CR 90-199 Harley Hopkins Redevelopment
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September 12, 1990 0 " :< \ " - council Report: 90-199
~ HARLEY HOPKINS REDEVELOPMENT BOND
TOLD DEVEIJOP~tENT - SERIES 1990
P;;'9R9.sed J\,ot io..fu.
Staff recomm,ends adoption of .the following motion: Resolutio:[l No: 9Q::
1Q8 Autho~zi~ t~_ Sale and Issuance of Taxap~~Qot Lease Revenue
Bond_jJra~-l,e-y- HQJtkins_Pre~SgttQQl PrOl.EH.':_t) Series 1990 a.n..Q the execution
of the necessar~ dpc~nts.
With this action th~ Council w'ill be approving both the preliminary
and ,final resolutions for this project and therefore the sale and
execution of doct.unent.s can be unde.rtaken.
Ovet:v~tew"
The Hopkins School District is proposing to demolish the existing _I
Harley Hopkins building and construct a new school facility on this
site. Told Development will construct and own the building and have a j
lease/purchase agreement with the School District. Demolition of the
existing building is proposed to be undertaken in September. 'rhe I
School District states that construction must be completed so that the
building can be occupied for classes beginning in September 1991. I
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Recently r8presentatives of both the School District and Told i
Development approached. the City concerning 'the possibility of issuing
a reveilue bond to finance the construction of this project. The bond
. would be a taxable revenue bond in the amount of $2,500,000. The City
Council previously reviewed this item and set the required public
hearing date for September 18.
Because the action being :t.'equested is for consideration of both the
preliminary and final resolutionsp with approval no further action is
required by the City Council on this matter.
A Conditional Use Permit has already been approved for this project.
l~_~:wt@.~ Q2.JjsiAt.&..,,_
o What are the specifics of the bond issue?
Q What a:ce the implications of such an issue for the city.?
o Have all staff concerns been addressed?
o What is the justification for the city issuing a bond for this
projact?
o Have a.lJ. bond documents been subm.itted and reviewed by the
Citys legal counsel?
o What will be the tax status of the new building?
bQ~l!fo~tiCln..
o Letter from stefanie Galey, Holmes & Graven dated 9/11/90
o Lett~r from Art Bruning dated 8/28/90
o L~tter from Tim Murnene, Told Development dated 9/23/90
o /RGsolution No: 90-108
.~~"-'f/ /~
V ~.. l t .
Ja;tGs"o."'"i' err n, Plannin~
E;onomic Devel pment Director
HARLEY HOPKINJ REDEVELOPMENT BOND
CR~ 90-199
. Page :2
AMlY~
Based upon the action requested.. 'the city council has the following
items to consider:
o \qhat are the specifics of the bond issue?
The proposed bond issue would be for $2j500,OOO. The proceeds from
this sale would be used by Told Deyelopment to ,facilitate construction
of the new building on the Harley Hopkins property. The bond would be
a taxable revenue bond.
o What are the implications of such an issue for the city?
In the past the City has flnanced a number of projects with both
taxable and tax exempt revenue bar:ds~ The purpose of this type of
financing is to provide a below market interest rate in order to make
a project more financially :feasible, Repayment of the bond is
strictly from the revenue of the project. The City is under nQ
obligation should there be a dafault.
~ 0 Have the staff concerns been addressed?
The lease that the School District will have with Told Development is
based upon approval of an annual appropriation payment by the state.
Should the School District not secure such an appropriation, they have
the ability to ter.minate the l~a~e. This could potentially create a
$i tuation in which the following ",~ould occur:
- Default on payment of bonds.
~ Create a vacant building which could not be occupied by any
future users because of zoning restrictions on school
buildings in resi.dential areas.
staff. has reviewed this concern with both the City Attorney and
Stefanie Galey of Holmes and Graven. It is their opinion that they do
not feel that th.e annual appropriations clause in the lease creates
any major problems for the City in issuing these bonds.
o What is the justification for the City issuing a bond for this
purpose~?
In previous discussions it has been generally agreed that the uses
presently op~rating at the existing Harley Hopkins buildinq do serve a
public benefit. The School District has agreed th!tt in order to
continue their presenC9 on this site, they need a new facility which
better addresses the needs of these users. The School District is now
statj,nq that in order to facilitate that new construction they need to
keep development coats down which can be partially facilitated by a
lower interest rate ie. taxable revenue bonds.
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. HARLEY HOPKINS REDEVELOPMENT BOND
CR: 90-199
Page 3
0 Have all bond documents been submitted and revie....,ed by the citys
legal counsel?
All of the bond documents were r~ceived by both the city Attorney and
Holmes & Gra.ven a week prior to the hearing date whi.ch was requested
by staff. These documents are presf;ntly being reviewed. A final
opinion on these documents will be able to he provided to the Council
at the pUblic hearing. It is understoQd that approval of the
req'.J.es ted resolution will be based upon these documents bei.ng
acceptable.
0 What will be the tax status of t.he new building?
The city hseessor has reviewed the future tax status of the proposed
building. After talking' with the state he will be submi t,ting
info~ation to the Department of Revenue for a formal decision.
Hopefully their an.swer will be available at the public hearing.
~YU~
The City Council has the following alternatives regarding this issue:
. 1. Approve the action as recommended by staff. With approval of
this action the City council will be approving both the
preliminary and final resolution and ther~fore the bond sale
will be able to be undertaken.
2. Deny the action as recommended by staff. Under this action it
will be assumed that the city council does not wish tc pursue
a revenue bond issue for. this project. This action could
potentially eliminate or slow down the redevelopment of the
Harley Hopkins site~ Basically it will require that the
developer look for. a private financing source to facilitate
construction.
3. COiltinu-e for further information. The School District wishes --
to occupy the new structure by August 1, 1991. In order to
meet this deadline demolition of the existing Harley Hopkins
School wi.ll need to be undertaken in the very near future.
~1Y ~ignificant continuation could jeopardize the project
being completed by the August 1 date.
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. HOh'ms &; GRA VE..~
CJIAMTEIlEO
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STUANlE N, GAt.~" {61Z/ Jl7.C})OO
Anc<nley ~ L..~w
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Saptembtir 11, 1990
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City of Hopldn. ,
1010 Fin.t St~t So\\tb
. H~kiM, Mtnnao~ ti13'S i
Att.ntfon~ "8me:u .D. K.~ '
PlAmili'c and' nomic Development Director
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.ae~ $2,425,000 C~ty or ~opkins, Mlnl''le.50U TA.xJlbl~ Saf\oo1 Le~s. Revenue Bonds
(Ha:~y HC9ld~ Pr~~~l P!"oje'3t) S4)Me,., 1 Sin
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Deaf Mr. Kwrt,aRr
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'We have repNtaent~ t."'*: C~ty of Hopldrii {the ~~erl'l) in cCM(,'i}tlon with tho
li'flqu..t ot Hopkins Schorll ~h1trlat. '2Ta (the ~hool Df4trit'ftfl) that the fuSUM Wlue
the abov~pt1on$d oorsd!: (hie ~nd111), the ptOOtiem of whioh will be applled to .
eomtruct a praohool tacd~t, :10 be teased to the School Distri<!t. The City CoW\cl1
of the City will oorn!!dcr- ~rlJtUmlMry and final ~:-oval of the Bon~ at a pubU~
heaf~ ba Mid on Si8pt;ttw U, lt91.l~ You tiavc a$ked Us to ~l'ovSd~ thbl. letter
to the .. fQIr COMldOft an at that me~tlrr&'. .,
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~ Bon4t ate p~9ld to ~ b$u:ed by th~ 1asuGt pursuant to 4ft lwjenture of 'l'rwt
(thij "'iOOentutt"i be.tw~vft the l$$\u~r end Nor wf:8: t Bank M'nn~ta N'atloi1a.\
Auoelatlo!i!j h Tfutttee. ~ ptQvld., funds '(0 }{,liP) Ine., 8 Minnesota corpot'atlon
tthe ftCompt,rq,? to COl1Strilct a preschwl dayorare facUlty al:cetMlble by presohool
hf.ndi~e,pped cbii4ren (the , ~rhoJeetl!). The ProJt;:el w1U be owned by thu Company
Gnt1 teued tel th" ~Mol; Diatriat punuant ~o . l€iUft agreement bet.w~18n the :;c;~f
'" CoIDPMY and tn. Sctaool~1>>trlct dlllted Jul1 12~ 1890i as amended (th. ~hool .'. ,;)IL~r.'"
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LtiMe'? The term of ~hool Lease rUM thfoough July 31, 2011, ,ubject. . '~~:,:J~"
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M-WeVtli", to earlier ttP-f)-;:~t10n in any year that the !ehool Dlftrict faU. to . ..' ~_':j;~~;.;~t4
awrtJP.ri~h~ hmdll tOt fl$.Y . ont ~f the b~aH payment.. Sueh an event, referfflQ to .:~';tl:t
(Ulf\I).napptoprlatiOft, Is no, .an event of default und~t the 8Ohool La&H, but does
Ilv. tbl.e to term1ntltlon ()~ the School ~"e and ee:lsaUon ut the School Dbtrlet's - ,,-. ,', >'j-: ~:."
r~t to occupy the ProJecv Because ths payments of principal and tnterellt on the
1.l.cnds ate to be d.rived tr,m &;aymenu madi! by tile School DlstrIot pUf'llW1t to the
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. Lett$r-c1ty of Ropklr'..1
~t8mber 11, 1990
Page 2
School LaueR !iu~h <t\tJ e...ent or nonsppropriat1on tmd term.inat1on or tha School
Leue, V"'LU giva rise to an lnad1'!~~ua(!y of fllOds to pay prin~lpal emd in~r)re.st on the
Bonds. The Bonds lU'6 .secUt~d by a mortgage on the Projecf; the mortgage could be
tcr-eclO$(.."C! IJpon l:.lIch an event of l1onappropde.tion in order to provide fund, tc! pay
off the Bonds, subjec~ how<sver, to adequltt:y ot the valtte ot the p-roperty.
Plnano!.!1g'll which -uei based on ara.nual appropriation obligat.ions of !>OUtical
subdivislore m"6 relatively oommonplace within the t"lnaoC'ia! marh6t. Th. financial
community eqvtte8 auen sn obllgaUon wf.tll a "moraFY ot>Uge.t!o-n; which, while not
legaUy entorc'llllble, Is e~ct~d to be paid by the politica1subdtvislQn. In this c.usf
the School Dbtriot ha. made npr~entRtlons in the Sohool Lea.se that it pr81umtIy
Intend. to oontlnu4.'l to appropriate moneY$ tor the term of the School Lebe, and to
continu. to ooeupy th~ facility tor the term of the School Lease. The &hool
Dl$trict Ila$ also &(It'~ed puraumnt to the School LSS$e that to t.he extent it
n>>na.pp.roprides, and t~.feto~e terminates the School Lea.;l8, It wUl not P~ha",
168M or rent space Of !!l!!3fUtial for operation or a preachool daYC8.1'e t&cU1t'j tor
handfea.pped ohildren o~ to p6l"mJt suoh tunctkm~ to be p01'to.rmad in other faet1Jtfes
then eu.rl~nt1y owned ",r !e(&~ed by the School District. The &hool Dlstril.'!t has
advised that it is eur.ra~tly reQt1lred by state law to pi'ovide ptoschooI ed~cat1on (or
. handicapped children. 'Thereforet it .is probablp. thli t the School District will. be
forced to continue to ~ropriate moneys pursuant to the ~hool Lease.
We have revieWed tite ~0nture, the Loan Agreement to be entGr~d into between
the :bsuer and the Ccmp.ny, 8 Bond PUl'chas(;" Agreement to be entered into by the
Issuer with .P~.r, Jattray & Hopwood IncOl'pQ!"8ted, as Underwriter, the Company
and the School Dfgtri~t, and the toem of Prelim!nary Official Statement to be
distributed to P!"O.1p~t1*e buyers of the Bonds, as well [W a form of the Bond. 'I'he
Bond, the Indenture and the Preliminary Offlcia.l Stktement all clearly state On
their face tlUlt thfl Bon~ are not Fl genel'tll.l obligation of the Issuer but ra.ther are
spec~al limned obUgat!ult8 payable wle!y from revanu~.s to be derived (rom the
Loan Agreement, the School ~ase, certain Bond pl'ooeeds held by the Trustee, ~nd
(lottiei' ~ifically Mentttied sour-ces. Further f the Boi:tds do not con~titute s eh'll'ge
-ag-a!~t the general c~t or taxing powell' ot eith>!l:1" the Issuer, the S-C~101 Dbt!'iGt
Of' MY other governmen~ I\utrority. The Preliminary Olficifu Statement explains
tbe annt.i8J appropr.laUop nature ot the School teaset and cjes~ribes. the ri~1oJ
associated with $ltcl'! ~n ievent. The Undflrwl'lter has advised that the Bonds have
been lIIOld to a dne1e ~bUca ted investor who is fuBy ~ ware ot the nature of the
tinanc1nr and the rf$.u: &asociated therewith. PU~u~nt to the Bond Pl.lrchue
}\peflme-nt, the School' Olatrl~t wm i1tp"e18 to IndE'nlnif)f and ~y~ the l'J8uer
herml.. tor any UabUJd_ of wha hO<f:vet' kind which may arise. from the Ie.lllel"!s
pertlo~tlon 1fl tlnaQ:he PI"QJe~t, -:xcepHng only tho~e liabi!.i ties whlc)h might
&rime ftOrn wmtul rn el of the luuet 01' Its agents. Also in the Bond Purchuf:
Aa"laem'8nt. tl1(1 Co1l\pa.nt and tho School Db:tri,,-,t agree to !;VJemHity and save the
baut'l" harmle&!.l from Iln)' :UabUltles undor fed<!ral ~Ul'Hieti lawC:t whi~h may ari$e 1n
. connection with the la4u.atace an(.! sale of tile Bonds.
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Septem~r 11~ legO
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In $hQft, whll'.l no "I'~e can l!$Ut't th~ City thl'l.t suffidt1n~ funds wll1 i~t all times be
11'lfs.tlable to pay the Bonds when du@p W~ beUevf) thtlt the docum~nts adequately
protact tha City from U..b~ty in such a.n ,"want.
The torqoltli' doeuments whlc-h teqlLire exseuti(m by the hsu'dr aN fft dU$ form and
appropriate tOt approval tl)' the City Council of the t8:tuet'. We wfll continue to
review P'~ chant'"' ~ li'>uch doeuTrumtt)J and advU:6 the Mayor Rild City elm
of our &ppl'Oval prior to I , 1 qxecuticn of the doolJimenta.
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ta\TOLD
. ~..1 DEVELOPMENT COMPANY
August 23, 1990
The Honorable Mayor Nelson Berg
And the Hopkins City Council
Hopkins City Hall
1010 First street South
Hopkins I Minnesota 55343
Dear Mayor Berg and Members of the Council:
Please all~w me to apologize for the recent comments that were made
by MJ.~. Kent Ritchie at the August 21, 1990 Council meeting
regarding a taxabl~ Dond issue for the new Harley Hopkins facilitY6
Mr. Ritchie is representing Piper, Jaffray & Hopwood as bond
counsel for the issuance of bonds for this project. Mr. Ritchie's
intet~t was not to threaten the Councilor to give ultimatums. His
intent was to e:how the City and the Council members the urqency and
critical schedule that we need to maintain for this process. His
. delivery of this message was poor~
It is extremely impox-tar.t for me to give you a bit of hi.at.ory on
this project that will hopefully explain the apparent Ulaat :minuteU
notice of this issue as it relates to having the City of Hopkins
isstle the taxable bonds for the financing of this new facility.
Approximately twel VEl lllonths ago TOLD Development Company was
invited to respond to a Request for Pr':lposals from Independent
School District 270 for the development of a new- preschool handicap
facilit.y. After almost eight months of meetings and negotiations
TOLD Development Company \-/as honored by being chosen as the
developer for t:.he new facility~ As a fi:rm that has developed
approximately 1 million square feet of commercial real estate in
the last three years, we were very excited at tQe opportunity of
developing a new relationship with the City of Hopkins. Part of
our success in securing the Harley Hopkins transaction was our
proposed fine.t\cing str.ucture. It was our intent throughout the
entb.~e process of working 'With the School District to use Tax
Exempt Financing for this project. Our lease wit.h Independent
School District 270 is written with a c.ontinqEmcy for State
approval and bond council review. We have been dQlic,ately
coordinating the various criteria mandated by the state with tha
criter.1lli which is mandated by the School Board f s legal counsel.
This transaction is unique in that the state has certain criteria
,,:,. that sometimes appear to be in direct conflict with the School
",.' Board ~ s criteria.. However, after many, many weeks of dialogue and
negotiation between the state and the School Board, we were able to
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WE!XlWOOO COM,fiIEFlCe CENTRE
6900 W~gW()Otl Rp<!c. S~I!11: 100
1I'lJpie OfO"'\!. />'IN 55369
(612} 420.9000 fa~ (512) 420.7514
,
COla€! up with a lease agreement and a method of fina.ncing that
. sat.isfied everyone IS criteria. The one maj or difference to the new
lease agreement howevE::r, was that the method of financing could not
be a tax exempt bond, The final status of the issue relative to
the use of taxable bonds versus tax exempt bonds did not fully
materialize until ~he beginning of August. It was at this time
that it beGamtS appa:::."ent that due to state regulations, tax exempt
financing was not possible. We then became aware that if taxable
bond.s werei:.o be issued I they to/Quld ne.ed to be issued through the
city .of Hopkins. This brings us to the current date and our
request on behalf of the School District that the City of Hupkins
hI;! the issuing entity.
We appreciate the ccu.ncil action of last evening setting the public
hearing for the issuance of these bonds. I can assure you that
between now and the september 18, 1990 meeting we will have all
doc\ments submitted correctly and on time. In addition, we will
continue to have dialogue with the City's legal counsel to resolve
questions and concerns in regard to the taxable bond issue.
Again, I appreciate your consideration of this letter and look
forward to a more constructive and positive dialogue with the city~
Equally as important to TOLD Development Company, we look forward
to the development of a premium quality facility for Independent
School District 270 and the establishment of a long term mutually
beneficial relationship between TOLD Development Company and. the
~ city of Hopkins.
If you have allY gue:=.\tions or comments please feel free to contact
meo
~hly,
I ~ft~
T(m M~rriane _.
Doc/Mayor, as
co: Ralph Robinson, PartneLp TOLD
Bryant Wangardf Partner, TOLD
Thomas Burke, Legal Counsel, TOLD
Ken Zastrow- Harley Hopkins
Ted Sauer - Ind. School District 270
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ADMINiSTRf'\TIVE OFFICES
1001 HIGHWAY 7
HOPKINS, MINNESOTA 55343
a "Learning for Life"
~OPK!NS
SCHOOL
DISTRICT ARTHUR BRUNING
Superintendent \ f\-- 1l .. ""
1612) 933-9353 ~9-. ~~, II ~
I ./ ,I 0
I ^ugust 28, 1990 ~ ~aJ · ,
I City of Hopkins ~
I 1010 First Avenu~ South
Hopkins; MN 55343
Mayor Berg and Council Members:
I understand that on. September 18 you are scheduled to consider issuing
taxable municipal bonds u} facilitate financing of the Harley Hopkins
development project. We are grateful for your continued support for this
I essential facility.
I It has been more that a }'ear since we initiated planning to replace the
exieting building \vith a facility more suitable for the programs located at
. Harley. As you know, the process has been complex and has taken many
unanticipated twists and turns. Our goal has remained the same,
howGvert Bnd that is to offer a quality preschool program in a facility which
ia appropriate for the children and parents of the Hopkins School District.
1-A:any of tha early childhood handicapped programs housed at Harley are
manda.ted by State Law; an are important and cont.inuing parts of our
educational system,
Need fOor the facility is both short and !ong,.term. Enrollments in early
childhood and elementary s(~hool progra.:ms are increasing significantly.
II ProjectiouB indicate that the growth will continue fo!' the foreseeable fu,ture.
, ~l'og'ram8 are pr:e~ent1y shoe,h.?rned .into lpjsel"1hower, but it is essentisl
, that we have additIonal spa-tv pnor t.o AUgllst of 1991.
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r,:~ Option8 are limited. Harley is no longer viable. and we do not have funds
k with. which to construct replacement facilities, 'l'he State h&s denied
~,;,; prop~!ed lease/purchase arrangements. 1.'he agreem.ent to lease with an
[', option to purcha..:ie ia OUi' best remaining alternative, but we continue t.o
( need yt'lur assistance in order to make it possible.
U',
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If I Copy: Steve Mielke'KJ
~c"" I 0< .~, EOUAl. OPPORTUNimN'''RMArrJE ACT1()N EDUCATOR AND EMPC OYER. .