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10 20 2014 EDA Report 8A_Attach1
BUSINESS PLAN TECHNOLOGY VILLAGE BUSINESS ACCELERATOR PHASE H.2 Fy2015 CITY OF PRIOR LAKE ECONOMIC DEVELOPMENT AUTHORITY OOGY H t� le 4646 DAKOTA STREET SE PRIOR LAKE, MN 55372 952-447-9813 drogness(a, cityofpriorlake.com www.cityofpriorlake.com TABLE OF CONTENTS SECTION TITLE PAGE 1.0 EXECUTIVE SUMMARY 2 1.1 History 2 1.2 Current Circumstances 3 1.3 Technology Village Phase 11 Overview 3 1.4 Technology Village Goals 4 1.5 Technology Village Metrics 5 2.0 MISSION 5 3.0 PROGRAM PARTICIPANT FOCUS 5 3.1 Program Participants 6 4.0 ORGANIZATION & MANAGEMENT 7 4.1 Board of Directors 7 4.2 Advisory Board 9 4.3 Service Providers / Technology Village Partners 9 5.0 CURRENT RENTAL RATES 9 6.0 SELECTION CRITERIA 10 7.0 STAFFING PLAN it 8.0 2015 OPERATING BUDGET it 8.1 Projected Program Demand 12 8.2 Program Participant Forecast 13 8.3 Employment/Staffing Forecast 13 8.4 Marketing Forecast 13 8.5 Funding Request 14 9.0 MICROENTERPRISE LOANS 14 10.0 VALUE OF A JOB 14 Appendix A - Current Technology Village Floor Plan 16 Appendix B - Sample Rent Scenarios 17 Technology Village Business Plan —Phase II.2 Page 1 1.0 EXECUTIVE SUMMARY This Phase II.2 Technology Village Business Accelerator Business Plan was drafted by the Technology Village Board of Directors. The Board of Directors was appointed by the Prior Lake City Council on November 26, 2012 to act in an advisory capacity to the Economic Development Authority (EDA) and advise the EDA on matters related to Technology Village. This business plan will help achieve some of the duties and responsibilities assigned to the board, which include the planning and formulating of policy to guide the programming and direction of the Technology Village program as well as ensuring the overall financial viability of the accelerator. The original Technology Village business plan anticipated five Technology Village program participants by the third year of operation. The program currently in its second year of operation and has five program participants, with a total of fourteen full-time employees. The demand for office space within Technology Village demonstrates a need for this type of program in the community. This Phase II.2 Business Plan serves as the next step in establishing the Prior Lake Technology Village Business Accelerator as a key economic development initiative of the City of Prior Lake. 1.1 HISTORY In the fall of 2011, the Prior Lake EDA appointed a Technology Village subcommittee in an effort to assemble and organize human resources to establish a business incubator in the community, which was identified as a key objective of the EDA. The EDA provided the subcommittee with direction to begin evaluating options to implement a technology business incubator facility in Prior Lake, including a report that covers these primary issues: • Identify models of business incubation (public, private, or combination); • Outline financial models to support start-up and ongoing operational costs; • Evaluate opportunities for business incubation in Prior Lake; and • Identify a preferred plan for Prior Lake. The subcommittee completed and presented its initial report and recommendations to the EDA on February 13, 2012. The report identified different models of business incubation, outlined financial options to support start-up and ongoing operational costs, evaluated opportunities for business incubation in Prior Lake and identified a preferred plan for the city. A business plan for the Technology Village Business Accelerator was then drafted by the subcommittee and presented to the EDA which detailed a preferred industry focus, organizational structure, Board of Director composition, services and programs offered through Technology Village, rental rates, marketing, application and acceptance criteria, staffing plan, facility information, budgets and financials, as well as potential funding sources. After discussion and revisions, the EDA approved the business plan for the Technology Village Business Accelerator on July 16, 2012. On September 10, 2012, after a review of the Technology Village business plan, the Prior Lake City Council approved an amendment to the 2012 Prior Lake General Fund and Economic Development Authority budget in the amount of $50,000 to fund the initial phase of Technology Village. Technology Village Business Plan —Phase H.2 Page 2 1.2 CURRENT CIRCUMSTANCES Technology Village provides offices located on the main floor of Prior Lake City Hall within a previously underutilized office space of approximately 2,000 square feet. The space consists of five hard -walled offices, one conference room and a 775 square foot open office area. Initiating the program in the existing city hall building helped minimize start-up costs and also allowed for the shared use of services already in place serving City of Prior Lake staff, including; internet, phone, copy machine, printer, meeting space, cafeteria/break room, etc. The office space within city hall also provided the added locational benefit of allowing the program participants to be in close proximity to city staff who administer the day-to-day program operations. The Board of Directors entered into Phase II of program development on June 1, 2014 when the first program participant entered into a private lease agreement for space outside of city hall. Phase II allows Technology Village to serve program participants who, because of lack of space within city hall or business needs that cannot be served in city hall, are located in private lease space within the City of Prior Lake. Instead of the escalating rent structure that is paid by Phase I program participants, Phase II participants enter into a private lease for office space in Prior Lake and receive a reimbursement of a portion of their monthly rental payment from the City of Prior Lake. 1.3 TECHNOLOGY VILLAGE PHASE 11 OVERVIEW One of the EDA's goals was to establish a business incubator in the community, which has been accomplished with Technology Village. By providing the resources necessary to implement Phase II of the Technology Village plan, the EDA has further endorsed Technology Village as an important tool to achieve the overall objectives of the EDA and 2030 Vision and Strategic Plan by removing obstacles to economic development, promoting growth and diversifying the city's tax base. The Technology Village Board of Directors is recommending a Phase 11.2 business plan which will allow the program to maintain and expand its current program participants and provide additional office space in privately owned properties throughout the community to serve not only emerging technology businesses but a wider variety of growing companies. As was anticipated with the original and Phase II Technology Village business plans, Phase 11.2 will require additional financial commitments from the City of Prior Lake EDA. Every effort will be made to locate program participants in the existing city hall facility whenever possible; however, once five businesses occupy the Phase I facility it is unlikely expansion space within city hall will be available for two reasons; i) the Prior Lake — Spring Lake Watershed District has occupied a portion of the lower level of city hall which has consumed the majority of the expansion space available, and ii) it is likely that city staff additions will be necessary in the next few years to provide services to our growing community. Assuming city hall Technology Village office space is occupied, or adequate lease space is not available within city hall, the Executive Director and Board of Directors work with existing property owners to maintain a list of available privately owned office space and allow program participants to lease space in multiple locations throughout the community. Technology Village program participants located outside of city hall are eligible to receive a reimbursement of gross rental costs from the City of Prior Lake Economic Development Authority. The reimbursed rental amount is calculated based on the actual number of employees and actual area of lease space, not to exceed 200 square feet for single employee businesses and 150 square feet per employee for multiple employee businesses. Technology Village Business Plan —Phase II.2 Page 3 The Technology Village subcommittee originally considered the option of the EDA leasing space in privately owned office space in the community and then sub -leasing that space to program participants at a reduced rental rate. This option was ultimately not pursued because of the anticipated cost to the EDA. The Phase II Technology Village business plan, which was approved by the EDA, envisioned private lease space agreements; however, the EDA does not enter into a lease agreement with a private landlord. The program participant is required to locate their own office space, with the assistance of city staff and the Technology Village board, and then a rental reimbursement is provided by the EDA to the participant on a quarterly basis after the monthly rent payment is received by the landlord. The Technology Village Board of Directors has determined that this will reduce the cost responsibilities of the EDA and will also eliminate the risk of the EDA leasing and paying for space which is not occupied by program participants. Each Phase II program participant is required to commit to three years of program participation, unless otherwise approved by the Technology Village Board of Directors, which is secured with a program participation contract. For single employee businesses, each program participant is eligible for reimbursement in the amount of $12 per square foot of lease space or two-thirds of the gross rental rate during the first year, whichever is less. During the second year, each program participant is eligible for reimbursement in the amount of $6 per square foot of lease space or one-third of the gross rental rate, whichever is less. During the third year, the program participant is responsible for all costs associated with the private lease agreement. The rental reimbursement is based on the actual area leased with a maximum area allowance of 200 square feet. Any additional space leased above 200 square feet is the sole responsibility of the program participant. Should a program participant have multiple employees working full-time within the approved office location, the rental reimbursement amounts are the same as a single employee business; however, the maximum area allowance is 150 square feet per employee who works full time from the approved office location. Program participants with multiple employees are required to submit a certificate of compliance annually which certifies the number of full-time equivalent positions working within the approved office location. In the event office space outside of the existing city hall Technology Village location is desired by a potential program participant, the City of Prior Lake will make no assurances or guarantees as to the quality of office space, furnishings or other amenities and technology offered by the private landlord. The EDA will not furnish office space outside of city hall; however, microenterprise loan funds will be made available for this purpose as described in greater detail below in section 9.0. All lease agreements for space outside of city hall are executed between the program participant and the private landlord; the City of Prior Lake will not be a party to the private lease agreements and will make no guarantees of lease payments or any other obligations of the program participant. 1.4 2014 TECHNOLOGY VILLAGE GOALS The 2014 program goals, developed by the Technology Village Board of Directors and approved by the Economic Development Authority and Prior Lake City Council, include: ➢ Obtain funding approval necessary to maintain Phase I and then fully implement Phase II Business Plans. ➢ Support and retain existing Technology Village businesses through direct assistance, networking and resource development. Technology Village Business Plan —Phase H.2 Page 4 ➢ Establish an adequate pipeline of technology businesses that will allow the continued full use of the Technology Village program. 1.5 TECHNOLOGY VILLAGE METRICS The Technology Village Board of Directors has identified seven metrics which are currently being tracked by the board. The metrics will be reported to the City of Prior Lake Economic Development Authority on an annual basis, or as requested by the EDA. ➢ Program Participant Contacts: Quarterly meetings between existing program participants and Technology Village Board of Director Members. ➢ Program Participants: number of businesses participating in the Technology Village Program. ➢ Employment: number of people currently employed by program participants. ➢ Vacancy/Occupancy Rate: percentage of city hall Technology Village space under lease agreement. ➢ Total Square Feet Leased: public (city hall) and private office space. ➢ Applications: number of program applications received, reviewed and accepted. ➢ Website Activity: total website hits, website hits by unique IP address and pages visited. 2.0 MISSION Technology Village Mission Statement — Technology Village supports the growth of emerging technology-based businesses within an entrepreneurial environment that encourages collaboration, fosters job creation and provides connections to local & regional resources. In general, the mission of any business accelerator is to aid in the successful development of emerging businesses. Ideally, businesses will grow and move from Technology Village out into the community and contribute to the overall vitality, diversity, and growth of the economy. Not only do participants of the Technology Village Program benefit, but the program is designed so the City of Prior Lake benefits through greater economic development activity, new employment opportunities, enhanced community image, increased entrepreneurialism and additional tax revenues that support services. 3.0 PROGRAM PARTICIPANT FOCUS Incubators and business accelerator programs throughout the nation vary in the way they deliver their services, in their organizational structure, and in the types of businesses they serve. Due to space limitations and the awareness that the Prior Lake Technology Village simply cannot meet the needs of all potential program participants, the recommendation of the Technology Village subcommittee and the focus of the Board of Directors has been to focus on emerging technology businesses. For the purposes of Technology Village, emerging technology is defined as any technology product or service that is currently developing or will be developed that may be commercialized and has the ability to alter a business or social environment. The board feels emerging technology businesses provide the greatest opportunity to positively impact the community and assist with high quality job growth. By narrowing the focus to emerging technology, the board feels confident in its ability to create a collaborative environment where complimentary businesses can work together and share information and resources to fully capture the business accelerator concept and provide the greatest opportunity for program success. Technology Village Business Plan —Phase H.2 Page 5 The Phase II.2 program focus will continue to be on emerging technologies; however, program expansion into alternate office locations in the community will allow the board and EDA to provide Technology Village services to non -tech companies with high growth and high employment potential. The city hall office space is proposed to be reserved for tech related companies while other businesses with a focus on other industries will be able to take advantage of this program at an alternate office location. Due to space restrictions, funding limitations, limited staff availability and board consulting time, the board cannot possibly approve each and every program application. The board has and will continue to work to maximize the funding provided by the EDA to support those businesses that, in the board's judgment, have the greatest opportunity for success and job creation. The ability of a potential program participant to demonstrate their business will most likely achieve the goals of job creation and community investment and therefore address the most pressing public purpose will be the primary factor in determining whether a business is accepted into the Technology Village program. 3.1 PROGRAM PARTICIPANTS Below is a list of current program participants. Technology Village has five existing program participants. The current Technology Village floor plan with program participant spaces identified is attached as Appendix A for reference. design a tivi1y design a tivity, llc has been a Technology Village program participant since January 1, 2013. design a tivity is a single employee graphic design studio and leases 126 square feet within Prior Lake City Hall. design a tivity's areas of expertise includes website development, logos, brand identity, product literature and brochures, invitations, advertising, publications, packaging and product design & development. Innovative Computer Professionals Innovative Computer Professionals (ICP) has been a Technology Village program participant since March 1, 2013. ICP has nine full-time employees who occupy 3,587 square feet of privately owned office space in the Village Commerce office building. ICP provides consulting services and solutions to the ATM (Automated Teller Machine) and POS (Point -of -Sale) industry with specialization in gaming, card encoding/embossing, ATM/POS host systems, and PCI DSS compliance. Black Dog Computer Services Black Dog Computer Services has been a Technology Village program participant since November 1, 2013. Black Dog Computer Services is a single employee software development firm and leases 180 square feet of office space in Prior Lake City Hall. Black Dog Computer Services specializes in the banking and financial industry; primarily fraud detection and fraud investigations software. Valde Group Valde Group has been a Technology Village program participant since November 1, 2013. Valde Group is a two employee firm and leases 264 square feet of space in Prior Lake City Hall. Valde Group is an emerging business services consulting firm specializing in custom software development and applications that drive financial transactions from self-service kiosks. Our clients engage Valde Group for strategy and implementation of cash management solutions, kiosk integration, digital signage and media products, electro- mechanical technician training and ATM parts fulfillment and refurbishment. Technology Village Business Plan —Phase II.2 Page 6 MyCarte MyCarte has been a Technology Village program participant since September 1, 2014. MyCarte is a one employee firm and leases 155 square feet of space in Prior Lake City Hall. MyCarte is a SaaS based subscription service utilizing both a website and integrated app to aggregate the restaurant ordering process. The software and app developed by MyCarte provides the technology for a restaurant owner/manager to place orders for any and all suppliers via API, email, fax or text through the app; eliminating the need to order from individual suppliers via, phone, web, sales representatives, etc. Local Vibe LLC Local Vibe LLC leases 126 square feet of office space and has been a Technology Village program participant since October 1, 2014. Local Vibe is in early stage development of a real time, location based marketing app. The app will provide real time information for local deals, specials and events that are happening in that community. 4.0 ORGANIZATION & MANAGEMENT Technology Village is a publicly sponsored business accelerator with its primary funding provided by the City of Prior Lake Economic Development Authority. The organizational structure of Technology Village includes the Prior Lake Economic Development Authority, Technology Village Board of Directors, an Executive Director and City of Prior Lake staff support. The Executive Director implements the goals of the organization and manages the day to day activities with the assistance of City of Prior Lake staff. The Board of Directors acts in an advisory capacity to the EDA and advises on matters related to Technology Village. The duties and responsibilities of the board include: • Plan and formulate policy to guide the programming and direction of the Technology Village program; • Assist in the hiring of the Executive Director position; • Assist in screening prospective accelerator clients; • Ensure the overall financial viability of the program; • Serve as a liaison between city government and the community; and • In conjunction with EDA members or city staff, introduce potential or new business representatives to others in the commercial community. 4.1 BOARD OF DIRECTORS The Board of Directors consists of individuals that share the vision of Technology Village as an economic development initiative and who are able to provide expertise that will help fulfill the program's mission. The board has been instrumental in promoting Technology Village in the community and generating awareness and understanding of the Technology Village program as an important economic development tool for the City of Prior Lake and surrounding Scott County communities. The members have provided network connections and assistance to the Executive Director in creating links to investment and professional resources that support the success of Technology Village businesses. Below is a list of the Technology Village Board of Directors: Technology Village Business Plan —Phase II.2 Page 7 Gerry Hughes, Chair With more than 25 years of Healthcare experience, Mr. Hughes is a proven and successful professional services leader within the business software industry with such well-known companies Lawson Software, Oracle, and Healthland. Through direct efforts related to professional consulting service contracts, product sales support, project implementation leadership and oversight, Gerry is known for being a strategist and passionate leader who understands the importance of a goal driven organization to meet operational objectives and maximize organic growth. Gerry is an innovative thinker adept at identifying client and company business needs, making decisions, problem solving, mentoring and initiating company culture change. Rick Bump, Vice -Chair As an Operating Partner with Open Road Venture, the President of ASI Datamyte, Inc. and a member of the City of Prior Lake Economic Development Authority, Rick brings a pragmatic, innovative and results -oriented approach to the Technology Village Board of Directors. Rick's 20 years of professional experience with business unit planning, product strategy, sales, operations and financial management and his proven ability to develop strong client relationships are a valuable resource to the Board of Directors and Technology Village program participants. Lori Frank Lori Frank currently serves as the CEO of Argos Risk, an online credit risk management business based in Edina, Minnesota. With over 25 years of executive management experience in the areas of technology and finance, Lori is a visionary leader who has led several start-up companies into market dominance. She has served as CEO of both public and private companies over her tenure and thrives in diverse and challenging enterprises that need a focused, motivated leader. Kris Pauna A Prior Lake resident since 2003, Kris moved here to start and raise his family. As a member of the board he provides a diverse experience in finance, operations and marketing with a perspective from medical device, agriculture, manufacturing and retail management. David Rech Dave has spent over 30 years as an executive in the technology sector focused on selling to the masses. He presently owns his own consulting firm and is actively involved in real estate development and sales. Previously he's held global executive management positions with The Walt Disney Company, Twentieth Century Fox, Digital River and Globalware Solutions as well as multiple distribution companies. Dave was born and raised in New Prague, MN and his family have been residents of Prior Lake for over 13 years, they also spent 10 years in California. As a member of the board Dave brings sales, marketing, ecommerce, contract management, coaching and SaaS experience to the mix. Adam Proehl Mr. Proehl is a partner at NordicClick Interactive, a cutting-edge Twin Cities Digital Marketing agency. Adam was instrumental in building this 18 person multi-million dollar agency from the ground up and he understands what it takes to make a young company succeed. With a background in marketing and an established network of industry peers, executives, service providers and investors, Adam is an invaluable resource for the Technology Village program. Adam loves seeing individuals who put their soul into their business dream and working with them to grow their technology start-up companies. Adam has spoken at several industry conferences over the last few years including SES, Pubcon, OMS, B2B, eMetrics, and DMA. He is also an instructor at the Online Marketing Institute and the University of San Francisco. Technology Village Business Plan —Phase II.2 Page 8 Dan Rogness, Executive Director Mr. Rogness is the Executive Director of Technology Village as well as the Community & Economic Director for the City of Prior Lake. Dan manages the day to day operations of Technology Village and fills an important role as a conduit to the Economic Development Authority. 4.2 ADVISORY BOARD In 2015 the Technology Village Board of Directors will be exploring opportunities to develop an Advisory Board which will work with the Board of Directors to advise and mentor program participants. The current Technology Village Bylaws prohibit any official to take action or make a decision that would substantially affect the official's financial interests or those of an associated business, unless the effect on the official is no greater than on other members of the official's business classification, profession or occupation. The Bylaws further requires that all members of the Board of Directors be either Prior Lake residents or be affiliated with a business located within the City of Prior Lake. The Technology Village Board of Directors feel there may be an opportunity to capitalize on the experience and expertise of non -Prior Lake residents or those who may wish to invest in or partner with a current or future program participant. The board will be considering establishing an Advisory Board of ex -officio, non-voting members who may not meet the requirements to be a member of the Board of Directors but whose skills would make them a valuable asset to the Technology Village board and its program participants. 4.3 SERVICE PROVIDERS / TECHNOLOGY VILLAGE PARTNERS The Technology Village Board of Directors has been successful in establishing partnerships with Integra Telecom and the Prior Lake Area Chamber of Commerce who provide their services at a reduced rate to Technology Village program participants. The board would like to expand the network of service providers to include accounting, legal, human resources, financial, and other local professionals and institutions who will offer their services at a free or reduced rate to program participants and may also serve on the Technology Village Board of Directors. The establishment of this service provider network will be a time consuming task and would be a key initiative of a future part-time Executive Director. An established network of service providers will help create awareness of the Technology Village program throughout the community and will provide the necessary services that are needed to ensure the success of our program participants. The Technology Village will be exploring opportunities to enhance its relationships with the existing service providers and develop new partnerships with organizations such as Scott County, SMSC, MN DEED, SCORE, and the Prior Lake — Savage School District (Fab Lab). 5.0 CURRENT RENTAL RATES The Technology Village Board of Directors will continue the escalating rent structure for rental space within the city hall location. The rental reimbursement for office space outside of city hall decreases over the three year term which will achieve the same purpose; which is to have the program participant pay a larger share of their operating costs as their business grows. Technology Village Business Plan —Phase H.2 Page 9 Currently, program participants pay an escalating rent payment over the lease term and the payment received is used to subsidize Technology Village program operations. For example, the Board of Directors has establish a standard market lease rate of $15 per square foot for the hard walled office area; however, a business is only required to pay $5 per square foot for the first year, $10 per square foot for the second year, followed by $15 per square foot during the third year of the lease term. In addition to the annual lease savings, the Technology Village Board has established an estimated value of $18.19 per square foot for program costs paid for or provided by the City of Prior Lake. These services, which are provided at no cost to program participants and are detailed in each lease agreement include; program management, city staff time, office equipment, furnishings, property insurance, janitorial service, grounds maintenance, snow removal, common area building maintenance, equipment maintenance, trash removal and payment of utilities including gas, electric, sewer and water. These no cost services and below market lease rate savings are considered the City of Prior Lake's "equity investment" in the participant's business. The lease agreement requires the equity investment to be repaid to the City of Prior Lake should the business relocate to another community prior to or upon graduation. If the business remains in Prior Lake, or Scott County at the EDA's discretion, for a term of five years after graduation the city's equity investment will be forgiven. Based on conversations with potential program participants and the questions and concerns they expressed, the board recommends that the value of the services provided through the program are emphasized and the consulting and mentoring time provided by the board be quantified so that program participants will have clear expectations of the services they will receive and the natural dollar amount thereof. Reimbursement of the city's equity investment is reduced by an equal amount over a five year period following expiration of the lease term. If the participant chooses to relocate its business outside of Prior Lake city limits prior to or upon graduation they are required to reimburse the full equity investment. During the second year after lease termination 20 percent of the city's equity investment will be forgiven and the repayment amount decreases by an equal amount during each subsequent year until the equity investment is $0.00. Program participants located outside of city hall are also responsible for reimbursement of the City of Prior Lake's equity investment; however, the equity investment will be less for those located in a privately owned office space because they will not be utilizing the city hall services and they will be responsible for a portion of common area maintenance fees at their alternate location. 6.0 SELECTION CRITERIA Because Phase II of the Technology Village program has made the program available for high growth and high employment businesses, which may not meet the definition of emerging technology, it is very important to ensure all future program participants meet the selection criteria. Due to limited funding and limited space options, the Technology Village Board of Directors cannot accept every business into the program. To determine which business start-ups have a strong potential to succeed and create employment opportunities in the community, the following eligibility requirements were drafted after a review of best practices of existing incubator/accelerator organizations. Technology Village Business Plan —Phase H.2 Page 10 • The applicant must be in the early stages of business development (first three years). Small companies involved in a significant change in direction or launching a new business product are also eligible to apply. • The applicant must be a for-profit business with growth potential. • The applicant must demonstrate a strong market for products and services. • The applicant must have potential for positive economic impact on the community through: o A technology, product, or service deemed to have a high marketplace potential. o A potential for company growth and the associated creation of desirable jobs within Prior Lake or surrounding Scott County communities. • The applicant must have a product or service that may be commercialized within the time set forth in the lease agreement. • The applicant must plan to remain headquartered within the City of Prior Lake. • The applicant must have a written description of the business or a draft business plan. • The applicant must show the ability to pay rent while they develop positive cash flow. • The applicant must be willing to accept advice and guidance from the Technology Village Board of Directors. • The applicant business must be willing to take advice from the professional network and/or the Executive Director. • The applicant must desire to take advantage of and be able to benefit from the value-added services and guidance provided through the Technology Village program. 7.0 STAFFING PLAN Phase I and Phase II staffing has been accomplished with existing City of Prior Lake staff. Dan Rogness, Community and Economic Development Director for the City of Prior Lake has been serving as the Technology Village Executive Director. The Executive Director is assisted by Prior Lake Community Development staff and existing City of Prior Lake support staff. Additionally, members of the Board of Directors have taken a hands-on approach to assist in the program's staffing needs. The Executive Director and city staff, along with members of the board, have coordinated and provided services to program participants, cultivated resource networks, managed facility development, and managed ongoing operations. 8.0 2015 OPERATING BUDGET Below is the estimated operating budget for 2015 Technology Village operations. Annual rental revenue for existing Technology Village businesses is estimated to be $6,000 in 2015. These anticipated revenues will be used to subsidize the costs for Technology Village operations. Note, the anticipated lease revenue in 2015 includes the four program participants currently under lease agreement within the city hall office space. Technology Village Business Plan —Phase H.2 Page 11 8.1 PROJECTED PROGRAM DEMAND It is very difficult to estimate the program's financial needs in 2015 because it is not known how many program participants will be accepted into the program, when they will be accepted, their space needs or number of employees per organization. For the purpose of these budget assumptions, the board anticipates two new Technology Village program participants, in addition to ICP, will be identified in 2015; one three employee businesses and one, two employee business. Assuming two business are identified, in addition to ICP who is a current Phase II.2 participant, the following rental reimbursement would be required. Although, it is noted the assumptions below assume the additional Phase II program participants would begin occupying space on January 1, 2015. Technology Village Business Plan -Phase H.2 Page 12 2014 Original Budget 2014 Amended Budget 2015 Proposed Budget Revenues/ Sources: Intergovernmental revenues 33010 jPropertyTa.es $ 19,315 $ 31,315 $ 34,000 33610 lGrant Revenue - - Charges for Services 34760 jIncubator Leases 7,185 7,185 6,000 Miscellaneous revenues 36210 jInterest Earnings - - - Transfers from Other Funds 39203 lGeneral Fund - Total Revenues/ Sources $ 26,500 $ 38,500 $ 40,000 Expenditures / Uses: 46503 Technology Village Incubator 201 Office Supplies 500 500 500 304 Legal Fees - - - 309 Software Design - - - 321 Communications 2,500 2,500 5,000 433 Dues & Subscriptions 2,500 2,500 2,500 437 Miscellaneous 2,500 2,500 2,500 520 Building & Structures 1,500 1,500 - 560 Furniture & Fixtures - - 1,500 580 General Equipment 4,000 4,000 1,500 xxx Business Assistance 3,000 3,000 3,000 xxx Rent Subsidies 10,000 22,000 23,500 Total Expenditures / Uses $ 26,500 $ 38,500 $ 40,000 8.1 PROJECTED PROGRAM DEMAND It is very difficult to estimate the program's financial needs in 2015 because it is not known how many program participants will be accepted into the program, when they will be accepted, their space needs or number of employees per organization. For the purpose of these budget assumptions, the board anticipates two new Technology Village program participants, in addition to ICP, will be identified in 2015; one three employee businesses and one, two employee business. Assuming two business are identified, in addition to ICP who is a current Phase II.2 participant, the following rental reimbursement would be required. Although, it is noted the assumptions below assume the additional Phase II program participants would begin occupying space on January 1, 2015. Technology Village Business Plan -Phase H.2 Page 12 Annual Reimbursement Additional rent subsidy scenarios are attached as Appendix B to this document. The board will first attempt to find available office space within the city hall location, which would not require an out of pocket rental reimbursement. If space is not available, or suitable, in the city hall location then office space within the community will be used, which will require a rental reimbursement. If additional businesses are identified for the program resulting in an increase in the allocated funding amount, the board will request EDA approval and funding allocation (if needed) prior to entering into additional program participation contracts. 8.2 PROGRAM PARTICIPANT FORECAST The Board of Directors is working on the assumption that the five existing program participants will continue occupying space per their lease agreements and participation contracts. The board anticipates one additional participant will be identified to occupy space within the city hall office and two new Technology Village program participants, in addition to ICP, will be identified in 2015 to occupy space outside of city hall; one three employee businesses and one two employee business. 8.3 EMPLOYMENT/STAFFING FORECAST To this point, Phase I and Phase 11 staffing has been accomplished with existing City staff and the Technology Village Board of Directors who have taken a hands-on approach to assist in the program's staffing needs. The Executive Director and city staff, along with members of the board, have coordinated and provided services to program participants, cultivated resource networks, managed facility development, and managed ongoing operations. The original Technology Village Business Plan anticipated the hiring of a full-time Executive Director with Phase II development due to subsequent increases in staffing hours, increases in workload, and additional funding availability. The Board of Directors recommended maintaining Phase I staffing levels with their Phase II.2 business plan. Because this program has continued to prove to be successful, the Technology Village Board of Directors is recommending a part-time Executive Director should be hired in Fy2016 to manage the operations of the accelerator, provide direct business assistance to program participants, establish a network of service providers and program sponsors, and continue to grow and expand the reach of the program. 8.4 MARKETING FORECAST The goal of the Technology Village Board of Directors is to fill and maintain the city hall Technology Village office space while establishing a pipeline of applicants for future program participation. The proposed 2015 Operating Budget includes $5,000 for communications. These funds will be spent to advertise the Technology Village program and space availability in regional publications, make Technology Village Business Plan —Phase H.2 Page 13 # of Tota I Business Employees 2014 2015 2016 2017 Reimbursement per Business ICP 9 $5,400 $13,500 $5,400 $0 $24,300 Business #2 3 $0 $5,400 $2,700 $0 $8,100 Business #3 2 $0 $3,600 $1,800 $0 $5,400 Total 14 $5,400 $22,500 $9,900 $0 $37,800 Additional rent subsidy scenarios are attached as Appendix B to this document. The board will first attempt to find available office space within the city hall location, which would not require an out of pocket rental reimbursement. If space is not available, or suitable, in the city hall location then office space within the community will be used, which will require a rental reimbursement. If additional businesses are identified for the program resulting in an increase in the allocated funding amount, the board will request EDA approval and funding allocation (if needed) prior to entering into additional program participation contracts. 8.2 PROGRAM PARTICIPANT FORECAST The Board of Directors is working on the assumption that the five existing program participants will continue occupying space per their lease agreements and participation contracts. The board anticipates one additional participant will be identified to occupy space within the city hall office and two new Technology Village program participants, in addition to ICP, will be identified in 2015 to occupy space outside of city hall; one three employee businesses and one two employee business. 8.3 EMPLOYMENT/STAFFING FORECAST To this point, Phase I and Phase 11 staffing has been accomplished with existing City staff and the Technology Village Board of Directors who have taken a hands-on approach to assist in the program's staffing needs. The Executive Director and city staff, along with members of the board, have coordinated and provided services to program participants, cultivated resource networks, managed facility development, and managed ongoing operations. The original Technology Village Business Plan anticipated the hiring of a full-time Executive Director with Phase II development due to subsequent increases in staffing hours, increases in workload, and additional funding availability. The Board of Directors recommended maintaining Phase I staffing levels with their Phase II.2 business plan. Because this program has continued to prove to be successful, the Technology Village Board of Directors is recommending a part-time Executive Director should be hired in Fy2016 to manage the operations of the accelerator, provide direct business assistance to program participants, establish a network of service providers and program sponsors, and continue to grow and expand the reach of the program. 8.4 MARKETING FORECAST The goal of the Technology Village Board of Directors is to fill and maintain the city hall Technology Village office space while establishing a pipeline of applicants for future program participation. The proposed 2015 Operating Budget includes $5,000 for communications. These funds will be spent to advertise the Technology Village program and space availability in regional publications, make Technology Village Business Plan —Phase H.2 Page 13 improvements to the existing Technology Village website, develop printed promotional materials and sponsor business and entrepreneur events which promote the program to potential participants and provide an educational component to the Technology Village program. 8.5 FUNDING REQUEST Although it is difficult to anticipate the space needs of future program participants and the actual dates where lease terms would begin, the board has attempted to provide an accurate estimate of future funding needs. Based upon the estimated budget information detailed above, the Technology Village Board of Directors is recommending a funding allocation of $34,000 to the Technology Village program in 2015. 9.0 MICROENTERPRISE LOANS The Board of Directors is not proposing to furnish office space for program participants who locate outside of the city hall location. However, the City of Prior Lake Economic Development Revolving Loan Fund Guidelines, adopted on May 7, 2012, allow microenterprise loans to be provided to eligible Technology Village program participants. A microenterprise is defined as a commercial enterprise that has five (5) or fewer employees, one or more of whom owns the enterprise. The available revolving loan funds consist of federal and state funds capitalized through funding made available to the City of Prior Lake from the Minnesota Department of Employment and Economic Development. Federal funds are subject to the rules and regulations established by the U.S. Department of Housing and Urban Development (HUD) for the State of Minnesota Community Development Block Grant (CDBG). When using federal funds, national objectives and other program requirements must be met as identified in the federal HUD program requirements for Small Cities CDBG. The Revolving Loan Fund guidelines allow microenterprise/business accelerator businesses to be eligible for both low-interest and deferred loans. The EDA, not the Technology Village Board of Directors, will review all Technology Village microenterprise loan requests and determine the terms of the loan. Deferred loans are provided at an interest rate of zero (0) percent and the loan principal repayment shall be deferred based on conditions established for each business. For example, microenterprise/incubator deferred loans may not have to be repaid until three (3) years from the date of assistance. Incentives could also include partial/full loan forgiveness based on the business meeting certain thresholds. Principal collected from loan repayments will be returned to the revolving loan fund for relending. The maximum amount of a microenterprise loan shall be $10,000.00 and the minimum amount shall be $2,000.00. Operating costs and working capital are not eligible loan costs. 10.0 VALUE OFA .TOB The Technology Village Board of Directors has attempted to evaluate the economic impact of a new technology related job in Prior Lake. The board used a paper titled, Measuring How Much Economic Change Will Mean to Your Community by Dr. Michael L. Walden, Professor and Extension Economist, Department of Agricultural and Resource Economics at North Carolina State University, as a reference to estimate the economic impact of anew technology related job in Prior Lake. The table below shows an income multiplier, which is essentially the number of times money earned and spent within a local economy circulates through the economy, to estimate of the impact of fourteen new technology related jobs at an estimated $50 per hour and a conservative leakage rate of 75%. Technology Village Business Plan —Phase II.2 Page 14 Technology Village Estimate 75% "Leakage" Example 14 jobs @ $50/hour Direct Earnings = $1,456,000.00 $1,456,000.00 X 25% = $364,000.00 $364,000.00 X 25% = $91,000.00 $91,000.00 X 25% = $22,750.00 $22,750.00 X 25% = $5,687.50 $5,687.50 X 25% = $1,421.88 $1,421.88 X 25% = $355.47 $355.47 X 25% = $88.87 $88.87 X 25% = $22.22 $22.22 X 25% = $5.55 $5.55 X 25% = $1.39 $1.39 X 25% = $0.35 $0.35 X 25% = $0.09 $0.09 X 25% = $0.02 $0.02 X 25% = $0.01 Total $1,941,333.35 $1,941,333.35 $1,456,000.00 $485,333.35 / 14 jobs = $34,666.67 per job Technology Village Business Plan —Phase II.2 Page 15 APPENDIX A Current Technology Village Floor Plan LEASED Valde Group LEASED Black Dog Computer Services LEASED I LEASED MyCarte Local Vibe Copy Storage r` 186 S.f. LEASED design a tiviq, AVAILABLE Work Station 12© SP AGVAILABLE Work Station 120 SF Technology Village Business Plan —Phase H.2 Page 16 APPENDIX B Sample Rent Scenarios Example Scenario 1: Program participant leases a 200 square foot office in a private building at a gross rental rate of $19 per square foot. Because two-thirds of the gross lease rate is in excess of $12/SF, the EDA will reimburse at the rate of $12 per square foot. EDA reimbursements will be paid to program participants on a quarterly basis after the Executive Director verifies rent payments for the previous quarter have been paid in full. First Year • 200 SF X $19 = annual lease rate of $3,800; monthly lease rate of $316.67. • EDA would reimburse $12 X 200 SF = annual reimbursement of $2,400; monthly reimbursement of $200. • Program participant would be responsible for the annual lease rate balance of $1,400; monthly lease rate balance of $116.67. Second Year • 200 SF X $19 = annual lease rate of $3,800; monthly lease rate of $316.67. • EDA would reimburse $6 X 200 SF = annual reimbursement of $1,200; monthly reimbursement of $100. • Program participant would be responsible for the annual lease rate balance of $2,600; monthly lease rate balance of $216.67. Third Year • 200 SF X $19 = annual lease rate of $3,800; monthly lease rate of $316.67. • EDA would not reimburse lease rates during the third year. • Program participant would be responsible for the annual lease rate of $3,800; monthly lease rate of $316.67. Total EDA contribution = $3,600 Total program participant contribution = $7,800 Example Scenario 2. Program participant leases a 125 square foot office in a private building at a gross rental rate of $15 per square foot. Because two-thirds of the gross lease rate is less than $12/SF, the EDA will reimburse two-thirds of the gross lease rate. EDA reimbursements will be paid to program participants on a quarterly basis after the Executive Director verifies rent payments for the previous quarter have been paid in full. First Year • 125 SF X $15 = annual lease rate of $1,875; monthly lease rate of $156.25. • EDA would reimburse two-thirds of the gross rental rate ($10/SF) X 125 SF = annual reimbursement of $1,250; monthly reimbursement of $104.17. • Program participant would be responsible for the annual lease rate balance of $625; monthly lease rate balance of $52.08. Second Year • 125 SF X $15 = annual lease rate of $1,875; monthly lease rate of $156.25. • EDA would reimburse one-third of the gross rental rate ($5/SF) X 125 SF = annual reimbursement of $625; monthly reimbursement of $52.08. • Program participant would be responsible for the annual lease rate balance of $1,250; monthly lease rate balance of $104.17. Third Year • 125 SF X $15 = annual lease rate of $1,875; monthly lease rate of $156.25. • EDA would not reimburse lease rates during the third year. • Program participant would be responsible for the annual lease rate of $1,875; monthly lease rate of $156.25. Total EDA contribution = $1,875 Total program participant contribution = $3,750 Technology Village Business Plan —Phase IL 2 Page 17 Example Scenario 3: Program participant has a total of two employees and leases a 400 square foot office in a private building at a gross rental rate of $18 per square foot. Because two-thirds of the gross lease rate is in excess of $12/SF, the EDA will reimburse at the rate of $12 per square foot. EDA reimbursements will be paid to program participants on a quarterly basis after the Executive Director verifies rent payments for the previous quarter have been paid in full. First Year • 400 SF X $18 = annual lease rate of $7,200; monthly lease rate of $600. • EDA would reimburse $12 X 300 SF (150SF/employee) = annual reimbursement of $3,600; monthly reimbursement of $300. • Program participant would be responsible for the annual lease rate balance of $3,600; monthly lease rate balance of $300. Second Year • 400 SF X $18 = annual lease rate of $7,200; monthly lease rate of $600. • EDA would reimburse $6 X 300 SF (150SF/employee) = annual reimbursement of $1,800; monthly reimbursement of $150. • Program participant would be responsible for the annual lease rate balance of $5,400; monthly lease rate balance of $450. Third Year • 400 SF X $18 = annual lease rate of $7,200; monthly lease rate of $600. • EDA would not reimburse lease rates during the third year. • Program participant would be responsible for the annual lease rate of $7,200; monthly lease rate of $600. Total EDA contribution = $5,400 Total program participant contribution = $16,200 Example Scenario 4: Program participant has a total of two employees and leases a 300 square foot office in a private building at a gross rental rate of $15 per square foot. Because two-thirds of the gross lease rate is less than $12/SF, the EDA will reimburse two-thirds of the gross lease rate. EDA reimbursements will be paid to program participants on a quarterly basis after the Executive Director verifies rent payments for the previous quarter have been paid in full. First Year • 300 SF X $15 = annual lease rate of $4,500; monthly lease rate of $375. • EDA would reimburse two-thirds of the gross rental rate ($10/SF) X 300 SF = annual reimbursement of $3,000; monthly reimbursement of $250. • Program participant would be responsible for the annual lease rate balance of $1,500; monthly lease rate balance of $125. Second Year • 300 SF X $15 = annual lease rate of $4,500; monthly lease rate of $375. • EDA would reimburse one-third of the gross rental rate ($5/SF) X 300 SF = annual reimbursement of $1,500; monthly reimbursement of $125. • Program participant would be responsible for the annual lease rate balance of $3,000; monthly lease rate balance of $250. Third Year • 300 SF X $15 = annual lease rate of $4,500; monthly lease rate of $375. • EDA would not reimburse lease rates during the third year. • Program participant would be responsible for the annual lease rate of $4,500; monthly lease rate of $375. Total EDA contribution = $4,500 Total program participant contribution = $9,000 Technology Village Business Plan —Phase IL 2 Page 18