4.0. EDSR 08-19-2002 Item # 4
City of
Elk -ft.,
River
MEMORANDUM
TO: Economic Development Authority
Mayor & City Council
FROM: Catherine Mehelich, Director of Economic Development
DATE: August 19, 2002
SUBJECT: Consider Adoption of the City's Tax Rebate Financing Policy as
Amended
Attachments
• Amended Tax Rebate Financing Policy,August 2002
• Existing Tax Rebate Financing Policy,Adopted April 2000
Background
At its June and July 2002 meetings the City Council and EDA discussed Tax Rebate
Financing policy issues related to office development. State law provides individual taxing
jurisdictions the flexibility to define their own priorities for the use of tax abatement. The
policy is to be used as a guide in the processing and review of applications requesting TRF
assistance.
The attached amended policy incorporates the following items discussed at the July 2002
meeting:
• Any developer receiving TRF assistance shall provide a minimum of twenty percent
(20%) cash equity investment in the project. Projects utilizing the SBA504 program
will be required to provide a minimum of ten percent (10%) cash equity investment.
(Section IV.b.)
• TRF proposals shall not be used to support speculative office projects. Speculative
projects are defined as those projects which have pre-leasing agreements or letters of
intent for less than 50% of the available space.
In addition,leasible office projects must meet the following guidelines:
1. Evidence of the 50% lease commitment must be reported to the
Director of Economic Development six months following an issued
• certificate of occupancy.
Tax Rebate Financing Policy—Amended
August 19,2002
Page 2 of 2
• 2. 50% of the jobs within the leasible office building space must be
considered"new"jobs to the City of Elk River,meaning jobs not
located in the City at any time prior 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 may 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. (Section IV.j.)
• Office facilities remain eligible for TRF but with the minimum requirements of
25,000 square feet new construction and result in a minimum market value of
$1,000,000 upon project completion. (SectionV.b.)
• The developer shall demonstrate that the project is not financially feasible
but for 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.
The cost of financial review and legal services will be deducted from the $5,000
application fee. (Section V.c. &Section VII.A.1.)
• An Itemized Project Construction Statement is among the list of required application
documentation. (Section VIII.E.j.)
• Recommendation
Consider adoption of the Tax Rebate Finance Policy as amended.
i
S:\EDA\TAXABATE\Elk River Policy History\02amendment2.doc
•
\iidi
City of
RJvei
0 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 3
II. Difference Between TRF & TIF 3
III. Objectives of Tax Rebate Financing 3 - 4
IV. Policies for the Use of TRF 4 - 5
V. Project Qualifications 5 - 6
VI. Subsidy Agreement & Reporting Requirements 6
VII. Application Process 7
City of Elk River 7
Application to Other Political Subdivisions 7
VIII. Application 8
Applicant Information 8
Project Information 9
• Public Purpose 9
Sources &Uses 10
Checklist&Additional Information 11
IX. Application Review Worksheet 12
X. Exhibits 14
A Corporation/Partnership Description
B Project Description
C Shareholders
D But for Analysis
E Prospective Lessees
F Legal Description and PID Number
Xl. Sample But-For Analysis 15
•
Proposed Tax Rebate Financing Policy,Amended August 2002 -2 -
I. POLICY PURPOSE
For the purposes of this document, the term "City"shall include the Elk River City Council,Economic
• DevelopmentAuthority, and Housing and RedevelopmentAuthority.
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
• 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.
Proposed Tax Rebate Financing Policy,Amended August 2002 - 3 -
• To offset increased costs of redevelopment (i.e. contaminated site clean up)
over and above the costs normally incurred in development.
• • 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-asyougo 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. Projects utilizing the
SBA504 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 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.
• j. TRF proposals shall not be used to support speculative office projects.
Speculative projects are defined as those projects which have pre-leasing
agreements or letters of intent for less than 50% of the available space.
Proposed Tax Rebate Financing Policy,Amended August 2002 - 4-
In addition,leasible office projects must meet the following guidelines:
1. Evidence of the 50%lease commitment 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"new" jobs to the City of Elk River,meaning jobs not
located in the City at any time prior 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 may 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.
k. All TRF proposals shall optimize the private development potential of a site.
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.
Sb. The use of TRF will be limited to:
• Industrial development, expansion,redevelopment, or
rehabilitation; or
• Commercial 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 eligible for
TRF under a separate set of policies and only with the
recommendation of the HRA.
c. The developer shall demonstrate that the project is not financially feasible
but for 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 Tax
Abatement Law, statues 469.1812 to 469.1815,as amended.
•
Proposed 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.
• f. 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.
• 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.
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 file 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
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, termination of the assistance, and be deemed
ineligible by the State to receive any loans or grants from public entities for a period
of five years.
•
Proposed Tax Rebate Financing Policy,Amended August 2002 - 6 -
VII. APPLICATION PROCESS FOR TRF
A. CITY OF ELK RIVER
1. Applicant submits the completed application along with a $5,000 application fee.
The application fee will be used toward the cost of services provided in the
evaluation of financial feasibility and preparation of legal documents. The balance
of the application fee will be returned to the applicant.
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 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.
SB. APPLICATIONS TO OTHER POLITICAL SUBDIVISIONS
It is recommended that applicants intending to seek TRF from Sherburne 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
•
Proposed Tax Rebate Financing Policy,Amended August 2002 - 7 -
VIII. APPLICATION FOR TAX REBATE FINANCING
A. APPLICANT INFORMATION
•
Name of Corporation/Partnership
Address
Primary Contact
Address
Phone Fax Email
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
Address
Phone Fax Email
Accountant Name
Address
Phone Fax Email
Contractor Name
Address
Phone Fax Email
Engineer Name
Address
Phone Fax Email
Architect Name
Address
Phone Fax Email
410
Proposed Tax Rebate Financing Policy,Amended August 2002 - 8 -
B. PROJECT INFORMATION
1. The project will be:
Industrial: New Construction Expansion Redevelopment/ Rehab.
• Office/research facility that conforms to business park standards
Commercial Redevelopment/Rehabilitation
Other
2. In addition to the City of Elk River, applicant is requesting TRF funds from:
Sherburne County School District 728
3. The project will be: _Owner Occupied 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
• Include Legal Description and PID Number. Attach as Exhibit F
5. Site Plan Attached: Yes No
6. Total Amount of TRF Requested: $ over years.
City Portion of TRF: Annual$ Total$
County Portion of TRF: Annual$ Total$
ISD 728 Portion of TRF: Annual$ Total$
7. Current Real Estate Taxes on Project Site: $
iEstimated Real Estate Taxes upon Completion: Phase I $
Phase II $
8. Construction Start Date:
Construction Completion Date:
If Phased Project: Year % Completed
Year % Completed
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.
Job Creation/Retention Number of existing jobs
Number of jobs created by project
Average hourly wage of jobs created/retained
New industrial development which will result in additional private
investment in the area.
Enhancement and/or diversification of the city's economic base.
The project contributes to the fulfillment of the City's Strategic
Plan for Economic Development.
Removal of blight.
Rehabilitation of a high profile or priority site.
Other:
Proposed Tax Rebate Financing Policy,Amended August 2002 - 9 -
D. SOURCES & USES
• SOURCES NAME AMOUNT
Bank Loan $
Other Private Funds $
Equity $
Fed Grant/Loan $
State Grant/Loan $
EDA Micro Loan $
Tax Rebate Financing $
ID Bonds $
TOTAL $
USES AMOUNT
Land Acquisition $
Site Development $
Construction $
Machinery&Equipment $
Architectural&Engineering Fees $
Legal Fees $
Interest During Construction $
Debt Service Reserve $
• Contingencies $
TOTAL $
•
Proposed Tax Rebate Financing Policy,Amended August 2002 - 10 -
E. ADDITIONAL DOCUMENTATION AND CHECKLIST
Applicants will also be required to provide the following documentation.
1110 A) Written business plan,including a description of the business,
ownership/management, date established,products and services, and future
plans
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
D) Two Year Financial Projections
F) Personal Financial Statements of all Major Shareholders
Profit&Loss
Current Tax Return
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 the Project
• I) Application fee of$5000
J) Itemized Project Construction Statement
K) Attach the following documentation as Exhibits
Exhibit A—Corporation/Partnership Description
Exhibit B—Description of Project
Exhibit C—List of Shareholders/Partners
Exhibit D —But-For Analysis
Exhibit E—List of Prospective Lessees
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 the City of Elk
River to check credit references,verify financial and other information, and share this
information with other political subdivisions as needed. The undersigned also agrees to
provide any additional information as may be requested by the City after the filing of this
application.
• Applicant Name Date
By
Its
Proposed Tax Rebate Financing Policy,Amended August 2002 - 11 -
TAX REBATE FINANCING PROPOSAL REVIEW WORKSHEET
• TO BE COMPLETED BY CITY STAFF
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.
c) Consistent with all city plans and ordinances.
d) Serves at least two public purposes as defined in Section V.
2. Ratio of Private to Public Investment in Project: Points:
$ Private investment 5:1 5
$ Public Investment 4:1 4
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:
Number of new jobs as a result of the project. 25+ 5
Number of existing/retained jobs 20+ 4
Total 15+ 3
10+ 2
• Less than 10 1
4. Ratio of TRF to new jobs created/retained: Points:
$ TRF request $8,000 or less 5
Number of new jobs created/retained $10,000 or less 4
$ of TRF per new job created/retained $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/retained: $18-21 / hour 4
$14-17 / hour 3
$10-13 / hour 2
Under$10 / hour 1
6. Project size: Points:
The project will result in the construction 40,000+ 5
of square feet 30,000+ 4
20,000+ 3
10,000+ 2
10,000 or less 1
•
Proposed Tax Rebate Financing Policy,Amended August 2002 - 12 -
7. Type of Project: Points:
• 100% Owner Occupied 5
Mix Owner Occupied& Investment 4
Investment Property 3
8. Use: Points:
Industrial or Business Park Project 5
Commercial Rehabilitation/Redevelopment 4
9. The project will pay annual Points:
property taxes in the first fully 35,000+ 5
assessed year of$ 25,000+ 4
15,000+ 3
10,000+ 2
Under$10,000 1
10. Likelihood that the project will result in Points:
unsubsidized, spin-off development. High 5
Moderate 3
Low 1
Sub -Total Points: of a possible 45 points.
• 9. Bonus Points Bonus Points:
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:
Overall project analysis: High 45-38 points
Moderate 37-29 points
Low 28-20 points
Not Eligible 19-0 points
•
Proposed Tax Rebate Financing Policy,Amended August 2002 - 13 -
• 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
•
Proposed Tax Rebate Financing Policy,Amended August 2002 - 14-
XI. SAMPLE BUT-FOR ANALYSIS
WITH NO WITH
TAX REBATE FINANCING TAX REBATE FINANCING
• SOURCES AND USES SOURCES AND USES
SOURCES SOURCES
Mortgage 9,600,000 8,667,000
Equity 2,400,000 2,400,00
Tax Rebate Financing 0 933,000
TOTAL SOURCES 12,000,000 12,000,000
USES USES
Land 1,500,000 1,500,000
Site Work 300,000 300,000
Soil Correction 468,000 468,000
Demolition 100,000 100,000
Relocation 65,000 65,000
Subtotal Land Costs 2,433,000 2,433,000
Construction 6,750,000 6,750,000
Finish Manufacturing 250,000 250,000
Subtotal Construction Costs 7,000,000 7,000,000
Soft Costs 350,000 350,000
IIIITaxes
35,000 35,000
Finance Fees 850,000 850,000
Project Manager 542,000 542,000
Developer Fee 540,000 540,000
Contingency 250,000 250,000
Subtotal Soft Costs 2,567,000 2,567,000
TOTAL USES 12,000,000 12,000,000
Income Statement Income Statement
Sq. Ft. Per Sq. Ft. Sq. Ft. Per Sq. Ft.
Rent-Space 1 100,000 $8.00 800,000 100,000 $8.00 800,000
Rent-Space 2 25,000 $8.50 212,500 25,000 $8.50 212,500
Rent-Space 3 25,000 $9.00 225,000 25,000 $9.00 225,000
Other 0 $0.00 0 0 $0.00 0
1,237,500 1,237,500
Mortgage 20 Term 1,051,646 20 Term 949,439
9.00% Interest 9.00% Interest
9,600,000 Principal 8,667,000 Principal
Net Income 185,854 288,061
Total Return on Equity 7.74% 12.00%
•
Proposed Tax Rebate Financing Policy,Amended August 2002 - 15 -
City of
Elk
River
• 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 I I
X. Exhibits 13
A Corporation/Partnership Description
B Project Description
C Shareholders
D But for Analysis
E Prospective Lessees
XI. Sample But-For Analysis 15
•
Existing Tax Rebate Financing Policy,Adopted April 2000 -2
I. POLICY PURPOSE
For the purposes of this document, the term "Ciy"shall include the Elk River City Council,Economic
• DevelopmentAuthoriy, and Housing and RedevelopmentAuthoriy.
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
• 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 unsubsicli7ed 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.
Existing Tax Rebate Financing Policy,Adopted April 2000 -3 -
• To offset increased costs of redevelopment (i.e. contaminated site clean up)
over and above the costs normally incurred in development.
• 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 thepay-asyougo 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.
•
Existing Tax Rebate Financing Policy,Adopted April 2000 -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.
•
Existing Tax Rebate Financing Policy,Adopted April 2000 - 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
• Council.
7. The City Council grants final approval or denial of the proposal.
Existing Tax Rebate Financing Policy,Adopted April 2000 - 6-
B. APPLICATIONS TO OTHER POLITICAL SUBDIVISIONS
It is recommended that applicants intending to seek TRF from Sherburne 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
VIII. APPLICATION FOR TAX REBATE FINANCING
A. APPLICANT INFORMATION
Name of Corporation/Partnership
Address
Primary Contact
Address
• Phone Fax Email
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
Address
Phone Fax Email
Accountant Name
Address
.
Phone Fax Email
Existing Tax Rebate Financing Policy,Adopted April 2000 - 7-
Contractor Name
Address
Phone Fax Email
Engineer Name
Address
Phone Fax Email
Architect Name
Address
Phone Fax Email
B. PROJECT INFORMATION
1. The project will be:
Industrial: New Construction Expansion Redevelopment/ Rehab.
Office/research facility that conforms to business park standards
Commercial Redevelopment/Rehabilitation
Other
2. In addition to the City of Elk River, applicant is requesting TRF funds from:
Sherburne County School District 728
3. The project will be: _Owner Occupied 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
• Include Legal Description and PID Number. Attach as Exhibit F
5. Site Plan Attached: Yes No
6. Total Amount of TRF Requested: $ over years.
City Portion of TRF: Annual$ Total$
County Portion of TRF: Annual$ Total$
ISD 728 Portion of TRF: Annual$ Total$
7. Current Real Estate Taxes on Project Site: $
Estimated Real Estate Taxes upon Completion: Phase I $
Phase II $
8. Construction Start Date:
Construction Completion Date:
If Phased Project: Year % Completed
Year % Completed
•
Existing Tax Rebate Financing Policy,Adopted April 2000 - 8-
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.
Job Creation: Number of existing jobs
Number of jobs created by project
Average hourly wage of jobs created
New industrial development which will result in additional private
investment in the area.
_Enhancement and/or diversification of the city's economic base.
The project contributes to the fulfillment of the City's 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 $
Other Private Funds $
Equity $
Fed Grant/Loan $
State Grant/Loan $
• EDA Micro Loan $
Tax Rebate Financing $
ID Bonds $
TOTAL $
USES AMOUNT
Land Acquisition $
Site Development $
Construction $
Machinery&Equipment $
Architectural&Engineering Fees $
Legal Fees $
Interest During Construction $
Debt Service Reserve $
Contingencies $
TOTAL $
•
Existing Tax Rebate Financing Policy,Adopted April 2000 - 9-
E. ADDITIONAL DOCUMENTATION AND CHECKLIST
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
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
D) Two Year Financial Projections
F) Personal Financial Statements of all Major Shareholders
Profit&Loss
Current Tax Return
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 the Project
• I) Application fee of$5000 (to be returned upon project
completion.)
J) Attach the following documentation as Exhibits
Exhibit A—Corporation/Partnership Description
Exhibit B—Description of Project
Exhibit C—List of Shareholders/Partners
Exhibit D —But-For Analysis
Exhibit E—List of Prospective Lessees
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 the City of Elk
River to check credit references,verify financial and other information, and share this
information with other political subdivisions as needed. The undersigned also agrees to
provide any additional information as may be requested by the City after the filing of this
application.
Applicant Name Date
By
Its
Existing Tax Rebate Financing Policy,Adopted April 2000 - 10-
TAX REBATE FINANCING PROPOSAL REVIEW WORKSHEET
• TO BE COMPLETED BY CITY STAFF
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.
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:
$ Private investment 5:1 5
$ Public Investment 4:1 4
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:
Number of new jobs as a result of the project. 25+ 5
Number of existing/retained jobs divided by 10. 20+ 4
Total 15+ 3
10+ 2
• Less than 10 1
4. Ratio of TRF to new jobs created: Points:
$ TRF request $8,000 or less 5
Number of new jobs created $10,000 or less 4
$ 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: $18-21 / hour 4
$14-17 / hour 3
$10-13 / hour 2
Under$10 / hour 1
6. Project size: Points:
The project will result in the construction 40,000+ 5
of square feet 30,000+ 4
20,000+ 3
10,000+ 2
10,000 or less 1
Existing Tax Rebate Financing Policy,Adopted April 2000 - 11 -
7. Type of Project: Points:
S 100% Owner Occupied 5
Mix Owner Occupied&Investment 4
Investment Property 3
8. Use: Points:
Industrial or Business Park Project 5
Commercial Rehabilitation/Redevelopment 4
9. The project will pay annual Points:
property taxes in the first fully 35,000+ 5
assessed year of$ 25,000+ 4
15,000+ 3
10,000+ 2
Under$10,000 1
10. Likelihood that the project will result in Points:
unsubsidized, spin-off development. High 5
Moderate 3
Low 1
Sub-Total Points: of a possible 45 points.
S 9. Bonus Points Bonus Points:
The project will be 100%Pay-asyougo TRF. 3 points
The project contributes to the goals of EnergyCity. 2 points
• Product promotes sensible use of energy, OR
• Project utilises significant energy efficient design&/or
materials in construction.
Total Points:
Overall project analysis: High 45-38 points
Moderate 37-29 points
Low 28-20 points
Not Eligible 19-0 points
•
Existing Tax Rebate Financing Policy,Adopted April 2000 - 12-
• 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
•
Existing Tax Rebate Financing Policy,Adopted April 2000 - 13 -
XI. SAMPLE BUT-FOR ANALYSIS
WITH NO WITH
TAX REBATE FINANCING TAX REBATE FINANCING
• SOURCES AND USES SOURCES AND USES
SOURCES SOURCES
Mortgage 9,600,000 8,667,000
Equity 2,400,000 2,400,00
Tax Rebate Financing 0 933,000
TOTAL SOURCES 12,000,000 12,000,000
USES USES
Land 1,500,000 1,500,000
Site Work 300,000 300,000
Soil Correction 468,000 468,000
Demolition 100,000 100,000
Relocation 65,000 65,000
Subtotal Land Costs 2,433,000 2,433,000
Construction 6,750,000 6,750,000
Finish Manufacturing 250,000 250,000
Subtotal Construction Costs 7,000,000 7,000,000
Soft Costs 350,000 350,000
• Taxes 35,000 35,000
Finance Fees 850,000 850,000
Project Manager 542,000 542,000
Developer Fee 540,000 540,000
Contingency 250,000 250,000
Subtotal Soft Costs 2,567,000 2,567,000
TOTAL USES 12,000,000 12,000,000
Income Statement Income Statement
Sq. Ft. Per Sq. Ft. Sq. Ft. Per Sq. Ft.
Rent-Space 1 100,000 $8.00 800,000 100,000 $8.00 800,000
Rent-Space 2 25,000 $8.50 212,500 25,000 $8.50 212,500
Rent-Space 3 25,000 $9.00 225,000 25,000 $9.00 225,000
Other 0 $0.00 0 0 $0.00 0
1,237,500 1,237,500
Mortgage 20 Term 1,051,646 20 Term 949,439
9.00% Interest 9.00% Interest
9,600,000 Principal 8,667,000 Principal
Net Income 185,854 288,061
Total Return on Equity 7.74% 12.00%
i
Existing Tax Rebate Financing Policy,Adopted April 2000 - 14-