6.3. SR 06-21-2004MEMORANDUM
Item 6.3.
TO:
FROM:
DATE:
SUBJECT:
Mayor & City Council
Catherine Mehelich, Director of Economic Development
June 21, 2004
PUBLIC HEARING - Consider Approval of Micro Loan Business
Subsidy and Tax Rebate (Abatement) Financing for Badger
Ventures, LLC (Gradient Technology) Project
Attachments · Ms. Mehelich Staff Report to the EDA regarding Project, June 14, 2004
· Public Hearing Notice
· Resolution Approving Property Tax Abatements
· Resolution Authorizing Execution of a Tax Abatement and Business Subsidy Agreement
· Draft Tax Abatement and Business Subsidy Agreement
Background
At its April meeting the City Council held a public hearing on the Tax Abatement (Tax Rebate
Financing) request and business subsidy for Badger Ventures, LLC. The EDA and Council took no
action on the request due to several unresolved issues related to the Tax Rebate Financing (TRF)
application.
At its May meeting the EDA requested that the Finance Committee consider making a
recommendation to the EDA regarding possible amendments to the Industrial Incentive ($100,000)
Micro Loan Program eligibility for citywide use rather than limited to the West Business Park. In
addition, the Finance Committee was asked to review and make recommendation on a Micro Loan
application from Badger Ventures, LLC (Gradient Technology).
Issue
At its June meeting the EDA reviewed and approved the recommendations from the Finance
Committee for amendments to the Micro Loan Policy and for approval of the Badger Ventures,
LLC (Gradient Technology) Micro Loan. In addition the EDA considered the analysis and made a
recommendation to the City Council for approval of the Badger Ventures, LLC Tax Rebate
Financing request. The attached staff report to the EDA regarding the project provides background
and analysis of the financing requests.
Consider Financing Assistance for Badger Ventures, LLC (Gradient Technology) Project
June 21, 2004 City Council Meeting
Page 2 of 3
Recommendations
Consider Approval of Micro Loan Amendments
In the past the City Council has also adopted any amendments to the Micro Loan Pohcy. The EDA
has approved the following Finance Committee recommended amendments:
· Eliminate the Supplemental Micro Loan Program
· All Micro Loans be consummated via a bank participation loan
· Add to the bank participation loan agreement and the Business Subsidy Agreement
o "If Borrower defaults on the loan, the City will collect based on a pro-rata basis with
the participating bank"
o "If Borrower does not meet the job and wage goals specified in the Subsidy
Agreement, the interest rate will change to 2 points above the participating bank's
rate, effective from the two year anniversary of the loan closing. Upon subsequent
achievement of the jobs and wage goals, the interest rate will revert back to the rate
when the loan was originated, effective from the date of attainment of the job and
wage goals"
· Amend the following Industrial Incentive Program Criteria:
o Amount: Eliminate "Up to $100,000 of secondary financing not to exceed 40% of
the project cost" and change to "up to $100,000 of secondary fmancing not to
exceed 20% of the project cost"
o Rate: Eliminate "4 points below the lowest prime rate pubhshed..."and change to
"2 points below the lowest prime rate published in the Wall Street Journal the day
the loan is closed, or 3 % whichever is greater"
o Term: Add "Balloon payment must not be longer than balloon payment of the
participating bank"
o Criteria: Eliminate "Borrower must locate in the West Business Park"
Staff recommends that the Council approve the proposed amendments, but remove the following
items:
"If Borrower defaults on the loan, the City will collect based on a pro-rata basis with the
participating bank." The proposed amendment limits the city's ability to provide the loan funds in a
subordinate collateral position behind the participating bank, which is often the case in any gap-
lending program (i.e. SBA, MN Community Capital Fund, Initiative Foundation).
"If Borrower does not meet the job and wage goals specified in the Subsidy Agreement, then the
interest rate will change to 2-points above the participating bank's rate, effective from the two year
anniversary of the loan closing. Upon subsequent achievement of the jobs and wage goals, the
interest rate will revert back to the rate when the loan was originated, effective from the date of
attainment of the job and wage goals." The proposed amendment is a provision that exceeds the
minimum obligations for failure to meet goals as specified in the MN Business Subsidy Law. The
statute requires as a minimum that the recipient pay back the assistance plus interest (at a rate
specified in the statute), but may be prorated to reflect partial fulfillment of goals. After a public
hearing the city may extend up to one year the period for meeting the goals. In addition the
company becomes ineligible to receive a business subsidy from any grantor for 5-years.
Consider Financing Assistance for Badger Ventures, LLC (Gradient Technology) Project
June 21, 2004 City Council Meeting
Page 3 of 3
Consider Approval of Badger Ventures, LLC $ 100,000 Micro Loan Request
Since the amount of the loan request qualifies as a business subsidy in accordance with the MN
Business Subsidy Statute, the City Council will need to hold a public hearing and consider approval
of the Micro Loan as it applies to the business subsidy being provided. The attached public heating
notice was published in the June 169 Star News.
The EDA has approved the $100,000 Badger Ventures Micro Loan request. Staff recommends that
the Council approve the $100,000 Badger Ventures Micro Loan request with the following terms
approved by the EDA:
Rate
Term
Security
Structure
Job performance agreement
(subsidy agreement)
Fixed, 2 points below prime with a 3% floor
15-year amortization, balloon payment to match the
bank term but not to exceed 5-years
Secured by 2"d position on the real estate, personal
guarantee from owners and spouses
Participation loan with The Bank of Elk River
To include 5 new full-time jobs in Elk River with
estimated wages ranging from $15-$75.00 within 2-
years
Consider Approval of Badger Ventures Tax Rebate Financing Request
Badger Ventures, LLC and Gradient Technology have met the minimum requirements of the City's
Tax Rebate Financing Policy. The EDA is recommending that the City Council approve the Badger
Ventures, LLC (Gradient Technology) Tax Rebate Financing request up to $72,778 on a pay-as-you-
go basis for up to 10-years. The Sherbume County Board of Commissioners at its June 15th meeting
approved the Badger Ventures TRF request for up to $72,778 on a pay-as-you-go basis for up to 10-
years.
Staff recommends that the Council consider approval of the Badger Ventures, LLC (Gradient
Technology) Tax Rebate Financing request up to $72,778 on a pay-as-you-go basis for up to 10-
years via the following attached resolutions:
· Resolution Approving Property Tax Abatement
· Resolution Authorizing Execution of a Tax Abatement and Business Subsidy Agreement.
TO:
FROM:
DATE:
SUBJECT:
MEMORANDUM
Economic Development Authority
Catherine Mehelich, Director of Economic Development
June 14, 2004
Consider Micro Loan and Tax Rebate Financing Assistance for
Badger Ventures, LLC (Gradient Technology) Project
Attachments · Ms. Steinmetz Staff Report Re: Micro Loan Pohcy Amendments and Micro Loan
Application from Badger Ventures, LLC Application, June 14, 2004.
· The Bank of Elk River Financing Proposal for Gradient Technology, May 27, 2004.
· City of Elk River Business Subsidy Policy.
· Correspondence from Sid Inman, Ehlers & Assoc. Re: Gradient Technology, June 2, 2004.
· Tax Rebate Financing Policy and Staff Proposal Review Worksheet, June 1 l, 2004.
· Draft City Council Resolution Approving Property Tax Abatements.
· Draft Tax Abatement and Business Subsidy Agreement.
Background
At its April meeting the City Council held a public hearing on the Tax Abatement (Tax Rebate
Financing) request and business subsidy for Badger Ventures, LLC. The EDA and Council took no
action on the request due to several unresolved issues related to the Tax Rebate Financing (TRF)
application. The unresolved issues included:
· Identification of a bank lender and proposed project financing terms
· The possibility of an EDA Micro Loan request of up to $100,000
· Identification of the amount and source of eligible equity
· Completion and review of a but-for analysis
At its May meeting the EDA requested that the Finance Committee consider making a
recommendation to the EDA regarding possible amendments to the Industrial Incentive ($100,000)
Micro Loan Program eligibility for citywide use rather than limited to the West Business Park. In
addition, the Finance Committee was asked to review and make recommendation on a Micro Loan
application from Badger Ventures, LLC (Gradient Technology).
Consider Financing Assistance for Badger Ventures, LLC (Gradient Technology) Project
June 14, 2004 EDA Meeting
Page 2 of 3
Project Description
Gradient Technology (G.D.O., Inc.) demilitarizes munitions for various branches of the military.
None of the demilitarization is performed at the company's Minnesota facility, but rather at Crane
Naval Service Warfare Center in Crane, Indiana. The Minnesota facility will 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. The
company currently employs 13 full-time staff, including 7 based in Minnesota and 6 in Indiana and
elsewhere. The positions have an hourly wage between $15-75.00 per hour.
Staff has been in contact over the past one and a half years with Eric Haehn, Vice President/CFO
of Gradient Technology. The company currently leases space in Blame, MN and is seeking a
suitable location within the northwest metro area to relocate.
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
fabrication 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
($145,556) to $0 through a pay-as-you-go note to the limited liability company.
Analysis
Bank Lender, Micro Loan and Financing Terms
The company has selected The Bank of Elk River as its primary lender for the project. The bank's
financing terms is attached. In addition the company applied for $100,000 from the city's Industrial
Incentive Program Micro Loan. The attached memo from Assistant Director of Economic
Development, Heidi Steinmetz, outlines the committee's recommendations regarding policy
amendments and the current application.
In addition to the 7 existing Minnesota based positions the company is committing to create up to 5
new positions at the Minnesota facility within 2-years. The new positions will likely consist of
management and engineers at a wage range between $15-75.00 per hour. The job and wage goals
for Badger Ventures, LLC & Gradient Technology meet the attached City of Elk River Business
Subsidy Policy that requires the job creation to have a mimmum wage of $15.00 per hour, exclusive
of benefits.
The project sources and uses include:
Project Costs
Land - 2.05 Acres
Construction - 13,000 SF
Total Project
$ 145,556
$1,035,000
$1,180,556
Project Financing
Bank Loan
EDA Micro Loan
Cash Equity 4%
Eligible Equity 5%
Ineligible Equity
Total
$ 883,500
$ 100,000
$ 47,056 - cash
$ 60,000 - exhaust hoods purchased
$ 90,000 - company kbor
$1,180,556
Consider Financing Assistance for Badger Ventures, LLC (Gradient Technology) Project
June 14, 2004 EDA Meeting
Page 3 of 3
Eligible Equity and But-For Analysis
The Tax Rebate Financing does not appear in the project financing since the city and county would
be providing the TRF on a pay-as-you-go basis and the company is fmancing the upfront land cost.
For the purpose of the Micro Loan Policy and the Tax Rebate Financing Policy, the estimated
$90,000 in company labor is not counted toward equity requirements of up to 10%.
Ehlers & Associates has completed a but-for analysis of the project. The attached email from Sid
Inman of Ehlers indicates that the but-for test is met by using the amount of the abatement and the
micro loan to make the net land price competitive with available land in other communities.
Recommendations
Consider Approval of Micro Loan Amendments
The Finance Committee has reviewed the Micro Loan Policy and is recommending that the EDA
consider approval of the policy amendments as outlined in the attached Ms. Steinmetz staff report.
The City Council will also need to consider approval of the Micro Loan Policy amendments.
Consider Approval of Badger Ventures, LLC $ 100,000 Micro Loan Request
The Finance Committee has reviewed the application and is recommending that the EDA consider
approval of the $100,000 Badger Ventures Micro Loan request with the terms as outlined in the
attached Ms. Steinmetz staff report. Since the amount of the loan request qualifies as a business
subsidy in accordance with the MN Business Subsidy Statute, the City Council will need to hold a
public hearing and consider approval of the Micro Loan as it applies to the business subsidy being
provided.
Consider Recommendation to City Council for Approval of Badger Ventures TRF Request
Gradient Technology has provided the necessary information for the city's consideration of the Tax
Rebate Financing request. Staff's analysis via the attached TRF Policy and Staff Proposal Review
Worksheet indicates that Badger Ventures, LLC and Gradient Technology have met the minimum
requirements of the City's Tax Rebate Financing Policy. Staff recommends that the EDA consider
making a recommendafon to the City Council for approval of the Badger Ventures, LLC (Gradient
Technology) Tax Rebate Financing request up to $72,778 on a pay-as-you-go basis for up to 10-
years. The attached resolution and draft Tax Abatement and Business Subsidy Agreement will be
provided to the City Council for consideration at its June 21, 2004 meeting. The Sherbume County
Board of Commissioners will consider the Badger Ventures TRF request for up to $72,778 and the
EDA's recommendation at its June 15, 2004 meeting.
g3ver
TO:
FROM:
DATE:
SUBJECT:
MEMOllANDUM
Economic Development Authority
Heidi Steinmetz, Assistant Director of Economic Development
June 14, 2004
Consider Micro Loan Fund Policy Amendments and Micro Loan
Application: Badger Ventures, LLC (Gradient Technology)
Attachments
· City of Elk River Micro Loan Fund Policy
· Finance Committee Minutes & Staff Memos
o June 1,2004
o June 9, 2004
· Applicahon - Badger Ventures, LLC (Gradient Technology)
Issue
On June 1 and June 9, 2004, the Finance Committee reviewed the attached Micro Loan
Fund Policy regarding the criteria for the Industrial Incentive Program.
Su~ested Micro Loan Policy Amendments
· Eliminate the Supplemental Micro Loan Program
· All Micro Loans be consummated via a bank participation loan
· Add to the bank participation loan agreement and the Business Subsidy Agreement
o "If Borrower defaults on the loan, the City will collect based on a pro-rata
basis with the participating bank"
o "If Borrower does not meet the job and wage goals specified in the Subsidy
Agreement, the interest rate will change to 2 points above the participating
bank's rate, effective from the two year anniversary of the loan closing.
Upon subsequent achievement of the jobs and wage goals, the interest rate
will revert back to the rate when the loan was originated, effective from the
date of attainment of the job and wage goals"
· Amend the following Industrial Incentive Program Criteria:
o Amount: Eliminate "Up to $100,000 of secondary financing not to exceed
40% of the project cost" and change to "up to $100,000 of secondary
financing not to exceed 20% of the project cost"
o Rate: Eliminate "4 points below the lowest prime rate published..."and
change to "2 points below the lowest prime rate published in the Wall Street
Journal the day the loan is closed, or 3 % whichever is greater"
Consider Micro Loan Application: Badger Ventures, LLC (Gradient Technology)
EDA -June 14, 2004
Page 2 of 2
o Term: Add "Balloon payment must not be longer than balloon payment of
the participating bank"
o Criteria: Eliminate "Borrower must locate in the West Business Park"
Badger Ventures Application
On June 9, 2004 the Finance Committee unanimously recommended that the EDA consider
awarding Badger Ventures, LLC a $100,000 Industrial Incentive Program Micro Loan
contingent upon and subject to proposed amendments to the Micro Loan Policy.
The proposed use of the loan is to finance construction costs of a new 13,000 square foot
light industrial/business park building in Elk River. The loan is proposed to be structured as
a participation loan with The Bank of Elk River.
A representative from Gradient Technology will be available at the EDA meeting to discuss
the proposed project and answer questions.
Recommendations
Staff recommends that the EDA consider the suggested amendments to the Micro Loan
Fund Policy regarding the following:
· Criteria for the Industrial Incentive Program
· Eliminate the Supplemental Micro Loan Program
· All Micro Loans be consummated via a bank participation loan
Regarding the suggested additions to the bank participation loan agreement and the Business
Subsidy Agreement, staff recommends that the EDA consider maintaining the current
agreements. It is important that industrial financing incentives remain flexible while
meeting, not exceeding, the MN Business Subsidy Law.
Staff also recommends that the EDA consider approval of the application from Badger
Ventures, LLC (Gradient Technology) for a $100,000 Industrial Incentive Program Micro
Loan upon consideration of the proposed Micro Loan Policy amendments. The terms of
the loan are as follows:
Rate
TerlTl
Security
Structure
Job performance agreement
(subsidy agreement)
f~xed, 2 points below prime with a 3% floor
15-year amortization, up to 5-year balloon payment
Secured by 2nd position on the real estate, personal
guarantee from owners and spouses
participation loan with The Bank of Elk River
to include 5 new full-time jobs in Elk River with
estimated wages ranging from $15-$75.00 within 2-
rears
ELK RIVER ECONOMIC DEVELOPMENT
MICRO LOAN FUND POLICY & GUIDELINES
P,.evised April 2003
PURPOSE
The Economic Development Authority for the City of Elk Raver ('EDA) recogr~izes
the need to sUrnulate private sector investment into manufacraZ-ng facilities and
equipment in order to create new jobs, boost productivity and retain ex/sting jobs for
local residents. Additionally, the need exists to encourage investment in the
expansion and/or rehabilkation of commercial and retail buildings in order to
maintain the economic viabili~ of Elk Kiver's central business ctistr/ct.
Subsequendy, the purpose of t52s program is to provide low interest, long-term (i.e.
greater than one year) loans as incentives for industrial development within the City
of Elk River and to encourage commercial and retail business owners in the central
business district to rehabilitate their e~stmg buildings.
II.
LOAN PROGRAMS
In order to meet the economic and community development objectives of the EDA,
three distinct loan programs exist wkhin the Micro Loan Fund to promote business
growth in Elk River.
Supplemental Financing Program
Purpose: The Supplemental Financing Program is designed for industrial farms
who have maxim/zed their conventional financing and equity
resources and subsequendy would be unable to complete a project
without EDA assistance.
Amount:
Up to $50,000 of secondary financing (not to exceed 40% of the
project cost.
Equity:
Must lave pr/vate-sector commir_ments for 50% of the project cost.
Borrower to provide 10% or more of project financing.
Kate:
FLxed; 1 point below the lowest prime rate published in the
Wall Street Journal the day the loan is closed, or 2%, wkichever is
greater.
TerlTl'
Financing with a balloon payment in up to 3-years. Loans may be
amortized up to the following limits:
15-years on real estate uses;
10-years on equipment uses.
Extension:
In r~he event that the Borrower is unable to obt,xin conven6onal
financing to replace r.he MScro Loan at ra~e end of three years, the
loan may be extended up to rwo addkion~ years at a market rate of
interest.
Elk Privet Econormc Development Au~ority
Nfic:o Loan Fund Policy & GuideSnes
Page~' o£ $
Critema:
I. Borrower must create one ne~' ~tl-dme job for each $20,000 loaned
wir52n two years. Said jobs must pay a mimmum wage o£ $9.00 per
hour plus benefits. Borrower ~ also be required to meet certain
provisions of the Ciw's Business Subsidy Policy.
2. Borrower must be an industrial fzrm and comply with the provisions
o£ ~ city's L~d=smiM and business park: zor~2g ordJmances.
Redevelopment Financing Program
Purpose:. The Redevelopment Financing Program is available to business and
property, owners in the central business district (CBD) for the
rehabilitation and restoration of their buildings.
~A_mouDU
Up to $50,000 of secondary £mancing (not to exceed 40% of the
project cost.
Equity,:
Must. have private-sector commitments for 508/0 of the project cost.
Borrower to provide 10% or more of project financing.
Rate:
Term:
FLxed; 2 points below the lowest prime rate published in the
Wall Street Journal the day the loan is closed, or 2%, whichever is
greater.
Financing with a balloon payment in up to 3-years. Loans may be
amortized up to the £ollowing limits:
15-years on real estate uses;
10-years on equipment uses.
Extension:
In the event that the Borrower is unable to obtM2 conventional
financing to replace the Micro Loan at the end of three years, the
loan may be extended up to two additional years at a market rate of
interest.
Criteria:
1. At a minimum, 20% of Micro Loan dollars must be used for the
improvement of the building's fagade.
2. Borrower must be located in the Central Business District
(see attached map).
Industrial Incentive Program
Purpose: The purpose of the Industrial Incentive Program is to encourage
industrial development that supports the tax base and brings quality,
jobs to the city.
Amount:
Up to $100,000 of secondary, ~ancing (not to exceed 40% of the
project cost.
Equity:
Must have pnivate-sector comrmm'~ents for 50% of the project cost.
Borrower to provide 10% or more of project financing.
River Economic Development Authority
Nfic:o Loan Fund Policy. & Gmdeknes
P2ge 3 of 8
III.
F/xed; 4 points below abe lowest prime ra:e published m
~o/~ wkichever is
the Wa~ S~eet Journal the day ~e loan is closed, or
greater.
TeL'lTl:
Financing wir_h a balloon payment in up to 5-years. Loans may be
amozts, zed up to t_he £ollow4ng lirmts:
15-years on real estate uses;
10-years on equipment uses.
Extension:
In the event that d2e Borrower is unable to obtain conventional
financing to replace the Micro Loan at r2:e end of' five years, tAe loan
may be extended up to rwo additional years at a market rate of
interest.
Criteria:
1. Borrower must be an industrial firm and create one new
full-dine job for each $20,000 loaned within 2 years. Said jobs must
pay a miniznum wage of $10.00 per hour plus benefits. Loans in excess
of $75,000 sba21 meet the City's Business Subsidy Policy for new job
and wage goals, as well as location requirements.
2. Borrower must locate in the West Business Park (see attached
map) and comply with the provisions of the city's industrial and
business park zoning ordinances.
USES
1. Permitted Fund Uses:
a. Building construction
b. Land acquisition
c. Machinery
d. Furniture, fixtures, and equipment (FF&E)
e. Renovation and modernization of buildings
f. Exterior renovation of retail, commercial and industrial buildings
g. Public infrastructure needed for economic development expansions
h. Investment real estate with a rrm25mum of 50% of the space pre-leased
2. Ineligible Fund Uses:
a. Expenditures for the construction and/or renovation of residentSal un.its
b. Working capital
c. Refinancing of e:cisting debt
d. Inventory
IV.
BUSINESSES ELIGIBILITY
Any project meeting t_he above criteria, and located or proposed to be located within
the city. limits of Elk River as de£med by this prog~:am, may be eti~ble for an
Economic Development Micro Loan as ~rther defined herein:
Elk River Economic Development Authonw,
Miczo Loan Fund Policy & Gmdelines
Page .t of 8
· Business must be a £or-profit corporation, partnership, or sole
proprietorskip.
· Business must be g ;mar buzinesz as defined by the Small Business
Admimsn:anon (SBA).
· Business must have a positive net worth.
, Religious, politiczl, znd pomogrzphic enterprises gtc not eligible ro use
the Econormc Development Micro Loan Fund.
Vo
¥1.
MICRO LOAN FUND TERMS & CONDITIONS
1. Loan Structure
All EDA Micro Loans will be structured as partidpation loans and will be serviced by
the project's primary, lending institution. Such an arrangement allows for r_he cenr_rai
distribution and collection of funds and simplifies the £mancing process for all
parties involved. A parfcipation agreement will be signed by the borrower, primary
lender and the EDA. The EDA may require additional a~eements to be signed by
the borrower (i.e. security agreement, personal guarantees, job performance
agreement).
2. Simultaneous Micro Loans
The simultaneous use of different IVScro Loan Fund Programs by any one borrower
or for any one project is prohibited.
3. Call of Loan
A loan shall become due and payable in full if a business relocates outside of the city
of Elk River prior to the maturity, date of the EDA loan.
4. Late Payment Charge
A late payment charge of up to 8% of the installment amount may be enforced.
REGULATION FOR NEW CONSTRUCTION AND IMPROVEMENTS
All buildings which public funds will be used for construction or renovation are to
be brought into conformance w/th city codes and policies. Repairs may include the
follo,xing systems and portions o£ real property:
a. Mecharfical heating, plumbing, and electrical
b. Structural; including the facade of the structure and energ7 related
improvements.
c. Hook-up to city services (i.e. water, sewer)
VII.
LOAN SECURITY AND GUARANTEES
_A. pplicant must be able to secure the loan by ?roviding the EDA with a mimmum o£
a subordinate mortgage upon the building and/or assets or odaer approved collateral.
Applicant must demonstrate the financial means to repay the loans, as determined by
dxe Economic Development Authority.
~nnenever possible, personal guarantees x¢21 be made part of any loan a~eement.
Elk River Econormc Development Aurhor/tF.'
Nficro Loan Fund Policy & Guidelines Page 5 of 8
VIII.
IX.
TIMING OF PROJECT EXPENSES
No project should commence until the El_k River Economic Development
has approved the loan application. Any costs incurred prior to the approval of the
loan application are generally not eli~ble expenditures.
No building construction should commence und2 the required City, permits are
secured.
The applicant will be responsible for all legal, recording, and other fees required for
protection of a security interest in the loan, payable by a 15/0 processing fee, which is
paid at the time of application.
PROCEDURAl' GUIDELINES FOR APPLICATION AND APPROVAL
1. All applicants shall first contact a primary lending institution to determine if
additional equity is needed, and if so, how much.
The applicant and the primary lender shall then meet with Ciw Staff to obtain
information about the Micro Loan program, discuss the project, and obtain
application forms.
The applicant shall complete and submit an application form to the City, along
~4th a processing fee of 1% of the loan request. (The fee is used to cover
processing expenses and w/il be returned if application is denied.) The applicant
must provide evidence of their ability, to meet the equity requirements or provide
a letter of commitment for conventional f'mancLng from the pr/mary lending
institution.
The application w/il be reviewed by the City staff to determine if it conforms to
alt City policies and ordinances and to consider the following:
a. The availability, and applicability of other governmental grants and/or
loan programs.
b. x~2~ether the proposed project will result in conformance with building
and zoning codes.
c. Whether it is desirous and in the best interests of the public to provide
funding for the project.
The EDA Finance Committee and EDA Commissioners will review each
application in terms of its consistency with the goals of the Growth
Management, Scrate~c, and Economic Development Plans a-nd in relation to the
project's overall impact on the communitT's economy. Redevelopment Loan
applications will also be reviewed bv an HP-~5 member in conjunction with r_he
EDA Finance Committee.
They will also evaluate the project application in terms of the follo~-ing:
a. Project Design- Evaluation of project design w/il include
review of proposed acr/viries, me lines and a capacir7 to implement.
E~k .River Econormc Development Author:~
Micro Loan Fund Pol/cy & Guide~anes
Page 6 of 8
Financial Feasibility, - Av~ilabiliV of funds, private involvement, ~ancial
packaging and cost effectaVeness.
· Appropriate ratio of prorate ~nds to Ivficro Loan Fands.
· Sufficient cash flow to cover proposed debt service as
demonstrated by financial statements and projections.
· Business must show a positive net wortla.
Letter of Commitment from applicant pledgnng to complete the
project during proposed project duration, if the loan application
is approved.
Letter of Commitment from other financing sources stating
terms and conditions of their participation in the project if
applicable.
· Sufficient collateral.
Ail other information as required in the application and/or additional
information as may be requested by the Economic Development
Authority.
d. Project compliance with ail city codes and policies.
Program Objectives - In addition to quality job and wage
creation/retention requirements, the applicant must meet all Micro Loan
Fund criteria and demonstrate how the proposed activities will meet at
least one of the following objectives:
The project contributes to the fulfillment of the city's approved
and adopted economic development and/or redevelopment
plans.
· The project prevents or elLmmates slums and blight.
· The project increases the local tax base.
· The project brings a structure into compliance with an e.-dsting
building code violation.
5.
A xvntren request for an extension shall be accompanied by a copy of current
financial statements and a $500 up£ront processing fee. The processing fee is
used to cover processing expenses and v~411 be returned if request is denied. The
application for an extension beyond the origmaI term should include a letter of
denial from a conventional lender. Refinancing will nor be allowed solely for dae
put-pose of reducing the interest rate due to lower market interest rates.
Elk River Econormc Development Authority
M_iczo Loan Fund Policy & Guideimes
Page 7 of 8
The EDA Finance Commkzee ~ recommend the approval, denial, or request
resubmission. A recommendation from the Finance Commattee x~J2 be
forwarded to t_he EDA for Smal action.
XI.
LOAN POLICY REVIEW
The above cmteria will be reviewed on an annual basis to ensure that the policies
reflected in this document a_re consistent wire the economic development goals set
forth by the Ck7.
COMPLIANCE WITH STATE STATUTES
Each company receiving assistance in excess of $75,000 from the EDA Micro Loan
Fund shall be subject to the provisions and requirements set ford2 by Nfianesota
State Statute 116J.993 and the Cky's Business Subsidy Policy summarized below:
Progress Reports
The borrower shall £de a report annually for t~-o years after the closing of the loan or
until all goals set forth in the application have been meet, which ever is later. Reports
shall be completed using the format clzafted by the State of Minnesota and shall be
flied with the City in March of each year for the previous year.
Maintain Facility
The borrower agrees to maintain and operate its facility at the site where the loan is
used for a period of 5-years after the date the loan is closed.
Goal Attainment
In addition to attaining or exceeding the jobs and wages goals set forth in Section IV
of the Application, the borrower agrees to achieve at least one of the goals for
communk7 development set forth in Section IX, part 5, subdivision (e) of the M_icro
Loan Fund Policy.
Redevelopment loans in the central business district are exempt from job creation and
wage goals stated in Section IX, part 5, subdivision (e) provided the loan amount does
not exceed 50% of the project cost.
Failure to Comply
Businesses failing to comply with the above provisions w21 be subject to fines,
repayment requirements in accordance with the state statute, and be deemed
ineli~ble by tiae State to receive any loans or grants from public entities for a period
of 5-years.
XII.
RIGHT OF REFUSAL
The Elk River Econormc Development _A_uthoriry may deny any project which it
deems inappropriate according to the g~idelmes established in dUs document.
Et River Economic Development Authority.
Micro Loan Fund Policy & Guidelines
Page 8 of 8
MEETING OF THE EDA FINANCE COMMITTEE
HELD AT THE ELK RIVER CITY HALL
TUESDAY, JUNE I, 2004
Members Present:
Chris Carlson, Steve I~d.ng, Ch fl Lundberg, Tom McNaiz (excused at 5:20
for discussion on Badger Ventyn:es recommendation), Paul Motto (excused
at 5:15 p.m.) and Jim Simpson (excused at 5:20 for discussion on Badger
Ventures recommendation)
Members Absent:
D~n Tveite
$[aff Present:
Assistant Director of Economic Development Heidi Steinmetz
Presentation by Duane Goetsch of Badger Ventures LLC (Gradient Technology)
M_r. Goetsch provided an overview of the project.
The Finance Committee asked questions re~rdmg the following issues:
· Company ownership
· Details regarding a [eg~l tie between Badger Ventures and Gradient Technology
· Proposed Iease structure between Badger Ventures and Gradient Technology
· Conf'u:mation that Badger Ventures requested the $100,000 yet won't be providing the
proposed 5 jobs. Gradient Technology would actually provide the jobs.
· Status.of the company's MaN Technology, Inc. grant
· The company's forbearance issue
· Expansion needs beyond the proposed project
· Experience with government contracts
· Aftermarket for the company's macb_inery and equipment
· '¢Yhether the jobs located at Gradient Technology's B[aine location will be moved to Elk
River
· Amount of truck deliveries per day
· Need for outside storage
· Confzrmation that the potential tiny explosions during testing are indoor only
· Details on the 35% Minority, Interest l.me item on Table 2.1 of' Gradient TechnologT's
Past Financial Performance
· tkelationsh/p with Ali/ant Tech
M_r. Goetsch was excused from the meeting to allow the corrumttee to diSCUSS the
application and determine a recommendation for EDA consideration.
M/cro Loan Poticv Discussion
M_rs. Steinmetz stated that the Badger Ventures request for $100,000 does not meet d~e
Industrial Incenr/ve Program criter/a, which stares that the applicant must locate in the aX/est
Business Park.
Mr. McNair stated that when the Industrial Incentive Program criteria were established that
SoftPac and the Allina clinic were not located out west at the r-tree.
Mr. Motto scared that a discussion took place at the recent Economic Development Srrate~c
Planning Sessions regarding the need for industrial development out west.
E]DA F{nanc~ Comrmne~ Mm. urns
june 1,200~-
Page 2
TLr. MoTM excused himself from the meeting.
lVfr. Lundberg stated that he is concerned that the Finance Committee and EDA are being
asked to consider awardin6 the $100,000 to finance a spec building, lYLr. Iv£ci'qair mentioned
that the Finance Committee and EDA approved a loan for the 1K &: IX7 builctJ, ng, wt~ch is a
s/re_ilar project.
Mr. Lundberg asked about the interest rate di£ferendal between the Supplemental Program
and the Industrial Incentive Program. M_rs. Sreinmetz stated that the Supplemental Program
is 1% below prune with a 2°,/0 floor and that the tndusnial Incentive Program is 4% below
prune with a 2% floor.
Nit. Simpson stated that the Industrial Incentive Program criteria is not preventing industrial
prospects from locating in the West Business Park, rather the lack o£ a joint marketing
agreement between the City, and the phvare landowners is what is preventing industrial
development. M_r. Simpson added that industrial prospects should be able to request loan
funds without location provisions.
THE FINANCE COMMITTEE RECOMMENDS THAT THE EDA CONSIDER
ELIMINATING THE SUPPLEMENTAL MICRO LOAN PROGRAM AND
THAT THE INDUSTRIAL INCENTIVE PROGtLa2vl RATE CRITERIA BE
CHANGED TO 2% BELOW PRIME WITH A 3% FLOOR. THE MOTION
CARRIED 5-0.
Badger Ventures Micro Loan Application Discussion
Committee members Iv[r. McNalr and Mr. Simpson excused themselves from the discussion
since The Bank of Elk River is £mancing a portion o£the project.
Mr. Carison, Mr. Lundberg and Mr. King discussed the application. Mr. Lundberg stated
that he would like a personal guarantee from the Badger Ventures owners and from
Gradient Technology. Mr. Lundberg also stated that he would like the lease between Badger
Ventures and Gradient Technology to speci~ a legal tie between the two companies.
Nit. IG_ng inquired of any claw back provisions within the City's Business Subsidies Policy
that urill be held between the City and Badger Ventures. M_rs. Stemmetz stated that the
company would have to repay the loan in full if job and wage goals were not met. Mr. I~-2ng
stated that he would like more provisions within the Business Subsidies agreement between
the City, and Badger Ventures. Mr. Lundberg concurred.
The Committee suggested the following verbiage for a motion: The Finance Committee
recommends that the EDA consider awarding Badger Ventures, LLC a $100,000 Industrial
Incentive Micro Loan contingent upon the folloWmg:
· Personal guarantee from the owners of Badger Ventures, LLC and Gradient
Technology
· A clear legal tie between Badger Ventures, LLC and Gradient Technolo~
Since the Committee requested additional information (the City's Business Subsidies Policy)
and due to a lack of a quorum, there was no action on the Badger Ventures request. Iv[rs.
$teinmetz stated that the Corrmmttee will have to consider the Badger Vent-ares applicanon
and modon for recommendanon to the EDA at a later dare.
EDA Finance Comrmtme Mm. urns
June 1, 2004
4. Closm§
The EIDA Fmmace Cornzm:tee meeffn6 ended ~t 5:30 p.m.
tKespectf~Lly subrmtted by,
Hei& stemmetz
Assistant Director of Economic Development
P~g¢ 3
2River
MEMORANDUM
TO:
CC:
FROM:
DATE:
SUBJECT:
EDA Finance Committee
Lori johnson, Finance Director
Heidi Steinmetz, Assistant Director of Economic Development
June I, 2004
Micro Loan Application: Badger Ventures, LLC (Gradient
Technology)
ISSUe
Co-owner of Badger Ventures, LLC, Duane Goetsck, kas submitted ~e axxched appEca6on
for an Indusmxl Incenuve Pro.am ~c:o Loan ~ ~e amount of ~100,000 to be used
die coas~c~on of a ne~' ~dus~l,/busmess p~k b~g ~ E~ ~vez. The loan is
Background
B,qdgez Venmazes, LLC proposes to cozis~l-~c~ a 23,O00-SC]UZLCe Foot b~g for lexse to
O:~t Tec~olog7. O:~e~t Technology is cu~e~7 Ie~smg sp~c~ Lc
been loo .g to expand mie Noz~west Memo xzex for ie past 1.5 yrs. Since t996,
G:l~ent Tec~ology his de~tii~ed mum~ons {o~ vinous b:mches of ~e ~:~'.
None of ~e de~i~a~on ~ be performed m B~ ~ver, but z~_ez ~ Cz~e N~
5e~ic'e ~ai~e Center m Czz:¢, ln~nx. The b~ ~1 be used for
Tec~olosy's business of 6ce, kb ~or conduce~g zese~ch ~nd devebpmen:
pzovi~ che~c~ eag~eem~g desi~ se~c:s ~d e~'~pment ~:bmcauon.
The applicant proposes to use uhe ~{ic:o Loan ~unds :o !~.~nce construcmon costs kemized
on ~e ~:tached Proiect Budget Reporz. The applicant has proposed t.h~: ~e lEDA take
second position on t_he zeal estate. The project costs ~.ciude:
Proiect Costs:
$1!5,556
Land-2.05 Acres
Const~acmor_
$1,180,556
?:ooosed Proiect Fmancmz:
Prorate E~' $47,056-czsk
zoo~s p~cngsa~
590,O00--comuanv !xbor
EDA NSczo Loan ~!00,000
Total $1,180,556
Rebate Financing ~)'m rake :moun~ of ~145,556 ($72,778 ~om are CiV and ~7!,778
~om ee Cou:V). The T~ ~ be assi~ed ~o The B~lk of ~ Paver and ~s: used :o pay
the kEczo Lo~n.
ToUs
'The company curzend7 employs 13 fuli-nzne staff, including 7 based
and 6 ~. tn~=na and dsewhe:e. The psi~ons have ~ Eo~l7 wage be~een ~16-}75.00 per
Eo~. TEe company zn~cip~es cze~.g up to 5 aery f~-~e ~obs
es~amd ~,ages r~qgmg ~om $10-$75.00 ~vi~ 2-years.
Micro Loan Criteria
In addition to the fi2anci:d czitema O~,~t must be considered, the Finance Con'xmktee must
also consider to wk~t de~ee ~_e appEcant satisfies dxe crite~z se~ fo~ ~ dxe a~ched N,~czo
Loan Fund poEcy.
~e au~cked M~ch 4, 2003 F~ance Co~ee ~utes m~cate 2~at ~e Core'tree
~scussed that ~e ~100,000 IndusmM Incentive Program cEte2a sko~d con~ue to specie'
~at ~e bo=ower mus~ locate m ~e West Business Park. ~e EDA approved =~s and
sevezM amendments to ake Ngc:o Lo~, PoEcy m Ap< of 2003. The EDA Sas recend7
:eSuested ~e F~ance Co~=ee's review and zeco~endaZon of
pro~=m skoutd be eE=ible ciV-~4de. The anached Finance Co~ttee ~u:es and memo
~ ·
m~caae O~at ~e Fin=ncc Co,zee and EDA also ~scussed ~s issue m 1997 and 1999.
O:a~ent Tec~olo~' kaz idenn~ed a 2.05 ac:e site m
Business Park). Below ~e xd&~onai comp~sons be~veen
k¢Eczo Loan c=te2z and ~e company's p:oposM:
* iViz:. Loan Amoun:: $100,000
* InteP-st Raze: 4 beto~v p~.e, 2% floor
* 1 job czeamd per 520,000 lo~ed
* ~z. xve:=ge wage of }10 per hour
*Loca~on: Wes: Business P~k
Gradient Tec!-molo~r
* Amoua~x recluested: $100,000
* Rate requested: ~ be!o'~ p~me, 2% ~ooz
* 1 job cze~ted pea $20,000 loaned
* Es~,ated ~v~ge r~,ge of $-I0-$7~ per
*Locahon: East B=sLzess
As m Fast b/ficro Low meem~gs, :b.e a=oiicant v:iE be given ~ oppo~mV =o present
pzo~ec~ and appEczmon. FoEo~g ~e presenm~on d~e Finance Co~ttee may ~s~c
quesuons of ~e approval. /ne ~pphcxn~ ~ ~%en be excused from ~e .... ~ ~owmg
Loan Apllc=Uoz: Badger V=nm.u:es, LLC (O:s~=nt T=chnology)
consider~on.
A ~:ach.m ents
· IVJiy 4, 200~ Fm:mc~ Com_mnttee b~u~es
o Business
o P~ojectBudge: Report
o Res'a~es of ownezs/"m~n~ge~e~
o Pezson~ Fmzqci~ 5:ztemen= of o~vnezs/man~gement
o ConStant tene: from apphcznt
CiV of E~ ~ver ~cro Lozn Fund PoEc7
Mzch 4, 2003 Fm~zc~
July 20, 1999 Finance Co~:tee Memo
August 21, 1997 F~azce Co~2=ee N~qutes
MEETING OF THE EDA FINANCE COMMITTEE
HELD AT THE ELK RIVER CITY HALL
WEDNESDAY, JUNE 9, 2004
Members Present:
Steve I~.ng, Cliff Lundberg, Paul Motin and Dan Tveire
Members Absent:
Tom McNair, Jim Simpson and Chris Carlson
Staff Present:
Assistant Director of Economic Development Heidi Steinmetz
Micro Loan Policy. Discussion,
MOVED BY STEVE KING AND SECONDED BY PAUL MOTIN, THE
FINANCE COMMITTEE VOTED TO RECONSIDER THE MICRO LOAN
POLICY MOTION MADE ON JUNE 1, 2004.
Discussion points regarding possible amendments to the Micro Loan Fund Policy were as
follows:
· Should loan amounts reflect the size of the project?
· Should commercial, retail and home-based businesses be considered?
Should there be more provisions in the City's Business Subsidies Policy?
Due to time constraints, the Committee postponed further policy discussion until later in the
meeting.
Consider Micro Loan AppLication: Badger Ventures, LLC (Gradient Technology)
Eric Haehn of Gradient Technology entered the meeting and answered questions regarding
the following issues:
· The company's forbearance issue
· Status of the company's M2'q Technology, Inc. grant
· Exhaust hoods included in the equity contribution
· Labor included in the equity contribution
· Proposed jobs
Mr. Haehn was excused from the meeting to allow the committee to discuss the application
and determine a recommendation for EDA consideration.
Mr. Motin asked that details regarding the exhaust hoods be provided prior to the June 14,
2004 EDA meeting.
Continued: Micro Loan Policy Discussion
The Committee continued their discussion regarding possible amendments to the Micro
Loan Policy. Mr. Krug expressed his concern that The Bank of Elk River's balloon payment
for the Badger Ventures loan is shorter than the balloon payment for the proposed Micro
Loan. The Committee discussed that the West Business Park is currendy receiving a benefit
that other Elk River industrial/business parks are not receiving (Industrial Incentive
Program criteria states that borrowers must locate in the West Business Park). The
Committee ctiscussed that this is an unfair advantage for the West Business Park.
EDA Finance Comrmttee M. mutes Page 2
June 9, 2004
It was of the Finance Committee's consensus that an in depth review of the Micro Loan
Policy must occur at a later date, yet initial Micro Loan Policy amendments should take place
due to the Badger Ventures application.
MOVED BY CLIFF LUNDBERG AND SECONDED BY DAN TVEITE, TI-IE
FINANCE COMMITTEE RECOMMENDS THAT THE EDA CONSIDER THE
FOLLOWING AMENDMENTS TO THE MICRO LOAN FUND POLICY AND
GUIDELINES:
ELIMINATE THE SUPPLEMENTAL MICRO LOAN PROGRAM
AMEND THE FOLLOWING INDUSTRIAL INCENTIVE PROGRAM
CRITERIA:
AMOUNT: ELIMINATE "UP TO $100,000 OF SECONDARY
FINANCING NOT TO EXCEED 40% OF THE PROJECT COST"
AND CHANGE TO "UP TO $100,000 OF SECONDARY FINANCING
NOT TO EXCEED 20% OF THE PROJECT COST"
RATE:. ELIMINATE "4 POINTS BELOW THE LOWEST PRIME
RATE PUPLISHED..." AND CHANGE TO "2 POINTS BELOW
THE LOWEST PRIME RATE PUBLISHED IN THE WALL STREET
JOURNAL THE DAY THE LOAN IS CLOSED, OR 3%,
WHICHEVER IS GREATER"
o TERM~ ADD "BALLOON PAYMENT MUST NOT BE LONGER
THAN BALLOON PAYMENT OF THE PARTICIPATING BANK"
o CRITERIA: ELIMINATE "BORROWER MUST LOCATE INTHE
WEST BUSINESS PARK"
THE FINANCE COMMITTEE RECOMMENDS THAT ALL MICRO LOANS
BE CONSUMMATED VIA A BANK PARTICIPATION LOAN.
THE FINANCE COMMITTEE ALSO RECOMMENDS THAT THE
FOLLOWING BE ADDED TO THE BANK PARTICIPATION LOAN
AGREEMENT AND THE BUSINESS SUBSIDY AGREEMENT:
"IF BORROWER DEFAULTS ON THE LOAN, THE CITY WILL COLLECT
BASED ON A PRO-RATA BASIS WITH THE PARTICIPATING BANK"
"IF BORROWER DOES NOT MEET THE JOB AND WAGE GOALS
SPECIFIED IN THE SUBSIDY AGREEMENT, THE INTEREST RATE
WILL CHANGE TO 2 POINTS ABOVE THE PARTICIPATING BANK'S
RATE, EFFECTIVE FROM THE TWO YEAR ANNIVERSARY OF THE
LOAN CLOSING. UPON SUBSEQUENT ACHIEVEMENT OF THE JOB
AND WAGE GOALS, THE INTEREST RATE WILL REVERT BACK TO
THE RATE WHEN THE LOAN WAS ORIGINATED, EFFECTIVE FROM
THE DATE OF ATTAINMENT OF THE JOB AND WAGE GOALS"
THE MOTION CARRIED 4-0.
EDA Finance Comrmttee Minutes
June 9, 2004
4. Continued: Consider Micro Loan Application: Badger Ventures, LLC (Gra&ent
TechnologT)
MOVED BY DAN TVEITE AND SECONDED BY STEVE KING, THE
FINANCE COMMITTEE tLECOMMENDS THAT THE EDA CONSIDER
AWARDING BADGER VENTURES, LLC A $100,000 INDUSTRIAL
INCENTIVE PROGRAM MICRO LOAN CONTINGENT UPON AND
SUBJECT TO PROPOSED AMENDMENTS TO THE MICRO LOAN
POLICY.
Page 3
THE MOTION CARRIED 4--0.
Closing
The EDA Finance Committee meeting ended at 6:20 p.m.
Respectfully submitted by,
Heidi Stemmetz
Assistant Director of Economic Development
MEMORANDUM
TO:
CC:
FROM:
DATE:
SUBJECT:
EDA Finance Committee
Lori Johnson, Finance Director
Heidi Steinmetz, Assistant Director of Economic Development
June 9, 2004
Consider Micro Loan Application: Badger Ventures, LLC
(Gradient Technology)
~SSUe
The attached meeting minutes summarize the Finance Committee's consideration of the
Badger Ventures, LLC Micro Loan application on June 1, 2004. Due to the Committee's
request for additional information (the City's Business Subsidies PoLicy and information
regarding the legal de between Badger Ventures and Gradient Technology) and a lack of a
quorum, there was no action on the Badger Ventures request. Therefore, the Committee
must continue discussions on the consideration of the request. The attached memorandum
surn_madzes the request.
Business Subsidies Polic.y
The Ciw's Business Subsidies Policy and background material about r_he MN Business
Subsidy Law is attached. Note page five which states that "Each company receiving a
business subsidy shall be subject to the subsidy agreement and reporting provisions and
requirements set forth by the MN Business Subsidy Law".
In addition, Finance Committee members may recall at the recent Economic Development
Strategic Planning Sessions that a discussion was held regarding a concern that the City's
Business Subsidies Policy $15/hour wage requirement may be too high. Staff requests t_he
Finance Committee's input be provided in a recommendation to the EDA. An analysis of
area com_mumty business subsidies wages is attached for your review.
Legal Tie Bet-,veen Badger Ventures & Gradient Technology
Staff obtained the opinion of the City's TIF/Abatement attorney regarding the legal tie
bet~ceen Badger Ventures and Gradient TechnologT. Verbiage will be included in the Tax
Abatement agreement and the Nficro Loan Subsidy Agreement bet-ween Badger Ventures
and Gradient Technolo~ requiring Badger Venires to reqUZre Gradient Technolo~ to
accomplish job and wage goals.
Consider Micro Lo~n A??~ica~io~: B~d~¢~ V~ntu~¢s, LLC (Omdi~n¢ T¢chno[o§y)
EDA Fm~_n¢¢ Comrmm¢¢ -june 9, 0-004
P~g¢ 2 of 2
Attachments
· June 1, 2004 ?mance comrmrtee lvimutes
· June 1, 2004 Memorandum, MScro Loan A?plicarion:
(Gradient Technology)
City, of Elk River Business Subsidies Policy
Fact Sheer: 2002 Business Subsidies Law
Badger Ventures, LLC
Frequendy Asked Questions About the 2000 Business Subsidies Law
Mirmesom Bus/ness Subsidies Law Statutes 2003
Analysis of area commumry business subsidies wages
__ __ Supplcm:~:m! l-:qnandn~ Pro~rxm
Rcdcvclo pmcn: l::h~ncin6 P rogr:mn
~ h:dus::i~l lnccnUvc Program
.Amount l~.cqucsead: S /~0., ~0 ~
Pic,~c describe how dlLs lo~ui will Lmpact ?'o~:r pt:oicct:
!11.
Project Cosk~
]'.:md $
Site imp~:ovcm~nts $
Buildings (~mch plnns & costs') &~ ~~e~ $
EClU~P men ~/M:~c hm~ q,/F'ix ~u rcs P
(a:tnch ~is: ~nd
R~modclin~ $
Totnl Costs
Commcn
:\'£ic:o L.o:ul i::und \[n~
proposed Sources of Yinuncin.~
$
$
.F~d C],::u: jLoa~
i-.}DA Micro I.oa::
Total Financing
(iornrncnts:
Collateral A.qsignments
/ Lr
../ -
'T'o EDA Micro Loa't:
t:>[c ~rovidc d~e goilowmz [r~forn~at.{ot~ ot~ jobs you expect co crca~c.
z\vcragc ;\re the .Jobs
Number i {ourl.v z\mn~zaI Permanent or
,,
~ I /:.o= " 7//,1~:
Job Creation Timetable
>!c,q=c k~dic::c ot~ I:hc rabtc bdow xvhen [z~dividual iobs ~Sg be added
'1 2
lobs
3 4
(") I:r.
7
~lk ?,~vc: [~cot:omt¢ Dc,~clo?mcnl:
,Micro I..o:~: k:'und .<ppiic:mon
Financing Sources (lenders, partners, etc...)
N ,q. lT1 C
.Address __
Phone
Address
P ho
Parent C o.m___p'.a_4~n ~
Address
Phone_
Others
Addru~s
Phone
B' [;:mxnchd 5.'.tntcn"J. cru:s for Pa~ Tv¢o xfc:u:s
V'/_G)
FinancL'd P:ojccdons fo[' Two
t~.cs un'~e o [ Owner/M:u'u',gcmcnt
Lct. I'cr of Comn4tmcnt from .,'\pplic,q. nt PLedging :o Cc mplct:c
Durh:~ thc Proposed Project Durath)t~
J)' F'ec (1% oF ~u-nou~:~c o F loan
[x. Lic,:t~ Lx;',m !:.'und A?piic:mon
provide nn), :~ddidonnl inform:moa ~s tony bc rc~tucs::cd by cbc (Ztn,' :::d ;:!:c i':[n:mcc
D A"I"E S
/
~111111
~lllI
7S3-717-S48~o' ~i~
-- Member FDIC
/=.I
May27,2004
Mr. Eric [--Iaelm ;md Duane ~
Gr~d-i~nt Tccb_no|ogy
8744 Wc~ 3~ S~ Dgve
Suite A
Blaa~ ~
~: Fin~g ~po~ ~ ~c ~c~on cfa 13,~0 sq~ ~t ~~ial bui}din~ m ~c
E~ ~v~ ~usin~s
Dear BfiJ: mad Duame:
Thank you for opportunity
oud~ ~e t~S ~d~ ~i~
subj~ pro~.
I.' C~Onstruc6on Loan:
Barrow~r: Badg:r Vantum% LLC
Loan ~t; S983,5~ ~~ ~o~t: not m ~d t4% of ap~ m~ ~uc.
~t~est ~; v~abtc ~ bas~ on ~mtc plus 1% wi~ a fl~r of 6.75%.
Co~/F~: ~t~n f~ ~u~ m 1% of~e ~ns~c~ ~m ~o~t pl~ ~1 out~f~
cosB i~ by ~ B~ of~k ~ in ~~c~iag ~ ~n,
~a~~: ~t~t oily, pa~ble money. Pfin~pM duc ~c c~a~
~I~fl; ~=at reft c~atc morgue ~d ~m~ of le~ ~
C. marant~=: Personal guaranttm-s ofDuane C, octsch and NahuM. Dick~rsm'~
MAIN' STREET · $CHIX)L STI~'T * OTS£GO
RIVER WAL.MART, MAPLE GR. OVI~ WAL-MART
~.Toet~ nko/Elkl~x~r..cam Bank~'hcBank~tEll~,lvcr.~ om
~I~Y. ?D. L:::'B2~{ 10: 15~c~M
';S3-? 17-948~0.5iS
HO. 5~ P. 3
IL l~rm~meutMort~·
Same as cu, n~iu'uc.~ion loan-
A. Thc Bank of Elk River ta provide $883,500 m~ximum ~enou~t offimding inOxe form ora
t~ real c~tatc mor~gage, not ~ c~ce~l 75% of thc ap!~aisccl ~alue atu~ i~ ~ny event not
mom tha~ $883,$00.
B. The C~ry of Elk l~iver Revol~ Loan ymui to provide $100,000 m~imura ~mout~t of
value and in my event no~ mote tlum $ lO0,00~.
A. T~e B~uk of]Elk River 6.25%, ~x~ ~tc ~~
B,~ City 0f ~ ~m~ ~l~ ~ F~(~t ~ ~ by Ci~ ofBIk~) ~mc
~te mM~ 4% ~ a ~ of 2%.
Ouatautecs: Same ~ thc constnw, hon loan.
7~3- 7 1 7--=~8~o' 516
Praying'at pex~lry: Nnna.
Oth~x Ctmttitior~ far botl~ Constru,~on and ?~t ~:
Title ~~: B°~ must ~o~e a ~i~t ~ · ~ee'~ ~ ~e ~ey
agans~ m~s li~. All con.orion ~ws m~e ~ rifle i~ ~P~Y
by ~ B~ of ~
Ri~,
~t m ~e B~ ~ Rivg wi~ 120 ~ ~e ~ af~ ~, Guam ~
pm~ a ~ fining ~t~t ~u~. T~ ( ~.O, ~/a ~i~ T~~)
T~ ~s: D~ ~e ~ of~ lo~ ~e ~o~w~ ~ll ~u~ly ~vg ~ ~fl
Le~: TM B~ of~ ~ ~1 ~ ~i~ ~ ~1 I~ ~ ~ ~e ~.
115 ~ of~ ~bt ~ce.
~e pr~ fi~ is ~ ~e~ ~ l~e t0~, 2~. ~ ~ is ~~ upon
~m~t ~d ~e ~ ~a~t ~n~t, I ~ be ~y ~ ~ist ~u ~ ~pl~g ~
proco~t we will n~ct to receive a ~om ~~an s~t ~1~ a ~mpl~
~1} ~ n~ a ~y of~ ~des of~;?~ ~ ~ ~ for
mis~g a ~on of ~ ~fi~ fee Please ~t~ti~ ~d t~ ~
require ~di~ ~a~n p]~c con~ me ~ 763-241
Sinca-fly,
Tom M~N';dr
Vic~ mfid~t
City of
t ver
Business Subsidies Policy
Adopted:
Economic Development Authority
Housing & Redevelopment Authority,
City Council
Amended:
Economic Development Authority
November 12, 2002
November 25, 2002
November 25, 2002
December 9, 2002
City of Elk River
13065 Orono Parkway
Elk River, MN 55330
(763) 635-1000
CITY OF ELK RIVER
POLICY AND PROCEDURES RELATING TO
THE USE OF BUSINESS SUBSIDIES
I. PURPOSE
For the pu~oses of this document, the term "CiE '' shall include the Elk River CiE Council, E:onomic Development
Author~tjy, and 3lousing and ~devdopment_~uthor~t_Y.
The purpose of this policy is to establish guidelines and c~iteria regarding the use of business
subsidies, such as tax increment financing (TIF), tax abatement, and other business subsidies
for private development projects within the City of Elk River and shall be in addition to the
requirements and lirmtat/ons set forth by provisions of Minnesota State Statute 116j.993
(MN Business Subsidy Law), and by the City's policy and guidelines of the particular form of
subsidy.
These guidelines shall be used in processing and reviewing applications requesting business
subsidies assistance. The fundamental purpose of business subsidies in the City is to
encourage desirable development or redevelopment that would not otherwise occur "but
for" the assistance provided through business subsidies.
It is the intent of the City to provide business subsidies, as well as other incentives that the
City may deem appropriate, 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
account established policies, specific project criteria, and demand on city services in relation
to the potent/al benefits to be received from a proposed project. Meeting policy guidelines
or other criteria does not guarantee the award of business subsidies. Furthermore, the
approval or denial of one project is not intended to set precedent for approval or denial of
another project.
Whenever possible it is the City's intent to coordinate the use of business subsidies with
other applicable taxing jurisdictions.
II. DEFINITION OF "BUSINESS SUBSIDY"
The following types of assistance having a value in excess of $25,000 are defined as a
"business subsidy" wirl4n the MN Business Subsidy Law:
State and local government agency grants;
· Contributions of personal property, real property', or infrastructure;
· The principal amount of a loan that exceeds $75,000 at rates
commercially available;
· Reductions or deferrals of taxes or fees;
below those
· Guarantees of any payment under any loan, lease, or other obligation; and,
· Preferential use of government facilities.
City of Elk River Business Subsidies Policy
liE PUBLIC PURPOSE OBJECTIVES OF BUSINESS SUBSIDIES
In accordance with the MN Business Subsidy Law, the City will consider using business
subsidies to assist private development projects to achieve one or more of the following
public purpose 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 tax base.
· To encourage additional unsubsidized private development in the area, either
direcdy or indirectly through "spin off" development.
· To achieve development on sites which would not be developed without
business subsidies assistance.
· To remove blight and/or encou~rage development of commercial and industrial
areas in the city that result in higher quality development or redevelopment and
private investment.
· To offset increased costs of development of specific properties when the umque
physical characteristics of the site may otherwise preclude private investment.
· To create opportunities for the construction, operation and maintenance of
affordable housing.
IV.
A.
GENERAL POLICIES FOR THE USE OF BUSINESS SUBSIDIES
Business subsidy assistance will be provided from the City, by a "pay-as-you-go"
note method, to the developer if the business subsidy is tax increment financing or
tax abatement. Requests for up front financing will be considered on a case-by-case
basis.
A developer requesting business subsidy assistance must demonstrate, to the
satisfaction of the City, sufficient cash equity investment in the project as required
within the City's policy for the particular form of subsidy.
Business subsidy will not be provided in circumstances where land and/or property
price is demonstrated by the County, Assessor to be in excess of fair market value.
This would normally be where the acquisition price is more than 10% in excess of
market value.
A developer must be able to demonstrate to the City, or, if applicable, to the
underwriting authority, a market-demand for a proposed project.
Business subsidy will not be used in cases where the subsidy would create an unfair
and significant competitive financial advantage over other similar projects in the area.
Business subsidy will not be used for projects that would place extraordinary
demands on city infrastructure and services.
City of Elk River Business Subsidies Policy 3
If requested by the City, the developer shall provide adequate fmanciai guarantees to
ensure completion of the project, including, but not limited to: assessment
agreements, letters of credit, cash escrows, and personal guaranties.
Each developer must be able to demonstrate to the City's satisfaction, an ability to
construct, operate, and maintain the proposed project based on past experience,
general reputation, and credit history.
If requested by the City, or its consultants, the developer shall provide sufficient
market, financial, environmental, or other data relative to the successful operation of
the project.
Projects receiving business subsidy' approval from other affected taxing jurisdictions
will be more favorably received by the City.
V°
GUIDELINES FOR COMMERCIAl/INDUSTRIAL BUSINESS
SUBSIDIES
Bo
C°
Business subsidies will not be used for on-site retail or service businesses unless it is
a redevelopment project that demonstrates that it will result in a substantial increase
in tax base and a significant improvement in quality employment.
The project must be consistent with the City's Comprehensive Plan, Land Use Plan,
and Zoning Ordinances.
The project must result in the retendon of existing jobs that would be lost "but for"
the proposed development or result an increase and diversification in local jobs.
Business retention jobs will be considered on a one-for-one match to job creation
only in cases where job loss is specific and demonstrable in accordance with the MN
Business Subsidy Law.
Specific wage and job goals will be determined by the City giving consideration to
the pardcular form of the subsidy, nature of the development, the purpose of the
subsidy, local economic conditions and similar factors. The recipient will have up to
two years to meet the job and wage goals established by the City. The rain/mum
wage for a job to be considered a new or retained job shall be $15.00 per hour
exclusive of benefits. Deviations less than the wage floor will be considered on a
case-by-case basis and in accordance with the requirements of the MN Business
Subsidy Law.
Business subsidies will not be used for commercial/industrial projects that have a
histo~ of inconsistent compliance with applicable environmental rules and
regulations.
ci~ of Elk River Business Subsidies Pol/cy 4
VI. SUBSIDY AGREEMENT AND REPORTING REQUIREMENTS
Each company receiving a business subsidy shall be subject to the subsidy agreement and
reporting provisions and requirements set forth by the MN Business Subsidy Law and
summarized below:
Progress Reports
The recipient shall f-re a report annually for two years after the receiving the
subsidy or until all goals set forth in the subsidy agreement have been met, which
ever is later. Reports shah be completed using the format drafted by the State of
Minnesota and shah be filed with the City, no later than March 1 of each year for
the progress made the previous year.
Maintain Facility.
The recipient agrees to maintain and operate its facility, at the site where the
subsidy is used for a period of five years after the dare the subsidy is provided.
Failure to Comply
Businesses failing to comply with the subsidy agreement 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.
A.
SUBSIDY APPLICATION PROCESS AND PROCEDURE
Application for business subsidies shall be made on forms for the particular form of
assistance provided by the City of Elk River Director of Economic Development, or
designee. A fee of $ 5,000.00 shall accompany any Tax Increment Finance, Tax
Abatement, or grant request application to cover the City's initial legal,
administrative, and planning costs. Micro-Loan applications shall include a fee in the
amount of 1% of the loan requested.
Following a review by appropriate City Staff the application shall be referred to the
either the Economic Development Authority, or Housing and Redevelopment
Authority, for recommendation to the City. Council for further action.
The application for business subsidies shall request information required within the
City's policies on the particular form of subsidy including but not limited to; a
detailed description of the project; a preliminary site plan; the amount of business
subsidy requested; the public purpose of the project; the number and types of jobs to
be created; the wages and benefits to be paid new employees; and verifiable funding
sources and uses.
City, of Elk River Business Subsidies Policy 5
Mehelich, Catherine
From:
Sent:
To:
Subject:
Sid Inman [sid@ehlers-inc.com]
Wednesday, June 02, 2004 9:31 AM
CMehelich@ci.elk-river.mn.us
Gradient Technology
I have reviewed the documents from Gradient Technology and have the
following comments. It is my understanding that your goal is to arrive
at a final land price that makes the land competitive with other
available land in other communities. The argument is that "But For" this
land price the project would not happen. Using the amount of the
abatement and Micro Loan you have reduced the net land price to achieve
this goal. In my opinion this meets the But For test.
Last, I noted that the total equity is over 16% which is over the
cities minimum.
Please let me know if you kave other questions.
Sid Inman - Senior Vice President
Ehlers and Associates Inc.
PH 651-697-8507
FAX 651-697-8555
This email has been scanned for all viruses by tke MessageLabs Email
Security System.
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
I. Policy Purpose
II. Difference Between TRF & TIF
III. Objectives of Tax Rebate Financing
IV. Policies for the Use of TRF
Project Qualifications
Subsidy Agreement & Reporting Requirements
VI.
VII.
Viii.
Application Process
City of Elk River
Application to Other Political Subdivisions
Application
Applicant Information
Project Inforrnadon
PubLic Purpose
Sources & Uses
Checklist & Additional Information
IX. Application RevieTM Worksheet
7
7
X. Exhibits
8
9
9
10
11
XI.
A
B
C
D
E
F
Corporation/Partnership Description
Project Description
Shareholders
Bu~ for Analysis
Prospective Lessees
Legal Description and PID Number
Sample But-For Analysis
3-4
4-5
5-6
6
7
8
12
14
15
Ciw of Elk River
Tax Rebate Financing PolicT, Amended Au=~ast 2002
-2-
I. POLICY PURPOSE
?or ~ ?urposes of 3is docu, n~ 3e term "City" shall ~ 3e Elk Ri'ar C~ ~, Econorrx
DezdoFn~ Au#Wnry, and HoUStng and Ra:fervJopnem Authori~.
The purpose of this policy is to establish the City of Elk ~ver's position rdating to the
use o:[ Tax Rebate Financing 0T,.F), 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 ga.tide 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~'ise
occur but 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 amen&& 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 ~arantee 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 (TW) is the way in which the dollars are awarded to the project. When T~ is
awarded to a project by the city, the other political sub&visions (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 T[F.
I!1. 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 fo[lowing 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 ad&donal unsubsi&zed private development in the area, either
directly or in&rectly 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 dty that resuk in high quality redevelopment and private
reinvestrnent.
City of ELk River
Tax Rebate Financing Polio,, .kmended 3ma~at 2002
-3-
· To offset increased costs of redevelopment (i.e. contaminated site dean up)
over and above the costs normally incurred in development.
· To create opportunities for affordable housing.
To contribute to the implementation of other public polities, 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.
IV. 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 the pay-as-:wu-go method. Requests for up front
financing will be considered on a case-by-case basis.
Any developer receiving TRF assistance shall provide a minimum of twenty
percent (20%) cash equity investment in the project. Projects utilizing the
SBAS04 program will be required to provide a minimum 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 will not be utilized in cases where it would create an unfair and
significant competitive finandal advantage over other projects in the area.
TRF shall not be used for projects that would place extraordinary demands
on dry services or for projects that would generate significant environmental
LrrlpactS.
The developer must provide adequate finandal 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 consukants.
j. TRF proposals shall not be used to support speculative office projects.
Speculative projects are defined as those projects which have pre-leasing
ag-reements or letters of intent for less than 50% of the available space.
City of Elk River
Tax Rebate Financing Policy,, Amended August 2002
-4-
In addition, leasible office projects must meet the following ~idelines:
1. Evidence of the 50% occupancy, must be reported to the Director of
Economic Development six months following an issued certificate of
occupancy.
2. 50% of the jobs within the leasible office building space must be
considered "n~w" jobs to the City of Elk River, meaning jobs not
located ha the City at any time pr4or to occupying space in the project.
3. Business retention jobs will be considered on a one-for-one match to
job creation only in cases where job loss is specific and demonstrable in
accordance with the MN Business Subsidy Law. Evidence m~v include
documentation that the company will have to close involuntarily, or the
company has received an attractive offer to move to another state or
community.
tc All TRF proposals shall optimize the private development potential of a site.
¥. PROJECT QUALIFICATIONS
All 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 TKF will be limited to:
· Industrial development, expansion, redevelopment, or
rehabilitation; or
· Commerdal redevelopment or rehabilitation; or
· Research and development facilities that satisfy Business Park
zoning requirements; or
· Office facilities with a minimum new construction of 25,000
square feet and minimum market value of $1,000,000 upon
project completion; or
· Residential development and redevelopment may be eli~ble for
TRF under a separate set of policies and only with the
recommendation of the HRA.
The developer shall demonstrate that the project is not financially feasible
buzfor the use of TRF. Evaluation of the project's financial feasibility without
TRF shall be provided by the City's financial advisor on requests of over
$25,000 total.
d. The project shall comply with all provisions set forth in the state's Tzx
Abatement Law, statues 469.1812 to 469.1815, as amended.
CiV 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 two of the following public purposes:
· Job creation or job retention.
· 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.
· Fulf'2Lment 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
City's Business Subsidy Criteria as adopted, and State Statute 116J.993 as
summarized below.
All developers/businesses receiving TRF assistance shall 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 well as other
subsidy agreement criteria set forth by Statute 116J.993.
The developer/business shall f~le a report annually for two years after the date the
benefit is received or until all goals set forth in the application and Subsidy
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
ful£flling 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
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 fines, repayment requirements, termination of the assistance, and be deemed
ineligible by the State to receive any loans or grants from public entides for a period
of five years.
Ci~' of Elk River
Tax Rebate Financing Policy, Amended Aua~ust 2002
-6-
Vii. APPLICATION PROCESS FOR TRF
CITY OF ELK RIVER
Applicant submits the completed application along with a $5,000 application fee.
The application fee will be used toward the cost of se~ices provided in the
evaluation of £mancial feasibility and preparation of legal documents. The balance
of the application fee will be returned to the applicant.
2. Ci~ 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, ali necessary notices, resolutions and agreements
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 Sherbume 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
Ciw of Elk Privet
Tax Rebate Fh~zmcing Poli~, Amended August 2002
-7-
TAX
REBATE FINANCING
PROPOSAL REVIEW WORKSHEET
TO BE COMPLETED BY CiTY STAFF
1. The project meets the criteria set forth in Section ¥ of the Tax Rebate Financing
poti?
Meets at least one of the objectives m Section III.
Demonstrates need for TKF with the bz.~tfor analysis.
/ c) Consistent with all ciB7 plans and ordinances.
J d) Ser~Tes at least into public purposes as de£~ed m Section V.
2. Ratio of Private to Public Investment in Project: Points:
5:1 5
$ ,,~g.~-~'~, Public Investment ~",~'-~/~'c/do(r.~/ ~'~-'--- 4B
r_~,., / Ratio Private: Public Financing 3:1 3
2:1 2
Less d~an 2:1 1
3. Job Creation in the City of Elk River: Points:__
~- Number of new jobs as a result of the project. 25+ 5
7 Number of ex/sting/retained jobs 20+ 4
_/_2____ Total 15+ 3
10 1
Less than
4. Ratio of TRF to new jobs created/retained:
$/~ ~'~-~ TRF request
/2. Number of ,ew jobs created/retained
$ /~ / ~- 7 of TRF per new job created/retained
Points: ~
$8,000 or less 5
$10,000 or less 4
~$12 000 3
Over $15,000 1
5. Wage Level of jo,bs created:
Average hourly wage
of jobs created/retained: :J~',/~- -- 7~'
Points: --~
Over $21/hour 5
$...~~ hour 4
hour 2
Under $10 / hour 1
6. Project size:
The project will result m the construction
of square feet / 3. CS)rDO
Points: Z
40,000+ 5
30s000+ 4
20,000+ 3
~'~,~00 + ~ ~
10,000 or less 1
City of Elk River
Tax Rebate Financing Pohcy. Amended August
-12-
7. T)~e of Project:
t/ 100% Owner Occupied
__ MLx Owner Occupied & Invest_merit
__ Investment Propert7
Use:
~ lndusr~-m! or Business Park Project
~ Commercial Rehabil~tation/~edevelopment
9. The project will pay annual
property taxes in the first fully
assessed year of $ .2 ~ _~ez>(D
10. Likelihood that the project will result in
unsubsidized, spin-off development.
Points: ~'-
4
3
Points:
4
Points:3
35,000+ 5
25,000+ 4
10,000+ 2
Under $10,000 1
Points:
igh 5
oderate
Low 1
Sub - Total Points: .~_ ?
of a possible 45 points.
9. Bonus Points
/'"The project will be 100% Paya~:you~go TRF.
__ The project contt4butes to the gOals of EneT_c/Ciy.
· Product promotes sensible use of energy, OR
· Project utilizes si~xificant enerD, efficient desi=m~ &/or
materials m construction.
Bonus Points: .~
2 points
Total Points: ._.~
Overall project analysis:
High
Low
Not Eli~ble
45-38 points
28-20 points
1%0 points
CiE' of Elk R/ver
Tax Rebate Financing Pol/cy, Amended August _00_
-13-
NOTICE OF PUBLIC HEARING
NOTICE IS HEREBY GIVEN t hat t he City Council o f t he City o f Elk River,
Minnesota, will hold a public hearing at a meeting of the City Council beginning at 6:30
p.m., on Monday, June 21, 2004 in the City Hall, Elk River, Minnesota, regarding a
proposed business subsidy to be granted by the City to G.D.O., Inc. d/b/a Gradient
Technology under Minnesota Statutes, Sections 116J.993 to 116J.995. The proposed
subsidy involves a $100,000 City Micro Loan to facilitate development of an
approximately 13,000 square foot light manufacturing facility to be located in the City.
Information about the proposed business subsidy and a copy of the draft business
subsidy agreement for the recipient are available for inspection at the office of the
Director of the Economic Development Authority at the City Hall during regular business
hours.
All interested persons may appear and present their views orally or in writing.
1657299vl
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 $72,778. The
abatement will apply to 100% of the City's share of the property taxes (the "Abatement")
derived from the property described as , 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 heating 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 469.1815 (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 2006 through 2015, inclusive.
1630423v2
(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 $72,778.
(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 thereofi
and the following voted against the same:
Whereupon said resolution was declared duly passed and adopted.
1630423v2 2
STATE OF MINNESOTA )
) SS
COUNTY OF SHERBURNE)
I, 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, LLC Project.
WITNESS my hand this 21 st day of June, 2004.
City Clerk
1630423v2
EXTRACT OF MINUTES OF MEETING
OF THE CITY COUNCIL OF THE
CITY OF ELK RIVER, MINNESOTA
HELD: June 21, 2004
Pursuant to due call and notice thereof, a meeting of the City Council of the City of Elk
River, Sherburne County, Minnesota, was duly called and held at the City Hall in said City on
Monday, the 21st day of June, 2004, at 6:30 o'clock p.m.
The following members were present:
and the following were absent:
Member
adoption:
introduced the following resolution and moved its
RESOLUTION AUTHORIZING EXECUTION OF
A TAX ABATEMENT AND BUSINESS SUBSIDY AGREEMENT
A. WHEREAS, Badger Ventures, LLC (the "Developer") has requested that the City
of Elk River, Minnesota (the "City") assist with the financing of certain costs of an
approximately 13,000 square foot light manufacturing facility, to be constructed by the
Developer in the City (the "Project").
B. WHEREAS, the Developer and the City have determined to enter into a Tax
Abatement and Business Subsidy Agreement providing for the City's assistance for the Project
(the "Agreement").
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Elk River,
Minnesota, as follows:
1. The City Council hereby approves the Agreement in substantially the form
submitted, and the Mayor and Administrator are hereby authorized and directed to execute, on
behalf of the City, the Agreement and the Subsidy Agreement attached as Exhibit A thereto.
2. The approval hereby given to the Agreement includes approval of such additional
details t herein a s m ay b e necessary and appropriate a nd such modifications t hereof, deletions
therefrom and additions thereto as may be necessary and appropriate and approved by the City
officials authorized by this resolution to execute the Agreement. The execution of the
Agreement by the appropriate officer or officers of the City shall be conclusive evidence of the
approval of the Agreement in accordance with the terms hereof.
1656961vl
The motion for adoption of the foregoing resolution was duly seconded by member
and, after full discussion thereof, and upon a vote being taken thereof, the
following voted in favor thereof:
and the following voted against same:
Adopted this 21 st day of June, 2004.
Mayor
Attest:
City Clerk
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STATE OF MINNESOTA
COUNTY OF SHERBURNE
CITY OF ELK RIVER
I, the undersigned, being the duly qualified and acting Clerk of the City of Elk River,
Minnesota, DO HEREBY CERTIFY that I have carefully compared the attached and foregoing
extract of minutes with the original minutes of a meeting of the City Council of the City held on
the date therein indicated, which are on file and of record in my office, and the same is a full,
true and complete transcript therefrom insofar as the same relates to a Resolution Authorizing
Execution of a Tax Abatement and Business Subsidy Agreement.
WITNESS my hand as such Clerk of the City Council of the City of Elk River,
Minnesota this __ day of June, 2004.
City Clerk
165696lvl 3
TAX ABATEMENT AND BUSINESS SUBSDY AGREEMENT
BY AND BETWEEN
CITY OF ELK RIVER, MINNESOTA
BADGER VENTURES, LLC
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS .................................................................................................
Section 1.1 Definitions ............................................................................................ 1
ARTICLE II REPRESENTATIONS AND 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
Section
Section
Section
Section
Section
Section
Section
Section
ARTICLE IV
Section 4.1
Section 4.2
Section 4.3
Section 4.4
Section 4.5
Section 4.6
ARTICLE V
Section
Section
Section
Section
Section
Section
Section
Exhibit
UNDERTAKINGS BY DEVELOPER AND CITY ....................................... 5
3.1 Construction of Project and Reimbursement of Tax Abatement
Property Cost ....................................................................................... 5
3.2 Limitations on Undertaking of the City ................................ . .............. 5
3.3 Commencement and Completion of Construction ............................... 5
3.4 Damage and Destruction ...................................................................... 5
3.5 No Change in Use of Project ............................................................... 5
3.6 Prohibition Against Transfer of Project and Assignment of
Agreement ............................................................................................ 5
3.7 Real Property Taxes ............................................................................. 6
3.8 Business Subsidies Act ........................................................................ 6
3.9 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
5.1 Conflicts of Interest ............................................................................ 10
5.2 Titles of Articles and Sections ........................................................... 10
5.3 Notices and Demands ........................................................................ 10
5.4 Counterparts ....................................................................................... 10
5.5 Law Governing .................................................................................. 10
5.6 Duration ............................................................................................. 11
5.7 Provisions Surviving Rescission or Expiration .................................. ! 1
A SUBSIDY AGREEMENT ........................................................................................ A- 1
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TAX ABATEMENT AND BUSINESS SUBSIDY AGREEMENT
THIS AGREEMENT, made as of the __ day of June, 2004, by and among the City of
Elk 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 Minnesota Statutes, Sections 4 69.1812 through 4 69.1815, t he
City has established a Tax Abatement Program; 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 Minnesota Statutes, Section 116J.993 through 116J.995
(the "Business Subsidy Law") apply to this Agreement; 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 the Subsidy Agreement attached as Exhibit A to
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 agree 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:
A~eement 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 River, Minnesota;
County means Sherburne County, Minnesota;
1630424v2
Developer means Badger Ventures, LLC, a Minnesota limited liability company, its
successors and assigns;
Event of Default means any of the 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 Minnesota;
Tax Abatement Act means Minnesota Statutes, Sections 469.1812 through 469.1815;
Tax Abatement Program means the actions by the City pursuant to Minnesota Statutes,
Section 469.1812 through 469.1815, as amended, and undertaken in support of the Project;
Tax Abatement Property means the real property identified as
, Elk River Business Park, located in the City;
Tax Abatements means 100% of the City's share of real estate taxes on the Tax
Abatement Property abated in accordance with the Tax Abatement Program.
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ARTICLE II
REPRESENTATIONS AND 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 Agreement 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 Agreement, '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 Program.
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 Agreement and carry out the covenants
contained herein.
(3) The Developer w ill cause t he P roj ect t o b e constructed i n accordance with t he
terms of this Agreement 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 will 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 before
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.
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(6) Neither the execution and delivery of this Ag-reement, the consummation of the
transactions contemplated hereby, nor the fulfillment of or compliance with the terms and
conditions of this Agreement is prevented, limited by or conflicts with or results in a breach of,
the terms, conditions or provision of 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 w ill cooperate fully with t he City with respect t o a ny 1 itigation
commenced with respect to the Project.
(8) The Developer will cooperate fully 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.
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ARTICLE
UNDERTAKINGS BY DEVELOPER AND 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 Agreement 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 agreement 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 $72,778 (the "Reimbursement
Amount") pursuant to the Abatement Program as provided in Section 3.8.
Section 3.2 Limitations on Undertaking of the City. Notwithstanding 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 shall complete the Project by December 31, 2004. 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 Agreement 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 Change 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 Against Transfer of Proiect and Assi,mament of Agreement. The
Developer represents and agrees that prior to the termination date of this Agreement the
Developer shall not transfer the Project or any part thereof or any interest therein, without the
prior written approval of the City. The City shall be entitled to require as conditions to any such
approval that:
1630424v2 5
(1) Any proposed transferee shall have the qualifications and financial responsibility,
in the reasonable judgment of the City, necessary and adequate to fulfill the obligations
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 assigns, and expressly for the benefit of the City, have expressly
assumed all of the obligations of the Developer under this Agreement' and agreed 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 all
instruments and other legal documents involved in effecting the transfer of any interest in this
Agreement or the Project.
Section 3.7 Real Property Taxes. The Developer shall, 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 owned by it which are payable pursuant to the provisions of the
Assessment Agreement and any other statutory or contractual duty that shall accrue subsequent
to the date of its acquisition of title to the Tax Abatement Property (or part thereof) and until title
to the property is vested in another person. The Developer agrees that for tax assessments so
long as this Agreement 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 law, 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. In order to satisfy the provisions of Minnesota
Statutes, Sections 116J.993 to 116J.995 (the "Subsidy Law"), the Developer acknowledges and
agrees that the amount of the "Business Subsidy" granted to the Developer under this Agreement
is the Reimbursement Amount, which is approximately $72,778, and that the Business Subsidy is
1630424v2 6
needed because the Project is not sufficiently feasible for the Developer to undertake without the
Business Subsidy. The public purpose of the Business Subsidy is to develop new jobs within the
City and to increase the tax base in the City. The Developer agrees that it will deliver,
simultaneously with the execution of this Agreement, the Subsidy Agreement in the form
attached as Exhibit A hereto, (the "Subsidy Agreement") executed by G.D.O., Inc. d/b/a Gradient
Technology ("Gradient") pursuant to which Gradient agrees to meet the goals set forth therein
(the "Goals") in compliance with the Subsidy Law.
Section 3.9 Duration of Abatement Pro.re'am. The Tax Abatement Program shall exist
for a period of up to ten years beginning with real estate taxes payable in 2006 through 2015. On
or before February 1 and August 1 of each year commencing August 1, 2006 to and including
February 1, 2016 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
Program and this Agreement at an earlier date if an Event of Default occurs and the City rescinds
or cancels this Agreement.
1630424v2 7
ARTICLE IV
EVENTS OF DEFAULT
Section 4.1 Events of Default Defined. The following shall 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 observed 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 law 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 right 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 agreement contained in this Agreement
should be breached by any party and thereafter waived by any other party, such waiver shall be
1630424v2 8
limited to the particular breach so waived and shall not be deemed to waive any other concurrent,
previous or subsequent breach hereunder.
Section 4.5 Agreement to Pay Attorney's Fees and Expenses. Whenever any Event of
Default 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 agreement 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 agrees that the City and its
governing body members, officers, agents, servants and employees shall not be liable for and
agrees to indemnify 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 agrees 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 Agreement, 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, agreements and obligations of the City
contained herein s hall b e deemed t o b e t he covenants, stipulations, promises, agreements 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 thereof.
1630424v2 9
ARTICLE V
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 Agreement.
Section 5.2 Titles of Articles and Sections. Any titles of the several parts, articles and
sections of the Agreement 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 Agreement 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, Minnesota
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.
Section 5.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute one and the same instrument.
Section 5.5 Law Governing. This Agreement will be governed and construed in
accordance with the laws of the State of Minnesota.
1630424v2 10
Section 5.6 Duration. This Agreement shall remain in effect through February 1, 2016,
unless earlier terminated or rescinded in accordance with its terms.
Section 5.7 Provisions Surviving Rescission o r Expiration. Sections 4.5 a nd 4.6 s hall
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 thereof.
1630424v2 1 1
IN WITNESS WHEREOF, the City has caused this Agreement to be duly executed in its
name and on its behalf, and the Developer has caused this Agreement to be duly executed in its
name and on its behalf, on or as of the date first above written.
BADGER VENTURES, LLC
By.
Its
By.
Its
This is a signature page to the Tax Abatement and Business Subsidy Agreement by and between
the City of Elk River, Minnesota and Badger Ventures, LLC.
1630424v2 S-1
CITY OF ELK RIVER, MINNESOTA
By.
Its Mayor
By¸
Its Administrator
This is a signature page to the Tax Abatement and Business Subsidy Agreement by and between
the City of Elk River, Minnesota and Badger Ventures, LLC.
1630424v2 S-2
Exhibit A
SUBSIDY AGREEMENT
The City of Elk River, Minnesota, 13065 Orono Parkway, Elk River, MN 55330-5600,
(the "City"), the Economic Development Authority of the City of Elk River, 13065 Orono
Parkway, Elk River, MN 55330-5600, (the "EDA") and G.D.O., Inc. d/b/a Gradient
Technology, a Minnesota corporation, 8744 W 35W Service Drive #A, Blaine, MN, 55449
("Gradient") agree that Gradient and its affiliate, Badger Ventures, LLC ("Badger") have
received assistance which is a "Business Subsidy" as defined by the City of Elk River Micro
Loan Policy and Minnesota Statutes, Sections 116J.993 through 116J.995 (the "Subsidy Law"),
and is subject to the provisions thereof, including without limitation, job creation goals, reporting
requirements, five year commitment by Gradient, and repayment of the subsidy if Gradient is in
default under this agreement.
Accordingly, it is agreed:
(1) The amount of the "Business Subsidy" is the total of approximately $72,778 of
tax abatement assistance from the City to Badger and the $100,000 City Micro Loan, sub-prime
financing, to Gradient.
(2) The public purposes of the subsidy include job creation and enhancement of the
City's industrial tax base.
(3) The goals of the subsidy include the above public purposes, the construction by
Badger of an approximately 13,000 square foot light manufacturing facility to be located in the
City (the "Project") and the retention of the Project for at least five years after the "Benefit Date"
of the Project, as defined in the Subsidy Law, which is hereby determined to be the date Gradient
occupies the Project. Gradient represents that the Business Subsidy is needed in order to induce
Badger to complete the Project in the City of Elk River.
(4) Gradient represents that it currently has in the State of Minnesota 7 full-time
equivalent permanent employees and agrees to meet the following goals (the "Goals"): it will
create at least 5 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".
(5) If the Goals are not met, Gradient agrees to repay to the EDA and the City all or a
part of the Business Subsidy theretofore paid to Gradient and Badger by the EDA and 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, Gradient will repay a portion of the Business Subsidy (plus Interest)
determined b y multiplying t he Business Subsidy b y a fraction, t he numerator o f which i s t he
number of jobs in the Goals which were not created at the wage level set forth above and the
denominator of which is 5 (i.e. number of jobs set forth in the Goals).
(6) Gradient agrees to continue operations of the Project for at least five (5) years
after the Benefit Date.
1630424v2 A-1
(7) Gradient represents that it is affiliated with Badger and there is no parent
corporation of either Gradient or Badger.
(8) Gradient represents that Gradient and Badger have accepted business subsidies
from the following additional public entities:
(a) Approximately $72,778 of tax abatement assistance from Sherburne
County, Minnesota to Badger.
(b) No additional business subsidies to Gradient.
(9) Gradient represents that neither it nor Badger is in default on the date hereof on
any subsidy agreement entered into under the Subsidy Law.
(10) Gradient agrees to (i) report its progress on achieving the Goals to the EDA 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 Section 116J.994, Subdivision 7 of the Subsidy Law on forms developed by the
Minnesota Department of Employment a nd Economic Development, a nd (iii) s end completed
reports to the EDA. Gradient 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
EDA agrees that if it does not receive the reports, it will mail Gradient a warning within one
week of the required filing date. If within 14 days of the post marked date of the warning the
reports are not made, Gradient agrees to pay to the EDA a penalty of $100 for each subsequent
day until the report is filed up to a maximum of $1,000.
(11) If Gradient fails to meet the job goals by the compliance date, the City and the
EDA, upon receiving written request by Gradient indicating the reasons why the job goals have
not been met and Gradient's reasonable assurance that the goals will be met, may, in their
absolute discretion, grant a one year extension of the compliance date.
(12) In t he.e vent t hat a ny provision o f t his Agreement i s inconsistent o r i n conflict
with any provision of the Subsidy Law, and in the event that any provision of the Subsidy Law
provides additional requirements, the provisions of the Subsidy Law shall apply and govern.
1630424v2 A-2
In witness whereof, the EDA and the Company have dully executed this agreement by
their duly authorized representatives.
G.D.O., INC., d/b/a Gradient Technology
By
Its
By
Its
1630424v2 A-3
CITY OF ELK RIVER, MINNESOTA
By.
Its Mayor
By.
Its Administrator
ECONOMIC DEVELOPMENT
AUTHORITY OF CITY OF ELK RIVER,
MINNESOTA
By
Its President
By
Its Executive Director
1630424v2 A-4