5.4. SR 04-08-1996-~ity of
ITeM 5.4.
MEMORANDUM
iver
FROM:
DATE:
SUBJECT:
Mayor and City Council
Pat Klaers, City Adm~' t~~'
April 8, 1996]//\~'~ .........
Public Hearing on T~x Increment
Financing Plan for Tax Increment
Financing District No. 14
(Marketech, Inc.)
Introduction
At its March 11, 1996, meeting, the City Council authorized a public hearing
for April 8, 1996, to consider a Tax Increment Financing Plan for Tax
Increment Financing District No. 14.
Background
Please see the material provided to the EDA on TIF No. 14 for Marketech,
Inc. This material should provide the City Council with all the background
information necessary on this company and proposed District.
Action Requested
After conducting the public hearing on the TIF Plan for TIF District No. 14,
the Council is requested to adopt the attached resolution. Approval of the
TIF Plan is subject to the execution of a contract for private development.
This contract will be presented to the Council in May.
It is recommended that the City Council approve the use of funds generated
through the selling of an Industrial Park lot to the School District as the
qualifying local contribution of 10 percent instead of selecting the local
government aid loss option.
s:\councilX48tif14m.doc
13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · (612) 441-7420 · Fax: (612) 441-7425
RESOLUTION 96 -
A RESOLUTION FOR THE CITY OF ELK RIVER
A RESOLUTION FOR THE CITY OF ELK RIVER RELATING TO THE
ESTABLISHMENT OF TAX INCREMENT FINANCING DISTRICT
NO. 14 AND THE ADOPTION AND APPROVAL OF THE TAX
INCREMENT FINANCING PLAN RELATED THERETO, LOCATED
WITHIN DEVELOPMENT DISTRICT NO. 1
BE IT RESOLVED by the City Council (the Council) of the City of Elk
River, Minnesota (the City), as follows:
Section 1. - Recitals.
1.01. It has been proposed and adopted by the Economic Development
Authority for the City of Elk River, Minnesota (the EDA) that the EDA
establish Tax Increment Financing District No. 14 within Development
District No. I pursuant to and in accordance with Minnesota Statutes.
1.02. The EDA has caused to be prepared, and this Council has
investigated the facts with respect thereto, a proposed Tax Increment
Financing Plan for Tax Increment Financing District No. 14 (the Plan).
1.03. The EDA and the City have performed all actions required by
law to be performed prior to the establishment of Tax Increment Financing
District No. 14 and the adoption of the Plan relating thereto.
1.04. The Council hereby determines that it is necessary and in the
best interest of the City at this time to establish Tax Increment Financing
District No. 14 and the adoption of the Plan relating thereto.
Section 2. - Findings for the Establishment of Tax Increment
Financing District No. 14.
2.01. The Council hereby finds, determines, and declares that the
establishment of Tax Increment Financing District No. 14 located within
Development District No. 1 is intended and, in the judgement of this Council,
its effects will be, to provide an impetus for commercial and industrial
development, increase employment, and otherwise promote certain public
purposes and accomplish certain objectives as specified in the Plan for Tax
Increment Financing District No. 14.
2.02. The Council further finds, determines, and declares that Tax
Increment Financing District No. 14 qualifies as an Economic Development
District pursuant to Minnesota Statutes, Section 469.174, Subdivision 12.
2.03. The Council further finds, determines, and declares that the
proposed development, in the opinion of the Council, would not occur solely
through private investment within the reasonably foreseeable future and,
therefore, the use of Tax Increment Financing is deemed necessary.
2.04. The Council further finds, determines, and declares that the
proposed Plan for Tax Increment Financing District No. 14 conforms to the
Comprehensive Plan of the City.
2.05. The Council further finds, determines, and declares that the
proposed Plan for Tax Increment Financing District No. 14 will afford
maximum opportunity, consistent with the sound needs of the City as a
whole, for the development or redevelopment of Development District No. 1
by private enterprise.
2.06. The Council determines and declares that Tax Increment
Financing District No. 14 located within Development District No. 1 is
hereby established.
Section 3. - Adoption of the Plan.
3.01. The Plan presented to the Council on this date, is hereby
approved and adopted and shall be placed on file in the office of the City
Clerk.
Section 4. - Implementation of the Plan.
The City Administrator and Assistant City Administrator are authorized and
directed to proceed with the implementation of this Plan, and for this
purpose, to negotiate, draft, prepare, and present to the Council for its
consideration, all future plans, resolutions, documents, and contracts
necessary for this purpose.
Adopted by the City Council of the City of Elk River, Minnesota, this 8th day
of April, 1996.
Henry A. Duitsman, Mayor
ATTEST:
Sandra A. Thackeray, City Clerk
ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
Economic Development AuthOrity
Pat Klaers, ExecutiVe Director
APril 8, 1996
EDA Public Hearing on Tax Increment
Financing Plan for Tax Increment
Financing District No. 14
(Marketech, Inc.)
Introduction
At its March 11, 1996, meeting, the Elk River EDA authorized a public
hearing for April 8, 1996, to consider a Tax Increment Financing Plan for Tax
Increment Financing District No. 14.
Background
Attached for your review is the material that was provided to the EDA on
3/11/96 when this public hearing was called. This information should provide
you with the background on the Marketech, Inc., project. The information in
this 3/11/96 memo is still valid with only some minor changes. Two changes
that should be noted are that the value of the project has increased based on
input from the county assessing department and, based on this increased
value, the TIF assistance is capped at $65,000 (the cost of the land) and we
are not using any reference to 17 percent. These changes show up in the
attached TIF No. 14 Plan for Marketech.
This request for TIF assistance comes from Rich Duggan who is the owner of
Marketech, Inc. Marketech needs additional space to enable the company to
grow. This project would allow Marketech to be located in an owner occupied
faciliW and move out of the two leased spaces from which it currently
operates.
The Marketech, Inc., proposal calls for the construction of a 9,324 square foot
office and manufacturing facility to be located on Lots 6 and 7, Block 1,
McChesney Industrial Park. The TIF Plan for TIF District No. 14 reflects a
valuation of approximately $400,000. Marketech is seeking $65,100 in tax
P.O. Box 490 * 13065 Orono Parkway · Elk River, MN 55330-1743 · (612) 441-7420 · Fax: (612) 441-7425
Equal Opportunity Housing and Equal Opportunity Employment
increment financing assistance to support the proposed facility. Tax
increment funds would be used to "write down" the cost of the land for this
project. This District is proposed to be a "pay-as-you-go" district. In this
manner, Marketech absorbs the cost of the site acquisition and newly
generated taxes pay back the cost of this land acquisition. Accordingly, the
EDA is not forced to borrow funds and the life of the District is shorter as no
interest charges are incurred. Additionally, the expanding company absorbs
the extra carrying costs and the city/EDA participates in the retention of an
existing company as well as the attraction of new jobs. The District will be
decertified as soon as the land acquisition costs and incidental
administration costs to the District are recaptured]
According to the application for TIF, Marketech would retain its existing 22
jobs and create 13 new jobs over the next three years. State law requires
that any business which receives assistance, including TIF in excess of
$25,000, must create a net increase in jobs in Minnesota within two years of
receiving the assistance. Job creation goals must be reported to the
Department of Trade and Economic Development. If these goals are not met,
the business must repay the financial assistance, The Marketech TIF
assistance will fall within the provisions of the state law.
This is an economic development TIF District. As such, there is a penalty
placed on the local unit of government that creates the District. This penalty
can either be a loss of local government aid or the city can opt out of the 'local
government aid penalty by making a qualified local contribution to the
District. The local government aid penalty equals approximately 35 percent
of the increment while the local opt out provision calls for 10 percent of the
tax increment financing assistance to be contributed by the city to the
District. It is recommended that the city selects the qualifying local
contribution option as this has a smaller impact on city funds and that the
city/EDA uses funds generated from the selling of the Industrial Park lot to
the School District for financing this contribution. Questions regarding the
TIF penalty should be directed to Lori Johnson before the meeting as she will
not be in attendance at the 4/8 EDA meeting.
As required by law, the Plan has been distributed to the School District and
County Board, and presentations to these groups were made. The notice of
this TIF public hearing has been published in the Elk River Star News. The
City Council public hearing on this District and proposal will follow the EDA
meeting.
Action Requested
'After conducting the public hearing on the TIF Plan for TIF District No. 14,
the EDA is asked to adopt the attached resolution. Approval of the Plan is
subject to the execution of a contract for private development which will be
presented to the EDA in May.
It is suggested that the EDA recommend to the City Council that it select the
option out provision for making a qualifying local contribution of 10 percent
of the tax increment financing assistance to the District using funds that
were generated from the land sale of the Industrial Park lot to the School
District.
s:\eda\meetings\tif14mm.doc
EDA RESOLUTION 96 -
A RESOLUTION FOR THE ECONOMIC DEVELOPMENT AUTHORITY
FOR THE CITY OF ELK RIVER, MINNESOTA, RELATING TO THE
ESTABLISHMENT OF TAX INCREMENT FINANCING DISTRICT NO. 14
AND THE ADOPTION AND APPROVAL OF THE TAX INCREMENT
FINANCING PLAN RELATING THERETO, LOCATED WITHIN
DEVELOPMENT DISTRICT NO. I
BE IT RESOLVED by the Economic Development Authority for the City of
Elk River, Minnesota (EDA), as follows:
Section 1. - Recitals.
1.01. It has been proposed that the EDA establish Tax Increment
Financing District No. 14 within Development District No. 1.
1.02 The EDA has caused to be prepared a proposed Tax Increment
Financing Plan (the Plan) for Tax Increment Financing District No. 14.
1.03 The EDA has performed all actions by Minnesota Statutes to be
performed prior to the estabhshment of Tax Increment Financing District No.
14 and the adoption of the Plan relating thereto.
1.04 The EDA hereby determines that it is necessary and in the best
interest of the City at this time to estabhsh Tax Increment Financing District
No. 14 and to approve the Plan relating thereto.
Section 2. - Findings for the Establishment of Tax Increment
Financing District No. 14.
2.01 The EDA hereby finds, determines, and declares that the
establishment of Tax Increment Financing District No. 14 within
Development District No. I is intended and, in the judgment of this EDA, its
effects will be, to provide an impetus for commercial and industrial
development, increase employment and otherwise promote certain public
purposes and accomphsh certain objectives as specified in the Plan for Tax
Increment Financing District No. 14.
2.02 The EDA further finds, determines, and declares that Tax
Increment Financing District No. 14 qualifies as an Economic Development
District pursuant to Minnesota Statutes, Section 469.174, Subdivision 12.
2.03 The EDA further finds, determines, and declares that the
proposed development, in the opinion of the EDA, would not occur solely
through private investment within the reasonably foreseeable future and,
therefore, the use of Tax Increment Financing is deemed necessary.
2.04 The EDA further finds, determines, and declares that the
proposed Plan for Tax Increment Financing District No. 14 conforms to the
Comprehensive Plan of the City.
2.05 The EDA further finds, determines, and declares that the
proposed Plan for Tax Increment Financing District No. 14 will afford
maximum opportunity, consistent with the sound needs of the City as a
whole, for the development or redevelopment of Development District No. 1
by private enterprise.
2.06 The EDA determines and declares that Tax Increment
Financing District No. 14 located within Development District No. I is
hereby established.
Section 3. - Adoption of the Plan.
3.01 The Plan for Tax Increment Financing District No. 14 presented
to the EDA on this date, is hereby approved and adopted and shall be placed
on file in the office of the City Clerk.
Section 4. - Implementation of the Plan.
4.01 The Executive Director of the EDA, the City Administrator, and
the Assistant City Administrator are authorized and directed to proceed with
implementation of the Plan, and for this purpose, to negotiate, draft, and
prepare and present to the EDA for its consideration all future plans,
resolutions, documents, and contracts necessary for this purpose.
Adopted this 8th day of April, 1996.
Jeffrey A. Gongoll, President
Elk River EDA
ATTEST:
Patrick D. Klaers, Executive Director
Elk River EDA
ity of
ITEM 8.
MEMORANDUM
River
FROM:
DATE:
SUBJECT:
Economl c Development Authority
Pat Klaers, City Adm~~
March 11, 1996
Request for Tax In6rement Financing
Assistance - Marketech, Inc.
Introduction
The EDA is in receipt of a request for Tax Increment Financing (TIF) from
Rich Duggan, president of Marketech, Inc. This business is currently located
at 16864 Highway 10, Elk River, Minnesota. The request is attached for
your review. This application is not totally complete at this time, but is
expected to be completed by Monday evenin g or very shortly thereafter.
Marketech is a company that produces products that test fully assembled
circuit boards. The firm produces the test' fixture and the test software. The
request for TIF assistance relates to the proposed construction of an
approximately 9,300 square foot facility. Appro~dmately 1,750 feet would be
for office and the balance, or about 7,550 feet would be for production.
The total cost of the project is in the $335,000 range with the market value
shghtly less than this amount. Mr. Duggan is proposing to purchase two lots
in the McChesney Industrial Park. TIF funds of approximately $50,000
would be used to "write down" the cost of the two lots for Mr. Duggan. This
TIF project would be a "pay-as-you-go" project.
Background
It should be noted that this project is proposed for the same lots as the Neos,
Inc. project. This was a Jack Mowry project that the Council authorized as
TIF No. 12. This project is now dead as Jack has released these properties
back to Jerry McChesney and Jerry and Rich Duggan have entered into a
purchase agreement for Lots 6 & 7, Block 1, of the McChesney Industrial
Park.
With previous industrial expansions, TIF funds have been used by the
city/EDA to assist local companies with their projects. Recent examples
include Alltool Manufacturing, T~mron Precision Gear, and Tescom
Corporation. TIF funds have been used to reduce project costs relating to
13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · (612) 441-7420 · Fax: (612) 441-7425
EDA TIF Request Page 2
March 11, 1996
land acquisition and the site development components of the project. With
each manufacturing project, an economic development (ED) district is
established.
The ED districts are designed to last only a few years as each one of these
new districts results in either a loss of state aid or a local contribution to the
project. This local contribution option is new (1995 law) and one that the city
favors because it carries a lower overall cost to the city. The local option is 10
percent of the annual tax increment and our source of funds would be the
EDA revenues that have been generated from the sale of the Industrial Park
lot to the School District. With this Marketech project, the local contribution
will be approximately $1,000 per year for the five year life of the district.
More detailed information on the finances of this project and the local
contribution should be available Monday evening.
Due to the fact that a local financial loss is part of all new TIF Districts, it
was the EDA and City Council consensus that they would evaluate new
projects on a case-by-case basis. Based on future job growth with Marketech,
the desire to have Marketech locate in the McChesney Industrial Park, the
fact that Marketech is not asking for a micro loan, and, the fact that city staff
beheves that this is the right location for this local business expansion, it is
recommended that this request should be supported by the City Council and
EDA.
On 3/7/96, the Assistant City Administrator Lori Johnson and I met with
Rich Duggan and Tom McNair from First National Bank to review this
project. Items discussed included an overview of the project, the city's strong
desire to do a pay-as-you-go project, and the city's support for business
retention and expansion. Additionally, I had a conversation with the county
commercial appraiser for Elk River on 3/7/96 to discuss this project. This
telephone conversation was important because the final market value drives
the maximum TIF amount available.
Our current TIF pohcy calls for a maximum TIF subsidy of 15 percent of the
project's finished value. In discussing all of the pros and cons of this project
and the city's support for this project, staff is recommending that the city
offer 17 percent of the finished project as the maximum TIF contribution.
Regardless if the contribution is 15 percent or 17 percent, the TIF increments
will still be collected for five years. The 15 to 17 percent increase is about an
extra $1,000 a year in available increment. The extra 2 percent maximum
TIF subsidy was discussed in order to encourage and support: this expansion
into McChesney Industrial Park, the pay-as-you-go approach, and the city's
strong commitment for business retention and growth.
This 17 percent request will need EDA and City Council approval.
EDA TIF Request Page 3
March 11, 1996
The EDA should also note that the City Council will be considering a
resolution on 3/11/96 to support Marketech's loan request to the Central
Miuuesota Initiative Fund. The City Council has typically supported these
loan requests and it is assumed that this resolution will again be approved
for Marketech.
Below is a proposed timetable to complete this request for TIF assistance.
Please note that this timetable is ambitious and that it could be longer ff the
counW or school takes the full 30 days as allowed by law to review the
project. At this point, based on past practice, it is assumed that the County
Board and School Board will not require the full 30 days to review the
project.
March 11 -
EDA authorizes preparation of TIF Plan for Marketech, Inc.;
EDA recommends that the City Council authorize a pubhc
hearing to consider the adoption of the TIF Plan;
EDA recommends that the City Council approves the resolution
supporting the CMIF Marketech loan request.
City Council estabhshes public hearing date to consider TIF
Plan; CiW Council adopts resolution in support of the CMIF
loan request.
Mid March - TIF Plan is sent to School District and County Board for review
and comment.
March 26 - School Board meeting.
Planning Commission reviews TIF Plan.
March 27 - EDA and City Council -TIF hearing notices pubhshed in Star
News.
April 2 - County Board meeting.
April 8 - EDA conducts public hearing and adopts TIF Plan.
April 8 or 11 - City Council conducts public hearing on TIF Plan.
EDA TIF Request
March 11, 1996
Page 4
Action Requested
After considering the merits of this TIF request, the EDA is asked to
ao
co
do
Authorize the preparation of TIF Plan for Marketech, Inc., expansion;
Schedule a public hearing for April 8, 1996, to consider the adoption of
the TIF Plan;
Approve and recommend that the City Council approve a deviation
from the TIF policy and allow a 17 percent ma~mum TIF subsidy;
and,
Recommend that the City Council approve the Marketech CMIF loan
request resolution.
s:\edaXmeetings\tffmark.doc
MARKETECH, INC. was started in March of 1990 and has grown to over $1,000,000.00
in sales as of 1995 year end. Currently Marketech services over 60 accounts through out
the US, Canada and some overseas accounts. Marketech still services the same markets
and services that were identified in the 1990 start up business plan with some expansion
into additional services to the ATE "Automatic Test Equipment" market. The annual sales
has been increasing at an average of 25% per year with a 36% growth in the most recent
year of 1995. 1996 brings continued growth of an expected 2.f% along with the addition
of a new project to assemble Pakon Impak Index Systems. The new Index Systems were
projected to be at 500/yr but recent market showings have caused Pakon to increase their
forecast to 200/month by this June (96). This will have an additional impact of 25 to 30%
additional growth to total sales. Total sales for 1996 are estimated to be 1.4 to 1.6M.
Employment is expected to increase from 20 at 1995 year end to 27 by end of 1996.
The annual growth of 25% normal is expected over the next 3 years and should be
attainable due to the new project which has an estimated 5 year market life.
To attain this growth Marketech is in need of both increased line of credit for additional
wot -king capital as well as manufacturing space. Marketech currently occupies 4350 sq. ft.
of manufacturing and office for the core business and has a temporary lease on an
additional 1500 sq. ft. in a nearby industrial building. As the current business was already
causing a space problem the additional space added for the Pakon project will not
keep pace for both needs. Other suitable space for lease in the Elk River area is not
available so the decision was made to pursue a new facility to consolidate the two
operations. The new facility is planned to be 9250 sq. ft. fully air-conditioned and finished
for off:ices and electro-mechanical type assembly. The land chosen has 2.2 acres and
allows an expansion to over 30,000 sq. ft. allowing continued expansion for many years.
Sheet1
ITEMS
BUILDING BID
SAC CHARGES
WAC CHARGES
PERMIT/PLAN/ST
MECHANICAL
ELECTRIC
GAS
PLUMBING
TIF FEE
MOVING COSTS
LANDSCAPE
MACHINE HOOK UP
UTILITIES:
WATER
SEWER
POWER COMPANY
NATURAL GAS
CABINATES
RACKS ETC.
TOTAL BLDG COSTS
LAND COST
TOTAL PROJECT
MARKETECH, INC. NEW BUILDING PROPOSAL
SOURCES OFINCOME
242,000.00
2,600.00
2,000.00
2,795.00
200.00
300.00
30.00
100.00
5,000.00
5,000.00
5,000.00
2,000.00
100.00
100.00
100.00
100.00
100.00
1,500.00
2,000.00
271,025.00
TIF $ 50,418.75
CIMF 100,000.00
FNB ER 185,706.25
TOTAL $ 336,125.00
ALLOWANCES included in building cost
SHOP FLOOR $ 5,000.00
OFFICE FLOOR $ 3,000.00
EXCAVATING $ 8,000.00
BLACK TOPPING $ 20,000.00
*ESTIMATED COSTS
65,100.00
336,125.00
Page 1
TAX INCREMENT FINANCING PLAN
TAX INCREMENT FINANCING DISTRICT NO. 14
CITY OF ELK RIVER, MINNESOTA
APRIL 8, 1996
TAX INCREMENT FINANCING PLAN
TAX INCREMENT FINANCING DISTRICT NO. 14
SUMMARY
Marketech, Inc., 16864 Highway 10 NW, Elk River, Minnesota seeks $65,100
in Tax Increment Financing assistance to support its proposed construction of
a 9,324 square foot facility in the McChesney Industrial Park. Marketech is
a service company in the printed circuit board (PCB) market. The services
offered include board test fixturing, in-circuit test development, loaded board
test and repair, and design services. Marketech, Inc., currently occupies
leased space at two facilities in Elk River, Minnesota, and currently employs
twenty-two (22) persons at these facilities. As a result of the expansion,
approximately five new full-time jobs will be created in 1996, four new jobs in
1997, and four new jobs in 1998.
The Economic Development Authority for the City of Elk River, Minnesota is
proposing the creation of an Economic Development District pursuant to the
Tax Increment Financing Act. Tax increment funds will be used to "write-
down" the acquisition price of the development site. The site, Lots 6 and 7,
Block 1, McChesney Industrial Park, is currently owned by Jerry and Joanne
McChesney. The Economic Development Authority for the City of Elk River
proposes to reimburse Marketech, Inc., for its expense associated with the
acquisition of Lots 6 and 7 under a pay-as-you-go Tax Increment Financing
District.
The 9,324 square foot facility will have a finished market value estimated at
$400,000 which produces property taxes of approximately $16,800 per year.
Of this total, $14,360 will be new additional taxes. These new funds will be
"captured" by the Economic Development Authority so that the City of Elk
River can recover the $65,100 in tax increment assistance. After these funds
have been repaid, Tax Increment Financing District No. 14 will be
decertified, thereby enabling all local taxing jurisdictions (county, school,
city, etc.) to share in the project's property taxes.
The Economic Development Authority for the City of Elk River, Minnesota
anticipates that Tax Increment Financing District No. 14 will exist for
approximately seven (7) years; during which time tax increment funds will be
collected for five (5) years.
TAX INCREMENT FINANCING PLAN
TAX INCREMENT FINANCING DISTRICT NO. 14
STATEMENT OF OBJECTIVES
Tax Increment Financing District No. 14 is located entirely within
the City's Development District No. 1, a Municipal Development
District created and established pursuant to the Development
District Act. The Development Program for Development District No.
1, was adopted by the City Council on April 1, 1985, and was
amended on January 27, 1986, and November 30, 1987. The
objectives of the Development District, as amended, and as set forth
in the Development Program, are hereby incorporated into this Tax
Increment Financing Plan. Attached as Exhibit A is a map of
Development District No. 1.
The specific objectives of the Tax Increment Financing Plan for Tax
Increment Financing District No. 14 are:
To provide pay-as-you-go reimbursement for the acquisition
price of Lots 6 and 7, Block 1, McChesney Industrial Park; (the
development site);
To encourage a manufacturing company to expand in the
McChesney Industrial Park; said expansion includes the
construction of a new facility estimated at approximately
9,324 square feet;
o
To increase employment opportunities in the community and in
the State of Minnesota; said expansion will create
approximately 13 full time positions over the next three years
and approximately 22 positions will be retained; and,
To preserve and enhance the local tax base and the tax base
in the State of Minnesota; said expansion will generate total
property taxes of approximately $16,800 including new
additional property taxes ol' approximately 14,360.
CLASSIFICATION OF THE DISTRICT
The City Council of the City of Elk River, Minnesota determines
that it is necessary, desirable, and in the public interest to
designate, establish, develop, and administer an Economic
Development Tax Increment Financing District in the City of Elk
River pursuant to the provisions of the Tax Increment Financing
Act, Minnesota Statutes 469.174, Subdivision 12. The purpose of the
Tax Increment Financing Plan and Tax Increment Financing District
No. 14 is to encourage the expansion of a manufacturing company in
Co
the McChesney Industrial Park, thereby increasing local employment
opportunities and preserving and enhancing the local tax base of the
State of Minnesota.
DEVELOPMENT PROGRAM
1. Overview
Marketech, Inc., 16864 Highway 10, Elk River, Minnesota,
seeks Tax Increment Financing assistance to support its
proposed construction of a 9,324 square foot facility in the
McChesney Industrial Park.
The Tax Increment funds will be used to reimburse Marketech,
Inc., for the acquisition of the development site.
2. Property Included in Tax Increment Financing District No. 12
The legal descriptions of the properties included in TIF District
No. 14 are as follows:
Lot 6, Block 1, McChesney Industrial Park (PID No. 75-
433-0150)
Lot 7, Block 1, McChesney Industrial Park (PID No. 75-
433-0160)
Attached as Exhibits B-1 and B-2 are maps showing the exact
location of the property included in Tax Increment Financing
District No. 14.
Do
3. Property to be Acquired by the Authority
No property will be acquired by the Authority.
DEVELOPMENT ACTIVITIES
1. Development Overview
Marketech, Inc., proposes to construct a new facility containing
approximately 9,324 square feet on Lots 6 and 7. The new
facility will have a finished market value estimated at $400,000.
Construction may begin during the summer of 1996 and will be
completed by December 31, 1996.
Marketech, Inc., currently employs 22 persons at its two leased
spaces in Elk River. As a result of the expansion, approximately
13 new full-time jobs will be created by Marketech, Inc., in the
next three years.
Contracts
No contracts have been entered into at the time of the
preparation of this Tax Increment Financing Plan.
Proposed contracts for services associated with Tax Increment
Financing District No. 14 include:
· Contract for Construction of a 9,324 Square Foot
Facility (by Marketech, Inc.)
· Soft Borings and Analysis
· Site Preparation and Development
ro
FINANCIAL
DISTRICT NO. 14
1. Tax
ANALYSIS OF TAX INCREMENT FINANCING
Increment Financing District No. 14 Cost Estimates
Budget
Land Write Down
Administration & Legal
Miscellaneous
Total
Bonded Indebtedness
Amount
$65,100
$ 1,000
$67,100
The City of Elk River anticipates a pay-as-you-go Tax Increment
Financing District No. 14 and no bonds will be issued.
Sources of Revenue to Pay Public Costs
Tax Increments collected from the Marketech, Inc., expansion
will be used to pay the pubhc costs associated with Tax
Increment Financing District No. 14.
Original Tax Capacity
The original net tax capacity, based on the 1995 valuation, for
the real property in Tax Increment District No. 14 is estimated
to be $2,300. The County Auditor Certification attributable to
this value is attached as Exhibit C.
Fo
5. Estimated Captured Tax Capacity
The finished market value upon completion of the
improvements in Tax Increment Financing District No. 14 is
estimated at $400,000. This value translates into a completed
net tax capacity estimated at $16,800. The captured net tax
capacity is estimated as follows:
Completed Net Tax Capacity
Less Original Net Tax Capacity
Equals Captured Net Tax Capacity
$16,800
$14,500
One hundred percent of the captured net tax capacity of Tax
Increment Financing District No. 14 will be required to finance
the pubhc costs associated with District No. 14. As a result, the
City of Elk River elects, pursuant to Minnesota Statute 469.177
Subdivision 2 (a)(1), to retain the full captured net tax capacity
of Tax Increment Financing District No. 14.
6. Duration of the Tax Increment Financing District No. 14
The City of Elk River expects that the first increment it will
receive from Tax Increment Financing District No. 14 will be for
taxes payable in 1998, and will be based on a completed value as
of January 2, 1997. The City expects to continue to receive tax
increment from Tax Increment District No. 14 up to and
including the year 2002, or until approximately $65,100 in tax
increment has been received. Thereafter, no further increments
may be received and Tax Increment Financing District No. 14
will terminate.
CASH FLOW ANALYSIS
Attached as Exhibit D is the Cash Flow Analysis for Tax Increment
Financing District No. 14.
IMPACT ON OTHER LOCAL TAXING JURISDICTIONS
Estimated Impact of District No. 14 on the Taxing Jurisdictions
Assuming the Captured Net Tax Capacity is Available to the
Taxing Jurisdictions Without Creation of District No. 14:
Pursuant to Minnesota law, tax increment generated by
development within the Tax Increment Financing District may
be captured by the City for a period of up to eight years. During
this period other taxing jurisdictions will continue to receive
taxes from the property within the Tax Increment Financing
District based on the current net tax capacity.
Ho
Estimated Impact of District No. 14 on the Taxing Jurisdictions
Assuming None of the Captured Net Tax Capacity is Available
to Taxing Jurisdictions Without Creation of District No. 14:
The Economic Development Authority of the City of Elk River
has determined that the Marketech, Inc., project would not
reasonably be expected to occur without the creation of TIF
District No. 14 and the use of tax increment financing is
necessary. Therefore, none of the net tax capacity captured
during the term of this TIF District would be available to other
taxing jurisdictions without the creation of this district.
o
Additional information on the impact of Tax Increment
Financing District No. 14 on the other local taxing jurisdictions
can be found in Exhibit E.
STUDIES AND ANALYSIS USED TO DETERMINE THE NEED FOR
TAX INCREMENT FINANCING
The Elk River EDA and City Council have determined that the
Marketech, Inc., expansion project cannot reasonably be expected to
occur solely through private investment within the reasonably
foreseeable future. Therefore, the use of Tax Increment Financing
assistance is deemed necessary.
This determination has been made based on the following:
The company currently occupies two leased space in Elk
River and this expansion into a permanent facihty is its first.
Tax increment assistance is needed to reduce the overall
project costs - thereby preserving scarce capital to ensure
that Marketech, Inc., remains financially stable after the
expansion.
In addition, tax increment assistance is necessary because
the project will result in increased employment in the State,
and, it will result in the preservation and enhancement of
the tax base of the State.
PARCELS INCLUDED IN TAX INCREMENT FINANCING
DISTRICT NO. 14
Tax Increment Financing District No. 14 is comprised of two parcels of
land. They are listed below:
Parcel
1995 EMV Payable 1996
1995 Original
Net Tax Capacity
75-433-0150 $25,000 $1,150
75-433-0160 $25,000 $1,150
Please refer to Exhibit C for the County Auditor Certification of this
parcel in Tax Increment Financing District No. 14
1tl
I!111!i!ti!1ii11
BOUNDARY OF
DEVELOPMENT DISTRICT NO.
(CITY LIMITS)
ELK RIVER, MINNESOTA
EXHIBIT A
DEVELOPMENT DISTRICT NO. 1
Il II1!
ELI(
193RD ST.
~ B LVD,
.aDDITION
,. I
:Z AVE:
O~ONo
'1
I
ZO0 4c ~.
5
/.O04c.
iz.'lq7
.AND
T~
INCREMENT
/-004¢. ~.
.9
4Oo4c. ~
/-20 4e. -/
Scale: 1 inch : 100 feet.
Bearings are assumed.
oDenotes iron pipe set with a plastic
plug stamped R.L.S. 8].94.
iDenotes drainage and utility easem.:nts.
10 feet in width unless otherwise .oted.
/0 /o
EXHIBIT B- 2
FINANCING DISTRICT NO. 14
EXHIBIT C
COUNTY AUDITOR CERTIFICATION
TAX INCREMENT FINANCING DISTRICT NO. 14
The original net tax capacity of the following listed parcel(s) as of January 2,
1995, is certified to be $2,300.
The parcel(s) contained in Tax Increment District No. 14 are listed below.
Parcel Number
1995 EMV
Payable 1996
1995 Original
Net Tax Capacity.
75-433-0150 $25,000 $1,150
75-433-0160 $25.000 $1,150
TOTAL $50,000 $2,300
The Base Tax Rate will be the rate calculated for taxes payable in 1996. In accordance
with Minnesota Statutes, Section 469.177, Subdivision 1, the average percentage increase
in the original Net Tax Capacity shall be three percent (3%).
SHERBURNE
COUNTY
SEAL
Ramona Doebler
Sherburne County Auditor
April ,1996
EXHIBIT D
TAX INCREMENT FINANCING DISTRICT NO. 14
CASH FLOW ANALYSIS
Original Net Tax Capacity(I)
Total Net Tax Capacity
Captured Net Tax Capacity
Estimated Tax Rate (2)
Captured Tax Increment
Cumulative Captured Tax Increment
I '1997 I 1998 I 1999I 2000I 2001 J 2002
$ 2,369 $2,440 $2,513 $2,772 $2,855 $2,940
$2,369 $16,800 $16,800 $16,800 $16,800 $16,800
$0
103.497
$14,360 $14,287 $14,028 $13,945 $13,860
103.497 103.497 103.497 103.497 103.497
$14,863 $14,787 $14,519 $14,433 $14,345
$29,650 $44,169 $58,602 $72,947
(1) Assumes a three percent (3%) annual increase in original tax capacity.
(2) Based on a payable 1996 tax rate. This rate will change in 1997 and in subsequent years;
This will result in a change in the actual amount of tax increment collected by the city.
* Taxes will be generated in 1997, but no increment will be collected. The first year an increment
will be collected is 1998 and is based on a finished market value as of January 1, 1997.
** Assumes no construction value as a January 1, 1996.
*** The District is decertified December 31, 2002, and taxes generated in 2003 will be collected by the local
taxing jurisdictions.
I***2003
$ 3,028
$ 16,800
$ 13,772
103.497
$o
$ 72,947
EXHIBIT E
IMPACT OF TAX INCREMENT FINANCING DISTRICT NO. 12
ON OTHER MAJOR TAXING JURISDICTIONS
City of Elk River, Minnesota
Without Project
1995/96 1996 1996 1995/96 Projected
Tax Capacity Ad Valorem Tax Capacity Tax Capacity Captured Tax
Value Taxes Levied Rate Value Capacity Value
With Project
New Tax 1995/96 Adjusted Tax Capacity
Capacity Ad Valorem Tax Capacity Rate
Value Taxes Levied Rate Impact
City of Elk River I $10,694,856 $2,570,439 24.033% $10,694,856 $14,500 $10,709,356 $2,570,439 24.002 0.031
Sherburne County I $57,579,856 $13,555,651 23.574% $57,579,856 $14,500 $57,594,356 $13,555,651 23.536 0.038
ISD728 1522'502'787 $12,305,019 54.530% $22,502,787 $14,500 $22,517,287 $12,305,019 54.495 0.035
Other ~ 1.360% $14,500 0
TOTALS 103.497% 103.393 0.104
Projected
Captured
Tax Capacity
Value
$14,500
$14,500
$14,500
$14,500
Negative
Impact On
Other Taxing
Jurisdictions
$449
$551
$5O7
$0
$1,507
STATEMENT 1: The 1995/96 tax capacity value times the 1995/96 tax capacity rate produces 1995/96 taxes generated. If the captured tax capacity value was
available to each taxing jurisdiction, the result would be a lower or adjusted tax capacity rate which would produce the same amount of taxes.
Thus, with the addition of captured value of $14,500, the tax capacity rate for the above-selected major taxing jurisdictions would be reduced
by a rate of .104% to an adjusted tax capacity of 103.393%. The captured tax capacity times the adjusted tax capacity rate of 103.393%
would generate $1,507 in increment income, which represents the loss of new revenues if the development had not occurred without inclusion
in a Tax Increment District.
STATEMENT 2: If no captured tax capacity value is available to each of the taxing jurisdictions, there is no impact on the taxes heretofore levied, and
therefore, no impact on tax capacity rates.
NOTE: The impact on "other" taxing jurisdictions is negligible since those jurisdictions represent approximately 1.0% of the overall tax levy
DOHERTY
RUMBI,R
& BUTLER
PROFESSIONAL ASSOCIATION
3500 Fifth Street Towers
150 ~uth Fifth Street
Minneapolis, Minnesota 5~02-4235
Telephone (612) 340-5555
FAX (612) 340-5584
2,g00 Minnesota ¼brld Trade Cenwr
30 East ~.venth Street
Saint Paul. Minnesota 55101-499'9
Telephone (612) 291-9333
FAX (612) 2ql-9313
14(11 New ~ork A~enue, N.W.
Suite 1100
~hshington, D.C. 20005
Telephone (202) 393-25~
FAX (202) 393-3131
2370 Ch~t, Tabor Center
I200 Sevenwenth Street
Denver, Colorado 80202-5823
Telephone (303) 572-6200
FAX (303) 5~-6203
Attorneys at Law
April 5, 1996
Writer's din,ct dial number:
340-5571
Reply to Minneapo s office
Mr. Pat Klaers
City of Elk River
P.O. Box 490
Elk River, MN 55330
Re: Marketech, Inc.
Dear Pat:
I enclose a draft of Contract for Private Development and Note, to be discussed with Rich
Duggan. I used the NEOS, Inc. documents for format and content, assuming them to be
accurate and functional. Please pay careful attention to the payment dates in the second
paragraph of the Tax Increment Revenue Note. You want to be sure the dates mesh with your
receipt of taxes from the County.
If you have any questions or comments, please call.
Sincerely yours,
DCS/eka
Enclosure
CONTRACT FOR PRIVATE DEVELOPMENT BY AND
BETWEEN THE CITY OF ELK RIVER, THE ECONOMIC
DEVELOPMENT AUTHORITY FOR THE CITY OF ELK RIVER,
AND MARKETECH, INC.
THIS AGREEMENT entered into this ~ day of , 1996, by and between the
City of Elk River ("City") and the Economic Development Authority for the City of Elk River CEDA")
and Marketech, Inc., a Minnesota corporation ("Developer").
WHEREAS, Minnesota Statutes, Section 469.090, et seq., authorizes cities and counties to
establish Economic Development Authorities for the purpose of furthering the economic development
objectives of the respective city or county; and
WHEREAS, the City of Elk River, Minnesota, established the Economic Development Authority
for the City of Elk River CEDA") in 1987; and
WHEREAS, Minnesota Statutes, Section 469.174, et seq., (the "Tax Increment Financing Act")
enables an Economic Development Authority to undertake certain housing projects, redevelopment
projects, and economic development projects with the use of Tax Increment Financing; and
WHEREAS, Developer applied to the EDA for Tax Increment Financing Assistance CTIF") for
development of the property located at 12797 Meadowvale Road, Elk River, Minnesota (the
"Development Site") into an office and manufacturing facility of approximately 9,324 square feet to be
constructed and owned by Developer (the "Project"); and
WHEREAS, the TIF assistance was requested to provide Developer with partial reimbursement
for site acquisition costs (the "Land Write Down"); and
WHEREAS, City staff prepared a Tax Increment Financing Plan CTIF Plan") for the Project
which proposed maximum reimbursement for Land Write Down to Developer in the amount of Sixty-Five
Thousand One Hundred and No/100 Dollars ($65,100.00); and
WHEREAS, the EDA held a public hearing on the TIF Plan on April 8, 1996, and approved the
TIF Plan on that date; and
WHEREAS, the City Council held a public hearing on the TIF Plan on April 8, 1996, and
approved the TIF Plan on that date; and
WHEREAS, an Economic Development Tax Increment Financing District CTIF District") was
established on the Development Site, legally described as follows:
Lots 6 and 7, Block 1, McChesney Industrial Park
WHEREAS, the Tax Increment Financing Plan for the TIF District provides for the Developer
to be reimbursed, in an amount up to a maximum total assistance sum of Sixty-Five Thousand One
Hundred and No/100 Dollars ($65,100.00), upon evidencing payment of annual real estate taxes; and
WHEREAS, the 1998 real estate tax year is the flu'st year Developer is eligible for a
reimbursement payment, based on the January 2, 1997, value of the Project;
NOW, THEREFORE, BE IT RESOLVED that the City, the EDA and the Developer agree on
the following terms and conditions for reimbursement of the Land Write Down:
The EDA hereby pledges the Tax Increment it receives from the TIF District to the City
of Elk River to enable the City to reimburse Developer for the Land Write Down
identified in the TIF Plan.
Payments shall be made by the City to Developer, in a total amount not to exceed the
Land Write Down, pursuant to the terms of the Note attached as Exhibit A to this
Agreement (the "Note").
The sole source of funds for payment of the City's obligations under the Note shall be the
tax increment generated by the TIF District. If taxes are not paid, or taxes paid are not
sufficient to generate tax increment, no payment on the Note shall be due from the City.
The annual tax increment payment will be determined by the City's Assistant City
Administrator, and will take into consideration the original net tax capacity of the
Development Site prior to the construction of the Project.
If Developer fails to make real estate tax payments prior to the date when said taxes are
due to Sherburne County, an Event of Default under this Agreement shall exist. No
payments shall be made to Developer under the terms of the Note if an Event of Default
occurs, and payments shall not be resumed until the Default is remedied. The Default
shall be deemed remedied upon evidence of receipt of payment in full for real estate taxes
from Sherburne County.
After reimbursing Developer for the principal sum of the Land Write Down, no further
payments shall be due under this Agreement and the City shall request that Sherburne
County decertify the TIF District.
Developer shall complete construction of the Project by December 31, 1996. Failure to
complete construction of the Project by this date shall be an Event of Default under this
Agreement and City and EDA shall have the right to terminate this Agreement and their
obligations h&reunder.
Developer shall, prior to January 2, 1997, provide City with evidence acceptable to City
of Developer's expenditures for Development Site acquisition costs.
Pursuant to Minnesota Statutes, Section 116J.991, City and EDA have established, and
Developer has agreed, to the following Job Creation and Wage Level Goals:
Job Creation:
Wage Level:
12 new jobs
PXB 100445 2
10.
Developer agrees to meet the Job Creation and Wage Level Goals on or before
· 19 Failure to meet the Goals by this date shall be a Default
under the terms of this Agreement. In addition to such other remedies as City and EDA
may have, if Developer defaults by not meeting the Job Creation and Wage Level Goals,
Developer shall immediately repay to City all mounts paid to Developer pursuant to this
Agreement.
11.
Developer shall report to EDA no later than
Agreement is in effect:
1 st of each year that this
Actual jobs created since fu'st payment received under this Agreement.
Actual average hourly wage paid to employees hired since first payment
received under this Agreement.
IN WITNESS WHEREOF, the City of Elk River, the Economic Development Authority for the
City of Elk River and Developer have caused this Development Agreement to be executed as of the date
and year f~rst above written.
CITY OF ELK RIVER
By:
Henry Duitsman, Mayor
By:
Patrick D. Klaers
City Administrator
ECONOMIC DEVELOPMENT AUTHORITY FOR
THE CITY OF ELK RIVER
By:
Jeffrey Gongoll, President
Elk River EDA
By:
Patrick D. Klaers, Acting Executive Director,
Elk River EDA
Pxa 100445 3
MARKETECH, INC.
By:
By:
PxB ~oo445 4
EXHIBIT A
TAX INCREMENT REVENUE NOTE
UNITED STATES OF AMERICA
STATE OF MINNESOTA
COUNTY OF SHERBURNE
CITY OF ELK RIVER, MINNESOTA
TAX INCREMENT REVENUE NOTE
The City of Elk River, Minnesota (the "City"), hereby acknowledges itself to be indebted
and, for value received, hereby promises to pay to Marketech, Inc., or its assigns (the "Owner"),
an amount equal to Sixty-Five Thousand One Hundred and No/100 Dollars ($65,100.00) as more
fully described in the Contract for Private Development by and between the City of Elk River, the
Economic Development Authority for the City of Elk River, and Marketech, Inc. (the "Development
Agreement"), in the maimer, at the times, from the sources of revenue, and to the extent hereinafter
provided.
The unpaid principal on this Note shall be payable on , 1998 and on each
December 15 and July 15 thereafter, or within ten (10) days of receipt by City of the tax settlement
from Sherburne County, whichever comes later, to and including December 15, 2003 (the "Payment
Dates"). On each Payment Date the City shall pay by check or draft mailed to the Owner of this
Note'an amount equal to the lesser of (1) the principal then due on this Note; or (2) the Tax
Increment received and retained by the City pursuant to the City of Elk River Tax Increment
Financing Plan for Tax Increment Financing District No. 14.
The amounts due hereon shall be payable solely from Tax Increments paid to the City and
which the City is entitled to retain pursuant to the provisions of Minnesota Statutes, Sections 469.174
through 469.179, as the same may be amended or supplemented from time to time. This Note shall
terminate and be of no further force and effect following the last Payment Date def'med above, on
any date upon which the City shall have terminated the Development Agreement, or on the date that
the principal payable hereunder shall have been paid in full, whichever occurs earliest.
The City makes no representations or covenants, express or implied, that the Tax Increment
received by the City will be sufficient to pay, in whole or in part, the amount due and payable
hereunder:
The City's payment obligations hereunder shall be further conditioned on the fact that there
shall not have occurred and be continuing on the Payment Date a Default under the terms of the
Development Agreement, but such unpaid amounts shall become payable if said Event of Default
shall have been cured. If, pursuant to the occurrence of a Default under the Development
Agreement, the City elects to terminate the Development Agreement, the City shall have no further
debt or obligation under this Note whatsoever.
This Note is a special, revenue obligation of the City and not a general obligation of the City
and is payable by the City only from the sources and subject to the qualifications stated or referenced
herein. Neither the full faith and credit nor the taxing powers of the City are pledged to the payment
of this Note, and no property or other asset of the City, save and except the above-referenced Tax
Increment, is or shall be a source of payment of the City's obligation hereunder.
Except as hereinafter qualified, this Note may be assigned but upon such assignment the
assignor shall promptly notify the City in care of the office of the City Administrator by registered
mail, and the assignee shall surrender the same to the City either in exchange for a new note or for
transfer of this Note on the records for the Note maintained by the City. Each permitted assignee
shall take this Note subject to the foregoing conditions and subject to all provisions stated or
referenced herein.
IN WITNESS WHEREOF, The City of Elk River, Minnesota, by its City Council, has
caused this Note to be executed by the manual signatures of its Mayor and its City Administrator and
has caused this Note to be issued on and dated , 1996.
CITY OF ELK RIVER
By:
Henry Duitsman, Mayor
By:
Patrick D. Klaers
City Administrator
PXB 100445 2
DOHERTY
RUMBLE
& BUTLER
PROFESSIONAL ASSOCIATION
3500 Fifth Street Tower~
l'g0 ~uth Fifth Street
Minneapolis, Minnesota 55402-4235
Telephone (612} ~0-5555
FAX (612) 340-5584
2S09 Minnesota World Trade Cenwr
30 East ,Seventh Street
Saint Paul, Minnesota 55101qt~-~
Telephone (612) 2c)1-9333
FAX (612) 291-c~313
1401 New 'turk Avenue, NW.
Suite ll0(I
¼ashington, D.C. 20005
Telephone (202) 393-2554
FAX (202) 393-3131
2370 that. Tabor Center
120(1 Seventeenth Street
Dcm'er, Colorado 80202-5823
Telephone (303) 572-6200
FAX (303) 572-6203
Attorneys at Law
April 5, 1996
Writer's direct dial number:
340-5571
Reply to Minneapolis office
Mr. Pat Klaers
City of Elk River
P.O. Box 490
Elk River, MN 55330
Re: Marketech, Inc.
Dear Pat:
I enclose a draft of Contract for Private Development and Note, to be discussed with Rich
Duggan. I used the NEOS, Inc. documents for format and content, assuming them to be
accurate and functional. Please pay careful attention to the payment dates in the second
paragraph of the Tax Increment Revenue Note. You want to be sure the dates mesh with your
receipt of taxes from the County.
If you have any questions or comments, please call.
Sincerely yours,
DCS!eka
Enclosure
CONTRACT FOR PRIVATE DEVELOPMENT BY AND
BETWEEN THE CITY OF ELK RIVER, THE ECONOMIC
DEVELOPMENT AUTHORITY FOR THE CITY OF ELK RIVER,
AND MARKETECH, INC.
THIS AGREEMENT entered into this ~ day of , 1996, by and between the
City of Elk River ("City") and the Economic Development Authority for the City of Elk River CEDA")
and Marketech, Inc., a Minnesota corporation ("Developer").
WHEREAS, Minnesota Statutes, Section 469.090, et seq., authorizes cities and counties to
establish Economic Development Authorities for the purpose of furthering the economic development
objectives of the respective city or county; and
WHEREAS, the City of Elk River, Minnesota, established the Economic Development Authority
for the City of Elk River CEDA") in 1987; and
WHEREAS, Minnesota Statutes, Section 469.174, et seq., (the "Tax Increment Financing Act")
enables an Economic Development Authority to undertake certain housing projects, redevelopment
projects, and economic development projects with the use of Tax Increment Financing; and
WHEREAS, Developer applied to the EDA for Tax Increment Financing Assistance CTIF") for
development of the property located at 12797 Meadowvale Road, Elk River, Minnesota (the
"Development Site") into an office and manufacturing facility of approximately 9,324 square feet to be
constructed and owned by Developer (the "Project"); and
WHEREAS, the TIF assistance was requested to provide Developer .with partial reimbursement
for site acquisition costs (the "Land Write Down"); and
WHEREAS, City staff prepared a Tax Increment Financing Plan CTIF Plan") for the Project
which proposed maximum reimbursement for Land Write Down to Developer in the amount of Sixty-Five
Thousand One Hundred and No/100 Dollars ($65,100.00); and
WHEREAS, the EDA held a public hearing on the TIF Plan on April 8, 1996, and approved the
TIF Plan on that date; and
WHEREAS, the City Council held a public hearing on the TIF Plan on April 8, 1996, and
approved the TIF Plan on that date; and
WHEREAS, an Economic Development Tax Increment Financing District CTIF District") was
established on the Development Site, legally described as follows:
Lots 6 and 7, Block 1, McChesney Industrial Park
; and
WHEREAS, the Tax Increment Financing Plan for the TIF District provides for the Developer
to be reimbursed, in an amount up to a maximum total assistance sum of Sixty-Five Thousand One
Hundred and No/100 Dollars ($65,100.00), upon evidencing payment of aimual real estate taxes; and
WHEREAS, the 1998 real estate tax year is the first year Developer is eligible for a
reimbursement payment, based on the January 2, 1997, value of the Project;
NOW, THEREFORE, BE IT RESOLVED that the City, the EDA and the Developer agree on
the following terms and conditions for reimbursement of the Land Write Down:
The EDA hereby pledges the Tax Increment it receives from the TIF District to the City
of Elk River to enable the City to reimburse Developer for the Land Write Down
identified in the TIF Plan.
Payments shall be made by the City to Developer, in a total amount not to exceed the
Land Write Down, pursuant to the terms of the Note attached as Exhibit A to this
Agreement (the "Note").
The sole source of funds for payment of the City's obligations under the Note shall be the
tax increment generated by the TIF District. If taxes are not paid, or taxes paid are not
sufficient to generate tax increment, no payment on the Note shall be due from the City.
The annual tax increment payment will be determined by the City's Assistant City
Administrator, and will take into consideration the original net tax capacity of the
Development Site prior to the construction of the Project.
If Developer fails to make real estate tax payments prior to the date when said taxes are
due to Sherburne County, an Event of Default under this Agreement shall exist. No
payments shall be made to Developer under the terms of the Note if an Event of Default
occurs, and payments shall not be resumed until the Default is remedied. The Default
shall be deemed remedied upon evidence of receipt of payment in full for real estate taxes
from Sherburne County.
After reimbursing Developer for the principal sum of the Land Write Down, no further
payments shall be due under this Agreement and the City shall request that Sherburne
County decertify the TIF District.
Developer shall complete construction of the Project by December 31, 1996. Failure to
complete construction of the Project by this date shall be an Event of Default under this
Agreement and City and EDA shall have the right to terminate this Agreement and their
obligations hereunder.
Developer shall, prior to January 2, 1997, provide City with evidence acceptable to City
of Developer's expenditures for Development Site acquisition costs.
Pursuant to Minnesota Statutes, Section 116J.991, City and EDA have established, and
Developer has agreed, to the following Job Creation and Wage Level Goals:
Job Creation:
Wage Level:
12 new jobs
PXB ~oo445 2
10.
Developer agrees to meet the Job Creation and Wage Level Goals on or before
, 19__ Failure to meet the Goals by this date shall be a Default
under the terms of this Agreement. In addition to such other remedies as City and EDA
may have, if Developer defaults by not meeting the Job Creation and Wage Level Goals,
Developer shall immediately repay to City all amounts paid to Developer pursuant to this
Agreement.
11.
Developer shall report to EDA no later than
Agreement is in effect:
1 st of each year that this
Actual jobs created since first payment received under this Agreement.
Actual average hourly wage paid to employees hired since first payment
received under this Agreement.
IN WITNESS WHEREOF, the City of Elk River, the Economic Development Authority for the
City of Elk River and Developer have caused this Development Agreement to be executed as of the date
and year fu'st above written.
CITY OF ELK RIVER
By:
Henry Duitsman, Mayor
By:
Patrick D. Klaers
City Administrator
ECONOMIC DEVELOPMENT AUTHORITY FOR
THE CITY OF ELK RIVER
By:
Jeffrey Gongoll, President
Elk River EDA
By:
Patrick D. Klaers, Acting Executive Director,
Elk River EDA
PXB 100445 3
MARKETECH, INC.
By:
By:
PXB 100445 4
EXHIBIT A
TAX INCREMENT REVENUE NOTE
UNITED STATES OF AMERICA
STATE OF MINNESOTA
COUNTY OF SHERBURNE
CITY OF ELK RIVER, MINNESOTA
TAX INCREMENT REVENUE NOTE
The City of Elk River, Minnesota (the "City"), hereby acknowledges itself to be indebted
and, for value received, hereby promises to pay to Marketech, Inc., or its assigns (the "Owner"),
an amount equal to Sixty-Five Thousand One Hundred and No/100 Dollars ($65,100.00) as more
fully described in the Contract for Private Development by and between the City of Elk River, the
Economic Development Authority for the City of Elk River, and Marketech, Inc. (the "Development
Agreement"), in the manner, at the times, from the sources of revenue, and to the extent hereinafter
provided.
The unpaid principal on this Note shall be payable on , 1998 and on each
December 15 and July 15 thereafter, or within ten (10) days of receipt by City of the tax settlement
from Sherburne County, whichever comes later, to and including December 15, 2003 (the "Payment
Dates"). On each Payment Date the City shall pay by check or draft mailed to the Owner of this
Note an amount equal to the lesser of (1) the principal then due on this Note; or (2) the Tax
Increment received and retained by the City pursuant to the City of Elk River Tax Increment
Financing Plan for Tax Increment Financing District No. 14.
The amounts due hereon shall be payable solely from Tax Increments paid to the City and
which the City is entitled to retain pursuant to the provisions of Minnesota Statutes, Sections 469.174
through 469.179, as the same may be amended or supplemented from time to time. This Note shall
terminate and be of no further force and effect following the last Payment Date def'med above, on
any date upon which the City shall have terminated the Development Agreement, or on the date that
the principal payable hereunder shall have been paid in full, whichever occurs earliest.
The City makes no representations or covenanu, express or implied, that the Tax Increment
received by the City will be sufficient to pay, in whole or in part, the amount due and payable
hereunder.
The City's payment obligations hereunder shall be further conditioned on the fact that there
shall not have occurred and be continuing on the Payment Date a Default under the terms of the
Development Agreement, but such unpaid amounts shall become payable if said Event of Default
shall have been cured. If, pursuant to the occurrence of a Default under the Development
Agreement, the City elects to terminate the Development Agreement, the City shall have no further
debt or obligation under this Note whatsoever.
This Note is a special, revenue obligation of the City and not a general obligation of the City
and is payable by the City only from the sources and subject to the qualifications stated or referenced
herein. Neither the full faith and credit nor the taxing powers of the City are pledged to the payment
of this Note, and no property or other asset of the City, save and except the above-referenced Tax
Increment, is or shall be a source of payment of the City's obligation hereunder.
Except as hereinafter qualified, this Note may be assigned but upon such assignment the
assignor shall promptly notify the City in care of the office of the City Administrator by registered
mail, and the assignee shall surrender the same to the City either in exchange for a new note or for
transfer of this Note on the records for the Note maintained by the City. Each permitted assignee
shall take this Note subject to the foregoing conditions and subject to all provisions stated or
referenced herein.
IN WITNESS WHEREOF, The City of Elk River, Minnesota, by its City Council, has
caused this Note to be executed by the manual signatures of its Mayor and its City Administrator and
has caused this Note to be issued on and dated , 1996.
CITY OF ELK RIVER
By:
Henry Duitsman, Mayor
By:
Patrick D. Klaers
City Administrator
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