8.1 SR 05-17-2021
Request for Action
To Item Number
Mayor and City Council 8.1
Agenda Section Meeting Date Prepared by
General Business May 17, 2021 Colleen Eddy, Economic Development Specialist
Item Description Reviewed by
Stonewood Development LLC TIF Assistance Cal Portner, City Administrator
Agreement
Reviewed by
Action Requested
Adopt, by motion, a resolution approving and authorizing the execution of a Tax Increment Financing (TIF)
Assistance Agreement and related documents for Delta Apartments Project.
Background/Discussion
The Delta Apartments Project is proposed as two 90-unit residential apartment buildings on the former Saxon
Auto site with underground parking. Phase 1 is expected to commence construction in 2021. The applicant intends
Phase 2 shortly thereafter but has indicated construction could start 2-3 years after Phase 1.
The establishment of Tax Increment Financing District No. 27 was approved at the May 3, 2021, City Council
meeting and the next step is for the City Council to approve the Tax Increment Assistance Agreement.
Financial Impact
N/A
Mission/Policy/Goal
The City of Elk River shall utilize TIF to encourage desirable development or redevelopment that would not
otherwise occur but for TIF.
Attachments
Resolution
Tax Increment Assistance Agreement
Financial Needs Analysis
The Elk River Vision
A welcoming community with revolutionary and spirited resourcefulness, exceptional
service, and community engagement that encourages and inspires prosperity.
Updated: August 2020
CITY OF ELK RIVER, MINNESOTA
RESOLUTION NO. __________
RESOLUTION APPROVING AND AUTHORIZING THE EXECUTION OF A TIF
ASSISTANCE AGREEMENT AND RELATED DOCUMENTS
BE IT RESOLVED by the City Council (the “City Council”) of the City of Elk River,
Minnesota (the “City”), as follows:
Section 1. Recitals.
1.01. The City has undertaken a program to promote economic development and job
opportunities and promote the development and redevelopment of land which is underutilized within
the City;
1.02. The City has previously established Development District No. 1 (the “Development
District”) and adopted a Development Program therefor (the “Development Program”). The City has
also established Tax Increment Financing (Redevelopment) District No. 27 (Delta Apartments
Project) (the “TIF District”) within the Development District, and adopted a Tax Increment Financing
Plan therefor (the “TIF Plan”);
1.03. The City proposes to enter into a TIF Assistance Agreement (the “Assistance
Agreement”) with Stonewood Development LLC (or an affiliated entity, the “Developer”) in
connection with the acquisition, construction and equipping by the Developer of an approximately
90-unit multifamily rental housing facility in two phases (the “Development”);
1.04. The Assistance Agreement has been prepared and presented to the City Council for
its consideration, stating the terms and conditions described therein and the City’s assistance with the
financing of certain costs of the Development;
1.05. The City has adopted a Tax Increment Financing Policy (the “Policy”) which limits
the term of tax increment financing assistance for redevelopment tax increment financing districts for
a period of 15 years; and
1.06. The Assistance Agreement deviates from the Policy by providing tax increment
assistance to the Developer over a period of 20 years for each phase of the Development.
Section 2. Approval of Development Documents.
2.01. The City finds that the Development requires a policy deviation from due to maximum
15 years due to exuberant circumstances that would require 20 years of assistance including, but not
limited to, the following: (a) the Development site contains a blighted building and has long been
vacant; (b) the removal of the blighted building and its redevelopment achieves of the goal of
redeveloping a site that is an important gateway into the City; and (c) the City commissioned a
Comprehensive Housing Market Study Update in 2018 which showed demand for additional market
rate housing units.
2.02. The City hereby approves the Assistance Agreement substantially in accordance with
the terms set forth in the forms presented to the City Council, together with any related documents
necessary in connection therewith, including without limitation all documents, exhibits, certifications
or consents referenced in or attached to the Assistance Agreement, including without limitation the
tax increment revenue notes (collectively, the “Development Documents”) and hereby authorizes city
staff and the Mayor and City Clerk to negotiate the final terms thereof and, in their discretion and at
such time as they may deem appropriate, to execute the Development Documents on behalf of the
City, and to carry out, on behalf of the City, the City’s obligations thereunder when all conditions
precedent thereto have been satisfied.
2.03. The approval hereby given to the Development Documents includes approval of such
additional details therein as may be necessary and appropriate and such modifications thereof,
deletions therefrom and additions thereto as may be necessary and appropriate and approved by legal
counsel to the City and by the officers authorized herein to execute said documents prior to their
execution; and said officers are hereby authorized to approve said changes on behalf of the City. The
execution of any instrument by the appropriate officers of the City herein authorized shall be
conclusive evidence of the approval of such document in accordance with the terms hereof. This
Resolution shall not constitute an offer and the Development Documents shall not be effective until
the date of execution thereof as provided herein.
2.04. In the event of absence or disability of the officers, any of the documents authorized
by this Resolution to be executed may be executed without further act or authorization of the City
Council by any duly designated acting official, or by such other officer or officers of the City Council
as, in the opinion of the City Attorney, may act in their behalf. Upon execution and delivery of the
Development Documents, the officers and employees of the City are hereby authorized and directed
to take or cause to be taken such actions as may be necessary on behalf of the City to implement the
Development Documents when all conditions precedent thereto have been satisfied.
2.05. The City Council hereby determines that the execution and performance of the
Development Documents will help realize the public purposes of state laws, including Minnesota
Statutes, Sections 469.124 through 469.133 and Sections 469.174 through 469.1794, the
Development Program, and the TIF Plan.
Approved by the City Council of the City of Elk River this 17th day of May, 2021.
Mayor
ATTEST:
City Clerk
2
TIF ASSISTANCE AGREEMENT
BETWEEN
CITY OF ELK RIVER, MINNESOTA
AND
STONEWOOD DEVELOPMENT LLC
This document drafted by:
KENNEDY & GRAVEN, CHARTERED (GAF)
150 South Fifth Street
Minneapolis, Minnesota 55402
(P) 612-337-9300
EL185-50-718703.v2
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS ........................................................................................................ 2
Section 1.1. Definitions .......................................................................................... 2
ARTICLE II REPRESENTATIONS AND WARRANTIES ..........................................................
Section 2.1. Representations and Warranties of the City ...........................................
Section 2.2. Representations and Warranties of the Developer .................................
ARTICLE III UNDERTAKINGS BY DEVELOPER AND City ...................................................
Section 3.1. Total Development Costs and Public Costs. ..........................................
Section 3.2. TIF Note. ..............................................................................................
Section 3.3. Developer to Pay City’s Fees and Expenses. ........................................ .
.............................................................................................................
Section 3.4. Construction Plans. ...............................................................................
Section 3.5. Commencement and Completion of Construction. ................................
Section 3.6. Insurance ..............................................................................................
Section 3.7 Certificate of Completion
Section 3.8. Encumbrance of the Development Property. .........................................
Section 3.9. Business Subsidy Act............................................................................
Section 3.10. Right to Collect Delinquent Taxes ........................................................
Section 3.11. Review of Taxes. ..................................................................................
ARTICLE IV EVENTS OF DEFAULT ........................................................................................
Section 4.1. Events of Default Defined .....................................................................
Section 4.2. Remedies on Default .............................................................................
Section 4.3. No Remedy Exclusive ..........................................................................
Section 4.4. No Implied Waiver. ..............................................................................
Section 4.5. Indemnification of City and City. ..........................................................
Section 4.6. Reimbursement of Attorneys’ Fees. ......................................................
ARTICLE V ADDITIONAL PROVISIONS .................................................................................
Section 5.1. Restrictions on Use ...............................................................................
Section 5.2. Reports .................................................................................................
Section 5.3. Limitations on Transfer and Assignment. ..............................................
Section 5.4. Conflicts of Interest. .............................................................................
Section 5.5. Titles of Articles and Sections...............................................................
Section 5.6. Notices and Demands ...........................................................................
Section 5.7. No Additional Waiver Implied by One Waiver. ....................................
Section 5.8. Counterparts. ........................................................................................
Section 5.9. Law Governing .....................................................................................
Section 5.10. Term; Termination. ...............................................................................
Section 5.11. Provisions Surviving Rescission, Expiration or Termination. ................
Section 5.12. Superseding Effect. ...............................................................................
Section 5.13. Relationship of Parties ..........................................................................
Section 5.14. Venue ...................................................................................................
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EXHIBIT A DESCRIPTION OF TIF DISTRICT................................................................... A-1
EXHIBIT B DESCRIPTION OF DEVELOPMENT PROPERTY .......................................... B-1
EXHIBIT C PUBLIC DEVELOPMENT COSTS ................................................................... C-1
EXHIBIT D FORM OF PHASE ONE TAXABLE TIF NOTE ............................................... D-1
EXHIBIT E FORM OF PHASE TWO TAXABLE TIF NOTE .............................................. E-1
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EL185-50-718703.v2
TIF ASSISTANCE AGREEMENT
THIS TIF ASSISTANCE AGREEMENT (the “Agreement”), made as of the __ day of
________, 2021, by and between the CITY OF ELK RIVER, MINNESOTA (the “City”), a
municipal corporation under the Constitution and laws of the State of Minnesota, and
STONEWOOD DEVELOPMENT LLC, a __________ limited liability company (the
“Developer”), and
WITNESSETH:
WHEREAS, the City has undertaken a program to promote economic development and
redevelopment and job opportunities and to promote the development of land which is
underutilized within the City, and in connection therewith created a development project known
as Development District No. 1 (the “Development District”) and developed a Development
Program (the “Development Program”) therefor pursuant to Minnesota Statutes, Sections 469.124
to 469.134, as; and
WHEREAS, pursuant to the provisions of Minnesota Statutes, Sections 469.174 through
469.1794, as amended (the “TIF Act”), the City has created, within the Development District, Tax
Increment Financing (Redevelopment) District No. 27 (Delta Apartments Project) qualified as a
redevelopment tax increment financing district (the “TIF District”), the description of which is
attached hereto as Exhibit A, and has adopted a Tax Increment Financing Plan therefor (the “TIF
Plan”) approved by the City Council on May 3, 2021 which provides for the use of tax increment
financing in connection with certain development within the Development District and TIF
District; and
WHEREAS, the Developer proposes to acquire certain property, demolish existing
blighted buildings thereon, and construct two approximately 90-unit multifamily housing
buildings and related amenities in two phases thereon (the “Project”); and
WHEREAS, the Developer has requested that the City use tax increment financing to assist
the Developer with certain costs thereof in order to fill the gap between the Total Development
Costs (as hereinafter defined) and the funds available to pay such costs; and
WHEREAS, the City believes that the redevelopment and construction of the Project, and
fulfillment of this Agreement, are vital and are in the best interests of the City, and in accordance
with the public purpose and provisions of applicable state and local laws and requirements under
which the Project has been undertaken and is being assisted;
NOW, THEREFORE, in consideration of the premises and the mutual obligations of the
parties hereto, each of them does hereby covenant and agree with the other as follows:
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ARTICLE I
DEFINITIONS
Section 1.1. Definitions. All capitalized terms used and not otherwise defined herein
shall have the following meanings unless a different meaning clearly appears from the context:
Administrative Costs has the meaning set forth in Section 3.3;
Affiliate means a corporation, partnership, joint venture, association, business trust or
similar entity organized under the laws of the United States of America or a state thereof which is
directly controlled by or under common control with the Developer or any other Affiliate. For
purposes of this definition, control means the power to direct management and policies through
the ownership of at least a majority of its voting securities, or the right to designate or elect at least
a majority of the members of its governing body by contract or otherwise;
Agreement means this TIF Assistance Agreement, as the same may be from time to time
modified, amended or supplemented;
Architect means the architect selected by the Developer as the architect for the Project;
Business Day means any day except a Saturday, Sunday or a legal holiday or a day on
which banking institutions in the City are authorized by law or executive order to close;
Certificate of Completion means a Certificate of Completion, a form of which is attached
hereto as Exhibit F with respect to each phase of the Project executed by the City and delivered
to the Developer pursuant to Section 3.9 hereof;
City means the City of Elk River, Minnesota;
Completion Date means the date on which the Certificate of Completion with respect to
each phase of the Project is executed by the City pursuant to Section 3.9 hereof;
Construction Costs means the capital costs of the construction of the Project, including the
costs of labor and materials; construction management and supervision expenses; insurance and
payment or performance bond premiums; architectural and engineering fees and expenses;
property taxes; usual and customary fees or costs payable to the City or any other public body with
regulatory authority over construction of the Project (e.g. building permits and inspection fees);
the developer fee; and all other costs chargeable to the capital account of the Project under
generally accepted accounting principles;
Construction Documents means the following documents, all of which shall be in form and
substance reasonably acceptable to the City: (a) evidence satisfactory to the City showing that the
Project conforms to applicable zoning, subdivision and building code laws and ordinances,
including a copy of the building permit for the Project; (b) a copy of the executed standard form
of agreement between owner and architect for architectural services for the Project, if any, and (c)
a copy of the executed General Contractor’s contract for the Project, if any;
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EL185-50-718703.v2
Construction Plans means the plans, specifications, drawings and related documents for the
construction of the Project, which shall be as detailed as the plans, specifications, drawings and
related documents which are submitted to the building inspector of the City;
County means Sherburne County, Minnesota;
County Assessor means the County Assessor of Sherburne County, Minnesota;
Design Drawings means the floor plans, renderings, elevations and material specifications
for the Project prepared by the Architect;
Developer means Stonewood Development LLC, a _________ limited liability company,
and its authorized successors and assigns;
Development Property means the real property legally described in Exhibit B attached to
hereto;
Event of Default means any of the events described in Section 4.1 hereof;
General Contractor means the general contractor selected by the Developer as the general
contractor for the Project;
Phase One Final Payment Date means the earliest of (i) the date on which the entire
principal on the Phase One TIF Note has been paid in full; or (ii) February 1, 2043; or (iii) any
earlier date this Agreement or the Phase One TIF Note is terminated or cancelled in accordance
with the terms hereof or deemed paid in full; or (iv) the February 1 following the date the TIF
District is terminated in accordance with the TIF Act;
Phase One Payment Date means August 1, 2023 and each February 1 and August 1
thereafter to and including the Phase One Final Payment Date; provided, that if any such Phase
One Payment Date should not be a Business Day, the Phase One Payment Date shall be the next
succeeding Business Day;
Phase One Project means the acquisition of the Development Property, demolition of
existing blighted buildings, and construction of an approximately 90-unit multifamily housing
building and related amenities thereon;
Phase One TIF Note means the Taxable Tax Increment Revenue Note (Delta Apartments
Phase One Project) to be executed by the City and delivered to the Developer pursuant to Article
III hereof, a form of which is set forth in Exhibit D attached hereto;
Phase Two Final Payment Date means the earliest of (i) the date on which the entire
principal on the Phase Two TIF Note has been paid in full; or (ii) February 1, 2045; or (iii) any
earlier date this Agreement or the Phase Two TIF Note is terminated or cancelled in accordance
with the terms hereof or deemed paid in full; or (iv) the February 1 following the date the TIF
District is terminated in accordance with the TIF Act;
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EL185-50-718703.v2
Phase Two Payment Date means August 1, 2025 and each February 1 and August 1
thereafter to and including the Phase Two Final Payment Date; provided, that if any such Phase
Two Payment Date should not be a Business Day, the Phase Two Payment Date shall be the next
succeeding Business Day;
Phase Two Project means the construction of a second approximately 90-unit multifamily
housing building and related amenities on the Development Property;
Phase Two TIF Note means the Taxable Tax Increment Revenue Note (Delta Apartments
Phase Two Project) to be executed by the City and delivered to the Developer pursuant to Article
III hereof, a form of which is set forth in Exhibit E attached hereto;
Pledged Tax Increments means for any 6-month period, 90% of the Tax Increments
received by the City since the previous Phase One Payment Date or Phase Two Payment Date,
respectively;
Project means, collectively, the Phase One Project and the Phase Two Project;
Public Development Costs means the public redevelopment costs of the Project identified
on Exhibit C attached hereto and any other cost incurred by the Developer, or its assigns, that the
City determines is eligible for reimbursement with Pledged Tax Increments;
Reimbursement Amount means the lesser of (i) $3,316,424 with respect to the Phase One
Project and $3,316,424 with respect to the Phase Two Project; or (ii) the Public Development Costs
actually incurred and paid by the Developer;
Site Plan means the site plan prepared for the Development Property approved by the City;
State means the State of Minnesota;
Tax Increments means the tax increments derived from the Development Property and the
improvements thereon which have been received and are permitted to be retained by the City as
determined in its sole discretion in accordance with the TIF Act including, without limitation,
Minnesota Statutes, Section 469.177; Section 469.176, Subd. 4h; and Section 469.175, Subd. 1a,
or otherwise pursuant to the Tax Increment Act as the same may be amended from time to time;
Termination Date means the later of the Phase One Final Payment Date or the Phase Two
Final Payment Date;
TIF Act means Minnesota Statutes, Sections 469.174 through 469.1794, as amended;
TIF District means Tax Increment Financing (Redevelopment Development) District No.
27 (Delta Apartments Project), a redevelopment tax increment financing district, consisting of the
property described in Exhibit A attached hereto, which was established as a redevelopment district
under the TIF Act;
TIF Notes means, collectively, the Phase One TIF Note and the Phase Two TIF Note;
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EL185-50-718703.v2
TIF Plan means the tax increment financing plan approved for the TIF District;
Total Development Costs means all Construction Costs and any other costs of the
development of the Project to be incurred by the Developer; and
Unavoidable Delays means delays, outside the control of the party claiming their
occurrence, which are the direct result of strikes, other labor troubles, unusually severe or
prolonged bad weather, acts of God, pandemic, acts of war or terrorism, fire or other casualty to
the Project, litigation commenced by third parties which, by injunction or other similar judicial
action or by the exercise of reasonable discretion, directly results in delays, or acts of any federal,
state or local governmental unit (other than the City) which directly result in delays, acts of the
public enemy or acts of terrorism and discovery of unknown hazardous materials or other
concealed site conditions or delays of contractors due to such discovery.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations and Warranties of the City. The City makes the following
representations and warranties:
(1) The City is a municipal corporation and political subdivision duly organized and
existing under the Constitution and laws of the State and has the power to enter into this Agreement
and carry out its obligations hereunder.
(2) The City has taken the actions necessary to establish the TIF District as a
“redevelopment district” within the meaning of Minnesota Statutes, Section 469.174, Subdivision
10.
(3) The development contemplated by this Agreement is in conformance with the
development objectives set forth in the Development Program and the TIF Plan.
(4) The City makes no representation or warranty, either express or implied, as to the
Development Property or its condition, or that the Development Property shall be suitable for the
Developer’s purposes or needs.
(5) No member of the City Council or other officer of the City, has either a direct or
indirect financial interest in this Agreement, nor will any member of the City Council, or other
officer of the City, benefit financially from this Agreement within the meaning of Minnesota
Statutes, Sections 412.311 and 471.87.
Section 2.2. Representations and Warranties of the Developer. The Developer makes
the following representations and warranties:
(1) The Developer is a ________ limited liability company duly and validly organized
and existing in good standing under the laws of the State of ________, is qualified to do business
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EL185-50-718703.v2
in the State, and has power and authority to enter into this Agreement and to perform its obligations
hereunder and is not in violation of any provision of the laws of the State.
(2) The construction of the Project would not be undertaken by the Developer, and in
the opinion of the Developer would not be economically feasible within the reasonably foreseeable
future, without the assistance and benefit to the Developer provided for in this Agreement.
(3) Neither the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby, nor the fulfillment of or compliance with the terms and
conditions of this Agreement is prevented, limited by or conflicts with or results in a breach of,
the terms, conditions or provision of any contractual restriction, evidence of indebtedness,
agreement or instrument of whatever nature to which the Developer is now a party or by which it
is bound, or constitutes a default under any of the foregoing.
(4) The Developer understands that the City may subsidize or encourage the
development of other developments in the City, including properties that compete with the
Development Property and the Project, and that such subsidies may be more favorable than the
terms of this Agreement, and that the City has informed the Developer that development of the
Development Property will not be favored over the development of other properties.
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ARTICLE III
UNDERTAKINGS BY DEVELOPER AND City
Section 3.1. Total Development Costs and Public Costs.
(1) Based on the Developer’s representation that the Total Development Costs for the
Project are approximately $34,702,589, that the sources of revenue available to pay such costs,
excluding the tax increment assistance contemplated herein, do not exceed $28,867,964, and that
the Developer is unable to obtain additional private financing or investment for the estimated Total
Development Costs, the City has agreed to provide tax increment financing subject to the terms
and conditions as hereinafter set forth. The Developer must provide the City copies of all executed
financing documents related to financing the Total Development Costs of the Project.
(2) The parties agree that the Public Development Costs to be incurred by the
Developer are essential to the successful completion of the Project. The Developer anticipates that
the Public Development Costs for the Project which are identified in Exhibit C attached hereto
will be at least $7,734,523.
(3) As of January 2, 2025, the estimated market value of the Development Property, as
improved by the Project, is expected to be at least $21,759,300.
(4) The Developer shall acquire the Development Property. In addition, the Developer
has acquired or has entered into a purchase agreement pursuant to which it will acquire fee title to
the Development Property.
(5) The Developer will cause the Project to be constructed in accordance with the terms
of this Agreement, the Development Program, and all local, state and federal laws and regulations
including, but not limited to, environmental, zoning, energy conservation, building code and public
health laws and regulations.
(6) The Developer shall, in a timely manner, comply with all requirements necessary
to obtain, or cause to be obtained, all required permits, licenses and approvals, and will meet, in a
timely manner, all requirements of all applicable local, state, and federal laws and regulations
which must be obtained or met for the construction and operation of the Project.
(7) The Total Development Costs shall be paid by the Developer, and the City shall
reimburse the Developer for the Public Development Costs in the Reimbursement Amount solely
through the issuance of the TIF Notes as provided herein.
Section 3.2. TIF Notes.
(1) The TIF Notes will be originally issued to the Developer, as provided in Section
3.2(2) and Section 3.2(3) hereof, in a principal amount equal to the Reimbursement Amount for
the respective phase of the Project and each shall be dated as of its date of issuance. The principal
of the TIF Notes shall be payable on a pay-as-you-go basis on a pro-rata basis solely from the
Pledged Tax Increments as provided below. The TIF Notes shall not bear interest.
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(2) The Phase One TIF Note shall be issued, in substantially the form attached hereto
as Exhibit D only when: (A) the Developer shall have submitted written proof and other
documentation as may be reasonably satisfactory to the City of the exact nature and amount of the
Public Development Costs incurred by the Developer relating to the Phase One Project, together
with such other information or documentation as may be reasonably necessary and satisfactory to
the City to enable the City to substantiate the Developer’s tax increment expenditures for Public
Development Costs in accordance with Exhibit C attached hereto and/or to comply with its tax
increment reporting obligations to the Commissioner of Revenue, the Office of the State Auditor
or other applicable official; (B) the Developer shall have obtained from the City a certificate of
occupancy for all residential units in the Phase One Project and a certificate of occupancy; (C) the
Developer shall have paid all of the City’s Administrative Costs required to have been paid as of
such date in accordance with Section 3.3 hereof; (D) the Developer shall be in material compliance
with each term or provision of this Agreement required to have been satisfied as of such date. The
documentation provided in accordance with Section 3.2(2)(A) shall include specific invoices for
the particular work from the contractor or other provider and shall include paid invoices, copies of
remittances and/or other suitable documentary proofs of the Developer’s payment thereof.
(3) The Phase Two TIF Note shall be issued, in substantially the form attached hereto
as Exhibit E only when: (A) the Developer shall have submitted written proof and other
documentation as may be reasonably satisfactory to the City of the exact nature and amount of the
Public Development Costs incurred by the Developer relating to the Phase Two Project, together
with such other information or documentation as may be reasonably necessary and satisfactory to
the City to enable the City to substantiate the Developer’s tax increment expenditures for Public
Development Costs in accordance with Exhibit C attached hereto and/or to comply with its tax
increment reporting obligations to the Commissioner of Revenue, the Office of the State Auditor
or other applicable official; (B) the Developer shall have obtained from the City a certificate of
occupancy for all residential units in the Phase Two Project and a certificate of occupancy; (C) the
Developer shall have paid all of the City’s Administrative Costs required to have been paid as of
such date in accordance with Section 3.3 hereof; (D) the Developer shall be in material compliance
with each term or provision of this Agreement required to have been satisfied as of such date. The
documentation provided in accordance with Section 3.2(3)(A) shall include specific invoices for
the particular work from the contractor or other provider and shall include paid invoices, copies of
remittances and/or other suitable documentary proofs of the Developer’s payment thereof.
(4) The TIF Notes shall not bear interest. Principal on the TIF Notes will be payable
on each Phase One Payment Date and Phase Two Payment Date, respectively; however, the sole
source of funds required to be used for payment of the City’s obligations under this Section and
correspondingly under the TIF Notes shall be the Pledged Tax Increments received in the 6-month
period preceding each Phase One Payment Date or Phase Two Payment Date, respectively. The
TIF Notes shall be payable on a pro-rata basis.
(5) On each Phase One Payment Date and Phase Two Payment Date, respectively the
Pledged Tax Increment shall be applied to reduce the principal on a pro rata basis. All Tax
Increments in excess of the Pledged Tax Increments necessary to pay the principal on the TIF
Notes are not subject to this Agreement, and the City retains full discretion as to any authorized
application thereof. To the extent that the Pledged Tax Increments are insufficient through the
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Final Payment Date, to pay all amounts otherwise due on the TIF Notes, said unpaid amounts shall
then cease to be any debt or obligation of the City whatsoever.
(6) The TIF Notes shall be special and limited obligations of the City and not a general
obligation of the City, and only Pledged Tax Increments shall be used to pay the principal of the
TIF Notes.
(7) The City’s obligation to make payments on the TIF Notes on any Phase One
Payment Date or Phase Two Payment Date, respectively is subject to Section 3.11(2) and shall be
conditioned upon the requirement that (A) there shall not at that time be an Event of Default that
has occurred and is continuing under this Agreement that has not been cured during the applicable
cure period, (B) this Agreement shall not have been terminated pursuant to Section 4.2, and (C)
all conditions set forth in Section 3.2(2) or 3.2(3), as applicable, have been satisfied as of such
date.
(8) The TIF Notes shall be governed by and payable pursuant to the additional terms
thereof, as actually executed, in substantially the forms set forth in Exhibit D and Exhibit E
attached hereto. In the event of any conflict between the terms of the TIF Note and the terms of
this Section 3.2, the terms of the TIF Notes shall govern. The issuance of the TIF Notes is pursuant
and subject to the terms of this Agreement.
(9) In accordance with Section 469.1763, Subdivision 3 of the TIF Act, conditions for
delivery of the TIF Notes must be met within 5 years after the date of certification of the TIF
District by the County. If the conditions are not satisfied by such date, the City has no further
obligations under this Section 3.2.
(10) The financial assistance to the Developer under this Agreement is based on certain
assumptions regarding likely costs and expenses associated with constructing the Project. The
City and the Developer agree that the Developer’s representations of the Total Development Costs
are true and correct.
(11) The Developer understands and acknowledges that the City makes no
representations or warranties regarding the amount of Pledged Tax Increment, or that revenues
pledged to the TIF Notes will be sufficient to pay the principal of the TIF Notes. Any estimates
of Tax Increment prepared by the City or its financial or municipal advisors in connection with the
TIF District or this Agreement are for the benefit of the City and are not intended as representations
on which the Developer may rely.
Section 3.3. Developer to Pay City’s Fees and Expenses. The Developer will pay all of
the City’s reasonable Administrative Costs (as defined below) and must pay such costs to the City
within 30 days after receipt of a written invoice from the City describing the amount and nature of
the costs to be reimbursed. For the purposes of this Agreement, the term “Administrative Costs”
means out of pocket costs incurred by the City together with staff and consultant (including
reasonable legal, financial or municipal advisor, etc.) costs of the City, all attributable to or
incurred in connection with the establishment of the TIF District and the TIF Plan and review,
negotiation and preparation of this Agreement (together with any other agreements entered into
between the parties hereto contemporaneously therewith) and review and approvals of other
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documents and agreements in connection with the Project. In addition, certain engineering,
environmental advisor, legal, land use, zoning, subdivision and other costs related to the
development of the Development Property are required to be paid, or additional funds deposited
in escrow, as provided in accordance with the City’s planning, zoning, and building fee schedules.
The parties agree and understand that Developer deposited with the City $10,000 toward payment
of the City’s Administrative Costs. If such costs exceed such amount, then at any time, but not
more often than monthly, the City will deliver written notice to Developer setting forth any
additional fees and expenses, together with suitable billings, receipts or other evidence of the
amount and nature of the fees and expenses, and Developer agrees to pay all fees and expenses
within 30 days of City’s written request. Any unused amount of such deposit shall be returned to
the Developer. This Section 3.3 shall survive termination of this Agreement and shall be binding
on the Developer regardless of the enforceability of any other provision of this Agreement.
Section 3.4. Compliance with Environmental Regulations.
(1) The Developer shall comply with all applicable local, state, and federal
environmental laws and regulations, and will obtain, and maintain compliance under, any and all
necessary environmental permits, licenses, approvals or reviews.
(2) The City makes no warranties or representations regarding, nor does it indemnify
the Developer with respect to, the existence or nonexistence on or in the vicinity of the
Development Property or anywhere within the TIF District of any toxic or hazardous substances
or wastes, pollutants or contaminants (including, without limitation, asbestos, urea formaldehyde,
the group of organic compounds known as polychlorinated biphenyls, petroleum products
including gasoline, fuel oil, crude oil and various constituents of such products, or any hazardous
substance as defined in the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (“CERCLA”), 42 U.S.C. §§ 961-9657, as amended) (collectively, the “Hazardous
Substances”).
(3) The Developer agrees to take all necessary action to remove or remediate any
Hazardous Substances located on the Development Property to the extent required by and in
accordance with all applicable local, state and federal environmental laws and regulations.
(4) The Developer waives any claims against the City, for indemnification,
contribution, reimbursement or other payments arising under federal and state law and the common
law or relating to the environmental condition of the land comprising the Development Property.
Section 3.5. Construction Plans.
(1) Prior to the commencement of construction of the Project, the Developer shall
deliver to the City the Construction Plans, Construction Documents and a sworn construction cost
statement certified by the Developer and the General Contractor (the “Sworn Construction Cost
Statement”) all in form and substance reasonably acceptable to the City. The Construction Plans
for the Project shall be consistent with the Development Program, this Agreement, and all
applicable State and local laws and regulations, and the Site Plan and Design Drawings submitted
to the City and shall provide for design, quality, materials and building finishes of the finished
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EL185-50-718703.v2
Project to be substantially similar to those which were presented to the City in connection with the
Developer’s request for tax increment financing assistance and identified on the preliminary
building elevations which were shared publicly. The City Administrator, or designee, on behalf
of the City shall promptly review any Construction Plans upon submission and deliver to the
Developer a written statement approving the Construction Plans or a written statement rejecting
the Construction Plans and specifying the deficiencies in the Construction Plans. The City
Administrator, or designee, on behalf of the City shall approve the Construction Plans for purposes
of this Agreement if: (i) the Construction Plans substantially conform to the terms and conditions
of this Agreement; (ii) the Construction Plans are consistent with the goals and objectives of the
Development Program and the TIF Plan; (iii) the Construction Plans comply with the Site Plan
and Design Drawings; and (iv) the Construction Plans do not violate any applicable federal, State
or local laws, ordinances, rules or regulations. If the Construction Plans are not approved by the
City, then the Developer shall make such changes as the City may reasonably require and resubmit
the Construction Plans to the City for approval, which will not be unreasonably withheld,
unreasonably conditioned or unreasonably delayed. If the City has not rejected the Construction
Plans in writing within 60 calendar days of submission, such Construction Plans shall
automatically be deemed approved by the City for purposes of this Agreement but only if the
Construction Plans provided to the City are complete and final and meet all requirements necessary
for the Developer to submit a complete application for a building permit.
(2) No changes shall be made to the Construction Plans for the Project without the
City’s prior written approval, unless the aggregate of such changes do not increase or decrease the
Total Development Costs by more than 10%. No changes which materially alter (a) the Project’s
site plan, (b) exterior appearance, (c) construction quality, or (d) exterior materials included in the
final Design Drawings and Construction Plans shall be made without the City’s prior written
consent. The approval of the City will not be unreasonably withheld, conditioned or delayed. If
an amendment or prior written approval from the City is necessary with respect to a change in the
Construction Plans, if the City has not rejected such amendment in writing within 30 calendar days
of submission of such amendment, the amendment to Construction Plans shall automatically be
deemed approved by the City for purposes of this Agreement but only if such amendment provided
to the City is complete and final and meets all requirements necessary for the Developer to submit
a complete application for a building permit.
(3) The approval of the Construction Plans, or any proposed amendment to the
Construction Plans, by the City does not constitute a representation or warranty by the City that
the Construction Plans or the Project comply with any applicable building code, health or safety
regulation, zoning regulation, environmental law or other law or regulation, or that the Project will
meet the qualifications for issuance of a certificate of occupancy, or that the Project will meet the
requirements of the Developer or any other users of the Project. Approval of the Construction
Plans, or any proposed amendment to the Construction Plans, by the City will not constitute a
waiver of an Event of Default or of any State or City building or other code requirements that may
apply. Nothing in this Agreement shall be construed to relieve the Developer of its obligations to
receive any required approval of the Construction Plans from any department of the City and does
not relieve the Developer of the obligation to comply with applicable federal, State and local laws,
ordinances, rules and regulations, or to construct the Project in accordance therewith.
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Section 3.6. Commencement and Completion of Construction. Subject to the terms and
conditions of this Agreement and to Unavoidable Delays, the Developer will commence
construction of the Phase One Project by December 31, 2021 and shall substantially complete the
Phase One Project by June 30, 2023. Subject to the terms and conditions of this Agreement and
to Unavoidable Delays, the Developer will commence construction of the Phase Two Project by
December 31, 2023 and shall substantially complete the Phase Two Project by June 30, 2024. The
Project will be constructed by the Developer on the Development Property in conformity with the
Construction Plans approved by the City. Prior to completion, upon the request of the City, and
subject to applicable safety rules, the Developer will provide the City reasonable access to the
Development Property. “Reasonable access” means at least one site inspection per week during
regular business hours. During construction, marketing and rentals of the Project, the Developer
will deliver progress reports to the City from time to time as reasonably requested by the City.
Section 3.7. Certificate of Completion. The Developer shall notify the City when
construction of each phase of the Project has been substantially completed. The City shall inspect
each phase of the Project in order to determine whether the respective phase of the Project has
been constructed in substantial conformity with the approved Construction Plans. If the City
determines that the respective phase of the Project has not been constructed in substantial
conformity with the approved Construction Plans, the City shall deliver a written statement to the
Developer indicating in adequate detail the specific respects in which the respective phase of
Project has not been constructed in substantial conformity with the approved Construction Plans
and Developer shall have a reasonable period of time to remedy such deficiencies. The City shall
re-inspect the respective phase of the Project within a reasonable period of time after receiving
notice that such deficiencies have been remedied in order to determine whether the respective
phase of the Project has been constructed in substantial conformity with the approved Construction
Plans and this Agreement. Within a reasonable period of time after determining that the respective
phase of the Project has been constructed in substantial conformity with the approved Construction
Plans, the City will furnish to the Developer a Certificate of Completion substantially in the form
attached hereto as Exhibit F certifying the completion of the respective phase of the Project. The
Certificate of Completion issued for respective phase of the Project shall conclusively satisfy and
terminate the agreements and covenants of the Developer in this Agreement solely with respect to
construction of respective phase of the Project. The issuance of a Certificate of Completion under
this Agreement shall not be construed to relieve the Developer of any approval required by any
City department in connection with the construction, completion or occupancy of any phase of the
Project nor shall it relieve the Developer of any other obligations under this Agreement.
Section 3.8. Insurance. The Developer will provide and maintain or cause to be
maintained at all times and, from time to time at the request of the City, furnish the City with proof
of payment of premiums on insurance of amounts and coverages normally obtained for properties
similar to the Project.
Section 3.9. Encumbrance of the Development Property. Until the Termination Date,
without the prior written consent of the City, neither the Developer nor any successor in interest
to the Developer will engage in any financing or any other transaction creating any mortgage or
other encumbrance or lien upon the Development Property, or portion thereof, whether by express
agreement or operation of law, or suffer any encumbrance or lien to be made on or attach to the
Development Property except for the purpose of obtaining funds only to the extent necessary for
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financing or refinancing the acquisition and construction of the Project (including, but not limited
to, land and building acquisition, labor and materials, professional fees, development fees, real
estate taxes, reasonably required reserves, construction interest, organization and other direct and
indirect costs of development and financing, costs of constructing the Project, and an allowance
for contingencies) including without limitation regulatory agreements and land use restriction
agreements in connection with such financings; provided, however, this provision shall not be
considered a waiver of the requirements of Section 5.3 with respect to any Transfer of the TIF
Note in connection with any such financing or refinancing nor shall anything contained in this
Section prohibit the Developer from making transfers in accordance with Section 5.3.
Section 3.10. Business Subsidy Act. The subsidy granted to the Developer pursuant to
this Agreement is assistance for housing and therefore the provisions of Minnesota Statutes,
Section 116J.993 to 116J.995 do not apply.
Section 3.11. Right to Collect Delinquent Taxes. The Developer acknowledges that the
City is providing substantial aid and assistance in furtherance of the Project through reimbursement
of Public Development Costs. To that end, the Developer agrees for itself, its successors and
assigns, that in addition to the obligation pursuant to statute to pay real estate taxes, it is also
obligated by reason of this Agreement, to pay before delinquency all real estate taxes assessed
against the Development Property and the Project. The Developer acknowledges that this
obligation creates a contractual right on behalf of the City through the Termination Date to sue the
Developer or its successors and assigns, to collect delinquent real estate taxes related to the
Development Property and any penalty or interest thereon and to pay over the same as a tax
payment to the county auditor. In any such suit in which the City is the prevailing party, the City
shall also be entitled to recover its costs, expenses and reasonable attorney fees.
Section 3.12. Review of Taxes.
(1) The Developer agrees that prior to the Termination Date it will not cause a
reduction in the real property taxes paid in respect of the Development Property through: (i) willful
destruction of the Development Property or any part thereof; or (ii) willful refusal to reconstruct
damaged or destroyed property. The Developer also agrees that it will not, prior to the Termination
Date, apply for an exemption from or a deferral of property tax on the Development Property
pursuant to any law, or transfer or permit transfer of the Development Property to any entity whose
ownership or operation of the property would result in the Development Property being exempt
from real property taxes under State law.
(2) The Developer shall notify the City within 10 days of filing any petition to seek
reduction in market value or property taxes on any portion of the Development Property under any
State law (referred to as a “Tax Appeal”). If as of any Phase One Payment Date or Phase Two
Payment Date, respectively, any Tax Appeal is then pending, the City will continue to make
payments on the TIF Note but only to the extent that the Pledged Tax Increment relates to property
taxes paid with respect to the market value of the Development Property not being challenged as
part of the Tax Appeal as determined by the City in its sole discretion and the City will withhold
the Pledged Tax Increment related to property taxes paid with respect to the market value of the
Development Property being challenged as part of the Tax Appeal as determined by the City in its
sole discretion. The City will apply any withheld amount to the extent not reduced as a result of
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the Tax Appeal promptly after the Tax Appeal is fully resolved and the amount of Pledged Tax
Increment, as applicable, attributable to the disputed tax payments is finalized.
(3) If Minnesota Statutes, Section 273.13 or any applicable successor statute is
amended to reduce the applicable classification tax rate, the City will require the Developer to
exchange the TIF Note for a replacement TIF Note issued in a principal amount determined based
on revised projections of Pledged Tax Increments as calculated by the City or its tax increment
financing consultant. Notwithstanding the date the City determines the adjusted principal amount
of the TIF Note, such adjustment will date back to the date any such legislative change affects
Pledged Tax Increments.
ARTICLE IV
EVENTS OF DEFAULT
Section 4.1. Events of Default Defined. The following shall be “Events of Default”
under this Agreement and the term “Event of Default” shall mean whenever it is used in this
Agreement any one or more of the following events:
(1) Failure by the Developer to timely pay any ad valorem real property taxes assessed
with respect to the Development Property.
(2) Subject to Unavoidable Delays, failure by the Developer to construct the Project in
accordance with the timelines set forth in Section 3.6 hereof.
(3) Failure of the Developer to observe or perform any other material covenant,
condition, obligation or agreement on its part to be observed or performed under this Agreement,
or if any certification, representation, or warranty by the Developer to the City is untrue or
misrepresented.
(4) If, prior to the Completion Date, the Developer shall
(a) file any petition in bankruptcy or for any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under the United
States Bankruptcy Act of 1978, as amended or under any similar federal or state law; or
(b) be adjudicated as bankrupt or insolvent; or if a petition or answer proposing
the adjudication of the Developer, as bankrupt or its reorganization under any present or
future federal bankruptcy act or any similar federal or state law shall be filed in any court
and such petition or answer shall not be discharged or denied within 90 days after the filing
thereof; or a receiver, trustee or liquidator of the Developer, or of the Project, or part
thereof, shall be appointed in any proceeding brought against the Developer, and shall not
be discharged within 90 days after such appointment, or if the Developer, shall consent to
or acquiesce in such appointment.
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Notwithstanding anything to the contrary set forth in this Agreement the lenders providing
construction or permanent financing for the Project shall have the right, but not the obligation, to
cure an Event of Default during the cure period provided for the Developer.
Section 4.2. Remedies on Default. Whenever any Event of Default referred to in Section
4.1 occurs and is continuing, the City, as specified below, may take any one or more of the
following actions after the giving of 30 days’ written notice to the Developer, but only if the Event
of Default has not been cured within said 30 days; provided that if such Event of Default cannot
be reasonably cured within the 30 day period, and the Developer has provided assurances
reasonably satisfactory to the City that it is proceeding with due diligence to cure such default,
such 30 day cure period shall be extended for a period deemed reasonably necessary by the City
to effect the cure, but in any event not to exceed 180 days:
(1) The City may suspend its performance under this Agreement and the TIF Note until
such default is cured or the City determines that it has received adequate assurances from the
Developer, that the Developer will cure its default and continue its performance under this
Agreement.
(2) The City may terminate this Agreement and/or cancel the TIF Note.
(3) The City may take any action, including legal or administrative action, in law or
equity, which may appear necessary or desirable to enforce performance and observance of any
obligation, agreement, or covenant of the Developer under this Agreement.
Notwithstanding anything to the contrary set forth in this Agreement the lenders providing
construction or permanent financing for the Project shall have the right, but not the obligation, to
cure an Event of Default during the cure period provided for the Developer.
Section 4.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to the
City is intended to be exclusive of any other available remedy or remedies, but each and every
such remedy shall be cumulative and shall be in addition to every other remedy given under this
Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to
exercise any right or power accruing upon any default shall impair any such right or power or shall
be construed to be a waiver thereof, but any such right and power may be exercised from time to
time and as often as may be deemed expedient.
Section 4.4. No Implied Waiver. In the event any agreement contained in this
Agreement should be breached by any party and thereafter waived by any other party, such waiver
shall be limited to the particular breach so waived and shall not be deemed to waive any other
concurrent, previous or subsequent breach hereunder.
Section 4.5. Indemnification of City.
(1) The Developer releases from and covenants and agrees that the City, and its
governing bodies’ members, officers, agents, including the independent contractors, consultants
and legal counsel, servants and employees thereof (for purposes of this Section, collectively the
“Indemnified Parties”) shall not be liable for and agrees to indemnify and hold harmless the
Indemnified Parties against any loss or damage to property or any injury to or death of any person
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occurring at or about or resulting from any defect in the Project, or any other loss, cost expense,
or penalty, except to the extent caused by any willful misrepresentation or any willful or wanton
misconduct of the Indemnified Parties.
(2) Except for any willful misrepresentation or any willful or wanton misconduct of
the Indemnified Parties, the Developer agrees to protect and defend the Indemnified Parties, now
and forever, and further agrees to hold the Indemnified Parties harmless from any claim, demand,
suit, action or other proceeding whatsoever by any person or entity whatsoever arising or
purportedly arising from the actions or inactions of the Developer (or if other persons acting on its
behalf or under its direction or control) under this Agreement, or the transactions contemplated
hereby or the acquisition, construction, installation, ownership, and operation of the Project;
including, without limitation, any pecuniary loss or penalty (including interest thereon at the rate
of 5.00% per annum from the date such loss is incurred or penalty is paid by the City) as a result
of the Project failing to cause the TIF District to qualify as a “redevelopment district” under Section
469.174, subdivision 10, of the TIF Act, or to violate limitations as to the use of Tax Increments
as set forth in Section 469.176, subdivision 4d of the TIF Act.
(3) All covenants, stipulations, promises, agreements and obligations of the City
contained herein shall be deemed to be the covenants, stipulations, promises, agreements and
obligations of the City and not of any governing body member, officer, agent, servant or employee
of the City, as the case may be. This Section 4.5 shall survive termination of this Agreement and
shall be binding on the Developer regardless of the enforceability of any other provision of this
Agreement.
Section 4.6. Reimbursement of Attorneys’ Fees. If an Event of Default under Section
4.1 hereof occurs, and the City employs attorneys or incurs other reasonable expenses for the
collection of payments due hereunder, or for the enforcement of performance or observance of any
obligation or agreement on the part of the Developer contained in this Agreement, the Developer
will within 30 days reimburse the City for the reasonable fees of such attorneys and such other
reasonable expenses so incurred.
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ARTICLE V
ADDITIONAL PROVISIONS
Section 5.1. Restrictions on Use. The Developer agrees for itself, its successors and
assigns and every successor in interest to the Development Property, or any part thereof, that the
Developer and such successors and assigns shall operate, or cause to be operated, the Project as a
rental housing development in accordance with this Agreement until the Termination Date.
Section 5.2. Reports. The Developer shall provide the City reports in a timely manner
with such information about the Project as the City may reasonably request for purposes of
satisfying any reporting requirements imposed by law on the City.
Section 5.3. Limitations on Transfer and Assignment.
(1) Except as provided in Sections 3.9 and 5.3(4), the Developer will not sell, assign,
convey, lease or transfer in any other mode or manner (collectively, “Transfer”) this Agreement,
the TIF Note, or the Development Property or the Project, or any interest therein, without the
express written approval of the City, which consent will not be unreasonably withheld, conditioned
or delayed. The City shall deliver a written statement to the Developer indicating whether the
Transfer is approved or specifying the additional conditions to be satisfied in accordance with
Section 5.3(2). The provisions of this Section 5.3 apply to all subsequent Transfers by authorized
transferees;
(2) The City shall be entitled to require, as conditions to any approval of any Transfer
of this Agreement, the Development Property, the Project, or the TIF Note in connection therewith,
which approval will not be unreasonably withheld, conditioned or delayed, that:
(a) Any proposed transferee shall have the qualifications and financial
responsibility, as determined by the City, necessary and adequate to fulfill the obligations
undertaken in this Agreement by the Developer;
(b) Any proposed transferee, by instrument in writing satisfactory to the City
shall, for itself and its successors and assigns, and expressly for the benefit of the City have
expressly assumed any of the remaining obligations of the Developer under this Agreement
and agreed to be subject to all the conditions and restrictions to which the Developer is
subject;
(c) There shall be submitted to the City for review all instruments and other legal
documents involved in effecting transfer, and if approved by City, its approval shall be
indicated to the Developer in writing;
(d) Any proposed transferee of the TIF Note shall (i) execute and deliver to the
City the Acknowledgment Regarding TIF Note in the form included in Exhibit 2 to the TIF
Note and (ii) surrender the TIF Note to the City either in exchange for a new fully registered
note or for transfer of the TIF Note on the registration records for the TIF Note maintained
by the City;
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(e) The Developer and its transferees shall comply with such other conditions as
are necessary in order to achieve and safeguard the purposes of the Act, the TIF Act and
this Agreement; and
(f) In the absence of a specific written agreement by the City to the contrary, no
such transfer or approval by the City thereof shall be deemed to relieve the Developer or
any other party bound in any way by this Agreement or otherwise with respect to the
construction of the Project, from any of its obligations with respect thereto.
(3) The Developer agrees to pay all reasonable legal fees and expenses of the City,
including fees of the City Attorney’s office and outside counsel retained by the City to review the
documents submitted to the City in connection with any Transfer.
(4) Nothing contained in this Section shall prohibit the Developer from (i) entering into
leases with tenants in the ordinary course of business, or (ii) entering into easements or other
agreements necessary for the construction or operation of the Project.
Section 5.4. Conflicts of Interest. No member of the governing body or other official of
the City shall have any financial interest, direct or indirect, in this Agreement, the Development
Property or the Project, or any contract, agreement or other transaction contemplated to occur or
be undertaken thereunder or with respect thereto, nor shall any such member of the governing body
or other official participate in any decision relating to this Agreement which affects his or her
personal interests or the interests of any corporation, partnership or association in which he or she
is directly or indirectly interested. No member, official or employee of the City shall be personally
liable to the City in the event of any default or breach by the Developer or successor or on any
obligations under the terms of this Agreement.
Section 5.5. Titles of Articles and Sections. Any titles of the several parts, articles and
sections of this Agreement are inserted for convenience of reference only and shall be disregarded
in construing or interpreting any of its provisions.
Section 5.6. Notices and Demands. Except as otherwise expressly provided in this
Agreement, a notice, demand or other communication under this Agreement by any party to any
other shall be sufficiently given or delivered if it is dispatched by registered or certified mail,
postage prepaid, return receipt requested, or delivered personally, and
(a) in the case of the Developer is addressed to or delivered personally to:
Stonewood Development LLC
_____________
______________
Attn: ___________
(b) in the case of the City is addressed to or delivered personally to the City at:
City of Elk River, Minnesota
13065 Orono Parkway
Elk River, Minnesota 55330
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Attn: City Administrator
or at such other address with respect to any such party as that party may, from time to time,
designate in writing and forward to the other, as provided in this Section.
Section 5.7. No Additional Waiver Implied by One Waiver. If any agreement contained
in this Agreement should be breached by either party and thereafter waived by the other party,
such waiver shall be limited to the particular breach so waived and shall not be deemed to waive
any other concurrent, previous or subsequent breach hereunder.
Section 5.8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute one and the same instrument.
Section 5.9. Law Governing. This Agreement will be governed and construed in
accordance with the laws of the State.
Section 5.10. Term; Termination. Unless this Agreement is terminated earlier in
accordance with its terms this Agreement shall terminate on the Termination Date. After the
Termination Date, if requested by the Developer, the City will provide a termination certificate as
to the Developer’s obligations hereunder.
Section 5.11. Provisions Surviving Rescission, Expiration or Termination. Sections 4.5
and 4.6 shall survive any rescission, termination or expiration of this Agreement with respect to or
arising out of any event, occurrence or circumstance existing prior to the date thereof.
Section 5.12. Superseding Effect. This Agreement reflects the entire agreement of the
parties with respect to the development of the Development Property, and supersedes in all respects
all prior agreements of the parties, whether written or otherwise, with respect to the development
of the Development Property.
Section 5.13. Relationship of Parties. Nothing in this Agreement is intended, or shall be
construed, to create a partnership or joint venture among or between the parties hereto, and the
rights and remedies of the parties hereto shall be strictly as set forth in this Agreement. All
covenants, stipulations, promises, agreements and obligations of the City contained herein shall be
deemed to be the covenants, stipulations, promises, agreements and obligations of the City and not
of any governing body member, officer, agent, servant or employee of the City or the City.
Section 5.14. Venue. All matters, whether sounding in tort or in contract, relating to the
validity, construction, performance, or enforcement of this Agreement shall be controlled by and
determined in accordance with the laws of the State, and the Developer agrees that all legal actions
initiated by the Developer or City with respect to or arising from any provision contained in this
Agreement shall be initiated, filed and venued exclusively in the State of Minnesota, Sherburne
County, District Court and shall not be removed therefrom to any other federal or state court.
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IN WITNESS WHEREOF, the City has caused this Agreement to be duly executed in its
name and on its behalf, and the Developer has caused this Agreement to be duly executed in its
name and on its behalf, on or as of the date first above written.
CITY OF ELK RIVER, MINNESOTA
By _________________________________
Its Mayor
By _________________________________
Its City Clerk
This is a signature page to the TIF Assistance Agreement.
S-1
EL185-50-718703.v2
STONEWOOD DEVELOPMENT LLC, a
___________ limited liability company
By: ____________________________
Its: ____________________________
This is a signature page to the TIF Assistance Agreement.
S-2
EL185-50-718703.v2
EXHIBIT A
DESCRIPTION OF TIF DISTRICT
The area encompassed by the TIF District shall also include all streets and utility right-of-ways
located upon or adjacent to the property described below.
l nu
Lot 1, Block 1, The Delta
Lot 2, Block 1, The Delta
A-1
EL185-50-718703.v2
EXHIBIT B
LEGAL DESCRIPTION OF DEVELOPMENT PROPERTY
The Development Property includes all street or utility right-of-ways located upon or adjacent to
the property legally described as:
Lot 1, Block 1, The Delta
Lot 2, Block 1, The Delta
l nu
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EL185-50-718703.v2
EXHIBIT C
PUBLIC DEVELOPMENT COSTS
Acquisition and site improvements including demolition, grading and excavating, curb and
gutter, outside utilities (e.g., stormwater, water, sanitary), bituminous paving, underground
parking and surface parking, sidewalks
C-1
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EXHIBIT D
FORM OF PHASE ONE TAXABLE TIF NOTE
No. R-1 $_________
UNITED STATES OF AMERICA
STATE OF MINNESOTA
COUNTY OF SHERBURNE
CITY OF ELK RIVER, MINNESOTA
TAXABLE TAX INCREMENT REVENUE NOTE
(DELTA APARTMENTS PHASE I PROJECT)
___________, 20___
The City of Elk River, Minnesota (the “City”), hereby acknowledges itself to be indebted
and, for value received, hereby promises to pay the amounts hereinafter described (the “Payment
Amounts”) to Stonewood Development LLC, a _______ limited liability company or its registered
assigns (the “Registered Owner”), the principal amount of ___________ ($________), but only in
the manner, at the times, from the sources of revenue, and to the extent hereinafter provided.
This Note is issued pursuant to that certain TIF Assistance Agreement, dated as of
__________, 2021, as the same may be amended from time to time (the “TIF Assistance
Agreement”), by and between the City and Stonewood Development LLC (the “Developer”).
Unless otherwise defined herein or unless context requires otherwise, undefined terms used herein
shall have the meanings set forth in the TIF Assistance Agreement.
The outstanding and unpaid principal amount of this Note shall not bear interest.
The amounts due under this Note shall be payable on August 1, 2023 and on each February
1 and August 1 thereafter to and including the earliest of (i) the date on which the entire principal
on the TIF Note has been paid in full; or (ii) February 1, 2043; or (iii) any earlier date the TIF
Assistance Agreement or this Note is cancelled in accordance with the terms of the TIF Assistance
Agreement or deemed paid in full; or (iv) the February 1 following the date the TIF District is
terminated in accordance with the TIF Act (the “Final Payment Date”) or, if the first should not be
a Business Day (as defined in the TIF Assistance Agreement) the next succeeding Business Day
(collectively, the “Payment Dates”). On each Payment Date, the City shall pay by check or draft
mailed to the person that was the Registered Owner of this Note at the close of the last business
day preceding such Payment Date an amount equal to 90% of the Tax Increments (as defined in
the TIF Assistance Agreement) received by the City during the 6-month period preceding such
Payment Date (“Pledged Tax Increments”).
Payments on this Note shall be payable solely from the Pledged Tax Increments.
This Note shall terminate and be of no further force and effect following the Final Payment
Date defined above, or any date upon which the City shall have terminated the TIF Assistance
Agreement under Section 4.2 thereof or on the date that all principal payable hereunder shall have
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been or deemed paid in full, whichever occurs earliest. This Note may be prepaid in whole or in
part at any time without penalty.
The City makes no representation or covenant, express or implied, that the Pledged Tax
Increments will be sufficient to pay, in whole or in part, the amounts which are or may become
due and payable hereunder. There are risk factors in the amount of Tax Increments that may
actually be received by the City and some of those factors are listed on the attached Exhibit 1. The
Registered Owner acknowledges these risk factors and understands and agrees that payments by
the City under this Note are subject to these and other factors.
The City’s payment obligations hereunder shall be subject to Sections 3.11(2) and 3.12 of
the TIF Assistance Agreement and are further subject to the conditions that (i) no Event of Default
under Section 4.1 of the TIF Assistance Agreement shall have occurred and be continuing at the
time payment is otherwise due hereunder, and (ii) the TIF Assistance Agreement shall not have
been terminated pursuant to Section 4.2, and (iii) all conditions set forth in Section 3.2(2) of the
TIF Assistance Agreement have been satisfied as of such date. Any such suspended and unpaid
amounts shall become payable, if this Note has not been terminated in accordance with Section
4.2 of the TIF Assistance Agreement and said Event of Default shall thereafter have been cured in
accordance with Section 4.2. If pursuant to the occurrence of an Event of Default under the TIF
Assistance Agreement the City elects, in accordance with the TIF Assistance Agreement to cancel
and rescind the TIF Assistance Agreement and/or this Note, the City shall have no further debt or
obligation under this Note whatsoever. Reference is hereby made to all of the provisions of the
TIF Assistance Agreement, for a fuller statement of the rights and obligations of the City to pay
the principal of this Note, and said provisions are hereby incorporated into this Note as though set
out in full herein.
This Note shall be payable on a pro-rata basis with the Phase Two TIF Note (as defined in
the TIF Assistance Agreement).
THIS NOTE IS A SPECIAL, LIMITED REVENUE OBLIGATION OF THE CITY
AND NOT A GENERAL OBLIGATION OF THE CITY AND IS PAYABLE BY THE CITY
ONLY FROM THE SOURCES AND SUBJECT TO THE QUALIFICATIONS STATED
OR REFERENCED HEREIN. THIS NOTE IS NOT A GENERAL OBLIGATION OF THE
CITY, AND THE FULL FAITH AND CREDIT AND TAXING POWERS OF THE CITY
ARE NOT PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF THIS NOTE AND
NO PROPERTY OR OTHER ASSET OF THE CITY, SAVE AND EXCEPT THE
ABOVE-REFERENCED PLEDGED TAX INCREMENTS, IS OR SHALL BE A SOURCE
OF PAYMENT OF THE CITY’S OBLIGATIONS HEREUNDER.
The Registered Owner shall never have or be deemed to have the right to compel any
exercise of any taxing power of the City or of any other public body, and neither the City nor any
person executing or registering this Note shall be liable personally hereon by reason of the issuance
or registration thereof or otherwise.
This Note is issued by the City in aid of financing a project pursuant to and in full
conformity with the Constitution and laws of the State of Minnesota, including the TIF Act.
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This Note may be assigned only as provided in Section 5.3 of the TIF Assistance
Agreement and subject to the assignee executing and delivering to the City the Acknowledgment
Regarding TIF Note in the form included in Exhibit 2 attached hereto. Additionally, in order to
assign the Note, the assignee shall surrender the same to the City either in exchange for a new fully
registered note or for transfer of this Note on the registration records maintained by the City for
the Note. Each permitted assignee shall take this Note subject to the foregoing conditions and
subject to all provisions stated or referenced herein.
IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions, and things required
by the Constitution and laws of the State of Minnesota to be done, to have happened, and to be
performed precedent to and in the issuance of this Note have been done, have happened, and have
been performed in regular and due form, time, and manner as required by law; and that this Note,
together with all other indebtedness of the City outstanding on the date hereof and on the date of
its actual issuance and delivery, does not cause the indebtedness of the City to exceed any
constitutional or statutory limitation thereon.
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IN WITNESS WHEREOF, the City of Elk River, Minnesota, by its City Council, has
caused this Note to be executed by the manual signatures of its Mayor and City Clerk and has
caused this Note to be issued on and dated as of the date first written above.
CITY OF ELK RIVER, MINNESOTA
By____________________________
Its Mayor
By____________________________
Its City Clerk
Signature Page for Tax Increment Revenue Note (Delta Apartments Phase One Project Project)
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CERTIFICATION OF REGISTRATION
It is hereby certified that the foregoing Note, as originally issued on the date first written above,
was on said date registered in the name of Stonewood Development LLC, a _______ limited
liability company, and that, at the request of the Registered Owner of this Note, the undersigned
has this day registered the Note in the name of such Registered Owner, as indicated in the
registration blank below, on the books kept by the undersigned for such purposes.
NAME AND ADDRESS OF DATE OF SIGNATURE OF
REGISTERED OWNER REGISTRATION FINANCE DIRECTOR
Stonewood Development LLC
\[DEVELOPER ADDRESS\]
_________, 20__ ___________________
____________________
____________________
____________________
____________________ _________, 20__ ___________________
____________________
____________________
____________________
____________________ _________, 20__ ___________________
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Exhibit 1
to Taxable TIF Note
RISK FACTORS
Risk factors on the amount of Tax Increments that may actually be received by the City
include but are not limited to the following:
1. Value of Project. If the contemplated Project (as defined in the TIF Assistance
Agreement) constructed in the tax increment financing district is completed at a lesser level of
value than originally contemplated, it will generate fewer taxes and fewer tax increments than
originally contemplated.
2. Damage or Destruction. If the Project is damaged or destroyed after completion,
its value will be reduced, and taxes and tax increments will be reduced. Repair, restoration or
replacement of the Project may not occur, may occur after only a substantial time delay, or may
involve property with a lower value than the Project, all of which would reduce taxes and tax
increments.
3. Change in Use to Tax-Exempt. The Project could be acquired by a party that
devotes it to a use which causes the property to be exempt from real property taxation. Taxes and
tax increments would then cease.
4. Depreciation. The Project could decline in value due to changes in the market for
such property or due to the decline in the physical condition of the property. Lower market
valuation will lead to lower taxes and lower tax increments.
5. Non-payment of Taxes. If the property owner does not pay property taxes, either
in whole or in part, the lack of taxes received will cause a lack of tax increments. The Minnesota
system of collecting delinquent property taxes is a lengthy one that could result in substantial
delays in the receipt of taxes and tax increments, and there is no assurance that the full amount of
delinquent taxes would be collected. Amounts distributed to taxing jurisdictions upon a sale
following a tax forfeiture of the property are not tax increments.
6. Reductions in Taxes Levied. If property taxes are reduced due to decreased
municipal levies, taxes and tax increments will be reduced. Reasons for such reduction could
include lower local expenditures or changes in state aids to municipalities. For instance, in 2001
the Minnesota Legislature enacted an education funding reform that involved the state increasing
school aid in lieu of the local general education levy (a component of school district tax levies).
7. Reductions in Tax Capacity Rates. The taxable value of real property is determined
by multiplying the market value of the property by a tax capacity rate. Tax capacity rates vary by
certain categories of property; for example, the tax capacity rates for residential homesteads are
currently less than the tax capacity rates for commercial and industrial property. In 2001 the
Minnesota Legislature enacted property tax reform that lowered various tax capacity rates to
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“compress” the difference between the tax capacity rates applicable to residential homestead
properties and commercial and industrial properties.
8. Changes to Local Tax Rate. The local tax rate to be applied in the tax increment
financing district is the lower of the current local tax rate or the original local tax rate for the tax
increment financing district. In the event that the Current Local Tax Rate is higher than the Original
Local Tax Rate, then the “excess” or difference that comes about after applying the lower Original
Local Tax Rate instead of the Current Local Tax Rate is considered “excess” tax increment and is
distributed by Sherburne County to the other taxing jurisdictions and such amount is not available
to the City as tax increment.
9. Legislation. The Minnesota Legislature has frequently modified laws affecting real
property taxes, particularly as they relate to tax capacity rates and the overall level of taxes as
affected by state aid to municipalities.
10. Multi-Owner District. In determining the amount of tax increment generated by
the development property, Sherburne County may allocate a sharing factor when there are multiple
parcels of land in the tax increment financing district. This may result in a lower amount of tax
increment attributable to the development property than if the development property was the only
parcel in the district. In addition, the sharing factor calculation is not consistent with the method
that the City will use to determine Pledged Tax Increments.
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Exhibit 2
to Taxable TIF Note
ACKNOWLEDGMENT REGARDING TIF NOTE
The undersigned, ______________ a ___________ (“Note Holder”), hereby certifies and
acknowledges that:
A. On the date hereof the Note Holder has \[acquired from\]/\[made a loan (the “Loan”)
\[to/for the benefit\] of\] Stonewood Development LLC (the “Developer”) \[secured in part by\] the
Taxable Tax Increment Revenue Note (Delta Apartments Phase One Project), a pay-as-you-go tax
increment revenue note (the “Note”) in the original principal amount of $___________ dated
__________, 20___ \[to be\] issued by the City of Elk River, Minnesota (the “City”).
B. The Note Holder has had the opportunity to ask questions of and receive from the
Developer all information and documents concerning the Note as it requested, and has had access
to any additional information the Note Holder thought necessary to verify the accuracy of the
information received. In determining to \[acquire the Note\]/\[make the Loan\], the Note Holder has
made its own determinations and has not relied on the City or information provided by the City.
C. The Note Holder represents and warrants that:
1. The Note Holder is acquiring \[the Note\]/\[an interest in the Note as collateral
for the Loan\] for investment and for its own account, and without any view to resale or
other distribution.
2. The Note Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of acquiring \[the
Note\]/\[an interest in the Note as collateral for the Loan\].
3. The Note Holder understands that the Note is a security which has not been
registered under the Securities Act of 1933, as amended, or any state securities law, and
must be held until its sale is registered or an exemption from registration becomes
available.
4. The Note Holder is aware of the limited payment source for the Note and
interest thereon and risks associated with the sufficiency of that limited payment source.
5. The Note Holder is \[a bank or other financial institution\] / \[the owner of the
property from which the tax increments which are pledged to the Note are generated\].
D. The Note Holder understands that the Note is payable solely from certain tax
increments derived from certain properties located in a tax increment financing district, if and as
received by the City. The Note Holder acknowledges that the City has made no representation or
covenant, express or implied, that the revenues pledged to pay the Note will be sufficient to pay,
in whole or in part, the principal due on the Note. Any amounts which have not been paid on the
Note on or before the final maturity date of the Note shall no longer be payable, as if the Note had
ceased to be an obligation of the City. The Note Holder understands that the Note will never
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represent or constitute a general obligation, debt or bonded indebtedness of the City, the State of
Minnesota, or any political subdivision thereof and that no right will exist to have taxes levied by
the City, the State of Minnesota or any political subdivision thereof for the payment of principal
on the Note.
E. The Note Holder understands that the Note is payable solely from certain tax
increments, which are taxes received on improvements made to certain property (the “Project”) in
a tax increment financing district from the increased taxable value of the property over its base
value at the time that the tax increment financing district was created, which base value is called
“original net tax capacity”. There are risk factors in relying on tax increments to be received,
which include, but are not limited to, the following:
1. Value of Project. If the contemplated Project (as defined in the TIF
Assistance Agreement) constructed in the tax increment financing district is completed at
a lesser level of value than originally contemplated, it will generate fewer taxes and fewer
tax increments than originally contemplated.
2. Damage or Destruction. If the Project is damaged or destroyed after
completion, its value will be reduced, and taxes and tax increments will be reduced. Repair,
restoration or replacement of the Project may not occur, may occur after only a substantial
time delay, or may involve property with a lower value than the Project, all of which would
reduce taxes and tax increments.
3. Change in Use to Tax-Exempt. The Project could be acquired by a party
that devotes it to a use which causes the property to be exempt from real property taxation.
Taxes and tax increments would then cease.
4. Depreciation. The Project could decline in value due to changes in the
market for such property or due to the decline in the physical condition of the property.
Lower market valuation will lead to lower taxes and lower tax increments.
5. Non-payment of Taxes. If the property owner does not pay property taxes,
either in whole or in part, the lack of taxes received will cause a lack of tax increments.
The Minnesota system of collecting delinquent property taxes is a lengthy one that could
result in substantial delays in the receipt of taxes and tax increments, and there is no
assurance that the full amount of delinquent taxes would be collected. Amounts distributed
to taxing jurisdictions upon a sale following a tax forfeiture of the property are not tax
increments.
6. Reductions in Taxes Levied. If property taxes are reduced due to decreased
municipal levies, taxes and tax increments will be reduced. Reasons for such reduction
could include lower local expenditures or changes in state aids to municipalities. For
instance, in 2001 the Minnesota Legislature enacted an education funding reform that
involved the state increasing school aid in lieu of the local general education levy (a
component of school district tax levies).
7. Reductions in Tax Capacity Rates. The taxable value of real property is
determined by multiplying the market value of the property by a tax capacity rate. Tax
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EL185-50-718703.v2
capacity rates vary by certain categories of property; for example, the tax capacity rates for
residential homesteads are currently less than the tax capacity rates for commercial and
industrial property. In 2001 the Minnesota Legislature enacted property tax reform that
lowered various tax capacity rates to “compress” the difference between the tax capacity
rates applicable to residential homestead properties and commercial and industrial
properties.
8. Changes to Local Tax Rate. The local tax rate to be applied in the tax
increment financing district is the lower of the current local tax rate or the original local
tax rate for the tax increment financing district. In the event that the Current Local Tax
Rate is higher than the Original Local Tax Rate, then the “excess” or difference that comes
about after applying the lower Original Local Tax Rate instead of the Current Local Tax
Rate is considered “excess” tax increment and is distributed by Sherburne County to the
other taxing jurisdictions and such amount is not available to the City as tax increment.
9. Legislation. The Minnesota Legislature has frequently modified laws
affecting real property taxes, particularly as they relate to tax capacity rates and the overall
level of taxes as affected by state aid to municipalities.
10. Multi-Owner District. In determining the amount of tax increment
generated by the development property, Sherburne County may allocate a sharing factor
when there are multiple parcels of land in the tax increment financing district. This may
result in a lower amount of tax increment attributable to the development property than if
the development property was the only parcel in the district. In addition, the sharing factor
calculation is not consistent with the method that the City will use to determine Pledged
Tax Increments.
F. The Note Holder acknowledges that the Note was issued as part of an TIF
Assistance Agreement between the City and the Developer dated__________, 2021 (“TIF
Assistance Agreement”), and that the City has the right to suspend payments under this Note and/or
terminate the Note upon an Event of Default under the TIF Assistance Agreement.
G. The Note Holder acknowledges that the City makes no representation about the tax
treatment of, or tax consequences from, the Note Holder’s acquisition of \[the Note\]/\[an interest in
the Note as collateral for the Loan\].
WITNESS our hand this ___ day of _______, 20__.
Note Holder:
_________________________
By ________________________
Name: __________________
Its ________________________
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EXHIBIT E
FORM OF PHASE TWO TIF NOTE
\[TO BE INSERTED AFTER REVIEW\]
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EXHIBIT F
CERTIFICATE OF COMPLETION OF PROJECT
__________, 20___
WHEREAS, the City of Elk River, Minnesota, a municipal corporation under the laws of
the State of Minnesota (the “City”), and Stonewood Development LLC, a ___________ limited
liability company (the “Developer”) have entered into a TIF Assistance Agreement (the “TIF
Assistance Agreement”), dated ________ __, 2021; and
WHEREAS, the TIF Assistance Agreement requires the Developer to construct the \[Phase
One\]\[Phase Two\] Project (as that term is defined in the TIF Assistance Agreement);
WHEREAS, the Developer has constructed the \[Phase One\]\[Phase Two\] in a manner
deemed sufficient by the City to permit the execution of this certification in accordance with
Section 3.7 of the TIF Assistance Agreement;
NOW, THEREFORE, this is to certify that the Developer has constructed the \[Phase
One\]\[Phase Two\] Project in accordance with the TIF Assistance Agreement. The remaining
covenants of the Developer under the TIF Assistance Agreement are not intended to run with title
to the Development Property or bind successors in title to the Development Property.
CITY OF ELK RIVER,
MINNESOTA
__________________________
City Administrator
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Memo
Members of the Elk River City Council
To: Cal Portner, City Administrator
Colleen Eddy, Economic Development Specialist
From: Mikaela Huot, Director
Date: May 17, 2021
Financial Needs Analysis for proposed Delta Tax Increment Financing
Subject: Redevelopment (TIF) District project proposed by Stonewood Development,
LLC
Background
The City of Elk River received an application from Stonewood Development, LLC for financial assistance
through Tax Increment Financing (TIF) to assist with financing the redevelopment of the former Saxon site and
offsetting a portion of the redevelopment costs necessary for construction of approximately 180 units of market
rate apartment housing units to be built in two phases (90 units each). The application included a request for
up to 26 years of tax increment assistance and the City’s current policy limits the level of assistance for
redevelopment projects to 15 years. The request for assistance has been reviewed by the Joint Finance
Committee (JFC) and Housing and Redevelopment Authority (HRA) at multiple meetings as consideration and
support for the project and recommended level of assistance. The JFC recommended 20 years of assistance
be provided for each phase of the project and would be considered a deviation from the City’s current policy
regarding term due to extraordinary circumstances.
The applicant provided a purchase agreement for $2,000,000 between Sun Rae Apartments, LLC and
Stonewood Development, LLC indicating acquisition of the property and subsequent construction of the project
was contingent upon 20 years of TIF assistance provided by the City. In conjunction with purchase of the
property was the request to provide an appraisal verifying value assumptions. That has been prepared and
provided to illustrate a value that supports the purchase price. The applicant has also provided a letter from its
anticipated lender, Bank Forward, that includes financing terms for each phase of development and an
indication that 20 years of tax increment from each phase will be necessary to provide sufficient cash flow to
meet minimum debt coverage requirements.
The purpose of this memorandum is to provide a summary of Baker Tilly’s review of the development project
costs and operating pro forma as provided by the applicant (Stonewood Development, LLC) to assist the City
with making a determination 1) if the project as proposed would be unlikely to proceed “but-for” the requested
Tax Increment Financing (TIF) assistance, and 2) if assistance was necessary, to determine the appropriate
amount and terms, if any, of public assistance. Prior to establishing a tax increment financing district, there are
findings that need to be made by the City that include: 1) determination that the project qualifies as a TIF district
and 2) determination that the project as proposed would not proceed without public assistance (meeting the
“but-for” test). When reviewing requests for financial assistance it is important to understand how the level of
financial assistance would impact the ability of the project to proceed as proposed and maximize new value
created on the current project site.
Project Summary
The applicant is proposing to construct two 90-unit residential apartment buildings on the former Saxon auto
site for completion of a total of 180 new units with underground parking. Phase 1 of the project is expected to
commence construction in 2021. The applicant intends to commence construction of the second building
(Phase 2) shortly thereafter but has indicated construction could start 2-3 years after phase 1.
Applicant Request for Assistance
Stonewood Development, LLC has requested assistance that includes 90% of incremental revenues for 20
years from each building phase as necessary for redevelopment of the project site. The applicant’s supporting
financial information includes updated sources and uses of funds with a revised total development cost of $34.7
million with 80% as debt financing and 20% as private equity. Financial assistance through pay-as-you-go tax
increment financing from the City of Elk River has been requested to provide additional revenues to support the
required level of debt and project cash flow to repay annual debt service payments. Typical extraordinary
redevelopment costs that cannot be supported solely by the project alone could justify the need for public
financial assistance and allow the project to proceed as proposed to provide appropriate upfront funding and
meet the minimum debt coverage requirements. The applicant has indicated the receipt of City financial
assistance is necessary for the project to proceed.
The updated sources and uses of funds from the applicant’s financial materials is illustrated in the table below.
Sources Amount Uses Amount
First Mortgage $27,762,071 80% Acquisition $2,225,000 6%
Equity $6,940,518 20% Professional $1,368,591 4%
General $2,842,024 8%
Site Development $1,671,415 5%
Construction $17,537,997 51%
Concrete $4,347,650 13%
Development Fee $1,499,634 4%
Construction Management Fee $1,499,634 4%
Contingency $1,710,645 5%
Total $34,702,589 100% Total $34,702,589 100%
Tax increment financing has been requested as pay-as-you-go and would not be an upfront funding source and
instead be used to support repayment of first mortgage debt service
TIF Eligible Expenses
Site Improvements/Preparation Costs Amount
Land acquisition $2,000,000
Excavating/grading $860,887
Concrete work $3,902,650
Driveway $220,986
Masonry/precast $445,000
Landscaping $305,000
Total $7,734,523
Project Financing
There are generally two ways in which assistance can be provided for most projects, either upfront or on a pay-
as-you-go basis. With upfront financing, the City would finance a portion of the applicant’s initial project costs
through the issuance of bonds or as an internal loan. Future tax increment would be collected by the City and
used to pay debt service on the bonds or repayment of the internal loan. With pay-as-you-go financing, the
applicant would finance all project costs upfront and would be reimbursed over time for a portion of those costs
as revenues are available.
Pay-as-you-go-financing is generally more acceptable than upfront financing for the City because it shifts the
risk for repayment to the applicant. If tax increment revenues are less than originally projected, the applicant
receives less and therefore bears the risk of not being reimbursed the full amount of their financing. However,
in some cases pay as you go financing may not be financially feasible. With bonds, the City would still need to
make debt service payments and would have to use other sources to fill any shortfall of tax increment revenues.
With internal financing, the City reimburses the loan with future revenue collections and may risk not repaying
itself in full if tax increment revenues are not sufficient. The project financing as requested includes pay-as-you-
go for reimbursement of eligible costs.
Tax Increment Revenue Assumptions
The County Assessor provided a taxable value estimate for the project. To estimate the amount of available
TIF revenues generated by the proposed project, certain assumptions were made based on the value of the
project, construction schedule, and anticipated financing terms.
Total existing value of $548,300
o Base value as of Jan. 1, 2020
o Original net tax capacity (ONTC) of $6,854
o Assuming classification as residential rental
Rental classification is 1.25%
Estimated total market value upon completion
o $21,759,300
o 180 new units
Classification for all units as rental
o Rental class rate (1.25% per unit)
Incremental value based on difference between existing and new land/building value
Construction commences in 2021 and is completed in 2022
o Project values 100% complete for assess 2023 and taxes payable 2024
First increment collected in 2023
o Election to delay first increment by up to 4 years
Net present value (discount) rate of 4%
0% annual market value inflation
Revenue Estimates
Estimated annual available increment (full buildout) $332,678
Projected tax increment (90%) $6,632,848
City retainage (10%) $736,988
Net amount available for development (90%) $7,369,836
Financial Needs (Pro forma Analysis) including But-For
Upon approval of a TIF district and project, the City must make several findings, including the “but for” test: that
the proposed development would not reasonably be expected to occur solely through private investment within
the reasonably foreseeable future. The applicant has stated that but for the provision of tax increment
financing, the project as proposed would not occur. Based on the applicant’s stated position relative to the
need for tax increment financing assistance, the City could make its “but for” finding and provide tax increment
assistance. We recommend, however, that the City review the provided assumptions to consider if the project
meets the but-for test and, if so, what an appropriate level and type of TIF assistance may be based on the
information submitted by the applicant.
Following thorough evaluation of the project as provided allows the City to be prepared to make an informed
“but-for” decision based on the likelihood of the project needing assistance, as well as the appropriate level of
assistance. To complete this analysis, we reviewed the applicant’s provided operating proforma and
constructed similar ten-year project proformas, showing a result if the project received financial assistance as
pay-as-you-go (reimbursement for TIF eligible costs) and showing a result if the project did not receive
assistance. Our analysis of the proformas included a review of the development budget, projected operating
revenues and expenditures, and the project’s capacity to support annual debt service on outstanding debt. The
purpose of evaluating the operating proformas is to understand the potential cash flow performance through
initial development of the project and the annual operations of the project over a 10-year period to assist with
determining if the project is financially feasible and would need public participation.
Measuring project feasibility is typically accomplished by analyzing a combination of 1) projected rate of return –
both annual and cumulative and 2) estimated debt coverage ratio (DCR). Rate of return analysis illustrates the
projected return to the applicant using the available cash flow after payment of operating expenses and debt as
a measurement to the initial equity investment. Industry standards for development types indicate the level of
investment a developer is willing to make based on projected returns from the project. Should the projected
annual and cumulative returns fall below those standards, the project would require reduced level of equity
participation and/or increased cash flow. Debt Coverage Ratio (DCR) is a calculation detailing the ratio by
which operating income exceeds the debt payments for the project. If the DCR is greater than 1.0 it indicates
the project has operating income that is greater than the debt-service payment by some margin; conversely if
the DCR is less than 1.0 it indicates the project is incapable of meeting its debt-service payment and would
need to seek additional revenue sources in order to pay its debt. Typical lending standards will require a DCR
of greater than 1.0 as a measure of cushion in the event actual revenues and expenses are different than
projected.
We reviewed the financial information as provided by the applicant to assist with making the determination 1)
that tax increment assistance is necessary and 2) what is an appropriate level of assistance. We analysed the
financial information as provided by the applicant including total development costs as compared to operating
income to estimate both the projected rate of return and debt coverage ratios. The level of debt financing the
project can obtain and support is based on the net operating income (NOI). The annual lease and other
(parking) revenues and operating expenses have been provided by the applicant to project the NOI.
Review of the operating proformas based on with assistance as pay-as-you-go and with no assistance provides
the range of financial feasibility for this project and what the estimated gap would be without assistance. It is
important to note that certain assumptions were made based on the applicant’s provided information and
market industry standards for annual lease rates, vacancy rates and annual revenue and operating expense
inflators in order to understand the project performance. Adjustments made to those assumptions assist in
understanding potential impact on project performance and what a required level of assistance (number of
years and total amounts) may be.
To understand viability of the project and need for an appropriate level of public assistance, we provided a
sensitivity analysis to the proformas with adjustments made to the total project costs (including land acquisition,
development and construction management fee and contingency) and corresponding funding sources, as well
as projected annual lease rates and operating expenses. As stated earlier within the memo, the property was
previously purchased for redevelopment in 2014 by Sun Rae Development, LLC. Sun Rae Development, LLC
and Stonewood Development, LLC have entered into a purchase agreement contingent on receipt of 20 years
of TIF for an estimated purchase price of $2,000,000. Included with the request for financial assistance were
appraisals supporting the anticipated purchase price. All other financing and operating performance
assumptions remaining the same, reducing the total development costs including potential purchase price and
other related development costs is expected to positively impact the project performance and would reduce the
level of public assistance that is necessary. However, the participants have indicated a reduced sale price is not
possible and adjustments to any assumptions would not eliminate the need for public assistance.
Upon review of the annual cash flow performance, increasing the projected lease rates beyond what is currently
estimated would also result in additional cash flow that would provide both a higher debt coverage ratio and rate
of return. Realizing these adjustments are all based on assumptions, and current market conditions support the
projected lease rates. The purpose of the sensitivity analysis is to test the level of assistance that may be
needed using those assumptions to understand if the recommended level of assistance could be consistent
with the City’s policy objectives and less than what has been requested. Analysis also requires a balancing of
existing market conditions with what the project could support.
Conclusion
The applicant has requested financial assistance related to redevelopment of the former Saxon site and
subsequent construction of two 90-unit market rate apartment buildings. Through submission of the tax
increment financing application and supporting financial information, the applicant has indicated that the project
would not occur as proposed without financial assistance from the City due to below market debt coverage and
rates of return. The applicant has provided documentation from a potential lender indicating financing for this
project subject to: availability of sufficient equity such as cash, land or acceptable soft costs, appraisal,
environmental and title for the property, and a minimum 20 year TIF equal or greater than 90% of the total tax
estimate. The purchase agreement of $2,000,000 for sale of the property is contingent upon receipt of 20 years
of tax increment assistance from the City to Stonewood Development, LLC. Included with the request for
financial assistance were appraisals supporting the anticipated purchase price. The additional requested
documentation provides support for the request and term of financial assistance.
Based on the financial analysis and available financing assumptions, without financial assistance, the project
does not appear to be feasible. The applicant’s operating proforma without tax increment assistance is less
than 1.0x DCR and with assistance using tax increment revenues as available cash flow, would be closer to
1.2x DCR, which is generally an acceptable level required for this type of project. Without assistance, the
projected annual and cumulative rate of return is below industry standards for this type of project and with
annual public assistance the project is projected to achieve marketable returns. Both the rate of return and debt
coverage analysis indicate that the provided financing structure would not be financially viable without one or
more of the following: 1) reduction in project costs 2) additional annual cash flow, and/or 3) additional funding
sources. The projected performance of the project without as or would be necessary to obtain a level of debt
financing necessary to fund all project costs and provide a reasonable return.
Considerations for level of public assistance parameters include:
Public to private investment
Public assistance (TIF) and private equity
Extraordinary costs
Financial gap
Additional factors that may impact project feasibility and level of public assistance include review of the City’s
current TIF policy and implications to the financing assumptions. The City’s TIF policy provides for TIF District
terms be limited to the minimum term necessary to meet the project needs with a redevelopment district limit of
15 years. Only projects exceeding the objectives identified in the policy will be considered to exceed those
general thresholds. The application includes a request for 20 years of assistance. A supporting preapproval
letter from the potential lender has indicated that 90% of the tax increment revenues over 20 years is needed to
support debt service. Also related to policy guidelines is the requirement of owner cash equity of 10%. The
applicant’s level of equity as proposed is 20%. The City commissioned a Comprehensive Housing Market Study
Update in 2018. At that time the study identified a potential demand for approximately 864 new housing units
through 2025. There was also strong demand for additional market rate (172 units).
Thank you for the opportunity to be of assistance to the City of Elk River. Please contact me at 651.368.2533
or Mikaela.huot@bakertily.com with any questions or comments.
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.................................................................................... _3
Section 1.1.
Definitions 3
ARTICLE II REPRESENTATIONS AND WARRANTIES......................................................................................................
Section 2.1.
Representations and Warranties of the City..........................................................................
Section 2.2.
Representations and Warranties of the Developer ...........................................................
ARTICLE III UNDERTAKINGS BY DEVELOPER AND City..........................................................................................
Section 3.1.
Total Development Costs and Public Costs...........................................................................
Section 3.2.
TIF Note.
Section 3.3.
Developer to Pay City's Fees and Expenses..........................................................................
Section 3.4.
Construction Plans.
Section 3.5.
Commencement and Completion of Construction..........................................................
Section 3.6.
Insurance
Section 3.7
Certificate of Completion
Section 3.8.
Encumbrance of the Development Property..........................................................................
Section3.9.
Business Subsidy Act....................................................................................................................................
Section 3.10.
Right to Collect Delinquent Taxes...................................................................................................
Section 3.11.
Review of Taxes.
ARTICLE IV EVENTS OF DEFAULT
Section 4.1.
Events of Default Defined........................................................................................................................
Section 4.2.
Remedies on Default
Section 4.3.
No Remedy Exclusive...................................................................................................................................
Section4.4.
No Implied Waiver..........................................................................................................................................
Section 4.5.
Indemnification of City and City.......................................................................................................
Section 4.6.
Reimbursement of Attorneys' Fees................................................................................................
ARTICLE V ADDITIONAL PROVISIONS...............................................................................................................................................
Section 5.1.
Restrictions on Use..........................................................................................................................................
Section5.2.
Reports..........................................................................................................................................................................
Section 5.3.
Limitations on Transfer and Assignment..................................................................................
Section 5.4.
Conflicts of Interest.
Section 5.5.
Titles of Articles and Sections.............................................................................................................
Section 5.6.
Notices and Demands....................................................................................................................................
Section 5.7.
No Additional Waiver Implied by One Waiver..................................................................
Section5.8.
Counterparts...........................................................................................................................................................
Section5.9.
Law Governing....................................................................................................................................................
Section5.10.
Term; Termination...........................................................................................................................................
Section 5.11.
Provisions Surviving Rescission, Expiration or Termination ..............................
Section 5.12.
Superseding Effect .......................
Section5.13.
Relationship of Parties..................................................................................................................................
Section 5.14.
Venue
EL 185-50-718703.v2
EXHIBIT A DESCRIPTION OF TIF DISTRICT A-1
EXHIBIT B DESCRIPTION OF DEVELOPMENT PROPERTY B-1
...........................................................................
EXHIBIT C PUBLIC DEVELOPMENT COSTS C-1
......................................................................................................................
EXHIBIT D FORM OF PHASE ONE TAXABLE TIF NOTE D-1
EXHIBIT E FORM OF PHASE TWO TAXABLE TIF NOTE E-1
...................................................................................
ii
EL185-50-718703.v2
TIF ASSISTANCE AGREEMENT
THIS TIF ASSISTANCE AGREEMENT (the "Agreement"), made as of the _ day of
, 2021, by and between the CITY OF ELK RIVER, MINNESOTA (the "City"), a
municipal corporation under the Constitution and laws of the State of Minnesota, and
STONEWOOD DEVELOPMENTCTHE DELTA APARTMENTS L.L.C., a
Minnesota limited liability company (the "Developer"), and
WITNESSETH:
WHEREAS, the City has undertaken a program to promote economic development and
redevelopment and job opportunities and to promote the development of land which is
underutilized within the City, and in connection therewith created a development project known
as Development District No. 1 (the "Development District") and developed a Development
Program (the "Development Program") therefor pursuant to Minnesota Statutes, Sections
469.124 to 469.134, as; and
WHEREAS, pursuant to the provisions of Minnesota Statutes, Sections 469.174 through
469.1794, as amended (the "TIF Act"), the City has created, within the Development District,
Tax Increment Financing (Redevelopment) District No. 27 (Delta Apartments Project) qualified
as a redevelopment tax increment financing district (the "TIF District"), the description of which
is attached hereto as Exhibit A, and has adopted a Tax Increment Financing Plan therefor (the
"TIF Plan") approved by the City Council on May 3, 2021 which provides for the use of tax
increment financing in connection with certain development within the Development District and
TIF District; and
WHEREAS, the Developer proposes to acquire certain property, demolish existing
blighted buildings thereon, and construct two approximately 90-unit multifamily housing
buildings and related amenities in two phases thereon (the "Project"); and
WHEREAS, the Developer has requested that the City use tax increment financing to
assist the Developer with certain costs thereof in order to fill the gap between the Total
Development Costs (as hereinafter defined) and the funds available to pay such costs; and
WHEREAS, the City believes that the redevelopment and construction of the Project, and
fulfillment of this Agreement, are vital and are in the best interests of the City, and in accordance
with the public purpose and provisions of applicable state and local laws and requirements under
which the Project has been undertaken and is being assisted;
NOW, THEREFORE, in consideration of the premises and the mutual obligations of the
parties hereto, each of them does hereby covenant and agree with the other as follows:
EL185-50-718703.v2
ARTICLE I
DEFINITIONS
Section L I. Definitions. All capitalized terns used and not otherwise defined herein
shall have the following meanings unless a different meaning clearly appears from the context:
Administrative Costs has the meaning set forth in Section 3.3;
Affiliate means a corporation, partnership, joint venture, association, business trust or
similar entity organized under the laws of the United States of America or a state thereof which
is directly controlled by or under common control with the Developer or any other Affiliate. For
purposes of this definition, control means the power to direct management and policies through
the ownership of at least a majority of its voting securities, or the right to designate or elect at
least a majority of the members of its governing body by contract or otherwise;
Agreement means this TIF Assistance Agreement, as the same may be from time to time
modified, amended or supplemented;
Architect means the architect selected by the Developer as the architect for the Project;
Business Dati means any day except a Saturday, Sunday or a legal holiday or a day on
which banking institutions in the City are authorized by law or executive order to close;
Certificate of Completion means a Certificate of Completion, a form of which is attached
hereto as Exhibit F with respect to each phase of the Project executed by the City and delivered
to the Developer pursuant to Section 3.9 hereof;
City means the City of Elk River, Minnesota;
Completion Date means the date on which the Certificate of Completion with respect to
each phase of the Project is executed by the City pursuant to Section 3.9 hereof;
Construction Costs means the capital costs of the construction of the Project, including
the costs of labor and materials; construction management and supervision expenses; insurance
and payment or performance bond premiums; architectural and engineering fees and expenses;
property taxes; usual and customary fees or costs payable to the City or any other public body
with regulatory authority over construction of the Project (e.g. building permits and inspection
fees); the developer fee; and all other costs chargeable to the capital account of the Project under
generally accepted accounting principles;
Construction Documents means the following documents, all of which shall be in form
and substance reasonably acceptable to the City: (a) evidence satisfactory to the City showing
that the Project conforms to applicable zoning, subdivision and building code laws and
ordinances, including a copy of the building permit for the Project; (b) a copy of the executed
standard form of agreement between owner and architect for architectural services for the
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EL185-50-718703.v2
Project, if any, and (c) a copy of the executed General Contractor's contract for the Project, if
any;
Construction Plans means the plans, specifications, drawings and related documents for
the construction of the Project, which shall be as detailed as the plans, specifications, drawings
and related documents which are submitted to the building inspector of the City;
Coun means Sherburne County, Minnesota;
County Assessor means the County Assessor of Sherburne County, Minnesota;
Design Drawings means the floor plans, renderings, elevations and material
specifications for the Project prepared by the Architect;
hereto;
Developer means The Delta Apartments L.L.C., a
Minnesota limited liability company, and its authorized successors and assigns;
Development Property means the real property legally described in Exhibit B attached to
Event of Default means any of the events described in Section 4.1 hereof,
General Contractor means the general contractor selected by the Developer as the general
contractor for the Project;
Phase One Final Payment Date means the earliest of (i) the date on which the entire
principal on the Phase One TIF Note has been paid in full; or (ii) February 1, 24432045; or (iii)
any earlier date this Agreement or the Phase One TIF Note is terminated or cancelled in
accordance with the terms hereof or deemed paid in full; or (iv) the February 1 following the date
the TIF District is terminated in accordance with the TIF Act;
Phase One Payment Date means August 1, 24,142024 and each February 1 and August 1
thereafter to and including the Phase One Final Payment Date; provided, that if any such Phase
One Payment Date should not be a Business Day, the Phase One Payment Date shall be the next
succeeding Business Day;
Phase One Project means the acquisition of the Development Property, demolition of
existing blighted buildings, and construction of an approximately 90-unit multifamily housing
building and related amenities thereon;
Phase One TIF Note means the Taxable Tax Increment Revenue Note (Delta Apartments
Phase One Project) to be executed by the City and delivered to the Developer pursuant to Article
III hereof, a form of which is set forth in Exhibit D attached hereto;
Phase Two Final Payment Date means the earliest of (i) the date on which the entire
principal on the Phase Two TIF Note has been paid in full; or (ii) February 1, 294-2048; or (iii)
any earlier date this Agreement or the Phase Two TIF Note is terminated or cancelled in
EL185-50-718703.v2
accordance with the terms hereof or deemed paid in full; or (iv) the February 1 following the date
the TIF District is terminated in accordance with the TIF Act;
Phase Two Pa\?rent Date means August 1, and each February 1 and August I
thereafter to and including the Phase Two Final Payment Date; provided, that if any such Phase
Two Payment Date should not be a Business Day, the Phase Two Payment Date shall be the next
succeeding Business Day;
Phase Two Project means the construction of a second approximately 90-unit multifamily
housing building and related amenities on the Development Property;
Phase Two TIF Note means the Taxable Tax Increment Revenue Note (Delta Apartments
Phase Two Project) to be executed by the City and delivered to the Developer pursuant to Article
III hereof, a form of which is set forth in Exhibit E attached hereto;
Pled_ed Tax Increments means for any 6-month period, 90% of the Tax Increments
received by the City since the previous Phase One Payment Date or Phase Two Payment Date,
respectively;
Project means, collectively, the Phase One Project and the Phase Two Project;
Public Development Costs means the public redevelopment costs of the Project identified
on Exhibit C attached hereto and any other cost incurred by the Developer, or its assigns, that
the City determines is eligible for reimbursement with Pledged Tax Increments;
Reimbursement Amount means the lesser of (i) $3,316,424 with respect to the Phase One
Project and $3,316,424 with respect to the Phase Two Project; or (ii) the Public Development
Costs actually incurred and paid by the Developer;
City;
Site Plan means the site plan prepared for the Development Property approved by the
State means the State of Minnesota;
Tax Increments means the tax increments derived from the Development Property and
the improvements thereon which have been received and are permitted to be retained by the City
as determined in its sole discretion in accordance with the TIF Act including, without limitation,
Minnesota Statutes, Section 469.177; Section 469.176, Subd. 4h; and Section 469.175, Subd. la,
or otherwise pursuant to the Tax Increment Act as the same may be amended from time to time;
Termination Date means the later of the Phase One Final Payment Date or the Phase Two
Final Payment Date;
TIF Act means Minnesota Statutes, Sections 469.174 through 469.1794, as amended;
TIF District means Tax Increment Financing (Redevelopment Development) District No.
27 (Delta Apartments Project), a redevelopment tax increment financing district, consisting of
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EL 185-50-718703.v2
the property described in Exhibit A attached hereto, which was established as a redevelopment
district under the TIF Act;
TIF Notes means, collectively, the Phase One TIF Note and the Phase Two TIF Note;
TIF Plan means the tax increment financing plan approved for the TIF District;
Total Development Costs means all Construction Costs and any other costs of the
development of the Project to be incurred by the Developer; and
Unavoidable Delays means delays, outside the control of the party claiming their
occurrence, which are the direct result of strikes, other labor troubles, unusually severe or
prolonged bad weather, acts of God, pandemic, acts of war or terrorism, fire or other casualty to
the Project, litigation commenced by third parties which, by injunction or other similar judicial
action or by the exercise of reasonable discretion, directly results in delays, or acts of any federal,
state or local governmental unit (other than the City) which directly result in delays, acts of the
public enemy or acts of terrorism and discovery of unknown hazardous materials or other
concealed site conditions or delays of contractors due to such discovery, or any other delays
beyond the reasonable control of the Developer or City including but not limited to, delays
caused directly or indirectly by pandemic.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations and Warranties of the City. The City makes the following
representations and warranties:
(1) The City is a municipal corporation and political subdivision duly organized and
existing under the Constitution and laws of the State and has the power to enter into this
Agreement and carry out its obligations hereunder.
(2) The City has taken the actions necessary to establish the TIF District as a
"redevelopment district" within the meaning of Minnesota Statutes, Section 469.174,
Subdivision 10.
(3) The development contemplated by this Agreement is in conformance with the
development objectives set forth in the Development Program and the TIF Plan.
(4) The City makes no representation or warranty, either express or implied, as to the
Development Property or its condition, or that the Development Property shall be suitable for the
Developer's purposes or needs.
(5) No member of the City Council or other officer of the City, has either a direct or
indirect financial interest in this Agreement, nor will any member of the City Council, or other
EL185-50-718703.v2
officer of the City, benefit financially from this Agreement within the meaning of Minnesota
Statutes, Sections 412.311 and 471.87.
Section 2.2. Representations and Warranties of the Developer. The Developer makes
the following representations and warranties:
(1) The Developer is a Minnesota limited liability company duly and
validly organized and existing in good standing under the laws of the State of
Minnesota, is qualified to do business in the State, and has power and authority to enter
into this Agreement and to perform its obligations hereunder and is not in violation of any
provision of the laws of the State.
(2) The construction of the Project would not be undertaken by the Developer, and in
the opinion of the Developer would not be economically feasible within the reasonably
foreseeable future, without the assistance and benefit to the Developer provided for in this
Agreement.
(3) Neither the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby, nor the fulfillment of or compliance with the terms and
conditions of this Agreement is prevented, limited by or conflicts with or results in a breach of,
the terms, conditions or provision of any contractual restriction, evidence of indebtedness,
agreement or instrument of whatever nature to which the Developer is now a party or by which it
is bound, or constitutes a default under any of the foregoing.
(4) The Developer understands that the City may subsidize or encourage the
development of other developments in the City, including properties that compete with the
Development Property and the Project, and that such subsidies may be more favorable than the
terms of this Agreement, and that the City has informed the Developer that development of the
Development Property will not be favored over the development of other properties.
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EL185-50-718703.v2
ARTICLE III
UNDERTAKINGS BY DEVELOPER AND City
Section 3.1. Total Development Costs and Public Costs.
(1) Based on the Developer's representation that the Total Development Costs for the
Project are approximately $34,702,589, that the sources of revenue available to pay such costs,
excluding the tax increment assistance contemplated herein, do not exceed $28,867,964, and that
the Developer is unable to obtain additional private financing or investment for the estimated
Total Development Costs, the City has agreed to provide tax increment financing subject to the
terms and conditions as hereinafter set forth. The Developer must provide the City copies of all
executed financing documents related to financing the Total Development Costs of the Project.
(2) The parties agree that the Public Development Costs to be incurred by the
Developer are essential to the successful completion of the Project. The Developer anticipates
that the Public Development Costs for the Project which are identified in Exhibit C attached
hereto will be at least $7,734,523.
(3) As of January 2, 242-52028, the estimated market value of the Development
Property, as improved by the Project, is expected to be at least $21,759,300.
(4) The Developer shall acquire the Development Property. In addition, the
Developer has acquired or has entered into a purchase agreement pursuant to which it will
acquire fee title to the Development Property.
(5) The Developer will cause the Project to be constructed in accordance with the
terms of this Agreement, the Development Program, and all local, state and federal laws and
regulations including, but not limited to, environmental, zoning, energy conservation, building
code and public health laws and regulations.
(6) The Developer shall, in a timely manner, comply with all requirements necessary
to obtain, or cause to be obtained, all required permits, licenses and approvals, and will meet, in
a timely manner, all requirements of all applicable local, state, and federal laws and regulations
which must be obtained or met for the construction and operation of the Project.
(7) The Total Development Costs shall be paid by the Developer, and the City shall
reimburse the Developer for the Public Development Costs in the Reimbursement Amount solely
through the issuance of the TIF Notes as provided herein.
Section 3.2. TIF Notes.
(1) The TIF Notes will be originally issued to the Developer, as provided in Section
3.2(2) and Section 3.2(3) hereof, in a principal amount equal to the Reimbursement Amount for
the respective phase of the Project and each shall be dated as of its date of issuance. The
7
EL185-50-718703.v2
principal of the TIF Notes shall be payable on a pay-as-you-go basis on a pro-rata basis solely
from the Pledged Tax Increments as provided below. The TIF Notes shall not bear interest.
(2) The Phase One TIF Note shall be issued, in substantially the form attached hereto
as Exhibit D only when: (A) the Developer shall have submitted written proof and other
documentation as may be reasonably satisfactory to the City of the exact nature and amount of
the Public Development Costs incurred by the Developer relating to the Phase One Project,
together with such other information or documentation as may be reasonably necessary and
satisfactory to the City to enable the City to substantiate the Developer's tax increment
expenditures for Public Development Costs in accordance with Exhibit C attached hereto and/or
to comply with its tax increment reporting obligations to the Commissioner of Revenue, the
Office of the State Auditor or other applicable official; (B) the Developer shall have obtained
from the City a certificate of occupancy for all residential units in the Phase One Project and a
certificate of occupancy; (C) the Developer shall have paid all of the City's Administrative Costs
required to have been paid as of such date in accordance with Section 3.3 hereof; (D) the
Developer shall be in material compliance with each term or provision of this Agreement
required to have been satisfied as of such date. The documentation provided in accordance with
Section 3.2(2)(A) shall include specific invoices for the particular work from the contractor or
other provider and shall include paid invoices, copies of remittances and/or other suitable
documentary proofs of the Developer's payment thereof.
(3) The Phase Two TIF Note shall be issued, in substantially the form attached hereto
as Exhibit E only when: (A) the Developer shall have submitted written proof and other
documentation as may be reasonably satisfactory to the City of the exact nature and amount of
the Public Development Costs incurred by the Developer relating to the Phase Two Project,
together with such other information or documentation as may be reasonably necessary and
satisfactory to the City to enable the City to substantiate the Developer's tax increment
expenditures for Public Development Costs in accordance with Exhibit C attached hereto and/or
to comply with its tax increment reporting obligations to the Commissioner of Revenue, the
Office of the State Auditor or other applicable official; (B) the Developer shall have obtained
from the City a certificate of occupancy for all residential units in the Phase Two Project and a
certificate of occupancy; (C) the Developer shall have paid all of the City's Administrative Costs
required to have been paid as of such date in accordance with Section 3.3 hereof; (D) the
Developer shall be in material compliance with each term or provision of this Agreement
required to have been satisfied as of such date. The documentation provided in accordance with
Section 3.2(3)(A) shall include specific invoices for the particular work from the contractor or
other provider and shall include paid invoices, copies of remittances and/or other suitable
documentary proofs of the Developer's payment thereof.
(4) The TIF Notes shall not bear interest. Principal on the TIF Notes will be payable
on each Phase One Payment Date and Phase Two Payment Date, respectively; however, the sole
source of funds required to be used for payment of the City's obligations under this Section and
correspondingly under the TIF Notes shall be the Pledged Tax Increments received in the
6-month period preceding each Phase One Payment Date or Phase Two Payment Date,
respectively. The TIF Notes shall be payable on a pro-rata basis.
8
EL 185-50-718703.v2
(5) On each Phase One Payment Date and Phase Two Payment Date, respectively the
Pledged Tax Increment shall be applied to reduce the principal on a pro rata basis. All Tax
Increments in excess of the Pledged Tax Increments necessary to pay the principal on the TIF
Notes are not subject to this Agreement, and the City retains full discretion as to any authorized
application thereof. To the extent that the Pledged Tax Increments are insufficient through the
Final Payment Date, to pay all amounts otherwise due on the TIF Notes, said unpaid amounts
shall then cease to be any debt or obligation of the City whatsoever.
(6) The TIF Notes shall be special and limited obligations of the City and not a
general obligation of the City, and only Pledged Tax Increments shall be used to pay the
principal of the TIF Notes.
(7) The City's obligation to make payments on the TIF Notes on any Phase One
Payment Date or Phase Two Payment Date, respectively is subject to Section 3.11(2) and shall
be conditioned upon the requirement that (A) there shall not at that time be an Event of Default
that has occurred and is continuing under this Agreement that has not been cured during the
applicable cure period, (B) this Agreement shall not have been terminated pursuant to Section
4.2, and (C) all conditions set forth in Section 3.2(2) or 3.2(3), as applicable, have been satisfied
as of such date.
(8) The TIF Notes shall be governed by and payable pursuant to the additional terms
thereof, as actually executed, in substantially the forms set forth in Exhibit D and Exhibit E
attached hereto. In the event of any conflict between the terms of the TIF Note and the terms of
this Section 3.2, the terms of the TIF Notes shall govern. The issuance of the TIF Notes is
pursuant and subject to the terms of this Agreement.
(9) In accordance with Section 469.1763, Subdivision 3 of the TIF Act, conditions for
delivery of the TIF Notes must be met within 5 years after the date of certification of the TIF
District by the County. If the conditions are not satisfied by such date, the City has no further
obligations under this Section 3.2.
(10) The financial assistance to the Developer under this Agreement is based on
certain assumptions regarding likely costs and expenses associated with constructing the Project.
The City and the Developer agree that the Developer's representations of the Total Development
Costs are true and correct.
(11) The Developer understands and acknowledges that the City makes no
representations or warranties regarding the amount of Pledged Tax Increment, or that revenues
pledged to the TIF Notes will be sufficient to pay the principal of the TIF Notes. Any estimates
of Tax Increment prepared by the City or its financial or municipal advisors in connection with
the TIF District or this Agreement are for the benefit of the City and are not intended as
representations on which the Developer may rely.
Section 3.3. Developer to Pay City's Fees and Expenses. The Developer will pay all of
the City's reasonable Administrative Costs (as defined below) and must pay such costs to the
City within 30 days after receipt of a written invoice from the City describing the amount and
nature of the costs to be reimbursed. For the purposes of this Agreement, the term
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EL185-50-718703.v2
"Administrative Costs" means out of pocket costs incurred by the City together with staff and
consultant (including reasonable legal, financial or municipal advisor, etc.) costs of the City, all
attributable to or incurred in connection with the establishment of the TIF District and the TIF
Plan and review, negotiation and preparation of this Agreement (together with any other
agreements entered into between the parties hereto contemporaneously therewith) and review
and approvals of other documents and agreements in connection with the Project. In addition,
certain engineering, environmental advisor, legal, land use, zoning, subdivision and other costs
related to the development of the Development Property are required to be paid, or additional
funds deposited in escrow, as provided in accordance with the City's planning, zoning, and
building fee schedules. The parties agree and understand that Developer deposited with the City
$10,000 toward payment of the City's Administrative Costs. If such costs exceed such amount,
then at any time, but not more often than monthly, the City will deliver written notice to
Developer setting forth any additional fees and expenses, together with suitable billings, receipts
or other evidence of the amount and nature of the fees and expenses, and Developer agrees to
pay all fees and expenses within 30 days of City's written request. Any unused amount of such
deposit shall be returned to the Developer. This Section 3.3 shall survive termination of this
Agreement and shall be binding on the Developer regardless of the enforceability of any other
provision of this Agreement.
Section 3.4. Compliance with Environmental Regulations.
(1) The Developer shall comply with all applicable local, state, and federal
environmental laws and regulations, and will obtain, and maintain compliance under, any and all
necessary environmental permits, licenses, approvals or reviews.
(2) The City makes no warranties or representations regarding, nor does it indemnify
the Developer with respect to, the existence or nonexistence on or in the vicinity of the
Development Property or anywhere within the TIF District of any toxic or hazardous substances
or wastes, pollutants or contaminants (including, without limitation, asbestos, urea
formaldehyde, the group of organic compounds known as polychlorinated biphenyls, petroleum
products including gasoline, fuel oil, crude oil and various constituents of such products, or any
hazardous substance as defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA"), 42 U.S.C. §§ 961-9657, as amended) (collectively, the
"Hazardous Substances").
(3) The Developer agrees to take all necessary action to remove or remediate any
Hazardous Substances located on the Development Property to the extent required by and in
accordance with all applicable local, state and federal environmental laws and regulations.
(4) The Developer waives any claims against the City, for indemnification,
contribution, reimbursement or other payments arising under federal and state law and the
common law or relating to the environmental condition of the land comprising the Development
Property.
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EL 185-50-718703.v2
Section 3.5. Construction Plans.
(1) Prior to the commencement of construction of the Project, the Developer shall
deliver to the City the Construction Plans, Construction Documents and a sworn construction
cost statement certified by the Developer and the General Contractor (the "Sworn Construction
Cost Statement") all in form and substance reasonably acceptable to the City. The Construction
Plans for the Project shall be consistent with the Development Program, this Agreement, and all
applicable State and local laws and regulations, and the Site Plan and Design Drawings
submitted to the City and shall provide for design, quality, materials and building finishes of the
finished Project to be substantially similar to those which were presented to the City in
connection with the Developer's request for tax increment financing assistance and identified on
the preliminary building elevations which were shared publicly. The City Administrator, or
designee, on behalf of the City shall promptly review any Construction Plans upon submission
and deliver to the Developer a written statement approving the Construction Plans or a written
statement rejecting the Construction Plans and specifying the deficiencies in the Construction
Plans. The City Administrator, or designee, on behalf of the City shall approve the Construction
Plans for purposes of this Agreement if. (i) the Construction Plans substantially conform to the
terms and conditions of this Agreement; (ii) the Construction Plans are consistent with the goals
and objectives of the Development Program and the TIF Plan; (iii) the Construction Plans
comply with the Site Plan and Design Drawings; and (iv) the Construction Plans do not violate
any applicable federal, State or local laws, ordinances, rules or regulations. If the Construction
Plans are not approved by the City, then the Developer shall make such changes as the City may
reasonably require and resubmit the Construction Plans to the City for approval, which will not
be unreasonably withheld, unreasonably conditioned or unreasonably delayed. If the City has not
rejected the Construction Plans in writing within 60 calendar days of submission, such
Construction Plans shall automatically be deemed approved by the City for purposes of this
Agreement but only if the Construction Plans provided to the City are complete and final and
meet all requirements necessary for the Developer to submit a complete application for a
building permit.
(2) No changes shall be made to the Construction Plans for the Project without the
City's prior written approval, unless the aggregate of such changes do not increase or decrease
the Total Development Costs by more than 10%. No changes which materially alter (a) the
Project's site plan, (b) exterior appearance, (c) construction quality, or (d) exterior materials
included in the final Design Drawings and Construction Plans shall be made without the City's
prior written consent. The approval of the City will not be unreasonably withheld, conditioned
or delayed. If an amendment or prior written approval from the City is necessary with respect to
a change in the Construction Plans, if the City has not rejected such amendment in writing within
30 calendar days of submission of such amendment, the amendment to Construction Plans shall
automatically be deemed approved by the City for purposes of this Agreement but only if such
amendment provided to the City is complete and final and meets all requirements necessary for
the Developer to submit a complete application for a building permit.
(3) The approval of the Construction Plans, or any proposed amendment to the
Construction Plans, by the City does not constitute a representation or warranty by the City that
the Construction Plans or the Project comply with any applicable building code, health or safety
regulation, zoning regulation, environmental law or other law or regulation, or that the Project
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EL185-50-718703.v2
will meet the qualifications for issuance of a certificate of occupancy, or that the Project will
meet the requirements of the Developer or any other users of the Project. Approval of the
Construction Plans, or any proposed amendment to the Construction Plans, by the City will not
constitute a waiver of an Event of Default or of any State or City building or other code
requirements that may apply. Nothing in this Agreement shall be construed to relieve the
Developer of its obligations to receive any required approval of the Construction Plans from any
department of the City and does not relieve the Developer of the obligation to comply with
applicable federal, State and local laws, ordinances, rules and regulations, or to construct the
Project in accordance therewith.
Section 3.6. Commencement and Completion of Construction. Subject to the terms
and conditions of this Agreement and to Unavoidable Delays, the Developer will commence
construction of the Phase One Project by Deeember 3March 15, 24242022 and shall
substantially complete the Phase One Project by June 30, 2Q232024. Subject to the terms and
conditions of this Agreement and to Unavoidable Delays, the Developer will commence
construction of the Phase Two. Project by December 31, 2-0232024 and shall substantially
complete the Phase Two Project by June 30, 2Q42027. The Project will be constructed by the
Developer on the Development Property in conformity with the Construction Plans approved by
the City. Prior to completion, upon the request of the City, and subject to applicable safety rules,
the Developer will provide the City reasonable access to the Development Property.
"Reasonable access" means at least one site inspection per week during regular business hours.
During construction, marketing and rentals of the Project, the Developer will deliver progress
reports to the City from time to time as reasonably requested by the City.
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EL185-50-718703.v2
Section 3.7. Certificate of Completion. The Developer shall notify the City when
construction of each phase of the Project has been substantially completed. The City shall
inspect each phase of the Project in order to determine whether the respective phase of the
Project has been constructed in substantial conformity with the approved Construction Plans. If
the City determines that the respective phase of the Project has not been constructed in
substantial conformity with the approved Construction Plans, the City shall deliver a written
statement to the Developer indicating in adequate detail the specific respects in which the
respective phase of Project has not been constructed in substantial conformity with the approved
Construction Plans and Developer shall have a reasonable period of time to remedy such
deficiencies. The City shall re -inspect the respective phase of the Project within a reasonable
period of time after receiving notice that such deficiencies have been remedied in order to
determine whether the respective phase of the Project has been constructed in substantial
conformity with the approved Construction Plans and this Agreement. Within a reasonable
period of time after determining that the respective phase of the Project has been constructed in
substantial conformity with the approved Construction Plans, the City will furnish to the
Developer a Certificate of Completion substantially in the form attached hereto as Exhibit F
certifying the completion of the respective phase of the Project. The Certificate of Completion
issued for respective phase of the Project shall conclusively satisfy and terminate the agreements
and covenants of the Developer in this Agreement solely with respect to construction of
respective phase of the Project. The issuance of a Certificate of Completion under this
Agreement shall not be construed to relieve the Developer of any approval required by any City
department in connection with the construction, completion or occupancy of any phase of the
Project nor shall it relieve the Developer of any other obligations under this Agreement.
Section 3.8. Insurance. The Developer will provide and maintain or cause to be
maintained at all times and, from time to time at the request of the City, furnish the City with
proof of payment of premiums on insurance of amounts and coverages normally obtained for
properties similar to the Project.
Section 3.9. Encumbrance of the Development Property. Until the Termination Date,
without the prior written consent of the City, neither the Developer nor any successor in interest
to the Developer will engage in any financing or any other transaction creating any mortgage or
other encumbrance or lien upon the Development Property, or portion thereof, whether by
express agreement or operation of law, or suffer any encumbrance or lien to be made on or attach
to the Development Property except for the purpose of obtaining funds only to the extent
necessary for financing or refinancing the acquisition and construction of the Project (including,
but not limited to, land and building acquisition, labor and materials, professional fees,
development fees, real estate taxes, reasonably required reserves, construction interest,
organization and other direct and indirect costs of development and financing, costs of
constructing the Project, and an allowance for contingencies) including without limitation
regulatory agreements and land use restriction agreements in connection with such financings;
provided, however, this provision shall not be considered a waiver of the requirements of Section
5.3 with respect to any Transfer of the TIF Note in connection with any such financing or
refinancing nor shall anything contained in this Section prohibit the Developer from making
transfers in accordance with Section 5.3.
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Section 3.10. Business Subside Act. The subsidy granted to the Developer pursuant to
this Agreement is assistance for housing and therefore the provisions of Minnesota Statutes,
Section 116J.993 to 1161995 do not apply.
Section 3.11. Right to Collect Delinquent Taxes. The Developer acknowledges that the
City is providing substantial aid and assistance in furtherance of the Project through
reimbursement of Public Development Costs. To that end, the Developer agrees for itself, its
successors and assigns, that in addition to the obligation pursuant to statute to pay real estate
taxes, it is also obligated by reason of this Agreement, to pay before delinquency all real estate
taxes assessed against the Development Property and the Project. The Developer acknowledges
that this obligation creates a contractual right on behalf of the City through the Termination Date
to sue the Developer or its successors and assigns, to collect delinquent real estate taxes related
to the Development Property and any penalty or interest thereon and to pay over the same as a
tax payment to the county auditor. In any such suit in which the City is the prevailing party, the
City shall also be entitled to recover its costs, expenses and reasonable attorney fees.
Section 3.12. Review of Taxes.
(1) The Developer agrees that prior to the Termination Date it will not cause a
reduction in the real property taxes paid in respect of the Development Property through: (i)
willful destruction of the Development Property or any part thereof, or (ii) willful refusal to
reconstruct damaged or destroyed property. The Developer also agrees that it will not, prior to
the Termination Date, apply for an exemption from or a deferral of property tax on the
Development Property pursuant to any law, or transfer or permit transfer of the Development
Property to any entity whose ownership or operation of the property would result in the
Development Property being exempt from real property taxes under State law.
(2) The Developer shall notify the City within 10 days of filing any petition to seek
reduction in market value or property taxes on any portion of the Development Property under
any State law (referred to as a "Tax Appeal"). If as of any Phase One Payment Date or Phase
Two Payment Date, respectively, any Tax Appeal is then pending, the City will continue to make
payments on the TIF Note but only to the extent that the Pledged Tax Increment relates to
property taxes paid with respect to the market value of the Development Property not being
challenged as part of the Tax Appeal as determined by the City in its sole discretion and the City
will withhold the Pledged Tax Increment related to property taxes paid with respect to the market
value of the Development Property being challenged as part of the Tax Appeal as determined by
the City in its sole discretion. The City will apply any withheld amount to the extent not reduced
as a result of the Tax Appeal promptly after the Tax Appeal is fully resolved and the amount of
Pledged Tax Increment, as applicable, attributable to the disputed tax payments is finalized.
(3) If Minnesota Statutes, Section 273.13 or any applicable successor statute is
amended to reduce the applicable classification tax rate, the City will require the Developer to
exchange the TIF Note for a replacement TIF Note issued in a principal amount determined
based on revised projections of Pledged Tax Increments as calculated by the City or its tax
increment financing consultant. Notwithstanding the date the City determines the adjusted
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EL185-50-718703.v2
principal amount of the TIF Note, such adjustment will date back to the date any such legislative
change affects Pledged Tax Increments.
ARTICLE IV
EVENTS OF DEFAULT
Section 4.1. Events of Default Defined. The following shall be "Events of Default"
under this Agreement and the term "Event of Default" shall mean whenever it is used in this
Agreement any one or more of the following events:
(1) Failure by the Developer to timely pay any ad valorem real property taxes
assessed with respect to the Development Property.
(2) Subject to Unavoidable Delays, failure by the Developer to construct the Project
in accordance with the timelines set forth in Section 3.6 hereof.
(3) Failure of the Developer to observe or perform any other material covenant,
condition, obligation or agreement on its part to be observed or performed under this Agreement,
or if any certification, representation, or warranty by the Developer to the City is untrue or
misrepresented.
(4) If, prior to the Completion Date, the Developer shall
(a) file any petition in bankruptcy or for any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under the United
States Bankruptcy Act of 1978, as amended or under any similar federal or state law; or
(b) be adjudicated as bankrupt or insolvent; or if a petition or answer
proposing the adjudication of the Developer, as bankrupt or its reorganization under any
present or future federal bankruptcy act or any similar federal or state law shall be filed in
any court and such petition or answer shall not be discharged or denied within 90 days
after the filing thereof; or a receiver, trustee or liquidator of the Developer, or of the
Project, or part thereof, shall be appointed in any proceeding brought against the
Developer, and shall not be discharged within 90 days after such appointment, or if the
Developer, shall consent to or acquiesce in such appointment.
Notwithstanding anything to the contrary set forth in this Agreement the lenders
providing construction or permanent financing for the Project shall have the right, but not the
obligation, to cure an Event of Default during the cure period provided for the Developer.
Section 4.2. Remedies on Default. Whenever any Event of Default referred to in
Section 4.1 occurs and is continuing, the City, as specified below, may take any one or more of
the following actions after the giving of 3060 days' written notice to the Developer, but only if
the Event of Default has not been cured within said 3060 days; provided that if such Event of
Default cannot be reasonably cured within the 3-060 day period, and the Developer has provided
assurances reasonably satisfactory to the City that it is proceeding with due diligence to cure
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EL185-50-718703.v2
such default, such -3860 day cure period shall be extended for a period deemed reasonably
necessary by the City to effect the cure, but in any event not to exceed 180 days:
(1) The City may suspend its performance under this Agreement and the TIF Note
until such default is cured or the City determines that it has received adequate assurances from
the Developer, that the Developer will cure its default and continue its performance under this
Agreement.
(2) The City may terminate this Agreement and/or cancel the TIF Note.
(3) The City may take any action, including legal or administrative action, in law or
equity, which may appear necessary or desirable to enforce performance and observance of any
obligation, agreement, or covenant of the Developer under this Agreement.
Notwithstanding anything to the contrary set forth in this Agreement the lenders
providing construction or permanent financing for the Project shall have the right, but not the
obligation, to cure an Event of Default during the cure period provided for the Developer.
Section 4.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to
the City is intended to be exclusive of any other available remedy or remedies, but each and
every such remedy shall be cumulative and shall be in addition to every other remedy given
under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or
omission to exercise any right or power accruing upon any default shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient.
Section 4.4. No Implied Waiver. In the event any agreement contained in this
Agreement should be breached by any party and thereafter waived by any other party, such
waiver shall be limited to the particular breach so waived and shall not be deemed to waive any
other concurrent, previous or subsequent breach hereunder.
Section 4.5. Indemnification of City.
(1) The Developer releases from and covenants and agrees that the City, and its
governing bodies' members, officers, agents, including the independent contractors, consultants
and legal counsel, servants and employees thereof (for purposes of this Section, collectively the
"Indemnified Parties") shall not be liable for and agrees to indemnify and hold harmless the
Indemnified Parties against any loss or damage to property or any injury to or death of any
person occurring at or about or resulting from any defect in the Project, or any other loss, cost
expense, or penalty, except to the extent caused by any willful misrepresentation or any willful or
wanton misconduct of the Indemnified Parties.
(2) Except for any willful misrepresentation or any willful or wanton misconduct of
the Indemnified Parties, the Developer agrees to protect and defend the Indemnified Parties, now
and forever, and further agrees to hold the Indemnified Parties harmless from any claim, demand,
suit, action or other proceeding whatsoever by any person or entity whatsoever arising or
purportedly arising from the actions or inactions of the Developer (or if other persons acting on
its behalf or under its direction or control) under this Agreement, or the transactions
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EL 185-50-718703.v2
contemplated hereby or the acquisition, construction, installation, ownership, and operation of
the Project; including, without limitation, any pecuniary loss or penalty (including interest
thereon at the rate of 5.00% per annum from the date such loss is incurred or penalty is paid by
the City) as a result of the Project failing to cause the TIF District to qualify as a "redevelopment
district" under Section 469.174, subdivision 10, of the TIF Act, or to violate limitations as to the
use of Tax Increments as set forth in Section 469.176, subdivision 4d of the TIF Act.
(3) All covenants, stipulations, promises, agreements and obligations of the City
contained herein shall be deemed to be the covenants, stipulations, promises, agreements and
obligations of the City and not of any governing body member, officer, agent, servant or
employee of the City, as the case may be. This Section 4.5 shall survive termination of this
Agreement and shall be binding on the Developer regardless of the enforceability of any other
provision of this Agreement.
Section 4.6. Reimbursement of Attorneys' Fees. If an Event of Default under Section
4.1 hereof occurs, and the City employs attorneys or incurs other reasonable expenses for the
collection of payments due hereunder, or for the enforcement of performance or observance of
any obligation or agreement on the part of the Developer contained in this Agreement, the
Developer will within 30 days reimburse the City for the reasonable fees of such attorneys and
such other reasonable expenses so incurred.
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ARTICLE V
ADDITIONAL PROVISIONS
Section 5.1. Restrictions on Use. The Developer agrees for itself, its successors and
assigns and every successor in interest to the Development Property, or any part thereof, that the
Developer and such successors and assigns shall operate, or cause to be operated, the Project as a
rental housing development in accordance with this Agreement until the Termination Date.
Section 5.2. Reports. The Developer shall provide the City reports in a timely manner
with such information about the Project as the City may reasonably request for purposes of
satisfying any reporting requirements imposed by law on the City.
Section 5.3. Limitations on Transfer and Assi nnt.
(1) Except as provided in Sections 3.9 and 5.3(4), the Developer will not sell, assign,
convey, lease or transfer in any other mode or manner (collectively, "Transfer") this Agreement,
the TIF Note, or the Development Property or the Project, or any interest therein, without the
express written approval of the City, which consent will not be unreasonably withheld,
conditioned or delayed. The City shall deliver a written statement to the Developer indicating
whether the Transfer is approved or specifying the additional conditions to be satisfied in
accordance with Section 5.3(2). The provisions of this Section 5.3 apply to all subsequent
Transfers by authorized transferees;
(2) The City shall be entitled to require, as conditions to any approval of any Transfer
of this Agreement, the Development Property, the Project, or the TIF Note in connection
therewith, which approval will not be unreasonably withheld, conditioned or delayed, that:
(a) Any proposed transferee shall have the qualifications and financial
responsibility, as determined by the City, necessary and adequate to fulfill the obligations
undertaken in this Agreement by the Developer;
(b) Any proposed transferee, by instrument in writing satisfactory to the City
shall, for itself and its successors and assigns, and expressly for the benefit of the City
have expressly assumed any of the remaining obligations of the Developer under this
Agreement and agreed to be subject to all the conditions and restrictions to which the
Developer is subject;
(c) There shall be submitted to the City for review all instruments and other
legal documents involved in effecting transfer, and if approved by City, its approval shall
be indicated to the Developer in writing;
(d) Any proposed transferee of the TIF Note shall (i) execute and deliver to the
City the Acknowledgment Regarding TIF Note in the form included in Exhibit 2 to the
TIF Note and (ii) surrender the TIF Note to the City either in exchange for a new fully
18
EL185-50-718703.v2
registered note or for transfer of the TIF Note on the registration records for the TIF Note
maintained by the City;
(e) The Developer and its transferees shall comply with such other conditions
as are necessary in order to achieve and safeguard the purposes of the Act, the TIF Act and
this Agreement; and
(f) In the absence of a specific written agreement by the City to the contrary,
no such transfer or approval by the City thereof shall be deemed to relieve the Developer
or any other party bound in any way by this Agreement or otherwise with respect to the
construction of the Project, from any of its obligations with respect thereto.
(3) The Developer agrees to pay all reasonable legal fees and expenses of the City,
including fees of the City Attorney's office and outside counsel retained by the City to review the
documents submitted to the City in connection with any Transfer.
(4) Nothing contained in this Section shall prohibit the Developer from (i) entering
into leases with tenants in the ordinary course of business, or (ii) entering into easements or other
agreements necessary for the construction or operation of the Project.
Section 5.4. Conflicts of Interest. No member of the governing body or other official
of the City shall have any financial interest, direct or indirect, in this Agreement, the
Development Property or the Project, or any contract, agreement or other transaction
contemplated to occur or be undertaken thereunder or with respect thereto, nor shall any such
member of the governing body or other official participate in any decision relating to this
Agreement which affects his or her personal interests or the interests of any corporation,
partnership or association in which he or she is directly or indirectly interested. No member,
official or employee of the City shall be personally liable to the City in the event of any default
or breach by the Developer or successor or on any obligations under the terms of this Agreement.
Section 5.5. Titles of Articles and Sections. Any titles of the several parts, articles and
sections of this Agreement are inserted for convenience of reference only and shall be
disregarded in construing or interpreting any of its provisions.
Section 5.6. Notices and Demands. Except as otherwise expressly provided in this
Agreement, a notice, demand or other communication under this Agreement by any party to any
other shall be sufficiently given or delivered if it is dispatched by registered or certified mail,
postage prepaid, return receipt requested, or delivered personally, and
(a) in the case of the Developer is addressed to or delivered personally to:
The Delta Apartments L.L.C.
31172 Co Road 17
Melrose MN 56352
Attn: Josh Thieschafer
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EL185-50-718703.v2
With a copy to:
_ Winthrop & Weinstine, P.A.
225 South Sixth Street, Suite 3500
Minneapolis, MN 55402
Attn: Tammera R. Diehm
(b) in the case of the City is addressed to or delivered personally to the City at:
City of Elk River, Minnesota
13065 Orono Parkway
Elk River, Minnesota 55330
Attn: City Administrator
or at such other address with respect to any such party as that party may, from time to time,
designate in writing and forward to the other, as provided in this Section.
Section 5.7. No Additional Waiver Implied b\_ One Waiver. If any agreement
contained in this Agreement should be breached by either party and thereafter waived by the
other party, such waiver shall be limited to the particular breach so waived and shall not be
deemed to waive any other concurrent, previous or subsequent breach hereunder.
Section 5.8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute one and the same instrument.
Section 5.9. Law Governing. This Agreement will be governed and construed in
accordance with the laws of the State.
Section 5.10. Term, Termination. Unless this Agreement is terminated earlier in
accordance with its terms this Agreement shall terminate on the Termination Date. After the
Termination Date, if requested by the Developer, the City will provide a termination certificate
as to the Developer's obligations hereunder.
Section 5.11. Provisions Surviving Rescission. Expiration or Termination. Sections 4.5
and 4.6 shall survive any rescission, termination or expiration of this Agreement with respect to
or arising out of any event, occurrence or circumstance existing prior to the date thereof.
Section 5.12. Su ersedim-, Effect. This Agreement reflects the entire agreement of the
parties with respect to the development of the Development Property, and supersedes in all
respects all prior agreements of the parties, whether written or otherwise, with respect to the
development of the Development Property.
Section 5.13. Relationship of Parties. Nothing in this Agreement is intended, or shall be
construed, to create a partnership or joint venture among or between the parties hereto, and the
rights and remedies of the parties hereto shall be strictly as set forth in this Agreement. All
covenants, stipulations, promises, agreements and obligations of the City contained herein shall
be deemed to be the covenants, stipulations, promises, agreements and obligations of the City
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EL185-50-718703.v2
and not of any governing body member, officer, agent, servant or employee of the City or the
City.
Section 5.14. Venue. All matters, whether sounding in tort or in contract, relating to the
validity, construction, performance, or enforcement of this Agreement shall be controlled by and
determined in accordance with the laws of the State, and the Developer agrees that all legal
actions initiated by the Developer or City with respect to or arising from any provision contained
in this Agreement shall be initiated, filed and venued exclusively in the State of Minnesota,
Sherburne County, District Court and shall not be removed therefrom to any other federal or
state court.
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IN WITNESS WHEREOF, the City has caused this Agreement to be duly executed in its
name and on its behalf, and the Developer has caused this Agreement to be duly executed in its
name and on its behalf, on or as of the date first above written.
CITY OF ELK RIVER, MINNESOTA
By
Its Mayor
By
Its City Clerk
This is a signature page to the TIF Assistance Agreement.
S-1
EL185-50-718703.v2
THE
DELTA APARTMENTS L.L.C., a
Minnesota limited liability company
By:
Its:
This is a signature page to the TIF Assistance Agreement.
S-2
EL185-50-718703.v2
EXHIBIT A
DESCRIPTION OF TIF DISTRICT
The area encompassed by the TIF District shall also include all streets and utility right-of-ways
located upon or adjacent to the property described below.
Lot 1, Block 1, The Delta
Lot 2, Block 1, The Delta
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EXHIBIT B
LEGAL DESCRIPTION OF DEVELOPMENT PROPERTY
The Development Property includes all street or utility right-of-ways located upon or adjacent to
the property legally described as:
Lot 1, Block 1, The Delta
Lot 2, Block 1, The Delta
B-1
EL185-50-718703.v2
EXHIBIT C
PUBLIC DEVELOPMENT COSTS
Acquisition and site improvements including demolition, grading and excavating, curb and
gutter, outside utilities (e.g., stormwater, water, sanitary), bituminous paving, underground
parking and surface parking, sidewalks
C-1
EL 185-50-718703.v2
No. R-1
EXHIBIT D
FORM OF PHASE ONE TAXABLE TIF NOTE
UNITED STATES OF AMERICA
STATE OF MINNESOTA
COUNTY OF SHERBURNE
CITY OF ELK RIVER, MINNESOTA
TAXABLE TAX INCREMENT REVENUE NOTE
(DELTA APARTMENTS PHASE I PROJECT)
,20
The City of Elk River, Minnesota (the "City"), hereby acknowledges itself to be indebted
and, for value received, hereby promises to pay the amounts hereinafter described (the "Payment
Amounts") to Steneweed Develepment LLGThe Delta Apartments L.L.C., a Minnesota
limited liability company or its registered assigns (the "Registered Owner"), the principal
amount of ($..... J, but only in the manner, at the times, from the sources of
revenue, and to the extent hereinafter provided.
This Note is issued pursuant to that certain TIF Assistance Agreement, dated as of
, 2021, as the same may be amended from time to time (the "TIF Assistance
Agreement"), by and between the City and Steneweed Develepment bbGThe Delta Apartments
L.L.C. (the "Developer"). Unless otherwise defined herein or unless context requires otherwise,
undefined terms used herein shall have the meanings set forth in the TIF Assistance Agreement.
The outstanding and unpaid principal amount of this Note shall not bear interest.
The amounts due under this Note shall be payable on August 1, 24242024 and on each
February 1 and August 1 thereafter to and including the earliest of (i) the date on which the entire
principal on the TIF Note has been paid in full; or (ii) February 1, 2043; or (iii) any earlier date
the TIF Assistance Agreement or this Note is cancelled in accordance with the terms of the TIF
Assistance Agreement or deemed paid in full; or (iv) the February 1 following the date the TIF
District is terminated in accordance with the TIF Act (the "Final Payment Date") or, if the first
should not be a Business Day (as defined in the TIF Assistance Agreement) the next succeeding
Business Day (collectively, the "Payment Dates"). On each Payment Date, the City shall pay by
check or draft mailed to the person that was the Registered Owner of this Note at the close of the
last business day preceding such Payment Date an amount equal to 90% of the Tax Increments
(as defined in the TIF Assistance Agreement) received by the City during the 6-month period
preceding such Payment Date ("Pledged Tax Increments").
Payments on this Note shall be payable solely from the Pledged Tax Increments.
D-1
EL185-50-718703.v2
This Note shall terminate and be of no further force and effect following the Final
Payment Date defined above, or any date upon which the City shall have terminated the TIF
Assistance Agreement under Section 4.2 thereof or on the date that all principal payable
hereunder shall have been or deemed paid in full, whichever occurs earliest. This Note may be
prepaid in whole or in part at any time without penalty.
The City makes no representation or covenant, express or implied, that the Pledged Tax
Increments will be sufficient to pay, in whole or in part, the amounts which are or may become
due and payable hereunder. There are risk factors in the amount of Tax Increments that may
actually be received by the City and some of those factors are listed on the attached Exhibit 1.
The Registered Owner acknowledges these risk factors and understands and agrees that
payments by the City under this Note are subject to these and other factors.
The City's payment obligations hereunder shall be subject to Sections 3.11(2) and 3.12 of
the TIF Assistance Agreement and are further subject to the conditions that (i) no Event of
Default under Section 4.1 of the TIF Assistance Agreement shall have occurred and be
continuing at the time payment is otherwise due hereunder, and (ii) the TIF Assistance
Agreement shall not have been terminated pursuant to Section 4.2, and (iii) all conditions set
forth in Section 3.2(2) of the TIF Assistance Agreement have been satisfied as of such date. Any
such suspended and unpaid amounts shall become payable, if this Note has not been terminated
in accordance with Section 4.2 of the TIF Assistance Agreement and said Event of Default shall
thereafter have been cured in accordance with Section 4.2. If pursuant to the occurrence of an
Event of Default under the TIF Assistance Agreement the City elects, in accordance with the TIF
Assistance Agreement to cancel and rescind the TIF Assistance Agreement and/or this Note, the
City shall have no further debt or obligation under this Note whatsoever. Reference is hereby
made to all of the provisions of the TIF Assistance Agreement, for a fuller statement of the rights
and obligations of the City to pay the principal of this Note, and said provisions are hereby
incorporated into this Note as though set out in full herein.
This Note shall be payable on a pro-rata basis with the Phase Two TIF Note (as defined
in the TIF Assistance Agreement).
THIS NOTE IS A SPECIAL, LIMITED REVENUE OBLIGATION OF THE CITY
AND NOT A GENERAL OBLIGATION OF THE CITY AND IS PAYABLE BY THE
CITY ONLY FROM THE SOURCES AND SUBJECT TO THE QUALIFICATIONS
STATED OR REFERENCED HEREIN. THIS NOTE IS NOT A GENERAL
OBLIGATION OF THE CITY, AND THE FULL FAITH AND CREDIT AND TAXING
POWERS OF THE CITY ARE NOT PLEDGED TO THE PAYMENT OF THE
PRINCIPAL OF THIS NOTE AND NO PROPERTY OR OTHER ASSET OF THE CITY,
SAVE AND EXCEPT THE ABOVE -REFERENCED PLEDGED TAX INCREMENTS, IS
OR SHALL BE A SOURCE OF PAYMENT OF THE CITY'S OBLIGATIONS
HEREUNDER.
The Registered Owner shall never have or be deemed to have the right to compel any
exercise of any taxing power of the City or of any other public body, and neither the City nor any
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EL185-50-718703.v2
person executing or registering this Note shall be liable personally hereon by reason of the
issuance or registration thereof or otherwise.
This Note is issued by the City in aid of financing a project pursuant to and in full
conformity with the Constitution and laws of the State of Minnesota, including the TIF Act.
This Note may be assigned only as provided in Section 5.3 of the TIF Assistance
Agreement and subject to the assignee executing and delivering to the City the Acknowledgment
Regarding TIF Note in the form included in Exhibit 2 attached hereto. Additionally, in order to
assign the Note, the assignee shall surrender the same to the City either in exchange for a new
fully registered note or for transfer of this Note on the registration records maintained by the City
for the Note. Each permitted assignee shall take this Note subject to the foregoing conditions
and subject to all provisions stated or referenced herein.
IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions, and things
required by the Constitution and laws of the State of Minnesota to be done, to have happened,
and to be performed precedent to and in the issuance of this Note have been done, have
happened, and have been performed in regular and due form, time, and manner as required by
law; and that this Note, together with all other indebtedness of the City outstanding on the date
hereof and on the date of its actual issuance and delivery, does not cause the indebtedness of the
City to exceed any constitutional or statutory limitation thereon.
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EL 185-50-718703.v2
IN WITNESS WHEREOF, the City of Elk River, Minnesota, by its City Council, has
caused this Note to be executed by the manual signatures of its Mayor and City Clerk and has
caused this Note to be issued on and dated as of the date first written above.
CITY OF ELK RIVER, MINNESOTA
By
Its Mayor
By
Its City Clerk
Signature Page for Tax Increment Revenue Note (Delta Apartments Phase One Project Project)
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EL185-50-718703.v2
CERTIFICATION OF REGISTRATION
It is hereby certified that the foregoing Note, as originally issued on the date first written above,
was on said date registered in the name of The Delta Apartments
L.L.C., a Minnesota limited liability company, and that, at the request of the Registered
Owner of this Note, the undersigned has this day registered the Note in the name of such
Registered Owner, as indicated in the registration blank below, on the books kept by the
undersigned for such purposes.
NAME AND ADDRESS OF DATE OF
REGISTERED OWNER REGISTRATION
Steneweed The
Delta Apartments L.L.C.
[DEVELOPER ADDRESS] , 20_
, 20_
, 20
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EL185-50-718703.v2
SIGNATURE OF
FINANCE DIRECTOR
Exhibit 1
to Taxable TIF Note
RISK FACTORS
Risk factors on the amount of Tax Increments that may actually be received by the City
include but are not limited to the following:
1. Value of Project. If the contemplated Project (as defined in the TIF Assistance
Agreement) constructed in the tax increment financing district is completed at a lesser level of
value than originally contemplated, it will generate fewer taxes and fewer tax increments than
originally contemplated.
2. Damage or Destruction. If the Project is damaged or destroyed after completion,
its value will be reduced, and taxes and tax increments will be reduced. Repair, restoration or
replacement of the Project may not occur, may occur after only a substantial time delay, or may
involve property with a lower value than the Project, all of which would reduce taxes and tax
increments.
3. Change in Use to Tax -Exempt. The Project could be acquired by a party that
devotes it to a use which causes the property to be exempt from real property taxation. Taxes
and tax increments would then cease.
4. Depreciation. The Project could decline in value due to changes in the market for
such property or due to the decline in the physical condition of the property. Lower market
valuation will lead to lower taxes and lower tax increments.
5. Non-payment of Taxes. If the property owner does not pay property taxes, either
in whole or in part, the lack of taxes received will cause a lack of tax increments. The Minnesota
system of collecting delinquent property taxes is a lengthy one that could result in substantial
delays in the receipt of taxes and tax increments, and there is no assurance that the full amount of
delinquent taxes would be collected. Amounts distributed to taxing jurisdictions upon a sale
following a tax forfeiture of the property are not tax increments.
6. Reductions in Taxes Levied. If property taxes are reduced due to decreased
municipal levies, taxes and tax increments will be reduced. Reasons for such reduction could
include lower local expenditures or changes in state aids to municipalities. For instance, in 2001
the Minnesota Legislature enacted an education funding reform that involved the state increasing
school aid in lieu of the local general education levy (a component of school district tax levies).
7. Reductions in Tax Capacity Rates. The taxable value of real property is
determined by multiplying the market value of the property by a tax capacity rate. Tax capacity
rates vary by certain categories of property; for example, the tax capacity rates for residential
homesteads are currently less than the tax capacity rates for commercial and industrial property.
In 2001 the Minnesota Legislature enacted property tax reform that lowered various tax capacity
D-6
EL185-50-718703.v2
rates to "compress" the difference between the tax capacity rates applicable to residential
homestead properties and commercial and industrial properties.
8. Changes to Local Tax Rate. The local tax rate to be applied in the tax increment
financing district is the lower of the current local tax rate or the original local tax rate for the tax
increment financing district. In the event that the Current Local Tax Rate is higher than the
Original Local Tax Rate, then the "excess" or difference that comes about after applying the
lower Original Local Tax Rate instead of the Current Local Tax Rate is considered "excess" tax
increment and is distributed by Sherburne County to the other taxing jurisdictions and such
amount is not available to the City as tax increment.
9. Legislation. The Minnesota Legislature has frequently modified laws affecting
real property taxes, particularly as they relate to tax capacity rates and the overall level of taxes
as affected by state aid to municipalities.
10. Multi -Owner District. In determining the amount of tax increment generated by
the development property, Sherburne County may allocate a sharing factor when there are
multiple parcels of land in the tax increment financing district. This may result in a lower amount
of tax increment attributable to the development property than if the development property was
the only parcel in the district. In addition, the sharing factor calculation is not consistent with the
method that the City will use to determine Pledged Tax Increments.
D-7
EL ] 85-50-718703.v2
Exhibit 2
to Taxable TIF Note
ACKNOWLEDGMENT REGARDING TIF NOTE
The undersigned,
acknowledges that:
a ("Note Holder"), hereby certifies and
A. On the date hereof the Note Holder has [acquired from]/[made a loan (the
"Loan") [to/for the benefit] of] The Delta A(the
"Developer") [secured in part by] the Taxable Tax Increment Revenue Note (Delta Apartments
Phase One Project), a pay-as-you-go tax increment revenue note (the "Note") in the original
principal amount of $ _ dated _, 20_ [to be] issued by the City of Elk
River, Minnesota (the "City").
B. The Note Holder has had the opportunity to ask questions of and receive from the
Developer all information and documents concerning the Note as it requested, and has had
access to any additional information the Note Holder thought necessary to verify the accuracy of
the information received. In determining to [acquire the Note]/[make the Loan], the Note Holder
has made its own determinations and has not relied on the City or information provided by the
City.
C. The Note Holder represents and warrants that:
1. The Note Holder is acquiring [the Note]/[an interest in the Note as
collateral for the Loan] for investment and for its own account, and without any view to
resale or other distribution.
2. The Note Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of acquiring [the
Note]/[an interest in the Note as collateral for the Loan].
3. The Note Holder understands that the Note is a security which has not
been registered under the Securities Act of 1933, as amended, or any state securities law,
and must be held until its sale is registered or an exemption from registration becomes
available.
4. The Note Holder is aware of the limited payment source for the Note and
interest thereon and risks associated with the sufficiency of that limited payment source.
5. The Note Holder is [a bank or other financial institution] / [the owner of
the property from which the tax increments which are pledged to the Note are generated].
D. The Note Holder understands that the Note is payable solely from certain tax
increments derived from certain properties located in a tax increment financing district, if and as
received by the City. The Note Holder acknowledges that the City has made no representation or
covenant, express or implied, that the revenues pledged to pay the Note will be sufficient to pay,
in whole or in part, the principal due on the Note. Any amounts which have not been paid on the
D-8
EL185-50-718703.v2
Note on or before the final maturity date of the Note shall no longer be payable, as if the Note
had ceased to be an obligation of the City. The Note Holder understands that the Note will never
represent or constitute a general obligation, debt or bonded indebtedness of the City, the State of
Minnesota, or any political subdivision thereof and that no right will exist to have taxes levied by
the City, the State of Minnesota or any political subdivision thereof for the payment of principal
on the Note.
E. The Note Holder understands that the Note is payable solely from certain tax
increments, which are taxes received on improvements made to certain property (the "Project")
in a tax increment financing district from the increased taxable value of the property over its base
value at the time that the tax increment financing district was created, which base value is called
"original net tax capacity". There are risk factors in relying on tax increments to be received,
which include, but are not limited to, the following:
1. Value of Proiect. If the contemplated Project (as defined in the TIF
Assistance Agreement) constructed in the tax increment financing district is completed at
a lesser level of value than originally contemplated, it will generate fewer taxes and fewer
tax increments than originally contemplated.
2. Damage or Destruction. If the Project is damaged or destroyed after
completion, its value will be reduced, and taxes and tax increments will be reduced.
Repair, restoration or replacement of the Project may not occur, may occur after only a
substantial time delay, or may involve property with a lower value than the Project, all of
which would reduce taxes and tax increments.
3. Change in Use to Tax-ExemRt. The Project could be acquired by a party
that devotes it to a use which causes the property to be exempt from real property
taxation. Taxes and tax increments would then cease.
4. Depreciation. The Project could decline in value due to changes in the
market for such property or due to the decline in the physical condition of the property.
Lower market valuation will lead to lower taxes and lower tax increments.
5. Non-payment of Taxes. If the property owner does not pay property taxes,
either in whole or in part, the lack of taxes received will cause a lack of tax increments.
The Minnesota system of collecting delinquent property taxes is a lengthy one that could
result in substantial delays in the receipt of taxes and tax increments, and there is no
assurance that the full amount of delinquent taxes would be collected. Amounts
distributed to taxing jurisdictions upon a sale following a tax forfeiture of the property are
not tax increments.
6. Reductions in Taxes Levied. If property taxes are reduced due to
decreased municipal levies, taxes and tax increments will be reduced. Reasons for such
reduction could include lower local expenditures or changes in state aids to
municipalities. For instance, in 2001 the Minnesota Legislature enacted an education
funding reform that involved the state increasing school aid in lieu of the local general
education levy (a component of school district tax levies).
D-9
EL185-50-718703.v2
7. Reductions in Tax Capacity Rates. The taxable value of real property is
determined by multiplying the market value of the property by a tax capacity rate. Tax
capacity rates vary by certain categories of property; for example, the tax capacity rates
for residential homesteads are currently less than the tax capacity rates for commercial
and industrial property. In 2001 the Minnesota Legislature enacted property tax reform
that lowered various tax capacity rates to "compress" the difference between the tax
capacity rates applicable to residential homestead properties and commercial and
industrial properties.
8. Changes to Local Tax Rate. The local tax rate to be applied in the tax
increment financing district is the lower of the current local tax rate or the original local
tax rate for the tax increment financing district. In the event that the Current Local Tax
Rate is higher than the Original Local Tax Rate, then the "excess" or difference that
comes about after applying the lower Original Local Tax Rate instead of the Current
Local Tax Rate is considered "excess" tax increment and is distributed by Sherburne
County to the other taxing jurisdictions and such amount is not available to the City as
tax increment.
9. Legislation. The Minnesota Legislature has frequently modified laws
affecting real property taxes, particularly as they relate to tax capacity rates and the
overall level of taxes as affected by state aid to municipalities.
10. Multi -Owner District. In determining the amount of tax increment
generated by the development property, Sherburne County may allocate a sharing factor
when there are multiple parcels of land in the tax increment financing district. This may
result in a lower amount of tax increment attributable to the development property than if
the development property was the only parcel in the district. In addition, the sharing
factor calculation is not consistent with the method that the City will use to determine
Pledged Tax Increments.
F. The Note Holder acknowledges that the Note was issued as part of an TIF
Assistance Agreement between the City and the Developer dated , 2021 ("TIF
Assistance Agreement"), and that the City has the right to suspend payments under this Note
and/or terminate the Note upon an Event of Default under the TIF Assistance Agreement.
G. The Note Holder acknowledges that the City makes no representation about the
tax treatment of, or tax consequences from, the Note Holder's acquisition of [the Note]/[an
interest in the Note as collateral for the Loan].
WITNESS our hand this _ day of , 20_
Note Holder:
By
Name:
Its
D-10
EL 185-50-718703.v2
EXHIBIT E
FORM OF PHASE TWO TIF NOTE
[TO BE INSERTED AFTER REVIEW]
E-1
EL185-50-718703.v2
EXHIBIT F
CERTIFICATE OF COMPLETION OF PROJECT
,20_
WHEREAS, the City of Elk River, Minnesota, a municipal corporation under the laws of
the State of Minnesota (the "City"), and Steneweed—Development L G, a The
Delta Apartments L.L.C., a Minnes, limited liability company (the "Developer") have entered
into a TIF Assistance Agreement (the "TIF Assistance Agreement'), dated 2021;
and
WHEREAS, the TIF Assistance Agreement requires the Developer to construct the
[Phase One][Phase Two] Project (as that term is defined in the TIF Assistance Agreement);
WHEREAS, the Developer has constructed the [Phase One][Phase Two] in a manner
deemed sufficient by the City to permit the execution of this certification in accordance with
Section 3.7 of the TIF Assistance Agreement;
NOW, THEREFORE, this is to certify that the Developer has constructed the [Phase
One][Phase Two] Project in accordance with the TIF Assistance Agreement. The remaining
covenants of the Developer under the TIF Assistance Agreement are not intended to run with
title to the Development Property or bind successors in title to the Development Property.
CITY OF ELK RIVER,
MINNESOTA
City Administrator
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EL185-50-718703.v2
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