7.1. EDSR 04-17-2023
Request for Action
To Item Number
Economic Development Authority 7.1
Agenda Section Meeting Date Prepared by
General Business April 17, 2023 Brent O’Neil, Economic Development Director
Item Description Reviewed by
Review Application – Beaudry Lubricants/Harvest Joshua Mollan, Economic Development Specialist
Reaper
Reviewed by
Cal Portner, City Administrator
Action Requested
Provide a recommendation, by motion, to the City Council regarding the attached tax abatement application from
Beaudry Oil.
Background/Discussion
The City of Elk River has received a tax abatement application from Beaudry Oil to operate a new lubricants
operation at a new site on Elk Lake Road, approximately one-half mile north of its current operations. The new
venture would be operated as Beaudry Lubricants, with the property to be developed and owned by Harvest
Reaper, LLC, an affiliated real estate company of Beaudry Oil. The abatement request was submitted to both the
city and Sherburne County for a total amount of $645,000, citing extraordinary site development costs due to
wetland configuration and mitigation on the site, and the necessity of a water main extension from Industrial Blvd.
to provide adequate water suppression systems.
The new project has a total investment of $4.3 million. It would result in a new 25,000sf. facility and a projected
range of 14 to 20 new jobs to the community.
Mikaela Huot of Baker Tilly has reviewed the application and submission materials. Ms. Huot’s memo summarizing
the application and financial review is attached. In summary, the Baker Tilly review advises a total city abatement
amount of $138,204, or 100% abatement for 11 years tied largely to the extension of the water main to the site at a
cost of $166,000. Further, the City’s abatement policy has a scoring rubric in which this request shows a score of 37
out of 45. This corresponds to a maximum abatement eligibility of 75% (maximum eligibility is nearly $190,000).
Sherburne County will be considering abatement at a future meeting. Should both the city and county approve
abatement at the levels guided by its policy, the total amount of abatement would be approximately $200,000 over
11 years.
This project and request was presented to the Joint Finance Committee on March 28; the committee unanimously
recommended the EDA and City Council consider an abatement in the amount of $138,204.
Financial Impact
The Joint Finance Committee is recommending an abatement amount of $138,204 over 11 years. This amount is
sourced from new city property taxes generated on the project site and is not financed by city or EDA funds.
The Elk River Vision
A welcoming community with revolutionary and spirited resourcefulness, exceptional
service, and community engagement that encourages and inspires prosperity.
Updated: January 2023
Mission/Policy/Goal
Support Elk River’s existing businesses through relationship building, programmatic offerings, and high-quality
city services. Attract new business development to Elk River to build the city’s economic vibrancy, job offerings
and tax base.
Attachments
Application from Beaudry Oil (Beaudry Lubricants/Harvest Reaper)
Completed Scoring Rubric
Financial Consultant Review Memo
Property Area Map
Summary Notes from Joint Finance Committee
Supplemental Information
\\\\dc3-elkr\\shared\\Departments\\Community Development\\Economic Development\\EDA\\Administrative\\Agenda\\EDA Agenda Packets\\2023\\04-17-2023\\7.1 sr
Beaudry Abatement Application.docx
Memo
To: Members of the Joint Finance Committee
Brent O’Neil, Economic Development Director
From: Mikaela Huot, Director
Date: March 24, 2023
Subject: Financial Analysis and Review related to Application for Tax Abatement
Assistance for Beaudry Oil business expansion
Executive Summary
The City of Elk River (the “City”) received an application from Beaudry Oil & Service DBA Beaudry Oil &
Propane and Harvest Reaper LLC (the “developer”) for tax abatement financing assistance related to the
construction of a 25,000 square foot building to further expand their existing operations. The developer’s
application for assistance included a request for $645,000 from the City and County over 15-20 years to finance
a portion of the site development costs associated with construction of the new building. The total development
cost for the project, including land acquisition and site development, is over $4.0 million. The County provided
an initial estimated taxable value of the project upon completion of $1,566,000 that includes the land value.
That value would equate to new estimated total annual taxes for the project of $43,698 with the estimated City
share as $11,350 and County share as $11,028. The remaining amounts would be the School, State and other
entities’ share.
Baker Tilly has been retained by the City to review the application for financial assistance. The purpose of this
memorandum is to provide a summary of Baker Tilly’s review of the development project costs and sources of
funds and supporting financial information as provided by the applicant to assist the City with making a
determination if the project as proposed meets the merits of the City’s tax abatement policy and verification for
need of tax abatement assistance. When reviewing requests for financial assistance it is important to
understand how the level of financial assistance would impact the ability of the project to proceed as proposed
and maximize new value created on the current project site. The level of requested tax abatement assistance
may trigger the City’s business subsidy policy and thereby require certain job and wage goals related to the
project and public assistance. Without public assistance, the applicant would not be subject to the same
requirements.
Following review of the request for tax abatement assistance and supporting financial information, including
conversations with the applicant, County and City staff, a recommendation can be made to provide some level
of assistance to the project as a mechanism to offset a portion of the extraordinary site development costs as
necessary for the new development to occur. As described further in the memo regarding tax abatement
revenue assumptions and revenue estimates, the amount of tax abatement revenues that would be generated
by the project are less than what has been requested. In addition, based on review of financial need, the
recommended term of assistance (number of years) would be less than what the applicant has requested.
Based on review of the project and for consistency with the City’s tax abatement policy, we can recommend
financial assistance of up to $200,000 that could potentially include County participation due to some of the
extraordinary site development costs related to the project. 11 years of City assistance assuming 100% of
incremental tax abatement revenues and 10 years of County assistance assuming 50% of incremental tax
abatement revenues would generate approximately $201,186 of total available tax abatement revenues to the
project over the term of the abatement. The estimated present value of the combined total assistance (City and
County if approved) would be approximately $152,000 assuming a 4.5% discount/interest rate.
Background
The City of Elk River (the “City”) received an application from Beaudry Oil & Service DBA Beaudry Oil &
Propane and Harvest Reaper LLC (the “developer”) for tax abatement financing assistance related to the
construction of a 25,000 square foot building to further expand their existing operations. The project will be
located in the City of Elk River on an undeveloped parcel for continued business growth and expansion of
existing company operations. The developer acquired the site (2 parcels) in 2020 for $235,000. There are
additional site improvements costs that must be incurred for the site to be developable and are a barrier to
development as currently proposed. The developer has plans to construct an approximate 25,000 square foot
building on the property. The adjacent remaining vacant parcel could include future development but there are
no current plans for any additional development beyond the 25,000 square foot industrial building as proposed.
Harvest Reaper, LLC would be the owner of the building and lease the space to Lubricants Warehouse. The
25,000 square foot building project is expected to retain the existing 6 company employees and create a
minimum of 14-20 new FTE employees within 3 years of project completion. The average base wage of the
employees is anticipated to be in the range of $29-$32/hour and would need to meet the City’s business
subsidy policy provisions.
Applicant Request for Assistance
The request for financial assistance includes an approximate $4 million project that would be funded by Harvest
Reaper, LLC (the owner) through private funds and owner cash equity. The developer has requested $645,000
in tax abatement assistance from both the City and County to provide annual cash flow assistance following the
construction for up to 15 years to assist with financing a portion of the extraordinary site development costs.
Following review of the financials, we can support a portion of those costs as extraordinary, in particular the
watermain extension with an estimated cost of $166,500. Tax abatement revenues would assist with offsetting
a portion of those costs.
The City’s share of tax abatement as requested over 15 years is approximately $188,460 and would constitute
as a business subsidy due to the proposed amount. The process for considering a business subsidy includes
holding of a public hearing, similar to the tax abatement process. The maximum estimated amount available
from the City’s share based on the terms of the abatement (up to 11 years) and recommended level of
assistance would be $138,204, as further described within the memo. Should the County Board choose to
participate in the abatement request, the total financial package could be up to $200,000.
The sources and uses of funds for the project are illustrated in the table below.
Sources Amount Uses Amount
First Mortgage $3,472,748 Acquisition ** $280,000
Other Private Funds $0 Site Development $645,000
Owner Cash Equity $868,187 Construction $3,290,935
Tax Abatement * $0 Soft Costs $125,000
Total $4,340,935 Total $4,340,935
* any tax abatement assistance would be as reimbursement and not provided upfront
** the developer acquired the property (2 parcels) in 2020 for $235,000
Project Qualifications
Pursuant to the Section V of the City’s tax abatement policy, all tax abatement projects considered by the
City must meet each of the following qualifications:
a. The project shall meet one of the objectives set forth in Section III
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.
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.
Section III of the policy outlines the following objectives for the use of tax abatement:
• 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
• 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 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
Any political subdivision, including statutory cities, home rule charter cities, towns, counties, and school
districts, is authorized to abate property taxes on selected parcels or defer the payments of the taxes and
abate the interest and penalty that otherwise would apply, if:
• The benefits gained equal or exceed the cost to the political subdivision or the abatement phases in
a property tax increase, and
• The abatement is in the public interest because it will:
− increases or preserves the tax base;
− provides employment opportunities;
− provides or helps acquire or construct public facilities;
− helps redevelop or renew blighted areas;
− helps provide access to services;
− finances or provides for public infrastructure;
− phase in a property tax increase on the parcel resulting from an increase of 50% or more in one
year on the estimated market value of the parcel, other than an increase due to improvement of the
parcel; or
− stabilize the tax base through equalization of property tax revenues for a specified time period with
respect to a taxpayer whose real and personal property is subject to valuation under Minnesota
Rules, chapter 8100.
Cities, counties, and school districts as combined jurisdictions may grant an abatement for no longer than 15
years (8 year maximum if no initial duration is specified), or for no longer than 20 years if two or fewer
jurisdictions participate. No back-to-back abatements. Eight years must pass before a new abatement can
be applied.
In any given year, the total amount of property taxes abated by a political subdivision for all parcels may not
exceed the greater of (1) 10% of the net tax capacity of the political subdivision for the taxes payable year to
which the abatement applies, or (2) $200,000. Property in a tax increment financing district is not eligible for
abatement.
Project Financing
There are generally two ways in which assistance can be provided for most projects, either upfront or on a pay-
as-you-go basis. With upfront financing, the City would finance a portion of the applicant’s initial project costs
through the issuance of bonds or as an internal loan. Future revenues would be collected by the City and used
to pay debt service on the bonds or repayment of the internal loan. With pay-as-you-go financing, the applicant
would finance all project costs upfront and would be reimbursed over time for a portion of those costs as
revenues are available.
Pay-as-you-go-financing is generally more acceptable than upfront financing for the City because it shifts the
risk for repayment to the applicant. If revenues are less than originally projected, the applicant receives less
and therefore bears the risk of not being reimbursed the full amount of their financing. However, in some cases
pay as you go financing may not be financially feasible. With bonds, the City would still need to make debt
service payments and would have to use other sources to fill any shortfall of revenues. With internal financing,
the City reimburses the loan with future revenue collections and may risk not repaying itself in full if revenues
are not sufficient. The project financing would be pay-as-you-go for reimbursement of certain costs. The
developer would finance all costs upfront through a combination of bank financing and equity (cash and land)
and would receive annual remittance of the tax abatement as a rebate for total taxes paid from both the City
and County, through separate agreements and terms of assistance.
Tax Abatement Revenue Assumptions
The County Assessor provided a preliminary taxable value estimate for the project. To estimate the amount of
available tax abatement revenues generated by the proposed project, certain assumptions were made based
on the value of the project, construction schedule, and anticipated financing terms.
• Total existing value
o Parcel ID: 75-128-4206 (previous)
o Parcel ID: 75-930-0105 (new)
o Base value as of Jan. 1, 2022
Existing land value of $137,200
Original net tax capacity (ONTC) of $1,994
o Assuming classification as commercial-industrial (C-I)
C-I classification rate is 1.5% first $150,000 value and 2% value above $150,000
• Estimated total market value upon completion
o 25,000 square foot facility
$57 per square foot (approximate)
$1,428,000
• Total taxable value of the project is $1,566,000
• Incremental value generating tax abatement based on difference between existing land and new
land/building value
• Construction commences and is completed in 2023
o Project values 100% complete for assess 2024 and taxes payable 2025
• First abatement collection in 2025
• Final year collection in 2034 (up to 10 years)
• Maximum term of abatement
o 15 years if all three taxing entities participate or
o 20 years if one taxing entity declines participation or 90 days pass from initial participation
request
With written denial of participation from the School District
• 0% annual market value inflator
Tax Abatement Revenue Estimates
Tax Abatement Revenue Projections
Annual Market Value Inflator 0%
City Share Total Estimated Annual Revenue Full Buildout $12,564
County Share Total Estimated Annual Revenue Full Buildout (estimated up to
50% of annual tax abatement revenues and subject to Board approvals) $6,298
School Share Total Estimated Annual Revenue Full Buildout $0
Total Annual Gross Revenues $18,862
Estimated City Share (11 Years) $138,204
Estimated County Share over 10 Years (50% annual tax abatement revenues
and subject to Board approvals) $62,982
Estimated School District Share $0
Total Potential Assistance $201,186
Applicant Financial Pro forma Analysis including But-For
In approving an abatement project, the Elk River EDA and City Council’s tax abatement policy includes a
provision that projects are reviewed to assist with determining that a finding be made that the proposed project
would not reasonably be expected to occur solely through private investment within the reasonably foreseeable
future. The City’s tax abatement policy outlines the general considerations and desired outcomes for which tax
abatement may be offered as a financing tool for new development projects. The policy also includes a
provision for which the but-for (financial needs) test need not be solely met if the assistance for a project is
considered more as a “location incentive”. Public benefits to be considered when offering tax abatement
financial assistance may include significant tax base increase, the creation and retention 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.
The County has indicated it is willing to provide tax abatement assistance to the project based on job creation
criteria that would be consistent with the County’s tax abatement policy. County staff has indicated a potentially
supportable level of assistance that may include up to 50% of the County’s share of incremental taxes
generated by the project over an up-to 10-year period. As shown in the table above, this equates to
approximately $62,000 of assistance and in addition to any assistance the City may consider providing to the
project.
The applicant has provided minimum expected job creation (14-20 new FTE) and wage goals (average range of
$29-$32/hour) based on completion of the business expansion. Without financial assistance, it will not be
committed or required to meet those job and wage goals. Financial assistance from the City allows for
additional revenues to provide sufficient project cash flow and market returns to investors that will achieve
project feasibility and facilitate the targeted job creation and wage goals. The applicant has stated the
assistance will offset a portion of the costs associated with construction of the building and additional site
development costs, as well as related costs for the tenant of retaining existing employees and hiring the new
employees. In addition, the current estimated project costs are in excess of the estimated future value of the
building upon development as provided by the County. Based on this analysis, the EDA and City could be
justified in determining that the project meets the “but for” test and would not proceed without assistance. As
stated previously, tax abatement does not statutorily require a “but for” analysis to determine if the project would
proceed without assistance and the City’s tax abatement policy provides considerations for when the but-for
test may not be entirely met.
We reviewed the developer’s operating proforma for the project using the developer’s assumptions for square
footage and lease rates of the new building. The proforma is based on the real estate transaction only and not
the projected annual net revenues of the lubricants warehouse business. The developer is assuming a lease
rate of $11.61/square foot to generate approximately $290,400 of annual revenue to support debt service
repayment. Financing terms for the project include a maximum loan based on 80% loan to value and 20%
down payment. The anticipated loan amount would be $2,960,000 with 6.5% interest rate for annual debt
service payments of approximately $240,816. The 20% down payment would be owner cash equity and land
value. Annual tax abatement revenues from the City and County would provide additional cash flow (reducing
the property tax burden) that allows the project to better meet minimum debt coverage ratios.
Conclusion
The applicant has requested financial assistance through tax abatement from the City of Elk River for financing
a portion of the costs associated with constructing an approximate 25,000 square foot building. The taxable
value for the expansion is estimated to be $1.566 million and total project investment is over $4 million. There
are significant site development costs that are barriers to development commencing and tax abatement has
been identified as a possible funding source to offset a portion of those costs. Tax abatement revenues would
provide additional cash flow for the project to allow fulfilment of increased employment goals and requirements
and meet growth expectations and future potential business growth and development.
According to the City’s tax abatement policy, the City may consider the use of tax abatement assistance for
projects that may not meet the traditional “but-for” and/or 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. For this proposed project, the applicant is proposing to create an additional minimum 14-20
employees with anticipated salary in the range of $29 $32/hour and would need to meet the City’s business
subsidy policy provisions. Without tax abatement assistance from the City, the company will not be required
to create the jobs or meet any provisions of the City’s business subsidy policy. The applicant is also
requesting tax abatement assistance from the County. The County’s policy for assistance would indicate a
support for up to 10 years of financial assistance assuming 50% participation through tax abatement. Any
County participation would be subject to further review and County Board approvals.
Tax abatement is a tool that can assist with covering a portion of the additional eligible costs associated with
the project. Since terms of the assistance include pay-as-you-go as reimbursement for certain costs, the
applicant will be responsible for obtaining all upfront funding sources and using cash flow from the project and
any tax abatement assistance to repay obligations. Total estimated tax abatement revenues that could be
available from the City’s share of taxes for this project for up to 11 years within the abatement area are
approximately $138,204 for the years 2025-2035. Aligning the level of assistance to the availability of projected
revenues provides a method of financing a portion of the project costs and allow the public participation for the
project to remain at a reasonable level, while meeting the City’s tax abatement and business subsidy policy
objectives. Without tax abatement assistance, the project may not adhere to the job and wage goal
requirements.
Following review of the request for tax abatement assistance and supporting financial information, including
conversations with the applicant, County and City staff, a recommendation can be made to provide some level
of assistance to the project as a mechanism to offset a portion of the extraordinary site development costs as
necessary for the new development to occur. As described further in the memo regarding tax abatement
revenue assumptions and revenue estimates, the amount of tax abatement revenues that would be generated
by the project are less than what has been requested. In addition, based on review of financial need, the
recommended term of assistance (number of years) would be less than what the applicant has requested.
Based on review of the project and for consistency with the City’s tax abatement policy, we can recommend
financial assistance of up to $200,000 that would include County participation due to some of the extraordinary
site development costs related to the project.
Thank you for the opportunity to be of assistance to the City of Elk River. Please contact me at 651.368.2533
or Mikaela.Huot@bakertily.com with any questions or comments.
Projected Tax Abatement Report
City of Elk River, Minnesota
Proposed Tax Abatement Assistance
Beaudry Oil Harvest Reaper Expansiosn
Draft Abatement Revenues: 25,000 new building construction
Less:100.00%50.00%
Non-Retained Times:Estimated Maximum Maximum Maximum P.V.
Annual Total Total Abated Captured Tax Annual Tax Tax Tax Estimated Annual
Period Market Net Tax Net Tax Net Tax Capacity Property Abatement Abatement Abatement Project Abate To
Ending Value (1)Capacity (2)Capacity (3)Capacity Rate (4)Taxes City *County *School *Abatement 02/01/24
(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)4.50%
12/31/23
12/31/24 0 0 0 0 121.136%0 0 0 0 0 0
12/31/25 1,566,000 30,634 2,058 28,576 121.136%34,616 12,564 6,298 0 18,862 17,528
12/31/26 1,566,000 30,634 2,058 28,576 121.136%34,616 12,564 6,298 0 18,862 16,773
12/31/27 1,566,000 30,634 2,058 28,576 121.136%34,616 12,564 6,298 0 18,862 16,051
12/31/28 1,566,000 30,634 2,058 28,576 121.136%34,616 12,564 6,298 0 18,862 15,360
12/31/29 1,566,000 30,634 2,058 28,576 121.136%34,616 12,564 6,298 0 18,862 14,698
12/31/30 1,566,000 30,634 2,058 28,576 121.136%34,616 12,564 6,298 0 18,862 14,065
12/31/31 1,566,000 30,634 2,058 28,576 121.136%34,616 12,564 6,298 0 18,862 13,460
12/31/32 1,566,000 30,634 2,058 28,576 121.136%34,616 12,564 6,298 0 18,862 12,880
12/31/33 1,566,000 30,634 2,058 28,576 121.136%34,616 12,564 6,298 0 18,862 12,325
12/31/34 1,566,000 30,634 2,058 28,576 121.136%34,616 12,564 6,298 0 18,862 11,795
12/31/35 1,566,000 30,634 2,058 28,576 121.136%34,616 12,564 0 0 12,564 7,518
12/31/36 1,566,000 30,634 2,058 28,576 121.136%34,616 0 0 0 0 0
12/31/37 1,566,000 30,634 2,058 28,576 121.136%34,616 0 0 0 0 0
12/31/38 1,566,000 30,634 2,058 28,576 121.136%34,616 0 0 0 0 0
12/31/39 1,566,000 30,634 2,058 28,576 121.136%34,616 0 0 0 0 0
$519,240 $138,204 $62,982 $0 $201,186 $152,453
(1) Total estimated market value based on preliminary value estimate following review by County Assessor
very preliminary and subject to further review. Includes 0% annual market value inflator
(2) Total net tax capacity based on commercial-industrial class rate of 1.5% first $150,000 value and 2% value above $150,000
(3) Original net tax capacity based on existing land value
(4) Total local tax capacity rate for taxes payable 2022
* subject to individual Board approvals. Maximum 20 year term requires denial of participation from other taxing entity (or 90 days passing from original request)
PROJECT LOCATIONSITEMINNESOTABEAUDRY ELK RIVER ADDITIONSITE IMPROVEMENT PROJECTELK RIVER, MNCITY OF ELK RIVER, MNSHERBURNE COUNTYSITESITESITE3030 County Road 101 NorthPlymouth, MN 55447Stephen D. Krausestevek@sdk-architects.com763-331-5178SDK ARCHITECTS LLCINDEX OF CIVIL SITE DRAWINGS: CIVIL ENGINEERINGSITE DESIGN
L=678.34,R=1212.09N 3 1 °0 2 '4 7 "W313.6 0 N 3 1 °0 2 '4 7 "W273.6 034.2556.53BLOCK 1LOT169.3466.31S89°04'00"W103.61E L K L A K E R O A D N W C .S .A .H . N O . 1
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9 0 9 9119 1 1
9 1 1912 9129129139109079089099119129139149159139139149169159149169 1 7915914914916
9 1 5
91391 4916916916917
N 2 4 °0 2 '5 2 "W
2 5 5 .8 6N88°37'36"E258.68N0°34'17"E858.49N 3 1 °0 2 '4 7 "W273.5 5N0°33'25"E171.03N 3 1 °0 2 '4 7 "W216.0 8
N89°01'49"E1058.54L=741.43,R=1272.09TMax Kickout 0.033ft15' - 0"truck parking (16)T/ SLAB EL: 917.00(PROPOSED)916.50916.00TC: 916.90BC: 916.40917.00917.00ACCESS #1(MODIFIED EXISTING)ACCESS #2(PROPOSED)596'north edge ofdriveway5' buffer betweenpavement edge & truck53' trailer(73.50' total length)18' wide OHDFUTUREOFFICE BUILDING25,000 sf / STORY100 STALLS24' - 0"Scale:Project Number:Date:Drawn By:Checked By:R E V I S I O N STHIS DRAWING, SPECIFICATION OR REPORT WAS PREPARED FOR BIDDING PURPOSES ONLY. FINAL DESIGN & DOCUMENTATION OF THIS PORTION OF THE PROJECT WILL BE COMPLETED VIA THE DESIGN/BUILD APPROACH BY LICENSED DESIGN PROFESSIONALS REGISTERED IN THE STATE OF MINNESOTA.5075 Holly Lane North -Unit 7Minneapolis, Minnesota 55446(763) 331-5178info@sdk-architects.com1" = 60'-0"PR-1ARCHITECTURALSITE PLAN22-001New Storage / Warehouse Facility forBeaudry Oil & PropaneJUL 25, 2022SDKElk River, MNIssued for Owner ReviewSCALE:1" = 60'-0"PR-11ARCHITECTURAL SITE PLANNORTH# Description Date
T/ SLAB (ML)917' - 6"TFE913' - 6"T/ WALL946' - 9"29' - 3"AWNING ??TYPE ??SIZE ??RETAINING WALL(EACH SIDE OF LOADING DOCKS)PAVEMENT SLOPE @ LOADING DOCKS5PR-3T/ SLAB (ML)917' - 6"TFE913' - 6"T/ WALL946' - 9"FENCE ??TYPE ??HEIGHT ??RETAINING WALL(EACH SIDE OF LOADING DOCKS)PAVEMENT SLOPE @ LOADING DOCKS5PR-3T/ SLAB (ML)917' - 6"TFE913' - 6"T/ WALL946' - 9"FENCE ??TYPE ??HEIGHT ??T/ SLAB (ML)917' - 6"TFE913' - 6"T/ WALL946' - 9"FENCE ??TYPE ??HEIGHT ??15243LOW POINT 22'-0" ABOVE SLABScale:Project Number:Date:Drawn By:Checked By:R E V I S I O N STHIS DRAWING, SPECIFICATION OR REPORT WAS PREPARED FOR BIDDING PURPOSES ONLY. FINAL DESIGN & DOCUMENTATION OF THIS PORTION OF THE PROJECT WILL BE COMPLETED VIA THE DESIGN/BUILD APPROACH BY LICENSED DESIGN PROFESSIONALS REGISTERED IN THE STATE OF MINNESOTA.5075 Holly Lane North -Unit 7Minneapolis, Minnesota 55446(763) 331-5178info@sdk-architects.com1" = 10'-0"PR-3BUILDING ELEVATIONSBUILDING SECTION22-001New Storage / Warehouse Facility forBeaudry Oil & PropaneJUL 25, 2022SDKElk River, MNIssued for Owner Review# Description DateSCALE:1" = 10'-0"PR-31EAST BUILDING ELEVATIONSCALE:1" = 10'-0"PR-32WEST BUILDING ELEVATIONSCALE:1" = 10'-0"PR-33SOUTH BUILDING ELEVATIONSCALE:1" = 10'-0"PR-34NORTH BUILDING ELEVATIONSCALE:1" = 10'-0"PR-35BUILDING SECTION #1
Elk River Joint Finance Committee
Excerpt from Draft Minutes
Held at Elk River City Hall
Tuesday, March 28, 2023
Members Present: Dan Tveite, Jim Gromberg, Ryan Hardin, Chad Vitzthum, Jill Larson-Vito
and Rhonda Magnussen (7:37 am)
Members Absent: Nate Ovall, and Charlie Blesener
Staff Present: Brent O’Neil, Economic Development Director
Joshua Mollan, Economic Development Specialist
Others Present: Mikaela Huot (Baker Tilly)
Ken Beaudry (Beaudry Oil)
4.2 Review Tax Abatement Application – Beaudry Lubricants/Harvest Reaper
Mr. O’Neil introduced the Beaudry project and presented the site location. Mr. O’Neil
introduced Ms. Huot (Baker Tilly) to present her review on the tax abatement application.
Ms. Huot described the project and tax abatement request from Beaudry Oil and Propane
and Harvest Reaper LLC of which the latter will be the recipient of the tax abatement. Ms.
Huot’s analysis determined that public assistance for this project can be supported due to
extraordinary site development costs. She estimates the city share to be $138,000 over 11
years.
Chair Tveite shared that this project would be a good fit for the area.
Mr. Beaudry shared that they would have liked assistance for the full 15 years but is happy
with any city assistance to support the project.
Mr. Hardin asked if there needed to be any additional language to the motion in subject to
county participation. Mr. O’Neil and Ms. Huot stated that the city review is for the city
portion only and the item under consideration isn’t intended to be dependent on the
county’s participation.
Moved by Gromberg and seconded by Larson-Vito to provide a recommendation to
the City Council and EDA to approve this tax abatement Motion carried 5-0
(Vitzthum abstained).
Prepared by Joshua Mollan.
Elk River, MN…23 EDA Meeting-17-4 Beaudry Oil / Harvest Reaper Tax Abatement Request On the cutting edge
Elk River, MN…On the cutting edge
City of Elk River, Minnesota April 2023Tax Abatement FinancingBeaudry Oil and Harvest Reaper, LLC Project Economic Development Authority Meeting
8 14 new jobs•6 retained jobs•Project includes both job retainage and creation•Total of $645,000 •Request for tax abatement assistance from City and County•2023-Constructed in mid•4.0
+ million project•Proposed 25,000 square foot new industrial facility•Beaudry Oil & Service DBA Beaudry Oil & Propane and Harvest Reaper LLC City received an application for financial
assistance through tax abatement from •Beaudry Oil Project Summary
9 Financial Analysis feasibility (availability of revenues to support repayment of project costs)and financial proposed and maximize new value created on the current project site level
of financial assistance may impact the ability of the project to proceed as terms of public assistance.if assistance is necessary, to determine the appropriate amount and and verification
for need for public financial assistance andif the project as proposed meets merits of City’s tax abatement policy determination:to assist the City with making a Purpose of financial
review and analysis is Beaudry Oil Project Summary
10 Request for Financial Assistance from the City May constitute as business subsidy, subject to amount•Specifically, watermain extension with estimated cost of $166,500•Portion may
be considered extraordinary and warrant need for assistance•Challenging site with required site development costs •As provided by County assessing•Estimated taxable value upon completion
of $1.566 million•Beaudry Oil (lubricants warehouse) would be the tenant•Harvest Reaper, LLC is building owner•Beaudry Oil Project Summary
11** the developer acquired the property (2 parcels) in 2020 for $235,000* any tax abatement assistance would be as reimbursement and not provided upfront Sources and Uses of Funds
Beaudry Oil Project Summary Total$4,340,935Total$4,340,935Tax Abatement *$0Soft Costs$125,000Construction$3,290,935Owner Equity$868,187Site Development$645,000First Mortgage$3,472,748Acquisition
**$280,000 SourcesAmountUsesAmount
12 Preliminary Tax Abatement Revenue Estimates Estimated Present Value (4.5%)$152,453Total Estimated Abatement$201,18650%)Estimated County Share (10 Years $62,982100%)Estimated City
Share (11 Years $138,204Total Annual Gross Revenue$18,862County Share Estimated Annual Revenue (up to 50%)$6,298City Share Estimated Annual Revenue (up to 100%)$12,564Scenario 1 Beaudry
Oil Project Summary
13 Financing Options City collects annual abatement revenues to repay obligation•City finances a portion of costs upfront•Bond or Internal Financing•Upfront (City financed)Developer
is reimbursed over time with available revenues•Note issued by City to developer•Project financed upfront by developer •go (Developer financed)-you-as-Pay Beaudry Oil Project Summary
14 Project Qualifications: Policy Review Likely to assist in marketing and attracting additional development•Creation of higher paying jobs•Significant tax base increase•Resulting other
public benefits such as•incentivefor but be considered location -Project may not necessarily meet the but•Project determined to be not financially feasible or,•Use of tax abatement•Policy
objectives•Beaudry Oil Project Summary
15 Tax Abatement Basics finance or provide public infrastructure•help provide access to services for residents of the political subdivision•help redevelop or renew blighted areas•provide
or help acquire or construct public facilities•provide employment opportunities in the political subdivision•increase or preserve tax base•Finds that doing so is in the public interest
because it will:•costs to the political subdivision of the proposed agreement andExpects benefits of the proposed abatement agreement to at least equal the •he approving governing body:Prior
to using tax abatement, t•Beaudry Oil Project Summary
16 Tax Abatement Basics of property taxesEach taxing entity chooses to participate in abatement based on their share •More like a tax rebate•NOT an actual abatement, properties pay property
taxes as usual•1815 (as amended)-Defined in Minnesota Statute 469.1812•Beaudry Oil Project Summary
17 Tax Abatement Basics: Process assistance/developmentBusiness subsidy provisions may apply , subject to level and type of •for test-No statutorily required but•Abatement resolution
includes terms: amount, length, public benefit•More than 10 days and less than 30 days•Adopted by resolution at noticed meeting•Beaudry Oil Project Summary
18 Tax Abatement Basics: Process Cannot be applied within TIF District but can be used after•Eight years between abatement on same parcel•back abatements-to-No back•20 years if two participants
•15 years if three participants (City, County and School District)•Maximum duration•Beaudry Oil Project Summary
19 Recommendation terms of financial assistanceAbatement/subsidy agreement between City and Developer would include •$32/hour-Average wage estimate of $29•20 new jobs created-14•as reimbursement
upon project completionPayGO•Present value estimate of approximately $150,000•11 years of City assistance assuming 100%•Up to $200,000 potentially included County participation•Recommended
level of assistance•Beaudry Oil Project Summary
20 Considerations Coordinate developments with existing plans•Facilitate infrastructure improvements•Enhance tax base•housingincome affordable -including construction of attainable,
mixedEncourage development of uses that would otherwise not occur, •(“but for” test)•Stimulate development where it would otherwise not occur •City may consider providing financial
as necessary to:Beaudry Oil Project Summary
21 Considerations Market conditions•dictateDeveloper wants less risk/more return than typical market conditions •“Oversizing” of utility/infrastructure needs for future•Development needs
more than it can pay for•Affordable housing•Hold out property owner, land price too high•Extraordinary redevelopment costs•What Drives The “Gap” Or Need For Public Financing Assistance?
Beaudry Oil Project Summary
22 Considerations Lender terms•Financing requirements•Value ‘gap’•Cash flow shortage•Upfront financing needs•Financial Feasibility of a Project Beaudry Oil Project Summary
23 Considerations Other necessary public improvements•Term of abatement•Financial gap•Extraordinary costs•Public assistance and private equity•Public to private investment•Purchase price
and other development costs•Return on Investment•identifying extraordinary costs:Parameters for an appropriate level of public assistance when Beaudry Oil Project Summary