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5.0. 5.0.a. 6.0. 7.0. EDSR 04-12-1999 ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY • MEMORANDUM TO: Economic Development Authority FROM: Paul Steinman, Director of Economic Development DATE: April 8, 1999 SUBJECT: Agenda Memo for April 12, 1999 Meeting 5. Brown/Kirkeide Land Purchase Issue At a meeting several months ago, the EDA authorized staff to begin negotiations with LeRoy and Ruth Brown for the purchase of their ilproperty in east Elk River. The city has been using Bud Storm to take care of various rights-of-way acquisition negotiations for the entire East Elk River project, therefore,Mr. Storm has also been spearheading negotiations with the Brown's for the EDA. The purpose of this issueis to gain a consensus of the EDA to move forward to execution of a formal purchase agreement for the Brown's property. Pat Klaers has been the primary staff person dealing with this issue. He will be present at the EDA meeting to add to the discussion. Background Discussion of purchase of the Brown's property began when it was concluded that the new Tyler Street extension would be built through the current location of their home site. It was also determined that a portion of the Brown's property would be needed for surface water management as a result of the eastern utility project. The entire Brown property equals approximately 102 acres. The Brown's will be retaining approximately 12 acres leaving 90 acres for purchase. Of this 90 acres, approximately 40 is developable. The current price • range for the purchase of this 90 acres, including the house, is 13065 Orono Parkway • P. 0. Box490 • Elk River,MN 55330-1743• (612) 441-7420 • Fax (612) 441-7425 Equal Opportunity Housing and Equal Opportunity Employment Economic Development Agenda Memo April 8, 1999 Page 2 • approximately 1.3 million dollars. Of this amount, the federal dollars assigned for this road project will provide approximately$655,000 to the Brown's. The remainder would be the responsibility of the EDA. This breakdown is as follows: • 1.3 million dollars - purchase price • Minus $655,000 - federal government funds • Total remaining equals $475,000- EDA Bud Storm has been instructed to negotiate with the Brown's that the, $475,000 be provided on a contract for deed with the EDA over a minimum term of 10 years. The interest rate on this contract for deed is currently under negotiation. The federal funds assigned to this right-of-way acquisition include the purchase of the Brown's house, since the house lies within the right-of- way of Tyler Street. These federal funds will be provided to the Brown's at the time of closing on this transaction - approximately May/June, 1999. The importance of the remainder being financed on a contract for deed is that the natural funding source for this purchase is TIF District No. 19. It appears from initial cash flow projections that • if the remaining $475,000 purchase price is on a 10 year term, that this will be similar to the tax increment stream which can then be used to make payment on this contract for deed. Staff supports using development fund dollars to pay off the assessment (approximately $250,000) against the Brown property once it is purchased. This helps cash flow the entire utility project. This proposal will include using Tax Increment from District No. 19 to reimburse the development fund for these costs. The schedule for utility construction indicates that the Brown home will need to be vacated and demolished or moved off the site by approximately July 15, 1999. This suggests that the entire Brown purchase will likely come back to the EDA for final approval at its meeting on May 10, 1999. Attached to this memo is a map of the Brown land which will aid in our discussion of this issue. The Kirkeide property lies entirely within the Brown property, but outside the right-of-way of Tyler Street. The Kirkeide property is approximately 2.5 acres, and includes a house and several out buildings. Bud Storm has indicated the Kirkeide purchase may be approximately$200,000. This purchase would occur at the same time. Economic Development Agenda Memo April 8, 1999 Page 3 • as that of the Brown property. The EDA's proposed funding source would be the development fund. The development fund would then be reimbursed over time from Tax Increment District No. 19. 5a. TIF 19 Staff and City Attorney Peter Beck are continuing to negotiate the details of the redevelopment agreement with Associated Developers for redevelopment of the former Hohlen Mobile Home Park and construction of the East Business Park. Staff has spent a great deal of time over the past couple of months working with Springsted to develop cash flow projections with which all involved parties appear to now be comfortable. These cash flow projections are driving the development agreement, because they show how much tax increment may be available to pay the developer incentive after other priority obligations have been paid, such as our annual debt service on general obligation bonds. The cash flow also projects how much may be available to be spent outside the boundaries of TIF District No. 19 for the purchase of the Brown and Kirkeide properties. 411 A deal with potential major users of the commercial development has not yet been completed. Associated Developers is continuing to work with these potential tenants to gain their commitment to build a project on this site. Staff and the developers are continuing to work on the development agreement and other issues fully expecting that a deal with a commercial tenant will be signed. However, until such a deal is signed there is no "project" to produce the anticipated tax increment. Tony Gleekel, Associated Developers,has indicated he is in ongoing discussions with at least one potential major tenant for their commitment to the project. 6. Post Office Relocation Attached to this memo are two letters dated March 26 and March 31 from the United States Postal Service regarding their site search for a new postal facility. These letters indicate the following: • All sites rejected from further review with the exception of that which is located at the northeast corner of the intersection of County Highway 12 and 13 (Mulvaney • property). Economic Development Agenda Memo April 8, 1999 Page 4 III • Letter formally releasing the EDA from any further obligation to sell the West Business Park property as indicated in our Offer to Sell Property. It is unclear at this time whether the postal service is considering the Mulvaney property for a complete Carrier Annex facility, including retail, or whether there is still discussion of keeping a retail presence in the Central Business District. Staff has been discussing a number of opportunities for sites nearby their current location which may possibly work for both the Carrier Annex and retail portions of their operation. They have eliminated these sites due to size, location, soil issues, and environmental concerns. Staff suggests that the EDA reaffirm its position with the postal service regarding its desire to see a retail facility maintained in its current location or another location within the Central Business District. 7. Mark Rothfork Micro Loan Request Issue Mark Rothfork, Ultra Image Powder Coating, has requested a micro • loan in the amount $65,000 to complete the construction of an approximately 13,000 square foot building in the McChesney Industrial Park. Terms requested on this loan include 5 percent interest over a 20 year period with a 5 year balloon. Background Ultra Image Powder Coating is currently located in the McChesney Industrial Park in a building owned by Mark Rothfork. The building is shared by several other industrial users. Ultra Image desires to expand in its existing building, but is unable to do so without relocating one or two of the other current tenants. Out of this issue arose Mark Rothfork's desire to construct a new building to which his existing tenant(s) would then move. This would allow Ultra Image to expand in its current location. This 13,000 square foot building would house several industrial tenants creating an estimated number of new jobs in the amount of 6. The expansion of Ultra Image Powder Coating would potentially increase that business's job growth by 3 new employees. • Economic Development Agenda Memo April 8, 1999 Page 5 The EDA Finance Committee met on Wednesday, April 7,1999, at 4:00 p.m.to hear a presentation from Mark Rothfork and to discuss his loan application. As a reminder, the EDA Finance Committee consists of the following individuals: • Jeff Gongoll • Tom Bender • Lloyd Brutlag • Jim Simpson • Tom McNair • Dan Tveite • Cliff Lundberg There were three primary issues noted by the Committee at that time, including: • The EDA's dollars would be at 93 percent of loan to value • The $65,000 request is above the maximum as stated in the guidelines of$50,000 • The interest rate requested at 5 percent is lower than any other micro loans which have been completed to date There are several issues pointed out by staff that influence this loan request, including: • There is no tax increment being requested for this project • Industrial/Manufacturing projects are indicated as a high priority for use of the micro loan fund • Staff believes the project will not proceed without the use of the EDA micro loan fund Earlier discussion with Mark Rothfork had indicated his desire to apply for a $35,000 tax increment grant, in addition to a $50,000 micro loan. Staff discussed this issue at length with Mr. Rothfork and opened the door for a loan possibly exceeding the maximum amount of $50,000,as a trade off for not requesting tax increment for the project. The Finance Committee discussed specifically the requestfor a 5 percent interest rate on this loan. An overview of past EDA micro loans shows the following: • 1 at 9 percent • • 1 at 8.75 percent • 14 at 8.5 percent Economic Development Agenda Memo April 8, 1999 Page 6 • 1 at 8 percent • 1 at 6.5 percent • 3 at 6 percent Due to this summary, the Finance Committee reached consensus that the recommended interest rate on this loan should be prime rate- currently 7.75 percent. Staff had discussions with Mark Rothfork regarding this issue after the meeting, and he expressed significant concern regarding a higher interest rate. He indicated a 7.75 percent interest rate would raise his monthly payment to the EDA by approximately $105. He stated he is becoming less comfortable with proceeding on this project, in part, due to the recommended interest rate of 7.75 percent. He suggested an interest rate of 6.5 percent may be acceptable. Staff discussed this issue verbally with several Finance Committee members, and a consensus was reaffirmed that the interest rate on this loan be no lower than 7.75 percent. Finance Committee Recommendation Unanimous approval by the Finance Committee to recommend that the EDA provide a $65,000 micro loan to Mark Rothfork at a fixed 40 interest rate 7.75 percent for'a term of 20 years with a balloon payment at the end of year 5. • ECONOMIC DEVELOPMENT MICRO LOAN FUND ELK RIVER, MINNESOTA APPLICATION • APPLICANT /1M-A76. QT c ADDRESS 277gq R/U' L/ . DR. NW. CITYj/f'J/�i/M9A/ STATE] /i/ Z IP CODE 57539 g CONTACT PERSON(S) BUSINESS PHONE ?/„.2--LN —J t?g[, HOME PHONE 6a—,3g7-8/73 AMOUNT REQUESTED TERMS REQUESTED SOCIAL SECURITY NUMBER ED ID #1111111111111111, STATE ID # 1 . Type of Project: VConstruction/New Building Expansion/Existing Building Equipment/Machinery Purchase Remodel/Commercial 111 Retail/Industrial Industrial Inventory Working Capital Other 2 . Describe Project: v;L /3/000 FT STS � 5,D ELO l� . s'✓ ,i4 ‘*-3/4/8Y ) v'L k v uie �lieta.t e"..,�'r- f- Ill, 0/-(pee (g lg953 Yr,e s . /1//Oc- o� 3 . Purpose of Loan: !/ 4:i'lH/ev) r 1?t4 i d 4 r .Sb/O/1 S y1700)//-4," • Ne-ec1 S ,y, i0 77 6OOO Sa l--7-- A>tr-e.\Y--ly 3 o d 0 s4 /*dA), �41 e` k W IvI lag g-e.4,7 dve,2 (/ Z 'I4 772W 27 6 1 Oho b k A-(Std Pzed5 Ad -' /ke-- 6 ro ,a-te-N. , . ' A/s e (N._ lie Q d&Led 1 A /l/d le4411A/J 0a1e 'c IA/Afe ;1 Opp( /-c)A;t; by `fly- Dr /es kW. t.aMIt1j v v l fr ayQ_ (A ctS Puirk,et s 116(d 4 . Cost of Project: 1 0v J v' V"a,e_ si. A) Land $ 5ooc2 B) Buildings (atta h plans & costcosts) 1ile-74/0/ $ 7�J'e .W.4 moth) W ,�'GOf#J C°TDL C) Equipment/Machinery/Fixtures (atta h list and estimated costs) $ III D) Remodeling $ E) Industrial Inventory/Working Capital $ F) Other (attach description) $ TOTAL COSTS $ 5 . Proposed Financing: SOURCE NAME TERMS AMOUNT A) Bank Loan 4 - ./ ((/ $ / 6/610 B) Bank Loan $ C) Other Private Funds $ D) Applicant Contribution $ = i . E) Other $ F) Fed Grant/Loan $ G) State Grant/Loan $ 111 H) This Loan iWgli— "*) -57o . $63j6m. TOTAL FINANCING 1140 $ _Slea -2- fifag:Yom, -- 6 . Collateral to be assigned (Describe and show lienwposition) : A) To Bank: f .G.2� 4;�c.(u�c-rc ri= Ss ' 1 o 2 la,d , 'l erg 1 B) To Bank: 411 C) To Private Funding Source: D) To Other Source: E) To Federal Govt: F) To State: • G) To This Loan: � / ,'�'i ' � /��i� � / '• 7 . Value of Collateral: COST BOOK VALUE EXISTING LIENS A) Land $35ACke. $ $ B) Buildings $ 17/6c; 09. - $ $ C) Mach. & Equip. $ $ $ D) Other $ $ $ E) Other $ $ $ 8 . Employment*: • Present: # of Employees Total Payroll After Project: # of Employees q Total Payroll *If Loan is for Job Retention Only, Explain in Business Plan. 9 . Attorney, Accountant (Names, addresses, phone) : D (1(d /v 8iC/9 'tti 13(/0/ — 7. tY/gt/e./1' S7. E-3q 1 G i /$2004 L yiii/4/72/4/./v. S5L/.25 02- 53b - 751-15 - 10 . Bank and Other Credit References (Names, addresses, phone) : 1-N00 ✓eW.r�o. And . /-'o0-Li3b - 1238 FIRCVN1DAJT- a--,Q0 . 5 XAc%e, AIN. :&- Ai/i4 �I�UO C9C,, , �"NR�lJ ;�I. n 1-go -FY7 -3g8(, 1 /e�ie,�S o6 � �D�s�n�, Tic .770`f/ (/eA1N�;.5 �-/i/►i�� '7900 6/;.z5,da LN. O ('�.Z3(v-3S5 , 8.fvvlle/Z Co. picdAie,A4.v. 55/2 g d2b'et ..SPIale, I )B . of b-- ,e,Wiz_ &zc Illie-e._ VAI Aide -/%tCrz ti/-3 III -3- • 11. Attach and include the following: A) Written Business Plan: 1. Description of Business 2 . Ownership 411 3. Management 4 . Date established 5 . Products/Services 6 . Future Plans B) Financial Statements for past two years C) Financial Projections for two years • D) Resume of Owner/Management E) Personal Financial Statements of proprietor, partners, guarantors F) Letter of commitment from applicant pledging to complete during the proposed project duration G) Letter of commitment from the other sources of financing, stating terms and conditions of their participation in project H) Other I) Other XJ) Fee ( 1% of amount of loan request) • -4- • I/We certify that all information provided in this application is true and correct to the best of my/our knowledge. I/We authorize the City of Elk River and the Finance Committee to check credit references and verify financial and other information. I/We agree to provide any additional information as may be requested by the City and the Finance Committee. C�Q DATEZ` G -1 Applicant Name /� 'lam6,04/ I ra 1 t By By . -5- First • Of Elk River Main Office: 729 Main Street Elk River,MN 55330-1595 612/441-2200 April 1, 1999 Paul T. Steinman Director of Economic Development 13065 Orono Parkway P.O. Box 490 Elk River,MN 55330 Re: CONSTRUCTION OF 13,000 SQ FT BUILDING IN McCHESNEY INDUSTRIAL PARK, TO BE OWNED BY MARK ROTHFORK Dear Paul: Per our phone conversation regarding the above project, this letter will confirm a loan commitment from First National Bank of Elk River. Our loan commitment for Mark Rothfork is as follows: • 4. $400,000.00 bank loan based on 80% advance rate of total project.(20)year amortization, (5)year balloon, to be secured by 1st Real Estate Mortgage a. 6. On or before start of construction, all square footage to be leased with signed, (5)year leases 4 Combination of both buildings Annual Debt Service Coverage to be at 1.25X, or greater. Please feel free to contact me if you have any further questions. Sincerely, Citi ‘„ Jan Hidde-Hooker Vice President (612) 241-3605 • JHH/gmw Branches in:Anoka,Elk River,Hassan,Monticello,and Zimmerman www.lnatbanker.com E Mail>fnber@lnatbanker.com • • • CO 0 O 0 M X ce 1 }}7 Aft _. _. \ 0/11111. .... 11 I , + r❑ • . • • 0. ig 1113 Io 'o\ .• `•� • • gm •Ji, --- � O Oy� / ••.• • �•• ` 7. r .6 T. .0,4> . ()\, . . • . ,,Mk,_,,,__,6,i) ..,.., 0 t .. _.„Th I ,0,_.... \\\,...-6 .. •4 • • • W �•' ° .(.' a.4 ii In MiNiMaa -- ♦. 4.M. • -1 I 4 m<> z is-a...04 z •+ L J m / .• • / • • • / • , ..,...7::::_..__,:,..,,,K)>_,,,..„2_,,,2-___.- ___,„„„.____ _ -- 1 I ■ ilk ID 4,4./47 . II 0 a tzicR5.1., "It r n r- ,„:,' , jy . • iii ...... • i 2 .r `ir •I ` 'T ER TREE ' v . ' • iv�. r� r I P 1 I n i rn 33 1 ii 11111 II 1 .Q� 1412 3 to3Qa NNNO ________J ni Ip O 41, O — a li gi I 5 4 � � o. .a Z v N S co A. L•D § 1>g ii 1II o --I Pn POLK ST. � � dM r 4 .o =,-, �0OM0 m zz C '0 7I0 ›6o rn i NrIll V 2. 5N or om 03 au-•^N,. pews m o Kansas City Facilities Service Office UNTIEDST/STES POSTAL SERVICE • March 31, 1999 FSO101:SGM:ds Re: Elk River, MN 55330-9998 Offer to Sell CITY OF ELK RIVER ATTN PAUL T STEINMAN PO BOX 490 ELK RIVER MN 55330-0490 Dear Mr. Steinman: The United States Postal Service wishes to take this opportunity to thank you for providing us with Offer to Sell Real Property for consideration in our search for a new site for the planned Elk • River, Minnesota postal facility. After careful review and evaluation of all sites and buildings offered we have selected another property. We appreciate your interest in this project. With this letter, you are released from any further obligation to sell your property for postal use. Your original Offer to Sell Property is returned with this letter. Sincere) � , -#17I / TEPHEN G. MUYSKENS REAL ESTATE SPECIALIST 913-831-1855, Ext. 436 Enclosure: As stated • 6800 W 64th Street Suite 100 Overland Park KS 66202-4179 MAR n 1:1 KANSAS CITY FACILITIES SERVICE OFFICE # UNITED STATES • POSTAL SERVICE March 26, 1999 PAUL STEINMAN DIRECTOR OF ECONOMIC DEVELOPMENT PO BOX 490 ELK RIVER MN 55330-0490 Re: Proposed Postal Facility Elk River, MN 55330-9998 Dear Mr. Steinman: In my letter dated December 24, 1998, I advised that the Postal Service planned to advertise for existing buildings and sites that could serve as the new Elk River Post Office or Carrier Annex. Based on the results of the advertisement, the enclosed list of properties was reviewed by our Site Review Committee as possible locations. This list includes properties looked at and rejected for reasons noted. The listing of potential sites is not in any particular order. • In compliance with postal regulations, any member of the community or your office, may offer written comments on any of these properties within the next 30 days. Letters should be directed to Vice President, Facilities, and addressed to my attention at the address shown in this letter. A response will be provided within 15 days. Since ly, /: Stephen G. Muyskens Real Estate Specialist, Sr. cc: Postmaster - NOTICE - Please date stamp and post in public lobby for 30 days, then return to me. District Manager Corporate Relations Enclosure: Map of sites • 6800 W 64TH STREET STE 100 OVERLAND PARK KS 66202-4171 (913)831-1855 FAX: (913)831-4202 • SITES CURRENTLY UNDER REVIEW Site "I" located at the northeast corner of the intersection of County Highways 12 and 13 SITES REJECTED FROM FURTHER REVIEW Site "A" was not chosen due to concerns about access and traffic, possible wetland soils and vegetation, site grades, multiple owners, and lack of site control. Site "B" was not chosen due to its location, price and environmental concerns. Site "C" was not chosen due to its location, lack of infrastructure, and possible wetlands. Site "D" was not chosen due to its location, soils, and fill requirements. Site "E" was not chosen due to its location, soils, and fill requirements. Site "F" was withdrawn from consideration by the leasing representative due to a contract being signed with another developer for the property. • Site "G" was not chosen due to its location and conditions included in the Offer to Sell. Site "H" was not chosen due to lack of infrastructure, possible wetlands, access questions and price. • 5 1\ o\-N 77J1j, h Z 11.1 Q M� `` Q R i Z v W t i.1 �", i Od i� O '< Li- , i i 0 'M•N "15 831/1 i ,A; 0 • ... _ •-S < S3SSAln < S'404 N , < N ,. J� c 2 z - Ta �� 0\°� yy a o,� �I 'M'N 1ST 831A � v ' MN '1S 4 a 31AM('s < 1...4, -7 0 'M•N"LS n 0 4110 _ 31YAO !S 3Nv: .is. -_MN 1S 3NY2 Y l?. 3AV 3N1 v, s v S p�`��;V'' N.1 S A,� L'' o '02! 1,-t- • =9IL.c 'Id Sld'�n . Nbn9nY Nlhq� /MJ z i NNnBnYt MN Oly r l "�'�. 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