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HomeMy WebLinkAbout2010 06-28 EDAP • EDA MEETING City of Brooklyn Center June 28 2010 AGENDA 1. Call to Order —The EDA requests that attendees turn off cell phones and pagers during the meeting. A copy of the full City Council packet, including EDA (Economic Development Authority), is available to the public. The packet ring binder is located at the front of the Council Chambers by the Secretary. 2. Roll Call 3. Approval of Agenda and Consent Agenda —The following items are considered to be routine by the Economic Development Authority (EDA) and will be enacted by one motion. There will be no separate discussion of these items unless a Commissioner so requests, in which event the item will be removed from the consent agenda and considered at the end of Commission Consideration Items. a. Approval of Minutes 1. June 14, 2010 — Regular Session 4. Commission Consideration Items a. Resolution Approving a Fourth Amendment to a Development Agreement and Certain Related Agreements Attached Thereto as Exhibits (License, Deed, Amended Easement, Lease Amendment, and Subordination Agreements) Requested Commission Action: — Motion to adopt resolution. 5. Adjournment • EDA Agenda Item No. 3a MINUTES OF THE PROCEEDINGS OF THE • ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF BROOKLYN CENTER IN THE COUNTY OF HENNEPIN AND THE STATE OF MINNESOTA REGULAR SESSION JUNE 14, 2010 CITY HALL — COUNCIL CHAMBERS 1. CALL TO ORDER The Brooklyn Center Economic Development Authority (EDA) met in Regular Session called to order by President Tim Willson at 7:31 p.m. 2. ROLL CALL President Tim Willson and Commissioners Kay Lasman, Tim Roche, Dan Ryan, and Mark Yelich. Also present were Executive Director Curt Boganey, Director of Business and Development Gary Eitel, Assistant City Manager/Director of Building and Community Standards Vickie Schleuning, City Attorney Charlie LeFevere, and Carla Wirth, TimeSaver Off Site Secretarial, Inc. • 3. APPROVAL OF AGENDA AND CONSENT AGENDA Commissioner Yelich moved and Commissioner Lasman seconded approval of the Agenda and Consent Agenda, and the following item was approved: 3a. APPROVAL OF MINUTES 1. May 24, 2010 — Regular Session Motion passed unanimously. 4. COMMISSION CONSIDERATION ITEMS 4a. RESOLUTION NO. 2010 -12 AUTHORIZING THE ACQUISITION OF PROPERTY TO FACILITATE NEIGHBORHOOD IMPROVEMENTS AND REDEVELOPMENT OPPORTUNITIES WITHIN THE BROOKLYN BOULEVARD CORRIDOR (NORTHBROOK APARTMENTS — 6037 BROOKLYN BOULEVARD) Director of Business and Development Eitel introduced the item, discussed the history, and stated the purpose of the proposed resolution to acquire property to facilitate potential reimaging opportunities on Brooklyn Boulevard. He explained the purchase agreement provides for the • voluntary sale of the Northbrook Apartment building for $505,000 with a closing date of 06/14/10 -1- DRAFT August 2, 2010, and requires the City to comply with relocation of eligible tenants on or before August 25, 2010. • Mr. Eitel presented a map depicting the alignment of Brooklyn Boulevard and described the streetscape improvements from 65 Avenue to the City's northerly boundary that were approved in early 2000. The next phase of that reimaging is the southern portion of Brooklyn Boulevard from 63` Avenue to Highway 100. He described how Brooklyn Boulevard acts as a gateway and "front door," opening to the easterly and westerly neighborhoods, and noted the properties acquired to date that allowed the closure of driveways to make Brooklyn Boulevard a safer corridor. Mr. Eitel advised that in the future, the EDA will consider demolition to remove the building from this site. The acquisition, relocation costs, and demolition will be funded from TIF District 3, which was created through special legislation, and currently has a fund balance of about $2 million. Commissioner Roche moved and Commissioner Yelich seconded adoption of EDA RESOLUTION NO. 2010 -12 Authorizing the Acquisition of Property to Facilitate Neighborhood Stabilization Program Improvements and Redevelopment Opportunities within the Brooklyn Boulevard Corridor (Northbrook Apartments — 6037 Brooklyn Boulevard). Motion passed unanimously. 4b. RESOLUTION NO. 2010 -13 APPROVING DEVELOPMENT AGREEMENT SUBORDINATION AGREEMENT AND AGREEMENT REGARDING COVENANT AND RESTRICTION WITH RESPECT TO THE PAYMENT OF REAL ESTATE TAXES TO BE ENTERED INTO BY ECONOMIC DEVELOPMENT AUTHORITY OF BROOKLYN CENTER, MINNESOTA, PH MINNEAPOLIS, LLC, TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA, AND WELLS FARGO BANK NORTHWEST NATIONAL ASSOCIATION City Manager Curt Boganey introduced the item, discussed the history, and stated the purpose of the proposed resolution. If approved, closing on the land sale should go forward within a week and construction commence soon thereafter. Mr. Boganey presented the terms of the subordination agreement that protects Teacher's Insurance and Annuity Association of America's (the lender) interest in this mortgaged property regardless of any claims, violations, defaults, or foreclosures that may occur and provides for Teacher's Insurance and Annuity Association of America's (the lender) right to cure any notice of default. In consideration of the EDA's execution of the subordination agreement, PH LLC (the developer) agrees to pay taxes on this property for a period of 20 years regardless of what happens in terms of foreclosure or default. This provision was not part of the original deal and will be included in the development agreement and filed so it runs with the property in the event of resale. 06/14/10 -2- DRAFT Mr. Boganey emphasized that it is not the EDA's intent to acquire this Class A building. The EDA concurred and indicated it is the EDA's intent to bring jobs and taxes to the City and have this Class A building constructed. Mr. Eitel explained that after the closing, the property will be reassessed. He estimated that after construction, the taxable value will exceed $20 million and result in taxes of about $750,000 that will be collected for a period of at least 20 years. Commissioner Lasman moved and Commissioner Yelich seconded adoption of EDA RESOLUTION NO. 2010 -13 Approving Development Agreement Subordination Agreement and Agreement Regarding Covenant and Restriction with Respect to the Payment of Real Estate Taxes and Authorizing Execution of Closing Documents. Dan VanDyke, Briggs and Morgan, commented on the challenge of financing this project at the rate of $300 per square foot, double the average cost, due to security requirements. He indicated they realize that the EDA does not want to own a federal office building and the subordination agreement agrees that for as long as the GSA lease is in place, the EDA will "stay on the sidelines" and let the lender cure any notice of default. He agreed that Teacher's has better resources to complete this project than the City or EDA and acknowledged there is no "wiggle room" for payment of taxes. Mr. VanDyke advised that through discussions with the developer and lender, they agree that the only way this building would default is if they have wildly underestimated construction costs which are currently estimated at double what would be expected for a building of this size. He indicated the property closing will be on Wednesday, • June 16, 2010. Mayor Willson extended the City's appreciation to Mr. VanDyke for his work on this project. Motion passed unanimously. 5. ADJOURNMENT Commissioner Roche moved and Commissioner Yelich seconded adjournment of the Economic Development Authority meeting at 7:58 p.m. Motion passed unanimously. i 06/14/10 -3- DRAFT EDA Agenda Item No. 4a EDA ITEM MEMORANDUM DATE: June 23, 2010 TO: Curt Boganey, City Manager FROM: Gary Eitel, Director of Business and Development' SUBJECT: Resolution Approving a Fourth Amendment to a Development Agreement and Certain Related Agreements Attached Thereto as Exhibits (License, Deed, Amended Easement, Lease Amendment and Subordination Agreements) Recommendation: It is recommended that the Economic Development Authority consider approval/adoption of Resolution Approving a Fourth Amendment to a Development Agreement and Certain Related Agreements Attached Thereto as Exhibits (License, Deed, Amended Easement, Lease Amendment and Subordination Agreements) Background: The following outlines the actions of the City Council, the EDA and the HRA pertaining to the development agreement for the phased development of Lot 1, Block 1, Brooklyn Farm 2nd Addition. On October 23, 2006, the City Council and the EDA adopted the following resolutions relating i to the development plans of the Brooklyn Hotel Partners, LLC for the development of an Embassy Suites Hotel and a 2 phase for a complementary hotel: City Council Resolution No. 2006 -121, ` Resolution Approving Property Tax Abatement and Authorizing Execution of a Development Agreement EDA Resolution No. 2006 -12, ` Resolution Deleting Property From Tax Increment District No 2 and Approving and Authorizing Execution of the Development Agreement. On July 23, 2007, the EDA adopted Resolution No. 2007 -12, approving the First Amendment to the Development Agreement, which revised the construction schedule and approved the Parking, Access and Pedestrian Link Easement Agreement. Additionally, on July 23, 2007, the HRA, owners of the land for the Earle Brown Heritage Center, adopted Resolution No. 2007 -01, HRA Resolution Approving and Authorizing Execution of a Parking Access and Pedestrian Link Easement Agreement between the Economic Development Authority Development Authority, the City of Brooklyn Center Brooklyn Center, and Brooklyn Hotel Partners, LLC On October 8, 2007, the EDA approved Resolution No. 2007 -19, Resolution Approving and Authorizing Execution of a Second Amendment to the Development Agreement. This amendment extended the closing date and revised the construction schedule. Mission: Ensuring an attractive, clean, safe community that enhances the quality of life and preserves the public trust EDA ITEM MEMORANDUM On December 27, 2007, the EDA at a Special Meeting adopted Resolution No. 2007 -23, Resolution Approving a Third Amendment to the Development Agreements and Certain Lender Consents /Subordination and Authoriziniz the EDA Executive Director to Execute Certain Documents The Third Amendment provided for the allocation of the tax abatements and business subsidy job requirements to the respective phases; approved assignment and subordination of the development agreement in favor of Prudential Insurance Company of America; and consented to the assignment of Right to Receive Tax Abatement Payments to the Hurlbut -Zeppa Charitable Trust AR. On October 13, 2008, the EDA approved Resolution No. 2008 -10, ` Resolution Approving Lease Agreement with Brooklyn Hotel Partners LLC for the D -Barn at the Earle Brown Heritage Center and Authorizing the EDA Executive Director to Execute Said Agreement On June 5, 2009, the Developer was notified that an Event of Default as defined in the Development Agreement had occurred. Over the last year, the City and Developer have worked on a compromise to settle their respective rights and claims under the Development Agreement and the Lease Agreement. On June 16, 2010, the City received confirmation that the Developer had executed the Fourth Amendment to the Development Agreement. On June 18, 2010, the City received confirmation that the Hurlbut -Zeppa Charitable Trust had • executed the security interest subordination agreement pertaining to the right of setoff and security agreement. Fourth Amendment to the Development Agreement The Fourth Amendment to the Development Agreement provides a global resolution to the default of the Development Agreement and the D -Barn Lease Agreement. The major elements of this global resolution include the following components: 1. The construction of the pedestrian link has been removed as a Developer's responsibility under the terms of the minimum improvements of Phase I. The EDA will have the sole and absolute discretion on the design, location, schedule and construction of the link. 2. The Developer relinquishes all rights and obligations to develop Phase II and is not entitled any tax abatements from the Phase II site development. 3. The EDA agrees to provide the Developer with a right of first offer for the Phase II site until July 1; 2011. The EDA maintains sole and absolute discretion to accept, reject or conditionally accept an offer from the Developer. :fission: Ensuring an attractive, clean, safe community that enhances the quality of life and preserves the public trust EDA ITEM MEMORANDUM 4. The payment of tax abatements for the Phase I (Embassy Suites Hotel Site) are • subject to a right of set off by the City for all payments owing the authority by the Developer as a tenant under the D -Barn Lease Agreement and License Agreement for use of the Pedestrian Link. 5. An Amended and Restated Parking, Access and Pedestrian Link easement Agreement provides the EDA with total discretion on the location and construction of the pedestrian link on the Earle Brown Heritage Center site. The agreement maintains the easement at its original location on the hotel site with minor adjustments to the legal description and replaces the easement on the BRA site with a non - exclusive license agreement. This license agreement identifies pedestrian link costs associated with the ownership, operations oration and maintenance of the link; provides a use charge to the Developer of 50 percent of these annual pedestrian link costs; and includes provisions for the use of the Right of Set -Off and Security Agreement. addresses the common entrance driveway to the Phase H Additionally, the agreement a Y Y� g site and includes similar cost sharing provisions when the site is developed. 6. The First Amendment to the D -Barn Lease provides for the commencement of this ten year lease to occur upon the issuance of an occupancy permit for the completed link; the developer's payment of $72,181, which represents certain lost revenues • arising from the adjustment of the commencement of the term of the Lease; and includes provisions for the use of the Right of Set -Off and Security Agreement. 7. The Security Interest Subordination Agreement provides the subordination of any of the granted agreements to the ht of Set -Off anted by the Developer to the EDA and gr Right Hurlbut-Ze a Charitable Trust AR , e. The lender, Hu BRA in the Lease and Licens pp consents to the grant by the Developer a security interest in the Tax Abatement payments to the EDA and BRA as collateral security for the Developer's payment obligations under the Lease and License. The attached City Council resolution provides for the approval of the Fourth Amendment to the Development Agreement, the following exhibits to the Development Agreement: a. License Agreement b. Quit Claim Deed and Termination of Development Rights c. Amended and Restated Parking, Access and Pedestrian Link d. First Amendment to the Lease e. Security Interest Subordination Agreement f. Subordination by Prudential and approves the execution of items (e) and (f) referenced above. And authorizes the execution of Exhibits c, d, e, and f as listed above. Mission: Ensuring an attractive, clean, safe community that enhances the quality of life and preserves the public trust �I EDA ITEM MEMORANDUM Budget Issues: • The EDA budget issues include the costs of the architectural design and construction of the pedestrian link. Previous architectural design and construction cost estimates were projected at approximately $900,000. Consideration of options in financing these costs include: • EDA Fund Balance (Present balance approximately $1.6 million) • Revenue Bond or inter -fund loan with repayment from lease revenue. Additional options which are being considered are recent Tax Increment Legislation for use of existing fund balances to promote economic development and the future sales negotiations of the global resolution includes a Phase II site. As previously noted in the Council memorandum, this g number of financial benefits to the city. Council Goals: Strategic: 1. We will aggressively proceed with implementation of City's redevelopment plans Ongoing: 1. We will move toward maintaining or lowering the level of City property taxes I i Hission: Ensuring an attractive, clean, safe community that enhances the quality of life and preserves the public trust I Commissioner introduced the following resolution and • moved its adoption: EDA RESOLUTION NO. RESOLUTION APPROVING A FOURTH AMENDMENT TO A DEVELOPMENT AGREEMENT AND CERTAIN RELATED AGREEMENTS ATTACHED THERETO AS EXHIBITS (LICENSE, DEED, AMENDED EASEMENT, LEASE AMENDMENT AND SUBORDINATION AGREEMENTS) WHEREAS, the Economic Development Authority of Brooklyn Center (the "Authority ") and the City of Brooklyn Center (the "City ") have heretofore entered into a Development Agreement dated October 23 2006 as amended July 23 2007 October 8 2007 and January 17, 2008 (as amended, the "Development Agreement ") between the Authority, the City and Brooklyn Hotel Partners, LLC, a Minnesota limited liability company (the "Developer ") in connection with hotel developments to be constructed by the Developer; and WHEREAS, the Authority, the City and the Developer desire to further amend the Development Agreement. NOW, THEREFORE, BE IT RESOLVED by the Economic Development Authority of Brooklyn Center as follows: • I . The Authority hereby approves the Fourth Amendment to the Development Agreement in the form on file with the City Clerk, with such changes thereto as may hereafter be approved by the Executive Director of the Authority. 2. The Authority hereby approves all of the exhibits to the Fourth Amendment to the Development Agreement, including without limitation: (a) License Agreement (Exhibit A to Fourth Amendment to the Development Agreement), (b) Quit Claim Deed and Termination of Development Rights (Exhibit B to the Fourth Amendment to the Development Agreement), (c) the Amended and Restated Parking, Access and Pedestrian Link Easement Agreement (Exhibit C to the Fourth Amendment to the Development Agreement), (d) the First Amendment to Lease (Exhibit D to the Fourth Amendment to the Development Agreement), e the Security Interest Subordination Agreement Exhibit E to the Fourth Amendment to the Development Agreement), and EDA RESOLUTION NO. • (f) Subordination by The Prudential Insurance Company of America (in substance similar to that subordination given by the Hurlbut- Zeppa Charitable Trust AR (see (e) above), and approves the execution and delivery of items (c), (d), (e) and, if necessary and appropriate, (f) above, in the forms on file with the City Clerk, with such changes thereto as may hereafter be approved by the Executive Director of the Authority. June 28, 2010 Date President The motion for the adoption of the foregoing resolution was duly seconded by Commissioner and upon vote being taken thereon, the following voted in favor thereof: and the following voted against the same: • whereupon said resolution was declared duly passed and adopted.