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The applicant has provided minimum expected job creation (85 new FTE) and wage goals (average $23.04 with <br />benefits) based on completion of the business expansion. Without financial assistance, it will not be committed <br />or required to meet those job and wage goals. Financial assistance from the City allows for additional revenues <br />to provide sufficient project cash flow and market returns to investors that will achieve project feasibility and <br />facilitate the targeted job creation and wage goals. The applicant has stated the assistance will offset a portion <br />of the costs associated with construction of the building expansion, acquiring the machinery and equipment, <br />related costs and hiring the new employees. In addition, the current estimated project costs are in excess of the <br />estimated future value of the building upon development as provided by the County. Based on this analysis, the <br />EDA and City could be justified in determining that the project meets the “but for” test and would not proceed <br />without assistance. As stated tax abatement does not statutorily require a “but for” analysis to determine if the <br />project would proceed without assistance and the City’s tax abatement policy provides considerations for when <br />the but-for test may not be entirely met. <br /> <br />Conclusion <br />The applicant has requested financial assistance through tax abatement from the City of Elk River for financing <br />a portion of the costs associated with constructing an approximate 91,050 square foot building expansion to the <br />existing building. The taxable value for the expansion is estimated to be $2.825 million and total project <br />investment is close to $8.38 million. Tax abatement revenues would provide additional cash flow for the project <br />to allow fulfilment of increased employment goals and requirements and meet growth expectations and future <br />potential business growth and development. <br /> <br />According to the City’s tax abatement policy, the City may consider the use of tax abatement assistance for <br />projects that may not meet the traditional “but-for” and/or job creation criteria, but rather would be considered <br />as a “location incentive”. These projects may result in other public benefits such as a significant tax base <br />increase, the creation of higher paying jobs (at least twice the minimum hourly rate stated in the city’s <br />Business Subsidy Policy), and is likely to assist in the marketing and attraction of additional desired <br />developments. For this proposed project, the applicant is proposing to retain over 323 employees between <br />both company locations, and create an additional minimum 85 employees with average wages of $23.04. <br />Without tax abatement assistance from the City, the company will not be required to create the jobs or meet <br />any provisions of the City’s business subsidy policy. The applicant is also requesting tax abatement <br />assistance from the County for the same period (15 years). The County’s policy for assistance supports 12 <br />years of financial assistance through tax abatement. <br /> <br />Tax abatement is a tool that can assist with covering a portion of the additional eligible costs associated with <br />the project. Since terms of the assistance include pay-as-you-go as reimbursement for certain costs, the <br />applicant will be responsible for obtaining all upfront funding sources and using cash flow from the project and <br />any tax abatement assistance to repay obligations. Total estimated tax abatement revenues that could be <br />available from the City’s share of taxes for this project for the remaining 14 years within the abatement area are <br />approximately $362,880 for the years 2023-2036. Aligning the level of assistance to the availability of projected <br />revenues provides a method of financing a portion of the project costs and allow the public participation for the <br />project to remain at a reasonable level, while meeting the City’s tax abatement and business subsidy policy <br />objectives. Without tax abatement assistance, the project may not adhere to the job and wage goal <br />requirements. <br /> <br />Thank you for the opportunity to be of assistance to the City of Elk River. Please contact me at 651.368.2533 <br />or Mikaela.Huot@bakertily.com with any questions or comments.