9.0. EDSR 08-08-2005 ITEM # 9.
•
4
City of
Elk
River
MEMORANDUM
TO: Economic Development Authority
FROM: Heidi Steinmetz, Assistant Director of Economic Development
DATE: August 8, 2005
SUBJECT: Consider Year 2006 EDA Budget and Resolution Regarding
EDA Levy
Attachments
• Budget Worksheet — Proposed 2006 EDA Revenue &Expenditures
• Initiative Foundation information
11111
• Resolution establishing the EDA tax levy for collection in year 2006
Summary
The Economic Development Department consists of two separate budgets including:
• Economic Development Authority
• Housing&Redevelopment Authority
Since 2003, the EDA and HRA levies have been feasible to balance the Economic
Development Department without General Fund revenues. EDA revenues are estimated at
10%growth in market value for the year 2006.
In 2004 the Personal Services costs (salaries and benefits) were adjusted from 70/30 percent
EDA and HRA respectively, to 60/40 percent due to staff time allotted to the HRA's
Downtown Revitalization Project. It is proposed that this continue in 2006.
Other common administrative expenses are proposed to be shared by the EDA and the
HRA. As in previous years, the HRA would make a one time transfer to the EDA in the
amount of$3,500 to cover approximately 37% of the shared expenses.
Below is a line item analysis of the proposed year 2006 expenditures for the EDA:
• Personal Services (including Commissioners compensation) $106,900
• Office supplies (shared with HRA) $ 2,500
• • Fuels (shared with HRA) $ 150
Consider Year 2006 EDA Budget and Resolution Regarding EDA Levy
August 8,2005 EDA Meeting
Page 2 of 3
• BDM Consulting Engineers $ 7,000
• Legal Fees (purchase agreements for EDA land, etc.) $13,000
• Other Professional Services $23,000
o Strategic Industrial Marketing Plan Update
o Ehlers &Associates
• Telephone (shared with HRA) $ 200
• Postage (some shared with HRA) $ 2,000
• Travel, Conference and Schools (shared with HRA) $ 6,200
• Advertising/Marketing $76,300
o Economic Development Website
o Community Profiles (design&print)
o Advertising (production&publication)
o Public Relations Writer (articles, direct mail, newsletters)
o Technical Assistance Program
• Publishing $1,000
• Insurance $ 500
• Dues & Subscriptions $ 1,500
o Economic Development Association of Minnesota
o Manufacturers Affiance
• Miscellaneous $8,500
o Chamber of Commerce July 4th Celebration contribution
o Initiative Foundation contribution
• • Transfer out to General Fund (support staff, etc.) $ 17,000
Total EDA Year 2006 Proposed Expenditures: $265,750
Total EDA Year 2006 Proposed Revenue: $345,800
The proposed budget includes a contribution in the amount of$2,500 to the Initiative
Foundation. Last year the EDA authorized a contribution of$2,500 to the Initiative
Foundation. Information about the Initiative Foundation's 2006 request of$5,000 is
attached.
The projected balance of$80,050 will be put into the EDA reserves for any future project
expenses.
Attached to this memo you will find a Resolution establishing the tax levy for the Elk River
EDA,which requests that the City Council levy such maximum amount for the authority for
the year 2006, as in previous years. The City must certify its proposed maximum levy,
including EDA and HRA levies, to Sherburne County annually in September.
Business Incubator Budget Summary
The EDA Business Incubator Budget is based upon the assumption that the program
continues as it has over the past eight years in Larry Hickman's building space.
1111111
Consider Year 2006 EDA Budget and Resolution Regarding EDA Levy
August 8,2005 EDA Meeting
Page 3 of 3
• In 2003 the EDA reduced the lease space to 3 suites (6,569-square feet). In February of this
year, the EDA and Mr. Hickman extended the lease for an additional 2 years at a rate of
$2.19 per square foot. Mr. Hickman's staff handles the building maintenance. The current
lease with Mr. Hickman expires April 15, 2007.
The EDA Business Incubator budget includes projected revenue of$15,600 from rent
expected in 2006, assuming a 60% occupancy rate. The projected rent revenue assumes cash
rent per square foot at$4.00. A base rent value of$11.00 per square foot has been used to
determine the cash rent/stock value conversion. A cash rent of approximately $5.25 would
be required from 3 tenants in order to break even on the annual operating expenses.
Currently,K-Netica occupies one suite in the Incubator.
Proposed Business Incubator expenses include the following:
Other Professional Services (Genesis Business Centers) $13,500
Advertising/Marketing $ 3,000
Building Rent (3 suites plus common areas) $15,600
Total Business Incubator Expenditures $32,100
Total Business Incubator Revenues $15,600
The approximate $16,500 shortfall in this budget is proposed, as it has been in the past, to
• be funded through the use of funds generated by Tescom Corporation's loan repayment.
The cash balance in this account could fund the annual estimated financial gap of the
Incubator Program for the next several years.
If a new Incubator concept is considered at any time in the future, the Business Incubator
Program budget would be reviewed by the EDA for adjustment.
Recommendations
Staff recommends that the EDA approve the year 2006 EDA Budget including the year
2006 Business Incubator Budget as presented. In addition, staff recommends that the EDA
approve the attached Resolution establishing the EDA tax levy for collection in year 2006.
•
• RESOLUTION 05 - 01
A RESOLUTION OF THE ELK RIVER
ECONOMIC DEVELOPMENT AUTHORITY
A RESOLUTION ESTABLISHING THE TAX LEVY FOR THE ELK RIVER
ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF
ELK RIVER, MINNESOTA
WHEREAS, Minnesota Statutes, Section 469.107, Subdivision 1, authorizes the
Economic Development Authority to levy an amount not to exceed
.01813 percent of the taxable market value in the city to fund the
Authority's anticipated budget needs for the fiscal year 2006;and,
WHEREAS, the Elk River Economic Development Authority will adopt and approve
its budget and will forward such to the City of Elk River pursuant to
Minnesota Statutes, Section 469.100, Subdivision 2.
NOW,THEREFORE, BE IT RESOLVED by the Economic Development Authority in
and for the City of Elk River,Minnesota, that it hereby requests the City Council of the City
of Elk River to levy a tax in the amount of.01813 percent of the taxable market value in the
city for the year 2006 for the benefit of the Authority to be used for Economic
• Development Authority purposes as provided by the statute.
Passed and adopted by the Elk River Economic Development Authority this 8th day of
August,2005.
Jeff Gongoll,President
ATTEST:
Heidi Steinmetz, Interim Executive Director
•
S:\EDA\DOCUMENT\RESOLUTI\EDA levy Resolutions\EDALEV06.doc
BUDGET WORKSHEET
PROPOSED 2006 BUDGET Page: 3
7/28/2005
CITY OF ELK RIVER 9:51 am
Prior Current Year (6) (7) (8)
Year Original Amended Actual Thru Estimated
7/31/2005 Actual Budget Budget July Total Requested Recommended Adopted
d: 920-EDA
Revenues
Dept 000.000
Acct Class: 3100 General property taxes
3111 Current Ad Valorem Taxes 221,566 261,400 261,400 132,668 0 307,200 307,200
General property taxes 221,566 261,400 261,400 132,668 0 307,200 307,200 0
Acct Class: 3300 Intergovernmental revenue
3322 MV Credit 10,463 0 0 0 0
3342 Other Local Grants 0 0 0 0 0
Intergovernmental revenue 10,463 0 0 0 0 0 0 0
Acct Class: 3620 Other revenue
3621 Interest Income 2,608 2,000 2,000 2,073 0 3,000 3,000
3629 Miscellaneous Revenue 0 0 0 0 0
Other revenue 2,608 2,000 2,000 2,073 0 3,000 3,000 0
Acct Class: 3920 Transfers in
3949 Transfer-HRA 3,500 3,500 3,500 3,500 0 3,500 3,500
Transfers in 3,500 3,500 3,500 3,500 0 3,500 3,500 0
Dept: 000.000 238,137 266,900 266,900 138,241 0 313,700 313,700 0
Dept: 620.623 BUSINESS INCUBATOR
Acct Class: 3620 Other revenue
miscellaneous Revenue 16,914 15,000 15,000 6,617 0 15,000 15,000
Other revenue 16,914 15,000 15,000 6,617 0 15,000 15,000 0
Acct Class: 3920 Transfers in
3921 Transfers 10,336 16,500 16,500 0 0 16,500 17,100
Transfers in 10,336 16,500 16,500 0 0 16,500 17,100 0
BUSINESS INCUBATOR 27,250 31,500 31,500 6,617 0 31,500 32,100 0
Total Revenues 265,387 298,400 298,400 144,858 0 345,200 345,800 0
Expenditures
Dept: 620.621 ECONOMIC DEVELOPMENT
Acct Class: 4100 Personal services
4101 Regular Pay 63,348 69,400 69,400 30,314 0 75,000 75,000
4102 Overtime Pay 60 0 0 62 0
4103 Part-time Pay 12,226 12,600 12,600 6,092 0 12,600 12,600
4104 PERA 3,637 4,200 4,200 1,750 0 4,950 4,950
4105 FICA 4,442 5,050 5,050 2,059 0 5,450 5,450
4107 Medicare 1,039 1,200 1,200 481 0 1,300 1,300
4108 Insurance 6,995 7,200 7,200 3,626 0 7,400 7,400
4109 Workers Comp 180 200 200 197 0 200 200
Personal services 91,927 99,850 99,850 44,581 0 106,900 106,900 0
A lass: 4200 Supplies
4201 Office Supplies 4,145 2,000 2,000 1,148 0 2,500 2,500
BUDGET WORKSHEET
PROPOSED 2006 BUDGET Page: 4
7/28/2005
CITY OF ELK RIVER 9:51 am
Prior Current Year (6) (7) (8)
Year Original Amended Actual Thru Estimated
/31/2005 Actual Budget Budget July Total Requested Recommended Adopted
920-EDA
Expenditures
Dept: 620.621 ECONOMIC DEVELOPMENT
Acct Class: 4200 Supplies
4212 Fuels&Lubs 142 150 150 112 0 150 150
Supplies 4,287 2,150 2,150 1,260 0 2,650 2,650 0
Acct Class: 4300 Other services&charges
4303 Engineering Fees 0 0 0 0 0 7,000
4304 Legal Fees 6,764 5,000 5,000 0 0 10,000 13,000
4319 Other Professional Services 9,248 10,000 10,000 3,713 0 26,000 23,000
4321 Telephone 120 200 200 32 0 200 200
4322 Postage 1,427 2,000 2,000 1,271 0 2,000 2,000
4331 Travel,Conferences&Schools 5,150 5,600 5,600 1,584 0 6,200 6,200
4349 Advertising/Marketing 34,491 56,600 56,600 31,228 0 76,300 76,300
4359 Publishing 951 1,000 1,000 0 0 1,000 1,000
4361 Insurance 292 500 500 34 0 500 500
4433 Dues&Subscriptions 2,208 1,400 1,400 1,004 0 1,500 1,500
4440 Miscellaneous 2,684 8,500 8,500 6,000 0 8,500 8,500
Other services&charges 63,335 90,800 90,800 44,866 0 132,200 139,200 0
ss: 4500 Capital outlay
likquipment 0 0 0 0 0
Capital outlay 0 0 0 0 0 0 0 0
Acct Class: 4700 Transfers out
4721 Transfer-General Fund 15,750 17,000 17,000 17,000 0 17,000 17,000
Transfers out 15,750 17,000 17,000 17,000 0 17,000 17,000 0
ECONOMIC DEVELOPMENT 175,299 209,800 209,800 107,707 0 258,750 265,750 0
Dept 620.623 BUSINESS INCUBATOR
Acct Class: 4200 Supplies
4219 Operating Supplies 0 0 0 0 0
Supplies 0 0 0 0 0 0 0 0
Acct Class: 4300 Other services&charges
4304 Legal Fees 473 0 0 0 0
4319 Other Professional Services 12,000 13,500 13,500 7,000 0 13,500 13,500
4349 Advertising/Marketing 0 3,000 3,000 1,568 0 3,000 3,000
4405 Cleaning Services 0 0 0 0 0
4412 Building Rent 14,778 15,000 15,000 8,490 0 15,600 15,600
Other services&charges 27,251 31,500 31,500 17,058 0 32,100 32,100 0
Acct Class: 4500 Capital outlay
ag
4uildings&Structures 0 0 0 0 0
Capital outlay 0 0 0 0 0 0 0 0
BUSINESS INCUBATOR 27,251 31,500 31,500 17,058 0 32,100 32,100 0
BUDGET WORKSHEET
PROPOSED 2006 BUDGET Page: 5
7/28/2005
CITY OF ELK RIVER 9:51 am
Prior Current Year (6) (7) (8)
Year Original Amended Actual Thru Estimated
W7/31/2005 Actual Budget Budget July Total Requested Recommended Adopted
: 920-EDA
Total Expenditures 202,550 241,300 241,300 124,765 0 290,850 297,850 0
EDA 62,837 57,100 57,100 20,093 0 54,350 47,950 0
•
•
r' 1
INITIATIVE
May 26, 2005 FOUNDATION
Catherine Mehelich
Elk River Economic Development Authority
13065 Orono Pkwy
Elk River, MN 55330-5600
RE: 2006 Budget Request for Initiative Foundation Support of$5,000.
Dear Ms. Mehelich,
The Initiative Foundation continues to be a relentless advocate for the quality of life we
share in Central Minnesota. With proven programs that build local citizens' capacity to
benefit their respective community,nonprofit organization, or lake/river association;
economic development business financing to attract and retain quality jobs; and grants
to units of government and nonprofit associations that will enhance community life . . .
the Foundation works with and through local citizens to fulfill its mission.
• As a convener of individuals andou s of citizens across traditional boundaries, the
1�' p
Initiative Foundation takes advantage of its unique, apolitical perspective to bring people
together in order to face challenges, share best practices and seize opportunities.
Examples include Regional Economic Development(RED) efforts, addressing affordable
housing, supporting early childhood education, increasing our understanding of rural
poverty, and combating the scourge of methamphetamines through awareness, citizen
involvement and support. The Foundation recognizes the significant strengths and assets
that already exist here in Central Minnesota and helps our local partners build on them to
help make this a better place to live and grow.
We hope you will agree that the Initiative Foundation's history of"saying what we mean
and meaning what we say"has resulted in tangible results for neighbors and friends
within the 14-County territory we serve. We invite you to refer to the information
enclosed with this mailing for a more detailed picture of the Foundation's impact on
Central Minnesota and your area in particular.
As our region faces near-explosive growth in some corners and an exodus of young
adults in others; as we strive to support land development while preserving the heritage
and character of our beautiful region; as opportunities and challenges arise. . . the
Initiative Foundation will continue to help bring out the very best in citizens to improve
• and enhance this place we call"home." Local people still know best!
•
Catherine Mehelich
Page 2
May 26, 2005
Please help further the mission and activities of the Initiative Foundation. We ask
that you consider our request for$5,000 of support from your City in 2006. Expect
to receive a call from Curt Hanson or Mark Lease as a follow up to this request.
•
Thank you for your consideration.
Sincerely,
OLAF 04
/KathyGaalswyk Curt Hanson
President Vice President for Donor Services
cc: G. George Wallin, Ph.D., Initiative Foundation Board of Trustees
Mark A. Lease, Donor Services Officer
i
CENTRA1.MINNESOTA•N
INITIATIVE 1'l17
• 405 FRasT STREET SE
LITTLE FAi.l.s. MN 56345
Pt1oNE: 320.632.9255
FAx: 320.632.9258
WWW.II ouNI).11l.G
Page l of 1
INFORMATION
• Steinmetz, Heidi
From: Tom Berry[tberry@industhard.com]
Sent: Monday, August 08, 2005 5:07 PM
To: Steinmetz, Heidi
Subject: Minnesota Fabrication &Machine EDA Note
Dear Heidi:
At the time we received our EDA loan, we had a mortgage of about$450,000 on our Minnesota
Fabrication building with First National Bank of Elk River. That mortgage came due and was paid off. At
that time our EDA loan assumed priority over our other Minnesota Fabrication indebtedness.
We are currently in the position of trying to borrow$550,000 against the same building to provide
additional working capital for the company. In order to do this,we request that the Economic
Development Authority allow our EDA note to take a secondary position behind the proposed Boundary
Waters Mortgage.
The property has been appraised at$900,000, so we believe the risk to the EDA would be minimal.
Thank you for your consideration in this matter.
Tom Berry
S
•
8/8/2005
Page 1of1
• Steinmetz, Heidi
From: Doug Hafner[dhafner@mybwbank.com]
Sent: Monday, August 08, 2005 5:00 PM
To: hsteinmetz@ci.elk-river.mn.us
Subject: MN Fab request-
Heidi,
Attached is our proposal/Terms sheet.
The loan is approved under SBA 7(a) and requires a subordination of the EDA loan. Please note we
have completed a new appraisal which indicates a market value of
$900,000, dated July 7, 2005. I would be happy to provide a copy if you wish.
Please note also that the property is expected to be deeded from Mn Fabrication to SKD Real Estate
Holdings, LLC, as the borrower needed to move some of the debt off balance sheet to strengthen their
company balance sheet. You may need to either do an assignment and assumption agreement, or
simply satisfy your existing mortgage and file a new one behind ours at our closing.
Let me know if I can be of any further help.
Best Regards,
• Douglas 1 5-fafner
Branch President
Boundary Waters Bank
11800 Aberdeen St NE, Suite # 102
Blaine, MN. 55449
(763) 862-9962 (0) (763) 862-1568 (FAX)
(612) 382-0808 (Cell)
dhafner@mybwbank.com
I
8/8/2005
Summary of Proposed Terms and Conditions
Date 8/8/2005
Borrower: Minnesota Fabrication, Inc/SKD Real
Estate Holdings,LLC.
Lender: DNH
Commitment: $ 550,000 or 65% of appraised value, Term
whichever is less
Purpose: Provide permanent working capital Current Assets
Remodeling
Payments P&I monthly
Amortization: 120 months
Maturity 120months
Guarantor: Individual owners, unlimited (Secure guaranty with real estate??)
Limited by LLC that owns real estate
Interest Rate: WSJ+1.75%, 365/365 basis. Fixed or variable
(Actual days,360 day year Floor?
basis)
Fees: $ 1,000 packaging fee SBA 7(a)
Prepayment Per SBA SOP
Consideration:
Collateral: • Jr on all business assets and 1st REM on Titled vehicles
• commercial building.
Minimum Appraised $ 850,000
value:
Advances/ • •
Repayments
Reporting • • Annual compiled and TR's
Financial Covenants $ 550,000 combined life insurance on all
guarantors.
Loan Documentation ALTA title, Survey,Environmental,
Appraisal
Loan Agreement: N/A
Depository Services Required as condition of approval.
Condition Precedent Acceptable environmental assessment.
Costs and Expenses Normal closing costs
For Commitment
Letters
Fees:
Commitment
Expiration Date:
Not Approved; Not a commitment
C:J)oeutnents and:Settingsi[.t alnoc d Settin s\Temporary Internet Fl les\OLK.A3I\Term Sheet.doc