7.1. EDSR 11-12-2002 - Laserfiche WebLink

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0 EHLERS • & nssacin —ES C MEMORANDUM DATE: November 3, 2002 TO: Catherine Mehelich, City of Elk River FROM: Sid Inman, Ehlers and Associates Inc RE: Industrial Park Options Following is a list of topics to consider regarding establishing an industrial park. The first step is to establish what you want in the park. For example, some cities try to use target marketing to attracted business that are related to business existing in the city. Other cities select business by type of use. If your goal is to achieve increased tax base then you will want to set minimum sizes and maybe market values. If jobs are the goal,you should set the minimum number of jobs and minimum wages for those jobs. We recommend that you determine the parks goals before you start the process. As part of the process you need to determine who is the developer? If a private company is the developer, you avoid some risks for the city but add costs such as profit and returns on invested equity. You also loose some level of control. If the city develops the park,you reduce the cost but increase the risk to the • city. Selecting the developer may also depend on who owns the land and how you can buy it. My landowners want to sell and would be happy to have the city as the developer. They may also sell the land to the city on terms, which may result in income tax savings to the seller. If the seller wants a full cash payment you may want a developer to assume the risk. Some landowners want to make a profit on selling the land and also earn a development fee. You then need to develop a financial—risk model. We suggest that you also review what the "Real Market"is. We suggest you talk to a number of developers to determine what the market is now and what they believe it to be in the future. They can guide you as to what can be built, at what value and how fast. They can advise you as to how much the end user will pay for land an improvements. Another part of the analysis is to determine the park's costs. Cost of the land purchase and public improvements are normally the major expenses. We suggest you determine the cost of both and be prepared to apply them to your financial model. With the information you have gathered,you develop a model that includes all of the financial and timing factors and measures the risk. If the cost of the project exceeds what the end user can pay then assistance may be needed. The model can determine what tool (tax increment or tax abatement) is best used to achieve the needed assistance. You may run dozens of versions of the model until you arrive at a financial plan that reduces any city risks and can be successful in the market. I hope this helps with your first steps in the process and look forward to working with you in the future. •