EDA Agenda 05-28-1997WORKSHOP AGENDA
MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY
Wednesday, May 28,1997 - 7:00 p.m.
City Hall
MEMBERS: Chairperson Ron Hoglund, Vice Chairperson Barb Schwientek, Assistant
Treasurer Ken Maus, Clint Herbst, Roger Carlson, Bill Demeules, and Darrin
Lahr.
STAFF: Treasurer Rick Wolfsteller, Executive Director Ollie Koropchak, and Jeff O'Neill.
GUEST: Rusty Fifield, Elhers & Associates, Inc.
Kevin Doty, Marquette Bank
Tom Lindquist/Carol Vogel, First National Bank
Mayor Bill Fair
Rita Ulrich, MPC Project Manager
1. CALL TO ORDER.
2. CONSIDERATION TO APPROVE THE APRIL 29, 1997 EDA MINUTES.
3. CONSIDERATION TO HEAR OF REHABILITATION PLANS FROM DOWNTOWN
- PROPERTY OWNERS.
4. CONSIDERATION TO REVIEW LOAN GUIDELINES AS PROVIDED BY RUSTY
FIFIELD AND TO DETERNIINE THE APPROACH AND THE TYPE OF LOCAL
COMMERCIAL/RETAIL FUNDING PROGRAM DESIRED.
5. OTHER BUSINESS.
6. ADJOURNMENT.
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MINUTES
MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY
Tuesday, April 29, 1997 - 7:00 p.m
City Hall
MEMBERS PRESENT: Chairperson Ron Hoglund, Vice Chairperson Barb Schwientek,
Assistant Treasurer Ken Maus, Clint Herbst, Roger Carlson, and
Darrin Lahr.
MEMBER ABSENT: Bill Demeules.
STAFF PRESENT: EDA Treasurer Rick Wolfsteller and Executive Director
Koropchak.
GUESTS: Mayor Bill Fair
Rusty Fifield, Ehlers &Associates, Inc.
Kevin Doty, Marquette Bank.
1. CALL TO ORDER.
Chairperson Hoglund called the EDA meeting to order at 7:00 p.m
2. NSIDERATION TO APPROVE THE FEBRUARY 11, 1997 EDA NIINLTTES
Roger Carlson made a motion to approve the February 11, 1997 EDA minutes. Clint
Herbst seconded the motion and with no corrections or additions, the minutes were
approved as written.
3. CONSIDERATION TO REVIEW THE 1997 CITY PRIORITL7ATION LIST
Koropchak informed EDA members that three property owners and one potential lessee in
addition to Bill Grassel of Domino's Pizza have contacted the City on the availability of
financial assistance to rehab the interior or exterior of their downtown retail/commercial
buildings. Of the prioritization list under development by the City Council, currently, both
"establishment of a commerciaUretail loan" and "store front redesign/revolving loan fund"
were ranked in the top 35 out of a possible 121 projects. At this time; however, the
Council has not finalized the prioritization list. Two projects earmarked by the EDA were
"explore to establish a commerciaUretail revolving loan program" and "explore to establish
a redevelopment loan/grant".
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EDA MINUTES
APRIL 29, 1997
Adoption of the Downtown and Riverfront Revitalization Plan as part of the Monticello
Comprehensive Plan by the City Council is anticipated to take place in June or July. The
process will include approval by the HRA followed by a public hearing of the Planning
Commission, this prior to council adoption.
4. CONSIDERATION TO DI C IN OPTIONS FOR REVITALIZATION OF
THE DOWNTOWN AREA. (RETAIL/COMMERCIAL LOAN PROGRAM).
Koropchak introduced Rusty Fifield of Ehlers & Associates, Inc., the financial consultant
firm for the HRA. Additionally, Ehlers & Associates is one of the team members of the
Hoisington Koegler Group, Inc. hired to study and prepare the plan for revitalization of
the Monticello Downtown and Riverfront area.
Rusty presented EDA members with a handout illustrating the framework for financing the
revitalization plan. The framework consists of two strong "anchors": the southern anchor
being the redevelopment of the mall and the northern being the development of a hotel or
some other type of massive development. The anchor developments financed by
developer's capital and TIF. It is likely the tax increments generated by these projects will
be consumed by the projects.
Within the revitalization plan, the area defined as " ublic" su ests the develo went of
P gg P
public and civic facilities which are best financed through city or other governmental funds
continued Rusty. Next, the area defined as "main street" is Walnut Street. The City's
budget of the next couple of years includes street improvements for Walnut Street.
Although some of the improvements are assessed to businesses, it is suggested TIF
revenues be used to enhance the street scape improvements. It was also suggested that a
Service District be established to maintain the improvements.
Lastly, the area defined as "revitalize" is along Broadway or the existing downtown area.
It is suggested this area be financed by TIF, developer's capital, and rehab loans.
Revitalize means to improve existing businesses and help new businesses. Revitalization
can be accomplished through development of financial programs tied to facade design
guidelines or functional codes or through gap financing to acquire properties. The
greatest use of money is with the facade design guidelines and functional codes.
Additionally, Rusty presented various approaches to loan programs assuming a $150,000
fund balance with interest rates ranging from 7.5% to 0%. The examples showed the rate
of return on the investment. Another approach was to write-off the interest rate of the
bank loan. With this approach, the out-lay is less; however, there is no money returned.
Another approach is a design grant for the public purpose of community benefit.
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2
EDA MINUTES
APRIL 29, 1997
EDA members raised questions and made comments: Who gets the loan? How does one
prevent discrimination? Are loans for the owner or tenant? Are loans for new
construction or rehab'? Retail/commercial loans have greater risk and exposure. Minimize
risk for practicality rather than politically. EDA reserve funds can stand behind a bank
loan as a pledge to the bank. Perhaps smaller loan amounts for smaller projects: loans for
signage such as in Big Lake. How best is the EDA money leveraged? For consistency of
the revitalization plan -projects must create people downtown, not just economics.
Rusty suggested sources of funding options for a retail/commercial loan or grant. Option
one being dollars from the City's Liquor Fund. Option two perhaps from existing EDA or
HRA funds. Lastly, sell bonds for rehabilitation; however, this option is the least cost
effective. A funding sum of $150,000 for a designated period of time was suggested by
Rusty.
Koropchak informed members of the visit to Little Falls stating Little Falls gained national
preservation or historical status which allows owners to qualify for historical tax credits
which serve as an attractive incentive. Additionally, rehabilitation has been funded
through Small Cities Grant money, a city low-interest loan, and developer's capital. The
city has the right to obtain easements of the exterior walls of downtown buildings which
the city than rehabs consistent with the design standard guidelines. Owners must maintain
the exterior walls according to the guidelines. Lastly, the city has worked with MDOT in
a shared-cost arrangement relating to funding of street lights and banners along the
proposed improvements of the state highway running through downtown (main street).
Barb Schwientek made a motion authorizing staff and the consultant to proceed with
research and gather of information for the potential development of a retail commercial
fundmg program Fifield to provide examples of funding criteria or guidelines from other
communities and Koropchak to invite the downtown property owners interested in
rehabilitation to the next meeting. Darrin Lahr seconded the motion and with no further
discussion, the motion passed unanimously.
General discussion continued as to whether the community buys into the concept of the
revitalization plan and will it work?
5. Other Business.
Mayor Fair informed EDA members that council members continue to work on the
prioritization list which will lead to the establishment of policies and values -what we are?
EDA members were encouraged to give input to the City Council and present budget
request in July. The next CounciUStaff meeting is scheduled for May 13.
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EDA MINUTES
APRIL 29, 1997
EDA members established Wednesday, May 28, 1997, 7:00 p.m as the date of the next
meeting.
6. adjournment.
Clint Herbst made a motion to adjourn. The EDA meeting adjourned at 9:00 p.m
~ 9.~, ~~~ ~~Q~~
Ollie Koropchak, Executive Director
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EDA AGENDA
MAY 28, 1997
3. Consideration to hear of rehabilitation glans from downtown prog~ owners.
A. Reference and Background:
At the April EDA meeting, the EDA members requested the property owners interested in
rehabilitation and funding assistance be invited to the next EDA meeting. The intent was
to learn of the potential rehab plan of property owners for a better understanding to
establish a funding program which is a benefit to the community.
Although the following three property owners agreed to attend the EDA meeting, please
be sensitive to the disclosure of their plans and recognize some may feel uncomfortable
before a public entity.
Doug Schneider, Elk River - owner of the building previously operated as Stella's
Cafe and the building currently occupied by Monticello Carpet and Karen's
Kustom Drapery.
Judy Kruse - owner of the building previously operated as Dino's.
Kent Kjellberg -owner of the building along Walnut Street (behind Golden Valley
Furniture).
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EDA AGENDA
MAY 28, 1997
4. Consideration to review loan guidelines as provided by Rusty Fifield and to determine the
approach and the type of local commerciaUretail funding program desired
A. Reference and Background:
Enclosed is a letter from Rusty relating to the retail/commercial loan program. The letter
talks about an approach to use when creating a loan program. He may bring guideline
examples to the meeting of May 28.
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MAY 23 '97 09~42AM FREERS & ASSOCIATES
~ Memo
-~-D: Monticello EDA
From: Rusty FifieId
Subject: Commercial Loan Program
Date: May 23, 1997
P.2i2
At your meeting on Apri129, we began the process of designing a commercial rehabilitation loan
program. The loan program would be part of the implementation strategies for the Downtown
Revitalization Plan. This process will continue with your meeting on May 28.
The concept of a commercial rehab loan program is simple: allocate funds to establish the
program, set loan guidelines, receive applications, and make loans. However, the effectiveness
of the program will be influenced by the effort put into initial planning. This memo poses a
series of questions that should be answered in creating a loan program.
1. What are the objectives of the program?
In general terms, the loan program is intended to assist in the revitalization of the
Downtown area. There are many facets to the revitalization effort. In designing a loan
program, the EDA must consider the results it hopes to achieve. It is unlikely that there
will be enough money to fund atl possible applications. Therefore, the prioritization of
objectives helps to target the use of available funds.
Setting objectives also influences ocher decisions about the loan program and about the
overall implementation of the Plan. The list below identifies some potential objectives.
• Enhance storefronts and facades in accordance with the design guidelines in the
Plan.
• Encourage the rehabilitation of building interiors to bring them into compliance
with local codes and ordinances.
• Encourage building rehabilitation to provide space suitable for the proposed use.
• Provide "gap" financing.
• Provide economic incentives to locate businesses in the Downtown.
• Target assistance at specific buildings.
• Target assistance at specific business activities.
Ehlers and Associates Inc.
2950 Norwest Center ®90 South Seventh Street
Minneapolis, Minnesota 55402
(612) 339-8291 4 FAX (612) 339-0854
rusty@ehters-inc.com
MAY 23 '97 09~09AM FREERS & ASSOCIATES
1Vlonticello EDA
Page 2
May 23, 1997
A discussion of these objectives may lead to other factors that will shape the loan
program.
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2. What financial assistance is needed?
Public objectives are only one part of the equation. The program will not be successful if
it fails to encourage private investment. The design of the loan program should take into
account the economic barriers to business development in the Downtown. How can the
EDA tailor the program to meet the needs of both existing and future businesses?
3. How much risk is acceptable?
As we discussed in April, commercial rehab loans carry more risk than the loans made by
the EDA for industrial development. With small commercial projects, the applicant is
likely to have a good idea and not a detailed business plan. Some good ideas may become
viable businesses and others will not. At the outset, the EDA should give careful
consideration to the implications of the: unsuccessful project. The nature of the risk that
you are willing to accept will shape guidelines on the nature of the loan, the type of
project and the .role of the FDA.
4. What role is appropriate for the EDA."
The nature of the loan program has implications for the time and effort required to
support the program. Processing loans to be administered by the EDA requires more
effort than providing a write down of interest expense for loans made by a local bank.
The EDA must be willing and capable of supporting the loan program.
5. How will the program be funded?
Funding is somewhat of a "chicken and egg" question. The nature of the loan program
will influence the amount of funding needed. On the other hand, limits on the amount of
available funds will shape decisions about the design of the loan program.
Our discussion in April also touched on what other cities have done with commercial loan
programs. 1 am in the process of finding and investigating existing models_ It is important to
remember that each community creates programs around their unique circumstances. Before we
spend time looking at what other communities have done, I encourage you to determine what is
appropriate to do in Monticello. Guidance from other communities will then help you take the
concept and make it a reality.
I will be at your meeting on Wednesday to discuss these issues and to determine the next steps in
the process.
"Revitalize"
• TIF
• Developer Capital
• Rehab Loans
•
"Public"
• City Funds
• Other
Governmental
,-- X'
"Anchor"
Development
• Developer Capital
• TIF
a
0
~ ~ b
"Main Street"
• City Funds
• Special Assessments
• TIF
• Service District
~~ "Anchor"
Development
• Developer Capital
• TIF
r~
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o e e
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Monticello
For Illustratan Ony
Mnplementing the Downtown Pfan
Rehabllftatlon Loan Program
Loan Structure 20-YEAR AMORTiZAT10N
Balloon Payment in Year 5
Interest Rate 7.50%
YEAR S FUNDS LOANS
~I~IB.IlIEQ )BADE Pdd
9EP91Q AVAILABLE
E1lIIQ8
1 150,000 50.000 0.00 100,000.00
2 50,000 4,904.61 54,904.61
3 50,000 9,809.22 14,713.83
4 10,000 14,713.83 19,427.68
5 15,000 15,694.75 20,122.41
6 20,000 60,459.71• 60,582.12
7 55,000 57,516.94 63,099.06
8 60,000 58,007.40 61,106.47
9 60,000 24,353.47 25,459.93
10 25,000 33,587.43 34,047.37
5395,000.00
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Ehlers and Associates, Inc.
04/28/97
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5365,000.00
Ehlers and Associates, Inc.
Monticello
For Illustretan Only
knplemeMing the Downtown Plan
Rehabllltation Loan Program
Loan Structure 20-YEAR AMORTIZATION
Balloon Payment ~ Year 5
Interest Rate S.OO~o
YEAH FUNDS LOANS
~IB.t~Q 1AADE P61
9EP~IQ AVAILABLE
E!lCyQE
1 150,000 50,000 0.00 100.000.00
2 50,000 4,012.13 54,012.13
3 50,000 8,024.28 12,036.39
4 10,000 12,036.39 14,072.78
5 15,000 12,838.81 11,911.59
6 10,000 55,686.98 57,59857
7 55,000 52,477.28 55,075.85
8 55,000 52,878.49 52,954.35
9 50,000 19,964.08 22,918.43
10 20,000 27,33824 30,256.67
04!28/97
Monticello
For Illustration Ony
Ynplementing the Downtown Plan
Rehabilitatbn Loan Program
Loan Structure 20-YEAR AMORTIZATION
Balloon Payment in Year 5
krterest Rate 3.00%
FUNDS
~~ CONTRI6UTE
1 150,000
2
3
4
5
6
7
8
9
10
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........., .. ....i+~, ;; n ti~:H:..1~.vwn A..., .!:~a.:.ti'Ld i<::R- ~ 4; i ... ,
Ehlers and ASSOCIates, InC.
LOANS
lAADE P81
HEEAIQ AVAILABLE
Fl1ND$
50,000 0.00 100,000.00
50,000 3,360.79 53,360.79
50,000 6,721.57 10,082.36
10,000 10,082.36 10,164.71
10,000 10,754.51 10,91923
10,000 51,54751 52,466.73
50,000 48,858.88 51,325.61
50,000 48.858.88 50,184.49
50,000 16,76221 16,946.70
15,000 19,450.84 21,39754
S345.000.00 D
04/28/97
For Illustration Ony
Monticello
implementing the Downtown Plan
Rehabllitatbn Loan Program
Loan Structure 20-YEAR AMORTIZATION
Balloon Payment in Year 5
Interest Rate 0.009'0
FUNDS LOANS
YEAH ~1@UIEQ lAAQE PdJ
SEeAIQ AVAILABt.E
E!!MQ$
1 150,000 50.000 0.00 100,000.00
2 50,000 2,500.00 52,500.00
3 50.000 5,000.00 7,500.00
4 7,500 7,500.00 7,500.00
5 7,500 7,875.00 7,875.00
6 7,500 45,750.00 46,125.00
7 40,000 43,625.00 48,750.00
8 45,000 43,125.00 47,875.00
9 45,000 11,000.00 13,875.00
10 13,000 12,875.00 13,750.00
5315.500.00
Ehlers and Associates, Inc.
04/28/97
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Monticello
For Itlustretion Ony
Implementing the Downtown Plan
Rehabllltatbn Loan Program
Loan Stnxture 20-YEAR AMORTIZATION
Balloon Payment in Year 5
Interest Rate 7.50%
Interest Expense Only 593,617.94
YEAH ~ FUNDS LOANS
9NISIB.tlIEQ MAQE
1 150,000 50,000
2 50,000
3 50,000
4 10,000
5 15,000
6 20,000
7 55,000
8 60,000
9 60,000
10 25,000
$395,000.00
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i
Ehlers and Associates, inc.
P&I AVAILABLE
0.00 100,000.00
4,904.61 54,904.61
9,809.22 14,713.83
14,713.83 19,427.66
15,694.75 20,122.41
60,459.71 60,582.12
57,516.94 63,099.06
58,007.40 61,106.47
24,353.47 25,459.93
33,587.43 34,047.37
04/28/97