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EDA Agenda 08-25-2021
AGENDA REGULAR MEETING - ECONOMIC DEVELOPMENT AUTHORITY (EDA) Wednesday, August 25th, 2021— 7:00 a.m. Academy Room, Monticello Community Center Participants can choose to attend in-person or remotely via Go -To: Web: https:// lg obal.gotomeeting com/join/9490] 3725 Phone: (571) 317-3112 1 Access Code: 949-013-725 Commissioners: President Steve Johnson, Vice President Bill Tapper, Treasurer Jon Morphew, Tracy Hinz, 011ie Koropchak-White and Councilmembers Lloyd Hilgart and Jim Davidson Staff: Executive Director Jim Thares, Rachel Leonard, Angela Schumann, Sarah Rathlisberger 1. Call to Order 2. Roll Call 3. Consideration of additional agenda items 4. Consent Agenda a. Consideration of Authorizing WSB Professional Services Quote in the Amount of $15,000 for Surveying and Plat Preparation related to Karlsburger Food's Expansion Proposal b. Consideration of Authorizing Northland Securities, Inc. (NSI) Professional Services Quote in the Amount of $8,600 related to TIF District 1-42 for Karlsburger Food's Expansion Proposal. Regular Agenda 5. Consideration of Resolution #2021-11 Approving a GMEF Loan Agreement between the EDA and co -borrowers RRG Holdings, LLC and Sota Car Wash, LLC in the amount of $140,000 6. Consideration of Accepting TIF Business Subsidy Application and Authorizing Call for a Public Hearing by the Monticello City Council related to establishing TIF District 1-42 for Karlsburger Foods' Expansion Proposal 7. Economic Development Manager's Report 8. Adjourn EDA: 08/25/21 4a. Consideration of Authorizing WSB Professional Services Quote in the amount of $15,000 for Otter Creek Business Park (OCBP) Lot Surveying and Plat Preparation related to Karlsburger Foods Expansion Proposal (JT) A. REFERENCE AND BACKGROUND: Staff is asking the EDA to consider authorizing surveying and plat preparation involving parcels currently owned by the EDA and the City of Monticello in Otter Creek Business Park (OCBP). The purpose of the survey and plat preparation is to demise a new functional parcel for the Karlsburger Foods' expansion proposal. Karlsburger Foods completed construction of its 23,000 +/- square foot food production facility at 3236 Chelsea Road West in OCBP in early 2007. Karlsburger Foods is now proposing an expansion and would like to acquire the EDA lot directly west of the facility and a small portion of the City -owned sewer lift station lot adjacent to its plant to the north. For the proposal process to continue beyond sketch drawings, the EDA and City parcels will need to be surveyed to prepare a new plat with the correct lot configuration. A basic description of the steps is outlined below: ➢ Tabulation of exact acreage to be deeded from City parcel Outlot A and the EDA's Outlot B. ➢ Establish Drainage and Utility Easement over the full portion to be deeded from Outlot A. ➢ Plat trail easement (Rotary Club Sponsored Trail); determine the easement area (square feet) ➢ Prepare a cross easement Exhibit showing access over a newly platted Outlot A allowing Karlsburger Foods to use it for vehicle ingress and egress and circulation. ➢ Prepare the preliminary and final plat documents for new enlarged Karlsburger Foods parcel It should be noted that this item is a companion to the Karlsburger Foods TIF District consideration (Item 6) on the agenda. Karlsbuger Foods has indicated that it needs to expand its facility and production capacity to meet customer demands. Karlsburger Foods has indicated the optimal construction start timeline is late fall 2021, though it is contingent on full completion of the TIF and land conveyance steps as well as potential state grant funding approvals, and may need to be pushed to early spring 2022. Al. STAFF IMPACT: The staff involved in this request includes the City Engineer -Public Works Director, Community Development Director, Economic Development Manager and the consulting Engineering firm, WSB & Associates. The plat process will also involve a review of the title work for the involved land parcels and interaction with the County for plat recording. The stormwater drainage system in OCBP will also be impacted by the Karlsburger Foods proposal. WSB previously completed a study indicating the necessary stormwater EDA: 08/25/21 system improvements for OCBP as development occurs. Staff will provide an update to the EDA regarding the needed stormwater drainage system improvements due to the Karlsburger Foods expansion during a future meeting. A2. BUDGET IMPACT: The budget impact is estimated to be approximately $15,000 +/- as noted in the professional services quote provided by WSB. The EDA will be asked at a future meeting to approve an interfund loan resolution allowing the expenses incurred in the survey and plat tasks to be covered through the tax increment generated through the completed expansion project. In the interim period though, the EDA General Fund budget has sufficient dollars to cover the expected costs. Ultimately, if the proposal is approved, the EDA will sell its 1.83 -acre parcel to Karlsburger foods and that may result in a yet to be determined amount of land sale proceeds. B. ALTERNATIVE ACTIONS: 1. Motion to accept quote from WSB for surveying and plat preparation in OCBP related to the Karlsburger Foods' expansion proposal in the amount of $11,600 plus related pass- through service fees not to exceed $3,400. 2. Motion to table acceptance of the quote for further research and/or discussion. C. STAFF RECOMMENDATION: Staff recommends Alternative #1. The parcels that Karslburger Foods has identified as critical to its expansion proposal are owned by the EDA and the City respectively. They are currently outlots and thus require platting steps to create the new functional development site. Through the plat steps, the land area identified in Karlsbuger Food's expansion sketch will be combined to create an enlarged parcel accommodating the proposed development. D. SUPPORTING DATA: a. WSB Professional Services quote b. Karlburger Foods' Expansion Preliminary Sketch Plans c. Karlsburger Foods' Summary Narrative d. Illustration of Karlsburger Food's Facility i wsb August 13, 2021 Ms. Angela Schumann Community Development Director City of Monticello 505 Walnut Street Monticello, MN 55362 RE: Proposal for Field Surveying, Preliminary and Final Platting Services Dear Ms. Schumann, On behalf of WSB, we are pleased to respond to your request for proposal for surveying services to provide the necessary field work and preparation of the Preliminary/Final plat documents for the 8 acre site/parcels. Our team is excited about the opportunity to work with City staff to complete these services. We understand that the City is requesting surveying services to complete a preliminary and final plat of the above described area. The area to be platted, includes Lot 1, Block 1, Outlot A, and Outlot B, Otter Creek Crossing 2nd Addition, in the City of Monticello, Wright County, Minnesota. Existing PID#'s are 155191000010, 155191000020 and 155191001010. (Parcels depicted on Exhibit A of page 3) These parcels will be combined into 1 lot and 1 Outlot by this platting. In addition, the scope of services will include the preparation of proposed easements to accompany the platting. Although we have separated into the following specific Tasks, we will prepare the Preliminary and Final plats to run concurrently as requested. Our scope is as follows: Task 1 - Preliminary Plat • Review title information and compute property boundary. • Field crew to perform existing conditions and boundary field work. • Review and verify property boundary with field information. • Coordination with property owners and/or design engineer. • Create a Preliminary Plat which will include the boundary, existing conditions, and proposed information, and tabulation of acreage. • Submit plat to City for review and approval. • Make final revisions per any comments. Task 2 - Final Plat • Prepare Final Plat. • Create drawing suitable for City and County review. • Submit Plat and Title Commitment to county for review. • Address any County comments and update plat. • Create Mylars of Final Plat for recording. • Field crew to set monuments at each corner per state statutes. Task 3 - Trail Easement By Minnesota statute, "Easements created on the plat shall be limited to public utility and/ or drainage easements as defined in section Minnesota Statute 505.01, Subdivision 3, paragraph (b), (h), and (j)." Thus, we will prepare a separate Exhibit and Description for the Trail Easement. Trail Easement to be recorded by separate document in coincidence with the plat recording. Task 4 - Cross -Access Easement By Minnesota statute, "Easements created on the plat shall be limited to public utility and/ or drainage easements as defined in section Minnesota Statute 505.01, Subdivision 3, paragraph (b), (h), and (j)." Thus, we will prepare a separate Exhibit and Description for the Cross -Access Easement. Cross -Access Easement to be recorded by separate document in coincidence with the plat recording. WSB will prepare this survey/platting for the following lump sum fee: • Task 1 and 2 fee • Task 3 and 4 Fee $9,800.00 $1,800.00 *The following are pass-through expenses are estimates and cost may vary; WSB does not mark up these expenses: • Title Commitment fees $1,800.00* • Plat checking fees $400.00* • Mylar fee $600.00* *Title commitments for each parcel will be necessary to complete the platting. Client to provide or WSB can order as an additional pass-through expense. These are typically ± $600.00 per commitment. If there are any significant unforeseen title complexities, additional fee maybe required; our team would let you know in advance if this were to occur. WSB can begin field work within 1 week of receiving a signed contract. Title commitments, however, will be necessary to continue with and complete the platting process. Our team is looking forward to working with you on this project. If you have any questions regarding this proposal, please contact me at 612-209-9051. If you agree with the terms as outlined above, please sign where indicated below and return. Sincerely, WSB Jeremy Honga, PLS Jim Stremel, PE 612-209-9051 763-287-8532 By Title Date EXHIBIT A CONCRETE CURB AND GUTTER DESIGN B618 I � ---------------------------- p ° I 52' r — J LOADING DOCK p p° p I c p p ° p ° J ° ° ° ° pp 4 12" RCP STORM SEWER p ° ° ° p ° J p ° C ° e ° n o ° e °p CLASS III RIPRAP OVERFLOW SWALE ° p 1 J 1: o — — o — — o O - I I I III I p I j III o I I I I I I �� Fl- 1 III --1 — = La--- II------ — — — — \ \\ N o 0' c9 --------- o 0 �\ 0 0 0 . rn � � I 01 J s I I I I TL$' /Z/Z71 I I I I I I I I I I I S I I II I I IIA I - I I I L-- i111n'—JuJ ti 3'-4' HIGH RETAINING WALL i \ — I FFAI 1L_JI L_ __ II I \ \ I �----- � J \ II — — I I I NEW TRASH ENCLOSUREk-1 REMOVE EXISTING PAVEMENT AND CONCRETE ISLANDS L 00 LEGEND: PROPOSED 4" BITUMINOUS SURFACE WITH 8" CLASS 5 BASE. 101 Z__2" BITUMINOUS MILL AND OVERLAY. (/ ° a 8" REINFORCED CONCRETE (LOADING DOCK) 4 CONCRETE (SIDEWALKS) 6 DIRECTIONAL INFILTRATION BASIN (1-2 FOOT DEPTH, 1:3 BORE WATERMAIN. SLOPES, GRASS AND VARIOUS PLANTS) / 8 COVER 1919 / PROVIDE EROSION CONTROL AS REQUIRED FOR ALL NECESSARY SITE PERMITS. 92� I i 71' I I I I I I I I I I I I i I I I I I I I I I 0I I I I I °p I I I I I---------------- I I I I I I I I I I 1 i � I PROPOSED LANDSCAPE. ` RELOCATE EXISTING PINE TREES. sj. 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C1.1 From: Michael Maher To: Anaela Schumann Cc: Justin Dahlman; Matthew Maher; Spencer Sanford Subject: FW: Karlsburger Foods Narrative Date: Monday, August 2, 20214:32:30 PM Attachments: imaae001. nnaa Karlsburger Foods 2021.pdf Hi Angela, Karlsburger Foods has been a leading manufacturer of Soup Bases, Sauces and Seasonings since 1956. We also are very active in Hunger Relief. We manufacture vitamin enriched flavoring for organizations like Feed My Starving Children and Kids Against Hunger. We help feed approximately 600 mm meals to third world countries annually. We proudly joined the Monticello Community in January of 2007 when we built our new production facility in Otter Creek Crossings. Since we moved here we have grown from 11 employees to 42 employees. We have outgrown our current production facility, employee amenities and our parking area. As we have discussed with Angela and Jim we are working on a building addition of approximately 17,000 square feet. In order to accommodate this we would like to purchase approximately 2 acres of the land to the west of us from the EDA. Additionally we would like to acquire a portion of the triangle lot on the north side from the City. I have included a proposed drawing for these lots. In regards to the lot to the North, we would like to share the current entrance to the lift station and possibly even make it slightly wider. That would allow us to build an access for semi -trucks to travel in one direction around our building to the new proposed dock doors on the south side of the building. My office overlooks this current lift station and I can also see the entrance to the trail for the park system. Our goal would be to acquire the land and provide an easement so that people can access the trail system. By aquiring this land and granting an easement back we hope to utilize the square footage of the easement towards our impervious area requirements. Benefits to the City of Monticello if Karlsburger Foods acquires the piece of land to the north would be: Eliminates the mowing and irrigation of the triangle in front of Karlsburger. Adds to the Karlsburger Foods Tax Basis. Allows us to keep semis from pulling over on the side road of Chelsea. As a paved parking area the City utilities below the ground would not be interfered with. Karlsburger Expansion will propose an additional 20 employees of various wage and salary levels within the next 3 to 5 years. In all honesty I did discuss with Jeff Nelson a few years ago about the city giving this parcel of land to Karlsburger for some of the same reasons that are listed above. We just never got around to completing the transaction. One last note, as we set our 10 year vison plan we see ourselves eventually acquiring more of the land to the West and expanding again. I look forward to presenting a more thorough narrative in person and introducing you to my three sons Justin, Matthew and Spencer. We are a family owned business with a solid succession plan in place to keep the company growing and contributing to the City of Monticello. Thanks Mike Michael H. Maher I President & CEO MikePkarlsburger.com 763.295.2273(Base) 1 800.383.6549 Office Hours: M -F, 7:30 am - 4:00 pm Central Time 3236 Chelsea Road W, Monticello, MN 55362 1 Karlsburger.com F. Of Osf M14 Osf i FON Pro si gMaFehGu i cm� 617 V4 O�f EDA: 08/25/21 4b. Consideration of Authorizing Northland Securities, Inc. (NSI) Professional Services Contract related to establishing Economic Development Tax Increment Financing (TIF) District (#1-42) for Karlsburger Foods' expansion (JT) A. REFERENCE AND BACKGROUND: This item is to ask the EDA to consider approving a specific project -based contract with Northland Securities, Inc. (NSI) related to establishing an Economic Development Tax Increment Financing (TIF) District (#1-42). The Karlsburger Foods' expansion proposal is expected to cost $4,500,000 +/- and involves land acquisition, new construction, equipment purchases, new ingress -egress to Chelsea Road and other site improvements. Karlsburger Foods' submitted a TIF Business Subsidy Application and that item (#6.) is a companion to this consideration. The EDA has contracted with NSI in the past to prepare TIF Plans, complete the financial analysis and ultimate certification of newly established districts with the County. The most recent TIF supported development project was the UMC expansion (now under construction). The EDA authorized a similar contract with NSI in July 2019 for that project. The attached proposal outlines services related to development parcel valuation data, review of the developer finance structure and "but for" findings. It also covers preparation and distribution of various notices, planning documents, completion of a TIF Plan and attendance at two meetings. It does not include legal documents such as resolutions and development agreements. NSI will only bill for actual work performed based on an hourly rate of $215 with the total amount of billings capped at $8,600. The development proposal is on a fast-track schedule per request from the applicant. Al. STAFF IMPACT: TIF Districts are extremely complicated tax based financial assistance tools used to support new development. There are a number of legal and critical financial review processes that are required in establishing a new TIF District. Under the proposed contract, NSI will analyze property and financing data and prepare a TIF Plan specifically tailored to the proposal and the site. They will also prepare the essential "but - for" findings. In-house staff will support and collaborate with NSI by providing application submittal materials and guidance as to EDA discussion regarding the policy of using TIF for a new economic development district. The EDA attorney will also be responsible for reviewing the plan and preparing development contracts reflecting the plan components. A2. BUDGET IMPACT: Karlsburger Foods will be asked to pay the $10,000 TIF Business Subsidy application fee which will be used to pay for the NSI contract fee. NSI's quote of $8,600 for the Financial Planning Services leaves a balance of $1,400 for other expenses (primarily legal fees) needed to complete the entire TIF review and approval process. It is likely that the total cost to establish a new TIF District will exceed EDA: 08/25/21 $10,000 and Karlsburger has been informed of this potential and that they will be asked to cover expenses incurred in establishing the TIF District. B. ALTERNATIVE ACTIONS: 1. Motion to authorize NSI Financial Planning Agreement for services related to creation of economic development TIF District 1-42 for the Karlsburger Foods' expansion proposal. 2. Motion to table consideration of the NSI Financial Planning Agreement for services related to creation of economic development TIF District 1-42 for the Karlsburger Foods expansion proposal. C. STAFF RECOMMENDATION: Staff recommends Alternative 1. TIF districts have impacts across several taxing jurisdictions and variety of financial implications. The NSI Financial Planning Services Agreement is essential to ensure the EDA stays within the bounds of all required steps and notices when creating a new TIF District. Therefore, it important that staff have the support of consultants such as NSI to perform highly specialized TIF Plan analytical work as well as for preparation of specific plans and documents that are part of a creating a new TIF District. D. SUPPORTING DATA: a. NSI Financial Planning Services Agreement 2 FINANCIAL PLANNING AGREEMENT BY AND BETWEEN THE CITY OF MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY AND NORTHLAND SECURITIES, INC. TAX INCREMENT FINANCING DISTRICT (ECONOMIC DEVELOPMENT) This Agreement made and entered into by and between the City of Monticello Economic Development Authority, Minnesota (hereinafter the "EDA") and Northland Securities, Inc., of Minneapolis, Minnesota (hereinafter "NSI"). WITNESSETH WHEREAS, the EDA desires to use the services of NSI for financial planning assistance related the establishment of a new tax increment financing economic development district, No. 1-42 (the "TIF District") to provide financial assistance for the construction of an approximate 17,100 square feet commercial building for manufacturing (the "Project"). WHEREAS, the Project is intended solely for financial planning and NSI is not providing advice on the timing, terms, structure or similar matters related to a specific bond issue. WHEREAS, NSI desires to furnish services to the EDA as hereinafter described. NOW, THEREFORE, it is agreed by and between the parties as follows: SERVICES TO BE PROVIDED BY NSI The scope of work will undertake the process and financial planning to establish the TIF District. Legal services to draft or review the plan for the establishment of the TIF District (the "TIF Plan"), resolutions, and agreements are not provided by NSI and are not subject to this agreement. NSI will provide the following services: 1. Collect data for the TIF District and the Project, including: a. Parcel identification numbers for all parcels within the Development District and theTIF District. b. Estimated market value and tax capacity value for all parcels within the TIF District. c. Current property tax rates for all jurisdictions. d. Map showing project location and parcel boundaries. 2. Evaluate and advise the EDA on the type of tax increment financing district and provide guidance on statutory findings. 3. Collect data about the Project, including: a. Type, size, value, and timing of proposed development. b. Activities and estimated costs (project budget) to be paid by the TIF District. Agreement (Economic Development TIF Page 1 4. Review basis for findings for establishing TIF District, including: a. Statutory criteria for proposed district. b. Developer justification ("but for") for the use of tax increment. c. Review and analyze Developer construction pro forma and operating pro forma for the Project. d. Prepare memorandum for the EDA presenting the findings. S. Determine basic understanding of key criteria for the process including: a. Boundaries of Development District and the TIF District. b. Specific development objectives to address in the planning documents beyondthe Project, including decertification of an existing tax increment financing district. c. Official newspaper and publication schedule. 6. Obtain any additional data not collected in item #1, including: a. Building permits issued for parcels in the TIF District over the past 18 months. b. Current comprehensive plan. 7. Set and distribute calendar of meetings and key dates. 8. Assist with preparation of notice of hearing and comply with statutory requirements for mailing and publication. 9. Assist the EDA's attorney with drafting of the development agreement for the Project. 10. Prepare planning documents including modification of the Redevelopment Project,if necessary, and Tax Increment Financing Plan for the TIF District. 11. Distribute draft planning documents with letter ofexplanation and other supporting information to the county and the school district. 12. Assist with preparation of resolutions authorizing the TIF District and approvingthe TIF Plan. 13. Prepare and distribute resolution for planning commission findings, if necessary(scope does not include NSI attendance at planning commission meeting). 14. Prepare and distribute packet for public hearing including the TIF Plan andapproving resolution and interfund loan resolutions (if loan is proposed). 15. Attend and facilitate the EDA meeting to consider approval of the TIF Districtand agreement for the Project. 16. Assist City staff in preparing presentation for the public hearing and City Council meeting to consider approval of the TIF District. 17. Prepare electronic transcript of documents for the establishment of the TIF District. 18. Submit request to the county for certification of the TIF District. 19. File district with the Office of the State Auditor and the State of Minnesota. Agreement (Economic Development TIF Page 2 COMPENSATION The budget for undertaking the tasks in this agreement is an amount not to exceed $8,600. The amount is based on the estimated number of hours required to complete these tasks at an hourly billing rate of $215 per hour plus reimbursable expenses for travel, printing, and mailing. NSI will bill on a monthly basis for actual services performed and reimbursable expenses. The EDA may at its discretion authorize NSI to undertake additional tasks, including meeting attendance, beyond the tasks listed above. Additional planning services will be billed monthly at a rate of $215 per hour. Invoices will detail the work performed, requested compensation for the period and show amounts previously billed. ASSIGNED NSI EMPLOYEE The NSI employee responsible for providing services pursuant to this agreement and for the services performed is Tammy Omdal, Managing Director. SUCCESSORS OR ASSIGNS The terms and provisions of this Agreement are binding upon and inure to the benefit of the EDA and NSI and their successors or assigns. DISCLAIMER In performing service under this agreement, NSI is relying on the accuracy of information provided by the developer for the proposed project and the EDA and the services provided by NSI are based on current State Law. The parties agree that the Minnesota property tax system and other laws may change and may affect the accuracy and validity of services provided by NSI. NSI will perform its work using the best available information. The EDA recognizes and accepts that future property values, tax levies and tax rates may vary from the assumptions used byNSI and such changes may affect the work product produced and provided by NSI. TERM OF THIS AGREEMENT This Agreement may be terminated by thirty (30) days written notice by either the EDA or NSI. In the event of early termination by the EDA, NSI shall provide the EDA with an itemized hourly statement of services already provided. All billable hours by NSI shall be billed at the stated hourly rates should early termination occur. Dated this day of 2021. Agreement (Economic Development TIF Page 3 Northland Securities, Inc. 1� By: - —n Managing Director, Public Finance City of Monticello Economic Development Authority Title Agreement (Economic Development TIF Page 4 EDA: 08/25/21 5. Consideration of Resolution #2021-11 Authorizing a GMEF Loan Agreement between the EDA and RRG Holdings, LLC and Sota Car Wash, LLC, co -borrowers, in the amount of $140,000 (JT) A. REFERENCE AND BACKGROUND: RRG Holdings LLC and Sota Car Wash LLC, co -borrowers, recently submitted a GMEF Loan application seeking $140,000 to fill a funding gap for a proposed car wash facility. The cost of the development proposal is expected to total $4,619,000. The proposed development site is the former Danner semi -truck terminal and repair shop located at 1301 Cedar Street. Under the City zoning ordinance, a car wash, as proposed, is a permitted use in the B-3 Zoning District. The applicant has indicated that the facility would be a new generation style operation and will use enhanced technology and design features ensuring fast, high-quality car washes in a customer -centric and friendly environment. Besides offering differentiated service levels and prices, Sota Car Wash's business model includes a membership rate/month which allows numerous washes each month. The business plan includes market research with current and projected demographics and relies on the visibility of the site to enable it to capture a percentage of the nearly 25,000 to 30,000 vehicles traveling past the facility via MNTH 25 daily. The proposed development involves real estate and is technically a special use building and a start-up, so the Bank -SBA loans combined are limited to 80 percent of the funding. This leaves the developer -applicant responsible to identify and gain commitments for 20 percent of the funding. Multiple gap lenders are proposed as sources of approximately 9.5 percent of the proposal. The proposed financing structure is shown in the Sources and Uses below: Sources Amount % Uses Amount CorTrust Bank $2,300,000 50.0 Land Purchase $ 849,000 CMDC — SBA -504 $1,399,000 30.0 New Construction $2,300,000 Cash Equity $ 480,000 10.5 Equipment $1,158,514 Initiative Foundation $ 200,000 4.5 Contingency $ 192,486 IF Loan #2 $ 100,000 2.0 Soft Costs $ 119,000 EDA—GMEF 140,000 3_0 Total $4,619,000 Total $4,619,000 100.0 Sota Car Wash is proposing to create 4 new FTE jobs and 4 new part-time jobs over the next two years. In addition to job creation, a community benefit is the redevelopment of a visible 1.16 -acre site. Currently, the site has older non -conforming metal buildings. It has a property value of $450,100 and generates approximately $11,000 in property taxes. Under the proposed redevelopment, the value may increase substantially and generate more than twice as much in annual property taxes. The details of the key loan terms are shown below. MN325\46\741914.v2 EDA: 08/25/21 1. Loan Amount = $140,000 2. Loan Term = 20 -year amortization with a 101h year balloon payment 3. Interest Rate = 1.25 percent (per GMEF Loan policies) 4. Collateral = Shared 3rd Real Estate Mortgage with IF (pro -rata) 5. Personal Guaranty: Yes; Corey Kampschroer (70 percent owner) and Jason Halverson (30 percent owner) 6. Loan Close Date = September 16 or 17, 2021 7. Deferral Period: P & I Loan Payments to Start in May 2022 8. Job Creation = 4 FTE jobs and 4 part-time jobs over two years 9. Loan Origination Fee = 1.5 percent; $2,100 The loan documents involved in the consideration include the following: • Loan Agreement • Mortgage Agreement • Promissory Note • Personal Guaranty of owners • Intercreditor Agreement with IF #1 for Mortgage Collateral Al. STAFF IMPACT: The amount of staff time committed to the file is approximately 22 hours including document preparation, EDA staff report preparation and meeting time. Staff involved includes the EDA Attorney, the Community Development Director, and the Economic Development Manager. The applicant paid the required fee to have Central Minnesota Development Corporation (CMDC) complete a thorough underwriting analysis of the credit and associated risks. CMDC, Andover, MN, is a Certified Development Company originating SBA 504 loans. It is also involved as the SBA lender providing 30 percent of the funding in the car wash proposal. A2. BUDGET IMPACT: The budgetary impact related to consideration of the EDA-GMEF loan request is to the loan fund itself. The fund currently has approximately $1,062,000 +/- available to be loaned out. This loan request of $140,000 is equal to approximately 13 percent of the available funds in the GMEF Loan program account. The application fee and origination fee should cover the legal fees that the EDA incurs related to document preparation by the EDA attorney. B. ALTERNATIVE ACTIONS: 1. Motion to adopt Resolution #2021-11 authorizing GMEF Loan Agreement and related Mortgage between the EDA and RRG Holdings, LLC and Sota Car Wash, LLC, co - borrowers, in the amount of $140,000. 2 MN325\46\741914.v2 EDA: 08/25/21 2. Motion to table Resolution #2021-11 for further research and/or discussion. C. STAFF RECOMMENDATION: Staff recommends Alternative #1. The loan request was underwritten by CMDC in a "Credit Memo" format used by commercial lenders. The Credit Memo indicates that the proposal is based on a sound business plan that shows projected revenue sufficient to service the debt sourced by all lenders in the proposal. Also, the individual guarantors have a history of responsible use of credit in the past. Kevin Weeres, CMDC, will attend the meeting to provide an overview of the key criteria involved in preparing the Credit Memo and summarize the approval recommendation. In summary, the GMEF loan request is recommended because the financial projections indicate a high expectation of repayment. The loan proposal is a critical component of the funding for a new business in the community. It also merits approval due to the overall context of the proposed gap financing structure. The community's economic benefits include new job creation, an increase in the tax base and redevelopment of a visible site that is currently occupied by an older metal building structure. SUPPORTING DATA: A. Resolution #2021-11 B. Loan Agreement, Promissory Note, Mortgage Agreement, Personal Guaranty C. GMEF Loan Application D. Business Description Summary E. Development Site Illustrations -Renderings F. Aerial Photo of Site —1301 Cedar Street MN325\46\741914.v2 EDA RESOLUTION NO. 2021-11 RESOLUTION APPROVING A GMEF LOAN AGREEMENT BETWEEN THE CITY OF MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY, RRG HOLDINGS LLC, AND SOTA CAR WASH LLC BE IT RESOLVED BY the Board of Commissioners ('Board") of the City of Monticello Economic Development Authority (the "Authority") as follows: Section 1. Recitals. 1.01. The Authority administers its Greater Monticello Enterprise Fund ("GMEF") revolving loan program pursuant to its authority under Minnesota Statutes, Sections 469.090 to 469.108 1, as amended (the "EDA Act"), in order to assist Monticello businesses in financing certain economic development activities that result in the creation of jobs. 1.02. RRG Holdings LLC and Sota Car Wash LLC (together, the `Borrower") has requested financial assistance from multiple lenders, including the Authority, in connection with the acquisition of certain real property located in the City of Monticello, Minnesota (the "City") and legally described at Exhibit A hereto (the "Property"), demolition of an existing structure, and construction of a new car wash facility to be located on the Property (the "Project"). 1.03. The Authority and the Borrower desire to enter into a loan agreement (the "Loan Agreement") wherein the Authority agrees to make a loan to the Borrower of GMEF funds in the maximum amount of $140,000 (the "Loan") to pay a portion of the costs of acquisition of the Property (the "Project Costs") in connection with the Project. 1.04. The loan will be evidenced by a promissory note (the "Note") and secured by a personal guaranty of Cory Kampschroer, Jessica Kampschroer, Ellen Halvorson, and Jason Halvorson (the "Guaranty"), and a Mortgage (the "Mortgage" and together with the Loan Agreement, the Note, and the Guaranty, the "Loan Documents"), to be executed and delivered to the Authority by the Borrower. 1.05. The terms of the Loan Agreement and Note shall conform to the Amended GMEF Guidelines approved by the Authority on July 24, 2017, including wages at a level equal to at least 160% of the federal minimum wage, a term of the loan of ten years, and a fixed interest rate of 1.25%. Section 2. Loan Documents Authorized. 2.01. The Authority hereby approves the Loan Documents in the form presented to the Board, and authorizes execution of the Loan Agreement, subject to modifications that do not alter the substance of the transaction and that are approved by the President and Executive Director, provided that execution of the Loan Agreement by such officials shall be conclusive evidence of approval. 1 MN325\46\741912.v2 Approved this 25th day of August, 2021, by the Board of Commissioners of the City of Monticello Economic Development Authority. President ATTEST: Executive Director 2 MN325\46\741912.v2 EXHIBIT A LEGAL DESCRIPTION That property located in the City of Monticello, Wright County, Minnesota and legally described as follows: Lot 1, Block 1, Kampschroer Addition. A-1 MN325\46\741912.v2 LOAN AGREEMENT This Loan Agreement ("Agreement") is made this _ day of August, 2021, between RRG Holdings LLC, a Minnesota limited liability company ("Owner"); Sota Car Wash LLC, a Minnesota limited liability company ("Operator") (together, the "Borrower"); and the City of Monticello Economic Development Authority (the "Lender"), a public body corporate and politic and political subdivision of the State of Minnesota. RECITALS A. In consideration for the loan contemplated by this Agreement, Borrower is executing and delivering to Lender this Loan Agreement. B. Lender administers its Greater Monticello Enterprise Fund ("GMEF") revolving loan program pursuant to its authority under Minnesota Statutes, Sections 469.090 to 469.1081, as amended (the "EDA Act"), in order to assist Monticello businesses in financing certain economic development activities that result in the creation of jobs. C. The Borrower has requested financial assistance from multiple lenders, including the Lender, in connection with the acquisition of certain real property located in the City of Monticello, Minnesota (the "City") and legally described at Exhibit A hereto (the "Property"), demolition of an existing structure, and construction of a new car wash facility to be located on the Property (the "Project"). D. The Lender agrees to make a loan to Borrower of GMEF funds in the maximum amount of $140,000 (the "Loan") to pay a portion of the costs of acquisition of the Property (the "Project Costs") in connection with the Project. ACCORDINGLY, to induce the Lender to make the Loan to Owner, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. The Loan Amount. Subject to and upon the terms and conditions of this Agreement, Lender agrees to loan to Owner the sum of One Hundred Forty Thousand and no/100ths Dollars ($140,000.00), or so much thereof as is disbursed to Owner in accordance with this Agreement for the purpose of financing a portion of the Project Costs. The Loan shall be evidenced by a promissory note (the "Note") payable by Owner to Lender and substantially in the form of Exhibit B attached to this Agreement, which shall be dated as of the date of closing on acquisition of the Property (the "Loan Closing Date"). Proceeds of the Loan shall be disbursed in accordance with Section 3 hereof. MN325\46\738385.v2 I 2. Repayment of Loan. The Loan shall be repaid with interest as follows: (a) Interest at the rate of one and one-quarter percent (1.25%) per annum shall accrue from the Loan Closing Date until the Loan is repaid in full. (b) Level payments of principal and interest shall commence on May 1, 2022 (the "Initial Payment Date") and continue on the first day of each and every month thereafter until paid in full. Such payments shall fully amortize the principal and interest over twenty (20) years, provided that the final unpaid balance of principal and interest shall be due and payable on the first day of the one hundred twentieth (120th) month following the Initial Payment Date. 3. Disbursement of Loan Proceeds. (a) The Loan proceeds shall be disbursed to Owner's chosen title company ("Title") and applied to the purchase price of the Property on the Loan Closing Date. (b) The following events shall be conditions precedent to the payment of the Loan proceeds to Owner on the Loan Closing Date: (i) Owner having executed and delivered to Lender, prior to the Loan Closing Date and without expense to Lender, executed copies of this Agreement and the Note, and Owner further having caused to be executed and delivered to Lender a mortgage in substantially the form attached hereto as Exhibit C (the "Mortgage"); (ii) Prior to the Loan Closing Date, the Owner having executed and delivered to the Lender a personal guaranty in substantially the form attached hereto as Exhibit D (the "Guaranty"); (iii) Prior to the Loan Closing Date, Owner having provided the Lender with Title's contact information, and Lender having received a copy of Owner's settlement statement evidencing the purchase price of the Property in at least the amount of the Project Costs; (iv) Lender having received an executed acknowledgement from Title in connection with Lender's instructions for disbursement of the proceeds of the Loan; (v) Borrower having provided evidence reasonably satisfactory to the Lender of formal approval of loans from the Initiative Foundation in the total aggregate principal amount of $300,000; (vi) Title having disbursed to Lender a loan origination fee of $2,100 from proceeds of the Loan; and (vii) Borrower having paid to Lender the full amount of the legal fees MN325\46\738385.v2 2 incurred by Lender in the negotiation and preparation of this Agreement and any other agreement or instrument securing the Loan. 4. Representations and Warranties. Borrower represents and warrants to Lender that: (a) Borrower is duly authorized and empowered to execute, deliver, and perform this Agreement and to borrow money from Lender. (b) The execution and delivery of this Agreement, and the performance by Borrower of its obligations hereunder, do not and will not violate or conflict with any provision of law and do not and will not violate or conflict with, or cause any default or event of default to occur under, any agreement binding upon Borrower. (c) The execution and delivery of this Agreement has been duly approved by all necessary action of Borrower, and this Agreement has in fact been duly executed and delivered by Borrower and constitutes its lawful and binding obligation, legally enforceable against it. (d) Borrower warrants that it shall keep and maintain books, records, and other documents relating directly to the receipt and disbursements of Loan proceeds and that any duly authorized representative of Lender shall, at all reasonable times, have access to and the right to inspect, copy, audit, and examine all such books, records, and other documents of Borrower pertaining to the Loan until the completion of all closeout procedures and the final settlement and conclusion of all issues arising out of this Loan. (e) Borrower warrants that it has fully complied with all applicable state and federal laws pertaining to its business and will continue to comply throughout the terms of this Agreement. If at any time Borrower receives notice of noncompliance from any governmental entity, Borrower agrees to take any necessary action to comply with the state or federal law in question. (f) Borrower warrants that it will use the proceeds of the Loan made by Lender solely for the Project Costs, as described in Recital D of this Agreement. (g) Borrower warrants that it will not create, permit to be created, or allow to exist any liens, charges, or encumbrances prior to the obligation created by this Loan Agreement, except as otherwise authorized in writing by Lender. 5. Business Subsidy. The Lender and Borrower agree and acknowledge that the Loan provided under this Loan Agreement is not a business subsidy as defined in Minnesota Statutes, Sections 1161993 to 1161995, as amended (the "Business Subsidy Act") because the Loan is in an amount under $150,000, but that the Borrower must comply with the job and wage provisions of the Lender's written Business Subsidy Policy. To this effect, the Borrower covenants and agrees as follows: MN325\46\738385.v2 3 (a) Job and Wage Goals. The "Benefit Date" of the assistance provided in this Agreement is the Loan Closing Date. By the Compliance Date, which is the date two (2) years after the Benefit Date, the Operator shall create or cause to be created at least four (4) full-time equivalent jobs and four (4) part-time equivalent jobs at the Facility, and cause the wages of the created jobs to be as shown below, exclusive of benefits: Job Wages Full -Time 1 $100,000/ ear Full -Time 2 - 4 $50,000/ ear Part -Time 1 - 4 $13.00/hour Notwithstanding anything to the contrary herein, if the wage and job goals described in this paragraph are met by the Compliance Date, those goals are deemed satisfied as of the date such wage and job goals are met. The Lender may, after a public hearing, extend the Compliance Date by up to one year, provided that nothing in this section will be construed to limit the Lender's legislative discretion regarding this matter. (b) Remedies. If the Operator fails to meet the goals described in Section 5(a), the Borrower shall repay to the Lender upon written demand from the Lender the outstanding principal amount of the Note, plus interest accrued to such payment date. Nothing in this Section shall be construed to limit the Lender's remedies under Section 7 hereof. In addition to the remedy described in this Section and any other remedy available to the Lender for failure to meet the goals stated in Section 5(a), the Borrower agrees and understands that it may not receive a business subsidy from the Lender or any grantor (as defined in the Business Subsidy Act) for a period of five (5) years from the date of the failure or until the Borrower satisfies its repayment obligation under this Section, whichever occurs first. 6. Event of Default by Borrower. The following shall be Events of Default under this Agreement: (a) failure to pay any principal or interest on the Loan when due; (b) any representation or warranty made by Borrower herein or in any document, instrument, or certificate given in connection with this Agreement, the Note, the Mortgage, or the Guaranty that is false when made; (c) Borrower fails to pay its debts as they become due, makes an assignment for the benefit of its creditors, admits in writing its inability to pay its debts as they become due, files a petition under any chapter of the Federal Bankruptcy Code or any similar law, state or federal, now or hereafter existing, becomes "insolvent" as that term is generally defined under the Federal Bankruptcy Code, files an answer admitting insolvency or inability to pay its debts as they become due in any involuntary bankruptcy case commenced against it, or fails to obtain a dismissal of such case within thirty (30) days after its commencement or convert the case from one chapter of the Federal Bankruptcy Code to another chapter, or be MN325\46\738385.v2 4 the subject of an order for relief in such bankruptcy case, or be adjudged a bankrupt or insolvent, or has a custodian, trustee, or receiver appointed for, or has any court take jurisdiction of its property, or any part thereof, in any proceeding for the purpose of reorganization, arrangement, dissolution, or liquidation, and such custodian, trustee, or receiver is not discharged, or such jurisdiction is not relinquished, vacated, or stayed within thirty (30) days of the appointment; (d) a garnishment summons or writ of attachment is issued against or served upon Lender for the attachment of any property of Borrower in Lender's possession or any indebtedness owing to Borrower, unless appropriate papers are filed by Borrower contesting the same within thirty (30) days after the date of such service or such shorter period of time as may be reasonable in the circumstances; (e) any breach or failure of Borrower to perform any other term or condition of this Agreement not specifically described as an Event of Default in this Agreement and such breach or failure continues for a period of fifteen (15) days after Lender has given written notice to Borrower specifying such default or breach, unless Lender agrees in writing to an extension of such time prior to its expiration; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, Lender will not unreasonably withhold its consent to an extension of such time if corrective action is instituted by Borrower within the applicable period and is being diligently pursued until the Default is corrected, but no such extension shall be given for an Event of Default that can be cured by the payment of money (i.e., payment of taxes, insurance premiums, or other amounts required to be paid hereunder); (f) any breach by Borrower of any other agreement between Borrower and Lender, or Borrower and the City. 7. Lender's Remedies upon Borrower's Default. Upon an Event of Default by Borrower and after provision by Lender of written notice, Lender shall have the right to exercise any or all of the following remedies (and any other rights and remedies available to it): (a) declare the principal amount of the Loan and any accrued interest thereon to be immediately due and payable upon providing written notice to Borrower; (b) suspend its performance under this Loan Agreement; (c) take any action provided for at law to enforce compliance by Borrower with the terms of this Agreement and the Note; (d) exercise its rights under the Mortgage and/or Guaranty. In addition to any other amounts due on the Loan, and without waiving any other right of Lender under any this Agreement or any other instrument securing the Loan applicable documents, Borrower shall pay to Lender a late fee of $250 for any payment not received in full by Lender within 30 calendar days of the date on which it is due. Furthermore, interest will MN325\46\738385.v2 5 continue to accrue on any amount due until the date on which it is paid to Lender, and all such interest will be due and payable at the same time as the amount on which it has accrued. 8. Lender's Costs of Enforcement of Agreement. If an Event of Default has occurred as provided herein, then upon demand by Lender, Borrower shall pay or reimburse Lender for all expenses, including all attorneys fees and expenses incurred by Lender in connection with the enforcement of this Agreement and the Note, or in connection with the protection or enforcement of the interests and collateral security of Lender in any litigation or bankruptcy or insolvency proceeding or in any action or proceeding relating in any way to the transactions contemplated by this Agreement. 9. Indemnification. (a) Borrower shall and does hereby agree to indemnify against and to hold Lender, and its officers, agents, and employees, harmless of and from any and all liability, loss, or damage that it may incur under or by reason of this Agreement, and of and from any and all claims and demands whatsoever that may be asserted against Lender by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants, or agreements contained herein. (b) Should Lender, or its officers, agents, or employees incur any such liability or be required to defend against any claims or demands pursuant to this Section, or should a judgment be entered against Lender, the amount thereof, including costs, expenses, and attorneys fees, shall bear interest thereon at the rate then in effect on the Note, shall be secured hereby, shall be added to the Loan, and Borrower shall reimburse Lender for the same immediately upon demand, and upon the failure of Borrower to do so, Lender may declare the Loan immediately due and payable. (c) The provisions of this Section shall survive the execution, delivery, and performance of this Agreement and the creation and payment of any indebtedness to Lender. Borrower waives notice of acceptance of this Agreement by Lender. (d) Nothing in this Agreement shall constitute a waiver of or limitation on any immunity from or limitation on liability to which Borrower is entitled under law. 10. Miscellaneous. (a) Waiver. The performance or observance of any promise or condition set forth in this Agreement may be waived, amended, or modified only by a writing signed by Borrower and Lender. No delay in the exercise of any power, right, or remedy operates as a waiver thereof, nor shall any single or partial exercise of any other power, right, or remedy. (b) Assi_nin. This Agreement shall be binding upon Borrower and its successors and assigns and shall inure to the benefit of Lender and its successors and assigns. All rights and powers specifically conferred upon Lender may be transferred or delegated by Lender to any of its successors and assigns. Borrower's rights and obligations MN325\46\738385.v2 6 under this Agreement may be assigned only when such assignment is approved in writing by Lender. (c) Governing Law. This Agreement is made and shall be governed in all respects by the laws of the state of Minnesota. Any disputes, controversies, or claims arising out of this Agreement shall be heard in the state or federal courts of Minnesota, and all parties to this Agreement waive any objection to the jurisdiction of these courts, whether based on convenience or otherwise. (d) Severability. If any provision or application of this Agreement is held unlawful or unenforceable in any respect, such illegality or unenforceability shall not affect other provisions or applications that can be given effect, and this Agreement shall be construed as if the unlawful or unenforceable provision or application had never been contained herein or prescribed hereby. (e) Notice. All notices required hereunder shall be given by depositing in the U.S. mail, postage prepaid, certified mail, return receipt requested, to the following addresses (or such other addresses as either party may notify the other): To Lender: City of Monticello Economic Development Authority 505 Walnut Street, Suite 1 Monticello, MN 55362 Attn: Executive Director To Owner: RRG Holdings LLC 1301 Cedar Street Monticello, MN 55362 To Operator: Sota Car Wash LLC 1301 Cedar Street Monticello, MN 55362 (f) Termination. If the Loan is not disbursed pursuant to this Agreement by December 31, 2021, this Agreement shall terminate and neither party shall have any further obligation to the other, except that if the Loan is not disbursed because Borrower has failed to use its best efforts to comply with the conditions set forth in Section 3 of this Agreement then Borrower shall pay to Lender all reasonable attorneys fees, costs, and expenses incurred by Lender in connection with this Agreement and the Note. (g) Entire Agreement. This Agreement, together with the Exhibits hereto, which are incorporated by reference, constitutes the complete and exclusive statement of all mutual understandings between the parties with respect to this Agreement, superseding all prior or contemporaneous proposals, communications, and understandings, whether oral or written, concerning the Loan. (h) Headings. The headings appearing at the beginning of the several sections MN325\46\738385.v2 7 contained in this Agreement have been inserted for identification and reference purposes only and shall not be used in the construction and interpretation of this Agreement. IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the proper officers thereunto duly authorized on the day and year first written above. LENDER: CITY OF MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY By: President By: Executive Director MN325\46\738385.v2 8 [SIGNATURE PAGE TO LOAN AGREEMENT - CITY OF MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY] MN325\46\738385.v2 BORROWERS: OWNER: RRG HOLDINGS LLC Its OPERATOR: SOTA CAR WASH LLC Its [SIGNATURE PAGE TO LOAN AGREEMENT - RRG HOLDINGS LLC] MN325\46\738385.v2 10 EXHIBIT A LEGAL DESCRIPTION That property located in the City of Monticello, Wright County, Minnesota and legally described as follows: Lot 1, Block 1, Kampschroer Addition. MN325\46\738385.v2 A-1 EXHIBIT B PROMISSORY NOTE -$140,000- -1.25%- 2021 RRG Holdings LLC ("Maker"), for value received, hereby promises to pay to the City of Monticello Economic Development Authority, a public body corporate and politic under the laws of Minnesota or its assigns (Authority and any assigns are collectively referred to herein as "Holder"), at its designated principal office or such other place as the Holder may designate in writing, the principal sum of One Hundred Forty Thousand and no/100ths Dollars ($140,000) or so much thereof as may be advanced under this Note, with interest as hereinafter provided, in any coin or currency that at the time or times of payment is legal tender for the payment of private debts in the United States of America. The principal of and interest on this Note are payable in installments due as follows: 1. Interest at the rate of one and one-quarter percent (1.25%) per annum shall accrue from the Loan Closing Date, as defined in the Loan Agreement between Borrower and Lender dated as of , 2021 ("Loan Agreement") until the Loan is repaid in full. 2. Level payments of principal and interest shall commence on May 1, 2022 (the "Initial Payment Date") and continue on the first day of each and every month thereafter until paid in full. Such payments shall fully amortize the principal and interest over twenty (20) years; provided that the final payment of unpaid principal and interest shall be due and payable on the first day of the one hundred twentieth (120th) month following the Initial Payment Date. 3. The Maker shall have the right to prepay the principal of this Note and interest accrued to the date of such prepayment, in whole or in part, on any date a principal and interest payment is due and payable. 4. This Note is given pursuant to the Loan Agreement and secured by a mortgage of even date herewith delivered by Borrower (the "Mortgage") and by personal guaranties of Cory Kampschroer, Jessica Kampschroer, Ellen Halvorson, and Jason Halvorson (altogether, the "Guaranty"). If any such security is found to be invalid for whatever reason, such invalidity shall constitute an Event of Default hereunder. All of the agreements, conditions, covenants, provisions, and stipulations contained in the Loan Agreement, the Mortgage, the Guaranty, or any other instrument securing this Note are hereby made a part of this Note to the same extent and with the same force and effect as if they were fully set forth herein. It is agreed that time is of the essence of this Note. If an Event of Default occurs under the Loan Agreement, the Mortgage, the Guaranty, or any other instrument securing this Note, then the Holder of this Note may at its right and option, without notice, declare immediately due and MN325\46\738385.v2 B-1 payable the principal balance of this Note and interest accrued thereon, together with reasonable attorneys fees and expenses incurred by the Holder of this Note in collecting or enforcing payment hereof, whether by lawsuit or otherwise, and all other sums due hereunder or any instrument securing this Note. The Maker of this Note agrees that the Holder of this Note may, without notice to and without affecting the liability of the Maker, accept additional or substitute security for this Note, or release any security or any party liable for this Note or extend or renew this Note. 5. The remedies of the Holder of this Note as provided herein, and in the Loan Agreement, the Mortgage, the Guaranty, or any other instrument securing this Note shall be cumulative and concurrent and may be pursued singly, successively, or together, and, at the sole discretion of the Holder of this Note, may be exercised as often as occasion therefor shall occur; and the failure to exercise any such right or remedy shall in no event be construed as a waiver or release thereof. The Holder of this Note shall not be deemed, by any act of omission or commission, to have waived any of its rights or remedies hereunder unless such waiver is in writing and signed by the Holder and then only to the extent specifically set forth in the writing. A waiver with reference to one event shall not be construed as continuing or as a bar to or waiver of any right or remedy as to a subsequent event. This Note may not be amended, modified, or changed except only by an instrument in writing signed by the party against whom enforcement of any such amendment, modifications, or change is sought. 6. If any term of this Note, or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Note, or the application of such term to persons or circumstances other than those to which it is invalid or unenforceable shall not be affected thereby, and each term of this Note shall be valid and enforceable to the fullest extent permitted by law. 7. It is intended that this Note is made with reference to and shall be construed as a Minnesota contract and is governed by the laws thereof. Any disputes, controversies, or claims arising out of this Agreement shall be heard in the state or federal courts of Minnesota, and all parties to this Agreement waive any objection to the jurisdiction of these courts, whether based on convenience or otherwise. 8. The performance or observance of any promise or condition set forth in this Note may be waived, amended, or modified only by a writing signed by the Maker and the Holder. No delay in the exercise of any power, right, or remedy operates as a waiver thereof, nor shall any single or partial exercise of any other power, right, or remedy. 9. IT IS HEREBY CERTIFIED AND RECITED that all conditions, acts, and things required to exist, happen, and be performed precedent to or in the issuance of this Note do exist, have happened, and have been performed in regular and due form as required by law. [The remainder of this page is intentionally blank.] MN325\46\738385.v2 B-2 IN WITNESS WHEREOF, the Maker has caused this Note to be duly executed as of the day of , 2021. RRG HOLDINGS LLC By: Its [SIGNATURE PAGE FOR PROMISSORY NOTE - RRG HOLDINGS LLC] MN325\46\738385.v2 B-3 EXHIBIT C MORTGAGE THIS MORTGAGE (the "Mortgage") made as of the _ day of , 2021 by RRG Holdings LLC, a Minnesota limited liability company, 1301 Cedar Street, Monticello, Minnesota 55362 (hereinafter designated as the "Mortgagor"), in favor of City of Monticello Economic Development Authority, a public body corporate and politic and a political subdivision of the State of Minnesota located at is 505 Walnut Street, Suite 1, Monticello, Minnesota 55362 (hereinafter designated as the "Lender"). WITNESSETH: Mortgagor owes Lender the principal sum of $140,000. This debt is evidenced by a promissory note of even date herewith (the "Note"). This Mortgage secures to Lender: (a) the repayment of the debt evidenced by the Note, and all renewals, extensions, and modifications of the Note; (b) the payment of all other sums, advanced to protect the security of this Mortgage; and (c) the performance of Mortgagor's covenants and agreements under this Mortgage and the Note. For this purpose, Mortgagor does hereby mortgage, grant and convey to Lender, with power of sale, the real property located in Wright County, Minnesota and fully described in the attached Exhibit A, together with all the improvements now or hereafter erected on the property, and all easements, appurtenances, and fixtures now or hereafter a part of the property. All replacements and additions shall also be covered by this Mortgage. All of the foregoing is referred to in this Mortgage as the "Property". MORTGAGOR COVENANTS that Mortgagor will warrant and defend generally the title to the Property against all claims and demands, subject to any encumbrances of record. Mortgagor and Lender agree as follows: 1. PAYMENT OF PRINCIPAL AND INTEREST; LATE CHARGES. Mortgagor shall promptly pay when due the principal of and interest on the debt evidenced by the Note and any late charges due under the Note. 2. SUBORDINATION. This Mortgage is subordinate to (a) the Mortgage given by Mortgagor to CorTrust Bank, Monticello, Minnesota, dated as of the date hereof and recorded herewith; and (b) the Mortgage given by Mortgagor to SBA 504 Lender CMDC, Andover, Minnesota dated as of the date hereof and recorded herewith. 3. INTERCREDITOR AGREEMENT. This Mortgage is subject to an Intercreditor Agreement between the Lender and the Initiative Foundation dated as of the date hereof and recorded herewith. 4. HAZARD OR PROPERTY INSURANCE. Mortgagor shall keep the improvements now existing or hereafter erected on the Property insured against loss by fire and MN325\46\738385.v2 C-1 any other hazards for which Lender requires insurance. This insurance shall be maintained in the amounts and for the periods that Lender reasonably requires. The insurance carrier providing the insurance shall be chosen by Mortgagor subject to Lender's approval, which shall not be unreasonably withheld or delayed. If Mortgagor fails to maintain coverage described above, Lender may, at Lender's option, obtain coverage to protect Lender's rights in the Property in accordance with paragraph 5. All insurance policies and renewals shall be reasonably acceptable to Lender and shall include a standard mortgage clause. If Lender requires, Mortgagor shall promptly give to Lender all receipts of paid premiums and renewal notices. In the event of loss, Mortgagor shall give prompt notice to the insurance carrier and Lender. Lender may make proof of loss if not made promptly by Mortgagor. If under paragraph 16 the Property is acquired by Lender, Mortgagor's right to any insurance policies and proceeds resulting from damage to the Property prior to the acquisition shall pass to Lender to the extent of the sums secured by this Mortgage immediately prior to the acquisition. 5. PROTECTION OF THE PROPERTY. Mortgagor shall not destroy or damage the Property or commit waste on the Property. Mortgagor shall be in default if any forfeiture action or proceeding, whether civil or criminal, is begun that in Lender's good faith judgment could result in forfeiture of the Property or otherwise materially impair the lien created by this Mortgage or Lender's security interest. Mortgagor may cure such a default and reinstate, as provided in paragraph 13, by causing the action or proceeding to be dismissed with a ruling that, in Lender's good faith determination, precludes forfeiture of the Mortgagor's interest in the Property or other material impairment of the lien created by this Mortgage or Lender's security interest. Mortgagor shall also be in default if Mortgagor gave materially false or inaccurate information or statements to Lender in connection with the loan evidenced by the Note. 6. PROTECTION OF LENDER'S RIGHTS IN THE PROPERTY. If Mortgagor fails to perform the covenants and agreements contained in this Mortgage, or there is a legal proceeding that may significantly affect Lender's rights in the Property (such as a proceeding in bankruptcy, condemnation, or forfeiture), Lender may do and pay for whatever is necessary to protect the value of the Property and Lender's rights in the Property. Lender's actions may include paying any sums secured by a lien which has priority over this Mortgage, appearing in court, paying reasonable attorneys' fees, and entering on the Property to make repairs. Although Lender may act under this paragraph 5, Lender is not required to do so. Any amounts disbursed by Lender under this paragraph 5 shall become additional debt of Mortgagor secured by this Mortgage. Unless Mortgagor and Lender agree to other terms of payment, these amounts shall bear interest from the date of disbursement at a rate equal to the interest rate on the Note and shall be payable, with interest, upon notice from Lender to Mortgagor requesting payment. 7. INSPECTION. Lender or its agent may make reasonable entries upon and inspections of the Property. MN325\46\738385.v2 C_2 8. CONDEMNATION. The proceeds of any award or claim for damages, direct or consequential, in connection with any condemnation or other taking of any part of the Property, or for conveyance in lieu of condemnation, are hereby assigned and shall be paid to Lender. In the event of a total taking of the Property, the proceeds shall be applied to the sums secured by this Mortgage, whether or not then due, with any excess paid to Mortgagor. In the event of a partial taking of the Property in which the fair market value of the Property immediately before the taking is equal to or greater than the amount of the sums secured by this Mortgage immediately before the taking, unless Mortgagor and Lender otherwise agree in writing, if any, the sums secured by this Mortgage shall be reduced by the amount of the proceeds multiplied by the following fraction: (a) the total amount of the sums secured immediately before the taking, divided by (b) the fair market value of the Property immediately before the taking. Any balance shall be paid to Mortgagor. In the event of a partial taking of the Property in which the fair market value of the Property immediately before the taking is less than the amount of the sums secured immediately before the taking, unless Mortgagor and Lender otherwise agree in writing or unless applicable law otherwise provides, the proceeds shall be applied to the sums secured by this Mortgage whether or not the sums are then due. 9. FORBEARANCE BY LENDER NOT A WAIVER. Any forbearance by Lender in exercising any right or remedy shall not be a waiver of or preclude the exercise of any right or remedy. 10. SUCCESSORS AND ASSIGNS BOUND. The covenants and agreements of this Mortgage shall bind and benefit the successors and assigns of Lender and Mortgagor. 11. LOAN CHARGES. If the loan secured by this Mortgage is or becomes subject to a law which sets maximum loan charges, and that law is finally interpreted so that the interest or other loan charges collected or to be collected in connection with the loan exceed the permitted limits, then: (a) any such loan charge shall be reduced by the amount necessary to reduce the charge to the permitted limit; and (b) any sums already collected from Mortgagor which exceeded permitted limits will be refunded to Mortgagor. Lender may choose to make this refund by reducing the principal owed under the Note or by making a direct payment to Mortgagor. If a refund reduces principal, the reduction will be treated as a partial prepayment under the Note. 12. NOTICES. Any notice to Mortgagor provided for in this Mortgage shall be given by delivering it personally or by mailing it by first class United States mail, postage prepaid, return receipt requested. The notice shall be directed to the Mortgagor at the Mortgagor address first written above, or any other address Mortgagor designates by notice to Lender. Any notice to Lender shall be given or mailed to the Lender address first written above, or any other address Lender designates by notice to Mortgagor. Any notice provided for in this Mortgage shall be deemed to have been given to Mortgagor or Lender when given as provided in this paragraph. 13. GOVERNING LAW; SEVERABILITY. This Mortgage shall be governed by the law of the state of Minnesota. In the event that any provision or clause of this Mortgage or the MN325\46\738385.v2 C_3 Note conflicts with applicable law, such conflict shall not affect other provisions of this Mortgage or the Note which can be given effect without the conflicting provision. To this end, the provisions of this Mortgage and the Note are declared to be severable. 14. MORTGAGOR'S RIGHT TO REINSTATE. If Mortgagor meets certain conditions, Mortgagor shall have the right to have enforcement of this Mortgage discontinued at any time prior to the earlier of. (a) 5 days before sale of the Property pursuant to any power of sale contained in this Mortgage; or (b) entry of a judgment enforcing this Mortgage. Those conditions are that Mortgagor: (a) pays Lender all sums which then would be due under this Mortgage and the Note as if no acceleration had occurred; (b) cures any default of any other covenants or agreements; (c) pays all expenses incurred in enforcing this Mortgage, including, but not limited to, reasonable attorneys' fees; and (d) takes such action as Lender may reasonably require to assure that the lien of this Mortgage, Lender's rights in the Property and Mortgagor's obligation to pay the sums secured by this Mortgage shall continue unchanged. Upon reinstatement by Mortgagor, this Mortgage and the obligations secured hereby shall remain fully effective as if no acceleration had occurred. 15. HAZARDOUS SUBSTANCES. Mortgagor shall not cause or permit the presence, use, disposal, storage, or release of any hazardous substances on or in the Property, except those solvents, oils, cleaning materials, and other substances as are used in the ordinary course of Mortgagor's business. Mortgagor shall not do, and will use its best efforts not to allow anyone else to do, anything affecting the Property that is in violation of any environmental law. Mortgagor shall promptly give Lender written notice of any investigation, claim, demand, lawsuit, or other action by any governmental or regulatory agency or private party involving the Property and any hazardous substance or environmental law of which Mortgagor has actual knowledge. If Mortgagor learns, or is notified by any governmental or regulatory authority, that any removal or other remediation of any hazardous substance affecting the Property is necessary, Mortgagor shall promptly take all necessary remedial actions in accordance with that environmental law. As used in this paragraph 14, "hazardous substances" are those substances defined as toxic or hazardous substances by environmental law and the following substances: gasoline, kerosene, other flammable or toxic petroleum products, volatile solvents, materials containing asbestos or formaldehyde, and radioactive materials. As used in this paragraph 14, "environmental law" means federal or state laws that relate to environmental protection. 16. ACCELERATION, REMEDIES. Lender shall give notice to Mortgagor prior to acceleration following Mortgagor's breach of any covenant or agreement in this Mortgage. The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Mortgagor by which the default must be cured, provided, however, if Mortgagor is diligently pursuing a cure, Mortgagor shall have such additional time as is reasonably necessary to complete the cure; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Mortgage and sale of the Property. The notice shall further inform Mortgagor of the right to reinstate after acceleration and sale. If the default is not cured on or before the date MN325\46\738385.v2 C_4 specified in the notice, Lender at its option may require immediate payment in full of any sums secured by this Mortgage without further demand and may invoke the power of sale and any other remedies permitted by law. Lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this paragraph 16, including, but not limited to, reasonable attorneys' fees. If Lender invokes the power of sale, Lender shall cause a copy of a notice of sale to be served upon any person in possession of the Property. Lender shall publish a notice of sale, and the Property shall be sold at public auction in the manner prescribed by law. Lender or its designee may purchase the Property at any sale. The proceeds of the sale shall be applied in the following order: (a) to all expenses of the sale, including, but not limited to, reasonable attorneys' fees; (b) to all sums secured by this Mortgage; and (c) any excess to the person or persons legally entitled to it. 17. RELEASE OF MORTGAGE. Upon payment of all sums secured by this Mortgage, Lender shall discharge this Mortgage without charge to Mortgagor. Mortgagor shall pay any recordation costs. (The remainder of this page is intentionally blank.) MN325\46\738385.v2 C_5 IN TESTIMONY WHEREOF, Mortgagor has hereunto set its hand the day and year first above written. RRG HOLDINGS LLC By: Its STATE OF MINNESOTA ) ss. COUNTY OF WRIGHT ) The foregoing instrument was acknowledged before me this —day of , 2021, by the of RRG Holdings LLC, a Minnesota limited liability company, on behalf of the company. SIGNATURE OF PERSON TAKING ACKNOWLEDGMENT NOTARIAL STAMP OR SEAL (OR OTHER TITLE OR RANK) This document drafted by: Kennedy & Graven, Chartered (MNI) 150 South Fifth Street, Suite 700 Minneapolis, MN 55402 (612)337-9300 FAILURE TO RECORD OR FILE THIS MORTGAGE MAY AFFECT THE PRIORITY OF THIS MORTGAGE MN325\46\738385.v2 C_6 EXHIBIT A TO MORTGAGE Legal Description of Property That property located in the City of Monticello, Wright County, Minnesota and legally described as follows: Lot 1, Block 1, Kampschroer Addition. MN325\46\738385.v2 C_7 EXHIBIT D GUARANTY GUARANTY AGREEMENT This Guaranty Agreement is made and entered into this _ day of , 2021, by Cory Kampschroer, Jessica Kampschroer, Ellen Halvorson, and Jason Halvorson, natural persons (together, the "Guarantor"), for the benefit of City of Monticello Economic Development Authority ("Lender"), a public body corporate and politic and a political subdivision of the State of Minnesota. WITNESSETH: WHEREAS, RRG Holdings LLC (the "Owner") proposes to borrow the sum of $140,000 from Lender to finance a portion of the costs of acquisition of property located in the City of Monticello, Minnesota (the "City") and legally described at Exhibit A hereto ("Property"); and WHEREAS, pursuant to the Loan Agreement between Owner, Sota Car Wash LLC ("Operator") and Lender dated as of , 2021 (the "Loan Agreement"), Owner and Operator have agreed to repay to Lender $140,000 together with interest thereon at the rate and within the time stated in Owner's promissory note of even date herewith ("Note"), additionally secured by that certain Mortgage of even date herewith given by the Owner to the Lender (the "Mortgage"); and WHEREAS, to secure payment of the Note, Lender has required, and Guarantor has agreed to provide, a personal guaranty of the indebtedness of Owner above described; and WHEREAS, Guarantor will receive a direct financial benefit from the loan to Owner by Lender pursuant to the Note. NOW, THEREFORE, to induce Lender to make the loan to Owner, Guarantor hereby covenants and agrees with Lender, for the benefit of all who at any time become holders of the Note, as follows: Section I.I. Guarantor hereby unconditionally guarantees to Lender for the benefit of the Holder (as defined in the Note) from time to time of the Note: (a) the full and prompt payment of the principal of the Note when and as the same shall become due, whether at the stated maturity thereof, by acceleration or otherwise; (b) the full and prompt payment of any interest on the Note when and as the same shall become due; and (c) any other amounts due Lender under the Loan Agreement or the Note. All payments shall be paid in lawful money of the United States of America. Each and every default in payment of the principal of or interest on the Note shall give rise to a separate cause of action hereunder, and separate suits may be brought hereunder as each cause of action arises. MN325\46\738385.v2 D-1 Section 1.2. The obligations of Guarantor under this Guaranty shall be absolute and unconditional and shall remain in full force and effect until the entire principal of and interest on the Note shall have been paid, and such obligations shall not be affected, modified, or impaired upon the happening from time to time of any event, including, without limitation, any of the following: a. The compromise, settlement, or release of less than all of the obligations, covenants, or agreements of Owner under the Note; b. The failure to give notice to any person of the occurrence of an event of default under the terms and provisions of this Guaranty or the Note executed by Owner: C. The extension of the time for payment of principal of or interest on the Note or under this Guaranty; d. Any failure, omission, delay, or lack on the part of Lender to enforce, assert or exercise any right, power, or remedy conferred on Lender in this Guaranty or other instruments executed and delivered in connection with the loan contemplated thereby, or any other act or acts on the part of Lender or any of the holders from time to time of the Note; e. The default or failure of Guarantor to perform any of the obligations set forth in this Guaranty. Section 1.3. No set-off, counterclaim, reduction, or diminution of any obligation, or any defense of any kind or nature that Owner has or may have shall be available hereunder to Guarantor against Lender. Section 1.4. In the event of a default in the payment of principal of the Note when and as the same shall become due, whether at the stated maturity thereof, by acceleration or otherwise, or in the event of a default in the payment of any interest on the Note when and as the same shall become due, or upon the occurrence and continuance of any Event of Default under the Agreement, Lender may proceed hereunder; and Lender, in its sole discretion, shall have the right to proceed first and directly against the Guarantor for the full amount due without proceeding against or exhausting any other remedies it may have as to Owner. Section 1.5. Guarantor hereby expressly waives notice from Lender or the holders from time to time of the Note of acceptance of or any reliance upon this Guaranty. Guarantor agrees to pay all the costs, expenses, and fees, including attorneys' fees, which may be incurred by Lender in enforcing or attempting to enforce this Guaranty whether the same shall be enforced by suit or otherwise. Section 1.6. This Guaranty is entered into by Guarantor with Lender for the benefit of Lender and the holders from time to time of the Note, all of whom shall be entitled to enforce performance and observance of this Guaranty. Section 1.7. Guarantor is duly authorized and empowered to execute, deliver, and perform MN325\46\738385.v2 D-2 this Agreement and to borrow money from Lender. Section 1.8. The performance or observance of any promise or condition set forth in this Guaranty may be waived, amended, or modified only by a writing signed by Guarantor and Lender. No delay in the exercise of any power, right, or remedy operates as a waiver thereof, nor shall any single or partial exercise of any other power, right, or remedy. Section 1.9. This Guaranty is made and shall be governed in all respects by the laws of the state of Minnesota. Any disputes, controversies, or claims arising out of this Guaranty shall be heard in the state or federal courts of Minnesota, and all parties to this Guaranty waive any objection to the jurisdiction of these courts, whether based on convenience or otherwise. Section 1.10. If any provision or application of this Guaranty is held unlawful or unenforceable in any respect, such illegality or unenforceability shall not affect other provisions or applications that can be given effect, and this Guaranty shall be construed as if the unlawful or unenforceable provision or application had never been contained herein or prescribed hereby. Section 1.11. All notices required hereunder shall be given by depositing in the U.S. mail, postage prepaid, certified mail, return receipt requested, to the following addresses (or such other addresses as either parry may notify the other): To Lender: City of Monticello Economic Development Authority 505 Walnut Street, Suite 1 Monticello, MN 55362 Attn: Executive Director To Guarantor: Cory Kampschroer 68255 Ih Street NE Buffalo, MN 55313 Jessica Kampschroer 68255 Ih Street NE Buffalo, MN 55313 Ellen Halvorson 5392 Braddock Avenue NE Buffalo, MN 55313 Jason Halvorson 5392 Braddock Avenue NE Buffalo, MN 55313 Section 1.12. This Guaranty constitutes the complete and exclusive statement of all mutual understandings between the parties with respect to this Guaranty, superseding all prior or contemporaneous proposals, communications, and understandings, whether oral or written, MN325\46\738385.v2 D-3 concerning the Guaranty. Nothing contained herein shall effect or impair Lender's rights under the Loan Agreement, the Note, or the Mortgage. Section 1.13. The obligation of each Guarantor under this Guaranty shall be joint and several with the obligations of each other Guarantor, shall be binding upon the heirs and estate of all the Guarantors, and shall survive the death, divorce, or any other change in situation or relationship of the Guarantors. (The remainder of this page is intentionally blank; signatures follow.) MN325\46\738385.v2 D-4 IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed as of the date first above written. Cory Kampschroer, Jessica Kampschroer Ellen Halvorson Jason Halvorson [SIGNATURE PAGE FOR GUARANTY] MN325\46\738385.v2 D-5 CITY Of CITY OF MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY Monticello BUSINESS SUBSIDY APPLICATION BUSINESS ASSISTANCE FINANCING 763-295-2711 - info@ci.monticello.mn.us Name of Contact Person:r yLI kp" ps(h wop-- Address: 6p, 5-,5- `ZI3 Sheer tJr� Telephone number: Business Name: Business Address: REQUESTED INFORMATION Addendum shall be attached hereto addressing in detail the following: 1. A map showing the exact boundaries of proposed development. 2. Give a general description of the project including size and location of building(s); business type or use; traffic information including parking, projected vehicle counts and traffic flow; timing of the project; estimated market value following completion. The existing Comprehensive Guide Plan Land Use designation and zoning of the property. Include a statement as to how the proposed development will conform to the land use designation and how the property will be zoned. 4. A statement identifying how the increment assistance will be used and why it is necessary to undertake the project. A statement identifying the public benefits of the proposal including estimated increase in property valuation, new jobs to be created, hourly wages and other community assets. 6. A written description of the developer's business, principals, history and past projects I understand that the application fee will be used for EDA staff and consultant costs and may be partially refundable if the request for assistance is withdrawn. Refunds will be made at the discretion of the EDA Board and be based on the costs incurred by the EDA prior to withdraw of the request for assistance. If the initial application fee is insufficient, I will be responsible for additional deposits. I further understand that by signing below, should the original escrow be exceeded, the applicant or responsible party will be billed for all additional services. In signing the acknowledgement below, the applicant is indicating that they have not relied on the estimate of fees in their decision to proceed with the application. If payment is not received as required by this agreement, the City will proceed to recover payment by action of assessment or a lien against the real property. Payment of the costs will be required whether the application is granted or denied. SIGNATURE Applicant's signature: /4; Date: DI-,II--;�-/ 2 FINANCIAL BACKGROUND: 1. Have you ever filed for bankruptcy? A)O 2. Have you ever defaulted on any loan commitment? f )Q 3. Have you applied for conventional financing for the project? %o0 4. List fit a. b. C. 5. Have you ever used Business Assistance Financing before? / vQ If yes, what, where and when? PROJECT INFORMATION: 1. Location of Proposed Project: 13o l ee a&, `j f {ed - 2. Amount of Business Assistance requested? a / �)61 f V 3. Need for Business Assistance: ' l O C� frits 4. Present ownership of site: btA J SA tyl e- dG4AeP 5. Number of permanent jobs created as a result of project? -% — Ty — 6. Estimated annual sales: Present: 1 Future: % -- -�-& -,,,.2 �,lf/ter✓ 7. Market value of project following completion:5T 8. Anticipated start date: i 1 3 Completion Date: FINANCIAL INFORMATION: 1. Estimated project related costs: a. Land acquisition b. Site development c. Building cost d. Equipment e. Architectural/engineering fee f. Legal fees g. Off-site development costs 2. Source of financing: a. Private financing institution b. Tax increment funds c. Other public funds d. Developer equity S5-a,C&O 1004 006 �p ooc� Irl, QO O S t0y0 .TUU, U00 4 PLEASE INCLUDE: 1. Preliminary financial commitment from bank. 2. Plans and drawing of project. 3. Background material of company. 4. Pro Forma analysis. 5. Financial statements. 6. Statement of property ownership or control. 7. Payment of application fee of $200. 4.4. Business History & Description Date operations began 05/24/2021 Sota Car Wash LLC (SCW) is a newly formed entity that is owned by Cory Kampschroer and Jason Halvorson A business plan was prepared by Cory Kampschroer as well as an independent feasibility study that was required by CorTrust and CMDC was performed by Jim Sauer of Strategic Performance Group, LLC (SPG). Cory and Jason's business plan and Jim Sauer's positive recommendation are the basis of Cory and Jason's decision to move forward with the Monticello opportunity. Jim Sauer is President of SPG, a market research firm with offices in Southwest Florida and the north metro region of Minneapolis - Saint Paul, MN. With over 45 years of hands-on business experience in both corporate and entrepreneurial settings, Jim has been involved in all types of challenges typically encountered in business and industry. For the past two decades, Jim has been actively involved as a consultant to hundreds of businesses, providing expertise in the areas of strategy formulation and feasibility studies. Prior to his consulting career, Jim was employed for 20 years in a broad range of middle and senior management positions with several Fortune 500 companies. SCW will operate as a dual belt conveyor system express exterior car wash. This express exterior dual belt conveyor car wash system is the industry's most modern, advanced, efficient, and profitable business model for new construction car washes. A unique factor of the dual belt conveyor system is how the automobiles move through the wash tunnel. Rather than the old-style system that grabs the driver's side front tire and pulls the auto through, the dual belt system allows the customer to load quicker and much easier and is a smoother ride. The concept of the dual belt conveyor car wash is the extremely fast wash, which not only eliminates waiting time due to fast processing but it's the highest quality wash in the industry outside of full -serve washing. SCW will have the ability to wash every type of vehicle under 7' tall, outside of service vehicles, due to the loading nature. They can wash cars with low -profile rims and they will not touch them with anything other than the closed -cell foam material, designed not to retain water or particles, as well as premium cloth in their washes and they can wash vehicles including full-size trucks with dual axles. SCW's 120 -foot tunnel wash can wash roughly 120 cars per hour. With SCW's two pay stations, payment -processing time takes roughly 15 to 30 seconds, and about 45 to 90 seconds per car to wash. With the wash never stopping, they can be washing about 5 to 6 cars at all times. The competition in the Monticello area has what the industry classifies as in -bay automatics. These washes are typically unmanned and have extremely long wait times. An in -bay automatic car wash has a typical wash time of 5-7 minutes per vehicle, meaning a single in -bay automatic can wash between 10-12 cars per hour. The limit of washing 1 car at a time at nearly 6 minutes per car resulting in long lines. Another unique feature of SCW will be that not only will they have vacuums on the outside of the building, but they will also have vacuums inside the building that will be available to members of a specific car wash club level. This feature will be well received during the winter months in Minnesota. There is no other conveyor wash in Monticello. An aspect of SCW's business model is it will offer unlimited monthly memberships. For $20 - $35 per month, SCW's experience will allow customers more control and ease. Before they even step onto the property, consumers can quickly and easily sign up for a club membership right from their phone within a matter of minutes. The membership app features license plate recognition and simple, easy one -touch account management. There is no need for consumers to be issued RFID equipment to put on their windshields. The license plate technology and reader are 98.5% accurate. Membership allows for unlimited car washes per month. The basis for this model is that SCW will get customer loyalty and regardless of weather, they get a set amount of income each month and the customer will wash regardless of the forecast. The express exterior focuses only on the auto's exterior. Customers can also utilize free self -serve vacuuming with any wash. Marketing and Sales: SCW will attract new customers through creative, smart, effective, and engaging marketing. Traditional marketing will include radio, newspaper, TV, direct mail, social media, community events, etc. In addition, SCW plans to have a stand-alone marketing campaign exclusively focused on the pre -opening, soft opening, and grand opening events. Industry: Per IBIS World, Over the next five years, revenue for the Car Wash and Auto Detailing industry is forecast to expand roughly 4% per year. Industry operators will benefit from improved consumer spending levels, which will fuel increased spending on discretionary services such as car washing and auto detailing. However, rising oil and gas prices are expected to somewhat hamper stronger industry revenue growth as some consumers will reduce driving and return to money -saving habits, such as carpooling and public transit. Additionally, as the COVID-19 (coronavirus) pandemic is not completely contained, many businesses will continue work -from - home arrangements for employees, keeping car use from returning to pre -pandemic levels. As previously stated, Jim Sauer from SPG performed an independent feasibility study. The following is a summary analysis of the study. Target Market & Demographics: Sota Car Wash LLC - 2021081201 Page 5 of 23 Thanks Cory On Tue, Jul 20, 2021 at 11:20 AM Jim Thares<Jim.Thares@ci.monticello.mn.us> wrote: Hi Cory, thank you for completing and submitting. The one attachment item that I would ask you to submit to me is a sketch or rendering of the proposed building and any draft site plans that are done (site layout). Let me know if you have any questions. Best. EDA: 08/25/21 6. Consideration of Accepting TIF Business Subsidy Application and Authorizing Call for a Public Hearing by the City Council related to the Karlsburger Foods Expansion Proposal (1T) A. REFERENCE AND BACKGROUND: Staff is asking the EDA to consider accepting a TIF Business Subsidy Application from Karksburger Foods and authorize a call for a public hearing establishing TIF District 1-42 supporting the Karlsburger Foods' expansion proposal. Karlsburger Foods has operated a 23,000 +/- square foot food production facility located at 3236 Chelsea Road West in Otter Creek Business Park (OCBP) since early 2007. Karlsburger Foods is now proposing an expansion to meet customer demand. The proposal is multi -faceted and involves land acquisition, new construction, equipment purchases, adjustments to ingress -egress to Chelsea Road. Karlsburger Foods has indicated that the building addition will be 17,100 square feet though it could be larger. They are still working with operations and design staff on the expansion plan. The expected cost of the entire proposal is approximately $4,500,000 +/- though that could increase if the building addition is made larger. To construct the addition and complete the circulation improvements per the preliminary plans (see attached), Karlsburger Foods would like to acquire the EDA lot directly west of the facility (Nevada) and a small portion of the City -owned sewer lift station lot (Kentucky) adjacent to its plant to the north. A calendar prepared by Northland Securities lays out all of the steps and dates to create a new TIF District. The starting date is 8-25-21, and if all steps remain on schedule, the end date is 10-11-21. This schedule is slightly faster than a typical timeline because Karlsburger Foods has indicated the optimal construction start timeline is late fall 2021. Again, the construction start date is contingent on full completion of the TIF and land conveyance steps as well as potential state grant funding approvals and may need to be pushed to early spring 2022. It should be noted that this item is a companion to two other Karlsburger Foods' expansioin proposal considerations (Item 4a and 4b) on the agenda Al. STAFF IMPACT: The staff involved in this request includes the Community Development Director, Economic Development Manager, the EDA attorney and the financial advisor, Northland Securities. No additional staff are needed to complete the tasks related to TIF District establishment. A2. BUDGET IMPACT: The estimated cost to complete the required steps in establishing a new TIF District ranges from $15,000 to $30,000. The level of complexity is a factor that determines the ultimate cost. These costs are passed through to the applicant. Karlsburger Foods will be asked to pay the initial $10,000 application -escrow fee if the EDA authorizes the Call for the public hearing. All costs for the TIF District tasks will be invoiced to Karlsburger Foods. EDA: 08/25/21 Also, the EDA will be asked at a future meeting to approve an interfund loan resolution allowing EDA expenses incurred in the expansion proposal to be covered through the tax increment generated through the completed project. In the interim period though, the EDA General Fund budget has sufficient dollars to cover the expected costs. Ultimately, if the proposal is approved, the EDA will sell its 1.83 -acre parcel to Karlsburger Foods and that may result in a yet to be determined amount of land sale proceeds. B. ALTERNATIVE ACTIONS: 1. Motion to accept the TIF Business Subsidy Application and authorize a call for a public hearing by the City Council related to the Karlsburger Foods' expansion proposal. 2. Motion to table acceptance of the TIF Business Subsidy Application and authorize a call for a public hearing by the City Council for further research and/or discussion. C. STAFF RECOMMENDATION: Staff recommends Alternative #1. Karslburger Foods original facility received assistance through a TIF District. That District was decertified several years ago. The expansion proposal will allow the EDA to capture increment for its land costs as well as adjustments in the stormwater drainage system in OCBP. Karlsburger has indicated that it would like to explore use of the various EDA financial assistance programs including TIF to make the proposal viable. They have also stated that they will create approximately 20 new FTE jobs through the expansion. D. SUPPORTING DATA: a. TIF Review and Approval Calendar b. Karlburger Foods' TIF Business Subsidy Application Preliminary for Discussion Purposes Only City of Monticello Central Monticello Redevelopment Project No. 1 Establishment of Tax Increment Financing District No. 1-42 Economic Development TIF District Karlsburger Foods Expansion Public Hearing on October 11 S M T W T F S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 August 25 EDA request City Council call for hearing 22 23 24 25 26 27 28 29 30 31 10 S M T W T F S 1 2 3 4 September 7 Planning Commission review 5 6 7 8 9 10 11 September 10 Last day for notice and TIF plan and fiscal implications to County and School District 12 13 14 15 16 17 18 September 13 City calls for public hearing 19 20 21 22 23 24 25 September 23 City submits hearing notice to newspaper 26 27 28 29 30 September 30 Hearing notice published in newspaper September 29 EDA approval of TIF .1ctober 2021 S M T W T F S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 October 11 Public hearing and establishment of TIF District 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 lovember 2021 S M T W T F S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 April 1, 2022 Request certification by County April 1, 2022 Submit plan to State June 30, 2022 Certification of TIF District by this Date Notes: 1. Denotes City Council meeting dates 2. Denotes EDA meeting dates 3. Denotes Planning Commission meeting date N� ORTHLAND � TIF District No. 1-42 P-0 I PUBLIC FINANCE 8/10/2021 KARLSBURGER TIF APPLICATION (ri 1�) CITY OF MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY BUSINESS SUBSIDY APPLICATION BUSINESS ASSISTANCE FINANCING Legal name of applicant:r,1 p S Address: -523& [. 6 [eec, /� /�iov��; c e�laM AJ G S 3( :,z Telephone number: _X3 L- 415 — Z Z-7 3 Name of contact person: JL`5'�� D" I dl2a,yl REQUESTED INFORMATION Addendum shall be attached hereto addressing in detail the following: I . A map showing the exact boundaries of proposed development. 2. Give a. general description of the projectincluding size and location of building(s); business type or use; traffic information including parking, projected vehicle counts and traffic flow; timing of the project; estimated market value following completion. 3. The existing Comprehensive Guide Plan Land Use designation and zoning of the property. Include a statement as to how the proposed development will conform to the land use designation and how the property will be zoned. 4.. A statement identifying how the increment assistance will be used and why it is necessary to undertake the project. 5. A statement identifying the public benefits of the proposal including estimated increase in property valuation, new jobs to be created, hourly .wages and other community assets.. 6. A written description of the developer's business, principals, history and past projects I understand that the application fee will be used for EDA staff and .consultant costs and may be partially refundable if the request for assistance is withdrawn. Refunds will be made at the discretion of the EDA Board and be based on the costs incurred by the EDA prior to withdraw of the request for assistance. If the initial application fee is insuffiyient, I will be responsible for additional deposits. SIGNATURE Applicant's signature: , Date: 3 z �: CITY OF MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY Application for Business Assistance Financing GENERAL INFORMATION: Business Name: Kd6&r`"ev F;AS Date: 3 Address: _ �� Cjte( Seca' 'C-ld, � Z Type (Partnership; etc.):��' -- Authorized Representative: Phone: (2,- 2 rf5-- ?2 - Description of Business: lj�Vd� j+'1 Y -ed i fee I rolll to�V 4-0-4e l,�h V YL (2 u.Y.G bLt� Legal Counsel; . POAI 9 V4 00 OZIA Address: G qob Ad, �4 t 4 Zoo Phone: mk� e. Cbrbve1 ASI N 5 5 3 i FINANCIAL BACKGROUND: 1. Have you ever filed for bankruptcy? No. 2. Have you ever defaulted on any loan commitment? �O 3. Have you applied for conventional financing for the project? (�,� y�e-��� L"- Mke rvJ 4. List financial references: a. 0 C. 2 5. Have you ever used. Business Assistance Financing before? If yes,. what, where and when? PROJECT INFORMATION: 1. Location of Proposed Project: MI( G� �;3(oz (�� 52-3o 6-�e,, PYl N- Iv a,,14-c'ce-110 2. Amount of Business Assistance requested? 3. Need for Business Assistance: .N�� 4. Present ownership of site: J L. R,,��e sv�ne ��-�� 6w.`�'� c�V 1Sb�'-�", 5. Number of permanent jobs created as a result of project? 6. Estimated annual sales: Present: : (n M Future: 7. Market value of project fallowing completion: f� � Yo�cr✓ e I y II/� -� 1 8. Anticipated start date: 0 66ey �C�2 Completion Date: JL'1 _1 `2C)2 -Z - FINANCIAL, INFORMATION: 1. Estimated project related costs: a. Land acquisition b. Site development c. Building cost d. Equipment e. ArchitecturaUengincering fee f. Legal fees g. Off-site development costs 34 f Doo, acro +2-7':2 106 Cl) 3 2. Source of financing: a. Private financing institution b. Tax increment funds c. Other public funds d. Developer equity PLEASE INCLUDE: 1. Preliminary financial commitment from bank. 2. Plans and drawing of project. 3. Background material of company. 4. Pro Forma analysis. 5. Financial statements. 6. Statement of property ownership or control, 7. Payment of application fee of $10,000. PRELIMINARY FINANCIAL COMMITMENT FROM BANK Preapproval letter from Bank Vista is expected by 8/27/2021 when our banker returns from vacation PLANS AND DRAWING OF PROJECT a �m � B v F � K =, ct u W. z6. a � ~ QQ mg6H it Y / a �Yaa 70I21 R&EL aKRSBURGEROtos „A1pNTICELLOMINNESOTA W i DS E T H 5 E LAFOM WenweacOm +R'Fi:TS • FT is • SCieVRSis • SlMNeSU`'S BACKGROUND MATERIAL OF COMPAN Y COMPANY OVERVIEW At Karlsburger, we pour our hearts into giving flavor its soul. As a savory ingredient specialist for foodservice and food manufacturers, we offer premium soup bases, sauces, gravies, and seasonings that provide rich foundational flavors, allowing you to craft signature dishes that rouse the passion of today's food lovers. History and Heritage Becoming a leading provider of the finest savory bases available didn't happen overnight. We've been crafting our recipe for success since Karisburger Foods, Inc., was founded by the Cserpes family in 1956. After immigrating to the United States from Hungary, Frank Cserpes Sr. started his own sausage business in Minneapolis, Minnesota, in 1927. He faced several challenges while navigating the ups and downs of the great depression and World War II, before he and Frank Jr. registered the name and logo, and became incorporated in 1956. Their focus shifted to soup bases and they began with three choices: chicken, beef and ham. Over the next several years they worked on reformulating their offerings to improve quality and flavor while also growing the product line. Today, Karlsburger offers more than 250 high-quality items and provides industry-leading service to an array of foodservice operators and food manufacturers. In 2020 Michael H. Maher, President and CEO of Karlsburger for the past 24 years, assumed sole ownership of the company, and revitalized his staff, including the hiring of his own sons. With Spencer and Matthew possessing experience and education in the culinary world, and Justin possessing experience managing and evolving operations, Michael is now leading them towards the next generation of Karlsburger. Markets and Products Karlsburger is made up of 4 divisions: - Hunger Relief: Serving hunger relief organizations around the world in their fight to end childhood starvation. Karlsburger posses the unique ability and relationships to blend nutritional vitamins with savory flavors to create product that is delicious and sustains life. - Contract Manufacturing: Serving large food processors and manufacturers, we are a primary food supplier providing bulk quantities of savory ingredients. - Food Service: Serving restaurants and casinos across the United States, providing them foundational savory ingredients such as soup bases, sauces, gravies, seasonings, and spices. - Schools and Healthcare: Serving hospitals, nursing homes and schools with savory ingredients and food products that not only are delicious, but also meet the unique dietary needs of these markets, including low sodium, organic, and gluten free. Management Team Michael H. Maher, Owner, President and CEO: Matthew R. Maher, VP Culinary and Regulatory Development Justin Dahlman, VP of Supply Chain and Finance Paul Stevens, Director of Quality Nichole Veches, Controller Bren Stepp, Senior Food Scientist Legal Structure and Ownership Karlsburger Foods is a Chapter S Corporation with MN as the State of Incorporation. Karlsburger Foods is 1000 owned by Michael H. Maher. The building a property that headquarters Karlsburger Foods is owned by S&L Real Estate. S&L Real Estate is 100% owned by Michael H. Maher. Locations and Facilities Monticello, MN: Corporate Headquarters and primary state of the art production facility. Karlsburger Foods leases the building from S&L Real Estate, which is 100% owned by Karlsburger Owner, Michael H. Maher. Detroit, Michigan: Regional Office Omaha, Nebraska: Regional Office Kansas City, Missouri: Regional Office STATEMENT OF PROPERTY OWNERSHIP OR CONTROL 1 Karlsburger Foods is a Chapter S Corporation with MN as the State of Incorporation. Karlsburger Foods is 100% owned by Michael H. Maher. The building and property that headquarters Karlsburger Foods at 3236 Chelsea Rd West, Monticello MN 55362 is owned by S&L Real Estate. S&L Real Estate is 100% owned by Michael H. Maher. EDA Agenda: 08/25/21 7. Economic Development Director's Report (JT) A. TED and TEDI Grants: Transportation Economic Development and Transportation Economic Development Infrastructure Grants related to Block 52 are being submitted to MN -DOT and MN -DEED respectively on 8-27-21. The funding is being sought to help pay for MNTH 25 and Broadway intersection improvements (signal light, control cabinet and turning radius in the northwest quadrant of the intersection) as a component of future redevelopment. The TEDI grant seeks funding for the work related to connecting Walnut Street to River Street. The two proposals, if approved would occur along with the redevelopment of Block 52. The grant funding must be used by 2024. B. Prospect List Update: Please see the updated Prospect List as Exhibit A. C. Rivertown Residential Suites: A tour of the new 47 -unit market rate apartment with and affordable component is scheduled for Thursday (8-26-21) at 3:30 p.m. See attached Exhibit B. for summary description of Rivertown Residential Suites. 3/31/2020 1 Project GiaSaurus Medical Prod. Mfg. New Construction 175,000 sq. ft. 0 75 $50,000,000 Active PROSPECT LIST 07/29/2021 Date of Company Name Business Category Project Description Building -Facility Retained Jobs New Jobs Total Investment Project Contact Status 11/12/2016 MN DEED Prospect Metal Mfg. Exist Facility+ Equip 65,000 sq. ft. 0 55- $2,500,000 Active 100 Search 11/17/2016 Project Novus v2 Precision Machining New Facility Constr. + Equip 58,000 sq. ft. 205 60 $10,831,000 Construction 6/22/2017 Project #6580 Metal Mfg. New Facility Constr. 70,000 sq. ft. 0 49 $5,480,000 On Hold 10/17/2017 Project Ted Equipment Mfg. New Equipment N/A 45 ? $650,000 Concept 5/22/2018 Karlsburger Foods Food Products Mfg. Facilty Expansion 20,000 sq. ft. +/- 42 10 to $4,500,000 Act -Plan -Fin Momik 20 7/30/2018 Project Saturn Plastic Products Mfg. New Construction 5,000 +/- sq. ft. 4+/- $830,000 Active Search 8/10/2018 Project Jupiter Metal Mfg. New Construction 5,000 sq. ft. 3 $800,000 Active Search 11/29/2018 Project Blitzen Precision Machining Exist Bldg or New Const. 12,000 sq. ft. 10 $1,200,000 Concept Staee 12/14/2018 Project Comet Commercial Bus New Const. 1,700 sq. ft. +/- 7 $700,000 Active 3/28/2019 Project Nutt Co -Working Space Existing Building ? ? ? ? Concept cr... 5/9/2019 Project FSJP Light Mfg -Res. Lab New Construction 20,000 sq. ft. 0 20+/- $1,400,000 Active 8/16/2019 Project Jaguar Office New Construction 22,000 sq. ft. 22 4 $2,700,000 Active 9/19/2019 Project Kata Service New Construction 22,000 to 35,000 sq. 0 25 $7,900,000 Concept ft ct 1/20/2020 Project Panda v3 Service -Child Care New Construction 10,500 sq. ft. 0 21 $4,100,000 Active Search 3/31/2020 1 Project GiaSaurus Medical Prod. Mfg. New Construction 175,000 sq. ft. 0 75 $50,000,000 Active 8/27/2020 Project Nuss Combo Service -sale New Construction 30,000 sq. ft. 0 20 to $3,500,000 Concept Search 6/16/2021 Project LJBAA Child Care Services New Construction or Exist 5,000 sq. ft. 0 12 to 15 $2,000,000 Act Search 30 Project Ecosphere Industrial Tech Mfg. New Construction Staee 12/23/2020 Project TD Industrial Existing or New Construction 10,000 to 15,000 sq. ft 0 5 to 7 $800,000 Concept zt- 11/5/2020 Project Flower Office Existing 7,000-8,000 sq. ft. 0 12 $750,000 Concept Stage 2/16/2021 Project Cold Industrial -Warehouse -Di New Construction 80,000 sq. ft. 0 21 $12,000,000 Concept stri Stage 2/18/2021 Project Shay Lounge -Restaurant Existing Bldg. 2,200 0 4 $150,000 Concept Stage 2/18/2021 Project Counsel Office -Service New Construction 5,600 sq. ft. 24 3 $1,120,000 Concept C.- 3/19/2021 Project Orion Warehouse-Distributi New Construction 832,500 sq. ft. 0 500 $125,000,000 Active on Search 4/23/2021 Project Emma Light Ind -Assembly New Construction 20,000 sq. ff. 0 4 $1,350,000 Active Cc ,h 6/3/2021 Project FCW Service New Construction w Redev 4,000 sq. ft. 0 9 $4,250,000 Concept Sta 6/11/2021 Project SBTP Industrial- New Construction 51,000 sq. ft. 0 40 * $4,800,000 Active Manufacturing Search 6/16/2021 Project LJBAA Child Care Services New Construction or Exist 5,000 sq. ft. 0 12 to 15 $2,000,000 Act Search 6/30/2021 Project Ecosphere Industrial Tech Mfg. New Construction 1,000,000 sq. ft. 0 1122 $85,000,000 Act Search 7/29/2021 Project BA710 Lt Assem-Distribute New Construction 6,500 to 7,000 sq. ft 0 10 $650,000 Active 8/12/2021 Project Integrity Precision Mfg. New Construction 100,000 sq. ft. 0 50 $9,500,000 Active Contacts: M = 02 YTD = 24 Rivertown Residential Suites Apartment Development Project Summary Rivertown Residential Suites is a brand new 47 -unit multi -family development located at 212 Locust Street in Monticello, MN. Briggs Companies of Big Lake, MN built the building as a market rate apartment with an affordable component; 10 units must be provided to low and moderate -income households. The City of Monticello EDA supported the development through the creation of a new Affordable Housing Tax Increment Financing District (#1-40). The building has a heated underground parking garage and convenient access to downtown restaurants, retail and services, and the Monticello Community Center fitness and pool facilities. The total cost of the project was approximately $7,100,000. The building opened on May 1, 2020. Recently, Briggs Companies sold Rivertown to an investor group affiliated with Granite City Real Estate (GCRE) in St. Cloud, MN. GCRE will manage the property for the investor group. For any additional information about Rivertown Residential Suites, please contact Teri McDowall, GCRE; 320-257-3750.