2f. Development AgreementCity of Kalispell
Post Office Box 1997 • Kalispell, Montana 59903-1997 • Telephone (406) 758-7700 • FAX (406) 758-7758
REPORT TO: The Honorable Mayor Boharski and City Council
FROM: Susan Moyer, Community Development Director
Chris A. Kukulski, City Manager
SUBJECT: Development Agreement Between the City of Kalispell and American Capital Group
LLC
MEETING DATE: February 7, 2000
BACKGROUND: The following is a summation of the major points in the above mentioned Development
Agreement:
American Capital is agreeing to construct, install and complete improvements on the total
Gateway West Mall Complex, exclusive of the property sold to the City, at a cost of not
less than $1.5 million by no later than March 8, 2002.
In the event that American Capital elects not to perform as stated above, it agrees and
covenants that it will pay to the City a "payment in lieu of taxes" commencing on
December 31, 2000 for a period of ten years in an amount equal to the amount of real
property tax that would be due and owing had the improvements been constructed.
The City is assuring American Capital that sufficient capacity exists within the City's
water and sewer systems to provide such services for the proposed improvements to the
extent that the total property is developed as a commercial shopping mall consistent with
existing zoning for the total property. The developer or its tenants will become users of
the City's water and sewer systems and will be subject to the same user charges and fees
as any other user under existing ordinances and resolutions.
Should the developer dedicate and construct a street along the west boundary of the Mall,
the City agrees to the extent the street meets all requirements for a dedicated public right-
of-way to accept the dedication and assume responsibility for maintenance thereof. The
City agrees to create a special improvement district for the design, construction and
installation of such improvements generated from the creation of such a street and
relocation of storm drainage area and levy a special assessment against the properties
benefited thereby if it is desired by the developer.
RECOMMENDATION:
The City Council approve the City Manager to sign the Development Agreement
between the City of Kalispell and American Capital Group LLC.
Page 1 of 2
FISCAL EFFECTS: The direct impact of this project on the City's tax revenues will be offset by the
expenses paid out in order to complete the project. However, the indirect impact
of creating 500 full time jobs will definitely help to strengthen our economy and
spur economic growth.
ALTERNATIVES: As suggested by the Council.
Respectfully submitted,
Susan Moyer, Director
Community Development
Report compiled February 7, 2000
Chris A. Kukulski
City Manager
Page 2 of 2
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Date: February 7, 2000
Total Number of Pages,
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Time: 16:23:
this cover
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FIRM NAME: City of Kalispell OFFICE #
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Development Agreement
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Reference 4631955-21
EXHIBIT _ TO
LOCATION, DEVELOPMENT AND USE AGREEMENT
DEVELOPMENT AGREEMENT
between;
CITY OF KALISPELL, MO'_ 7ANA
and
AMERICAN CAPITAL GROUP LLC
Dated as of March 20W
TABLE OF CONTENTS
Section 1.
Definitions; Rules of Interpretation; Exhibits ..............................................
1
1.1.
Definitions.................................................................................................
1
1.2.
Rules of Interpretation..............................................................................
3
1.3.
Exhibits.....................................................................................................
4
Section2.
Representations............................................................................................
4
2,1.
City Representations.................................................................................
4
2.2.
Company Representations........................................................................
4
Section3.
Site Plans............................................................................. .......................
4
Section 4.
Company's Undertakings........_...................................................................
5
4.1.
Improvements...........................................................................................
5
4.2.
Payment in Lieu of Taxes.........................................................................
5
4.3.
Advance....................................................................................................
5
Section 5.
Public Improvements and Related Matters . .................................................
6
5.1.
Water and Sewer ........... .......................... ..................................................
6
5.2
Dedication of Through Street...................................................................
6
5.3.
Relocation of Stoimwater Retention fond ...............................................
6
5.4.
Flood Plain................................................................................................
6
5.5_
Fire Hydrant Protection............................................................................
7
5.6.
Financing of infrastructure Improvements ...............................................
7
Section 6.
Agreement to Pay Attornerv's Fees and Expenses ....................................
7
Section 7.
Administrative Provisions .......... .................... ...------ ........... ... ...... I...............
8
7.1.
Notices ......... •......................_.....................................................................
8
7.2.
Binding Effect .........................................................................................
8
7.3,
Severability......................................................................................, .....
8
7.4.
Amendments, Changes and Modifications ...............................................
8
7.5.
Further Assurances and Corrective Instruments .......................................
8
7.6,
Execution Counterparts .... ............................. ............... ............................
8
7.7.
Applicable Law............................._................................_..........................
9
7.8.
Captions..................................................................................................
9
Signatures
.......................................................................................................................
10
xhi hit A— Total Real Property
ZNhjjtit 13— Real Property
Exhibi — Description of improvements to Total Real Property exclusive of Real Property
Exhibit D— Site Plans
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DEVELOPMENT AGREE'%ffiNT
THIS DEVELOPMENT AGREEMENT, dated as of March_,, 2000, between the
CITY OF KALISPELL, MONTANA, a municipal corporation and political subdivision of the
State of Montana (the "City"), and AMERICANN CAPITAL GROUP LLC, a California limited
liability company (as hereinafter defined, the "Company").
Vv ITNES-SETH:
WHEREAS, the Company has certain rights to acquire certain real property (the "Total
Real Property") located in the City, more particularly described on Exhibit A hereto, and the
improvements located thereon (the 'Total Improvements") (the Total Real Property and the Total
Improvements, collectively, the "Total Property") commonly known as the Gateway 'West Mall
(the U-Mall°); and
WHEREAS, provided that the Company (or an affiliate of the Company) acquires the
Total Property, the Company desires to sell that portion of the Total Real Property more
particularly described on Exhibit B hereto (the "Real Property") and the approximate 59,000
square feet of the Total improvements located thereon (the "Improvements") (the Real Property
and the Improvements, collectively, the "Property") to the City: and
WHEREAS, the Cornpany and the City have approved the terms of an Agreement for
the Conveyance of Real Property, wherein the City would acquire the 'Property" as provided
therein; and
WHEREAS, the Company understands that the City's ability to meet its obligations
Frith respect to the Project, as hereinafter defined, and to obtain a loan from the Montana Board
of Investments for the acquisition of the Property is subj act to the execution of various
agreements relating to the Project, and the creation of Tax Increment Revenues as hereinafter
defined, sufficient with other revenues to retire the Bond, as hereinafter defined; and
W IER1jAS, the Company realizes that the Development of the Total Property has an
effect on the Tax Increment received and available for the payment of the Bond and that the City
has proceeded with the Project based on an understanding of the Developer's intention with
respect to the Total Property.
Based on the foregoing and, in consideration of the mutual promises contained herein,
the Parties hereby agree, represent and covenant as follows:
Section 1. Definitions Rues of Intgr retajQp. Exhibits.
1.1. Definitions. For all purposes of this Agreement, except as otherwise expressly
provided or unless the context clearly requires otherwise, the following terms have the meanings
assigned to them:
"Act" means Montana Code Annotated, Title 7, Chapter 15, Parts 42 and 43, including
any amendment thereof:
"Advance" means the Advance to be made by the Company to Stream as described in
Section 4.3 hereof.
"Agreement" means this Development Agreement, including any amendment hereof or
supplement hereto entered into in accordance with the provisions hereof.
"Agreement for Conveyance of heal Property," means the agreement between the
City and American Capital Group, LLC, dated as of February 8, 2000.
"Board of Investments" means the Board of Investments of the State of Montana or
any successor to its functions under the Bond Resolution.
"Bond" means the City's $2,500,000 Vilest Side District Taxable Tax Increment Urban
Renewal Revenue Bonds, Series 2000, issued to evidence a loan in the amount of $2,500,000
from the Board of investments.
"City" means the City of Kalispell, Montana, or any successors to its functions
hereunder.
"Cit3 Representative" means the City Manager or any other person authorized to act
on behalf of the City under or with respect to this Agreement, as evidenced by a certificate
conferring such authority executed by the City Manager and provided to the Company.
"Company" means American Capital Group LLC, a California limited liability
company, organized and existing under the laws of Montana, or its permitted successors and
assigns hereunder.
"Council" means the City Council or any successor governing body of the City,
however denominated by statute or charter.
"District" means the west Side Urban Renewal District created by Ordinance No. 1259
(the "Ordinance"), adopted on March 17, 1997, which Ordinance approved the West Side Urban
Renewal Plan for the District containing a tax increment financing provision all as set forth in
the Ordinance.
"Improvements" means the w-or'x, materials, fixtures and improvements to be installed
by the Company on the Total Property exclusive of the Real Property, described in. Exhibit C
hereto, as such may be amended from time to time in accordance with Section 4.1 hereof
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"Project" means the Gateway West -Stream Project wherein the City shall acquire the
Property and lease it to Stream at a fair market rate; Stream shall construct and install
Improvements and Personal Property and Equipment in and on the Property; Stream shall
establish and maintain within 36 months of June 1, 2000, 500 Full Time Jobs with Benefits; the
City will reimburse Stream for up to $2,750,000 over a ten year period for the Improvements to
the Property, provided Stream's job obligations as described in the Location, Development and
Use Agreement are met, the City will loan Stream $1,000,OW to be used for the construction of
the Improvements and the acquisition, installation of Equipment, Personal Property; and the City
will cause the Company to advance S1,500,000 to Stream to be used for the construction of the
Tinprovements; and the City will seek to obtain the EDA Grant, the CDBG Grant and financial
assistance from Flathead Electric and CenturyTel in accordance with the Location, Development
and Use Agreement.
Site Plans" means the four preliminary site plans submitted to the City showing
various alternatives for the future development of the Mall.
"State" means the State of Montana.
"Stream" mearis Stream International Services Corp., a for profit corporation duly
organized and existing under the laws of the State of Delaware (as hereinafter defined "Stream°).
"Tax Increment" means the amount received by the City pursuant to the Act and the
Plan from the extension of levies of taxes against the incremental taxable value, as defined in the
Act, of all taxable property within the District and shall include any payments in lieu of taxes
attributable to the incremental taxable value and [all payments received by the City designated as
replacement revenues for lost tax increment.)
Defined terms used herein, shall have the meaning ascribed to them in the Location,
Development and Use Agreement, dated February 8, 2000, between the City and Stream.
1.2. Rules of Interpretation.
(1) This Agreement shall be interpreted in accordance with and governed by the
laws of the State without giving effect to the conflicts -of -laws principles thereof.
(2) The words "herein," "hereon' and words of similar import, without reference
to any particular section or subdivision, refer to this Agreement as a whole rather than
to any particular section or subdivision hereof
(3) References herein to any particular section or subdivision hereof are to the
section or subdivision of this instrument as originally executed.
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(4) Any terms not defined herein but defined in the Bond Resolution shall have
the same meanings herein unless the context Hereof requires otherwise.
(5) "Or" is not exclusive but is intended to contemplate or encompass one, more
or all of the alternatives conjoined.
1.�. Ex. The following Exhibits are attached to and by reference made a part of
this Agreement:
EXhi it : Total Real Property;
Exhibi : Real Property;
Exhibit C: a description of Improvements to Total Real Property exclusive of
Real Property; and
Exhibit lb: Site Plans
Section 2, Representations.
2.1, City Representatioms. The City hereby represents as follows:
(a) The City is authorized by laver to enter into this Agreement and to carry out
its obligations hereunder.
(b) The City is authorized to enter into the Agreement for Conveyance of Real
Property.
(c) The City has duly authorized the execution and delivery of this Agreement
and the Agreement for Conveyance of Real Property.
2.2. CompajXj&1 rresentations. The Company hereby represents as follows:
(a) The Company is a limited liability company duly incorporated, validly
existing and in good standing under the laws of the State of California and is duly
qualified to do business in the State. The Company has the power to enter into this
Agreement and the Agreement for Conveyance of Real Property and by all necessary
corporate action has duly authorized the execution and delivery of this Agreement and
the Agreement for Conveyance of Real Property.
Section 3. Site Plans. The City has reviewed the Site Plans for purposes of
determining the availability of the City services and Improvements to the Mall as set forth in
Section 4.1 hereof. Generally speaking, the uses contemplated in the Site Plans are consistent
with the allowable uses in the applicable zoning designation. The Site Plans submitted to date
are not of sufficient detail to permit the City zoning office to determine whether ail zoning
requirements and regulations would be met by each or any of the Site Plans.
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The City agrees to cause its staff to promptly review as soon as submitted the more
detailed Site Plans to determine the extent to which they comply with the existing ordinances
and resolutions and advise of the development of any changes that need to be made.
Section 4. Comet F ='.a Undertakings.
4.1. improvements. The Company hereby agrees that it will construct, install and
complete the Improvements on the Total Property, exclusive of the Property, shown on Exhibit C
hereto, at a cost of not less than $1,500,000, no Later than March 8, 2002_
4.2. P., =ent in Lieu of Taxes. In the event that the Company, in its sole discretion,
elects not to construct, install and complete the Improvements or any other improvements at a
total aggregate cost of not less than $1,500,000, it hereby agrees and covenants that it will pay to
the City a 'payment in lieu of taxes" commencing on December 31, 2002, and on each December
31 for a period of ten years, in an amount equal to the amount of real property tax that would be
due and oaring for the Improvements had they been constructed ("Payment in Lieu of Taxes).
7.n determining the amount of the Payment in Lieu of Taxes, the City will request that the
Department of Revenue through the Flathead County Assessor's office certify the taxable value
that would be attributable to such Improvements had they been installed or constructed (the
"Imputed Taxable Valuer). The amount of the Payment in Lieu shall be the Imputed Taxable
Value times the number of mills to be levied in the District by the applicable taxing jurisdictions
for each of the Fiscal Years that the obligation to make the Payment in Lieu of Taxes is
outstanding. The obligation to make the Payment in Lieu of Taxes is over and above the
payment of any real and personal property taxes that would otherwise be owed by the Company
by virtue of its ownership of the Total Property, exclusive of the Property. If the Developer
installs the Improvements or other improvements at a cost in excess of $1,500,000 subsequent to
March 8, 2002, and such Improvements are placed on the tax rolls of the County as of January of
the following year, in any calendar year after January 1, 2003, the obligation to make the
Payment in Lieu of Taxes will be extinguished by the City upon presentation by the Developer
of a property tax bill for the Total Property exclusive of the Propemy, for the ensuing Fiscal Year
showing that the taxable value of the Total Property, excl�ssive of the Property, has increased by
an amount at least equal to the "Imputed Taxable Value" or in the alternative, invoices for the
Improvements showing costs of at least $1,500,000.
43. Advance. The Company agrees to advance Stream $1,500,000 payable over a
term of 10 years. The Company will make the advance upon the request of the City and Stream
and the Company represents that all of the terms and conditions for the Advance have been
negotiated and are acceptable to Stream and the Company, and that the Company is, or will be
able to perform its obligations under such agreement.
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Section 5. Public Improvemen and Related Matters.
5.1. Water and Sewer. The City and Developer acknowledge and agree that the Mall
is an existing commercial development and that City water and sewer service is available to the
Mall. The City represents, in connection with the proposed Improvements and redevelopment
depicted on the Site Plans, that sufficient capacity exists within the City's water and sewer
systems to provide water and sewer services for such improvements to the extent that the Total
Property is developed as a commercial shopping mall consistent with existing zoning for the
Total Property_ Once the Propert-y is connected to and served by the City's water and sewer
system, the Developer or its tenants, as the case may be, will become users of the City's water
and sewer systems and will be subject to the same user charges and fees as any other user under
existing ordinances and resolutions, including "connection fees" if the number or size of water
and sewer connections is changed from the present configuration serving the existing Mall. The
City will not impose a "capacity" or "impact" fee relating to the City's water system or sewer
system.
5.2. Dedication of Through Street. The City and Developer acknowledge that at the
present time there is no through street along the westerly boundary of the Mall property. The
Developer may dedicate a right-of-way for a public street along the west boundary of the Mall
property which would connect Two Mile Drive (at a point to the northwest of the Mall property),
all as depicted on the Site flans (the "Street"). In the event that Developer pursues the dedication
and construction of the Street, the City agrees to the extent that the Street meets all requirements
for a dedicated public right-of-way, to accept the dedication and assume responsibility for
maintenance of the Street. The costs of the Street may be financed as provided in Section 5.6
hereof.
5.3. Relocation of 1 tQM water Retention Pond. The City and Developer recognize that
the construction of the Street will require the relocation of the stormwater detention pond
presently situated southeast of the Mall entrance off of Highway 2, which detention pond
accommodates storm drainage and surface flow from the Mall property. The City agrees to
support Developer's application for any permits required to effectuate the relocation of the
existing detention pond. Developer agrees that such relocation of the stormwater detention pond
shall comply with applicable City of Kalispell water management plans and manuals and further
agrees that any plans for such relocation shall be subject to the approval of the City of Kalispell
Engineer, which approval shall not be unreasonably withheld. The costs associated with: (a) any
regarding and repaving of the Mall parking area necessitated by the relocation of the existing
detention pond, and (b) the installation or extension of any storm drain lines to the relocated
pond to the extent eligible may be financed as provided in Section 5.6 hereof
5.4. Mood Plain, The City and Developer further acknowledge that the construction of
the Street will require the backfill of areas near- Spring Creek and may require directing the flow
of Spring Creek thorough a culvert to be placed under the new Mall enhance off of Highway 2.
The City agrees to support the Developer's application for any permits required from the City of
U.
Kalispell, Flathead County or the State of Montana to complete said improvements to the Spring
Creek area_ The Developer agrees to obtain an adequate replacement flood plain for the area
thus impacted without materially reducing the number of parking spaces available for the -Mall.
5.5_ Fire HXdrant Protection. The City and Developer realize that the Site Plans
include the expansion of the Mall on to contiguous properties and the construction of additional
improvements. As such, existing fire protection systems, including but not United to water
mains and hydrants, may be insufficient to adequately protect the property after the Mall is
expanded. The costs of providing such improvements may be financed as provided in Section
5.6 hereof
5.6. Financing of Infrastructure ImpMyements. In the event that Developer's
improvements to, or expansion of, the Mall require the extension of existing, or construction of
additional, municipal utility lines to present or future Mall properties, or the improvements
described in Sections 5.1 through 5.5 hereof, the City hereby agrees to create a special
improvement district for the design, construction, installation of such needed improvements and
levy a special assessment against the properties benefitted thereby, over a term that is agreeable
to the Developer to the extent that such term may not, extend over 20 years. Based on the
description of the improvements in Section 5.1 through 5.5 hereof, the City represents and
believes that all such improvements would be Public Improvements and would be eligible for
such financing.
The City further agrees that to the extent possible and as permitted by the Board of
Investments, it would use available Tax Increment to finance a portion of the Public
Improvements. The City acknowledges, however, that unless there is a substantial increase in
the taxable value of the District attributable to the Developer's proposed development or other
new development over and above the Improvements, the City would not have sufficient Tax
Increment to incur any additional debt payable from the Tax Increment.
Section 6. Agreement To Pad AZD=gv_e fees and Expenses_ In the event either party
to this Agreement should default under any of the provisions hereof and the nondefaulting party
should employ attorneys or incur other expenses for the collection of moneys or the enforcement
or performance or observance of any obligation or agreement on the part of the defaulting party
herein contained, the defaulting party, agrees that it will on demand therefor pay to the
nondefaulting party the reasonable fee of such attorneys and such other expenses reasonably so
incurred by the Dondefaulting party.
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Section 7. Adnninistrative Provisions.
7.1. Notices. All notices, certificates or other communications required to be given to
the City and the Company hereunder shall be sufficiently given and shall be deemed given when
delivered or deposited in the United States mail in certified form with postage fully prepaid and
addressed as follows -
If to the City: City of Kalispell
312 1 st Avenue East
Kalispell, Montana 59903
Attn: City Manager
If to the Company: American Capital Group LLC
115 S. La C•ambre Lane, Suite 302
Santa Barbara, CA 93105
Attn, Mr. James S. Taylor and
Mr. Hugh M. Boss
The City and the Company, by notice given hereunder, may designate different addresses to
which subsequent notices, certificates or other communications should be sent_
7.2. Binding Effect. This Agreement shall inuie to the benefit of and shall be binding
upon the City and the Company and their respective successors and assigns.
7.3_ Severab lit:. If any provision of'this Agreement shall be held invalid or
unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof
7.4. Amendments. Changes and Modifieatiors. This Agreement may be amended or
any of its terms modified only by written amendment authorized and executed by the City and
the Company and, except as othem ise provided herein, with the prior written consent of the
Board of Investments.
7.5. Further Assurances and Corrective Instruments. The City and the Company agree
that they will, from time to time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, such supplements hereto and such further instruments as may
reasonably be required for correcting any inadequate or incorrect description of the Project or the
Improvements or for carrying out the expressed intention of this Agreement.
7.6. Execution Coant. This Agreement may be simultaneously executed in
several counterparts, each of which shall be an original and all of which shall constitute but one
and the same instruiment.
10
7.7. Applicable aw�I This Agreement shall be governed by and construed in
accordance with the laws of the State of Montana without gig ing effect to the conflicts -of -laws
principles thereof.
7_8. Captions. The captions or headings in this Agretment are for convenience only
and in no way define, Iimit or describe the scope of intent of any provisions or Sections of this
Agreement.
10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day of March, 2000.
(SEAL)
(SEAL)
CITY OF KALISPELL, MONTANA
By
Mayor
By
City Manager
Attest:
Clerk of Council
AMERICAN CAPITAL GROUP LLC
By
Its
Attest:
Its
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EXHIBIT A
TOTAL REAL PROPERTY
A-1
W:4N Yi 3
REAL PROPERTY
e
DESCRIPTION OF iMPROVEMENTS TO TOTAL REAL PROPERTY
EXCLUSIVE OF REAL PROPERTY
Facade Renovations Improvements
Interior Improvements
Renovations and Improvements to Roof
Parking Improvements
C-1
Total: $1,500,000
OMEBIT D
SITE PLANS
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