Agenda - Economic Development Authority - 02/14/2013

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Economic Development Authority (EDA) Meeting Date: 02/14/2013 By: Patrick Brama, Administrative Services 4. 4. Title: 15153 Nowthen Blvd: Review Cost Benefit Analysis Background: The EDA and City Council have expressed interest in developing the old municipal center site, 15153 Nowthen Boulevard ("Subject Property") for a data center user(s). The City is partnering with Connexus Energy to pursue this development opportunity. As part of this effort, Staff was directed to pursue a "Shovel Ready" development certification through the State of Minnesota. Additionally, both the EDA and the City Council have requested Staff develop a cost/benefit analysis on potential development scenarios for the Subject Property. PURPOSE OF CASE: 1) Provide EDA with an update on the Shovel Ready certification program application. 2) Review the attached cost/benefit analysis; and consider moving forward with marketing and positioning the Subject Property for a data center user(s). Observations: Shovel Ready Certification Progress: Staff has submitted an application, including all required information to the State of Minnesota. Connexus Energy will be paying the program application fee (see attached invoice). It is expected the State of Minnesota will certify the Subject Property this spring; exact timing is to -be -determined. Cost/Benefit Analysis: The EDA and City Council have expressed interest in developing the Subject Property for a data center user. However, before committing additional resources and directing Staff to pursue a data center user(s), both the EDA and City Council have requested Staff to develop a cost/benefit analysis. The intention of the analysis is to compare a data center development to a residential development, from a financial prospective. Three scenarios were considered by Staff: (1) Data Center, Single User, 250,000 square feet (2) Data Center, Two Users, 200,000 square feet (3) Residential Development, 47 single family homes Attached to this case are sketch plans of the proposed development scenarios. Said sketch plans were used to develop input information for the referenced cost/benefit analysis. Please note, the three scenarios provided are considered "best -case -scenarios" for full build out. Every option carries risk. For example, a homebuilder may only take down ten homes a year; or, a data center development happens in phases over a number of years. Meaning, the City would not yield a full built out potential for several years. In order to insure proposed scenarios were realistic for the market, Staff reviewed with builders (Mortenson and Kraus Anderson), real estate agents (CBRE), Greater MSP (regional economic development agency), the State of Minnesota (Department of Employment and Economic Development), the City's economic development consultant (Mike Mulrooney) and the City's planning consultant (Stantec). With the information above in mind, Staff developed the attached cost/benefit analysis. Said analysis renders a