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HomeMy WebLinkAbout9A Execute Dev Agree w/Prior Lake Leased Housing Assoc ti c� 4646 Dakota Street SE Prior Lake,MN 55372 CITY COUNCIL AGENDA REPORT MEETING DATE: MAY 11, 2015 AGENDA#: 9A PREPARED BY: DAN ROGNESS, COMMUNITY& ECONOMIC DEVELOPMENT DIRECTOR PRESENTED BY: DAN ROGNESS AGENDA ITEM: CONSIDER APPROVAL OF A RESOLUTION AUTHORIZING EXECUTION OF A DEVELOPMENT AGREEMENT WITH PRIOR LAKE LEASED HOUS- ING ASSOCIATES FOR GATEWAY REDEVELOPMENT DISCUSSION: Introduction The purpose of this agenda item is to consider approval of a Development Agree- ment with Prior Lake Leased Housing Associates I, LLP for Dominium's Gateway Center redevelopment housing project. This agreement specifies the public fi- nancing assistance in the form of tax increment financing and a direct payment from the developer's park dedication fee. This action follows the City Council's earlier approval of: (1) modifying the existing Municipal Development District No. 1; (2) establishing TIF District No. 1-5; and (3) approving a TIF Plan. History On March 9, the City Council adopted resolutions amending the Comprehensive Land Use Plan to R-HD Residential Urban High Density and approving a Prelim- inary PUD Plan; it also approved an ordinance rezoning the property to PUD. On April 13, the City Council adopted a resolution approving the Final PUD Plan and PUD Agreement. Dominium applied for public financing assistance in the form of Tax Increment Financing (TIF), waiver of city fees, and City Revenue Conduit Bond financing. Now, a public hearing is being held by the Council on May 11 to consider the public financing proposals for TIF and Bond assistance. As part of the full approval process, the City must approve a Development Agreement with Prior Lake Leased Housing Associates I, LLP (Dominium). Current Circumstances The proposed Development Agreement establishes the responsibilities of the de- veloper and the city. Key elements of this agreement include: 1. Tax increments will be provided to the developer in the form of a Pay-as- you-go Note; this allows the city to reimburse the developer for eligible project cost from the property tax proceeds that are received annually up to the maximum principal amount in the Note. The city will retain 5% of the annual increment for administrative costs. 2. The TIF Note has a total principal value of$1,637,000 with an interest rate of 3.0%; the maximum term of the Note is 20 years. The current financial analysis shows the Note being fully paid in the 19th year(unless TIF pool- ing from Shepherd's Path is later approved by the City Council) 3. Once 25% of the project is completed, the City will reimburse the devel- oper$187,500,which will come from an internal loan from the Park Fund's additional revenue from this project of$637,500. 4. The developer must construct a 170-unit multifamily senior housing pro- ject on the redevelopment site. 5. With the Housing TIF District, the developer will be required to have at least 20% of the housing units (34) affordable to households with incomes at/below 50% of the Area Median Income, adjusted by HUD annually. 6. The developer agrees to pay annual property taxes promptly. At the April 20th EDA meeting, a unanimous vote (4-0) recommended public fi- nancing assistance for the Dominium redevelopment project as proposed by staff. In addition, the EDA discussed and recommended a business financing program for potential assistance that would support the move of three businesses in the Gateway Center (McGeez Closet, Pizza & Pasta, and Prior Lake Shoe Service)to move to other commercial property in Prior Lake. That recommended program is provided in a separate agenda item under New Business. Conclusion Staff and the City's consultants, including Northland Securities (financial) and Briggs & Morgan (legal) have evaluated this agreement based upon what is ben- eficial to the City and to Dominium. All financial and legal consulting costs asso- ciated with this agreement are being paid by Dominium. ISSUES: Staff has worked closely with Dominium staff to develop this final proposal. The City will see the following benefits from the Dominium redevelopment project: • An underutilized commercial area will be redeveloped into a new use, which may also spur other improvements in the Gateway area. • The market value of the property will increase ten-fold to $17 million. • After the TIF District is complete within 15-20 years, an estimated total property tax revenue will be over $150,000 annually to be divided by the taxing jurisdictions. • Affordable high-quality housing will be available to the growing senior population in and around Prior Lake. • This project will help the city achieve its affordable and life-cycle housing goals identified in the Comprehensive Plan. • Single family housing being vacated by seniors for this rental option will make more affordable housing available to families. • The city's Park Fund will see a net revenue gain of$450,000 for city park improvements. • The city's sewer and water trunk funds will see an estimated net revenue gain of$297,500 in 2015. • The city's Building Inspection division will see a gain of permit revenue of nearly $117,500 in 2015. • A high level of construction jobs will be in Prior Lake for this project within an estimated 14-month timeframe. ALTERNATIVES: 1. Motion and a second to approve a resolution authorizing execution of a Development Agreement with Prior Lake Leased Housing Associates I, LLP for Gateway Redevelopment. 2 2. Motion and a second to deny a resolution authorizing execution of a De- velopment Agreement with Prior Lake Leased Housing Associates I, LLLP for Gateway Redevelopment. 3. Motion and a second to table action and ask City staff to provide additional information as requested by the Council. RECOMMENDED Alternative#1 MOTION: ATTACHMENTS: 1. Development Agreement By and Between the City of Prior Lake and Prior Lake Leased Housing Associates I, LLLP (Gateway Project) 3 O� p�O+P 11U Prior Lake,MN 55372 So, 4646 Dakota Street SE 4Thvm RESOLUTION 15-xx A RESOLUTION AUTHORIZING EXECUTIION OF A DEVELOPMENT AGREEMENT WITH PRIOR LAKE LEASED HOUSING ASSOCIATES I, LLLP FOR GATEWAY REDEVELOPMENT Motion By: Second By: WHEREAS, It Prior Lake Leased Housing Associates I, LLLP (the "Developer") has requested the City of Prior Lake, Minnesota (the "City") to assist with the financing of certain costs incurred in connection with the construction of an approximately 170-unit multifamily senior housing development in the City by the Developer; and WHEREAS, The Developer and the City have determined to enter into a Development Agreement providing for the City's tax increment financing assistance for the Project(the"Development Agreement"). NOW THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, MINNESOTA as follows: 1. The recitals set forth above are incorporated herein. 2. The City Council hereby approves the Development Agreement in substantially the form submitted, and the Mayor and City Manager are hereby authorized and directed to execute the Development Agreement on behalf of the City. 3. The approval hereby given to the Development Agreement 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 the City officials authorized by this resolution to execute the Development Agreement. The execution of the Development Agreement by the appropriate officer or officers of the City shall be conclusive evidence of the approval of the Development Agreement in accordance with the terms thereof. PASSED AND ADOPTED THIS 11 h DAY OF MAY, 2015. VOTE Hedberg Keeney McGuire Morton Thompson Aye ❑ ❑ ❑ ❑ 0 Nay ❑ ❑ ❑ ❑ ❑ Absent 0 0 ❑ 0 0 Abstain 0 0 ❑ ❑ ❑ Frank Boyles, City Manager DEVELOPMENT AGREEMENT BY AND BETWEEN THE CITY OF PRIOR LAKE, MINNESOTA AND PRIOR LAKE LEASED HOUSING ASSOCIATES I, LLLP (GATEWAY PROJECT) i This document drafted by: BRIGGS AND MORGAN Professional Association W2200 First National Bank Building St. Paul, Minnesota 55101 7038763v1 Table of Contents Page ARTICLE I. DEFINITIONS 2 Section 1.1 Definitions 2 ARTICLE II. REPRESENTATIONS AND WARRANTIES 5 Section 2.1 Representations and Warranties of the City 5 Section 2.2 Representations and Warranties of the Developer 5 ARTICLE III. UNDERTAKINGS BY DEVELOPER AND CITY 7 Section 3.1 Site Improvements 7 Section 3.2 Reimbursement: Tax Increment Revenue Note 7 Section 3.3 Execution of Assessment Agreement; Market Value 8 Section 3.4 Compliance with Low and Moderate Income Requirements 8 Section 3.5 Real Property Taxes 9 ARTICLE IV. EVENTS OF DEFAULT 11 Section 4.1 Events of Default Defined 11 Section 4.2 Remedies on Default 11 Section 4.3 No Remedy Exclusive 12 Section 4.4 No Implied Waiver 12 Section 4.5 Agreement to Pay Attorney's Fees and Expenses 12 Section 4.6 Indemnification of City 12 ARTICLE V. ADDITIONAL PROVISIONS 14 Section 5.1 Restrictions on Use 14 Section 5.2 Conflicts of Interest 14 Section 5.3 Titles of Articles and Sections 14 Section 5.4 Notices and Demands 14 Section 5.5 Counterparts 15 Section 5.6 Law Governing 15 Section 5.7 Expiration 15 Section 5.8 Provisions Surviving Rescission or Expiration 15 Section 5.9 Assignability of Agreement and Note 15 EXHIBIT A Description of Development Property A-1 EXHIBIT B Form of Tax Increment Note B-1 EXHIBIT C Site Improvements C-1 EXHIBIT D Form of Assessment Agreement D-1 EXHIBIT E Compliance Certificate E-1 i 7038763v1 DEVELOPMENT AGREEMENT THIS AGREEMENT, made as of the day of , 2015, by and between the City of Prior Lake, Minnesota (the "City"), a municipal corporation organized and existing under the laws of the State of Minnesota and Prior Lake Leased Housing Associates I, LLLP (the "Developer"), a Minnesota limited liability limited partnership. WITNESSETH: WHEREAS, pursuant to Minnesota Statutes, Section 469.124 through 469.134, the City has formed Municipal Development District No. 1 (the "Development District") and has adopted a development program therefor(the "Development Program"); and WHEREAS, pursuant to the provisions of Minnesota Statutes, Section 469.174 through 469.1794, as amended (hereinafter, the "Tax Increment Act"), the City has created within the Development District, Tax Increment Financing District No. 1-5 (the "Tax Increment District"), and has adopted a tax increment financing plan therefor(the "Tax Increment Plan")which provides for the use of tax increment financing in connection with certain development within the Development District; and WHEREAS, in order to achieve the objectives of the Development Program and particularly to make the land in the Development District available for development by private enterprise in conformance with the Development Program, the City has determined to assist the Developer with the financing of certain costs of a Project(as hereinafter defined)to be constructed within the Tax Increment District as more particularly set forth in this Agreement; and WHEREAS, the City believes that the development and construction of the Project, and fulfillment of this Agreement are vital and are in the best interests of the City, the health, safety, morals and welfare of residents of the City, and in accordance with the public purpose and provisions of the applicable state and local laws and requirements under which the Project has been undertaken and is being assisted; and 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: 7038763v1 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: Agreement means this Agreement, as the same may be from time to time modified, amended or supplemented; Assessment Agreement means the agreement, in substantially the form of the agreement contained in Exhibit D attached hereto and hereby made a part of this Agreement, among the Developer, the City and the Assessor for the County, entered into pursuant to Article III of this Agreement; Assessor's Minimum Market Value means the agreed minimum market value of the Development Property and for calculation of real property taxes as determined by the Assessor for the County pursuant to the Assessment Agreement; 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; City means the City of Prior Lake, Minnesota; Compliance Certificate means the Compliance Certificate in substantially the form attached hereto as Exhibit E. Contract for Development means the Contract for Development of Land as a Planned Unit Development in the City of Prior Lake, Minnesota, to be known as Gateway Redevelopment, between the City and the Developer; County means Scott County, Minnesota; Developer means Prior Lake Leased Housing Associates I, LLLP, its successors and assigns; Development District means the real property described in the Development Program for Municipal Development District No. 1; Development Program means the development program approved in connection with the Development District; Development Property means the real property legally described in Exhibit A attached to this Agreement; Event of Default means any of the events described in Section 4.1 hereof; 2 7038763v1 Note Payment Date means August 1, 2017, and each February 1 and August 1 of each year thereafter to and including February 1,2037;provided,that if any such Note Payment Date should not be a Business Day, the Note Payment Date shall be the next succeeding Business Day; Person means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof; Prime Rate means the rate of interest from time to time publicly announced by U.S. Bank National Association in St.Paul,Minnesota,as its "prime rate" or"reference rate" or any successor rate, which rate shall change as and when that rate or successor rate changes; Project means the acquisition,construction and equipping of a 170-unit multifamily senior housing development to be located on the Development Property; Site Improvements means the site improvements to be undertaken on the Development Property as identified on Exhibit C attached hereto; State means the State of Minnesota; Tax Increment Act means Minnesota Statutes, Sections 469.174 through 469.1794, as amended; Tax Increment District means Tax Increment Financing District No. 1-5,located within the Development District, which was qualified as a housing district under the Tax Increment Act; Tax Increment Financing Plan means the tax increment financing plan approved for the Tax Increment District by the City Council; Tax Increment Note or Note means the Tax Increment Revenue Note(Gateway Project)to be executed by the City and delivered to the Developer pursuant to Article III hereof, the form of which is attached hereto as Exhibit B; Tax Increments means 95% of the tax increments derived from the Development Property which have been received and retained by the City in accordance with the provisions of Minnesota Statutes, Section 469.177; Termination Date means the earlier of(i) February 1,2037, (ii)the date the Tax Increment Note is paid in full, (iii) the date on which the Tax Increment District expires or is otherwise terminated,or(iv)the date this Agreement is terminated or rescinded in accordance with its terms; and Unavoidable Delays means delays,outside the control of the party claiming its occurrence, which are the direct result of strikes, other labor troubles, unusually severe or prolonged bad weather, acts of God, fire or other casualty to the Project, delays in delivery of materials for the construction of the Project,the soil conditions of the Development Property,litigation commenced by third parties which,by injunction or other similar judicial action or by the exercise of reasonable 3 7038763v1 discretion, directly results in delays, or acts of any federal, state or local governmental unit(other than the City) which directly result in delays. 4 7038763v1 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 has the power to enter into this Agreement and carry out its obligations hereunder. (2) Based on the representation of the Developer set forth in Section 3.4 below,the Tax Increment District is a "housing district" within the meaning of Minnesota Statutes, Section 469.174, Subdivision 11, and was created, adopted and approved in accordance with the terms of the Tax Increment Act. (3) The development contemplated by this Agreement is in conformance with the development objectives set forth in the Development Program. (4) To finance certain costs within the Tax Increment District, the City proposes, subject to the further provisions of this Agreement, to apply Tax Increments to reimburse the Developer for certain Site Improvements in connection with the Project as further provided in this Agreement. (5) The City makes no representation or warranty, either expressed or implied, as to the Development Property or its condition or the soil conditions thereon, or that the Development Property shall be suitable for the Developer's purposes or needs. 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 limited partnership and has power to enter into this Agreement and to perform its obligations hereunder and is not in violation of its certificate and agreement of limited partnership or the laws of the State. (2) The Developer shall 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). (3) 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. (4) The Developer will use its best efforts to obtain, or cause to be obtained,in a timely manner, all required permits, licenses and approvals, and will meet, in a timely manner, all requirements of all applicable local, state,and federal laws and regulations which must be obtained or met before the balance of the Project may be lawfully constructed. 5 7038763v1 (5) 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. (6) The Developer will cooperate with the City with respect to any litigation commenced with respect to the Project. (7) The Developer will cooperate with the City in resolution of any traffic, parking, trash removal or public safety problems which may arise in connection with the construction of the Project. (8) Construction of the Project will commence on or before , 20_ and barring Unavoidable Delays the Project will be substantially completed by 20 (9) The Developer acknowledges that Tax Increment projections contained in the Tax Increment Plan are estimates only and the Developer acknowledges that it shall place no reliance on the amount of projected Tax Increments and the sufficiency of such Tax Increments to reimburse the Developer for the costs of the Site Improvements as provided in Article III. 6 7038763v1 ARTICLE III. UNDERTAKINGS BY DEVELOPER AND CITY Section 3.1 Site Improvements. The costs of the Site Improvements shall be paid by the Developer. The City shall reimburse the Developer for the lesser of$1,637,000 or the costs of the Site Improvements actually paid by the Developer(the "Reimbursement Amount") as further provided in Section 3.2 hereof. Upon completion of 25% of the Project, the City will reimburse the Developer the sum of$187,500 for costs of the Project upon submission by the Developer of paid invoices totaling such amount. Section 3.2 Reimbursement: Tax Increment Revenue Note. The City shall reimburse the Developer the Reimbursement Amount identified in Section 3.1 through the issuance of the City's Tax Increment Revenue Note in substantially the form attached to this Agreement as Exhibit B, subject to the following conditions: (1) The Note shall be dated, issued and delivered as of the date of execution of this Agreement. The Developer shall submit paid invoices for Site Improvements in an amount not less than the Reimbursement Amount. (2) The unpaid principal amount of the Note shall bear simple, non-compounding interest from the date that the City has determined the paid invoices are in compliance with the terms of the Development Agreement, at 3% per annum. Interest shall be computed on the basis of a 360 day year consisting of twelve (12) 30-day months. (3) The principal amount of the Note and the interest thereon shall be payable solely from the Tax Increments. (4) On each Note Payment Date and subject to the provisions of the Note and Section 3.3, the City shall pay, against the principal and interest outstanding on the Note, Tax Increments received by the City during the preceding 6 months. All such payments shall be applied first to accrued interest and then to reduce the principal of the Note. (5) The Note shall be a special and limited obligation of the City and not a general obligation of the City, and only Tax Increments shall be used to pay the principal and interest on the Note. If, on any Note Payment Date, the Tax Increments for the payment of the accrued and unpaid interest on the Note are insufficient for such purposes, the difference shall be carried forward, without interest accruing thereon, and shall be paid if and to the extent that on a future Note Payment Date there are Tax Increments in excess of the amounts needed to pay the accrued interest then due on the Note. (6) The City's obligation to make payments on the Note on any Note Payment Date or any date thereafter 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 and (B) this Agreement shall not have been rescinded pursuant to Section 4.2(b). (7) The Note shall be governed by and payable pursuant to the additional terms thereof, as set forth in Exhibit B. In the event of any conflict between the terms of the Note and the terms 7 7038763v1 of this Section 3.2, the terms of the Note shall govern. The issuance of the Note pursuant and subject to the terms of this Agreement, and the taking by the City of such additional actions as bond counsel for the Note may require in connection therewith, are hereby authorized and approved by the City. Section 3.3 Execution of Assessment Agreement; Market Value. (1) Simultaneously with the execution of this Agreement, the Developer and the City shall execute an Assessment Agreement pursuant to the provisions of Minnesota Statutes, Section 469.177, Subdivision 8, specifying the Assessor's Minimum Market Value for the Development Property and the Project for calculation of real property taxes. Specifically, the Developer shall agree to a market value for the Development Property and the Project which will result in a market value as of January 2, 2016 of not less than$ until the Termination Date(such minimum market value at the time applicable is herein referred to as the "Assessor's Minimum Market Value"). Nothing in the Assessment Agreement shall limit the discretion of the Assessor to assign a market value to the property in excess of such Assessor's Minimum Market Value nor prohibit the Developer from seeking through the exercise of legal or administrative remedies a reduction in such market value for property tax purposes, provided however, that the Developer shall not seek a reduction of such market value below the Assessor's Minimum Market Value in any year so long as the Assessment Agreement shall remain in effect. The Assessment Agreement shall remain in effect until the Termination Date. The Assessment Agreement shall be certified by the Assessor for the County as provided in Minnesota Statutes, Section 469.177, Subdivision 8, upon a finding by the Assessor that the Assessor's Minimum Market Value represents a reasonable estimate based upon the plans and specifications for the Project to be constructed on the Development Property and the market value previously assigned to the Development Property. Pursuant to Minnesota Statutes, Section 469.177, Subdivision 8,the Assessment Agreement shall be filed for record in the office of the county recorder or registrar of titles of Scott County, and such filing shall constitute notice to any subsequent encumbrancer or purchaser of the Development Property (or part thereof), whether voluntary or involuntary, and such Assessment Agreement shall be binding and enforceable in its entirety against any such subsequent purchaser or encumbrancer, including the holder of any mortgage recorded against the Development Property. (2) Notwithstanding the previous paragraph,the Developer will not seek a reduction in the Market Value (as defined in Minnesota Statutes, Section 273.02) for the tax collection years of 2032 through 2036. In the event that the Developer obtains a reduction in Market Value that results in the City having to make a payment to the County (the "County Payment") for the tax collection years of 2017 through 2031,the Developer agrees that: (a) If the TIF Note remains outstanding, the next Tax Increments to be paid to the Developer shall be reduced by the County Payment, and (b) If the TIF Note is no longer outstanding, Developer shall pay the amount of the County Payment to the City within thirty (30) days after written notice from the City as to the amount of the County Payment. Section 3.4 Compliance with Low and Moderate Income Requirements. 8 7038763v1 (1) The City and the Developer understand and agree that the Tax Increment District will constitute a "housing district" under Section 469.174, Subd. 11 of the Tax Increment Act. Accordingly, in compliance with Section 469.1761, Subd. 3 of the Tax Increment Act, the Developer agrees that the Project must satisfy,or be treated as satisfying,the income requirements for a qualified residential rental project as defined in Section 142(d)of the Internal Revenue Code. The parties further agree that no more than 20%of the square footage of the Project(which is the only building receiving assistance from Tax Increments) may consist of commercial, retail, or other nonresidential uses. The Developer must meet the above requirements as follows: (a) At least 20% of the residential units in the Project must be occupied or available for occupancy by persons whose incomes do not exceed 50% of the County median income; and (b) The limits described in clause (A) must be satisfied commencing with the date on which at least 10% of the units in the Project are occupied and continuing through the Termination Date. Income for occupants of units described in clause (A) shall be adjusted for family size in accordance with Section 142(d) of the Internal Revenue Code and related regulations. (2) On or before each January 1 and July 1,commencing on July 1,2017,the Developer or an agent of the Developer must deliver or cause to be delivered to the City a Compliance Certificate executed by the Developer covering the preceding six months together with written evidence satisfactory to the City of compliance with the covenants in this Section. This evidence must include a statement of the household income of each of qualifying renter, a written determination that each qualifying renter's household income falls within the qualifying limits of this Section (and Section 142(d) of the Internal Revenue Code), and certification that the income documentation is correct and accurate (and that the determination of qualification was made in compliance with Section 142(d) of the Internal Revenue Code). The City may review, upon request, all documentation supporting the Developer submissions and statements. In determining compliance with this Section, the Developer must use the County median incomes for the year in which the payment is due on the TIF Note, as promulgated by the Minnesota Housing Finance Agency based on the area median incomes established by the United States Department of Housing and Urban Development. Section 3.5 Real Property Taxes. Prior to the Termination Date, the Developer shall pay all real property taxes payable with respect to all and any parts of the Development Property acquired and owned by it and pursuant to the provisions of the Assessment Agreement until the Developer's obligations have been assumed by any other person pursuant to the provisions of this Agreement or title to the Development Property is vested in another person. The Developer agrees that prior to the Termination Date: (1) It will not seek administrative review or judicial review of the applicability of any tax statute relating to the ad valorem property taxation of real property contained on the Development Property determined by any tax official to be applicable to the Project or the Developer or raise the inapplicability of any such tax statute as a defense in any proceedings with 9 7038763v1 respect to the Development Property, including delinquent tax proceedings; provided, however, "tax statute" does not include any local ordinance or resolution levying a tax; (2) It will not seek administrative review or judicial review of the constitutionality of any tax statute relating to the taxation of real property contained on the Development Property determined by any tax official to be applicable to the Project or the Developer or raise the unconstitutionality of any such tax statute as a defense in any proceedings, including delinquent tax proceedings with respect to the Development Property; provided, however, "tax statute" does not include any local ordinance or resolution levying a tax; (3) It will not seek any tax deferral or abatement, either presently or prospectively authorized under Minnesota Statutes, Section 469.1813, or any other State or federal law, of the ad valorem property taxation of the Development Property between the date of execution of this Agreement and the Termination Date. Notwithstanding the foregoing, nothing in this Section 3.5 shall be interpreted to limit the Developer's rights under Section 3.3. 10 7038763v1 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: (a) Failure by the Developer to timely pay any ad valorem real property taxes assessed or other City charges with respect to the Development Property while such property is owned by Developer. (b) Failure by the Developer to cause the construction of the Project to be completed pursuant to the terms, conditions and limitations of this Agreement or the Contract for Development. (c) Failure of the Developer to observe or perform any other covenant, condition, obligation or agreement on its part to be observed or performed under this Agreement or the Contract for Development. (d) The holder of any mortgage on the Development Property or any improvements thereon, or any portion thereof, commences foreclosure proceedings as a result of any default under the applicable mortgage documents. (e) If 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) make an assignment for the benefit of its creditors; or (C) admit in writing its inability to pay its debts generally as they become due; or (D) be adjudicated a bankrupt or insolvent; or if a petition or answer proposing the adjudication of the Developer, as a 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 sixty (60) 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 sixty (60) days after such appointment, or if the Developer, shall consent to or acquiesce in such appointment. 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 11 7038763v1 following actions after the giving of thirty (30) days' written notice to the Developer citing with specificity the item or items of default and notifying the Developer that it has thirty (30) days within which to cure said Event of Default. If the Event of Default has not been cured within said thirty (30) days: (a) The City may suspend its performance under this Agreement until it receives assurances from the Developer, deemed adequate by the City,that the Developer will cure the Event of Default and continue its performance under this Agreement, and no interest shall accrue on the Note while performance is suspended in accordance with this Section 4.2. (b) The City may cancel and rescind the Agreement. (c) 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. 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 Agreement to Pay Attorney's Fees and Expenses. Whenever any Event of Default occurs and the City shall employ attorneys or incur other expenses for the collection of payments due or to become due or for the enforcement or performance or observance of any obligation or agreement on the part of the Developer herein contained, the Developer agrees that it shall, on demand therefor, pay to the City the reasonable fees of such attorneys and such other expenses so incurred by the City. Section 4.6 Indemnification of City. (1) The Developer releases from and covenants and agrees that the City, its governing body members, officers, agents, including the independent contractors, consultants and legal counsel, servants and employees thereof(hereinafter,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, provided that the foregoing indemnification shall not be effective for any actions of the Indemnified Parties that are not contemplated by this Agreement. 12 7038763v1 (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 aforesaid 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; provided, that this indemnification shall not apply to the warranties made or obligations undertaken by the City in this Agreement or to any actions undertaken by the City which are not contemplated by this Agreement but shall, in any event and without regard to any fault on the part of the City, apply to any pecuniary loss or penalty (including interest thereon from the date the loss is incurred or penalty is paid by the City at a rate equal to the Prime Rate) as a result of the Project causing the Tax Increment District to not qualify or cease to qualify as a "housing district" under Section 469.174, Subdivision 11, of the Act and Section 469.176, Subdivision 4c. or to violate limitations as to the use of Tax Increments as set forth in Section 469.176, Subdivision 4c. (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. 13 7038763v1 ARTICLE V. ADDITIONAL PROVISIONS Section 5.1 Restrictions on Use. The Developer agrees for itself, its successor and assigns and every successor in interest to the Development Property, or any part thereof, that the Developer and its successors and assigns shall operate, or cause to be operated, the Project as a housing facility and shall devote the Development Property to, and in accordance with, the uses specified in this Agreement. Section 5.2 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 the 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 5.3 Titles of Articles and Sections. Any titles of the several parts, articles and sections of the Agreement are inserted for convenience of reference only and shall be disregarded in construing or interpreting any of its provisions. Section 5.4 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: Prior Lake Leased Housing Associates I, LLLP 2905 Northwest Boulevard Suite 1500 Plymouth, MN 55441 Attn: (b) in the case of the City is addressed to or delivered personally to the City at: City of Prior Lake, Minnesota Prior Lake City Hall 4646 Dakota Street SE Prior Lake, Minnesota 55372-1176 Attn: Community Development Director 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. 14 7038763v1 Section 5.5 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute one and the same instrument. Section 5.6 Law Governing. This Agreement will be governed and construed in accordance with the laws of the State. Section 5.7 Expiration. This Agreement shall expire on the Termination Date. Section 5.8 Provisions Surviving Rescission or Expiration. Sections 3.3, 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 5.9 Assignability of Agreement and Note. This Agreement may be assigned only with the consent of the City which consent shall not be unreasonably withheld. The Note may only be assigned pursuant to the terms of the Note. 15 7038763v1 IN WITNESS WHEREOF, the City has caused this Agreement to be duly executed in its name and on its behalf and its seal to be hereunto duly affixed, and the Developer has caused this Agreement to be duly executed on its behalf, on or as of the date first above written. CITY OF PRIOR LAKE, MINNESOTA By Its Mayor By Its Manager (SEAL) This is a signature page to the Development Agreement by and between the City of Prior Lake and Prior Lake Leased Housing Associates I, LLLP. S-1 7038763v1 Prior Lake Leased Housing Associates I, LLLP By Its This is a signature page to the Development Agreement by and between the City of Prior Lake and Prior Lake Leased Housing Associates I, LLLP. S-2 7038763v1 EXHIBIT A Description of Development Property A-1 7038763v1 EXHIBIT B Form of Tax Increment Note No. R-1 $ UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF SCOTT CITY OF PRIOR LAKE TAX INCREMENT REVENUE NOTE (GATEWAY PROJECT) The City of Prior Lake, 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 Prior Lake Leased Housing Associates I, LLLP (the "Developer") or its registered assigns(the "Registered Owner"),but only in the manner,at the times,from the sources of revenue, and to the extent hereinafter provided. The principal amount of this Note shall equal from time to time the principal amount stated above, as reduced to the extent that such principal installments shall have been paid in whole or in part pursuant to the terms hereof; provided that the sum of the principal amount listed above shall in no event exceed $1,637,000 as provided in that certain Development Agreement, dated as of , 2015 as the same may be amended from time to time (the "Development Agreement"), by and between the City and the Developer. The unpaid principal amount hereof shall bear interest from the date that the Developer has submitted to the City and the City has determined that the closing statement,purchase agreement and paid invoices in the amount of the Reimbursement Amount (as defined in the Development Agreement) are in compliance with the terms of the Development Agreement at the simple non-compounded rate of three percent (3%) per annum. Interest shall be computed on the basis of a 360 day year consisting of twelve(12)30- day months. The amounts due under this Note shall be payable on August 1,2017,and on each February 1 and August 1 thereafter to and including February 1,2037,or,if the first should not be a Business Day(as defined in the Development Agreement),the next succeeding Business Day(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 of the City preceding such Payment Date an amount equal to the Tax Increments (hereinafter defined) received by the City during the six month period preceding such Payment Date. All payments made by the City under this Note shall first be applied to accrued interest and then to principal. The Payment Amounts due hereon shall be payable solely from 95%of tax increments(the "Tax Increments") from the Development Property within the City's Tax Increment Financing District No. 1-5 (the "Tax Increment District") within its Municipal Development District No. 1 which are paid to the City and which the City is entitled to retain pursuant to the provisions of B-1 7038763v1 Minnesota Statutes, Sections 469.174 through 469.1794, as the same may be amended or supplemented from time to time (the "Tax Increment Act"). This Note shall terminate and be of no further force and effect following the last Payment Date defined above,on any date upon which the City shall have terminated the Development Agreement under Section 4.2(b)thereof,the date the Tax Increment District is terminated, or on the date that all principal and interest payable hereunder shall have been paid in full, whichever occurs earliest. The City makes no representation or covenant, express or implied,that the Tax Increments will be sufficient to pay,in whole or in part,the amounts which are or may become due and payable hereunder. The City's payment obligations hereunder shall be further conditioned on the fact that no Event of Default under the Development Agreement shall have occurred and be continuing at the time payment is otherwise due hereunder, but such unpaid amounts shall become payable if said Event of Default shall thereafter have been cured; and, further, if pursuant to the occurrence of an Event of Default under the Development Agreement the City elects to cancel and rescind the Development Agreement, the City shall have no further debt or obligation under this Note whatsoever. Reference is hereby made to all of the provisions of the Development Agreement, including without limitation Section 3.2 thereof, 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 is a special, limited revenue obligation 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 neither the full faith and credit nor the taxing powers of the City are 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 Tax Increments, is or shall be a source of payment of the City's obligations hereunder. 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 Tax Increment Act. This Note is subject to prepayment in immediately available funds on any date at the option of the City, in whole or in part and without penalty. This Note may be assigned only with the consent of the City which consent shall not be unreasonably withheld. 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 for the Note maintained by the City. 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 B-2 7038763v1 its actual issuance and delivery, does not cause the indebtedness of the City to exceed any constitutional or statutory limitation thereon. IN WITNESS WHEREOF, City of Prior Lake, Minnesota,by its City Council,has caused this Note to be executed by the manual signatures of its Mayor and Manager and has caused this Note to be dated as of . DO NOT EXECUTE UNTIL PAID INVOICES FOR SITE IMPROVEMENTS ARE GIVEN TO THE CITY—REFER TO SECTION 3.2(1). Manager Mayor B-3 7038763v1 CERTIFICATION OF REGISTRATION It is hereby certified that the foregoing Note was registered in the name of Prior Lake Leased Housing Associates I, LLLP, 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 CITY MANAGER Prior Lake Leased Housing Associates I, LLLP 2905 Northwest Boulevard Suite 150 Plymouth, MN 55441 B-4 7038763v1 EXHIBIT C Site Improvements Earthwork/excavation Soils test and environmental studies Environmental remediation Building demolition and clearance Streets and roads Curb and gutter Sidewalks and trails Soils correction Storm water retention systems Pilings/Caissons Utilities (sanitary sewer, storm sewer, and water), including utility relocations Parking improvements C-1 7038763v1 EXHIBIT D Form of Assessment Agreement THIS AGREEMENT, dated as of this day of , 20 , is by and among the City of Prior Lake,Minnesota(the "City")and Prior Lake Leased Housing Associates I,LLLP, a Minnesota limited liability limited partnership(the "Developer"), and the Scott County Assessor (the "Assessor"). • WITNESSETH WHEREAS, on or before the date hereof the City and Developer have entered into a Development Agreement dated as of , 2015 (the "Agreement")regarding certain real property located in the City(the "Development Property")which property is legally described on Exhibit A attached hereto and made a part hereof. WHEREAS, it is contemplated that pursuant to said Agreement, the Developer will acquire, construct and equip a 165-unit independent affordable multifamily senior housing development(the "Project") on the Development Property. WHEREAS, the City and Developer desire to establish a minimum market value for the Development Property and the improvements constructed or to be constructed thereon, pursuant to Minnesota Statutes, Section 469.177, Subdivision 8. WHEREAS, the Developer has acquired the Development Property. WHEREAS, the City and the Assessor have reviewed plans and specifications for the Project. NOW, THEREFORE, the parties to this Agreement, in consideration of the promises, covenants and agreements made by each to the other, do hereby agree as follows: 1. As of January 2,2016 through and thereafter until December 31,2035 the minimum market value which shall be assessed for the Project shall be not less than$ 2. The minimum market value herein established shall be of no further force and effect and this Agreement shall terminate on Termination Date. 3. This Agreement shall be recorded by the City with the County Recorder of Scott County, Minnesota. The Developer shall pay all costs of recording. 4. The Assessor has reviewed the plans and specifications for the improvements and the market value previously assigned to the land upon which the improvements are to be constructed, and that the "minimum market value" as set forth above is reasonable. 5. Neither the preamble nor provisions of this Agreement are intended to,or shall they be construed as, modifying the terms of the Agreement between the City and the Developer. D-1 7038763v1 6. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the parties. IN WITNESS WHEREOF, the City, the Developer and the Assessor have caused this Agreement to be executed in their names and on their behalf all as of the date set forth above. CITY OF PRIOR LAKE, MINNESOTA (SEAL) By Its Mayor By Its Manager STATE OF MINNESOTA ) ) ss COUNTY OF SCOTT ) The foregoing instrument was acknowledged before me this day of , 20_, by Ken Hedberg, the Mayor and Frank Boyles, the Manager of the City of Prior Lake, Minnesota on behalf of said City. Notary Public This Instrument Drafted By: Briggs and Morgan, P.A. 2200 First National Bank Building St. Paul, MN 55101 D-2 7038763v1 Prior Lake Leased Housing Associates I, LLLP By: Its: STATE OF MINNESOTA ) ) ss. COUNTY OF ) The foregoing instrument was acknowledged before me this day of , 20_, by , the of Prior Lake Leased Housing Associates I, LLLP, a Minnesota limited liability limited partnership, on behalf of said partnership. Notary Public Signature page for Assessment Agreement by and between the City of Prior Lake, Minnesota, Prior Lake Leased Housing Associates I, LLLP, and the Scott County Assessor. D-3 7038763v1 CERTIFICATION BY COUNTY ASSESSOR The undersigned, having reviewed the Assessment Agreement dated as of 2015 between the City of Prior Lake, Minnesota and Prior Lake Leased Housing Associates I, LLLP, a Minnesota limited liability limited partnership; the construction plans for the Project, as defined in the Assessment Agreement;and the market value currently assigned to land upon which the improvements are to be constructed and being of the opinion that the minimum market value contained in the Assessment Agreement appears reasonable, hereby certifies as follows: The undersigned Assessor, being legally responsible for the assessment of the above described property,hereby certifies that the market values assigned to such land and improvements are reasonable. County Assessor for Scott County STATE OF MINNESOTA ) ) ss. COUNTY OF SCOTT ) This instrument was acknowledged before me on , 20_, by , the County Assessor of Scott County. Notary Public D-4 7038763v1 EXHIBIT A TO ASSESSMENT AGREEMENT LEGAL DESCRIPTION OF DEVELOPMENT PROPERTY D-A-1 7038763v1 CONSENT TO ASSESSMENT AGREEMENT The , of (the "Bank"), does hereby consent to all terms, conditions and provisions of the foregoing Assessment Agreement and agrees that, in the event it purchases the Development Property at a foreclosure sale or acquires the Development Property through a deed in lieu of foreclosure or otherwise in satisfaction of the indebtedness owed by the Developer, it and its respective successors and assigns, shall be bound by all terms and conditions of the Assessment Agreement, including but not limited to the provision which requires that the minimum market value of the Development Property shall be not less than $ as of January 2, 2016 and subsequent assessments through the January 2, 2035 assessment. IN WITNESS WHEREOF, we have caused this Consent to Assessment Agreement to be executed in its name and on its behalf as of this day of , 20_. By Its STATE OF MINNESOTA ) ) ss. COUNTY OF SCOTT ) This instrument was acknowledged before me this day of ,20_,by , the of , a , on behalf of the Notary Public D-A-2 7038763v1 EXHIBIT E Compliance Certificate The undersigned Prior Lake Leased Housing Associates I, LLLP, does hereby certify that as of the date of this Certificate not less than 20% of the residential units in the Gateway Project located at in Prior Lake, Minnesota (the "Project") are occupied by individuals whose income is 50% or less of the Scott County median income. Dated this day of , 201_ PRIOR LAKE LEASED HOUSING ASSOCIATES I, LLLP By Its [Attach household income verification required by Section 3.4.] E-1 7038763v1