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CR 92-238 Loan Agreement - Minnehaha Oaks ~ ,Y \ 0 CJ '" ~ ,y' '" eovember 10, 1992 0 ~ Council Report 92-238 P K \ LOAN AGREEMENT - MINNEHAHA OAKS ASSOCIATION Proposed Action. staff recommends adoption of the following motion: Move to adopt Resolution No. 92-107 which cancels the special assessment relatinq to the acquisition of the Mark Z. Jones property. and authorize the Mayor and City Manager to execute a loan aqreement between the city of Hopkins. Minnehaha Oaks Association, and applicable home owners. , I overview. On October 20, 1992 the city Council approved an assessment roll involving four home owners as a means to reimburse the City for expenses incurred for the acquisition of the Mark Z. Jones property. During this same meeting, as well as during the Council's November 10 meeting, staff discussed the concept of the city providing a direct loan to the Association ln the amount of $175,000 with the understanding that four or more home owners would be assessed directly in the event the Association did not make its annual payment. As a result of these discussions, the City Council directed staff to continue to work with the Minnehaha Oaks Association on details pertaining to a loan arrangement. At this point, it appears the .basic fundamentals of the loan agreement have been worked out. However, it ;hould be noted that the attached agreement is still in draft form and is being reviewed by city staff, Association and the homeowners. It is hoped that by the time Council meets the agreement will be signed or, more likely, in a format which has been found acceptable by all parties. If the loan arrangement becomes the means to finance the acquisition of the Mark Z. Jones property, it is necessary for the City to cancel the special assessment roll which was adopted on October 20. primary Issues to consider o What are the details pertaining to the proposed loan arrangement? o What are some of the consequences of each method - direct assessment to homeowner versus direct loan to the Association? Supportinq Documents o Analysis of issues o Alternatives o r-fesolution No. 92-107 o pratt of Loan Agreement ! i , / H men~--~ Development DIrectar ~ CR92-238 Page 2 . Primary Issues to Consider 0 What are the details pertaining to the proposed loan arrangement? The basic principals of the loan proposal are as follows: 0 $175,000 loan from the city of Hopkins to the Minnehaha Oaks Association. 0 Terms - 8% per annum for 15 years (declining interest - similar to a home mortgage) . 0 15 equal payments of approximately $20,500 per year to the City, although the first year payment may be adjusted (assumes no prepayments) . 0 Total principal and interest paid after the entire term - approximately $306,000. 0 Prepayments would be allowed. 0 security provisions - in the event of non-payment by the Association, the City would assess the four home owners for a pro . rata share of the yearly payment which was not paid. Each property owner would be also liable for a pro rata share of the entire principal and interest amount on the loan, which equals approximately $76,000 to '$77,000 per property owner (assuming four property owners are involved). This liability would decline yearly as payments were made by the Association or through the assessments to the home owners. 0 What are some of the consequences of each method - direct assessment versus direct loan? Direct assessment to property owners - Follows the terms of the original assessment agreement. - Does not allow assessed home owners to make partial payments - Is likely that an existing home owner would be required by a new buyer to payoff the entire assessment at time of sale of property - Creates difficulties in terms of how the Association would allocate donations or grants it might receive to the four home owners to assist them in paying for their assessment. . Direct loan to the Association - Allows the Association to make prepayments on the loan. - Allows the four home owners to make donations to the Association for the Association's annual payment. CR92-238 Page 3 . - Is likely that if a home owner desired to sell his horne, the home owner would need to payoff the entire assessment amount that the property may be liable for. - Resolves questions on how the Association provides funds to the homeowners. - May result in the loan being paid off more quickly than the special assessment process. By and large, the benefits of utilizing the loan arrangement instead of the direct special assessment are primarily in favor of the Association and home owners. The city is basically providing an alternate method to allow for the $175,000 to be repaid in perhaps a more efficient and useful manner and at the same time provide the City with the necessary security provisions. One benefit to the City by undertaking the loan arrangement relates to the fact that the loan may actually be paid off more quickly than through the special assessment process due to the fact that partial prepayments are permitted. The loan method will require additional bookkeeping on the City's part regarding prepayments which might be made, etc. However, this should not be overly burdensome. .Alternatives The city Council has the following alternatives: 0 Adopt staff's recommendation 0 Do not approve staff's recommendation. This would result in the assessment roll being certified to the County. 0 Approve staff's recommendation but modify the terms of the loan arrangement. It would seem appropriate to have some kind of assurance that the Minnehaha Oaks Association and property owners , are in agreement with changes to the terms of the loan agreement. 0 Continue matter for further information. This is really not an option for the City Council due to the fact that if the assessment roll is not canceled it will be necessary for staff to certify the assessment roll to Hennepin County. . ~ . ~ CITY OF HOPKINS Hennepin County, Minnesota . RESOLUTION NO: 92-107 RESOLUTION CANCELING ASSESSMENTS FOR THE PURCHASE OF MARK Z. JONES PROPERTY WHEREAS, the Minnehaha Oaks Association, a non profit corporation, and property owners who own and occupy single family homes located along Hiawatha Avenue within the City of Hopkins requested the city of Hopkins acquire certain undeveloped property lying adjacent to and west of Hiawatha Avenue, and WHEREAS, the undeveloped property was owned by Mark Z. Jones and consists of heavily forested trees which the Minnehaha Oaks Association and property owners desired to be preserved for passive park and nature area purposes for them and for the community as a whole, and WHEREAS, the City of Hopkins agreed to acquire the property and the property owners agreed to reimburse acquisition costs incurred by the city through a special assessment, and WHEREAS, the city of Hopkins, Minnehaha Oaks Association and four property owners entered into a special assessment agreement dated 4/15/92 which set forth the terms under which the affected property owners would be assessed, and .HEREAS, on October 20, 1992 the city Council adopted Resolution No. 92-89 which adopted the assessment roll relating to the purchase of the Mark Z. Jones property, and WHEREAS, recently, the city has discussed with the Minnehaha Oaks Association and property owners matters pertaining to using an alternate means of reimbursing the city for the cost of the acquisition of the property. This alternative method involves a direct loan to the Minnehaha Oaks Association with the understanding that the property owners would be assessed if the Minnehaha Oaks Association defaulted on the terms of the loan, and WHEREAS, the City Council of the city of Hopkins has determined that using the alternate loan arrangement provides a more appropriate means of reimbursing the city of Hopkins for the acquisition of the Mark Z. Jones property. NOW THEREFORE BE IT RESOLVED, by the City Council of the city of Hopkins that the assessment roll for the acquisition of the Mark Z. Jones property, which was adopted through Resolution No. 92-89 is hereby canceled and that this assessment roll is not to be certified to Hennepin County. Adopted by the City Council of the city of Hopkins this 17th day of November, 1992. . Nelson W. Berg, Mayor ATTEST: James A. Genellie, City Clerk ,--, r-~\ r-\ r-~ S _.~j ,1~J UJ' ill ~ IT \ ~'l 'C i m U u ~ UQ . LOAN AGREEMENT This Agreement is made on the ____ day of November, 1992 by and among the City of Hopkins, a municipal corporation ("City"), Minnehaha Oaks Association, a nonprofit corporation ("Association") and those homeowners who have signed and otherwise executed this agreement, (collectively referred to as .. Homeowners" ) : RECITALS: 1. City is a municipal corporation created by Charter possessing all of the powers of a municipality. 2. Association is a nonprofit corporation composed of members residing on Hiawatha Avenue within the City. . 3. Homeowners own and occupy certain single family residences located on Hiawatha Avenue within the City and as such are members of the Association. 4. Pursuant to and in reliance upon a Special Assessment Agreement dated April 15, 1992, between City, Association and Homeowners, the City was inducerl to acquire~)j certain undeveloped property lying adjacent to and west of Hiawatha Avenue there form Mark z. Jones II consisting of approximately 1. 54 acres of forested land which all parties desired to preserved for passive park and nature area purposes. 5. The City has expended the sum of One Hundred Eighty-Five Thousand Dollars ($185,000.00) in the acquisition . of said property and Association and Homeowners wish to . reimburse City to the extent of the acquisition costs of One Hundred Eighty-Five Thousand Dollars ($185,000.00). 6. The City acknowledges receipt of Ten Thousand Dollars ($10,000.00) paid to City by Association. 7. All parties desire that the terms of the Assessment Agreement dated April 15, 1992 be modified and adjusted to provide for payment by loan terms while retaining the rights of assessment by City for purposes of security in event of default in any of the terms of the Loan Agreement. NOW THEREFORE in consideration of the mutual benefits set forth. PAYMENT TERMS: . l. Association shall pay to the City the sum of One Hundred Seventy-Five Thousand Dollars ($175,000.00) with interest thereon at eight percent (8%) per annum payable in fifteen (15) equal annual payments of Twenty Thousand Sixty-eight and 80/100 Dollars ($20,060.80) commencing on September 1, 1993 and on the first day of each annual anniversary date thereafter. Such annual payments shall be inclusive of and applied first upon the accumulated interest and thereafter upon the principal balance remaining. Said interest on the principal balance shall commence on November 1, 1992. 2. Association may prepay the principal balance in full or in part at its option without penalty. . -2- SECURITY PROVISION: e 1. It is understood and agreed upon all parties to this Agreement that the security of the City to enforce compliance with the installment payments due herein is the initiation of special assessment procedure in conformance with the terms of this Agreement which security shall remain in full force and effect applicable to all of the parcels described in Exhibit A (attached) until receipt of final payment by the City. 2. The Association shall be obliged to collect and receive payments from its members who are or shall become parties to this Agreement or from such other sources available to the Association and pay such sums to the City as . provide for herein. 3. In the event of a default in any of the terms and conditions provided for in this Agreement and which remains uncured for a period of 20 days, the City at its option shall implement special assessment proceedings and assess the delinquent balance then due and payable to the City against each of the properties described on Exhibit A. The resolution adopted by the City to levy such special assessment shall be certified to the Hennepin County Auditor by November 30 for inclusion on the real estate tax statement of each such parcel for the year following the assessment certification. PAYMENT UPON DEFAULT: . 1. The terms of the assessment thus levied upon and in the amount of the default shall be for a term of one year -3- with interest thereon at the rate of eight percent (8%) per e annum. 2. Prepayment terms shall be as provided in Minnesota Statute 429 as follows: The homeowner of a property so assessed may at any time prior to certification of the assessment to the Hennepin County Auditor or prior to the first installment of the assessment to the County Auditor pay the whole of the assessment with interest accrued to the date of payment. No further interest shall be charged on the amount assessed if the entire assessment is paid within 30 days from the adoption of the assessment. 3. In the event of default, the amount to be assessed in addition to the delinquent installment shall be increased by additional costs, expenses and attorney fees incurred by the City which all parties agree shall be the sum of Five . Hundred Dollars ($500.00),. 4. For purpose of illustration and example only, a delinquency in the annual installment would be levied by assessment and certified to Hennepin County pro rata (in equal amounts) upon the tax statement of each property owned by a homeowner who is a party to this Agreement including the amount provided for additional costs, expenses and attorney fees. Thereafter, prepayment would be limited in the manner provided in this paragraph. If the assessed amount matures without payment, the City would have the option to commence foreclosure proceedings and acquire the property in the manner provided by law. This Agreement contemplates the possibility that a subsequent purchaser would insist the pro . -4- rata share of the balance due under this Loan Agreement be . paid off in which event the City would furnish the homeowner a release from the assessment lien. The property thus released would no longer be subject to the terms of this Agreement. OBLIGATION OF ASSOCIATION: l. The Association shall be obliged to collect and receive payments from its members who are or shall become parties to this Agreement or from such other sources available to the Association and pay such sums to the City as provided for in this Agreement and to otherwise enforce individual compliance of its member Homeowners with all of the terms of this Agreement. Provided, however, the City may . release one or more parcels from the lien of the assessment the mutual consent of all other Homeowners who are then upon parties to this Agreement. 2. It shall be the obligation of the Association to maintain and provide for inspection at reasonable times proper books and records disclosing the receipt and source of all payments obtained by the Association. MISCELLANEOUS PROVISIONS: l. The provisions of this Agreement shall govern over any other contrary term, condition or provision contained in any prior Agreement or understanding among the parties whether expressed verbally or in writing. 2. This Agreement shall be binding upon and inure to . the benefit as well as the obligation of all parties hereto, -5- their successors, representatives and assigns including . without limitation any successor by purchase, transfer or conveyance of anyone or more of the properties described on Exhibit A. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the day and year first above written. CITY OF HOPKINS By Its By Its . MINNEHAHA OAKS ASSOCIATION By Its By Its HOMEOWNERS Marie McNeff, (Address) Larry McNeff, (Address) Malara Carlson, (Address) Joey Carlson, (Address) -6- . , . Irene Ibsen, (Address) Kenneth Ibsen, (Address) Patricia Isaak, (Address) Vernon Isaak, (Address) State of Minnesota) ) 55 County of Hennepin) The foregoing instrument was acknowledged before me this day of , 1992 by - and the and of the City of Hopkins, a municipal corporation under the laws of Minnesota, on behalf of the City. . Notary Public State of Minnesota) ) ss County of Hennepin) The foregoing instrument was acknowledged before me this day of , 1992 by and the and of Minnehaha Oaks Association, a under the laws of Minnesota on behalf of the . Notary Public State of Minnesota) ) ss County of Hennepin) The foregoing instrument was acknowledged before me this day of , 1992 by Marie McNeff and Larry McNeff. . Notary Public -7- "'" . . . . State of Minnesota) ) ss County of Hennepin) The foregoing instrument was acknowledged before me this day of , 1992 by Malora Carlson and Joey Carlson. Notary Public State of Minnesota) ) ss County of Hennepin) The foregoing instrument was acknowledged before me this day of , 1992 by Irene Ibsen and Kenneth Ibsen. Notary Public State of Minnesota) ) ss . County of Hennepin) The foregoing instrument was acknowledged before me this day of , 1992 by patricia Isaak and Vernon Isaak. Notary Public . -8-