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HomeMy WebLinkAbout9F - Onsite Engineering16200 Eagle Creek Avenue S.E. Prior Lake, MN 55372-1714 CITY COUNCIL AGENDA REPORT MEETING DATE: AGENDA#: PREPARED BY: AGENDA ITEM: DISCUSSION: July 18, 2005 9F JOHN SULLIVAN, COMMUNITY DEVELOPMENT DIRECTOR CONSIDER APPROVAL OF A RESOLUTION APPROVING THE ASSIGNMENT OF A TIF NOTE AND DEVELOPMENT AGREEMENT WITH ONSlTE ENGINEERING (TIF DISTRICT 4-1 IN DEERFIELD INDUSTRIAL PARK) Introduction: The purpose of this item is to consider a resolution approving an assignment of a Tax Increment Finance (TIF) Note and Development Agreement with Onsite Engineering and Forensic Services, Inc. Background: On May 16, 2005 the City Council approved the creation of Development District #4 and adopted the TIF Plan for TIF District 4-1 and the Business Subsidy Agreement and Development Contract with Onsite Engineering and Forensic Services. TIF District 4-1 is approximately 1.09 acres in size, and is located north of Adelman Street. Development District No. 4 includes the Deerfield Industrial Park approximately 60 acre site. The property is guided C-BO Business Office Park in the City of Prior Lake 2030 Comprehensive Plan and the zoning is C-5 Business Park Use District. Construction for the Onsite building commenced in late June of 2005. Current Circumstances: After the project was approved and TIF 4-1 and the Business Subsidy and Development Agreement was signed, the lender for the project, Wells Fargo Bank, requested (via e-mail to the City) an assignment of the Development Agreement and TIF note as additional security for the bank. This request is as attached in the form of an assignment agreement, and was written and presented www.cityofpriorlake.com Phone 952.447.4230 / Fax 952.447.4245 by the banks legal counsel, Winthrop and Weinstein of Minneapolis. This assignment request by the lender is relatively common practice in bank projects in which a City TIF Business Subsidy is involved; however, the request came after the City approvals. It was reiterated by the bank that the City's approval of the assignment of its interests as requested was not a contingency of financing approval, and the project was approved on its own merits. Conclusion: The City Council should determine if the requested assignment is appropriate. ISSUES: The lender, Wells Fargo Bank, wants the proceeds of the TIF to go directly to them to secure the obligations of the borrower under the Note, Loan Agreement, and the documents related thereto. The proposed assignment has been reviewed by the City Attorney and the City's bond counsel, Mary Ippel of Briggs and Morgan. Both have submitted their review comments and suggested language changes to the original document provided by Wells Fargo Bank. The changes proposed by the City's counsel were as follows: · The TIF note has not been issued as of yet, and the language in the assignment agreement needs to reflect that. · The City is not going to subordinate to the mortgage as the City has no interest in the property, so subordination makes no sense. · There shall be no liability to the City if it failed in some aspect to provide the lender with a copy of the notices. · Lender acknowledges that if defaults are not cured by the borrower or the lender the City can exercise its remedies under the Development Agreement, including suspending its performance under the Development Agreement or terminating the Development Agreement. FINANCIAL IMPACT: The proposed assignment, if approved, would not result in financial impacts to the City. ALTERNATIVES: Adopt Resolution #05-xx, approving the assignment of the TIF Note and Development Agreement as proposed or with recommended modifications subject to counsel review and acceptance. Further discuss this issue and direct staff to provide additional information to the Council. Deny the assignment request. RECOMMENDATION: Alternative #1. ATTACHMENTS: Reviewed by: City Manager Resolution #05-xx Assignment of Development Agreement and TIF Note Agreement between City and Wells Fargo Bank National Association. 16200 Eagle Creek Avenue $.E. Prior Lake, MN 55372-1714 RESOLUTION 05-xx A RESOLUTION APPROVING THE ASSIGNMENT OF A TIF NOTE AND DEVELOPMENT AGREEMENT WITH ONSlTE ENGINEERING (TIF DISTRICT 4-1 IN DEERFIELD INDUSTRIAL PARK) WHEREAS, WHEREAS, WHEREAS, WHEREAS, Motion By: Second By: On May 16, 2005 the City Council approved the creation of Development District #4 and adopted the TIF Plan, Development Agreement, and Business Subsidy for TIF District 4-1 for Onsite Engineering and Forensic Services at Deerfield Industrial Park, and Wells Fargo Bank, the lender for the Onsite Engineering and Forensic Services, has requested an assignment of the TIF Note and Development Agreement to secure their position in receiving direct TIF Pay As You Go Note payments by Onsite Engineering and Forensic Services, and The City staff and City Attorney have reviewed and accepted the proposed assignment agreement in its current form, and The proposed assignment is in the best interest of the project, borrower, lender, and City to promote economic development in accordance and consistent with the Comprehensive Plan and 2030 Strategic Vision and Plan. 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 Manager and Mayor are hereby authorized by the City Council to execute the assignment agreement on behalf of the City. PASSED AND ADOPTED THIS 18th DAY OF JULY, 2005. YES NO Hau~en Haugen Fleming Fleming LeMair LeMair Petersen Petersen Zieska Zieska Frank Boyles, City Manager www.cityofpriorlake.com Phone 952.447.4230 / Fax 952.447.4245 ASSIGNMENT OF DEVELOPMENT AGREEMENT AND TIF NOTE AND AGREEMENT THIS ASSIGNMENT OF DEVELOPMENT AGREEMENT AND TIF NOTE AND AGREEMENT is made and entered into this 8th day of June, 2005 by and among CITY OF PRIOR LAKE, MINNESOTA, a municipal corporation duly organized and existing under the laws of the State of Minnesota ("City"), ONSITE ENGINEERING AND FORENSIC SERVICES, INC., a Minnesota corporation ("Borrower") and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association ("Lender"). RECITALS A. Borrower (added) will possesses the right, title and interest in that certain interest beating Tax Increment Revenue Note in the original principal amount of (added) approximately $68,900 (the "TIF Note") (added) when issued by City pursuant to a Development Agreement by and between City and Borrower dated as of June 1, 2005 (the "Development Agreement") providing for the development of certain property legally described on Exhibit A attached hereto (the "Property"). B. The TIF Note (deleted amount) (added) is to be issued in consideration of acquisition of the Property by Borrower. C. Lender has agreed to make a loan to Borrower to acquire the Property and construct improvements thereon pursuant to the terms of that certain Construction Loan Agreement dated as of June 8, 2005 (the "Loan Agreement"), by and between Borrower and Lender. C. The obligation of Borrower to repay amounts advanced under the Loan Agreement is evidenced by those certain Promissory Notes dated as of June 8, 2005 in the original principal amounts of $527,000 and $420,000, respectively (collectively, the "Notes"), each executed by Borrower and made payable to Lender. D. The Notes are secured by, among other things, those certain dated as of June 8, 2005 (collectively, the "Mortgages"), each executed by Borrower in favor of Lender. E. Lender has required, as an express condition to providing the financing contemplated by the Loan Agreement, (a) Borrower to assign all of its rights under the Development Agreement and the TIF Note to Lender to secure the obligations of Borrower under the Notes, the Loan Agreement and the documents related thereto (collectively, the "Loan Documents"), (original item B was omitted, which stated) "certain rights of City under the Development Agreement to be subordinated to the Mortgages" (b) City to agree to certain other matters, all as more fully contained herein. NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements set forth herein and other good and valuable consideration, it is agreed by the parties as follows: Borrower hereby assigns to Lender all of Borrower's right, title and interest in and to the Development Agreement and the TIF Note to secure Borrower's obligations to Lender under the Loan Documents. To perfect Lender's security interest in the TIF Note, Borrower shall endorse and deliver the original TIF Note (Added) after issuance by City to Lender to be held by Lender pursuant to the terms of this Agreement. Borrower hereby represents and warrants that there have been no prior assignments of the Development Agreement or the TIF Note, that the Development Agreement and the TIF Note are valid and enforceable agreements, that neither City nor Borrower is in default under the Development Agreement or the TIF Note and that all covenants, conditions and agreements have been performed as required therein (except those not to be performed until after the date hereof). Borrower hereby agrees not to sell, assign, pledge, mortgage, encumber or otherwise transfer its interest in the Development Agreement or the TIF Note as long as this Agreement is in effect. Borrower hereby irrevocably constitutes and appoints Lender as its attorney-in-fact to demand, receive and enforce Borrower's rights with respect to the Development Agreement and the TIF Note for and on behalf of and in the name of Borrower or, at the option of Lender, in the name of Lender, with the same force and effect as Borrower could do if this Agreement had not been made. This Agreement shall constitute a perfected, absolute and present assignment, provided that Lender shall have no right under this Agreement to enforce any of the provisions of the Development Agreement or the TIF Note or exercise any fights or remedies under this Agreement until an Event of Default (as that term is defined in the Loan Agreement) shall occur and be continuing. City hereby agrees to provide Lender with a copy of each (a) notice of default or of an Event of Default (as that term is defined in the Development Agreement), (b) notice of termination given by it to Borrower under and pursuant to the Development Agreement, and/or (c) any other notice given by it to Borrower, under or pursuant to the TIF Note and/or the Development Agreement, in the same manner as such notice is given to Borrower at the its address set forth below, or at such other address as Lender may hereafter provide to City. (Added) There shall be no liability to City if it fails to provide Lender with a copy of these notices. Upon the occurrence of an Event of Default, Lender may, without affecting any of its rights or remedies against Borrower under any other instrument, document or agreement, exercise its rights under this Agreement as Borrower's attorney-in-fact in any manner permitted by law and, in addition, Lender shall have the right to exercise and enforce any and all rights and remedies available after a default to a secured party under the Uniform Commercial Code as adopted in the State of Minnesota. If notice to Borrower of any intended disposition of collateral or of any intended action is required by law in any o ° 10. 11. 12. 13. 14. particular instance, such notice shall be deemed commercially reasonable if given at least ten (10) calendar days prior to the intended disposition or other action. City shall continue to make all payments of principal, interest, and any other kind or type due under the TIF Note pursuant to the terms of the TIF Note and only from the revenue sources indicated in the TIF Note, as and when due under the TIF Note, directly to the Borrower. However, notwithstanding the foregoing, upon written notice from Lender, City shall make all payments of principal, interest, and any other kind or type due under the TIF Note pursuant to the terms of the TIF Note and only from the revenue sources indicated in the TIF Note, as and when due under the TIF Note, directly to Lender at the its address set forth below, or at such other address as Lender may hereafter provide to City. City hereby consents and agrees to the terms and conditions of this Agreement. City further represents and warrants to Lender that the Development Agreement and the TIF Note are valid and enforceable agreements. (Last sentence omitted, which read) "To the actual knowledge of the undersigned, neither City nor borrower is in default under the Development Agreement and all covenants, conditions and agreements have been performed as required therein (except those not to be performed until after the date hereof)". (This sentence omitted, which read) "The City hereby agrees that any of its right, title and interest in and to the Property pursuant to the Development Agreement shall be subject and subordinate to the lien of the Mortgage". City hereby agrees that the agreement of Borrower to indemnify City as set forth in Section 5.6 of the Development Agreement is not the obligation of, nor shall any provisions in such section impose any obligation upon, the holder of the Mortgage, its successors and/or assigns. Pursuant to Section 7.9 of the Development Agreement, City hereby consents to and approves of the assignment of the Development Agreement and the TIF Note pursuant to the terms hereof. City hereby agrees to provide Lender with copies of any notice or demand made under the Development Agreement. (Added) There shall be no liability to City if it fails to provide notices. City further agrees that Lender shall have the right, but not the obligation, to cure any defaults on behalf of Borrower within the periods of time set forth in Section 5.2 of the Development Agreement. (Added) Lender acknowledges that if these defaults are not cured by the borrower or lender the City can exercise its remedies under the Development Agreement, including suspending its performance under the Development Agreement or terminating the Development Agreement. The parties hereto agree that no change or amendment shall be made to the terms of the Development Agreement or the TIF Note without the prior written consent of Lender. This Agreement can be waived, modified, amended, terminated or discharged only explicitly in a writing signed by Lender, City and Borrower. A waiver by Lender shall be 15. 16. effective only in a specific instance and for the specific purpose given. Mere delay or failure to act shall not preclude the exercise or enforcement of any of Lender's rights or remedies hereunder. All rights and remedies of Lender shall be cumulative and may be exercised singularly or concurrently, at Lender's option, and any exercise or enforcement of any one such right or remedy shall neither be a condition to nor bar the exercise or enforcement of any other. No provision of this Agreement shall be deemed or construed to alter, amend or modify, in any way, the rights and obligations of City with respect to Borrower and Borrower with respect to City as contained in the Development Agreement. Nothing herein shall be construed to limit City's remedies under Section 5.2 of the Development Agreement upon the occurrence and during the continuance of an Event of Default under the Development Agreement. Any notice, request, demand or other communication hereunder shall be deemed fully given if delivered or postage prepaid, certified or registered, addressed to the party as set forth below: If to City: City of Prior Lake 16200 Eagle Creek Avenue SE Prior Lake, Minnesota 55372-1787 Attn: If to Borrower: Onsite Engineering and Forensic Services, Inc. 5714 Graystone Court SE Prior Lake, MN 55372 Attn: If to Lender: Wells Fargo Bank, National Association 17. Attn: This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota. If any provision or application of this Agreement is held unlawful or unenforceable in any respect, such illegality or unenforceability shall not affect other provisions or applications which can be given effect, and this Agreement shall be construed as if the unlawful or unenforceable provision or application had never been contained herein or prescribed hereby. All covenants contained in this Agreement shall survive the execution, delivery and performance of this Agreement and the creation and payment of the TIF Note. [signature pages follow] The parties have executed this Agreement as of the date set forth in the first paragraph of this Assignment. CITY OF PRIOR LAKE, MINNESOTA STATE OF MINNESOTA ) ) ss COUNTY OF ) By: Its: The foregoing instrument was acknowledged before me this , the of City of Prior Lake, corporation, for and on behalf of the municipal corporation. day of June, 2005, by a Minnesota municipal Notary Public ONSITE ENGINEERING AND FORENSIC SERVICES, INC. STATE OF MINNESOTA ) ) ss COUNTY OF ) By: Its: The foregoing instrument was acknowledged before me this 8th day of June, 2005, by , the of Onsite Engineering and Forensic Services, Inc., a Minnesota corporation, for and on behalf of the corporation. Notary Public WELLS FARGO BANK, NATIONAL ASSOCIATION By: Its: STATE OF MINNESOTA ) ) ss COUNTY OF ) The foregoing instrument was acknowledged before me this 8th day of , the of Wells Fargo Bank, National national banking association, for and on behalf of the association. June, 2005, by Association., a Notary Public THIS INSTRUMENT WAS DRAFTED BY: Winthrop and Weinstine P.A. 225 South Sixth Street, Suite 3500 Minneapolis, Minneapolis 55402 2359920vl EXHIBIT A (Legal Description) The Parcel numbered 25-428001-0 in the City of Prior Lake, Minnesota located in Scott County, Minnesota.