ITEM 4.2 Otsego Apartmentsc
Ot - T F o
MINNESOTA V
DEPARTMENT INFORMATION
Request for
City Council Action
ORIGINATING DEPARTMENT: REQUESTOR: MEETING DATE:
Legal Andy MacArthur, City Attorney September 25, 2017
PRESENTER(s): REVIEWED BY: ITEM #:
City Attorney 4.2
AGENDA ITEM DETAILS
RECOMMENDATION:
Staff recommends that the Council approve the attached Agreement with LHB to undertake a
redevelopment study and Escrow Agreement with Otsego Apartments LLC to pay for the study. Approval
of the LHB Agreement will be contingent upon Otsego Apartments, LLC executing escrow agreement
and posting the required amount.
ARE YOU SEEKING APPROVAL OF A CONTRACT?
IS A PUBLIC HEARING REQUIRED?
Yes.
No.
BACKGROUND/JUSTIFICATION:
Otsego Apartments, LLC has submitted an application to the City seeking TIF assistance regarding
removal of the existing private wastewater treatment plant and payment of sewer hookup charges to
the existing mobile home park and the proposed apartment buildings. The applicant has requested that
the City consider a redevelopment TIF as part of their request. The request was analyzed by the City's
TIF consultants who recommended that a TIF Analysis be undertaken by a third party to ascertain
whether or not the property qualified for redevelopment status.
The contract for the analysis would be between the City and LHB, but would be paid for by the applicant
through the proposed escrow agreement. The proposal cost for the study is $5,900.00. The escrow
agreement would require $7,000.00 to cover any additional costs that arose during the study.
A traffic study also needs to be undertaken. It is also recommended to the Council that they also set a
special meeting for October 9 at 6 pm to review the LHB report.
SUPPORTING DOCUMENTS
• LHB Proposal and Agreement
• Escrow Agreement
MOTION: (Please word motion as you would like it to appear in the minutes.
Motion to approve LHB Proposal and Agreement with the City to undertake TIF analysis as presented,
subject to execution of Escrow Agreement between the City and Otsego Apartments, LLC as presented
and posting of required escrow.
Motion to set a special meeting for the purposes of reviewing the LHB TIF analysis and other issues
related to the Otsego Apartments LLC TIF application on October 9, 2017 at bpm.
BUDGET INFORMATION
FUNDING: BUDGETED: ❑ YES
NA
❑ NO
PEREQRMANCE
DRIVEN -DESIGN.
September 13, 2017
Adam Flaherty
City Administrator
City of Otsego
13400 90th Street NE
Otsego, MN 55330
RIVER ROAD REDEVELOPMENT TIF ANALYSIS
Dear Adam;
Thank you for the opportunity to submit a proposal for the River Road Redevelopment TIF
analysis •in' Otsego, Minnesota. 'Il is a full service architecture, planning and engineering firm
with 250 employees in our Minneapolis, Duluth; Cambridge, and'Superior, Wisconsfn offices.
Our Government studio has extensive experience working with local governments on their
planning, design, architectural and engineering needs. Having been personally involved on various
-city councils "and planning commissions, I understand how cities function and the importance of
maintaining the support of your appointed and elected officials and community throughout the
process.
PREVIOUS EXPERIENCE
I HB has significant experience with a variety of inspection and facility assessment projects,
including the analysis of over 200'TIF Districts. Examples include:
• City of Columbia Heights TIF inspection services
• City of St. Paul TIF inspection services
• City of St. Anthony Village, NW Quadrant TIF inspection services
• City of St. Louis Park TIF District inspection services
• City of Mound TIF District "1--2" inspection services
• City of Osseo TIF inspection services
e City of New Richmond, W1 TIF inspection services
• Minnesota State Colleges and Universities system facility assessments
• State of Minnesota Facility Assessments
• Property Condition Assessments for the St. Paul Department of Planning and Economic
Development (Franldin/Emerald Neighborhood)
• Condition surveys for every DNR facility in the State of Minnesota, 2014
2.1 VAASupe.ddr Street, Suite -500, I. Duluth;. W. 5580-2, 1. 218,727:844.6
701 Washington Avenue North, Suite 200 1 Wnneap6hs, AAN 55401 1 6'12.338.20?9
200 Third,Avenue,Northeast; Spite. '100 1 camhridge, N1N:55008 I. 763.639,40,42
53.EastSecondStreet, Suite -150- - A Superlof,-W54880- t 71&.392.2902-
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Otsego River Road TIF Analysis — September 13, 2017
TEAM CREDENTIALS
MrchaglA. Fischer, .AIA, LEED AP -Project Pdi2cipal/TIFAvalyst
Michael has 29 years of experience as project principal, project manager, project designer and
project architect on planning, urban design, educational, commercial and governmental projects.
He has become an expert on Tax Increment Finance District analysis assisting over 100 cities with
strategic planning for TIF Districts. He is an Architectural Principal at LHB and currently leads
the Minneapolis office.
Michael completed a two-year Bush Fellowship, studying at MIT and Harvard in 1999, earning
Masters degrees in City Planning and Real Estate Development from MIT. He has served on more
than 50 committees, boards and community task forces, including a term as a City Council
President and as Chair of a Metropolitan Planning Organization. Most recently, he served as Chair
of the Edina, Minnesota planning commission and is currently a member of the Edina city council.
Michael has also managed and designed several award-winning architectural projects, and was one
of four architects in the Country to receive the AIA. Young Architects Citation in 1997.
Phil Waugh — Project MwagerlrIFAnalyst
Philip is a project manager with 13 years of experience in historic preservation, building
investigations, material research, and construction methods. He previously worked as a historic
preservattonist and also served as the preservation specialist at the St. Paul Heritage Preservation
Commission. Currently, Phil sits on the Board of Directors for the Preservation Alliance of
Minnesota. His current responsibilities include project management of historic preservation
projects, performing building condition surveys and analysis, TIF analysis, writing preservation
specifications, historic design reviews, writing Historic Preservation Tax Credit applications,
preservation planning, and grant writing.
Jonathan Pettigrew, AIA --Inspector
Jonathan Pettigrew has worked in architecture and construction for the last twenty years in
Minnesota, California and Washington. His experience includes a variety of commercial and
residential project types and scales, from single-family homes to a 300,000 square foot multi -building
office complex. He has significant experience in code reviews and building systems inspections and
analysis. Jonathan received his Minnesota architect's license in 2004. He brings a strong interest in
sustainability and an eye for detail to his work. He enjoys working with clients, consultants and
contractors to bring projects together successfully.
Phil Fisher—ltsspeetor
For 35 years, Phil Fisher worked in the field of Building Operations in Minnesota including White
Bear Lake Area Schools. At the University of Minnesota, he earned his Bachelor of Science in
Industrial Technology. He is a Certified Playground Safety Inspector, Certified Plant Engineer, and
is trained in Minnesota Enterprise Real Properties (MERP) Facility Condition Assessment (FCA).
His FCA training was recently applied to the Minnesota Department of Natural Resources Facilities
Condition Assessment project involving over 2,000 buildings.
Page: 3
Otsego River Road TIF Analysis — September 13, 2017
SCOPE OF SERVICES
LHB will provide the following services based upon the terms and conditions described below.
1. Survey the TIF District to determine if it meets applicable coverage test.
A. To meet the coverage test, parcels consisting of 70 percent of the area of the district
must be "occupied" by buildings, streets, utilities, or paved or gravel parking lots.
B. A parcel is not considered "occupied" unless at least 15% of its total area contains
improvements.
2. Conduct a visual review of building(s) interior and exterior:
A. Obtain property owner's consent for inspection.
B. Document property conditions relative to Minnesota Statutes Section 469.174
Subdivision 10,
3. Estimate building(s) replacement cost:
A. Replacement cost is the cost of constructing a new structure of the same square footage
and type on the site.
B. A base cost will be calculated by establishing the building class, type and construction
quality.
C. Identify amenities, which increase the value of the building over the standard
construction quality level.
D. Review building permits for each parcel.
E, The base cost and cost of amenities will be totaled to determine the replacement cost
for the property.
4. 'Evaluate building(s) existing condition:
A. "Structurally substandard shall mean containing defects in structural elements or a
combination of deficiencies in essential utilities and facilities, light and ventilation, fire
protection including adequate egress, layout and condition of interior partitions, or
similar factors, which defects or deficiencies are of sufficient total significance to justify
substantial renovation or! clearance:"
5. Determine Building(s) Code Deficiencies:
A. Determine technical conditions, which are not in compliance with current building
code applicable to new buildings.
B. Provide opinion of probable cost to correct identified deficiencies.
C. Compare cost of deficiency corrections to replacement value of building.
6. Prepare and deliver report:
A. Prepare a written narrative analysis of the District describing why the property within
the District does or does not meet the criteria as "structurally substandard" as
established in Minnesota Statutes Section 469.174, subdivision 10.
B. Deliver final reports via email PDF.
ASSUMPTIONS
1. LHB will inspect up to two buildings on multiple parcels. We will inspect both the
interior.andexterior.of.the_buildings.and-evaluate-the.coverage,of.thesepar.cels. TEe
Client will provide the following:
Page: 4
Otsego River Road TIF Analysis — September 13, 2017
A scalable parcel map and/or aerial photo of the area to be inspected, including GIS
information with specific parcel data, including parcel area measured in square feet.
A list of all parcels affected including name of owner, current known business or
resident name and address.
Available information regarding the condition of the structures, including past
building permit information, and known code violations.
§iANDARD OF CARE
LHB shall perform services consistent with the professional skill and care ordinarily provided by
other professionals practicing in the same or similar locality under the same or similar
circumstances.
Any report prepared by LHB represents'a professional opinion based -upon information available
and arrived at in accordance with generally accepted professional standards. Other than as
contained in the report, LHB makes no express or implied warranty.
Short of complete deconstruction to examine every element at every location, no assessment can
reveal all conditions which may exist. Additional testing, assessment, or demolition, may uncover
conditions which would make it necessary to modify LHB's conclusions or recommendations.
Any report prepared for the purpose described in this Agreement is for the exclusive use by those
to whom the report is addressed. LHB will not and cannot be held liable for the unauthorized
reliance upon this report by any thud party.
COMPENSATION
We propose to work on an hourly basis with the following key staff:
Project Principal, Michael Fischer (nF analysis) $265/hour
Project Manager $155/hour
Project Architect/Inspector $140/hour
Project Administrator $80/hour
We will work on an hourly basis not to exceed Five Thousand Nine Ilundted dollars ($ 5,900)
including reimbursable expenses for a full report outlining the findings for the proposed TIF
District
Payments are due and payable upon receipt of our invoice. Unpaid balances 60 -daps after invoice
date shall beat interest at the rate of 8% annually.
Failure to make timely payment to LHB is a material breach of this Agreement and may, at LHB's
sole discretion, result in a suspension or termination of services, and may, at LHB's sole discretion,
result in the termination of the Client's limited license authorization to use LHB's copyrighted
Instruments of Service.
Page: 5
Otsego River Road TIF Analysis — September 13, 2017
ADDITIONAL SERVICES,
If there is a material change in the circumstances or conditions that affect the scope of work,
schedule, allocation of risks or other material terms, LHB shall notify the Client. The Client and
LHB shall promptly and in good faith enter into negotiation to address the changed conditions
including equitable adjustment to compensation. The fees and costs for any additional services will
be based upon Lh1B's Standard Hourly Rates and Standard Reimbuxsabie Schedule.
SCHEDULE
The final report typically requires 30-60 days to complete from the time we are authorized to start.
We can make preliminary conclusions pAor to our full report being, completed if necessary to allow
other consultants and the client to begin their work.
We understand that a preliminary assessment will be necessary prior to the October 9, 2017 council
meeting.
CONSEQUENTIAL DAMAGES
LHB and Client waive consequential damages for claims, disputes or other matters in question
arising out of or relating to this Agreement.
LIMIT OF LIABILITY
To the maximum extent permitted by law, the Client agrees to limit LHB's liability for the Client's
damages to the sum of Ten Thousand Dollars ($10,000) or the amount of fee paid to LFIB,
whichever is greater. This limitation shall apply regardless of the cause of action or legal theory
pled or asserted.
USE OF LHB'S DOCUMENTS
The documents prepared by LHB are solely for use with respect to this project. All documents
prepared by LHB pursuant to this Agreement are the instruments of services to the Project and
LHB shall retain all common law, statutory and other reserved rights, including copyright. LHB
grants to Client a nonexclusive limited license solely for the purposes of evaluating and executing
the Project. The Client shall not assign, delegate, sublicense, or otherwise transfer any license
granted herein to another party.
To the extent the documents are transferred or are modified, supplemented or otherwise altered
by the Client, subsequent design professional, or any other party, the Client agrees to indemnify,
defend and hold LHB harmless for any claims, demands, damages or causes of action arising out
of such transfer or modification, supplementation or alteration.
OTHER CONDITIONS'
The laws of the State of Minnesota shall govern this Agreement. Any provision of this agreement
later held to violate a law or regulation shall be deemed void. Allremaining provisions shall
continue in force.
The Client recognizes that matetialsprepared by others maybe subject to copyrightpxotectionand
warrants to LHB that any documents provided by the Client do not infringe upon the copyright
Page: 6
Otsego Rivet Road TIF Analysis — September 13, 2017
held by another.
Unless the parties mutually agree otherwise, the parties shall endeavor to settle disputes by
mediation. A demand for mediation shall be filed, in -writing, within a reasonable period of titAe
t
after a claim, dispute or other matter in question has arisen. r
LHB and the Client, acting through the Client's legal representative, will, to the fullest reasonable
extent, cooperate and coordinate efforts in preparing necessary responses to any third party
challenges to the inspections. The Client agrees to pay LHB its regular hourly rates for time spent
as a result of a third party legal challenge
If the terms and conditions of this Agreement are acceptable, please sign and return a copy to LHB.
CLIENT NAME
LHB INC.
By.
By
(Signature)
(Signature)
Its:
Its: Principal
(Tide)
(Tide)
Hayne,`
Name.' MichadA. hc1jer,,1)A
(Printed Name)
(Printed Name)
C:\Users\MAFisch\Documents\LHB\TIF\TIF Agreements\2017 Agreements\Otsego River Road TIF Analysis AG 9-13-17.docx
ESCROW AGREEMENT BETWEEN THE CITY OF OTSEGO AND OTSEGO APARTMENTS LLC
THIS AGREEMENT made this _ day of September, 2017 by and between the City of Otsego (CITY), a
Minnesota municipal corporation and Otsego Apartments, LLC (APPLICANT), a Minnesota Limited
Liability Company.
WHEREAS, APPLICANT has requested that CITY consider providing TIF assistance to their Project in order
to cover costs related to abandonment of the existing private wastewater treatment and hookup to City
services on certain real property located within CITY and legally described as CIC Number 143, Riverbend
North CIC Plat, and intends to apply for City approvals to construct an apartment building, storage
facilities and commercial uses on the described property; and
WHEREAS, APPLICANT has met with CITY staff regarding issues inherent in the requested TIF assistance
and the proposed land use; and
WHEREAS, CITY's consultants have recommended that a TIF analysis be undertaken by an independent
consultant to determine whether or not the property and buildings qualify as a redevelopment district
as defined by State statute; and
WHEREAS, the CITY has received a proposal from LHB setting forth the terms and conditions for
undertaking such a study; and;
WHEREAS, the study will provide information to the CITY and its consultants as well as the APPLICANT as
to whether or not TIF assistance can be based upon redevelopment of the property; and
WHEREAS, LHB has provided a proposal for the TIF analysis to the CITY and the estimated costs of the
TIF Analysis is $5,900.00; and
WHEREAS, CITY requires an escrow by APPLICANT in the amount of $7,000.00 prior to CITY execution of
an Agreement with LHB to cover the estimated costs of the Traffic Study, and to reimburse the CITY for
any costs incurred prior to and during application, including but not limited to CITY engineering,
planning and legal costs; and
WHEREAS, APPLICANT will be further required to cover any additional costs incurred by CITY in the
event that the costs of the TIF Analysis and CITY incurred engineering, legal and planning costs exceed
the initial escrow amount posted.
NOW, THEREFORE IT IS AGREED BETWEEN THE PARTIES AS FOLLOWS:
1. APPLICANT shall immediately submit a cash escrow to the CITY in the amount of $7,000.00.
2. The cash escrow shall be used to pay LHB for the TIF Analysis and to reimburse the CITY for any
legal, planning or engineering costs incurred as the result of the TIF Analysis and related issues.
3. CITY shall provide APPLICANT with a final billing statement indicating payments made regarding
the TIF Analysis and related issues, or periodic statements if specifically requested by
APPLICANT.
4. In the event that the initial escrow amount is fully utilized, APPLICANT shall provide escrow in an
additional amount as determined by CITY.
5. CITY may utilize any and all legal remedies available to it under City Ordinance or State statutes
to recover any costs incurred by CITY above the posted escrow including, but not limited to
planning, engineering or legal costs incurred as the result of the TIF Analysis or related issues,
said remedies include assessment of costs against the subject property.
6. This Agreement is entered into by APPLICANT in order to determine whether or not a certain
form of TIF assistance is feasible. APPLICANT undertakes the TIF Analysis and any CITY incurred
related costs at its own risk. APPLICANT understands and agrees that the TIF Analysis is
undertaken only to ascertain preliminarily whether or not redevelopment TIF assistance is
feasible, and by entering into this Agreement the CITY not taking any action that could be
construed to be a preliminary approval or approval of the use or uses proposed for the site or
approval of any Tax Increment Financing or any other form of assistance. APPLICANT will not
represent that the undertaking of this TIF Analysis confers any rights by APPLICANT related to
the subject property.
7. APPLICANT acknowledges and agrees that the results of the TIF Analysis and any related or
required studies or analysis may be utilized by CITY in order to make decisions related to
whether or not to approve or reject, in whole or part, any requested TIF assistance and that the
final decision is solely at the discretion of the CITY.
Dated:
APPLICANT
OTSEGO APARTMENTS, LLC
By:
Its
Dated:
CITY OF OTSEGO
Jessica Stockamp, Mayor
Tami Loff, City Clerk