2003 06 09 Agenda
Economic Development Authority
Monday, June 9, 2003
Immediately Following the Regular City Council Meeting
(Approximately 8:30p. m.)
City Council Chambers, 7700 Market Blvd.
lm
Approval of Stipulation of Settlement and Order for Judgment, Tax
Increment Financing District 2-1.
2. Approval of Minute~ dated May 27, 2003.
CITYOF
CHANHA SEN
7700 Market Boulevard
PO Box 147
Chanhassen. MN 55317
Administration
Phcne: 952.227.1100
Fax: 952.227.1110
Building Inepectlone
Phone: 952.227.1180
Fax: 952.227.1190
Engineering
Phone: 952.227.1160
Fax: 952.227.1170
Finence
Phone: 952.227.1140
Fax: 952..227.1110
Park & Recreation
Phone: 952.227.1120
Fax: 952227.1110
Recreation Center
2310 Coulter Boulevard
Phone: 952.227.1400
Fax:. 952.227.1404
Plannlnll &
Natural Resources
Phone: 952.227.1130
Fax: 952.227.1110
Pabllc Work=
1591 Park Road
Phone: 952.227.1300
Fax:. 952227.1310
Senior Center
Phone: 952.227.1125
Fax: 952.227.1110
Web Site
',',--,',,,,;,.ci.chan ha.,.~.m n.us
TO:
Economic Development Authority
FROM: Todd Ge~ardt, City Manager
DATE: June 3, 2003
SUB J:
Approve Stipulation of Settlement and Order for Judgm~ ent
Regarding Tax Increment Financing District 2-1
Attached you will find a Stipulation of Settlement and Order for ;Iudgment in
response to the State Auditor's Notice of Non-Compliance conc~ing Tax
Increment Financing District No. 2-1. This settlement resolves the State
Auditor's alleged violations and is a compromise of the disputed claims that the
City and EDA should not have received a TIF payment for this district in 1998.
The settlement allows the city to keep the first haft TIF payment and requires
that we repay the county its share of the second half taxes, plus interest, totaling
$144,553.87.
Staff recommends approval of this settlement as a fair and reasonable
compromise to the claims against the city/EDA.
1. Stipulation of Settlement and Order for Judgment
The City of Chanhassen · A gro~;,ing commu~i~;,, ;',i[h c19:,.~ I,~.:<~.s..".:~a;!::, scr, oo~s. a charmin?, downtown, t~riving businesses, winding trails, and beautiful parks. A or, at plar~ to live, wor~, and play.
STATE OF IVJ~IN]~A DISTRICT COURT
COUNTY OF CARVER
FIRST IUDICIAL DISTRICT
CASE TYPE: ~ CIVIL
In the Matter of the County of Carver
a lVllnnesota Political Subdivision,
Plaintiff,
VS.
The City of Chanhassen, et al.,
' Court File No.
STIPULATION OF SETfLEMENT-
AND ORDER FOR JUDGMENT
The County of Carver ("County"), the City of Chanhassen ("City~ and the Chanhassen
Economic Development Authority ("Authority") hereby stipulate and agree as follows:
~, pummnt to Minn~ St2hItes Sectiol1469.1771, subd. l(c), tl~ Office of
the Sts_te. Auditor (the 'qDSA") ~ a Final Notice of Noncomplimace dated Mmrch 21,
2000 regarding the Authority's Tax Increment Financing District 2-1 (the "Distfi~;
and
~, pummnt to Section 469.1771, sut~ 1Co) of the Act, the OSA notified the
County Attorney of its findings of viohtions of the Tax Increment Financing Act
("Act'~ regarding the District; and
· ~, the CounW Attorney initiated this action under Section 469.1771, subck
l(b) of the Act; and.
WHEREAS, this settlcment ahall constitute a full and complete resolution of the OSA's
alleged violations set forth above and assetaxl in these proceedings under Section
469.1771, subd. 1Co) of the Act.
the Authority, and the City and the Authority deny liability for the claims being asserted.
NOW, TI-]]:~/~~ the parties agree as follows:
lO~,o 1
1. This settlement resolves aH disputes arising out of the trmal Notice of
Noncompliance from the OSA do_ted March 21, 2000 assemxi in these proceedings concerning the
2. The City of Chanhas~-n shall pay to the Carver County Auditor within ten (10) day~
of the execution of this Stipulation and entry of l~dgment the amount of $144~53.87, togelt~ with
interest in the,amount of $26,311.82 through March 14, 2003 and per diem interest ~ bosed
upon the most recent average monthly-one-year T-bill rate (1~7%) until date_, of paHnent
3. The Carver County Auditor shall distn"oute the funds to Carver County to the
exclusion of the City of Chanhassen.
.
4. Each party shall pay their own costs and disbu~ements incurred in these
proceedings
co rY og. cAgv
Dated: ,2002. By:
CITY OF CHANHASSEN
Dated: ,2002
And:
ECONOMIC DEVELO~
AUTHORITY IN AND FOR ~
CITY OF CHANHASSEN
BT.
:o~as. 2
ORDER FOR JUDG~
Based upon the above Stipulation, rr IS I-r~l~y ORDERRD,
1. The City of Chanhassen shall pay to the Carver County Auditor within ten (10) days
of the execution of this Stipulation and entry of ludgment the amount of $144,553.87, together with
interest in the amount of $26,311.82 through Mmch 14, 2003 and per diem interest thavafler based
upon the most recent average monthly one-year T-bill rate (1.27%) until d~___e of payment.
2. The Carver County Auditor shall distribute the funds to Carver County m the
exclusion of the City of Ch~mssen.
3. Each party shall be responsible for its own costs and disbursements incutrefl in these
proceedings.
BY THE COURT:
CHANHASSEN ECONOMIC
DEVELOPMENT AUTHORITY
SPECIAL MEETING
MAY 27, 2003
Chairman Furlong called the meeting to order at 8'.2~ p.m.
MEMBER~ PRE~ENT: Tom Furlong, Steve Labatt, Bob Ayotte, Brian Ltmdquist, Craig
Peterson and Jim Bohn
STAFF PRF~ENT: Todd Gerhardt, Justin Miller, Kate Aane~son and Tom Scott
CONSmER APPROVAL OF PUR~ AGRi~]~IEN-T~ BOWLING
PROPERTY~ BLQQMB~G COMPANIES.
Gerhardt: Chairman, EDA members. Included in your packet is a proposed purchase agreement
with Bloomberg Companies. At our last meeting staff was able to continue negotiations with
Bloo~g Companies and the purchase price is now at $1,150,000. Up approximately $82,000
from the last time you mec Justin Miller, Assistant Executive Director has prepared a time table
that I'd like to have him go through right now to update all EDA members and public that are
present.
Furlong: Thank you Mr. Miller.
Miller: Good evening. One of the principles that I think the EDA stated clearly last time when
we met.
Ayotte: Could you pull the mic closer.
Miller: I'm sorry. One of the key factors in approving this site plan, or the concept plan at the
last EDA meeting was that we put some specific time tables into the purchase agreement and I
think we've done that. I think we have a pretty aggres~ve timefl'ame on this proposal. If you
look at the handout that I gave you earlier, there's three columns. One is for the Bloomberg
Companies. One is for the City, and those are how we split out the obligations on both sides for
this contract. The first one you'll see is an obligation of the City that we need to provide to
Bloomberg all surveys and environmental ~ that we have on hand within 15 days of the
executed agreement. We have already done that so that's something we don't have to worry
about. The next would be for Bloomberg to enter into a contract for environme~ testing. That
would need to be done within 20 days of the executed contract, and we would have to provide the
City being ALTA rifle commitment within 20 days and we have already started that process, so
we feel confident we can get that done within 20 days. The next step would be for the Bloomberg
Companies. They would need to obtain an ALTA survey of the entire site within 30 days of
executing this agreement. Those 3 days that I just told you are the most fluid of this, of this
agreement and those are dependent on the actual exec~on which will be the si~ing of the
agreement. The rest of the dates from hereon out are actual firm calendar days. The first of
which would be Bloomberg Companies disclosing any problems they see with the title
commitment that we provide them, they would need to do that by July 15"'. The next four are ail
by August 1'~. I think that's an impo, rtant day in this agreement. They would need to disclose any
concerns they have, that they find with the environmental testing on the site. They would also
need to provide to us a letter they have come to an agreement with the Chanhassen Cinema in
regards to tearing down and repairing the party wall, as well as relocating the Southwest Metro
Economic Development Authority - May 27, 2003
park and ride easement onto a property in the developrm-nt area that is owned by Bloomberg.
And we would also need to receive proof that they have applied for the PUD, which is planned
unit development process by August 1". The next big date in this agreement is September 30~,
and that is the target that we have for city site approval Along with that will probably be two or
three Planning Cornmi.ssion meetings. One is going to be just kind of a broad overview of what
we are looking for and also give staff and the developer a chance to fred out problems or the
interest that the Planning Commission has with this. And thell we think it will probably take at
least 2 Planning Commission meetings to get through the entire PUD and site plan approval
process. Those will be the first two meetings in September, and hopefully you will have final
City Council, EDA approval by the last meeting in September. We're also asking that the
applicant provide some proof that they have lease or occupancy agreements with tenants by
Sel~tember 30a', and then if aH goes well we will ciose on the ~ no later than November
14'". All through this process also Bloomberg Companies will be providing hi-weekly repons on
the status of all ~ items and we will share those with the EDA members.
Gerhardt: Chairman, at thi~ time I think I received a couple of comments from EDA members.
There was a section in the purchase agreement that we had asked Tom Scott to give clarification
on regarding liability on Section 12.7. Torn.
Tom Scot~ Would you like me to address that now Todd?
Gerhardt: Yes, if you could please.
Tom Scott: Yeah, Section 12.7, I guess thi~ really is how it relates to another provision in the
purchase agreement which is 2.11. And it relates to if the EDA does not go ahead and perform
under the agreement for some reason and it would be in breach of the agreement. What remedy
would, what remedies would the buyers have and in 2.11 the agreement indicaw~ that the buyer's
sole remedy if seller refuses to perform it's obligation shah be to have it's earnest money
reun'ned, which would be $10,000. Now, that' s what is indicated in the 2.11. Then when you go
to the Section that Todd referred to, 12.7. It says if seller defaults for different reasons, buyer
may either terminate this agreement by giving seller written notice thereof, in which case the
earnest money shall be refunded to buyer or buyer may seek specific perfornmnee of this
agreement or buyer may proceed to close and basically waive, with or without waiver of any
breach by seller. The point in 12.7 is, and I did talk to Mr. Kelly of my office just before the
meeting who had negotiated this and had talked with Mr. Rice, the attorney for Bloomberg. We
do want to clarify that and I would like some counsel from, I guess some input from the EDA.
We would clarify it, as I understand it, Mr. Rice might want to address this point too, is that it
would in fact be, the remedy would be if we don't, if we breach the agreement and don't convey,
would be the return of the earnest money deposit. So we would clarify 12.7 to be consis~t with
the earlier paragraph.
Furlong: So you would strike the or buyer may seek specific perfommnce of this agrcem~t?
Tom Scott: Right It would be, and I think: right. We would strike it to make it consistent with
the initial.
Furlong: 2.11.
Tom Scott: Language in the earlier paragraph that would ~rnply be, which is as I read the
agreement is reciprocal so that's also the, if the buyer's breach, don't fulfill the obligations, then
we're limited to simply returning the earnest money deposit as damages and we can't seek
Economic Development Authority - May 27, 2003
specific performance to require them to perform or seek other damages so. So that would need to
be clarified so, and if there's any other clarifications, I guess we'll just have to see wbem we're
at. If the EDA is comfortable with it we could approve the agreement subject to that clarification
and final approval by the EDA attorney. But again we can see ff there are other issues with the
agreement or where we go from here. So that would be my comments on that point.
Furlong: Mr. Gerhardt, other issues? Comments.
Gerhardt: The hist issue, again raised by an EDA member was having that deadline for the
building demolition of the bowl property itself. There are some circumstances that go along with
not having that in there. One being that if you tear down the bowling alley properS, you have to
have some type of agreement to replace either a tempcoxy wall or permanent wall with the
theater. There is a party wall agreement between the two and if the building comes down, there
needs to be an exterior wall built in place. Right now it is a four hour wall that is sheet rock,
which is not an element that can handle our weathers here in ]~[innesota so some type of
permanent stmcUm~ needs to go in there. At this point Bloomberg Companies have told us that
they don't have an agreement with the movie theater people so they can't make a commitment on
when the building should come down. However there is some incentives on them to tear down
that building. One is that it would reduce their ~ taxes by having the building down so
there's an incentive to save some money on that side of it. And I guess that's really the only
incentive for them to do that. For some reason they do not follow through with the purchase
agreement within a one year period of tearing down the buildin~ we have that clause in there that
we can buy the ~ back from the~ Under State Statute and it's also included in thi~
purchase agreement if they do not fulfill their obligations of what they promi~i, we can acquire
that property back at what we sold it for. So with that Mr. Bloomberg and his representatives are
here tonight to answer any questions that you have regarding the purchase agreement or ~
proposed development and we had a meeting today to give them some initial comments on their
presentation to the Planning Commission. And hoping to go to see them lune 15z. 17~h.
Furlong: Okay. Any questions for staff at thi~ time? lust point of clarification. Is it one year
from the date of close or one year from the date of demolition of the building?
Gerhardt: Fve got to believe it's closing.
Furlong: Okay. That's what I thought. Thank you. Other questions.
Lundquist: Todd we talked on the phone today about, my concern still is the time. I know that
you guys have laid out the calendar here and it looks liire it's lm~tty tight but is them any ways to
expedite through the process at all to get anything faster than a November 14 close or anything
that we can do to move that date up at all?
Gerhardt: trtrst reaction is when they make their formal submittal and getting direction from the
Planning Commission is going to be key. Usually we can turn these things around a little faster if
the Planning Commission doesn't see it as a difficult site plan and bring it to council sooner.
Other than that, a lot of it goes back to us notifying other government jurisdictions and getting
their comments back is what is going to time consuming. We have to allow them 30 days to
comment and to get those back so we can make a formal presen~on to the Planning
Commission.
Lundquist: So is that a yes there's a way to expedite it or a no, thig is the way it's going to be?
Economic Development Authority - May 27, 2003
Gerhardt: I thought I talked my way around it pretty good but, not really. I mean this is going to
be a difficult site to redevelop. It's not like Chipofle and Buffalo W'fld Wings where you take a
vacant lot. You're going to take an existing building, with existing parking easements in the area.
Probably have to look at a traffic study. Special aignage. So it's not going to be real easy to take
through like the industrial building you saw tonight. That's a fairly simple site plato This is a
little more complicated when you're dealing with retail and you want to make sure you've got the
adequate parking or people aren't parking out in the street or that you have uniform signage and
architectural standards. So I just don't see how we can move it along any faster but we will try if
it's there to do so.
Lundquist: Then onto the reconstruction or the demolition of the building. The condition, in
Section 7.8 on the purchase agreement. Is that Bloomberg must have an agreem~ with the
Cinema by August 1~ as to the arrangements for demolition of the bowling alley and
reconstruction of the wall. Can we add, would it be, can we add a condition that we've got to
have that date for demolition along with that agreement7 Part of that agreement must be a date
for demolition. Any objections from staff's point of view? Well we can talk to.
Gerhardt: I think that's appropriate.
Lundquist: Okay.
Furlong: Thank you. Other questions for staff at this time?
Peterson: The only one I've got Todd is, I was somewhat smlnised by the amount of earnest
money and I didn't get a chance to call you on thaL It seems remarkably low for the value of the
deal, less than one percent. What's your ~ve?
Gerhardt: I'd say that's pretty typical. In a lot of the deals Fve done in the past I haven't seen
too much over that. It' s usually $5,000 to $10,000.
Peterson: Didn't we have more than 10 last time7
Gerhardt: No. I don't believe so. I think it was 10.
Peterson: It just seems low to me. As you've heard my broken rectmt before but we haven't
been able to get this thing done and if making, upping that would motivate you know motivate
anybody further, Fd like to consider that
Furlong: Okay. Other questions for staff at this time7 ff there are none, I see Mr. John~n
you're here this evening. Is there any commentz, discussion you'd like to provide?
Clayton Johnson: Mr. Rice has a point of clarification.
Furlong: Very good, good evening. Certainly, please come forward.
John Rice: My name is John Rice. Fm an attorney here in Chanhassem Fm here on behalf of
Bloomberg Companies. I have just a couple of comments. I don't kn~w ff Justin's memorandum
regarding the Southwest Metro Park and Ride doctunented, in fact provides at 7.9 that we'll
provide a letter of intent. That would be a letter of intent with Southwest Me~ that we would do
it because quite frankly they're wonderful folk but whether or not we can get an ageermnt for
relocation of everything and all the accomngdations and the additional easements by August 1 is,
Economic Development Authority - May 27, 2003
I don't think it's possible. But I mean that's without knowing what their schedule for m~etin~
and their process of approval that they would have to go through. But presumably by August 1
we can get a letter of intent that will say we intend to do this and we will work towards getting
this and that will give everybody in the initial agreement and then moving towards the final. But
it's a little bit different in the purchase agreement. And the other one is.
Miller: One thing to add though, that would still be a signed release of that permanent easement
would be required before closing.
John Rice: Oh yes. Yes. That basically says Southwest Meuo and the City and Bloomberg will
work to achieve by the date of closing a recordable set of documents, nxge than one, that releases
the existing Southwest Metro easement and moves it over to Bloomberg's ~ and then it
would also have to provide separate agreements for rebuilding the shelter, etc, etc. Moving it,
whatever they were going to do.
Furlong: And just for clarification. Mr. Rice, is the~ what you're desen~, is that what we're
reading here in 7.9? It seems to be the same thing. Okay. Okay, thank you.
John Rice: And then just again, the clarification on the lease and occupancy agreements by
September 3ffh.
Furlong: And which section is this sir?
John Rice: That is 7.7 on page 10. We'll have agreements that, we'll try to have the agreements
so that the contingency can be fulfilled for notification by September 30~. A status report on
them, but I don't think we won't n_~'_essarily be able to file with you copies of leases because we
might not have them. We might not have the tenants. It might proceed anyway. And the tenant
may not want the lease publicly disclosed, but as long as we understand that it's a report that's
going to be given to you and it will be a good faith report That's what, is that aceummly state the
understanding? We may have to tell you them are no tenants, but we're going to do it anyway.
But we hope that's not the case. Then I've got to disagree a little bit with my colleague Mr.
Scott. The discussions that we had regarding the specific performance issue was, it was in two
places. The only thing that we have insisted or that I think that we're entitled to have the right of
specific performance is in the event that everything else has fallen into place, all the
contingencies for the buyer have been satisfied. The buyer's ready to go ahead and the city has
no enforceable reason to terminate the agreement, you've got to show up for the closing and sign
the deed. And that is a contract that is enforceable by the court because if you take money you
pay, then the court in effect says those are the documents and they're good as signed. You can
either sign them or the Mayor might be held in contempt. They'll need Mr. Scott there for sure,
but that's an enforceable contract And if we don't have that remedy on November 14, then
we've spent all of this money and what do we do? See, it's not a contingency to say that well you
didn't show up so we get to cancel. We don't want that contingency and we've got it set up with
the documents and the contingencies and the dates ~ of time that if something hasn't
occurred, there's the right to terminate. And then the money goes back or the city terminals and
the money goes baclc But the discussion with Mr. Schmekpepper and myseff and Mr. Kelly this
afternoon was that we would modify the 12.7 language to leave that right of specific perfommuce
in there only if everything else has happened and the city has no valid right to terminate, and all
of the contingencies for the buyer have occurred and the buyer's ready to perform, then we've got
the right of specific performance. That just makes you come to the table. And then language in
2.11 would be qualified that would remain the same except as provided in 12.7. No right of
specific performance except as provided in 12.7. And that was the way that we lcf~ it and that
Economic Development Authority - May 27, 2003
presumably you could approve the document subject to mutual approval of that lan~mm~ by
whoever wants to do it. Mr. Scott, Mr. Kelly and presumably the manager. But some post
meeting tonight process of redraffin~ that language. And then the other one was the issue of the
reverter which came up with the discussion about the demolition. But if we have the right of
reverter that is going to mean that if you're going to exercise it, you're goin~ to repay the
purchase price, then we can live with that.
Miller: I think that's what's outlined in the state law, ifI understand right.
Gerhardt: We have it currently in the purchase agreement.
John Rice: Well it's not exactly crystal clear in the statute that you're going to write us a check
bacL So that's the only thing that we would want to clarify and then there's no problen~ Other
than that, this baby's fine.
Furlong: Other questions?
Clayton Johnson: Let me just add a couple comments, if I can~
Furlong: Sure.
Clayton Johnson: One is I think he was just trying to clarify the point on Southwest Metro.
Justin's summary may have been unclear when he said the formal agreement will be in hand by
August first. The agreement says that the letter of intent will be in place because we're conce~a~
about, we don't know what the meeting schedule is. I think the other, let me speak to the
consideration on the purchase agreement. I mean believe me we are going to have spent a lot of
money before September 30~, somewhere approaching $100,000 between all the architectm'e,
which we have to have to go through plamfing and so on so it's not as though we don't have a
significant investment, we do. We've spent a lot of money already but we're going to spend a lot
more between now, so I think that's part of the consideration on the purchase, and the earnest
money issue. Any other questions?
Ayotte: I was wondering if there would be a target for the 1Z7 re-write so that we're not waiting~
I understand that everyone's motivated but if we're going to be looking at this and a potential
approval of this with a contingency for a m-write of 1Z7.
Clayton Johnson: Well I think they re-wrote it this aftern~. I mean I think it's a matter of
signing it in the next couple of days. If we clarified thi~ specific perf~ issue, I hope we
did. I don't know.
Peterson: Before you go away. We had 3 or 4 items that we left last meeting with that you were
supposed to meet, and I don't have them in front of me but. Did we meet all of those7 Some of
those were from you Brian.
Lundquist: The 14 days. Yeah, it was a rough agreement.
Peterson: And was them, as I said earlier Justin, financing. Was that one of them? Proof of
financing. Have we met that? Or was that one of the conditions as I recall?
Miller: I can't remember specifically but I think that might be addressed in one of the various
deadlines is that, I doubt that Bloomberg Companies and Kraus-Anderson would be able to
Economic Development Authority - May 27, 2003
secure leases without them seeing that they have si~ificant financing to build out this
development so.
Peterson: Nobody seems to rememlx~ and that's fine but.
Labatt: Well I think the motion is in the minutes here. I moved and Ayotte seconded the EDA
direct staff to negotiate and enter into a purchase agreement with Bloomberg Properties to
purchase the bowling alley site and bring back within 14 days a letter of intent with the final
purchase price and aggressive time table. 4-2 vote. Nothing about financing. I don't recall
anything.
Furlong: The only thing that was in the EDA packet on the side by side comparison was the
information that for investors that they will provide financial information upon request So that
was in the packet as opposed to the direct motion but...be requested ff that's the desire.
Gerhardt: Chairman, if I could ask that question of Clayton. Have you, can you get a letter of
intent from who's going to provide the constn~on financing? Are you looking at construction
financing?
Clayton Johnson: Well I think we would, believe me before we get to Septemlx~ 30~ we're
going to have some sort of commitment for consmLefing financing. The nature of the project
though, some of it's going to be built on spec so it will be construction financing. Probably not a
permanent take out. A lot of the oiT:u~ will have to be built on spec, we know that and we fully
anticipate thac
Gerhardt: Can you share a commitment letter with us when you get it?
Clayton Johnson: Sure, if that's.
Clayton Johnson: Well at September 30~, sure. The other ~ue, let me speak to the bowling
alley party wall, just a you know. This came up late teday. Tslimd with the, one of the concerns
there is that we can't put the Cinema out of business in December. We have an incentive to tegr
it down because it can't be assessed on January 1 if the building's down and it will save us taxes
for a year. But the big issue is, we have to have an agreement with the construction plan has got
to accommodate Cinema because Cinema cannot be Out of business on any of their auditoriums in
the month of Decemb~. Now we hope to have that agreement worked out with them but that just
came up teday.
Peterson: So your intent is to demolish in November?
Clayton Johnson: RighL Prior to January 1.
Peterson: That'd be great.
Clayton Johnson: Yeah, and the environmental is a concern. We're going to get the keys as soon
as we have a deal and then we'll have our environmental people in there right away. There is
some concern. The Cinema people have, you know as staff knows, have expressed all this
concern about moisture and we hope we don't find a mold problem, but we'll know that too
within, and that's really part of the purpose of the 2 week reports. We'll share with you what we
Economic Development Authority - May 27, 2003
know when we know it and we'll, we don't know what we're going to find when we get in there.
We'll keep you posted.
Peterson: Did we do an EA when we purchased it?
Gerhardt: There has been an En~tal Assesament that was done as a part of, when Bob
Copeland had a purchase agreement and we shared that with Bloomberg Companies and they're
reviewing it.
Clayton Johnson: But we have to do the whole site. We have to do the vacant land and also your
land has never been studied. Our land hasn't been studied recemly, and then the bowling alley so
the new environmental will have to encompass the whole site. But we'll do that, I think we've
made arrangements to do that fight away, in the next few days.
Gerhardt: What hasn't been done is soil borings outside of the existing foundations and they also
want to do an analysis on water table. So they'll be putting some liffie test pumps out
determining...put underground parking in to see what the i .mpact of that may have on it.
Clayton Johnson: The survey's viromlly done. The survey that you had done by Otto has been
extremely helpful and has saved us a lot of time. If we hadn't had that, but I think the way it is,
the survey will probably be done in the next week to 10 days.
Furlong: Excuse me Mr. Jotm~n, with regard to the demolition Mr. Lundquist asked about
including an anticipated schedule or expected a_~te even with your comment, within that
agreement with the cinema, do you see that as workable?
Clayton Johnson: Well we would work towards that. I don't really know, Fm not a lawyer so I
don't know how we'd work it into the agreement and what i .mpact it would have. But I just
wanted to let you know, we have every incentive to do it, And we would probably at the time of
August 1't, when we have this agreement as to how we're going to build that, I would think we'd
have the timing ironed out too. But I'm a little reluctant to put it in the agreement because I don't
know exactly what the remedies would be.
Gerhardt: Well I would think the Cinema would want to know what timefrm~ that you may do
demolition as a part of their agreement with yom Because they're not going to want you
knocking out walls in December when they're probably their busiest time.
Clayton Johnson: Well we may have to, but we're going to have to provide some other barrier
while that in.
Lundquisl: Yeah I wasn't asking for a, what I would like to see is for you to have a date as part
of that arrangement. You know it doesn't have to be, I mean you're going to have to work out
with the Cinema when you plan on demolishing their wall
Clayton Johnson: And the method, right.
Lundquist: And the method and what you're going to build it back out of and all kinds of good
stuff like that. So obviously as a part of that they're going to want to know when you're going to
knock it down so.
Economic Development Authority - May 27, 2003
Clayton Johnson: Right. If we had to put it in there I guess we'd have to say spring because we
can't, sitting here tonight we can't say they're going to let us do it in Deo?dnb~. We're going to
try, but I can't say that they will.
Furlong: Okay. Other questions at this point? For either slxflt' or the applicant. Okay. If not
we'll bring it back to the EDA then for discussion. Is there any discussion?
Lundquist: Any particular order you want to go in?
Furlong: No. If you've got some points go ahead.
Lundquist: I guess in the interest of urgency, I'd have to go along with Mr. Peterson's comments
about the earnest money. I concur that a little more incentive wouldn't hurt. I would like on
Section 4.1, ~ in the urgency clause, to remove the extension of 30 day possibility on the
November 14* day.
Ayotte: Say that again.
Lundquist: On Section 4.1, we would allow to have 30 day extension provided the buyer is
diligently pursuing the satisfaction of required actions, lid like to remove that 30 day clause.
You know November 14~ is 5 ½ months away so although the calendar seems aggressive, I've
got to believe we can do it faster and short of you know taking a lot more earnest money, I would
think that by removing that 30 day extension, that we have that on them and I'm still not getting a
warm fuzzy that we're going to get this thing going ms fast as we'd like to, and again just with the
things around perspective tenants. Not getting those things done by Septeaxtb~r 3ffh. Not
knowing when we can get the demolition do~. Not knowing when the party wall's going to get
done and not wanting to pin down dates. I mean Fm just not getting a real warm fnzzy that this is
something, I realize that both Kraus-Anderson and Bloomberg are going to invest a substantial
amount of resoumes and time into this thing but I don't want to be here a year from now
wondering why there's not a hole in the ground yet. I see 5 ½ months of time and some
conditions that don't look like they're stretc~ to me and less than one percent earnest money
and I think that's not enough pressure. So whether or not we want to naa conditions or what,
that's my thoughts and opinions but it's a fairly, see what everyone else want~ to do.
Furlong: Okay. Other comments.
Peterson: Yeah, I would probably parallel Councilman Iamdquist's perspective. I think moving
it to $20,000 earnest money is just another help. If it only maims me feel better, I think it's
appropriate. That, because I do believe that it will incent, it makes it a little bit wugher to walk
away from it if he doesn't follow through so. Moving the target dates, I probably don't feel that
as strongly as Mr. Lundquist just because I think you know unless we call some special meetings,
which I'm certainly open to do to expedite the process, knowing that we've got an issue with
December, I'd like to get that building down in November too so if we can, if we need to call a
special council meeting, EDA meeting and/or Planning Commission meeting, lim certainly
willing to invest time into thaL As I think that the Planning Commission would too if they. I
think everybody that drives by there wants to get that building down so let's think outside the box
and do some special meetings. If we're holding up the scenario, then let's stop that and let's
make this a priority.
Furlong: Okay.
Economic Development Authority - May 27, 2003
Ayotte: I have a question of staff if I may.
Furlong: Sure.
Ayotte: With regard to the time table, and there's a direct correlation between the business of the
Planning Commission and the ability to meet the schedule. Correct or no?
Gerhardt: I don't think the Planning Commission's schedule is time consuming. My points were,
the project being complicated and you may need a second or a third meeting to handle some
issues to get questions back. It's, a second issue is notifying other government agencies. We
need 30 days to send notice to the DN1L to the Watershed District. To the County and a few
other ones.
Ayotte: I guess that's my questiom If there are other agencies that have an impact on the
schedule that's outside of our ability to control is that the case?
Gerhardt: Yes.
Ayotte: So if that's the case then how can we tighten that schedule if we don't have control of the
agents that would i~ the schedule? Do we put language into an agme~mm that says if the
SWMP is the slicking point then it provides some sort of extension of the schedule. How do we
deal with that?
Peterson: We get to the point where we submit it to them earlier than we would have otherwise.
Gerhardt: I'm going to go the expert on this. Let Kate...
Aanenson: This is a very complex, just so you understand, even doing Chipotle, internally in
staff we worked with them several months before you even see it so this is a very aggressive
schedule. All the parties involved are used to working on this type of process. We've met with
them and what we've said to do is we're going to go to the Planning Commission on the 17~ and
give a similar presentation as they gave here to get an early read because they want to do
something a little bit different so what we're trying to do is frame up the issues that we have so
the Planning Commission again has time to digest and give them good directiom So the
complexity comes in is that there's a lot of different layers. The Planning Commission hasn't
done a lot of redevelopment. This is all new. There's a lot of diffeaa~ layers there that they have
to understand. The parking arrangement. Who's involved. Who's not involved. Developing,
suuctming the PUD. Just doing the PUD itself, which is the whole framework for that, we're
going to measure the design by, is going to take a meeting. Just because there's a lot to review.
So after we all agree that, after the first meeting on the 17~, which we met today to gear up for,
then they'll refine that Come back with the design standards. A complete applicafiom Several
drawings, landscaping, everything for that first meeting, but I doubt we'll get throu~ the site
plan and the PUD that first meeting. More than likely we'll just get through the PUD. Get
concurrence on that and the second part of that meeting we will go through the site plan. Can it
get done in one? Possibly, but I just think that' s just a lot to ask.
Ayotte: Then to Craig's point then, ff because traditionally we have learning curve, we have
outside agents, if we were to try to accelerate schedule, is it reasonable to suspect that we could
reduce risk to the agreement with an increase in the number of meetings and more focus by staff,
Planning Commission, Council, EDA to do that?
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Economic Development Authority - May 27, 2003
Aanenson: Sure, and I think we agreed on that today. They're willing to do thac Again the best
thing we can do is go to the Planning Commission early and get some concurrence on the types of
materials and tell them what they're trying to accomplish so everybody's on bomxl. With that
they're certainly willing to keep in contact with staff and we'll be working with the Planning
Commission so we're again not just dropping something complex in their laps so I think we're on
the same page on that.
Peterson: To support Kate's position, I think I wouldn't be mn'prised if we have one separate
meeting just on design standards.
Aanenson: Right, that' s what I'tn saying, right.
Furlong: And excuse me, the we being the Planning Commission or the EDA or both?
Peterson: Planning Commission.
Aanenson: But I don't think giving it back, when they get a complete application, that is going to
include all the civil's, everything so I don't think if we have to have a special meeting, it looks
like it's going to take three and we want to stay within the time fork, as a Planning Commission,
have we ever done...sure. It's just understanding the complexity of the project ~
redevelopment this Planning Commission hasn't done too many of those types of proj~. So
there's just a lot of underlying issues. So, and it's not going to be a ~ issue.
Furlong: Other discussion. Mr. Bolm, anything? Mr. Labatt?
Labatt: Just a quick question to Mr. :lotmmn. Is $20,000 a problem?
Clayton Johnson: No. I just want everybody to understand that it's not...that's the smallest part
of our investment Our risk_., spending money hand over fist.
Labatt: Yeah, and okay. I'm fine with the schedule and I'd lil~ to actually, did the extea~on or
30 days I think is fair. You know who knows what can happen with the DNR, as slow as they are
and things are getting cut and staff is getting cut. If they need it, then Fm fine with it. I don't
want to do too much more chopping here, but I'm okay with increasing the earnest money to
$20,000. 4.1, leave the same. And then 12.7 1 believe, I guess I would just let the lawyers and
Mr. G-~rhardt and Mr. Miller work through that la~ on this evening or tomorrow and come up
with something and then let's sign it.
Furlong: Okay. It's just from co~. I think the issue on the earnest money I would agree
with Councilman Peterson, Lundquist and I. abatt, that that's appropriate and I appreciate that
And since this is the smallest portion, would more be okay then? No, that comes later. That
comes later. The time~ I fully appreciate Mr. Lundqulst's concern to get this done. I think that
was expressed at our last meeting. It seems like a long time to me but Fm going to defer to our
experts here in terms of getting it done and if they feel it's accelerated then I trust them on that. I
don't think it's in anybody's desire to delay thi~. I think it's in everybody's desire to get it done
and clearly our's. For that reason I think with regard to !an~a_ge on 12.7, since that, and I'll
defer to the attorneys here on language but that paragraph speaks of seller's default as opposed to
seller completing everything and then just not showing up, so I think with regard to default, I do
have a problem including specific perf~ce in there. If there is, I mean if it's a deal ~
on the part of the buyer to include specific performance, if we do everything and just don't show
up, then I would expect that would be mutual on the buyer default. That either we strike the
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Economic Development Authority - May 27, 2003
specific performance language in it's entirety, which I think would be cleaner and appropriate, or
we make that mutual simply because this speaks to the seller's default in this paragraph as
opposed to, you know if we do everything and are not in default, we just can't ~ to find the
closing, which is not too, which doesn't seem likely to me so I guess my preference would be to
strictly, to simply strike that sentence on buyer may seek specific performance. Keep it clean in
terms of the earnest money and to me that's more simple. If that is a problem, then I would
suggest that we have mutual specific performance language on the part of the seller too. So I
guess I would ask that question Mr. Rice.
John Rice: It's simply, and given the intensity with which this body wants to see that ~
sold and developed, I can't imagine you're not going to come to the closing if everything's all set.
And you'd probably like to see the money as well as getting that property redeveloped. But it's
the one protection that a buyer has. The buyer has really, there's no suit for damages here in the
event of a breach~ There's only one protection that we're asking for. That is if everything's all
set and you haven't terminated the purchase agreement, and we're not in default, then you've got
to come to the closing. And the only way to enfc~ that is specific performance. Can't make
you clean up, we can't make you tear down the building. All we can make you do is come to the
closing. That' s all. But that's all. It doesn't have anything else. It doesn't have attorney fees. It
doesn't have damages, it just says you've got to come to the closing or else you've got to respond
to the court order that says give them a deed because they gave you the money. That's all it is.
And that's the only protection the buy's got here. And the buyer, if we're not going to not show
up at the closing. If things aren't going right you're going to get a notice that the contingency has
not occurred and that we have to terminal. So that's not going to come. That's not going to
come. Because, especially with the in~ earnest money, if there's any problem at all, if
they're worried about that smallest part of the investment, then they're going to terminate and not
spend any more money or take any more risk. That's the way, that's the way they work. That's
just the way that the commercial purchase agreements are done. I mean sometimes if somebody's
got some huge leverage then there's damages but we don't want to seek damages and we don't
want you to seek damag~ against us. We want to level it out, make sure that this deal is both
sides have the incentive to get it done. That's all. And I don't lilce to be here talking about suing
you for specific performance but it is the only protection that the buyer has. With any seller.
And that's why it's important.
Furlong: Okay. Do you have any comments on that? Mr. Scott.
Tom Scott: Well I guess Fd agree with Mr. Rice that without that then we would have the ability
at the end of the game to seek and take your deposit back. And not perform, but as you indicat~
Mr. Mayor, I don't see any reason why we shouldn't have rmm~ul specific perf~ lan~g~
to encourage, and I agree with Mr. Rice. It's probably highly i .mpro~le that his client would get
to that point and then not decide not to go ahead with the deal, so it's highly i .mprobable. It's also
highly improbable that we would not perform at that point and stage so my recommena~tion
would be in the highly improbable event from both sides, that both sides would agree to a mxmml
specific performance provision and I would think that's fairly standard and should be acceptable
to everyone.
Furlong: Okay.
Peterson: I heard them say okay.
Furlong: Did they say okay?
12
Economic Development Authority - May 27, 2003
Labatt: He nodded.
Furlong: Okay, mutual. Under those.
John Rice: Again, not because we mess up...
Furlong: Not because of default on either side.
John Rice: ...between, we don't show up far closing.
Tom Scott: Right, I understand.
$ohn Rice: If we haven't terminated it in the night, the day before the closj'ng, we're going to be
there.
Tom Scote If I could just add, if we're going to approve thi~ subject to the a_-_orney, that we
approved by the, finally approved by the EDA far final format, just in ease there's some other.
Labatt: EDA. Also the Executive Director.
Tom Scott: EDA attorney I'm sorry. That it be conditioned upon the EDA attorney, that we need
to nxxti~ the language in 12.7 and thin generally that the EDA approve the final, EDA attorney
approve the final format of the agreement. In ease there's any other little clean-up thinL~ we ne~d
to do.
John Rice: I don't know if you want to do 2.11.
Tom Scott: Wherever that's substantive change on the earnest money, yeaE
John Rice: The earnest money and you want...letter of intent with Cinema.
Tom Scott: I don't know that we have a final motion here.
Lundquist: I don't think Clayton was amenab~ to that.
Clayton Johnson: He's th~ one you would like to be because...
Peterson: I think to your point that you're m~fivated from a tax perspective to make it happen,
that's self motivation.
Furlong: Puts some motivation ~ exactly. I think the issues that I heard from substantive
standpoint is the earnest money changing from 10 to 20 likelihood, and then subject to the
agreement of the attorneys to adjust language in whatmter paragraph~ necessary, 12.7, 2.11, 12.6,
wherever they want, with regard to mutual ~e perfommnce. Not under default but simply if
all conditions are agreed to and whatever tim amameys agree to there, I think they understand the
sense in terms of mutual specific perf~ Okay. And to that end is them any other
discussion or comments?
Bohn: I have one question. How long is it going to take to tear that bowling alley down? I know
when we tore, remodeled it far the bowling alley it was a printing company and they went
13
Economic Development Authority - Mary 27, 2003
through a lot of concrete for those trusses t~ sit om It was a long process t~ tear that building
down for a bowling alley.
Labatt: Probably a couple weeks. Two weeks to tear down all the way.
Furlong: It depends on what date they start in December.
Labatt: And if they can get through all the movie goers.
Furlong: That's fight. That's right. It depends on how far before December 31't. Any other
discussions I guess at this point or questions? ff not, is there a motion?
Labatt: I'll recommend that EDA approve the attached purchase agree~nent with the amendment
showing that the earnest money has now been changed to $20,000 instead of $10,000. And the
verbiage in 12.7 being mutually agreeable between the EDA attorney and the attorney for
Bloomberg. Is that okay?
Furlong: Yep. I guess providing the, Tom do you?
Tom Scott: Yeah, if we could just have a, just a gcne~ final review of the format from a legal
standpoint by the EDA attorney, lust in case there's some other.
Labatt: Okay, and final approval of the EDA attorney.
Lundquist: And that would include more than 12.7 and 2.11 that has to dealt with in other.
Furlong: I think the other.
Furlong: The appro~ paragraphs for mutual specific performance, as limited in that regard as
explained. Okay. With that is there a second?
Bohn: Second.
Furlong: Is there any discussion on the motion?
Ayotte: Heavens no. We've got two more to do.
Furlong: ff there's no further discussion we'll call the question without objection.
Labatt moved, Bolm s~onded that the EDA approve the bowling alley purchase agr~ment
with Bloomberg Companies amended to change Section 2.1, the earnest money amount
from $10,000 to $20,000; to change the appropriate paragraphs with respect to mutual
specific performance not due to default; and with final approval by the EDA attorney. All
voted in favor and the motion carried unanimously with a vote of 6 to 0.
Furlong: Are we going to see that Mr. Scott, tomorrow? Do you think if that language is drafted,
generally ~, are we going to have that ready for signature tomorrow?
$ohn Rice: Kelly is telling us what to do and Schmekpepper is ~g it so yeah...
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Economic Development Authority - May 27, 2003
Tom Scott: I would think by tomorrow or the next day.
Furlong: Okay.
CQNSIDER RFP FOR RED-E-MIX SITE.
Miller: Good evening again. At the last EDA meeting if you remember we had a represeotative
from New Horizons Daycare approach the city about building a new location on the former Apple
Valley Red-E-Mix and Taco Shoppe. I think that was generally well received but it was also the
direction of the EDA to send out an RFP to see what other ideas might be out there for the site.
So staff has developed an RFP with the guiding principles that we hemxt from the EDA as well as
what staff believes should be there and incorporated into the RFP. We have a list of 10 or so
developers ready to send thin out to tomorrow, pending approval tonight. It has about a month
turnaround timeframe. I would probably recommend, I believe on the draft you have it says that
we, staff would like to have these back by June 20th. I would recomnmnd that we probably push
that back to June 30~. We are in the ~ of getting a survey for this property right now. That
will give the developers a little bit more time to have exact dimensions on thin PmtxnXy. As well
as giving them some more time to develop...retum the product to us and with the hopes of
bringing it back to the EDA for another review on July 14~. So staff would recomme~l approval
of this RFP and we'd be happy to take any questions.
Furlong: Questions.
Peterson: Your list of developers, how do we, when you said 10. Why isn't it 30?
Miller: Well you've had some interest in thin site already by 3 or 4 so they're definitely on there.
Just developers that have sent in different proposals or that we've spoken to in the past that are
looking for office space. So it will be out in the public domain so we'll probably get ques'dons
about it just like we got some about the bowling alley, so we'll, that's by no means a limit of 10.
It will be expanded to whoever requests one.
Lundquist: Maybe we can put an article or in the Villager to, as well for public. Non-solicited
public input if you want to call it that
Miller:. Sure.
Peterson: Second question. Purchase lrrice. We've had this, is $9 enough? Is it not7 How
comfortable are you with this one that we say that $9 is kind of the minimum but should we say
$9.50? Should we say $9.757
Miller.. I think probably we've seen everything in town recently go from 9 to 11 so if we wanted
to maybe put a range in there that the City expects to receive from $9 to $11. That way people
don't come in at $9. They all come in at 9.
Peterson: I think there's an expectation that when somebody buys something from the city
they're going to get a deal. You know and that we're not as market driven as anybody else and I
think we should be as market driven and if we all agree with that So to that end I think to your
point, I think a range is, or go with median instead of the range.
Ayotte: Well the range will sharpen the pencils rather than.
15
Economic Development Authority - May 27, 2003
Furlong: I'm sorry, your suggested range was?
Miller: 9to 11.
Labatt: Do we even want to say in here that the City expects $9 per square foot? Why are we
even saying that? I mean that's only $975,000 for 2 ½ acres of land. I mean why would we, see
what they'll pay us.
Lundquist: Well it might save us time weeding them out too. Some guy might come in with
some ridiculously low, we'll offer you $300,000 or something.
Gerhardt: Seen that before.
Peterson: If we listed it with a broker Steve we'd list the purchase price.
Gerhardt: You've got to give them a starting point. I mean we want to put, you always have to
have at least a minimum in there. And I guess we as~ the minimum was 9. That's what we
sold Chipotle for and we wouldn't consider anything under the 9.
Aanenson: It's got limited access.
Furlong: Well but it's got visibility, but limited access.
Aanenson: Right, so it's hard for a retail, and that goes back to what Justin. The people that
we've talked to, it doesn't have the right access for a retail use so that's affecting some of the
people.
hmdquist: Well we've said in here that no retail will be accept~ so we've.
Aanenson: But the people that are lookin~ at it for retail don't want, they have the trip and it's
hard to get into so, because we talk to those people and they want.
Millen. You're also lookinE, this is again a redevelopment site so it's a little bit hard...just the
size of the loc The configuration. It's narrow. The orientation of the building's going to be a
little bit more difficult- Where you place the parking.
Furlong: Because of the.
Miller: Because of the railroad right-of-way, traghway 5. The existing pedestrian bridge.
Furlong: Okay. It's a little harder to build.
Miller:. Little bit harder.
Furlong: Well and I think that perhaps speaks to a range as Ol~msed to a mininum~
Lundquist: We could make the range wider. That would open it up to getting somebody to come
in with more possibly.
Furlong: I guess the question is are we looking to sell at any price, or are we looking to.
16
Economic Development Authority - May 27, 2003
Gerhardt: ff you want to up the minimum, you can do thsc If you think $9 is too low, again it's
got real limited access. It's got huge exposure and fox some uses, you know you probably
wouldn't think is appropriate that yon probably won't allow there that's probably willing to pay
12 to 13 but aren't uses that you want to see there.
Ayotte: I'd like to see a range, I really would. And just because we stop there with the range,
that doesn't limit our ability to be more scrutinizing down the road.
Peterson: ff we get multiple people interested, that's helps too so I think the range is fine.
Whether it's $9.25 ox $9.50 or. I think $9 is cheap. So maybe says we should start at $9.50 and
if someone wants to, it doesn't mean they're going to offer less.
Furlong: $9.50 to what?
Peterson: 11.
Furlong: Okay. Other comments, questions on the dm/L Okay, I think those are the isslles. I~
there a motion?
Labatt: To adjourn?
Furlong: I'm asking for a motion.
Lundquist: I don't think ~'s a motion exc:el3t to direcL
Furlong: Well I think: do we want to approve the ~
Gerhardt: It would be nice just so we have direction...
Furlong: We like being nice. Alright.
Lundquist: Okay. Motion to approve the attached RFP with changes to due day on June 30~ and
range from $9.50 to $11.00 a square foot.
Ayotte: And change the suspense date to June 30~.
Lundquist: Yeah.
Furlong: Any discussion on the motion? Hearing none we'll call the question without objection~
Iamdquist moved, Labatt seconded that the EDA approve the RFP for the Red-E-Mix ~ite
amended to change the due date to June 30, 2003 with a range of $9.~0 to $11.00 per square
foot. All voted in favor mui the motion carried ummimously with a vote of 6 to 0.
APPROVAL OF MINUTE~: Lundquist moved, Ayotte ~eonded to approve the Mlnutes of
EDA meeting dated May 5, 2003 as presented. All voted in favor and the motion carried
with a vote of 6 to 0.
17
Economic Development Amhority - May 27, 2003
Labatt move~ A yofle seconded ~o adjourn the meeting~ Ail voted in favor and the motion
carried. The meeting was adjourned at 9:30 p.m.
Submitted by Todd Gerhardt
Executive Director
Prepared by Nann Opheim
18