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040891 EDAOFFICAL FILE COPY Agenda #3 CTTY OF NEW HOPE EDA AGENDA EDA Regular Meeting #3 President Edward J. Erickson Commissioner W. Peter Enck Commissioner Gary L'Herault Commissioner Gerald Otten Commissioner Marky Williamson April 8, lggl City Hall 2. 3. 4. Call to Order Roll Call Approval of Minutes of February 25, 1991 Consideration of Request by Foremost, Incorporated, for Economic Development Grant Program/Economic Recovery Fund Application Other Business 6. Adjournment Approved EDA Minutes Meeting #2 CITY OF NEW HOPE 4401Xylon Avenue North Hennepin County, Minnesota 55428 February 25, 1991 CALL TO ORDER ROLL CALL APPROVE MINUTES FEBRUARY 11, 1991 SALE OF PROPERTY 7675 42ND AVE. N. Item 4 MOTION EDA RES. #91-2 Item 4 President Erickson called the meeting of the Economic Development Authority to order at 8:45 p.m. Present: Erickson, L'Herault, Otten, Enck, Williamson Motion by Commissioner Williamson, seconded by Commissioner Otten to approve the EDA minutes of February 11, 1991. All present voted in favor. President Erickson introduced for discussion Item 4, Resolution Authorizing Sale of Property at 7675 42nd Avenue to Autohaus of Minneapolis, Inc. (Project #467). Mr. Donahue stated this public hearing is scheduled regarding the sale of the Herman property to Autohaus. The property would be acquired by direct purchase, the existing structure would be razed, and the property would be incorporated with the Autohaus property in conjunction with expansion plans. Autohaus has agreed to purchase the property from he EDA in the amount of $140,000. The Council inquired of the closing date. City Attorney, Steve Sondrall, stated he does not believe a closing date has been scheduled. Mr. Tom Oestreich, representing Autohaus was recognized and stated there was an issue regarding possible soil contamination. Soil tests were taken and the test results came back favorable. The closing date is set for Tuesday, March 5, 1991. Motion was made by Commissioner Enck, seconded by Commissioner Williamson, to close the public hearing on consideration of the sale of the property at 7675 42nd Avenue North to Autohaus. All present voted in favor. Motion carried. Commissioner Enck introduced the following resolution and moved its adoption: "RESOLUTION AUTHORIZING SALE OF PROPERTY AT 7675 42ND AVENUE NORTH TO AUTOHAUS OF MINNEAPOLIS, INC." The motion for the adoption of the New Hope EDA Page 1 February 25, 1991 ADJOURNMENT foregoing resolution was seconded by Commissioner Otten, and upon vote being taken thereon; the following voted in favor thereof: L'Herault, Otten, Erickson, Enck, Williamson; and the following voted against the same: None; Absent: None; whereupon the resolution was declared duly passed and adopted, signed by the president which was attested to by the executive director. Motion made by Commissioner Otten, seconded by Commissioner L'Herault to adjourn the EDA meeting as there was no further business to come before the Council. All present voted in favor. The New Hope EDA adjourned at 8:50 p.m. Sincerely, Valerie Leone City Clerk New Hope EDA Page 2 February 25, 1991 EDA REQUF T FOR ACTION Orig~g Departme~ Approved Mr Agenda Agenda Section City Manager EDA 4-8-91 Kirk McDonald /~ Item No. By: Management Assistant By:~ 4 CONSIDERATION OF REQUEST BY FOREMOST, INCORPORATED, FOR ECONOMIC DEVELOPMENT GRANT PROGRAM/ECONOMIC RECOVERY FUND APPLICATION Foremost, Incorporated, 7528 42nd Avenue North, is interested in relocating and expanding their sheet metal fabrication business. They have encountered problems marketing their property due to the groundwater contamination problems generated by Electronic Industries and have requested economic development assistance from the City. Foremost has made three specific requests, one of which involves an Economic Development Grant Application through the Economic Recovery Fund. Staff would like to discuss the requests with the EDA. Renew: Admlnis~n: Finance: RFA-O01 ~ CITY OF NEW HOPE MEMORANDUM DATE: TO: FROM: SUBJECT: April 5, 1991 Dan Donahue, City Manager Kirk McDonald, Management Assistant/Community Development Coordinator Consideration of Request by Foremost, Incorporated, for Economic Development Grant/Economic Recovery Fund Appl. Foremost, Inc., a sheet metal fabricator located at 7428 42nd Avenue North, desires to relocate its present operation for expansion purposes. The firm employs 30-40 employees, wants to remain in New Hope, and is interested in a site at the 49th Avenue Industrial Park developed by Brad Hoyt. The existing building is 23,000 square feet in size and they rent an additional 6,000 square feet of building off-site. The expansion plans are to construct a 40,000 square foot building on a two-acre site. The estimated cost of the new building is $625,000 (including almost $300,000 in special electrical and shop needs) and the estimated cost of the land is $190,000, or a total cost of $815,000 for a new building at a new site. Due to the soil and ground water contamination at the Electric Industries site next door, Foremost has been unable to sell the property or retain financing to develop a new site. Foremost has filed suit against Electronic Industries. Foremost has requested assistance from the city and staff has met with representatives of the Minnesota Department of Trade and Economic Development to analyze various programs available. The staff would like to assist Foremost in their relocation to retain this industry in New Hope. The long- term goal would be to acquire all three sites (Foremost, Electronic Industries, and Ardel) on 42nd Avenue, accelerate the contamination cleanup on the properties, and redevelop the property in conjunction with the 42nd Avenue Redevelopment Plan. The State has recommended that the City submit an application for an Economic Development Grant available under the Economic Recovery Fund. The grant amounts range from $250,000-$500,000 and are specifically targeted towards the creation of new jobs or the retention of endangered jobs. The grant could be used for acquisition of the Foremost site or for a low interest loan to the business. Loan paybacks can be retained by the City as part of a revolving loan fund for economic development. Due to the soil contamination issue, the State feels the City would have a good chance of being funded. The funds become available in July and will be expended by the end of August. Foremost would then work with the State on a "504 Plan", which is a loan package for small businesses through the Small Business Administration. The 504 loan, which would be utilized for the new site/building, would consist of 50% conventional loan, 40% SBS loan, and 10% business equity investment. -2- The City's Planning Consultant has identified six issues which need to be investigated if the City is interested in exploring redevelopment of the site, several of which include identifying the limits of contamination, hold harmless agreements and identifying the land value of the property in light of the contamination. Foremost has made three specific requests of the City: 1. Share in the cost of an appraisal of the property, Share in the cost of drilling several test holes to determine if the Foremost property is contaminated, and City submit application to State for Economic Development Grant. The staff recommends as follows: me If the City does receive the grant to purchase the property, an independent appraisal will need to be completed, therefore we would recommend declining the request to share appraisal costs at this time. Before the City could even consider the purchase of the property, it needs to be determined if the Electronic Industries contamination is present on the Foremost site (the PCA feels there is a good chance that Foremost property has not been contaminated due to the directional flow of the groundwater). The City could share in the cost of the test drilling if Foremost is willing to seek quotes/bids and accept the low bid. The Planning Consultant has estimated that the cost to complete the grant application would be a maximum of $5,000. Staff supports the submittal of a grant application, but feels that Foremost should submit a deposit/ escrow to the City for 50% of the cost to complete the grant application. If the grant were successful the deposit could be refunded. The City has indicated it is not in the business of land speculation and another piece of the puzzle involves securing a developer commitment to redevelop the 42nd Avenue site. Brad Hoyt has indicated an interest, but has not committed doe to the number of unknown variables. The staff feels it would be in the City's best interest to initiate some type of action to assist with the business relocation and redevelopment of this site, however, we need to keep expenditures to a minimum until the project looks feasible. The grant application would initiate that action at a minimum cost to the City if Foremost would share in the cost. Attachments: Foremost Building/Land Costs March 27th Planner's Report March 14th Planner's Report February 21st Planner's Report Excerpts - Grant Program INCORPORATED III I I I II II I I 7528-42nd AVENUE NORTH · MINNEAPOLIS, MINNESOTA 55427 TELEPHONE: (612) 533.-0793 FAX: (612) 533-rt08 ~' April 1, 1991 Moving (price good for 30 days) Electrical Overhead Crane Cost Office Shops Welding & Dressing Segregation Building $ 17,900.00 146,000.00 53,000.00 22,000.00 14,300.0C~c~ 625,000.00 Land 190,000.00 PRECISION SHEET METAL · S'I'AMPINGS · SILl,{ SCREENING we sso Consultants, Inc. PL NG · · MARKET R ES E A RC H MEMORANDUM TO: FROM: DATE: RE: FILE NO: Kirk McDonald Allan Hunting/Alan Brixius 27 March 1991 New Hope - Quebec/42nd Avenue 131.00 - 91.05 On 14 March 1991, a meeting was held to discuss the redevelopment options for Foremost, Inc. and for the 42nd Avenue and Quebec block. Attending the meeting were: Mr. Allen Fredendal!, President of Foremost, Inc.; James Lushine, Minnesota Department of Trade and Economic Development; Kirk McDonald, Dan Donahue, City of New Hope; Alan Brixius, Northwest Associated Consultants, Inc. Foremost, Inc. is looking to expand and relocate its present operation. Relocation is necessary due to the limited size of their parcel and the soil and ground water contamination of their land, which prevents expansion on site. The existing building is approximately 23,000 square feet in size, plus the Company has an off-site building of 6,000 square feet. Foremost, Inc.'s expansion plans call for a parcel approximately two acres in size and a building about 40,000 square feet designed for future expansion. Foremost, Inc. plans to remain in New Hope and is interested in a site in the 49th Avenue Industrial Park. Due to the soil and ground water contamination at the Electronic Industries site, Mr. Fredendall has been unable to sell the property nor is able to get financing to help develop a new site. Foremost, Inc. has filed a lawsuit against Electronic Industries for the damage to his land and building value. 4601 Excelsior Blvd..Suite 410-Minneapolis, MN 55416.(612) 925-9420. Fax 925-2721 Due to these financial encumbrances, Mr. Fredendall has requested assistance from the City to help him relocate. The following options, discussed at the 14 March meeting, are available: Acquisition of 42nd Avenue and Quebec Properties To resolve a larger problem than just Foremost Inc.'s relocation needs, the City may wish to consider the redevelopment of the three industrial sites abutting 42nd Avenue between Quebec Avenue and the railroad tracks. The City could consider the acquisition of Foremost Inc., Electronic Industries, and Ardel Engineering and redevelop these three sites as one property. Foremost would benefit from the sale income to invest in its relocation site. of their property with The three sites are located in the 42nd Avenue TIF District. such, two revenue sources may be available for the project. As 1. On-Site Tax Increments Currently, the three industries are generating a frozen tax base that would make on-site TIF ineffective. To improve the TIF effectiveness the City could request that the County Assessor reappraise the industrial properties with the full understanding of the ground water contamination and the blighted building on Electronic Industries site. This reappraisal may lower the frozen base to allow a greater tax increment generation. 2. Off-Site Tax'Increments The City has existing surplus TIF revenue from the 42nd Avenue TIF District that could be available to assist in the redevelopment of the site. If the City is interested in exploring redevelopment, following should be investigated or required: the The City receive hold harmless agreements from Foremost, Inc., Electronic Industries and Ardel Engineering for clean up of contamination on the site. 2. Testing be done to identify limits of contamination. o Foremost continue its pursuit of its lawsuit against Electronic Industries for depreciation of their land value. If Foremost, Inc. is successful in their lawsuit, the City's acquisition costs should be reflective of compensation received through the lawsuit. 2 If the lawsuit does show depreciation in value, then the County Assessor should reflect this in the property assessment, as this may affect tax increment generation. 5. If the City acquires land, Foremost, their relocation benefits. Inc. should waive 6. The City should have interested developers on hand who would redevelop and promote the site. 504 Proqram To assist in land acquisition, building construction and building infrastructure investment, James Lushine, of the Minnesota Department of Trade and Economic Development, identified the 504 Plan which is available to small businesses. The 504 loan consists of 50 percent conventional loan, 40 percent SBA loan and 10 percent private business investment for equity. To apply for the 504 Plan, Mr. Fredendall will have to file an application on his company's behalf for the low interest loan through the Small Business Administration. The 504 application must be pursued by Foremost, Inc. and will require a monetary and time investment by Foremost, Inc. to complete the application properly. If Mr. Fredendall is in need of assistance to help fill out the application, professional services should be sought. Economic Recovery Fund This grant is available to the City of New Hope through the community development grant application. The grant amount can range from $250,000 to $500,000 and consist of Federal and State funds. The grant applications are processed through the Minnesota Department of Trade and Economic Development. The grants are awarded to the applicant City who in turn offers the funds as low interest loans to local businesses. Loan paybacks are retained by the City as part of a revolving loan fund for economic development. A New Tax Increment District Another means of providing financial assistance to Foremost would be establishing an economic development TIF district over the new relocation site. New construction will generate taxes which will help underwrite land acquisition and site improvements. It is important to note that under the following implications would occur: new tax laws, the The City would be subject to a State currently amounts to approximately increment generated by the district. aid reduction. This one-third of the tax The City would have to arrange some type of developer compensation for the loss of State aid funds. The general impact of these tax laws would be a reduction in the tax increment benefits to approximately 66 percent of total TIF revenues. cc: Dan Donahue U R B A P L NG N M AR K E T R S E Inc. ARCH MEMORANDUM - Revised TO: FROM: DATE: RE: FILE NO: Kirk McDonald Robert Kirmis/Alan Brixius 14 March 1991 New Hope - Quebec/42nd Avenue 131.00 - 91.05 BACKGROUND Per your request, I have modified the estimates of land acquisition and demolition costs for the Quebec/42nd Avenue redevelopment project as we discussed on 13 March. It should be noted that the following text is basically a reiteration of information contained within a 21 February 1991 memorandum with simple cost estimate modifications. ISSUES AND ANALYSIS Land Acquisition. Redevelopment of the require land acquisition, the following based on the County Assessor's estimated ten percent. Property Estimated Market Value (Plus 10%) subject parcels will acquisition costs are market valuation plus Foremost (7528 42nd Ave. N.) Electronic Industries (7516 42nd Ave. N.) Ardel Engineering (7500 42nd Ave. N.) $ 543,400 $ 299,640 $ 344,960 TOTAL ACQUISITION COST $1,188,000 4601 Excelsior Blvd.. Suite 410.Minneapolis, MN 55416.(612) 925-9420. Fax 925-2721 The City should investigate flexibility that may be available in negotiating land acquisition. Any acquisition negotiations should recognize the Foremost, Inc. has a vital need to relocate and the Electronic Industries contains a building that is structurally substandard. Site acquisition offers should reflect these conditions. Due to the ground water and soil problems associated with the Electronic Industries and spreading to impact surrounding lots, the City must be cautious in any land acquisition efforts. The first concern would be the City entering a chain of title and becoming responsible for the site clean-up. If the City pursues land acquisition, it must receive indemnification from the site clean-up responsibility and costs. It should be noted that due to identified ground water pollution concerns associated with site, the Hennepin County Assessor has been asked to re-evaluate the market value of the said property. It is assumed that the pollution concern will lower the property's land value and subsequently decrease City land acquisition costs. To date, investigation into this matter is pending. The soil and ground water problems must be corrected to allow for future conveyance of the property to a private developer. Without a clean site, obtain. private financing will be difficult to Relocation. Public land entitles the private to benefits. Specifically, owners or tenants may be basis of actual reasonable moving costs and related under certain circumstances, a fixed payment. acquisition of property owners for redevelopment, receive relocation paid on the expenses or, Actual Reasonable Moving Expenses: Actual reasonable moving expenses may be paid when the move is performed by a professional mover or by the owner/tenant. Related expenses such as personal property losses, re- establishment costs, and expenses in finding a replacement site also may be reimbursable. In calculating relocation costs, two scenarios are offered. Scenario A anticipates that relocation costs for the Foremost facility will be incurred, while Scenario B omits relocation costs for the said business. The relocation cost omission follows an indication from Foremost property owners that this element of a potential redevelopment project is considered negotiable and may be waived. Scenario A: Structure Relocation Costs Foremost Electronic Industries Ardel Engineering Reger Grinding $50,00'0 NA $30,000 $15,000 TOTAL $95,0.00 Scenario B: Structure Relocation Costs Foremost Electronic Industries Ardel Engineering Reger Grinding NA NA $30,000 $15,000 TOTAL $45,000 As shown above, relocation costs for the subject redevelopment project could range from $45,000 to $95,000 depending upon whether costs for the Foremost business are waived. Demolition Costs. Based upon bids reviewed by the City Building Official, demolition of the three industrial buildings under study can be expected to cost approximately $95,000. The stated cost would include the removal of buildings, asphalt and all concrete curbing.. Sunhmary of Costs. For ease of reference, tables summarizing project acquisition, relocation and demolition costs have been prepared. It should be noted that Scenario A includes relocation costs for the Foremost business while Scenario B waives the said costs. Scenario Property Acquisition Relocation Demolition Total TOTAL COST $1,188,000 $ 95,000 $ 95,000 $1,378,000 Scenario B~ Property TOTAL COST Acquisition $1,188,000 Relocation $ 45,000 Demolition $ 95,000 Total $1,328,000 As shown above, redevelopment costs for the three parcels of land located north of 42nd Avenue between Quebec Avenue and the Soo Line Railroad may be expected to range between $1,328,000 and $1,378,000, depending upon whether the Foremost facility is subject to relocation payment. It should be noted that the aforementioned estimates of cost should be construed as generalized figures which attempt to provide an idea as to expectant costs. The said figures should in no way be considered finalized or fixed and should be subject to more detailed investigation upon redevelopment action. Groundwater Contamination. The costs summary also does not include any estimate of cost for the groundwater cleanup. We are attempting to determine the extent of cleanup and time frame that the PCA is requiring. To date, we have not been able to identify all the conditions influencing the site groundwater cleanup. This issue affects the potential following manner: redevelopment project in the Without indemnification of the City for cleanup costs, the City may become responsible for a portion of the cleanup if it acquires the property. Total cleanup will be necessary to potential developer. sell the property to a COSTS/REVENUES ANALYSIS Total Project Costs Revenues: Land Sale Existing Cumulative TIF #8 Surplus Remaining Project Costs Capitalized (8% @ 2.5 years) Bond Discount (2%) Administration/Bond Sale/Bond Counsel Bond Amount Annual Payment at 15 Year Term at 8% Interest Rate $1,328,000 316,000 500,000 512,000 137,000 13,700 22,300 $ 685,000 $ 86,670 U R B A P L N G · D E S N M A R K E T R E S E A R C I.~ MEMORANDUM TO: FROM: DATE: RE: FILE NO: Kirk McDonald Alan Brixius 21 February 1991 New Hope - Quebec/42nd Avenue 131.00 - 91.05 The redevelopment of three industrial sites in the corner of Quebec and 42nd Avenue of the City offer t.he opportunity to accomplish the following objectives: Promote economic development through the relocation and expansion of Foremost Industries in another part of New Hope. Promote the redevelopment of a highly visible site that is characterized by nonconforming over-utilized industrial sites and a building that has structurally deteriorated. Promotion of commercial redevelopment along 42nd avenue that promotes a cohesive and defined shopping environment in New Hope. o Clean up of contaminated soils and ground water that has impacted surrounding properties. ?he aforementioned objectives provide the emphasis for pursuing this redevelopment project. Investigation of the various elements of the project raises a number of concerns that require attention. 4601 Excelsior Blvd.. Suite 410.Minneapolis, MN 55416.(612) 925-9420- Fax 925-2721 Land of require land acquisition. The following based on the County Assessor's estimated fifteen percent. Acquisition. Property Redevelopment the subject parcels will acquisition costs are market valuation plus Estimated Market Value (Plus 10%) Foremost (7528 42nd Avenue No.) $ 568,100 Electronic Industries (7516 42nd Ave No.) $ 301,300 Ardel Engineering (7500 42nd Ave No.) $ 346,840 TOTAL ACQUISITION COST $1,216,240 The City should investigate flexibility that may be available in negotiating land acquisition. Any acquisition negotiations should recognize that Foremost, Inc. has a vital need to relocate and the Electronic Industries contains a building that is structurally substandard. Site acquisition offers should reflect these conditions. Due to the ground water and soil problems associated with the Electronic Industries and spreading to impact surrounding lots, the City must be cautious in any land acquisition efforts. The first concern would be the City entering a chain of title and becoming responsible for the site clean-up. If the City pursues land acquisition, it must receive indemnification from the site clean-up responsibility and costs. The soil and ground water problems must be corrected to allow for future conveyance of the property to a private developer. Without a clean site, private financing will be difficult to obtain. Relocation. Public acquisition of land for redevelopment, entitles the private property owners to receive relocation benefits. Specifically, owners or tenants may be paid on the basis of actual reasonable moving costs and related expenses or, under certain circumstances, a fixed payment. Actual Reasonable Moving Expenses: Actual reasonable moving expenses may be paid when the move is performed by a professional mover or by the owner/tenant. Related expenses such as personal property losses, re- establishment costs, and expenses in finding a replacement site also may be reimbursable. Specifically, actual reasonable moving costs include: Personal property losses. Expenses in finding a replacement site to $1,000. Re-establishment expenses up to $10,000. or building up Fixed Payment: The owner/tenant may be eligible to receive a fixed payment from $1,000 to $20,000. This payment is based on the annual net earnings of the business, not to exceed $20,000. To qualify for a fixed payment, certain conditions must be met. In calculating relocation costs, sensitivity toward business type and facility machinery must be taken under consideration. Foremost Metal Specialties is a business which conducts metal stamping and precision tooling. This industry is characterized by heavy equipment and building infrastructure unique to this type of industry. Consequently these characteristics will increase relocation costs. Taking these considerations into account, relocation costs could reach $50¥000 or more. We note that this only represents a conservative estimate for the purpose of this preliminary study. Actual relocation costs can only be identified through a more detailed inspection of each industry. It should be noted that the Foremost property owners have approached the City in pursuing the redevelopment of their site. They have requested assistance through land acquisition and relocation. The City may be in the position to negotiate having Foremost waive their relocation benefits. The Electronic Industries structure, which lies east of the Foremost building, currently lies vacant and has been subject to condemnation. Consequently, the property is not considered eligible for relocation expenses. The Ardel Engineering building, which lies adjacent to the Soo Line Railroad, currently houses two industrial type businesses, the Ardel machine shop operation and Reger Grinding. The Ardel facility, while smaller in scale than the Foremost business, may also require the relocation of heavy machinery. For the purpose of this feasibility study, we have allocated a relocation expense of $30,000. The Reger Grinding facility is relatively small in scale and we have allocated approximately $15,000 for relocation. These costs offer only a conservative estimate for the purpose of this study. More detailed relocation costs may only be available upon an inspection of the premises. In calculating relocation costs, two scenarios are offered. Scenario A anticipates that relocation costs for the Foremost facility will be incurred, while Scenario B omits relocation costs for the said business. The relocation cost omission follows an indication from Foremost property owners that this element of a potential redevelopment project is considered negotiable and may be waived. Scenario A: Structure Relocation Costs Foremost Electronic Industries Ardel Engineering Reger Grinding $50,000 NA $30,000 $15,000 TOTAL $95,000 Scenario B: Structure Foremost Electronic Industries Ardel Engineering Reger Grinding Relocation Costs NA NA $30,000 $15,000 TOTAL $45,000 As shown above, relocation costs for the subject redevelopment project could range from $45,000 to $95,000 depending upon whether costs for the Foremost business are waived. Demolition Costs. According to a qualified demolition service estimator, demolition costs for 1960s type industrial buildings, such as that under study, can be expected to cost approximately 25 cents per cubic foot. Utilizing this standard, the following demolition costs may be anticipated. 4 Structure Cubic Feet Foremost 518,400 (21,600 SF x 24') Electronic Ind. Ardel Engineering/ Reger Grinding 230,400 (9,600 SF x 24') 196,000 (14,000 SF x 14') TOTAL DEMOLITION COSTS Unit Cost .25/CF .25/CF .25/CF Total Cost $ 129,600 $ 57,600 49,000 236,200 NOTE: Cubic foot allotments are not to be considered exacting or precise measurements and may be subject to change. As shown above, demolition of the Foremost, Electronic Industries and Ardel building can be expected to cost approximately $236,200. Summary of Costs. For ease of reference, tables summarizing project acquisition, relocation and demolition costs have been prepared. It should be noted that Scenario A includes relocation costs for the Foremost business while Scenario B waives the said costs. Scenario A: Property Acquisition Relocation Demolition Total Foremost $ 568,100 $ 50,000 $ 129,600 $ 747,700 Electronic Industries $ 301,300 NA $ 57,600 $ 358,900 Ardel Eng./ Reger $ 346,840 $ 45,000 $ 49,000 $ 440,840 TOTAL PROJECT COST $1,216,240 $ 95,000 $ 236,200 $1,547,440 Scenario B~ Property Foremost Electronic industries Ardel Eng./ Reger Acquisition Relocation $ 568,100 NA Demolition Total $ 129,600 $ 697,700 $ 301,300 NA $ 57,600 $ 358,900 $ 346,840 $ 45,000 $ 49,000 $ 440,840 TOTAL PROJECT COST $1,216,240 $ 45,000 $ 236,200 $1,497,440 As shown above, redevelopment costs for the three parcels of land located north of 42nd Avenue between Quebec Avenue and the Soo Line Railroad may be expected to range between $1,497,440 and $1,547,440, depending upon whether the Foremost facility is subject to relocation payment. It should be noted that the aforementioned estimates of cost should be construed as generalized figures which attempt to provide an idea as to expectant costs. The said figures should in no way be considered finalized or fixed and should be subject to more detailed investigation upon redevelopment action. Groundwater Contamination. The costs summary also does not include any estimate of cost for the groundwater cleanup. We are attempting to determine the extent of cleanup and time frame that the PCA is requiring. Todate, we have not been able to identify all the conditions influencing the site groundwater cleanup. This issue affects following manner: the potential redevelopment project in the Without indemnification of the City for cleanup costs, the City may become responsible for a portion of the cleanup if it acquires the property. Total cleanup will be potential developer. necessary to sell the property to a Revenues Land Sale. The City involvement in the redevelopment of this site will be contingent on having a developer for the site. This will allow for the City t generate some of the revenue through the sale of the land and guarantee new construction. The total redevelopment site is approximately 2.4 acres in size. If the City can sell the land at $3.00 per square foot, the site will generate $316,000 in proposed revenue. The City may investigate the vacation and sale of the 20 foot alley abutting the site on the north side of the site. The area of the alley amounts to 6,600 square feet. This could generate another $19,800 if the alley right-of-way is sold with the balance of the redevelopment site. Tax Increment Financinq. The redevelopment of the three industrial sites will support a retail shopping center of approximately 15,250 square feet. Using the following assumption, the new shopping center would generate approximately $41,180 annually in taxes. Shopping Center Size: Construction Value: Shell Construction Tenant Improvement $15 00 ft 15,250 sq.ft. Total Construction Cost Tax Capacity New Hope Tax Rate $50.00/sq.ft. $762,500.00 36,902.00 111.594 Estimated Tax Generation Estimated Tax Generation Per Sq. Ft. $ 41,180.00 $ 2.70 The three industrial sites are currently generating an accumulative tax total of approximately $47,250. This frozen base generates more revenues than the projected taxes. In this case, redevelopment must rely on funds other than TIF funds generated from the project. The site is located in New Hope's Tax Increment District #8. As such, surplus TIF revenue could be used to finance the project and cover the deficit in the tax generation. TOTAL PROJECT COSTS REVENUES Land Sale Existing Cumulative TIF #8 Surplus TOTAL PROJECT COST TO BE BONDED TOTAL BOND AMOUNT Project Cost Capitalized Interest (8% @ 2.5 years) $1,550,000 316,000 500,000 734,000 1,020,000 734,000 203,900 Bond Discount Administration/Bond Counsel Bond Sale 20,400 61,700 $1,020,000 ANNUAL PAYMENT AT 15 YEAR TERM, 8% INTEREST RATE $ 129,052 PROGRAM PURPOSE The purpose of the Economic Development Program is to assist communities in addressing critical economic development needs. For purposes of this program, economic development is defined as the stimulation of private investment in order to expand, maintain or start a business. The desired result of economic development grants is the creation of new jobs or the retention of endangered jobs for low and moderate income (LMI) people. The program is not intended to substitute for conventional business financing or to be used in place of other specialized state, federal or local programs that may be better suited to the specific project needs. Instead, grants from this program are intended to be used in situations in which a funding "gap" exists, and alternative sources of public and private financing are inadequate or are unavailable. PROGRAM FUNDING The Economic Development Program finances projects using state and federal dollars. Source of State Funds Through the Economic Recovery Fund appropriated by the Minnesota State Legislature. Source of Federal Funds Through a Community Development Block Grant (CDBG) appropriated by Congress. A total of 15 percent of this appropriation is made available for funding the Economic Development Program. The remaining 85 percent of the CDBG, used to assist other types of community needs, is administered by the Community Development Division as the Small Cities Development Program (SCDP). NOTE: The decision to use state or federal funds to make grant awards will be made by the Community Development Division and will be determined by availability of funds and eligibility of the applicant to receive federal dollars. THE ECONOMIC DEVELOPMENT PROGRAM ELIGIBLE PROJECTS Economic Development Funds can be used by communities to make a business loan(s) for start-up or expansion purposes. The business may use the financing for building construction or renovation, purchase of equipment or working capital. Loan terms must be agreed upon by all parties involved. Terms for working capital should not exceed five years; machinery and equipment should not exceed 10 years; real estate should not exceed 20 years.Terms should generally match the terms of other financing for the proposed project. (The applicant is encouraged to get a personal guarantee fi.om the owner[s] of the business.) Loan repayments received by the community must be used to establish a revolving loan fund (RLF). The RLF must be used to further economic development in that community by making additional business loans,thereby creating additional jobs for low- and moderate-income people. If the grant is composed of state funds, the community may keep the first $100,000 of principal repayment from the business including all accrued interest repaid to that point. The remaining principal and interest must be returned to the Community Development Division to make grants to other communities. If the grant is composed of federal funds, the community may keep all repayments by the business, including interest, for its RLE Economic Development Grants may be made to communities for public facilities projects necessary to support new or expanding businesses. ELIGIBLE ACTIVITIES Eligible activities for Economic Development grants include, but are not limited to, the following: * Property acquisition · Site improvements · Building construction * Building renovation - Purchase and repair of machinery and equipment · Working capital (inventory and receivables) · Professional fees · Infrastructure improvements necessary to support new or expanding businesses · Professional fees · Administrative costs of applicants THE ECONOMIC DEVELOPMENT PROGRAM STATE AND FEDERAL OBJECTIVES Eligible projects for Economic Development Grants must meet two of the following state, objectives and one federal objective. State Objectives 1. Creation or Retention of Permanent Private Sector Jobs 2. Leverage of Private Investment 3. Increase of the Local Tax Base 1. Creation or Retention of Permanent Private Sector Jobs At least one job must be created or retained for each $20,000 of economic development grant funds. Created Jobs - Only those jobs created within the two years following grant award will be considered. Secondary jobs created in the market place will not be counted for this objective. Retained Jobs - Acceptable documentation must be provided by the business to demonstrate that it will reduce operations in the community or discontinue operations in Minnesota within the next 12 months if state economic development assistance is not made available. The number of jobs to be retained must also be documented. 2. Leverage of Private Investment At least one dollar of private funds must be leveraged for each dollar of economic development grant funds. Private investment must be from sources other than state, local or federal government appropriations. A Challenge Grant Loan, administered through the Rural Development Board, may be used to provide up to 50 percent of the private investment required to qualify for a grant from the Economic Development Program. · Leveraged private investment must be in the form of new commitments, specifically for the proposed project, that have not yet been expended and are not contingent upon events other than approval of an economic development grant. · A bank line-of-credit is not considered as private investment for purposes of this objective. 4 THE ECONOMIC DEVELOPMENT PROGRAM 3. Increase of the Local Tax Base At least a 50 percent increase in the value of the parcels of land that will be directly assisted by the proposed project. Only those increases to the local tax base directly resulting from the business being assisted will be considered. Acceptable documentation from the local assessor of the current value and the projected increase in value is required. Federal ObjectiVes 1. Benefit to Low- and Moderate-Income Persons 2. Prevention or Elimination of Slums and Blight 3. Alleviation of Urgent Community Development Needs Economic development projects are intended to create or retain jobs that benefit low- and moderate-income (LMI) persons. Created jobs must be made available and taken by LMI persons, and retained jobs must employ LMI persons. At least 51 percent of all jobs must be filled by LMI persons. To make jobs available to LMI persons, the jobs created should not require specialized training other than that which will be provided by the employer. Also, advertising, recruitment and other outreach efforts must be made to contact and involve LMI persons. THE APPLICATION PROCESS Applications can be submitted by eligible applicants on a year-round basis through the Community Development Application process. NOTE: The application process is described in detail in the Community Development Application manual. Read this document carefully for complete information on the community development application process. THE REVIEW PROCESS Economic Development Program staff will review and rate complete applications. Applicants will be contacted for missing or incomplete information; this may delay the processing of their application. At the discretion of the Community Development Division, other technical and professional Community Development staff may participate in the review and rating. PROJECT RATING Section I Community Development m An Integrated Approach Introduction to the Community Development Application innesota's communities are made up of people with various individual and collective needs. They are partnerships of institutions, both public and private, working together to obtain common goals -- addressing the public needs of their communities. These needs are diverse and often include parks and recreational facilities, adequate and dependable water supply systems, safe sewage treatment facilities, commercial/industrial development and expansion, renovated residential and downtown areas and other general development projects. As a member of this partnership, the Community Development Division of DTED administers a number of varied community assistance programs. And to make the goals of communities easier to obtain, the Community Development Division has developed a single, integrated application process -- the Community Development Application. Our goal is to help you enhance your community -- making it a better place to live, work and play. The Community Development Application The Community Development Application, or the single application as it is more commonly called, enables applicants to apply for financial assistance for up to six projects at a single time on one application form. The two-part process of the Community Development Application enables our professional staff to become involved with your project proposal(s) at an early development stage, providing you with customized assistance and guidance to help make your projeci(s) fundable or more competitive. The single application e~ables you to complete several common project requirements at one time. It's been designed to be user friendly, and you'll receive personalized direction for completing the application process. The Community Development Application offers many advantages; we've designed it to better serve you and your community. Section III of this manual will provide you with a general overview of the type of programs administered by Community Development. Please review this section carefully before you submit an application. Additional copies of the Community Development Application manual can be requested from the Community Development Office. They also are available at the following offices: Section II The Community Development Application Process Tommunity Development Application provides a unique opportunity for applicants to y for and receive Community Development aSsistance in a ne~v and innovative way. With this application, the initial expression of a community's interest need not be expensive or time- consuming. And it makes specialized technical assistance available throughout the entire process. The Process Complete the application forms in this manual and return it to the Community Development Office. Based on the information (Part I) you provide, a project review team will determine which Community Development program, or combination of programs, can best meet your needs. 2. You will be advised how to make your projects eligible or competitive. You will be provided a program manual(s) and a forms pa. ckage (Part II) composed of pro!ect- specific supporting materials, that you will need to complete and return to continue the processing of your application. 4. Or, you will receive information on other types of funding sources (such as federal, etc.) that may better assist your project(s). THIS IS NOT A GUARANTEE OF FUNDING. However, you will know up front: · which Community Development program(s) can best assist your overall needs; · if your project(s) are eligible or how to make them eligible; · the competitive nature of your project(s) and how to improve it; · other sources of financing available to you if your project(s) cannot qualify or compete for funding. Section III Available Assistance C ommunity Development programs administered by the Community Development Division include: · Agriculture Resources Program · Capital Access Program · Challenge Grant Program (through Minnesota Initiative Funds)* · Economic Development Grant Program · Energy Conservation Investment Loan Program · Opportunities Minnesota, Inc. (OMNI)* · Outdoor Recreation Grants Program · Small Business Development Loan Program · SmallCities Development Program · State Independent Grants Program · Tourism Loan Program · Water Pollution Control Revolving Loan Fund These programs provide diverse types of assistance to address overall community needs. Applications may be made for grants and long-term, low-interest loans to assist: 1. Improving housing and commercial sectors to provide quality living and working conditions for community residents and commercial activities. 2. Adequate and safe water, sewer and treatment facilities to support residential and business needs. Agricultural and economic development projects to encourage healthier local economies and tax bases, and to strengthen and diversify the economic profiles of communities statewide. Acquiring and developing parks and open spaces to enhance Minnesota's rich heritage of natural resources. 5. Local and regional revolving loan funds for business startups and expansions to stimulate job creation, private investment and economic growth. 6. Upgrading and development of tourism-related businesses to aid Minnesota's hospitality industry. Through our community-based approach to development, we can continue to help make Minnesota's communities truly desirable places to make our homes, raise our families and conduct our businesses. * Projects referred for funding under these programs, through the single application process, will receive and be required to submit a separate application.