EDA Agenda 09-28-1990AGENDA
MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY
Q> Friday, September 28, 1990 - 7:00 AM
City Hall
MEMBERS: Chairperson Ron Hoglund, Vice Chair Barb Schvientek,
Assist Treasurer Bob Mosford, Fran Fair, Warren Smith,
Harvey Kendall, and Al Larson.
STAFF: Treasurer Rick Wolfsteller, Executive Director 011ie
Koropchak, and Jeff O'Neill.
GUEST: Mike Muller, President of the Muller Theatre.
Kevin Doty, Commercial Lender, Wright County State Bank.
Tom Hayes, EDA Attorney
1. CALL TO ORDER.
2. APPROVAL OF THE JULY 24. 1990 EDA MINUTES.
3. CONSIDERATION TO HEAR UPDATE ON CMEF LOAN APPLICATION FOR
JEFF EASTEY ENTERPRISES. INC.
4. CONSIDERATION TO REVIEW PRELIMINARY AND FORMAI. GMF.F APPLICATION
FOR MULLER THEATRE. EXPANSION.
5. CONSIDERATION TO APPROVE OR DENY GMEF LOAN FOR MULLER THEATRE
EXPANSION.
6. OTHER BUSINESS.
7. ADJOURNMENT.
MINUTES
MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY
Tuesday, July 24, 1990 - 7:00 A.M.
City hall
MEMBERS PRESENT: Chairperson Ron Hoglund, Fran Fair, Barb
Schwientek, Warren Smith, and Bob Mosford.
MEMBERS ABSENT: Al Larson and Harvey Kendall.
STAFF: 011ie Koropchak.
1.
CALL TO ORDER.
Chairperson Ron Hoglund called the EDA meeting to order
at 7:05 A.M.
2.
APPROVAL OF THE APRIL 24, 1990 EDA MINUTES.
Warren Smith made a motion to approve the April 24, 1990
EDA minutes, seconded by Fran Fair, the minutes stand
approved as written.
3.
CONSIDERATION TO HEAR. ADJUSTED REDUCTION OF THE CHEF
ALLOCATION FOR TAPPER'S INC.
Koropchak informed the EDA members that the CHEF loan
for Tapper's Inc was reduced from $100,000 to $88,000.
This became necessary, as the Small Business Administration
(SBA) officers would not accept the recommendation of
Bob Heck, BUS, Inc.. as given to the EDA upon the CHEF
loan approval. SBA loan requirements state that any
subordinated debt must have o maturity equal to or
granter than the 504 debenture. The subordinated
debt gap for equal maturity is $12,000, therefore, the
Tax Increment Finance (equity) was increased to rectify
the problem. This meets SBA requirements and allows
for n greater remaining balance in the city's revolving
loan fund and reduces the city's loan amount which is
a third position loan. The minimum market value placed
in the assessment agreement of the redevelopment agreement
is sufficient to cover the increased proposed budget, bond
Issuance, and bond indebtedness. The developers, Wright
County State Bank, SBA, and Tom Ilayea were all in
agreement with the recommended resolution.
4.
CONSIDERATION TO REVIEW PRELIMINARY GMEF LOAN APPLICATION
FOR EASTF.Y, INC.
Koropchak reported that approximately one year ago, the
Eastey Company had visited with Kevin Doty, Wright County
State Bank, regarding the need for financial assistance.
(+
Mr. Doty vas unable to assist a company outside the bank's
regional area, however, he gave the EastLy Company the
name of Pat Palstring, BDS. Inc., who has a financial
consultant agreement with the Housing and Radavalopmant
of
I
EDA Minutes 7/24/90
Page 2
4. CONTINUED.
Authority. This reference was done as the company expressed
an interest to expand in the Monticello area.
On Monday, June 25, 1990, Charlie Rogers, Pat Pelstring, and
Koropchak met to discuss the potential of a financial proposal.
The Jeff Eastey Enterprises, Inc. is a small company located
off Highway 101 in Rogers, Minnesota. They designed and
produce a shrink wrap machine which sales for $5,000-$6,000,
they do rebuilts, and would like to expand their operation
to include a basic full line production. The company
currently employs twelve and plan to employ an additional
five to seven with the proposed expansion.
Pat Pelstring summarized the company sales at $1.5 million
and stated the company is highly leveraged. On July 10, 1990,
the same group (plus Sally Eastey) visited the M&P Transport
facility. The company is looking to lease an approximate
7,200 sq ft of which Jay Morrell's one bay fits perfectly.
An initial proposal letter was prepared by BDS. Inc. and
signed by Koropchak, stated total capital required, $450.000
(operating capital, $400,000 and equipment acquisition,
$50,000). Sources proposed were SBA Guaranteed loan Program,
CMEF (equipment), and Central Minnesota Initiative Fund.
Again, Pat summarized the financials as good, the need to
pull out the Research and Development for greater profit-
ability. Monticello makes good sense as It is within a close
proximity of existing facility In Rogers. The company
needs to prepare the CHEF preliminary application,
draft a letter of Intent, contact a lending institution,
and draft a lease agreement with Morrell.
IDC representatives Ron Hoglund, Shelley Johnson, Jeff O'Neill
and Koropchak visited the Eastey facility in Rogers on July 20th.
The group was given a demonstration of how the shrink wrap
machine and tunnel (heat process) works. The product is
quality and soundly constructed. Jeff Eastey 1s SOZ owner
and to the company's designer and sales person. Sally
Eastoy is 202 owner and finance controller. The company
states they have always liked the Monticello area, they were
more or less forced into purchasing the Rogers five acre
parcel and have concerns about entrance and exist with the
proposed four -lane Highway 101. Mostly, a Monticello site
location Is fnvorable because of our tax structure compared to
Hennepin County.
Koropchak compared the EDA public purpose criteria to the
company's application. First. Koropchak explained no
recommendation is given at this time as to the company's
credit worthiness because a bank nor staff has nor seen
financial statements. Five of the six public ouraoses
are satisfied, the one not satisfied is there would be no
EDA Minutes 7/24/90
Page 3
4. CONTINUED.
increase in the community tax base as Eastey plans to lease
initially. Other issues of concern addressed were: 1) to verify that
jobs created are new; 2) owners Jeff and Sally Eastey are
divorced; 3) a M&E loan would be to a leased property business;
4) what can be used for collateral; and 5) $450,000 is a very
healthy loan request for a company who started in 1986.
It was recommended by the EDA that the MdE loan become due
if the building is vacated or the company is no longer located
in the City of Monticello. Attorney Tom Mayes will address
this issue, advise the EDA, and draft the appropriate documents
if agreed. The EDA agreed that leasing a facility would
allow the company more time to increase profitability prior
to additional debt for land and building.
Barbara Schwientek made a motion stating the project was worth
looking at, recommended staff continue working with
Jeff Eastey Enterprises, Inc., and to request the company
to complete the CMEF formai application. This motion is a
preliminary application acceptance, only, with final loan approval/
denial at a future date. Bob Mosfora seconded the mccion
and without further discussion the motion carried 5-0.
5. OTHER BUSINESS.
The EDA briefly discussed the idea to change the EDA meeting
time from 7:00 AM to 7:00 PM as suggested by a couple of
members. In their opinion, this would allow more relaxed time
for discussion and approval consideration. It was decided
to table the issue until after Council member Fran Fair and
Warren Smith terms expire.
Bob Mosford requested that meeting notices be mailed two
weeks prior to a meeting.
6. ADJOURNMENT.
Chairperson Ron Hoglund adjourned the EDA meeting at 7:40 AM.
0
CSS4,� \<rn oG �rJ
011ie Koropehak
EDA Executive Secretary
CI
1. CONSIDERATION TO HEAR UPDATE ON GMEF LOAN APPLICATION FOR
JEFF EASTEY ENTERPRISES, INC.
A. REFERENCE AND BACKGROUND.
According to Mr. Charlie Rogers, the Jeff Eastey Enterprise, Inc.
was denied bank financing necessary for the SAA 7(a)Loan. The
company is applying for SBA 7(a) bank funding at another lending
institution or others. The GMEF formal application will be
reviewed upon securing bank financing. Charlie Rogers is the
the company's attorney.
4. CONSIDERATION TO REVIEW PRELIMINARY AND FORMAL GMEF APPLICATION
FOR MULLER THEATRE EXPANSION.
A. REFERENCE AND BACKGROUND.
Mr. Mike Muller will be present to explain the expansion project
to the EDA and to answer any of your questions.
Kevin Doty will be present to give a credit analysts of the developers.
Tom Hayes. EDA Attorney may be present for legal advise.
Enclused is the information 1 have as of today.
I'0 BE DETERMINED: Financial Method
GMEF dollars
a` Terms
Interest Rate
Collateral
Loan Fee
FORMAI. APPLICATION: Projections only.
5. CONSIDERATION TO APPROVE OR DENY GMEF LOAN FOR MULL ER THEATRE
EXPANSION.
A. REFERENCE AND BACKGROUND.
The F.DA may wish to table the approval or denial for GMEF loan
if they feel an i»sufficlent amount of information is present at the
time of the IrDA meeting. Formal application documentation
has not been completed at this time.
GREATER. MONTICELLO ENTERPRISE
250 EAST BROADWAY
MONTICELLO, MINNESOTA
�v PRELIMINARY APPLICATION FOR LOAN ' APPLICANT: 1111b I;IUA//L
FIRM OR TRADE NAME:
BUSINESS ADDRESS: /,?/ E !_4ic.o�JaY /hC�%[r.% ,
(I b Street) ZCity a State) (Zta Code)
TELEPHONE: BUSINESS P'!) �'G3 1011Z HOME 6—) �,�.3 3 OY/
DATE ESTABLISHED: //07,3 EMPLOYER I.D. 1: ZL/'32,F,4//
SOLE PROPRIETOR CORPORATION it PARTNERSHIP
MANAGEMENT
NAME TITLE OWNERSHIP 8
/toroa� /n //tia
A- 'X- & r �o
PROJECT LOCATION:
NEW BUSINESS X EXISTING BUSINESS
TOTAL PROJECT COST ESTIMATE: S ,SS/, -n9 -9
PROPOSED USES: REQUEST:
LAND s /. S' Tv 0 AMOUNT OF LOAN
EXISTING BUILDINI ,T "'' MATURITY 6 TEAMS
CONSTRUCTION 7/0 /pCJ REQUESTED
MACHINERY CAPITAL O P6 APPLICANT'S
WORKING CAPITAL EQUITY
OTHER IRAN PURPOSE
TOTAL USES $ „TS/ ,,9,P
PROPOSED BEGINNING DATE:
ESTIMATED COMPLETION DATE:
TITLE TO
PROJECT ASSETS TO BE HELD BY: X OPERATING, ENTITYY _ ALTER EGO
PARTICIPATING LENDER: LW/fh/ LIO✓�✓r' 1/ ��I • /%%O.✓//Glt��
, (Name) (AdOress)
Cr / ✓ // ( )
Contact PerBonj (Telepnons I)
PRESENT 1 OF EMPLOYEES: G,S PROJECTED 1 OF EMPLOYEES Ia, s
ADDITIONAL PROJECT INFORMATION:
��� f7 ib✓o/, n�/1/s.' r /)//�✓
/,A �Cr n 1 iea )- �/ U//✓jJ
APPLICANT SIGNATURE: /��/�: //s'rt�� DATE SIGNED:
MON710ELLO
250) Easr Broadway
Mon ricello. MN 55362.9245
Phone: (617)295.2711
Metro: (612) 333.5739
AUTHORIZATION RELEASING INFORMATION
TO: /^/i o/L , l D J�j /'< .Q e
Name of Financial Institution
Street
City State Zip
I hereby authorize any person to furnish to the Monticello Economic
Development Authority, 250 East Broadway, PO Box 1147, Monticello,
Minnesota 55362, any and all financial records, reports,
statements, or other documentatio or information in their
possession regarding: All-Ifa /�l✓%ice
Developer's name(s)
Developer's address
Upon presentation of this authorization or an exact copy thereof,
you aro directed to permit the personal review, copying, or
photostating of such records, information, and evidence and provide
same to the Monticello Economic Development Authority.
I, the undersigned, acknowledge the said above information may
become public.
This authorization shall be valid
the entire pterm of the loan.
Dated: 9/r�1�a
Ono copy for each principal of a
partnership or corporation as
woll as the entity itself.
Authorized Signature
GMEF LOAN APPLICATION
APPLICANT: Mike Muller, Monticello Theatre Expansion
PROJECT DESCRIPTION: The proposed project is to expand the current
two screen theatre (509 seats) to a four screen
theatre (additional 406 seats plus bathrooms and
lobby area). Acquisition of the Bank Plaza lot
plus two feet of the abutting lot to the west
is necessary to complete this project.
The theatre will have a shared parking lot agreement
with Wright County State Bank on the lots previously
occupied by National Bushing and Stoke's Marine
Service. Parking plans have been approved by the
Planning Commission and City Council.
GMEF POLICY CRITERIA:
A. PUBLIC PURPOSE:
1) Credit worthy business - to be determined by the EDA upon the recommend-
ation of Kevin Doty and 011ie Koropchak.
2) Creates new jobs - Two full time and eight part-time for
a total of six full-time.
3) Increase community tax base - Estimated annual taxes $9.470.
4) Assists an existing non-competitive commercial business to
Improve or expand its operation.
5) Used as a secondary source of financing to a conventional bank.
6) Used as gap financing.
7) Does not assist in obtaining other funds such ns SRA, federal or
state grants. (Theatres do not qualify under these programs.)
B. BUSINESS ELIGIBILITY:
1) Non-competttive commercial business which enhances the community.
2) Business located within the City of Monticello.
3) Credit worthy existing business - to be determined by the EDA.
4) $10,000 loan per each job created (Maximum $60,000).
5) OTHERS: Maintains a more vibrnnt downtown
Supports the Streetacape Project
Creates n higher use of under-utilized property
C. FINANCING METHOD:
The financing method has not been determined until the Bank
receives confirmntion from the Muller Family to refinance the
existing theatre mortgage of $112.000 into one mortgage and the Hank receives
the appraisal from Jack Maxwell. Listed below are two options.
Option I. PARTICIPATION LOAN - Convert to one mortgage
Existing Mortgage $112,000 Project Cost: Land $ 69,500
Project Cost 550,000 Construction 310,000
TOTAL $662,000 M6E 172,500
EQUITY 110,000 TOTAL $552.000
DSS $552,000
OR New Mortgage $440,000
C`tEP may buy a portion of the loan (the CHEF to not lit a subordinate
position, no collateral is required by the GMEP, and the loan provides
a lower Interest rate) 130.000 or $50,000.
MULLER APPLICATION
Page 2
C. CONTINUED.
Option 11. Companion Direct Loan - GMEF loan is subordinated to
primary lenders if requested by the primary lenders
and collateral is required.
Example:
Wright County State Bank $360,000 54.01 or $360,000 54.01
GMEF 50,000 7.51 30,000 4.51
Equity 110.000 17.01 110,000 17.02
Other Bank 142,000 21.51 162,000 24.52 1
TOTAL $662,000 $662,000
D. USE, OF PROCEEDS:
a) P. al Property acquisition
L) ..::•I :'coperty expansion and improvements
c) Machinery and Equipment
E. TERMS AND CONDITIONS:
n) Loan size - $200,000 Original Loan Balance
88,000 Tapper's Inc.
$112,000 Remaining Balance
56,000 GMEF Available for funding (501 of remaining balance)p
b) Leveraging - Minimum 601 Bank
Maximum 301 GMEF
Minimum 101 Equity
See Financing Method Option 11 for leveraging percentages.
c) Loan Term - depends on financing method
Options: Real estate amortize up to 30 years, balloon payment of
five years.
MhE five to seven years.
d) Interest rate - Fixed rate not less than 21 below Minneapolis
prime rate. (101, 9/24/90. Nat'l Bank of Mpla.
First Bnnksl).
e) Loan Fee - Minimum fee $200.00
or not to exceed 11 of total Loon project
($5.520) or $300 to $500 of GMEF loan
f) Prapayment - No penalty for prepayment.
g) Deferral of Payments - Subject to EDA membership by majority vote.
h) Interest limitation
on guaranteed loans - Subject to security and/or ravlawnl by EDA.
1) Assunwbillty of Loan - None.
J) Business Equity
Requirements - Subject to type of loan. Board of Directors will
datormino case by caro, analysis under normal lending
guldalinas.
MULLER THEATRE
Page 3
E. CONTINUED.
k) Collateral - subject to finance method.
• Liens on real property In project (Mortgage Deed)
• Machinery and equipment liens (Except equipment exempt from
bankruptcy)
• Liens of real property in business (Mortgage Deed)
• Personal and/or corporate quarantees (requires unlimited
personal guarantees)
• Liens on real property held personally (Subject to Board of
Directors - homestead exempt).
F. LOAN CONDITIONS:
Loan conditions as written within the commitment letter as
prepared by Attorney Tom Hayes.
MULLER THEATRE EXPANSION
ADDITIONAL INFORMATION
Present structure: Lots 5 and 6 plus W 14 inches of Lot 7, Block 53
Building: 8,526 sq ft first floor
2,600 sq ft second floor
ENV '90 - $232,100 (Land and Building)
C 9,508
Taxes 7,781.64
Expansion: Purchase Lot 4 plus W 24 inches of Lot 3, Block 53
EMV '90 $19,100
Purchase Price - $69,500
Fair market value per Doug Gruber, County Assessor - $35,000
Construction 5,775 sq It, two screen theatre ($40-550 per sq ft)
EMV per Doug Gruber Building $250,000
Land 19,100
Total 5269,100
$100,000 $169,100
.0320 .0495
S 3,200 f 8,370
C . $11,570
Taxes 9,470 ESTIMATED
Current Assessments On Lot 4
190 Remaining
'60 Improvement f 10.02 -
'61 Improvement 3.72 $ 3.32
'77-3 Streer Imp 3.50 23.31
'88 Streetscape 324.52 1,370.13
TOTAL. $341.52 $1,396.76
NO Delinquent Taxes
Adjoining Property: Lot 1, Block 53 F11V $19,100
Taxes $790.70
Lot 2 6 3, Block 53 P14 $71,000 (Bldg $32.900
Land $38,100)
Taxes $1,918
The HRA purchased the Old Monticello Ford property for $75.000
Stelton's Laundry property for $65,000 plus $10,000
for relocation and moving expenses
J
ft