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Home My WebLink About2018-07-13 HRA Recessed Meeting Agenda_Continued from June 28_July 13 Recessed to July 16 Page 1 MINUTES OF REGULAR MEETING OF THE EDINA HOUSING AND REDEVELOPMENT AUTHORITY JUNE 28, 2018 7:30 A.M. I. CALL TO ORDER Chair Hovland called the HRA meeting to order at 7:33 a.m. II. ROLLCALL Answering rollcall were Commissioners Fischer, Staunton, Chair Hovland, and Brindle, Stewart. III. APPROVAL OF MEETING AGENDA Motion made by Commissioner Brindle seconded by Commissioner Staunton approving the Meeting Agenda. Ayes: Brindle, Fischer, Hovland, Staunton, Stewart Motion carried. IV. COMMUNITY COMMENT – None. V. CONSENT AGENDA ADOPTED Motion made by Commissioner Fischer seconded by Commissioner Brindle approving the consent agenda. V.A. Minutes of June 14, 2018 Regular Meeting, and June 18, 2018 Special Meeting. VI. REPORTS/RECOMMENDATIONS – (Favorable vote of majority of HRA Board Members present to approve except where noted). V.A. RESOLUTION NO. 2018-05 NAMING FRAUENSHUH, INC AS PREFERRED DEVELOPER FOR 5146 EDEN AVENUE City Manager Neal explained staff was looking for the Commissioners’ direction on whether to proceed with the agreement with Frauenshuh, Inc. and where the HRA stood on the issues outlined in staff’s report. Economic Development Manager Neuendorf reviewed Resolution No. 2018-05, described the redevelopment planned for the site, noted several third-party services to be completed, reviewed staff’s recommendation, and the two changes requested by Frauenshuh, Inc. Commissioners discussion included developer’s requested changes; what costs the HRA would incur if the HRA decided to move forward with Frauenshuh as preferred development partner; explanation of land price, including sale and repurchase of a portion, and area roadway improvements. Dave Anderson, Frauenshuh, Inc., answered questions of the Commissioners. Mr. Anderson said the cost per acre land price was a fair comparison to the nearby Trammell Crowe redevelopment; he said product variables such as levels of density, senior living, public space, also would drive the price of land. Mr. Anderson said Frauenshuh was assuming risks by developing the public green. Mr. Anderson stated Frauenshuh’s two requests (payment of City’s third-party costs of preparing the TIF Redevelopment Agreement, and the project schedule), were not deal-breakers. Motion made by Commissioner Staunton seconded by Commissioner Fischer approving Resolution No. 2018-05 naming Frauenshuh, Inc. as the preferred developer for 5146 Eden Avenue and extend the existing agreement 90 days. Commissioners discussed the challenges of balancing public and private redevelopment; the continuing parking challenge; and the ability to extend the timeline. Mr. Anderson agreed to an extension of the timeline. Minutes/HRA/June 28, 2018 2 Motion made by Commissioner Staunton to amend the previous motion by amending Resolution No. 2018-05, Paragraph 5, deleting “as amended in accordance with the attached Exhibit B.” Commissioner Fischer agreed to the amendment. Motion by Commissioner Staunton seconded by Commissioner Fischer added further amendments to the original motion approving Resolution No. 2018-05 naming Frauenshuh, Inc. as the preferred developer for 5146 Eden Avenue; adding the following new sentence to Resolution No. 2018-05, Paragraph 3, ‘The designation is conditional on agreement by Frauenshuh, Inc. to an extension of the term of the agreement for 90 days;’ and Paragraph 5, deleting ‘as amended in accordance with the attached Exhibit B.’ Ayes: Fischer, Hovland, Staunton, Stewart Nay: Brindle Motion carried. V.B. TAX INCREMENT FINANCING FOR PENTAGON PARK SOUTH, 4815-4901 WEST 77TH STREET AND 7710 COMPUTER AVENUE Mr. Neuendorf said staff were at an impasse with developers Chase Real Estate and Hillcrest Development and on four major issues. He said staff was firm on their position and was looking for clear direction from the Commissioners so that the developers could decide whether to continue negotiations or withdraw their proposal. During Commissioners discussion, Jay Lindgren, Dorsey & Whitney, noted the developer was taking a significant risk, while the HRA’s risk was over-committing TIF. He said a TIF note of $18.1 million on a retail development of $25-$30 million was not enough increment to pay back the TIF. He said this was not good public policy because it far exceeded the return. Mr. Neuendorf was asked what the outcome would be for the City from this project and he said the concept of the Gateway would be started with the construction of all of Phase 1, and incentive to construct Phase 2 with the second TIF note, plus, sidewalks, parking, and a large public plaza. Tony Gleekel, council for the developer, addressed the HRA. Mr. Gleekel stated his clients would be investing $20 million within the first 12 months and had commitments from two hotels; however, they were concerned they could lose the commitments if an agreement was not reached soon. He said reaching an agreement was difficult because of several issues some of which were the 5-year rule that has already started, uncertain business terms, accruing interest, unique project for the oversized TIF requested, etc. Mr. Gleekel said the project was unique and compared it to Centennial Lakes redevelopment. Motion by Commissioner Brindle seconded by Commissioner Stewart to recess the June 28, 2018, meeting until July 13, 2018, 7:30 a.m. Ayes: Brindle, Fischer, Hovland, Staunton, Stewart Motion carried. Meeting recessed at 10:07 a.m. V.C. TAX INCREMENT FINANCING FOR PENTAGON PARK NORTH, 4600-4660 WEST 77TH STREET VII. CORRESPONDENCE VIII. HRA COMMISSIONERS’ COMMENTS IX. EXECUTIVE DIRECTOR’S COMMENTS X. ADJOURNMENT Minutes/HRA/June 28, 2018 3 Respectfully submitted, ___________________________________________ Scott Neal, Executive Director Dorsey & Whitney Draft June 25, 2018 Pentagon South Term Sheet June 28, 2018 DRAFT Page 1 Pentagon South Term Sheet between Housing and Redevelopment Authority of Edina, Minnesota (the “Authority”) and [Solomon/Pentagon JV entity] (“Developer”) Draft: June 28, 2018 A. Summary of the Project (1) Purpose and Scope (a) This term sheet outlines the Authority’s and Developer’s general expectations for the redevelopment and improvement of the approximately 12.1 acre “South Parcel” of the existing Pentagon Park Tax Increment Financing redevelopment district (the “TIF District”), legally described on Exhibit 1 (collectively, the “Redevelopment Site”). The general terms agreed upon in this Term Sheet will be expanded in a formal redevelopment agreement or an amendment to the Master Agreement (as defined herein) among the city of Edina, Minnesota (the “City”), the Authority, and Developer (“Redevelopment Agreement”). (b) The redevelopment of the “South Parcel” as described herein is anticipated to be the first step in the creation of a vibrant, mixed-use destination and southwest gateway to Edina, and serve as a catalyst to revive and attract additional investment to the rest of Pentagon Park and the surrounding area. The Project will promote the growth of property tax base, new business and employment opportunities, new lodging opportunities, and new services for area residents and employees. The Project will also include improved public realm, sidewalks, bicycle infrastructure, transit stations, public art, landscaping and enhanced opportunities for connection to the Fred Richards Park. (c) The Redevelopment Site is currently owned by Pentagon South LLC and JUD, LLC, each an affiliate of Pentagon Revival, LLC (“Master Redeveloper”) and is subject to an existing Master Redevelopment Agreement between the City, the Authority, and Master Redeveloper, dated May 20, 2014 (“Master Agreement”). Capitalized terms not defined herein have the meaning ascribed to such terms in the Master Agreement. (d) The parties acknowledge that the Project is contingent upon (i) the transfer of the Development Site from the Master Redeveloper to Developer and (ii) the release of the Redevelopment Site and the Master Redeveloper from the Master Agreement pursuant to an amendment to the Redevelopment Agreement in a form mutually acceptable to the City, the Authority, Developer and Master Redeveloper. Dorsey & Whitney Draft June 25, 2018 Pentagon South Term Sheet June 28, 2018 DRAFT Page 2 (e) The Authority and Developer intend that certain improvements necessary to support redevelopment of the Redevelopment Site will be installed by Developer subject to reimbursement the Qualified Costs (as defined herein) through tax increment financing (“TIF”) from the TIF District and the requirements of the Minnesota Statutes Section 469.174 to 469.1799, as amended (the “TIF Act”). (2) Description of the Project (a) Developer anticipates that the Redevelopment Site will be redeveloped in two phases. (1) The first phase (“Phase I”) will consist of the following improvements (collectively, the “Phase I Minimum Improvements”): - a 4-story, approximately 193-room dual-branded hotel, with associated surface parking (“Hotel Element 1”); - a 4-story, approximately 153-room extended stay hotel (“Hotel Element 2”); - an approximately 390-space parking structure, integrated into Hotel Element 2 (“Phase I Parking Element”); - an approximately 7,500 square foot retail/restaurant building and a 4,300 square foot retail/restaurant build, with associated surface parking (collectively, “Retail Element”); and - an approximately one (1) acre green space/plaza area (“Plaza Element”); and - Site preparation, soil correction costs, demolition, abatement and environmental remediation for that portion of the Redevelopment Site which is not otherwise developed as part of the other Phase I Minimum Improvements (“Phase II Site Work”). (2) Developer currently anticipates that, based on market conditions, the second phase of the redevelopment of the Redevelopment Site (collectively, “Phase II”) will consist of the following improvements: - an approximately 19,000 square foot retail/office building, with associated surface parking (“Retail/Office Element”); - an approximately 5-story office building containing approximately 125,000 square feet (“First Office Element”); and - an approximately 5-story office buildings containing approximately 100,000 square feet, with an integrated 1,155-space parking structure (“Second Office Element”). Dorsey & Whitney Draft June 25, 2018 Pentagon South Term Sheet June 28, 2018 DRAFT Page 3 Approval by the City Council of a resolution and final PUD ordinance (including the “Final Development Plan”) for Phase II (“Final Phase II Approval Resolution”) will control the Phase II improvements constructed by the Developer, including, without limitation, land use (including a mix of uses, including, without limitation, retail, office, hospitality and multi-family residential uses), the proposed densities on each parcel, other Phase II details. The details included herein are merely estimates and not requirements. Except for the Phase II Site Work and the Phase II Soft Costs (defined below), costs incurred for Phase II will not be eligible reimbursement under the Redevelopment Agreement. Phase I and Phase II are collectively referred to herein as the “Project”. The parties anticipate that the Phase I Minimum Improvements described herein will replace the “Phase IA Minimum Improvements” and the “Phase IB Minimum Improvements” under the Master Agreement. A preliminary site plan for the Project is attached as Exhibit 2. [Need site plan which depicts Phase I and Phase II] (b) The Project will be developed as a planned unit development (PUD). The Preliminary PUD was approved by the City on June 5, 2018 pursuant to the Resolution (No. 2018-50) attached hereto as Exhibit 3, including the draft PUD Ordinance 2018-11. The Redevelopment Agreement is conditioned upon approval by the City Council of a resolution and final PUD ordinance (including the “Final Development Plan”) for Phase I (collectively referred to as the “Final Phase I Approval Resolution”) which is consistent in all material respects with the Phase I Minimum Improvements described herein. (The Final Phase I Approval Resolution is anticipated to occur at the City Council’s July 17, 2018 meeting.). (c) The City and Developer will negotiate a separate “Development Contract” containing the City’s land use and engineering regulations for Phase I, which is currently scheduled for consideration by the City Council on July 17, 2018. (d) A more detailed description of the proposed land uses and densities for the Project and projected Project schedule is included in the Project narrative, which is attached as Exhibit 4). The development objectives summarized in the Project narrative for Phase I will be included in the Final Phase I Approval Resolution; including, without limitation, land use and densities on each parcel. The Final Phase I Approval Resolution will control the improvements constructed by Developer for Phase I; provided, however, the Redevelopment Agreement is conditioned upon the Final Phase I Approval Resolution being consistent in all material respects with the Phase I Minimum Improvements described herein. (3) Budget; Financial Assistance Dorsey & Whitney Draft June 25, 2018 Pentagon South Term Sheet June 28, 2018 DRAFT Page 4 (a) The total cost for all private development and public infrastructure elements of the Phase I Minimum Improvements is estimated to be approximately $70,600,000. Developer’s sources and uses for all such costs are set forth on the attached Exhibit 5 (the “Sources and Uses Budget”). (b) Developer is requesting $18,019,269 in TIF assistance from the Authority as reflected in the Sources and Uses Budget. (c) The total cost for all private development and public infrastructure elements of Phase II is estimated to be approximately $79,200,000. B. TIF Assistance (1) Basic TIF Requirements (a) As part of the TIF assistance process, and prior to issuance of each TIF Note, Phase I and the Project as a whole must be evaluated and the “but for” must be demonstrated. Developer will prepare a current annual revenue and expenditure pro forma for Phase I and the Project as a whole (each a “Pro Forma”) and a current Sources and Uses Budget prior to execution of the Redevelopment Agreement, prior the issuance of each TIF Note (as defined below), and such other times as requested by the Authority in accordance with Section (B)4 (Look Back Provisions) below. Each Pro Forma must demonstrate the need for TIF assistance. The Sources and Uses Budget must show an amount of applicable Qualified Costs equal to or greater than the principal amount of each TIF Note. (b) Any TIF assistance and costs eligible for TIF reimbursement must be in accordance with the Authority’s Tax Increment Finance Policy, dated April 19, 2011 and the TIF Act. (2) Five-Year Rule Developer acknowledges that July 15, 2019 is the end of the five-year period following certification of the TIF District and such date is the deadline for Developer to expend Qualified Costs, enter into binding contracts for TIF-eligible costs, or otherwise comply with the requirements of Minn. Stat. section 469.1763, Subd. 3 (the “Five-Year Rule”), in order to be reimbursed for such costs in accordance with the Redevelopment Agreement and TIF Note. Such costs which are not expended or otherwise incurred in accordance with the Five-Year Rule by such date will not be eligible for TIF reimbursement and the Authority will have no obligation to otherwise reimburse Developer for such costs. (3) TIF Note; Reimbursement of Qualified Costs; Administrative Costs (a) The Authority will reimburse Developer on a pay-as-you-go basis through two TIF notes (each a “TIF Note”, and, collectively the “TIF Notes”) as follows: (1) one TIF Note in the maximum principal amount of $14,400,000 (“TIF Note A”) and Dorsey & Whitney Draft June 25, 2018 Pentagon South Term Sheet June 28, 2018 DRAFT Page 5 (2) one TIF Note in the maximum principal amount of $3,619,269 (“TIF Note B”). (b) The Authority will reimburse Developer through the TIF Notes only for costs incurred by Developer which are authorized under state law and approved by the Authority pursuant to the Redevelopment Agreement (collectively, “Qualified Costs”), plus simple interest at a rate of six percent (6%) annually in accordance with each TIF Note. (c) The Authority will issue TIF Note A for Phase I Qualified Costs (as described in subsection (f) below) up to the maximum principal amount for TIF Note A stated above. (d) The Authority will issue TIF Note B for Phase II Qualified Costs (as described in subsection (f) below) up to the maximum principal amount for TIF Note B stated above. (e) The terms of the TIF Notes will be included in the Redevelopment Agreement and issued pursuant to the terms thereof. Accrual of interest and payment on the unpaid principal balance of each TIF Note will commence upon the satisfaction of the conditions set forth in Section B(3)(l)(1) with respect to TIF Note A and the conditions set forth in Section B(3)(l)(2) with respect to TIF Note B. The Authority shall take all reasonable steps to promptly issue each TIF Note after Developer’s satisfaction of the applicable conditions, as time is of the essence. (f) Qualified Costs for the Project are identified in the Sources and Uses Budget and will include the following (subject to Developer expending such Qualified Costs prior to the deadline imposed under the Five-Year Rule): Phase I Qualified Costs Qualified Costs Amount Soil correction costs $___ Demolition, abatement and environmental remediation $___ Storm water management and flood mitigation $___ Construction of public streets and trails, City right-of-way and construction of shared parking $___ Costs associated with construction of the Plaza Element Costs associated with construction of the Phase I Parking Element Pre-development planning, engineering, legal and consulting costs related to TIF and Developer contracts applicable to Phase I (collectively, “Phase I Soft Costs”) $___ $___ Dorsey & Whitney Draft June 25, 2018 Pentagon South Term Sheet June 28, 2018 DRAFT Page 6 Phase II Qualified Costs Qualified Costs Amount Phase II Site Work $___ Pre-development planning, engineering, legal and consulting costs related to TIF and Developer contracts applicable to Phase II (collectively, “Phase II Soft Costs”) $___ $___ Phase I Soft Costs and Phase II Soft Costs will be allocated between the Phase I Qualified Costs and the Phase II Qualified Costs based on the area of land contained in Phase I and Phase II, respectively. (g) The Authority will make one payment of principal and interest to Developer each six months on each TIF Note, commencing on the first February 1 or August 1 following the Developer’s satisfaction of the conditions under Section B(3)(l) with respect to the applicable TIF Note, for reimbursement of applicable Qualified Costs from 90% of the tax increment generated from the development of Phase I on the Redevelopment Site and received by the Authority from Hennepin County in the six months before each payment date (“Available Tax Increment”). The Authority will not reimburse Developer from any other revenue source nor guaranty the amount of money which Developer will receive as a reimbursement, such amount being payable solely from the Available Tax Increment. (h) Ten percent of tax increment generated from the development of Phase I on the Redevelopment Site will be retained by the Authority for administrative costs related to the planning, management and oversight of the TIF District. (i) Developer may, without the Authority’s consent, collaterally assign Developer’s rights and obligations under the TIF Note to the holder of any mortgage on the Redevelopment Site granted by Developer for the purpose of obtaining funds necessary for constructing the Project. In all other cases, the TIF Note shall not be assignable nor transferable without the prior written consent of the Authority [detail of terms of consent to be inserted]. The Authority is not responsible for calculations or payments for the TIF Note. (j) The term of the TIF Note will end no later than December 31, 2043 based on the required decertification date of the TIF District, regardless of the date of first receipt of increment. (k) The TIF Notes will be issued no later than July 15, 2019, provided that the Developer has satisfied each of the following requirements by May 15, 2019: (1) final execution of the Redevelopment Agreement and recording of a memorandum of the Redevelopment Agreement in the applicable land records; Dorsey & Whitney Draft June 25, 2018 Pentagon South Term Sheet June 28, 2018 DRAFT Page 7 (2) adoption of the Final Phase I Approval Resolution; (3) closing on Developer’s acquisition of the Redevelopment Site; (4) Issuance of grading permit and commencement of grading of entire Redevelopment Site; and (5) Issuance of a foundation permit for at least one element of the Phase I Minimum Improvements. (l) Notwithstanding the earlier issuance of the TIF Notes payment of Available Tax Increment and accrual of interest under each TIF Note will be fully conditioned upon satisfaction of each of the following requirements: (1) With respect to TIF Note A: (i) Developer providing evidence satisfactory to the Authority that the Developer has incurred Phase I Qualified Costs equal at least the amount of the requested TIF Note A; (ii) a “Certificate of Completion” for Phase I has been recorded against the Phase I property; (iii) the Authority’s receipt of an updated Pro Forma sufficient to demonstrate that the “but for” requirement continues to be satisfied; and (iv) no Developer event of default exists under the Redevelopment Agreement (following the passing of any applicable cure periods and subject to Section C(8)(b) below); (2) With respect to TIF Note B: (i) Developer providing evidence satisfactory to the Authority that the Developer has incurred Phase II Qualified Costs equal at least the amount of the requested TIF Note B; (ii) adoption of the Final Phase II Approval Resolution; (iii) Completion of at least one element of the Phase II improvements approved as part of the Final Phase II Approval Resolution; (iv) the Authority’s receipt of an updated Pro Forma sufficient to demonstrate that the “but for” requirement continues to be satisfied; and Dorsey & Whitney Draft June 25, 2018 Pentagon South Term Sheet June 28, 2018 DRAFT Page 8 (v) no Developer event of default exists under the Redevelopment Agreement (following the passing of any applicable cure periods and subject to Section C(8)(b) below). (4) Look Back Provisions The Redevelopment Agreement will include a “look back” provisions to ensure that any TIF assistance was actually needed in substantially the same form as shown in the attached Exhibit 6. (5) Fiscal Disparities Developer acknowledges that any of the Authority’s obligations with respect to “Fiscal Disparities” under Minnesota law that are applicable to the Project will be considered in calculating Available Tax Increment. (6) Timeline and Construction Phasing The chart below is the Developer’s current anticipated timeline for the construction of the Project. The commencement and completion dates for the Phase I Minimum Improvements under the Redevelopment Agreement shall be substantially in accordance with the below timeline. The actual completion of the Phase II improvements will be driven by market conditions and failure to meet the below dates for Phase II improvements will not be a default under the Redevelopment Agreement. Developer will notify the Authority of material changes to the following estimated construction dates. Developer will periodically provide the Authority with written notification related to meeting proposed construction benchmarks. A timeline for completion of all Project improvements will be included in the Redevelopment Agreement. Description of Work Estimated Commencement Date Estimated Completion Date Hotel Element 1 (Phase I) Hotel Element 2 and Phase I Parking Element (Phase I) Retail Element (Phase I) Plaza Element (Phase I) Phase II Site Work (Phase I) Retail/Office Element (Phase II) First Office Element (Phase II) Second Office Element (Phase II) C. Additional Terms and Conditions Dorsey & Whitney Draft June 25, 2018 Pentagon South Term Sheet June 28, 2018 DRAFT Page 9 (1) Public Infrastructure Improvements Developer will be responsible for the “Phase IA Public Infrastructure Improvements” and “Phase IB Public Infrastructure Improvements” in accordance with the Master Agreement and applicable “Public Infrastructure Improvements Plans”. The chart below is the current anticipated timeline for the required Public Infrastructure Improvements. Developer will notify the Authority of material changes to the following estimated construction dates. Developer will periodically provide the Authority with written notification related to meeting proposed construction benchmarks. A timeline for completion of the required Public Infrastructure Improvements will be included in the Final Development Plan approval and the Redevelopment Agreement. Description of Work Estimated Commencement Date Estimated Completion Date Phase IA Public Infrastructure Improvements (77th Street, Transit Shelters, Normandale Road and Viking/Computer Drive) Phase IB Public Infrastructure Improvements (77th Street, Transit Shelters, Normandale Road and Viking/Computer Drive) (2) Plaza Element; Plaza Easement The Plaza Element will consist of [a minimum [one acre] green space with fountains, related hardscaping and other pedestrian amenities consistent with the Final Phase I Approval Resolution], together with all sidewalks, paths, trails, and roads which provide access to the primary Plaza Element green space. While the primary purpose of the Plaza Element is to serve and support the Project and Project tenant, Developer will grant a permanent, public easement for access and use of the Plaza Element by the public, subject to reasonable, nondiscriminatory limitations, rules and regulations governing its use adopted by Developer. The Developer will be responsible for all maintenance of the Plaza Element. (3) Parking Easement Developer will grant the City a “Parking Facilities Easement” for the Phase I Parking Element to be integrated with Hotel Element 2 with the following terms and conditions, which will not materially interfere with the use of the facility by the hotel guests: [at least __ parking space available 24/7 to the public, permitted park-and-ride public use, permitted bike-and-ride public use]. The Developer will be responsible for all maintenance of the Phase I Parking Element. (4) Public Realm/Pedestrian/Bicycling Enhancements Developer will construct and install the following public enhancements and features pursuant to the Final Phase I Approval Resolution, all of which will be deemed part of the Phase I Minimum Improvements, and Developer will grant the City public easements as applicable: Dorsey & Whitney Draft June 25, 2018 Pentagon South Term Sheet June 28, 2018 DRAFT Page 10 - Public artwork in multiple locations throughout the property; - Walking and biking trails interconnected throughout the property, to the adjacent neighborhoods and to the Fred Richards Park and Regional Trail System, including crosswalks across 77th Street; - Bike parking stations, and other bicycle infrastructure including a dedicated bicycle repair facility and/or space; - EV charging stations; and - Improved transit stops along W. 77th Street. The Developer will be responsible for all maintenance of the foregoing public enhancements and features. (5) Notice of Commencement; Certificate of Completion Prior to commencing any development activities for Phase I, Developer will demonstrate to the Authority that Developer has secured adequate financing to complete the Phase I Minimum Improvements and will issue the Authority a “Go Ahead Letter”. The Authority will issue a “Certificate of Completion” for the Phase I Minimum Improvements in accordance with terms and conditions consistent with the Master Agreement. (6) City Approval of Significant Changes Changes to the Project scope and design that are inconsistent with the Final Development Plan will be subject to the review and approval by the City pursuant to applicable City regulations, and for review by the Authority with regards to Qualified Costs and Phase I Minimum Improvements. (7) Performance Bonds Performance bonds are required for all work in the public way pursuant to applicable City regulations. (8) Default by Developer or Authority (a) Standard default provisions will be applicable. The Redevelopment Agreement will include remedies to be determined by the Authority and Developer, and will include, without limitation, the right of the Authority to terminate the Redevelopment Agreement or the right to deny issuance of any TIF Note. (b) The Master Redeveloper’s default under the Master Agreement for a failure to commence “Development Activity” for a period of 24 months (under Section 6.3 of the Master Agreement), as described in the December 5, 2017 notice of default served by the Authority, shall be deemed to have been timely cured upon the adoption of the Final Phase I Approval Resolution. Dorsey & Whitney Draft June 25, 2018 Pentagon South Term Sheet June 28, 2018 DRAFT Page 11 (9) Preparation of Redevelopment Agreement a. The Authority and Developer will work diligently to prepare a Redevelopment Agreement for City Council consideration for execution on July 17, 2018. b. The Redevelopment Agreement presented to the City Council must be pre-signed by Developer. (10) Authority Out-of-Pocket Costs. Developer will reimburse the Authority for its direct cost of legal and financial consultants as well as special consultants for TIF inspections, traffic and utility studies. Reimbursement will be made within 30 days after invoicing. (11) Grants Nothing contained in the Redevelopment Agreement, nor the failure of the parties to enter into a Redevelopment Agreement with respect to the Redevelopment Site, will modify or abridge the responsibilities and obligation of the Master Redeveloper and/or the Developer under the sub-grant agreements entered into by the Master Redeveloper with respect to the below grants. Master Redeveloper and/or the Developer remain responsible for responsibilities and obligation Met Council LCDA Pentagon Revival, South Awarded $448,100 in 2014 $448,100 awarded $____ reimbursed Mn DEED # RDGP-14-0027-o- FY15 Pentagon Revival Awarded with term running 9/2014 to 12/2017; work is complete and developer has been reimbursed; project must still be delivered to satisfy outcomes in grant application $625,000 awarded $625,000 reimbursed Dorsey & Whitney Draft June 25, 2018 Pentagon South Term Sheet June 28, 2018 DRAFT Page 12 EXHIBIT 1 REDEVELOPMENT SITE LEGAL DESCRIPTION Dorsey & Whitney Draft June 25, 2018 Pentagon South Term Sheet June 28, 2018 DRAFT Page 13 EXHIBIT 2 PRELIMINARY PROJECT SITE PLAN Dorsey & Whitney Draft June 25, 2018 Pentagon South Term Sheet June 28, 2018 DRAFT Page 14 EXHIBIT 3 Resolution (No. 2018-50) Dorsey & Whitney Draft June 25, 2018 Pentagon South Term Sheet June 28, 2018 DRAFT Page 15 EXHIBIT 4 PROJECT NARRATIVE Dorsey & Whitney Draft June 25, 2018 Pentagon South Term Sheet June 28, 2018 DRAFT Page 16 EXHIBIT 5 Sources and Uses Budget Dorsey & Whitney Draft June 25, 2018 Pentagon South Term Sheet June 28, 2018 DRAFT Page 17 EXHIBIT 6 Lookback Provision Section [7.4] TIF Lookback. (a) Generally. The financial assistance to the South Redeveloper under this Agreement is based on certain assumptions regarding likely costs and expenses associated with constructing the Phase I Minimum Improvements and Public Infrastructure Improvements, as well as proceeds to be derived by the South Redeveloper from the sale and/or operation of Elements and/or Element Property. Specifically, the maximum aggregate principal amount of the TIF Notes (TIF Note A and TIF Note B) has been determined based on the amount of assistance needed to make the South Project financially feasible, as shown in the TIF Pro Forma attached as Exhibit ___. The Authority and the South Redeveloper agree that those assumptions will be reviewed at the times described in this Section, and that the amount of Tax Increment assistance provided herein may be adjusted in accordance with this Section. Such review will be based on a TIF Pro Forma. Any fees which are paid to the South Redeveloper, as reflected in a TIF Pro Forma, will be commercially reasonable and common in the market place. (b) South Redeveloper as Developer. (i) Within thirty (30) days after a Controlling Interest Transfer of any Element or Element Property, the South Redeveloper shall submit a certified cost and revenue analysis for the Controlling Interest Transfer of that Element Property to the Authority in the form of the TIF Pro Forma attached as Exhibit ___ hereto and prepared in accordance with generally accepted accounting principles. This analysis will include (1) a fair market value determination regarding the Element or Element Property subject to the Controlling Interest Transfer, and (2) without limitation, all Acquisition Costs, Stabilization Costs, Land Carrying Costs, Project Redevelopment Costs, and all other improvement costs allocated to the Element or Element Property subject to the Controlling Interest Transfer. The South Redeveloper agrees to provide to the Authority any reasonable and relevant background documentation, prepared in accordance with generally accepted accounting principles, related to the financial data, upon request. The Authority at its cost may retain an accountant to audit the submitted Phase TIF Pro Forma. (ii) The amount by which the actual IRR for a Controlling Interest Transfer shown in an updated TIF Pro Forma required under Section [7.4(b)(i)] exceeds the percentages shown in Section [7.4(b)(ii)(2) - (4)] below will be referred to as the “South Developer Excess Percentage.” The South Redeveloper will be obligated to pay to the Authority, subject to Section [7.4(b)(iii)], the South Developer Excess Percentage in an amount to be calculated pursuant to Section [7.4(b)(ii)(2) - (4)] below, plus interest calculated against the adjusted cumulative total of any amounts the South Redeveloper is obligated to pay to the Authority under this Section [7.4(b)(ii)] at a rate of 6% compounded annually until the date determined in accordance with Section [7.4(b)(iii)] (the “South Developer TIF Adjustment”). For the sake of clarity, the South Developer TIF Adjustment will be recalculated as of each date a TIF Pro Forma identified in Section [7.4(b)(i)] is submitted to the Authority for the purposes of calculating the applicable principal amount against which interest will be charged. In determining the South Developer TIF Adjustment the following shall apply: Dorsey & Whitney Draft June 25, 2018 Pentagon South Term Sheet June 28, 2018 DRAFT Page 18 (1) If the IRR realized from the Transfer of an Element or Element Property is less than 16% then there is no South Developer TIF Adjustment. (2) If the IRR realized from the Transfer of an Element or Element Property is 16% or more, but less than 18% then the South Developer TIF Adjustment is limited to 10% of the Tax Increment, as further limited in this Section [7.4(b)(ii)]. (3) If the IRR realized from the Transfer of an Element or Element Property is 18% or more, but less than 20% then the South Developer TIF Adjustment is limited to 15% of the Tax Increment, as further limited in this Section [7.4(b)(ii)]. (4) If the IRR realized from the Transfer of an Element or Element Property is 20% or more then the South Developer TIF Adjustment is limited to 25% of the Tax Increment under TIF Note A and 100% of the Tax Increment under TIF Note B, as further limited in this Section [7.4(b)(ii)]. (iii) Upon the earlier date to occur of (a) three hundred sixty-five (365) days from the Transfer of the last Element or Element Property or (b) ninety (90) days after the [twentieth (20th)] anniversary of the Effective Date, the South Redeveloper shall submit an updated TIF Pro Forma to account for all Controlling Interest Transfers subject this Section [7.4(b)], which will be subject to the calculation of a cumulative total South Developer TIF Adjustment. To the extent this amount exceeds the IRR amounts set forth in Section [7.4(b)(ii)], the South Redeveloper must pay the Authority in accordance with Section [7.4(d)] the amounts at set forth in Section [7.4(b)], less the South Developer TIF Adjustment, if any. (c) South Redeveloper as Operator. (i) For all Elements which are not subject to a Controlling Interest Transfer by the South Redeveloper, the following shall apply: (1) On each “Calculation Date”, the amount of the TIF assistance provided pursuant to this Agreement will be subject to adjustment based on a targeted annual “Cash-On-Cash Return” of 10.0% for all unsold Elements. On each Calculation Date, the South Redeveloper shall submit to the Authority a certified cost and revenue analysis for all unsold Elements in the form of the TIF Pro Forma and prepared in accordance with generally accepted accounting principles, together with any reasonable and relevant background documentation, prepared in accordance with generally accepted accounting principles, related to the financial data, upon request. The Cash- On-Cash Return shall be calculated by the Authority (or its consultant) based on the Lookback Data (to be calculated in a manner comparable to the sample attached as Exhibit ____). (2) If the demonstrated average annual Cash-On-Cash Return exceeds 10.0%, then the principal amount of the TIF Notes issued to the South Redeveloper will first be reduced by 100% of the demonstrated Cash Flow amount in excess of an average annual Cash-On-Cash Return of 10.0%, and second by an amount the results in a stabilized Cash-On-Cash Return of 10.0% over the remaining term of the TIF Notes (the “South Operator TIF Adjustment”). Dorsey & Whitney Draft June 25, 2018 Pentagon South Term Sheet June 28, 2018 DRAFT Page 19 (3) For the purposes of this Section, the following terms have the following meanings: “Calculation Date” means within 30 days after each three-year anniversary of the issuance of by the Authority to the South Redeveloper of the Certificate of Completion for the Phase I Minimum Improvements, for as long as either TIF Note is outstanding. “Cash Flow” means Net Operating Income less debt service with respect to the first mortgage loan. “Cash on Cash Return” means Cash Flow divided by the sum of South Redeveloper’s actual equity, which excludes any grants or City, Authority, Federal or State funds received by the South Redeveloper, and the principal amount of the TIF Notes. “Net Operating Income” means total income and other project-derived revenue, including payments under the TIF Notes, less Operating Expenses in accordance with each TIF Pro Forma. “Operating Expenses” means reasonable and customary expenses incurred in operating the Elements in accordance with each TIF Pro Forma. (d) If the Authority determines that either a South Developer TIF Adjustment or a South Operator TIF Adjustment (each a “TIF Adjustment”) is required, then (i) the Authority may elect to either require payment from the South Redeveloper to the Authority of the applicable TIF Adjustment or (ii) the Authority may elect to have the applicable TIF Adjustment applied to reduce the outstanding principal amount of either TIF Note A or TIF Note B, as determined by the Authority in its sole discretion (as a deemed prepayment) in accordance with the terms of applicable TIF Note. July 13, 2018 Board of the Edina Housing and Redevelopment Authority Bill Neuendorf, Economic Development Manager Tax Increment Financing for Pentagon Park South: 4815-4901 West 77th Street and 7710 Computer Avenue Information / Background: The purpose of this Staff Report is to supplement the previous materials provided at the June 28, 2018 meeting of the Housing and Redevelopment Authority (HRA). This report also builds upon the original Staff Report issued at the June 14, 2018 meeting. Since the previous HRA meeting was recessed, the City/HRA’s negotiating team has continued to meet with the Solomon/Hillcrest team in hopes of finding an agreeable compromise. Although some progress has been made, the City/HRA staff and financial and legal advisors remain hesitant to support the full funding request proposed by the developers. While the City/HRA team is fully supportive of using tax increment financing on this site, to deliver this proposed $140 million project, some critical concerns remain unresolved and are presented to the HRA Board for direction. The topics of concerns are summarized below: 6/28 Topic of Concern Current Status (7/13) 1) What is the maximum size of the TIF Note(s) that is supported by the HRA? All parties are agreeable to 3 separate pay-as-you go TIF Notes, connected to different deliverables in Phase 1 and Phase 2. Staff can support a maximum value of $18.1 million provided that interest does not accrue on the full amount upon issuance. The maximum amount of each TIF Note and the conditions that trigger interest payments remain unresolved. Direction from the HRA Board is sought regarding the size of the TIF Notes and the conditions which trigger interest payments. STAFF REPORT Page 2 6/28 Topic of Concern Current Status (7/13) 2) What is the degree of improvements that should be delivered in order to qualify for the full TIF amount? Should there be a commitment to construct both Phase 1 and Phase 2 as a condition of TIF assistance? How much of Phase 1 should be completed to initiate TIF payments? No agreement reached and the parties have not been able to find a workable compromise. The Developer is willing to commit to a minimal amount of finished buildings in order to qualify for the maximum amount of TIF reimbursement. While the Developer is taking a significant risk by making a major speculative investment, this arrangement threatens compliance with the State-mandated “but for” test. Failure to meet the standards of the TIF law would potentially invalidate the TIF Agreement. Staff has suggested using a Minimum Assessment Agreement in case the completion of the proposed buildings is delayed. The developer is not willing to commit to a full build-out and is not agreeable to an alternative like a Minimum Assessment Agreement. Direction from the HRA Board is sought regarding the degree of finished improvements necessary to receive TIF payments. Direction is also sought regarding a Minimum Assessment Agreement to ensure compliance with MN TIF Statutes. 3) Should lookback provisions be enhanced so that the general public has rights to reduce the TIF contribution if long-term profits yield greater than normal returns to the Developer? Progress has been made on this item. While specific language has not been drafted, the parties are on a path to resolve this item using clarifying examples and language from the 2014 Master Redevelopment Agreement. 4) Are the public realm improvements required to be installed as a condition of TIF payment? Progress has been made on this item. The developer is willing to provide the on-site public realm improvements as a condition of TIF payments. Direction from the HRA Board is needed on a related topic: However, a new concern has evolved. The developer has requested that the City incur public debt to construct the improvements to W. 77th Street and Computer Avenue related to this project. The developer is agreeable to paying the full cost of these improvements via the Chapter 429 Special Assessment process. While this arrangement is helpful to the Developers pro forma, it would be a departure from City and HRA policy. Typically, the City does not incur public debt to only benefit a single property owner. The TIF Policy suggests that pay-go Notes be used instead of issuing public debt to support a private project. STAFF REPORT Page 3 6/28 Topic of Concern Current Status (7/13) While this is a creative solution to a budget problem, City staff and legal counsel have mixed opinions regarding the appropriateness of this solution. Direction from the HRA Board is sought regarding the willingness to issue public debt for these road improvements and assess back to the property owner. SUMMARY AND RECOMMENDATION Direction is sought from the HRA Board so that the Developer can determine whether or not to proceed with the project. After an additional two weeks of discussion, the City and Developer’s negotiating teams have not been able to identify agreeable terms. Several updated documents are attached for your review and consideration: - Email proposal from Jay Scott with Solomon Real Estate dated July 10 - Summary of the 3 TIF Note structure supported by City/HRA staff and Developer dated July 11 – please note that the parties are not in agreement on the items highlighted in yellow - Revised Term Sheet dated July 13 – please note that the parties are not in agreement on the items highlighted in yellow The developers and their team of advisors will be available at the meeting to answer questions. The City staff, City Attorney, and Ehlers Financial Advisors will also be available to answer questions. The Special Counsel, Dorsey & Whitney is not available to attend in person, but has drafted an updated Term Sheet to reflect the issues on which all parties agree and to identify those issues that need direction from the HRA Board. Staff recommends that the HRA Board identify the terms of the public financial incentives that can be offered to the Developer while maintaining compliance with MN TIF Statutes and without setting precedents for other projects. After those terms are clearly identified, the Developer can choose whether or not to accept the City’s TIF assistance to create new business opportunities and a new gateway to Edina from Highway100. # # # STAFF REPORT Page 4 Background Information for Reference May 2018 Site Plan (granted Preliminary Approval on 6/5/2018) From: Jay Scott [mailto:JayScott@solomonre.com] Sent: Tuesday, July 10, 2018 8:05 PM To: Bill Neuendorf Subject: Pentagon South TIF Proposal Terms Importance: High Good evening, Bill. While we have made significant progress on our discussions on the TIF Terms for Pentagon South, we feel that we are unfortunately going to fall just short of being able to present a mutually supportive proposal to the HRA on July 13th. For the purposes of your staff report and so that there is no confusion or misunderstanding regarding our position (given all the back and forth discussions that have occurred), our proposal is as follows: 1. TIF Amount. $18,100,000 2. Three Notes as follows: TIF Note A - $9.0M to be issued with interest when we deliver: a. Completion of the infrastructure improvements; b. Commence construction of the two retail buildings on Lot 1; and c. Completion of the Plaza within 12-months of items (a) and (b) above. TIF Note B - $8.1M to be issued with interest when we deliver: a. Items a, b and c above (under TIF Note A); and b. Commence construction of one additional “element”. To further clarify, an additional element means any use(s) allowed under the PUD including but not limited to hotel/hospitality, residential, office, medical, retail, or some combination thereof. TIF Note C - $1.0M to be issued with interest when we deliver: a. Satisfaction of the requirements under TIF Note A and B; and b. Commence construction of one additional element. 3. The Look Back provision in the Master Redevelopment Agreement shall remain in place as previously negotiated and agreed to 4. The City will install the public improvements to W 77th Street outlined in the Engineer’s Memo dated May 3, 2018 that was part of Resolution 2018-50 more specifically defined as: Addition of a northbound left turn lane, southbound striped left turn lane and eastbound right turn lane at 77th Street and Commercial Access driveway; and Addition of a northbound dual left turn lane and eastbound right turn lane at 77th Street and Computer Avenue. The cost of these improvements will be assessed back to the five (5) lots within Pentagon Village on a pro- rata share basis in accordance with the city assessment standards. We feel that our proposal meets all prior requirements asked of us by you and your team and would ask for your support in these terms in the presentation to the HRA. We are excited about the project and look forward to getting started. If you have any questions or there is any additional information you need, please let me know. Thanks, Jay Scott Pentagon Park South – Summary of 3 Note Concept DRAFT FOR REVIEW 7-11-18 Maximum Amount Requested Deadlines to Issue TIF Notes Eligible Expenses (to be incurred prior to deadline) 6% Interest Begins TIF Payments Begin TIF Note “A” $9 million Monday June 3, 2019 submittal of expenses to City/HRA for review and confirmation TIF Note(s) issued by Friday July 12, 2019 Legislative deadline is July 15 Approx $9,148,000 Subject to City/HRA verification Site prep on 12-acres (soil correction, storm water, etc) $5.222M Demolition, abatement & remediation (complete) $822k Pre-development costs (mostly complete) $1.104M Site prep for Parking Structure #1 $1.5M Site prep for public plaza $500k Min. assessment agreement Confirm eligible expenses (completed July 2019) Begin two retail shell buildings (full building permits issued) Complete all site work (prep and pads) Deliver easement for public plaza Deliver easement for internal and perimeter public circulation routes (sidewalks, transit, etc) Anticipated Fall 2019 or mid 2020 Cert. of Occ. For both retail shells Issue Cert. of Completion “A” Twice annually (estimated Q1 and Q4) Based on 90% of actual incremental taxes collected from South parcel(s) Anticipated to begin approx. 1-year after Cert. of Completion TIF Note “B-1” $8.1 million ($5.4 M supported by staff) Approx $9,386,000 Subject to City/HRA verification Parking Structure #1 Min. assessment agreement After all items in Note “A” Deliver Parking Structure #1 Begin construction of any second Building Element per approved plan (full building permit issued) Anticipated Fall 2020 Cert. of Occ. For Building Element #2 Issue Cert. of Completion “B-1” Same conditions as above TIF Note “B-2” $1 million ($3.7 M supported by staff) Approx $1,000,000 Subject to City/HRA verification Parking Structure #1 Min. assessment agreement After all items in Note “B-1” Begin construction of third Building Element per approved plan (full building permit issued) Anticipated Fall 2020 to Fall 2021 Cert. of Occ. For Building Element #3 Issue Cert. of Completion “B-2” Same conditions as above Dorsey & Whitney LLP Draft July 13 2018 Pentagon South Term Sheet July 13, 2018 DRAFT Page 1 Pentagon South Term Sheet between Housing and Redevelopment Authority of Edina, Minnesota (the “Authority”) and [Solomon/Pentagon JV entity] (“Developer”) Draft: July 13, 2018 A. Summary of the Project (1) Purpose and Scope (a) This term sheet outlines the Authority’s and Developer’s general expectations for the redevelopment and improvement of the approximately 12.1 acre “South Parcel” of the existing Pentagon Park Tax Increment Financing redevelopment district (the “TIF District”), legally described on Exhibit 1 (collectively, the “Redevelopment Site”). The general terms agreed upon in this Term Sheet will be expanded in a formal redevelopment agreement or an amendment to the Master Agreement (as defined herein) among the city of Edina, Minnesota (the “City”), the Authority, and Developer (“Redevelopment Agreement”). (b) The redevelopment of the “South Parcel” as described herein is anticipated to be the first phase in the creation of a vibrant, mixed-use destination and southwest gateway to Edina, and serve as a catalyst to revive and attract additional investment to the rest of Pentagon Park and the surrounding area. The Project will promote the growth of property tax base, new business and employment opportunities, new lodging opportunities, and new services for area residents and employees. The Project will also include improved public realm, sidewalks, bicycle infrastructure, transit stops, public art, landscaping and enhanced opportunities for connection to the Fred Richards Park. (c) The Redevelopment Site is currently owned by Pentagon South LLC and JUD, LLC, each an affiliate of Pentagon Revival, LLC (“Master Redeveloper”) and is subject to an existing Master Redevelopment Agreement between the City, the Authority, and Master Redeveloper, dated May 20, 2014 (“Master Agreement”). Capitalized terms not defined herein have the meaning ascribed to such terms in the Master Agreement. (d) The parties acknowledge that the Project is contingent upon (i) the transfer of the Development Site from the Master Redeveloper to Developer and (ii) the release of the Redevelopment Site and the Master Redeveloper from the Master Agreement pursuant to an amendment to the Redevelopment Agreement in a form mutually acceptable to the City, the Authority, Developer and Master Redeveloper. (e) The Authority and Developer intend that certain improvements necessary to support redevelopment of the Redevelopment Site will be installed by Developer subject to reimbursement the Qualified Costs (as defined herein) through tax increment financing (“TIF”) from the TIF District and the requirements of the Minnesota Statutes Section Dorsey & Whitney LLP Draft July 13 2018 Pentagon South Term Sheet July 13, 2018 DRAFT Page 2 469.174 to 469.1799, as amended (the “TIF Act”). (2) Description of the Project (a) Developer anticipates that the Redevelopment Site will be redeveloped in two phases. (1) The first phase (“Phase I”) will consist of the following improvements (collectively, the “Phase I Improvements”): - a 4-story, approximately 193-room dual-branded hotel, with associated surface parking (“Hotel Element 1”); - a 4-story, approximately 153-room extended stay hotel (“Hotel Element 2”); - an approximately 390-space parking structure, integrated into Hotel Element 2 (“Phase I Parking Element”); - an approximately 7,500 square foot retail/restaurant building and a 4,300 square foot retail/restaurant build, with associated surface parking (collectively, “Retail Element”); - an approximately one (1) acre green space/plaza area (“Plaza Element”); and - Site preparation (including utilities, grading, and internal roads), soil correction, demolition, abatement and environmental remediation for the entire Redevelopment Site (“Project Site Work”). (2) Developer currently anticipates that, based on current market conditions, the second phase of the redevelopment of the Redevelopment Site (collectively, “Phase II”) will consist of the following improvements: - an approximately 19,000 square foot retail/office building, with associated surface parking (“Retail/Office Element”); - an approximately 5-story office building containing approximately 125,000 square feet (“First Office Element”); and - an approximately 5-story office buildings containing approximately 100,000 square feet, with an integrated 1,155-space parking structure (“Second Office Element”). The elements to be constructed in Phase II may be modified subject to approval by the City Council of a resolution and final PUD ordinance (including the “Final Development Plan”) for Phase II (“Final Phase II Approval Resolution”). However, when complete, Phase II must include the equivalent of approximately 244,000 square feet of leasable building space with related parking. Phase I and Phase II are collectively referred to herein as the “Project”. Dorsey & Whitney LLP Draft July 13 2018 Pentagon South Term Sheet July 13, 2018 DRAFT Page 3 Hotel Element 1 (together with Phase I Parking Element), Hotel Element 2, Retail Element, Retail/Office Element, Office Element 1, and Office Element 2 are each referred to herein as a “Commercial Element” and collectively as the “Commercial Elements”. A preliminary site plan for the Project is attached as Exhibit 2. (b) The Project will be developed as a planned unit development (PUD). The Preliminary PUD was approved by the City on June 5, 2018 pursuant to the Resolution (No. 2018-50) attached hereto as Exhibit 3, including the draft PUD Ordinance 2018-11. The Redevelopment Agreement is conditioned upon approval by the City Council of a resolution and final PUD ordinance (including the “Final Development Plan”) for Phase I (collectively referred to as the “Final Phase I Approval Resolution”) which does not contain a material deviation from the Phase I Improvements described herein. (The Final Phase I Approval Resolution is anticipated to occur at the City Council’s July 17, 2018 meeting.) (c) The City and Developer will negotiate a separate “Development Contract” containing the City’s land use and engineering regulations for Phase I, which is currently scheduled for consideration by the City Council on July 17, 2018. (d) A more detailed description of the proposed land uses and densities for the Project and projected Project schedule is included in the Project narrative, which is attached as Exhibit 4). The development objectives summarized in the Project narrative for Phase I will be included in the Final Phase I Approval Resolution; including, without limitation, land use and densities on each parcel. The Final Phase I Approval Resolution will control the improvements constructed by Developer for Phase I; provided, however, the Redevelopment Agreement is conditioned upon there being no material deviation between the Final Phase I Approval Resolution and the Phase I Improvements described herein. (3) Budget; Financial Assistance (a) The total cost for all private development and public infrastructure elements of the Phase I Improvements is estimated to be approximately $69,700,000, including Hotel Element 1 and Hotel Element 2. Developer’s sources and uses for all such costs (excluding the vertical improvements for Hotel Element 1 and Hotel Element 2, which are to constructed by a third party) are set forth on the attached Exhibit 5 (the “Sources and Uses Budget”). (b) Developer is requesting $18,100,000 in TIF assistance from the Authority as reflected in the Sources and Uses Budget. (c) The total cost for all private development and public infrastructure elements of Phase II is estimated to be approximately $78,800,000. B. TIF Assistance Dorsey & Whitney LLP Draft July 13 2018 Pentagon South Term Sheet July 13, 2018 DRAFT Page 4 (1) Basic TIF Requirements (a) As part of the TIF assistance process, and prior to issuance of each TIF Note, Phase I and the Project as a whole must be evaluated and the “but for” must be demonstrated. Developer will prepare a current annual revenue and expenditure pro forma for Phase I and the Project as a whole (each a “Pro Forma”) and a current Sources and Uses Budget prior to execution of the Redevelopment Agreement, prior the issuance of each TIF Note (as defined below), and such other times as requested by the Authority in accordance with Section (B)4 (Look Back Provisions) below. Each Pro Forma must demonstrate the need for TIF assistance. The Sources and Uses Budget must show an amount of applicable Qualified Costs equal to or greater than the principal amount of each TIF Note. (b) Any TIF assistance and costs eligible for TIF reimbursement must be in accordance with the Authority’s Tax Increment Finance Policy, dated April 19, 2011 and the TIF Act. (2) Five-Year Rule Developer acknowledges that July 15, 2019 is the end of the five-year period following certification of the TIF District and such date is the deadline for Developer to expend Qualified Costs, enter into binding contracts for TIF-eligible costs, or otherwise comply with the requirements of Minn. Stat. section 469.1763, Subd. 3 (the “Five-Year Rule”), in order to be reimbursed for such costs in accordance with the Redevelopment Agreement and TIF Note. Such costs which are not expended or otherwise incurred in accordance with the Five-Year Rule by such date will not be eligible for TIF reimbursement and the Authority will have no obligation to otherwise reimburse Developer for such costs. (3) TIF Note; Reimbursement of Qualified Costs; Administrative Costs (a) The Authority will reimburse Developer on a pay-as-you-go basis through two to three TIF notes (each a “TIF Note”, and, collectively the “TIF Notes”) as follows: (1) a TIF Note in the maximum principal amount of $9,000,000 (“TIF Note A”); (2) a TIF Note in the maximum principal amount of $5,400,000 (“TIF Note B-1”); and (3) a TIF Note in the maximum principal amount of $3,700,000 (“TIF Note B-2”). TIF Note B-1 and TIF Note B-2 may be issued as a single “TIF Note B” if all the pre- conditions applicable to each such TIF Note have been satisfied. (b) The Authority will reimburse Developer through the TIF Notes only for costs incurred by Developer which are authorized under state law and approved by the Authority pursuant to the Redevelopment Agreement (collectively, “Qualified Costs”), plus simple interest at a rate of six percent (6%) annually in accordance with each TIF Note. (c) The Authority will issue TIF Note A for Note A Qualified Costs actually incurred (as described in subsection (f) below) up to the maximum principal amount for TIF Note A Dorsey & Whitney LLP Draft July 13 2018 Pentagon South Term Sheet July 13, 2018 DRAFT Page 5 stated above. (d) The Authority will issue TIF Note B for Note B Qualified Costs actually incurred (as described in subsection (f) below) up to the maximum principal amount for TIF Note B stated above. (e) The terms of the TIF Notes will be included in the Redevelopment Agreement and issued pursuant to the terms thereof. Accrual of interest and payment on the unpaid principal balance of each TIF Note will commence upon the satisfaction of the conditions set forth in Section B(3)(l)(1) through (3) with respect to the applicable TIF Note. The Authority shall take all reasonable steps to promptly issue each TIF Note after Developer’s satisfaction of the applicable conditions, as time is of the essence. (f) Qualified Costs for the Project are identified in the Sources and Uses Budget and will include the following (subject to Developer expending such Qualified Costs prior to the deadline imposed under the Five-Year Rule), provided the actual amounts may vary within the individual categories of Qualified Costs within the maximum total amount: Note A Qualified Costs Qualified Costs Amount Soil correction, storm water management, and flood mitigation $5,222,000 Demolition, abatement and environmental remediation $822,000 Additional site work attributable to the Phase I Parking Element $1,500,000 Costs associated with construction of the Plaza Element $500,000 Pre-development planning, engineering, legal and consulting costs related to TIF and Developer contracts applicable to the Project $1,104,000 $9,148,000 Note B Qualified Costs Qualified Costs Amount Costs associated with construction of the Phase I Parking Element $10,386,000 $10,386,000 (g) The Authority will make one payment of principal and interest to Developer each six months on each TIF Note, commencing on the first February 1 or August 1 following the Developer’s satisfaction of the conditions under Section B(3)(l) with respect to the applicable TIF Note, for reimbursement of applicable Qualified Costs from 90% of the tax increment generated from the development of the Redevelopment Site and Dorsey & Whitney LLP Draft July 13 2018 Pentagon South Term Sheet July 13, 2018 DRAFT Page 6 received by the Authority from Hennepin County in the six months before each payment date (“Available Tax Increment”). The Authority will not reimburse Developer from any other revenue source nor guaranty the amount of money which Developer will receive as a reimbursement, such amount being payable solely from the Available Tax Increment. (h) Ten percent of tax increment generated from the development of the Redevelopment Site will be retained by the Authority for administrative costs related to the planning, management and oversight of the TIF District. (i) Developer may, without the Authority’s consent, collaterally assign Developer’s rights and obligations under the TIF Note to the holder of any mortgage on the Redevelopment Site granted by Developer for the purpose of obtaining funds necessary for constructing the Project. In all other cases, the TIF Note shall not be assignable nor transferable except upon terms and condition consistent with the Master Agreement. The Authority is not responsible for calculations or payments for the TIF Note. (j) The term of the TIF Note will end no later than December 31, 2043 based on the required decertification date of the TIF District, regardless of the date of first receipt of increment. (k) The TIF Notes will be issued no later than July 15, 2019, provided that the Developer has satisfied each of the following requirements by May 15, 2019: (1) final execution of the Redevelopment Agreement and recording of a memorandum of the Redevelopment Agreement in the applicable land records; (2) adoption of the Final Phase I Approval Resolution; (3) closing on Developer’s acquisition of the Redevelopment Site; (4) Issuance of grading permit and commencement of grading of entire Redevelopment Site. (l) Notwithstanding the earlier issuance of the TIF Notes payment of Available Tax Increment and accrual of interest under each TIF Note will be fully conditioned upon satisfaction of each of the following requirements: (1) With respect to TIF Note A: (i) Developer providing evidence satisfactory to the Authority that the Developer has incurred Note A Qualified Costs equal to at least the amount of the requested TIF Note A; (ii) a “Certificate of Completion” for one Commercial Element has been recorded against the application portion of the Redevelopment Site; Dorsey & Whitney LLP Draft July 13 2018 Pentagon South Term Sheet July 13, 2018 DRAFT Page 7 (iii) the Plaza Element and Project Site Work are substantially complete in accordance with the Redevelopment Agreement and the applicable Final Development Plan(s); (iv) the Authority’s receipt of an updated Pro Forma sufficient to demonstrate that the “but for” requirement continues to be satisfied (including, if necessary to satisfy the “but for” requirement, Developer’s delivery of a “Minimum Assessment Agreement” in order to achieve the “Minimum Valuation”, as described in Section B(4) below); and (v) no Developer event of default exists under the Redevelopment Agreement (following the passing of any applicable cure periods and subject to Section C(8)(b) below). (2) With respect to TIF Note B-1: (i) Developer providing evidence satisfactory to the Authority that the Developer has incurred Note B Qualified Costs equal to at least the amount of the requested TIF Note B-1; (ii) Commencement of actual physical construction of at least one additional (and second overall) Commercial Element [which is anticipated to be Hotel Element 2, or one or more other Commercial Elements, integrated with the Phase I Parking Element, in order for Developer to incur Note B Qualified Costs]; (iii) the Authority’s receipt of an updated Pro Forma sufficient to demonstrate that the “but for” requirement continues to be satisfied (including, if necessary to satisfy the “but for” requirement, Developer’s delivery of a “Minimum Assessment Agreement” in order to achieve the “Minimum Valuation”, as described in Section B(4) below); and (iv) no Developer event of default exists under the Redevelopment Agreement (following the passing of any applicable cure periods and subject to Section C(8)(b) below); (3) With respect to TIF Note B-2: (i) Developer providing evidence satisfactory to the Authority that the Developer has incurred Note B Qualified Costs equal to at least the amount of the requested TIF Note B-2; (ii) Commencement of actual physical construction of at least one additional (and third overall) Commercial Element; (iii) the Authority’s receipt of an updated Pro Forma sufficient to Dorsey & Whitney LLP Draft July 13 2018 Pentagon South Term Sheet July 13, 2018 DRAFT Page 8 demonstrate that the “but for” requirement continues to be satisfied (including, if necessary to satisfy the “but for” requirement, Developer’s delivery of a “Minimum Assessment Agreement” in order to achieve the “Minimum Valuation”, as described in Section B(4) below); and (iv) no Developer event of default exists under the Redevelopment Agreement (following the passing of any applicable cure periods and subject to Section C(8)(b) below). (4) But-For Test; Minimum Assessment Agreement If, by the date on which payments and interest are otherwise due under applicable TIF Note(s), the Developer’s improvements to the Redevelopment Site have not increased the taxable market value of the Redevelopment Site by an amount which exceeds the increase in taxable market value that could reasonably be expected to occur without the use of TIF, consistent with the requirements set forth in Section 469.175, Subd. 3, of the TIF Act (“Minimum Valuation”), then Developer shall enter into a minimum assessment agreement (“Minimum Assessment Agreement”) with respect to all or a portion of the Redevelopment Site sufficient to satisfy the Minimum Valuation until such time as the Minimum Valuation is achieved by additional improvements to the Redevelopment Site. Payments shall not be made and interest shall not accrue on the applicable TIF Note(s) until the Minimum Valuation is achieved through the Minimum Assessment Agreement or otherwise. (5) Look Back Provisions The Redevelopment Agreement will include “look back” provisions consistent with the Master Agreement to ensure that any TIF assistance was actually needed. (6) Fiscal Disparities Developer acknowledges that any of the Authority’s obligations with respect to “Fiscal Disparities” under Minnesota law that are applicable to the Project will be considered in calculating Available Tax Increment. (7) Timeline and Construction Phasing The chart below is the Developer’s current anticipated timeline for the construction of the Project. The commencement and completion dates for the Phase I Improvements under the Redevelopment Agreement shall be substantially in accordance with the below timeline. The actual completion of the Phase II improvements will be driven by market conditions and failure to meet the below dates for Phase II improvements will not be a default under the Redevelopment Agreement. Developer will notify the Authority of material changes to the following estimated construction dates. Developer will periodically provide the Authority with written notification related to meeting proposed construction benchmarks. A timeline for completion of all Project improvements will be included in the Redevelopment Agreement. Dorsey & Whitney LLP Draft July 13 2018 Pentagon South Term Sheet July 13, 2018 DRAFT Page 9 Description of Work Estimated Commencement Date Estimated Completion Date Hotel Element 1 (Phase I) Summer 2019 Fall 2020 Hotel Element 2 and Phase I Parking Element (Phase I) Summer 2019 (ramp) Fall 2019 (hotel) Fall 2019 (ramp) December 2020 (hotel) Retail Element (Phase I) Summer 2019 December 2019 Plaza Element (Phase I) Summer 2019 Fall 2019 Project Site Work December 2018 Summer 2019 Retail/Office Element (Phase II) Fall 2019 December 2020 First Office Element (Phase II) Fall 2019 December 2020 Second Office Element (Phase II) Fall 2020 December 2021 C. Additional Terms and Conditions (1) Public Infrastructure Improvements (a) Developer will be responsible for the “Phase IA Public Infrastructure Improvements” and “Phase IB Public Infrastructure Improvements” in accordance with the Master Agreement and applicable “Public Infrastructure Improvements Plans”. The chart below is the current anticipated timeline for the required Public Infrastructure Improvements. Developer will notify the Authority of material changes to the following estimated construction dates. Developer will periodically provide the Authority with written notification related to meeting proposed construction benchmarks. A timeline for completion of the required Public Infrastructure Improvements will be included in the Final Development Plan approval and the Redevelopment Agreement. Description of Work Estimated Commencement Date Estimated Completion Date Phase IA Public Infrastructure Improvements (77th Street, Transit Shelters, Normandale Road and Viking/Computer Drive) Phase IB Public Infrastructure Improvements (77th Street, Transit Shelters, Normandale Road and Viking/Computer Drive) (b) Right-of-way improvements to West 77th Street at the entrance to the Redevelopment Dorsey & Whitney LLP Draft July 13 2018 Pentagon South Term Sheet July 13, 2018 DRAFT Page 10 Site required by the City engineer in connection with the Final Phase I Approval Resolution shall be constructed and installed by the City and assessed back to Developer pursuant to the City’s special assessment powers. Developer will enter into an assessment agreement (either separately or as part of the Redevelopment Agreement) agreeing to accept such special assessments, waiving Developer’s rights to protest such special assessments, and otherwise meeting all requirements of Minnesota Statutes chapter 429. (2) Plaza Element; Plaza Easement The Plaza Element will consist of a minimum one acre green space with fountains, related hardscaping and other pedestrian amenities consistent with the Final Phase I Approval Resolution], together with all sidewalks, paths, trails, and roads which provide access to the primary Plaza Element green space. While the primary purpose of the Plaza Element is to serve and support the Project and Project tenant, Developer will grant a permanent, public easement for access and use of the Plaza Element by the public, subject to reasonable, nondiscriminatory limitations, rules and regulations governing its use adopted by Developer. The Developer will be responsible for all maintenance of the Plaza Element. (3) Parking Easement Developer will grant the City a “Parking Facilities Easement” for the Phase I Parking Element to be integrated with Hotel Element 2 with the following terms and conditions, which will not materially interfere with the use of the facility by the hotel guests: [at least __ parking space available 24/7 to the public, permitted park-and-ride public use, permitted bike-and-ride public use]. The Developer will be responsible for all maintenance of the Phase I Parking Element. (4) Public Realm/Pedestrian/Bicycling Enhancements Developer will construct and install the following public enhancements and features pursuant to the Final Phase I Approval Resolution, all of which will be deemed part of the Project Site Work, and Developer will grant the City public easements as applicable: - Public artwork in multiple locations throughout the property; - Walking and biking trails interconnected throughout the property, to the adjacent neighborhoods and to the Fred Richards Park and Regional Trail System, including crosswalks across 77th Street; - Bike parking stations, and other bicycle infrastructure including a dedicated bicycle repair facility and/or space; - EV charging stations; and - Improved transit stops along W. 77th Street. The Developer will be responsible for all maintenance of the foregoing public enhancements and features. Dorsey & Whitney LLP Draft July 13 2018 Pentagon South Term Sheet July 13, 2018 DRAFT Page 11 (5) Notice of Commencement; Certificate of Completion Prior to commencing any development activities for Phase I or Phase II, Developer will demonstrate to the Authority that Developer has secured adequate financing to complete the subject element(s) of the Phase I Improvements and/or Phase II Improvements and will issue the Authority a “Go Ahead Letter”. The Authority will issue a “Certificate of Completion” for the elements of the Phase I Improvements and Phase II Improvements in accordance with terms and conditions consistent with the Master Agreement. (6) City Approval of Significant Changes Changes to the Project scope and design that are inconsistent with the Final Development Plan will be subject to the review and approval by the City pursuant to applicable City regulations, and for review by the Authority with regards to Qualified Costs. (7) Performance Bonds Performance bonds are required for all work in the public way pursuant to applicable City regulations. (8) Default by Developer or Authority (a) Standard default provisions will be applicable. The Redevelopment Agreement will include remedies to be determined by the Authority and Developer, and will include, without limitation, the right of the Authority to terminate the Redevelopment Agreement or the right to deny issuance of any TIF Note. (b) The Master Redeveloper’s default under the Master Agreement for a failure to commence “Development Activity” for a period of 24 months (under Section 6.3 of the Master Agreement), as described in the December 5, 2017 notice of default served by the Authority, shall be deemed to have been timely cured upon the adoption of the Final Phase I Approval Resolution. (9) Preparation of Redevelopment Agreement a. The Authority and Developer will work diligently to prepare a Redevelopment Agreement for City Council consideration for execution on July 17, 2018. b. The Redevelopment Agreement presented to the City Council must be pre-signed by Developer. (10) Authority Out-of-Pocket Costs. Developer will reimburse the Authority for its direct cost of legal and financial consultants as well as special consultants for TIF inspections, traffic and utility studies. Reimbursement will be made within 30 days after invoicing. (11) Grants Dorsey & Whitney LLP Draft July 13 2018 Pentagon South Term Sheet July 13, 2018 DRAFT Page 12 Nothing contained in the Redevelopment Agreement, nor the failure of the parties to enter into a Redevelopment Agreement with respect to the Redevelopment Site, will modify or abridge the responsibilities and obligation of the Master Redeveloper and/or the Developer under the sub-grant agreements entered into by the Master Redeveloper with respect to the below grants. Master Redeveloper and/or the Developer remain responsible for responsibilities and obligation Met Council LCDA Pentagon Revival, South Awarded $448,100 in 2014 $448,100 awarded $____ reimbursed Mn DEED # RDGP-14-0027-o- FY15 Pentagon Revival Awarded with term running 9/2014 to 12/2017; work is complete and developer has been reimbursed; project must still be delivered to satisfy outcomes in grant application $625,000 awarded $625,000 reimbursed Dorsey & Whitney LLP Draft July 13 2018 Pentagon South Term Sheet July 13, 2018 DRAFT Page 13 EXHIBIT 1 REDEVELOPMENT SITE LEGAL DESCRIPTION Dorsey & Whitney LLP Draft July 13 2018 Pentagon South Term Sheet July 13, 2018 DRAFT Page 14 EXHIBIT 2 PRELIMINARY PROJECT SITE PLAN Dorsey & Whitney LLP Draft July 13 2018 Pentagon South Term Sheet July 13, 2018 DRAFT Page 15 EXHIBIT 3 Resolution (No. 2018-50) Dorsey & Whitney LLP Draft July 13 2018 Pentagon South Term Sheet July 13, 2018 DRAFT Page 16 EXHIBIT 4 PROJECT NARRATIVE Dorsey & Whitney LLP Draft July 13 2018 Pentagon South Term Sheet July 13, 2018 DRAFT Page 17 EXHIBIT 5 Sources and Uses Budget June 28, 2018 Board of the Edina Housing and Redevelopment Authority Bill Neuendorf, Economic Development Manager Tax Increment Financing for Pentagon Park South: 4815-4901 West 77th Street and 7710 Computer Avenue Information / Background: A joint venture consisting of Hillcrest Development and Solomon Real Estate proposes to build a two-phase project to serve as a catalyst development on the Pentagon Park South parcel. Phase 1 is intended to include two retail buildings, two hotels, a public plaza and site improvements for the entire site. Phase 2 is intended to consist of two office buildings and an office/retail building. The recent zoning approval allows for a change in the specific uses built on Phase 2. The redevelopment effort is estimated to cost more than $140 million (approximately $70 million per phase). At the June 14, 2018 meeting of the Housing and Redevelopment Authority, the Board discussed several issues that were unresolved after extensive negotiations between the City’s negotiating team and the Developer. The developer has requested an $18.1 million TIF Note (payable with the TIF District’s remaining 24 years of incremental property taxes potentially generated by the site). This is approximately 26% of the Phase 1 cost and approximately 13% of the overall cost of the two-phase proposal. This is a very high proportion of costs and is expected to offset the Developer’s Phase I equity in the project. Based on the discussion at that meeting, the City’s negotiating team has continued with the discussions based on the principles that were expressed by the majority of the HRA Board: 1) Agreeable to a high level of TIF in order to spark a catalytic project on this vacant site a. Size of TIF Note(s) as recommended by City’s negotiating team 2) Willing to consider structured parking as a TIF expense that is eligible for reimbursement STAFF REPORT Page 2 3) Seeking commitment to build both Phases in order to receive the full TIF amount a. Flexibility will be applied to the specific uses contained in Phase 2 4) Apply typical lookback provisions to ensure that the TIF “but for” is satisfied and to avoid over subsidizing a very profitable project The City and Developer have continued discussions over the past two weeks but have not been able to resolve all issues. Thus, a Term Sheet is not yet ready to be presented for consideration and approval. Time is of the essence as the Pentagon Park TIF District is nearly four years into the five year limit to define eligible costs. There are four major issues that have prevented completion of the TIF Term Sheet. They are summarized in this report for discussion purposes. 1) What is the maximum size of the TIF Note(s) that is supported by the HRA? 2) What is the degree of improvements that should be delivered in order to qualify for the full TIF amount? Should there be a commitment to construct both Phase 1 and Phase 2 as a condition of TIF assistance? How much of Phase 1 should be completed to initiate TIF payments? 3) Should lookback provisions be enhanced so that the general public has rights to reduce the TIF contribution if long-term profits yield greater than normal returns to the Developer? 4) Are the public realm improvements required to be installed as a condition of TIF payment? The City’s negotiating team and the Developer request clear direction so that the developer can decide whether to continue negotiations or withdraw the proposal. STAFF REPORT Page 3 Key Issues Requiring HRA Clarification and Direction 1) What is the maximum size and structure of Pay-as-you-Go TIF Note(s)? Staff Recommendation Developer Request • Ehlers has projected that the reasonably-anticipated amount of TIF collected from the fully completed project totals $14.4 million; • Two TIF Notes should be issued – the first provides reimbursement for the $14.4 million (supported by Ehlers projections); the second provides reimbursement for the additional $3.7 million but only accrues interest and is payable if the developer commences one of the buildings in Phase 2 • The developer requests to capture higher potential TIF generation- $18.1 million counting on valuation assumptions that exceed existing hotel and office development valuations in Edina • requests one TIF Note in the maximum amount so that they can recognize any upside in case it is necessary to offset future risks • The full TIF Note would begin to bear interest as soon as possible Rationale – TIF Notes should be sized 1) to reimburse qualifying project costs subject to a “But/For” test, and 2)up to the maximum value that is reasonably anticipated; Inflated notes provide the developer greater ability to achieve long-term reimbursement and profit, ensures full deferral of local tax generation for the full term with no greater benefit to the community; If the HRA is willing to issue TIF Notes at a higher level, precautions are recommended so that the higher TIF amount has conditions that provide accountability for the Developer to perform or risk losing future payments on this higher value. Interest should only be paid on completed projects not speculative development. Rationale – the Developer seeks to maximize potential TIF revenue in order to offset the up-front risk of the immediate investment under current office development market conditions 2) Should there be a commitment to construct both Phase 1 and Phase 2 elements as a condition of TIF assistance? How much of Phase 1 should be completed to initiate payments? Staff Recommendation Developer Request • The Phase 1 and Phase 2 elements should be constructed as a condition of receiving the full TIF Note amount • Monies should be spent by the Developer as a condition to receiving incremental taxes. STAFF REPORT Page 4 Staff Recommendation Developer Request • Two TIF Notes should be issued to ensure partial reimbursement but also provide accountability for each Phase • TIF Note A would begin to bear interest and make payments upon completion of the 2 retail strips, the 2 hotels and the outdoor public plaza • Only one retail building should be required to be delivered to qualify for the full TIF Amount • Single TIF Note is preferred • The full amount of the TIF Note would bear interest and payments begin upon completion of all sitework and one retail building with no guarantee that other buildings will be completed Rationale – Payments and interest should only begin after the approved project phases are constructed to minimize speculative costs. Increased Phase I reimbursement is intended to create a new gateway to Edina from the 77th Street interchange. Rationale – the Developer is taking on significant risk by preparing the site ahead of end users to comply with the TIF District 5- year rule. 3) Should enhanced lookback/claw back provisions be applied? Staff Recommendation Developer Request • Additional look backs are included to protect the public interest and justify the “But/For” findings in case the project becomes highly successful and proves capable of operating without TIF • Internal Rate of Return (IRR) measures are proposed using the same limits of the Master TIF Agreement – these apply only if an Element is sold within a short time frame • Return on Cost (cash on cost) measures are also proposed based on the Developer’s stated intent to hold several of the elements for many years. The cash on cost measure applies to Elements in which the Developer maintains a controlling interest for several years. Alternatively, the IRR provisions in the Master Agreement could be amended to require more frequent IRR calculations using pre-negotiated terms and agreed-upon third party appraisers. • Staff recommends both IRR and Return on Cost measures. • Fewer lookbacks and claw backs are preferred • The existing IRR measures are acceptable but no other lookbacks are currently acceptable Rationale – The HRA is willing to issue TIF Notes at a very high level in order to incentive catalytic investment in the southern gateway to Edina’s business park mixed-use district. As such, comprehensive lookbacks and meaningful claw backs are strongly recommended so that the public’s interest is maintained and a “But/For” test continues to be demonstrated Rationale – the Developer is taking on significant risk by preparing the site ahead of end users and is entitled to the ‘upside’ if it happens STAFF REPORT Page 5 4) Are public realm improvements required to be completed prior to TIF payments? Staff Recommendation Developer Request • The public realm improvements are included among the items to be reimbursed with TIF, and are required to be completed as a condition of TIF payment • Requests landscaping, bus shelters and other public realm amenities be allowed to be installed later, rather than as a condition to receive TIF payments Rationale – It is common practice to require such items to be installed so they can be used by the public before the costs are reimbursed. Rationale – the Developer is taking on significant risk by preparing the site ahead of end users # # # STAFF REPORT Page 6 Background Information for Reference May 2018 Site Plan (granted Preliminary Approval on 6/5/2018) The CITY of EDINA Pentagon Park South – Request for TIF from Solomon Real Estate and Hillcrest Development Summary of Staff Report HRA Discussion June 28, 2018 The CITY of EDINA 1)What is the maximum size of the TIF Note(s) that is supported by the HRA? 2)What is the degree of improvements that should be delivered in order to qualify for the full TIF amount? Should there be a commitment to construct both Phase 1 and Phase 2 as a condition of TIF assistance? How much of Phase 1 should be completed to initiate TIF payments? 3)Should lookback provisions be enhanced so that the general public has rights to reduce the TIF contribution if long-term profits yield greater than normal returns to the Developer? 4)Are the public realm improvements required to be installed as a condition of TIF payment? The City’s negotiating team and the Developer request clear direction so that the developer can decide whether to continue negotiations or withdraw the proposal. www.EdinaMN.gov 2 Four Unresolved Issues The CITY of EDINA Staff Recommendation Developer Request Ehlers has projected that the reasonably- anticipated amount of TIF collected from the fully completed project totals $14.4 million; Two TIF Notes should be issued – the first provides reimbursement for the $14.4 million (supported by Ehlers projections); the second provides reimbursement for the additional $3.7 million but only accrues interest and is payable if the developer commences one of the buildings in Phase 2 The developer requests to capture higher potential TIF generation- $18.1 million counting on valuation assumptions that exceed existing hotel and office development valuations in Edina requests one TIF Note in the maximum amount so that they can recognize any upside in case it is necessary to offset future risks The full TIF Note would begin to bear interest as soon as possible www.EdinaMN.gov 3 1) What is the maximum size and structure of Pay-as-you-Go TIF Note(s)? The CITY of EDINA Staff Recommendation Developer Request Rationale – TIF Notes should be sized 1) to reimburse qualifying project costs subject to a “But/For” test, and 2) up to the maximum value that is reasonably anticipated; Inflated notes provide the developer greater ability to achieve long-term reimbursement and profit, ensures full deferral of local tax generation for the full term with no greater benefit to the community; If the HRA is willing to issue TIF Notes at a higher level, precautions are recommended so that the higher TIF amount has conditions that provide accountability for the Developer to perform or risk losing future payments on this higher value. Interest should only be paid on completed projects not speculative development. Rationale – the Developer seeks to maximize potential TIF revenue in order to offset the up-front risk of the immediate investment under current office development market conditions www.EdinaMN.gov 4 1) What is the maximum size and structure of Pay-as-you-Go TIF Note(s)? The CITY of EDINA Staff Recommendation Developer Request The Phase 1 and Phase 2 elements should be constructed as a condition of receiving the full TIF Note amount Two TIF Notes should be issued to ensure partial reimbursement but also provide accountability for each Phase TIF Note A would begin to bear interest and make payments upon completion of the 2 retail strips, the 2 hotels and the outdoor public plaza Monies should be spent by the Developer as a condition to receiving incremental taxes. Only one retail building should be required to be delivered to qualify for the full TIF Amount Single TIF Note is preferred The full amount of the TIF Note would bear interest and payments begin upon completion of all sitework and one retail building with no guarantee that other buildings will be completed www.EdinaMN.gov 5 2) Should there be a commitment to construct both Phase 1 and Phase 2 elements as a condition of TIF assistance? How much of Phase 1 should be completed to initiate payments? The CITY of EDINA Staff Recommendation Developer Request Rationale – Payments and interest should only begin after the approved project phases are constructed to minimize speculative costs. Increased Phase I reimbursement is intended to create a new gateway to Edina from the 77th Street interchange. Rationale – the Developer is taking on significant risk by preparing the site ahead of end users to comply with the TIF District 5-year rule. www.EdinaMN.gov 6 2) Should there be a commitment to construct both Phase 1 and Phase 2 elements as a condition of TIF assistance? How much of Phase 1 should be completed to initiate payments? The CITY of EDINA Staff Recommendation Developer Request Additional look backs are included to protect the public interest and justify the “But/For” findings in case the project becomes highly successful and proves capable of operating without TIF Internal Rate of Return (IRR) measures are proposed using the same limits of the Master TIF Agreement – these apply only if an Element is sold within a short time frame Return on Cost (cash on cost) measures are also proposed based on the Developer’s stated intent to hold several of the elements for many years. The cash on cost measure applies to Elements in which the Developer maintains a controlling interest for several years. Alternatively, the IRR provisions in the Master Agreement could be amended to require more frequent IRR calculations using pre-negotiated terms and agreed-upon third party appraisers. Staff recommends both IRR and Return on Cost measures. Fewer lookbacks and claw backs are preferred The existing IRR measures are acceptable but no other lookbacks are currently acceptable www.EdinaMN.gov 7 3) Should enhanced lookback/claw back provisions be applied? The CITY of EDINA Staff Recommendation Developer Request Rationale – The HRA is willing to issue TIF Notes at a very high level in order to incentive catalytic investment in the southern gateway to Edina’s business park mixed-use district. As such, comprehensive lookbacks and meaningful claw backs are strongly recommended so that the public’s interest is maintained and a “But/For” test continues to be demonstrated Rationale – the Developer is taking on significant risk by preparing the site ahead of end users and is entitled to the ‘upside’ if it happens www.EdinaMN.gov 8 3) Should enhanced lookback/claw back provisions be applied? The CITY of EDINA Staff Recommendation Developer Request The public realm improvements are included among the items to be reimbursed with TIF, and are required to be completed as a condition of TIF payment Requests landscaping, bus shelters and other public realm amenities be allowed to be installed later, rather than as a condition to receive TIF payments Rationale – It is common practice to require such items to be installed so they can be used by the public before the costs are reimbursed. Rationale – the Developer is taking on significant risk by preparing the site ahead of end users www.EdinaMN.gov 9 4) Are public realm improvements required to be completed prior to TIF payments? But-For Analysis — Pentagon South (TIF Note A 2018 Assessed Value (South Site) New Market Value of Improved and Finished Pad Lots: 10,029,100 19,862,500 Lot 1 — Improved with Retail Buildings 5,074,000 Lot 2 — for Hotel #1 ($38.35 PSF) 3,000,000 Lot 3 — for Hotel #2 ($32.75 PSF) 3,000,000 Lots 4 & 5 — for Retail/Office, Office(s) (251,100 sf, $35 PSF avg) 8,788,500 Difference 9,833,400 Present Value of Tax Increment 9,000,000 Difference 833,400 Value Likely to Occur Without TIF is Less Than: 833,400 Note: the new market value assumes that the 12 acre site will include a total of 5 lots. Prepared by Shenehon Company 7/12/2018 June 28, 2018 Board of the Edina Housing and Redevelopment Authority Bill Neuendorf, Economic Development Manager Tax Increment Financing for Pentagon Park North: 4600-4660 West 77th Street Information / Background: Chase Real Estate proposes to build two multi-family housing developments on 11-acres of the Pentagon North site. The first building consists of 353 market-rate apartments. The second building is a senior living building with a total of 225 market-rate apartments. Approximately 32 of the units will be designated for residents who need special memory care or transitional care services. The remainder will be independent living or assisted living units. The estimated construction cost of the overall project is $141 million. Both buildings would be located along the southern edge of Fred Richards Park. The redevelopment of this portion of the North Parcel would also include a new access road to the park, new sidewalks to the park and shared public parking along the edge of the park. This project was granted preliminary rezoning approvals on June 19, 2018. The developer has requested two TIF Notes totaling $14.73 million (payable with the Pentagon Park TIF District’s remaining 24 years of incremental property taxes generated by the site). This is approximately 11% of the overall cost of the proposal. After review the developer’s pro forma, staff agrees that TIF is necessary to make the project viable, but not to the degree requested. At the June 14, 2018 meeting of the Housing and Redevelopment Authority, the Board discussed several issues that were unresolved after extensive negotiations between the City’s negotiating team, the developer (Chase) and the property owner (Hillcrest). Based on the discussion at the June 14th meeting, the City’s negotiating team has continued the discussion using the direction that was expressed by the majority of the HRA Board: STAFF REPORT Page 2 1) TIF Notes capped at a maximum return of 8 percent cash on cash and not to exceed the total cost of extraordinary site costs and cost of public improvements; this was most recently estimated at $9.89 million but may increase based on the updated operating pro forma. 2) Look backs and claw backs at multiple intervals over life of the TIF Notes to confirm developer returns (will measure cash on cash returns and IRR, as appropriate using industry standards evaluated by Ehlers Associate) 3) In lieu of affordable units in the two Chase buildings, $5.46 million in security will be accepted in accordance with City’s Affordable Housing Policy 4) Approximately 230 shared public parking stalls are required on Pentagon North parcels as a condition of TIF assistance; Chase has provided about 100 surface parking stalls. Hillcrest is required to provide the remainder as part of the required amendment to the TIF Master Redevelopment Agreement. 5) Reasonable cost participation in Fred Richards Park maintenance will be required from Chase. 6) Other terms similar to most recent draft term sheet. The developer (Chase Real Estate) has responded with a counter proposal regarding the estimated $9.89 million TIF assistance previously offered. The property owner (Hillcrest) has re-affirmed their previous offer regarding affordable housing and their position regarding public parking. None of these responses appear to satisfy the criteria laid out by the HRA Board and do not appear to satisfy the zoning conditions required in the City Council approval. There continues to be a large divide between the positions of the HRA, developer and property owner. There are four major issues that have prevented completion of the TIF Term Sheet. They are summarized in this report for discussion purposes. Decisions need to be made soon in the event that the developer chooses to begin site work in Fall 2018. 1) What level of TIF assistance is acceptable for this project? 2) Should TIF proceeds be reserved for future affordably-priced housing? 3) What type of security is acceptable in lieu of affordably-priced housing units in the Pentagon North site? 4) How should public parking be provided in the remainder of the Pentagon Park North site? The City’s negotiating team, the developer and the property owner request clear direction from the HRA Board so that the private parties can decide whether to continue negotiations or withdraw the proposal. STAFF REPORT Page 3 Key Issues Requiring HRA Clarification and Direction 1) What level of TIF assistance is acceptable for this project? Staff Recommendation Developer / Owner Request • Two TIF pay-as-you-go Notes sized in the amount to provide a projected 8% average return to the Developer – currently estimated at $9.89 million but will be re-calculated based on final project • TIF Note A payable upon completion of Market-Rate Apartments – size TBD • TIF Note B payable upon completion of Senior Apartments – size TBD • Typically lookbacks at key intervals and claw backs on the full TIF amount if average returns exceed 8% • Agreeable with the two Note concept tied to completion of each building • TIF Notes sized to provide $14.37 million total • Developer suggests a “lookback” provision occurring 8-years after completion with a clawback if return greater than 9% is achieved and with no clawback on the cost of the public improvement Rationale – TIF assistance is recommended to bring the returns up to an acceptable rate in the marketplace. Returns in the 8% to 10% range are generally acceptable. Based on the level of public improvements proposed, staff recommends TIF assistance sized at an 8% level of return. It is noted that other projects are advancing with returns in the 6% to 7% range while also delivering public benefits. These projects recognize the long-term value of holding properties in Edina. Rationale – the Developer is taking on significant risk with a project of this scale and seeks a higher return STAFF REPORT Page 4 2) Should TIF proceeds be reserved for future affordably-priced housing? Staff Recommendation Developer / Owner Request • Each TIF Note is typically paid from 90% of the incremental taxes generated from the site; in accordance with MN Statute, 10% is retained by the City for administrative purposes • TIF Note repayment is recommended to be limited to 80% of tax increment collected to allow for an additional 10% to be pooled to a future affordably-priced housing project located on an adjacent parcel • Developer requests 90% of the incremental taxes be used to fund the TIF Notes Rationale – A separate developer anticipates building affordably- priced housing on a separate parcel (4820 W. 77th St). While no formal application or request has been submitted now, it is likely that the developer will request (and need) several million dollars of public assistance to make their project viable. All incremental taxes generated from the South parcel are likely to remain with that property and very little taxes will be collected from the 4820 site itself. The property owner is not willing to provide discounted land to support the affordable housing project. The developer is not willing to provide monies to support affordable housing either. It would be highly unusual for the City to issued general obligation debt to support the affordable project. The North Parcel appears to be the most viable source of public revenue to help fund the revenue gap of the future affordable housing project. The proposed 80% arrangement provides full reimbursement to the developer but spread out over a few more years. This additional 10% pooling is estimated to provide approximately $1.8 million in funding. The anticipated funding request from Dominium is likely to be 2 or 3 times this amount. Rationale – the Developer’s project is separate from the future Dominium project and the Developer prefers faster payment on the TIF Notes STAFF REPORT Page 5 3) What type of security is acceptable in lieu of affordably-priced units in the Pentagon North site? Staff Recommendation Developer / Owner Request • In lieu of the anticipated Dominium project, security in the amount of $5.46 million is needed • Acceptable forms of security include: cash, cash-in-escrow, letter of credit, land or combination thereof • Security is not required until Chase is ready for complete building permits for each building in Summer 2019 and Winter 2019/2020 – this should allow for Dominium to be awarded tax credits in Fall 2019 for construction in 2020 • If the Dominium project is not under construction within 3- years of security being issued, the security will be retained by the City • Credit will be given for any Dominium units built on the 4820 site in excess of the 55 required; credit will apply to any new housing built on the remainder of the Pentagon North site for a period of 3-years after the Dominium project is complete • No change from June 14th position • $3.0 million cash at closing or combination of $1.9 million in real estate (4820 W. 77th Street) if the Dominium project does not proceed and $1.1 million cash Rationale – Based on the current estimates of independent and assisted living apartments in the Chase proposal, 55 units of affordably-priced housing are required. The memory care and transitional care units are excluded from this calculation. The first choice is for a minimum of 55 units to be constructed, possibly at the 4820 W. 77th St. site which is also owned by Hillcrest Development. While Dominium has executed a purchase agreement at a market-rate price, there are many contingencies and hurdles to clear before this project advances beyond the concept-phase. Based on current City policy, a ‘buy-in’ fee of $100,000 per unit is used to calculate the security. The actual amount will be determined when full construction plans for each Chase building are submitted for building permit. The recommended approach delays the issuance of security as late as possible so as to provide greater time for the Dominium project to be entitled and solicit financingd. It should be noted that the Dominium affordable housing will likely require several million dollars of funding support from the City/HRA and that neither the developer or property owner intend to provide financial support to the Dominium project. Rationale – the property owner is supportive of affordable housing and is willing to sell the 4820 site to the City or a different developer who can build affordable units on the site STAFF REPORT Page 6 4) How should public parking be provided in the remainder of the Pentagon North site? Staff Recommendation Developer / Owner Request • Chase to provide public easements on 90-100 surface parking stalls along the shared property line of Fred Richards Park as a requirement of their TIF assistance. These shared stalls would be available to apartment residents, guests and the general public. • The property owner (Hillcrest) is requested to provide a public easement for approximately 130 surface parking stalls anywhere on the remaining property with the flexibility for the owner to move those parking stalls as needed to support ongoing leasing of the buildings and future redevelopment. • No payment is proposed because the request requires no cash outlay from the property owner. • No change from June 14th position • The property owner is willing to sell approx. 1-acre of land for public parking to the City or HRA for $1.75 million Rationale – Shared public parking has been a goal of this redevelopment effort for many years. This was an important element of the 2014 Master Redevelopment Agreement. With redevelopment of the remaining North Parcel buildings many years in the future, it is unlikely that the parking structures anticipated in the 2014 Master Agreement will be built. An alternative is proposed to satisfy the City’s need without requiring additional investment from the property owner. Rationale – the Developer is not building new parking at this time and believes fair compensation is appropriate to provide public parking on private property # # # STAFF REPORT Page 7 Background Information for Reference 2014 Master TIF Redevelopment Agreement (Minimum Improvements) Proposed Chase Real Estate Project STAFF REPORT Page 8 Background Information for Reference April 2018 Site Plan - Preliminary Approval granted on 6/19/2018 The CITY of EDINA Pentagon Park North– Request for TIF from Chase Real Estate and Hillcrest Development Summary of Staff Report HRA Discussion June 28, 2018 The CITY of EDINA 1)What level of TIF assistance is acceptable for this project? 2)Should TIF proceeds be reserved for future affordably-priced housing? 3)What type of security is acceptable in lieu of affordably-priced housing units in the Pentagon North site? 4)How should public parking be provided in the remainder of the Pentagon Park North site? The City’s negotiating team, the developer and the property owner request clear direction from the HRA Board so that the private parties can decide whether to continue negotiations or withdraw the proposal. www.EdinaMN.gov 2 Four Unresolved Issues The CITY of EDINA www.EdinaMN.gov 3 1a) What level of TIF assistance is acceptable for this project? Staff Recommendation Developer / Owner Request Two TIF pay-as-you-go Notes sized in the amount to provide a projected 8% average return to the Developer – currently estimated at $9.89 million but will be re-calculated based on final project TIF Note A payable upon completion of Market-Rate Apartments – size TBD TIF Note B payable upon completion of Senior Apartments – size TBD Typically lookbacks at key intervals and claw backs on the full TIF amount if average returns exceed 8% Agreeable with the two Note concept tied to completion of each building TIF Notes sized to provide $14.37 million total Developer suggests a “lookback” provision occurring 8-years after completion with a clawback if return greater than 9% is achieved and with no clawback on the cost of the public improvement The CITY of EDINA www.EdinaMN.gov 4 1b) What level of TIF assistance is acceptable for this project? Staff Recommendation Developer / Owner Request Rationale – TIF assistance is recommended to bring the returns up to an acceptable rate in the marketplace. Returns in the 8% to 10% range are generally acceptable. Based on the level of public improvements proposed, staff recommends TIF assistance sized at an 8% level of return. It is noted that other projects are advancing with returns in the 6% to 7% range while also delivering public benefits. These projects recognize the long-term value of holding properties in Edina. Rationale – the Developer is taking on significant risk with a project of this scale and seeks a higher return The CITY of EDINA www.EdinaMN.gov 5 2a) Should TIF proceeds be reserved for future affordably-priced housing? Staff Recommendation Developer / Owner Request Each TIF Note is typically paid from 90% of the incremental taxes generated from the site; in accordance with MN Statute, 10% is retained by the City for administrative purposes TIF Note repayment is recommended to be limited to 80% of tax increment collected to allow for an additional 10% to be pooled to a future affordably-priced housing project located on an adjacent parcel Developer requests 90% of the incremental taxes be used to fund the TIF Notes The CITY of EDINA www.EdinaMN.gov 6 2b) Should TIF proceeds be reserved for future affordably-priced housing? Staff Recommendation Developer / Owner Request Rationale – A separate developer anticipates building affordably-priced housing on a separate parcel (4820 W. 77th St). While no formal application or request has been submitted now, it is likely that the developer will request (and need) several million dollars of public assistance to make their project viable. All incremental taxes generated from the South parcel are likely to remain with that property and very little taxes will be collected from the 4820 site itself. The property owner is not willing to provide discounted land to support the affordable housing project. The developer is not willing to provide monies to support affordable housing either. It would be highly unusual for the City to issued general obligation debt to support the affordable project. The North Parcel appears to be the most viable source of public revenue to help fund the revenue gap of the future affordable housing project. The proposed 80% arrangement provides full reimbursement to the developer but spread out over a few more years. This additional 10% pooling is estimated to provide approximately $1.8 million in funding. The anticipated funding request from Dominium is likely to be 2 or 3 times this amount. Rationale – the Developer’s project is separate from the future Dominium project and the Developer prefers faster payment on the TIF Notes The CITY of EDINA www.EdinaMN.gov 7 3a) What type of security is acceptable in lieu of affordably-priced units in the Pentagon North site? Staff Recommendation Developer / Owner Request In lieu of the anticipated Dominium project, security in the amount of $5.46 million is needed Acceptable forms of security include: cash, cash-in-escrow, letter of credit, land or combination thereof Security is not required until Chase is ready for complete building permits for each building in Summer 2019 and Winter 2019/2020 – this should allow for Dominium to be awarded tax credits in Fall 2019 for construction in 2020 If the Dominium project is not under construction within 3-years of security being issued, the security will be retained by the City Credit will be given for any Dominium units built on the 4820 site in excess of the 55 required; credit will apply to any new housing built on the remainder of the Pentagon North site for a period of 3-years after the Dominium project is complete No change from June 14th position $3.0 million cash at closing or combination of $1.9 million in real estate (4820 W. 77th Street) if the Dominium project does not proceed and $1.1 million cash The CITY of EDINA www.EdinaMN.gov 8 3b) What type of security is acceptable in lieu of affordably-priced units in the Pentagon North site? Staff Recommendation Developer / Owner Request Rationale – Based on the current estimates of independent and assisted living apartments in the Chase proposal, 55 units of affordably-priced housing are required. The memory care and transitional care units are excluded from this calculation. The first choice is for a minimum of 55 units to be constructed, possibly at the 4820 W. 77th St. site which is also owned by Hillcrest Development. While Dominium has executed a purchase agreement at a market-rate price, there are many contingencies and hurdles to clear before this project advances beyond the concept-phase. Based on current City policy, a ‘buy-in’ fee of $100,000 per unit is used to calculate the security. The actual amount will be determined when full construction plans for each Chase building are submitted for building permit. The recommended approach delays the issuance of security as late as possible so as to provide greater time for the Dominium project to be entitled and solicit financing. It should be noted that the Dominium affordable housing will likely require several million dollars of funding support from the City/HRA and that neither the developer or property owner intend to provide financial support to the Dominium project. Rationale – the property owner is supportive of affordable housing and is willing to sell the 4820 site to the City or a different developer who can build affordable units on the site The CITY of EDINA www.EdinaMN.gov 9 4) How should public parking be provided in the remainder of the Pentagon North site? Staff Recommendation Developer / Owner Request Chase to provide public easements on 90-100 surface parking stalls along the shared property line of Fred Richards Park as a requirement of their TIF assistance. These shared stalls would be available to apartment residents, guests and the general public. The property owner (Hillcrest) is requested to provide a public easement for approximately 130 surface parking stalls anywhere on the remaining property with the flexibility for the owner to move those parking stalls as needed to support ongoing leasing of the buildings and future redevelopment. No payment is proposed because the request requires no cash outlay from the property owner. No change from June 14th position The property owner is willing to sell approx. 1-acre of land for public parking to the City or HRA for $1.75 million Rationale – Shared public parking has been a goal of this redevelopment effort for many years. This was an important element of the 2014 Master Redevelopment Agreement. With redevelopment of the remaining North Parcel buildings many years in the future, it is unlikely that the parking structures anticipated in the 2014 Master Agreement will be built. An alternative is proposed to satisfy the City’s need without requiring additional investment from the property owner. Rationale – the Developer is not building new parking at this time and believes fair compensation is appropriate to provide public parking on private property Dear HRA board members/City Council: Below is a synthesis of information presented in materials published in the June 28, 2018 HRA meeting packet; staff, financial and legal advisors, and HRA board members’ statements at the June 18 and June 28 HRA meetings, and email exchanges with Bill Neuendorf. Although the details of the deal need to be flushed out, the overview presented on June 28 is the result of weeks of discussions among and between the developer, HRA staff, the HRA’s legal and financial advisors, and HRA board. At the June 28 meeting, Bill Neuendorf stated: In your packet there is a copy of a resolution for your consideration. There is also a summary and overview of the financial, business deal points that we have been talking about in closed session quite a bit. While we don’t have every detail flushed out, I think this is a really good framework to move forward. Kevin Staunton stated that they have spent a lot of time focusing on the financial piece of the deal. Based on these facts, it seems fair to conclude that the final agreements are not likely to depart from the overview on the main points. Even if the HRA were to retain some of the land, or buy the “public” parking garage from the developer over time, it will still be an overall bad deal. Please let me know if you have any questions or take issue with any of the facts below. Please address these with me directly rather than discount or discredit behind my back. I am reaching out to you directly. Please show me the same courtesy in response. Thank you. Jennifer By selling the property at 5146 Eden Avenue for private development are we: o Getting a community center? No. No tax increments from private development will go to a future civic building. The land sale contributes only 16% of the civic building’s estimated cost. o Getting an outdoor civic space? The .92-acre outdoor civic space is proposed to be constructed on the roof of a private parking garage. Tax increments from private development of the site will fund “the concrete that supports the park,” “the waterproofing, the drainage, the trees and all that.” This, according to Bill Neuendorf, is “a significant cost.” It stands to reason that the same outdoor space could be constructed for far less at grade. So, TIF from the private development is being directed to unnecessary expenses. If the expenses are unnecessary, perhaps so is the private development that funds them. o Getting public parking? No. There will be a parking ramp on the site that the public can use, but it will be owned by the developer and financed with tax increments from 5220 Eden (former school bus garage). Private development on the site is not needed to pay for “public” parking. o Keeping some of the land? No. The HRA will sell 100% of the site, but have perpetual easements on the green roof (outdoor civic space) and “public” parking garage, and the right to construct a future civic building on top of the “public” parking garage. o Getting a park and ride? No. HRA staff stated that Metro Transit is not interested. o Getting light rail on the CP line? No. In 2017, the Council decided not to further study the issue. o Getting affordable housing? Yes, but units would remain affordable for only 15 years and be financed with a $1.2M HRA loan. o Getting senior housing? It is market rate housing, not specifically for seniors. o Getting needed intersection improvements? No. 100% of tax increments, for the full 26 years, from 5146 Eden and 5220 Eden will be directed to the outdoor civic space and “public” parking, leaving no TIF to fund identified infrastructure improvements. o Getting a new street between Vernon and Arcadia as shown in the Framework? No. The proposed shared street (“woonerf”) would run across the north end of the site and dead end before the RR tracks. Funding for the street is TBD (likely debt). o Increasing the tax base? Yes, but some caveats. o A benefit of increasing the tax base is that new development can shoulder some of the tax burden of local taxpayers. But this site is in a TIF district. Taxes on the improved value of the property (above the original or base value) go into the TIF district—in this case, for the full 26 years. During this time, the rest of us pay city, county, and school district (for specific levies) taxes as though this development doesn’t exist. o The original market value of the property (pre-improvements) is based on the purchase price. All taxing authorities continue to collect taxes on the original value while the TIF district is active. The sale price of the land, however, is significantly lower than two recent sales (5220 Eden and 5000 Vernon). Selling the land for too cheap lowers the base value and so lowers the tax potential. o The HRA has been advised that the property will have a lower value because of the HRA “strings” attached. By combining public and private development on two- thirds of the site, the HRA is reducing the tax potential and future sale value of the property. o Getting top dollar for sale of its land? No. Based on statements by Kevin Staunton and Bill Neuendorf, the sales price seems more related to what the developer can afford (per unit) than what the open market might pay. The $2.98M net sales price for 3.3 acres works out to $905,756 per acre -- $1.89M less than Trammel Crow paid the Edina school district for 5220 Eden and about $1.3M less per acre than a developer paid for 5000 Vernon. o “Activating the area 24/7”? No more than the existing apartments and businesses do. o Spurring other nearby property owners to redevelop their properties? The private development (apartments) is not an amenity for the owners, tenants or residents of other properties. A larger outdoor civic space and community center would be. It stands to reason that public development/public use would offer more benefits to other property owners, tenants, and residents and so be more likely to stimulate redevelopment. There is a smarter alternative o Retain the land for 100% public use o Construct outdoor civic space at grade (far less expensive than constructing on top of parking structure, making TIF from apartments on site not necessary) o Direct TIF from 5220 Eden to fund the district parking structure (the plan anyway) o Use same sources of funding for community building, minus the $2.98M contribution of sales price of the land. Eliminate the shared street, which would reduce costs by over $1M, helping to offset loss of sales revenue o Focus on encouraging redevelopment of other sites, such as building on stilts Advantages o Total control o TIF funds publicly-owned improvements (parking structure) o Reduced costs for outdoor civic space o Room to design public elements in most cost effective and advantageous way o Room to expand in the future o Prime location on site (south end) for outdoor space or civic building o Does not preclude constructing spaces that can be leased to complementary private uses Dear City Council/HRA board members: Five years ago, what if somebody had said “You have $62M to spend on parks and recreation improvements over the next 8-10 years. How do you want to spend it?” I ask because as some of you have expressed concern about the cost of a new arts center (underestimated, I believe, at $18M), I would like you to see that the Council has been very willing to spend money on community facilities — just not on an all-ages, comprehensive, community-based fitness/wellness/learning/arts & culture center at Grandview. The above number includes: • $16M for Braemar Field/Backyard Rink • $10,482,500 spent or committed to Braemar golf and clubhouse improvements • Braemar Master Plan — $8.1M estimated • Fred Richards Park improvements — estimated $8-10M, plus cost of clubhouse improvements • $18M new arts/active adults center It does not include playgrounds, park shelters, trails, Hornet’s Nest, and various other projects. This is what it takes to provide for a community. I do wonder why, as a Council, you have been willing to commit to certain projects, but have drawn the line at an all-ages, comprehensive, community-based fitness/wellness/learning/arts & culture center. Yes, it would be a major investment in our community — but it would be operationally profitable. The smaller investment in an arts and active adults only center is not likely to be operationally profitable. It is also not likely to serve a significant percentage of Edinans, or attract signficantly more users than the current facilities. It is just a reality that the proposed facility does not offer enough, and it can’t offer enough because of its small size and limited programming vision. What do we get from the sale and development of the former public works site? We don’t get the benefit of an increased tax base. The taxes go into a TIF fund to pay for “district parking” which is not needed and the infrastructure/substructure to support the civic outdoor area, which may not be needed (if community facility is not constructed) and which may not have much benefit to the general public. We get affordable housing, but at a public cost. Please take a step back and consider whether this is the best way to spend limited affordable housing dollars. We get another apartment building, which a majority of residents have stated unequivocally they do not want. We don’t get needed improvements on Eden, Arcadia, and Vernon/Interlachen. We don’t get an all-ages, comprehensive, community-based fitness/wellness/learning/arts & culture center that would be operationally profitable and that would enliven the area 7-days a week year around and generate several hundred thousand visits per year. We don’t get the prime location on the parcel for a building. We do get the more difficult to access part of the parcel tucked against a tall corner of dirt. We lose the future potential of this land. Is this project really exciting enough to give that up? Jim, Kevin, and Mike — you never respond to me. I would like to hear from you on this. Mary and Bob, thank you for often responding to me. I would also like to hear your thoughts. I want to know why the proposal you have in front of you is better than another possibility. What makes it better for Edina than an all-ages, comprehensive, community-based fitness/wellness/learning/arts & culture center? If the issue is money, the Council always finds a way. It may make you nervous, but the funding can be worked out. Edina is a compact community, in terms of area. We need centrally located infill development devoted to community use. It can’t all be at the edges, as Braemar, Edinborough, Centennial Lakes, and Fred Richards are. In this very divided time, we need places that bring us together. Please end the arrangement with Frauenshuh and pursue a public use for this land (which does not preclude some private spaces). Thank you. Jennifer Janovy Stephanie Mullaney, Chair stephaniemullaney@comcast.net www.GrandviewEdina.com 952-925-1569 PUBLIC GRANDVIEW PROPOSAL GRANDVIEWCITIZEN TASK FORCE FOR THE FORMER PUBLIC WORKS SITE To: Edina City Council Scott Neal, City Manager Cary Teague, City Development Director Bill Neuendorf, Economic Development Manager From: Stephanie Mullaney RE: Proposal for Former Public Works Site Planning Dear Council Members, Mr. Neal, Mr. Teague, and Mr. Neuendorf, As a Grandview neighborhood resident and the lead of a community effort to preserve public land, I kindly ask your serious consideration of this proposal for a community-led effort to plan the future of the former public works site. Please respond to me before June 27, prior to the HRA meeting. Before signing off our public land to a private developer, I ask that you seriously consider the contents of this proposal and correspondence package. There is no risk to the City, and there is much to be gained through goodwill and community collaboration. The development plan that you are pursuing with Fraunenshuh has many disadvantages for Edina residents. Please consider the following: • The Frauenshuh concept illustrates that the site is not large enough to house mixed-use development. Green space is small, the community building is small, and does not leave sufficient room for expansion. By retaining the entire parcel, there is room for less expensive parking and more green space, which was important element in public opinion. • The plan does not reflect public input and community needs based on data and studies. • The development does not conform to the Grandview Framework or the Comp Plan. • The “give to get” is not sufficient; the public gets very little benefit short-term or long term. • Livability elements have not been considered such as walk-ability, bike-ability and the creation of a community space that is inclusive and welcoming. Thank you for your consideration of this important issue.This plan impacts the future of our community. Stephanie Mullaney Chair, Public Grandview stephaniemullaney@comcast.net :: 952-925-1569 Cover Letter 22Proposal for Development Planning for the Former Public Works Site Knowledge Future-Oriented Experience Decisions Based on Data The leaders have completed hundreds of hours of research on the Grandview District, city development, livability standards, community centers, art centers, and community programming. The Citizen Task Force will be forward- looking when making recommendations for the site. With a vast amount of City experience, the task force knows what elements need to be considered for innovative growth and development. The leaders of this effort have intimate knowledge of Grandview planning process, experience in Edina planning processes, City policies, project management, and people management. The Citizen Task Force will make recommendations based on data and facts. Previously-obtained data will be processed and additional data gathering can be performed as requested. Executive Summary This proposal is being submitted to retain the public land at the former public works site and create a more Who: A dedicated group of residents Where: The former public works site What: Community-based planning for the site Why: To use public land for the highest potential community 33Proposal for Development Planning for the Former Public Works Site Task Force Objectives CREATE A LIVABLE SITE COMMUNITY FOCUS MINIMIZE CITY EFFORT The task force will ensure that all livability issues are addressed, including transit, walkability, vibrancy, and connection with the District. The task force goal is to create a site that is welcoming and useful to the entire community, helping create bonds between generations and residents of all backgrounds. The task force will minimize the effort of City staff and city council members. The proposal will not incur cost to the City. This citizen-driven effort will enable the completion of a true small requirements. This proposal brings the Grandview neighborhood to parity with the other Edina neighborhoods’ planning processes. VISION • COLLABORATION • EFFICIENCY 4 Proposal for Development Planning for the Former Public Works Site Endorsements This proposal is endorsed by the Edina Neighborhood Coalition (ENC), a group of neighborhood leaders in Edina with the following mission: to advocate for the community in the City’s development processes. We will represent the majority viewpoint of the community and advocate for reasonable development projects that align with what the majority of Edina residents want. Individual endorsements to follow. 55Proposal for Development Planning for the Former Public Works Site The citizen team leadership brings a broad range of knowledge, expertise, and skills to this effort. The team has the experience and tools to perform the work and will utilitze the wider community to enhance our efforts. City Knowledge Breadth of Experience Outreach & Technology Collaboration for Results We Know Edina Wide Breadth of Experience Strategy, Communications, Marketing, and Technology Collaboration and Compilation Skills Our team leadership knows Edina. We know City processes, commissions, communications, and staff. We are connected with resident leaders from other neighborhoods. We know what the community is saying, what residents want, and what they need. The task force team has experience in art centers, community centers, legal processes, online technology, personnel management, project management, and data analysis. The team knows social media, websites, survey tools, and other means of reaching the community. The proposal will include professional materials with detailed recommendations that are based on research and data and have measurable outcomes. The task force team has decades of experience working in collaborative groups. Our leaders have experience in team work, management, and negotiation. The team has the technical know-how to gather, parse, and consolidate information from various sources. 66Proposal for Development Planning for the Former Public Works Site This proposal provides a unique opportunity to allow Edina residents to have a true voice in the future of their neighborhood and community. The strategies and methodology are applicable to other development projects and will ensure the City’s growth is centered on community,and livability. Why? 7 Proposal for Development Planning for the Former Public Works Site 1 4 2 5 3 6 FREE. Minimal City Effort Professional Results Small Area Plan is Completed at No Cost Provides a Model for City Development Avert a Resident Battle and Increase Goodwill Non-Binding There are no costs associated with this proposal, and a small time commitment required by Council members. We propose one or two Council/City staff members act as liaisons in the process. The Council receives project collateral that contains concise information based on data and facts. Objectives and recommendations are clear and understandable. The March 28, 2018 request for parity for the Grandview District with respect to small area plans is answered with this proposal, at no cost to the City, and no consultant time. Using livability standards and other methodologies will apply to other City planning.Use of metrics ensures that City growth is community-centered and provides a foundation for future needs. Recent Council meetings have included hours of confrontation with unhappy resident groups. This effort will be a collaboration that will eliminate resident frustration and save Council time. Proposal recommendations to the Council are non-binding. This project the Council. Adopting this proposal enables the Edina City Council to engage the community, show residents they are heard, and to create a premier community-centered site on the public land. Why? 88Proposal for Development Planning for the Former Public Works Site Livability Standards (1of 2) This proposal will develop and implement a standard of metrics to ensure the development plan for the land is sustainable and future-friendly. A Livability Checklist will be implemented that, at the minimum, considers the following elements: Fulfills Community Needs • Provides needed amenities and services to all Edina residents. • Offers community amenities with indoor and outdoor spaces. • Enables year-around usage; is adaptable to change of seasons. Encourages a Sense of Community • Creates a sense of place. • Creates a sense of belonging across ages and cultures. • Encourages community interaction across generations and cultures. Resident-Friendly • Pedestrian-friendly and safe. • Bike-friendly and safe. • Accessible, welcoming, and usable to entire population. • Includes considerations of age groups, family makeup, cultural diversity, special needs, and more. • Provides a welcoming green space. Traffic and Parking • Transit is considered - is mass transit incorporated or is the plan transit-ready? • Parking convenience and accessibility. • Traffic and congestion issues for the neighborhood. • Connectivity to the neighborhood and District. • Connectivity and integration into the community as a whole. 99Proposal for Development Planning for the Former Public Works Site Economic Considerations • Cost and funding. • Does it keep dollars in the city because community needs are met? • What is the impact on local businesses? Environmentally Friendly • Preservation of natural assets such as trees. • Use of energy-efficiency technology. • Site sustainability and maintenance. General Considerations • Consideration of housing needs. • Special requests from community groups. Livability Standards (2 of 2) HOW DOES THIS PROJECT SERVE AND ENHANCE THE COMMUNITY? 10 Proposal for Development Planning for the Former Public Works Site Summary The Edina City Council has a unique opportunity examine a consolidation of the former Grandview process data close study of community needs and livability elements. The current development plan with Frauenshuh bears little resembalance to the Grandview Framework, does not conform with public opinion about how the site should be used, and does not heed the City’s Comprehensive Plan. not consider the future needs of the City. This proposal enables the city council to reestablish a working relationship with neighborhood and the community as a whole. The result of this proposal is a development project that builds partnership with city staff, trust in city government, provides an inspired outcome for the site, and provides a blueprint for future developments in Edina. Community-Centered. Collaborative. Creative. Helping Grow the Grandview District Using Livability Standards 1111Proposal for Development Planning for the Former Public Works Site A central commons on the Public Works site with indoor and outdoor public space that connects the civic cornerstones of the District and serves the neighborhood and community needs. Framework, page 3 A MIXED USE PLAN FOR OUR PUBLIC LAND HOW DOES IT SERVE THE NEIGHBORHOOD AND COMMUNITY NEEDS? JUNE 2018 EXECUTIVE SUMMARY WHY DO WE NEED PRIVATE DEVELOPMENT ON PUBLIC LAND? With the consideration of a development partnership with Frauenshuh for the former public works site in Edina, the ongoing question surfaces: “Why is the Council selling this last piece of public land?” This document poses the questions regarding: • Why sell the public land? • What benefits occur from mixed use development? ~ Do the benefits favor the developer or the community? ~ What benefits occur from retaining the land for 100% public use? 2015 PLAN AND 2018 PLAN VERY SIMILAR The 2015 plan (below) presented to the public did not get a favorable response from residents.The 2018 plan is very similar to that plan. At a public meeting on March 11, 2015, attendees were given three development scenarios and asked to put circle stickers on the scenario board(s) they preferred. The results? • 14 of the 183 attendees (8%) voted for this type of scenario • The other 2 scenarios garnered a total of 39 votes (21%) • The total votes for NONE OF THE SCENARIOS: 130 (71%) THE MAJORITY of RESIDENTS HAVE REPEATEDLY STATED THEY WANT THE SITE USED for PUBLIC PURPOSES. PUBLIC OPINION HAS BEEN EXPRESSED in CITY- PAID SURVEYS, STUDIES, and MEETINGS. A SWEET DEAL FOR THE DEVELOPER. WHAT ABOUT FOR RESIDENTS? WHAT DEVELOPERS GET: • 2.13 acres of the site - 65% of the site • Acquisition of city-owned land at only $1.4M per acre • $1.2M loan at 1% interest “toward affordable housing” and for “lost revenue due to affordable housing.” The loan is compensation for affordable housing required by Edina. Current commercial SBA interest rates are 5.5% to 7.5%*. • Tax-increment financing (TIF) funds of $10.47M - using up all TIF money for the district • Ownership of the “green” • Ownership of the District parking structure • Lease rights for 20-30 stalls in District parking • Ability to buy northern parcel if City does not construct civic building within 3-5 years WHAT RESIDENTS GET: • 1.16 acres of the site - 35% of the site • Loss of 65% of the site for current public use • Loss of 65% of the site for future public use • Loss of 1.16 acres if civic building not constructed within time limit • “Easement” on .92-acre green roof • “Easement” on District parking structure • Loss of tax revenue for 26 years due to use of TIF funds • Other public improvements are deferred (unless other monies identified) • Vernon Avenue Intersection Improvements • Arcadia Avenue improvements • New street from Eden Avenue to Jerry’s Foods (needed for safety of Grandview Square residents) • Loss of interest and use of $1.2M over 15 years • ANOTHER uninspired market rate (luxury) apartment building in Edina • Heavy mass near the street (like Trammell/Crow development at 5220 Eden Avenue - site of the former school bus garage) WHAT ARE THE FINANCIAL BENEFITS OF MIXED USE? The City touts the following benefits with Frauenshuh’s plan: • A community center, parking, and green space. • Revenue from the sale of the privately developed portion of the site. • Tax revenue from the private development. • The ability to use the sale revenue and the the future tax revenue to help pay for the community center, green space, and public parking. • The private development helps keep the area active 24/7. LET’S TAKE A LOOK AT EACH OF THESE POINTS A COMMUNITY CENTER, PARKING AND GREEN SPACE • A community center has not been officially defined. • One of the City staff concerns stated is “City readiness to design, build, and operate 30,000 Sq Ft future civic building.” • Risk that 100% of the land will become privatized due to lack of a plan, action, or political will by the City. • The parking does not belong to the City (but will be maintained by the City. • The green space is not owned by the City. • The green space planned is not significant and will not be perceived as being for public use, similar to the Grandview Square Green. REVENUE FROM THE SALE OF PROPERTY • The purchase price being considered would yield $2.989M to the City, not a significant amount. • This amount is under the current market (i.e. the city is giving the developer a too favorable price on the sale of public land) and will not make a significant contribution to the construction of the art center. TAX REVENUE FROM THE PRIVATE DEVELOPMENT • Having mixed use development does not “put the land back on the tax rolls.” • Tax benefits are not seen for 26 years. PRIVATE DEVELOPMENT KEEPS THE AREA ACTIVE 24/7 • How would the site be more active with private residences than with a publicly used facility that would be open most of the 24 hour day? A true community center would have use from early morning through approximately 11:00 PM seven days a week. WHAT IS WRONG WITH THIS MIXED USE PROPOSAL? NO TRUE BENEFITS TO RESIDENTS • The land does not go “back on the tax rolls” for 26 years. • There is no demonstrated need for district parking; the City-owned Jerry’s ramp is under utilized. • We don’t own the green, which is smaller than a football field. • We don’t own the parking, but will maintain it. NO SOLID PLANS FOR A CIVIC BUILDING • Hesitancy of City to commit to civic building. • Risk losing the 35% of the site the City would own. • Leaves no room for future civic growth. NO WALKABILITY IMPROVEMENTS • This plan does nothing to improve walkability. • Grandview Framework calls for a “more vibrant, walkable, functional and life-filled place.” This project meets none of the Franework’s place-making objectives. • The density and proximity to street are not pedestrian friendly. DEPLETES GRANDVIEW TIF FUNDS 100%=LOSS OF LOCAL IMPROVEMENTS • Vernon Avenue intersection • This intersection is already congested and dangerous. • The addition of the Caribou/Einstein drive-through will exacebate the safety and congestion. • New street from Eden Avenue to Jerry’s Foods • This is needed for the safety of pedestrians. • Affects seniors that live in Grandview Square. • Affects library visitors. • Acadia Avenue improvements WHAT IS WRONG WITH THIS MIXED USE PROPOSAL? IT DOES NOT REFLECT WHAT RESIDENTS WANT OR CITY POLICY • Apartments were the LEAST favored use of the site in City-paid surveys. • Majority of residents (61%) believe public land should not be sold. • Majority of residents believe public land should be used for public purposes only (66%). • Comprehensive plan states that we should not sell any park or open space currently owned by the City of Edina. RISK • There is currently no market failure for market rate apartments in Edina. • Future market is more uncertain: • June Finance and Commerce article forsees the apartment market slowing down, forcing landlords to reduce rents and make concessions to get new residents. • Edina and surrounding area apartments have considerable vacancy rate - see https://bit.ly/2lps6Gd. • Possible construction crash due to increased cost of building materials from government tariff policies. • Potential impact to City credit rating. WHAT IF? WHAT IF THE FORMER PUBLIC WORKS SITE STAYED 100% PUBLIC? HOW RESIDENTS BENEFIT: • 100% ownership of the site. • Preservation of a rare resource - Edina has no other centrally-located public land available. • Land space to use for less-expensive surface parking. • The ability to build a civic building with the space and opportunity for future expansion. • Resident voices are heard and heeded. HOW THE CITY COUNCIL BENEFITS: • Provides a forward-looking plan for the future of public land. • Conformance with data gathered by City-paid consultants. • Residents feel heard. • No battle from residents regarding development. THE COUNCIL SHOULD CONSIDER WHAT RESIDENTS SAID THEY WANTED Hello, I am asking for urgency in your response to this matter. There are strong indications that you intend to enter a private development partnership with Frauenshuh for the former public works site. I am asking you to stop movement on that plan and consider the attached proposal for the site. >>> I would like to meet with representative Council members before the June 28 meeting to discuss this proposal. The Frauenshuh plan clearly illustrates that the site is not large enough for a mixed-use development plan. The plan clearly does not create: A central commons on the Public Works site with indoor and outdoor public space that connects the civic cornerstones of the District and serves the neighborhood and community needs. - Grandview Framework There is nothing in the plan that meets the greater community needs. Similar to the $62M you have spent on sports facilities that serve a narrow segment of the population, this plan will not serve the needs of our neighborhood or community. And, the public gets VERY LITTLE in return. This plan does nothing to provide a solution to services that are sorely missing in the community: a place to connect residents across generations, connect groups with different cultural backgrounds (i.e. consider the diversity study), provide teens a safe place to gather, or integrate seniors into larger community. I ask that you put aside your personal biases and preferences and consider the long-term future for the neighborhood and community – there is no need to implement Frauenshuh’s plan just to get something done. Let the residents develop and present a proposal for the property. It is public property and should stay as such. I look forward to hearing from you. Thank you for your service and consideration of this matter. Stephanie Mullaney 952-925-1569 stephaniemullaney@comcast.net Attachments: Proposal for a citizen-led task force to complete a plan for the site. Note: The completed Grandview small area plan consolidation of findings document is available upon request. A document that outlines why the Fraunenshuh plan should not move forward 1 Sharon Allison From:Ryan Browning Sent:Monday, June 25, 2018 2:32 PM To:Sharon Allison Subject:form From Redevelopment Overview, updated June 25, 2018 June 28, 2018 HRA meeting My comments and questions in red NOTE: the document uses the term “City” throughout. Is that accurate, or are some elements likely to be owned/maintained/operated/executed by the HRA? Please clarify. Project Description • Subdivide into two parcels – North (1.16 acres) and South (2.13 acres) 5146 is currently comprised of three parcels. Which parcel(s) would be subdivided? Or will the boundaries of the parcels be redrawn? If subdivided, the developer could owe $5,000 per unit in park dedication fees -- $715,000. Park land may also be dedicated. If I am reading city code right, it requires city ownership of the dedicated parkland, and also that it be a dedication of land (not a surface on top of a structure). Please clarify. • South Parcel to include o 2.13 acres o 143 residential apartments _ 10 percent priced at 50% AMI affordable rates o 172 private stalls for residents (1.2 per unit) o 40,000 Sq Ft public green space At the corner of St. John’s and 60th, there is a public green space that is .94 acres – .2 acres larger than the civic green space being proposed. Please go look. Does the size match your vision of an outdoor community gathering space at Grandview? Is the size adequate for the type of programming you envision? o Pedestrian bridge #1 across RR tracks Has RR been approached about this? If yes, what is the status of discussions? What are challenges? o $41.8 million estimated cost • North Parcel to include o 1.16 acres o 160 stalls of District parking _ 20-30 available to apartment residents o 30,000 Sq Ft future Civic building o Shared street/loading drive/woonerf to edge of RR track RR track or RR property line? o Pedestrian bridge #2 across RR track Same question as above. o $24.2 million estimated cost (includes City & Developer costs) • Constructed in two phases o Phase 1 begins Spring 2019 _ Completion Summer 2020 _ Includes residential, private parking, public parking, green space and buildable “pad” for future civic building o Phase 2 begins as early as Spring 2021 _ Completion 12-14 months later Overview of Public / Private Arrangement 1. Sales Transaction • City to sell 3.3 acres • Simultaneously, City would buy back North Parcel (1.16 acres) Is this accurate? Would the city buy back land? Or would the city be buying an easement or right to build on the parking structure? Please provide clarity on this. • Developer to retain right-of-first-refusal on North Parcel o Can buy North Parcel for pre-established price if City does NOT construct future civic building within 3-5 years Which is it? Three or five? • Price contingent upon: o TIF to reimburse for public elements (green roof and District parking) o HRA loan to support 10% affordable units 2. Ownership Structure • Developer to own land and Phase 1 infrastructure improvements • City to own “pad” above District parking and air rights to construct future civic building Does owning the “pad” involve owning anything physical – for example, the roof of the parking structure? Or is it an easement or some other type of legal agreement? • City to hold public easement on 0.92-acre green roof Terms TBD • City to hold public easement on District parking structure Terms TBD • Developer to have lease rights to 20-30 stalls in District parking Plus a fee to operate/manage the parking facility? 4. Maintenance Responsibility Residential Building Although there is a general outline of maintenance responsibilities, details – and any ongoing/future costs to the City or HRA – appear TBD. 5. Operations/Management Responsibility Residential Building The developer will operate/manage the district parking for a fee. What is the fee? What is the source of revenue to pay the fee? City will operate/manage the green roof. What is the source of revenue to pay ongoing/future costs? It is clear that this deal generates costs to the City/HRA that are not known and the need to enter into additional agreements, such as shared maintenance agreements, that have not been defined. Civic Building District Parking Financial Overview 1. Purchase Price & Term • City to sell 3.3 acres for $4.589 million According to Zillow, EPS sold the 1.7-acre former bus garage site for $4.737,500 last year. The former public works site is almost twice the size but is being sold for less. Why? What were the city’s appraisals for the property? If higher than the negotiated sales price, is the HRA writing down the price of the land? If yes, why and shouldn’t there be transparency on that fact? • Simultaneously, City would buy back North Parcel (1.16 acres) for $1.6 million What exactly is the City (or HRA) buying? Actual land, the top of a parking garage? The right to build on top of the parking garage? If not buying back actual land, please be clear with the public on that fact. • $2.989 net proceeds to City o $1.4 million per acre Compared to the school district’s $2.78M per acre. o $20,902 per residential unit • City/HRA would loan $1.2 million toward affordable housing Is this the best way to spend affordable housing funds? • City/HRA would pledge $10.47 million in TIF revenue to support public elements Public elements that the public does not own. Be clear that this does not include the civic building, woonerf, and that it leaves no TIF funding for identified infrastructure improvements in the area. It buys a roof of one parking garage that can be used as an outdoor civic space (elements of which cannot be paid for with TIF, so where if that funding coming from). It buys the right to build on top of another parking garage. Funding for that building TBD. It buys an easement to a parking garage that may not be needed (depends on whether civic building is constructed, because there is no demonstrated need for district parking – the public ramp behind Jerry’s is underutilized), that the developer will manage for a fee. The public has been told that 60% of the site will remain public. That statement needs an asterisk and paragraph long explanation. As of now, with current information, it appears that the public will own no land at 5146 Eden Avenue, and no structure built directly on land. The HRA is selling 100% of the site, seemingly for well under market value. Since this is an unnecessary deal, it is not a good deal for the public. Edina does not need to privately develop this site. Please address the above questions and issues. Thank you.