8.4 SR 03-16-2015
Request for Action
To Item Number
Mayor and City Council 8.4
Agenda Section Meeting Date Prepared by
General BusinessMarch 16, 2015Jeremy 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 (Sportech)
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 EDA is expected to provide a recommendation, after their meeting on March 16, 2015. This
recommendation will be provided verbally.
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.
Analysis
The agreement proposes the sale of the two lots for 50 cents each, with no mechanism to reimburse the
city for 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 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.
In the past, the city has sold land for one dollar (Sportech in 2008, Preferred Powder Coating in 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 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.
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
Comparison of assistance
Financial model cash sale; cash sale with abatement reimbursement
Purchase agreement (to be distributed at meeting)
N:\Public Bodies\Agenda Packets\03-16-2015\Final\Laserfiche\x8.4 sr Consider sale of lots 1 and 2, Block 2 NEBCII (sportech).docx
Comparison of Business Subsidy associated with lot purchase
Morrell
Classic Acrylics Preferred Powder Sportech** Trucking* GATR**
(RST Cayo, LLC)Coating(proposed)(proposed)(proposed)
Alliance MachineCDI (OBrien)METSportech
2013201520152015
20052005200520052008
Upfront Purchase Price (paid at
$ 207,956.00 $ 276,940.00 $ 229,996.80$ 194,452.00 $ 1.00
$ 1.00 $ 1.00 $ 349,351.00 $ 1,316,695.00
closing)
Total Purchase Price (Land
value adjusted after receipt of
$ 74,009.00 $ 138,470.00 $ 114,998.40$ 119,452.00 $ 809,346.00
$ 680,695.00 $ 1.00 $ 349,351.00 $ 1,316,695.00
subsidy payments used
specifically for land cost)
$ 0.60 $ 0.86 $ 1.00 $ 1.11 $ 2.00 $ 1.51$ 0.00$
2.00 $ 2.04
Price per sqft
Business Subsidy
TIF
$ 1,153,878.00
$ 133,947.00 $ 138,470.00 $ 114,998.00$ 75,000.00 $ 460,000.00
TAF
$ 500,000.00 Amount not known Amount not known
1015151012
Number of years
8 (ending in 2023)
$ 100,000.00
Microloans
$ 100,000.00
Land write down
$ 1,288,589.00
Forgivable loan
$ 200,000.00
$ 500,000.00
Other state funds
$ 133,947.00 $ 138,470.00 $ 114,998.00$ 75,000.00 $ 1,060,000.00$ 1,453,878.00 $ 1,788,589.00 $ - $
-
Total business subsidy
$ 46,836.00
Estimated levy impact 2015$ 14,551.37$ 14,925.04 $ 12,749.24$ 2,143.72$ 43,273.82
* Subsidy not yet applied for.
** Subsidy not yet applied for. Two lot purchase
EDA and City Development Fund, cash sales
201320142015E2016E2017E2018E2019E2020E2021E2022E2023E2024E2025E2026E2027E
Revenues
Perferred Powder (8 years TIF)$ 85,087$ 85,087$ 85,087$ 85,087 $ 85,087$ 85,087$ 85,087 $ 85,087
Company B cash sale$ 349,351
Company C cash sale$ 1,316,695
Company D $ 1
current abatement revenue
(Sportech 2008, City and County
Taxes)
$ 100,000$ 100,000$ 100,000$ 100,000$ 35,318
EDA Fund$ 450,000$ 568,000$ -
City Development Fund$ 132,588$ 200,000$ -
Trunk Funds (Sewer & Water$ 353,012$ 366,000
DEED Grant$ 250,000$ 291,000
Total Revenue$ 1,185,600$ 1,425,000$ 1,851,134$ 185,087$ 185,087$ 185,087$ 120,405$ 85,087$ 85,087 $ 85,087$
-$ - $ -$ - $ -
Expenditures
Natures Edge Phase I$ 1,185,600
Natures Edge Phase II$ 1,425,000
Area Improvements (Intersection, boulevard)$ 2,000,000
Future business park
Total Expenditures$ 1,185,600$ 1,425,000$ -$ 2,000,000$ - $ -$ -$ - $ -$
- $ -$ - $ -$ - $ -
Difference$ -$ -$ 1,851,134$ (1,814,913)$ 185,087$ 185,087$ 120,405$ 85,087$ 85,087 $ 85,087$
-$ - $ -$ - $ -
Available Fund Balance as of 12/31/2014
EDA (less amount reserved for operations)$ 298,289$ 925,567$ (907,457)$ 92,544$ 92,544 $ 60,203$ 42,544$ 42,544 $
42,544$ -$ - $ -$ - $ -
City Development Fund$ 224,402$ 925,567$ (907,457)$ 92,544$ 92,544 $ 60,203$ 42,544$ 42,544 $ 42,544$
-$ - $ -$ - $ -
Total$ 522,691$ 2,373,825$ 558,912$ 743,999$ 929,086$ 1,049,491 $ 1,134,578$ 1,219,665$ 1,304,752$ 1,304,752$ 1,304,752$
1,304,752$ 1,304,752$ 1,304,752
New Business Park is expected to cost $2,000,000.
EDA and City Development Fund, cash sales and tax abatement reimbursement
201320142015E2016E2017E2018E2019E2020E2021E2022E2023E2024E2025E2026E2027E
Revenues
Perferred Powder (8 years TIF)$ 85,087$ 85,087$ 85,087$ 85,087 $ 85,087$ 85,087$ 85,087 $ 85,087
Company B (8 years abatement)$ 43,669$ 43,669 $ 43,669$ 43,669$ 43,669 $ 43,669$ 43,669 $ 43,669
Company C (10 years abatement)$ 131,670$ 131,670$ 131,670$ 131,670$ 131,670$ 131,670$ 131,670$ 131,670 $ 131,670$
131,670
Company D $ 1
current abatement revenue
(Sportech 2008, City and County
Taxes)
$ 100,000$ 100,000$ 100,000$ 100,000$ 35,318
EDA Fund$ 450,000$ 568,000$ -
City Development Fund$ 132,588$ 200,000$ -
Trunk Funds (Sewer & Water$ 353,012$ 366,000
DEED Grant$ 250,000$ 291,000
Total Revenue$ 1,185,600$ 1,425,000$ 185,088$ 185,087$ 360,426$ 360,426$ 295,744$ 260,426$ 260,426$ 260,426$
175,339$ 175,339 $ 131,670$ 131,670$ -
Expenditures
Natures Edge Phase I$ 1,185,600
Natures Edge Phase II$ 1,425,000
Area Improvements (Intersection, boulevard)$ 2,000,000
Future business park
Total Expenditures$ 1,185,600$ 1,425,000$ -$ - $ - $ -$ -$ 2,000,000$ -$
- $ -$ - $ -$ - $ -
Difference$ -$ -$ 185,088$ 185,087$ 360,426$ 360,426$ 295,744$ (1,739,574)$ 260,426$ 260,426$
175,339$ 175,339 $ 131,670$ 131,670$ -
Available Fund Balance as of 12/31/2014
EDA (less amount reserved for operations)$ 298,289$ 92,544$ 92,544$ 180,213$ 180,213$ 147,872$ (869,787)$ 130,213$
130,213$ 87,670 $ 87,670$ 65,835 $ 65,835$ -
City Development Fund$ 224,402$ 92,544$ 92,544$ 180,213$ 180,213$ 147,872$ (869,787)$ 130,213$ 130,213$ 87,670
$ 87,670$ 65,835 $ 65,835$ -
Total$ 522,691$ 707,779$ 892,866$ 1,253,292$ 1,613,718$ 1,909,462 $ 169,888$ 430,314$ 690,740$ 866,079$ 1,041,418$
1,173,088$ 1,304,758$ 1,304,758
Company B and C assumes 2016 Assess, Pay 2017
New Business Park is expected to cost $2,000,000.