EDA Minutes 06-07-1993
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MINUTES
MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY
Monday, June 7, 1993 - 7:00 p.m.
City Hall
MEMBERS PRESENT:
Chairperson Ron Hoglund, Bob Mosford, Clint
Herbst, Al Larson, and Patty Olsen (tardy).
MEMBERS ABSENT:
Barb Schwientek and Harvey Kendall.
STAFF PRESENT:
Rick Wolfsteller and Ollie Koropchak.
STAFF ABSENT:
Jeff O'Neill.
GUEST:
Lenny Kirscht, BDS, Inc.
1. CALL TO ORDER.
Chairperson Hoglund called the EDA meeting to order at 7:00
p.m.
2. CONSIDERATION TO APPROVE THE MARCH 30, 1993 EDA MINUTES.
Al Larson made a motion to approve the March 30, 1993 EDA
minutes. Seconded by Clint Herbst, and with no corrections or
additions, the minutes were approved as written.
3.
CONSIDERATION TO REVIEW THE H-WINDDW EXPANSION FINANCIAL
PACKAGE.
Mr. Kirscht and Koropchak reviewed the H~Window expansion
plans and the proposed financial package with EDA members.
The H-Window's immediate plans are to add 25,000 sq ft
doubling the manufacturing space and acquiring $650,000 of new
production equipment. The expansion will create 60 new jobs.
The company's 3-5 year plan requires the need for 200,000 sq
ft of manufacturing space.
Based on the fact the company has shown steady growth,
currently has no first mortgage holder on the property, and
with the difficulties the company experienced with state
financing at their start-up in 1987/88; BDS, Inc. recommended
a very aggressive financial package to meet the company's
immediate and long-term expansion needs.
Since the EDA has the power to issue General Obligation
Taxable TIF Bonds, the recommendation was for the EDA to issue
$1,175,000 of G.O. TIF Bonds at 7.6% over 20 years. With the
City's favorable bond rating, the rate is anticipated at 7.1%.
The additional .5% override is for EDA administration costs
($400/month or $4,800 annually). The EDA/City would take
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EDA MINUTES
JUNE 7, 1993
first mortgage position with a loan-to-collateral value of 40-
45 percent. TIF would be used to "write-down" the interest
rate costs over the life of the district providing additional
security for the bond.
Other sources of funds for the $2,075,000 project are equity
at $400,000 and the State of Minnesota at $500,000 (5%
interest rate, 20 years, 2nd REM). A State job forgiveness
will be requested at $5,000 per job created.
4. CONSIDERATION TO ENDORSE OR NOT ENDORSE THE ISSUANCE OF
"TAXABLE" GENERAL OBLIGATION BONDS FOR THE H-WINDOW EXPANSION.
Although the EDA recognized their power
the adopted ordinance, they fel t
exercising the power without first
guidelines or policies much as the GMEF
City issue the bonds?
to issue bonds through
uncomfortable about
establishing written
Guidelines. Could the
Additionally, the EDA questioned "What was the benefit to the
H--Window?" Mr. Kirscht responsed, "Currently, bank financing
would be at approximately 8% (2% over prime rate) fixed for
three years and adjusted annually thereafter. A SBA loan
would be a fixed 7.5% rate. The EDA 7.6% rate would be fixed
over 20 years."
Administrator Wol fsteller asked, "What's the 1 ikel ihood of the
State approving the $500,000 request or would it be egg-on-
our-face as maybe its just a wish list request?1l Mr. Kirscht
responsed, "It's a most aggressive approach and will likely
be a hard sell."
Mr. Mosford stated, "Europeans think long-term; therefore, a
fixed rate would be most attractive."
The EDA members fully supposed the H-Window Company and their
project. Feeling uncomfortable about issuing bonds without
established written guidelines and hearing no great benefit to
the IT-Window with the anticipated G.O. Taxable Obligation Bond
rate, the EDA elected not to endorse the issuance of bonds and
recommended maximum use of TIF, an aggressive approach for the
State I s $500,000 request, and an explanation to Mr. Steve
Lemme of the EDA's recommendation.
5. OTHER BUSINESS.
None.
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EDA MINUTES
JUNE 7, 1993
6. ADJOURNMENT.
By consensus
adjour.ned at
a~ ~< CIl
Ollie Koropchak,
members in attendance, the EDA meeting
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