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EDA Agenda 07-23-1991AGENDA MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY Tuesday, July 23, 1991 - 7:OOPM City Hall MEMBERS: Chairperson Ron Hoglund, Barb Schwientek, Bob Moeford, Brad Fyle, Clint Herbst, Harvey Rendall, and Al Larson. STAFF: Rick Wolfsteller, 011ie Roropchak, and Jeff O'Neill. 1. CALL TO ORDER. 2. CONSIDERATION TO APPROVE THE APRIL 23, 1991 AND JUNE 26, 1991 EDA MINUTES. 3. CONSIDERATION TO REVIEW CITY COUNCIL ACTIONS ON EDA REQUESTS. a) Aroplax Corporation GMEF Loan No. 003 b) Annual Activity and Financial Reports. C) GMEF Guidelines and EDA Bylaws. d) UDAG Repayment Income Commitment. e) Annual Appropriation of $200,000 GMEF Commitment. 4. CONSIDERATION TO HEAR AND REVIEW GUIDELINE COMPATIBILITY AND LEGAL ACCOUNTABILITY OF THE UDAG AND GMEF FUNDS. 5. CONSIDERATION OF AN UPDATE ON THE TWO GMEF LOANS. a) Tapper's Inc. b) Muller Theatre 6. OTHER BUSINESS. 7. ADJOURNMENT. 7 MINUTES MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY Wednesday, June 26, 1991 - 7:00 PM City Hall MEMBERS PRESENT: Chairperson Ron Hoglund, Barb Schwientek, Brad Fyle, Clint Herbst, Harvey Kendall, and Al Larson. MEMBERS ABSENT: Bob Mosford. STAFF PRESENT: 011ie Koropchak. GUEST PRESENT: Jerry and Mary Schoen, Aropiax Corporation. Deb Gustafson, ODS, Inc. 1. CALL TO ORDER. Chairperson Hoglund called the special EDA meeting to order at 7:00 PM. 2. CONSIDERATION TO REVIEW GMEF LOAN NO. 003 FORMAL APPLICATION FOR AROPLAX CORPORATION. aj Project Plans - Mr. Jerry Schoen told of the company's plans to construct a 23,000 sq ft manufacturing/office facility in the Oakwood Industrial Park. At this point, Norwest Camden Bank indicates a positive position for bank commitment, however, no commitment has boon made. Mr. Schoen hopes to occupy the facility by the end of October. He expects the majority of his employees to transfer as they live in the northwest metro suburbs and additionally ho has advertised in the Monticello Times for a couple positions. Total employment of 20-25 jobs. The company currently owns a 40,000 sq ft facility on Chestnut Avenue of which they utilize 17,000 sq ft and lease the remaining portion to two other companies. It is their plan to lease the vacated space to the current tenants. Aroplax needs to relocate from the old Burma Shavo building because the coiling height is 10 foot and is a wood structure. The manufacturing coiling height in the now concrete facility will be 24 foot which will allow increased utilization and efficiency of thoir machinery and increase production capabilities. Mr. Schoen responded to tho EDA that a general contractor hasn't been selected, howovor, they have four bids which do not include the aloctrical. Appraisal of the building is approximately $24.00 par square foot. EDA MINUTES 6/26/91 b) GMEF Guidelines and terms/conditions - Koropchak reviewed with the EDA members the Axoplax Corporation formal loan application and how it compares with the GMEF public purposes and policies as provided with the agenda supplement. Recommending to the EDA that the loan request meets the GMEF public purposes and policies. In addition to the information the EDA members received, Koropchak has on file the history and description of the business; sources and uses of funds; balance sheets and income/operating statements for fiscal years ending September 30, 1990, 1989, and 1988; balance sheet and income/operating statement for the period ended March 31, 1991; proforma balance sheet and two years' earnings forecast; resumes of Jerry, Paul, and Steve Schoen; personal financial statement of Jerald and Mary Schoen, majority owners of Aroplax Corporation; Articles of Incorporation; and purchase agreement for the 5.2 acre parcel to be acquired and a map showing the location in the Oakwood Industrial Park. Additional information is available to the EDA if so requested as each principal of the corporation has signed the Authorization Releasing Information Form. The loan request is for $30,000 to be used for machinery and equipment. With the approval of the GMEF, the EDA needs to determine the loan term/interest rate, loan fee, and the required collateral. C) Attorney's recommendation - Koropchak informed the EDA that Mr. Paul Woingarden, City Attorney, had received and reviewed the all the loan application data. He concluded the overall project was a good project for Monticello. d) Financial analysis and total project funding - Deb Gustafson reviewed the total project funding of $925,000 as $462,500, 508 bank; $370,000, 403 SBA; $30,000, 38 GMEF; $62,500, 7% TIF. She reported the company appears to be a credit -worthy business, as the debt to not worth ratio is 2.3 which falls within the industry average of 3.9 to .9. The company's financials of the last 3-1/2 years indicate an increase in sales and profit. The company appears to be well managed, and last year's cash flow to total debt service ratio is 1.7:1 and the projected cash flow to total debt service ratio is 1.8:1 which is considered more than sufficient. Although the Norwest Bank Camden commitment letter hasn't boon received, she foresees no problem and anticipates submittal of the SBA loan to the OMNI Board in early July, with SDA approval the end of July. EDA MINUTES 6/26/91 The EDA inquired of why the decrease in profits when sales increased in years 1989 and 1990. Deb referred to the attached sheet per the company's accountant stating the verification of bonuses and profit sharing expenses. CONSIDERATION TO APPROVAL GMEF LOAN NO. 003 FOR THE AROPLAX PROJECT WITH RECOMMENDATION FOR CITY COUNCIL TO REVIEW ON JULY 8. Based upon the information received above the EDA determined the Aroplax Corporation loan application to be in compliance with the GMEF public purposes, policies, and guidelines and EDA viewed this industrial company as the ideal company which supports the recruitment criteria and efforts of the Industrial Development Committee. Barb Schwientek made a motion to approve the $30,000 GMEF Loan No. 003 request for Axoplax Corporation subject to bank commitment and SBA approval. Use of the proceeds for machinery and equipment, interest rate of 6.5% (two percent below Minneapolis prime rate on 6-26-91) over seven years, developer's loan fee at actual costs or not to exceed $450. Loan documents to be prepared by Attorney Paul Weingarden. The motion was seconded by Al Larson and without discussion the motion passed unanimously. Koropchak will submit the approved loan information to the City Council on July 8, 1991 to comply with the 21 days City Council has to reverse the EDA's decision if determined the loan was issued in violation of the GMEF Guidelines. 4. ADJOURNMENT. The EDA meeting adjourned at 7:45 PM. 011ie Koropchak, EDA Executive Director 14 MINUTES MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY Tuesday, April 23, 1991 - 7:00 PM City Hail MEMBERS PRESENT: Chairperson Ron Hoglund, Barb Schwientek, Bob Mosford, Brad Pyle, Clint Herbst, and Al Larson. MEMBERS ABSENT: Harvey Kendall. STAFF PRESENT: 011ie Koropchak. 1. CALL TO ORDER. Chairperson Hoglund called the EDA meeting to order at 7:00 PM. 2. CONSIDERATION TO APPROVE THE JANUARY 29. 1991 EDA ANNUAL MEETING MINUTES. Barb Schwientek made a motion to approve the January 29, 1991 EDA Annual meeting minutes, seconded by Bob Mosford and without comment or corrections the minutes were approved and filed as written. 3. CONSIDERATION TO REVIEW THE REVISED 1990 EDA FINANCIAL STATEMENTS. a) Accountability of Remaining Committed $62,000 GMEF Balance - In the revised Balance Shoot, the EDA's assets consist of cash in bank, notes receivable for Tapper's and Mueller Theatre, and the $62,000 appropriations receivable from the Liquor Fund. Fund equity means the reserved funds for participation loans and includes the liabilities. Additionally, the members received a copy of the EDA statement of rovenues and expenditures. The Cash Flow Projection was based on the assumption of an additional committed $100,000 appropriation. The EDA recognized the statement to be a projection and a projection only. b) Consideration of the Bank to Reduce the GMEF Bank Service Fee - Koropchak reported that Mr. Wolfstollor in his discussions with Wright County State Bank was able to reduce the GMEF Bank service fee from $20.00 to $10.00 per month. C) Financial Report Consistent to Accounting Procedures - With the revised EDA Financial Statements being consistent with accounting procedures, Barb Schwientok made a motion approving the 1990 EDA Balance Sheet and 17 Revenues and Expenditures Statement and recommending the �+ Financial and Activity Report be submitted to the City Council thereby meeting the GMEF Guideline: Staff shall submit quarterly summaries and/or annual report detailing the status of the GMEF. The motion was seconded by Bred Fyle and without further discussion the motion passed unanimously. 4. CONSIDERATION TO REVIEW THE RESEARCHED UDAG INFORMATION. Koropchak reported that in August 1983, the City Council authorized the submission of a UDAG application for Fulfillment Systems, Inc. (FSI), with UDAG approval in 1984. In accordance with the UDAG agreement between the City and the Department of Housing and Urban Development (HUD) Grant No. B- 83 -AB -27-0203, EXHIBIT A, any repayments received after completion of the UDAG funded recipient activities shall be deemed miscellaneous reveneues and shall be spent for activities eligible under Title I of the Housing and Community Development Act of 1974, as amended, and shall not be governed by Part 570. The agreement between the City and the developer states the same as above with the addition "unless otherwise provided in the close-out agreement between City and HUD." The EDA members were given a summary of the Title I basic eligible activties, special economic development activities, and ineligible activities. Also provided was a summary of the January 1990 U.S. HUD Report, An Analysis of the Income Cities Earn from UDAG Proiects. Principal and interest paid by FSI as of April 12, 1991, is $90,907.05, Koropchak informed the EDA. The debt service payments are received monthly for a yearly total of $27,971.40. The debt service was amortized over 12 years with final payment due December 1999. The EDA recommended that tho City Attorney verify the UDAG and GMEF Guidelines for compatibility (real proporty versus real/ personal property) and legal accountability (creation of low to moderato income jobs) of funds. After discussion by the EDA members, Bob Mosford made a motion that the EDA roquest the City Council to consider authorizing the commitment of UDAG repayment income to the City's rovolving loan fund. The initial commitment would incroaso the present appropriation fund by approxmiatoly $90,000 and thereafter for eight years an annual appropriation of $27,000. Clint Herbst socondod the motion which passed unanimously without furthor discussion. Reasons for tho EDA request were to create more stability in tho dollar amount of the CMEF balance, to reduce and minimize the EDA request for liquor store fund dollars, to assuro the availability of future dollars for economic development duo to unpredictable logiolation actions such as the reduction in tho amount of available tax increment project dollars caused by the Tax Increment or HACA Penalty and other new restrictions placed on the use of TIF; also, other state and regional financial programs are dwindling, and UDAG repayment income would provide the community with a continued, long-term reuse or investment of dollars. Additionally, the EDA's request is supported by an 1991 IDC Work Plan Activity. The EDA then recalled their annual meeting discussions to establish an annual appropriation of $200,000 for the GMEF and to become self-funded. With an annual appropriation of $200,000 this would mean a yearly beginning maximum lending capability of $100,000. The EDA felt that without a pre - Council authorization of additional transfer funds, the GMEF available funds become like a path down a blind alley, meaning the City or the EDA Executive Director has no substantial amount of funds to market. The annual appropriation would also allow increased policing of the city budget by the City Staff and Council in addition to establishing the EDA's goal. Bob Mosford made a motion that the EDA request the City Council to consider authorizing a commitment to a 1991 appropriation of $200,000 for the GMEF based on the reasons stated above. The motion was seconded by Clint Herbst and further discussion was a clarification: With the assumption the Council commits the UDAG repayment income of $90,000 for GMEF appropriations, the requested appropriation funds would be $48,000 (commitment from Liquor Fund) to meet the EDA's goal of a $200,000 annual GMEF appropriation. Without the UDAG repayment income commitment, the requested appropriation funds would be $138,000 (commitment from Liquor Fund) to meet the EDA's goal of a $200,000 annual GMEF appropriation. It is the full intent of the EDA to become self-supporting. The motion passed unanimously. The EDA will again review their funding needs and determine a request, if any, for the City's 1992 Fall Budget session. CONSIDERATION TO REVIEW AMENDED GMEF GUIDELINES FOR SECOND RECOMMENDATION TO THE CITY COUNCIL. The EDA members reviewed all past EDA and Council agendas and minutes pertaining to the approval of the Muller Theatre expansion and the recommended GMEF Guidelines as submitted for amendment to the City Council on November 13, 1990. The EDA members were unclear as to why the Council's motion to amend the GMEF Guidelines died, and the EDA saw no acknowledgement that the entire roccommondod amendments were considered. The EDA was also unclear of Council's reaction because no specific reasons or requests wore given for Council's disagreement to the EDA's recommendation regarding non-compotitivo commercial funding. The EDA again reconsidered the previously recommended guidelines and their previous decision to fund the Mullor project and reaffirmed that the decisions woro both sound and good for the community. Bob Mosford made a motion to resubmit the recommended GMEF i Guidelines for amendment to the City Council and to submit the V. recommended EDA Bylaws for amendment: EDA meeting time amended from 7:00 AM to 7:00 PM. The motion was seconded by Barb Schwientek and without further discussion passed unanimously. The EDA meeting time is recommended for amendment to accommodate the convenience of members and the public. It was suggested that Koropchak provide the Council with the same supporting data as provided to the EDA, this to provide the total picture of the EDA's and Council's past activities and the EDA's rational for the recommended GMEF amendments. 6. CONSIDERATION TO HEAR OF POTENTIAL GMEF APPLICATIONS. a) The Aroplax Corporation request for GMEF is $30,000, Machinery and Equipment. The total financial package will include SBA, GMEF, and TIF. The participating lending institution request is Nor-west Bank Camden. Formal GMEF is expected in May. b) Dennis Pomerleau - Having received the preliminary GMEF application for Burrax Diversified Inc., the request is for $15,000, Machinery and Equipment. The company manufactures water vending machines. The owner plans to purchase the existing inventory from previous Chemtool, Inc. of which has been his employer for the past seven years. Mr. Pomerleau will moot with a local lending institution later this week. 7. OTHER BUSINESS. None. a. ADJOURNMENT. The EDA meeting adjourned at 9:00 PM by a consensus of its members. {} 011ie Koropchak, EDA Executive Director GREATER MONTICELLO ENTERPRISE FUND ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF MONTICELLO Preliminary Loan Application approval 4-14-91 Loan terms negotiated and agreed upon between the developer, the EDA, 1$KiL1Eii6ki, and the EDA Executive Director 6/26/91 Formal loan application and financial statements analyzed by the lending institution and/x*X�ix4X4*x** BDS, Inc 6/26y/91 7ormal loan documents reviewed by.city staff 6-21-91 Building permit approval or construction commitment Loan documents reviewed by the City Attorney 6/25/91 Economic Development Authority approval or disapproval: Loan Number GMEF No. 003 Loan approved Yes Borrower Aroplax Corporation ' ' Address 'Jlk$ Lhestnut.,Ave. W. mels 55405 Loan disapproved Loan Amount $30.000 Rate 6..�w Date 6/26/91 Terms 7 }rears (M&E) Subject to nanK commicmenc ana ao., approval. Loan fee of actual coats or not to exceed $450.00. A motion was made by EDA member Barbara Schwientek to (approve - d(d�i(/e1iK GMEF in the amount of $30,000.00 dollars and cents to developer Aroplax Corporation (Jerald J and Ma Sy E. Schoen) this 26 day of June 1991 Seconded by EDA member Al Larson YEAS: Hon Hoglund NAYS: None Absent: Bob Moeford Brad Fyle Harvey Kendall Clint Herbst Al Lnraon Bnrb Schvtentek GMEF disbursed 19_ by Check No. EDA Treasurer City Council may reverse an EDA loan decision within twenty-one days of EDA approval. July g, 1991 Council Agenda. Reviewed and confirmed. ACCEPTANCE OF TERMS ,r(We) hereby -accept the terms a stated above as approved by the Economic Development Authority in and for he City of Monticello. Dated: 6/26/91 ���ti r.� [t. .�/Cr ll—A.I��✓ In MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY GREATER MONTICELLO ENTERPRISE FUND (GMEF) 1991 Cash Flow Projection RECEIPTS Appropriations -Original Liquor Fund $ 62,000 Appropriations-UDAG 90,000 Appropriations -1991 Liquor Fund 48,000 Note amortization payts-Tapper's Inc (:736.07 Mo.) 8,833 Note amortization payts-Mueller Theatre (;418.22 Mo) 5,019 Interest income -investment 500 Loan Fees 2,250 Total Receipts EXPENDITURES $216,602 GMEF loans 4150,000 Legal fees 1,500 Service fees 480 r �- Total Expenditures $151,980 Excess of Receipts Over Expenditures 3 64,622 C 612-925-5879 OLSEWUSSET P.u: 137 P03 JUL 23 '91 1.1:00 Jr OLSON, USSET, ALAN & WEINGARDEN �� ATIOPNErB Ar uw SUITE BYO PAUL A. W EINGARDEN' 6600 FRANCE AVENUE YOUTH Bu, r,I O O,(ICF CHARLES T. AGAN MINNEAPOLIS. MN 69439 TELL-wO- 15121 6823007 DAVID J. USSET 1110 ASO. OLSON TEE[PHOUS 16121 025.3644 ROC..OPD O..ICE 0ENN19 C. DALEN Titt.1—.110121 477.7010 MARGUERITE RATELLE —16121025.5079 DEL A. OLOCHER L[OAL AP S161Awr sr PUGUTJ.AGAN 0.- 1— NO. YHIRLC6 J. ALLEN 7975 (6) Jul 22, 1991 OEORA OAKKE Y PA TSV A•P ORSLAND KIM FO RT IN TRUDV9UND OONNIF TRONNrS 0 Ee ZEOAN 011ie Koropchak Economic Development Director City of Monticello 250 East Broadway Monticello, MN 55362 Re: Greater Monticello Enterprise Fund Guidelines Dear 011ie: You have requested that I review your GMEF guidelinen and provide any comments. We have previously discussed the necessity for holding meetings open to the public with adequate notice provisions in accordance with Minnesota Statuten. I am specifically concerned that applicants do not present their case and are then asked to leave the room during discussions. As open meetings, all applicants have a right to be present. My other concern is your definition of publicppurpose, specifically paragraph 3 which appears to be anti-competitivo in nature. while I can understand your desire to avoid hurting oxisting businesses in the city of Monticello, it is my belief that as a governmental agency you should not IID attempting to manipulatn the marketplace in this ronpoct. Accordinqly, I would suggnnt you re -write paragraph 3 an follows: 3. "To assist new or existing industrial or commercial businesses to improve or expand their. oporations. Considorationn for loans shall take into account factors including, but not limited to, the nature and extent of the business, the product or service involved, the present availability or the product or service within the City of. Monticello, the compatibility of the proposed business as it relates to the comprehonsive plan and exintiny roninq policies, .and the potential for adverse environmental effoet-e of the bunineoa, if. any.,, •n.� 11_11 _.. ---- - -- " — -- - - - .. _ - ............ 612-925-58713 rjLSA-#1,USSET P.A. 011ie Koropchak 137 PrW J'A- 23 '91 14; 01 -2- July 22, 1991 I would suggest that you amend In this fashion. should you care to discuss the matter in any detail, please advice at your convenience. Very truly yours, ;'.?A. W ngar PAW:Ild cc: Rick Wolfstallor N N A rr 612-925-5879 OLSEWUSSET P. A. PA ULA.WEINGARDEN• CHARLES T. AOAN DAVID J. U99ET THOMAS B. OLSON DENN19 6. OALEN MARGUORITO A. RATELLE DEL A•OLOCNCR 0l FILE No. 7975 137 P01 JUL 23 '91 1359 OLSON, USSET, ALAN & WEINGARDEN ArroRRe•A u.•.. SUITE LBO 0000 FRA NCS AVENUE SOUTH BYrr.L00F[IL[ MINNEAPOLIS. MN 99479 T[L[...0... 19 1 21 682-3007 TILE -.18121929.20.. F.. 16 121 929-5879 011ie Koropchak Economic Development Director City of Monticello 250 Fast Broadway Monticello, MN 55362 July 22, 1991 Ro: Use of UDAG Funds Dear 011ie: POL1tc 080 O,wC. 7[16 P..OeI. 1@ 171.77-5010 L[04 PEGGY J. AOAN SNIRLEG J. ALLEN OEBRA OAKKH PA19Y A, P049LAND KIM FORTIN TRUDY SONO BONNIE TRONNE9 DHC EEOAN Post -It' brand tat transmittat memo 7b -A I..IP1902 . V xe � rnry� l DOI. PA9ne I . Pa. .r..r i_zss : y ro y I have reviewed the documentation you have provided to me concerning the above -entitled matter. In accordance with the UDAG agreement, and more specifically Exhibit A which modifies Section 2.04 of said ogrooment, I rind that any funds which you have available which constitute program income received after completion of the UDAG funded recipient activities are miscellaneous revenues and may be spent for activities eligible under T.itIo 1 of the !lousing and Community Development Act of 1974, as amended, and not be governed by Part 570 of said Act. The only caveat i have to this opinion in that thio analynis does not apply if you have o noparate closeout agreement which more specifically targets the use of. those fundn. You have not supplied to me a closeout agreement and, accordingly, I cannot comment regarding the some. If you have not yet executed a closeout agreement with [IUD, my only concern would be that any closeout agreement would advise what the funds are to be used for.. To that extant, I would be hesitant to allow you to util.izo those fundn when it is ponnihle that HUD may require the funds to be uned for another purpose or perhaps even returned. Whi.l.o 1 believe this to be a unlikely pronpect, I must at least raise the possibility. if there already is a closeout' agreoment which dons not mention the uno of those f.'undo, I will a.ltur my opinion accordingly. In ardor to prevent: any confusion, and in order to more accurately track the use of the funds if in fact you are roquestad to do so in a subnnquent audit, rather than placing the funds in your GMF? account, 1 would recommend that you establish a soparate account specifically for the use of program income us mi.ncallaneoun revenue. In this manner, you can trace the protean and use of all funds available for Title 1 activities without cnnror.n or intermingling fundn from other sources. 612-925-5Sr79 OLSUI/USSET P.A. 13" P02 JUL 23 '91 14: 00 011ie Koropchak -2- July 22, 1991 Should you have any further questions regarding the within, please advise. Very truly yours, Pa IA- W ngar PAW:lld cc: Rick Wolfstellor N MEETING SUMMARY KEVIN, LANCE, AND OLLIE July 12, 1991 Wright County State Bank Lance summarized the first year of Tapper's Inc. in the City of Monticello to be slow and tough because of the economcy, their move, and monthly lease payments of $3,000 toward existing property in St. Michael. Genereux needs $110,000 monthly sales for profitability. Last year sales were between $70,000 to $80,000. Sales up in June and July. 1. Lease in St. Michael ended June 1, 1991. 2. Hired a sales person, Phil Olson. 3. Cut fixtures for lumber yards, Best Buy, etc. 4. Acquired Acuride (prestige name). Westlund sales were up all year and basically carried Genereux. Acquired a contract with Crystal Cabinets. Monthly statements for January 31 through May 31, 1991 available at Wright County State Bank. All loan payments current. A Letter of Credit by the bank and Tappers for $15,000 (total of mechanic liens) will be filed by Wright County Title Insurance to allow for closing of the SBA loan this fall.