EDSR MEMORANDUM 07-11-1994 ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY
MEMORANDUM
TO: ECONOMIC DEVELOPMENT AUTHORITY
FROM: WILLIAM RUBIN, EXECUTIVE DIRECTO In
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DATE: JULY 6, 1994
SUBJECT: AGENDA MEMO FOR JULY 11, 1994, EDA MEETING
5. Financial Update
The following is a summary from Finance Director Lori Johnson:
Micro Loan Fund - The Micro Loan Fund had a cash balance of
$132,328.66 on June 30, 1994. As of July 7, all July payments
• are current with the exception of Alltool, Indy Lube, Woodsmen
Quality Products, and Designing Women of Elk River.
Block.Grant Micro Loan Fund This Fund had a cash balance of
$5,463.21 on June 30, 1994. Tescom is current on its loan
payment.
ACTION REQUESTED
This is an informational item only and no action is requested.
6. Interim Park Improvements/EDA Main Street Site
At the June EDA meeting, Commissioners discussed alternatives to
redeveloping the EDA Main Street site. Although still committed to
eventual redevelopment, Commissioners desired some interim
improvements to this site. As a result of a public works project along
Jackson Road, the City of Elk River can access excess fill material at a
relatively inexpensive price. The sentiment of the EDA
Commissioners is to utilize the fill material on this site to create a
"open space" until the property is redeveloped.
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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
EDA Agenda Memo Page 2
July 11, 1994
Street/Park Superintendent Phil Hals was requested to prepare some
• cost estimates for this endeavor. Please refer to Phil's handout in the
agenda packet.
ACTION REQUESTED
The EDA Commissioners are asked to consider the costs of the interim
improvements, and further, to recommend that the City of Elk River
absorb these costs.
Depending on the scope and desired outcome of this project, the EDA
Commissioners may also wish to recommend that the City retain a
landscape architect who would be responsible for the preparation of a
design for this project. Phil indicates that one of his summer
employees has the ability to create various designs.
7. Business Park Issues
At the May EDA meeting, Commissioners authorized Panger/Benson
Appraisal Professionals to undertake an appraisal of 34 to 35 acres of
proposed business park property. The appraisal was still under review
• at the June EDA meeting. Since that time, the Negotiating Committee
has met with Panger/Benson as part of an appraisal consultation to
answer the questions of the Negotiating Committee. As a result of this
consultation, a follow-up report was submitted by Panger/Benson:
This follow-up took into consideration a development cost approach
excluding traditional expenses such as real estate tax, profit, etc., and,
a discount rate at 10.5 percent. A second illustration utilized a
discount rate of 4.5 percent. Utilizing this approach, Panger/Benson
indicates a fair market value of $283,947 ($.19 per square foot) or
$383,566 ($.25 per square foot) if a 4.5 percent discount rate is utilized.
Salient points of the appraisal together with the follow-up
correspondence from the consultation are included in the agenda
packet.
Subsequently, the Negotiating Committee met to review the
consultation update, and, to consider a potential offer to Country Ridge
Partnership. At its June 28th meeting, the Negotiating Committee
agreed to meet with Country Ridge to discuss the broad brush strokes
of the appraisal's estimated fair market value of the 34 acres, and, to
discuss the broad parameters of an offer the Negotiating Committee
• would recommend to the EDA Commissioners. Committee members
EDA Agenda Memo Page 3
July 11, 1994
Patrick Dwyer, Carol Mills, Hank Duitsman, and the writer of this
• memo attended the July 5th meeting with Country Ridge Partnership.
Mr. Tony Emmerich and Jay Johnson attended as representatives of
Country Ridge. At the meeting, Emmerich and Johnson explained the
background of its April 25th price of $556,750 ($16,375 per acre; $.376
per square foot) for the 34 acre business park tract. Based on the
Panger/Benson consultation summary, the Negotiating Committee was
comfortable that it could recommend to the EDA Commissioners a
price of $296,208 ($8,712 per acre; $.20 per square foot) for the site.
Country Ridge's price of $556,750 is well beyond the Negotiating
Committee's recommended offer of$296,208. Both parties disagree on
the site's intended use - based on the zoning ordinance and the
comprehensive plan. As such, Country Ridge does not wish to "give the
site away", and therefore, it is doubtful that future meetings with the
Partnership will be held.
Options that are available to the EDA include:
• Recommend to the City Council that it initiate a rezoning of
the 34 acre Country Ridge Partnership tract, the 25 acre
Gagne site, and the property held by Hoyt Partners; thereby
allowing one or more of the private sector owners to develop
• a business campus;
• Negotiate with Gagne or Hoyt Partners for the potential
acquisition of its holdings; thereby enabling the EDA to own
and develop a business campus.
ACTION REQUESTED
The EDA is asked to accept the Panger/Benson Appraisal Report and
retain it for future business park reference.
8. Joint Meeting with City Staff/Utilities Commission
If the EDA resolves to acquire and develop its own business park, it is
appropriate to begin finalizing potential sources of funds for the
infrastructure costs associated with this project. Should a business
park fall on the private sector, then the infrastructure costs rest with a
private developer.
Initially, the Business Park Task Force vigorously pursued a Rural
Electrification Administration (REA) grant/loan through Anoka
• Electric Cooperative (AEC). This program would have provided up to
EDA Agenda Memo Page 4
July,1 1, 1994
$400,000 in a combination grant (that is, not to be repaid) and a zero
• interest loan on the balance. Having failed with the REA program, the
need for other sources of funds, public and private, continue.
Potential options may include:
• A $400,000 grant request to the Elk River Municipal
Utilities, This request could be modeled after the REA
program.
• A joint venture request with the Utilities Commission.
• TIF funds/RDF settlement funds previously pledged
towards other projects.
• Other municipal accounts or funds.
In order to help the EDA finalize potential sources of funds for
infrastructure improvements, it is vital that a meeting with the City
Council, City staff, and the Utilities Commission be scheduled. This
meeting will help all parties identify and understand potential sources
of funds that could be accessed for street and utility improvements.
• ACTION REQUESTED
The EDA is asked to request that a joint meeting with City staff and
the Elk River Municipal Utilities Commission be scheduled at a time
that is mutually convenient for all parties.
9. Comp Plan Steering Committee Meeting
As a prelude to the July 14th Steering Committee meeting on Elk
River's commercial sector, the writer of this memo felt that it was
appropriate for the EDA to discuss the future of our Central Business
District (CBD). A separate outline on this topic has been prepared and
is included in the agenda packet. In short, a vibrant CBD is one of
many barometers of a community's health. Because of extraordinary
redevelopment costs found in the CBD, investment or reinvestment in
this area is an expensive endeavor. Without incentives, private
investment` will likely occur elsewhere. There are challenges in
providing these incentives; that is, the TIF Law includes a very
narrow definition of "blight", and, there are penalties in the form of
state aid losses if new TIF Districts are established. In addition,
EDA Agenda Memo Page 5
July 11, 1994
potential redevelopment projects in the CBD compete for a limited or
411 finite pool of funds.
There is, however, a role that can be played by the City and its EDA or
HRA. A proactive role is that of facilitating redevelopment. An
EDA/HRA can be a conduit for redevelopment to occur. Examples
include TIF grants or redevelopment grants, assembling land in
anticipation of redevelopment, and finally, a willingness to absorb
some redevelopment costs to ensure that investment in the CBD
occurs. Another role is less proactive. It is the traditional regulatory
role; that is, the traditional "police powers" of code enforcement, public
safety, setbacks, and building code regulations.
As the Steering Committee begins to explore Elk River's commercial
sector, the writer of this memo believes that many opportunities exist
for public sector participation. An opportunity exists for the
City/EDA/HRA to commit itself towards absorbing certain
redevelopment costs in future projects to ensure a vibrant CBD. This
commitment must be long term and the financial pockets should be
deep enough to ensure a long-term commitment. Of highest
importance, is a recognition that public dollars that are not repaid or
are left on the table as a result of a future redevelopment project
• should not place a burden on the typical taxpayer. These are the
challenges and the opportunities that will be discussed in greater
detail at the EDA meeting.
10. MHFA Rental Rehab Program
At a recent City Council meeting, a Twin Cities-based property
manager introduced himself and reviewed with the Council two
projects he had successfully undertaken in Minneapolis and in St.
Louis Park. The individual has been working as property manager at
the Lake Orono Estates apartments. He has indicated that this
complex is no longer in receivership, and, the new owners are anxious
to begin work on rehabing the apartments.
A potential source of financing for a project like this is through the
Minnesota Housing Finance Agency (MHFA). MHFA offers a Home
Rental Rehab Program which makes federal dollars, up to $14,000 per
unit, available to apartment owners desiring assistance in rehabing
their projects. This program covers 75 percent of the rehab costs. The
balance of the costs are funded through owner's equity and/or other
funds. The MHFA funds are typically provided as a zero percent loan
• that is forgiven after five years. As a condition of this program, there
EDA Agenda Memo Page 6
July ] 1, 1994
are rent and income restrictions which ensure that the project benefits
low and moderate income wage earners.
Additional information on the MHFA program is found in a summary
in the agenda packet. (To t MAIGOY) UNDO" 6b9A1LA € CAVkyz Nat" AVAI(Xtk AS
ACTION REQUESTED NM-.
The EDA is asked to explore the merits of participating in this
program, or, the EDA is asked to refer this matter to the Elk River
Housing and Redevelopment Authority.
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