HomeMy WebLinkAbout04 15 2013 EDA 8B Economic Development Financing Tools O 1rxr o �
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4646 Dakota Street SE
Prior Lake_ MN 55372
411 NNE S OS P
ECONOMIC DEVELOPMENT AUTHORITY AGENDA REPORT
MEETING DATE: April 15, 2013
AGENDA #: 8B
PREPARED BY: Casey McCabe, Community Development Specialist
AGENDA ITEM: ECONOMIC DEVELOPMENT FINANCING TOOLS
DISCUSSION: Introduction
Presumably the EDA has concluded that they are willing to make the investments which are re-
quired to have successful economic development. During the January 2013 EDAC meeting,
members discussed the value of having a list of available economic development financing tools
and incentives to share with business leaders during Business Retention & Expansion interviews.
History
Over the past year, Community & Economic Development staff has been working to update and
develop guidelines and policies related to financing or incentive programs; including the Technol-
ogy Village Business Plan, an Economic Development Plan for Deerfield Business & Welcome
Industrial Parks, EDA Business Plan, a Sewer and Water Fee Deferral Program, and an update of
the Economic Development Revolving Loan Fund Guidelines.
Current Circumstances
City staff has developed a list of available incentives offered by the City of Prior Lake. Economic
development incentives are intended to fill gaps in private development project financing that
would otherwise make the project improbable without public support. Incentives are available for
use by the City of Prior Lake for certain economic development projects. Not all incentives are
available for each project, and projects may be able to combine more than one incentive. The type
and number of incentives offered for a project is at the sole discretion of the Prior Lake Economic
Development Authority and /or the Prior Lake City Council.
Conclusion
A handout identifying available City of Prior Lake financing tools and programs has been provided
for EDA discussion during the April 15th meeting.
ISSUES: EDA members should review the list of available financing tools and programs and determine
whether or not these incentives should be included in a new document identifying Economic De-
velopment Policy Guidelines, added to the Business Subsidy Policy (Agenda Item 8C), or provid-
ed to property owners and developers in its current form as a handout.
FINANCIAL Use of these financing tools as needed.
IMPACT:
ALTERNATIVES: 1. Provide direction to staff related to how information about the City of Prior Lake's available
financing tools and incentives should be provided to the public.
2. Continue discussion at a future meeting.
RECOMMENDED Alternative #1.
MOTION:
ATTACHMENTS: 1. Economic Development Financing Tools & Incentives
2. Savage Pacer Article: Public Financing Assistance for Emerson Project in Shakopee
Economic Development Financing Tools & Incentives
City of Prior Lake, Minnesota
Financing incentives offered by the City of Prior Lake are intended to fill gaps in private
development project financing that would otherwise make the project improbable without public
support. Incentives are approved based on development projects meeting specified criteria tied
to each program. The type and number of incentives available for a project is at the sole
discretion of the Prior Lake Economic Development Authority (EDA) and /or the Prior Lake City
Council.
Potential incentives are as follows:
Tax Increment Financing — A development tool whereby the taxes generated by a development
or redevelopment project are used to pay the costs of the project. Four types of Tax Increments
Districts are used for different projects:
Economic Development District — for new commercial or industrial expansion and job
creation purposes. Increments are limited to 10 years (8 years of increment production).
Redevelopment District — to redevelop or reuse previously developed land and /or
buildings. Usually used for building code issues, base value purchase, demolition and /or
infrastructure purposes.
Soils Condition District — used to make land with unstable soils usable for development.
Also used to address situations involving pollution.
Housing District — used to develop affordable housing by acquiring land, buildings
and /or funding infrastructure.
Sewer and Water Fee Deferral Program — Eligible businesses or properties can apply for the
deferral of a portion of one or more sewer /water fees, including: Metropolitan Council Sewer
Availability Charge (SAC); Prior Lake Sewer Connection Charge; Prior Lake Water Connection
Charge; and Prior Lake Water Tower Charge.
Conduit Bonds — City issued bonds on behalf of a private developer. The City is not a guarantor
of conduit bonds and the liability of the bonds is solely that of the developer. Conduit feature is
used to obtain rates in the tax - exempt market.
Land Sale Write Downs — Land owned by the City, acquired either through purchase or through
property tax default, is occasionally sold at less than what an appraisal determines to be is
estimated market value. This can be done either because of unique conditions on a site, such as
soils, rock, pollution, wetland, or it can be done purely as an incentive.
Special Assessment — The levying of a charge for public costs against property that has received
a benefit from a particular project or activity undertaken by the city. The special assessment
becomes a part of the funding mechanism to defray the cost of the project.
Building Leases — City owned commercial properties are available for lease to private business
enterprise. Below market lease rates will be considered by the EDA and /or City Council.
Business Accelerator Lease Space Write Downs — Below market lease rates available to
qualifying companies or tenants in city owned incubator space.
Economic Development Revolving Loan Fund — Provides gap financing through low interest
loans to low to small and medium size businesses for a variety of economic development
activities requiring public assistance but that also provide added value.
Industrial Revenue Bonds — A bond issue sponsored by the City with the proceeds directed to a
private business enterprise. Payments made by the business enterprise to City government are
used to service the bonds.
Tax Abatement — Abatement redirects all or a portion of property taxes to be used for a wide
range of public benefit projects and purposes, including; general economic development, such as
increasing tax base or employment; construction of public facilities or infrastructure; and
redevelopment of blighted areas.
DEED Loans /Grants — Numerous grant and loan programs are available from the Minnesota
Department of Employment and Economic Development (DEED) for the purpose development,
redevelopment and /or job creation. The city must serve as the applicant in partnership with a
company or developer.
Metropolitan Council Loans /Grants — The Metropolitan Council has several programs that
provide funding and fee waivers to local communities to assist with planning, development,
housing, and environmental initiatives.
With any questions about the Economic Development financing tools or incentives, please
contact:
Dan Rogness
Community & Economic Development Director
City of Prior Lake
4646 Dakota Street SE
Prior Lake, MN 55372
(952) 447-9813
drogness(cr�cityofpriorlake.com
District 191 School Board approves tax abatement for Emerson - Savage P... Page 1 of 3
District 191 School Board approves tax
abatement for Emerson
By ALEX HALL ahall @swpub.com I Posted: Friday, April 5, 2013 12:00 pm
The Burnsville- Eagan- Savage School Board narrowly passed a tax abatement deal for Emerson
Process Management on Thursday, likely clearing the path for the tech company to start
development in Shakopee.
The Board passed the abatement 4 -2 at its April 4 meeting with Board members Bob
VandenBoom and Jim Schmid voting against. The abatement is for $366,925 over nine years, or
about $41,000 per year from 2015 to 2023.
District 191 is the latest governmental agency to approve an incentive package intended to entice
Emerson to move into the area. On Tuesday, the Shakopee City Council approved more than
$806,000 in incentives, including the waiver of utility fees, the provision of regional sewer access
system credits and a $350,000 forgivable loan. The City Council previously approved a $590,000
nine -year tax abatement on Feb. 12. Scott County has offered up to a possible $2.42 million worth
of incentives to lure Emerson to the site, including a fiber connection that could save the company
$1.1 million to $1.7 million over 20 years.
In total, Emerson has requested a combined city, county and state assistance package of about $6
million. That is the gap of its costs to locate here versus Mexico, the company says. Emerson
expects to make a decision on its planned expansion soon.
Emerson, a Fortune 500 technology company, is looking to purchase a large, never- completed
building in Shakopee's Valley Green Industrial Park, located southeast of Valleyfair, that was
originally supposed to house ADC Telecommunications in the early 2000s. Emerson would use
the 508,000- square -foot building – which is within District 191's boundaries — to expand its
Rosemount division, which has its final assembly operations in Chanhassen.
CRITICISM
Officials from Emerson and the city of Shakopee came to Thursday's District 191 meeting armed
with more detailed answers to a series of questions raised at a March 7 public hearing.
Shakopee City Administrator Mark McNeill laid out a more compelling case for why the deal
would benefit District 191, explaining that it would expand the district's tax base in the long -term
— the property is currently worth $8.85 million, but McNeill said it's projected to be $21 million
when development is finished — and eventually bring 400 to 500 high- paying jobs to the region,
with some of the new employees hopefully moving into District 191 boundaries.
http : / /www.savagepacer.com/news /district - school- board- approves- tax - abate... 4/9/2013
District 191 School Board approves tax abatement for Emerson - Savage P... Page 2 of 3
"It's a regional sort of prosperity, but we hope that this will also be something that District 191, as
well as District 720 and all the neighboring jurisdictions, will see in terms of more families, more
students [and] more per pupil aid," said McNeill.
Brian Harstad, the vice president of finance for Rosemount's North America operations, also laid
out a more detailed plan for the company to partner with the district on various educational
initiatives, including a youth mentoring program, a "BestPrep" partnership and employee
engagement with students through career fairs and field trips.
"The partnership here that a high -tech company like Rosemount can have with the community and
the schools can be greatly mutually beneficial for all of us," Harstad said. "It provides our
employees an opportunity to serve and give back, and frankly they're asking for that."
However, Schmid, who was the most vocal opponent of the abatement at the March 7 public
hearing, continued to question just how beneficial the deal would be for District 191, especially in
comparison with the other parties involved.
"When I look at who's really going to benefit from this, in my order, it would go city of
Shakopee, Scott County, state of Minnesota, Shakopee School District, city of Savage, then
maybe our district," Schmid said. "It seems to come to us for the abatement when we're not even
in the top three [of parties that benefit]. It's a bit troubling."
Schmid also continued to oppose the deal from a philosophical perspective. "We're being asked to
collect a tax from all of our district residents, whether they live in Eagan, Burnsville or Savage, to
pass on to a private business," he said. "That does not seem right to me."
SUPPORT
While Schmid opposed the deal, eventually being joined by VandenBoom in voting against it,
Board member DeeDee Currier stood in strong support.
"This business development in our region is a positive one," Currier said. "Rosemount Inc. is a
Minnesota corporation and we hope it's committed to our region. I trust that they are, and I hope
that trust won't be violated."
Currier also pointed to an assertion by District 191 Business Services Director Lisa Rider that
because of per pupil fiinding, the district would only need seven new students (hypothetically a
result of new employees moving into the district) to cover the loss from the abatement, and then
some.
"Savage has the housing that attracts corporate executives, [and] this development draws them and
their families to our schools," said Currier.
http: / /www. savagepacer.com /news /district - school- board- approves- tax - abate... 4/9/2013
District 191 School Board approves tax abatement for Emerson - Savage P... Page 3 of 3
Board member Ron Hill said that he had been struggling with how he would vote on the issue,
noting that taxpayers would be the only ones footing the bill, but said he eventually decided to
support it because "it's our job to weigh that long -term benefit, and I think there's a lot of long-
term benefit that comes with this."
District 191 Business Services Director Lisa Rider estimated that the owner of a $300,000
property would likely see an annual increase of about $2.12 in their tax bill as a result of the deal.
Emerson's Rosemount division would occupy 60 acres of the 108 -acre site, initially using about
300,000 square feet of the building and expanding into the additional area as it grows. The
estimated cost of constructing the rest of the current property is $20 to $30 million.
Emerson believes that if it moves to Shakopee, it will bring an estimated 300 engineering and 200
hourly jobs to the area, and District 191 officials hope that that would mean more taxpayers
moving into their boundary lines.
The average annual wages for the new jobs would be $55,000 to $64,000, and the workers would
manufacture a line of products for the energy industry. It would be an expansion of the company's
final assembly operations in Chanhassen. Emerson made more than $7 billion in sales in 2011.
http : / /www, savagepacer. com/news /district - school- board- approves- tax - abate... 4/9/2013