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11-27-00 agendaCITY OF RICHFIELD, MINNESOTA MONDAY, NOVEMBER 27, 2000 SPECIAL HOUSING AND REDEVELOPMENT AUTHORITY MEETING COUNCIL CHAMBERS 5:00 P.M. 'AGENDA Call to order ADMINISTRATIVE REPORTS AND OTHER BUSINESS 1. Consideration of first amendment to contract for private development with Best Buy Co., Inc. (Reconvened from November 20, 2000) Staff Report No. 79 • Notes: PUBLIC HEARING 2. Public hearing regarding resolution authorizing adoption of Business Subsidy Agreement with Best Buy, Co., Inc. (Reconvened from November 20, 2000) Staff Report No. 80 Notes: RESOLUTION 3. Consideration of resolution regarding approval of modification to tax increment financing plan for Interchange West and Lyndale Gateway Tax Increment Financing District (Reconvened from November 20, 2000) Staff Report No. 81 Notes: PUBLIC HEARING 4. Public hearing regarding resolution authorizing adoption of Business Subsidy Agreement with CSM Investors II, Inc. related to development within Lyndale Gateway redevelopment area (Reconvened from November 20, 2000) Staff Report No. 82 Notes: Adjournment Auxiliary aids for individuals with disabilities are available upon request. Requests must be made at least 96 hours in advance to the Administrative a Services Director at 861-9702._ • • • AGENDA SECTION: ~"`''° "~`~' t~V ~ AGENDA ITEM # REPORT # C~?i J STAFF REPORT HOUSING AND REDEVELOPMENT AUTHORITY MEETING NOVEMSER 27, 2000 JOHN STARK, REPORT PREPARED BY: COMMUNITY DEVELOPMENT MANAGER NAME, TITLE Jo~-nv STARK, REPORT PRESENTER: COMMUNITY DEVELOPMENT MANAGER NAME, TITLE DEPARTMENT DIRECTOR REVIEW: SIGNATURE REVIEWED BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Reconvene discussion from the November 20, 2000 HRA meeting to consider a resolution authorizing the adoption of a Business Subsidy Agreement with CSM Investors II, Inc. related to their develo merit within the L ndale Gatewa redevelo merit area. L RECOMMENDED ACTION: By Motion: Approve a resolution authorizing the adoption of a Business Subsidy Agreement with CSM Investors I1, Inc. related to their develo merit within the L ndale Gatewa redevelo merit area. L 11. BACKGROUND ~ In 1999, the Minnesota State legislature approved the Business Subsidies Act.. This law requires that certain types of developments which receive more than $100,000 in public assistance must enter into a business subsidy agreement with the government entity providing such assistance. The contents of a business subsidy agreement are based, in part, on the business subsidy criteria established by a governmental entity. The Richfield Housing and Redevelopment Authority (HRA) established its business subsidy criteria on November 15, 1999. It has been determined that the commercial redevelopment planned by CSM Investors II (CSM) for the west side of Lyndale Avenue and east side of Aldrich 1127csm2 Avenue between 76th and 77th Streets is to receive public assistance to a degree which requires a Business Subsidy Agreement. The other two portions of the Lyndale Gateway development did .not require such an agreement because they were exempted as housing and/or non-profit uses. The attached Business Subsidy Agreement reflects the public assistance to CSM that has previously been approved by the HRA as part of the Contract for Private Redevelopment with CSM. The subsidy, as identified in the agreement, is $1,925,000 as land write down for the site to be acquired. The Business Subsidy Agreement states that the development will create at least five new jobs on the redevelopment site, each paying no less than $10 per hour, excluding benefits. For the purpose of this agreement, new jobs. are defined as jobs which did not. previously exist in the state of Minnesota priorto the date of the agreement. III. BASIS OF RECOMMENDATION A. POLICY • Minnesota state law requires the execution of a Business Subsidy Agreement for certain types of public assistance, including the type of public assistance which is to be granted to CSM for the redevelopment of portions of the Lyndale Gateway area. • . The Richfield HRA approved Business Subsidy Criteria on November 15, 1999 (see attached). B. CRITICAL ISSUES • Public funding for the CSM redevelopment of portions of the Lyndale :Gateway area cannot proceed without the approval of a Business Subsidy Agreement. C. FINANCIAL • The public funding identified in the attached Business Subsidy Agreement has previously been approved by the HRA as part of the Contract for Private Redevelopment with CSM for the Lyndale Gateway area. . D. LEGAL Legal. staff have reviewed the Business Subsidy Agreement and - drafted the attached resolution. IV. ALTERNATIVE RECOMMENDATION(S) • Do not approve the Business Subsidy Agreement. S • Defer. approval of the Business Subsidy Agreement to a later date. ti V. ATTACHIvIENTS • Resolution authorizing the adoption of a Business Subsidy Agreement with CSM Investors II, Inca. (Updated version to be distributed prior to the November 27 meeting.) • Business Subsidy Agreement with .CSM Investors II, Inc. (Updated version to be distributed prior to the November 27 meeting.) • ~ Business Subsidy Criteria -November 15, 1999 VI. PRINCIPAL PARTIES EXPECTED AT MEETING • A representative of CSM Investors 11, Inc. • • HRA RESOLUTION NO. • RESOLUTION AUTHORIZING THE ADdPT1ON OF BUSINESS SUBSIDY AGREEMENT WITH C.S.M. INVETORS II, INC. WHEREAS, the Housing and Redevelopment Authority (HRA) in and for the City of Richfield, Minnesota, as part of its operations, provides economic assistance to individuals who are engaged in the development and redevelopment of land within the HRA's area of operation; and WHEREAS, pursuant to legislation enacted by the State of Minnesota, ("Business Subsidy Act"), the HRA is required to enter into an agreement with any recipient of a business subsidy conforming to the requirements of the Business Subsidy Act prior to granting such assistance; and WHEREAS, the Business Subsidy Act further provides that the approval of such an agreement must be preceded by a public hearing on the matter in situations where the subsidy exceeds $100,000; and WHEREAS, C.S.M. Investors ll, Inc., ("CSM") has requested that the HRA provide it with a business subsidy of approximately $1,925,000 to be used for land write-down in connection with CSM's development; and WHEREAS, the HRA has evaluated the request. based on Business Subsidy Criteria established by the HRA and ordered a public hearing concerning the matter. NOW THEREFORE, BE IT RESOLVED by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota as follows: 1. A public hearing on the approval of a business subsidy agreement with CSM has been held ` before the HRA on November 20, 2000, at 7:00 p.m. in the City Council Chambers at the Richfield City Hall located at 6700 Portland Avenue South, Richfield, Minnesota. 2. A business subsidy agreement in the amount of approximately $1,240,.000 to be used for land write-down in connection with CSM's development is approved. Adopted by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota this 27th day of November, 2000. Thomas E. Harms, Chair ATTEST: Michael Sandahl, Secretary • x ,K BUSINESS SUBSIDY AGREEMENT THIS AGREEMENT, made and entered into as of this 18~' day of December, 2000, by and between the HOUSING .AND REDEVELOPMENT AUTHORITY IN AND .FOR THE CITY OF RICHFIELD, a Minnesota public body corporate and .politic, ("Grantor"), and C.S.M..Investors II, Inc., a Minnesota corporation, ("Grantee") WITNESSETH: L Grantor and Grantee are. the parties to that certain instrument entitled Contract for Private Redevelopment approved on January 18, 2000, and subsequently amended on August 21, 2000. 2. The January 18, 2000, Contract provides for financial. assistance to the Grantee that constitutes a "business subsidy" for the purposes of the. Business Subsidy Act (Chapter: 243, Article 12, Laws 1999).("Act"). 3. The Act requires that a business subsidy may not be provided until the parties have entered into a business subsidy agreement that complies with the requirements of the Act. 4. This Agreement is intended to constitute a business subsidy agreement for the purposes of the Act. S NOW THEREFORE, in consideration of the mutual covenants contained herein. and in the Contract, it is hereby stipulated and agreed by and between the parties hereto as follows. (a) .Definitions. The terms used in this agreement shall have the meanings given ahem in the Contract and the Act unless a different meaning is clearly indicated. (b) General Terms. The parties agree and represent to each other as follows: (1) The subsidy provided to the Grantee involves use of funds currently available to the Grantor for the payment of costs incurred by the Grantee in performing certain. land assembly, including acquisition, relocation and demolition on the Redevelopment Property as more fully described in the Contract. The subsidy has an estimated value for land write-down assistance of up to $1,925,000. The public purposes for the subsidy are as described in the Business Subsidy Criteria adopted by the Grantor.. (2) The goals for the subsidy are: to secure development of the Minimum - Improvements on the Redevelopment Property, and to create the jobs and wage levels in accordance with Section (c) hereof. (3) If the goals described in clause (2) are met, the Grantee shall have no obligation to repay the payments to the Grantee described in the Agreement (4) The subsidy is needed because site development costs make development of the Minimum Improvements financially infeasible without public assistance, all as determined upon approval of the TIF Plan. (5) The Grantee does not have a parent corporation. ~' (c) Job and Wane Goals. Within two years after the date of issuance of the certificate of completion of the Minimum Improvements (the "Compliance Date"), the Grantee shall cause directly or indirectly, the creation of at least 5 new jobs on the Redevelopment Property (excluding. any jobs previously existing. in the State as of the date of this Agreement and relocated to this site) .and shall cause the wages of such new employees on the Redevelopment Property to be no less than $10.00 per hour, exclusive of benefits.. Notwithstanding anything to the contrary herein, if the wage and job goals described in this paragraph are met by the Compliance Date, those .goals are deemed satisfied despite the Redeveloper's continuing obligations under sections (e). The Grantor may, after a public hearing,- extend the Compliance. Date by up to a year, provided that nothing in this Section will be construed to limit he Grantor's legislative discretion regarding this matter. (d) Remedies. If the Grantee fails to meet the goals described in Section (b)(2), the Grantee shall repay to the Grantor, upon written demand from the Grantor (a) a "pro rata share" of the amount of subsidy expended by the Grantor. The term "pro rata share" means. percentages calculated as follows: (i) if the failure relates to the number of jobs, the. jobs required less the jobs created, divided by the jobs required; (ii)' if the failure relates to wages, the number of jobs required less .the number of jobs that meet the required wages, divided by the number of jobs required; (iii) if any more, than one of clauses (i) through (ii) apply, the sum of the applicable percentages ,not to exceed 100%. Nothing is this Agreement shall be construed to limit the Grantor's remedies otherwise. available to it under this Contract. In addition to the remedy described in .this Section and any other remedies available to the Grantor for failure to meet the goals stated in Section (b)(2), the Grantee agrees .and understands that it may not receive a business subsidy from the Grantor or any grantor (as defined in the Act) for a period of five years from the date of the failure or until the Grantee satisfies its repayment obligations under this Section, whichever occurs first. (e) Resorts. The Grantee must submit to the Grantor a written report regarding business subsidy goals and results by no later than March 1 of each year, .commencing March 1, 2002 and continuing until the later of (i) the date the •t goals stated in Section (b)(2) are met; (ii) two years after the benefit date; or (iii) if the goals are not met, the date the subsidy is repaid in accordance with Section (d). The report. must comply with Section 116J.994, subdivision 7 of the Act. The Grantor will provide information to the Grantee regarding the required forms. If the Grantee fails to timely file any report required under this section, -the Grantor will mail the Grantee a warning within one week after the required filing date. If, after 14 days of the postmarked date of the warning, the Grantee fails to provide a report, the Grantee must pay the Grantor a penalty of $100 for each subsequent day until -the report is filed. The maximum aggregate penalty payable under this section is $1,000. A rovaL This A reement shall not be effective until ap roved by the City (fl pp 9 P Council, ,which approval shall be conclusively evidenced by the .City Council resolution of approval being affixed to this Agreement. s • AGENDA SECTION: public Hearing AGENDA ITEM # 4 REPORT # ~ 2 J STAFF REPORT HOUSING AND REDEVELOPMENT AUTHORITY MEETING NOVEMBER 27, 2000 • JOHN STARK, REPORT PREPARED BY: COMMUNITY DEVELOPMENT MANAGER NAME, TITLE BRUCE PALMBORG, REPORT PRESENTER: COMMUNITY DEVELOPMENT DIRECTOR DEPARTMENT DIRECTOR REVIEW: REVIEWED BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Reconvene discussion from the November 20, 2000 HRA meeting to consider a resolution authorizing the adoption of a Business Subsidy Agreement with CSM Investors II, Inc. related to their development within the Lyndale Gateway redevelopment area. I. RECOMMENDED ACTION: By Motion: Approve a resolution authorizing the adoption of a Business Subsidy Agreement with .CSM Investors II, Inc. related to their develoament within the Lyndale Gateway redeveloament area. II. BACKGROUND In 19.99, the Minnesota State legislature approved the Business Subsidies Act. This law requires that certain types of developments which receive more than $100,000 in public assistance must enter into a business subsidy agreement with the government entity providing such assistance. The contents of a business subsidy agreement are based, in part, on the business subsidy criteria established by a governmental entity. The Richfield Housing and Redevelopment Authority (HRA) established its business subsidy criteria on November 15, 1999. It has been determined that the commercial redevelopment planned by CSM Investors II (CSM) for the west side of Lyndale Avenue and east side of Aldrich 1127csm2 Avenue between 76th and 77th Streets is to receive public assistance to a degree which requires a Business Subsidy Agreement. The other two portions of the Lyndale Gateway development did not require such an agreement because they were exempted as housing and/or non-profit uses. The attached Business Subsidy Agreement reflects the public assistance to CSM that has previously been approved by the HRA as part of the Contract for Private Redevelopment with CSM. The subsidy, as identified in the agreement, is $1,925,000 as land write down for the site to be acquired. The Business Subsidy Agreement states that the development will create at least five new jobs on the redevelopment site, each paying no less than $10 per hour, excluding benefits. For the purpose of this agreement, new jobs are defined as jobs which did not previously exist in the state of Minnesota prior to the date of the agreement. III. BASIS OF RECOMMENDATION A. POLICY • Minnesota state law requires the execution of a Business Subsidy Agreement for certain types of public assistance, including the type of public assistance which is to be granted to CSM for the redevelopment of portions of the Lyndale Gateway area. • The Richfield HRA approved Business Subsidy Criteria on November 15, 1999 (see attached). B. CRITICAL ISSUES • Public funding for the CSM redevelopment of portions of the Lyndale Gateway area cannot proceed without the approval of a Business Subsidy Agreement. C. FINANCIAL • The public funding identified in the attached Business Subsidy Agreement has previously been approved by the HRA as part of the Contract for Private Redevelopment with CSM for the Lyndale Gateway area. D. LEGAL • Legal staff have reviewed the Business Subsidy Agreement and drafted the attached resolution. IV. ALTERNATIVE RECOMMENDATION~S~ • Do not approve the Business Subsidy Agreement. • Defer approval of the Business Subsidy Agreement to a later date. V. ATTACHMENTS • Resolution authorizing the adoption of a Business Subsidy Agreement with CSM Investors II, Inc. (Updated version to be distributed prior to the November 27 meeting.) • Business Subsidy Agreement with CSM Investors II, Inc. (Updated version to be distributed prior to the November 27 meeting.) • Business Subsidy Criteria -November 15, 1999 VI. PRINCIPAL PARTIES EXPECTED AT MEETING • A representative of CSM Investors II, Inc. HRA RESOLUTION NO RESOLUTION AUTHORIZING THE ADOPTION OF BUSINESS SUBSIDY AGREEMENT WITH C.S.M. INVESTORS I1, INC. WHEREAS, the Housing and Redevelopment Authority (HRA) in and for the City of Richfield, Minnesota, as part of its operations, provides economic assistance to individuals who are engaged in the development and redevelopment of land within the HRA's area of operation; and WHEREAS, pursuant to legislation enacted by the State of Minnesota, ("Business Subsidy Act"), the HRA is required to enter into an agreement with any recipient of a business subsidy conforming to the requirements of the Business Subsidy Act prior to granting such assistance; and WHEREAS, the Business Subsidy Act further provides that the approval of such an agreement must be preceded by a public hearing on the matter in situations where the subsidy exceeds $100,000; and WHEREAS, C.S.M. Investors II, Inc., ("CSM") has requested that the HRA provide it with a business subsidy of approximately $1,925,000 to be used for land write-down in connection with CSM's development; and WHEREAS, the HRA has evaluated the request based on Business Subsidy Criteria established by the HRA and ordered a public hearing concerning the matter. NOW THEREFORE, BE IT RESOLVED by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota as follows: 1. A public hearing on the approval of a business subsidy agreement with CSM has been held before the HRA on November 20, 2000, at 7:OO p.m. in the City Council Chambers at the Richfield City Hall located at 6700 Portland Avenue South, Richfield, Minnesota. 2. A business subsidy agreement in the amount of approximately $1,240,000 to be used for land write-down in connection with CSM's development is approved. Adopted by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota this 27th day of November, 2000. Thomas E. Harms, Chair ATTEST: Michael Sandahl, Secretary r • BUSINESS SUBSIDY AGREEMENT THIS AGREEMENT, made and entered into as of this 27th day of November, 2000, by and between the HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD, a Minnesota public body corporate and politic, ("Grantor"), and C.S.M. Investors II, Inc., a Minnesota corporation, ("Grantee") WITNESSETH: 1. Grantor and Grantee are the parties to that certain instrument entitled Contract for Private Redevelopment approved on January 18, 2000, and subsequently amended on August 21, 2000. 2. The January 18, 2000, Contract provides for financial assistance to the Grantee that constitutes a "business subsidy" for the purposes of the Business Subsidy Act (Chapter 243, Article 12, -Laws 1999) ("Act"). 3. The Act requires that a business subsidy may not be provided until the parties have entered into a business subsidy agreement that complies with the requirements of the Act. 4. This Agreement is intended to constitute a business subsidy agreement for the purposes of the Act. NOW THEREFORE, in consideration of the mutual covenants contained herein and in the Contract, it is hereby stipulated and agreed by and between the parties hereto as follows. (a) Definitions. The terms used in this agreement shall have the meanings given them in the Contract and the Act unless a different meaning is clearly indicated. (b) General Terms. The parties agree and represent to each other as follows: (1) The subsidy provided to the Grantee involves use of funds currently available to the Grantor for the payment of costs incurred by the Grantee in performing certain land assembly, including acquisition, relocation and demolition on the Redevelopment Property as more fully described in the Contract. The subsidy has an estimated value for land write-down assistance of up to $1,925,000. The public purposes for the subsidy are as described in the Business Subsidy Criteria adopted by the Grantor. (2) The goals for the subsidy are: to secure development of the Minimum Improvements on the Redevelopment Property, and to create the jobs and wage levels in accordance with Section (c) hereof. (3) If the goals described in clause (3) are met, the Grantee shall have no obligation to repay the payments to the Grantee described in the Agreement (4) The subsidy is needed because site development costs make development of the Minimum Improvements financially infeasible without public assistance, all as determined upon approval of the TIF Plan. (5) The Grantee does not have a parent. corporation. (c) Job and Wage Goals. Within two years after the date of issuance of the certificate of completion of the Minimum Improvements (the "Compliance Date"), the Grantee shall cause directly or indirectly, the creation of at least 5 new jobs on the Redevelopment Property (excluding any jobs previously existing in the State as of the date of this Agreement and relocated to this site) and shall cause the wages of all employees on the Redevelopment Properly to be no less than $10.00 per hour, exclusive of benefits. Notwithstanding anything to the contrary herein, if the wage -and job goals described in this paragraph are met by the Compliance Date, those goals are deemed satisfied despite the Redeveloper's continuing obligations under sections (b)(6) and (e). The Grantor may, after a public hearing, extend the Compliance Date by up to a' year, provided that nothing in this Section will be construed to limit the Grantor's legislative discretion regarding this matter. (d) Remedies. If the Grantee fails to meet the goals described in Section (b)(3), the Grantee shall repay to the Grantor upon written demand from the Grantor (a) a "pro rata share" of the amount of subsidy expended by the Grantor. The term "pro rata share" means percentages calculated as follows: (i) if the failure relates to the number of jobs; the jobs required less the jobs created, divided by the jobs required; (ii) if the failure relates to ..wages, the number of jobs required less the number of jobs that meet the required wages, divided by the number of jobs required; (iii) if the failure relates to maintenance of the facility in accordance with Section (b)(6), 60 less the number of months of operation as .the required facility (where any month in which the facility is in operation for at least 15 days constitutes a month of operation), commencing on the date of the certificate of completion and ending with the date the facility ceases to be so operated as determined by the Grantor, divided by 60; and (iv) if any more than one of clauses (i) through (iii) apply, the sum of the .applicable percentages, not to exceed 100%. Nothing is this Agreement shall be construed to limit the Grantor's remedies • otherwise available to it under this Contract. In addition to the remedy described in this Section and any other remedies available to the Grantor for failure to meet the goals stated in Section (b)(3), the Grantee agrees and understands that it may not receive a business subsidy from the Grantor or any grantor (as defined in the Act) for a period of five .years from the date of the failure or until the Grantee satisfies its repayment obligations under this Section, whichever occurs first. (e) Reports. The Grantee must submit to the Grantor a written report regarding. business subsidy goals and results by no later than March 1 of each year, commencing March 1,`2001 and continuing until the later of (i) the date the goals stated in Section (b)(3) are met; (ii) 30 days after expiration of the five- year period described in Section (b)(6); or (iii) if the goals are not met, the date the subsidy is repaid in accordance with Section (d). Thee report must comply with Section 116J.994, subdivision 7 of the Act. The Grantor will provide information to the Grantee regarding the required forms. If the Grantee fails to timely file any report required under this section, the Grantor will mail. the Grantee a warning within one week after the required filing date. If, after 14 days of the postmarked date of the warning, the Grantee fails to provide a report, the Grantee must pay the Grantor a penalty of $100 for each subsequent day until the report is filed. The maximum aggregate penalty payable under this section is $1,000. (f) Approval. This Agreement shall not be effective until approved by the City Council, which approval shall be conclusively evidenced by the City Council resolution of approval being affixed to this Agreement. IN WITNESS WHEREOF, the Grantor has caused this Agreement to be executed in its corporate name by its duly .authorized officers; and the Grantee has caused this Agreement to be executed all as of the date first above written. THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD By Its Chair And by Its Executive Director STATE OF MINNESOTA ) )ss. COUNTY OF HENNEPIN ) On this th day of , 2000, before me, a Notary Public within and for said county appeared and to me personally known, who being by me duly sworn, did say thaf they are respectively the Chair and Executive Director of the Housing and Redevelopment Authority. in and for the City of Richfield, a Minnesota public body corporate and politic, on behalf of the corporation. Notary Public IN WITNESS WHEREOF, the Grantor has caused this Agreement to be executed in its corporate name by its duly authorized officers; and the Grantee has caused this Agreement to be executed all as of the date first above written. By STATE OF MINNESOTA ) )ss. COUNTY OF HENNEPIN ) THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD Its Chair And by Its Executive Director On this t" day of , 2000, before me, a Notary Public within and for said county appeared and to me personally known, who being by me duly sworn, did say that they are respectively the Chair and Executive Director of the Housing and Redevelopment Authority in and for the City of Richfield, a Minnesota public body corporate and politic, on behalf of the corporation. Notary Public C.S.M. INVESTORS I1, INC. By: STATE OF MINNESOTA ) )ss. COUNTY OF HENNEPIN ) Its: The foregoing instrument was acknowledged before me this t" day of 2000, by the of C.S.M. Investors II, Inc., a corporation under the laws of Minnesota by and on behalf of said corporation. Notary Public r~ I-.._J AGENDA SECTION: R e s ~ l n t i nn AGENDA ITEM # ~ REPORT # R I STAFF REPORT • r HOUSING AND REDEVELOPMENT AUTHORITY MEETING. NOVEMBER 27, 2000 REPORT PREPARED BY: REPORT PRESENTER: DEPARTMENT DIRECTOR REVIEW REVIEWED BY EXECUTIVE DIRECTOR: KATIA MEDVETSKI, REDEVELOPMENT SPECIALIST BRUCE PALMBORG, COMMUNITY DEVELOPMENT DIRECTOR m'/~,,;.,.,t,10,~,,.~ ITEM FOR HRA CONSIDERATION: Reconvene discussion from November 20, 2000 HRA meeting to consider a resolution regarding approval of a Modification to the Tax Increment Financing Plan for the Interchange West and Lyndale Gateway Tax Increment Financing District. I. RECOMMENDED ACTION: By Motion: Approve a resolution for a Modification to the Tax Increment Financing. Plan for the Interchange West and Lyndale Gateway Tax Increment Financina District. II. BACKGROUND On May 17, 1999, the Richfield Housing and Redevelopment Authority (HRA) approved-the Modification to the Redevelopment Plan for the Richfield Redevelopment Project Area and established the Interchange West and Lyndale Gateway Tax Increment Financing (TIF) District and Tax Increment Financing Plan. On June 14, 1999, the City Council held a public hearing and approved the same. A few months after this, the developer (CSM Corporation) of the Interchange West portion of the District withdrew from the project. Shortly thereafter, a new developer (Best Buy/OPUS) and use were identified. 1127WestTlF.doc At this time, a modification is being proposed to the Interchange West and Lyndale Gateway Tax Increment Financing Plan (Modified Plan) to revise the descriptions of the facilities to be developed and budgeted expenditures for the Interchange West portion. The Modified Plan is brief since only relevant sections were revised. Based on discussions with the HRA's legal counsel (Kennedy & Graven) and financial consultants (Ehlers & Associates), no notifications were necessary to be made to the county commissioner, county board, or school district and no public hearing on the proposed modification was required because the Modified Plan does not (1) reduce or enlarge the geographic area of the Richfield Redevelopment Project Area or the TIF District; (2) increase the amount of bonded indebtedness to be incurred; (3) increase the portion of net tax capacity to be retainedby the HRA; (4) increase the total estimated tax increment expenditures; or (5) designate additional property to be acquired. If any of the aforementioned items were changed, proper notifications to the county commissioner, county board and school board, planning commission and council action, including public hearing would have been undertaken in accordance with Minnesota Statutes Sections 469.174 - 469.179, inclusive, as amended. III. BASIS OF RECOMMENDATION A. POLICY • All modifications to tax increment financing plans are undertaken in compliance with the Minnesota TIF Act. B. CRITICAL ISSUES • Modification to the Plan was deemed prudent as the project within the Interchange West portion changed. Changes to the Plan do not necessitate a formal modification in which notification to the county commissioner, county board and school board, planning commission action, public hearing, and council action is required. C. FINANCIAL • Budget line items were clarified based on updated project information. The bottom line of the budget did not change. • The are no additional impacts to any of the taxing jurisdictions based on the revised use in the Interchange West portion of the TIF district. The impacts prepared under the original Plan continue to stand for the Modified Plan. D. LEGAL • Legal counsel has reviewed the Modified Plan in conjunction with Ehlers & Associates and in accordance with Minnesota Statutes, Section. 469.174-469.179, inclusive, as amended. IV. ALTERNATIVE RECOMMENDATION(S~ • Do not approve the resolution to adopt the Modified Plan. • Delay approval of the Modified Plan. V. ATTACHMENTS • Resolution approving a Modification to the Tax Increment Financing Plan for the Interchange West and Lyndale Gateway Tax Increment Financing District • Modification to .the Tax Increment Financing Plan for the Interchange West and Lyndale Gateway Tax Increment Financing District. VI. PRINCIPAL PARTIES EXPECTED AT MEETING • Sid Inman, Ehlers & Associates, Inc. n HRA RESOLUTION NO. RESOLUTION APPROVING. MODIFICATION TO THE TAX INCREMENT FINANCING PLAN FOR THE INTERCHANGE WEST-AND LYNDALE GATEWAY TAX INCREMENT FINANCING DISTRICT Section. 1. Recitals. 1.01. The City of Richfield ("City") and the Housing and Redevelopment Authority in and for the City ("Authority") approved the creation of the Interchange West and Lyndale Gateway Tax Increment :Financing- District:("TIF .District") and a Tax Increment Financing Plan ("TIF Plan") for that district, by resolutions approved May 17, 1999 (by the. Authority) and June 14, 1999 (by the City) in accordance with Minnesota Statutes, Sections 469.174 to 469.176, inclusive as amended, (the "TIF Act"). 1.02. Under .Section 469.175, subd. 4 of the TIF Act, the Authority is authorized to modify the TIF Plan without the notice and approval procedures required for approval of the initial plan if the modification does not involve: reduction or enlargement of the geographic area of the district, increase in the .amount of bonded indebtedness to be incurred, increase in the portion of the captured tax capacity to be retained by the Authority, increase in total estimated tax increment expenditures, or designation of additional property to be acquired by the Authority. 1.03. The Authority has determined a need to modify the TIF Plan to reflect changes in the redevelopment to be undertaken,. none of which changes involve the items cited .above. Section 2. TIF Plan Modification Approved. 2.01. The Modification of the Tax Increment Financing Plan for the TIF District is approved in substantially the form on file in City Hall. 2.02. Authority staff and consultants are authorized to take all actions necessary to implement the TIF Plan as modified. Adopted by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota this 27th day of November, 2000. Thomas E. Harms, Chair ATTEST: Michael Sandahl, Secretary LJ • • Draft as of November 13, 2000 MODIFICATION TO THE TAX INCREMENT FINANCING PLAN for THE INTERCHANGE WEST AND LYNDALE GATEWAY TAX INCREMENT FINANCING DISTRICT (a scattered site redevelopment district) within THE RICHFIELD REDEVELOPMENT PROJECT AREA RICHFIELD HOUSING AND REDEVELOPMENT AUTHORITY CITY OF RICHFIELD HENNEPIN COUNTY STATE OF 1~'IlNNESOTA Public Hearing: June 14, 1999 Adopted: June 14, 1999 Modified by HRA Action: Prepared by: EHLERS & ASSOCIATES, INC. 3060 Centre Pointe Drive Roseville, Minnesota 55113-1105 Phone: (651) 697-8500 Fax: (651) 697-8555 E-mail: info@ehlers-inc.com Web Site: www.ehlers-inc.com TABLE OF CONTENTS (for reference purposes only) SECTIONII MODIFICATION TO THE TAX INCREMENT FINANCING PLAN FOR THE INTERCHANGE WEST AND LYNDALE GATEWAY TAX INCREMENT FINANCING DISTRICT ...................................................................2-1 Subsection 2-1. Foreword ....................................................2-I Subsection 2-3. Statement of Objectives ......................................... 2-I Subsection 2-10. Uses of Funds ................................................. 2-I APPENDIX A PROJECT DESCRIPTION ..................................................... A-1 SECTIONII MODIFICATION TO THE TAX INCREMENT FINANCING PLAN FOR THE INTERCHANGE WEST AND LYNDALE GATEWAY TAX INCREMENT FINANCING DISTRICT Subsection 2-1. Foreword (Modified to add the following as of November 20, 2000) The Plan for the Interchange West and Lyndale Gateway Tax Increment Financing District was approved by the City Council on June 14,1999. The Plan is now being modified to revise the description of the facilities to be developed and budgeted expenditures. The modification does not- (1) reduce or enlarge the geographic area of the Richfield Redevelopment Project Area or the TIF District, (2) increase the amount of bonded indebtedness to be incurred, (3) increase the portion of net tax capacity to be retained by the HRA, (4) increase the total estimated tax increment expenditures, or (5) designate additional property to be acquired. Subsection 2-3. Statement of Ob,Lectives (Modified to delete the first paragraph and add the following as of November 20, 2000) > > The Interchange West portion of the Interchange West and Lyndale Gateway Tax Increment Financing District consists of 98 parcels of land and adjacent and internal rights-of--way. The Interchange West project was created to facilitate the redevelopment of the area generally bounded by 76"' Street to the north, Interstate Highway 494 to the south, Knox Avenue to the east and Penn Avenue to the west. The proposed redevelopment of the site area consists of office buildings, related parking, utility, street, and infrastructure upgrade to accommodate a corporate headquarters for the Best Buy Company. Best Buy proposes to redevelop the site in a campus setting by constructing: (a) four or five office buildings with a minimum of 1.5 million square feet and parking facilities for 7,500 cars (the expected level of redevelopment). Best Buy expects that initial employment at the Best Buy Campus will be 5,500 to 6,500 persons, rising to 7,500 persons in subsequent years (the expected level of development). Subsection 2-10. Uses of Funds (Modified to read as follows as of November 20, 2000) Currently under consideration for the Interchange West and Lyndale Gateway Tax Increment Financing District is a proposal to facilitate redevelopment of existing buildings. The City and HRA have determined '~ that it will be necessary to provide assistance to the project for certain costs. The City has studied the feasibility of the development or redevelopment of property in and around the Interchange West and Lyndale City of Richfield Tax Increment Financing Plan for the Interchange West and Lyndale Gateway TIF District 2-1 Gateway Tax Increment Financing District. To facilitate the establishment and development or redevelopment of the Interchange West and Lyndale Gateway Tax Increment Financing District, this 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 Interchange West and Lyndale Gateway Tax Increment Financing District is outlined in the following table. Uses of Funds Interchange West Lyndale Gateway Land Acquisition, Site Improvements, ~g~ee $9,000,000 Public Improvements, Public Utilities, and Other Public Improvements Land Acquisition -Office Project and $53,317,000 Housing Project (15%) Public Improvements 8,000,000 Interest 42,024,000 7,953,300 Administrative Costs (up to 10%) 5,439,000 1,883,700 TOTAL $108,780,000 $18,837,000 Estimated budget costs associated with the Interchange West and Lyndale Gateway Tax Increment Financing District are subject to change among line item categories without a modification to this Plan. The cost of all activities to be considered for tax increment financing will not exceed, without formal modification, the indicated budget pursuant to the applicable statutory requirements. Pursuant to M.S., Section 469.1763, Subd. 2, no more than 25 percent of the tax increment paid by property within the Interchange West and Lyndale Gateway Tax Increment Financing District will be spent on activities related to development or redevelopment outside of the Interchange West and Lyndale Gateway Tax Increment Financing District but within the boundaries ofthe Richfield Redevelopment Project Area, (including administrative costs, which may be spent outside of the Interchange West and Lyndale Gateway Tax Increment Financing District) subject to the limitations as described in this Plan. It is the intent of the City to spend up to 15 percent of the Interchange West tax increment outside the District on housing projects. All expenses will comply with M.S. Section 469.1764.J. • City of Richfield Tax Increment Financing Plan for the Interchange West and Lyndale Gateway TIF District 2-2 APPENDIX A PROJECT DESCRIPTION (Modified to delete the first paragraph and add the following as of November 20, 2000) > > The Interchange West portion of the Interchange West and Lyndale Gateway Tax-Increment Financing District consists of 98 parcels of land and adjacent and internal rights-of--way. The Interchange West project was created to facilitate the redevelopment of the area generally bounded by 76"' Street to the north, Interstate Highway 494 to the south, Knox Avenue to the east and Penn Avenue to the west. The proposed redevelopment of the site area consists of office buildings, related parking, utility, street, and infrastructure upgrade to accommodate a corporate headquarters for the Best Buy Company. Best Buy proposes to redevelop the site in a campus setting by constructing: (a) four or five office buildings with a minimum of 1.5 million square feet and parking facilities for 7,500 cars (the expected level of redevelopment). Best Buy expects that initial employment at the Best Buy Campus will be 5,500 to 6,500 persons, rising to 7,500 persons in subsequent years (the expected level of development). ~7+ ~_J APPENDIX A-1 x AGENDA SECTION: T wO'~~C. ~AN1~Q AGENDA ITEM # 2. REPORT # ~~ t~7CtxileOL J STAFF REPORT HOUSING AND REDEVELOPMENT AUTHORITY MEETING .NOVEMBER 27, 2000 REPORT PREPARED BY: REPORT PRESENTER: JOHN STARK, COMMUNITY DEVELOPMENT MANAGER NAME, TITLE JOHN STARK, COMMUNITY DEVELOPMENT 1VIANAGER NAME, TITLE DEPARTMENT DIRECTOR REVIEW: .SIGNATURE REVIEWED BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Reconvene discussion from the November 20, 2000 HRA meeting to consider a resolution authorizin the ado tion of a Business Subsid A reement with Best Bu Co., Inc. L RECOMMEi~7DED ACTION: By Motion: Approve a resolution authorizing the adoption of a Business Subsid A reement with Best Bu Co., Inc. IL BACKGROUND In 1999, the Minnesota State legislature approved the Business Subsidies Act. This law requires that certain types of developments which receive mire than $100,000 in public assistance must enter into a business subsidy agreement with the government entity providing such assistance. The contents of a business subsidy agreement are based, in part, on the business subsidy criteria established by a government entity. The Richfield Housing and Redevelopment Authority (HRA) established its business subsidy criteria on November 15, 1999 (see attached). 1 It has been determined that the redevelopment planned by. Best Buy is to receive public assistance to a degree which requires a Business Subsidy Agreement. The public funding.identified in the proposed amendment to the Contract for Private Development with Best Buy is consistent the attached Business Subsidy Agreement. The subsidy, as identified in the agreement, is: • $48,073,127 as land write down for the site to be acquired; • $8,350,000 as Penn Avenue bridge reconstruction costs attributed to Best Buy; and • An additional $3,500,000 in public improvement costs attributed to Best Buy. The Business Subsidy Agreement states that the development will create at least 1,000 new jobs on the redevelopment site. For the purpose of this agreement, -new jobs are defined as jobs which did not previously exist in the state of Minnesota prior to the date of the agreement. The agreement further requires that 15 percent of the. new jobs pay at least $75,000 per year; 35 percent pay at least $50,000 per year, 35 percent pay at least $30,000 per year and 15 percent pay at least $20,000 per year. III. BASIS OF RECOMMENDATION A. POLICY • Minnesota state law requires the execution of a Business Subsidy Agreement for certain types of public assistance, including the type of public assistance which is to be granted to Best Buy for the redevelopment of the Interchange West area. • =- The Richfield HRA approved Business Subsidy Criteria on November 15, 1999. B. CRITICAL ISSUES • Public funding for Best Buy's redevelopment of the Interchange West area cannot proceed without the approval of a Business Subsidy Agreement. ~~ FINANCIAL • The public funding identified in the proposed amendment to the Contract for Private Development with Best Buy is consistent with the attached Business Subsidy Agreement. 2 D. LEGAL ~ • Legal staff has. reviewed the Business Subsidy Agreement and the attached resolution. IV. ALTERNATIVE RECOMMENDATION(S~ • Do not approve the Business Subsidy Agreement. • Defer approval of the Business Subsidy Agreement to a later date. V. ATTACHMENTS Resolution authorizing the adoption of a Business Subsidy Agreement with Best Buy Co., Inc. (Updated version to be distributed prior to the November 27 meeting.) • Business Subsidy Agreement with Best Buy Co, Inc. (Updated ' version to be distributed prior to the November 27 meeting.) • Business Subsidy Criteria, November 15, 1999. VI. PRINCIPAL PARTIES EXPECTED AT MEETING • A representative of Best Buy or their developer Opus. • • 3 ., HRA RESOLUTION NO. • RESOLUTION AUTHORIZING THE ADOPTION OF BUSINESS SUBSIDY AGREEMENT WITH BEST BUY CO., INC. WHEREAS, the Housing and Redevelopment Authority (HRA) in and for the City of Richfield, Minnesota, as part of its operations, provides economic assistance to individuals who are engaged in the development and redevelopment of land within the HRA's area of operation; and WHEREAS, pursuant to legislation enacted by the State of Minnesota, ("Business Subsidy Act"), the HRA is required to enter into an agreement with any recipient of a business subsidy conforming to the requirements of the Business Subsidy Act prior to granting such assistance; and .WHEREAS, the Business Subsidy Act further provides that the approval of such an agreement must be preceded by a public hearing on the matter in situations where the subsidy exceeds .$100,000;. and WHEREAS, Best Buy Co., Inc., ("Best Buy") has requested that the HRAprovide it.with a business subsidy of approximately $48,073,127 to be used for land write-down, $8,350,000 to be used for the Penn Avenue Bridge, and $3,500,000 to be .used public improvements required in connection with Best Buy's development; and WHEREAS, the HRA has evaluated the request based on Business Subsidy Criteria established by the HRA and ordered a public hearing concerning the matter. , NOW THEREFORE, BE IT RESOLVED by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota as follows: 1. A public hearing on the approval of a business subsidy agreement with Best Buy has been held before the HRA on November 20, 2000, at 7:00 p.m. in the City Council Chambers at the Richfield City Hall located at 6700 Portland Avenue South, Richfield, Minnesota. 2. A business subsidy agreement in the amount of $48,073,127 to be used for land write-down, .$8,350,000 to be used for the Penn Avenue Bridge, and $3,500,000 to be used public improvements required in connection with Best Buy's development is approved. 3. Such approval is contingent upon the necessary modification of the budget for the tax increment financing plan for the TIF District. 4. Upon completion of such modifications, the Executive Director and Board Chair are direct?d to take all steps and do all things necessary to effectuate the provisions of the First Amendment. Adopted by the Housing and Redevelopment Authority in and for the City of .Richfield, Minnesota this 27th day of November, 2000. 4 BUSINESS SUBSIDY AGREEMENT THIS AGREEMENT, made and entered into as of this 18~' day of December, 2000, by and between the HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD,. a Minnesota public body corporate and politic, ("Grantor"), and BEST BUY CO., INC., a Minnesota corporation, ("Grantee") WITNESSETH: 1. Grantor and Grantee are the parties to -that certain instrument entitled Contract for Private Development. executed .March 28, 2000, and subsequently amended on July 17, 2000, and October 16, 2000, ("Contract"). 2. The March 28, 2000, Contract provides for financial assistance to the Grantee that constitutes a "business subsidy" for the purposes of the Business Subsidy Act (Chapter 243, Article 12, Laws 1999) ("AcY'). 3. The Act requires that a business subsidy may not be provided until the parties have entered into a business subsidy agreement that complies with the requirements of-the Act. 4. This Agreement is intended to constitute a business subsidy agreement for the purposes of the Act. NOW THEREFORE, in consideration of the mutual covenants contained herein and in the Contract, it is hereby stipulated and agreed by and between the parties hereto as follows. (a) Definitions. The terms used in this agreement shall have the meanings given them in the Contract and the Act unless a different meaning is .clearly indicated. (b) Genera! Terms. The parties agree and represent to each other as follows: (1) The subsidy provided to the Grantee involves use of funds currently available to the Grantor for the payment of costs incurred by the Grantee in perForming certain land assembly, including acquisition, relocation and demolition on .the Redevelopment Property as more fully described in the Contract.. The subsidy has an estimated value for land write-down "~~ assistance of $48,073,127, an estimated value for the Penn Avenue Bridge of $8,350,000, and an estimated value for public improvements of $3,500,000. (2) The public purposes for the subsidy are as described in the Business .Subsidy Criteria adopted by the Grantor. 6 (3) The goals for the subsidy are: to secure development of the Minimum Improvements on the Redevelopment Property; to maintain such improvements for at least 5 years as described in clause (6) below; and to create -the jobs and wage levels in accordance with Section (c) hereof. (4) If the goals described in clause (3) are met, the Grantee shall have no obligation to repay the payments to the Grantee described in the Agreement (5) The subsidy is needed because site development costs make development of the Minimum Improvements financially infeasible without public assistance, all as determined upon approval of the TIF Plan. (6) The Grantee must continue. operation of the Minimum Improvements for at least five years after the date of issuance of the certificate of completion. (7) The Grantee does not have a parent corporation. (c) Job and Wa oals. Commencing on .the date of .this Agreement and ending on the. date which is two (2) years after the date of this issuance of the certificate of completion of the Minimum Improvements (the "Compliance Date"), the Grantee shall cause to be created at least one thousand. (1,000) new full-time equivalent jobs on the Redevelopment Property (excluding any .jobs previously existing in the State as of the date of this Agreement and relocated to this site, but including any jobs not previously existing. in the State as of the date of this Agreement and relocated to this site) and shall cause the wages of any such new full- time equivalent jobs on-the Redevelopment Property to be no less than the following: Fifteen `percent (15%) of the. newly created full-time equivalent jobs to have a salary of seventy-five thousand dollars ($75,000.00) per year, or more, exclusive of benefits. Thirty-five percent (35%) of the newly created full-time equivalent jobs to have a salary of fifty thousand .dollars ($50,000.00) per year, or more, exclusive of benefits. _. Thirty-five percent (35%) of the newly created full-time equivalent jobs to have a salary of thrity thousand dollars ($30,000.00) per year, or more, exclusive of benefits. Fifteen percent (15%) of the newly created full-time equivalent jobs to have a salary of twenty thousand dollars ($20,000.00) per year, or more, exclusive of benefits. 7' s' Notwithstanding anything to the .contrary herein, if the wage and job goals described in this paragraph are met by the Compliance -Date, those goals are .deemed satisfied despite the Redeveloper's continuing obligations under sections {b)(6) and (e). The Grantor. may, after a public hearing, extend the Compliance Date by up to a year, provided that nothing in this Section .will be construed to limit the Grantor's legislative discretion regarding this matter. (d) Remedies. If the Grantee fails to meet the goals described in Section (b)(3), the Grantee shall repay to the Grantor upon written demand from the Grantor (a) a "pro rata .share" of the amount of .subsidy expended by the Grantor. The term "pro rata share" means percentages calculated as follows: • • (i) if the. failure relates to the number of jobs, the jobs required less the jobs created, divided by the jobs required; (ii) if the failure relates to wages, the number of jobs required less the number of jobs that meet the required wages, divided by the number of jobs required;. (iii) if the failure relates to maintenance of the facility in accordance with Section (b)(6), 60 less the number of months. of operation as the required facility (where any month in which the facility is in operation for at least 15 days constitutes a month of operation), commencing on the date of the certifrcate of completion. and ending with the date the facility ceases to be so operated as determined by the Grantor, divided by 60; and (iv) if any more than one of clauses (i) through (iii) apply,. the sum of the applicable percentages ,not to exceed 100%. Nothing. is this Agreement shall be construed to limit the Grantor's remedies otherwise available to it under this Contract. In addition to the remedy described in this Section and any other remedies available to the Grantor for failure to meet the goals stated in Section (b)(3), the Grantee agrees and understands that it may not receive a .business subsidy from the Grantor or any grantor (as defined in the Act) for a period of five years from the date of the failure or until the Grantee satisfies its repayment obligations under this Section, whichever occurs first. (e) Reports. The Grantee must submit to the Grantor a written report regarding. business subsidy goals and results by no later than March 1 of each year, commencing March 1, 2002 and continuing until the later of (i) the date the goals stated in Section (b)(3) are met; (ii) 30 days after expiration of the five-year period described in Section 8 Y (b)(6); or (iii) if the goals are not met, the date the subsidy is repaid in accordance with S~cti~in (d). The report must comply with Section 116J.994, subdivision 7 of the Act. The Grantor will provide information to the Grantee regarding the required forms. If the Grantee fails to timely file any report required under this section, the Grantor will mail the .Grantee a warning within one week after the required filing date. If, after _14 days of the postmarked date of the warning, the Grantee fails to provide a .report, the Grantee must pay the Grantor a penalty of $1.00 for each subsequent day until the report is filed. The maximum aggregate penalty .payable under this section is $1,000.. (f) Aanroval. This Agreement shall not be effective until approved by the City Council, which approval shall be conclusively evidenced by the City .Council resolution of approval being affixed to this Agreement. t • Y IN WITNESS WHEREOF, the Grantor has caused this Agreement to be executed in its corporate name by its duly authorized officers; and the Grantee has caused this Agreement to be executed all as of the date first above written. THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD By Its Chair And by Its Executive Director .STATE OF MINNESOTA ) )ss. COUNTY OF HENNEPIN ) On this 18th.. day of December, 2000, before me, a Notary Public within and for said county appeared and to me personally known, who being by me duly sworn, did say that they are respectively the Chair and Executive Director of the Housing and .Redevelopment Authority in .and for the City of Richfield, a Minnesota public body corporate and politic, on behalf of the corporation. Notary Public 10 T BEST BUY CO., INC. g Y• Its: STATE OF MINNESOTA )ss. COUNTY OF HENNEPIN ) The foregoing instrument was .acknowledged before me this 18th day of December, 2000, by the of Best. Buy Co, Inc., a corporation under the laws of Minnesota by and on behalf of said corporation. Notary Public • • • AGENDA SECTION: public Heating AGENDA ITEM # 2 REPORT # 8 ~ STAFF REPORT ~ HOUSING AND REDEVELOPMENT AUTHORITY MEETING NOVEMBER 27, 2000 JOHN STARK, REPORT PREPARED BY: COMMUNITY DEVELOPMENT MANAGER NAME, TITLE REPORT PRESENTER: BRUCE PALMBORG, COMMUNITY DEVELOPMENT DIRECTOR NAME, TITLE DEPARTMENT DIRECTOR REVIEW: ~~/~~I~-~ REVIEWED BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Reconvene discussion from the November 20, 2000 HRA meeting to consider a resolution authorizing the adoption of a Business Subsidy Agreement with Best Buy Co., Inc. I. RECOMMENDED ACTION: By Motion: Approve a resolution authorizing the adoption of a Business Subsidy Agreement with Best Buy Co., Inc. II. BACKGROUND In 1.999, the Minnesota. State legislature approved the Business Subsidies Act. This law requires that certain types of developments which receive more than. $100,000 in public assistance must enter into a business subsidy agreement_with the government entity providing such assistance. The contents of a business subsidy agreement are based, in part, on the business subsidy criteria established by a government entity. The Richfield Housing and Redevelopment Authority (HRA) established its business subsidy criteria on November 15, 1999 (see attached). It has been determined that the redevelopment planned by Best Buy is to receive public assistance to a degree which requires a Business Subsidy Agreement. The public funding identified in the proposed amendment to the Contract for Private Development with Best Buy is consistent the attached Business Subsidy Agreement. The subsidy, as identified in the agreement, is: • $41,079,056 as land write down for the site to be acquired; • $8,350,000 as Penn Avenue bridge reconstruction costs attributed to Best Buy; and • An additional $3,500,000 in public improvement costs attributed to Best Buy. The Business Subsidy Agreement states that the .development will create at least 1,000 new jobs on the redevelopment site. For the purpose of this agreement, new jobs are defined as jobs which did not previously exist in the state of Minnesota prior to the date of the agreement. The agreement further requires that 15 percent of the new jobs pay at least $75,000 per year; 35 percent pay at least $50,000 per .year, 35 percent pay at least $30,000 per year and 15 percent pay at least $20,000 per year. III. BASIS OF RECOMMENDATION A. POLICY • Minnesota state law requires the execution of a Business Subsidy Agreement for certain types of public assistance, including the type of public assistance which is to be granted to Best Buy for the redevelopment of the Interchange West area. The Richfield HRA approved Business Subsidy Criteria on November 15, 1999. B. CRITICAL ISSUES • Public funding for Best Buy's redevelopment of the Interchange West area cannot proceed without the approval of a Business Subsidy Agreement. C. FINANCIAL • The public funding identified in the proposed amendment. to the Contract for Private Development with Best Buy is consistent with the attached Business Subsidy Agreement. D. LEGAL • Legal staff has reviewed the Business Subsidy Agreement and the attached resolution. IV. ALTERNATIVE RECOMMENDATION(S~ • Do not approve the Business Subsidy Agreement. • Defer approval of the Business Subsidy Agreement to a later date. V. ATTACHMENTS • Resolution authorizing the adoption of a Business Subsidy Agreement with Best Buy Co., Inc. (Updated version to be distributed prior to the November 27 meeting.) • Business Subsidy Agreement with Best Buy Co, Inc. (Updated version to be distributed prior to the November 27 meeting.) • Business Subsidy Criteria, November 15, 1999. VI. PRINCIPAL PARTIES EXPECTED AT MEETING • A representative of Best Buy or their developer Opus. • • HRA RESOLUTION NO. RESOLUTION AUTHORIZING THE ADOPTION OF BUSINESS SUBSIDY AGREEMENT WITH BEST BUY CO., INC. WHEREAS, the Housing and Redevelopment Authority (HRA) in and for the City of Richfield, Minnesota, as part of its operations, provides economic assistance to individuals who are engaged in-the development and redevelopment of land within the HRA's area of operation; and WHEREAS, pursuant to legislation enacted by the State of Minnesota, ("Business Subsidy Act"), the HRA is required to enter into an agreement with any recipient of a business subsidy conforming to the requirements of the Business Subsidy Act prior to granting such assistance; and, WHEREAS, the Business Subsidy Act further provides that the approval of such an agreement must be preceded by a public hearing on the matter in situations where the subsidy exceeds $100,000; and WHEREAS, Best Buy Co., Inc., ("Best Buy") has requested that the HRA provide it with a business subsidy of approximately $41,079,056 to be used for land write-down, $8,350,000 to be used for the Penn Avenue Bridge, and $3,500,000 to be used for public improvements required in connection with Best Buy's development; and WHEREAS, the HRA has evaluated the request based on Business Subsidy Criteria established by the HRA and ordered a public hearing concerning the matter. NOW THEREFORE, BE IT RESOLVED by the Housing and Redevelopment Authority in and for the City. of Richfield, Minnesota as follows: 1. A public hearing on the approval of a business subsidy agreement with Best Buy has been held before the HRA on November 27, 2000, at 7:00 p.m. in the City Council Chambers at the Richfield City Hall located at 6700 Portland Avenue South, Richfield, Minnesota. 2. A business subsidy agreement in the amount of $41,079,056 to be used for land write-down, $8,350,000 to be used for the Penn Avenue Bridge, and $3,500,000 to be used for public improvements required in connection with Best Buy's development is approved. Adopted by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota this 27th day of November, 2000. Thomas E. Harms, Chair ATTEST: Michael Sandahl, Secretary BUSINESS SUBSIDY AGREEMENT THIS AGREEMENT, made and entered into as of this 27th day of November, 2000, by and between the HOUSING AND-REDEVELOPMENT-AUTHORITY IN=AND FOR THE CITY OF RICHFIELD, a Minnesota public body corporate and politic, ("Grantor"), and BEST' BUY CO., INC., a Minnesota corporation, ("Grantee") WITNESSETH: 1. Grantor and Grantee are the parties to that certain instrument entitled Contract for Private Development executed March 28, 2000, and subsequently amended on July 17, 2000, and October 16, 2000, ("Contract"). 2. The March 28, 2000, Contract provides for financial assistance to the Grantee that constitutes a "business subsidy" for the purposes of the Business Subsidy Act (Chapter 243, Article 12, taws 1999). ("Act"). 3. The Act requires that a business subsidy may not be provided until the parties have entered into a business subsidy agreement that complies with the requirements of the Act. 4. This Agreement is intended to constitute a business subsidy agreement for the purposes of the Act. NOW THEREFORE, in consideration of the mutual covenants contained herein and in the Contract, it is hereby stipulated and agreed by and between the parties hereto as follows. (a) Definitions. The terms used in this agreement shall have the meanings given .them in the Contract and the Act unless a different meaning is clearly indicated. (b) General Terms. The parties agree and represent to each other as follows: (1) The subsidy provided to the Grantee involves use of funds currently available to the Grantor for the payment of costs incurred by the Grantee in performing certain land assembly, including acquisition, relocation and demolition on the Redevelopment Property as more fully described in the Contract. The subsidy has an estimated value for land write-down assistance of $41,079,056, an estimated value for the Penn Avenue Bridge of $8,350,000, and an estimated value for public improvements of $3,500,000. (2) The public purposes for the subsidy are as described in the Business Subsidy Criteria adopted by the Grantor. (3} The goals for the subsidy are: to secure development of the Minimum Improvements on the Redevelopment Property; to maintain such improvements for at least 5 years as described in clause (6) below; and to create the jobs and wage levels in accordance with Section (c) .hereof. (4) If the goals described in clause (3) are met, the Grantee shall have no obligation to repay the payments to the Grantee described in the Agreement (5) The subsidy is needed because site development costs make development of the Minimum Improvements financially infeasible without public assistance, all as determined upon approval of the-TIF-Plan. (6) The Grantee must continue operation of the Minimum Improvements for at least five years after the date of issuance of the certificate of completion. (7) The Grantee does not have a parent corporation. (c) Job and Wage Goals. Commencing on the date of this Agreement and ending on the date which is two (2) years after the date of this issuance of the certificate of completion of the Minimum Improvements (the "Compliance Date"), the Grantee shall cause to be created at least-one thousand (1,000) new full-time equivalent jobs. on the Redevelopment Property (excluding any jobs previously.existing in the State as of the date of this Agreement and relocated to this site, but including any • jobs not previously existing in the State as of the date of this Agreement and relocated to this site) and shall cause the wages of any such new full-time equivalent jobs on the Redevelopment Property to be no less than the following: Fifteen percent (15%) of the newly created full-time equivalent jobs to have a salary of seventy-five thousand dollars ($75,000.00) per year, or more, exclusive of benefits. Thirty-five percent (35%) of the newly created full-time equivalent jobs to have a salary of fifty thousand .dollars ($50,000.00) per year, or more, exclusive of benefits. Thirty-five percent (35%) of the newly created full-time equivalent jobs to have a salary of thirty thousand dollars ($30,000.00) per year, or more, exclusive of benefits. Fifteen percent (15%) of the newly created full-time equivalent jobs to have a salary of twenty thousand dollars ($20,000.00) per year, or more, exclusive of benefits. Notwithstanding anything to the contrary herein, if the wage and job goals described in this paragraph are met by the Compliance Date, those goals are deemed satisfied despite the Redeveloper's continuing obligations under sections (b)(6) and (e). The Grantor .may, after a public hearing, extend the Compliance Date by up to a year, provided that nothing in this Section will be construed to limit the Grantor's legislative discretion regarding this matter. (d) Remedies. If the Grantee fails to meet the goals described in Section (b)(3), the Grantee shall repay to the Grantor upon written demand from the Grantor (a) a "pro rata share" of the amount of subsidy expended by the Grantor. The term "pro rata share" means percentages calculated as#ollows: (i) if the failure relates to the number of jobs, the jobs required less the jobs created, divided by the jobs required; (ii) if the failure relates to wages, the. number of jobs required less the number of jobs that meet the required wages, divided by the number of jobs required; (iii) if the failure relates to maintenance of the facility in accordance with Section (b)(6), 60 less the number of months of operation as the required facility (where any month in which the facility is in operation for at least 15 days constitutes a month of operation), commencing on the date of the certificate of completion. and ending with the date the facility ceases to be so operated as determined by the Grantor, divided by 60; and (iv) if any more than one of clauses (i) through (iii) apply, the sum of the applicable percentages ,not to exceed 100%. Nothing is this Agreement shall be construed to limit the Grantor's remedies otherwise .available to it under this Contract.. In addition to the remedy described in this Section and any other remedies available to the Grantor-for failure to meet the goals stated in Section (b)(3), the Grantee agrees and understands that it may not receive a business subsidy from the Grantor or any grantor (as defined in the Act) for a period. of five years from the date of the failure or until the Grantee satisfies its repayment obligations under this .Section, whichever occurs first. (e) Reports. The Grantee must submit to the Grantor a written report regarding business subsidy goals and results by no later than March 1 of each year, commencing March 1, 2002 and continuing until the later of (i) the date the goals stated in Section (b)(3) are met; (ii) 30 days after expiration of the five- yearperiod described in Section (b)(6); or (iii) if the goals are not met, the date the. subsidy is repaid in accordance with Section (d). The report must comply with Section 116J.994, subdivision 7 of the Act. The Grantor will provide information to the Grantee regarding the required forms: If the Grantee fails to timely file any report required under this section, the Grantor will mail the Grantee a warning within one week after the required filing date. If, after 14 days of the postmarked date of the warning, the Grantee fails to provide a report, the Grantee. must pay the Grantor a penalty of $100 for each subsequent day until the report is filed. The maximum aggregate penalty payable underthis section is $1,000. (f) Approval. This Agreement shall .not be effective until approved by the City Council, which approval shall be conclusively evidenced by the City Council resolution of approval being affixed to this Agreement. IN WITNESS WHEREOF, the Grantor has caused this Agreement to be executed in . its corporate name by its duly authorized ofFcers; and the Grantee has caused this Agreement to be executed all as of the date first above written. THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD By Its Chair And by Its Executive Director STATE OF MINNESOTA ) )ss. COUNTY OF HENNEPIN ) On this t" day of , 2000, before me, a Notary Public within and for said county appeared and , to me personally known, who being by me duly sworn, did say that they are respectively the Chair and Executive Director of the Housing and Redevelopment Authority in and for the City of Richfield, a Minnesota public body corporate and politic, on behalf of the corporation. Notary Public • • BEST BUY CO., INC. By: Its: STATE OF MINNESOTA ) )ss. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged'before me this `th day of 2000, by the of Best Buy Co, Inc., a corporation under the laws of Minnesota by and on behalf of said corporation: Notary Public i • AGENDA SECTION: (~ AGENDA ITEM # REPORT # `7 ~ 1~~' STAFF REPORT HOUSING AND REDEVELOPMENT AUTHORITY MEETING NOVEMBER 27, .2000 REPORT PREPARED BY: I REPORT PRESENTER: DEPARTMENT DIRECTOR REVIEW .JOHN .STARK, COMMUNITY DEVELOPMENT MANAGER NAn~tE T/TLE JOHN STARK, COMMUNITY DEVELOPMENT MANAGER NAME, TITLE SIGNATURE ~ REVIEWED. BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Reconvene. discussion from the November 20, 2000 HRA meeting to consider First Amendment to the Contract for Private Develo ment with Best Bu Co., Inc. I. RECOMMENDED ACTION: By Motion: Approvethe First Amendment to the Contract for Private Development with Best Buy Co., Inc. II. BACKGROUND The attached First Amendment to the Contract for Private Development (Contract) with Best Buy Co., Inc. (Best Buy) prescribes changes to the amount and type of public financing for the development. Section 3.2 subdivision 3 of the Contract, which was approved on March 18, 2000, cites several reasons Best Buy could effectively terminate the project. Among these reasons are acquisition costs which exceed $44.5 million. Best Buy-has informed staff that they are now projecting acquisition costs at over $10 million above and beyond the acquisition cost as stated in this section of the Contract. The proposed. amendment would increase .the acquisition cost, as identified in Section 3.2 Subdivision 3 (6) of the Contract, to $54.5 million. In order to cover the increased acquisition costs, the amendment proposes changes to the method and amount of public financing. The Contract currently provides for $22.8 million of bond proceeds as well as up to $13.1 million of "pay- as-you-go" tax increment to .Best Buy, fora .total. of $35.9 million in public financing. The following benefits could be achieved by converting all of the public financing to $48,073,127 in "pay-as-you-go" tax increment, as is proposed in the Amendment to the Contract: • According to financial consultants Ehlers & Associates, the issuance costs of .the general obligation tax increment bond would have been approximately $1 million; this money would now be used to reimburse Best Buy for site assembly costs rather than being spent on issuance costs. • The removal of a $22.8 million dollar bond from the public financing package represents a reduced amount of risk to the City and/or HRA for. either covering the debt service in the event that there is not sufficient tax increment or any possible effect on the City or HRA bond rating which could result in higher interest rates in the future. In addition to the need for additional tax increment funds to finance increases in site assembly costs, the amount of public financing described in the proposed amendment is also necessary to pay bridge costs that had previously been pledged. by the Minnesota Department of Transportation (MnDOT). According to a Memorandum of Understanding (MOU), MnDOT is to fund $6.7 million of the bridge construction costs; estimated at a #otal of $22.5 million. On November 20, 2000 the Deputy. Director of MnDOT submitted a letter restating MnDOT's commitment to fund $6.7 million of the bridge construction costs. This letter stated that if MnDOT is unable to provide the funds prior to bid. letting on the bridge then the City would be expected to provide the funds in the form of a loan to be repaid by MnDot in 2006 or 2007. Short term grant anticipation bonds issued by the City and/or HRA may be required to cover the time between bid letting and MnDOTS repayment of the loan. In the event that MnDOT is unable to keep their funding commitment,.staff has identified alternative funding from HRA cash .reserves and the plege of administrative costs which are included as -:part of the tax increment financing for this project. If funds from MnDOT or other state or federal agencies are not available for bridge~construction and if bridge costs exceed $22.5 million, then the City/HRA will be responsible for identifying funding sources for such costs. MnDOT has also recently stated that they connot pledge any repayment to the $7 million loan which Best Buy was to have provided in order to facilitate the construction of the bridge. -Best Buy.has since agreed that if the Contract is amended as proposed, then they wilt cover the $7 million loan with the additional pay-as-you-go tax increment defined by the proposed amendment. • In this funding scenario, an additional $7 million in bridge bond proceeds would continue to be used to fund a portion of the construction costs. Thesource of debt service on these bonds would be the .tax increment to be generated by the development. The amount of public assistance indicated in the proposed Amendment would exceed the total amount of public financing which is prescribed in the Tax Increment Financing Plan for the Interchange West and.. Lyndale Gateway Tax Increment Financing District. The TIF Plan, therefore, must be modified before the proposed amendment could become effective. It is anticipated that the TIF Plan modification could be accomplished by January 21, 2001. III. BASIS OF RECOMMENDATION A. POLICY • The site assembly costs anticipated in the Contract for Private Development at the time of its initial approval were. $44,500,000. • The Contract allows Best Buy's termination of the acquisition process, and thus the project, in the event that site assembly costs exceed the amount stated in the. Contract. • Staff has concluded that site assembly costs will exceed $44,500,000. B. CRITICAL ISSUES • The proposed Amendment, including the increased amount of site assembly costs as referenced in the Contract, will. help insure that the project can move forward. C. FINANCIAL • The HRA's financial consultant, Ehlers & Associates, has reviewed the proposed Amendment and concurs that it sets forth a rational method for providing public financing to the development. D. LEGAL • HRA legal staff drafted the Amendment. IV. ALTERNATIVE RECOMMENDATION(S) • Do not approve the Amendment. • Approve a modified version of the Amendment, subject to further approval by Best Buy as a party to the Contract. V. ATTACHMENTS w • First Amendment to the Contract for Private Development with Best Buy Co., Inc. (Updated version to be distributed prior to the November 27 meeting.) VI. PRINCIPAL PARTIES EXPECTED AT MEETING • HRA Legal Counsel • A representative of Ehlers & Associates. • A representative of Best Buy or their developer Opus. • • • • ~J HRA RESOL-UTION NOti RESOLUTION APPROVING FIRST AMENDMENT TO CONTRACT FOR PRIVATE DEVELOPMENT WHEREAS, the HRA and Best. Buy Company, Inc: did. on or about March 28, 2000 enter into an agreement entitled, Contract for Private Development, (the "Contract"), calling for the redevelopment of an area of land (the. "Property") lying within the City of Richfield; and WHEREAS, events subsequent to the Contract have established that the land acquisition costs and the costs of constructing the necessary Public Improvements to serve the project are substantially greater than was then contemplated; and WHEREAS, the parties desire to address such matters through certain amendments to .the Contract; and also to modify the form by which portions of the economic assistance will be provided to the HRA; and WHEREAS, the HRA has reviewed and is familiar with the proposed amendment to the Contract entitled: First Amendment to Contract For Private Redevelopment ("First Amendment"), and is satisfied that the terms thereof carry out the intentions of the parties, and are necessary and appropriate for the bevelopment. NOW, THEREFORE, BE IT RESOLVED, by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota as follows: 1. The proposed first amendment is hereby in all respects approved. 2. Such approval is .contingent upon the necessary modification of the budget for the tax increment financing plan for the TIF District. 3. Upon completion of such modifications, the .Executive Director and Board Chair are directed to take all. steps and do all things necessary to effectuate the provisions of the First Amendment. Dated: Thomas E. Harms, Chair ATTEST: Michael. Sandahl, Secretary 11 /27/00 FIRST AMENDMENT TO CONTRACT FOR PRIVATE. DEVELOPMENT THIS AGREEMENT, made and entered into as of the day of November, 2000, by and between the HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD, MINNESOTA, a Minnesota. public body corporate and politic (the "HRA"), and BEST BUY CO., INC., a Minnesota corporation (the "Redeveloper"). WITNESSETH: WHEREAS, the parties hereto did on or about March 28, 2000 enter into an agreement entitled, Contract for Private Development, (the "Contract"), calling for the redevelopment of an area of land (the "Property") lying within the City of Richfield; and WHEREAS, events subsequent to the Contract have established that the land acquisition costs and the costs of constructing the necessary Public Improvements to serve the project are substantially greater than was then contemplated; and i WHEREAS, the parties desire to address such. matters through certain amendments. to the Contract; and also to modify the form by which portions of the economic assistance will be provided to the HRA; NOW, THEREFORE, based upon the mutual covenants and undertakings hereinafter, and in the Contract provided, the parties hereto stipulate and agree as follows: L The Contract is hereby amended in the following respects (New material underlined and deleted material stricken through) 1. Section 1.1 is hereby amended as follows: By amending the definition of Available Tax Increment to read as follows: "Available Tax. Increment" for the purpose of the Note means the Tax Increment received with .respect to the Development Property after first deducting therefrom, and in the following. order: i) fifteen percent (15%) of the Tax Increment to be paid to the HRA Housing Trust Fund, but not more than $ 634,366 per year; ii) five percent (5%) of the Tax Increment, but not more than $210,566 per year, to be paid to the HRA as reimbursement for administrative costs; iii) any.amount necessary to pay principal and interest on the TIF Bonds or, subjecfi to the provisions of Section 3.5, subd. 3, any TIF Refunding Bonds. 6. By deleting in its entirety the definition of Bridge Bonds.. C. By adding thereto the following new defined term: "Business Subsidy Agreement" means the agreement between the parties made in accordance with the provisions of Minnesota Statutes, Sections 116J.993 to 116J.995 (The Minnesota Business Subsidy Act) D. By deleting in its entirety the definition of Cash Component. D. By amending the .definition of Closing to read as follows: "Closing" means the transaction at which the Authority: {I) transfers to the Developer good and marketable title to any and all properties acquired through condemnation, and (ii) delivers the Public Assistance as provided in Section 3.5 subd. 2. E. By deleting in its entirety the definition of Land Bonds. F. By amending the definition of Note to read as follows: "Note" means the Limited Revenue Tax Increment Note in the principal amount. of not to exceed $48,073,1.27 to be executed and delivered at closing as part of the ' Public Assistance. G. By amending the definition of Public Assistance to read as follows: "Public. Assistance" means the monetary assistance to be provided to the Developer in accordance with the terms of this Agreement and the Business Subsidy Agreement. H. 13y amending the definition of TIF Bonds to read as follows: "TIF Bonds" means the City's $8,350,000 General Obligation Tax Increment Bonds, the. net proceeds of which ($7,100,000). are utilized for the improvements of the. Penn Avenue Bridge. "TIF Refunding Bonds" means any bonds issued to refund the TIF Bonds. 2. ~ - By amending Section 2.2 by adding the following new paragraph (f): (f) The Redeveloper acknowledges that it has relied exclusively upon its own analysis of the potential Tax Increment and/or Available Tax Increment to be ..generated by the Redevelopment Property and that neither the HRA nor Opus i Northwest L.L.C. has made any representation or covenant, express or implied, as to the amount of Tax Incremen#, and/or Available Tax Increment that will be generated by the Redevelopment Property; or that such will be sufficient to make payments under the Note. The Redeveloper further acknowledges that payments under the Note are the sole source of payments for the costs described in Section. 3.2 subd. 3 (6) of the Contract. The Redeveloper further acknowledges that .the amount of Tax Increment and/or Available Tax Increment maybe affected by a variety of factors, including without limitation legislative reductions in property class rates that could reduce. the Captured Tax Capacity of the Redevelopment Property, thus reducing the Tax Increment collected by the Authority and the Available Tax Increment pledged to payments on the Note. The Redeveloper agrees that Opus Northwest L.L.C. shall be a third-party beneficiary of this representation and covenant.. 3. By amending Section 3.2 Subd. 3 (6)' to read as follows: 6. The cost of acquisition of .all of the Development Property, including land, relocation, fees and other-expenses to be paid by the Developer exceed the total amount of $49,709,798, including. any and all costs paid to the Authority for the Acquisition of requested portions of the Development Property, and not taking into account all or any portion of the Public Assistance, it being understood that the .Authority shall .have no obligation to pay or assist -the Developer in the payment of any such costs. 4. By amending subdivision 2 of Section 3.5 to read as follows:: • Subdivision 2. Public Assistance. It is the intention of the parties that the funds. that Developer has expended in connection with and related to the acquisition of the Property, both through negotiated purchase and condemnation, should be reimbursed to the extent and in the manner hereinafter provided. It is further understood that Developer would not otherwise have undertaken such expenditures absent reimbursement.. Accordingly, at Closing, the Authority shall execute and deliver the Note to Developer. The Note. will be in substantially the form of the attached Exhibit G. The actual principal amount of the note shall be determined at the time of Closing. Such amount shall be the Developer's actual costs incurred in connection with and related to the acquisition of the Development Property, as such costs are described in Section 3.2 Subd. 3 (6), minus $8,600,000. However, in no event shall the principal amount of the Note exceed $48,073,127. 5. By amending Section 3.5 by adding the following new paragraph thereto Subdivision 3. Available Tax Increment-TIF Refunding Bonds. Debt service. payments on any TIF .Refunding Bonds are to be used in computing Available Tax Increment only to the extent that the total and annual payments of principal and interest do not exceed the total and annual principal and interest payments on the TIF Bonds 6. By amending paragraph (b) of Section 3.6 to read as follows: (b) The Development will also necessitate the relocation of some of the utility structures located.. within the boundaries of .the .Development Property, .and the.. abandonment of others located. within, and outside of, the boundaries of the Development Property. The Developer will. be responsible for such activities inside the boundaries of the Development Property, except in instances in which either the Authority or the City is required by law to bid or perform the actual work. The Authority will be responsible. for such activities outside the boundaries of the Development Property, but may contract with the Developer, as permitted by law, to perform some or all of the actual work. The entire cost of utility relocation and abandonment and removal of utilities located within the boundaries of the Development Property shall be borne by and be the responsibility of the Developer and shall be a qualified cost available for Public Assistance in accordance with the terms of Section 3.5 subd. 2 above. The entire cost of such work outside of the. boundaries of the Development Property will be borne by and be the responsibility of the Authority.. 7. By amending Section 3.7 to read as follows: Section 3.7. Additional funding sources for Penn Avenue Bridge. The Authority is seeking, and agrees to continue to use its. best efforts to obtain, federal TEA-21 funding or any other State or federal funding to cover alf or part of the cost of the Penn Avenue Bridge work.. If and when such funds become available, the Authority will reduce the principal amount of the TIP Bonds, or the TIF- Refunding Bonds (if such have not yet been issued) in recognition of the availability of such funds; or use such funding to pay or to prepay the TIF Bonds,. or the TIF Refunding. Bonds (if such have been issued) as permitted by the terms and conditions relating to payment of such bonds. In either event, the resulting additional Available Tax Increment will be used to make Scheduled Payments under the Note. 8. By amending paragraph (a) of section 6.4 to read as follows: (a) The Authority or the City intends to sell the TIF Bonds. If, prior to .the Termination Date, the Tax .Increment available to the Authority or the City is less .than - the amount necessary make principal and interest payments on the TIF Bonds, or any TIF Refunding Bonds,. but only to the extent that such payments meet the- requirements of Section 3.5 subd. 3, the Authority shall provide notice to the Developer of such fact and the amount of such deficiency in Tax Increment. Ten days after receipt of such notice of deficiency, the Developer shall be liable for and shall pay to the Authority such deficiency. Failure by the Authority to provide the notice of deficiency when required by this Section. 6.4 shall not relieve the Developer of its obligation to make the required payment 10 days after the Developer-receives actual notice of the deficiency from the Authority. In the event the Authority or the City determine at its or their-sole discretion not to sell the TIF Bonds and determine instead to rely on internal borrowings, the Developer. agrees to meet any deficiencies in Tax Increment needed to meet debt service on such internal borrowings, plus interest at the Authority's or City's normal investment rate; provided, however, that the Authority or City and the Developer agree to negotiate in good faith regarding the equivalent investment rate and amortization as if bonds had been sold. 9. By amending Exhibit G to the Contract to read as follows: EXHIBIT G FORM OF LIMITED REVENUE TAX INCREMENT NorE , UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF HENNEPIN HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD .$48,073,127 LIMITED REVENUE TAX INCREMENT NOTE SERIES Date of Interest Rate Original Issue 8.0% 2/2001 ~' The Housing and Redevelopment Authority in and for the City of Richfield (the "Authority"), hereby acknowledges itself to be indebted and, for -value .received, promises to pay to the order of -Best Buy Company, Inc. (the "Owner"), to the extent and in the manner hereinafter provided, the original principal amount of this Note, being $48,073, 427 (the "Principal Amount"), together with interest thereon accrued from the date of this Note, at the rate of interest of 8.0 % per annum. (the "Stated Rate"), in-the amount and on the :dates (the "Scheduled Payment Dates") set forth on the Payment Schedule attached as Schedule A hereto and in the amounts stated thereon (the "Scheduled Payments"). The unpaid interest accruing from the date of .this Note, shall be added to principal'on a semi annual basis on each August 1 and February 1 until. February 1, .Any payments on this. Note shall be applied first to accrued interest and then to the Principal Amount in respect of which such payment is made. 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 it postal address within the United States which shall be designated from time to time by the Owner. The Note is a special. and limited obligation and not a general obligation - of the Authority, which has been issued by the Authority to aid in financing a "project," as defined in Minnesota Statutes, § 469.174, of the Authority within and for the benefit of the Interchange West .and Lyndale Gateway Tax Increment Financing District ("District"). ,~ THE NOTE IS NOT A DEBT OF THE AUTHORITY,..THE CITY. OF RICHFIELD, OR THE STATE OF MINNESOTA {THE "STATE"), AND NEITHER THE AUTHORITY, THE CITY OF RICHFIELD, THE STATE NOR ANY POLITICAL SUBDIVISION. THEREOF SHALL BE LIABLE ON THE NOTE, NOR SHALL THE. NOTE BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN AVAILABLE TAX INCREMENT, AS DEFINED BELOW. Each Scheduled Payment on-this Note due. on any Scheduled Payment Date is payable solely from and only to the extent that the Authority shall have .received as of such Scheduled Payment Date. "Available Tax Increment" as that term is defined in Section 1.1 of that certain. Contract for Private Development between the Authority and the Owner dated 2000. (the "Development Contract"). For purposes of this .Note, a "Payment .Date" shall mean each of the Scheduled Payment Dates set forth on Schedule A attached hereto. To the extent that on any Payment Date the Authority is unable to .make a full Scheduled Payment due to insufficienf Available Tax Increment (which insufficiency is not due to a failure of the Owner to pay full real estate taxes payable on the Development Property), such deficiency shall be deferred and paid, with interest at the Stated Rate along .with future Scheduled Payments, but only to the extent of Available Tax Increment. This Note shall. terminate upon the earlier of (i) the date when the Owner fias been fully reimbursed according to the terms hereof; or (ii) February 1, The Authority's obligation to make any payments under this Note may be suspended and the Authority shall have no obligation and incur no liability to make any payments _hereunder immediately upon the occurrence of an "Event of Default" under the Development Contract subject to the notice and cure provisions therein, and limited only to defaults which relate to the Development Property. This Note shall not be payable from or constitute a charge upon any funds of the Authority or the City of Richfield and the Authority shall not be subject to any liability hereon or be deemed to have obligated itself to pay hereon from any funds except the Available Tax .Increments, and then only to the extent and in the manner herein specified. The Owner shall never have or be deemed to have the right to compel any exercise of any taxing power of the Authority or the City of Richfield or of any other public body, and neither the Authority or the City of Richfield nor any director, commissioner, council member, board member, officer, employee or .agent of .the Authority or the City of Richfield, nor any person executing or registering this Note shall be liable personally hereon by reason of the issuance or registration hereof or otherwise. This Note shall not be transferable or assignable, in whole or in part, by the Owner without the prior written consent of the Authority; provided- that the Owner may pledge the payments hereunder to a lender or assign. the payments .hereunder to a subsequent purchaser of the. Redevelopment, but only with :prior written notice. thereof to the Authority. The Authority .also agrees to consent totransfer or assignment upon being furnished securities .investment letters. and/or .indemnities satisfactory to the ~' Authority. The Owner may also, without prior notice to or consent of the Authority transfer or assign the Note or the right to receive. payments under the Note to a wholly-owned ' subsidiary of the Owner. This Note may be prepaid in full at any time. at the option of the Authority; and may also be prepaid at the request of the Owner, but in either .instance only if the Authority first determines that sufficient tax increment is or will be generated to permit such prepayment, and the parties agree upon the actual prepayment amount. This Note is issued pursuant to proper action of the Authority. by Resolution and the Owner is entitled to the benefits thereof, which Resolution is incorporated herein by reference. IT IS HEREBY CERTIFIED. AND RECITED that any acts, conditions, and things required by the Constitution and laws of the State of Minnesota to be done, to have happened, and to be performed precedent to and in the issuance of .this Note have been done, have happened, and have been performed in regular and due form, time, and manner as required by law; and that this Note, together with all other indebtedness of the Authority or the City of Richfield outstanding on the date hereof and on the date of its actual issuance. and delivery, does not cause the indebtedness of the Authority or the City of Richfield to exceed any constitutional or statutory limitation thereon. IN WITNESS WHEREOF, the- Board of Commissioners of the Authority. has caused this Note to be executed by the manual signatures of the Chairperson and the Executive Director of the Authority and has caused this .Note to be dated ~2 Chairperson Executive Director • • SCHEDULE A TO EXHIBIT G Date Pa ment Date Pa ment Total Present Value IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed in their behalf by their authorized representatives on or as of the date first above written. HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD By Its Chair By Its Executive Director r STATE OF MINNESOTA ss.. COUNTY OF HENNEPIN The foregoing instrument was acknowledged before me this day of 2000 by Thomas E. Harms and Samantha Orduno, the Chair and Executive Director, respectively, of the. Housing and Redevelopment Authority in and for the City of Richfield, a public body corporate and politic under. the laws of Minnesota, on behalf of the Authority. -Notary Public BEST BUY CO., INC. By: Its: STATE OF MINNESOTA ' ss.. COUNTY OF HENNEPIN The foregoing instrument was acknowledged before me thin day of 2000 by ,the of Best Buy Co., Inc., a Minnesota corporation, on behalf of the corporation. " Notary Public AGENDA SECTION: ADMIN. REPORTS AGENDA ITEM # 1 REPORT # ~ 9 STAFF REPORT HOUSING AND REDEVELOPMENT AUTHORITY MEETING NOVEMBER 27, 2000 REPORT PREPARED BY: REPORT PRESENTER: JOHN STARK, COMMUNITY DEVELOPMENT MANAGER NAME; TITLE BRUCE PALMBORG, COMMUNITY DEVELOPMENT DIRECTOR NAME, TITLE DEPARTMENT DIRECTOR REVIEW: REVIEWED BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Reconvene discussion from the November 20, 2000 HRA meeting to consider First Amendment to the Contract for Private Development with Best Buy Co., Inc. I. RECOMMENDED ACTION: By Motion: Approve the First Amendment to the Contract for Private Development with Best Buy Co., Inc. ~ IL BACKGROUND ~ The- attached First Amendment to the Contract for Private Development (Contract) with Best Buy Co., Inc. (Best Buy) prescribes changes. to the amount and type of public financing for the development. Section 3.2 subdivision 3 of the Contract, which was approved on March 18, 2000, cites several reasons Best Buy could effectively terminate the project. Among these reasons are acquisition costs which exceed $44.5 million. Best Buy has informed staff that they are now projecting acquisition costs at over $10 million above and beyond the acquisition cost as stated in this section of the Contract. The proposed amendment would increase the acquisition cost, as identified in Section 3.2 Subdivision 3 (6) of the Contract, to $54.5 million. 1127contract In order to cover the increased acquisition costs, the amendment proposes changes to the method and amount of public financing. The Contract currently provides for $22.8 million of bond proceeds as well as up to $13.1 million of "pay-as-you-go" tax increment to Best Buy, for a total of $35.9 million in public financing. The following benefits could be achieved by converting all of the public financing to $41,079,000 in "pay-as-you-go" tax increment, as is proposed in the Amendment to the Contract: • According to financial consultants Ehlers & Associates, the issuance costs of the general obligation tax increment bond would have been approximately $1 million; this money would now be used to reimburse Best Buy for site assembly costs rather than being spent on issuance costs. • The removal of a $22.8 million dollar bond from the public financing package represents a reduced amount of risk to the City and/or HRA for either covering the debt service in the event that there is not sufficient tax increment or any possible effect on the City or HRA bond rating which could result in higher interest rates in the future. • While the estimated cost of site assembly, has increased by $10 million, the Amendment only provides an additional $5.18 million in public financing; this means that Best Buy is is assuming responsibility for an additional $4.8 million in site assembly costs which they had not been anticipating. The amount of public assistance indicated in the proposed Amendment would not exceed the total amount of public financing which is prescribed in the Tax Increment Financing Plan. for the Interchange West and Lyndale Gateway Tax Increment Financing District. III. BASIS OF RECOMMENDATION A. POLICY • The site assembly costs anticipated in the Contract for Private Development at the time of its initial approval were $44,500,000. • -The Contract allows Best Buy's termination of the acquisition process, and thus the project, in the event that site assembly costs exceed the amount stated in the Contract. • Staff has concluded that site assembly costs will exceed $44,500,000. B. CRITICAL ISSUES • The proposed Amendment, :including the increased amount of site assembly costs as referenced in the Contract,. will help insure that the project can move forward. C. FINANCIAL • The HRA's financial consultant, Ehlers & Associates, has reviewed the proposed Amendment and concurs that it sets forth a rational method for providing public financing to the development without exceeding the budget established in the TIF Plan. D. LEGAL • HRA legal staff drafted the Amendment. IV. ALTERNATIVE RECOMMENDATION~S~ • Do not approve the Amendment. • Approve a modified version of the Amendment, subject to further approval by Best Buy as a party to the Contract. V. ATTACHMENTS • First Amendment to the..Contract for Private Development with ,Best Buy Co., Inc. (Updated version to be distributed prior to the November 27 meeting.) VI. PRINCIPAL PARTIES EXPECTED AT MEETING • HRA Legal Counsel • A representative of Ehlers & Associates. • A representative of Best Buy or their developer Opus. • DRAFT 11 /14/00 FIRST AMENDMENT TO CONTRACT FOR PRIVATE REDEVELOPMENT THIS AGREEMENT, made and entered into as of the day of August, 2000, by and between- the HOUSING AND. REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD, MINNESOTA, a Minnesota public body corporate and politic (the "HRA"), and BEST BUY CO., INC., a Minnesota corporation (the "Redeveloper"). WITNESSETH: WHEREAS, the parties hereto did on or about into an agreement entitled, Contract for Private Redevelopment, (the "Contract"), for the redevelopment of an area of land (the "Property") lying within the Richfield; and _ enter calling City of WHEREAS, events subsequent to .the Contract have established that the land acquisition costs and the costs of constructing the necessary Public Improvements to serve the project are substantially greater than was then contemplated; and WHEREAS, the parties desire to address such matters through certain amendments to the Contract; and also to modify the form by which portions of the economic assistance will be provided to the HRA; NOW, THEREFORE,.. based upon the mutual covenants and undertakings hereinafter,- and in the Contract provided, the parties hereto stipulate and agree as follows: I. The Contract, is hereby amended in the following respects: (New material underlined and deleted material stricken through) Section 1.1 is hereby amended as follows: follows: A. By amending the definition of Available Tax Increment to read as "Available Tax Increment" for the purpose of the Note means the Tax Increment received with respect to the Development Property after first deducting therefrom i) fifteen percent (15%) of the Tax Increment to be paid to the HRA Housing Trust Fund; ii) five percent (5%) of the Tax Increment, .but not more than $210,566 per year; iii) any amount necessary to pay principal and interest on the TIF Bonds or, subject to the provisions of Section 3.5, subd. 3, any TIF Refunding Bonds. JBD-189046v2 RC125-210 B. By deleting in its entirety the definition of Bridge Bonds. C. By adding thereto the following new defined term: "Business Subsidy Agreement" means the agreement between the parties made in accordance with the provisions of .Minnesota Statutes, Sections 116J.993 to 116J.995 (The Minnesota Business Subsidy Act) D. By deleting in its entirety the definition of Cash Component. D. By amending the definition of Closing to read as follows: "Closing" means the transaction at which the Authority: (I) transfers to the Developer good and marketable title to any and all properties acquired through condemnation, and (ii) delivers the Public Assistance as provided in Section 3.5 subd. 2. E. By deleting in its entirety the definition of Land Bonds. F. By amending the definition of Note to read as follows: "Note" means the Limited Revenue Tax Increment Note in the principal amount of not to exceed $41,079,056 to be executed and delivered at closing as part of the Public Assistance. G. By amending the definition of Public Assistance to read as follows: "Public Assistance" means the monetary assistance to be provided to the Developer in accordance with the terms of this Agreement and the Business Subsidy Agreement. H. By amending the definition of TIF Bonds to read as follows: "TIF Bonds" :means the City's $8,350,000 General Obligation Tax Increment Bonds, the proceeds of which are utilized for the improvements of the Penn Avenue Bridge. "TIF Refunding Bonds" means any bonds issued to refund the TIF Bonds. 2. By amending Section 3.2 Subd. 3 (6) to read as follows: 6. The cost of acquisition of all of the Development Property, including land, relocation, fees and other expenses to be paid by the Developer exceed the total amount of $54,500,000.00, including any and all costs paid to the Authority for the Acquisition of requested portions of the Development Property; and not taking into account all or any portion of the Public Assistance, it JBD-189046v2 RC125-210 being understood that the Authority shall have no obligation to pay or assist the Developer in the payment f any such costs. 3. By amending subdivision 2 of Section 3.5 to read as follows: Subdivision 2. Public Assistance. It is the intention of the parties that the funds that Developer has expended in connection with and related to the acquisition of the Property, both through negotiated purchase and condemnation, should be reimbursed to the extent and in the manner hereinafter provided. It is further understood .that Developer would not otherwise have undertaken such expenditures absent reimbursement. Accordingly, at Closing, the Authority shall execute and deliver the Note to Developer. The Note will be in substantially the form of the attached Exhibit G. The actual principal amount of the note shall be determined at the time of Closing. Such amount shall be the Developer's actual costs incurred in connection with and related to the acquisition of the Development Property, as such costs are described in Section 3.2 Subd. 3 (6), minus $8,600,000. However, in no event shall the principal amount of the Note exceed $41,079,056. 4. By amending Section 3.5 by adding the following new paragraph thereto: Subdivision 3..Available Tax Increment-TIF Refunding Bonds. Debt service. payments on any TIF Refunding Bonds are to be used in computing Available Tax Increment only to the extent that the total and annual payments of principal and interest do not exceed the total and annual principal and interest payments on the TIF Bonds 5. By amending paragraph (b) of Section 3.6 to read as follows: (b) The Development will also necessitate the relocation of some of the utility structures located within the boundaries of the Development Property, and the abandonment of others located within, and outside of, .the boundaries of the Development Property.. The Developer will be responsible for such activities inside the boundaries of the Development Property, except in instances in which either the Authority or the City is required by law to bid or perform the actual work. The Authority will be responsible for such activities outside the boundaries of the Development Property, but may contract with the Developer, as permitted by law, to perform some or all of the actual work. The entire cost of utility relocation and abandonment and removal of utilities located within the boundaries of the Development Property shall be borne by and be the responsibility of the Developer and shall be a qualified cost available for Public Assistance in accordance with the terms of Section 3.5 subd. 2 above. The entire cost of such work outside of the boundaries of the Development Property will be borne by and be the responsibility of the Authority. 6. By amending Section 3.7 to read as follows: Section 3.7. Additional funding sources for Penn Avenue Bridge. JBD-189046v2 RC125-210 The Authority is seeking, and agrees to continue to use its best efforts to obtain, federal TEA-21 funding or any other State. or federal funding to cover all or part of the cost of the Penn Avenue Bridge work. If and when such funds become available, the Authority will reduce the principal amount of the TIF Bonds, or the TIF Refunding Bonds (if such have not yet been issued) in recognition of the availability of such funds; or use such funding to pay or to prepay the TIF Bonds, or the TIF Refunding Bonds (if such have been issued) as permitted by the terms and conditions relating to payment of such bonds. In either event, the resulting additional Available Tax Increment will be used to make Scheduled Payments under the Note. 5. By amending paragraph (a) of section 6.4 to read as follows: (a) The Authority or the City intends. to sell the TIF Bonds. If, prior to the Termination Date, the Tax Increment available to the Authority or the City is less than the amount necessary make principal and interest payments on public debt issued for the TIF Bonds, the Authority shall provide notice to the Developer of such fact and the amount of such deficiency. in Tax, Increment. Ten days after receipt of such. notice of deficiency, the .Developer shall be liable for and shall pay to the Authority such deficiency. Failure by the Authority to provide the notice of deficiency when required by this Section 6.4 shall not relieve the Developer of its obligation to make the required payment 10 days after the. Developer receives actual notice of the deficiency from the Authority. In the event the Authority or the City determine at its or their sole discretion not to sell .the TIF Bonds and determine instead to rely on internal borrowings, the Developer agrees to meet any deficiencies in Tax Increment needed to meet debt service on such internal borrowings, plus interest at the Authority's or City's normal investment rate; provided, however, that the Authority or City and the Developer agree to negotiate in good faith regarding the equivalent investment rate and amortization as if bonds had been sold. 6. By amending Exhibit G to the Contract to read as follows: JBD-189046v2 RC125-210 UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF HENNEPIN HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD $41,079,056 LIMITED REVENUE TAX INCREMENT NOTE EXHIBIT G FORM OF LIMITED REVENUE TAX INCREMENT NOTE. SERIES • Interest Rate 8.0% Date of Original Issue 2/2001 The Housing and Redevelopment Authority in and for the City of Richfield (the "Authority"), hereby acknowledges itself to be indebted and, for value received, promises to pay to the order of Best Buy Company, Inc. (the "Owner"), to the extent and in the manner .hereinafter provided, the original principal amount of this Note, being $41,079,056 (the "Principal Amount"), together with interest thereon accrued from the date of this Note, at the rate of interest of 8.0 % per annum (the "Stated Rate"), in the amount and on the dates (the "Scheduled Payment Dates") set forth on the Payment Schedule attached as Schedule A hereto and in the amounts stated thereon (the "Base Scheduled Payments", and subject to increase as provided hereinafter. The combination of Base Scheduled Payment and any increased payment are referred to as the Scheduled Payments). Unpaid interest accruing from the date of this Note, shall be added to principal on a semi annual basis on each August 1 and February 1 until February 1, Any payments on this Note shall be applied first to accrued interest and then to the Principal Amount in respect of which such payment is made. 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 it postal address within the United States which shall be designated from time to time by the Owner. JBD-189046v2 RC125-210 The Note is a special and limited obligation and not a general obligation of the Authority, which has .been issued by the Authority to aid in financing. a "project," as defined in Minnesota :Statutes, § 469.174, of the Authority within and for the benefit of the Interchange West and Lyndale Gateway Tax Increment Financing District ("District"). THE NOTE IS NOT A DEBT OF THE. AUTHORITY, THE CITY OF RICHFIELD, OR THE STATE OF MINNESOTA (THE "STATE"), AND NEITHER THE AUTHORITY, THE CITY OF RICHFIELD, THE STATE NOR ANY POLITICAL .SUBDIVISION THEREOF SHALL BE LIABLE ON THE NOTE, NOR SHALL THE NOTE BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES -OTHER THAN AVAILABLE TAX INCREMENT, AS DEFINED BELOW. Each Scheduled Payment on this Note due on any Scheduled Payment Date is payable solely. from and only to the extent that the Authority shall have received as of such Scheduled Payment Date "Available Tax Increment" as that term is defined in Section 1.1 of that certain Contract for Private Development between the Authority and the Owner dated 2000 (the "Development Contract"). For purposes of this Note, a "Payment Date" shall mean .each of the Scheduled Payment Dates set forth on Schedule A attached hereto. To the extent that on any Payment Date the Authority is unable to make a full Scheduled Payment due to insufficient Available Tax Increment (which insufficiency is not due to a failure of -the Owner to pay full real estate taxes payable on the Development Property), such deficiency shall be deferred and paid, with interest at the Stated Rate along with future Scheduled Payments, but only to the extent of Available Tax Increment. This Note shall terminate upon the earlier of (i) the date when the Owner has been fully reimbursed according to the terms hereof; or (ii) February 1, The Authority's obligation to make any payments under this Note may be suspended and the Authority shall. have no obligation and incur no liability to make any payments hereunder immediately upon the occurrence of an "Event of Default" under the Development Contract subject to the notice and cure provisions therein, and limited only to defaults which relate to the Development Property. This. Note shall not be payable from or constitute a charge upon any funds of the Authority or the City of Richfield and the Authority shall not be subject to any liability hereon or be deemed to have obligated itself to pay hereon from any funds except the Available Tax Increments, and then only to the extent and in the manner herein specified. The Owner shall never have or be deemed to have the right to compel any exercise of any taxing power of the Authority or the City of Richfield or of any other public body, and neither the Authority or the City of Richfield nor any director, commissioner, council member, board member, officer, employee or agent of the Authority or the City of Richl:Ield, nor any person executing or registering this Note shall be liable personally hereon by reason of the issuance or registration hereof or otherwise. JBD-189046v2 RC125-210 This Note shall not be transferable or assignable, in whole or in part, by the Owner without the prior written consent of the Authority; provided that the Owner may pledge the payments hereunder to a lender or assign the payments hereunder to a subsequent purchaser of the Redevelopment, but only with prior written notice thereof to the Authority. The Owner may also, without prior notice to or consent of the Authority transfer or assign the Note or the right to receive payments under the Note to a wholly-owned subsidiary of the Owner. This Note may be prepaid in full at any time at the option of the Authority; and may also be prepaid at the request of the Owner, but in either instance .only if the Authority first determines that sufficient tax increment is or will be generated. to permit such prepayment, and the parties agree upon the actual prepayment amount. This Note is issued pursuant to proper action of the Authority by Resolution and the Owner is entitled to the benefits thereof, which Resolution is incorporated herein by reference. IT IS HEREBY CERTIFIED AND RECITED that any acts, conditions, and things required by the Constitution and laws of the State of Minnesota to be done, to have. happened, and to be .performed precedent to .and in the issuance of this Note have been done, have happened, and .have been performed in regular and due form, time, and manner as required by law; and that this Note, together with all other indebtedness of the Authority or the City of Richfield outstanding on the date hereof and on the date of its actual issuance and delivery, does not cause the indebtedness of the Authority or the City of Richfield to exceed any constitutional or statutory limitation thereon. IN WITNESS WHEREOF, the Board of Commissioners of the Authority has caused this Note to be executed by the manual signatures of the Chairperson and the Executive Director of the Authority and has caused this Note to be dated .2 • • L SCHEDULE A II. TO EXHIBIT G III. D A T E IV. P A Y M E N T V. D A T E VL P A Y M E N T VII. VIII. IX. X. XI. XII. XIII. XIV. XV. XVI. XVIL XVIII. XIX. XX. XXI. XXIL XXIII. XXIV. XXV. XXVI. XXVII. XXVIII. XXIX. ~:XX. ~;XXI. ~:XXII. x:XXIII. x:XXIV. ~:XXV. X:XXVI. ~!:XXVII. XXXVIII. X:XXIX. XL. XLI. XLIL XLIII. XLIV. XLV. XLVI. XLVII. XLVIIL XLIX. L. LI. LII. LIII. LIV. LV. LVI. LVII. LVIII. LIX. LX. LXL LXIL LXIII. LXIV. LXV. LXVI. LXVII. LXVIII. LXIX. LXX. LXXI. LXXII. LXXIII. LXXIV. LXXV. LXXVI. LXXVII. LXXVIII. LXXIX. OTAL JBD-184793v1 RC125-153 • Lx;XX. RESENT VALUE IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed in their behalf by their authorized representatives on or as of the date first above written. --HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD By Its Chair By Its Executive Director STATE OF MINNESOTA ss.. COUNTY OF HENNEPIN The foregoing instrument was acknowledged before me this day of 2000 by Thomas E. Harms and Samantha Orduno, the Chair and Executive Director, respectively, of the Housing and Redevelopment Authority in and for the City of Richfield, a public body corporate and politic under the laws of Minnesota, on behalf of the Authority. Notary Public BEST BUY CO., INC. By: Its: STATE OF MINNESOTA ss.. COUNTY OF HENNEPIN JBD-184793v1 9 RC125-153 The foregoing instrument was acknowledged before me this day of 2000 by ,the of Best Buy Co., Inc., a Minnesota corporation, on behalf of the corporation. Notary Public