HomeMy WebLinkAbout02-22-2017AGENDA
Economic Development Commission
Wednesday, February 22, 2017 - 4:30 p.m.
City Hall, Marion Conference Room
1. Call to order
2. Approval of January 23, 2017 minutes
3. Review of Preliminary Application for Tax Increment Financing for the proposed
Launch Park Development
4. Presentation of 2016 Economic Development Annual Report
(To be presented at the meeting)
5. Director's Report
6. Adjourn
Attachments:
• January, 2017 Building Permit Report
• January 2017 BATC Building Activity Report
• Twin Cities Housing Construction Posts Strongest January Activity Since 2007,
1/27/17
• Lakeville again leads in homebuilding, Minneapolis/St. Paul Journal, 1/27/17
• Lakeville leaders look to its economic future, ThisWeek, 2/17/17
• Twin Cities is a hothouse for icy sport of curling, StarTribune 1/1/17
• Curling is cool in Lakeville, where the ice is always smooth, Pioneer Press,
1/29/17
• How Much Does Minnesota Spend Subsidizing Private Business?
TwinCities Business, 212117
CITY OF LAKEVILLE
ECONOMIC DEVELOPMENT COMMISSION
MEETING MINUTES
January 23, 2017
1. Chair Starfield called the meeting to order at 4:30 p.m. in the Marion Conference Room at
City Hall.
Members Present: Comms. Starfield, Scherer, Matasosky, Gillen, Vlasak, Collman, and
Emond
Ex -officio members: Mayor Doug Anderson, City Administrator Miller, Chamber President
Roche
Members Absent: Comms. Longie, Smith, Rajavouri
Others Present: David Olson, Community & Economic Development Director; Rick
Howden, Economic Development Specialist.
At this time, Mayor Anderson addressed the EDC members.
2. Approval of December 1, 2016 meeting minutes
Comms. Matasosky/Scherer moved to approve the minutes of the December 1, 2016
meeting as presented. Motion carried unanimously.
3. Review and Recommend Proposed Strategic Initiatives for the Draft 2017-2019
Strategic Plan for Economic Development
Mr. Olson reviewed the draft 2017-2019 Strategic Plan for Economic Development and
noted that Strategic Initiatives have been drafted by staff and are included in the
document. EDC members discussed the proposed language and provided feedback to
staff. Staff will also be presenting and gaining input from the City Council during their work
session later this evening.
4. Discussion of the Possible Establishment of a Revolving Loan Fund
Due to time limits and the robust discussion regarding the Strategic Plan for Economic
Development, this item will be placed on the February EDC Meeting agenda.
5. Director's Report
Mr. Olson reviewed the Director's Report including the latest building permit report.
Mr. Olson also mentioned that notice of reappointments will be sent out the those EDC
members whose term is expiring.
The Advisory Appreciation Dinner has been scheduled for Wednesday, March 22nd at
6:00 p.m. at the Lakeville Area Arts Center. Please mark your calendars.
The Dakota Curling Club remodeling project in the former Total Hockey space in
Downtown Lakeville has been completed and a ribbon -cutting was held on January 13th.
Total Hockey has also completed their remodeling of a portion of the current
Schneiderman's Furniture store on Junelle Path for their dryland training area.
6. Adjourn
Meeting adjourned at 5:47 p.m.
Respectfully submitted by
Rick Howden, Economic Development Specialist
Memorandum
City of Lakeville
Community & Economic Development
To: Mayor and City Council
Economic Development Commission
From: David L. Olson, Community and Economic Development Director
Copy: Justin Miller, City Administrator
Rick Howden, Economic Development Specialist
Date: February 17, 2017
Subject: Review of Preliminary Tax Increment Financing Application from Launch
Properties LLC
The City received an application for Tax Increment Financing (TIF) assistance from Launch
Properties LLC (Launch) on February 14th. Launch is proposing to develop a portion of the Hat
Trick Investment property located in the industrial park east of Cedar Avenue. (see attached
location map). Launch is proposing to construct a 280,000 square foot office -warehouse
building on 21 acres of this property. Approximately 150, 000 square feet of this building
would be leased to Menasha Packaging.
Menasha Packaging has operated in Lakeville since 1970. Their current manufacturing facility
is located at 8085 220' Street. Menasha completed a 120,000 square foot expansion of this
facility in 2014. The City provided up to $626,000 in Tax Increment Financing assistance for
this expansion and the State of MN Department of Employment and Economic Development
provided $422,520 in Job Creation Fund assistance. Menasha committed to retaining 221
existing jobs and to create 15 new jobs. As of March 30, 2016 Menasha reported that they
had retained 221 jobs and created 25 new jobs. Menasha is in the process of relocating
manufacturing and warehouse functions that they had in Brooklyn Park to Lakeville. This will
result in 75 new jobs coming to Lakeville and also creates the need for more space in
Lakeville.
Launch is also in discussions with another prospective tenant to occupy an additional 90,000
square feet of the proposed 280,000 square foot building. This tenant remains confidential at
this time, but is another manufacturing company that would relocate an additional 80 jobs to
Lakeville with an average wage level of $58,000 per year not including benefits.
Launch has indicated that a development cost of $17,670,000 for the project. The request for
TIF is to assist in filling a project financing gap of approximately $1,941,076. The proposed
project includes significant infrastructure costs since the proposed site is a considerable
distance from existing municipal services such as water and sewer service. A new east -west
public street, along with turn -lane improvements on Cedar Avenue are also required for the
project.
The Launch TIF application includes an estimate of increased market value for property tax
purposes of $11,936,140 after all of the proposed improvements have been constructed. (It
should be noted that this estimate of market value has not been confirmed by the County
Assessor's Office.) Based on this estimate, Launch has estimated the total amount of new
property taxes upon completion of the proposed improvements would be $471,776. After
the State Property Tax and Fiscal Disparities are deducted since they are not able to be
captured as tax increments, the preliminary estimated total of tax increment to be generated
is $215,675 per year or a maximum of $1,941,076 over the maximum life of a nine year
Economic Development TIF District. The TIF application indicates that any assistance be
provided on a pay-as-you-go basis which means that TIF funds would be reimbursed on an
annual basis after the payment of property taxes has occurred. This eliminates any financial
risk to the City.
The amount of any proposed TIF assistance for this project does not need to be determined at
this time. The estimated TIF eligible costs for the project are estimated at $2.964 million and
thus no level of TIF assistance would cover all of the TIF eligible project costs. It should also
be noted that Launch has requested the City consider installing the street, water and sewer
improvements as a public improvement project and that Launch would enter into an
assessment agreement with the City to pay 100% of this portion of the development cost for
the project over a period of years.
Requested Action: If the EDC and City Council support this preliminary request from Launch
for TIF assistance, the next step would be for the City HRA Board and City Council to schedule
a public hearing to consider the creation of a new Tax Increment Financing District and retain
Springsted to prepare the required TIF Plans and notifications to Dakota County and
Farmington Independent School District #192.
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Mr. David Olson
City of Lakeville
20195 Holyoke Ave
Lakeville, MN 55044
February 14, 2017
1875 Highway 36 W, Suite 2001 Roseville, MN 55113
launchproperties.com
Via email: dolson(a)lakevillemn.aov
RE: TAX INCREMENT FINANCING APPLICATION
Pursuant to our discussions regarding our proposed industrial park development, we are pleased to
submit this application for TIF assistance.
We are proposing to construct a 280,000 SF multi -tenant office -warehouse building on the east side of
Cedar Avenue that can accommodate up to three tenants. Should our TIF application be accepted, the
first prospective tenant would be Menasha Packaging. Menasha would occupy 150,000 square -feet or
53% of the building. Menasha would relocate approximately 75 employees from Brooklyn Park to
Lakeville. The average wage for those employees would be $20.50/hr plus 46% in benefits.
A second prospective tenant, who must remain confidential at the time of this application, is a 90,000
square -foot manufacturer considering a move to Lakeville from another municipality in the South Metro.
This prospective tenant would bring 80 employees whose average annual salary is $58,000 plus benefits.
The remainder of the building, approximately 39,000 square -feet would be available for lease. Based on
average employees per square -foot, this space could accommodate between 10 to 30 employees. If TIF
were approved, upon completion and full lease up of the building, it is assumed this project would
represent approximately 175 additional employees to the community.
Secondly, we are requesting a 429 -bonding bill and assessment agreement for public improvements
totally $1,500,000 to extend infrastructure to the site. This investment would be assessed against our
property and repaid with interest semi-annually over a stipulated period of time.
We project to create additional net property tax of $215,000 on an assessed valuation of $12,000,000.
TIF eligible costs are assumed to be $2,965,000. Over the 9 year Economic Development District, the
captured increment is projected to be $1,940,00.
These requests will allow the proposed project to be financially feasible and move forward, but also act as
a catalyst for future projects on adjacent land parcels. Additionally, these investments will further the
perception in the market that Lakeville is a great place to do business and has shovel -ready sites
available for others who are seeking similar sites in the Twin Cities.
On behalf of Launch Properties, I'm excited about pursuing this opportunity together. I look forward to our
future communications about your project.
Sincerely,
r,
Principal, Launch Properties
CITY OF LAKEVILLE TAX INCREMENT FINANCING APPLICATION
PROJECT:
1. Business Name: Launch Properties, LLC
Address: 800 Lasalle Ave. Suite 1610, Minneapolis, MN 55402
Telephone: (612) 564-4070
Contact: Dan Regan
2. Brief description of the business: Commercial Real Estate Developer
3. Present ownership of the site: Hat Trick Investments, LLC
4. Proposed project: Building square footage, size of property, description of buildings
materials, etc.: 21 acre site for the purpose of developing an industrial park
5. Total Estimated Project Costs:
a. Land Acquisition
1,370,000
b. Site Development
1,750,000
C. Building Cost
10,770,000
d. Soft Costs
1,500,000
e. Tenant Improvements
1,830,000
f. Financing Costs
350,000
g. Contingencies
100,000
Total
17,670,000
1
6. Estimated Project Costs Eligible for TIF Assistance (i.e. Acquisition, Demolition, Site
Improvements, Utilities, Streets):
a.
Civil Engineering
45,000
b.
Insurance Builders Risk
16,500
C.
Clean Up
23,687
d.
Concrete Curbing
87,750
e.
Grading & Excavating
329,000
f.
Erosion Control
26,850
g.
Asphalt Paving
670,813
h.
Crane Access Road
27,500
i.
Pavement Marking
3,575
j.
Site Utilities
189,000
k.
Irrigation
26,600
1.
Landscaping
79,500
m.
Frost Ripping
30,400
n.
Footings, Sidewalks & Stoops
6781125
o.
Electrical Transformer
22,000
p.
Temporary Service
23,500
q.
Metro & City SAC / WAC
252,000
r.
Construction Staking
71500
S.
Soils Engineering & Inspection
25,000
t.
Grading & Excavating
400 000
Total
2,964,300
7. .PLEASE SUBMIT PROJECT PROFORMAS SHOWING NEED FOR ASSISTANCE
(I.E. WITH ASSISTANCE AND WITHOUT).
See attached exhibit.
8. Total Estimated Market Value at completion: $12,620,940
9. Estimated real estate taxes upon completion: $471,776
10. Source of Financing
a. Equity
3,932,231
b. Bank Loan
11,796,693
C. TIF (Gap)
1,941,076
Total
17,670,000
11. Amount of Assistance (Estimated Gap): $1,941,076
12. Type of Assistance Requested (Upfront or Pay -as -you -Go): Pay -as -you -Go
13. Name & Address of architect, engineer, and general contractor:
APPRO Development, Inc.
21476 Grenada Ave.
Lakeville, MN 55044
Project Manager: Gordy Schiltz
2
Civil Engineer:
Kimley-Horn & Associates
2550 University Avenue West, Suite 238N
St. Paul, Minnesota 55114
14. Project construction schedule:
a. Construction Start Date
b. Construction Completion Date
C. If phased project:
April / May 2017
September 2017
Year % Complete
Year % Complete
15. State specific reasons why assistance is necessary for the project (the "but for" test).
This development would not occur solely through private investment in
the reasonably foreseeable future. The TIF development will yield a net
increase in market value for the site compared to the likely development
that would occur without TIF. There is a significant cost to provide
infrastructure to a site so far removed from current commercial
development. In order to get a company to locate to the site, the cost
basis has to be on parity with other developments in the metro. Without
TIF funds, the infrastructure investment would prove to be an
insurmountable impediment to grow this potential industrial park.
Determination of feasibility for the project to move forward is
contingent upon the costs being equal to or more economical than other
locations in other municipalities.
16. Please indicate how the project would meet one or more of the following: Economic
Development goals; creation of jobs that pay wages adequate to support households, job
retention, or tax base expansion.
This project would increase investment in the City, County, and State, thus
expanding the tax base from a minimal tax base today to an estimated $471,000.
The project would create new jobs for the community, strengthen Menasha's
long-term retention in Lakeville, support household incomes, and support local
businesses. The project will provide transportation and other utility
infrastructure that will spur further economic development and growth in the
community (i.e., spinoff development) due to the creation of additional shovel -
ready development sites.
17. Municipal Reference (if applicable). Please name any other municipalities wherein the
applicant, or other corporations the applicant has been involved with, has completed
developments within the last five years.
The potential lessee (Menasha Corporation) has completed a development in
Lakeville at their manufacturing site in 2014.
The applicant has completed numerous projects throughout the metro in the last
5 years, including Woodbury, MN, Rogers, MN, Roseville, MN, and Maplewood,
MN.
3
18. Submit this form along with an initial $500 nonrefundable application fee. An additional
fee of $5,500 will need to be submitted should the request for assistance proceed.
ADDITIONAL DOCUMENTATION AND CHECKLIST
Applicants will also be required to provide the following documentation.
All personal financial information will be kept private and confidential.
❑ 1. Written business plan or a description of the business, ownership/ management, date
established, products and services, and future plans.
❑ 2. Two year financial projections, or if housing project, or leased space, include a
10 -year operating pro -forma.
❑ 3. Letter of commitment from other sources of financing, stating terms and conditions of
their participation in the project.
❑ 4. Initial nonrefundable application fee of $500, with a $5,500 fee to follow should the
request for assistance proceed. In addition to defraying the cost of staff time, the fee
will be used to pay costs associated with processing this request for financial assistance
such as legal, engineering and financial analysis. The City reserves the right to stop the
processing of the request until additional fees are paid should the original amount be
insufficient to pay such costs. That portion which remains unspent, if any, will be
returned only if the project is denied approval.
❑ 5. Attach the following documentation:
complete Part 1 — Corporation/Partnership Description
complete Part 2 — List of Shareholders/Partners
complete Part 3 — Description of Project
complete Part 4 — But For Analysis
complete Part 5 — List of Prospective Lessees
complete
Part b — Legal Description, Property Identification Numbers,
maps of the project area, and project renderings
complete Part 7 — Public Purpose Narrative
complete Part 8 Sources & Uses of Funds — Additional Information
The undersigned certifies that all information provided in this application is true and correct to
the best of the undersigned's knowledge. The undersigned authorizes the City of Lakeville to
check credit references, verify financial and other information, and share this information with
other political subdivisions as needed. The undersigned also agrees to provide any additional
information as may be requested by the City after the filing of this application.
Applicant Name 4&1 / -,e_� ZCaf. Date
By
Its
5
Attachments
Part 1— Corporation / Partnership Description
The applicant, Launch Properties, LLC, is a local commercial real estate development firm
based in Minneapolis, MN. Launch Properties has completed numerous business park,
healthcare, retail, and mixed-use developments throughout the Twin Cities since the company
was founded in 2010.
2
Attachments
Part 2 — List of Shareholders / Partners
The applicant, Launch Properties, LLC, has two members, Dan Regan and Mark Nordland.
Each member owns 50% of the membership interests of the company.
Attachments
Part 3 — Description of Project
The proposed project is a 280,000 square foot multi -tenant industrial building.
The building features thirty-two foot interior clear height from floor slab to joists, which is an
important criteria most occupants desire today and cannot find in older obsolete buildings.
Automobile parking for up to 331 employees is provided on the front and sides of the
building and is isolated from conflicts with truck traffic. Truck traffic, loading, and storage is
contained in a fully paved truck court on the rear of the building, out of site from the public
right-of-way in front of the building, which creates a neat, clean environment.
The building is composed of insulated Fabcon panels, glass, and aluminum composite metal
panels to create attractive entryway features that also assist with wayfnding.
Menasha Packaging is the industry's largest independent, retail -focused packaging and
merchandising solutions provider. Menasha has operated in Lakeville since 1970 and
currently has over 220 employees. This project will accommodate Menasha's relocation of
business machines and manufacturing functions from their warehouse in Brooklyn Park to
Lakeville.
The project will result in Menasha's 75 new jobs coming to Lakeville. Additionally, with this
potential consolidation within Lakeville, Menasha's long-term occupancy will be further
solidified across both locations; at this new project and their existing manufacturing building
on 220'h St W. Average pay per employee is $20.50 per hour plus 46% for benefits.
In addition to Menasha's employment gains, Lakeville will benefit from further employment
gains via a tenant or tenants taking occupancy within the remainder of the 286,000 square -
foot building. One such prospective tenant remains confidential at this time, but is another
attractive employer in the manufacturing sector. This prospective tenant would relocate 80
employees into 90,000 square -feet of space within the building. Average pay per employee is
estimated to be $58,000 not including benefits.
If Menasha and the prospective tenant both took occupancy, the building would still have
roughly 45,000 square -feet of space to lease to another tenant, which would result in
additional job gains for Lakeville.
Attachments
Part 4 — But For Analysis
This development would not occur solely through private investment in the
reasonably foreseeable future. The TIF development will yield a net increase in
market value for the site compared to the likely development that would occur
without TIF. There is a significant cost to provide infrastructure to a site so far
removed from current commercial development. In order to get a company to locate
to the site, the cost basis has to be on parity with other developments in the metro.
Without TIF funds, the infrastructure investment would prove to be an
insurmountable impediment to grow this potential industrial park.
PROJECT LEASE FEASIBILITY STUDY
280,000
Square Feet
5.25
Target Base Rent PSF
2.00
Expense Reimbursements
7.25
Target Gross Rent
2.00
Expenses
5.25
Target Net Operating Income PSF
7.50% Cap Rate
1,470,000 Target Net Operating Income
17,670,000 Actual Costs
1,325,250 Actual Net Operating Income
144,750 Actual Net Operating Income Gap
1,930,000 Actual Project Costs Gap
E
Attachments
Part 5 — List of Prospective Lessees
COMPANY USE SIZE NET NEW JOBS ADD'L JOBS AVERAGE SALARY
Menasha Manufacturing 150,000 SF 75 $20.50/hr + 46% incl. benefits
Confidential Manufacturing 90,936 SF 80 15 $58,000 plus benefits
Speculati\,e Speculative 38,772 SF 25
279,708 SF 180 15
10
Attachments
Part 6 — Legal Description, Property ID Numbers, Maps of Project Area, and Project
Rendering
• Property Description: Section 3 TWN 113 Range 20 3 113 20
• Property ID: 22-00310-25-011
• Tax Description: NW 1/4 EX S 1000 FT
• Total Acres: 98.98
• R/W Acres: 2.27234354
• School District: 192
• Watershed District: Vermillion River
• 2016 Land Values: $684,800 for 98.98 acres. $131,452 for 19 acres allocated to
proposed project parcel.
• Net Tax (payable 2016): $8,634.86 for 98.98 acres. $1,657 for 19 acres allocated
to proposed project parcel.
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11
Attachments
Part 7 — Public Purpose Narrative
This development would not occur solely through private investment in the reasonably
foreseeable future. The TIF development will yield a net increase in market value for the site
compared to the likely development that would occur without TIF. There is a significant cost
to provide infrastructure to a site so far removed from current commercial development. In
order to get a company to locate to the site, the cost basis has to be on parity with other
developments in the metro. Without TIF funds, the infrastructure investment would prove to
be an insurmountable impediment to grow this potential industrial park.
This project would increase investment in the City, County, and State, thus expanding the tax
base. The project would create jobs for the community, support household incomes, and
support local businesses. The project will provide transportation and other utility
infrastructure that will spur further economic development and growth in the community (i.e.,
spinoff development).
12
Attachments
Part 8 — Sources & Uses of Funds (additional information)
Estimated Project Costs Eligible for TIF Assistance (i.e. Acquisition, Demolition, Site
Improvements, Utilities, Streets):
a.
Civil Engineering
45,000
b.
Insurance Builders Risk
16,500
C.
Clean Up
23,687
d.
Concrete Curbing
87,750
e.
Grading & Excavating
329,000
f.
Erosion Control
26,850
g.
Asphalt Paving
670,813
h.
Crane Access Road
27,500
i.
Pavement Marking
3,575
j.
Site Utilities
189,000
k.
Irrigation
26,600
1.
Landscaping
79,500
In.
Frost Ripping
30,400
n.
Footings, Sidewalks & Stoops
678,125
o.
Electrical Transformer
22,000
p.
Temporary Service
23,500
q.
Metro & City SAC / WAC
252,000
r.
Construction Staking
7,500
S.
Soils Engineering & Inspection
25,000
t.
Grading & Excavating
400,000
Total
2,964,300
Sources 17,670,000
Equity
3,932,231
Debt
11,796,693
TIF
1,941,076
Uses
17,670,000
Project Costs 17,670,000
13
Attachments
Part 9a — Additional Information
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14
$ ISS" 6 0,7" 1.3%
Attachments
Part 9b — Additional Information
TIF Value Calculation
and Value
wilding Value
Total Value
State General
0.00000000
0.00932036
Dakota County
0.00282880
0.00354129
Lakeville
0.00378940
0.00474383
Sch. Dist. 192
0.00569320
0.00892592
Metro Spec. Dist.
0.00025619
0.00032073
Other Spec. Dist.
0,00019942
0.00024963
Tax Increment
0.00000000
0.00000000
Fiscal Disparity
0.00000000
0.01097137
Total Tax Revenue
0.01276700
0.03807312
,ss: State
Net Annual Tax Increase
TIF
Dev.
15
684,800 1,372,140 687,340
- 11,248,800 11,248,800
684,800 12,620,940 11,936,140
-
117,632
117,632
1,937
44,694
42,757
2,595
59,872
57277
3,899
112,653
108,755
175
4,048
3,872
137
3,151
3,014
-
138,469
138,469
8.743
480.519
471.776
Max. Years
9
101
2
1,941,076
Attachments
Part 10 - Operating Proformas
a1♦MV,
Square Feet
Year
Year
Year
Year
Years
Year
Year
Year
Year
Year 10
Menasha 150,000
Confidential 90,936
Spec Tenant 38,772
Bax Rent
595,699
1,320,148
1,346,551
1,373,482
1,400,951
1,428,970
1,457,550
1,486,701
1,516,435
1,546,763
Expense Reimbursements
99,726
307,679
559,416
576,198
593,484
611,289
629,628
648,516
667,972
688,011
Grosslncome
695,425
1,627,826
1,905,967
1,949,680
1,994,436
2,040,259
2,087,177
2,135,217
2,184,407
2,234,774
Expenses
Yr 1 0.75 $ PSF
(209,781)
(307,679)
(559,416)
(576,198)
(593,484)
(611,289)
(629,628)
(648,516)
(667,972)
(688,011)
Yr2&3 1.10 2.00
Net Operating Income
485,644
1,320,148
1,346,551
1,373,482
1,400,951
1,428,970
1,457,550
1,486,701
1,516,435
1,546,763
i YEAR OPERAI ING •-a
Square Feet Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Menasha 150,000
Confidential 90,936
Spec Tenant 38,772
Bax Rent 678,824 1,465,498 1,494,808 1,524,704 1,555,198 1,586,302 1,618,028 1,650,388 1,683,396 1,717,064
Expense Reimbursements 99,726 307,679 559,416 576,198 593,484 611,289 629,628 648,516 667,972 688,011
Gross Income 778,550 1,773,176 2,054,224 2,1DD,902 2,148,682 2,197,591 2,247,655 2,298,905 2,351,368 2,405,075
Expenses
Yr 1 0.75 $ PSF (209,781) (307,679) (559,416) (576,198) (593,484) (611,289) (629,628) (648,516) (667,972) (688,011)
Yr 2 & 3 1.10 2.00
Net Operating Income 568,769 1,465,498 1,494,608 1,524,704 1,555,198 1,566,302 1,618,028 1,650,388 1,683,396 1,717,064
16
Attachments
Part 11— Bank Letter
7866 WHITE BEAR AVE N ° MAPLEWOOn, MINNESOTA 551051384 PHONE 051-777-7700' FAX 651-777-3763 - www premxerbanRs corn
February 10. 2017
VIA EMAIL ONLY
I..aunch Properties
Attn: Daniel O. Regan
800 LaSalle Ave., Suite 1610
Minneapolis, MN 55402
dregaa_nWaunchnrotxntics.cam
Re: Letter of Interest, Construction Fin slncing for Industrial Building in Lakeville, Ml\`
Dear Dan:
Premier hank (the "Bank") understands that you are in the process of obtaining preliminary approvals in
connection with the potential construction of an approximately 280.000 square foot industrial building off 222ed
Street Wcst in Lakeville. Minnesota (the "Project"). Subject to Hank underwriting. negotiation of appropriate
terms. and due diligence deemed appropriate by the Flank. we have an interest in providing market -rate
construction financing for this Project in an amount equal to the lesser of $11.800.000 or 75% of your total
Project costs.
This is simply a preliminary expression of interest in providing construction financing for this project. °phis is
not a loan commitment, and nothing, in this letter obligates the funk to make a construction loan in connection
with the Project.
Thank you for your interest in financing this Project through Premier. and please Deep me updated as you
develop additional information regarding the Project.
eery -Truly Yours..
Brian L. CaTnCs
ChicfCredit Officer, Premier Hank
M %P[.FNfN1n ' (KV.) ' R/SLs 11 i t ' N 1111r bt.Ak I..AKII. - itt 0.1%1 - 1111Y60 ' 'A00DRt Rl *A %V%IIARTR
F �
17
Who we are
W"
ANOM Premier
Wnere
rewerede've �n
Where tra re destined.
1s1 Banks
Wetravel together
04,W16 6 R,*a,
7866 WHITE BEAR AVE N ° MAPLEWOOn, MINNESOTA 551051384 PHONE 051-777-7700' FAX 651-777-3763 - www premxerbanRs corn
February 10. 2017
VIA EMAIL ONLY
I..aunch Properties
Attn: Daniel O. Regan
800 LaSalle Ave., Suite 1610
Minneapolis, MN 55402
dregaa_nWaunchnrotxntics.cam
Re: Letter of Interest, Construction Fin slncing for Industrial Building in Lakeville, Ml\`
Dear Dan:
Premier hank (the "Bank") understands that you are in the process of obtaining preliminary approvals in
connection with the potential construction of an approximately 280.000 square foot industrial building off 222ed
Street Wcst in Lakeville. Minnesota (the "Project"). Subject to Hank underwriting. negotiation of appropriate
terms. and due diligence deemed appropriate by the Flank. we have an interest in providing market -rate
construction financing for this Project in an amount equal to the lesser of $11.800.000 or 75% of your total
Project costs.
This is simply a preliminary expression of interest in providing construction financing for this project. °phis is
not a loan commitment, and nothing, in this letter obligates the funk to make a construction loan in connection
with the Project.
Thank you for your interest in financing this Project through Premier. and please Deep me updated as you
develop additional information regarding the Project.
eery -Truly Yours..
Brian L. CaTnCs
ChicfCredit Officer, Premier Hank
M %P[.FNfN1n ' (KV.) ' R/SLs 11 i t ' N 1111r bt.Ak I..AKII. - itt 0.1%1 - 1111Y60 ' 'A00DRt Rl *A %V%IIARTR
F �
17
Lakeville
Memorandum
City of Lakeville
Community & Economic Development
To: Economic Development Commission
From: David L. Olson, Community and Economic Development Director
Copy: Justin Miller, City Administrator
Rick Howden, Economic Development Specialist
Date: February 17, 2017
Subject: February Director's Report
The following is the Director's Report for February, 2017
Advisory Appreciation Dinner
A reminder to mark your calendars for the annual Advisory Board Appreciation Dinner
scheduled for Wednesday, March 22"d at 5:30 p.m. at the Lakeville Area Art Center.
Building Permit Report
The City has issued building permits with a total valuation of $21,266,289 through January.
This compares to a total valuation of $8,776,812 for building permits issued in January of
2016.
The City issued commercial and industrial permits with a total valuation of $175,400 in
January compared to a total valuation of $678,000 during the same period in 2016.
The City has also issued permits for 34 single family homes in January with a total valuation of
$10,540,000. This compares to 20 single family home permits in January of 2016 with a total
valuation of $5,970,000.
The City also issued permits for 2 townhome units in January with a total valuation of
$512,000. This compares to 3 townhome permits issued in January of 2016 with a total
valuation of $765,000.
Development Update
A preliminary and final plat application has been submitted for a 4,240 square -foot dental
office and a future 7,000 square -foot retail building in the southwest corner of CR 46 and
Elmhurst Lane, north of Hy -Vee.
A building permit has been issued for Lakeville Pointe, a 49 -unit apartment building located
off of Kenwood Trail (CR 50) at Jurel Way. The valuation for construction of Lakeville Pointe is
$5.9 million.
A building permit has been issued for the construction of Christian Heritage Academy, a
private elementary and middle school at Crossroads Church located at 17671 Glacier Way.
Valuation for the construction of Christian Heritage Academy is $3 million.
A permit has been issued for the remodel of the former Unimed building in the Airlake
Industrial Park for Consulting Engineers Group (CEG). CEG provides engineering services for
transmission and distribution in the utility, wind, and solar industries. CEG is currently located
in Farmington and employs 19 people with a plan to grow in the future.
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January 2016
February 2016
March 2016
April 2016
May 2016
June 2016
July 2016
August 2016
September 2016
October 2016
November 2016
December 2016
January 2017
January 2017 Building Activity
Past Twelve
Months
Permits
Permitted Units
363
i 657
286
371
408
615
383
788
496
863
571
610
480
1,109
465
888
526
767
465
845
474
1,099
428
1,289
455
1,092
Five -Year Comparisons
Permit Value
143,901,986
121,414,561
153,737,216
140,423,137
191,224,352
188,281,483
195,410,123
173,110,812
183,526,036
168,063,646
227,475,343
174,296,101
201,740,525
Total Multifamily Units
Feb -16
Permits
Permitted Units
Permit Value
January 2013
311
703
145,019,865
January 2014
358
1,059
173,989,650
January 2015
308
529
135,411,906
January 2016
363
657 I
143,901,986
January 2016
455
1,092
201,740,525
Total Multifamily Units
Feb -16
Mar -16
April -16
May -16
June -16
July -16
Aug -16
Sept -16
Oct -16
Nov -16
Dec -16
Jan -17
YTD -16
92
221
1 415 1
351
1 53 1
644
439
254
395
647
884
664
1 664
Multifamily Construction as a
Percentage of Total Activity
Feb -16
Mar -16
April -16
May -16
June -16
July -16
Aug -16
Sept -16
Oct -16
Nov -16
1-)ec-16
Jan -17
YTD -16
24
35
52
42
8
58
49
33
47
59
69
61
1 61
Top Cities for Building Activity
January
Permits
Lakeville
46
Edina
27
Blaine
24
Woodbury
22
Maple Grove
21
Permitted Units
Golden Valley
305
Apple Valley
172
Woodbury
87
Lakeville
47
Chaska
44
The Builders Association of the Twin Cities has contracted with Keystone Report, a local research firm, to maintain a database with information about new residential cotistritction permits
around the metropolitan area. After a builder has picked zip the permit from a city, Keystone Report compiles and updates weekly residential housing permits by city for 70 percent of the metro-
politan -area municipalities in the greater 13 -county region. Planned units are the total number of housing units planned to be built under the pertttits issued (one permits is issued per building
which may include more than one housing unit). Permit value does not include the landflot costs.
Twin Cities Housing Construction Posts Strongest January
Activity Since 2007
Photo courtesy of Scott Lewis (CC)
After last year, Lakeville
continued to be the most
active city for new housing
permits in the metro area.
by Sam Schaust
January 27, 2017
After last year's housing construction bocnn in the Twin Cities, builders carried the positive momentum into 2017 with
the most active January on record since 2007.
Approximately 455 permits were issued over the last four weeks, according to a report released Thursday by the Builders
Association of the Twin Cities (BATC). The number of new permits marked a 25 percent increase from January of last year.
From those new permits will come a mix of single-family, multifamily and other housing units. Altogether, January 2017
permit numbers will translate to the construction of 1, 092 new units, a 66 percent increase from the same time last year.
"Twin Cities homebuilders are definitely feeling optimistic about 2017," said Bob Michels, president of the BATC. "There is a
serious need for housing in the Twin Cities; we are focused on building strong communities at a price families can afford."
To assist more residents become homeowners, BATC executive director David Siegel said the organization would be working
with lawmakers to bring more affordable homes to market.
"Homeownership strengthens communities and provides stability for families, yet there are major road blocks for home buyers
right now," he said. "We are working with lawmakers at the Capitol this year to create incentives for first-time homebuyers and
regulatory reform that will help our industry build more entry-level housing."
The state currently offers a number of incentive programs, each of which assists prospective homeowners based on region and
income. The BATC, along with the Minnesota Realtors organization, have been working on new legislative priorities since
last summer.
Lakeville continued to be the metro area's hotbed for residential housing construction. After leading the state last year with 401
permits pulled — nearly loo more than any other city — 46 new permits were issued in January.
Rounding out the top five were Edina (27 permits), Blaine (24), Woodbury (22) and Maple Grove (21).
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From the Minneapolis / St. Paul Business Journal:
http://www.bizjournaIs.com/twincities/news/2017/01/27/1akeviIle-aga in-leads-in-
homebuilding.html
Market Watch
Lakeville again leads in homebuilding
o- SUBSCRIBER CONTENT: Jan 27, 2017, 5:00am CST
National homebuilders are ramping up development in the Twin
Cities, and one city in particular is attracting them like a magnet.
Each year since 2013, Lakeville has led all metro -area cities with
the most permits pulled for home construction. In 2016, builders
pulled 401 permits in Lakeville, the most of any city during that
four-year period. Blaine finished second with 309 permits,
followed by Plymouth with 286, Woodbury with 270 and Otsego
with 214.
There are 1,967 single-family lots in development in Lakeville,
SUBMITTED
with another 607 pending, and most are for neighborhoods being David Olson is Lakeville's community and economic
built by national brands. development director.
Examples include D.R. Horton, which recently paid $3.7 million for 107 single-family lots in the
Chokecherry Hill development; Mattamy Homes, which has a 205 single -family -lot project in the works;
and Lennar, which has seven neighborhoods in development for a total of 203 lots.
Other national builders working on projects in Lakeville include CalAtlantic and K. Hovnanian Homes,
while Pulte Homes is opening a community there in March. Minnesota-based builders like Robert
Thomas Homes, Homes by Tradition and Country Joe Homes are also active in the city.
The south -metro suburb also has 609 multifamily units in development.
David Olson, Lakeville's community and economic development director, said builders are attracted to
the city's proximity to Interstate 35, express transit service it offers commuters to downtown
Minneapolis and Lakeville's school district.
He added that the increase in residents is having a positive economic impact. "It keeps our tax rates
lower because we're continually expanding the base."
On the other hand, the city doesn't want to be known as just a hub for homebuilders, Olson said. The
City Council envisions attracting commercial developers and companies looking to move into the area.
"We don't want to be a bedroom community," he said. "We have one of the largest industrial parks in
the state in the southern part of our city and we're also trying to attract other types of businesses that
provide head-of-household-type jobs. Rooftops can certainly drive retail, but we're also trying to get
office and high-tech business and other types of companies that provide those types of jobs that, if
people choose to, they can live and work in the same city."
That streak may continue in the coming years.
"We're only about two-thirds or three-fourths developed," he said. "We've got a lot of developable land
in Lakeville. That's not the case everywhere else, either. Whether it's for residential development or
commercial industrial development, we have available land. For the most part, we have most of the
infrastructure in place to serve and allow that land to be developed."
Nick Williams
Q
Staff reporter
Minneapolis/St. Paul Business
Journal
Government
Lakeville leaders look to its economic future
Published February 17, 2017 al 7:13 am
By Laura Adelniann
Three-year plan recognizes need for workforce housing
To help keep Lakeville businesses in the city and growing, local leaders are looking at
its housing stock,
After years of leading the metro with single-family housing starts, Lakeville officials are
focusing on building more workforce housing.
Construction of a three-story 146 -unit apartment building was recently approved to be
constructed near the park-and-ride off Cedar Avenue, and city officials are planning to
continue working with developers to identify other sites that could become home for
higher density housing.
That initiative is one of several in the draft Lakeville Economic Development
Commission 2017-2020 Strategic Plan Report, released in January.
Updated every three years since the 1990s, the plan identifies the city's highest
priorities to encourage economic development: business retention and expansion,
maintain a competitive edge, housing to support economic goals and workforce.
The draft report identified outcomes that included limiting loss of existing business
and making the city a business' first choice for expansion.
A need for baseline data was indicated to help track development, set future targets
and measure accomplishments.
The plan identified the need for a balance of housing options to meet market demands
and suggested a target of creating 250 additional higher density housing units.
It also suggested developing housing in areas that stimulate or enhance commercial
development and set a target to have two sites developed.
Under "workforce," the outcome stated in the plan was for businesses to offer more
quality jobs and identified a target of 200 more jobs paying over $60,000 per year.
City Council Member Luke Hellier said there is a workforce gap, and expressed interest
in the plan's goal for pursuing possible partnerships or collaborations with the
Chamber of Commerce, school districts and higher education providers.
He encouraged the city to work with schools to educate students about the career
opportunities that do not require a college education.
"Whatever you can do to educate the schools that you can stay in Lakeville and have a
really good job with a two-year degree from DCTC (Dakota County Technical College)
is important," Hellier said.
Community and Economic Development Director Dave Olson said the job climate has
changed from several years ago, and now companies are struggling to fill jobs.
Olson said the city will review its 2012 City Business Marketing Plan to help attract new
businesses, but noted city staff is limited in time and budget to focus on marketing
because they are busy with new development underway.
He said several Economic Development Commission members have volunteered to
help in that area, using their expertise and contracts to help attract new businesses.
Council members have in the past expressed a desire for the. EDC members to have a
more significant role in city initiatives, and Council Member Colleen LaBeau
encouraged the members' involvement.
The planning document identified threats and strengths regarding economic
development.
Threats included high taxes, regulations and increasing land and development costs.
Strengths identified include Lakeville's affluent community, quality education and
strong area infrastructure that includes access to rail, highways and the airport.
Filed Under: economic development plan, Lakeville
Sponsored Content
VARIETY
Twin Cities is a hothouse for icy sport of
curling
By Erin Adler (http://wwwMartribune.com/erin-adier/195633361/) Star Tribune
FEBRUARY 1, 2017—10:52PM
Curling — long a niche sport in the Twin Cities with a small but devoted following — is
spreading across the metro area, with hundreds of new aficionados at one of four new
facilities that have sprung up in the past five years.
Dakota Curling opened in late January in a former grocery store in downtown Lakeville.
Lakeville's two high schools appear to be the first metro -area schools to add curling as
an independent club sport; the teams will begin play this winter, both intramurally and
against other youth teams.
Chaska's $18 million municipal Curling Center, which is adjacent to an event center and
pub, has gone from an unconventional idea to a success story in the year since it opened.
The Four Seasons Curling Club at Fogerty Arena in Blaine was designated an official
Olympic training site in 2015, the only one in the United States.
"It's certainly exploding with growth around the metro, more so than anywhere in the
world that I know of," said Jeff Isaacson, a two-time Olympic curler who manages the
Chaska Curling Center.
And there's talk on the street that groups in Rogers, Woodbury, Plymouth and St. Louis
Park also want to build their own curling centers.
The St. Paul Curling Club, which dates back to the 19th century and boasts one of the
country's biggest rosters with 1,100 members, long has made the Twin Cities a center for
organized curling. The sport is best known in Canada and on the Iron Range but its
popularity is growing across the United States, Isaacson said, because it's challenging yet
accessible for all ages and abilities.
It became an Olympic sport in 1998 and, four years later, NBC ran more than 50 hours
of Olympic curling on TV, said Rick Patzke, CEO of USA Curling, the sport's national
association.
Once they've tried it, players keep coming back, hooked by the sport's social nature and
the camaraderie it creates.
"It's been kind of a coming-out for curling since the 2002 Olympics," Patzke said. "In
Minnesota, what's really surprising is the number of dedicated curling facilities."
The new golf or bowling?
In curling, two teams of four players each slide a 42 -pound granite stone down a 15 -foot -
wide sheet of ice toward the target, called a house. Each team tries to get its rock closer
to the center of the house, which is the size of a dinner plate. As the rock travels, players
must judge whether to furiously sweep back and forth in front of it, using heat and
friction to direct its path.
The sport caught on with TV viewers during the Olympics because of amusing
commentators and the fact that players wear microphones, so their comments can be
heard in real time. It's a sport where spectators can get up to speed on what's happening
quickly, Patzke said. And it's an indoor winter sport, so it never gets snowed out.
Because it involves strategy and finesse, curling draws comparisons to golf and bowling.
"It doesn't take long to learn the game, but it's a challenge to do it well," said Jeff
Kennedy, who curls at both the Chaska and Dakota facilities.
Lakeville North junior Levi Rosenthal and several friends lobbied to bring curling to
Lakeville North and South high schools as a coed club sport this year. About 15 kids have
signed up, Rosenthal said. They will play high school students throughout the region and
each other, and Dakota Curling will be their home base.
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he launched his stone toward the bull's-eye
more than 100 feet away.
Rosenthal likes that the sport is competitive yet friendly, with an emphasis on etiquette.
"In hockey, you're not going up to your opponent and telling them how they can get
better," he said. "This is more of a gentleman's game, and I think that's fun."
St. Paul led the way
Wisconsin has the largest concentration of curlers in the U.S., Patzke said, but Minnesota
isn't far behind. Wisconsin has 27 clubs that belong to the national association with
4,660 members, while Minnesota has 22 clubs and 4,237 members. There are 2,000 to
3,000 curlers nationally in clubs that aren't association members.
Because of demand, the St. Paul Curling Club helped start the Frogtown Curling Club in
2012, said Scott Clasen, general manager of the St. Paul club. A year later, Blaine curlers
created Four Seasons. The Chaska Curling Center debuted in December 2015 and already
has 1,200 members, though it isn't affiliated with the national association, Isaacson said.
Clasen said time will tell whether curling's popularity lasts but that none of the clubs
have lost members as facilities were built. There's camaraderie among clubs, Clasen
said, and some people belong to more than one.
The Dakota Curling Club began in 2006, playing at the Burnsville Ice Arena. But the club
couldn't grow there, said Darcy Ellarby, club president. The group was also "really
interested in getting better control over the ice" in terms of its temperature and water
quality, which can change how the rock slides.
Dakota Curling's new facility, built in a former grocery store, required a $1 million
investment. The landlord paid $750,000 toward renovation, and the nonprofit club used
fundraising, reserve funds and a loan to buy $250,000 worth of ice -making equipment.
The club is leasing the space for 20 years.
Membership has shot up from 125 to 400 since the new facility opened, Ellarby said, and
the winter session is nearly full. Friday night mixed league games have become a popular
date night for couples.
"I wouldn't be surprised if, in the next 10 years, there are curling facilities in the extreme
east and west of the metro," Ellarby said. "We could have more than five."
Erin.Adler@startribune.Dom 612-673-1781
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RICHARD TSONG-TAATARII - RTSONG-
TAATARIIOSTARTRIBUNE.COM
People awaited a curling lesson at Dakota
Curling last week.
F
THINGS TO DO
Curling is cool in Lakeville,
where the ice is always
smooth
By MCK FERRM I nferraro@pioneerpress.com I
PUBLISHED: January 29, 2017 at 4:00 am I UPDATED: January 30, 2017 at 8:44 pm
Tom Born had one modest goal for his introduction to curling.
"I just want to stay upright," the 51 -year-old Sun Country Airlines pilot said before
stepping onto the ice one night last week at Dakota Curling, the first metro -area
curling rink south of the river.
Born is one-fourth of his curling team — his wife, Jennifer, and their Lakeville
neighbors Mike and Kristi Portugue are the others — who decided to take up the
sport at the rink, which opened Jan. 13. The team's tongue-in-cheek name: "The
Born Curlers."
"I'm a southerner, so this is a novelty for me," Jennifer Born said.
She is not alone. Since September, when Dakota Curling announced its plan to
open the Lakeville rink, the club's membership has more than tripled — from 125
to nearly 400 — with about half the players brand new to the sport, said Darcy
Ellarby, club president.
"it's exciting," Ellarby said, "because I personally really love teaching curling; it's
one of my favorite aspects of the sport. I like seeing people's eyes light up when
they realize they can do it, and also when they also realize that it's so much harder
than it looks on TV."
Dakota Curling, a nonprofit organization, rented ice on Sundays at Burnsville Ice
Center for the past decade. In September, the club signed a 20 -year lease for the
new space in Holyoke Plaza where Total Hockey Minnesota had been running its
training programs.
Curling stones await players at Dakota Curling in Lakeville on Tuesday, ,tan. 24,
2017. (Pioneer Press: John Autey)
The space, which was a grocery store before Total Hockey Minnesota took it over,
has been retrofitted for the club by the building's owner at a cost of about
$750,000, Ellarby said. The club invested $250,000 for ice -making equipment.
Dakota Curling is a volunteer -run operation. To get the rink ready, dozens of club
members laid carpet tile, painted and built benches. Members also run the day-to-
day tasks.
The rink has six curling sheets, each about 15 feet wide. Giant windows allow
spectators to watch the action from a large club room, where a bar and food
service will be offered soon.
"Curling is a sport that is very highly social," Ellarby said.
Having its own facility allows the club to increase membership and build cash
reserves, which are generated through membership fees and league play, Ellarby
said. It costs $60 a year to join the club and $150 for each 6 -week session.
"Otherwise, we have a two-hour, learn -to -curl class, and you don't need to be a
member for that," Ellarby said.
Because it's a space dedicated solely to curling, the ice is better, she said. Unlike
the shared ice in Burnsville, the group now controls environmental factors —
subtle things such as air temperature, humidity and air flow that affect the ice
quality and, therefore, the game.
"Getting into a building for us is like night and day," she said. "(The ice) Is faster.
it's much more level. We're getting a predictable curl in both directions. it's really
nice."
Downtown Lakeville has been a great fit, she said, with its historic charm along
with three restaurants and two brew pubs within walking distance of the rink.
"We are not out in the middle of an industrial park or someplace where we'd be
isolated from the community," she said. "We are very deeply embedded."
Ellarby and her husband, Paul, formed Dakota Curling in 2006 to offer new players
a place to learn the game, in response to interest driven by the Olympics. At the
time, the St. Paul Curling Club was the only one in the metro area.
�T
Jennifer Born celebrates a point for her team at Dakota Curling, in Lakeville on
Tuesday, Jan. 24, 2017. (Pioneer Press: John Autey)
over the past decade, three other curling rinks have sprung up — at Biff Adams Ice
Arena in St. Paul's Frogtown neighborhood; at Fogerty Arena in Blaine; and at the
Chaska Curling Center, opened by the city in December 2015 and drawing more
than 1,000 curlers.
Justin Haffner has been a member of the Frogtown Curling Club for the past five
years. He wanted to curl more — and Dakota Curling is close to his Apple Valley
home.
"When l saw this was opening up, I jumped on it," the 37 -year-old Wells Fargo
analyst said. "This is a sport that I just encourage people to try. It's like anything --
if you want to take it super seriously, you can. But for the most part, people are
pretty laid back and stay within themselves and just want to have some fun."
Teens are also showing interest in curling, Ellarby said. An open house at Dakota
Curling last week drew 40 students from Lakeville North and South high schools,
both of which offer curling as an independent sport.
"Kids will be able to letter in curling through the schools," Ellarby said. "That's so
coot."
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MinnPost
How Much Does Minnesota Spend Subsidizing
Private Business?
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From 2005-2013, Minnesota governments (state and local) paid out
at least $1.2 billion to private organizations via various subsidy
programs.
l0Share
Subsidies are notoriously
difficult to track, but here's
what we know.
by Greta Kaul
February 2, 2017
What do Brau Brothers Brewing Co., Minnesota Rubber and Plastics and Walmart have in common?
They all received subsidies from state or local governments in Minnesota in recent years, along with hundreds
of other businesses, according to Good Jobs First, a Washington, D.C. nonprofit that tracks subsidies in an
effort to promote government and corporate accountability.
With $250,000 in grants and loans, Marshall helped bring Bran Brothers Brewing into its city limits in 24313
from a nearby town. Minnesota Rubber and Plastics, a manufacturing company, was approved for $2oo,000 in
loans and grants to expand in a facility in Meeker County in 2011. And Mankato agreed to provide Walmart
with $5.3 million worth of grants, tax abatements, and contributions to infrastructure in 2005 to support
construction of a distribution center for the benefit of the tax base and "creating high-quality job growth,"
These are just three examples of payments made by
Minnesota governments to try to entice businesses to
start, move or expand. All told, from 2005-2013,
Minnesota governments (state and local) paid out at
least $1.2 billion to private organizations via various
subsidy programs, according to Good Jobs First.
So who got the money? And is it worth it?
What is a subsidy?
By textbook definition, government subsidies are direct
or indirect payments by governments to organizations or
individuals, designed to incentivize some behavior,
whether that's installing solar panels, revitalizing an
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underdeveloped part of town, training workers or creating jobs. In theory, they provide benefits to both the
organization that receives them and the public.
MinnPost looked at subsidies recorded in Good Jobs First's Subsidy Tracker between 2005 and 2013, the most
comprehensive data available.
Good Jobs First obtains subsidy data from government websites as well as public records requests. More recent
data isn't available for Minnesota for a couple reasons: because comprehensive public reporting lags somewhat
behind, and because Minnesota's Subsidy Tracker data were last updated in 2015.
The Tracker also excludes subsidies whose values were not publicly available, including 213 subsidies that were
part of Minnesota's Job Opportunity Building Zones (JOBZ) program. It also may not include all subsidies
authorized by local governments.
Even given those limitations, state and local Minnesota subsidies totaled at least $1.2 billion
Those subsidies come from a lot of different forms — from tax breaks, to business loans, grants and other forms
of assistance and out of a lot of different sources.
G
By sheer number, the biggest fount of subsidies in the Minnesota Subsidy Tracker data is local governments
looking to lure in or bolster businesses. Local subsidies not related to JOBZ numbered 45o, and were valued at
more than $318 million between 2oo5 and 2013.
Sources of subsidies in Minnesota
IT) Svbsidy Tracker entries between 2045 and 2013, ttas most money tame Brom malti-wume deals,
followed by local subsidies Note: Dollar amounts for 218 Join Opportunity Building Zc na and 32 Spedal
1rcumberd Worker Trainkny subsidies in the database were not avalabfe.
tJ'ufI e'e soiEca�
(2 deals)
NomJOt9Z local subs,d,es
(450 deals)
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1' dei) !
Minnesota investment fund
(26 deals)
St Pau Sva:egrt 1,,vesuner:I Fund 1
(12 deals) 1
Sex xc:aa ?ncu-tent Worxer Training
(s deals)
FOOM 200M 3001V 4X41 Soots 60010 700M
(Dollars recorded In subsidies
Another big source of subsidies was the Minnesota Investment Fund, which funnels state funds into cities,
counties, townships and tribes to expand businesses or retain workers in industrial, manufacturing and
technology fields. This accounted for $8.1 million in subsidies between 2005 and 2013 in Subsidy Tracker.
Companies that received subsidies under this program include Thin Film Technology, Magnum Machining and
Ever Cat Fuels.
The St. Paul Strategic Investment Fund, aimed at attracting businesses to St. Paul, accounted for $2.8 million
in subsidies in the data. Recipients include Memorial Blood Centers, Gander Mountain and BioMedix.
Minnesota's Special Incumbent Worker Training Program helps businesses invest in training. It spent at least
$847,000 on subsidies from 2005 to 2013, according to Subsidy Tracker. Companies that received training
reimbursement include Reviva, Viracon and Deli Express.
The Metropolitan Council's Fiscal Disparities Program gave tax breaks valued at $250 million to help expand
the Mall ofAmerica (described below) in this time period, according to Subsidy Tracker. The Fiscal Disparities
Pool, which pools a percentage of tax revenues from the seven -county Twin Cities metro area, was created in
1971 in with the goal of to promote smart and equitable growth.
How much do Minnesotans pay
Minnesota and local units of government within its borders spend an average of at least $239 million — or $45
per capita — on subsidies each year, according to a 5o -state investigation by the New York Times. That puts
Minnesota far behind Alaska ($704 million per year or $991 per capita), but ahead of Nevada ($33.4 million
per year or $12 per capita). Minnesota's most subsidized industries are agriculture, finance and
telecommunications.
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Per capita spending on subsidies
A New York Times investigation found Minnesota spent about $45 per cepita annually on subsidies.
Alaska
West Virginia
Nebra•,ka
Texas
M,r'nesota -
Missouri ,
Nevada ,
0 100 200 300 463 500 600 700 Bo0 900 `orw 5X.
Annual per capita spending an subsidies
With the exception of South Dakota, all of Minnesota's neighbors spend more per capita on government
subsidies than Minnesota does. Wisconsin spends at least $1.53 billion per year, or $268 per capita; Iowa: $233
million or $73 per capita, and North Dakota, $32.9 million or $49 per capita.
The lion's share of Minnesota government subsidies — 8o percent of the dollars in Subsidy Tracker entries
between 2005 and 2013 — went toward a few giant economic development deals, some of which have multiple
sources. This type of subsidy is specifically tailored to help businesses expand or relocate in a given spot. The
five biggest subsidies in Subsidy Tracker in the 2005 to 2013 timeframe were as follows:
• The Mayo Clinic, for which the legislature approved subsidies worth $585 million to turn its campus
into a "destination medical center." The clinic's CEO had threatened to expand the clinic in another
state without a subsidy from Minnesota.
• In 2013, the Legislature approved $250 million in tax breaks for Triple Five Group, the Mall of
America's owner, to assist with a $1.5 billion expansion for the mall.
• In 2010, Essar Steel Minnesota was approved for $72 million in state grants and loans to build a
taconite and steel mine — about $66 million in grants and $6 million in loans. In 2015, a competitor
asked the state to force Essar to pay back the money "because it says the project has failed to meet
construction and project timelines and other promises," the Star Tribune reported. Essar Steel
Minnesota has since filed for bankruptcy.
• Otter Tail Ag Enterprises received more than $26 million worth of subsidies from Otter Tail County in
2007, according to Subsidy Tracker. The Fergus Falls ethanol company filed for banknlptcy in
2009 and was acquired by Green Plains Inc in lou, according to Bloomberg.
• Medtronic Inc. sealed a $22.9 million tax increment financing deal with Mounds View in 2005 to help
it build a new facility. In 2014, the company announced it would move its headquarters to Ireland
because of lower taxes (it still has some of its operations and jobs in Minnesota).
Why isn't the $498 million in state and local subsidies for the Vikings stadium factored in? The bonds for that
deal weren't sold until 2014.
Is it worth it?
Economic development subsidies tend to be popular with public officials, who can trumpet returns on the
initial investment in the form of an expanded tax base and the creation of jobs for their districts. And their
popularity makes sense from a local perspective — why would a city want to lose out on a major business to a
neighboring city — or state?
But experts say if you zoom out, they often create more neutrals and negatives than positives.
Arthur Rolnick, former senior vice president at the Federal Reserve Bank of Minneapolis and a senior fellow at
the Humphrey School of Public Affairs criticized subsidies' tendency to create bidding wars between localities
and states.
Complaints of such a competition emerged recently when Greater MSP, an economic development partnership
aimed at fostering the Twin Cities' business community, was accused of pitting metro cities against one another
for Prime Therapeutics, a pharmacy benefits manager. Greater MSP disputed that was the case.
It's not just luring new businesses that can present problems: it's also not uncommon for established
businesses to threaten to move to another city or state because of a sweet subsidy deal. When they use this
tactic — and they often do — it's tough to know whether they're bluffing or not. And sometimes, they do leave
for greener pastures.
The Pioneer Press reported this month that Newport -based Diversified Manufacturing Corp. will move 13 miles
southeast of its present location to Prescott, Wise. in June, where the company has been offered free land, a tax
increment financing deal and other assistance.
Despite a competing offer from Cottage Grove, where some of its jobs are located, the company opted to cross
the border.
"There is nothing that our cities have to offer that is in any way lucrative or can be considered a good incentive
program," the company's owner told the paper. "Wisconsin and the Dakotas are very aggressive in luring
Minnesota companies, and I mean really aggressive. They give you the sun, the moon, Jupiter and parts of
Mars."
Jobs and a larger tax base can be easy to sell from the parochial, local perspective, Rolnick said, but researchers
have often found the net effects to be negative.
In many cases, Rolnick said, they fund projects that businesses would have undertaken anyway: In the case of
the Mall of America's expansion, the owner of the mall acknowledged the project could have gone forward
without the tax breaks, though — the company said — not at the same level of density.
Furthermore, a 2004 study by University of Iowa regional planning professors found that economic
development subsidies didn't seem to create jobs or provide fiscal benefits to states.
"If the state funds locally targeted incentives, the state is merely spending money to move taxpaying firms from
one place to another; once again the local fiscal effects cancel out, but now the entire incentive cost is a state
loss. And these fiscal losses are not trivial; the cost per job could be massive," the authors write.
While economists tend to say no — they're not really worth the money, it's difficult to get good numbers to do
the analysis that would tell us for sure, adding another layer of uncertainty, Philip Mattera, research director of
Good Jobs First, said. States vary greatly in how stringently they require companies and subsidy -givers to track
the creation of jobs and economic impact, he said, though Minnesota is better than most.
Still, "Even in Minnesota, there's no comprehensive, centralized reporting," Mattera said. "There isn't a single
state where there's comprehensive, central reporting."
In 1995, the state passed a law requiring the reporting of many state and local subsidies, including job creation
and wages. But there is no mechanism for enforcing that requirement, said Shane Delaney, a DEED
spokesman.
The state also faced criticism over a lack of transparency in its M I N N ��
JOBZ program, which made summary data public, but kept
confidential information that would make it possible to
determine which businesses got tax breaks and whether or not 77tu story is brought to you by MinnPost
they were working, the Star Tribune reported.
The Minnesota Legislature replaced JOBZ with a new Job Creation Fund in 2013, under which businesses will
receive subsidy money after they show they have met goals.
Even when numbers on the effects of subsidies are available, Mattera said, they're somewhat squishy:
calculations that claim to show the economic impact of a project may not account for other costs to taxpayers,
such as increased demand on infrastructure.
"If a big new facility comes to town, you may need to make infrastructure improvements, you might need more
fire and police and other kinds of services. If a lot of people move to the town as a result, you might need more
schools and other facilities like that," he said.
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