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07-11-2005 EDA MINMEETING OF THE ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY HELD AT THE ELK RIVER CITY HALL MONDAY, JULY I I, 2005 Members Present: President Gongoll, Commissioners Dwyer, Farber, Gumphrey, Klin~ing, Motin and Tveite Members Absent: None Staff Present: Director of Economic Development Catherine Mehelich, Assistant Director of Economic Development Heidi Steinmetz, and Recording Secretary Jessica Miller Call Meeting To Order Pursuant to due call and notice thereof, the meeting of the Economic Development Authority was called to order at 5:30 p.m. by President Gongoll. 2. Consider Agenda MOVED BY COMMISSIONER MOTIN AND SECONDED BY COMMISSIONER TVEITE TO APPROVE THE JULY 11, 2005 EDAAGENDA. MOTION CARRIED 7-0. 3. Consider Consent Agenda MOVED BY COMMISSIONER TVEITE AND SECONDED BY COMMISSIONER MOTIN TO APPROVE THE CONSENT AGENDA AS FOLLOWS: 3.1. JUNE 13, 2005 MINUTES 3.2. CHECK REGISTER 3.3. BALANCE SHEET 3.4. REVENUE/EXPENDITURE REPORT MOTION CARRIED 7-0. 4. Mike No one appeared for open mike. 5. Northstar Business Park Devel~ment Update Director of Economic Development Catherine Mehelich provided background information on the Northstar Business Park Development. Ms. Mehelich stated that in May the EDA provided comment on the feasibility study and recommended an option that would prepare plans and specifications and platting for the entire business park but only proceed with underground utilities in the first phase. She stated that the Council recently held a public hearing and ordered the improvement. Ms. Mehelich indicated that the preliminary plat and Economic Development Authority Minutes Juts 11, Zoos Page 2 concept has changed slightly in order to accommodate three business prospects. She noted that there is a gas line n,nning through the center of the property that had to be worked around. President Gongoll noted that the gas line easement is not totally restricted in its covering and that it cannot be built on but it can be used as a driveway or parking lot. Ms. Mehelich explained that last month staff informed the EDA of a grant for up to 50% of the capital cost of public infrastnrcnrre from the MN Department of Employment and Economic Development (DEED and the City Council adopted a resolution authorizing the application and certifying the availability of its 50% match. Ms. Mehelich indicated that the grant application was submitted June 22 requesting $495,000 and was based on the entire unprovement project. Ms. Mehelich noted that cities are eligible to receive bonus points in the grant scoring process if the amount requested is below $500,000. Ms. Mehelich stated that in addition to the three prospects wishing to build in the park this fall staff has also received inquiries from two different prospects wishing to build 100,000 - 150,000 square feet manufacturing or office facility on the 9.29 acre lot. Ms. Mehelich indicated that staff has been working with Tom Bray of Briggs and Morgan to prepare a purchase agreement form which outlines the general terms for the sale of the properly within the park as well as statutory requirements for the EDA's sale of the property. 6. Consider Tax Rebate Financing Assistance for Medical Extrusion Technologies Inc Assistant Director of Economic Development Heidi Steinmetz stated that Medical Extrusion Technologies, Inc. (MET) is requesting Tax Rebate Financing (II2F) assistance in order to expand the company's operations to Elk River. Ms. Steinmetz indicated that MET was established in 1990 and manufactures plastic rubing and profiles for medical, commercial, telecommunications, and recreational applications. She stated that the company currently owns a 20,000 square foot facility in Marietta, CA and is looking for a suitable location in Minnesota to expand and move closer to their clients in this area with a "sister" facility. Ms. Steinmetz explained that the company currently employs 30 full-time staff with an average hourly wage of $23.00 per hour and within two years of the expansion the company proposes to create 23 new jobs with a minimum hourly wage of $15.00. Ms. Steinmetz stated that MET proposes to construct a 20,000 square foot light industrial building on a 2.39 acre lot in the Northstar Business Park in which the company would occupy 50% of the space and lease out the balance of the space. A public hearing is required for the EDA to sell property. Ms. Steinmetz indicated that staff is proposing financing assistance in the form of a pay-as- you-go TRF note to MET in an amount up to 100% of the land cost at $208,217. The amount has been established based on providing a land cost write down of $25,000 per new job to be created at a minimum hourly wage of $15.00. She stated that staff recommends that the TRF assistance be provided 50/50 by the city and Sherburne County with the comparry receiving 90% of the annual TRF and the EDA receiving 10% of the annual TRF to reimburse itself for expenses not included in the sale price of $2.00/sf for a maximum of 15 years. The city's portion of the TRF provided to the company would be in the amount of $104,108. Economic Development AuthorityMinutes Jay 11, Zoos Page 3 Councilmember Motin questioned if the 15-year timeframe would be shortened if the taxes gained faster than expected. Councilmember Moon also questioned why the timeframe has been set at 15 years as he thought it was the city's policy to use 10 years. Ms. Steinmetz indicated that the 15 years is a conservative estimate and that staff chose 15 yeazs due to new state statutory policies in place with the TRF financing. Ms. Mehelich noted that State Starute allows 20 years and the purpose of the 15 years is to allow the EDA to recapture a portion of the annual abatement for costs not included in the sale price, rather than mcreasing the out of pocket sale price to the companies. Ms. Steinmetz indicated that MET has submitted the city~s TRF application and fee and per the city's policy, any requests over the amount of $25,000 require financial review and but- foranalysis by the city's financial advisor. President Gongoll welcomed Tom and Rikki Bauer, owners of MET and asked them to explain a little about their company. Tom Bauer, owner Medical Extrusion Technologies - explained the product that his company produces. Mr. Bauer also explained that the reason they would like to locate in Minnesota is to be closer to their clients in this azea. He stated that they would like to rent out the additional space to companies who compliment theirs but MET would eventually like to grow into it. MOVED BY COMMISSIONER FARBER AND SECONDED BY COMMISSIONER GUMPHREY TO DIRECT STAFF TO COMPLETE THE DUE DILLIGENCE FOR THE TAX REBATE FINANCING REVIEW PROCESS AND RECOMMEND THAT THE CITY COUNCIL CALL FOR A PUBLIC HEARING ON THE TAX REBATE FINANCING ASSISTANCE REQUEST AND BUSINESS SUBSIDY FOR MEDICAL EXTRUSION TECHNOLOGIES, INC. MOTION CARRIED 7-0. MOVED BY COMMISSIONER KLINZING AND SECONDED BY COMMISSIONER TVEITE TO CALL A PUBLIC HEARING OF THE EDA FOR MONDAY, AUGUST 8 AT 5:30 P.M. REGARDING THE SALE OF APPROXIMATELY 2.39 ACRES OF EDA PROPERTY IN THE NORTHSTAR BUSINESS PARK TO MEDICAL EXTRUSION TECHNOLOGIES, INC. MOTION CARRIED 7-0. Consider Tax Rebate Financing Assistance for Crystal Distribution Inc Director of Economic Development Catherine Mehelich indicated that Crystal Distribution, Inc. (CDI) is requesting Tax Rebate Financing ('IRF) assistance and sale of EDA property in order to relocate and expand the company's operations to Elk River. Ms. Mehelich stated that CDI fabricates sheet metal into custom curb adapters which are used to replace existing roof top equipment with new roof top equipment. She stated that the company currently employs 31 full-time employees and within two yeazs of expansion the company proposes to create 15 new jobs with a minunum hourly wage of $15.00. The company currently leases 22,OOOsf in Maple Grove and is seeking a suitable location within the northwest metro azea to relocate and expand in time for their cturent lease expiration in Mazch 2006. Economic Development Authority Minutes July 11, 2005 Page 4 Ms. Mehelich indicated that CDI is proposing to construct a 30,000sf light industrial building on a 3.7 acre lot in the Northstar Business Park in which they would occupy 100% of the space. She noted that the 3.7 acre lot would also accommodate an additional 12,000sf for CDI's fixture expansion. Ms. Mehelich stated that the property is proposed to be sold for the purchase price of $2.00 per square foot with exception of the property that is encumbered by the Northern Natural Gas line easement. Ms. Mehelich explained that staff is proposing financing assistance in the form of apay-as- you-go TRF note to CDI in an amount up to 100% of the land cost at $276,940. The amount has been established based on providing a land cost write down of $25,000 per new job to be created at a minimum hourly wage of $15.00. She stated that staff recommends that the TRF assistance be provided 50/50 by the city and Sherburne County with CDI receiving 90% of the annual TRF and the EDA receiving 10% of the annual TRF to reimburse itself for expenses not included in the sale price of $2.00/sf for a maximum of 15 years. The city's portion of the TRF to be provided to the company in the amount of $138,470. Ms. Mehelich indicated that CDI has submitted the city's TRF application and fee and per the city's policy, any requests over the amount of $25,000 require financial review and but- for analysis by the city's financial advisor. President Gongoll introduced Pat O'Brien and his wife Bobbi Jo and asked them to explain their company. Pat O'Brien, owner Crystal Distribution, Inc. -explained the product that his company produces. Mr. O'Brien indicated that CDI is growing very quickly and they need room to expand for their cturent employees. He stated that the timeline is their maim concern as they must meet the deadlines before their lease expires in order to make this work. MOVED BY COMMISSIONER FARBER AND SECONDED BY COMMISSIONER TVEITE TO DIRECT STAFF TO COMPLETE THE DUE DILLIGENCE FOR THE TAX REBATE FINANCING REVIEW PROCESS AND RECOMMEND THAT THE CITY COUNCIL CALL FOR A PUBLIC HEARING ON THE TAX REBATE FINANCING ASSISTANCE REQUEST AND BUSINESS SUBSIDY FOR CRYSTAL DISTRIBUTION, INC. MOTION CARRIED 7-0. MOVED BY COMMISSIONER MOTIN AND SECONDED BY COMMISSIONER FARBER TO CALL A PUBLIC HEARING OF THE EDA FOR MONDAY, AUGUST 8 AT 5:30 P.M. REGARDING THE SALE OF APPROXIMATELY 3.7 ACRES OF EDA PROPERTY IN THE NORTHSTAR BUSINESS PARK TO CRYSTAL DISTRIBUTION, INC. MOTION CARRIED 7- 0. 8. Consider Tax Rebate Financing Assistance for Alliance Machine Inc Director of Economic Development Catherine Mehelich indicated that Alliance Machine, Inc. is requesting Tax Rebate Financing (IRF) assistance and sale of EDA property in order to relocate and expand the company's operations to Elk River. Ms. Mehelich stated that Alliance Machine, Inc. conducts light, precision machining of plastic and metal components for national and international clients in the aerospace, medical, Economic Development Authority Minutes Duty 11, Zoos Page 5 defense, and computer industries. She stated that the company currendy employs 30 full- time staff and within two years of expansion the company proposes to create nine new jobs with a minimum hourly wage of $15.00. The company currently leases 18,000sf in Maple Grove and is seeking a suitable location within the northwest metro to relocate and expand in time for lease expiration. Ms. Mehelich explained that Alliance Machine, Inc. is proposing to construct an 18,000sf light industrial building on a 2.84 acres lot in the Northstar Business Parkin which they would occupy 100% of the space. She noted that the 2.84-acre lot will also accommodate an additional 10,000sf future expansion. The property is proposed to be sold for the purchase price of $2.00 per square foot with the exception of the properly that is encumbered by the gas line easement. Ms. Mehelich indicated that staff is proposing financing assistance in the form as a pay-as- you-go TRF note to Alliance Machine, Inc. in an amount up to 100% of the land cost at $207,956. The amount has been established based on providing a land cost write down of $25,000 per new job to be created at a minimum hourly wage of $15.00. She stated that staff recommends that the TRF assistance be provided 50/50 by the city and Sherburne County with Alliance Machine receiving 90% of the annual TRF and the EDA receiving 10% to reimburse itself for costs not included in the $2.OOsf sale price for a maximum of 15 years. The city's portion of the TRF assistance provided to the company would be $103,978. President Gongoll welcomed Bryan Provo, VP of Alliance Machine, Inc. and asked him to explain a little about their company. Bryan Provo, owner Alliance Machine, Inc. -explained that their company is busting at the seams. He indicated that many of their employees already live in the Elk River area and he believes locating their business in Elk River will also help them to gain and retain employees. MOVED BY COMMISSIONER MOTIN AND SECONDED BY COMMISSIONER KLINZING TO DIRECT STAFF TO COMPLETE THE DUE DILLIGENCE FOR THE TAX REBATE FINANCING REVIEW PROCESS AND RECOMMEND THAT THE CITY COUNCIL CALL FOR A PUBLIC HEARING ON THE TAX REBATE FINANCING ASSISTANCE REQUEST AND BUSINESS SUBSIDY FOR ALLIANCE MACHINE, INC. MOTION CARRIED 7- 0. MOVED BY COMMISSIONER KLINZING AND SECONDED BY COMMISSIONER DWYER TO CALL A PUBLIC HEARING OF THE EDA FOA MONDAY, AUGUST 8 AT 5:30 P.M. REGARDING THE SALE OF APPROXIMATELY 2.84 ACRES OF EDA PROPERTY IN THE NORTHSTAR BUSINESS PARK TO ALLIANCE MACHINE, INC. MOTION CARRIED 7-0. 9. Consider Tax Rebate Financing Assistance for Classic Acrylics Inc Assistant Director of Economic Development Heidi Steinmetz indicated that Classic Acrylics has been working with staff since the fall of 2004 to identify a site and financing assistance to relocate and expand the company's current operations to Elk River. Ms. Steinmetz stated that Classic Acrylics specializes in custom plastic fabrication for point- of-purchase displays. She stated that the company is owned by three brothers, Stuart, Ron, Economic Development Authority Minutes July 11, 2005 Page 6 and Tom Patterson. Ms. Steinmetz indicated that the company currently employs 13 full- time staff and within two years of expansion the company proposes to create five new jobs with a minimum hourly wage of $15.00 exclusive of benefits required bylaw. She slated that Classic Acrylics is proposing to construct a 20,000sf light industrial building on a 2.48 acres lot in Elk River Business Park, occupying 100% of the space. She noted that the lot will also accommodate an additiona15,000sf future expansion. Ms. Steinmetz indicated that staff is proposing financing assistance in the form of spay-as- you-go Tax Rebate Financing (I'RF) note to the company in an amount up to $150,000 which is equal to approximately 77% of the land cost. The amount of assistance has been established based on providing a land cost write down of $30,000 per new job to be created at a minimum hourly wage of $15.00 exclusive of benefits required bylaw. Ms. Steinmetz noted that the amount Classic Acrylics is eligible for per new job created is at $30,000 rather than the $25,000 because staff began working with Classic Acrylics in November prior to decisions made on Northstaz Business Park. Ms. Steinmetz stated that staff is recommending that the TRF assistance be provided 50/50 by the city and Sherburne County with the company receiving 100% of the annual TRF for a maximum period of 10 years. The city's portion of the TRF assistance provided to the company would be $75,000. Ms. Steinmetz noted that Classic Acrylics has submitted the city's TRF application and fee and per the city's TRF policy, any requests over $25,000 requires financial review and but-for analysis by the city's financial advisor. President Gongoll welcomed Stuart Patterson, owner of Classic Acrylics and asked that he explain his company to the EDA. Stuart Patterson, owner Classic Acrylics -explained what his company produces and who his clients are. Mr. Patterson indicated that is has been great working with city staff and he looks forward to relocating his business to Elk River. Commissioner Tveite questioned what happens if the goals for new jobs to be created are not met. Director of Economic Development Catherine Mehelich explained that according to state law, the companies have two years to meet the job requirements and if they are not met, the City Council can chose to grant aone-year extension and if they are still not met the company's assistance would be suspended or repaid. MOVED BY COMMISSIONER FARBER AND SECONDED BY COMMISSIONER DWYER TO DIRECT STAFF TO COMPLETE THE DUE DILLIGENCE FOR THE TAX REBATE FINANCING REVIEW PROCESS AND RECOMMEND THAT THE CITY COUNCIL CALL FOR A PUBLIC HEARING ON THE TAX REBATE FINANCING ASSISTANCE REQUEST AND BUSINESS SUBSIDY FOR CLASSIC ACRYLICS. MOTION CARRIED 7-0. 10. Consider EDA Commissioner Appointment to Energy City Commission Commissioner Klinzing indicated that she would like President Gongoll to serve on the Energy City Commission as the EDA representative as she believes he will represent the city well. President Gongoll suggested that President of the EDA be appointed to serve as the EDA representative on the Energy City Commission by title rather than byname. MOVED BY COMMISSIONER KLINZING AND SECONDED BY COMMISSIONER FARBER TO APPOINT THE PRESIDENT OF THE Economic Development Authority Minutes Page 7 July 11, 2005 ECONOMIC DEVELOPMENT AUTHORITY TO SERVE AS THE EDA REPRESENTATIVE TO THE ENERGY CITY COMMISSION. MOTION CARRIED 7-0. 11. Other Business President Gongoll thanked the city for their contribution towards the Fourth of July Celebration. He indicated that the event was an overwhelming success and it wouldn't have been possible without the assistance of city staff, especially the Police Department, Street Department, and the Parks and Recreation Department. 12. Adjournment There being no other business, PRESIDENT GONGOLL ADJOURNED THE MEETING. The meeting of the Elk River Economic Development Authority adjourned at 6:29 p.m. Submitted by: ~~ ~~