Memo - Block 64 Redevelopment
I Economic Development I
MEMORANDUM
TO: ! Honorable Mayor and City Council
,
FROMr '-jWim Kerrigan, Director of Planning & Economic Development
i
DATE: May 18, 2005
SUBJECT: Block 64 Redevelopment Project
On the May 24 Council work session agenda staff scheduled time to provide an
update on preparation of the development agreement for this project. A draft
agreement was prepared and provided to the developer, Steve Flanagan of GPS
Financial, on May 9,2005. As of the date of this memo, no comments have been
received from GPS Financial.
GPS Financial e-mailed City staff (dated May 6, 2005) identifying four issues they
wanted addressed in the final development agreement. Three of these issues are
a significant departure from what the staff detailed as necessary to be in the
development agreement to protect the City.
The present timetable is to work out an acceptable agreement that could be
brought to the City Council for consideration on June 21.
Sid Inman, Ehlers & Associates, will also be present at the work session. GPS
Financial has not been informed that they need to be at this meeting. It is
proposed that they be invited to a subsequent meeting (tentatively June 7) to
discuss issues/concerns.
Finally, a letter was sent to GPS Financial (dated April 27, 2005) detailing three
items that still needed to be submitted to comply with the preliminary
development agreement. Two of these items have not yet been received by staff:
detailed project financial data and a preliminary financing commitment. Staff
recommends that the information needs to be provided in an acceptable form
before the development agreement is executed.
Attachment: May 9, 2005, letter to Steve Flanagan, GPS Financial
City oj%pkins
1010 J"irstStreetSoutli . !Jf.opf:jnsJ 9vf9.f. 55343-7573 · Pfiorr.e: 952-935-8474 · J"tVG 952-935-1834
'WeB cuUfress: www.fwpKinsnm.com
May 9,2005
Steve Flanagan
GPS Financial Group
15 Sixth Avenue North,
Hopkins, MN 55343
RE: Response to e-mail dated 5/6/05, final development agreement, Block 64
Redevelopment
Dear Steve:
The following will serve to respond to the four points identified in the above-
referenced e-mail:
1. I would agree that the development agreernent will need to identify a
reasonable period for you to complete this project, but it must identify an
end date when construction of all the phases will be completed. The
timetable you detailed in your memo is much more pessimistic than you
originally projected in your construction schedule. Although the market
study by McComb Group, dated March 2005, identified an approximately
six-year period to complete the sale of all units, the schedule that you
provided in conjunction with the preliminary development agreement shows
a two-year period. You need to take into account that the project timetable
, directly reflects tax increment generation. The longer it take's to complete
the project the less increment is available.
2. As we have discussed, we can use an inflation rate for the tax increment
note, which is reasonable in the marketplace; however, guaranteeing a 3.5
percent inflation rate would obligate the City to pay any shortfalls should
this rate not be achieved. This, in essence, is guaranteeing tax increment,
which creates a financial risk for the City.
3. If the City undertakes eminent domain for the Park Plaza property, the
residents are eligible to make claims for relocation payments from the City
at the start of the process; therefore, there needs to be a guaranteed
source of funds to make these payments before the eminent domain
process can begin. Funds from the construction loan would not be
available until you actually started to build.
TartnerU'!f witfi the Comnumity to 'EIWmce the QJu1fity of Life
. Inspire + 'Etfucau t Involve + Communiwte .
Letter to Steve Flanagan, May 9, 2005 - Page 2
4. As we have discussed throughout the process, if eminent domain does
take place on the Park Plaza property, GPS Financial needs to provide
sufficient funds to the City so that the purchase can be completed once
there is a court award. The City does not have a source of funds to pay for
all or a portion of the cost of this property.
As staff and the Council have detailed in various meetings, in moving forward
with this project the City needs to be protected from any financial risk. Based on
this position, staff could not support what is proposed in Items 2 through 4 of your
memo, as they would create a financial exposure for the, City. .
Finally, neither Ehlers nor I have received anything related to the three items
detailed in my April 27 memo. Just a reminder, this information needs to be
provided in an adequate form before staff would recommend executing the
development agreement.
/)
since,rehi,
/ ./
\2::l
J~ errig
Planning ,Economic Development Director
"\
Enclosures: E-mail from Steve Flanagan to Jim Kerrigan, dated 5/6/05
Letter from Jim Kerrigan to Steve Flanagan, dated 4/27/05
Construction Phasing Schedule provided by GPS Financial
Copies: Hopkins City Council
Bob Deike
Kersten Elverum
Rick Getschow
Sid Inman
Page 1 of!
Jim Kerrigan
Sent:
To:
Cc:
From: Flanagan Stephen T LtCol 502 AOS/AOP [Stephen.Flanagan@hickam.af.mil]
Friday, May 06, 2005 4:39 PM
Jim Kerrigan (E-mail)
. Sid Inman (E-mail); Rebecca Kurtz (E-mail); Michael Broich (E-mail); Fred Kalter (E-mail);
'aj@4gfg.com'
Subject: Finai Development Agreement
Jim,
Here are the issues that we would like to address in the FDA,
1. Legnth of GPS's sole right to develop Block 64 should be 6 years, with 1 year extensions if phases have
not been sold.
2. TIF funding to include a 3.5% inflation rate guaranteed, with an additional note to include an additional
5.5% non-guaranteed inflation rate.
3. Reiocatlon monies to be paid out of the construction financing, not deposited during the condemnation
period. This is the market norm.
4. Deposit for the Park Plaza property to be discussed,
The issue of financing is based on an acceptable return for the development. This will require the higher inflation
rate and timing of deposit to coincide with permanent financing.
Very respectfully,
Steve Flanagan, Lt Col, USAFR
POSC Director
448-8672
Home/Cell
261-4996/561-6100
City oj%pkins
1010 !Frrst Street Sout!i .1fopRfrts,!M!J{. 55343-7573 · pfume: 952-935-8474 · :F~ 952.935.1834
Weo cufiress: www.fiopRfrtsmn.cam
April 27, 2005
Steve Flanagan
GPS Financial Group
15 Sixth Avenue North
Hopkins, MN 55343
Re: Preliminary Development Agreement Dated February 2, 2005, between GPS
and the Hopkins HRA - Block 64 Redevelopment Project
Dear Steve:
In accordance with Section 3(c) of the above agreement, this ""ill serve to notify
you that tile Authority approves of all of the information submitted as required by
Section 3, except for the following:
Section 3(t) Required public improvements-preliminary information has
been subrnitted, but more detailed information from the project engineer is
still needed. Andy Jones has talked to the City engineer about this item.
Section 3(i) Project financial data-still need some ofthe information as
identified in memo to you from Sid Inman, Ehlers & Associates, dated
April 6 (see attached). The information provided 4/21/05 does not have
sufficient detail for Ehlers to complete an accurate financial analysis of the
proj ect.
Section 3(k) Preliminary financing commitrnent--not received to date.
As detailed in the agreement, you have 30 days to submit the above information
in a form satisfactory to the Authority.
If you have any questions concerning this matter, please give me a call at 952-
548-6340.
~I
since7(;' / /-
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///~'
,.,>1::-'. I .
, ,0
J~ Keyrigan \
flanning & ~ nomic Development Director
Attachment
Copies: Bob Deike
Sid Inman
Richard Getschow
Kersten Elverum
Pamuring witli tlie Community to 'Enliance tlie'Qjlality of Life
. Inspire. '.Eluca.tt. Invo[ve + Communuate +
I
I:
Construction Phasing
Parking Garage Phase I
Building A
Building B
Landscaping
Building C
Building D
Landscaping
Parking Garage Phase II
Building E
Building F
Landscaping
Start Finish
07118/05 12/02/05
10/31/05 OS/26/06
02/03/06 09/01/06
08/07/06 10/13/06
05/12/06 12/08/06
08/18/06 03/16/07
OS/20/07 07/13/07
08/21/06 12/08f06
11 f24f06 06f22/07
03f02/07 09f28/07
08/06/07 10/12/07
Assumptions
Phase I parking will cover 2/3 site, Phase II will be 1 f3
Construction of each building will begin 14 weeks after the previous building
Ground breaking July 18 '05
Condemnation will effect start date
Buildings are projected at 7.5 months per structure
Total Project duration is projected at 117 weeks