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Economic Development Authority Minutes <br />March 6, 2006 -Special Meeting <br />Page 2 <br />• Job creation is not a significant component to this project, but would result in <br />significant tax base generation. This request should be considered as a "location <br />incentive" for the purpose of tax base generation and not based on a proven <br />fmancia] need nor on a large number of jobs. <br />• The market value hasn't been established for this project. Staff estimates a <br />market value range of $10.8 million to $13.5 million for the proposed 180,000 <br />square foot project. <br />• Based on past industrial projects, an average of 20% total assistance was <br />provided to market value, although market value previously has not been a <br />measurement for the amount of assistance to be provided. <br />Ms. Mehelich indicated that staff is requesting EDA direction on this request and is not <br />looking to set a formal policy. She stated that if the EDA desires to provide a location <br />incentive for the proposed project in the form of a pay-as-you-go tax abatement, then staff <br />would like direction from the EDA on the percentage of financial assistance to the end <br />market value and a cap dollaz amount since the market value of the project is undetermined <br />at this time. Ms. Mehelich reviewed a range of financial assistance amounts based on a range <br />of 3% to 6% of financial assistance to market value. <br />Community Development Director Scott Clark explained that staff's struggle with this <br />request is that the company has indicated the real estate value will be $20 million but it is <br />difficult to compare with other data centers of its kind. Mr. Clark indicated that if the EDA <br />provides dtrecdon on a percentage of assistance, staff can go back to the company with a <br />range of assistance the city will provide. <br />Commissioner Tveite stated that he believes there are risks and opportunities with this <br />project. He stated that a lazge risk is if the Utilities provides electricity to that area and the <br />company leaves before the electric bonds are paid off. He stated that one of the <br />opportunities will be the increased marketability of Elk River if we are home to such a large, <br />well known company. Commissioner Tveite indicated that he is in support of providing a <br />location incentive and believes 5% of the market value is fair. <br />Councilmember Dietz spoke on behalf of the Utilities Commission. He stated that Elk River <br />Municipal Utilities is spending $3.5 million to provide a direct feeder line to the Target <br />Technology Centex and they have agreed to spend an additional $3.5 million to provide the <br />same for this company. Mr. Dietz explained that there aze risks for the Utilities if they <br />provide a direct feeder line for this company. He stated that the Utilities will have to use <br />electric revenue bonds and if the company should leave prior to those being paid off, the <br />Utilities would have to request assistance to pay the bonds from the city. He noted that there <br />will be no other use for the direct feeder line in this area should this company leave Elk <br />River. Mr. Dietz explained that if the Target Technology Center were to relocate there would <br />be other uses for the direct feeder line that was installed on that side of town. <br />Councilmember Dietz indicated that the Utilities agreeing to spend $3.5 million to install a <br />direct feeder line should be enough incentive and that he is not in favor of providing any <br />additional incentive to this company. He noted that Target did not receive any incentives to <br />come to Elk River. <br />Commissioner Dwyer indicated that he agrees with Commissioner Tveite that the company <br />should receive some sort of location incentive. He stated that he believes that Elk River will <br /> <br />