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HomeMy WebLinkAbout10/25/2018 EDA Meeting••• •••• Apple II Valley Meeting Location: Municipal Center 7100 147th Street West Apple Valley, Minnesota 55124 October 25, 2018 ECONOMIC DEVELOPMENT AUTHORITY SPECIAL MEETING TENTATIVE AGENDA 6:30 PM 1. Call to Order 2. Approve Agenda 3. Approve Consent Agenda Items Consent Agenda Items are considered routine and will be enacted with a single motion, without discussion, unless a commissioner or citizen requests to have any item separately considered. It will then be moved to the regular agenda for consideration. A. Approve Minutes of July 26, 2018, Regular Meeting 4. Regular Agenda Items A. Bigos-Galante, LLC 1. Adopt Resolution Confirming Completion of Minimum Improvements and Issuance of TIF Note 2. Adopt Resolution Certifying: 1. Benefit Date for the Business Subsidy Agreement with Bigos- Galante, LLC 2. Authorizing the Execution of Exhibit B (Benefit Date Certification) to the Business Subsidy Agreement 3. Authorizing Execution of Loan Forgiveness Agreement 5. EDA Items and Communications (For items EDA wishes to discuss) 6. Staff Updates 7. Adjourn Regular meetings are broadcast, live, on Charter Communications Cable Channel 180 and on the City's website at www.cityofapplevalley.org l App Valil ley ITEM: EDA MEETI NG DATE: SECTION: 3.A. October 25, 2018 Consent Agenda Description: Approve Minutes of July 26, 2018, Regular Meeting Staff Contact: Joan Murphy, Department Assistant Department / Division: Community Development Department ACTION REQUESTED: Approve minutes of regular meeting of July 26, 2018. SUMMARY: The minutes of the regular Economic Development Authority meeting are attached for your review and approval. BACKGROUND: State statute requires the creation and preservation of meeting minutes which document the official actions and proceedings of public governing bodies. BUDGET IMPACT: N/A ATTACHMENTS: Minutes ECONOMIC DEVELOPMENT AUTHORITY City of Apple Valley Dakota County, Minnesota July 26, 2018 Minutes of the regular meeting of the Economic Development Authority of Apple Valley, Dakota County, Minnesota, held July 26, 2018, at 6:00 p.m., at Apple Valley Municipal Center. PRESENT: Commissioners Bergman, Goodwin, Grendahl, Hamann -Roland, Hooppaw and Johnson ABSENT: Commissioner Melander City staff members present were: Executive Director Tom Lawell, Community Development Director Bruce Nordquist, Finance Director Ron Hedberg, Planner/Economic Development Specialist Alex Sharpe and Department and Assistant Joan Murphy. Meeting was called to order at 6:00 p.m. by President Hooppaw. APPROVAL OF AGENDA MOTION: of Hamann -Roland, seconded by Grendahl, approving the agenda. Ayes - 6 - Nays - 0. CONSENT AGENDA MOTION: of Bergman, seconded by Johnson, approving the minutes of the meeting of May 24, 2018, as written. Ayes - 6 - Nays - 0. AMEND 2018 EDA BUDGET Community Development Director Bruce Nordquist introduced the item and stated staff is recommending that the 2018 budget be amended to provide for a transfer of $36,000 to the Education Building Fund to be used for the installation of statuary at that site. The operating budget is approved each year by the Apple Valley Economic Development Authority (EDA) and by the City Council in their annual budget. Periodically it is necessary to amend the budget as plans change and new development initiatives arise. The EDA budget reserves would be impacted by $36,000, the cost for installation. Discussion followed. MOTION: of Hamann -Roland, seconded by Grendahl, adopting Resolution EDA 2018-03 amending the 2018 EDA Budget. Ayes - 6 - Nays - 0. APPROVE PRELIMINARY 2019 EDA BUDGET Finance Director Ron Hedberg stated the proposed 2019 budget, approved by the City Council in their annual budget, includes the Economic Development Operations Fund. The proposed budget Economic Development Authority City of Apple Valley Dakota County, Minnesota July 26, 2018 Page 2 includes the anticipated activities in 2019. If the need arises to address development opportunities, such as Business Retention, Expansion and Attraction (BREA) activities, future action would be requested to address the need. Possible activity areas in 2019 and 2020 include: • Anticipate trade/business development mission of a national and global destination as they present themselves. • Continue as a member of GREATER MSP, the regional economic development organization with national and global contacts for local business development. • Continue the "Open to Business" small business development service with the Dakota County CDA and Metropolitan Consortium of Community Developers. • Begin the master planning of the Mixed Business Campus (MBC) with the identified developer, Rockport LLC. • Facilitate repositioning and improvement of properties within the quadrants of CR42 and Cedar Avenue. • Manage City/EDA owned property until development. • With a fully occupied and updated old City Hall in 2017 and 2018, apply a portion of lease revenues toward EDA business development initiatives. With a fully occupied and updated old City Hall in 2018, a portion of lease revenues will be applied as a management fee to benefit EDA business development initiatives. The projected 2019 year-end fund balance is $140,562, or $104,562 if the 2018 budget is amended as proposed. Discussion followed. MOTION: of Bergman, seconded by Goodwin, adopting Resolution EDA 2018-04 approving preliminary 2019 EDA Budget. Ayes - 6 - Nays - 0. ADJOURNMENT MOTION: of Hamann -Roland, seconded by Grendahl, to adjourn. Ayes - 6 - Nays - 0. The meeting was adjourned at 6:30 p.m. Respectfully Submitted, /s/ Joan Murphy Joan Murphy, Department Assistant Approved by the Apple Valley Economic Development Authority on Clint Hooppaw, President ... .... •••• ..• l App Valil ley ITEM: EDA MEETING DATE: SECTION: 4.A. October 25, 2018 Regular Agenda Description: Bigos-Galante, LLC Staff Contact: Ron Hedberg, Finance Director Department / Division: Community Development Department ACTION REQUESTED: 1. Adopt resolution confirming completion of minimum improvements and issuance of TIF Note. 2. Adopt resolution certifying the: 1. Benefit date for the Business Subsidy Agreement with Bigos-Galante, LLC; and 2. Authorizing the execution of Exhibit B (Benefit Date Certification) to the Business Subsidy Agreement; and 3. Authorizing execution of Loan Forgiveness Agreement SUMMARY: In 2016, the Apple Valley Economic Development Authority (EDA) entered into a number of agreements to accomplish the development of the Parkside Galante building. At this time the Galante building is substantially complete and the developer has completed the required minimum improvements. It is appropriate for the EDA to confirm the completion of the minimum improvements and to issue the tax increment financing note and cancel the forgivable note. BACKGROUND: On November 14, 2016, the City of Apple Valley entered into an Amended and Restated Development Assistance Agreement with Bigos Galante, LLC, to provide financial support in the amount of up to $2,666,000 for substantial site improvements involved in the construction of the Parkside Galante Apartments. The support provided comes in the form of "Pay as You Go" Tax Increment Financing (TIF) in addition to returning of penalties and interest that had accrued on delinquent special assessments through 2012 and providing upfront assistance of $574,000. The Parkside Development consisted of two phases, the first phase was the construction of the Gabella building and the second phase consists of the Galante building constructed on Galaxie Avenue. The construction of Parkside Galante is substantially complete and a temporary certificate of occupancy was issued on 7-30-18. The Galante apartments are now 100% leased. The development agreement provided for a minimum assessed valuation for the Phase 2, Parkside Galante project at $13,830,000 and a partial market value (building was only partially complete by 1-1-18) as determined by the County Assessor as of January 1, 2018, for taxes payable in 2019 is $10,805,000. The final constructed value will exceed the minimum assessed value. The development agreement provided for upfront assistance on phase two in the amount of $574,000. The assistance agreement contemplated that a portion of the upfront assistance would be paid at the time of building permit was issued and a letter of credit be provided benefitting the City of Apple Valley, and the remainder to be paid at substantial completion. Because of the cost associated with a letter of credit Bigos Galante LLC did not request the initial upfront assistance, instead choosing to wait until substantial completion when the full amount would be released. As of this date, the Galante building is considered substantially complete and they have constructed the minimum improvements included in the development agreement so the $574,000 can be released at this time. Pay as you Go TIF Financing — TIF Note The Development Assistance Agreement included a "Pay as You Go" TIF financing provision where the developer could be reimbursed for eligible development costs related to the construction of Parkside Galante Apartments in the second phase of the TIF 15 Parkside District. A remaining condition of the tax increment district is that 20% of the available units be rented to, or held out for, households that are under 50% of the median household income for Dakota County. The "Pay as You Go" financing calls for repayment from the annual tax increment collected from the project and is dependent on the property owner making the annual property tax payments. The terms of the TIF Revenue Note include an interest rate of 5% and the amount of the note is $2,666,000. The annual payment on the TIF Note is set at 70% of the available Tax Increment generated by the project and are applied first to interest and then towards the principal balance until the balance is retired; estimated in be in the year 2032. The other 30% of available tax increment will be retained and used to recover the upfront assistance. The first year of increment repayment will be 2018. BUDGET IMPACT: The development assistance will be recovered in the future by retaining 30% of any available tax increment generated by this property. ATTACHMENTS: Agreement Agreement Agreement Resolution Resolution No. R-1 $2,666,000 UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF DAKOTA APPLE VALLEY ECONOMIC DEVELOPMENT AUTHORITY TAX INCREMENT REVENUE NOTE (GALANTE PROJECT) The Apple Valley Economic Development Authority, Minnesota (the "Authority"), hereby acknowledges itself to be indebted and, for value received, hereby promises to pay the amounts hereinafter described (the "Payment Amounts") to Bigos-Galante, LLC, or its registered assigns (the "Registered Owner"), but only in the manner, at the times, from the sources of revenue, and to the extent hereinafter provided. The principal amount of this Note shall equal from time to time the principal amount stated above, as reduced to the extent that such principal installments shall have been paid in whole or in part pursuant to the terms hereof; provided that the sum of the principal amount listed above shall in no event exceed $2,666,000 as provided in that certain Amended and Restated Development Assistance Agreement, dated as of July 1, 2014 (the "Original Agreement"), as amended by a First Amendment to Amended and Restated Development Assistance Agreement dated as of October 9, 2014 (the "First Amendment", and together with the Original Agreement, the "Agreement"), by and between the Authority, the City of Apple Valley, Minnesota (the "City") and IMH Special Asset NT 175 -AVN, LLC ("175 -AVN"), and as assigned to IMH Gabella, LLC by 175 -AVN, pursuant to a Partial Assignment of Development Agreements, dated October 9, 2014 (the "Assignment"). The Agreement was further amended by a Second Amendment to Amended and Restated Development Assistance Agreement by and between the Authority, the City, and IMH Gabella, LLC, dated as of November 14, 2016 (the "Second Amendment" and together with the "Agreement", the "Development Assistance Agreement"). The unpaid principal amount of the Note shall bear simple, non -compounding interest from the date of issuance of the Note at 5.0% per annum. Interest shall be computed on the basis of a 360 day year consisting of twelve (12) 30 -day months. The amounts due under this Note shall be payable on August 1, 2019, and on each August 1 and February 1 thereafter to and including February 1, 2042 (as determined in accordance with the Development Assistance Agreement), or, if the first should not be a Business Day (as defined in the Development Assistance Agreement) the next succeeding Business Day (the "Payment Dates"). On each Payment Date the Authority shall pay by check or draft mailed to the person whom was the Registered Owner of this Note at the close of the last business day preceding such Payment Date an amount equal to the sum of the Tax Increments (hereinafter defined) received by the Authority during the six month period preceding such Payment Date. All payments made by the Authority under this Note shall first be applied to accrued interest and then to principal. 7915814v2 The Payment Amounts due hereon shall be payable solely from 70% of the tax increments (the "Tax Increments") from the Phase 2 Development Property and the Phase 2 Minimum Improvements (as defined in the Development Assistance Agreement) within the Authority's Tax Increment Financing District Tax Increment Financing District No. 15 (the "Tax Increment District") within its Master Development District which are paid to the Authority and which the Authority is entitled to retain pursuant to the provisions of Minnesota Statutes, Sections 469.174 through 469.1794, as the same may be amended or supplemented from time to time (the "Tax Increment Act"). This Note shall terminate and be of no further force and effect following: (i) the last Payment Date defined above, (ii) on any date upon which the Authority shall have terminated the Development Assistance Agreement under Section 9.2(3) thereof; (iii) on the date the Tax Increment District is terminated; or (iv) on the date that all principal and interest payable hereunder shall have been paid in full, whichever occurs earliest. The Authority makes no representation or covenant, expressed or implied, that the Tax Increments will be sufficient to pay, in whole or in part, the amounts which are or may become due and payable hereunder. The Authority's payment obligations hereunder shall be further conditioned on the fact that no Event of Default under the Development Assistance Agreement shall have occurred and be continuing at the time payment is due hereunder, but subject to the terms and conditions under the Development Assistance Agreement such unpaid amounts may become payable, without interest accruing thereon in the meantime, if said Event of Default shall thereafter have been timely cured; and, further, if pursuant to the occurrence of an Event of Default under the Development Assistance Agreement the Authority elects to cancel and rescind the Development Assistance Agreement, the Authority shall have no further debt or obligation under this Note whatsoever. Reference is hereby made to all of the provisions of the Development Assistance Agreement, and said provisions are hereby incorporated into this Note as though set out in full herein. This Note is a special, limited revenue obligation and not a general obligation of the Authority and is payable by the Authority only from the sources and subject to the qualifications stated or referenced herein. This Note is not a general obligation of the Authority and neither the full faith and credit nor the taxing powers of the Authority are pledged to the payment of the principal of this Note and no property or other asset of the Authority, save and except the above - referenced Tax Increments, is or shall be a source of payment of the Authority's obligations hereunder. This Note is issued by the Authority in aid of financing a project pursuant to and in full conformity with the Constitution and laws of the State of Minnesota, including the Tax Increment Act. This Note may be assigned only with the consent of the Authority which consents shall not be unreasonably withheld. In order to assign the Note, the assignee shall surrender the same to the Authority either in exchange for a new fully registered note or for transfer of this Note on the registration records for the Note maintained by the Authority. Each permitted assignee shall take this Note subject to the foregoing conditions and subject to all provisions stated or referenced herein. 2 7915814v2 IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions, and things required by the Constitution and laws of the State of Minnesota to be done, to have happened, and to be performed precedent to and in the issuance of this Note have been done, have happened, and have been performed in regular and due form, time, and manner as required by law; and that this Note, together with all other indebtedness of the Authority outstanding on the date hereof and on the date of its actual issuance and delivery, does not cause the indebtedness of the Authority to exceed any constitutional, statutory or charter limitation thereon. IN WITNESS WHEREOF, Apple Valley Economic Development Authority, Minnesota, by its Board of Commissioners, has caused this Note to be executed by the manual signatures of its President and Secretary and has caused this Note to be dated as of , 2018. President Secretary 3 7915814v2 CERTIFICATION OF REGISTRATION It is hereby certified that the foregoing Note, as originally issued on 2018, was on said date registered in the name of Bigos-Galante, LLC, and that, at the request of the Registered Owner of this Note, the undersigned has this day registered the Note in the name of such Registered Owner, as indicated in the registration blank below, on the books kept by the undersigned for such purposes. NAME AND ADDRESS OF DATE OF SIGNATURE OF REGISTERED OWNERS REGISTRATION EDA SECRETARY Bigos-Galante, LLC 832 Wayzata Boulevard, Suite 200 Golden Valley, MN 55426 7915814v2 4 , 2018 20 20 20 BENEFIT DATE CERTIFICATION Pursuant to the Business Subsidy Agreement, made between Apple Valley Economic Development Authority ("EDA") and Bigos-Galante, LLC ("Bigos"), as successor of IMH Special Asset NT 175 -AVN, LLC, (hereinafter, the "Parties") on the 10th day of July, 2014, a subsidy in favor of Bigos was approved in an amount of up to One Million One Hundred Thirty- one Thousand Three Hundred Twenty-two and No/100 Dollars ($1,131,322.00) from Apple Valley Economic Development Authority. This subsidy is subject to the terms and conditions set forth in the aforementioned Business Subsidy Agreement, as amended. IN WITNESS WHEREOF, in accordance with the amended Business Subsidy Agreement, the Parties do hereby acknowledge the Benefit Date (as defined in Minnesota Statutes § 116J.993, Subd. 2) for the Phase II Improvements is September 23, 2018. Apple Valley Economic Development Authority By: Clint Hooppaw Its: President By: Pamela J. Gackstetter Its: Secretary Bigos-Galante, LLC, a Minnesota limited liability company By: Theodore J. Bigos Its: Chief Manager {00422912 } LOAN FORGIVENESS AGREEMENT THIS LOAN FORGIVENESS AGREEMENT ("Agreement") is made this day of October, 2018, by and between Bigos-Galante, LLC, a Minnesota limited liability company, ("Bigos-Galante") and Apple Valley Economic Authority, a public body corporate and political subdivision of the State of Minnesota ("EDA"). RECITALS A. Unless otherwise defined herein, all capitalized terms used in this Agreement shall have the same meaning as defined in the Business Subsidy Agreement, as defined therein. B. IMH Special Asset NT 175 -AVN, LLC, an Arizona limited liability company, ("IMH Special Asset") and the EDA entered into that certain business subsidy agreement, dated July 10, 2014, (the "Original Agreement") to provide a business subsidy Loan to IMH Special Asset. C. IMH Special Asset subsequently transferred, assigned, and conveyed its right, title, and interest in, to, and under the Original Agreement to IMH Gabella, LLC Gabella") by means of that certain Partial Assignment of Development Agreement, dated October 9, 2014, and recorded on October 22, 2014, as Document No. 3035344. D. The Original Agreement was amended by that certain First Amendment to Business Subsidy Agreement, dated September 22, 2016 (the "First Amendment"). E. The Original Agreement and First Amendment are collectively referred to herein as the "Business Subsidy Agreement." F. IMH Gabella subsequently transferred, assigned, and conveyed its right, title, and interest in, to, and under the Business Subsidy Agreement to Bigos-Galante by means that of certain Partial Assignment of Development Agreements, dated November 10, 2016 and recorded on November 17, 2016, as Document No. 3162174. G. The business subsidy Loan is evidenced by an Amended Note. H. Under the Business Subsidy Agreement, if Bigos-Galante meets the construction and job creation Goals for the Phase II Improvements and no event of default exists at the time the Goals are met, the EDA shall forgive the Loan in its entirety. I. Bigos-Galante warrants and represents to the EDA that Bigos-Galante has met the construction and job creation Goals for the Phase II Improvements and no default existed at the time such Goals were met. J. In accordance with the Business Subsidy Agreement, the EDA has determined that the Loan shall be forgiven it is entirety. {00422913 } NOW, THEREFORE, in consideration of the above promises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged the parties hereto, intending to be legally bound, agree as follows: 1. The above -stated Recitals are true and accurate and are incorporated herein by reference and made a part hereof. 2. The EDA hereby forgives $369,038.28, as well as any and all accrued interest, of the obligation under the Amended Note. 3. Article 4, Sections 4.1 and 4.2 of the Business Subsidy Agreement are hereby terminated. 4. Effective upon the execution of this Agreement, the Amended Note is hereby cancelled, voided and of no further force or effect. 5. Except as otherwise as provided for herein, all terms of the Business Subsidy Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be made effective as of the day and year above written. Apple Valley Economic Development Authority, a public body corporate and a political subdivision of the State of Minnesota, a Minnesota Corporation By: Clint Hooppaw Its: President By: Pamela J. Gackstetter Its: Secretary Bigos-Galante, LLC, a Minnesota limited liability company By: Theodore J. Bigos Its: Chief Manager APPLE VALLEY ECONOMIC DEVELOPMENT AUTHORITY RESOLUTION NO. EDA -18 - RESOLUTION AUTHORIZING THE EXECUTION OF TAX INCREMENT REVENUE NOTE (PARKSIDE - GALANTE PROJECT) WHEREAS, the Apple Valley Economic Development Authority entered into a Amended and Restated Development Assistance Agreement with Bigos Galante LLC dated November 14, 2016; and WHEREAS, the Amended and Restated Development Assistance Agreement provided for the financing of costs incurred in connection with construction of the Parkside Galante Apartments consisting of 134 dwelling units; and WHEREAS, Bigos Galante LLC has submitted documentation of eligible expenditures exceeding the maximum amount provided for in the Amended and Restated Development Assistance Agreement; and NOW, THEREFORE, BE IT RESOLVED by the Board of Commissioners of the Apple Valley Economic Development Authority, Minnesota, approves the Tax Increment Revenue Note in the form attached, and the President and Secretary are hereby authorized and directed to execute the Tax Increment Revenue Note on behalf of the EDA. ADOPTED this 25th day of October 2018. Clint Hooppaw, President ATTEST: Pamela J. Gackstetter, Secretary APPLE VALLEY ECONOMIC DEVELOPMENT AUTHORITY RESOLUTION NO. EDA -18- A RESOLUTION CERTIFYING THE BENEFIT DATE FOR THE BUSINESS SUBSIDY AGREEMENT WITH BIGOS-GALANTE, LLC AND AUTHORIZING THE EXECUTION OF LOAN FORGIVENESS AGREEMENT WHEREAS, the Board of Commissioners of the Apple Valley Economic Development Authority (EDA) finds as follows: 1. That on July 10, 2014, the Apple Valley Economic Development Authority entered into a Business Subsidy Agreement to construct an apartment building within TIF District Number 15 in order to stimulate construction of private development in a way that will also create or retain jobs. 2. That Bigos-Galante, LLC, assignee, (the "Developer") requested assistance from the EDA to support building renovations, construction and site improvements consistent with the TIF Plan within TIF District Number 15. 3. That on July 10, 2014, the EDA and the Developer entered into a Business Subsidy Agreement and authorized the issuance of a forgivable loan in the amount of $1,131,322. for the substantial building improvements listed in the Business Subsidy Agreement. 4. That the Developer has exceeded the job creation goals established in the Business Subsidy Agreement for phase II. 5. That over 50 construction jobs with an average wage of $30 per hour was created as a result of the project. NOW, THEREFORE, the EDA hereby certifies the benefit date certification date is determined to be September 23, 2018 for the Bigos-Galante, LLC Business Subsidy Agreement, and authorizing the execution of Exhibit B to the Business Subsidy Agreement and the Loan Forgiveness Agreement. ADOPTED the 25th day of October, 2018. Clint Hooppaw, President ATTEST: Pamela J. Gackstetter, Secretary