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6.0. EDSR 03-08-1993 ITEM 6 • TAX INCREMENT FINANCING PLAN TAX INCREMENT FINANCING DISTRICT NO. 9 • CITY OF ELK RIVER, MINNESOTA MARCH 8, 1993 TAX INCREMENT FINANCING PLAN TAX INCREMENT FINANCING DISTRICT NO. 9 SUMMARY Tescom Corporation, Inc. , 12616 Industrial Boulevard, Elk River, Minnesota seeks $194,000 in Tax Increment Financing assistance to support its proposed 30,000 square foot expansion on a vacant site adjacent to its existing 34,000 square foot facility in the Elk River Industrial Park. At its Elk River facility, Tescom produces regulators, valves, and control devises. The current business grew out of applications in the 1960 ' s which were heavily dependent on aerospace. Sales have been greatly diversified since that time. This diversity currently includes the following industries: Semi Conductor, General Industrial, Specialty Gas, Instrumentation, Government/Aero Space, and Petroleum/Hydraulic. The Elk River facility currently employs 200 people, up from 54 when Tescom moved to Elk River in 1982 . The growth projections forecast employment at the end of 1994 to be 265 to 270 people. The Economic Development Authority for the City of Elk River, Minnesota is proposing the creation of an Economic Development District pursuant to the Tax Increment Financing Act. Tax Increment funds will be used to "write-down" the acquisition of • the development site. In addition, funds will be used to conduct borings and analysis of the property, site survey, and for civil and engineering costs. The 30,000 square foot facility will have a finished market value estimated at $900,000, which produces property taxes estimated at $43,300 . These funds will be "captured" by the City of Elk River so that the City can recover the $194,000 in Tax Increment assistance. After recapturing the project debt, Tax Increment Financing District No. 9 will be decertified, thereby enabling all local taxing jurisdictions (County, School, City, etc. ) to share in the project's property taxes . The Economic Development Authority for the City of Elk River, Minnesota anticipates that Tax Increment Financing District No. 9 will exist for six (6) to seven (7) years. • TAX INCREMENT FINANCING PLAN TAX INCREMENT FINANCING DISTRICT NO. 9 A. STATEMENT OF OBJECTIVES Tax Increment Financing District No. 9 is located entirely within the City's Development District No. 1, a Municipal Development District created and established pursuant to the Development District Act. The Development Program for Development District No. 1, was adopted by the City Council on April 1, 1985, and was amended on January 27, 1986, and November 30, 1987. The objectives of the Development District, as amended, and as set forth in the Development Program, are hereby incorporated into this Tax Increment Financing Plan. Attached as Exhibit A is a map of Development District No. 1 . The specific objectives of the Tax Increment Financing Plan for Tax Increment Financing District No. 9 are: 1 . To provide incentive financing for the sale of Lots 1, 2, and 3, Block 2, Elk River Industrial Park 2nd Addition; (the development site) ; 411 2 . To encourage a manufacturing company to expand in the Elk River Industrial Park; said expansion includes the construction of a new facility estimated at approximately 30,000 square feet; 3. To increase employment opportunities in the community and in the State of Minnesota; said expansion will create 45 to 60 permanent full time positions; and, 4 . To preserve and enhance the local tax base and the tax base in the State of Minnesota; said expansion will generate new property taxes of approximately $43,300 . B. CLASSIFICATION OF DISTRICT The City Council of the City of Elk River, Minnesota determines that it is necessary, desirable, and in the public interest to designate, establish, develop, and administer an Economic Development District in the City of Elk River pursuant to the provisions of the Tax Increment Financing Act, Minnesota Statutes 469 . 174 to 469 . 179, inclusive. The purpose of the Tax Increment Financing Plan is to encourage the expansion of a manufacturing company in the Elk River Industrial Park, thereby increasing local employment opportunities and preserving and enhancing the local tax base and the tax base of the State of Minnesota. C. DEVELOPMENT PROGRAM 1 . Overview Tescom Corporation, Inc. , 12616 Industrial Boulevard, Elk River, Minnesota, seeks Tax Increment Financing assistance to support its proposed 30,000 square foot expansion on a vacant lot adjacent to its existing 34,000 square foot facility in the Elk River Industrial Park. The Tax Increment funds will be used to "write down" the acquisition of the development site. In addition, funds will be used to conduct borings and analysis of the property, site survey, and for civil and engineering costs . 2 . Property Included in Tax Increment Financing District No. 9 The legal description of the property included in TIF District No. 9 is as follows : Lot 1, Block 2, Elk River Industrial Park 2nd Addition (PID No. 75-520-0210) • Lot 2, Block 2, Elk River Industrial Park 2nd Addition (PID No. 75-520-0220) Lot 3, Block 2, Elk River Industrial Park 2nd Addition (PID No. 75-520-0230) Attached as Exhibits B-1 and B-2 are maps showing the exact location of the property included in Tax Increment Financing District No. 9 . 3. Property to be Acquired by the Authority No property is scheduled for acquisition by the Economic Development Authority for the City of Elk River, Minnesota. D. DEVELOPMENT ACTIVITIES 1 . Development Overview Tescom Corporation, Inc. , proposes to constuct a new facility of approximately 30,000 square feet on the Development Property. The facility will have a 411 finished market value estimated at $900,000 . Construction is scheduled to begin in March, 1993, and will be completed by the fall of 1993. Tescom currently employs 200 persons at its Elk River facility. As a result of the expansion, 45 to 60 permanent, full time jobs will be created within a two year time period. 2 . Contracts No contracts have been entered into at the time of the preparation of this Tax Increment Financing Plan. Proposed contracts for services associated with Tax Increment Financing No. 9 include: - Soil borings and analysis. - Survey, civil and engineering - Contract for construction of 30,000 square foot facility (by Tescom Corporation, Inc. ) . E. TAX INCREMENT FINANCING DISTRICT NO. 9 BUDGET 1. Tax Increment Financing District No. 9 Cost Estimates Budget Amount Land Write Down $165,000 Site Survey, Civil and Engineering 4,000 Soil Borings and Analysis 25,000 Administration 6,000 Legal -0- Cost of Issuance Fees -0- Bond Discount -0- Capitalized Interest -0- Miscellaneous Total $200,000 2 . Bonded Indebtedness No Bonds will be issued as part of Tax Increment Financing District No. 9 . 3 . Sources of Revenue to Pay Public Costs Tax Increments collected from Tescom Corporation's expansion will be used to pay the public costs associated with Tax Increment Financing District No. 9 . 4 . Original Tax Capacity • Because the property in Tax Increment District No. 9 is tax exempt, the original net tax capacity, based on the January 2, 1992, valuation, is estimated to be $0 . 00 . The County Auditor Certification attributable to this value is attached as Exhibit C. 5. Estimated Captured Tax Capacity The finished market value upon completion of the improvements in Tax Increment Financing District No. 9 is estimated at $900,000 . This value translates into a completed net tax capacity estimated at $41,400. The captured net tax capacity is estimated as follows : Completed Net Tax Capacity $41,400 Less Original Net Tax Capacity -0- Equals Captured Net Tax Capacity $41,400 One hundred percent of the captured net tax capacity of Tax Increment Financing District No. 9 will be required to finance the public costs associated with District No. 9 . As a result, the City of Elk River elects, pursuant to Minnesota Statute 469 . 177 Subdivision 2 (a) ( 1) , to retain the full captured net tax capacity of Tax Increment Financing District No. 9 . 111 6 . Duration of the Tax Increment Financing District No. 9 The City of Elk River expects that the first increment it will receive from Tax Increment Financing District No. 9 will be for taxes payable in 1995 . This is based on a project with a completed value on January 1, 1994 . The City expects to continue to receive tax increment from Tax Increment District No. 9 up to and including 1999, or until $194,000 in Tax Increment has been received. Thereafter, no further increments may be received and Tax Increment District No. 9 will terminate. F. CASH FLOW ANALYSIS Attached as Exhibit D is the Cash Flow Analysis for Tax Increment District No. 9 . G. IMPACT ON OTHER LOCAL TAXING JURISDICTIONS 1. Estimated Impact of District No. 9 on the Taxing Jurisdictions Assuming the Captured Net Tax Capacity • is Available to the Taxing Jurisdictions Without Creation of District No. 9 : Pursuant to Minnesota law, tax increment generated by development within the TIF District may be captured by the City for a period of up to eight years . During this period other taxing jurisdictions will continue to receive taxes from the property within the TIF District based on the current net tax capacity. However, the current net tax capacity is $0. 2 . Estimated Impact of District No. 9 on the Taxing Jurisdictions Assuming None of the Captured Net Tax Capacity is Available to Taxing Jurisdictions Without Creation of District No. 9 : The Economic Development Authority of the City of Elk River has determined that the Tescom project would not reasonably be expected to occur without the creation of TIF District No. 9 and the use of tax increment financing. Therefore, none of the net tax capacity captured during the term of this TIF District would be available to other taxing jurisdictions without the creation of this district. 3 . Additional information on the impact of Tax Increment Financing District No. 9 on the other local taxing 111 jurisdictions can be found in Exhibit E. H. STUDIES AND ANALYSIS USED TO DETERMINE THE NEED FOR TAX INCREMENT FINANCING The Elk River EDA and City Council have determined that the Tescom Corporation, Inc. expansion project cannot reasonably be expected to occur solely through private investment within the reasonably foreseeable future. Therefore, the use of Tax Increment Financing assistance is deemed necessary. This determination has been made based on the following: - The Company was purchased, through a Leveraged Buy-Out (LBO) , in December, 1986 . While Tescom Corporation, Inc. is still highly leveraged, it has proven the ability to service its debt as illustrated by the significant reduction over the five and one half years since the LBO. Tax Increment assistance is needed to reduce overall project costs to ensure Tescom remains a financially stable and profitable company after its expansion. - Tescom Corporation, Inc. owns and operates a second facility in Watertown, South Dakota. The Company is currently reviewing its options for appropriate locations for expansion. While Elk River offers some . advantages, the financial attraction of South Dakota offers significant benefits as well. Tax Increment assistance is necessary because it would discourage commerce or industry from moving to another State, it would increase employment in the State of Minnesota and it would preserve or enhance the tax base of the State of Minnesota. I . PARCELS INCLUDED IN TAX INCREMENT FINANCING DISTRICT NO. 9 Tax Increment Financing District No. 9 is comprised of three land parcels. They are listed below: 1993 Original Parcel 1992 EMV Pay 1993 Net Tax Capacity 75-520-0210 $59,400 $0 (Tax Exempt) 75-520-0220 59,400 0 (Tax Exempt) 75-520-0230 50,000 0 (Tax Exempt) Please refer to Exhibit C for the County Auditor Certification of this parcel in Tax Increment Financing District No. 9 . . 410 EXHIBIT C COUNTY AUDITOR CERTIFICATION TAX INCREMENT FINANCING DISTRICT NO. 9 The original net tax capacity of the following listed parcel(s) , as of January 2, 1992, is certified to be: $0 .00 . The parcel(s) contained in Tax Increment District No. 9 are listed below: Parcel 1992 EMV 1992 Original Number Pay 1993 Net Tax Capacity 75-520-0210 $ 59,400 $0 (Tax-Exempt) 75-520-0220 59,400 0 (Tax-Exempt) 75-520-0230 50,000 0 (Tax-Exempt) Total $168,800 The Base Tax Rate will be the rate calculated for taxes payable in 1993. In accordance with Minnesota Statutes, Section 469 . 177, Subd. 1, the average percentage increase in the • original Net Tax Capacity shall be zero percent (0%) . E. Dale Palmer Sherburne County Auditor SHERBURNE COUNTY SEAL March , 1993 • 1#.1 il 4 ,1 .1 . • • . , , -,, ! .1. , 1 : 4q . .1-1 • • - -;1 a , J.11.11 • , .1 .1 , 11. 1 . , • : . . • ....2.,. . ' • . • • • — . .. . • I 3 .. • • i I ••• • —W::: ../.I . • .——. ..... ...; 3:132- . , . — — , • . ••••• — .....• . • . • .• • • .• — - . ... — — . . )..( • I. • ' . . I' -. ...... • .....— i ...--.. . •• a .. -. .•. `I. . . . .• 1 • .. . i .. • , ..... • f V • ,.. ••••• . .. • t • ,".'' . .... .. .L.12 .. — •— -...... . , . I , ' ', ,....... ...! ........... . ; . . ..... ._ •' * • , - - - --,i ---,• ,•;,--7,.•i; i : . , .• ; !' - f. . . , •:: tit --; • • • 7:,.7: C. ..... I -.: 1...'. - .......;-77 N'''.i!: .. . : ' ' • . * ' ' 1'1 ' ••••• -. • ' .',...,4 ...,.. ; : . ••• : ......4! . ' ...-. —!.• 1,4 1 i ..:,.... ., . • .. .• r . ;:.‘ .. -.. - 1 ',-,,' I .... 11. ... , . •• .•!., .... . • . .., . .• ..i .... 1 • • . ir 1 . .... ..- '"' ;:il„S....•.'C, •T:;•:7-- . . . . 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' .••• •• - I • • ; 7 ' ! : ' ' 7 ' i , ' .; . .... .,. ... 1 ......, ._ . ..:,.. „,... . _... . BOUNDARY OF DEVELOPMENT DISTRICT NO. 1 .-.. (CITY LIMITS) I ....„... - ..,. ..._ . ...... • -._ -._\ • ...„.... • lig ....,._ . ...,.. --c 4 1 i .-.--- . —X lt•.. • ,.. . Elk - River g i ....., . .. . .., • I i 1 1 - - \`\_.11°l• 11.1 . i • i i 1 1 i 11 '.”'-.—\ — . ...182 1 -As- ; . ........ EXHIBIT A - 1 1111,1..4 I li il viliiti DEVELOPMENT DISTRICT NO. 1 1 \ \ ' Air I4 • 6 9 , iJp � ro . La l I 193R0 ST. gal w 2 i RO AVE. '-- 1111 8 co. Ro. I 6 ti 14, w ' \"11111 .,1 :•:•:,:RVIC OR.. .F o i.z.e! ?VAR : ELK ,.•.•.•.2:•:•: 0_11' \2 TRIG I'0•. �` 411111114t •2ND \ ,.s_STRIA ````\ vow. ��; _� BLVD. �` `OI� 1 Ill ADDITION ' \ E RDNLFA•514 DO. 2 I ° R EN. I EppII E' 4 �:Lilt- ._ R1C I 01\c' � CE HIR 'DP x pP 10V41 _ ta `� ro n ( 1. I • xe Mr" I`L`. \•• / * in; 169TN i''' • Via. �vi,, u. YpY � �oC ii(12.1-02;0\\lam r/ '6 v oVgc Z4,..1 e a ' Cf - \ /0/ \.'"1 '. '/.02, gar? iiiiPte t 43. 4. 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Fy MANOR I '162ND ' ANE., �� a i..zt o-0- 4. >- — z , `SS\SS\T °2 14 1 I* 1 '� Aom - - II I _____qk ]21!!‘1117rf ii g / • EXHIBIT B-1 / II TAX INCREMENT DISTRICT NO. 9 4 /1 11 \ \ 1 OUNTY ROAD NO.1 SEAVI�E DA0t 410.81 ::':•:4 C6:;.; 20000 20000 2.18 A.C. g :;: ] :: :•: ::: 1 AlaF ::.::i.:::.:,:17::7!..,:::::::. .-:1 114 A. 1.i6A.0 g 2.11 A.C. 111, 410; :g:::::::::::.'•:':':' g45 a `1 400,00•:' . 200 215.05 77Z •••••:::::::::::::::::::::::::::•:- 415.05 �Q Ldp + litAC g :::::•:•:•:•:•:•:•:•:•:•:•:•:•:•:•: it" 2 s c 8 .1.0.3.). G St .a:: :: :: v,j N 410.00 E 4';:}: . 3 2.392 C Z74 ::: ::.42. 322A.0 Y - S1 88 op �.c. A ::: : szZs1 381.21NORTH - k i''': .47.Q 3 :a" '. 150, 00 747.61 N 410. ;.•: •'•:::'.':' r± 3 ! • g a 218 A.0 x•97 , A.C. • yN � • 28371 4 &YD 825.91 • .9A. C 201 24 320.06 413 A.C. $ j P.�� �O �!� Q S NMI uS.72 6344 C 4, I.S7 A.C. / 443 A.C..0 r• .1 ���!__ v ,`h\P`- S7 330 eURCINGTpN����: ac1O�S 7 9' <�� ;; 313AC • 417% 1,4`7) RTiii 15.43 A.0 s4110 S, y a , 9i.. 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C W 0 T1 33 a 0 -I •N 0 >> E H .1 d -n U -4 3 I-. 0 al 0 a 04 x o E 0 .X E A Wu 0 .-4 N 0 • w 0 0 CA N 44CA NCO C 0 m a E O O iJ A ° >. 004) 4 .ONu a a.+ a •• v00 1+ a wmo . 0a ro 313 0 � 0 -.4 U #40 0 03 z • EDA RESOLUTION 93 - 1 A RESOLUTION FOR THE ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF ELK RIVER, MINNESOTA, RELATING TO THE ESTABLISHMENT OF TAX INCREMENT FINANCING DISTRICT NO. 9 AND THE ADOPTION AND APPROVAL OF THE TAX INCREMENT FINANCING PLAN RELATING THERETO, LOCATED WITHIN DEVELOPMENT DISTRICT NO. 1 BE IT RESOLVED by the Economic Development Authority for the City of Elk River, Minnesota (EDA) , as follows: Section 1 . - Recitals . 1.01 . It has been proposed that the EDA establish Tax Increment Financing District No. 9 within Development District No. 1 . 1. 02 . The EDA has caused to be prepared a proposed Tax Increment Financing Plan (the Plan) for Tax Increment Financing District No. 9 . 1. 03 . The EDA has performed all actions by Minnesota Statutes to be performed prior to the establishment of Tax Increment Financing District No. 9 and the adoption of the Plan • relating thereto. 1. 04 . The EDA hereby determines that it is necessary and in the best interest of the City at this time to establish Tax Increment Financing District No. 9 and to approve the Plan relating thereto. Section 2 . - Findings for the Establishment of Tax Increment Financing District No. 9 2 . 01 . The EDA hereby finds, determines and declares that the establishment of Tax Increment Financing District No. 9 within Development District No. 1 is intended and, in the judgement of this EDA, its effects will be, to provide an impetus for commercial and industrial development, increase employment and otherwise promote certain public purposes and accomplish certain objectives as specified in the Plan for Tax Increment Financing District No. 9 . 2 . 02 . The EDA further finds, determines and declares that Tax Increment Financing District No. 9 qualifies as an Economic Development District pursuant to Minnesota Statutes, Section 469 . 174, Subdivision 12. 2 .03 . The EDA further finds, determines and declares 411 that the proposed development, in the opinion of the EDA, would not occur solely through private investment within the reasonably foreseeable future and, therefore, the use of Tax Increment Financing is deemed necessary. • 2 .04 . The EDA further finds, determines and declares that the proposed Plan for Tax Increment Financing District No. 9 conforms to the Comprehensive Plan of the City. 2 . 05 . The EDA further finds, determines and declares that the proposed Plan for Tax Increment Financing District No. 9 will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development or redevelopment of Development District No. 1 by private enterprise. 2 . 06 . The EDA determines and declares that Tax Increment Financing District No. 9 located within Development District No. 1 is hereby established. Section 3. - Adoption of the Plan. 3. 01 . The Plan for Tax Increment Financing District No. 9 presented to the EDA on this date, is hereby approved and adopted and shall be placed on file in the office of the City Clerk. Section 4 . - Implementation of the Plan. The Executive Director of the EDA, the City Administrator, and . the Finance Director are authorized and directed to proceed with implementation of the Plan, and for this purpose, to negotiate, draft, and prepare and present to the EDA for its consideration all future plans, resolutions, documents and contracts necessary for this purpose. Adopted this 8th day of March, 1993. Jeffrey A. Gongoll, President ATTEST: Elk River EDA Patrick D. Klaers, Executive Director Elk River EDA •