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5.1. SR 02-06-2006 City of Elk River REQUEST FOR COUNCIL ACTION Agenda Section Meeting Date Administration February 6, 2006 Item Number 5.1 Prepared by Heidi Steinmetz, Assistant Director of Economic Develo ment Reviewed by Catherine Mehelich, Director of Economic Develo ment Introduction The City received a $200,000 grant in 2003 from the Minnesota Department of Employment and Economic Development (DEED) under its Minnesota Investment Fund Program. The DEED grant funds were loaned by the City to Sportech, Inc. to assist with the purchase of equipment related to the 20,000 square foot manufacturing facility expansion located at 15703 Jarvis Street NW, Elk River, Minnesota. Discussion A public hearing must be held by the City Council to close out the grant. The purpose is to discuss the outcome of the grant as it relates to the attached Community Need Guideline, which was part of the grant application. Staff will provide a report on the grant outcomes in addition to Chris Carlson, President of Sportech, Inc. Financial Impact As the loan is paid back to the city by Sportech, Inc. over a period of seven years the city is able to retain the full $200,000 to be used as a revolving loan fund for economic development purposes. The company has remained current on their loan payments. Attachments Community Need Guideline Action Requested There is no action requested other than holding the public hearing. Council Action Motion by _ Second by _ Vote Follow Up Community Need Guideline Economic vulnerability of the community Elk River's industrial employment base primarily consists of several small to medium sized companies in the following sectors: industrial machining, metal fabrication, and electronic equipment. The area's manufacturing community is vulnerable to economic downturns and losing business due to competition from foreign comparues. Need to attract or retain essential services The city has recognized the need to attract and retain services that are essential to a diverse and healthy economic base. Events contributina to a unique situation Recent events that are impacting area manufacturers include, the economic downturn after 9-11 and increasing competition from China. Sportech, Inc. has continued to experience growth opportunities despite recent events. Infrastructure conditions if pertinent Not applicable. Out-miaration due to lack of iobs The creation and retention of quality employment is critical in order to avoid out-migration to the metro area for better wages and jobs. Opportunity or timeliness to implement proiect The Sportech, Inc. expansion presents an opportunity to enhance the economic diversification and stability of the community. How long-term jobs will be retained because of the project or other needed employment opportunities that will result Sportech, Inc. has agreed to create a minimum of 15 new full-time permanent positions within two years of completion of the building expansion project. In addition, the company will retain approximately 25 full-time equivalent positions as a result of the project. How the proiect will stimulate private capital investment Sportech, Inc. will contribute approximately 10% of the expansion project cost. In addition, the business expansion will spur private capital investment by area businesses that may experience an increase in services provided to Sportech, Inc. How the proiect can aenerate a substantial increase in local property tax base It is projected that the expansion project will result in an estimated $678,000 increase in property tax market value, which will result in an estimated increase of $1,400 in property taxes. How the project will serve other valuable economic purposes within the community; i.e. damage to a community's economic base if a business were lost It is critical for the city to retain diverse industries, such as Sportech, Inc., to minimize the impact of economic downturns that can damage the community's vitality. How the proiect will support the economic viability of small or minority, includinq female owned, businesses Sportech, Inc. is co-owned by Debra Carlson, a female. In addition, Sportech, Inc. works closely with RLM Enterprises of Mound, MN in supplying imported materials. RLM Enterprises is a female, and minority owned business.