6. EDSR 06-17-2013 - Laserfiche WebLink

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4%interest and in 8 years at no interest. There is no minimum assessment agreement establishing a minimum market value to guarantee repayment in the 8-year term. The interest rate charged is at the discretion of the Council,but capped at 4%. Ehlers compared the project with and without abatement. Without abatement, the return on equity would be -1.88%,or not sustainable. They recommend an abatement amount in the amount of$680,895 to buy down the land which would give them an 11.55%return on equity which is considered acceptable. The resulting gap between this recommendation and the original request is $472,983. At the request of the applicant, staff has retained Springsted for a second opinion on the amount of necessary tax abatement. Unfortunately, the final analysis is not expected before the June 17 EDA meeting . Staff's recommendation is based on the Ehlers findings. Should Springsted's findings differ significantly from Ehlers, the item could be brought back to the EDA in a special meeting. However,independent of the second opinion, the EDA may consider additional assistance,by policy as outlined in the Tax Abatement Policy, Section V. Project Qualifications: V. The City will consider the use of Tax Abatement assistance for projects that may not meet the but for and job creation criteria, but rather would be considered as a "location incentive': These projects may result in other public benefits such as a significant tax base increase, the creation of higher payingjobs(at least twice the minimum hourly rate stated in the Ciy's Business Subsidy Policy), and is likely to assist in the marketing and attraction of additional desired developments. e. The project shall comply with all provisions set forth in the Minnesota Tax Abatement Law, State Statues 469.1812 to 469.1815, as amended. f The project must be consistent with the Ciy s Comprehensive Plan,Land Use Plan, and Zoning Ordinances. g. The project shall serve at least two of the following public purposes: • Job creation or job retention. • Significantly increase the 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 Economic Development Strategic Plan or the City's Comprehensive Plan, among others. • Removal of blight or the rehabilitation of a high profile or priority site." The items in bold are deemed to be met. Staff can support tax abatement for the larger amount for a number of reasons,including: 1) Without support,the project will not go forward,based on statements of the applicant. 2) Tax abatement is administered as a Pay As You Go. 3) Upon construction, there will be a large,industrial building in the new development. 4) As the first such project,Preferred Powder should generate interest,momentum, and additional investment toward the eventual build out of the area. 5) Changes to the economy and banking rules have limited the ease at which a property owner can obtain private financing. N:\Departments\Community Development\Economic Development\EDA to move\Agenda\Year2013\6-17-2013\Action Requested-EDA 6-17- 13 Preferred Powder.docx