9. HRSR 04-04-2005ITEM # 9.
ver
MEMORANDUM
TO: Housing & Redevelopment Authority
FROM: Catherine Mehelich, Director of Economic Development ~i~~
DATE: April 4, 2005
SUBJECT: 2004 Annual Report
Attachment
• Economic Development Department section of the City 2004 Annual Report
The 2004 Annual Report was presented to the City Council at its special meeting on March
28`h The attached Economic Development Department section includes a summary of the
HRA's activities during 2004. The entire Annual Report is available on the city's website at
www. ci.elk-river. mn. us.
~~
fiver
For The Year Ended December 31, 2004
City of Elk River
13065 Orono Parkway
Elk River, Minnesota 55330
Phone: 763.635.1000
Fax: 763.635.1090
Website: www.ci.elk-river.mn.us
E~orvor~r~ ~~V~LOPI`~ENT
MISSION STATEMENT:
Our mission is to actively participate in economic development by utilizing available resources
to leverage viable and healthy investments in our community. Such investments will create
diverse job opportunities as a result of a stable and growing business and industrial base. We
will strive to provide quality services, maintain a favorable tax rate, supply full-cycle housing
options for our residents, and foster an environment that will result in substantial growth of
our local economy.
In addition, the strategic industrial marketing mission is to become the Light Industrial Hub of
the Northwest Metro.
YEAR I N REVIEW
ECONOMIC DEVELOPMENT AUTHORITY
Economic Development Strategic Plan
The Economic Development Strategic Plan provides a framework for the City Council and
Economic Development and Housing and Redevelopment Commissions to work within and
focuses staff energies on those priority areas important to the economic health of the city. The
original Strategic Plan was adopted in 1997 and was modified in 1999 reflect a reorganization of
priority issues.
Jim Brimeyer, Brimeyer & Associates facilitated the 2004 strategic planning discussions which
included participation from the City Council, EDA, HRA and EDA subcommittees Incubator
Advisory, Finance, Marketing and city staff. The 2004-2007 Strategic Plan was adopted in late
2004 by the EDA, HRA and City Council. The priority goals identified in the Plan are:
I) Industrial Development
2) Central Business District
3) Transportation
4) Commercial Development.
2004 Advertising & Public Relations Campaign
The advertising campaign in 2004 was consistent with previous years in order to make a
stronger impression for Elk River as the Light Industrial Hub of the Northwest Metro.
Advertisements were placed in the MN Real Estate Journal Leasing Guide, The Business Journal,
and the Manufacturers Alliance Newsletter. The advertisements featured photos of Cymbet,
Display Solutions, E & O Tool and Plastics, Metal Craft Machine & Engineering, Orluck
Industries, SoftPac, and Sportech.
The economic development newsletter, the Progress Partner Dispatch, continued for the second
year in 2004. April, July, and December editions highlighted issues important to manufacturers
and site selectors. Approximately 500 people receive the newsletter, including key accounts,
and local and area manufacturers. In October, a direct mail piece was distributed to the same
500 people promoting the Micro Loan Program and the Technical Assistance Program.
Case study articles featuring SoftPac Industries, Orluck Industries, and Gradient Technology
were developed in 2004. The articles appear on the Web site and are included in appropriate
marketing packets to industrial prospects.
Marketing Events
In February, the City of Elk River participated as a co-sponsor of the MN Real Estate Journal
Economic Development and Site Selection conference. The conference focused on site
selection, financial incentives, and in particular JOBZ. The Director of Economic Development
was a panelist discussing financial incentives other than JOBZ. Participation in the event was a
strategy for building relationships with key accounts including commercial real estate
developers and brokers.
In October, the City of Elk River participated with the MN Department of Employment &
Economic Development (DEED) and the Elk River Area Chamber of Commerce in the
recognition of MN Manufacturing & Technology Week. The recognition event included tours of
Metal Craft Machine & Engineering and Solors Optional Axis, followed by a luncheon/keynote
speaker address at Lions Park Center. Afull-page advertisement was featured in the Elk River
Star News thanking the list of local manufacturers for their contributions to the community.
The Economic Development booth was also rotated in three local banks. The booth featured
photos and a list of local manufacturers.
Energy City Marketing
The Energy City brochure and the Web site were updated and the Energy City booth was
included in the Chamber's Business Expo.
Economic Development Web Page
Updates were made throughout 2004 to the Economic Development page of the city's website
located at www.ci.elk-river.mn.us. There is a link for economic development information
directly on the home page entitled "Grow Your Business."
Economic Development Micro Loans
Several loans were paid off and closed out in 2004, including Beaudry Convenience, Ink
Wizards, Olde Main Eatery, and Ultra Image Powder Coating. Six micro loans remain in current
standing, including Display Solutions, Galli, Lake Assault Custom Boats, Minnesota Fabrication &
Machine, Second Generation Properties (NAPA), and Water Laboratories. The loan fund ended
with an approximate $900,047.98 cash balance in 2004.
Upon the EDA Finance Committee recommendation, the EDA approved several amendments
to the Micro Loan Policy, including the ability to loan up to $ 100,000, which was previously
capped at $50,000.
The EDA approved two new loan applications in 2004. A $50,000 loan was provided to Display
Solutions for the purchase of machinery and equipment necessary to begin operations in Elk
River. The company operates within the former Ultra Image Powder Coating space located in
the McChesney Industrial Park. The loan is structured as a participation loan with American
National Bank. The company committed to creating 7 new full-time jobs at no less than a
$ 12.00/hour wage within 2 years.
A $ 100,000 loan was provided to Badger Ventures, LLC (Gradient Technology) for the
purchase of real estate necessary for operation. The company began construction of a new
building in the Elk River Business Park in July. The loan is structured as a participation loan with
The Bank of Elk River. The company committed to creating 5 new full-time jobs at no less than
a $ 15.00/hour wage within 2 years.
Gradient Technology Tax Abatement Project
With the help of the City of Elk River, officials of Badger Ventures, LLC and Gradient
Technology, Inc, formerly of Blaine, moved into a new 13.000sf facility in November.
Gradient's primary business is demilitarizing munitions for the US Department of Defense. The
Elk River facility will be used strictly for corporate headquarters, research and development and
equipment fabrication. The actual "demilling" takes place at military bases and other locations.
Gradient paid up front for the two-acre, $ 145,556 lot in the Elk River Business Park, but is
being reimbursed through tax abatement equally from the City of Elk River and Sherburne
County for a period up to 10-years. The city also provided a $100,000 Industrial Incentive
Micro Loan. Gradient Technology employs 13 highly skilled employees, 7 of which are located
in Minnesota. In addition to retaining the present workforce, Gradient will create a minimum of
5 full time positions at a minimum of $ 15.00 per hour (exclusive of benefits) within two years.
Orluck Industries, Inc. Tax Abatement Project
Following the economic ups and downs the past few years Orluck Industries remained a patient
opportunity for the City of Elk River. The company, formerly of Dayton, is a manufacturer of
high precision metal and plastic components serving industries in Minnesota and across the
United States. The Elk River Economic Development Department crafted an aggressive
package of financial assistance and city staff shepherded the project allowing for construction to
begin in the fall of a $1.4 million, 23,000sf manufacturing facility. Orluck Industries will occupy
about I S,000sf with its 15 full-time employees with jobs that pay $ 15.00-20.00 per hour. The
remaining roughly 8,000sf will provide much needed lease space for new and growing
businesses.
The city had acquired the 2.79 acre lot, located at the southwest corner of Joplin Street and
Business Center Drive from Sherburne County upon tax forfeiture in 2001. The city sold the
$201,520 property upfront to Orluck, but is being reimbursed through tax abatement equally
from the City of Elk River and Sherburne County for a period up to 12-years.
Industrial/Business Park Development
In November 2004 the City Council held a joint work session with the EDA to discuss its sites
and development options. The sites under discussion were:
^ City-owned Cargill land-60 net acres, Light Industrial & Commercial
^ EDA-owned Brown land-45 net acres, Business Park
The EDA and Council provided staff direction to proceed in developing a plan for Phase I
improvements and development of the sites listed above. The goal is to have lots available for
immediate industrial development and to put all industrial land in Elk River on a level playing
field in price and financing assistance, allowing the prospect to select a site based on the site
location and its amenities, rather than on price. Contingent upon the EDA and Council
approval, it is anticipated that infrastructure improvements will begin summer 2005 for the sale
and development of lots by fall 2005.
In late December 2004, the Sherburne County Board of Commissioners took action to
purchase the 76-acre Elk Path Business Park land.
Industrial Business Retention & Expansion Visits
Staff and EDA Commissioners attended six visits in 2004, including Contour Mold, Cretex,
Great River Energy, NRG, Supermats, and Riverside Manufacturing.
The goal of the visits is to develop a relationship with the local manufacturers for a better
understanding of their issues and future needs.
Business Incubator Program
The EDA has been operating the Business Incubator Program in conjunction with Genesis
Business Centers since 1996. The goal of the Business Incubator Program is to develop long-
term relationships with young, growing companies that have an emphasis on new technologies
and to help these companies become established in Elk River. Since the program's inception, 9
companies have entered the Incubator to further develop their products and grow their
business. The EDA currently leases three suites from building owner, Larry Hickman.
Two renewals were granted in 2004 to Incubator tenant, KnowledgeNetica Corporation (K-
Netica). K-Netica develops intelligent software to interpret and translate written and spoken
human languages. The software has a number of key applications for commercial, government,
military, and personal use.
One renewal was granted to Incubator tenant, LapTwo Technology Corporation. Early during
its first year in the Incubator, LapTwo did research and development work in several product
areas involving new uses of the internet, web servers, and hand-held PDA computers. In the
first quarter of 2004, a new product opportunity was identified. The product, to be sold as a
software package, is a management and security system for internet hospitality "hot spot"
providers such as restaurants, hotels, motels, and the like. The full-scale product development
project began in March.
In 2004 staff continued to maintain a close relationship with incubator graduate, Cymbet
Corporation for their anticipated expansion project in Elk River and on their successful funding
round of $ 16 million.
HOUSING & REDEVELOPMENT AUTHORITY
Housing Work Plan
In follow up to a 9-month Housing Work Plan that included presentations from a variety of
housing resources, the HRA directed staff to conduct an informal/non-scientific survey of Elk
River manufacturers and retail/service businesses regarding housing availability and affordability
issues. The results of the survey were presented to the HRA in February of 2004. In summary,
66% of retail/service businesses surveyed and 64% of manufacturers surveyed felt that Elk River
was meeting the housing needs of their employees. It was of HRA consensus that the next
steps in the Housing Work Plan are the following:
^ Utilize existing city plans, such as the Comprehensive Plan and the Economic
Development Strategic Plan, to guide housing decisions.
^ Utilize workforce data (updated quarterly by the State of MN) to analyze the types
of workers and wages in Elk River and compare it to housing affordability/availability
in Elk River.
^ Continue to consider the appropriate housing balance for Elk River.
^ Consider conducting an informal housing survey to manufacturers and retail/service
businesses on a biannual basis.
Downtown North of Hwy 10 Visioning
Prompted by a Tax Abatement application from Arrow Building Center that was later
withdrawn, the HRA began a visioning process in late June of 2004 for Downtown North of
Hwy 10. As part of this process, the HRA reviewed the redevelopment process, the recent
planning efforts, and the current conditions of the area. The HRA then developed a study area
boundary and long-term vision for the area. The study area and the long-term vision was
incorporated into a series of concept options for the area. The approved concept includes
mixed use, retail service, and single family rehabilitation in the area. It was of HRA consensus
that the approved concept plan be utilized when responding to redevelopment proposals and
inquiries from the private sector and that staff continue to monitor the area for development
activity and update the HRA as needed.
Downtown Revitalization Project
In late 2001 the HRA developed goals and objectives for the Downtown Revitalization Project.
The goal of the project is to enhance downtown Elk River as a vibrant retail, commercial and
residential area and revitalize private investment downtown. Following a request for proposals
and interview process the HRA selected MetroPlains Development as the project developer in
August 2002 and entered into a preliminary redevelopment agreement together. Over the past
2 years the city and developer have completed a number of steps to refine the project including
market and financial feasibility studies and gathering community input on the project proposed
as follows:
The plan for the Jackson Block includes a three story building with about 10,000 square feet
of first floor commercial along Main Street and Jackson Avenue; 32 units of rental housing and
approximately 50 underground parking stalls and 16 surface stalls.
The plan for the Bluff Block includes a four story building with about 10,000 square feet of
commercial space along Main Street; 60 to 68 units of for-sale housing and approximately 110
underground parking stalls.
Discussions to address parking concerns, financing, and the development agreement continued
in 2004 with several issues being resolved by the end of the year.
The HRA and Council supported the concept to remove the Elk River Municipal Utilities
building and close the King Avenue-Highway 10 access in order to expand the public parking lot
in this area. Preliminary designs indicated the addition of up to 50 parking stalls. Construction
of the parking lot is anticipated to begin spring 2005 with summer completion.
A key component to the process during 2004 was with regard to the project financing. A Small
Cities Development Program (SCDP) grant from the MN Department of Employment and
Economic Development (DEED) was awarded upon the city's 2003 application. While the
application requested grant funds for the rehabilitation of commercial and residential buildings
downtown, DEED awarded only $400,000 for the Jackson Block rental housing new
construction, which will be provided as a long-term low-interest loan to MetroPlains.
The City Council established Tax Increment Financing District No. 22 (a redevelopment
district) in November. By mid-year MetroPlains had executed a purchase agreement for one of
the three Bluff Block properties, 641 Main Street.
Another key component of the process was the negotiation and approval of the final
development agreement. Earlier in the year the HRA and City Council concurred that the
project should include both the Jackson Block and Bluff Block developments. In addition to the
linkage between the Jackson and Bluff projects the development agreement outlines the project
schedule and financial assistance to be provided. With the HRA's recommendation, the City
Council approved the Final Development Agreement with MetroPlains Development, LLC on
December 6, 2004.
Communication with the public has been a key component of the Downtown Revitalization
Project. The multiple means of communications continued in 2004 to including the following:
^ Monthly project updates on the city website
^ Q & A inserts and project coverage in the Star News
^ Project update articles in The Current
^ Monthly updates to River's Edge Downtown Association group
^ Monthly HRA/Council meeting updates
^ Direct mailing of meeting notices
DEPARTMENT STAFF
NAME
rine Mehelich
Heidi Steinmetz
Support Staff
Debbie Huebner
Jessica Miller
TITLE
Director of Economic Development
Executive Director, Economic Development Authority
Executive Director, Housing & Redevelopment Authority
Assistant Director of Economic Development
Administrative Secretary (Planning Dept.)
Secretary (Administration Dept.)
START DATE
June 2000
December 2001
March 1993
February 2001
2005 GOALS & PROD ECTS
The Economic Development Strategic Plan provides a framework for the City Council and EDA
and HRA to work within and focuses staff energies on those priority areas important to the
economic health of the city.
The 2004-2007 Economic Development Strategic Plan includes the following major goals:
I. Industrial Development
^ Attract new businesses and expand existing businesses to increase the city's
industrial tax base.
II. Central Business District
^ Undertake planning and activities that facilitate redevelopment in the Central
Business District.
III. Transportation
^ Advocate and support proactive planning for improvements to the local and area
transportation system.
IV. Commercial Development
^ Encourage desired commercial development in identified areas.
Dowrrtou~rz 1Zwitalv~aLz'ow
PROJECT DESCRIPTION
~•-~.--~
aver
NOVEMBER 2004
Enhancing Downtown Elk River's Role
As a Vital Retail, Commercial and Residential Area.
Primary Goal of Downtown
Revitalization Project:
The City of Elk River has partnered with MetroPlains
Development to assure the long-term viability of
downtown by making a connection to the rest of the
community and by utilizing the riverfront location.
Redevelopment will enhance downtown Elk River's
role as a residential, retail and commercial area
and also revitalize investment in the downtown
business district.
Development Objectives:
• Mixed use (residential/retaillservice)
• Consideration of the historic context study results
• Strengthen connection to the community
• Traditional downtown design elements
• Brick, stucco, stone materials with visual breaks in
the building design
• Increased residential density
• Pedestrian orientation
• Increase exposure to the riverfront
• Recognize those buildings that have potential
for rehabilitation
• Replace market/economic obsolete buildings
• Multiple types of housing products (i.e. townhomes,
senior rental coops, market rate apartments)
• BLUFF BLOCK DEVELOPMENT
- Approx. 10,000 sq. ft. commercial on first floor
along Main St.
- 60 to 68 units of for-sale housing
- 4 total stories
- Approx.110 below grade parking stalls
- Connection to City with plaza on corner of
Main St. and Cty. Rd. 42 and potential
connection to river walk
• JACKSON BLOCK DEVELOPMENT
- Approx. 10,000 sq. ft. commercial on first floor
along Jackson Ave. and at the corner of Jackson
Ave. and Main St.
- 32 units rental housing
- 3 total stories
- Approx. 50 below grade parking stalls and
16 surtace parking stalls
~~ __ - - -
• JACKSON BLOCK DEVELOPMENT