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RES 21-17CITY OF ELK RIVER, MINNESOTA RESOLUTION NO.21-17 RESOLUTION GRANTING A PROPERTY TAX ABATEMENT FOR CERTAIN PROPERTY IN THE CITY OF ELK RIVER AND AUTHORIZING THE EXECUTION OF A TAX ABATEMENT AND BUSINESS SUBSIDY AGREEMENT FOR THE SPORTECH PHASE II PROJECT BE IT RESOLVED by the City Council (the "City Council") of the City of Elk River, Minnesota (the "City") as follows: Section 1. Recitals. 1.01. The City is authorized by Minnesota Statutes, Sections 469.1812 to 469.1815 (the "Abatement Act") to grant a property tax Abatement (as hereinafter defined) in order to achieve one or more public purposes identified in the Abatement Act. 1.02. On July 20, 2015, the City Council adopted a resolution (the "Original Abatement Resolution") approving the provision of tax abatement assistance in the amount of $1,288,590 (the "Original Abatement") to Envision Company, LLC ("Envision") in the form of a land write down in connection with the sale of land to Envision for the construction of a 105,000 square foot manufacturing facility (the "Original Facility") to be located in the City on the property identified as Lots 1 and 2, Block 2, Natures Edge Business Center Second Addition, tax parcel number 758280205 (the "Property"). 1.03. The City entered into an Abatement Agreement, dated September 14, 2016 (the "Original Abatement Agreement"), with Envision setting forth the terms and conditions of the provision of the Original Abatement. The Original Abatement Agreement was assigned to Envision 3, LLC, a Minnesota limited liability company (the "Assignor"), and in connection therewith, the City received a Mortgage, Security Agreement, Assignment of Leases and Rents, and Fixture Financing Statement dated September 14, 2016 (the "Mortgage") from the Assignor in favor of the City and a Promissory Note dated September 14, 2016 (the "Note") as security for the land write down provided to Envision. 1.04. In April 2016, the City consented to (i) the transfer of the Property and the Original Facility to Meritex Elk River, LLC ("Meritex"), (ii) the satisfaction of the Mortgage and the termination of the Note in accordance with the terms thereof, (iii) an amendment to the Abatement Agreement to address insurance for the Original Facility pursuant to a First Amendment to Abatement Agreement by and between the City and the Assignee (the "Amendment"), and (iv) the assignment of the Assignor's rights and obligations under the Abatement Agreement to Sportech, Inc., a wholly owned subsidiary of Off Road Acquisition Co., LLC (the "Sportech") pursuant to an Assignment and Assumption of Tax Abatement by and between the Assignor and the Sportech (the "Assignment and Assumption Agreement"). 1.05. Meritex, or an affiliate or an entity related thereto (the "Developer"), proposes to expand the Original Facility through the construction and equipping of an approximately 91,050 square foot expansion to the existing manufacturing facility located on the Property to be owned by the Developer and leased to Sportech for use in its manufacturing business (the "Expansion Project"). 1.06. The Developer and Sportech propose to expand their operations in the City and has requested financial assistance in the form of additional tax abatement assistance in connection with the Expansion Project. It is expected that Sportech will maintain existing jobs in the City and create additional new jobs within two years of the completion of the Expansion Project. 1.07. The City has determined that it is reasonable and necessary to provide certain financial assistance to the Developer and Sportech in order to facilitate the Expansion Project and to modify the Original Abatement Resolution to provide additional abatement assistance to the Developer and Sportech in connection with the Expansion Project on the Property. To that end, the City will consider approving a Tax Abatement and Business Subsidy Agreement between the City and Developer (the "Abatement Agreement") which sets forth term and conditions of the Abatement and the construction the Expansion Project. 1.08. The proposed term of the abatement will be for up to 14 years in an amount not to exceed $362,880. The proposed abatement will apply to a portion of the City's share of real estate taxes which relate to the construction of the Expansion Project on the Property by the Developer and not the real estate taxes on the Property that relate to the value of the land or the Original Facility. The "Abatement" authorized herein means 100% of the City's share of annual real estate taxes received by the City with respect to the Property in an amount calculated in each tax -payable year as follows: the City tax rate for such tax -payable year multiplied by the difference between the net tax capacity of the Property resulting from the construction of the Expansion Project, as of January 2 in the prior year, less $106,946 (i.e. the net tax capacity of the existing land and existing building value only of the Property, as established by the County assessor on January 2, 2020, for taxes payable in 2021). 1.09. The Abatement constitutes a business subsidy within the meaning of Minnesota Statutes, Sections 116J.993 to 116J.995, as amended (the "Business Subsidy Act") and the Abatement Agreement set certain job and goals in connection with the subsidy represented by the Abatement as required by the Business Subsidy Act. 1.10. On the date hereof, the City Council conducted a duly noticed public hearing on the Abatement proposed to be granted by the City, as well as the business subsidy to be provided to the Developer. The views of all interested persons were heard and considered at the public hearing. Section 2. Findings. 2.01. This resolution modifies the Original Abatement Resolution to provide additional 2 abatement assistance to the Developer and Sportech in connection with the Expansion Project on the Property. All other terms of the Original Abatement Resolution and the Original Abatement shall remain in full force and effect. 2.02. The recitals set forth above are incorporated into this resolution. 2.03. It is hereby found and determined that the benefits to the City from the Abatement will be at least equal to the costs to the City of the Abatement, because (a) based on representations of the Developer, the City believes that the development to be facilitated is not reasonably likely to occur absent the Abatement, (b) the development to be facilitated by the Abatement will likely encourage additional development within the area; and (c) the Facility will generate significant City tax revenues after termination of the Abatement, which revenues will far exceed the amount of the Abatement itself. 2.04. It is hereby found and determined that the Abatement is in the public interest because such action will increase the City's tax base, stimulate commercial development and provide additional employment opportunities in the City and the State. 2.05. It is further specifically found and determined that the Abatement is expected to result in the following public benefits: (a) Creation of an estimated $2,825,000 increase in market value for property tax purposes for the Expansion Project, which will be available to all taxing jurisdictions after expiration of the Abatement; and (b) Creation of new jobs in the City and the State. Section 3. Actions Ratified; Abatement Approved 3.01. The City Council hereby ratifies all actions of the City's staff and consultants in arranging for approval of this resolution in accordance with the Abatement Act and the Business Subsidy Act. 3.02. Subject to the provisions of the Abatement Act, the Abatement is hereby approved and adopted subject to the following terms and conditions: (a) The City will pay the Abatements in the amount, at the time, and in accordance with all the terms and conditions set forth in the Abatement Agreement, which are incorporated herein by reference upon the execution thereof by both parties. (b) In accordance with Section 469.1813, subdivision 8 of the Abatement Act, in no year shall the Abatement, together with all other abatements approved by the City under the Abatement Act and paid in that year exceed the greater of 10% of the net tax capacity of the City for that year or $200,000 (the "Abatement Cap"). The City may grant other abatements permitted under the Abatement Act after the date of this resolution, provided that to the extent the total abatements in any year exceed the Abatement Cap, the 3 allocation of Abatement Cap to such other abatements is subordinate to the Abatement granted pursuant to this resolution. (c) The Abatement will have a maximum term of fourteen (14) years. (d) In no event shall the total payments of the Abatement to the Developer exceed $362,880 or continue to be paid for more than fourteen (14) years as set forth in the Abatement Agreement. (e) The Abatement is subject to modification in accordance with the Abatement Act, subject to the terms of the Abatement Agreement. (f) In accordance with Section 469.1815 of the Abatement Act, the City will add to its levy in each year during the term of the Abatement the total estimated amount of current year Abatement granted under this resolution. (g) The City makes no warranties or representations regarding the amount or availability of the Abatement. (h) The Property is not located in a tax increment financing district. (i) The City will abate and pay to the Developer the Abatement as provided in the Abatement Agreement, the terms of which, as executed by both parties, are incorporated herein by reference. Section 4. Execution of Documents. The City Council hereby approves the Abatement Agreement in substantially the form on file with the City Administrator, together with any related documents necessary in connection therewith, including without limitation issuance of and any related documents necessary in connection therewith, including without limitation, all documents or certifications referenced in or attached to the Abatement Agreement (collectively, the "Documents") and, the Mayor and City Clerk are hereby authorized and directed to execute the Documents to which the City is a party on behalf of the City and to carry out, on behalf of the City, the City's obligations thereunder. In the event of absence or disability of the officers, any of the Documents authorized by this Resolution to be executed may be executed without further act or authorization of the Council by any duly designated acting official, or by such other officer or officers of the City as, in the opinion of the City Attorney, may act in their behalf. Section 5. Finalizing Documents. The approval hereby given to the Documents includes approval of such additional details therein as may be necessary and appropriate and such modifications thereof, deletions therefrom and additions thereto as may be necessary and appropriate and approved by legal counsel to the City and by the officers authorized herein to execute said Documents prior to their execution; and said officers are hereby authorized to approve said changes on behalf of the City. The execution of any instrument by the appropriate officers of the City herein authorized shall be conclusive evidence of the approval of such Document in accordance with the terms hereof. 4 Section 6. Conflicting Provisions. In the event of a conflict between the content of this resolution and the Documents, the terms of the Documents shall prevail. Section 7. Effective Date. This resolution is effective upon execution in full of the Abatement Agreement. Approved by the City Council of the City of Elk River, Minnesota this 1st day of March, 2021. M r ATTE City Clerk W