HRA Report 2012-07 (Resolution Establishing an interfund loan fore reimbursement of certain costs in connection with Tax increment financing district)June 5, 2012 --4f6a HRA Report 2012-07
Cit} of Hopkins
RESOLUTION ESTABLISHING AN INTERFUND LOAN FOR REIMBURSEMENT OF
CERTAIN COSTS IN CONNECTION WITH TAX INCREMENT FINANCING DISTRICT
NO. 1-4.
Proposed Action
Staff recommends adoption of the following: _Move to approve Resolution 486 establishing an interfund
loan for reimbursement of certain costs in connection with Tax Increment Financing District No. 1-4.
Adoption of this motion will establish a $400,000 interfund loan between TIF District 1-4 and the Economic
Development Fund to allow repayment of Economic Development Funds used to facilitate the purchase of property
for this development.
Overview
As stated in the attached memo from Ehlers the City's Housing and Redevelopment Authority (HRA) entered into a
development agreement with Marketplace Holdings, under which the HRA agreed to make a $900,000 loan to
facilitate the purchase of the property. The funding was provided by both the HRA's Economic Development Fund
($400,000) and TIF District 2-11 ($500,000). The development agreement provided that the loan would be
forgiven if Marketplace Holdings commenced construction of the housing development on the property.
Marketplace Holdings has commenced construction of the housing development and the loan from the HRA to the
developer is technically forgiven. However, the HRA would like to repay its Economic Development Fund the
$400,000 it advanced for the project as qualified TIF costs. In order to do this, the HRA needs to document its
intent to repay the Economic Development Fund from various tax increment Districts within the City. This
interfund loan will be repaid at 4%interest, which is the current maximum interest that can be charged under State
Law. Interest will accrue from June 5, 2012 (effective date of the resolution) and payment will begin on August 1,
2012. The interfund loan will be repaid from TIF generated and not needed to pay other obligations from TIF
Districts 1-4 (Market Place and Main), 1-2 (Entertainment District), 2-1 (RL Johnson), 2-9 (Oaks of Mainstreet) and
2-11 (Excelsior Crossings/Super Valu).
Primary Issues to Consider
• This resolution gives the HRA the ability to recapture its investment in the TIF 1-4 project to
potentially provide funds for future redevelopment.
Staff Recommendation
Finance recommends approval of Resolution 486
Supporting Information
• Memo from Ehlers dated June 5, 2012.
• Resolution 486
Christine Harkess, CPA, CGFM
Finance Director
Memo
To:
Christine Harkess — Finance Director
From:
Stacie Kvilvang
Date:
June 5, 2012
Subject:
Interfund Loan—TIF District 1-4 (Market Place and Main)
The City's Housing and Redevelopment Authority (HRA) entered into a development agreement with
Marketplace Holdings, under which the HRA agreed to make a $900,000 loan to facilitate the purchase of
the property. The funding was provided by both the HRA's Economic Development Fund ($400,000)
and TIF District 2-11 ($500,000). The development agreement provided that the loan would be forgiven
if Marketplace Holdings commenced construction of the housing development on the property.
Marketplace Holdings has commenced construction of the housing development and the loan from the
HRA to the developer is technically forgiven. However, the HRA would like to repay its Economic
Development Fund the $400,000 it advanced for the project as qualified TIF costs. In order to do this, the
HRA needs to document its intent to repay the Economic Development Fund from various tax increment
Districts within the City. This interfund loan will be repaid at 4% interest, which is the current maximum
interest that can be charged under State Law. Interest will accrue from June 5, 2012 (effective date of the
resolution) and payment will begin on August 1, 2012. The interfund loan will be repaid from TIF
generated and not needed to pay other obligations from TIF Districts 1-4 (Market Place and Main), 1-2
(Entertainment District), 2-1 (RL Johnson), 2-9 (Oaks of Mainstreet) and 2-11 (Excelsior Crossings/Super
Valu).
Please contact me at 651-697-8506 with any questions.
EHLER ....... ... _ ...4a .. .....
Minnesota phor�e 651-697 - . .6 ... .5 ... . W
LEADERS rN PU ae RNAHCE offices also in Wisconsin and Illinois fax £51-897.8555
toll free 800-552-1171
3060 Centro Pointe t7wo
Roseville, MN 55113-1122
Council member
HOUSING AND REDEVELOPMENT AUTHORITY
IN AND FOR THE CITY OF HOPKINS
CITY OF HOPKINS
COUNTY OF HENNEPIN
STATE OF MINNESOTA
introduced the following resolution and moved its adoption:
RESOLUTION NO. 486
RESOLUTION ESTABLISHING AN INTERFUND LOAN FOR
REIMBURSEMENT OF CERTAIN COSTS IN CONNECTION WITH TAX
INCREMENT FINANCING DISTRICT NO. 1-4.
BE IT RESOLVED by the Board of Commissioners (the 'Board") of the Housing and
Redevelopment Authority In and For the City of Hopkins, Minnesota (the "Authority"), as follows:
Section 1. Background.
1.01. The Authority and the City of Hopkins have heretofore approved the establishment of Tax
Increment Financing District No.1-4 ("TIF District No. 14") within Redevelopment Project No. 1 (the
"Project"), and have adopted a Tax Increment Financing Plan (the "TIF Plan") for the purpose of
financing certain improvements within the Project.
1.02. TIF District No.1-4 encompassed a auto sales facility that was no longer in use and was
purchased by Marketplace Holdings, Inc., a development company that intended to redevelop the site as
residential rental housing.
1.03. The Authority entered into a development agreement with Marketplace Holdings, under
which the Authority agreed to make a loan to facilitate Marketplace Holdings, Inc.'s purchase of the
property.
1.04. The development agreement with Marketplace Holdings, Inc., provided that the loan
from the Authority would be forgiven if Marketplace Holdings, Inc., commenced construction of the
housing development on the property.
1.05. Marketplace Holdings, Inc., has commenced construction of the housing development
and the loan from the Authority has been forgiven.
1.06. $400,000 of the loan to Marketplace Holdings, Inc., was made from the Authority's
development account and the Authority desires to document its intent to repay the development account
from tax increment generated from other tax increment districts in the City.
1.07. The $400,000 of the loan made to Marketplace Holdings, Inc., from the development
account is referred to herein as the "Qualified Costs".
1.08. The Authority intends to reimburse itself for the Qualified Costs from available tax
increments from Tax Increment Districts 1-4, 1-2, 2-1, 2-9 and 2-11 in accordance with the terms of this
resolution (which terms are referred to collectively as the "Interfund Loan").
Section 2. Terms of Interfund Loan.
2.01. The amount of the Interfund Loan is $400,000. The Authority will repay the Interfund
Loan together with interest at the rate of 4.0% per annum. Interest accrues on the principal amount of the
Interfund Loan from the date of June 5 2012 (approval date of the resolution). The interest rate is no
more than the greatest of the rate specified under Minnesota Statutes, Section 270.C40 and Section
549.09, both in effect for calendar year 2012. The interest rate will, without further action by the
Authority, be adjusted on January 1 of each year to reflect the greater of the rate specified under
Minnesota Statutes, Section 270.C40 and Section 549.09 in effect for that calendar year. Payments on the
Interfund Loan will be applied first to accrued interest and then to the principal amount.
2.02. Principal and interest ("Payments") on the Interfund Loan shall be paid semi-annually on
each August 1 and February 1 (each a "Payment Date"), commencing on the first Payment Date on which
the Authority has Available Tax Increment (defined below), or on any other dates determined by the
Authority's Executive Director, through the date of last receipt of tax increment from the tax increment
districts specified in Section 1.08 above.
2.03. Payments on the Interfund Loan are payable solely from "Available Tax Increment," which
shall mean, on each Payment Date, all of the tax increment which may be legally spent for such purpose
generated in the preceding six (6) months with respect to the property within the tax increment districts
specified in Section 1.08 above and remitted to the Authority by Hennepin County, all in accordance with
Minnesota Statutes, Sections 469.174 to 469.1799, all inclusive, as amended. Available Tax Increment
also includes unencumbered fund balances in said tax increment districts. Payments on the Interfund
Loan are subordinate to any outstanding or future bonds, notes or contracts secured in whole or in part
with Available Tax Increment, and are on parity with any other outstanding or future interfund loans
secured in whole or in part with Available Tax Increment.
2.04. The principal sum and all accrued interest payable under the Interfund Loan are pre-
payable in whole or in part at any time by the Authority without premium or penalty. No partial
prepayment shall affect the amount or timing of any other regular payment otherwise required to be made
under the Interfund Loan.
2.05. The Interfund Loan is evidence of an internal borrowing by the Authority in accordance
with Minnesota Statutes, Section 469.178, Subd. 7, and is a limited obligation payable solely from
Available Tax Increment pledged to the payment hereof under this resolution. The Interfund Loan and
the interest hereon shall not be deemed to constitute a general obligation of the State of Minnesota or any
political subdivision thereof, inchiding, without limitation, the City and Authority. Neither the State of
Minnesota, nor any political subdivision thereof shall be obligated to pay the principal of or interest on
the Interfund Loan or other costs incident hereto except out of Available Tax Increment, and neither the
full faith and credit nor the taxing power of the State of Minnesota or any political subdivision thereof is
pledged to the payment of the principal of or interest on the Interfund Loan or other costs incident hereto.
The Authority shall have no obligation to pay any principal amount of the Interfund Loan or accrued
interest thereon, which may remain unpaid after the final Payment Date.
2.06. The Authority may amend the terms of the Interfund Loan at any time by resolution of the
Board of Commissioners, including a determination to forgive the outstanding principal amount and
accrued interest to the extent permissible under law.
Section 3. Effective Date. This resolution is effective upon the date of its approval
The motion for the adoption of the foregoing resolution was duly seconded by Board Member
, and upon a vote being taken thereon, the following voted in favor thereof:
and the following voted against the same:
Dated: June 5, 2012
Secretary
(Seal)
ATTEST:
Chair