5. EDSR 10-10-2011Item #5.
MEMORANDUM
Kiver
TO: Economic Development Authority
FROM: Annie Deckert, Director of Economic Development
DATE: 10 October 201 I
SUBJECT: Crystal Distribution, Inc. (CDI) proposal
ATTACHMENTS
• CDI request- dated 9-12-11
• CDI proposed expansion & renovation site plan
• Buildable lot- proposed CDI expansion with future expansion options
• Buildable lot- proposed CDI expansion, potential lot split and right-in right-out
access
BACKGROUND
Established in 1994, Crystal Distribution, Inc. (CDI) primarily fabricates sheet metal into
custom curb adapters which are used to replace existing roof top equipment with the new
roof top equipment. The roof top units are sold to heating, ventilation and air conditioning
(HVAC) distributors across the nation and into Canada. The company is owned and
managed by Pat O'Brien and his wife, Bobbie Jo. The company currently employs over 100
full-time staff.
CDI relocated to a 3.7 acre lot in Northstar Business Park in 2005, building a 30,000 square
foot building, with room to expand 12,000 sq. ft.. The lot was purchased at $2/sq. ft for a
total of $276,940 (161,172 sq. ft.) which excluded the portion of the property subject to the
existing recorded easement for the Northern Natural Gas Company (22,702 sq. ft.).
DISCUSSION
CDI initially approached staff in February of 2011 with a proposed 60,000-80,000 sq. ft..
expansion plan. On 9-12-11, CDI submitted a revised proposa130,000 sq. ft. expansion.
This proposal indicates building a portion of the 8.88 developable acre parcel in Northstar
Business Park. CDI is requesting to purchase a portion of the 8.88 acre lot.
Below are staff comments/issues per preliminary review:
If the lot is split, access (off of Twin Lakes Road, or a frontage road on the property)
sewer and water service will need to be made available to the remaining portion of
the parcel.
o From an engineering standpoint, City Engineer does not recommend an
access off of Twin Lakes Road. Access spacing guidelines identified in the
City of Elk River's. transportation plan do not permit an access onto Twin
Lakes Road. The City Engineer has no problem with a frontage road on the
property to provide access to the remainder of the lot
• Based on the proposed addition, a storm sewer line that exists along the current
north property line will need to be relocated around the north side of the building.
• The proposed plan shows dock doors adjacent to a public street which would require
a conditional use permit and extensive screening. This typically takes about 6 weeks
from the date of complete application to City Council review
• The property is owned by the EDA, therefore, before the CUP application would be
considered complete, CDI must purchase the property or the EDA must provide
written support for the application/sign the application
Should the EDA choose to move forward with the sale of a portion of the lot, the costs
below should be discussed with the EDA and negotiated with the applicant:
^ Relocation of storm sewer line- $50,000
^ Water Service- $3,900
^ Sanitary Service - $12,000
^ Turn Lane and entrance (off Twin Lakes Road)- $29,000
^ Frontage road on property- $102,000 (approximately 450 ft. at
$267.00/ft.)
At their meeting on July 11T'' 2011, the EDA discussed their intentions with the lot in
question as it pertained to Spectrum Charter School's request to place a dome on a portion
of the lot. It was the consensus of the EDA that this lot was intended for industrial
development, higher design standards and that the dome would decrease visibility, therefore
bringing development down. Additionally, at their July 18`", 2011 Council meeting, the City
Council expressed their desire. to hold the lot for future industrial development and indicated
splitting the lot was not an option because of the lack of City owned property, with utility
access available for industrial development.
Staff is seeking direction on how to proceed. Options for consideration include:
• Purchase lot at $2 sq/ft for a total of $773,625.60 (12.13 acre lot for net price of
$1.46 sq/ft)
• Purchase lot at fair market value; may be determined by appraisal
PowEefo er
~~~~~
o Costs associated with lot split, including but not limited to future
development on remaining parcel (extension of frontage road, etc. to be
determined by EDA.
The first map attached to the memo depicts CDI's proposed expansion if the lot were split,
showing access options and speculative development on the remainder of the parcel. The
second map depicts CDI's proposed expansion in addition to future expansion opportunities
should CDI decide to purchase the entire lot.
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September 12, 2011
Ms. Annie Deckert
Marketing & Business Development Director
City of Elk River
13065 Orono Parkway
Elk River, MN 55330
RE: CDI Expansion
Dear Annie
Per our previous conversations and your direction to have CDI provide the EDA a request to review its
proposed expansion plans we offer the following for your and their consideration:
1) Regarding the City's memo dated February 2, 2011 from Catherine Mehelich to Fat O'Brien:
- Company Needs:
* We would like to clarify that the expansion being proposed would be no
larger than 40,000sq. ft.
Preliminary Siting Proposal:
* CDI would like to pursue EDA sale of a PORTION of adjacent parcel Lot 1, Block 1.
It is not economically feasible or responsible for CDI to acquire the entire site as it does
not currently have the need to develop it in its entirety.
* CDI wishes to investigate all the potential financing options; Tax Abatement, Mircro
Loan, Contract for Deed etc.
- CDI Benefits:
* No issues unrelated to those mentioned above.
2) Regarding the City's memo dated August 25, 2011 from Annie Deckert to Pat O'Brien:
- Proposed Site Plan:
* CDI will develop a revised site plan that shows the expansion at 30,000 sq. ft. vs. the
22,000 plan CDI has submitted and reviewed with Staff.
* We understand that the layout will require a CUP.
- Property Owned by EDA:
* We understand that the EDA would need to support a sale of the property to CDI
before a CUP would be considered.
* We would like to EDA to review CDI's request to purchase a portion of Lot 1, Block 1
at its October 10 meeting.
* CDI will submit a drawing showing its proposed expansion by September 23.
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September 12, 2011
Page 2 of 2
CDI Expansion
- CDI wishes to purchase a portion of the lot:
* CDI is proposing it work with City Staff to reach a mutual agreement on how access,
sewer and water service would be provided to the new parcel should the EDA determine
splitting the lot is not detrimental to the City. This would include but is not limited to
cost sharing, cross easement agreements, etc.
- Storm Sewer Line:
* CDI is willing to share in the cost of relocating this line.
- Financial Mechanisms:
* CDI wishes to investigate all the potential financing options; Tax Abatement, Micro
Loan, Contract for Deed etc. with the City and intends to do so once the EDA makes a
decision on splitting Lot 1 Block 1.
- Options:
* CDI would be in favor of a fair market appraisal being completed and understands why
the City would want to pursue this means to determine if splitting the lot would
negatively impact the City's ability to market/develop the portion not used by CDI.
In summary, CDI is requesting that the EDA/Staff review its request to purchase a portion of Lot 1
Block 1 and its proposed plan. CDI believes that a fair market appraisal will provide the EDA proof that
splitting the parcel will have no negative long term impact on its ability to provide a return on the City's
investment and take immediate advantage of the benefits the City will derive from a CDI expansion. If
you have any questions please do not hesitate to call me. Thanks for the opportunity to help CDI plan
for the future, we look forward to hearing from you soon.
Best regards,
David M. Link
V.P.
CC: Pat O'Brien, CDI
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