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Home My WebLink AboutHRA Item 03City of Lakeville Community & Economic Development Memorandum To: HRA Board From: David L. Olson, Community & Economic Development Director Copy: Justin Miller, City Administrator Kati Bachmayer, Economic Development Specialist Jason Schneiderman, Schneiderman’s Furniture Inc. Dan Salzer, Scannell Properties Date: June 4, 2018 Subject: Tax Increment Financing (TIF) Application - Schneiderman’s Distribution Center ___________________________________________________________________________ Schneiderman’s Furniture Inc. in cooperation with Scannell Properties LLC as the proposed project developer, have recently submitted an application for Tax Increment Financing to assist in the development of a new 104,000 square foot distribution center for Schneiderman’s Furniture. The distribution center is proposed to be the first project developed in Interstate South Logistics Park located at the southwest quadrant of Co. Rd. 70 and Dodd Blvd. The proposed Distribution Center would serve the four Schneiderman’s stores in the Twin Cities as well as the stores in Duluth and Rochester. Schneiderman’s currently leases a distribution center in Burnsville. The proposed project would result in the relocation of a minimum of 40 full-time jobs to Lakeville with an average wage level of $17 per hour along with additional part-time positions. The total development cost of this new proposed distribution center is $7,272,900. Of the total estimated development cost, $2,303,000 of these costs is considered eligible for TIF assistance. The TIF application has identified a financing gap of $1,109,900 for the project. The Developer’s estimate of Estimate Market Value for tax purposes upon completion is $4,160,000. Using this Estimated Market Value, it is estimated that this project would generate between $400,000 and $500,000 in available tax increment. This increment would be paid out over the next 10-11 years on “Pay-as-you-go” approach with annual reimbursements based on a percentage of the actual new tax increment received. The TIF application indicates that “but for” Tax Increment Financing, it is not economically feasible for Schneiderman’s to relocate their distribution center operation from its current location to a new distribution center building in Lakeville. There are significant costs to extend road and utility infrastructure to the project site. This is somewhat similar to the Launch Park development last year in that there were significant up-front costs to extend the necessary infrastructure into that new development which is also the case for Interstate South Logistics Park. This application is consistent with the City’s current Business Subsidy Policy and Tax Increment Policy. The EDC reviewed this application at their May 29th Meeting. The EDC recommended unanimously to proceed with this TIF application and schedule it for a public hearing. Action Requested: Direct staff to engage Springsted to prepare the necessary notices to Dakota County and ISD 194 and to prepare a Proposed Tax Increment Financing Plan for proposed new TIF District for the Schneiderman’s Distribution Center project and schedule this proposal for a public hearing at the City Council. 1 PROJECT: Schneiderman’s Furniture Distribution Facility 1. Business Name: Schneiderman’s Furniture, Inc. Address: 1600 Annapolis Lane N, Plymouth, MN 55441 Telephone: 763-551-3544 Contact: Jason Schneiderman 2. Brief description of the business: Schneiderman’s Furniture is a locally based retailer of top quality to heirloom quality furniture with four locations across the Greater Twin Cities, one in Rochester, and one in Duluth, Minnesota. This facility will distribute product to the retail locations and customers. 3. Present ownership of the site: Thomas J & Jane M TS Stepka, Michael V & Jean A T Hauer, et al 4. Proposed project: Building square footage, size of property, description of buildings – materials, etc. 104,000 square foot distribution center with office on approximately nine (9.0) acres. The facility will be constructed with precast concrete panels and will have a clear height of thirty two feet (32’). The proposed project is located at the northwest quadrant of Dodd Blvd. and 217th Street West (proposed). 5. Total Estimated Project Costs: a. Land Acquisition 784,100 b. Site Development 1,350,200 c. Building Cost 3,860,300 d. Soft Costs 981,400 e. Financing Costs 195,900 f. Contingencies 100,000 Total 7,271,900 CITY OF LAKEVILLE TAX INCREMENT FINANCING APPLICATION 2 6. Estimated Project Costs Eligible for TIF Assistance (i.e. Acquisition, Demolition, Site Improvements, Utilities, Streets): a. Land Acquisition 784,100 b. Utilities 216,400 c. Pavement 137,800 d. Sidewalks, Curb & Gutter 57,900 e. Landscaping & Irrigation 100,000 f. Footings, Dock Apron & Stoops 179,900 g. Earthwork 296,500 h. SAC & WAC Fees 91,100 i. Streets & Utilities 345,000 j. Civil Design 40,500 k. Soil Engineering & Material Testing 53,800 Total 2,303,000 7. PLEASE SUBMIT PROJECT PROFORMAS SHOWING NEED FOR ASSISTANCE (I.E. WITH ASSISTANCE AND WITHOUT). See Part 4 of Attachments 8. Total Estimated Market Value at completion: $4,160,000 9. Estimated real estate taxes upon completion: $ 138,653 10. Source of Financing: a. Equity 1,454,380 b. Bank Loan 4,707,620 c. TIF (Gap) 1,109,900 Total 7,271,900 3 11. Amount of Assistance (Estimated Gap): $1,109,900 12. Type of Assistance Requested: Pay-as-you-go 13. Name & Address of architect, engineer, and general contractor: Developer: Scannell Development Company II, Inc. dba Scannell Properties, LLC 8801 River Crossing Blvd., Suite 300 Indianapolis, IN 46240 General Contractor: TBD Architect: TBD Civil Engineer: Wenck Associates 1800 Pioneer Creek Center P.O. Box 249 Maple Plain, MN 55359 14. Project construction schedule: a. Construction Start Date August 1st, 2018 b. Construction Completion Date February 1st, 2019 c. If phased project: Year % Complete Year % Complete 15. State specific reasons why assistance is necessary for the project (the “but for” test). Without TIF, it is not economically feasible for Schneiderman’s to relocate from its current facility. The extraordinary cost to extend road and utility infrastructure to the project site along with significant costs associated with onsite earthwork, utility, drainage, and pavement create a significant gap compared to the alternative options. In order for this project to proceed, the economics of the project must be better than or equal to other alternatives. 4 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 create 40 new office/warehouse jobs in the community and would expand the tax base on what is currently agricultural land. Additionally, the project would provide new infrastructure that would create further economic development and business interest in the community, specifically growth within Interstate South Logistics Park. 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. Schneiderman’s has had a presence in Lakeville for over 30 years and recently completed their new retail store in Lakeville in 2017. Additionally, Schneiderman’s has stores in Plymouth, Roseville, Woodbury, Duluth, and Rochester. The new distribution facility would support Schneiderman’s retail stores throughout the region. 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. 5 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: Part 1 – Corporation/Partnership Description Part 2 – List of Shareholders/Partners Part 3 – Description of Project Part 4 – But For Analysis Part 5 – List of Prospective Lessees Part 6 – Legal Description, Property Identification Numbers, maps of the project area, and project renderings Part 7 – Public Purpose Narrative 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 Date By Its 6 Attachments Part 1 – Corporation/Partnership Description The applicant, Schneiderman’s Furniture, Inc., is a local, privately-owned, corporation in the furniture business with retail stores in Lakeville, Plymouth, Roseville, Woodbury, Duluth, and Rochester, MN. 7 Attachments Part 2 – List of Shareholders/Partners The applicant, Schneiderman’s Furniture, Inc., will be the sole tenant. The building will be owned by JAS Warehouse Property, LLC, with Jason Schneiderman being the 100% managing member of this single-purpose entity. 8 Attachments Part 3 – Description of Project The proposed project is a 32’ clear, 104,000 SF single tenant distribution facility located on approximately 9 acres. The building will be constructed with load bearing precast concrete wall panels with architectural reveals, horizontal and vertical articulation, metal canopies, glass at the office areas, and clerestory windows to provide natural light in the warehouse. The facility will also be expandable to 130,000 SF in the future. The building will include 16 dock doors and one drive-in door at the back of the building along with a fully paved truck court. The front of the building will include 60 auto parking stalls initially with expansion capabilities for future growth. This project will accommodate Schneiderman’s relocation of its regional distribution operation from Burnsville, MN where it currently leases space. Schneiderman’s will own the facility and will be making a significant investment racking systems and other furnishings excluded from the Total Estimated Project Costs. The project will result in 40 full time jobs coming to Lakeville, including office employees, warehouse/ fulfillment employees, and drivers. Average wages per employee is $17.00 per hour plus 50% of the employees receive benefits. 9 Attachments Part 4 – But For Analysis Without TIF, it is not economically feasible for applicant to relocate from its current facility. The extraordinary cost to extend road and utility infrastructure to the project site along with significant costs associated with onsite earthwork, utility, drainage, and pavement create a significant gap compared to the alternative options. In order for this project to proceed, the economics of the project must be better than or equal to other alternatives. 483,000 Target Annual Net Rental Income -566,242 Annual Debt /Equity Service 83,242 Annual Financing Gap 83,242 Annual Financing Gap ÷ 7.50%Cap Rate 1,109,900 Project Cost Gap Financial Analysis 10 Attachments Part 5 – List of Prospective Lessees Schneiderman’s Furniture, Inc. will be the sole lessee. 11 Attachments Part 6 – Legal Description, Property Identification Numbers, maps of the project area, and project renderings Existing Legal Description: A portion of the Southeast Quarter (SE 1/4) of Section Thirty-one (31), Township One Hundred Fourteen (114) North, Range Twenty (20) West of the Fifth Principal Meridian, Dakota County, Minnesota lying westerly of the highway known as Dodd Boulevard; and also a portion of the Southwest Quarter (SW 1/4) of Section Thirty-two (32), Township One Hundred Fourteen (114) North, Range Twenty (20) West, Dakota County, Minnesota, lying westerly of the highway known as Dodd Boulevard. Proposed Legal Description: Lot 1, Block 1, Interstate South Logistics Park Property Identification Numbers: • 22-03100-75-010 • 22-03200-50-010 Map of the Project Area: 12 Attachments Part 6 (continued) Concept Site Plan: Conceptual Rendering: 13 Attachments Part 7 – Public Purpose Narrative Without TIF, it is not economically feasible for applicant to relocate from its current facility. The extraordinary cost to extend road and utility infrastructure to the project site along with significant costs associated with onsite earthwork, utility, drainage, and pavement create a significant gap compared to the alternative options. In order for this project to proceed, the economics of the project must be better than or equal to other alternatives. This project would create 40 new office/warehouse jobs in the community and would expand the tax base on what is currently agricultural land. Additionally, the project would provide new infrastructure that would create further economic development and business interest in the community, specifically growth within Interstate South Logistics Park. 14 Attachments Part 8a – Sources & Uses of Funds Source of Funds: a. Equity 1,454,380 b. Bank Loan 4,707,620 c. TIF (Gap) 1,109,900 Total 7,271,900 Use of Funds: a. Land Acquisition 784,100 b. Site Development 1,350,200 c. Building Cost 3,860,300 d. Soft Costs 981,400 e. Financing Costs 195,900 f. Contingencies 100,000 Total 7,271,900 15 Attachments Part 8b – Additional Information 16 Attachments Part 8b (continued)