ITEM 4.1 Resolutions 2017-49, 50, 510
06egoTF
MINNESOTA V
DEPARTMENT INFORMATION
Request for
City Council Action
ORIGINATING DEPARTMENT
REQUESTOR:
MEETING DATE:
Administration
City Administrator/ Finance Director
Flaherty
June 12, 2017
PRESENTER(s)
REVIEWED BY:
ITEM #:
City Administrator/ Finance
Director Flaherty
City Attorney MacArthur
4.1
AGENDA ITEM DETAILS
RECOMMENDATION:
City staff is recommending that the City Council conduct the public hearing for consideration of tax
increment financing on the Kadler Avenue street construction and industrial development project.
After the hearing has been conducted, City staff is recommending that the City Council approve the
attached resolutions.
ARE YOU SEEKING APPROVAL OF A CONTRACT?
ISA PUBLIC HEARING REQUIRED?
Yes
Yes
BACKGROUND/JUSTIFICATION:
At a special meeting on April 10, 2017, the City Council concurred to move forward with the consideration
of tax increment financing on the Kadler Avenue street construction and industrial development project.
The project will include the construction of a roadway to facilitate the development of an industrial park on
properties owned by Bury Industries, LLC. This project meets the City's economic development goals by
increasing the number of jobs within the City as well as increasing the tax capacity on the development
site.
Bury Industries, LLC has proposed the first development within the industrial park, with a three phased
construction plan with the ultimate construction including an office of approximately 7,500 square feet and
shop space of approximately 52,000 square feet.
The tax increment district will include approximately 77 acres owned by Bury Industries, LLC as well as the
adjacent roads and rights of way. The current taxable market value of the district is calculated to be
$804,700. The future taxable market values project to be $2,329,787 after phase one and $5,045,604 after
phase three of the respective Bury Industries, LLC developments.
The tax increment district is projected to generate approximately $320,000 of revenue over the life of the
district, assuming only phase 1 of the Bury Industries, LLC development. This was the primary assumption
used in discussions with the City Council, as future phases cannot be guaranteed. If all three phases of Bury
Industries, LLC developments are constructed, the district could generate approximately $650,000 of
revenue over the life of the district.
It is the City's intent to retain 100% of the increment to pay for the construction of Kadler Avenue.
The following TIF plan documents, agreements and resolutions have been a cooperative effort between
City staff, Jessica Green (Northland Securities) and Mary Ippel (Briggs & Morgan).
In order to continue, the City Council will need to approve the following items:
1] Resolution 2017-49
This resolution will formally establish Tax Increment Financing District No. 2 and will formally approve the
attached Tax Increment Financing Plan. The Tax Increment Financing Plan provides a summary of the
District and provides a budget for the sources and uses of the tax increment revenue.
2] Resolution 2017-50
This resolution will authorize an interfund loan in an amount not to exceed $660,000 with an interest rate
of 4.00%. During the establishment and throughout the life of the Tax Increment District, the City may incur
certain costs related to the District which may be financed with City funds. This interfund loan resolution
allows the City to reimburse itself for said costs with future collections of tax increment revenues.
3] Resolution 2017-51
This resolution will authorize the execution of a development agreement by and between the City of
Otsego and Bury Industries, LLC. This agreement outlines certain understandings of the project between
the City and the developer as they relate to the Tax Increment Financing District.
The City and developer will also enter into another separate agreement that will include, but not limited to
the following: land use approvals; terms, amounts and waivers of special assessments; calculations of City
fees, escrows and securities; etc. This agreement will be presented for approval at a future meeting.
SUPPORTING DOCUMENTS ATTACHED:
• Tax Increment Financing Plan
• Resolution 2017-49: Establishing Tax Increment District & Approve Tax Increment Financing Plan
• Resolution 2017-50: Authorizing Interfund Loan
• Development Agreement
• Resolution 2017-51: Authorizing Execution of a Development Agreement
POSSIBLE MOTION
PLEASE WORD MOTION AS YOU WOULD LIKE IT TO APPEAR IN THE MINUTES:
Motion to approve Resolution 2017-49 establishing Tax Increment Financing District No. 2 —and- approving
a Tax Increment Financing Plan therefor.
Motion to approve Resolution 2017-50 authorizing an interfund loan for advance of certain costs in
connection with Tax Increment Financing District No. 2.
Motion to approve Resolution 2017-51 authorizing the execution of a development agreement by and
between the City of Otsego and Bury Industries, LLC.
BUDGET INFORMATION
FUNDING: BUDGETED:
N/A
DRAFT FOR PUBLIC HEARING
CITY OF OTSEGO, MINNESOTA
TAX INCREMENT FINANCING PLAN FOR THE
ESTABLISHMENT OF
TAX INCREMENT FINANCING (ECONOMIC DEVELOPMENT)
DISTRICT No. 2
(KADLER AVENUE DEVELOPMENT)
WITHIN DEVELOPMENT DISTRICT No. 1
PUBLIC HEARING DATE: JUNE 12, 2017
PLAN APPROVED DATE. JUNE 12, 2017 (est.)
PLAN CERTIFICATION REQUEST DATE. JUNE 19, 2017 (est.)
PLAN CERTIFIED DATE. JULY 3, 2017 (est.)
Northland Securities, Inc. 45
South 7th Street, Suite 2000
Minneapolis, MN 55402 (800)
851-2920
Member NASD and SIPC
TABLE OF CONTENTS
Section 3 - Tax Increment Financing Plan for TIF District No. 2 ...........................
Section 3.01
Statutory Authority 3
Section 3.02
Planned Development................................................................... 3
3.02.1
Project Description.................................................................................... 3
3.02.2
City Plans and Development Program .................................................. 3
3.02.3
Land Acquisition....................................................................................... 3
3.02.4
Development Activities............................................................................ 3
3.02.5
Need for Tax Increment Financing......................................................... 3
Section 3.03
Tax Increment Financing District ................................................. 4
3.03.1
Designation................................................................................................ 4
3.03.2
Boundaries of TIF District........................................................................ 4
3.03.3
Type of District.......................................................................................... 4
Section 3.04
Plan for Use of Tax Increment...................................................... 5
3.04.1
Estimated Tax Increment......................................................................... 5
3.04.2
Project Costs............................................................................................... 5
3.04.3
Estimated Sources and Uses of Funds ................................................... 5
Figure3-1.................................................................................................... 6
3.04.4
Administrative Expense........................................................................... 6
3.04.5
County Road Costs................................................................................... 6
3.04.6
Bonded Indebtedness............................................................................... 7
3.04.7
Duration of TIF District............................................................................ 7
3.04.8
Estimated Impact on Other Taxing Jurisdictions ................................. 7
3.04.9
Prior Planned Improvements.................................................................. 7
Section 4 - Administering the District...........................................................
Section 4.01 Filing and Certification........................................................ 8
Section 4.02 Modifications of the Tax Increment Financing Plan........ 8
Section 4.03 4 -Year Knockdown Rule ...................................................... 8
Section 4.04 Pooling/5-Year Rule.............................................................. 9
Section 4.05 Financial Reporting and Disclosure Requirements ......... 9
Section 4.06 Business Subsidy Compliance ............................................ 9
EXHIBITS....................................................................................................................
Exhibit 3-1- Present Value Analysis........................................................... 10
Exhibit 3-2 - Projected Tax Increment......................................................... 11
Exhibit 3-3 - Impact on Other Taxing jurisdictions .................................. 12
Exhibit 3-4 - Estimated Tax Increment Over Life of District ................... 13
Exhibit 3-5 - Map of Development District and TIF District ................... 14
8
10
3
2
TAX INCREMENT FINANCING DISTRICT NO. 2
SECTION III - TAX INCREMENT FINANCING
PLAN SECTION 3.01 STATUTORY AUTHORITY
The TIF District and this TIF Plan are established under the authority of the TIF Act. For future
reference in administering the TIF Plan, a copy of the TIF Act will be included in the TIF record
book for the TIF District.
SECTION 3.02 PLANNED DEVELOPMENT
3.02.1 Project Description
The Project is anticipated to include the construction of a roadway to facilitate the construction
of a manufacturing facility upon property within the boundaries of the TIF District. The project
is for the construction an approximate 61,092 square foot commercial building for
manufacturing and warehousing purposes.
3.02.2 City Plans and Development Program
In addition to achieving the objectives of the City's plans and Development Program, the
proposed development is consistent with and works to achieve the development objectives of
the City. The TIF Plan for the TIF District conforms to the general plan for development of the
City as a whole.
The reasons and facts supporting this finding are that the City Council has reviewed the plans
for the proposed development and found them to be consistent with the goals of the
Comprehensive Plan and zoning ordinances and serves to promote the City's development
objectives for economic development.
This project is consistent with the City's Comprehensive Plan, dated as of March 13, 2017,
including the Transportation Plan and Future Land Use Plan maps. The Project is also consistent
with the City's Zoning Map as the parcels are guided for industrial land use and will be zoned I-
2, General Industrial District as part of the project approvals.
3.02.3 Land Acquisition
The City does not intend to acquire any property within the TIF District, other than for right of
way and/or easements related to street improvements, infrastructure and related public
improvements.
3.02.4 Development Activities
As of the date of approval of this TIF Plan, there are no development activities proposed in this TIF
Plan that are subject to contracts.
3.02.5 Need for Tax Increment Financing
In the opinion of the City, the proposed development would not reasonably be expected to occur
solely through private investment within the foreseeable future and that the increased market
value of the site that could reasonably be expected to occur without the use of tax increment
financing would be less than the increase in the market value estimated to result from the
proposed development after subtracting the present value of the projected tax increments for the
maximum duration of the TIF District permitted by the TIF Plan.
The reasons and facts supporting this finding include the following. The proposed
development requires the need for public financial assistance to offset the site improvements
and preparation costs, utility improvements, and other qualifying improvements to allow for
the Developer to proceed with construction of the project.
TAX INCREMENT FINANCING DISTRICT NO. 2
A comparative analysis of estimated market values both with and without establishment of the TIF
District and the use of tax increments has been performed as described above and is shown in
Exhibit 3-1. This analysis indicates that the increase in estimated market value of the proposed
development (less the present value of the projected tax increments for the maximum duration
permitted by the TIF Plan) exceeds the estimated market value of the site prior to the
establishment of the TIF District.
SECTION 3.03 TAX INCREMENT FINANCING DISTRICT
3.03.1 Designation
This TIF District is designated Tax Increment Financing (Economic Development) District
No. 2.
3.03.2 Boundaries of TIF District
The boundaries of the TIF District are depicted in Exhibit 3-5. The area within the TIF District
includes the following parcels and adjacent roads and right of way: 118-800-274101 and 118-
800-274100.
3.03.3 Type of District
The TIF District is established as an "economic development" district pursuant to Minnesota
Statutes Sections 469.174, Subd. 12 and 469.176, Subd. 4c. These sections of the TIF Act allow tax
increments from an economic development district may be used to provide improvements,
loans, subsidies, grants, interest rate subsidies, or assistance in any form to developments
consisting of buildings and ancillary facilities, if all the following conditions are met:
(1) it will discourage commerce, industry, or manufacturing from moving their operations
to another state or municipality; or
(2) it will result in increased employment in the state; or
(3) it will result in preservation and enhancement of the tax base of the state.
Revenue derived from tax increment from an economic development district may not be used
to provide improvements, loans, subsidies, grants, interest rate subsidies, or assistance in any
form to developments consisting of buildings and ancillary facilities, if more than 15 percent of
the buildings and facilities (determined on the basis of square footage) are used for a purpose
other than:
(1) the manufacturing or production of tangible personal property, including
processing resulting in the change in condition of the property;
(2) warehousing, storage, and distribution of tangible personal property, excluding retail sales;
(3) research and development related to the activities listed in clause (1) or (2);
(4) telemarketing if that activity is the exclusive use of the property;
(5) tourism facilities; or
(6) space necessary for andrelated to the activities listed in clauses (1) to (5).
The proposed project, as described, relates to plans for construction of a roadway to facilitate
the development and construction of a manufacturing and warehousing facility within the
district.
in
TAX INCREMENT FINANCING DISTRICT NO. 2
SECTION 3.04 PLAN FOR USE OF TAX INCREMENT
3.04.1 Estimated Tax Increment
The original net tax capacity of value of the TIF District will be set by the County upon request
for certification. For the purposes of this Plan, the estimated original net tax capacity is $14,594.
This amount is estimated based the most recent published estimated combined taxable market
value of $804,700 for the parcels within the TIF District, with tax capacity value calculated for
commercial -industrial property.
The Project is intended to be developed in phases, with the first phase occurring in 2018. The
taxable market value is anticipated to be $2,329,787 with a tax capacity of $45,846. The second
phase is currently scheduled for 2020; the resulting taxable market value is estimated to increase
to $3,066,263 and the tax capacity will increase to $59,379. The final phase is planned for 2021.
The resulting taxable market value is estimated at $4,626,377 with a tax capacity of $88,074. It is
expected that the property located within the district will appreciate at one and three quarters
percent (1.75%) per year. The final tax capacity value of the parcels within the TIF District after
full development and at the end of the life of the district is estimated to be $94,404. This amount
is based on a total estimated market value of $5,045,604 with property classified as commercial -
industrial. The difference between the total tax capacity value and the original net tax capacity
value is the captured tax capacity value for the creation of tax increment estimated to range
from $31,252 from $79,810, and will increase as project phases are completed.
The total local tax rate for taxes payable in 2017 is 114.774%. The TIF Plan assumes that this
rate will be set as the original local tax rate for the TIF District. At the time of the certification of
the original net tax capacity for the TIF District, the county auditor shall certify the original
local tax rate that applies to the TIF District. The original local tax rate is the sum of all the
local tax rates, excluding that portion of the school rate attributable to the general education levy
under Minnesota Statutes section 126C.13, that apply to a property in the TIF District. The
local tax rate to be certified is the rate in effect for the same taxes payable year applicable to the tax
capacity values certified as the TIF District's original tax capacity. The resulting tax capacity rate is
the original local tax rate for the life of the TIF District.
Under these assumptions, the estimated annual tax increment will be $35,869 in the first year of tax
increment collection, and increasing to $91,601 as the property is developed further. The actual tax
increment will vary according to the certified original tax capacity value and original tax rate, the
actual property value produced by the proposed development and the changes in property
value and State tax policy over the life of the district.
It is the City's intent to retain 100% of the captured tax capacity value for the duration of the TIF
district. Exhibit II contains the projected tax increment over the life of the District.
3.04.2 Project Costs
The City will use tax increment to pay for Project Costs. Figure 3-1 in Section 3.04.3 provides
the estimated Project Costs to be paid from tax increment. Project Costs to be paid or
financed with tax increment are estimated to be $650,000. This amount includes $460,500 for
reimbursement of construction of public infrastructure, including streets and other similar
public improvements, within the boundaries of the Development District. The remaining
Project Costs is estimated to be for interest expense and administrative costs.
The City anticipates other revenues may be used to finance or pay for other project costs associated
with the development in the TIF District. The City reserves the right to use any other legally
available revenues to finance or pay for project costs associated with development in the TIF
District.
TAX INCREMENT FINANCING DISTRICT NO. 2
3.04.3 Estimated Sources and Uses of Funds
The estimated sources of revenue, along with the estimated Project Costs to be paid or financed
with tax increment, and estimated financing costs, are itemized in Figure 3-1 that follows
FIGURE 3-1
ESTIMATED SOURCES AND USES OF FUNDS
City of Otsego
Tax Increment Financing District No. 2
Projected Tax Increment
Kadler Avenue Development
6
Total
Estimated Tax Increment Revenues (from tax increment generated by the district)
Tax increment revenues distributed from the county
$650,000
Interest and investment earnings
$10,000
Sales/lease proceeds
$0
Market value homestead credit
$0
Total Estimated Tax Increment Revenues
$660,000
Estimated Project/Financing Costs (to be paid or financed with tax increment)
Project costs
Land/building acquisition
$0
Site improvements/preparation costs
$460,500
Utilities
$0
Other qualifying improvements
$0
Construction of affordable housing
$0
Small city authorized costs, if not already included above
$0
Administrative costs
$23,000
Estimated Tax Increment Project Costs
$483,500
Estimated financing costs
Interest expense
$176,500
Total Estimated Project/Financing Costs to be Paid from Tax Increment
$660,000
Estimated Financing
6
TAX INCREMENT FINANCING DISTRICT NO. 2
The City reserves the right to administratively adjust the amount of any of the items listed
above or to incorporate additional eligible items, so long as the total estimated tax increment
project costs to be paid from tax increment, before estimated financing costs, is not increased.
3.04.4 Administrative Expense
The City will retain up to 10 percent (10%) of annual tax increment revenues, less fees paid to
the State and County. The City will use these monies to pay for and reimburse the City for costs
of administering the TIF district. The estimated amount of administrative costs to be paid from
tax increment is shown in Figure 3-1 in Section 3.04.3. Anticipated administrative expenses of
the TIF District include establishment of the TIF District, annual audit of the fund for TIF
District, preparation of annual reporting, legal publication of annual report, and administration
of any development agreements.
3.04.5 County Road Costs
The proposed development will not substantially increase the use of county roads
and necessitate the need to use tax increments to pay for county road improvements.
3.04.6 Bonded Indebtedness
Figure 3-1 in Section 3.04.3 provides the estimated maximum amount of total amounts of bonds
to be issued and paid from tax increments from the TIF District.
The City anticipates issuing general obligation bonds as a result of the TIF Plan.
The City may use tax increments on a pay-as-you-go basis (i.e., issuance of a tax increment note)
to reimburse Developer for Project Costs. The amount of reimbursement to a Developer for
Project Costs, and the term of reimbursement, shall be specified in a written agreement.
The City may loan or advance money from its general fund or any other fund it has legal
authority to finance Project Costs. An interfund loan or advance is defined in the TIF Act as a
bond or a qualifying obligation. Before money is transferred, advanced, or spent, the loan or
advance shall be authorized by resolution of the City Council. For the loan or advance to be
repaid with TIF revenues, an interfund loan agreement must be in place before any loans or
advances are made. The terms and conditions for repayment of the loan must be in writing
and include, at minimum, (i) the principal amount of the loan or advance, (ii) the interest rate
to be charged, and (iii) its maximum term. The maximum rate of interest that can be charged
is limited to the annual rate charged by the State Courts or by the Department of Revenue,
whichever is greater.
3.04.7 Duration of TIF District
The TIF Act allows tax increments to be collected from the TIF District for a period not to exceed
eight (8) years from the date of receipt of the first tax increment. The City reserves the right to
collect tax increments for this period to undertake eligible activities in the TIF District and the
Development District.
Under the current schedule for development, the first tax increment is estimated to be collected
in 2019 (construction of phase 1 improvements completed in 2017) creating the authority to
collect tax increments through 2028. The City will request decertification of the TIF District after
payment (or reimbursement) of all Project Costs but no later than after the final receipt of taxes
payable.
3.04.8 Estimated Impact on Other Taxing Jurisdictions
Exhibit III and IV shows the estimated impact on other taxing jurisdictions if the maximum
projected retained captured net tax capacity of the TIF District was hypothetically available
to the other taxing jurisdictions. The City believes that there will be no adverse impact on
other taxing jurisdictions during the life of the TIF District, since the proposed development
would not have occurred without the establishment of the TIF District and the provision of
7
public assistance. A positive impact on other taxing jurisdictions will occur when the TIF
District is decertified and the development therein becomes part of the general tax base.
The City anticipates minimal impact of the proposed development on city -provided services. A
manageable increase in water and sewer usage is expected. It is anticipated that there may be a
slight but manageable increase in police and fire protection duties due to the development.
3.04.9 Prior Planned Improvements
There have been no building permits issued in the last 18 months in conjunction with any of the
properties within the TIF District. The City will include this statement with the request for
certification to the County Auditor. If building permits had been issued during this time period,
then the County Auditor would increase the original net tax capacity of the TIF District by the
net tax capacity of each improvement for which a building permit was issued.
TAX INCREMENT FINANCING DISTRICT N0. 2
ARTICLE IV - ADMINISTERING THE TIF DISTRICT
SECTION 4.01 FILING AND CERTIFICATION
The filing and certification of the TIF Plan consists of the following steps:
1. Upon adoption of the TIF Plan, the City shall submit a copy of the TIF Plan to the
Minnesota Department of Revenue and the Office of the State Auditor.
2. The Authority shall request that the County Auditor certify the original net tax capacity and
net tax capacity rate of the TIF District. To assist the County Auditor in this process, the City
shall submit copies of the TIF Plan, the resolution establishing the TIF District and adopting
the TIF Plan, and a listing of any prior planned improvements.
3. The City shall send the County Assessor any assessment agreement establishing the
minimum market value of land and improvements in the TIF District, and shall request
that the County Assessor review and certify this assessment agreement as reasonable.
SECTION 4.02 MODIFICATIONS OF THE TAX INCREMENT FINANCING PLAN
The City reserves the right to modify the TIF District and the TIF Plan. Under current State Law,
the following actions can only be approved after satisfying all the necessary requirements for
approval of the original TIF Plan (including notifications and public hearing):
■ Reduction or enlargement in the geographic area of the Development District or the
TIF District.
■ Increase in the amount of bonded indebtedness to be incurred.
■ Increase in the amount of capitalized interest.
■ Increase in that portion of the captured net tax capacity to be retained by the City.
■ Increase in the total estimated public costs.
■ Designation of additional property to be acquired by the City.
Other modifications can be made by resolution of the City Council. In addition, the original
approval process does not apply if (1) the only modification is elimination of parcels from the
TIF District and (2) the current net tax capacity of the parcels eliminated equals or exceeds the
net tax capacity of those parcels in the TIF District's original net tax capacity, or the City
agrees that the TIF District's original net tax capacity will be reduced by no more than the
current net tax capacity of the parcels eliminated.
The City must notify the County Auditor of any modification that reduces or enlarges the
geographic area of the TIF District. The geographic area of the TIF District may be reduced but
not enlarged after five years following the date of certification.
SECTION 4.03 4 -YEAR KNOCKDOWN RULE
Since the TIF District consists of two parcels, a delay or reduction of planned development of the
project could lead to loss of value from the 4 -Year Knockdown Rule. This Rule requires that if
after four years from certification of the TIF District, no demolition, rehabilitation, renovation or
site improvement, including a qualified improvement of an adjacent street, has commenced on a
parcel located within the TIF District, then that parcel shall be excluded from the TIF District and
the original net tax capacity shall be adjusted accordingly. Qualified improvements of a street
are limited to construction or opening of a new street, relocation of a street, or substantial
reconstruction or rebuilding of an existing street. The City must submit to the County Auditor,
0
TAX INCREMENT FINANCING DISTRICT NO. 2
by February 1 of the fifth year, evidence that the required activity has taken place for each parcel
in the TIF District.
If a parcel is excluded from the TIF District and the City or owner of the parcel subsequently
commences any of the above activities, the City shall certify to the County Auditor that such
activity has commenced and the parcel shall once again be included in the TIF District. The
County Auditor shall certify the net tax capacity of the parcel, as most recently certified by the
Commissioner of Revenue, and add such amount to the original net tax capacity of the TIF
District.
SECTION 4.04 POOLING/5-YEAR RULE
At least 80% of the tax increments (net of administrative expenses) from this TIF District (the
"In -District Percentage") must be expended on activities within the TIF District, including
payment on any bonds for which the proceeds were used to finance activities within the TIF
District. Up to 20% of the tax increments from this TIF District may be used to finance activities
outside the TIF District but within the Development District. Tax increments are considered to
have been "spent" within the TIF District if such amounts are:
• actually paid to a third party for activities performed within the TIF District within
five years after certification of the district;
• used to pay bonds that were issued and sold to a third party, the proceeds of which are
reasonably expected on the date of issuance to be spent within the later of the five-year
period or a reasonable temporary period or are deposited in a reasonably required reserve
or replacement fund.
• used to make payments or reimbursements to a third party under binding contracts for
activities performed within the TIF District, which were entered into within five years after
certification of the district; or
• used to reimburse a party for payment of eligible costs (including interest) incurred within
five years from certification of the district.
It is anticipated that all tax increments collected in the TIF District will spent or obligated
within this time period. Unless the TIF Plan is modified within this 5 -year period and
additional expenditures are authorized, tax increments will only be used to pay for
authorized redevelopment costs and administrative expenses.
SECTION 4.05 FINANCIAL REPORTING AND DISCLOSURE REQUIREMENTS
The City will comply with the annual reporting requirements of State Law pursuant to the
guidelines of the Office of the State Auditor. Under current law, the City must prepare and
submit a report on the TIF district on or before August 1 of each year. The City must also
annually publish in a newspaper of general circulation in the City an annual statement for
each tax increment financing district.
The reporting and disclosure requirements outlined in this section begin with the year the
district was certified, and shall end in the year in which both the district has been decertified
and all tax increments have been spent or returned to the county for redistribution. Failure to
meet these requirements, as determined by the State Auditor's Office, may result in
suspension of distribution of tax increment.
SECTION 4.06 BUSINESS SUBSIDY COMPLIANCE
The Authority will comply with the business subsidies requirements specified in
Minnesota Statutes, Sections 116J.993 to 116J.995.
10
TAX INCREMENT FINANCING DISTRICT NO. 2
Exhibit 3-1
City of Otsego
Tax Increment Financing District No. 2
Present Value Analysis As Required By Statute
Minnesota Statutes 469.175(3)(2)
KadlerAvenue Development
1 Estimated Future Market Value w/ Tax Increment Financing
2 Payable 2017 Market Value
3 Market Value Increase (1-2)
4 Present Value of Future Tax Increments
5 Market Value Increase Less PV of Tax Increments
6 Estimated Future Market Value w/o Tax Increment Financing
7 Payable 2017 Market Value
5,045,604
804,700
4,240,904
537,766
3,703,138
924,505 '
804,700
8 Market Value Increase (6-7) 119,805
9 Increase in MV From TIF 3,583,333 2
' Assume 1.75% annual appreciation over 8 year life of district.
2 Statutory compliance achieved if increase in market value from TIF (Line 9) is
greater than or equal to zero.
11
TAX INCREMENT FINANCING DISTRICT NO. 2
Exhibit 3.2
City of Otsego
Tax Increment Financing District No. 2 (Economic Development)
Kadler Avenue Development
Projected Tax Increment Cash Flow
Key Asssumptions
1 Taxable market value JMV annual growth assumption =1,75%,
2 Assume Pay 2017 Tax Year.
3 Base Taxable Market Value = $804,700 PID 118-800-274100 118-800-274101
4 Assumption for New Taxable Market Value = $4,391,752 based on 60,710 SF
5 Present value is based on semi-annual payments.
6 Present value is calculated based on semi-annual payments, stated rate in the schedule above, and beginning on the follosiing date of 8/1/2018
7 Tax capacity is calculated based on first $150,000 of TMV at 1,5% and TMV above the $150,000 at 2,0%,
12
0,36%
100,00%
2,74%
100,00%
2,74%
TIF
Taxes
Assumed
Estimated
Less
Present Value of
Est. TIF To Pay
Present
District.
Value
Payable
Taxable Market
New Tax
Base Tax
Captured Tax
Original
Tax
State
Estimated Tax
Estimated Tax
City Project
Value of TIF
Year
Value 14
Capacity 17
a Capacity
Capacity
Tax Rate z
Increment
Fee
Increment
Increment � 6
and Financing
to City
Year
Year
Before State Fee
Costs
1
2019
2020
2,329,787
45,846
(14,594)
31,252
114,774%
35,869
(129)
35,740
33,618
35,740
33,618
2
2020
2021
2,370,558
46,661
(14,594)
32,067
114.774%
36,805
(132)
36,673
67,188
36,673
67,188
3
2021
2022
3,066,263
59,379
(14,594)
44,785
114.774%
51,402
(185)
51,217
112,812
51,217
112,812
4
2022
2023
4,626,377
88,074
(14,594)
73,480
114.774%
84,336
(304)
84,032
185,658
84,032
185,658
5
2023
2024
4,707,339
88,933
(14,594)
74,339
114.774%
85,322
(307)
85,015
257,377
85,015
257,377
6
2024
2025
4,789,717
89,807
(14,594)
75,213
114.774%
86,325
(311)
86,014
327,991
86,014
327,991
7
2025
2026
4,873,537
92,083
(14,594)
77,489
114.774%
88,937
(320)
88,617
398,789
88,617
398,789
8
2026
2027
4,958,824
93,233
(14,594)
78,639
114.774%
90,258
(325)
89,933
468,710
89,933
468,710
9
2027
2028
5,045,604
94,404
(14,594)
79,810
114.774%
91,601
(330)
91,271
537,766
91,271
537,766
4,895,604
TOTAL =
650,855
(2,343)
648,512
648,512
Key Asssumptions
1 Taxable market value JMV annual growth assumption =1,75%,
2 Assume Pay 2017 Tax Year.
3 Base Taxable Market Value = $804,700 PID 118-800-274100 118-800-274101
4 Assumption for New Taxable Market Value = $4,391,752 based on 60,710 SF
5 Present value is based on semi-annual payments.
6 Present value is calculated based on semi-annual payments, stated rate in the schedule above, and beginning on the follosiing date of 8/1/2018
7 Tax capacity is calculated based on first $150,000 of TMV at 1,5% and TMV above the $150,000 at 2,0%,
12
TAX INCREMENT FINANCING DISTRICT NO. 2
Exhibit 3-3
City of Otsego
Tax Increment Financing District No. 2
Impact on Other Taxing Jurisdictions
(Taxes Payable 2017)
KadlerAvenue Development
ANNUAL TAX INCREMENT
Estimated Annual Captured Tax Capacity (Full Development) $79,810
Payable 2017 Local Tax Rate 114.774%
Estimated Annual Tax Increment $91,601
NOTE NO. 1; Assuming that ALL of the captured tax capacity would be available to all taxing jurisdictions
even if the City does not create the Tax Increment District, the creation of the District will reduce tax
capacities and increase the local tax rate as illustrated in the above tables.
NOTE NO. 2: Assuming that NONE of the captured tax capacity would be available to the taxing jurisdiction
if the City did not create the Tax Increment District; then the plan has virtually no initial effect on the tax
capacities of the taxing jurisdictions. However, once the District is established, allowable costs paid from the
Increments, and the District is terminated, all taxing jurisdictions will experience an increase in their tax base.
13
Percent of Tax Base
Net Tax
Captured
Percent of
Capacity
Tax
Total NTC
(NTC)
Capacity
City of Otsego
13,328,424
79,810
0.60%
Wright County
146,611,070
79,810
0.05%
ISD 728
397,233,300
79,810
0.02%
Dollar Impact of Affected Taxing Jurisdictions
Net Tax
Tax
Added
Capacity
% of Total
Increment
Local Tax
(NTC)
Share
Rate
City of Otsego
37.973%
33.085%
30,306
0.227%
Wright County
39.604%
34.506%
31,608
0.022%
ISD 728
37.197%
32.409%
29,687
0.007%
Other
0.000%
0.000%
0
Totals
114.774%
100.000%
91,601
NOTE NO. 1; Assuming that ALL of the captured tax capacity would be available to all taxing jurisdictions
even if the City does not create the Tax Increment District, the creation of the District will reduce tax
capacities and increase the local tax rate as illustrated in the above tables.
NOTE NO. 2: Assuming that NONE of the captured tax capacity would be available to the taxing jurisdiction
if the City did not create the Tax Increment District; then the plan has virtually no initial effect on the tax
capacities of the taxing jurisdictions. However, once the District is established, allowable costs paid from the
Increments, and the District is terminated, all taxing jurisdictions will experience an increase in their tax base.
13
TAX INCREMENT FINANCING DISTRICT NO. 2
Exhibit 3-4
City of Otsego
Tax Increment Financing District No. 2 (2)
Kadler Avenue Development
Estimated Tax Increments Over Maximum Life of District
14
Based on Pay 2017 Tax Rate =
114.774%
37.973%
39.604%
37.197%
0.000%
New
Estimated
City
County
School
Other
TIF
Taxes
Taxable
New
Base
Captured
Total
TIF
TIF
TIF
TIF
District
Payable
Market
Tax
Tax
Tax
Tax
Related
Related
Related
Related
Year
Year
Value
Capacity
Capacity
Capacity
Increment
Share
Share
Share
Share
1
2020
2,329,787
45,846
(14,594)
31,252
35,869
-
-
2
2021
2,370,558
46,661
(14,594)
32,067
36,805
12,177
12,700
11,928
3
2022
3,066,263
59,379
(14,594)
44,785
51,402
17,006
17,737
16,659
4
2023
4,626,377
88,074
(14,594)
73,480
84,336
27,903
29,101
27,332
-
5
2024
4,707,339
88,933
(14,594)
74,339
85,322
28,229
29,441
27,652
-
6
2025
4,789,717
89,807
(14,594)
75,213
86,325
28,561
29,788
27,977
-
7
2026
4,873,537
92,083
(14,594)
77,489
88,937
29,425
30,689
28,824
-
8
2027
4,958,824
93,233
(14,594)
78,639
90,258
29,862
31,144
29,252
-
9
2028
5,045,604
94,404
(14,594)
79,810
91,601
30,306
31,608
29,687
-
Total
650,855
203,469
212,208
199,311
-
14
TAX INCREMENT FINANCING DISTRICT NO. 2
EXHIBIT 3-5
Boundaries of Municipal Development District No. 1 and
Tax Increment Financing District No. 2
The boundaries of the Municipal Development District No. 1 are coterminous with corporate
boundaries of the City of Otsego and Tax Increment Financing District No. 2
includes parcels 118-800-274101,118-800-274100 and adjacent roads and right of way:
Tax Increment Financing District No. 2
15
16
EXTRACT OF MINUTES OF A MEETING OF THE
CITY COUNCIL OF THE CITY
OF OTSEGO, MINNESOTA
HELD: June 12, 2017
Pursuant to due call and notice thereof, a regular meeting of the City Council of the City
of Otsego, Wright County, Minnesota, was duly called and held on the 12th day of June, 2017, at
approximately 7:00 p.m.
The following members of the Council were present:
and the following were absent:
Member introduced the following resolution and moved its adoption:
RESOLUTION 2017-49
RESOLUTION ESTABLISHING TAX INCREMENT
FINANCING (ECONOMIC DEVELOPMENT) DISTRICT NO. 2 AND APPROVING A TAX
INCREMENT FINANCING PLAN
THEREFOR
A. WHEREAS, it has been proposed that the City of Otsego, Minnesota (the "City")
establish Tax Increment Financing (Economic Development) District No. 2 within Development
District No. 1 (the "TIF District") and approve and accept the proposed Tax Increment
Financing Plan therefor, pursuant to Minnesota Statutes, Sections 469.124 through 469.133 and
Minnesota Statutes, Sections 469.174 through 469.1794, both inclusive, as amended (collectively
the "Act"); and
B. WHEREAS, the proposed Tax Increment Financing Plan for the TIF District (the
"Plan") has been prepared and is contained in that certain document entitled in part "Tax
Increment Financing Plan for Tax Increment Financing (Economic Development) District No.
2", dated as of June 12, 2017, and presented for the Council's consideration; and
C. WHERAS, the City has performed all actions required by law to be performed
prior to the establishment of the TIF District, and the adoption of a proposed Plan therefor,
including, but not limited to, notification of Wright County and Independent School District
No. 728 having taxing jurisdiction over the property to be included in the TIF District; and the
holding of a public hearing upon published and mailed notice as required by law; and
D. WHEREAS, certain written reports (the "Reports") relating to the Plan and to the
activities contemplated therein have heretofore been prepared by staff and submitted to the
Council and/or made a part of the City files and proceedings on the Plans. The Reports include
data, information and/or substantiation constituting or relating to (1) the "studies and
analyses' on why the TIF District meets the so-called "but for" test and the tests for establishing
a economic development tax increment financing district under the Act and (2) the basis for the
other findings and determinations made in this Resolution. The Council hereby confirms,
ratifies and adopts the Reports, which are hereby incorporated into and made as fully a part of
this resolution to the same extent as if set forth in full herein; and
NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Otsego as
follows:
1. Tax Increment Financing District No. 2. There is hereby established in the City of
Otsego within Municipal Development District No. 1, Tax Increment Financing District No. 2,
the initial boundaries of which are fixed and determined as described in the Tax Increment
Financing Plan.
2. Tax Increment Financing Plan. The Tax Increment Financing Plan is adopted as
the tax increment financing plan for Tax Increment Financing District No. 2, and the City
Council makes the following findings:
(a) The Tax Increment Financing District No. 2 is an economic development
district as defined in Minnesota Statutes, Section 469.174, Subd. 12, and
development in the TIF District will result in increased employment in the State
and the preservation and enhancement of the tax base of the State.
(b) Development in the Tax Increment Financing District No. 2 will increase
employment in the state, including construction jobs, through the construction of
commercial and industrial improvements.
(c) The proposed development, in the opinion of the City Council, would not
occur solely through private investment. The reasons supporting this finding are
that:
i. The need for the use of tax increment financing has been
determined in negotiations with the developer of the project. The
developer has provided supporting materials to attest to inability to
proceed with construction of the project without the assistance for the
development. The developer proposes to finance and construct
improvements, including a commercial industrial building, for occupant
by Bury Industries, LLC (a manufacturing company). The extraordinary
cost of the improvements and the building results in costs, which have
proven to be prohibitive. Therefore, tax increments are needed primarily
to assist with infrastructure costs for the development property.
ii. The proposed project will allow an industrial manufacturing
business to be built within the City of Otsego. The proposed development
consists of the phased construction of, once completed, an approximately
61,092 square foot manufacturing facility on property within the City.
Attracting this company and related jobs in Otsego is important to the
economic future of the community.
2
iii. Private investment will not finance these development activities
because of the prohibitive costs of the underlying site improvements and
infrastructure. It is necessary to finance a portion of these costs through
the use of tax increment financing.
iv. A comparative analysis of estimated market values both with and
without establishment of the Tax Increment Financing District No. 2 and
the use of tax increments has been performed as described above. Such
analysis is found in Exhibit I of the TIF Plan and is incorporated herein by
reference, and indicates that the increase in estimated market value of the
proposed development (less the indicated subtractions) exceeds the
estimated market value of the site absent the establishment of the Tax
Increment Financing District No. 2 and the use of tax increments.
V. In the opinion of the City Council, the increased market value of
the site that could reasonably be expected to occur without the use of tax
increment financing would be less than the increase in the market value
estimated to result from the proposed development after subtracting the
present value of the projected tax increments for the maximum duration
of the TIF District permitted by the TIF Plan. The reasons supporting this
finding can be found in Exhibit I of the TIF Plan.
(d) The TIF Plan for the TIF District conforms to the general plan for
development of the City as a whole.
The reasons for supporting this finding are that:
(i) The TIF District is properly zoned; and
(ii) The TIF Plan will generally complement and serve to implement
policies adopted by the City.
(e) The TIF Plan will afford maximum opportunity, consistent with the
sound needs of the City as a whole, for the development or redevelopment of the
Development District No. 1 by private enterprise.
The reasons supporting this finding are that the development activities are
necessary so that development and redevelopment by private enterprise can
occur within the Development District No. 1.
3. Public Purpose. The adoption of the Tax Increment Financing Plan for Tax
Increment Financing District No. 2 therein conform in all respects to the requirements of the Act
and will help fulfill a need to develop an area of the State which is underused to help improve
the tax base and to improve the general economy of the State and thereby serves a public
purpose.
4. Certification. The Auditor of Wright County is requested to certify the original
net tax capacity of Tax Increment Financing District No. 2 as described in Tax Increment
Financing Plan, and to certify in each year thereafter the amount by which the original net tax
capacity has increased or decreased in accordance with the Act; and the City Administrator is
authorized and directed to forthwith transmit this request to the County Auditor in such form
and content as the Auditor may specify, together with a list of all properties within Tax
Increment Financing District No. 2 for which building permits have been issued during the 18
months immediately preceding the adoption of this Resolution.
5. Filing. The City Clerk is further authorized and directed to file a copy of the Tax
Increment Financing Plan for Tax Increment Financing District No. 2 with the Commissioner of
Revenue and the Office of the State Auditor.
6. Administration. The administration of Tax Increment Finance District No. 2 is
assigned to the City Administrator who shall from time to time be granted such powers and
duties pursuant to Minnesota Statutes, Sections 469.130 and 469.131 as the City Council may
deem appropriate.
The motion for the adoption of the foregoing resolution was duly seconded by member
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.
M
STATE OF MINNESOTA
COUNTY OF WRIGHT
I, the undersigned, being the duly qualified and acting City Clerk of the City of Otsego,
Minnesota, DO HEREBY CERTIFY that I have compared the attached and foregoing extract of
minutes with the original thereof on file in my office, and that the same is a full, true and
complete transcript of the minutes of a meeting of the City Council of said City, duly called and
held on the date therein indicated, insofar as such minutes relate to the establishment of Tax
Increment Financing District No. 2 in the City.
WITNESS my hand this _ day of June, 2017.
City Clerk
5
CITY OF OTSEGO
COUNTY OF WRIGHT
STATE OF MINNESOTA
RESOLUTION NO: 2017-50
AUTHORIZING INTERFUND LOAN FOR
ADVANCE OF CERTAIN COSTS IN CONNECTION
WITH TAX INCREMENT FINANCING DISTRICT NO.2
BE IT RESOLVED By the City Council of the City of Otsego, Minnesota (the "City") as
follows:
Section 1. Background.
1.01. The City of Otsego has established Tax Increment Financing District No. 2 (the
"TIF District") within Municipal Development District No. 1 (the 'Development District")
pursuant to Minnesota Statutes, Sections 469.174 to 469.1794, as amended (the "TIF Act").
1.02. The City may incur certain costs related to the TIF District which may be
financed on a temporary basis from available City funds.
1.03. Under Section 469.178, Subdivision 7 of the TIF Act, the City is authorized to
advance or loan money from any fund from which such advances may be legally made in order
to finance expenditures that are eligible to be paid with tax increments under the TIF Act.
1.04. The City has determined that it may pay debt service on bonds issued to finance
project costs associated with the TIF District (the "Project Costs Advance") on a temporary basis
from the General Fund or any other fund from which such advances may be legally made (the
"Fund") as an Interfund Loan pursuant to Minnesota Statutes, Section 469.178, Subd. 7.
1.05. The City has also determined that it may be necessary to finance administrative
costs associated with the TIF District (the "Administrative Costs) using City funds legally
authorized for such purpose, and to reimburse such fund from tax increments from the district
when received.
1.06. The City hereby designates the Project Costs Advance as an interfund loan in
accordance with the terms of this resolution and the TIF Act.
Section 2. Repayment of Interfund Loan.
2.01. The City will reimburse itself for the Project Costs Advance and Administrative
Costs in an amount not to exceed $660,000, together with interest at the rate of 4.0% per annum
(the "Interfund Loan"). Interest accrues on the principal amount from the date of each advance.
The interest rate is no more than the greatest of the rate specified under Minnesota Statutes,
Section 270C.40 and Section 549.09, both in effect for calendar year 2017, and will not be
adjusted.
2.02. Principal and interest ("Payments") on the Interfund Loan shall be paid semi-
annually on each February 1 and August 1 (each a "Payment Date"), commencing on the first
Payment Date on which the City has Available Tax Increment (defined below), or on any other
dates determined by the City Administrator, through the date of last receipt of tax increment
from the TIF District.
2.03. Payments on the Interfund Loan will be made solely from Available Tax
Increment, defined as the tax increment from the TIF District received by the City from Wright
County in the six-month period before any Payment Date. Payments shall be applied first to
accrued interest, and then to unpaid principal. Interest accruing from the Loan Date will be
compounded semiannually on February 1 and August 1 of each year and added to principal until
the first Payment Date, unless otherwise specified by the City Administrator. Available Tax
Increment shall be applied to payment on the Interfund Loan and for no other purpose until the
Interfund Loan is fully paid or forgiven as provided in Section 2.06 hereof. Payments on this
Interfund Loan may be subordinated to any outstanding or future bonds, notes, or contracts
secured in whole or in part with available tax increment, and are on a parity with any other
outstanding or future interfand loans secured in whole or in part with available tax increment.
2.04. The principal sum and all accrued interest payable under this resolution is pre-
payable in whole or in part at any time by the City without premium or penalty.
2.05. This resolution is evidence of an internal borrowing by the City in accordance
with Section 469.178, subdivision 7 of the TIF Act, and is a limited obligation payable solely
from Available Tax Increment pledged to the payment hereof under this resolution. The
Interfund Loan shall not be deemed to constitute a general obligation of the State of Minnesota
or any political subdivision thereof, including, without limitation, the City. Neither the State of
Minnesota, nor any political subdivision thereof shall be obligated to pay the principal of or
interest on the Interfund Loan or other costs incident hereto except out of Available Tax
Increment. The City shall have no obligation to pay any principal amount of the Interfund Loan
or accrued interest thereon, which may remain unpaid after the final Payment Date.
2.06. The City may at any time make a determination to forgive the outstanding
principal amount and accrued interest on the Interfund Loan to the extent permissible under law.
2.07. The City may from time to time amend the terms of this Resolution to the extent
permitted by law, including without limitation amendment to the payment schedule and the
interest rate; provided that the interest rate may not be increased above the maximum specified in
Section 469.178. subd. 7 of the TIF Act.
2
Section 3. Effective Date. This resolution is effective upon execution in full of the
Contract.
Adopted this day of June 12, 2017.
ATTEST:
City Clerk
Q
Mayor
DEVELOPMENT AGREEMENT
BY AND BETWEEN
THE CITY OF OTSEGO, MINNESOTA
AND
BURY INDUSTRIES, LLC
This document drafted by: BRIGGS AND MORGAN
Professional Association
2200 IDS Center
80 South 8th Street
Minneapolis, Minnesota 55402
8314393v2
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS................................................................................................. 2
Section1.1
Definitions............................................................................................ 2
ARTICLE II REPRESENTATIONS AND WARRANTIES ................................................ 4
Section 2.1
Representations and Warranties of the City ......................................... 4
Section 2.2
Representations and Warranties of the Developer ............................... 4
ARTICLE III UNDERTAKINGS
BY DEVELOPER AND CITY ....................................... 6
Section 3.1
Use of Tax Increment........................................................................... 6
Section 3.2
Special Assessments............................................................................ 6
Section 3.3
Business Subsidies Act........................................................................ 6
ARTICLE IV EVENTS OF DEFAULT................................................................................. 8
Section 4.1
Events of Default Defined................................................................... 8
Section 4.2
Remedies on Default............................................................................ 8
Section 4.3
No Remedy Exclusive.......................................................................... 9
Section 4.4
No Implied Waiver.............................................................................. 9
Section 4.5
Agreement to Pay Attorney's Fees and Expenses ................................ 9
Section 4.6
Indemnification of City........................................................................ 9
ARTICLE V ADDITIONAL
PROVISIONS......................................................................11
Section 5.1
Conflicts of Interest............................................................................
11
Section 5.2
Titles of Articles and Sections...........................................................11
Section 5.3
Notices and Demands........................................................................
11
Section5.4
Counterparts.......................................................................................
12
Section5.5
Law Governing..................................................................................
12
Section5.6
Expiration...........................................................................................
12
Section 5.7
Provisions Surviving Rescission or Expiration ..................................
12
Section 5.8
Assignability of Agreement...............................................................12
EXHIBIT A DESCRIPTION OF DEVELOPMENT PROPERTY .......................................... A-1
8314393v2
DEVELOPMENT AGREEMENT
THIS AGREEMENT, made as of the lst day of June, 2017, by and between the City of
Otsego, Minnesota (the "City"), a municipal corporation existing under the laws of the State of
Minnesota and Bury Industries, LLC, a Minnesota limited liability company (the "Developer"),
WITNESSETH:
WHEREAS, pursuant to Minnesota Statutes, Section 469.124 to 469.133, the City has
heretofore established Development District No. 1 (the "Development District") and has adopted
a development program therefor (the "Development Program"); and
WHEREAS, pursuant to the provisions of Minnesota Statutes, Section 469.174 through
469.1794, as amended (hereinafter, the "Tax Increment Act"), the City has heretofore
established, within the Development District, Tax Increment Financing District No. 2 (the "Tax
Increment District") and has adopted a tax increment financing plan therefor (the "Tax Increment
Plan") which provides for the use of tax increment financing in connection with certain
development within the Development District; and
WHEREAS, in order to achieve the objectives of the Development Program and
particularly to make the land in the Development District available for development by private
enterprise in conformance with the Development Program, the City has determined to finance
certain costs of a Project (as hereinafter defined) to be constructed within the Tax Increment
District as more particularly set forth in this Agreement; and
WHEREAS, the City believes that the development and construction of the Project, and
fulfillment of this Agreement are vital and are in the best interests of the City, the health, safety,
morals and welfare of residents of the City, and in accordance with the public purpose and
provisions of the applicable state and local laws and requirements under which the Project has
been undertaken and is being assisted;
WHEREAS, the requirements of the Business Subsidy Law, Minnesota Statutes, Section
116J.993 through 116J.995, apply to this Agreement;
WHEREAS, the City has adopted criteria for awarding business subsidies that comply
with the Business Subsidy Law, after a public hearing for which notice was published; and
WHEREAS, the Council has approved this Agreement as a subsidy agreement under the
Business Subsidy Law;
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:
8314393v2
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 Agreement, as the same may be from time to time modified,
amended or supplemented;
City means the City of Otsego, Minnesota;
City Reimbursement Amount means an amount not to exceed $660,000 as set forth in
Section 3.1;
County means Wright County, Minnesota;
Developer means Bury Industries, LLC, its successors and assigns;
Development District means Development District No. 1, including the real property
described in the Development Program;
Development Program means the development program approved in connection with the
Development District;
Development Property means the real property described in Exhibit A attached to this
Agreement;
Event of Default means any of the events described in Section 4.1 hereof,
Prime Rate means the rate of interest from time to time publicly announced by U.S. Bank
National Association in St. Paul, Minnesota, as its "reference rate" or any successor rate, which
rate shall change as and when that prime rate or successor rate changes;
Project means the construction of an approximately 26,400 square foot manufacturing
and warehouse facility on the Development Property;
State means the State of Minnesota;
Tax Increments means the tax increments derived from the Tax Increment District which
have been received and retained by the City in accordance with the provisions of Minnesota
Statutes, Section 469.177;
Tax Increment Act means Minnesota Statutes, Sections 469.174 through 469.1794, as
amended;
Tax Increment District means Tax Increment Financing District No. 2 located within the
Development District, a description of which is set forth in the Tax Increment Financing Plan,
which was qualified as an economic development district under the Tax Increment Act;
8314393v2
Tax Increment Financing Plan means the tax increment financing plan approved for the
Tax Increment District by the City Council on June 12, 2017 and any future amendments thereto;
Unavoidable Delays means delays, outside the control of the party claiming its
occurrence, which are the direct result of 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 City) which directly result in delays.
3
8314393v2
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 municipal corporation and has the power to enter into this
Agreement and carry out its obligations hereunder.
(2) The Tax Increment District is an "economic development district" within the
meaning of Minnesota Statutes, Section 469.174, Subdivision 12, and was created, adopted and
approved in accordance with the terms of the Tax Increment Act.
(3) The development contemplated by this Agreement is in conformance with the
development objectives set forth in the Development Program.
(4) The City makes no representation or warranty, either expressed or implied, as to
the Development Property or its condition or the soil conditions thereon, or that the Development
Property shall be suitable for the Developer's purposes or needs.
Section 2.2 Representations and Warranties of the Developer. The Developer makes
the following representations and warranties:
(1) The Developer is a Minnesota limited liability company and has the power and
authority to enter into this Agreement and to perform its obligations hereunder, and doing so will
not violate its articles of organization, member control agreement or operating agreement, or the
laws of the State and by proper action has authorized the execution and delivery of this
Agreement.
(2) The Developer shall cause the Project to be constructed in accordance with the
terms of this Agreement, the Development Program, and all applicable local, state and federal
laws and regulations (including, but not limited to, environmental, zoning, energy conservation,
building code and public health laws and regulations).
(3) The construction of the Project would not be undertaken by the Developer, and in
the opinion of the Developer would not have been or be economically feasible within the
reasonably foreseeable future, without the assistance and benefit to the Developer provided for in
this Agreement.
(4) The Developer will use its best efforts to obtain, or cause to be obtained, in a
timely manner, all required permits, licenses and approvals, and will meet, in a timely manner,
all requirements of all applicable local, state, and federal laws and regulations which must be
obtained or met before the Project may be lawfully constructed.
(5) Neither the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby, nor the fulfillment of or compliance with the terms and
conditions of this Agreement is prevented, limited by or conflicts with or results in a breach of,
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the terms, conditions or provision of any contractual restriction, evidence of indebtedness,
agreement or instrument of whatever nature to which the Developer is now a party or by which it
is bound, or constitutes a default under any of the foregoing.
(6) The Developer will cooperate fully with the City with respect to any litigation
commenced with respect to the Project.
(7) The Developer will cooperate fully with the City in resolution of any traffic,
parking, trash removal or public safety problems which may arise in connection with the
construction and operation of the Project.
(8) The construction of the Project shall commence no later than April 1, 2018 and
barring Unavoidable Delays, will be substantially completed by October 31, 2018.
(9) The Developer will not seek a reduction in the market value as determined by the
County Assessor of the Project for the period of time that the Tax Increment District exists.
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ARTICLE III
UNDERTAKINGS BY DEVELOPER AND CITY
Section 3.1 Use of Tax Increment. To finance certain costs within the Tax Increment
District, the City proposes, subject to the further provisions of this Agreement and an interfund
loan resolution adopted by the City, to apply Tax Increments to reimburse itself for costs related
to the costs of installation of public improvements adjacent to the boundaries of the Tax
Increment District and necessary for the Project and the costs of the establishment and
administration of the Tax Increment District aggregating an amount not to exceed $660,000 (the
"City Reimbursement Amount").
Section 3.2 Special Assessments. Additional costs of the public improvements located
outside of the Tax Increment District and necessary for the Project will be assessed against the
Development Property and the City and the Developer shall enter into an agreement relating to
the special assessments which agreement shall be prepared by the City Attorney.
Section 3.3 Business Subsidies Act.
(1) In order to satisfy the provisions of Minnesota Statutes, Sections 116J.993 to
116J.995 (the 'Business Subsidies Act"), the Developer acknowledges and agrees that the
amount of the 'Business Subsidy" granted to the Developer under this Agreement is $660,000
which is the City Reimbursement Amount and that the Business Subsidy is needed because the
Project is not sufficiently feasible for the Developer to undertake without the Business Subsidy.
The Tax Increment District is an economic development district and the public purpose of the
Business Subsidy is to encourage the construction of manufacturing/warehouse facilities in the
City. The Developer agrees that it will meet the following goals (the "Goals") in connection
with the development of the Development Property. It will create at least one (1) full time job,
including benefits, totaling of at least $20.00 per hour within two years from the 'Benefit Date",
which is the earlier of the date the Developer completes or occupies the Project.
(2) If no Goals are met, the Developer agrees to repay all of the Business Subsidy to
the City, plus interest ("Interest") set at the implicit price deflator defined in Minnesota Statutes,
Section 275.70, Subdivision 2, accruing from and after the Benefit Date, compounded
semiannually. If the Goals are met in part, the Developer will repay a portion of the Business
Subsidy (plus Interest) determined by multiplying the Business Subsidy by a fraction, the
numerator of which is the number of jobs in the Goals which were not created at the wage level
set forth above and the denominator of which is one (1) (i.e. number of jobs set forth in the
Goals).
(3) The Developer agrees to (i) report its progress on achieving the Goals to the City
until the later of the date the Goals are met or two years from the Benefit Date, or, if the Goals
are not met, until the date the Business Subsidy is repaid, (ii) include in the report the
information required in Minnesota Statutes, Section 116J.994, Subdivision 7 on forms developed
by the Minnesota Department of Employment and Economic Development, and (iii) send
completed reports to the City. The Developer agrees to file these reports no later than March 1
of each year commencing March 1, 2019, and within 30 days after the deadline for meeting the
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Goals. The City agrees that if it does not receive the reports, it will mail the Developer a
warning within one week of the required filing date. If within 14 days of the post marked date of
the warning the reports are not made, the Developer agrees to pay to the City a penalty of $100
for each subsequent day until the report is filed up to a maximum of $1,000.
(4) The Developer agrees to continue operations within the City for at least five (5)
years after the Benefit Date.
(5) There are no other state or local government agencies providing financial
assistance for the Project other than the City.
(6) There is no parent corporation of the Developer.
(7) The Developer certifies that it does not appear on the Minnesota Department of
Employment and Economic Development's list of recipients that have failed to meet the terms of
a business subsidy agreement.
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ARTICLE IV
EVENTS OF DEFAULT
Section 4.1 Events of Default Defined. The following shall be "Events of Default"
under this Agreement and the term "Event of Default" shall mean whenever it is used in this
Agreement any one or more of the following events:
(1) Failure by the Developer to timely pay any ad valorem real property taxes
assessed, special assessments or other City charges with respect to the Development Property.
(2) Failure by the Developer to cause the construction of the Project to be completed
pursuant to the terms, conditions and limitations of this Agreement.
(3) Failure of the Developer to observe or perform any other covenant, condition,
obligation or agreement on its part to be observed or performed under this Agreement.
(4) The holder of any mortgage on the Development Property or any improvements
thereon, or any portion thereof, commences foreclosure proceedings as a result of any default
under the applicable mortgage documents.
(5) If the Developer shall:
(A) file any petition in bankruptcy or for any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under the United
States Bankruptcy Act of 1978, as amended or under any similar federal or state law; or
(B) make an assignment for the benefit of its creditors; or
(C) admit in writing its inability to pay its debts generally as they become due;
or
(D) be adjudicated as bankrupt or insolvent; or if a petition or answer
proposing the adjudication of the Developer as bankrupt or its reorganization under any
present or future federal bankruptcy act or any similar federal or state law shall be filed in
any court and such petition or answer shall not be discharged or denied within sixty (60)
days after the filing thereof; or a receiver, trustee or liquidator of the Developer, or of the
Project, or part thereof, shall be appointed in any proceeding brought against the
Developer, and shall not be discharged within sixty (60) days after such appointment, or
if the Developer, shall consent to or acquiesce in such appointment.
Section 4.2 Remedies on Default. Whenever any Event of Default referred to in
Section 4.1 occurs and is continuing, the City, as specified below, may take any one or more of
the following actions after the giving of thirty (3 0) days' written notice to the Developer, but only
if the Event of Default has not been cured within said thirty (30) days:
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(1) The City may suspend its performance under this Agreement until it receives
assurances from the Developer, deemed adequate by the City, that the Developer will cure its
default and continue its performance under this Agreement.
(2) The City may cancel and rescind the Agreement.
(3) The City may take any action, including legal or administrative action, in law or
equity, which may appear necessary or desirable to enforce performance and observance of any
obligation, agreement, or covenant of the Developer under this Agreement.
Section 4.3 No Remedy Exclusive. No remedy herein conferred upon or reserved to
the City is intended to be exclusive of any other available remedy or remedies, but each and
every such remedy shall be cumulative and shall be in addition to every other remedy given
under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or
omission to exercise any right or power accruing upon any default shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient.
Section 4.4 No Implied Waiver. In the event any agreement contained in this
Agreement should be breached by any party and thereafter waived by any other party, such
waiver shall be limited to the particular breach so waived and shall not be deemed to waive any
other concurrent, previous or subsequent breach hereunder.
Section 4.5 Agreement to Pay Attorney's Fees and Expenses. Whenever any Event of
Default occurs and the City shall employ attorneys or incur other expenses for the collection of
payments due or to become due or for the enforcement or performance or observance of any
obligation or agreement on the part of the Developer herein contained, the Developer agrees that
it shall, on demand therefor, pay to the City the reasonable fees of such attorneys and such other
expenses so incurred by the City.
Section 4.6 Indemnification of City.
(1) The Developer releases from and covenants and agrees that the City, its governing
body members, officers, agents, including the independent contractors, consultants and legal
counsel, servants and employees thereof (hereinafter, for purposes of this Section, collectively
the "Indemnified Parties") shall not be liable for and agrees to indemnify and hold harmless the
Indemnified Parties against any loss or damage to property or any injury to or death of any
person occurring at or about or resulting from any defect in the Project, provided that the
foregoing indemnification shall not be effective for any actions of the Indemnified Parties that
are not contemplated by this Agreement.
(2) Except for any willful misrepresentation or any willful or wanton misconduct of
the Indemnified Parties, the Developer agrees to protect and defend the Indemnified Parties, now
and forever, and further agrees to hold the aforesaid harmless from any claim, demand, suit,
action or other proceeding whatsoever by any person or entity whatsoever arising or purportedly
arising from the actions or inactions of the Developer (or other persons acting on its behalf or
under its direction or control) under this Agreement, or the transactions contemplated hereby or
the acquisition, construction, installation, ownership, and operation of the Project; provided, that
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this indemnification shall not apply to the warranties made or obligations undertaken by the City
in this Agreement or to any actions undertaken by the City which are not contemplated by this
Agreement but shall, in any event and without regard to any fault on the part of the City, apply to
any pecuniary loss or penalty (including interest thereon from the date the loss is incurred or
penalty is paid by the City at a rate equal to the Prime Rate) as a result of the Developer
operating the Project so that the Tax Increment District does not qualify or ceases to qualify as
an "economic development district" under Section 469.174, Subdivision 12, of the Act and
Section 469.176, Subdivision 4c. or to violate limitations as to the use of Tax Increments as set
forth in Section 469.176, Subdivision 4c.
(3) All covenants, stipulations, promises, agreements and obligations of the City
contained herein shall be deemed to be the covenants, stipulations, promises, agreements and
obligations of the City and not of any governing body member, officer, agent, servant or
employee of the City.
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ARTICLE V
ADDITIONAL PROVISIONS
Section 5.1 Conflicts of Interest. No member of the governing body or other official
of the City shall have any financial interest, direct or indirect, in this Agreement, the
Development Property or the Project, or any contract, agreement or other transaction
contemplated to occur or be undertaken thereunder or with respect thereto, nor shall any such
member of the governing body or other official 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 shall be personally liable to the City in the event of any default
or breach by the Developer or successor or on any obligations under the terms of this Agreement.
Section 5.2 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 5.3 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 Developer is addressed to or delivered personally to:
Bury Industries, LLC
Attention: Tom Bury
14210 Northdale Boulevard
Rogers, MN 55374
(2) in the case of the City is addressed to or delivered personally to the City at:
City of Otsego, Minnesota
Attention: City Administrator/Finance Director
13400 90th Street NE
Otsego, MN 55330
with a copy to:
Briggs and Morgan, P.A.
Attention: Mary Ippel
2200 IDS Center
80 South 8th Street
Minneapolis, MN 55402
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.
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Section 5.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute one and the same instrument.
Section 5.5 Law Governing. This Agreement will be governed and construed in
accordance with the laws of the State.
Section 5.6 Expiration. This Agreement shall terminate on the earlier of (i) the date
the City has been reimbursed the City Reimbursement Amount from Tax Increments, or (ii) the
termination date of the Tax Increment District.
Section 5.7 Provisions Surviving Rescission or Expiration. Sections 4.5 and 4.6 shall
survive any rescission, termination or expiration of this Agreement with respect to or arising out
of any event, occurrence or circumstance existing prior to the date thereof.
Section 5.8 Assi ng ability of Agreement. This Agreement may be assigned only with
the consent of the City.
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IN WITNESS WHEREOF, the City has caused this Agreement to be duly executed in its
name and on its behalf and its seal to be hereunto duly affixed, and the Developer has caused this
Agreement to be duly executed on its behalf, on or as of the date first above written.
CITY OF OTSEGO, MINNESOTA
By
Its Mayor
By
City Administrator/Finance Director
This is a signature page to the Development Agreement by and between the City of Otsego and
Bury Industries, LLC.
S -t
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BURY INDUSTRIES, LLC
IM
Its
This is a signature page to the Development Agreement by and between the City of Otsego and
Bury Industries, LLC.
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EXHIBIT A
DESCRIPTION OF DEVELOPMENT PROPERTY
Property located in the City of Otsego, Wright County, Minnesota with the following
parcel identification numbers:
118-800-274101
118-800-274100
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EXTRACT OF MINUTES OF MEETING
OF THE CITY COUNCIL OF THE
CITY OF OTSEGO, MINNESOTA
HELD: June 12, 2017
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 Otsego Prairie Center, in said
City on the 12th day of June, 2017, at 7:00 o'clock p.m.
The following members were present:
and the following were absent:
Member introduced the following resolution and moved its
adoption:
RESOLUTION NO. 2017-51
RESOLUTION AUTHORIZING EXECUTION
OF A DEVELOPMENT AGREEMENT
A. WHEREAS, Bury Industries, LLC, (the "Developer") has requested the City of
Otsego, Minnesota (the "City") to assist with the financing of certain costs incurred in
connection with the construction of an approximately 26,400 square foot manufacturing and
warehouse facility in the City by the Developer (the "Project"); and
B. WHEREAS, the Developer and the City have determined to enter into a
Development Agreement providing for the City's tax increment financing assistance for the
Project (the "Development Agreement").
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Otsego,
Minnesota, as follows:
1. The City Council hereby approves the Development Agreement in substantially
the form submitted, and the Mayor and the City Administrator/Finance Director are hereby
authorized and directed to execute the Development Agreement on behalf of the City.
2. The approval hereby given to the Development 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 Development
Agreement. The execution of the Development Agreement by the appropriate officer or officers
of the City shall be conclusive evidence of the approval of the Development Agreement in
accordance with the terms hereof.
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The motion for adoption of the foregoing resolution was duly seconded by member
and, after full discussion thereof, and upon a vote being taken thereof, the
following voted in favor thereof:
and the following voted against same:
Adopted this 12th day of June, 2017.
Attest:
City Administrator/Finance Director
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2
Mayor
STATE OF MINNESOTA
COUNTY OF WRIGHT
CITY OF OTSEGO
I, the undersigned, being the duly qualified and acting City Administrator/Finance
Director of the City of Otsego, Minnesota, DO HEREBY CERTIFY that I have carefully
compared the attached and foregoing extract of minutes with the original minutes of a meeting of
the City Council of the City held on the date therein indicated, which are on file and of record in
my office, and the same is a full, true and complete transcript therefrom insofar as the same
relates to a Resolution Authorizing Execution of a Development Agreement.
WITNESS my hand as such City Administrator/Finance Director of the City Council of
the City of Otsego, Minnesota this 12th day of June, 2017.
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City Administrator/Finance Director