5.0.-14.0. EDSR 04-11-1994 ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY
MEMORANDUM
TO: ECONOMIC DEVELOPMENT
AUTHORITY
FROM: WILLIAM RUBIN, EXECUTIVM
DIRECTOR
DATE: APRIL 6, 1994
SUBJECT: AGENDA MEMO FOR APRIL 11, 1994,
EDA MEETING
5. Financial Update
The following is a summary from Finance Director Lori Johnson:
• Micro-Loan Fund
On March 28, the EDA closed its loan with LaRose Enterprises
in the amount of$25,000 for a restaurant project. On March 18,
PureSteam Humidifier paid its Micro-Loan balance in full with
a payment of $13,543.26. After these two transactions, the
March 31, 1994, Micro-Loan cash balance was $119,590.91.
There is one approved loan in the amount of $15,000.00 to
Water Laboratories which has not yet been closed. As of Friday,
April 8, 1994, all April loan payments are current with the
exception of Alltool.
ACTION REQUESTED
This is an informational item only and no action is requested.
6. Joint Meeting with the Elk River Utilities Commission
At a past EDA meeting, it was suggested that the EDA and the
Utilities Commission conduct a joint meeting to discuss common issues
as they relate to the alley between the Sunshine Depot and the Main
• Street Redevelopment Site. From previous discussions, one concept
entertained by the City/EDA was to vacate the alley and reroute utility
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
lines (electrical, storm drainage, etc.) so that the Redevelopment Site
• gains an additional 20 feet of Main Street frontage.
The General Manager of the Utilities Commission, its President, Vice
Chair, and Trustee will be in attendance to discuss this issue and other
which may come up as part of this item.
7. Tescom Corporation TIF Reimbursement
This is a carry-over item from the March EDA meeting. Staff is
anticipating a request for TIF reimbursement from Tescom
Corporation as part of the EDA's incentive package. Of the $153,000
in TIF assistance, approximately $53,000 is attributable to general on-
site utility extensions and site preparation costs. This amount will be
funded "internally" by the EDA and will be recovered along with the
land write down costs beginning in 1995.
ACTION REQUESTED
The EDA is asked to authorize a TIF reimbursement in the amount of
$53,000 to Tescom Corporation.
• 8. Right of First Refusal(Lot 1, Block 2, Industrial Park 2nd Addition)
EDA Commissioners will recall that Tescom Corporation's initial
expansion project consisted of three lots in the Elk River Industrial
Park. In fact, TIF District No. 9 is comprised of Lots 1, 2, and 3,
Industrial Park 2nd Addition. Only Lots 2 and 3 were conveyed to
Tescom as part of its expansion project. Recognizing the
aforementioned, City staff and representatives from Tescom informally
discussed a right of first refusal, or, an option which the company
might secure in order to control Lot 1 which is still vacant.
This control may take one of several forms:
a. Open-ended;
b. Exclusive option over a stated time period;
c. Right of first refusal over a stated time period.
A right of first refusal enables the EDA to continue to market the site
to prospective companies, while at the same time, enabling Tescom to
control the property until it is ready to expand. If another buyer was
identified, and a bonified offer for the purchase of the site was
• obtained, the EDA may wish to give Tescom, say, 10 working days to
purchase the site or forfeit it to the prospective buyer.
• EDA Commissioners may have other ideas about Tescom's desire to
control Lot 1 without expending funds to do so.
ACTION REQUESTED
In the near future, the EDA is asked to formalize an understanding
with Tescom Corporation regarding its desire to have some control
over Lot 1.
9. TIF Legislative Issues
Numerous Legislative issues regarding Tax.Increment Financing are
in front of State Legislators in St. Paul. The continued use of TIF will
go a long way towards determining the success of the proposed Elk
River Business Park. Rather than placing additional restrictions on
the use of TIF, new bills have been introduced to restore its continued
use. A discussion of past legislative action follows.
In 1990, new restrictions were placed on TIF which resulted in a
community losing a portion of its state aid as a consequence of new TIF
Districts being created. This restriction nearly ground the creation of
• new Districts to a halt in Minnesota. Some Districts, however, were
created. In Elk River, Districts No. 9, 10, and 11 are considered post
1990 TIF Districts. Although it is likely that the City will lose a
portion of its state aid as a result of these Districts being created,
specific language in the respective contracts for private development
require that the companies benefiting from the TIF assistance
reimburse the City for any loss.
In 1993, additional restrictions prohibited developer repayments of the
state aid loss. As a result, new TIF Districts in Elk River are subject
to close scrutiny and on-going evaluation. The 1993 restrictions have
not stopped other communities from using TIF for redevelopment
projects or for manufacturing type projects. In fact, some communities
are arbitrarily extending the life of pre-1990 TIF Districts in order to
issue more bonds in support of a manufacturing or housing projects.
Elk River may not have this luxury. Toward that end, it is to our
benefit to support the easing of certain TIF restrictions during this
current session. For example:
• One proposed bill would remove the state aid penalty for TIF
redevelopment projects;
•
• Another proposed bill would remove the state aid penalty for
IDmanufacturing projects within economic development TIF
Districts;
• Another bill would exempt soil correction districts from the
state aid penalties.
These initiatives are consistent with the 1994 priorities of the League
of Minnesota Cities. Information on these priorities and the proposed
bills which would ease the TIF restrictions are outlined in greater
detail in the agenda packet.
What are the alternatives of not supporting the proposed TIF
legislative initiatives? The City of St. Cloud successfully obtained
special legislation which exempted a certain manufacturing project
from most of the restrictions found in Minnesota Statutes. Some have
suggested that this is a dangerous precedent by giving special
treatment to one company. How does one say "no" to the next business
that asks for similar treatment? In addition, seeking special
legislation for each new TIF District is not practical.
As stated previously, the easing of these restrictions will go a long way
• toward filling a future business park. For example, with the Timron
transaction and the Tescom transaction, land was written down as an
incentive to expand in Elk River. Over time, the .City/EDA recovers
the cost of the land as future property taxes are paid. It may take four
or five years to achieve this, but the City/EDA is eventually made
whole to help "recycle" the public funds to another project.
ACTION REQUESTED
The EDA is asked to go on record in support of the TIF Legislative
Initiatives. In addition, the EDA is asked to communicate this support
to its State Representative and Senator.
10. Business Park Lay-outs
Mr. Tony Emmerich was unsuccessful in his attempts to amend the
Comp Plan in order to achieve a Highway Business land use
designation for a portion of his property (the former Lakoduk
property). With that, Mr. Emmerich has asked the City/EDA to
determine how much land it wishes to purchase for purposes of
developing a publicly-owned business park. Several schematics and
• lay-outs are currently underway which reflect a variety of land uses
(single family, townhouse, business park, etc.) on the Lakoduk
property. The Business Park Task Force will be reviewing these lay-
outs and will be recommending one or two designs which gives the
EDA an opportunity to develop a business park. Eventually, these
schematics will require greater detail and subsequent cost estimates.
A portion of the EDA's 1994 budget is set aside for purposes of
engaging a consulting engineering firm to assist staff with this
endeavor.
ACTION REQUESTED
Once the Task Force narrows down the lay-out designs to a more
manageable number, the EDA Commissioners are asked to engage
MSA Consulting Engineers to assist with a more detailed business
park design, and, to develop infrastructure cost estimates.
11. Custom Motors
At a previous City Council meeting, action to rezone approximately 15
acres of I-1 (light industrial) property to R-lb (single family
residential) was initiated. This initiative involves two separate
properties - Custom Motors and Jerry Gallati. If the Planning
• Commission and City Council approve the rezoning, a five-year
amortization period will begin for the continued operation of Custom
Motors. At the end of 5 years, Custom Motors will have to relocate
because of the incompatible zoning.
At the Planning Commission hearing, the rezoning action was tabled
until such time as certain financing programs were identified to assist
with the relocation of Custom Motors. This information is spelled out
in greater detail in a memo included in the agenda packet.
ACTION REQUESTED
The EDA is asked to review the financing programs that were
identified so that it is in a better position to assist with the future
relocation of Custom Motors.
12. Comprehensive Plan Steering Committee
Preparation is underway to begin an update of the City's
Comprehensive Land Use Plan. A fourteen-person Steering
Committee is being formed to assist the Planning Commission and
• City staff with this endeavor. One of the members of the Steering
Committee will be an EDA Commissioner.
ACTION REQUESTED
The EDA is asked to appoint one of its members to the Comp Plan
Steering Committee.
13. Micro-Loan Policy Guidelines
From time to time,it may be appropriate for the EDA and its Finance
Committee to review the Micro-Loan Policy guidelines for changes
and/or corrections. For example, a possible change might be that of
increasing the loan limits from $50,000 to, say, $75,000 or $100,000.
This change may apply only to companies that have in excess of, say,
100 employees so that a small user isn't automatically eligible for the
higher amounts. This suggestion is particularly germane in light of a
proposed expansion by an existing Elk River company. Information on
the expansion is outlined in greater detail in the Prospect Status
Report.
The company seeks a variety of sources of financing to assist with the
purchase of new machinery and equipment as part of an expansion.
An EDA Micro-Loan in the amount of $50,000 only begins to approach
• the company's equipment needs. However, a larger EDA loan used in
conjunction with, say, an Initiative Fund loan may go a long way in
financing new equipment purchases.
Additional insights on this proposed policy guideline change will be
presented at the EDA meeting.
14. Ice Arena Feasibility Study
Staff and EDA President Jeff Gongoll will provide Commissioners with
an update on the Ice Arena Feasibility Study at the April 11th
meeting.
15. Prospect Status Report
The Prospect Status Report has been sent under separate cover.
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April 6, 1994 7 1994
Mr. William Rubin
Economic Development Coordinator
City of Elk River
13065 Orono Parkway
Elk River, MN 55330 .
Dear Bill,
Please find enclosed the application for payment, identifying the
various areas of activity expenses incurred during construction of
our new facility.
The previously agreed upon acceptable activities are highlighted on
the application for payment. Namely, civil engineering for land :
preparation design and utilities design are each $2, 000.; and
included in line item number 2, "Design;" excavation and earthwork,
although initially budgeted for $15, 000, actually came to $27,500
• and shown in line item number 3, "Excavation; " and utilities are
included in line item number 6, "Storm Sewer, Water, Sanitary, " at
a cost of $23, 850 .
The additional acceptable activities include: survey costs at
$2, 956:50, and soil tests for $6, 760 . Copies of the checks and
invoices are included for these items .
Additional monies in the amount of $1,700 were expended for a
required environmental assessment for those lots (invoice and copy
of check enclosed), and $295 for title insurance for which I do not
have a separate check.
The total expenditure for items we previously agreed as appropriate
was 67,061 .50. I do understand, however, the allocated sum, based
on the expected cost for these items, is $53, 000 . If there is any
further information you need to process this request, kindly let me
know.
Best regards,
Edwaro A. Cunnington
• Vice *resident, Tescom Corporation
Corporate Offices: 12616 Industrial Boulevard J Elk River,MN 55330-2491
612-441-6330❑FAX:612-241-3224
MN Dept of Trade & Econ Dev 1 612 297-1168 04/02/94 03:18:25 Page 2 of 2
APR 01 '94 02:25PM YAGGY COLBY ASSOCIATES P.1
ECONOMIC DEVELOPMENT
ASSOCIATION OF MINNESOTA
•
One Appletree Square, Suite 201
LEGISLATIVE ALERT Bloomington, MN 55425
11114
(612) 8546215 • Fax 854-2614
House Tax Committee Hearing
Tuesday, April 5, 1994, 8:00 to 12:00
Room 5 of State Office Building
April 1, 1994
Tax Increment Financing is an important Local Development Tool. Competition from
surrounding states has further increased the need for Local Development Tools. The flood of
special TIF legislation since the 1990 "reforms" confirms the existence of state policies that are
presently flawed and forces communities to make choices between good projects and LGA.cuts.
The House Tax Committee will consider general tax increment financing provisions relating to
manufacturing job creation, redevelopment, housing and polluted lands. More special legislation
will be considered as well as the possible unveiling of Representative Ann Rest's own tax
increment bill--one that is rumored to impose even more restrictions on the use of Tll and might
even abolish it in favor of a "tax abatement program".
Economic Developers need to act now. Plan on attending this Hearing or contact your
• representatives or members of the House Tax Committee.
H.F. 3070 (Bauerly): Allows relief from the HACA/LGA penalties for manufacturing
districts if there is County approval and if the school district agrees to forgo future aid
calculated on the amount of increments to be captured.
H.F. 2654 (Carruthers): Exempts redevelopment districts from the HACAJLGA penalties.
H.F. 3180 (Hausman): Exempts soils correction districts from the aid penalties and makes
it easier to qualify as a soils correction district; removes the provision requiring a portion of
the local match to be from non-tax increment sources.
H.F. 2974 (Jefferson): Extends the interest rate reduction program from twelve to fifteen
years for multi-family, rental housing.
House Tax Committee Members, Chair-Ann Rest, Vice Chair-Ted Winter, Abrams, Anderson,
Carruthers, Dauner, Dawkins, Erhardt, Girard, Goodno, Hugoson, Jacobs, Jaros, Krinkie, Lesley,
Long, Macklin, Milbert, Olson, E., Orfield, Osthoff, Ostrom, Peterson, Rukavina, Solberg,
Sviggum, Van Dellen, Wagenius, Workman.
Unless we speak out, the legislature will continue a trend towards reducing a communities ability
to use T.I.F.
•
Any questions or concerns please contact EDAM Legislative Committee Co-Chairs, Tim
Clawson, Yaggy Colby Associates, 507-288-6464 or Pat Connoy, MCDA, 612-673-5193.
1994 top issues
The League of Minnesota Cities has
• Contents eight priority issues for the 1994
legislative session. We will include
Action alert--Annexation deal close 1 this list every week with a page
Action alert—Landfill bill in trouble,call your°representative.. 1 number after the issue if we Include a
Mandate alert--Bill would require minimum wage story.
for on-call employees I
State Aid to Cities Preserve 1994.
Contest for"good ideas"to improve lobbying 2
level and seek additional funding for
Audit exemption for small cities and towns progresses 3 future years for LGA and HACA.
Cities testify 3
City officials meet in St.Paul
4 page 4
Training -. 4 •
Local Government Trust Fund -
Best practices review audit gets Senate committee OK 4 Stabilize the LGTF and resolve the
House Tax Committee considers LGA bill 4 current shortfall./page 4
Bill Summaries B1
Municipal ads Inside back cover
• Open Meeting Law-Clarify require-
----- — ments and permit defense of alleged
Contest for "good ideas" to violations. ..
improve lobbying Annexation-Preserve 1992 annex-
Duke Addicks ation amendments,expand cities
The League of Minnesota Cities Legislative Advisory Com-
ability to annex urban or urbanizing
areas, and control growth in nonurban
mittee is'seeking"good ideas"to improve the League's legislative/ areas:/page 1 y
• congressional policy adoption and lobbying process.
The goals of the Legislative Advisory Committee are to
ensure maximum member participation and ownership of the Landfill Cleanup-
Establish new
policy adoption and lobbying process and to ensure effectiveness program separate from Superfund tii
at the state and federal levels. clean up closed municipal landfills.
If you have a"good idea"please send it to Duke Addicks, /page 1
director of intergovernmental relations at the League.
The person submitting the best"good idea"as judged by the Public Employment Labor Rela-
Legislative Advisory Committee,will win a free registration to the tions Act- Reform PELRA's interest
League's annual conference and be recognized for their contribu- arbitration provisions to balance the
tion at the annual meeting.0
bargaining power of essential and
nonessential public employees.
The Cities Bulletin is a publication of the League of Minnesota Cities and
includes an update of state legislative,administrative,and congressional actions that affect
cities.It also includes reviews of metropolitan area issues by the Association of Metropoli- Development/Redevelopment-
tan Municipalities.The Cities Bulletin lists authors of bill summaries and some articles by -
RemOVe the aid penalties on TIF for
their initials.
Joel Jamnik-ii manufacturing and redevelopment
Sarah Hackett-SH districts;obtain additional funding for
League legislative staff members are available to answer your questions concernpollution clean-up.
ing legislation relating to cities.
Transportation Systems Funding''-
Executive Director Editors Typesetting and design Increase funding for roads and transit
Jim Miller Jean Mehie Goad Gayle Brod( by extending the sales tax to gasoline;
Tim Busse Laurie.Athletic or increase the gas tax and estihlisb
dedicated revenue for transit.
• League of Minnesota Cities. 1.190 I.rxingkm Avenue North.St. Paul.MN 551 2b Ark
1.1,4„,,:(ljI I'),I too.las:('i'1.mo0072. I'm 01214Q11-0010,1800-02S 1122.plus your city code T047 Printed on recycled pnpnr
Page 2 LMC Cities Bulletin
Senate subcommittee considers tax increment legislation
j,. Sarah Hackett for redevelopment. Now that the from manufacturing within economic
The Senate Taxes and Tax Laws potential uses of redevelopment TIF development TIF districts. The bill is
Subcommittee on Property Tax, have been narrowed,the bill would being redrafted and should then focus
Chaired by Sen.Carol Flynn(DFL- remove the local government aid/ on removal of the LGA/HACA penalty
Minneapolis)heard presentations and homestead and agricultural credit aid and include language to reassure that
testimony on four bills concerning (LGA/HACA)penalty to make TIF a this tool would be used to create or
development. The committee used the more practical component of cities' retain jobs within the state,rather than
hearing to become better educated redevelopment efforts. encourage the movement of jobs from
about the proposals and to ask ques- one city to another.
tions of the authors and presenters;no Housing interest rate reduction
official votes were taken. The Senate Cities ability to provide affordable Development of polluted land
Tax Committee is next stop for this public housing would be enhanced by Sen.Ted Mondale(DFL-St.Louis
legislation and its likely the committee S.F.2174(Berglin,Metzen,Belanger, Park)discussed a bill that will improve
will include these provisions in the Novak). TIF can currently be used to the ability of cities to clean up polluted
omnibus tax bill. finance an"interest rate reduction property. The bill has not yet been
The League has been involved program"to reduce the interest rates on assigned a Senate File number.The
with the Minnesota Solutions Partner- multi-family rental housing for a proposal would eliminate the require-
ship and the creation of these bills. maximum of 12 years. This tool is ment that a city provide a match of 18
Please contact your Senators and frequently used in conjunction with percent of pollution clean up costs from
Representatives in support.(see Bill federal housing programs that run for its general fund,tax levy,or other non-
Summaries for House authors) 15 years. The bill would match the TIF source. This requirement was
state process to the federal system and passed in 1993 as part of a contamina-
TIF for Redevelopment extend these TIF districts to 15 years. tion grant clean up program. The fault,
S.F.2173 (Hottinger,Pogemiller, or responsibility,by the city was never
(. r Doug Johnson, Pappas,Flynn)could Creating manufacturing jobs well justified,and the use of general
help cities across the state address the with TIF fund dollars to pay for clean up was
problems of blight and decay. Sen. Sen.Joe Bertram(DFL- cited as poor policy. The bill will also
John Hottinger(DFL-Mankato) include a repeal of the LGA/HACA
Paynesville)explained how S.F.2268
described how restrictions passed in (Betram,Flynn,Doug Johnson,Sams, penalty on TIF projects for pollution
1990 have prohibited the perceived Langseth)would remove the penalty clean up.0
abuses of tax increment financing(TIF)
Legislative Advisory Committee begins analyzing
League's policy process
Tnn Busse specific solutions. He also stressed reliance on the League,and to make the
With the goal of increasing again the importance of spotlighting League the chief source of unbiased,
member participation and enhancing the few major problems of highest complete,and accurate information on
importance to cities. Addicks outlined city issues.
lobbying efforts, the League of
Minnesota Cities Legislative Advisory changes that the League has already In July 1995,the committee will
Committee met for the first time March implemented,including a department present their recommendations to the
4. Co-chaired by Lorraine Browne and reorganization allowing IGR staff to LMC Board of Directors. The board
Susan Hoyt,the Committee will review focus on city issues at all levels of prompted the creation of the committee
the LMC policy formulation and government. at their retreat last summer by naming
legislative process over the next 18 Citing the lackluster adoption of the enhancement of the League's policy
legislative policies at the Policy formulation and lobbying process as
months. Adoption Meeting,the committee the organization's top priority.
LMC Director of Intergovernmen-
hopes to change the process to maxi- The committee will meet again
tal Relations Duke Addicks told the mize member participation and March 23. Watch the Cities Bulletin
committee that the policy adoption ownership in the policies. The commit- for updates and reports on the
process should focus on the problems tee also hopes to increase legislative committee's progress.0
cities face,rather than a series of
March 18, 1994 Page 5
ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY
DRAFT
April 6, 1994
Representative Stephanie Klinzing
549 State Office Building
St. Paul, MN 55155
Dear Representative Klinzing:
Several State Legislators have undertaken new initiatives which address the
continued use of Tax Increment Financing by communities throughout
• Minnesota. The initiatives include:
• The exclusion of LGA/HACA penalties for TIF manufacturing
Districts (H.F. 3070);
• The exclusion of LGA/HACA penalties for TIF redevelopment
Districts (H.F. 2654);
• The exclusion of LGA/HACA penalties for soils condition TIF
Districts - including the elimination of the local match requirement
for clean-up costs (H.F. 3180).
I am bringing these proposals to your attention because many exciting things
are occurring in Elk River. For example, in order to encourage more
industrial development opportunities, the Economic Development Authority
(EDA) will likely develop its own business campus and its own industrial
park. The ability to utilize TIF for some of these industrial transactions will
go a long way towards ensuring a successful development. The EDA's Main
Street Redevelopment Site is still vacant and it will likely require TIF
incentives to attract a developer.
• In closing, the Elk River EDA supports the Legislative initiatives listed
above and respectfully requests your support as the proposed bills move
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
forward during the session. In the event of questions or comments, please
• feel free to call me or EDA Executive Director Bill Rubin (441-4905). Thank
you for your support.
Sincerely yours,
Jeffrey A. Gongoll, President
Elk River Economic Development Authority
•
ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY
•
DRAFT
April 6, 1994
Honorable Betty Adkins
309 State Capital
St. Paul, MN 55155
Dear Senator Adkins:
Several State Legislators have undertaken new initiatives which address the
continued use of Tax Increment Financing by communities throughout
.
Minnesota. The initiatives include:
• The exclusion of LGA/HACA penalties for TIF manufacturing
Districts (H.F. 3070);
• The exclusion of LGA/HACA penalties for TIF redevelopment
Districts (H.F. 2654);
• The exclusion of LGA/HACA penalties for soils condition TIF
Districts - including the elimination of the local match requirement
for clean-up costs (H.F. 3180).
I am bringing these proposals to your attention because many exciting things
are occurring in Elk River. For example, in order to encourage more
industrial development opportunities, the Economic Development Authority
(EDA) will likely develop its own business campus and its own industrial
park. The ability to utilize TIF for some of these industrial transactions will
go a long way towards ensuring a successful development. The EDA's Main
Street Redevelopment Site is still vacant and it will likely require TIF
incentives to attract a developer.
In closing, the Elk River EDA supports the Legislative initiatives listed
above and respectfully requests your support as the proposed bills move
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
forward during the session. In the event of questions or comments, please
• feel free to call me or EDA Executive Director Bill Rubin (441-4905). Thank
you for your support.
Sincerely yours,
Jeffrey A. Gongoll, President
Elk River Economic Development Authority
•
•
A.(
City of MEMORANDUM
lElkRiver
TO: STEVE ACH, CITY PLANNER
ELK RIVER PLANNING COMMISSION
FROM: WILLIAM RUBIN, ECONOMIC
DEVELOPMENT COORDINATOR
DATE: APRIL 1, 1994
SUBJECT: POTENTIAL FINANCING PROGRAMS:
CUSTOM MOTORS 13913 HWY 10
INTRODUCTION
At the March Planning Commission meeting, you requested information
regarding potential financing programs to assist Custom Motors with a
potential relocation from its existing site at 13913 Highway 10. The
information found below is submitted in response to this request.
. TYPICAL ELK RIVER FINANCING PROGRAMS
1. Micro-Loan Fund
The Elk River EDA, in conjunction with the City of Elk River,
established its own micro-loan program to supplement primary
financing and business/owner equity associated with expansion and/or
relocation programs in the community. Loans may be used for fixed
assets (land, building, machinery, equipment) plus working capital and
industrial inventory. Retail inventory and the refinancing of existing
debt are ineligible uses.
The micro-loan program offers great flexibility. Loans may range from
$5,000 to $50,000, and, repayment is tied to the life of the asset that is
financed (land and building: 15-20 years; machinery and equipment: 7
years). The interest rate on the loan is tied to prime, but is subject to
periodic adjustments should the prime rate fluctuate.
As loans are repaid, the principal and interest is returned to the micro-
loan pool so that additional business loans can be made.
•
P.O. Box 490 • 13065 Orono Parkway • Elk River, MN 55330 • (612) 441-7420 • Fax: (612) 441-7425
• 2. Central Minnesota Initiative Fund
The Initiative Fund is a private, non profit corporation dedicated to
strengthening the economy and enhancing the quality of life in the
fourteen-county Central Minnesota area. The initiative program
provides supplemental loan assistance to small businesses and also
provides grants to non-profit organizations. Business loans range from
$5,000 to $100,000 with the majority of the project funds coming from
private investments (primary lender and company equity).
3. SBA 504 Loan
This is a fixed-asset mortgage program to help small businesses
achieve long-term, low-interest financing for expansion and/or
relocation projects. The acquisition of land and the purchase and/or
construction of buildings are typically financed under the 504
Program. The option to finance machinery and equipment under this
program is available, too.
4. Tax Increment Financing
• This is a locally administered grant program that relies on future
property tax payments to fund specific development activities such as
site acquisition, site preparation cost, demolition of blighted
structures, and the clean-up of polluted property. Because new
restrictions continue to be placed on the use of TIF, its availability in
Elk River is subject to an on-going evaluation.
5. Industrial Revenue Bonds
State and Federal law enables cities to issue long-term below-market
bonds or mortgages to assist commercial and industrial expansions.
Because the IRB is sold by the municipality, the bond issue is
considered tax-exempt and this low interest is passed on to the
expanding company in the form of a mortgage that is well below
current market rates. The company's credit worthiness is
instrumental in determining the interest rate. Real estate can be
financed over 20 years, equipment at 10 years - not to exceed the
useful life of the asset being financed. Soft costs such as architectural
fees and legal fees may also be included in the bond issue.
•
• 6. Small Business Development Loan
This loan is administered through the Minnesota Agricultural and
Economic Development Board. It makes small business loans through
the issuance of industrial revenue bonds backed by a State-funded
reserve of 25%. This reserve helps lower the interest rate on the
mortgage. Funds can be used for real-estate financing as well as
equipment purchases.
7. Environmental Clean-Up Funds
Twenty-five percent (25%) of the surcharge the City collects from the
Elk River Landfill is designated for landfill abatement. These funds
could be used to accomplish environmental clean-up on the Custom
Motor site, avoiding disposal at a landfill.
8. Summary
Most of the programs listed above can be used in conjunction with one
another. That is, an EDA micro-loan can be used to supplement, say,
conventional financing (or SBA financing) and business/owner equity.
• If TIF is utilized, a new or expanding business may be reimbursed for
such things as land acquisition costs, site preparation costs, on-site
utility extensions, and off-site utility extensions, etc. Using more than
one financing program provides an additional benefit to the company
as it ensures that a competitive package is being offered. This, in turn,
helps the company preserve its funds for other needs such as working
capital, etc.
• ACH-br