ITEM 4.1 Tax Abatements0tseF O
MINNESOTA g
DEPARTMENT INFORMATION
Request for
City Council Action
ORIGINATING DEPARTMENT REQUESTOR:
MEETING DATE:
Administration City Administrator/Finance Director Flaherty
November 25, 2019
PRESENTER(s) REVIEWED BY:
ITEM #:
Administration
4.1
STRATEGIC VISION
MEETS:
THE CITY OF OTSEGO:
and authorizing execution of an agreement with Wright County.
Is a strong organization that is committed to leading the community through innovative
communication.
X
Has proactively expanded infrastructure to responsibly provide core services.
Yes — Held October 28, 2019
Is committed to delivery of quality emergency service responsive to community needs and
expectations in a cost-effective manner.
X
Is a social community with diverse housing, service options, and employment opportunities.
development stage building plans were approved by the City Council on November 12, 2019.
Is a distinctive, connected community known for its beauty and natural surroundings.
AGENDA ITEM DETAILS
RECOMMENDATION:
City staff is recommending that the City Council approve a resolution approving property tax abatements
and authorizing execution of an agreement with Wright County.
ARE YOU SEEKING APPROVAL OF A CONTRACT?
IS A PUBLIC HEARING REQUIRED?
Yes
Yes — Held October 28, 2019
BACKGROUND/JUSTIFICATION:
The City of Otsego has received a request for financial assistance from Rice Companies for the Parkview
Retail development. This development received preliminary plat approval in July 2019. A final plat and
development stage building plans were approved by the City Council on November 12, 2019.
The financial assistance request from Rice Companies was for the construction of certain streets, utilities
and related public improvements within the Parkview Retail development. The improvements are currently
estimated to cost $871,171; however, it should be noted that the improvements have not been through
engineering design or the contractual bidding process, so the cost is subject to change.
City staff is recommending that the City Council provide funding for the improvements through tax
abatement. The City is authorized to establish tax abatement through Minnesota Statute §469.1812
through §469.1815. The City has adopted a Tax Abatement Policy to be used as a guide in the processing
and review of financial assistance requests.
The City's proposed tax abatement program would establish an abatement of a portion of the increase in
property taxes caused by the Parkview Retail development to finance and provide the public infrastructure
improvements. The maximum amount of the tax abatement is estimated to be $950,000 based on eligible
development costs, estimated values of the new development and current property tax rates.
Per request from the City, Wright County has agreed to partner with the City to provide funding for the
improvements through their own tax abatement program. On November 19, 2019, Wright County
approved a Tax Abatement Resolution and Agreement with the City of Otsego. This agreement outlines
that Wright County will provide abatement of 90% of the increase in property taxes caused by the Parkview
Retail development. The County will reimburse the City up to a maximum of $400,000 for a period of up to
fifteen years. The reimbursements will begin in 2022 and will occur on a semi-annual basis.
Nick Anhut from Ehlers, the City's development finance consultant has prepared the attached tax
abatement cash flow scenarios. With development of the grocery store only, it is estimated that Wright
County will be able to reimburse the $400,000 to the City in approximately 11 years. Using the currently
estimated project costs, it is estimated that the City would be able to reimburse itself the remaining
$471,171 in approximately 14 years.
Minnesota Statute and City Policy require a public hearing to be held for the proposed property tax
abatement program, which was held on October 28, 2019. There were no comments from the public
regarding the proposed property tax abatement program.
Briggs and Morgan, the City's bond counsel has drafted the attached tax abatement agreement for
consideration of approval via the attached resolution, also drafted by Briggs and Morgan.
SUPPORTING DOCUMENTS ATTACHED: I
• Tax Abatement Cash Flow Scenarios
• Tax Abatement Agreement
• Resolution 2019-77
POSSIBLE MOTION
PLEASE WORD MOTION AS YOU WOULD LIKE ITTO APPEAR IN THE MINUTES:
Motion to adopt Resolution 2019-77 approving property tax abatements and authorizing execution of an
agreement with Wright County.
BUDGET INFORMATION
FUNDING: BUDGETED:
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TAX ABATEMENT AGREEMENT
BY AND BETWEEN
THE CITY OF OTSEGO, MINNESOTA
I1 0
WRIGHT COUNTY, MINNESOTA
THIS DOCUMENT WAS DRAFTED BY:
Briggs and Morgan, Professional Association (MLI)
2200 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
12168882v3
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS................................................................................................. 1
Section1.1
Definitions............................................................................................ 1
ARTICLE II
REPRESENTATIONS AND WARRANTIES ................................................ 3
Section 2.1
Representations and Warranties of the City ......................................... 3
Section 2.2
Representations and Warranties of the County .................................... 3
ARTICLE III
UNDERTAKINGS BY CITY AND COUNTY .............................................. 4
Section 3.1
Reimbursement of Costs...................................................................... 4
Section 3.2
Duration of County's Tax Abatement Program ................................... 4
Section3.3
Limitations........................................................................................... 4
ARTICLE IV
ADDITIONAL PROVISIONS........................................................................ 4
Section 4.1
Conflicts of Interest.............................................................................. 4
Section 4.2
Titles of Articles and Sections............................................................. 4
Section 4.3
Notices and Demands.......................................................................... 4
Section 4.4
Counterparts......................................................................................... 5
Section 4.5
Law Governing.................................................................................... 5
Section4.6
Duration............................................................................................... 5
EXHIBIT A
TAX ABATEMENT PROPERTY.............................................................. A-1
EXHIBIT B
DESCRIPTION OF PUBLIC IMPROVEMENTS ...................................... B-1
-i-
12168882v3
TAX ABATEMENT AGREEMENT
THIS TAX ABATEMENT AGREEMENT (this "Agreement"), made as of
, 2019, by and between the City of Otsego, Minnesota, a political subdivision
of the State of Minnesota (the "City"), and Wright County, Minnesota, a political subdivision of
the State of Minnesota (the "County"),
WITNESSETH:
WHEREAS, in connection with the construction of the Project (as defined herein) by the
Company (as defined herein), it is necessary that Public Improvements (as defined herein) be
constructed by the City; and
WHEREAS, in order to finance the cost of the Public Improvements, the City and the
County have determined to utilize tax abatement financing as authorized by Minnesota law; and
WHEREAS, pursuant to Minnesota Statutes, Sections 469.1812 through 469.1815, the
City has established the City's Tax Abatement Program (as defined herein), and the County has
established the County's Tax Abatement Program (as defined herein); and
WHEREAS, the City and the County believe that the development and construction of a
certain Project and the Public Improvements (as defined herein) and the fulfillment of this
Agreement: are vital and are in the best interests of the City and the County; will result in the
enhancement of the tax base; will provide employment opportunities; and will provide for the
financing of public infrastructure; and
WHEREAS, the requirements of the Business Subsidy Law, Minnesota Statutes, Section
116J.993 through 116J.995, do not apply to this Agreement because the Tax Abatements will
assist in the financing of the construction of public infrastructure improvements; and
WHEREAS, the City Council of the City, and the Board of Commissioners of the County
have approved this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual obligations of the
parties hereto, each of them does hereby covenant and agree with the other as follows:
121688820
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. All capitalized terms used and not otherwise defined herein
shall have the following meanings unless a different meaning clearly appears from the context:
Agreement means this Tax Abatement Agreement, as the same may be from time to time
modified, amended or supplemented;
City means the City of Otsego, Minnesota;
City's Tax Abatement Program means the actions by the City pursuant to Minnesota
Statutes, Section 469.1812 through 469.1815, as amended, undertaken in connection with the
construction of the Public Improvements;
City's Tax Abatements means the City's share of real estate taxes on the Tax Abatement
Property abated in accordance with the City's Tax Abatement Program, which shall not exceed
$950,000;
Comp anX means Rice Companies, Inc., its successors and assigns;
Cop121y means Wright County, Minnesota;
County's Tax Abatement Program means the actions by the County pursuant to
Minnesota Statutes, Section 469.1812 through 469.1815, as amended, and undertaken in
connection with the construction of the Public Improvements;
County's Tax Abatements means 90% of the County's share of real estate taxes on the
Tax Abatement Property, derived from the increased market values resulting from the Project to
be constructed on Lot 1, Block 1, and Outlot D Parkview Retail, abated in accordance with the
County's Tax Abatement Program, which shall not exceed $400,000;
Project means the construction of an approximately 44,000 square -foot grocery store with
an accessory motor fuel facility, and an approximately 70 unit multi -family housing facility, by
the Company on the Tax Abatement Property;
Public Improvements means the construction by the City of certain public infrastructure,
as described in Exhibit B;
Reimbursement Amount means $400,000;
State means the State of Minnesota;
Tax Abatement Act means Minnesota Statutes, Sections 469.1812 through 469.1815, as
amended;
2
121688820
Tax Abatement PropertX means the property described in Exhibit A, attached hereto;
Term means the period in which this Agreement shall remain in effect, commencing on
the Effective Date and continuing until the earlier of (i) the date the City receives the final
payment from the County derived from the County's Tax Abatements totaling the
Reimbursement Amount, or (ii) February 1, 2038 unless earlier terminated or rescinded in
accordance with the terms contained herein;
Unavoidable Delays means delays, outside the control of the party claiming its
occurrence, including strikes, other labor troubles, unusually severe or prolonged bad weather,
acts of God, fire or other casualty to the Project, litigation commenced by third parties which, by
injunction or other similar judicial action or by the exercise of reasonable discretion, directly
results in delays, or acts of any federal, state or local governmental unit (other than the County or
the City) which directly result in delays.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the City. The City makes the following
representations and warranties:
(1) The City is a political subdivision and has the power to enter into this Agreement
and carry out its obligations hereunder.
(2) The City's Tax Abatement Program was created, adopted and approved in
accordance with the terms of the Tax Abatement Act.
(3) To finance a portion of the costs of the Public Improvements, the City proposes,
subject to provisions of this Agreement, to apply the City's Tax Abatements to reimburse itself
for a portion of the costs of the Public Improvements.
(4) The City has made the findings required by the Tax Abatement Act for the City's
Tax Abatement Program.
3
121688820
Section 2.2 Representations and Warranties of the County. The County makes the
following representations and warranties:
(1) The County is a political subdivision and has the power to enter into this
Agreement and carry out its obligations hereunder.
(2) The County's Tax Abatement Program was created, adopted and approved in
accordance with the terms of the Tax Abatement Act.
(3) To pay for a portion of the costs of the Public Improvements, the County
proposes, subject to the provisions of this Agreement, to apply the County's Tax Abatements to
reimburse the City for the costs of the Public Improvements, as further provided for in this
Agreement.
(4) The County has made the findings required by the Tax Abatement Act for the
County's Tax Abatement Program.
ARTICLE III
UNDERTAKINGS BY CITY AND COUNTY
Section 3.1 Reimbursement of Costs. The County agrees to reimburse the City for a
portion of the cost of the construction of the Public Improvements in an amount not to exceed
$400,000 (the "Reimbursement Amount"). and the County shall reimburse the City for such
costs pursuant to the County's Abatement Program as provided for in Section 3.2.
Section 3.2 Duration of County's Tax Abatement Program. The County's Tax
Abatement Program shall exist for a period of up to fifteen (15) years beginning with real estate
taxes payable in 2022 through 2037. On or before February 1 and August 1 of each year
commencing August 1, 2022 until the earlier of the date that the City shall have received the
Reimbursement Amount or February 1, 2038 the County shall pay the City the amount of the
County's Tax Abatements received by the County in the previous six month period.
Section 3.3 Limitations. The pledge of the County's Tax Abatements is subject to all the
terms and conditions of the resolution approving the abatement approved by the Board of
Commissioners of the County on November 19, 2019.
0
121688820
ARTICLE IV
ADDITIONAL PROVISIONS
Section 4.1 Conflicts of Interest. No member of the governing body or other official of
the City or the County shall participate in any decision relating to the Agreement which affects
his or her personal interests or the interests of any corporation, partnership or association in
which he or she is directly or indirectly interested. No member, official or employee of the City
or the County shall be personally liable to the City or the County in the event of any default or
breach by the Company or successor or on any obligations under the terms of this Agreement.
Section 4.2 Titles of Articles and Sections. Any titles of the several parts, articles and
sections of the Agreement are inserted for convenience of reference only and shall be
disregarded in construing or interpreting any of its provisions.
Section 4.3 Notices and Demands. Except as otherwise expressly provided in this
Agreement, a notice, demand or other communication under this Agreement by any party to any
other shall be sufficiently given or delivered if it is dispatched by registered or certified mail,
postage prepaid, return receipt requested, or delivered personally, and
(1) in the case of the City, is addressed to or delivered personally to:
City of Otsego
13400 90th St. NE
Otsego, MN 55330
Attn: City Administrator
(2) in the case of the County, is addressed to or delivered personally to the County at:
Wright County
10 2nd St. NW
Buffalo, MN 55313
Attn: County Administrator
or at such other address with respect to any such party as that party may, from time to time,
designate in writing and forward to the other, as provided in this Section.
Section 4.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute one and the same instrument.
Section 4.5 Law Governing. This Agreement will be governed and construed in
accordance with the laws of the State of Minnesota.
Section 4.6 Duration. This Agreement shall remain in effect through the Term, unless
earlier terminated or rescinded in accordance with its terms.
121688820
IN WITNESS WHEREOF, the City has caused this Agreement to be duly executed in its
name and on its behalf, and the County has caused this Agreement to be duly executed in its
name and on its behalf, on or as of the date first above written.
S-1
121688820
THE CITY
OF OTSEGO,
MINNESOTA
Its Mayor
Its
Administrator
[This is a signature page to the Tax Abatement Agreement dated as of , 2019, by
and among the City of Otsego, Minnesota, and Wright County, Minnesota.]
12168882v3
WRIGHT COUNTY, MINNESOTA
By
Its
By
Its
[This is a signature page to the Tax Abatement Agreement dated as of , 2019, by
and among the City of Otsego, Minnesota, and Wright County, Minnesota.]
3
12168882v3
EXHIBIT A
TAX ABATEMENT PROPERTY
PID #s
118-500-221203, 118-257-000010, 118-257-000020, 118-257-001010, 118-257-001020, 118-
500-221205, and 118-500-221206.
A-1
12168882v3
EXHIBIT B
DESCRIPTION OF PUBLIC IMPROVEMENTS
Construction of Parkview Avenue and 88th Street Infrastructure, including but not limited to:
Streets, Water Utility, Sanitary Sewer Utility, Storm Water Utility, Street Lighting, Pedestrian
Walkways and other infrastructure within the Parkview Retail plat.
In
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EXTRACT OF MINUTES OF A MEETING
OF THE CITY COUNCIL OF THE
CITY OF OTSEGO, MINNESOTA
HELD: November 25, 2019
Pursuant to due call and notice thereof, a meeting of the City Council of the City of
Otsego, Wright County, Minnesota, was duly called and held at the Prairie Center (8899 Nashua
Avenue NE) in said City on November 25, 2019, at 7:00 o'clock p.m.
The following members were present:
and the following were absent:
Member
adoption:
introduced the following resolution and moved its
RESOLUTION 2019-77
APPROVING PROPERTY TAX ABATEMENTS AND AUTHORIZING
EXECUTION OF AN AGREEMENT WITH WRIGHT COUNTY,
MINNESOTA
BE IT RESOLVED by the City Council (the "Council") of the City of Otsego, Minnesota
(the "City"), as follows:
1. Recitals.
(a) In connection with the construction of a 44,000 square -foot grocery store
with accessory motor fuel facility and an approximately 70 unit multi -family housing
facility (the "Project") to be constructed Rice Companies, Inc. (the "Developer"), it is
necessary that certain public improvements ("Public Improvements") be constructed by
the City.
(b) In order to finance the cost of the Public Improvements the City and
Wright County, Minnesota (the "County"), have determined to utilize tax abatement
financing as authorized by the Abatement Law (as hereinafter defined).
(c) The City proposes to abate property taxes, pursuant to Minnesota Statutes,
Sections 469.1812 through 469.1815 (the "Abatement Law"), in order to assist in the
financing of the Public Improvements.
(d) It is proposed that the City and the County enter into a Tax Abatement
Agreement (the "Agreement"), which provides for the use of tax abatements to assist in
the financing of the Public Improvements.
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(e) On October 28, 2019, the Council held a public hearing on the question of
granting its tax abatements, and said hearing was preceded by at least 10 days but not
more than 30 days prior published notice thereof at which all interested persons appeared
and were heard.
(f) The City proposes to approve tax abatements on the City's portion of
property taxes on the property, described in Exhibit A, attached hereto (the "Tax
Abatement Property"), in an amount not to exceed $950,000 for a term of up to twenty
(20) years to assist in the financing of a portion of the costs of the Public Improvements
(the "Abatement").
(g) The Abatement is authorized under the Abatement Law.
2. Findings for the Abatement. The City Council hereby makes the following
findings:
(a) The Abatement is the City's share of taxes on the Tax Abatement Property.
(b) The Council expects the benefits to the City of the Abatement to at least
equal or exceed the costs to the City thereof.
(c) Granting the Abatement is in the public interest because it will:
(i) increase the tax base;
(ii) provide employment opportunities in the City; and
(iii) finance and provide for public infrastructure.
(d) The Tax Abatement Property is not located in a tax increment financing
district.
(e) In any year, the total amount of property taxes abated by the City by this
and other resolutions and agreements, does not exceed the greater of ten percent (10%) of
the net tax capacity of the City for the taxes payable year to which the abatement applies
or $200,000, whichever is greater. The City may grant other abatements permitted under
the Abatement Law after the date of this resolution, provided that to the extent the total
abatements in any year exceed the Abatement Limit the allocation of the Abatement limit
to such other abatements is subordinate to the Abatement granted by this resolution.
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3. Terms of Abatement. The Abatement is hereby approved. The terms of the
Abatement are as follows:
(a) The Abatement shall be for up to twenty (20) years beginning with real
estate taxes payable in 2022 and continuing through 2041, inclusive and shall not exceed
$950,000.
(b) The City shall abate the Abatement as provided in this resolution.
(c) The Abatement shall be subject to all the terms and limitations of the
Abatement Law.
4. Approval of Agreement.
(a) The City Council hereby approves the Agreement with the County
providing for the reimbursement by the County from the County's tax abatements for a
portion of the costs of the Public Improvements incurred by the City, in substantially the
form submitted, and the Mayor and Administrator are hereby authorized and directed to
execute the Agreement on behalf of the City.
(b) The approval hereby given to the Agreement includes approval of such
additional details therein as may be necessary and appropriate and such modifications
thereof, deletions therefrom and additions thereto as may be necessary and appropriate
and approved by the City officials authorized by this resolution to execute the
Agreement. The execution of the Agreement by the appropriate officer or officers of the
City shall be conclusive evidence of the approval of the Agreement in accordance with
the terms hereof.
The motion for the adoption of the foregoing resolution was made by member and
duly seconded by member and, upon a vote being taken thereon after
full discussion thereof, the following voted in favor thereof:
and the following voted against the same:
Whereupon said resolution was declared duly passed and adopted.
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STATE OF MINNESOTA )
) ss.
COUNTY OF WRIGHT )
I, the undersigned, being the duly qualified and acting Clerk of the City of Otsego,
Minnesota (the "City"), do hereby certify that attached hereto is a compared, true and correct
copy of a resolution approving the abatement of property taxes by the City on behalf of Rice
Companies, Inc., duly adopted by the City Council of the City on November 25, 2019, at a
regular meeting thereof duly called and held, as on file and of record in my office, which
resolution has not been amended, modified or rescinded since the date thereof, and is in full force
and effect as of the date hereof, and that the attached Extract of Minutes as to the adoption of
such resolution is a true and accurate account of the proceedings taken in passage thereof.
WITNESS My hand this day of November, 2019.
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City Clerk
EXHIBIT A
TAX ABATEMENT PROPERTY DESCRIPTION
118-500-221203; 118-257-000010, 118-257-000020; 118-257-001010; 118-257-001020;
118-500-221205; 118-500-221206
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