8.0. EDSR 12-12-1994 AGENDA ITEM NO.8
ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY
MEMORANDUM
TO: ECONOMIC DEVELOPMENT
AUTHORITY
FROM: WILLIAM RUBIN, EXECUTI 0,,,...
DIRECTOR
DATE: DECEMBER 12, 1994
SUBJECT: PROPOSAL TO CONVEY INDUSTRIAL
SITE TO TESCOM CORPORATION
Introduction
Several months ago, the Economic Development Authority authorized its
Executive Director to provide a variety of options to Tescom Corporation,
12616 Industrial Boulevard, regarding its acquisition of Lot 1, Block 2, Elk
• River Industrial Park 2nd Addition for future expansion. A map identifying
the location of Lot 1 is attached to this memo.
Background
Several land purchase scenarios were presented to Tescom, including:
• Outright purchase via a Purchase Agreement
• The right to purchase via an Option Agreement
• Right of First Refusal
• Open ended - No stated Sunset Provision
Another option offered for consideration is that of simply conveying Lot 1 to
Tescom by Quit Claim Deed for future expansion. In doing so, the EDA's
value in the lot would be recovered through Tescom's future property taxes
that are converted into "tax increment payments" by virtue of the
development that has occurred in TIF District No. 9 and Tescom's future
expansion. A map of TIF District No. 9 is also attached to this memo. The
map identifies the geographic limits of TIF District No. 9 and these limits
include Lot 1. TIF Plan No. 9 provides that District No. 9 could extend as
late as the year 1999. As a result, TIF Plan No. 9 gives the City/EDA the
• flexibility to quit claim Lot 1 to Tescom.
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
• Below is the current summary of the cash flow projections associated with
District No. 9:
TESCOM PROPERTY TAX CUMULATIVE
YEAR PAYMENT* PAYMENT PAYMENTS
1994 $18,000 -0- -0-
1995 $18,000 $59,735 $ 59,735
1996 $18,000 $59,735 $119,470
1997 $18,000 $59,735 $179,205
Through the quit claim process, one additional year of property tax payments
(that is, collecting tax increments) is required as follows:
TESCOM PROPERTY TAX CUMULATIVE
YEAR PAYMENT* PAYMENT PAYMENTS
1998 $18,000 $59,735 $238,940
*(Reimbursement for additional municipal services)
You will note that over the life of District No. 9, the City/EDA collects nearly
$239,000 which covers the City's project costs, including the addition of Lot 1,
associated with this project. Although Tescom benefits as a recipient of a lot
di that is quit claimed to it, the company is also obligated to pay an additional
year's worth of property tax payments into District No. 9, plus an additional
year of out-of-pocket payments as reimbursement for additional municipal
services.
The quit claim scenario results in a win/win situation. Tescom receives an
additional lot for future expansion; the City/EDA recovers its expenses
associated with District No. 9; and Tescom is agreeable to make an additional
year's payment related to reimbursement for additional municipal services.
Because Lot 1 was not referenced in the Contract for Private Development by
and between the EDA and Tescom Corporation, an addendum to this
agreement is recommended. The addendum will ensure that the conveyance
of Lot 1 is consistent with TIF Plan No. 9. As further assurance that Lot 1 is
used for the purposes provided in the TIF Plan, it is recommended the
Tescom warrant and covenant that the site will be used by the company or its
successors or assigns for expansion and places certain restrictions on the
resale of Lot 1 during the lift of TIF District No. 9 so as to ensure that the
objectives of TIF Plan No. 9 are met, etc.
• Action Requested
Subject to the execution of an addendum to the Contract for Private
Development by and between the Elk River EDA and Tescom Corporation,
the Elk River EDA is asked to convey Lot 1, Block 2, Elk River Industrial
Park 2nd Addition to Tescom Corporation, 12616 Industrial Boulevard, by
way of a Quit Claim Deed.
•
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