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6.0. EDSR 03-11-2002 Item If 6 � City of Elk -� River MEMORANDUM TO: Economic Development Authority FROM: Catherine Mehelich, Director of Economic Development/�1..� DATE: May 13, 2002 SUBJECT: Consider Tax Rebate Financing Application -J.L.T. Partnership, L.L.P. &John C. Weicht & Associates, L.L.P. Attachments * Tax Rebate Financing Application—J.L.T. Partnership,L.L.C. &John C. Weicht& Associates,L.L.P. • *Tax Rebate Financing Proposal Review Worksheet *Tax Rebate Financing Projection Worksheet * City of Elk River Tax Rebate Financing Policy *Article: "Abatement...the new development tool of choice",April 29, 2002 MN Real Estate Journal. Issue An application for Tax Rebate Financing (TRF) has been submitted by J.L.T. Partnership, L.L.P. and John C. Weicht&Associates,L.L.P. The partnership (Elk Path,L.L.C.) is requesting TRF assistance for the construction of a 42,000 square foot professional office building to be located in the West Business Park. Specifically, the applicant is requesting the City abate up to $200,000 of its portion of the new property taxes from the project. Lynn Caswell of J.L.T. Partnership,L.L.P., and John Weicht will be present at the EDA meeting to answer any questions. Background J.L.T. Partnership,L.L.P. and John C. Weicht&Associates,L.L.P. will be forming a partnership by the name of Elk Path,L.L.C. in order to construct a 42,000 square foot multi- tenant office building in the West Business Park. The building will be designed for lease to professional,medical, and legal related businesses. Local company,John Oliver& Associates, Inc. will occupy 7,000 square feet of the building. The building will include amenities such as fiber optics, a T-1 line,heated underground parking and environmentally efficient geothermal heating and cooling. TRF Application J.L.T.Partnership,L.L.P.&John C.Weicht&Associates,L.L.P. May 13,2002 • Page 2 of 2 The total cost of the project is projected to be$4,720,000. Sources of financing include a $3,456,000 loan from First National Bank of Elk River and a$864,000 equity contribution by the partners. The applicant is requesting that the city rebate its portion of the property taxes up to $200,000 on a pay-as-you-go arrangement. The Sherburne County Assessor's office has estimated the project market value of$3,346,200. The annual City portion of the project's property taxes is estimated to be $28,852. Accordingly, the $200,000 rebate would be provided over a term of 6-7 years (see attached TRF Projection Worksheet). In addition, the applicant has submitted an application to Sherburne County for TRF up to $200,000. The total tax rebate request is $400,000. Upon receipt of the applicant's tax rebate financing application, staff completed the ratings worksheet used to help analyze such proposals. The proposed project scored a"49",which equates to a "High" eligibility rating. The project meets several economic development goals of the City including: *Job retention (John Oliver&Associates, Inc.) and job creation- the applicant has projected to create up to 100 new full-time positions at a wage of$21/hour exclusive of benefits. Per the MN Business Subsidy Law, the applicant would be required to commit to the job and wage goals defined within a two-year period or repay the public assistance provided. • *The new development will likely spur additional private investment in the West Business Park. * Increase the City's tax base. Action Requested While the application meets the general requirements of the City's Tax Rebate Financing Policy, the following issues should be considered: *The proposed development is 17%pre-leased by John Oliver&Associates, Inc. Is the office market demand sufficient to fill the remaining 83%without a significant negative cashflow? Perhaps a smaller scaled project would be more financially and market feasible without the use of tax rebate financing. * The proposed development includes several amenities which add to the cost of the total project. Are the proposed amenities necessary to the project thereby making the project more affordable without the use of TRF? * Does office space in Elk River need public financing assistance? Generally such a project would be driven by market demand. Additionally,what impact and precedence will the use of TRF for speculative office space have on future office developments in Elk River, such as 4110 on Highway 169? If the EDA approves the project,its recommendation will be sent to the City Council for consideration and a public hearing. CITY OF ELK RIVER TAX REBATE FINANCING PROJECTION WORKSHEET Project Name: Elk Path Professional Building TRF Project: 42,000-square foot office building Assumption: Final construction 12/31/02, assessed 1/01/03 for payable 2004 First TRF payment to developer available 2004 YEAR d State Class Rate ASSUMPTIONS Up to $150,000 0.015 Pay 2002 Over $150,000 0.020 Pay 2002 Tax Capacity Rate City Portion 0.436 Pay 2002 County Portion 0.47577 Pay 2002 School District Portion 0.45969 Pay 2002 State Portion 0.57933 Pay 2002 Proposed } roj�±C � Land Value $: ,,,,;;:,:548t600-;;Da: • Building Value $ �Z9�5660 00; Total Market Value $ : , 3,346x2.QCk,OQ Years of TRF Project Property's Total Tax Capacity $ 66,174.00 pry rfiy' ax � � n . .. n€of Estirri t r Total;'!`kret City Portion $ 28,851.86 $ 288,518.64 County Portion $ 31,483.60 $ 314,836.04 School District Portion $ 30,419.53 $ - State Portion $ 38,336.58 $ - Joint city& County Portion $ 60,335.47 $ 603,354.68 rg t equ4st*d•AmQur>t!' U ;ac djk ... g$400,q,gcti WFR$ eaks g' City 1/2: $200,000 6.93 County 1/2: $200,000 6.35 *Amount of abatement will vary depending on market value,tax rates,class rates,construction schedule and inflation on MV. FILE:JoliverTRF.xls 5/10/02 • TAX REBATE FINANCING PROPOSAL REVIEW WORKSHEET TO BE COMPLETED BY CITY STAFFg/i 8-0-Z 1. The project meets the criteria set forth in Section V of the Tax Rebate Financing policy.. a) Meets at least one of the objectives in Section III. b) Demonstrates need for TRF with the but for analysis. V c) Consistent with all city plans and ordinances. d) Serves at least two public purpose as defined in Section V. 2. Ratio of Private to Public Investment in Project: Points: $ '026)::100 O Private investment 5:1 5 $ 'C/00,000 Public Investment 4:1 4 /0.8:1 Ratio Private : Public Financing 3:1 3 2:1 2 Less than 2:1 1 3.Job Creation in the City of Elk River: Points: h Number of new jobs as a result of the project. 25+ 5 Number of existing/retained jobs divided by 10. 20+ 4 A50 Total 15+ 3 10+ 2 1 Less than 10 1 4. Ratio of TRF to new jobs created: Points: $9C O,CXiD TRF request $8,000 or less 5 /CO Number of new jobs created $10,000 or less 4 $ /(1.-)i of TRF per new job created $12,000 or less 3 $15,000 or less 2 Over$15,000 1 5. Wage Level of jobs created: Points: Average hourly wage Over$21/ hour 5 of jobs created: 12T4 /..CO $18-21 / hour 4 $14-17 / hour 3 $10-13 / hour 2 Under $10 / hour 1 6. Project size: Points: The project will result in the construction 40,000+ 5 of square feet lid/ FEY 30,000+ 4 20,000+ 3 10,000+ 2 10,000 or less 1 • 11 • 7. Type of Project: Points: 7 100% Owner Occupied 5 Mix Owner Occupied & Investment 4 Investment Property 3 8. Use: Points: Industrial or Business Park Project 5 Commercial Rehabilitation/Redevelopment 4 9. The project will pay annual Points: 6- property property taxes in the first fully 35,000+ 5 assessed year of$ /32,96 ��1�� 25,000+ 4 15,000+ 3200 10,000+ 2 Under$10,000 1 10. Likelihood that the project will result in Points: unsubsidized, spin-off development. V High 5 Moderate 3 Low 1 Sub -Total Points: 99 of a possible 45 points. 11119. Bonus Points Bonus Points: 1 The project will be 100% Pay-asyougo TRF. 3 points The project contributes to the goals of Energy City. 2 points • Product promotes sensible use of energy, OR • Project utilizes significant energy efficient design&/or materials in construction. Total Points: 7 9 Overall project analysis: High 45-38 points Moderate - points Low 28-20 points Not Eligible 19-0 points • 12 03/28/02 • VII. APPLICATION FOR TAX REBATE FINANCING A. APPLICANT INFORMATION Name of Corporation/Partnership: J.L.T. PARTNERSHIP, L.L.P and JOHN C. WEICHT &ASSOCIATES, L.L.P. Address: 580 Dodge Ave, Elk River, MN 55330 Primary Contact: Lynn Caswell Address: (Same) Phone: 763-441-2072 Fax: 763-441-5665 Email: eriverc oliverassoc.net On a separate sheet, please provide the following: • Brief description of the corporation/partnership's business, including history, principal product or service, etc... Attach as Exhibit A . • Brief description of the proposed project. Attach as Exhibit B. • List names of officers and shareholders/partners with more than five percent (5%) interest in the corporation/partnership. Attach as Exhibit C. • A but-for analysis and narrative. Attach as Exhibit D. Attorney Name: TERPSTRA, BLACK, BRANDLL & JENSEN Address: 913 Main St NW, Elk River, MN 55330 Phone: 763-441-7040 Fax: 763-441-0901 Email: ronblackasherbtel.net Accountant Name: MOSFORD, BARTHEL & CO, P.L.C. Address: 372 Jackson Av, Elk River, MN 55330 Phone: 763-441-1384 Fax 763-295-4804 Email: lbarthel@mbcocoa.com Contractor Name: JOHN C. WEICHT &ASSOCIATES, L.L.P. Address: P.O. Box 368, Elk River, MN 55330 Phone: 763-633-3600 Fax: 763-633-3601 Email: weichtassoc cx usa.net Engineer Name: W.T. McCALLA Address: 6600 - 75 '/z Av N, Brooklyn Park, MN 55428 Phone: 763-560-7446 Fax (same) Email (n.a.) Architect Name: PAUL MEYER ARCHITECTS, INC Address: 15650 36 Av N, Plymouth, MN Phone: 763-557-9081 Fax: 763-557-9233 Email: pma a(�usgo.net 8 03/28/02 • B. PROJECT INFORMATION 1. The project will be: Industrial: _X_New Construction Expansion Redevelopment/Rehab. X Office/research facility that conforms to business park standards Commercial Redevelopment/Rehabilitation/Development Retail Other 2. In addition to the City of Elk River, applicant is requesting TRF funds from: Sherburne County X School District#728 X 3. The project will be: Owner Occupied X Leased Space • If leased space, please attach a list names and addresses of future lessees and indicate the status of commitments or lease agreements. Attach as Exhibit E. 4. Project Address: Lot 1, Block 1, Elk Path Business Park, 2nd Addition • Include Legal Description and PID Number. Attach as Exhibit F 5. Site Plan and Floor Plan ( foot print) Attached: X_Yes No 6. Total Amount of TRF Requested: $ 400,000. over X years. 1111 City Portion of TRF: Annual $ 25,000. Total.$ 200,000. County Portion of TRF: Annual $ 25,000. Total $ 200,000. ISO 728 Portion of TRF: Annual $ Total $ Township Portion of TRF: Annual $ Total $ 7. Current Real Estate Taxes on Project Site: $ 400. Estimated Real Estate Taxes upon Completion: Phase I $ 100,000. Phase II $ 8. Construction Start Date: 07/01/02 Construction Completion Date: 07/01/03 If Phased Project: N/A Year % Completed Year % Completed • 9 03/28/02 • C. PUBLIC PURPOSE It is the policy of the City of Elk River that the use of Tax Rebate Financing should result in a benefit to the public. Please indicate how this project will serve a public purpose. _X_Job Creation: Number of existing jobs NONE Number of jobs created by project 100+ Average hourly wage of jobs created* $21.00+ *attach a position specific hourly wage _X_New industrial, commercial, or retail development which will result in additional private investment in the area. X Enhancement and/or diversification of the City's economic base. _X_The project contributes to the fulfillment of City's Economic Strategic Plan for Economic Development. Removal of blight. Rehabilitation of a high profile or priority site. Other: D. SOURCES & USES SOURCES NAME AMOUNT Bank Loan FIRST NATIONAL BANK $ 3,456,000. BDF Loan $ • Other Private Funds $ Equity PARTNERS $ 864,000. Fed Grant/Loan $ State Grant/Loan $ EDA Micro Loan $ Tax Rebate Financing CITY / COUNTY $ 400,000. ID Bonds $ TOTAL $ 4,720,000. USES AMOUNT Land Acquisition $ 300,000. Site Development $ Construction $ 3,626,000. Machinery & Equipment $ Architectural & Engineering Fees $ 65,000. Legal Fees $ 100,000. Interest During Construction $ 100,000. Debt Service Reserve $ 329,000. Contingencies $ 200,000. TOTAL $ 4,720,000. • 10 03/28/02 E. ADDITIONAL DOCUMENTATION • Applicants will also be required to provide the following documentation. * A) Written business plan, including a description of the business, ownership/management, date established, products and services, and future plans * The Attached 2 year Financial Projection is our plan. B) Financial Statements for Past Two Years Profit & Loss Statement Balance Sheet C) Current Financial Statements Profit & Loss Statement to Date Balance Sheet to Date X D) Two Year Financial Projections F) Personal Financial Statements of all Major Shareholders Profit & Loss Current Tax Return X G) Letter of Commitment from Applicant Pledging to Complete During the Proposed Project Duration H) Letter of Commitment from the Other Sources of Financing, Stating Terms and Conditions of their Participation in Project • X I) Application fee of$5,000 (to be returned upon completion of project. X J) Attach the following documents as Exhibits X Exhibit A — Corporation/ Partnership Description X Exhibit B — Description of Project X Exhibit C — List of Shareholders/ Partners X Exhibit D — BUT-FOR Analysis X Exhibit E — List of Prospective Lessees X Exhibit F — Legal Description Note: All Major shareholders will be required to sign personal guarantees if up front financing of the project is required. The undersigned certifies that all information provided in this application is true and correct to the best of the undersigned's knowledge. The undersigned authorizes Sherburne County to check credit references and verify financial and other information. The undersigned also agrees to provide any additional information as may be requested by the County after the filing of this application. Applicant Name 3 Cr Q a" •pr's\Aiip Date ";/2$ By • Its 11 • ADDITIONAL DOCUMENTATION PARAGRAPH (VII E) D. TWO YEAR FINANCIAL PROJECTION ELK PATH PROFESSIONAL BUILDING 2,003 2,004 2,005 Rental Income: Rent 41,889 SF @ 12.50 523,612 523,612 523,612 Storage 5,500 SF @ 8.00 38,672 38,672 38,672 Parking 18 @ 360/YR 6,480 6,480 6,480 SUBTOTAL 568,764 568,764 568,764 Vacancy Loss (312,820) (85,315) (56,876) Oper. Ex. Re-imb. 41,889 SF @ 6.12 115,377 217,935 230,755 TOTAL REVENUE 371,321 701,384 742,642 MORTGAGE $3,456,000 @8% -20Yr. 346,889 346,889 346,889 • Operating Expenses Taxes 100,000 100,000 100,000 Insurance 18,000 18,000 18,000 Utilities 75,000 75,000 75,000 Bldg. Maint. 10,000 10,000 10,000 Custodial/Lawn 15,000 15,000 15,000 Admin 25,594 25,594 25,594 Snow Plowing 6,000 6,000 6,000 P-Lot Maint. 5,000 5,000 5,000 Trash 1,800 1,800 1,800 TOTAL OPER. EXP. 256,394 256,394 256,394 EXPENSE/SF 6.12 6.12 6.12 NET INCOME/(LOSS) (231,962) 98,101 139,359 RETURN ON INVESTMENT -26.85% 11.35% 16.13% • JOHN C. EICHT AND ASSOCIATES LLP ♦® R WA STA • DESIGN GENERAL CONTRACTORS BUILDINGS BUILD P.O. Box 368,Elk River, Minnesota 55330 Telephone: (763) 633-3600 • Fax: (763) 633-3601 ADDITIONAL DOCUMENTATION PARAGRAPH (VII E) G. LETTER OF COMMITMENT FROM APPLICANTS We,J.L.T. PARTNERSHIP, L.L.P. and JOHN C. WEICHT AND ASSOCIATES, L.L.P., the owners, are committed to the proposed project called Elk Path Professional Building,provided that all parties can participate. The owners commit their finances,time and experience to make this project happen. • J.L.T. PARTNERSHIP, L.L.P. JOHN C. WEICHT & ASSOCIATES, L.L.P. w (11 /1/1/L1-1 Ly taswell, Partner hn C. Weicht, Partner • 03/28/02 i EXHIBIT A Description of the corporation or partnership EXHIBIT B Description of the proposed project EXHIBIT C Names of officers and shareholders/partners with more than five percent(5%) interest in the corporation/partnership. EXHIBIT D But-for analysis EXHIBIT E Prospective Lessees • EXHIBIT F Legal Description and PID Number • 14 1171 JOHN C.WEICHT AND ASSOCIATES LLP • DESIGN GENERAL CONTRACTORS BUILDINGS BUILD P.O. Box 368,Elk River,Minnesota 55330 Telephone: (763) 633-3600 • Fax: (763) 633-3601 EXHIBIT A Elk Path, L.L.C. is being formed by J.L.T. Partnership, L.L.P. and John C. Weicht and Associates, L.L.P., who are principals in two existing businesses in Elk River. The purpose of this new endeavor is to create a 42,000 square foot prime location for professional, medical, and legal rental office space. Our plan is to build this property. This is not the primary business of either of our businesses. Lynn Caswell & Terry Herman are the managing partners of J.L.T. Partnership, L.L.P, a local real estate investment firm. John C Weicht is the managing partner of John C. Weicht& Associates, L.L.P., a local general contracting firm that specializes in design build work in the commercial and industrial fields. With other investors, he owns and manages over$10,000,000 in other real estate holdings in Sherburne County. The construction management, as well as future management of Elk Path Center will be done by John C. Weicht& Associates, L.L.P. John Oliver and Associates, Inc. is the only committed tenant for 7,000 square feet so far. Small professional office tenants usually cannot wait six months or longer when they need space. This has been verified by calls from existing small firms looking for immediate rental space. When we cannot help them, they go elsewhere. We feel Sherburne County is losing potential business because of a lack of adequate prime professional, medical and legal office space. • JOHN C.WEICHT AND ASSOCIATES LLP• WA DESIGN GENERAL CONTRACTORS BUILDINGS BUILD P.O. Box 368,Elk River,Minnesota 55330 Telephone: (763) 633-3600 • Fax: (763) 633-3601 EXHIBIT B ELK PATH BUSINESS CENTER Purpose: The purpose of this project is long range investment and growth for all owners involved. In order to do this, Elk River needs to be a strong growing community. It is lacking in good quality office and professional space, in our opinion,therefore the proposed building. Description: A prime location for Professional, Medical, Legal and related business. Building Size: 42,000 square foot Professional office building on three stories. 14,000 square foot secure lower level parking and temperature controlled storage. •ate Opening: Fall, 2002. Rates: $ 12.50 Net —Office $ 8.00 Gross- Storage $360.00 Each—Parking Operating Exp: $ 6.12 S.F. —Approximate Amenities: Fiber Optics T-1 Heated Parking available Next to Sherburne County Government Center and close to Alina Medical Center Close to Elk River City Hall, Lake Orono and Orono Park Environmentally efficient geothermal heating and cooling • Z Z 1 Q) , : , . . . . . ., . . . • o r D O L_., O ■ O . Eli it o Ell, s ■ Q . 1 ■ I ■ ■ ■ I 0 ' U. , 'ec"HIGHWAY NO. 10 -0 Z UTLOT C / � � - / -�� � �.14.90 / ^QIVf- p %/N39°21'52"W o // -362.24 \ / / : 9° 890,8 �+��`j�A1'/ �y�y . /4.•i' - ���►..ra—Aril; , ' .... s.�t; 4.97' $-1 =I •fl' \ .. a,4• 50' / / 11 •cb S. 9,47•.1As ct t< I / / �4 \� /// 895 9g S�j �1 AIS b gi I 'I • 2 X 70, \ d kli • , �� / 5.15 .` Tr. 9 °,�ill " S- �111 if 897.05 `'s \/ryo $ lo\--..- 893.89 ��4;1 `,1,(7".14-4## 14-4-.'� S•ooOTY. ►G E• >41 fit+t+. -. 4 a. - ' Aillh'14141 V? IITI s. 1� ��,, ♦ r, :...geit‘10 MOA ora / .Th INV \, 7 A . c,,,,-- _, 0111170,1"--,0$400101111L-41V-.. '� �\ Ilii mpripP- .. .0 1 ''. '‘.4 *- ofef#"er Alitic.\ OM A----gr+ r j.1!' , '�„>, o Pgo,v. \ \\1,10_,,...••pceS\ DRI- t'.r.11yer ..1.. .„1„.___4;,:......- 4p. a \ r Opp S.F ` ` , " moi► t9 N. \ r 4 ,,6 � ./ .Ny U ta LA. %I' \ ViSite. \ ii° i.1 04.14 - • VVILive,--4010 iiiiiwi • • a :,1011.1* _44101 - C4\T2, '2). /iptAl :PS\ tyw,:.- %5 S\u,,,,, . ___,,, 010,-,---- 14101 - 89'90111 •o C+j '�. ._.• ,��•'/ 0UTL0T s �. SP. /' ceF, „ /� 2\264 0 15:4\4- - ---- 1465. 1° 50 ELK PATH BUSINESS CENTER 1 JOHN C.WEICHT AND ASSOCIATES LLP 1® • DESIGN GENERAL CONTRACTORS BUILD P.O. Box 368, Elk River, Minnesota 55330 BUILDINGS Telephone: (763) 633-3600 • Fax: (763) 633-3601 EXHIBIT C The proposed"Elk Path Business Center"will be owned by Elk Path, L.L.P., a partnership of J.L.T. Partnership, L.L.P. and John C. Weicht and Associates, L.L.P. J.L.T. Partnership, L.L.P. is owned by: 1. Lynn Caswell 2. Terry Herman John C Weicht&Assoc., L.L.P. is owned by: 1. John C. Weicht . 2. William Weicht 3. Dave Cornelius 4. Dean Leshovsky 110 JOHN CWEICHT AND ASSOCIATES LLP �® • DESIGN GENERAL CONTRACTORS BUILDINGS BUILD P.O. Box 368, Elk River,Minnesota 55330 Telephone: (763) 633-3600 • Fax: (763) 633-3601 EXHIBIT D Following is the "but-for" analysis for Elk Path Business Center. A review of this document will show that the implementation of this project is not financially feasible without the use of the Tax Rebate Financing option. Without TRF, our return on investment would be too low (7.03%) to justify the huge commitment to this project. With the help of TRF, we feel the return on our investment (11.67%) is justifiable. • • JOHN C.WEICHT AND ASSOCIATES LLP ♦m Vi. ;R i DESIGN GENERAL CONTRACTORS BUILDINGS BUILD P.O. Box 368, Elk River, Minnesota 55330 Telephone: (763) 633-3600 • Fax: (763) 633-3601 WITH NO WITH TAX REBATE FINANCING TAX REBATE FINANCING SOURCES AND USES SOURCES AND USES SOURCES SOURCES Mortgage 3,856,000 3,456,000 Equity 864,000 864,000 Tax Rebate Financing 0 400,000 TOTAL SOURCES 4,720,000 4,720,000 USES USES Land 300,000 300,000 Site Work 65,000 65,000 Soil Correction Demolition Relocation Subtotal Land Costs 365,000 365,000 • Construction 3,626,000 . 3,626,000 Finish Manufacturing Subtotal Construction Costs 3,626,000 3,626,000 Soft Costs 100,000 100,000 Taxes Finance Fees 100,000 100,000 Project Manager 184,000 184,000 Developer Fee 92,000 92,000 Contingency 253,000 253,000 Subtotal Soft Costs 729,000 729,000 TOTAL USES 4,720,000 4,720,000 Income Statement Income Statement Sq.Ft. Per Sq.Ft. Sq. Ft. Per Sq.Ft. Rent-Space 1 41,889 $12.50 523,612 41,889 $12.50 523,612 Rent-Space 2 4,834 $8.00 38,672 4,834 $8.00 38,672 Parking 18 $360.00 6,480 18 $360.00 6,480 Vacancy Loss 10% (56,876) 10% (56,876) Oper.Expense (64,098) (64,098) Mortgage 20 Term 387,038 20 Term 346,888 8.00%Interest 8.00%Interest 3,856,000 Principal 3,456,000 Principal IPNet Income 60,752 100,902 Total Return on Equity 7.03% 11.67% 1\ TA JOHN C.WEICHT AND ASSOCIATES LLP �® sTA� rNk • DESIGN GENERAL CONTRACTORS BUILDINGS BUILD P.O. Box 368, Elk River,Minnesota 55330 Telephone: (763) 633-3600 • Fax: (763) 633-3601 EXHIBIT E The targeted market will be Professional, Medical, Legal, and related businesses. The first primary tenant will be John Oliver& Associates, Inc., who will be leasing approximately 7,000 square feet. i • JOHN C.WEICHT AND ASSOCIATES LLP A® W/� sraR DESIGN GENERAL CONTRACTORS BUILDINGS BUILD P.O. Box 368, Elk River,Minnesota 55330 Telephone: (763) 633-3600 • Fax: (763) 633-3601 EXHIBIT F LEGAL DESCRIPTION: Lot 1, Block 1, Elk Path Business Park, 2❑d Addition. s 93/27i 29.92 14:45 7b34415665 JOHN OL1'VER & AS;0r:: PAGE 91 ♦. 1 0 . ' IA `\.\ ux: 4 •°� .moi \°', y`', , . \' \ \ / \\ , \ \ ' _ f h / \ \ \reg • • \` �-` \ `- - S s, 1t / I I ,` t I\\ LI c• L.._.-- ______.,•!....__‘_____________...L.. ....... ._, _��._: .. I . _r -------"'r z` ' �., — _ j. _ L� r • SI litaIRre ifl If'' _ r. 31rG it iI!1Ii1i ia s: S ,v!ga = a n e ; 1 i$ II ' 1=7Iy III z, r of t § A 9 i .I' w t 14 ( 11 i p 1 i rl ;9 far {: 1 q ill 1ff ,,AAat I i 1$1 G '� ca ''3 ; '.i L4Fiell 2 ia3sa 9#ti a i is 0G qr Fi 6 iitfigf4'; 2 2 VI il lf 1 i fir 1 , rlq111E 1,1- F e E . b?l 4 i g+� = 8; 12 4a3 X h X cage° y l if Q3Q c�p f� ! ?n •r' O rF _ III ',.. lbf '- "� e n ii A Y7 4 1 1 F �I , . . til n q ` +' H}- -• Ent 1" _ -"Q� -z r 1)11 1 4 e.= II Y ` ---. i .—• rp! tJ ��p l ��p I r i —6I ALTA/ASCM LANG TITLE SURVEY Join 011v1 A Asaviates, Irux .n +ie, I 0.,E o 0, CSAIPIv;, ELK PATH BUSINESS CENTER SECOND ADDITION +'•.+. fro* _ _--.--- , q ELK RIPER, MN w°°'w•"""�' CRAW.en UN -- - Pa.i411.40” PLY rlw RWr.wn.ruw. J-a — — CNwcit00 a,,_RNA 0-111.11 . \ J.L.T. PARTNERSHIP LIP Ora au n.....,s .wn ow ,ev-zo-n•.v.�n ,1 JOHN OLIVER &.4S'SOCL4rES ^"�"""" w^^••• "•^ °,r°�c_-_— ---:T-__________._._ • City of Elk Rive? Economic Development Tax Rebate Financing Policy & Application Adopted: April 10, 2000 City of Elk River,Minnesota Table of Contents • I. Policy Purpose 3 II. Difference Between TRF & TIF 3 III. Objectives of Tax Rebate Financing 3 IV. Policies for the Use of TRF 4 V. Project Qualifications 5 VI. Subsidy Agreement & Reporting Requirements 6 VII. Application Process 6 City of Elk River 6 Application to Other Political Subdivisions 6 VIII. Application 7 Applicant Information 7 Project Information 8 Public Purpose 8 Sources &Uses 9 Checklist&Additional Information 10 IX. Application Review Worksheet X. Exhibits 13 A Corporation/Partnership Description B Project Description C Shareholders D But for Analysis E Prospective Lessees Xl. Sample But-For Analysis 15 • 2 I. POLICY PURPOSE . For the purposes of this document, the term "Ci "shall include the Elk River City Council,Economic Development Author ty, and Housing and Redevelopment Authority. The purpose of this policy is to establish the City of Elk River's position relating to the use of Tax Rebate Financing(TRF), otherwise referred to as Tax Abatement, for private development above and beyond the requirements and limitations set forth by State Law. This policy shall be used as a guide in the processing and review of applications requesting tax rebate assistance. The fundamental purpose of tax rebate financing in Elk River is to encourage desirable development or redevelopment that would not otherwise 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 amended. 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 guarantee 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 (TIF) is the way in which the dollars are awarded to the project. When TIF is 111/ awarded to a project by the city, the other political subdivisions (the school district and the county) are required to contribute their portion of the increased taxes to the project. Conversely,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 TIF. III. OBJECTIVES OF TAX REBATE FINANCING As a matter of adopted policy, the City will consider using TRF to assist private development projects to achieve one or more of the following 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 additional unsubsidized private development in the area, either directly or indirectly through "spin off" development. • To facilitate the development process and to achieve development on sites which would not be developed without TRF assistance. • To remove blight and/or encourage redevelopment of commercial and • industrial areas in the city that result in high quality redevelopment and private reinvestment. 3 • To offset increased costs of redevelopment (i.e. contaminated site clean up) over and above the costs normally incurred in development. 110 • To create opportunities for affordable housing. • To contribute to the implementation of other public policies, 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 a. TRF assistance will be provided to the developer upon receipt of taxes by the City, otherwise referred to as the pay-asyou go method. Requests for up front financing will be considered on a case-by-case basis. b. Any developer receiving TRF assistance shall provide a minimum of twenty percent (20%) cash equity investment in the project. 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 financial advantage over other projects in the area. f. TRF shall not be used for projects that would place extraordinary demands on city services or for projects that would generate significant environmental impacts. g. The developer must provide adequate financial guarantees to ensure completion of the project, including,but not limited to: assessment agreements,letters-of credit,personal guaranties, and etcetera. h. 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. i. 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 consultants. • 4 • V. 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. b. The use of TRF will be limited to: • Industrial development, expansion,redevelopment, or rehabilitation; or • Commercial redevelopment or rehabilitation; or • Office or research facilities that satisfy Business Park zoning requirements; • Residential development and redevelopment may be eligible for TRF under a separate set of policies and only with the recommendation of the HRA. • New commercial or retail development is not eligible for TRF. c. The developer shall demonstrate that the project is not financially feasible but for the use of TRF. • d. The project shall comply with all provisions set forth in the state's Tax Abatement Law, statues 469.1812 to 469.1815, as amended. e. The project must be consistent with the City's Comprehensive Plan,Land Use Plan, and Zoning Ordinances. f. The project shall serve at least two of the following public purposes: • Job creation. • 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. • Fulfillment 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. 5 • 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 state statute 116J.993 and 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 e subsidy, and the goals for the subsidy, as well as other criteria set forth by statute 116J.993. The developer/business shall file a report annually for two years after the date the benefit is received or until all goals set forth in the application and performance 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 fulfilling 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, and be deemed ineligible by the State to receive any loans or grants from public entities for a period of five years. VII. APPLICATION PROCESS FOR TRF A. CITY OF ELK RIVER 1. Applicant submits the completed application along with all application fees. 2. City 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, all necessary notices,resolutions and certificates 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 11111 Council. 7. The City Council grants final approval or denial of the proposal. 6 ^O N DG`*" a) N bA N >, '° -,T-..i >+i..� O O N O. n Q N ai O > 0 .� y, n bA N'_ ❑ y rt,, C.,_, U N m ,A li N tU.)) 1) .J F.. `-- ct E"• 2 w t"" a=moi".,•cn Q.f" •�^,, (n N c�'C3 w.-r Q p p p L aS a., . O Oz.-. ° 1!)-0 = °)O bA C CD > � 7 tO U z py— w ny1•O u O N i!U y cc1..=. N Ui =.a• a.. O, 0L•,o 3 >.. U ai5 +•'. +' OK�n t•.a U Gba) ° v4�g °° ' cp`rn �.°c '4- OwO — ca y0.0 II � n ,u,-,!' it co I oo p.a) tD4 � o �'sC n GOE . ON > 0 • ' .ccl 0-0 O -0 - v 0 b.0 J ›'.." 1-) 5 -;) 4 p N N• az c� «S ct'C C;-. m`,14) '-',8 y 0 04-'c.).,,_,,,-.,..,?..4 8 at w° a)w > 9'�O p oev1.-, > °U v ct'0 3 ''' .?-' C.10.';'<.20 °1 " Ow O -,.0w... y) O. O ° ai 00 N N p A N i< ° a5 i. C L. rn O,--, t.. �.-, N bq>•. O .fl E-, ..,.� n ,--. v� ai C U ..O...P. .+ +-+'C .+ . 6 F % FL 4 ° LL MSSS >' L r LW 5. 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No • 0 Page 18 Minnesota Rea state Journal April 29, 2002 ABATEMENT from previous page , Before property tax reform, the aver- However, some school districts have age breakdown of the tax bill was as fol- participated in abatement projects in the lows: One important thing to note is that abatement cannot be past.Typically,they have had short peri- . ods of assistance or have assisted devel- School District: 50 percent opments that increase enrollment in a County: 30 percent used at the same time as a TIF district. However, some mature school district. Counties also City: 20 percent. have,in the past,been reluctant to favor •urisdictions have tacked abatement on to the end of a TIF one business or housing development Under this breakdown, abatement I over another. However, counties seem was a less powerful tool because it wasmuch more interested in utilizing abate- difficult for a school board to agree to district , after it has been decertified, to provide additional ment today for job creation efforts now help a private development when it is that the economy is in a recession. increasing class sizes or cutting bus assistance to a development.ment. Because of these issues, cities tended routes, even though the funding for the to be the main source of abatement abatement is a different source than funds, with the lowest share of the tax general fund money. dollar. Since property tax reform, the roles have reversed and cities have more funds available for abatement, as do lcounties. ESOTA'` While great variation exists in the M split of a tax bill, the average break- down is now: Twin Cities Real Estate Professionals f� 1 School District: 25 percent County: 38 percent CornerHouse Fundraiser City: 37 percent. Hosted Based upon this breakdown in taxes, Hosted by Dave Mona and Roy Smalley the mechanics of abatement are fairly easy to grasp. Let's assume that an existing private medical clinic is going When: Picnic: 4:00 p.m. Game: 7:05 p.m Where: Picnic area to add 20,000 square feet to its facility, but the site requires major soil correc- Tuesday,June 25, 2002 Music provided by Twins vs. on the SE side of the tion. The existing annual property taxes the NAIOP's Chicago White Sox Metrodome byGate D ond the clinic are increase$20, , and the new $ addition will taxes by $40,000 for a new total tax bill of$60,000. • — Each major taxing jurisdiction is able Registration Form h to decide whether its share of the prop ,, , . �. . ., 1 erty tax bill for a development should Name be returned to the project for a period of up to 15 years.The facility will still pay ��� �a taxes (unlike the traditional view of an Ln - , abatement) and will receive a benefit P y through an annual rebate or through a general obligation (G.O.) abatement bond issued by one of the local govern- Addressments (see chart). Based upon our example, the city City,State,Zip could now rebate up to$22,200 per year of the new total tax bill of$60,000 for our clinic project, which is 46 percent Phone higher than before tax reform. If the county can be persuaded to participate, Packages: Individual Tickets: the annual assistance could be increased up to $45,000 (city plus county por- tions). he The Red and White packages include 10 tickets Includes tickets to thegame and thepicnic. project, Total assistancehhecityayaand otty project, if both the and county to the game,picnic and 4 free parking passes. agreed to participate and abate 100 per- cent of the taxes, could be as high as $675,000. t R dr Package (Infield tickets) 3 Individual Infield Tickets Other innovative uses exist for abate- ment as well.If new development is tax- pkgs @ $600.00 = @ $60.00 = ing the limits of a roadway intersection, abatement can be used to finance road White Package (Lower level tickets) improvements where no specific benefit Individual Lower Level Tickets can be assessed to one or more proper- ties. A new single-family housing sub- pkgs @ $450.00 = @ $45.00 = division with high assessments could be assisted with abatements to assure Blue Package (no game tickets) affordability in the new homes.A rental housing development badly in need of pkgs @ $300.00 = renovation could have its taxes abated for five years to allow for major improvements, or a redevelopment area could be assisted with abatements from Package Total $ Individual Total $ within and from surrounding properties, outside the boundaries its area. One important thing to note is that GRAND TOTAL AMOUNT ENCLOSED $ abatement cannot be used at the same time as a TIF district. However, some Please mail this registration form with your payment jurisdictions have tacked abatement on ts by MAY 31,2002,to reserve your CornerHouse Send to: CornerHouse been te end tioa TIF district,ovdafter it nhal decertified, to provide additional Fundraiser Picnic and Twins game tickets. 2502 - 10th Avenue South assistance to a development. 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