5.0. EDSR 02-12-2001 Item # 5
ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY
MEMORANDUM
TO: Economic Development Authority
FROM: Cathy Mehelich, Director of Economic Development
DATE: March 12, 2001
SUBJECT: Consider TIF 19 Contract for Private Redevelopment
Event of Default
Background
The EDA entered into a Contract for Private Redevelopment with Associated Investors of
Elk River,Fisher Sand&Aggregate,LLP,and Elk River Business Park,LLC(Redeveloper)
on July 30, 1999. The Redeveloper did not meet the requirement to have a Certificate of
Occupancy for the"Initial Improvements"by December 31,2000. The EDA took action in
February to put the Redeveloper on formal notice of the Event of Default by mailing the
letter drafted by the City Attorney.
Issue
11, Since formal written notice,the Redeveloper has been issued a Certificate of Occupancy for
the 50,000 square foot building in the East Business Park(February 22,2001). The receipt
of the Certificate of Occupancy satisfies the requirements of the "Initial Improvements"
outlined in the Contract. Attached is the response correspondence from the Redeveloper.
Although the Event of Default occurred,this default does not cause any financial harm to
the tax increment that will be received from TIF 19. At this time the Redeveloper has
accomplished the general goals of the agreement,which includes the construction of 140,000
square feet of retail/commercial space and 50,000 square feet of industrial space.
Action Requested
Staff recommends that the EDA make a motion to waive imposing a remedy at this time for
the technical default of failing to have a Certificate of Occupancy for all "Initial
Improvements" by December 31, 2000. Staff further recommends that a letter be sent to
the Redeveloper notifying them that the EDA insists on strict compliance of the Contract
terms,including the scheduled completion of the Business Park, and that this waiver shall
not be construed to set a precedent or preclude the EDA from asserting any available
remedy upon any future default.
•
13065 Orono Parkway • P. O. Box 490 • Elk River, MN 55330-1743 • (612) 441-7420 •Fax (612) 441-7425
Equal Opportunity Housing and Equal Opportunity Employment
FROM GRAY PLANT MOOTY MOOTY & BENNETT (#3) (FRI) 3. 2' 01 12: 10/ST. 12:09/N0. 4261218324 P 2
LAW ORfiCES
SIEGEL, BRILL, GREUPNER, DUFFY & FOSTER, P.A.
1300 WASHINGTON SQUARE
,10C1Aw E. 9RgL. JR. -
100 WASHINGTON AVF.NIIF SOUTH JAMC3 A. TAROS!
J AMES R. OREU=NEst MINNEAPOLIS, MINNESOTA 55401 STEvcN J. WEINTReUT
GERALD S. DUFrT ROBERT F. ROOF
.BRENNA E. NELSON
WOOD R. COSTE4,JR. TELEPHONE 16121 339-7131
THOMAS M. GOODMAN VICItI$ L. LONER
J OHN S.WATSON FAC51M,LE 1612)339-6591
WM.CMQ1,TODMER m£NWELL
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ANoler
ANTHONYO Writer's E-Mail Address: TonY Gleekel df com
J.GLEEKEL '400 EAST WISCONSIN AVENUE
JOCL w,JENSEN SUITC n»,'LOOA O�
SHEAR, L. 4O1.1Lc - MILWAUKEE.WISCONSIN S32OE.AA6S
JORDAN M, LewIe 14141 Tst-s646
BRIAN E.WEISH ERG FAA 14141.270.0862 MICHELLE R. KLEGON
March 1,2001
Mr- Peter Beck
Gray Plant Mooty Mooty&Bennett P.A.
3400 City Center
33 South Sixth Street
Minneapolis,Mn 55402-3796
Re: Contract for Private Development by and between the Economic Development Authority -
in and for the City of Elk River and Associated Investors of Elk River, Inc., Fischer Sand
&Aggregate, LLP, and Elk River Business Park,LLC
Our File No. 19,293-D-002
Dear Peter
The purpose of this letter is to respond to your letter dated February 8, 2001,which I received on
February 20, 2001, regarding the alleged breach of Section 3.2(1)(1) of the Contract for Private
Redevelopment by and between the Economic Development Authority in and for the City of Elk
River ("Authority") and Associated Investors of Elk River, Inc., Fischer Sand & Aggregate,
LLP, and Elk River Business Park, LLC (collectively "Redeveloper") ("Redevelopment
Agreement"). As Richard Martens of Elk River Business Park, LLC, advised the Authority at its
meeting on February 12, the issuance of the Certificate of Occupancy for the 50,000 square foot
building on the Business Park was imminent. In fact, the Certificate of Occupancy was obtained
by Elk River Business Park, LLC a few days ago. I attached a copy of the Certificate of
Occupancy for your convenience.
As for the Certificate of Occupancy of the additional 140,000 square feet, it is my understanding
that Wal-Mart opened in the second or third week of January, and accordingly, a Certificate of
Occupancy for 140,000 square feet, which was in addition to the 120,000 square foot Home
Depot already in operation,greatly exceeds the requirements of the Redevelopment Agreement.
Accordingly, the alleged default set forth in your correspondence has been cured, and therefore,
suspension of the Authority's performance of the terms of the Redevelopment Agreement and
Note is unnecessary.
•
FROM GRAY PLANT MOOTY MOOTY & BENNETT (#3) (FRI) 3. 20112: 11/ST. 12:O9/N0. 4261218324 P 3
March 1,2001
Paget
•
Not only has the default been cured,but the obvious intent of the Redeveloper is to complete the
minimum improvements required by Section 3.2(I) of the Redevelopment Agreement. With over '
260,000 square feet of retail, the addition of the gas/car wash/convenience and a potential
pending sale of additional property within the retail development, as well as the completion of
the 50,000 square foot building and the lease negotiations for portions of that building, the
Redeveloper sees no significant issues at this time regarding completion of the minimum
Improvements. It is the Redeveloper's position that there has been no default in the spirit of the
Redevelopment Agreement, and that the alleged technical breach is merely a result of winter
conditions and other delays in obtaining material for the improvements.
I believe this correspondence adequately responds to your February 8 correspondence, and that
all alleged breaches have been cured.
The Redeveloper looks forward to continuing to work closely with the City.so that both parties
will realize the benefits of the development and the Redevelopment Agreement.
Could you please call me to discuss the status of the promissory notes and the interest
commencement.
I hope all is well.
Very truly yours,
Zeekel
A3Gnar
Enclosure
cc: Liza Robson(via mail)
Rick Martens (via mail)