EDSR MEMORANDUM 12-11-1995 ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY
TO: Economic Development Authority
FROM: William Rubin, Executive Directs
DATE: December 11, 1995 p
SUBJECT: Agenda Memo for December 11, 1995
EDA Meeting
6. December Financial Update
Please refer to the financial summary prepared by Assistant City
Administrator, Lori Johnson.
Action Requested
The December financial update is an informational item only and no
• action is requested.
8. Elk River Arts Council Presentation!Clifford Lundberg)
City Administrator,Pat Klaers and the writer of this memo are in
receipt of a letter from Mr. Clifford Lundberg, a representative of the
Elk River Area Arts Council. He is requesting an audience with the
Elk River City Council and its EDA to discuss the results of a space
needs study undertaken by way of a grant from Artspace Projects, Inc..
Artspace is a non-profit development corporation that creates space for
arts organizations and individual artists. In response to the need for
human resources in the Dakotas and Minnesota, Artspace created the
Regional Cultural Facility Consulting Program. Its intent is to assist
organizations with the technical, procedural, and organizational
elements of facility development, renovation, and operation. A report
that is included in the agenda packet outlines the work completed
through this program for the Elk River Area Arts Council.
The Arts Council requested Artspace's assistance in determining the
specific nature of arts-related space in a potential civic center.
Further, the Council's intention was to complete preliminary design
• work that would enable its organization to more accurately
P.O. Box 490 . 13065 Orono Parkway • Elk River, MN 55330-1743 • (612) 441-7420 • Fax: (612) 441-7425
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communicate their space needs and to reconcile different artistic user's
needs - prior to any community wide design determinations. By
defining art related space requirements at an early stage, the Council
hopes to ensure that proper consideration is given to its needs.
Clifford Lundberg will be in attendance to provide the specifics of
Artspace's final report to the Elk River Area Arts Council. In his cover
letter, Mr. Lundberg suggests that the City Council and the EDA begin
to think of creative ways to finance, say, a multi-use auditorium. In
addition, Mr. Lundberg requests that the City Council consider
revitalizing its Community Center Task Force in order to review the
Art Council's proposal as well as any additional space requirements for
recreational users.
At this writing, it is not known what role, if any, the EDA would play
in financing a multi-use auditorium.
9. Contract For Private Development (TIF District No. 13)
This item was deleted from the EDA's November 13 agenda.
Information found in the following paragraphs is offered as a review.
Following a public hearing on June 12,EDA Commissioners approved
a request for Tax Increment Financing assistance from Jack T.
Mowrey/Neos, Inc. to assist with the construction of a 12,000 square
foot precision machining facility in the McChesney Industrial Park.
On June 19, the Elk River City Council finalized the request for TIF
assistance by also approving the TIF Plan. The TIF assistance is
limited to 15 percent of the project's finished market value (for tax
purposes).
Because this TIF District is structured as a pay-as-you-go district, the
developer/company incurs all of the up-front costs including the
acquisition costs and site development and site preparation costs. As
the new project begins to generate taxes, the EDA/City reimburses
them to the developer/company twice a year - in July and in December.
As a result,the contract for private development is much more
simplified because the city's risk is minimized.
Although no construction activities will begin during 1995, all parties
agree that it is beneficial to execute a contract for private development
under the existing TIF rules and regulations. Execution of a contract
also enables the County Auditor to certify the legal description as
• being in a TIF District.
The Final draft of the contract for private development is included in
the agenda packet. The following groups will be party to this
agreement: Elk River EDA, Elk River City Council, Breagan
Corporation (an entity comprised of Jack T. Mowry and Greg
Erlandson - the proposed owners of the 12,000 square foot facility),
and Neos, Inc. (the primary tenant in the facility).
While Breagan Corporation will own the facility, Neos will be
responsible for job creation and wage level goals. These are new
statutory requirements for companies obtaining public grants or loans
after July 1, 1995. Companies that receive such assistance must
create a net increase in jobs in Minnesota within two years of receiving
assistance, and, must meet wage level and job creation goals
established by the funding agency. Businesses not meeting these
conditions must repay the assistance at the terms negotiated by the
business and the organization administering the assistance. Each
government agency is mandated to annually report wage and job level
goals and actual progress toward those goals for each business
receiving assistance. Wage level and job creation goals must be
documented until the project goals are achieved.
• An intregal component of the contract for private development is a Tax
Increment Revenue Note. This Note indebts the city to
MowreyBreagan/Neos so long as the pay-as-you-go reimbursements
are required of this project. Stated another way, the note indebts the
city in an amount equal to 15 percent of the project's finished market
value. An anticipated range of indebtedness is $56,250 to $67,500.
This reflects a finished market value of$375,000 on the low end to
$450,000 on the high end:
Action Requested
The EDA is asked to authorize its president and executive director to
execute its potion of a contract for private development with Jack T.
Mowry/Breagan'Corporation/Neos, Inc.
/O. Modifications to TIF Plan No. 2 and TIP Plan No. 3
At its November 20 meeting, the Elk River City Council scheduled
public hearings for December 21 to consider proposed modifications to
the above-referenced TIF plans. It is the intention of the City Council
ID to decertify both districts by December 31, 1995. TIF District No. 3 is
scheduled to be decertified on time according to its TIF plan and in
accordance with statutory limits. TIF District No. 2 is scheduled to be
decertified one year early as funds in this debt service account are of
a sufficient level to justify this action at an earlier anticipated date.
EDA Commissioners will recall that they discussed the proposed
expenditure of TIF funds from District No. 3 and former District No. 4
at workshops in June and August of this year. At the August
workshop, general agreement was obtained to allocate the expenditure
of TIF Funds as follows:
East Highway 10 Utilities Writedown $400,000
Business Park/Industrial Park Initiatives 400,000
Downtown Redevelopment 150,000
Total $950,000
The EDA did not discuss funds in the District No. 2 account, which
totals approximately $80,000. In addition, because District No. 4 has
been decertified, funds available in that account would presumably be
spent on activities consistent with the goals and objectives outlined in
its TIF Plan.
411 The rationale behind the modifications to Plans No. 2 and No. 3 is to
reference specific tax increment expenditures that will be used for
purposes and activities authorized pursuant to Minnesota Statutes.
Failure to modify respective plans before they are decertified will
significantly place limitations on how TIF funds from the respective
districts can be accessed.
With respect to the modifications for TIF Plan No. 3, the following
activities/expenditures are proposed:
Business Park and Industrial Park Activities
Including, but not limited to off-site and on-site
infrastructure extensions, site development and
site preparation costs, land acquisition, and certain
municipal water and sanitary sewer
improvements, etc. $400,000
Urban Renewal and Redevelopment Activities
Including, but not limited to, off-site and on-site
infrastructure extensions, site development and
• site preparation costs, land acquisition, building
acquisition, rehabilitiation, demolition, and Mississippi
Pathway development, etc. 150,000
Infrastructure Improvements
Including, but not limited to, certain municipal water
and sanitary sewer system improvements, etc. 75,000
Total $625,000
The above-referenced expenditures have been overstated as it is likely
that only $550,000 will be available from District No. 3.
With respect to the modification to TIF Plan No. 2 the following
expenditures are proposed:
Business Park and Industrial Park Activities
(Same language as above) $50,000
4111 Urban Renewal and Redevelopment Activities
(Same language as above) 75,000
Infrastructure and Improvements
(Same language as above) 50,000
Total $175,000
As with the proposed expenditures for District No. 3 fundsthe
activities in District No.2 have been overstated as this account will
have a balance of approximately $80,000.
As EDA Commissioners can see, the proposed modifications will
address two of the three major expenditures agreed to following the
August workshop. They include downtown redevelopment activities
and business park/industrial park initiatives. The remaining
expenditure, that of east Highway 10 utilities writedown, will
presumably be funded from former District No. 4. The cash balance in
• this account totals approximately $450,000.
• By overstating the proposed activities and by developing a list of
activities consistent with the August workshop, it is hope that
sufficient flexibility exists in the respective modifications to Plans No.
2 and No. 3. Flexibility in the way these funds are expended is an
essential component of the modifications.
Action Requested
Although state law provides no review and comment opportunity for
the EDA, it maybe appropriate for Commissioners to present some
recommendation or comment on the upcoming modifications to Plans
No. 2 and No. 3.
11. 1996 EDA Committee Appointments
At its October 9 meeting, EDA Commissioners discussed its 1996
appointments/reappointments to the Finance Committee, Marketing
Committee, and R & D Committee. EDA Commissioners suggested
that it advertise for new members in order to give other residents a
chance to serve on these committees. In addition, the Executive
Director was asked to contact the current committee members to keep
them updated on the EDA's intentions.
In late October and in early November, two display ads seeking
committee appointments were placed in the Elk River Star News. A
copy of this display ad can be found in the agenda packet. The ads did
not result in any responses from prospective candidates. A similar ad
was placed in the December issue of city's newsletter. At this writing,
the newsletter has not been distributed.
EDA Commissioners may have further insights into this appointment
process at its December meeting.
12. Other Business
EDA Annual. Meeting
Just a reminder that the EDA's annual meeting is scheduled for
Monday, January 8, 1996. As Commissioners will recall,election of
officers occur at this time as does the designation of the official
newspaper, depositories, etc..
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