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Anatomy of a deal: Bringing business to Eyota

Getting a new manufacturing plant in Eyota has been a long, multi-pronged project that should pay benefits down the road.

Future site of Menards nail plant (1).png
The future site of a Menards nail plant along Minnesota Highway 42 in Eyota.
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EYOTA — Sometime in May, dirt will start moving on the west side of Minnesota Highway 42, bringing a new manufacturing plant to the city of Eyota.

The project, which brings with it 20 jobs, is the result of more than a year's worth of work on behalf of the city, state, agreeable landowners, and a business looking to expand production during a tough economy.

"At any given time, the land purchase could fall through," said Eyota Mayor Tony Nelson. "Menards could have changed its mind with the economy. But everything fell into place, and in May, they start digging."

Need to expand

The city first got wind of a possible deal when Menards, which operates a nail-manufacturing plant in Chester Township a few miles west of the city, decided it wanted to expand and modernize its operation, and it needed a new building to do the job.

Jim Starr, senior associate at ReMax Advantage Plus in Eagan, said Menards approached his company looking for land zoned for industrial use. Starr, who represents clients who own two parcels west of Highway 42, said the company initially looked into buying his client's land before purchasing land next to theirs.

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Still, that didn't leave Starr or his clients out of the deal overall.

The land — both the land of his clients and the land purchased by Menards — has several advantages to it, such as proximity to four major highways, including Interstate 90, Highway 42, U.S. Highway 52 and U.S. Highway 14. There is also a rail line running adjacent to the property, and Eyota's proximity to Rochester makes it desirable for commercial developers.

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The first step, Starr said, was for all the land being looked at to be rezoned from agricultural to commercial.

With the city's economic development authority involved, Starr said, that meant putting the process of making the deal happen into the hands of Eyota's EDA director, Cathy Enerson.

Pieces of the puzzle

"Cathy is a master puzzle-solver," Starr said.

To make the land work, Starr said, a turn lane and "stub road," along with utilities, needed to be brought to the farm field.

Menards' site selector, Nicholas Brenner, contacted the EDA looking for land. Having employees who worked at the existing plant in nearby Chester Township made Eyota a good pick for the new plant, but there was much to be done.

"We have a development map," Enerson said. "The city didn't have any land, but we knew what was for sale."

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Cathy Enerson.jpg
Cathy Enerson

Enerson said she worked with potential land sellers and Menards to find the right piece of real estate. But she also saw an opportunity to prime the city for future commercial development along the west side of Highway 42. Part of the process of making the land useful for Menards would also make it easier to sell the neighboring properties in the future.

Roads and utilities

One requirement for Menards was to install a turn lane for trucks coming to the plant to alleviate potential traffic problems.

Initially, Enerson said, the company wanted both right-turn and left-turn lanes to the property, but after a traffic analysis from the Minnesota Department of Transportation, it was determined that a right-turn lane for trucks traveling south on Highway 14 toward the plant would be sufficient.

Menards also needed sewer and water infrastructure brought under Highway 14 and to the property.

Both of those needs required some serious investment.

Enerson wrote a business development infrastructure program grant application that netted $439,000 for the project. That money helped pay for the stub road that would bring traffic onto the land from the highway.

There was also a need to pay for the utilities infrastructure and the turn lane.

Taxes now and later

The city, with Enerson's help, developed a plan to make that happen. Eventually, the city approved a nine-year, $1.7 million tax-increment finance plan to help Menards pay for those improvements.

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A TIF takes the tax money that would be earned by the city — and also the other local tax entities, such as the school district — for the increased value on the land and pays the developer back over a period of years to help fund infrastructure on a project.

The city and school district will continue to get tax revenues on the original pre-project valuation on the land during the TIF period, and once the TIF is completed, the city and schools would earn the new developed value of tax money off the project.

"The project started at 100,000 square feet, but now it's been permitted for 140,000 square feet," Enerson said. "Because the TIF was calculated at 100,000, the city will see tax benefits sooner."

That will happen either through a small incremental tax assessment increase to benefit taxing entities, or by having the TIF paid off more quickly, she said.

Through the whole process, Enerson said, development agreements between the landowners and Menards, and between Menards and the city, needed to be extended in order to make the deal happen over the course of more than a year of development.

Long-term benefits

Eventually, the city and school district will see its tax base increase due to the value of the nail plant being added to the tax base. But, Enerson said, that's only part of the benefit.

The land to the north and west of the Menards property now has a stub road, turn lane, and sewer and water hookups ready for development. That's 79 acres of land — 1 acre already donated by the owners, the Pries family for the stub road — ready for development, with all the same transportation and location benefits that drew Menards to Eyota in the first place.

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Tony Nelson

"Once you build it, the nail plant, we have a lot of eyeballs on it," Starr said. "We’re getting calls from people inquiring about Eyota. It kind of creates an opportunity."

Nelson said he hopes some of the employees, if they don't already, will choose to move to Eyota, thereby adding another benefit for the city.

But in the interim, he's hoping to see more development for the town.

"Just by putting in that turn lane, and there’s a spur going in there, and the water and sewer, the next person going in there is just hooking up to water and sewer lines," Nelson said. "That makes it more appealing than just a piece of bare land."

Related Topics: DOVER-EYOTAMANUFACTURING
Brian Todd is the news editor at the Post Bulletin. When not at work, he spends time with his family, roots for the Houston Astros and watches his miniature dachshund sleep, which is why that dog is more bratwurst than hotdog. Readers can reach Brian at 507-285-7715 or btodd@postbulletin.com.
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