HomeMy WebLinkAbout7B Versatile Vehicles PresentationPUBLIC HEARING TO CONSIDER APPROVAL OF A
RESOLUTION APPROVING A BUSINESS SUBSIDY TAX
ABATEMENT AND BUSINESS SUBSIDY AGREEMENT
VERSATILE VEHICLES, INC.
August 8, 2016
City Council
Location Map
Site Plan
Project Costs & Funding
Project Cost Estimates:
$ 930,000 Land Acquisition
$ 26,000 Professional Fees
$ 640,000 Site Development
$ 300,000 Equipment
$2,600,000 Building Construction
$4,496,000 Total
Funding Sources:
$1,650,000 Private Equity (37% of Total Dev. Cost)
$2,517,000 Bank Financing
$ 329,000 City Funding (Net Present Value)
$4,496,000 Total
Scott County preliminary estimated market value upon completion is
$3,500,000 ($700,000 land + $2,800,000 improvement).
Property Tax Abatement
for Economic Development
MN law authorizes cities to grant property tax
abatements for economic development.
Abatements and TIF have a similar purpose.
City can abate taxes on site-only, or it can include
other properties in the abatement district.
City can abate all (City) taxes, or only a portion.
Unlike TIF, must be approved by each taxing
jurisdiction.
–Counties, cities, towns, and school districts may grant
abatements of the taxes they impose.
Property Tax Abatement
Structured as “pay-as-you-go”, similar to TIF.
Property taxes are paid by the owner and City
will reimburse per the terms of the BSA.
City may set the length of the abatement.
–term is generally 15 years (start in 2018)
Scott County is being asked to consider
providing a (County) tax abatement.
School District will not be asked to consider
abatement.
EDA Revolving Loan
Versatile Vehicles has received EDA approval for a
revolving loan in the approximate amount of $94,300 to
assist with this project.
–Funded with program income received from previous
MIF loans issued by the City.
–0% interest with deferred payments for two years.
–Loan is forgiven if job creation and wage goals are
met.
–Required to repay all or a portion of the loan if job
creation and wage goals are not met.
Scenario A
City -deferred EDA Revolving Loan in the amount of $94,300.
City -tax abatement (improvement value only) on the
Deerfield Business Park lot with a maximum amount of
$180,000 (estimated NPV of $140,000) over a 15-year term.
Scott County -tax abatement (improvement value only) on the
Deerfield Business Park lot with a maximum amount of
$200,000 (estimated NPV of $160,000) over a 15-year term.
$ 94,300 City Loan
$180,000 City Abatement
$200,000 Scott Co. Abatement
$474,300 Total ($394,300 NPV)
Scenario B
City -deferred EDA Revolving Loan in the amount of $94,300.
Scott County -$0, declines to participate in the abatement.
City -tax abatement based upon the total value of the
development (land + improvements), for:
–The Deerfield Business Park lot; and
–The current Versatile Vehicles property on Hwy. 13
Abatement would be provided with a maximum amount of
$295,000 (estimated NPV of $235,000) over a 15-year term.
$ 94,300 City Loan
$295,000 City Abatement
$389,300 Total ($329,300 NPV)
Job Creation / Retention
EDA RLF Guidelines require one permanent FT job to be
created or retained for each $20,000 borrowed.
Business Subsidy Policy requires the minimum wage for
a new or retained job to be 120% of the federal poverty
level for a family of four ($14.02/hour), exclusive of
benefits.
Currently, 15 FT employees between Savage and Prior
Lake, in addition to a number of PT positions.
Retaining –relocating all Savage staff to Prior Lake.
Creating –7 to 12 additional FT positions in Prior Lake.
Business Subsidy Agreement
State Statutes requires the City to enter into a Business Subsidy
Agreement with anyone receiving a business subsidy of
$150,000 or more. The BSA includes:
Description of the subsidy, amount and type;
Public purpose statement;
Jobs and wage goals;
Description of the financial obligation if the goals are not met;
Subsidy need statement;
5-year commitment to continue operations in the city; and
List of all financial assistance to the project.
Public Purpose Objectives
The proposed development would meet the following
Public Purpose Objectives identified in the Business
Subsidy Policy.
To retain local jobs and/or increase the number and
diversity of jobs that offer stable employment and/or
attractive wages and benefits; and
To enhance and diversify the City of Prior Lake’s tax
base; and
To achieve development on sites that may not be
developed without business subsidies assistance.
Questions / Comments
Building Plan