7.1 EDSR 11-18-2013 City
E1 Request for Action
River
To Item Number
Economic Development Authority 7.1
Agenda Section Meeting Date Prepared by
Other Business November 18,2013 Brian Beeman,Director of Economic
Development
Item Description Reviewed by
Project Updates Jeremy Barnhart,Deputy Director, CODD
Reviewed by
Action Requested
None
Background/Discussion
The purpose of this report is to provide an update on the Economic Development Divisions' ongoing
projects of interest to the EDA.
Professional Service Bureau(PSB)
Staff has held numerous phone conversations,meetings, and email correspondence in response to Mr.
Briggs,who represents Professional Service Bureau(PSB). Options were provided including: 1.
Purchasing the land at the EDA's set price,2. Leasing the land for a temporary parking lot,3.PSB to
purchase the building and land then the City to work on a possible Tax Abatement. To this date, staff has
not received a Tax Abatement application.Mr.Briggs remains rigid in is desire to purchase the property
for 1$.
Orluck Industries
Closing documents have been drafted and EDD staff is waiting for the bank's lead to notify staff when a
closing date will be set for the approved Forgivable loan that the EDA approved April 8,2013.
The Bank of Elk River- Business Subsidy Job Goals
In cooperation from the State DEED office,EDD staff has allowed The Bank of Elk River to report
November 2013 instead of the September 2013 deadline to meet its wage and job goals. The bank
reported their numbers on November 1,2013.From the November reporting,the bank has not met its
wage and job goals. The EDA Finance Committee met to discuss the situation. The EDA Finance
Committee directed staff to obtain information on wage and job goals from the bank. The bank has until
December 5,2013 to provide the requested information. The committee also recommended suspending
all future abatement and requesting the bank pay all attorney fees as required in the Business Subsidy
Agreement. The EDA Finance Committee will review the banks reporting numbers at its next meeting
December 10,2013. The committee is trying to determine the "high-water mark" of wage and job goals
P 0 W A E R E 0 � E
met since the agreement was signed in 2006. The committee will be determining the pay back amount of
the unmet goals going back to 2006.It is anticipated that the committee will have a recommendation
ready for the EDA at its December 16,2013 or January 20,2013 regular meeting.
Forgivable Loan
EDD staff has received an application for the Forgivable loan program. Staff has requested and is waiting
for additional information. Once received, staff will be reviewing the application and submitting it to the
EDA Finance Committee for review in December. Staff has contacted DEED and they are aware of the
application. From recent conversations,DEED is cooperative in allowing the City to close on the loan in
2014.As long as the City continues an open dialog,and they are aware that the City is using the money,
they are flexible on the 2013 deadline.
MNCAR Expo
EDD staff attended the Minnesota Commercial Association of Realtors (MNCAR) Expo October 24,
2013 in Minneapolis as a sponsor to promote the City and network with potential developers. Chanda
Knoof,EDD Marketing Intern and Debbi Rydberg,Elk River Area Chamber of Commerce Director was
in attendance. They were successful in networking and obtaining developer contacts. The contacts will be
included in the update to the city's developer contact list.
Realtors Day
EDD staff participated in the 2' annual Realtors Day held in Elk River November 13,2013 from 9:00
a.m.to Noon at City Hall.Various members of the City staff made presentations to a group of realtors in
order to inform them of Elk River city services for processing their development projects.Mayor John J.
Dietz kicked off the event with a short welcome presentation. The event was well received.
Ethanol Technology
Ethanol Technology is bankrupt and therefore has defaulted on its microloan. The bank has written off
this loan and EDD staff has presented the situation to the EDA Finance Committee for review. The
Committee requested that staff determine if there are any personal guarantees to go after. Originally,
when staff had contacted the attorney, it was assumed that there were no assets to recover. Staff will be
taking this issue back to the committee in December. Originally,Ethanol Technology was loaned$74,000
and the unpaid balance is $66,729.66. The EDA would have to make formal approval to write off the
loan as uncollectible.
Financial Impact
N/A
Attachments
• Bank of Elk River letter
N:\Departments\Community Development\Economic Development\EDA\Adminstrative\Agenda\EDA Agenda\Year2013\11-18-2013\7.1 sr
Project Updates.docx
oty
Elk
River
13065 Orono Parkway
Elk River,MN 55330
November 5,2013
Bill LaVigne,
Chief Operating Officer
630 Main Street
Elk River,MN 55330
Re: Bank of Elk River Tax Abatement Agreement dated April 17,2006
Dear Mr.LaVigne:
I am writing in regard to the recent EDA Finance Committee's direction on the Bank of Elk River's
Tax Abatement default.
The EDA Finance Committee met this morning and reviewed the background associated with the
Tax Abatement Agreement which included the following:
In February 2006, the City of Elk River approved$300,000 of Tax Abatement assistance to The
Bank of Elk River.As a requirement of receiving the Tax Abatement assistance,the bank was
required to establish the wage and job goals—create 20 full-time jobs at a wage of$15/hour,in
addition to the job retention of 63 FTE positions (Elk River downtown location as of April 2006)
within 2-years of the Certificate of Occupancy issued September 13,2007.
Upon the banks request,the City Council approved a 2-year extension on December 21,2009. The
approval extended the deadline to meet the wage and job goals as specified in the original agreement
by September 13,2011. The bank was required to continue to report its progress on wage and job
goals annually as requested by the City until the goals were met.
Upon the Bank's request,the City Council approved an additional 2-year extension on November
21,2011. The approval extended the deadline to meet the wage and job goals as specified in the
original agreement by September 13, 2013. Since the last extension was not approved until
November 21,2011,the State allowed the City to extend the deadline to November 1, 2013.The
bank was required to continue to report its progress on wage and job goal annually as requested by
the City until the goals were met.
On November 1,2013 the Bank reported its current wage and job numbers as follows: 14 FTE
positions were created at$15/hour with a current total of 61 1,1'E. The 14 FIE is included in the 61
jobs currently existing with the Bank.The Bank stated that these numbers were directly related to
the down town location for the Tax Abatement project.
Phone:763.635.1000 P ! N L R I O IT
Fax:7 63.635.1090 NATURE
www.ElkRiveri\IN.gov
The EDA Finance Committee has directed staff to obtain from the Bank additional substantiated
employment records to show the"highwater"mark for jobs created at the required wage over and
above the 63 jobs in existence on the Benefit Date at any time since the Benefit Date. Preferably,we
are requesting the bank to set up a chart similar to what has been sent before,with each of the
positions,hiring date,wage,benefits,termination dates, etc. for each year.We would like to know,
was there any time since the agreement was signed where the bank retained at least 63 FI E's and
also created new jobs above the 63 that were at least$15.00 per hour?If so,what was the highest
number of jobs created above the 63.Please substantiate these numbers for each year and ensure
that all of the numbers are directly related to the actual downtown Tax Abatement project. We will
needs chart all of these detains for each year.The-highest number of jobs existing during that
period will be used to determine the extent of a default by the Bank and what,if any,prorated
portion of the subsidy will need to be repaid. The EDA Finance Committee requires this
information from the Bank by December 5,2013.
In addition,the EDA Finance Committee is recommending that the City suspend all future Tax
Abatement payments to the Bank and that the Bank of Elk River reimburse the City for all attorney
fees associated with this issue pursuant to Section 4.5 of the Tax Abatement Agreement.
Please feel free to contact me to discuss if you have any questions.
Sincerely,
Brian Beeman M.P.A.
Director of Economic Development