City Council Agenda Packet 11-27-2006 SpecialAGENDA
SPECIAL MEETING - MONTICELLO CITY COUNCIL
Monday November 27, 2006 - 5:30 p.m.
Mayor: Clint Herbst
Council Members: Wayne Mayer, Tom Perrault, Glen Posusta and Brian Stumpf
1. Call to Order
2. Review Potential Revenue Stabilization Agreement between City and Xcel.
3. Adjourn
Special Council Meeting Agenda: 11127/06
2. Citv Council Workshop Review Potential Revenue Stabilization Agreement Between Citv and,
Xcel.
Xcel officials visited City staff on Wednesday, November 8, 2006 to review an agreement relating to
stabilization of revenue to host cities. This agreement was prepared over a two year period on a joint
basis by Xeel, Goodhue County and the City of Redwing. Following is a summary of the underlying
purpose or reason for establishment of the agreement.
"As a consequence of the uncertain nature of regulatory, administrative, statutory and judicial
developments that may affect the future valuation of, and assessment of taxes upon property owned by
utilities within the State of Minnesota, which are reasonably anticipated to create a degree of
instability and uncertainty in the revenue base of the Host Community, the Parties are entering into
the Agreement for the purposes (i)promoting in the public interest a stable and controlled revenue
stream for the Host Community, ii)promoting a stable and controlled expense base for NSP,
iii)providing a basis for along term budgetary planning of revenues and expenses for each of the
Parties to this Agreement and (iv) continuation of NSP's responsible and practice stewardship of
costs to utility customers"
In essence, Xcel property market value will be lowered significantly via Department of Revenue
action, this agreement attempts to buffer this impact by establishing a provision whereby Xcel
provides separate funds to off -set the loss of the tax revenue thus establishing a "level" contribution by
Xcel over a period of ten years. According to the agreement, this amount to be contributed annually is
based on the tax rate for taxes paid in 2007. Unfortunately, a spike in commercial development
combined with a modest levy drove down the tax rate creating a relatively unfavorable setting for this
otherwise positive agreement.
Due to pending action proposed to occur in January by the Department of Revenue relating to this
matter it is important that the City Council review and discuss this matter. City Council may wish to
consider taking action on this agreement at the meeting in December. Department of Revenue could
take action in January to reduce the utility company valuation thus reducing Xcel motivation to enter
into a stabilization agreement.
The City of Redwing has provided financial spreadsheets which we have adapted to fit Monticello. An
analysis of the fiscal impact of the stabilization agreement via the worksheets will be provided at the
workshop on Monday. Rick will not be able to attend the meeting, however Mark Ruff from Ehlers
will be present to review financial implications relating to the proposed agreement.
�9 1
„rY
DATED: 2006
1959470v1
1. PROPERTY TAX 2
2. BASE YEAR AND BASE YEAR AMOUNT ................................................................ 3
(») Base Year ............................................................................................................... 3
(b) Base Year Amount ................................................................................................. 3
(c) Exazuo]o of the Base Year and Base Year Amount ............................................... 3
4. HOST COMMUNITY STABILIZATION PROPERTY AND DOR
ASSESSMENT................................................................................................................. 3
(») Property Subject 10Stabilization ........................................................................... 3
(b) TdeDtifioatouOfStabilization Property .................................................................. 4
(c) DOR Market Valuation and Assessment ............ ................................................... 4
5. STABILIZATION AND ABATEMENT PAYMENTS; TIMING,
TRACKING AND RECONCILIATION ..,....,....~~..,~,~..,~,~..~~..~~~,~,~~,~,,,,~~,,~~,~~,,4
/ra\ ---------- ofStabilization/Abatement ~ `'—.--.—'-'.--.-----..4
/b\ Property Tax Stabilized to the Base Year pay level .............................................. 5
/c)' and .—.--.....--...5
v, -----'---------------- Timing, Tracking
/6\ Duration ofTax Abatement ................................................................................... /
(�) 7�am/�bo1eol8zt.--....._,----.-.,—..-.,--..-.— 8
` ' -_-_--_-__-�__�'-���"
HlDispute Resolution ................................................................................................. 8
6. FUTURE UTILITY PROPERTY ACQUISITIONS AND DIVESTITURES~.-....~~. 8
(x) General Replacementsamd Additions .................................................................... 8
(6) Divestiture .............................................................................................................. U
7. EXTRAORDINARY 0NVESTMENT(S)....................................................................... 8
(») Definition ............................................................................................................... 8
(b) Application .,.._.',_--.,._--_-----.---..—...—.-----.—.—..-.',—''''-9
8, ADDITIONAL COVENANTS OF THE PARTIES ................................................... 10
(n) Gono73l(�OvenamtS-....--._-...—..—.--..--.----.'.---..-10
� �
/b\ Grants ofFuture Abatements ............................................................................... I0
9. ON~ EFFECT OF TERMINATION ......~~~.~~..~..~..~......~......~~~.~~~X1
(») Termination .......................................................................................................... ]l
(b) Effect of Termination
--....—_---~--.-...-'^----.---....---..—_--.....I2
1959470vl -i-
(c)
Extension ..............................................................................................................
12
10. REPRESENTATIONS OF THE PARTIES ................................................................
I2
/n\
Representations8fNSP .......................................................................................
l2
0`\
Representations o[the Host Community ---.----.------.---.--.-13
11. DISPUTE ..,,.....~..,,.........,~.,.,...................,..........~......,...~~....~.......l4
/m\
: Discussion and Mediation ...............................................
|5
(b)
Dispute Resolution: Arbitration ..........................................................................
l5
(o)
Jurisdiction and Venue .........................................................................................
l5
(d)
Enforcement —.---.--.-.-.—.—.---.—.--....—.--.-----------.l6
/e\
Applicability --..----_.—^._......--.—....—.----.--.--.—.-....--.--l6
12. MIS .........._...............~.~.............. ........
16
(n)
Survival of Representations, Covenants and Agreements ...................................
1.6
(6)
Notices .................................................................................................................
l7
/n\
Entire Agreement ..,--.--.---.----.....'..--..—..-..--.--.-.—.—..---..—]8
(d)
Amendments .._^.._—.`.—_--.----.—.—..-....-_--.--.-------....----18
(e)
Successors and Assigns --_^.-~~~.—..,_.--.--,.--.--.....-_..—.-..--.-...[8
R\
Fees and Expenses --..—,.-.......—..---.—...--.---.-.—.—...-.—_-.--.—..l8
(»)
Governing Law and Venue ..................................................................................
18
(h)
Counterparts and Facsimile/ElectroniSignature —.--.—.~.---..-.—......—..-18
6\
Headings and Certain Terms ................................................................................
]0
6\
Severability .----.—._.—._.,.—.—,..-.-.—..--.--_.--,.—.---..—.---l0
(k)
Parties ioInterest ..................................................................................................
1g
/D
Waiver ..................................................................................................................
Ig
(n)
Construction.—....'-'—...-,..—..---......--...,,.--------.-----.--lg
(n)
Specific Performance ...........................................................................................
20
(n)
Condition to of Agreement ............................................................
20--��� �
/nl
State General Tax .................................................................................................
2Q
/n\
Savings Clouoe.....................................................................................................
ZO
(r)
Regular Meetings, -----..---.--..--._--...,--..-...-..-------20
1959470r -ii-
THIS REVENUE STABILIZATION AGREEMENT (this "Agreement") is entered
into as of the _ day of , 2006 by and between the City of Monticello,
Minnesota (the "City" or the "Host Community") and Northern States Power Company
d/b/a Xcel Energy, a corporation existing and governed under the laws of the State of Minnesota
("NSP"). The Host Community and NSP may be collectively referred to herein as the "Parties"
and each individually may be referred to herein as a "Party."
NSP owns the Monticello nuclear power plant, which power plant is located in Wright
County, Minnesota (the "County" or "Wright County"). The power plant operates as a
baseload plant which is operated continuously without interruption, except for periods of time
required for maintenance and refueling outages. The utility property tax revenues from this plant
constitute a significant portion of the tax base of the Host Community and the Host Community
is significantly impacted by changes in utility property tax policy. The Host Community has in
recent years experienced a decline in its property tax base revenues.
As a consequence of the uncertain nature of regulatory, administrative, statutory and
judicial developments that may affect the future valuation' of, and assessment of taxes upon,
property owned by utilities within the State of Minnesota, which are reasonably anticipated to
create a degree of instability and uncertainty in the revenue base of the Host Community, the
Parties are entering into this Agreement for the purposes of, among other things: (i) promoting
in the public interest a stable and controlled revenue stream for the Host Community,
(ii) promoting a stable and controlled expense base for NSP, (iii) providing a basis for long-term
budgetary planning of revenues and expenses for each of the Parties to this Agreement, and
(iv) continuation of NSPs responsible and proactive stewardship of costs to utility customers.
I
A. Utility property owned and operated by NSP that is located within Wright County
is subject to property taxes imposed under Applicable Laws of the State of Minnesota, including
without limitation, (i) Chapter 272, et. of the Minnesota Statutes, and (ii) Minnesota Rules,
Chapter 8100, in each case as amended. Minnesota law requires that all property be valued at its
"market value" pursuant to MiNN. STAT. §§273.11, Subd. 1, 273.12, and 272.03, Subd. 8, in each
case as amended.
B. The existing rules within Applicable Law governing valuation and assessment of
utility property taxes within the State of Minnesota (the "Rule" or the "Rules") have generated
ongoing controversies and litigation -challenging,,- among other things, the market values -of utility
property assessed by the State of Minnesota and the assessment of utility property. In an
ostensible effort to address such controversies, the Minnesota Department of Revenue (the
"DOR") published a request for comments on possible amendments to the Rules governing
valuation and assessment of property owned by utilities and has established a rulemaking process
by which the DOR may recommend changes to the Rules.
1959470vl
C. NSP and the Host Community, have in the past and will in the future pursue
changes to the Minnesota Statutes and Rules governing utility property valuation and assessment
(i) to assure accurate reflection of market value(s), and (ii) that they believe are equitable and
warranted on behalf of their respective customers and taxpayers. Notwithstanding these efforts,
NSP and the Host Community desire to also facilitate stable and predictable revenue and expense
streams for, respectively, the Host Community and NSP.
D. In the event that there is a change in or to utility property tax valuation and
assessment Rules with respect to NSP utility property, it is possible that the Host Community
could experience a substantial reduction in property tax revenues.
E. Recognizing that changes in the Rules governing the valuation of, and the
assessment of utility property tax on, utility property may result in a significant detriment to the
can c I
Host Community, and to lessen the impact of any such changes, the Parties have agreed upon
certain revenue and expense stabilization measures set forth herein by which the Parties seek to
achieve uniform utility property tax revenue streams for the Tenn set forth in and defined by this
Agreement.
F. As an integral and essential legal consideration with respect to the Parties'
purpose hereunder to stabilize utility property tax revenues and expenses pursuant to the
provisions of this Agreement, the Parties have agreed that the Host Community shall authorize
the Abatement Payments that may arise under Section 5 of this Agreement pursuant to the
statutory authority for such payments granted in and by MiNN. STAT. §§ 469.1813 through
469.1815, as amended (collectively, the "Abatement Statutes"). The abatement authorization
adopted by the Host Community is attached hereto and incorporated by reference herein as
Exhibit A to this Agreement.
G. At the time of this Agreement, the Parties are unable to predict with any certainty
the outcome or the economic impact, if any, of (i) controversies that may arise with respect to, or
matters that may be litigated concerning, utility property valuation and assessment, and/or
(ii) changes to the Rules which affect the respective utility property tax burden or benefit to the
Host Community and/or NSP.
H. This Agreement does not apply to the state general tax, and any other tax and/or
assessments, that may be now or in the future set forth on the Wright County property tax
statement, other than the utility property taxes of the Host Community as described herein.
110TI091 "i►1111
NOW, THEREFORE, in consideration of the (i) foregoing Purposes and the Recitals,
each provision of which is incorporated by reference as essential terms and understandings of
and with respect to -this Agreement, -(ii) the covenants of the Parties set forth -herein, and
(iii) other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties hereto agree as follows:
1. Property Tax Payments Generally. During the Tenn of this Agreement (as
defined in Section 3 hereof), NSP shall remit the properly computed and undisputed amount of
property tax set forth on the property tax statements issued by the County on or before the
1959470v1 2
� 21111i "1113N, a, 1, 1 � K I 11:111'Jill 1���
payment due dates specified in the applicable property tax statements. Based on present
requirements, property tax payment due dates are May 15 and October 15 of each year. In the
event that NSP disputes the valuation and/or property tax assessed by the State of Minnesota
and/or the County, respectively and as applicable, NSP shall follow Applicable Law in
contesting the property tax assessed. Resolution of the foregoing shall be reflected in the
tracking of the yearly calculations arising from this Agreement as set forth in Section 12(q)
hereof.
2. Base Year and Base Year Amount. The primary objective of this Agreement is
to stabilize utility property revenues of the Host Community for a fixed term based on a certain
point -in -time and in an amount certain. For purposes of this Agreement such point -in -time is the
"Base Year" and the amount certain is the "Base Year Amount," as each are defined below.
(a) Base Year. The "Base Year" is the assessment year that the Rule changes
currently under consideration by the DOR will take effect.
(b) Base Year Amount. The "Base Year Amount" is the total of the amount
of utility property tax paid in the Base Year by NSP solely with respect to the Host
Community for the specific property tax parcels identified as "Stabilization Property" (as
defined in Section 4), subject to a divestiture adjustment. The Base Year Amount is
calculated by example for the year 2006 as set forth in Exhibit B to this Agreement.
Once the Base Year is determined, the Parties shall amend such Exhibit B to reflect the
calculation of the actual Base Year Amount.
(c) Example of the Base Year and Base Year Amount. If the DOR Rule
changes are implemented for assessment in the year 2007 for utility property tax payable
in 2008 (i) the Base Year is 2007, and (ii) the Base Year Amount is the amount of utility
property taxes paid by NSP to the Host Community in 2007.
3. Term, of Aereement. Subject to the termination provisions of Section 9 below,
the term of this Agreement will be ten (10) years after the Base Year, if the Rule changes
currently under consideration by the DOR are enacted, effective under Applicable Law and
implemented for assessment in the year 2007; provided however, if such Rules are so
implemented and effective for assessment in any year later than 2007, this Agreement shall
terminate not later than December 31, 2018 (the "Term").
4. Host Communitv Stabilization Provertv and DOR Assessment.
(a) Property Subiect to Stabilization. The Parties have determined by mutual
agreement the specific NSP utility property that is subject to the stabilization and/or
abatement provisions hereof. It is the intent of the Parties to assure that all NSP property
subject to utility property tax will be taxed either through the state DOR- procedures or at
the local level, without duplication. NSP utility property that is taxed at the local level is
not subject to the stabilization and/or abatement provisions of this Agreement.
(i) The NSP utility property subject to stabilization pursuant to this
Agreement (the "Stabilization Property" or "Stabilized Property") is the plant
operational property located in the Host Community that is (A) valued by the
1959470v1 3
NIII
U, ZZ, 1111-11 113111i", qpl
DOR, (B) subject to the utility property tax, and (C) not subject to local
assessment (that is, the non-operating property, such as land and certain buildings,
that is locally assessed). Property subject to stabilization is identified in
Exhibit B to this Agreement, as referenced in Section 4(b) below.
(ii) The NSP utility property located in the Host Coinn-lunity that is not
subject to stabilization pursuant to this Agreement is (A) property subject to local
assessment, including land utilized for the plant and the buffer land (including the
buildings situated on such buffer land) and the training centers, (B) transmission
and distribution facilities and other personal property valued by the DOR that
(x) are located in the Host Community, and (y) are not located at the operating
plant, (C) other property and structures in the Host Community that are not
directly associated with the plant generating facility, (D) construction of a new
generating unit(s) on an existing plant site or on a new plant site, [and (E) Dry
Cask Storage property].
(b) Identification of Stabilization PrODertV. The Stabilization Property that is
subject to stabilization and/or abatement pursuant to the principles set forth above in
Section 4(a) is identified by the specific property tax statement(s) that are assigned a
specific property tax identification parcel number as set forth in Exhibit B to this
Agreement.
(c) DOR Market Valuation and Assessment.. The property subject to
stabilization and/or abatement will be assessed by parcel identification number in
accordance with the DOR valuation methodology. Any disputes between the Parties with
respect to the impact of actions by the DOR that affect property classification,
particularly the uniformity of Stabilization Property for comparison purposes during the
Term of this Agreement, will be resolved by the dispute resolution provisions set forth in
Section 11 of this Agreement. The utility property tax associated with a Stabilization
Property parcel number that is subject to stabilization and/or abatement is confined to that
portion of the total utility property tax which is allocated solely to the Host Community.
5. Stabilization and Abatement Pavinents; TiminLy. Tracking and
Reconciliation.
(a) Commencement of Stabilization/Abatement Pavment(s). The first year
that utility property taxes payable to the Host Community by NSP on Stabilization
Property are subject to stabilization/abatement payments by a Party hereto will be the
year following the Base Year. For example, if the DOR Rule takes effect as of January 2,
2007 for the assessment year 2007 (the Base Year) payable in 2008, then the first year
subject to stabilization/abatement payments by a Party hereto will be for utility property
taxes -payable in 2008. The determination of this commencement year will not be
affected by a "phase-in" period(s) included in the DOR Rule changes, if any.
1959470v1 4
V 111 11 1 31 1 11
X
MINFil 11,812; W I
(b) Property Tax Stabilized to the Base Year Day level.
(i) The Utility Prol)ertv Tax pavable by NSP on Stabilization PrOI
is less than the Base Year Amount (Stabilization Payment). In the event that the
utility property tax on Stabilization Property in any year during the Term is less
than the Base Year Amount, NSP will remit to the Host Community the
difference between the higher Base Year Amount and the lower utility property
taxes on Stabilization Property paid by NSP to the Host Community (a
"Stabilization Payment"), subject to offset due to tracking of unpaid Abatements
(defined in Section 5(b)(ii) below), reconciliation of Abatements at the end of the
Terni and the effect of Extraordinary Investment and future divestiture provisions
described below in this Section 5.
(ii) The Utility Property Tax Payable by NSP on Stabilization Pro-Oertv
is over Base Year Amount -oay level (Abatement Payment). In the event that the
utility property tax on the Stabilization Property in any year during the Term is
greater than the Base Year Amount, the Host Community will remit to NSP the
difference between the higher utility property tax paid by NSP to the Host
Community and the. lower Base Year Amount pursuant to Minn. Stat. §§
469.1813-1815, as amended (an "Abatement Payment" or an "Abatement"),
subject to offset due to the deferral and tracking of unpaid Abatements,
reconciliation of Abatements at the end of the Term and Extraordinary Investment
and future divestiture provisions described below in this Section 5.
(iii) Host Community Notices and Statements. The Host Community
will provide (A) truth in taxation notices in accordance with Applicable Law and
consistent practice, (B) the property tax statements relating to all DOR assessed
property and locally assessed property, and (C) invoice(s) and detailed
calculations to NSP for Stabilization Payments, Abatement Payments and
deferrals determined to be (i) payable to either the Host Community or NSP,
and/or (ii) deferred for payment to a later date, no later than April 1 of each
calendar year during the Term. NSP shall have the right to review and raise
objection(s) to the Host Communities' calculations within forty-five (45) days of
receipt of the information and documentation provided by the Host Community
pursuant to subsentence C immediately above. In the event that such calculations,
and the effect of such calculations, cannot informally be resolved, the Parties will
utilize the dispute resolution procedures set forth in Section 11.
(c) Stabilization/Abatement Timing, Tracking and Reconciliation.
(i) Payment of Stabilization and Abatement Payments. If the utility
property tax paid on Stabilization Property by NSP to the Host Community in a
particular year during the Term respectively exceeds or is less than the Base Year
Amount and:
(A) an Abatement Payment becomes due from the Host
Community, any such payment will be made in two (2) installments on or
1959470v1 5
before July 31 and December 31 in the year following the year in which
the utility property tax payment was (or was to be) timely paid by NSP, or
(B) a Stabilization Payment becomes due from NSP, such
payment will be made in two (2) equal installments directly to the Host
Community on or before the regularly scheduled utility property tax
payment date(s) in the applicable payment year.
Whether an Abatement Payment or Stabilization Payment becomes due and
payable is subject to the deferral and tracking, reconciliation, Extraordinary
Investment and future divestiture provisions described below.
(ii) Trackiniz of Stabilization and Abatement Amounts. "Tracking"
applies to the situation where the utility property tax on Stabilization Property
paid by NSP in any particular year with respect to the Host Community exceeds
the Base Year Amount and results in an Abatement. Generally, an Abatement
requires payment of the Abatement amount by the Host Community to NSP as set
forth in Section 5(c)(i) above; -provided, however, in the event the amount of the
Abatement in that year, plus all prior Abatement amounts (less any offsets for
stabilization amounts), does not exceed more than fifteen percent (15%) of the
Base Year Amount (the "Abatement Payment Threshold"), no Abatement
Payment will currently be, payable by the Host Community until reconciliation at
the end of the Term unless, and only to the extent that, the cumulative amount of
Abatements (less any offsets of stabilization amounts as described in
Section 5(c)(ii)(C) below) exceeds the Abatement Payment Threshold. If the
yearly and aggregate net amount of the Abatement(s) does not exceed the
Abatement Payment Threshold, it will be "tracked" on a year -by -year basis until
the Abatement Payment Threshold is exceeded.
(A) In any year that the Abatement Payment Threshold is
exceeded by the tracked aggregate Abatement(s), then the Host
Community shall remit the amount in excess of the Abatement Payment
Threshold to NSP in the year following the year in which the specified
percentage is exceeded as described in Section 5(c)(i) above.
(B) In any year during the Tenn that a Stabilization Payment
becomes due, and there exists an unpaid Abatement that is being tracked
below the Abatement Payment Threshold, NSP shall have the right to
offset such cumulative Abatement against the Stabilization Payment that
would otherwise be payable pursuant to the provisions of Sections 5(b)(i)
and 5(c)(ii)(B) above.
(iii) Reconciliation. At the end of the Tenn the aggregate amount by
which the utility property tax and Stabilization Payment(s) remitted by NSP to the
Host Community exceeds the aggregate Base Year Amount during the Tenn (the
Base Year Amount times the number of years of the Tenn to the date of
termination of this Agreement) (the "Excess Payments") will be reconciled. The
1959470vl 6
sum of the Excess Payments made by NSP during the Tenn, less (A) the amount
of any Abatement in an El (Extraordinary Investment) Year (defined in Section 7
below) and the years following an El Year, net of accrued and/or offset NSP
Stabilization Payment obligations to the Host Community after any El Year, and
(B) the Abatement Payments made by the Host Community to NSP, will equal the
final "reconciliation" amount upon which a payments) to NSP by the Host
Community would be based. The Parties acknowledge and agree that
reconciliation does not apply to Stabilization Payments to be made by NSP
because NSP remits all Stabilization Payments on a current basis, subject to ofrsct
for outstanding tracked Abatement amounts.
Provisions of the Host Corninunity's authorizing resolution relating to
Abatement, including reconciliation payment(s) to be made by the Host
Community shall be drafted to confoini to Minnesota Statutes that govern,
property tax abatement by local governmental units.
(iv) Interest on Deferred Abatement Payments. Any Abatement
Payments delayed for a period of one (1) year or more as a consequence of the
tracking and/or reconciliation principles set forth above will be subject to simple
interest at the mid-term Applicable Federal Rate in effect on the date the
Abatement would have otherwise become due and payable but for the provisions
of this Section 5(b). The Host Community will calculate and document such
interest and will submit the calculations and payment, if applicable, to NSP.
Schedule 5(clCiv
I sets forth an example of an Abatement Payment and delayed
payment principles and an interest calculation example for delayed Abatement
Payments.
I
,v) Examples of Tracking, Payment and Reconciliation Principles.
(A) Schedule 5(c)MI11 sets forth an example of the tracking,
payment and reconciliation principles described above, without an
Extraordinary Investment Abatement. (Note that this example does not
include an example of the Extraordinary Investment principles.)
(B) Schedule 5(c)(v)(2) sets forth the reconciliation principles
described in Section 5(c)(iii) above with an Extraordinary Investment
Abatement and a subsequent year Stabilization Payment offset.
(d) Duration of Tax Abatement. The tax Abatement period, if any, shall not
exceed ten (10) years, except as allowed by Applicable Law and as required herein. The
tax Abatement period will commence, if at all, in the first year in which the Host
Community remits Abatement Payments. In the event of termination of this Agreement,
all provisions of Section 5 of this Agreement which authorize the tax Abatement shall
also terminate, except for Abatement Payments that are determined to be owed to NSP by
the Host Community as of the date of termination.
1959470vl 7
11' 114 111 01111 IF IiIiiIIIE'll
(e) Understandinia Reaardina Tax Abatement. It is the intent and
understanding of the Parties hereto that this Agreement, and specifically the provisions of
Section 5 of this Agreement, shall be deemed a valid, legal, binding and enforceable
abatement agreement for economic development with respect to the Host Community as
contemplated by and under MrNN. STAT. §§ 469.1813 through 469.1815, as amended. In
the event that for any reason the Parties' intent and understanding as expressed herein
above is determined to be incorrect and the Host Community is unable to perform its
payment obligation(s) under this Section 5 due to any final, enforceable and non -
appealable Judicial, legislative or other authoritative dc'Leri-nination(s) that the Abatement
Payments cannot be made in accordance with Applicable Law as required by this
Agreement, then NSP (i) may, at its option, terminate this Agreement within thirty (30)
-days of such deterinination(s), and (ii) shall be contractually entitled to repayment of
Stabilization Payments by the Host Community of the lesser amount of either (A) the
Stabilization Payments made by NSP to the Host Community pursuant to this Agreement,
or (B) the Abatement amount(s) that the Host Community is unable to remit to NSP
pursuant to the circumstances described above. The foregoing contractual repayment
right shall survive any termination of this Agreement.
(f) Disoute Resolution. Any disputes between the Parties with respect to the
impact of actions by the DOR or the Minnesota legislature that affect the Stabilization
Payment and Abatement terms and calculations set forth in this Agreement subsequent to
the date of this Agreement will, be resolved by the dispute resolution provisions of
Section 11 below.
i. Future Utilitv Provertv Acquisitions and Divestitures.
(a) General Replacements and Additions. General replacements and additions
to Stabilization Property (those not defined as an Extraordinary Investment) in property
tax assessment years subsequent to the Base Year will be taxed under the agreed upon
property tax parcel identification number tax statement(s) set forth in Exhibit B to this
Agreement pursuant to the DOR Rules and procedures. In this instance there shall not be
a change to the Base Year Amount.
(b) Divestiture. A "divestiture" in assessment years subsequent to the Base
Year will require reduction of the stabilized Base Year Amount as a consequence of -
(i) sale of a material portion, but less than all, of the Stabilized Property, or
(ii) destruction or significant impairment of a material portion of the Stabilized Property,
or (iii) an event that renders a plant generating unit that is Stabilized Property
substantially non -operational. The Parties hereto shall negotiate in good faith to calculate
and agree upon such a reduced Base Year Amount. If no such agreement can be reached,
the Parties shall utilize the dispute resolution provisions set forth in Section 11 of this
Agreement.
7. Extraordinary Investment(sl.
(a) Definition. "Extraordinary Investment" is defined as a capital
investment in the plant pursuant to a specific plant utility capital investment project that
1959470v1 8
OM I
results in a "significant increase" in the Market Value of the Stabilization Property from
points in time described in Section 7(b). A "significant increase" is agreed by the Parties
to equal an amount in excess of seven percent (7%) over the Market Value of the
previous year (or years in the case of multi-year capital investment projects), subject to
the aggregation of construction work in process that is placed in service and valued by
the DOR over a period of years (in which case Abatement Payments may be subject to
deferral, and ultimately subject to the provisions of Section 7(b)(iii) below). The Host
Community will generally receive written notice of such planned investment from NSP
one (1) year in advance of the physical on-site con-,moncemcnt of any s,1,Ch Extrlaorulr,-ary
Investment project. Extraordinary Investment projects will be tracked and aggregated for
yearly comparison hereunder. The definition of Extraordinary Investment shall not
include the general replacements and additions described in Section 6(a) above.
(b) Ai) -plication. An Extraordinary Investment (i) applies to a specific plant
utility capital investment project, whether new equipment or replacement/refurbishment
of existing equipment, and (ii) represents a significant increase (as defined in Section 7(a)
above) of the DOR Market Value of the Stabilization Property between a "Year X"
reference point -in -time and a subsequent "Year X+ construction completion or a CWp
(defined below) year" (the "El Year") comparison point -in -time:
(i) The "Year X" reference point -in -time is the Market Value of the
Stabilization Property for the assessment year immediately prior to the
commencement year of the Extraordinary Investment project.
(ii) The comparison point is the Market Value of the Stabilization
Property for the assessment year immediately after the year the Extraordinary
Investment project is classified as "in service" or valued as Construction Work in
Process ("CWIP"). For example, if Stabilization Property is classified "in
service" or as taxable CWIP in 2007, it would be assessed as of assessment year
2008, taxes payable 2009.
(iii) If utility property taxes paid by NSP exceed the Base Year Amount
and result in an Abatement arising from an Extraordinary Investment, then the
following provisions apply in determining whether Abatement Payments and
Stabilization Payments are required to be accrued and/or remitted in any
subsequent year during the remainder of the Tenn:
(A) Any unpaid Abatement Payments accrued up to the year of
completion of the Extraordinary Investment remain subject to the tracking
and reconciliation provisions described in Section 5 above. Any
Abatement calculated (i) while a specific plant utility capital investment
project is unfinished and -in the process of completion, where such project
is reasonably anticipated in the aggregate to exceed seven percent (7%) of
the "Year X" reference year, and (ii) certain property of the unfinished
project is placed "in service" for DOR Market Value purposes in a year
that is prior to the completion year, the Abatement Payment will be
1959470vl 9
WINNOW" "EV, a 8 "WRIZ
deferred until completion of the project and the calculation as to whether
the aggregate amount of the project resulted in a "significant increase."
(B) If utility property taxes exceed the Base Year Amount and
result in an Abatement arising from an Extraordinary Investment, the
amount of the utility property tax above the Base Year Amount which
arose as a consequence of the Extraordinary Investment will not be subject
to the Abatement payment provisions of this Agreement, but will be
track. -d and applied again st any future in
subsequent years.
(C) If utility property taxes exceed the Base Year Amount as a
result of an Extraordinary Investment, NSP and the Host Community will
discuss renegotiation and continuation of this Agreement with the
following options:
(i) Terminate this Agreement. In such event, NSP will
continue to remit its utility property taxes as calculated through
normal procedures and the past Abatements preserved in the
tracking process will be reconciled and paid in accordance with the
tracking and reconciliation provisions of this Agreement, or
(ii) Negotiate an amendment to this Agreement based
on mutually agreeable adjusted stabilization base levels.
i. Additional Covenants of the Parties,
(a) General Cooperation Covenants. To the extent allowed by Applicable
Law, NSP and the Host Community shall cooperate and assist each other in the
implementation, maintenance, defense and performance of this Agreement. Each of the
Parties shall promptly advise the other Parties with respect to any information, data and
contacts with respect to Applicable Laws or any related matter that is received,
communicated to or brought to the attention of NSP and/or the Host Community that
could be reasonably anticipated to affect the operation of this Agreement. All actions
taken or omitted to be taken by NSP and/or the Host Community shall be with the intent
to directly include the other Party in all matters arising from or in connection with the
subject matter and purpose(s) of this Agreement. It is understood and agreed that the
Parties shall act in a manner that is consistent with the intent and purposes of this
Agreement.
(b) Grants of Future Abatements. From and after the date hereof through the
end of the Term, the Host Community shall not take any action or omit to take any action
that does or have the effect to limit or eliminate the amount of the Abatement Payments
that are authorized to be made to NSP hereunder, including (i) the grant of any tax
abatements under MINN. STAT. §§ 469.1813 through 469.1815, as amended, which would
have any priority over, or otherwise abrogate in any way, the tax abatement granted with
respect to this Agreement, (ii) adopt any Applicable Law contrary in any way to the
1959470v1 10
purpose, intent and operation of this Agreement with respect to the tax abatement
described herein, or (iii) otherwise take any actions, or omit to take action that, though
lawful, would breach the obligations of the Host Community under this Agreement with
respect to the tax abatement described herein. In furtherance of the foregoing, any tax
abatement resolution adopted by the Host Community, or any resolution that is adopted
that may affect the Host Community's performance of its Abatement Payment obligations
to NSP hereunder, shall specifically state that any and all third party abatement
arrangements by (or on behalf of) the Host Community shall be subordinate to the right
T
i
Of N" -]P to rel iV 2),IU-L-ILcmciii Paymonts.
9. Termination, Effect of Termination,
(a) Termination. This Agreement shall be tenninated prior to the end of the
Tenn ofthis A Agreement in the event of any or more of following:
9 L
(i) The joint written agreement of NSP and the Host Community; or
(ii) This Agreement or any significant provision hereof is determined
to be unlawful, unenforceable or otherwise in material contravention of
Applicable Law, including the circumstances described in Section 5(e); or
(iii) The Rule changes currently under consideration by the DOR are
not enacted, effective under Applicable Law and implemented on or before
December 31, 2008; or
(iv) The abatement legislation enacted in the 2006 legislative session
by the State of Minnesota is amended or repealed such that the payment of
Abatement obligations by the Host Community as contemplated by this
Agreement are no longer authorized or lawful, in whole or in part; or
(v) The property tax system in the state of Minnesota is abolished or
fundamentally revised by the legislature or the DOR, such that, for example, NSP
Stabilization Property is no longer valued by the DOR or such valuation system is
substantially changed, including a (x) material change in the tax classification
rates enacted and/or promulgated, as applicable, by the Minnesota legislature (or
its delegated agency or political subdivision), or (y) material legislative change in
the definition of state assessed property. The level of materiality (by amount
and/or percentage) will be resolved in discussions between the Host Community
and NSP; or
(vi) A generating unit ceases operations or an event of Force Majeure
occurs which interrupts operations of the power plant for a period of more than
one (1) year; or
(vii) The Host Community becomes entitled to any form of substitute
revenue due to reduced utility property tax revenues, such as a "replacement" tax,
fee or similar revenue source enacted to supplement revenue to the Host
Community and other governmental bodies. A tax, fee or other similar revenue
1959470v1 1 1
'a 'IEW li'11`15 I
source, such as a sales tax, that does not affect only utilities (or its customers) or
select industries, and is broad based, will not constitute a "replacement tax" (i.e.,
local governmental aid, state program aid, or other general state aids). For
purposes of this Agreement, an electric or gas franchise fee will not constitute a
substitute revenue; or
(viii) If NSP or the Host Community breaches certain material
representations and/or warranties under this Agreement, in each case only at the
option of t1 -c- non-brc.-chili- Pal-ty.
I
(b) Effect of Tennination.
(i) Payment obligations are discontinued, except the payments that are
due and owing on the termination date, or would become due and owin',, by virtue
of reconciliation (as if the Abatement tracking and reconciliation amounts were
payable at the end of the Term).
(ii) If payments are unlawful, the Parties are to be put in a position that
is fair and equitable. May include repayment by Parties receiving, monies prior to
-the termination. j
(c) Extension. During or subsequent to the Term, the Parties may discuss
extensi6n'of this Agreement and reach mutually agreeable terms for such an extension.
The Parties acknowledge and understand that (i) there is no assurance that the Parties will
reach mutually agreeable terms for an extension of this Agreement, and (ii) any such
extension, to become effective, will require a writing executed by each of the Parties.
(a) Representations of NSP. NSP hereby represents and warrants the
following:
(i) OrRanization. NSP is a corporation duly organized, legally
existing and in good standing under the laws of the State of Minnesota. NSP has
all requisite power and authority, corporate and otherwise, to own, operate and
lease its properties and assets and to conduct its business as it is now being
conducted.
(ii) Due Authorization. The execution, delivery and performance of
this Agreement, including the documents, instruments and agreements to be
executed and/or delivered by NSP pursuant to this Agreement, and the
consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary action, corporate or otherwise. This
Agreement has been duly and validly authorized, executed and delivered by NSP
and the obligations of NSP hereunder and thereunder are or will be upon such
execution and delivery valid, legally binding and enforceable against NSP in
accordance with its terms.
1959470vl 12
(iii) No Breach. NSP has full power and authority to otherwise
perforin its obligations under this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and
thereby will not: (A) violate any provision of the Articles of Incorporation, as
amended and restated, or Bylaws, as amended, (or comparable governing
documents or instruments) of NSP, (B) violate any Applicable Law applicable to
NSP, (C) except as set forth in Schedule 10(a)(iii) which is attached hereto and
incorporated by reference herein, require any filing with, permit from,
authorlizabiOn, consent or approval of, or the of al' no',"'coo 'LO, 'Iy It or
entity, or (D) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give another party any rights of
termination, cancellation or acceleration) under any of the teens, conditions or
provisions of any note, bond, mortgage, indenture, license, franchise, pennit
(including..,, but not limited to, any permits, approvals or authorizations of any
governmental body), leased real estate lease, benefit plan or other contract to
which NSP is a party, or by which it or any of its properties or assets may be
bound.
(iv) Permits, Consents and Approvals. NSP has obtained any and all
permits, authorizations, consents, approvals and/or waivers required for NSP to
lawfully and without violation of Applicable Law or breach or violation of any
contractual or other right of any third person or entity (excluding the other Parties
to this Agreement) (A) execute and deliver this Agreement, and (B) perform and
otherwise consummate the transactions contemplated by and pursuant to this
Agreement, including all covenants hereof.
(b) Representations of the Host Community. The Host Community represents
and warrants:
(i) Organization. The Host Community is a political body duly
organized and legally existing under the laws of the State of Minnesota. The Host
Community has all requisite power and authority, corporate and otherwise, to
own, operate and lease its properties and assets and to conduct its governmental
affairs as they are now being conducted.
(ii) Due Authorization. The execution, delivery and performance of
this Agreement, including the documents, instruments and agreements to be
executed and/or delivered by the Host Community pursuant to this Agreement,
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary action, corporate or otherwise.
This Agreement has been duly and validly authorized, executed and delivered by
the Host Community and the obligations of the Host Community hereunder and
thereunder are or will be upon such execution and delivery valid, legally binding
and enforceable against the Host Community in accordance with its terms.
(iii) No Breach. The Host Community has full power and authority to
otherwise perform its obligations under this Agreement. The execution and
1959470vl 13
delivery of this Agreement and the consummation of the transactions
contemplated hereby and thereby will not: (A) violate any governing documents,
as amended, (or comparable governing documents or instruments) of the Host
Community, (B) violate any Applicable Laws applicable to the Host Community,
(C) except as set forth in Schedule 10(b)(iii) which is attached hereto and
incorporated by reference herein, require any filing, with, permit from,
authorization, consent or approval of, or the giving of any notice to, any person or
entity, or (D) result in a violation or breach of, or constitute (with or without due
jap of 4"ir- a',ii1t lor
tii or bc,11,I), a dc,,�!
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, franchise, permit
(including, but not limited to, any permits, approvals or authorizations of any
governmental body), leased real estate lease, benefit plan or other contract to
which the Host Community is a party, or by which it or any of its or assets may be
bound.
(iv) Permits, Consents and A-Pnrovals. The Host Community has
obtained any and all permits, authorizations, consents, approvals and/or waivers
required for the Host Community to, without violation of Applicable Law or
breach or violation of any contractual or other right of any third person or entity
(excluding NSP), (A) -execute and deliver this Agreement, and (B) perform and
otherwise consummate the transactions contemplated by and pursuant to this
Agreement, including all covenants hereof.
(v) Compliance with Abatement Statutes. The Host Community has
acted and complied in accordance with the Abatement Statutes such that the Host
Community has the specific legal, binding and valid authority to perform in
accordance with this Agreement and, specifically, to perform and make payments
to NSP in accordance with the provisions of Section 5 hereof. In furtherance of
the foregoing, the Host Community has, concurrently upon the execution and
delivery of this Agreement, delivered to NSP the written action(s) of the Host
Community authorizing resolutions and enactments, which were adopted in
accordance with Applicable Law of the State of Minnesota and attached hereto as
Exhibit A to this Agreement, including those evidencing compliance with the
Abatement Statutes.
(vi) Cumulative Tax Abatement Obkations. Schedule 10(b)(vil sets
forth any and all (i) Abatements adopted and granted by the Host Community as
of the date hereof, (ii) the amount of such Abatements in the aggregate and by
year (current and future), and (iii) the amount of the current levy and a
computation of the percent of the current levy of the aggregate of such
Abatements in each year that is or may be affected by such Abatement.
11. Dispute Resolution. In the event a dispute arises under this Agreement, except
with respect to (i) equitable remedies that may be pursued under this Agreement (such as,
without limitation, requiring the production of documents and information required under
Section 5(b)(iii) and preventing certain third -party abatement grants described in Section 8(b)),
19594700 14
and (ii) late payment of undisputed Stabilization Payment(s) and/or Abatement Payment(s), such
disputes shall be resolved in the manner set forth in this Section 11. Disputes with respect to
property taxes generally are not subject to this Section 11 and shall be determined in accordance
with the provisions set forth in Sections I and 12(q) of this Agreement.
I
(a) Dispute Procedure(s): Discussion and Mediation. If a dispute arises under
this Agreement, including any question regarding the existence, validity, interpretation or
I
termination hereof, which is not described as an exception in this Section 11, the Host
sol
Section 11 by -ivina-, written notice to the other Party. The Parties shall enter into
giving L
discussions concerning this dispute. If the dispute is not resolved as a result of such
discussion in ten (10) days, an attempt will be made to resolve the matter by a fornial
nonbinding mediation with an independent neutral mediator agreed to by the Parties. If
the Parties cannot agree on a mediator within a period of ten (10) days after expiration of
the ten (10) day period for resolution by discussion, then either Party may apply to any
court of competent jurisdiction for appointment of a mediator, which appointment shall
be binding and non -appealable. Upon commencement of the mediation process, the
Parties shall promptly communicate with respect to a procedure and schedule for the
conduct of the proceeding and for the exchange of documents and other information
related to the dispute. The mediation process shall be deemed ended if the dispute has
not been resolved within thirty (30) days after appointment of the mediator.
(b) Dispute Resolution: Arbitration. All claims, disputes or other matters in
question between the Parties to this Agreement that are subject to the provisions of this
Section 11 which are not resolved by mediation in accordance with Section I I (a) within
thirty (30) days after appointment of mediator shall be submitted for, subject to and
decided by arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association currently in effect as of the date of this Agreement
("AAA Rules"), except to the extent those rules are inconsistent with this Section 11.
Any arbitration must be held in Minneapolis, Minnesota by a single arbitrator mutually
selected by the Parties hereto or, if the Parties hereto cannot agree on the appointment of
such arbitrator within ten (10) days following the date notice of the dispute is given by a
Party to the adverse Party, an arbitrator selected according to the AAA Rules. The
arbitrator's award shall be final, conclusive and binding upon all Parties to this
Agreement, and judgment may be entered upon it in accordance with the Federal
Arbitration Act in any court of general jurisdiction in Minnesota, or in any United States
District Court having jurisdiction in Minnesota. The arbitrator shall be required to
provide in writing to the Parties the basis for the award or order of such arbitrator, and a
court reporter shall record all hearings (unless otherwise agreed to by the Parties), with
such record constituting the official transcript of such proceedings. NSP and the Host
Comm -unity specifically desire this arbitration clause to be governed by the United States
Federal Arbitration Act, and not by the arbitration laws of any state. The arbitrator shall
establish an allocation of cost, damages and expenses between the Parties as set forth in
Section I I (d) below.
(c) Jurisdiction and Venue. NSP and the Host Community agree and consent
that any legal action, suit or proceeding seeking to enforce this Section 11, this
1959470vl 15
Agreement or to confirm or contest any arbitration award shall be instituted and
adjudicated solely and exclusively in any court of general jurisdiction in Minnesota, or in
the United States District Court having jurisdiction in Minnesota and NSP and the Host
Community each agree that venue will be proper in such courts and waive any objection
which they may have now or hereafter to the venue of any such suit, action or proceeding
in such courts, and irrevocably consent and agree to the jurisdiction of said courts in any
such suit, action or proceeding. NSP and the Host Community further agree to accept
and acknowledge service of any and all process which may be served in any such suit,
1, 1 1 '-, l.I.t tax 1 t:'... I'-- " � I - L' 1 '-' u� 1 S' ail 'Llso 'i .. "'" - '- iI -
k 'D
them shall be deemed in every respect effective service of process or notice upon thein, in
any suit, action, proceeding or arbitration demand, if given or made: (i) according to
Applicable Law, (ii) according to the AAA Rules, (11i) by a person over the age of
eighteen who personally serves such notice or service of process on NSP or the Host
Community, as the case may be, or (1v) by certified mail, return receipt requested, mailed
to NSP and the Host Community, as the case may be, at their respective addresses set
forth in this Agreement.
(d) Enforcement. In the event of arbitration filed or instituted between or
among the Parties pursuant to this Section 11, the prevailing Party, who is determined by
the arbitrator to- have substantially prevailed over the other Party with respect to the
material issues presented for resolution to the arbitrator, will be entitled to receive from
the adverse Party an amount awarded by the arbitrator for costs, damages and expenses,
including reasonable attorneys fees, incurred by the prevailing Party in connection with
that action or proceeding, whether or not the controversy is reduced to judgment or
award.
(e) Applicability. For the avoidance of doubt, the dispute resolution
provisions above shall not apply to disputes between the Host Community and NSP
which arise out of the utility property taxes assessed on the Wright County property tax
statements described in Section I of this Agreement.
12. Miscellaneous.
(a) Survival of Re-oresentations, Covenants and A2reements.
Notwithstanding any provision to the contrary set forth in this Agreement: (i) each of the
representations and warranties of the Parties contained in this Agreement and in any
exhibit, schedule, certificate, instrument or document delivered by or on behalf of any
one or more of the Parties hereto pursuant to this Agreement and the transactions
contemplated hereby shall survive the expiration or termination of this Agreement for a
period of twenty-four (24) months after such expiration or termination, after which no
claim for indemnification for any misrepresentation, or for the breach or falsity of any
representation or warranty under this Agreement, may be brought, and no action with
respect thereto may be commenced, and no Party shall have any liability or obligation
with respect thereto, unless a claim was made by one Party against another and the claim
made specifies with particularity the misrepresentation or a breach of representation or
warranty claimed on or before the expiration of such period, and (ii) the covenants and
agreements arising from, incident to or in connection with this Agreement shall survive
19594700 16
any expiration or termination of this Agreement indefinitely, until such covenants and
agreements are either fully satisfied or require no further performance or forbearance, or
the rights or obligations of a Party hereto expire on a specific or referenced date by the
terins hereof
(b) Notices. All notices, demands and other communications provided for
hereunder shall be in writing and shall be given by personal delivery, via facsimile
transmission (receipt telephonically confirmed), by nationally recognized ovemilclit
},
receipt requested, sent to each Party, at its address as set forth below or at such other
address or in such other manner as may be designated by such Party in written notice to
each of the other Parties. All such notices, demands and communications shall be
effective when personally delivered, one (1) business day after delivery to the overnight
courier, upon telephone confirmation of facsimile transmission or upon receipt after
dispatch by mail to the Party to whom the same is so given or made:
If to the City:
With a copy to:
City of Monticello
Monticello, Minnesota
Attention: City Administrator
Facsimile:
City Attorney
Facsimile:
If to NSP: Northern States Power Company
414 Nicollet Mall
Minneapolis, Minnesota 55401
Attention: Tax Services
Facsimile: (612) 330-6335
Attention: Community Relations
Facsimile: (612) 573-9388
Northern States Power Company
414 Nicollet Mall, 5th Floor
Minneapolis, Minnesota 55402
Attention: General Counsel
Facsimile: (612) 215-4501
1959470vl 17
jj:'jji JCW�J, 7
With a copy to: Briggs and Morgan, P.A.
2200 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
Attention: Michael J. Grimes
Facsimile: (612) 977-8650
(c) Entire Agreement. This Agreement, including the documents,
entire agreement of the Parties hereto and supersedes all prior discussio"'S' no,"T""Ll"LL'L"'Ons,
correspondence, agreements, understandings and representations, oral or written, between
the Parties hereto with respect to the subject matter hereof.
(d) Amendments. No purported amendment, modification or wa,;A7-r of a',117
provision of this Agreement or any of the documents, instruments or agreements to be
executed by the Parties pursuant hereto shall be effective unless in a writing specifically
referring to this Agreement and signed by all of the Parties hereto.
(e) Successors and Assims. This Agreement shall be binding upon and inure
to the benefit of the Parties hereto and theirrespective successors and permitted assigns;
-provided, however, except as hereinafter provided in this section, nothing in this
Agreement is to be construed as an authorization or right of any Party to assign its' rights
or delegate its duties under this Agreement without the prior written consent of the other
Parties hereto. Notwithstanding the foregoing, in its sole discretion, NSP may assign its
rights in and/or delegate its duties under this Agreement to (i) an affiliate of NSP, or
(ii) pursuant to a merger or exchange transaction or in a transaction in which all or
substantially all of the Stabilization Property of NSP located within the Host Community
is sold to a third party. In the event of such an assignment of rights and/or delegation of
duties, all references to NSP, as applicable to the assignment, in this Agreement shall also
be deemed to be references to the person to which this Agreement is assigned; provided
that no such assignment and/or delegation shall relieve the assignor of any of its duties or
obligations hereunder.
(f) Fees and Expenses. Each Party hereto shall pay their own fees and
expenses incurred in connection with negotiating and preparing this Agreement and
consummating the transactions contemplated hereby, including but not limited to fees and
disbursements of their respective attorneys, accountants and other advisors.
(g) Governiniz Law and Venue. This Agreement, including the documents,
instruments and agreements to be executed and/or delivered by the Parties pursuant
hereto, shall be construed, governed by and enforced in accordance with the internal laws
of the State of Minnesota, without giving effect to the principles of comity or conflicts of
laws thereof. Any disputes between or among the Parties to this Agreement shall be
venued in a District Court of the State of Minnesota.
(h) Counterparts and Facsimile/Electronic Signature. This Agreement may be
executed in one or more facsimiles, counterparts or electronic signature counterparts of
1959470vl 18
4i" `•^ i;r I •�"t. i i►t � k � 6+s I 1" " ��� „"� k t ( 4i3
any form, all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts, facsimiles or electronic signatures have been
executed by each of the Parties and delivered to the other Parties, it being understood that
all Parties need not sign the same counterpart, facsimile or form of electronic
transmission.
(i) Headings and Certain Terms,. The headings of the articles, sections and
subsections of this Agreement are intended for the convenience of the Parties only and
Ui
.,"ieul iii i1 ., iii.�t.l 0
intelyrCt;..'tlon of the provisions hereof. The terms "di115 A rccrncat," "11 1'vUt;" "i1Ci lil }'
"hereunder," "hereto" and similar expressions refer to this Agreement as a whole and not
to any particular article, section, subsection or other portion hereof and include the
schedules and exhibits hereto and any document, instrument or agreement executed
andi'or delivered by the .Parties pursuant hereto. Tile telilS "117C1Ud11.(.,," "L'1Cl.1Cl " or
"includes" shall mean including without limitation.
0) Severabilitv. In the event that any provision of this Agreement is declared
or held by any court of competent jurisdiction to be invalid or unenforceable, such
provision"shall be severable from, and such invalidity or unenforceability shall not be
construed to have any effect on, the remaining provisions of this Agreement, unless such
invalid or unenforceable provision goes to the essence of this Agreement, in which case
the entire Agreement may be declared invalid and not binding upon any of the Parties.
(k) Parties in Interest. Nothing expressed• or implied in this Agreement is
intended or shall be construed to confer any rights or remedies under or by reason of this
Agreement upon any persons or entities other than the Parties and their respective
permitted successors and permitted assigns. Nothing in this Agreement is intended to
relieve or discharge the liabilities of any third person to any of the Parties.
(1) Waiver. The terms, conditions, representations and covenants contained
in this Agreement, including the documents, instruments and agreements executed and/or
delivered by the Parties pursuant hereto, may be waived only by a written instrument
executed by the Party waiving compliance. Any such waiver shall only be effective in
the specific instance and for the specific purpose for which it was given and shall not be
deemed a waiver of any other provision hereof or of the same breach or default upon any
recurrence thereof No failure on the part of a Party hereto to exercise and no delay in
exercising any right hereunder shall operate as a waiver thereof nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise thereof or
the exercise of any other right.
(m) Construction. The Parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any Party by
virtue of the authorship of any of the provisions of this Agreement. The Parties intend
that each representation and covenant contained herein shall have independent
significance. If any Party has breached any representation or covenant contained herein
1959470v1 19
in any respect, the fact that there exists another representation or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which the Party has
not breached shall not detract from or mitigate the fact that the Party is in breach of the
first representation or covenant.
(n) Specific Performance. The Parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is accordingly
Agrcicnaciat and to en,"orce spcei-Lically the tcrins and provisions horcof in any COLUt Of 1110
Z::1 L�
United States or of the State of Minnesota, this being in addition to any other remedy to
which they are entitled at law or in equity.
(o) Condition to Effectiveness of Agreement. In order for this A-rcomcrt to
become effective (1) NSP must execute and deliver this Agreement to the Host
Community, and (ii) the Host Community must execute and deliver this Agreement to
NSP.
(p) State General Tax. The Parties understand and agree that this Agreement
is not intended to and does not apply to the state general tax, as described and set forth on
the Wright County property tax statement.
(q) Savings Clause. In the event that there is a valuation of utility property
that is challenged in accordance with Applicable Law and such challenge results in a
settlement adjustment or an adjudicated adjustment of utility property taxes on Stabilized
Property, the tracking calculations for Stabilization Payments Abatement Payments, and
deferrals shall be adjusted to reflect the settlement or adjudication.
(r) Re�ular Meetings. Each of NSP and the Host Community will appoint
one or more authorized representatives and provide the name(s) and contact information
of such representative(s) in writing to the other Party promptly following the execution
and delivery of this Agreement. Such authorized representatives shall meet as often as
deemed reasonably necessary, but not less than once each calendar year during the Term,
to discuss matters arising from, in connection with or incident to this Agreement.
19594700 20
I: . ... ... 0 � F111171� ilig,111
I ON 1
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by duly authorized representatives as of the day, month and year first above written.
P_
Its
1959470vl
By
Mayor
Attest:
Clerk -Treasurer
Council Administrator
I'll I �9!5 09 11 F1 ii 711
MWI�u
Definitions List - Appendix I
l�
Exhibit A Host Community Abatement Authorization and Enactment (NSP Property Taxes)
Tj ,,) -
Exhibit B Base Year Amount and County Parccl ldeii1L*1L'ic',1f!,-m I — , '1101S
for Property Stabilization
Schedules
Schedule -5(c,"fiAl'-
lav) — Example of Interest Calculatiois on Doycd Abalcn:=lt Paynacnts
Schedule 5(c)(v)(1) — Tracking, payment and reconciliation principles
Schedule 5(c)(v)(2) — Example Proof of Extraordinary Investment
Schedule I 0(a)(iii) — Required filings, permits, authorizations, consents, approvals and notices of
NSP.
Schedule 10(b)(iii) — Required filings, permits, authorizations, consents, approvals and notices of
Host Community.
Schedule 10(b)(vi) — Host Community Tax Abatement Information
1959470vl
110101113101!
"AAA Rules" has the meaning set forth in Section I l(b) of this Agreement.
"Abatement" has the meaninc, set forth in Section 5( )(ii) of this Agrecnicnt.
"Abatement Payment" has the ineaninc, set forth in Section 5(b)(11) of this Agreement.
1.� ID
"Abatement Payment Threshold" has the meaning set forth in Section 5(c)(ii) of this
Agreement.
"Abatement Statutes" has the meaning set forth in the Recitals to this Agreement.
ID
"Agreement" has the meaning set forth in the introductory paragraph of this Agreement.
"Applicable Law" or "Applicable Laws" shall mean any and all laws (including all
statutory enactments and common law), ordinances, constitutions, regulations, statutes, treaties,
rules, codes, standards, licenses, certificates, franchises, permits, requirements and injunctions
that have been adopted, enacted, implemented, promulgated, ordered, issued, entered or deemed
applicable by or under the authority of any governmental body having jurisdiction over a
specified person or entity (or the properties or assets of such person or entity).
"Base Year" has the meaning set forth -in Section 2(a) of this Agreement.
"Base Year Amount" has the meaning set forth in Section 2(b) of this Agreement.
"C P" has the meaning set forth in Section 7(b)(ii) of this Agreement.
"City" has the meaning set forth in the introductory paragraph of this Agreement.
"County" or "Wright County" has the meaning set forth in the "Purpose" statement to
this Agreement.
"DOR" has the meaning set forth in the Recitals to this Agreement.
"El Year" has the meaning set forth in Section 7(b) of this Agreement.
"Excess Payments" has the meaning set forth in Section 5(c)(iii) of this Agreement.
"Extraordinary Investment" has the meaning set forth in Section 7(a) of this
Agreement.
"Force Majeure" shall mean fire, floods, explosion, catastrophe, accident, declared war,
riot, Acts of God, insurrection, strike, and Applicable Laws that prevent performance, to the
extent (i) such event of Force Majeure is beyond the reasonable control of the Party claiming
Appendix A (I of 2)
1959470vl
111 "1
110",
Force Majeure, and (ii) the Party claiming Force Majeure gives prompt written notice of the
same to the other Party.
"Host Community" has the meaning set forth in the introductory paragraph of this
Agreement.
"Market Value" is the DOR apportioned value attributable to Stabilization Property.
Market Value may also be referred to in this Agreement as the "apportioned value", the "DOR
market value", "apportioned by the DOR", "valued by the DOOR", "valued by the State of
Minnesota", "DOR assessed", and/or phrases of similar usage and import.
"NSP" has the meanino, set forth in the introductory paragraph of this Agreement.
"P.-rty" or "Parties" has the meaning set forth in the int.ro:luctoiy Paragraph of this
Agreement.
"Rule" or "Rules" has the meaning set forth in the Recitals to this Agreement.
"Stabilization Payment" has the meaning set forth in Section 5(b)(1) of this Agreement:
"Stabilization Property" or "Stabilized Property" has the meaning set forth in
Section 4(a)(i) of this Agreement.
"Term" has the meaning set forth in Section 3 of this Agreement.
1959470vl
11,10,14"'1120,11
Lt ,
PROPERTY
Exhibit A (1 of
0111#121-141
BASE TEAR AMOUNT
,'.
COUNTY PARCEL IDENTIFICATION NUMBERS
FOR STABILIZATION PROPERTY
Exhibit (1 of�}
1959470v1
�T,14113)111111=
+
Interest on Abatement Payments that are delayed for a period of one (1) year or more will
be calculated in accordance with the following example:
In 2010 utility property taxes payable by NSP to the Host Community are $120. The
Base Year Amount is $100. The difference of $20 between the 2010 amount payable and the
Base Year Amount is subject to Abatement. There are no previous accumulated Abatements and
the Abatement did not arise from an Extraordinary Investment. Based on the foregoing, there is
an Abatement amount of $20. The Abatement Payment Threshold is $15 ($100 X 15%),
therefore $15 is not currently payable; however, the $5 difference between the Abatement
amount and the Abatement Payment Threshold is payable by the Host Community in two (2)
equal installments of $2.50 on or before July 31, 2011 and December 31, 2011.
Interest on the $15 Abatement Payment Threshold amount, if it remains unpaid until July
31, 2019 ($7.50) and December 31, 2019 ($7.50) (assumed dates after termination of the
Agreement on December 31, 2017), and with the further assumption that the payment is made by
the Host Community to NSP as Reconciliation Payments in 2019), would accrue as follows:
Amount
August 1, 2011— July 31, 2012 ($15.00 X 0%) 1 $ -0-
August 1, 2012 — December 31, 2012
($7.50 X 5% X 153/365) + ($7.50 X 0%) .157
January 1, 2013 — July 31, 2019
($15.00 X 5% X 2343/365)
August 1, 2019 — December 31, 2019
($7.50 X 5% X 153/365)
SM
BM
Total Interest on Delayed Abatement Payment
Amount' $5.13 (rounded)
I / No interest for a one (1) year period after the normal Abatement payment date(s) pursuant to Section 5(c)(iv) of
the Agreement. The payment due dates for Abatement Payments are July 31 and December 31 of the year following
the accrual of the Abatement.
' / 5% is an assumed mid-term Applicable Federal Rate ("AFR") on the payment due date. This rate will change
based on the AFR rates published from time to time by the Internal Revenue Service.
1959470vl
SCHEDULE 5(c)(v)(1)
Tracking, payment and reconciliation principles
TECHNICAL CALCULATI®NS/IMPACT MEMORANDUM (Base Amount=100)
' Per property tax statement
2 Tracking Provision
3 Abatement Payment (Lag Year concept)
4 Stabilization Payment (Lag Year concept)
5 Assumes 115% Abatement Payment Threshold
1959470v1
Credit tae
Tracking$ Credit
NSP
Payment3 Payment°
% Base
Year
Prop Tax
Pd'
(cumulative)
by
LGUs by NSP
(cumulative)
1
70
120
0
20
0
5 310 0
0
15
2
80
115
ti
30
0
15 20 0
0
15
3
90
110
0
25
0
10 10 0
0
15
4
95
105
0
20
0
5 5 0
0
15
5
100
100
0
15
0
0 0 0
0
15
6
100
100
0
15
`.
0
0 0 0
0
15
7
105
95
5
10
0
0 0 0
5
10
8
110
90
15
0
0
0 0 0
1.5
0
9
'115-' '
80
30
' 0
0 ' 0 20
1 , .:.
0
10
120 '"
100
5
0
0
0 0 0
10
1015
�/
N/A
35 1 20
N/A
Reconciliation Payment (LGU)
0
Proof
A
B
Tax Paid
985
1015
NSP Stabilization Payment
65
20
LGU Abatement Payment
(35)
(35)
LGU Reconciliation Payment
15
10 (x) 100 (Aggregate Base
1000
1000
Year Amount)
' Per property tax statement
2 Tracking Provision
3 Abatement Payment (Lag Year concept)
4 Stabilization Payment (Lag Year concept)
5 Assumes 115% Abatement Payment Threshold
1959470v1
EXAMPLEPROOF'
OF
EXTRAORDINARY INVESTMENT RECONCILIATION
FOR
REVENUE STABILIZATION AGREEMENT
SECTION 5(c)(iii)
Proof of Calculations Per Section 5(c)(iii)
Utility Property Tax Paid
Stabilization
Abatement
Stabilization
Abatement
1,260
Less: Aggregate Base Year
Property
Payment by
Payment by
Tracking
Tracking El
Less: Net El Abatement/
Tax Paid
LGU
NSP
Credit
Abatement
10"' Year Results
$985
$35
$65
$15'
Year 11 (EI)4
120
-0-
0
151
$202
Year 12 (Stabilization)4
90
-0-
-0-315'
103
Totals
$1,195
---$35
$65
S15'
S10
Proof of Calculations Per Section 5(c)(iii)
Utility Property Tax Paid
$1,195
Stabilization Payments
65
Total
1,260
Less: Aggregate Base Year
Amount (12 x $ 100)
1,200
Excess Payments
60
Less: Net El Abatement/
Stabilization ($20 - $ 10)
(10)
Less: Abatement Payments
(35)
Reconciliation Payment
Amount Due
$15
I / $15 tracking of pre -EI Abatement is deferred and payable per Section 7(b)(iii)(A)
2/ $20 tracked El Abatement not payable but used for offset against future stabilization
(See Section 7(b)(iii)(B))
3/ $10 stabilization amount ($100 - $90) offset against the $20 tracked El Abatement
(age Section 7(b)(iii)(A)); $10 is deferred (age Section 7(b)(iii)(B))
4/ For example purposes only: Assuming extended Agreement and no termination of the Agreement under
Section 7(B)(3)(c)
1959470vl
11111- ;,�11-migm
111 11 ''�Jrjj 1110
I III ii �Ifi
MID i ) T mom]
1959470vl
fla-IININYWI Wal
60?717 MWI,
WT, WI - "Orf
IN �MIM MMITNITTL Tv
Host Community.
1959470vl
1959470vl