Adopt Resolution #19-116 Accepting Business Subsidy Request Application and Calling for a Public Hearing; Case of SLP EX, LLC and AMP EX, LLC (Delta Mod Tech)

PURPOSE
Consider multiple actions related to the SLP EX, LLC and AMP EX, LLC (DeltaModTech) project proposal, herein referred to as the Developer.  For a detailed outline of future steps, please see the attached schedule.

Please note that this case does not award assistance. This case is simply authorization to begin the review process for future consideration. This is also an opportunity for the City Council to outline any questions it would like answered on an official Application.
BACKGROUND (project)
The project consists of:
BACKGROUND (subsidy request)
The Developer has asked the City for public financial incentives related to both items above in relation to the Delta Mod Tech project (A and B).  Specifically, the Developer is requesting $1,500,000 in Tax Increment Financing/Assistance to assist with eligible project costs. The Developer is requesting the City provide 9 years of pay-go TIF for the 185,000 square foot building and lot to be leased to Delta Mod Tech.  Based on their modeling and project pro-forma, the Developerbelieves financial assistance is needed, in order to make this project work.

The Developer has competed and submitted a business subsidy application to staff, including a $10,000 non-refundable fee to establish an project escrow.  Staff and Ehlers have preliminarily reviewed the request are ready to formally process this request (underwriting, establish a new TIF district, draft a TIF agreement).  The application states that this project will bring 125 jobs to Ramsey upon completion of the of construction and opening of the new building.  In addition, 20 new jobs will be created within 2 years once they move to Ramsey, paying wages of $22.00 / hr.  In total, this project will result in at least 145 new, good paying, jobs being brought to Ramsey. The estimated tax assessed value of the completed project is $11.1 Million Dollars and it is expected to generate between $375,000 in total property taxes annually.  Attached to this case is the Business Assistance Application and Policy.

Preliminary review of the application and policy indicate that this request meets the criteria necessary to provide financial assistance for this project.

More information on TIF is included in the attached LMC TIF background document and the attached mock TIF run.

Notification is not required at this time. The purpose of this case is to authorize an official Public Hearing and provide for required notification. 

Project Benefits

• 145 new jobs for the City of Ramsey.  125 jobs will be retained and relocated to Ramsey by Delta Mod Tech and an additional 20 jobs will be created paying a minimum wage of at least $22.00 / hour.
• Opportunity for employment for Ramsey Residents.  Delta Mod Tech is a growing company that will be providing employment opportunities for Ramsey Residents.
• Payment of required outstanding 2011 and 2017 special assessments for the extension of Bunker Lake Boulevard and City Utilities (Bunker Lake Business Park / Puma Street) attributable to the developed parcel will be made at time of proposed property closing in July 2019.
• 19.65 Million Dollar project.
• $375,000 in annual property taxes 1.5 years after project is completed. The newly created local tax revenue will be captured by the TIF district for 9 years.  When the district is decertified the City can expect to receive around $90,000 annually in property taxes (including fiscal disparities) from this project.
• The proposed 185,000 square foot building is high-quality and market relevant.  It will be one of the largest industrial buildings in Ramsey and be a significant investment for the City's new business park, the Bunker Lake Industrial Park.
• The proposed funding sources for the subsidy request would be from a newly created TIF District 17   Meaning, this subsidy will not have a direct impact on the general tax levy and Ramsey taxpayers.  Also, like any TIF project, the existing tax base remains in place, 100%.
• The City of Ramsey is seeking retail and restaurant users.  Common feedback from the development community and prospects is that Ramsey needs to improve their demographics in order attract these users.  Ramsey can do that by increasing both population (rooftops) and increasing trip generation (i.e. large employers and destination users).  The development of Bunker Lake Industrial Park will help improve demographics needed by retail and restaurant users (via new vehicle trip generation).

Project Considerations

• This project must be underwritten and must meet Ramsey's business subsidy policies.  The Developer's request must be justified and must meet State Statute.  The Developer must demonstrate that "but-for" this assistance, they cannot move forward with this project.  Staff will be working with Ehlers to underwrite the Developer's financials/ project pro-forma.  The outcome of underwriting this project will determine if, and how much, city subsidy is justified.

Funding for the assistance would come from the establishment of a new Economic Development TIF District (TIF District #17). The Developer is responsible for the cost of application review through the establishment of Escrow of $10,000.

Staff is comfortable accepting the business subsidy request application.  Staff believes this request needs to be underwritten and checked against our policies.  Staff believes the request made by the Developer appears to be reasonable for the City to further consider from a preliminary/ high-level perspective.

EDA Review

• The EDA reviewed this case on 04/11.  The EDA discussed the project in great detail.
• The EDA was supportive of accepting the attached application and calling for a public hearing.
• The EDA was excited for this project, and was comfortable with the proposal from SLP EX, LLC and AMP EX, LLC (from a preliminary perspective), and desires to find a reasonable solution to move this project forward.
• The EDA is interested in the results from the financial underwriting process (from Ehlers).

Staff recommends adoption of  Resolution #19-116 Calling for a Public Hearing by the City Council on the Proposed Adoption of a Modification to the Development Program for Development District No. 1 and the Proposed Establishment of Tax Increment Financing District No. 17: Delta Mod Tech Therein and Adoption of the Tax Increment Financing Plan.

Motion to adopt Resolution #19-116 to Accept Business Subsidy Application and Call for a Public Hearing by the City Council on the Proposed Adoption of a Modification to the Development Program for Development District No. 1 and the Proposed Establishment of Tax Increment Financing District No. 17.