5.1. SR 07-11-2005
Item 5.1.
MEMORANDUM
TO: Mayor and City Council
FROM: Catherine Mehelich, Director of Economic Developmen~
DATE: July II, 2005
SUBJECT: Downtown Building Expansion Proposal - The Bank of Elk River
Attachments
. Staff Correspondence to Pat Dwyer, The Bank of Elk River dated April 11 , 2005
. City of Elk River Tax Rebate Financing Policy
. Memo from Director of Planning re: Downtown Parking Requirements
Background
Earlier this year staff was notified by representatives of The Bank of Elk River about
preliminary discussions to expand the Bank's corporate offices to accommodate an
additional 20,000-square feet for current and future growth of the company. The Bank has
been evaluating the pros and cons of either expanding its corporate office facility located
downtown, or to relocate its corporate offices to its commercial location in Otsego.
Issue
Expanding the downtown Elk River location presents some challenges to the Bank both
financially and functionally. The Bank's contractor has estimated up to $1.5 million in extra
costs to expand the downtown site as compared to constructing on vacant land.
Functionally, maintaining adequate parking and drive thru access is a challenge due to the
shape and size of the lot.
An expansion to the downtown facility presents an opportunity for additional revitalization
in the downtown through private investment and expands the downtown employment and
customer base which will support small businesses in the central business district.
In response to the Bank's financial challenge, staff provided the Bank with the attached
correspondence offering a recommendation for the City's consideration of Tax Rebate
Financing for the proposed expansion project. The Director of Planning has prepared an
analysis of the parking issue.
The Bank representatives have requested a discussion with the City Council regarding some
options to address the Bank's two primary challenges through:
. The City's preliminary consideration of Tax Rebate Financing assistance
. The City's flexibility on parking requirements
S:\EDA \TAXABATE\Bank of Elk River\7.11.0S Council. doc
13065 Orono Parkway
Elk River, MN 55330
April 11 , 2005
Pat Dwyer, Sr. v.P. & CFO
The Bank of Elk River
630 Main Street
Elk River, MN 55330
Dear Pat,
We appreciate the opportunity to respond to The Bank of Elk River's needs and interest in
expanding its facilities in downtown Elk River. We recognize the value of The Bank of Elk
River's retail and corporate presence downtown and look forward to working with you on
the proposed project. The proposed project as discussed at our meeting on March 29,2005
is consistent with the City and HRA's goal for revitalizing downtown Elk River as a vibrant
retail and commercial area by stimulating new investment.
Based on the preliminary information that's been provided and discussed thus far, staff has
prepared this letter as a preliminary proposal for your consideration. Staff supports
recommending that the City and Sherburne County contribute to the project via a pay-as-
you-go tax rebate of 100% of the increased City and County property taxes as a result of the
proposed project for a period of up to 10-years.
The actual amount of tax rebate assistance that could be provided under this structure would
be based on a number of factors including actual tax rates and market value in the year
following construction. Staff estimates that the tax rebate assistance could be within the
following range depending on the final increased market value as a result of the project:
Increased Market Value $ 2,440,000 (20,000sf @ $122/ sf)
Combined City and County Taxes $41.000 annual
Total Estimated Amount of Assistance $ 4tO,000 after to-years
Increased Market Value $ 3,300,000 (20,000sf@ $165/sf)
Combined City and County Taxes $ 55.900 annual
Total Estimated Amount of Assistance $ 559,000 after to-year
Phone: 763.635.1000
Fax: 763.635.1090
www.cLelk-river.mn.us
April 11, 2005
Page 2 of 2
We understand that the proposed range of assistance cannot match the significant
investment that The Bank of Elk Ri~er will make with the proposed project. We look
forward to meeting with you to discuss and refine this preliminary proposal as it relates to
your project needs.
We hope that you will find downtown Elk River to be the continued home of The Bank of
Elk River's retail and corporate office. Please feel free to contact either one of us at 763-
635-1000 if you have any questions.
Sincerely, .
&~jf!~
~~
Catherine Mehelich
Director of Economic Development
Patrick Klaers
City Administrator
Economic Development
Tax Rebate Financing
Policy & Application
AJnended: August 2002
Adopted: April 10, 2000
City of Elk River, Minnesota
Table of Contents
I. Policy Purpose 3
II. Difference Between TRF & TIF 3
III. Objectives of Tax Rebate Financing 3-4
IV. Policies for the Use of TRF 4-5
V. Project Qualifications 5-6
VI. Subsidy Agreement & Reporting Requirements 6
VII. Application Process 7
City of Elk River 7
Application to Other Political Subdivisions 7
VIII. Application 8
Applicant Information 8
Project Information 9
Public Purpose 9
Sources & Uses 10
Checklist & Additional Information 11
IX. Application Review Worksheet 12
X. Exhibits 14
A Corporation/Partnership Description
B Project Description
C Shareholders
D ButfOr Analysis
E Prospective Lessees
F Legal Description and PID Number
XI. Sample But-For Analysis 15
City of Elk River
Tax Rebate Financing Policy, Amended August 2002
- 2 -
I. POLICY PURPOSE
For the purposes of this document, the term "City" shall include the Elk River City Counci4 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 Rebate Financing (TRF), otherwise referred to as 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 rebate assistance. The fundamental purpose of tax rebate financing in Elk
River is to encourage desirable development or redevelopment that would not otherwise
occur but for the assistance provided through TRF.
The City of Elk River is granted the power to utilize TRF by the Minnesota Tax
Abatement Act, as amended. It is the intent of the City to provide the minimum amount
ofTRF, as well as other incentives, 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 ofTRF 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 TRF & TIF
The primary difference between Tax Rebate Financing (TRF) 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 political subdivisions (the school district and
the county) are required to contribute their portion of the increased taxes to the project.
Conversely, when TRF 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 TRF are generally less than the dollars generated with TIP.
III. OBJECTIVES OF TAX REBATE FINANCING
As a matter of adopted policy, the City will consider using TRF 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.
. 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.
. To facilitate the development process and to achieve development on sites
which would not be developed without TRF 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.
City of Elk River
Tax Rebate Financing Policy, Amended August 2002
- 3 -
. 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.
IV. POLICIES FOR THE USE OF TRF
a. TRF assistance will be provided to the developer upon receipt of taxes by the
City, otherwise referred to as the pqy-as-you-go method. Requests for up front
financing will be considered on a case-by-case basis.
b. Any developer receiving TRF assistance shall provide a minimum of twenty
percent (20%) cash equity investment in the project. Projects utilizing the
SBA504 program will be required to provide a minimum of ten percent
(10%) cash equity investment.
c. TRF 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. TRF will not be utilized in cases where it would create an unfair and
significant competitive financial advantage over other projects in the area.
f. TRF 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: assessment
agreements, letters of credit, personal guaranties, and etcetera.
h. 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.
1. 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.
J. TRF 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.
City of Elk River
Tax Rebate Financing Policy, Amended August 2002
- 4 -
In addition, leasible 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. 50% of the jobs within the leasible office building space 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 MN 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 TRF proposals shall optimize the private development potential of a site.
v. PROJECT QUALIFICATIONS
All TRF 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 TRF 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 and minimum market value of $1,000,000 upon
project completion; or
. Residential development and redevelopment may be eligible for
TRF under a separate set of policies and only with the
recommendation of the HRA.
c. The developer shall demonstrate that the project is not financially feasible
butfor the use of TRF. Evaluation of the project's financial feasibility without
TRF shall be provided by the City's financial advisor on requests of over
$25,000 total.
d. The project shall comply with all provisions set forth in the state's
Tax Abatement Law, statues 469.1812 to 469.1815, as amended.
City of Elk River
Tax Rebate Financing Policy, Amended August 2002
- 5 -
e. The project must be consistent with the City's Comprehensive Plan, Land
Use Plan, and Zoning Ordinances.
f. The project shall serve at least two of the following public purposes:
. Job creation or job retention.
. Increase of 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
Strategic Plan for Economic Development or the city's Comprehensive
Plan, among others.
. Removal of blight or the rehabilitation of a high prof1le or priority site.
VI. SUBSIDY AGREEMENT & REPORTING REQUIRMENTS
All developers/businesses receiving Tax Rebate Financing assistance from the City
of Elk River shall be subject to the provisions and requirements set forth by the
City's Business Subsidy Criteria as adopted, and State Statute 116].993 as
summarized below.
All developers/businesses receiving TRF assistance shall enter into a Subsidy
Agreement with the City of Elk River that identifies: the reason for the subsidy, the
public purpose served by the subsidy, and the goals for the subsidy, as well as other
subsidy agreement criteria set forth by Statute 116].993.
The developer/business shall f1le a report annually for two years after the date the
benefit is received or until all goals set forth in the application and Subsidy
Agreement have been met, whichever is later. Reports shall be completed using the
format drafted by the State of Minnesota and shall be f1led with the City of Elk
River no later than March 1 of each year for the previous calendar year. Businesses
fulfilling job creation requirements must f1le a report to that effect with the city
within 30 days of meeting the requirements.
The developer/business owner shall maintain and operate its facility at the site
where TRF assistance is used for a period of five years after the benefit is received.
In addition to attaining or exceeding the jobs and wages goals set forth in the
Subsidy Agreement, the borrower shall achieve at least one of the objectives set
forth in Section III of this document.
Developers / Businesses failing to comply with the above provisions will be subject
to fines, repayment requirements, termination of the assistance, and be deemed
ineligible by the State to receive any loans or grants from public entities for a period
of five years.
City of Elk River
Tax Rebate Financing Policy, Amended August 2002
- 6 -
VII. APPLICATION PROCESS FOR TRF
A. CITY OF ELK RIVER
1. Applicant submits the completed application along with a $5,000 application fee.
The application fee will be used toward the cost of services provided in the
evaluation of financial feasibility and preparation of legal documents. The balance
of the application fee will be returned to the applicant.
2. City staff reviews the application and completes the Application Review
Worksheet.
3. Results of the Worksheet are submitted to the appropriate governing authorities
for preliminary approval of the proposal.
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 project are held.
6. The EDA or HRA recommends approval or denial of the proposal to the City
Council.
7. The City Council grants final approval or denial of the proposal.
B. APPLICATIONS TO OTHER POLITICAL SUBDIVISIONS
It is recommended that applicants intending to seek TRF 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 TRF
through Sherburne County and! or School District 728, contact:
Brian Benson
Sherburne County Administrator
763-241-2701
Dr. Alan] ensen
Superintendent - School District 728
763-241-3400
City of Elk River
Tax Rebate Financing Policy, Amended August 2002
- 7 -
MEMORANDUM
TO:
FROM:
Mayor and City Council
Michele MCPherso~ctor of Planning
DATE:
July II, 2005
SUBJECT:
Parking Requirements - Bank of Elk River
Attachments
· Total Building Square Footage Estimates
· Projected Number of Employees
· Floor plan - Bank of Elk River
· Preliminary Elevations - Bank of Elk River
On June 14, 2005 staff met with representatives of The Bank of Elk River regarding their
proposed corporation office expansion. Of primary concern to bank representatives are the
parking requirements of the City Code.
Future Bank Expansions
The Bank anticipates needing to add two additions over the next ten years in order to
accommodate their projected employee growth. With the existing building, the total gross
square footage of the building would be 41,900 square feet. At the current parking
requirement for banks, which is one space per 200 square feet of floor area plus room to
stack five vehicles per drive-through lane, the total number of spaces required for the total
building after expansion would be 210 spaces. The Bank's current site after expansion plus
the Boelter's lot to the east provides a total of 104 parking spaces.
The Downtown District does not specifically address parking other than that required for
housing in the downtown. In the past, the City has not required individual sites within the
downtown area to provide 100 percent of their required parking on site. Staff believes that
this trend would continue with any bank expansion and that alternative ways of looking at
the parking issue could be explored. For example, the City could use the maximum number
of employees which is projected to be 150 as the target number of spaces. With flexible
Planning Department Mission: the orderly development of a livable and sustainable Elk River community.
Bank of Elk River
July 11, 2005
Page 2
scheduling, job sharing, part-time employees, and tele-commuting, it unlikely that 150
physical spaces would be occupied 100 percent of the time.
Staff believes that the proposed 104 parking spaces will be adequate to accommodate the
parking needs of the Bank, acknowledging that the Bank employees would eligible to receive
employee parking permits similar to all other employees of the downtown businesses and
therefore could park in the King Avenue lot.
Boelter's Lot
The Bank of Elk River has purchased the Boelter's site east of Highway 10 and west of the
railroad tracks. They have removed the building and cleaned up the site, removing the
miscellaneous items that were on display. The Bank proposes to construct a parking area for
employees in this area. Typically, parking lots are not considered principal uses, however,
since most of the parking area will actually be on either MnDOT or railroad right-of-way,
staff believes that this can be classified as an accessory use to the principal use of the Bank,
even though they are separated physically from each other by Highway 10.
The Bank will be required to submit their parking plan to staff for site plan approval, at
which time such items as access, grading and drainage, and landscaping will be reviewed.
S:\PLANNING\Case Files\2005\Bank ofER expansion. doc
The Bank of Elk River
Headquarters
Minnesota
Square footage estimates - total bui'fdingarea
Basement
7,769 sf
3,504 sf
11,273 sf
Total combined:
Main level
Existing total:
Adcrrtion total:
Total cOmbined:
7,952 sf
3,504 sf
11,456 sf
Second level
total:
total:
Osf
9,594 sf
Third level
Existing total:
Addition total:
Osf
9,594 sf
Building totals:
Existing: 15,721 sf
Addition: 16.602 sf
.With basement, main, and second level
Addition:
*with basement, mf.dn. second, and
Total (existing plus second level addition):
Total (existing plus max. addition):
33,323 sf
41,917 sf
55427
www.vunmunab.com
The Bank of Elk River
Downtown
Elk: River. Mi
Projected number of employees and
building capacity by year
Downtown Year
capacity
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