7.1 SR 07-01-2013 City of
EW REQUEST FOR ACTION
River
TO ITEM NUMBER
Mayor and City Council 7.1
AGENDA SECTION MEETING DATE PREPARED BY
Public Hearing July 1, 2013 Clay Wilfahrt,Assistant Director of
Economic Development
ITEM DESCRIPTION REVIEWED By
Tax Abatement Application for Preferred Powder Coating, LLC Brian Beeman,Director of Economic
Development
REVIEWED BY
Jeremy Barnhart,Deputy Director,
CODD
ACTION REQUESTED
Hold a public hearing to consider tax abatement application for Preferred Powder Coating,LLC.
BACKGROUND/DISCUSSION
The owners of Preferred Powder Coating are requesting property tax abatement for the construction of a
100,000 square foot manufacturing facility in the city-owned Nature's Edge Business Center. The
attached staff report describes the proposed project and tax abatement request that were reviewed by the
EDA on June 24, 2013. This Abatement request meets all of the FDA's policies regarding employment
and valuation. The EDA recommends approval of the tax abatement and business subsidy for the
project following review of the project at a special meeting on June 24, 2013.
The entire parcel (land and building) valuation will be used to repay the up-front assistance. Using the
entire parcel is consistent with recent tax abatements in which the land price was written down. The
estimated duration is 18 years. The statutory maximum is 20 years.
1Vlikaela Huot from Springsted will provide a brief overview of the independent but/for analysis that
supports the abatement.
State statute requires local government agencies to hold a public hearing to receive comment on tax
abatement and business subsidies.
FINANCIAL IMPACT
Up to $576,939 in city tax abatement assistance. The city will use the 10.36 acre land site and an inter-
fund loan from the Development Fund to provide the assistance up front to meet the needs of the
business. All abatement dollars from the city and county will pay back the inter-fund loan and the land
with a 3%interest rate.
A request has also been made to Sherburne County for up to $576,939 of tax abatement assistance. The
project will result in an estimated market value of$4,682,700 and will create and retain a minimum of 32
full-time jobs at hourly wages not less than $12.19.
POWERED By
A IR
ATTACHMENTS
• EDA Tax Abatement Policy and Guidelines
• Tax Abatement Application and Review Worksheet
• Springsted memo dated June 20, 2013
• Springsted memo dated June 26, 2013
• Action Requested EDA dated June 24, 2013
N:APublic Bodies\Agenda Packets\7-01-2013\Final\x7.1 sr Pref Powder.docx
City of
Tax Abatement
Policy & Application
Amended: May 2006
Amended: August 2002
Adopted: April 10,2000
City of Elk River
Economic Development Division
13065 Orono Parkway
Elk River,TN1N 55330
763.635.1040
Table of Contents
I. Policy Purpose 3
11. Difference Between Tax Abatement &
Tax Increment Financing 3
III. Objectives of Tax Abatement 3
IV. Policies for the Use of Tax Abatement 4
V. Project Qualifications 5
V1. Subsidy Agreement & Reporting Requirements 6
VII. Application Process for Tax Abatement 7
City of Elk River 7
Application to Other Jurisdictions 7
VIII. Application for Tax Abatement 8
Applicant Information 8
Project Information 9
Public Purpose 9
Sources & Uses 10
Additional Documentation and Checklist 11
IX. Sample But-For Analysis 12
X. Application Review Worksheet 13
X1. City of Elk River Business Subsidy Policy 15
City of Elk River
Tax Abatement Policy
Amended May 2006 - 2-
I. POLICY PURPOSE
For the purposes of this document, the term "City"shall include the Elk River City Council,Economic
Development Authority, and Housing and Redevelopment Authority.
The purpose of this policy is to establish the City of Elk River's position relating to the
use of Tax Abatement for private development above and beyond the requirements and
limitations set forth by State Law. This policy shall be used as a guide in the processing
and review of applications requesting Tax Abatement assistance. The fundamental
purpose of providing Tax Abatement in Elk River is to encourage desirable development
or redevelopment that would not otherwise occur but for the assistance provided through
the Tax Abatement.
The City of Elk River is granted the power to utilize Tax Abatement by Minnesota
Statutes, Sections 469.1812 to 469.1815 (the "Minnesota Tax Abatement Act"), as
amended. It is the intent of the City to provide the minimum amount of Tax
Abatement,as well as other incentives, at the shortest term required for the project to
proceed. Preference is given to projects in which the total amount of Tax Abatement
request includes participation from the county. The City reserves the right to approve or
reject projects on a case by case basis, taking into consideration established policies,
project criteria,and demand on city services in relation to the potential benefits from the
project. Meeting policy criteria does not guarantee the award of Tax Abatement to the
project. Approval or denial of one project is not intended to set precedent for approval
or denial of another project.
II. DIFFERENCE BETWEEN TAX ABATEMENT AND
TAX INCREMENT FINANCING
The primary difference between Tax Abatement and Tax Increment Financing (TIF) is
the way in which the dollars are awarded to the project. When TIF is awarded to a
project by the city,the other taxing jurisdictions (the school district and the county) are
required to contribute their portion of the increased taxes to the project. Conversely,
when Tax Abatement is requested, each political subdivision has the option of granting
its portion of the increased taxes to the project. Subsequently, the dollars generated for
the project with Tax Abatement are generally less than the dollars generated with TIF.
III. OBJECTIVES OF TAX ABATEMENT
As a matter of adopted policy,the City will consider using Tax Abatement to assist
private development projects to achieve one or more of the following objectives:
• To retain local jobs and/or increase the number and diversity of jobs that offer
stable employment and/or attractive wages and benefits as defined in the City's
Business Subsidy Policy.
• To enhance and diversify the City of Elk River's economic base.
• To encourage additional unsubsidized private development in the area, either
directly or indirectly through"spin off' development.
City of Elk River
Tax Abatement Policy
Amended May 2006 - 3-
• To facilitate the development process and to achieve development on sites
which would not be developed without Tax Abatement assistance.
• To remove blight and/or encourage redevelopment of commercial and
industrial areas in the city that result in high quality redevelopment and private
reinvestment.
• To offset increased costs of redevelopment (i.e. contaminated site clean up)
over and above the costs normally incurred in development.
• To create opportunities for affordable housing.
• To contribute to the implementation of other public policies, as adopted by the
city from time to time, such as the promotion of quality urban or architectural
design, energy conservation, and decreasing capital and/or operating costs of
local government.
• To significantly increase the City of Elk River's tax base.
IV. POLICIES FOR THE USE OF TAX ABATEMENT
a. Tax Abatement assistance will be provided to the developer upon receipt of
taxes by the City, otherwise referred to as the pay-asyougo method. Requests
for up front financing will be considered on a case-by-case basis.
b. Any developer receiving Tax Abatement assistance shall provide a minimum
of ten percent (10%) owner cash equity investment in the project.
c. Tax Abatement will not be used in circumstances where land and/or
property price is in excess of fair market value.
d. Developer shall be able to demonstrate a market demand for a proposed
project.
e. Tax Abatement will not be utilized in cases where it would create an unfair
and significant competitive financial advantage over other projects in the
area.
f. Tax Abatement shall not be used for projects that would place extraordinary
demands on city services or for projects that would generate significant
environmental impacts.
g. The developer must provide adequate financial guarantees to ensure
completion of the project,including,but not limited to: minimum assessment
agreements,letters of credit,personal guaranties,and etcetera.
h. The developer shall adequately demonstrate,to the City's sole satisfaction,an
ability to complete the proposed project based on past development
City of Elk River
Tax Abatement Policy
Amended May 2006 - 4-
experience,general reputation, and credit history, among other factors,
including the size and scope of the proposed project.
i. For the purposes of underwriting the proposal, the developer shall provide
any requested market, financial, environmental, construction plans or other
data requested by the City or its consultants.
j. Tax Abatement proposals shall not be used to support speculative office
projects. Speculative projects are defined as those projects which have pre-
leasing agreements or letters of intent for less than 50% of the available
space.
In addition,leasable office projects must meet the following guidelines:
1. Evidence of the 50% occupancy must be reported to the Director of
Economic Development six months following an issued Certificate of
Occupancy.
2. Of the occupants certified at the six month period, 50% of the jobs
must be considered "new" jobs to the City of Elk River, meaning jobs
not located in the City at any time prior to occupying space in the
project.
3. Business retention jobs will be considered on a one-for-one match to
job creation only in cases where job loss is specific and demonstrable in
accordance with the MN Business Subsidy Law. Evidence may include
documentation that the company will have to close involuntarily, or the
company has received an attractive offer to move to another state or
community.
k. All Tax Abatement proposals shall optimize the private development
potential of a site.
V. PROJECT QUALIFICATIONS
All Tax Abatement projects considered by the City of Elk River must meet each of the
following requirements=
a. The project shall meet at least one of the objectives set forth in Section III of
this document.
b. The use of Tax Abatement will be limited to:
• Industrial development, expansion, redevelopment, or
rehabilitation; or
• Commercial redevelopment or rehabilitation; or
• Research and development facilities that satisfy Business Park
zoning requirements; or
• Office facilities with a minimum new construction of 25,000
square feet; or
City of Elk River
Tax Abatement Policy
Amended May 2006 - 5-
• Residential development and redevelopment may be eligible for
Tax Abatement under a separate set of policies and only with the
recommendation of the HRA.
c. The developer shall demonstrate that the project is not financially feasible
but for the use of Tax Abatement. Evaluation of the project's financial
feasibility without Tax Abatement shall be provided by the City's financial
advisor on all requests of over$25,000 total public investment.
d. The City will consider the use of Tax Abatement assistance for projects that
may not meet the but for and job creation criteria,but rather would be
considered as a"location incentive". These projects may result in other
public benefits such as a significant tax base increase,the creation of higher
paying jobs (at least twice the minimum hourly rate stated in the City's
Business Subsidy Policy),and is likely to assist in the marketing and attraction
of additional desired developments.
e. The project shall comply with all provisions set forth in the Minnesota Tax
Abatement Law, State Statues 469.1812 to 469.1815,as amended.
f. The project must be consistent with the City's Comprehensive Plan,Land
Use Plan, and Zoning Ordinances.
g. The project shall serve at least two of the following public purposes:
• Job creation or job retention.
• Significantly increase the tax base.
• Enhancement or diversification of the city's economic base.
• Development or redevelopment that will spur additional private
investment in the area.
• Fulfillment of defined city objectives, such as those identified in the
Economic Development Strategic Plan or the City's Comprehensive
Plan, among others.
• Removal of blight or the rehabilitation of a high profile or priority site.
VI. SUBSIDY AGREEMENT & REPORTING REQUIRMENTS
All developers/businesses receiving Tax Abatement assistance from the City of Elk
River shall be subject to the provisions and requirements set forth by the City's
Business Subsidy Policy as amended and attached as Section XI of this document,
and Minnesota State Statute 116J.993 (the "Minnesota Business Subsidy Law").
City of Elk River
Tax Abatement Policy
Amended May 2006 - 6-
VII. APPLICATION PROCESS FOR TAX ABATEMENT
A. CITY OF ELK RIVER
1. Applicant submits the completed application along with a non-
refundable $5,000 application deposit. The application deposit will
be used toward the cost of services provided in the evaluation of
financial feasibility and preparation of legal documents and
agreements. Projects that demand professional services in excess of
the initial deposit shall be required to reimburse the City for the
additional expenses.
2. City staff reviews the application and completes the Application
Review Worksheet.
3. Results of the Worksheet are submitted to the appropriate governing
authorities (EDA or HRA) for recommendation to the City Council
of approval or denial of the request.
4. If preliminary approval is granted,all necessary notices,resolutions
and agreements are prepared by City staff and/or consultants.
5. Public hearing(s) on the proposed request are held.
6. The City Council grants final approval or denial of the request.
B. APPLICATIONS TO OTHER JURISDICTIONS
It is recommended that applicants intending to seek Tax Abatement from
Sherburne County and/or School District 728 make their applications to
those bodies concurrent with their application to the City of Elk River. For
more information on applying for Tax Abatement through Sherburne
County and/or School District 728, contact:
Sherburne County Administrator
763-241-2701
School District 728 Superintendent
763-241-3400
City of Elk River
Tax Abatement Policy
Amended May 2006 - 7-
VIII. APPLICATION FOR TAX ABATEMENT
A. APPLICANT INFORMATION
Name of Corporation/Partnership
Address
Primary Contact
Address
Phone Fax Email
Brief description of the corporation/partnership's business,including history,principal
product or service:
Brief description of the proposed project:
Attorney Name
Address
Phone Fax Email
Accountant Name
Address
Phone Fax Email
Contractor Name
Address
Phone Fax Email
Engineer Name
Address
Phone Fax Email
Architect Name
Address
Phone Fax Email
City of Elk River
Tax Abatement Policy
Amended May 2006 - 8-
B. PROJECT INFORMATION
1. The project will be:
Industrial: New Construction Expansion Redevelopment / Rehab.
Office/research facility that conforms to Business Park zoning standards
Commercial Redevelopment/Rehabilitation
Other
2. In addition to the City of Elk River, applicant is requesting Tax Abatement from:
Sherburne County School District 728
3. The project will be:_Owner Occupied Leased Space
4. Project Address
Parcel Identification Number(s)
5. Site Plan and Construction Plans Attached: Yes No
6. Total Amount of Tax Abatement Requested: $ over years.
City Portion: Annual$ Total$
County Portion: Annual$ Total$
ISD 728 Portion: Annual$ Total$
7. Current Real Estate Taxes on Project Site: $
Estimated Real Estate Taxes upon Completion:Phase I $
Phase II$
8. Construction Start Date:
Construction Completion Date:
If Phased Project= Year % Completed
Year % Completed
C. PUBLIC PURPOSE
It is the policy of the City of Elk River that the use of Tax Abatement should result
in a benefit to the public. Please indicate how this project will serve a public
purpose.
Job Creation/Retention Number of existing jobs
Number of jobs created by project
Average hourly wage of jobs created/retained
New industrial development which will result in additional private
investment in the area.
_Enhancement and/or diversification of the City of Elk River's economic base.
_The project contributes to the fulfillment of the City's Economic Development
Strategic Plan.
_Removal of blight.
_Rehabilitation of a high profile or priority site.
_Significantly increase the City's tax base.
City of Elk River
Tax Abatement Policy
Amended May 2006 - 9-
D. SOURCES & USES
SOURCES NAME AMOUNT
Bank Loan $
Other Private Funds $
Owner Cash Equity $
Fed Grant/Loan $
State Grant/Loan $
EDA Micro Loan $
Tax Abatement $
ID Bonds $
TOTAL $
USES AMOUNT
Land Acquisition $
Site Development $
Construction $
Machinery&Equipment $
Architectural&Engineering Fees $
Legal Fees $
Interest During Construction $
Debt Service Reserve $
Contingencies $
TOTAL $
City of Elk River
Tax Abatement Policy
Amended May 2006 - 10-
E. ADDITIONAL DOCUMENTATION AND CHECKLIST
Applicants will also be required to provide the following documentation:
A) Written business plan,including a description of the business,
ownership/management,date established,products and services,and
future plans
B) Financial Statements for Past Two Years
Profit&Loss Statement
Balance Sheet
C) Current Financial Statements
Profit&Loss Statement to Date
Balance Sheet to Date
D) Two Year Financial Projections
E) Personal Financial Statements of all Major Shareholders
Profit&Loss
Current Tax Return
F) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
G) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in the Project
H) Non-refundable application deposit of$5,000
1) Construction Plans and Itemized Project Construction Statement
J) Attach the following documentation as Exhibits
Exhibit A—Corporation/Partnership Description
Exhibit B—Description of Project
Exhibit C—List of Shareholders/Partners
Exhibit D—But-For Analysis
Exhibit E—List of Prospective Lessees
Exhibit F—Legal Description and PID Number(s)
Note:All Major shareholders will be required to sign personal guarantees and a minimum
assessment agreement if up front financing of the project is required.
The undersigned certifies that all information provided in this application is true and correct
to the best of the undersigned's knowledge. The undersigned authorizes the City of Elk
River to check credit references,verify financial and other information, and share this
information with other political subdivisions as needed. The undersigned also agrees to
provide any additional information as may be requested by the City after the filing of this
application.
Applicant Name Date
City of Elk River
Tax Abatement Policy
Amended May 2006 - 11-
IX. SAMPLE BUT-FOR ANALYSIS
WITH NO WITH
TAX ABATEMENT TAX ABATEMENT
SOURCES AND USES SOURCES AND USES
SOURCES SOURCES
Mortgage 9,600,000 8,667,000
Equity 2,400,000 2,400,00
Tax Abatement 0 933,000
TOTAL SOURCES 12,000,000 12,000,000
USES USES
Land 1,500,000 1,500,000
Site Work 300,000 300,000
Soil Correction 468,000 468,000
Demolition 100,000 100,000
Relocation 65,000 65,000
Subtotal Land Costs 2,433,000 2,433,000
Construction 6,750,000 6,750,000
Finish Manufacturing 250,000 250,000
Subtotal Construction Costs 7,000,000 7,000,000
Soft Costs 350,000 350,000
Taxes 35,000 35,000
Finance Fees 850,000 850,000
Project Manager 542,000 542,000
Developer Fee 540,000 540,000
Contingency 250,000 250,000
Subtotal Soft Costs 2,567,000 2,567,000
TOTAL USES 12,000,000 12,000,000
Income Statement Income Statement
Sq. Ft. Per Sq. Ft. Sq. Ft. Per Sq. Ft.
Rent-Space 1 100,000 $8.00 800,000 100,000 $8.00 800,000
Rent-Space 2 25,000 $8.50 212,500 25,000 $8.50 212,500
Rent-Space 3 25,000 $9.00 225,000 25,000 $9.00 225,000
Other 0 $0.00 0 0 $0.00 0
1,237,500 1,237,500
Mortgage 20 Term 1,051,646 20 Term 949,439
9.00% Interest 9.00% Interest
9,600,000 Principal 8,667,000 Principal
Net Income 185,854 288,061
Total Return on Equity 7.74% 12.00%
City of Elk River
Tax Abatement Policy
Amended May 2006 - 12-
X. TAX ABATEMENT APPLICATION REVIEW WORKSHEET
TO BE COMPLETED BY CITY STAFF
1. The project meets the criteria set forth in Section V of the Tax Abatement policy.
a) Meets at least one of the objectives in Section III.
b) Demonstrates need for Tax Abatement with the but for analysis.
c) Consistent with all city plans and ordinances.
d) Serves at least two public purposes as defined in Section V(g).
2. Ratio of Private to All Public Investment in Project: Points:
$ Private Investment 5:1 5
$ Public Investment 4:1 4
Ratio Private: Public Financing 3:1 3
2:1 2
Less than 2:1 1
3.Job Creation in the City of Elk River: Points:
Number of new jobs as a result of the project. 25+ 5
Number of existing/retained jobs 20+ 4
Total 15+ 3
10+ 2
Less than 10 1
4. Ratio of Public Investment to Job Creation: Points:
Public Investment $8,000 or less 5
Number of new jobs created/retained $10,000 or less 4
$ of Public Investment per new job $12,000 or less 3
$15,000 or less 2
Over $15,000 1
5. Wage Level of new jobs created/retained Points:
Minimum hourly wage Over$21/ hour 5
of jobs created/retained: $18-21 / hour 4
$14-17 / hour 3
$10-13 / hour 2
Under$10 /hour 1
6. Project size: Points:
The project will result in the construction 40,000+ 5
of square feet 30,000+ 4
20,000+ 3
10,000+ 2
10,000 or less 1
City of Elk River
Tax Abatement Policy
Amended May 2006 - 13-
7. Market Value/Tax Base Generation: Points:
The project will result in a per square foot Industrial Commercial
estimated market value(land and building) $80/sf+ $110/sf+ 5
of $70/sf+ $100/sf+ 4
$60/sf+ $90/sf+ 3
$50/sf+ $80/sf+ 2
$40/sf+ $70/sf+ 1
8. Type of Project: Points:
100% Owner Occupied 5
Mix Owner Occupied&Investment 4
Investment Property 3
9. Use: Points:
Industrial or Business Park Project 5
Commercial Rehabilitation/Redevelopment 4
10. Likelihood that the project will result in Points:
unsubsidized, spin-off development. High 5
Moderate 3
Low 1
Sub -Total Points: of a possible 45 points.
11. Bonus Points Bonus Points:
The project will be 100%Pay-asyougo Tax Abatement 3 points
The project contributes to the goals of Energy City. 2 points
• Product promotes sensible use of energy, OR
• Project utilizes significant energy efficient design&/or
materials in construction.
Total Points:
Overall project desirability: High 45-38 points
Moderate 37-29 points
Low 28-20 points
Not Eligible 19-0 points
City of Elk River
Tax Abatement Policy
Amended May 2006 - 14-
DECKLAN
...........................................................................................................................................................
May 24, 2013
City of Elk River
ATTN: Clay Wilfahrt
13065 Orono Parkway
Elk River, MN 55330
RE: PREFERRED POWDER COATING TAX ABATEMENT APPLICATION
Dear Mr. WiifaK,
Attached you will find a completed City of Elk River Tax Abatment Application for Preferred Powder Coating.
Please send me confirmation dates and times of all meetings as they relate to this application moving
forward, 1 believe you are still finalizing meeting dates and times with Sherburne County.
If you have any questions, please contact me at 612-564-0795, or email me at�irnit �deciclangro t .c 3re?.
Respectfully,
Annie B. Deckert
Decklan Group
...........................................................................................................................................................
DECKLAN
VIII. APPLICATION FOR TAX ABATEMENT
A. APPLICANT INFORMATION
Name of Corporation/Partnership Preferred Powder Coating, LLC
Address 251 George Weber Dr Rogers, MN 55374
Primary.Contact Annie Deckert, Decklan Group
Address 812 Main Street NW, Suite 250, Elk River MN 55330
Phone 612-564-0795 Email annie@decklangroup.com
Brief description of the coiporation/partnership's business,including history,principal
product or service:
Preferred Powder Coating is a metal powder coating company that prides
itself in environmental preservation and conservation, ensuring their work
is done in an environmentally sensitive manner through a process known
as EEP, or "Enhanced Performance Pretreatment" which was developed to
meet the new phosphate restrictions, reduce water usage, lower chemical
consumption and eliminate the natural gas needed to heat the stage.
Preferred Powder Coating works with all types of ferrous and non-ferrous
substrates including steel, aluminum, stainless, cast iron and zinc die
castings. Preferred Powder works with a variety of industries that require
premium powder services including, but not limited to: aeronautics, athletic
equipment, automotive, die casting, medical equipment, OEM, recreational,
retail and sheet metal.
Brief description of the proposed project:
Currently located in Rogers, MN in a 73,000 state of the art facility, Preferred
Powder is looking to expand their operations and relocate to the City of Elk
River. Elk River Economic Development Authority President Dan Tveite and
Elk River economic development staff toured the facility with President
Lloyd Peterson and Vice President of Operations Dan Bosshart to learn
more about the company in late 2012.
Preferred Powder currently employs 24 employees, and plans on creating
8-10 jobs within the next two years. They plan on constructing a 100,000
square foot facility which will not only increase Elk River's tax base; it will
also generate excitement and momentum for the newly finished Nature's
Edge Business Center, being as they will be the first to build in the park.
Because of their operations, a rectangular shaped building is required to
City of Elk River
Tat Abatement Policy
Amended May,2006 - 10-
meet the needs of their equipment lay-out and maximize efficiency. This
10.36 acre site poses challenges not only with the wetlands, but the
Northern Natural Gas line (approximately one acre) which runs North/South
through the middle of the property. The existing encroachment agreement
between the city of Elk River and Northern Natural Gas prohibits anything
from being built over this gas main. Because of where the gas line is
located, it leaves approximately six buildable acres to the west of the line,
making it challenging to build an adequate building without impacting the
existing wetlands. Preferred Powder has received approval from the TEP
Committee for wetland mitigation. They have taken all steps required to
build a 100,000 square foot facility on an extremely challenging lot. The
four acres to the east of the gas main will not be built on, but is necessary to
be utilized during site preparation.
We have met with the City of Elk River and Sherburne County to discuss the
project, and all parties involved are supportive of the project. Preferred
Powder Coating is doing everything they can to utilize this challenging lot
to the highest and best use possible, but will need abatement to make this
project happen.
The abatement request will help offset the total cost of the land, wetland
delineation and site preparation necessary to satisfy the requirement of the
TEP committee.
Attorney Name Lloyd Peterson
Address 13251 George Weber Drive, Rogers, MN 55374
Phone 763-428-4990
Email 1peterson@,prefELrredDowder.com
Engineer Name Craig Joehum, President
Address 3601 Thurston Avenue, Anoka, MN 55303
Phone 763-852-0485
B. PROJECT INFORMATION
1. The project will be:
X Industrial: �x_New Construction Expansion Redevelopment / Rehab.
Office/research facility that conforms to Business Park zoning standards
Commercial Redevelopment/Rehabilitation
City of Elk River
Tat Abatement Policy
Amended May 2006
Other
2. In addition to the City of Elk River, applicant is requesting Tax Abatement from:
_x_ Sherburne County School District 728
3. The project will be:_x_Owner Occupied Leased Space
4. Project Address 10846 170th CT NW, Elk giver, MN 55330
Lot 1, Block 3, Nature's Edge Business Center
Parcel Identification Number(s� 75-820-0305
5. Site Plan and Construction Plans Attached: X Yes No
6. Total Amount of Tax Abatement Requested: $ 1153,878 over 12 years.
Ciry Portion: Annual $45,656 $ 547, 872
County Portion: Annual S 50,500* $ 606,006
*this is an estimation based on the gap needed for the project to work; we
are open to discussing once the county amount is calculated.
7. Current Real Estate Taxes on Project Site: $
Estimated Real Estate Taxes upon Completion:
8. Construction Start Date: August 2013
Construction Completion Date: November 2013
C. PUBLIC PURPOSE
It is the policy of the City of Elk River that the use of Tax Abatement should result
in a benefit to the public. Please indicate how this project will serve a public
purpose.
_X Job Creation/Retention Number of existing jobs 24
Number of jobs created by project 8-10
Average hourly wage of jobs created/retained
$15.00
X_New industrial development which will result in additional private
investment in the area.
X_Enhancement and/or diversification of the City of Elk River's economic base.
X_The project contributes to the fulfillment of the City's Economic Development
Strategic Plan.
_Removal of blight.
_X_Rehabilitation of a higli profile or priority site. First development in
City of Elk River
Tax Ahaternent Policy
Amended May 2006 - 12-
city-owned Nature's Edge Business Center
X_Significantly increase the City's tax base.
D. SOURCES & USES
SOURCES NAME AMOUNT
Bank Loan First National $ 4,547,000
Other Private Funds $
Owner Cash Equity- $ 191,817
Fed Grant/Loan $
State Grant/Loan $
EDA Micro Loan $ 100,000
EDA Forgivable Loan $ 200,000
Tax Abatement $ 1,153,878
ID Bonds $
TOTAL $ 6,192,695
USES AMOUNT
Land Acquisition $ 680,895
Site Development (site prep,wetland mitigation,
grading,gasline,etc.) $ 630,000
Construction-Building $ 3,470,000
Machinery&Equipment $ 1,000,000
Working Capital $ 200,000
Wetland Mitigation $ 11,800
Debt Service Reserve $
Contingencies $ 200,000
TOTAL $ 6,192,695
City of l?Ik River
Taa Abatement Policy_
Amended May 2006 - 13-
E. ADDITIONAL DOCUMENTATION AND CHECKLIST
Applicants will also be required to provide the following documentation:
A) Written business plan,including a description of the business,
ownership/management, date established,products and services, and
future plans
B) Financial Statements for Past Two Years
Profit&Loss Statement
Balance Sheet
C) Current Financial Statements
Profit&Loss Statement to Date
Balance Sheet to Date
D) Taro Year Financial Projections
E) Personal Financial Statements of all 1\4ajor Shareholders
Profit&Loss
Current Tax Return
F) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
G) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in the Project
H) Non-refundable application deposit of$5,000
I) Construction Plans and Itemized Project Construction Statement
J) Attach the following documentation as Exhibits
Exhibit A—Corporation/Partnership Description
Exhibit B—Description of Project
Exhibit C--List of Shareholders/Partners
Exhibit D—But-Por Analysis
Exhibit E—List of Prospective Lessees
Exhibit F—Legal Description and PID Number(s)
Note: All Major shareholders will be required to sign personal guarantees and a minimum
assessment agreement if up front financing of the project is required.
The undersigned certifies that all information provided in this application is true and correct
to the best of the undersigned's knowledge. The undersigned authorizes the City of Elk
River to check credit references, verify financial and other information, and share this
information with other political subdivisions as needed. The undersigned also agrees to
provide any additional information as may be requested by the City after the filing of this
application.
Applicant Name / �7_.,.,.,�` G> �.�-- i Z Date f
Ciry of Elk River
Tax Abatement Policy
Amcrndcd Nfay 2006 - 11-
Preferred Powder Coating About Preferred Powder Coating Rogers, Minnesota Page 1 of 2
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PREFERRED
P O W D E R - C O A T I N G
Call us at (763)428-4990
Lei us quote a job fosr you now d s
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3{7C;E A€3{3UT us POWDER COATING INDUSTRIES SERVED S.G4&GRAPHICS C3Fki.LERY 'CON1Tr'VTUS
• About is
. Mission About Preferred Powder Coating
• Quality& PCI-1 1-mance
• C,lur_Faeihiv All employees of Preferred Powder Coating share the common goal of
• Emplovinent providing top-notch customer service that is second to none.This commitment
• l.irtic> is something we take very seriously.
Just one of the things that sets Preferred apart is the personal attention each
client receives from our staff,no matter the size of the job.Preferred does net
compromise quality for any reason.We take the time necessary to perform
work to meet—and exceed-our customers'expectations.
Due to the size and capabilities of our facility,Preferred is exceptionally cost-
competitive in large-run jobs.The technology we have on site provides our
customers and staff with the latest status of each job on the floor,needs for
materials,schedules,and costs associated with each aspect of our work.
What makes Preferred Powder Coating distinctly different:
• A focus on individual training with team-driven execution
• Ensuring cost-effectiveness and high-quality standards
• Being"green"with no phosphate,low-waste and CNC control
• Quality calibration of automated chemical dispensing to ensure
consistent and repeatable process controls
• A return to the core competency of large-volume powder coating
• Our development of partnerships that competitively compete against
global manufacturing competition
In the summer of 2009,Preferred Powder Coating acquired the assets and
43,000-square-foot facility of Profile Companies in Rogers,Minn. Preferred
takes pride in continuing to provide clients with outstanding quality and service
in powder coating—and plans to take customersery ice to a brand-new level.
Preferred's Vice President of Operations.Dan Bosshart,worked as operations
manager with the former company,and partnered with Lloyd Peterson to form
Preferred. Lloyd Peterson has a long history in contract law and business
relationships including many years with the Employers Assocoation.
General Manager Scott Peterson,and Estimator/Buyer Derek Ramacher,
remain from Profile Companies and bring 40 years of metal finishing
experience to Preferred Powder Coating. Derek and Scott utilize state-of-the-
http://preferredpowder.com/about—us/ 5/27/2013
Preferred Powder Coating I About Preferred Powder Coating 1 Rogers, Minnesota Page 2 of 2
art ERP(Enterprise Resource Planning)software to ensure all of the
organizational functions are integrated into one system that produces real-time
access to the system's data.
Currently we occupy 73.000 square feet of warehouse space and have added
the Preferred Sign and Graphics division as well as the Preferred License Plate
Frame division.
QUICK FIND – — INDUSTRIES SERVED- --- - PREFERRED POWDER COATING
I TOM E GALLERY" Castings Powder coa&,g
• Die/Foundry CaStigS (3251 George Weber Drive
ABOU 1 US f-t)\!l AC"I US • Medical 13251s,eorgeWe
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http://preferredpowder.com/about_us/ 5/27/2013
Preferred Powder Coating Specialists in Powder Coating I Rogers, Minnesota Page 1 of 2
RE)i,;I_;ti"C A t)1,0i11'.
PREFERRED
P O W D E R ` C O A T I N G
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110M,E ABOUT US � POWDER COATING €N'DUSTRiES SERVED `.;li.>'u&13RAM K. _, GALLERY � C 0 N",A CT US
• Polo�der Coadnu Specialists in Powder COCdthig
• Pre?reatment
1 ho-'phatc I J—cc How the process works
• Scrvice& Capabilities When we powder coat metal,we electrostatically apply a dry coating of
I xitir _ Finishes
Ites pigment to a product,then cure it under heat to allow the pigment to spread and
form an even-coated finish.
Unlike conventional liquid paint,powder coating does not require toxic solvent
to keep the pigment in a liquid suspension form.thereby eliminating the need
for using,storing,and disposing of harmful chemicals.
In addition,powder coating creates a more durable finish that is tougher and
lasts longer than conventional paint. Preferred Powder Coating focuses on
quality and customer service during the entire powder coating process.
Our work features:
• Cost-effective finish–With assistance in product development to deliver
the best finishing process for your budget.Conveyor line with auto guns
or Batch systems available to meet most production needs.
• Full service–From pre-treatment and wash.to application,light
assembly in-house silk screen inspection.anti-skid applications,
packaging,logistics,and documentation.
• Quality control–Preferred provides full-scale documentation tailored to
your exact quality control standards.
• Quick turnaround–From prototypes to production runs,our large-scale
production area enables us to turn around your project quickly.
• Short-term storage–Our warehouse allows us to easily receive,store,
track and ship your products.
• Expansive capabilities–Preferred is able to handle high-or low-volume
production for customers.
QUICK FIND -- INDUSTRIES SERVED .- PREFERRED POWDER COATING
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• P�ele
Die/Foundry Castings
rreA Po'der Coaling
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Preferred Powder Coating ( Mission Statement and Values ( Rogers, Minnesota Page 1 of 2
l A0 121_.QUEST A QUOTE
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REFERED
P O W D E R < C O A T I N G
3
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HOME ABOUT US POWDER COATING ,.JL1t,SII.2 S SERVED CON TACT tS� "ie~€; £ x i`
• About U's
. Mission Mission Statement and Values
• Oualily& Performance
• Our rac_ii q Mission statement
• E?mplovrn,"t Preferred Powder Coating is committed to providing cost-competitive work by
•
Links using state-of-the-art equipment with an emphasis on customer service.
Preferred Powder Coating is a'-green"company dedicated to the development
and utilization of ISO fundamentals grounded in our core values.
Vision statement
Preferred strives to become a respected local,regional and national resource in
the metal powder coating industry. We will endeavor to preserve our natural
environment while providing high-quality,cost-effective services for our
customers.Our employees will stay current with the latest methods and be
encouraged to develop their skills and creativity. Preferred-s top-caliber
customer service will be the foundation on which will continue to build and
expand our business.
Our values
Several key values serve as a foundation for all that we do at Preferred Powder
Coating.
Environmental preservation and conservation-Our work is done in an
environmentally sensitive manner.Powder coating.unlike liquid coatings.do
not produce hazardous solid waste or hazardous air pollutants.
Employee safety-The safety and health of our employees is critically
important. We aim to have a healthy.safe workplace by providing necessary
training,well-maintained equipment,and employee accountability on the job.
Teamwork- Each employee is entitled to respect for their talents and is
appreciated as a critical part of the Preferred team.
Being accountable-All employees will take responsibility for errors and learn
from their mistakes. Important information gathered from errors will be input
into past master files to ensure there will riot be repeatable mistakes.
Positive attitude—Negativity is not welcome in our workplace. Employees
should maintain a positive attitude in all interactions with fellow employees
and our customers.
Valuing education—Our company supports employees who choose to pursue
new educational opportunities.Additional training benefits the entire company
and leads to a more productive workplace.
littp://preferredpowder.com/about—us/mission/` 5/27/201
Preferred Powder Coating I Mission Statement and Values I Rogers, Minnesota Page 2 of 2
Being innovative-Employees are encouraged to think of new and innovative
ways to improve service,cost and quality for our customers.
Taking initiative—Our employees can fcel empowered to be self-motivated
and strive to achieve goals in their professional and personal lives.
Valuing relationships-Maintaining relationships with our customers is a
critically important part of our business.They must be built with a sense of
mutual respect and courtesy.with a focus on the needs of the customer.
Honesty—Preferred employees will conduct themselves in an honest and
trustworthy manner with all clients and fellow employees.
QUICK FIND.------- — -- ---- INDUSTRIES SERVED - -- PREFERRED POWDER COATING
I I O M E G A 1 1.i;iR Y Preferred Powder Coating
• Die/Foundry Castings 13251 George Weber Drive s � '-
1i3()t I US CON IA(71)S • Medical Rogers,MN 55374
P(Ak11)FR COAT1\6 FA QS • OEM Products
Phone-.-,63-428-4990
Recreational Faa 7634285237 t.?1R1 (_ o f€,�+\`�
1�(Dt,S_fftli 5 SI l L MAP • Sheet Metal lob Shops — --- --
S E•R 4f E'D _.— .—... ._..__
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1-ittp://preferredpowder.com/about—us/mission/ 5/27/2013
Preferred Powder Coating I Industries Served i Rogers, Minnesota Page 1 of 1
I_V, It1-t>IIU A }i OI°l:
PREFERRED
P O W D E R - C o A T I N G
Cal us at (763)428-4990
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HOOT ABOUT US � POWDER WDUSTMES SERVED i SiGN-.&GRAPHICS GALLERY � C .N t,<C!US
• Industries Scrvec
Premium powder coating
Preferred Powder Coating works with a variety of industries that require
premium powder services for their quality products.The use of our high-
quality facility helps their products stand out from the crowd.We specialize in
the following:
• Aeronautics
• Air Purification
• Agriculture
• Athletic equipment
• ATV
• Automotive
• Computer
• Construction
• Die casting
• Foundry castings
• Hangars and shelving
• Hardware
• Medical Equipment
• OEM
• Point-of-purchase displays
• Recreational
• Retail
• Sheet metal
• Wire products
QUICK FIND ---- INDUSTRIES SERVED - - PREFERRED POWDER COATING
I l S 1! LI'_RY ,t marred rowde,('opting
• Die/Foundry Castings
13251 George Weber Drive l
fit,0 'T'[ S Co I AC;I US Medical Rn 111N 5374
110 UIjR COA'l1 'G) 1 A1_>S OEM Products
Pbo,e:763-128 4990 ..!
ItiDI S'[RII.S Recreational F,. 7634288237 441 m
SERVED S1€1'MAP Sheet Metal Job Shops I>,.�,e�=°�,,n.°d F«�E° .-..........
--
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http://preferredpowder.com/industries—served/ 5127/2013
Dan Bosshart,co-owner of Preferred Powder Coatings, has built a career managing and operating large
multi-faceted organizations within both the manufacturing and military sectors. Dan's expertise in
communications, mathematics, and a professional management style has proven beneficial for the last
16 years as he performed various positions including; Director of Operations,VP of Operations and
President of medium to large sized manufacturing companies within the sheet metal, die cast,
machining, and finishing industries.
Dan's previous life, as a 20 year retired Lieutenant Colonel in the US Army, with 12 years of command
experience, allowed him to hone his skills as he managed everything from single building plants to
53,000 acre Federal Military complexes throughout the world.
Dan holds a Bachelors of Science degree from Clemson University majoring in both Math and Physics.
Dan has enjoyed various educational endeavors such as becoming a certified ISO and QS Auditor/Quality
manager and working in conjunction with W. Edwards Deming to create a TQLM—Total Quality
Leadership Management doctrine for the US Army. He is also a graduate of the Stephen Covey
Leadership Center in Sundance Utah.
Dan is a noted wrestler and softball player but his real passion is ice fishing for walleye at the Westwind
Resort on Red Lake.
11 March 2013
Elk River Economic Development Authority
Suzanne Fischer, EDA Executive Director
13065 Orono Parkway
Elk River, MN 55330
RE: Letter of Commitment for Elk River Forgivable Loan Application
Dear Ms. Fischer,
This letter is my Official pledge of commitment to complete my approximately 70,000 square foot
building for Preferred Powder Coating no later than November 2013.
1 am hoping to break ground on this project in August of 2013.
If you have any questions or need additional information, please do not hesitate to contact Annie
Deckert, Decklan Group, at 612„564-0795.
I appreciate your time.
Respectfully,
Dan Bosshart
Vice President of Operations, Preferred Powder Coating, LLC.
�3
FIRST NATIONAL BANK of Elk River E812 lk River, N Phone 763.241.3637
Elk River,MN 55330 Fax 763.441.5784
www.finmationalfinancial.com
May 24th, 2013
City of Elk River
13065 Orono Pkwy,
Elk River, MN 55330
R=: Prel':_rre6 Powder Coa ing,
Tax P�atemerit application
To wFrsrrl it may ccmncern:
have beer'i the banking relationship manager. for Preferred Powder Coating for the past two years.
Based orr, my examination; and analysis of past financial performance and projected financial
perforr-,ance provided to First National Bank of Elk River, Preferred Powder Coating demonstrates the
ability to service debt repayment necessary to support the building project proposed in their application
with the City of Elk River dated May 28`h, 2013.
The debt structure reviewed consisted of$3,547,000 real estate debt based on a 25 year amortization
and $1,000,000 equipment note based a 10 year amortization.
While Preferred Powder demonstrates the ability to service debt payments on the debt, I do
anticipating a substantiri equity gap requiring alternative funding sources including the utilization of the
SBA 504 pil and program like the Tax Abatement program to make the project a reality. This
letter is only an assessment:of Preferred Powders ability to service debt outlined in the application and
not a commitment to lend from f=irst National Bank.
If you have any questions please fee! free to contact me at you convenience
Sincerely
Chad A. Vitzthum
Senior Vice President
First National E?t r:. of Elk i;iver
Business Filing Details Page 1 of 1
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Order a Certificate (/Business/Certificates?businessMasterGuid=b9f3793f-94d4-e011-
a886-001 ec94ffe7f&route=filing&p rod uctld=063dd338-fad3-e011-a886-
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s Minnesota Business Name
PREFERRED POWDER COATING LLC
Business Type MN Statute
Limited Liability Company(Domestic) 3228
File Number Home Jurisdiction
3398194-4 Minnesota
Filing Date Status
06/30/2009 Active/In Good Standing
Renewal Due Date: Registered Office Address
12/31/2013 1369 Mississippi Str
New Brighton MN 55112
USA
Registered Agent(s) Manager
Lloyd Peterson Dan Bosshart
13251 George Weber Drive
Rogers MN 55374
USA
Principal Executive Office Address
13251 George Weber Drive
Rogers MN 55374
USA
Filing History Renewal History
http://mblsportal.sos.state.mn.us/Business/SearchDetails?filingGuid=b9f3793 f-94d4-e011-a... 3/4/2013
ENGINEER'S ESTIMATE-ALTERNATIVE NO.1
PREFERRED POWDER COATING
CITY OF ELK RIVER
TOTAL TOTAL
ITEM SPEC. UNIT ESTIMATED ESTIMATED
NO. REF. DESCRIPTION UNIT COST QUANTITY COST
1 2021.501 MOBILIZATION LUMP SUM $15,000.00 1 $15,000
2 2104.501 REMOVE CURB LIN FT $3.00 156 $468
3 2104.604 SALVAGE CONCRETE PAVEMENT SQ YD $50.00 44 $2,200
4 2105.501 COMMON EXCAVATION(EV)(P) CU YD $5.00 16,727 $83,635
5 2105.505 MUCK EXCAVATION CU YD $6.00 2,013 $12,078
6 2105.521 GRANULAR BORROW(LV) CU YD $9.00 8,962 $80,658
7 2211.501 AGGREGATE BASE CLASS 5 TON $12.50 3,590 $44,875
8 2357.502 BITUMINOUS MATERIAL FOR TACK COAT GALLONS $3.00 524 $1,572
9 2360.501 TYPE SP 9.5 WEARING COURSE MIXTURE(2,B) TON $68.00 1,171 $79,628
10 2360.501 TYPE SP 12.5 NON WEARING COURSE MIXTURE(2,B) TON $65.00 1,489 $96,785
11 2411.507 CONCRETE FLUME EACH $400.00 2 $800
12 2411.618 MODULAR BLOCK RETAINING WALL SO FT $20.00 4,130 $82,600
13 2531.501 CONCRETE CURB&GUTTER DESIGN 8612 LIN FT $11.00 2,366 $26,026
14 2531.507 6"CONCRETE DRIVEWAY PAVEMENT SO FT $4.00 1,000 $4,000
15 2531.604 7"CONCRETE VALLEY GUTTER SO YD $40.00 64 $2,560
16 2563.601 TRAFFIC CONTROL LUMP SUM $500.00 1 $500
17 2571.501 INFILTRATION POND PLANTINGS LUMP SUM $20,000.00 1 $20,000
18 2573.502 SILT FENCE,TYPE MACHINE SLICED LIN FT $3.00 3,407 $10,221
19 2573.530 STORM DRAIN INLET PROTECTION EACH $500.00 1 $500
20 2573.602 TEMPORARY ROCK CONSTRUCTION ENTRANCE EACH $1,000.00 1 $11000
21 2575.502 WETLAND SEED MIX WITH COVER CROP ACRE $5,000.00 1.2 $6,000
22 2575.505 SODDING TYPE LAWN SQ YD $3.50 3,510 $12,285
23 2575.532 FERTILIZER TYPE 1 POUND $1.00 220 $220
24 2582.502 4"SOLID LINE YELLOW-PAINT LIN FT $0.50 2,100 $1,050
25 2501.515 24"RC PIPE APRON EACH $750.00 1 $750
26 2503.541 15"RC PIPE SEWER DESIGN 3006 CL V LIN FT $28.00 116 $3,248
27 2503.541 24"RC PIPE SEWER DESIGN 3006 CL III LIN FT $48.00 22 $1,056
28 2503.602 CONNECT TO EXISTING STORM SEWER EACH $500.00 1 $500
29 2506.502 CONSTRUCT DRAINAGE STRUCTURE DESIGN SPECIAL 1 EACH $1,000.00 1 $1,000
30 2506.502 CONSTRUCT DRAINAGE STRUCTURE DESIGN SPECIAL 2 EACH $1,500.00 2 $3,000
31 2506.502 CONSTRUCT DRAINAGE STRUCTURE DESIGN SPECIAL 3 EACH $2,000.00 1 $2,000
32 2506.502 CONSTRUCT DRAINAGE STRUCTURE DESIGN 48-4020 EACH $1,500.00 1 $1,500
33 2506.516 CASTING ASSEMBLY EACH $500.00 2 $1,000
34 2511.501 RANDOM RIPRAP CLASS II-FIELD STONE CU YD $80.00 35 $2,800
35 2503.602 PIPE PLUG EACH $100.00 1 $100
36 2503.602 6"X6"PVC WYE SDR 26 EACH $200.00 1 $200
37 2503.602 CONNECT TO EXISTING SANITARY SEWER EACH $500.00 1 $500
38 2503.602 6"CLEANOUT ASSEMBLY EACH $750.00 1 $750
39 2503.603 6"PVC SANITARY SERVICE PIPE SDR 26 LIN FT $20.00 80 $1,600
40 2503.608 DUCTILE IRON FITTINGS POUND $3.00 464 $1,392
41 2503.608 6"WATERMAIN DUCTILE IRON CL 52 LIN FT $28.00 442 $12,376
42 2503.608 8"WATERMAIN DUCTILE IRON CL 52 LIN FT $33.00 102 $3,366
43 2504.602 6"GATE VALVE AND BOX EACH $1,300.00 1 $1,300
44 2504.602 8"GATE VALVE AND BOX EACH $1,800.00 1 $1,800
45 2504.602 CONNECT TO EXISTING WATERMAIN EACH $500.00 1 $500
46 2504.602 HYDRANT EACH $3,200.00 1 $3,200
47 2504.603 1HYDRANT RISER LIN FT $545.00 1 $545
$629,144
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X. TAX ABATEMENT APPLICATION REVIEW WORKSHEET
TO BE COMPLETED BY CITY STAFF
1.The project meets the criteria set forth in Section V of the Tax Abatement policy.
a) Meets at least one of the objectives in Section III.
b) Demonstrates need for Tax Abatement with the 61st for analysis.
c) Consistent with all city plans and ordinances.
d) Serves at least two public purposes as defined in Section V(g).
2. Ratio of Private to All Public Investment in Project: Points:
$'A,-7�i ,'bb Private Investment 5:1 5
$1.LA � Public Investment 4:1 4
' Ratio Private: Public Financing 3:1 3
2:1 2
Less than 2:1 1
3.Job Creation in the City of Elk River: Points:
Number of new jobs as a result of the project. 25+ 5
Number of existing/retained jobs 20+ 4
Total 15+ 3
10+ 2
Less than 10 1
4. Ratio of Public Investment to Job Creation: Points:
$ t i i�C'i Public Investment $8,000 or less 5
Number of new jobs created/retained $10,000 or less 4
$ �'Al� of Public Investment per new job $12,000 or less 3
$15,000 or less 2
Over$15,000 1
5.Wage Level of new jobs created/retained Points:
Minimum hourly wage Over$21/ hour 5
of jobs created/retained: $18-21 / hour 4
$14-17 / hour 3
$10-13 / hour 2
Under$10 / hour 1
6. Project size: Points: CD
The project will result in the construction 40,000+ 5
of square feet 1 , 30,000+ 4
20,000+ 3
10,000+ 2
10,000 or less 1
City of Elk River
Tax Abatement Policy
Amended May 2006 - 13-
7. Market Value/Tax Base Generation: Points:
The project will result in a per square foot Industrial Commercial
estimated market value(land and building) $80/sf+ $110/sf+ 5
of r $70/sf+ $100/sf+ 4
$60/sf+ $90/sf+ 3
$50/sf+ $80/sf+ 2
$40/sf+ $70/sf+ 1
8.Type of Project: Points:
100% Owner Occupied 5
Mix Owner Occupied& Investment 4
Investment Property 3
9. Use: Points:
—Industrial or Business Park Project 5
Commercial Rehabilitation/Redevelopment 4
10. Likelihood that the project will result in Points:
unsubsidized, spin-off development. High 5
Moderate 3
Low 1
Sub -Total Points: -7'i of a possible 45 points.
11. Bonus Points Bonus Points:
�,7 The project will be 100%Pay-asyou go Tax Abatement 3 points
P`.. The project contributes to the goals of Energy City. 2 points
-7"- • Product promotes sensible use of energy, OR
• Project utilizes significant energy efficient design&/or
materials in construction.
Total Points:
Overall project desirability: High 45-38 points
Moderate 37-29 points
Low 28-20 points
Not Eligible 19-0 points
City of Elk River
Tax Abatement Policy
Amended May 2006 - 14-
Springsted Incorporated
380 Jackson Street, Suite 300
Saint Paul,MN 55101-2887
�i it ul t e d
Tel: 651-223-3000
Fax: 651-223-3002
www.springsted.com
MEMORANDUM
TO: Members of the EDA and City Council
Brian Beeman, Economic Development Director
Clay Wilfhart,Assistant Director of Economic Development
FROM: Mikaela Huot,Vice President
Julian Bradshaw,Analyst
CC: Terri Heaton, Senior Vice President
Tony Schertler, Senior Vice President
DATE: June 20, 2013
SUBJECT: Preferred Powder Coating—Project Analysis
The City of Elk River has asked Springsted to evaluate a tax abatement request for assistance from the City and
Sherburne County submitted by the developer, Preferred Powder Coating, LLC. for the construction of an
approximate 100,000 square foot facility. The purpose of the analysis is to estimate the tax abatement revenues for
the project and to determine whether the development is likely to proceed "but for" the requested Tax Abatement
assistance. We have reviewed the project assumptions and general rationale for assistance submitted by the
developer. It is our understanding that the developer is in the process of assembling financing for the project, and
has received preliminary financing commitments from its lender. A letter as provided by the lender has indicated that
there is a limit to the amount of debt that could be supported by the project and that financial assistance is necessary
to finance a portion of the extraordinary project costs, including site preparation and acquisition. Assistance would be
necessary to provide an additional upfront funding source for a portion of the project costs and to provide sufficient
cash flow to meet the annual debt service coverage requirements in the operating proforma.
Based on this information, the City could be justified in making a "but for" finding that the anticipated development
would not reasonably be expected to occur solely through private investment within the reasonably foreseeable
future. We recommend, however, that the City also consider an appropriate level of assistance for reimbursement of
certain eligible project costs based on the developer's information.
Public Sector Advisors
City of Elk River, Minnesota
Preferred Powder Coating request for Tax Abatement
June 20,2013
Page 2
There are several methods available to determine if a project would proceed "but for' the assistance. An analysis
comparing the rates of return with and without assistance is a common method used to analyze the "but for" test.
However, in some cases, a review of the project's sources and uses of funds and operating cash flow performance is
done to determine the project meets the "but for' test. If following the review, it is determined that the project has a
shortage of debt and/or equity based on the projected value of the project upon completion and net operating income
available to support debt service, it can be determined that the project would not proceed "but for" the assistance. It
is important to note that tax abatement does not statutorily require a "but for" analysis to determine if the project
would proceed without assistance, however it must be determined that the project is in the public interest and that the
benefits outweigh the costs.
The purpose of this memo is to outline our analysis of the project including review of the developer's request for
assistance, tax abatement revenue projections, and review of the developer's project proforma.
Following initial discussions with City staff, Springsted is providing several revenue scenarios that include abatement
projections for City and County participation for the maximum authorized term (20 years when one or two entities
participate). County participation of tax abatement based on these projections is subject to any policy discussions
and approval by the county board. Additional assumptions and terms of the proposed abatement project are outlined
further below.
Background
Preferred Powder Coating is a metal powder coating company that works with ferrous and non-ferrous substrates
including steel, aluminum, stainless, cast iron and zinc die castings. Some of the industries that require this type of
service include aeronautics, automotive, athletic equipment, medical equipment, die casting and
recreational/industrial sheet metal. The developer has proposed the construction of an approximately 100,000 square
foot manufacturing facility in the City of Elk River. The developer has also indicated that operations would be
relocated from the current Rogers facility to Elk River, and will create 8-10 new jobs over the next two years. The
facility will require an approximately 10.36 acre site to construct a building to maximum efficiency specifications. The
property on which the developer intends to erect this building is in close proximity to a protected wetland and
currently has a 1 acre natural gas line (accompanied by an encroachment agreement) running through its center.
Construction is proposed to commence in August 2013,with the building ready for occupancy by November 2013.
Developer Request for Tax Abatement Assistance
The developer submitted a request for tax abatement assistance from the City of Elk River and Sherburne County to
finance extraordinary site development and acquisition costs associated with building on the selected parcel. The
total sources and uses of funds for the project is approximately $6,192,695. The total requested amount of
assistance is approximately 12 years and $1,153,878 for land acquisition, wetland delineation and other site
improvements necessary to meet TEP requirements. We have assumed (based upon the sources and uses provided
in the application) the developer will fund approximately 82% of the project costs through a combination of private
financing, equity and EDA loans and grants. The financing gap of$1,153,878 equates to approximately 18% of the
City of Elk River, Minnesota
Preferred Powder Coating request for Tax Abatement
June 20,2013
Page 3
total project costs and would be financed through tax abatement financing. Based on the provided information in the
application and additional back-up information from the applicant, it appears the financial assistance requested from
the City and County would be provided as an upfront source.
Tax Abatement Analysis
In order to estimate the amount of Abatement revenues generated by the proposed development, certain
assumptions were made based on the value of the project, construction schedule,and anticipated financing terms.
• Abate incremental building value only:
o Estimated Total Market value of$3,855,000(Building value provided by Assessor)
• Base value of land
• PID: 75-820-0305
• EMV as of Jan. 2, 2013 is$815,900
• Abatement term (maximum):
o 20 year abatement—City and County
• Construction commences in 2013
0 100% complete prior to December 31, 2013
o assessed in January of 2014 for taxes payable in 2015
• 2013 tax rates remain constant through term (Rates Provided by Sherburne County)
• City: 50.373%
• County: 54.420%
• School: 50.058%
• Other: 5.264%
• Total 160.115%
• Class rates remain constant through abatement term
• Fiscal disparities contribution -NA
• 0%annual market value inflator assumed
• Present Value assumptions
0 4%, 2%and 3% discount rates
0 8/1/13 present value date
City of Elk River, Minnesota
Preferred Powder Coating request for Tax Abatement
June 20,2013
Page 4
Tax Abatement Revenue Estimates
Anticipated Term 20 years
(Statutory Maximum)
City Share of Revenues $776,752
County Share of Revenues $839,156
School District Share of Revenues $0
Estimated Net Revenue $1,615,908
Total Estimated Present Value of Revenues $1,048,925
(4%discount rate and 811113 date)
Total Estimated Present Value of Revenues
(3%discount rate and 811113 date) $1,161,286
Total Estimated Present Value of Revenues
(2%discount rate and 811113 date) $1,290,949
`These are estimates and subject to verification
The maximum abatement, based on the assumptions outlined above would generate$1,615,908 with City and
County participation over 20 years. Participation by any taxing entity is subject to policy and approval.
Sources of Funds and Project Cost Scenarios
The Developer's submittal includes a preliminary total project budget of$6,192,695 that includes land acquisition, site
development, building construction, equipment, working capital, wetland mitigation and soft costs as shown in the
following table.
Scenario 1: All Costs and Secured Financing
II �.�.. ..... �..i
Land Acquisition $680,895 Private Equity $191,817
Site Development (site prep, wetland 630,000 Private Financing 4,547,000
mitigation, grading, gas line, etc.)
Building Construction 3,470,000 EDA Forgivable Loan 200,000
Machinery& Equipment 1,000,000 EDA Micro Loan 100,000
Working Capital 200,000
Wetland Mitigation 11,800
Contingencies 200,000
Total Costs $6,192,695 Total Sources $5,038,817
Funding Gap= $1,153,878
City of Elk River, Minnesota
Preferred Powder Coating request for Tax Abatement
June 20,2013
Page 5
Scenario 2: All Project Costs with Reduced Land Acquisition to$1
Project Costs Total Cost fir „` tiitt � iii c
Land Acquisition **$1 Private Equity $191,817
Site Development (site prep, wetland 630,000 Private Financing 4,547,000
mitigation, grading, gasoline, etc.)
Building Construction 3,470,000 EDA Forgivable Loan 200,000
Machinery& Equipment 1,000,000 EDA Micro Loan 100,000
Working Capital 200,000
Wetland Mitigation 11,800
Contingencies 200,000
Total Costs $5,511,801 Total Sources $5,038,817
**includes assumption of land write down
Funding Gap= $472,984
Scenario 3: All Project Costs with Reduced Land Acquisition to$1 and Reduced Site Development costs
Project Costs Total Cost re � Hitt � � ��Irc,I ..
Land Acquisition **$1 Private Equity $191,817
Site Development (site prep, wetland **157,016 Private Financing 4,547,000
mitigation, grading, gasoline, etc.
Building Construction 3,470,000 EDA Forgivable Loan 200,000
Machinery& Equipment 1,000,000 EDA Micro Loan 1005000
Working Capital 200,000
Wetland Mitigation 11,800
Contingencies 200,000
Total Costs $5,038,817 Total Sources $5,038,817
**includes assumption of land write down and reduction in site development costs
Funding Gap= $0
The purpose of providing the multiple financing scenarios outlined above is to show that the funding gap is created
from a combination of acquisition and site development costs that are not supported by the operating revenues of the
project—thus limiting the amount of debt that could be obtained.
Developer Proforma "But For"Analysis
In approving an abatement project the Elk River EDA has requested that a finding be made that the proposed
development would not reasonably be expected to occur solely through private investment within the reasonably
foreseeable future. The three scenarios outlined above illustrate that a funding gap exists between estimated costs
of the project and the available sources of funds. The funding gap would have to be filled through an increase in
debt obtained, equity contribution, a reduction in site costs,financial (abatement)assistance, or some combination
of all, or the project would not proceed. Based on this analysis, the EDA could be justified in determining that the
City of Elk River, Minnesota
Preferred Powder Coating request for Tax Abatement
June 20,2013
Page 6
project meets the"but for" test and would not proceed without assistance. The lender has indicated it is not likely
to increase the amount of debt available for the project, the business is not able to attract additional equity, and
there are significant site development costs necessary to develop on the project site. As a result,financial
assistance would be necessary to fill the financial gap.
Again, It is important to note that tax abatement does not statutorily require a"but for" analysis to determine if the
project would proceed without assistance. A city, county or school district may grant a tax abatement, by contract
or otherwise, of the taxes imposed by the city on a parcel of property,which may include personal property and
machinery,or defer the payments of the taxes and abate the interest and penalty that otherwise would apply, if:
• it expects the benefits to the city of the proposed abatement agreement to at least equal the costs to the city
of the proposed agreement or intends the abatement to phase-in a property tax increase, as provided in
clause(2)(vii); and
• it finds that doing so is in the public interest because it will:
• increase or preserve tax base;
• provide employment opportunities in the political subdivision;
• provide or help acquire or construct public facilities;
• help redevelop or renew blighted areas;
• help provide access to services for residents of the political subdivision;
• finance or provide public infrastructure;
• phase-in a property tax increase on the parcel resulting from an increase of 50 percent or more in
one year on the estimated market value of the parcel, other than increase attributable to
improvement of the parcel; or
• stabilize the tax base through equalization of property tax revenues for a specified period of time
with respect to a taxpayer whose real and personal property is subject to valuation under
Minnesota Rules, chapter 8100.
The provided "but for" argument states the development requires improvements the developer could not
economically provide to construct the manufacturing facility without the use of Tax Abatement. The developer states
the assistance is necessary to facilitate construction of the building due to extraordinary site development costs
associated with wetlands mitigation and the meeting of requirements set by the TEP board. The developer has also
stated that additional private financing options are not viable with the current debt outline. The developer has
indicated that without abatement revenues that a move from its current location to Elk River would not be feasible
given the increased cost of developing the land and increased debt load that the company would incur to achieve the
relocation. The implication being that "but for" abatement assistance the project will not proceed. It is a worthwhile
exercise for the City to consider the likelihood that another project of equal benefit could be generated privately on
the parcel in question.
We have reviewed financial information provided by the developer and their lending institution. The Developer's
lender has indicated that Preferred Powder Coating is being offered the maximum amount of new debt that it can
support and that some kind of public assistance is necessary to fill the equity gap. In reviewing Preferred Powder
City of Elk River, Minnesota
Preferred Powder Coating request for Tax Abatement
June 20,2013
Page 7
Coating's 2012 financial statements it appears that"but for" a reduction in costs or a supplementary revenue stream,
the lenders assessment of the company's inability to produce additional equity in the amount of $1,153,878 is
reasonable.
Conclusion
The developer has requested assistance in the amount of $1,153,878. The developer has indicated that
extraordinary site development costs relating to wetlands mitigation and a gas line that runs through the center of the
property is the basis of their request. There are several methods to determine if a project would proceed "but for"
assistance. Based on the available information, in this case a gap analysis was utilized to test the viability of the
project. The tables in the above paragraphs indicated that a gap in available financing exists and that "but for"
abatement assistance, a reduction in costs, or increased equity the project would not go forward. In addition the
lending institution working with the developer has indicated that the developer has obtained the maximum amount of
new debt that they can support and without some kind of public assistance that amounts to$1,153,878 (in addition to
the EDA loans)the developer would not be able to proceed.
Thank you for the opportunity to be of assistance to the City of Elk River. Please contact us at 651-223-3000 or
mhuot(a,springsted.com and ibradshaw(a,springsted.com with any questions or to discuss.
Springsted Incorporated
380 Jackson Street, Suite 300
Saint Paul,MN 55101-2887
Springsted
Tel: 651-223-3000
Fax: 651-223-3002
MEMORANDUM www.springsted.com
TO: Members of the EDA and City Council
Brian Beeman, Economic Development Director
Clay Wilfhart,Assistant Director of Economic Development
FROM: Mikaela Huot,Vice President
Julian Bradshaw,Analyst
DATE: June 26, 2013
SUBJECT: Preferred Powder Coating-Project Analysis
The City of Elk River and the Elk River Economic Development Authority(EDA) previously requested that Springsted
provide preliminary Tax Abatement revenue projections and a "but for" analysis for the Preferred Powder Coating
project. The EDA held a meeting on June 24, 2013 to discuss the"but for" report and the available financing options
for the project. As a result of questions posed at the meeting, Springsted has prepared additional Abatement
scenarios.
Tax Abatement Revenue Estimates
Preferred Powder Coating Scenario 1 -Abate Scenario 2-Abate
Building Value Only Land and Building Value
Anticipated Term 20 years 20 years
City Share of Revenues $776,752 $933,593
County Share of Revenues $839,156 $1,008,599
School District Share of Revenues $0 $0
Estimated Net Revenue $1,615,908 $1,942,192
Total Estimated Present Value of Revenues
(4%discount rate and 811113 date) $1,048,925 $1,260,724
Total Estimated Present Value of Revenues
(3%discount rate and 811113 date) $1,161,286 $1,395,772
Total Estimated Present Value of Revenues
(2%discount rate and 811113 date) $1,290,949 $1,551,615
`These are estimates and subject to verification
Please note that if abating building value only(assuming a 3%discount rate)it would take approximately 20 years to fulfill the developer's request.If
both land and building are abated(also assuming a 3%discount rate)it would take approximately 18 years to fulfill the developer's request
Public Sector Advisors
City of Elk River, Minnesota
Preferred Powder Coating request for Tax Abatement
June 26,2013
Page 2
In order to estimate the amount of Abatement revenues generated by the proposed development, certain
assumptions were made based on the value of the project, construction schedule,and anticipated financing terms.
• Abatement scenarios:
• Scenario 1:Abate Incremental Building Value
• Scenario 2:Abate Land and Building Value
• Building Value
o Estimated Total Building value of$3,855,000 (value provided by Assessor
• Base value of land
• PID: 75-820-0305
• EMV as of Jan. 2, 2013 is$815,900
• Abatement term (maximum):
o 20 year abatement—City and County
• Construction commences in 2013
0 100% complete prior to December 31,2013
o assessed in January of 2014 for taxes payable in 2015
• 2013 tax rates remain constant through term (Rates Provided by Sherburne County)
• City: 50.373%
• County: 54.420%
• School: 50.058%
• Other: 5.264%
• Total 160.115%
• Class rates remain constant through abatement term
• Fiscal disparities contribution -NA
• 0%annual market value inflator assumed
• Present Value assumptions
0 4%, 2%and 3% discount rates
0 8/1/13 present value date
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City of
EW REQUEST FOR ACTION
River
TO ITEM NUMBER
Economic Development Authori
AGENDA SECTION MEETING DATE PREPARED BY
June 24, 2013 Clay Wilfahrt,Assistant Director of
Economic Development
ITEM DESCRIPTION REVIEWED By
Consider Tax Abatement Application and make Brian Beeman,Director of Economic
recommendation to City Council for Preferred Powder Coating Development
REVIEWED BY
Jeremy Barnhart,Deputy Director,
CODD
ACTION REQUESTED
Consider Tax Abatement in the amount of$1,153,878, as requested by Preferred Powder Coating LLC.
BACKGROUND/DISCUSSION
Preferred Powder Coating submitted an offer to purchase 10.36 acres of land from the city for$1.67 per
square foot excluding approximately one acre of land that is unbuildable due to a utility easement,for a
total cost of$680,895.
Preferred Powder is requesting tax abatement of$1,153,878 dollars over 12 years. The City amount of
tax abatement would be $576,939 and the County would be $576,939.
Staff has evaluated Preferred Powder's application and has scored it as a 36 out of a possible 45 points
which qualifies it as a"moderately desirable" project based on the city's project priorities.
The City Council is scheduled to hold a public hearing and consider the abatement application on July 1.
The county has held a public hearing and plans to consider the abatement application on July 9 with land
use review expected on July 15.
Because the proposed financial assistance exceeds $150,000, a Business Subsidy Agreement is required by
state statute. The Business Subsidy Agreement will require the applicant to create a minimum of 8 jobs
and retain their existing 24 jobs. They will need to retain the jobs for a minimum of one year. All of the
jobs must pay wages greater than $12.19 per hour. Preferred Powder stated that they intend to pay an
average wage of$15 per hour.
FINANCIAL IMPACT
In accordance with the city's Tax Abatement Policy, Springsted Inc. completed a but for analysis and
financial projection for the tax abatement project. Springsted analyzed the sources and uses of funds for
the applicant, and used input from the developer,banker, and city staff to form its opinion. They
determined that Preferred Powder's request for $1,153,878 is reasonable, and that the project would not
occur "but for" the tax abatement in the amount requested.
POWERED By
A IR
A representative of Springsted will be at the meeting to address any questions.
Staff can support the tax abatement application for a number of reasons,including:
1) Springsted's independent"but for" analysis supports the applicant's abatement request.
2) Without support, the project will not go forward,based on statements of the applicant.
3) Upon construction, there will be a large,industrial building in the new development.
4) As the first such project, Preferred Powder should generate interest,momentum, and additional
investment toward the eventual build out of the area.
5) Changes to the economy and banking rules have limited the ease at which a property owner can
obtain private financing.
The developer and the banker financing the deal has expressed that the tax abatement is needed as up-
front assistance. The city will use the land as $680,895 of the abatement up-front, and provide the
remaining$472,982 through an inter-fund loan from the city's development fund. This will cover the site
development costs and will be loaned based on actual costs incurred.
All of the property tax dollars generated by the city and county from this property will be used to repay
first the development fund, and then the land both with a 3%interest rate. Springsted stated that 2-4%
interest is standard. At 3%interest, staff anticipates this project will take 20 years to pay back.
The construction project will cost an estimated $6,192,695. Public financing will include:
• Elk River Tax Abatement $576,939 (requested)
• Sherburne County Tax Abatement $576,939 (requested)
• EDA NEcroloan (equipment) $100,000
• EDA Forgivable Loan (construction) $200,000
Total public financing $1,453,878 (23% of project cost)
If the EDA recommends approval, the City Council will hold a public hearing on July 1 and consider the
abatement application. Pending approvals, staff expects to close on the abatement and all other city
financing and the land sale in late July. Preferred Powder plans to begin construction in August.
ATTACHMENTS
• EDA Tax Abatement Policy and Guidelines
• Tax Abatement Application and Review Worksheet
• Springsted memo dated June 20, 2013
N:APublic Bodies\Agenda Packets\7-01-2013\Final\x7.1 ot5 Act Req-EDA 6-17-13 Preferred Powder Springsted.docx