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EDA Minutes 08-31-1999 I , , MINUTES MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY Tuesday, August 31, 1999 - 7 p.m. Members Present: Chair Ron Hoglund, Assistant Treasurer Ken Maus, Bill Demeulcs, Vice Chair Barb Schwientek, Clint Herbst and Roger Carlson Absent: Staff: Others: Darrin Lahr Executive Director Ollie Koropchak, Recording Secretary Lori Kraemer Pam Campbell, DA T and Jerry & Mary Schoen, Aroplax Corporation 1. Call to Order. 2. 3. Chair Ron Hoglund called the EDA meeting to order at 7 p.m. Consideration to aporove the February 23.1999 EDA minutes. A MOTION WAS MADE BY BILL DEMEULES AND SECONDED BY CLINT HERBST TO APPROVE THE FEBRUARY 23, 1999 EDA MINUTES. Motion carried. Consideration of addinu agenda items. Nothing added. 4. Consideration to review to review the GMEF Guidelines for possible amendment. Executive Director Ollie Koropehak stated that this item relates to consideration of adopting the EDA Business Subsidy Criteria for the GMEF pursuant to Minnesota Statues, Section 1161.993 through 1161.994. It is recommended to amend GMEF Guidelines, DEFINITION OF PUBLIC PURPOSE, l.(b) to add: Annual written reports are required until termination date. Failure to meet the job and wage level goals require partial or full repayment of the assistance with interest. Ollie stated this recommendation is consistent with the new business subsidy criteria rule which became effective August 1, 1999. Ollie Koropchak also reminded the members that recently they had amended the Guidelines to include language relating to wage level goals for consistency with state requirements. The GMEF wage level goals are consistent with requirement for use of -1- I I . Economic Development Authority Minutes - 8/31/99 TIF on Grcen Acres propertics which today includes the Monticello Commerce Center and Market Place industrial properties. The EDA attorney advises the EDA to be aware of the fact that 160% of the federal minimum wage is $8.24, for example if a warehousing facility of 300,000 sq. ft. were interested in Monticello the project would increase the tax and employment base, however, a warehousing facility does not typically pay high wages or more than likely 90% of their work force may be paid wages of less than $8.24 excluding benefits. This does not prohibit a facility from locating in Monticello, the project just may not be eligible for public financial assistance. Secondly, EDA Treasurer Wolfsteller and Koropchak briefly discussed the option to suggest amending the GMEF Guidelines to add a Late Penalty Fee as an incentive to ensure timely monthly paymcnts. Most GMEF loan payments arc due the first day of each month. Wolfsteller and Koropchak dismissed the idea because a late penalty fee creates a negative criteria to a oncc positive program, number of late payments relatively small, requires additional monitoring and collection time, and would we collect the penal ty. The members discussed the possibility of adding a late fee penalty and it was the consensus of the members to speak with the attorney regarding the language to be used as well as the amount that could be charged. There was also some discussion on the possibility of having to "call" a loan if payment does not occur for an extended period of time and it looks like there would be a default on the loan. It was also questioned whether a late fee could be charged to an existing loan or would this affect new loans only. A MOTION WAS MADE BY KEN MAUS AND SECONDED BY ROGER CARLSON TO AMEND GMEF GUIDELINES, DEFINITION OF PUBLIC PURPOSE, l.(b) l'O ADD: ANNUAL WRITTEN REPORTS ARE REQUIRED UNTIL 'fERMINATION DATE. FAILURE TO MEET THE JOB AND WAGE LEVEL GOALS REQUIRE PARTIAL OR FULL REPAYMENT OF THE ASSISTANCE WITH INTEREST. Motion carried. A MOTION WAS MADE BY KEN MAUS AND SECONDED BY ROGER CARLSON TO AMEND THE GMEF GUIDELINES TO ADD A LATE PENALTY FEE SUBJECT TO LANGUAGE PREPARED BY ATTORNEY. Motion carried. 5. Consideration to adopt the EDA Business Subsidy Criteria for the GMEF pursuant to Minnesota Statutes. Section 116J.993 through 116J.994. Ron Hoglund opened the public hearing. -2- I Economic Development Authority Minutes - 8/31/99 Ollie Koropchak noted the change in this item with the addition of the late fee motion. Koropchak advised the membcrs that effective August 1, 1999, the legislature repealed existing Section 1161. 991 and enactcd new rules governi ng all business subsidies granted by state and local governments. In summary and first, all business subsidies must meet a public purpose other than incrcasing tax base. Job retention is a public purpose only wherc job loss is imminent and demonstrable. Before granting any subsidy, a grantor (EDA) must adopt criteria for awarding business subsidies at a public hearing. The EDA public hearing notice appeared in the Monticello Times, August 19 and 26, 1999. Ollie provided a copy of the addition which will be added to the guidelines as part ofthc criteria for consideration to adopt. Additionally, the new rule states a subsidy agreement must be approved by thc local clected governing body. In the case of the GMEF loans, legal counsel will prepare a subsidy agreement between the developer and the EDA for Council to approve. This agreement wiI I be in addition to the Loan Agreement or other closing documents. I Thc new rule states the criteria must include a policy regarding job and wage goals, specific target to attain the goals, and at a minimum, requires the recipient failing to meet the stated goals to repay the assistance plus interest at a defined statutory rate except that repayment may be prorated to reflect partial fulfillment of goals. A recipient must file detailed reports to the grantor for two years after the benefit date or until goals are met. A recipient must commit to continue operations at the site for at least five years after the benefit date. The new rule excludes a subsidy ofless than $25,000. In the case of the DMRF Guidelines this would apply only if a business would maximize the $20,000 loan and maximize two sides of the facade matching grant. Since this appears unlikely, it is not recommended to cstablish new criteria and hold a public hearing for the DMRF program at this time. A MOTION WAS MADE BY KEN MAUS AND SECONDED BY BARB SCHWIENTEK TO CLOSE THE PUBLIC HEARING. Ron Hoglund closed the public hearing. Motion carried. A MOTION WAS MADE BY BARB SCHWIENTEK AND SECONDED BY BILL DEMEULES TO ADOPT THE EDA BUSINESS SUBSIDY CRITERIA FOR THE GMEF PURSUANT TO MINNESOTA STATUTES, SECTION 1161.993 THROUGH 116J.994, SUBJECT TO AS AMENDED IN PREVIOUS AGENDA ITEM. Motion carried. . -3- I I . Econom ic Development Authority Minutes - 8/31/99 6. Consideration to review the second GMEF loan application from Schoen Properties Limited Partnership dba Aroplax Corporation. Ollie Koropchak introduced Jerry & Mary Schoen of Aroplax and gave a brief summary of their company. Koropchak provided the project summary and status of the 1992 GMEf Loan No. 005 [or Aroplax. Aroplax's plans in 1999 were to begin construction of a 14,000 sq. ft. addition to their existing building and to increase their employment base by the addition of 10 individuals within 2 years. Their current employment base is 35. The new GMEF loan will be to Schoen Properties Limited Partnership dba Aroplax Corporation. Uses of funds would be for building construction and soft costs in the amount of$450,000. The sources of these funds would be $340,000 from Stearns Bank, $10,000 in equity and $100,000 from the GMEF. Ollie also provided the GMEF guidelines and policies. Jcrry Schoen gave a brief discussion on their plans to expand to better meet their current customer needs, as well as be able to meet the needs of new customers. This would probably be a three year process. Ollie Koropchak also gave a summary of where the monies would be coming from, a total of $450,000. She also explained the criteria they needed to meet as far as the number of jobs, wages, and that this would be an increase in tax base. Koropchak stated that Aroplax does meet the criteria for the $100,000 loan and that the interest rate could be as low as 6.25%. The construction time table is starting approximately the second week in October and finishing the end of November. No action was necessary. 7. Consideration to approve or deny GMEF no. 016 for Schoen Properties Limited Partnership dba Aroplax Corporation. Ollie Koropchek advised the members that the EDA needs to determine ifthis GMEF loan application from Schoen Properties will encourage economic development, if the proposed construction ofreal estate property and application comply with the EDA Business Subsidy Criteria (GMEF Guidelines), as well as determine the amount and terms of the loan for approval. Ollie also noted the City Council will consider ratification of the EDA's action and approval of the Subsidy Agreement for GMEF No. 016 to Schoen Properties on September 13, 1999. A MOTION WAS MADE BY BARB SCHWIENTEK AND SECONDED BY BILL DEMEULES TO APPROVE GMEF LOAN NO. 016 FOR SCHOEN PROPERTIES -4- I , . -- Economic Development Authority Minutes - 8/31/99 LIMIT'ED PARTNERSHIP, DBA AROPLAX CORPORATION IN THE AMOUNT OF $100,000 WITH TERMS AND CONDITIONS AS RECOMMENDED. COLLATERAL, GUARANTEES, AND OTHER CONDITION REQUIREMENTS TO BE DETERMINED AND PREPARED BY THE OMEF ATTORNEY. TI-IE OMEF LOAN APPROVAL SUBJECT TO LENDER COMMITMENT AND SUBMISSION OF FINANCIAL STATEMENTS AND COUNCIL APPROVAL OF THE SUBSIDY AGREEMENT. Motion carried. 8. Consideration to review the DMRF Guidelines for possible amendment. Ollie Koropchak advised the EDA members that a discussion arose at the OAT meeting about the possibility of amending the DMRF boundaries to include the blocks or businesses along Walnut Street between the North and South Anchors which would encourage business facade improvements along Walnut Street and accelerate the use of the funds. It was also noted by Koropchak that the focus of the MCP for 2000 is revitalization, rear store entrances, and new businesses with less concentration on community activities. At the conclusion of the last DAT meeting, DAT members agreed with Koropchak to concentrate on marketing the DMRF for year 2000 through one-to-one meetings with Broadway business owners and present drawings of facade improvement options. Pam Campbell, OAT, advised the members of the last OAT meeting and the decision for them to keep the boundaries where they are, but having a deadline to look at the boundaries once again at a predetermined time. Ollie Koropchak thought the guidelines stated this is to be done annually. Pam stated the DA T members would like to look a having a plan rather than creating ideas on the spot. It was asked if funding was a road block for DA T and Pam stated that was not the case, however, DA T would like to be able to have an architect make sketches before going back to a particular business and be able to show the business various ideas and costs. Ollie Koropchak recommended the EDA should make a motion to extend the use ofthe remaining DMRF balance 01'$174,078.08 through year-ending, December 31, 2000. The consensus of the members was to have the DA T write up requests for proposals and get the estimate on costs. These requests would be for concept drawings on the particular buildings selected by OAT. MOTION TO TABLE EXTENDING THE USE OF THE REMAINING DMRF BALANCE OF $174,078.08 THROUGH YEAR-ENDING DECEMBER 31,2000 AND ASKING THE DESIGN ADVISORY TEAM TO OBTAIN REQUESTS FOR PROPOSALS FOR 3 TO 6 BUSINESS SITES IN THE DOWNTOWN AREA. Motion carried. -5- I , . 9. Economic Dcvelopment Authority Minutes - 8/31/99 Consideration to discuss EDA requests for City Budget Process Year 2000. Ollie Koropchak asked the EDA to consider an endorsement of the HRA's request for an additional $75,000 from the City toward an Industrial Reserve Fund for future acquisition of industrial land which supports the IDC resolution endorsing the acquisition of industrial land. Koropchak also stated DA l' is requesting the EDA request $20,000 for acquisition and improvements for walkway between West Broadway and the rear parking lots which is part of the Grassl and Larson properties and part of the Comprehensive Plan. The members asked if we could take existing EDA funds instead of asking Council for $20,000 more. Ollie also asked the EDA to endorse the North Anchor request of an annual appropriation of $200,000 for acquisition of blighted parcels. A MOTION WAS MADE BY BARB SCHWIENTEK AND SECONDED BY KEN MAUS TO SUPPORT ENDORSING THE NORTH ANCHOR REQUEST FOR $200K AND THE HRA REQUEST FOR $75,000. Clint Herbst abstained. Motion passed. 10. Executive Director's Report. GMEF No. 015 - This real estate loan for Mainline Distribution dba Groebner & Associates closed on June 1, 1999. DMRF No. 108 to Bruce and Cynthia Hamond was disbursed on June 11, 1999 and DMRF No. 109 to Dorothy Topel was disbursed on July 12, 1999. GMEF No. 014 - Ollie Koropchak included a letter mailed to 1'.1. Martin, Inc. dba Lake Tool giving notice of payment due. Previously the company submitted payment for January through May. The existing payback is for interest only with the principal payback starting at a later date per the loan agreement. The company has not paid their first half year of property taxes on which they re~eived up-front TIF assistance in the amOlmt of$37,900. HRA addressing this issue. Koropchak advised that Lake Tool is now paid through the month of August. Original loan was for $85,000 - only one we are receiving interest only from. Ken Maus suggested Koropchak check with the mortgage lender and prepare for possible default of loan. Twin City Die Casting, Inc. has selected Monticello for the site oftheir new Phase I 40,000 sq. ft. facility. The company plans to add 50 to 75 new jobs at wage goals -6- I , . Economic Development Authority Minutes - 8/31/99 between $10 to $16 per hour excluding benefits. The planned funding sources include Industrial Revenue Bonds, Lender, State Grant, GMEF, and TIF. Will need to meet in approximately 30 days to get this loan processed. Acquisition of industrial lands - Rick Wolfstcller and Ollie Koropchak met with the Goeman Group and Jolm Chadwick relating to discussion of price for acquisition and costs for infrastructure development. No firm numbers at this time. Asking City Engineer for cost estimates to construct infrastructure for both the Goeman & Chadwick properties. SCREG Aroplax - the Grant Adjustment Notice from the State satisfies all repayment requirements of the $170,000 grmlt/loan. 11. Other Business 12. No other business. Adjournment. Ron Hoglund adjourned the meeting at 8:30 p.m. CL~~ ecording Secretary -7-