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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 25,000 square foot building. The taxable <br />value for the expansion is estimated to be $1.566 million and total project investment is over $4 million. There <br />are significant site development costs that are barriers to development commencing and tax abatement has <br />been identified as a possible funding source to offset a portion of those costs. Tax abatement revenues would <br />provide additional cash flow for the project to allow fulfilment of increased employment goals and requirements <br />and meet growth expectations and future 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 create an additional minimum 14-20 <br />employees with anticipated salary in the range of $29 $32/hour and would need to meet the City’s business <br />subsidy policy provisions. Without tax abatement assistance from the City, the company will not be required <br />to create the jobs or meet any provisions of the City’s business subsidy policy. The applicant is also <br />requesting tax abatement assistance from the County. The County’s policy for assistance would indicate a <br />support for up to 10 years of financial assistance assuming 50% participation through tax abatement. Any <br />County participation would be subject to further review and County Board approvals. <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 up to 11 years within the abatement area are <br />approximately $138,204 for the years 2025-2035. 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 />Following review of the request for tax abatement assistance and supporting financial information, including <br />conversations with the applicant, County and City staff, a recommendation can be made to provide some level <br />of assistance to the project as a mechanism to offset a portion of the extraordinary site development costs as <br />necessary for the new development to occur. As described further in the memo regarding tax abatement <br />revenue assumptions and revenue estimates, the amount of tax abatement revenues that would be generated <br />by the project are less than what has been requested. In addition, based on review of financial need, the <br />recommended term of assistance (number of years) would be less than what the applicant has requested. <br />Based on review of the project and for consistency with the City’s tax abatement policy, we can recommend <br />financial assistance of up to $200,000 that would include County participation due to some of the extraordinary <br />site development costs related to the project. <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.