4.1. SR 08-19-2002River
Item
MEMORANDUM
TO:
FROM:
DATE:
Economic Development Authority
Mayor & City Council
Catherine Mehelich, Director of Economic Development//9~
August 19, 2002
SUBJECT: Consider Adoption of the City's Tax Rebate Financing Policy as
Amended
Attachments
· Amended Tax Rebate Financing Policy, August 2002
· Existing Tax Rebate Financing Policy, Adopted April 2000
Background
At its June and July 2002 meetings the City Council and EDA discussed Tax Rebate
Financing policy issues related to office development.' State law provides individual taxing
jurisdictions the flexibility to define their own priorities for the use of tax abatement. The
policy is to be used as a guide in the processing and review of applications requesting TRF
assistance.
The attached amended policy incorporates the following items discussed at the July 2002
meeting:
Any developer receiving TRF assistance shall provide a minimum of twenty percent
(20%) cash equity investment in the project. Projects utilizing the SBAS04 program
~vill be requited to provide a minimum of ten percent (10%) cash equity investment.
(Section IV.bO
TRF proposals shall not be used to support speculative office projects. Speculative
projects are defined as those projects which have pre-leasing agreements or letters of
intent for less than 50% of the available space.
In addition, leasible office projects must meet the following guidelines:
1. Evidence of the 50% lease commitment must be reported to the
Director of Economic Development six months following an issued
certificate of occupancy.
Tax Rebate Financing Policy - Amended
August 19, 2002
Page 2 of 2
2. 50% of the jobs within the leasible office building space must be
considered "new" jobs to the City of Elk River, meaning jobs not
located in the City at any time prior to occupying space in the project.
3. Business retention jobs will be considered on a one-for-one match to
job creation only in cases where job loss is specific and demonstrable in
accordance with the MN Business Subsidy Law. Evidence may include
documentation that the company will have to close involuntarily, or the
company has received an attractive offer to move to another state or
community. (Section IV.j.)
Office facilities remain eligible for TRF but with the minimum requirements of
25,000 square feet new construction and result in a min/mum market value of
$1,000,000 upon project completion. (SectionV.b.)
The developer shall demonstrate that the project is not financially feasible
but-for f_he use of TRF. Evaluation of the project's financial feasibility without TRF
shall be provided by the City's financial advisor on requests of over $25,000 total.
The cost of financial review and legal services will be deducted from the $5,000
application fee. (Section V.c. & Section VII.AA.)
An Itemized Project Construction Statement is among the list of required application
documentation. (Section VIII.E.j.)
Recommendation
Consider adoption of the Tax Rebate Finance Policy as amended.
S:\EDA~TAXAI3ATE\Elk River Policy History~02amendment2.doc
City of
P, dver
Economic Development
Tax Rebate Financing
Policy & Application
Amended: August 2002
Adopted: April 10, 2000
~City of Elk River, Minnesota
Table of Contents
I. Policy Purpose
II. Difference Between TRF & TIF
III. Objectives of Tax Rebate Financing
I¥. Policies for the Use of TRF
V. Project Qualifications
VI. Subsidy Agreement & Reporting Requirements
VII. Application Process
City of Elk River
Application to Other Political Subdivisions
VIII. Application
Applicant Information
Project Information
Public Purpose
Sources & Uses
Checklist & Additional Information
IX. Application Review Worksheet
X. Exhibits
7
?
8
9
9
10
11
3
3
3-4
4-5
5-6
6
7
8
12
14
A
B
C
D
E
F
Corporadon/Parmership Description
Project Description
Shareholders
But-for Analysis
Prospective Lessees
Legal Description and PID Number
Xl. Sample But-ForAnalysis
15
Proposed Tax Rebate Financing Policy, Amended August 2002 2
I. POLICY PURPOSE
For the purposes of this document, the term "City" shall include the Elk River Ci(y Council, Economic
Development Authori(y, and Housing and Redevelopment Authori[y.
The purpose of this policy is to establish the City of Elk River's position relating to the
use of Tax Rebate Financing (TRF), otherwise referred to as Tax Abatement, for private
development above and beyond the requirements and limitations set forth by State Law.
This policy shall be used as a guide in the processing and review of applications
requesting tax rebate assistance. The fundamental purpose of tax rebate financing in Elk
River is to encourage desirable development or redevelopment that would not otherwise
occur but for the assistance provided through TRF.
The City of Elk River is granted the power to utiliTe TRF by the Minnesota Tax
Abatement Act, as amended. It is the intent of the City to provide the minimum amount
of TRF, as well as other incentives, at the shortest term required for the project to
proceed. The City reserves the right to approve or reject projects on a case by case basis,
taking into consideration established policies, project criteria, and demand on city
services in relation to the potential benefits from the project. Meeting policy criteria does
not guarantee the award of TRF to the project. Approval or denial of one project is not
intended to set precedent for approval or denial of another project.
II. DIFFERENCE BETWEEN TRF & TIF
The primary difference between Tax Rebate Financing (TRF) and Tax Increment
Financing (TIF) is the way in which the dollars are awarded to the project. When TIF is
awarded to a project by the city, the other political subdivisions (the school district and
the county) are required to contribute their portion of the increased taxes to the project.
Conversely, when TRF is requested, each political subdivision has the option of granting
its portion of the increased taxes to the project. Subsequently, the dollars generated for
the project with TRF are generally less than the dollars generated with TIF.
III. OBJECTIVES OF TAX REBATE FINANCING
As a matter of adopted policy, the City will consider using TRF to assist private
development projects to achieve one or more of the following objectives:
· To retain local jobs and/or increase the number and diversity of jobs that offer
stable employment and/or attractive wages and benefits.
· 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 TRF assistance.
To remove blight and/or encourage redevelopment of commercial and
industrial areas in the city that result in high quality redevelopment and private
reinvestrnent.
Proposed Tax Rebate Financing Policy, Amended August 2002 - 3 -
· 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 rime to time, such as the promotion of quality urban or architectural
design, energy conservation, and decreasing capital and/or operating costs of
local government.
IV. POLICIES FOR THE USE OF TRF
TRF assistance will be provided to the developer upon receipt of taxes by the
City, otherwise referred to as thepqy-as:you-go method. Requests for up front
financing will be considered on a case-by-case basis.
Any developer receiving TRF assistance shall provide a minimum of twenty
percent (20%) cash equity investment in the project. Projects utiliTing the
SBAS04 program will be required to provide a minimum of ten percent
(10%) cash equity investment.
c. TRF will not be used in circumstances where land and/or property price is in
excess of fair market value.
d. Developer shall be able to demonstrate a market demand for a proposed
project.
e. TRF will not be utilized in cases where it would create an unfair and
significant competitive financial advantage over other projects in the area.
TRF shall not be used for projects that would place extraordinary demands
on city services or for projects that would generate significant environmental
impacts.
The developer must provide adequate financial guarantees to ensure
completion of the project, including, but not limited to: assessment
agreements, letters of credit, personal guaranties, and etcetera.
The developer shall adequately demonstrate, to the City's sole satisfaction, an
ability to complete the proposed project based on past development
experience, general reputation, and credit history, among other factors,
including the size and scope of the proposed project.
For the purposes of underwriting the proposal, the developer shall provide
any requested market, financial, environmental, or other data requested by
the City or its consultants.
jo
TRF proposals shall not be used to support speculative office projects.
Speculative projects are defined as those projects which have pre-leasing
agreements or letters of intent for less than 50% of the available space.
Proposed Tax Rebate Financing Policy, Amended August 2002 - 4 -
In addition, leasible office projects must meet the following guidelines:
1. Evidence of the 50% lease commitment must be reported to the
Director of Economic Development six months following an issued
certificate of occupancy.
2. 50% of the jobs within the leasible office building space must be
considered "new" jobs to the City of Elk River, meaning jobs not
located in the City at any time prior to occupying space in the project.
3. Business retention jobs will be considered on a one-for-one match to
job creation only in cases where job loss is specific and demonstrable in
accordance with the MN Business Subsidy Law. Evidence may include
documentation that the company will have to close involuntarily, or the
company has received an attractive offer to move to another state or
community.
k. All TRF proposals shall optimize the private development potential of a site.
V. PROJECT QUALIFICATIONS
All TRF projects considered by the City of Elk River must meet each of the following
requirements:
a. The project shall meet at least one of the objectives set forth in Section III of
this document.
The use of TRF 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 and minimum market value of $1,000,000 upon
projeCt completion; or
· Residential development and redevelopment may be eligible for
TRF under a separate set of policies and only with the
recommendation of the HRA.
The developer shall demonstrate that the project is not financially feasible
but-for the use of TRF. Evaluation of the project's financial feasibility without
TRF shall be provided by the City's financial advisor on requests of over
$25,000 total.
d. The project shall comply with all provisions set forth in the state's Tax
Abatement Law, statues 469.1812 to 469.1815, as amended.
Proposed Tax Rebate Financing Policy, Amended August 2002 - 5 -
e. The project must be consistent with the City's Comprehensive Plan, Land
Use Plan, and Zoning Ordinances.
The project shall serve at least two of the following public purposes:· Job creation or job retention.
· Increase of tax base.
· Enhancement or diversification of the city's economic base.
· Development or redevelopment that will spur additional private
investment in the area.
· Fulfillment of defined city objectives, such as those identified in the
Strategic Plan for Economic Development or the city's Comprehensive
Plan, among others.
* Removal of blight or the rehabilitation of a high profile or priority site.
VI. SUBSIDY AGREEMENT & REPORTING REQUIRMENTS
AH developers/businesses receiving Tax Rebate Financing assistance from the City
of Elk River shah be subject to the provisions and requirements set forth by the
City's Business Subsidy Criteria as adopted, and State Statute 116J.993 as
summarized below.
All developers/businesses receiving TRF assistance shah enter into a Subsidy
Agreement with the City of Elk River that identifies: the reason for the subsidy, the
public purpose served by the subsidy, and the goals for the subsidy, as well as other
subsidy agreement criteria set forth by Statute 116J.993.
The developer/business shall file a report annually for two years after the date the
benefit is received or until all goals set forth in the application and Subsidy
Agreement have been met, whichever is later. Reports shall be completed using the
format drafted by the State of Minnesota and shall be filed with the City of Elk
River no later than March 1 of each year for the previous calendar year. Businesses
fulfilling job creation requirements must file a report to that effect with the city
within 30 days of meeting the requirements.
The developer/business owner shah maintain and operate its facility at the site
where TRF assistance is used for a period of five years after the benefit is received.
In addition to attaining or exceeding the jobs and wages goals set forth in the
Subsidy Agreement, the borrower shah achieve at least one of the objectives set
forth in Section III of this document.
Developers / Businesses failing to comply with the above provisions will be subject
to fines, repayment requirements, termination of the assistance, and be deemed
ineligible by the State to receive any loans or grants from public entities for a period
of five years.
Proposed Tax Rebate Financing Policy, Amended August 2002 - 6 -
VII. APPLICATION PROCESS FOR TRF
A. CITY OF ELK RIVER
1. Applicant submits the completed application along with a $5,000 application fee.
The application fee will be used toward the cost of services provided in the
evaluation of financial feasibility and preparation of legal documents. The balance
of the application fee will be returned to the applicant.
2. City staff reviews the application and completes the Application Review
Worksheet.
3. Results of the Worksheet are submitted to the appropriate governing authorities
for preliminary approval of the proposal.
4. If preliminary approval is granted, all necessary notices, resolutions and agreements
are prepared by City staff and/or consultants.
5. Public he. afing(s) on the proposed project are held.
6. The EDA or HRA recommends approval or denial of the proposal to the City
Council.
7. The City Council grants final approval or denial of the proposal.
B. APPLICATIONS TO OTHER POLITICAL SUBDIVISIONS
It is recommended that applicants intending to seek TRF from Sherbume County
and/or School District 728 make their applications to those bodies concurrent with
their application to the City of Elk River. For more information on applying for TRF
through Sherbume County and/or School District 728, contact:
Alex Wikstrom
Sherburne County Budget / Economic Development Coordinator
763-241-2700
Dr. Alan Jensen
Superintendent - School District 728
763-241-3400
Proposed Tax Rebate Financing Policy, Amended August 2002 - 7 -
VIII. APPLICATION FOR TAX REBATE FINANCING
A. APPLICANT INFORMATION
Name of Corporation/Partnership.
Address
Primary Contact
Ad&ess
Phone Fax Email
On a separate sheet, please provide the following:
Brief description of the corporation/partnership's business, including history,
principal product or service, etc... Attach as Exhibit A.
Brief description of the proposed project. Attach as Exhibit B.
· List names of officers and shareholders/partners with more than five percent
(5%) interest in the corporation/parmership. Attach as Exhibit C.
· A but-for analysis and narrative. Attach as Exhibit D.
Attorney Name
Ad&ess
Phone Fax Email
Accountant Name
Address
Phone Fax Email
Contractor Name
Address
Phone Fax Email
Engineer Name
Ad&ess
Phone Fax Email
Architect Name
Ad&ess
Phone ~ Fax Email
Proposed Tax Rebate Financing Policy, Amended August 2002 - 8 -
B. PROJECT INFORMATION
1. The project will be:
Industrial: New Construction __ Expansion Redevelopment / Rehab.
__Office/research facility that conforms to business park standards
Commercial Redevelopment/Rehabilitation
Other
2. In addition to the City of Elk River, applicant is requesting TRF funds from:
Sherbume County __ School District 728
3. The project will be: __Owner Occupied Leased Space
· If leased space, please attach a list names and addresses of future lessees and indicate
the status of commitments or lease agreements. Attach as Exhibit E.
4. Project Ad&ess
· Include Legal Description and PID Number. Attach as Exhibit F
5. Site Plan Attached:
Yes No
6. Total Amount of TRF Requested: $
City Portion of TRF:
County Portion of TRF:
ISD 728 Portion of TRF:
over years.
Annual $. Total $.__
Annual $. Total $.__
Annual $. Total $.__
Current Real Estate Taxes on Project Site: $.
Estimated Real Estate Taxes upon Compledon: Phase I $.
Phase II $
o
Construction Start Date:
Construction Completion Date:
If Phased Project:
Year % Completed
Year % Completed
C. PUBLIC PURPOSE
It is the policy of the City of Elk River that the use of Tax Rebate Financing 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
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's economic base.
The project contributes to the fu]fillrnent of the City's Strategic
Plan for Economic Development.
Removal of blight. ~'
__Rehabilitation of a high profile or priority site.
Other:
Proposed Tax Rebate Financing Policy, Amended August 2002 - 9 -
D. SOURCES & USES
SOURCES
Bank Loan
Other Private Funds
Equity
Fed Grant/Loan
State Grant/Loan
EDA Micro Loan
Tax Rebate Financing
ID Bonds
TOTAL
NAME
AMOUNT
$
$
$.
USES
Land Acquisition
Site Development
Construction
Machinery & Equipment
Architectural & Engineering Fees
Legal Fees
Interest During Construction
Debt Service Reserve
Contingencies
TOTAL
AMOUNT
$
$
$
$.
$.
$
$
$
Proposed Tax Rebate Financing Policy, Amended August 2002 - 10 -
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
phns
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
Personal Financial Statements of all Major Shareholders
Profit & Loss
Current Tax Return
__ G) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
~ H) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in the Project
__ I) Application fee of $5000
__ J) Itemized Project Construction Statement
__ K) 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
Note: All Major shareholders will be required to sign personal guarantees if up front.
financing of the project is required.
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.
Applicant Name Date
By.
Its
Proposed Tax Rebate Financing Policy, Amended August 2002 - 11 -
TAX REBATE FINANCING PROPOSAL REVIEW WORKSHEET
TO BE COMPLETED BY CITY STAFF I
1. The project meets the criteria set forth in Section V of the Tax Rebate Financing
policy.
i b)
Meets at least one of the objectives in Section III.
Demonstrates need for T1LF with the butfor analysis.
Consistent with all city plans and ordinances.
Serves at least two public purposes as defined in Section V.
2. Ratio of Private to Public Investment in Project:
$. Private investment
$. Public Investment
Ratio Private: Public Financing
Less than
Points:
5:1 5
4:1 4
3:1 3
2:1 2
2:1 1
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:
25+ 5
20+ 4
15+ 3
10+ 2
10
4. Ratio of TRF to new jobs created/retained:
$. TRF request
Number of new jobs created/retained
$ of TRF per new job created/retained
Points:
$8,000 or less 5
$10,000 or less 4
$12,000 or less 3
$15,000 or less 2
Over $15,000
5. Wage Level of jobs created:
Average hourly wage
of jobs created/retained:
Points:
Over $21/hour 5
$18-21 / hour 4
$14-17 / hour 3
$10-13 / hour 2
Under $10 / hour 1
6. Project size:
The project will result m the construction
of square feet
Points:
40,000+ 5
30,000+ 4
20,000+ 3
10,000+ 2
10,000 or less
Proposed Tax Rebate Financing Policy, Amended August 2002 - 12 -
7. Type of Project:
__ 100% Owner Occupied
__ Mix Owner Occupied & Investment
__ Investment Property
8. Use:
__ Industrial or Business Park Project
Commercial Rehabilitation/Redevelopment
9. The project will pay annual
property taxes in the first fully
assessed year of $.
10. Likelihood that the project will result in
unsubsidized, spin-off development.
Points:
5
4
3
Points:
5
4
Points:
35,000+ 5
25,000+ 4
15,000+ 3
10,000+ 2
Under $10,000 1
Points:
__High 5
Moderate 3
Low 1
Sub - Total Points:
of a possible 45 points.
9. Bonus Points
Bonus Points:
__ The project will be 100% Pa_y-aszyou-go TRF.
__ The project contributes to the goals of Energy City.
· Product promotes sensible use of energy, OR
· Project utilizes significant energy efficient design &/or
materials m construction.
3 points
2 points
Total Points:
Overall project analysis:
High
Moderate
Low
Not Eligible
45-38 points
37-29 points
28-20 points
19-0 points
Proposed Tax Rebate Financing Policy, Amended August 2002 - 13 -
EXHIBIT A
Description of the corporation or parmership
EXHIBIT B
Description of the proposed project
EXHIBIT C
Names of officers and shareholders/partners with more than five percent (5%) interest in
the corporation/parmership.
EXHIBIT D
But-for analysis
EXHIBIT E
Prospective Lessees
EXHIBIT F
Legal Description and PID Number
Proposed Tax Rebate Financing Policy, Amended August 2002 - 14 -
Xl. SAMPLE BUT-FOR ANALYSIS
Mortgage
Equity
Tax Rebate Financing
TOTAL SOURCES
Land
Site Work
Soil Correction
'Demolition
Relocation
Subtotal Land Costs
Construction
Finish Manufacturing
Subtotal Construction Costs
Soft Costs
Taxes
Finance Fees
Project Manager
Developer Fee
Contingency
Subtotal Soft Costs
TOTAL USES
Rent-Space 1
Rent-Space 2
Rent-Space 3
Other
Mortgage
Net Income
Total Return on Equity
WITH NO
TAX REBATE FINANCING
WITH
TAX REBATE FINANCING
SOURCES AND USES SOURCES AND USES
SOURCES SOURCES
9,600,000 8,667,000
2,400,000 2,400,00
0 933,000
12,000,000 12,000,000
USES USES
1,500,000
300,000
468,000
100,000
65,000
2,433,000
6,750,000
250,000
7,000,000
350,000
35,000i
850,000
542,000
540,000
250,000
2,567,000
1,500,000
300,000
468,000
100,000
65,000
2,433,000
6,750,000
250,000
7,000,000
350,000
35,000
850,000
542,000
540,000
250,000
2,567,000
12,000,000 12,000,000
Income Statement Income Statement
100,000
25,000
25,000
Sq. Ft. Per Sq. Ft.
$8.00 800,000
$8.50 212,500
$9.00 225,000
o $o.oo o
1,237,500
100,000
25,000
25,000
Sq. Ft. Per Sq. Ft.
$8.00 800,000
$8.50 212,500
$9.00 225,000
0 $0.00 0:
1,237,500
'20 Term
9.00% Interest
9,600,000 Principal
1,051,646
20 Term
9.00% Interest
8,667,000 Principal
949,439
185,854 288,061
7.74% 12.00%
Proposed Tax Rebate Financing Policy, Amended August 2002 - 15 -
City of
l ver
Economic Development
Tax Rebate Financing
Policy & Application
Adopted: April 10, 2000
City of Elk River, Minnesota
Table of Contents
I. Policy Purpose
II. Difference Between TRF & TIF
3
3
III. Objectives of Tax Rebate Financing
IV. Policies for the Use of TRF
V. Project Qualifications
VI. Subsidy Agreement & Reporting Requirements
VII. Application Process
City of Elk River
Application to Other Political Subdivisions
6
6
VIII. Application
Applicant Information
Project Information
Public Purpose
Sources & Uses
Checklist & Additional Information
7
8
8
9
10
IX. Application Review Worksheet
X. Exhibits
A
B
C
D
E
Corporation/Partnership Description
Project Description
Shareholders
But-for Analysis
Prospective Lessees
Xl. Sample But-For Analysis
3
4
5
6
6
7
II
13
15
Existing Tax Rebate Financing Policy, Adopted April 2000 - 2 -
I. POLICY PURPOSE
t%r the pu~oses of this document, the term "Ci(y" shall include the Elk. lOver City Coundl, Economic
Development Authori(y, and Housing and Redevelopment Authori~y.
The purpose of this policy is to establish the City of Elk River's position relating to the
use of Tax Rebate Financing (TRF), otherwise referred to as Tax Abatement, for private
development above and beyond the requirements and limitations set forth by State Law.
This policy shall be used as a guide in the processing and review of applications
requesting tax rebate assistance. The fundamental purpose of tax rebate financing in Elk
River is to encourage desirable development or redevelopment that would not otherwise
occur but for the assistance provided through TRF.
The City of Elk River is granted the power to utilize TR_F by the Minnesota Tax
Abatement Act, as amended. It is the intent of the City to provide the mimmurn amount
of TRF, as well as other incentives, at the shortest term required for the project to
proceed. The City reserves the right to approve or reject projects on a case by case basis,
taking into ~onsideration established policies, project criteria, and demand on city
services in relation to the potential ben. efits from the project. Meeting policy criteria does
not guarantee the award of TRF to the project. Approval or denial of one project is not
intended to set precedent for approval or denial of another project.
II. DIFFERENCE BETWEEN TRF & TIF
The primary difference between Tax Rebate Financing (TRF) and Tax Increment
Financing (TIF) is the way in which the dollars are awarded to the project. When TIF is
awarded to a project by the city, the other political subdivisions (the school district and
the county) are required to contribute their portion of the increased taxes to the project.
Conversely, when TRF is requested, each political subdivision has the option of granting
its portion of the increased taxes to the project. Subsequently, the dollars generated for
the project with TRF are generally less than the dollars generated with TIF.
III. OBJECTIVES OF TAX REBATE FINANCING
As a matter of adopted policy, the City will consider using TRF to assist private
development projects to achieve one or more of the following objectives:
· To retain local jobs and/or increase the number and diversity of jobs that offer
stable employment and/or attractive wages and benefits.
· 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 TRF assistance.
To remove blight and/or encourage redevelopment of commercial and
indusu:ial areas in the city that result in high quality redevelopment and private
reinvestment.
Existing Tax Rebate Financing Policy, Adopted April 2000 - 3 -
I¥.
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 pubhc policies, as adopted by the
city from time to time, such as the promotion of quality urban or architectural
design, energy conservation, and decreasing capital and/or operating costs of
local government.
POLICIES FOR THE USE OF TRF
Co
TRF assistance will be provided to the developer upon receipt of taxes by the
City, otherwise referred to as thepa_y-as:you-go method. Requests for up front
financing will be considered on a case-by-case basis.
Any developer receiving TRF assistance shall provide a mimmum of twenty
percent (20%) cash equity investment in the project.
TRF will not be used in circumstances where land and/or property price is in
excess of fair market value.
Developer shall be able to demonstrate a market demand for a proposed
project.
TRF will not be utili~.ed in cases where it would create an unfair and
significant competitive financial advantage over other projects in the area.
TRF shall not be used for projects that would place extraordinary demands
on city services or for projects that would generate significant environmental
impacts.
The developer must provide adequate financial guarantees to ensure
completion of the project, including, but not limited to: assessment
agreements, letters of credit, persOnal gUaranties, and etcetera.
The developer shall adequately demonstrate, to the City's sole satisfaction, an
ability to complete the proposed project based on past development
experience, general reputation, and credit history, among other factors,
including the size and scope of the proposed project.
For the purposes of underwriting the proposal, the developer shall provide
any requested market, financial, environmental, or other data requested by
the City or its consultants.
Existing Tax Rebate Financing Policy, Adopted April 2000 - 4 -
__ V. PROJECT QUALIFICATIONS
All TRF projects considered by the City of Elk River must meet each of the following
requirements:
a. The project shall meet at least one of the objectives set forth in Section III of
this document.
b0
The use of TRF will be limited to: · Industrial development, expansion, redevelopment, or
rehabilitation; or
· Commercial redevelopment or rehabilitation; or
· Office or research facilities that satisfy Business Park zoning
requirements;
· Residential development and redevelopment may be eligible for
TRF under a separate set of policies and only with the
recommendation of the HRA.
· New commercial or retail development is not eligible for TRF.
c. The developer shall demonstrate that the project is not financially feasible
but-for the use of TRF.
d. The project shall comply with all provisions set forth in the state's Tax
Abatement Law, statues 469.1812 to 469.1815, as amended.
e. The project must be consistent with the City's Comprehensive Plan, Land
Use Plan, and Zoning Ordinances.
The project shall serve at least two of the following pubhc purposes: · Job creation.
· Increase of tax base.
Enhancement or diversification of the city's economic base.
· Development or redevelopment that will spur additional private
investment in the area.
· Fulfillment of defined city objectives, such as those identified in the
· Strategic Plan for Economic Development or the city's
Comprehensive Plan, among others.
· Removal of bhght or the rehabilitation of a high profile or priority site.
Existing Tax Rebate Financing Policy, Adopted April 2000 - 5 -
VI. SUBSIDY AGREEMENT & REPORTING REQUIRMENTS
All developers/businesses receiving Tax Rebate Financing assistance from the City
of Elk River shall be subject to the provisions and requirements set forth by state
statute 116J.993 and summarized below.
Ail developers/businesses receiving TtLF assistance shall enter into a subsidy agreement
with the City of Elk River that identifies: the reason for the subsidy, the public
purpose served by e subsidy, and the goals for the subsidy, as well as other criteria
set forth by statute 116j.993.
The developer/business shall file a report annually for two years after the date the
benefit is received or until all goals set forth in the application and performance
agreement have been met, whichever is later. Reports shall be completed using the
format drafted by the State of Minnesota and shall be filed with the City of Elk
River no later than March 1 of each year for the previous calendar year. Businesses
fulfilling job creation requirements must file a report to that effect with the city
within 30 days of meeting the requirements.
The developer/business owner shall maintain and operate its facility at the site
where TRF assistance is used for a period of five years after the benefit is received.
In addition to attaining or exceeding the jobs and wages goals set forth in the Subsidy
Agreement, the borrower shall achieve at least one of the objectives set forth in
Section III of this document.
Developers / Businesses failing to comply with the above provisions will be subject
to fines, repayment requirements, and be deemed ineligible by the State to receive
any loans or grants from public entities for a period of five years.
VII. APPLICATION PROCESS FOR TRF
A. CITY OF ELK RIVER
1. Applicant submits the completed apPlication along with all application fees.
2. City staff reviews the application and completes the Application Review
Worksheet.
3. Results of the Worksheet are submitted to the appropriate governing authorities
for preliminary approval of the proposal.
4. If preliminary approval is granted, all necessary notices, resolutions and
certificates are prepared by City staff and/or consultants.
5. Public hearing(s) on the proposed project are held.
The EDA or HRA recommends approval or denial of the proposal to the City
Council.
7. The City Council grants final approval or denial of the proposal.
Existing Tax Rebate Financing Policy, Adopted April 2000 - 6 -
B. APPLICATIONS TO OTHER POLITICAL SUBDIVISIONS
It is recommended that apphcants intending to seek TRF from Sherburne County
and/or School District 728 make their apphcations to those bodies concurrent with
their application to the City of Elk River. For more information on applying for TRF
through Sherbume County and/or School District 728, contact:
Alex Wikstrom
Sherburne County Budget / Economic Development Coordinator
763-241-2700
Dr. Alan Jensen
Superintendent - School District 728
763-241-3400
VIII. APPLICATION FOR TAX REBATE FINANCING
A. APPLICANT INFORMATION
Name of Corporation/Partnership
Address ·
Primary Contact
Address
Phone Fax Email
On a separate sheet, please provide the following:
· Brief description of the corporation/partnership's business, including history,
principal product or service, etc... Attach as Exhibit A.
· Brief description of the proposed project. Attach as Exhibit B.
· List names of officers and shareholders/partners with more than five percent
(5%) interest in the corporation/partnership. Attach as Exhibit C.
· A but-for analysis and narrative. Attach as Exhibit D.
Attorney Name
Ad&ess
Phone Fax Email
Accountant Name
Address
Phone
Fax Email
Existing Tax Rebate Financing Policy, Adopted April 2000 - 7 -
Contractor Name
Ad&ess
Phone Fax Email
Engineer Name
Ad&ess
Phone Fax Email
Architect Name
Ad&ess
Phone Fax Email
B. PROJECT INFORMATION
1. The project will be:
Industrial: New Construction __ Expansion Redevelopment / Rehab.
__Office/research facility that conforms to business park standards
Commercial Redevelopment/Rehabilitation
Other
2. In addition to the City of Elk River, applicant is requesting TRF funds from:
Sherbume County School District 728
3. The project will be: Owner Occupied Leased Space
If leased space, please attach a list names and addresses of future lessees and indicate
the status of commitments or lease agreements. Attach as Exhibit E.
4. Project Address
· Include Legal Description and PID Number. Attach as Exhibit F
5. Site Plan Attached: ~ Yes ~ No
o
o
Total Amount of TRF Requested: $
City Portion of TRF:
County Portion of TRF:
ISD 728 Portion of TRF:
over years.
Annual $ Total $
Annual $ Total $.
Annual $ Total $.
Current Real Estate Taxes on Project Site: $.
Estimated Real Estate Taxes upon Completion: Phase I $
Phase II $.
Construction Start Date:
Construction Completion Date:
If Phased Project:
Year
Year
% Completed
% Completed
Existing Tax Rebate Financing Policy, Adopted April 2000 - 8 -
C. PUBLIC PURPOSE
It is the policy of the City of Elk River that the use of Tax Rebate Financing should
result m a benefit to the public. Please indicate how this project will serve a public
purpose.
Job Creation: Number of existing jobs
Number of jobs created by project
Average hourly wage of jobs created
New industrial development which will result m additional private
investment in the area.
Enhancement and/or diversification of the city's economic base.
The project conmbutes to the fulfillment of the City's Strategic
Plan for Economic Development.
Removal of blight.
Rehabilitation of a high profile or priority site.
Other:
D. SOURCES & USES
SOURCES
Bank Loan
Other Private Funds
Equity
Fed Grant/Loan
State Grant/Loan
EDA Micro Loan
Tax Rebate Financing
ID Bonds
TOTAL
NAME AMOUNT
$
$.
USES
Land Acquisition
Site Development
Construction
Machinery & Equipment
Architectural & Engineering Fees
Legal Fees
Interest During Construction
Debt Service Reserve
Contingencies
TOTAL
AMOUNT
$
$
$
$
$
$
$
$
Existing Tax Rebate Financing Policy, Adopted April 2000 - 9 -
E. ADDITIONAL DOCUMENTATION AND CHECKLIST
Applicants will also be required to provide the following documentation.
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
F) Personal Financial Statements of all Major Shareholders
Profit & Loss
Current Tax Return
__.G) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
__ H) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in the Project
I) Application fee of $5000 (to be returned upon project
completion.)
J)
Attach the following documentation as Exhibits __ Exhibit A - Corporation/Parmership Description
~ Exhibit B - Description of Project
Exhibit C -List of Shareholders/Parmers
~ Exhibit D - But-For Analysis
__ Exhibit E - List of Prospective Lessees
~ Exhibit F - Legal Description
Note: All Major shareholders will be required to sign personal guarantees if up front
financing of the project is required.
The undersigned certifies that all information provided in this application is tree 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.
Applicant Name
By.
Date
Its
Existing Tax Rebate Financing Policy, Adopted April 2000 - 10 -
TAX REBATE FINANCING PROPOSAL REVIEW WORKSHEET
[ TO BE COI~IPLETED BY CITY STAFF
1. The project meets the criteria set forth in Section V of the Tax Rebate Financing
policy.
__ a)
i b)
i c)
Meets at least one of the objectives m Section III.
Demonstrates need for TRF with the but-for analysis.
Consistent with all city plans and ordinances.
Serves at least two public purpose as defined m Section V.
2. Ratio of Private to Public Investment in Project:
$ Private investment
$ Public Investment
Ratio Private: Public Financing
Less than
Points:
5:1 5
4:1 4
3:1 3
2:1 2
2:1 1
3. Job Creation in the City of Elk River:
__ Number of new jobs as a result of the project.
__ Number of existing/retained jobs divided by 10.
Total
Less than
Points:
25+ 5
20+ 4
15+ 3
10+ 2
10 1
4. Ratio of TRF to new jobs created:
$ TRF request
Number of new jobs created
$. of TRF per new job created
Points:
$8,000 or less 5
$10,000 or less 4
$12,000 or less 3
$15,000 or less 2
Over $15,000 1
5. Wage Level of jobs created:
Average hourly wage
of jobs created:
Points:
Over $21/hour 5
$18-21 / hour 4
$14-17 / hour 3
$10-13 / hour 2
Under $10 / hour
6. Project size:
The project will result in the construction
of square feet
Points:
40,000+ 5
30,000+ 4
20,000+ 3
10,000+ 2
10,000 or less 1
Existing Tax Rebate Financing Policy, Adopted April 2000 - 11 -
7. Type of Project:
__ 100% Owner Occupied
__ Mix Owner Occupied & Investment
__ Investment Property
8. Use:
__ Industrial or Business Park Project
__ Commercial Rehabilitation/Redevelopment
9. The project will pay annual
property taxes in the first fully
assessed year of $
10. Likelihood that the project will result in
unsubsidized, spin-off development.
Points:
5
4
3
Points:
5
4
Points:
35,000+ 5
25,000+ 4
15,000+ 3
10,000+ 2
Under $10,000 1
Points:
__High 5
Moderate 3
Low 1
Sub - Total Points:
of a possible 45 points~
9. Bonus Points
Bonus Points:
__ The project will be 100% Pa_y-aszyou-go TRF.
__ The project contributes to the goals of Energy City.
· Product promotes sensible use of energy, OR.
· Project utilizes significant energy efficient design &/or
materials in construction.
3 points
2 points
Total Points:
Overall project analysis:
High
Moderate
Low
Not Eligible
45-38 points
37-29 points
28-20 points
19-0 points
Existing Tax Rebate Financing Policy, Adopted April 2000 - 12 -
EXHIBIT A
Description of the corporation or parmership
EXHIBIT B
Description of the proposed project
EXHIBIT C
Names of officers and shareholders/parmers with more than five percent (5%) interest in
the corporation/parmership.
EXHIBIT D
But-for analysis
EXHIBIT E
Prospective Lessees
EXHIBIT F
Legal Description and PID Number
Existing Tax Rebate Financing Policy, Adopted April 2000 - 13 -
Xl. SAMPLE BUT-FOR ANALYSIS
Mortgage
Equity
Tax Rebate Financing
TOTAL SOURCES
Land
Site Work
Soil Correction
Demolition
Relocation
Subtotal Land Costs
Construction
Finish Manufacturing
Subtotal Construction Costs
Soft Costs
Taxes
Finance Fees
Project Manager
Developer Fee
Contingency
Subtotal Soft Costs
TOTAL USES
Rent-Space 1
Rent-Space 2
Rent-Space 3
Other
Mortgage
Net Income
Total Remm on Equity
WITH NO
TA_X REBATE FINANCING
WITH
TAX REBATE FINANCING
SOURCES AND USES SOURCES AND USES
SOURCES SOURCES
9,600,000 8,667,000
2,400,000 2,400,00
0 933,000
12,000,000 12,000,000
USES USES
1,500,000
300,000
468,000
100,000
65,000
2,433,000
6,750,000
250,000
7,000,000
350,000
35,000
850,000
542,000
540,000
250,000
2,567,000
1,500,000
300,000
468,000
100,000
65,000
2,433,000
6,750,000
250,OOO
7,OOO,O0O
350,000
35,000
850,OOO
542,OO0
54O,OO0
25O,0OO
2,567,000
12,000,000 12,000,000
Income Statement Income Statement
100,000
25,00O
25,000
0
Sq. Ft. Per Sq. Ft.
$8.00 800,000
$8.50 212,500
$9.00 225,000
$o.oo o
1,237,500
100,000
25,000
25,000
Sq. Ft. Per Sq. Ft.
$8.00 800,000
$8.50 212,500
$9.00 225,000
o $o.oo o
1,237,500
20 Term
9.00% Interest
9,600,000 Principal
1,051,646
20 Term
9.00% Interest
8,667,000 Principal
949,439
185,854 288,061
7.74% 12.00%
Existing Tax Rebate Financing Policy, Adopted April 2000 - 14 -