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08-08-2005 EDA MINMEETING OF THE ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY HELD AT THE ELK RIVER CITY HALL MONDAY, AUGUST 8, 2005 Members Present: President Gongoll, Commissioners, Dwyer, Farber, Gumphrey, Motin and Tveite Members Absent: Commissioner Klinzing Staff Present: Assistant Director of Economic Development Heidi Steinmetz, City Administratox Pat Klaers, and Recording Secretary Debbie Huebner 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 FARBER AND SECONDED BY COMMISSIONER DWYER TO APPROVE THE AUGUST 8, 2005 EDA AGENDA WITH THE FOLLOWING ADDITION: 10. OTHER BUSINESS -HANDOUT REGARDING MINNESOTA FABRICATION AND MACHINE MICRO LOAN MOTION CARRIED 6-0. 3. Consider Consent Agenda MOVED BY COMMISSIONER TVEITE AND SECONDED BY COMMISSIONER MOTIN TO APPROVE THE CONSENT AGENDA AS FOLLOWS: 3.1. JULY 11, 2005 MINUTES 3.2. CHECK REGISTER 3.3. BALANCE SHEET 3.4. REVENUE/EXPENDITURE REPORT MOTION CARRIED 6-0. 4. Open Mike No one appeared for open mike. i. Consider Business Incubator Tenant Lease Extension K-Netica Assistant Director of Economic Development Heidi Steinmetz provided background information regarding Business Incubator tenant K-Netica. She stated that Joe Roushar of Economic Development tluthority Minutes Page 2 August 8, 2005 K-Netica is requesting an extension of their sublease agreement for asix-month term through February 2006. Staff recommended approval of the six-month sublease extension at the rate noted in the staff report to the Commission dated August 8, 2005. Joe Roushar, Chief Technology Officer of K-Netica -Provided information regazding the company's software and the various types of applications. He stated that their product reduces call time, and increases accurary and efficiency. He stated that half of the company's operations axe conducted at the Incubator site and the remaining is done in Finland and Wisconsin. Commissioner Dwyer asked if Mr. Roushar was interested in a longer sublease period, since they have asked for extensions several times already. Mr. Roushar stated no, that they prefer to come back and report to the Commission. MOTION BY COMMISSIONER TVEITE AND SECONDED BY COMMISSIONER FARBER TO GRANT ASIX-MONTH SUBLEASE EXTENSION TO K-NETICA, EFFECTIVE AUGUST 21, 2005 THROUGH FEBRUARY 20, 2006 AT THE FOLLOWING CASH/STOCK RENT RATE: $ 4 PER SF CASH RENT ($755.66 PER MONTH) PER SF STOCK VALUE (DIVIDED AMONG BUILDING OWNER, INCUBATOR CONSULTANT, &EDA) $11 PER SF TOTAL RENT VALUE MOTION CARRIED 6-0. 6. Northstar Business Park Development Update Ms. Steinmetz stated that the Improvement Project and Plat Status Report/Schedule is the same as last month. She stated that they have not yet received a response from the Minnesota Department of Employment and Economic Development (DEED) regarding the grant proposal ui the amount of $495,000, but that they should have an answer soon. Public Hearings: Consider Disposition of EDA Property to Provo Enterorises. LLC, 9'Brien Holdings. LLC and Medical Extrusion Technolo ~es. Inc. Ms. Steinmetz explained that the EDA is required to hold a public hearing for the disposition of property to the three companies. A public hearing has been called and advertised in the Elk R1verStarNems for the sale of three lots of EDA property located in Northstar Business Pazk fox industrial development purposes. Ms. Steinmetz provided a summary of the proposed sale as follows: 1. Provo Enterprises. LLC (Alliance Machine. Inc.) Lot size: 2.84 acres Purchase Price: $207,956 Project: Build 18,000 squaze foot building, retain 30 jobs, create 9 new jobs 2. Q'Brien Holdings LLC (crystal Distribution. Inc.l Lot size: 3.7 acres Purchase Price: $276,940 Project: Build 32,000 squaze foot building, retain 31 jobs, create 15 new jobs Econoailc Development duthoriTy btinutes Page 3 august 8, 2005 3. Medical Extrusion Technologies Inc (META Lot size: 2.64 acres Purchase Price: $229,996 Project: Building 20,000 square foot building, create 23 new jobs Ms. Steinmetz then provided details of the purchase agreements for each of the three companies as noted in the information packet to the EDA dated August 8, 2005. President Gongoll opened the public hearing. There being no comment from the public, President Gongoll closed the public hearing. MOTION BY COMMISSIONER GUMPHREY, SECONDED BY COMMISSIONER FARBER TO APPROVE THE RESOLUTIONS AUTHORIZING EXECUTION OF PURCHASE AGREEMENTS BETWEEN THE EDA AND PROVO ENTERPISES, LLC; O'BRIEN HOLDINGS, LLC; AND MEDICAL EXTRUSION TECHNOLOGIES, INC. MOTION CARRIED 6- 0. 8.1. Consider Recommendations to City Council for Approval of Tax Rebate Financinn Assistance to Provo Enterprises LLC (Alliance Machine Inc 1 Mr. Sid Inman of Ehlers & Associates provided a summary of the "But For" analyses for Crystal Distribution, Inc., Medical Extrusion Technologies, Inc., Alliance Machine and Classic Acrylics. Mr. Inman stated that the justification for the use of abatement can easIly be made, considering the return in taxes and jobs. He sated that the EDA is being very conservative in the abatement period of 12 - 15 years, since they are allowed up to 20 years by State Statute. He explained the process used to review the projects to determine their need for assistance. Mr. Inman concluded that the amount of TRF assistance proposed for each of the four projects is justified. Ms. Steinmetz provided a summary of the Alliance Machine project as noted in the staff report to the Commission dated August 8, 2005. She noted that the Sherburne County Board of Commissioners will also consider TRF assistance to Provo Enterprises (.'llliance Machine, Inc.) for the remaining 50 percent of the land cost ($103,978). She noted that the Alliance Machine project scored 41.5 out of 45 possible points on the City's TRF Proposal Review Worksheet. Commissioner Tveite asked how long the company has to provide the new jobs. Ms. Steinmetz stated that State Statute requires the conditions be met within two years of the Certificate of Occupancy. MOTION BY COMMISSIONER GUMPHREY, SECONDED BY COMMISSIONER TVEITE TO RECOMMEND THE CITY COUNCIL APPROVE THE TAX REBATE FINANCING ASSISTANCE TO PROVO ENTERPRISES, LLC (ALLIANCE MACHINE, INC.). MOTION CARRIED 6-0. Economic Development Authorih IVlinutes Page 4 August 8, 2005 8.2. Consider Recommendations to City Council for Approval of Tax Rebate Financing Assistance to O'Brien Holdings LLC (~ystal Distribution, Inc Ms. Steinmetz provided a summary of the Crystal Distribution project as noted in the staff report to the Commission dated August 8, 2005. She noted the Sherburne County Boazd of Commissioners will also consider TRF assistance to O'Brien Holdings, LLC for the remaining 50 percent of the land cost ($138,470). She noted that the Crystal Distribution, Inc. project scored 44 out of 45 possible points on the City's TRF Proposal Review Worksheet. Staff requests that the EDA recommend to the City Council approval of TRF Assistance to O'Brien Holdings, LLC (Crystal Distribution, Inc.). MOTION BY COMMISSIONER FARBER, SECONDED BY COMMISSIONER TVEITE TO RECOMMEND THE CITY COUNCIL APPROVE THE TAX REBATE FINANCING ASSISTANCE TO O'BRIEN HOLDINGS, LLC (CRYSTAL DISTRIBUTION, INC.). MOTION CARRIED 6-0. 8.3. Consider Recommendations to City Council fox Approval of Tax Rebate Finanung Assistance to Medical Extrusion Technologies. Inc. Ms. Steinmetz provided a summary of the Medical Extrusion Technologies, Inc. project as noted in the staff report to the Commission dated August 8, 2005. She noted the Sherburne County Boazd of Commissioners will also consider TRF assistance to Medical Extrusion Technologies for the remaining 50 percent of the land cost ($114,998). She noted that the. project scored 40 out of 45 possible points on the City's TRF Proposal Review Worksheet. Staff requests that the EDA recommend to the City CouncIl approval of TRF Assistance to Medical Extrusion Technologies, Inc. MOTION BY COMMISSIONER MOTIN, SECONDED BY COMMISSIONER FARBER TO RECOMMEND THE CITY COUNCIL APPROVE THE TAX REBATE FINANCING ASSISTANCE TO MEDICAL EXTRUSION TECHNOLOGIES, INC. MOTION CARRIED 6-0. 8.4. Consider Recommendations to City Council for Approval of Tax Rebate Financing Assistance to RST Cayo, LLC (Classic Acrylics- Inc.) Ms. Steinmetz provided a summary of the RST Cayo, LLC (Classic Acrylics, Inc.) project as noted in the staff report to the Commission dated August 8, 2005. She noted the Sherburne County Boazd of Commissioners will also consider TRF assistance to RST Cayo, LLC for the remaining 50 percent of the land cost ($75,000). She noted that the project scored 38.5 out of 45 possible points on the City's TRF Proposal Review Worksheet. Staff requests that the EDA recommend to the City Council approval of TRF Assistance to RST Cayo, LLC (Classic Acrylics, Inc.) MOTION BY COMMISSIONER GUMPHREY, SECONDED BY COMMISSIONER FARBER TO RECOMMEND THE CITY COUNCIL APPROVE THE TAX REBATE FINANCING ASSISTANCE TO RST CAYO, LLC (CLASSIC ACRYLICS, INC.) MOTION CARRIED 6-0. Commissioner Dwyer asked if the EDA would be willing to hold a special meeting to expedite processing of the Provo Enterprises, LLC Micro Loan request (Alliance Machine). Ms. Steinmetz noted that the applicant is also requesting $100,000 in Micro Loan assistance Economic Development.~uthoaty :<tinutes :-lugust 8, 2005 Page 5 from the City. She stated that staff recommends that the EDA Finance Committee review the request prior to an EDA recommendation to the Council. President Gongoll suggested that if necessary, the EDA could review the request at a special EDA meeting. Commissioner Morin stated that he had some concerns that the applicant was requesting both types of assistance from the City. Commissioner Gongoll stated that the request should go through the Finance Committee for their recommendation. Ms. Steinmetz asked Mr. Inman if his "But For" analysis for the company would be affected by the additional financing. Mr. Inman stated that the was small in comparison to their whole package, and should have no direct impact on the "But For" fording. Commissioner Morin noted that the transportation bonding bill has been approved for the Northstar Corridor project and the project will be going to foral design. He stated that $80 million in Federal funds has been included in the 2006 Federal Budget. Consider Year 2006 EDA Budget and Resolution Regarding EDA Levy Ms. Steinmetz reviewed the 2006 projected expenditures and revenues. She noted that the 60/40 split for Personal Services between the EDA and HRA will continue for 2006..Slso, the budget includes a $2,500 contribution to the Initiative Foundation. Ms. Steinmetz discussed the proposed Business Incubator expenses, noting that the Business Incubator continues to be funded since 1997 from repayment of the Tescom loan. She reviewed the current lease agreement with Mr. Larry Hickman and contract with Harlan Jacobs of Genesis Business Centers. Commissioner Dwyer stated that he feels payment to Mr. Jacobs should be 100 percent incentive-based. President Gongoll stated that he felt the retainer was worthwhile, since Mr. Jacobs provides a service. The Commission discussed the issue of a retainer versus an incentive fee, and the state of the Business Incubator Program. Commissioner Tveite suggested decreasing the retainer and including bonuses for filling the three spaces. Commissioner Motin stated that he had concerns with giving incentives and felt a flat rate of $125 a month when all three Incubator spaces were full would be appropriate. He suggested that the Commission look at this issue when the 20071ease with Mx. Hickman expires. President Gongoll stated that the EDA needs to look at what they want to put into the Business Incubator project and what they expect to get out of it. MOTION BY COMMISSIONER FARBER, SECONDED BY COMMISSIONER TVEITE TO APPROVE THE 2006 EDA BUDGET, INCLUDING THE 2006 BUSINESS INCUBATOR BUDGET AS PRESENTED; AND, TO APPROVE RESOLUTION 05-O1, A RESOLUTION ESTABLISHING THE TAX LEVY FOR THE ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF ELK RIVER, MINNESOTA. MOTION CARRIED 6-0. Economic Development Authority Minutes august 8, 2005 10. 9ther Business Page G Ms. Steinmetz provided background information regarding Minnesota Fabrication and Machine Micro Loan and their recent request for the EDA to subordinate the Micro Loan to the company's new lender, Boundary Waters Bank. Ms. Lori Johnson, Finance & Administrative Services Director, suggested language for a motion. MOTION BY COMMISSIONER DWYER, SECONDED BY COMMISSIONER TVEITE TO DIRECT STAFF TO PROCEED WITH DRAFTING OF LANGUAGE FOR A PARTICIPATION AND SUBORDINATION AGREEMENT AND, CONTINGENT UPON THE MICRO LOAN BEING CURRENT, AND THAT THE LOAN BE PAID AT THE END OF THE TWO-YEAR EXTENSION PERIOD, AS PER THE TERMS AND CONDITIONS PREVIOUSLY APPROVED. MOTION CARRIED 6-0. Commissioner Tveite asked if the company would have the right to ask for another extension. Ms. Steinmetz stated that she believes State Statute only allows one extension. 11. Adjournment There being no other business, CHAIR GONGOLL ADJOURNED THE MEETING. The meeting of the Elk River Economic Development Authority adjourned at 6:40 p.m. Su//b~~mitted''b``y:/~ ,~ .(S/iL~/ei XYlicesu.~ Debbie Huebner Recording Secretary