Agenda - Economic Development Authority - 06/08/2017

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Economic Development Authority (EDA) Meeting Date: 06/08/2017 Submitted For: Patrick Brama, Administrative Services By: Patrick Brama, Administrative Services 4. 5. Title: PSD LLC Business Park: Accept Business Subsidy Application & Call for a Public Hearing (Building #2) Purpose/Background: ***this case is 3 of 3 cases related to the new PSD business park*** PURPOSE Consider accepting an application for City assistance related to PSD's proposed 56,000 square foot industrial building (Building #2); which will be home to Adrenaline Sports Center. STEP 1 (this case): formally accept a business subsidy application from PSD LLC. The purpose of this case is not to "award" any financial incentives to PSD LLC. However, this case begins the State required public process to "allow" the City to award financial incentives to PSD LLC. STEP 2 (future case): review underwriting of project pro -forma, consider awarding a business subsidy agreement BACKGROUND (Project) Please see attached background (background, maps, and renderings) document for greater context. Regarding this project specifically, PSD LLC plans to immediately construct a 56,000 square foot industrial building. Adrenaline Sports Center would be the anchor tenant. PSD LLC is proposing a high -quality, highly functional, and market relevant building; which will include: 24' clear ceilings, and glass facades along Highway 10. The estimated total cost for PSD LLC's first building is $4.9M. BACKGROUND (Subsidy Request) PSD LLC has asked the City for financial incentives related to this 56,000 square foot speculative building (building #1). Specifically, PSD LLC is requesting the City provide of assistance ($200,000). Based on their modeling and project pro -forma, PSD LLC believes this assistance is needed, in order to make this project work. PSD has indicated community sports tenants are very risky, and have very thin margins, thus requiring some assistance from the City. PSD LLC has competed and submitted a business subsidy application to staff, including a $7,500 non-refundable fee. If the City decides to accept the application, Ehlers will formally underwrite PSD's request (underwriting the pro-froma, sources and uses, and review the lease terms, etc.). REMINDER: the PSD LLC request will not meet the job creation requirements outlined in the City's official business subsidy policy, due to the fact community sports centers create very few high -paying jobs. Guaranteeing job creation on this project is very challenging. The PSD LLC subsidy request will require an wavier to the City's policy, in order to be approved. A similar exception was provided to Platinum Properties, for their speculative construction building proposal, in 2016. BACKGROUND (Anchor Tenant, Adrenaline Sports Center) Adrenaline Sports Center began operations in Coon Rapids about eight years ago, under the name Gold Kick Soccer. Four years ago, it was converted to Adrenaline Sports Center. Today, Adrenaline leases 25,000 square feet