5.0. & 5.1. & 5.2. EDSR 04-14-2008

Home Browse Search

In accordance with the City's Tax Abatement Policy, Ehlers and Associates, Inc. have completed abut- for analysis and financial projection far the tax abatement to conclude that at an estimated market value of $4,800,000 the project will generate sufficient tax abatement revenue to repay the EDA within the 10- year term at a modest interest rate. It should be noted that there is no minimum assessment agreement that establishes a minimum market value to guarantee repayment in the 10-year term. Staff has evaluated the company's application based on the attached Tax Abatement and Business Subsidy Policies and the Tax Abatement Application Review Worksheet, which indicates that the project scored 36 out of 45 possible points, which equates to a "moderately desirable" project based on the City's project priorities. Proposed Business Subsidies The expansion project, estimated at a cost of $6,359,000, will involve finance participation from the company's lender, equity participation, and the following public financing applications: * City of Elk River Tax Abatement (land purchase) $ 404,672 * Sherburne County Tax Abatement (land purchase) $ 404,672 * EDA Micro Loan (equipment) $ 100,000 * MN Investment Fund Loan (equipment) 500 000 Total $1,409,345 The Business Subsidy Agreement establishes the following job and wage goals to be met within 2-years as a result of the assistance: • Retention of 66 full-time jobs • Creation of 25 full-time jobs at hourly wages not less than $12.00 The City's Business Subsidy Policy requires the minimum wage for new or retained jobs at $15.00 per hour. Deviations are allowed to be considered for projects that result in a significant tax base increase. Therefore it should be noted that 19 of the 25 new positions are proposed at wages below the City's Business Subsidy Policy, but are also at a market rate wage for the types of positions. Industrial Incentive Micro Loan The attached staff report to the EDA Finance Committee re: Sportech, Inc. Micro Loan application provides background about the $100,000 Micro Loan request to assist in financing a portion of the company's new equipment needs. At its meeting on Apri17, 2008 the EDA Finance Committee approved a motion to recommend approval of the Micro Loan request at the terms outlined below: * Loan Amount: $100,000 * Interest Rate: fixed, 2 points below prime * Term: 10-year amortization; 5-year balloon * Security: 1ti` position lien on related equipment purchase Attachments • EDA Resolution Authorizing the Sale of Land • EDA Resolution Authorizing Execution of Abatement Agreements • DRAFT Tax Abatement Agreement • Purchase Agreement • Preliminary Building Plans S:AIndustrial Siting\Sportech Expansion II\Memos\4.14.08 EllA Action Requested.doc