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061812completeagenda CITY OF RICHFIELD, MINNESOTA MONDAY, JUNE 18, 2012 RICHFIELD MUNICIPAL CENTER 6700 PORTLAND AVENUE REGULAR HOUSING AND REDEVELOPMENT AUTHORITY MEETING COUNCIL CHAMBERS 7:00 P.M. AGENDA Call to order Roll call 1. Approval of minutes of(1) Special HRA/City Council/Planning Commission Worksession of May 21, 2012 and (2) Regular HRA Meeting of May 21, 2012 2. HRA approval of agenda 3. Consideration of request for subordination of HRA Deferred Loan at 6620 Oakland Avenue Staff Report No. 23 Notes: 4. Consideration of request for subordination of HRA Transformation Home Loan at 1300 73rd Street West Staff Report No. 24 Notes: 5. Consideration of scheduling public hearing to consider sale of 301 77th Street West (vacant Candlewood parcel) and consent to application for Comprehensive Plan amendment, conditional use permit and rezoning by LaMettry's Collision Inc. Staff Report No. 25 Notes: 6. Public hearing to consider sale of HRA property located at 211 76th Street West to Richfield Properties I, Limited Partnership (dba Ron Clark Construction and Design and Connelly Development) Staff Report No. 26 Notes: 7. Consideration of contract for private development with Richfield Properties I, Limited Partnership for Pillsbury Commons development Staff Report No. 27 Notes: 8. Consideration of resolution adopting modification to Redevelopment Plan for Richfield Redevelopment Project Area and Tax Increment Financing Plan for 2012-1 Housing Tax Increment Financing District (Pillsbury Commons) Staff Report No. 28 Notes: 9. HRA discussion items Notes: 10. Executive Director Report Notes: 11. Claims and Payroll Adjournment Auxiliary aids for individuals with disabilities are available upon request. Requests must be made at least 96 hours in advance to the City Clerk at 612-861-9738. richfield: June 2012 Page 1 of 1 City of Richfield Calendar Calendars Net Navigate: 2011 Jan Feb Mar Apr, May Jun Jul Aug Sep Oct Nov Dec 2013 June 2012 Monday Tuesday Wednesday Thursday Friday 28 I May 29 30 31 1 I Jun CITY ADMINISTRATIVE 7:OOp Planning OFFICES CLOSED- Commission MEMORIAL DAY SATURDAY,JUNE 2 9 AM to 1 PM Commission OOP Planning RICHFIELD MUNICIPAL Commission (Rescheduled to May CENTER BUILDING 29) DEDICATION 4 5 6 7 8 11:30a Tourism 7:OOp Transportation 7:OOp Arts Commission Promotion Board @ Commission @ 6335 Portland Ave 6601 Lyndale Ave, Suite 106 6:30p Human Rights Commission 7:OOp Community Services Commission @ 7000 Nicollet Ave 11 12 13 14 15 6:15p Special City Council Worksession 7:OOp City Council Regular Meeting 18 19 20 21 22 6:OOp Advisory Board of 8:OOa Police Civil 7:OOp Friendship City Health-CANCELED Service Commission Commission 7:OOp Housing and Meeting Redevelopment 8:15a Fire Civil Service Authority(HRA) Commission Meeting 7:OOp Community Services Commission (Rescheduled to June 5) 25 26 27 28 29 7:OOp Planning 6:OOp Special Joint SATURDAY,JUNE 30 Commission Meeting between 9:30 a.m.-10:30 a.m. Bloomington, Richfield, Mayor's Hour-Farmer's and Edina Advisory Market Boards of Health- Bartholomew Room 6:15p Special City Council Worksession 7:OOp City Council Regular Meeting Display: Year Month Week Day Block it Condensed Abs Slide Calendars: Search Add Events: Daily Duration Periodic Administer: This Calendar All meetings held at City Hall (6700 Portland Avenue) unless indicated otherwise Calendars Net free online interactive web calendars http://www.my.calendars.net/richfield 6/14/2012 HOUSING AND REDEVELOPMENT AUTHORITY MEETING MINUTES , 'ee Richfield, Minnesota G t�L Special HRA/City Council/Planning Commission Worksession May 21, 2012 CALL TO ORDER The meeting was called to order by Chair Sandahl at 6:02 p.m. in the Council Chambers. ROLL CALL Council Members Debbie Goettel, Mayor; Pat Elliott; Sue Sandahl; and Tom Fitzhenry Present: Council Members Fred Wroge Absent: HRA Members Sue Sandahl, Chair; Doris Rubenstein; Steven J. Quam; and Debbie Goettel Present: HRA Members David Gepner Absent: Planning Members Gordon Vizecky; Josh Root; and Maureen Scaglia Present: Planning Members Rick Jabs, Chair; Robert Hall; Daniel Kitzberger; Tom Rublein; and Dennis Absent: Schuller Staff Present: Steven L. Devich, City Manager/HRA Executive Director, John Stark, Community Development Director; Karen Barton, Community Development Manager; Christine Costello, Community Development Coordinator; and Nancy Gibbs, City Clerk Item #1 DISCUSSION REGARDING RENTAL HOUSING INVENTORY AND NEEDS ASSESSMENT(HRA MEMO NO. 27, COUNCIL MEMO NO. 60) Jay Demma, Project Manager for Stantec Consulting Services, Inc., presented the Rental Housing Inventory and Needs Assessment report. Special Worksession Minutes -2- May 21, 2012 ADJOURNMENT The HRA/City Council/Planning Commission worksession was adjourned by unanimous consent at 6:41 p.m. Date Approved: June 18, 2012 Suzanne M. Sandahl Chair Nancy Gibbs Steven L. Devich City Clerk Executive Director HOUSING AND REDEVELOPMENT �d AUTHORITY MEETING MINUTES 6c4 4.e Richfield, Minnesota Regular Meeting May 21, 2012 CALL TO ORDER The meeting was called to order by Chair Sandahl at 7:00 p.m. ROLL CALL HRA Members Sue Sandahl, Chair; Doris Rubenstein; Steven J. Quam; David Gepner Present: and Debbie Goettel Staff Present Steven L. Devich, Executive Director; John Stark, Community Development Director, Karen Barton, Community Development Manager; Christine Costello, Community Development Coordinator; Julie Eddington, HRA Attorney; and Nancy Gibbs, City Clerk Item #1 APPROVAL OF MINUTES OF (1)SPECIAL CITY COUNCIL/HRA/PLANNING COMMISSION WORKSESSION OF APRIL 10, 2012; (2) REGULAR HRA MEETING OF APRIL 16, 2012; (3)SPECIAL HRA/CITY COUNCIL MEETING OF APRIL 16, 2012; AND (4) SPECIAL HRA/CITY COUNCIL/PLANNING COMMISSION WORKSESSION OF APRIL 16, 2012 Commissioner Quam requested that the attendance on the minutes of the Regular HRA Meeting of April 16, 2012 be corrected to reflect that Commissioner Quam and Chair Sandahl were present. M/Goettel, S/Quam to approve the minutes of(1) Special City Council/HRA/Planning Commission Worksession of April 10, 2012; (2) Regular HRA Meeting of April 16, 2012; (3) Special HRA/City Council Meeting of April 16, 2012; and (4) Special HRA/City Council/Planning Commission Worksession of April 16, 2012 as amended. Motion carried 5-0. Item#2 HRA APPROVAL OF AGENDA M/Rubenstein, S/Goettel to approve the agenda. HRA Meeting -2- May 21,2012 Motion carried 5-0. Item #3 CONSENT CALENDAR A. Consideration of approval of resolution authorizing the HRA to affirm the monetary limits on statutory municipality tort liability S.R. No. 17 HRA RESOLUTION NO. 1120 RESOLUTION AFFIRMING MUNICIPAL TORT LIABILITY LIMITS ESTABLISHED BY MINNESOTA STATUTES 466.04 This resolution appears as HRA Resolution No. 1120. M/Gepner, S/Rubenstein to approve the Consent Calendar. Motion carried 5-0. Item#4 PUBLIC HEARING AND CONSIDERATION OF A RESOLUTION AUTHORIZING THE SALE OF 7338 QUEEN AVENUE TO BRANDL ANDERSON HOMES AND A CONTRACT FOR PRIVATE DEVELOPMENT WITH BRANDL ANDERSON HOMES FOR THE CONSTRUCTION OF A SINGLE FAMILY HOME UNDER THE RICHFIELD REDISCOVERED PROGRAM S.R. NO. 18 Community Development Manager Barton presented Staff Report No. 18. Jeff Nichols, 7638 Harriet Avenue, asked to see photos of the new home. M/Goettel, S/Quam to close public hearing. Motion carried 5-0. M/Rubenstein, S/Quam to approve a contract for private development with Brandt Anderson Homes for the construction of a single family home under the Richfield Rediscovered Program and that the following resolution be adopted and that it be made part of these minutes: HRA RESOLUTION NO. 1121 • RESOLUTION AUTHORIZING THE SALE OF REAL PROPERTY LOCATED AT 7338 QUEEN AVENUE TO BRANDL ANDERSON HOMES Motion carried 5-0. This resolution appears as HRA Resolution No. 1121. Item #5 PUBLIC HEARING AND CONSIDERATION OF A RESOLUTION AUTHORIZING THE SALE OF 6616 2ND AVENUE TO BRANDL ANDERSON HOMES AND A CONTRACT FOR PRIVATE DEVELOPMENT WITH BRANDL ANDERSON HOMES FOR THE CONSTRUCTION OF A SINGLE FAMILY HOME UNDER THE RICHFIELD REDISCOVERED PROGRAM S.R. NO. 19 HRA Meeting -3- May 21,2012 Community Development Manager Barton presented Staff Report No. 19. A neighbor to the project house asked if neighbors would be contacted before building begins. Community Development Manager Barton responded yes. M/Goettel, S/Sandahl to close public hearing. Motion carried 5-0. M/Goettel, S/Sandahl to approve a contract for private development with Brandt Anderson Homes for the construction of a single family home under the Richfield Rediscovered Program and that the following resolution be adopted and that it be made part of these minutes: HRA RESOLUTION NO. 1122 RESOLUTION AUTHORIZING THE SALE OF REAL PROPERTY LOCATED AT 6616 2nd AVENUE TO BRANDL ANDERSON HOMES INC Motion carried 5-0. This resolution appears as HRA Resolution No. 1122. Item #6 PUBLIC HEARING AND CONSIDERATION OF A RESOLUTION AUTHORIZING THE SALE OF 6609 HUMBOLDT AVENUE TO METRO CLASSIC HOMES, INC. AND A CONTRACT FOR PRIVATE DEVELOPMENT WITH METRO CLASSIC HOMES, INC. FOR THE CONSTRUCTION OF A SINGLE FAMILY HOME UNDER THE RICHFIELD REDISCOVERED PROGRAM S.R. NO. 20 Community Development Manager Barton presented Staff Report No. 20. M/Sandahl, S/Goettel to close public hearing. Motion carried 5-0. M/Rubenstein, S/Gepner to approve a contract for private development with Metro Classic Homes, Inc. for the construction of a single family home under the Richfield Rediscovered Program and that the following resolution be adopted and that it be made part of these minutes: HRA RESOLUTION NO. 1123 RESOLUTION AUTHORIZING THE SALE OF REAL PROPERTY LOCATED AT 6609 HUMBOLDT AVENUE TO METRO CLASSIC HOMES INC. Motion carried 5-0. This resolution appears as HRA Resolution No. 1123. Item#7 PUBLIC HEARING AND CONSIDERATION OF A RESOLUTION AUTHORIZING THE SALE OF 7408 SHERIDAN AVENUE TO DONNAY HOMES, INC.AND A CONTRACT FOR PRIVATE DEVELOPMENT WITH DONNAY HOMES, INC. FOR THE CONSTRUCTION OF A SINGLE FAMILY HOME UNDER THE RICHFIELD REDISCOVERED PROGRAM S.R. NO. 21 HRA Meeting -4- May 21,2012 Community Development Manager Barton presented Staff Report No. 21. Greg Resendez, 7220 Garfield Avenue, asked how an individual could purchase one of these properties. Community Development Manager Barton responded that Mr. Resendez should contact City staff for information. Commissioner Quam stated that we still have nine lots available and he encouraged people to talk to staff regarding purchasing these properties. M/Goettel, S/Rubenstein to close public hearing. Motion carried 5-0. M/Sandahl, S/Gepner to approve a contract for private development with Donnav Homes, Inc. for the construction of a single family home under the Richfield Rediscovered Program and that the following resolution be adopted and that it be made part of these minutes: HRA RESOLUTION NO. 1124 RESOLUTION AUTHORIZING THE SALE OF REAL PROPERTY LOCATED AT 7408 SHERIDAN TO DONNAY HOMES, INC Motion carried 5-0. This resolution appears as HRA Resolution No. 1124. Item#8 CONSIDERATION OF A MOTION DIRECTING STAFF TO SCHEDULE A PUBLIC HEARING TO CONSIDER SALE OF 211 76TH STREET WEST (FORMER GLEASON MORTUARY) TO RON CLARK CONSTRUCTION AND DESIGN (DBA CONNELLY DEVELOPMENT) S.R. NO. 22 Community Development Director Stark presented Staff Report No. 22. Jim Susag, Attorney at Larkin Hoffman who is representing Ron Clark Construction and Design, presented an overview of the project. Commissioner Goettel stated that she supports a public hearing so the people can be heard. Commissioner Quam stated that his vote tonight represents only a vote to hold a public hearing to allow people a chance to be heard. Commissioner Rubenstein stated that she was disturbed by receiving a phone call from Mr. Clark to meet with her. She stated that she did not meet with him. HRA Attorney Eddington explained the guidelines regarding open meeting laws. M/Sandahl, S/Goettel to authorize staff to schedule a public hearing to consider sale of 211 76th Street West (former Gleason Mortuary)to Ron Clark Construction and Design (dba Connelly Development). Motion carried 5-0. HRA Meeting -5- May 21,2012 Item #9 HRA DISCUSSION ITEMS None. Item #10 EXECUTIVE DIRECTOR REPORT None. Item #11 CLAIMS AND PAYROLL M/Goettel, S/Quam that the following claims and payrolls be approved: U.S BANK 05/21/2012 Section 8 Checks: 121888-122016 $ 149,682.15 HRA Checks: 31462-31483 $ 69,099.65 TOTAL $ 218,781.80 Motion carried 5-0. ADJOURNMENT The meeting was adjourned by unanimous consent at 8:06.m. Date Approved: June 18, 2012 Suzanne M. Sandahl Chair Nancy Gibbs Steven L. Devich City Clerk Executive Director AGENDA ITEM#: 3 REPORT#: 23 =wadi STAFF REPORT RICHFIELD HOUSING AND REDEVELOPMENT AUTHORITY MEETING JUNE 18, 2012 REPORT PREPARED BY: JULIE URBAN,HOUSING SPECIALIST NAME,TITLE REPORT PRESENTER: KAREN BARTON, COMMUNITY DEVELOPMENT ASSISTANT DIRECTOR AME,TIT ACTING DEPARTMENT DIRECTOR REVIEW: 1/11110"41j '1 7mireizapy REVIEWED BY EXECUTIVE DIRECTOR: / 47r10 /� ITEM FOR HRA CONSIDERATION: Consideration of a request for a subordination of a Housing and Redevelopment Authority Deferred Loan at 6620 Oakland Avenue. I. RECOMMENDED ACTION: By Motion: Approve or deny the request for a subordination of a Housing and Redevelopment Authority Deferred Loan at 6620 Oakland Avenue. II. BACKGROUND Kanapathipillai Shanmugam and Kanageswary Kanapathipillai (Homeowners) of 6620 Oakland Avenue have requested a subordination of a $19,050 Deferred Loan they received from the Housing and Redevelopment Authority (HRA) on September 28, 2009. At 92 percent, the combined loan-to-value ratio exceeds the HRA Subordination and Satisfaction Policy limit of 80 percent and was therefore denied by staff. The Homeowners are appealing the denial and have asked that their request be brought to the HRA for consideration. The Homeowners qualify for and are pursuing a refinance through the federal Home Affordable Refinance Program (HARP). HARP is a streamlined refinance program that allows property owners who are impacted by decreased property values and 06182012 6620 Oakland subordination appeal.doc whom have an FHA-insured mortgage the opportunity to refinance their mortgage to secure better terms and help stabilize the housing markets in the United States. The Homeowners would like to refinance their primary mortgage into a new mortgage of$145,500, which includes the total balance of the first mortgage and closing costs. The interest rate would be reduced from 5.75 percent to 3.75 percent resulting in a savings of$94 per month. The term of the loan would also be reduced from 30 to 20 years. The HRA's Deferred Loan is currently behind the primary mortgage with a current balance of$139,895 and two Energy Advantage loans from the Center for Energy and the Environment, with current balances of$8,273 and $1,500. Based on the value of$188,740 assigned by the HARP guidelines (a formal appraisal is not required by the program), the combined loan-to-value ratio is 92 percent. Although the refinance reduces the interest rate and monthly payments, the combined loan-to-value ratio is above the HRA's Subordination and Satisfaction Policy limit of 80 percent (85% under administrative appeal guidelines). Although the superior debt to the HRA's lien is increasing, it is still within the 50 percent increase permitted under the Subordination and Satisfaction Policy guidelines. The request meets all other requirements of the guidelines: property taxes are current, no equity is being removed, closing costs are three percent, payment terms are within the financial means of the homeowners, and no other subordinations have been granted in the past five years. III. BASIS OF RECOMMENDATION A. POLICY According to the HRA Subordination and Satisfaction Policy: • The total debt secured by the property, including the HRA lien and all superior mortgages, shall not exceed 80 percent of the documented market value of the property. A staff-authorized administrative appeal of the Policy can be granted if the loan-to-value ratio does not exceed 85 percent or if the amount of superior debt does not increase. • The overall value of superior debt must not be increased by more than 50 percent. • Closing costs do not exceed three percent (currently at 3.0%). • Payment terms are within the financial means of the borrower. • Equity being removed must be no more than $5,000 or must be for qualified home improvements. • Property taxes must be current. • No more than one subordination has been granted to the loan within the past five years. B. CRITICAL ISSUES • The combined loan-to-value ratio is 92 percent. • The amount of debt in front of the HRA lien increases four percent from $139,895 to $145,500. The closing costs and escrow costs are being rolled into the principal mortgage. The homeowners are unable to pay cash for these costs. • The refinancing will lower the primary loan's interest rate and will reduce the amount of the monthly payments. The refinance will improve the homeowners' ability to continue to pay the mortgage payments. • The HARP program does not require an appraisal; however, the estimated value is $188,740. • The Hennepin County estimated market value for taxes payable 2012 is $186,000. C. FINANCIAL • The application fee has been received for the appeal request. D. LEGAL • N/A IV. ALTERNATIVE RECOMMENDATIONS) • Approve the subordination request. • Approve the subordination request with financial counseling as a contingency of the approval. • Deny the subordination request. V. ATTACHMENTS • Letter from homeowner VI. PRINCIPAL PARTIES EXPECTED AT MEETING • Kanapathipillai Shanmugam and Kanageswary Kanapathipillai, homeowners 3-1 To Whom It May Concern: We are requesting that you grant us an approval on the subordination of our loan with the Richfield HRA. We are in the process of doing a refinance through the Home Affordable Refinance Program (HARP)and it is a very good refinance. We are dropping our term from a 30 year loan to a 20 year loan so we will be paying our primary mortgage off sooner. We are also dropping our rate from 5.75% to 3.75% so that is a huge benefit as well. And, even though we are cutting the term of the loan down to 20 years, we are still dropping out monthly payment, too. The current payment is 957/month and the new payment will be 863/month. All of these benefits of this new loan will put us into a position to pay the loan off more quickly and to meet our monthly obligation more easily. Although we are increasing the first mortgage amount in order to cover the closing costs of the loan, it is still, overall, a huge benefit to us to do this refinance. The main reason that our loan to value is higher than is preferred is because of the decreasing values in the housing market and our house, too, has unfortunately been affected by this. We are hoping very much that after understanding all of the benefits of this refinance, that you will find it in yourselves to be able to grant the subordination request to us. We thank you very much for your time and eagerly await your response. Sincerely, it Air 1 . .k_a,y,ftes ultra. Kanapathipillai Shanmugam and Kanageswary Kanapathipillai AGENDA ITEM#: 4 REPORT#: 24 STAFF REPORT RICHFIELD HOUSING AND REDEVELOPMENT AUTHORITY MEETING JUNE 18, 2012 REPORT PREPARED BY: JULIE URBAN,HOUSING SPECIALIST NAME,TITLE REPORT PRESENTER: KAREN BARTON, COMMUNITY DEVELOPMENT ASSISTANT DIRECTOR NAME,TITLE ACTING DEPARTMENT DIRECTOR ��1 REVIEW: rlg! ■ � 1\ wli REVIEWED BY EXECUTIVE DIRECT• 9: U �� /foorir • /./ ITEM FOR HRA CONSIDERATION: Consideration of a Subordination Agreement for a Housing and Redevelopment Authority Transformation Home Loan at 1300 73rd Street West. I. RECOMMENDED ACTION: By Motion: Approve or deny the request for a Subordination of a Housing and Redevelopment Authority Transformation Home Loan at 1300 73rd Street West. II. BACKGROUND Scott and Sang Hee Lindeberg requested a Subordination Agreement for an $8,970 Transformation Home Loan that was approved in 2000. The Lindebergs are proposing to refinance their first mortgage and remove equity to pay for college costs for their children. Cashing out equity to pay for anything other than home improvements is not permitted under the Housing and Redevelopment Authority's (HRA) subordination policy, and therefore the subordination request was denied by staff. The Lindebergs are appealing the denial and have asked that their request be brought to the HRA for consideration. The HRA's Transformation Home Loan is currently in second position behind the Lindeberg's primary mortgage, which has a remaining balance of$4,590. The Lindebergs are proposing to refinance the primary mortgage to a 10-year, fixed- 06182012 Lindeberg Subordination Appeal.doc interest rate mortgage of$120,000, and in that transaction pay off the existing loan balance, pay $78,041 to the Department of Education for student loans, pay closing costs, and use the approximately $35,000 in remaining cash to pay for future college expenses. The Lindebergs request does not meet two of the HRA's Subordination and Satisfaction Policy Evaluation Criteria. First, the Lindeberg's proposal will increase the secured primary mortgage by 2600 percent (from $4,590 to $120,000) and second, they are removing cash equity for purposes other than home improvements. The Lindebergs meet all of the other Evaluation Criteria and their proposal retains 48 percent equity in the property. III. BASIS OF RECOMMENDATION A. POLICY • According to the HRA's Subordination and Satisfaction Policy Evaluation Criteria: 4. "Any equity being removed beyond the cost of the loan transaction will be used to improve the property. A typed letter, dated and signed by the applicant, must be submitted stating the use of any equity being removed." The Lindeberg's proposal removes equity to pay off college loans and for college expenses. 5. "The overall value of superior debt must not be increased by more than 50%. Exceptions may be granted by the HRA in cases where superior debts are found to be unusually low with sufficient equity protection." The overall value of superior debt increases by 2604 percent. The Combined Loan-to-Value ratio is 52 percent, leaving 48 percent of the property's equity unencumbered. • The Lindeberg's request meets all of the other Evaluation Criteria: • Closing costs do not exceed three percent. • Payment terms are within the financial means of the borrowers. The Combined Loan-to-Value ratio is 52 percent. • The HRA has not granted more than one subordination within the past five years. • Property taxes are current. B. CRITICAL ISSUES • The interest rate on the student loans is currently 7.9 percent. The mortgage rate would be 3.1 percent. • The amount of debt ahead of the HRA lien is increased with the refinance scenario, but it leaves 48 percent equity in the property. • The property's current value based on appraisal is $229,000. C. FINANCIAL • The appeal fee has been received. D. LEGAL • N/A IV. ALTERNATIVE RECOMMENDATIONS) • Approve the subordination request. • Approve the subordination request with financial counseling as a contingency of the approval. • Deny the subordination request. V. ATTACHMENTS • Appeal Letter from Scott and Sang Hee Lindeberg, homeowners VI. PRINCIPAL PARTIES EXPECTED AT MEETING • Scott and Sang Hee Lindeberg 4-- 1 To Whom It May Concern: This letter is in regard to the HRA decision denying our request for subordination of the $8900.00 home improvement loan from back in 2000. We would like you to consider reviewing the request for subordination. Our goal is to consolidate student loans totaling $78,041.00 already incurred for our two daughters, and approximately$35,000 for the younger daughters future college debt. (three more years). The U.S.Department of Education charges 7.9%interest. Our re-finance through P.N.C. Mortgage carries interest of 3.1%at the current rate. We would like to re-finance for$120,000.00 to include any closing costs and incidentals. Our family has a strong,healthy business in Richfield and our goal is to maintain fiscal responsibility in all our affairs. Your decision will make us stronger financially well into the future. Thank you, Scott Lindeberg Sang Hee Lindeberg AGENDA ITEM#: 5 REPORT#: 25 ..gial STAFF REPORT RICHFIELD HOUSING AND REDEVELOPMENT AUTHORITY MEETING JUNE 18, 2012 REPORT PREPARED BY: CHRISTINE COSTELLO, COMMUNITY DEVELOPMENT SPECIALIST NAME,TITLE REPORT PRESENTER: JOHN STARK, COMMUNITY DEVELOPMENT DIRECTOR NAME,TITLE ACTING DEPARTMENT DIRECTOR fiat", A� -. 1a,■REVIEW: ✓�-�4i��.'.,-'�1-J,�_\ W ww d .-i REVIEWED BY EXECUTIVE DIRECTOR: [ f ITEM FOR HRA CONSIDERATION: Consideration of a motion directing staff to schedule a public hearing to consider the sale of 301 77th Street West (vacant Candlewood parcel) and consent to the land use application for LaMettry's Collision Inc. I. RECOMMENDED ACTION: By Motion: Direct staff to schedule a public hearing to consider the sale of 301 77th Street West (vacant Candlewood parcel) and consent to the application for a Comprehensive Plan Amendment, Conditional Use Permit and rezoning by LaMettry's Collision Inc. II. BACKGROUND The Richfield Housing and Redevelopment Authority (HRA) has owned 301 West 77th Street, often referred to as the vacant Candlewood parcel, since 1992. The parcel was originally part of a larger tract of land that had been a lumber yard. In 1998 the land was platted into two parcels and the southerly portion was sold to Candlewood Suites for the development of a hotel. The remaining parcel, retained by the HRA, has been vacant since the HRA's acquisition in 1992. Richfield Bloomington Honda (RB Honda) had previously expressed interest in the site for the construction of a showroom for leasing, charging, and servicing of 06182012-Consider Setting PH 301 West 77th St.doc electric vehicles. Since that time, RB Honda has met with LaMettry's Collision (located immediately to the west of RB Honda), to discuss purchasing LaMettry's current property to allow for the expansion and updating of the facility. This would allow RB Honda to meet Honda Corporation's dealership requirements and to remain competitive in the Honda market in the Twin Cities. LaMettry's has indicated a willingness to sell their property to RB Honda on the condition they would be able to purchase the HRA property for the development of a new facility. At the November 21, 2011 HRA worksession Rick LaMettry presented a proposal to purchase the vacant Candlewood lot for the development of a new collision-repair facility. At the worksession RB Honda stated they would be willing to opt out of their proposal for the site to allow for the sale to LaMettry's. Members of the HRA stated they would like to see and hear more information about this project. The Comprehensive Plan guides this site for High Density Residential Development and the property is zoned Mixed Use— Community (MU-C). While the MU-C District conditionally permits auto body repair shops, this use is inconsistent with the Comprehensive Plan designation. A change to either Regional Commercial or Regional Commercial/Office would be necessary. The necessary land use approvals require public hearings before the Planning Commission and the final approval of the City Council. Calling for the public hearing does not commit the HRA to approving the Purchase Agreement. The decision whether or not to approve the Purchase Agreement can only be made after the HRA has had an opportunity to fully consider the matter with public input at a public hearing. If the call for a public hearing is approved, the next steps would be: a) For the Planning Commission to hold a public hearing for the consideration of a Comprehensive Plan Amendment and a Planned Unit Development (PUD); b) For the City Council to hold a first reading of the rezoning; c) For the City Council to consider a Comprehensive Plan amendment and the second reading of the rezoning and PUD approval; and d) The holding of a public hearing by the HRA on July 16, 2012. III. BASIS OF RECOMMENDATION A. POLICY • A public hearing is required in order for the HRA to consider approval or denial of the Purchase Agreement for HRA-owned parcel (301 West 77th Street, vacant Candlewood parcel). B. CRITICAL TIMING ISSUES • LaMettry's PUD approval will be contingent upon them entering into a Purchase Agreement with the HRA to acquire the HRA-owned parcel. C. FINANCIAL • An appraisal was completed on this site on April 9, 2012 which estimated the market value at $675,000. • LaMettry's is offering $675,000 for the HRA-owned parcel. • LaMettry's would provide earnest money in the amount of$33,750 per the Purchase Agreement. D. LEGAL • The HRA would consider the sale and the proposed Purchase Agreement of 301 77th Street West at their July 16th meeting. IV. ALTERNATIVE RECOMNIENDATION(S) • Continue the consideration of a motion directing staff to schedule a public hearing to consider sale of 301 77th Street West (vacant Candlewood parcel) to LaMettry's Collision Inc. V. ATTACHMENTS • Proposed Purchase Agreement for the HRA-owned parcel. • Map VI. PRINCIPAL PARTIES EXPECTED AT MEETING • Representatives of LaMettry Collision, Inc. 5- 1 Draft June 7, 2012 PURCHASE AGREEMENT THIS AGREEMENT is made as of this day of , 2012, by and between the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota, a public body corporate and politic under the laws of the State of Minnesota ("Seller") and LaMettry's Collision, Inc., a Minnesota corporation, or its assigns ('Buyer"). RECITALS A. Seller is the owner of property which is legally described on the attached Exhibit A("Property"). B. Buyer wishes to purchase the Property in accordance with the provisions of this Agreement. AGREEMENT 1. Offer/Acceptance for Sale of Property. The Seller agrees to sell to the Buyer the Property and the Buyer agrees to purchase the same,according to the terms of this Agreement. 2. Purchase Price for Property and Terms. A. PURCHASE PRICE: The total Purchase Price for the Property is $675,000.00(the"Purchase Price"). B. TERMS: (1): EARNEST MONEY. The sum of $33,750.00 Earnest Money is paid herewith by the Buyer to the Seller. The balance of the Purchase Price shall be due on the date of closing (the"Closing Date") (2): BALANCE DUE SELLER: Buyer agrees to pay by electronic transfer of funds on the Closing Date any remaining balance due according to the terms of this Purchase Agreement. (3): DEED/MARKETABLE TITLE: Subject to performance by Buyer, Seller agrees to execute and deliver a Quitclaim Deed conveying title to the Property to Buyer, subject only to the following exceptions: a. Building and zoning laws, ordinances, state and federal regulations; 1 401090v5 JAE RC125-323 5 - a b. Reservation of minerals or mineral rights to the State of Minnesota, if any; c. Public utility and drainage easements of record which will not interfere with Buyer's intended use of the Property; and d. A Cross Access Easement Agreement, dated June 22, 1998 (the "Easement Agreement"), between the Seller and Candlewood Minneapolis, MN LLC. (4): DOCUMENTS TO BE DELIVERED AT CLOSING BY SELLER. In addition to the deed required at paragraph 2B(3) above, Seller shall deliver to the Buyer: a. Standard form Affidavit of Seller. b. A"bring-down" certificate, certifying that all of the warranties made by Seller in this Purchase Agreement remain true as of the Closing Date. c. Certificate that Seller is not a foreign national. d. Well disclosure certification,if required,or,if there is no well on the Property, the Deed given pursuant to paragraph 2B(4) above must include the following statement: "The Seller certifies that the Seller does not know of any wells on the described real property." e. Any other documents reasonably required by the Buyer's title insurance company or attorney to evidence that title to the Property is marketable and that Seller has complied with the terms of this Purchase Agreement. 3. Contingencies. Seller's obligation to sell, and Buyer's obligation to buy is contingent upon the following: a. Buyer's determination of marketable title pursuant to paragraph 4 of this Agreement; b. Buyer's determination, in its sole discretion, that the results of the environmental investigation under this Agreement are satisfactory to Buyer; c. Successful rezoning of the Property to Buyer's intended commercial use; d. If deemed necessary by the Buyer, the Buyer's ability to satisfactorily renegotiate the Easement Agreement(as described in Section 14 hereof); 2 401090v5 JAE RC125-323 e. Satisfactory evidence that Richfield Honda will purchase the property upon which the Buyer currently operates and that Richfield Honda will move forward with its plans to build a larger facility on such property and adjacent properties; f. Approval of this Agreement by the Board of Commissioners of the Housing and Redevelopment Authority in and for the City of Richfield (the "Board"); and g. The Board conducting a public hearing on the sale of the Property and approving such sale by resolution. Buyer and Seller shall have until the Closing Date to remove the foregoing contingencies. The contingencies listed in 3a, 3b, 3c, and 3d above are solely for the benefit of Buyer and may be waived by Buyer. The contingency listed in 3e above is solely for the benefit of Seller and may be waived by Seller. The contingencies listed in 3f and 3g may not be waived by either party. If one or more of Buyer's or Seller's contingencies is not satisfied, or is not satisfied on time, and is not waived, this Purchase Agreement shall thereupon be void at the written option of either party. In such event, Seller shall return the Earnest Money to Buyer, and Buyer and Seller shall execute and deliver to each other a termination of this Purchase Agreement. As a contingent Purchase Agreement, the termination of this Agreement is not required pursuant to Minnesota Statutes, Section 559.21, et. seq. 4. Title Examination/Curing Title Defects. The Buyer shall, at its expense and within a reasonable time after Seller's acceptance of this Agreement, obtain a commitment for title insurance ("Commitment") for the Property. The Buyer shall have ten (10) business days after receipt of the commitment and executed Purchase Agreement to examine the same and to deliver written objections to title, if any, to Seller, or Buyer's right to do so shall be deemed waived. Seller shall have the option, but not the obligation, until the Closing Date (or such later date as the parties may agree upon) to cure such objections, at the Seller's cost. In the event that Seller elects not to undertake a cure, or in the event title to the Property cannot be made marketable or is not made marketable by the Seller by the Closing Date, then, unless Buyer elects to proceed to closing without a cure to the objections, this Agreement may be terminated by either party. 5. Inspections; Environmental Investigation. From the date of this Agreement to the Closing Date, Buyer, its employees and agents, shall be entitled to enter upon the Property to conduct such surveying, inspections, investigations, soil borings and testing, and drilling, monitoring, sampling and testing of groundwater monitoring wells and conducting such other environmental examination and tests as Buyer deems necessary; provided, that Seller is given at least 48 hours' notice to Seller. Buyer shall promptly pay, before any lien attaches, all charges for costs incurred in connection with the work permitted under this Paragraph. Buyer agrees to indemnify the Seller against any liens, claims, losses, or damage occasioned by Buyer's exercise of 3 401090v5 JAE RC125-323 5-y its right to enter and work on the Property. Buyer agrees to provide Seller with a copy of any report as a result of such examination and tests. 6. Real Estate Taxes, Special Assessments, and Special Service District Charges. Real estate taxes, installments of special assessments, if any, and charges related to the Special Service District known as the Interstate/Lyndale/Nicollet Maintenance Area or the 77th Street Maintenance District payable in the year of closing will be pro-rated between the Buyer and Seller to the Closing Date. Seller shall pay all real estate taxes, installments of special assessments, and charges related to the Special Service District known as the Interstate/Lyndale/Nicollet Maintenance Area or the 77th Street Maintenance District due and payable in previous years. Buyer shall pay all real estate taxes, installments of special assessments, and charges related to the Special Service District known as the Interstate/Lyndale/Nicollet Maintenance Area or the 77th Street Maintenance District and due and payable after the year of closing. Seller also agrees to pay all assessments related to service charges furnished to the Property prior to the Closing Date (e.g., delinquent water or sewer bills), including those charges levied,pending,or certified to taxes payable in the year of closing. 7. Closing Date. The Closing Date will be on or before . Delivery of all purchase documents and the closing shall be made at the offices of the Seller, 6700 Portland Avenue South, Richfield, Minnesota 55423, or at such other location as is mutually agreed upon by the parties. All deliveries and notices to Seller shall be made to the above address and marked to the attention of John Stark, Community Development Director. 8. Property. (a) Condition of Property, removals. Seller has made no representations or warranties concerning the condition of the Property or of any improvements located thereon. Seller shall have no obligation to remove any items from the Property prior to the Closing Date; and Seller abandons any right title or interest in any items remaining on the Property following the Closing Date. (b) No encumbrances. Seller agrees not to place any liens or encumbrances on the Property after the date of this Purchase Agreement. 9. Well Disclosure. Seller has provided Buyer with a separate well disclosure statement and will provide a well disclosure certificate at closing. 10. Seller and Signatory Warranties. (a) Sewer and water. Seller does not warrant whether the Property is connected to the City sewer and water systems. (b) Mechanics' Liens. Seller warrants that, prior to the Closing Date, except costs for work furnished Buyer in accordance with Paragraph 13, Seller shall pay in full all amounts due for labor, materials, machinery, fixtures or tools furnished within the 120 days immediately preceding 4 401090v5 JAE RC125-323 the closing in connection with construction, alteration or repair of any structure upon or improvement to the Property. (c) Notices. Seller warrants that it has not received any notice from any governmental authority as to violation of any law, ordinance or regulation in connection with the Property. (d) Authority. Seller warrants that it is the owner of the Property, it has full authority to enter into this Purchase Agreement for the sale of the Property, and that there are no other parties who hold any unrecorded interest in the Property. 11. Broker Commission. Each party represents to the other that it has not utilized the services of any real estate broker or agent in connection with this Purchase Agreement or the transaction contemplated by this Purchase Agreement. Each party agrees to indemnify, defend, and hold harmless the other party against and in respect of any such obligation and liability based in any way upon agreements, arrangements, or understandings made or claimed to have been made by the party with any third person. 12. Closing Costs/Recording Fees/Deed Tax. The Buyer will pay: (a)the closing fees charged by the title insurance or other closing agent, if any, utilized to close the transaction contemplated by this Agreement; (b) the premium for title insurance policy, if any, obtained by the Buyer; and(c)any transfer taxes and recording fees required to enable the Buyer to record its deed from Seller under this Agreement. Seller will pay all other fees normally paid by sellers, including fees and charges related to the filing of any instrument required to make title marketable. Each party shall pay its own attorney fees. 13. Risk of Loss. If the Property is destroyed or substantially damaged before the Closing Date,this Purchase Agreement shall become null and void, at the Buyer's option. At the request of the Seller,Buyer agrees to sign a cancellation of Purchase Agreement. 14. Easement. The Property is subject to a Cross Access Easement Agreement, dated June 22, 1998 (the "Easement Agreement"), between the Seller and Candlewood Minneapolis, MN LLC that will continue to be in effect following the sale of the Property. The Easement Agreement grants the owner of the property directly south of the Property an access easement over the Property. Buyer has been provided and has reviewed a copy of the Easement Agreement. If Buyer wishes to renegotiate the Easement Agreement, it is solely the responsibility of Buyer to do so. As a condition of closing, Buyer must assume all of Seller's rights and responsibilities under the Easement Agreement. 15. Comprehensive Plan Amendment Consent. Seller hereby authorizes Buyer, at Buyer's sole cost and expense, to make application to the City for changes to the comprehensive plan of the City of Richfield or other land use changes that must be completed in order for Buyer to utilize the Property as contemplated. It is understood that any such changes will be effective only if the Property is sold to Buyer. 5 401090v5 JAE RC125-323 5-(4° 16. Notice.Any notice,demand,request or other communication which may or shall be given or served by the parties, shall be deemed to have been given or served on the date the same is personally served upon one of the following indicated recipients for notices or is deposited in the United States Mail, registered or certified, return receipt requested, postage prepaid and addressed as follows: (a) in the case of the Buyer, is addressed to or delivered personally to the Buyer at 3209 Galleria, Unit 1804, Minneapolis, MN 55435, Attn: Richard LaMettry; with a copy to Joel Seltz, 5001 Chowen Avenue South,Minneapolis,MN 55410. (b) in the case of the Seller, is addressed to or delivered personally to the Seller at 6700 Portland Ave. So., Richfield, MN 55423, Attn: Community Development Director; with a copy to Kennedy & Graven, Chartered, 470 U.S. Bank Plaza, 200 South Sixth Street, Minneapolis, MN 55402,Attn: Julie A. Eddington. 17. Map. Attached to this Agreement as Exhibit C is a map (the "Map") which locates the various parcels which are legally described in this Agreement. The Map is for convenience purposes only, and the legal descriptions contained in the other exhibits control. 18. Entire Agreement. This Purchase Agreement, the attached exhibit, and other amendments signed by the parties, shall constitute the entire Agreement between Seller and Buyer and supersedes any other written or oral agreements between the parties relating to the Property. This Purchase Agreement can be modified only in a writing properly signed on behalf of Seller and Buyer. 19. Survival. Notwithstanding any other provisions of law or court decision to the contrary,the provisions of this Purchase Agreement shall survive closing. IN WITNESS WHEREOF,the undersigned have executed this Agreement on the date and year above. HOUSING AND REDEVELOPMENT LAMETTRY'S COLLISION, INC. AUTHORITY IN AND FOR THE CITY OF RICHFIELD By: By: Its Chair Its: And by: Its Executive Director 6 401090v5 JAE RC125-323 5-1 EXHIBIT A LEGAL DESCRIPTION OF PROPERTY Lot 1, Block 1, Candlewood Hotel Addition A-1 401090v5 JAE RC 125-323 „ . 1 Fes.? . i. t ay,frn+r+> +r.. _ L; � I 9 it "IIIII,Mrt , # - - f . 4 p _ - ; ,.. • ° _ a !1 1' r eiLii i 6 ,.?�4, , � ' ;f; , i..EiIE. i1 8 LE b F r I i 0 /L% tit ,' q' F V., 1 $ , ``y C r 1' ti, :U ` `. C a V] . . . . . . 1 E__�" 'i' rr N. /. , i'•■ itf . , 4 ` .,A O f "±17-,—. i' . T it / 1., 4.+ri ` , T-3' a) i .....91,., ; :- ,, , ‘. ; ..c g 0_, ::. - -.- _ f 414 co el ' 4” ' j'''' 'w; .- ' i / 1 ° ."4:.'+I M rrt I/ ) Tyj I • p Z. . TD \' )1 P, � Jul I. L y '0 al 1 1414;t- P '- ' i L' 1 it bil ri_j . CD A., ✓ c r■. / Q r°" �x u"'i F ter.. ,f i4 'L'.nii iT 1r I C �' f Lf ? LL 1 EC�4"; l4 f ' 4i .' ii,- 44 �6 r . ill df 1 Gi! y1) fj c . 11 iie kit b 1 41, . ,,, , r, - 0 :',V-VI` a , Z -411111111(■ Ili ti - � 4kV u :J n l _ e- . i sillp" A' , y17 -m0P7-irt Villimilifingillikiiii- / AGENDA ITEM#: 6 REPORT#: 26 mralli STAFF REPORT RICHFIELD HOUSING AND REDEVELOPMENT AUTHORITY MEETING JUNE 18, 2012 REPORT PREPARED BY: CHRISTINE COSTELLO, COMMUNITY DEVELOPMENT SPECIALIST NAIvLE,TITLE REPORT PRESENTER: iiiv E,TITLE ACTING DEPARTMENT DIRECTOR a � � ; 2�REVIEW: � kA► vJ�l, 4t* iA ---- --*7 17.10;17" REVIEWED BY EXECUTIVE DIRECTOR: . i7 , 0 i / m 1`v ✓ -- ITEM FOR HRA CONSIDERATION: Consideration of proposed sale of land to Richfield Properties I, Limited Partnership (dba Ron Clark Construction and Design and Connelly Development). I. RECOMMENDED ACTION: By Motion: • Hold a public hearing with respect to sale of Housing and Redevelopment Authority property located at 211 West 76th Street; and • Reject the Purchase Agreement for the sale of Housing and Redevelopment Authority property located at 211 West 76th Street to Richfield Properties I, Limited Partnership. II. BACKGROUND On April 30th Richfield Properties I, Limited Partnership (Developer) submitted an application for a rezoning amendment (Industrial to Planned Multi-Family Residential), Planned Unit Development (PUD) approval, and preliminary plat approval for its proposed development (70-unit complex that includes 52 apartments and 18 townhomes) at 76th/77th Streets and Pleasant/Pillsbury Avenues. This application replaced a previous proposal that was withdrawn by the 06182012-PH Sale of 211 West 76th Street.doc Developer on April 3rd. The revised development proposal contemplated that Ron Clark would purchase three city parcels (designated as C-1, C-2 and C-3 on the attached map) as well as the former Gleason Mortuary parcel (211 West 76th Street) that is currently owned by the Richfield Housing and Redevelopment Authority (HRA). The Developer has an option on the City parcel C-3. At its June 12, 2012 meeting, the City Council rejected the Developer's offer to purchase Parcels C-1 and C-2. As a result, the Developer lacks the necessary property to complete the project as currently proposed. Sale of the HRA parcel to the Developer would create a patchwork of public and private ownership on the block that would inhibit rather than promote the HRA's goal for the entire block to redevelop. Staff recommends that the HRA reject the proposed sale for the reason that the Developer lacks control of adjacent properties necessary for the project as proposed. HRA members may have additional reasons for rejecting the proposed sale, which may include: • Proposed project does not meet the HRA's original vision of development for the parcel (density on the HRA portion of the property is only 11 units per acre; the development does not encompass the entire block, etc.). • Proposed project is inconsistent with some of the guidelines of the Corridor Housing Initiative (including exceeding 2-3 stories and exceeding "low to medium density" housing). • HRA wishes to study the appropriate mix of affordable and market rate housing for projects that receive public funding. • Desire to wait until the HRA property value appreciates. • Desire to wait until other housing models (i.e. for sale, different income mix, more townhomes, etc.) are more feasible. III. BASIS OF RECOMMENDATION A. POLICY • A public hearing is required prior to the HRA agreeing to sell property it owns. • The HRA must decide whether it is in the best interest of the public to sell the property under the terms offered. B. CRITICAL TIMING ISSUES • The purchase offer does not have an expiration date but may be withdrawn at any time prior to acceptance. C. FINANCIAL • The proposed Purchase Agreement provides for a purchase price of $183,912. • Ron Clark also submitted earnest money in the amount of$1,000 with the Purchase Agreement. • The property was purchased in 2001 for$630,000 plus relocation and legal fees. This value appears to have been based on an appraisal identifying the Highest and Best Use of the property as it existed at that time (a mortuary with 4 apartment units). • The appraisal for the property (dated June 8, 2011) estimates the market value at approximately $185,500. This appraisal assumes Medium/High Density (12-24 dwelling units per acre). Housing as the Highest and Best Use of the land; such a density would equate to 9-17 dwelling units on this site which is greater than the 8 units being proposed. • An independent review appraisal was completed on this site on March 15, 2012 which confirmed the conclusions of the 2011 appraisal. D. LEGAL • The HRA Attorney will be at the meeting to answer questions. • The HRA may go into closed session to consider offers or counteroffers. The meeting must be tape recorded, and the recording becomes public once negotiations are concluded. The Purchase Agreement can only be approved during a public meeting. W. ALTERNATIVE RECOMMENDATION(S) • None. V. ATTACHMENTS • Map showing parcel designations. • Purchase Agreement. VI. PRINCIPAL PARTIES EXPECTED AT MEETING • Representative(s) of Ron Clark Construction and Design • HRA Legal Counsel City- and HRA-Owned Parcels ,t.ses ILA. . Ile 604 ."-f 1:5: ., ,, ..._. _, ..,,, ,, ,,,,„..„ •; ". -r 4, . ,..,. _ ,. . . ,'...... , > ` k'` 1 • . I II 170 city � � _. . -',''.'*''' C a 1 • . 7.4 ,,,,,A t•,,., _,,,r -a.. • ' �] .y r '" -- 4-•. ... i• „ • :tea. .b li . a • Ftil ,,, • T •' -4 ■1.V ', 7.1 Illr HI; `,. ,. h }.. 4`• y 1414 ti ' - + r • _ 14 � to +r 11 . i 1 , �� r.i IA , tiCity ' 4 , k, -,, u a''flag lot' �; 'r k , if { • w _ C-2 i uj • r 4 Wit) Q 1 • ), r. .t. • r1 In _ tsA t '' - i3 ... t ., .. , .If a SIP I r + 1 11 .■ {{ i x ( RdM 1} ,P.PW .. • v fail, M !per, ,„lir.' '... - b.r; t'-'s••••. ...".. -a 4 ) ` •' ` '. .; rf xi :.iT - �- •1'.`. .:;.�.'., Vii'+' WI ■ (9-d RonClark Construction & Design 7500 West 786 Street Edina.MN 55439 (952)947-3000 fax(952)947-3030 Tuesday, May 08,2012 Mr. Steven Devich Executive Director City of Richfield Housing&Redevelopment Authority 6700 Portland Avenue Richfield,MN 55423 Re: Pillsbury Commons Subject: Land Purchase Agreement and Earnest Money for HRA Parcel H-1 Dear Mr. Devich, Attached is the purchase agreement for the HRA land. Please refer to Exhibit C of the purchase agreement which is a depiction o f the different parcels that make up the city block on which Pillsbury Commons is proposed. As a brief overview we are proposing to purchase the HRA owned parcel H-1. We currently have an option to purchase parcel C-3 from the City and we have already exercised that option to purchase. We also have issued a separate purchase agreement to the City for the additional City parcels C-1 and C-2. The square footage of each parcel was calculated by Hedlund Engineering Company,the project surveyor and engineer. The attached Land Value Calculation(Exhibit D)uses the total land value of $769,000 as appraised by the city's appraiser and it calculates the value of each parcel based on the square footage of the parcel. There is a slight difference between Hedlund's square footage calculations and the appraiser's square footage calculations, and therefore the value of each individual parcel may be slightly different than previously calculated;however,the total price of all parcels is at the appraised value,after deducting the value of the HRA single family lot H-2 which is not being purchased. We therefore request the sellers to adjust if desired the allocation of value for each parcel. Thank you. ,e;14.erlya cia41, 'onald E. Clark Chief Executive Officer • Connelly Development,LLC Attachments:Purchase Agreement,Exhibit C&D �,£d!attCt'F sp � MINT Builder License 4 122C uaEa° LEI www.RonCiarkcom 2008 Recipient ax ° 5/7/12 PURCHASE AGREEMENT THIS AGREEMENT is made as of this day of , 2012, by and between the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota, a public body corporate and politic under the laws of the State of Minnesota ("Seller") and Richfield Properties I,Limited Partnership,a Minnesota limited partnership C'Buyer"). RECITALS A. Seller is the owner of property which is legally described on the attached Exhibit A (the "Property"). The property is also depicted on the attached Exhibit C as parcel H-1. B. Buyer wishes to purchase the Property in accordance with the provisions of this Agreement. C. Buyer is also purchasing three separate parcels of land from the City of Richfield (the "City Property"). The City Property is legally described in Exhibit B. The three parcels are also depicted on the attached Exhibit C as parcels C-1, C-2, and C-3 AGREEMENT 1. Offer/Acceptance for Sale of Property. The Seller agrees to sell to the Buyer the Property and the Buyer agrees to purchase the same,according to the terms of this Agreement. 2. Purchase Price for Property and Terms. A. PURCHASE PRICE: The total Purchase Price for the Property is $183,912.00(the"Purchase Price"). B. TERMS: (1): EARNEST MONEY. The sum of $$1,000.00 is paid herewith by the Buyer to the Seller as Earnest Money. If closing does not occur, the Earnest Money will be returned to Buyer after first deducting amounts equal to the Seller's costs incurred in connection with this transaction. The balance of the Purchase Price shall be due on the date of closing (the "Closing Date"). (2): BALANCE DUE SELLER: Buyer agrees to pay by electronic transfer of funds on the Closing Date any remaining balance due according to the terms of this Purchase Agreement. 1 (3): DEED/MARKETABLE TITLE: Subject to performance by Buyer, Seller agrees to execute and deliver a Quitclaim Deed conveying title to the Property to Buyer, subject only to the following exceptions: a. Building and zoning laws, ordinances, state and federal regulations. b. Reservation of minerals or mineral rights to the State of Minnesota,if any. c. Public utility and drainage easements of record which will not interfere with Buyer's intended use of the Property. (4): DOCUMENTS TO BE DELIVERED AT CLOSING BY SELLER. In addition to the deed required at paragraph 2B(3) above, Seller shall deliver to the Buyer: a. Standard form Affidavit of Seller. b. A"bring-down"certificate, certifying that all of the warranties made by Seller in this Purchase Agreement remain true as of the Closing Date. c. Certificate that Seller is not a foreign national. d. Well disclosure certification,if required, or,if there is no well on the Property, the deed given pursuant to paragraph 2B(3) above must include the following statement: "The Seller certifies that the Seller does not know of any wells on the described real property." e. Any other documents reasonably required by the Buyer's title insurance company or attorney to evidence that title to the Property is marketable and that Seller has complied with the terms of this Purchase Agreement. 3. Contingencies. Seller's obligation to sell, and Buyer's obligation to buy is contingent upon the following: a. Buyer's determination of marketable title pursuant to paragraph 4 of this Agreement; b. Buyer's determination, in its sole discretion, that the results of the environmental investigation under this Agreement are satisfactory to Buyer; 2 6-5 c. Approval of this Agreement by the Board of Commissioners of the Housing and Redevelopment Authority in and for the City of Richfield (the`Board"); d. The Board conducting a public hearing on the sale of the Property and approving such sale by resolution; e. Buyer purchasing from the City of Richfield the City Property; with the closing on such purchase occurring simultaneously with the Closing on the Property; f. Buyer and Seller successfully negotiate and execute a contract for private development with respect to the development on the Property;and g. Buyer obtaining approvals from the City of Richfield of its applications for the development of the Property and the City Property, including its requested tax increment fmancing. Buyer shall have until the Closing Date to remove the foregoing contingencies. The contingencies at a. and b. are solely for the benefit of Buyer and may be waived by Buyer. The contingencies at c.,d.,e.,f.,and g.may not be waived by either party. If one or more of Buyer's or Seller's contingencies is not satisfied,or is not satisfied on time,and is not waived, this Purchase Agreement shall thereupon be void at the written option of either party. In such event, Seller shall return the Earnest Money to Buyer, and Buyer and Seller shall execute and deliver to each other a termination of this Purchase Agreement. As a contingent Purchase Agreement, the termination of this Agreement is not required pursuant to Minnesota Statutes, Section 559.21,et.seq. 4. Title Examination/Curing Title Defects. The Buyer shall, at its expense and within a reasonable time after Seller's acceptance of this Agreement, obtain a commitment for title insurance ("Commitment") for the Property. The Buyer shall have ten (10) business days after receipt of the Commitment to examine the same and to deliver written objections to title, if any, to Seller, or Buyer's right to do so shall be deemed waived. Seller shall have the option, but not the obligation, until the Closing Date (or such later date as the parties may agree upon) to cure such objections,at the Seller's cost. In the event that Seller elects not to undertake a cure,or in the event title to the Property cannot be made marketable or is not made marketable by the Seller by the Closing Date,then, unless Buyer elects to proceed to closing without a cure to the objections,this Agreement may be terminated by either party. 5. Inspections; Environmental Investigation. From the date of this Agreement to the Closing Date, Buyer, its employees and agents, shall be entitled to enter upon the Property to conduct such surveying, inspections, investigations, soil borings and testing, and drilling, monitoring, sampling and testing of groundwater monitoring wells and conducting such other environmental examination and tests as Buyer deems necessary; provided, that Seller is given at least 48 hours' notice to Seller. Buyer shall promptly pay, before any lien attaches, all charges 3 L9 r for costs incurred in connection with the work permitted under this Paragraph. Buyer agrees to indemnify the Seller against any liens,claims,losses,or damage occasioned by Buyer's exercise of its right to enter and work on the Property. Buyer agrees to provide Seller with a copy of any report as a result of such examination and tests. 6. Real Estate Taxes and Special Assessments. Real estate taxes, if any, payable in the year of closing will be pro-rated between the Buyer and Seller to the date of closing. Seller shall pay all real estate taxes payable in previous years, the entire unpaid balance of special assessments, and all installments of special assessments levied and pending, including special assessments payable after the year of closing. Seller also agrees to pay all assessments related to service charges furnished to the Property prior to the date of closing(e.g., delinquent water or sewer bills),including those charges levied,pending,or certified to taxes payable in the year of closing. 7. Closing Date. The Closing Date will be on or before November 30, 2012 concurrent with the closing of the Minnesota Housing Finance Agency ( MHFA ) tax credit financing for the project. Delivery of all purchase documents and the closing shall be made at the offices of the Seller, 6700 Portland Avenue South, Richfield, Minnesota 55423, or at such other location as is mutually agreed upon by the parties. All deliveries and notices to Seller shall be made to the above address and marked to the attention of John Stark, Community Development Director. 8. Property. (a) Condition of Property, removals. Seller has made no representations or warranties concerning the condition of the Property or of any improvements located thereon. Seller shall have no obligation to remove any items from the Property prior to the Closing Date; and Seller abandons any right,title, or interest in any items remaining on the Property following Closing. (b) No encumbrances. Seller agrees not to place any liens or encumbrances on the Property after the date of this Purchase Agreement. 9. Well Disclosure. Seller has provided Buyer with a separate well disclosure statement and will provide a well disclosure certificate at closing. 10. Seller and Signatory Warranties. (a) Sewer and water. Seller does not warrant whether the Property is connected to the City sewer and water systems. (b) Mechanics' Liens. Seller warrants that, prior to the Closing Date, except costs for work furnished Buyer in accordance with Paragraph 5, Seller shall pay in full all amounts due for labor, materials, machinery, fixtures or tools furnished within the 120 days immediately preceding the closing in connection with construction, alteration or repair of any structure upon or improvement to the Property. 4 (c) Notices. Seller warrants that it has not received any notice from any governmental authority as to violation of any law, ordinance or regulation in connection with the Property. (d) Authority. Seller warrants that it is the owner of the Property, it has full authority to enter into this Purchase Agreement for the sale of the Property, and that there are no other parties who hold any unrecorded interest in the Property. 11. Broker Commission. Each party represents to the other that it has not utilized the services of any real estate broker or agent in connection with this Purchase Agreement or the transaction contemplated by this Purchase Agreement. Each party agrees to indemnify, defend, and hold harmless the other party against and in respect of any such obligation and liability based in any way upon agreements,arrangements,or understandings made or claimed to have been made by the party with any third person. 12. Closing Costs/Recording Fees/Deed Tax. The Buyer will pay: (a)the closing fees charged by the title insurance or other closing agent, if any, utilized to close the transaction contemplated by this Agreement; (b) the premium for title insurance policy, if any, obtained by the Buyer; and(c)any transfer taxes and recording fees required to enable the Buyer to record its deed from Seller under this Agreement. Seller will pay all other fees normally paid by sellers, including fees and charges related to the filing of any instrument required to make title marketable.Each party shall pay its own attorney fees. 13. Risk of Loss. It there is any loss or damage to the Property between the date hereof and the date of closing, for any reason including fire, vandalism, flood, earthquake or act of God, the risk of loss shall be on the Seller. If the Property is destroyed or substantially damaged before the Closing Date, this Purchase Agreement shall become null and void, at the Buyer's option. At the request of the Seller, Buyer agrees to sign a cancellation of Purchase Agreement. 14. Notice.Any notice,demand,request or other communication which may or shall be given or served by the parties, shall be deemed to have been given or served on the date the same is personally served upon one of the following indicated recipients for notices or is deposited in the United States Mail, registered or certified, return receipt requested, postage prepaid and addressed as follows: (a) in the case of the Buyer, is addressed to or delivered personally to the Buyer at 7500 West 78th Street, Edina MN 55439, Attn: Ron Clark; with a copy to Larkin Hoffman Daly Lindgren Ltd., 7900 Xerxes Avenue South, 1500 Wells Fargo Plaza, Minneapolis, MN 55431, Attn:James M. Susag. (b) in the case of the Seller, is addressed to or delivered personally to the Seller at 6700 Portland Ave. So., Richfield, MN 55423, Attn: Community Development Director; with a copy to Kennedy & Graven, Chartered, 470 U.S. Bank Plaza, 200 South Sixth Street, Minneapolis,MN 55402,Attn:Julie A.Eddington. 5 15. Map. Attached to this Agreement as Exhibit C is a map (the "Map") which locates the various parcels which are legally described in this Agreement. The Map is for convenience purposes only,and the legal descriptions contained in the other exhibits control. 16. Entire Agreement. This Purchase Agreement, the attached exhibits, and other amendments signed by the parties, shall constitute the entire Agreement between Seller and Buyer and supersedes any other written or oral agreements between the parties relating to the Property. This Purchase Agreement can be modified only in a writing properly signed on behalf of Seller and Buyer. 17. Survival. Notwithstanding any other provisions of law or court decision to the contrary,the provisions of this Purchase Agreement shall survive closing. IN WITNESS WHEREOF,the undersigned have executed this Agreement on the date and year above. HOUSING AND REDEVELOPMENT RICHFIELD PROPERTIES I,LIMITED AUTHORITY IN AND FOR THE CITY OF PARTNERSHIP RICHFIELD By: By: Richfield Properties, LLC Its Chair It • General Partner By; C41--adCa, And by: Its:Chief Manager Its Executive Director 6 6-o EXHIBIT A Legal Description of Property [Legal to be inserted prior to execution] A-1 EXHIBIT B Legal Description of City Property [Legal to be inserted prior to execution] B-1 (p-- 1 1 b- 14 a est fa 11,1 te 1 si g tsi to:pi tz: ;,...;ti cr■ci fj I I fiK, .-- .- INI t.)V. ... Chl F .....■ -- --- ........- —..._ ........ ..-...... ......... -- 1 I-- — -- Qk . „ . . . . Yr ,• 0... 11 . 1 (1- Q. I kellix.No i : 1 I I ..i, .44 i411) 111 A "iv in t 2i -A II cl i d.— I , . , .. .../. . 4.)•,- ' I . • . . zn. I 3 < , , ..„ . I ,,, ,. • „. /" . i 1 . . . / I m < . . . .,. / . . . , . . . , . a) V) ••••., I . / 7" tJ 0 , . . . ., .. ...,, Et i..) ,.• , v • / i ... ;.2,..; I , . ...- / • .., ./ .• . .• ._ u-, • . I „.. 0., . , . 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N P. en CONNELLY DEVELOPMENT LLC 1932 (o- 13 5/08/12 5/8/12 EARNEST MONEY 1000.00 1000 .00 5/08/12 1932 1000. 00 1000. 00 1932 CONNELLY DEVELOPMENT LLC WELLS FARGO BANK,N.A. 7500 WEST 78TH STREET • EDINA,MN 55439 17-1-91� 952-947-3000 2 S Pay: ***************************************One thousl dollars and noAolms PAY May 8, 2012 1932 $******1, 000. 00 a TO THE ORDER CITY OF RICHFIELD 8 OF r /410/(2.-4.41/) AUTHORIZED SIGNATURE v00 L 9 3 211' 1:09 L0000 /91:38 2 70 7 20'RSn' AGENDA ITEM#: 7 REPORT#: 27 modal STAFF REPORT RIG-YIELD HOUSING AND REDEVELOPMENT AUTHORITY MEETING JUNE 18, 2012 REPORT PREPARED BY: CHRISTINE COS'1'ELLO, COMMUNITY DEVELOPMENT SPECIALIST NAME,TITLE REPORT PRESENTER: 1 ACTING DEPARTMENT DIRECTOR 1 1%. REVIEW: - �.� � J VW., f REVIEWED BY EXECUTIVE DIRECTO/ 'l , r „ _____ _, ._ ■ ITEM FOR BRA CONSIDERATION: Consideration of a Contract for Private Development with Richfield Properties I, Limited Partnership for the Pillsbury Commons development. I. RECOMMENDED ACTION: By Motion: Deny approval of attached Contract for Private Development with Richfield Properties I, Limited Partnership. II. BACKGROUND ' Richfield Properties I, Limited Partnership (working with Ron Clark Construction and Design and Connelly Development LLC (which is a wholly-owned entity of Ron Clark)) (Developer) has proposed to acquire and redevelop the former north half of the Public Works garage site located at 7641 Pleasant Avenue, along with the adjacent parcel at 211 West 76th Street (former Gleason Mortuary parcel) and an additional City-owned parcel at the corner of 76th Street and the railroad tracks. The proposed development includes a 70 unit affordable housing development that includes a 52-unit apartment building and 18 townhomes. 06182012-Development-agmnt Pillsbury Commons.doc The Housing and Redevelopment Authority (HRA) staff, legal counsel and representatives of the Developer and their legal counsel have cooperatively negotiated a proposed contract for HRA consideration. Among the more notable provisions in the proposed contract and TIF Plan (attached) are: • Minimum improvements include approximately 131,312 square foot multifamily housing complex containing 70 units of affordable housing: 52-unit apartment building and 18 townhomes; • Construction of the development must be substantially complete by December 31, 2014; • Due to the estimated cost of the acquisition and redevelopment, the Developer has identified a need for public assistance; and • Development requires purchase of HRA property located at 211 West 76th Street (former Gleason Mortuary parcel). At its June 12, 2012 meeting, the City Council rejected the Developer's offer to purchase two of the three City-owned parcels upon which the development is proposed to be built. As a result, the Developer lacks the necessary property to complete the housing development as currently contemplated in the Contract for Private Development. Staff recommends denying approval of the Contract for Private Development because the development contemplated in the Contract is no longer feasible. III. BASIS OF RECOMMENDATION A. POLICY • Developer must enter into a contract for private development with the HRA in order to receive tax increment assistance. B. CRITICAL TIMING ISSUES • N/A C. FINANCIAL • The Contract provides for$530,082 in tax increment assistance to be provided to the Developer in the form of a pay-as-you-go note from the HRA. • The terms of the proposed Contract require the Developer to pay the HRA's legal counsel costs, the HRA's financial consultant costs and other costs deemed necessary by HRA staff. D. LEGAL • HRA legal counsel drafted the proposed Contract in cooperation with staff, the Developer and the Developer's legal counsel. IV. ALTERNATIVE RECOMMENDATIONS) • N/A V. ATTACHMENTS • Contract for Private Development • Pillsbury Commons Three-Ring Binder (provided to you earlier) VI. PRINCIPAL PARTIES EXPECTED AT MEETING • HRA Legal Counsel • HRA Financial Analyst (Ehlers and Associates) • Representative(s) of Ron Clark Construction and Design DRAFT June 8,2012 Note This document is a draft, and, as such, is still being discussed and revised by Authority staff, its fiscal and legal consultants and the Developer and its counsel and consultants. It is not in final form, it has not been presented to the Authority Board for consideration, it has not been either reviewed or approved by the Authority Boar(L Every provision of the draft is subject to change in future drafts, every provision is subject to change or rejection at the time it is considered by the Authority Board, this draft should not be viewed as an indication or suggestion as to the official position of either the Authority or the Developer as to any matter contained herein. CONTRACT FOR PRIVATE DEVELOPMENT By and Between HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD,MINNESOTA and RICHFIELD PROPERTIES I,LIMITED PARTNERSHIP Dated: ,2012 This document was drafted by: KENNEDY&GRAVEN, Chartered(JBD) 470 U.S. Bank Plaza 200 South Sixth Street Minneapolis,Minnesota 55402 Telephone: 612-337-9300 TABLE OF CONTENTS Paae ARTICLE I: Definitions 2 ARTICLE II: Representations and Warranties 5 Section 2.1. Representations by the Authority 5 Section 2.2. Representations and Warranties by the Developer 6 ARTICLE III: Property Acquisition; Financing 8 Section 3.1. Development Property 8 Section 3.2. Authority Property 8 Section 3.3. Grants 9 Section 3.4. Issuance of Pay-As-You-Go Note 9 Section 3.5. Payment of Administrative Costs 10 Section 3.6. Records 10 Section 3.7. Purpose of Assistance 10 ARTICLE IV: Construction of Minimum Improvements 11 Section 4.1. Construction of Improvements 11 Section 4.2. Construction Plans 11 Section 4.3. Commencement and Completion of Construction 12 Section 4.4. Certificate of Completion 12 Section 4.5. Affordability Covenants; Qualification of the TIF District 12 Section 4.6. Affordable Housing Reporting 13 ARTICLE V: Insurance 14 Section 5.1. Insurance 14 Section 5.2. Subordination 15 ARTICLE VI: Tax Increment;Taxes 16 Section 6.1. Right to Collect Delinquent Taxes 16 Section 6.2. Reduction of Taxes 16 i 396011v8 JBD RC125-292 Page ARTICLE VII: Financing 17 Section 7.1. Mortgage Financing 17 Section 7.2. Authority's Option to Cure Default on Mortgage 17 Section 7.3. Modification; Subordination 17 Section 7.4. Termination 17 ARTICLE VIII: Prohibitions Against Assignment and Transfer;Indemnification 18 Section 8.1. Representation as to Development 18 Section 8.2. Prohibition Against Developer's Transfer of Property And Assignment of Agreement 18 Section 8.3. Release and Indemnification Covenants 19 ARTICLE IX: Events of Default 21 Section 9.1. Events of Default Prior to Completion 21 Section 9.2. Remedies on Default 21 Section 9.3. No Remedy Exclusive 21 Section 9.4. No Additional Waiver Implied by One Waiver 22 Section 9.5. Attorney Fees and Costs 22 ARTICLE X: Authority Development Requirements 23 Section 10.1. Renter Screening Criteria 23 Section 10.2. Crime-Free and Drug-Free Housing 23 ARTICLE XI: Additional Provisions 24 Section 11.1. Conflict of Interests;Authority Representatives Not Individually Liable 24 Section 11.2. Equal Employment Opportunity 24 Section 11.3. Restrictions on Use 24 Section 11.4. Provisions Not Merged with Deed 24 Section 11.5. Titles of Articles and Sections 24 Section 11.6. Notice and Demands 24 Section 11.7. Counterparts 25 Section 11.8. Recording 25 Signature Pages. S-1 ii 396011v8 JBD RC125-292 SCHEDULE A: Development Property Description SCHEDULE B: Authorizing Resolution SCHEDULE C: Certificate of Completion SCHEDULE D: Application Criteria Disclosure Agreement SCHEDULE E: Lease Addendum for Crime-Free/Drug Free Housing SCHEDULE F: Form of Investment Letter iii 39601Iv8 JBD RC125-292 CONTRACT FOR PRIVATE DEVELOPMENT THIS CONTRACT FOR PRIVATE DEVELOPMENT, made as of , by and between the HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD,MINNESOTA, a public body corporate and politic under the laws of the State of Minnesota (the "Authority"), and RICHFIELD PROPERTIES I,LIMITED PARTNERSHIP,a Minnesota limited partnership(the"Developer"). WITNES SETH: WHEREAS,the Authority was created pursuant to Minnesota Statutes, Sections 469.001 to 469.047, as amended (the "HRA Act") and was authorized to transact business and exercise its powers by a resolution of the City Council of the City of Richfield("City"); and WHEREAS, the Authority has undertaken a program to promote redevelopment and development of land that is underused or underutilized within the City, and in this connection the Authority administers a redevelopment project known as the Richfield Redevelopment Project ("Redevelopment Project")pursuant to the HRA Act; and WHEREAS, pursuant to the HRA Act, the Authority is authorized to acquire real property, or interests therein, and to undertake certain activities to facilitate the redevelopment of real property by private enterprise and promote the development of affordable housing within the City; and WHEREAS, within the Redevelopment Project, the Authority has created a tax increment district to be known as 2012-1 Housing Tax Increment Financing District (Pillsbury Commons) ("TIF District') in order to facilitate redevelopment of certain property in the Redevelopment Project and promote the development of affordable housing within the City; and WHEREAS, the Developer proposes to acquire certain property (the "Development Property") within the Tit" District and construct a 70-unit multifamily housing complex (the "Minimum Improvements") that will comply with the affordability covenants contained in Section 4.5 of this Agreement;and WHEREAS, in order to achieve the objectives of the Redevelopment Plan for the Redevelopment Project and make the Minimum Improvements economically feasible for the Developer to construct, the Authority is prepared to provide the Developer with assistance in the form of tax increment generated from the Development Property as herein provided;and WHEREAS,the Authority believes that the development of the'1'W District pursuant to this Agreement,and fulfillment generally of this Agreement,are in the vital and best interests of the City and the health, safety, morals, and welfare of its residents, and in accord with the public purposes and provisions of the applicable State and local laws and requirements under which the Redevelopment Project has been undertaken and is being assisted. NOW, THEREFORE, in consideration of the premises and the mutual obligations of the parties hereto,each of them does hereby covenant and agree with the other as follows: 1 396011v8 JBD RC125-292 ARTICLE I Definitions Section 1.1. Defmitions. In this Agreement, unless a different meaning clearly appears from the context: "Agreement" means this Contract for Private Development, as the same may be from time to time modified,amended,or supplemented. "Authority" means the Housing and Redevelopment Authority in and for the City of Richfield,Minnesota. "Authority Property" means the property owned by the Authority and legally described in Schedule A. "Authority Representative"means the Executive Director of the Authority. "Available Tax Increment"means,on each Payment Date,Tax Increment attributable to the Development Property determined as a percentage of the increase in the base value of the TIF District to the increase of the base value of the Development Property, and paid to the Authority by Hennepin County in the six months preceding the Payment Date after first deducting therefrom ten percent of the Tax Increment to be used to reimburse the Authority for administrative expenses incurred after completion of construction of the Minimum Improvements. Available Tax Increment shall not include any Tax Increment if, as of any Payment Date, there is an uncured Event of Default for which the remedy of withholding payments of tax increment is provided under Section 9.2. "Board"means the Board of Commissioners of the Authority. "Certificate of Completion" means the certification provided to the Developer pursuant to Section 4.4 of this Agreement. "City"means the City of Richfield,Minnesota. "Closing" means the gathering at which the Developer receives the deed to the portion of the Development Property owned by the City from the City, the deed to the portion of the Development Property owned by the Authority from the Authority, and the Note from the Authority, along with any other documents required in connection with those activities, or required in this Agreement or any agreements between the Developer and the City to be delivered at Closing. "Construction Plans" means the plans, specifications, drawings and related documents on the construction work to be performed by the Developer on the Development Property, including the Minimum Improvements, which (a) shall be as detailed as the plans, specifications, drawings and related documents which are submitted to the appropriate building officials of the City, and (b) shall include at least the following: (1) site plan; (2) foundation plan; (3) floor plan for each floor; (4) cross sections of each(length and width); (5) elevations (all sides,including a building materials schedule); (6) landscape and grading plan; and(7) such other plans or supplements to the foregoing 2 396011v8 JBD RC125-292 plans as the City may reasonably request to allow it to ascertain the nature and quality of the proposed construction work. "County"means Hennepin County,Minnesota. "Developer" means Richfield Properties I, Limited Partnership, or its permitted successors and assigns. "Development Property" means the real property described in Schedule A of this Agreement. "Event of Default"means an action by a party listed in Article IX of this Agreement. "Holder"means the owner of a Mortgage. "HRA Act"means Minnesota Statutes, Sections 469.001 to 469.047,as amended. "Material Change" means a change in construction plans that materially adversely affects generation of tax increment or changes the number of units of rental housing. "Maturity Date" means the date that the Authority will no longer be entitled to receive tax increment from the Tax Increment District. "Minimum Improvements" means the development on the Development Property of an approximately 131,312 square foot multifamily housing complex containing 70 units of housing, including units that will comply with the affordability covenants contained in Section 4.5 of this Agreement. "Mortgage" means any mortgage made by the Developer which is secured, in whole or in part, with the Development Property and which is a permitted encumbrance pursuant to the provisions of Article VII of this Agreement. "Project Area"means the real property located within the boundaries of the Redevelopment Project. "Redevelopment Plan" means the Redevelopment Plan for the Redevelopment Project as approved and adopted by the Authority and the City Council of the City,and as modified from time to time. "Redevelopment Project"means the Richfield Redevelopment Project. "State"means the State of Minnesota. "Tax Increment"means that portion of the real property taxes which is paid with respect to the TIF District and which is remitted to the Authority as tax increment pursuant to the Tax Increment Act. "Tax Increment Act" or "'l'ipi` Act" means the Tax Increment Financing Act, Minnesota Statutes, Sections 469.174 to 469.1799,as amended. 3 396011v8 JBD RC125-292 "Tax Increment District"or"TIF District"means 2012-1 Housing Tax Increment Financing District(Pillsbury Commons), a housing tax increment district which,when established will include the Development Property. "Tax Increment Plan" or "TIF Plan" means the Tax Increment Financing Plan for Tax Increment District,and as it may be amended. "Tax Official" means any County assessor; County auditor; County or State board of equalization, the commissioner of revenue of the State, or any State or federal district court,the tax court of the State,or the State Supreme Court. "Unavoidable Delays" means any delay beyond the reasonable control of the party seeking to be excused as a result thereof, including, without limitation, delays which are the direct result of strikes, other labor troubles, prolonged adverse weather or acts of God, fire or other casualty to the Minimum Improvements, litigation commenced by third parties which, by injunction or other similar judicial action, directly results in delays, or acts of any federal, state or local governmental unit(other than the Authority in exercising its rights under this Agreement) which directly result in delays. (The remainder of this page is intentionally left blank.) 4 396011v8 JBD RC125-292 ARTICLE II Representations and Warranties Section 2.1. Representations by the Authority. The Authority makes the following representations as the basis for the undertaking on its part herein contained: (a) The Authority is a housing and redevelopment authority organized and existing under the laws of the State. Under the provisions of the Act, the Authority has the power to enter into this Agreement and carry out its obligations hereunder, and execution of this Agreement has been duly,properly and validly authorized by the Authority. (b) Based solely on advice of its counsel, the Authority has followed all of the procedures required for the establishment of the TIF District, and will duly request certification at the appropriate time. (c) The Authority proposes to assist in financing certain land acquisition costs, environmental cleanup costs, site improvement costs, and other costs eligible under the TIF Act and TIF Plan necessary to facilitate the construction of the Minimum Improvements in accordance with the terms of this Agreement to further the objectives of the Redevelopment Plan. (d) The Authority finds that the Minimum Improvements are necessary to alleviate a shortage of, and maintain existing supplies of, decent, safe, and sanitary housing for persons of low or moderate income and their families as such income is determined by the Authority. (e) The execution, delivery and performance of this Agreement and of any other documents or instruments required pursuant to this Agreement by the Authority, and consummation of the transactions contemplated therein and the fulfillment of the terms thereof, do not and will not conflict with or constitute a breach of or default under any existing(i) indenture,mortgage, deed of trust or other agreement or instrument to which the Authority is a party or by which the Authority or any of its property is or may be bound; or (ii)legislative act, constitution or other proceedings establishing or relating to the establishment of the Authority or its officers or its resolutions. This representation does not apply to any recorded interests of third parties to or in the Development Property. (f) There is not pending, nor to the best of the Authority's knowledge is there threatened, any suit, action or proceeding against the Authority before any court, arbitrator, administrative agency or other governmental authority that materially and adversely affects the validity of any of the transactions contemplated hereby, the ability of the Authority to perform its obligations hereunder,or the validity or enforcement of this Agreement. (g) No commissioner of the Board of the Authority or officer of the Authority has either a direct or indirect financial interest in this Agreement, nor will any commissioner or officer benefit financially from the Agreement within the meaning of Minnesota Statutes, Section 469.009. (h) The Authority will assist and reasonably cooperate with any local, state or federal environmental law or land use regulation or development review procedure applicable to the Development Property, however, this provision does not obligate the Authority to surrender the 5 396011v8 JBD RC125-292 exercise of its legislative discretion, or to incur costs except when the incurring of such costs is otherwise provided in this Agreement or elsewhere. Section 2.2. Representations and Warranties by the Developer. The Developer represents and warrants that: (a) The Developer is a business corporation duly organized and in good standing under the laws of the State, is duly authorized to transact business within the State, and has the power to enter into this Agreement. (b) The Developer will construct, operate and maintain the Minimum Improvements in accordance with the terms of this Agreement, Redevelopment Plan and all local, state and federal laws and regulations(including,but not limited to, environmental, zoning,building code and public health laws and regulations). Without limiting the forgoing, Developer acknowledges that it shall have the responsibility, and bear the cost, of obtaining all necessary land use approvals including, without limitation, comprehensive plan amendments,rezonings,zoning text amendments,variances and conditional use permits. (c) The Developer will obtain, in a timely manner, all required permits, licenses and approvals, and will meet, in a timely manner, all requirements of all applicable local, state and federal laws and regulations which must be obtained or met before the Minimum Improvements may be lawfully constructed. The Developer has not previously obtained, and will not obtain a building permit for any portion of the Minimum Improvements before the date of approval of the 111' Plan for the TIF District. (d) Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement is prevented, limited by or conflicts with or results in a breach of,the terms, conditions or provisions of any corporate restriction or any evidences of indebtedness, agreement or instrument of whatever nature to which the Developer is now a party or by which it is bound,or constitutes a default under any of the foregoing. (e) The proposed development by the Developer hereunder would not occur but for the tax increment financing assistance being provided by the Authority hereunder. (f) The Developer shall promptly advise the Authority in writing of all litigation or claims affecting any part of the Minimum Improvements and all written complaints and charges made by any governmental authority materially affecting the Minimum Improvements or materially affecting Developer or its business which may delay or require changes in construction of the Minimum Improvements. (g) The TIF Act requires that no more than 20% of the square footage of the Minimum Improvements consist of commercial, retail or other nonresidential use. The Developer represents that there will be no commercial,retail or other nonresidential uses in the Minimum Improvements. (h) The Developer represents that it is aware that the Authority makes no representations or warranties regarding the TIF District other than those contained in Section 2.1 (b); and further represents that it understands (i) that activities by the Developer, following the creation of the District, which are not in conformity with the TIF Act may result in the termination 6 396011v8 JBD RC125-292 of the '[IF District and the termination of any Tax Increment; and (ii) that the amount of Available Tax Increment will be reduced as the result of a reduction of the net tax capacity of parcels in the TIF District (including those not constituting the Development Property) below the original net tax capacity for those parcels. (The remainder of this page is intentionally left blank.) 7 396011v8 JBD RC125-292 ARTICLE III Property Acquisition; Financing Section 3.1. Development Property. A portion of the Development Property is currently owned by the City and a portion of the Development Property is owned by the Authority. The Developer will be responsible for acquiring the portion of the Development Property currently owned by the City, and paying to the City all consideration required by the City for the sale. The Developer will also be responsible for securing any right of entry permission needed from the City in order for Developer to conduct environmental and geotechnical testing and other tests or examinations deemed necessary by Developer in evaluating the purchase of the Development Property. The Authority has no obligation to acquire the Development Property or any portion thereof, and has played no role in any acquisition Developer's activities except as described in Section 3.2. If the Closing on the purchase of the Development Property, unless extended by mutual agreement of the parties, has not taken place by June 30, 2013, either party may declare this Agreement null and void, whereupon, the parties will be relieved and discharged from any further obligation hereunder. Notwithstanding the preceding sentence, the Authority agrees that that date will be automatically extended to the closing date under the Option Agreement if the Developer extends the closing date under the Option Agreement with the City dated June 15,2011. The Authority will cooperate with Developer in Developer's activities under this Section, provided that the Authority's cooperation will be without cost to the Authority, and will not compromise the legislative judgment of the Authority. Section 3.2. Authority Property. One of the parcels of land comprising the Development Property is owned by the Authority and is described and shown as such on Schedule A. Subject to all of the terms of this Agreement, at the Closing, the Authority will transfer title to the Authority Property to the Developer by quit claim deed. (a) The Authority Property will be conveyed "as-is" and "where-is". Within 30 days following execution of this Agreement the Authority will provide the Developer with a commitment for title insurance from a title insurance company acceptable to Developer. The Authority will be responsible for the cost of preparation of the commitment,but the Developer will be responsible for obtaining a policy of title insurance. Without limitation,the Developer is responsible for satisfying itself as to matters such as contamination, soils and soil stability, title and survey. The Authority shall have no obligation to cure any defect or other matter other than liens or other monetary encumbrances incurred by the Authority, but agrees to cooperate, at no cost or expense to it, in any efforts by Developer to achieve such a cure. (b) At the Closing,the Authority will,upon payment by Developer of the purchase price of$ , execute and deliver to the Developer the following, in form and content reasonably acceptable to the Developer: i. A Quit Claim Deed conveying the Authority Property to the Developer. ii. A non-foreign affidavit, properly executed, containing such information as is required by Internal Revenue Code section 1445(b)(2)and its regulations. iii. A standard form Seller's Affidavit. 8 396011v8 JBD RC125-292 iv. A Well Certificate in the form required by law. v. Any affidavit and disclosures required by law pertaining to private sewage treatment systems or otherwise required by law. (c) The Developer acknowledges that the Authority will be conveying the Authority Property to the Developer for a cash payment of$ , which the parties acknowledge to be the fair market value of the Authority Property. (d) The Closing will not take place until the Developer has obtained all necessary land use approvals from the City, and has met any requirements of the City regarding subdivision of the Development Property. Section 3.3. Grants. The Authority agrees, at no expense to it, to cooperate with efforts of Developer to obtain grants and other funding from government agencies to assist in construction of the Minimum Improvements or site preparation activities. The Authority will also cooperate with the City and Developer in securing similar funding for the purpose of construction of infrastructure improvements. Section 3.4. Issuance of Pay-As-You-Go Note. (a) To reimburse the Developer for a portion of certain land acquisition, environmental cleanup, site preparation costs, and other costs eligible under the TIF Act and the TIF Plan incurred by the Developer, at Closing, the Authority shall issue and deliver and the Developer shall purchase the Note in substantially the form set forth in the Authorizing Resolution attached as Schedule B but subject to the terms of Section 3.4(b). The principal amount of the Note will be established based upon the estimate of Available Tax Increment generated by the estimated market value of the Development Property over the duration of the TIF District. The Authority and the Developer agree that the consideration from the Developer for the purchase of the Note shall consist of the Developer's payment of certain land acquisition, environmental cleanup, site preparation costs,and other costs eligible under the TIF Act and the TIF Plan as described above incurred by the Developer in at least the principal amount of the Note. The Authority will not enter a Principal Advance as to the Note on the Principal Advance Ledger (as such term is defined in the Note) until the Developer has supplied the Authority with information reasonably required by the Authority to determine that such costs have been incurred by Developer. The Authority shall deliver the Note upon delivery by the Developer of an investment letter reasonably acceptable to the Authority. (b) The Developer understands and acknowledges that the Authority makes no representations or warranties regarding the amount of Available Tax Increment, or that revenues pledged to the Note will be sufficient to pay the principal of and interest on the Note. Any estimates of Tax Increment prepared by the Authority or its financial advisors in connection with the TIF District or this Agreement are for the benefit of the Authority, and are not intended as representations on which the Developer may rely. (c) The Authority acknowledges that the Developer may assign the Note to a lender that provides part of the fmancing for the acquisition of the Development Property or the construction of the Minimum Improvements. The Authority also agrees that future assignments of the Note may be approved by the Executive Director without action of the Board, upon the receipt of an investment 9 396011v8 JBD RC125-292 letter in substantially the form attached as Schedule F or other investment letter reasonably acceptable to the Executive Director,'upon review by Authority counsel,from such assignees. (d) The Note will not be issued and delivered to the Developer until each of the following have occurred: (i) the Developer has obtained title to the Development Property; (ii) all land use approvals necessary for construction and use of the Minimum Improvements have taken place; and (iii) the Developer has complied with any requirements of the City with respect to platting or subdividing the Development Property. (e) If all the preconditions to issuance of the Note have not occurred by June 30, 2013, or extended by mutual agreement of the parties, this Agreement will, upon notice from any party to the other party, be null and void without the need for further actions by either party, and the parties will thereupon be relieved of any further obligation hereunder. Section 3.5. Payment of Administrative Costs. As a precondition to execution of this Agreement by the Authority, the Developer has previously deposited with the Authority funds as required by the Authority. The Authority will use such deposit to pay "Administrative Costs," which term means out of pocket costs incurred by the Authority,together with staff costs and costs for the service of its consultants, including legal and fiscal advisors attributable to or incurred in connection with the negotiation, preparation or modification of this Agreement, the TIF Plan, the Redevelopment Plan and other documents and agreements in connection with the establishment or modification of the TIF District and development of the Development Property, and not previously paid by Developer. At Developer's request, but no more often than monthly, the Authority will provide Developer with a written report including invoices, time sheets or other comparable evidence of expenditures for Administrative Costs and the outstanding balance of funds deposited. If at any times that the unexpended amount of the deposit is less than $2,000, the Authority may notify the Developer in writing, and Developer shall have 10 business days to deposit additional funds so that the unexpended amount is $5,000. If the additional deposit is not made within such period,the Authority may,in addition to any remedy available under Section 9.2, cease all activities in connection with the Development until the deposit is made. If Administrative Costs incurred,and reasonably anticipated to be incurred are less than the remaining deposit by the Developer, the Authority shall return to the Developer any funds not anticipated to be needed. Section 3.6. Records. The Authority and its representatives shall have the right at all reasonable times after reasonable notice to inspect, examine and copy all books and records of Developer relating to the Minimum Improvements and the costs for which the Developer has been reimbursed with Tax Increment. Section 3.7. Purpose of Assistance. The parties agree and understand that the purpose of the Authority's financial assistance to the Developer is to facilitate development of affordable residential rental housing for persons of low and moderate income, and is not a"business subsidy" within the meaning of Minnesota Statutes, Sections 116J.993 to 1161995. 10 396011v8 JBD RC125-292 ARTICLE IV Construction of Minimum Improvements Section 4.1. Construction of Improvements. Provided that the Developer acquires the Development Property, the Developer agrees that it will construct the Minimum Improvements on the Development Property substantially in accordance with the Construction Plans as approved pursuant to Section 4.2, and at all times prior to the Maturity Date, will operate and maintain, preserve and keep the Minimum Improvements or cause such improvements to be maintained, preserved and kept with the appurtenances and every part and parcel thereof, in good repair and condition. The Authority shall have no obligation to operate or maintain the Minimum Improvements. Section 4.2. Construction Plans. (a) Before commencement of construction of the Minimum Improvements,the Developer shall submit the Construction Plans to the Authority. The Authority Representative will approve the Construction Plans in writing if: (i) the Construction Plans conform to the terms and conditions of this Agreement; (ii)the Construction Plans conform to the goals and objectives of the Redevelopment Plan; (iii) the Construction Plans conform to all applicable federal, state and local laws, ordinances, rules and regulations; (iv) the Construction Plans are adequate to provide for construction of the Minimum Improvements; (v)the Construction Plans do not provide for expenditures in excess of the funds available to the Developer from all sources (including any deferred Developer fee and equity) for construction of the Minimum Improvements; (vi)the Construction Plans provide for the construction of Minimum Improvements having an estimated market value, including land, of at least$6,582,941 and(vii)no uncured Event of Default has occurred. Approval may be based upon a review by the City's Building Official of the Construction Plans. No approval by the Authority Representative shall relieve the Developer of the obligation to comply with the terms of this Agreement or of the Redevelopment Plan,applicable federal, state and local laws, ordinances, rules and regulations, or to construct the Minimum Improvements in accordance therewith. No approval by the Authority Representative shall constitute a waiver of an Event of Default. If approval of the Construction Plans is requested by the Developer in writing at the time of submission, such Construction Plans shall be deemed approved unless rejected in writing by the Authority Representative, in whole or in part. Such rejections shall set forth in detail the reasons therefore, and shall be made within 30 days after the date of their receipt by the Authority. If the Authority Representative rejects any Construction Plans in whole or in part,the Developer shall submit new or corrected Construction Plans within 30 days after written notification to the Developer of the rejection. The provisions of this Section relating to approval, rejection and resubmission of corrected Construction Plans shall continue to apply until the Construction Plans have been approved by the Authority. The Authority Representative's approval shall not be unreasonably withheld, delayed or conditioned. Said approval shall constitute a conclusive determination that the Construction Plans (and the Minimum Improvements constructed in accordance with said plans) comply to the Authority's satisfaction with the provisions of this Agreement relating thereto. (b) If the Developer desires to make any Material Change in the Construction Plans after their approval by the Authority, the Developer shall submit the proposed change to the Authority for its approval. If the Construction Plans, as modified by the proposed change, conform to the requirements of this Section 4.2 of this Agreement with respect to such previously approved Construction Plans, the Authority shall approve the proposed change and notify the Developer in writing of its approval. Such change in the Construction Plans shall, in any event, be deemed 11 396011v8 JBD RC125-292 approved by the Authority unless rejected, in whole or in part,by written notice by the Authority to the Developer, setting forth in detail the reasons therefor. Such rejection shall be made within 30 days after receipt of the notice of such change. The Authority's approval of any such change in the Construction Plans may be conditioned on amendment to provisions of this Agreement if such amendments will mitigate the materiality of such proposed changes. Section 4.3. Commencement and Completion of Construction. Subject to Unavoidable Delays, the Developer will substantially complete construction of the Minimum Improvements by December 31, 2014. All work with respect to the Minimum Improvements to be constructed or provided by the Developer on the Development Property shall be in substantial conformity with the Construction Plans as submitted by the Developer and approved by the Authority. The Developer agrees for itself,its successors and assigns, and every successor in interest to the Development Property, or any part thereof,that the Developer, and, subject to the subordination provisions in Section 7.3, such successors and assigns,shall promptly begin and diligently prosecute to completion the development of the Development Property through the construction of the Minimum Improvements thereon. Section 4.4. Certificate of Completion. (a) Promptly after completion of the Minimum Improvements substantially in accordance with those provisions of the Agreement relating solely to the obligations of the Developer to construct the Minimum Improvements (including the dates for beginning and completion thereof), the Authority Representative is authorized to furnish the Developer with a Certificate of Completion shown as Schedule C. The Authority agrees that a Certificate of Completion will not be withheld if exterior Minimum Improvements cannot be completed by the Developer due to inclement weather if: (i) a certificate of occupancy has been issued by the building official, and (ii) funds have been escrowed with the construction lender sufficient to cover the cost of completion of the uncompleted exterior Minimum Improvements. (b) If the Authority Representative shall refuse or fail to provide any certification in accordance with the provisions of this Section 4.4 of this Agreement, the Authority Representative shall, within thirty (30) days after written request by the Developer, provide the Developer with a written statement, indicating in adequate detail in what respects the Developer has failed to complete the Minimum Improvements in accordance with the provisions of the Agreement, or is otherwise in default, and what measures or acts will be necessary, in the opinion of the Authority, for the Developer to take or perform in order to obtain such certification. (c) Regardless of whether a Certificate of Completion is issued by the Authority, the construction of the Minimum Improvements shall be deemed to be complete upon issuance of a certificate of occupancy by the City. Section 4.5. Affordability Covenants; Qualification of the TIF District. The City and the Developer understand and agree that the TIF District constitutes a"housing district"under Section 469.174, Subdivision 11 and Section 469.1761 of the TIF Act. In that regard,Developer agrees that the Minimum Improvements are subject to the following affordability covenants: (a) At all times from initial occupancy of the Minimum Improvements through the date that the District is decertified, the Minimum Improvements must comply with Section 469.1761, Subdivision 3 of the TIF Act, which requires that the Minimum Improvements satisfy the income requirements for a qualified residential rental project as deemed in Section 142(d) of the Internal 12 396011v8 JBD RC125-292 Revenue Code. Those income requirements are either (i) 20% or more of the residential units are occupied by individuals whose income is 50%or less of the area's median gross income,or(ii)40% or more of the residential units are occupied by individuals whose income is 60% or less of the area's median gross income. (b) In consideration of the financial assistance provided by this Agreement (from tax increment),the Developer represents and covenants that from the date the Minimum Improvements are completed through the date the District is decertified, the rent charged for each of the income- restricted units shall not exceed the maximum rent that is determined by the Minnesota Housing Finance Agency (or any successor entity) to be affordable to persons who meet the income restrictions set forth in this Section. (c) If the Authority or the City receives notice from the State Department of Revenue, the State Auditor, any Tax Official or any court of competent jurisdiction that the'1'W District does not qualify as a "housing district," such event shall be deemed an Event of Default under this Agreement; provided, however, that the Authority may not exercise any remedy under this Agreement so long as such determination is being contested and has not been finally adjudicated. In addition to any remedies available to the Authority and the City under Article IX hereof, the Developer hereby agrees to indemnify, defend and hold harmless the Authority and the City for any damages or costs resulting therefrom to the extent such damages or costs are not caused by the Authority or the City. Section 4.6. Affordable Housing Reporting. At least annually, no later than April 1 of each year commencing on the April 1 first following the issuance of the Certificate of Completion, the Developer shall provide a report to the Authority evidencing that the Developer complied with the income and rent affordability covenants set forth in Section 4.5 hereof during the previous calendar year. The income affordability reporting shall be on the form entitled "Tenant Income Certification" from the Minnesota Housing Finance Agency (MHFA HTC Form 14), or if unavailable, any similar form. The rent affordability reporting shall be in the form of a certification from the Developer to the effect that it has met the rent affordability requirements of Section 4.5 for the period. The Authority may require the Developer to provide additional information in order to access the accuracy of such certification. Unless earlier excused by the Authority, the Developer shall send affordable housing reports to the Authority until the date of decertification of the '11F District. If Developer is sending reports to other agencies regarding low income requirements which contain the information required in this section, then the reporting requirement will be satisfied for the periods covered in such reports if the Developer sends copies of such.reports to the Authority. (The remainder of this page is intentionally left blank.) 13 396011v8 JBD RC125-292 ARTICLE V Insurance Section 5.1. Insurance. (a)The Developer will provide and maintain at all times during the process of constructing the Minimum Improvements an All Risk Broad Form Basis Insurance Policy and, from time to time during that period, at the request of the Authority, furnish the Authority with proof of payment of premiums on policies covering the following: (i) Builder's risk insurance, written on the so-called `Builder's Risk — Completed Value Basis," in an amount equal to one hundred percent (100%) of the insurable value of the Minimum Improvements at the date of completion, and with coverage available in nonreporting form on the so-called"all risk"form of policy. The interest of the Authority shall be protected in accordance with a clause in form and content satisfactory to the Authority; (ii) Comprehensive general liability insurance (including operations, contingent liability, operations of subcontractors, completed operations and contractual liability insurance) together with a Protective Liability Policy with limits against bodily injury and property damage of not less than$1,000,000 for each occurrence (to accomplish the above- required limits, an umbrella excess liability policy may be used). The Authority shall be listed as an additional insured on the policy;and (iii) Workers' compensation insurance,with statutory coverage. (b) Upon completion of construction of the Minimum Improvements and prior to the Maturity Date,the Developer shall maintain, or cause to be maintained, at its cost and expense, and from time to time at the request of the Authority shall furnish proof of the payment of premiums on, insurance as follows: (i) Insurance against loss and/or damage to the Minimum Improvements under a policy or policies covering such risks as are ordinarily insured against by similar businesses. (ii) Comprehensive general public liability insurance, including personal injury liability (with employee exclusion deleted), against liability for injuries to persons and/or property, in the minimum amount for each occurrence and for each year of$1,000,000, and shall be endorsed to show the Authority as additional insured. (iii) Such other insurance, including workers' compensation insurance respecting all employees, if any, of the Developer, in such amount as is customarily carried by like organizations engaged in like activities of comparable size and liability exposure; provided that the Developer may be self-insured with respect to all or any part of its liability for workers' compensation. (c) All insurance required in this Article V shall be taken out and maintained in responsible insurance companies selected by the Developer which are authorized under the laws of the State to assume the risks covered thereby. Upon request, the Developer will deposit annually with the Authority policies evidencing all such insurance, or a certificate or certificates or binders of 14 396011v8 JBD RC125-292 the respective insurers stating that such insurance is in force and effect. Unless otherwise provided in this Article V of this Agreement each policy shall contain a provision that the insurer shall not cancel nor modify it in such a way as to reduce the coverage provided below the amounts required herein without giving written notice to the Developer and the Authority at least thirty (30) days before the cancellation or modification becomes effective. In lieu of separate policies, the Developer may maintain a single policy, blanket or umbrella policies, or a combination thereof, having the coverage required herein, in which event the Developer shall deposit with the Authority a certificate or certificates of the respective insurers as to the amount of coverage in force upon the Minimum Improvements. (d) The Developer agrees to notify the Authority immediately in the case of damage exceeding $300,000 in amount to, or destruction of, the Minimum Improvements or any portion thereof resulting from fire or other casualty. In such event the Developer will forthwith repair, reconstruct and restore the Minimum Improvements to substantially the same or an improved condition or value as it existed prior to the event causing such damage and, to the extent necessary to accomplish such repair, reconstruction and restoration,the Developer will apply the net proceeds of any insurance relating to such damage received by the Developer to the payment or reimbursement of the costs thereof. The Developer shall complete the repair, reconstruction and restoration of the Minimum Improvements, whether or not the net proceeds of insurance received by the Developer for such purposes are sufficient to pay for the same. Any net proceeds remaining after completion of such repairs, construction and restoration shall be the property of the Developer. Notwithstanding the foregoing, if the net proceeds are not sufficient to repair, reconstruct or restore the Minimum Improvements, the Developer shall be provided sufficient time to find financing for such gap in proceeds before commencing any such work and the Developer shall not be in default under this Agreement as a result of such delay. (e) Notwithstanding anything to the contrary contained in this Agreement, in the event of damage to the Minimum Improvements in excess of $300,000 and the Developer fails to complete any repair, reconstruction or restoration of the Minimum Improvements within eighteen months from the date of damage,the Authority may,at its option,delay payments under the Note as provided in Section 9.2(b) hereof. If the Authority delays payments under the Note, such delay shall constitute the Authority's sole remedy under this Agreement as a result of the Developer's failure to repair, reconstruct or restore the Minimum Improvements. Thereafter,the Authority shall have no further obligations to make any payments under the Note until the repair,reconstruction or restoration is completed. (f) The Developer and the Authority agree that all of the insurance provisions set forth in this Article V shall terminate upon the termination of this Agreement. Section 5.2. Subordination. Notwithstanding anything to the contrary contained in this Article V, the rights of the Authority with respect to the receipt and application of any proceeds of insurance shall, in all respects, be subject and subordinate to the rights of any lender under a Mortgage approved pursuant to Article VII of this Agreement. (The remainder of this page is intentionally left blank.) 15 396011v8 JBD RC125-292 ARTICLE VI Tax Increment;Taxes Section 6.1. Right to Collect Delinquent Taxes. The Developer acknowledges that the Authority is providing substantial aid and assistance in furtherance of the development. The Developer understands that the Tax Increments pledged to payment of the Note are derived from real estate taxes on the Development Property, which taxes must be promptly and timely paid. To that end, the Developer agrees for itself, its successors and assigns, in addition to the obligation pursuant to statute to pay real estate taxes, that it is also obligated by reason of this Agreement to pay before delinquency all real estate taxes assessed against the Development Property and the Minimum Improvements. The Developer acknowledges that this obligation creates a contractual right on behalf of the Authority to sue the Developer or its successors and assigns to collect delinquent real estate taxes and any penalty or interest thereon and to pay over the same as a tax payment to the county auditor. In any such suit, the Authority shall also be entitled to recover its costs,expenses and reasonable attorney fees. Section 6.2. Reduction of Taxes. The Developer may seek through petition or other means to have the Assessors Estimated Market Value for the Development Property reduced. Until the Note is fully paid, such activity must be preceded by written notice from the Developer to the Authority indicating its intention to do so. Upon receiving such notice, or otherwise learning of the Developer's intentions, the Authority may suspend payments due under the Note until the actual amount of the reduction is determined, whereupon the Authority will make the suspended payments less any amount that the Authority is required to repay the.County as a result any reduction in market.value of the Development Property. During the period that the payments are subject to suspension, the Authority may make partial payments on the Note if it determines, in its sole and absolute discretion that the amount retained will be sufficient to cover any repayment which the County may require. The Authority's suspension of payments on the Note pursuant to this Section shall not be considered a default under Section 9.1 hereof. (The remainder of this page is intentionally left blank.) 16 396011v8 JBD RC125-292 ARTICLE VII Financing Section 7.1. Mortgage Financing. (a) Before commencement of construction of the Minimum Improvements, the Developer shall submit to the Authority evidence of one or more commitments for financing which, together with committed equity for such construction, is sufficient for payment of the Minimum Improvements. Such commitments may be submitted as short term financing, long term mortgage financing, a bridge loan with a long term take-out financing commitment,or any combination of the foregoing. (b) If the Authority fmds that the financing is sufficiently committed and adequate in amount to pay the costs specified in paragraph (a) then the Authority shall notify the Developer in writing of its approval. Such approval shall not be unreasonably withheld and either approval or rejection shall be given within 30 days from the date when the Authority is provided the evidence of financing. A failure by the Authority to respond to such evidence of financing shall be deemed to constitute an approval hereunder. If the Authority rejects the evidence of financing as inadequate,it shall do so in writing specifying the basis for the rejection. In any event the Developer shall submit adequate evidence of financing within 30 days after such rejection. Section 7.2. Authority's Option to Cure Default on Mortgage. In the event that any portion of the Developer's funds is provided through mortgage financing, and there occurs a default under any Mortgage authorized pursuant to Article VII of this Agreement, the Developer shall cause the Authority to receive copies of any notice of default received by the Developer from the holder of such Mortgage. Thereafter, the Authority shall have the right, but not the obligation, to cure any such default on behalf of the Developer within such cure periods as are available to the Developer under the Mortgage documents. Notwithstanding the foregoing, the Authority acknowledges that Developer's lenders may not agree to the terms of this section with respect to the giving of notice, and the Developer shall only be obligated to request,in good faith,that the provisions of this section be included in any of its mortgage financing documents. Section 7.3. Modification; Subordination. In order to facilitate the Developer obtaining financing for the development of the Minimum Improvements, the Authority agrees 1.o subordinate its rights under this Agreement to the Holder of any Mortgage securing construction or permanent financing,under terms and conditions reasonably acceptable to the Authority. Section 7.4. Termination. All the provisions of this Article VII shall terminate with respect to the Minimum Improvements, upon delivery of the Certificate of Completion for the Minimum Improvements. The Developer or any successor in interest to the Minimum Improvements or portion thereof, may sell or engage in financing or any other transaction creating a mortgage or encumbrance or lien on the Minimum Improvements or any portion thereof for which a Certificate of Completion has been obtained, without obtaining prior written approval of the Authority, provided that such sale, financing or other transaction creating a mortgage or encumbrance shall not be deemed as resulting in any subordination of the Authority's rights under this Agreement unless the Authority expressly consents to such a subordination. (The remainder of this page is intentionally left blank.) 17 396011v8 JBD RC125-292 ARTICLE VIII Prohibitions Against Assignment and Transfer; Indemnification Section 8.1. Representation as to Development. The Developer represents and agrees that its purchase of the Development Property, and its other undertakings pursuant to the Agreement, are, and will be used, for the purpose of development of the Development Property and not for speculation in land holding. Section 8.2. Prohibition Against Developer's Transfer of Property and Assignment of Agreement. The Developer represents and agrees that prior to issuance of the Certificate of Completion for the Minimum Improvements: (a) Except only by way of security for, and only for, the purpose of obtaining financing necessary to enable the Developer or any successor in interest to the Development Property, or any part thereof, to perform its obligations with respect to making the Minimum Improvements under this Agreement, and any other purpose authorized by this Agreement, the Developer has not made or created and will not make or create or suffer to be made or created any total or partial sale, assignment, conveyance, or lease, or any trust or power, or transfer in any other mode or form of or with respect to the Agreement or the Development Property or any part thereof or any interest therein, or any contract or agreement to do any of the same (except a lease to a residential occupant), without the prior written approval of the Authority unless the Developer remains liable and bound by this Agreement in which event the Authority's approval is not required. Any such transfer shall be subject to the provisions of this Agreement. _ (b) In the event the Developer, upon transfer or assignment of the Development Property seeks to be released from its obligations under this Agreement, the Authority shall be entitled to require,except as otherwise provided in this Agreement,as conditions to any such release that: (i) Any proposed transferee shall have the qualifications and financial responsibility, in the reasonable judgment of the Authority, necessary and adequate to fulfill the obligations undertaken in this Agreement by the Developer. (ii) Any proposed transferee, by instrument in writing satisfactory to the Authority and in form recordable among the land records, shall, for itself and its successors and assigns,and expressly for the benefit of the Authority,have expressly assumed all of the obligations of the Developer under this Agreement and agreed to be subject to all the conditions and restrictions to which the Developer is subject; provided, however, that the fact that any transferee of, or any other successor in interest whatsoever to,the Development Property, or any part thereof, shall not, for whatever reason, have assumed such obligations or so agreed, and shall not (unless and only to the extent otherwise specifically provided in this Agreement or agreed to in writing by the Authority) deprive the Authority of any rights or remedies or controls with respect to the Development Property or any part thereof or the construction of the Minimum Improvements;it being the intent of the parties as expressed in this Agreement that (to the fullest extent permitted at law and in equity and excepting only in the manner and to the extent specifically provided otherwise in this Agreement) no transfer of, or change with respect to, ownership in the Development Property or any part thereof, or any interest therein, however consummated or occurring, and whether voluntary 18 396011v8 JBD RC125-292 or involuntary, shall operate, legally or practically, to deprive or limit the Authority of or with respect to any rights or remedies on controls provided in or resulting from this Agreement with respect to the Minimum Improvements that the Authority would have had, had there been no such transfer or change. In the absence of specific written agreement by the Authority to the contrary, no such transfer or approval by the Authority thereof shall be deemed to relieve the Developer, or any other party bound in any way by this Agreement or otherwise with respect to the construction of the Minimum Improvements, from any of its obligations with respect thereto. (iii)_ Any and all instruments and other legal documents involved in effecting the transfer of any interest in this Agreement or the Development Property governed by this Article VIII,shall be in a form reasonably satisfactory to the Authority. In the event the foregoing conditions are satisfied then the Developer shall be released from its obligation under this Agreement. After issuance of the Certificate of Completion for the Minimum Improvements, the Developer may transfer or assign the Development Property or the Developer's interest in this Agreement without obtaining the prior written consent of the Authority provided that the transferee or assignee is bound by all the Developer's obligations hereunder. The Developer shall submit to the Authority written evidence of any such transfer or assignment, including the transferee or assignee's express assumption of the Developer's obligations under this Agreement. If the Developer fails to provide such evidence of transfer and assumption, the Developer• shall remain bound by all its obligations under this Agreement. Section 8.3. Release and Indemnification Covenants. (a) The Developer releases from and covenants and agrees that the Authority, the City and their respective governing body members, officers, agents, servants and employees thereof shall not be liable for and agrees to indemnify and hold harmless the Authority, the City and their respective governing body members, officers, agents, servants and employees thereof against any loss or damage to property or any injury to or death of any person occurring at or about or resulting from any defect in the Minimum Improvements. (b) Except for any willful misrepresentation, gross negligence or any willful or wanton misconduct of the Authority, or its board members, officers, agents or employees, the Developer agrees to protect and defend the Authority and its governing body members, officers, agents, servants and employees thereof, now or forever, and further agrees to hold the aforesaid harmless from any claim, demand, suit, action or other proceeding whatsoever by any person or entity whatsoever arising or purportedly arising from this Agreement, or the transactions contemplated hereby or the acquisition, construction, installation, ownership, maintenance and operation of the Minimum Improvements. As to any willful misrepresentation, gross negligence or any willful or wanton misconduct of the Authority, or its board members, officers, agents or employees, the Authority agrees to protect and defend the Developer, its officers, agents, servants and employees and hold the same harmless from any such proceedings. (c) The Authority and its governing body members, officers, agents, servants and employees thereof shall not be liable for any damage or injury to the persons or property of the Developer or its officers, agents, servants or employees or any other person who mar,be about the Development Property or Minimum Improvements due to any act of negligence of any person. 19 396011v8 JBD RC125-292 (d) All covenants, stipulations, promises, agreements and obligations of the Authority contained herein shall be deemed to be the covenants, stipulations, promises, agreements and obligations of the Authority and not of any governing body member, officer, agent, servant or employee of the Authority in the individual capacity thereof. (The remainder of this page is intentionally left blank.) 20 39601 Iv8 JBD RC125-292 ARTICLE IX Events of Default Section 9.1. Events of Default Prior to Completion. The following shall be "Events of Default"under this Agreement and the term "Event of Default" shall mean, whenever it is used in this Agreement (unless the context otherwise provides), subject to the period of Unavoidable Delays, any failure by any party to observe or perform any covenant, condition, obligation or agreement on its part to be observed or performed under this Agreement or under any loan agreement,promissory note,or related document in connection with this Agreement. Section 9.2. Remedies on Default. Whenever any Event of Default referred to in Section 9.1 of this Agreement occurs, the non-defaulting party may exercise its rights under this Section 9.2 after providing thirty days written notice to the defaulting party of the Event of Default, but only if the Event of Default has not been cured within said thirty days or, if the Event of Default is by its nature incurable within thirty days, the defaulting party does not provide assurances reasonably satisfactory to the non-defaulting party that the Event of Default will be cured and will be cured as soon as reasonably possible: (i) If the non-defaulting party is the Authority: (a) Suspend its performance under the Agreement until it receives assurances that the defaulting party will cure its default and continue its performance under the Agreement. (b) Delay issuance or delivery of the Note, or delay payments under the Note, which will be released to Developer upon cure of the default. (c) Terminate the Note if the Event of Default is based on a finally adjudicated determination under Section 4.5 (c) of this Agreement that the TIF District does not qualify as a "housing district". (d) Cancel and rescind or terminate the Agreement. (ii) If the non-defaulting party is either the Developer or the Authority: (a) Take whatever action, not inconsistent with the remedies provided in Section 9.2 (i) a through d, including legal, equitable or administrative action, which may appear necessary or desirable to collect any payments due under this Agreement, or to enforce performance and observance of any obligation, agreement, or covenant under this Agreement, provided that any action for specific performance must be commenced within six months of the Event of Default. Section 9.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Authority, the City or the Developer is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or hi equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the 21 396011v8 JBD RC125-292 Authority to exercise any remedy reserved to it, it shall not be necessary to give notice, other than the notices already required in Sections 9.2 and 9.3 hereof. Section 9.4. No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other concurrent,previous or subsequent breach hereunder. Section 9.5. Attorney Fees and Costs. The prevailing party in any action for the collection of payments due or to become due or for the enforcement of performance or observance of any obligation or agreement on the part of the other party shall be entitled to recover,and the other party upon ten days written demand, shall pay, the reasonable fees of such attorneys and such other expenses so incurred by the prevailing party. (The remainder of this page is intentionally left blank.) 22 396011v8 JBD RC125-292 ARTICLE X Authority Development Requirements Section 10.1. Renter Screening Criteria. The Developer represents and covenants that each potential tenant for the Minimum Improvements will be screened prior to occupancy using criteria similar to what is set forth in the Schedule D. Prior to entering into any lease or renewal, the Developer and the tenant shall execute the Application Criteria Disclosure Agreement, and complete the Apartment Screening Criteria worksheet both attached as Schedule D or a worksheet similar in nature. The Developer will keep all such agreements and worksheets, and make them available for the Authority's review upon request. Section 10.2. Crime-Free and Drug-Free Housing. The Developer represents and covenants that until the Maturity Date, each new tenant's lease shall include the Lease Addendum for Crime- Free/Drug-Free Housing similar to the form attached hereto as Schedule E. Further, the Developer represents and covenants to enforce the requirements of the Lease Addendum for Crime-Free/Drug- Free Housing. (The remainder of this page is intentionally left blank) 23 396011v8 JBD RC125-292 ARTICLE XI Additional Provisions Section 11.1. Conflict of Interests;Authority Representatives Not Individually Liable. The Authority and the Developer, to the best of their respective knowledge, represent and agree that no member,official, or employee of the Authority shall have any personal interest,direct or indirect,in the Agreement,nor shall any such member, official, or employee participate in any decision relating to the Agreement which affects his personal interests or the interests of any corporation,partnership, or association in which he is, directly or indirectly, interested. No member, official, or employee of the Authority shall be personally liable to the Developer,or any successor in interest,in the event of any default or breach by the Authority or City or for any amount which may become due to the Developer or successor or on any obligations under the terms of the Agreement. Section 11.2. Equal Employment Opportunity. The Developer, for itself and its successors and assigns, agrees that during the construction of the Minimum Improvements provided for in the Agreement it will comply with all applicable federal, state and local equal employment and non- discrimination laws and regulations. Section 11.3. Restrictions on Use. The Developer agrees that, prior to the Maturity Date, the Developer, and such successors and assigns, shall use the Development Property solely for the development of residential rental housing in accordance with the terms of this Agreement, and shall not discriminate upon the basis of race, color, creed, sex or national origin in the sale, lease, or rental or in the use or occupancy of the Development Property or any improvements erected or to be erected thereon,or any part thereof. Section 11.4. Provisions Not Merged With Deed. None of the provisions of this Agreement are intended to or shall be merged by reason of any deed transferring any interest in the Development Property and any such deed shall not be deemed to affect or impair the provisions and covenants of this Agreement. Section 11.5. Titles of Articles and Sections. Any titles of the several parts, Articles, and Sections of the Agreement are inserted for convenience of reference only and shall be disregarded in construing or interpreting any of its provisions. Section 11.6. Notices and Demands. Except as otherwise expressly provided in this Agreement, a notice, demand, or other communication under the Agreement by either party to the other shall be sufficiently given or delivered if it is dispatched by registered or certified mail, postage prepaid,return receipt requested,or delivered personally;and (a) in the case of the Developer, is addressed to or delivered personally to the Developer at 7500 West 78th Street, Edina MN 55439, Attn: Ron Clark; with a copy to Faegre Baker Daniels LLP, 90 South Seventh Street, Suite 2200,Minneapolis,MN 55402,Attn:Peter J. Berrie. (b) in the case of the Authority, is addressed to or delivered personally to the Authority at 6700 Portland Ave. So., Richfield, MN 55423, Attn: Community Development Director; with a copy to Kennedy & Graven, Chartered, 470 U.S. Bank Plaza, 200 South Sixth Street, Minneapolis, MN 55402,Attn:Julie A.Eddington. 24 396011v8 JBD RC125-292 or at such other address with respect to either such party as that party may, from time to time, designate in writing and forward to the other as provided in this Section. Section 11.7. Counterparts. This Agreement may be executed in any number of counterparts,each of which shall constitute one and the same instrument. Section 11.8. Recording. The Authority may record a memorandum of this Agreement and any amendments thereto with the Hennepin County recorder. The Developer shall pay all costs for recording. (The remainder of this page is intentionally left blank.) 25 39601 Iv8 JBD RCI25-292 IN WITNESS WHEREOF,the Authority has caused this Agreement to be duly executed in its name and behalf and its seal to be hereunto duly affixed and the Developer has caused this Agreement to be duly executed in its name and behalf as of the date first above written. HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD,MINNESOTA By: Its: Chair (SEAL) By Its: Executive Director STATE OF MINNESOTA ) ) SS. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this , 2012, by and , the Chair and Executive Director, respectively, of the Housing and Redevelopment Authority in and for the City of Richfield,Minnesota,on behalf of the Authority. Notary Public S-1 396011v8 JBD RC125-292 RICHFIELD PROPERTIES I,LIMITED PARTNERSHIP By: Richfield Properties,LLC Its: General Partner By: Ron Clark Its: Chief Manager STATE OF MINNESOTA ) ) SS. COUNTY OF ) The foregoing instrument was acknowledged before me this , 2012, by Ron Clark, the Chief Manager, Richfield Properties, LLC, the general partner of Richfield Properties I,Limited Partnership,on behalf of the Partnership. Notary Public (Signature Page of Developer to the Contract for Private Development) S-2 396011v8 JBD RC125-292 SCHEDULE A DEVELOPMENT PROPERTY DESCRIPTION [to be added prior to execution] Authority Property A-1 396011v8 JBD RC125-292 SCHEDULE B Authorizing Resolution HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD,MINNESOTA RESOLUTION NO. RESOLUTION APPROVING THE ISSUANCE OF, AND PROVIDING THE FORM, TERMS, COVENANTS AND DIRECTIONS FOR THE ISSUANCE OF ITS TAX INCREMENT LIMITED REVENUE NOTE, SERIES 201_IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED$ BE IT RESOLVED BY the Board of Commissioners ("Board") of the Housing and Redevelopment Authority in and for the City of Richfield,Minnesota(the"Authority")as follows: Section 1. Authorization;Award of Sale. 1.01. Authorization. The Authority has heretofore approved the establishment of 2012-1 Housing Tax Increment Financing District (Pillsbury Commons) (the ".1114 District") within the Richfield Redevelopment Project ("Redevelopment Project"), and has adopted a tax increment financing plan for the purpose of financing certain improvements within the Redevelopment Project; and has approved the Contract for Private Development (the "Agreement") between the Authority and Richfield Properties I, Limited Partnership(the"Owner"). Pursuant to Minnesota Statutes, Section 469.178, the Authority is authorized to issue and sell its bonds for the purpose of financing a portion of the public development costs of the Development District. Such bonds are payable from all or any portion of revenues derived from the TIN' District and pledged to the payment of the bonds. The Authority hereby finds and determines that it is in the best interests of the Authority that it issue and sell its Tax Increment Limited Revenue Note, Series 2012 (the "Note") in the aggregate principal amount of up to $ for the purpose of financing certain public costs of the Project. 1.02. Issuance, Sale, and Terms of the Note. Pursuant to the Agreement,the Note shall be sold to the Owner. The aggregate original principal amount of the Note shall equal from time to time the sum of the amounts advanced under the terms of the Note. The Note shall be dated as of the date of delivery and shall bear interest at the rate of 5.25%per annum to the earlier of maturity or prepayment, accrued from the date of each Principal Advance as defined in the Note. In exchange for the Authority's issuance of the Note to the Owner, the Owner shall pay certain land acquisition costs, environmental cleanup costs, site improvement costs, and other costs eligible under the TIF Act related to the Minimum Improvements (as defined in the Agreement)pursuant to Section 3.4 of the Agreement. B-1 396011v8 JBD RC125-292 Section 2. Form of Note. The Note shall be in substantially the following form, with the blanks to be properly filled in and the principal amount and payment schedule adjusted as of the date of issue: UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF HENNEPIN HOUSING AND REDEVELOPMEMNT AUTHORITY IN AND FOR THE CITY OF RICHFIELD No. $ TAX INCREMENT LIMITED REVENUE NOTE SERIES 20 Date Rate of Original Issue 5.25% The Housing and Redevelopment Authority in and for the City of Richfield, Minnesota ("Issuer") for value received, certifies that it is indebted and hereby promises to pay to Richfield Properties I, Limited Partnership or registered assigns (the "Owner"), solely from the source, to the extent and in the manner hereinafter provided, the principal sum of$ , or so much thereof as has been from time to time advanced as hereinafter provided (the "Principal Amount"), together with interest on the unpaid balance thereof accrued from the respective dates of entry of each Principal Advance on the Principal Advance Ledger(as such terms are hereafter defined)at the rate of 5.25% per annum (the "Stated Rate"). This Note is given in accordance with that certain Contract for Private Redevelopment among the Issuer and the Owner dated as of (the "Agreement"). Capitalized terms used and not otherwise defined herein have the meaning provided for such terms in the Agreement unless the context clearly requires otherwise. The amounts due under this Note shall be payable on each February 1 and August 1, (the "Scheduled Payment Dates") commencing August 1, 20_ and ceasing no later than February 1, 20 (the"Maturity Date"). Payments shall be applied first to accrued interest, and then to unpaid principal. Interest accruing from the respective dates of entry of each Principal Advance on the Principal Advance Ledger(except to the extent paid in part on any prior Scheduled Payment Date), will be compounded semiannually on February 1 and August 1 of each year and added to principal. Interest shall be computed on the basis of a year of 360 days and charged for actual days principal is unpaid The Principal Amount and accrued interest thereon is subject to prepayment at the option of the Issuer in whole or in part on any date after the date of original issue. B-2 396011v8 JBD RC125-292 Each payment on this Note is payable in any coin or currency of the United States of America which on the date of such payment is legal tender for public and private debts and shall be made by check or draft made payable to the Owner and mailed to the Owner at its liostal address within the United States which shall be designated from time to time by the Owner. Upon the Date of Original Issue or on any date thereafter through August 1, 2015, the Owner may request the Issuer to enter an advance of principal under the Note`(a "Principal Advance") on the ledger of such advances maintained by the Registrar (the "Principal Advance Ledger"), by submitting to the Issuer a certificate (the "Principal Advance Certificate") signed by the Owner's duly authorized representative, containing the following: (i) a statement that each cost identified in the Principal Advance Certificate is a eligible for payment as provided in the Agreement and in 1.02 of the Authorizing Resolution and that no part of such cost has been included in any previous Principal Advance Certificate or any disbursement from another funding source which was intended for the making of such payment; (ii)evidence that each identified Public Redevelopment Cost has been paid or incurred by or on behalf of the Owner, and (iii) a statement that no uncured Event of Default by the Owner has occurred and is continuing under the Agreement. Within 15 days after receipt of the Principal Advance Certificate, the Issuer shall, if the Authority Representative has determined that all the aforementioned requirements have been satisfied, so notify the Owner and direct the Registrar to enter the amount requested in the Principal Advance Ledger, such entry being dated as of the date of the Principal Advance Certificate, provided that the aggregate amount of sums entered on the Principal Advance Ledger shall not exceed$ . The Issuer may,if not satisfied that the conditions described herein have been met, return the Principal Advance Certificate with a statement of the reasons why the Principal Advance Certificate is not acceptable and requesting such further documentation or clarification as the Issuer may reasonably require. Failure by the Authority to notify the Owner of any objections within 15 days after receipt of the Principal Advance Certificate will be deemed acceptance thereof. On each Scheduled Payment Date, as long as no event of default under the Agreement has occurred and is continuing,the Authority will pay all Available Tax Increment to the holder of this Note. This Note, and interest accrued on this Note, are payable solely from Available Tax Increment. The Issuer shall have no obligation to make any payment on any Scheduled Payment Date if, as of such date there has occurred and is continuing any Event of Default on the part of the Owner as defined in the Agreement. If the Event of Default is thereafter cured in accordance with the Agreement the Available Tax Increment as of such Scheduled Payment Date shall be deferred and paid, without interest, within ten (10) days after the Event of Default is cured. If an Event of Default is not timely cured and the Issuer elects to terminate its obligations under the Agreement, the Note shall be deemed terminated and the Issuer shall have no further obligations hereunder. The Issuer shall have no obligation with respect to the amount of any Principal Advance, and no interest shall accrue thereon, until the date of entry of such amount on the Principal Advance Ledger in accordance with the terms of this Note. The obligation of Issuer to make payments under this Note is also subject to the provisions of Section 6.2 of the Agreement. B-3 396011v8 JBD RC125-292 • The Issuer makes no representation or covenant, express or implied, that the Available Tax Increment will be sufficient to pay, in whole or in part, the amounts which are or may become due and payable hereunder. The Issuer shall have no obligation to pay any portion of the Principal Amount or accrued interest thereon that remains unpaid after the Maturity Date. This Note is issued for the purpose of financing certain public redevelopment costs in connection with a project undertaken by the Issuer pursuant to Minnesota Statutes, Sections 469.001 to 469.047 and is issued pursuant to the resolution of the Issuer adopted on 20 . (the "Authorizing Resolution") duly adopted by the Issuer pursuant to and in full conformity with the Constitution and laws of the State of Minnesota, including Minnesota Statutes, Sections 469.174 to 469.1799, as amended. This Note is a limited obligation of the Issuer, payable solely from moneys pledged to the payment of the Note under the Authorizing Resolution. The Note and the interest hereon shall not be deemed to constitute a general obligation of the State of Minnesota, or any political subdivision thereof, including, without limitation, the Issuer. Neither the State of Minnesota, nor any political subdivision thereof, including, without limitation, the Issuer, shall be obligated to pay the principal of or interest on this Note or other costs incident hereto except from the revenues and receipts pledged therefor, and neither the full faith and credit nor the taxing power of the State of Minnesota or any political subdivision thereof, including, without limitation, the Issuer, is pledged to the payment of the principal of or interest on this Note or other costs incident hereto. Any estimates of Tax Increment prepared by the Authority or its financial advisors in connection with the TIF District or the Agreement are for the benefit of the Authority, and are not intended as representations on which the Developer may rely. THE AUTHORITY MAKES NO REPRESENTATION OR WARRANTY THAT THE AVAILABLE TAX INCREMENT WILL BE SUFFICIENT TO PAY THE PRINCIPAL OF AND INTEREST ON THIS NOTE. This Note is issuable only as a fully registered note without coupons. As provided in the Resolution, and subject to certain limitations set forth therein,this Note is transferable upon the books of the Issuer kept for that purpose at the principal office of the City Clerk of the City of Richfield. Upon surrender for transfer of the Note, including any assignment or exchange thereof, duly endorsed by the registered owner thereof or accompanied.by a written instrument of transfer, in form reasonably satisfactory to the Registrar, duly executed by the registered owner thereof or by an attorney duly authorized by the registered owner in writing, and the payment by the Owner of any tax, fee, or governmental charge required to be paid by or to the Issuer with respect to such transfer or exchange, the Registrar shall authenticate and deliver, in the name of the designated transferee or transferees, a new Note of the same aggregate principal amount,bearing interest at the same rate and maturing on the same dates. Notwithstanding the foregoing, the Note shall not be transferred to any person other than an affiliate,or other related entity,of the Owner unless the Issuer has been provided with an investment letter in a form substantially similar to the investment letter in Schedule F of the Agreement or a certificate of the transferor, in a form satisfactory to the Executive Director of the Issuer, that such transfer is exempt from registration and prospectus delivery requirements of federal and applicable B-4 396011v8 JBD RC125-292 • state securities laws. The Registrar may close the books for registration of any transfer after the fifteenth day of the month preceding each Payment Date and until such Payment Date. The Owner may assign the Note to a lender that provides all or part of the financing for the acquisition of the Development Property or the construction of the Minimum Improvements. The Issuer hereby consents to such assignment, conditioned upon receipt of an investment letter from such lender in substantially the form attached in the Agreement as Schedule F,.or other form reasonably acceptable to the Executive Director of the Issuer. The Issuer also agrees that future assignments of the Note may be approved by the Executive Director of the Issuer without action of the Issuer's Board, upon the receipt of an investment letter in substantially the form of Schedule F of the Agreement or other investment letter reasonably acceptable to the Issuer from such assignees. This Note is issued pursuant to a resolution of the Board of the Issuer and is entitled to the benefits thereof,which Resolution is incorporated herein by reference. 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 exist, to happen, and to be performed in order to make this Note a valid and binding limited obligation of the Issuer according to its terms, have been done, do exist, have happened, and have been performed in due form, time and manner as so required. IN WITNESS WHEREOF, the Board of Commissioners of the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota, has caused this Note to be executed with the manual signatures of its Chair and Executive Director, all as o I the Date of Original Issue specified above. HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD,MINNESOTA Executive Director Chair REGISTRATION PROVISIONS The ownership of the unpaid balance of the within Note is registered in the bond register of the Issuer's Executive Director,in the name of the person last listed below. • { B-5 396011v8 JBD RC125-292 Date of Registration Registered Owner Signature of Executive Director Richfield Properties I,Limited Partnership • Federal ID# [End of Form of Note] Section 3. Terms,Execution and Delivery. 3.01. Denomination, Payment. The Note shall be issued as a single typewritten note numbered The Note shall be issuable only in fully registered form. Principal of and interest on the Note shall be payable by check or draft issued by the Registrar described herein. 3.02. Dates:Interest Payment Dates. Principal of and interest on the Note shall be payable by mail to the owner of record thereof as of the close of business on the fifteenth day of the month preceding the Payment Date,whether or not such day is a business day. 3.03. Registration. The Authority hereby appoints the Authority's Executive Director to perform the functions of registrar, transfer agent and paying agent (the "Registrar"). The effect of registration and the rights and duties of the Authority and the Registrar with respect thereto shall be as follows: (a) Register. The Registrar shall keep at its office a bond register in which the Registrar shall provide for the registration of ownership of the Note and the registration of transfers and exchanges of the Note. (b) Transfer of Note. Upon surrender for transfer of the Note, including any assignment or exchange thereof, duly endorsed by the registered owner thereof or accompanied by a written instrument of transfer, in form reasonably satisfactory to the Registrar, duly executed by the registered owner thereof or by an attorney duly authorized by the registered owner in writing,and the payment by the Owner of any tax, fee, or governmental charge required to be paid by or to the Authority with respect to such transfer or exchange, the Registrar shall authenticate and deliver, in the name of the designated transferee or transferees, a new Note of the same aggregate principal amount, bearing interest at the same rate and maturing on the same dates. Notwithstanding the foregoing, the Note shall not be transferred to any person other than an affiliate, or other related entity, of the Owner unless the Authority has been provided with an investment letter in a form substantially similar to the investment letter submitted by the Owner or a certificate of the transferor, in a form satisfactory to the Authority, that such transfer is exempt from registration and prospectus delivery requirements of federal and applicable state securities laws. The Registrar.may close the books for registration of any transfer after the fifteenth day of the month preceding'each Payment Date and until such Payment Date. B-6 396011v8 JBD RC125-292 The Owner may assign the Note to a lender that provides all or part of the financing for the acquisition of the Development Property or the construction of the Minimum Improvements. The Authority hereby consents to such assignment, conditioned upon receipt of an investment letter from such lender in substantially the form attached in the Agreement as Schedule F, or other form reasonably acceptable to the Executive Director of the Authority. The Authority also agrees that future assignments of the Note may be approved by the Executive Director of the Authority without action of the Authority's Board, upon the receipt of an investment letter in substantially the form of Schedule F of the Agreement or other investment letter reasonably acceptable to the Authority from such assignees. (c) Cancellation. The Note surrendered upon any transfer shall be promptly cancelled by the Registrar and thereafter disposed of as directed by the Authority. (d) Improper or Unauthorized Transfer. When the Note is presented to the Registrar for transfer, the Registrar may refuse to transfer the same until it is satisfied that the endorsement on such Note or separate instrument of transfer is legally authorized. The Registrar shall incur no liability for its refusal, in good faith,to make transfers which it, in its judgment, deems improper or unauthorized. (e) Persons Deemed Owners. The Authority and the Registrar may treat the person in whose name the Note is at any time registered in the bond register as the absolute owner of the Note, whether the Note shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal of and interest on such Note and for all other purposes, and all such payments so made to any such registered owner or upon the owner's order shall be valid and effectual to satisfy and discharge the liability of the Authority upon such Note to the extent of the sum or sums so paid. (f) Taxes, Fees and Charges. For every transfer or exchange of the Note,the Registrar may impose a charge upon the owner thereof sufficient to reimburse the Registrar for any tax, fee, or other governmental charge required to be paid with respect to such transfer or exchange. (g) Mutilated,Lost, Stolen or Destroyed Note. In case any Note shall become mutilated or be lost, stolen, or destroyed,the Registrar shall deliver a new Note of like amount,maturity dates and tenor in exchange and substitution for and upon cancellation of such mutilated Note or in lieu of and in substitution for such Note lost, stolen, or destroyed, upon the payment of the reasonable expenses and charges of the Registrar in connection therewith; and,in the case the Note lost, stolen, or destroyed, upon filing with the Registrar of evidence satisfactory to it that such Note was lost, stolen, or destroyed, and of the ownership thereof, and upon furnishing to the Registrar of an appropriate bond or indemnity in form, substance, and amount satisfactory to it, in which both the Authority and the Registrar shall be named as obligees. The Note so surrendered to the Registrar shall be cancelled by it and evidence of such cancellation shall be given to the Authority. If the mutilated, lost, stolen, or destroyed Note has already matured or been called for redemption in accordance with its terms,it shall not be necessary to issue a new Note prior to payment. 3.04. Preparation and Delivery. The Note shall be prepared under the direction of the Executive Director of the Authority and shall be executed on behalf of the Authority by the B-7 396011v8 JBD RC125-292 signatures of its Chair and its Executive Director. In case any officer whose signature shall appear on the Note shall cease to be such officer before the delivery of the Note, such signature shall nevertheless be valid and sufficient for all purposes, the same as if such officer had remained in office until delivery. When the Note has been so executed, it shall be delivered by the Authority to the Owner following the delivery of the necessary items delineated in Section 3.4 of the Agreement. Section 4. Security Provisions. • 4.01. Pledge. The Authority hereby pledges to the payment of the principal of and interest on the Note all Available Tax Increment as defined in the Note. Available Tax Increment shall be applied to payment of the principal of and interest on the Note in accordance with the terms of the form of Note set forth in Section 2 of this resolution. 4.02. Bond Fund. Until the date the Note is no longer outstanding and no principal thereof or interest thereon(to the extent required to be paid pursuant to this resolution) remains unpaid,the Authority shall maintain a separate and special "Bond Fund" to be used for no purpose other than the payment of the principal of and interest on the Note. The Authority irrevocably agrees to appropriate to the Bond Fund in each year Available Tax Increment. Any Available Tax Increment remaining in the Bond Fund shall be transferred to the Authority's account for the TIF District upon the payment of all principal and interest to be paid with respect to the Note. Section 5. Certification of Proceedings. 5.01. Certification of Proceedings. The officers of the Authority are hereby authorized and directed to prepare and furnish to the Owner of the Note certified copies of all proceedings and records of the Authority, and such other affidavits, certificates, and information as may be required to show the facts relating to the legality and marketability of the Note as the same appear from the books and records under their custody and control or as otherwise known to them, and all such certified copies, certificates, and affidavits, including any heretofore furnished, shall be deemed representations of the Authority as to the facts recited therein. Section 6. Effective Date. This resolution shall be effective Adopted by the Board of Commissioner the Housing and Redevelopment Authority in and for the City of Richfield,Minnesota,this day of ,20 Chair Executive Director B-8 396011v8 JBD RC125-292 SCHEDULE C CERTIFICATE OF COMPLETION The undersigned hereby certifies that Richfield Properties I, Limited Partnership (the "Developer"), has fully complied with its obligations under Articles III and IV of that document titled "Contract for Private Development," dated , 201_, between the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota and the Developer ("Agreement"), a memorandum of which was recorded on , as document no. , with respect to construction of the Minimum Improvements in accordance with Article IV of the Agreement, and that the Developer is released and forever discharged from its obligations with respect to construction of the Minimum Improvements under Articles III and IV of the Agreement. Dated: ,20_ HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD,MINNESOTA By: Executive Director STATE OF MINNESOTA ) ) SS. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this , 201_, by , the Executive Director of the Housing and Redevelopment Authority in and for the City of Richfield,Minnesota,on behalf of the Authority. Notary Public C-1 396011v8 JBD RC125-292 SCHEDULE D APPLICATION CRITERIA DISCLOSURE AGREEMENT STEVENSCOTT MANAGEMENT, INC. AooiiraS rt Criter a t' s s©ra Ai tr trt Steven Scott Managernent Inc. bases their rental application approval or denial on the following criteria: Criminal History lneomelSource of income Credit History • Rental/Housing History Should your rental application be denied for any reason.i a. listed above,your application fee via be returned to you In the event thst we would refund your application fee we would like you to choose he ►you would prefer to receive the rutin& Please check one of the boxes below. Please rnaii my application fine t+ Applicant Print Name Street Address City Mete Zip Please destroy my applIcaeon fee. Please hold my application foe and I will = arrangements to picck it up at the Steven Sett Management Inc. property within 24 hours after t have been contacted. Applicant Print Name 'Date Applicant Print Name Date Applicant's Signature Applicant's Sigr • Applicant Print Name Date Applicant Print Name Date Applicant's Signature Applicants Signature • BETTER APARTMENTS. BETTER SERVICE.BETTER LIFE. D-1 396011v8 JBD RC125-292 5/1620015 Seaton D Stem ,aga Tnc..Application A._wtc Applicant Property a; f relmed cooviertons- n&vast 10 yams Deny App Drug related convicdea x`10 years feed enverate appioval) FolonfrotAlledenteancr-Especially Crime against people, or involclug weapons within last FavalesavradermanosaspeciaRy Crimes against people,property,or involving weapons over s years(nerd corporate approval) Multiple Arrests-Driving .• pawl 5 years Less firma times rent 0 2 rimea the int 1 2%times lbe sent 2 3 toms tie rent 3 Mere than 3 dotes Meant 4 No Iowan 0 :a_�,_��I:,- 0—1 year ientaY Q'37A:t fzf 1 1.2 geed aa 2 years w gee 4 Resolved evictkm action — Ummeleed gviet t1 amiesi 1I,,1;;F en feedinrdothence Deny App 77177"5 a.}:.-.tai;p 6 mongols-__ -- ,1 I 1 :I:L some abeam 1- 1pars years of a coatimsme souroperimorms 2 2 yeas to 3 years eta OgetillaNS some ofincome 3 3 years or more afa continuous stance income 4 r i.t1rI€'a K ]'b - Croft Riek Score or below - 0 Credk Risk Score of 59.13 1 C'redit Risk . of 800425 2 Credit Risk Some of' 0 3 Credit Risk Score of 6,50 alai above 4 Thilities companies' DM? CrICP717..riirtra 1P4 APPROVAL t s W or Mew Approved' ScerafPoirdm 0 g o 7' Use .ai iii to below) 5 6 , 1}. Requires- F•F2F t':A'.I:.I:':sel ScomoPotaist 4 Deery Warden Addition!D ell to enementbs tent 2 Guarantor 2 Managentest[approval Approve:1411460W by Daft Management -al(l€ D-2 396011v8 JBD RC125-292 SCHEDULE E CRIME-FREE/DRUG-FREE HOUSING LEASE ADDENDUM mi STEVEN SCOTT MANAGEMENT, INC. ADDENDUM TO LEASE R DRUG-FREE/CRIMINAL-FREE HOUSING ki consideration of the execution or renewal of a lease of the deidling unit identffied at the lease, ent end Resident epee as . 1. Management *Ind Resident agree not to anew un uP activides relaartg to controlled eudStsnces, dreg related Laity, preetttution, or erceteutioneedated actNities, the unlawftd use or possession of a firearm, or allowing stolen property on or near related wirrdned activigt trowel the Segal manufaoture, Vie,distribution, use or possession with Intent to mamfardltwe, cadiribute or use of a d substance,I - drugs,II substance,drug Ma paraphernalia or contraband . In Swam 102 orthe Centrolled Substance Act 121 U.84. 2. Resident any member household or a guest or other person under the Rettdsr rs canard I: I J2,, did s chug-related eri activity or ; said premises. 3. Resident or members of the household e;f not rL_gn irc umlt to ita fa-�r to I !'l to . _Lek. , Including drug-rotated I, lees or whether irsavidual engaging in su activity is a member of the ho.usehold or a guest.. 4. Resident or mambos of the household WI not >® = -; In the mamdecture, rude or distitertion of .g. I&meat gge lotratkins,whether on or near lip ,,b,:unit premises or ohs Fe Resident, any mbar of the Resident's househoki or a guest or other person under the Resident's control -dna a In cl nr -e or including bed not Smiled to the urievvful discharge of firearms,on or near the Iii;_ unit premises,and threats to resident's, resident's guests oremplo rte. ,n._ D e',• :V._ .i N� _`s ti (riil nt* '- ] Via: A single violation of any of the pmvisions this added addendum shell be deemed,a serious violation and nraderial non-compllience the Lease. It Is understood and agreed that a violation shall be d cause for temilnation of the Lease. Unless `(err a provided by law,proof of Violatkin glyelljagglaggsglegimethate.but shall be by a ponds the�d ash of ' ice, with or without kn ledge of resident,is a violation the lease and can result kt voiding the Residenre right to pessetelon end cause mentto bring ane_evidion Roam Tf in case of conflict between the provisions of this addsmdum and any other pmakriorre of the Leese,the perivieloneof the addendum shedl govern, This; LEASE NDUM Is Insorporated into the Leese executed or renewed tios day betvveen Management and Resident. Resident Signs Date Resktent Sig Resident Date Resident SST. Resident Signature Date Resident Signature Date maw Signatwe Date .. : • MITER:PAPS' .S E-1 .. 396011v8 JBD RCI25-292 SCHEDULE F FORM OF INVESTMENT LE'V'ER INVESTMENT LETTER To: Housing and Redevelopment Authority in and for the City of Richfield,Minnesota, Attention: Chairperson of the Board of Commissioners Re: $ Tax Increment Limited Revenue Note, Series 20_ The undersigned, as Owner of$ in principal amount of the above-captioned Tax Increment Limited Revenue Note (the "Note"), approved pursuant to Resolution No. adopted by the Board of Commissioners of the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota (the "Authority"), on , 20 (the "Resolution"), hereby represent to you and to Kennedy & Graven, Chartered, Minneapolis, Minnesota, as counsel to the Authority,as follows: 1. We understand and acknowledge that the Note is delivered to the Owner on this date pursuant to the Resolution and the Contract for Private Development (the "Agreement"), by and between the Authority, and Richfield Properties I, Limited Partnership, dated (the "Contract"). 2. We understand that the Note is payable as to principal and interest solely from Available Tax Increment pledged to the Note,as defined in the Contract. 3. We further understand that any estimates of Tax Increment (as defined in the Contract)prepared by the Authority or its financial advisors in connection with the TIF District(as defined in the Contract), the Contract or the Note are for the benefit of the Authority, and are not intended as representations on which the Owner may rely. 4. We acknowledge and understand that, if at anytime,the Developer fails to meet the housing income restrictions required for a housing tax increment district as set forth in Minnesota Statutes, Section 469.174, subd. 11 and Section 469.1761, and therefore, the tax increment district will no longer qualify as a housing tax increment district, no further payments will be made under the Note. 5. We have sufficient knowledge and experience in financial and business matters, including purchase and ownership of municipal obligations, to be able to evaluate the risks and merits of the investment represented by the purchase of the above stated principal amount of the Note. F-1 396011v8 6. We acknowledge that no offering statement, prospectus, offering circular or other comprehensive offering statement containing material information with respect to the Authority and the Note has been issued or prepared by the Authority,and that,in due diligence,we have made our own inquiry and analysis with respect to the Authority,the Note and the security therefor, and other material factors affecting the security and payment of the Note. 7. We acknowledge that we have either been supplied with or have access to information, including financial statements and other financial information, to which a reasonable investor would attach significance in making investment decisions,and we have had the opportunity to ask questions and receive answers from knowledgeable individuals concerning the Authority,the Note and the security therefor, and that as. reasonable investors we have been able to make our decision to purchase the above-stated principal amount of the Note. • 8. We have been informed that the Note (i) is not being registered or otherwise qualified for sale under the"Blue Sky"laws and regulations of any state, or under federal securities laws or regulations, (ii) will not be listed on any stock or other securities exchange, and (iii) will carry no rating from any rating service. 9. We acknowledge that the Authority,-the City, Kennedy& Graven,Chartered; as counsel to the Authority, and Ehlers & Associates, Inc., as financial consultant to the Authority, have not made any representations or warranties as to the status of interest on the Note for the purpose of federal or state income taxation. 10. We represent to you that we are purchasing the Note for our own accounts and not for resale or other distribution thereof, except to the extent otherwise provided in the Contract, the Note, the Resolution, or any other resolution adopted by the Authority. We plan to assign the Note to a lender that provides construction financing for the Minimum Improvements as allowed by the Note and Contract. 11. All.capitalized terms used herein have the meaning provided in the Contract unless the context clearly requires otherwise. 12. The Owner's federal tax identification number is 13. We acknowledge receipt of the Note on the date hereof. [Owner] By: Its: Dated: .20 F-2 396011v8 F-3 396011v8 AGENDA ITEM#: 8 REPORT#: 28 STAFF REPORT RICF1FIELD HOUSING AND REDEVELOPMENT AUTHORITY MEETING JUNE 18, 2012 REPORT PREPARED BY: CHRISTINE COSTELLO, COMMUNITY DEVELOPMENT SPECIALIST Nip'TILE ACTING DEPARTMENT DIRECTOR REVIEW: I% -A f `a. ,Q�S.11 REVIEWED BY CITY n MANAGER: / / � �' ��'� ITEM FOR COUNCIL CONSIDERATION: Consideration of a resolution adopting a Modification to the Redevelopment Plan for the Richfield Redevelopment Project Area and adopting a Tax Increment Financing Plan for the 2012-1 Housing Tax Increment Financing District (Pillsbury Commons). I. RECOMMENDED TION: By Motion: Deny approval of a Modification to the Redevelopment Plan for the Richfield Redevelopment Project Area and a Tax Increment Financing Plan for the 2012-1 Housing Tax Increment Financing District (Pillsbury Commons). II. BACKGROUND The Richfield Properties I, Limited Partnership and Ron Clark Construction and Design along with Connelly Development LLC (which is a wholly-owned entity of Ron Clark) (Developer) have proposed to acquire and redevelop the former north half of the Public Works garage site located at 7641 Pleasant Avenue, along with the adjacent parcel at 211 West 76th Street (former Gleason Mortuary parcel) and an additional City-owned parcel at the corner of 76th Street and the railroad tracks. The proposed development includes a 70 unit affordable housing development that includes a 52-unit apartment building and 18 townhomes. 06182012-TIF Plan_Pillsbury Commons.doc The Developer has submitted a request for tax increment assistance for the proposed development in the amount of$530,082 (see attached letter), and on March 27, 2012 the City Council adopted a Resolution calling for a public hearing regarding the Establishment of a Modification to the Redevelopment Plan for the Richfield Redevelopment Project Area; and the proposed establishment of the Pillsbury Commons Tax Increment Financing (TIF) District relating to the proposed development. The following steps are the process for the establishment of the Pillsbury Commons Tax Increment Financing (TIF) District: • The HRA's consideration of the proposed TIF plan —June 18th • The Planning Commission's consideration that the proposed TIF plan is consistent with the Comprehensive Plan —June 25th. • Final step is for the City Council to hold a public hearing for the consideration of the adoption of the TIF Plan —June 26th. The Housing and Redevelopment Authority's (HRA) financial consultants, Ehlers and Associates, have drafted the attached Modification to Richfield's Redevelopment Plan for the Establishment of the 2012-1 Housing TIF District. The costs of preparing this document were borne by the Developer; however, all work was directed by the HRA staff in the best interests of the HRA. This document identifies the boundaries of the proposed TIF District, states the legal authority for establishment of such a District and makes findings associated with this proposed District, including a finding that this project could not occur"But-for" the use of TIF. As drafted, the TIF District includes the City-owned parcels and the HRA-owned parcel described above. At its June 12, 2012 meeting, the City Council rejected the Developer's offer to purchase two of the three City-owned parcels upon which the development is proposed to be built. As a result, the Developer lacks the necessary property to complete the housing development as currently contemplated in the TIF Plan. Staff recommends denying the Modification of the Redevelopment Plan and the TIF Plan because the development contemplated in the TIF Plan is no longer feasible. III. BASIS OF RECOMMENDATION A. POLICY • The Developer's award of Low Income Housing Tax Credits from the Minnesota Housing Finance Agency (MHFA) is contingent upon their receipt of$531,082 in TIF as was indicated on Ron Clark's Tax Credit application. • The Developer has indicated, and the HRA's financial consultant has concurred, that it would not be feasible to develop the proposed affordable rental housing development without the assistance of Tax Increment Financing. • The proposed development would satisfy the requirements of a Housing TIF District. B. CRITICAL TIMING ISSUES • The Planning Commission is scheduled to review the proposed Pillsbury Commons TIF Plan for consistency with the City's Comprehensive Plan at their regular meeting on June 25, 2012. • A Public Hearing for the Redevelopment Plan modification and establishment of the TIF District is scheduled for the June 26, 2012 regular City Council meeting. C. FINANCIAL • Due to the estimated cost of the acquisition, site improvements and other redevelopment costs, the Developer has identified a need for public assistance. • The public assistance that the Developer has identified includes a $530,082 tax increment financing note from the HRA. • The HRA's financial analyst, Ehlers and Associates drafted the proposed TIF Plan. D. LEGAL • Ehlers and Associates drafted the proposed TIF Plan in cooperation with staff, the Developer and the Developer's legal counsel. • HRA legal counsel has reviewed the TIF Plan and will be at the meeting to answer questions. E. ENVIRONMENTAL CONSIDERATIONS • N/A IV. ALTERNATIVE RECOMMENDATIONS) • N/A V. ATTACHMENTS • Resolution • Developer's Letter requesting TIF assistance • 2012-1 Housing Tax Increment Financing District Plan (Pillsbury Commons) VI. PRINCIPAL PARTIES EXPECTED AT MEETING • HRA Financial Analyst (Ehlers and Associates) • HRA Legal Counsel • Representative(s) of Ron Clark Construction and Design 3- I RESOLUTION NO. RESOLUTION ADOPTING A MODIFICATION TO THE REDEVELOPMENT PLAN FOR THE RICHFIELD REDEVELOPMENT PROJECT AREA, ESTABLISHING THE 2012—1 HOUSING TAX INCREMENT FINANCING DISTRICT THEREIN AND ADOPTING A TAX INCREMENT FINANCING PLAN THEREFORE WHEREAS, it has been proposed by the Board of Commissioners (the "Board")of the Richfield Housing and Redevelopment Authority (the "HRA") and the City of Richfield (the "City")that the HRA adopt a Modification to the Redevelopment Plan (the "Redevelopment Plan Modification") for the Richfield Redevelopment Project Area (the "Project Area") and establish the 2012-1 Tax Increment Financing District (the "District") and adopt a Tax Increment Financing Plan (the "TIF Plan") therefore (the Redevelopment Plan Modification and the TIF Plan are referred to collectively herein as the"Plans"), all pursuant to and in conformity with applicable law, including Minnesota Statutes, Sections 469.001 to 469.047, and Sections 469.174 to 469.1799, inclusive, as amended (the "Act"), all as reflected in the Plans and presented for the Board's consideration;and WHEREAS,the HRA has investigated the facts relating to the Plans and has caused the Plans to be prepared;and WHEREAS, the HRA has performed all actions required by law to be performed prior to the adoption of the Plans. The HRA has also requested the City Planning Commission to provide for review of and written comment on the Plans and that the Council schedule a public hearing on the Plans upon published notice as required by law. NOW,THEREFORE,BE IT RESOLVED,by the Board as follows: 1. The HRA approves the Redevelopment Plan Modification, and specifically finds that: (a) the land within the Project Area would not be available for redevelopment and affordable housing purpose without the financial aid to be sought under the Redevelopment Plan; (b) the Redevelopment Plan, as modified, will afford maximum opportunity, consistent with the needs of the City as a whole,for the development of the Project Area by private enterprise; and (c) that the Redevelopment Plan, as modified,conforms to the general plan for the development of the City as a whole. 2. The HRA approves the TIF Plan, and specifically finds that such district is a "housing district" under Minnesota Statutes, Section 469.174, Subd. 10a(1), and finds that the Plans conform in all respects to the requirements of the Act and will help fulfill a need to redevelop an area of the State of Minnesota which is blighted and that the adoption of the proposed Plans will preserve and enhance the tax base of the City and the State because the Plans promote redevelopment of substandard areas and provide an impetus for commercial and housing development,and thereby serves a public purpose. 3. The HRA further finds that the Plans will afford maximum opportunity, consistent with the sound needs for the City as a whole, for the development or redevelopment of the Project Area by private enterprise in that the intent is to provide only that public assistance necessary to make the private developments financially feasible. 4. The boundaries of the Project Area are not being expanded. 5. The reasons and facts supporting the findings in this resolution are described in the Plans. The Plans are hereby incorporated into this resolution as if set forth herein. 6. The HRA elects to calculate fiscal disparities for the District in accordance with Minnesota Statutes, Section 469.177, Subd. 3, clause b, which means the fiscal disparities contribution would be taken from inside the District. 7. Conditioned upon the approval thereof by the City Council following its public hearing thereon, the Plans,as presented to the HRA on this date,are hereby approved,established and adopted and shall be placed on file in the office of the Community Development Director. 8. Upon approval of the Plans by the City Council, the staff, the HRA's advisors and legal counsel are authorized and directed to proceed with the implementation of the Plans and for this purpose to negotiate, draft, prepare and present to this Board for its consideration all further plans, resolutions, documents and contracts necessary for this purpose. Approval of the Plans does not constitute approval of any project or a Development Agreement with any developer. 9. Upon approval of the Plans by the City Council, the Community Development Director is authorized and directed to forward a copy of the Plans to the Minnesota Department of Revenue and the Office of the State Auditor pursuant to Minnesota Statutes 469.175, Subd.4a. 10. The Community Development Director is authorized and directed to forward a copy of the Plans to the Hennepin County Auditor and request that the Auditor certify the original tax capacity of the District as described in the Plans,all in accordance with Minnesota Statutes 469.177. Approved by the Board on June 18,2012. Suzanne M. Sandahl,Chair ATTEST: • Doris Rubenstein, Secretary RonClark Construction &Design 7500 West 78th Street Edina,MN 5543.9 (952)9474000 fax(952)9474030 Monday,April 30,2012 Mr.Steven L. Devich Executive Director City of Richfield Housing&RedeVeloproent Authority 6700 Portland Ave South Richfield, MN Re: Pillsbury Commons Subject: Request for Tax lOcrement Financing(Exhibit 0) Dear Mr.Devich: From our initial financial modeling that was-done prior to submitting our application to Minnesota Housing Finance Agency(MHFA)it was determined that the cost of the project would exceed available funding,e.g.there would be a financial gap, Because of this gap, prior to making our application to MI4FA we came to the city and requested Tax Increment Financing(TIF)to make the project feasible,The TIF will be used to pay for the costs involved in the demolition, environmental cleanup Of the site,site improvements,and other TIF eligible costs and will be needed to make the project financlallyfeasible. To justify the need for TIF we will support this request in the future with documentation that these are all T1F eligible coats. It is important to know that we Will Incur and pay for these costs up front and then request reimbursement from "pay as you go Tr over an extended period of time In this manner the reimbursement will be paid from the new, higher real estate taxes paid by our project,and not from other city sources. This letter is intended to define the amount of TIF needed to make the project financially feasible and to request the city complete the process of approving the TIF district simultaneously with the Land Use-approval of our Project. Due to the lengthy time frame to get to this point in the development process,we think it would be helpful to give a brief "bulletpoint"history of the tax increment financing element involved in our development:to date: • City Council meeting on 4/12/11;the-City Council was made aware of our intent to submit an application to Minnesota Housing Finance Agency(MHFA)for a 70-unit 400% affordable housing project on the former City Maihtenance,Facility property to be called "Pillsbury Commons",(This was also restated in an HRA memorandum dated 10/27/2011 to the City Council.) • City Council meeting on:6/14/11:the City Council approved Resolution 10520.The Resolution states that"the City wishes to supped the Project and directs staff to work With the Developer to take steps necessary to create a tax increment financing district for the Project".The"Project"is described in the Resolution to be"70 units of multifamily housing"and"is to be known as Pillsbury Commons and 100%of the units will be affordable to persons with incomes at of the area median income".We submitted our application to MHFA immediately after receiving the City Council's Resolution to support TIF for our project. t MN Builder License# 1220 . lea". MLA Lra uvw.Ronaads.com 2000116cIptant r47!%!" Ran Clark construction & Design 7500 West 78th Suter Etiim,MN 55439 (952)947-3000 fax1952)947-3030 • in our application to MHFA for financing for this project we used the approved city TiF Resolution as a key component of our application in order to demonstrate T1F support by the city which awarded es additional points for a higher score against our competition. On 11/17/2011 MHFA allocated federal tax credits to the Pillsbury Commons project through its competitive process.A requirement of this approval Is a pay as YOU go TIF note of$530,082.00 from The.City, On February 21,2012 Ron Clark Construction(Connelly Development,LLC)made formal application to the City of Richfield for our Pillsbury Commons project Our project has remained unchanged in Its overall concept for 70 units of 100%affordable rental housing since our meeting on this concept back on 04/12/2011 noted above.Based on the above noted City approved Resolution,our MHFA application Included Tax increment Financing(TIF)as an integral financial component for project feasibility. PRIOR TO.MHFA Application The original TIF amount used in our MHFA application for sources of funds for proof of development financial feasibility was$530,082.00,which was based on the original site plan exiting onto•Pillsbury Ave. Attached please find our"Project Sources&Uses"showing the financial gap in our sources of funds-necessary to pay for project costs.This continues to be the:amount of our TIF request even though the costs of the project have Increased due.the additional land area that will be required to be purchased to accommodate the addition of t8 Townhomes(and thus reducing the size of the apartment building to 52 units)toopread the density of the project and more actively use the:entire site area.This additional Land purchase and Townhome costs will be funded with an additional Developer equity contribution.This will increase the Developer Equity required for the project from the original amount of$437,580.00 to the:current Developer Equity required of 51,143„00&00(See attached Sources and Uses schedule) 1.Tax Increment Financing Requested$530,082.00 Tax Benefits to the Citv Upon theclosing of the land sale this fall,the area included in the TIF District will come back onto the tax rolls at the fair market value of the land included in the district based on the Appraisal done by the city in 2011.The current TIF analysis done by Ehlers for the City shows the base taxes on the site will be about$3,900.00 per year. The estimated total property taxes produced over the 26 years by the project are expected to be about$2,000,000.00. We look forward to the upcoming City meetings to to be able to present and discuss the variations in our project and come up with the best solution for all Involved. SAtf*--WV,A "OptC.W.1,, I Ronald E.Clark CEO Ron Clark Construction&Design Connelly Development 110. FLE.C.,lnc 041 ( AiNBuildorLicense# 1220 *!,,utu, www.RonClarkeom 200$Recipient Ikei"4 -5 u ro m t gp v U .O v o. -0 r O a, 5 t CC a a F— s. o Q 4- 'V .a o N !a O dap O V▪ 1 C c• 4Q+ N CUO c 4 •p d ate. _o u O 'O T U S Q y E m 0 E 2 ,O F2 .1 w >�3 EP ,a O 07 U CJ O 5 O � � O u.p t g P N F.- = 1a c = Ti RI Q It yF• f6 r�p c �O 2 co tub � ,c1 � L 'O ▪ a p j A O = . 'a � Q Q• a) c 'I ? ° a c _ 7 a .c c O g t . - v -o ,„ › d i 'c F 0 c ppU s a. U. 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Nj U C N CO N a-1 CA M w. 06 i0 t0 U X e-1 N M M `OAS Q`; OA O 0. ei C X ;1— 0 C W Q — •+ N • f its eo{ O h• d 'd', N' Vr tt) ,•c:r a1 y•• L N 0 01 LL N O N CI eN-I' r.,1 T-1 ',La O:': E CIJ . ' a ; ∎ ' W .! C - , i1; r M 'e1' N O N C Ui U V U. 2 2 .. 0 3 d', rl M r < , x„. : N O. .�' 0 o ta o. C O Lf t0 t 0 ' E 4. g tom v `o ? ,a •J J N =. U 2 E .c C'a 3 U 01 f N OLD > 4, co), 4, � C O CC 3 W L.' 0' Q 0 0 33 / io 0. 3:j O. F- as.. F- F- -ice Z. tri > • ® . • As ofJune 11, 2012 Draft for Public Hearing Modification to the Redevelopment Plan for the Richfield Redevelopment Project Area and the Tax Increment Financing Plan for the establishment of the 2012-1. Housing Tax Increment Financing District (Pillsbury Commons) (a housing district) within the Richfield Redevelopment Project Area Richfield Housing and Redevelopment Authority City of Richfield Hennepin County State of Minnesota Public Hearing:June 26,2012 Adopted: Prepared by: EHLERS&ASSOCIATES, INC. EFILERS 306 Drive, inn l 651-697-8500 fx: 651-697-85 Seh ersi c com Table of Contents (for reference purposes only) Section 1-Modification to the Redevelopment Plan for the Richfield Redevelopment Project Area Foreword 1-1 Section 2-Tax Increment Financing Plan for the 2011-1 Housing Tax Increment Financing District Subsection 2-1. Foreword 2-1 Subsection 2-2. Statutory Authority 2-1 Subsection 2-3. Statement of Objectives 2-1 Subsection 2-4. Redevelopment Plan Overview 2-1 Subsection 2-5. Description of Property in the District and Property To Be Acquired 2-2 Subsection 2-6. Classification of the District 2-2 Subsection 2-7. Duration and First Year of Tax Increment of the District 2-3 Subsection 2-8. Original Tax Capacity, Tax Rate and Estimated Captured Net Tax Capacity Value/Increment and Notification of Prior Planned Improvements 2-4 Subsection 2-9. Sources of Revenue/Bonds to be Issued 2-5 Subsection 2-10. Uses of Funds 2-6 Subsection 2-11. Fiscal Disparities Election 2-6 Subsection 2-12. Business Subsidies 2-7 Subsection 2-13. County Road Costs 2-8 Subsection 2-14. Estimated Impact on Other Taxing Jurisdictions 2-8 Subsection 2-15. Supporting Documentation 2-10 Subsection 2-16. Definition of Tax Increment Revenues 2-10 Subsection 2-17. Modifications to the District 2-10 Subsection 2-18. Administrative Expenses 2-11 Subsection 2-19. Limitation of Increment 2-12 Subsection 2-20. Use of Tax Increment 2-12 Subsection 2-21. Excess Increments 2-13 Subsection 2-22. Requirements for Agreements with the Developer 2-13 Subsection 2-23. Assessment Agreements 2-14 Subsection 2-24. Administration of the District 2-14 Subsection 2-25. Annual Disclosure Requirements 2-14 Subsection 2-26. Reasonable Expectations 2-14 Subsection 2-27. Other Limitations on the Use of Tax Increment 2-14 Subsection 2-28. Summary 2-15 Appendix A Project Description A-1 Appendix B Map of the Richfield Redevelopment Project Area and the District B-1 Appendix C Description of Property to be Included in the District C-1 Appendix D Estimated Cash Flow for the District D-1 Appendix E Housing Qualifications for the District E-1 Appendix F Findings for the District F-1 Appendix G Prior Improvements G-1 I Section 1 -Modification to the Redevelopment Plan for the Richfield Redevelopment Project Area Foreword The following text represents a Modification to the Redevelopment Plan for the Richfield Redevelopment Project Area. This modification represents a continuation of the goals and objectives set forth in the Redevelopment Plan for the Richfield Redevelopment Project Area. Generally, the substantive changes include the establishment of the 2012-1 Housing Tax Increment Financing District(Pillsbury Commons). For further information,a review of the Redevelopment Plan for the Richfield Redevelopment Project Area is recommended. It is available from the Community Development Director at the City of Richfield. Other relevant information is contained in the Tax Increment Financing Plans for the Tax Increment Financing Districts located within the Richfield Redevelopment Project Area. Richfield Housing and Redevelopment Authority Modification to the Redevelopment Plan for the Richfield Redevelopment Project Area 1-1 Section 2- Tax Increment Financing Plan for the 2011-1 Housing Tax Increment Financing District(Pillsbury Commons) Subsection 2-1. Foreword The Richfield Housing and Redevelopment Authority(the"HRA"),the City of Richfield(the"City"),staff and consultants have prepared the following information to expedite the establishment ofthe 2012-1 Housing Tax Increment Financing District(Pillsbury Commons)(the "District"),a housing tax increment financing district, located in the Richfield Redevelopment Project Area. Subsection 2-2. Statutory Authority Within the City, there exist areas where public involvement is necessary to cause development or redevelopment to occur. To this end,the HRA and City have certain statutory powers pursuant to Minnesota Statutes ("MS.'), Sections 469.001 to 469.047, inclusive, as amended, and M.S., Sections 469.174 to 469.1799, inclusive,as amended(the "Tax Increment Financing Act" or"TIF Act"),to assist in financing public costs related to this project. This section contains the Tax Increment Financing Plan(the "TIF Plan") for the District. Other relevant information is contained in the Modification to the Redevelopment Plan for the Richfield Redevelopment Project Area. Subsection 2-3. Statement of Objectives The District currently consists of three parcels of land and adjacent and internal rights-of-way. The District is being created to facilitate the construction of a 70 unit affordable housing development in the City consisting of 52 units of affordable, multi-family rental apartments and 18 units of affordable, rental townhomes. Please see Appendix A for further District information. The HRA intends to enter into an agreement with Ron Clark as the developer. Development is expected to begin in 2012. This TIF Plan is expected to achieve many of the objectives outlined in the Redevelopment Plan for the Richfield Redevelopment Project Area. The activities contemplated in the Modification to the Redevelopment Plan and the TIF Plan do not preclude the undertaking of other qualified development or redevelopment activities. These activities are anticipated to occur over the life of the Richfield Redevelopment Project Area and the District. Subsection 2-4. Redevelopment Plan Overview 1. Property to be Acquired-The HRA or City currently owns three parcels of property within the District. The remaining property located within the District may be acquired by the HRA or City and is further described in this TIF Plan. 2. Relocation - Relocation services, to the extent required by law, are available pursuant to M.S., Chapter 117 and other relevant state and federal laws. 3. Upon approval of a developer's plan relating to the project and completion of the necessary legal requirements,the HRA or City may sell to a developer selected properties that it may acquire within the District or may lease land or facilities to a developer. 4. The HRA or City may perform or provide for some or all necessary acquisition,construction, relocation,demolition,and required utilities and public street work within the District. Richfield Housing and Redevelopment Authority Tax Increment Financing Plan for the 2012-1 Housing Tax Increment Financing District(Pillsbury Commons) 2-1 Subsection 2-5. Description of Property in the District and Property To Be Acquired The District encompasses all property and adjacent rights-of-way and abutting roadways identified by the parcels listed in Appendix C of this TIF Plan. Please also see the map in Appendix B for further information on the location of the District. The HRA currently owns one of the parcels, and the City currently owns two of the parcels to be included in the District. The HRA or City may acquire any parcel within the District including interior and adjacent street rights of way. Any properties identified for acquisition will be acquired by the HRA or City only in order to accomplish one or more ofthe following:storm sewer improvements;provide land for needed public streets,utilities and facilities;carry out land acquisition,site improvements,clearance and/or development to accomplish the uses and objectives set forth in this plan. The HRA or City may acquire property by gift, dedication,condemnation or direct purchase from willing sellers in order to achieve the objectives of this TIF Plan. Such acquisitions will be undertaken only when there is assurance of funding to finance the acquisition and related costs. Subsection 2-6. Classification of the District The HRA and City,in determining the need to create a tax increment financing district in accordance with M.S.,Sections 469.174 to 469.1799 as amended,inclusive,find that the District to be established is a housing district pursuant to M.S., Section 469.174, Subd. 11 and M.S., Section 469.1761 as defined below: M.S., Section 469.174, Subd.11: "Housing district"means a type of tax increment financing district which consists of a project, or a portion of a project, intended for occupancy, in part, by persons or families of low and moderate income, as defined in chapter 462A, Title II of the National Housing Act of 1934, the National Housing Act of 1959, the United States HousingAct of 1937, as amended, Title Vof the Housing Act of 1949, as amended, any other similar present or future federal, state, or municipal legislation, or the regulations promulgated under any of those ac ts, and that satisfies the requirements ofM.S., Section 469.1761. Housing project mea ns a project, or portion of a project, that meets all the qualifications of a housing district under this subdivision, whether or not actually established as a housing district. M.S., Section 469.1761: Subd. 1. Requirement imposed. (a) In order for a tax increment financing district to qualify as a housing district: (1) the income limitations provided in this section must be satisfied;and (2) no more than 20 percent of the square footage of buildings that receive assistance from tax increments may consist of commercial, retail, or other nonresidential uses. (b) The requirements imposed by this section apply to property receiving assistance financed with tax increments, including interest reduction, land transfers at less than the Authority's cost of acquisition, utility service or connections, roads, parking facilities, or other subsidies. The provisions of this section do not apply to districts located within a targeted area as defined in Section 462C.02 Subd 9, clause (e). Richfield Housing and Redevelopment Authority Tax Increment Financing Plan for the 2012-1 Housing Tax Increment Financing District(Pillsbury Commons) 2-2 (c)For purposes of the requirements of paragraph (a), the authority may elect to treat an addition to an existing structure as a separate building if (1) construction of the addition begins more t han three years after construction of the existing structure was completed;and (2) for an addition that does not meet the requirements of paragraph (a), clause(2),if it is treated as a separate building, the addition was not contemplated by the tax increment financing plan which includes the existing structure. Subd. 2. Owner occupied housing. For owner occupied residential property, 95 percent of the housing units must be initially purchased and occupied by ind ividuals whose family income is less than or equal to the income requirements for qualified mortgage bond projects under section 1430 of the Internal Revenue Code. Subd. 3. Rental property. For residential rental property, the property mu st satisfy the income requirements for a qualified residential rental p roject as defined in section 142(d) of the Internal Revenue Code. The requirements of this subdivisi on apply for the duration of the tax increment financing district. Subd 4. Noncompliance; enforcement. Failure to comply with the requirements of this section is subject to M.S., Section 469.1771. In meeting the statutory criteria the HRA and City rely on the following facts and findings: • The District consists of three parcels. • The development will consist of 52 units of affordable,multi-family rental apartments and 18 units of affordable,rental townhomes. • A minimum of 40% of the units will be occupied by person with incomes less than 60% of median income,per Minnesota Statutes.However,it is anticipated that 100%of the units will be affordable. Pursuant to MS., Section 469.176, Subd. 7,the District does not contain any parcel or part of a parcel that qualified under the provisions of M.S., Sections 273.111 or 273.112 or Chapter 473H for taxes payable in any of the five calendar years before the filing of the request for certification of the District. Subsection 2-7. Duration and First Year of Tax Increment of the District Pursuant to MS., Section 469.175, Subd 1, and Section 469.176, Subd. 1,the duration and first year of tax increment ofthe District must be indicated within the TIF Plan. Pursuant to M.S.,Section 469.176, Subd lb., the duration of the District will be 25 years after receipt of the first increment by the HRA or City(a total of 26 years of tax increment). The HRA or City elects to receive the first tax increment in 2015,which is no later than four years following the year of approval of the District. Thus, it is estimated that the District, including any modifications of the TIF Plan for subsequent phases or other changes,would terminate after 2040,or when the TIF Plan is satisfied. The HRA or City reserves the right to decertify the District prior to the legally required date. Richfield Housing and Redevelopment Authority Tax Increment Financing Plan for the 2012-1 Housing Tax Increment Financing District(Pillsbury Commons) 2-3 Subsection 2-8. Original Tax Capacity,Tax Rate and Estimated Captured Net Tax Capacity Value/Increment and Notification of Prior Planned Improvements Pursuant to M.S.,Section 469.174, Subd. 7 and 11B.,Section 469.177,Subd.1,the Original Net Tax Capacity (ONTC)as certified for the District will be based on the market values placed on the property by the assessor in 2011 for taxes payable 2012. Pursuant to M.S., Section 469.177, Subds. 1 and2,the County Auditor shall certify in each year(beginning in the payment year 2015)the amount by which the original value has increased or decreased as a result of: 1. Change in tax exempt status of property; 2. Reduction or enlargement of the geographic boundaries of the district; 3. Change due to adjustments,negotiated or court-ordered abatements; 4. Change in the use of the property and classification; 5. Change in state law governing class rates;or 6. Change in previously issued building permits. In any year in which the current Net Tax Capacity(NTC)value of the District declines below the ONTC,no value will be captured and no tax increment will be payable to the HRA or City. The original local tax rate for the District will be the local tax rate for taxes payable 2012, assuming the request for certification is made before June 30,2012. The ONTC and the Original Local Tax Rate for the District appear in the table below. Pursuant to M.S., Section 469.174 Subd. 4 and M.S., Section 469.177, Subd. 1, 2, and 4 , the estimated Captured Net Tax Capacity(CTC)of the District,within the Richfield Redevelopment Project Area,upon completion of the projects within the District,will annually approximate tax increment revenues as shown in the table below. The HRA and City request 100 percent of the available increase in tax capacity for repayment of its obligations and current expenditures,beginning in the tax year payable 2015. The Project Tax Capacity (PTC) listed is an estimate of the captured tax capacity of the District in the final year of collection of tax increment(year 26 of the District). Project Estimated Tax Capacity upon Completion(PTC) $103,374 Original Estimated Net Tax Capacity(ONTC) $3,894 Estimated Captured Tax Capacity(CTC) $99,480 Original Local Tax Rate 1.49211 Pay 2012 Estimated Annual Tax Increment(CTC x Local Tax Rate) $148,435 Percent Retained by the HRA 100% Tax capacity includes a 3.0%inflation factor for the duration of the District. The tax capacity included in this chart is the estimated tax capacity of the District in year 26. The tax capacity of the District in year one is estimated to be$49,372. Pursuant to M.S., Section 469.177, Subd. 4,the HRA shall, after a due and diligent search, accompany its request for certification to the County Auditor or its notice of the District enlargement pursuant to M.S., Section 469.175, Subd. 4,with a listing of all properties within the District or area of enlargement for which building permits have been issued during the eighteen(18)months immediately preceding approval of the TIF Plan by the municipality pursuant to M.S.,Section 469.175, Subd. 3. The County Auditor shall increase the original net tax capacity of the District by the net tax capacity of improvements for which a building permit was issued. Richfield Housing and Redevelopment Authority Tax Increment Financing Plan for the 2012-1 Housing Tax Increment Financing District(Pillsbury Commons) 2-4 The City has reviewed the area to be included in the District and found no parcels for which building permits have been issued during the 18 months immediately preceding approval of the TIF Plan by the City. Subsection 2-9. Sources of Revenue/Bonds to be Issued The costs outlined in the Uses of Funds will be financed primarily through the annual collection of tax increments. The HRA or City reserves the right to issue bonds or incur other indebtedness as a result of the TIF Plan. As presently proposed,the projects within the District will be financed by one or more pay-as-you- go notes. Any refunding amounts will be deemed a budgeted cost without a formal TIF Plan Modification. This provision does not obligate the HRA or City to incur debt. The HRA or City will issue bonds or incur other debt only upon the determination that such action is in the best interest of the City. The total estimated tax increment revenues for the District are shown in the table below: SOURCES OF FUNDS TOTAL Tax Increment $2,679,383 Interest $267.938 TOTAL $2,947,321 The HRA or City may issue bonds(as defined in the TIF Act)secured in whole or in part with tax increments from the District in a maximum principal amount of$1,947,321. Such bonds may be in the form of pay-as- you-go notes, revenue bonds or notes,general obligation bonds, or interfund loans. This estimate of total bonded indebtedness is a cumulative statement of authority under this TIF Plan as of the date of approval. Subsection 2-10. Uses of Funds Currently under consideration for the District is a proposal to facilitate the construction of a 70 unit affordable housing development in the City,consisting of 52 units affordable,multi-family rental apartments and 18 units of affordable, rental townhomes. The HRA and City have determined that it will be necessary to provide assistance to the project for certain District costs,as described. The HRA has studied the feasibility of the development or redevelopment of property in and around the District. To facilitate the establishment and development or redevelopment of the District,this TIF Plan authorizes the use of tax increment financing to pay for the cost of certain eligible expenses. The estimate of public costs and uses of funds associated with the District is outlined in the following table. Richfield Housing and Redevelopment Authority Tax Increment Financing Plan for the 2012-1 Housing Tax Increment Financing District(Pillsbury Commons) 2-5 I LP USES OF TAX INCREMENT FUNDS TOTAL Land/Building Acquisition $531,000 Site Improvements/Preparation $0 Utilities $0 Other Qualifying Improvements $1,148,383 Administrative Costs(up to 10%) $267,938 PROJECT COST TOTAL $1,947,321 Interest $1,000,000 PROJECT AND INTEREST COSTS TOTAL $2,947,321 The total project cost,including financing costs(interest)listed in the table above does not exceed the total sources of funds. Estimated costs associated with the District are subject to change among categories without a modification to this TIF Plan. The cost of all activities to be considered for tax increment financing will not exceed, without formal modification,the budget above pursuant to the applicable statutory requirements. The HRA may expend funds for qualified housing activities outside of the District boundaries. Subsection 2-11. Fiscal Disparities Election Pursuant to M.S., Section 469.177, Subd. 3 , the City may elect one of two methods to calculate fiscal disparities. If the calculations pursuant to M.S., Section 469.177, Subd. 3, clause b,(inside the District)are followed,the following method of computation shall apply: (1) The original net tax capacity and the current ne t tax capacity shall be determined before the application of the fiscal disparity provisions of Chapter 276A or 473F. Where the original net tax capacity is equal to or greater than thecurrent net tax capacity, there is no captured nettax capacity and no tax increment determination. Where the original net tax capacity is less than the current net tax capacity, the difference between the original net tax capacity and the current net tax capacity is thecaptured net tax capacity. This amount less any portion thereof which the authority has designated, in its tax increment financing plan, to share with the local taxing districts is the retained captured net tax capacity of the authority. (2) The county auditor shall exclude the retainethaptured net tax capacity of the authority from the net tax capacity of the local taxing districts in determining local taxing district tax rates. The local tax rates so determined are to be extended against the retained captured net tax capacity of the authority as well as the nettax capacity of the local taxing districts. The tax generated by the extension of the lesser of(A)the local taxing district tax rates or(B)the original local tax rate to the retained capture d net tax capacity of the authority is the tax increment of the authority. The City will choose to calculate fiscal disparities by clause b. It is not anticipated that the District will contain commercial/industrial property. As a result, there should be no impact due to the fiscal disparities provision on the District. Richfield Housing and Redevelopment Authority Tax Increment Financing Plan for the 2012-1 Housing Tax Increment Financing District(Pillsbury Commons) 2-6 qt— (1 According to M.S., Section 469.177,Subd. 3: (c) The method of computation of tax increment applied to a district pursuant to paragraph (a) or (b)shall remain the same for the duration of the district, except that the governing body may elect to change its election from the method of computation in paragraph(a)to the method in paragraph (b). Subsection 2-12. Business Subsidies Pursuant to M.S., Section 116J.993, Subd. 3,the following forms of financial assistance are not considered a business subsidy: (1) A business subsidy of less than$150,000; (2) Assistance that is generally available to all businesses or to a general class of similar businesses, such as a line of business, size,location, or similar general criteria; (3) Public improvements to buildings or lands owned by the state or local government that serve a public purpose and do not principally benefit a single business or defined group of businesses at the time the improvements are made; (4) Redevelopment property polluted by contaminants as defined in MS.,Section 116J.552, Subd.3; (5) Assistance provided for the sole purpose of renovating old or decaying building stock or bringing it up to code and assistance provided for designated historic preservation districts,provided that the assistance is equal to or less than 50%of the total cost; (6) Assistance to provide job readiness and training services if the sole purpose of the assistance is to provide those services; (7) Assistance for housing; (8) Assistance for pollution control or abatement,including assistance for a tax increment financing hazardous substance subdistrict as defined under M.S., Section 469.174, Subd 23; (9) Assistance for energy conservation; (10) Tax reductions resulting from conformity with federal tax law; (11) Workers'compensation and unemployment compensation; (12) Benefits derived from regulation; (13) Indirect benefits derived from assistance to educational institutions; (14) Funds from bonds allocated under chapter 474A,bonds issued to refund outstanding bonds,and bonds issued for the benefit of an organization described in section 501 (c) (3) of the Internal Revenue Code of 1986,as amended through December 31, 1999; (15) Assistance for a collaboration between a Minnesota higher education institution and a business; (16) Assistance for a tax increment financing soils condition district as defined under M.S., Section 469.174, Subd. 19; (17) Redevelopment when the recipient's investment in the purchase of the site and in site preparation is 70 percent or more of the assessor's current year's estimated market value; (18) General changes in tax increment financing law and other general tax law changes of a principally technical nature; (19) Federal assistance until the assistance has been repaid to, and reinvested by, the state or local government agency; (20) Funds from dock and wharf bonds issued by a seaway port authority; (21) Business loans and loan guarantees of$150,000 or less; (22) Federal loan funds provided through the United States Department of Commerce,Economic Development Administration;and (23) Property tax abatements granted finder M.S., Section 469.1813 to property that is subject to valuation under Minnesota Rules,chapter 8100. Richfield Housing and Redevelopment Authority Tax Increment Financing Plan for the 2012-1 Housing Tax Increment Financing District(Pillsbury Commons) 2-7 • g-Ig The HRA will comply with M.S., Sections 116J.993 to 116J.995 to the extent the tax increment assistance under this TIF Plan does not fall under any of the above exemptions. Subsection 2-13.County Road Costs Pursuant to M.S.,Section 469.175, Subd.la,the county board may require the HRA or City to pay for all or part of the cost of county road improvements if the proposed development to be assisted by tax increment will,in the judgment of the county,substantially increase the use of county roads requiring construction of road improvements or other road costs and if the road improvements are not scheduled within the next five years under a capital improvement plan or within five years under another county plan. If the county elects to use increments to improve county roads,it must notify the HRA or City within forty- five days of receipt of this TIF Plan. In the opinion of the HRA and City and their consultants,the proposed development outlined in this TIF Plan will have little or no impact upon county roads,therefore the TIF Plan was not forwarded to the county 45 days prior to the public hearing. The HRA and City are aware that the county could claim that tax increment should be used for county roads,even after the public hearing. Subsection 2-14. Estimated Impact on Other Taxing Jurisdictions The estimated impact on other taxing jurisdictions assumes that the redevelopment contemplated by the TIF Plan would occur without the creation of the District. However,the HRA or City has determined that such development or redevelopment would not occur"but for" tax increment financing and that,therefore,the fiscal impact on other taxing jurisdictions is $0. The estimated fiscal impact of the District would be as follows if the"but for"test was not met: IMPACT ON TAX BASE 2011/Pay 2012 Estimated Captured Total Net Tax Capacity(CTC) Percent of CTC Tax Capacity Upon Completion to Entity Total Hennepin County 1,251,745,096 99,480 0.0079% City of Richfield 22,626,954 99,480 0.4397% Richfield ISD No.280 29,274,944 99,480 0.3398% IMPACT ON TAX RATES Pay 2012 Percent Potential Extension Rates of Total CTC Taxes Hennepin County 0.482310 32.32% 99,480 47,980 City of Richfield 0.625630 41.93% 99,480 62,238 Richfield ISD No.280 0.288940 19.36% 99,480 28,744 Other 0.095230 6.38% 99.480 9,473 Total 1.492110 100.00% 148,435 Richfield Housing and Redevelopment Authority Tax Increment Financing Plan for the 2012-1 Housing Tax Increment Financing District(Pillsbury Commons) 2-8 The estimates listed above display the captured tax capacity in year 26 of the District. The tax rate used for calculations is the actual Pay 2012 rate. The total net capacity for the entities listed above are based on actual Pay 2012 figures. The District will be certified under the actual Pay 2012 rates. Pursuant to M.S.Section 469.175 Subd. 2(b): (1) Estimate of total tax increment. It is estimated that the total amount of tax increment that will be generated over the life of the District is$2,679,383; (2) Probable impact of the District on city provided services and ability to issue debt. The probable impact of the District on police protection is not expected to be significant.With any addition of new residents or businesses,police calls for service will be increased.The City does not expect that the proposed development, in and of itself, will necessitate new capital investment in vehicles or facilities. The probable impact of the District on fire protection is not expected to be significant. Typically new buildings generate few calls, if any, and are of superior construction. The City may have a slight increase in medical related calls;however,the development is not expected to require an increase in capital investment in vehicles or facilities. The impact of the District on public infrastructure is expected to be minimal. The development is not expected to significantly impact any traffic movements in the area.The current infrastructure for sanitary sewer,storm sewer and water will be able to handle the additional volume generated from the proposed development. Based on the development plans,there are no additional costs associated with street maintenance, sweeping,plowing,lighting and sidewalks. The development in the District will pay to the City sanitary sewer(SAC)connection fees. The probable impact of any District general obligation tax increment bonds on the ability to issue debt for general fund purposes is expected to be minimal. It is not anticipated that there will be any general obligation debt issued in relation to this project, therefore there will be no impact on the City's ability to issue future debt or on the City's debt limit. (3) Estimated amount of tax increment attributable to school district levies. It is estimated that the amount of tax increments over the life of the District that would be attributable to school district levies, assuming the school district's share of the total local tax rate for all taxing jurisdictions remained the same,is$518,729 (4) Estimated amount of tax increment attributable to county levies. It is estimated that the amount of tax increments over the life of the District that would be attributable to county levies,assuming the county's share of the total local tax rate for all taxing jurisdictions remained the same,is$865,977 (5) Additional information requested by the county or school district. The City is not aware of any standard questions in a county or school district written policy regarding tax increment districts and impact on county or school district services. The county or school district must request additional information pursuant to M.S. Section 469.175 Subd. 2(b) within 15 days after receipt of the tax increment financing plan. No requests for additional information from the county or school district regarding the proposed development for the District have been received. Richfield Housing and Redevelopment Authority Tax Increment Financing Plan for the 2012-1 Housing Tax Increment Financing District(Pillsbury Commons) 2-9 Subsection 2-15.Supporting Documentation Pursuant to MS. Section 469.175, Subd. 1 (a), clause 7 the TIF Plan must contain identification and description of studies and analyses used to make the findings are required in the resolution approving the District. Following is a list of reports and studies on file at the City that support the HRA and City's findings: • Project Sources and Uses and Project Pro forma provided by Ron Clark. • Site Plans provided by Ron Clark. • Minnesota Housing Finance Agency Tax Credit Application prepared by Ron Clark and submitted to MHFA. Subsection 2-16. Definition of Tax Increment Revenues Pursuant to MS.,Section 469.174, Subd. 25,tax increment revenues derived from a tax increment financing district include all of the following potential revenue sources: 1. Taxes paid by the captured net tax capacity,but excluding any excess taxes,as computed under M.S., Section 469.177; 2. The proceeds from the sale or lease of property,tangible or intangible,to the extent the property was purchased by the Authority with tax increments; 3. Principal and interest received on loans or other advances made by the Authority with tax increments; 4. Interest or other investment earnings on or from tax increments; 5. Repayments or return of tax increments made to the Authority under agreements for districts for which the request for certification was made after August 1, 1993;and 6. The market value homestead credit paid to the Authority under M.S., Section 273.1384. Subsection 2-17. Modifications to the District In accordance with M.S., Section 469.175, Subd. 4,any: 1. Reduction or enlargement of the geographic area of the District,if the reduction does not meet the requirements of M.S., Section 469.175, Subd. 4(e); 2. Increase in amount of bonded indebtedness to be incurred; 3. A determination to capitalize interest on debt if that determination was not a part of the original TIF Plan; 4. Increase in the portion of the captured net tax capacity to be retained by the HRA or City; 5. Increase in the estimate ofthe cost of the District,including administrative expenses,that will be paid or financed with tax increment from the District;or 6. Designation of additional property to be acquired by the HRA or City, shall be approved upon the notice and after the discussion,public hearing and findings required for approval of the original TIF Plan. Pursuant to MS.Section 469.175 Subd. 4(f),the geographic area of the District may be reduced,but shall not be enlarged after five years following the date of certification of the original net tax capacity by the county auditor. If a housing district is enlarged, the reasons and supporting facts for the determination that the addition to the district meets the criteria of M.S., Section 469.174, Subd. 11 must be documented. The requirements of this paragraph do not apply if(1)the only modification is elimination of parcel(s)from the District and(2)(A)the current net tax capacity of the parcel(s)eliminated from the District equals or exceeds the net tax capacity of those parcel(s)in the District's original net tax capacity or(B)the HRA agrees that, notwithstanding M.S.,Section 469.177,Subd. 1,the original net tax capacity will be reduced by no more than the current net tax capacity of the parcel(s)eliminated from the District. Richfield Housing and Redevelopment Authority Tax Increment Financing Plan for the 2012-1 Housing Tax Increment Financing District(Pillsbury Commons) 2-10 (3 The HRA or City must notify the County Auditor of any modification to the District. Modifications to the District in the form of a budget modification or an expansion of the boundaries will be recorded in the TIF Plan. Subsection 2-18.Administrative Expenses In accordance with MS.,Section 469.174, Subd. 14, administrative expenses means all expenditures of the HRA or City,other than: 1. Amounts paid for the purchase of land; 2. Amounts paid to contractors or others providing materials and services,including architectural and engineering services, directly connected with the physical development of the real property in the District; 3. Relocation benefits paid to or services provided for persons residing or businesses located in the District;or 4. Amounts used to pay principal or interest on,fund a reserve for,or sell at a discount bonds issued pursuant to M.S., Section 469.178;or 5. Amounts used to pay other financial obligations to the extent those obligations were used to finance costs described in clauses(1)to(3). For districts for which the request for certification were made before August 1, 1979,or after June 30, 1982, and before August 1,2001,administrative expenses also include amounts paid for services provided by bond counsel,fiscal consultants,and planning or economic development consultants. Pursuant to MS., Section 469.176, Subd. 3, tax increment may be used to pay any authorized and documented administrative expenses for the District up to but not to exceed 10 percent of the total estimated tax increment expenditures authorized by the TIF Plan or the total tax increments,as defined by M.S.,Section 469.174, Subd. 25, clause (1),from the District,whichever is less. For districts for which certification was requested after July 31,2001,no tax increment may be used to pay any administrative expenses for District costs which exceed ten percent of total estimated tax increment expenditures authorized by the TIF Plan or the total tax increments,as defined in M.S.,Section 469.174, Subd 25, clause (1),from the District,whichever is less. Pursuant to M.S., Section 469.176, Subd. 4h, tax increments may be used to pay for the County's actual administrative expenses incurred in connection with the District and are not subject to the percentage limits of MS.,Section 469.176, Subd. 3. The county may require payment of those expenses by February 15 of the year following the year the expenses were incurred. Pursuant to MS., Section 469. 177, Subd. 11,the County Treasurer shall deduct an amount(currently .36 percent) of any increment distributed to the HRA or City and the County Treasurer shall pay the amount deducted to the State Commissioner of Management and Budget for deposit in the state general fund to be appropriated to the State Auditor for the cost of financial reporting of tax increment financing information and the cost of examining and auditing authorities' use of tax increment financing. This amount may be adjusted annually by the Commissioner of Revenue. Subsection 2-19. Limitation of Increment • The tax increment pledged to the payment of bonds and interest thereon may be discharged and the District may be terminated if sufficient funds have been irrevocably deposited in the debt service fund or other escrow account held in trust for all outstanding bonds to provide for the payment of the bonds at maturity or redemption date. Richfield Housing and Redevelopment Authority Tax Increment Financing Plan for the 2012-1 Housing Tax Increment Financing District(Pillsbury Commons) 2-11 Pursuant to MS., Section 469.176, Subd. 6: if, after four years from the date of certification of the original net tax capacity of the tax increment financing district pursuant to MS., Section 469.177, no demolition, rehabtfition or renovation of property or other site preparation, including qualified improvement of a street adjacent to a parcel but not installation of utility service including sewer or wa ter systems,has been commenced on a parcellocated within a tax increment financingdistrict by the authority or by the owner of the parceiln accordance with tie tax increment financing plan, no additional tax increment may be taken from that parcel and the original net tax capacity of that parcel sha ll be excluded from the original net tax capacity of the tax increment financing district. If the authority or the owner of the parcel subsequently commences demolition, rehabilitation or renovationor other site preparation on that parcel including qualified improvement of a street adjacent to that parcel, in accordance with the tax increment financing plan, theauthority shall certify to the county auditor that the activity has commenced and the county auditor sh all certify the net tax capacity thereof as most recently certified by the commissioner of revenue and addit to the original net tax capacity ofthe tax increment financing district. The coui3tauditor must enforce the provisions of this subdivision. The authority must submit to the county auditor evidence that the required activity has taken place for each parcel in th e district. The evidence for a parcel must be submitted by February 1 of the fifth year follwng the year inwhich the parcel was certified as included in the district. For purposes of this subdivision, qualified improvements of a street are limited to (1) construction or opening of a new street, (2) relocation of a street, and(3)substantial reconstruction or rebuilding of an existing street. The HRA or City or a property owner must improve parcels within the District by approximately June 2016 and report such actions to the County Auditor. Subsection 2-20. Use of Tax Increment The HRA or City hereby determines that it will use 100 percent of the captured net tax capacity of taxable property located in the District for the following purposes: 1. To pay the principal of and interest on bonds issued to finance a project; 2. to finance,or otherwise pay public redevelopment costs of the the Richfield Redevelopment Project Area pursuant to M.S., Sections 469.001 to 469.047; 3. To pay for project costs as identified in the budget set forth in the TIF Plan; 4. To finance,or otherwise pay for other purposes as provided in M.S., Section 469.176, Subd. 4; 5. To pay principal and interest on any loans,advances or other payments made to or on behalf of the HRA or City or for the benefit of the Richfield Redevelopment Project Area by a developer; 6. To finance or otherwise pay premiums and other costs for insurance or other security guaranteeing the payment when due of principal of and interest on bonds pursuant to the TIF Plan or pursuant to M.S., Chapter 462C.MS., Sections 469.152 through 469.165,and/or M.S., Sections 469.178;and 7. To accumulate or maintain a reserve securing the payment when due of the principal and interest on the tax increment bonds or bonds issued pursuant to MS., Chapter 462C,MS., Sections 469.152 through 469.165,and/or M.S., Sections 469.178. Revenues derived from tax increment from a housing district must be used solely to fmance the cost of housing projects as defined in M.S.,Sections 469.174,Subd 11 and 469.1761. The cost of public improvements directly related to the housing projects and the allocated administrative expenses of the BRA or City may be included in the cost of a housing project. Richfield Housing and Redevelopment Authority Tax Increment Financing Plan for the 2012-1 Housing Tax Increment Financing District(Pillsbury Commons) 2-12 These revenues shall not be used to circumvent any levy limitations applicable to the City nor for other purposes prohibited by M.S., Section 469.176, Subd. 4. Tax increments generated in the District will be paid by Hennepin County to the HRA for the Tax Increment Fund of said District. The HRA or City will pay to the developer(s)annually an amount not to exceed an amount as specified in a developer's agreement to reimburse the costs of land acquisition, public improvements,demolition and relocation and site preparation. Remaining increment funds will be used for HRA or City administration(up to 10 percent)and for the costs of public improvement activities outside the District. Subsection 2-21. Excess Increments Excess increments,as defined in M.S.,Section 469.176, Subd. 2,shall be used only to do one or more of the following: 1. Prepay any outstanding bonds; 2. Discharge the pledge of tax increment for any outstanding bonds; 3. Pay into an escrow account dedicated to the payment of any outstanding bonds;or 4. Return the excess to the County Auditor for redistribution to the respective taxing jurisdictions in proportion to their local tax rates. The HRA or City must spend or return the excess increments under paragraph(c)within nine months after the end of the year. In addition,the HRA or City may,subject to the limitations set forth herein,choose to modify the TIF Plan in order to finance additional public costs in the Richfield Redevelopment Project Area or the District. Subsection 2-22. Requirements for Agreements with the Developer The HRA or City will review any proposal for private development to determine its conformance with the Redevelopment Plan and with applicable municipal ordinances and codes. To facilitate this effort, the following documents may be requested for review and approval: site plan, construction, mechanical, and electrical system drawings,landscaping plan,grading and storm drainage plan,signage system plan,and any other drawings or narrative deemed necessary by the HRA or City to demonstrate the conformance of the development with City plans and ordinances. The HRA or City may also use the Agreements to address other issues related to the development. Pursuant to M.S., Section 469.176, Subd. 5, no more than 10 percent, by acreage, of the property to be acquired in the District as set forth in the TIF Plan shall at any time be owned by the HRA or City as a result of acquisition with the proceeds of bonds issued pursuant to MS.,Section 469.178 to which tax increments from property acquired is pledged,unless prior to acquisition in excess of 10 percent of the acreage,the HRA or City concluded an agreement for the development of the property acquired and which provides recourse for the HRA or City should the development not be completed. Subsection 2-23.Assessment Agreements Pursuant to M.S.,Section 469.177, Subd. 8,the HRA or City may enter into a written assessment agreement in recordable form with the developer of property within the District which establishes a minimum market value of the land and completed improvements for the duration of the District. The assessment agreement shall be presented to the County Assessor who shall review the plans and specifications for the improvements to be constructed,review the market value previously assigned to the land upon which the improvements are Richfield Housing and Redevelopment Authority Tax Increment Financing Plan for the 2012-1 Housing Tax Increment Financing District(Pillsbury Commons) 2-13 ail to be constructed and,so long as the minimum market value contained in the assessment agreement appears, in the judgment of the assessor, to be a reasonable estimate, the County Assessor shall also certify the minimum market value agreement. Subsection 2-24.Administration of the District Administration of the District will be handled by the Community Development Director. Subsection 2-25.Annual Disclosure Requirements Pursuant to M.S., Section 469.175, Subds. 5, 6, and 6b the HRA or City must undertake financial reporting for all tax increment financing districts to the Office of the State Auditor,County Board and County Auditor on or before August 1 of each year. M.S., Section 469.175, Subd. 5 also provides that an annual statement shall be published in a newspaper of general circulation in the City on or before August 15. If the City fails to make a disclosure or submit a report containing the information required by M.S.,Section 469.175 Subd. 5 and Subd. 6, the OSA will direct the County Auditor to withhold the distribution of tax increment from the District. Subsection 2-26. Reasonable Expectations As required by the TIF Act,in establishing the District,the determination has been made that the anticipated development would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future. In making said determination, reliance has been placed upon written representation made by the developer to such effects and upon HRA and City staff awareness ofthe feasibility of developing the project site(s)within the District. Subsection 2-27.Other Limitations on the Use of Tax Increment 1. General Limitations. All revenue derived from tax increment shall be used in accordance with the TIF Plan. The revenues shall be used to finance, or otherwise pay public redevelopment costs of the the Richfield Redevelopment Project Area pursuant to M.S.,Sections 469.001 to 469.047. Tax increments may not be used to circumvent existing levy limit law. No tax increment may be used for the acquisition, construction,renovation,operation,or maintenance of a building to be used primarily and regularly for conducting the business of a municipality,county,school district,or any other local unit of government or the state or federal government. This provision does not prohibit the use of revenues derived from tax increments for the construction or renovation of a parking structure. 2. Housing District Exceptions to Restriction on Pooling; Five Year Limit. Pursuant to M.S., Section 469.1763, (1)At least 80%of the tax increment derived from the District must be expended on Public Costs incurred within said district,and up to 20%of said tax increments may be spent on Public Costs incurred outside of the District but within the Richfield Redevelopment Project Area;provided that in the case of a housing district,a housing project,as defined in M.S.,Section 469.174, Subd 11,is deemed to be an activity in the District,even if the expenditure occurred after five years. Subsection 2-28. Summary The Richfield Housing and Redevelopment Authority is establishing the District to provide an impetus for residential development and provide safe and decent life cycle housing in the City. The TIF Plan for the District was prepared by Ehlers&Associates,Inc.,3060 Centre Pointe Drive,Roseville,Minnesota 55113- 1105,telephone(651)697-8500. Richfield Housing and Redevelopment Authority Tax Increment Financing Plan for the 2012-1 Housing Tax Increment Financing District(Pillsbury Commons) 2-14 Appendix A Project Description The 2012-1 Housing Tax Increment Financing District(Pillsbury Commons)is being established to facilitate the construction of a 70 unit affordable housing development in the City consisting of 52 units of affordable, multi-family rental apartments and 18 units of affordable,rental townhomes. Minnesota Statutes require that a minimum of 40%of the units will be affordable to persons at or below 60% of median income or 20%of the units will be affordable to persons at or below 50%of median income for a housing district.However,the developer is proposing that 100%of the units be affordable. The TIF District consists of three parcels plus the adjacent right of way as shown on the map.Currently,the City of Richfield and the Richfield HRA own the three parcels.The developer intends to purchase the three City and HRA owned parcels.Appraisals on these parcels have been completed. The developer has received approval from the Minnesota Housing Finance Agency for tax credits to assist with the financing of the development.MHFA will underwrite the project using a rate of 5.25%.The HRA anticipates issuing a Pay-as-you-go Note to reimburse the developer for costs including acquisition, demolition and other site improvements and qualified costs. The developer has requested assistance of $530,082.The HRA will retain 10 percent of the tax increment generated from the TIF District for the costs of administering the TIF District,which is the maximum allowed by Minnesota Statutes.The balance of the increment may be used for other low and moderate income housing projects as allowed by Minnesota Statutes,or the district may be decertified after obligations have been met.At the time of the consideration of the TIF Plan,other projects have not been identified. Appendix A-1 (6 -2AP Appendix B Map of the Richfield Redevelopment Project Area and the District Appendix B-1 S -ate E S 2 a <IZ 21.1030 --- Q® 608E NV03O , '- .... 1111111■■•••111■MI■...X11.11■�∎1•I yLgt� �� J E$ t∎. j�rv'llllullu 11111111 HIM 0001 418E r at r `o m11111 11111111 11111111 1111111►L `�.mulnu/111111111 1111111111 1111111111111111111 Y y ti IYp ♦ �n uItt 8 l 1111111Lmn lI Ilnllu grunt D��o`♦♦1111111111 1111111111 1111111111 1111111111 111111111 �4 911 1111111/11� 11111111 11111111 ID♦♦♦♦mss 1111111 Illllllll) 11111/1111 114 006E Nat $ E S •_111111111111111111111111111111!111111111111111 IIIIIIII 111111111111%, S VIII 1111111111 111111111111111111 Mt - 1 8'.. 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X21Vd 11111111 111111 11/11111/11111/1 11111111 11111/11 111111111 CE I 1111111 OOt NNW ONVDIVO I 111111111111111111111111■ 11111111 II 11111111 11111111 11111111 0� ONVIXVO 1111141 lllglllll ll•111111111111111g1I1...111111 1 411111 -� O aNV1121Od I I I I� L1111m1 Illllllll)Illulllll 1111111 II 1 1 11111111 1111111111 mm COg ON'llaod •1 1.111111111 ` .IIIII• III 1111/1/111 1111111 11111 IL11�111111111111.11111111 111111/11 H Z 4la 111111111111111 I■11111111 ■om!!11111111 1111/11111 1 II ■11111111 11.1111 11.11111 UN p mnnnl11111 JJJJJJ ILL I1 I 1118nm11 m11111 mn111 n11nm m1 Ems 88m11111 1111111111 11m111 f�1 111 Illlll111111111' IIIIIIIIIII 1111111/1111//11 IIIIIIII 11111111 IIIII 11111 111111111111 Illllllll 11111/11 Il 1■111 y14 •► 111111111111111 r�..Ill 111111111111/111/111 11111//1 1/1/1111 11111111 11111111 1111111111 111111111111 1111111111 11111111 1 CD NO1NI1O 1111111111111111 llllll.,►I..I; -a1IIIIIIII 1/111111 Mum 11/11111 IIIIIIII 1/1/1111 1111111111 111111111111 1111111111 1111/111 I I p� NOlNIIO 11111111111111 dI- 111111111111 11111111 11111111 11/111/1 11111111 IIIIIIII/11111111 111111111.111111/1/11111111 I 6 yg IIIIlllllllllll 11111= 11111111111 11111111 11111111 11/11111/11/1111 11/11/11 1111111111!MINIM 111/11111 IIIIi•41 1111111 WE IIIIIIII11111111 11:111- 11111/11/1 111111/1 1111111 1/111111 11111111111 11111111181 111111111 1111111/1111/111 11111.1 Dos 1111111111111111111111 111111. 1111i11111 11111111 11111/1 11111111 11111111111 111111111111 II 11111111 IIIIIII Le P� 11111111 111111: �IIII111 1111111►__ i 8811111111 111111 111 IIIIIIII 111111I1/1111111 1111111 00Z P0Z Q SN3A318 11/1/111 111111. .111111 11111111 Erp 11111II1.1 11111111 111111111111 111111111111 11111111 11111111 11111111 1111111 6ZL SN3A318 1111111/111111;11111111 111111111 1/111111 111111111111 111111111111 11111111 1111111 l ' 4E4 11111 11/11111 111111. 11111//1 111/11/11_-M 1111111111 1111111181111111111 1181111.1 111/111/1 11111111 0011 IBL C.) �uw .. ■11■ 111,111 1111111111 1111111111 13TIOOIN lid 1 111111 11 1111111 I11111..u1 111/111111■11111 Il11Th81111 11111111. 111111111 000 J3TIOOIN W m 1111 I 1111.. 113081V18 3O81v18 III III 11111 ■ - 09 1130£11V18 1111 11111111 11111 III 11111111 11111111 11111/11 11111111 11111111 11111111 HJ.2IQNLLN3N1 1111 11111111 III►IIIIIII 11111111 11111111 11111111 11111111 11111111 1111111 ODL H1ilOAA1N3M re 1111 111111/1 11111 11111 11111111 111111. 11111111 1/111/11 111111/1 111/111/IIIIIII .•• Cl. A2111eSTUd III 111/1111 I111Ik 11111. 11111111111 1111111111111111111111111111 1111•• ow ANIISSTIId 1111 • II11191111111111111 --- _ m I- 1NVSV31d 11• ui II --.-.�-C Z .III -1..111■ 11111111111•IIIIIill 11111111 11111111111 11111111//= 1111 1111111 1 OOE 1NVSV3ld W ONtll1O 1111 . Z_ IIIIIIIIII•IIIIIIIIIII 111111111111 11 - 1111 11111.1 00y ONVHO 11111 1111111;1111: 111111111111 111111111111 11111111 1111111111 11111111= 1111 1111111 131a2NH 1111 1111111.1111■ 11111111111 81181818 11111111 11111111111 1111111111= 11..1111 1111111 1 Opt 1312121VH Q. 1111 1111111-ll lg �� a®hill 1 11111111=11111111 iilIIIIM 1111111111111 1111111111= 1111 MEMO II 8131.121A0 l un i ,V ►li Appendix C Description of Property to be Included in the District The District encompasses all property and adjacent rights-of-way and abutting roadways identified by the parcels listed below. Parcel Numbers Address Owner 34-028-24-34-0072 Address Pending,per Hennepin County City of Richfield To be assigned:The West 30 Address Pending,per Hennepin County City of Richfield feet of Lot 1,Block 4,"R.C. Soens Addition" 34-028-24-34-0070 211 76th Street West Richfield HRA Appendix C-1 Appendix D Estimated Cash Flow for the District Appendix D-1 g--3-D N z al W , LL d F I n o ,•*; N y 1 N s.MLMiL C NNNN ' Ex R NNN ~ Q N aa S0 i LL >y eE>gyO o 0 0 0 0 0 0 0 o P Fyy N _ O° O OOO U,U U) O.00 I C (p O P O In O N h N ONO, m NNE' O —NN'-O— —a-'—I '�.SI r m E d m E E F N O a �sdd o t'00 g v _ F 0.-` U aEi m S.S.S.S�, N 2 �" m x a'� E E E E E. 3 N �c�c U '� � d F-V U'S 'u5 u'S ul ul e a 4o �, g w v d _ TTT0 m ti.a . d C�y L mNNN NN, �¢ 00—{{S� i4 WD 0 R'& N Z Q'00 '5.;i 0 C00000! 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CP. - O OD V W T V D O O f0 W. co Z x0 .0 1— C F' * MM N 88 m 882 M M MQ V 4 V 444444 4 4 V 48 N N 8' 3388 N r2 N O 88 8888 m w 8 I�Ir 1:5-!g:8P To C Zy1 4I _ z Oo `y,2 Q, w '^ 0 ° F y OD O /7 f0 N a� t0 ( fop wN NM t(�O N 'OV' N (O lM0 N N t(M� l0 (� Qp' 0 0 Z C m N of •:f 8 1 m N 2 8 W O O O V N N 8- l7 m Y V' C) •7 X . 2 m LTV Q .fl ~ e e e e e at e e e e e e e e e e e e e < e e e e e e 0 Q. o 7 4 k N N (Y N N N N N N y 74 Y '4 N N igi N H N ' (Y 04 `! N N . -~it V w V 4 4 4 4 V w w wV' V V V V w V w V 4 R wV 4 w w Ts m N a vs NVOr 90 � Q QV 0 g m O) pV p p H T V V . (o - O) I� > 0 CX m O N U M N mm m m m m m (0 r Co P O Co Co 1'8. 0 Co m w m I .F U V 0. M 2 N z o It. 0 0 O E C ){ M M M M M M (7 M (h co- (+1 o M M co' ( M M (7 47 (7 co C7 C7 N M W, oFN� > m o N �qO w Ft MM w ENO cN} wM b mO NO t(eO� V ra N aO ((p� i �T+ M GpO M (� ttOO t.( m '�R{ (lp7 {m+) M t0 W ., aO �“.1 pv� Gp (SCI Q Cps/ 4.7,'-' M C) X Y 4 lO b tO tO t8O N 0m fN0 m fD (O [ n N W aD OD 8 g N W 8- O cM0_ • a U I $F e e e e e e e e e e e e e e e D e e 0 e D e e e m 0 o S 0 O 0 0 0 0 0 0 p 0 O 0 O O S p 0 0 0 0 0 0 p o O m S N a 8 a 33 Appendix E Housing Qualifications for the District INCOME RESTRICTIONS-ADJUSTED FOR.FAMILY SIZE (HOUSING DISTRICT)-HENNEPIN COUNTY HENNEPIN COUNTY MEDIAN INCOME $83,900 No.of Persons 50%of Median Income 60%of Median Income 1-person $29,400 $35,280 2-person $33,600 $40,320 3-person $37,800 $45,360 4-person $41,950 $50,400 Source: Department of Housing and Urban Development and Minnesota Housing Finance Agency The two options for income limits on a standard housing district are 20% of the units at 50% of median income or 40%of the units at 60%of median income. There are no rent restrictions for a housing district. ***PLEASE NOTE: THESE NUMBERS ARE ADJUSTED ANNUALLY. ALL INCOME FIGURES REPORTED ON THIS PAGE ARE FOR 2012. Appendix E-1 Appendix F Findings for the District Appendix F-1 - 1 Memo To: Richfield City Council From: Rebecca Kurtz, Ehlers Date: June 8, 2012 Subject: But For Analysis for Proposed Pillsbury Commons Development Background The City and HRA received a request from Ron Clark on behalf of Richfield Properties I,LLC(the "Developer") for tax increment assistance for a 70 unit, affordable housing development, which includes 52 units of apartments and 18 units of townhomes. It is proposed that the City and the HRA create the 2012-1 Housing Tax Increment Financing("TIF")District(Pillsbury Commons) on three parcels and adjacent right of way on the 7600 block of Pillsbury Ave. (This includes the north portion of the former City public works site.) In order to qualify as a housing TIF district,the development will need to have either 40 percent of the units available for persons at or below 60 percent of median income or 20 percent of the units for persons at or below 50 percent of median income. For 2012, 60 percent of median income ranged between $35,280 and $50,400 for a family of one to four persons, respectively. Fifty percent of median income ranged between$29,400 and$42,000. ' The former City garage site is currently owned by the City and has been vacant since the new facility was constructed in 2007.The City and the HRA own the remaining two parcels. The City and HRA have completed appraisals on their three parcels, and it is proposed that the Developer purchase these parcels for fair market value. It is proposed that tax increment from the development be provided in the form of a Pay-as-you-go Note to the developer to reimburse for land acquisition,site improvements,and other TIF qualifying improvements. Process for But For Test The City and HRA have asked Ehlers to review the Developer's feasibility analysis for the project to determine if the level of financial assistance requested is needed to make the project financially feasible. But For Test Under current market conditions,the proposed developments may not reasonably be expected to occur solely through private investment within the reasonably near future. The proposed development described in the tax increment plan is a housing development that meets the City's WWW,ehlors-inc com E H L E RS Minnesota phone 651-697-8500 3060 Centre Pointe Drive LEADERS IN PUBLIC FINANCE Offices also in Wisconsin and Illinois fax 651-697-8555 Roseville,MN 55113-1122 toll free 800-552-1171 3(0°1 T objectives for development and redevelopment. The cost of land acquisition and site improvements makes an affordable housing development infeasible without City assistance. Due to the high cost of building new housing in the City, this project is feasible only through assistance,in part,from tax increment financing. As part of the But For Analysis, Ehlers has reviewed budgetary figures and cost estimates submitted by the Developer. Based on the information provided,the analysis shows that in order to promote the development of affordable housing in the City, financial assistance is needed to reduce the costs of acquiring the land for the developments and improving the site. The construction of the proposed housing development is cost prohibitive without the use of Tax Increment, due to several factors, including (1) the difficulty in obtaining sufficient low cost financing in the current economic market; (2) the additional costs of building the proposed housing development in an area which is already established as a residential area, including the increased costs for land acquisition; (3) potentially significant costs related to remediating hazardous substances on two or the three parcels; and (4) affordable housing does not generate sufficient revenues to offset these increased start up costs. The Developer has requested $530,082 in assistance in the form of a pay-as-you-go note. After review of the financial information it is determined that there is a financing gap, and the request for assistance is reasonable to move the project forward but not unduly compensate the Developer. Providing assistance in the amount of$530,082 would provide a fair market return based on the market for tax credit projects and meets the guidelines for financing and for returns as provided by Minnesota Housing Finance Agency. In order to make the proposed housing development economically feasible, the Developer has obtained low-interest loans from the Minnesota Housing Finance Agency. These types of loans are limited, and eligibility is determined by an application to the Minnesota Housing Finance Agency and a point or rating system. The Developer received a high rating, and therefore a lower interest loan, based on the City and HRA's support of the project and willingness to consider tax increment as a financing tool for the project. Historically, site development costs in this location have made development infeasible without tax increment assistance. The former garage site has been marketed for at least 6 years without success. Under current market conditions, it is anticipated that no other development of similar scope would occur in the foreseeable future on these sites without some type of similar financial assistance being provided to the developments. Additional Factors to Consider as Part of the But For Test In addition to the financial analysis, there are several factors that provide support to the But For Analysis and the need for public assistance. Although it is a developed community, Richfield is expected to grow over the coming decades. Bordered by four major transportation corridors and located just minutes from both downtowns, the community will continue to be a desirable place to live.Projections indicate a growth of 4,427 households between 2000 and 2030, or about 150 new households per year. Richfield is required to plan for its fair share of the regional need for housing, including newly-constructed workforce housing units.Additional units are required because there are projected to be a greater number of low-wage jobs (paying less than $41,950) within ten miles of the center of Richfield than there are currently affordable housing opportunities. The Metropolitan Council has identified a need of 765 affordable housing units for Richfield between 2011 and 2020, to which this project would contribute 70 units,or about 9%of the overall goal. The Developer has provided a Market Study completed by Joe Urban Inc. Per the Study, the trends indicate relatively strong demand for affordable, rental housing, and there are a significant number of households(approximately 1,700)in the area qualified to rent under HUD's affordable requirements. The site is located near significant area retail and recreation options, and the demographic trends favor additional affordable housing in the area. The Study goes on to say that the strongest aspect of the site is its overall proximity to several employment centers, with good transportation and transit options.The affordable housing market in this area of Richfield and east Bloomington is healthy, but lacking in new options. A large number of apartments building primarily in the 1960s offer rents that are competitive with those proposed for the project. According to a 2006 Metropolitan Council report, the City of Richfield has a 1.93 ratio of low wage jobs paying less than $41,000 to housing units that are affordable at those wages. In addition, based on median wage information provided by the Department of Employment and Economic Development and analyzed by Joe Urban, full-time employees earning$6.15 per hour (minimum wage)to$21.80 per hour could afford to live in the proposed units. Conclusion In conclusion, we have determined that the proposed development meets the But For Test as defined by Minnesota Statues. I will be at the HRA meeting and the Council meeting to address any questions.In the meantime,if you have questions,please do not hesitate to contact me.