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05-23-2023 City Council AgendaR EG U LAR C IT Y C O U N C IL MEET IN G R IC H F IE L D MU N IC IPAL C E N TE R, C O U N C IL C H AMB E R S MAY 23, 2023 7:00 P M IN TR O D U C TO RY P R O C E E D IN G S C all to order P ledge of A llegiance Open forum C all into the open forum by dialing 1-415-655-0001 U se webinar access code: 2633 626 2586 and password: 1234. P lease refer to the C ouncil A genda & M inutes web page for additional ways to submit comments. A pproval of the Minutes of the (1) C ity C ouncil Work S ession of May 9, 2023; and (2) C ity C ouncil Meeting of May 9, 2023. P R E S E N TATIO N S 1.F ood S afety Awards AG E N D A APPR O VAL 2.A pproval of the A genda 3.Consent Calendar contains several separate items, which are acted upon by the City Council in one motion. Once the Consent Calendar has been approved, the individual items and recommended actions have also been approved. No further Council action on these items is necessary. However, any Council Member may request that an item be removed from the Consent Calendar and placed on the regular agenda for Council discussion and action. All items listed on the Consent Calendar are recommended for approval. A .C onsider approval of a Temporary On S ale Intoxicating L iquor license for an event scheduled to take place J une 10, 2023, at F red B abcock V F W #5555, located at 6715 L akeshore D r. S taff Report No. 61 B .C onsider approval of a Temporary On S ale Intoxicating L iquor license for events scheduled to take place J uly 3rd and 4th, 2023, at F red B abcock V F W #5555, located at 6715 L akeshore D r. S taff Report No. 62 C .C onsider approval for a Temporary On S ale Intoxicating L iquor license for the A cademy of Holy A ngels, located at 6600 Nicollet Avenue S ., for their annual Rock The L awn event scheduled to take place June 24, 2023. S taff Report No. 63 D .C onsider an appointment to the A dvisory B oard of Health. S taff Report No. 64 4.C onsideration of items, if any, removed from C onsent C alendar O T H E R B U S IN E S S 5.C onsider confirmation of the appointment of K umud Verma to be F inance D irector for the C ity of Richfield. S taff Report No. 65 6.C onsider a request to modify (2024) and then terminate (2025) B est B uy's Minimum A ssessment A greement. S taff Report No. 66 C IT Y MAN AG E R’S R E P O R T 7.C ity Manager's Report C LAIMS AN D PAYR O L LS 8.C laims and P ayroll C O U N C IL D ISC U SSIO N 9.Hats Off to Hometown Hits 10.A djournment Auxiliary aids for individuals with disabilities are available upon request. Requests must be made at least 96 hours in advance to the City Clerk at 612-861-9739. CITY COUNCIL MEETING MINUTES Richfield, Minnesota City Council Work Session May 9, 2023 CALL TO ORDER Mayor Supple called the work session to order at 5:18 p.m. in the Bartholomew Room. Council Members Present: Mary Supple, Sharon Christensen, Simon Trautmann, Sean Hayford Oleary, Ben Whalen Staff Present: Katie Rodriguez, City Manager; Kristin Asher, Public Works Director; Joe Powers, City Engineer; Matt Hardegger, Transportation Engineer; Jay Henthorne, Police Chief; Chris Link, Deputy Public Works Director; Rachel Lindholm, Sustainability Specialist; and Chris Swanson, Management Analyst ITEM #1 STAFF IS SEEKING DIRECTION ON A PROPOSED INCREASE TO ELECTRIC AND GAS FRANCHISE FEES AND THE STREETLIGHT USER FEE TO HELP FUND RIGHT-OF-WAY IMPROVEMENTS, SUSTAINABILITY PROJECTS, AND TO COVER ELECTRICITY COSTS FOR THE STREETLIGHTING SYSTEM. Deputy Director Link provided a summary of the items for discussion. He talked about the city’s current fee structure and outlined the rising cost in utilities in recent years. Deputy Director Link reviewed the proposed increase in fees, including what projects would be supported along with the $50,000 earmarked for sustainability projects. Council Member Hayford Oleary asked if staff could provide an outline of how the fees are structured. Deputy Director Link provided a summary of the current fee structure, specifically highlighting the difference between the electric and gas franchise fees and the streetlight user fee. Council Member Hayford Oleary noted that other cities are using these fees for dedicated bike ped funding and would be in support of increasing the amount to $250,000 a year for this work. Director Asher said some of this funding is already included in the franchise fee but would be willing to explore additional options. Council Member Whalen asked if there was a way to do a sliding scale for the fee. Specifically, he was wondering if there was a way to require higher energy users to pay a larger portion. He talked about how the City of Portland is using a model with a sliding scale and that this has raised a significant amount of funds. Director Asher said staff will do some more research. Council Member Whalen asked staff why we haven't done a standard 3-5% annual increase each year to reflect that pricing has continued to increase. Deputy Director Link stated that state statute restricts when the fees can be increased. City Council Work Session Minutes -2- May 9, 2023 Mayor Supple asked how multi units are billed. Deputy Director Link detailed the way these units are billed. Mayor Supple asked if the recent increase in utility costs was because of an unfunded mandate from the state. Deputy Director Link said that is not the major driver but there are additional costs from state decisions. Council Member Hayford Oleary asked what projects have been funded so far from these franchise fees as he would like to see these funds spent on projects that benefit the whole community. Director Asher said that the funds cover rejuvenation work done on the street. Council Member Hayford Oleary said he understood but wanted to be transparent that multi units are paying a bigger portion of the bill. Staff outlined the next steps with the implementation of these new fees. Staff expects this new rate to go into effect January 1, 2024. ITEM #2 REFRESHER ON LOCAL SPEED LIMITS, STAFF'S ONGOING SPEED LIMIT STUDY, AND AN UPDATED STAFF RECOMMENDATION FOR DISCUSSION. Transportation Engineer Hardegger provided a summary of previous discussions, including the history of speed limits in the city and what can be regulated per state statute. He provided a broad summary of what other cities are doing around lowering speed limits along with a refresher of the work session held in September of 2022. Staff provided the council with their recommendation that the speed limit in the city should be 25 mph. He went through the methodology for how staff came to this conclusion. Staff noted the entire city is residential and having a standard speed limit in Richfield would not create "high speed zones" in racially diverse areas. Engineer Hardegger provided information on why staff is not recommending 20 mph as the adopted limit. He noted the proposed speed will create an opportunity for more voluntary compliance. He also talked about one of the long-term goals of the city is to support active transportation. He asked how the council would define success for this project. Council Member Trautmann talked about his goals for this work. Specifically, he wanted to see increased safety. He asked about the benefit of a 25-mph speed limit if folks were already driving this speed. Staff noted this reduction helps push down the median speed of everyone. Council Member Trautmann asked if there would be any impact on the top 5% of speeders. Staff said there is mixed data around this question as the speed reductions are new. Staff did note that other cities found the median speeds stayed the same but the odds that someone was speeding decreased when speeds were reduced. Council Member Christensen noted she hears a lot of speeding around the STEM school. She asked if staff had an education and enforcement plan in place. Staff said they do not have a plan yet but would come up with a robust education campaign. Staff did say they would work with other cities that have done this work to come up with best practices. Chief Henthorne noted that with a reduction in most speeds they can better focus on the small number of habitual speeders. Council Member Hayford Oleary confirmed with staff that the recommendation was a lowered speed. He asked staff on looking at setting a 20-mph limit, particularly in some areas where we already see reduced speeds, in the future. Engineer Hardegger agreed there were some neighborhoods where folks already drive slower. He said that having a neighborhood-by- neighborhood speed limit would be challenging from a messaging and enforcement aspect. He did discuss some of the work that can be done in the interim to continue to reduce speeds. Council Member Hayford Oleary thanked staff for the response, he did say he would prefer 20-mph, but would be willing to support a 25-mph standard. He also asked staff to look at how stop signs are placed to see if this can impact speeds. He felt strongly that 77th Street should not be over 30-mph. He noted that there are many lower income families living on this strip of road and that they should also receive City Council Work Session Minutes -3- May 9, 2023 the benefit of the reduced speed limits. Staff said they would investigate this in the future. Engineer Hardegger said a speed study would be done sometime later this year in that area and that one of the challenges that has been found with this discussion is there is not good data on speeds across the city. Council Member Whalen thought the city should also focus time on making pedestrian crossings safer. He specifically spoke of the crossing at Chicago as an area of focus. He did agree that he would like to see 20-mph across the city but recognized that lowering the speed limit does not make people decrease their speed. He also wondered how much it would cost to re-sign the city. Staff said that this cost would be minimal as most of the work is done in house. Council Member Trautmann spotlighted 77th Street on the map. He noted that 20% of residents live along this corridor, next to the highway. He wanted to advocate for decreasing the speed on 77th to make it safer for kids and the families in this corridor. City Engineer Powers noted the Chicago Ave crossing statement may be improved in the upcoming 494 project. Staff reiterated that this would be an area of particular focus. Director Asher mentioned the play between finding the right speed for a road while not creating additional traffic. Council Member Trautmann said he really felt strongly about decreasing 77th to 30-mph and, for the sake of safety, the council should do what they can to make it happen regardless of the pain. Council Member Hayford Oleary was supportive. Mayor Supple said she was pleased about the updated proposal. She felt the multi-tier system presented at the last work session would have been confusing to residents and challenging to enforce. She talked broadly about wanting to keep the speeds down across the entire city, specifically looking at roads like 77th. Council Member Whalen asked about earlier comments regarding designing roads to be driven slower. He asked if there were options to continue to decrease traffic speeds without reconstructing roads. Staff said there are ways to add additional items to the road to help with this. Mayor Supple said her main goal was safety. Council Member Christensen agreed; she talked about what she had seen on other streets that may help slow down drivers. Staff were willing to look at other options to reduce speeds in the future. Staff noted there is always a balance in terms of what can be done and the cost of the upgrades. Council Member Whalen noted this was also climate action as slower drivers create less emission and the city should incentivize walking, biking, or public transit. He talked about how slower speed limits may encourage other forms of transportation. Council Member Hayford Oleary asked about how the city could lower speed limits on county roads. Staff said they would investigate. Council Member Whalen asked that we include county roads in future maps. Mayor Supple asked if roundabouts will still be 15-mph. Staff said the recommended speed limit for a roundabout is still 15-mph. Council Member Hayford Oleary congratulated staff for their work on this item. Staff provided a final summary of the discussion and a timeline for the next steps. Staff planned to start looking at an education strategy sooner rather than later. Implementation will be in the fall of 2023-spring of 2024. Director Asher asked if there needed to be more public discussion on this or if the council was comfortable moving forward with this program. Council Member Christensen asked if this timeline worked with the speed limit discussions with the county. Director Asher said the city can start that conversation immediately and this work can move forward. Mayor Supple asked if plans to talk with MnDOT about their current construction schedule and the impact this will have on their work. Staff said they have thought about this item and believe the impact will be minimal, as the MnDOT projects do not redirect any traffic to city roads so there should be little impact. Staff will reach out to make sure MnDOT is aware of the work. City Council Work Session Minutes -4- May 9, 2023 Council Member Whalen asked about the current traffic count maps and the locations of the speed surveys. Staff said the surveys are based on complaints or state aid programs. Engineer Hardegger noted that staff plans to provide more random sampling moving forward. Mayor Supple and City Manager Rodriguez summarized the conversation and spoke about next steps. ADJOURNMENT Mayor Supple adjourned the work session at 6:47 pm Date Approved: May 23, 2023 Mary B. Supple Mayor Chris Swanson Katie Rodriguez Management Analyst City Manager CALL TO ORDER The meeting was called to order by Mayor Supple at 7:00 p.m. in the Council Chambers. Council Members Present: Mary Supple, Mayor; Sharon Christensen; Simon Trautmann; Sean Hayford Oleary; and Ben Whalen Staff Present: Katie Rodriguez, City Manager; Mary Tietjen, City Attorney; and Chris Swanson, Management Analyst PLEDGE OF ALLEGIANCE Mayor Supple led the Pledge of Allegiance. OPEN FORUM Mayor Supple reviewed the options to participate:  Participate live by calling 1-415-655-0001 during the open forum portion  Call prior to meeting 612-861-9711  Email prior to meeting kwynn@richfieldmn.gov Kathleen Balaban, 65th and Stevens, stated she asked at the March 14 meeting for direct contact with her citizen chairpersons for the various commissions, boards, and authorities. She indicated staff’s response was that it would cost $130 per email and they were now working on an online form to fill out. She noted at the Commission’s training session, the City Attorney stated the Commissioners are now public servants, which meant to her that their personal information was now public and would be on the Commission’s website. She requested the City do nothing further with her March 14 request, but instead she was now asking that each commission, board, and authority member have their pictures on the City’s website and some personal contact information be given for the Chairperson(s). She requested the videos be removed where staff was presenting from every commission site. APPROVAL OF MINUTES M/Trautmann, S/Christensen to approve the minutes of the: (1) City Council Work Session of April 25, 2023; (2) Council Meeting of April 25, 2023. Motion carried: 5-0 CITY COUNCIL MEETING MINUTES Richfield, Minnesota Regular Council Meeting May 9, 2023 City Council Meeting Minutes -2- May 9, 2023 ITEM #1 APPROVAL OF THE AGENDA M/Hayford Oleary, S/Trautmann to approve the agenda. Motion carried: 5-0 ITEM #2 CONSENT CALENDAR City Manager Rodriguez presented the consent calendar. A. Consider adoption of several resolutions to accept financial and/or material support from state and federal agencies for local infrastructure planning and construction (Staff Report No. 55) RESOLUTION NO. 12089 RESOLUTION AUTHORIZING THE CITY OF RICHFIELD TO ACCEPT A PLANNING ASSISTANCE GRANT FROM THE MINNESOTA DEPARTMENT OF TRANSPORTATION FOR ACTIVE TRANSPORTATION PLANNING ASSISTANCE RESOLUTION NO. 12090 RESOLUTION AUTHORIZING THE CITY OF RICHFIELD TO ACCEPT A PLANNING ASSISTANCE AND MATERIAL GRANT FROM THE MINNESOTA DEPARTMENT OF TRANSPORTATION FOR A DEMONSTRATION PROJECT ON 70TH STREET RESOLUTION NO. 12091 RESOLUTION AUTHORIZING THE CITY OF RICHFIELD TO ACCEPT A PLANNING ASSISTANCE AND MATERIAL GRANT FROM THE MINNESOTA DEPARTMENT OF TRANSPORTATION FOR A DEMONSTRATION PROJECT ON 73RD STREET RESOLUTION NO. 12092 RESOLUTION AUTHORIZING THE CITY OF RICHFIELD TO ACCEPT GRANT FUNDS FROM THE MINNESOTA DEPARTMENT OF TRANSPORTATION FOR SIDEWALK CONSTRUCTION ON 71ST STREET RESOLUTION NO. 12093 RESOLUTION AUTHORIZING THE CITY OF RICHFIELD TO ACCEPT GRANT FUNDS FROM THE MINNESOTA DEPARTMENT OF TRANSPORTATION FOR PEDESTRIAN IMPROVEMENT AT 66TH STREET AND RICHFIELD PARKWAY RESOLUTION NO. 12094 RESOLUTION AUTHORIZING THE CITY OF RICHFIELD TO GRANT FUNDS FROM THE METROPOLITAN COUNCIL FOR TRAIL CONSTRUCTION ON 73RD STREET B. Consider the approval of resolution authorizing Agreement #1044209 with the Minnesota Department of Transportation (MnDOT) and Hennepin County for provisions related to minor City Council Meeting Minutes -3- May 9, 2023 traffic signal maintenance for the south traffic signal at Trunk Highway 62 and Penn Avenue (CSAH 32) (Staff Report No. 56) RESOLUTION NO. 12095 RESOLUTION AUTHORIZING APPROVAL OF MNDOT AGREEMENT NO. 1044209 BETWEEN THE MINNESOTA DEPARTMENT OF TRANSPORTATION AND THE CITY OF RICHFIELD FOR TRAFFIC CONTROL SIGNAL MAINTENANCE C. Consider acceptance of the public storm sewer constructed by Hope Presbyterian Church and authorize reimbursement of costs incurred by Hope Presbyterian Church for the installation of public storm sewer across the church’s private parking lot (Staff Report No. 57) RESOLUTION NO. 12096 RESOLUTION ACCEPTING THE PUBLIC STORM SEWER IMPROVEMENTS AT HOPE PRESBYTERIAN CHURCH AND AUTHORIZING REIMBURSEMENT OF ELIGIBLE CONSTRUCTION COSTS D. Consider the approval of the amended fourth amendments to the Site Lease Agreement at 6700 Portland Avenue between the City of Richfield and Sprint Spectrum Realty Company, LLC (successor in interest to Sprint Spectrum LP., a Delaware limited partnership) to modify equipment, request for the addition of a five (5) year automatic Renewal Term and change of successor in interest to T-Mobile Central LLC. (Staff Report No. 58) E. To consider a resolution to approve the amendment to (1) Educational Facilities Revenue Note (academy of Holy Angels Project), Series 2002, dated December 30, 2002; and (2) the Educational Facilities Revenue Note (Academy of Holy Angels Project), Series 2003. (Staff Report No. 59) RESOLUTION NO. 12097 RESOLUTION APPROVING AMENDMENTS TO CERTAIN REVENUE NOTES ISSUED FOR THE BENEFIT OF ACADEMY OF HOLY ANGELS AND AUTHORIZING THE EXECUTION AND DELIVERY OF ALLONGES TO THE NOTES F. Consider a resolution to accept $100,000 in funds from Hennepin County’s Broadband Expansion grant and to authorize the Mayor and City Manager to execute the grant agreement with Hennepin County and subsequent agreement with Arrive Ministries (Staff Report No. 60) RESOLUTION NO. 12098 RESOLUTION APPROVING ACCEPTANCE OF HENNEPIN COUNTY BROADBAND EXPANSION GRANT FUNDS M/Trautmann, S/Christensen to approve the consent calendar. Council Member Whalen lifted up the City’s partnership on Item A (the Safe Routes to School Program) between the Public Work’s Department and the School District. He stated these projects would make for a safer bike and pedestrian routes for the students to get to school. He thanked staff for their work in applying for the various grants. Motion carried: 5-0 City Council Meeting Minutes -4- May 9, 2023 ITEM #3 CONSIDERATION OF ITEMS, IF ANY, REMOVED FROM CONSENT CALENDAR None. ITEM #4 CITY MANAGER’S REPORT City Manager Rodriguez stated she had nothing to report. ITEM #5 CLAIMS AND PAYROLL M/Trautmann, S/Hayford Oleary that the following claims and payrolls be approved: U.S. BANK 05/09/2023 A/P Checks: 313986 - 314284 $1,664,880.51 Payroll: 178131 - 178424 $804,935.01 TOTAL $2,469,815.52 Motion carried: 5-0 ITEM #6 HATS OFF TO HOMETOWN HITS Council Member Trautmann stated the Taste of Richfield is May 11, 2023. He indicated this is a great opportunity to support the Richfield Foundation. Council Member Hayford Oleary stated there were still tickets available for the Taste of Richfield at the Richfield Foundation’s website. Council Member Christensen stated she had attended the first Farmers Market at Veteran’s Park this past Saturday. She noted there were many past vendors that were back again, and it was a fun event and runs through October. Council Member Whalen shared the Sustainability Commission had their first City tree and rain barrel sale both of which sold out. He noted the Commission was planning to have this event again with it possibly being expanded. With respect to the community garden project, he believed most of the plots have been claimed. He gave a shout out to the City’s former Council Member, State Representative Mike Howard, who chairs the Housing Committee which passed a historic housing Bill of $1 billion. He thanked Representative Howard and others for their good work in getting this Bill passed. Mayor Supple stated the City was looking for one resident to fill an open seat on the Housing and Redevelopment Authority (HRA), which means that person would also be on the Economic Development Authority (EDA). She noted additional information on this position is posted on the City’s website under the HRA and EDA. She stated this was Drinking Water Week and to celebrate the City was offering limited tours of the Richfield Water Plant. She indicated there were still spots open for this event and she encouraged people to attend the tour. She stated the opening of the High School Art show was being held at the Richfield Community Center where student’s exhibits will be there through City Council Meeting Minutes -5- May 9, 2023 the end of June. She also stated the City is looking for feedback from the community regarding the off- road bike park that was being proposed. She then gave hats off to the Richfield Fire Department for rescuing ducklings out of a sewer grate. ITEM #7 ADJOURNMENT M/Trautmann, S/Whalen to adjourn the meeting at 7:19 p.m. Motion carried: 5-0 Date Approved: May 23, 2023 Mary B. Supple Mayor Chris Swanson Katie Rodriguez Management Analyst City Manager AGENDA SECTION:CONSENT CALENDAR AGENDA ITEM #3.A. STAFF RE P ORT NO. 61 CIT Y COUNCIL ME E T ING 5/23/2023 RE P O RT P RE PA RE D B Y: Jennifer A nderson, S upport S ervices Manager D E PA RTME NT D IRE C TO R RE V IE W: Jay Henthorne, D irector of P ublic S afety/C hief of P olice 5/17/2023 O THE R D E PA RTM E NT RE V IE W: C ITY MA NA G E R RE V IE W: K atie Rodriguez, C ity Manager 5/17/2023 I T E M F O R C O UNC IL C O NS ID E RAT I O N: Consider approval of a Temporary On Sale Intoxicating Liquor license for an event scheduled to take place June 10, 2023, at Fred Babcock V FW #5555, located at 6715 Lakeshore Dr. E X E C UT IV E S UM M ARY: On April 7, 2023, the City received application materials for a Temporary On Sale I ntoxicating Liquor license for Fred Babcock V F W #5555. This is for a wrestling event. The V FW plans to set up in the parking lot. Food and refreshments, including alcohol, will be sold at the event. Their request is to serve alcohol from 2:00 p.m. to 10:00 p.m. The Director of Public Safety has reviewed and approved the license application and sees no reason it should be denied. All required information has been provided and all licensing fees have been received. RE C O M M E ND E D AC T I O N: By motion: Approve the issuance of a Temporary On Sale Intoxicating Liquor license for Fred Babcock V FW #5555 located at 6715 Lakeshore Dr., for their wrestling event scheduled to take place June 10, 2023. B AS IS O F RE C O M M E ND AT I O N: A.H IS TOR IC AL C ON T E X T The applicant has satisfied the following requirements for the issuance of this license: The required licensing fee has been paid. Proof of liquor liability insurance has been submitted showing I ntegrity Mutual I nsurance Company affording coverage (parking lot included). The applicant has contacted sanitarians from the City of Bloomington to ensure proper food handling practices are followed. Employees of the V F W will be providing security and will patrol the area for this event. B.P OL IC IE S (resolutions, ordinances, regulations, statutes, etc): Richfield City Code Section 1202.05 requires all applicants to comply with all of the provisions of this code, as well as the provisions of Minnesota Statue Chapter 340A. C.C R IT IC AL T IMIN G IS S U E S: The sale of intoxicating liquor in the parking lot must cease no later than 10:00 p.m. on J une 10, 2023. D.F IN AN C IAL IMPAC T: The required licensing fees have been received. E.L E GAL C ON S ID E R AT ION: There are no legal considerations. ALTE R N AT IV E R E C O MME N D ATIO N(S): The Council could deny the requested license; however, that would mean the applicant would not be able to serve alcohol outside to the public during the J une 10th event. P R IN C IPAL PAR TIE S E X P E C TE D AT ME E TIN G: Representative of V F W. AGENDA SECTION:CONSENT CALENDAR AGENDA ITEM #3.B. STAFF RE P ORT NO. 62 CIT Y COUNCIL ME E T ING 5/23/2023 RE P O RT P RE PA RE D B Y: Jennifer A nderson, S upport S ervices Manager D E PA RTME NT D IRE C TO R RE V IE W: Jay Henthorne, D irector of P ublic S afety/C hief of P olice 5/8/2023 O THE R D E PA RTM E NT RE V IE W: N/A C ITY MA NA G E R RE V IE W: K atie Rodriguez, C ity Manager 5/17/2023 I T E M F O R C O UNC IL C O NS ID E RAT I O N: Consider approval of a Temporary On Sale Intoxicating Liquor license for events scheduled to take place July 3rd and 4th, 2023, at Fred Babcock V FW #5555, located at 6715 Lakeshore Dr. E X E C UT IV E S UM M ARY: On April 20, 2023, the City received application materials for a Temporary On Sale I ntoxicating Liquor license for Fred Babcock V F W #5555. This is for their 4th of J uly event. The V F W plans to set up in the parking lot. Food and refreshments, including alcohol, will be sold at the event. Their request is to serve alcohol from 3:00 p.m. to 10:00 p.m. on J uly 3, 2023, and from 1:00 p.m. to 10:00 p.m. on J uly 4, 2023. The Director of Public Safety has reviewed and approved the license application and sees no reason it should be denied. All required information has been provided and all licensing fees have been received. RE C O M M E ND E D AC T I O N: By motion: Approve the issuance of a Temporary On Sale Intoxicating Liquor license for Fred Babcock V FW #5555 located at 6715 Lakeshore Dr., for their event scheduled to take place July 3-4, 2023. B AS IS O F RE C O M M E ND AT I O N: A.H IS TOR IC AL C ON T E X T The applicant has satisfied the following requirements for the issuance of this license: The required licensing fee has been paid. Proof of liquor liability insurance has been submitted showing I ntegrity Mutual I nsurance Company affording coverage (parking lot included). The applicant has contacted sanitarians from the City of Bloomington to ensure proper food handling practices are followed. Employees of the V F W will be providing security and will patrol the area for this event. B.P OL IC IE S (resolutions, ordinances, regulations, statutes, etc): Richfield City Code Section 1202.05 requires all applicants to comply with all of the provisions of this code, as well as the provisions of Minnesota Statue Chapter 340A. C.C R IT IC AL T IMIN G IS S U E S: The sale of intoxicating liquor in the parking lot must cease no later than 10:00 p.m. on J uly 3 and 4, 2023. D.F IN AN C IAL IMPAC T: The required licensing fees have been received. E.L E GAL C ON S ID E R AT ION: There are no legal considerations. ALTE R N AT IV E R E C O MME N D ATIO N(S): The Council could deny the requested license; however, that would mean the applicant would not be able to serve alcohol outside to the public during the J uly 3-4 event. P R IN C IPAL PAR TIE S E X P E C TE D AT ME E TIN G: Representative of V F W. AGENDA SECTION:CONSENT CALENDAR AGENDA ITEM #3.C. STAFF RE P ORT NO. 63 CIT Y COUNCIL ME E T ING 5/23/2023 RE P O RT P RE PA RE D B Y: Jennifer A nderson, S upport S ervices Manager D E PA RTME NT D IRE C TO R RE V IE W: Jay Henthorne, D irector of P ublic S afety/C hief of P olice 5/8/2023 O THE R D E PA RTM E NT RE V IE W: C ITY MA NA G E R RE V IE W: K atie Rodriguez, C ity Manager 5/17/2023 I T E M F O R C O UNC IL C O NS ID E RAT I O N: Consider approval for a Temporary On Sale Intoxicating Liquor license for the Academy of Holy Angels, located at 6600 Nicollet Avenue S., for their annual Rock The Lawn event scheduled to take place June 24, 2023. E X E C UT IV E S UM M ARY: On April 24, 2023, the City received application materials for a Temporary On Sale I ntoxicating Liquor license for Academy of Holy Angels, located at 6600 Nicollet Avenue South, for their annual Rock the Lawn event taking place on J une 24, 2023. They will serve beer and wine from 5:00pm - 11:00pm. No other intoxicating liquor beverages will be permitted. Pizza Luce and NorthStar Tavern will be providing food for the event. The Academy of Holy Angels has contacted food sanitarians from the City of Bloomington to ensure proper food handling practices are allowed. The Director of Public Safety has reviewed all required information and documents and has found no basis for denial. RE C O M M E ND E D AC T I O N: By motion: Approve the issuance of a Temporary On Sale Intoxicating Liquor license for Academy of Holy Angels, located at 6600 Nicollet Ave S., for their annual Rock The Lawn event scheduled to take place June 24, 2023. B AS IS O F RE C O M M E ND AT I O N: A.H IS TOR IC AL C ON T E X T The applicant has satisfied the following requirements for the issuance of this license: The required licensing fee has been paid. Proof of liquor liability insurance has been submitted showing I ntegrity Mutual I nsurance Company affording coverage. Along with the application they included a diagram of where the alcohol will be served and consumed as well as how I D's will be checked and how they will be monitoring sales and consumption. Employees of the Academy of Holy Angels and off-duty Richfield Police Officers will be providing security and will patrol the area for this event. B.P OL IC IE S (resolutions, ordinances, regulations, statutes, etc): Richfield City Code Section 1202.05 requires all applicants to comply with all of the provisions of this code, as well as the provisions of Minnesota Statue Chapter 340A. C.C R IT IC AL T IMIN G IS S U E S: There are no critical timing issues. D.F IN AN C IAL IMPAC T: The required licensing fees have been received. E.L E GAL C ON S ID E R AT ION: There are no legal considerations. ALTE R N AT IV E R E C O MME N D ATIO N(S): The Council could deny the approval of the Temporary On Sale I ntoxicating Liquor license for the Academy of Holy Angels. This would mean the applicant would not be able to serve wine or strong beer; however, Public Safety has not found any basis for denial. P R IN C IPAL PAR TIE S E X P E C TE D AT ME E TIN G: Representive of Academy of Holy Angels. AGENDA SECTION:CONSENT CALENDAR AGENDA ITEM #3.D. STAFF RE P ORT NO. 64 CIT Y COUNCIL ME E T ING 5/23/2023 RE P O RT P RE PA RE D B Y: K elly Wynn, A dministrative A ssistant D E PA RTME NT D IRE C TO R RE V IE W: O THE R D E PA RTM E NT RE V IE W: C ITY MA NA G E R RE V IE W: K atie Rodriguez, C ity Manager 5/17/2023 I T E M F O R C O UNC IL C O NS ID E RAT I O N: Consider an appointment to the Advisory Board of Health. E X E C UT IV E S UM M ARY: The Advisory Board of Health has two current openings on the board due to resignations. Terms for advisory board and commissions are for three years unless filling a mid-term vacancy. The City received one application in the recent recruitment from this spring. The Mayor and City Council members reviewed the application and made the decision for appointment to the Advisory Board of Health. RE C O M M E ND E D AC T I O N: By motion: Appoint Stephanie Mockobee to fill an opening on the Advisory Board of Health with a term that will expire January 31, 2025. B AS IS O F RE C O M M E ND AT I O N: A.H IS TOR IC AL C ON T E X T This information is contained in the Executive Summary. B.P OL IC IE S (resolutions, ordinances, regulations, statutes, etc): City advisory board and commissions were established by City ordinance or resolution. C.C R IT IC AL T IMIN G IS S U E S: To ensure a quorum at future advisory board and commission meetings, the City Council should make appointments to fill vacant positions. D.F IN AN C IAL IMPAC T: None E.L E GAL C ON S ID E R AT ION: None ALTE R N AT IV E R E C O MME N D ATIO N(S): None P R IN C IPAL PAR TIE S E X P E C TE D AT ME E TIN G: AGENDA SECTION:OTHER BUSINESS AGENDA ITEM #5. STAFF RE P ORT NO. 65 CIT Y COUNCIL ME E T ING 5/23/2023 RE P O RT P RE PA RE D B Y: K atie Rodriguez, C ity Manager D E PA RTME NT D IRE C TO R RE V IE W: O THE R D E PA RTM E NT RE V IE W: C ITY MA NA G E R RE V IE W: K atie Rodriguez, C ity Manager 5/16/2023 I T E M F O R C O UNC IL C O NS ID E RAT I O N: Consider confirmation of the appointment of Kumud Verma to be Finance Director for the City of Richfield. E X E C UT IV E S UM M ARY: Kumud Verma started in her role as Finance Manager on May 18, 2022. Ms. Verma brings over 20 years of experience in accounting, budgeting, municipal bond issuance, technology solutions and leadership experience to the role. She also has a Master's degree in Finance and a Bachelor's degree in Accounting. Ms. Verma has excelled in her leadership of the Finance Department. She had to quickly learn municipal accounting, operations and processes. She has regularly improved and updated processes as she learned and will be key in implementing further process and technology upgrades. The City plans a major financial software upgrade in May 2024. She is already an important member of the leadership team and has developed strong professional relationships with colleagues both inside and outside the organization. Her accomplishments are even more impressive given that the department continues to be short staffed. Ms. Verma's response to the staff shortages demonstrates her strategic problem-solving and innovation. Given the shortage of public finance professionals nationwide, she recently created a student internship position to help with the annual budget and also create a better pipeline of talent to fill current and future needs. Ms. Verma's skill set will also be needed to continue progress on Strategic Plan initiatives, including better long-term financial planning. The City's success depends on an effective Finance Department and Ms. Verma has the technical and leadership skills to strengthen the department so the City can build on a tradition of sound and responsible financial management. RE C O M M E ND E D AC T I O N: By motion: Confirm the appointment of Kumud Verma as Finance Director for the City of Richfield. B AS IS O F RE C O M M E ND AT I O N: A.H IS TOR IC AL C ON T E X T Historical Context is contained in the Executive Summary. B.P OL IC IE S (resolutions, ordinances, regulations, statutes, etc): C.C R IT IC AL T IMIN G IS S U E S: The Finance Director position has been vacant since August 2021. D.F IN AN C IAL IMPAC T: The 2023 Budget includes the funding necessary to provide for the salary and benefit contributions as negotiated. E.L E GAL C ON S ID E R AT ION: According to Richfield City Charter Section 6.02 Powers and Duties of the City Manager, subsection 3, and under Richfield City Code Section 310.01 Subd. 3, Charter authority, appointment or removal of department heads shall be made final only upon a majority vote of the Council. ALTE R N AT IV E R E C O MME N D ATIO N(S): The Council can reject the recommendation and direct the City Manager to not fill the Finance Director position or seek a new candidate. P R IN C IPAL PAR TIE S E X P E C TE D AT ME E TIN G: AGENDA SECTION:OTHER BUSINESS AGENDA ITEM #6. STAFF RE P ORT NO. 66 CIT Y COUNCIL ME E T ING 5/23/2023 RE P O RT P RE PA RE D B Y: Melissa P oehlman, C ommunity D evelopment D irector / HRA E xecutive D irector D E PA RTME NT D IRE C TO R RE V IE W: Melissa P oehlman, C ommunity D evelopment D irector / HRA E xecutive D irector 5/18/2023 O THE R D E PA RTM E NT RE V IE W: C ITY MA NA G E R RE V IE W: K atie Rodriguez, C ity Manager 5/18/2023 I T E M F O R C O UNC IL C O NS ID E RAT I O N: Consider a request to modify (2024) and then terminate (2025) Best Buy's Minimum Assessment Agreement. E X E C UT IV E S UM M ARY: The I nterchange W est / Ly ndale Gateway Tax I ncrement Financ ing (TI F) Distric t was established in 1999. This D istrict is a “sc attered site” redevelopment D istrict with multiple projects and outstanding obligations, including the Best Buy corporate headquarters, Mainstreet Village, and the Casteel Plac e Townhomes. Best Buy has approac hed the City and Housing and Redevelopment Authority (HRA) to request a modific ation to their individual contract which would remove the Minimum Assessment A greement that prevents the tax value of their property from falling below $118.5 million during the life of the TI F Distric t (ending Dec ember 31, 2025). The Minimum Assessment Agreement (MA A) is in place for two purposes. As part of the Contract for Private Development with Best Buy, the City agreed to issue General Obligation Bonds (Bonds) to help fund the significant infrastructure improvements nec essary to handle the traffic of the Best B uy Corporate Campus. The princ ipal and interest payments on these Bonds are made with tax increment generated by the project. This obligation remains outstanding, with the final pay ment due on February 1, 2024. Sufficient inc rement will be available to make the remaining two pay ments. The MA A is also in place to provide a mechanism for pooling. Pooling allows the HRA to spend a portion of tax increment outside the geographical boundaries of the TI F District for TI F-eligible activities such as affordable housing. A modification or termination of the MA A will not impac t remaining B ond payments, but it will likely impac t the amount of money c ontributed to the Housing and Redevelopment Fund. I n November of 2022, Best Buy submitted a request for termination of the MA A (attached). After significant work by HRA staff, the HRA A ttorney, and HRA financial c onsultants from Ehlers, a work session was held with the Counc il and HRA in Marc h to disc uss the potential impac ts to the HRA and Best Buy. At the time, Best Buy proposed a c ontrac t amendment that would ensure no loss of revenue to the HRA for pooling for affordable housing, which is estimated to be between $210,000 and $385,000 over the remaining two y ears of the District. Best B uy also requested that the HRA provide an acc ounting of pay ments to Best Buy and pooling over the life of the TI F Distric t. This analy sis was ongoing at the time of the work session; however, policymakers made it clear that a global solution to all outstanding issues should be found prior to any request to modify or terminate the MA A. This financial review has now been c ompleted and has revealed that due to the complexities of this D istrict and two succ essful tax court petitions by Best Buy to reduc e their property tax value, the HRA has overpaid Best Buy by approximately $851,000. HRA and City staff have indicated support for a solution that 1) ensures that the Housing and Redevelopment Fund is fully funded at the level anticipated by the MA A and 2) that Best Buy ac knowledge that the HRA intends to rec oup the identified overpay ment by withholding additional available increment rec eived over the last two years of the TI F District. Best Buy has submitted the attached letter and legal analysis (dated May 12, 2023) disputing the HRA's assertion that they have been overpaid. To resolve the dispute and move forward with their request for modification and termination of the MA A, they have proposed that the C ity and HRA approve their request in exchange for 20% of the ac tual tax benefit to B est Buy in 2024 and 2025 (staff recommends that the request to subtrac t Best Buy ’s legal and appraisal fees to pursue a tax value reduc tion be rejected out of hand; therefore the following analysis does not include a reduction for these costs). I f succ essful in their request for a reduced tax value in 2024 and 2025, the potential pay ment to the HRA under the proposal is estimated to be between $423,000 and $764,000 (c umulative). HRA staff and financial consultants believe that this would leave the HRA between $472,000 and $638,000 short of full rec oupment. I f Best Buy is unable to get a reduc tion for pay 2024 taxes, the amount paid to the HRA would be halved. The HRA has advised Best Buy and believes that the approval of the City, Sc hool Distric t and C ounty are required to modify and/or terminate the MA A and the deadline for these approvals is J une 30, 2023. The HRA believes that Best Buy is unlikely to be suc cessful in their request for the 2024 tax year and that the second scenario is therefore more likely. Finally, there is a possibility (though seemingly unlikely) that no reduction in value would be granted, in which case, the HRA would c ontinue to receive the antic ipated funds for the Housing and Redevelopment Fund but would not recoup any overpayment. HRA and City staff, along with the HRA Attorney and financial experts have reviewed the proposal and legal analysis provided. W e strongly disagree with the analysis and a legal response by the HRA A ttorney is included as an attac hment to this report. Based on our analy sis, we recommend denial of the request. W hile Best Buy is an important and valued employer in our c ommunity, the c ontrac tual agreement in plac e should be honored unless a “do no harm” solution can be found. RE C O M M E ND E D AC T I O N: By Motion: Deny a request to modify and/or terminate the Minimum Assessment Agreement for the Best Buy Corporate Campus at 7601 Penn Avenue South. B AS IS O F RE C O M M E ND AT I O N: A.H IS TOR IC AL C ON T E X T The MA A requires that during the life of the TI F Distric t the value upon which Best Buy's taxes are calculated does not fall below $118.5 million. The value of the Best Buy parcel exc eeded the MA A amount until 2014. Since that time, the value has remained at the minimum assessment. B.P OL IC IE S (resolutions, ordinances, regulations, statutes, etc): See attached legal analysis by HRA Attorney J ulie Eddington. C.C R IT IC AL T IMIN G IS S U E S: Best Buy has indicated to staff that they would like the MMA modified/terminated as soon as possible. I n order to reduce pay 2024 taxes, Best Buy must obtain written approval of a modification or termination of the MA A from the City, County, and School Board and record the document modifying the MMA on or prior to J une 30, 2023. D.F IN AN C IAL IMPAC T: The HRA has concluded that Best Buy has been overpaid by approximately $851,000. Modification and/or termination of the Minimum Assessment Agreement will reduce money available for other housing and redevelopment work in the c ommunity by an estimated $210,000 to $385,000. I n exchange for the City and HRA's support, Best Buy has proposed to share the benefits of a reduced tax value with the HRA should their request to the C ounty be succ essful. The HRA estimates that this amount could be in the range of $212,000 to $764,000. HRA staff and consultants believe that the lower end of the range is more likely given timing constraints for a pay 2024 reduction. I n all of the proposed scenarios, the HRA fails to recoup the total increment and pooling that it should receive under the terms of the current contract. E.L E GAL C ON S ID E R AT ION: The HRA has the legal authority and duty to recoup overpayments and will begin to do so with the August 1, 2023 TI F Payment. HRA Attorney J ulie Eddington will be present to address legal questions. An amendment to the Contract for Private Development between the HRA and Best Buy is also required. Consideration by the HRA has been scheduled for J une 5, 2023. ALTE R N AT IV E R E C O MME N D ATIO N(S): Approve the request for modification/termination of the Minimum Assessment Agreement with Best Buy for property at 7601 Penn Avenue South. P R IN C IPAL PAR TIE S E X P E C TE D AT ME E TIN G: J ulie Eddington, HRA Attorney, Kennedy & Graven J eanne Vogt, Senior Fiscal Consultant, Ehlers Tracy Smith, Senior Director and Tax Counsel, Best Buy Dan Lopez, Director of Government Affairs, Best Buy W illiam Griffith & Timothy Rye, Attorneys for Best Buy, Larkin Hoffman AT TAC H ME N T S: D escription Type B est B uy - Min. A ssessment Termination Request E xhibit 051223 B est B uy L tr to Richfield HRA E xhibit 051223 B est B uy L egal A nalysis of HRA P osition E xhibit HRA L egal Response to 051223 B est B uy L tr E xhibit May 12, 2022 Sent via email to: MPoehlman@richfieldmn.gov Melissa Poehlman, Executive Director Richfield Housing and Redevelopment Authority 6700 Portland Avenue Richfield, MN 55423 Re: Interchange West TIF District – Settlement of Issues as the District Approaches Decertification Dear Ms. Poehlman: This letter follows up our recent discussion in which Best Buy, the City of Richfield (“City”) and the Richfield Housing and Redevelopment Authority (“HRA”) are seeking a global resolution of all matters and issues facing the parties regarding administration of the Interchange West TIF District (the “TIF District” or the “District”). To do so, the parties must be respectful of their mutual good work, long term relationship, and fruitful negotiations over the past two decades that have led to the unqualified success of the largest office building in Richfield, along with significant funding of the housing programs of the HRA. As discussed, the parties recognize and are proud that the increased tax increment generated from Best Buy’s corporate headquarters has supported numerous affordable housing and rehabilitation initiatives in Richfield, including the new home program, the rehabilitation loan program, Richfield Rediscovered, transformation home loans, and the affordable housing trust fund. Best Buy itself has funded over $11 million to the City/HRA to be used as they saw fit to support the community and these affordable housing initiatives. Best Buy also is proud of its significant presence in the Richfield community, which includes repeated contributions to over a dozen local organizations, including Richfield Public Schools, and its recent and very exciting opening of a Best Buy Teen Tech Center at Richfield Middle School. In this letter, Best Buy’s intent is to provide the parties with a win-win resolution; this intent has remained constant throughout our discussions this past year (and previously). Today we are again making a “win-win” proposal to address all issues at hand, while also making it clear that Best Buy has a strong legal basis for its claims. In furtherance of our desire to reach a global resolution with full transparency and on a reasonable and fair basis, I have asked our outside counsel to provide relevant background, our understanding of the HRA’s position with respect to outstanding matters, and Best Buy’s response to this position. See attached correspondence and exhibits to Larkin Hoffman letter dated May 12, 2023 (“Larkin Hoffman Letter”). Best Buy Tax – C6-938 Mobile: 612-817-8573 tracy.smith4@bestbuy.com Melissa Poehlman May 12, 2023 Page 2 • Best Buy’s New Proposal for Resolution In addition to resolving administrative and legal claims, Best Buy puts forth a global resolution that would include: (1) Richfield’s express support and cooperation with Best Buy’s request to modify and then terminate the Minimum Assessment Agreement, which agreement has fully served its intended purpose; (2) a resolution of Richfield’s recent claim that it has overpaid Best Buy, which according to Richfield’s own analysis largely arose from payments made about a decade ago; and (3) a resolution of the HRA’s pooling of tax increment generated by the District, which Best Buy believed had previously been resolved as a result of our discussions that culminated in execution of the Fifth Amendment in 2014. To be clear, this proposal is made for global settlement purposes only. Aside from the legal and financial issues outlined in the Larkin Hoffman Letter, Best Buy and the HRA have worked diligently to align on matters associated with the Minimum Assessment Agreement. The parties understand the Minimum Assessment Agreement is no longer beneficial to either party (with the full payment of bonds), particularly given Best Buy’s offer to “make the HRA whole” for the loss of any funds associated with the modification/termination of the Minimum Assessment Agreement (assuming Best Buy is able to reduce the value of the property for property tax purposes to a reasonable fair market value). As discussed at the meeting with the HRA on March 6th, the parties were encouraged to negotiate a global resolution of all matters, including those associated with the modification and termination of the Minimum Assessment Agreement and pooling limitations. In various discussions following the City Council meeting, and despite the strength of Best Buy’s legal position, Best Buy has offered to be flexible with respect to the substantial amount of funds to which it believes Best Buy is entitled under Minnesota law and the Contract for Private Development (about $1.5 million as of the end of the District). The HRA, however, continues to pursue its newfound position desiring to collect a legally questionable “overpayment” to Best Buy of approximately $850,000 – most of which arises from payments over a decade ago. Setting aside these past discussions, Best Buy is offering a new resolution for the mutual benefit of the parties. In very simple terms, (1) the HRA/City agrees to, and expressly supports, the modification and termination of the Minimum Assessment Agreement on or before June 27, 2023, and (2) any property tax benefit flowing to Best Buy from the reduction in assessed value below $118,500,000 in tax years pay-2024 and pay-2025 (net of attorney’s fees and appraisal costs incurred in pursuing this change to the Minimum Assessment Agreement and the property tax reduction) will be shared by the parties – with 20 percent of such net benefit to be received by the HRA. The idea behind this proposal is that the parties work in collaboration to their mutual benefit, with the HRA ultimately receiving funds that may well exceed the “make whole” payment originally discussed with the HRA. Of course, any shared benefit is dependent on a lower assessed value reached for the pay-2024 and pay-2025 tax years. Please keep in mind that the potential benefit to the HRA and to Best Buy as a result of a reduced assessed value for property tax purposes is reduced dramatically if the Minimum Assessment Agreement is not modified and consented to by the County Assessor before June 30, 2023. Melissa Poehlman May 12, 2023 Page 3 Conclusion Best Buy, like the HRA, strongly believes a global resolution is in the best interests of the parties; it manages risk, resolves longstanding concerns with the administration of the District, shares potential benefits, and avoids protracted dispute resolution. Best Buy does not believe the HRA’s current position is supported by law. Best Buy has acted in good faith throughout our long relationship with the HRA and the City and does so again with this proposal for a global resolution that offers a “win-win” for all parties. We look forward to hearing from you within the next week or so to discuss our next steps. Sincerely, Tracy M. Smith Vice President, Tax Counsel cc via email: Julie Eddington William Griffith Timothy Rye Mike Hiltner Dan Lopez 4857-3332-4131, v. 5 May 12, 2023 Ms. Tracy Smith Best Buy 7601 Penn Avenue South Richfield, MN 55423-3645 Via Email (tracy.smith4@bestbuy.com) Re: Legal Analysis of Issues Presented for Wind Down of the Best Buy-Richfield HRA TIF District Dear Tracy: Since 2014, Best Buy Co., Inc. (“Best Buy”), has been working to understand the administration by the City of Richfield (the “City”) and the Richfield Housing and Redevelopment Authority (the “HRA”), of the Interchange West TIF District (the “District”) that includes the Best Buy corporate headquarters at 7601 Penn Ave. S. (the “Campus”). In 2014, it was discovered that the HRA was collecting tax increment at levels well in excess of statutory limits, which would result in a substantial overcollection by the HRA through the end of the District if action were not taken. As a result, Best Buy and the HRA agreed to amend the Contract for Private Development (the “Contract”) to bring the HRA collections in line with statutory limits and moderate the degree of overcollections by the HRA so that it would be easier to fall under the statutory limit before decertification. That agreement was memorialized in the Fifth Amendment to the Contract, dated July 14, 2014 (the “Fifth Amendment”). Throughout that process, and even after the Fifth Amendment, calculation errors and issues with the administration of the District were identified. We had correspondence, meetings and information exchanges with you and the HRA from 2015 through 2018, but substantial issues remained. We were frequently reminded, by the HRA and its counsel, that the HRA only had to comply with pooling requirements by the end of the District and that any miscalculations and overcollections would be corrected in the final years of the District. In the fall of 2022, we reached out to the HRA to open that discussion and work toward an orderly wind down of the District. As part of that conversation, Best Buy requested the termination or modification of the Minimum Assessment Agreement (“MAA”) so that the Campus could be fairly valued at market rates allowing Best Buy and other tenants to pay taxes Ms. Tracy Smith May 12, 2023 Page 2 in line with other similar quality office buildings in the Twin Cities, particularly given the unprecedented downsizing taking place in the office market.1 Through many meetings and exchanges, progress was made. We now have a common understanding of how the District was administered by the HRA, and the HRA seems to agree that the Campus being valued at market levels would be a positive for Best Buy, potential tenants, and the City. Unfortunately, other legal and administrative issues remain unresolved. The HRA has presented a position that disregards Best Buy’s rights under the Contract and violates Minnesota statutory law. This letter outlines our legal analysis of the HRA’s position. We have outlined below the HRA’s position as we understand it and our responsive analysis. 1. HRA Position a. HRA Asserts Overpayment to Best Buy The HRA currently alleges it overpaid Best Buy $851,420.75 to date. This is a newfound assertion made by the HRA for the first time during the parties’ recent discussions in 2022 and 2023. The HRA’s recent analysis of the TIF payments over the life of the District shows that almost every single semi-annual payment to Best Buy over the past two decades has been inaccurate. Attached hereto as Ex. 1 (column entitled “Over/(Under) Payment”). Ex. 1 is the HRA’s own current analysis of the tax increment calculations associated with the District. Despite these numerous inaccuracies over the years with respect to the District, the HRA now purports it overpaid Best Buy between 2010 and 2014, almost more than a decade ago. b. HRA Argues that Minn. Stat. § 469.1763, Subd. 2, 25% Pooling Limit, Does Not Apply The HRA asserts it follows Minn. Stat. § 469.1763, Subd. 2, the statutory 25% pooling limit, despite HRA’s own analysis and documentation showing that it has collected 29% of total tax increment. See Ex. 1. As shown at the bottom of Column M in Exhibit 1, the HRA admits it currently has collected amounts in excess of 29%, which is well above the 25% statutory limit as discussed below. Moreover, the HRA asserts it has no plans to reduce its collections below 25% 1 Recent articles regarding office downsizing: https://www.axios.com/2023/05/09/commercial-real-estate-us-fed https://protect-us.mimecast.com/s/PUKSC5yALjHMpvl3tzpLRG?domain=startribune.com/ https://www.startribune.com/marshalls-in-downtown-minneapolis-is-closing/600234487/ https://www.bizjournals.com/twincities/news/2022/12/15/what-to-do-with-big-office-blocks-in-twin- cities.html?utm_source=st&utm_medium=en&utm_campaign=me&utm_content=MN&ana=e_MN_me&j=300012 85&senddate=2022-12-16 https://www.startribune.com/ameriprise-will-cut-its-downtown-mpls-office-space-moving-to-one-building-from- two/600234538/ https://www.axios.com/2023/05/09/commercial-real-estate-us-fed https://www.startribune.com/unitedhealth-group-headquarters-building-in-minnetonka-is-for-sale/600261083/ https://www.axios.com/local/twin-cities/2023/04/17/wells-fargo-office-consolidation-twin-cities-home-mortage- campus https://www.twincities.com/2023/03/30/blue-cross-blue-shield-downsizing-eagan-real-estate-footprint/ https://www.startribune.com/thomson-reuters-searches-for-new-offices-in-the-twin-cities/600243289/ Ms. Tracy Smith May 12, 2023 Page 3 per payment, but nonetheless the HRA claims it will comply with pooling requirements at the end of the District. HRA Wind Down Proposal to Best Buy In recent discussions with Best Buy, the HRA said it would withhold $851,420.75 from the remaining PayGo payments to Best Buy while continuing to collect 25% of the tax increment from Best Buy’s portion of the District – the same rate it has been collecting since the commencement of the Fifth Amendment. See Ex. 2, which is a copy of the Fifth Amendment. Either or both actions by the HRA, the withholding of the $851,420.75 and the continuing to collect 25% of the tax increment, are contrary to the parties’ agreement and understanding as of the execution of the Fifth Amendment. Attached hereto is Ex. 3, the HRA’s own forecast and analysis as of February 2014, prepared by Ehlers, the HRA’s finance expert, to calculate the the impact of the Fifth Amendment and the parties’ negotiations at that time to address the 25% statutory limit problem. Ex. 3 provides, “…From 2014 forward, we have projected increment and payments using the following assumptions…Total pooling of 25% for the HRA to allocate between the Administration and Housing and Redevelopment Fund…We also want to note that we previously estimated that the HRA would not take administration the last 1.5 years; however, based on final review that period will be 3.0 years.” The chart in Ex. 3 further confirms, “City cannot collect Admin/Pooling [for last six semi-annual payments] to stay within 25% limit.” Clearly, the HRA’s continued collection of 25% of the tax increment is contrary to the parties’ understanding at the time of the Fifth Amendment, as confirmed by Ex. 3 specifically showing HRA collections of zero during the last three years of the District to allow the overall collection percentage to meet the 25% statutory threshold. 2. Legal Problems with the HRA Position a. Asserted Overpayment Is Beyond the Statute of Limitations and Unenforceable The HRA Act, defined as Minn. Stat. §§ 469.001-469.047 by the Contract under Article 1, provides that contract and tort law apply to the Contract for Private Development between the parties. The HRA Act provides that “an authority shall be liable in contract or tort in the same manner as a private corporation.” Minn. Stat. § 469.014 (emphasis added). As such, any action for the enforcement of a contract or other obligation (such as an assertion of an overpayment) must be commenced within six years from the commission of the act. Minn. Stat. § 541.05, subd. 1(1). Since the majority of the alleged overpayments occurred between 2010 and 2014, stated simply, the statute of limitations has expired, and any assertion of overpayment is time barred. Moreover, if the HRA attempted to collect the claimed overpayment now, it also would be a breach of the Contract pursuant to the 5th Amendment and all remedies for breach would be available to Best Buy. Accordingly, the HRA’s claim for payment of $851,420.75 is legally infirm and unenforceable. Keep in mind that one rationale for Minnesota’s six-year contract dispute statute of limitations is to ensure that any such dispute is decided on good, valid, and available information and evidence. When disputes, such as contract disputes, are a decade old, the witnesses and documents involved become dated and often inaccurate. In fact, it is clear that many of the Ms. Tracy Smith May 12, 2023 Page 4 discussions and communications between the parties in the 2010 through 2014 period are no longer available and have not been thoroughly researched. Today’s assertion by the HRA of an overpayment is based solely on an analysis of the numbers as of today, and not the specific facts that may have existed at the time. Even if the HRA somehow overlooks both the clear statute of limitations bar and the breach of contract problem, the HRA still can only “find” an “overpayment” if the HRA collects and spends tax increment in excess of the statutory pooling limit, which it cannot under Minnesota law as we explain in the next section. b. The HRA is in Violation of the Statutory 25% Pooling Limit Minn. Stat. § 469.1763, Subd. 2, limits the amount of money eligible for spending by the HRA for activities outside the District but within a defined geographic area to 25%. More importantly, the statute mandates that at least 75% of the total revenue derived from the tax increment “must be expended on activities in the district”, which in this case are the Bonds and the PayGo Note. Minn. Stat. 469.1763, Subd. 3(a)(2) and (3). Under the HRA’s own analysis, HRA collections of 29% of the total tax increment generated from taxes paid by Best Buy confirms that its collections violate the 25% statutory limit. See, Ex. 1. Moreover, in May of 2022, pursuant to Resolution No 11979, the HRA unilaterally amended the TIF Plan attempting to increase the pooling limit from 25% to 35%, so long as 10% was for affordable housing. However, the statute relied on by the City, Minn. Stat. § 469.1763, Subd. 2(d) does not increase the 25% pooling limit, it merely alters the geographic area in which the funds can be spent. Subdivision 2(a) provides: Not more than 25 percent of the total revenue derived from tax increments paid by properties within the district may be expended, through a develop fund or otherwise, on activities outside of the district but within the defined geographic area of the project. Subdivision 2(d) provides: The authority may elect, in the tax increment financing plan for the district, to increase by up to ten percentage points the permitted amount of expenditures for activities located outside the geographic area of the district under paragraph (a). There are two components to the 25% pooling limit: 1) expenditures outside of the District; and 2) within a specified geographic area. Subdivision 2(d) does not change the 25% limit or the mandate that at least 75% of the tax increment must be spent on in district obligations. It only changes the geographic area in which the HRA can spend its maximum 25%. As a result, the election by the HRA pursuant to Minn. Stat. § 469.1763, subd. 2(d) does increase the 25% pooling limit to 35%, it only changes where the 25% can be spent. Interestingly, this election would have been relevant at the beginning of the District when the Richfield Redevelopment Project Area (“Project Area”) did not incorporate the entire city, but on December 13, 2005 the Project Area was increased to incorporate the entire city. After December 13, 2005 the HRA could spend its 25% anywhere in the city. As a result, the May 2022 Amendment to the TIF Plan has no meaning and the 25% pooling limit remains. Ms. Tracy Smith May 12, 2023 Page 5 Moreover, even if the City were successful in increasing the pooling limit to 35%, it would violate the terms of the Fifth Amendment, and of the Contract, which also set the limit at 25%. Finally, the HRA cannot make any change that would alter the terms or application of the agreement without written consent of Best Buy – see Section 10.13 of the Contract. Accordingly, any unilateral change to the terms or operations of the contract is a material breach of the Contract. c. Other issues (1) Best Buy appreciates the work that the HRA, the City, and Best Buy have invested to understand the TIF calculations performed by Ehlers, the HRA’s financial advisor. However, Best Buy only agrees with the current Ehlers TIF calculations for the District for purposes of settlement discussions; in any other venue, the HRA will need to prove all of its calculations and the particular facts and errors applicable to each payment to Best Buy pursuant to the PayGo Note; (2) Consistent with the above explanation, Minn. Stat. § 469.1763, Subd. 2(d) does not increase the spending limit outside the district to 35%; as such, the HRA has overcollected approximately $575,000 from the non-Best Buy portion of the District, which will need to go to in-district obligations, including the PayGo Note. 3. An Orderly Wind Down of the TIF District Requires Payment to Best Buy of $605,449 to Comply with Minnesota Law and the Parties’ Contract for Private Development. As of this moment, according to the HRA’s own financial advisor, the HRA has collected $10,304,940 of the $35,392,281 in total tax increment; or 29.12% of the total tax increment. Twenty-five percent (25%) of the $35,392,281 in total tax increment equals $8,848,070, which means the HRA currently has overcollected $1,456,870 from Best Buy portion of the District. Due to accounting errors, some of the nearly $1.45 million must be transferred to the Best Buy portion of the District, including toward paydown of the PayGo Note. To comply with Minn. Stat. 469.1763, Subd. 2(a), the HRA is required to pay Best Buy $605,449, consistent with the following schedule. Total Tax Increment HRA @ 25% Bonds PayGo Compliant $35,392,281 $8,848,070 $11,826,921 $14,717,290 Actual $35,392,281 $10,304,940 $11,826,921 $14,111,841 Correction $0 ($1,456,870) $0 $605,4492 2 This amount is less than the HRAs overcollection because it offsets any purported overpayments on the PayGo. Ms. Tracy Smith May 12, 2023 Page 6 Best Buy’s request to confirm the orderly wind down of the TIF District, consistent with the parties’ discussions in 2014 when the Fifth Amendment was executed, has already led to correction of administrative errors and, more importantly, is a reasonable step to resolve the HRA’s continued overcollection to avoid refunds that would be required by the HRA to meet the 25% pooling limit by the end of the District. The HRA’s newfound assertion of an overpayment to Best Buy reaches back more than a decade ago. This assertion is not only problematic because it is inconsistent with the HRA’s projections in 2014 that it would be able to meet the 25% limit by the end of the District by ending pooling early, but is barred by the statute of limitations and is a violation of Minn. Stat. § 469.1763, subd. 2(a) limiting HRA collections to 25%. This is what the parties intended when negotiating the Fifth Amendment. See Exhibit 3. 4. Conclusion As of this moment, the HRA has collected $10,304,940 of the $35,392,281 in total tax increment; or 29.12% of the total tax increment (25% of $35,392,281 is $8,848,070, which means the HRA has overcollected by $1,456,870). To comply with Minn. Stat. 469.1763, subd. 2(a) as of now the tax increment should be corrected as shown in the preceding section As you have noted on several occasions in our discussions with HRA staff, legal counsel, and consultants, Best Buy initiated discussions in 2014 and again in 2022 to resolve the substantial financial and legal issues set forth in this letter, among others on a cooperative basis. Through Best Buy’s insistence and diligence in this regard, significant accounting errors have been corrected and both parties have a better understanding of collections over the life of the District. Still, the HRA cannot unilaterally alter the applicable TIF Plan, TIF collections, and pooling limits in ways that undermine the Contract, PayGo Note or avoid its obligations under Minnesota law. Sincerely, Timothy A, Rye, for Larkin Hoffman William C. Griffith, for Larkin Hoffman 4884-9723-6067, v. 7 City of RichfieldLyndale Gateway / Interchange West TIF DistrictHistory of PAYGO Payments to Best BuyThrough and Including August 1, 2022 PaymentTies to G/L 10% 15%Ties to G/LAB C DE FGHI = D ‐ E ‐ F ‐ G ‐ HJ K = J ‐ IL MNDeveloper Agreement Requirements Increment Used in PAYGO Calc Admin CostsTo HRA Trust Fund (Pooling)TIF Shortfall Payments / AdjustmentsDebt Service Payments Actual PaymentOver / (Under) PaymentComments% of Admin & Pooling to TIF Received8/1/2002 2nd Amendment‐$                         ‐$                           ‐$                           ‐$                           ‐$                           ‐$                           ‐$                           ‐$                           ‐$                       ‐$                   2/1/2003 2nd Amendment‐                           ‐                             ‐                             ‐                             ‐                             ‐                             ‐                             ‐                             ‐                         ‐                      8/1/2003 3rd Amendment Fixed Exhibits‐                           ‐                             ‐                             ‐                             ‐                             ‐                             ‐                             ‐                             ‐                         ‐                      2/1/2004 3rd Amendment Fixed Exhibits‐                           ‐                             ‐                             ‐                             ‐                             ‐                             ‐                             ‐                             ‐                         ‐                      8/1/2004 3rd Amendment Fixed Exhibits 868,271.00            870,480.02              (32,012.00)               (224,084.00)              ‐                            (195,321.88)             419,062.14              416,853.00              (2,209.14)              Admin is Exhibit C 29% (2,209.14)          2/1/2005 3rd Amendment Fixed Exhibits 868,271.00            870,480.01              (32,686.00)               (228,801.00)              ‐                            (455,321.88)             153,671.13              156,853.00              3,181.87               Admin is Exhibit C 30% 972.73               8/1/2005 3rd Amendment Fixed Exhibits 923,239.00            906,162.44              (32,686.00)               (228,801.00)              ‐                            (190,121.88)             454,553.56              471,631.00              17,077.44             Admin is Exhibit C 29% 18,050.17         2/1/2006 3rd Amendment Fixed Exhibits 923,239.00            945,408.92              (33,371.00)               (233,598.00)              ‐                            (460,121.88)             218,318.04              201,631.00              (16,687.04)           Admin is Exhibit C 28% 1,363.13            8/1/2006 3rd Amendment Fixed Exhibits 856,073.00            858,672.26              (33,371.00)               (233,598.00)              ‐                            (184,721.88)             406,981.38              404,382.00              (2,599.38)              Admin is Exhibit C 31% (1,236.25)          2/1/2007 3rd Amendment Fixed Exhibits 856,073.00            858,672.25              (34,068.00)               (238,479.00)              ‐                            (469,721.88)             116,403.37              119,382.00              2,978.63               Admin is Exhibit C 32% 1,742.38            8/1/2007 3rd Amendment Fixed Exhibits 895,588.00            898,460.12              (34,068.00)               (238,479.00)              ‐                            (179,021.88)             446,891.24              444,020.00              (2,871.24)              Admin is Exhibit C 30% (1,128.86)          2/1/2008 3rd Amendment Fixed Exhibits 895,588.00            898,460.13              (34,777.00)               (243,443.00)              ‐                            (474,021.88)             146,218.25              149,020.00              2,801.75               Admin is Exhibit C 31% 1,672.89            8/1/2008 3rd Amendment Fixed Exhibits 994,093.51            990,015.10              (34,777.00)               (243,443.00)              ‐                            (173,121.88)             538,673.22               ‐                            (538,673.22)         Admin is Exhibit C 28% (537,000.33)      2/1/2009 3rd Amendment Fixed Exhibits 994,093.51            990,015.10              (35,499.00)               (248,493.00)              ‐                            (483,121.88)             222,901.22              767,330.01              544,428.79          Admin is Exhibit C 29% 7,428.46            8/1/2009 3rd Amendment Fixed Exhibits 1,186,644.76        1,029,251.37          (35,499.00)               (248,493.00)              ‐                            (166,766.88)             578,492.49               ‐                            (578,492.49)         Admin is Exhibit C 28% (571,064.03)      2/1/2010 3rd Amendment Fixed Exhibits 1,180,652.87        1,026,100.11          (36,233.00)               (253,631.00)              ‐                            (486,766.88)             249,469.23              1,137,941.96          888,472.73          PAYGO Pd on full district, not just Best Buy 28%317,408.70       8/1/2010 3rd Amendment Fixed Exhibits 897,090.80            893,861.27              (36,233.00)               (253,631.00)              ‐                            (160,046.88)             443,950.39              453,912.18              9,961.79               Admin is Exhibit C 32% 327,370.49       2/1/2011 4th Amendment Fixed Exhibits 993,584.48            893,861.27              (36,979.00)               (263,611.08)              ‐                            (495,046.88)             98,224.31                190,345.99              92,121.68             Debt refinanced 34% 419,492.17       8/1/2011 4th Amendment Fixed Exhibits 678,299.10            510,892.14              (36,979.00)               (258,857.00)              ‐                            (95,458.45)               119,597.69              287,004.69              167,407.00          PAYGO Pd on full district, not just Best Buy 58% 586,899.17       2/1/2012 4th Amendment Fixed Exhibits 633,289.20            475,121.50              (37,739.00)               (320,583.63)              ‐                            (451,433.75)             (334,634.88)              ‐                            334,634.88          $170,391.14 withheld; paid on full district75% 921,534.05       8/1/2012 4th Amendment Fixed Exhibits 948,293.74            949,230.22              (37,739.00)               (264,173.00)             (28,897.04)               (300,508.75)             346,809.47              230,208.31              (116,601.16)         Admin is Exhibit C 32% 804,932.89       2/1/2013 4th Amendment Fixed Exhibits 971,755.62            949,230.20              (38,511.00)               (328,632.26)             (28,896.82)               (300,508.75)             281,578.19              310,081.06              28,502.87             G/L doesn't have Clean‐up settlement of $1,777.09 39% 833,435.76       8/1/2013 4th Amendment Fixed Exhibits 1,037,457.24        1,037,368.76          (38,511.00)               (269,581.00)             (28,905.89)               (301,358.75)             427,918.01              309,121.34              (118,796.67)         Admin changed from Exhibit B to Exhibit C30% 714,639.09       2/1/2014 4th Amendment Fixed Exhibits 1,037,457.24        1,037,457.77          (39,297.00)               (330,783.26)             (28,899.22)               (301,358.75)             366,018.76              368,179.28              2,160.52               Admin changed from Exhibit B to Exhibit C36% 716,799.61       8/1/2014 4th Amendment Fixed Exhibits 907,565.45            997,757.58              (39,297.00)               (275,082.00)             (28,905.89)               (301,633.75)             381,744.83              506,220.81              124,475.98          Reduction for pooling not included in payment 32% 841,275.58       2/1/2015 5th Amendment 75% of TIF Received 907,565.45            997,757.57              (99,775.76)               (149,663.64)             (28,906.86)               (301,633.75)             446,684.42              350,133.48              (96,550.94)           PAYGO schedule had incorrect frozen rate 25% 744,724.64       8/1/2015 5th Amendment 75% of TIF Received 1,181,472.27        1,181,465.53          (118,146.55)             (177,219.83)              ‐                            (303,483.75)             582,615.40              582,620.45              5.05                       Value petitioned 25% 744,729.70       2/1/2016 5th Amendment 75% of TIF Received 1,181,472.27        1,181,465.53          (118,146.55)             (177,219.83)             (206,924.92)             (303,483.75)             375,690.48              375,695.54              5.06                       Value petitioned ‐ portion of payment withheld 25% 744,734.75       8/1/2016 5th Amendment 75% of TIF Received 1,529,741.27        1,378,151.63          (137,815.16)             (206,722.74)             (346,357.95)             (304,573.75)             382,682.03              382,682.02              (0.01)                     Value petitioned ‐ portion of payment withheld 25% 744,734.74       2/1/2017 5th Amendment 75% of TIF Received 1,377,593.76        1,378,151.61          (137,815.16)             (206,722.74)             (346,357.94)             (304,573.75)             382,682.02              382,682.02               ‐                         Value petitioned ‐ portion of payment withheld 25% 744,734.74       8/1/2017 5th Amendment 75% of TIF Received 1,300,674.61        1,300,681.97          (130,068.20)             (195,102.30)             (323,359.72)             (304,638.75)             347,513.00              347,507.49              (5.51)                     Value petitioned ‐ portion of payment withheld 25% 744,729.23       12/31/2017 5th Amendment 75% of TIF Received (179,851.69)          (179,851.01)             17,985.10                26,977.65                206,924.92               ‐                            72,036.66                109,778.73              37,742.07             2015 Adjustment ‐ Tax Court Petition 782,471.30       12/31/2017 5th Amendment 75% of TIF Received (586,554.23)          (585,104.29)             58,510.43                87,765.64                692,715.89               ‐                            253,887.67              292,273.34              38,385.67             2016 Adjustment ‐ Tax Court Petition 820,856.97       12/31/2017 5th Amendment 75% of TIF Received 754,306.25            745,418.54              (74,541.85)               (111,812.78)             323,359.72              (304,638.75)             577,784.88              578,901.16              1,116.28               Includes reduction for Pay 2017 tax court petition 25% 821,973.25       8/1/2018 5th Amendment 75% of TIF Received 979,426.56            975,900.99              (97,590.10)               (146,385.15)              ‐                            (304,258.75)             427,666.99              428,166.72              499.73                  Bond payment reduction for 2019 not 2018 25% 822,472.98       2/1/2019 5th Amendment 75% of TIF Received 979,426.56            975,900.99              (97,590.10)               (146,385.15)              ‐                            (304,258.75)             427,666.99              428,166.72              499.73                  Bond payment reduction for 2019 not 2018 25% 822,972.71       8/1/2019 5th Amendment 75% of TIF Received 1,011,713.23        987,514.72              (98,751.47)               (148,127.21)              ‐                            (306,898.75)             433,737.29              756,053.30              322,316.01          Payment not reduced for debt service 25% 1,145,288.72    2/1/2020 5th Amendment 75% of TIF Received 1,011,713.23        987,514.72              (98,751.47)               (148,127.21)              ‐                            (306,898.75)             433,737.29              142,255.80              (291,481.49)         Payment corrected 25% 853,807.23       8/1/2020 5th Amendment 75% of TIF Received 896,142.72            892,916.61              (89,291.66)               (133,937.49)              ‐                            (306,621.25)             363,066.21              363,066.21              (0.00)                     25% 853,807.23       2/1/2021 5th Amendment 75% of TIF Received 896,142.72            892,916.61              (89,291.66)               (133,937.49)              ‐                            (306,621.25)             363,066.21              363,066.21              (0.00)                     25% 853,807.22       8/1/2021 5th Amendment 75% of TIF Received 885,065.89            881,875.38              (88,187.54)               (132,281.31)              ‐                            (308,090.00)             353,316.53              353,319.74              3.21                       25% 853,810.43       2/1/2022 5th Amendment 75% of TIF Received 885,065.89            885,065.89              (88,506.59)               (132,759.88)              ‐                            (308,090.00)             355,709.42              353,319.74              (2,389.68)              G/L not reduced for OSA fee 25% 851,420.75       8/1/2022 5th Amendment 75% of TIF Received 816,730.29            813,790.06              (81,379.01)               (122,068.51)              ‐                            (311,325.00)             299,017.54              299,017.55              0.01                       25% 851,420.75       2/1/2023 5th Amendment 75% of TIF Received 816,730.29            813,790.06              (81,379.01)               (122,068.51)             (311,325.00)             299,017.54              299,017.54               ‐                         25% 851,420.75       8/1/2023 5th Amendment 75% of TIF Received 813,790.06              (81,379.01)               (122,068.51)             (313,500.00)             296,842.54              296,842.54               ‐                         25% 851,420.75       2/1/2024 5th Amendment 75% of TIF Received 813,790.06              (81,379.01)               (122,068.51)             (313,500.00)             296,842.54              296,842.54               ‐                         25% 851,420.75       8/1/2024 5th Amendment 75% of TIF Received 813,790.06              (81,379.01)               (122,068.51)              ‐                            610,342.54              610,342.54               ‐                         25% 851,420.75       2/1/2025 5th Amendment 75% of TIF Received 813,790.06              (81,379.01)               (122,068.51)              ‐                            610,342.54              610,342.54               ‐                         25% 851,420.75       8/1/2025 5th Amendment 75% of TIF Received 813,790.06              (81,379.01)               (122,068.51)              ‐                            610,342.54              610,342.54               ‐                         25% 851,420.75       2/1/2026 5th Amendment 75% of TIF Received 813,790.06              (81,379.01)               (122,068.51)              ‐                            610,342.54              610,342.54               ‐                         25% 851,420.75       GRAND TOTALS ‐ PAID THROUGH & INCLUDING 2/1/2023 36,957,602.78$   35,392,281.65$      (2,400,864.31)$      (7,904,075.71)$      (173,411.72)$          (11,826,921.02)$    13,260,420.61$      14,111,841.36$      851,420.75$        29%CALCULATION OF ADMIN AND POOLING CAPPED AT 25% 35,392,281.65$      (3,539,228.17)$      (5,308,842.25)$      (173,411.72)$          (11,826,921.02)$    14,717,290.21$      14,111,841.36$      (605,448.85)$      25%DIFFERENCE‐$                          (1,138,363.86)$      2,595,233.46$         ‐$                           ‐$                          1,456,869.60$         ‐$                          (1,456,869.60)$   Payment DateNet Payment to Best BuyCummulative Over / (Under) PaymentAmounts WithheldTax Increment Received ‐ Best Buy Portion OnlyDeveloper Agreement In Place** REVISED AS OF 03/13/2023 ‐ FINAL ** 3/13/2023Best Buy Historical PAYGO Analysis ‐ FINALEXHIBIT 1 FIFTH AMENDMENT TO CONTRACT FOR PRIVATE REDEVELOPMENT THIS AGREEMENT, made and entered into as of the ith day of Ju Ji x__, 2014, by and between the HOUSING AND REDEVELOPMENT AUTHORITY IN AND F 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 Redevelopment (the “Contract”), calling for the redevelopment of an area of land (the “Property”) lying within the City of Richfield; and WHEREAS, the parties hereto did on or about November 27, 2000, February 20, 2001, March 5, 2003, and December 21, 2010, enter into agreements entitled First Amendment to Contract for Private Redevelopment (the “First Amendment”), the Second Amendment to Contract for Private Redevelopment (the “Second Amendment”), the Third Amendment to Contract for Private Redevelopment (the “Third Amendment”), and the Fourth Amendment to Contract for Private Redevelopment (the “Fourth Amendment”), respectively, which amended the Contract; and WHEREAS, the HRA and the Redeveloper propose to amend the Contract further to revise the provisions related to the City’s administrative fees and housing fund fees; and 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 WHEREAS clauses set forth above are incorporated into this Fifth Amendment to Contract for Private Redevelopment and confirmed in all respects. II. The Contract is hereby amended in the following respects: 1. The definition of “Available Tax Increment” found in Section 1.1 of the Contract (as amended by the Fourth Amendment) is amended as follows: "Available Tax Increment" for the purpose of the Note means seventy-five percent (75%) of the Tax Increment attributable to the Minimum Improvements and Development Property that is paid to the HRA by the County in the six months preceding each Payment Date, after deducting 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. 2. Exhibits A, B, and C to the Fourth Amendment are deleted. 3. The HRA and the Redeveloper acknowledge and agree that pursuant to the terms of the Contract and the Note, all Available Tax Increment will be used to pay the principal of and interest on the Note. EXHIBIT 2 IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amendment to Contract for Private Redevelopment 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 STATE OF MINNESOTA ) ) SS. COUNTY OF HENNEPIN ) III. The foregoing instrument was acknowledged before me this 1{, day of DM 2014, by Noey BB. Suprle SuzammeM—Sandaht, the CRaifperson 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 HRA. NANCY K GIBBS : & NOTARY PUBLIC - MINNESOTA £ * My Comm. Expires Jan. 31. 2015 ¢ STATE OF MINNESOTA ) ) ss.: COUNTY OF HENNEPIN ) IV. The foregoing instrument was acknowledged before me this {iy day of fun Une. 2 2014, by Steven L. Devich, the Executive Director 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 be a ’ A MYRTLE A. LINK ; NOTARY PUBLIC-MINNESOTA My Commission Expires Jan. 31, 2017 BEST BUY CO., INC. By Its VP Global Propeties STATE OF MINNESOTA ) ) SS. COUNTY OF HENNEPIN ) foregoing instrument Yi S aghn wledged before me this | day of Jul , 2014, Dard Sisson, the C loba | of Best Buy Co., Inc., a Minnesota corporation, on ait of the Redeveloper. Forel es ans Notary Public sas KELLY JO EWERT R Y PUBLIC - MNNESOTA § NOTAR es on. 3. 015 8 S-2 441449v2 JAE RC125-210 From: Rebecca Kurtz [mailto:rkurtz@ehlers-inc.com] Sent: Monday, February 03, 2014 11:41 AM To: Griffith, William C. Cc: Steve Devich (SDevich@cityofrichfield.org); John Stark; Myrt Link (MLink@cityofrichfield.org); Julie Eddington (External Address) Subject: RE: Best Buy Co. Good morning, Bill, Attached is the cashflow for the estimated increment and payments for the Best Buy TIF Note, assuming the minimum market value of $118,500,000 and the needed adjustments for the HRA’s administration and pooling. The top half shows actual TIF payments from Hennepin County to date and the Pooling (Administration and Housing and Redevelopment Fund) payments. These payments are per the Contract. We received the final settlement information for 2013 from the County last week, so that has been updated for the 2013 information. From 2014 forward, we have projected increment and payments using the following assumptions:  Semi-annual TIF settlement based on the current market value and tax rate with no inflationary increases  Total Pooling of 25% for the HRA to allocate between the Administration and Housing and Redevelopment Fund Based on the updated information and final review, we are estimating that the remaining amount to be paid on the Pay-as-you-go Note is $18,712,117. We also want to note that we previously estimated that the HRA would not take administration the last 1.5 years; however, based on final review, that period will be 3.0 years. As you know, to the extent that market values and tax rates change, the TIF projections will change, and therefore the Paygo Note and Pooling projections will be adjusted. Please do not hesitate to contact me with any questions. Rebecca L. Kurtz, Financial Advisor/CIPFA 3060 Centre Pointe Drive Roseville, MN 55113 Phone: (651) 697-8516 EXHIBIT 3 2. From: Griffith, William C. [mailto:wgriffith@larkinhoffman.com] Sent: Friday, January 31, 2014 9:36 AM To: Rebecca Kurtz Subject: Best Buy Co. Good morning Rebecca, I am following up our last meeting with you and City staff to see if we can get copies of your modeling of the revised administrative fees and impact on the PAYG Note. Thanks so much, Bill William C. Griffith Shareholder p | 952-896-3290 m | 612-986-7711 www.larkinhoffman.com CONFIDENTIALITY NOTICE: INFORMATION IN THIS MESSAGE, INCLUDING ANY ATTACHMENTS, IS INTENDED ONLY FOR THE PERSONAL AND CONFIDENTIAL USE OF THE RECIPIENT(S) NAMED ABOVE. This message may be an Attorney-Client communication from the law firm of Larkin Hoffman Daly & Lindgren Ltd., and as such is privileged and confidential. If you are not an intended recipient of this message, or an agent responsible for delivering it to an intended recipient, you are hereby notified that you have received this message in error, and that any review, dissemination, distribution, or copying of this message is strictly prohibited. If you received this message in error, please notify the sender immediately, delete the message, and return any hard copy print-outs. No legal advice is being provided or implied via this communication unless you are (1) a client of Larkin Hoffman Daly & Lindgren Ltd., and (2) an intended recipient of this message. CIRCULAR 230 DISCLOSURE: Any advice contained in this email (including any attachments unless expressly stated otherwise) is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. City of Richfield Best Buy proj with proposed d to Contract (reducing and Pooling amount) Actual to date and projections beginning in 2014 based on minimum assessed market value of $118,500,000 and estimated Pay 2014 tax information, but City takes only 25% for Administration and Pooling beginning in 2014. | Proposed Per Semi-Annual ‘Admin. Housing Tax Exempt $170,408 Annual Tax Payment Gross Tax Total at at Pooling G.O.Bond Repayment of Available Available Year Date MVHC FIXED FIXED 25% Payment _2/1/12Shortfall _for Paygo for Paygo 1999 2000 1,440 1,440 2001 74,977 74377 2002 91,095 2ss 91,350 2003 384,269 4157 388,426 2004 1,740,960 5,890 1,746,850 116,278 448,169 2005 1,851,571 1,851,571 118,622 457,601 2006 1,717,344 1,717,344 121,004 467,196 2007 1,796,920 1,796,920 123,428 476,957 2008 1,980,030 1,980,030 125,894 486,886 2009 2,055,351 2,055,351 128,404 496,987 2010 1,787,723 1,787,723 130,956 507,261 2011 986,014 986,014 133,552 522,468 2012 1,898,460 1,898,460 136,192 584,757 2013 2,078,663 2,078,663 138,878 598,213 through 2013 18,444,817 10,302 18,455,119 1,273,208 5,046,496 2014 08/01/14 1,037,457 1,037,457 (259,364) (76,634) (28,897) 931,926 2014 02/01/15, 1,037,457 1,037,457 (259,364) (526,634) (28,907) 481,916 1,413,843 2015 08/01/15 1,037,457 1,037,487 (259,364) (73,484) 963,973 2015 02/01/16 1,037,457 eigenen 1,037,457 (259,364) (533,484) 503,973 1,467,947 2016 08/01/16 1,037,457 |change 1,037,457 (259,364) (69,874) 967,883 259,364 2016 02/01/17 1,037,457 |based on 1,037,457 (259,364) (539,574) 497,883 1,465,767 259,364 2017 08/01/17 1,037,457 [changes in 9 1,037,457 (259,364) (64,639) 972,818 259,364 2017 02/01/18 1,037,457 [market 1037,457 (259,364) (544,639) 492,818 1,465,637 259,364 2018 08/01/18 1,037,487 1,037,487 (259,364) (58,759) 978,698 259,364 2018 02/01/19 1,037,457 1,037,457 (259,364) (548,759) 488,698 1,467,397 259,364 2019 08/01/19 1,037,457 1,037,457 (259,364) (51,899) 985,558 259,364 2019 02/01/20 1,037,457 1,037,457 (259,364) (561,899) 475,558 1,461,117 259,364 2020 08/01/20 1,037,457 1,037,487 (259,364) (44,121) 993,336 259,364 2020 02/01/21 1,037,457 1,037,457 (259,364) (569,121) 468,336 1,461,672 259,364 2021 08/01/21 1,037,457 1,037,457 (259,364) (35,590) 1,001,867 259,364 2021 02/01/22 1,037,457 1,037,457 (259,364) (580,590) 456,867 1,458,734 259,364 2022 08/01/22 1,037,457 1,037,487 (259,364) (26,325) 1,011,132 259,364 2022 02/01/23 1,037,457 1,037,457 (259,364) (596,325) 441,132 1,452,264 259,364 2023 08/01/23 1,037,457 1,037,487 o (13,500) 1,023,957 2023 02/01/24 1,037,457 1,037,487 o (613,500) 423,957 1,447,914 2024 08/01/24 1,037,457 1,037,457 o o 1,037,487 2024 02/01/25 1,037,457 1,037,457 0 1,037,487 2,074,914 2025 08/01/28 1,037,457 1,037,487 o 1,037,487 2025 02/01/26 1,037,457 1,037,457 oO 1,037,457 2,074,914 Estimated Totals: 43,343,785 10,302 43,354,087 1,273,208 5,046,496 (4,668,557) (6,129,048) (57,804) 18,712,117 | 872 Notes: 1. Projections are estimates based on the Pay 2014 market value. To the extend that market values and tax rates change, the payment for the Paygo note and Pooling will change. 4886-331 1-3187, v. 1 3. 4886-3311-3187, v. 1 Error! Unknown document property name. May 18, 2023 Melissa, Thank you for sharing with me the letter drafted by Larkin Hoffman which Tracy Smith from Best Buy provided to you. There are a number of inaccuracies in the letter that I would like to clarify. I believe a lot of the inaccuracies arise due to the fact that the contract is what drives the TIF payments for the Best Buy development and the manner of providing TIF to the HRA and to Best Buy fluctuated over time. Contract for Private Development The contract and its five amendments provide the requirements of how TIF is used for the Best Buy portion of the TIF District. The contract itself had numerous changes in TIF payments over the years. The HRA is required to follow the requirements of the contract and its amendments. The manner of providing TIF to the HRA and Best Buy changed four times over the years. It is important to note that TIF contracts can be structured in many ways - an authority can provide any amount of TIF (from a very small amount like $5,000 to 100% of the TIF). An authority may determine to collect some TIF to pool for other projects. How TIF is used and what TIF amounts are provided to the developer are memorialized in the contract. HRA Expenditures of TIF An authority can collect TIF and keep the TIF as provided by the contract. However, an authority cannot expend more than 25% of the TIF. The HRA can use up to 10% of the TIF from the TIF District for administrative expenses and can pool tax increment with a maximum of pooled TIF in the amount of 25% of the TIF (including administrative expenses). TIF District The TIF District is complicated. The TIF District has three different developments and each development has or had its own contract and TIF Note. Each development has to comply with the requirements of their contracts. Each development receives TIF from the property upon which it has developed. For purposes of reporting to the Office of the State Auditor every year, the HRA must treat the TIF District as on e TIF District. The HRA is currently below the 25% expenditure limit for the TIF District. Change in TIF Payments Over Time (TIF Note was issued 7/31/2001)  The original contract (2000) had a set schedule of payments to be provided under the TIF Note to Best Buy and the HRA kept the remaining TIF.  The First Amendment (2000) changed the TIF payment formula to provide that the HRA receive 15% of the TIF (with a maximum amount of $634,366 per year), plus 5% of the TIF (with a maximum of $210,566).  The Third Amendment (2010) revised the definition of “Available Tax Increment” to include set schedule of payments to the HRA for pooling for affordable housing (to replace the housing that was lost) and a set schedule of payments for administrative expenses of the HRA. Error! Unknown document property name.  The Fourth Amendment (2010) revised the definition of “Available Tax Increment” to include set payments to the HRA for pooling for affordable housing (to replace the housing that was lost) and set payments for administrative expenses of the HRA.  The Fifth Amendment (2014) revised the definition of “Available Tax Increment” to the following formula (which remains in place today): “Available Tax Increment” for the purpose of the Note means seventy-five percent (75%) of the Tax Increment attributable to the Minimum Improvements and Development Property that is paid to the HRA by the County in the six months preceding each Payment Date, after deducting 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. The HRA and Best Buy approved the original contract and all the amendments that changed how TIF was distributed over time. Confusion Regarding Fifth Amendment The only material change made in the Fifth Amendment was to update the definition of “Available Tax Increment.” The definition was changed as follows: “Available Tax Increment” for the purpose of the Note means seventy-five percent (75%) of the Tax Increment attributable to the Minimum Improvements and Development Property that is paid to the HRA by the County in the six months preceding each Payment Date, after deducting 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. What the Fifth Amendment says is that moving forward (as of July 14, 2014), the developer will receive 75% of the TIF collected from the County in the last six months and the HRA will receive the remaining 25% of the Tax Increment collected from the County in the last six months. There was no other substantive agreement in the Fifth Amendment. “Unilateral” Amendment to TIF Plan The TIF Plan is a document approved by the City and the HRA and not approved or executed by the developer. The HRA modified the TIF Plan for this TIF district (per Minn. Stat. Section 469.1763, subd. 2d) in order to maximize the use of the T IF it had received under the First Amendment and used the unobligated TIF funds to (i) transfer money to a spending plan pursuant to Minn. Stat. Section 469.176, subd. 4n; and (ii) transfer money to the City’s affordable housing trust fund as provided in s pecial legislation the HRA received in 2021. These were funds that otherwise would have been returned to the County for redistribution and not funds that would have been paid to Best Buy. To be clear, these funds were provided to the HRA in the early 2000s and were lawfully provided to the HRA based on the contract at the time. Overpayments of TIF to Best Buy TIF law does not prevent the TIF authority from seeking to correct an overpayment. We confirmed this with Jason Nord at the Office of the State Auditor. In fact, the HRA has a duty to correct the error because otherwise, an overpayment is an unauthorized use of tax increment. Best Buy’s position that a statute of limitations is applicable does not make sense in this context. The HRA makes payments on the TIF Note every six months. A statute of limitations argument does not apply because the semi-annual TIF payments on the TIF Note are effectively just prepayments of the total amount that is due to the developer under the terms of the TIF Note and the contract. The statute of limitations period would not be triggered payment by payment but rather based on the total amount due at maturity. A statute of limitations period would only begin after final payment of the TIF Note. Error! Unknown document property name. Minimum Assessment Agreement We discussed the assessment agreement during our meetings with Best Buy several times. We repeatedly informed the Best Buy team that they would need significant lead time in order to get the proper sign offs from the County, the School District, and the City in order to remove the assessment agreement from the Best Buy property (as required by Minn. Stat. Section 469.177, subd. 8). Please contact me at your convenience with any questions regarding the foregoing. KENNEDY & GRAVEN, CHARTERED Julie Eddington