03/08/2011 - City Council Finance CommitteeFINANCE COMMITTEE MEETING
MARCH 8, 2011
12:00-2:00 P.M.
CITY HALL CONFERENCE ROOMS 2A & 2B
AGENDA
I. AGENDA ADOPTION
II. FUND STATUS UPDATE - CITY WIDE AND CEDAR GROVE TIF FUND
STATUS
III. CEDAR GROVE REDEVELOPMENT PARTNERS AND AGREEMENT
IV. OTHER BUSINESS
V. ADJOURNMENT
Agenda Information Memo
Finance Committee Meeting
March 8, 2011
II. FUND STATUS UPDATE — CITY WIDE AND CEDAR GROVE TIF FUND
STATUS
ACTION TO BE CONSIDERED:
To provide direction to staff regarding the potential reallocation of resources
among the various City funds.
FACTS:
• The Finance Committee and City Council have routinely reviewed the
status of the City's various funds (accounting entities) to better understand
the purpose for each, the adequacy or inadequacy of the level of cash or
fund balances within each fund, and to explore opportunities to better
allocate and/or use the City's overall resources.
• The last review was in June of 2010 at which time staff was directed to
complete additional work and return additional information to the Finance
Committee for further discussion.
• The following material is included in this packet to serve as the basis for
discussion, to narrow the focus, and to assist in providing further direction:
1. Exhibit I:
• Includes a list of all City funds broken down by fund type.
• The individual fund names and purposes.
• The primary revenue sources for each fund.
• Restrictions for each fund that limit the City Council's
discretion regarding the use of the fund resources (All funds
are restricted by definition with some having restrictions
beyond the control of the City Council).
• A general yes/no response to the question as to whether or
not each fund is sustainable.
• On Exhibit I; yellow highlighting indicates the fund type,
green highlighting indicates funds with available resources
(more detail on Exhibit II) and red highlighting indicates
funds with potential resource needs (more detail on Exhibit
III).
2. Exhibit II:
• Includes a list of City funds that have resources available
that could be reallocated/redirected by the City Council.
While the resources of all of these funds are available to be
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used at the discretion of the City Council, each carries a
certain amount of expectation for resource use incorporated
in its original purpose. Some, like Housing and Cable TV
Franchise Fees may have even higher expectation levels
and the Cable TV Franchise Fees are State and Federal
dependent in the long-term.
• Exhibit II includes a number of restricted cash accounts
within the Public Utilities Fund. The City Council has
complete discretion over the use of those restricted cash
accounts and may desire to redirect some balances or to
modify the purposes for which they exist.
• The dollar amounts included on Exhibit II are as of
1 2/31 /2009.
3. Exhibit 111:
• Includes a list of funds with potential resource needs.
• This list includes only current or future obligations of the City
that have already been identified and discussed by the City
Council. Staff has made no attempt to incorporate any other
future/unknown/contingency obligations or opportunities into
this list. That is certainly an option available to the City
Council either as part of the current undertaking or as part of
a future project after a first phase of adjustments have been
made to the City's resource allocation.
• The "Cash" and "Levy" notes included within the
Observations boxes are not intended to presuppose any
outcome or provide any recommendations to the Finance
Committee. It is included only to try to differentiate needs for
the various funds. In certain cases the expectation is that a
cash infusion would solve the long-term needs. While in
other cases a consistent long-term levy may be a better
option. In certain cases a combination could be the best
option. Also, "Levy" does not assume new, but could
certainly be a redirection of a portion of the existing tax levy.
• Included within Exhibit III as a fund with potential resource
needs is the Cedar Grove TIF Fund — materials specific to
that fund will be provided at the meeting.
• Exhibits II and III clearly do not include answers to the very important
questions: Exhibit II — "How much money is available?"
Exhibit III — "How much cash is needed or what type of levy would be
adequate?"
• It is staff's suggestion that the focus be narrowed resulting from the
direction at this meeting, 12-31-10 numbers be used after the completion
of the audit (June) and transfers be approved and made in the fall.
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ATTACHMENTS:
• Enclosed on pages 4 through 7 is a copy of Exhibit I.
• Enclosed on page o
• Enclosed on page
is a copy of Exhibit II.
is a copy of Exhibit III.
• Enclosed on page /0 is a copy of public policy questions that may
help to frame the discussion and assist in providing further direction and
suggested next steps for staff and the finance Committee and City
Council.
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FUND STATUS PUBLIC POLICY DISCUSSION
1. Are the following primary objectives which provide background for
discussion appropriate?
a. To address the Cedar Grove TIF Fund status.
b. To guard against impact to the City's overall tax levy — present and
near term future.
c. Reduce/adjust cash balances to levels appropriate for today while
maintaining options for the future.
d. Develop a clear understanding of the purpose of the various City
funds and potential uses of cash balances currently and in the
future.
2. Funds with available resources (Exhibit II)
a. Which balances should be reduced.
b. Should any funds be eliminated or have their purposes modified.
3. Specific approaches to funds with potential resource needs (Exhibit III)
a. Cash infusion
b. Redirect part of the tax levy
c. Adjust expectations
i. Combine with other operations
ii. Monitor for later action
PROPOSED NEXT STEPS
1. Receive direction in response to the public policy discussion.
2. Complete 2010 audit and update numbers.
3. Provide specific options/recommendations to include dollar amounts and
rationale to the Finance Committee for further discussion in summer/fall.
4. City Council approval and implementation in the fall.
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Agenda Information Memo
Finance Committee Meeting
March 8, 2011
III. CEDAR GROVE REDEVELOPMENT PARTNERS AND
AGREEMENT
ACTION TO BE CONSIDERED:
To provide direction to staff regarding a proposed modification of the Cedar
Grove Master Developer team and an Updated Preliminary Development
Agreement in that regard.
FACTS:
• In 2007, the EDA issued an RFP for a Master Developer for the core area
of the Cedar Grove Redevelopment District. The RFP approach was
intended to have a single development entity responsible for the overall
planning and implementation of the new development activities in the
core. As an outcome of that process, the Doran Pratt development team
was chosen to serve in that capacity and a Preliminary Redevelopment
Agreement was executed by the EDA and that partnership in August,
2007. It was subsequently extended in August, 2008.
• In the time since, the development team has done financial analysis and
approached a number of development partners to attempt to implement
the residential projects anticipated in the Phase I concept, but the market,
economy and lending environment have not permitted them to go forward.
• In late December, Mr. Doran indicated that he needed to withdraw from
the development partnership for personal reasons. A letter to that effect
was subsequently forwarded to the EDA.
• In that letter and in subsequent discussions, it was indicated that the other
master development partner, Len Pratt, is in a position to proceed with the
master developer responsibilities and that Mr. Pratt is proposing to add a
broker team from Cassidy Turley, including Jim McCaffrey, to the
development team to cast a broader net for business and development
prospects that may be attracted to the development district.
• In consideration of the proposed shift within the master developer team,
Mr. Pratt and staff have negotiated a draft Amended and Restated
Preliminary Redevelopment Agreement that would be between the EDA
and Pratt Development, with a provision that Pratt and Cassidy Turley
would also have a formal listing agreement for the Cedar Grove core area
property for through March 16, 2012 or a mutually agreed upon later date.
• This matter is before the Finance Committee under the committee's
charge to review and provide recommendations regarding the Cedar
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Grove Redevelopment District's financing. The proposed agreement
contemplates the continuation and transfer of the Master Purchase
Agreement to Pratt Development LLP for the duration of the Amended
Redevelopment Agreement and, that agreement provides the terms and
conditions under which land write downs and claw backs would be
considered.
• In addition, the proposed agreement contemplates more aggressive
broker marketing of the redevelopment area to a wider market of
prospective businesses and developers. It is feasible that some prospects
that could pay market rates for land and generate significant TIF revenue
may fall at the edges of the City's vision or outside it. In contrast, some
prospects that align most closely with the high density, mixed use vision
may continue to require land price considerations or may not be as market
supportable in the near term.
• Mr. Pratt and Mr. McCaffrey will be present for the appropriate portion of
the Committee meeting to provide an overview of their approach to the
site and the project and, more specifically, to discuss the Committee's
perceptions of the parameters for the marketing effort if the EDA considers
approval of the amended agreement. In particular, Mr. McCaffrey has
asked staff whether it would be advisable to market to certain retailers or
hotel prospects. If certain types of development would not be considered
in any case, it would be important for the team to know those limitations.
If certain types of development would only be considered under certain
conditions, the team should know that as well.
• Pending the Committee's discussion and direction, the matter of the
Amended and Restated Preliminary Redevelopment Agreement is
tentatively scheduled for EDA consideration on its March 15 agenda.
ATTACHMENTS:
• Staff memo on pages 15 through 15
• Original Doran Pratt Preliminary Concept Plan on page gP
• Approved 2009 Preliminary Conceit Plan with Urban Park on page 11
• Doran withdrawal letter on page
• Cassidy Turley background enclosed without page number.
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City of Ea�afl demo
TO: TOM HEDGES, CITY ADMINISTRATOR
FROM: JON HOHENSTEIN, COMMUNITY DEVELOPMENT DIRECTOR
DATE: MARCH 4, 2011
SUBJECT: CEDAR GROVE DEVELOPMENT PARTNERSHIP AND AMENDED
REDEVELOPMENT AGREEMENT
The purpose of this memo is to provide information relative to a prospective
modification of the Master Development entity for the Cedar Grove Redevelopment
District core area. The change is expected to retain continuity from the Doran Pratt
partnership, while offering the opportunity to cast a broader net to attract
development prospects for the area as the economy recovers and property
assembly in the area is completed.
BACKGROUND
• In 2007, the EDA issued an RFP for a Master Developer for the core area
of the Cedar Grove Redevelopment District. The RFP approach was
intended to have a single development entity responsible for the overall
planning and implementation of the new development activities in the
core. As an outcome of that process, the Doran Pratt development team
was chosen to serve in that capacity and a Preliminary Redevelopment
Agreement was executed by the EDA and that partnership in August,
2007. It was subsequently extended in August, 2008.
• During this time, the EDA proceeded with acquisitions in the area in order
to complete property assembly to prepare the area for new development.
The developers began preparing development scenarios for the entire
core area and contacting prospective investors and development
prospects and partners.
• Beginning in 2008, as the effects of the recession stalled development
throughout the country, lenders, investors and prospects withdrew and the
team began to focus on a more compact plan in the eastern end of the
core to be made up of rental and senior housing elements that appeared
to be market supportable in spite of the economy.
• That effort culminated in the approval of a First Phase Preliminary
Concept Plan by the EDA in April, 2009. The plan placed these elements
in an area bounded by Cedar Grove Parkway, Rahn Road and a realigned
Cedar Grove Parkway. It also strategically opened up the western half of
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the development in the most substantial way possible to provide flexibility
for future development prospects. The concept plan also provided for a
hotel development proposal on the easternmost end of the core, which
was being pursued by a third party developer.
• In recognition of the fact that land price considerations might be requested
in order to make development projects feasible, the developers and EDA
also negotiated and executed a master purchase agreement that provided
for a claw -back provision if the initial purchase price of the development
site(s) required a write down, confirmed by a pro forma analysis.
• In the time since, the development team has done financial analysis and
approached a number of development partners to attempt to implement
the residential projects anticipated in the Phase I concept, but the market,
economy and lending environment have not permitted them to go forward.
PARTNERSHIP MODIFICATION
• In late December, Mr. Doran indicated that he needed to withdraw from
the development partnership for personal reasons. A letter to that effect
was subsequently forwarded to the EDA.
• In that letter and in subsequent discussions, it was indicated that the other
master development partner, Len Pratt, is in a position to proceed with the
master developer responsibilities and that Mr. Pratt is proposing to add a
broker team from Cassidy Turley, including Jim McCaffrey, to the
development team to cast a broader net for business and development
prospects that may be attracted to the development district.
DRAFT REDEVELOPMENT AGREEMENT AMENDMENT
• In consideration of the proposed shift within the master developer team,
Mr. Pratt and staff have negotiated a draft Amended and Restated
Preliminary Redevelopment Agreement that would be between the EDA
and Pratt Development, with a provision that Pratt and Cassidy Turley
would also have a formal listing agreement for the Cedar Grove core area
property for through March 16, 2012 or a mutually agreed upon later date.
• The strategy contemplated by the draft agreement is to take advantage of
the continuity of Mr. Pratt's skills and experience with respect to the
project, while recognizing that the current development environment is
recovering, but is not yet at a point at which developers would commit to
specific, long term, phased development plans and agreements.
• This strategy was also suggested by the Opportunity Cities Site Evaluation
Team, which indicated that the EDA would be wise to approach a project
as large as the Cedar Grove Redevelopment in smaller, doable pieces
that would still serve the long term vision. That group also advised that
the EDA and City maintain flexibility to consider prospects or options that
may offer different approaches to parts of the District, as long as they do
not detract from the vision for the overall development.
• The draft amendment also clarifies issues of out of pocket cost recovery
for the EDA and the developer. It makes the developer responsible for
prequalifying projects and development partners before presenting them
to the EDA. On the basis of those reviews, the EDA will have the ability to
perform additional financial analysis as appropriate and will be responsible
for the preparation of purchase agreements on a project by project basis.
As in the past, concept reviews would be submitted to the EDA in advance
of formal plans or agreements moving to the approval process. In
addition, the agreement clarifies the project sign plan including the
opportunity for Cassidy Turley to place broker signage at the site.
As indicated in Mr. Doran's letter, Mr. Pratt has extensive experience in
development and redevelopment throughout the region and Cassidy Turley has
national and international reach to complement Mr. Pratt and Mr. McCaffrey's
relationships with developers and business prospects in the Twin Cities region. The
change in entity requires that the EDA consider a modification of the Preliminary
Redevelopment Agreement in any case, the modifications outlined in the draft
agreement update are intended to offer a shift in strategy focused on pursuing
specific opportunities for smaller projects within the redevelopment district while
retaining the ability of the EDA and the City to approve or deny specific proposals
on the basis of whether they support the community's vision for the area.
If you have any questions in this regard, please let me know.
ilk. Aril_ !4 ,
munity Development Director
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December 31, 2010
Jon Hohenstein
Community Development Director
City of Eagan
3830 Pilot Knob Road
Eagan, MN55122
Re: Cedar Grove Redevelopment
Dear Jon,
DORAN
COMPANIES
Please consider this letter our formal notification of Doran Companies termination of the Master
Purchase Agreement by and between Doran — Pratt Development LLC and the Eagan Economic
Development Authority for the Cedar Grove Redevelopment District effective 12/31/11.
Although we have enjoyed our partnership with the City of Eagan and all of the various interested
parties, many unforeseen circumstances are occurring personally and within our organization that
will preclude us from investing the time and resources necessary to pursue redevelopment activities
for the Cedar Grove Redevelopment District.
1 understand our partner, Len Pratt with Pratt Homes, is willing, able, and committed to continue
pursuing the redevelopment activities in cooperation with the brokerage team led by Jim McCaffery
from Cassidy Turley. I believe Mr. Pratt and Mr. McCaffery have the knowledge, experience and
tenacity to bear fruit from the tree that has been planted at Cedar Grove. We have coordinated an
informational exchange with Mr. Pratt and Mr. McCaffery to allow them the opportunity to have all
the project information and the contacts of the parties we were courting to attract to the
redevelopment.
Thank you for allowing us the opportunity to work with you and your staff on this project. We wish
all the future success with the redevelopment of the unique area of Cedar Grove.
Sincerely,
Cc:
Paul Anderson, Messerli & Kramer
Jim McCaffery, Cassidy Turley
Len Pratt, Pratt Homes
7803 Glenroy Road, Suite 200 • Bloomington, MN 55439 • 952-288-2000 • Fax: 952-288-2001 • www. DoranCompanies.com
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