5.1. SR 07-08-2002Item 6. EDA
Item 5.1. CC
MEMORANDUM
TO:
FROM:
DATE:
Economic Development Authority
Mayor & City Council
Catherine Mehelich, Director of Economic Development/~/~/
July 8, 2002
SUBJECT: Consider Adoption of the City's Tax Rebate Financing Policy as
Amended
Attachments
· Amended Tax Rebate Financing Policy, July 2002
· Existing Tax Rebate Financing Policy, Adopted April 2000
Background
At its June 24, 2002 meeting the City Council and EDA discussed Tax Rebate Financing
policy issues related to office development. State law provides individual taxing jurisdictions
the flexibility to define their own priorities for the use of tax abatement. The policy is to be
used as a guide in the processing and review of applications requesting TRF assistance.
The attached amended policy incorporates the following items:
Speculative office development is not eligible for TRF assistance. Speculative
projects are defined as those projects which have pre-leasing agreements for less
than 50% of the available space. In addition, 50% of the jobs within the leasible
office space must be "new" jobs to the City of Elk River, meaning jobs provided by
employers not located in the city at any time prior to occupying space in the project.
(Section IV.j.). Per the Business Subsidy Law, subsidy agreement goals would be
reported and evaluated annually for two years after the date the benefit is received or
until all goals have been met. If the recipient fails to meet the goals they would be
required to pay back the assistance plus interest.
Office facilities remain eligible for TRF but with the minimum requirements of
25,000 square feet new construction and result in a minimum market value of
$1,000,000 upon project completion. (SectionV.b.)
Tax Rebate ?inancmg Policy - Amended
July 8, 2002
Page 2 of 2
· Applications shall be reviewed by the City's financial advisor for evaluation of
financial feasibility without TRF assistance. The cost of financial review and legal
services will be deducted from the $5,000 application fee. (Section V.c. & Section
VII.A.1.)
A reduction m the requirement for a minimum 20% cash equity investment in the
project. A reduction to 10% would be consistent with SBAS04 financing and allow
businesses to utilize the benefits of SBA financing in addition to TRF.
(Section IV.b.)
All developer/businesses receiving Tax Rebate Financing assistance from the City of
Elk River shall be subject to the provisions and requirements set forth by the City's
Business Subsidy Criteria and MN Business Subsidy Law (Section VI).
MN Business Subsidy Law requires subsidy grantors to establish a "Business Subsidy
Criteria" by May 2003. Staff is preparing the draft City of Elk River Business
Subsidy Criteria for review by the EDA and City Council at the August 12, 2002
meeting. A public hearing of the City Council is required prior to adoption of the
Business Subsidy Criteria.
Recommendation
Consider adoption of the amended Tax Rebate Finance Policy.
S:\EDA~TAXABATE~Elk River Policy History~02amendment.doc
City of
t Aver
Economic Development
Tax Rebate Financing
Policy & Application
Amended: July 2002
Adopted: April 10, 2000
City of Elk River, Minnesota
Table of Contents
I. Policy Purpose
II. Difference Between TRF & TIF
III. Objectives of Tax Rebate Financing
IV. Policies for the Use of TRF
V. Project Qualifications
VI. Subsidy Agreement & Reporting Requirements
VII. Application Process
City of Elk River
Application to Other Political Subdivisions
VIII. Application
Applicant Information
Project Information
Public Purpose
Sources & Uses
Checklist & Additional Information
7
8
8
9
10
IX. Application Review Worksheet
X. Exhibits
A
B
C
D
E
Corporation/Partnership Description
Project Description
Shareholders
But-for Analysis
Prospective Lessees
Xl. Sample But-ForAnalysis
3
3
3
4
5
6
6
7
II
13
15
2
I. POLICY PURPOSE
For the puq)oses of this document, the term "Ci(y" shall include the Elk P~'ver Ci(y Council, t~conomic
Development ~4uthori~, and Housing and Redevelopment~Zluthori~.
The purpose of this policy is to establish the City of Elk River's position relating to the
use of Tax Rebate Financing (TRF), otherwise referred to as 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 rebate assistance. The fundamental purpose of tax rebate financing in Elk
River is to encourage desirable development or redevelopment that would not otherwise
occur but for the assistance provided through TRF.
The City of Elk River is granted the po~ver to utilize TRF by the Minnesota Tax
Abatement Act, as amended. It is the intent of the City to provide the minimum amount
of TRF, as well as other incentives, at the shortest term required for the project to
proceed. 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 TRF 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 TRF & TIF
The primary difference between Tax Rebate Financing (TRF) 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 political subdivisions (the school district and
the county) are required to contribute their portion of the increased taxes to the project.
Conversely, when TRF 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 TRF are generally less than the dollars generated with TIF.
III. OBJECTIVES OF TAX REBATE FINANCING
As a matter of adopted policy, the City will consider using TRF 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.
· 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.
· To facilitate the development process and to achieve development on sites
which would not be developed without TRF 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.
IV.
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 dine, such as the promotion of quality urban or architectural
design, energy conservation, and decreasing capital and/or operating costs of
local government.
POLICIES FOR THE USE OF TRF
TRF assistance will be provided to the developer upon receipt of taxes by the
City, otherwise referred to as thepqy-as:.you-go method. Requests for up front
financing will be considered on a case-by-case basis.
b. Any developer receiving TRF assistance shall provide a minimum of ~wcn~T
ten.percent (g10%) cash equity investment in the project.
c. TRF 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. TRF will not be utilized in cases where it would create an unfair and
significant competitive financial advantage over other projects in the area.
TRF shall not be used for projects that would place extraordinary demands
on city services or for projects that would generate significant environmental
impacts.
The developer must provide adequate financial guarantees to ensure
completion of the project, including, but not limited to: assessment
agreements, letters of credit, personal guaranties, and etcetera.
The developer shah adequately demonstrate, to the City's sole satisfaction, an
ability to complete the proposed project based on past development
experience, general reputation, and credit history, among other factors,
including the size and scope of the proposed project.
For the purposes of underwriting the proposal, the developer shall provide
any requested market, financial, environmental, or other data requested by
the City or its consultants.
TRF proposals shall not be used to support speculative office projects.
Speculative projects are defined as those projects which have pre-leasing
agreements for less than 50% of the available space. In addition, 50% of the
jobs within the leasible office building space must be considered "nexv" jobs
to the City of Elk River, mea~fing jobs provided by employers not located in
the Citx~ at any time prior to occupying space in the project. Business
4
retention will be considered onb~ m cases where job loss is specific and
demonstrable.
k. All TRti' proposals shah optimize the private development potential of a site.
V. PROJECT QUALIFICATIONS
AH TRF 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.
The use of TRF will be limited to: · Industrial development, expansion, redevelopment, or
rehabilitation; or
· Commercial redevelopment or rehabilitation; or
· Office or ~_Research anti development facilities that satisfy
Business Park zoning requirements; or
· Office facilities with a minimum nev¢ construction of 25,000
square feet and minimum market value of $1,000,000 upon
project completion
· Residential development and redevelopment may be eligible for
TRF under a separate set of policies and only with the
recommendation of the HRA.
· New commercial or retail development is not eligible for TRF.
The developer shah demonstrate that the project is not financially feasible
but-for the use of TRF. Evaluation of the project's financial feasibiliw
without TRF shall be provided bv the Cit3,'s financial advisor.
d. d. The project shall comply with all provisions set forth in the state's Tax
Abatement Law, statues 469.1812 to 469.1815, as amended.
The project must be consistent with the City's Comprehensive Plan, Land
Use Plan, and Zoning Ordinances.
The project shall serve at least two of the following public purposes: · Job creation.
· Increase of 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
~Strategic Plan for Economic Development 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 Rebate Financing assistance from the City
of Elk River shall be subject to the provisions and requirements set forth by the
CitT's Business Subsidy Criteria as adopted, and Sstate sStatute 116j.993 s~---~
summarized below.
All developers/businesses receiving TRF assistance shall enter into a sut~sidj aegreeme,t
with the City of Elk River that identifies: the reason for the subsidy, the public
purpose served by thee subsidy, and the goals for the subsidy, as well as other criteria
set forth by statute 116J.993.
The developer/business shall file a report annually for two years after the date the
benefit is received or until all goals set forth in the application and pc~f~rmancc
abatement agreement have been met, whichever is later. Reports shall be completed
using the format drafted by the State of Minnesota and shall be filed with the City of
Elk River no later than March 1 of each year for the previous calendar year.
Businesses fulfilling job creation requirements must file a report to that effect with
the city within 30 days of meeting the requirements.
The developer/business owner shall maintain and operate its facility at the site
where TRF assistance is used for a period of five years after the benefit is received.
In addition to attaining or exceeding the jobs and wages goals set forth in the ~vut~sid~y
~tgreeme,/, the borrower shall achieve at least one of the objectives set forth in
Section III of this document.
Developers / Businesses failing to comply with the above provisions will be subject
to frees, repayment requirements, and be deemed ineligible by the State to receive
any loans or grants from public entities for a period of five years.
VII. APPLICATION PROCESS FOR TRF
A. CITY OF ELK RIVER
1. Applicant submits the completed application along with ~4t a ~5.000 application
fees. The application fee will be used toward the cost of services provided in the
evaluation of financial feasibility and preparation of legal documents. The balance of
the application fee will be term:ned to the applicant.
7
City staff reviews the application and completes the Application Review
Worksheet.
Results of the Worksheet are submitted to the appropriate governing authorities
for preliminary approval of the proposal.
If preliminary approval is granted, all necessary notices, resolutions and
certificates are prepared by City staff and/or consultants.
Public hearing(s) on the proposed project are held.
The EDA or HRA recommends approval or denial of the proposal to the City
Council.
__ 7. The City Council grants final approval or denial of the proposal.
B. APPLICATIONS TO OTHER POLITICAL SUBDIVISIONS
It is recommended that applicants intending to seek TRF 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 TRF
through Sherburne County and/or School District 728, contact:
Alex Wikstrom
Sherburne County Budget / Economic Development Coordinator
763-241-2700
Dr. Alan Jensen
Superintendent - School District 728
763-241-3400
8
VII. APPLICATION FOR TAX REBATE FINANCING
A. APPLICANT INFORMATION
Name of Corporation/Partnership
Address
Primary Contact
Address
Phone Fax Email
On a separate sheet, please provide the following:
· Brief description of the corporation/partnership's business, including history,
principal product or service, etc... Attach as Exhibit A.
· Brief description of the proposed project. Attach as Exhibit B.
· List names of officers and shareholders/partners with more than five percent
(5%) interest in the corporation/partnership. Attach as Exhibit C.
· A but-for analysis and narrative. Attach as Exhibit D.
Attorney Name
Address
Phone Fax Email
Accountant Name
Address
Phone
Contractor Name
Fax Email
Ad&ess
Phone
Engineer Name
Fax Email
Address
Phone
Architect Name
Fax Email
Ad&ess
Phone Fax Email
9
B. PROJECT INFORMATION
1. The project will be:
~Industrial: New Construction Expansion __Redevelopment / Rehab.
Office/research facility that conforms to business park standards
__Commercial Redevelopment/Rehabilitation
Other
2. In addition to the City of Elk River, applicant is requesting TRF funds from:
. Sherburne County School District 728
3. The project will be: Owner Occupied Leased Space
· If leased space, please attach a list names and addresses of future lessees and indicate
the status of commitments or lease agreements. Attach as Exhibit E.
4. Project Address
· Include Legal Description and PID Number. Attach as Exhibit F
5. Site Plan Attached: Yes No
o
Total Amount of TRF Requested: $
City Portion of TRF:
County Portion of TRF:
ISD 728 Portion of TRF:
over years.
Annual $. Total $
Annual $. Total $
Annual $. Total $
o
Current Real Estate Taxes on Project Site: $.
Estimated Real Estate Taxes upon Completion: Phase I $
Phase II $
o
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 Rebate Financing should
result in a benefit to the public. Please indicate how this project ~vill serve a public
purpose.
__Job Creation: Number of existing jobs
Number of jobs created by project
Average hourly wage of jobs created
New industrial development which ~vill result in additional private
investment in the area.
Enhancement and/or diversification of the city's economic base.
The project contributes to the fulfillment of the City's Strategic
Plan for Economic Development.
Removal of blight.
Rehabilitation of a high profile or priority site.
Other:
10
D. SOURCES & USES
SOURCES
Bank Loan
Other Private Funds
Equity
Fed Grant/Loan
State Grant/Loan
EDA Micro Loan
Tax Rebate Financing
ID Bonds
TOTAL
NAME
AMOUNT
USES
Land Acquisition
Site Development
Construction
Machinery & Equipment
Architectural & Engineering Fees
Legal Fees
Interest During Construction
Debt Service Reserve
Contingencies
TOTAL
AMOUNT
$.
$.
$.
$
$
$.
$.
$,
$.
$
11
E. ADDITIONAL DOCUMENTATION AND CHECKLIST
Applicants will also be required to provide the following documentation.
mA)
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
F)
Personal Financial Statements of all Major Shareholders
Profit & Loss
Current Tax Return
__G) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
H) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in the Project
I) Application fee of $5000~,,,r'- ,,~,~ .......... ~.,..~.,~.,~ upon project
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
Note: All Major shareholders will be required to sign personal guarantees 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 f2ing of this
application.
Applicant Name Date
By.
Its
12
TAX REBATE FINANCING PROPOSAL REVIEW WORKSHEET
BY CITY STAFF
TO
BE
COMPLETED
1. The project meets the criteria set forth in Section V of the Tax Rebate Financing
policy.
__ a)
I b)
i c)
Meets at least one of the objectives m Section III.
Demonstrates need for TRF with the but-for analysis.
Consistent with all city plans and ordinances.
Serves at least two public purpose as defined in Section V.
2. Ratio of Private to Public Investment in Project:
$. Private investment
$. Public Investment
Ratio Private: Public Financing
Less than
Points:
5:1 5
4:1 4
3:1 3
2:1 2
2:1 1
3. Job Creation in the City of Elk River:
__ Number of new jobs as a result of the project.
__ Number of existing/retained jobs divided by 10.
Total
Less than
Points:
25+ 5
20+ 4
15+ 3
10+ 2
10 1
4. Ratio of TRF to new jobs created:
$. TRF request
Number of new jobs created
$ of TRF per z~ewjob created
Points:
$8,000 or less 5
$10,000 or less 4
$12,000 or less 3
$15,000 or less 2
Over $15,000
5. Wage Level of jobs created:
Average hourly wage
of jobs created:
Points:
Over $21/hour 5
$18-21 / hour 4
$14-17 / hour 3
$10-13 / hour 2
Under $10 / hour 1
6. Project size:
The project will result in the construction
of square feet
Points:
40,000+ 5
30,000+ 4
20,000+ 3
10,000+ 2
10,000 or less 1
13
7. Type of Project:
100% Owner Occupied
__ Mix Owner Occupied & Investment
__ Investment Property
8. Use:
__ Industrial or Business Park Project
__ Commercial Rehabilitation/Redevelopment
9. The project will pay annual
property taxes in the first fully
assessed year of $
10. Likelihood that the project will result in
unsubsidized, spin-off development.
Points:
5
4
3
Points:
5
4
Points:
35,000+ S
25,000+ 4
15,000+ 3
10,000+ 2
Under $10,000 1
Points:
__High 5
Moderate 3
Low I
Sub - Total Points:
of a possible 45 points.
9. Bonus Points
Bonus Points:
__ The project will be 100% Pqy-aszyou-go TRF.
__ The project contributes to the goals of Energy City.
· Product promotes sensible use of energy, OR
· Project utilizes significant energy efficient design &/or
materials m construction.
3 points
2 points
Total Points:
Overall project analysis:
High
Moderate
Low
Not Eligible
45-38 points
37-29 points
28-20 points
19-0 points
14
EXHIBIT A
Description of the corporation or parmership
EXHIBIT B
Description of the proposed project
EXHIBIT C
Names of officers and shareholders/parmers with more than five percent (5%) interest in
the corporation/parmership.
EXHIBIT D
But-for analysis
EXHIBIT E
Prospective Lessees
EXHIBIT F
Legal Description and PID Number
15
Xl. SAMPLE BUT-FOR ANALYSIS
Mortgage
Equity
Tax Rebate Financing,
TOTAL SOURCES
Land
Site Work
Soil Correction I
Demolition
Relocation
Subtotal Land Costs
Construction
Finish Manufacturing
Subtotal Construction Costs
Soft Costs
Taxes
Finance Fees
Project Manager
Developer Fee
Contingency
Subtotal Soft Costs
TOTAL USES
Rent-Space 1
Rent-Space 2
Rent-Space 3
Other
Mortgage
Net Income
Total Return on Equity
WITH NO
TAX REBATE FINANCING
WITH
TAX REBATE FINANCING
SOURCES AND USES SOURCES AND USES
SOURCES SOURCES
9,600,000 8,667,000
2,400,000 2,400,00
0 933,000
12,000,000 12,000,000
USES USES
1,500,000
300,000
468,000
100,000
65,000
2,433,000
6,750,000
250,000
7,000,000
350,000
35,000
850,000
542,000
540,000
250,000
2,567,000
1,500,000
300,000
468,000
100,000
65,000
2,433,000
6,750,000
250,000
7,000,000
350,000
35,000
850,000
542,000
540,000
250,000
2,567,000
12,000,000 12,000,000
Income Statement Income Statement
100,000
25,000
25,000
Sq. Ft. Per Sq. Ft.
$8.00 800,000
$8.50 212,500
$9.00 225,000
$o.oo o
1,237,500
100,000
25,000
25,000
Sq. Ft. Per Sq. Ft.
$8.00 800,000
$8.50 212,500
$9.00 225,000
o $o.oo o
1,237,500
20 Term
9.00% Interest
9,600,000 Principal
1,051,646
185,854
20 Term
9.00% Interest
8,667,000 Principal
949,439
288,061
7.74% 12.00%
16
City of
12ave r
Economic Development
Tax Rebate Financing
Policy & Application
Adopted: April 10, 2000
City of Elk River, Minnesota
Table of Contents
I. Policy Purpose
II. Difference Between TRF & TIF
III. Objectives of Tax Rebate Financing
IV. Policies for the Use of TRF
¥. Project Qualifications
VI. Subsidy Agreement & Reporting Requirements
¥11. Application Process
City of Elk River
Application to Other Political Subdivisions
6
6
VIII. Application
Applicant Information
Project Information
Public Purpose
Sources & Uses
Checklist & Additional Information
7
8
8
9
10
IX. Application Review Worksheet
X. Exhibits
Xl.
A
B
C
D
E
Corporation/Partnership Description
Project Description
Shareholders
But-for Analysis
Prospective Lessees
Sample But-For Analysis
3
3
3
4
5
6
6
7
II
13
15
2
I. POLICY PURPOSE
For the purposes of this document, the term "Ci~y" sha// inc/ude the Elk P~'ver Ci~ Council, Economic
Deve/opment ~luthori~y, and Housing and Redeve/opment .4utho,i[y.
The purpose of this policy is to establish the City of Elk River's position relating to the
use of Tax Rebate Financing 0PRF), otherwise referred to as 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 rebate assistance. The fundamental purpose of tax rebate financing in Elk
River is to encourage desirable development or redevelopment that would not otherwise
occur bu/for the assistance provided through TRF.
The City of Elk River is granted the power to utilize TRF by the Minnesota Tax
Abatement Act, as amended. It is the intent of the City to provide the minimum amount
of TRF, as well as other incentives, at the shortest term required for the project to
proceed. 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 TRF 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 TRF & TIF
The primary difference between Tax Rebate Financing (TRF) 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 political subdivisions (the school district and
the county) are required to contribute their portion of the increased taxes to the project.
Conversely, when TRF 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 TRF are generally less than the dollars generated with TIF.
III. OBJECTIVES OF TAX REBATE FINANCING
As a matter of adopted policy, the City will consider using TRF 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.
· To enhance and diversify the city of Elk River's economic base.
· To encourage additional unsubsidized private development in the area, either
direcdy or indirectly through "spin off" development.
· To facilitate the development process and to achieve development on sites
which would not be developed without TRF 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.
IV.
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.
POLICIES FOR THE USE OF TRF
TRF assistance will be provided to the developer upon receipt of taxes by the
City, otherwise referred to as thep~-asdyou-ego method. Requests for up front
financing will be considered on a case-by-case basis.
b. Any developer receiving TRF assistance shall provide a minimum of twenty
percent (20%) cash equity investment in the project.
c. TRF 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. TRF will not be utilized in cases where it would create an unfair and
significant competitive financial advantage over other projects in the area.
TRF shall not be used for projects that would place extraordinary demands
on city services or for projects that would generate significant environmental
impacts.
The developer must provide adequate financial guarantees to ensure
completion of the project, including, but not limited to: assessment
agreements, letters of credit, personal guaranties, and etcetera.
The developer shall adequately demonstrate, to the City's sole satisfaction, an
ability to complete the proposed project based on past development
experience, general reputation, and credit history, among other factors,
including the size and scope of the proposed project.
For the purposes of underwriting the proposal, the developer shall provide
any requested market, financial, environmental, or other data requested by
the City or its consultants.
4
V. PROJECT QUALIFICATIONS
All TRF projects considered by the City of Elk River must meet each of the following
requirements:
a. The project shah meet at least one of the objectives set forth in Section III of
this document.
The use of TRF will be limited to: · Industrial development, expansion, redevelopment, or
rehabilitation; or
· Commercial redevelopment or rehabilitation; or
· Office or research facilities that satisfy Business Park zoning
requirements;
· Residential development and redevelopment may be eligible for
TRF under a separate set of policies and only with the
recommendation of the HRA.
· New commercial or retail development is not eligible for TRF.
c. The developer shall demonstrate that the project is not financially feasible
butfor the use of TRF.
d. The project shall comply with all provisions set forth in the state's Tax
Abatement Law, statues 469.1812 to 469.1815, as amended.
e. The project must be consistent with the City's Comprehensive Plan, Land
Use Plan, and Zoning Ordinances.
The project shall serve at least two of the following public purposes: · Job creation.
· Increase of 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
· Strategic Plan for Economic Development 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 Rebate Financing assistance from the City
of Elk River shall be subject to the provisions and requirements set forth by state
statute 116J.993 and summarized below.
All developers/businesses receiving TRF assistance shall enter into a subsid~y agreement
with the City of Elk River that identifies: the reason for the subsidy, the public
purpose served by e subsidy, and the goals for the subsidy, as well as other criteria
set forth by statute 116J.993.
The developer/business shall file a report annually for two years after the date the
benefit is received or until all goals set forth in the application and performance
agreement have been met, whichever is later. Reports shall be completed using the
format drafted by the State of Minnesota and shall be filed with the City of Elk
River no later than March 1 of each year for the previous calendar year. Businesses
fulfilling job creation requirements must file a report to that effect with the city
within 30 days of meeting the requirements.
The developer/business owner shall maintain and operate its facility at the site
where TRF assistance is used for a period of five years after the benefit is received.
In addition to attaining or exceeding the jobs and wages goals set forth in the Subsid~y
~4greement, the borrower shall achieve at least one of the objectives set forth in
Section III of this document.
Developers / Businesses fa'fling to comply with the above provisions will be subject
to frees, repayment requirements, and be deemed ineligible by the State to receive
any loans or grants from public entities for a period of five years.
VII. APPLICATION PROCESS FOR TRF
A. CITY OF ELK RIVER
1. Applicant submits the completed application along with all application fees.
2. City staff reviews the application and completes the Application Review
Worksheet.
3. Results of the Worksheet are submitted to the appropriate governing authorities
for preliminary approval of the proposal.
4. If preliminary approval is granted, all necessary notices, resolutions and
certificates are prepared by City staff and/or consultants.
5. Public hearing(s) on the proposed project are held.
6. The EDA or HRA recommends approval or denial of the proposal to the City
Council.
7. The City Council grants final approval or denial of the proposal.
B. APPLICATIONS TO OTHER POLITICAL SUBDIVISIONS
It is recommended that applicants intending to seek TRF 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 TRF
through Sherburne County and/or School District 728, contact:
Alex Wikstrom
Sherburne County Budget / Economic Development Coordinator
763-241-2700
Dr. Alan Jensen
Superintendent - School District 728
763-241-3400
VII. APPLICATION FOR TAX REBATE FINANCING
A. APPLICANT INFORMATION
Name of Corporation/Partnership
Address
Primary Contact
Address
Phone Fax Email
On a separate sheet, please provide the following:
· Brief description of the corporation/parmership's business, including history,
principal product or service, etc... Attach as Exhibit A.
· Brief description of the proposed project. Attach as Exhibit B.
· List names of officers and shareholders/partners with more than five percent
(5%) interest in the corporation/partnership. Attach as Exhibit C.
· A but-for analysis and narrative. Attach as Exhibit D.
Attorney Name
Address
Phone Fax Email
Accountant Name
Ad&ess
Phone Fax Email
Contractor Name
Ad&ess
Phone
Engineer Name
Fax Email
Ad&ess
Phone
Architect Name
Fax Email
Ad&ess
Phone Fax Email
B. PROJECT INFORMATION
1. The project will be:
Industrial: New Construction __ Expansion Redevelopment / Rehab.
Office/research facility that conforms to business park standards
Commercial Redevelopment/Rehabilitation
Other
2. In addition to the City of Elk River, applicant is requesting TRF funds from:
Sherburne County __ School District 728
3. The project will be: __Owner Occupied Leased Space
· If leased space, please attach a list names and addresses of future lessees and indicate
the status of commitments or lease agreements. Attach as Exhibit E.
4. Project Address
· Include Legal Description and PID Number. Attach as Exhibit F
5. Site Plan Attached: Yes No
o
Total Amount of TRF Requested: $
City Portion of TRF:
County Portion of TRF:
ISD 728 Portion of TRF:
over years.
Annual $ Total $
Annual $ Total $
Annual $ Total $
Current Real Estate Taxes on Project Site: $.
Estimated Real Estate Taxes upon Completion: Phase I $
Phase II $
Construction Start Date:
Construction Completion Date:
If Phased Project:
Year
Year
% Completed
% Completed
8
C. PUBLIC PURPOSE
It is the policy of the City of Elk River that the use of Tax Rebate Financing should
. result in a benefit to the public. Please indicate how this project will serve a public
purpose.
Job Creation: Number of existing jobs
Number of jobs created by project
Average hourly wage of jobs created
New industrial development which will result in additional private
investment in the area.
__Enhancement and/or diversification of the city's economic base.
The project contributes to the fulfillment of the City's Strategic
Plan for Economic Development.
Removal of blight.
Rehabilitation of a high profile or priority site.
Other:
D. SOURCES & USES
SOURCES
Bank Loan
Other Private Funds
Equity
Fed Grant/Loan
State Grant/Loan
EDA Micro Loan
Tax Rebate Financing
ID Bonds
TOTAL
NAME AMOUNT
USES
Land Acquisition
Site Development
Construction
Machinery & Equipment
Architectural & Engineering Fees
Legal Fees
Interest During Construction
Debt Service Reserve
Contingencies
TOTAL
AMOUNT
$.
$
$
$,
$.
$,
$.
$.
9
E. ADDITIONAL DOCUMENTATION AND CHECKLIST
Applicants ~vill 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
F) Personal Financial Statements of all Major Shareholders
Profit & Loss
Current Tax Return
__G) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
__ H) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in the Project
I) Application fee of $5000 (to be returned upon project
completion.)
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-I:or Analysis
__ Exhibit E - List of Prospective Lessees
__ Exhibit F - Legal Description
Note: All Major shareholders will be required to sign personal guarantees 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
By
Its
10
TAX REBATE FINANCING PROPOSAL REVIEW WORKSHEET
I TO BE COMPLETED BY CITY STAFF
1. The project meets the criteria set forth in Section V of the Tax Rebate Financing
policy.
__ b)
c)
Meets at least one of the objectives m Section III.
Demonstrates need for TRF with the but-for analysis.
Consistent with all city plans and ordinances.
Serves at least two public purpose as defined in Section V.
2. Ratio of Private to Public Investment in Project:
$ Private investment
$ Public Investment
Ratio Private: Public Financing
Less than
Points:
5:1 5
4:1 4
3:1 3
2:1 2
2:1 1
3. Job Creation in the City of Elk River:
__ Number of new jobs as a result of the project.
__ Number of existing/retained jobs divided by 10.
Total
Less than
Points:
25+ 5
20+ 4
15+ 3
10+ 2
10 1
4. Ratio of TRF to new jobs created:
$. TRF request
Number of new jobs created
$ of TRF per new-job created
Points:
$8,000 or less 5
$10,000 or less 4
$12,000 or less 3
$15,000 or less 2
Over $15,000 1
5. Wage Level of jobs created:
Average hourly wage
of jobs created:
Points:
Over $21/hour 5
$18-21 / hour 4
$14-17 / hour 3
$10-13 / hour 2
Under $10 / hour 1
6. Project size:
The project will result in the construction
of square feet
Points:
40,000+ 5
30,000+ 4
20,000+ 3
10,000+ 2
10,000 or less 1
11
7. Type of Project:
100% Owner Occupied
__ MLx Owner Occupied & Investment
__ Investment Property
8. Use:
Industrial or Business Park Project
__ Commercial Rehabilitation/Redevelopment
9. The project will pay annual
property taxes in the first fully
assessed year of $
10. Likelihood that the project will result in
unsubsidized, spin-off development.
Points:
5
4
3
Points:
5
4
Points:
35,000+ 5
25,000+ 4
15,000+ 3
10,000+ 2
Under $10,000 1
Points:
High 5
Moderate 3
Low 1
Sub - Total Points:
of a possible 45 points.
9. Bonus Points
Bonus Points:
__ The project will be 100% Pq-aszyou-go TRF.
__ The project contributes to the goals of Energy Ci(y.
· Product promotes sensible use of energy, OR
· Project utilizes significant energy efficient design &/or
materials m construction.
3 points
2 points
Total Points:
Overall project analysis:
High
Moderate
Low
Not Eligible
45-38 points
37-29 points
28-20 points
19-0 points
12
EXHIBIT A
Description of the corporation or parmership
EXHIBIT B
Description of the proposed project
EXHIBIT C
Names of officers and shareholders/parmers with more than five percent (5%) interest in
the corporation/parmership.
EXHIBIT D
But-for analysis
EXHIBIT E
Prospective Lessees
EXHIBIT F
Legal Description and PID Number
13
Xl. SAMPLE BUT-FOR ANALYSIS
Mortgag~
Equity
Tax Rebate Financing
TOTAL SOURCES
Land
Site Work
Soil Correction
Demolition
Relocation
Subtotal Land Costs
Construction
Finish Manufacturing
Subtotal Construction Costs
Soft Costs
Taxes
Finance Fees
Project Manager
Developer Fee
Contingency
Subtotal Soft Costs
TOTAL USES
Rent-Space 1
Rent-Space 2
Rent-Space 3
Other
Mortgage
Net Income
Total Return on Equity
WITH NO
TAX REBATE FINANCING
WITH
TAX REBATE FINANCING
SOURCES AND USES SOURCES AND USES
SOURCES SOURCES
9,600,000 8,667,000
2,400,000 2,400,00
0 933,000
12,000,000 12,000,000
USES USES
1,500,000
300,000
468,000
100,000
65,000
2,433,000
6,750,000
250,000
7,000,000
350,000
35,000
850,000
542,000
540,000
250,000
2,567,000
1,500,000
300,000
468,000
100,000
65,000
2,433,000
6,750,000
250,000
7,000,000
350,000
35,000
850,000
542,000
540,000
250,000
2,567,000
12,000,000 12,000,000
Income Statement Income Statement
100,000
25,000
25,000
Sq. Ft. Per Sq. Ft.
$8.00 800,000
$8.50 212,500
$9.00 225,000
o $o.oo o
1,237,S00
100,000
25,000
25,000
Sq. Ft. Per Sq. Ft.
$8.00 800,000
$8.50 212,500
$9.00 225,000
o $o.oo o
1,237,S00
20 Term
9.00% Interest
9,600,000 Principal
1,051,646
20 Term
9.00% Interest
8,667,000 Principal
949,439
185,854 288,061
7.74% 12.00%
14
MEMORANDUM
TO:
Mayor & City Council
CC:
FROM:
DATE:
SUBJECT:
Economic Development Authority
Catherine Mehelich, Director of Economic Development~,~
July 8, 2002
Consider Property Tax Abatement for Elk Path, LLC
Professional Office Building Project
Background
The City Council held a public heating on June 10, 2002 regarding the Tax Rebate Financing
(tax abatement) application by Elk Path, LLC for the construction of a professional office
building.
Following the public hearing the City Council held a joint meeting on June 24, 2002 with the
Economic Development Authority to discuss policy issues related to the use of tax rebate
financing for office developments. It was the consensus of the Council and EDA that the
Elk Path, EEC project be evaluated based on the city's amended Tax Rebate Financing
policy.
Analysis & Recommendation
The proposed Elk Path, LLC professional office building project does not meet the city's
new minimum requirement for 50% of the available office space to be pre-leased.
Since the Elk Path LLC project, as proposed, does not meet the minimum requirement staff
recommends the application be denied. The project may be reconsidered once 50% of the
space is pre-leased, or the project scope is revised.
S:\EDA\TAXABATE~ElkPathLLC\7-8-02.doc