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City of Elk River, Minnesota
<br />Envision Co., LLC (Sportech) request for Tax Abatement
<br />June 23, 2015
<br />Page 4
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<br />Project Costs Total Cost Sources of Funds Total Sources
<br />Land Acquisition $1,288,590 Bank Loan $6,468,474
<br />Site Development $667,215 Equity $1,939,266
<br />Construction $5,640,525 Tax Abatement $1,288,590
<br />Machinery & Equipment $2,100,000
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<br />Total Costs $9,696,330 Total Sources $9,696,330
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<br />Project Financing
<br />There are generally two ways in which assistance can be provided for most projects, either upfront or on a pay-as-
<br />you-go basis. With upfront financing, the City would finance a portion of the Developer’s initial project costs through
<br />the issuance of bonds or as an internal loan. Future revenues would be collected by the City and used to pay debt
<br />service on the bonds or repayment of the internal loan. With pay-as-you-go financing, the Developer would finance
<br />all project costs upfront and would be reimbursed over time for a portion of those costs as revenues are available.
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<br />Pay-as-you-go-financing is generally more acceptable than upfront financing for the City because it shifts the risk for
<br />repayment to the Developer. If revenues are less than originally projected, the Developer receives less and therefore
<br />bears the risk of not being reimbursed the full amount of their financing. However, in some cases pay as you go
<br />financing may not be financially feasible. With bonds, the City would still need to make debt service payments and
<br />would have to use other sources to fill any shortfall of revenues. With internal financing, the City reimburses the loan
<br />with future revenue collections and may risk not repaying itself in full if revenues are not sufficient. The form of
<br />financial assistance proposed in this case would be considered upfront internal financing in which the City would
<br />defer receiving upfront payment for the land in the amount of $1,288,590. The City would collect the annual
<br />abatement revenues from the proposed project (City and County share, if participation is approved) to reimburse the
<br />Development fund for the land cost of $1,288,590. An interest component has not been included and is simply
<br />payment in full for the price of the land.
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<br />Envision Co., LLC (Sportech)
<br />Abatement Project Scenario 1 Scenario 2 Scenario 3 Scenario 4
<br />Total Estimated Tax Abatement Revenues
<br />Estimated City Share $699,924 $945,605 $699,924 $945,605
<br />Estimated County Share $608,587 $770,955
<br />Estimated Total Combined Revenues $699,924 $945,605 $1,308,512 $1,716,560
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<br />Total Land Cost $1,288,590 $1,288,590 $1,288,590 $1,288,590
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<br />Estimated Surplus / (Deficit) $(588,666) $(342,985) $19,922 $427,970
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<br />The table above shows what the impact of participants (City and County) and number of years may have on the
<br />ability of the City to receive full payment for the land price of $1,288,590. Scenario 3 which includes City participation
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