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08 14 2006 EDA MINMEETING OF THE ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY HELD AT THE ELK RIVER CITY HALL MONDAY, AUGUST 14, 2006 Members Present: President Gongoll, Commissioners, Dwyer, Farber, Klinzing, Motin and Tveite Members Absent: Commissioner Gumphrey Staff Present: Director of Economic Development Catherine Mehelich, Community Developmem Director Scott Clark, and Recording Secretary Debbie Huebner 1. 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 TVEITE AND SECONDED BY COMMISSIONER FARBER TO APPROVE THE AUGUST 14, 2006 EDA AGENDA. MOTION CARRIED 6-0. 3. Consider Consent Agenda MOVED BY COMMISSIONER KLINZING AND SECONDED BY COMMISSIONER FARBER TO APPROVE THE CONSENT AGENDA AS FOLLOWS: 3.1. JULY 10, 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 for open mike. 5. Consider Year 2007 EDA Budget and Resolution Regarding EDA Lew Director of Economic Development Catherine Mehelich reviewed details of the 2007 proposed EDA budget. MOTION BY COMMISSIONER FARBER AND SECONDED BY COMMISSIONER DWYER TO APPROVE THE PROPOSED 2007 EDA Economic Development Authority Minutes August 14, 2006 Page 2 BUDGET AS PRESENTED BY STAFF IN THE MEMO TO THE EDA DATED AUGUST 14, 2006. MOTION CARRIED 6-0-. MOTION BY COMMISSIONER KLINZING AND SECONDED BY COMMISSIONER MOTIN TO APPROVE RESOLUTION 06-02, A RESOLUTION ESTABLISHING THE 2007 TAX LEVY FOR THE ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF ELK RIVER, MINNESOTA. MOTION CARRIED 6-0. President Gongoll requested that staff provide information in an upcoming packet on the EDA's program fund balances. 6. Director of Economic Development Catherine Mehelich introduced Sandy Voight, Project Manager for Technology Finance from the Initiative Foundation. Ms. Voight provided an overview of the ENSA project. She noted that the project includes fourteen counties which are divided into 4sub-groups: the Metro Fringe (Sherburne and Wright Counties), the East Central (Pine City area), North Central (Brainerd area), and the Benton and Stearns Counties area. She explained the Metro Fringe analysis resulted in 57 potential industries for the Sherburne-Wright Counties area and then using a ranking system, ultimately narrowed those down to six for further exploration. The goal is to locate two industries as aresult of the analysis tool for expansion, startup, or relocation; one in Sherbturne County and one in Wright County. A Request for Proposals (RFP) for a consultant to complete the comprehensive research phase resulted in a cost of $10,000. Ms. Voight explained that the Initiative Foundation proposes to contribute $7,500 of the cost, and requests that the participating groups come up with the rema;ning $2,500. Wright County has conututted to half of the amount ($1,250), and Sherburne County and Big Lake have each conurtitted up to $500. Elk River is asked to contribute up to $500 to cover the remaining cost. Ms. Voight explained the next steps in the process and benefits of having access to the data base information. President Gongoll asked what the time frame is for the project. Ms. Voight stated that as soon as the funds are committed, Phase I will begin in 30 days. President Gongoll asked if the City would have rights to the data base. Ms. Voight stated that Elk River would have access to all the data which is in an Access format. Commissioner Klinzuig expressed her concern for competition between communities and asked how they could be assured that one community would not be "pitted" against another in competing for a business. Ms. Voight stated that their intent is to have as many "players as possible at the table". She noted that if a business was interested in Elk River, they would not attempt to change their mind and go to another community. Commissioner Farber stated that the cost was very muvmal in comparison to other venues they have pursued for attracting industry. Commissioner Tveite noted that they would have access to the database and give the EDA rights to pursue prospects on their own. Ms. Voight stated that they would have access to additional data, not just data for this particular project. Ms. Mehelich stated that Big Lake and Elk River would directly benefit from the project, since there is no one cunrently at Sherburne County who can currently use the infom~ation. EconomicDevelopment AuthoriryMinutes August 14, 2006 Page 3 For business recruitment purposes. Ms. Mehelich requested that the competition issue be discussed by the Metro Fringe group agenda on their neat meeting, as well as on the other regions' agendas. MOTION BY COMMISSIONER DWYER AND SECONDED BY COMMISSIONER FARBER TO AUTHORIZE THE EXPENDITURE OF UP TO $500 FOR THE ENSA PROJECT. MOTION CARRIED 6-0. Consider Purchase Option Policy for Norrhs[az Business Park Ms. Mehelich stated that staff has received inquires from a couple of local manufacturers indicating their interest in relocating to construct facilities between 60,000 to 125,000 square feet; one in 12 months, the other in 24 months. She noted that only Lot 4, Block 1 (9.29 acres) in the city-owned Northstar Business Park would accommodate the proposed project size. Also there is a privately-owned 18-acre lot in Sandpiper Business Park. Ms. Mehelich explained that one of the manufacturers is interested in purchasing the Northstar Business Park lot. She reviewed issues related to entering into a purchase option with the company. Conutussioner Tveite questioned why Lot 1, Block 1 was not being considered. Ms. Mehelich explained that the 8.88 acres of developable property are divided by the gas line easement and a maximum 40,000 square foot building footprint could likely be built on the site. Commissioner Tveite felt that the down payment should benon-refundable and that he would support requiring at least apre-concept plan with building elevations. Commissioner Dwyer concurred the down payment should benon-refundable. He felt that if both prospects are interested in the property, the EDA should opt for the best offer with the best terms. He suggested anon-azbitrage agreement also be required, so that the buyer could not turn azound and sell the property for a profit to someone else. Cotrunissioner Motin stated that he was not concerned about the building elevations, since there were standards in place for the Business Park zoning district. Community Development Director Scott Clark stated that the reason it was suggested to consider requiring a site plan and building elevations was to ensure that the end product was what they had envisioned. He noted that the standards establish minimum quality, and that the design should be tied to the agreement in the beginning. Commissioner Klinzing stated that she was in favor of securing an option with a prospect who would be ready to build in 12 months. Commissioner Dwyer stated that asix-month time period was more realistic. Chair Gongoll stated that he concurred with Commissioner Motin that a site plan was not necessary at this point, but he felt that Scott's suggestion for building elevations was good, so that the client would understand what they were looking for. Commissioner Moon stated that they have received feedback that the city's standards are too stringent. Commissioner Dwyer stated that he felt the EDA owes it to the existing companies in the Business Park to require high standards. He felt that asix-month time period was not out of line, and that if the companywanted an extension, an additional payment could be required. He felt that if six months did not work for the company, they would still have an opportunity to sell the property in 2007. Commissioner Tveite concurred that an extension should include an additional fee. Commissioner Dwyer asked if an option payment of 10% Economic Development Authority Minutes August 14, 2006 Page 4 was proposed. Comtissioner Tveite stated he felt 10% down and an additional 10% for a six-month extension was appropriate. President Gongoll proposed scheduling a future planning session to identify potential business park properties. Commissioner Klinzing noted that staff will be looking at the gravel muting areas for future development. Strategic Industrial Marketing Plan URdate Ms. Mehelich provided a report on progress to date for updating the EDA' Strategic Industrial Marketing Plan. She noted that according to Wolf Marketing & Media, 95% of the feedback received in the interviews was positive. The Marketing Committee will meet to review the research data and to firm up objectives for the update. Ms. Mehelich stated that she anticipates the completed plan will be presented at the EDA's regular September meeting. 9. Update on Incubator Location Commitmem - K-Netica Ms. Mehelich provided an update on events leading to the EDA's request to K-Netica to require them to repurchase the shazes of stock owned by the EDA. She discussed the response from K-Netica CEO Steven Pederson, describing the company's situation and request for the EDA to reconsider its action. Staff would like direction from the EDA as to how to proceed. President Gongoll stated the letter was sent to him as Chair of the EDA, but that he would disclose that he still is an advisor to K-Netica and holds a position as having an option on some warrants in the company. He stated that he had asked Ms. Mehelich if Mr. Pederson's and Mr. Jacob's comments could be presented to the EDA for comments and/or discussion. Commissioner Dwyer stated it is mentioned several times in the letter that there was no space in Elk River to relocate. He felt that K-Netica perhaps did not look for space in good faith, although they indicate in the letter that they did. He noted that when Mr. Rousher was before the EDA, he indicated that one of the reasons for their move was attracting talent to their organization. He felt their azguments in the letter are somewhat contradictory of their comments when they were before the EDA. Commissioner Dwyer stated that they did not end their lease early, and that it was expiring on its own. He stated that the company had three months to look for space. He felt that they signed an agreement and should be bound to it. He felt that if K-Netica wished to find someone to buy the City's shazes, so be it. He felt that if they did not like the terms of the agreement when they signed it, they should not have signed it. President Gongoll stated that K-Netica indicated that the spaces they found in Elk River were twice as much as they were willing to pay and felt that is why they ended up in the Earle Brown property. He noted that they will be sub-leasing their space there. The EDA discussed Mr. Pederson's comments, as well as comments received from Harlon Jacobs of Genesis. Commission Motin stated he is only wiling to consider deferral if the company can show significant hazdship, and if not, he felt the EDA should proceed with their request. He did not feel the City could speculate on future value of the stocks. He disagreed with the company's arguments, as well. Economic Development Authority Minutes Augur[ 14, 2006 Page 5 Commissioner Tveite stated that he felt K-Netica's letter attempts to draw similarities between their situation and Bixby's which was incorrect, since the City was not able to physically provide a building to meet Bixby's needs. Staff provided several options to K- Netica, but they were not interested. It was the consensus of the EDA directing s[aff to proceed with payment of the location commitment requiremem from K-Netica. 10. Update on Sub-Committee Exploring Sherburne County Economic Development Entity Commissioner Dwyer stated that the Sub-Committee has completed their recommendation regarding an Economic Development entity for Sherburne County. Their recommendation includes the following: • Utilize an EDA format • Cities may opt in or out to participate • Staff will remain the same, using a consultant • The County Board will make the final decision on use of funds and budget • The commission will consist of nine members, including two from the County Board, and the remaining members will represent other areas of the County and business community. • Bylaws and committee selection will be approved by County Board Commissioner Dwyer stated that he felt Elk River's participation was important for the County as a whole. President Gongoll asked if SCEDA will be discontinued. Commissioner Dwyer stated yes. 11. Date Center Project Update Ms. Mehelich stated that the data center they have been working with has announced they have selected the City of Elk River to locate their facility. She stated that the name of the business cannot be disclosed at this time, since the project is owned and leased by a separate financial entity. She explained that 12 - 14 months lead time is required for the electrical generators needed for the project. Details will be provided to the EDA as they become available. 12. Other Business -None 13. Adjournment There being no other business, President Gongoll adjourned the meeting. The meeting of the Elk River Economic Development Authority adjourned at 6:50 p.m. Submitted by: Joan Schmidt City Clerk