13a&b. Rosemount Dev Proposal Consider TIF with HRA & Purchase Agreement I / 3 A-4-.6
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CITY OF
i \I 'IN, CHANHASSEN
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4 . 690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317
•` (612) 937-1900
MEMORANDUM
ITO: Mayor and City Council
IFROM: Don Ashworth, City Manager
DATE: September 26 , 1988
ISUBJ: Rosemount Development Proposal
A. Consider TIF Agreement with HRA
I B . Land Purchase Agreement
C . Authorize Feasibility Study for Lake Drive East/
Market Blvd.
BACKGROUND
The establishment of the tax increment district for McGlynn
Irepresents a more traditional method of completing tax increment
projects . Specifically, the City Council acted to establish the
district, authorize the feasibility study, authorize the sale of
I bonds , and collect tax increment for repayment of those bonds .
The Rosemount proposal is a highbred in that Rosemount is located
within the City' s existing tax increment district which falls
I under the purview of the Housing and Redevelopment Authority.
Policies relating to the encouragement of businesses , purchase/
resale of lands and collection of tax increment fall within the
responsibilities of the Housing and Redevelopment Authority. By
I contrast, the sale of bonds , authorization of a feasibility study,
and payment of those bonds are the responsibility of the City
Council. Recognizing this highbred situation, the best means to
insure that all documentation is properly executed is to
insure that both groups are fully aware of the actions of the
other and that both are jointly supportive of each other.
A. CONSIDER TIF AGREEMENT WITH HRA "w
Initial indications would reflect that the existing tax increment
I plan adequately addresses the necessity for the Housing and
Redevelopment Authority to pay to the City tax increments
received for the payment of any bond sales which the HRA
I requested the City to sell. In anticipation that the attorneys
would rather have a specific agreement in place outlining such,
this office would request that the City Council authorize such
a resolution.
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Mayor and City Council
September 26 , 1988
Page 2
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B. ROSEMOUNT DEVELOPMENT - PURCHASE AGREEMENT
Attached please find the memorandum from John Dean, the LeFevere
Firm, outlining the proposed purchase/resale agreement for
Rosemount. The Housing and Redevelopment Authority acted on
Thursday, September 22, 1988 to approve these documents. No
action is required by the City Council .
C. AUTHORIZE FEASIBILITY STUDY FOR LAKE DRIVE EAST/MARKET BLVD. '
Attached please find a memorandum from Gary Warren dealing with
this item.
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M E M O R A N D U M
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' TO: HRA Commissioners
FROM: John Dean
DATE: September 19, 1988
RE: Rosemount Development - Purchase Agreement
1
On your agenda for September 22, 1988, is consideration of
' two purchase agreements relating to the Rosemount development.
The purpose of this memorandum is to (1) explain the process
which we are following, and (2) provide you with my analysis of
' the two agreements . The two purchase agreements are not included
in this transmittal, they are being revised by the attorneys for
' Opus and Rosemount. I hope to be able to make them available to
you in advance of the meeting.
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' A. PROCESS.
In most of your redevelopment activities heretofore, you
have been looking primarily at a development contract which
contains within it the provisions relating to purchase and sale
' of property. The Rosemount situation is different for two
reasons :
1 . The land is not owned by the developer (or being purchased
1 directly by the developer) . Consequently, the first
purchase agreement (between Alscor and the HRA) must of
necessity be an agreement separate from the development
contract. P:7 ;; {°lA
S EP 19 1988
CM DE CHAdt AS_SEN
HRA Commissioners
September 19 , 1988
Page 2
2. Because this development will be funded by the proceeds from
a tax increment bond (rather than by "pay as you go") .
There are potential risks which the City would face if, for
whatever reason, the land was not conveyed to the developer.
In order to reduce that risk, the bonds are structured with
an extraordinary call feature. By that feature, the City
can call the bonds either in May or in November of 1989 if a
development contract has not been executed by that date.
Because our right to call the bonds is lost once a
development contract is executed we want to delay the
execution of the development contract until that risk is ! !
gone. In other words, the contract will be executed at the f
Closing. Although the call provision refers to "execution"
rather than "approval, " we believe that it would be prudent
to defer approval for at least a short time.
I
Delay of the development contract would create some uncer-
tainty for the developer. Much of that uncertainty is
removed if the developer has a purchase agreement from the
HRA which obligates the HRA to sell, and the developer to
purchase if certain contingencies are met. Hence, the
second purchase agreement between the HRA and Rosemount.
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B. ANALYSIS.
All kinds of approaches can be followed in analyzing the two
purchase agreements. However, I think that the best approach,
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HRA Commissioners
September 19 , 1988
' Page 3
for our purposes, is to analyze them from the standpoint of the
following issues:
1 . Does the Alscor purchase agreement give the HRA the same
nature and quality of interest in the land that the Rose-
mount purchase requires the HRA give to it.
2 . If something goes wrong with the Alscor conveyance, are we
' "off the hook" in terms of the Rosemount conveyance.
3 . If something goes wrong with the Rosemount conveyance, are
' we "off the hook" with the Alscor conveyance.
' 4 . To the extent realistic, do the agreements allocate between
Alscor and Rosemount the various costs involved in the
transactions (except purchase price) .
5 . Do the purchase agreements accurately reflect the land
' conveyance understandings of the HRA.
6 . Are there provisions and contingencies in either agreement
which create a significant likelihood that the land convey-
' ance will not take place.
' ISSUE #1
Alscor Agreement Rosemount Agreement
1 . Fee simple title Fee simple title
' 2 . Subject to Permitted
Encumbrances: Subject to Permitted
Encumbrances:
(a) Governmental regu- (a) Want evidence that all
lations including governmental approvals
zoning and requirements
necessary for construc-
tion have been granted
and that property is
correctly zoned for
proposed use.
HRA Commissioners
September 19 , 1988
Page 4 '
(b) Drainage and utility (b) Will accept only T36447.
easements including Others to be vacated.
T36447
(c) Access limitations of (c) Requires access at points
record to Hwy 5. acceptable to it. '
(d) Development Standards (d) Wants evidence that pro-
Declaration posed development is
consistent with develop-
ment standards.
(e) Temporary easement for (e) Want all easements except
sewer interceptor T36447 removed.
T55349 .
(f) Resolution T38617 (f) Want these matters
resolved prior to Closing
(g) Easement for public (g) Probably OK
access, etc. T53381
3 . Plat approval Plat recording '
4. Portion of East Lake Same
Drive vacated (plus
utility and drainage
easement) and proceeding
subsequent completed.
Conclusion: There are some potential mismatches between what we
will get from Alscor and what we will give to Rosemount. Those '
potential mismatches can probably be resolved prior to Closing.
ISSUE #2 1
The answer is yes. If, for whatever reason, Rosemount
terminates its purchase agreement or simply fails to close, your ,
obligation to purchase from Alscor likewise terminates. If
Rosemount delays the Closing, the Closing date on the Alscor I
purchase is likewise delayed.
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HRA Commissioners
September 19 , 1988
I Page 5
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ISSUE #3
IThe answer is yes. If Alscor cannot deliver clear title, we
I are not subject to damage claims from Rosemount. If Rosemount is
not satisfied with any of the matters mentioned in Issue #1
Iabove, it can either accept title or terminate the agreement.
IISSUE #4. COST ALLOCATIONS
Alscor HRA Rosemount
I1 . Taxes & Specials 1988 payable None 1989 and
+ levied or thereafter
I pending spe-
cials
II 2 . Plat Pays None None
3 . Proceeding Pays None None
Subsequent
I4 . Surveys Pays None None ,
I5. RPA Pays None None
6 . Title
None None Pays
Commitment
I7 . Public Improve- Some survey Feasi- None
ment work-up work bility
I plans &
specs
8 . Hazardous waste
Examination Has pre-
viously None Pays
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paid for
examination
I9 . Brokerage Fees Pays None None
I 10 . Recording fees Deed tax on Recording Recording
etc. Alscor deed fees on fees on
recording Alscor deed Rosemount
fees on plat tax on Rose- deed
Imount deed
HRA Commissioners
September 19 , 1988
Page 6 I
The cost allocation appears fair and reasonable and the HRA
benefits from the fact that some of the costs which ordinarily '
would be its responsibility, such as survey, plat and proceeding
subsequent will be incurred by Alscor. '
ISSUE #5 1
The basic "flow" of the purchase agreements is consistent '
with what I understand to be the objectives of the HRA. Obvi-
ously, not all of the HRA' s objectives are reflected in the
purchase agreements. The remaining issues must be addressed in
the development contract. Two aspect of the purchase agreements
requires some further comment: I
1 . Hazardous Wastes.
(a) No party is warranting to any other party that there '
are no hazardous wastes on the property.
(b) No party is agreeing to indemnify any other party from '
costs which would be incurred if hazardous wastes are ,
found on the property.
(c) Because each party will be in the chain of title, each '
party will face some risk of liability if hazardous
wastes are ever discovered on the site. ,
(d) If the Rosemount purchase agreement is terminated, we
are responsible to indemnify Rosemount ( and Alscor in
turn to indemnify us) for any hazardous waste costs '
which result from testing, except intentional or
negligent acts. '
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HRA Commissioners
I September 19 , 1988
Page 7
Basically what this means is that if, for example, the
people conducting the tests for hazardous waste were to
drill a hole through an underground tank which contains
' hazardous waste thereby releasing the waste into the
' environment, and further if Rosemount then terminates
its purchase agreement, then we would indemnify
Rosemount and Alscor would indemnify us from any claim
for damages (unless the testing people negligently or
' intentionally did the damage) .
' (e) The HRA is required to represent that it has no knowl-
edge of the existence of hazardous wastes; and to make
its records and staff available for examination.
On balance, I believe that these provisions are fair and do
' not create an unreasonable risk for the HRA.
2. Rosemount' s Right to Terminate.
As you will note upon reading the Rosemount Purchase
Agreement, Rosemount has the right "for any reason, or for no
reason" to terminate the purchase agreement and walk away from
the deal. I recommend that the HRA accept that condition for the
' following reasons:
(a) Everyone, including Rosemount, is on a "fast track" in
' putting this development together. Because of that,
Rosemount is probably still weighing all of the
HRA Commissioners
September 19 , 1988
Page 8 1
business issues which must be factored into a very
expensive development. It is understandable that they '
need this type of flexibility.
(b) If Rosemount does "walk away" from the purchase, the
HRA can likewise "walk away" from its purchase from
Aiscor. Because the two Closings will occur (if at
all) at the same time, the HRA does not risk ending up
with the land.
(c) Rosemount' s right to "walk away" is gone upon Closing. ,
Thereafter, it will be obligated to construct the
development and pay the taxes. '
(d) The City' s bonds are callable if the project collapses '
before the development agreement is signed. Exercise
of Rosemount' s right of termination will allow the City '
to call the bonds .
ISSUE #6
There are a number of requirements and contingencies in the
Rosemount purchase agreement which may create problems in the '
transaction. -
1 . Recording of the New Plat. The new plat is scheduled to
receive final approval in late October. It will then be
executed and recorded. The processing of the plat after it
has been presented to the county for recording can take up
to six weeks. Rosemount is requiring that its deed be "a
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HRA Commissioners
September 19, 1988
Page 9
matter of public record" immediately following the
November 8 , 1988, Closing. All of the deeds of conveyance
describe the Property in terms of the new plat. Conse-
ilquently, there may be a practical difficulty in meeting
Rosemount' s requirements.
' 2. Restrictions on Public Lands. Rosemount is requiring that
q g at
' the City agree to restrictions and limitations regarding the
uses and activities which are permitted on the public lands
' within the Third Addition plat. Rosemount has not yet
indicated what restrictions will be acceptable to it. The
' City may not wish to place restrictions upon its lands.
' 3. Restrictions on Private Lands . Rosemount is requiring a
similar agreement by Alscor concerning its lands within the
' Third Addition, including an option in favor of Rosemount to
purchase a parcel at the Northeast corner of the plat.
1 There is some doubt whether Alscor will agree to this .
' 4. Miscellaneous. The Rosemount purchase agreement contains a
number of other pre-Closing requirements. Some of them may
be difficult to achieve prior to Closing.
Although the requirements and contingencies contained in the
Rosemount purchase agreement may not be satisfied (and therefor
the Closing may not take place) , I do not believe that the HRA
should decline to proceed to execute the purchase agreement on
HRA Commissioners
September 19, 1988
Page 10
that basis. Once the purchase agreements have been authorized
and executed, my expectation is that all the parties will con- '
tinue to work diligently to address and resolve all those issues.
C. RECOMMENDATION.
My opinion, from a legal standpoint, is that the purchase
agreements are appropriate in furtherance of the Rosemount '
development. I would therefore recommend that you authorize
their execution if: '
(a) You are committed to going forward with the Rosemount
development; and '
(b) You have had sufficient opportunity to review and '
become familiar with the purchase agreements.
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ROSEMOUNT ENGINEERING
APPROVALS/CONSTRUCTION SCHEDULE September 15 , 1988
CITY OF CHANHASSEN
A. AGREEMENTS PHASE
AUG 17 , 1988 SELECTION OF CIANHASSEN
AUG 17 INITIATE PLATTING/SURVEY (OPUS)
AUG 17 - SEP 26 PREPARE/NEGOTIATE AGREEMENTS
- CITY WITH OPUS (LAND PURCHASE)
' - CITY WITH ROSEMOUNT (DEV AGREEMENT)
- ROSEMOUNT WITH OPUS (DESIGN AGREEMENT)
SEP 14 TEAM. MEETING : ROSEMOUNT, OPUS , CHANHASSEN
I (7 : 00 A .M . )
B. DOCUMENTATION/APPLICATION PHASE
AUG 15 - SEP 19 PREPARE ENVIRONMENTAL ASSESSMENT WORKSHEET
(OPUS)/ROSEMOUNT COMMITS TO BUILDING AND
SITE DEVELOPMENT PROGRAM
AUG 15 - SEP 15 PREPARE PLANS & SUPPORT DOCUMENTATION
(OPUS)
- PRELIMINARY BUILDING & SITE PROGRAM
- PRELIMINARY DESIGN/SITE PLAN
- WETLAND ALTERATION PERMIT
- WATERSHED DISTRICT
- PRELIMINARY PLAT
- VACATION OF LAKE DRIVE EAST
- CORPS 404
SEP 1 - 16 PREPARE REDEVELOPMENT PLAN MODIFICATION ( CITY)
SEP 15 SUBMIT APPLICATIONS TO CITY/SELECT CONTRACTOR
GZe s; ds
/1„..d�1 SEP 19 NEIGHBORHOOD INFORMATION MEETING (CITY)
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C . APPROVALS PHASE
AUG 22 CC CALL FOR BOND SALE
44461 SEP 15 °O SALE OF BONDS
ISEP 16 APPLICATION DEADLINE FOR
PC PUBLIC HEARING
ON SPR APPLICATION , ETC .
IRECEIVED
SEP 19 1988
CITY OF CHANHASSEN
SEP 16 PUBLIC HEARING ADS PREPARATION ( PC)
SEP 19 - 23 CITY STAFF REVIEW OF EAW ,
SEP 21 PC REVIEW OF REDEVELOPMENT PLAN MODIFICATION
AND LAND SALE RE: COMPREHENSIVE PLAN COMPLIANCE
SEP 22 PUBLISH PC PUBLIC HEARINGS NOTICES
SEP 22 HRA APPROVAL OF REDEVELOPMENT PLAN MOD/TIF
AGREEMENT WITH CC/DEVELOPMENT AGREEMENT/
PURCHASE AGREEMENT/SETS PUBLIC HEARING ON LAND
SALE/DIRECTS PUBLICATION NOTICE FOR LAND SALE
SEP 26 DISTRIBUTE EAW TO REGULATORY AGENCIES
INCLUDING EQB '
SEP 26 CC APPROVAL OF PURCHASE AGREEMENTS/TIF
AGREEMENT WITH HRA/INITIATES LAKE DRIVE EAST
FEASIBILITY STUDY/SETS 429 HEARING DATE
SEP 29 PUBLISH REDEVELOPMENT PLAN HEARING NOTICE
SEP 30 PUBLIC HEARING ADS PREPARATION
(STREET VACATION)
SEP 30 CLOSING DATE FOR BOND SALE/BOND PROCEEDS
AVAILABLE PENDING AGREEMENT
OCT 3 PUBLICATION OF EAW IN MONITOR '
OCT 3 - NOV 2 EAW COMMENT PERIOD
OCT 5 PC PUBLIC HEARING ON ALL APPLICATIONS
OCT 6 PUBLICATION OF STREET VACATION NOTICE
(LAKE DRIVE EAST)
OCT 7 PUBLIC HEARING ADS PREPARATION (CC & HRA)
OCT 10 CC PUBLIC HEARING & APPROVAL OF REDEVELOPMENT
PLAN MODIFICATION/RECEIVES LAKE DRIVE EAST
FEASIBILITY STUDY '
OCT 13 PUBLISH/MAIL NOTICES FOR VARIANCE AND CC
HEARINGS ,
OCT 13 PUBLISH NOTICE FOR HRA LAND SALE HEARING
OCT 21 APPLY FOR WATERSHED DISTRICT PERMIT '
(GRADING & EROSION CONTROL)
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OCT 24 BOARD OF ADJUSTMENTS & APPEALS PUBLIC HEARING
' OCT 24 CC HEARINGS ON:
- LAKE DRIVE EAST SPECIAL ASSESSMENTS ( 429)
' - ALL APPLICATIONS
- PRELIMINARY/FINAL PLAT
OCT 25 COMMENCE PREPARATION OF DEV CONTRACT (CITY)
' OCT 27 HRA PUBLIC HEARING ON SALE OF PROPERTY
' NOV 2 WATERSHED DISTRICT MEETING
NOV 7 CC SALE OF IMPROVEMENT BONDS/NEGATIVE
' DECLARATION ON EAW/APPROVAL OF DEV CONTRACT
NOV 8 SIMULTANEOUS CLOSINGS ON PROPERTY
D. DESIGN/APPLICATION/CONSTRUCTION PHASE
' OCT 6 - NOV 8 CONSTRUCTION DOCUMENTS PREPARATION (DEVELOPER )/
ONGOING REVIEW BY ROSEMOUNT
OCT 6 - JAN 15 DESIGN LAKE DRIVE EAST (CITY)
NOV 9 GRADING AND FOUNDATION/BUILDING PERMIT APPS
' NOV 9 - 22 CITY BUILDING DEPARTMENT REVIEW OF CONSTRUCTION
DOCUMENTS/PERMIT ISSUANCE
NOV 14 CC APPROVAL OF GRADING/FOUNDATION PERMIT
NOV 15 GROUND BREAKING/COMMENCE SITE GRADING
' NOV 28 - MAY 1990 ROSEMOUNT CONSTRUCTION
JAN 23 , 1989 CC APPROVAL OF LAKE DRIVE EAST PLANS
' & SPECS/AUTHORIZES TAKING BIDS
MAR 13 CC AWARDS LAKE DRIVE EAST PROJECT
MAR 27 - SEP 1989 LAKE DRIVE EAST CONSTRUCTION
APR 1990 OCCUPANCY OF ROSEMOUNT BUILDING
U`JJ L4 ■-, ,,—_ i 6,— : Z 1--;:i*,., /;_...//..;. .:
PMT 260000 cap Int 333, 120 Mkt Val 18,500,0001
IR 0. 1 incent cast 1 , 441 ,880 Assess' d 7, 400,000
N 30 total 1 ,775,000 Taxes 851 ,000 I
PV 1 ,775,000 Fis Disp 340,400 !
Net Taxes 851000
14,/,/,4 ° -IL_t h -7o a u a..,
7fka-n. rvoal�� ,� ,,,,,��,//y beg int pymt end
1989 $1 ,775,000 $177,5000 $1 ,952,500
aac...r, 275125 1990 $1 ,952,500 $195,250 $275, 125 $1 ,872,625
1991 $1 ,872,625 $187,263 $851 ,000 $1 ,208,888
IAA" ;,,,I, yr- � 1992 $1 ,208,888 $120,889 $851 ,000 $478,776
i..." X1993 $478,776 $47,878 $851 ,000 ($324 ,346)
1994 ($324,346) ( $32, 435) $851 ,000 ($1 ,207,781 )
1995 ($1 ,207,781 ) ($120,778) $851 ,000 ($2, 179,559) '
ley m4- y, . d,,; J 199b ($2, 179,559) ($217,956) $851 ,000 ($3,248,515)
1997 ($3,248,515) ($324,851 ) $851 ,000 ($4,424,366)
t_4 1.« ,-I 1998 ($4, 424,366) ($442,437) X851 ,000 ($5,717,803)
1999 ($5,717,803) ($571 ,780) $851 ,000 ($7 , 140,583) I
2000 ($7, 140,583) ($714 ,058) $851 ,000 ($8, 705,641 )
- a,,raj e,,//....4 it_
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