7.0. EDSR 05-08-1995 ITEM NO. 7
ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY
MEMORANDUM
TO: Economic Development Authority
FROM: William Rubin, Executive Directo
91_
DATE: May 8, 1995
SUBJECT: Request for Tax Increment Financing
Assistance -Neos, Inc.
Introduction
The EDA is in receipt of a request for Tax Increment Financing (TIF) from
Mr. Jack Mowry, Neos, Inc., 12797 Meadowvale Road. The request for TIF
assistance relates to the proposed construction of a 12,000 square foot
manufacturing facility on two lots in the McChesney Industrial Park. Neos,
a company that designs and builds machinery - specializing in packaging
• machinery, would occupy 3,600 square feet of space. The balance of the space
is intended for long-term industrial tenants. TIF funds in the amount of
$80,000 would be used to"write down" the cost of the two lots Mr.
Mowry/Neos, Inc., will acquire and for site preparation costs.
Background
With previous industrial expansions, TIF funds have been used by the
City/EDA to assist local companies with their expansion projects. Recent
examples include Alltool Manufacturing, Timron Precision Gear, and Tescom
Corporation. TIF funds have been used to reduce project costs relating to the
land acquisition and the site development component of the project.
With each manufacturing project, an "Economic Development District" has
been established. These districts are designed to last a few years. Since
1990, new TIF districts created by a city will result in the loss of state aid.
With an Economic Development District,state aid is lost as soon as the new
project begins paying property taxes. With redevelopment TIF Districts,
state aid loss is less severe and is calculated on a graduated step-up basis.
Preliminary estimates of the state aid loss with the Neos TIF District will be
available on Monday.
•
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
At an EDA workshop in January, Commissioners reviewed the merits of
Screating new TIF Districts in Elk River. Commissioners concluded by
indicating they would evaluate each TIF request on a case by case basis.
Criteria to evaluate these requests included type of user, number of jobs
created or retained, and finished product. It is believed that the
Mowry/Neos, Inc., request achieves these factors.
The $80,000 TIF request is broken down with $60,000 attributable to land
acquisition and $20,000 for site development. The two lots contain 2.19 acres
- for a value of nearly .63¢ per square foot. This is considered a market value-
based transaction. Site preparation costs are reimbursed based on expenses
incurred.
Below is a proposed timetable to complete this request for TIF assistance:
May 8 EDA authorizes the preparation of a TIF Plan for the Neos, Inc.,
project; EDA also recommends that the City Council authorize a
public hearing to consider the adoption of the TIF Plan.
Further, the EDA authorizes a 90-day option agreement with
the owner of the lots in the McChesney Industrial Park. Lastly,
the EDA authorizes a public hearing to consider the resale of
these sites to Mowry/Neos, Inc.
•
May 8 - City Council sets public hearing date to consider TIF Plan.
Mid May TIF Plan is sent to School District and County Board for review
and comment.
May 16 County Board meeting.
May 23 - School Board meeting.
May 23 Planning Commission reviews TIF Plan.
May 31 EDA TIF hearing notice published in the Star News;
City Council TIF hearing notice published in the Star News;
EDA land sale hearing notice published in the Star News.
June 12 EDA conducts public hearing and adopts TIF Plan;
EDA conducts public hearing on land sale.
June 19 - City Council conducts publichearing on TIF Plan.
•
Action Requested
After considering the merits of this TIF request, the EDA is asked to:
a. Prepare a TIF Plan for the Mowry/Neos, Inc., expansion,
b. Schedule a public hearing for June 12, 1995, to consider the
adoptionof the TIF Plan,
c. Authorize a 90-day option on Lots 6 and 7, McChesney
Industrial Park, and,
d. Schedule a public hearing for June 12, 1995, to discuss the
terms and conditions by which Lot 6 and 7, McChesney
Industrial Park, would be conveyed to Mowry/Neos, Inc.
•
110
MAY- 4-95 THU 9:31 METAL CRAFT FAX NO. 4410798 P. 02
INEos . iNc.
' a 12797 Meadowvale Road, Suite 8 • Elk River, MN 55330
(612) 441-0705 • 1-800-848-4912 ext. 2958
Dear Bill,
We are looking at building a 12,000 square foot building used for manufacturing and
office space. Our current plans are for Tip-up concrete panels, or cement block construction. We
are trying to lay out the building to accommodate various other business renters as well as
planned growth for Neos. Any suggestions you have would be greatly appreciated. Thank you for
your help.
Sincerely,
Jack T. Mowry
•
•
MAY- 4-95 THU 9:32 METAL CRAFT FAX NO, 4410798 P. 03
• APPLICATION FOR TAX INCREMENT FINANCING
CITY OF ELK RIVER, MINNESOTA
APPLICANT
Business Name:Neos Incorporated
2797 Meadowvale Road
Elk River,MN. 55330
Phone: 612-441-0705
Officers: Jack T. Mowry,President
Gregory E. Erlandson, General Manager
Kathy Eckert, Corporate Secretary
Contact Person: Jack T. Mowry
Title: President
Business Form: Corporation
Years in Operation: 8 years
• Applicant has never filed for bankruptcy.
Applicant has never defaulted on any bond or mortgage commitment.
Applicant does have commitments for conventional financing.
Financing References:
Bank: J.E. Braas Company Industrial Supply Company
First National Bank Of Elk River 7970 Wallace Road 12905 Hiway 55 West
736 Main Street Eden Prairie,MN.55344 Minneapolis,MN.
Elk River,MN. 55330 612-937-8902 612-559-0033
612-441-2100
Combined Welding& Mach. Power/Mation
Officer: Tom McNair 5873 Queens Ave. N/W-8330 P.O.Box 1450
Elk River, MN. 55330 Minneapolis,MN. 55485
612-241-0685 612-645-0781
Accountant: Legal Counsel:
Hubmer and Enstad, Ltd. Lindquist and Vennum
• Jon Enstad, CPA Jim Rueter
8960 Springbrook Drive 4200 IDS Tower
Coon Rapids, MN. 55433 Minneapolis, MN. 55402
612-786-7899 612-371-3519
MAY- 4-95 THU 9:33 METAL CRAFT FAX NO. 4410798 P. 05
• PROPOSED PROJECT
Describe Project: To build a manufacturing plant/office building with approximately
12,000 square feet.Neos Inc. will require 4800 square feet now, and approximately 3000 more in
the next two years. Metal Craft also needs expansion room and will take over the existing area
rented by Neos now. It is far more cost effective to build a larger building now and rent the space
until needed by Neos, or Metal Craft.
Location: Lot 6 and 7 of McChesneys Industrial Park.
Type of Project: Industrial
JOB CREATION
NEOS PROSPECTIVE TENANTS
Current Number of employees 3 full time, 2 part time 11 full time
Current Payroll $120,000.00 $360,000.00
Number of Jobs Created 6 10
Number of Jobs Retained 5 11
• Revised Payroll $240,000.00 $690,000.00
PROJECT COSTS
Land Acquisition: $60,000.00
Site Development: $20,000.00 Estimate
Construction: $380,000.00 Estimate
Machinery and Equipment:
Architectural and Eng. Fees:
Legal Fees:
Interest During Construction:
Debt Service Reserve:
Contingencies
Total: $460,000.00
SOURCE OF FINANCING
Conventional Loan $300,000.00
Equity 4O100O.00
• SBA Loan
Revenue Bond
Tax Increment Financing $80,000.00 Estimate
Grant(s)
Other
Total $u6fl 1000
MAY- 4-95 THU 9:32 METAL CRAFT FAX NO. 4410798 P. 04
CONSTRUCTION AND DESIGN
Name and Address of Architect
Name and address of Engineer
Name and address of Contractor
Target Dates:
Start of construction: ASAP
Construction completed: 12.2`.16
Finished Market Value: $550,000.00 approximately
• STATEMENT OF PUBLIC PURPOSE:
Tax increment funds are needed to reduce overall project cost to assure that Neos remains
a stable and profitable company through it's initial building stage.
The undersigned, Jack T. Mowry,President of Neos Incorporated,hereby represents and
warrants to the City that he has carefully reviewed this application, and that the statements and
information contained herein and submitted herewith are accurate and complete to the best of his
knowledge and belief.
Dated: May 4, 1995 Neos,Incorporated
By. Q
President
The City reserves the right to require additional information and supporting data from the
applicant after the filing of this Application.
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