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EDA Minutes 10-24-1996 . . . MINUTES MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY Thursday, October 24, 1996 - 7:00 p.m. City Hall Members Present: Vice Chair Barb Schwientek, Assist Treasurer Ken Maus, Clint Herbst, Tom Perrault, AI Larson, and Bill Demeules. Member Absent: Chair Ron Hoglund. Staff Present: Executive Director Ollie Koropchak Staff Absent: Treasurer Rick Wolfsteller. Guest Present: Steve Birkeland, Jr. Custom Canopy and Pat Dwyer, Bank of Elk River. 1. CALL TO ORDER Vice Chair Schwientek called the EDA meeting to order at 7:00 p.m. 2. CONSIDERATION TO APPROVE THE AUGUST 6, 1996. EDA MINUTES. AI Larson made a motion to approve the August 6, 1996, EDA minutes. Seconded by Tom Perrault and with no corrections or additions, the minutes were approved as written. Vote: 5-0-1. Yeas: Larson, Perrault, Schwientek, Maus, and Demeules. Nays: None. Abstention: Herbst (not present). 3. CONSIDERATION OF A REQUEST FROM STEVE BIRKELAND. JR. RELATING TO GMEF LOAN NO. 006. Steve Birkeland, JI. requested the EDA consider amending the terms of the Mortgage and Assignment of Rent for GMEF Loan No. 006. Koropchak informed EDA members that Loan No. 006 was approved for Steve Birkeland, Jr. (Custom Canopy) on March 30, 1993, and is a $42,500 real estate loan with a 4.5% interest rate. Currently, the loan has a second position behind the original bank loan. The EDA balloon payment is due May 1, 1998. Payback is current and the remaining principal balance ofthe original $42,500 loan as of October 24, 1996, is $37,672.47. Speaking on behalf of Mr. Birkeland, Jr., Pat Dwyer ofthe Bank of Elk River, asked the EDA to consider the $42,500 GMEF loan taking a third position behind the original bank loan of$308,000 and a new bank loan of $60,000. Dwyer explained the reason for the . . . EDA MINUTES OCTOBER 24, 1996 need of the new bank loan. As a confidential matter, Mr. Birkeland's accounting system for the IRS was changed from a cash basis to an accrual basis, which resulted in a tax liability of approximately $60,000. This is not a tax delinquency. Dwyer infonned EDA members that the 1993 appraisal ofthe property was $440,000 and the original bank loan was $308.000. This a 3.1 coverage for the $42,500 EDA loan. The 1996 appraisal ofthe same property is $500,000, the original bank mortgage balance is $228,645, and the proposed second bank mortgage is $60,000. This is a 3.8 coverage for the EDA loan balance of $40,000. Equity has increased from $132,000 in 1993 to $151,355 in 1996. Dwyer stated the borrower has good equity, is of no risk, and is a good customer. EDA members reviewed the City Council minutes of July 8, 1996, outlining the conditions ofthe approved conditional use permit. The EDA felt the determination or satisfaction for completion ofthe conditions was a matter of the City Council and not the EDA. EDA members advised Mr. Birkeland to call the city hall to schedule an inspection. EDA members recognized for Mr. Birkeland to remortgage or refmance would be more costly. They noted payback on the EDA loan was current, the 3.8 coverage is actually greater as the remaining balance of the EDA loan is less than $40,000, and equity is greater in 1996 than 1993. For these reasons, AI Larson made a motion amending the terms of the Mortgage and Assignment of Rent and authorized EDA Attorney Steve Bubul to prepare a Subordination Agreement placing GMEF Loan No. 006 in third position behind the bank's first and second mortgage. Legal fees for preparation and filing of the document are the responsibility of Steve Birkeland, Jr., the borrower. Council to coI1sider ratifying the EDA's approval at the City Council meeting of November 12, 1996. Bill Demeules seconded the motion and with no further discussion, the motion passed unanimously. Job projection was 11 full-time, Birkeland said employment totaled thirty full-time people. 4. OTHER BUSINESS: a - c) EDA members accepted the written updates. d) Other business - None. 2 . . . EDA MINUTES OCTOBER 24, 1996 5. ADJOURNMENT. The EDA meeting adjourned at 7:20 p.m. 0)~ \<6\~~ Ollie Koropchak, Executive Drrector 3