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MINUTES New Brighton Economic Development Commission Approved Regular Meeting—January 18,2011 730 a.m. Members/Liaisons Present: Gina Bauman, Dennis Flahave,Bob Benke, Bob Smith,Mike Murlowski, and D.L. Beach Members/Liaisons Absent: Ruben Vazquez, Mark Nelson,Marie Hansen, Terri Snell Staff Present: Grant Fernelius, Community Development Director;Katie Bruno,Office Assistant. Call to Order Commissioner Benke called the meeting to order. Approval of Minutes Minutes from the November 16, 2010 were approved. Report from Council Liaison There were no questions for Councilmember Bauman. Northwest Quadrant Report Director Fernelius reported the City is working diligently to negotiate the Development Agreement with Stuart Companies. One issue that was left for future negotiation following the December meeting was the topic of subordination. Over the course of the last few weeks, both sides have been negotiating the terms of the subordination agreement. One of the things that we learned is that the City must also subordinate its interest in the personal guarantee that will secure the forgivable note. The developer has agreed to pay$1.25M for the land, of which $700,000 would be paid at closing. The remaining amount ($550,000) would be covered by a note from the developer to the City. The City has agreed to forgive 10%of the principal over a 10 year time frame, assuming the developer builds the project and fulfills all of their other obligations. The note would be secured by a personal guarantee by the developer. If the developer were to default,the City could make a claim against the personal guarantee. Because the City was being asked to subordinate its rights to the personal guarantee and approving a form or subordination well in advance of a lender commitment, staff believed that the developer should concede something in exchange. During the subordination negotiations, staff introduced the idea that the developer should be restricted from converting the property to a tax exempt use. Conversion to a tax exempt(i.e.public or quasi-public ownership)would drastically reduce the tax increment for the project. On January 11th, the City Council was asked to consider a revised development agreement that included the subordination language and the tax exempt restriction. During the January 11th meeting, the developer did offer a solution on a form security for the note. In addition to the personal guarantee, the developer would provide a Letter of Credit (LOC) in the amount of the note ($550,000). The LOC would remain in place through construction of the building.This would give the greatest amount of security to the City during the most critical phase of the project. The personal guarantee would remain in effect for the duration of the forgivable note. In terms of tax exemption, we have received information from the County Assessor's office that it is highly unlikely the property could be converted to a tax exempt use. The goal is to bring back a revised Development Agreement for Council consideration on January 25th The Council would consider the land use approvals the same evening. Staff is optimistic that a deal can still be reached to keep the project moving ahead on schedule.