7.1. EDSR 04-17-2023 - Laserfiche WebLink

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Background The City of Elk River (the “City”) received an application from Beaudry Oil & Service DBA Beaudry Oil & Propane and Harvest Reaper LLC (the “developer”) for tax abatement financing assistance related to the construction of a 25,000 square foot building to further expand their existing operations. The project will be located in the City of Elk River on an undeveloped parcel for continued business growth and expansion of existing company operations. The developer acquired the site (2 parcels) in 2020 for $235,000. There are additional site improvements costs that must be incurred for the site to be developable and are a barrier to development as currently proposed. The developer has plans to construct an approximate 25,000 square foot building on the property. The adjacent remaining vacant parcel could include future development but there are no current plans for any additional development beyond the 25,000 square foot industrial building as proposed. Harvest Reaper, LLC would be the owner of the building and lease the space to Lubricants Warehouse. The 25,000 square foot building project is expected to retain the existing 6 company employees and create a minimum of 14-20 new FTE employees within 3 years of project completion. The average base wage of the employees is anticipated to be in the range of $29-$32/hour and would need to meet the City’s business subsidy policy provisions. Applicant Request for Assistance The request for financial assistance includes an approximate $4 million project that would be funded by Harvest Reaper, LLC (the owner) through private funds and owner cash equity. The developer has requested $645,000 in tax abatement assistance from both the City and County to provide annual cash flow assistance following the construction for up to 15 years to assist with financing a portion of the extraordinary site development costs. Following review of the financials, we can support a portion of those costs as extraordinary, in particular the watermain extension with an estimated cost of $166,500. Tax abatement revenues would assist with offsetting a portion of those costs. The City’s share of tax abatement as requested over 15 years is approximately $188,460 and would constitute as a business subsidy due to the proposed amount. The process for considering a business subsidy includes holding of a public hearing, similar to the tax abatement process. The maximum estimated amount available from the City’s share based on the terms of the abatement (up to 11 years) and recommended level of assistance would be $138,204, as further described within the memo. Should the County Board choose to participate in the abatement request, the total financial package could be up to $200,000. The sources and uses of funds for the project are illustrated in the table below. Sources Amount Uses Amount First Mortgage $3,472,748 Acquisition ** $280,000 Other Private Funds $0 Site Development $645,000 Owner Cash Equity $868,187 Construction $3,290,935 Tax Abatement * $0 Soft Costs $125,000 Total $4,340,935 Total $4,340,935 * any tax abatement assistance would be as reimbursement and not provided upfront ** the developer acquired the property (2 parcels) in 2020 for $235,000 Project Qualifications Pursuant to the Section V of the City’s tax abatement policy, all tax abatement projects considered by the City must meet each of the following qualifications: a. The project shall meet one of the objectives set forth in Section III b. The use of tax abatement will be limited to • Industrial development, expansion, redevelopment, or rehabilitation or • Commercial redevelopment or rehabilitation, or • Research and development facilities that satisfy Business Park zoning requirements, or • Office facilities with a minimum new construction of 25,000 square feet, or