HomeMy WebLinkAboutJuly 17, Northland Forest
MEMO
TO:
FROM:
EDA MEMBERS
CONNIE CARLSON
DATE:
JULY 17, 1998
NORTHLAND FOREST PRODUCTS, INC.
RE:
I am faxing a copy of Roger Guenette's letter to Don Rye and Frank Boyles regarding the
above. Please note Mr. Pyles will be tentatively meeting with staff on Monday, July 20.
This will discuss this further at the EDA meeting Monday night.
I am sending a copy ofthis in today's packet as well.
16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245
AN EQUAL OPPORTUNITY EMPLOYER
JUL-16-1998 14:11 FROM
TO [12]
P.02
FROM:
Don Rye, Frank Boyles & Prior Lake EDA
Roger Guenette
TO:
DATE:
July 16, 1998
Negotiation With Northland Forest Prod~cts, Ine.
RE:
As you are aware, we are in a "holding pattern" 'with Northland Forest Products, Inc. regarding
their potent~al acquisition and development of a 4.5 acre' parcel in WaterFront Passage Business Park.
A meeting ,has been tentatively set for 3:30 p.m. Monday, ],uly 20 with Dick Pyle and Gene Happe
(contractor)' to deterin,ine if the project will: proceed in Prior Lake.
M~., Pyle has raised several questions that need to be answered in a straight forward manncr if
we are to receive an executed purchase agreement from~. Following is a listing of the questions and
my understanding of the responses that may be conveyed to Mr. Pyle. I have raised additional questions
regarding potential inducements that may heip to finalize the negotiations with Mr. Pyle. I am sharing
my perceptions of these issues in an attempt to determine if we may arrive at a consensus in order to
provide ,a direct and substantive response at Monday~s meeting.
1) Will his business be subject to operating restrictions or future hidden costs regarding noise
: pollution issues?
Based upon the sound tests performed by Braun Intertec, it appears that noise pollution from
the proposed operation ~ result and pose a nuisance, to adjacent residential property if doors or
other apperatures are left open on the south, and west sideS of the facility during saWing or planing
operations. Consequently, the solution would appear to be: incorporating ventilation doors on the
north/east sides of the facility- To the extent these openings increase project costs, is the EDA willing to
pay for them?
2) What, if any, extraordinary COSts will he be cOnfronted with relating to site development?
, Until soil borings arc taken based upon' a building, footprint, it is not possible to determine the
extent of (if any) extraordinary costs. Due to. the wood chip pile, the site has not been accessible for soU
borin~. As an inducement to Mr. Pyle, arc, wc prcparcd ,to initially fund the cost of soil borings il he
will execute.a purchase agreement that provides a oontingeney 'for the EDA to void the land sale if
extraordinary (:Osts of site work are 'deemed excessive.
, 3) What will be tbe net cost of the land following.implementation of a tax increment program?
, , .
Based upon the proposed purcJ1ase agreement Mr. Pyle would pay the EDA a cash price of
S1.50/SF for the land. Following is ~ overview of the CityfEDA's cost for the project:
Development '
and Finance' ,
Specialists '
Coqf~ATE OFFICES:
P.O. Box 48269
Mpls.. MN 55448-0269
Phone: (612) 755-7741
f'ox: (012) 755-5393
p,O. Box 3027
Monkato, MN 56002-3027
Phone: (507) 387-7117
Fox: (507) 387-6115
JUL-16-1998 14:12 FROM
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Don 'Rye, Frank Boyles & Prior Lake EDA
July 16, 1998 '
Page Z
4.5 aeres (estimated) @ $2.04/SF '
Wetland mitigation (Bngineer"~ c::stirnat'e)
Legal/consulting fees '" '
Soil Correction allowance (estimate)
, SUBTOTAL ,
Less Developer Cash Payment'
Less 10% local contribution
TOTAL , ,
5399,880
30,000
10,000
50.000
$489.880
(294,030)
(42. 7f1J.)
$153,090
, ,
,The .citylEDA will need net 'I1F revenues 'of S153,090 to breakeven. The TIP'potential based
upon a 45,OOOSF facility and an estimated real estate tax of'$1.60/SF is $350,175 (net present value @
7% discount factor, 9 years). '
, ,
Based upon this net present value TIP,estimate, related project costs 'and the developer cash
. payment, there wouldbe approximately $197,085 available for developer reimbursement; thus, the nei:
cost for the land would be $96,945 'or $.49/SF.
The use' ~f' a "rIF inducement is ~eCessary because the CitylEDA is competing with Bumsville for
the project. I have b~en told that the City'of Bumsville has offered a,n upfront contribution of $112.500
as an induCement fOr development~ " ,
, ,
Ifwe do not convey this propertY to Mr. Pyle: it is unlikely th2i.t develop~ent will occur iri'l998.
Every year that passes without development will ,result in a delay of tax base enhancement (estimated at
$72.000/yeat). If we wan,t to close ou~ the busin~s park, I believe that we should maintain an assertive
and positive position in' negotiations. '
. Please call me 'with your thoughts and questions.. Thank you!
TOTAL P.03