7.1 SR 07-01-2013 - Laserfiche WebLink

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A representative of Springsted will be at the meeting to address any questions. Staff can support the tax abatement application for a number of reasons,including: 1) Springsted's independent"but for" analysis supports the applicant's abatement request. 2) Without support, the project will not go forward,based on statements of the applicant. 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. The developer and the banker financing the deal has expressed that the tax abatement is needed as up- front assistance. The city will use the land as $680,895 of the abatement up-front, and provide the remaining$472,982 through an inter-fund loan from the city's development fund. This will cover the site development costs and will be loaned based on actual costs incurred. All of the property tax dollars generated by the city and county from this property will be used to repay first the development fund, and then the land both with a 3%interest rate. Springsted stated that 2-4% interest is standard. At 3%interest, staff anticipates this project will take 20 years to pay back. The construction project will cost an estimated $6,192,695. Public financing will include: • Elk River Tax Abatement $576,939 (requested) • Sherburne County Tax Abatement $576,939 (requested) • EDA NEcroloan (equipment) $100,000 • EDA Forgivable Loan (construction) $200,000 Total public financing $1,453,878 (23% of project cost) If the EDA recommends approval, the City Council will hold a public hearing on July 1 and consider the abatement application. Pending approvals, staff expects to close on the abatement and all other city financing and the land sale in late July. Preferred Powder plans to begin construction in August. ATTACHMENTS • EDA Tax Abatement Policy and Guidelines • Tax Abatement Application and Review Worksheet • Springsted memo dated June 20, 2013 N:APublic Bodies\Agenda Packets\7-01-2013\Final\x7.1 ot5 Act Req-EDA 6-17-13 Preferred Powder Springsted.docx