The URL can be used to link to this page

4.2. EDSR ATTACHMENT 03-28-2017 City of er Powered by Nature Economic Development Business Microloan Fund Guidelines, Policy & Application Amended: May 2011 November 2013 July 2014 November 2014 December 2016 March 2017 Citv of Elk River Economic Development Division 13065 Orono Parkwav Elk River,MN 55330 763.635.1040 ELK RIVER ECONOMIC DEVELOPMENT BUSINESS MICROLOAN FUND GUIDELINES, POLICY & APPLICATION I. POLICY PURPOSE The Economic Development Authority for the city of Elk River (EDA) recognizes the need to stimulate private sector investment into manufacturing and certain commercial facilities and equipment in order to create new jobs, boost productivity and retain existing jobs for local residents.Additionally, the need exists to encourage investment in the expansion and/or rehabilitation of commercial and retail buildings in order to maintain the economic viability of the city and in the Downtown District. Subsequently,the purpose of this microloan program is to provide low interest,long- term (i.e. greater than one year) loans as incentives for new industrial and commercial development within the city of Elk River and to encourage commercial and retail business owners in the Downtown District to rehabilitate their existing buildings. 2. ELIGIBLE BUSINESSES Any project located or proposed to be located within the city limits of Elk River as defined by this microloan program, may be eligible for a Microloan as further defined herein: • Unless otherwise stated, business must be a for-profit corporation, partnership, or sole proprietorship. • Business must be a small business as defined by the Small Business Administration (SBA). • Religious,political,and pornographic enterprises are not eligible. 3. MICROLOAN FUND TERMS & CONDITIONS Loan Structure All Economic Development Microloans shall be structured as direct loans unless otherwise approved by the EDA Finance Committee. If a participation loan is requested, an agreement will be signed by the borrower,primary lender and the EDA. The EDA may require additional agreements to be signed by the borrower (i.e. security agreement,personal guarantees,business subsidy agreement). Simultaneous Microloans The simultaneous use of different EDA microloan programs by any one borrower or for any one project is prohibited. Loan Repayment Jobs Incentive funds,including principal and interest received may not be used to support restaurant, retail, casinos, or sports facilities. Page 2 of 21 IN"ATURE] Call of Loan A loan shall become due and payable in full if a business relocates outside of the city of Elk River prior to the maturity date of the loan. Late Payment Charge A late payment charge of 8% of the installment amount will be enforced following a grace period of 10 calendar days. 4. REGULATION FOR NEW CONSTRUCTION AND IMPROVEMENTS All buildings which public funds will be used for construction or renovation are to be brought into conformance with city ordinances and state building codes. S. LOAN SECURITY AND GUARANTEES Applicant must be able to secure the loan by providing the EDA with a minimum of a subordinate mortgage upon the building and/or assets or other approved collateral equal to the amount of the loan. Applicant must demonstrate the financial means to repay the loans, as determined by the EDA. Whenever possible,personal, corporate,and/or entity guarantees will be made part of any loan agreement. Key person life insurance may be required as determined by the EDA Finance Committee based on loan amount and company ownership partners. 6. TIMING OF PROJECT EXPENSES No project should commence until the EDA has approved the loan application. Any costs incurred prior to the approval of the loan application are not eligible expenditures. No building construction should commence until the required city permits are secured. The applicant will be responsible for all legal,recording,and other fees required for protection of a security interest in the loan,payable by a $2,000 processing fee,which is paid at the time of application. In addition to the processing fee, all legal and filing fees shall be paid by the borrower at loan closing. Closing of the N icroloan should be simultaneous with the borrower's primary funding. The EDA should be given two weeks' notice before closing. 7. PROCEDURAL GUIDELINES FOR APPLICATION AND APPROVAL Page 3 of 21 IN"ATURE1 1. All applicants shall first contact a primary lending institution to determine if additional equity is needed, and if so,how much (if applicable). 2. The applicant shall then meet with city staff to obtain information about the microloan program, discuss the project,and obtain application forms. 3. The applicant shall complete and submit an application form to the city, along with a $2,000 processing fee. The fee is used to cover processing expenses and any remaining funds will be returned to the applicant. The applicant must provide evidence of their ability to meet the 10% equity requirements or provide a letter of commitment for conventional financing from the primary lending institution. 4. The EDA is a governmental entity and as such must provide public access to public data it receives. Data deemed by Applicant to be nonpublic data under State law should be so designated or marked by Applicant. See Minn. Sat. Sections 13.59, Subd. 1,respectively. 5. The application will be reviewed by the city staff to determine if it conforms to all city policies and ordinances and to consider the following: a. The availability and applicability of other governmental grants and/or microloan programs. b. Whether the proposed project will result in conformance with building and zoning codes. c. Whether it is desirous and in the best interests of the public to provide funding for the project. 6. The EDA Finance Committee and EDA Commissioners will review each application in terms of its consistency with the goals of the city's Comprehensive Plan and Economic Development Strategic Plan and in relation to the project's overall impact on the community's economy. Downtown Revitalization Loan applications will also be reviewed by a Housing&Redevelopment Authority Commissioner in conjunction with the EDA Finance Committee. Energy Efficiency Improvement Loan applications will also be reviewed by an Energy City Commissioner in conjunction with the EDA Finance Committee. The EDA Finance Committee will evaluate the project application in terms of the following: a. Project Design- Evaluation of project design will include review of proposed activities,time lines and a capacity to implement the project. b. Financial Feasibility-Availability of funds,private involvement, financial packaging and cost effectiveness. • Appropriate ratio of private funds to Microloan funds. • Sufficient cash flow to cover proposed debt service as demonstrated Page 4 of 21 IN"ATURE1 by financial statements and projections. • Letter of Commitment from applicant pledging to complete the project during proposed project duration,if the loan application is approved. • Letter of Commitment from other financing sources stating terms and conditions of their participation in the project if applicable. • Sufficient collateral. c. All other information as required in the application and/or additional information as may be requested by the Economic Development staff. d. Project compliance with all city codes and policies. e. Microloan Objectives - In addition to quality job and wage creation/retention requirements,the applicant must meet all Microloan Fund criteria and demonstrate how the proposed activities will meet at least one of the following objectives: • The project contributes to the fulfillment of the city's approved and adopted economic development and/or redevelopment plans. • The project prevents or eliminates slums and blight. • The project increases the local tax base. • The project brings a structure into compliance with an existing building code violation. 7. A written request for an extension shall be accompanied by a copy of current financial statements and a $500 upfront processing fee. The processing fee is used to cover processing expenses. The application for an extension beyond the original term should include a letter of denial from a conventional lender. 8. The EDA Finance Committee will recommend the approval, denial, or request a resubmission. A recommendation from the Finance Committee will be forwarded to the EDA for recommendation of approval,denial to the City Council for final action. 8. MICROLOAN POLICY REVIEW The above criteria will be reviewed on an annual basis to ensure that the policies reflected in this document are consistent with the economic development goals set forth by the city. 9. RIGHT OF REFUSAL The EDA may deny any application if it is found not consistent with the goals of the city's Comprehensive Plan and Economic Development Strategic Plan and in relation to the project's overall impact on the community's economy. Page 5 of 21 IN"ATURE1 10. COMPLIANCE WITH MN BUSINESS SUBSIDY LAW All developers/businesses receiving financial assistance from the City of Elk River shall be subject to the provisions and requirements set forth by the City's Business Subsidy Policy as amended and Minnesota Statutes Sections 116J.993 to 116J.995 (the "Minnesota Business Subsidy Law") if applicable. 11. Agreement to Pay Costs of Review It is the policy of the city of Elk River to require applicants to pay costs incurred by the city in reviewing and acting upon applications, so that these costs are not borne by the taxpayers of the city. These costs include all of the city's out-of-pocket costs for expenses,including the city's costs for review of the application by the city's Financial Consultant and City Attorney, or other consultants, recording fees, and necessary publication costs. The application processing fees cover anticipated costs; costs incurred above the application fee will be invoiced as they are incurred,and payment will be due within thirty (30) days. Any unused portion of the application fee will be returned to the applicant. If payment is not received as required by this agreement, the city may suspend the application review process and may deny the application for failure to comply with the requirements for processing the application. Payment for costs will be required whether the application is granted or denied. 12. Microloan Programs In order to meet the economic and community development objectives of the EDA, five distinct microloan programs exist within the Business Microloan Fund. Industrial Incentive Loan Purpose: The purpose of the Industrial Incentive Loan is to encourage industrial and high technology business development that supports the tax base and brings quality jobs to the city. Amount: Up to $100,000 of secondary financing not to exceed 20% of the total project cost. Remaining Principal: Must have private-sector commitments for 50% of the project cost. Borrower must provide 10% or more of project financing. Rate: Fixed at 3% Term: Loans must mature within 5 years,but must be amortized over a longer period of time. The balloon payment must not be longer than the balloon payment of the participating bank if applicable. Loans may be amortized up to the following limits: 20 years on real estate uses; P 0 W I R 10 B T Page 6 of 21 IN"ATURE1 10 years on equipment uses. Extension: In the event that the Borrower is unable to payoff the loan or refinance the Microloan at the end of five years,the loan may be extended up to two additional years at 3%interest. Criteria: Borrower must be an industrial or high technology business and create or retain one new full-time job for each$20,000 loaned within 2 years. Said jobs must pay a minimum wage of$15.00 per hour excluding benefits required by law. Loans of$75,000 or more shall meet the city of Elk River Business Subsidy Policy for the creation of new jobs at a minimum wage of$15.00 per hour excluding benefits required by law, as well as a 5-year location requirement. In the case where multiple sources of public financing are requested (e.g. Microloan and Tax Increment Financing) job creation goals shall not be double-counted. Borrower must comply with the provisions of the city's Industrial and Business Park zoning ordinances as applicable. Permitted Fund Uses: a. Building construction b. Land acquisition c. Machinery d. Furniture, fixtures, and equipment (FF&E) e. Renovation and modernization of buildings f. Public infrastructure needed for economic development expansions g. Investment real estate with a minimum of 50% of the space pre-leased Ineligible Fund Uses: a. Expenditures for the construction and/or renovation of residential units b. Inventory c. Refinancing of existing debt d. Working capital Downtown Revitalization Financing Loan Purpose: The Downtown Revitalization Financing Loan is available to business and property owners in the Downtown Area primarily for the rehabilitation and restoration of older buildings,as well as new business development. Non-profit organizations may be considered. The Downtown Area shall be described as that area in the attached in Exhibit A. Amount: Up to $74,999 of secondary financing not to exceed 20% of the total Page 7 of 21 IN"ATURE1 project cost. Remaining Principle: Must have private-sector commitments for 50% of the project cost. Borrower must provide 10% or more of project cost. Rate: Fixed at 3%. Term: Financing with a balloon payment in up to 5-years. Loans may be amortized up to the following limits: 20 years on real estate uses; 10 years on equipment uses. Extension: In the event that the Borrower is unable to payoff the loan or refinance the Microloan at the end of five years,the loan may be extended up to two additional years at 3%interest. Criteria: At a minimum, 20% of Microloan dollars must be used for the improvement of the building facade,with exceptions to be considered when it appears the facade improvements are not necessary. Financing of leasehold improvements will be considered at a limit of$25,000. Permitted Fund Uses: a. Building construction b. Renovation and modernization of buildings c. Furniture, fixtures, and equipment (FF&E) d. Exterior renovation of retail or commercial buildings e. Financing of leasehold improvements including facade improvements will be considered at a limit of$25,000 f. Expenditures for the construction and/or renovation of residential units Ineligible Fund Uses: a. Inventory b. Refinancing of existing debt c.Working capital Energy Efficiency Improvement Loan Purpose: The Energy Efficiency Improvements Loan is available to property owners of commercial or industrial buildings in Elk River to provide low interest loans to businesses to invest in energy efficiency and improve their profitability through reduced energy costs. In addition, the microloan program helps the city of Elk River use energy conservation as an economic development tool. Non-profit organizations may be considered. Amount: Applicants may apply for the cost of improvements up to $74,999 Page 8 of 21 IN"ATURE1 Equity: Must have a minimum of 10% equity provided by the borrower. Rate: Fixed at 3% Term: The maximum maturity date of the loan will be determined by the useful life of the improvement and the energy payback achieved as determined by ERMU. For projects that have a shorter length of payback (2-5) years as calculated according to energy savings,the loans will have an initial maturity of up to 5 years from the date of closing. Longer life improvements (6-15 years) may apply for a longer maturity of up to 10 years. Criteria: Microloan funds shall be spent on energy efficiency improvements outlined below or related building improvement costs Applicant must agree to energy audits conducted under the utility company's Conservation Improvement Program (CIP). If warranted, engineering studies then are performed on facilities with conservation opportunities under the utility company's CIP Program. Energy efficiency is defined as improvements that are rebatable by the Elk River Municipal Utilities (ERMU) or the utility provider for the property if not ERMU. Proposed energy efficiency improvements that do not qualify for the utility's prescriptive rebate program will be reviewed and approved by the utility company servicing the upgrade measures (e.g. Elk River Municipal Utilities, Connexus, CenterPoint) along with a letter indicating eligible utility rebates. Utility rebates as applicable will be assigned to the Elk River EDA and applied toward principal repayment of the loan. An Elk River Energy City Commission member will be asked to participate in the EDA Finance Committee review. The loans will be secured by personal and corporate guarantees,and if applicable alien on equipment financed and subordinate mortgage on the property. Installation must be certified through a licensed contractor and electrician. New construction is eligible when participating with a utility company rebate program. Eligible costs shall include only incremental costs over industry design standards. Permitted Fund Uses: P 0 W I R 10 B T Page 9 of 21 IN"ATURE1 a. Energy efficiency measures installed in or on a building include: b. Facility systems optimization (commissioning/re-commissioning) c. Facility systems control improvements d. Process efficiency improvements (CenterPoint Energy) e. Lighting efficiency improvements f. Heating,ventilation and air conditioning system modifications g. Exterior envelope improvements h. Motor and pump efficiency improvements i. Ground-source heat pump systems used to heat or cool a facility j. Installation of equipment or devices that use renewable energy sources to generate electricity or heat or cool a building including solar electricity (photovoltaic),wind turbine or solar thermal. Ineligible Fund Uses: a. Inventory b. Refinancing of existing debt c. Working capital d. Expenditures for the construction and/or renovation of residential units Micro-Brewery Loan Purpose: The Micro-Brewery microloan is available to business and property owners in the Downtown Area. The Downtown Area shall be described as that area in the attached Exhibit A. Amount: Up to $74,999 of secondary financing not to exceed 20% of the Total project cost. Equity: Must have private-sector commitments for 50% of the project cost. Borrower must provide 10% or more of project financing. Rate: Fixed at 3%. Term: Financing with a balloon payment in up to 5-years. Loans may be amortized up to the following limits: 10 years on equipment uses Extension: In the event that the Borrower is unable to obtain conventional financing to replace the Microloan at the end of five years, the loan may be extended up to two additional years at a market rate of interest. Criteria: At a minimum, 50% of Microloan dollars must be used for the purchase of equipment. Borrower must be located in the Downtown Area. Loans must be supported by sufficient collateral,which will include personal guarantees. Page 10 of 21 IN"ATUDJ Permitted Fund Uses: e. Renovation and modernization of buildings f. Furniture, fixtures, and equipment (FF&E) g. Exterior renovation of retail or commercial buildings h. Financing of leasehold improvements including facade improvements will be considered at a limit of$25,000 Ineligible Fund Uses: a. Inventory b. Refinancing of existing debt c. Working capital P 0 W I R 10 B T Page 11 of 21 INRATUDE �J E11 -_ RiVer ELK RIVER ECONOMIC DEVELOPMENT MICROLOAN FUND APPLICATION I . CONTACT INFORMATION Legal Name of Business: Project Site Address: City / State / Zip Contact Person(s) Business Phone Fax Home Phone Email Check One: Proprietor Corporation Partnership Federal ID # State ID # 2. NATURE OF LOAN REQUEST Which N icroloan Program are you applying for? Industrial Incentive Loan Downtown Revitalization Financing Loan Energy Efficiency Improvement Loan Jobs Incentive Loan TNEcro-Brewery Loan Amount Requested: $ Total Project Cost: $ Type of project: New construction for a start-up business New construction for an existing business On site expansion Equipment purchase Remodeling: circle one Commercial / Retail / Industrial Other Page 12 of 21 P9WIIEI IT INATUREJ Pleasegive a brief summary of your business and its products or service: Pleasegive a brief summary of the project: Please describe how this loan will impact your project: 3. FINANCING Project Costs Land $ Site improvements $ Buildings (attach plans & costs) $ Equipment/Machinery/Fixtures (attach list and estimated costs) $ Remodeling $ Industrial Inventory/Working Capital $ Other (attach description) $ Total Costs $ Comments: Page 13 of 21 P9WIIEI IT INATUREJ Proposed Sources of Financing SOURCE NAME TERMS AMOUNT Bank Loan $ Bank Loan $ Other Private Funds $ Applicant Contribution $ Other $ Fed Grant/Loan $ State Grant/Loan $ EDA Microloan $ Tax Increment Financing $ Tax Abatement $ Total Financing $ Collateral Assignments Lien Description of Collateral Position To Bank 1 To Bank 2 To Private Sources To Other Sources To Federal Govt To State To EDA Microloan Page 14 of 21 P 0 w E 0 E 0 8 T INNATURU Value of Collateral Book Value Cost Existing Liens Land $ $ $ Buildings $ $ $ Machinery&Equip. $ $ $ Other $ $ $ Other S $ $ 4. JOB & WAGE GOALS Present# of Employees Total Payroll Jobs To Be Created* Please provide the followin information on jobs you expect to create within 2-years. Average Are the Jobs Expected Number Hourly Annual Permanent or Hiring job Title of jobs Wage Salary Temporary? Date *If loan is for job retention only,please explain in Business Plan. Microloan Program Objectives (Check all that apply) The project contributes to the fulfillment of the city's approved and adopted economic development and/or redevelopment plans. The project prevents or eliminates slums and blight. The project increases the local tax base. The project brings a structure into compliance with an existing building code violation. Page 15 of 21 P 0 w E 0 E 0 8 11UNRATUR-El S. PROJECT CONTACTS Attorney Name Address Phone Accountant Name Address Phone Financing Sources (lenders, partners, etc... Name Address Phone Name Address Phone Parent Company Name Address Phone Others Name Address Phone Name Address Phone Page 16 of 21 PIwIIEI 1T 6. ATTACHMENTS CHECK LIST Please attach the following: A) Written Business Plan: 1. Description of Business 2. Ownership 3. Management 4. Date Established 5. Products/Services 6. Future Plans B) Financial Statements for Past Three Years and Year to Date 1. Profit&Loss Statements 2. Balance Sheets C) Financial Projections for up to Three Years D) A Project Proforma to include: 1. Projected revenues, 2. Operating expenses, 3. Net Operating Income, and 4. Annual Debt Service and Loan Payments. D) Resume of Owner/Management E) Personal Financial Statements of Proprietor, Partners, Guarantors F) Letter of Commitment from Applicant Pledging to Complete During the Proposed Project Duration G) Letter of Commitment from the Other Sources of Financing, Stating Terms and Conditions of their Participation in Project H) Processing Fee of$2,000 Page 17 of 21 P 0 w E N E 0 8 INNATUR-El 7. AGREEMENT I / We certify that all information provided in this application is true and correct to the best of my/our knowledge. I /We authorize the city of Elk River and the Finance Committee to check credit references and verify financial and other information. I / We agree to provide any additional information as may be requested by the city and the Finance Committee. The undersigned has received the city's policy regarding the payment of costs of review, understands that reimbursement to the city of costs incurred in reviewing the application will be required,agrees to reimburse the city as required in the policy and make payment when billed by the city, and agrees that the application may be denied for failure to reimburse the city for costs as provided in the policy. APPLICANT SIGNATURE BY DATE Page 18 of 21 P 0 w E 0 E 0 8 T INNATUR-U Exhibit A: Downtown Area n 1 �'t✓ �+ �I - �ri'aj ISCi �'+ 159 r.. 28_. I 4 r' 1 A'. 1 3341 14+ Ya 10E AkFlU ",\� GAKFIF VANDFNIBICE EIIC RRiH[ EUMMART ELVILWART F rJAN yAFR]' ME101F SC.IIIXiI „^JlgpgpE - SCHOOL $610C1 CGNMUNITT S,� Kl.ppt iCHil_Y.Sf I 5 R 10. �. •. _ - — y x = I 8 �•, T ,l h �B,Ix�p,.4 1 PARK f.Y Yom' ll ' L�� _ PlVRIC Rly. r I11IM1 or G] GN ST _i n [ham IIB I pll 5] 4 '10 4th S1FI, F ' 'A a i'$ I�.. ac€I ST IGF I �`•�: .�,, � T m FxscMulr J -+ � 1 I 1 M15SESSIPPI ANSA UI } Y , , may _ D ovvntown Area �+I November 19,2013 Page 19 of 21 PIIIR10 IT NATURE MICROLOAN APPLICATION SCORING WORKSHEET TO BE COMPLETED BY CITY STAFF 1. The project meets the criteria set forth in the appropriate the Microloan policy. a) Meets at least one of the microloan objectives in Section 7; 6(e). c) Consistent with all city plans and ordinances. d) Meets the wage requirements as defined in the city's business subsidy policy. 2. Ratio of Private to All Public Investment in Project: Points: $ Private Investment 5:1 5 $ Public Investment 4:1 4 Ratio Private: Public Financing 3:1 3 2:1 2 Less than 2:1 1 3.Job Creation in the City of Elk River: Points: Number of new jobs as a result of the project. 25+ 5 Number of existing/retained jobs 20+ 4 Total 15+ 3 10+ 2 Less than 10 1 4. Ratio of Public Investment to Job Creation: Points: $ Public Investment $8,000 or less 5 Number of new jobs created/retained $10,000 or less 4 $ of Public Investment per new job $12,000 or less 3 $15,000 or less 2 Over$15,000 1 5. Wage Level of jobs created/retained or relocated Points: Minimum hourly wage Over$21/ hour 5 of jobs created/retained: $18-21 / hour 4 $15 / hour 3 6. Project size: Points: The project will result in the construction 40,000+ 5 of square feet 30,000+ 4 20,000+ 3 10,000+ 2 10,000 or less 1 Page 20 of 21 P 0 w E N E 0 8 T INNATURU 7. Market Value/Tax Base Generation: Points: The project will result in a per square foot Industrial Commercial estimated market value(land and building) $80/sf+ $110/sf+ 5 of $70/sf+ $100/sf+ 4 $60/sf+ $90/sf+ 3 $50/sf+ $80/sf+ 2 $40/sf+ $70/sf+ 1 8. Type of Project: Points: 100% Owner Occupied 5 Mix Owner Occupied&Investment 4 Investment Property 3 9. Use: Points: Industrial or Business Park Project 5 Commercial/Retail Rehabilitation/Redevelopment 4 Downtown Revitalization or Microbrew 3 10. Likelihood that the project will result in Points: unsubsidized, spin-off development. High 5 Moderate 3 Low 1 Sub -Total Points: of a possible 45 points. 11. Point Adjustments Point Adjustments: The project contributes to the goals of Energy City. 5 points • Product promotes sensible use of energy,OR • Project utilizes significant energy efficient design&/or materials in construction. Total Points: Overall project desirability: High 50-35 points Moderate 34-29 points Low 28-20 points Not Eligible 19-0 points Page 21 of 21 P 0 w E N E 0 8 T INNATURU City of er Powered by Na tune Economic Development Job Incentive Microloan Guidelines, Policy & Application (Seeded by State MN Investment Fund Awards) March, 2017 City of Elk River Economic Development Division 13065 Orono Parkwav Elk River,TAIN 55330 763.635.1040 1 ELK RIVER ECONOMIC DEVELOPMENT JOB INCENTIVE MICROLOAN GUIDELINES, POLICY & APPLICATION GENERAL PURPOSE AND GUIDELINES The purpose of the RLF is to provide financial and technical assistance for the creation and retention of new employment.These objectives may be accomplished through the following means: 1. Create/retain permanent private sector jobs to fuel above-average economic growth. 2. Investment in technology and equipment that increase productivity and provide for higherwages; 3. Leverage of private investment to ensure economic renewal and competitiveness; 4. Increase the local tax base to guarantee a diversified industry mix; 5. Improve the quality of existing jobs,based on increases in wages or improvements in the job duties,training,or education associated with those jobs; 6. Improve employment and economic opportunities and create a reasonable standard of living, and 7. Enhance productivity growth through improved manufacturing or new technologies. One way to meet these objectives is to assist businesses that have location options outside of Elk River. These firms bring income into the state and raise the overall standard of living. ELIGIBLE EXPENDITURES The MIF-seeded funds maybe used in a variety of ways include example noted below.More information is available in Minn.Stat. 116J.8731 and through conversations with your loan officer. 1. Provide loans, and other forms of participation,ensuring that RLF funds are matched by private financing/owner equity. 2. Fund strategic investments in renewable energy market development. Any expenditure for external marketing for renewable energy market development is not subject to the matching requirements listed above. 3. Provide entrepreneurs with training,other technical assistance, and financial assistance as defined by federal guidelines. ELIGIBLE PROJECTS Assistance must be evaluated on the existence of the following conditions as noted in Minn.Stat. 116J.8731: 1. Creation or retention of jobs,or the improvement of jobs as measured by wages,skills or knowledge; 2. Increase in the tax base; 3. Attraction of private funds to the project; 4. Incapacity of local communities and finance partners to finance project; 5. Results in higher wage levels or workforce skills; 6. Supports development of microenterprises,as defined by federal guidelines,through technical assistance or financial assistance. 7. The project promotes or advances the green economy. 8. Need for assistance to retain existing business; 9. Importance of assistance to attract out-of-Elk River business;and The assistance cannot meet solely 8 or 9;other conditions must also be present. 2 ELIGIBLE ACTIVITIES RLF's may be used to fund a variety of business activities including: 1. Acquisition of land 2. Construction or rehabilitation of facilities 3. Site improvements 4. Utilities or infrastructure 5. Machinery and Equipment 6. Training Advance approval from DEED is necessary if the local government would like to provide financing for activities not listed above.Approval is more likely to occur in projects that relate to business development and involve other local government funds. INELIGIBLE ACTIVITIES In contrast to federal MIF funds,there are industry limitations on how state MIF RLFs may be used.State MIF RLFs may not be used for the operation,construction or expansion of a casino,a sport facility that that has a professional sports team as a principal tenant or any firm engaged in retailing merchandise.All assistance should follow the approved RLF guidelines.Please call the Economic Development Director to discuss any prospective financing. WAGE GOALS Businesses receiving RLF-State MIF assistance must pay each employee total compensation,including benefits not mandated by law, shall be the greater of$15.00 per hour or 150%of state or federal minimum wage,whichever is greater,exclusive of benefits required by law. OTHER ELIGIBLE USES OF THE FUNDS Minn.Stat. 116J.8731 allows local governments to loan or grant RLF funds to a regional development commission,other regional entities,or a certain statewide community capital funds to provide the local match required for capitalization of a regional or statewide RLF. CONFLICT OF INTEREST Minn.Stat.471.87 and 471.88 provide guidance on conflict of interest in a MIF transaction.An actual conflict of interest shall be deemed to exist when a decision on a MIF transaction would compromise a duty to another party or if special advantage is deemed to occur.Potential conflict of interests should also be considered. BUSINESS SUBSIDY LAW As mentioned on page 1,Minn. Stat. 116J.993 and 116J.994 must be followed in the administration of RLF- State MIF.These sections pertain to the definition of a business subsidy,public purpose of the subsidy, criteria, subsidy agreements,wage and job goals,timing of the project,public notice and hearing requirements,failure to meet goals,and reporting of information regarding the outcomes of the subsidy. JOB LISTING REQUIREMENTS Per Minn.Stat. 116L.66, a business that receives grants or loans in an amount greater than $200,000 must agree to list any vacant or new positions related to the financial assistance on the MinnesotaWorks.net job bankwebsite. 3 PREVAILING WAGE Per Minn. Stat. 116J.871,laborers and mechanics at the project site during construction,installation, remodeling,and repairs must be paid the state prevailing wage if the financial assistance is greater than $2,000 for a loan.All contracts for publicly owned infrastructure using the RLF must comply with the prevailing wage provisions. DATA PRIVACY The provision of any information related to any applications for assistance is guided by Minn. Stat. 13.591, particularly Subd 1 and 2. Other applicable state and federal laws and rules must also be followed. JOBS INCENTIVE MICROLOAN PROGRAM Purpose: To assist existing businesses with expansion and attract new businesses to the City whose local operations will help expand the City's economy through job retention and creation and maintain/grow the City's tax base. The purpose of the Jobs Incentive Program is to encourage the creation of high paying and quality jobs to the city. Amount: Up to $200,000 of secondary financing not to exceed 20% of the total project cost. Equity: Must have private-sector commitments for 50% of the project cost. Borrower must provide 10% or more of project financing. Rate: Fixed at 3%. Term: Financing with a balloon payment in up to 5-years. Loans may be amortized up to the following limits: 20 years on real estate uses; 10 years on equipment uses. MICROLOAN FUND TERMS & CONDITIONS Loan Structure All Economic Development Microloans shall be structured as direct loans unless otherwise approved by the EDA Finance Committee. If a participation loan is requested,an agreement will be signed by the borrower,primary lender and the EDA. The EDA may require additional agreements to be signed by the borrower (i.e. security agreement,personal guarantees,business subsidy agreement). Simultaneous Microloans The simultaneous use of different EDA microloan programs by any one borrower or for any one project is prohibited. Loan Repayment Jobs Incentive funds,including principal and interest received may not be used to support restaurant,retail, casinos, or sports facilities. Call of Loan 4 A loan shall become due and payable in full if a business relocates outside of the city of Elk River prior to the maturity date of the loan. Late Payment Charge A late payment charge of 8% of the installment amount will be enforced following a grace period of 10 calendar days. REGULATION FOR NEW CONSTRUCTION AND IMPROVEMENTS All buildings which public funds will be used for construction or renovation are to be brought into conformance with city ordinances and state building codes. LOAN SECURITY AND GUARANTEES Applicant must be able to secure the loan by providing the EDA with a minimum of a subordinate mortgage upon the building and/or assets or other approved collateral equal to the amount of the loan. Applicant must demonstrate the financial means to repay the loans, as determined by the EDA. Whenever possible,personal, corporate, and/or entity guarantees will be made part of any loan agreement. Key person life insurance may be required as determined by the EDA Finance Committee based on loan amount and company ownership partners. TIMING OF PROJECT EXPENSES No project should commence until the EDA has approved the loan application. Any costs incurred prior to the approval of the loan application are not eligible expenditures. No building construction should commence until the required city permits are secured. The applicant will be responsible for all legal,recording,and other fees required for protection of a security interest in the loan,payable by a $2,000 processing fee,which is paid at the time of application. In addition to the processing fee,all legal and filing fees shall be paid by the borrower at loan closing. Closing of the N icroloan should be simultaneous with the borrower's primary funding. The EDA should be given two weeks' notice before closing. PROCEDURAL GUIDELINES FOR APPLICATION AND APPROVAL 1. All applicants shall first contact a primary lending institution to determine if additional equity is needed,and if so, how much (if applicable). 2. The applicant shall then meet with city staff to obtain information about the microloan program, discuss the project, and obtain application forms. 3. The applicant shall complete and submit an application form to the city,along with a $2,000 processing fee. The fee is used to cover processing expenses and any remaining 5 funds will be returned to the applicant. The applicant must provide evidence of their ability to meet the 10% equity requirements or provide a letter of commitment for conventional financing from the primary lending institution. 4. The EDA is a governmental entity and as such must provide public access to public data it receives. Data deemed by Applicant to be nonpublic data under State law should be so designated or marked by Applicant. See Minn. Sat. Sections 13.59, Subd. 1,respectively. 5. The application will be reviewed by the city staff to determine if it conforms to all city policies and ordinances and to consider the following: a. The availability and applicability of other governmental grants and/or microloan programs. b. Whether the proposed project will result in conformance with building and zoning codes. c. Whether it is desirous and in the best interests of the public to provide funding for the project. 6. The EDA Finance Committee and EDA Commissioners will review each application in terms of its consistency with the goals of the city's Comprehensive Plan and Economic Development Strategic Plan and in relation to the project's overall impact on the community's economy. Downtown Revitalization Loan applications will also be reviewed by a Housing&Redevelopment Authority Commissioner in conjunction with the EDA Finance Committee. Energy Efficiency Improvement Loan applications will also be reviewed by an Energy City Commissioner in conjunction with the EDA Finance Committee. The EDA Finance Committee will evaluate the project application in terms of the following: a. Project Design- Evaluation of project design will include review of proposed activities,time lines and a capacity to implement the project. b. Financial Feasibility- Availability of funds,private involvement, financial packaging and cost effectiveness. • Appropriate ratio of private funds to Microloan funds. • Sufficient cash flow to cover proposed debt service as demonstrated by financial statements and projections. • Letter of Commitment from applicant pledging to complete the project during proposed project duration,if the loan application is approved. • Letter of Commitment from other financing sources stating terms and conditions of their participation in the project if applicable. • Sufficient collateral. c. All other information as required in the application and/or additional information as may be requested by the Economic Development staff. 6 d. Project compliance with all city codes and policies. e. Microloan Objectives - In addition to quality job and wage creation/retention requirements, the applicant must meet all Microloan Fund criteria and demonstrate how the proposed activities will meet at least one of the following objectives: • The project contributes to the fulfillment of the city's approved and adopted economic development and/or redevelopment plans. • The project prevents or eliminates slums and blight. • The project increases the local tax base. • The project brings a structure into compliance with an existing building code violation. 7. A written request for an extension shall be accompanied by a copy of current financial statements and a $500 upfront processing fee. The processing fee is used to cover processing expenses. The application for an extension beyond the original term should include a letter of denial from a conventional lender. 8. The EDA Finance Committee will recommend the approval, denial, or request a resubmission. A recommendation from the Finance Committee will be forwarded to the EDA for recommendation of approval, denial to the City Council for final action. MICROLOAN POLICY REVIEW The above criteria will be reviewed on an annual basis to ensure that the policies reflected in this document are consistent with the economic development goals set forth by the city. RIGHT OF REFUSAL The EDA may deny any application if it is found not consistent with the goals of the city's Comprehensive Plan and Economic Development Strategic Plan and in relation to the project's overall impact on the community's economy. AGREEMENT TO PAY COSTS OF REVIEW It is the policy of the City of Elk River to require applicants to pay costs incurred by the City in reviewing and acting upon applications, so that these costs are not borne by the taxpayers of the City. These costs include all of the City's out-of-pocket costs for expenses,including the City's costs for review of the application by the City's Financial Consultant and City Attorney, or other consultants, recording fees, and necessary publication costs. The application processing fees cover anticipated costs; costs incurred above the application fee will be invoiced as they are incurred,and payment will be due within thirty (30) days. Application fees are not refundable,though any unused portion is returned at the request of the applicant. If payment is not received as required by this agreement, the City may suspend the application review process and may deny the application for failure to comply with the requirements for processing the application. Payment for costs will be required whether the application is granted or denied. 7 The undersigned has received the City's policy regarding the payment of costs of review, understands that reimbursement to the City of costs incurred in reviewing the application will be required, agrees to reimburse the City as required in the policy and make payment when billed by the City, and agrees that the application may be denied for failure to reimburse the City for costs as provided in the policy. AGREEMENT I / We certify that all information provided in this application is true and correct to the best of my/our knowledge. I /We authorize the city of Elk River and the Finance Committee to check credit references and verify financial and other information. I /We agree to provide any additional information as may be requested by the city and the Finance Committee. The undersigned has received the city's policy regarding the payment of costs of review,understands that reimbursement to the city of costs incurred in reviewing the application will be required,agrees to reimburse the city as required in the policy and make payment when billed by the city,and agrees that the application may be denied for failure to reimburse the city for costs as provided in the Policy. APPLICANT SIGNATURE BY DATE 8 Elk - -_ F Ver ELK RIVER ECONOMIC DEVELOPMENT MICROLOAN FUND APPLICATION I . CONTACT INFORMATION Legal Name of Business: Project Site Address: City / State / Zip Contact Person(s) Business Phone Fax Home Phone Email Check One: Proprietor Corporation Partnership Federal ID # State ID # 2. NATURE OF LOAN REQUEST Which Microloan Program are you applying for? Jobs Incentive Loan (Funded by State MIF Funds) Amount Requested: $ Total Project Cost: $ Type of project: New construction for a start-up business New construction for an existing business On site expansion Equipment purchase Remodeling: (circle one Commercial / Retail / Industrial Other Please give a brief summary of your business and its products or service: 9 Please give a brief summary of the project: Please describe how this loan will impact your project: 3. FINANCING Project Costs Land $ Site improvements $ Buildings (attach plans & costs) $ Equipment/MachineryT/Fixtures (attach list and estimated costs) $ Remodeling $ Industrial Inventoryr/Working Capital $ Other (attach description) $ Total Costs $ Comments: Proposed Sources of Financing 10 SOURCE NAME TERMS AMOUNT Bank Loan $ Bank Loan $ Other Private Funds $ Applicant Contribution $ Other $ Fed Grant/Loan $ State Grant/Loan $ EDA Microloan $ Tax Increment Financing $ Tax Abatement $ Total Financing $ Collateral Assignments Lien Description of Collateral Position To Bank 1 To Bank 2 To Private Sources To Other Sources To Federal Govt To State To EDA Microloan 11 Value of Collateral Book Value Cost Existing Liens Land $ $ $ Buildings $ $ $ Machinery&Equip. $ $ $ Other $ $ $ Other $ $ $ 4. JOB & WAGE GOALS Present# of Employees Total Payroll Jobs To Be Created* Please provide the foll ing information on jobs you expect to create within 2-years. Average Are the Jobs Expected Number Hourly Annual Permanent or Hiring job Title of jobs Wage Salary Temporary? Date *If loan is for job retention only,please explain in Business Plan. 12 S. PROJECT CONTACTS Attorney Name Address Phone Accountant Name Address Phone Financing Sources (lenders, partners, etc... Name Address Phone Name Address Phone Parent Company Name Address Phone Others Name Address Phone Name Address Phone 13 6. ATTACHMENTS CHECK LIST Please attach the following: A) Written Business Plan: 1. Description of Business 2. Ownership 3. Management 4. Date Established 5. Products/Services 6. Future Plans B) Financial Statements for Past Three Years and Year to Date LProfit&Loss Statements 2.Balance Sheets C) Financial Projections for up to Three Years D) A Project Proforma to include: 1. Projected revenues, 2. Operating expenses, 3. Net Operating Income, and 4. Annual Debt Service and Loan Payments. D) Resume of Owner/Management E) Personal Financial Statements of Proprietor,Partners, Guarantors F) Letter of Commitment from Applicant Pledging to Complete During the Proposed Project Duration G) Letter of Commitment from the Other Sources of Financing, Stating Terms and Conditions of their Participation in Project Letter of Commitment from the Applicant committing to prevailing wage requirements. Processing Fee of$2,000 14 7. AGREEMENT I / We certify that all information provided in this application is true and correct to the best of my/our knowledge. I /We authorize the city of Elk River and the Finance Committee to check credit references and verify financial and other information. I / We agree to provide any additional information as may be requested by the city and the Finance Committee. The undersigned has received the city's policy regarding the payment of costs of review,understands that reimbursement to the city of costs incurred in reviewing the application will be required,agrees to reimburse the city as required in the policy and make payment when billed by the city,and agrees that the application may be denied for failure to reimburse the city for costs as provided in the Policy. APPLICANT SIGNATURE BY DATE 15 MICROLOAN APPLICATION SCORING WORKSHEET TO BE COMPLETED BY CITY STAFF 1. The project meets the criteria set forth in the appropriate the Microloan policy. a) Meets at least one of the microloan objectives in Section 7; 6(e). c) Consistent with all city plans and ordinances. d) Meets the wage requirements as defined in the city's business subsidy policy. 2. Ratio of Private to All Public Investment in Project: Points: $ Private Investment 5:1 5 $ Public Investment 4:1 4 Ratio Private: Public Financing 3:1 3 2:1 2 Less than 2:1 1 3.Job Creation in the City of Elk River: Points: Number of new jobs as a result of the project. 25+ 5 Number of existing/retained jobs 20+ 4 Total 15+ 3 10+ 2 Less than 10 1 4. Ratio of Public Investment to Job Creation: Points: $ Public Investment $8,000 or less 5 Number of new jobs created/retained $10,000 or less 4 $ of Public Investment per new job $12,000 or less 3 $15,000 or less 2 Over$15,000 1 5. Wage Level of jobs created/retained or relocated Points: Minimum hourly wage Over$21/ hour 5 of jobs created/retained: $18-21 / hour 4 $15 / hour 3 6. Project size: Points: The project will result in the construction 40,000+ 5 of square feet 30,000+ 4 20,000+ 3 10,000+ 2 10,000 or less 1 16 7. Market Value/Tax Base Generation: Points: The project will result in a per square foot Industrial Commercial estimated market value(land and building) $80/sf+ $110/sf+ 5 of $70/sf+ $100/sf+ 4 $60/sf+ $90/sf+ 3 $50/sf+ $80/sf+ 2 $40/sf+ $70/sf+ 1 8. Type of Project: Points: 100% Owner Occupied 5 Mix Owner Occupied&Investment 4 Investment Property 3 9. Use: Points: Industrial or Business Park Project 5 Commercial/Retail Rehabilitation/Redevelopment 4 10. Likelihood that the project will result in Points: unsubsidized, spin-off development. High 5 Moderate 3 Low 1 Sub - Total Points: of a possible 45 points. 11. Point Adjustments Point Adjustments: The project contributes to the goals of Energy City. 5 points • Product promotes sensible use of energy,OR • Project utilizes significant energy efficient design&/or materials in construction. Total Points: Overall project desirability: High 50-35 points Moderate 34-29 points Low 28-20 points Not Eligible 19-0 points 17 City o er Tax Increment Financing Policy & Application Amended: March 2017 February 2014 May 2006 March 2000 August 1991 City of Elk River Economic Development Division 13065 Orono Parkway Elk River,MN 55330 763.635.1040 TABLE OF CONTENTS Policy Purpose 3 Objectives of Tax Increment Financing 3 Policies for the Use of TIF 3 Statutory TIF Districts 4 Project Requirements 5 Project Qualifications 6 Subsidy Agreement and Reporting Requirements 7 Public Information Notice 7 Application Process for TIF 8 Signature Page 9 Application 10 Sample But-For Analysis 17 Application Review Worksheet: 18 Non-Housing Projects Application Review Worksheet: 20 Housing Projects Cit<r of Elk River Tax Increment Financing Policy&Application P 0 MI F R E ➢ e T Amended March 2017 Page 2 of 15 INATURE1 I. POLICY PURPOSE For the purposes of this document, the term "city"shall include the Elk River City Council, Economic DevelopmentAutbority, and Housing and RedevelopmentAutbority. The purpose of this policy is to establish the city of Elk River's position relating to the use of Tax Increment Financing (TIF) for private development above and beyond the requirements and limitations set forth by State Law. This policy shall be used as a guide in the processing and review of applications requesting tax increment assistance. The fundamental purpose of tax increment financing in Elk River is to encourage desirable development or redevelopment that would not otherwise occur but for the assistance provided through TIF. The city of Elk River is granted the power to utilize TIF by the Minnesota Tax Increment Financing Act, as amended. It is the intent of the city to provide the minimum amount of TIF,at the shortest term required for the project to proceed. The city reserves the right to approve or reject projects on a case by case basis, taking into consideration established policies,project criteria, and demand on city services in relation to the potential benefits from the project. Meeting policy criteria does not guarantee the award of TIF to the project.Approval or denial of one project is not intended to set precedent for approval or denial of another project. II. OBJECTIVES OF TAX INCREMENT FINANCING As a matter of adopted policy, the city will consider using TIF to assist private development projects to achieve one or more of the following objectives: • To retain local jobs and/or increase the number and diversity of jobs that offer stable employment and/or attractive wages and benefits as defined in the city's Business Subsidy Policy. • To encourage additional unsubsidized private development in the area, either directly or indirectly through"spin off' development. • To facilitate the development process and to achieve development on sites which would not be developed without TIF assistance. • To remove blight and/or encourage redevelopment of commercial and industrial areas in the city that result in high quality redevelopment and private reinvestment. • To offset increased costs of redevelopment (e.g. contaminated site cleanup) over and above the costs normally incurred in development. • To create opportunities for affordable housing. • To enhance and diversify the city of Elk River's economic base. • To significantly increase the city of Elk River's tax base. III. POLICIES FOR THE USE OF TIF a. When possible,TIF shall be used to finance public improvements associated with the project. The priority for the use of TIF funds is: 1. Public improvements,legal,administrative,and engineering costs. 2. Site preparation, site improvement,land purchase, and demolition. 3. Capitalized Interest and Bonding Costs. City of Elk River Tax Increment Financing Policy&Application P 0 N E B E 0 B T Amended March 2017 Page 3 of 15 INAT- UREI IV. STATUTORY TIF DISTRICTS Redevelopment District[Minn. State Statutes 469.174, Subd 10;469.176, Subd 4i] ■ Buildings, streets,other improvements occupy 70% of the area,and, more than 50% of the main buildings are substandard (substantial renovation or clearance justified; cost of attaining State building code exceeds 15% of the cost of a new structure). ■ At least 90% of the tax increment revenues must be used to correct the conditions that allow redevelopment district designation. Such costs include:land acquisition, demolition,land clearance,utility installation,roads, sidewalks,and parking facilities. ■ Maximum term 25 years after receipt of the first increment. Renewal& Renovation District[Minn. State Statutes 469.174, Subd. 10a;469.176, Subd 4i] ■ Buildings,street, other improvements occupy 70% of area; and at least 20% of the main buildings are substandard (as defined under Redevelopment District;and,30%of the other buildings require substantial renovation or clearance to remove conditions such as inadequate street layout, incompatible uses,overcrowding,obsolete buildings,or other identified hazards to community health, safety,and general welfare.These conditions must be reasonably distributed throughout the geographic area of the district. ■ At least 90% of the tax increment revenues must be used to finance the cost of correcting the conditions (i.e. land acquisition,demolition,land clearance,utility installation,roads, sidewalks,and parking facilities). ■ Maximum term 15 years after receipt of the first increment. Economic Development District[Minn. State Statutes 469.174, Subd. 12, 469.176, Subd. 4c] • A project found to be in the public interest because: ■ It will discourage a business from moving operations to another state or municipality;or, ■ It will result in increased local employment;or, ■ It will preserve and enhance the tax base. • At least 85%of the facilities must be used for: ■ the manufacturing or production of tangible personal property,including processing resulting in the change in condition of the property; ■ warehousing, storage,and distribution of tangible personal property, excluding retail sales; ■ research and development related to the activities listed in clause (1) or (2) of the statutes ; ■ telemarketing if that activity is the exclusive use of the property; ■ tourism facilities; or City of Elk River Tax Increment Financing Policy&Application P 0 N E B E 0 B T Amended March 2017 Page 4 of 15 INAT- URE1 ■ space necessary for and related to the activities listed in clauses (1) to (5) of the statutes. • Maximum term 8 years after receipt of the first increment. Housing District[Minn. State Statutes 469.174, Subs. 11, 469.176, Subd 44, 469.17611 ■ A project for low&moderate income housing occupancy.A project does not qualify if more than 20% of the square footage of improvements are for commercial,retail or other non-housing uses. ■ Tax increment revenue must solely finance housing project costs,which may include public infrastructure. ■ For owner-occupied housing,95% of the units must be initially purchased and occupied by individuals qualifying as low and moderate income under current Federal schedules. For rental housing, 50% of the units must be occupied by persons whose income is 80% or less of area median gross income. ■ Maximum term 25 years after receipt of the first increment. Soils Condition District[Minn. State Statutes 469174, Subd. 19, 469176 Subd 4b] ■ A project where presence of hazardous substances, pollution, or contaminants requires removal or remedial action for use; and, the estimated cost of remediation exceeds the land's fair market value,or, exceeds $2 per square foot. ■ Tax increment may be used only to: o Acquire parcels on which the improvements will occur; o Pay for the cost of removal or remedial action;and o Pay for the administrative expenses of the TIF Authority allocable to the district. ■ Maximum term is 20 years after receipt of the first increment. V. PROJECT REQUIRMENTS In addition to complying with all statutory guidelines,projects requesting TIF should meet the following requirements. However,it should not be presumed that a project meeting this set of criteria will automatically be approved. a. TIF assistance may be provided to the developer upon receipt of the increment by the city, otherwise referred to as the pay-asyougo method. Requests for up front financing will be considered on a case-by-case basis. b. A maximum of ten percent (10%) of any tax increment received from the district will be retained by the city to reimburse administrative costs. c. Any developer receiving TIF assistance shall provide a minimum of ten City of Elk River Tax Increment Financing Policy&Application P 0 N E B E 0 B T Amended March 2017 INAT- UREI Page 5 of 15 percent (10%) owner cash equity investment in the project. d. TIF will not be used to purchase property where land and/or property price is in excess of fair market value. e. Developer shall be able to demonstrate a market demand for a proposed project. TIF shall not be used to support purely speculative projects. f. TIF will not be utilized in cases where it would create an unfair and significant competitive financial advantage over other projects in the area. g. TIF shall not be used for projects that would place extraordinary demands on city services or for projects that would generate significant environmental impacts. h. The developer must provide adequate financial guarantees to ensure completion of the project,including,but not limited to: minimum assessment agreements,letters of credit,personal guaranties, etc. i. The developer shall adequately demonstrate,to the city's sole satisfaction, an ability to complete the proposed project based on past development experience,general reputation, and credit history,among other factors, including the size and scope of the proposed project. j. For the purposes of underwriting the proposal, the developer shall provide any requested market, financial, environmental, or other data requested by the city or its consultants. k. All TIF proposals shall optimize the private development potential of a site. VI. PROJECT QUALIFICATIONS All TIF projects considered by the city of Elk River must meet all of the following requirements: a. To be eligible for TIF, a project shall result in: i. The new construction of a minimum of 25,000 square feet; ii. A minimum increase of$37,500 per year in property taxes, excluding the state portion;and iii. Have a market value of at least$1,250,000 upon completion. b. The project shall meet at least one or more-of the objectives set forth in Section II and satisfy all the provisions set forth in Section III of this document. c. The developer shall demonstrate that the project is not financially feasible but for the use of TIF. d. The project shall comply with all provisions set forth in the Tax Increment Financing Act,Minnesota Statutes 469.124 to 469.134,inclusive, as amended, and Statutes 469.174 to 469.1794,inclusive,as amended. City of Elk River Tax Increment Financing Policy&Application P 0 N E B E 0 B T Amended March 2017 Page 6 of 15 INAT- UREI e. The project must be consistent with the city's Comprehensive Plan,Land Use Plan,and Zoning Ordinances. f. A Non-Housing project shall serve at least two of the following public purposes: • Creation of jobs with livable wages and benefits. • Significantly increase the city's tax base. • Enhancement or diversification of the city's economic base. • Industrial development that will spur additional private investment in the area. • Fulfillment of defined city objectives such as those identified in the city's Comprehensive Plan and the city's Economic Development Strategic Plan, among others. • Removal of blight or the rehabilitation of a high profile or priority site g. A Housing Project shall serve at least two of the following public purposes: • Enhancement or diversification of the city's housing stock. • Development that will spur additional private investment in the area. • Fulfillment of defined city objectives such as those identified in the city's Comprehensive Plan and the city's Housing and Redevelopment Strategic Plan, among others. • Removal of blight or the rehabilitation of a high profile or priority site. VII. SUBSIDY AGREEMENT & REPORTING REQUIRMENTS All developers/businesses receiving Tax Increment Financing assistance from the city of Elk River shall be subject to the provisions and requirements set forth by the city's Business Subsidy Policy as amended and Minnesota Statutes Sections 116J.993 to 116J.995 (the "Minnesota Business Subsidy Law"),if applicable. VIII. PUBLIC INFORMATION NOTICE Generally, correspondence to and from Staff is considered public information. Specific data related to a financial assistance request is deemed not public: (e.g.) Financial Information, Financial Statements,Net worth Calculations, Business Plans, Income and Expense projections,Balance Sheets, Customer Lists, Income Tax returns. When public financial assistance is received, only the following remains not public: Business Plans,Income and Expense projections, Customer lists,Income tax returns,design,market, and feasibility studies not paid for with public funds. The city allows an applicant to submit sensitive financial information directly to the city's financial consultant, for additional security. City of Elk River Tax Increment Financing Policy&Application . . N E H E D B T Amended March 2017 Page 7 of 15 A URE IX. APPLICATION PROCESS FOR TIF 1. Meet with appropriate EDA and City Staff to discuss the scope of the project,public participation being requested, and other information as may be necessary. 2. Applicant submits the completed application along with a$10,000 application deposit. The application deposit will be used toward the cost of services provided in the evaluation of financial feasibility, establishment or modification of the TIF district, and preparation of legal documents and agreements. An additional deposit of$10,000 will be required for projects that require meeting statutory eminent domain and/or redevelopment substandard tests. Projects that require professional services in excess of the initial deposit shall reimburse the city for the additional expenses. 3. Staff reviews the application and completes the Commercial-Industrial and/or Housing Worksheets. The Application and Commercial-Industrial and/or Housing Worksheets are primarily designed to score the desirability of the proposed project. 4. The EDA Finance Committee reviews the request 5. Results of the Commercial-Industrial and/or Housing Application and Worksheets are submitted to the EDA Finance Committee for recommendation to the appropriate governing authorities (EDA or HRA) and to the City Council for approval or denial of the request. 6. If preliminary approval is granted, the Tax Increment Financing Plan,along with all necessary notices and,resolutions are prepared by city staff and/or consultants. 7. If Planning Commission action is required,it will be necessary for the applicant to make application to the Commission for Concept Review. 8. A development agreement based upon the terms will be prepared in addition to an economic development plan or redevelopment plan and tax increment financing plan if required. 9. Notices are published and sent to the county and school board. 10. A public hearing may be set,if required by statutes, at which the EDA or HRA will consider a final recommendation related to the formal application. Following the necessary financial analysis and preparation of the detailed plans,the City Council shall take action on the project as required under the Tax Increment Financing statutes 11. The City Council grants final approval or denial of the request. City of Elk River Tax Increment Financing Policy&Application P 0 N E B E 0 B T Amended March 2017 Page 8 of 15 INAT- UREI X. SIGNATURE I certify that (legal business name)is defined as a Small Business, For-Profit and is not a religious,Political, Casino, Sports Facility, or Pornographic Enterprise. I further certify that all information provided in this application is true and correct to the best of my knowledge. I authorize the city of Elk River and the Finance Committee to check credit references and verify financial and other information. I further agree,if approved,to the loan security and guarantees required by the Subsidy policy. I agree to provide any additional information as may be requested by the city. Agreement to Pay Costs of Review It is the policy of the city of Elk River to require applicants to pay costs incurred by the city in reviewing and acting upon applications, so that these costs are not borne by the taxpayers of the city. These costs include all of the city's out-of-pocket costs for expenses, including the city's costs for review of the application by the city's Financial Consultant and City Attorney, or other consultants, recording fees, and necessary publication costs. The application deposit covers anticipated costs; costs incurred above the application deposit will be invoiced as incurred,and payment will be due within thirty (30) days. Application deposit is not refundable, though any unused portion is returned to the applicant. If payment is not received as required by this agreement,the city may suspend the application review process and may deny the application for failure to comply with the requirements for processing the application. Payment for costs will be required whether the application is granted or denied. The undersigned has received the city's policy regarding the payment of costs of review, understands that reimbursement to the city of costs incurred in reviewing the application will be required, agrees to reimburse the city as required in the policy and make payment when billed by the city, and agrees that the application may be denied for failure to reimburse the city for costs as provided in the policy. Note: All owners with ownership interests greater than 20%will be required to sign personal guarantees and a minimum assessment agreement if up front financing of the project is required. APPLICANT SIGNATURE: TITLE: DATE: City of Elk River Tax Increment Financing Policy&Application P 0 N E B E 0 B T Amended March 2017 Page 9 of 15 INAT- UREI /i Cltyoi ELK RIVER ECONOMIC DEVELOPMENT Elk - TAX INCREMENT APPLICATION River` CONTACT INFORMATION Legal Name of Business: Project Site Address: City / State / Zip Contact Person(s) Business Phone Fax Home Phone Email Check One: Proprietor Corporation Partnership Federal ID # State ID # PROJECT INFORMATION Property Information (please print) Address: Parcel Number: 75 - - Legal Description: Site Plan and Preliminary Construction Plans Attached: Yes No The project will be: Redevelopment District Renewal&Renovation District Economic Development Housing District Soils Condition District Amount Requested: $ Total Project Cost: $ The project will be: Owner Occupied Leased Space If Leased Space Percent Occupied 6 months after Certificate of Occupancy City-of Elk River Tax Increment Financing Policy&Application P 0 w E A E a e T Amended March 2017 NATURE Page 10 of 15 Total Amount of Tax Increment Requested: $ over years. City Portion: Annual$ Total$ County Portion: Annual$ Total$ ISD 728 Portion: Annual$ Total$ Amount of Tax Increment Requested for: Land Purchase $ Public Improvement$ Site Improvement$ Current Real Estate Taxes on Project Site: $ Estimated Real Estate Taxes upon Completion: Phase I $ Phase II $ Construction Start Date Construction Completion Date If Phased Project: Year % Completed Year % Completed Percent of project complete on December 31, current year. Brief description of the business entities,business,including history,principal product or service: Brief description of the proposed project: City of Elk River Tax Increment Financing Policy&Application P 0 N E B E 0 B T Amended March 2017 Page 11 of 15 INAT- URE1 PUBLIC PURPOSE It is the policy of the city of Elk River that the use of Tax Increment Financing should result in a benefit to the public. A Non-Housing project shall serve at least two of the following public purposes: • Creation of jobs with livable wages and benefits. • Significantly increase the city's tax base. • Enhancement or diversification of the city's economic base. • Industrial development that will spur additional private investment in the area. • Fulfillment of defined city objectives such as those identified in the city's Comprehensive Plan and the city's Economic Development Strategic Plan, among others. • Removal of blight or the rehabilitation of a high profile or priority site A Housing Project shall serve at least two of the following public purposes: • Enhancement or diversification of the city's housing stock. • Development that will spur additional private investment in the area. • Fulfillment of defined city objectives such as those identified in the city's Comprehensive Plan and the city's Housing and Redevelopment Strategic Plan, among others. • Removal of blight or the rehabilitation of a high profile or priority site. Please indicate how this project will serve a public purpose: JOB CREATION/RETENTION Number of existing jobs: Number of jobs created by project: Average hourly wage of jobs created/retained: Job Creation/Retention Average Expected Number Hourly Annual Are the Jobs Newly Hiring job Title of jobs Wage Salary Created or Retained Date City of Elk River Tax Increment Financing Policy&Application P 0 N E B E 0 B T Amended March 2017 Page 12 of 15 INAT- UREI Project Consultant Contacts Attorney Name Address Phone Fax Email Accountant Name Address Phone Fax Email Contractor Name Address Phone Fax Email Engineer Name Address Phone Fax Email Architect Name Address Phone Fax Email City of Elk River Tax Increment Financing Policy&Application P 0 N E B E 0 B T Amended March 2017 Page 13 of 15 INAT- URE1 SOURCES & USES SOURCES NAME AMOUNT Bank Loan $ Other Private Funds $ Owner Cash Equity $ Fed Grant/Loan $ State Grant/Loan $ EDA Micro Loan $ Tax Increment $ ID Bonds $ TOTAL $ USES AMOUNT Land Acquisition $ Site Development $ Construction $ Machinery&Equipment $ Architectural&Engineering Fees $ Legal Fees $ Interest During Construction $ Debt Service Reserve $ Contingencies $ TOTAL $ City of Elk River Tax Increment Financing Policy&Application POWERED BY Amended March 2017 Page 14 of 15 INAT- UREI ADDITIONAL DOCUMENTATION AND CHECKLIST Applicant to provide the following documentation: Application deposit of$10,000,application deposit is not refundable, though any unused portion is returned to the applicant. B) Written Narrative: Please give a brief summary of the project and how this subsidy will impact your project. The narrative should include a statement demonstrating how the project meets the public purpose. B) Written business plan,including the following: 1. Description of Business 2. Ownership 3. Management 4. Date Established 5. Products/Services 6. Future Plans 7. Market for Business C) Financial Statements for Past Two Years Profit&Loss Statement Balance Sheet Tax Returns D) Current Financial Statements Profit&Loss Statement to Date Balance Sheet to Date E) Project ProForma: 1. Operating cash flow assumptions that include: a. Projected revenues, b. Operating expenses, c. Net operating income,and d. Annual debt service and loan payments. 2. Financial Projections for Term of abatement, up to 10 Years F) Personal Financial Statements of all owners with ownership interest greater than 20%. Profit&Loss Current Tax Return G) Letter of Commitment from Applicant Pledging to Complete During the Proposed Project Duration. H) Letter of Commitment from the Other Sources of Financing, Stating Terms and Conditions of their Participation in Project. City of Elk River Tax Increment Financing Policy&Application P 0 N E B E 0 B T Amended March 2017 Page 15 of 15 INAT- UREI I) Site and Construction Plans and Itemized Project Construction Statement J) Attach the following documentation as Exhibits Exhibit A—Corporation/Partnership Description Exhibit B—Description of Project Exhibit C—List of Shareholders/Partners Exhibit D—But-For Analysis Exhibit E—List of Prospective Lessees Exhibit F—Legal Description and PID Number(s) Note: All owners with ownership interest greater than 20%will be required to sign personal guarantees and a minimum assessment agreement if up front financing of the project is required. The undersigned certifies that all information provided in this application is true and correct to the best of the undersigned's knowledge. The undersigned authorizes the city of Elk River to check credit references and verify financial and other information. The undersigned also agrees to provide any additional information as may be requested by the city after the filing of this application. Applicant Name Date City of Elk River Tax Increment Financing Policy&Application P 0 N E B E 0 B T Amended March 2017 Page 16 of 15 INAT- URE1 SAMPLE BUT-FOR ANALYSIS WITH NO WITH TAX INCREMENT TAX INCREMENT SOURCES AND USES SOURCES AND USES SOURCES SOURCES Mortgage 9,600,000 8,667,000 Equity 2,400,000 2,400,00 Tax Increment Financing 0 933,000 TOTAL SOURCES 12,000,000 12,000,000 USES USES Land 1,500,000 1,500,000 Site Work 300,000 300,000 Soil Correction 468,000 468,000 Demolition 100,000 100,000 Relocation 65,000 65,000 Subtotal Land Costs 2,433,000 2,433,000 Construction 6,750,000 6,750,000 Finish Manufacturing 250,000 250,000 Subtotal Construction Costs 7,000,000 7,000,000 Soft Costs 350,000 350,000 Taxes 35,000 35,000 Finance Fees 850,000 850,000 Project Manager 542,000 542,000 Developer Fee 540,000 540,000 Contingency 250,000 250,000 Subtotal Soft Costs 2,567,000 2,567,000 TOTAL USES 12,000,000 12,000,000 Income Statement Income Statement Sq. Ft. Per Sq.Ft. Sq. Ft. Per Sq.Ft. Rent-Space 1 100,000 $8.00 800,000 100,000 $8.00 800,000 Rent-Space 2 25,000 $8.50 212,500 25,000 $8.50 212,500 Rent-Space 3 25,000 $9.00 225,000 25,000 $9.00 225,000 Other 0 $0.00 0 0 $0.00 0 1,237,500 1,237,500 Mortgage 20 Term 1,051,646 20 Term 949,439 9.00%Interest 9.00%Interest 9,600,000 Principal 8,667,000 Principal Net Income 185,854 288,061 Total Return on Equity 7.74%1 12.00% City of Elk River Tax Increment Financing Policy&Application P 0 N E B E 0 B T Amended March 2017 Page 17 of 15 INAT- UREI TAX INCREMENT FINANCING APPLICATION REVIEW WORKSHEET FOR NON-HOUSING PROJECTS TO BE COMPLETED BY CITY STAFF 1. The project meets the criteria set forth in Section IV of the city's Tax Increment Financing policy. a) Meets minimum thresholds for size,value,and tax revenue. b) Meets at least one of the objectives in Section II and satisfies all of the provisions set forth in Section III. c) Demonstrates need for TIF with the but for analysis. d) Consistent with all city plans and ordinances. e) Serves at least two public purposes as defined in Section IV (f). Meets the appropriate statutory TIF district requirements 2. Ratio of Private to All Public Investment in Project: Points: $ Private investment 5:1 5 $ Public Investment 4:1 4 Ratio Private: Public Financing 3:1 3 2:1 2 Less than 2:1 1 3. Job Creation in the city of Elk River: Points: Number of new jobs as a result of the project. 40+ 5 Number of existing/retained jobs divided by 2. 30+ 4 Total 20+ 3 10+ 2 Less than 10 1 4. Ratio of Public Investment to Job Creation: Points: $ Public Investment $15,000 or less 5 Number of new jobs created/retained $20,000 or less 4 $ Public Investment per new job $22,000 or less 3 $25,000 or less 2 Over$25,000 1 5. Wage Level of new jobs created/retained: Points: Minimum hourly wage Over$21/ hour 5 of jobs created/retained: $18-21 / hour 4 $14-17 / hour 3 $10-13 / hour 2 Under$10 / hour 1 6. Project size: Points: The project will result in the construction 80,000+ 5 of square feet 65,000+ 4 50,000+ 3 35,000+ 2 25,000+ 1 City of Elk River Tax Increment Financing Policy&Application P 0 N E B E 0 B T Amended March 2017 Page 18 of 15 INAT- UREI 7. Market Value/Tax Base Generation: Points: The project will result in a per square foot Industrial Commercial estimated market value (land and building) $80/sf+ $110/sf+ 5 of $70/sf+ $100/sf+ 4 $60/sf+ $90/sf+ 3 $50/sf+ $80/sf+ 2 $40/sf+ $70/sf+ 1 8. Type of Project: Points: 100% Owner Occupied 5 Mix Owner Occupied&Investment 4 Investment Property 3 9. Use: Points: Manufacturing 5 Research&Development 4 Commercial Redevelopment 3 Warehouse/Distribution 2 Housing 1 10. Likelihood that the project will result in Points: unsubsidized, spin-off development. High 5 Moderate 3 Low 1 Sub -Total Points: of a possible 45 points. 11. Bonus Points Bonus Points: The project will be 100%Pay-asyougo TIF. 3 points The project contributes to the goals of Energy City. 2 points • Product promotes sensible use of energy, OR • Project utilizes significant energy efficient design&/or materials in construction. Total Points: Project Rating: Points: Max Eligibility: Overall project analysis: High 50-38 points 100% Moderate 37-29 points 85% Low 28-20 points 65% Not Eligible 19-0 points 0% City of Elk River Tax Increment Financing Policy&Application P 0 N E B E 0 B T Amended March 2017 Page 19 of 15 INAT- UREI TAX INCREMENT FINANCING APPLICATION REVIEW WORKSHEET- HOUSING PROJECTS TO BE COMPLETED BY CITY STAFF The project must meet the criteria set forth in Section IV of the city's Tax Increment Financing policy to continue. a) Meets minimum thresholds for size,value,and tax revenue. b) Meets at least one of the objectives in Section II and satisfies all of the provisions set forth in Section III. c) Demonstrates need for TIF with the but for analysis. d) Consistent with all city plans and ordinances. e) Serves at least two public purposes as defined in Section IV (g). Meets the appropriate statutory TIF district requirements 1. Ratio of Private to All Public Investment in Project: Points: Greater than 7:1 10 $ Private investment 6:1 8 $ Public Investment 5:1 6 Ratio Private: Public Financing 4:1 4 3:1 2 Less than 3:1 1 2. Project provides housing that is restricted Points: to persons 55 years and older: 10 3. Market Value/Tax Base Generation: Points: Project will result in an estimated market value per unit $135,000/Unit 5 (land and building) of $125,000/Unit 4 $115,000/Unit 3 $105,000/Unit 2 $ 95,000/Unit 1 4. Project proposes rehabilitation of existing housing, housing stock, and maximizes utilization of existing infrastructure: Points: 10 5. Project proposes a location near existing jobs, transportation, recreation, retail services, social services, and schools: Points: 5 City of Elk River Tax Increment Financing Policy&Application P 0 N E B E 0 B T Amended March 2017 Page 20 of 15 INAT- URE1 6. Project includes community/ neighborhood: Points: facility (pool, community center, etc.) 5 7. Type of Housing Project: Points: 100% Owner Occupied 3 Investment Property 2 8. Likelihood that the project will result in Points: unsubsidized, spin-off development. High 5 Moderate 3 Low 1 Sub -Total Points: of a possible 55 points. 9. Point Adjustments Bonus Points: The project will be 100%Pay-asyougo TIF. 5 points The project does not require modification to land use plan. 2 points The project contributes to the goals of Energy City. 2 points • Product promotes sensible use of energy, OR • Project utilizes significant energy efficient design&/or materials in construction. Total Points: Project Rating: Points: Max Eligibility: Overall project analysis: High 64-50 points 100% Moderate 37-49 points 85% Low 30-36 points 65% Not Eligible 0-29 points 0% City of Elk River Tax Increment Financing Policy&Application P 0 N E B E 0 B T Amended March 2017 Page 21 of 15 INAT- UREI J City of 1- kr Tax Abatement Policy & Application Amended: March 2017 September 2016 Februarys 2014 May 2006 August 2002 April 2000 Citv of Elk River Economic Development Division 13065 Orono Parkway Elk River,tiIN 55330 763.635.1040 Table of Contents I. Policy Purpose 3 II. Difference Between Tax Abatement & Tax Increment Financing 3 III. Objectives of Tax Abatement 3 IV. Policies for the Use of Tax Abatement 4 V. Project Qualifications 5 VI. Subsidy Agreement & Reporting Requirements 6 VII. Application Process for Tax Abatement 7 city of Elk River Application to Other Jurisdictions VIII. Application for Tax Abatement 8 Applicant Information Project Information Public Purpose Sources & Uses Additional Documentation and Checklist IX. Sample But-For Analysis 13 X. Application Review Worksheet 14 Page 2of15 row18E0 sr 1*4AfURE I. POLICY PURPOSE For the purposes of this document, the terra "city"shall include the Elk River City Council,Economic Development Authority, and Housing and Redevelopment Authority. The purpose of this policy is to establish the city of Elk River's position relating to the use of Tax Abatement for private development above and beyond the requirements and limitations set forth by State Law. This policy shall be used as a guide in the processing and review of applications requesting Tax Abatement assistance. The fundamental purpose of providing Tax Abatement in Elk River is to encourage desirable development or redevelopment that would not otherwise occur but for the assistance provided through the Tax Abatement. The city of Elk River is granted the power to utilize Tax Abatement by Minnesota Statutes, Sections 469.1812 to 469.1815 (the "Minnesota Tax Abatement Act"),as amended. It is the intent of the city to provide the minimum amount of Tax Abatement, as well as other incentives, at the shortest term required for the project to proceed. Preference is given to projects in which the total amount of Tax Abatement request includes participation from the county. The city reserves the right to approve or reject projects on a case by case basis, taking into consideration established policies,project criteria,and demand on city services in relation to the potential benefits from the project. Meeting policy criteria does not guarantee the award of Tax Abatement to the project.Approval or denial of one project is not intended to set precedent for approval or denial of another project. II. DIFFERENCE BETWEEN TAX ABATEMENT AND TAX INCREMENT FINANCING The primary difference between Tax Abatement and Tax Increment Financing (TIF) is the way in which the dollars are awarded to the project. When TIF is awarded to a project by the city,the other taxing jurisdictions (the school district and the county) are required to contribute their portion of the increased taxes to the project. Conversely, when Tax Abatement is requested, each political subdivision has the option of granting its portion of the increased taxes to the project. Subsequently,the dollars generated for the project with Tax Abatement are generally less than the dollars generated with TIF. III. OBJECTIVES OF TAX ABATEMENT As a matter of adopted policy, the city will consider using Tax Abatement to assist private development projects to achieve one or more of the following objectives: • To retain local jobs and/or increase the number and diversity of jobs that offer stable employment and/or attractive wages and benefits as defined in the city's Business Subsidy Policy. • To enhance and diversify the city of Elk River's economic base. • To encourage additional unsubsidized private development in the area, either directly or indirectly through"spin off' development. Page 3of15 P 0 W 1 8 E 0 BT •'AURE • To facilitate the development process and to achieve development on sites which would not be developed without Tax Abatement assistance. • To remove blight and/or encourage redevelopment of commercial and industrial areas in the city that result in high quality redevelopment and private reinvestment. • To offset increased costs of redevelopment (i.e. contaminated site clean-up) over and above the costs normally incurred in development. • To create opportunities for affordable housing. • To contribute to the implementation of other public policies, as adopted by the city from time to time, such as the promotion of quality urban or architectural design, energy conservation, and decreasing capital and/or operating costs of local government. • To significantly increase the city of Elk River's tax base. IV. POLICIES FOR THE USE OF TAX ABATEMENT a. Tax Abatement assistance will generally be provided to the developer upon receipt of taxes by the city, otherwise referred to as the pay-asyougo method. Requests for up front financing will be considered on a case-by-case basis. b. Any developer receiving Tax Abatement assistance shall provide a minimum of ten percent (10%) owner cash equity investment in the project. c. Tax Abatement will not be used in circumstances where land and/or property price is in excess of fair market value. d. Developer shall be able to demonstrate a market demand for a proposed project. e. Tax Abatement will not be utilized in cases where it would create an unfair and significant competitive financial advantage over other projects in the area. f. Tax Abatement shall not be used for projects that would place extraordinary demands on city services or for projects that would generate significant environmental impacts. g. The developer must provide adequate financial guarantees to ensure completion of the project,including, but not limited to: agreements,letters of credit,personal guaranties, etc. h. The developer shall adequately demonstrate,to the city's sole satisfaction,an ability to complete the proposed project based on past development Page 4of15 P 0 W 1 8 E 0 BT 111#4ATURE experience,general reputation, and credit history, among other factors, including the size and scope of the proposed project. i. For the purpose of underwriting the proposal,the developer shall provide any requested market, financial, environmental, construction plans or other data requested by the city or its consultants. j. Tax Abatement proposals shall not be used to support speculative office projects. Speculative projects are defined as those projects which have pre- leasing agreements or letters of intent for less than 50% of the available space. In addition,leasable office projects must meet the following guidelines: 1. Evidence of the 50% occupancy must be reported to the Director of Economic Development six months following an issued Certificate of Occupancy. 2. Of the occupants certified at the six month period, 50% of the jobs must be considered "new" jobs to the city of Elk River,meaning jobs not located in the city at any time prior to occupying space in the project. 3. Business retention jobs will be considered on a one-for-one match to job creation only in cases where job loss is specific and demonstrable in accordance with the Minnesota Business Subsidy Law. Evidence may include documentation that the company will have to close involuntarily, or the company has received an attractive offer to move to another state or community. k. All Tax Abatement proposals shall optimize the private development potential of a site. V. PROJECT QUALIFICATIONS All Tax Abatement projects considered by the city of Elk River must meet each of the following requirements: a. The project shall meet at least one of the objectives set forth in Section III of this document. b. The use of Tax Abatement will be limited to: • Industrial development, expansion, redevelopment, or rehabilitation; or • Commercial redevelopment or rehabilitation; or • Research and development facilities that satisfy Business Park zoning requirements; or • Office facilities with a minimum new construction of 25,000 square feet; or c. The developer shall demonstrate that the project is not financially feasible but for the use of Tax Abatement. Evaluation of the project's financial feasibility without Tax Abatement shall be provided by the city's financial Page 5of15 Paw E8E B BY IIA'ATURE1 advisor on all requests of over$25,000 total public investment. d. The city will consider the use of Tax Abatement assistance for projects that may not meet the but-for and job creation criteria, but rather would be considered as a "location incentive". These projects may result in other public benefits such as a significant tax base increase,the creation of higher paying jobs (at least twice the minimum hourly rate stated in the city's Business Subsidy Policy),and is likely to assist in the marketing and attraction of additional desired developments. e. The project shall comply with all provisions set forth in the Minnesota Tax Abatement Law,Minnesota Statutes 469.1812 to 469.1815,as amended. f. The project must be consistent with the city's Comprehensive Plan,Land Use Plan,and Zoning Ordinances. g. The project shall serve at least two of the following public purposes: • Job creation or job retention. • Significantly increase the tax base. • Enhancement or diversification of the city's economic base. • Development or redevelopment that will spur additional private investment in the area. • Fulfillment of defined city objectives, such as those identified in the Economic Development Strategic Plan or the city's Comprehensive Plan, among others. • Removal of blight or the rehabilitation of a high profile or priority site. VI. SUBSIDY AGREEMENT & REPORTING REQUIRMENTS All developers/businesses receiving Tax Abatement assistance from the city of Elk River shall be subject to the provisions and requirements set forth by the city's Business Subsidy Policy as amended and Minnesota Statutes Sections 116J.993 to 116J.995 (the "Minnesota Business Subsidy Law"),if applicable Page 6 of 15 P 0 W E 8 E 0 B T 111#4ATURE VII. APPLICATION PROCESS FOR TAX ABATEMENT A. CITY OF ELK RIVER 1. Applicant submits the completed application along with a $10,000 application deposit, to be refunded for any portions not utilized if the tax increment project does not proceed. The application deposit will be used toward the cost of services provided in the evaluation of financial feasibility and preparation of legal documents and agreements. Projects that demand professional services in excess of the initial deposit shall be required to reimburse the city for the additional expenses. 2. City staff reviews the application and completes the Application Review Worksheet. 3. Results of the Worksheet are submitted to the appropriate governing authorities (EDA or HRA) for recommendation to the City Council of approval or denial of the request. 4. If preliminary approval is granted,all necessary notices,resolutions and agreements are prepared by city staff and/or consultants. 5. Public hearing(s) on the proposed request are held. 6. The City Council grants final approval or denial of the request B. APPLICATIONS TO OTHER JURISDICTIONS It is recommended that applicants intending to seek Tax Abatement from Sherburne County and/or School District 728 make their applications to those bodies concurrent with their application to the city of Elk River. For more information on applying for Tax Abatement through Sherburne County and/or School District 728, contact: Sherburne County Administrator 763-241-2701 School District 728 Superintendent 763-241-3400 Page 7 of 15 P 0 W E B E 0 B T •'AURE C,TYoT Financial Incentive Application Elly - Tax Abatement Financing River VIII. APPLICATION FOR TAX ABATEMENT Public Information Notice Generally, correspondence to and from Staff is considered public information. Specific data related to a financial assistance request is deemed not public: Financial Information,Financial Statements, Net worth Calculations,Business Plans,Income and Expense projections,Balance Sheets,Customer Lists,Income Tax returns. When public financial assistance is received, only the following remains not public: Business Plans,Income and Expense projections,Customer lists,Income tax returns, design,market, and feasibility studies not paid for with public funds. The city does allow an applicant to submit sensitive financial information directly to the city's financial consultant,for additional security. A. APPLICANT INFORMATION Name of Business Entity's Address Primary Contact Address Phone Fax Email Brief description of the business entity,including history, principal product or service: Brief description of the proposed project: Attorney Name Address Phone Fax Email Accountant Name Page 8of15 P a W E R E 9 8r INATUREJ Address Phone Fax Email Contractor Name Address Phone Fax Email Engineer Name Address Phone Fax Email Architect Name Address Phone Fax Email B. PROJECT INFORMATION 1. The project will be: Industrial: New Construction Expansion Redevelopment/ Rehab. Office/research facility that conforms to Business Park zoning standards Commercial Redevelopment/Rehabilitation Other 2. In addition to the city of Elk River,applicant is requesting Tax Abatement from: Sherburne County School District 728 3. The project will be:_Owner Occupied Leased Space 4. Project Address Parcel Identification Number(s) 5. Site Plan and Construction Plans Attached: Yes No 6. Total Amount of Tax Abatement Requested: $ over years. City Portion: Annual$ Total$ County Portion: Annual$ Total$ ISD 728 Portion: Annual$ Total$ 7. Current Real Estate Taxes on Project Site: $ Estimated Real Estate Taxes upon Completion: Phase I $ Phase II $ 8. Construction Start Date: Construction Completion Date: If Phased Project: Year % Completed Year % Completed C. PUBLIC PURPOSE It is the policy of the city of Elk River that the use of Tax Abatement should result in Page 9 of 15 P 0 W E 8 E 0 B T •'AURE a benefit to the public. Please indicate how this project will serve a public purpose. Job Creation/Retention Number of existing jobs Number of jobs created by project Average hourly wage of jobs created/retained _New industrial development which will result in additional private investment in the area. _Enhancement and/or diversification of the city of Elk River's economic base. _The project contributes to the fulfillment of the city's Economic Development Strategic Plan. _Removal of blight. _Rehabilitation of a high profile or priority site. _Significantly increase the city's tax base. D. SOURCES & USES SOURCES NAME AMOUNT Bank Loan $ Other Private Funds $ Owner Cash Equity $ Fed Grant/Loan $ State Grant/Loan $ EDA Micro Loan $ Tax Abatement $ ID Bonds $ TOTAL $ USES AMOUNT Land Acquisition $ Site Development $ Construction $ Machinery&Equipment $ Architectural&Engineering Fees $ Legal Fees $ Interest During Construction $ Debt Service Reserve $ Contingencies $ TOTAL $ Page 10 of 15 P 0 W E 8 E 0 BY IIA'ATURE1 E. ADDITIONAL DOCUMENTATION AND CHECKLIST Applicants will also be required to provide the following documentation: A) Written business plan,including a description of the business, ownership/management, date established,products and services, and future plans B) Financial Statements for Past Two Years Profit&Loss Statement Balance Sheet C) Current Financial Statements Profit&Loss Statement to Date Balance Sheet to Date D) Two Year Financial Projections E) Personal Financial Statements& Current Tax Return of all Major Shareholders F) Letter of Commitment from Applicant Pledging to Complete During the Proposed Project Duration G) Letter of Commitment from the Other Sources of Financing, Stating Terms and Conditions of their Participation in the Project Application deposit of$10,000,with any unused portion to be refunded if project does not proceed 1) Construction Plans and Itemized Project Construction Statement J) Attach the following documentation as Exhibits Exhibit A—Corporation/Partnership Description Exhibit B —Description of Project Exhibit C—List of Shareholders/Partners Exhibit D—But-For Analysis Exhibit E—List of Prospective Lessees Exhibit F—Legal Description and PID Number(s) 1. Note: All owners with ownership interests greater than 20%will be required to sign personal guarantees if up front financing of the project is required. Page 11 of 15 P 0 W E 8 E 0 B T •'AURE The undersigned certifies that all information provided in this application is true and correct to the best of the undersigned's knowledge. The undersigned authorizes the city of Elk River to check credit references,verify financial and other information,and share this information with other political subdivisions as needed. The undersigned also agrees to provide any additional information as may be requested by the city after the filing of this application. The undersigned has received the city's policy regarding the payment of costs of review, understands that reimbursement to the city of costs incurred in reviewing the application will be required,agrees to reimburse the city as required in the policy and make payment when billed by the city, and agrees that the application may be denied for failure to reimburse the city for costs as provided in the policy. Applicant Name Date Page 12 of 15 P 0 W E 8 E 0 B T IIA'ATUREI IX. SAMPLE BUT-FOR ANALYSIS WITH NO WITH TAX ABATEMENT TAX ABATEMENT SOURCES AND USES SOURCES AND USES SOURCES SOURCES Mortgage 9,600,000 8,667,000 Equity 2,400,000 2,400,00 Tax Abatement 0 933,000 TOTAL SOURCES 12,000,000 12,000,000 USES USES Land 1,500,000 1,500,000 Site Work 300,000 300,000 Soil Correction 468,000 468,000 Demolition 100,000 100,000 Relocation 65,000 65,000 Subtotal Land Costs 2,433,000 2,433,000 Construction 6,750,000 6,750,000 Finish Manufacturing 250,000 250,000 Subtotal Construction Costs 7,000,000 7,000,000 Soft Costs 350,000 350,000 Taxes 35,000 35,000 Finance Fees 850,000 850,000 Project Manager 542,000 542,000 Developer Fee 540,000 540,000 Contingency 250,000 250,000 Subtotal Soft Costs 2,567,000 2,567,000 TOTAL USES 12,000,000 12,000,000 Income Statement Income Statement Sq. Ft. Per Sq. Ft. Sq. Ft. Per Sq. Ft. Rent-Space 1 100,000 $8.00 800,000 100,000 $8.00 800,000 Rent-Space 2 25,000 $8.50 212,500 25,000 $8.50 212,500 Rent-Space 3 25,000 $9.00 225,000 25,000 $9.00 225,000 Other 0 $0.00 0 0 $0.00 0 1,237,500 1,237,500 Mortgage 20 Term 1,051,646 20 Term 949,439 9.00% Interest 9.00% Interest 9,600,000 Principal 8,667,000 Principal Net Income 185,854 288,061 Total Return on Equity 7.74% 12.00% Page 13 of 15 P B W E 8 E B B T •'AURE X. TAX ABATEMENT APPLICATION REVIEW WORKSHEET TO BE COMPLETED BY CITY STAFF 1. The project meets the criteria set forth in Section V of the Tax Abatement policy. a) Meets at least one of the objectives in Section III. b) Demonstrates need for Tax Abatement with the but for analysis. c) Consistent with all city plans and ordinances. d) Serves at least two public purposes as defined in Section V(g). 2. Ratio of Private to All Public Investment in Project: Points: $ Private Investment 5:1 5 $ Public Investment 4:1 4 Ratio Private: Public Financing 3:1 3 2:1 2 Less than 2:1 1 3.Job Creation in the city of Elk River: Points: Number of new jobs as a result of the project. 25+ 5 Number of existing/retained jobs 20+ 4 Total 15+ 3 10+ 2 Less than 10 1 4. Ratio of Public Investment to Job Creation: Points: Public Investment $8,000 or less 5 Number of new jobs created/retained $10,000 or less 4 $ of Public Investment per new job $12,000 or less 3 $15,000 or less 2 Over$15,000 1 5. Wage Level of newjobs created/retained Points: Minimum hourly wage Over$21/ hour 5 of jobs created/retained: $18-21 / hour 4 $14-17 / hour 3 $10-13 / hour 2 Under$10/ hour 1 6. Project size: Points: The project will result in the construction 40,000+ 5 of square feet 30,000+ 4 20,000+ 3 10,000+ 2 10,000 or less 1 Page 14 of 15 P 0 W E B E 0 B T •'AURE 7. Market Value/Tax Base Generation: Points: The project will result in a per square foot Industrial Commercial estimated market value(land and building) $80/sf+ $110/sf+ 5 of $70/sf+ $100/sf+ 4 $60/sf+ $90/sf+ 3 $50/sf+ $80/sf+ 2 $40/sf+ $70/sf+ 1 8. Type of Project: Points: 100% Owner Occupied 5 Mix Owner Occupied&Investment 4 Investment Property 3 9. Use: Points: Industrial or Business Park Project 5 Commercial Rehabilitation/Redevelopment 4 10. Likelihood that the project will result in Points: unsubsidized, spin-off development. High 5 Moderate 3 Low 1 Sub -Total Points: of a possible 45 points. 11. Bonus Adjustments Bonus Adjustments: The project will be 100%Pay-asyougo Tax Abatement 3 points The project contributes to the goals of Energy City. 2 points • Product promotes sensible use of energy, OR • Project utilizes significant energy efficient design&/or materials in construction. Total Points: Rating Points Max Eligibility Overall project desirability: High 45-38 points 100% Moderate 37-29 points 75% Low 28-20 points 50% Not Eligible 19-0 points 0% Page 15 of 15 P B W E 8 E B B T IIA'ATURE1