7.1. SR 05-18-2009City of
Elk.
River
REQUEST FOR ACTION
To Item Number
Ma or & Ci Council 7.1.
Agenda Section Meeting Date Prepared by
Community Development May 18, 2009 Catherine Mehelich, Director of
Economic Develo ment
Item Description Reviewed by
Consider Extending Time for Meeting Wage & Job Goals Lori ohnson, Ci Administrator
Under the Tax Abatement and Business Subsidy Agreement for Reviewed by
Provo Enterprises, LLC Project -Public Hearing
Action Requested
Following the public hearing, the Council is asked to authorize an extension up to three years to Provo
Enterprises, LLC (Alliance Machine, Inc.) for meeting the wage and job goals outlined in the Tax
Abatement & Business Subsidy Agreement.
Background/Discussion
In August 2005 the developer, Provo Enterprises, LLC entered into a Tax Abatement & Business Subsidy
Agreement with the City, committing to constructing an 18,000-sf industrial building in Northstar
Business Park and relocating 30 existing employees in addition to creating nine jobs at an average wage of
$15/hour by May 19, 2008. Under the agreement the developer is eligible to receive the value of a
portion of the property in the amount of $103,978 provided on apay-as-you-go basis (commencing
2008). In addition, the EDA provided a $100,000 Micro Loan to the project.
Under the MN Business Subsidy Law, public agencies are required to report on the progress toward job
and wage goals annually for two years, or until the goals are met, whichever is later. As of the end of
2008, the developer has indicated an employment level of 24 full-time positions at an average wage of
$21 /hour. The attached letter from Alliance Machine indicates the developer's response in their attempt
to achieve the wage and job goals. Due to economic conditions, the developer is requesting the City's
consideration of up to a three year extension to achieve these goals. The request would extend the
deadline to May 19, 2011. The developer has been invited to the Council meeting to provide additional
information.
Staff recommends in consideration of economic conditions and the developer having exceeded the
average wage goal for positions held, that the City Council authorize a three year extension fox meeting
the job and wage goals established in the agreement.
Financial Impact
The agreement allows that if goals are met in part, the City has the option to reduce the subsidy on a
prorated basis to the jobs created, or consider an extension of the term to meet the goals. To date the
developer has received total tax abatement in the amount of $9,105.28. The term of the tax abatement is
up to 15-years with real estate taxes payable through 2022 or until the reimbursement amount is reached.
S:\EDA\BUSINESS SUBSIDY\State Reporting\2008\Provo\Action Requested 5.18.09.doc
If the developer does not meet the goals by the end of the extension term, the City retains the option to
reduce the subsidy.
Attachments
• Correspondence from Alliance Machine dated March 25, 2009
Action Motion by Second by Vote
Follow Up
S:\EDA\BUSINESS SUBSIDY\State Reporting\2008\Provo\Action Requested 5.18.09.doc
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F?" L I ANCE MACHINE
FAX N0. :7634252067 Mar. 25 2009 02:02PM P1
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17520 'T'YLER S'1`II;E.F..T
LT..K R1Vr.R, MN 55330
PH: 763-425-1610 ~ IjAX: 763-42.5-2067
WLB: wc?vw.alli~in~ems~chinc.coan
U3-25-U9
City of Elk River
nttn: Catherine Nlchelich
Defu• Cathy,
We arc responding to your request 1.'or the ~umual report of o~tr project goals which is a
requi~'ement .l~or the Tax Rehatc I~inancing/I3u5incss Subsidy Agreement. Iia review o~l'
the first two years '(2006-2007) in 1/'ll<. River we averagec128 F'l.'L mn.c( cndeii 2008 with 2~
I~'.l'E.
iii view of. tho national financial crisis and its effect on All.i.anec Machine and our
customer base, we are requesting a three yeai extension to rnect. our •job and wabe goals
as established within the original agreement.
1~t this time we are restructuring our. labor fi:~rce and fnanci.ally cutting back where
needed to run mote efficiently. With these changes vve hope to weather the storm ~jnd
emerge a stronger company.
11'you have an.y q~pestions, please ca11 or email n1e: ww~w.Bryan(a),alliaueein.~iclrine,coin
Thank. yi~u.
Sni;ercly,
/~
Rryan 1'ri~ o
Vice Preside~.at
F~0"1 :ALLIANCE MACHINE FAX N0. :7634252067 Mar. 25 2009 02:02PM P2
rcbru~ r)T 27, 2(1(19
P.rrwo Enterprises, J:._l,(:
Bryan T'rovo
~17520'T'yler Strctt
Elk River, MN' 553.3
In A>i,;,tst 2005, the Cicy of Elk River approved '103,)78 of Tax Absttcment assisrarace Co PLUVU Enterprises.,
l .l ,(_: (.(1.l.l.i.atice Maclurtc). ~s a recluircmcnt of .r.ecei.'ving such assisl:ance, you were required to establish the job
;.u~d wage goals noted be]otiv within 2-years of tare Cerrifica.te of (~)ccupattcy issued May 19, 2006.
1~n upda~c ott cht; status <>f your job and wage go11s is required by ehc City cif Elk River and the titate of
Minncsatn on an annual bai.si.s until the goals are rnet:. Tl~crc:forc, please cotl~.plete the below chart and Cax this
it>.fortnation Y.o tnc a.r. 7C3.P35.1(190 as soon as possil?lr..
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'1'l~.at~ls you Eor your atteutioaa. to This manes, Please contact the ~vitli atiy qurstiotlr: ae 763,635.1041.
SiruPrPly,
Caxlier.it~e Me.l>e.li.cli
Director t~l' Econutzuc Devclapttienl