EDA Minutes 11-09-1993
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MINUTES
MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY
Tuesday, November 9, 1993 - 7:00 p.m.
City Hall
MEMBERS PRESENT:
Chairperson Ron Hoglund, Barb Schwientek,
Harvey Kendall, Al Larson, Bob Mosford
(tardy), and Patty Olsen (tardy).
MEMBER ABSENT:
Clint Herbst.
STAFF PRESENT:
Ollie Koropchak.
STAFF ABSENT:
Rick Wolfsteller and Jeff O'Neill.
1. CALL TO ORDER.
Chairperson Hoglund called the EDA meeting to order at 7:00
p.m.
2. CONSIDERATION TO APPROVE THE JUNE 7, 1993 EDA MINUTES.
Al Larson made a motion to approve the June 7, 1993 EDA
minutes. With the tardiness of EDA members in attendance at
the June meeting, the motion received no second. With no
corrections or additions, the minutes were approved as
written.
3.
CONSIDERATION TO REVIEW THE PRELIMINARY AND FORMAL GMEF
APPLICATION FOR LAWRENCE T. DEMEULES DBA STANDARD IRON AND
WIRE WORKS, INC.
The EDA reviewed the preliminary GMEF application from
Lawrence T. Demeules, dba Standard Iron and Wire Works, Inc.
and noted the requested 10-year equipment loan term did not
comply with the GMEF guidelines of 5 to 7 years.
Koropchak reviewed the Demeules loan application with EDA
members for compliance of the GMEF public purpose criteria and
policies, and made various recommendations. Terms for the
$75,000 loan were recommended at a 5% interest rate amortized
over 7 years to comply the the GMEF equipment term condition,
therebye, being somewhat comparable to the proposed annual
GMEF debt service.
Prior to the EDA meeting, Mr. Mosford requested to see the
company's cash f low projections. Koropchak provided Mr.
Mosford with the financial information as prepared for and
submi tted wi th the State Grant application. As per the
enclosed Executive Summary, he noted the projected annual debt
service was $316,236 and questioned the company's ability to
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EDA MINUTES
NOVEMBER 9, 1993
cover the debt service wi th the net income reduction from
$345,168 in 1991 to the projected 1993 year-ending net income
of $322,982.
Upon review of the State Grant financial information which did
not include the cash flow projections, Mr. Mosford was unable
to determine corporate or individual ownership of the real
estate. This is not an uncommon practice of corporations;
therebye, maximizing tax benefits. The annual rent payment
indicated a reduction of approximately $130,000. Koropchak
responded that the company plans to put the existing New Hope
office building on the market which may account for part of
the rent reduction.
Additionally, Mr. Mosford noted the bank was requiring a
payback of 1.25 times the annual debt service and questioned
if that was reasonable. Although Mr. Mosford saw the GMEF
loan of $75,000 as peanuts in relationship to the total
funding of $3,125,000, he suggested the EDA request a copy of
the cash flow projections for an explanation of the rent
payment reduction prior to final loan approval.
The EDA members briefly discussed whether the requested
$75,000 was "gap" financing. If "gap" financing meant the
determination between a do or die project than no GMEF loan
request would comply. If a company had weak financials, the
EDA would most likely deny the loan. The EDA viewed "gap"
financing as an "incentive" for use among competitive
communities. Additionally, the members saw a great potential
for growth in this family-owned business.
Wi th no further discussion on the loan applications, the
Chairperson Hoglund called for consideration of Agenda Item 4.
4. CONSIDERATION TO APPROVE OR DISAPPROVE GMEF LOAN NO. 007 FOR
LAWRENCE T. DEMEULES DBA STANDARD IRON AND WIRE WORKS, INC.
Barb Schwientek made a motion approving GMEF Loan No. 007 for
Lawrence T. Demeules, dba Standard Iron and Wire Works, Inc.
subject to receipt and review of the cash flow projections by
Mr. Mosford, and EDA affirmation of Mr. Mosford's findings and
recommendation. Findings meaning an explanation of the rent
reduction payment as it relates to the company's ability to
cover the proposed debt service. The "subject to" approval is
for a $75,000 equipment loan at 5% interest rate amortized
over seven years. GMEF loan fee of $1,125 and the GMEF legal
fees are the responsibility of the borrower. The GMEF, State
Economic Recovery Grant (ERG), and Central Minnesota
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EDA MINUTES
NOVEMBER 9, 1993
Initiative Fund (CMIF) loans will share a first Purchase Money
on the Horizontal Machine Center. Collateral, guarantees, and
other condition requirements to be determined and prepared by
the GMEF attorney. GMEF approval subject to State ERG and
CMIF approval. The loan becomes null and void if funds are
not disbursed by March 9, 1994. The motion was seconded by Al
Larson and wi th no further discussion, the motion passed
unanimousl y. Wi th the exception of the findings, the EDA
determined Loan No. 007 to comply with the GMEF public purpose
criteria and policies.
Upon EDA affirmation and final approval, the City Council will
review approved GMEF Loan No. 007 for compliance of the
guidelines at the November 22 Council meeting.
5. CONSIDERATION TO ENDORSE OR NOT ENDORSE THE FINANCIAL PROPOSAL
FOR ADVANCED FOOD SCIENCES, INC.
EDA members reviewed the enclosed agenda information.
Although no formal proposal was received from BDS, Inc. for
review, it was the consensus of the EDA that a research and
development project would qualify as GMEF "gap" financing.
The EDA supported the issuance of revenue bonds if backed by
the corporation(s).
6.
OTHER BUSINESS.
Looking into 1994, Koropchak reported two potential GMEF loan
request from Genereux Fine Wood Products for a 19,000 sq ft
manufacturing expansion and Steinwall, Inc. for an approximate
50,000 sq ft office/manufacturing facility.
7. ADJOURNMENT.
With no further business, Al Larson made a motion to adjourn
the EDA meeting. Seconded by Harvey Kendall, the meeting
adjourned at 8:25 p.m.
Q~ \(0'1 uc9-~
Ollie Koropchak, EDA Executive Director
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