2.1. EDSR 03-18-2019Request for Action
To Item Number
Economic Development Authority 2.1
Agenda Section Meeting Date Prepared by
Work Session March 18, 2019 Amanda Othoudt, EDD
Item Description Reviewed by
Energy Incentive Program Cal Portner, City Administrator
Reviewed by
Action Requested
Discuss the Energy Incentive Program and Policy.
Background/Discussion
At their December 17, 2018, meeting the EDA heard a presentation on the new Energy Incentive Program
utilizing Elk River Municipal Utilities (ERMU) Payment in Lieu of Taxes (PILOT) to the city.
This incentive would waive PILOT as a development tool for new businesses meeting very specific criteria
and redirect it as a credit distributed through the applicant’s electric service bill for up to two years. The
amount of the incentive shall be determined by ERMU in its sole discretion in consultation with the city.
To be eligible, the business must be located within the ERMU electric service territory in which the electric
sales are included in the calculation for the city PILOT and the project must meet all other applicable
provisions of the policy.
At their February 19, 2019, meeting, the EDA discussed the policy and whether there was a need for a
lengthy application and review process and a fee to apply for the program. The EDA attorney evaluated the
need for the application, review process and fee. Our attorney suggested that it would be fine to forgo an
application fee and simplify the process as long as the criterion for qualifying for the program is clearly
stated. She indicated that with this type of financial assistance, being that this is not a loan to the applicant,
there is not a need for the Joint Finance Committee to review the application. She suggested keeping the
application as part of the program for reporting and auditing purposes.
Our attorney added a clause in the policy to address financial assistance greater than $150,000, which the
EDA would need to hold a public hearing, and will add some costs.
Financial Impact
N/A
Attachments
Energy Incentive Program Policy and Application (revised and redlined)
ERMU PILOT Policy
Map
The Elk River Vision
A welcoming community with revolutionary and spirited resourcefulness, exceptional
service, and community engagement that encourages and inspires prosperity
Economic
Development
Energy Incentive
Program Policy
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Elk River Economic Development
Energy Incentive Program
Guidelines, Policy & Application
1. Policy Purpose
The City of Elk River Economic Development Authority (EDA) and the City of Elk
River (City) maintain a goal to stimulate private sector investment for new job
creation and tax base growth. The Energy Incentive Program offers a savings to
qualified applicants on their Elk River Municipal Utilities (ERMU) electric bills for
up to two years.
2. Compliance with the ERMU Payment in Lieu of Taxes (PILOT) and
Other Donations to the City of Elk River Policy
Elk River Municipal Utilities was purchased by the City in 1945 and separate
governance was created in 1947. It is typical for a municipal utility to provide a
PILOT regardless of the separation of governance. The PILOT is calculated based
on eligible electric sales within the City.
As an economic development incentive option, the City agrees to waive the
applicable PILOT for an approved applicant and redirect that amount as a credit
distributed through the applicant’s monthly ERMU electric service bill for up to two
years. The amount of the incentive shall be determined by ERMU in its sole
discretion in consultation with the City.
For the applicant to be eligible for this incentive, the business must be located within
an area of the ERMU electric service territory in which the electric sales are included
in the calculation for the PILOT to the City. And for the applicant to be eligible, the
project must meet all other applicable prevision of the ERMU PILOT policy; the
City must be eligible to receive PILOT for the location to be able to waive PILOT
for the project.
Eligible Businesses
Comment \[OA1\]: Criteria Established for
Eligible Business within the application will simplify
the process and eliminate the need for review by the
Projects located or proposed to be located within the city limits of the City may be
Joint Finance Committee and a scoring criteria at the
eligible for the program as further defined herein:
end. EDA to discuss and establish criteria.
Data Centers and Manufacturing Facilities are only eligible to apply.
Comment \[OA2\]: EDA to discuss
Unless otherwise stated, business must be a for-profit corporation,
partnership, limited liability company, or sole proprietorship.
Business mMust be a small business as defined by the Small Business
Administration.
Must be Only nnew construction, expansion or addition projects only
projects qualify.
Located within eligible ERMU area within the City of Elk River. Religious,
political, and pornographic enterprises are not eligible.
Data Center Projects must meet the following requirements:
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numbering
Peak electric demand greater than 50kW per month.
Minimum New Job Creation of 12 FTE Employees
Wages greater than $18 per hour
Minimum Project Size: 20,000 square feet
Minimum Economic Output: $5 million through Implan software
(information provided by Sherburne County)
Total Annual Property Taxes of at least $80,000
Comment \[OA3\]: EDA to discuss
Manufacturing Facilities must follow the following requirements:
Peak electric demand greater than 50kW per month.
Minimum New Job Creation of 50 FT Employees within 2 years
Wage Level of greater than $18 per hour
Minimum Project Size: 20,000 square feet
Minimum Calculated Economic Output: $5 million through Implan software
(information provided by Sherburne County)
Total Annual Property Taxes of at least $80,000
Located within eligible ERMU area within the City of Elk River.
.
Comment \[OA4\]: EDA Should Discuss New
Must The createion of at least 50 new jobs at .
Jobs and Wages
Shall have a Calculated Economic Output of $10 million through Implan
Comment \[OA5\]: EDA Should Discuss
software (information provided by Sherburne County).
Economic Output
Completed project Project mmust generate a least $80,000 in total annual
Comment \[OA6\]: EDA Should discuss amount
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property taxes.
of total annual property taxes
Religious, political, and pornographic enterprises are not eligible.
numbering
3. Regulation for New Construction
All buildings which public funds will be used for construction are toshall conform to
Ccity codes and ordinances and the state building codes.
4. Timing of Project Expenses
No project shall commence without final Ccity cCouncil approval of the application.
Any costs incurred prior to the approval of the application are not eligible
expenditures.
No building construction should shall commence until the all required permits are
secured.
The applicant will shall be responsible for all legal, recording, and other fees payable
Comment \[OA7\]: Elimination of application fee
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 applicant.
5. Procedural Guidelines for Application and Approval
1. The applicant shall obtain information about the Energy Incentive Program and
application from the City.
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2. The applicant shall complete and submit an application, along with a $2,000
processing fee. The fee covers processing expenses. Any remaining funds will be
returned to the applicant. The applicantand must provide a letter of commitment
for constructing the project.
3. The EDA and the City are a governmental entities and must provide access to
public data received in accordance with the Minnesota Government Data
Practices Act, (Minnesota Statutes, Chapter 13 - ) (the “Minnesota Government
Data Practices Act (MGDPA”).
3. The information provided in an application to the EDA and the City will be
used to assess eligibility for financial assistance. The EDA and the City will not
be able to process an application without this information. The Minnesota
Government Data Practices ActMGDPA governs whether the information that
you are provideding to the EDA is public or private. If financial assistance is
provided for the project, the information submitted in connection with your
application will become public, except for those items protected under
Minnesota Statutes, Section 13.59, Subdivision 3(b) or Section 13.591,
Subdivision 2. Data deemed by the applicant to be nonpublic data under state
law should be so designated or marked by the applicant. See Minn. Stat. Sections
13.59, Subd. 1, respectively.
4. The application will be reviewed to determine conformity to all City policies and
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ordinances and to consider the following:
a. The availability and applicability of other governmental grants and/or
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microloan programs.
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b. Whether the proposed project will result in conformance with building
and zoning codes.
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bc. Whether it is desirous and in the best interests of the public to provide
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incentives and/or funding for the project.
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5. The Joint Finance Committee of the EDA and EDA Commissioners will review
each application for compliance with the City’s Comprehensive Plan, Economic
numbering
Development Strategic Plan and the goals, requirements and intent of this policy.
The Joint Finance Committee EDA Finance CommitteeEDA will also evaluate
the project application in terms of the following:
a. Project Design - Evaluation of project design willto include review of
proposed activities, time lines and a capacity to implement the project.
b. Letter of Commitment from applicant pledging to complete the project
during proposed project duration, if the application is approved.
c. Project compliance with all City codes, ordinances and policies.
d. Quality job and wage creation requirements. of at least fifty (50) new jobs
Comment \[OA8\]: Jobs/Wages
at a minimum hourly wage of $18.00.
e. Peak electric demand greater than 50kW per month.
f. Located within the eligible ERMU area.
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Comment \[OA9\]: Economic Output Discussion
g. Calculated economic output of $10 million through Implan software
(information provided by Sherburne County).
h. Total annual Project tax generates generation.a minimum of $80,000 in
Comment \[OA10\]: Property Tax Discussion
total annual property taxes.
i. The project contributes to the fulfillment of the City’s approved and
adopted economic development and/or redevelopment plans.
j. All other information as required in the application and/or additional
information as may be requested by the economic development staff, in
its sole discretion.
j.k. Compliance with this Economic Development Energy Incentive
Program policy
6. The EDA Finance Committee will recommend the approval, denial, or request a
resubmission. A recommendation from the Finance CommitteeEDA will be
forwarded to the EDA for recommendation of approval or, denial to the City
Council for final action.
6. 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.
Formatted: Font: 9 pt
7. Right of Refusal
The EDA shall deny any application found inconsistent with the goals of the Ccity’s
Comprehensive Plan, and Economic Development Strategic Plan and the intent,
requirement and goals of this policy. The City Council shall have final authority to
review the application and will make the final determination as to whether the
assistance shall be granted. The EDA and the City reserve the right to approve or
reject projects on a case-by-case basis, taking into consideration established policies.
Meeting policy criteria does not guarantee the award of assistance to the project.
Approval or denial of one project is not intended to set precedent for approval or
denial of another project.
8. Compliance with the Minnesota Business Subsidy Law
All developers/businesses receiving financial assistance from the EDA and the City
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
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(the “Minnesota Business Subsidy Law”) if applicable, including entering into a
business subsidy agreement if necessary. Any business subsidy agreement will be
drafted by the EDA. If the applicant requests any changes to the agreement, the
applicant will pay the EDA’s legal costs associated with review of the requested
changes and incorporation of any accepted changes by the EDA’s attorney.
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9. Compliance with the ERMU Payment in Lieu of Taxes (PILOT) and
Other Donations to the City of Elk River Policy
Elk River Municipal Utilities was purchased by the City in 1945 and separate governance was
created in 1947. It is typical for a municipal utility to provide a PILOT regardless of the
separation of governance. The PILOT is calculated based on eligible electric sales within the
City.
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6 pt, Line spacing: single
As an economic development incentive option, the City agrees to waive the applicable PILOT for
an approved applicant and redirect that amount as a credit distributed through the
applicant’s monthly ERMU electric service bill for up to two years. The amount of the
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incentive shall be determined by ERMU in its sole discretion in consultation with the City.
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next
For the applicant to be eligible for this incentive, the business must be located within an area of the
ERMU electric service territory in which the electric sales are included in the calculation for
the PILOT to the City. And for the applicant to be eligible, the project must meet all other
applicable prevision of the ERMU PILOT policy; the City must be eligible to receive PILOT
for the location to be able to waive PILOT for the project.
109. Form of Assistance; Repayment
The incentive will be provided over a period of two (2) years starting after the City
issues a cCertificate of oOccupancy (CO) for the project. If the business owner fails
to create the number of jobs as set forth in its application within two (2) years of the
issuance of a certificate of occupancyCO, the business may be required to repay the
amount of assistance provided if required by applicable law.
11. Agreement to Pay Costs of Review
City and EDA policy requires applicants to pay all costs incurred by the Ccity to review and
act upon applications so that these costs are not borne by the taxpayers. These cCosts
include all of the city’s out-of-pocket costs for expenses, including the City’s and the EDA’s
costs for review of the application by the City/’s and EDA’s financial advisor, attorney,
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 cCity may
suspend the application review process and may deny the application for failure to
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comply with the requirements for processing the application. Payment for costs will
be required whether the application is granted or denied.
10. Project Scoring
Projects scoring at a high desirability rating will be eligible to receive up to 100% of
the total incentive over two years. Projects scoring at a moderate desirability rating
will be eligible to receive up to 75 % of the total incentive over two years. Projects
scoring at a low desirability rating will be eligible to receive up to 50% of the total
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incentive over two years. Projects scoring at not eligible, will not be eligible to
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receive this incentive. The amount of incentive determined is at the sole discretion of
the Economic Development Authority.
Comment \[OA11\]: The Project Scoring Criteria
was discussed with ERMU. Their billing system is
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not capable of handling the tiered (100% , 75%,
50%) incentive levels. They will have to check with
spelling and grammar
their vendor to see if this is possible and what the
cost to the city would be to implement if they can do
it.
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punctuation, Don't adjust space between Latin
and Asian text, Don't adjust space between
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Elk River Economic Development
Energy Incentive Program Application
11. 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 Request
Please give a brief summary of your business and its products or service:
Please give a brief summary of the project and a construction timeline for the project:
Please describe how this program will impact your project:
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3. Proposed Peak Electric Demand and Energy Usage
4. Job & Wage Goals
Jobs to be Created*
Please provide the following 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
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5. 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
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6. Attachment Checklist
Please attach the following:
______ A) Application
______ B) Projected Electric Usage as calculated by ERMU
______ C) Economic Impact Analysis (from Sherburne County)
______ D) Proposed Increase in Property Taxes
______ ED) Certificate of Good Standing and Applicant’s Organizational
Documents (for example, articles of incorporation and bylaws)
______ FE) Resume of Owner/Management
______ GF) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
Comment \[OA12\]: Eliminate Application Fee
______ G) Processing Fee of $2,000
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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 Ccity of Elk River and the EDA Joint 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 cCity and the EDA.
Joint Finance Committee.
The undersigned has received the cCity’s policy regarding the payment of costs of review,
understands that reimbursement to the cCity of costs incurred in reviewing the application
will be required, agrees to reimburse the cCity as required in the policy and make payment
when billed by the cCity, and agrees that the application may be denied for failure to
Comment \[OA13\]: Not needed if we eliminate
reimburse the cCity for costs as provided in the policy.
application fee
APPLICANT SIGNATURE
BY
DATE
12
th
Comment \[OA14\]: At the Feb 19 meeting we
APPLICATION SCORING WORKSHEET
discussed a graduated scoring formula.
After discussions with our attorney to simplify the
TO BE COMPLETED BY CITY STAFF
process, we concluded that the application scoring
worksheet can be eliminated if the criteria is defined
within the policy and the application.
1. The project meets the criteria set forth in the Energy Incentive policy.
a) Meets the objectives of the program
c) Consistent with all city plans and ordinances.
d) Meets the wage requirements as defined in the city’s business subsidy policy.
2. Job Creation in the City of Elk River: Points: _____
Number of new jobs as a result of the project. 50+ 5
Total Less than 50 0
3. Wage Level of jobs created/retained or relocated Points: _____
Minimum hourly wage Over $21/ hour 5
of jobs created/retained: $19-20 / hour 4
$18 / hour 3
4. Project size: Points: _____
The project will result in the construction 50,000+ 5
of square feet 40,000+ 4
30,000+ 3
5. Tax Base Generation: Points: _____
The project will result in the annual estimated
Tax Base Generation $100,000+ 5
of $90,000+ 4
$80,000+ 3
Sub - Total Points: _____________of a possible 20 points.
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6. Bonus Points Point Adjustments:
The project contributes to the goals of Energy City. 3 points
Product promotes sensible use of energy, OR
Project utilizes significant energy efficient design &/or materials in construction.
Total Points:
Overall project desirability: High 2018-23
points
Moderate 182-1917
points
Low 6-12-1711
points
Not Eligible 0-11 5
points
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Economic Development Energy Incentive Program
Policy History
Adopted by: On (date) Item #
EDA January 22, 2019 7.7
City Council
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Page 1 of 2
A.17 – Payment in Lieu of Taxes (PILOT) and Other Donations to the City of Elk River
1.0 Purpose and Summary
The success of ERMU is linked with the success of our community. And the success of our
community is linked with the operation of our city government and ERMU. ERMU was
purchased by the City of Elk River in 1945 and separate governance was created per State
Statute in 1947. Although governed separately, ERMU is still an important component of our
local government and our city services.
It is typical for a municipal utility to provide a Payment in Lieu of Taxes (PILOT) and other
donations to their city, regardless of a separation of governance. Although typical, this
contribution should never inhibit ERMU’s ability to make repayment on debt, cause ERMU to
become non-competitive, or inhibit needed investment in personnel or infrastructure which may
hurt ERMU’s ability to meet the needs of their customers. For these reasons the PILOT and
other donations should be reviewed at least once every five (5) years by the ERMU Commission.
2.0 Payment in Lieu of Taxes (PILOT)
The PILOT transfer from Elk River Municipal Utilities to the City of Elk River shall be four
percent (4%) of the revenues generated by ERMU’s electric customers within the corporate
boundaries of the City of Elk River which are not subject to a loss of revenue payment resulting
from the March 20, 2015, electric service territory transfer agreement with Connexus Energy.
3.0 Donated Electricity
Elk River Municipal Utilities shall donate all electricity to the City of Elk River for street lights
and signal lights.
4.0 Donated Water
Elk River Municipal Utilities shall donate water for use by the Elk River Fire Department
(ERFD) for the purpose of extinguishing fires within the City of Elk River and other cities under
contract with the ERFD.
Page 2 of 2
For the purpose of creating ice rinks for public/ non-enterprise use, ERMU shall donate water for
use by the Elk River Parks Department.
Elk River Municipal Utilities shall donate water for the use by the Elk River Streets Department
for the use of street sweeping.
5.0 Donated Labor
Because of specialized skills and equipment, ERMU may be able to provide a better value to our
community by donating labor to the City of Elk River. For example, ERMU has trained
employees and the equipment to hang banners where the City does not. In this example, ERMU
is able to provide this donated service to the City for less cost than a third party, creating greater
value to our community. For such situations, ERMU shall donate labor to the City of Elk River,
as appropriate, where a greater value is created for our community and where ERMU is not
subjected to undue burden.
In addition to hanging banners, other examples include: maintenance of street lighting, relamping
signal lights, locating underground fiber optics and/or other facilities, administration costs
associated with the billing of city franchise fees, installation of temporary lighting, relamping of
city ball field lighting, installation and/or maintenance of city warning sirens, meter reading for
wastewater, assistance with tree trimming, etc…
Adopted December 6, 1994
Revised June 6, 2008
Revised July 2, 2013
Revised October 13, 2015
Revised January 1, 2016
$
2031
2031
2031
The City of Elk River Economic DevelopmentEnergy Incentive ProgramEligibility Timeline Map
2030
2029
2028
2027
2019
Not Eligible(Day ton)
Not Eligible(O tsego)
Not Eligible(Big Lake Township)