6.1. SR 01-25-1993
ITEM 6. 1.
TO: MAYOR & CITY COUNCIL
FROM: WILLIAM RUBIN, ED COORDINATORJ\! ~
DATE: JANUARY 22, 1993
SUBJECT: TIF GRANT REQUEST FROM PERF-FORM
PRODUCTS, INC.
INTRODUCTION
Staff is in receipt of a request from Perf-form Products, Inc.,
21595 County Road 83, Big Lake Township, for Tax Increment
Financing (TIF) assistance to support the company's proposed
construction of a 6,000 square foot facility on a vacant lot in
the Elk River Industrial Park. The request for assistance
totals $22,500 and is outlined in greater detail in a January
18 letter from Mr. Douglas Koelfgen, President of Perf-form.
BACKGROUND
.
This project and its related request for TIF assistance was
discussed previously at the Economic Development Authority's
(EDA) meeting on January 11, 1993. A copy of the January 6
agenda memo and a January 7 letter from Perf-form is attached
as background information. At the EDA meeting, Commissioners
discussed the merits of creating a new TIF District, or,
drawing TIF funds from one or more existing Districts. Based
on the information submitted, it was the consensus of EDA
Commissioners to assist this company with TIF funds from
Districts No. 1 and No.3.
Because the City Council created the initial TIF Districts in
the community, the EDA acted as an advisory body with this
request. The final decision on approving Perf-form's request
for TIF assistance +ests with the City Council.
Perf-form has identified specific costs which are eligible for
TIF assistance:
- Frontage road-street improvements
- On site utility extensions
- Site preparation
These costs are estimated at $22,500 and
acquisition price of the lot which Perf-form is
for. That cost is estimated at $25,000 to $27,500.
exclude the
responsible
.
720 Dodge Avenue N.W., Elk River, Minnesota 55330 (612) 441-7420
.
.
.'
Concurrence from the City Council is sought regarding the
availability of TIF funds from Districts No. 1 and No. 3 to
fund the costs outlined above. This action is requested
subject to:
- The filing of a TIF application by Perf-form
- Payment of the TIF application fee
- Execution of a development agreement
- TIF paYments made only after a Certificate of Occupancy is
issued
RECOMMENDATION
I recommend that the Elk River City Council concur with the EDA
to draw down TIF funds from Districts No. 1 and No. 3 to assist
this project. I further recommend that TIF assistance be
limited to off site utility extensions (i.e. construction of
frontage road), on site utility extensions, and site
preparation costs not exceeding $22,500.
.
Perf-f!!!!"
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January 18, 1993
ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY
Mr. William Rubin
Elk River, Minnesota
Dear Bill,
Based on our discussion of last Friday, I would like to
apply for Tax Increment Financing in the amount of $22,500.
The money would be used to finance the following:
.
$13,000. to extend Service Drive 60' on the adjoining lot
and 169' on the proposed 1.14 acre lot.
$5,000. to extend sewer & water connections to the new
building.
$4,500 for site preparation.
I hope this meets with your directors approval, and I
believe this will make it possible to go forward on this
project if I can secure the necessary financing.
If you need more information please let me know.
Sincerely,
jJ~r/~
Douglas F. Koelfgen
President, Perf-form Products, Inc.
.
21595 Cty. Rd. 83 N., Big Lake, MN 55309 · Phone (612) 263-6615
ITEM 9
TO: ECONOMIC DEVELOPMENT AUTHORITY
FROM: WILLIAM RUBIN, ED COORDINATOR~ Yl-
DATE: JANUARY 6, 1993
SUBJECT: ALTERNATIVES FOR TAX INCREMENT
FINANCING (TIF) GRANT REQUEST
INTRODUCTION
Policy direction is sought from the Elk River Economic
Development Authority and the Elk River City Council regarding
alternatives for a Tax Increment Financing Grant Request. In
short, staff is seeking direction from both Boards regarding
the potential availability of TIF to assist a manufacturing
company with its relocation program into the City of Elk River.
BACKGROUND
.
Perf-form Products, Inc., 21595 County Road 83, Big Lake
Township, manufactures oil filters and oil drain systems for
original equipment manufacturers (OEM's) such as Harley
Davidson and as after-market products that are available for
sale in motorcycle accessory stores. Mr. Douglas Koelfgen is
owner and president of the company. He also holds a patent for
developing this oil filtration system. The company has been in
operation for several years and currently operates in Big Lake
Township as a result of a conditional use permit issued by
Sherburne County. A check of County records reveals that
Perf-form Products has conformed to the County's stipulated
conditions, and as a result, has a clean record of operations.
This company has been previously outlined in monthly Prospect
Status Reports and appears to be close to a decision on
expanding in Elk River. Additional information on the company
can be obtained from the letter submitted by Mr. Koelfgen and
from the brochures included in the agenda packet.
.
Mr. Koelfgen is proposing the construction of a 6,000 square
foot facility that can be expanded in the future. In an effort
to maximize the land to building ratio, the company has
tentatively identified Lot 2, Block 2, Elk River Industrial
Park, as a potential site to undertake this expansion project.
Lot 2 is a privately owned site located immediately west of the
Neary Manufacturing building in the Industrial Park. It is
owned by Steven Neary, who also owns the facility and the real
estate where Neary Manufacturing conducts its operations.
While vacant, Lot 2 was not part of the City/EDA-Associated
Investors transaction of June, 1992.
720 Dodge Avenue N.W., Elk River, Minnesota 55330 (612) 441-7420
.
.
.
Alternatives for TIF Grant Request
January 6, 1993
Page 2
In reviewing and analyzing potential sources of assistance
available to the company, it was concluded that the creation of
a new TIF District may not be feasible. That is, based on:
- the contemplated level of TIF assistance sought,
- the finished market value of the expansion project,
- current Assessor's market value of the vacant lot,
likely capitalized interest if EDA-City borrowing is
required,
- limitation on the number of years tax increments may be
collected,
the cost of creating a new TIF District outweighs the benefits
of TIF assistance.
Alternatives to the creation of a new TIF District include:
-No TIF assistance
- Amending an existing District or Districts where the
amount of new tax increments collected exceeds the debt
service required by previously issued bonds.
In that vein, I am suggesting that the EDA and City Council
consider an amendment to TIF Districts No. 1 and No. 3 in order
to provide a TIF Grant to Perf-form Products. Presumably, this
request will be similar to the Chuba Company's TIF request in
early 1992. TIF law enables tax increments generated from a
"District" to be expended in the broader "project area" or
"development district". In the case of Elk River, the entire
community is located in a development district. With the Chuba
request for assistance, tax increment funds from Districts No.
1 and No. 3 were expended in the broader development district
and the funds were used to reimburse Mr. Chuba for certain
demolition and site preparation costs associated with his
office project at Evans Avenue and Main Street.
Assuming that Perf-form Products can document eligible expenses
for which TIF funds can be used as reimbursement, it may be
possible to utilize tax increment funds from District No. 1 and
No. 3 for this process. Likely eligible expenses for which the
company may seek reimbursement includes:
- Off site infrastructure
extension of a frontage road
- On site utility improvements
- General site preparation.
the
improvements (that is,
across a portion of Lot 2)
Lastly, the advantage of amending an existing district results
in the local taxing jurisdictions benefitting immediately from
the new development. That is, since a new district is not
created, the project's new property taxes are not captured by
an EDA, but rather, the taxes go directly to the County for
redistribution to the local jurisdictions.
.
.
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Alternatives for TIF Grant Request
January 6, 1993
Page 3
The nuance with a potential request from Perf-form Products
centers around what triggers the need for a public hearing to
amend an existing TIF Plan. Previously, TIF funds have been
expended without a public hearing. An example here is the
infrastructure improvements to the Industrial Park 2nd
Addition. With other expenditures from Districts No. 1 and No.
3, staff has gone through the public hearing process found in
the Tax Increment Act. Examples here include the Chuba project
and the City-EDA acquisition of the Main Street redevelopment
site.
Staff has reviewed the general terms of the Perf-form Products
expansion with the City Attorney. Based on the company
providing staff with information on "eligible expenditures",
the attorney agreed to determine whether or not a public
hearing would be required.
The fundamental question, however, is whether the EDA and City
Council desires to assist a project utilizing this process. As
a result, direction is sought from the EDA with the expectation
that it would forward a recommendation on to the City Council.
As with all requests for City incentives, the applicant must
submit financial records and make projections which help ensure
the applicant is a credit worthy risk.
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Perf-f!!!!"
January 7, 1993
ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY
Elk River, Minnesota
The purpose of this letter is to give a brief description of
our company, provide cost estimates for proposed site
acquisition, and utility improvements. Doing so in the hope
that some financial help can be obtained to make it possible
for us to construct a new building on the 1.4 acre lot
bordering Hwy. 1 in the Elk River Industrial park.
.
The company started as Douglas Filter Company in 1981.
Working out of my basement in Delano, MN. in my spare time,
I manufactured small quantities of a Motorcycle Oil Filter I
designed and patented. Sales grew as more people became
aware of Perf-form Oil Filters. I purchased a home in Big
Lake township in June of 1985 and obtained a conditional use
permit to operate the business on the property.
I incorporated and changed the company name to PERF-FORM
PRODUCTS, INC. in September of 1991. Presently we have
13 products, manufactured from tin-plated steel, filter
paper, Plastisol glue, and assorted gaskets or O-Rings
to make the different filters. The filters are packaged and
shipped to our 27 distributors in the USA, Canada, The
Netherlands, Sweden, and Germany. I am to the point that in
order to operate efficiently or to grow any further it is
imperative that we have more space. We have grown more than
30% a year in the past and I expect this to continue.
continued on page 2.
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21595 Cty. Rd. 83 N., Big Lake, MN 55309 · Phone (612) 263-6615
.
PerJ-f!m!"
Page 2.
The quote obtained from Aho Construction, Inc. (the building
contractor) to put in the required extension of Service
Drive, 60' on the adjoining lot, and 169' on the proposed
lot came in at $13,000. Sewer & water extensions to the
building would cost $5,000. and another $7,385. for a drive
way & parking lot. These costs along with the purchase price
of the property itself ($20 to $26 K) would bring the site
acquisition and improvement cost conservatively to
$47,385., that's not inCluding the landscaping that would be
necessary.
.
It would be nice to locate in the Elk River Industrial Park
and keep our school tax dollars in the same district, but
with out substantial assistance in some form to offset the
site costs I don't believe it will be possible.
Sincerely,
5h.~r/~
Douglas F. Koelfgen
President, Perf-form Products, Inc.
.
21595 Cty. Rd. 83 N., Big Lake, MN 55309 · Phone (612) 263-6615