7. EDSR 07-10-2006ITEM / 7.
ver
MEMORANDUM
TO: Economic Development Authority
FROM: Heidi Steinmetz, Assistant Director of Economic Development ~J
DATE: July 10, 2006
SUBJECT: Proposed Energy Improvement Loan Program Update
Attachment
EDA Finance Committee Minutes, June 14, 2006
Background
At its June 12"' meeting, the EDA discussed the potential of investing the balance of the
Business Incubator Program fund ($133,095) into an incentive program for businesses to
incorporate energy efficient design and/ox materials in the construction of rhea facility. The
program could be developed as a new EDA Micro Loan Fund program and/or it could
capitalize off of existing environmental assistance low-interest loan programs offered by the
state to finance capital equipment upgrades that meet ox exceed environmental regulations.
The EDA did not take action regarding this issue in June and planned to discuss the issue
again at a future meeting.
Update
The Finance Committee discussed the issue at its June 14"' meeting. Pex the attached
minutes, the Finance Committee consensus was that the Energy City Commission (ECC)
explore creating their own incentive program. An update regarding the EDA and Finance
Committee's recent discussions will be provided to the Energy City Commission (ECC) at
its July 19`h meeting.
MEETING OF THE EDA FINANCE COMMITTEE
HELD AT THE ELK RIVER CITY HALL
WEDNESDAY, JUNE 14, 2006
Members Present: Chris Carlson, Cliff Lundberg, Tom McNair, Paul Motin, Dave
Rymanowski and Dan Tveite
Staff Present: Director of Economic Development Catherine Mehelich and
Assistant Director of Economic Development Heidi Steinmetz
Accept September 28. 2005 EDA Finance Committee Minutes
The September 28, 2005 EDA Finance Committee Minutes were accepted.
2. Consider Micro Loan Extension Request: Lake Assault Custom Boats. LLC
Assistant Director of Economic Development Heidi Steinmetz provided a summary
(terms, job performance goals achieved, payment history, etc.) of the $50,000 EDA
Micro Loan provided to Lake Assault Custom Boats, LLC in 2003. She indicated
that the company has requested atwo-year extension.
Lake Assault president, Jexxy Atherton, summarized the current status of the
company and distributed company brochures. Mx. Atherton indicated his need to
lease more square footage but that he likes his current location in the Decker
building on East Hwy 10.
Committee member Dan Tveite inquired about current sales. Mx. Atherton
indicated that sales have typically doubled each year and that he expects the same fox
this year. Mx. Tveite mentioned that it's good that Lake Assault is modifying their
product line to meet market needs.
Mx. Atherton mentioned that the company has seen difficult times, especially each
November, but that his outlook remains positive. He added that his niche is not
boat dealers who sell in large volumes.
Committee member Tom McNair asked Mx. Atherton if the Rogers Cabelas has
impacted Lake Assault. Mx. Atherton stated that its nearby location is a good thing
and that Cabelas may carry Lake Assault's duck boat.
Committee member Chris Carlson asked if Mx. Atherton is seeing Lake Assault's
margins improve now that the company has txansitioned to manufacturing
commodity boats. Mx. Atherton stated "yes."
Finance Committee member Cliff Lundberg inquired about the negative notes
receivable line on the company's 2005 year end fmancial reports. Mr. Atherton
indicated that the company's software indicates deposits vs. sales, which relates to
EDA Finance Committee Minutes
June 14, 2006
Page 2
their 50% down payment requirement fox each boat, so down payments arc counted
as assets rather than liabilities.
Chris Carlson asked if the company will be profitable this year. Mx. Atherton stated
.`yes".
At this time, Mr. Atherton was excused from the meeting.
The Committee discussed that the company's interest rate will increase from 3.25%
to 8% and how that would affect the company's monthly loan repayment amount.
The Committee's consensus was that the repayment amount difference is reasonable
because it will only increase from $488.60 to approximately $585 per month.
There was additional discussion regarding changing the loan's amortization schedule
but the Committee's consensus was not to do so because it would set precedence for
future loan requests.
MOVED BY DAN TVEITE AND SECONDED BY CLIFF LUNDBERG,
THE FINANCE COMMITTEE RECOMMENDS THAT THE EDA
CONSIDER APPROVING THE TWO-YEAR LOAN EXTENSION
REQUEST TO LAKE ASSAULT CUSTOM BOATS, LLC WITH THE
FOLLOWING TERMS:
• PRIME RATE OF INTEREST AT 8%
LOAN REPAYMENT SCHEDULE TO BE ADJUSTED
RETROACTIVE AS OF THE COMPANY'S JUNE 5, 2006
BALLOON PAYMENT DUE DATE
THE MOTION CARRIED 5-0.
Summary of Information Memorandums:
Staff summarized the Information Memos attached to the Committee's meeting
packet, which included the Micro Loan portfolio report and an update on recent
amendments to Micro Loan, Tax Increment Financing, Tax Abatement and Business
Subsidy Policies.
Tom McNair suggested that there are inconsistencies between the following
sections of the Micro Loan Policy regarding the Downtown Rehabilitation Financing
Program:
Rehabilitation Financing Programs purpose statement
"Downtown Rehabilitation Financing Pxogxam is available to business and
property owners in the Downtown District (DD) fox the rehabilitation and
restoration of their buildings."
EDA Finance Committee ;bLnutes Page 3
June 14, 2006
Section III. 1. Permitted Fund Uses
d. Furniture, fixtures, and equipment
Mx. McNair suggested that a clarification be made within the Policy verbiage regarding
whether the Rehabilitation Financing Program is specific to building rehabilitation or if
business development items can be included.
The Committee discussed this issue at length and determined that the original and
primary intent of the pxogxam was specific to the rehabilitation or restoration of
downtown buildings, which in downtown Elk River's case is geared towards property
owners since most business owners axe renters within the downtown. Examples raised
included a new business that would lease space in The Blu~' building that would not
need rehabilitation ox a recently rehabbed building with a new owner ox business
locating in it.
The Committee consensus was that business owners should also be allowed access to
the program fox assistance with things such as purchasing fixtures and equipment
necessary fox the real estate and/or business with the understanding that the project is
required to still have a building rehabilitation component.
-"-~ 4. Added Agenda Item• Proposed Energy Improvement Loan Pxogxam Update
Heidi Steinmetz summarized the EDA's recent discussions regarding exploring the
option of utilizing the Business Incubator Pxogxam fund balance ($133,095) towards
developing a new low-interest loan pxogxam, as part of the Micro Loan Fund, fox
businesses to incorporate energy efficient design and/ox materials in the
construction of their facility.
Cliff Lundberg stated that this is an interesting idea. Chris Carlson mentioned that
$133,095 is not enough money to start a pxogxam. Director of Economic
Development indicated that in addition to accessing the existing Micro Loan Fund
pool, the program could also capitalize off of existing environmental assistance low-
intexest loan programs offered by the state to finance capital equipment upgrades
that meet ox exceed environmental regulations.
Committee member Paul Motin stated his concern, which he expressed at the recent
EDA meeting, regarding the EDA's mission to create jobs and improve Elk River's
tax base, which may not fit with this pxogxam.
Heidi Steinmetz added that the Energy City Commission has expressed interest in
developing a program such as this.
Catherine Mehelich mentioned that companies who have recently located in the
EDA's Noxthstar Business Paxk indicated an interest in energy savings incentives.
Dan Tveite stated his concern, which he expressed at the recent EDA meeting, that
he does not want to abandon the idea of a Business Incubator Pxogxam. Tom
EDA Finance Committee Minutes
June 14, 2006
Page 4
McNair added that the Incubator fund balance should be used toward a program of
the same nature and that an "Incubator without walls" may be a good idea, where a
discounted rent can be provided for a short period of time at various locations
within the City.
Chris Carlson stated his concern that companies will not utilize an energy
improvement incentive pxogxam.
Catherine Mehelich stated hex concern that a program such as this would become an
"automatic" request by companies in addition to other incentive programs such as
Tax Abatement and the Industrial Incentive Program Micro Loan.
It was the consensus of the Committee that the Energy City Commission explore
creating their own incentive pxogxam.
5. Other
Catherine Mehelich mentioned that she appreciates the Committee fox their
assistance in helping to market the Micro Loan Program.
Cliff Lundberg inquired about the Badger Ventures line item on the Micro Loan
portfolio report Catherine Mehelich stated that unlike the other Micro Loans which
have monthly payment schedules, this particular loan is structured as asemi-annual
Micro Loan payment, which is tied to the company's Tax Abatement payment
schedule.
6. Closing
The EDA Finance Committee meeting ended at 7:45 a.m.
Respectfully submitted by,
~~~
Heidi Steinmetz
Assistant Director of Economic Development