EDSR MEMORANDUM 05-11-1998 ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY
MEMORANDUM
TO: Economic Development Authority
y-.0 FROM:, Paul T. Steinman, Director of Economic
Development
DATE: May 6, 1998
SUBJECT: Agenda Memo for May 11, 1998,
Meeting
5. Consider Zoning Recommendation to the City Council
At the last EDA meeting, City Planner Steve Ach presented
• information to the Commission regarding BP (business
usine
s park) and
LI (light industrial) zoningcomparisons. Thadiscussion
related to
the issue of rezoning a number of acres along the new eastern
transportation corridor from their current zoning status to either
business park or light industrial. The issue is scheduled to be
considered by the City Council on May 18, 1998. Therefore it is
appropriate for the EDA to provide a recommendation on this issue.
As discussed by Steve Ach, the conceptual layouts which have been
completed for these areas indicate the challenges involved in creating
smaller two acre lots to accommodate the more typical light industrial
users. The conceptual layouts show larger lots of approximately 7 to
15 acres, which are more appropriate for typical business park users.
The size of these lots are determined by the characteristics of the land,
wetlands, ability to construct frontage roads, and access issues onto
the new transportation corridor.
It is important to note that a portion of the property along this
transportation corridor, which is owned by Roger Eull, is already
zoned light industrial. The Eull property is not being proposed for
rezoning.
•
13065 Orono Parkway • P. 0. Box 490 • Elk River, MN 55330-1743 • (612) 441-7420 • Fax (612) 441-7425
Equal Opportunity Housing and Equal Opportunity Employment
EDA Agenda Memo
April 9, 1998
Page 2
Staff feels that with development of the Vandenberge property into a
business park as part of the Hohlen mixed use development, this will
set the standard for a great portion of this area to develop in a
comparable manner. Staff feels, in an effort to maximize the potential
of our available industrial property, that as much land as possible be
zoned to allow a higher value "institutional" grade development, such
as "Business Park"would allow.
Recommendation
Staff recommends that the EDA support a recommendation to the City
Council the two areas currently under consideration by the City
Council for rezoning, including the Brown property and the area lying
between County Road 12 and 13, be rezoned to BP (business park).
6. Consider MAS Technologies Business Incubator Lease
MAS Technologies has been discussing a possible Business Incubator
location in Elk River for approximately one year. Over the course of
that year, MAS Technologies has gone through some changes typical
of small, fast growing, high technology companies. A couple major
• events have occurred with the company over the past several months
which now have placed them in a position to begin serious
negotiations on a lease arrangement in the Elk River Business
Incubator. These changes include,hiring a new CEO, Mike Troedel,
closing on approximately $600,000 in financing from the Food Fund,
and expanding sales and production to a point where they can no
longer meet their needs in their current space.
MAS Technologies made a presentation to the Business Incubator
Advisory Board on Wednesday, May 6, 1998. The company had been
before the Advisory Board previously, but due to the number of
changes which have occurred over the past year,staff felt it was
appropriate to have the Advisory Board review MAS Technologies and
make another recommendation to the EDA regarding their possible
location in the Business Incubator. After the presentation by MAS
Technologies to the Business Incubator Advisory Board, the board
unanimously supported recommending to the EDA that the company
be allowed to enter the Business Incubator program as our fourth
member company.
At this time staff would like to discuss the major parameters of the
• lease concept with the EDA:
• two year lease of 2,267 square feet
EDA Agenda Memo
April 9, 1998
Page 3
• $3.00 per square foot cash rent in year one
• $4.00 per square foot cash rent in year two
• $8.47 per square foot of company stock provided up front for
the full two year lease period
EDA - $2.97/s.f. = 53,814 shares
- Larry Hickman $3.00/s.f. = 54,508 shares
- Genesis Portfolio Partners - $2.50/s.f. = 45,290 shares
• MAS Technologies share value equals $.25 per share
Likely the most significant issue in this lease arrangement concept is
the request being made by MAS Technologies that the EDA complete
improvements to the space in the amount of approximately$9,600.
These improvements include constructing a hanging ceiling and two
large offices in the space. Staff has proposed that the cost of these
improvements be split between the EDA ($7,500) and MAS
Technologies ($2,100). This proposal is being currently considered by
MAS Technologies, but staff feels it may not be acceptable. Staff
would recommend that the EDA agree to pay for the total cost of these
improvements if necessary,but also to continue negotiations with
MAS Technologies for their financial participation.
• An alternative which has been discussed and agreed to in concept by
MAS Technologies is that the EDA pay the full cost of improvements
of$9,600, but take shares of MAS Technologies stock to cover the
$2,100 still in question. Staff would recommend proceeding with this
concept. The $8.47 shown above as the dollar amount of stock being
provided reflects this concept.
Funds can be made available within the Business Incubator budget to
cover this expense of up to $9,600 for additional leasehold
improvements.
Recommendation
Staff recommends that a Business Incubator lease and Business
Incubator Memorandum of Understanding be executed with the
parameters as indicated in this memo with MAS Technologies, and
that a maximum of$9,600 be spent on lease hold improvements to the
space within which MAS Technologies intends to locate.
Attachment
• MAS Technologies Stock Calculation
• Sublease
• Memorandum of Understanding
EDA Agenda Memo
April,9, 1998
Page 4
7. Consider Sportech Micro Loan Request- $45.000
The EDA Finance Committee met at 4 p.m. on Thursday, May 7,
1998, to consider a request by Chris Carlson of Sportech for a $45,000
micro loan. The purpose of the micro loan as explained by Mr.
Carlson is to help facilitate a manufacturing project in east Elk River
off of Jarvis Street. The parcel currently under purchaseagreement
by Sportech is approximately 9 acres in size and is owned by Alltool
Manufacturing. Mr. Carlson plans to construct a building of
approximately 11,000 square feet to house his
office/manufacturing/warehouse operations for Sportech. Sportech
manufactures after-market snowmobile accessories and will be
manufacturing plastic windshields specifically for Polaris
snowmobiles in their new facility.
Staff has been working with Sportech for approximately a year to
locate a parcel which would meet their needs here in the city of Elk
River. The nine acre Alltool parcel is approximately twice as large as
is needed by Sportech, therefore, staff proposed the use of the EDA
Micro Loan Fund to provide a financing source for 50 percent of the
gib cost of the property. The staff concept is that Sportech will make the
other half of the property available for another potential developer as
soon as possible, and when the property is sold the EDA micro loan
will be paid in full to a maximum term of three years.
This is an example of utilizing the Micro Loan Fund as an incentive
tool rather than a gap financing mechanism.
The EDA Finance Committee unanimously supported a motion to
recommend that the EDA provide a loan to Sportech with the
following conditions:
• 8.5% interest
• 20 year amortization
• 3 year balloon, or payoff when adjacent property is
sold, whichever comes first
• Personal guarantees required
Recommendation
Staff recommends support of the Finance Committee's recommendation to
approve the Sportech micro loan in the amount of$45,000 with the terms as
W listed.
EDA Agenda Memo
April 9, 1998
Page 5
8. Consider a Request to the City Council to Reschedule the
Public Hearing for Tax Increment Financing District No. 19
(Hohlen Project
Due to the complexity of this tax increment financing district, staff is
recommending the EDA ask the Council to reschedule the public
hearing for establishment of Tax Increment Financing District No. 19
from June 1 to July 13, 1998.
Staff, Springsted, the city engineer, and building official are moving
forward on various aspects of the qualification of this TIF District at
this time:
• City Engineer - Measurements of the parcels within the
proposed District for percentage of parcels containing
improvements versus non-improved portions
• Building Official - Interior inspections of all of the structures,
in the proposed boundaries to determine their"substandard"
qualification
• • Springsted - Financial analysis of the commercial portion of
the project using minimal information provided by the
developer at this time.
The Business Park portion of this mixed use development is also
proceeding with a partnership being formed between Amcon and
Associated Builders. Amcon is currently completing a pro forma
analysis of the site based upon the net development of approximately
30 acres. At a future meeting or worksession of the EDA we should be
able to see a conceptual plan including projected market values and
expenses involved with the Business Park development.
Recommendation
Staff recommends the EDA ask the City Council to reschedule the
public hearing for TIF District No. 19 from June 1 to July 13, 1998, at
approximately 6 p.m. in the City Hall Council Chambers.
•