7.1. EDSR 11-12-2002 Item 7 . 1 .
• 1,
City of
Elk
River
MEMORANDUM
TO: Economic Development Authority
FROM: Catherine Mehelich, Director of Economic Development '
DATE: November 12, 2002
SUBJECT: Industrial Land Development
Attachment
• Memo from Sid Inman, Ehlers &Associates regarding Industrial Park Options
Background
• The recently updated Strategic Industrial Marketing Plan includes a recommendation that the
EDA consider dedicating city-owned land with utilities for industrial development. An
alternative recommendation was to dedicate one of the current business parks to industrial
development if the landowners are willing to sign a joint marketing agreement.
The reason behind the recommendations made by Duckor&Associates is that the City of
Elk River is at a distinct competitive disadvantage with its business park property because it
does not own the land directly. This has caused the process to take longer because of the
private land pricing and negotiations.
In staff's analysis of competitive communities (Big Lake,Anoka, and Ramsey) the cities have
been successful in siting industrial prospects largely due to the fact that they are able to
move quickly and be in the lead of the siting process. In addition, these communities are in
the process of bringing on additional land for industrial development.
Action Requested
Staff requests the EDA's feedback and direction for staff to explore the following options:
• Alternative strategies for working with private landowners of business park property
• Strategy for the development of the EDA's property located off of Twin Lake Blvd.
The attached memo from the city's financial advisors, Ehlers &Associates briefly
summarizes how either of the above strategies may be approached.
. A work session for further discussion on the issue may be scheduled for the EDA's
December 9th meeting.
S:\EDA\Marketing\Industrial Land\11-12-02.doc
0 EHLERS
• & nssacin —ES C MEMORANDUM
DATE: November 3, 2002
TO: Catherine Mehelich, City of Elk River
FROM: Sid Inman, Ehlers and Associates Inc
RE: Industrial Park Options
Following is a list of topics to consider regarding establishing an industrial park.
The first step is to establish what you want in the park. For example, some cities try to use target
marketing to attracted business that are related to business existing in the city. Other cities select business
by type of use. If your goal is to achieve increased tax base then you will want to set minimum sizes and
maybe market values. If jobs are the goal,you should set the minimum number of jobs and minimum
wages for those jobs. We recommend that you determine the parks goals before you start the process.
As part of the process you need to determine who is the developer? If a private company is the developer,
you avoid some risks for the city but add costs such as profit and returns on invested equity. You also
loose some level of control. If the city develops the park,you reduce the cost but increase the risk to the
• city.
Selecting the developer may also depend on who owns the land and how you can buy it. My landowners
want to sell and would be happy to have the city as the developer. They may also sell the land to the city
on terms, which may result in income tax savings to the seller. If the seller wants a full cash payment you
may want a developer to assume the risk. Some landowners want to make a profit on selling the land and
also earn a development fee.
You then need to develop a financial—risk model. We suggest that you also review what the "Real
Market"is. We suggest you talk to a number of developers to determine what the market is now and
what they believe it to be in the future. They can guide you as to what can be built, at what value and
how fast. They can advise you as to how much the end user will pay for land an improvements.
Another part of the analysis is to determine the park's costs. Cost of the land purchase and public
improvements are normally the major expenses. We suggest you determine the cost of both and be
prepared to apply them to your financial model.
With the information you have gathered,you develop a model that includes all of the financial and timing
factors and measures the risk. If the cost of the project exceeds what the end user can pay then assistance
may be needed. The model can determine what tool (tax increment or tax abatement) is best used to
achieve the needed assistance. You may run dozens of versions of the model until you arrive at a
financial plan that reduces any city risks and can be successful in the market.
I hope this helps with your first steps in the process and look forward to working with you in the future.
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