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9.0. EDSR 02-14-1994 • CITY OF ELK RIVER ECONOMIC DEVELOPMENT DEPARTMENT 1993 ANNUAL REPORT • • ECONOMIC DEVELOPMENT AUTHORITY • COMMISSIONERS AND STAFF The Economic Development Authority for the City of Elk River (the EDA) is comprised of the five members of the City Council and two non-elected residents of the community. The terms of the Commissioners coincide with the terms of office as members of the City Council - except for the two non-elected residents whose terms on the EDA are for six years. At its annual meeting on January 8, 1993,the EDA Commissioners elected the following slate of officers: President- Jeffrey Gongoll (term expires 12/31/93) Vice President- Patrick Dwyer(term expires 12/31/97) Treasurer- Roger Holmgren(term expires 12/31/94) Secretary -Larry Farber(term expires 12/31/96) Assistant Treasurer-Hank Duitsman(term expires 12/31/94) The remaining Commissioners are: • John Dietz(Term expires 12-31-94 Cecilia Scheel (Term expires 12-31-96) The EDA also reappointed City Administrator Patrick Klaers as its Executive Director at the annual meeting. The EDA maintains three Committees: Finance, Marketing, and Research and Development(R& D). The Committees are comprised of the following members: RESEARCH& FINANCE MARKETING DEVELOPMENT Lloyd Brutlag Elaine Anderson Cliff Lundberg Bud Houlton Jerry Hagen Carol Mills Jim Simpson Brian Moran Larry Toth Bill Birrenkott Rod McArdle Dick Gongoll Tom McNair Mike Leary John Oliver Paul Ammerman Don Heinzman • • HOUSING AND REDEVELOPMENT AUTHORITY COMMISSIONERS AND STAFF The Elk River Housing and Redevelopment Authority (the HRA) is comprised of five members who are appointed to five year terms: NAME TERM EXPIRES Richard Hinkle, Chair 12/31/97 Duane Kropuenske, Vice Chair 12/31/96 Larry Toth, Secretary 12/31/94 Hank Duitsman 12/31/95 Gene Schuldt 12/31/93 At its annual meeting on January 9, 1993, the HRA elected the following slate of officers: Chair,Richard Hinkle Vice Chair, Duane Kropuenske Secretary, Larry Toth STAFF AND CONSULTANTS • Bill Rubin serves as the City's Economic Development Coordinator and is the staff liaison to both the EDA and HRA. The law firm of Larkin, Hoffman, Daly, Lindgren, Ltd.,provides legal counsel on economic development issues. Lori Johnson is the City's Finance Director and is responsible for financial summaries on fund balances and supplemental loans. Sandra Thackeray is the City's City Clerk; she is responsible for the preparation of HRA/EDA minutes. In addition, she maintains files and records for the HRA and EDA. TAX INCREMENT FINANCING PROJECTS On March 8, 1993, the Elk River City Council approved the Tax Increment Financing Plan for Tax Increment Financing District No. 9 as proposed by the EDA. District No. 9 is a three-parcel district comprised of Lots 1, 2, and 3, Block 2, Elk River Industrial Park 2nd Addition. This district was created in support of the expansion of Tescom Corporation's high purity division. Tescom subsequently expanded on Lots 2 and 3, Block 2. Tescom Corporation received $153,000 in TIF assistance to support its • expansion project. A production and office facility containing 28,000 square feet was constructed on Lots 2 and 3. The project has a finished market value of$1,200,000 and was completed in December, 1993. There were two modifications to the TIF Plans for TIF Districts No. 1 and No. 3 during 1993. On August 2, 1993, the Elk River City Council approved a budgetary amendment to these plans which authorized the expenditure of $177,000 to assist with the public library expansion. On August 16, 1993, the City Council approved a$50,000 amendment to Plans No. 1 and No. 3 to support a redevelopment project at Main Street and Freeport Avenue. The redevelopment project was proposed by Mr. Dennis Chuba of the Chuba Company. This project, a five-suite office townhouse containing 8,900 gross square feet, was a continuation of a 1992 three-suite office townhouse redevelopment project. The 1993 project will have a finished market value of$565,000. The $50,000 TIF assistance will be used to reimburse the developer for costs associated with demolition, site preparation, and onsite utility extensions. The Elk River HRA agreed to fund 50% of these costs, up to a maximum of$25,000 - thereby reducing the City's obligations from $50,000 to a maximum of$25,000. Construction activities affecting two other TIF Districts were completed during 1993. A 23-unit senior housing project financed through Farmers Home Administration (FmHA) was completed in April, 1993. TIF District No. 10 was created for this project, which • has a finished market value of$800,000. Timron Precision Gear completed the construction of an 11,000 square foot office and production facility on Lot 1, Block 1, Elk River Industrial Park during 1993. TIF District No. 11 was created to support this project. The finished market value of the Timron facility is $350,000. INDUSTRIAL REVENUE BOND On May 18, 1993, closing was held on a $1,500,000 industrial revenue bond (IRB) that was issued by the City of Elk River in 1992 to support the Tescom Corporation expansion project. Proceeds from the IRB were used by Tescom Corporation to construct and equip a 28,000 square foot manufacturing facility for its high purity division. In addition, a small amount of the IRB will be used by Tescom to remodel a portion of its 34,000 square foot facility. This IRB was issued almost one year before its closing. This was due to the June 30, 1992, sunset provision which precluded cities and states from issuing IRB's in support of manufacturing projects and housing related initiatives. In late 1993, Congress granted IRB's a permanent extension, thereby giving cities and states the ability to issue them once again. • DTED FEDERAL BLOCK GRANT . In October, 1992, the Department of Trade and Economic Development (DTED) advised the City of Elk River that it would award a $250,000 federal block grant to support the 28,000 square foot Tescom Corporation expansion. The grant is intended to leverage private financing and local incentives in support of an expansion. The grant must meet one of three federal objectives: a. benefit to low- and moderate-income (LMI)persons; b. prevention or elimination of slums and blight; or c. alleviation of urgent community development needs. The City of Elk River intended to use the proceeds of the grant award as a low-interest loan to Tescom to assist it with the purchase of additional machinery and equipment necessitated by the expansion of its high purity division. Tescom proposes that it will create 45 new, permanent jobs as a result of this expansion. Many of these jobs will benefit LMI persons and families. Closing on the block grant loan to Tescom occurred on May 18, 1993. According to a semi-annual progress report on the DTED loan, Tescom had created 34 new jobs as of December 31, 1993. • EDA MAIN STREET REDEVELOPMENT SITE As 1993 began, the EDA was approaching the expiration of an exclusive option it had extended to REP, Ltd., of Elk River. The option expired on January 11, 1993, and REP did not request another extension. Subsequently, Mr. Chris Bulow of the Bruce Company expressed an interest in the redevelopment site. An exclusive option was granted to the Bruce Company. Mr. Bulow is proposing that Kurt Kjellberg/Kjellberg's Carpet and Interiors construct a two-story 12,000 square foot retail facility on the Main Street site. Kjellberg's Carpet, which was recently awarded a Carpet One franchise, would occupy the 6,000 square foot level at the street grade. The lower level would be leased to other retail/office/commercial users. On October 11, 1993, the Elk River EDA considered a request by Kjellberg's Carpet for tax increment financing assistance. The EDA approved the TIF Plan for TIF District No. 12 following a public hearing on November 15, 1993. The City Council delayed its public hearing until December 13, 1993. No action was taken following the hearing. On December 20, 1993, the City Council denied the TIF request but agreed to reconsider it at a meeting scheduled for January 10, 1994. MHFA MORTGAGE PROGRAM • In April, 1993, the EDA made application to the Minnesota Housing Finance Agency (MHFA) for an allocation of first time homebuyer funds known as the Minnesota City Participation Program (MCPP). Elk River's $1,500,000 request for mortgage funds was reduced to $974,242. Under the program, the mortgage funds are used to assist first time homebuyers with the purchase of new or existing homes. To qualify for the 1993 funds, an applicant's adjusted income cannot exceed $39,680 and the maximum purchase price cannot exceed $95,000 (new construction) or$85,000 (existing homes). Because of the 1992 sunset provision which prohibited cities and states from issuing revenue bonds for this purpose, the MCPP program was delayed until the fall of 1993. The program's initial interest rate on 30 year mortgages is 6.25% (7.033 APR). MICRO LOAN FUND The balance of the EDA's micro loan fund as of January 1, 1993, was $199,741.75 (excluding December, 1992 interest). The year end balance was approximately $118,541.30 (excluding December, 1993 interest). Five loans were closed in 1993: Business Name Loan Amount Coldwell Banker Allegiance $ 27, 500 STescom Corporation $ 50,000 Indy Lube $ 24,700 R& D Sales $ 17,500 Beaudry Convenience $ 50,000 Two other loans were approved during the year but will be closed during 1994. These include a $15,000 loan to Water Laboratories and an $18,750 loan to Woodsmen Quality Products. Including the DTED loans, the EDA currently has thirteen loans outstanding. The original principal balance of these loans was $1,367,200. Total principal outstanding on these loans as of December 31, 1993, is $1,210,294.43. Of this amount, DTED will receive $500,000 (Alltool: $100,000; Roma Tool & Plastics: $400,000). Attached as Exhibit A to this report is a summary of loans currently outstanding. ECONOMIC DEVELOPMENT NEWSLETTER The EDA continued publishing a newsletter on economic development issues during 1993. The newsletter is mailed to approximately 1,500 persons and companies associated with real estate development, construction, design, and sales. This mailing list was developed by City staff and was obtained primarily through accessing certain 4111 professional real estate associations. • DEMOGRAPHIC STATISTICS City staff updated a number of demographic statistics that were presented in the form of a booklet. The demographic information contains topics such as population estimates, housing estimates, residential construction value, commercial and industrial construction value, retail sales, and an estimate of effective buying income (disposable income). NOVELTY MARKETING PROJECT Another novelty marketing item was developed during 1993. The marketing item consisted of a plastic "thumb puz7le" that pictured the Elk logo in the middle of the puzzle. The puzzle was affixed to a placard that asked the question, "Puzzled about expansion opportunities?". The novelty puz7le was mailed to approximately 500 companies - half of which were small manufacturers; the other one-half were persons involved in real estate development. ADVERTISING Marketing and advertising activities continued during 1993. Newly revised display ads were placed in the Minnesota Real Estate Journal, Business Media, and Minnesota • Ventures magazine. STAR CITY RECERTIFICATION The City of Elk River was once again recertified by the Department of Trade and Economic Development(DTED)under its Star City program. The 1993 recertification consisted of an on-site visit from DTED. Assisting city staff with this presentation was Richard Hinkle (Chair, Elk River HRA), Jackie Schuelein(Executive Vice President- Area Chamber of Commerce), and Paul Ammerman(member- EDA Marketing Committee). BUSINESS PARK TASK FORCE In May,the EDA established a Business Park Task Force comprised of members of the EDA, City Council, EDA R&D Committee, and Area Chamber of Commerce. Patrick Dwyer, EDA Vice President, agreed to Chair the Task Force. This group met throughout the balance of the year and examined the existing inventory of industrial sites, potential sites for future parks, development options, financing alternatives, and funding sources. The Task Force found that the private sector is generally unwilling to develop large tracts of property for industrial parks. As a result,the EDA may likely acquire, improve, and sell industrial sites in the to new or expanding companies. To assist with this endeavor, a presentation was made to the City Council on October 11, 1993. The City Council agreed to authorize up to $400,000 in TIF funds from Districts No. 1 and No. 3 for • purposes of acquiring industrial sites in the community. Following a discussion with local utility companies,the EDA requested that Anoka Electric Cooperative (AEC) participate in an application to the Rural Electrification Administration (REA) to help underwrite a portion of the infrastructure costs associated with an industrial park/business park. After a presentation to AEC managers, the Task Force learned that it would receive AEC's participation in this request. An application to REA will likely be completed in early to mid 1994. The EDA Task Force also considered a"business park" concept that would encourage a mixed-use of light industrial, office, and limited commercial within the same area. The business park would require higher architectural standards for these end users. The Task Force and city staff developed a new set of standards and presented them to the Planning Commission for its consideration. Following a public hearing,the Planning Commission recommended that the City Council adopt an ordinance related to the business park standards. INDUSTRIAL COUNCIL Owners and managers of Elk River industrial companies continued meeting informally as an Industrial Council during 1993. This is done in an effort to share resources and • resolve common problems. The group conducted a lunch session dealing with the topic of sexual harassment; it examined the topic of Total Quality Management(TQM); and it hosted a morning meeting with U.S. Congressman Jim Oberstar. This meeting was done in conjunction with the Area Chamber of Commerce. MSA DESIGNATION In December, 1992, the federal Office of Management and Budget(OMB) designated Sherburne County as part of the Minneapolis-St. Paul Metropolitan Statistical Area (MSA). While warmly received by Elk River and surrounding communities and health care providers,this designation was less well received by the City of St. Cloud. A small portion of St. Cloud, containing 5,500 persons, is located in Sherburne County. OMB's designation effectively reduced the St. Cloud MSA from a three county area(Sherburne, Benton, and Stearns),to a two county area(Benton and Stearns). In addition, the 5,500 persons in St. Cloud that are also residents of Sherburne County were now considered part of the Minneapolis-St. Paul MSA. This led to an ongoing series of meetings resulting in a request to have both Benton and Stearns counties included in a Consolidated Metropolitan Statistical Area(CMSA). In late December, 1993, OMB reversed its earlier decision and designated Sherburne County as part of the St. Cloud MSA. This action results in lower mortgage insurance • limits and lower health care reimbursements for providers like Guardian Angels of Elk River, Inc., and St. Benedict's Center. This recent decision will not be finalized until it is • published in the Federal Register tentatively scheduled for June 1994. PARKING LOT IMPROVEMENTS The HRA participated in two parking lot improvements in 1993. The Jackson Square parking lot was upgraded with additional parking stalls as was the former railroad property at Jackson Avenue and U.S. Highway 10. The HRA agreed to pay for these costs. CERTIFIED DEVELOPMENT COMPANY The concept of a Certified Development Company (CDC)to serve the City of Elk River and/or Sherburne County received a great deal of attention in 1993. CDC's obtain its designation from the Small Business Administration (SBA)which gives the organizations the ability to access SBA fixed-asset financing programs. The primary financing tool of a CDC is the SBA 504 loan program. Rather than create a new CDC, a relationship with an existing company was explored. Discussions were held with the Coon Rapids Development Company - a CDC that is active in SBA loans in Anoka County. Under the proposal discussed with Coon Rapids, it would expand into Sherburne County, and, in consideration for numerous cities and • organizations in the county purchasing stock, it would rename itself to reflect a multi- county organization. When this did not occur, new discussions were held with Twin Cities-Metro CDC. This organization operates in six of the seven metropolitan counties and had expressed an interest in expanding into Sherburne and Wright counties. With the absence of a resolution of support from the Sherburne County Commissioners, neither the Coon Rapids Development Company, now renamed Central Minnesota Development Company, nor Twin Cities-Metro can expand into Sherburne County. State legislation was approved in 1993 which resulted in the creation of a public organization known as Minnesota Business Finance, Inc. (MBFI). This organization is the former statewide OMNI which processes 504 loan requests throughout Minnesota. MBFI has since been relocated to St. Cloud and is operating there. In the absence of a local CDC, 504 loan requests will be processed by MBFI. VIDEO PRESENTATION In July, EDA Commissioners authorized the preparation of a video presentation on Elk River. The video is intended for use as a recruitment tool for new and expanding companies. It will also provide a broad overview of Elk River to newcomers, etc. The contract for the video project was awarded to Diversified Marketing Resouces, Inc. • of St.Cloud. Dick Gongoll and JimTralle assisted staff with the development and review of the script and with the sequencing of various shots. • REVIEW AND PERMITTING TASK FORCE Based on comments received from expanding busiesses and d from the Chamber of Commerce,the EDA created a task force to examine the City's review and permitting procedures. A group consisting of Pat Dwyer, Jeff Gongoll, Hank Duitsman, Pat Klaers, and Bill Rubin, were appointed to the task force, which will likely organize itself in early 1994 for purposes of examig the City's procedures. • • GOALS FOR 1994 • MARKETING Continue to market Elk River as a growth-oriented community. This will result in the ongoing distribution of the City's marketing brochure to developers, commercial realtors, and prospective businesses and industries. The EDA-City video presentation will also be distributed to a network of local utility companies, lenders, realtors, etc. Another novelty marketing item will be developed for distribution in 1994,too. ADVERTISING Continue periodic advertising in publications such as Minnesota Real Estate Journal, Business Media, Minnesota Ventures magazine, etc. DOWNTOWN REDEVELOPMENT Work in conjunction with civic groups,the HRA, and prospective businesses in order to implement redevelopment opportunities in the Elk River Central Business District. Sites scheduled for improvement may include additional parking areas adjacent to the railroad tracks (post office area, U.S. Highway 10 and Main Street intersection(former City Hall site), walking path and observation stands along the riverfront, and additional landscaping • enhancements). INDUSTRIAL DEVELOPMENT A. Elk River Industrial Park- Continue to market the Elk River Industrial Park to commercial real estate agents, contractors, developers, and area manufacturers. B. Business Park Task Force - The Task Force will likely finalize sites for one or more development areas - including property in the western part of the community for a business park. City staff and Task Force members will develop a master plan concept resulting in engineer feasibility studies and the request for assistance for infrastructure improvements needed to make the business park a reality. STAR CITY RECERTIFICATION Staff will complete the Star City Recertification as required by DTED in 1994. • • INDUSTRIAL COUNCIL City staff will continue to participate in a liaison capacity with the Elk River Industrial Council in 1994. INDUSTRIAL CALL PROGRAM Staff willcontinue the informal program of contacting Minnesota industries to determine expansion , relocation, or consolidation programs. ECONOMIC DEVELOPMENT NEWSLETTER The preparation and distribution of a newsletter that is devoted to economic development topics in Elk River will continue in 1994. PERMITTING AND REVIEW TASK FORCE This Task Force will begin examining the City's permitting and review procedures in order to develop strategies relative to a customer-friendly environment at City Hall. COMMUNITY RELATIONS • The City-EDA, HRA, will also sponsor or jointly sponsor workshops, speakers, forums, or seminars on topics of interest to specific groups during 1994. CERTIFIED DEVELOPMENT COMPANY Staff will continue to explore a potential relatinship with an existing CDC during 1994. This may result in one or more CDC's expanding into Sherburne County. LABOR MARKET STUDY Staff will conduct a study, in conjunction with the Department of Jobs and Training, to estimate the number of jobs in Elk River. This study will also categorize these jobs into various sectors- manufacturing, service, retail, etc. NEW COMMUNITY PROFILE Work in conjunction with the Area Chamber of Commerce to design and publish a new "User-Friendly" comminity profile. This publication will replace the existing profile that is printed by DTED. • • LEGISLATIVE ISSUES Staff will monitor proposed legislation during the upcoming session which may have an impact on economic development activities. • • EXHIBIT A ELK RIVER ECOMONIC DEVELOPMENT AUTHORITY • MICRO LOANS Loan Loan Interest Term Monthly 12/31/93 Borrower Date Amount Rate (Months) Payment Principal Anoka Medical Properties 7/1/90 $100,000 8.75% 120 $1,253.27 $74,353.50 Alltool (1) 6/1/89 $200,000 9.00% 120 $2,533.52 $129,959.56 Beaudry Convenience` 12/28/93 $50,000 6.00% 120 $555.10 $50,000.00 Designing Women of Elk River' 2/18/93 $21,500 6.00% 180 $181.43 $20,821.17 2/18/93 $6,000 6.00% 60 $114.30 $5,134.27 Elk River Motel Properties 7/1/90 $32,500 7.00% 65 $377.35 $28,738.80 Indy Lube• 10/28/93 $24,700 6.00% 180 $208.43 $17,379.07 Pomeroy Tool 7/1/92 $25,000 6.50% 180 $217.78 $23,447.23 Pure Steam (2) 7/1/90 $15,000 8.75% 36 $475.25 $0.00 4/1/92 $25,000 3.50% 48 $558.90 $14,491.20 R &D Sales' 12/8/93 $17,500 6.00% 180 $147.68 $17,500.00 Roma Tool (3) 7/1/91 $500,000 10.00% 240 $750.00 $481,658.22 • Second Generation Properties' 11/23/92 $50,000 6.00% 240 $358.22 $48,665.05 Tescom• 5/18/93 $50,000 6.00% 180 $555.10 $48,146.36 (4) 5/18/93 $250,000 4.50% 120 N/A $250,000.00 TOTAL $1,367,200.00 $8,286.33 $1,210,294.43 (1) The City retains the first $100,000 principal plus interest. The remainder is payable to the State. (2) Final payment was made on June 1, 1993. (3) The terms of this loan were renegotiated in 1991; the renegotiated terms are as listed. Monthly payments increase to $1,000.00 on January 1, 1994. The City retains the first $200,000 principal plus interest; the remainder is payable to the State. (4) The City retains all principal and interest to be repaid. Tescom has not requested any draws; therefore, the December 31, 1993, principal balance is $250,000.00. *Variable Interest Rate. • LOANS.XLS EXHIBIT B EXPANSION OPPORTUNITIES 1— c ‘abb Elk River, MN (612) 441-7420 NOVELTY MARKETING ITEM • • PUZZLED ABOUT EXPANSION OPPORTUNITIES? CONSIDER ELK RIVER: • Commercial Sites • Industrial Sites • Redevelopment Opportunities • Financing Programs • Time To Solve Rating 5 Minutes Genius 10 Minutes Brilliant 20 Minutes Top of the Class 25 Minutes Rising Star 35 Minutes Keep Trying ELK RIVER, MINNESOTA (612) 441-7420 • ity of Elk'. River JULY, 1993 TO: COMMERCIAL AND INDUSTRIAL REAL ESTATE AGENTS RE: ELK RIVER EXPANSION OPPORTUNITIES By now, we hope you have had an opportunity to solve the expansion "puzzle" . For those of you who haven' t, the enclosed brochure on Elk River should be of assistance, It' s loaded with information on expansion opportunities - ranging from industrial sites to financing options . e hope you' ll find that Elk River is a growing and resourceful community. Most of all , we hope you' ll discover that Elk River can help your clients solve their expansion puzzles . For more information on Elk River, or, to preview various commercial or industrial areas, contact the Economic Development Department at 441-7420. Sincerely, EDI Elk River EDA Enc . P.O. Box 490 • 13065 Orono Parkway • Elk River, MN 55330 • (612) 441-7420 • Fax: (612) 441-7425 EXHIBIT C MINNESOTA DEPARTMENT OF TRADE AND ECONOMIC DEVELOPMENT ',. • . �,pomic III 500 Metro Square F. 121 7th Place East Saint I'aul,Minnesota 55101-2146 USA % ‘,, May151993 C. r r.1- 1 1; + t..,, I %� ai�� Mr. Bill Rubin Star City Coordinator City of Elk River 720 Dodge Avenue, NW Elk River, MN 55330 Dear Mr. Rubin: Congratulations! The City of Elk River has been recertified as a Minnesota Star City for 1993. Your community must be very proud of its innovative Economic Development Team! The goals are the catalyst that propels your City's productive job creation strategies and enables a bright and promising future for the greater Elk River area. • The City of Elk River is to be commended for an excellent economic development effort in 1992. This effort included the creative use of local and state programs to facilitate industrial, commercial and residential development. Marketing efforts were directed internally and externally through mailings, newsletters and business education. The city should also be congratulated for its efforts with the county economic development effort and the quad-county network. The 1993 Action Plan is equally aggressive and comprehensive. The successful completion of the Main Street Redevelopment project will be a real plus for the City and its downtown businesses. Elk River is well prepared to take advantage of its favorable manufacturing location. Should your community need any technical assistance, DTED Regional Star Staff is available to be of service to you. Wishing you and your Star Organization continued success. Sinc• - ,/ ,nnifer L. ngh,. Deputy Commissioner • V' '''.. ..` An Equal Opportunity Employer