HomeMy WebLinkAbout8A Pike Lake Marsh TIF Report
4646 Dakota Street SE
Prior Lake, MN 55372
CITY COUNCIL AGENDA REPORT
MEETING DATE: APRIL 10, 2017
AGENDA #: 8A
PREPARED BY:
PRESENTED BY:
CASEY MCCABE, COMMUNITY DEVELOPMENT SPECIALIST
CASEY MCCABE
AGENDA ITEM: CONSIDER APPROVAL OF 1) A RESOLUTION MODIFYING MUNICIPAL DE-
VELOPMENT DISTRICT NO. 1 AND ESTABLISHING TAX INCREMENT FI-
NANCING (HOUSING) DISTRICT NO. 1-6 AND APPROVING A TAX INCRE-
MENT FINANCING PLAN; AND 2) A RESOLUTION APPROVING A DEVEL-
OPMENT AGREEMENT WITH PIKE LAKE MARSH LIMITED PARTNERSHIP.
DISCUSSION: Introduction
The purpose of this agenda item is to consider approval of two resolutions related
to the Pike Lake Marsh 68-unit multifamily residential housing development. The
first resolution would modify Municipal Development District No. 1, establish Tax
Increment Financing (Housing) District No. 1-6 and approve the Tax Increment
Financing Plan. The second resolution authorizes the Mayor and City Manager
to execute a Development Agreement with Pike Lake Marsh Limited Partnership.
History
The City of Prior Lake received an application for tax increment financing from
Pike Lake Marsh Limited Partnership to assist with the development of the Pike
Lake Marsh multifamily rental housing project. The development will include 68
affordable rental housing units with underground and surface parking. The de-
veloper is planning for 100% of the units to be affordable to households at or
below 50% of the area median income for Scott County for the first 10 years.
Rents may adjust up to 60% of the county median income in years 11 through
30. The project cost is estimated at $15.3 million. The tax increment financing
will assist with the affordability aspect of the project together with the housing tax
credits the developer is slated to receive through MN Housing. The developer
informs us that without both subsidies the project is not financially feasible.
The Pike Lake Marsh project received approval of a Conditional Use Permit for a
Multiple Family Dwelling on May 4, 2015. On May 11, 2015, the Prior Lake City
Council provided a nonbinding preliminary approval for the creation of a Housing
TIF District in support of the proposed multifamily housing project for $600,000
and a maximum 15-year term (Res. 15-083). On this basis, the developer sought
and was approved for housing tax credits. On May 26, 2015, the City Council
approved the Pike Lake Preliminary Plat.
The City Council held a public hearing related to the TIF request during their
March 27, 2017 meeting. Following the public hearing, the Council approved a
motion to close the public hearing and defer action until April 10th to allow the
request to be considered by the full City Council. The Council will also consider
approval of the Final Plat and wetland replacement plan at this meeting.
2
Current Circumstances
Following the March 27, 2017 public hearing, the applicant requested the City
revise the proposed TIF plan to limit the amount of captured valuation increase
from the development within the TIF district to 52 percent of the total increase.
This will reduce the tax increment collected by the City and available to assist the
development to an estimated $300,000. The remaining $300,00 would be derived
from increased assistance from the Scott County CDA. An election to capture
only a portion of the increase in valuation will benefit the City, County, and School
District. These taxing jurisdictions will realize some immediate benefit from an
increase in taxes paid by this property as a result of the development as displayed
on the attachments.
The attached TIF Plan and Resolution have been revised since the March 27,
2017 meeting and both documents now state, “The proposed development, re-
quires that only 52 percent (a “portion”) of the captured net tax capacity is neces-
sary to finance or otherwise make permissible expenditures under Minnesota
Statutes, Section 469.176, Subdivision 4, only that portion shall be set aside and
the remainder shall be distributed among the affected taxing districts by the
county auditor.”
TIF Plan
Northland Securities, Inc. drafted the Tax Increment Financing plan for TIF Hous-
ing District 1-6. The TIF Plan establishes:
1. The use of Tax Increment Financing is needed to offset the high construction
costs of high-quality housing.
2. The boundaries of the TIF district, which will be Lot 1, Block 1, Pike Lake
Marsh and adjacent roads and right-of-way. The other properties owned by
the applicant will not be included in TIF District No. 1-6.
3. The proposed development, requires that only 52 percent (a “portion”)
of the captured net tax capacity is necessary to finance or otherwise
make permissible expenditures, only that portion shall be set aside and
the remainder shall be distributed among the affected taxing district s
by the county auditor.
4. The City elects to delay receipt of first increment until 2020.
5. With a Housing TIF District, the developer will commit to provide (a) 20% or
more of units for occupancy by persons at 50% or less of area median gross
income, or (b) 40% or more of units for occupancy by persons at 60% or less
of area median gross income, adjusted by HUD annually,
Development Agreement
Briggs & Morgan drafted the Development Agreement related to the Pike Lake
Marsh housing project. The Development Agreement establishes the responsi-
bilities of the developer and city, as well as the terms and conditions for TIF to be
provided to the affordable housing project.
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
costs from the tax increment proceeds that are received semi-annually up to
the maximum principal amount in the Note. The Note is payable solely from
95 percent of the tax increment and is not a general obligation of the City.
3
2. The project is defined as the acquisition, construction and equipping of a 68-
unit multifamily rental housing development.
3. Tax increments are defined as 95 percent of the available tax increments de-
rived from the development property in a Housing TIF District.
4. The developer understands that the projected tax increments are estimates
only with no obligation by the city to pay the full Note principal.
5. The project must meet certain low and moderate income requirements (at
least 40% of units must be occupied by persons at/below 60% of area median
income for the life of the TIF).
6. The Developer must begin the project on/before July 31, 2017 and be sub-
stantially completed by December 31, 2018.
7. Although 25 years is the statutory maximum for housing districts, the maxi-
mum duration to collect tax increment derived from property within the TIF
District is set at fourteen years after the first -year of tax increment collection
for a total maximum duration of 15 years.
8. The Termination Date of the Note means the earlier of (i) February 1, 2035,
(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 the
Development Agreement is terminated or rescinded.
9. The TIF Note has a total principal value of $300,000 with an interest rate of
5.0%; the maximum term of the Note is 15 years.
Conclusion
Per the Comprehensive Housing Needs Update for Scott County, completed in
November 2016 by Maxfield Research & Consulting, a total of 513 general‐occu-
pancy rental units in Scott County were identified as having a shallow‐subsidy, or
restricted to homeowners with low to moderate incomes. Maxfield Research sur-
veyed these properties and found there was a vacancy rate of 0%.
The Maxfield Research study projected demand for 258 shallow-subsidy units (as
is the case here) in Prior Lake between 2017 and 2040. With existing rental
housing performing at almost 0% vacancy and a very strong rental market Metro‐
wide, Maxfield Research recommended prioritizing additional market rate and
shallow‐subsidy rental development in the short‐term, including support for a
workforce rental development of 50 units with more modest rents.
City staff, along with Northland Securities (financial) and Briggs & Morgan (legal)
have evaluated the TIF plan and Development Agreements based upon what is
beneficial to the Pike Lake Marsh and the City of Prior Lake. Staff has worked
closely with Ron Clark Construction & Design, Northland Securities and Briggs &
Morgan to develop this final proposal. The City of Prior Lake is expected to see
the following benefits from the Pike Lake Marsh redevelopment project:
➢ A property which has been challenging to develop in the past due to
topography and useable land area limitations will be developed.
➢ A portion of Pike Lake Trail, north of CH42, will be improved at the developer’s
cost.
➢ The market value of the property will increase from $222,000 to an estimated
$7.48 million.
➢ After the TIF District is decertified (15 years), the estimated total property tax
revenue from the property will increase from $3,510 (current) to an estimated
4
ISSUES:
approximate $77,900 annually (based on current tax rates) to be divided by
the taxing jurisdictions.
➢ Affordable high-quality housing will be available to the population in and
around Prior Lake meeting a need identified in the Maxfield Research report.
➢ This project will help the city achieve its affordable and life-cycle housing
goals identified in the Comprehensive Plan.
➢ The city’s Park Fund will see a net revenue gain of $255,000.
➢ The city’s street, sewer and water trunk funds will see an estimated net
revenue gain of $120,547.
➢ The city’s Building Inspection division will see a gain of permit revenue of
$48,000 in 2017.
➢ The project could provide the financial wherewithal to complete Marsh Drive
to the west.
Of course, the construction of this facility does entail some challenges as well.
We assume that each dwelling unit will house about 2.8 persons for a total pop-
ulation of about 190 people. Some of those persons will be school age children.
This property is within the ISD 719 Prior Lake-Savage School District which does
have long term capacity issues. Also expected is the addition of an automobile
for each unit which will add incremental traffic to the roadway. Other city services
will see a mild increase as well, most notably police and fire. These issues are
mitigated, at least in part by the portions of revenue which will be collected during
the term of the Tax Increment.
The Developer is dedicating the public right-of-way for a future roadway exten-
sion of Marsh Drive to the west, however, only a portion of this street will be
constructed and funding for the future extension of this road remains uncer-
tain. The City Engineer does not support the full construction of Marsh Drive to
the western property line at this time because a street extension would be prem-
ature and there are challenges related to extending the sewer service.
It is likely the City of Prior Lake may desire a Marsh Drive extension as a sup-
porting roadway in the future, however, the project may be difficult to fund with a
high estimated construction cost of $400,000 and potentially only two additional
residential properties who may benefit from this street.
The TIF Plan, as proposed, does not include the construction of the east-west
street or extension of utilities to the western property line of the development
property. In addition, the developer is planning to grade, but not install, a trail
connection along CH42 to the western property line. The Council could consider
extending the term of the TIF district to the 25 years authorized by statute to
provide funding for future construction of the Marsh Drive extension and trail,
which would require an amendment to the TIF plan as drafted. If, at some point
in the future, it becomes apparent that the road will not or should not be built, the
then existing city council could terminate the district after meeting the parameters
set forth in this approval.
Briggs and Morgan and the developer have been discussing various aspects of
the TIF Development Agreement. It is expected that the document will be similar
to that which is attached but the language of the approving resolution authorizes
the attorney to make changes in the language of the agreement if they are in the
best interests of the city.
5
FINANCIAL
IMPACT:
If approved, Tax Increment Financing (Housing) District No. 1-6 would be created
which would establish a 15-year TIF term and TIF assistance to the Developer of
up to $300,000 (present value) unless the city council authorizes the 25-year
proposal to potentially fund Marsh Drive.
All financial and legal consulting costs associated with the TIF plan and
Development Agreement are being paid by the applicant.
ALTERNATIVES: 1. Motion and a second to approve a resolution modifying Municipal Develop-
ment District No. 1 and modifying the development program therefor and es-
tablishing Tax Increment Financing (Housing) District No. 1-6 therein, and
approving a Tax Increment Financing Plan therefor.
2. Motion and a second to approve a resolution authorizing the Mayor and City
Manager to execute a Development Agreement with Pike Lake Marsh Limited
Partnership in connection with the construction of an approximate 68-unit
multifamily rental housing development.
3. Motion and a second to deny resolution modifying Municipal Development
District No. 1 and modifying the development program and establishing Tax
Increment Financing (Housing) District No. 1-6, and approving a Tax Incre-
ment Financing Plan and deny resolution authorizing the Mayor and City Man-
ager to execute a Development Agreement with Pike Lake Marsh Limited
Partnership.
4. Motion and a second to table action and provide direction to City staff and/or
the applicant.
RECOMMENDED
MOTION:
Alternatives #1 and #2.
ATTACHMENTS: 1. Northland Securities TIF Memorandum
2. TIF 1-6 Cash Flow
3. TIF 1-6 Estimated Property Taxes
4. TIF Plan
5. Development Agreement
45South7th Street,Suite2000,Minneapolis,MN55402
Main:(612)851-5900/Direct:(612)851-4964/Email:tomdal@northlandsecurities.com
MemberFINRAandSIPC
MEMORANDUM
To:City of Prior Lake
From:TammyOmdal
Date:March 21, 2017
Re:TaxIncrementFinancing (TIF) Assistance for PikeLake MarshApartmentProject
The City of PriorLake (the “City”) received a proposal fromConnellyDevelopment, LLC, and its
affiliate Pike LakeMarshLimited Partnership (the “Developer”) for taxincrement financing
assistancefor the proposed developmentof the PikeLake Marshmulti-family rental housingfacility.
The housing facilitywill include approximately 68 new rental affordable housing units with
underground parking spaces (“the Project”). The Developeris planning for 100% ofthe units tobe
affordable at60% of the county medianincome. The Projectcostis estimated at $15.3million. The
requestfor taxincrementfinancing assistance is toassistwiththe affordability aspectof the Project.
BackgroundofDeveloper
PikeLakeMarshLimitedPartnershipis the owner of the Project and the entitywho will enter into
agreementwiththeCity for taxincrementfinancing assistance. Itis asingle purpose limited
partnershipsolelyfor thisprojectas required by Minnesota Housing Finance Association(MHFA)
and Wells Fargo. PikeLake MarshLLC is the general partnerfor the Projectand solelyowned by
entity controlled byRonClark. Wells Fargowill purchase the taxcredits and will be the limited
partner butdoes nothaveany say intheday-to-dayoperations of the Project. RonClark
Constructionand Designwill be the general contractorand be responsibleforbuilding all the
improvements under the general contract. ExhibitE providesanorganization chartfor the PikeLake
MarshLimited Partnership.
TaxIncrementAssistance
Due to the extraordinarycosts associated withacquisitionand developmentof the Project, the
Developer is seeking taxincrementfinancing intheform of a $600,000 TaxIncrementFinancing(TIF)
Note, payablesolely fromnet available semi-annual taxincrements. TheTIF note shall bearsimple,
non-compounding interest from thedate that theCity hasdetermined paid invoices(paid bythe
Developer) incompliancewiththeterms of the proposed developmentagreement,at 5.00% per
annum.
Thismemorandum provides areview of the need for therequested assistance based onNorthland’s
analysis of the Developer’s sources and uses of funds and operating proformafor the Project.
Northland conducted areview oftheDeveloper’s projectestimates to ensure all anticipated sources
and uses for the Projectwere properly included. ExhibitA provides information on the sources and
uses offunds forthe Project. Based onour reviewof the pro formaand undercurrentmarket
conditions, wefind that the Projectas proposed may notreasonably be expected tooccursolely
throughprivate investment withinthereasonably nearfuture. Dueto the costs associated with
City of Prior Lake,MN
TIFAssistance for Affordable Housing
March 21,2017
Page 2
acquisitionof the property and constructionof theaffordable housing units, the Projectas proposed
is feasible only throughassistance, in part, from taxincrementfinancing.
SourceofTaxIncrementFinancing(TIF)Revenue
The sourceof TIF revenue for the Projectis proposed to come fromthe proposed establishment of
Tax Increment FinancingDistrictNo. 1-6 (the “TIFDistrict”), a housingdistrict. TheCityCouncil
will consider establishment of theTIFDistrictfollowing a public hearing onMarch27, 2017. The
Citywill consider approval of adevelopmentassistance agreement withtheDeveloperat the same
meetingdate.
The proposed Planforthe TIF Districtretains100%of the increased local propertytaxes(the tax
increment)from propertywithintheTIFDistrict to pay for projectcosts. The Planfor theTIFDistrict
provides that theCityretain 5% ofthe taxincrement toreimburse theCity for the cost of
administering theTIFDistrict. Theremaining95% of the taxincrementwill beavailablefor payment
on theTIFNote.
ExhibitB providesa summaryof the projected annual taxincrementcashflow fromthe Project
withintheTIFDistrict. The Planfor the TIF Districtelects the first year of tax incrementcollectionto
be no earlier than year 2020 inorder to maximize the amount of tax incrementavailable over the
durationof theTIFDistrict ( toavoid the receiptof taxincrementinanearlieryearbased on partial
valuationincrease due to timing of constructioncompletion). The maximum term of the TIFDistrict
is setto be15 years of taxincrementcollection, withan estimated decertificationdate of December 31,
2034. Themaximum termis less thanthe26 years of taxincrementcollection allowable understate
law for a housing TIFdistrict.
ExhibitC providesinformationonthe estimated total property taxes payable before and after the
Projectcompletion. The TIF authorityinstate law provides that the increasein property taxesfrom
the captured taxcapacity(from the increase intaxable marketvalue) applied against thelocal tax
capacityrates is captured to assist the Project. Thereferendum marketvalue taxes are not captured
for taxincrementfinancing.
ReviewofNeedforDeveloperAssistance
Based onour reviewof the operating proformafor the Project, as proposed, and under current
market conditions, we find thatthe Project may notreasonablybe expected tooccursolely through
privateinvestment withinthe reasonably nearfuture. Facts supporting this findingare asfollows:
As showninExhibitA, the Developer proposes the Projecttobe funded froma combinationof
debt and (taxcreditsyndicationproceeds) equity. The estimated presentvalue of thetax
incrementfinancingassistance fromthe Cityreduces the effective cost of the Project. The tax
incrementfinancingwillincrease inthe Project’s annual incometo achievethe required debt
service coverage ratio of at least 1.2X, as showninExhibitD.
The totalcostfor the Project is estimated at $15.3millionor $224,230 per unitfor 68 units. Based
onNorthland’s experience withsimilar projects and giventhelocationof the Project, wewould
City of Prior Lake,MN
TIFAssistance for Affordable Housing
March 21,2017
Page 3
expect total developmentcosts torange between$190,000and $235,000 per unit. The total per
unit project cost is withinthis range.
The Projectincludes anequity contribution(investor taxcredits) of 69.2%. Inadditiontothe
investor equitycontribution, theDeveloper will defer collectionof a portionof thedevelopment
fee to provideadditional fundingfor the Project. The Projectincludes adevelopment fee of
$1,200,000,which is7.9% of the total project costs. The Developerwill defer collection of $204,000
of the totaldevelopmentfee and assume therisk that future incomefrom the Projectwill be
sufficient to paythedeferred fee. The Developeris not guaranteed reimbursement of the
deferred fee. The deferral of the fee providesadditional equitycontributiontothe Project. For a
projectof this nature, wewould expect tosee thedevelopmentfee at no morethan 5-6% of total
projectcosts. Because therisk theDeveloper will assume for the potential reimbursementof the
deferred fees, the 7.9% of total projectcosts forthedevelopmentfeeisreasonable.
The estimated average gross monthlyrentfor units is $930 per month. The Projectis estimated to
include threestories withunderground parking and 15 one-bedroom units, 33two-bedroom
units, and 20three-bedroom units for a total of 68 units. Monthly average gross rents will range
from $691 for a one-bedroom unitto $1,115for athree-bedroom unit. All 68 units are planned to
be affordableat60% of the average medianincome(estimated tobe $51,480). The income
assumptionfor the Projectis approximately $757,000inthe firstyear of stabilized occupancy,
beforeadjusting forapartment vacancy estimated at 7%.
The total expenses, operating and non-operating, are estimated atapproximately $6,500 per unit.
The projected operating costs for the Projectare within industrystandards.
Proposed contributiontoreplacementreserves is estimated at$17,000annually plus inflationary
adjustment. This is reasonableand withinindustrystandards.
The estimated debt service coverage withtaxincrementfinancing is estimated toaverage 1.2X in
the firsttenyears of operations and 1.0X withouttaxincrement assistance. The minimum
required coverage forthe mortgage is 1.2X, whichis estimated tobe metwiththe taxincrement
financing.
The estimated annual cash oncashreturn(netannual operating incomedivided by total
developmentprojectcosts) withtaxincrementfinancing is estimated to average 2.21%in the first
ten years of operations and 1.82%withouttax increment assistance. The cashoncashreturnofis
reasonablefor this typeof projectand the proposed source of financing.
City of Prior Lake,MN
TIFAssistance for Affordable Housing
March 21,2017
Page 4
EXHIBIT A
Note: Contractor fee includes the following: 6% for general conditions; 2% for overhead; and 5% contractor fee.
Total % of Total Per Unit
Sources of Funds
First Mortgage $3,700,000 24.3% $54,412
TIF Mortgage $600,000 3.9% $8,824
Tax Credit Syndication Proceeds (Equity) $10,553,445 69.2% $155,198
Dakota County CDA $175,000 1.1% $2,574
Energy Rebate $15,000 0.1% $221
Deferred Development Fee $204,204 1.3% $3,003
Total Sources of Funds $15,247,649 100.0% $224,230
Uses of Funds
Acquisition $307,500 2.0% $4,522.06
Construction $9,829,372 64.5% $144,550
Contractor Fees $1,376,112 9.0% $20,237
Professional Fees, Other Fees, Financing Costs $1,895,040 12.4% $27,868
Developer Fee $1,200,000 7.9% $17,647
Contingency $448,219 2.9% $6,591
Reserves and Non-Mortgageable $191,406 1.3% $2,815
Total Uses of Funds $15,247,649 100.0% $224,230
Number of Units 68
Pike Lake Marsh
Developer Sources and Uses of Funds for Construction
68 Unit Residential Apartment Building
City of Prior Lake
City of Prior Lake,MN
TIFAssistance for Affordable Housing
March 21,2017
Page 5
EXHIBIT B
1 2019 2020 7,480,000 56,100 (1,812) 54,288 108.021% 58,431 53,377
2 2020 2021 7,536,100 56,521 (1,812) 54,709 108.021% 58,884 104,576
3 2021 2022 7,592,621 56,945 (1,812) 55,133 108.021% 59,341 153,686
4 2022 2023 7,649,565 57,372 (1,812) 55,560 108.021% 59,800 200,792
5 2023 2024 7,706,937 57,802 (1,812) 55,990 108.021% 60,263 245,974
6 2024 2025 7,764,739 58,236 (1,812) 56,424 108.021% 60,730 289,313
7 2025 2026 7,822,975 58,672 (1,812) 56,860 108.021% 61,200 330,883
8 2026 2027 7,881,647 59,112 (1,812) 57,300 108.021% 61,673 370,755
9 2027 2028 7,940,759 59,556 (1,812) 57,744 108.021% 62,150 409,000
10 2028 2029 8,000,315 60,002 (1,812) 58,190 108.021% 62,632 445,684
11 2029 2030 8,060,317 60,452 (1,812) 58,640 108.021% 63,116 480,871
12 2030 2031 8,120,770 60,906 (1,812) 59,094 108.021% 63,604 514,620
13 2031 2032 8,181,676 61,363 (1,812) 59,551 108.021% 64,095 546,992
14 2032 2033 8,243,038 61,823 (1,812) 60,011 108.021% 64,591 578,042
15 2033 2034 8,304,861 62,286 (1,812) 60,474 108.021% 65,090 607,824
TOTAL =925,600
Key Asssumptions
1 Taxable market value annual growth assumption = 0.75%
2 Assume Pay 2016 Tax Year for tax rates.*Pay 2017 tax rates not available from the County as of the date of this report.
3 Base Taxable Market Value = $241,600 *Based on preliminary Pay 2017 valuation.
4 Assumption for New Taxable Market Value = $7,480,000 based on 68 units at $110,000 per unit.
5
6
7 All amounts are estimated and do not represent agreement by the City on any amount of assistance or terms.
8
9
10 Assumes tax classification is Qualified 4d/Low Income Housing, Classification Rate = 0.75%.
TIF
District
Year 9
Value
Year
Taxes
Payable
Year 8
New Tax
Capacity 1,
10
Base Tax
Capacity 3
City of Prior Lake
Tax Increment Financing District No. 1-6 (Housing)
Pike Lake Marsh
Projected Tax Increment Cash Flow
7
Cash flow assumes City elects the first year of tax increment to be no earlier than year 2020. If construction commences in
2017 with partial completion, the City will receive tax increment in year 2019 unless the City elects in the TIF Plan to defer the
first year of tax increment collection to be year 2020.City will limit the duration of the TIF District to 14 years after the first year of tax increment colleciton, for a total number of
years of collection not to exceed 15 years.
Estimated total tax increment is after deducting the State Auditor's Office fee of 0.36% of the tax increment distribution.
Present value is calculated based on semi-annual payments, stated rate in the schedule above, and beginning date of:
1/1/2019.
Taxable
Market
Value 1 4
Estimated Tax
Increment 5
Present Value of
Estimated Tax
Incdrement 6
Captured
Tax
Capacity
Assumed
Original
Tax Rate
2
City of Prior Lake,MN
TIFAssistance for Affordable Housing
March 21,2017
Page 6
Exhibit C
Before Project
After Project (Tax Year
2020)Differences
Classification of Property
Residential Non-
Homestead
Residential Low Income
Housing (4d)
Total Estimated Market Value $222,000 $7,480,000
Total Tax Capacity Value $2,775 $56,100
Estimated Original Tax Capacity Value of TIF District $1,812
Estimated Captured Tax Capacity Value of TIF District $54,288
County $1,004 $655 ($348)
City $886 $579 ($307)
School $894 $584 ($310)
Other $213 $139 ($74)
Tax Increment Financing $0 $58,642 $58,642
Total Tax Capacity Taxes $2,997 $60,599 $57,603
Referendum Market Value Taxes - School $430 $14,502 $14,072
Referendum Market Value Taxes - City $83 $2,811 $2,728
Total Referendum Market Value Taxes $514 $17,313 $16,799
Total Property Taxes $3,510 $77,912 $74,402
Note:
1. Schedule above is calculated based on Pay 2016 tax rates.
3. The "Before Project" is based on the 2016 tax statement for the parcel.
2. The change in classification of the property from residential non-homestead to residential low income reduces the original tax capacity
value of the property.
4. The "After Project" is based on estimated future valuation of the property and Pay 2016 tax rates. The first year of tax increment for
the Project is estimated to be year 2020. The actual taxes payable in year 2020, including tax increment, will be based on actual valuation
of the property at that time and the actual tax rates for Pay 2021.
City of Prior Lake
Total Estimated Taxes Payable
Pike Lake Marsh
PID# 259230020
City of Prior Lake,MN
TIFAssistance for Affordable Housing
March 21,2017
Page 7
EXHIBIT D
1 2 3 4 5 6 7 8 9 10
Income
Rental income
Gross potential 757,836 772,993 788,453 804,222 820,306 836,712 853,446 870,515 887,926 905,684
Less: vacancy and rental loss (53,808) (54,884) (55,982) (57,102) (58,244) (59,409) (60,597) (61,809) (63,045) (64,306)
Total rental income 704,028 718,109 732,471 747,120 762,062 777,303 792,849 808,706 824,881 841,378
Other income 5,880 5,998 6,118 6,240 6,365 6,492 6,622 6,754 6,889 7,027
Effective gross income 709,908 724,107 738,589 753,360 768,427 783,795 799,471 815,460 831,770 848,405
Expenses
Operating 312,592 321,969 331,628 341,577 351,825 362,379 373,251 384,448 395,982 407,861
Management fee 36,720 37,454 38,203 38,968 39,747 40,542 41,353 42,180 43,023 43,884
Property taxes 77,898 78,482 79,071 79,664 80,261 80,863 81,470 82,081 82,696 83,317
Replacement reserves 17,000 17,510 18,035 18,576 19,134 19,708 20,299 20,908 21,535 22,181
Total expenses 444,210 455,416 466,938 478,785 490,966 503,492 516,372 529,617 543,236 557,243
Net Operating Income (NOI) 265,698 268,691 271,651 274,575 277,461 280,303 283,099 285,843 288,534 291,162
Plus TIF reimbursement 55,509 55,940 56,374 56,810 57,250 57,694 58,140 58,589 59,042 59,500
Net Operating Income After TIF 321,207 324,631 328,025 331,385 334,711 337,997 341,239 344,432 347,576 350,662
Debt service
First Mortgage 240,690 240,690 240,690 240,690 240,690 240,690 240,690 240,690 240,690 240,690
TIF Mortgage 39,031 39,031 39,031 39,031 39,031 39,031 39,031 39,031 39,031 39,031
Total Debt Service 279,721 279,721 279,721 279,721 279,721 279,721 279,721 279,721 279,721 279,721
Cash Flow After Debt Service 41,486 44,910 48,303 51,664 54,990 58,276 61,518 64,711 67,855 70,941
Net cash flow 41,486 44,910 48,303 51,664 54,990 58,276 61,518 64,711 67,855 70,941
Cash on cash with TIF (NOI / TDC) 2.107% 2.129% 2.151% 2.173% 2.195% 2.217% 2.238% 2.259% 2.280% 2.300%
Cash on cash without TIF (NOI after TIF / TDC)1.743% 1.762% 1.782% 1.801% 1.820% 1.838% 1.857% 1.875% 1.892% 1.910%
Annual debt coverage with TIF 1.1 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.3
Annual debt coverage without TIF 0.9 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
Total development cost (TDC) 15,247,649 15,247,649 15,247,649 15,247,649 15,247,649 15,247,649 15,247,649 15,247,649 15,247,649 15,247,649
Ending Oustanding Deferred Development Fee 162,718 117,808 69,505 17,841 -
City of Prior Lake
Pike Lake Marsh
68 Unit Residential Apartment Building
Developer Pro Forma (as Prepared by Northland)
City of Prior Lake,MN
TIFAssistance for Affordable Housing
March 21,2017
Page 8
Exhibit E
48.00% 52.00% 0.36% 100.00% 5.00%5.00% 5.00% 95.00% 5.00%
Estimated Less
Tax State
Increment Fee
1 2019 2020 7,480,000 56,100 (1,812) (26,058)28,230 108.021% 30,494 (110)30,384 27,756 1,519 1,388 28,865 26,369
2 2020 2021 7,536,100 56,521 (1,812) (26,260)28,449 108.021% 30,730 (111)30,619 54,379 1,531 2,719 29,088 51,661
3 2021 2022 7,592,621 56,945 (1,812) (26,464)28,669 108.021% 30,968 (111)30,857 79,916 1,543 3,996 29,314 75,920
4 2022 2023 7,649,565 57,372 (1,812) (26,669)28,891 108.021% 31,208 (112)31,096 104,411 1,555 5,221 29,541 99,190
5 2023 2024 7,706,937 57,802 (1,812) (26,875)29,115 108.021% 31,450 (113)31,337 127,906 1,567 6,396 29,770 121,510
6 2024 2025 7,764,739 58,236 (1,812) (27,083)29,340 108.021% 31,694 (114)31,580 150,442 1,579 7,522 30,001 142,920
7 2025 2026 7,822,975 58,672 (1,812) (27,293)29,567 108.021% 31,939 (115)31,824 172,058 1,591 8,603 30,233 163,455
8 2026 2027 7,881,647 59,112 (1,812) (27,504)29,796 108.021% 32,186 (116)32,070 192,792 1,604 9,640 30,466 183,152
9 2027 2028 7,940,759 59,556 (1,812) (27,717)30,027 108.021% 32,435 (117)32,318 212,679 1,616 10,634 30,702 202,045
10 2028 2029 8,000,315 60,002 (1,812) (27,931)30,259 108.021% 32,686 (118)32,568 231,755 1,628 11,588 30,940 220,167
11 2029 2030 8,060,317 60,452 (1,812) (28,147)30,493 108.021% 32,939 (119)32,820 250,052 1,641 12,503 31,179 237,549
12 2030 2031 8,120,770 60,906 (1,812) (28,365)30,729 108.021% 33,193 (119)33,074 267,602 1,654 13,381 31,420 254,221
13 2031 2032 8,181,676 61,363 (1,812) (28,584)30,966 108.021% 33,450 (120)33,330 284,435 1,666 14,222 31,664 270,213
14 2032 2033 8,243,038 61,823 (1,812) (28,805)31,206 108.021% 33,709 (121)33,588 300,581 1,679 15,029 31,909 285,552
15 2033 2034 8,304,861 62,286 (1,812) (29,028)31,447 108.021% 33,969 (122)33,847 316,068 1,692 15,803 32,155 300,265
TOTAL =483,050 (1,739)481,311 24,065 457,246
Key Asssumptions
1 Taxable market value annual growth assumption = 0.75%
2 Assume Pay 2016 Tax Year for tax rates. *Pay 2017 tax rates not available from the County as of the date of this report.
3 Base Taxable Market Value = $241,600 *Based on preliminary Pay 2017 valuation.
4 Assumption for New Taxable Market Value = $7,480,000 based on 68 units at $110,000 per unit.
5
6
7 All amounts are estimated and do not represent agreement by the City on any amount of assistance or terms.
8
9
10 Assumes tax classification is Qualified 4d/Low Income Housing, Classification Rate = 0.75%.
11 Election to limit captured tax capacity is based on the City electing to capture only 52% of the captured tax capacity; reduction calculated as new tax
capacity minus base tax capacity multiplied by 48%.
Cash flow assumes City elects the first year of tax increment to be no earlier than year 2020. If construction commences in 2017 with partial completion, the City will receive tax increment in year 2019 unless the City elects in
the TIF Plan to defer the first year of tax increment collection to be year 2020.
City will limit the duration of the TIF District to 14 years after the first year of tax increment colleciton, for a total number of years of collection not to exceed 15 years.
Estimated total tax increment is after deducting the State Auditor's Office fee of 0.36% of the tax increment distribution.
Present value is calculated based on semi-annual payments, stated rate in the schedule above, and beginning date of: 1/1/2019.
Taxable
Market
Value 1 4
Est. TIF To Pay
City Project
and Financing
Costs
Present
Value of TIF
to City
6
Est. TIF To Pay
Developer
Project and
Financing Costs
Estimated
Tax
Increment 5
Present Value
of Estimated
Tax
Incdrement 6
Net
Captured
Tax
Capacity
Assumed
Original
Tax Rate
2
Election to
Limit
Captured Tax
Capacity 11
Present
Value of TIF
to
Developer 6
City of Prior Lake
Tax Increment Financing District No. 1-6 (Housing)
Pike Lake Marsh
Projected Tax Increment Cash Flow
7
TIF
District
Year 9
Value
Year
Taxes
Payable
Year 8
New Tax
Capacity
1, 10
Base Tax
Capacity
3
4/4/2017
As Included in Draft TIF Plan (March 27,
2017)
As Included in Revised Draft TIF Plan
(April 10, 2017)
Before Project After Project (Tax Year 2020) After Project (Tax Year 2020)
Classification of Property Residential Non-Homestead Residential Low Income Housing (4d) Residential Low Income Housing (4d)
Total Estimated Market Value $222,000 $7,480,000 $7,480,000
Total Tax Capacity Value $2,775 $56,100 $56,100
Estimated Original Tax Capacity Value of TIF District $1,812 $1,812
Estimated Captured Tax Capacity Value of TIF District $54,288 $28,230
County $1,004 $655 $10,080
City $886 $579 $8,905
School $894 $584 $8,980
Other $213 $139 $2,139
Tax Increment Financing $0 $58,642 $30,494
Total Tax Capacity Taxes $2,997 $60,599 $60,599
Referendum Market Value Taxes - School $430 $14,502 $14,502
Referendum Market Value Taxes - City $83 $2,811 $2,811
Total Referendum Market Value Taxes $514 $17,313 $17,313
Total Property Taxes $3,510 $77,912 $77,912
Estimated Reimbursement of Developer Costs from TIF $0 $600,000 $300,000
Note:
1. Schedule above is calculated based on Pay 2016 tax rates.
3. The "Before Project" is based on the 2016 tax statement for the parcel.
4. The "After Project" is based on estimated future valuation of the property and Pay 2016 tax rates. The first year of tax increment for the Project is estimated to be year 2020. The actual taxes payable
in year 2020, including tax increment, will be based on actual valuation of the property at that time and the actual tax rates for Pay 2021.
City of Prior Lake
Total Estimated Taxes Payable
Pike Lake Marsh
PID# 259230020
2. The change in classification of the property from residential non-homestead to residential low income reduces the original tax capacity value of the property.
Housing TIF District No. 1-6 1
REVISED DRAFT (APRIL 10, 2017)
CITY OF PRIOR LAKE, MINNESOTA
MODIFICATION TO DEVELOPMENT PROGRAM FOR
MUNICIPAL DEVELOPMENT DISTRICT NO. 1
TAX INCREMENT FINANCING PLAN FOR
TAX INCREMENT FINANCING (HOUSING)
DISTRICT NO. 1-6
(PIKE LAKE MARSH)
PUBLIC HEARING DATE: MARCH 27, 2017
PLAN APPROVED DATE: _________________
PLAN CERTIFICATION REQUEST DATE: _________________
PLAN CERTIFIED DATE: _________________
Northland Securities, Inc.
45 South 7th Street, Suite 2000
Minneapolis, MN 55402
(800) 851-2920
Member NASD and SIPC
TABLE OF CONTENTS
ȃ .........................................................1
Section 1.01 Introduction ......................................................................................1
Section 1.02 Defi nitions .........................................................................................1
Section 1.03 Plan Preparation...............................................................................1
ǧ
......................................................................2
Section 2.01 Overview...........................................................................................2
Section 2.02 Statement of Objectives...................................................................2
Section 2.03 Boundaries of Development District.............................................3
Section 2.04 Development Activities...................................................................3
Section 2.05 Payment of Project Costs.................................................................3
Section 2.06 Environmental Controls; Land Use Regulations.........................3
Section 2.07 Park and Open Space to be Created..............................................3
Section 2.08 Proposed Reuse of Property...........................................................3
Section 2.09 Administration and Maintenance of Development District......4
Section 2.10 Amendments.....................................................................................4
ǧ
......................................................5
Section 3.01 Statutory Authority..........................................................................5
Section 3.02 Planned Development .....................................................................5
3.02.1 Project Description......................................................................................5
3.02.2 City Plans and Development Program ....................................................5
3.02.3 Land Acquisition.........................................................................................5
3.02.4 Development Activities..............................................................................5
3.02.5 Need for Tax Increment Financing...........................................................5
Section 3.03 Tax Increment Financing District...................................................6
3.03.1 Designation..................................................................................................6
3.03.2 Boundaries of TIF District..........................................................................6
3.03.3 Type of District............................................................................................6
Section 3.04 Plan for Use of Tax Increment ........................................................6
3.04.1 Estimated Tax Increment............................................................................6
3.04.2 Project Costs.................................................................................................7
3.04.3 Estimated Sources and Uses of Funds.....................................................8
Figure 3-1......................................................................................................8
3.04.4 Administrative Expense.............................................................................9
3.04.5 County Road Costs.....................................................................................9
3.04.6 Bonded Indebtedness.................................................................................9
3.04.7 Duration of TIF District and Election to Delay First Yr of Collection.9
3.04.8 Estimated Impact on Other Taxing Jurisdictions ...................................9
3.04.9 Prior Planned Improvements..................................................................10
ȃ
...................................................10
Section 4.01 Filing and Certifi cation ..................................................................10
Section 4.02 Modifi cations of the Tax Increment Financing Plan ..................10
Section 4.03 4-Year Knockdown Rule................................................................10
Section 4.04 Pooling/5-Year Rule........................................................................11
Section 4.05 Financial Reporting and Disclosure Requirements...................11
Section 4.06 Business Subsidy Compliance......................................................12
EXHIBITS..........................................................................................................................13
Exhibit I – Present Value Analysis..........................................................................13
Exhibit II – Projected Tax Increment......................................................................14
Exhibit III – Impact on Other Taxing Jurisdictions..............................................15
Exhibit IV – Estimated Tax Increment Over Life of District...............................16
Exhibit V – Map of Municipal Development District No. 1 and TIF 1-6..........17
TAX INCREMENT FINANCING DISTRICT NO. 1-6
DRAFT TIF PLAN AS OF 4/10/17 1
ARTICLE I – INTRODUCTION AND DEFINITIONS
SECTION 1.01 INTRODUCTION
The City of Prior Lake proposes to provide tax increment fi nancing assistance to Pike Lake
Marsh Limited Partnership for public costs related to the construction of a multifamily rental
housing project in the City. This document contains the plan for achieving the objectives of the
Development Program for Municipal Development District No. 1 through the establishment of
Tax Increment Financing District No. 1-6.
SECTION 1.02 DEFINITION
For the purposes of this document, the terms below have the meanings given in this section,
unless the context in which they are used indicates a diff erent meaning:
1. “City” means the City of Prior Lake, Minnesota.
2. “City Council” means the City Council of the City.
3.ȃ¢ȄȱȱĴȱȱ¢ǰȱǯ
4. “Developer” means the private party undertaking construction in the TIF District,
anticipated to be Pike Lake Marsh Limited Partnership.
5. “Development District” means Development District No. 1 in the City, created and
established pursuant to and in accordance with the Development District Act.
6. “Development District Act” means Minnesota Statutes, Sections 469.124 through 469.133, as
amended and supplemented from time to time.
7. “Development Program” means the Development Program for the Development District, as
amended and supplemented from time to time.
8. “Project Area” means the geographic area of the Development District.
9. “Project Costs” means the cost of the development activities that will or are expected to
occur within the Project Area or TIF District.
10. “School District” means Prior Lake-Savage Area Public Schools (ISD #719).
11. “State” means the State of Minnesota.
12. “TIF Act” means Minnesota Statutes, Sections 469.174 through 469.1794, as amended, both
inclusive.
13. “TIF District” means Tax Increment Financing (Housing) District No. 1-6 (Pike Lake Marsh).
14.“TIF Plan” means the tax increment fi nancing plan for the TIF District (this document).
SECTION 1.03 PLAN PREPARATION
The document was prepared for the City by Northland Securities, Inc.
TAX INCREMENT FINANCING DISTRICT NO. 1-6
DRAFT TIF PLAN AS OF 4/10/17 2
ARTICLE II - DEVELOPMENT PROGRAM
SECTION 2.01 OVERVIEW
The City established the Development District and the related Development Program as a tool
to achieve the objectives described in Section 2.02. The Development District was fi rst approved
in March, 1985, and has been modifi ed subsequently. The Development District serves as
the Project Area for tax increment fi nancing districts established within its boundaries. The
Development Program describes the City’s objectives for the development of this area and the
use of tax increment fi nancing.
Current modifi cations to the Development Program include budget revisions to coincide with
the TIF Plan relating to the TIF District.
This modifi ed Development Program is intended to restate and expand on the original
Development Program and all prior amendments hereto, which are incorporated herein by
reference. Nothing in this modifi cation is intended to supersede or alter the activities described
in the original Development Program.
SECTION 2.02 STATEMENT OF OBJECTIVES
The modifi cations of the Development District in the City pursuant to the Development District
Act are necessary and in the best interests of the City and its residents and are necessary to give
the City the ability to meet certain public purpose objectives that would not be obtainable in the
foreseeable future without intervention by the City in the normal development process.
The current proposed development is consistent with the established “Statement of Objectives”
documented by the original Development Program and prior amendments hereto, which are
incorporated herein by reference.
The established “Statement of Objectives” for the Development Program provide the City with
the ability to achieve certain public purpose goals not otherwise obtainable in the foreseeable
future without City intervention in the normal development process. The public purpose
goals include: restore and improve the tax base and tax revenue generating capacity of the
Development District; increase employment and housing opportunities; realize comprehensive
planning goals; remove blighted conditions; revitalize the property within the Development
ȱȱȱȱĴȱǰȱǰȱǰȱȱĜȱȱȱȱȱǰȱ
commercial and related use. The City and Council seek to achieve the following Development
District program objectives:
1. Promote and secure the prompt development of certain property in the Development
District, which property is not now in productive use or in its highest and best use, in a
manner consistent with the City’s Comprehensive Plan and with the minimum adverse
impact on the environment, and thereby promote and secure the development of other land
in the City.
2. Promote and secure additional employment and housing opportunities within the
Development District and the City for residents of the City and the surrounding area,
thereby improving living standards, reducing unemployment and the loss of skilled and
unskilled labor and other human resources in the City.
3. Secure the increase of commercial/industrial property subject to taxation by the City, School,
¢ȱȱȱ¡ȱȱȱȱȱĴȱȱȱȱȱȱ¢ȱȱ
governmental services and programs required to be provided by them.
4.Provide for the fi nancing and construction of public improvements in the Development
District necessary for the orderly and benefi cial development of the Development District
TAX INCREMENT FINANCING DISTRICT NO. 1-6
DRAFT TIF PLAN AS OF 4/10/17 3
and adjacent areas of the City.
5.Promote the concentration of commercial, offi ce, and other appropriate development in the
Development District so as to maintain the area in a manner compatible with its accessibility
and prominence in the City.
6. Encourage local business expansion, improvement, and development, whenever possible.
7. Create a desirable and unique character within the Development District thorough quality
land use alternatives and design quality in new and remodeled buildings.
8. Encourage and provide maximum opportunity for private redevelopment of existing areas
and structures that are compatible with the Development Program.
9. Encourage redevelopment of substandard buildings, to improve employment opportunities
in the Development District and the City, where compatible with other planning and
development goals.
SECTION 2.03 BOUNDARIES OF DEVELOPMENT DISTRICT
The boundaries of the Development District are depicted in Exhibit V. The boundaries of the
Development District are coterminous with the boundaries of the City. Within the Development
District, the City has previously established Tax Increment Financing District Numbers 1
through 5, inclusive.
SECTION 2.04 DEVELOPMENT ACTIVITIES
The proposed development activities within the Development District are consistent with the
goals, objectives, and plans expressed by the Development Program. The current modifi cations
to the Development Program relate to plans by the Developer to construct a multi-family rental
housing project.
SECTION 2.05 PAYMENT OF PROJECT COSTS
Project Costs and the plan for their payment will be described in the tax increment fi nancing
plans. It is anticipated that the Project Costs of the Development Program will be paid
primarily from Tax Increments. The City reserves the right to utilize other available sources of
revenue to pay Project Costs of the Development Program.
SECTION 2.06 ENVIRONMENTAL CONTROLS; LAND USE REGULATIONS
All municipal actions, public improvements and private development shall be carried out
in a manner consistent with existing environmental controls and all applicable Land Use
Regulations.
SECTION 2.07 PARK AND OPEN SPACE TO BE CREATED
Park and open space within the Development District if created will be created in accordance
with the City’s Comprehensive Plan and zoning and subdivision ordinances.
SECTION 2.08 PROPOSED REUSE OF PROPERTY
The modifi cation to the Development Program does not contemplate that the City will acquire
property and reconvey the same to another entity. Should the Development Program be further
amended to authorize land acquisition, the City Council will require the execution of a binding
TAX INCREMENT FINANCING DISTRICT NO. 1-6
DRAFT TIF PLAN AS OF 4/10/17 4
development agreement with respect thereto and evidence that Tax Increments or other funds
will be available to repay the Project Costs associated with the proposed acquisition. It is the
intent of the City to negotiate the acquisition of property whenever possible. Appropriate
restrictions regarding the reuse and redevelopment of property shall be incorporated into any
Development Agreement to which the City is a party.
SECTION 2.09 ADMINISTRATION AND MAINTENANCE OF DEVELOPMENT
DISTRICT
Maintenance and operation of the Development District will be the responsibility of the
City Manager who shall serve as administrator of the Development District. Each year the
administrator will submit to the Council the maintenance and operation budget for the
following year.
The administrator will administer the Development District pursuant to the provisions of
Section 469.131 of the Development District Act; provided, however, that such powers may only
be exercised at the direction of the City Council. No action taken by the administrator pursuant
to the above-mentioned powers shall be eff ective without authorization by the City Council.
SECTION 2.10 AMENDMENTS
The City reserves the right to alter and amend the Development Program, subject to the
provisions of state law regulating such action. The City specifi cally reserves the right to enlarge
or reduce the size of the Development District, the Development Program and the Project Costs
of the Development.
TAX INCREMENT FINANCING DISTRICT NO. 1-6
DRAFT TIF PLAN AS OF 4/10/17 5
ARTICLE III - TAX INCREMENT FINANCING PLAN
SECTION 3.01 STATUTORY AUTHORITY
The TIF District and the TIF Plan are established under the authority of the TIF Act.
SECTION 3.02 PLANNED DEVELOPMENT
3.02.1 Project Description
The Developer proposes to build an approximate 68-unit multi-family rental housing projecton an approximate 16 acre site located north of 140th Street northeast and west of Pike LakeTrail northeast within the City. The Developer’s proposal calls for three-story building withunderground parking. The building will include approximately 15 one-bedroom, 33 two-bedroom, and 20 three-bedroom units. The property where the housing will be built currentlyis not occupied.
3.02.2 City Plans and Development Program
In addition to achieving the objectives of the Development Program, the proposed development
is consistent with and works to achieve the development objectives of the City. The TIF Plan
for the TIF District conforms to the general plan for development or redevelopment of the City
as a whole. The City has adopted land use controls to guide the use of property. The proposed
development plans for the project in the TIF District have been reviewed by the Planning
Commission and the City Council.
3.02.3 Land Acquisition
The City does not intend to acquire any property within the TIF District.
3.02.4 Development Activities
As of the date of approval of this TIF Plan, there are no development activities proposed in this
TIF Plan that are subject to contracts.
3.02.5 Need for Tax Increment Financing
In various materials the Developer has demonstrated that the proposed use of tax increment
fi nancing is needed to off set the high construction costs of high-quality low-to moderate-
income housing and associated infrastructure required to support the facility. Without the
proposed assistance, these initial up-front costs would make it infeasible for the Developer to
be able to charge the aff ordable rents required for low-to moderate-income tenants. Thus, it is
the City’s opinion that the proposed development would not reasonably be expected to occur
solely through private investment within the foreseeable future and that the increased market
value of the site that could reasonably be expected to occur without the use of tax increment
fi nancing would be less than the increase in the market value estimated to result from the
proposed development after subtracting the present value of the projected tax increments for
ȱ¡ȱȱȱȱ ȱȱĴȱȱ¢ȱȱ ȱǯ
A comparative analysis of estimated market values both with and without establishment of
the TIF District and the use of tax increments has been performed as described above and is
shown in Exhibit I. This analysis indicates that the increase in estimated market value of the
proposed development (less the present value of the projected tax increments for the maximum
ȱĴȱȱ¢ȱȱ ȱǼȱ¡ȱȱȱȱȱȱȱȱȱȱȱ
establishment of the TIF District.
TAX INCREMENT FINANCING DISTRICT NO. 1-6
DRAFT TIF PLAN AS OF 4/10/17 6
SECTION 3.03 TAX INCREMENT FINANCING DISTRICT
3.03.1 Designation
This TIF District is designated Tax Increment Financing (Housing) District No. 1-6.
3.03.2 Boundaries of TIF District
The boundaries of the TIF District are depicted in Exhibit V. The TIF District includes a new
parcel that will be established, as described below, along with the adjacent roads and right-of-
ways to the parcel:
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3.03.3 Type of District
The TIF District is designated as a “housing” district pursuant to Minnesota Statutes Section
469.174, Subd. 11. In the Development Agreement, the developer will commit to:
1.Satisfy the income requirements for a qualifi ed residential rental project as defi ned in
section 142(d) of the Internal Revenue Code. This requirement applies for the duration
of the tax increment fi nancing district. The Fiscal Year 2016 Area Median Income for the
County is $85,800. The developer will commit to provide (a) 20% or more of units for
occupancy by persons at 50% or less of area median gross income (estimated at $42,900) or
(b) (a) 40% or more of units for occupancy by persons at 60% or less of area median gross
income (estimated at $51,480). These income thresholds may change over the life of the TIF
District.
2. No more than 20% of the square footage of buildings that receive assistance from tax
increments consist of commercial, retail, or other nonresidential uses. Revenue derived from
tax increment from a housing district must be used solely to fi nance the cost of housing
projects as defi ned in Minnesota Statutes, Section 469.174, subdivision 11. The cost of public
improvements directly related to the housing projects and the allocated administrative
expenses of the City may be included in the cost of a housing project.
3. Failure to comply with these income limitations is subject to Minnesota Statutes, Section
469.1771.
SECTION 3.04 PLAN FOR USE OF TAX INCREMENT
3.04.1 Estimated Tax Increment
The original net tax capacity of value of the TIF District will be set by the County upon requestfor certifi cation. For the purposes of this Plan, the estimated original net tax capacity is $1,812. This amount is estimated based on the most recent published (taxes payable 2017) estimatedmarket value of $241,600 for Parcel 259230020; with tax capacity value calculated for residentiallow income property.
The total tax capacity value of the property after development completion (for taxes payablein 2020) is estimated to be $56,100. This amount is based on a total estimated market value of$7,480,000 with property classifi ed as residential low-income property.
The proposed development, requires that only 52 percent (a “portion”) of the captured net taxcapacity is necessary to fi nance or otherwise make permissible expenditures under Minnesota Statutes, Section 469.176, Subdivision 4, only that portion shall be set aside and the remaindershall be distributed among the aff ected taxing districts by the county auditor.
The estimated diff erence between the total tax capacity value after development completion (for taxes payable in 2020) and the original net tax capacity value is the captured net tax capacity($54,288). The City elects that only 52% of the captured tax net tax capacity shall be set aside for
TAX INCREMENT FINANCING DISTRICT NO. 1-6
DRAFT TIF PLAN AS OF 4/10/17 7
the TIF District ($28,320).
The total local tax rate for taxes payable in 2016 is 108.021%. The TIF Plan uses this rate as
the original local tax rate for the TIF District. At the time of the certifi cation of the original net
tax capacity for the TIF District, the county auditor shall certify the original local tax rate that
applies to the TIF District. It is anticipated the original tax rate will be based on taxes payable
in 2017. The original local tax rate is the sum of all the local tax rates, excluding that portion
ȱȱȱȱĴȱȱȱȱȱȱ¢ȱȱȱȱȱ
126C.13, that apply to a property in the TIF District. The local tax rate to be certifi ed is the rate
in eff ect for the same taxes payable year applicable to the tax capacity values certifi ed as the TIF
District’s original tax capacity. The resulting tax capacity rate is the original local tax rate for the
life of the TIF District.
Under these assumptions, including the election to limit the captured net tax capacity to 52%
of the total, the estimated annual tax increment after development completion is $30,384. This
estimate is after deducting for the fee payable to the State Auditor’s Offi ce in the amount of
0.36% of the total tax increment derived from the property. The actual tax increment will vary
according to the certifi ed original tax capacity value and original tax rate, the actual property
value produced by the proposed development and the changes in property value and State tax
policy over the life of the district.
It is the City’s intent to retain 52% of the captured net tax capacity for the duration of the TIF
district. Exhibit II contains the projected tax increment over the life of the District.
3.04.2 Project Costs
The City will use tax increment to pay Project Costs. The City anticipates the use of taxincrement to pay administrative expenses for the TIF District and to reimburse the Developer ona pay-go basis for a portion of the cost for construction of aff ordable housing. A development assistance contract with the Developer will defi ne the means for verifying Developer costs eligible for reimbursement and the means of disbursing tax increments collected by the City tothe Developer.
The City may also use tax increments to pay fi nancing costs. The interest rate payable on bonds (i.e., tax increment fi nancing pay-go note) to be issued will be set pursuant to a development assistance contract with the Developer.
The City reserves the right to use any other legally available revenues to fi nance or pay for Project Costs.
The City reserves the authority to modify the TIF Plan to provide authority to expend taxincrement from the TIF District on other housing projects that meet the criteria for establishinga housing TIF district. The statutes governing the use of TIF defi ne a housing district consisting of a project, or a portion of a project, intended for occupancy, in part, by persons or families oflow and moderate income (Minnesota Statutes, Section 469.174, Subd. 11). The requirementsfor the establishment of a housing TIF district are contained in Minnesota Statutes, Section469.1761. The primary criteria are income related. The criteria are diff erent for owned and rental housing.
The practical application of this authority for the City includes:
•The use of tax increment is not limited by pooling restrictions or the fi ve-year rule.
• The tax increment can be spent on activities outside of the TIF district, but within theDevelopment District.
• This authority does not extend the maximum statutory duration of the TIF district.
•The tax increment must be used solely to fi nance the cost of the “housing project” as defi ned by the TIF Act. The cost of public improvements directly related to the
TAX INCREMENT FINANCING DISTRICT NO. 1-6
DRAFT TIF PLAN AS OF 4/10/17 8
housing project and the allocated administrative expenses of the city may be included
in the cost of a housing project.
• No more than 20% of the square footage of buildings that receive TIF assistance may
consist of commercial, retail, or other nonresidential uses.
Potential applications of this authority include:
• Individual housing projects avoiding the need for a new TIF district.
• Supplementing the revenues of another housing TIF district.
• Assistance for the renovation of existing housing.
• Acquisition of land for housing.
•Assistance to make public improvements more aff ordable.
3.04.3 Estimated Sources and Uses of Funds
The estimated sources of revenue, along with the estimated Project Costs of the TIF District,are itemized in Figure 3-1 that follows. Such costs are eligible for reimbursement from taxincrements, and other listed sources of revenue from the TIF District.
FIGURE 3-1ESTIMATED SOURCES AND USES OF FUNDS
TAX INCREMENT FINANCING DISTRICT NO. 1-6
DRAFT TIF PLAN AS OF 4/10/17 9
The City reserves the right to administratively adjust the amount of any of the Project Cost
items listed in Figure 3-1, so long as the total estimated tax increment project costs amount, not
including fi nancing costs, is not increased.
3.04.4 Administrative Expense
The City reserves the authority to use up to ten percent (10%) of annual tax increment revenuesto pay administrative costs, in addition to required fees paid to the State and County. Section3.03.3, Figure 3-1, provides the estimated amount of tax increment the City plans to use to payCity administration costs. The City will use these monies to pay for and reimburse the Cityfor costs of administering the TIF district allowed by the TIF Act. Anticipated administrativeexpenses of the TIF District include an annual audit of the fund for the TIF District, preparationof annual reporting, legal publication of an annual report, and administration of thedevelopment agreement.
3.04.5 County Road Costs
The proposed development will not substantially increase the use of county roads and
necessitate the need to use tax increments to pay for county road improvements.
3.04.6 Bonded Indebtedness
The total amount of bonds estimated to be issued is included in Figure 3-1 in Section 3.03.3. TheCity does not anticipate the issuance of any general obligation bonded indebtedness as a resultof the TIF Plan.
The City intends to use tax increment fi nancing to reimburse the developer on pay-as-you-go basis for Project Costs.
The City reserves the authority to act to loan or advance money from its general fund or anyother fund it has legal authority to use to fi nance Project Costs. An interfund loan or advance is defi ned in the TIF Act as a bond or a qualifying obligation. Before money is transferred, advanced, or spent, the loan or advance shall be authorized by resolution of the City. For theloan or advance to be repaid with TIF revenues, an interfund loan agreement must be in placebefore any loans or advances are made. The terms and conditions for repayment of the loanmust be in writing and include, at minimum, (i) the principal amount of the loan or advance, (ii)the interest rate to be charged, and (iii) its maximum term. The maximum rate of interest thatcan be charged is limited to the annual rate charged by the State Courts or by the Department ofRevenue, whichever is greater.
3.04.7 Duration of TIF District and Election to Delay First Year of TIF Collection
The maximum duration to collect tax increment derived from property within the TIF District
shall be set at fourteen (14) years after the fi rst year of tax increment collection for a total
maximum duration of 15 years.
The City elects to delay receipt of fi rst increment until 2020, pursuant to MN Statutes, Section 469.175 subdivision 1(b). Based on the elected fi rst year of tax increment collection, the estimated decertifi cation date for the TIF District is December 31, 2034.
3.04.8 Estimated Impact on Other Taxing Jurisdictions
Exhibit III and IV shows the estimated impact on other taxing jurisdictions if the maximum
projected retained captured net tax capacity of the TIF District was hypothetically available to
the other taxing jurisdictions. The City believes that there will be no adverse impact on other
taxing jurisdictions during the life of the TIF District, since the proposed development would
not have occurred without the establishment of the TIF District and the provision of public
assistance. A positive impact on other taxing jurisdictions will occur when the TIF District is
decertifi ed and the development therein becomes part of the general tax base.
The City anticipates minimal impact of the proposed development on city-provided services.
There will be no borrowing costs to the City for the project. A manageable increase in water and
TAX INCREMENT FINANCING DISTRICT NO. 1-6
DRAFT TIF PLAN AS OF 4/10/17 10
sewer usage is expected. It is anticipated that there may be a slight but manageable increase in
police and fi re protection duties due to the development.
3.04.9 Prior Planned Improvements
There have been no building permits issued in the last 18 months in conjunction with any ofthe properties within the TIF District. The City will include this statement with the request forcertifi cation to the County Auditor. If building permits had been issued during this time period, then the County Auditor would increase the original net tax capacity of the TIF District by thenet tax capacity of each improvement for which a building permit was issued.
ARTICLE IV – ADMINISTERING THE TIF DISTRICT
SECTION 4.01 FILING AND CERTIFICATION
The fi ling and certifi cation of the TIF Plan consists of the following steps:
1. Upon adoption of the TIF Plan, the City shall submit a copy of the TIF Plan to the MinnesotaDepartment of Revenue and the Offi ce of the State Auditor.
2. The City shall request that the County Auditor certify the original net tax capacity and nettax capacity rate of the TIF District. To assist the County Auditor in this process, the Cityshall submit copies of the TIF Plan, the resolution establishing the TIF District and adoptingthe TIF Plan, and a listing of any prior planned improvements.
3. The City shall send the County Assessor any assessment agreement, if so applicable,establishing the minimum market value of land and improvements in the TIF District, andshall request that the County Assessor review and certify this assessment agreement asreasonable.
SECTION 4.02 MODIFICATIONS OF THE TAX INCREMENT FINANCING PLAN
The City reserves the right to modify the TIF District and the TIF Plan. Under current StateLaw, the following actions can only be approved after satisfying all the necessary requirementsfor approval of the original TIF Plan (including notifi cations and public hearing):
§Reduction or enlargement in the geographic area of the Development District or the TIFDistrict.
§Increase in the amount of bonded indebtedness to be incurred.
§Increase in the amount of capitalized interest.
§Increase in that portion of the captured net tax capacity to be retained by the City.
§Increase in the total estimated Project Costs, not including cost of fi nancing.
§Designation of additional property to be acquired by the City.
Other modifi cations can be made by resolution of the City Council. In addition, the original approval process does not apply if (1) the only modifi cation is elimination of parcels from the TIF District and (2) the current net tax capacity of the parcels eliminated equals or exceeds thenet tax capacity of those parcels in the TIF District’s original net tax capacity, or the City agreesthat the TIF District’s original net tax capacity will be reduced by no more than the current nettax capacity of the parcels eliminated.
The City must notify the County Auditor of any modifi cation that reduces or enlarges the geographic area of the TIF District. The geographic area of the TIF District may be reduced but
TAX INCREMENT FINANCING DISTRICT NO. 1-6
DRAFT TIF PLAN AS OF 4/10/17 11
not enlarged after fi ve years following the date of certifi cation.
SECTION 4.03 4-YEAR KNOCKDOWN RULE
Since the TIF District consists of a single parcel, development of the project as planned
prevents any loss of value from the 4-Year Knockdown Rule. This Rule requires that if after
four years from certifi cation of the TIF District no demolition, rehabilitation, renovation or site
improvement, including a qualifi ed improvement of an adjacent street, has commenced on a
parcel located within the TIF District, then that parcel shall be excluded from the TIF District
and the original net tax capacity shall be adjusted accordingly. Qualifi ed improvements of a
street are limited to construction or opening of a new street, relocation of a street, or substantial
reconstruction or rebuilding of an existing street. The City must submit to the County Auditor,
by February 1 of the fi fth year, evidence that the required activity has taken place for each parcel
in the TIF District.
If a parcel is excluded from the TIF District and the City or owner of the parcel subsequently
commences any of the above activities, the City shall certify to the County Auditor that such
activity has commenced and the parcel shall once again be included in the TIF District. The
County Auditor shall certify the net tax capacity of the parcel, as most recently certifi ed by the
Commissioner of Revenue, and add such amount to the original net tax capacity of the TIF
District.
SECTION 4.04 POOLING/5-YEAR RULE
It is anticipated that all tax increments collected in the TIF District will be spent or obligated
within the fi rst fi ve years of establishment of the TIF District. Unless the TIF Plan is modifi ed
and additional expenditures authorized, tax increments will only be used to pay for authorized
“In-District” Project Costs included in the TIF Plan.
Revenue derived from tax increment from the TIF District must be used solely to fi nance the
cost of housing projects as defi ned in the TIF Act, sections 469.174, subdivision 11, and 469.1761.
The cost of public improvements directly related to the construction of the housing project and
the allocated administrative expenses of the City may be included in the cost of the housing
project.
A housing project as defi ned in the TIF Act, Section 469.174, Sub. 11, is deemed to be an activity
in the TIF District, even if the expenditure occurs after fi ve years. For purpose of applying
this restriction, all administrative expenses must be treated as if they were solely for activities
outside of the TIF District. In the case of a housing district, a housing project, as defi ned in the
TIF Act, section 469.174, subdivision 11, is an activity in the district.
SECTION 4.05 FINANCIAL REPORTING AND DISCLOSURE REQUIREMENTS
The City will comply with the annual reporting requirements of State Law pursuant to the
guidelines of the Offi ce of the State Auditor. Under current law, the City must prepare and
submit a report on the TIF district on or before August 1 of each year. The City must also
annually publish in a newspaper of general circulation in the City an annual statement for each
tax increment fi nancing district.
The reporting and disclosure requirements outlined in this section begin with the year the
district was certifi ed, and shall end in the year in which both the district has been decertifi ed
and all tax increments have been spent or returned to the county for redistribution. Failure to
meet these requirements, as determined by the State Auditors Offi ce, may result in suspension
of distribution of tax increment.
TAX INCREMENT FINANCING DISTRICT NO. 1-6
DRAFT TIF PLAN AS OF 4/10/17 12
SECTION 4.06 BUSINESS SUBSIDY COMPLIANCE
The City is exempt from the business subsidies requirements specifi ed in Minnesota Statutes,
Sections 116J.993 to 116J.995 because the intended subsidy for the project specifi ed in this
document is anticipated to be 100% for housing assistance.
TAX INCREMENT FINANCING DISTRICT NO. 1-6
DRAFT TIF PLAN AS OF 4/10/17 13
TAX INCREMENT FINANCING DISTRICT NO. 1-6
DRAFT TIF PLAN AS OF 4/10/17 14
TAX INCREMENT FINANCING DISTRICT NO. 1-6
DRAFT TIF PLAN AS OF 4/10/17 15
TAX INCREMENT FINANCING DISTRICT NO. 1-6
DRAFT TIF PLAN AS OF 4/10/17 16
TAX INCREMENT FINANCING DISTRICT NO. 1-6
DRAFT TIF PLAN AS OF 4/10/17 17
EXHIBIT V
Boundaries of Development District and Tax Increment Financing District No. 1-6
8211988v3
DEVELOPMENT AGREEMENT
BY AND BETWEEN
THE CITY OF PRIOR LAKE, MINNESOTA
AND
PIKE LAKE MARSH LIMITED PARTNERSHIP
This document drafted by: BRIGGS AND MORGAN
Professional Association
2200 IDS Center
80 South 8th Street
Minneapolis, Minnesota 55402
8211988v3
Table of Contents
Page
i
ARTICLE I. DEFINITIONS ................................................................................................. 2
Section 1.1 Definitions............................................................................................ 2
ARTICLE II. REPRESENTATIONS AND WARRANTIES................................................ 4
Section 2.1 Representations and Warranties of the City ......................................... 4
Section 2.2 Representations and Warranties of the Developer ............................... 4
ARTICLE III. UNDERTAKINGS BY DEVELOPER AND CITY ....................................... 6
Section 3.1 Site Improvements ............................................................................... 6
Section 3.2 Reimbursement: Tax Increment Revenue Note ................................... 6
Section 3.3 Compliance with Low and Moderate Income Requirements .............. 7
Section 3.4 Real Property Taxes ............................................................................. 7
Section 3.5 Action to Reduce Taxes ....................................................................... 8
Section 3.6 Legal Expenses .................................................................................... 8
ARTICLE IV. EVENTS OF DEFAULT ................................................................................. 9
Section 4.1 Events of Default Defined ................................................................... 9
Section 4.2 Remedies on Default ............................................................................ 9
Section 4.3 No Remedy Exclusive........................................................................ 10
Section 4.4 No Implied Waiver ............................................................................ 10
Section 4.5 Agreement to Pay Attorney's Fees and Expenses .............................. 10
Section 4.6 Indemnification of City ...................................................................... 11
Section 4.7 The Developer's Option to Terminate ................................................ 11
Section 4.8 Action to Terminate ........................................................................... 11
Section 4.9 Effect of Termination ......................................................................... 12
ARTICLE V. ADDITIONAL PROVISIONS ...................................................................... 13
Section 5.1 Restrictions on Use ............................................................................ 13
Section 5.2 Conflicts of Interest............................................................................ 13
Section 5.3 Titles of Articles and Sections ........................................................... 13
Section 5.4 Notices and Demands ........................................................................ 13
Section 5.5 Counterparts ....................................................................................... 14
Section 5.6 Law Governing .................................................................................. 14
Section 5.7 Expiration ........................................................................................... 14
Section 5.8 Provisions Surviving Rescission or Expiration.................................. 14
Section 5.9 Assignability of Agreement and Note................................................ 14
EXHIBIT A Description of Development Property ...................................................................... 1
EXHIBIT B Form of Tax Increment Note ..................................................................................... 1
EXHIBIT C Site Improvements..................................................................................................... 1
EXHIBIT D Compliance Certificate ............................................................................................. 1
8211988v3
DEVELOPMENT AGREEMENT
THIS AGREEMENT, made as of the ____ day of ________________, 2017, 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 Pike Lake Marsh Limited Partnership (the
"Developer"), a Minnesota limited partnership.
WITNESSETH:
WHEREAS, pursuant to Minnesota Statutes, Section 469.124 through 469.133, 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. 1-6 (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
WHEREAS, the requirements of the Business Subsidy Law, Minnesota Statutes, Section
116J.993 through 116J.995, do not apply to this Agreement pursuant to an exemption for housing.
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:
8211988v3
2
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;
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 D.
County means Scott County, Minnesota;
Developer means Pike Lake Marsh Limited Partnership, 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;
Legal Expenses means the legal fees and expenses incurred by the City in connection with
the adoption of the Tax Increment Financing Plan and the preparation of this Agreement;
Note Payment Date means August 1, 2020, and each February 1 and August 1 of each year
thereafter to and including February 1, 2035; 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;
8211988v3
3
Project means the acquisition, construction and equipping of a 68-unit multifamily rental
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 (Housing) District No. 1-6, 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 (Pike Lake Marsh
Housing 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 Tax Increment Financing
Plan and the provisions of Minnesota Statutes, Section 469.177;
Termination Date means the earlier of (i) February 1, 2035, (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
discretion, directly results in delays, or acts of any federal, state or local governmental unit (other
than the City) which directly result in delays.
8211988v3
4
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.
(6) The City will not issue any further indebtedness payable from, or secured by, the
Tax Increments prior to the Termination Date without the prior written consent of the Developer.
Section 2.2 Representations and Warranties of the Developer. The Developer makes
the following representations and warranties:
(1) The Developer is a Minnesota 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
8211988v3
5
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) 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 o f,
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 July 31, 2017 and barring
Unavoidable Delays the Project will be substantially completed by December 31, 2018.
(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.
8211988v3
6
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 $300,000 or the costs of
the Site Improvements actually paid by the Developer (the "Reimbursement Amount") as further
provided in Section 3.2 hereof.
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 this Agreement, at 5.00% 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 Incr ements 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
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
8211988v3
7
bond counsel for the Note may require in connection therewith, are hereby authorized and
approved by the City.
Section 3.3 Compliance with Low and Moderate Income Requirements.
(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 40% of the residential units in the Project must be occupied or
available for occupancy by persons whose incomes do not exceed 60% 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, 2020, 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 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 3.4 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 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:
8211988v3
8
(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
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 r aise 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.
(4) The parties hereto acknowledge that Developer intends to apply to have the
Property certified as low-income rental housing property as described in Minnesota Statutes,
Section 273.13, Subdivision 25(e).
Section 3.5 Action to Reduce Taxes. The Developer may seek through petition or other
means to have the Assessors Estimated Market Value for the Project reduced. Until the Note is
fully paid, such activity must be preceded by written notice from the Developer to the City
indicating its intention to do so. Upon receiving such notice, or otherwise learning of the
Developer's intentions, the City may suspend payments due under the Note until the actual amount
of the reduction is determined, whereupon the City will make the suspended payments less any
amount that the City is required to repay the County as a result of any reduction in market value
of the Property. During the period that the payments are subject to suspension the City may make
partial payments on the Note if it determines, in its sole and absolute discretion that the amount
retained will be sufficient to cover any repa yment which the County may require. The City's
suspension of payments on the Note pursuant to this Section shall not be considered a default under
this Agreement.
Section 3.6 Legal Expenses. The Developer shall pay all Legal Expenses incurred by
the City within 30 days of the receipt of the invoice from the City.
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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.
(c) Failure of the Developer to observe or perform any other covenant,
condition, obligation or agreement on its part to be observed or performed u nder this
Agreement.
(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
following actions after the giving of thirty (30) days' written notice to the Developer citing with
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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, or, if such cure cannot be reasonably completed within thirty (30) days, then such
longer time as agreed between the parties, but in no event to exceed sixty (60) 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.
(d) Developer's investor limited partner ("Investor Limited Partner") shall have
the right, but not the obligation, to cure any Event of Default by Developer under this
Agreement or any default under any other document to be executed in connection herewith,
and City shall accept performance by Investor Limited Partner of any obligation of
Developer thereunder as though tendered by Developer itself, provided such performance
by Investor Limited Partner has occurred during the applicable cure period, if any, provided
to Developer thereunder with respect to such default or Event Of Default.
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.
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(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.
(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 b y 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.
Section 4.7 The Developer's Option to Terminate. This Agreement may be terminated
by Developer, if (i) the Developer is in compliance with all material terms of this Agreement and
no Event of Default has occurred; and (ii) the City fails to comply with any material term of this
Agreement, and, after written notice by the Developer of such failure, the City has failed to cure
such noncompliance within ninety (90) days of receipt of such notice, or, if such noncompliance
cannot reasonably be cured by the City within ninety (90) days, of receipt of such notice, the City
has not provided assurances, reasonably satisfactory to the Developer, that such noncompliance
will be cured as soon as reasonably possible.
Section 4.8 Action to Terminate. Termination of this Agreement pursuant to Section
4.7 must be accomplished by written notification by the Developer to the City within thirty (30)
days after the date when such option to terminate may first be exercised. A failure by the
Developer to terminate this Agreement within such period constitutes a waiver by the Developer
of its rights to terminate this Agreement due to such occurrence or event.
Section 4.9 Effect of Termination. If this Agreement is terminated pursuant to Sections
4.7 and 4.8, this Agreement shall be from such date forward null and void and of no further effect;
8211988v3
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provided, however, the termination of this Agreement shall not affect the rights of either party to
institute any action, claim or demand for damages suffered as a result of breach or default of the
terms of this Agreement by the other party, or to recover amounts which had accrued and become
due and payable as of the date of such termination. Upon termination of this Agreement pursuant
to Sections 4.7 and 4.8, the Developer shall be free to proceed with the Project at its own expense
and without regard to the provisions of this Agreement; provided, however, that the City shall not
be required to make any further payments on the Note.
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ARTICLE V.
ADDITIONAL PROVISIONS
Section 5.1 Restrictions on Use. The Developer agrees for itself, its successor and
assigns 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:
Pike Lake Marsh Limited Partnership
7500 West 78th Street
Edina, MN 55439
Attn: J. Michael Waldo
with copies to:
Winthrop & Weinstine, P.A.
Capella Tower, Suite 3500
225 South Sixth Street
Minneapolis, MN 55402
Attn: Erin Mathern
8211988v3
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And so long as any affiliates of Wells Fargo Bank, N.A. owns a partnership interest in
Mortgagor, to:
Wells Fargo Affordable Housing
Community Development Corporation
MAC D1053-170
301 South College Street, 17th Floor
Charlotte, NC 28202-6000
Attention: Director of Asset Management
(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
with a copy to:
Briggs and Morgan, P.A.
Attention: Mary Ippel
2200 IDS Center
80 South 8th Street
Minneapolis, MN 55402
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 5.5 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 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.
8211988v3
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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 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
Pike Lake Marsh Limited Partnership.
8211988v3
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Pike Lake Marsh Limited Partnership
By: Pike Lake Marsh LLC
Its General Partner
By _______________________________________
J. Michael Waldo
Its Vice President
This is a signature page to the Development Agreement by and between the City of Prior Lake and
Pike Lake Marsh Limited Partnership.
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EXHIBIT A
Description of Development Property
Property located in the City of Prior Lake, Scott County, Minnesota with the following
legal description:
Lot 1, Block 1, Pike Lake Marsh
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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
(PIKE LAKE MARSH HOUSING 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 Pike Lake Marsh Limited Partnership (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 $300,000 as provided in that certain Development Agreement, dated as of
__________________, 2017 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 of this Note at the simple non-compounded rate of five percent
(5.00%) 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, 2020, and on each February
1 and August 1 thereafter to and including February 1, 2035 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 sum of 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
(Housing) District No. 1-6 (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 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
8211988v3
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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
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, 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 __________________.
Manager Mayor
DO NOT EXECUTE UNTIL PAID INVOICES FOR SITE IMPROVEMENTS ARE
GIVEN TO THE CITY - REFER TO SECTION 3.3(1).
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CERTIFICATION OF REGISTRATION
It is hereby certified that the foregoing Note was registered in the name of Pike Lake Marsh
Limited Partnership, 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
REGISTERED OWNER
DATE OF
REGISTRATION
SIGNATURE OF
CITY MANAGER
Pike Lake Marsh Limited Partnership
7500 West 78th Street
Edina, MN 55439 ________________ ______________________
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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
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EXHIBIT D
Compliance Certificate
The undersigned Pike Lake Marsh Limited Partnership, does hereby certify that as of the
date of this Certificate not less than 40% of the residential units in the Pike Lake Marsh Housing
Project located at ______________________________ in Prior Lake, Minnesota (the "Project")
are occupied by individuals whose income is 60% or less of the Scott County median income.
Dated this ____ day of _________________, 201__.
PIKE LAKE MARSH LIMITED PARTNERSHIP
By _______________________________________
Its _______________________________________
[Attach household income verification required by Section 3.3.]