HomeMy WebLinkAbout06-08-1998 EDA PacketAGENDA
ECONOMIC DEVELOPMENT AUTHORITY
MONDAY
JUNE 8, 1998
6:00 P.M.
1. Call to Order and Roll Call
2. Consideration of Minutes of Tuesday, May 26, 1998
3. Industrial Incentives - Tax Increment Financing Policy
4. Teknapack proposal - Fritz Johnson
5. Adjourn
CITY OF LINO LAKES
ECONOMIC DEVELOPMENT AUTHORITY
MINUTES
DATE: May 26, 1998
MEMBERS
PRESENT: K. Sullivan, C. Lyden, J. Bergeson, A. Neal, C. Dahl
MEMBERS
ABSENT: None
OTHERS
PRESENT: B. Wessel, R. Batty, M. Divine, J. Shannon, D. Pecchia
CONSIDERATION OF MINUTES
EDA Member Bergeson moved to approve the minutes of March 9, 1998. EDA Member
Neal seconded the motion. Motion passed unanimously.
CONSIDERATION OF RESOLUTION NO. 98-01 PROVIDING FOR THE
ISSUANCE AND SALE OF $5,350,000 LEASE REVENUE BONDS
Mr. Wessel explained to the board that the 20-year Lease Revenue Bonds were to assist in
the financing of the construction of the public facilities complex. Revenues from the lease
of the Early Childhood Center to the school district at $1.2 million for 10 years will be
used to pay that portion of the bond. Mr. Batty explained these bonds were not general
obligation bonds of either the EDA or the city, but "conduit financing" at no risk to the
EDA.
EDA President Sullivan asked if the bond takes into account the interest on the $1.2
million for the early childhood center. Mr. Batty responded it did, but the city's lease
payments are what pays the bonds and that the school district has no obligation regarding
the bonds. They do have a contractual agreement with the lease.
EDA Member Neal moved to approve Resolution No. 98-01. EDA Member Bergeson
seconded the motion. Motion passed unanimously.
CONSIDERATION OF SUBORDINATION AGREEMENT TO THE CONTRACT
FOR PRIVATE DEVELOPMENT BETWEEN LINO LAKES EDA AND NOL-TEC
LLC
Mr. Batty explained that this agreement was requested by the bank for the refinancing of
Nol-Tec to expand. This is a typical request and the EDA is generally willing to
accommodate to a degree. The assessment agreement will not be subordinated, and the
city can relevy unpaid special assessments in the case of default. The principal risk in a
subordination agreement is during construction. Since the TIF is a pay-as-you-go on the
expansion, so the EDA loses nothing if the expansion is not built. EDA Member
Bergeson moved to approve the subordination agreement. EDA member Lyden seconded
the motion. Motion passed unanimously.
CONSIDERATION OF EDA MEETING ON JUNE 8
Mr. Wessel suggested an EDA meeting at 6 p.m. on Monday, June 8 to review the city's
tax increment financing policies. Mr. Batty will be here to answer questions. Board
members agreed to the meeting.
ADJOURNMENT
EDA Member Neal moved to adjourn. EDA Member Dahl seconded the motion. Meeting
adjourned at 6:16 p.m.
AGENDA ITEM 3
STAFF ORIGINATOR: Brian Wessel
DATE: 6/8/98
TOPIC: Industrial Incentives: Tax Increment Financing Policy
BACKGROUND:
Since 1995, when the Economic Development Tax Increment Financing District
1-7 (Apollo Business Park) and 3-1 (Clearwater Creek) were created, the city
experienced a boom in quality Tight industrial development. Six new industries,
with a total market value of $6.8 million, have moved into the Apollo Business
Park. Three industries, totaling $10 million, have built in Clearwater Creek.
For the first two years of the 10-year TIF Districts, the city was subsidizing land
and assessments to qualified companies on a combination of "upfront" and "pay-
as-you-go" basis. This generally provided a company moving into the city equity
in the range of 16% of the total project cost.
As the districts have aged and diminished in capacity, the city is no longer able
to provide a subsidy in the range of 16%. This limits the city's ability to attract
new business to the city while competing with neighboring cities that are offering
land in fully improved business parks, strong TIF incentives and good access to
the freeway systems.
Other factors also have produced a slow down in industrial development this
year in Lino Lakes:
• The remaining land in the Apollo Business Park abuts the Lino Lakes
Correctional Facility, which has been perceived negatively by some
prospects.
• Much of the remaining land in Clearwater Creek will not be accessible until
the new Otter Lake Road alignment is complete.
• The combination of low interest rates and low inflation brought an industrial
building boom in 1995 that is now slowing. The opportunistic phase of the
market cycle may be over.
As the "Industrial Park TIF Status" chart shows, the new businesses that have
been built since 1995 will be coming on the tax rolls between 1998 and 2004.
However, because of the slowdown of new industrial construction over the past
year, the city may not see as steady a return from industrial development coming
onto the tax rolls after 2004.
The opportunity is available in the Apollo Business Park and potentially in
Clearwater Creek to recreate new TIF districts to have the capacity to provide
land and assessments to qualified businesses looking to locate in Lino Lakes.
Parcels can be removed from the existing TIF District and a new 10-year district
can be established.
The Lino Lakes EDA should consider the fundamental purpose of TIF and
whether it wishes to continue to use TIF to attract new business to Lino Lakes.
Staff recommends that the EDA consider continuing the standard policy for use
of TIF, allowing new districts to be created to provide competitive subsidies to
qualified businesses.
OPTIONS:
1. Reestablish the TIF Proposal Policy by allowing the creation of new districts,
when appropriate, within Apollo Business Park and Clearwater Creek
Development Center
2. Return to staff for further consideration
RECOMMENDATION:
Option 1
MEMORANDUM
TO: File
FROM: Brian Wessel
DATE: October 13, 1995
SUBJECT: TIF PROPOSAL POLICY - ECONOMIC DEVELOPMENT
The following is standard policy for use of tax increment financing in Lino Lakes:
1. The prospect must qualify according to the Economic Development selection
criteria.
2. A TIF commitment will be made to a project for the following qualified site
improvement expenses:
a. Special assessments
b. Land write down
c. Administrative fees
3. A land write down commitment will be based on a minimum of 10,000 square feet
of building per one acre of land.
4. Each project will be self sufficient within the allowable TIF capacity.
5. Payback will be within five years of the year the company makes its first tax
payment.
6. TIF commitments are not to exceed 20% of the total project cost.
7. Fifty percent of a TIF commitment to a company will be upfront at closing and 50
percent will be on a pay-as-you-go basis.
INDUSTRIAL PROJECTS TIF STATUS
U46
•
O O
U
CL
Total Points:
Product/Service (Maximum 3 points each)
Environmental
Hazardous waste generation
0
O
V
Market Area
New Products/Services
4.1
0
a)
bO
O
U
cri
t.
O
✓
Functional planning
Structure/Materials
Environmental sensitivity
O
H
0
O
Ties to Lino Lakes
a
a
cct
bq
1.
O
0
tr
Environmental Ethic
Intent to be community participant
(Maximum 5 points each)
et
Past 3-year sales
71
a
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a
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H•
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4
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Financial Statement
0
0
E
C
d
O
a
W
Number of Employees
0
Land Utilization (Maximum 4 points each)
Size of Building
Expansion Potential
Tax Revenue Generation
Sensitivity to Environment
0
H
CLEARWATER CREEK DEVELOPMENT CENTER
GENERAL
BUSINESS
1
LIGHT
INDUSTRIAL
NTERSTATE HIGHW
GENERAL
BUSINESS
MAIN ST. (C.S.A.H. 14)
FRONTAGE ROAD
GENERAL
BUSINESS
WATER
TANK
•
PHELPS ROAD
i
o LIGHT
cc INDUSTRIAL
w
CEDAR STREET
pit Cgq-%
INDUGHT
STRIAL
-+ N
ANOKA COUNTY
COUNTY ROAD 54
WASHINGTONN-COUNTY
AGENDA ITEM 4
STAFF ORIGINATOR: Brian Wessel
DATE:
6/8/98
TOPIC: Consideration of a proposal from Teknapack, Inc.,
Apollo Business Center
BACKGROUND:
In 1995 the City' of Lino Lakes provided TIF to Blue Heron Development, the first
speculative office/manufacturing facility in the Apollo Business Park. This was
done as part of the economic development plan to provide incubator space to
small business. As these businesses grow and need their own facilities, the hope
is they will stay and build in Lino Lakes. These small entrepreneurs are the
backbone to long term economic stability and growth.
Fritz Johnson of Teknapack, Inc. is an excellent example of the entrepreneurial
spirit the city hoped to encourage through the incubator program. A Lino Lakes
resident, he started his company in 1995 and moved into Blue Heron. His
company manufactures "eco-compatible" specialty packing materials.
He and his neighbor in the Blue Heron building, Dana Madsen of NATRA, an
industrial electronics manufacturer, are interested in building a facility that
provides them with the space they need and offers leasable space to other small
manufacturers. Their desire is to stay in Lino Lakes,
As part of the economic development plan to support small business growth in
the city, staff recommends that Teknapack be given consideration for TIF based
on the creation of a new district to provide greater capacity to assist with the cost
of land and assessments
OPTIONS:
1. Direct staff and bond attorney to begin the process for providing assistance to
Teknapack based on the creation of a new district
2. Return to staff for further consideration
RECOMMENDATION:
Option 1