6.1 EDSR 03-16-2015Elk
River
Request for Action
To
Item Number
Economic Development Authori
6.1
Agenda Section
Meeting Date
Prepared by
General Business
March 16, 2015
Jeremy Barnhart, Deputy Director, CODD
Item Description
Reviewed by
Sale of Lots 1 and 2, Block 2, Natures Edge
Cal Portner, City Administrator
Business Center II
Reviewed by
Action Requested
Respond to Purchase Agreement received for Lots 1 and 2, Block 2, Natures Edge Business Center II
(NEBC II). (Envision Companies, dba Sportech)
Background /Discussion
The city has received a Purchase Agreement to purchase lots 1 and 2, block 2, NEBC II from Envision
Companies, the parent company of Sportech.
The purchase agreement proposes the purchase of the two lots for 50 cents each. Envision Company
desires to retain tax abatement income to fund their projects. Envision proposes to place $15,000 in
escrow pending the closing. Escrow dollars would be used for buyer's closing costs.
Envision proposes closing by July 31, though this date may be extended up to 30 days at their discretion.
The contingency date is the closing date; contingencies include: Environmental testing, land use
approvals (rezoning, lot combination, easement vacation, site plan approval), title, city obligations, and
financing.
Anal
The agreement proposes the sale of the two lots for 50 cents each, with no mechanism to reimburse to
the city the value of the land or the cost of the infrastructure improvements. The sale of land for less
than market value is considered a business subsidy. The EDA attorney recommends that the city not
accept the purchase agreement until the public hearing process for the business subsidy has concluded, in
part to preserve Due Process associated with a public hearing. If the EDA wishes to agree to the
purchase agreement, a contingency of business subsidy approval should be added. Based on lot size, it
cost approximately $500,000 to improve the two lots.
The city has in the past sold land for a dollar (Sportech, 2008, Preferred Powder Coating, 2013).
Preferred's agreement included collection of tax increment from the school district and the county; that
money was paid to the development fund. In 2008, the city sold 9.3 acres to Envision for $1, with the
balance of the land value being returned to the city from city and county tax abatement receipts. In 2005,
the city used tax abatement to write down the land cost on four projects (Alliance Machine, CDI, MET,
and Classic Acrylics), though for those projects, the buyer paid full value at closing, and were (and
continue to be) repaid through tax abatement receipts. At most, land was written down 50% of the value.
P R IN E R E R R i
1 CIA R
In the context of a land sale, Sportech is a business consistent with the goals and objectives of the city
and its economic development endeavors. In voicing support for financial assistance in recent meetings,
this support seemed based on the level of subsidy provided by previous agreements, and including
expectations of reimbursement of the lot price. While no application has yet been received, the total
subsidy, including land write down and $500,000 in tax abatement is expected to be $1,788,589, based on
conversations with the buyer's agent.
The city does not have a policy on giving land, improved or otherwise, away for nearly free.
Financial Impact
N/A
Attachments
• Attorney memo dated March 11, 2015, provided at the closed session, (attorney -client
privilege)
• Comparison of assistance
• Financial Model cash sale; cash sale with abatement reimbursement
■ Purchase agreement (to be distributed at closed meeting)
N: \Departments \Community Development \Economic Development \EDA \Administrative \Agenda \EDA Agenda Packets \2015 \3 -16- 2015 \6.1 sr
Consider sale of lots 1 and 2, Block 2 NEBCIl (sportech).docx
o N
O
O
O
'.�
N
�
O ti
O
O
O
O
O
O
yy
O
O
N
O O
O
O
O
U
.ti
vi
•--�
M O
O
`j
a
CV'
p O
O
m
O pp
O
M N O
O
M
'0 O
O N
•--i bA
ri
sU.
Cq
`V
M
O O
O
O
N
O
71 C
O
O
O
OC
N
C L
Cq
a
Q0
C,
Cq
Nc,
W O
CN
-
cS
N
N
N
ti
ti
ti
ti
ti
ti
ti
1
O
O
O
O
O
O
O
vi
N
0
Gam',
N
G
O O
N
"0
N
ti
ti
ti
Q
0
0
0
0
0
I
t
U N
N
�
O
Q�
c5
b
C
p w
N
a
a
�+
A
O
U
U
OFF
wOF
p
I
|
|
|
§
|
|
|
|
|
|
|
| _ .0
CL « `\ --
! \§)
« y
k
tf
\muuu } \u \)) {\/
\ \/ \
)(Ea \
\ \\ )
o
o
o
o
o
o
o
o
o
o
o
§\
§
§
§ ®®;
`
)\
o
\
\
\ ��I
° ° °\o
\s
\ \\
\
\
w
o
o o
lo
~
C
\ }) ! §
o
\)
> !2
!
Q
#
$// .o {\
ZZ§[)
)oE
o
/)) §«%
z§»
«
-f #§
!!!_« 7 = =�
`y
k
§ ((( \ {aj {)(/
k
` ®
(;
_