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ITEM 3.10 BlueDot expansionTY OtSezFo MINNESOTA V DEPARTMENT INFORMATION Request for City Council Action ORIGINATING DEPARTMENT: Planning REQUESTOR: City Planner Licht MEETING DATE: 25 July 2016 PRESENTER(s): REVIEWED BY: ITEM #: Consent City Administrator Johnson 3.10 — BlueDot expansion City Attorney MacArthur City Engineer Wagner AGENDA ITEM DETAILS RECOMMENDATION: City staff recommends approval of a development agreement for expansion of the BlueDot building within Gateway North Fourth Addition. ARE YOU SEEKING APPROVAL OF A CONTRACT? IS A PUBLIC HEARING REQUIRED? Yes. No. BACKGROUND/JUSTIFICATION: Duke Realty Limited Partnership received approval for construction of a 150,000 square foot warehouse distribution building with a planned 116,200 square foot addition within the Gateway North Business Center on 22 September 2016. The building is occupied by BlueDot furniture and Duke Realty has submitted plans to move forward with the planned expansion of the building to accommodate the tenant's spatial needs. The proposed building expansion requires relocation of an existing water main to the west of the building. The City Council already approved vacation of the existing drainage and utility easement on 13 June 2016. The City Attorney has drafted a development agreement related to the building expansion, dealing primarily with the relocation of the watermain. SUPPORTING DOCUMENTS: ❑ ATTACHED ❑ NONE A. Resolution 2016-65 approving a Development Agreement B. Development Agreement POSSIBLE MOTION Please word motion as you would like it to appear in the minutes. Motion to adopt Resolution 2016-65 approving a development agreement for Lot 1, Block 1, Gateway North 4th Addition. RlinGFT INFORMATION FUNDING: BUDGETED: ❑ YES NA ❑ NO ACTION TAKEN ❑ APPROVED AS REQUESTED o DENIED ❑ TABLED ❑ OTHER (List changes) COMMENTS: CITY OF OTSEGO COUNTY OF WRIGHT STATE OF MINNESOTA RESOLUTION NO.2016-65 RESOLUTION APPROVING DEVELOPERS AGREEMENT- GATEWAY NORTH FOURTH ADDITION- LOT 2, BLOCK 1 (BUILDING 3) - BLU DOT EXPANSION WHEREAS, Duke Realty Limited Partnership is seeking approval of an existing building on Lot 2, Block 1 (Building 3) of GATEWAY NORTH FOURTH ADDITION; and WHEREAS, the expansion requires construction of some public improvements and payment of City costs and fees as well as placing certain restrictions on the development; and WHEREAS, those obligations are contained and memorialized in the attached Developers Agreement; and WHEREAS, the Developers Agreement also sets forth the security required to assure satisfactory construction of public improvements and establishes the various remedies available to the City in the event that Developer breaches the terms and conditions of the Agreement. NOW, THEREFORE BE IT RESOLVED by the City Council of the City of Otsego, Wright County, Minnesota as follows; 1. The attached Developers Agreement between the City of Otsego and Duke Realty Limited Partnership is hereby approved. 2. The Mayor and City Clerk are hereby authorized to execute the Developers Agreement on behalf of the City of Otsego. ADOPTED this 25th day of July, 2016 by the City Council of Otsego. MOTION TO ADOPT the Resolution by Council Member and seconded by Council Member IN FAVOR: OPPOSED: CITY OF OTSEGO Jessica Stockamp, Mayor Tami Loff, City Clerk 2 DEVELOPMENT AGREEMENT GATEWAY NORTH FOURTH ADDITION GATEWAY NORTH BUILDING 3 EXPANSION LOT 2, BLOCK 1* *Lot 1, Block I Gateway North Fourth Addition is the subject of a separate Development Agreement between the City and Developer dated July 1, 2014 THIS AGREEMENT, entered into this day of July, 2016, by and between the CITY OF OTSEGO, a Minnesota municipal corporation ("CITY') and DUKE REALTY LIMITED PARTNERSHIP, a Limited Partnership under the laws of the State of Indiana ("DEVELOPER") RECITALS WHEREAS, DEVELOPER and CITY entered into that certain Development Agreement Gateway North 4th Addition dated July 1, 2014 (the "Building 5 Agreement") for the development of approximately 30.25 acres of land shown on the Final Plat (hereinafter defined) as Lot 1, Block 1 ("Lot 1"). The Building 5 Agreement shall apply to the development of Building 5 (as defined in the Building 5 Agreement). WHEREAS, DEVELOPER is the fee owner of a parcel of land described in the attached Exhibit A incorporated herein by reference, which parcels of land measure approximately26.14 acres ("Subject Property"). The Subject Property was final platted as LOT 2, BLOCK 1 ("Lot 2"). WHEREAS, Lot 2, measuring approximately 13.64 acres has a building constructed upon it and this Agreement regards only the proposed expansion of that building ("Building 3"); and WHEREAS, the Final Plat and Buildings 3 and 5 are part of a Planned Unit Development ("PUD") for 109.71 acres of property rezoned on June 12, 2006 as I-2 District with a Planned Unit Development; and WHEREAS, on September 20, 2007 the CITY and DEVELOPER entered into that certain Development Agreement Gateway North ("Master Development Agreement"); and WHEREAS, the Master Development Agreement requires that the DEVELOPER enter into additional Development Agreements with the CITY as a condition of approval of individual developments; and WHEREAS, in accordance with the Master Development Agreement, DEVELOPER and CITY hereby agree that the expansion of Building 3 shall be developed on Lot 2 and within the Final Plat in accordance with the terms and conditions contained herein; and WHEREAS, the majority of the terms and conditions of this Agreement apply to Lot 2 and Building 3, and certain terms and conditions of this Agreement apply to Lot 3 since both lots are created by the Final Plat. When a building is constructed upon Lot 3 a separate development agreement between DEVELOPER and CITY will be required to address specific issues related to that building; and NOW THEREFORE, in consideration of the promises and mutual promises hereinafter contained, it is agreed between the parties as follows: Development Plans. The expansion of Building 3 shall be developed on Lot 2 in accordance with the plans the cover sheet of which is attached to this Agreement as Exhibit B dated , 2016 and signed by the City Engineer on file and of record at CITY and herein fully incorporated herein by reference and the conditions stated below (hereinafter the "Building 3 Expansion Development Plans"). If the Building 3 Expansion Development Plans vary from the written terms of this Agreement, the Building 3 Expansion Development Plans shall control. Further, in the event of any conflict or variance between the Building 3 Expansion Development Plans and the Development Plans 2 (as defined in the Master Development Agreement), the Building 3 Expansion Development Plans shall control. 2. Municipal Improvements. The Building 3 Development Expansion Plans include certain Municipal Improvements as set forth on the attached Exhibit C. 3. Building 3 Private Improvements. The DEVELOPER or any future owner of the Subject Property ("Future Owner") agrees that it shall cause to be constructed and installed certain private improvements ("Private Improvements") on the Subject Property. All Private Improvements are to be installed at DEVELOPER'S or Future Owner's sole cost and expense pursuant to this Agreement and the private improvements to Lot 2 shall include those improvements shown on the Building 3 Expansion Development Plans. DEVELOPER or Future Owner shall construct such Private Improvements in accordance with all applicable building codes, ordinances and CITY standards and, as for Lot 2 only the Building 3 Expansion Development Plans furnished to the CITY and approved by the City Engineer. The DEVELOPER shall obtain all necessary permits before construction of the expansion of Building 3. CITY shall provide adequate field inspection personnel to assure acceptable quality control, which will allow certification of the construction work. Within thirty (30) days after the completion of Building 3 expansion and before any security is released (as more fully set forth in the Master Development Agreement), the DEVELOPER or Future Owner shall supply the CITY with a complete set of reproducible "as built" plans and two (2) complete sets of blue line "as built" plans prepared in accordance with CITY standards. 4. Grading, Landscaping and Drainage. The DEVELOPER or Future Owner shall be responsible for grading, landscaping and storm water management on the Subject Property as more fully set forth in this Agreement and as for Lot 2 only the Building 3 Expansion Development Plans and previously approved Building 3 Landscaping Plan. A. Erosion Control. The erosion control plan for Lot 2 within the Building 3 Expansion Development Plans has been reviewed and approved by CITY and shall be implemented by DEVELOPER prior to additional grading of Lot 2. All areas disturbed by the excavation 3 and backfilling operations shall be reseeded forthwith after completion of work in that area. If DEVELOPER does not comply with the erosion control plan and schedule or any erosion control requirements, CITY may, with reasonable notice, take action as it deems appropriate in accordance with all applicable laws, ordinances or regulations or according to this Agreement. B. Grading Plan. Grading of Lot 2 shall be in accordance with the approved Grading Plan as provided in the Building 3 Expansion Development Plans. 5. Pre -Construction Activity. DEVELOPER shall schedule a pre - construction meeting with CITY to review the proposed schedule for grading and construction of Building 3 and related improvements as set forth on the Building 3 Development Plans, and to coordinate the schedule with the City Engineer. 6. Ownership of Improvements. Upon completion of the work and construction required by this Agreement, improvements lying within public easements on the Subject Property shall become CITY property without further notice or action, except that those streets, which will be maintained as private drives shall remain under DEVELOPER's ownership subject to any and all necessary easements, including necessary ingress and egress access to future lots. 7. Clean Up. DEVELOPER shall promptly clean any and all dirt and debris from streets resulting from construction work by DEVELOPER, its agents or assigns during the work and construction required by this Agreement. 8. AUAR. DEVELOPER has completed and AUAR (Alternative Urban Areawide Review) affecting the Subject Property that the CITY approved on June 26, 2006. DEVELOPER shall comply with all terms and conditions of CITY approval of the AUAR and implement any and all actions or mitigation required by CITY approval. 9. Administrative Fee. No Administrative Fee is required for the building expansion. 10. Park and Trail Dedication. Park and Trail dedication requirements for GATEWAY NORTH FOURTH ADDITION were satisfied with the Final Plat of GATEWAY NORTH as set forth in the Master Development Agreement. M 11. Storm Water Fees. No Storm Water Fees are applicable to the Final Plat as set forth in the Master Development Agreement. 12. Sewer Availability Charges. There are no Sewer Availability Charges for the building expansion. 13. Sewer Connection Fees. Sanitary sewer connection fees, if any, are paid at the time of issuance of a building permit. 14. Water Availability Charges. There are no Water Availability Charges for the building expansion. 15. Water Connection Fees. Water connection fees, if any, are paid at the time of issuance of a building permit. 16. Street and Traffic Control Sign Fees. The fee amount for the Subject Property was calculated as follows: 0 signs at $250.00 per sign or $00.00. Using these funds, CITY shall purchase and install the street and traffic control signs. 17. CITY Engineering, Engineering Administration, Construction Observation, and Legal Fee Escrow and City Fees. DEVELOPER shall pay escrow for the CITY' S engineering, engineering administration and construction observation services of Municipal Improvements as set forth on Exhibit C, following execution of this agreement, in the estimated amount set forth below. City engineering administration will include consultation with DEVELOPER and its engineer on status or problems regarding the Project, monitoring during the warranty period, general administration and processing of requests for reduction in security. Fees for this service shall be the actual amount billed for those service estimated to be three percent (3%) of the estimated construction cost of the improvements to be inspected, assuming normal construction and project scheduling.. DEVELOPER shall pay for construction observation performed by the City Engineer. Construction observation shall include part or full time observation, as determined by the City Engineer, of the Municipal Improvements and will be billed at hourly rates actually required for said inspection estimated to be five percent (5%) of the estimated construction cost of the improvements to be inspected. In the event of prolonged construction or unusual problems, CITY will notify DEVELOPER of anticipated cost overruns for engineering administration and observation services. The Escrow and Fee account for Building 3 shall include estimated escrow for City Engineering, Engineering Administration and Construction Observation limited to the Municipal Improvements expenses and Legal expenses, and fees for City Administrative, Street and Traffic Control Signs, Water and Sewer Availability Charges as follows: ESCROW AND FEES (Building 3) City Construction Administration and Inspection Escrow $4,500.00 Legal Fees (actual billings to be paid) $ 500.00 TOTAL $ 5,000.00 These Escrow and Fee amounts shall be submitted to CITY prior to CITY executing this Agreement. Any Escrow amounts not utilized for legal and engineering charges incurred by the City under this Agreement shall be returned to DEVELOPER when all improvements have been completed, all financial obligations to CITY satisfied, and all required "as -built " plans have been received by CITY. Engineering, planning and legal fees incurred prior to the execution of this Agreement shall be deducted from escrow already submitted with the Plat application or charged against the escrow herein established. All other amounts listed as one-time fees are non-refundable and available immediately for CITY use when posted. 18. Security. To ensure compliance with the terms of this Agreement, and construction of all Municipal Improvements, DEVELOPER shall furnish CITY with a cash escrow or Irrevocable Standby Letter of Credit in the amount of $75,000.00, said amount calculated as follows: Watermain- Lateral $50,000.00 Storm Sewer- Lateral $25,000.00 SUBTOTAL $75,000.00 0 TOTAL SECURITY $75,000.00 The issuer and form of the security (other than cash escrow) shall be subject to CITY approval, which approval shall not be unreasonably withheld. The security shall be issued by a banking institution in good standing as determined by CITY and approved by the City Administrator. CITY shall have the ability to draw on the Security by overnight courier delivery to the bank or branch bank issuing the Letter of Credit. The security shall be for a term ending July 1, 2017 and shall contain an automatic renewal provision. CITY may draw down the security for any violation of the terms of this Agreement, or upon receiving notice of the pending expiration of the security. It shall be the responsibility of DEVELOPER to inform CITY at least thirty (30) days prior to expiration of the security of the impending expiration and the status of the Project relative to the security and this Agreement. If, for whatever reason, the security lapses prior to complete compliance with this Agreement (other than during any warranty period), DEVELOPER shall immediately provide CITY with either an extension of the security or an irrevocable letter of credit of the same amount upon notification of the expiration. If the required improvements are not completed at least thirty (30) days prior to the expiration of the security, CITY may also draw down the security. CITY may draw down the security for any violation of the terms of this Agreement (after any reasonable notice to DEVELOPER and cure periods). If the security is drawn down, the proceeds shall be used to cure any default. CITY will, upon making determination of final costs to cure any default, refund to the DEVELOPER any monies which CITY has in its possession which are in excess of the security needed. Upon receipt of proof satisfactory to CITY that work has been completed and financial obligations to CITY have been satisfied, the security will be reduced from time to time down to the amount of warranty security as set forth in paragraph 19 of this Agreement. The security shall not be reduced below ten percent (10%) of the posted security until all improvements have been completed, all financial obligations to CITY satisfied (which includes posting of warranty security), and required "as built" plans have been received by CITY. The intent of this Agreement that CITY shall have access to sufficient 7 security, either security or warranty security, to complete the Project and insure warranty on all public improvements. The security amount shall be submitted to CITY prior to execution of the Agreement. 19. Warranty. DEVELOPER warrants all work required to be performed by it against poor material and faulty workmanship for a period of one (1) year after its completion and acceptance by CITY. The amount of posted security for public improvements to be posted by DEVELOPER shall be in the amount of $ 11,250.00. The amount has been determined by the City Engineer and is based upon the costs of the raw materials and labor which would be necessary to correct the most common deficiencies in the public improvements. 20. Restrictions. The following restrictions apply to the Subject Property and all lots thereon shall be held, sold, and conveyed subject to the following conditions and restrictions, which are for the purpose of protecting the value and desirability of the Plat and insuring all conditions imposed by CITY in this Agreement are properly recorded against the Final Plat. Said conditions shall run with the real property and be binding upon all parties having a right, title or interest in the Subject Property or any part thereof, their heirs, executors, representatives, successors and assigns: None 21. Responsibility for Costs. A. Except costs for Developer's Internal Improvements (as defined in the Master Development Agreement) and except as otherwise set forth herein and in the Master Development Agreement, DEVELOPER shall pay all costs incurred by it or CITY in conjunction with the expansion of Building 3 on Lot 2, including, but not limited to legal, planning, engineering, and inspection expenses in connection with the expansion of said Building 3. B. DEVELOPER shall hold CITY and its officers, employees and agents harmless from claims made by itself and third parties for damages sustained or costs incurred resulting from DEVELOPER's acts or failures to act in connection with development of the Subject Property by DEVELOPER. DEVELOPER shall indemnify CITY and its officers, employees and agents for all costs, damages or expenses which CITY may pay or incur in consequence of such claims, including attorney's fees. C. DEVELOPER shall reimburse CITY for costs incurred in the enforcement of this Agreement, including engineering fees, planning fees, attorney's fees, and costs and disbursements. CITY shall reimburse DEVELOPER for costs incurred in the enforcement of this Agreement, including engineering fees, attorney's fees, and costs and disbursements. D. DEVELOPER shall pay in full all bills submitted to it by CITY for obligations incurred under this Agreement and agreed to be paid by DEVELOPER under this Agreement within thirty (30) days after receipt. If the bills are not paid on time, and DEVELOPER does not reasonably dispute the payment of amount of such bill CITY may either reimburse itself from existing Escrow or Security or may halt all Building 3 development work and construction until all bills are paid in full. Bills not paid within thirty (30) days shall accrue interest at the rate of twelve percent (12%) per year. 22. Miscellaneous. A. Third parties shall have no recourse against CITY under this Agreement. B. If any portion, section, subsection, sentence, clause, paragraph or phrase of this Agreement is for any reason held invalid, such decision shall not affect the validity of the remaining portion of this Agreement. C. The action or inaction of CITY or DEVELOPER shall not constitute a waiver or amendment to the provisions of this Agreement. To be binding, amendments or waivers shall be in writing, signed by the parties and approved by written resolution of the City Council. CITY's or DEVELOPER's failure to promptly take legal action to enforce this Agreement shall not be a waiver or release. D. This Agreement shall run with the land, shall be recorded against the title to the Subject Property, and shall be binding on all parties having any right, title or interests in the Subject Property or any part thereof, their heirs, successors and assigns. 1 E. Each right, power or remedy herein conferred upon CITY or DEVELOPER is cumulative and in addition to every other right, power or remedy, express or implied, now or hereafter arising, available to CITY or DEVELOPER, at law or in equity, or under any other agreement, and each and every right, power and remedy herein set forth or otherwise so existing may be exercised from time to time as often and in such order as may be deemed expedient by CITY or DEVELOPER and shall not be a waiver of the right to exercise at anytime thereafter any other right, power or remedy. F. DEVELOPER shall pay for all local costs related to drainage improvements required to complete the construction of Building 3 on Lot 2 according to the Building 3 Development Plans. Local costs are costs related required internal drainage improvements such as retention ponds. G. Should development of Building 3 proceed at a pace slower than anticipated, and for that reason, specific terms of this Agreement become onerous or unduly burdensome to DEVELOPER, upon DEVELOPER's application, CITY will enter into negotiations regarding those specific terms and shall not unreasonably withhold consent to appropriate changes in the terins of this Agreement. H. DEVELOPER shall demonstrate and maintain compliance with the 1991 Wetland Conservation Act. DEVELOPER shall be responsible for all on site drainage for the Subject Property, as well as for any affects their actions may have on adjoining properties. 23. Violation of Agreement. If while the escrow or security provided in this Agreement is outstanding, a violation of any of the covenants or agreements herein contained occurs and such violation is not cured within thirty (30) days after written notice thereof from CITY to DEVELOPER, CITY may draw upon the DEVELOPER's escrow or security to cure any violation of the Agreement and to reimburse CITY for any costs incurred in curing the violation. 24. Maintain Public Property Damaged or Cluttered During Construction. DEVELOPER agrees to assume full financial responsibility for any damage which may occur to public property including, but not limited to , street, street sub -base, base, bituminous surface, curb, utility system including, but not limited to, watermain, 10 sanitary sewer or storm sewer when said damage occurs as a result of construction activity which takes place during development of the Subject Property by DEVELOPER or its contractors, except for damage caused by CITY, its employees, agents or contractors. DEVELOPER further agrees to pay all costs required to repair the streets and/or utility systems damaged or cluttered with debris when occurring as a direct or indirect result of the Developer's construction that takes place on the Subject Property. In the event that DEVELOPER is required to maintain or repair such damage and fails to maintain or repair the damaged public property referred to aforesaid within thirty (30) days after written notice from CITY or such longer period as may reasonably necessary or in the event of an emergency as shorter time period as determined by CITY, CITY may, upon notifying DEVELOPER undertake making or causing it to be repaired or maintained. When CITY undertakes such repair, DEVELOPER shall reimburse CITY for all its reasonable expenses within thirty (30) of its billing to DEVELOPER. If DEVELOPER fails to pay said bill within thirty (30) days, the security shall be responsible for reimbursing CITY. 25. Non -Assignment Without Consent. The obligations of DEVELOPER under this Agreement may be assigned by DEVELOPER if the assignment is approved by CITY. However, DEVELOPER shall not be released from its obligations under this Agreement without the express written consent of the City Council through Council resolution. 26. Subordination. This Agreement must be recorded against the Subject Property and all other liens, interests or mortgages shall be subordinate to the terms and conditions this Agreement and said Agreement shall not be subject to foreclosure by any other lien, interest or mortgage. 27. Notices. Required notices to DEVELOPER shall either hand delivered to DEVELOPER, it employees or agents, or mailed to DEVELOPER by registered mail or sent by overnight delivery at the following address: Duke Realty Limited Partnership, c/o Duke Realty Corporation, Attn: Dale Emter, 1600 Utica Avenue South, Suite 250, St. Louis Park, NIN 55416 with a copy to Lisa Starcevich, Duke Realty Corporation, 9377 West Higgins Road, Suite 600, Rosemont, IL 60018. Notice to CITY shall be in writing and shall be either hand delivered to the City Clerk or Deputy City Clerk or mailed by registered mail or sent by overnight delivery at the following address: City of Otsego, City Hall, 13400 90tn Street NE, Otsego, NIN 55330, Attention: City Clerk. 11 28. Agreement Effect. This Agreement shall be binding and extend to the respective representatives, heirs, successors and assigns of the parties hereto. 29. Amendment. This Agreement shall be amended only by addendum executed by both parties to this Agreement. 12 IN WITNESS WHEREOF, DEVELOPER and CITY have executed this Agreement as of the day and year above first written. CITY OF OTSEGO, A municipal corporation Jessica Stockaznp, Mayor Tami Loff, City Cleric DUKE REALTY LIMITED PARTNERSHIP, An Indiana limited partnership BY: Duke Realty Corporation, its General Partner By: Steven W. Schnur Senior Regional Senior Vice President, Midwest Region 13 STATE OF MINNESOTA ) ) ss. COUNTY OF WRIGHT ) On this day of July, 2016, before me personally appeared Jessica Stockamp and Tami Loff to me known as the persons described in the foregoing instrument and who did say they are, respectively, the Mayor and City Clerk of the municipal corporation named therein and that said instrument was signed on behalf of said municipal corporation by authority of its City Council and said Jessica Stockamp and Tami Loff acknowledged said instrument to be the free act and deed of said municipal corporation. NOTARY PUBLIC STATE OF MINNESOTA ) ) ss. COUNTY OF WRIGHT ) On this day of July, 2016, before me personally appeared Steven W. Schnur to me known as the person described in the foregoing instrument and who did say he is the Senior Regional Senior Vice President of Duke Realty Corporation, the general partner of Duke Realty Limited Partnership and that said instrument was signed on behalf of Duke Realty Limited Partnership with authority and on behalf of the partnership and said Senior Regional Senior Vice President acknowledged said instrument to be the free act and deed of said entity. NOTARY PUBLIC 14 EXHIBIT A LEGAL DESCRIPTION OF THE SUBJECT PROPERTY LOT 2, BLOCK 1 OF GATEWAY NORTH FOURTH ADDITION according to the Final Plat on file and of record at the Office of the County Recorder, Wright County, Minnesota. 15 EXHIBIT B DEVELOPMENT PLANS FOR THE SUBJECT PROPERTY Site Development Plans for Gateway North Business Center Building 3 Expansion by Sambatek dated and approved by CITY , cover sheet attached. 16 EXHIBIT C- MUNICIPAL IMPROVEMENTS WATERMAIN AND STORM SEWER 17