6.3 EDSR 10-17-2016 - Laserfiche WebLink

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Request for Action To Item Number Economic Development Author' 6.3 Agenda Section Meeting Date Prepared by General Business October 17, 2016 Amanda Othoudt, EDD Item Description Reviewed by SBH Properties, LLC (Apex Embroidery & Design, Cal Portner, City Administrator Reviewed by Inc.) Property Tax Abatement Request Action Requested Approve or deny, by motion, $70,970 property tax abatement for SBH Properties, LLC. (Apex Embroidery & Design, Inc.) Background /Discussion SBH Properties, LLC dba /Apex Embroidery & Design requested 12 -year pay -as- you -go property tax abatement from the city in the amount of $85,164. The applicant has also submitted an application for tax abatement assistance from the county totaling $77,592 over 10 years. The total requested combined abatement revenue amount from both the city and the county total $162,756 which equates to approximately 9.3% of the total project costs. The applicant has also requested a $200,000 forgivable loan from the city. The combination of public funding consisting of tax abatement dollars and forgivable loan money equates to 20.7% of the total project costs. The proposed $1.75 million project consists of constructing a 13,312 sq. ft. facility on approximately 1.4 acres of land at 9775 1581h Circle NW. They will have the option in the future to purchase an adjacent parcel that would provide room to expand their proposed facility by an additional 14,975 sq. ft. Apex Embroidery & Design plans to create seven new jobs averaging $17.71 /hour within two years of project completion. In addition, they propose to relocate 18 FT employees with an average wage of $15.57 per hour. The attached memos from Springsted summarize the analyses completed to date. At their September 29 meeting, the EDA Finance Committee discussed the applicant's financial need analysis in detail and requested that Springsted prepare an updated alternative analysis to understand how an increase of assumed lease rate based on a blended rate of office and industrial market lease rates may impact cash flow of the project and amount of city abatement assistance needed for the project to proceed. Following this discussion, the EDA Finance committee recommended that the EDA approve up to a 12 year property tax abatement for Apex to meet the immediate financing gap that is needed for the project to proceed. Further discussion by the EDA Finance Committee directed staff to shorten the abatement term if Springsted could show through alternative assumptions that a shorter term of abatement would cover the immediate financing gap the company needed based on the blended rate of $5.50 SF. NAfURFj