Loading...
CR 96-65 Admin Payment Agreement - Renaissance Project Revenue BondApril 12, 1996 • Proposed Action Staff recommends adoption of the following motion: Authorize execution of an administrative payment agreement between the City of Hopkins and Community Housing Development Corporation. With adoption of this motion, the subject document will be executed by the mayor and city manager. Overview Community Housing Development Corporation (CHDC) is requesting approval from the City for the issuance of tax exempt housing revenue bonds to finance the purchase of the Hopkins Renaissance Apartments from the existing owner. CHDC, as part of the purchase, is proposing to establish a lease cooperative with the tenants of the project, which will result in a reduction in the annual • amount of property taxes that are paid. The applicant is proposing to address this matter by paying the City an annual administrative fee based on the difference between the amount of property taxes that would be paid if the property was not a leasehold cooperative and the lower amount with the leased cooperative classification. Primary Issues to Consider o What is the property tax impact? o What are the specifics of the agreement? Supporting Documents O Administrative Fee Agreement iC Jailies D. Kerrigan Director Planning & Economic Development ADMINISTRATIVE PAYMENT AGREEMENT RENAISSANCE PROJECT REVENUE BOND Council Report 96 -65 Council Report 96 -65 - Page 2 Primary Issues to Consider 0 What is the property tax impact? The total taxes payable in 1996 for both the Renaissance apartments and townhouses is $99,139. If the property is converted to a cooperative, the current tax rate of 3.4 percent on the land and 2.3 percent on the structures would be reduced to a total rate of 1 percent for both land and structures (assuming all units are homesteaded). The total tax for a cooperative would drop to $41,110. This would amount to an annual tax loss to the City of $11,629. 0 What are the specifics of the agreement? The subject agreement details the following regarding the payment to be made to the City: Alternatives o Payment to be made on an annual basis at the same time that the second installment of real estate tax is due (presently, October 15) o Payment shall be calculated based on the difference between the amount of tax that would be paid if the property was not a leasehold cooperative and the lower amount with the leasehold cooperative classification o The late payments would bear an interest rate of 8 percent The agreement shall terminate upon the earlier of the following: o Termination or expiration of the leasehold cooperative o Legislation that makes a leasehold cooperative classification unavailable for the project The City Council has the following alternatives regarding this item: 1. Approve the action as recommended by staff. This will allow execution of the subject agreement and completion of the sale of the bond to finance the purchase by CHDC of the Renaissance Apartments. Continue for additional information. With this action, the Council needs to detail specifically to staff what additional information they require in order to make a decision on this matter. 3. Deny approval of the agreement. With this action, any final action on the sale of bonds will cease, and the purchase of Renaissance Apartments will be void. Approve agreement with changes as recommended by the City Council. ADDITIONAL PAYMENT AGREEMENT THIS AGREEMENT made as of the day of , 1996 by and between the CITY OF EOPRIMO, MISNZBOTA, a public body corporate and politic ( "Hopkins ") and COMMUNITY ROUSING DEVELOPMENT CORPORATION, a Minnesota nonprofit corporation ( "CHOC "). flEAEAM, CHDC has acquired the one hundred one (101) unit residential rental project located on the property legally described on Exhibit A attached hereto and incorporated herein (the "Project"); and 11122222, CHDC intends to obtain real estate property tax classification of the Project as permitted by Minnesota Statutes 5273.124, subd. 6 ( "Leasehold Cooperative Classification "); and X18, Hopkins is willing to approve the Leasehold Cooperative Classification only on the condition that CADC enters into this Agreement. MOW, rimmeron, TEE PARTIES RMItEM Ad FOLLOW . i, additional Payaaat. For any year that the Project pays property taxes at the Leasehold Cooperative Classification rate CHDc agrees to make an additional payment to Hopkins computed in accordance with Section 2 of this Agreement (the "Additional Payment "). The Additional Payment shall be made in one installment payable an the same date that the second installment of real estate tax payments is due. The payment shall be made to the City at 1010 First Street, Hopkins, Minnesota or at such other address as Hopkins shall designate in writing from time to time to CHOC. 2. deputation of additional Payment. The Additional Payment shall equal the difference between (a) the amount of real estate taxes that would be received by Hopkins, excluding any tax amounts payable to the other governmental entities, if the Project were taxed at the real property tax classification that otherwise would be available to the Project and that would result in the lowest real property rate, other than Leasehold Cooperative Classification, and (b) the real estate taxes actually received by Hopkins With the Project taxed at the Leasehold Cooperative Classification. CHDC shall prepare a computation of the Additional Payment to Hopkins on or before the later of: (a) April 1, 1996 of each year, or (b) thirty (30) days after the property tax information is available for the Project. Hopkins agrees to cooperate with CHDC in preparing such calculation and specifically agrees that it will provide any information necessary to calculate Hopkins' portion of the tax payment. 431562.1 3. RMMMilis. Nothing herein shall be deemed to give Hopkins any lien rights with respect to the Project. The obligation of CHDC hereunder is a contractual obligation to pay the Additional Payment to Hopkins. 4. Successors and Assigns. It is the intent of the parties that this Agreement shall be binding on CHDC, its successors and assigns, including any future owner of the Project. As a condition to owning the Project, any future owner must agree to assume CHDC's obligations under this Agreement. CHDC shall not be relieved of any liability under this Agreement until this Agreement has been assumed by an owner approved by Hopkins, which approval shall not be unreasonably withheld. 5. Subordination. This agreement is subordinate to the mortgage in favor of Hopkins dated April 1, 1996 filed in the office of the Hennepin County on 1996 as Document Number 4. Termination. This Agreement shall terminate upon the earlier of (a) the termination or expiration of the term of the Lease between CHDC and Hopkins Renaissance Cooperative, or (b) the repeal of Minnesota Statutes 5273.124, subd. 6 or other legislative action that makes the Leasehold Cooperative Classification unavailable for the Project. 7. severability. The invalidity of any clause, part or provision of this Agreement shall not affect the validity of the remaining portions thereof. 8. Notices. All notices to be given pursuant to this Agreement shall be in writing and shall be deemed given when mailed by certified or registered mail, return receipt requested, to the parties hereto at the addresses set forth below, or to such other place as a party may from time to time designate in writing. A duplicate copy of each notice, certificate or other communication given hereunder shall also be given to the Trustee at the address set forth below. The parties may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. The initial addresses for notices and other communications are as follows: *33542.3 To Hopkins: To CHDC: City of Hopkins, Minnesota 1010 First Street Hopkins, Minnesota 55343 Attention: city Manager Community Housing Development Corporation 408 Butler North 510 First Avenue North Minneapolis, Minnesota 55403 Attention: President 2 To the Trustee: Norwest Bank Minnesota, National Association Corporate Trust Norwest Center Sixth and Marquette Minneapolis, Minnesota 55473 -0069 Attention: Corporate Trust Department 9. Governing Law. This Agreement shall be governed by the laws of the State of Minnesota and, where applicable, the lava of the United States of America. IN MITNES6 MMENBOF, the parties have executed this Agreement as of the date first above written. CITY OP HOPPINS, MINNESOTA By Its COMMUNITY ROUSING DEVELOPMENT CORPORATION By Its 431562.1 EXHIBIT 1 ;MGM; DISCRIPTIOW A -1