ECONOMIC DEVELOPMENT AUTHORITY- Erik J. Thorvig, Economic Development Coordinator
Title
APPROVAL OF A DEVELOPMENT AGREEMENT AND TIF EXPENDITURE IN THE AMOUNT OF $1,450,000 FOR THE LEGENDS OF BLAINE PROJECT BY DOMINIUM
Background
The City of Blaine, Wellington Management and Dominium have been working on a development project called Lexington Meadows at the southwest corner of 109th and Lexington Ave. Wellington Management is proposing to purchase approximately 80 acres of land and develop a 32 acre commercial center along with selling land to Dominium who would construct a 192-unit apartment building called the Legends of Blaine. Wellington is planning to acquire the property by the end of September and will start mass site grading shortly thereafter. In addition, Dominium will purchase their site in October and start construction of the apartment this fall.
The Legends of Blaine project is a 192-unit apartment building that will be marketed to seniors. It will have an affordability component where the units will be restricted to the 60% area median income rent and income limits. The overall project will be $47,450,000 and the developer has requested TIF assistance from the Blaine EDA in the amount of $1,450,000. Whenever there is an affordability component it’s typical for cities to contribute TIF as the rents collected are less than market rate. At the November 16, 2017 EDA meeting, the EDA adopted a resolution supporting the use of TIF for this project and directed staff to continue to work with Dominium to prepare a development agreement.
The EDA has two different pooled TIF accounts, a redevelopment and a housing account. Pooled TIF dollars have been generated from districts that are now decertified. The EDA currently has $2,530,000 in housing TIF available for projects. Minnesota State Statues require that housing TIF be used for projects that offer an affordability component, such as the Legends of Blaine. Other recent projects that have used housing TIF include Crest View, the senior apartment building near Blaine City Hall and the ACCAP townhomes at 109th Ave. and University Ave.
Staff is proposing the use of existing pooled TIF in the amount of $1,450,000 for the Legends of Blaine project. The development agreement states that the funds would not be distributed to the developer until the project is complete. The payment will be structured as a forgivable, 15 year, 0% loan. The loan is only forgivable provided that Dominium maintains the 60% affordability component. If they fail to maintain the affordability component, the EDA would get a pro-rata repayment ($96,666/yr.) for any year the affordability component is not maintained within the 15 year term of the loan.
The alternative to providing a payment upon project completion would be to create a new housing TIF district and provide an annual “pay-as-you-go” payment to the developer from the tax increment dollars generated from the development. This scenario would result in any increased tax revenue from the development not being available for general city use for 25 years as it would be used to pay back the original TIF note. By using pooled TIF, all taxing entities would receive the full benefit of the increased tax revenue immediately.
Recommendation
Staff recommends approval of the attached resolution.
Body
WHEREAS, the Economic Development Authority of the City of Blaine (the “EDA”) has established Tax Increment Financing Districts Nos. 1-3, 1-4, 1-5, 1-11, and 1-13 (the “Pooling TIF Districts”) within Blaine Development District No. 1 (the “Development District”), and adopted the Tax Increment Financing Plans therefor for the purpose of financing certain improvements within the Development District.
WHEREAS, the EDA has reviewed a proposal by Blaine Leased Housing Associates III, LLLP (the “Developer”), for tax increment financing assistance in connection with the acquisition, construction, and equipping of an approximately 192-unit multifamily rental housing development and functionally related facilities to be located on an extended portion of Austin Street near the SW corner of the intersection of Lexington Avenue and 109th Avenue NE in the City (the “Project”).
WHEREAS, the EDA has determined that it is reasonable and necessary to provide certain financial assistance to the Developer in order to facilitate Developer’s plans for the Project, and to that end, the EDA has negotiated a Development Agreement between the EDA and Developer (the “Agreement”).
NOW, THEREFORE, BE IT RESOLVED, by the Board of Commissioners (the “Board”) of the Economic Development Authority of the City of Blaine, Minnesota as follows:
1. The Board hereby approves the Agreement in substantially the form presented to the EDA, together with any related documents necessary in connection therewith, including without limitation all documents, exhibits, certifications or consents referenced in or attached to the Agreement (collectively, the “Development Documents”) and hereby authorizes the President and Executive Director of the EDA to execute the Development Documents on behalf of the EDA, and to carry out, on behalf of the EDA, the EDA’s obligations thereunder.
2. The approval hereby given to the Development Documents 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 legal counsel to the EDA and by the officers authorized herein to execute said documents prior to their execution; and said officers are hereby authorized to approve said changes on behalf of the EDA. The execution of any instrument by the appropriate officers of the EDA herein authorized shall be conclusive evidence of the approval of such document in accordance with the terms hereof. In the event of absence or disability of the officers, any of the Development Documents authorized by this Resolution to be executed may be executed without further act or authorization of the EDA by any duly designated acting official, or by such other officer or officers of the EDA as, in the opinion of its Attorney, may act in their behalf.
3. Upon execution and delivery of the Development Documents, the officers and employees of the EDA are hereby authorized and directed to take or cause to be taken such actions as may be necessary on behalf of the EDA to implement the Development Documents, including without limitation the payment of tax increments, when all conditions precedent thereto have been satisfied, to the Developer to reimburse certain costs of the Project.
4. The authority to approve, execute and deliver future amendments to the Agreement and any consents required under the Agreement is hereby delegated to the Executive Director of the EDA, subject to the following conditions: (a) such amendments or consents do not materially adversely affect the interests of the EDA; (b) such amendments or consents do not contravene or violate any policy of the EDA or the City of Blaine, and (c) such amendments or consents are acceptable in form and substance to the counsel retained by the EDA to review such amendments. The authorization hereby given shall be further construed as authorization for the execution and delivery of such certificates and related items as may be required to demonstrate compliance with the Agreement, as amended, and the terms of this Resolution. The execution of any instrument by the Executive Director shall be conclusive evidence of the approval of such instruments in accordance with the terms hereof. In the absence of the Executive Director any instrument authorized by this paragraph to be executed and delivered may be executed by the officer of the EDA or the City of Blaine authorized to act in his/her place and stead.
Passed by the Blaine Economic Development Authority this 4th day of October, 2018.