EDA Minutes 04-04-1990MINUTES
CMONTICELLO ECONOMIC DEVELOPMENT AUTHORITY
Wednesday, April 4, 1990 - 7:OOAM
City Hall
MEMBERS PRESENT: President Ron Hoglund, Vice President Barb
Schwfentek, Harvey Kendall, Warren Smith,
Fran Fair, and Al Larson.
MEMBERS ABSENT: Assistant Treasurer Bob Mosford.
STAFF PRESENT: EDA Treasurer Rick Wolfsteller and EDA Executive
Director 011ie Koropchak.
GUEST PRESENT: Bill Tapper, Tapper Inc.
Lance Hartkopf, Tapper Inc.
Bob Heck, Business Development Services, Inc.
Kevin Doty, Wright County State Bank
1. CALL TO ORDER.
President Ron Hoglund call the EDA meeting to order at 7:00 AM.
2. CONSIDERATION TO HEAR PROJECT BACKGROUND INFORMATION.
Koropchak reported this project started fall of 1989.
Genereux finished cabinets for the Grimsmo home, visited
city hall, and the IDC Promotional Committee visited the
Genereux St. Michael facility. The company having received
information of Monticello and toured the industrial sites,
Business Development Services, Inc. were contacted to
prepare a financial proposal for Genereux and Westlund
Distributing. The original financial proposal included
a Small Business Developemnt Loan, TIF, GMEF, and equity.
However, upon denial for funding by the SMDL board, the
alternative funding for Small Business Administration Loan
was applied for. The TIF Plan and District No. 1-9 has
been approved by the Planning Commission, HRA, and the
City Council.
The project includes an approximate 27,000 sq ft concrete
office, manufacturing facility for Genereux Fine Wood Products
and Westlund Distributing. Purchase agreement for Lot 4,
Block 2, DIP of approximately 7.2 Berea. Total employment
50, 15-25 new jobs.
The Development Agreement has not been drafted by Holmes 6
Graven at this time nor has the Building Inspector received
the site plans, building plans, drainage or landscaping plans.
The SBA Omni Board has approved the funding which then
goes to the SBA Board for final approval.
c
EDA Minutes - 4/4/90
Page 2
3. CONSIDERATION TO HEAR COMPANY HISTORY AND BUSINESS PLANS.
Bill Tapper told the EDA that he and his wife. Barbara, did
a market analysis of the cabinet industry in 1983 and
determined the a opportunity existed to create a franchisable
business system for the custom cabinet industry. In 1984
Tapper's Inc. was formed and in turn they purchased Genereux
Fine Wood Products, a small custom cabinet manufacturing
company in St. Michael. Three years after they formed
Westlund Distributing, a cabinet hardware distribution
company.
Long term goals for Tapper's Inc. is to become the Super
Valu of the cabinet business. Meaning they would manufacture
and distribute complex decorative component parts, and provide
management services to a nation wide network of independent
franchises. Plans include expansion of the facility up to
100,000 sq ft.
4. CONSIDERATION TO HEAR LOAN REQUEST COMPARED TO GMEF GUIDELINES.
Koropchak presented a comparison summary to the EDA members
(see attached) and pointed out the two conflicts with CHEF Guidelines were
request for 7% interest rate and 20 year term.
C5. CONSIDERATION TO HEAR TAPPER, INC. FINANCIAL PRESENTATION.
Bob Heck reported the company shoved good sales of 1.5
million and inorder to proceed with their business plans
the company need to move to allow expansion as they are
landlocked at their present leased facilities in St. Michael.
Mr. Heck recommended this to be a good little project for
the first EDA loan as it meets the GMEF guidelines. Mr.
Heck recommended the EDA adjust their loan term to meet
SBA requirement of, 20 years as follows: The adjustment
meets SBA's 10% total project subordinated 20 year debt
term. Total project of $895,000 times 102 equals required
subordinated debt of $89,000 less equity or TIF of $77,500
equals GMEF loan portion of $12,000 (balloon at 7 years).
The interest rate will be 82 which is 2% below Minneapolis
prime. As of April, 3, 1990, Minneapolis prime is 101
per First Bank Minneapolis. Loan amortized over 20 years.
Kevin Doty, Wright County State Bank, reported he had
visited the facility in St. Michael and definitely agreed
with their need to expand. .He is willing to share any
company information the bank haslabove what the EDA
Executive Director has received, however, suggested a
Intercredit Agreement be drafted between the EDA,
Tapper's Inc. and the bank. The bank has Issued a commitment
letter subject to numerous conditions which will be revised
to coordinate with the SBA loan. He informed the EDA
of his suggestion to Rick Wolfsteller and 011ie Koropchak
for the bank to service the loan at $20 per month. He
EDA Minutes - 4/4/90
Page 3
informed the EDA that real estate is held by Bill and Barb
Tapper and the M&E .is held by Tapper's, Inc. therefore a
combination loan agreement might be drafted. He noted that
the existing lease of $31,000 was figured into the projections
under rental expense. The financials were unaudited however
had no problems with them after meeting with the CPA firm
and the state. An appraisal by Jack Maxwell disclosed a
value of $1,000,000 for land and building and $1,146,000
for land, building and equipment. Kevin Doty recommended
to the EDA that Tapper's Inc. is a credit worthy business.
Afterfurther questions and discussion by the EDA members and
the EDA Executive Direcrors, President Ron Hoglund called
for a motion to approve or deny GMEF funds to Tapper's Inc.
EDA Commissioner Warren Smith made a motion to approve a
$100,000 GMEF loan request for Tapper's Inc., because the
company's financial statements, as analyzed by Kevin Doty of
Wright County State Bank, determined Tapper's Inc., to be
a credit worthy business. Secondly, the GMEF guidelines
state all loans must comply with four or more of the six
public purpose criteria (creation of jobs a must). Said
loan meets public purposes:
/ 1. Credit worthy business that creates new jobs (estimated
between 15-20).
2. Credit worthy business that increases the community tax
base (estimated annual taxes of $27,000).
3. Assistance to an existing industrial business expanding
and relocating their operation to Monticello.
4. Provides gap funding.
5. Provides funds for economic development that could be
used to assist in obtaining other funds such as Small
Business Administration loans, federal and state grants,
etc.
Thirdly, the loan complies with CHEF policies. This a $100,000
Companion Direct Loan, which is in a third subordinated position
to the primary lenders, Wright County State Bank and Small
Business Administration, on real property development and machinery
and equipment. The real estate and M b E is amortized over 20
years with balloon payment in seven (7) years. Interest rate is
8%.
The loan fee to the developer is to be waived, and Wright County
State Bank will service the GMEF loan for a service charge of
$20.00 per month. EDA staff is responsible for loan payment
collection. The service charge will be deducted from the GMEF
accumulated interest.
V
C
EDA Minutes - 4/4/90
Page 4
An Intercreditor agreement between the developer, the lending
institution, and the EDA shall be drafted and executed in addition
to the Authorization Releasing Information form.
The motion was seconded by Harvey Kendall and without further
discussion was carried unanimously.
Rick Wolfsteller, Kevin Doty, and 011ie Koropchak will meet
Thursday, April 5, 1990, with Attorney Tom Hayes to discuss
preparation of the necessary loan documents.
The City Council will be advised of the EDA loan approval at
Council meeting, April 9. 1990.
6. OTHER BUSINESS.
None.
7. ADJOURNMENT.
President Ron Hoglund adjourned the EDA meeting.
011ie Koropchak
EDA Secretary