5.4. SR 04-12-2004Item 5.4.
MEMORANDUM
TO:
FROM:
DATE:
Economic Development Authority
Mayor & City Council
Catherine Mehelich, Director of Economic Developmen~
April 12, 2004
SUBJECT: Consider Tax Rebate Financing Request for Badger Ventures, LLC
(Gradient Technology, Inc.)
Attachments
· PrelimmauT Expansion Siting Proposal for Gradient Technology, Februa~7 2, 2004.
· Revised Preliminary Expansion Siting Proposal for Gradient Technology, March 9, 2004.
· Tax Rebate Financing Application from Gradient Technology, Inc.
· Tax Rebate Financing Projection Worksheet, Gradient Technology
· Public Hearing Nodce, published March 31, 2004
· Resolution Approving Property, Tax Abatement
· DRAFT- Tax Abatement and Business Subsidy Agreement
Issue
At its March 8, 2004 meeting the Economic Development Authoritw and City Council approved
the attached Revised Preliminary Expansion Siting Proposal and that Gradient Technology be
considered for receiving Tax Rebate (Abatement) Financing. Staff anticipates that a
representative from Gradient Technology ~vill be present at the EDA meeting to discuss the
proposed project.
Prior to the Council's final consideration, staff u, pically requests that the EDA revie~v, comment,
and often times provide a recommendation to the City Council regarding tax abatement and tax
increment financing requests.
Background
Gradient Technology (G.D.O., Inc.) demilitarizes munitions for various branches of the militant.
None of the demilitarization is performed at the company's Minnesota facili~', but rather at
Crane Naval Service Warfare Center in Crane, Indiana. The Minnesota facility ~vill be used for
Gradient Technology's business office and for providing chemical engineering design services
and equipment fabrication. The company will also have a lab for conducting research and
development.
Consider Property Tax Abatement ['or Badger Ventures, LLC
EDA/Ciry Council Meeting April 12, 2004
Page 2 of 3
The company currently employs 13 full-time staff, including 7 based m Minnesota and 6 m
Indiana and elsewhere. The positions have an hourly wage between $16-75.00 per hour. The
company anticipates creating up to 5 new positions at the Minnesota facili~ ~vithin
2-years. The new positions will likelv consist of management and engineers.
Staff has been m contact over the past one and a half years ~vith Eric Haehn, Vice
President/CFO of Grachent Technology. The company currently leases space m Blame, MN and
is seeking a suitable location xvithm the northwest metro area to relocate. The City of Big Lake
has aggressively pursued the company's relocation project, in addition to staff's efforts.
Project Description
Badger Ventures, LLC proposes to construct a 13,000-square foot light industrial/business park
building for lease to Gradient Technology's office, research & development, and equipment
hbrication operation. Badger Ventures proposes to purchase 2.05-acres within the Elk River
Business Park and has requested that the city and county consider a write down of the land cost
to $0 through a pay-as-you-go note to the limited liability company.
The attached Preliminary Siting Proposal dated FebruaU' 2, 2004 and the Revised Prelhninary
Proposal dated March 9, 2004 indicate the revised land cost/tax abatement assistance following
the EDA's concept approval.
Analysis
Staff has been working with the company through the due diligence process for the financial
analysis and the City's Tax Rebate Financing process.
The Sherburne County Assessor's office has reviewed the building reformation and has provided
the follo~vmg esthnated market value (EMV) of the proposed building project for 2005:
EMV Building $ 609,700
EM-V Land $107,300
Total ENfV $ 717,000
The attached Tax Rebate Financing Projection Worksheet indicates the payment period given the
assessor's estimates. The estimated payment period to provide a land ~vrite down to 50 is 12
years city and county. The MN Tax Abatement Statute allows jurisdictions to provide tax
abatement over a 1 O-year period. A period longer than 1 O-years is allo~ved only follo~vmg
another jurisdiction (school dismct in this case) denying the abatement request in writing. Staff
believes that the term will liken be 10-years simply based upon annual inflationa~ increases to
the market value and tax rates.
Staff completed the ratings worksheet used to help analyze such proposals. The proposed
project scored a "32", out of a total possible of 50 points, which equates to a "moderately
desirable" project.
Consider Propert?' Tax Abatement for Badger Ventures, [,LC
ED?~/Ciw. Council Mecting ApriI 12, 2004
Page 3 of 3
There 2re several issues that remain unresolved, including:
· Identification of a bank lender and proposed project £mancing terms
· The possibih~T ora CiD' Micro Loan request of up to $100,000
Identification of the amount and source of ehgible equiD~
Completion and review of a b~t(/'or analysis
Recommendation
At this me there is not enough information for staff to provide a recommendation to the EDA
regarding the tax abatement request for the project.
The City Council may continue to hold a public hearing and receive comment on the tax
abatement request. Staff recommends postpone any action regarding the abatement request until
staff and the company to finalize the project details and resolve the remaimng issues. Staff will
report at a future regular meeting of the City Council for f'mal acdon.
City of Elk River
Preliminary Expansion Siting Proposal
Gradient Technology
Revised February 2, 2004
Site
A.
Proposed Location
1.5 acre lot
A proposed subdivision of Lot 5, Block 1, Elk River Business Park
Access from Industrial Circle.
~ee at/ached Locat/o, ~.
Zoning/Land Use Requirements
Business Park/Light Industrial
An administrative subdivision (lot split) to be administered by the lando~vner prior to
sale.
Building Requirements
Building and site to comply with Business Park District Ordinance and other Ci~
requirements. An accessory building for materials storage could be allowed.
~gee al/ached Bz~siness Par/e Dis/ri~'t Ord/na,~'e Reqz~/reme,~'.
Land Cost/Value
$1.61/sf 1.5-acres Total: $105,197
Includes special assessments and park dedication.
Project Timeframe
Upon acceptance of this Preliminaw Proposal and a letter of intent, the Director of
Economic Development will prepare and submit a comprehensive proposal
including a detailed project timetable for finance and building permit timing and
application requirements.
At this ttme the proposed site would require an administrative subdivision
application, to be submitted by the landowner to the City Council for consideration.
This process could be completed within 30-days. Financing application review and
considerations can take up to 45-days and can mn concurrently with the
administrative subdivision, building site plan and permit application review process.
City, of Elk River
Prelimina~ Proposal for Expansion Siting
Gradient Technology -JanuaU, 14. 2004
Page 2 of 2
II.
Financing
A. Project Costs
Land $105,197
Construction $650,000
Equipment $ 0
Total Uses $755,197
1.5 acres at $1.61/SF
Estimate - 13,000 SF at $50.00/SF
Proposed Business Financing Sources
Bank $ 574,924
O~vner Equity $ 75,076
Tax Rebate Finance $ 105,197
Total Sources $ 755,197
90 % Building Cost
10% if using SBAS04 via Bank
50/50 City and County*
* Total Ciw Assistance Proposed: $ 52,598.50
* Total County Assistance Proposed: $ 52,598.50
Job & Wage Goals (to be met xvittml 2 years of building occupancy)
Job Creation 5 full-time at $15.00/hour (minimum)
Job Retention 13 full-time at $13.00-75.00/hour
Preliminary
Financing Applications
Tax Rebate Financing assistance, or Tax Abatement, is proposed to be provided in
the form of "pay-as-you-go" basis, in ~vhich the buyer (Gradient Technology) pays
improvement costs upfront, and then is reimbursed annually svith 100% of
abatement proceeds upon receipt of annual real estate taxes by the City and County
for a maximum term/amount equal to the land cost or 7-years, the earlier. The
buyer could consider an assignment of the "pay-as-you-go" note to a bank for
"upfront equity" financing.
Other
Projoosa/ is contingen~ uj~on letter of ajoj~rova/ from qualified/ending insti~u?ion.
Proposal is contingent upon approvals from the Elk River Economic Development
Authority,, City Council and Sherburne County Board of ComnCUssioners.
Proposal is exclusive of project contractor/builder. However, Amcon Construction
or the lando~vner partnership ~vould consider accepting an assignment of the
abatement note in exchange if the buyer builds with Amcon Construction.
Additional acreage, beyond buyer's initial needs, may also be considered if building
with Amcon.
See attached ~mcon correJ~ondem'e re: Gra~/ien/ Techno/o~gy Pro, Oosa/
Proposal Accepted:
By Date
City of Elk River
Preliminary Expansion Siting Proposal
Gradient Technology
Revised March 9, 2004
Site
A.
Proposed Location
2.05 acre lot
A proposed subdivision of Lot 5, Block 1, Elk River Business Park
Access from Industrial Circle.
See a//~che:/ LocaEo, ;¥[~.
Zoning/Land Use Requirements
Business Park/Light Industrial
An administrative subdivision (lot split) to be administered by the landowner prior to
sale.
Building Requirements
Building and site to comply ~vith Business Park District Ordinance and other City
requirements. An accessory building for materials storage could be allowed.
See a~ac~ed B~siae~'~' Parle Dis~fc~ Ordiaaace Req~dremen?s.
Land Cost/Value
$1.61/sf 2.05-acres Total: $143,770
Includes special assessments and park dedication.
Project Timeframe
Upon acceptance of this Prelimina~ Proposal and a letter of intent, the Director of
Economic Development will prepare and submit a comprehensive proposal
including a detailed project Umetable for finance and building permit timing and
application requirements.
At this time the proposed site would require an administrative subdivision
apphcation, to be submitted bv the landowner to the City Council for consideration.
This process could be completed within 30-days. Financing application review and
considerauons can take up to 45-days and can run concurrendv with the
admimstrative subdivision, building site plan and permit application review process.
Ciw o£ Elk River
Preliminary, Proposal for Expansion Siting
Gradient Technology - Revised March 8, 2004
Page 2 o£ 2
II.
Financing
A. Project Costs
Land $143,770
Construction $650,000
Equipment $ 0
TotaI Uses $793,770
2.05 acres at $1.61/SF
EstZmare - 13,000 SF at $50.00/SF
Proposed Business Financing Sources
Bank - TBD $ 574,924
Owner Cash Equit7 $ 79,377
Tax Rebate Finance $143,770
Total Sources $ 793,770
90% Btfilding Cost
10% Project Cost
50/50 City and County*
* Total City Assistance Proposed: $ 71,885
* Total County Assistance Proposed: $ 71,885
Job & Wage Goals (to be met ~vithm 2 years of building occupancy)
Job Creation 5 £ull-time at $15.00/hour (minimum)
Job Retention 13 full-time at $13.00-75.00/hour (7 based in MN)
Financing Applications
Tax Rebate Financing assistance, or Tax Abatement, is proposed to be provided in
the form of "pay-as-you-go" basis, in xvhich the buyer (Gradient Technology) pays
improvement costs upfront, and then is reimbursed annually ~vith 100% of
abatement proceeds upon receipt of annual real estate taxes by the City and CounU
for a ma"Ctmum term/amount equal to the land cost or 10-years, the earlier. The
buyer could consider an assignment of thc "pay-as-you-go" note to a bank for
"upffont equity."' financing.
Other
Projoosa/ is ~vn~ingen~ z~on /et/er of a~prova/ from qualified/endin~ ins?i~u?ion.
Proposal is contingent upon approvals from the Elk R/ver Economic Development
Authority, City Council and Sherburne County Board of Commissioners.
Proposal is excluswe of project contractor/builder. However, Amcon Construction
or the landowner partnership ~vould consider accepting an assignment of the
abatement note in exchange if the buyer builds with Amcon Construction.
Additional acreage, beyond buyer's initial needs, may also be considered if building
with Amcon.
~ee attac/;ed~,4m~vn corre¢onden:e re: Gradien? Tech.o/o~ Proposal
Preliminary Proposal Accepted:
By Date
GRADIENT TECHNOLOGY, 2004
City of
River
Economic Development
Tax Rebate Financing
Policy & Application
Amended: August 2002
Adopted: April 10, 2000
City of Elk River, Minnesota
Table of Contents
VII.
VIII.
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
Application Process
C~ty of Elk River 7
Application to Other Political Subdivisions 7
Application
Applicant Information 8
Project Information 9
Public Purpose 9
Sources & Uses 10
Checklist & Additional Information 1 1
IX. Application Review Worksheet
X. Exhibits
3
3
3-4
4-5
5-6
6
7
8
12
14
XI.
A
B
C
D
E
F
Corporation/Partnership Description
Project Description
Shareholders
But-for Analysis
Prospective Lessees
Legal Description and PID Number
Sample But-For Analysis
15
City of Elk River
Tax Rebate Financing Policy, Amended August 2002
-2-
I. POLICY PURPOSE
~or ;he ?u~oses of this document, ~he ~erm "CiV'' shall include ~h~ ~//e ~'ver Cit_y CoumiJ, ~co~omic
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 La~v.
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 other~vise
occur bzztfor 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 CiD' to provide the minimum amount
of TRF, as well as other incentives, at the shortest term required for the project to
proceed. The Ci~ reserves the right to approve or reject projects on a case by case basis,
taking into consideration established policies, project criteria, and demand on ci~
services in relation to the potential benefits from the project. Meeting policy criteria does
not guarantee the a~vard 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 'Fax Increment
Financing (TIF) is the way in which the dollars are axvarded to the project. When TIF is
a~varded 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, ~vhen 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 ~vith 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 follo~ving objectives:
· To retain local jobs and/or increase the number and diversity of jobs that offer
stable employment and/or attractive xvages 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 ~vithout 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.
City of Elk River
Tax Rebate Financing Policy, Amended August 2002
· To offset increased costs of redevelopment (i.e. contaminated site clean up)
over and above the costs normally incurred in development.
· To create opporturfides for affordable housing.
To contribute to the implementation of other public policies, as adopted bv the
ciw from Ume to time, such as the promotion of qualiw, urban or architectural
design, energy conservation, and decreasing capital and/or operating costs of
local government.
IV. POLICIES FOR THE USE OF TI:IF
TRF assistance ~vill be provided to the developer upon receipt of taxes by the
Cid-, othe~vise referred to as the ~-aJ':yo,-go method. Requests for up front
financing will be considered on a case-by-case basis.
Any developer receiving TRF assistance shah provide a minimum of twenw
percent (20%) cash equity investment in the project. Projects utilizing the
SBAS04 program will be required to provide a mimmum of ten percent
(10%) cash equity investment.
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 ~vill not be utilized in cases ~vhere 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 extraordina~' 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.
ho
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 bv
the City or its consultants.
j. TRF proposals shah not be used to support speculative office projects.
Speculam;e projects are defined as those projects ~vhich have pre-leasing
agreements or letters of intent for less than 505'0 of the available space.
Citv of Elk River
Tax Rebate Financing Policy, Amended August 2002
-4-
In addition, leasible office projects must meet the following guidelines:
1. Evidence of the 50% occupancy must be reported to the Director of
Economic Development slx months following an issued certificate of
occupancy.
2. 50% of the jobs within the leasible office building space must be
considered "new" jobs to the City of Elk River, meamng 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 onlv in cases where job loss is specific and demonstrable in
accordance with the bin Business Subsidy Law. Evidence may include
documentation that the company xvill have to close involuntarily, or the
company has received an attractive offer to move to another state or
community.
k. All TRF proposals shah optimize the private development potential of a site.
V. PROJECT QUALIFICATIONS
All TRF projects considered by the Cit~, 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.
b. The use of
·
TRF will be limited to:
Industrial development, expansion, redevelopment, or
rehabilitation; or
· Commercial redevelopment or rehabilitation; or
· Research and development facilities that sadsfy Business Park
zoning requirements; or
· Office facilities with a mimmum new construction of 25,000
square feet and mimmum market value of $1,000,000 upon
project completion; or
· Residential development and redevelopment maybe eligible for
TR? under a separate set of policies and onty xvith the
recommendation of the
The developer shah demonstrate that the project is not financially feasible
bz~-for the use of TRF. Evaluation of the project's fmancial feasibility, without
TRF shah be provided by the Ciw, 's financial advisor on requests of over
$25,000 total.
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.
Ciw of Elk River
Tax Rebate Financing Policy, Amended August 2002
-5-
e. The project must be consistent with the City's Comprehensive Plan, Land
Use Plan, and Zoning Ordinances.
The project shall serve at least t~vo of the folloxving public purposes:· Job creation or job retention.
· Increase of tax base.
· Enhancement or diversification of the city's economic base.
· Development or redevelopment that xvill spur additional private
investment in the area.
· Fulfillment of defined ciw 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 REQUIRPIENTS
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
City's Business Subsidy Criteria as adopted, and State Statute 116j.993 as
summarized belo~v.
AH developers/businesses receiving TRF assistance shah enter into a Subsidy
Agreement with the City of Elk River that identifies: the reason for the subsidy, the
public purpose served by the subsidy, and the goals for the subsidy, as xveLl as other
subsidy agreement criteria set forth by Statute 116J.993.
The developer/business shall file a report annually for t~vo years after the date the
benefit is received or until all goals set forth in the application and Subsidy
Agreement have been met, ~vhichever is later. Reports shah be completed using the
format drafted by the State of Minnesota and shall be filed ~vith 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 ciD'
~vithin 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
Subsidy Agreement, 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, termination of the assistance, and be deemed
ineligible by the State to receive anv loans or grants from public endties for a period
of five years.
Ciw of Elk R/vet
Tax Rebate Financing Policy, Amended August 2002
-6-
VII. APPLICATION PROCESS FOR TRF
Ae
CITY OF ELK RIVER
Appticant submits the completed application along with a $5,000 application fee.
The application fee will be used toward the cost of serwqces provided in the
evaluation of financial feasibility, and preparation of legal documents. The balance
of the application fee will be returned to the applicant.
City staff reviexvs the application and completes the Application Review'
Worksheet.
Results of the Worksheet are submitted to the appropriate governing authorities
for prelimma~ approval of the proposal.
If preliminary' approval is granted, all necessary, notices, resolutions and agreements
are prepared by City staff and/or consultants.
Publ/c 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 intenchng to seek TRF from Sherburne County
and/or School District 728 make their apphcarions to those bodies concurrent ~vith
their apphcation to the City of Elk tLiver. 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
Ci~' of Elk River
Tax Rebate Financing Policy, Amended August 2002
VIII. APPLICATION FOR TAX REBATE FINANCING
A. APPLICANT INFORMATION
Name of Corporation/Parmership: G.D.O., Inc., d/b/a Gradient Technology
Address: 8744 35W West Service Drive, Suite A, Blaine, MN 55449
Primarv Contact: Eric Haehn, Vice-President/CFO
Address: Same as above
Phone: 763-792-9990 Fax: 763-792-9972 Email: haehn@gradtech.com
On a separate sheet, please provide the following:
Brief description of the corporation/partnership's business, including history,,
principal product or service, etc... 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 m the corporation/partnership. Attach as Exhibit C.
· A but-_/br analysis and narrative. Attach as Exhibit D. PENDING
Attorney Name: Sholly Blustm
Address: 5775 Wayzata Blvd, Suite 700, Minneapolis, MN 55416
Phone 763-550-1133 Fax: 952-545-0071 Email:
Accountant Name: Silverman Olson Thorvilson & Kaufmann LTD
Address: 1550 K~_nnard Financial Center, 920 2nd Ave. S., Minneapolis, MN 55402
Phone: 612-373-9000 Fax: 612-373-9010 Email
Contractor Name
Address
Phone
Engineer Name
Fax Email
Address
Phone Fax Email
Architect Name: Auth Consulting/Associates
:~ddress: 406 Technology Drive E., Suite A, Menomome, WI 54751
Phone: 715-232-8490 Fax: 715-232-8492 Email
City of Elk River
Tax Rebate Fhaancmg Policy, Amended August 2002
-8-
B. PROJECT INFORMATION
1. The project will be:
X Industrial: X__Ne~v Construction __ Expansion __Redevelopment / Rehab.
N Office/research facility that conforms to business park standards
Commercial Redevelopment/Rehabilitation
Other
2. In addidon to the Ciw of Elk River, applicant is requesting TRF funds from:
Sherburne County __ School District 728
3. The project ~vill be: X O~vner 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
industrial Circle, Elk River Business Park
· Include Legal Description and PiD Number. Attach as Exhibit F.
PENDING
5. Site Plan Attached: X Yes __ No
Total Amount of TRF Requested: $143,770 over
City, Portion of TRF: Annual $
County Pordon of TRF: Annual $
ISD 728 Portion of TRF: Annual $_
10-12 years. (Equal to land cost)
$5,943 Total $ 71,885
$6,028 Totals 71,885
Total $_
Current Real Estate Taxes on Project Site: SEst. MV $62,509 (2.05acres)
Estimated Real Estate Taxes upon Completion: $~]st. MV $717,000
Taxes $24,784
Construction Start Date:
Construction Completion Date:
If Phased Project:
May 2004
October 1, 2004
Year
Year
% Completed
% 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 xvill serve a pubhc
purpose.
__X_Job Creation/Retention Number of existing jobs
Number of jobs created by project 3-5
Average hourly wage of jobs created/retained $30
X New industrial development xvhich xvill result in additional private
investment in the area.
X Enhancement and/or diversification of the city's economic base.
X 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:
City of Elk Pdver
Tax Rebate Financing Policy, Amended :\ugust 2002
-9-
D. SOURCES & USES
SOURCES
Bank Loan
Other Private Funds
Equi~
Fed Grant/Loan
State Grant/Loan
EDA Micro Loan
Tax Rebate Financing
ID Bonds
TOTAL
NAME
TBD
AMOUNT
$ 575,000
$
$ 75,000
$ 105,000
$ 755,000
USES
Land Acquisition
Site Development
Construction
Machinery & Equipment
Architectural & Engineering Fees
Legal Fees
Interest During Construction
Debt Service Reserve
Contingencies
TOTAL
AMOUNT
$ 105,000
$
$ 650,000
$
$
$
$
$
$
$ 755,000
Ciw of Elk River
Tax Rebate Fh~ancmg Policy, Amended _Sugust 2002
-10-
E. ADDITIONAL DOCUMENTATION AND CHECKLIST
Applicants xvill also be required to provide the follo~ving documentation.
x A)
Written business plan, including a description of the business,
oxvnership/management, date established, products and services, and future
plans
x
__ __ B) Financial Statements for Past Two Years
X Profit & Loss Statement
X Balance Sheet
X
C) Current Financial Statements
x Profit & Loss Statement to Date
x Balance Sheet to Date
X D) Txvo Year Financial Projections
X
__ __ F) Personal Financial Statements of all Major Shareholders
Profit & Loss
x Current Tax Return
X
_ __ G) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
PENDING H) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in the Project
X I) Apphcation fee of $5000
X j) Itemized Project Construction Statement
__ 1,2) Attach the following documentation as Exhibits
X Exhibit A - Corporation/Partnership Description
X Exhibit B - Description of Project
X Exhibit C - last of Shareholders/Partners
PENDING__ Exhibit D - Bz~t-For Analysis
Exhibit E - List of Prospective Lessees
PENDING 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 knoxvledge. 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 bv the City after the filing of this
application.
Applicant Name Date
City of Elk River
Tax Rebate Financing Policy, Amended .Sugust 2002
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TAX REBATE FINANCING PROPOSAL REVIEW WORKSHEET
1. The project meets the criteria set forth in Section V of the Tax Rebate Financing
p°li,sJ/'
/. a) Meets at least one of the objectives in Section III.
Demonstrates need for TRF with the but-_jbr analysis.
Consistent with all ciD' plans and ordinances.
Serves at least m'o public purposes as defined in Section V.
2. Ratio of Private to Public Investment in Project:
$ 7 '3 7'7' Private investment
$//a//~ 7/.?C Public Investment
/ ~. 'Z Ratio Private: Public Financing
Points: /
5:1 5
4:1
3:1
2:1
than 2:1
3. Jo_~..b Creation in the City of Elk River:
D Number of ne~v jobs as a result of the project.
'-"~/)V/t/Number of Txisting/retained jobs
,/'5-'_~ Total
Less than
4. R3t, io of TRF to new jobs created/retained:
$ j ~73,'~ 5v 7C TRF request
/~-- Number of new jobs created/retained
$ /7~.. ~ PC: of TRF per new job created/retained
5. Wage Level of jobs created:
Average hourly wage z-'__._>~'- ':~5
of jobs created/retained:
6. Project size:
The project will result in the construction
of square feet //25"> 0C5,'C5';
4
3
2
Points: ~
25+ 5
20+ 4
15+ 3
~ Q± ..... J
$8,000 or less 5
$10 000 or less 4
$15,000 or less 2
Over $15,000 1
Points:
$18-21 / hour 4
$14-17 / hour 3
$10-13 / hour 2
Under $10 / hour
Points: ~'
40,000+ 5
30,000+ 4
20,000+ 3
(--'-~,000 + -2-'--.
10,000 or less t
City. of Elk River
Tax Rebate Financing Policy, Amended August 2002
7. Typ.e-of Project:
/.../ 100% O~vner Occupied
__ Mkx O~vner Occupied & Investment
__ Investment Proper~
8. Use:._
~f Industrial or Business Park Project
__ Commercial Rehabilitation/Redevelopment
9. The project will pay annual
property taxes in the first fully
assessed year of $ ~5/~ 7~'~
10. Likelihood that the project will result in
unsubsidized, spin-off development.
Points: --~-~'-
4
3
Points:
4
Points:
35,000+ 5
25~0_000+ 4
10,000+ 2
Under $10,000 1
Points.'~
__High 5
M'"'Moderate~
Low 1
Sub - Total Points:
of a possible 45 points.
9. Bonus Points
Bonus Points:
L/The project will be 100% Pqy-as:),oat-~go TRF.
__ The project contributes to the goals of Ene~ Ci~.
· Product promotes sensible use of energy,, OR
,, Project utilizes significant energy efficient design &/or
materials in construction.
pom s
2 points
Total Points: -~
Overall project analysis:
~'-Moderate
LOw
Not Eligible
45-38 ~
37-29
pomts~
28-20 points
19-0 points
City of Elk River
Tax Rebate Financing Policy, .kmended 3_ugust ~.00_
-t3-
CITY OF ELK RIVER
TAX REBATE FINANCING PROJECTION WORKSHEET
Project Name: Gradient Technology Expansion/Relocation
TRF Project: 13,000-sq.ft. light manufacturing facility, located on 2.05-acres
Assumption: Projection is based on estimated payable 2004 tax rates and estimated project market value.
The Project will be assessed upon actual tax rates and market value in the year following construction.
State Class Rate IASSUMPTIONS
Up to $150,000 0.0151Pay 2004
Over $150,000 0.0201Pay 2004
Tax Capacity Rate
City Portion
County Portion
School District Portion
State Portion
Other Jurisdictions*
Total Tax Capacity Rate
0.43734
0.44363
0.32709
0.54447
0.03559
1.78812
Pay 2004 Est.
Pay 2004 Est.
Pay 2004 Est.
Pay 2004 Est.
Pay 2004 Est.
Pay 2004 Est.
Land Value ::$ : 1;07,300:00
Building Value ; $; 609,700;00;
Total Assessed Market Value $ ;717;000.00
MAX Years of TRF Project ;;1;0
Property's Total Tax Capacity $ 13,590.00
Per Co. Assessor 3/23/04
Per Co. Assessor 3/23/04
Per Co. Assessor 3/23/04
Property TaX Breakdown Annual Estimate
City Portion $ 5,943.45
County Portion $ 6,028.93
School District Portion $ 4,445.15
State Portion $ 7,399.35
Other Jurisdictions $ 483.67
Total Estimated Real Estate Taxes $ 24,300.55
TOtal TRF Needed: Land;COSt ;:; $1;43,770
City 1/2: $71,885.00
County 1/2:
TRF YearSi~ Land
12
Cost = 1.61/sf
$71,885.00
*Amount of abatement will vary depending on market value, tax rates, class rates, construction schedule and inflation on MY.
*Includes City HRA, City EDA, County HRA, County Rail Authority
'Does not include Market Value School Excess Levy Referendum 2003 rate of 0.07597%
FILE:gradtechTRF.xls 3/23/2004
Total TRF
2O05
20O6
2007
2008
2009
2010
2011
2012
2013
2014
Total MV
3% Annual Increase
717,300
738,819
760,984
783,813
807,327
831,547
856,494
882,189
908,654
935,914
Total NTC
13,590
13,998
14,418
14,850
15,296
15,755
16,227
16,714
17,215
17,732
Total City & County Tax
11,972
12,331
12,701
13,082
13,475
13,879
14,295
14,724
15,166
15,621
137,246
Total TRF
2OO5
2006
2007
2008
2009
2010
2011
2012
2013
2014
Total MV
717,300
745,992
775,832
806,865
839,140
872,7O5
907,613
943,918
981,675
1,020,942
Total NTC
13,590
14,134
14,699
15,287
15,898
16,534
17,196
17,884
18,599
19,343
Total City & County Tax
11,972
12,451
12,949
13,467
14,006
14,566
15,148
15,754
16,385
17,040
143,737
Total TRF
2OO5
2006
2007
2008
2009
2010
2011
2012
2013
2014
Total MV
717,300
753,165
790,823
830,364
871,883
915,477
961,251
1,009,313
1,059,779
1,112,768
Total NTC
13,590
14,270
14,983
15,732
16,519
17,345
18,212
19,122
20,079
21,083
Total City & County Tax
11,972
12,571
13,199
13,859
14,552
15,280
16,044
16,846
17,688
18,573
150,583
For publication on Wednesday, March 31, 2004
Please contact Heidi Steinmetz with any questions at (763) 635-1042.
CITY OF ELK RIVER
NOTICE OF PUBLIC HEARING
REGARDING PROPOSED PROPERTY TAX ABATEMENTS
FOR THE GRADIENT TECHNOLOGY PROJECT
NOTICE IS HEREBY GIVEN that the City Council of the City of Elk River, Minnesota,
will hold a public hearing at a meeting of the City Council beginning at 6:30 p.m., on Monday,
April 12, 2004, to be held at the Elk River Senior High School Little Theater, 900 School Street
(enter through door H on the north side of the building), Elk River, Minnesota, on the request of
Badger Ventures, LLC (the "Company") to have the City abate to the Company 100% of the
property taxes to be levied by the City on 2.05 acres of Lot 5, Block 1, Elk River Business Park
located off of Twin Lakes Road on Industrial Circle in the City (the "Property") for an
approximately 13,000 square fbot light manufacturing facility (the "Improvements") to be
constructed by the Company and leased to Gradient Technology. The total amount of the taxes
proposed to be abated by the City on the Property for up to a ten year period is estimated to be
not more than $75,000.
This abatement would constitute a "business subsidy" under Minnesota Statutes, Sections
116J.993 through 116J.995, and the City would impose specific wage and job goals for the
Project under that law.
The City Council will consider granting this property tax abatement in response to the
request. A draft of a proposed Abatement Agreement between the City and the Company, which
includes t he proposed business subsidy agreement, a s w ell a s a summary of t he terms o f t he
subsidy, are available for review from the office of the City's Economic Development Director at
City Hall.
All interested persons may appear at the April 12th public hearing and present their views
orally or in writing. Anyone needing reasonable accommodations or an interpreter should
contact the City Clerk's office at the City Hall, telephone (763) 635-1000.
[Publish on March 31, 2004]
i630387vl
RESOLUTION NO.
RESOLUTION APPROVING PROPERTY TAX ABATEMENTS
BE IT RESOLVED by the City Council (the "Council") of the City of Elk River,
Minnesota (the "City"), as follows:
1. Recitals.
(a) Badger Ventures, LLC (the "Developer") proposes to construct an
approximately 13,000 square foot light manufacturing facility in the City (the "Project").
The Developer has requested that the City provide financial assistance to the Developer
for the Project. The City proposes to use the abatement for the purposes provided for in
the Abatement Law (as hereinafter defined), including the Project. The proposed term of
the abatement will be for up to ten years in an amount not to exceed $71,885. The
abatement will apply to 100% of the City's share of the property taxes (the "Abatement")
derived from a 2.05 acre portion of the property described as Lot 5, Block l, Elk River
Business Park (the "Property").
(b) On the date hereof, the Council held a public hearing on the question of
the Abatement, and said hearing was preceded by at least 10 days but not more than 30
days prior published notice thereof.
(c) The Abatement is authorized under Minnesota Statutes, Sections 469.1812
through 469.18 ! 5 (the "Abatement Law").
findings:
Findings for the Abatement. The City Council hereby makes the following
(a) The Council expects the benefits to the City of the Abatement to at least
equal or exceed the costs to the City thereof.
(b) Granting the Abatement is in the public interest because it will increase or
preserve the tax base of the City and provide employment opportunities in the City.
(c) The Property is not located in a tax increment financing district.
(d) In any year, the total amount of property taxes abated by the City by this
and other resolutions, if any, does not exceed the greater of ten percent (10%) of the
current levy or $200,000.
3. Terms of Abatement. The Abatement is hereby approved; provided, however, the
this approval is contingent upon the approval by Sherburne County of an abatement program for
the Project upon the same terms as set forth below for the County's share of property tax amount
which the County receives from the Property. The terms of the Abatement are as follows:
(a) The Abatement shall be for up to ten (10) years and shall apply to the
taxes payable in the years 200__ through 20 , inclusive.
1630423vl
(b) The City will abate 100% of the City's share of property tax amount which
the City receives from the Property, not to exceed $71,885.
(c) The Abatement shall be subject to all the terms and limitations of the
Abatement Law.
(d) The Abatement may not be modified or changed during its term.
The motion for the adoption of the foregoing resolution was made by member
and duly seconded by member and, upon a vote being
taken thereon after full discussion thereof, the following voted in favor thereof:
and the following voted against the same:
Whereupon said resolution was declared duly passed and adopted.
1630423vl 2
STATE OF MINNESOTA )
) SS
COUNTY OF SHERBURNE)
[, the undersigned, being the duly qualified and acting Clerk of the City of Elk River,
Minnesota (the "City"), by reason of my office as Clerk, DO HEREBY CERTIFY that I have
compared the attached and foregoing extract of minutes with the original thereof on file in my
office, and that the same is a full, true and complete transcript of the minutes of a meeting of the
City Council of the City, duly called and held on the date therein indicated, insofar as such
minutes relate to property tax abatements for the Badger Ventures Industries, Inc. Project.
WITNESS my hand this 12th day of April, 2004.
City Clerk
1630423v[
DRAFT
TAX .ABATEMENT AND BUSINTESS SUBSIDY AGREEMENT
BY AND BETWEEN
CiTY OF ELK RIVER, MINNESOTA
ANT)
BADGER VENTURES, LLC
1630424v1
TABLE OF CONTENTS
DRAFT]
A~T[CLE I DEF~ITIONS .................................................................................................
Section 1.1 Definitions ............................................................................................
ARTICLE II REPRESENTATIONS ANT) WARRANTIES ................................................ 3
Section 2.1 Representations and Warranties of the City ......................................... 3
Section 2.2 Representations and Warranties of the Developer ............................... 3
ARTICLE III
Section 3.1
Section 3.2
Section""
Section .2.4
Section 3.5
Section 3.6
Section 3.7
Section 3.8
Section 3.9
ARTICLE IV
Section 4.1
Section 4.2
Section 4.3
Section 4.4
Section 4.5
Section 4.6
ARTICLE V
Section 5.1
Section 5.2
Section 5.3
Section 5.4
Section 5.5
Section 5.6
Section 5.7
UNT)ERTAKINGS BY DEVELOPER A2,qT) CITY .......................................5
Construction of Project and Reimbursement of Tax Abatement
Property Cost ....................................................................................... 5
Limitations on Undertaking of the City ............................................... 5
Commencement and Completion of Construction ............................... 5
Damage and Destruction ...................................................................... 5
No Change in Use of Project ............................................................... 5
Prohibition Against Transfer of Project and Assignment of
Agreement ............................................................................................ 5
Real Property Taxes ............................................................................. 6
Business Subsidies Act ........................................................................ 6
Duration of Abatement Program .......................................................... 7
EVENTS OF DEFAULT ................................................................................. 8
Events of Default Defined ................................................................... 8
Remedies on Default ............................................................................ 8
No Remedy Exclusive .......................................................................... 8
No Implied Waiver .............................................................................. 8
Agreement to Pay Attorney's Fees and Expenses ................................ 9
Release and Indemnification Covenants .............................................. 9
ADDITIONAL PROVISIONS ...................................................................... 10
Conflicts of Interest ............................................................................ 10
Titles of Articles and Sections ........................................................... 10
Notices and Demands ........................................................................ 10
Counterparts ....................................................................................... 10
Law Governing .................................................................................. 10
Duration ............................................................................................. 11
Provisions Su~'iving Rescission or Expiration .................................. 11
1630424v1 -i-
THIS AGREEMENT, made as of the day of ~
City of El!< River, Minnesota (the "City"), a municipal corporation and political subdivision of
the State of Minnesota, and Badger Ventures, LLC, a Minnesota limited liability company (the
"Developer"),
W1TNESSETH:
WHEREAS, pursuant t o M irmesota Statutes, S ections 4 69.1812 through 4 69.1815, t he
City has established a Tax Abatement ProgTam; and
WHEREAS, the City believes that the development and construction of a certain Project
(as defined herein), and fulfillment of this Agreement are vital and are in the best interests of the
City, will result in preservation and enhancement of the tax base, provide employment
opportunities and are in accordance with the public purpose and provisions of the applicable state
and local laws and requirements under which the Project has been undertaken and is being
assisted; and
WHEREAS, the requirements of the Business Subsidy Law, Minnesota Statutes, Section
116J.993 through 116J.995, apply to this A~eement; and
WHEREAS, the City has adopted criteria for awarding business subsidies that comply
with the Business Subsidy Law, after public hearings for which notice was published; and
WHEREAS, the Council has approved this Agreement as a subsidy agreement under the
Business Subsidy Law.
NOW, THEREFORE, in consideration of the premises and the mutual obligations of the
parties hereto, each of them does hereby covenant and a~ee with the other as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. All capitalized terms used and not otherwise defined herein
shall have the following meanings unless a different meaning clearly appears from the context:
Agreement means this Agreement, as the same may be from time to time modified,
amended or supplemented;
Business Day means any day except a Saturday, Sunday or a legal holiday or a day on
which banking institutions in the City are authorized by law or executive order to close;
City means the City of Elk P, Sver, Minnesota;
County means Sherbume County, Minnesota;
[630424v!
successors and assi~s;
!
Event o~'De£ault means any o£th¢ events described in Section 4.1;
Project means the construction by the Developer of an approximately 13,000 square foot
light manufacturing facility to be located in the City;
State means the State of Mirmesota;
Tax Abatement Act means Mirmesota Statutes, Sections 469.1812 through 469.1815;
Tax Abatement Pro,am means the actions by the City pursuant to Minnesota Statutes,
Section 469.1 $12 through 469.1815, as amended, and undertaken in support of the Project;
Tax Abatement Property means a 2.05 acre portion of the property described as the real
property identified as [Lot fi, Block 1,] Elk River Business Park, located in the City;
Tax Abatements means t00% of the City's share of real estate taxes on the Tax
Abatement Property abated in accordance with the Tax Abatement Program.
ARTICLE II
DRAFT
REPRESENTATIONS ANT) WARRANTIES
Section 2.1 Representations and Warranties of the City. The City makes the following
representations and warranties:
(1) The City is a municipal corporation and a political subdivision of the State and
has the power to enter into this A~eement and carry out its obligations hereunder.
(2) The Tax Abatement Program was created, adopted and approved in accordance
with the terms of the Tax Abatement Act.
(3) To finance the costs of the Project to be undertaken by the Developer, the City
proposes, subject to the further provisions of this Ag-reement, to reimburse the Developer for the
costs of the Tax Abatement Property as further provided in this Agreement.
(4) The City has made the findings required by the Tax Abatement Act for the Tax
Abatement Pro,am.
Section 2.2 Representations and Warranties of the Developer. The Developer makes the
following representations and warranties:
(1) The Developer has the power to enter into this Agreement and to perform its
obligations hereunder and is not in violation of its articles, operating agreement or member
control agreement or any local, state or federal laws.
(2) The Developer is a limited liability company validly existing under the laws of
this State and has full power and to enter into this A~eement and carry out the covenants
contained herein.
(3) The Developer w ill cause t he Project t o b e constructed i n accordance with t he
terms of this A~eement and all local, state and federal laws and regulations (including, but not
limited to, environmental, zoning, energy conservation, building code and public health laws and
regulations).
(4) The Developer ,,viii obtain or cause to be obtained, in a timely manner, all
required permits, licenses and approvals, and will meet, in a timely manner, all requirements of
all applicable local, state, and federal laws and regulations which must be obtained or met belbre
the Project may be lawfully constructed
(5) The construction of the Project would not be undertaken by the Developer, and in
the opinion of the Developer would not be economically feasible within the reasonably
foreseeable future, without the assistance and benefit to the Developer provided for in this
Agreement.
i630424vl 3
transactions contemplated hereby, nor the f.uifillment of or complianc wit terms an
conditions of this Affeement is prevented, limited by or conflicts with or results m a Oreach or,
the terms, conditions or provision o£ any contractual restriction, evidence of' indebtedness,
agreement or instrument of whatever nature to which the Developer is now a party or by which it
is bound, or constitutes a default under any of the foregoing.
(7) The Developer will cooperate fully with the City with respect to any litigation
commenced with respect to the Project.
(8) The Developer will cooperate hilly with the City in resolution of any traffic,
parking, trash removal or public safety problems which may arise in connection with the
construction and operation of the Project.
163042~vi 4
ARTICLE III
)RAFT]
O~T)ERT:-UKiNGS BY DEVELOPER ANT) CITY
Section 3.1 Construction of Project and Reimbursement of Tax Abatement Property
Cost.
(1) The costs of the Tax Abatement Property and the construction of the Project shall
be paid by the Developer. The Developer will construct the Project in accordance with the
approved construction plans and at all times prior to the termination of this A~eement will
operate and maintain, preserve and keep the Project or cause the Project to be maintained,
preserved and kept with the appurtenances and every part and parcel thereof, in good repair and
condition.
(2) Upon submission to the City of a purchase a~eement and settlement statement
relating to the purchase of the Tax Abatement Property in an amount not less than the
Reimbursement Amount, the City shall reimburse the Developer for the costs of the Tax
Abatement Property actually incurred in an amount not to exceed $71,885 (the "Reimbursement
Amount") pursuant to the Abatement Program as provided in Section 3.8.
Section 3.2 Limitations on Undertakino, of the City. Notwvithstanding the provisions of
Sections 3.1, the City shall have no obligation to reimburse the Company for the costs of the Tax
Abatement Property, if the City, at the time or times such payment is to be made, is entitled
under Section 4.2 to exercise any of the remedies set forth therein as a result of an Event of
Default which has not been cured.
Section 3.3 Commencement and Completion of Construction.
The Developer snail complete the Project by December 3 I, 2005. All work with respect
to the Project to be constructed or provided by the Developer shall be in conformity with the
construction plans as submitted by the Developer and approved by the City.
Nothing in this A~eement shall be deemed to impair or limit any of the City's rights or
responsibilities under its zoning laws or construction permit processes.
Section 3.4 Damage and Destruction. In the event of damage or destruction of the
Project the Developer shall repair or rebuild the Project.
Section 3.5 No Chanae in Use of Proiect. The City's obligations pursuant to this
Agreement shall be subject to the continued operation of the Project by the Company.
Section 3.6 Prohibition Ao_ainst Transfer of Proiect and Assitnment of A~reement. The
Developer represents and agrees that prior to the termination date of this A~eement the
Developer shall not transfer the Project or any part thereof or any interest therein, ~vithout the
prior written approval of the City. The City shall be entitled to require as conditions to any such
approval that:
[020424v1 5
in the reasonable judgment of the City, necessary and adequate to f~tI'fT'll me o~tmatmn,
undertaken in this Agreement by the Developer.
(2) Any proposed transferee, by instrument in writing satisfactory to the City shall,
for itself and its successors and assigxns, and expressly for the benefit of the City, have expressly
assumed all of the obligations of the Developer under this Agreement and a~eed to be subject to
all the conditions and restrictions to which the Developer is subject.
(3) There shall be submitted to the City for review and prior written approval ail
instruments and other legal documents involved in effecting the transfer of any interest in this
Agreement or the Project.
Section 3.7 Real Propert,v Taxes. The Developer shalI, so long as this Agreement
remains in effect, pay all real property taxes with respect to all parts of the Tax Abatement
Property acquired and oxvned by it which are payable pursuant to the provisions of the
Assessment A~eement and any other statutory or contractual duty that shall accrue subsequent
to the date o fits acquisition of title to the Tax Abatement Property (or part thereof) and until title
to the property is vested in another person. The Developer a~ees that for tax assessments so
long as this A~eement remains in effect:
(a) It will not seek administrative review or judicial review of the
applicability of any tax statute relating to the ad valorem property taxation of real
property contained on the Tax Abatement Property determined by any tax official to be
applicable to the Project or the Developer or raise the inapplicability of any such tax
statute as a defense in any proceedings with respect to the Tax Abatement Property,
including delinquent tax proceedings; provided, however, "tax statute" does not include
any local ordinance or resolution levying a tax;
(b) It will not seek administrative review or judicial review of the
constitutionality of any tax statute relating to the taxation of real property contained on
the Tax Abatement Property determined by any tax official to be applicable to the Project
or the Developer or raise the unconstitutionality of any such tax statute as a defense in
any proceedings, including delinquent tax proceedings with respect to the Tax Abatement
Property; provided, however, "tax statute" does not include any local ordinance or
resolution levying a tax;
(c) It will not seek any tax deferral or abatement, either presently or
prospectively authorized under Minnesota Statutes, Section 469.181, or any other State or
federal la,v, of the ad valorem property taxation of the Tax Abatement Property so long
as this Agreement remains in effect.
Section 3.8 Business Subsidies Act.
(1) In order to satisfy the provisions of Minnesota Statutes, Sections 116J.993 to
116J.995 (the "Business Subsidies Act"), the Developer acknowiedges and agrees that the
amount of The "Business Subsidy" ~anted to the Developer under this A~eement is the
1630424vi 6
!
Reimbursement.'Amount, which is approximately. . $71,885, and that the[ ' s~2~u 1Ti{~
needed becausetheProjectisnotsufficlentlvfeaslblefortheDevelopertolingerie ~O~U
, wi t th
Business Subsidy. The public purpose of the Business Subsidy is to develop new jobs w~tl~in the
City and to increase the tax base in the City. The Developer a~ees that it will meet the
following goals (the "Goals"): It will create at least I$] full-time equivalent jobs in connection
with the development of the Project at a direct hourly wage of at least $[15.00] per hour within
two years from the "Benefit Date", which is the date the Project is completed.
(2) If the Goals are not met, the Developer a~ees to repay all or a part of the
Business Subsidy to the City, plus interest ("Interest") set at the implicit price deflator defined in
Minnesota Statutes, Section 275.70, Subdivision 2, accruing from and after the Benefit Date,
compounded semiannually. If the Goals are met in part, the Developer will repay a portion of
the Business Subsidy (plus Interest) determined by multiplying the Business Subsidy by a
fraction, the numerator of which is the number of jobs in the Goals which were not created at the
wage level set forth above and the denominator of which is I$] (i.e. number of jobs set forth in
the Goals).
(3) The Developer agrees to (i) report its progress on achieving the Goals to the City
until the later of the date the Goals are met or two years from the Benefit Date, or, if the Goals
are not met, until the date the Business Subsidy is repaid, (ii) include in the report the
information required in Subdivision 7 of the Jobs Act on forms developed by the Minnesota
Department of Employment and Economic Development, and (iii) send completed reports to the
City. The Developer agrees to file these reports no later than March 1 of each year commencing
March 1, 2005, and within 30 days after the deadline for meeting the Goals. The City agrees that
if it does not receive the reports, it will mail the Developer a warning within one week of the
required filing date. If within 14 days of the post marked date of the ~varning the reports are not
made, the Developer agrees to pay to the City a penalty of $100 for each subsequent day until the
report is filed up to a maximum of $1,000.
(4) The Developer agrees to continue operations of the Project for at least five ($)
years after the Benefit Date.
($) Other than the Tax Abatements and comparable tax abatements from the County,
there are no other state or local government agencies providing financial assistance for the
Project other than the City and the County.
(6) is the sole member and parent corporation of the
Developer.
Section 3.9 Duration of Abatement Pro.am. The Tax Abatement Program shall exist
for a period of up to ten years beginning with real estate taxes payable in 20__ through 20__. On
or before February 1 and August 1 of each year commencing August l, 20__ to and including
February 1, 20__ the City shall pay the Developer the amount of the Tax Abatements received
by the City in the previous six month period. The City may terminate the Tax Abatement
Pro.am and this A~eement at an earlier date it' an Event of Default occurs and the City rescinds
or cancels this Agreement.
1630424vl 7
,ARTICLE IV
DRAFT
EVENTS OF DEFAULT
Section 4.1 Events of Default Defined. The following shai1 be "Events of Default" under
this Agreement and the term "Event of Default" shall mean whenever it is used in this
Agreement any one or more of the following events:
(1) Failure by the Developer to timely pay any ad valorem real property taxes, special
assessments, utility' charges or other governmental impositions with respect to the Project.
(2) Failure by the Developer to cause the construction of the Project to be completed
pursuant to the terms, conditions and limitations of this Agreement.
(3) Failure b y t he Developer t o observe o r perform a ny other covenant, condition,
obligation or agreement on its part to be obserYed or performed under this Agreement.
Section 4.2 Remedies on Default. Whenever any Event of Default referred to in Section
4.1 occurs and is continuing, the City, as specified below, may take any one or more of the
following actions after the giving of thirty (30) days' written notice to the Developer citing with
specificity the item or items of default and notifying the Developer that it has thirty (30) days
within which to cure said Event of Default. If the Event of Default has not been cured within
said thirty (30) days:
(a) The City may suspend its performance under this Agreement until it
receives assurances from the Developer, deemed adequate by the City, that the Developer
will cure its default and continue its performance under this Agreement.
(b) The City may cancel and rescind the Agreement.
(c) The City may take any action, including legal or administrative action, in
law or equity, which may appear necessary or desirable to enforce performance and
observance of any obligation, agreement, or covenant of the Developer under this
Agreement.
Section 4.3 No Remedy Exclusive. No remedy herein conferred upon or reserved to the
City is intended to be exclusive of any other available remedy or remedies, but each and every
such remedy shall be cumulative and shall be in addition to every other remedy given under this
Agreement or now or hereafter existing at iaw or in equity or by statute. No delay or omission to
exercise any right or power accruing upon any default shall impair any such right or power or
shall be construed to be a waiver thereof but any such fight and power may be exercised from
time to time and as often as may be deemed expedient.
Section 4.4 No Implied Waiver. In the event any a~eement contained in this A~eement
should be breached by any party and thereafter waived by any other party, such waiver shall be
[650a24v [ 8
previous or subsequent breach hereunder.
Section 4.5 A~reement to Pay Attorney's Fees and Expenses..Whenever any Event of
Def;ault occurs and the City shall employ attorneys or incur other expenses for the collection of
payments due or to become due or for the enforcement or performance or observance of'any
obligation or a~eement on the part of the Developer herein contained, the Developer agrees that
they shall, on demand therefor, pay to the City the reasonable fees of such attorneys and such
other expenses so incurred by the City.
Section 4.6 Release and Indemnification Covenants.
(1) The Developer releases from and covenants and agn:ees that the City and its
governing body members, officers, agents, servants and employees shall not be liable for and
agrees to indenmify and hold harmless the City and its governing body members, officers,
agents, servants, and employees against any loss or damage to property or any injury to or death
of any person occurring at or about or resulting from any defect in the Project.
(2) Except for any willful misrepresentation or any willful or wanton misconduct of
the following named parties, the Developer a~ees to protect and defend the City and its
governing body members, officers, agents, servants and employees, now or forever, and further
agrees to hold the aforesaid harmless from any claim, demand, such, action or other proceeding
whatsoever by any person or entity whatsoever arising or purportedly arising from a breach of
the obligations of the Developer under this A~eement, or the transactions contemplated hereby
or the acquisition, construction, installation, ownership, maintenance and operation of the
Project.
(3) The City and its governing body members, officers, agents, servants and
employees shall not be liable for any damages or injury to the persons or property of the
Developer or its officers, agents, servants or employees or any other person who may be about
the Project due to any act of negligence of any person.
(4) All covenants, stipulations, promises, a~eements and obligations of the City
contained herein s hall b e deemed t o b e t he covenants, stipulations, promises, a ~eements a nd
obligations of the City and not of any governing body member, officer, agent, servant or
employee of the City in the individual capacity thereot:
103042av[ 9
ARTICLE V
DRAFT
ADDiTiONAL PROVISIONS
Section 5.1 Conflicts of Interest. No member of the governing body or other official of
the City shall participate in any decision relating to the Agreement which affects his or her
personal interests or the interests of any corporation, partnership or association in which he or
she is directly or indirectly interested. No member, official or employee of the City shall be
personally liable to the City in the event of any default or breach by the Developer or successor
or on any obligations under the terms of this A~eement.
Section 5.2 Titles of Articles and Sections. Any titles of the several parts, articles and
sections of the A~eement are inserted for convenience of reference only and shall be
disregarded in construing or interpreting any of its provisions.
Section 5.3 Notices and Demands. Except as otherwise expressly provided in this
Agreement, a notice, demand or other communication under this A~eement by any party to any
other shall be sufficiently given or delivered if it is dispatched by registered or certified mail,
postage prepaid, return receiPt requested, or delivered personally, and
(1) in the case of the Developer is addressed to or delivered personally to:
Badger Ventures, LLC
(2) in the case of the City is addressed to or delivered personally to the City at:
City of Elk River
Elk River City Hall
13065 Orono Parkway
Elk River, MN 55330-5600
or at such other address with respect to any such party as that party may, from time to time,
designate in writing and forward to the other, as provided in this Section.
Section5.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shai1 constitute one and the same instrument.
Section 5.5 Law Govemino~. This A~eement will be governed and construed in
accordance with the laws of the State of Minnesota.
1630a£4vt 10
Section 5.6 Duration. This A~eement shall remain in effect throt{g] }~[ ]42f~}t
unless earlier terminated or rescinded in accordance with its terms.
Section 5.7 Provisions Surviving Rescission o r Expiration. S ections 4.5 and 4.6 shall
survive any rescission, termination or expiration of this Agreement with respect to or arising out
of any event, occurrence or circumstance existing prior to the date thereot:
1650424v[ 1 1
name and on its behalf, and the Developer has caused this Agreement to y execu m it
name and on its behalf, on or as of the date first above written.
BADGER VENTURES, LLC
Its
By
Its
This is a signature page to the Tax Abatement and Business Subsidy AgTeement bv and between
the City of Elk River, Minnesota and Badger Ventures, LLC.
By
Its Mayor
By.
Its Administrator
This is a sigxqature page to the Tax Abatement and Business Subsidy A~eement by and between
the City of Elk River, Minnesota and Badger Ventures, LLC.