A Handshake is Not Enough: Good Redevelopment Agreement The Importance of a Good Redevelopment Agreement Presented by: Mark Spykerman Gilmore & Bell, P.C. Phone: (314) 436-1000 mspykerman@gilmorebell.com Joe Palumbo Gilmore & Bell, P.C. Phone: (314) 436-1000 jpalumbo@gilmorebell.com

Overview That sounds crazy. Why would the City ever agree to that? OK, maybe it’s not that crazy. What exactly are you proposing? Fine, we’ll do it – but it will be on our terms.

Reasons to Provide Incentives Remove Blight Create Jobs/Taxes Bring Prestige to the Community These are the 3 most common reasons I hear from communities as to why they think it is appropriate to provide incentives. As mentioned, I always represent the City/County providing incentives. So in that case, they are making policy decisions about (1) whether to provide incentives, (2) what incentives to offer, (3) how much to offer and (4) conditions that must be fulfilled in order to receive the incentive. As lawyers, our job is NOT to make the policy/business decisions for our clients. Rather, our job is to (1) inform out clients about the options available to them, (2) advise them about pros and cons of different alternatives, and (3) assist them in carrying out their decisions.

The Proposal – Tax Redirection TIF, tax rebate agreements, municipal appropriations Taxes are “redirected” from other taxing districts (or other City funds) and used to pay project costs Municipality concerns Project completion Successful operation of project Limiting sources of redirected funds “But for” test http://www.bettertogetherstl.com/tax-incremental-financing-map

The Proposal – Tax Abatement Taxes on property are abated Developer uses tax savings to fund the development and/or reduce operating costs Municipality concerns Project completion Successful operation of project “But for” test

The Proposal – Tax Addition CID, TDD, NID, SBD District levies sales tax, property tax or special assessment Developer is reimbursed to the extent of District Revenues Municipality concerns Infrastructure/Services Limiting tax increases

Types of Agreements Redevelopment Agreements Memorandums of Understanding Preliminary Funding Agreements Intergovernmental Cooperation Agreements District Project Agreements Performance Agreements Easements/Licenses/Etc.

The 11th Commandment

Basic Elements of a Redevelopment Agreement Representations Expenses Obligations Defaults Assignability Indemnification

Developer Representations City Representations Power to act No litigation Developer Representations Power to act No litigation Control of property

Other Representations Accuracy of project data Zoning Clean title No delinquent taxes All project financing in place

Other Representations – Ability to Complete the Project

Expenses Who pays? Not you… …at least not right away

Obligations - What gets built?

Obligations – How Much Money Do They Want and When Do They Want It? Type of incentive Duration of incentive Notes vs Bonds vs Pay-as-you-go

Obligations – Building and Operating the Project Utility improvements Streetscape Architecture LEED Condemnation Relocation Tenant restrictions Reporting Union labor MBE/WBE participation Make-whole payments If you don’t ask, you won’t get it

Events of Default City Defaults Developer Defaults Failing to pay incentive Failing to collect/account for revenues Developer Defaults Failing to complete the project Improper use of project Failing to satisfy reporting requirements

Assignability Parent corporations Affiliates and subsidiaries Arm’s length purchasers Tenants Who remains responsible to perform the obligations? Who gets the benefit of any on-going incentives?

Indemnification Rule Number 2: The City should not indemnify the Developer Rule Number 1: Developer should indemnify the City, its governing body, officers, employees and agents

Questions?