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HomeMy WebLinkAbout5.a. Resolution Approving the TIF Note for Morrison Partners, LLC. EXECUTIVE SUMMARY Port Authority Meeting Date: January 18, 2022 AGENDA ITEM: Resolution Approving the TIF Note for Morrison Partners, LLC. AGENDA SECTION: New Business PREPARED BY: Eric Van Oss, Economic Development Coordinator AGENDA NO. 5.a. ATTACHMENTS: Authorizing Resolution and Investment Letter APPROVED BY: LJM RECOMMENDED ACTION: Motion to Approve the Resolution approving the issuance of, and providing the form, terms, covenants and tax directions for the issuance of its taxable tax increment revenue note, series 2022A in an aggregate principal amount not to exceed $3,400,000. BACKGROUND As part of The Morrison Redevelopment project the city required a Contract for Private Redevelopment which established some of the terms of the Tax Increment Financing (TIF) assistance and performance measures. Under the terms of the contract Morrison Partners, LLC was to acquire the necessary 13 parcels, demolish existing buildings, and construct the minimum improvements which are defined by the Contract; 124-unit multi-family residential building and 4,000 square feet of commercial space. The Contract was approved by the Port Authority on February 8, 2020 and established that the Port Authority will pay $600,000 to Morrison Partners, LLC after acquisition of the parcels and will issue a pay as you go TIF note for the principal amount of $3.4 million after receipt of a Certificate of Occupancy for the first phase of the residential project. The developer was required to substantially complete the residential minimum improvements by 12/31/2022, and the commercial minimum improvements by 12/1/2025. The City will be taking 5% of the TIF generated for administrative fees associated with operating and managing the TIF District. The document notes that if there are grants received associated with land acquisition or any other activity excepting abatement and demolition which totals $1,000,000; the $600,000 payment will be reduced by the grant amount. Staff and the consultant, Ehler’s Inc., have confirmed that all the conditions have been met, and the developer provided documentation of just over $4,000,000 in eligible expenses. Regarding the amount of the assistance, the City / developer has received at least $600,000 in grant assistance from various sources, so per amount identified in Section 3.1(b) of the Agreement, the TIF Note and assistance is for $3,400,000. Under the initial contract, the first payment of this note was scheduled to occur on August 1, 2023; however, given the completion of the phase I residential portion the first payment can occur on August 1, 2022. It will be a partial payment, but it will reduce the interest. This will not affect the full 26 years of increment with the final payment occurring on February 1, 2048. Based on where market values have been, staff and the consultant believe this likely will be paid off early. RECOMMENDATION Staff recommends the Port Authority approve the Resolution. 1 ROSEMOUNT PORT AUTHORITY DAKOTA COUNTY, MINNESOTA RESOLUTION 2022-01 A RESOLUTION APPROVING THE ISSUANCE OF, AND PROVIDING THE FORM, TERMS, COVENANTS AND DIRECTIONS FOR THE ISSUANCE OF ITS TAXABLE TAX INCREMENT REVENUE NOTE, SERIES 2022A IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $3,400,000 BE IT RESOLVED BY the Rosemount Port Authority (“Authority”), as follows: Section 1. Authorization; Award of Sale. 1.01. Authorization. The Authority has heretofore approved the establishment of the KenRose Tax Increment Financing District (the “TIF District”) within Redevelopment Project No. 1 (“Redevelopment Project”), and has adopted a tax increment financing plan for the purpose of financing certain improvements within the Redevelopment Project. Pursuant to Minnesota Statutes, Section 469.178, the Authority is authorized to issue and sell its bonds for the purpose of financing a portion of the public development costs of the Redevelopment Project. The bonds are payable from all or any portion of revenues derived from the TIF District and pledged to the payment of the bonds. The Authority hereby finds and determines that it is in the best interests of the Authority that it issue and sell its taxable Tax Increment Revenue Note, Series 2022A (the “Note”), in the aggregate principal amount of $3,400,000, for the purpose of financing certain public costs of the Redevelopment Project. 1.02. Agreement Approved; Issuance, Sale and Terms of the Note. The Authority has previously approved the Contract for Private Redevelopment (the “Agreement”) between the Authority and The Morrison Partners, LLC (the “Owner”), and authorized the Executive Director to execute the Agreement. Pursuant to the Agreement, the Note will be sold to the Owner. The Note will be dated as of the date of delivery and will bear interest at the rate of 4.35% per annum to the earlier of maturity or prepayment. In exchange for the Authority’s issuance of the Note to the Owner, the Owner will pay certain costs related to the Residential Minimum Improvements (the Qualifying Costs, as defined in the Agreement) pursuant to Section 3.2 of the Agreement. The Note will be delivered in the principal amount not to exceed $3,400,000 for reimbursement of the Owner’s costs in accordance with the terms of Sections 3.2 and 3.3 of the Agreement. Section 2. Form of Note. The Note will be in substantially the following form, with the blanks to be properly filled in and the principal amount and payment schedule adjusted as of the date of issue: 2 UNITED STATE OF AMERICA STATE OF MINNESOTA DAKOTA COUNTY ROSEMOUNT PORT AUTHORITY No. R-1 $3,400,000 TAXABLE TAX INCREMENT REVENUE NOTE SERIES 2022A Date Rate of Original Issue 4.35% January 21, 2022 The Rosemount Port Authority (“Authority”), for value received, certifies that it is indebted and hereby promises to pay to The Morrison Partners, LLC or registered assigns (the “Owner”), the principal sum of $3,400,000 and to pay interest thereon at the rate of 4.35 percent per annum, as and to the extent set forth herein. 1. Payments. Principal and interest (“Payments”) are estimated to be paid on August 1, 2022, and each February 1 and August 1 thereafter to and including February 1, 2048 (“Payment Dates”), in the amounts and from the sources set forth in Section 3 herein. Payments will be applied first to accrued interest, and then to unpaid principal. Payments are payable by mail to the address of the Owner or any other address as the Owner may designate upon 30 days written notice to the Authority. Payments on this Note are payable in any coin or currency of the United States of America which, on the Payment Date, is legal tender for the payment of public and private debts. 2. Interest. Interest at the rate stated herein will accrue on the unpaid principal, commencing on the date of original issue. Interest will be computed on the basis of a year of 360 days and charged for actual days principal is unpaid. 3. Available Tax Increment. Payments on this Note are payable on each Payment Date in the amount of and solely payable from “Available Tax Increment,” which will mean, on each Payment Date, 95 percent of the Tax Increment attributable to the Redevelopment Property (defined in the Agreement) and paid to the Authority by Dakota County in the six months preceding the Payment Date, all as the terms are defined in the Contract for Private Redevelopment between the Authority and Owner dated as of May 13 , 2020 (the “Agreement”). Available Tax Increment will not include any Tax Increment if, as of any Payment Date, there is an uncured Event of Default by the Owner under the Agreement. The Authority will have no obligation to pay principal of and interest on this Note on each Payment Date from any source other than Available Tax Increment, and the failure of the Authority to pay the entire amount of principal or interest on this Note on any Payment Date will not constitute a default hereunder as long as the Authority pays principal and interest hereon to the 3 extent of Available Tax Increment. The Authority will have no obligation to pay unpaid balance of principal or accrued interest that may remain after the final Payment on February 1, 2048. 4. Optional Prepayment. The principal sum and all accrued interest payable under this Note is prepayable in whole or in part at any time by the Authority without premium or penalty. No partial prepayment will affect the amount or timing of any other regular payment otherwise required to be made under this Note. 5. Termination. At the Authority’s option, this Note will terminate and the Authority’s obligation to make any payments under this Note will be discharged upon the occurrence of an Event of Default on the part of the Redeveloper as defined in Section 8.1 of the Agreement, but only if the Event of Default has not been cured in accordance with Section 8.2 of the Agreement. 6. Nature of Obligation. This Note is a single note in the total principal amount of $3,400,000 issued to aid in financing certain public redevelopment costs and administrative costs of a Redevelopment Project undertaken by the Authority pursuant to Minnesota Statutes, Sections 469.001 through 469.047, as amended, and is issued pursuant to an authorizing resolution (the “Resolution”) duly adopted by the Authority on January 18, 2022, and pursuant to and in full conformity with the Constitution and laws of the State of Minnesota, including Minnesota Statutes, Sections 469.174 to 469.179, as amended. This Note is a limited obligation of the Authority which is payable solely from Available Tax Increment pledged to the payment hereof under the Resolution. This Note and the interest hereon will not be deemed to constitute a general obligation of the State of Minnesota or any political subdivision thereof, including, without limitation, the Authority or the city of Rosemount. Neither the State of Minnesota, nor any political subdivision thereof will be obligated to pay the principal of or interest on this Note or other costs incident hereto except out of Available Tax Increment, and neither the full faith and credit nor the taxing power of the State of Minnesota or any political subdivision thereof is pledged to the payment of the principal of or interest on this Note or other costs incident hereto. 7. Adjustment of Principal. The principal amount of this Note may be adjusted or the Owner may be required to exchange this Note in an adjusted principal amount in accordance with section 3.2 of the Agreement. 8. Estimated Tax Increment Payments. Any estimates of Tax Increment prepared by the Authority or its financial advisors in connection with the TIF District or the Agreement are for the benefit of the Authority, and are not intended as representations on which the Owner may rely. THE AUTHORITY MAKES NO REPRESENTATION OR WARRANTY THAT THE AVAILABLE TAX INCREMENT WILL BE SUFFICIENT TO PAY THE PRINCIPAL OF AND INTEREST ON THIS NOTE. 9. Registration and Transfer. This Note is issuable only as a fully registered note without coupons. As provided in the Resolution, and subject to certain limitations set forth therein, this Note is transferable upon the books of the Authority kept for that purpose at the principal office of the Executive Director of the Authority as Registrar, by the Owner hereof in person or by the Owner’s attorney duly authorized in writ ing, upon surrender of this Note together with a written 4 instrument of transfer satisfactory to the Authority, duly executed by the Owner. Upon the transfer or exchange and the payment by the Owner of any tax, fee, or governmental charge required to be paid by the Authority with respect to the transfer or exchange, there will be issued in the name of the transferee a new Note of the same aggregate principal amount, bearing interest at the same rate and maturing on the same dates. This Note will not be transferred to any person other than an affiliate, or other related entity, of the Owner unless the Authority has been provided with an investment letter in a form substantially similar to the investment letter submitted by the Owner or a certificate of the transferor, in a form satisfactory to the Authority, that the transfer is exempt from registration and prospectus delivery requirements of federal and applicable state securities laws. Notwithstanding the foregoing, Owner may grant, pledge and assign to its lender, to secure full payment and performance of its obligations under the loan, all of Owner’s right, title and interest in and to this Note. IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions, and things required by the Constitution and laws of the State of Minnesota to be done, to exist, to happen, and to be performed in order to make this Note a valid and binding limited obligation of the Authority according to its terms, have been done, do exist, have happened, and have been performed in due form, time and manner as so required. IN WITNESS WHEREOF, the board of commissioners of the Rosemount Port Authority, has caused this Note to be executed with the manual signatures of its President and Executive Director, all as of the Date of Original Issue specified above. ROSEMOUNT PORT AUTHORITY By: Heidi Freske, Chair By: Logan Martin, Executive Director 5 REGISTRATION PROVISIONS The ownership of the unpaid balance of the within Note is registered in the bond register of the Executive Director of the Authority, in the name of the person last listed below. Date of Registration Registered Owner Signature of the Authority Executive Director The Morrison Partners, LLC 7500 West 78th Street Edina, MN 55439 Attn: Mike Waldo Federal Tax ID #85-0948507 [End of Form of Note] Section 3. Terms, Execution and Delivery. 3.01. Denomination, Payment . The Note will be issued as a single typewritten note numbered R-1. The Note will be issuable only in fully registered form. Principal of and interest on the Note will be payable by check or draft issued by the Registrar described herein. 3.02. Dates; Interest Payment Dates. Principal of and interest on the Note will be payable by mail to the owner of record thereof as of the close of business on the fifteenth day of the month preceding the Payment Date, whether or not the day is a business day. 3.03. Registration. The Authority hereby appoints the Executive Director to perform the functions of registrar, transfer agent and paying agent (the “Registrar”). The effect of registration and the rights and duties of the Authority and the Registrar with respect thereto will be as follows: (a) Register. The Registrar will keep at his office a bond register in which the Registrar will provide for the registration of ownership of the Note and the registration of transfers and exchanges of the Note. (b) Transfer of Note. Upon surrender for transfer of the Note duly endorsed by the registered owner thereof or accompanied by a written instrument of transfer, in form reasonably satisfactory to the Registrar, duly executed by the registered owner thereof or by an attorney duly authorized by the registered owner in writing, the Registrar will authenticate and deliver, in the name of the designated transferee or transferees, a new Note of a like aggregate principal amount and maturity, as requested by the transferor. Notwithstanding the foregoing, the Note will not be transferred except (1) to any person other than an affiliate, or other related entity, of the Owner unless the Authority has been provided with an investment letter in a form substantially similar to the investment letter submitted by the Owner or a certificate of the transferor, in a form satisfactory to the Authority, that the transfer is exempt from registration and prospectus delivery requirements 6 of federal and applicable state securities laws, or (2) to the note holder’s construction lender to secure full payment and performance of its obligations under the loan. The Registrar may close the books for registration of any transfer after the fifteenth day of the month preceding each Payment Date and until the Payment Date. The Owner may assign the TIF Note to a lender that provides all or part of the financing for the acquisition of the Redevelopment Property or the construction of the Minimum Improvements. (c) Cancellation. The Note surrendered upon any transfer will be promptly cancelled by the Registrar and thereafter disposed of as directed by the Authority. (d) Improper or Unauthorized Transfer. When the Note is presented to the Registrar for transfer, the Registrar may refuse to transfer the same until he is satisfied that the endorsement on the Note or separate instrument of transfer is legally authorized. The Registrar will incur no liability for his refusal, in good faith, to make transfers which he, in his judgment, deems improper or unauthorized. (e) Persons Deemed Owners. The Authority and the Registrar may treat the person in whose name the Note is at any time registered in the bond register as the absolute owner of the Note, whether the Note is overdue or not, for the purpose of receiving payment of, or on account of, the principal of and interest on the Note and for all other purposes, and all the payments so made to any registered owner or upon the owner’s order will be valid and effectual to satisfy and discharge the liability of the Authority upon the Note to the extent of the sum or sums so paid. (f) Taxes, Fees and Charges. For every transfer or exchange of the Note, the Registrar may impose a charge upon the owner thereof sufficient to reimburse the Registrar for any tax, fee, or other governmental charge required to be paid with respect to the transfer or exchange. (g) Mutilated, Lost, Stolen or Destroyed Note. In case the Note becomes mutilated or is lost, stolen, or destroyed, the Registrar will deliver a new Note of like amount, maturity dates and tenor in exchange and substitution for and upon cancellation of the mutilated Note or in lieu of and in substitution for the Note lost, stolen, or destroyed, upon the payment of the reasonable expenses and charges of the Registrar in connection therewith; and, in the case the Note lost, stolen, or destroyed, upon filing with the Registrar of evidence satisfactory to it that the Note was lost, stolen, or destroyed, and of the ownership thereof, and upon furnishing to the Registrar of an appropriate bond or indemnity in form, substance, and amount satisfactory to it, in which both the Authority and the Registrar will be named as obligees. The Note so surrendered to the Registrar will be cancelled by him and evidence of the cancellation will be given to the Authority. If the mutilated, lost, stolen, or destroyed Note has already matured or been called for redemption in accordance with its terms, it will not be necessary to issue a new Note prior to payment. 3.04. Preparation and Delivery. The Note will be prepared under the direction of the Executive Director and will be executed on behalf of the Authority by the signatures of its President and Executive Director. In case any officer whose signature appears on the Note ceases to be the officer before the delivery of the Note, the signature will nevertheless be valid and sufficient for all purposes, the same as if the officer had remained in office until delivery. When the Note has been so executed, it will be delivered by the Authority to the Owner following the delivery of the necessary items delineated in Section 3.3 of the Agreement. 7 Section 4. Security Provisions. 4.01. Pledge. The Authority hereby pledges to the payment of the principal of and interest on the Note all Available Tax Increment as defined in the Note. Available Tax Increment will be applied to payment of the principal of and interest on the Note in accordance with the terms of the form of Note set forth in Section 2 of this resolution. 4.02. Bond Fund. Until the date the Note is no longer outstanding and no principal thereof or interest thereon (to the extent required to be paid pursuant to this resolution) remains unpaid, the Authority will maintain a separate and special “Bond Fund” to be used for no purpose other than the payment of the principal of and interest on the Note. the Authority irrevocably agrees to appropriate to the Bond Fund in each year Available Tax Increment. Any Available Tax Increment remaining in the Bond Fund will be transferred to the Authority’s account for the TIF District upon the payment of all principal and interest to be paid with respect to the Note. Section 5. Certification of Proceedings. 5.01. Certification of Proceedings. The officers of the Authority are hereby authorized and directed to prepare and furnish to the Owner of the Note certified copies of all proceedings and records of the Authority, and the other affidavits, certificates, and information as may be required to show the facts relating to the legality and marketability of the Note as the same appear from the books and records under their custody and control or as otherwise known to them, and all the certified copies, certificates, and affidavits, including any heretofore furnished, will be deemed representations of the Authority as to the facts recited therein. Section 6. Effective Date. This resolution will be effective upon full execution of the Agreement. ADOPTED this 18th day of January, 2022 by the Port Authority of the City of Rosemount. Heidi Freske, Chair ATTEST: ___________________________________ Logan Martin, Executive Director 1 RS230-64-770941.v1 INVESTMENT LETTER To the Rosemount Port Authority (“Authority”) Attention: Executive Director Dated: January 21, 2022 Re: $3,400,000 Tax Increment Revenue Note, Series 2022A (KenRose TIF District) The undersigned, as Purchaser of $3,400,000 in principal amount of the above-captioned Tax Increment Revenue Note (the “Note”), approved by the Board of Commissioners of the Rosemount Port Authority on January 18, 2022, hereby represents to you and to Kennedy & Graven, Chartered, Minneapolis, Minnesota, as legal counsel to the Authority, as follows: 1. We understand and acknowledge that the Note is delivered to the Purchaser on this date pursuant to the Contract for Private Redevelopment by and between the Authority and the Purchaser dated May 13, 2020 (the “Agreement”). 2. The Note is payable as to principal and interest solely from Available Tax Increment pledged to the Note, as defined therein. 3. We have sufficient knowledge and experience in financial and business matters, including purchase and ownership of municipal obligations, to be able to evaluate the risks and merits of the investment represented by the purchase of the above-stated principal amount of the Note. 4. We acknowledge that no offering statement, prospectus, offering circular or other comprehensive offering document or disclosure containing material information with respect to the Authority and the Note has been issued or prepared by the Authority, and that, in due diligence, we have made our own inquiry and analysis with respect to the Authority, the Note and the security therefor, and other material factors affecting the security and payment of the Note. 5. We acknowledge that we have either been supplied with or have access to information, including financial statements and other financial information, to which a reasonable investor would attach significance in making investment decisions, and we have had the opportunity to ask questions and receive answers from knowledgeable individuals concerning the Authority, the Note and the security therefor, and that as reasonable investors we have been able to make our decision to purchase the above-stated principal amount of the Note. 6. We have been informed that the Note (i) is not being registered or otherwise qualified for sale under the “Blue Sky” laws and regulations of any state, or under federal securities laws or regulations, (ii) will not be listed on any stock or other securities exchange, and (iii) will carry no rating from any rating service. 7. We acknowledge that the Authority and Kennedy & Graven, Chartered, as legal counsel to the Authority, have not made any representations or warranties as to the status of interest on the Note for the purpose of federal or state income taxation.