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HomeMy WebLinkAboutResolution No. 224-25 (EDA007-25) - EDA - Resolution - TIF District No. 86-1 and Development Assistance Agreement Lowertown Project JOINT RESOLUTION EDA RESOLUTION NO. COUNCIL RESOLUTION NO. ______ Rochester Economic Development Authority Rochester City Council County of Olmsted, State of Minnesota Approving Economic Development District No. 86, and Economic Development Plan; Redevelopment Tax Increment Financing District No. 86-1 and Tax Increment Financing Plan; and Authorizing the Execution of a Development Assistance Agreement WHEREAS, it has been proposed that the Rochester Economic Development Authority (the “EDA”) establish Economic Development District No. 86 (the “Development District”), adopt the Economic Development Plan for the Development District (the “Development Plan”), establish Redevelopment Tax Increment Financing District No. 86- 1 (Lowertown Project) within the Development District (the “TIF District”) and adopt a Tax Increment Financing Plan therefor (the “TIF Plan” and, together with the Development Plan, the “Plans”), all pursuant to and in conformity with applicable law, including Minnesota Statutes, Sections 469.001 through 469.047, Sections 469.090 through 469.1082, Sections 469.174 through 469.1794 (collectively the “Act”), all as reflected in that certain document entitled in part “Economic Development Plan for Economic Development District No. 86 of the Rochester Economic Development Authority and Tax Increment Financing Plan for Redevelopment Tax Increment Financing District No. 86-1 (Lowertown Project),” dated September 22, 2025, and presented for consideration by the Board of Commissioners (the “Board”) of the Rochester Economic Development Authority and the Common Council (the “Council”) of the City of Rochester, Minnesota (the “City”). WHEREAS, the Council and the Board have investigated the facts relating to the establishment of the Development District, the adoption of the Development Plan, the establishment of the TIF District and the adoption of the TIF Plan. WHEREAS, the TIF District is being established to facilitate the construction of an approximately five-story, 133-unit apartment development with amenities that include one level of below grade parking, fitness room, club house room, and roof deck on property located just east of North Broadway Avenue, between 8th and 9th Streets NE in the City (the “Development”). WHEREAS, certain written reports and other documentation (collectively, the “Reports”) relating to the Plans, including the tax increment application made and other information supplied by Stack Downtown Investments, LLC, Rochester Lowertown Apartments LLC, a Minnesota limited liability company, or an affiliate thereof (collectively, the “Developer”) as to the activities contemplated in the TIF District Eligibility Assessment Proposed Redevelopment TIF District 816 Broadway Apartments Rochester, MN dated 4921-2366-0392.2 May 31, 2024, prepared by Christopher Colby Architect Design & Construction Consulting (the “Redevelopment TIF Assessment”) have heretofore been assembled or prepared by staff or others and submitted to the Council and the Board and/or made a part of the City and EDA files and proceedings on the Plans. The Reports include data, information and/or substantiation constituting or relating to (1) the “studies and analyses” on why the TIF District meets the requirements to be a redevelopment tax increment financing district, (2) why the assistance satisfies the so-called “but for” test and (3) the bases for the other findings and determinations made in this resolution. The Council and the Board hereby confirm, ratify and adopt the Reports, which are hereby incorporated into and made as fully a part of this resolution to the same extent as if set forth in full herein. WHEREAS, the EDA or the City has performed all actions required by law to be performed prior to the adoption and approval of the TIF Plan, including but not limited to notice to the County Commissioner representing the area of the County to be included in the TIF District, delivery of the TIF Plan to the County and School Board and the holding of a joint public hearing thereon by the City and the EDA following notice thereof published in the City’s official newspaper at least 10 but not more than 30 days prior to the public hearing. NOW, THEREFORE, BE IT RESOLVED by the Common Council of the City of Rochester, Olmsted County, Minnesota, and the Board of Commissioners of the Rochester Economic Development Authority as follows: Section 1. Findings for the Adoption and Approval of the Plans. 1.01. The Council and the Board hereby find that the Development District is proper and desirable to establish in the City and the Development Plan will afford maximum opportunity, consistent with the needs of the City as a whole, for the development of the Development District by private enterprise. 1.02. The Council and the Board hereby find that the TIF District is in the public interest and is a “redevelopment tax increment financing district within the meaning of Minnesota Statutes, Section 469.174, Subd. 10 because it consists of a project or portions of a project within which the following conditions, reasonably distributed throughout the District, exist: (1) parcels consisting of at least 70% of the area of the TIF District are occupied by buildings, streets, utilities, paved or gravel parking lots, or other similar structures and (2) more than 50% of the buildings located within the TIF District are deemed “structurally substandard” (within the meaning of Minnesota Statutes, Section 469.174, Subdivision 10(b) and (c)) to a degree requiring substantial renovation or clearance. Such conditions are reasonably distributed throughout the geographic area of the proposed TIF District. The TIF District consists of portions of 10 parcels, and (1) 100% of the parcels (which is more than 70%) are “occupied” as defined in Minnesota Statutes, Section 469.174, Subd. 10(e), in that at least 15% of the area of each parcel is occupied or deemed occupied by buildings, streets, utilities, paved or gravel parking lots, or other similar structures and (2) there were originally 5 buildings, not including outbuildings, within the TIF District, 4 of 2 4921-2366-0392.2 which buildings have been removed by the Developer under a Demolition and Development Agreement, dated June 18, 2024, with the EDA after the Council and the EDA found by resolution, adopted June 17, 2024, that such buildings were structurally substandard to a degree requiring substantial renovation or clearance. Such buildings are deemed to exist within the TIF District for purposes of satisfying the conditions of Section 469.174, Subd. 10 of the TIF Act. Such 4 out of the 5 buildings within the TIF District (i.e. 80% which is greater than the required 50%), were “structurally substandard” to a degree requiring substantial renovation or clearance. The “structurally substandard” buildings were not in compliance with the building code applicable to new buildings, and the costs of modifying each building to satisfy the building code would be more than 15% of the cost of constructing a new structure of the same square footage and type on the site. The Reports, including, without limitation, the Redevelopment TIF Assessment and the supporting facts for these determinations, are on file with the staff of the City. Other than the permits necessary for demolition of the structurally substandard buildings referred to above, There have been no building permits issued or improvements made to the parcel or buildings since the date of the report. 1.03. The Council and the Board hereby make the following additional findings in connection with the TIF District: (a) The Council and the Board further find that the proposed Development, in the opinion of the Council and the Board, would not occur solely through private investment within the reasonably foreseeable future and, therefore, the use of tax increment financing is deemed necessary. The specific basis for such finding being: The property on which the Development will occur would not be redeveloped for purposes consistent with the Development Plan in the reasonably foreseeable future. The estimated total redevelopment costs for this property make the total cost of this effort significantly higher than costs reasonably incurred for similar developments on a clean site. The demolition and redevelopment costs are higher than for new development and would make development infeasible. The developers of the Development have represented that they could not proceed with the Development without tax increment assistance. (b) The Council and the Board further find that the TIF Plan conforms to the general plan for the development or redevelopment of the City as a whole. The specific basis for such finding being: The TIF Plan will generally complement and serve to implement policies adopted in the City’s comprehensive plan. The City has determined that the Development proposed in the TIF Plan conforms to the City comprehensive plan and is or will be in substantial 3 4921-2366-0392.2 accordance with the existing zoning or any permitted exception for the property and is consistent with other uses in the area. The anticipated redevelopment of the project site and any subsequent demolition, reconstruction, or renovation related to the project will remain consistent with the City’s design goals. (c) The Council and the Board further find that the TIF Plan will afford maximum opportunity consistent with the sound needs of the City as a whole for the development of the TIF District by private enterprise. The specific basis for such finding being: The Development proposed to occur within the TIF District to be completed and operated by the Developer will afford maximum opportunity for the development of the applicable parcels consistent with the needs of the City. The Development will increase the taxable market valuation of the City. The Development will expand the number and type of available housing options in the City and help fulfill the need for such housing in the City. (d) For purposes of compliance with Minnesota Statutes, Section 469.175, Subdivision 3(b)(2)(ii), the Council hereby finds that the increased market value of the site that could reasonably be expected to occur without the use of tax increment financing is approximately $0, which is less than $21,141,357 which is the increase in the market value estimated to result from the proposed development (approximately $26,015,042, assuming no annual inflation) after subtracting the present value of the projected tax increments for the maximum duration of the TIF District (approximately $4,873,685). Thus, the use of tax increment financing will be a positive net gain to the City, the School District, and the County, and the tax increment assistance does not exceed the benefit which will be derived therefrom. 1.04. The City and the EDA elect to retain all of the captured tax capacity to finance the costs of the TIF District and the Development District. 1.05. The provisions of this Section 2 are hereby incorporated by reference into and made a part of the TIF Plan. 1.06. The Council and the Board further find that the Plans are intended and in the judgment of the Council and the Board their effect will be to promote the public purposes and accomplish the objectives specified therein. The Council and the Board also intend that the EDA shall have and enjoy, with respect to the Development District, the full range of powers and duties conferred upon the EDA pursuant to the Development Plan, the Act and such other legal authority as the EDA may have or enjoy from time to time. 1.07. The Development District and the TIF District are hereby established and the Plans, as presented to the Council and the Board on this date, including without 4 4921-2366-0392.2 limitation the findings and statements of objectives contained therein, are hereby approved, ratified, established, and adopted and shall be placed on file in the office of the Executive Director of the EDA. City or EDA staff shall, in writing, request the Olmsted County Auditor to certify the new TIF District and file the Plans with the Commissioner of Revenue and the Office of the State Auditor. 1.08. Upon filing the request for certification of the tax capacity of the TIF District, EDA staff shall notify the Olmsted County Auditor that the original tax capacity of the parcels must be adjusted as provided by section 469.177, subdivision 1, paragraph (f) of the TIF Act with respect to the substandard buildings which are deemed to exist within the TIF District. Section 2. Approval of Development Assistance Agreement. 2.01. The Developer has presented the Council and the Board with a proposal for the Development, and there has been prepared and presented to the Board for its consideration a certain Development Assistance Agreement (the “Agreement”) between the EDA and the Developer regarding the Development and the terms and conditions of the EDA’s assistance with financing certain costs of the Development. 2.02. Subject to obtaining necessary variances, site plan approvals and zoning approvals, the Council and the Board hereby approve the Agreement in substantially the form presented to the Council and the Board, together with any related documents necessary in connection therewith, including but not limited to any documents, exhibits, certifications or consents referenced in or attached to the Agreement including without limitation the TIF Note as defined therein, (collectively, the “Development Documents”) and hereby authorize the President and Secretary to negotiate the final terms thereof and, in their discretion and at such time, if any, as they may deem appropriate, to execute the same on behalf of the EDA, and to carry out, on behalf of the EDA, the EDA’s obligations thereunder. 2.03. The approval hereby given to the Development Documents includes approval of such additional details therein as may be necessary and appropriate and such modifications thereof, deletions therefrom and additions thereto as may be necessary and appropriate and approved by legal counsel to the EDA and by the officers authorized herein to execute said documents prior to their execution; and said officers are hereby authorized to approve said changes on behalf of the EDA. The execution of any instrument by the appropriate officers of the EDA herein authorized shall be conclusive evidence of the approval of such document in accordance with the terms hereof. This Resolution shall not constitute an offer and the Development Documents shall not be effective until the date of execution thereof as provided herein. 2.04. In the event of absence or disability of the officers, any of the documents authorized by this Resolution to be executed may be executed without further act or authorization of the Council or the Board by any duly designated acting official, or by such other officer or officers of the Board as, in the opinion of the City Attorney, may act in their behalf. Upon execution and delivery of the Development Documents, the officers and 5 4921-2366-0392.2 employees of the EDA are hereby authorized and directed to take or cause to be taken such actions as may be necessary on behalf of the EDA to implement the Development Documents, including without limitation the issuance of the Tax Increment Revenue Note thereunder, when all conditions precedent thereto have been satisfied. 2.05. The Council and the Board hereby determine that the execution and performance of the Development Documents will help realize the public purposes of the Act. Section 3. Interfund Loans. 3.01. The Council and the Board hereby approve a policy on interfund loans or advances (“Loans”) for the TIF District, as follows: (a) The authorized tax increment eligible costs (including without limitation out-of-pocket administrative expenses in an amount up to $484,272, interest in an amount up to $3,500,000, real property acquisition in an amount up to $2,000,000, affordable housing costs in an amount up to $484,272, and other project costs in an amount up to $3,216,901) payable from the TIF District, as its TIF Plan is originally adopted or may be amended, may need to be financed on a short-term and/or long-term basis via one or more Loans, as may be determined by the City Finance Director from time to time. (b) The Loans may be advanced if and as needed from available monies in the City’s general fund or other City fund designated by the City Finance Director. Loans may be structured as draw-down or “line of credit” obligations of the lending fund(s). (c) Neither the maximum principal amount of any one Loan nor the aggregate principal amount of all Loans may exceed $9,685,445 outstanding at any time. (d) All Loans shall mature not later than February 1, 2054 or such earlier date as the City Finance Director may specify in writing. All Loans may be pre- paid, in whole or in part, whether from tax increment revenue, tax increment revenue bond proceeds or other eligible sources. (e) The outstanding and unpaid principal amount of each Loan shall bear interest at the rate prescribed by the statute (Minnesota Statutes, Section 469.178, Subdivision 7), which is the greater of the rates specified under Sections 270C.40 or 549.09 at the time a Loan, or any part of it, is first made, subject to the right of the City Finance Director to specify a lower rate (but not less than the City’s then- current average investment return for similar amount and term). (f) Such Loans within the above guidelines are pre-approved. The Loans need not take any particular form and may be undocumented, except that the City Finance Director shall specify the principal amount and interest rate and maintain all necessary or applicable data on the Loans. 6 4921-2366-0392.2 PASSED AND ADOPTED BY THE BOARD OF COMMISSIONERS OF THE ROCHESTER ECONOMIC DEVELOPMENT AUTHORITY, THIS 22ND DAY OF SEPTEMBER, 2025. PRESIDENT OF SAID AUTHORITY SECRETARY OF SAID AUTHORITY PASSED AND ADOPTED BY THE COMMON COUNCIL OF THE CITY OF nd ROCHESTER, MINNESOTA, THIS 22 DAY OF SEPTEMBER, 2025 ____________________________________ PRESIDENT OF SAID COMMON COUNCIL ATTEST: _________________________ CITY CLERK nd APPROVED THIS 22 DAY OF SEPTEMBER, 2025. __________________________________ MAYOR OF SAID CITY (Seal of the City of Rochester, Minnesota) 7 4921-2366-0392.2