4.2.
Economic Development Authority (EDA)
- Meeting Date:
- 06/06/2013
- Submitted For:
- Patrick Brama
- By:
- Patrick Brama, Administrative Services
Title:
Economic Development Prospect Foxtrot: Business Subsidy Application
Purpose/Background:
The purpose of this case is to review Prospect Foxtrot's Business Subsidy Application and draft a recommendation for the City Council.
For background information on Prospect Foxtrot and the proposed project please review case one of the EDA Agenda (06/06/2013).
The City's Economic Development consultant, Mike Mulrooney (Advanced Consulting Group), will be presenting this case.
For background information on Prospect Foxtrot and the proposed project please review case one of the EDA Agenda (06/06/2013).
The City's Economic Development consultant, Mike Mulrooney (Advanced Consulting Group), will be presenting this case.
Observations/Alternatives:
Attached to this case is Prospect Foxtrot's business plan, project overview document and project sources and uses of funds table. Business and personal financial statements submitted by the prospect will remain confidential. Mr. Mulrooney will review the application, underwrite the project and present findings and alternatives for EDA consideration.
Business Subsidies Background (General)
The purpose of local economic development is to (1) expand the City's tax base and (2) create/retain jobs. Increasing commercial tax base allows Cities to provide services at a lower cost--per capita. Creating jobs not only offers residents employment opportunities, it also drives consumer dollars to a local economy. Often times, due to competition and/or financial gaps, City's financially participate in economic development projects (known as Business Subsidies).
The City of Ramsey has actively participated in economic development for the past 20 years; a number of local businesses relocated to Ramsey as a direct result of City business subsidies. The City utilizes a business subsidy policy to guide the review process of business subsidy applications. The City of Ramsey adopted an updated policy in 2008 (see attached).
Outline of the business subsidy policy:
Prospect Foxtrot is requesting a business subsidy in the form of a complete land write down. Meaning, reducing the cost of land to zero. The value of the three parcels Prospect Foxtrot is interested in purchasing is $924,000 (County valuation). In order to meet the City's business subsidy policy requirements (for the requested land write down), Prospect Foxtrot would need to produce 37 jobs paying at least $13.77 an hour within two years. Prospect Foxtrot is willing to commit to said requirements.
NOTE: prospect Foxtrot has indicated phase one of this project will include a 77,000 square foot building with offices facing Ramsey Boulevard (entrance to The COR). Prospect Foxtrot's goal is to have 50 employees within five years; and begin phase two of their Ramsey facility (48,000 square foot addition).
Alternatives
The EDA will have two decisions to make (A) what amount of business subsidy should be provided; and (B) how should the subsidy be provided. Detailed information will be presented at the EDA meeting. Below is a summary.
Positives: long term significant tax base ($20,000-$37,000 per year PV 9-25 years out), ability to pull tax dollars from Anoka County to pay for the land write down (TIF only).
Negatives: time consuming/complex process to provide TIF/Abatement, economic development tools are not 'needed' in this situation (as the City owns the land).
(3) The City could not provide a business subsidy.
Business Subsidies Background (General)
The purpose of local economic development is to (1) expand the City's tax base and (2) create/retain jobs. Increasing commercial tax base allows Cities to provide services at a lower cost--per capita. Creating jobs not only offers residents employment opportunities, it also drives consumer dollars to a local economy. Often times, due to competition and/or financial gaps, City's financially participate in economic development projects (known as Business Subsidies).
The City of Ramsey has actively participated in economic development for the past 20 years; a number of local businesses relocated to Ramsey as a direct result of City business subsidies. The City utilizes a business subsidy policy to guide the review process of business subsidy applications. The City of Ramsey adopted an updated policy in 2008 (see attached).
Outline of the business subsidy policy:
- Project must pass 'But For' Test. Meaning, 'But For' City assistance a project would not occur.
- Project must be feasible. Meaning, the City will be allowed to independently underwrite the project.
- Project assistance will be provided at $25,000 per qualified job (70% of median wage, $13.77)
- Project must establish 2 year job, wage and tax base goals
Prospect Foxtrot is requesting a business subsidy in the form of a complete land write down. Meaning, reducing the cost of land to zero. The value of the three parcels Prospect Foxtrot is interested in purchasing is $924,000 (County valuation). In order to meet the City's business subsidy policy requirements (for the requested land write down), Prospect Foxtrot would need to produce 37 jobs paying at least $13.77 an hour within two years. Prospect Foxtrot is willing to commit to said requirements.
NOTE: prospect Foxtrot has indicated phase one of this project will include a 77,000 square foot building with offices facing Ramsey Boulevard (entrance to The COR). Prospect Foxtrot's goal is to have 50 employees within five years; and begin phase two of their Ramsey facility (48,000 square foot addition).
Alternatives
The EDA will have two decisions to make (A) what amount of business subsidy should be provided; and (B) how should the subsidy be provided. Detailed information will be presented at the EDA meeting. Below is a summary.
(A) What amount of subsidy should be provided?
According to the City's adopted business subsidy policy, the City is allowed to provide $925,000 in business assistance to the proposed project. The EDA (and City Council) will need decide what action to take:
(1) provide the requested $924,000 land write down
(2) counter offer prospect Foxtrot for a different sale price
(3) do not provide a business subsidy.
(B) How should the subsidy be provided?
(1) The City is able to provide assistance by simply writing down the cost of land; and not explicitly re-pay itself back. This alternative would still require the prospect to enter into a business subsidy agreement.
Positives: instant significant tax base for the City ($20,000-$37,000 per year*), no economic development tools needed, quick/fast response/process for prospect. NOTE: the prospect does have a short timeline.
Negatives: the City would not explicitly re-pay itself back for the land write down. The City would not pull tax dollars from Anoka County to help pay for the land write down (which is possible with TIF).
(2) The City is able to provide assistance by writing down the cost of land; and explicitly re-pay itself back by utilizing an economic development tool. Attached to this case is a summary of what tools are available; including revenue generations. This alternative would require the prospect to enter into a business subsidy agreement.
According to the City's adopted business subsidy policy, the City is allowed to provide $925,000 in business assistance to the proposed project. The EDA (and City Council) will need decide what action to take:
(1) provide the requested $924,000 land write down
(2) counter offer prospect Foxtrot for a different sale price
(3) do not provide a business subsidy.
(B) How should the subsidy be provided?
(1) The City is able to provide assistance by simply writing down the cost of land; and not explicitly re-pay itself back. This alternative would still require the prospect to enter into a business subsidy agreement.
Positives: instant significant tax base for the City ($20,000-$37,000 per year*), no economic development tools needed, quick/fast response/process for prospect. NOTE: the prospect does have a short timeline.
Negatives: the City would not explicitly re-pay itself back for the land write down. The City would not pull tax dollars from Anoka County to help pay for the land write down (which is possible with TIF).
(2) The City is able to provide assistance by writing down the cost of land; and explicitly re-pay itself back by utilizing an economic development tool. Attached to this case is a summary of what tools are available; including revenue generations. This alternative would require the prospect to enter into a business subsidy agreement.
Positives: long term significant tax base ($20,000-$37,000 per year PV 9-25 years out), ability to pull tax dollars from Anoka County to pay for the land write down (TIF only).
Negatives: time consuming/complex process to provide TIF/Abatement, economic development tools are not 'needed' in this situation (as the City owns the land).
(3) The City could not provide a business subsidy.
Funding Source:
Recommendation will be provided at EDA meeting.
Recommendation:
Depends on alternative chosen by EDA/City Council.
Action:
Staff is requesting the EDA provide a recommendation to the City Council for the following items:
(A) Amount of subsidy to be provided:
(1) provide the requested $924,000 land write down
(2) counter offer prospect Foxtrot for a different land sale price
(3) do not provide a business subsidy
(B) How should the subsidy be provided?
(1) Write down the cost of land without an explicit pay back plan.
(2) Write down the cost of land and utilize [Below] for pay back.
2a: Tax Increment Financing
2b: Tax Abatement
(3) Do not provide a business subsidy
(A) Amount of subsidy to be provided:
(1) provide the requested $924,000 land write down
(2) counter offer prospect Foxtrot for a different land sale price
(3) do not provide a business subsidy
(B) How should the subsidy be provided?
(1) Write down the cost of land without an explicit pay back plan.
(2) Write down the cost of land and utilize [Below] for pay back.
2a: Tax Increment Financing
2b: Tax Abatement
(3) Do not provide a business subsidy
Attachments
No file(s) attached.
Form Review
| Inbox | Reviewed By | Date |
|---|---|---|
| Kurt Ulrich | Kurt Ulrich | 06/04/2013 06:59 AM |
- Form Started By:
- Patrick Brama
- Started On:
- 05/30/2013
- Final Approval Date:
- 06/04/2013