CR 96-202 Industrial Development Fefunding BondDecember 10, 1996
Proposed Action
Staff recommends approval of the following motion: Move to adopt Resolution 96 -81, providing
for the issuance of sale of Industrial Development Refunding Revenue Bond on behalf of Western
Properties for the purpose of refunding an outstanding bond of the City, subject to staff
conditions.
Overview
INDUSTRIAL DEVELOPMENT REFUNDING REVENUE BOND
(WESTERN PROPERTIES PROJECT)
In 1982, the City of Hopkins issued a commercial development revenue bond in the amount of
$900,000 to facilitate construction of a retail -office building located at 150 -176 Blake Road
(north of Arby's, south of the railroad track). Under the original terms of the present bond
agreement, the borrower is required to pay off the bonds in 1996. In September of 1996, action
was approved by the City Council to extend the period for payment of these bonds until
December 31, 2007.
The applicant is now requesting approval for the sale of a new bond issue to refund the existing
bonds. The amount of the bond issue would be $600,000, which is sufficient to pay the
outstanding bonds. The purpose of this action is to secure more favorable financing terms
available in today's market.
Primary Issues to Consider
o What is the purpose of this financing?
o Does the project meet the requirements of the City policy regarding taxable/tax- exempt
financing?
o What are the implications to the City regarding this action?
o Has legal counsel reviewed this matter?
o What are the staff conditions?
Sunportina Documents
o Bond application
o Resolution 96-81
an
g & Economic Dev- opment Director
Council Report 96 -202
Council Report 96 -202 - Page 2
Primary Issues to Consider
o What is the purpose of this financing?
Local units of government are authorized to issue tax - exempt and taxable revenue bonds to
facilitate projects which are felt to be beneficial to the community. Because the subject bonds
would be tax exempt, the applicant would be able to secure a lower interest rate and, therefore,
the project is more "financially feasible."
o Does the project meet the requirements of the City policy regarding taxable/tax- exempt
financing?
The City of Hopkins adopted a policy regarding revenue bond financing in 1991. The approval
criteria within this policy, for the most part, relate to new construction projects.
At the time the original bond was sold for the subject project, the City did not have an
application process nor policy regarding revenue bond financing. It is assumed that the staff
and City Council, as part of the hearing process at the time, felt sufficiently comfortable that
the project as proposed to be undertaken served the benefit of the community and, therefore,
approved the bond sale.
o What are the implications to the City regarding this action?
These bonds, and all such revenue bonds, are secured by a pledge of repayment strictly from
the proposed project. The City is not liable to make any payment should there be a default.
The City is acting only as a facilitator in this process.
The City has not been informed that the owner of the subject project is in default of payment to
bond holders.
It should be noted that a condition of the application process requires the applicant to pay all
the City's legal and administrative costs.
o Has legal counsel reviewed this matter?
The City Attorney has reviewed the various documents related to this transaction.
Furthermore, the City has been represented by Stefanie Galey of Holmes and Galey concerning
this matter.
o What are the staff conditions?
Staff recommends approval, subject to the following conditions:
• Payment of all City legal costs incurred in conjunction with this transaction
• Payment of application and administrative fee
•
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Council Report 96 -202 - Page 3
Alternatives
The City Council has the following alternatives regarding this matter:
1. Approve the action as recommended by staff. This will be the final action the Council needs
to take concerning this matter.
2. Continue for additional information.
3. Deny the approval of the sale of the bond. With this action, the project would still be able to
continue with the existing financing that is in place.
Type of Request:
Taxable Bond Issue
Tax - Exempt Bond Issue
Refunding of Previous Bond Issue
APPLICATION FOR TAXABLE /TAX EXEMPT
BOND FINANCING OR BOND REFUNDING
(Complete as appropriate)
APPLICANT INFORMATION
1. Applicant /business name: Western Properties
Contact person: Terry Kingston
Address: 11455 Viking Drive
Telephone: (work) 943 -7091 (home)
Fax: 9437055
Interest in property: Owner
2. Applicant's legal counsel:
Firm: Faegre & Benson LLP
Telephone: (work) (home)
Fax: 336 -3026
Telephone: (work)
Fax:
State:
CITY OF HOPKINS
1010 FIRST STREET SOUTH
HOPKINS, MN 55343
OFFICE USE ONLY:
Date Received:
Received by:
X
City: Minneapolis State: MN Zip: 55344
Address: 2200 Norwest Center; 90 South Seventh Street
City: Minneapolis State: MN Zip: 55402
3. Applicant's architect: N/A
Address:
City:
(home)
Zip:
1
4. Applicant's contractor: (If selected): N/A
Firm:
Address:
City: State: Zip:
Telephone: (work) (home)
Fax:
5. Property owner(s) of record:
Addresses:
City: Minneapolis State: MN Zip: 55344
Telephone: (work)
Fax:
11455 Viking Drive
943 -7055
6. Applicant's business form (corporation, partnership, sole
proprietorship, etc.) and state of incorporation or
organization:
General Partnership in Minnesota
7. If the applicant is a corporation, list the officers, directors
and stockholders holding more than 5% of the stock of the
corporation. State their name, address, telephone and
relationship to the applicant. (If a corporation is not
formed, list the potential officers, directors and
stockholders):
N/A
943 -7091
Western Properties
(home)
2
8. If the applicant is a partnership, list
and any limited partners with more than
partnership is not formed, give as much
concerning the potential partners):
Peggy A. Kingston
Anne M. Strachota
None
the general partners
5% interest. (If the
data as possible
9. List any cities to which you have previously applied for
taxable /tax exempt bond financing within the last five years:
10. Has the applicant ever been in bankruptcy? If yes, please
explain:
No
11. Has the applicant ever defaulted on any bond or mortgage
commitment? If yes, please explain:
No
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1. Project name: Western Properties Project
2. Legal description of the site: See Exhibit A to the Combination
Mortgage, Security Agreement and Fixture Financing Statement sent
under separate cover.
3. Brief description of the nature of the business, such as
principal services or products, etc.: Western Properties owns
_th_e_LjUake Road Shoppina Center which is a shopping center with
of retail tenant
PROJECT INFORMATION
4. Amount of bond issue requested: $ 600,000
5. Who is lending interim financing, and in what amount: N/A
A. Before this project:
B. After this project:
BUSINESS INFORMATION
1. Number of employees in Hopkins?
3. Projected annual payroll: $ None
Full Time Part Time
None None
None None
2. Projected annual sales: $ Periodic Rents are collected from
tenants whose annual sales are unknown to the partnership.
4. Is the project associated with an existing Hopkins business?
A. Yes X The shopping center tenants
B. No
4
9.
5. If this project is associated with an existing Hopkins
business, which of the following apply:
A. Relocation No
B. Expansion No
C. Rehabilitation No
6. Will you occupy this project after completion?
A. Yes
B. No
X
7. If no, state name of future lessees and status of commitments
or lease agreements:
The Western Pro.erties Blake R.ad
1... ..
occupied by a variety of tenants since its completion in
1982
('enter has been
8. Estimated date of construction: 1882 Completion: 1982
Will any public official of the City, directly or indirectly,
to the best of your knowledge, benefit by the issuance of the
City's tax - exempt financing for this project according to
Minnesota Statutes, Section 412.87? No
If so, please explain:
FILING REQUIREMENTS
You must provide all of the following items with your application,
unless the Director of Planning & Economic Development waives a
requirement:
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1. If the project requires approval by the Zoning and Planning
Commission, you must apply for these approvals prior to or with
this application. If Zoning or Planning Commission approval is
not required, you must submit a list of property owners and
their addresses, for your property and for all properties
within 350 feet. An abstract company must certify this list.
Abstract companies are listed in the yellow pages.
2. A written opinion, with supporting justification, from an
expert acceptable to the Director of Planning & Economic
Development, to document that the development will not
adversely effect similar, existing developments. This
requirement may be waived if there are no similar developments
in the area of your project.
3. A public hearing notice and resolution of preliminary approval.
You must have these items prepared by the City's bond counsel.
4. An application fee of $5,000. Make your check out to the City
of Hopkins. This fee is not refundable and is separate from
the Bond Counsels', City Attorneys', or closing fees.
PROCEDURE
1. Return this application to the Community Development
Department.
2. The City Council will hold a public hearing and decide whether
to approve your application. City staff will notify you of the
meeting.
REOUIREMENTS FOR TAX - EXEMPT /TAXABLE BOND FINANCING
Your application must meet the following requirements for approval
of taxable /tax- exempt bond financing:
1. The project shall not require a significant amount of public
money for City improvements if the City Council determines that
the site is premature for development.
2. The notes or bonds shall be for an issue not less than
$250,000.
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3. Construction must begin within one year of preliminary
approval. The City Council may grant a time extension if just
cause is shown.
4. Contractors doing work on projects funded in whole or in part
by tax - exempt financing:
a. Shall not discriminate in the hiring and firing of
employees on the basis of race, color, creed, religion,
national origin, sex, marital status, age, disability or
the need for public assistance.
6.
it
b. Shall pay employees as provided under the United States
Code, Section 276A, as amended through June 23, 1986, and
under Minnesota Statutes 1985, Sections 177.41 - 177.44.
c. Shall employ Minnesota residents in at least 80% of the
jobs created by the project. In addition, at least 60% of
these employees shall be residents of the seven - county
metropolitan area. Residential status shall be determined
as of the date of the project's approval by the City
Council. However, if the contractor can show that these
quotas are not possible because of a shortage of qualified
personnel in specific skills, the contractor may request a
release from the City Council of the two residency
requirements. These requirements shall continue for the
length of the construction project.
d. Shall be active participants in a State of Minnesota
apprentice program, approved by the Department of Labor
and Industry.
e. The above requirements shall apply to all subcontractors
working on the project.
5. You must use the City's Bond Counsel.
The project must involve an existing business that the City
wishes to expand or a new business which the City wishes to
attract. A business is the manufacturing, distribution, sale,
storage or making of any merchandise, real estate, produce
food, housing or services which will produce income for one or
more individuals. An existing business is a commercial project
that has operated for at least one year in the City. A new
business is a commercial project which does not qualify as an
existing business.
a. Existing business criteria: The City will consider any
expansion, relocation or rehabilitation of an existing
business for approval.
b. New business criteria: The City will only consider a new
business for approval if it:
(1) Offers at least 400 hours per week of new,
year- around employment, or
(2) Involves the rehabilitation of a vacant or scheduled
to be vacated structure, or
(3) Is within a designated development or redevelopment
target area, and
(4) Has a low potential for creating pollution.
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7. The project must exceed minimum code requirements by including
at least five of the following features into the project:
financap
a. Brick
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b. Building design should be a distinctive, non - generic
style.
c. A noticeable increase in the size and quantity of
landscape plantings over what the City normally requires.
d. Underground irrigation of all landscaping.
e. Open space, other than required setbacks.
f. At least 10* more parking than code requires.
g. Walkway along street frontages.
h. All parking stall widths at least ten feet.
i. All signs shall be at least 20% smaller or fewer than
allowed by code.
8. City staff shall review compliance with the appropriate
request for refunding of previous bond issues.
9. You must pay an administrative fee to the City of one half
percent of the bond issue. The City will credit the
application fee against the administrative fee.
AGREEMENT
I, by signing this application, agree to the following:
1. I have read and will abide by all the requirements of the
City for taxable /tax- exempt financing. I will also commit
all contractors, subcontractors and any other major
contributors to the project to all segments applicable to
them. I am aware that failure to comply by myself or any
of the above can result in cancellation of the resolution.
2. The above information is true and correct.
3. I agree to pay all costs involved in the legal and fiscal
review of this project. These costs include the Bond
Counsel and City Attorney, and all costs involved in the
issuance of the bonds to finance the project.
4. I understand that the City reserves the right to deny
fig -wear- ova, regardless of preliminary approval or the
ion completed.
•
BE IT RESOLVED by the City Council of the City of Hopkins, Minnesota (the "City "), as
follows:
to Authority. The City is, by the Constitution and laws of the State of Minnesota,
including Minnesota Statutes, Sections 469.152 to 469.165, as amended (the
"Act "), authorized to issue and sell its revenue bonds and refunding revenue bonds
for the purpose of financing and refinancing costs of authorized projects and to
enter into agreements necessary or convenient in the exercise of the powers
granted by the Act.
2. Authorization of Project: Documents Presented. Western Properties, a Minnesota
general partnership (the "Borrower "), has proposed to this Council that the City
issue and sell its City of Hopkins Industrial Development Refunding Revenue
.Bond (Western Properties Project) (the "Bond") pursuant to the Act, and loan the
proceeds thereof to the Borrower in order to refinance costs incurred in the
acquisition, construction and equipping of a commercial Facility located at
152 -174 Blake Road North in the City (referred to generally herein, together with
any related site improvements, as the "Project "), by causing to be refunded in full
the City's outstanding Commercial Development Revenue Bond (Standal Project),
Series 1982, originally issued in the aggregate principal amount of $900,000, and
amended pursuant to an Agreement Amending Commercial Development
Revenue Bond and Loan and Purchase Agreement, dated as of February 1, 1986,
and further amended pursuant to an Amendment and Consent, dated as of
September 1, 1996, and currently outstanding in an aggregate principal amount in
excess of $600,000 (sometimes referred to generally as the "Prior Bond "). Forms
of the following documents relating to the Bond have been submitted to the City
and are now on file in the office of the City Clerk:
C!TY OF HOPKINS
Hennepin County, Minnesota
RESOLUTION NO. 96
A RESOLUTION PROVIDING FOR THE ISSUANCE AND SALE OF
AN INDUSTRIAL DEVELOPMENT REFUNDING REVENUE BOND
ON BEHALF OF WESTERN PROPERTIES FOR THE PURPOSE OF
REFUNDING AN OUTSTANDING BOND OF THE CITY
(a) Loan and Purchase Agreement (the "Loan Agreement ") dated as of
December 1, 1996 between the City, the Borrower and Century Bank
National Association (the "Lender "), whereby the City agrees to make a
loan to the Borrower of the gross proceeds of' sale of the Bond and the
Borrower agrees to provide for the refunding and redemption in whole of
the Prior Bond, as more fully provided therein, and to pay amounts in
repayment of the loan sufficient to provide for the full and prompt
3. Approval and Execution of Documents. The forms of agreements referred to in
paragraph 2, are approved. The Loan Agreement and the Loan Agreement
Assignment shall be executed in the name and on behalf of the City by the Mayor
and the City Manager, or executed or attested by other officers of the City, in
substantially the form on file, but with all such changes therein, not inconsistent
with the Act or other law, as may be approved by the officers executing the same,
which approval shall be conclusively evidenced by the execution thereof.
4. Approval, Execution and Delivery of Bond. The City shall proceed forthwith to
issue the Bond, in a principal amount of $600,000, in substantially the form and
upon the terms set forth in the Loan Agreement, which terms are for this purpose
incorporated in this resolution and made a part hereof. The Lender has agreed
pursuant to the provisions of the Loan Agreement, and subject to the conditions
therein set forth, to purchase the Bond at a price equal to 100% of the principal
amount thereof, and said purchase price is hereby found to be favorable and is
hereby accepted. The Mayor and City Manager are authorized and directed to
prepare and execute the Bond as prescribed in the Loan Agreement and to deliver
it to the Lender upon receipt of the purchase price therefor, and upon payment by
the Borrower of all costs and expenses of the City and its counsel in connection
with the transaction contemplated hereby. The Bond shall contain a recital that it
D:\HPK100 \007\RES\AUTHORIZ.DOC
payment of the principal of, premium, if any, and interest on the Bond
when due; and
(b) Loan Agreement Assignment dated as of December 1, 1996, between the
City and the Lender, assigning to the Lender as security for the Bond all of
the right, title and interest of the City in the Loan Agreement (except for
certain retained rights); and
(c) Combination Mortgage, Security Agreement and Fixture Financing
Statement (the "Mortgage "), dated as of December 1, 1996, from the
Borrower to the Lender, by which the Borrower grants, as security for the
payment of the Bond, a mortgage lien on and security interest in the
Project, as mortgaged thereunder, and as more fully described therein; and
(d) Assignment of Leases and Rents (the "Rent Assignment "), dated as of
December 1, 1996, from the Borrower to the Lender, by which the
Borrower grants, as further security for the payment of the Bond, an
assignment of the leases and rents of the Project; and
(e) Guaranty Agreement (the "Guaranty "), dated as of December 1, 1996,
from James Etter, John Harper III, Michael Harper, Peggy Kingston,
Terrence Kingston, Scott Rinn and Robert Strachota (collectively, the
"Guarantors ") to the Lender, pursuant to which the Guarantors guarantee
to the Lender the prompt and full payment of the Bond and payment and
performance by the Borrower of all of its obligations under the Loan
Agreement.
2 AUTHORIZING RESOLUTION
is issued pursuant to the Act, and such recital shall to the extent permitted by law
be conclusive evidence of the validity and regularity of the issuance thereof
Certificates, etc. The Mayor, City Manager, City Clerk and other officers of the
City are authorized and directed to prepare and furnish to bond counsel and the
purchaser of the Bond, when issued, certified copies of all proceedings and
records of the City relating to the Bond, and such other affidavits and certificates
as may be required to show the facts appearing from the books and records in the
officers' custody and control or as otherwise known to them; and all such certified
copies, certificates and affidavits, including and heretofore furnished, shall
constitute representations of the City as to the truth of all statements contained
therein.
6. Authorization. The City Clerk and any other officer or employee of the City is
authorized and directed to deliver a certified copy of this Bond Resolution to the
Director of Property Taxation, together with such other information as the
Director of Property Taxation may require, and obtain the certificate of the
Director of Property Taxation as to entry of the Bond on his bond register as and
to the extent required by Section 475.63, Minnesota Statutes.
7. Revenue Obligation of City. Under the provisions of the Act, and as provided in
the Loan Agreement, the Bond is not to be payable from nor charged upon any
funds other than amounts payable pursuant to the Loan Agreement, the Mortgage,
the Rent Assignment or the Guaranty which are pledged to the payment thereof;
no owners of the Bond shall ever have the right to compel the exercise of the
taxing power of the City to pay the Bond or the interest thereon, nor to enforce
payment thereof against any property of the City (other than the interest of the
City in the Loan Repayments to be made by the Borrower under the Loan
Agreement); and the Bond shall recite that such Bond, including interest thereon,
shall not constitute or give rise to a charge against the general credit or taxing
powers of the City.
8. No Individual Liability. No covenant, stipulation, obligation or agreement herein
contained or contained in the aforementioned documents shall be deemed to be a
covenant, stipulation, obligation or agreement of' any member of the City, or any
officer, agent or employee of the City in that person's individual capacity, and
neither the City Council nor any officer or employee executing the Bond shall be
liable personally on the Bond or be subject to any personal liability or
accountability by reason of the issuance thereof.
9. Sole Benefit of City and Holders of Bond. Except as herein otherwise expressly
provided, nothing in this resolution or in the aforementioned documents expressed
or implied, is intended or shall be construed to confer upon any person or firm or
corporation, other than the City or any holder of the Bond issued under the
provisions of this resolution, any right, remedy or claim, legal or equitable, under
and by reason of this resolution or any provision hereof, this resolution, the
aforementioned documents and all of their provisions being intended to be and
D \HPK700 \007\RES\AUTHORIZ.DOC 3 AL ;HORIZING RESOLUTION
being for the sole and exclusive benefit of the City and any holder from time to
time of the Bond issued under the provisions of this resolution
11. Effective Date. This Resolution shall take effect immediately.
Adopted by the City Council of the City of Hopkins this day of December, 1996.
ATTEST:
10. Infirmity of Officer. In the event any of the officers of the City authorized to
execute documents on behalf of the City under this resolution shall have resigned
or shall for any reason be unable to do so, any member of the City, or officer of
the City, is hereby directed and authorized to do so on behalf of the City, with the
same effect as if executed by the officer authorized to do so in this resolution.
James A. Genellie, City Clerk
By
Charles D. Redepenning, Mayor
DAHPKl00 \007\RES\AUTHOf.:ZDOC 4 AUTHORIZE 3 RESOLUTION