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8.0. EDSR 04-08-1996 ITEM 8. Ai ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY IIP MEMORANDUM TO: Economic Development Authority FROM: Pat Klaers, Executive Director DATE: April 8, 1996 SUBJECT: EDA Public Hearing on Tax Increment Financing Plan for Tax Increment Financing District No. 14 (Marketech, Inc.) Introduction At its March 11, 1996, meeting, the Elk River EDA authorized a public hearing for April 8, 1996, to consider a Tax Increment Financing Plan for Tax Increment Financing District.No. 14. 0 Background Attached for your review is the material that was provided to the EDA on 3/11/96 when this public hearing was called. This information should provide you with the background on the Marketech, Inc., project. The information in this 3/11/96 memo is still valid with only some minor changes. Two changes that should be noted are that the value of the project has increased based on input from the county assessing department and, based on this increased value,the TIF assistance is,capped at $65,000(the cost of the land) and we are not using any reference to 17 percent. These changes show up in the attached TIF No. 14 Plan for Marketech. This request for TIF assistance comes from Rich Duggan who is the owner of Marketech, Inc. Marketech needs additional space to enable the company to grow. This project would allow Marketech to be located in an owner occupied facility and move out of the two leased spaces from which it currently operates. The Marketech, Inc., proposal calls for the construction of a 9,324 square foot office and manufacturing facility to be located on Lots 6 and 7, Block 1, • McChesney Industrial Park. The TIF Plan for TIF District No. 14 reflects a valuation of approximately $400,000. Marketech is seeking $65,100 in tax P.O. Box 490 • 13065 Orono Parkway • Elk River, MN 55330-1743 • (612) 441-7420 • Fax: (612) 441-7425 Equal Opportunity Housing and Equal Opportunity Employment • increment financing assistance to support the proposed facility. Tax increment funds would be used to "write down" the cost of the land for this project. This District is proposed to be a "pay-as-you-go" district. In this manner, Marketech absorbs the cost of the site acquisition and newly generated taxes pay back the cost of this land acquisition. Accordingly, the EDA is not forced to borrow funds and the life of the District is shorter as no interest charges are incurred. Additionally, the expanding company absorbs the extra carrying costs and the city/EDA participates in the retention of an existing company as well as the attraction of new jobs. The District will be decertified as soon as the land acquisition costs and incidental administration costs to the District are recaptured. According to the application for TIF, Marketech would retain its existing 22 jobs and create 13 new jobs over the next three years. State law requires that any business which receives assistance, including TIF in excess of $25,000, must,create a net increase in jobs in Minnesota within two years of receiving the assistance. Job creation goals must be reported to the Department of Trade and Economic Development. If these goals are not met, the business must repay the financial assistance. The Marketech TIF assistance will fall within the provisions of the state law. This is an economic development TIF District. As such, there is-a penalty . placed on the local unit of government that creates the District. This penalty can either be a loss of local government aid or the city can opt out of the local government aid penalty by making a qualified local contribution to the District. The local government aid penalty equals approximately 35 percent of the increment while,the local opt out provision calls for 10 percent of the tax increment financing assistance to be contributed by the city to the District. It is recommended that the city selects the qualifying local contribution option as this has a smaller impact on city funds and that the city/EDA uses funds generated from the selling of the Industrial Park lot to the School District for financing this contribution. ,Questions regarding the TIF penalty should be directed to Lori.Johnson before the meeting as she will not be in attendance at the 4/8 EDA meeting. As required by law, the Plan has been distributed to the School District and County Board, and presentations to these groups were made. The notice of this TIF public hearing has been published in the Elk River Star News. The City Council public hearing on this District and proposal will follow the EDA meeting. • Action Requested After conducting the public hearing on the TIF Plan for TIF District No. 14, the EDA is asked to adopt the attached resolution. Approval of the Plan is subject to the execution of a contract for private development which will be presented to the EDA in May. It is suggested that the EDA recommend to the City Council that it select the option out provision for making a qualifying local contribution of 10 percent of the tax increment financing assistance to the District using funds that were generated from the land sale of the Industrial Park lot to the. School District. s:\e da\meetings\tif l4m m.doe • • • EDA RESOLUTION 96 - A RESOLUTION FOR THE ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF ELK RIVER, MINNESOTA, RELATING TO THE ESTABLISHMENT OF TAX INCREMENT FINANCING DISTRICT NO. 14 AND THE ADOPTION AND APPROVAL OF THE TAX INCREMENT FINANCING PLAN RELATING THERETO, LOCATED WITHIN DEVELOPMENT DISTRICT NO. 1 BE IT RESOLVED by the Economic Development Authority for the City of Elk River, Minnesota (EDA), as follows: Section 1. - Recitals. 1.01. It has been proposed that the EDA establish Tax Increment Financing District No. 14 within Development District No. 1. 1.02 The EDA has caused to be prepared a proposed Tax Increment Financing Plan (the Plan) for Tax Increment Financing District No. 14. 1.03 The EDA has performed all actions by Minnesota Statutes to be • performed prior to the establishment of Tax Increment Financing District No. 14 and the adoption of the Plan relating thereto. 1.04 The EDA hereby determines that it is necessary and in the best interest of the City at this time to establish Tax Increment Financing District No. 14 and to approve the Plan relating thereto. Section 2. - Findings for the Establishment of Tax Increment Financing District No. 14. 2.01 The EDA hereby finds, determines, and declares that the establishment of Tax Increment Financing District No. 14 within Development District No. 1 is intended and, in the judgment of this EDA, its effects will be, to provide an impetus for commercial and industrial development, increase employment and otherwise promote certain public purposes and accomplish certain objectives as specified in the Plan for Tax Increment Financing District No. 14. 2.02 The EDA further finds, determines, and declares that Tax Increment Financing District No. 14 qualifies as an Economic Development District pursuant to Minnesota Statutes, Section 469.174, Subdivision 12. • 2.03 The EDA further finds, determines, and declares that the proposed development, in the opinion of the EDA, would not occur solely through private investment within the reasonably foreseeable future and, therefore, the use of Tax Increment Financing is deemed necessary. 2.04 The EDA further finds, determines, and declares that the proposed Plan for Tax Increment Financing District No. 14 conforms to the Comprehensive Plan of the City. 2.05 The EDA further finds, determines, and declares that the proposed Plan for Tax Increment Financing District No. 14 will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development or redevelopment of Development District No. 1 by private enterprise. 2.06 The EDA determines and declares that Tax Increment Financing District No. 14 located within Development District No. 1 is hereby established. Section 3. - Adoption of the Plan. 3.01 The Plan for Tax Increment Financing District No. 14 presented to the EDA on this date, is hereby approved and adopted and shall be placed on file in the office of the City Clerk. Section 4. - Implementation of the Plan. 4.01 The Executive Director of the EDA, the City Administrator, and the Assistant City Administrator are authorized and directed to proceed with implementation of the Plan, and for this purpose, to negotiate, draft, and prepare and present to the EDA for its consideration all future plans, resolutions, documents, and contracts necessary for this purpose. Adopted this 8th day of April, 1996. Elk River EDA ATTEST: Patrick D. Klaers, Executive Director .41) Elk River EDA Jeffrey A. Gongoll, President k.( A ITEM 8. ( / MEMORANDUM of .V 1 tlkTO: RiverEconomic Development Authority FROM: Pat Klaers, City Admi •i4 to to DATE: March 11, 1996 SUBJECT: Request for Tax In rement Financing Assistance - Marketech, Inc. Introduction The EDA is in receipt of a request for Tax Increment Financing (TIF) from Rich Duggan, president of Marketech, Inc. This business is currently located at 16864 Highway 10, Elk River, Minnesota. The request is attached for your review. This application is not totally complete at this time, but is expected to be completed by Monday evening or very shortly thereafter. Marketech is a company that produces products that test fully assembled II circuit boards. The firm produces the test fixture and the test software. The request for TIF assistance relates to the proposed construction of an approximately 9,300 square foot facility. Approximately 1,750 feet would be for office and the balance, or about 7,550 feet would be for production. The total cost of the project is in the $335,000 range with the market value slightly less than this amount. Mr. Duggan is proposing to purchase two lots in the McChesney Industrial Park. TIF funds of approximately $50,000 would be used to "write down" the cost of the two lots for Mr. Duggan. This TIF project would be a "pay-as-you-go" project. Background It should be noted that this project is proposed for the same lots as the Neos, Inc. project. This was a Jack Mowry project that the Council authorized as TIF No. 12. This project is now dead as Jack has released these properties back to Jerry McChesney and Jerry and Rich Duggan have entered into a purchase agreement for Lots 6 & 7, Block 1, of the McChesney Industrial Park. With previous industrial expansions, TIF funds have been used by the city/EDA to assist local companies with their projects. Recent examples include Alltool Manufacturing, Timron Precision Gear, and Tescom IIICorporation. TIF funds have been used to reduce project costs relating to 13065 Orono Parkway • P.O. Box 490 • Elk River, MN 55330 • (612) 441-7420 • Fax: (612) 441-7425 EDA TIF Request Page 2 March 11, 1996 land acquisition and the site development components of the project. With • each manufacturing project, an economic development (ED) district is established. The ED districts are designed to last only a few years as each one of these new districts results in either a loss of state aid or a local contribution to the project. This local contribution option is new (1995 law) and one that the city favors because it carries a lower overall cost to the city. The local option is 10 percent of the annual tax increment and our source of funds would be the EDA revenues that have been generated from the sale of the Industrial Park lot to the School District. With this Marketech project, the local contribution will be approximately $1,000 per year for the five year life of the district. More detailed information on the finances of this project and the local contribution should be available Monday evening. Due to the fact that a local financial loss is part of all new TIF Districts, it was the EDA and City Council consensus that they would evaluate new projects on a case-by-case basis. Based on future job growth with Marketech, the desire to have Marketech locate in the McChesney Industrial Park, the fact that Marketech is not asking for a micro loan, and, the fact that city staff believes that this is the right location for this local business expansion, it is recommended that this request should be supported by the City Council and EDA. On 3/7/96, the Assistant City Administrator Lori Johnson and I met with Rich Duggan and Tom McNair from First National Bank to review this project. Items discussed included an overview of the project, the city's strong desire to do a pay-as-you-go project, and the city's support for business retention and expansion. Additionally, I had a conversation with the county commercial appraiser for Elk River on 3/7/96 to discuss this project. This telephone conversation was important because the final market value drives the maximum TIF amount available. Our current TIF policy calls for a maximum TIF subsidy of 15 percent of the project's finished value. In discussing all of the pros and cons of this project and the city's support for this project, staff is recommending that the city offer 17 percent of the finished project as the maximum TIF contribution. Regardless if the contribution is 15 percent or 17 percent, the TIF increments will still be collected for five years. The 15 to 17 percent increase is about an extra $1,000 a year in available increment. The extra 2 percent maximum TIF subsidy was discussed in order to encourage and support: this expansion into McChesney Industrial Park, the pay-as-you-go approach, and the city's strong commitment for business retention and growth. • This 17 percent request will need EDA and City Council approval. EDA TIF Request Page 3 March 11, 1996 • The EDA should also note that the City Council will be considering a resolution on 3/11/96 to support Marketech's loan request to the Central Minnesota Initiative Fund. The City Council has typically supported these loan requests and it is assumed that this resolution will again be approved for Marketech. Below is a proposed timetable to complete this request for TIF assistance. Please note that this timetable is ambitious and that it could be longer if the county or school takes the full 30 days as allowed by law to review the project. At this point, based on past practice, it is assumed that the County Board and School Board will not require the full 30 days to review the project. March 11 - EDA authorizes preparation of TIF Plan for Marketech, Inc.; EDA recommends that the City Council authorize a public hearing to consider the adoption of the TIF Plan; EDA recommends that the City Council approves the resolution supporting the CMIF Marketech loan request. City Council establishes public hearing date to consider TIF Plan; City Council adopts resolution in support of the CMIF loanrequest. Mid March - TIF Plan is sent to School District and County Board for review and comment. March 26 - School Board meeting. Planning Commission reviews TIF Plan. March 27 - EDA and City Council -TIF hearing notices published in Star News. April 2 - County Board meeting. April 8 - EDA conducts public hearing and adopts TIF Plan. April 8 or 11 - City Council conducts public hearing on TIF Plan. • EDA TIF Request Page 4 March 11, 1996 Action Requested After considering the merits of this TIF request, the EDA is asked to a. Authorize the preparation of TIF Plan for Marketech, Inc., expansion; b. Schedule a public hearing for April 8, 1996, to consider the adoption of the TIF Plan; c. Approve and recommend that the City Council approve a deviation from the TIF policy and allow a 17 percent maximum TIF subsidy; and, d. Recommend that the City Council approve the Marketech CMIF loan request resolution. s:\eda\meetings\tifmark.doc Ii • • MARKETECH, INC. was started in March of 1990 and has grown to over $1,000,000.00 in sales as of 1995 year end. Currently Marketech services over 60 accounts through out the US, Canada and some overseas accounts. Marketech still services the same markets and services that were identified in the 1990 start up business plan with some expansion into additional services to the ATE"Automatic Test Equipment" market. The annual sales has been increasing at an average of 25% per year with a 36%growth in the most recent year of 1995. 1996 brings continued growth of an expected 25% along with the addition of a new project to assemble Pakon Impak Index Systems. The new Index Systems were projected to be at 500/yr but recent market showings have caused Pakon to increase their forecast to 200/month by this June(96). This will have an additional impact of 25 to 30% additional growth to total sales. Total sales for 1996 are estimated to be 1.4 to 1.6M. Employment is expected to increase from 20 at 1995 year end to 27 by end of 1996. The annual growth of 25% normal is expected over the next 3 years and should be attainable due to the new project which has an estimated 5 year market life. To attain this growth Marketech is in need of both increased line of credit for additional working capital as well as manufacturing space. Marketech currently occupies 4350 sq. ft. of manufacturing and office for the core business and has a temporary lease on an additional 1500 sq. ft. in a nearby industrial building. As the current business was already causing a space problem the additional space added for the Pakon project will not keep pace for both needs. Other suitable space for lease in the Elk River area is not available so the decision was made to pursue a new facility to consolidate the two operations. The new facility is planned to be 9250 sq. ft. fully air-conditioned and finished • for offices and electro-mechanical type assembly. The land chosen has 2.2 acres and allows an expansion to over 30,000 sq. ft. allowing continued expansion for many years. Sheet1 MARKETECH, INC. NEW BUILDING PROPOSAL • ITEMS SOURCES OF INCOME BUILDING BID $ 242,000.00 TIF $ 50,418.75 SAC CHARGES 2,600.00 CIMF 100,000.00 WAC CHARGES 2,000.00 FNB ER 185,706.25 PERMIT/PLAN/ST 2,795.00 MECHANICAL 200.00 TOTAL $ 336,125.00 ELECTRIC 300.00 GAS 30.00 PLUMBING 100.00 TIF FEE 5,000.00 MOVING COSTS * 5,000.00 LANDSCAPE * 5,000.00 MACHINE HOOK UP * 2,000.00 UTILITIES: * 100.00 WATER * 100.00 ALLOWANCES included in building cost SEWER * 100.00 POWER COMPANY * 100.00 SHOP FLOOR $ 5,000.00 NATURAL GAS * 100.00 OFFICE FLOOR $ 3,000.00 CABINATES 1,500.00 EXCAVATING $ 8,000.00 RACKS ETC. 2,000.00 BLACK TOPPING $ 20,000.00 TOTAL BLDG COSTS* OSTS $ 271,025.00 *ESTIMATED COSTS II LAND COST $ 65,100.00 , l TOTAL PROJECT $ 336,125.00 • Page 1 • TAX INCREMENT FINANCING PLAN TAX INCREMENT FINANCING DISTRICT NO. 14 . CITY OF ELK RIVER, MINNESOTA APRIL 8, 1996 0 • TAX INCREMENT FINANCING PLAN TAX INCREMENT FINANCING DISTRICT NO. 14 SUMMARY Marketech, Inc., 16864 Highway 10 NW, Elk River, Minnesota seeks $65,100 in Tax Increment Financing assistance to support its proposed construction of a 9,324 square foot facility in the McChesney Industrial Park. Marketech is a service company in the printed circuit board (PCB) market. The services offered include board test fixturing, in-circuit test development, loaded board test and repair, and design services. Marketech, Inc., currently occupies leased space at two facilities in Elk River, Minnesota, and currently employs twenty-two (22) persons at these facilities. As a result of the expansion, approximately five new full-time jobs will be created in 1996, four new jobs in 1997, and four new jobs in 1998. The Economic Development Authority for the City of Elk River, Minnesota is proposing the creation of an Economic Development District pursuant to the Tax Increment Financing Act. Tax increment funds will be used to "write- down" the acquisition price of the development site. The site, Lots 6 and 7, Block 1, McChesney Industrial Park, is currently owned by Jerry and Joanne • McChesney. The Economic Development Authority for the City of Elk River proposes to reimburse Marketech, Inc., for its expense associated with the acquisition of Lots 6 and 7 under a pay-as-you-go Tax Increment Financing District. The 9,324 square foot facility will have a finished market value estimated at $400,000 which produces property taxes of approximately $16,800 per year. Of this total, $14,360 will be new additional taxes. These new funds will be "captured" by the Economic Development Authority so that the City of Elk River can recover the $65,100 in tax increment assistance. After these funds have been repaid, Tax Increment Financing District No. 14 will be decertified, thereby enabling all local taxing jurisdictions (county, school, city, etc.) to share in the project's property taxes. The Economic Development Authority for the City of Elk River, Minnesota anticipates that Tax Increment Financing District No. 14 will exist for approximately seven (7) years; during which time tax increment funds will be collected for five (5) years. • • TAX INCREMENT FINANCING PLAN TAX INCREMENT FINANCING DISTRICT NO. 14 A. STATEMENT OF OBJECTIVES Tax Increment Financing District No. 14 is located entirely within the City's Development District No. 1, a Municipal Development District created and established pursuant to the Development District Act. The Development Program for Development District No. 1, was adopted by the City Council on April 1, 1985, and was amended on January 27, 1986, and November 30, 1987. The objectives of the Development District, as amended, and as set forth in the Development Program, are hereby incorporated into this Tax Increment Financing_ lan. Attached as Exhibit A is a map of Development District No. 1. The specific objectives of the Tax Increment Financing Plan for Tax Increment Financing District No. 14 are: 1. 2. To provide pay-as-you-go reimbursement for the acquisition price of Lots 6 and 7, Block 1, McChesney Industrial Park; (the development site); To encourage a manufacturing company to expand in the McChesney Industrial Park; said expansion includes the construction of a new facility estimated at approximately 9,324 square feet; 3. To increase employment opportunities in the community and in the State of Minnesota; said expansion will create approximately 13 full time positions over the next three years and approximately 22 positions will be retained; and, 4. To preserve and enhance the local tax base and the tax base in the State of Minnesota; said expansion will generate total property taxes of approximately $16,800 including new additional property taxes of approximately 14,360. B. CLASSIFICATION OF THE DISTRICT The City Council of the City of Elk River, Minnesota determines that it is necessary, desirable, and in the public interest to designate, establish, develop, and administer an Economic Development Tax Increment Financing District in the City of Elk River pursuant to the provisions of the Tax Increment Financing Act, Minnesota Statutes 469.174, Subdivision 12. The purpose of the Tax Increment Financing Plan and Tax Increment Financing District No. 14 is to encourage the expansion of a manufacturing company in • the McChesney Industrial Park, thereby increasing local employment opportunities and preserving and enhancing the local tax base of the State of Minnesota. C. DEVELOPMENT PROGRAM 1. Overview Marketech, Inc., 16864 Highway 10, Elk River, Minnesota, seeks Tax Increment Financing assistance to support its proposed construction of a 9,324 square foot facility in the McChesney Industrial Park. The Tax Increment funds will be used to reimburse Marketech, Inc., for the acquisition of the development site. 2. Property Included in Tax Increment Financing District No. 12 The legal descriptions of the properties included in TIF District No. 14 are as follows: Lot 6, Block 1, McChesney Industrial Park (PID No. 75- 433-0150) Lot 7, Block 1, McChesney Industrial Park (PID No. 75- 433-0160) • Attached as Exhibits B-1 and B-2 are maps showing the exact location of the property included in Tax Increment Financing District No. 14. 3. Property to be Acquired by the Authority No property will be acquired by the Authority. D. DEVELOPMENT ACTIVITIES 1. Development Overview Marketech, Inc., proposes to construct a new facility containing approximately 9,324 square feet on Lots 6 and 7. The new facility will have a finished market value estimated at $400,000. Construction may begin during the summer of 1996 and will be completed by December 31, 1996. Marketech, Inc., currently employs 22 persons at its two leased spaces in Elk River. As a result of the expansion, approximately 13 new full-time jobs will be created by Marketech, Inc., in the next three years. • • 2. Contracts No contracts have been entered into at the time of the preparation of this Tax Increment Financing Plan. Proposed contracts for services associated with Tax Increment Financing District No. 14 include: • Contract for Construction of a 9,324 Square Foot Facility (by Marketech, Inc.) • Soil Borings and Analysis • Site Preparation and Development E. FINANCIAL ANALYSIS OF TAX INCREMENT FINANCING DISTRICT NO. 14 1. Tax Increment Financing District No. 14 Cost Estimates Budget Amount Land Write Down $65,100 Administration & Legal $ 1,000 Miscellaneous $ 1.000 Total $67,100 2. Bonded Indebtedness The City of Elk River anticipates a pay-as-you-go Tax Increment Financing District No. 14 and no bonds will be issued. 3. Sources of Revenue to Pay Public Costs Tax Increments collected from the Marketech, Inc., expansion will be used to pay the public costs associated with Tax Increment Financing District No. 14. 4. Original Tax Capacity The original net tax capacity, based on the 1995 valuation, for the real property in Tax Increment District No. 14 is estimated to be $2,300. The County Auditor Certification attributable to this value is attached as Exhibit C. • 5. Estimated Captured Tax Capacity The finished market value uponP completion of the improvements in Tax Increment Financing District No. 14 is estimated at $400,000. This value translates into a completed net tax capacity estimated at $16,800. The captured net tax capacity is estimated as follows: Completed Net Tax Capacity $16,800 Less Original Net Tax Capacity 01 Equals Captured Net Tax Capacity $14,500 One hundred percent of the captured net tax capacity of Tax Increment Financing District No. 14 will be required to finance the public costs associated with District No. 14. As a result, the City of Elk River elects, pursuant to Minnesota Statute 469.177 Subdivision 2 (a)(1), to retain the full captured net tax capacity of Tax Increment Financing District No. 14. 6. Duration of the Tax Increment Financing District No. 14 The City of Elk River expects that the first increment it will receive from Tax Increment Financing District No. 14 will be for taxes payable in 1998, and will be based on a completed value as of January 2, 1997. The City expects to continue to receive tax increment from Tax Increment District No. 14 up to and including the year 2002, or until approximately $65,100 in tax increment has been received. Thereafter, no further increments may be received and Tax Increment Financing District No. 14 will terminate. F. CASH FLOW ANALYSIS Attached as Exhibit D is the Cash Flow Analysis for Tax Increment Financing District No. 14. G. IMPACT ON OTHER LOCAL TAXING JURISDICTIONS 1. Estimated Impact of District No. 14 on the Taxing Jurisdictions Assuming the Captured Net Tax Capacity is Available to the Taxing Jurisdictions Without Creation of District No. 14: Pursuant to Minnesota law, tax increment generated by development within the Tax Increment Financing District may be captured by the City for a period of up to eight years. During this period other taxing jurisdictions will continue to receive taxes from the property within the Tax Increment Financing District based on the current net tax capacity. 0 • 2. Estimated Impact of District No. 14 on the Taxing Jurisdictions Assuming None of the Captured Net Tax Capacity is Available to Taxing Jurisdictions Without Creation of District No. 14: The Economic Development Authority of the City of Elk River has determined that the Marketech, Inc., project would not reasonably be expected to occur without the creation of TIF District No. 14 and the use of tax increment financing is necessary. Therefore, none of the net tax capacity captured during the term of this TIF District would be available to other taxing jurisdictions without the creation of this district. 3. Additional information on the impact of Tax Increment Financing District No. 14 on the other local taxing jurisdictions can be found in Exhibit E. H. STUDIES AND ANALYSIS USED TO DETERMINE THE NEED FOR TAX INCREMENT FINANCING The Elk River EDA and City Council have determined that the Marketech, Inc., expansion project cannot reasonably be expected to occur solely through private investment within the reasonably foreseeable future. Therefore, the use of Tax Increment Financing assistance is deemed necessary. • This determination has been made based on the following: • The company currently occupies two leased space in Elk River and this expansion into a permanent facility is its first. Tax increment assistance is needed to reduce the overall project costs - thereby preserving scarce capital to ensure that Marketech, Inc., remains financially stable after the expansion. • In addition, tax increment assistance is necessary because the project will result in increased employment in the State, and, it will result in the preservation and enhancement of the tax base of the State. PARCELS INCLUDED IN TAX INCREMENT FINANCING DISTRICT NO. 14 Tax Increment Financing District No. 14 is comprised of two parcels of land. They are listed below: 1995 Original Parcel 1995 EMV Payable 1996 Net Tax Capacity 75-433-0150 $25,000 $1,150 75-433-0160 $25,000 $1,150 • 1 • Please refer to Exhibit C for the County Auditor Certification of this parcel in Tax Increment Financing District No. 14 • I1i‘i11i.i; itI> 11Iiiii> d liiliil�iir'1ii!i�iiniiiliidiii�ailiidi :• _....• .:.,..,,r1- .::::____,...:::"....___ ' • • I.' .. ii> iiiiiidlliIiI>d -4414. --.1:-i'''t;i_ r: I a . a - L ..... _ 2 - .� .::1- ` .1e.: ,,..-7-i.--- / TL"‘"1".- :.... iilt;,...j''''.,*,4-.H, 7 I: ' wile hua / � i�• �� � 1p (' 2;� a �� a 14 ill..:......,''1,116..." \‘1111111, 'to'"' -'-..:00../.7'....5.4 ,.. ...., — ri:::—.7- *\1 „_____,,,,,-_,... s _/ ".' -------4"---; L ' - I �a s++�v�t�f �` '`r�ia�'__ °rl _ ~ �"®ir It � TIS -m a MIL .11111111"SZ o. 111 1:-.." MIL +C _J \G� V = Lti, ,Iv • . ..,airts,.:. ,..........._ „illt [..,,,..... ,,, ,.......... _ , ! illi � iiiiil Iiia'Ji;�iilifiili 01 ! ! Itt ! tltt1IIItll ! ! ! ! ! �� _� 1. g ' i ,i -.1131.- j Ili s i • I J+s ' BOUNDARY OF l DEVELOPMENT DISTRICT NO. 1 __-. t — ' _ ANL (CITY LIMITS) — m ELK RIVER, MINNESOTA \ .... a. A a River I III Mil- a . 1 ---.N\Ilk ,':1111",: ' --- f. DEVELOPMENT DISTRICT NO. 1 t � !`� I I I I ! 1�,! .i , ti . (-. . ,I I • AP Rim 15 T. ci L r ...7; ill . JI J I 193RD ST. Oil 1 j RD AVE. ta 2 I I SE RVIG� DR it �1.2.B 3 RIVER dELK 2 K 1 ° �`' ! —PARIF 2 �\ g1}STRIAL . 1J R - �2�1D/ STRIP, �` I BLVD. \! �!y ADDITION ! �III�i►a Arreller-or __Poem , ii 14;404... RONLF4f• AOO. iftWilliat ` . , .,..iilo . „, ,-.• . ?°I( \ ��• r� } �Be� lE O L�1 r--1,...... I��• 4y L 'I 6 ., ?Z wawa'/ 1 :1: JT N., 43' .7<.<%\ E4�''WM �,�`"tr�� �f Rp �Fe rf /15.1 X ,II Mil • IIIN m 11111 1 `------;\lin 4,,,,, t • C:RCL ... Ell 1 i moo • ik ,# 1, 1. -,/ � W �• � h1/4811 E .•I ai LO a 744.111 . al AO r(rS os .. . e It • /Apn141r- 10, 111111 6T,F L „.... ..„..„==. ** �'w apppp ES .n>r 1111111 A (/� /� ^\�\\ LAKE ORONO \- 4� p• ILF• �i+i ©BS t I . Y1l ` �� �.. mit „s„.a �_. _i_I I I M �1 \N .11 Tivil IL 5 SOFTBALL ji'AIR qouNT V' �� 11 ,‘ _ *440 • ` 07OUNOS • _ N, ICI** 4\ ..,...., • \ �, AA �� 1 ���� \�\ iii ';\.. ��� ti - '183RD 2 AVE' A�4e1' v,`'. `� _ �1 ' a Nowo W a °F< \,--, • NO MISSon, • 'a i IFS Vo :3 '7.--- \ • +182 NO ° 'AVE.+ 'a , °0a\ ISS. /4F9 , . IN l VP N P IRK , I. •J X� I + fr7 'D.. PD' :i i I 1 ri Lc?'4• �� 182ND •VE. I. la V ssp` •2 HI .� �Q 1 1,0 Iii 4'‘S I Ai° I it ' TAX INCREMENT FINANCING DISTRICT NO. 14 'l r1.---...... al MC.4---2• I 4yy •4..yr C' tlO✓7t'w•w1r f. Nry� 4 116Ac.%- 1. 14 . E It i �I Q L r f y►•:••: • EXHIBIT C COUNTY AUDITOR CERTIFICATION TAX INCREMENT FINANCING DISTRICT NO. 14 The original net tax capacity of the following listed parcel(s) as of January 2, 1995, is certified to be $2,300. The parcel(s) contained in Tax Increment District No. 14 are listed below. 1995 EMV 1995 Original Parcel Number Payable 1996 Net Tax Capacity 75-433-0150 $25,000 $1,150 75-433-0160 $25,000 $1,150 TOTAL $50,000 $2,300 The Base Tax Rate will be the rate calculated for taxes payable in 1996. In accordance with Minnesota Statutes, Section 469.177, Subdivision 1,the average percentage increase in the original Net Tax Capacity shall be three percent(3%). • Ramona Doebler Sherburne County Auditor SHERBURNE COUNTY SEAL April , 1996 • 0 CO k / \o Eft / 0 ® co 2 CO r- A– * • , m m m - 0 0 0 & m N- N a) 2 2 $ 7 $ k 2 .- CO A- � 63 a / - LO 11) N- CO aa) .0 0 2 0 $ $ CO 2 E 2 o � CD CO # cc q te ea A- 63 2 \ 0 w k >. c o 0 — 22 a) 2 0 o / k CO k / k 0 f a) ' - Q \ q ® A- 0 A 7 a) 7 g • 2 — m � � c / co a e m o U CO 0 co \ L 0 / H / CV c IY $ G c q # ¥ ( k § o • m = $ y- '- 0 - q 0. ¥ 2 % @ a) C/) te VT VI o o c ti@ 2 • p — l ' E kk c 00 < % / k k N- CO c / k ƒ Q 2 n + c x - 2 ® 0 / f / \ E k a § _ o £ 2 7 X $ $ 2 \ k k \ 2 as w CO # a £ 0 7 ~ 2 CO ° E• % @ co q § 2 ° 69. \ $ To' k - k R- W — E a@• k@ as 0 0 C _ al _c \ _oE co Z E / / 2 co 2 0 E % 7 k 0 f \ f ƒ 2 % § 7 5 \ £ ® 2 0 2 a 5E w / \ 0 7 § > , / / -0 0 0. § as f 0 ■ 2 ° 7 co % § xco co - a) c 0 % 0 Cl)m C % / k ® / a) 2 9 k / 2 \ : • z• 2 7 / . k 2 % § R E / • • 2 k E cn as 1E �_ co \ J ¢ / O / 0 0 0 - : i a u� co r- o co c c c O a 0 69 6 � a mayu) Z E L '; O —' pp 0) N O 0 0 0 0 O c a 7 (0 In co co •N o. �0 O co V 7 e<- ems- <- ac.) m isvtu►is F- U U � n 0 0 0 0 ,- M' X E o 0 o o ; oi o y F- 7 0 o O « l0 13 C ,L>_' > O E 0) .O 'O O M Z.C d M 7 c >. N 0 a) o CO o) N O 0 .c 7 MI mi0) Q X a' *17: fh V N p r- 3 0 X 07 N N RC1 X O ; a) '� I— N E 0 F.3a' N O ` v 0 > R p O O J 0 i0 0 co d y a 0 N w Z T > 0 10 to M 0 7 z U - L _V N Q M N w O C w L X Z O F- fA 69 r- 0.•X C « p 0_ T.6... . 'O (0 N ID I— N r X OD (401 o 0 E _c >.a ID o o a co O p a m o cO1i u- c c E co >a) IS o £ Z O O) 07 u1 N m 3 d .C" V a O Z U O I�N U ai ifl v►Ea d D 6 a) -c E a Z ' C X 7 .XO.. N y •y C 0) t0to P N m LI' XZ ai 0m000 mi mom. co to co 5 co 0_`° � ac y y 0 - i_ Q m X FZ a m a in u9 isisi CO X o ur W W 0CO CJ v ° 'a c o 7 trz .O 0) 0 V0, a 7 t7 O) Cl N N 7, m Lu U rn U > �� 0 m `o 0._ E c N = 0 p � N d VI— y N Lo. {- V! EH(ft 3 X C LL O spa�0 �p y M N — C OO X 01 -CM 0. 4O 'U w0 f7 .- . N CO ED Q CD O 1 a o p U a) d 3 v o 3 0 • ZS _ ._ 0 c 0 0 0 o e fA 0 W OD a� M ' 0 N d O O E N Vj N 07 V O to. '� 0) 7 l6 U. .a w c X N N LO e- 0 N w > X C cc N O I— E cvw c mL cs _O y 0) y O y N 'O p O) 7 U 7 Ill y ? spa�p `O N > sr co o co N la0 O U > U .� a (8 OJ c tri co- > •c U N •C L'• X c S 0' J u) � 2 M '•V�co O c N 2 O -o xO N _M N co c c o n y a c Q d� a X O _0cr) �p O i tR EA W .0. _ U ..- 0) tp A' CO CO N- 1.0 N U N N w a O o) N 0) co co r (Ca) ' ! N O O o) O N co N.0 i0 O t O c C d. c co0) 0 • X > 0 N-N 0) .n 3 f0 0) l00 U O E F- fR 69 69 0) l0 7 07 7 f— O d • = > l0 c O 0) I... co 1-- a 3 c = w H S 0) 7 N > 0 F- 1- k k 0 Z z _v 0) W W • „._• =oaN. ,- Q i— < I— < - W • O F' F Ulp � O � N 0 r DOHERTY 3500 Fifth Street Towers 2800 Minnesota World Trade Center 1401 New loris Avenue,N.W. 2370 One Tabor Center RUMBLEMinneapolis, South Fifth Street 30 East Seventh Street Suite 1100 1200 Seventeenth Street Minneapolis,Minnesota 55402-4235 Saint Paul,Minnesota 55101-4999 Washington,D.C.20005 Denver,Colorado 80202-5823 & � �� Telephone(612)340-5555 Telephone(612)291-9333 Telephone(202)393-2554 FAX(202)393-3131 Telephone(303)572-6200 . FAX(612)340 5584 FAX(612)291-9313 FAX(303)572-6203 PROFESSIONAL ASSOCIATION Attorneys at Law Writer's direct dial number: 340-5571 Reply to Minneapolis office April 5, 1996 Mr. Pat Klaers City of Elk River P.O. Box 490 Elk River, MN 55330 Re: Marketech, Inc. Dear Pat: I enclose a draft of Contract for Private Development and Note, to be discussed with Rich Duggan. I used the NEOS, Inc. documents for format and content, assuming them to be III accurate and functional. Please pay careful attention to the payment dates in the second paragraph of the Tax Increment Revenue Note. You want to be sure the dates mesh with your receipt of taxes from the County. If you have any questions or comments, please call. Sincerely yours, , dr/ -i 'Kir" _ lif Davis C. Sellerg/ DCS/eka Enclosure 4110 CONTRACT FOR PRIVATE DEVELOPMENT BY AND BETWEEN THE CITY OF ELK RIVER, THE ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF ELK RIVER, AND MARKETECH, INC. THIS AGREEMENT entered into this day of , 1996, by and between the City of Elk River ("City") and the Economic Development Authority for the City of Elk River ("EDA") and Marketech, Inc., a Minnesota corporation ("Developer"). WHEREAS, Minnesota Statutes, Section 469.090, et seq., authorizes cities and counties to establish Economic Development Authorities for the purpose of furthering the economic development objectives of the respective city or county; and WHEREAS, the City of Elk River, Minnesota, established the Economic Development Authority for the City of Elk River ("EDA") in 1987; and WHEREAS, Minnesota Statutes, Section 469.174, et seq., (the "Tax Increment Financing Act") enables an Economic Development Authority to undertake certain housing projects, redevelopment projects, and economic development projects with the use of Tax Increment Financing; and WHEREAS, Developer applied to the EDA for Tax Increment Financing Assistance("TIF") for development of the property located at 12797 Meadowvale Road, Elk River, Minnesota (the • "Development Site") into an office and manufacturing facility of approximately 9,324 square feet to be constructed and owned by Developer (the "Project"); and WHEREAS, the TIF assistance was requested to provide Developer with partial reimbursement for site acquisition costs (the "Land Write Down"); and WHEREAS, City staff prepared a Tax Increment Financing Plan ("TIF Plan") for the Project which proposed maximum reimbursement for Land Write Down to Developer in the amount of Sixty-Five Thousand One Hundred and No/100 Dollars ($65,100.00); and WHEREAS, the EDA held a public hearing on the TIF Plan on April 8, 1996, and approved the TIF Plan on that date; and WHEREAS, the City Council held a public hearing on the TIF Plan on April 8, 1996, and approved the TIF Plan on that date; and WHEREAS, an Economic Development Tax Increment Financing District ("TIF District") was established on the Development Site, legally described as follows: Lots 6 and 7, Block 1, McChesney Industrial Park ; and WHEREAS, the Tax Increment Financing Plan for the TIF District provides for the Developer • to be reimbursed, in an amount up to a maximum total assistance sum of Sixty-Five Thousand One Hundred and No/100 Dollars ($65,100.00), upon evidencing payment of annual real estate taxes; and WHEREAS, the 1998 real estate tax year is the first year Developer is eligible for a • reimbursement payment, based on the January 2, 1997, value of the Project; NOW, THEREFORE, BE IT RESOLVED that the City, the EDA and the Developer agree on the following terms and conditions for reimbursement of the Land Write Down: 1. The EDA hereby pledges the Tax Increment it receives from the TIF District to the City of Elk River to enable the City to reimburse Developer for the Land Write Down identified in the TIF Plan. 2. Payments shall be made by the City to Developer, in a total amount not to exceed the Land Write Down, pursuant to the terms of the Note attached as Exhibit A to this Agreement (the "Note"). 3. The sole source of funds for payment of the City's obligations under the Note shall be the tax increment generated by the TIF District. If taxes are not paid, or taxes paid are not sufficient to generate tax increment, no payment on the Note shall be due from the City. 4. The annual tax increment payment will be determined by the City's Assistant City Administrator, and will take into consideration the original net tax capacity of the Development Site prior to the construction of the Project. 5. If Developer fails to make real estate tax payments prior to the date when said taxes are • due to Sherburne County, an Event of Default under this Agreement shall exist. No payments shall be made to Developer under the terms of the Note if an Event of Default occurs, and payments shall not be resumed until the Default is remedied. The Default shall be deemed remedied upon evidence of receipt of payment in full for real estate taxes from Sherburne County. 6. After reimbursing Developer for the principal sum of the Land Write Down, no further payments shall be due under this Agreement and the City shall request that Sherburne County decertify the TIF District. 7. Developer shall complete construction of the Project by December 31, 1996. Failure to complete construction of the Project by this date shall be an Event of Default under this Agreement and City and EDA shall have the right to terminate this Agreement and their obligations hereunder. 8. Developer shall, prior to January 2, 1997, provide City with evidence acceptable to City of Developer's expenditures for Development Site acquisition costs. 9. Pursuant to Minnesota Statutes, Section 116J.991, City and EDA have established, and Developer has agreed, to the following Job Creation and Wage Level Goals: Job Creation: 12 new jobs Wage Level: • PXB 100445 2 10. Developer agrees to meet the Job Creation and Wage Level Goals on or before • , 19 . Failure to meet the Goals by this date shall be a Default under the terms of this Agreement. In addition to such other remedies as City and EDA may have, if Developer defaults by not meeting the Job Creation and Wage Level Goals, Developer shall immediately repay to City all amounts paid to Developer pursuant to this Agreement. 11. Developer shall report to EDA no later than 1st of each year that this Agreement is in effect: • Actual jobs created since first payment received under this Agreement. • Actual average hourly wage paid to employees hired since first payment received under this Agreement. IN WITNESS WHEREOF, the City of Elk River, the Economic Development Authority for the City of Elk River and Developer have caused this Development Agreement to be executed as of the date and year first above written. CITY OF ELK RIVER By: Henry Duitsman, Mayor • By: Patrick D. Klaers City Administrator ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF ELK RIVER By: Jeffrey Gongoll, President Elk River EDA By: Patrick D. Klaers, Acting Executive Director, Elk River EDA 4110 PXB 100445 3 S INC. By: By: • PXB l ooaas 4 EXHIBIT A • TAX INCREMENT REVENUE NOTE UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF SHERBURNE CITY OF ELK RIVER, MINNESOTA TAX INCREMENT REVENUE NOTE The City of Elk River, Minnesota (the "City"), hereby acknowledges itself to be indebted and, for value received, hereby promises to pay to Marketech, Inc., or its assigns (the "Owner"), an amount equal to Sixty-Five Thousand One Hundred and No/100 Dollars ($65,100.00) as more fully described in the Contract for Private Development by and between the City of Elk River, the Economic Development Authority for the City of Elk River, and Marketech, Inc. (the "Development Agreement"), in the manner, at the times, from the sources of revenue, and to the extent hereinafter provided. The unpaid principal on this Note shall be payable on , 1998 and on each December 15 and July 15 thereafter, or within ten(10) days of receipt by City of the tax settlement from Sherburne County, whichever comes later, to and including December 15, 2003 (the "Payment Dates"). On each Payment Date the City shall pay by check or draft mailed to the Owner of this Note an amount equal to the lesser of (1) the principal then due on this Note; or (2) the Tax • Increment received and retained by the City pursuant to the City of Elk River Tax Increment Financing Plan for Tax Increment Financing District No. 14. The amounts due hereon shall be payable solely from Tax Increments paid to the City and which the City is entitled to retain pursuant to the provisions of Minnesota Statutes, Sections 469.174 through 469.179, as the same may be amended or supplemented from time to time. This Note shall terminate and be of no further force and effect following the last Payment Date defined above, on any date upon which the City shall have terminated the Development Agreement, or on the date that the principal payable hereunder shall have been paid in full, whichever occurs earliest. The City makes no representations or covenants, express or implied, that the Tax Increment received by the City will be sufficient to pay, in whole or in part, the amount due and payable hereunder. The City's payment obligations hereunder shall be further conditioned on the fact that there shall not have occurred and be continuing on the Payment Date a Default under the terms of the Development Agreement, but such unpaid amounts shall become payable if said Event of Default shall have been cured. If, pursuant to the occurrence of a Default under the Development Agreement, the City elects to terminate the Development Agreement, the City shall have no further debt or obligation under this Note whatsoever. This Note is a special, revenue obligation of the City and not a general obligation of the City II and is payable by the City only from the sources and subject to the qualifications stated or referenced herein. Neither the full faith and credit nor the taxing powers of the City are pledged to the payment of this Note, and no property or other asset of the City, save and except the above-referenced Tax • Increment, is or shall be a source of payment of the City's obligation hereunder. Except as hereinafter qualified, this Note may be assigned but upon such assignment the assignor shall promptly notify the City in care of the office of the City Administrator by registered 0 mail, and the assignee shall surrender the same to the City either in exchange for a new note or for transfer of this Note on the records for the Note maintained by the City. Each permitted assignee shall take this Note subject to the foregoing conditions and subject to all provisions stated or referenced herein. IN WITNESS WHEREOF, The City of Elk River, Minnesota, by its City Council, has caused this Note to be executed by the manual signatures of its Mayor and its City Administrator and has caused this Note to be issued on and dated , 1996. CITY OF ELK RIVER By: Henry Duitsman, Mayor By: S Patrick D. Klaers City Administrator PXB 100445 2