6.1 EDSR 07-20-2015 - Laserfiche WebLink

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Springsted Incorporated 380 Jackson Street, Suite 300 Saint Paul,MN 55101-2887 Springsted Tel: 651-223-3000 Fax: 651-223-3002 www.springsted.com DRAFT MEMORANDUM TO: Amanda Othoudt, Economic Development Director FROM: Mikaela Huot,Vice President/Consultant DATE: June 23,2015 SUBJECT: Envision Co., LLC(Sportech)Proposed Tax Abatement—Project Analysis The City of Elk River has asked Springsted to evaluate a tax abatement request for assistance submitted by the developer, Envision Co., LLC(Sportech).The developer proposes to purchase land from the Economic Development Authority of the City located within the 2^d phase of the Nature's Edge Business Center and construct an approximate 105,000 square foot facility to be used to assemble cab systems and parts for vehicle OEMS. There are plans for a potential future expansion of an additional 73,500 square feet that is not currently included within this analysis. The company is purchasing land from the City for a total purchase price of$1,288,590. The company currently employs 204 FTE and plans to create an additional 72 new FTE by the end of 2017. According to the applicant, the tax abatement assistance will be used as annual cash flow to support debt service on the approximate$9.7M project to be financed with a combination of debt and equity. The purpose of this memo is to summarize the analysis that Springsted prepared, including the estimate of tax abatement revenues for the project and to assist with determining whether the project as proposed is likely to proceed "but for" the requested tax abatement assistance. The analysis is based on our review of the project components and financials and general rationale for assistance as submitted by the developer. There are several methods available to determine if a project would proceed "but for" the assistance. An analysis comparing the rates of return with and without assistance is a common method used to analyze the "but for" test. However, in some cases,a review of the project's sources and uses of funds and operating cash flow performance is done to determine if an operating gap exists or if the project performance is not expected to meet minimum financing requirements and return thresholds to assist with determining that a project meets the"but for"test. If,following the review, it is determined that the project has a shortage of debt, cash, and/or equity based on the projected value of the project upon completion and net operating income available to support debt service, it can be determined that the Public Sector Advisors