Piper Jaffray’s request to change the TIF for The Crossing: translation, please?

The CrossingLast week the Northfield City Council heard a presentation from staff and an attorney re:  Piper Jaffray’s request to amend the tax increment financing (TIF) note for the Mendota Homes development called The Crossing. Some Councilors keyed in on the opportunity this might provide for site improvements and others expressed big picture concerns.  I understood very little of it all so a conversation here might help. (continued)

May 8 Nfld News: Tidying may come to the Crossing site

May 13 Nfld News editorial: Use that contract to get weeds cleaned up

In last week’s Friday memo,

The Community Development Director is following up with the special legal counsel to the City of Northfield in relation to the request that has been received recently from Piper-Jaffray related to financing for the Crossing Project. The City Council gave specific direction related to completing site improvements, park improvements and site maintenance in relation to the request to change financing on the project.

See the letter from Piper Jaffray (PDF) and see p. 32 of the May 4 Council Packet

Request from Piper-Jaffray to Amend the Tax Increment Financing Note and Development Contract Related to the Crossing of Northfield

SUMMARY:

The City Council has been asked by the finance underwriting firm of Piper-Jaffray to consider amending the tax increment financing note series 2006 for the Crossing project in Northfield. The request for amendment would result in the following changes:

1. No further draws on the tax increment note series 2006 would occur;

2. The Contract for Private Development between the City and Mendota Homes, Inc. would be revised to provide for the issuance of additional tax increment only when conditions stated in the contract were met. Piper-Jaffray would have no obligation to participate in any future financing;

3. The contract would be revised to eliminate the right of the City to terminate the note if real estate taxes have not been paid;

4. The note would be amended to provide for a level debt payment.

Steve Bubul from the firm of Kennedy and Graven, who has been assisting the City as lead counsel on the Crossing project, will be in attendance at the meeting. Should the Council be willing to revise the note and contract, these items will be brought back to a regular meeting of the Council for action later in May.

4 thoughts on “Piper Jaffray’s request to change the TIF for The Crossing: translation, please?”

  1. Here’s the transcript of the live blogging/chat that I did during the meeting with Tracy and a citizen named Christopher:

    8:01: Griff Wigley:  Community Dev Director Brian O’Connell now speaking about the  2006 TIF note for the Crossings Project

    8:01: Griff Wigley:  This is a complex issue. I’m not confident I’ll be able to explain on the fly.

    8:02: Griff Wigley:  “Request from Piper-Jaffray to Amend the Tax Increment Financing Note and Development Contract Related to the Crossing of Northfield”

     

    8:06: Griff Wigley:  An attorney from the firm of Kennedy and Graven is explaining what Piper-Jaffray is asking

     

    8:08: Griff Wigley:  Jim Pokorney is trying to make sense of what she’s saying. Good!

    8:12: Griff Wigley:  Jeesh. I’m going to need lots of charts and plain language rationale to understand this.

    8:16: Griff Wigley:  The attorney thinks the request is fair…  but I can’t follow the explanation. Pokorney is the only one asking her questions.

    8:20: Griff Wigley: Councilor Denison wonders who the attorney is representing.  She’s a partner with  Kennedy and Graven, representing the City. The usual attorney,  Steve Bubul, wasn’t able to be here.

    8:21: Griff Wigley:  Kathleen McBride, city finance director, is taking a stab at explaining the Piper request

    8:23: Tracy:  I guess I’ll have to review the supporting documentation… if any.

    8:23: Tracy:  What’s Piper Jaffray’s interest? Are they one of the investors behind Mendota Homes?

    8:24: Tracy:  And I wonder if it’s clear that it’s in the City’s interest to amend the contract.

    8:26: Griff Wigley: Piper underwrote the $2.1 million TIF note and loaned it to Mendota Homes… and then got several banks to participate.

     

    8:27: Griff Wigley:  Brian is now talking…

     

    8:30: Griff Wigley:  Brian’s explaining that there are many site improvements that still need to be made… maybe a quid pro quo to get these done, eg, blacktop, riverwalk, etc.

     

    8:32: [Comment From christopher] the link to the 18 Feb 09 letter from Patrick O’Leary of P/J to “Brian and Mac” is here: http://www.ci.northfield.mn.us/assets/2/2009-item-11-attach-2-ltr-from-piper-jaffray-the-crossing.pdf

    8:33: Tracy:  Thanks for the link, Christopher, I’m looking at it now…

    8:36: Tracy:  The document helps explain what’s going on and how we got here, but I’m still not clear on the implications. I hope the Council is!

    8:39: Griff Wigley:  Brian is saying the original contract would remain in effect… the City would still be in the driver’s seat… but the TIF financing would change?

     

    8:41: Griff Wigley:  Erica is emphasing the site improvements that need to be done… to ‘clean up that corner’ plus the walk along the river

    8:43: Griff Wigley:  Councilor seem to like the idea of having some, in the words of the Mayor, “leverage.”

     

    8:45: Griff Wigley:  I think we’re going to need a blog post on this, along with a whole radio show, plus lots of  discussion.

    8:46: Tracy:  I’m not sure why/how amending the TIF agreement gives the City that kind of leverage. Unless part of the terms of the agreement are that P/J undertakes those improvements…? But I can’t imagine that’s really what they’re talking about, is it?

    8:50: [Comment From christopher] Erica may have asked the “money” question re: P/J TIF: Who has to pony up the cash for required remaining improvements?

    9:19: [Comment From christopher] If anyone is still interested: A common reading of the !8 Feb ’09 letter from P/J re: the Crossings TIF note( the note was issued to cover costs of public development incurred by the developer) makes these declarations: it notes the demise of the project; an August interest payment [from the city?] was late, the account is now current; only 2.1 has been drawn on the original 4.2 note; the market value of the incomplete project may violate the original terms of the note[is the project “upside down”]; P/J has cut the interest on the note by 45% so that we can keep up with the payments; no further advances will be made on the note; if Phase I developments remain P/J will consider those on an “can we pay” basis; and will consider future notes if the project ever gets back on its feet.

    9:21: Griff Wigley:  Thx, Christopher… we’ll use that when we tee up a blog post on the  Piper Jaffray /    Mendota Homes issue.

  2. I think tracy had it right , in your live chat, griff… P/J is asking for some amendments to the PART of the financing that is covered by the city -issued TIF, but P/J is in no way in default ( not their part of the deal ) on doing the ‘improvements’ that the city wants Mendota Homes to complete… so the idea of ‘leverage’ didn’t make sense to me either.
    Check out Jane Mc Williams’s council observer report when it goes up on the LWV website; she may go into some detail.

    I don’t think the paper got it right in their editorial either, because the editorial seems to imply that P/J was the financer of the entire project, rather than just the notes for the TIF portion.

  3. Kiffi, here’s an excerpt from Jane McWilliams’s LWV blog post on the TIF discussion from her May 4 Council Observer’s report:

    The stalled project on Highway 3, The Crossing of Northfield, was a discussion item. The city has a contract with the developer, Mendota Homes, to issue a Tax Increment Revenue Note up to $4,266,000 to pay for or reimburse certain public redevelopment costs. Piper Jaffray purchased the note and sold portions to various banks.  As of January 2006, $1,821,000 has been drawn from the note for the first phase of the project.

    Current economic conditions prevent development proceeding according to schedule. Piper Jaffrey has requested amendment of the Tax Increment Financing Note so that no further draws could occur.  The contract would be revised to provide:  additional tax increments would be paid only when conditions in the contract are met (completion of phases two and three); elimination of the right of the city to terminate the note if real estate taxes are not paid (if a delinquency is later cured, the TIF payments on the note would resume); level debt service upon resetting of the interest rate.

    Julie Eddington, representing Kennedy and Graven, the firm assisting the city on the Crossing project, and Kathleen McBride, City Finance Director, tried to clarify for the council the complex issues at hand and answered questions. Kennedy and Graven indicated that the city might impose certain requirements as a condition of changing the note and the contract. These include completion of the asphalt overlay, fencing adjacent to Highway 3 and completion of park improvements. O’Connell said that Kennedy and Graven will revise the documents, talk with Piper Jaffrey and bring revisions to the council for review and approval.

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