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6.0. EDSR 12-09-1996 ITEM 6. ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY MEMORANDUM TO: Economic Development Authority i)11,5„.„...--FROM: Paul T. Steinman, Director of Economic Development DATE: December 5, 1996 SUBJECT: Business Incubator The purpose of this memo is to provide a brief update on the business incubator program. I have attached for the EDA's information,the following draft documents: •` Tenant selection guidelines • Application forms • I have also attached a copy of a letter to Larry Hickman, the private property owner who has indicated an interest in participating in this program with the EDA. Staff was directed at the last EDA meeting to pursue a preliminary lease arrangement with Mr. Hickman and continue to research financing alternatives for lease hold improvements and other costs associated with the project. The letter to Mr. Hickman indicates that two concerns would need to be addressed prior to the EDA entering into a lease arrangement. The concerns are parking issues and sewer capacity, the later being the most important. It appears from discussions with city building officials that a new septic system may have to be constructed on the site in order to accommodate additional capacity due to a change in the use of the building from retail furniture to an office use. The EDA will need to see some assurance as to how this issue will be resolved prior to entering into a final lease. This item is for discussion only at this time, and no action is required. s:\eda\meetings\businc.cloc • 13065 Orono Parkway • P. O. Box 490 • Elk River, MN 55330-1743 • (612) 441-7420 • Fax (612) 441-7425 Equal Opportunity Housing and Equal Opportunity Employment • ELK RIVER BUSINESS INCUBATOR PROGRAM TENANT SELECTION GUIDELINES The primary purpose of the Business Incubator Program is to provide inexpensive space and support for new, high technology, start-up, and existing, small businesses whose success would add significantly to the growth and diversification of the City of Elk River's economic base. The Elk River Economic Development Authority (EDA) will, as its primary objective, select companies which appear to have the necessary fundamentals established to assure their future growth and success. I. Basic Entry Guidelines The following basic entry guidelines will be used to determine the eligibility of applicants to the Business Incubator Program: 1. Retail businesses will not be considered. 2. Businesses which compete exclusively in the local market with other similar local businesses will not be considered. • 3. Manufacturing/assembly businesses will be screened to assure the facility is able to accommodate their intended process and byproducts. 4. Special consideration may be provided to businesses marketing new products/technology in the energy field. 5. Businesses are required to have a completed business plan and a workable product prototype. II. Specific Application Guidelines Evidence of the following specific guidelines is to be provided at the time of application to the Business Incubator Program: 1. Business must be involved in product manufacturing or assembly. 2. Business may be required to give preference to JTPA eligible persons. 3. The principals must have substantial technical and/or managerial skills, or demonstrated experience and education in the product field. 4. Existing companies will be considered for incubator occupancy if • either (a) it is deemed that circumstances clearly indicate that a move to the incubator will help retain and/or create jobs that • would otherwise be lost, and if those circumstances are considered to be the result of factors other than poor management or inadequate technical skills, or (b) the aim is to begin a research and production effort that is new and for which there is inadequate space in the companies present facility and adequate facilities cannot be found elsewhere. 5. Business must be able to demonstrate credible projections which show significant job creation and growth. 6. Business must have a prepared and legally acceptable stock "offering statement" prior to entry into the business incubator. 7. Business must agree to a stock "barter" transaction whereby the EDA, building owner, and business incubator consultant would be provided company stock in lieu of services rendered. 8. Business must clearly demonstrate a need for incubator services. III. Tenant Selection Considerations which enhance a company's eligibility for admittance to the incubator: • 1. Business is considered to have the potential of creating significant employment opportunities in Elk River in the near future, provided that such business projections are deemed to be realistic. 2. Business is involved in high technology or energy technology related products. • • ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY BUSINESS INCUBATOR APPLICATION FORM Name of Business: Name of Principal: Address: Phone: Fax: Ownership structure: Sole Proprietorship ❑ Partnership ❑ Corporation ❑ Business is primarily involved in: Research and Development ❑ Product Manufacturing/Assembly ❑ Other ❑ Principal product(s): 111/ Activities to be undertaken in the incubator facility: Projected number of employees (including principal) at incubator operation: Full Time Part Time Initially After 6 months At the end of 1 Year . At the end of 3 Years • The Business has the following characteristics: Advances Technology 1] Projects Fast to Moderate Growth ❑ Medical Related Product/Technology ❑ Energy Related Product/Technology ❑ If Business is a sole proprietorship, indicate principals net worth: $0 - $24,999 ❑ $25,000 - $74,999 ❑ $75,000 - $99,999 ❑ $100,000 - $200,000 ❑ Greater than $200,000 ❑ List the amount of equity in the form of stock ownership and/or direct investment: $0 - $24,999 ❑ $300,000 - $400,000 ❑ $25,000 - $74,999 ❑ $400,000 - $500,000 ❑ $75,000 - $99,999 ❑ $500,000 - $1,000,000 ❑ $100,000 - $200,000 ❑ $1,000,000 - $1,500,000 (1 $200,000 - $300,000 ❑ $1,500,000 + up ❑ List the amount of equity you would require over the period of: one year in the business incubator $ years in the business incubator $ • two The Business is currently in operation: Yes ❑ No ❑ Current Location of Business Number of Years In Operation Current Number of Employees Most Recent Annual Sales The Business will require square feet of office space, and square feet of warehouse/storage space in the incubator facility, with the following special needs/requirements: • Please attach the following information: Business Plan, including financial projections, current sales figures (if any), Profit and Loss Statement, and Balance Sheet. • Signature: Date: eda\bincapp.doc • •City of 0 Elk River December 4, 1996 Larry Hickman Furniture and Things 16820 Highway 10 Elk River, Minnesota 55330 SUBJECT: BUSINESS INCUBATOR PROJECT Dear Mr. Hickman: We determined at our last meeting that the next steps in this process would . include a preliminary lease proposal by the City of Elk River EDA for approximately 15,000 square feet of space in your building. I am continuing to work on this proposed lease at this time, but would like to take the opportunity to point out some concerns and issues which will need to be addressed prior to our entering into a final lease arrangement. After discussing our intended use for your building with planning and engineering staff I have become concerned about the change of use which you would be proposing for your building. The change of use to which I am referring is from a retail furniture store to an office use. The two primary issues which I will need to see resolved prior to entering into a final lease arrangement include the following: • An assurance that minimum parking standards for the proposed use can be met either on site or through an alternative leasing arrangement to the satisfaction of city planning staff. • An assurance that the sewer facilities will be upgraded to handle the capacity of our proposed incubator tenants, in addition to the increased usage of the system due to your leasing of the remaining part of the building. After initial discussions with planning staff, it appears that if specific parts of • the building were proposed to be used for warehousing or storage, rather than all of the building for office use, that this would help to ease the parking 13065 Orono Parkway • P.O. Box 490 • Elk River, MN 55330 • (612) 441-7420 • Fax: (612) 441-7425 requirements. From the incubator tenants perspective, it appears as though there is a need for a certain amount of warehousing and clean storage space. I would assume from my initial discussions with incubator tenants that warehousing and clean storage would take up approximately 2,000 to 4,000 square feet of the total 15,000 square feet we are proposing to lease. This segmentation of uses would not only ease the parking requirements for the site, but also ease the projected burden on the septic system. As you can see, it is necessary to address these issues so that the EDA can be assured that your building would be able to accommodate our intended uses and needs. Due to your intended use of the building as an office, these issues would need to be resolved regardless of whether the EDA leases part of the building. I will continue to work on a preliminary lease agreement based upon the concepts which we discussed at our last meeting. As soon as that is completed I will provide you a copy and we will continue our discussion of this issue. If you have any questions or comments, please feel free to give me a call anytime at 441-4905. • Si ly, Paul . Steinman Director of Economic Development PTS:akh c: Pat Klaers, City Administrator EDA Commissioners eda\letters\hickman.doc • c � MEMORANDUM ay of Elk • River TO: Economic Development Authority FROM: Paul T. Steinman, Director of Economic "Cr Development DATE: November 26, 1996 SUBJECT: Worksession Scheduled for December 9, 1996 The purpose of this memo is to notify you of a worksession scheduled prior to the regular EDA meeting on December 9, 1996. The worksession will be for the purpose of meeting with a company called St. Paul Medical and will begin at 5 p.m. in the Training Room at City Hall. The EDA meeting will immediately follow at 6 p.m. in the Council Chambers. • St. Paul Medical is an "emerging growth" company which staff has been working with over the past couple of months regarding relocating and expanding their current business operations from Columbia Heights. St. Paul Medical is the owner of new technology in the medical field which is currently being marketed and sold in both Canada and the United States. This new technology has substantial implications in the medical marketplace and the business projects tremendous growth of their product line over the next six months. Initial funding in the start up phase for this company has come from the following: • Minnesota Technology - $150,000 • Anoka County Capital Fund - $120,000 • $1.1 million from other private sources This next phase of the project, which will involve vertical integration of their manufacturing process and relocation of their company outside the seven county metro area, is scheduled to be undertaken within the next one to three month period. Additional funding in this next phase is proposed to include another $200,000 from Minnesota Technology and, potentially, additional funding from the Anoka County Capital Fund. Total sources are anticipated to equal approximately $500,000-$700,000. • 13065 Orono Parkway • P.O. Box 490 • Elk River, MN 55330 • (612) 441-7420 • Fax: (612) 441-7425 St. Paul Medical has indicated a desire to work with the EDA to become a tenant in the business incubator facility. They are currently researching availability of short term space here in Elk River until the incubator is underway. Staff has indicated to the company that the business incubator program has not been completely finalized, but that they would be specifically the type of tenant which the EDA would be interested in attracting to that project. In addition to marketing representatives from the company, others invited to attend this meeting include: • Representative from the Central Minnesota Initiative Fund • Representative from Minnesota Technology - Richard Fast • Anoka County Capital Fund - Roger Jensen • Genesis Business Centers - Harlan Jacobs • Larry Hickman - Possible Business Incubator Program Participant I would greatly encourage everyone's attendance at this worksession. St. Paul Medical has not made a final decision regarding their move to Elk River, and this meeting will give them the opportunity to meet the group with which they will be working in the future as their business continues to • grow. This worksession will be an opportunity to put our best foot forward to bring this company to Elk River. If you have any questions prior to this meeting, please feel free to call me at 441-4905. c: Christoper Turnbull, St. Paul Medical Jeanne Endahl, Central Minnesota Initiative Fund Richard Fast, Minnesota Technology Roger Jensen, Anoka County Capital Fund Harlan Jacobs, Genesis Business Centers Larry Hickman eda\meetings\dec9mtg.doc