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Item No: 8G Meeting Date: Dec 12, 2005 Type of Business: Discussion Administrator Review : ____ City of Mounds View Staff Report To: Honorable Mayor and City Council From: James Ericson, Community Development Director Item Title/Subject: Review Medtronic CRM Project Acceleration Option; Consider Establishing a Public Hearing on Feb 13, 2006 Introduction: As the Council is aware, Medtronic has expressed a desire to explore construction of Phase 2 of the Medtronic CRM development concurrent with Phase 1. The Council directed staff to explore the possibility with Medtronic and to continue using Ehlers and Associates for financial analysis. Ehlers has conducted the analysis which assesses the financial ramifications of a joint Phase 1 - Phase 2 construction project. This analysis has been provided to the EDA and Council for your review. Discussion: Phase 2 of the Medtronic CRM development consists of a third office building of 380,000 square feet plus two additional levels on the Phase 1 parking ramp. The only eligible expense associated with Phase 2 would be the parking ramp expansion. It has been estimated that the cost of the ramp on a per floor basis is about $4,000,000, which means the TIF eligible expenses for Phase 2, if it were to be constructed on its own and supported by a new TIF district, would be limited to $8,000,000. The taxable value added by constructing Phase 2 concurrent with Phase 1 is $30,400,000 for a total project improvement value of $96,000,000. Setting aside the assistance agreement for Phase 1, staff examined the amount of increment that would be generated from Phase 2 and whether it could support the eligible expenses. With Ehlers assistance, it is clear that the additional increment would support the expenses. Using the same assumptions from the original analysis, there appears to be a total of $22 million of available increment for the $96,000,000 project. Regardless of the outstanding qualified costs, the increment provided would be limited to reimbursement of ONLY the structured parking ramp, the cost for which is estimated at $24 million, well in excess of the available increment. In return for this consideration, Medtronic would pick up the City's cost to install the utilities to their site (budgeted at $400,000), would cover all the relocation costs for the signs (the previous agreement identified City cost at $550,000) and finally, perhaps most significantly, Medtronic would be responsible for ALL potential sign buy-outs (a potential savings to the City of $1,620,000.) Altogether, the potential financial benefit to Mounds View is $2,570,000, all of which the City would potentially have to pay out relating to this project in its present form. Medtronic would also cover all administrative expenses incurred as a result of processing this request (estimated on the high side to be $150,000.)