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06 12 2006 EDA MINMEETING OF THE ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY HELD AT THE ELK RIVER CITY HALL MONDAY, JUNE 12, 2006 IVfembexs Present: President Gongoll, Commissioners, Dw~~er, Faxbex, HIinzing, Motin and Tveite. Commission Gmnphxey arrived at 532 p.m. Members tlbsenu None Staff Present: Director of Economic Development Catherine Mehelidi, Assistant Director of Economic Development Heidi Steinmetz, Community Development Director Scott Clark, and Recording Secretary Debbie Huebner 1. Call Meeung_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 JUNE 12, 2006 EDA AGENDA. MOTION CARRIED 6-0. 3. Consider Consent Agenda MOVED BY COMMISSIONER TVEITE AND SECONDED BY COMMISSIONER DWYER TO APPROVE THE CONSENT AGENDA AS FOLLOWS: 3.1. MAY 8, 2006 MINUTES 3.2. CHECK REGISTER 3.3. BALANCE SHEET 3.4. REVENUE/EXPENDITURE REPORT MOTION CARRIED 6-0. 4. Open Mike No one appeared fox open mike. Commissioner Gumphrey arrived at this time (5:32 p.m.) 5. Consider Approval of Contract with ~X/olf Marketing & Media fox Update of Strategic Industrial Marketing Plan Assistant Director of Economic Development Heidi Steinmetz provided background information regarding updating the Strategic Industrial Marketing Plan. The update will Economic Development Authority D4inutes June 12,2006 Page 2 include an assessment of the 2002-2004 Plan and development of a 2007-2009 Action Plan. Three consultants responded to the Request For Proposals; Duckox & Associates, Wolf Marketing & Media, and Barsness Consulting Services. The Commission is asked to accept the Marketing Committee's recommendation to consider Wolf Marketing & Media to facilitate and complete the Plan update. Comnussionex Tveite, Marketing Committee representative, stated that Wolf Marketing & Media was chosen based on three findings: 1) the company has real estate experience, 2) they would provide a "fresh set of eyes", and 3) their cost was the lowest. Cotmmissioner Gumphxey concurred that a new company could bring something new "to the table". President Gongoll asked if staff anticipated afull-scale EDA workshop to discuss the update. Ms. Steinmetz stated that two meetings of the Marketing Comtnittee are proposed. Director of Economic Development Catherine Mehelich stated that there could be possibly be a joint workshop of the EDA and Marketing Committee. She stated that input is needed from the Commission regarding commercial development, and whether ox not the marketing Focus should continue as the "light industrial hub of the northwest metro", or if the desire is to tum their focus to medium-to-large industrial companies and facilities. Commissioner Dwyer stated that he felt the EDA would be able to provide input on marketing incentives at a joint workshop meeting, as well. Ms. Mehelich stated that staff will discuss with the consultant the possibility and tuning of an EDA workshop for additional direction. MOTION BY COMMISSIONER KLINZING, SECONDED BY COMMISSIONER MOTIN TO APPROVE THE CONTRACT WITH WOLF MARKETING & MEDIA FOR UPDATE OF THE STRATEGIC INDUSTRIAL MARKETING PLAN. MOTION CARRIED 7-0. 6. Consider Enforcement of Incubator Location Commitment Clause - K-Netica Ms. Steinmetz stated that staff had received a letter dated May 19, 2006 from K-Netica indicating that the company has relocated to Minneapolis. She provided background information regarding K-Netica as an Incubator tenant since May of 2002, including their product, sub-lease and extensions and efforts made by staff to retain the company in Elk Ricer. She stated that since K-Netica relocated, they axe bound to a location commitment clause as part of the Memo of Understanding between the EDA and K-Netica. Commissioner Dwyer asked what the value of K-Netica's stock was. Ms. Steinmetz stated that it was $1 per share. Commissioner Farber stated that he was not sure why the EDA would not hold them to the clause. Commissioner Tveite stated that K-Netica was offered a number of viable options for relocation in Elk River. He agreed that the company should be held to the clause. Commissioner Motin asked if K-Netica had a stock offering recently, and if not, how was staff able to arrive at a value for the stock. Ms. Steinmetz explained that the amount was determined by the company's latest round of venture capital funding, which was in December 2005. Commissioner Motin noted that the EDA would be owed twice the $1 price of the EDA's 26,451 shares, which would equal $52,901. Economic Development Authority Minutes June 72, 2006 Page 3 President Gongoll provided background information regarding the purpose of the stock option component of the Business Incubator program. He suggested that the Corrnnission consider retaining the stock, as it may become more valuable. Commissioner I{linzing agreed that it should be taken into consideration. Commissioner Gumphrey stated he would support holding K-Netica to the location commitment clause. He stated the EDA is not in the business to make money by investing in stock. Cotrunissionex Tveite stated he also did not feel it was right fox a public entity to speculate in a private compan}-. Commissioner biotin stated that he concurred with Commissioners Gumphrey and Tyeite's comments. He felt the ED~Ys job is to protect the Citds assets and conserve their investment. Commissioner Dwper stated he also felt they should enforce the clause and sell the stocks, and would then be able to recoup their investment back to the EDA. Comnussionex Klinzing questioned whether ox not K-Netica had the funds to pay the EDA, and if legal counsel was required, how much would that cost. She suggested that the EDA inform K-Netica of their intention to enforce the commitment clause and remind the company that they would hate 30 days to respond per the clause. Ms. Steinmetz noted that the amount of stock the EDA owns will need to be recalculated, since K-Netica may have overpaid, and the number is likely 17,000 rather than 26,452. Commissioner Tveite stated that he felt that K-Nedca should be put on notice of die EDA's intent to enforce the clause as soon as possible. MOTION BY COMMISSIONER KLINZING, SECONDED BY COMMISSIONER TVEITE TO ENFORCE THE LOCATION COMMITMENT CLAUSE OF THE MEMO OF UNDERSTANDING DOCUMENT HELD BETWEEN THE EDA AND K-NETICA, WHICH STATES AS FOLLOWS: °°LOCATION COMMITMENT: MANDATORY REPURCHASE; PUT OPTIONS. SO LONG AS EDA IS OWNER OF ANY SHARES OF COMPANY STOCK, THE COMPANY'S HEADQUARTERS AND ADMINISTRATIVE FACILITIES SHALL BE LOCATED WITHIN THE CITY OF ELK RIVER. IN THE EVENT THAT THE COMPANY NO LONGER MAINTAINS ALL SUCH FACILITIES WITHIN THE CITY OF ELK RIVER, THE EDA SHALL HAVE THE OPTION TO REQUIRE THE COMPANY TO REPURCHASE THE SHARES OWNED BY EDA WITHIN 30 DAYS OF WRITTEN DEMAND. THE REPURCHASE PRICE SHALL BE THE LAST PRICE PER SHARE OFFERED IN ANY PRIVATE OR PUBLIC OFFERING AUTHORIZED BY THE BOARD OF DIRECTORS OF THE COMPANY, BUT NOT LESS THAN TWICE THE PRICE USED TO CALCULATE SHARES PROVIDED TO THE EDA UNDER 2.1.(A) OF THIS AGREEMENT." MOTION CARRIED 6-1. President Gongoll opposed. Discuss EDA Business Incubator Program Analysis Econorrilc Development ~uthonty Minu[es June 12,2006 Page 4 Ms. Steinmetz stated that in Pebruan~ ?006, the EDA directed staff to complete an analysis of the Business Incubator program, and also explore options for a new incubator model, ox, investing the program's fund balance (generated from the Tescom loan fund originating from a state program) into some other npe of program, such as an incentive program for energy-related companies. Ms. Steinmetz noted that the analysis was completed using cost-benefit analysis, prospect histore-, and current access to capital. Staff then reviewed details of the analysis and provided a list of four options fox the future of the program. Commissioner Dwyer stated that he felt it was die financial incentives that brought people into the incubator program, not the incubator space. President Gongoll stated that it is frustrating teldng to compete with areas that offer hundreds of thousands of dollars in incentives such as Fargo, and tliexe is no funding available here. He noted that ~C%isconsin uses a portion of the pension fund to invest in new businesses. Ms. Mehelich stated that the most recent research indicates the most successful incubator programs are directly connected to a university system. She stated that it seems to be more about the service, and less about the building. Convnissioner Klinzing stated that she felt it was important to focus on Energy CitS~ for providing incentives to new businesses coming into Elk River using renewable energy and resources, green products, etc. She noted that the proposed Energy City Conference will be very important in bringing in cutting edge technology companies. Commissioner Motin stated he was not sure about using the EDA's limited funding for Energy City-related businesses. He stated that he would consider support for low interest loans, but not grants. He stated that the EDA's focus has always been to expand the Ciry's tax base and create jobs. Commissioner Klinzing stated that energy efficiency helps businesses save on energy costs, and that a loan could be offered as an incentive to help a company save money as an incentive to make the building improvements. President Gongoll asked what the legal implications are regarding use of the Tescom loan funds. Ms. Mehelich stated that they must be spent on economic development. If the EDA decides to do nothing at this time, the funds will continue as part of the EDA's revolving loan fund. Commissioner Tveite stated that more discussion is needed, and that he did not want to see the concept of a business incubator eliminated completely. President Gongoll concurred. Commissioner Dwyer stated that he would support the funds remaining in the revolving loan fund for the time being, and the EDA could pursue Option 3, the "incubator without walls" concept, if a prospect were to come along. Ms. Mehelich stated that this issue will be discussed further next month, and that the topic will go to the Finance Committee this week fox input. Economic Development 9uthonty T'finutes June 12,2006 Page 5 Ms. Mehelich stated that the State has a $SQ000 low interest loan program fox businesses ro make energy°-efficiency improvements to their buidings. She noted that other dries such as Oakdale pace given discounted building permit fees and other fees to encourage constructing "green" buildings. She noted that one out of the four industrial companies that recendp located to Elk River brought up the issue of discounts for using energy efficient technologies. 8. Other Business Community Development Director Scott C1axk pxoyided an update on the Gateway Business Centex studs. He stated that staff will be looking at the land uses, transportation, and an economic development police plan. The study area will also include neighboring properties. Corrunissioner Iilinzing stated that it was her hope chat the City would not be "caught" off guard, as they were oath the Noxthstar Business Park taking oEf so quickly. i\Ir. Clark stated that the advantage was that the Cit}' still has land inventory at the Noxdistax Business Paxk. He stated that the Ciq needs to look at whether or not they want the site up and conning as quickly as possible, ox if they want to take some time fox the market to mature. Mr. Clark stated that he Eeels this is a critical piece of pxoperry and that the City should undertake a process to "do it right". 9. Adiouxnment There being no other business, PRESIDENT GONGOLL ADJOURNED THE MEETING. The meeting of the Elk River Economic Development Authoxiry adjourned at 6:30 p.m. Su//b~~mitted''b``y:// ~ .C~~ iCYC~-~- Recording Secretary