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EDA Minutes 08-09-2005 . . . MINUTES MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY Tuesday, August 9th, 2005 - 4:00 p.m. City Hall - Academy Room MEMBERS: Chair Bill Demeules, Tom Perrault, Wayne Meyer, Susie Wojchouski, Darrin Lahr, Ron Hoglund ABSENT: Barb Schwientek ST AFF: Executive Director Ollie Koropchak, Recorder Angela Schumann, Rick Wolfsteller I. Call to Order. Chair Demeules called the meeting to order at 4:00 PM, declaring a quorum. 2. Consideration to approve the April 26th, 2005 EDA minutes. Tom Perrault suggested that the slate of officers be listed within the minutes, and noted other corrections that should be made to the minutes. MOTION BY COMMISSIONER PERRAULT TO TABLE APPRO V AL OF THE APRIL 2611I MINUTES TO THE NEXT REGULAR MEETING OF THE EDA. MOTION SECONDED BY COMMISSIONER HOGLUND. MOTION CARRIED. 3. Consideration of adding or removing agenda items. NONE. 4. Consideration to approve extending the non-performance date and to amend the loan position for approved GMEF Loan No. 024. Applicant: Tapper's Holdings, Inc. Koropchak reported that the GMEF Loan was a real property rehabilitation loan, which was approved by the FDA on February 10[h, 2005. The EDA had approved the loan for an expansion to the "H Window" building. The loan amount was for $200,000 at a 3.5% interest rate, which was amortized over 20 years with a balloon payment due in 5 years. Koropchak stated that in reviewing the loan criteria, it included a non-performance clause, which required funds to be disbursed within ISO-days. The guidelines allow for the disbursement payment to be extended up to 120 days based on a written request. Koropchak noted that the extension needs to be approved by the majority of the EDA members. Koropchak referenced a letter from Bill Tapper requesting the extension and EDA Minutes - 08/09/05 . requested forgiveness on the written 30-day notice prior to expiration of the non- performance date. Tapper was not informed of that requirement by staff. Koropchak stated that it is staff's recommendation to grant the extension for the full 120 days to December lO'h, 2005. That time period allows Tapper the time needed to close on the loan. Perrault asked if the 30-day notice required was a City or State guideline. Koropchak confirmed that was a City requirement. Wojchouski noted that the 30- day waiver should also be included in the motion. Koropchak commented that when the EDA approved the loan, the EDA was in 2nd position to the lender. By the time the EDA and Tapper had signed loan agreement, the bank had requested that the EDA also be behind their loan for aequisition of the building. Koropchak noted that she had subsequently received a call from the Central Minnesota Initiative Fund, who indicated that they were participating in the loan, as well. Koropchak provided the CMIF with the latest use and sources statement. It is her understanding that the City of Monticello and CMIF could be a shared position. Currently the loan is set up for the EDA to be in the 4th position and CMIF in 5th Koropchak stated that when changing the agreement for these purposes, there will be added costs to Tapper. . Bill Tapper stated that he has not received notification of approval on the loan from CMIF. Koropchak stated that she had talked with CMIF who had confirmed it was approved, contingent on the EDA positioning. Koropchak noted that eMIF indicated that they would not accept the 5[h position. Koropchak reviewed the process ofthe Small Business Administration approval. The SBA had involved the CMIF. Tapper explained that the SBA has originally approved an estimated loan of 1.2 million, based on the total project cost, which was after the EDA had approved the original loan. Tapper stated that in the beginning, financing was coming only from the bank and the EDA as the SBA had denied the loan. However, the SBA looked at it again and approved it both locally and in California office. When the loan came back to the local SBA for due diligence, it didn't qualify because the majority of the work done was for Strategic and not for Tapper's Holdings. So, Tapper re-submitted the loan for Tapper's building purchase rather than the Strategic expansion. In turn, then the SBA brought in CMIF. Koropchak stated that currently, the fees for the loan documents are close to $1200. The modification of the agreement will incur more. . Wojchouski asked Tapper if in the case the 120 day extension is approved, will they be able to draw on it within that timeframe. Tapper clarified that they will get no money until they close. Wojchouski asked if the extension is adequate, Tapper indicated it would be. Koropchak stated that it can only be extended up to 120 days. Koropchak 2 . . . EDA Minutes - 08/09/05 noted if the extension is not approved, the EDA would approve for new application at a higher interest rate. MOTION BY COMMISSIONER WOJCHOUSKI TO EXTEND THE NON- PERFORMANCE DATE UP TO AN ADDITIONAL 120 DAYS FROM AUGUST IOTIl, 2005, TO DECMBER 10,2005 FOR APPROVED GMEF LOAN NO. 024 WITH THE APPLICANT TO PAY LEGAL EXPENSES TO AMEND THE LOAN AGREEMENT AND TO WAIVE THE 30 DAY NOTIFICATION PERIOD FOR EXTENSION. MOTION SECONDED BY COMMISSIONER HOGLUND. MOTION CARRIED. Wojchouski asked Wolfsteller if there were repercussions to the positions on the loan. Wolfsteller stated that the difference between the 4th or 5th position does not really have a definable impact. However, the recommendation would be to share the 4th position. Tapper asked that the EDA make the motion on the positioning. Mayer agreed. Lahr noted that the difference between 4th and 5th position was not worth CMIF possibly walking away. MOTION BY COMMISSIONER LAHR TO AGREE TO SHARED FOURTH POSITION ON THE LOAN TO TAPPER'S HOLDINGS, LLC, WITH OPTION TO MOVE TO 5th IF NECESSARY, WITH THE NOTATION THAT THE APPLICANT PA Y THE ASSOCLA. TED LEGAL FEES FOR THE DOCUMENT CHANGES. MOTION SECONDED BY COMMISSIONER PERRAULT. MOTION CARRIED. 5. Consideration to discuss the late payment policy and continued delinquent pavment of GMEF Supplement Loan No. 014. (Carl Bondhus. Eric Bondhus and Dennis Bondhus). Koropchak stated in February of 1998, the EDA had approved a loan for TJ Martin, located in the Oakwood Industrial Park. The original loan amount was an $87,500 machinery and equipment loan. At the request of the owners, the EDA had accepted a settlement of$18,000 out of the $45,000 still owed. Wojchouski asked why that was accepted. Koropchak explained that the EDA tried to work with the owners and created a supplement loan agreement, which was entered into with three owners as borrowers and a replacement promissory note. Koropchak noted that payments on this new loan amount are due on the I st of each month. Koropchak reported that they arc in default of their contract. as payments are delinquent. Administratively, the City has been accepting three independent checks, as loan was with the threc individuals. Koropchak stated that the City consistently gets two of the three checks only, which puts the loan into default. Koropchak explained that after this loan, the EDA amended their criteria to add a late penalty for $250 if payments , , . . . EDA Minutes - 08/09/05 are more than I month late. Koropchak stated that for June, the 3'd check was again not received, triggering the late fee. In summary, the owners do not want to pay the late fee. Koropchak stated that she had brought this matter to the EDA as she is concerned about the administration problem this has created. Koropchak stated that the EDA could go to conciliation court, or call the loan. Koropchak stated that the balance due is about $4800, with the loan to be paid off in May. Koropchak stated that the EDA could also send a letter requiring one check. Lahr stated that they could also accrue the late payment and then go to court at last payment. MOTION BY COMMISSIONER LAHR TO CONTINUE TO TRA..CK THE LATE FEES PER LOAN AGREEMENT AND ACCEPT PAYMENTS ON A MONTHLY BASIS AS REQUIRED. MOTION SECONDED BY COMMISSIONER HOGLUND. MOTION CARRIED UNANIMOUSLY. 6. Executive Director's Report Koropchak presented the HRA's annual TIF reports, noting that the Twin City Die Cast loan was elosed by the state, and the funding could be reused by the ED1\. Koropchak reported that Dahlheimer's is relocating to the industrial park, the liRA. is currently working on contract for private development. Koropchak stated that the inirastructure will be completed by August 2005. Koropchak also reported on conversations with other business prospects for the City industrial park Wojchouski inquired where leads are from. Koropchak responded that they come from various sources. Koropchak stated that not all leads meet the required criteria for job and wage levels. Koropchak inquired of the EDA if businesses are willing to pay the market rate, does the City still want them to be able to purchase property at market rate. Lahr stated that if they meet the covenants, there may not be a way to prevent that. Lahr stated that the goal is to grow the local high end job employment base. If businesses do not meet that goal, they should need to pay a premium for the land. Mayer stated that another good question for businesses is the retention of employees. Demueles noted that the covenants also would protect that land values. Wolfsteller pointed out that these potential businesses would be paying market rate and building a good building. Lahr stated that this group believes there is more benefit to the high-end jobs and the City 0\\11ed park allowed us to set the parameters with high paying jobs being the goal. Bill DeMueles mentioned Standard Iron's upcoming birthday celebration. 4 . . . EDA Minutes - 08/09/05 Koropchak indicated that the Fiber Optics task force will go to Council on August 22nd with a recommendation. Charter and TDS will be invited to an upcoming Fiber Optics meeting in terms of long term planning for services. Lahr reported on the meeting held to look at efficiencies in the City's organizational structure. The meeting was set up to look at the potential of merger of some of the organizations. Koropchak stated there are pros and cons of mergers. She stated that the EDA by statute has more powers than the HRA. The EDA powers are created by ordinance rather than an enabling resolution. However, the EDA currently only administers the loans. A potential recharter could absorb HRA and EDA. Koropchak noted that the EDA includes 2 Council members as voting members, and represents a more direct representation. Koropchak stated while a merger may cut down on meeting times, there would still be the same amount of preparation and potentially a longer meeting. Koropchak urged the EDA to voice their opinion on the matter to the Council. Lahr stated that at the time of previous discussion on a merger, the current structure stayed due to the feeling that there was more community representation and citizen involvement in the decision-making process. 7. Other Business. NONE. 8. Adiournment. MOTION BY COMMISSIONER LAHR TO ADJOURN. MOTION SECONDED BY COMMISSIONER HOGLUND. MOTION CARRIED UNANIMOUSL Y. ~d1ftf f I/P,"/</' ecor Co 5