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HomeMy WebLinkAbout6A - Tax Increment Financing District No. 2-8 AGENDA #: PREPARED BY: SUBJECT: DATE: INTRODUCTION: BACKGROUND: DISCUSSION: STAFF AGENDA REPORT 6A JANE KANSIER, PLANNING COORDINATOR PUBLIC HEARING TO CONSIDER APPROVAL OF RESOLUTION 97-XX APPROVING THE FORMATION OF TAX INCREMENT FINANCING DISTRICT NO. 2-8 APRIL 7, 1997 The purpose of this item is to consider approval of the formation of Tax Increment Financing District (TIF) #2-8. This district is a part of Development District No.2, which is the Waterfront Passage Business Park. Approval is also requested for the development agreement. TIF District No. 2-8 is approximately 1.65 acres located along the east side of Fish Point Road, directly north of Keyland Homes. The property is currently vacant, and is zoned BP (Business Park). Upon inclusion in the Development District, a private developer, Stan Anderson, will construct a 12,000 square foot manufacturing/warehouse facility. Development District No. 2 was formed to promote development of certain property, secure additional industrial, commercial, and housing development and redevelopment opportunities, increase property subject to taxation, provide public improvements to development properties, and designate methods for financing of activities in the Development District. The purpose of the proposed TIF District 2-8 is to finance the development activities of this site. This site is designated as C-BO (Commercial - Business Office Park) on the 2010 Comprehensive Plan. The property is also zoned BP. The proposed use of the property is consistent with both the land use plan designation and the zoning. On March 24, 1997, the Planning Commission reviewed this proposal. The Planning Commission recommends approval of the formation of TIF District No. 2-8, finding the proposed use is consistent with the Comprehensive Plan. The Economic Development Authority also recommended approval of the Tax Increment District and the Development Agreement. Financing for the project will consist of bank financing, general 1:\97files\97eda\tif2-8\tif2-8cc.doc PAGE 1 16200 Eagle Creek Ave. S.E., Prior Lake. Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER ALTERNATIVES: RECOMMENDA TIO N: ACTION REQUIRED: REPORT ATTACHMENTS: 1:\97files\97 eda\tif2-8\tif2-8cc.doc obligation bonds, tax increment financing, a City contribution of "unrestricted funds" equal to 10% of the tax increment revenues, and developer equity. The use of tax increment financing will employ the "pay-as-you-go" method of reimbursing eligible project costs. Under this program, tax increment receipts generated from the development will be used to reimburse the City and developer for certain qualified costs such as land, site work, sewer, water, roads, sidewalks and landscaping. This "buy down" method will occur over the life of the District, or until all agreed upon costs have been reimbursed. The intent of this method is to apply all of the revenues from the "pay-as-you-go" tax increment financing to reduce the project cost. The attached narrative, prepared by Advance Resources, explains the proposal in greater detail. The Development Agreement sets forth the legal relationship between the City and the Developer in this project. Roger Guenette of Advance Resources will make a presentation on the proposed Tax Increment plan and Development Agreement. 1. Adopt Resolution #97 -XX, approving the creation of TI F District No. 2-8, and a separate motion authorizing the Mayor and City manager to enter into a Development Agreement with Mr. Stan Anderson. 2. Further discuss this issue and direct the staff to provide additional information to the City Council. 3. Deny the tax increment financing proposal. Adopt Alternative #1. A motion and second to adopt the proposed resolution, and a separate motion authorizing the Mayor and City Manager to enter into a Development Agreement. 1. 2. Reviewed By: oyles, City Manager PAGE 2 RESOLUTION 97-_ MOTION BY: SECONDED BY: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PRIOR LAKE APPROVING TAX INCREMENT FINANCING DISTRICT NO. 2-8 AND THE USE OF TAX INCREMENT FINANCING WHEREAS, the City Council of the City of Prior Lake, Minnesota (the "City"), has previously approved Development District No.2 (the "Development District") and in connection therewith adopted a development program; and WHEREAS, it is desirable and in the public interest that the City undertake and carry out a tax increment finance plan for Tax Increment Financing District No. 2-8 pursuant to Chapter 469 of Minnesota Statutes, encompassing the area which is more particularly described on Exhibit A attached hereto and made a part hereof, (which area is herein called the "District"); and WHEREAS, the City Council has reviewed "Tax Increment Financing District No. 2-8, dated April 7, 1997" (the "Plan Booklet"), which sets forth a tax increment financing plan for the District; and WHEREAS, the Plan Booklet sets forth the City's estimate of the fiscal and economic impact of the District on the tax capacities of all taxing jurisdictions in which the District is located; and WHEREAS, the Board of Commissioners of Scott County, Minnesota, has been notified of the public hearing for the review of the Plan Booklet; and WHEREAS, the School Board of Independent School District No. 719 has been notified of the public hearing for the review of the Plan Booklet; and WHEREAS, the City has received and considered the comments of the Board of Commissioners of Scott County and the School Board of the Independent School District No. 719 respecting the contents of the Plan Booklet; and WHEREAS, the City on April 7, 1997, after having published a notice of public hearing in the official newspaper of the City, conducted a public hearing on the Plan Booklet and received public comments on the same. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Prior Lake, Minnesota, as follows: 1. The City 'finds and determines that there is a need for the activities of Development District No.2 to be financed in part by the tax increments from the District. 2. The City finds and determines that the activities to be financed by the tax increments from the District will carry out the objectives of Development District No.2 by encouraging industrial develop- ment, providing job opportunities and enhancing the tax base. 3. The City 'finds and determines that the provision for job opportunities and the preservation and enhancement of the tax base are in the public interest of the City and the expenditures of the District are a public purpose. 4. The City 'finds and determines that the tax increment financing plan as set forth in the Plan Booklet having been duly reviewed and considered is hereby approved and adopted, and the area described in Exhibit A hereto is hereby designated as an Economic Development District pursuant to Minnesota Statutes, Sections 469.174, Subd. 12. 5. The City finds and determines that the District is an Economic Development District because it will result in increased employment in the City, and that it will result in preservation and enhancement of the tax base of the City. 6. The City finds and determines that the proposed development, in the opinion of the City, would not r~sonably be expected to occur solely through private investment within the reasonably foresee- able future and therefore the use of tax increment financing is deemed necessary. 7. The City finds and determines that the tax increment financing plan will afford maximum opportuni- ty, consistent with the sound needs of the City as a whole, for the development of the District by private enterprise. 8. The City finds and determines that the tax increment financing plan set forth in the Plan Booklet conforms to the general plan for the development of the City as a whole. 9. The reasons and supporting facts for findings 5, 6, 7 and 8 as set forth on pages 3 and 4 of the Plan Booklet are by this reference confirmed, approved and adopted. 10. The City elects to retain tax increment revenues generated in District No. 2-8 pursuant to clause (a) of Minnesota Statutes, Section 469.1 n Subdivision 3, Paragraphs 1 and 2. By making this election tax increment revenues generated within District No. 2-8 will not be made available for calculation or sharing with the fiscal disparity provisions of Chapter 473F. 11. Pursuant to the 1996 Omnibus Tax Bill, Article 5, Section 6, the City requests an exemption from a LGAlHACA penalty because a contribution of unrestricted funds in excess of 10% of the tax increment to be generated will be made in support of the project. 12. The City Clerk shall request the auditor of Scott County to certify the original tax capacity and original local tax rate of the District approved by this resolution. 13. The City Clerk is hereby directed to file a copy of this resolution with a copy of the Plan Booklet to the Minnesota Department of Revenue. 14. The City hereby states its intention to use all of the captured tax capacity for purposes of tax increment financing as per the conditions set forth in the Plan Booklet. Passed and adopted this 7th day of April, 1997. YES NO Andren Greenfield Kedrowski Mader Schenck Andren Greenfield Kedrowski Mader Schenck Frank Boyles City Manager City of Prior Lake (Seal) EXHIBIT A TO CITY COUNCIL RESOLUTION APPROVING TAX INCREMENT FINANCING DISTRICT NO. 2-8 Tax Increment Financing District No. 2-8 includes the following property: An exact legal description will be provided upon completion of a survey for the property. In the interim, the property is described as an approximate 1.65 acre parcel situated in Block 2 of Waterfront Passage Business Park situated adjacent and immediately north of Lot 2, Block 2 (Keyland Homes) parcel and immediately east of Fish Point Road. Parcel #25-296-002-2 (to be acquired) r r I [ r I I I ~ ~ ~ ~ I I I I I I I TAX INCREMENT FINANCING DISTRICT NO. 2-8 PRIOR LAKE, MINNESOTA APRIL 7, 1997 PREPARED BY ADVANCE RESOURCES FOR DEVELOPMENT, INC. MANKATO, MINNESOTA I INTRODUCTION I LOCATION I Tax Increment Financing District No. 2-8 is located in the Waterfront Passage Business Park south of County Road 21 on the east side of Prior Lake. The map following page 1 shows the location of District No. 2-8. DEFINITIONS I For the purpose of clarity, the following terms defined in this report shall have the meanings given them. I .Project" means development district as defined in Minnesota Statutes, Section 469.125, Subd. 9. I "Development District" means a specific area within the corporate limits of a municipality which has been so designated and separately numbered by the governing body. "Development District" also means Development District No.2. . I "Tax Increment Financing District No. 2-8", "Tax Increment Financing District" or "District" means a contiguous or noncontiguous geographic area within a project delineated in the tax increment financing plan, as provided by Minnesota Statutes, Section 469.175, Subd. 1, for the purpose of financing redevelopment, mined underground space development, housing, or economic development in municipalities through the use of tax increment generated from the captured net tax capacity in the tax increment financing district. I "Economic Development District" means a type of tax increment financing district which consists of any project, or portions 01 a project, not meeting the requirements found in the definition 01 redevelopment district, renewal and renovation district, soils condition district, mined underground space development district, or housing district, but which the authority finds to be in the public interest because: I I 1. It will discourage commerce, industry, or manufacturing from moving their operations to another state or municipality; or I 2. It will result in increased employment in the state; or 3. It will result in preservation and enhancement of the tax base of the state. I PURPOSE OF TAX INCREMENT FINANCING PLAN I District No. 2-8 is being established pursuant to Minnesota Statutes, Chapter 469, in order to give the City Council the authority to use Tax Increment Financing as a funding source. Under Chapter 469, a tax Increment district has to be established as a housing district, a redevelopment district, a mined underground space district, a renewal and renovation district, a soils condition district or an economic development district. Since this area qualifies as an economic development district, pursuant to Minnesota Statutes, Section 469.174, Subd. 12, it will have a duration of not greater than nine years from the date of receipt of the first tax increment or eleven years from the approval of the tax increment financing plan, whichever is less. . I I SUMMARY 1- The formation of District No. 2-8 improves the quality of life in the community by financing eligible Project costs which will result in the creation of job opportunities and increase of the tax base. I I I. I;" z..o ", , . . '".:' .;.. ONOS I' o '0' \. ," OUTlor( I · A ') ,., ./ .:---.. ( '\ < ''- - " .. + ...) ~. TAX INCREMENT FINANCING DISTRICT 2-8 III' 1111 ,., II --~ II -'. \. y, \' , I i ~ -..... . " C,\fif:)lNAL ~ FOlImt ~'::, . N..... '. j .,' J'"' . ~. ...., to. t ! . Ii I!' I. I! .- i .. ... 1~< NORTH "'tII.. ...... ..- I,' I; , 'i.: ,J, .. .... ..:t 0..7" : -... 1M... ~. i:, ~:~ ; .::~..r ! ~ : ."; '~i .~ ~ "'~ 'j"", '~ . ::':. '~'i'.~: ; . il.' i~:':. 0 ..... . I i: -" i 1 " COHO. NO, 1001 Q ~ WATERFRONT PASSAGE SECOND -Ar5blTToN~ DEVELOPMENT DISTRICT NO.2 . ~". ~ ... l . . .,. . . I TAX INCREMENT FINANCING PLAN I RELATIONSHIP OF TAX INCREMENT DISTRICT TO DEVELOPMENT DISTRICT I Development District No.2 was formed in order to promote development of certain property, secure additional industrial, commercial and housing development and redevelopment opportunities, increase property subject to taxation, provide public improvements to development properties, and designate methods for the financing of activities in the Development District. I Development District law authorizes the use of tax increment funds to pay for these Project activities and improvements. When using tax increment funds, it is necessary to establish a tax increment financing district according to Minnesota Statutes, Sections 469.174 to 469.179, inclusive. Approval of this plan results in the formation of Tax Increment Financing District No. 2-8, the purpose of which is to finance the develop- ment activities authorized by the creation of Development District No.2. I PROPERTY CONDITIONS I The District consists of an approximate 1.65 acre parcel which was recently incorporated as part of the Waterfront Passage Business Park. The property is currently vacant and is appropriately zoned for its intended use. Upon inclusion in the District, a private developer will construct a 12,000 SF manufactur- ing/warehouse facility. I I Financing for the project will consist of bank financing, general obligation bond proceeds, tax increment financing, a City contribution of "unrestricted funds" equal to 10% of the tax increment revenues and developer equity. The use of tax increment financing will empioy the "pay-as-you-go" method of reimbursing eligible project costs. Under this program tax increment receipts generated from the development will be used to reimburse the City and developer for certain qualified costs such as land, site work, sewer, water, roads, sidewalks and landscaping. This "buy down" will occur over the life of the District or until all agreed upon costs have been reimbursed. The intent of this method is to apply all the revenues from the "pay-as- you-go" tax increment financing to reduce the project cost. I I I NARRATIVE BOUNDARY DESCRIPTION OF DISTRICT NO. 2-8 An exact legal description will be provided upon completion of a survey for the property. In the interim, the property is described as an approximate 1.65 acre parcel situated in Block 2 of Waterfront Passage Business Park situated adjacent and immediately north of Lot 2, Block 2 (Keyland Homes) parcel and immediately east of Fish Point Road. 1- l LIST OF PARCELS INCLUDED IN DISTRICT NO. 2-8 The following parcel is included in District No. 2-8: I Parcel #25-296-002-2 (to be assigned) I, L I I I 2 !j';'i~_' ; ',,'~ '~t ;f~. ;;,"ktfb,+J~t... .1, I ( I~: FINDINGS Minnesota Statues, Section 469.175, Subd. 4, requires that prior to municipality approval of a tax increment financing plan that the statutory findings of Minnesota Statutes, Section 469.175, Subd. 3, must be made and the reasons for those findings must be set forth in writing along with supporting facts for each determination. The tax increment financing plan for District No. 2-8 finds the following: 1. FINDING. That the proposed tax increment financing district is an economic development district. SUPPORTING FACTS. Minnesota Statutes, Chapter 469 provides for six types of districts -- a redevelopment district, renewal and renovation district, soils condition district, a mined underground space district, a housing district, and an economic development district - each serving a well-defined need and each having different qualifying standards. Tax Increment Financing District No. 2-8 is intended to be an "Economic Development District", Minnesota Statutes, Section 469.174, Subdivi- sion 12, defines "Economic Development District-. This definition is also included on page 1 of this plan. The proposed District qualifies as an "Economic Development District" pursuant to the above cited statute because Project activities will increase employment and result in preservation and enhancement of the tax base of the municipality, Upon inclusion in the District the vacant property will be developed by Stan Anderson, a real estate developer and leased for manfacturing/warehouse activities. Inclusion of this property in the District will increase the community's tax base and add approxiamtely 10 new jobs to the area. 2. FINDING That the proposed development or redevelopment, in the opinion of the municipality, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future and therefore, the use of tax increment financing is deemed necessary. SUPPORTING FACTS. In order for the company to develop and occupy the site, project financing must be obtained. The City of Prior Lake in conjunction with a local bank and the developer has prepared a public/private financial package which includes owner equity, proceeds from previously issued general obligation bonds, tax increment financing, a contribution of unrestrict- ed funds from the City equal to 10% of the tax increment revenues and a bank fixed asset loan. The need for this type of project financing was determined by the City with the assistance of the bank and in the opinion of City officials this development would not occur in the City of Prior Lake without the public/private effort, including the financial assistance offered. 3. FINDING. That the Market Value increase estimated for the proposed Project is greater than what could reasonably be expected to occur if tax increment financing was not available. SUPPORTING FACTS. The Project is estimated to result in a market value increase of $378,195. The present value of the projected tax increment revenues is estimated at $127,588; thus, the net market value increase less the present value tax increment estimate is $250,607. Since. the Project would not be developed without the availability of tax increment financing there is a positive impact on the local tax base despite the use of tax increment financing. 4. FINDING. That the tax increment financing plan conforms to the general plan for the develop- ment or redevelopment of the municipality as a whole. SUPPORTING FACTS. The tax increment financing plan conforms to the general plan of the City of Prior Lake for the following reasons: A. The tax increment financing area is designated on the zoning map for industrial develop- ment. Plan activities and subsequent development are intended to encourage and result in industrial development for this area. 3 I I I I: I I Ii I I II I I II I I II I I I B. The general plan for the community supports the creation of job opportunities: particularly, increased opportunities for low and moderate income individuals. 5. FINDING. That the tax increment financing plan will afford maximum opportunity, consistent with the sound needs of the municipality as a whole, for the development or redevelopment of the project by private enterprise. SUPPORTING FACTS. The City of Prior Lake, in approving Development District No.2, has prepared a blueprint for the development and redevelopment of the community. The Development District plan encourages cooperation with private enterprise. Information contained in the Develop- ment District report along with other city plans and reports has been used in the preparation of the District No. 2-8 plan. Based upon the objective of cooperation and upon the guidance provided by city plans and ordinances, the city has determined Project costs which will be paid for by tax increment revenues. As the Financial Plan contained on pages 6 through 11 of this report indicates, the city intends to concentrate the use of tax increment revenue on those improvements which would not reasonably be expected to occur solely through private action. Private enterprise will be responsible for the vast majority of the expenses and activities normally associated with land development. STATEMENT OF OBJECTIVES FOR DEVELOPMENT DISTRICT NO.2 The City Council of Prior Lake, Minnesota, determines that it is necessary, desirable, and in the public interest to establish/modify, designate, develop, and administer a development district in the city pursuant to the provisions of Minnesota Statutes, Sections 469.124 to 469.134, inclusive. The city council further determines that the funding of the necessary activities and improvements in the Development District may be financed through tax increment financing, as well as, other appropriate sources. Prior to involving itself in financing Project activities or a development, the city council shall determine financial feasibility of the Project or development. Any public or private activity when funded by the city shall demonstrate the need for such financing and how said financing is going to be repaid if it is a loan. In the case of a grant or tax increment financing, the benefits to the community, such as housing or job opportunities, increased tax base or removal of blighting conditions, shall be demonstrated. The city council seeks to achieve the following objectives for Development District No.2: 1. Acquire land which is vacant or underused, including public or semi-public properties already devoted to. a public use which is underutilized. 2. Assist with land assembly for new and expanding business, office and industrial areas. 3. Provide development sites of such size and character so as to assure the development of the Project area. 4. Eliminate or correct physical deterrents to the development of land. 5. Provide adequate streets, utilities and other public improvements and facilities to enhance the , area for development. 6. Achieve a high level of design and landscaping quality to enhance the physical environment. 7. Accomplish convenient and adequate parking to serve the needs of the area. 8. Create effective buffers, screens and/or transitions between residential and nonresidential uses to minimize the potential blighting effects of divergent land uses. 9. Combine elements of the comprehensive city plan with these Project objectives. 10. Improve the financial base of the city. 4 11. Provide maximum opportunity, consistent with the needs of the city, for development by private enterprise. 12. Provide increased employment opportunities and as much as possible seek businesses which would employ the unemployed and. underemployed. 13. Promote redevelopment in order to prevent or eliminate blight and maintain the viability of commercial and residential areas. DEVELOPMENT PROGRAM FOR DEVELOPMENT DISTRICT NO.2 Minnesota Statutes, Section 489.175, Subd. 1 (2) requires: "A statement as to the development program for the project, including the property within the project, if any, which the authority intends to acquire". The Development Program for Development District No.2 is delineated in a report entitled "Development District No.2" adopted May, 1992 and modification August 1, 1994, copies of which are on file in the city clerk's office. By this reference, said development program is incorporated as part of this tax increment financing plan. TAX INCREMENT DISTRICT DEVELOPMENT ACTIVITIES Development activities to be financed in whole or in part as a result of the implementation of this Plan include: 1. Reimbursement, to the city and developers, via a pay-as-you-go tax increment agreement for property acquisition and site preparation costs. 2. Expansion and development by Stan Anderson, a real estate developer, of an approximate 12,000 sq. ft. productionjwarehouse facility. All of the proposed activities and improvements are within the boundaries of Development District No.2 and District No. 2-8. The developments will be started in 1997 and completed prior to December 31, 1997. The above activities are, at the time of preparation of this report, the only activities proposed for the Development District as a result of the formation of District No. 2-8. No contract has been entered into at the time of preparation of this Plan pursuant to Minnesota Statutes, Section 489.175, Subd. 1 (3), completion of any of the activities. CONFORMANCE WITH PLAN FOR THE CITY The City Council, by approval of this report, believes that creation and implementation of District No. 2-8 does indeed meet the intent of the plan for the city by maintaining the quality of existing development, and improving the quality of life through orderly planned improvements. PROCEDURE FOR MAKING MODIFICATIONS IN AN APPROVED TAX INCREMENT DISTRICT PLAN Tax Increment Financing District No. 2-8 may be modified, provided that the modification shall be approved by the City Council under provisions of the Minnesota Tax Increment Financing Act of Minnesota Statutes, Section 489.175, Subd. 4, as follows: "(a) A tax increment financing plan may be modified by an authority, provided that any reduction or enlargement of geographic area of the project or tax increment financing district, increase in amount of bonded indebtedness to be incurred, including a determination to capitalize interest on the debt if that determination was not a part of the original plan, or to increase or decrease the amount of interest on the debt to be capitalized, increase in the portion of the captured assessed value to be retained by the authority, increase in total estimated tax increment expenditures or designation of additional property to be acquired by . the authority shall be approved upon the notice and after the discussion, public hearing and findings 5 II . . . . . . . . I I II II - - l - t f -::Y. .'~ \ 1 - - II 1 I I - I II I i -- II - I ~ I - II ~ II ~ i i required for approval of the original plan; provided that if an authority changes the type of district from housing, redevelopment or economic development to another type of district, this change shall not be considered a modification, but shall require the authority to follow the procedure set forth in Sections 469.174 to 469.179 for adoption of a new plan, including certification of the assessed valuation of the district by the county auditor. If a redevelopment district or a renewal and renovation district is enlarged, the reasons and supporting facts for the determination that the addition to the district meets the criteria of section 469.174, subdivision 10, paragraph (a), clauses (1) and (2), or subdivision 10a must be documented. The require- ments of this paragraph do not apply if (1) the only modification is elimination of parcels from the project or district and (2)(A) the current tax capacity of the parcels eliminated from the district equals or exceeds the tax capacity of those parcels in the district's original tax capacity or (8) the authority agrees that, notwithstanding section 469.177, subdivision 1. the original tax capacity will be reduced by no more than the current tax capacity of the parcels eliminated from the district. The authority must notify the county auditor of any modification that reduces or enlarges the geographic area of a district or a project area. (b) The geographic area of a tax increment financing district may be reduced, but shall not be enlarged after five years following the date of certification of the original assessed value by the county auditor or five years from August 1,1979." RELOCATION POLICY The Tax Increment Financing Plan does not require any relocation at this time. The District does not contain any residential, commercial, or industrial uses that will require relocation or movement on individual sites. If in the future the District is expanded or modified to include additional area or relocation activities, the City Council shall adopt rules and regulations that are in compliance with the Uniform Relocation Act and any persons affected shall be treated according to those laws, rules and regulations. PROPERTY ACQUISITION AND DISPOSITION The Prior Lake EDA will transfer property to the developers to enable their development of a production facility. The property proposed for disposition includes the property described under the "Narrative Boundary Description of District No. 2-8- on page 2 of this Plan. METHOD OF FINANCE The City Council of the City of Prior Lake, Minnesota, elects to use Tax Increment Financing pursuant to Minnesota Statutes, Chapter 469, to finance all or part of the costs of the Project. By electing these methods of financing, the City Council is not precluding the use of other methods provided by State law. . NOTIFICATION OF PRIOR PLANNED IMPROVEMENTS Minnesota Statutes, Section 469.177, Subd. 4 requires that the request for certification of original tax capacity be accompanied by a listing of properties within the tax increment district for which building permits have been issued in the 18 months preceding approval of the tax increment financing plan. District No. 2-8 has had no building permits issued during this period. The parcel to be included within the District has yet to be split and recorded; it is estimated that upon a platting.and recording the most recent tax capacity for the parcel to be included will be 129. FINANCIAL PLAN ESTIMATE OF PUBUC COST The following is an estimate of public costs including cost of District indebtedness, source of revenue, most recent tax capacity, and estimate of captured tax capacity. 1. Activities. Activities within the Project area consist of property acquisition and site improve- ments. Costs which may be funded in Development District No.2 as a result of the formation of District No. 2-8 include: 6 -'t'"", ,:Ii!"", ","'f.-~ A. Property acquisition B. Administration C. Interest Expense SUBTOTAL $165,310 15,000 75.118 $255,428 l I I I I I I I I I 2. Source of Funds. A. Tax Increment Revenu'es B. City Contribution of Unrestricted Funds TOTAL 207,103 48,325 $255,428 SOURCES OF REVENUE The proposed sources of revenue to be used to finance public costs associated with the develop- ment projects in the District are developer payments and tax increment generated as a result of the taxation of the land and improvements in the District. Tax increment financing refers to a funding technique that utilizes increases in tax capacity and the property taxes attributed to new development to finance, or assist in the financing of public development costs. The improvements resulting from development of the property by private' business within the District is anticipated to generate an initial annual tax increment of 21,450 in 1999 through the year 2007. The District's tax increment will be generated from the construction of an approximate 12,000 SF production facility. The city may issue tax increment bonds or use the annual receipt of tax increment to reimburse eligible Project costs. FINANCING ASSUMPTIONS Tax increment will be used to finance activities in the Project area. The following information and assumptions were used to calculate financing costs for the activities in the Project area. 1. Table 1 on page 8 shows the calculations which were used to determine the amount of property taxes and tax increment resulting from the proposed development in District No. 2-8. 7 I I I . . ." ,", . ., . . I 2. Development activities are scheduled to begin in June, 1997, and shall be completed by December 31, 1997. 3. Financing of the Project activities will be undertaken in 1997. 4. The first tax increment in the estimated amount of $21,450 collected from the District will be in 1999 payable from the 1998 tax levy. ' 5. The 1997 local tax rate of 135.784% and 1997 tax values were used to calculate the estimate of increment in this plan. 6. Annual tax increments of $21,450 in 1999 through 2007 generated as a result of formation of this District will be one source of funds used to finance the Project area activities. A portion of developer financed costs for property acquisition will be repaid through increment revenues pursuant to terms and conditions delineated in a development agreement between the developer and the City. 7. Increment revenues will be used to finance only capital and administrative costs resulting from the Project activities. All tax increment generated by the formation of this District will be used to finance the activities of the Plan. The projected tax increment revenues will not be adequate to reimburse,the identified City costs. Full reimbursement will occur if additional increment revenues are generated within District No. 2-8 or through "pooling" of increment proceeds from other tax increment districts within Development District No.2. 8. The city will use tax increments of approximately $21,450 in 1999 through 2007. Additional increment revenues as a result of future expansions may be available for repayment to the City or - r developer to service Project costs. "Project Costs" means all expenditures of the city or reimburse- ment for the purchase of land or amounts paid to contractors or others providing materials and services, including architectural and engineering services, directly connected with the physical development of the real property in the District, including interest thereon. Project costs also include all administrative expenses as defined in Minnesota Statutes, Section 469.174, Subdivision 14. In order to estimate the amount of the increment assistance the City and developer will receive as a result of the approval of District No. 2-8 the estimated present value of the net tax increment has been calculated. The first increment would be available to the city in 1999 and would continue through 2007. f' r I 9. In the event that the proposed facility generates tax increment revenues in excess of the estimates necessary to finance reimbursement of City costs, the developer will be entitled to receive .pay-as- you-go" reimbursement for the initial land acquisition payments. The maximum amount of assistance will be limited to the initial cash payment made by the developer for land acquisition. t' I I TABLE 1: TAX INCREMENT CALCULATIONS Local Tax Rate = 135.784% (Prior Lake, Payable 1997) f- I ESTIMATED COMPLETION MARKET VALUE: $381,000 (assume completion prior to 12-31-97) CLASSIFICATION: INDUSTRIAL (1 ) Year Tax Payable (2) Estimated Captured Tax Capacity (3) Estimated Annual Increment I. 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 TOTAL o o 15.797 15,797 15,797 15,797 15,797 15,797 15,797 15,797 15,797 $ 0 o 21,450 21,450 21,450 21.450 21,450 21,450 21 ,450 21,450 21.450 $193,050 PRESENT VALUE DISCOUNTED AT 7<'-' $127,588 UMITATION ON USE OF TAX INCREMENT; GENERAL RULE '- Pursuant to Minnesota Statutes, Section 469.176, Subd. 4, "All revenues derived from tax increment shall be 'used in accordance with the tax increment financing plan. The revenues shall be used solely for the following purposes: (1) to pay the principal and interest on bonds issued to finance a project: (2) by a rural development financing authority for the purposes stated in Minnesota Statutes, Section 469.142, by a port authority or municipality exercising the powers of a port authority to finance or otherwise pay the cost of redevelopment pursuant to Minnesota Statutes, Sections 469.048 to 469.068, by an economic development authority to finance or otherwise pay the cost of redevelopment pursuant to Minnesota Statutes, Sections 469.090 to 469.108, by a housing and redevelopment authority or economic development authority to finance or otherwise pay public redevelopment costs pursuant to Minnesota Statutes, Sections 469.001 to 469.047, by a municipality or economic development authority to finance or otherwise pay the capital and administra- tion costs of a development district pursuant to Minnesota Statutes, Sections 469.124 to 469.134, by a municipality or authority to finance or otherwise pay the costs of developing and implementing a develop- 8 , ... ment action response plan, by a municipality or redevelopment agency to finance or otherwise pay premiums for insurance or other security guaranteeing the payment when due of principal of and interest on the bonds pursuant to Minnesota Statutes, Sections 462C, Sections 469.152 to 469.165, or both, or to accumulate and maintain a reserve securing the payment when due of the principal of and interest on the bonds pursuant to Chapters 462C, Sections 469.152 to 469.165, or both, which revenues in the reserve shall not exceed, subsequent to the fifth anniversary of the date of issue of the first bond issue secured by the reserve, an amount equal to 20 percent of the aggregate principal amount of the outstanding and nondefeased bonds secured by the reserve. EXCESS TAX INCREMENTS Pursuant to Minnesota Statutes, Section 469.176, Subd. 2, "(a) In any year in which the tax increment exceeds the amount necessary to pay the costs authorized by the tax increment financing plan, including the amount necessary to cancel any tax levy as provided in Section 475.61, Subd. 3, the authority shall use the excess amount to do any of the following: (1) prepay any outstanding bonds, (2) discharge the pledge of tax increment therefore, (3) pay into an escrow account dedicated to the payment of such bonds, or (4) return the excess amount to the county auditor who shall distribute the excess amount to the municipality, county and school district in which the tax increment financing district is located in direct proportion to their respective tax capacity tax extension rates. The county auditor must report to the commissioner of education the amount of any excess tax increment distributed to a school district within 30 days of the distribution. (b) The amounts distributed to a city or county must be deducted from the levy limits of the governmental unit for the following year. In calculating the levy limit base for later years, the amount deducted must be treated as a local government aid payment. DURATION OF TAX INCREMENT FINANCING DISTRICTS The city estimates that the District shall endure for as long as it is permitted to by law. If no new development activities were to occur, the city estimates that tax increments would be sufficient to pay all indebtedness initially undertaken and to pay all initial and administration costs of the District by 2007. UMITATION OF ADMINISTRATIVE EXPENSES Pursuant to Minnesota Statutes, Section 469.176, Subd. 3, .(a)....notax increment shall be used to pay any administrative expenses for a project which exceed ten percent of the total tax increment expenditures authorized by the tax increment financing plan or the total tax increment expenditures for the project, whichever is less.. ESTIMATED TOTAL CAPTURED TAX CAPACITY; RETENTION The city estimates that the District's total tax capacity at completion of the initial activities will be 15,926; the original tax capacity estimate is 129 and the estimated captured tax capacity will be 15,797 in 1999. Pursuant to Minnesota Statutes, Section 469.1n, Subd. 2, the authority may retain the full captured tax capacity to pay expenditures noted in the Plan or subsequent Plan modifications. TAX INCREMENT ACCOUNT Pursuant to Minnesota Statutes, Section 469.1 n, Subd. 5, "the tax increment received with respect to any district shall be segregated by the authority in a special account or accounts on its official books and records or as otherwise established by resolution of the authority to be held by a trustee for the benefit of holders of the bonds.. ANNUAL DISCLOSURE AND FINANCIAL REPORTING Minnesota Statutes, Section 469.175, Subd. 5, requires .For all tax increment financing districts, whether created prior or subsequent to August 1, 1979, on or before July 1 of each year, the authority shall submit to the county board, the school board, the commissioner of revenue and, if the authority Is other than the municipality, the governing body of the municipality a report of the status of the district. The report shall 9 II ., . I . I I . I I I I - - - II II - ~ f' I I , the municipality. the governing body of the municipality a report of the status of the district. The report shall include the following information: the amount and the source of revenue in the account, the amount and purpose of expenditures from the account, the amount of any pledge of revenues, including principal and interest on any outstanding bonded indebtedness. the original tax capacity of the district. the captured tax capacity retained by the authority, the captured tax capacity shared with other taxing districts, the tax increment received, and any additional information necessary to demonstrate compliance with any applicable tax increment financing plan. An annual statement showing the tax increment received and expended in that year, the original tax capacity, captured tax capacity, amount of outstanding bonded indebtedness, and any additional information the authority d_eems necessary shall be published in a newspaper of general circulation in the municipality." I I I I I I ~ Minnesota Statutes, Section 469.175, Subd. 6, requires: I I I "(a) The state auditor shall develop a uniform system of accounting and financial reporting for tax increment financing districts. The system of accounting and financial reporting shall, as nearly as possible: (1) provide for full disclosure of the sources and uses of public funds in the district; (2) permit comparison and reconciliation with the affected local government's accounts and financial reports; (3) permit auditing of the funds expended on behalf of a district, including a single district that is part of a multidistrict project or that is funded in part of whole through the use of a development account funded with tax increments from other districts or with other public money; (4) be consistent with generally accepted accounting principles. (b) The authority must annually submit to the state auditor, on or before July 1, a financial report in compliance with paragraph (a). Copies of the report must also be provided to the county and school district boards and to the governing body of the municipality, if the authority is not the municipality. To the extent necessary to permit compliance with the requirement of financial reporting, the county and any other appropriate local government unit or private entity must provide the necessary records or information to the authority or the state auditor as provided by the system of accounting and financial reporting developed pursuant to paragraph (a). (c) The annual financial report must also include the following items: (1) the original tax capacity of the district; (2) the captured tax capacity of the district, including the amount of any captured tax capacity shared with other taxing districts; (3) the outstanding principal amount of bonds issued or other loans incurred to finance project costs in the district; (4) for the reporting period and for the duration of the district, the amount budgeted under the tax increment financing plan, and the actual amount expended for, at least, the following categories: (i) acquisition of land and buildings through condemnation or purchase; (ii) site improvements or preparation costs; (iv) installation of public utilities or other public improvements; (iii) administrative costs, including the allocated cost of the authority; (5) for properties sold to developers, the total cost of the property to the authority and the price paid by the developer; (6) the amount of tax exempt obligations, other than those reported under clause (3), that were issued on behalf of private entities for facilities located in the district. (d) The reporting requirements imposed by this subdivision are in lieu of the annual disclosure required by subdivision 5.. I I I I I I 10 IMPACT OF THE USE OF TAX INCREMENT OF TAXING JURISDICTIONS fl J J I "' .1 Minnesota Statutes, Section 489.175, Subd. 1 (6), requires "statements 01 the authority's alternate estimates 01 the impact of tax increment financing on the tax capacity of all taxing jurisdictions in which the tax increment financing district is located in whole or in part. For purposes of one statement, the authority shall assume that the' estimated captured tax capacity would be available to the taxing jurisdictions without creation 01 the district, and for purposes of the second statement, the authority shall assume that none of the estimated captured tax capacity would-be available to the taxing jurisdictions without creation of the district;" Table 2 on page 12 depicts the impact of tax increment financing on the tax capacity of the affected taxing jurisdictions assuming (1) none of the increment would be available, and (2) the increment would be available to the tax jurisdictions. I J ~I :11 J ~I ,11 ,I . J] .1 . 11 J -------------...,..-- -_._------~ - - - - - - - .. - IiIiI1 - - - - - - - - - ESTIMA"rn OF FISCAL AND ECONOMIC IMPLICATIONS OF PROPOSED TAX INCREMENTDISTRICrNO. 2-8 PRIOR LAKE, MN Project Description: 12.000sF production facility in Waterfrontl'assage Business Park. The following is an estimate of the fiscal and economic impact of the proposed project. Type of Tax Increment District: Economic Development Maximum Length of District: 9 years from the date of receipt of the first tax increment or December 31, 2007 Value of Project Upon Completion: $381,000 (estimated) Estimated School's School's Loss of Counly's County's Loss City's City's Loss of Estimated Annual Share of Properly Taxes Share of Property Taxes Share of Property Taxes Property Taxes Tax Increment Property Taxes Due to 'I'll' Property Taxes Due to TIF Properly Taxes Due to TIF 1997 S 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 1998 0 0 0 0 0 0 0 0 1999-2024 21,625 21,450 9,473 9,396 6,551 6,498 5,184 5,142 TOTAL $194,625 $193,050 $85,257 $84,564 $58,959 $58,479 $46,658 $46,280 Assumptions: 1. The 1997 local tax rates of 41.132% (county), 32.552% (city), 59.482% (school dislrict) and 135.784% (total) arc used to estimate the increment. 2. The district is intended to cease on December 31, 2007. 3. For purposes of preparing this estimate local tax rates remain constant regardless if the district is or is not created. The above information represents an estimate of tax revenue each jurisdiction could expcctto receive if the development occurred without tax increment assistance. However, it has been determine that this project will not proceed unless il receives its anticipated funding packagc part of which is lax incrcmcnt assistance. -ll..~__m_ .. ------~----_.. . DEVELOPMENT CONTRACT BY AND BETWEEN THE CITY OF PRIOR LAKE AND STAN ANDERSON APRIL. 1997 TABLE OF CONTENTS ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 1.1. PURPOSE............................................................... 2 SECTION 1.2. INCORPORATION OF RECITALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 1.3. DEFINmONS ............................................................ 2 ARTICLE II REPRESENTATIONS AND WARRANTIES........................................ 4 SECTION 2.1. REPRESENTATIONS AND WARRANTIES OF mE CITY ........................ 4 SECTION 2.2. REPRESENTATIONS AND WARRANTIES OF TIffi DEVELOPER ................. 5 ARTICLE ill UNDERTAKINGS BY DEVELOPER AND CITY ...... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 3.1. COST ESTIMATE RElATING TO ACQUISmON OF mE DEVELOPMENT PROPERTY, INFRASTRUCIURE, SITE IMPROVEMENTS AND SOIL CORRECTION . . . . . . . . . . . . . 7 SECTION 3.2. ASSESSMEN!" AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 3.3. REIMBURSEMENT: DEVELOPER PAYMENTS AND TAX INCREMENT REVENUES. 7 SECTION 3.5. GUARANTEE OF PAYMENTS .............................................. 8 SECTION 3.6. TAXES AND SPECIAL ASSESSMENTS ........................................ 8 SECTION 3.7. EXCESS TAX INCREMENT REVENUES ...................................... 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 IMPUED W AlVER .................................................... 10 SECTION 4.5. CONTRACT TO PAY ATTORNEY'S FEES AND EXPENSES ...................... 10 SECTION 4.6. INDEMNIFICATION OF CITY ......................... . . . . . . . . . . . . . , . . . . . . . . 10 ARTICLE V INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 5.1. INSURANCE ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE VI ADDmONAL PROVISIONS .................................................. 13 SECTION 6.1. RESTRICTIONS ON USE .................................................. 13 SECTION 6.2. 1TI1..ES OF ARTICLES AND SECTIONS ...................................... 13 SECTION 6.3. NOTICES AND DEMANDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 6.4. COUNlERPARTS ........................................................ 13 SECTION 6.5. lAW GOVERNING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 6.6. SEVERABll.lTY .......................................................... 13 SECTION 6.7. PROMPT PAYMENT OF SUBCONTRACTORS.................................. 13 ARTICLE VII DEVELOPER'S OPTION TO lERMINATE CONTRACT ........................... 15 SECTION 7.1. THE DEVELOPER'S OPTION TO TERMINATE ................... .'............ 15 SECTION 7.2. ACTION TO lERMINATE ................................................. 15 SECTION 7.3. EFFECT OF lERMINATION ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 7.4. LIMITATION OF DAMAGES ....................................... . . . . . . . . . 15 EXHIBIT A DESCRIYTION OF DEVELOPMENT DISTRICT .................................... A-I EXHIBIT B DESCRIPTION OF DEVELOPMENT PROPERTY ............................ . . . . . . . B-1 EX:HIBIT C ASSESSMEN!" AGREEMENT ................................................... C-l DEVELOPMENT CONTRACT THIS CONTRACT, made as of the _ day of , 1997, by and between the City of Prior Lake, Minnesota (the "City"), a Minnesota municipal corporation and Stan Anderson, an individual, his personal representatives, successors and assigns, (the "Developer"), WITNESSETH: WHEREAS, pursuant to Minnesota Statutes, Section 469.124 through 469.134 the City has formed City Development District No.2 (the "Development District") the legal description of which is attached hereto as Exhibit A and has adopted a development program therefore (the "Development Program"); and WHEREAS, pursuant to the provisions of Minnesota Statutes, Section 469.174 through 469.179 as amended, (hereinafter the ''Tax Increment Act"), the City will create, within the Development District, an Economic Development District No. 2-8 (the ''Tax Increment District"), the legal description of which is attached hereto as Exhibit B and will adopt a tax increment financing plan April 7, 1997, therefore (the ''Tax Increment Plan") which provides for the use of tax increment financing in connection with development within the Development District; and WHEREAS, the City will request the County to certify the original tax capacity of the Tax Increment District pursuant to Section 469.177 of the Tax Increment Act; and WHEREAS, the City has previously acquired and improved property in the Waterfront Passage Business Park a portion of which will be utilized by the Developer for an industrial expansion, and the Developer has agreed to reimburse City costs through the generation and guarantee of Tax Increment revenues, pursuant to the terms and conditions contained in this Contract; 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 the Development Property as defined in this Contract; and WHEREAS, the City believes that the development of a certain Project (as defined herein) and the construction of the Project, and fulfillment of this Contract are vital and are in the best interests of the City will result in increased employment and preservation/enhancement of the tax base and is 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. 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: ARTICLE I PURPOSE AND DEFINITIONS Section 1.1. Purpose. The City has previously incurred costs for acquisition of and improvements to the Development Property. The City has previously transferred the Development Property to the Prior Lake Economic Development Authority. The Developer will acquire the Development Property from the Prior Lake Economic Development Authority. The reimbursement of City costs and Developer costs via Tax Increment Financing will be governed by the terms and conditions set forth in this Contract. Section 1.2. Incorporation of Recitals. The recitals set forth previously are incorporated herein as if fully set forth. Section 1.3. Definitions. All capitalized terms used and not otherwise defined herein shall have the following meanings. unless a different meaning clearly appears from the context: Business Day means any day except a Saturday, Sunday or a legal holiday or a day on which banking institutions in the City are authorized by law or executive order to close; Certificate of Completion means the certification in the form of the certificate attached hereto as Exhibit E and hereby made a part of this Contract, provided to the Developer pursuant to Section 4.2 of this Contract; City means the City of Prior Lake, Minnesota; Contract means this Contract, as the same may be from time to time modified, amended or supplement- ed; County means Scott County, Minnesota; Developer means Stan Anderson, individually; Development District means the real property described in Exhibit A; Develooment Prolrram means the development program approved in connection with the Development District; Excess Tax Increment Revenues means annual Tax Increment Revenues generated from the Project in excess of the estimated revenues anticipated from the initial Project to be constructed by the Developer. Infrastructure means the municipal utilities, roadways, grading and excavation improvements specified, bid and contracted for by the City of Prior Lake within the Waterfront Passage Business Park. Develol'ment Property means the real property described in Exhibit B of this Contract; Leeal and Administrative Expenses means the fees and expenses incurred in connection with the adoption of the Tax Increment Financing Plan, the preparation of this Development Contract, and the issuance of the Tax Increment Note; 2 Event of Default means any of the events described in Section 4.1; Payment Date means July 15, 1998, and each December 15 and July 15 of each year thereafter to and including December 15,2006; provided, that if any such Payment Date should not be a Business Day, the Payment Date shall be the next succeeding Business Day; Plan Booklet means "Tax Increment Financing District No. 2-8, Prior Lake, Minnesota, April 7, 1997". Proiect means the approximate 12,000 square foot production/warehouse facility and any future expansions of said facility to be located on the Development Property; Site Improvements means excavation, grading, filling, utility improvements and extensions, landscaping and access and parking preparations; State means the State of Minnesota; Tax Increments means the tax increments derived from the Tax Increment District created in accordance with the provisions of Minnesota Statutes, Section 469.177; Tax Increment Act means the Tax Increment Financing Act, Minnesota Statutes, Sections 469.174 through 469.179, as amended; Tax Increment District means Economic Development District No. 2-8 to be established on April 7, 1997 on property legally described in Exhibit B to be qualified as an economic development district under the Tax Increment Act; Tax Increment Financing Plan means the plan approved for the Tax Increment District; Unavoidable Delays means delays, outside the control of the party claiming its occurrence, which are the direct result of strikes, other labor troubles, construction material shortages relating to building frame or envelope, unusually severe or prolonged bad weather, acts of God, fire or other casualty to the Project and/or Site Improvements, site conditions including the existence of environmental problems, 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 which directly result in delays. 3 ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.1. Representations and Warranties ofthe City. The City makes the following representations and warranties: (1) The City is a municipal corporation and has the power to enter into this Contract and carry out its obligations hereunder. (2) The Tax Increment District shall be an "economic development district" within the meaning of Minnesota Statutes, Section 469.174, Subdivision 12 and will be created, adopted and approved in accordance with the terms of the Tax Increment Act. (3) The development contemplated by this Contract is in conformance with the development objectives set forth in the Development Program. (4) The City has previously acquired and improved the Development Property which will be utilized by the Developer in accordance with the Plan and this Contract. (5) The City is not a party to any unrecorded contract or agreement affecting the Development Property that will be binding on the Developer or that will prevent the Developer from completing, owning and operating the Minimum Improvements as required by this Contract (6) There are no claims, actions, suits or other proceedings outstanding to which the City is a party, resolution of which could have a materially adverse effect on the Development Property, the Minimum Improvements, or the transactions contemplated by this Contract. (7) The City has not incurred any obligation or liability (contingent to otherwise) for brokerage or finder's fee or agent's commissions or other like payment in connection with this Contract or the transaction contemplated herein. (8) To finance the costs of the activities to be undertaken by the City and Developer, the City proposes, subject to the further provisions of this Contract, to apply Tax Increment generated by the Tax Increment District and other revenues identified within this Contract, to reimburse public and private costs incurred in the acquisition of the Development Property and the construction ofInfrastructure and Site Improvements in the Development District as further provided in this Contract. (9) The City has not received any notice from any local, state or federal official that the activities of the Developer or the City or third parties with respect to the Development Property or any immediately adjacent property mayor will be in violation of any environmental law or regulation (other than those notices, if any, of which the Developer has been notified). The City is not aware of any state or federal claim filed or planned to be filed by any party relating to any violation of any local, state or federal environmental law, regulation or review procedure, with respect to such property and the City is not aware of any violation of any local, state or federal law, regulation or review procedure which would give rise to a valid claim under the Minnesota Environmental Rights Act or other state or federal environmental statute. (10) The City shall make findings required by Section 469.175, Subdivision 3, of the Tax Increment Financing Act for the Tax Increment District, and set forth in writing the reasons and supporting facts for each determination. 4 (11) The City will not unreasonably delay, withhold, or condition any consent or action requested of it by the Developer or otherwise contemplated by this Contract provided such consent or requested action complies with all applicable local, state or federal laws or regulations or this Contract. Section 2.2. Representations and Warranties of the Developer. The Developer makes the following representations and warranties: (1) The Developer has power to enter into this Contract and to perform its obligations hereunder and is not in violation of any local, state or federal laws. (2) The Developer is an individual and has full power and authority to enter into this Contract and carry out the covenants contained herein. (3) The Developer will cause the Project to be installed in accordance with the terms of this Contract, 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). (4) Subject to Unavoidable Delays, the Developer will obtain or cause to be obtained, in a timely manner, all required permits, licenses and approvals, and will meet, in a timely manner, all requirements of all applicable local, state, and federal laws and regulations which must be obtained or met before the Project may be lawfully installed. Notwithstanding the preceding sentence, this Contract will be null and void if the Developer fails to obtain a building permit within ninety (90) days following execution of this Contract. (5) To the best of the Developer's knowledge after reasonable investigation, the Developer has not received any notice or communication from any local, state or federal official that the activities of Developer or the City with respect to the Development Property mayor will be in violation of any environmental law or regulation. As of the date of the execution of this Contract, Developer is aware of no facts the existence of which would cause it to be in violation of any local, state or federal environmental law, regulation or review procedure which would give any person a valid claim under the Minnesota Environmental Rights Act. (6) 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 Contract. (7) To the best of the Developer's knowledge after reasonable investigation, neither the execution and delivery of this Contract, the consummation of the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Contract is prevented, limited by or conflicts with or results in a breach of, the terms, conditions or provision of any contractual restriction, evidence of indebtedness, agreement or instrument of whatever nature to which the Developer is now a party or by which it is bound, or constitutes a default under any of the foregoing. (8) The Developer will cooperate fully with the City with respect to any litigation commenced with respect to the Project provided, however, that any such litigation settled by the City which would require ,payment by the Developer would require that the City obtain the prior written consent of the Developer. (9) The Developer personally guarantees and agrees to pay the total amount of any costs, charges, . expenses and attorneys fees reasonably incurred or paid at any time by City because of any Event of Default by Developer as to any stipulation, agreement, and covenant of this Contract. (10) The Developer will cooperate fully with the CitY in resolution of any traffic, parking, trash removal 5 ._--, - or public safety problems which may arise in connection with the construction and operation of the Project. (11) Barring Unavoidable Delays, the Project will be completed by December 31, 1997 such that the City will issue a Certificate of Completion on or before that date. The City has no knowledge of anything which would prevent the Project from being completed by December 31, 1997, subject to Unavoidable Delays, including within its knowledge, an estimate of the reasonable time for review of the Project by the City and its agencies and commissions. 6 ARTICLE III UNDERTAKINGS BY DEVELOPER AND CITY Section 3.1. Cost Estimate Relating to Acquisition of the Development Property. Administration. Infrastructure. Site Improvements. The parties agree that the Infrastructure and Site Improvements previously undertaken or to be constructed by the City and Developer are essential to the successful completion of the Project. The costs of the acquisition of the Development Property, Administration, Infrastructure and Site Improvements, which shall include engineering and all other costs directly related to the making of the Site Improvements, together with the Legal and Administrative expenses, and interest expense, are estimated as follows: Land Acquisition, Site Improvements and Infrastructure (1.65 acres) Administrative, Interest Expense and Legal Expenses TOTAL $165,310 75.118 $255,428 Sources of reimbursement to the City for the identified Project costs are as follows: City Contribution (Unrestricted Funds) TIF Revenues TOTAL 48,325 207.103 $255,421 (1) In regard to the Development Property, the Developer will furnish soil borings, analysis and soil density tests as necessary, all in accordance \\-ith ASTM specifications and usual and accepted geotechnical engineering practice, and an opinion from a Professional Engineer, registered in Minnesota, that the building pad has been properly prepared and is capable of supporting the foundation for the proposed 12,000 SF facility. In the event that the structural Soil Correction and Site Improvement cost for the Development Property exceed $25,000 based upon good faith estimates the Developer shall have seven (7) days to terminate this Contract without any further obligation by either party and Developer shall be entitled to a refund of all monies previously paid to the City relative to this transaction. (2) The City will utilize Tax Increment Financing revenues generated from the Project along with contributions of unrestricted funds to finance $255,428 in Land Acquisition, Administration, and Infrastructure costs. Section 3.2. Assessment Agreement. The parties covenant that, effective January 2,1998, the Develop- ment Property shall have a.minimum market value of $381,000 for purposes of determining tax capacity. Developer explicitly waives and will not challenge any market valuation of the Development Property determined by the Scott County Assessor for taxes assessed on or after January 2, 1998 to the extent that such valuation is at or below $381,000. Should the Scott County Assessor for any year up .to and including 2007, establish a market value for taxes payable in such year in excess of $381,000, the Developer may challenge at the Board of Equalization or by filing a tax petition or by such other method as permitted by law, the valuation as determined by the Assessor but only to the extent that the value exceeds $381,000. Section 3.3. Reimbursement: Developer Payments and Tax Increment Revenues. (1) The City shall receive reimbursement for Acquisition, Administration, Infrastructure and Site Improvements made on behalf 7 of the Developer under Section 3.1 through the receipt of tax increment revenues generated from Tax Increment Financing District No. 2-8. Following is a schedule of anticipated Developer payments and tax increment payments to be made available for reimbursement of City costs: Schedule of Pavment July 15, 1998 - $10,725 December 15, 1998 - $10,725 July 15, 1999 - $10,725 December 15, 1999 - $10,725 July 15,2000 - $10,725 December 15, 2000 - $10,725 July 15,2001 - $10,725 December 15, 2001 - $10,725 July 15, 2002 - $10,725 December 15, 2002 - $10,725 July 15, 2003 - $10,725 December 15,2003 - $10,725 July 15, 2004 - $10,725 December 15, 2004 - $10,725 July 15, 2005 - $10,725 December 15, 2005 - $10,725 July 15, 2006 - $10,725 December 15,2006 - $10,725 Section 3.4. Guarantee ofPavments. In the event that the tax increment revenues are less than $10,725 for any of the specific payment dates commencing July 15, 1999 through December 15,2007 pursuant to the schedule within Section 3.6, the Developer will remit the amount of the shortfall to the City on or before each of these dates. Except that Developer shall not be liable to the City for any shortfall in the tax increment revenues resulting from actions taken by the City or failure of the City to take any action which results in a reduction in the tax increment revenues, unless such actions by the City involve enforcement of regulatory standards or requirements necessary to maintain the health, safety or welfare of the community and/or its residents. Section 3.5. Taxes and Special Assessments. Real estate taxes due and payable prior and in the year of closing shall be paid by the City. Real estate taxes due and payable in the years subsequent to the closing shall be paid by the Developer. On or prior to the Date of Closing, City shall pay all special assessments, whether or not then due, then levied against the Development Property or pending for improvements with respect to which, as of the Date of Closing, the letting of contracts has been duly authorized by appropriate governmental action. Section 3.6. Excess Tax Increment Revenues. As an inducement to the Developer, the City agrees to share on a 1:1 pro rata basis, annual tax increment revenues in excess of $18,923; these revenues shall be defined as Excess Tax Increment Revenues. The Excess Tax Increment Revenues shall be made available to the Developer for reimbursement of any initial payments made for land acquisition. Payment of these Excess Tax Increment Revenues shall be net of any penalties or loss of local government aid incurred by the City in relation to the collection of the proceeds. The maximum amount remitted to the Developer is limited to the initial land acquisition cost and a 9% interest factor. 8 ARTICLE IV EVE~"'TS OF DEFAULT Section 4.1. Events of Default Defined. The following shall be "Events of Default" under this Contract and the term "Event of Defaultlt shall mean whenever it is used in this Contract anyone or more of the following events: (1) Failure by the Developer to timely pay any ad valorem real property taxes assessed with respect to the Development Property. (2) Failure by the Developer to cause the installation of the Project to be completed by December 31, 1997, pursuant to the terms, conditions and limitations of this Contract. (3) The holder of any mortgage on the Development Property or any improvements thereon, or any portion thereof, comme.nces foreclosure proceedings as a result of any default under the applicable mortgage documents. (4) Failure by the Developer to substantially obselVe or perform any other covenant, condition, obligation or agreement on its part to be observed or performed under this Contract. (5) If the Developer shall: (A) file any petition in bankruptcy or for any reorganization, arrangement, composition, readjust- ment, 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 of 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 adjucation 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 ninety (90) days after the filing thereof; or a receiver, trustee or liquidator of the Developer, or of the Project, or part thereof, shall be appointed in any proceeding brought against the Developer, and shall not be discharged within ninety (90) 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 anyone or more of the following actions after the giving of thirty (30) days' written notice to the Developer, but only if the Event of Default has not been , cured within said thirty (30) days. The City shall not be required to elect in the notice required herein the remedy it will pursue. (1) The City may suspend its performance under this Contract until it receives assurances from the Developer, deemed adequate by the City, that the Developer will cure its default and continue its performance under this Contract. . (2) The City may cancel and terminate this Contract, except that no cancellation may be effective at any time that the Developer is proceeding in good faith to cure the defect and/or reasonable assurances to the City as required in (1) above, or if there exists a good faith dispute with the City, mortgagee or creditor 9 ~.~-,~ as to an event of default as defined above, and the Developer posts an irrevocable letter of credit in a form satisfactory to the City Attorney in an amount reasonably adequate to cure the alleged default. (3) The City may take any action, including legal or administrative action, which may appear necessary or desirable to enforce performance and observance of any obligation, agreement, or covenant of the Developer under this Contract. 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 Contract 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 Contract 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 Oi subsequent breach hereunder. Section 4.5. Contract to Pay Attorney's Fees and E"'\penses. (1) Whenever any Event of Default occurs and the City shall incur attorney's fees or incur other expenses for the collection of payments due or to become due or for the enforcement of performance or observance of any obligation or agreement on the part of the Developer herein contained, the Developer agrees that it shall, on demand therefor, pay to the City the reasonable fees of such attorneys and such other expenses so incurred by the City. Section 4.6. Indemnification of City. (1) The Developer, its successors and assigns, its agents, employees and/or contractors of the Project 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 arising out of the design, construction, maintenance, or use by Developer, its successors, assigns, his agents, employees, or contractors of the Project, provided that the foregoing indemnification shall not be effective for any actions of the Indemnified Parties that are not contemplated by this Contract. (2) Except for any willful misrepresentation or any willful or wanton misconduct of the Indemnified Parties, the Developer agrees to protect and defend the Indemnified Parties, now and forever, and further agrees to hold the aforesaid harmless from any claim, demand, suit, action or other proceeding whatsoever by any person or entity whatsoever arising or purportedly arising from the actions or inactions of the Developer (or if other persons acting on its behalf or under its direction or control) under this Contract, 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 ordinary negligence of the City to the extent that the Developer is not insured for the event at issue (but provided further that the City's liability in such event shall not exceed the limitations under Minnesota Statute Chapter 466) nor to the warranties made or obligations undertaken by the City in this Contract or to any actions undertaken by the City which are not contemplated by this Contract and 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 10 causing the Tax Increment District to not qualify or cease to qualify as a "economic development" under Section 469.174, Subdivision 12. (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. 11 ARTICLE V INSURANCE Section 5.1. Insurance. The Developer will provide and maintain or cause to be maintained at all times during the process of constructing the Project (and, from time to time at the request of the City, furnish the City with proof of payment of premiums on): . (1) Builder's risk insurance, written on the so-called "Builder's Risk -- Completed Value Basis", in an amount equal to one hundred percent (100%) of the insurable value of the Project at the date of completion, and with coverage available in nonreporting form on the so-called "all risk" form of the policy; the interest of the City shall be protected in accordance with a clause in form and content satisfactory to the City; (2) Worker's compensation insurance, with statutory coverage for all persons engaged in the construction of the Project; (3) Comprehensive general liability insurance (including operations, contingent liability, operations of subcontractors, completed operations and contractual liability insurance) together with an Owner's Contractor's Policy with limits against bodily injury and property damage of not less that $1,000,000 for each occurrence (to accomplish the above-required limits, an umbrella excess liability policy may be used); (4) The City shall be named as an additional insured party on the insurance policies set out in the preceding paragraph; and (5) Within ten (10) days of the execution of this Contract and prior to the initiation of construction activities the Developer must provide the City with proof of insurance. 12 ARTICLE VI ADDITIONAL PROVISIONS Section 6.1. Restrictions on Use. The Developer agrees for itself that it shall devote the Development Property to, and in accordance with, the uses specified in this Contract. The Developer shall not assign, transfer or convey the Contract without the prior written consent of the City except Developer may lease the Development Property to tenants which shall operate in conformance with all applicable City ordinances. Section 6.2. Titles of Articles and Sections. Any titles of the several parts, articles and sections of the Contract are inserted for convenience of reference only and shall be disregarded in construing or interpreting any of its provisions. . ' Section 6.3. Notices and Demands. Except as otherwise expressly provided in this Contract, a notice, demand or other communication under this Contract 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 (1) in the case of the Developer is addressed to or delivered personally to: Stan Anderson 2500 W. Co. Rd. 42. Bumsville, MN 55337 (2) in the case of the City is addressed to or delivered personally to: City Manager City of Prior Lake 16200 Eagle Creek Ave. S.E. Prior Lake, Minnesota 55372 with a copy to: Advance Resources for Development, Inc. PO Box 3027 Mankato, MN 56002-3027 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 6.4. Counterparts. This Contract may be executed in any number of counterparts, each of which shall constitute one and the same instrument. , Section 6.5. Law Governing. This Contract will be governed and construed in accordance with the laws of the State of Minnesota. Section 6.6. Severability. To the extent any portion of this Contract is held unenforceable by a court of com~tent jurisdiction, the remaining provisions of this Contract shall remain effective; as if, the unenforceable provision had never been included herein. Section 6.7. Prompt Payment of Subcontractors. The Developer and/or Contractor hired by the Developer shall insert the following language in any contract relating to the Project: The Contractor shall 13 ---- - ..., pay any subcontractor within ten (10) days of the Contractor's receipt of payment by the City for undisputed services provided by the subcontractor. If the Contractor fails within that time to pay the subcontractor any undisputed amount for which the Contractor has received payment by the City, the Contractor shall pay interest to the subcontractor on the unpaid amount at the rate of 1 1-/2 percent per month or any part of a month. The minimum monthly interest penalty payment for an unpaid balance of $100 or more is $10. For an unpaid balance of less that $100, the Contractor shall pay the actual interest penalty due to the subcontractor. A subcontractor who prevails in a civil action to collect interest penalties from the Contractor shall be awarded its costs and disbursements, including attorney's fees, incurred in bringing the action. 14 ARTICLE VII DEVELOPER'S OPTION TO TERMINATE CONTRACT Section 7.1. The Developer's Option to Terminate. This Contract may be terminated by Developer, if (i) the Developer is in compliance with all material terms of this Contract and no Event of Default has occurred; and (ii) the City fails to comply with any material term of this Contract, 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 7.2. Action to Terminate. Termination of this Contract pursuant to Section 7.1 must be ac- complished 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 Contract within such period constitutes a waiver by the Developer of its rights to terminate this Contract due to such occurrence or event. Section 7.3. Effect of Termination. If this Contract is terminated pursuant to this Article VII, this Contract shall be from such date forward null and void and of no further effect; provided, however, the termination of this Contract 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 Contract 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 Contract pursuant to this Article VII, the Developer shall be free to proceed with the Project at its own expense and without regard to the provisions of this Contract; provided, however, that if the City financed improvements on behalf of the Developer, the Developer is obligated to reimburse the City for the expenses as set forth in Section 3.5. Section 7.4. Limitation of Damages. By May 31,1997, if the Developer in his sole discretion is unable to secure adequate financing, acceptable construction bids, satisfactory appraisal report, satisfactory Phase I environmental assessment or the parties to this Contract are unable to reach mutual agreement on construction and related terms and conditions as set forth within the City's design standards and covenants for the Waterfront Passage Business Park, then the Developer shall have the option to terminate this Contract by sending the City written notice on or before June 15, 1997. Upon termination,in accordance with this Section, the Developer agrees to execute and deliver to the City such documentation as the City shall deem necessary to effectively cancel this Contract. 15 IN WITNESS WHEREOF, the City has caused this Contract 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 Contract to be duly executed in its name and on its behalf, on or as of the date first above written. DEVELOPER THE CITY OF PRIOR LAKE By Its Stan Anderson By Its This Contract was drafted by: Advance Resources for Development, Inc. P. O. Box 3027, Mankato, MN 56002-3027 This is a signature page to the Development Contract dated as of and between the City of Prior Lake and Stan Anderson. , 1997, by 16 STATE OF MINNESOTA ) ): ss COUNfY OF SCOIT ) The foregoing instrument was acknowledged before me this _ day of , 1997, by Lydia Andren and Frank Boyles the Mayor and the City Manager, respectively, of the City of Prior Lake, Minnesota, a municipal corporation. Notary Public STATE OF MINNESOTA ) ): ss COUNfY OF SCOIT ) The foregoing instrument was acknowledged before me this _ day of 1997, by Stan Anderson. Notary Public 17 ---~ iJj'lII. EXHIBIT A Legal Description of Development District No.2 All of the Southeast Quarter of Section 1, Township 114, Range 22, Scott County, Minnesota. And that part of the East 1/4 of the Southwest Quarter, Section 1, Township 114, Range 22, Scott County, Minnesota, lying northerly of the northerly right-of-way of Eagle Creek Avenue (County Road 21). The west line of said East 1/4 shall be parallel with the east line of said Southwest Quarter. Waterfront Passage Addition, Cottonwood Condominium CIC No. 1026 and that part of the Southwest Quarter, Section 1, ToWnship 114, Range 22, Scott County, Minnesota, lying southerly of the Northerly right-of-way of Eagle Creek Avenue (County Road 21) and southeasterly of the southeasterly right-of-way line of Franklin Trail (County Road 39) except for that part of BORGERDING SECOND ADDITION, according to the recorded plat thereof, lying within said Southwest Quarter. AND Block 1, Lot 3 and Outlot A, Langhorst First Addition; Block 1, Lot 1, Cates Addition; the southerly one-half of Lot 2, Block 14, Prior Lake; and, Section la, Township 114, Range 22, 3.62 acres in Government Lot 5 lying north and west of Highway 13. A-I EXHIBIT B Economic Development District No. 2-8 and Legal Description of Development Property That part of Block 2, WATERFRONT PASSAGE ADDITION, Scott County, Minnesota described as follows: An exact legal description will be provided upon completion of a survey for the property. In the interim, the property is described as an approximate 1.65 acre parcel situated in Block 2 of Waterfront Passage Business Park situated adjacent and immediately north of Lot 2, Block 2 (Keyland Homes) parcel and immediately east of Fish Point Road. Containing 1.65 acres. B-1 EXHIBIT C ASSESSMEt..rr AGREEMENT THIS AGREEMENT, dated as of this _ day of , 1997, by and BETWEEN the City of Prior Lake, a statutory City under the laws of the State of Minnesota (the "City"), Stan Anderson, an individual ("Developer"), and the Assessor for Scott County (the "Assessor"): WITNESSETH WHEREAS, on or before the date hereof the City and Developer have entered into a Development Contract dated as of , 1997 (the "Contract"), regarding certain real property located in the City (the "Development Property") which property is legally described on Exhibit A attached hereto and hereby made a part hereof; WHEREAS, it is contemplated that pursuant to the Contract, the Developer will undertake the development of a 12,000 sq. ft. production/warehouse facility and related improvements (the "Project") on the Development Property; Whereas, the City and Developer desire to establish a minimum market value for the portion of the Development Property and the improvements constructed or to be constructed thereon, pursuant to Minnesota Statutes, Section 469.177, Subdivision 8; WHEREAS, the Developer has acquired the Development Property; and Whereas, the City and the Assessor have reviewed plans and specifications for the Project: NOW, THEREFORE, the parties to this Agreement, in consideration of the promises, covenants and agreements made by each to the other, do hereby agree as follows: 1. As of January 2, 1998 and thereafter until December 31, 2007, the minimum market value which shall be assessed for the Project shall be not less than $381,000. 2. The minimum market value herein established shall be of no further force and effect and this Contract shall terminate on December 31, 2007. 3. This Agreement shall be promptly recorded by the Developer along with a copy of Minnesota Statutes, Section 469.177, Subdivision 8, attached as Exhibit B and hereby made a part hereof, with the County Recorder of Scott County, Minnesota. The Developer shall pay all costs of recording. 4. The Assessor represents that he has reviewed the plans and specifications for the improvements and the market value previously assigned to the land upon which the improvements are to be constructed, and that the "minimum market value" as set forth above is reasonable. 5. Neither the preamble nor provisions of this Agreement are intended to modify, or shall they be construed as modifying, the terms of the Contract between the City and the Developer. 6. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the parties, or any future owners of the Development Property. 7. Nothing herein shall limit the discretion of the Assessor or any other public official or body having the duty to determine the market value of the Development Property for ad valorem tax purposes to C-l assign to the Development Property a market value in excess of the minimum market value specified in this Agreement. IN WITNESS WHEREOF, the City, the Developer and the Assessor have caused this Contract to be executed in their names and on their behalf all as of the date set forth above. THE CITY OF PRIOR LAKE, MINNESOTA (SEAL)BY: Lydia Andren, Mayor BY: Frank Boyles, City Manager Signature page for Assessment Agreement by and among the City of Prior Lake, Minnesota, Stan Anderson and the Assessor for Scott County. C-2 DEVELOPER BY Stan Anderson Signature page for Assessment Agreement by and among the City of Prior Lake, Minnesota, Stan Anderson and the Assessor for Scott County. C-3 CONSENT TO ASSESSMENT AGREEMENT The Stearns County National Bank (the "Bank") of St. Cloud, Minnesota, does hereby consent to all terms, conditions and provisions of the Assessment Agreement attached to the Development Contract as Exhibit C, and agrees that, in the event it purchases the Development Property at a foreclosure sale or acquires the Development Property through a deed in lieu of foreclosure or otheIWise in satisfaction of the indebtedness owed by the Developer, it and its respective successors and assigns, shall be bound by all terms and conditions of the Assessment Agreement, including but not limited to the provision which requires that the minimum market value of the Development Property shall be not less than $381,000 as of January 2, 1998 and thereafter. IN WITNESS WHEREOF, we have caused this Consent to Assessment Agreement to'be executed in its name and on its behalf as of this day of , 1997. BY: John Herges ITS: Executive Vice-President STATE OF MINNESOTA ) ) SS. COUNTY OF SCOTT ) This instrument was aclmowledged before me this day of . 1997, by John Herges, the Executive Vice-President of Stearns County National Bank, a Corporation, on behalf of the Corporation. Notary Public C-4 CERTIFICATION BY COUNTY ASSESSOR The undersigned, having reviewed the plans and specifications for the improvements to be constructed and the market value assigned to the land upon which the improvements are to be constructed, and being of the opinion that the minimum market value contained in the forgoing Contract appears reasonable, hereby certifies as follows: The undersigned Assessor, being legally responsible for the assessment of the above described property, hereby certifies that the market value assigned to such land and improvements upon completion of the improvements to be constructed thereon shall not be less than $381,000 as of January 2, 1998 and thereafter. County Assessor for Scott County STATE OF MINNESOTA ) ) SS. COUNTY OF SCOTT ) This instrument was acknowledged before me this T. Arnoldi, the County Assessor of Scott County. day of , 1997, by Leroy Notary Public Signature page for Assessment Agreement by and among the City of Prior Lake, Minnesota, Stan Anderson and the Assessor for Scott County. C-5 STATE OF MINNESOTA ) ) SS. COUNTY OF SCOTI' ) This instrument was acknowledged before me this Anderson. day of , 1997, by Stan Notary Public STATE OF MINNESOTA ) ) SS. COUNTY OF SCOTI' ) This instrument was acknowledged before me this day of , 1997, by Lydia Andren, the Mayor and Frank Boyles, the City Manager of the City of Prior Lake, Minnesota. Notary Public C-6 EXHIBIT A TO ASSESSMENT AGREEMENT Legal Description That part of Block 2, WATERFRONT PASSAGE ADDITION, Scott County, Minnesota described as follows: An exact legal description will be provided upon completion of a survey for the property. In the interim, the property is described as an approximate 1.65 acre parcel situated in Block 2 of Waterfront Passage Business Park situated adjacent and immediately north of Lot 2, Block 2 (Keyland Homes) parcel and immediately east of Fish Point Road. Containing 1.65 acres. C-7