6.1 EDSR 03-16-2015 - Laserfiche WebLink

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Elk River Request for Action To Item Number Economic Development Authori 6.1 Agenda Section Meeting Date Prepared by General Business March 16, 2015 Jeremy Barnhart, Deputy Director, CODD Item Description Reviewed by Sale of Lots 1 and 2, Block 2, Natures Edge Cal Portner, City Administrator Business Center II Reviewed by Action Requested Respond to Purchase Agreement received for Lots 1 and 2, Block 2, Natures Edge Business Center II (NEBC II). (Envision Companies, dba Sportech) Background /Discussion The city has received a Purchase Agreement to purchase lots 1 and 2, block 2, NEBC II from Envision Companies, the parent company of Sportech. The purchase agreement proposes the purchase of the two lots for 50 cents each. Envision Company desires to retain tax abatement income to fund their projects. Envision proposes to place $15,000 in escrow pending the closing. Escrow dollars would be used for buyer's closing costs. Envision proposes closing by July 31, though this date may be extended up to 30 days at their discretion. The contingency date is the closing date; contingencies include: Environmental testing, land use approvals (rezoning, lot combination, easement vacation, site plan approval), title, city obligations, and financing. Anal The agreement proposes the sale of the two lots for 50 cents each, with no mechanism to reimburse to the city the value of the land or the cost of the infrastructure improvements. The sale of land for less than market value is considered a business subsidy. The EDA attorney recommends that the city not accept the purchase agreement until the public hearing process for the business subsidy has concluded, in part to preserve Due Process associated with a public hearing. If the EDA wishes to agree to the purchase agreement, a contingency of business subsidy approval should be added. Based on lot size, it cost approximately $500,000 to improve the two lots. The city has in the past sold land for a dollar (Sportech, 2008, Preferred Powder Coating, 2013). Preferred's agreement included collection of tax increment from the school district and the county; that money was paid to the development fund. In 2008, the city sold 9.3 acres to Envision for $1, with the balance of the land value being returned to the city from city and county tax abatement receipts. In 2005, the city used tax abatement to write down the land cost on four projects (Alliance Machine, CDI, MET, and Classic Acrylics), though for those projects, the buyer paid full value at closing, and were (and continue to be) repaid through tax abatement receipts. At most, land was written down 50% of the value. P R IN E R E R R i 1 CIA R