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06-24-2005 EDAMHutchinson EDA Board of Directors Minutes of Meeting Friday, June 24, 2005 at 7:00 a.m. Members present in bold print: Members: Tim Ulrich Steve Jansick Jim Haugen Duane Hoversten Casey Stotts Mike McGraw Staff: Miles Seppelt, EDA Executive Director Erin Eberdt, EDA Intern L Tim Ulrich called the meeting to order at 7:O1am. II. Approve Agenda No action taken III. Review and Approve Meeting Minutes a. Review minutes from May 27th EDA Board Meeting Don Walser M/S /P: McGraw / Haugen to approve the minutes from the May 27th EDA Board with the two necessary changes. Passed unanimously. b. Review minutes from May 18th Finance Team Meeting M/S /P: Walser / Jansick to approve the minutes from the May 18th Finance Team Meeting as written. Pass unanimously IV. Review May Financial Statements -Ken Merrill Miles Seppelt gave the following report: o On Pg 1 under operations for the EDA, there is $72,547 cash on hand. The total fund balance as of May 31, 2005 is $72,943. There is the continuation of the land write down. Total Mortgages receivable is $90,238. o Pg 2 and 3 is the statement of revenue and expenses. The EDA continues to collect $500 each month for the Wetherell Property. Total expenses for May are $10,968, which includes wages for Director and intern and license and taxes for EDA Board Meeting June 24, 2005 Page 2 of 7 first half of property taxes ($1,327). The EDA has spent down a total of $10,468 for the month of May. The EDA has spent down a total of $50,635 for the first five months of 2005. • Pg 4 under the EDA Loan Fund, there is $147,314 as cash on hand. This fund has seen no activity for the month of May. The only YTD activity is the $7,500 recovered Allied Mechanical. • Pg 5 under the EDA Downtown Loan Fund, there is $467,092 as cash on hand. Mortgages receivable is $790,595. $40,134 has been collected this year for loan repayments, but this does not include May's numbers. A total of $190,380 has been paid out thus far for 2005 including loans, downtown grant program, and miscellaneous. The balance sheet reflects spending down a total of $150,246. • There will be more revenues to report for the month of May that were not included in the financial statements. M/S /P: Hoversten/Haugen to approve May financial statements as presented. Pass unanimously. V. Director's Report Miles Seppelt gave the following report: A. State Theater- Improvements continue to progress. The McMonagle's are moved in. The other apartments are nearly finished and ready to rent out. The seats are going to be set this week. Mr. McMonagle is working on tracking down the person that puts up the screen and the drape and those should be installed the first week of July. B. Liquor Hutch- Construction has begun. It should be done by October 31St The store will keep open during the whole project. C. Cornerstone Commons- The developer has received bank financing. This will be discussed in detail later. D. Downtown Streetscape project- The project is being rebid. It is being advertised this week, with bids being due by July 15th. At the first City Council meeting in August there will be a public hearing to award bid. The project could still be completed this fall, but some work may have to be finished in the spring. E. Wetherell Industrial Park- This will be covered later. F. Cenex Project- Mr. Seppelt has not heard anything on this project. G. Business Recruitment- There is a company coming today to give a presentation. Also, a purchase agreement is being drawn up for Company "X ". This should be put together by the first or second week in August. The JOBZ steps are being taken to make them available. The company will finish with the planning this year and begin construction next year. VI. Grant and Loan Applications None VIL Plastic Specialties Land Write -Down EDA Board Meeting June 24, 2005 Page 3 of 7 Mr. Ulrich gave the following report: Tom Daggett is currently leasing the building and has been since July of 2002. There was an option to purchase and close on the building in February 2006. Mr. Daggett is exercising this early and wants to purchase it. The EDA and City of Hutchinson did a 1/3 -2/3 -land write -down. There was a special assessment of $62,150.61 against the property. The mortgage against the property was $79,056. At the Board meeting on April 14, 1997, it was documented that was included in the land write -down and that the mortgage was $79,056. The land write -down was recorded, but the assessment and mortgage show as outstanding, but both of these were included in the 1/3 -2/3 -land write -down. In November of 2002, there were two motions made. Duane Hoversten made a motion to recognize the loss of $60,000 for the loan to Plastic Specialties; the loan is now null and void. Don Walser seconded the motion. Motion carried with Tim Ulrich and Jeff Haag abstaining from voting. The second motion was made by Duane Hoversten to continue with the original arrangement for the 2/3 land write- down, Daggett has three 9 -month leases, after that time, the issues will be reviewed. Bob Windel seconded the motion. Motion carried with Tim Ulrich and Jeff Haag abstaining from voting. Mr. Ulrich stated that the EDA has agreed to allow Daggett to assume the land write- down, because the building is still paying taxes and creating jobs. He said the following needs to happen: o Recognize the special assessment and mortgage are one in the same. o Satisfy the $79,056 mortgage on property. o Work with the city attorney to draft an agreement that acknowledges that Mr. Daggett can keep the land write down. M/S /P: Hoversten/Haugen to recognize the outstanding mortgage and special assessment as being one in the same. Passed unanimously with Tim Ulrich abstaining. The city attorney needs to decide how to redraft the land write -down assessment to Daggett Ventures, LLC. It will need to be decided if there should be a satisfaction or new mortgage. M/S /P: Walser /Jansick to instruct the city attorney to do necessary changes to move land write -down to the new owner. Passed unanimously with Tim Ulrich abstaining. VIIL Hutchinson Hotel — Sale of Kock Jewelry The EDA provided a loan of $130,000. The project is complete. If there is a sale of any part of the property, the EDA requires repayment of the loan. Kock Jewelry is EDA Board Meeting June 24, 2005 Page 4 of 7 only a small portion of the property and was not included in any of the renovation. If this portion were to be sold, the value of the property would still be $700,000. The Finance Team concluded that because it is a large project that covers multiple city lots and because none of the money was spent on the Kock portion, that the EDA should allow it to be sold because it was not part of the renovation. Mr. Jansick wondered if a new mortgage needed to be drafted. Mr. Seppelt stated that the mortgage was all done as one, so we will need to draft a partial release of mortgage. M/S /P: Jansick/Hoversten to approve the sale of the Kock Jewelry portion without requiring the repayment of the loan. Passed unanimously with Tim Ulrich abstaining. IX. Proposal from Small Business Development Center — Duane Hoversten Duane Hoversten gave the following report: At one time the EDA did house the SBDC, but it got moved to Ridgewater College because of staff differences. Funding has changed in the college environment because of the merges between tech, 2 -year, and 4 -year colleges. The tech education programs are slipping due to money problems. The college is not putting any funding towards the SBDC. The SBA funds the SBDC. The SBDC is a governmental program funded by the SBA, and run in this state by DEED. The region needs to come up with matching dollars. Currently, SWMF, Prairie land, Lyon County, and SW University give money to the SBDC. The SW region has 18 counties. McLeod County has the second most in working with clients, with Lyon County being first. The SBM works with business owners at business with how to run a business. The SBDC is more project related and deals with business start-ups, expansions, and loan information. The SBDC is not allowed to charge. The business gets assigned a counselor and the counselor gets paid for the hours put in. Why should the EDA be involved? The SBDC is asking for $10,000 /year, in which the EDA is able to bill back the SBDC any entering we do at a rate of $25 /hour. With this, the EDA would get back about $5,000 of the initial $10,000. Down the road there would be creative ways in which the EDA could get back all of the money put into the SBDC each year. With spending the $5,000 in net dollars, there is still a big return in job creation and economic development. Currently in McLeod County, 1.6 jobs are created for every business that the SBDC makes contact with. Right now there is no structure in place for the SBDC. It Mr. Hoversten were to quit, his position would not be replaced. In McLeod County, Mr. Hoversten works with 30 -40 businesses. EDA Board Meeting June 24, 2005 Page 5 of 7 Mr. Haugen wanted to know why the annual funding was needed. Mr. Hoversten said this was because the SBA requires a match. The money goes to the regional office and then to the federal government to get funding. Mr. Seppelt was wondering if there would be the potential for any real or perceived conflict of interest with the SBDC being located in the city of Hutchinson, because people may think that we are only bringing businesses into Hutchinson. Mr. Hoversten said that Hutchinson would become a natural attraction and that other communities had the opportunity. The big problem is that McLeod County does not have an EDA. Mr. Ulrich suggested taking this back to the Finance Team to get direction from them. He also felt that we need to talk with Ken Merrill about the $5,000410,000 out of the budget. Mr. Hoversten said it would require about 15 -20 hours a month for the intern. The rating in the SW Region is 94% satisfaction, which is the highest in the state. Mr. Ulrich would like to be able to show that we are able to give how much we get back. Mr. Jansick wondered if with the new SWMF building if it was ever considered to go there. Mr. Hoversten said that the SBDC would prefer to keep SWMF as a contributor. It was recommended to get Mr. Hoversten to the next Finance Team meeting on July 20th No action was taken. X. Accept bid from JUUL Contracting for 5th Avenue Industrial Park Improvements (Removal of topsoil) and authorize expenditure of $9,150 for the improvements. Quotes have been obtained to have all of the topsoil removed from the buildable area on Block 2, Lot 2 of the Wetherell Property. Approximately 11,200 square yards of topsoil will be removed and free fill can be obtained from other city improvements that are going on. This will allow the property to become buildable, because currently, the whole site is low and needs to be brought up. To do so, the topsoil needs to be excavated, then filled, compressed, and graded. Juul Contracting was the lowest bidder. The reason why this bid was so much lower was because the company will haul away the topsoil, grind it, and sell it. M/S /P: McGraw /Walser to award contract to Juul Contracting to remove the topsoil on the Wetherell Property. Passed unanimously. XI. Cornerstone Commons Redevelopment TIF District The developers have secured financing for $1.65 million. The total project cost is approximately $2.1 -2.2 million. The financing is contingent on the EDA putting together a TIF District. It will take about 60 days to set up the TIF District. The TIF EDA Board Meeting June 24, 2005 Page 6 of 7 District will eliminate the building and take care of all of the clean up and all of the things that go into the ground. Mr. Ulrich asked what the recapture would be. Mr. Seppelt did not know yet. The district will last up to 25 years. On an earlier run that was done with this project, $980,000 would be generated. Mr. Ulrich felt that the EDA Board should take action today to get this project moving because of the minimal cost to get it started. Once the EDA has received the packet from Ehlers and Associates, a special meeting will be held to clarify the numbers. M/S /P: Jansick/Stotts to move ahead with the Redevelopment TIF District for Cornerstone Commons, and to have a subcommittee and the Finance Team review it after the initial work. Passed unanimously. XII. Review of terms of Purchase & Sales Agreement — Company "X" Mr. Seppelt asked for any suggestions on the provisions laid out below. The total purchase price is $194,700. Mr. Seppelt laid out the following provisions: • City of Hutchinson shall have right of first refusal in the event of any resale of the property • Company must begin development of the site no later than June 1, 2006 • Construction or manufacturing facility must be complete by November 1, 2007 (would this make sense to include ?) • Earnest Money = $25,000 • Purchase agreement shall be voided and earnest money refunded to the company if the City of Hutchinson fails to provide the following assistance: 4 JOBZ designation for the property to be purchased 4 3 acres of land under the EDA's "Land Write Down" program 4 A 7 -year equipment loan in the amount of $50,000 at 4% Closing Date: Friday, August 12, 2005 The City Attorney is drawing up a purchase agreement. Mr. Jansick wanted to be sure that the land could be sold to an LLC if it had the intentions of utilizing JOBZ benefits. Mr. Seppelt stated that after the company gets started, it will sell it to Company "X" so as to be able to get the JOBZ benefits. It was noted that the provisions should state that the city has the right of first refusal in the event of any resale of my part of the property. Mr. Haugen suggested adding a definition of development. Mr. Ulrich wanted to be sure that the property was left alone until after the crops on the property were harvested. Mr. Seppelt said that a provision would be made stating that the crops could be harvested this year. No action was taken. EDA Board Meeting June 24, 2005 Page 7 of 7 XIII. Chamber Update Mr. Vaillancourt gave the following updates: • The open house and business after hours was recently held at the new location. • Next week will be the first joint board meeting. • In the coming months, issues related to the organization will be addressed, and any adjustments to the bylaws, etc. will be made. • The staff is meeting on program of work for the next year. • During the summer, they will be preparing for the community leadership program, focusing on adding a skills component to leadership. In March, they will be attending leadership classes in St. Paul at the Capital. • Music in the park is doing well. • All of the vendors for arts and crafts are secured. • This past month has seen 5 or 6 new members, and the goal for 3 years is to reach 600 members. XIV. Other Business Mr. Haugen wanted to know how the railroad piece of the Plastic Specialties land got back to Mr. Daggett. Mr. Ulrich stated that maybe it was because the city did not need it, so they gave it back, but the EDA never took action on it. Mr. Seppelt stated that at 11:30 a company would be coming to Hutchinson to present their business that they would like located in Hutchinson. This is a company from the Community Venture Network. XV. The next meeting will be July 22, 2005, at 7:OOam. XVI. Adjourn The meeting adjourned at 8:30 am. Respectfully submitted, Erin Eberdt EDA Intern