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6.0. EDSR 08-19-2002
Item # 6 • City of Elk -�-1 River MEMORANDUM TO: Economic Development Authority FROM: Catherine Mehelich, Director of Economic Developmen' DATE: August 19, 2002 SUBJECT: Consider Cymbet Corporation Expansion Siting Proposal Attachments • Cymbet Corporation Company Information • Location Map—Gagne Property • Financial Package - Cymbet/Equity Proposal • • City and County TRF Projection Worksheet • Business Incubator Program Concept- Cymbet/Equity Proposal • Elk River Business Incubator Finance Summary and Projections Issue A preliminary siting proposal has been submitted by staff to Equity Management, in conjunction with Cymbet Corporation, to provide space for Cymbet's manufacturing facility and for the EDA's Business Incubator Program. Equity Management is requesting that Tax Rebate Financing be used to assist the project. Gary Santwire of River's Crossing, and Mark Wallace from Cymbet Corporation will be present at the meeting to answer any questions. Background Cymbet Corporation, formerly Integrated Power Solutions,is a 2001 graduate of the Elk River Business Incubator Program. Cymbet is a high-tech firm that has developed a process for manufacturing a solid-state, thin-film battery technology,which has many advantages and applications. Due to the size of the battery, the technology can be integrated into the circuit boards of any electronic device, thus eliminating the need for large batteries and expanding the capabilities of the device. Additionally, the battery is recharged via radio frequencies, thus eliminating the need to remove it from the device. Finally,it has a nearly infinite lifespan and will likely outlive any device it powers. This battery technology has already been developed at Oak Ridge National Laboratories, however, production methods are too costly to bring the battery to market. Founder Mark Jensen, has developed a process to manufacture such a battery at a price acceptable to the market. 11111 Consider Cymbet Corp.Expansion Siting Proposal August 19,2002 Page e 0‘3 • In year 2000 the company occupied approximately 1,500 square feet of Incubator space. In 2001 the company moved into 7,500 square feet of market rate space in the West Business Park. The company has expanded to date into approximately 14,000 square feet of corporate headquarters and research& development space. The company is prepared to begin production in Fall 2002 at a smaller scale in its present facility. Cymbet has indicated to staff a need for up to 50,000 square feet (expandable to 100,000 square feet) of lease space by July 2003 for its full-scale light manufacturing operation. In addition the company will retain its present facilities for corporate offices and research& development. River's Crossing and Equity Management (Linda Norha,President) have indicated interest in constructing and leasing the necessary facility to Cymbet. River's Crossing is currently negotiating a purchase of the approximately 17-acre Gagne property located directly west of SoftPac on Business Center Drive. The property would then be subdivided with 7-acres for Cymbet and the balance for smaller light industrial lots. Equity Management has indicated interest in constructing an additional 10,000 square feet to the Cymbet project in order to provide space for tenants of the City of Elk River Business Incubator Program. Expansion Siting Proposal In response to Cymbet and Equity Management's siting requirements, staff proposed the following described preliminary proposal to Cymbet and Equity Management for consideration. The proposal timeframe is contingent on the EDA's approval of the finance concept and the property being secured by River's Crossing and Equity Management. • Proposed Project • Construction of a 60,000 square foot light manufacturing facility which meets the requirements of the Business Park District; o 50,000 square feet leased to Cymbet Corporation, and o 10,000 square feet reserved for tenants of the city's Business Incubator Program. Public Purpose • Enhance and diversify the city's industrial base • Quality job creation • Development of the West Business Park in accordance with the city's Strategic Economic Development Plan • Spur private investment and development in the West Business Park Tax Base • $2,800,000 Estimated Land&Building Market Value Jobs/Wages • Cymbet currently employs 16 full-time people. The company anticipates hiring up to 26 additional employees within 24 months of completion of the facility. The new positions include several skilled Process and Production Technicians with an average wage of$20/hour plus benefits. • • Jobs created by Business Incubator tenants. S:\Industrial Siting\CYMBET expansion\Aug19EDA.doc Consider Cymbet Corp.Expansion Siting Proposal August 19,2002 Page 3.7(3 • Financing Assistance and Subsidy Requirements • City Tax Rebate Financing Assistance (TRF) up to $225,000 or 10 years;whichever is earlier (subject to and contingent upon minimum building and land value of $2,800,000). • County Tax Rebate Financing Assistance (TRF) up to $225,000 or 10 years; whichever is earlier (subject to and contingent upon minimum building and land value of$2,800,000). • Financial Package and Financing Requirements of Proposal attached. • City and County TRF Projection Worksheet attached. • Business Incubator Program Concept attached. Business Incubator Concept Currently the EDA leases approximately 7,500 square feet of the former Furniture&Things building located on east Highway 10. The current lease term, at a rate of$1.85/square foot, expires April 2003. The EDA has the option to renew the lease for another two years at a rate not to exceed$3.00/square foot. Should the EDA chose not to renew the lease the building owner,Larry Hickman,would be required to repay the EDA approximately$23,000 of the total$81,253 in initial leasehold improvements. The Incubator Advisory Committee has directed staff to explore facility options for the Incubator Program. In addition to tenant rent revenue, the Incubator program has been funded by an annual • transfer of approximately$20,000 from the Tescom MN Investment Fund loan repayment. The attached Business Incubator Finance Summary&Projections sheet indicates sufficient funds to operate the Incubator program under the existing arrangement until year 2008. The proposed Incubator concept provides the following benefits: • Excludes the EDA from leasing/subleasing space, commitments on vacant space, and from staff time responding to building issues. • Equity Management may consider a barter stock-for-cash rent option on a case-by- case basis with tenants of the Incubator Program. • EDA may consider its participation in the space and program by continuing to provide technical assistance and tenant recruitment via Genesis Business Centers and paying for initial leasehold improvements (ie. conference room,restrooms, etc.) in exchange for up to 10-years reservation of the space for the Incubator Program. • Building space that is designed for companies involved in product manufacturing/assembly or high technology-service. Action Requested Staff recommends that the EDA consider the following actions: • Approval of the proposed finance concept for the Cymbet Corporation expansion and development of space for the EDA's Business Incubator Program, and • Recommendation that the City Council schedule a public hearing on the Tax Rebate 111 (abatement) and Business Subsidy request for its meeting on September 9,2002. Staff will work with the developer and company to complete the necessary TRF application for the EDA and City Council's formal consideration. S:\Industrial Siting\CYMBET expansion\Aug19EDA.doc Cymbet Corporation Page 1 of 1 411) CYMBET" (.OF- PO f?t..' ION ufi1= E� IIWI'�. ' , 11-1"N PRESS ROOM I TECHNOLOGY OVERVIEWtaws CYMBET Corporation is the first to market high cycle, high energy thin-film z rechargeable or primary solid state batteries deposited onto virtually any *, surface in any shape or size. t. . W CYMBET's patent pending POWER FABrM manufacturing process stands for "Programmable Orientation With Enhanced Reactivity" and is a combination of traditional thin-film deposition technologies and proprietary enhancements that "program"the orientation of the material being deposited while maintaining a low process temperature. Combine this unique capability with the high energy density of a lithium cobalt oxide/lithium phosphorous oxynitride (LIPON) couple and you have a paradigm shifting energy source that easily and efficiently replaces existing battery sources with application specific batteries that enable a new generation of thin light weight products. The CYMBET unique POWER FARM process allows us to design microscopic � .. • to macroscopic rechargeable energy sources (batteries) onto almost any _ substrate or built directly into products to create more robust and useable devices. Imagine products that need no battery because the battery was built into the case or IC or LCD screen during manufacture. Imagine products that need no contacts for battery recharge because the built in battery is recharged through inductive or RF means. By designing 'application specific' solutions Cymbet offers products that dramatically reduce overall size and weight of the energy source. In those cases where the battery becomes part of the structure it provides reliable power with little or no gain in weight and without affecting structural integrity. Cymbet energy sources provide high energy density( up to 900 Watt-hours per liter), long cycle life, fast recharge, wide operating temperatures, flat discharge profiles (3.6 volts per cell) and a stable shelf life making it usable as either a rechargeable or primary battery. Click on the POWER FABTM button for detailed information on the Cymbet thin-film energy system. POWER FABT'" ®Technical White Paper http://www.cymbet.com/tech_overview.php 7/19/02 Cymbet Corporation Page 1 of 1 4110 :#4 eiut4414.1411— CYMBEC C:ORPORA'TION o ECHNOLO6Y FRODUCT SOLUTIONS Vi i:„ PRESS ROOM COMPANY OVERVIEW LU Cymbet Corporation (Cymbet) is the first to market a true solid state energy system using a proprietary, patent pending "POWER FABTM" low temperature manufacturing process. The Cymbet thin-film battery system will enable new NT concepts in battery application for IC's and new products for handheld computer, communication, medical, sensor, and portable electronic devices. a Cymbet batteries can be integrated directly within IC's or built into the . electronics they power. This enabling technology uniquely combines existing deposition techniques with high energy solid state battery technology to produce a simple, competitive thin-film battery and process that has immediate application and payback. Located in Elk River, Minnesota Cymbet is made up of a highly skilled team of7.V professionals dedicated to optimizing and producing thin-film energy sources `��' and adapting these concepts to battery powered products. Through the • development of the POWER FABTM process Cymbet can easily design and implement 'application specific' batteries that provide users with the lightest weight, highest power, best value solutions. These exciting new battery systems are stable and safe, can be made in a nearly infinite variety of form factors and placed on almost any substrate. Cymbet thin-film batteries are being designed into semiconductors, RFID tags, military and aerospace, medical and communications products. New challenges for this unique enabling technology like powering MEMS devices and advancing the state-of-the-art of nano-circuitry continue to emerge. Many other new products will recognize the advantages of this truly remarkable energy source as the Cymbet team strives to advance revolutionary new concepts in batteries. S http://www.cymbet.com/company.php 7/19/02 Cymbet Corporation Page 1 of 2 CYMBET (okPC> A." -ECNNOLOGY PRODUCT SOLUTIONS SEARCH PRESS ROOM 1.7 OUR TEAMLIJ William (Bill)Priesmeyer—CEO Mr. Priesmeyer brings to Cymbet over 30 years of senior financial, product -4- management „management and business operations experience for public, private andWO- international Fortune 200 companies. He was SVP and Chief Financial Officer of Jostens, Inc., a NYSE Company, and has had extensive operations and technology experience as SVP and CFO of Waldorf Corporation, DataCard Corporation, and Onan Corporation. He was Vice President of the Pillsbury Company and had broad executive and product management experience with Xerox Corporation. His deep experience bringing new technology and products to market while maintaining a strong customer and financial performance focus is vital to Cymbet. Mark Jenson—President—Founder `` ` P. Mark Jenson is Founder/ President of Cymbet Corporation and Chief Technical " f",�,. Officer. With more than 20 years of thin film deposition development % � • experience at Honeywell, Mark characterized a new concept for applying thin film deposition techniques to the solid state Lithium battery process. He conceived this novel concept while researching and developing thin film technology at several research centers. His research involved the development of some of the most sophisticated physical vapor deposition techniques ever conceived. Mark holds 3 patents (semiconductor technology) and has 7 patents pending (related to manufacturing technology for energy products). James Sullivan—Vice President of Sales and Marketing Mr. Sullivan has over 30 years in the battery business with Duracell, Power Conversion, and most recently with Ultralife Batteries as a corporate officer. He has successfully launched numerous new battery chemistries and designs into the marketplace. He has developed the Marketing and Sales strategy for Cymbet and is responsible to develop programs with targeted customers to drive product design and generate program revenue. Brian Shiffman—Vice President of Business Development and Secretary Mr. Shiffman brings a wide range of experience in business development, management (including international management), multinational marketing, and sales as well as technical design and development of commercial products. He has spent the last 20+ years evaluating, guiding and participating in the formation and growth of early stage technology companies, served on several boards of directors and has licensed technology both in and out of companies. Dr.Jody Klaassen—Director of Technology • Dr. Klaassen received his B.A. in Physics and Chemistry from Augustana College, Sioux Falls, SD and his Ph.D. in Physical Chemistry from Massachusetts Institute of Technology. Dr. Klaassen performed postdoctoral fellow work for NIST in Boulder, CO followed by a Senior Research Scientist position at SVT Associates in Minnesota where he developed Group III Nitride http://www.cymbet.com/team.php 7/19/02 Cymbet Corporation Page 2 of 2 materials. He has published 29 papers. Dr. Klaassen is developing processes • and products for strategic partners, customers and select Cymbet Inc. products. In addition, Dr. Klaassen has oversight of government programs acquisition, development, and performance. Mark Wallace—Director of Manufacturing Technology Mr Wallace holds several advanced degrees with his latest being a Master of Business. Mark was formerly with Tescom where he was responsible for new product development as well as manufacturing engineering. Prior to that Mark worked for Honeywell in manufacturing and engineering in several capacities including Failure Analysis and Quality. Mark has additionally been charged with achieving ISO certification and Six Sigma quality at Cymbet. Jeff Sather—Director of Product Developement Mr. Sather received his Bachelor of Science, Electrical Engineering from the University of Minnesota. He has more than a decade of experience in integrated circuit processing. Jeff leads the product development effort for Cymbet. Mr. Sather's experience encompasses developing, designing, integrating, and troubleshooting both Bipolar and CMOS semiconductor processes for Honeywell. He also managed the test development for a major DOD memory program at Honeywell. His strong technical background and additional experience in design make him ideally suited for product development. IO ) a • • http://www.cymbet.com/team.php 7/19/02 Cymbet Corporation Page 1 of 2 ,.#51, 411 i' "V'NIIBE` " ., CORPORATION ROME -Ei1140. ,r,, PRODUCT SOLUTIONS SEARCH PRESS ROOM OUR PRODUCTS PRODUCT NISHJ&HTS PRODUCT SPECIFICATIONS ONIMMIM APPLICATION NOTES ' I INVESTORS&PARTNERSHIPS W ✓tr X Cymbet is a development stage company supported by its world-class network �t¢" of financial and business partners. Started with angel funding in 2000, Cymbet ", is now supported by two strategic venture investors with extensive expertise in material science, solid state electronics and nanotechnology. In addition, critical technology and cooperative partners are critical to the future development of Cymbet. +I; ► 1111,11 Investors w NEM • Millennium Materials Fund - A unique focus on advanced materials and ► bio-materials. Click on the logo for a link to the Millennium site. tlfl l l \ \ll NI -IP .• ' • Helmet Capital - Supporting growth partners with expertise and capital. '`" Click on the logo for a link to Helmet Capital ,HNE L M E h ,,,,, Partners • Department of Energy - Oak Ridge National Laboratory Thin film energy cell technology was developed over a span of 15 years by the U.S. Department of Energy effort at Oak Ridge National Laboratory (ORNL). This fundamental scientific work is the starting point for the development of the patented Cymbet POWER FABTM technology, a high volume and cost effective thin film energy cell manufacturing technology. For a discussion of the ONRL technology and the associated patents licensed by Cymbet, use the following link: OAK RIDGE NATIONAL LABORATORY • Medtronic Inc. - Cymbet and Medtronic Inc announced a technology sharing agreement. Medtronic Inc is the world's leading medical technology company, providing lifelong solutions for people with chronic disease. Use the following link http://www.medtronic.com ll Customers Cymbet is currently designing applications for future customer products in the semiconductor, medical, nanotechnology, wireless, computer and military applications. The Cymbet goal is to provide our customers with enabling http://www.cymbet.com/investors.php 7/19/02 Cymbet Corporation Page 2 of 2 • technology with superior operating performance and competitive product advantage. Future Partners Cymbet is interested in hearing from future partners where thin film energy is of strategic interest. See our contact information. top a • 411 http://www.cymbet.com/investors.php 7/19/02 Cymbet Corporation Page 1 of 1 a , • u ;," - • c0RPORArioN HUM' TECHNOLOGY PRODUCT SOLUTIONS SEARCIi PRESS ROOM CORPORATE PRESS RELEASE o CYMBET Closes Series A. Round ��. ce of CYMBET CORPORATION Elk River Mn. 05/07/01 - Victor Weiss, Chairman tri •> W (originally incorporated under the name of Integrated Power Solutions Inc.) announced receipt of a $4.5 million private placement of equity securities from two overseas venture capital investment groups, one international group of individual investors and one from Israel. r For the rest of the release, click d"LdiF?.Y:� Medtronic Inc.and CYMBET Corporation Enter Exclusivity Arrangement Elk River Mn. 10/16/01 - CYMBET CORPORATION (formerly Integrated Power ► Solutions Inc.) announced completion of an agreement with Medtronic Inc. Ada whereby CYMBET will grant Medtronic a 2-year exclusive right to evaluate Cymbet's thin-film battery technology for implantable devices in return for ► testing and other non-disclosed contributions from Medtronic. ZoFw CYMBET Corporation was co founded by Mark Jenson and Genesis Business Centers (Harlan Jacobs, President) as a development stage company to implement a patent pending low cost manufacturing process for an advanced solid state lithium ion rechargeable battery. The battery chemistry was developed over a 12 year period at Oak Ridge National Laboratories and has significant advantages over the best rechargeable batteries in the market. An important characteristic of the CYMBET battery is its true solid state construction that results in an extremely large number of recharge cycles (70,000) with minimal loss of capacity. The manufacturing technology allows batteries to be incorporated on a wide variety of substrates and in a large range of sizes and form factors. Medtronic Inc., headquartered in Minneapolis, is the world's leading medical technology company, providing lifelong solutions for people with chronic disease. • http://www.cymbet.com/corp_release.php 7/19/02 Feature Article-Seeding the Prairie-Minnesota Technology Magazine Online, Summer 2002 Page 1 of 6 yy p e�E e. MAGAZINE INSIDE TECHNOLOGY AND MANUFACTURING EIUSINESe A.r U LIC riON OF MINNESOTA TECHNOLOGY,INC liArmitakhirko. SUMMER 2002 FEATURE Seeding the Prairie Building a high-tech economy requires investments in infrastructure, but that's not all. Minnesota cities are finding that they also need cooperation, education, and the right culture to help tech businesses grow and prosper. By: Mary Lahr Schier Contributing Writer, Minnesota Technology magazine Whenever Steve Boland talks about high-tech business development, he starts with the local barbershop. Sure, your barber will never give a virtual haircut. Customers still need to plop down in the chair, but that doesn't mean the barber couldn't use technology to make appointments, get the word out to customers about specials, or reach out to new markets. Boland, who owns Decipher IT, a St. Paul-based "technology translation" business, has been working with several Minnesota cities to help them learn what they need to do to attract high-tech businesses, and with individual companies to help them figure out how to leverage investments they've made in technology. • "The ability to expand the marketplace beyond those who are geographically next to you has changed the ballgame," says Boland. That and growth in the technology sector have inspired many communities to seek ways to encourage the growth of high-tech companies. Despite significant declines in military-related employment, high-tech employment increased 22 percent in Minnesota between 1990 and 2000, compared to 13 percent growth nationally, according to the state Department of Trade and Economic Development. In addition, workers in high-tech jobs-those involving computers, telecommunications, medical and other scientific devices, chemical processing, and military equipment-added between 14 and 140 percent more value per hour worked. So, what does it take to make a city a high-tech haven? Connectivity may be the answer-both the kind you get from wires and cables, and the kind cities develop by forging connections in their business community. But it also takes luck, the right environment, and a dose of specialized help for high-tech firms. Collaboration In January 2000, Best Buy Corp., one of Eden Prairie's largest employers, announced it was moving its headquarters down the road to Richfield. It was a shock to Eden Prairie, a community that prided itself on being a go-go town with prestigious residential developments, great schools, and a thriving business sector bounded by 1-494, County Rd. 18, and the Crosstown Highway. • The Best Buy move sparked a lot of talk in the city about economic development. About six months after the announcement, a group began forming to consider how to ensure Eden Prairie's future as a safe haven for high technology. It included several big names in Minnesota tech circles: William Cadogan, now retired CEO of ADC Telecommunications was http://www.minnesotatechnology.org/publications/magazine/2002/Summer/feature_seeding.a:... 8/16/02 Feature Article-Seeding the Prairie-Minnesota Technology Magazine Online, Summer 2002 Page 2 of 6 involved, as was Tom Kieffer, CEO of Agiliti Inc.; Joe Stoebner, CEO of AVI Systems; Jim Smiley, recently retired CEO at U S West's operations in • Minnesota and South Dakota (and now a partner at Mason Smiley Larson, Ltd., a St. Paul-based public relations firm); and Scott Thiss, CEO of S&W Plastics, a high-tech manufacturer based in Eden Prairie. "There were a lot of high-tech businesses in Eden Prairie, yet no one really knew why," says Nick Eian, CEO of Endurant Business Systems, an Eden Prairie-based consulting firm. Eian also joined the group of business owners, and now serves as president of its brainchild, a cooperative venture called Habitat for Technology. The premise of the organization is simple: Pull together all of the players in Eden Prairie to encourage the development and growth of high-tech companies. Partners include the city, the Eden Prairie School District, Hennepin Technical College, the Eden Prairie Chamber of Commerce, and a number of local businesses. As one of its first initiatives, Habitat for Technology has set up an intern program to place high school and technical school students and teachers in area businesses. The internships are designed to nurture young talent and to connect local schools with the business community. In addition to the intern program, Habitat is creating a database of the city's more than 2,200 businesses, about half of which are small companies or startups with one to four employees, many of them in high-tech fields. It also is developing a marketing program to sell Eden Prairie to potential business owners. "One of the things we did was ask people why they had come here," says Eian. "The top reason was the schools. Second, it's a good place to live-you'll find that many of the CEOs of companies based here also live here. Finally, we found there was a high percentage of people connected to • the Internet at high speeds, yet we are still under the capacity [for high-speed connectivity] that we have in the city." Building on the city's potential connectivity is a significant goal for Habitat, Eian says. With that in mind, the organization recently unveiled a Web portal for Eden Prairie companies. "There are two ways to do economic development," says Don Uram, the City of Eden Prairie's director of economic development and financial services. "You can go out and recruit new businesses, which is extremely difficult. The other way is to make existing businesses as healthy as possible. The plan behind the Web portal is to get people to do business with each other." Habitat for Technology has encouraged a new spirit of cooperation in the city. According to Uram, the the organization's high-profile membership also is making it easier to convince entrepreneurs that Eden Prairie is a good place to do business. "I could sit at my desk all day trying to find companies to come here, but Nick,just by being in the business community, has many more contacts," he says. Building the economy, one business at a time For Mark Jenson, CEO of Cymbet, a high-tech startup based in Elk River, the presence of a tech incubator in the city made"the difference between my company being here and not being here. I'm a technical guy and I did not have a clue about how to get my company going." Fortunately, Jenson, an electrical engineer by training, noticed the Elk River incubator during his daily commute to Honeywell in Minneapolis from his home in Princeton. He approached the city with an idea for a new company. • Elk River's economic development agency started the incubator in 1997, with the idea of nurturing small technology firms. The program provides companies with space at a substantial http://www.minnesotatechnology.org/publications/magazine/2002/Summer/feature_seeding.at... 8/16/02 Feature Article-Seeding the Prairie-Minnesota Technology Magazine Online, Summer 2002 Page 3 of 6 discount, and rent may be paid with a mix of Seeing the Light cash and stock. Incubator companies also get Redwood Falls takes • access to equity capital through several area high-speed Net access funds, including the Anoka/Sherburne Capital into its own hands. Fund, the Elk River Investment Club, and the Central Minnesota Initiative Fund. Most Redwood Falls City importantly to Jenson, however, the incubator Administrator Jeff Weldon gives access to mentoring assistance from could see it coming. Despite Harlan Jacobs, owner of Genesis Business the solid economy of this Centers, a Columbia Heights firm that helps county-seat community of n serious Redwood Falls was high-tech start-ups gain access to capital. "iSays Jenson: "He helped me figure out how e danger of p g becoming road-kill on the to organize my company, both legally and information super highway," administratively." says Weldon,who also is director of the city's Port Cymbet received $350,000 initially from local Authority. investors to develop Jenson's idea-a thin-film, solid state battery with a nearly infinite About three years ago, number of recharge cycles. Jenson used Weldon and other city battery chemistry developed at Oak Ridge officials participated in a Business Expansion Laboratories in California to create program on Retention and Expansion the process, which has potential applications offered by the University of for such products as hearing aids and cellular Minnesota.As part of the phones. In 2001, the company received $4.5 program,extensive million in venture capital from Israeli and interviews were conducted Finnish investment groups, which allowed it to with more than 70 members develop a manufacturing process for the of the business community. batteries. Cymbet also moved out of the "That's where we got teed incubator into a larger space in Elk River. The up on this issue,"says next stage, says Jenson, is to attract about Weldon. • $10 million in private funding to begin The city's elected officials manufacturing. The company hopes to knew Redwood Falls would complete most of that placement by the end not be competitive in the of this year, he says. future unless residents and businesses had high-speed Elk River's incubator, which costs the city access to the Internet. First, about$50,000 a year to operate, provides the city tried to convince its startup companies with the right sets of tools, in telephone provider to bring says Jacobs. Nonetheless, he also cautions in thelcableing necessary,webut Y its pleadings went that city leaders sometimes think all they unheeded.Then Weldon need to provide is a space for companies and and the town's council a phone line. "That is a small part of the started looking at the cost of recipe for success," he notes. "What these the city wiring itself and start-ups need first is access to seed capital operating a municipal and a mentoring program. And for high-tech telecommunications startups, they need to be the right kind of company."We knew that mentors." some cities had done this successfully, but that some had not,"says Weldon. But High-tech companies also need individuals before those discussions with experience in cutting-edge technologies concluded, a council and new companies. The seed capital should member learned that New be private, says Jacobs, because nearly all of Ulm Telecom Inc., a regional an early-stage tech company's costs are phone company based in "soft," such as expenses for patent attorneys New Ulm,was doing and trade shows. "Sometimes these overbuilds in some of its companies need a couple of million dollars to communities.After a year of roll the dice on an idea," he adds. "You can't talking; Redwood Falls struck a deal. do that with state money, but you can do it with money from wealthy individuals and The overbuild,which will be private sources." completed this summer, involves a combination of http://www.minnesotatechnology.org/public ations/magazine/2002/Summer/feature_s eeding.a:... 8/16/02 Feature Article-Seeding the Prairie-Minnesota Technology Magazine Online, Summer 2002 Page 4 of 6 Elk River understands that not every fiber optic cable and copper company in its incubator will become a major cable that will give every • employer in the city, or even exist a few years home and business in from now, says Catherine Mehelich, the city's Redwood Falls a high-speed director of economic development. But the line. New Ulm Telecom's hope is that if the companies are screened investment-an estimated$6 well, at least some will become major million-was essential to keep employers and taxpayers. So far, only eight Redwood Falls competitive companies have qualified for the incubator in the future,according to and not all of them are around today. Says WeldehBusinesses neededdWeldon. Businesses kind of service, Mehelich: "I figure if we get one out of 10, although some of them didn't that's good odds." realize how much they needed it,"he adds. Other communities around the state have approached Jacobs for help. "My prediction is To help business owners that in a few years you'll have a half-dozen or understand the potential so communities with seed funds and value of connectivity,the city incubators and the potential to develop high- and the Redwood Area tech businesses," he says. Development Commission provided assessments for many companies in town. Help at hand for high-tech The city's major employers In Dakota County, the focus has been on include a local hospital; nurturing the technology use of all Schutt Homes,a businesses. "Many businesses invested in the manufactured housing Internet on blind faith, and [now]want to know provider; Central Bi- more about how to use it," says Steven Haas, Products, a rending plant; chair of the Dakota County Economic and computer chip manufDevelopment Partnership's Technology Technology. DuArtringn Committee, and a business consultant with Technology. ,During the assessments,we found • Minneapolis-based Enterprise Development ways that nearly every Inc. company could work better or work smarter,"says To wit, a March conference on Internet Weldon. For instance, a marketing drew more than 100 people. local bank with 14 branches "There's a big hunger for information out would benefit greatly from there," says Boland of Decipher IT,who high-speed electronic data conducted the program. "People want to transfer. explore these ideas outside of a sales One business owner who did situation." not need convincing was Jean Lepper,who owns a One of the attendees at the seminar was quilting shop in Redwood Brian Anderson, president and owner of Falls and a sister store in Anderson Air Cargo, an Eagan transportation Hutchinson.The Main Street brokerage.Anderson formed his company in Cotton Shop is a mecca for 1990 to help firms ship product by air. quilters all over the country. Sometime in the late 1990s, "we became The store, named one of the top 10 quilt shops in America basically an Internet company,"says in 1995, is noted for carrying Anderson, whose business handles the popular Thimbleberries shipments worldwide by air, truck, or sea. The designs of Lynette Jensen, a firm now manages 68 percent of its orders Hutchinson resident and electronically, a process that has allowed it to long-time friend of Lepper. cut three steps out of 26 from the typical Lepper's two shops carry shipment process. Its computers even more than 3,000 bolts of connect directly to the intranet of its largest fabric and routinely attract client, a Fortune 100 firm in Minneapolis. busloads of avid quitters. Anderson Air Cargo operates with about half "I could not survive on a the number of employees it would need bricks-and-mortar store, • without the Internet, says Anderson. even with all the local trade we do,"says Lepper,who Despite his Net savvy, Anderson felt could has specialized in quilting get more out of the technology. "What we had fabric, notions, and books for http://www.minnesotatechno logy.org/public ations/magazine/2002/Summer/feature_s eeding.a:... 8/16/02 Feature Article-Seeding the Prairie-Minnesota Technology Magazine Online, Summer 2002 Page 5 of 6 not done very well was get the Internet to 13 years. Several years ago, drive business to us," he explains. As a result she started a catalog of the conference, the company is business,and this summer redesigning its Web site to increase its the Main Street Cotton Shop marketing orientation and also is developing a will go live with its e- program to e-mail advertising notices to commerce site. people who say they want to receive them. "The idea is to get interested people to Lepper applauds the city's forward the information on to other interested efforts to bring high-speed parties," says Anderson. "It's a lot better waycoulds to town, but says, "I Y couldn't wait. I ended up to market than just blasting 1,000 names with getting a wireless information." connection."The wireless connection is offered The Dakota County committee also is through Redwood County developing a proposal for a technology Telephone Co.,a private incubator, working with local technical phone company based in Wcolleges to offer classes that meet community dozen communitieso that serves a a business needs, and working with local donaroundRedwood in d government and business to ensure the donut Redwood Falls. It also offers fiber optic county's technology infrastructure can support and wireless high-speed business growth. connections. "There is a growing sophistication in the The commitment to helping development community," says JoAnne businesses stay current on Johnson, a senior regulatory analyst for technology is essential for Burnsville-based Frontier smaller communities."In Telecommunications. "They know that high- rural Minnesota,isolated,"you can speed Internet access has risen right upon become very ity says g Lepper. "The city has a the development checklist for many vision that that's not going to • companies. The old days of just listing electric happen here." and phone companies on the development profile doesn't cut it anymore." -Mary Lahr Schier With backing from the Dakota County Technology Committee, Johnson has presented seminars for community leaders on how to use telecommunications services to improve community development. Many cities in Minnesota have been aggressive about demanding high-speed services, says Johnson, and "community groups have accelerated the timeline for these connections." Most observers agree, however, that connections alone do not make a high- tech economy. Rochester, for example, has adabout 30 new tech companies emerge in the city in the past few years, according to Gary Smith, director of Rochester Area Economic Development Inc. The city does have"just about anything you need for connectivity,"says Smith, but it is its highly educated labor pool that has driven growth. Many of the new businesses have been started by former employees of IBM or Mayo Clinic. "We're fortunate in that the fruit trees we have are those with low-hanging fruit,"says Smith, whose organization offers assistance to startup companies. "When it falls off,we can pick it up and do something with it." Mary Lahr Schier is a Northfield-based freelance writer. Top of p to Mai I rtic Page Page antic e • http://www.minnesotatechnology.org/publications/magazine/2002/Summer/feature_seeding.a;... 8/16/02 0 j fkIP �� ,�'14/0 41t, ,�rill I (;),4,1 I I TI I ii OINSIN oda Hi • 0 oH.I0� CI rilliV , willUMIX i 1d / ` `, ow H rim IPI�' �� 1 S'�► \M ��J• A I I'BT, IANE NW lip 186TH A -p.,. ,CE � 1 ,r 86 INNbill _.. © mGUARD AN \ / MI w 1ONIVICIIIIII ///. 0).�. HIGHWAY N0. 52 NTRY ,� BUSIN CEN DRIVE CO CO r"--- COUNTY SITF, /1 BUSINESS CENTER DRIVE 3 F G COURT 17 ACRES APPROX CROS USINEss w CR0 • ELK PACE TER HOUSE OUTLOT A CENTS R Ess SECOND ADDITION z BUS'S 183RD AVENUE 1 t\ o ORONO 4,/y��p IV ,7��,,,_ J Z ^V L1,, W TOWNHOMES CROSSI14 ✓✓,i PAR [� THIRD ADD. TOWNHOME y, Lal f� w SEGO r`'j. /�w 0 11121 diii IN` Wil 2312 NW • I182_�A_E. NW) \�mg Ma� - 151 �� Ai/ARVIN III z. w — NEMA wa le a IURSE —R En,MIN C'UNTRY i- elm G�i�L LL, VER�IE GH7 r�: ;OTH PVE`N 180 1, . � R# W HES �M .' in , ••. s2� W , R 'V W ic. r s:INc z M w f SFT 1- --' -Z . ., c� U W 180 r IR E a ii \� N W� ADDS Ir S w � �, ' \� .Lu I ..J -Q I l- 3RD 1 ED. H 9Ac • 1, Location Map t-441 N River Case Number: PROPOSED SITE-GAGNE PROPERTY CYMBET CORP EXPANSION' II/ III. FINANCIAL PACKAGE • City Tax Rebate Financing Assistance (TRF) up to $225,000 or 10 years;whichever is earlier (subject to and contingent upon minimum building and land value of$2,800,000). • County Tax Rebate Financing Assistance (TRF) up to $225,000 or 10 years;whichever is earlier (subject to and contingent upon minimum building and land value of$2,800,000). Tax Rebate Financing assistance, or Tax Abatement,is provided on a "pay-as-you-go" basis,in which the property owner (Equity Management, Inc.) pays improvement costs upfront, and is then reimbursed annually with 100% of abatement proceeds upon receipt of annual real estate taxes by the participating governmental entities (possibly the City, County, and School District). See TRF Projection Worksheet—Exhibit E There may be additional funding opportunities available to Cymbet through the MN Department of Trade&Economic Development by means of the MN Investment Fund—Exhibit F Financing Requirements: • Equity Management to purchase property up front from landowner and plat property in accordance with City requirements. • Minimum of 20% cash equity investment by Equity Management in the construction • project. • Equity Management's completion of a minimum 60,000 square foot light manufacturing facility in accordance with Business Park District Ordinance and other City requirements. • Cymbet to occupy a minimum of 50,000 square feet of building with a minimum 3-year lease agreement. Cymbet provides to Equity Management$250,000 for initial building improvement, due upon execution of lease agreement. Equity Management to provide Cymbet a lease guarantee not to exceed$4.50/sf annual net rate on the total 50,000 square feet for 5-years. • Up to 10,000 square feet of building reserved for tenants of the City of Elk River Business Incubator Program, for 5-years plus option to extend for an additional 5-years - Exhibit K. • Equity Management's completion of City and County Tax Rebate Financing Applications &payment of applicable fees—Exhibit G. • Proposal is subject to Final Approval by the Elk River Economic Development Authority, Elk River City Council, Sherburne County Economic Development Affiance (SCEDA), and Sherburne County Board of Commissioners upon proposal acceptance. Cymbet Corporation/Equity Management,Inc. City of Elk River Expansion Siting Proposal Page 4 August 2002 CITY OF ELK RIVER • TAX REBATE FINANCING PROJECTION WORKSHEET Project Name: Cymbet Corporation Expansion/Equity Management. Inc. TRF Project: 60,000-sq.ft. light manufacturing facility,located on 7-acres Assumption: Projection is based on estimated payable 2002 tax rates and estimated project market value. The Project will be assessed upon actual tax rates and market value in the year following construction. Per the Siting Proposal timetable,the first TRF payment to Equity Managment would be available in year 2005. YEAR 2002 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 ESTIMATE State Portion 0.56 Pay 2002 NOT TAX ABATEMENT �INPGT Land Value $ 396,396.00 $1.30/sf for 7 Acres • Building Value $ 2,400,000.00 $40/sf for 60,000-sqft Total Market Value $ 2,796,396.00 Years of TRF Project 10 Property's Total Tax Capacity $ 55,177.92 Property Tax Breakdown Annual Estimate Total TRF (10yrs) City Portion $ 24,057.57 $ 240,575.73 County Portion $ 26,252.00 $ 262,519.99 School District Portion $ 25,364.74 separate request State Portion $ 30,899.64 cannot abate Joint City& County Portion $ 50,309.57 $ 503,095.72 Tax Rebate Assistance $450,000 TRF Years City 1/2: $225,000.00 9 County 1/2: $225,000.00 9 *Amount of abatement will vary depending on market value,tax rates, class rates, construction schedule and inflation on MV. Subsidy Requirements of Equity Management: *Construction completion of minimum 60,000sf facility *Minimum 50,000 sf leased to Cymbet(min.3yr) • *Up to 10,000 sf reserved for Elk River Business Incubator Program(up to loyrs) FILE:cymbetTRF.xls 8/14/02 i EXHIBIT K City of Elk River Business Incubator Program Concept • 10,000 sqft (part of total 60,000 sqft building with Cymbet) • Constructed&owned by Equity Management, Inc. (Linda Norha,President) • TRF Subsidy agreement includes contingency of issuance of Final Certificate of Occupancy from the Building Department and Certificate of Completion from the Planning Department for the completion and reservation of 10,000 sqft for incubator program for minimum of 5-years,with option to extend another 5-years at negotiated rate. • Ownership: Equity Management Landlord/Maintenance: Rivers Crossing, Gary Santwire • Incubator Tenant Gross Rent: $5.00/sf annual rate • No leasing commitments by the EDA. • Genesis Business Centers to continue to provide technical assistance to tenants,recruit and complete due diligence on incubator prospects for consideration by the Incubator Advisory Committee and EDA. • Initial Leasehold Improvements: based upon EDA approved building layout and finish specifications (ie. shared conference room,restrooms as required by building code, dividing walls) EDA to pay amount not to exceed$95,000 upfront with MN Investment Fund dollars from Tescom loan • Any leasehold improvements beyond EDA's initial contribution will be at tenant cost. • Cymbet Corporation/Equity Management,Inc. City of Elk River Expansion Siting Proposal Page 17 August 2002 Elk River Business Incubator Finance Summary & Projections 1-Aug-02 A B C D E F G Year End Loan Fund SF Loan Teseonl Assets Less Rent Incubator incubator Dollars Loan Fund Incubator Rate Expenses Revenues Transfered Assets Expenses 1997 $ 89,502 1.50/sf Actual 13186sf 1998 $ 28,633 1.50/sf Actual 13186sf 1999 $ 34,325 $ 10,124 $ 28,633 $ 67,370 n/a* 1.65/sf Actual 13186sf 2000 $ 33,606 $ 13,567 $ - $ 79,794 $ 79,794 1.65/sf Actual 13186sf 2001 $ 26,616 $ 4,998 $ 21,618 $ 115,927 $ 94,309 1.85/sf Actual 7522sf 2002 $ 25,200 $ 7,000 $ 18,200 $ 126,550 $ 108,350 1.85/sf Budget 7522sf 2003 $ 34,900 $ 12,000 $ 22,900 $ 140,591 $ 117,691 2.71/sf Estimate 7522sf 2004 $ 35,000 $ 12,000 $ 23,000 $ 131,125 $ 108,125 3.00/sf Estimate 7522sf 2005 $ 36,000 $ 12,000 $ 24,000 $ 108,125 $ 84,125 3.00/sf Estimate 7522sf 2006 $ 37,000 $ 12,000 $ 25,000 $ 84,125 $ 59,125 3.00/sf Estimate 7522sf 2007 $ 38,000 $ 12,000 $ 26,000 $ 59,125 $ 33,125 3.00/sf Estimate 7522sf 2008 $ 39,000 $ 12,000 $ 27,000 $ 33,125 $ 6,125 3.00/sf Estimate 7522sf 2009 $ 40,000 $ 12,000 $ 28,000 $ 6,125 $ (21,875) 3.00/sf Estimate 7522sf 2010 $ 41,000 $ 12,000 $ 29,000 $ (21,875) $ (50,875) 3.00/sf Estimate 7522sf • *Transfer for incubator expenses from loan fund already accounted for in column F -Tescom loan payments included in column E until April of 2004 when loan is paid off. -Column B represents improvements,rent,&consulting services. File: s/ EDA/busnsinc/03incubsum.xls •