Loading...
7.3 SR 05-15-2023Request for Action To Item Number Mayor and City Council 7.3 Agenda Section Meeting Date Prepared by Public Hearings May 15, 2023 Brent O'Neil, Economic Development Director Item Description Reviewed by Abatement Request: Harvest Reaper (Beaudry Oil) Cal Portner, City Administrator Reviewed by Action Requested Adopt, by motion, a resolution granting a property tax abatement for Harvest Reaper, LLC. Background/Discussion The City of Elk River has received a tax abatement application from Harvest Reaper, LLC, and 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. Harvest Reaper would be the beneficiary of the abatement. 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,OOOsf. facility and a projected range of 14 to 20 new jobs to the community over the next five years. Nlikaela Huot of Baker Tilly has reviewed the application and submission materials. 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 has considered and approved abatement for a portion of county taxes over a period of 10 years. The total amount of city and county abatement would be approximately $200,000 over the abatement period. This project has been presented to the Joint Finance Committee UFC) and EDA for review, with both entities recommending the City Council approve an abatement in the amount of $138,204. This resolution additionally authorizes the execution of a tax abatement and business subsidy agreement between the city and Harvest Reaper outlining the implementation and requirements of the abatement. Of the jobs proposed for the project, the agreement requires at least seven be created within two years at a wage of at least $31.77. The Elk River Vision A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community engagement that encourages and inspires pi ospei ly. M TUREJ Updated.- Januag 2023 Financial Impact The JFC and EDA are recommending a city 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. Mission/Policy/Goal Attract new business development to Elk River to build the city's economic vibrancy, job offerings and tax base. Attachments ■ Resolution ■ Abatement Agreement ■ Application ■ Scoring Rubric ■ Financial Advisor Analysis to JFC ■ Property Area Map and Site Elevations ■ Additional Submissions ■ Summary Notes from JFC N:APublic Bodies\Agenda Packets\05-15-2023\Fugal\x7.3 sr Beaudiv Tax Abatementdocx City of Elk -�.-1 River City of Elk River City Council Resolution 23- A Resolution of the City Council of the City of Elk River Granting a Property Tax Abatement for Certain Property in the City and Approving a Tax Abatement Agreement with Harvest Reaper, LLC BE IT RESOLVED by the City Council (the "City Council") of the City of Elk River, Minnesota (the "City'), as follows: Section I. Recitals. 1.01. The City has reviewed a proposal to acquire, construct and equip an approximately 25,000 square foot facility to be owned by Harvest Reaper, LLC, a Minnesota limited liability company or an entity affiliated with or related to Beaudry Oil & Service, Inc. (the "Developer"), to commence a lubricants operation (the "Pro)ect") to be located on Elk Lake Road in the City and on the property identified by property identification number 75- 930-0105 (the "Property'). 1.02. With the Project, the Developer proposes to expand its existing business, maintain and create and retain jobs in the City, Sherburne County (the "County") and the State of Minnesota (the "State"), and preserve and enhance the property tax base in the City, the County and the State. 1.03. Pursuant to Minnesota Statutes, Sections 469.1812 through 469.1815, as amended (the "Abatement Act"), the Developer has requested a property tax abatement on the Property in order to assist in financing a portion of the costs of the Project, including in particular, the cost to extend a water main from Industrial Boulevard in the City to the Property to provide an adequate water suppression system for the Project. The proposed term of the abatement will be up to eleven (11) years in an amount not to exceed $138,204. The proposed abatement will apply to the Developer's share of real estate taxes which relate to the construction of the Project on the Property by the Developer and not to the real estate taxes on the Property that relate to the existing land value (the "Abatement"). 1.04. The Developer has also requested a property tax abatement on the Property from the County (the "County Abatement") 1.05. The City and the Developer have caused to be prepared a Tax Abatement and Business Subsidy Agreement (the "Agreement") setting forth the terms and conditions under which the City will provide tax abatement assistance for the Project i including compliance with job and wage goals as required by Minnesota Statutes, Sections 116J.993 to 116J.995, as amended (the "Business Subsidy Act"). 1.06. On the date hereof, the City Council conducted a duly noticed public hearing on the Abatement, at which the views of all interested persons were heard and considered. Section 2. Findings. 2.01. The recitals set forth above are incorporated into this resolution. 2.02. 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 and (b) the long-term taxes collected from the Property after termination of the Abatement will exceed the amount of the Abatement provided to the Developer. 2.03. It is hereby found and determined that the Abatement is in the public interest because it is expected to result in the following public benefits: (a) The Abatement will increase the City's tax base through the creation of an estimated $1,290,800 increase in market value for the Property; (b) The Abatement will help an existing business expand in the City, the County and the State; and (c) It will provide additional employment opportunities in the City, the County 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. 3.02. Subject to the provisions of the Abatement Act and the execution of the Agreement as set forth in Section 4 hereof, the Abatement is hereby approved and adopted subject to the following terms and conditions: (a) The term "Abatement" means a portion of the City's share of annual real property taxes received by the City with respect to the Property in an amount calculated in each tax - payable year as follows: the City's tax rate for such tax -payable year multiplied by the difference between the net tax capacity of the Property as improved by the Project as determined by the City in its sole distraction, as of January 2 of the prior year, less $2,838 (i.e. the net tax capacity of the Property, as established by the County assessor on January 2, 2023, for taxes payable in 2024). (b) The City will pay the Abatement in the amount, at the time, and in accordance with the terms and conditions set forth in the Agreement. (c) 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 allocation of Abatement Cap to such other abatements is subordinate to the Abatement granted pursuant to this resolution. (d) In no event shall the total payments of the Abatement to the Developer exceed $138,204 or continue to be paid for more than eleven (11) years as set forth in the Agreement. (e) The Abatement is subject to modification in accordance with the Abatement Act, subject to the terms of the Agreement. (0 In accordance with Section 469.1815 of the Abatement Act, in each year during the term of the Abatement the City will add to its levy 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. Section 4. Agreement Approved. 4.01. The City believes that the development of the Project pursuant to the Agreement, and fulfillment generally of the Agreement, are in the vital and best interests of the City and the health, safety, morals, and welfare of its residents. Those public purposes of the Agreement include providing higher -paying employment opportunities in the City, County and State, preserving and enhancing the tax base in the City, the County and the State, retaining a local business by helping them expand and succeed in the City and encouraging additional desired developments in the City. 4.02. The City hereby approves the Agreement, including the business subsidy agreement set forth therewith, substantially in accordance with the terms set forth in the form presented to the City Council, together with any related documents necessary in connection therewith, and without limitation all documents, exhibits, certifications or consents referenced in or attached to the Agreement (collectively, the "Development Documents") and hereby authorizes the Mayor and City Administrator to negotiate the final terms thereof and, in their discretion and at such time as they may deem appropriate, to execute the Development Documents on behalf of the City, and to carry out, on behalf of the City, the City's obligations thereunder when all conditions precedent thereto have been satisfied. 4.03. The approval hereby given to the Development 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 i 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. This Resolution shall not constitute an offer and the Development Documents shall not be effective until the date of execution thereof as provided herein. 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 City Council by any duly designated acting official, or by such other officer or officers of the City Council as, in the opinion of the City Attorney, may act in their behalf. 4.04. Upon execution and delivery of the Development Documents, the officers and employees of the City are hereby authorized and directed to take or cause to be taken such actions as may be necessary on behalf of the City to implement the Development Documents. Section S. Effective Date. This resolution is effective upon execution in full of the Agreement. Passed and adopted this 151h day of May 2023. John J. Dietz, Mayor ATTEST: Tina Allard, City Clerk i TAX ABATEMENT AND BUSINESS SUBSIDY AGREEMENT BY AND BETWEEN CITY OF ELK RIVER, MINNESOTA AND HARVEST REAPER, LLC This document drafted by: KENNEDY & GRAVEN, CHARTERED (GAF) 150 S 51' Street, Suite 700 Minneapolis, MN 55402 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS............................................................................................. 1 Section 1.1 Definitions........................................................................................ 1 ARTICLE II REPRESENTATIONS AND WARRANTIES ............................................. 4 Section 2.1 Representations and Warranties of the City ....................................... 4 Section 2.2 Representations and Warranties of the Developer ............................. 4 ARTICLE III UNDERTAKINGS BY DEVELOPER AND CITY ...................................... 6 Section 3.1 Construction of Project and Reimbursement of Project Cost ............. 6 Section 3.2 Limitations on Undertaking of the City ............................................. 6 Section 3.3 Commencement and Completion of Construction ............................. 6 Section 3.4 Damage and Destruction................................................................... 6 Section 3.5 Change in Use of Project.................................................................. 7 Section 3.6 Prohibition Against Transfer of Project and Assignment of Agreement........................................................................................ 7 Section 3.7 Real Property Taxes.......................................................................... 7 Section 3.8 Tax Abatement Program................................................................... 8 Section 3.9 Business Subsidy Act........................................................................ 9 Section 3.10 Legal and Administrative Expenses ................................................ 10 Section3.11 Records.......................................................................................... 11 ARTICLE IV EVENTS OF DEFAULT............................................................................ 12 Section 4.1 Events of Default Defined............................................................... 12 Section 4.2 Remedies on Default....................................................................... 13 Section 4.3 No Remedy Exclusive.................................................................... 13 Section 4.4 No Implied Waiver......................................................................... 13 Section 4.5 Agreement to Pay Attorney's Fees and Expenses ............................ 13 Section 4.6 Release and Indemnification Covenants .......................................... 13 ARTICLE V ADDITIONAL PROVISIONS................................................................... 15 Section5.1 Insurance........................................................................................ 15 Section 5.2 Conflicts of Interest........................................................................ 16 Section 5.3 Titles of Articles and Sections......................................................... 17 Section 5.4 Notices and Demands..................................................................... 17 Section5.5 Counterparts................................................................................... 17 Section 5.6 Law Governing............................................................................... 17 Section5.7 Duration......................................................................................... 17 Section 5.8 Provisions Surviving Rescission or Expiration ................................ 17 Section 5.9 Superseding Effect.......................................................................... 17 Section 5.10 Recording....................................................................................... 18 Section 5.11 Relationship of Parties.................................................................... 18 Section 5.12 Interpretation; Concurrence............................................................ 18 -I- EL 185\74\870137.v5 TAX ABATEMENT AND BUSINESS SUBSIDY AGREEMENT THIS TAX ABATEMENT AND BUSINESS SUBSIDY AGREEMENT (the "Agreement"), made as of the day of May, 2023, by and between the CITY OF ELK RIVER, MINNESOTA (the "City"), a municipal corporation and political subdivision of the State of Minnesota, and HARVEST REAPER, LLC, a Minnesota limited liability company (the "Developer"). WITNESSETH WHEREAS, the Developer has requested tax abatement assistance from the City in connection with acquisition, construction and equipping of a certain Project (as hereinafter defined) located within the City; and WHEREAS, pursuant to Minnesota Statutes, Sections 469.1812 through 469.1815, as amended, the City has established a Tax Abatement Program (as hereinafter defined) after a duly noticed public hearing held on May 15, 2023; and WHEREAS, the City believes that providing financial assistance for the Project, and the fulfillment of this Agreement are vital and are in the best interests of the City, will result in preservation and enhancement of the tax base, help retain and create employment opportunities in the City and the State, help an existing business expand in the City and the State, and are in accordance with the public purpose and provisions of the applicable state and local laws and requirements under which the Project has been undertaken and is being assisted; and WHEREAS, the requirements of the Minnesota Statutes, Sections 116J.993 through 116J.995, as amended (the "Business Subsidy Act"), apply to this Agreement; and WHEREAS, the City has adopted criteria for awarding business subsidies that comply with the Business Subsidy Act; and WHEREAS, in connection with the assistance provided under this Agreement, this agreement constitutes a subsidy agreement under the Business Subsidy Act. NOW, THEREFORE, in consideration of the premises and the mutual obligations of the parties hereto, each of them does hereby covenant and agree with the other as follows: ARTICLE I DEFINITIONS Section 1.1 Definitions. All capitalized terms used and not otherwise defined herein shall have the following meanings unless a different meaning clearly appears from the context: Administrative Costs shall have the meaning set forth in Section 3.10; 1 EL 185\74\870137.v5 Affiliate means a corporation, partnership, association, limited liability company or similar entity organized under the laws of the United States of America or a state thereof which is directly controlled by or under common control with the Developer or the Business. For purposes of this definition, control means the power to direct management and policies through the ownership of at least a majority of its voting securities, or the right to designate or elect at least a majority of the members of its governing body by contract or otherwise; Agreement means this Tax Abatement and Business Subsidy Agreement, as the same may be from time to time modified, amended or supplemented, as provided by the terms of this Agreement; Benefit Date means the date which is the earlier of (i) the date the City issues a certificate of occupancy for the Project, or (ii) the date the Developer fully occupies the Project; Business Day means any day except a Saturday, Sunday or a legal holiday or a day on which banking institutions in the City are authorized by law or executive order to close; Business Subsidy Act means Minnesota Statutes, Sections 116J.993 through 116J.995, as amended; City means the City of Elk River, Minnesota; CouM means Sherburne County, Minnesota; Developer means Harvest Reaper, LLC, a Minnesota limited liability company, its successors and assigns; Eligible Costs means the actual costs of constructing a watermain extension on the Tax Abatement Property in connection with the Project under the Tax Abatement Act; Event of Default means any of the events described in Section 4.1; Net Tax Capacity has the meaning provided in Minnesota Statutes, Section 273.13, Subdivision 21b, as amended; Project means the acquisition, construction and equipping of an approximately 25,000 square foot facility on the Tax Abatement Property to be owned by the Developer and leased to the Tenant to expand their lubricants operation in the City; Reimbursement Amount has the meaning set forth in Section 3.1(2) hereof, State means the State of Minnesota; Tax Abatement Act means Minnesota Statutes, Sections 469.1812 through 469.1815, as amended; 2 EL 185\74\870137.v5 Tax Abatement Program means the actions by the City pursuant to Minnesota Statutes, Section 469.1812 through 469.1815, as amended, and undertaken in support of the Project including without limitation this Agreement and the resolution of the City authorizing the Tax Abatements and the findings of fact set forth therein; Tax Abatement Property means all and any portion of the real property currently identified as Parcel Identification Number 75-930-0105, located in the City; Tax Abatements means a portion of the City's share of annual real estate taxes received by the City with respect to the Tax Abatement 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 Tax Abatement Property as improved by the Project as determined by the City in its sole discretion, as of January 2 in the prior year, less $2,838 (i.e. the Net Tax Capacity of the Tax Abatement Property, as established by the County assessor on January 2, 2023, for taxes payable in 2024), then abated in accordance with the Tax Abatement Program; Tenant means Beaudry Oil, LLC, a to be created Minnesota limited liability company, or an entity affiliated with or related thereto; Termination Date means the earliest of (i) February 1, 2036; (ii) any earlier date this Agreement is cancelled in accordance with the terms hereof, or (iii) the date the Reimbursement Amount is paid or deemed paid in full in accordance with the terms hereof, Unavoidable Delays means delays, outside the control of the parry claiming its occurrence, which are the direct result of strikes, other labor troubles, unusually severe or prolonged bad weather, acts of God, fire or other casualty to the Project, litigation commenced by third parties which, by injunction or other similar judicial action or by the exercise of reasonable discretion, directly results in delays, or acts of any federal, state or local governmental unit (other than the City, with respect to its respective obligations only) which directly result in delays. 3 EL 185\74\870137.v5 ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.1 Representations and Warranties of the City. The City makes the following representations and warranties: (1) The City is a municipal corporation and a political subdivision of the State and has the power to enter into this Agreement and carry out its obligations hereunder. (2) The Tax Abatement Program was created, adopted and approved in accordance with the terms of the Tax Abatement Act. (3) The City proposes, subject to the further provisions of this Agreement, to provide certain financial assistance to the Developer for certain Eligible Costs incurred in connection with the Project as further provided in this Agreement. (4) The City makes no representation or warranty, either express or implied, as to the Tax Abatement Property or its condition, or that the Tax Abatement Property shall be suitable for the Developer's purposes or needs. Section 2.2 Representations and Warranties of the Developer. The Developer makes the following representations and warranties: (1) The Developer has the power and authority to enter into this Agreement and to perform its obligations hereunder and is not in violation of its articles of organization, operating agreement or any local, state or federal laws. (2) The Developer is a limited liability company validly existing and in good standing under the laws of this State and has full power and to enter into this Agreement and carry out the covenants contained herein. (3) The Developer will construct the Project or cause the Project to be constructed in accordance with the terms of this Agreement and all local, state and federal laws and regulations (including, but not limited to, environmental, zoning, energy conservation, building code and public health laws and regulations). (4) Before the Project may be constructed, the Developer will obtain or cause to be obtained, in a timely manner, all required permits, licenses and approvals, and will meet, in a timely manner, all requirements of all applicable local, state, and federal laws and regulations. (5) The construction of the Project would not be undertaken by or on behalf of the Developer, and in the opinion of the Developer would not be economically feasible within the reasonably foreseeable future, without the assistance and benefit to the Developer provided for in this Agreement. 4 EL 185\74\870137.v5 (6) Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement is prevented, limited by or conflicts with or results in a breach of, the terms, conditions or provisions of any contractual restriction, evidence of indebtedness, agreement or instrument of whatever nature to which the Developer is now a parry or by which it is bound, or constitutes a default under any of the foregoing. (7) The Developer will cooperate fully with the City with respect to any litigation commenced with respect to the Project but only to the extent that the City and the Developer are not adverse parties to the litigation. (8) The Developer understands that the City may subsidize or encourage the development of other developments in the City, including properties that compete with the Tax Abatement Property and the Project, and that such subsidies may be more favorable than the terms of this Agreement, and that the City have not represented that development of the Tax Abatement Project will be favored over the development of other properties. (9) The total development costs of the Project are estimated to be approximately $4,340,935 and the Project is more economically feasible within the reasonably foreseeable future with the provision of the Tax Abatements by the City. (10) The Developer will comply and will cause the Tenant to comply with all City ordinances, rules and regulations relating to traffic, parking, trash removal or public safety problems which may arise in connection with the construction and operation of the Project. (11) The Developer will provide and maintain or cause to be maintained at all times and, from time to time at the request of the City, furnish the City with proof of payment of premiums on insurance of amounts and coverages pursuant to Section 5.1 hereof. (12) In addition to the "Goals" detailed in Section 3.9 hereof, the Developer agrees to create 7 full time equivalent jobs at an average hourly wage of at least $31.77 per hour, excluding benefits, not later than five years from the Benefit Date, for a total of 14 new jobs. The additional 7 jobs are not subject to the reporting or repayment requirements of the Business Subsidy Act or Section 3.9 hereof. 5 EL 185\74\870137.v5 ARTICLE III UNDERTAKINGS BY DEVELOPER AND CITY Section 3.1 Construction of Project and Reimbursement of Project Cost. (1) The costs of the Project shall be paid by the Developer. The Developer will cause the Project to be constructed in accordance with the construction plans by the City (the "Construction Plans") and at all times prior to the Termination Date will operate and maintain, preserve and keep the Project or cause the Project to be maintained, preserved and kept with the appurtenances and every part and parcel thereof, in good repair and condition. (2) Upon completion of the Project in accordance with the Construction Plans as confirmed by the City in its sole discretion, the City shall reimburse the Developer (over the term of this Agreement) pursuant to the terms of the Tax Abatement Program as provided in Section 3.8 for the costs of the construction of the Project actually incurred in an amount not to exceed the lesser of (i) the actual Eligible Costs as evidenced by paid invoices or other documentation submitted and satisfactory to the City or (ii) a sum not to exceed $138,204 (the "Reimbursement Amount"). Section 3.2 Limitations on Undertaking of the City. Notwithstanding the provisions of Sections 3.1 and 3.8, the City shall have no obligation to the Developer under this Agreement to reimburse the Developer for Eligible Costs of the construction of the Project, if the City, at the time or times such payment is to be made, is entitled under Section 4.2 to exercise any of the remedies set forth therein as a result of an Event of Default unless and until such time as the Event of Default has been cured to the reasonable satisfaction of the City. Notwithstanding any other provisions of this Agreement, the City shall have no obligation to the Developer under this Agreement to reimburse the Developer for Eligible Costs in an amount greater than $138,204. Section 3.3 Commencement and Completion of Construction. The Developer shall commence construction of the Project no later than December 31, 2023 and, barring Unavoidable Delays, shall complete the Project by December 31, 2024. All work with respect to the Project to be constructed or provided by the Developer shall be in conformity with the Construction Plans. Nothing in this Agreement shall be deemed to impair or limit any of the City's procedures, rights or responsibilities under its zoning laws or construction permit processes and policies. Section 3.4 Damage and Destruction. In the event of damage or destruction of the Project the Developer shall repair or rebuild the Project or cause the Project to be repaired or rebuilt. Alternatively, the Developer may refund all Tax Abatements received from the City prior to the event of damage or destruction, and thereafter, this Agreement shall terminate. Section 3.5 Change in Use of Project. The City's obligations pursuant to this Agreement shall be subject to the continued operation of the Project by the Developer, the Tenant, or an 6 EL 185\74\870137.v5 Affiliate during the term of this Agreement. A failure to comply with this Section shall be an Event of Default in accordance with Section 4.1 hereof. Section 3.6 Prohibition Against Transfer of Project and Assignment of Agreement. The Developer represents and agrees that, prior to the Termination Date, the Developer shall not transfer this Agreement, the Project or the Tax Abatement Property or any part thereof or any interest therein, except to the Tenant or an Affiliate with written notice to the City, without the prior written approval of the City. The City shall be entitled to require as conditions to any such approval that: (1) Any proposed transferee shall have the qualifications and financial responsibility, in the reasonable judgment of the City, necessary and adequate to fulfill the obligations undertaken in this Agreement by the Developer. (2) Any proposed transferee, by instrument in writing satisfactory to the City shall, for itself and its successors and assigns, and expressly for the benefit of the City, have expressly assumed all of the obligations of the Developer under this Agreement and agreed to be subject to all the conditions and restrictions to which the Developer is subject. (3) There shall be submitted to the City for review and prior written approval all instruments and other legal documents involved in effecting the transfer of any interest in this Agreement, the Project or the Tax Abatement Property. (4) The Developer shall have paid all reasonable legal fees and expenses of the City, including fees of the City Attorney's office and outside counsel retained by the City to review the documents submitted to the City in connection with any transfer. Section 3.7 Real Property Taxes. The Developer shall, so long as this Agreement remains in effect, pay or cause to be paid all real property taxes with respect to all parts of the Tax Abatement Property acquired, owned or leased by it or acquired, owned and leased by the Tenant which are payable pursuant to any statutory or contractual duty that shall accrue subsequent to the date of its acquisition of title to the Tax Abatement Property (or part thereof) and until title to the property is vested in another person. The Developer further acknowledges that failure of the Developer to commence and complete the Project by the time set forth in Section 3.3 could reduce the amount of Tax Abatements below the Reimbursement Amount. The Developer agrees that for tax assessments so long as this Agreement remains in effect: (1) That for itself, its successors and assigns, in addition to the obligation pursuant to statute to pay real estate taxes, it is also obligated by reason of this Agreement to pay before delinquency all real estate taxes assessed against the Tax Abatement Property and the Project. The Developer acknowledges that this obligation creates a contractual right on behalf of the City to sue the Developer or its successors and assigns to collect delinquent real estate taxes and any penalty or interest thereon and to pay over the same as a tax payment to the County auditor. In any such suit, the City also be entitled to recover its costs, expenses and reasonable attorney fees. (2) It will not seek administrative review or judicial review of the applicability of any tax statute relating to the ad valorem property taxation of real property contained on the Tax 7 EL 185\74\870137.v5 Abatement Property determined by any tax official to be applicable to the Project or the Developer or raise the inapplicability of any such tax statute as a defense in any proceedings with respect to the Tax Abatement Property, including delinquent tax proceedings; provided, however, "tax statute" does not include any local ordinance or resolution levying a tax; (3) It will not seek administrative review or judicial review of the constitutionality of any tax statute relating to the taxation of real property contained on the Tax Abatement Property determined by any tax official to be applicable to the Project or the Developer or raise the unconstitutionality of any such tax statute as a defense in any proceedings, including delinquent tax proceedings with respect to the Tax Abatement Property; provided, however, "tax statute" does not include any local ordinance or resolution levying a tax; (4) It will not seek any tax deferral or abatement, either presently or prospectively authorized under Minnesota Statutes, or any State or federal law, of the ad valorem property taxation of the Tax Abatement Property so long as this Agreement remains in effect; (4) Prior to the Termination Date, it will not cause a reduction in the real property taxes paid in respect of the Tax Abatement Property through: (i) willful destruction of the Tax Abatement Property or any part thereof, or (ii) willful refusal to reconstruct damaged or destroyed property. The Developer also agrees that it will not, prior to the Termination Date, take any action which will result in the Tax Abatement Property becoming exempt from real estate property taxes or transfer or permit transfer of the Tax Abatement Property to any entity whose ownership or operation of the property would result in the Tax Abatement Property being exempt from real estate property taxes under State law; and (5) Prior to the Termination Date, it will not challenge the market value of the Tax Abatement Property with any governmental entity. Section 3.8 Tax Abatement Program. The Tax Abatement Program shall exist for a period of up to 11 years beginning with real estate taxes payable in 2025 through 2035. (1) The City shall make the first payment of Tax Abatements to the Developer on the later of August 1, 2025 or the date that (A) the City has determined the Reimbursement Amount in accordance with Section 3.1(2) hereof, (B) the City has determined that the Project has been constructed in accordance with Construction Plans approved by the City in accordance with Section 3.3 hereof, (C) the Developer has submitted to the City paid invoices for Eligible Costs of the Project; (D) the Developer has paid all of the City's Administrative Costs required to have been paid as of such date in accordance with Section 3.10 hereof, and (E) no Event of Default exists hereunder (the "Initial Payment Date"). From the Initial Payment Date and on each February 1 and August 1 thereafter and continuing until the earlier of the date that the Developer shall have received the Reimbursement Amount or the Termination Date, the City shall pay the Developer the amount of the Tax Abatements actually received by the City from the County in the previous six-month period. The City may terminate the Tax Abatement Program and this Agreement at an earlier date if an Event of Default occurs and the City rescinds or cancels this Agreement as more fully set forth in Article V herein. 8 EL 185\74\870137.v5 (2) The Developer acknowledges that it has not relied on any representations of the City, or any of their officers, agents, or employees, and has not relied on any opinion of any attorney of the City, as to the Federal or State income tax consequences relating to the Tax Abatement payments under this Section. The pledge of Tax Abatements is subject to all the terms and conditions of the Tax Abatement Program. The Tax Abatements are payable solely from and to the extent of the Tax Abatements actually received by the City, and nothing herein shall be construed to obligate the City to make payments from any other funds. (3) The Developer acknowledges that the City shall in no event be obligated to make any payment of Tax Abatements under this Section to Developer unless and until (i) all ad valorem property taxes due and payable with respect to the Tax Abatement Property as of the applicable payment date have been paid in full and (ii) the City has received from the County or any other source as provided by law an ad valorem property tax distribution that includes all or any portion of the Tax Abatements. (4) The Developer acknowledged that a failure to complete construction of the Project in accordance with the timelines set forth in Section 3.3 hereof constitutes an Event of Default and could reduce the amount of the Tax Abatements below the Reimbursement Amount. (5) The Developer acknowledges that all estimates of Tax Abatements that have been prepared by or on behalf of the City have been done for the City's use only and neither the City nor their consultants shall have liability to Developer if the actual Tax Abatements are less than the amounts estimated. (6) The Developer further acknowledges that the total Tax Abatements attributable to any calendar year (i.e., the combined payments on Payment Dates of August 1 and the following February 1) may not exceed the greater of $200,000 or 10% of the City's Net Tax Capacity for that tax -payable year (the "Statutory Cap"), all pursuant to Minnesota Statutes, Section 469.1813, Subdivision 8. The City reasonably expects that the Statutory Cap will not cause the Tax Abatements under this Agreement to be reduced; however, Developer acknowledges that, during the term of the Tax Abatement under this Section, if the total abatements payable by the City under the Tax Abatement Act in any year would exceed either of their respective Statutory Caps, the Statutory Cap is allocated first to any of the City's existing abatement obligations as applicable, second to the Tax Abatements payable under this Agreement, and third to any other abatements granted after the date of this Agreement. Section 3.9 Business Subsidy Act. (1) In order to satisfy the provisions of the Business Subsidy Act, the Developer acknowledges and agrees that the amount of the "Business Subsidy" granted to the Developer under this Agreement is the value of a portion of the Tax Abatement Property, which is approximately $138,204, and that the Business Subsidy is needed because the Project may not be feasible for the Developer to undertake without the Business Subsidy. The public purpose of the Business Subsidy is to increase the tax base, help the Developer expand in the City and the State, help develop a vacant site in the City, and help retain and create employment opportunities in the City and the State. The Developer agrees that it will meet the following goals (the "Goals"): it 9 EL 185\74\870137.v5 will cause the Tenant to create at least 7 full time equivalent jobs in connection with the development of the Project on the Tax Abatement Property at an average hourly wage of at least $31.77 per hour, excluding benefits, not later than two years from the Benefit Date (the "Compliance Date"). (2) If the Goals are not met by the Compliance Date, the Developer agrees to repay all or a part of the Business Subsidy it has received to the City on a pro rate basis, plus interest set at the implicit price deflator defined in Minnesota Statutes, Section 275.70, Subdivision 2 ("Interest"), accruing from and after the Compliance Date, compounded semiannually. If the Goals are only met in part by the Compliance Date, the Developer will repay a portion of the Business Subsidy (plus Interest) determined by multiplying the Business Subsidy by a fraction, the numerator of which is the number of jobs in the Goals which were not created at the wage level set forth above by the Compliance Date and the denominator of which is 7 (i.e. number of jobs set forth in the Goals). (3) The Developer agrees to (i) report its progress on achieving the Goals to the City until the later of the date the Goals are met or the Compliance Date, or, if the Goals are not met, until the date the Business Subsidy is repaid, (ii) include in the report the information required in Section 116J.994, Subdivision 7 of the Business Subsidy Act on forms developed by the Minnesota Department of Employment and Economic Development, and (iii) send completed reports to the City. The City shall have the right to inspect the Developer's books and records to verify compliance with the requirements of this Section. The Developer agrees to file these reports no later than March 1 of each year commencing March 1, 2024, and within 30 days after the Compliance Date. The City agrees that if it does not receive the reports by such date, it will mail the Developer a warning within one week of the required filing date. If the reports are not made within 14 days of the post marked date of the warning, the Developer agrees to pay to the City a penalty of $100 for each subsequent day until the report is filed up to a maximum of $1,000. (4) The Developer agrees to cause the Tenant to continue operations of the Project on the Tax Abatement Program for at least the duration of the Tax Abatement Program as provided in Section 3.8. (5) In addition to the tax abatement assistance from the City paid pursuant to Section 3.9, the Developer has also applied for tax abatement assistance from the County in the amount of approximately $60,0000. (6) Neither the Developer nor the Tenant have parent corporations. Section 3.10 Legal and Administrative Expenses. The Developer will pay all of the City's reasonable Administrative Costs (as defined below) and must pay such costs to the City within 30 days after receipt of a written invoice from the City describing the amount and nature of the costs to be reimbursed. For the purposes of this Agreement, the term "Administrative Costs" means out of pocket costs incurred by the City together with staff and consultant (including reasonable legal, financial advisor, etc.) costs of the City, all attributable to or incurred in connection with establishing the Tax Abatement Program and the review, negotiation 10 EL 185\74\870137.v5 and preparation of this Agreement (together with any other agreements entered into between the parties hereto contemporaneously therewith) and review and approvals of other documents and agreements in connection with the Project. In addition, certain engineering, environmental advisor, legal, land use, zoning, subdivision and other costs related to the development of the Tax Abatement Property are required to be paid, or additional funds deposited in escrow, as provided in accordance with the City's planning, zoning, and building fee schedules. At any time, but not more often than monthly, the City will deliver written notice to Developer setting forth any additional fees and expenses, together with suitable billings, receipts or other evidence of the amount and nature of the fees and expenses, and Developer agrees to pay all fees and expenses within 30 days of the City's written request. Any unused amount of such deposit shall be returned to the Developer. Section 3.11 Records. The City, through any authorized representatives, shall have the right at all reasonable times after reasonable notice to inspect, examine and copy all books and records of Developer relating to the Project. Such records shall be kept and maintained by Developer through the Termination Date. 11 EL 185\74\870137.v5 ARTICLE IV EVENTS OF DEFAULT Section 4.1 Events of Default Defined. The following shall be "Events of Default" under this Agreement and the term "Event of Default" shall mean whenever it is used in this Agreement any one or more of the following events: (1) Failure by the Developer to timely pay any ad valorem real property taxes, special assessments, utility charges or other governmental impositions with respect to the Project or the Tax Abatement Property. (2) Failure by the Developer to cause the construction of the Project to be completed pursuant to the terms, conditions and limitations of this Agreement. (3) Failure by the Developer to observe or perform any other covenant, condition, obligation or agreement on its part to be observed or performed under this Agreement, including, without limitation, failure by the Developer to create new jobs as represented in Section 2.2 (12) hereof. (4) If, prior to the Termination Date, the Developer shall: (a) file any petition in bankruptcy or for any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under the United States Bankruptcy Act of 1978, as amended or under any similar federal or state law; or (b) be adjudicated a bankrupt or insolvent; or if a petition or answer proposing the adjudication of the Developer, as a bankrupt or its reorganization under any present or future federal bankruptcy act or any similar federal or state law shall be filed in any court and such petition or answer shall not be discharged or denied within 60 days after the filing thereof, or a receiver, trustee or liquidator of the Developer, or of the Project, or part thereof, shall be appointed in any proceeding brought against the Developer, and shall not be discharged within 60 days after such appointment, or if the Developer, shall consent to or acquiesce in such appointment. Section 4.2 Remedies on Default. Whenever any Event of Default referred to in Section 4.1 occurs and is continuing, the City may take any one or more of the following actions after the giving of 30 days' written notice to the Developer citing with specificity the item or items of default and notifying the Developer that it has 30 days within which to cure said Event of Default. If the Event of Default has not been cured within said 30 days: (1) The City may suspend its performance under this Agreement including, but not limited to, making payments hereunder, until it receives assurances from the Developer, deemed adequate by the City in its sole discretion, that the Developer will cure its default and continue its performance under this Agreement. 12 EL 185\74\870137.v5 (2) The City may terminate this Agreement and the Tax Abatement Program and terminate the payment of Tax Abatements to the Developer. (3) The City may take any action, including legal or administrative action, in law or equity, which may appear necessary or desirable to enforce performance and observance of any obligation, agreement, or covenant of the Developer under this Agreement. Section 4.3 No Remedy Exclusive. No remedy expressed conferred herein upon or reserved to the City is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof but any such right and power may be exercised from time to time and as often as may be deemed expedient. Section 4.4 No Implied Waiver. In the event any agreement contained in this Agreement should be breached by any parry and thereafter waived by the other parry, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other concurrent, previous or subsequent breach hereunder. Section 4.5 Agreement to Pay Attorney's Fees and Expenses. Whenever any Event of Default occurs and the City shall employ attorneys or incur other expenses for the collection of payments due or to become due or for the enforcement or performance or observance of any obligation or agreement on the part of the Developer herein contained, the Developer agrees that it shall, on demand therefor, pay to the City the reasonable fees of such attorneys and such other expenses so incurred by the City. Section 4.6 Release and Indemnification Covenants. (1) The Developer, and the Developer's successors or assigns, releases from and covenants and agrees that the City and its governing body members, officers, agents, servants and employees shall not be liable for and agrees to indemnify and hold harmless the City and its governing body members, officers, agents, servants, and employees against any loss or damage to property or any injury to or death of any person occurring at or about or resulting from the Proj ect. (2) Except for any willful misrepresentation or any willful or wanton misconduct of the following named parties, the Developer agrees to protect and defend the City and its governing body members, officers, agents, servants and employees, now or forever, and further agrees to hold the aforesaid harmless from any claim, demand, action or other proceeding whatsoever by any person or entity whatsoever arising or purportedly arising from a breach of the obligations of the Developer under this Agreement, or the transactions contemplated hereby. (3) The City and its governing body members, officers, agents, servants and employees shall not be liable for any damages or injury to the persons or property of the Developer or its officers, agents, servants or employees or any other person due to any act of negligence of any person. 13 EL 185\74\870137.v5 (4) All covenants, stipulations, promises, agreements and obligations of the City contained herein shall be deemed to be the covenants, stipulations, promises, agreements and obligations of the City and not of any governing body member, officer, agent, servant or employee of the City in the individual capacity thereof. 14 EL 185\74\870137.v5 ARTICLE V ADDITIONAL PROVISIONS Section 5.1 Insurance. (1) The Developer will provide and maintain at all times during the process of constructing the Project an All -Risk Broad Form Basis Insurance Policy and, from time to time during that period, at the request of the City, furnish the City with proof of payment of premiums on policies covering the following: (a) Builder's risk insurance, written on the so-called `Builder's Risk -- Completed Value Basis," in an amount equal to 100% of the aggregate principal amount of the Tax Abatement Notes, and with coverage available in nonreporting form on the so- called "all risk" form of policy. The interests of the City shall be protected in accordance with a clause in form and content satisfactory to the City; (b) Comprehensive general liability insurance (including operations, contingent liability, operations of subcontractors, completed operations, and contractual liability insurance) together with an Owner's Protective Liability Policy with limits against bodily injury and property damage of not less than $1,000,000 for each occurrence (to accomplish the above -required limits, an umbrella excess liability policy may be used). The City shall be listed as an additional insured parry on the policy; and (c) Workers' compensation insurance, with statutory coverage, provided that the Developer may be self -insured with respect to all or any part of its liability for workers' compensation. (2) Upon completion of construction of the Project and prior to the Termination Date, the Developer shall maintain, or cause to be maintained, at its cost and expense, and from time to time at the request of the City shall furnish proof of the payment of premiums on, insurance as follows: (a) Insurance against loss and/or damage to the Project under a policy or policies covering such risks as are ordinarily insured against by similar businesses. (b) Comprehensive general public liability insurance, including personal injury liability (with employee exclusion deleted), against liability for injuries to persons and/or property, in the minimum amount for each occurrence and for each year of $1,000,000, and shall be endorsed to show the City as an additional insured parry. (c) Such other insurance, including workers' compensation insurance respecting all employees of the Developer, in such amount as is customarily carried by like organizations engaged in like activities of comparable size and liability exposure; 15 EL 185\74\870137.v5 provided that the Developer may be self -insured with respect to all or any part of its liability for workers' compensation. (3) All insurance required in this Agreement shall be taken out and maintained in responsible insurance companies selected by the Developer that are authorized under the laws of the State to assume the risks covered thereby. Upon request, the Developer will deposit annually with the City, policies evidencing all such insurance, or a certificate or certificates or binders of the respective insurers stating that such insurance is in force and effect. Unless otherwise provided in this Agreement each policy shall contain a provision that the insurer shall not cancel nor modify it in such a way as to reduce the coverage provided below the amounts required herein without giving written notice to the Developer, the City at least 30 days before the cancellation or modification becomes effective. In lieu of separate policies, the Developer may maintain a single policy, blanket or umbrella policies, or a combination thereof, having the coverage required herein, in which event the Developer shall deposit with the City a certificate or certificates of the respective insurers as to the amount of coverage in force upon the Project. (4) The Developer agrees to notify the City immediately in the case of damage exceeding $100,000 in amount to, or destruction of, the Project or any portion thereof resulting from fire or other casualty. In such event the Developer will forthwith repair, reconstruct, and restore the Project to substantially the same or an improved condition or value as it existed prior to the event causing such damage and, to the extent necessary to accomplish such repair, reconstruction, and restoration, the Developer will apply the net proceeds of any insurance relating to such damage received by the Developer to the payment or reimbursement of the costs thereof. The Developer shall complete the repair, reconstruction and restoration of the Project regardless of whether the net proceeds of insurance received by the Developer for such purposes are sufficient to pay for the same. Any net proceeds remaining after completion of such repairs, construction, and restoration shall be the property of the Developer. A failure to promptly repair, reconstruct and restore the Project as required by this Section 5.1(4) will be considered an Event of Default under this Agreement and the City may suspend payments of the Tax Abatements under the Tax Abatement Program, or exercise any other remedies provided in Section 4.2 hereof. (5) All of the insurance provisions set forth in this Section shall terminate on the Termination Date. Section 5.2 Conflicts of Interest. No member of the governing body or other official of the City shall have any financial interest, direct or indirect, in this Agreement, the Tax Abatement Property or the Project, or any contract, agreement or other transaction contemplated to occur or be undertaken thereunder or with respect thereto, nor shall any such member of the governing body or other official participate in any decision relating to this Agreement which affects his or her personal interests or the interests of any corporation, partnership or association in which he or she is directly or indirectly interested. No member, official or employee of the 16 EL 185\74\870137.v5 City shall be personally liable to the City in the event of any default or breach by the Developer or successor or on any obligations under the terms of this Agreement. Section 5.3 Titles of Articles and Sections. Any titles of the several parts, articles and sections of this Agreement are inserted for convenience of reference only and shall be disregarded in construing or interpreting any of its provisions. Section 5.4 Notices and Demands. A notice, demand, warning or other communication under this Agreement by any parry to any other shall be sufficiently given or delivered if it is dispatched by registered or certified mail, postage prepaid, return receipt requested, or delivered personally, and (1) in the case of the Developer is addressed to: Harvest Reaper, LLC 630 Proctor Avenue NW Elk River, MN 55330 Attn: (2) in the case of the City is addressed to: City of Elk River Elk River City Hall 13065 Orono Parkway Elk River, MN 55330-5600 Attn: Director of Economic Development or at such other address with respect to any such parry as that parry may, from time to time, designate in writing and forward to the other, as provided in this Section. Section 5.5 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute one and the same instrument. Section 5.6 Law Governing. This Agreement will be governed and construed in accordance with the laws of the State of Minnesota. Section 5.7 Duration. This Agreement shall terminate on the Termination Date. Section 5.8 Provisions Surviving Rescission or Expiration. Sections 4.5 and 4.6 shall survive any rescission, termination or expiration of this Agreement with respect to or arising out of any event, occurrence or circumstance existing prior to the date thereof. Section 5.9 Superseding Effect. This Agreement reflects the entire agreement of the parties with respect to the development of the Tax Abatement Property, and supersedes in all respects all prior agreements of the parties, whether written or otherwise, with respect to the development of the Tax Abatement Property 17 EL 185\74\870137.v5 Section 5.10 Recording. The City may record this Agreement and any amendments thereto with the County recorder. The Developer shall pay all costs for recording. Section 5.11 Relationship of Parties. Nothing in this Agreement is intended, or shall be construed, to create a partnership or joint venture among or between the parties hereto, and the rights and remedies of the parties hereto shall be strictly as set forth in this Agreement. All covenants, stipulations, promises, agreements and obligations of the contained herein shall be deemed to be the covenants, stipulations, promises, agreements and obligations of the City and not of any governing body member, officer, agent, servant or employee of the City. Section 5.12 Interpretation; Concurrence. The language in this Agreement shall be construed simply according to its generally understood meaning, and not strictly for or against any parry and no interpretation shall be affected by which parry drafted any part of this Agreement. By executing this Agreement, the parties acknowledge that they (a) enter into and execute this Agreement knowingly, voluntarily and willingly of their own volition with such consultation with legal counsel as they deem appropriate; (b) have had a sufficient amount of time to consider this Agreement's terms and conditions, and to consult an attorney before signing this Agreement; (c) have read this Agreement, understand all of its terms, appreciate the significance of those terms and have made the decision to accept them as stated herein; and (d) have not relied upon any representation or statement not set forth herein. Section 5.13 Data Practices. All data collected, created, received, maintained or disseminated for any purpose in the course of the Developer's performance of this Agreement is governed by the Minnesota Government Data Practices Act, Minn. Stat. Ch. 13, and any other applicable state statutes, any state rules adopted to implement the Act and statutes, as well as federal statutes and regulations on data privacy. EL 185\74\870137.v5 IN WITNESS WHEREOF, the City and the Developer have each caused this Agreement to be duly executed in its name and on its behalf, on or as of the date first written above. HARVEST REAPER, LLC Its This is a signature page to the Tax Abatement and Business Subsidy Agreement by and between the City of Elk River, Minnesota and Harvest Reaper, LLC S-1 EL 185\74\870137.v5 CITY OF ELK RIVER, MINNESOTA By Its Mayor By Its City Clerk This is a signature page to the Tax Abatement and Business Subsidy Agreement by and between the City of Elk River, Minnesota and Harvest Reaper, LLC S-2 EL 185\74\870137.v5 Financial Incentive Application Elk -.- Tax Abatement Financing River VIII. APPLICATION FOR TAX ABATEMENT Public Information Notice Generally, correspondence to and from Staff is considered public information. Specific data related to a financial assistance request is deemed not public: Financial Information, Financial Statements, Net worth Calculations, Business Plans, Income and Expense projections, Balance Sheets, Customer Lists, Income Tax returns. When public financial assistance is received, only the following remains not public: Business Plans, Income and Expense projections, Customer lists, Income tax returns, design, market, and feasibility studies not paid for with public funds. The city does allow an applicant to submit sensitive financial information directly to the city's financial consultant, for additional security. A. APPLICANT INFORMATION Name of Business Entity's ��s +- *� ©tG' �% i L' Q-- %Y �' I �+ ` t pYd --2 (►�' Address 3 O ) v 0 0V k JL,Je , Primary Contact , Address (9 -3 D E'Q�I�dL✓ 1 300, �F Rf�v eL ?4/v Phone 76 3 - D / 8 36 �� 76 3� � 3 — ��r," Email C 1 �yi" ,e ff'' dv", Brief description of the business entity, including history, principal product or service: Brief description of the proposed project: Attorney Name V " 1 Y i 0 Lt ' Address , (3- 3 lY1 cc.,o S-Y- P:1W _, Phone (a IQ M a & aaFax Page 8 of 15 EDA & City Council Approved April 17, 2017 P a I I A [ 0 I7 NATUREJ Accountant Name � �'� V-a:ksem- Address._ 306 C-eyeey - d - i1-t 0,d t'V-e11 i2 04& Phone 76 3 -a!J 6- 4I8Ci Fax Email PQ ;/'�O*v e wt 6 COW X6k, Contractor Name 7*-, AdtlrP,z�, V- 0 _ 1='/ k cve� i Phone 7/ -3 - a8_6- GS Fax EmailTk-:i &J- q- b Y kev , 6d 4�, Engineer Name 5ae, 77- P4.A L k e- Address / I 3 k p 'V e -2>i�1't @ n c'r�441V ^, Phone Ire 3 -3 1 - a ag Email ' Ci 1/ll Architect Name I)'e r\N a U- Address `Z L t- e �` f lrv� L n �te4/0ol tt S Phone 711a 3 - 3 3 % Fax Email 5 5i ?Sr @- B. PROJECT INFORMATION 1. The project will be: Industrial: New Construction Expansion Redevelopment / Rehab. Office/research facility that conforms to Business Park zoning standards Commercial Redevelopment/Rehabilitation 2. In addition to the city of Elk River, applicant is requesting Tax Abatement from: )6 Sherburne County School District 728 3. The project will be: �/ Owner Occupied Leased Space Wi 4. Project Address o Q� g•e 2t�° wr c1'"E'® �! �f GZ✓� � Oc4 ® ` ' , e� Parcel Identification Numbers '^k w 5. Site Plan and Construction Plans Attached: Yes X No 6. Total Amount of Tax Abatement Requ2ted: $ 5 0 ©� over - years. City Portion: Annual $ . Total $ County Portion: Annual $ Total $ ISD 728 Portion: Annual $ Total $ 7. Current Real Estate Taxes on Project Site: Estimated Real Estate Taxes upon Completion: Phase I $ &C9 Phase II $ 8. Construction Start Dater/rt `! aC43 Construction Completion Date: -1v iEb a0a If Phased Project: Year % Completed Year % Completed Page 9 of 15 EDA & City Council Approved April 17, 2017 p 0 Ml, F, 9 1 0 H r C. PUBLIC PURPOSE It is the policy of the city of Elk River that the use of Tax Abatement should result in a benefit to the public. Please indicate how this project will serve a public purpose. `Job Creation/Retention Number of existing jobs & Number of jobs created by project 1 q IQ ;;) T) Average hourly wage of jobs created/retained New industrial development which will result in additional private investment in the area. Enhancement and/or diversification of the city of Elk River's economic base. The project contributes to the fulfillment of the city's Economic Development Strategic Plan. _Removal of blight. i� Rehabilitation of a high profile or priority site. Significantly increase the city's tax base. D. SOURCES & USES SOURCES NAME n Bank Loan �'i i (QW ®� AMOUNT $ �1 a 5 0, 0 0 0 Other Private Funds R�c�. J,,V c $ -) ®, 606 Owner Cash Equity IJCLwy-ST v $ asp, 4 �; Fed Grant/Loan $ State Grant/Loan $ EDA Micro Loan $ Tax Abatement C y o(• d �j -uv�e$ �r C) ®®' l ID Bonds $ TOTAL $ USES AMOUNT Land Acquisition w- Site Development $ co 0-6 CO Construction $ zl/ 60J 8,9 C1 Machinery & Equipment $ Architectural & Engineering Fees $ ! d , coo, " Legal Fees $ Interest During Construction $ Debt Service Reserve $ Contingencies $ TOTAL $�,0 Page 10 of 15 EDA & City Council Approved April 17, 2017 p ® V ( 8 E ® INATURil E. ADDITIONAL DOCUMENTATION AND CHECKLIST Applicants will also be required to provide the following documentation: A) Written business plan, including a description of the business, ownership/management, date established, products and services, and future plans B) Financial Statements for Past Two Years Profit & Loss Statement Balance Sheet C) Current Financial Statements Profit & Loss Statement to Date Balance Sheet to Date D) Two Year Financial Projections .// E) Personal Financial Statements & Current Tag Return of all Major Shareholders F) Letter of Commitment from Applicant Pledging to Complete '01 During the Proposed Project Duration G) Letter of Commitment from the Other Sources of Financing, Stating Terms and Conditions of their Participation in the Project I-1) Application deposit of $10,000, with any unused portion to be refunded if project does not proceed I) Construction Plans and Itemized Project Construction Statement J) Attach the following documentation as Exhibits Exhibit A — Corporation/Partnership Description Exhibit B — Description of Project Exhibit C — List of Shareholders/Partners Exhibit D — But -For Analysis Exhibit E — List of Prospective Lessees Exhibit F — Legal Description and PID Number(s) I. Note: All owners with ownership interests greater than 20% will be required to sign personal guarantees if up front financing of the project is required. Page 11 of 15 EDA & City Council Approved April 17, PO/E1E0 1f NATM The undersigned certifies that all information provided in this application is true and correct to the best of the undersigned's knowledge. The undersigned authorizes the city of Elk River to check credit references, verify financial and other information, and share this information with other political subdivisions as needed. The undersigned also agrees to provide any additional information as may be requested by the city after the filing of this application. The undersigned has received the city's policy regarding the payment of costs of review, understands that reimbursement to the city of costs incurred in reviewing the application will be required, agrees to reimburse the city as required in the policy and make payment when billed by the city, and agrees that the application may be denied for failure to reimburse the city for CO Applicant )o a3 Page 12 of 15 EDA & City Council Approved April 17, 2017 P 8 / E 8 l 8 S [ INATUR Staff Scoring of Beaudry Application + Rec. 1/25/23 X. TAX ABATEMENT APPLICATION REVIEW WORKSHEET TO BE COMPLETED BY CITY STAFF 1. The project meets the criteria set forth in Section V of the Tax Abatement policy. a) Meets at least one of the objectives in Section III. b) Demonstrates need for Tax Abatement with the but for analysis. c) Consistent with all city plans and ordinances. d) Serves at least two public purposes as defined in Section V(g). 2. Ratio of Private to All Public Investment in Project: $ Private Investment $ Public Investment Ratio Private: Public Financing Less than 3. Job Creation in the city of Elk River: Number of new jobs as a result of the project. Number of existing/retained jobs Total Less than Points: 5:1 5 4:1 4 3:1 3 2:1 2 2:1 1 Points: 25+ 5 20+ 4 15+ 3 10+ 2 10 1 4. Ratio of Public Investment to Job Creation: Points: $ 26a QZZ Public Investment $8,000 or less 5 c_x`. Number of new jobs created/retained $10,000 or less 4 $ 10 ec C) of Public Investment per newjob $12,000 or less 3 $15,000 or less 2 Over $15,000 1 5. Wage Level of new jobs created/retained Points: Minimum hourly wage Over $21 / hour 5 of jobs created/retained: 2 $18-21 / hour 4 $14-17 / hour 3 $10-13 / hour 2 Under $10/ hour 1 6. Project size: Points: The project willresult in the construction 40,000+ 5 of square feet30,000+ 4 20,000+ 3 10,000+ 2 10,000 or less 1 Page 15 of 17 EDA & City Council Approved April 17, 2017 p 0 it E R E 1 1 1 IIINATURE Staff Scoring of Beaudry Application (Rec. 1/25/23) 7. Market Value/Tax Base Generation: Points: The project will result in a per square foot Industrial Commercial es ted market value (land and building) $80/sf+ $110/sf+ 5 $70/sf+ $100/sf+ 4 $60/sf+ $90/sf+ 3 $50/sf+ $80/sf+ 2 $40/sf+ $70/sf+ 1 8. Type of Project: Points: 100% Owner Occupied 5 Mix Owner Occupied & Investment 4 Investment Property 3 9. Use: Points: Industrial or Business Park Project 5 Commercial Rehabilitation/Redevelopment 4 10. Likelihood that the project will result in Points: unsubsidized, spin-off development. High 5 Moderate 3 Low 1 Sub - Total Points: of a possible 45 points. 11. Bonus Adjustments Bonus Adjustments: The project will be 100% Pay-asyougo Tax Abatement 3 points The project contributes to the goals of Energy City. 2 points • Product promotes sensible use of energy, OR • Project utilizes significant energy efficient design &/or materials in construction. Total Points: . D Rating Points Max Eligibility Overall project desirability: Hi h 45-38 points 100° o Moderate 37-29 points 75% ow i20 points 50% Not Eligible 19-0 points 0% Page 16 of 17 EDA & City Council Approved April 17, 2017 p R ! E R E R R i INATUREI CQ bakertilty MUNICIPAL ADVISORS Memo Members of the Joint Finance Committee To: 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 The developer shall demonstrate that the project is not financially feasible but -for the use of tax abatement. 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 rg eater 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-1) ■ C-1 classification rate is 1.5% first $150,000 value and 2% value above $150,000 • Estimated total market value upon completion 0 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 0 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 0 15 years if all three taxing entities participate or 0 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.Huotabakertilv.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 Capacity (2) Capacity (3) Capacity Rate 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 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) MINNESOTA :1 IT I I 1 1 1 , I I IIII I, I 1 1 � a1 SHERBURNE COUNTY PROJECT LOCATION CLIENI SDK ARCHITECTS LLC 3030 Caumy R.d 101 Nurth Plymouth, MN 55447 Stephen D. Krause steveK@stlk- ... hitec[ .- 7-331-51]8 6�� m �zla goo CITY OF ELK RIVER, MN 8 INDEX OF CIVIL SITE DRAWINGS: FILE NO. 0O656 CO PROJECT LOCATION PLAN Cl PRELIMINARY PLAT C2 OVERALL SITE C3 SITE PLAN C4 GRADING AND DRAINAGE PLAN C5.1-05.2 SANITARY & WATERMAIN PLAN CO C6 STORM SEWER PLAN CETI-C].2 SWPPP C8 EXISTING CONDITIONS & REMOVAL PLAN CAT-C9.2 DETAILS Cl0 LANDSCAPE PLAN PYO%ECt Location plan 0 ARCHITECTURAL SITE PLAN SDK ARCHITECTS 0 µ u C L N O 0._ Z s +J v >®�y_I \ T` J v 3 v 7. REVISIONS ARCHITECTURAL SITE PLAN 22-001 JUL 25, 2022 SDK PR-1V- LLL�L� III !I II 1 lull III IIII II I!' III 'I ILI I ILI III hill III 1 ' !III 'Till ' I I ilk, _I ...III IIII, I'llu IIII III 1 ,III II III ��IIIIIII�II I �II�III� ��RplI1�1��!�IIIgI��II III ���I� III��III�III�� I�'11'��I 4III �;� �ll� 11 I I Ibllilllll lul '�II I IIII IIII °I,�" II'jlll'II L'IIIII "'', II I°IIII! II'I'lr11IIIIII II;II!III' �� NORTH BUILDING ELEVATION I LOW POINT22'-O'ABOVE SLAB FENCE I? I TYPE PP HEIGHF'1'1 I BUILDING SECTION #1 �3� SOUTH BUILDING ELEVATION , -", (') �E. , -1a Li WALL-5 FENCE PP TYPE 21 HEIGHT 11 iI SLAB MI L� 9R TE KAB MI L� _9? & it WALL & FENCE?? TYPE 21 HEIGHT'?? RETAINING WALL I EACH SI BE OF LOANING DOCKS ... I _ •......�.......�.�.�..._._._._..>_..�..._•..��.�.�..�.........�._..u.�..........�.�...�... �.�...�...... J..._._..�.u. ......._.sue....._.....• iI SLAB ML TlE 2� WEST BUILDING ELEVATION - PAVEMENT SLOPE @ LOADING DOCKS �� iI WWALL & M �l RETAINING WALL ! tT EACH SI BE OF LOAN NO DOCKS N iI SLAB,ML� � — - —.alp'-ate iFE PAVEMENTSLOPE @LOADING DOCKS AWNING'!'! s EAST BUILDING ELEVATION TYPE" L. ,-, slzE as SDK ARCHITECTS L µ U c L N O 0._ Z s L •�_ N >®�y_I \ T` J v 3 N REVISIONS BUILDING ELEVATIONS BUILDING SECTION 2-001 JUL 25, 2022 DK Business Plan for Beaudry )%1 Lubricants rip Purpose of Business To provide lubricant products to commercial companies in Minnesota and Wisconsin, focusing on industries such as Automotive, Trucking, Excavating, and Agricultural. Business Established Beaudry started with one employee in Elk River, MN, in December of 1981. Today, we have over one hundred employees and six office locations throughout Minnesota, and our main office remains in Elk River. Factors Contributing to Growth Our commitment to providing solutions tailored to each customer's needs is the number one factor contributing to our growth. In addition to our service, we offer highly competitive prices, customized set-ups and installations, lab testing motor oils, and other complete programs to meet the needs of our customers, regardless of size. Trust and communication are critical to building and maintaining customer relationships, and we are committed to exceeding their expectations. What Sets Us Apart From the Competition Aside from our commitment to our customers and services, we have an exclusive distribution contract for the Twin Cities and Central Minnesota with Petro -Canada, one of Canada's largest oil companies. In addition, the growth of our brand Eagle Gold Motor Oils, allows us to offer premium lubrication oils for an affordable price. Finally, last year we added Lucas Oil Products to our division. Lucas Oil is one of the fastest -growing lubricants, enabling us to enter the specialty market of power sports and performance motoring. Top Competitors Our number one competitor is Lube Tech of Golden Valley and multiple other distributors within the Twin Cities. However, expanding our product offerings and solutions to suit businesses from the smallest shop to the national corporation separates us from our competitors. Why We Need This Warehouse We are continually expanding our streams of income and product offerings. As a result, our growth projections over the next five years indicate that we need to hire approximately 15 new employees in the next 24 months and 20 in the next five years in the lubricants division alone. In addition, we estimate that we will have six delivery trucks within five years, requiring additional dock space and warehouse storage to accommodate this growth. Why Do We Need ELk River's HeLp? To reduce fuel and labor costs, the property selected for our new warehouse location is as logistically close to our main office and repair shop as possible. However, there are factors at this location that causes additional financial issues to build here. For example, we must purchase environmental credits, fill to bring the land up to grade, and run an 8-inch waterline from the adjoining development. Without the city of Elk River's help, these factors will make this project non -feasible due to extraordinarily high upfront costs. LETTER OF COMMITMENT Dear City of Elk River, January 25, 2023 This letter is to inform you that we are confident and fully committed to seeing the Lubricants Warehouse building project through to completion. Our financing is secured, and we have the funds available for the down payment. Over the last 41 years of business, we have started numerous projects and always completed them, regardless of economic conditions, cost overruns, or delays, due to risk management plans being in place and followed. Additionally, we have a fully licensed and insured contractor we have used in previous building projects and are confident that he can complete this contract as he has many others. Thank you, CEO Beaudry Oil & Propane Beaud r y MidWestOne Bank® January 20, 2023 Beaudry Oil & Service Kenneth Beaudry 630 Proctor Ave NW Elk River, MN 55330 Greetings Ken, 18233 Carson Ct. NW Elk River, MN 55330 Phone:763.2I4.:3214 i Geii:612.206.66;31 WdwestOne.com Allan Pavek Vice President & Commercial Banker I am pleased to advise that MidwestOne Bank will partner with you on your new lube shop in Elk River and provide financing. The financing is subject to standard du diligence requirements. A completed appraisal showing a current and as complete value, any environmental review needed as required by policy, title work confirming property interests and continued receipt of updated financial records with items to be reviewed. If any other items arise during the loan process I will let you know. Borrower: LLC to be confirmed Guarantors: Beaudry Oil and Services and Kenneth Beaudry — continuing unlimited unsecured Purpose: Finance construction of new lube facility Amount: Up to 80% of project costs or appraised as complete — maximum of $3,200,000 Collateral: 151 Mortgage on Subject property Term: 12 month construction draw note, followed by permanent financing, Rates: TBD, based on spread versus 5 year treasury yield Estimated payment: Interest only during draw period, P & I payments tbd once final loan amount is determined Fees: Origination fee TBD, all costs associated with closing, including, but not limited to Appraisal, filing fees, title work, environmental due diligence, construction fees, etc. Payment to be made auto debit with MidwestOne account to be opened. Housekeeping items needed for closing: 1. Vehicle details, title, VIN 2. Insurance information on property FDIC iEN�Eq 3. Operating agreement or related as needed 4. Certificate of Beneficial Ownership signed —to be provided 5. Checking account to be opened — allow for funding of draws and payment of note 6. Title Company to be determined — to close loan and will work with Bank construction team to manage process Please let me know if you have any questions. Sincerely, Allan Pavek Vice President MidwestOnexom Miember FDIC IE- 110EA City of Elk River Members Present: Members Absent: Staff Present: Others Present: Elk River Joint Finance Committee Excerpt from Draft Minutes Held at Elk River City Hall Tuesday, March 28, 2023 Dan Tveite, Jim Gromberg, Ryan Hardin, Chad Vitzthum, Jill Larson -Vito and Rhonda Magnussen (7:37 am) Nate Ovall, and Charlie Blesener "4*— Brent O'Neil, Economic Development Director Joshua Mollan, Econi Mikaela Huot (Baker Ken Beaudry (Beaudi 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 $138,000 over 11 years ....; ..., .. Chair Tveite shared that this project would be a good fit for the area. Mr. Beaudry shared that they would have liked assistance for the full 15 years but is happy with any city assistance to support the project. Mr. Hardin asked if there needed to be any additional language to the motion that city participation should be subject to county participation. Mr. O'Neil and Ms. Huot stated that the due to request being reviewed as a location incentive, the city review is for the city portion only and the item under consideration isn't intended to be dependent on the county's participation. Moved by Gromberg and seconded by Larson -Vito to provide a recommendation to the City Council and EDA to approve this tax abatement Motion carried 5-0 (Vitzthum abstained). Prepared by Joshua Mollan. City of Elk River, Minnesota City Council Public Hearing for Tax Abatement and Tax Abatement Business Subsidy Assistance Beaudry Oil and Harvest Reaper, LLC Project Consideration of Granting of Tax Abatement Assistance May 15, 2023 MI N N ESOTA SHERBURNE COUNTY PROJECT LOCATION r a I wwr.••• r rim.. wrYM pop. CITY OF ELK RIVER, MN INDEX OF CIVIL SITE DRAWINGS: CO PROJEICT LACATtON PLM C' PRRIMNARY PUT CZ TNERALL SITE C] 5nE PLAR Ci CRAONG DRCE AN NNAPUN CS.I-CST SWRARY k ATEN", Ptm Ce STORM SEMERAA PL CIA-V2 SWPPP CO CASING OORWONS t RDIOVAL PLAN co I-C, 7 OLTALS CIO LNb"$CAPE PLAN Y (;) t. G SECTION sstSECTIOU sti NO I UILONG FLa ATION A I � wa �e.a m� g) ny B m!A G—ELEVATIOMB m!A G—ELEVATI M iJl-'iJ�J n+u^ arm[^ +�^ ianu�vu �mrEarwwwx -- r wneanauEftuvsuom WEST UUIOING ELEVATION Beaudry Oil Project Summary • City received an application for financial assistance through tax abatement from Beaudry Oil & Service DBA Beaudry Oil & Propane and Harvest Reaper LLC • Proposed 25,000 square foot new industrial facility • 4.3 million project investment • Constructed in mid-2023 • Request for tax abatement assistance from City and County • Total of $645,000 • Project includes creation of at least 14 jobs Beaudry Oil Project Summary • City received an application for financial assistance through tax abatement from Beaudry Oil & Service DBA Beaudry Oil & Propane and Harvest Reaper LLC • Proposed 25,000 square foot new industrial facility • 4.3 million project investment • Constructed in mid-2023 • Request for tax abatement assistance from City and County • Total of $645,000 • Project includes creation of at least 14 jobs Beaudry Oil Project Summary Financial Analysis Purpose of financial review and analysis is to assist the City with making a determination: • if the project as proposed meets merits of City's tax abatement policy and verification for need for public financial assistance and • if assistance is necessary, to determine the appropriate amount and terms of public assistance. level of financial assistance may impact the ability of the project to proceed as proposed and maximize new value created on the current project site and financial feasibility (availability of revenues to support repayment of project costs) Beaudry Oil Project Summary Request for Financial Assistance from the City • Harvest Reaper, LLC is building owner • Beaudry Oil (LLC to be created) would be the tenant • Estimated taxable value upon completion of $1.566 million • As provided by County assessing • Challenging site with required site development costs • Portion may be considered extraordinary and warrant need for assistance • Specifically, watermain extension with estimated cost of $166,500 • May constitute as business subsidy, subject to amount Beaudry Oil Project Summary Project Qualifications: Policy Review • Policy objectives • Use of tax abatement • Project determined to be not financially feasible or, • Project may not necessarily meet the but for but be considered location incentive • Resulting other public benefits such as • Significant tax base increase • Creation of higher paying jobs • Likely to assist in marketing and attracting additional development Beaudry Oil Project Summary Tax Abatement Basics • Prior to using tax abatement, the approving governing body: • Expects benefits of the proposed abatement agreement to at least equal the costs to the political subdivision of the proposed agreement and • Finds that doing so is in the public interest because it will: • increase or preserve tax base • provide employment opportunities in the political subdivision • provide or help acquire or construct public facilities • help redevelop or renew blighted areas • help provide access to services for residents of the political subdivision • finance or provide public infrastructure Beaudry Oil Project Summary Terms of Assistance Agreement • Abatement/subsidy agreement between City and Developer includes terms of financial assistance • Up to $138,204 or • Maximum 11 years • PayGO as reimbursement upon project completion • Business subsidy requirements • 7 new jobs created within 2 years of benefit date • Average wage estimate of $31.77/hour • 7 additional jobs to be created within 5 years 110