Loading...
4.12. SR 04-21-2014 /i ECly l Request for Action River - To Item Number Mayor& City Council 4.12 Agenda Section Meeting Date Prepared by Consent Agenda April 21, 2014 Brian Beeman,Director of Economic Development Item Description Reviewed by Orluck Industries Forgivable Loan Extension Jeremy Barnhart,Deputy Director, CODD Reviewed by Cal Portner, City Administrator Action Requested Approve,by motion,a forgivable loan extension for Orluck Industries. Background/Discussion On April 8, 2013, the Economic Development Authority (FDA) and City Council approved a Forgivable Loan for Orluck Industries to help fund a 12,000 sq. ft. expansion that will create six new jobs and induce $1.2 million in private investment. The loan was for$200,000 at 3%interest, 5-year term,20-year amortization,with the EDA to secure a personal guarantee and subordinate lien position on the building and machinery financed. The loan is to be forgiven upon completion of all the goals and requirements set forth by the Forgivable Loan Policy, and the jobs created as a result of the forgivable loan program are retained for a minimum of one year. The initial expansion project was to be completed in 2014. Due to the Federal Sequestration and the announcement of military cutbacks, Orluck Industries has experienced some contract reductions. This has caused Orluck to reconsider its options and has decided not to pursue the expected 2014 expansion project. Instead, Orluck is requesting that the City Council extend the approved Forgivable Loan to allow the project to begin in 2015. A new letter of commitment will be provided at the meeting. The Department of Employment and Economic Development (DEED) has confirmed that an extension is permissible. If the City Council considers an extension beyond 2015,DEED has requested that they be notified before proceeding. Financial Impact The Forgivable Loan fund balance is $311,155.13. With $111,155.13 allocated to Sportech.The financial impact of approving the loan extension would be $200,000 with the applicant paying all legal and filing fees at closing.This would close out the account in 2015 as requested by DEED. Attachments • March 29, 2013, EDA Finance Committee Minutes • April 8, 2013, EDA Staff Report and Minutes • May 6, 2013, excerpt from City Council Minutes • April 21, 2014, EDA Report P a w E n E o A Y UREJ MEETING OF THE EDA FINANCE COMMITTEE HELD AT THE ELK RIVER CITY HALL FRIDAY, MARCH 29, 2013 Members Present: Chad Vitzthum,Larry Toth, Paul Motin, Nate Ovall, Cliff Lundberg,Dan Tveite Members Absent: None Staff Present: Assistant Director of Economic Development, Clay Wilfahrt, Others Present: Bruce DeWitt,Blue Egg Bakery,Tim Dolan and Annie Deckert,Decklan Group,Peter Orluck, Orluck Industries,Dan Bosshart and Lloyd Peterson, Preferred Powder Coating 1. Call Meeting to Order Assistant Director of Economic Development Clay Wilfahrt called the e'ting to order at 7:30am 2. Consider Downtown Revitalization Loan for Blue Egg Market Mr. Wilfahrt reviewed the staff report. Mr. Lundberg asked if the EDA should seek a positioill on Blue Egg's existing building. Tim Dolan of the Decklan Group who was working with the applicant stated that they would be okay with that. Bruce DeWitt introduced himself and explained about Blue Egg Bakery. They just celebrated their first anniversary. He explained that high end breads and cakes have been selling well which led them to the idea of expanding. The committee discussed the fact that the loan was a 10 year term and direct loan. Mr. Oval stated that the baker equipment lasted a long time. The committee was okay with the term and the fact that the loan was direct. The committee liked the fact that the loan was fully amortized. Several members of the committee mentioned that it was good to see the applicants had extensive experience in management and business ownership. MOVED BY MOTIN AND SECONDED BY TVEITE TO RECOMMEND APPROVAL OF THE APPLICATION FOR A DOWNTOWN REVITALIZATION MICROLOAN FOR BLUE EGG BAKERY. MOTION CARRIED 6-0. 3. Consider the Loan Applications for the Forgivable Loan Program—Alliance Machine, Orluck Industries, Preferred Powder Coat*nQ Lloyd Peterson and Dan Bosshart of Preferred Powder Coating introduced themselves and explained their business and their plans to move to Elk River. Commissioner Vitzham noted that he is working with the applicants,and that he would abstain from voting. Mr. Tveite stated that the project fit exactly into what the EDA was looking for when they created the program. MOVED BY LUNDBERG AND SECONDED BY TOTH TO RECOMMEND APPROVAL OF THE APPLICATION BY PREFERRED POWDER COATING FOR A FORGIVABLE LOAN IN THE AMOUNT OF $200,000. MOTION CARRIED 5-0 WITH COMISSIONER VITZHAM ABSTAINING. EDA Finance Committee Minutes Page 2 January,30,2013 Page 2 of 3 ------------------------------------------------------------- Peter Orluck introduced himself and gave an overview of his business and plans for expansion. Mr. Ovall stated that the Bank of Elk River is working with the applicant and he would abstain from voting. Commissioner Toth noted that the business is growing quickly and expressed concern that they may move in the near future. He asked if the EDA had any protection against abusiness accepting the forgivable loan and then moving. Mr.Wilfahrt stated that under the city's business subsidy policy, any business that accepts a subsidy and moves within five years of acceptin that subsidy is subject to repayment and penalties. Mr. Motin expressed concern with the low score on the forgiva'"'e loan sc—— system. Mr. Wilfahrt stated that the forgivable loan scoring system was designed more to differentiate between applicants than it was to indicate strength of the project. Mr. Wilfahrt added that all three applications received would score very highly on the abatement scoring system, and are comparable to other subsidy projects the EDA has accepted in terms of job creation,taxable value added, and the other measurement criteria. Mr. Vitzham asked if the EDA or city accepted a state grant,would the city or EDA be penalized by the state if someone were to accept a forgivable loan and the applicant failed to go through with their project. Mr. Wilfahrt said that he would check with the state to see what the recourse would be in that event. The committee further recommended that the terms coincide with the terms provided by the bank. MOVED BY TVEITE AND SECONDED BY VITZHAM TO RECOMMEND APPROVAL OF THE REQUEST BY ORLUCK INDUSTRIES FOR A FORGIVABLE LOAN IN THE AMOUNT OF $200,000. MOTION CARRIED 5-0 WITH COMISSIONER OVALL ABSTAINING. Annie Deckert of the Decklan Group informed the committee about Alliance Machine and their proposed expansion. The committee expressed,th t the sc Ingheet may need to be updated to better reflect the strength of the application. Mr. Tveite stated that suppo" ing the Alliance project is an excellent example of how a city can support an existing business to encourage economic growth. Mr. Ovall stated that the Bank of Elk River is working with the applicant and he would abstain from voting. MOVED BY TVEITE AND SECONDED BY MOTIN TO RECOMMEND APPROVAL OF THE REQUEST BY ALLIANCE MACHINE FOR A FORGIVABLE LOAN IN THE AMOUNT OF $200,000. MOTION CARRIED 5-0 WITH COMISSIONER OVALL ABSTAINING. N:\Departments\Community Development\Economic Development\EDA\Administrative\Agenda\EDA Agenda\Year2014\4-21-2014\6.1 at 1 Orluck Finance Committee Minutes 3.29.2013.doc EDA Finance Committee Minutes Page 3 January,30,2013 Page 3 of 3 ------------------------------------------------------------- 4. Consider Revisions to the Forgivable Loan Program Mr. Wilfahrt reviewed the staff report. He noted that there are several businesses that could utilize the forgivable loan if the requirement that businesses be in the manufacturing,high-tech,and industrial sectors was removed. Mr. Vitzham asked whether or not there was a provision to prevent businesses from leaving after receiving the dollars,particularly in leased situations. Mr.Wilfahrt stated that there is a requirement that they stay in Elk River for five years following the business subsidy, otherwise they would be subject to repayment and penalties. A, Mr. Motin and Mr. Tveite stated concern with removing the restriction from the program after only one round of applicants. Mr. Vitzham echoed the concern and stated that he believed the EDA should keep the program as is. The committee came to a consensus that no changes should be made to the policy at this time. 4. Clo�sin� The EDA Finance Committee meeting ed at 9:08 a.m. Respectfully submitted by, Clay Wilfahrt Assistant Director of Economic Develo ment N:\Departments\Community Development\Economic Development\EDA\Administrative\Agenda\EDA Agenda\Year2014\4-21-2014\6.1 at 1 Orluck Finance Committee Minutes 3.29.2013.doc City of Ells = REQUEST FOR ACTION River` TO ITEM NUMBER Economic Development AuthorM- ?. AGENDA SECTION MEETING DATE PREPARED BY April 8,2013 Clay Wilfahrt,Assistant Director of Economic Development ITEM DESCRIPTION REVIEWED By Consider Forgivable Loan Application for Orluck Industries Jeremy Barnhart, Deputy Director, Community Operations and Development REVIEWED BY ACTION REQUESTED Consider Forgivable Loan application for Orluck Industries and recommend that City Council approve the Forgivable Loan of$200,000 BACKGROUND/DISCUSSION The attached staff report to the EDA Finance Committee dated March 29,2013, and committee meeting minutes provide background regarding the Forgivable Loan request. The EDA passed the Forgivable Loan guidelines in February and set an initial application period of February 15 through March 15. The program is designed to stimulate private sector investment,help spur new construction, create and retain employment opportunities, and promote the sale of city property. Staff received three applications for the Forgivable Loan during the initial application period. Orluck Industries currently occupies a 25,000 square foot facility in Elk River. The Forgivable Loan would help them fund a 12,000 square foot expansion that will create six new jobs and induce $1.2million in private investment. The Finance Committee recommends the EDA recommend City Council approval of the Forgivable Loan for Orluck Industries with the following terms and conditions: • $200,000 at 3%interest, 5 year term,20 year amortization • EDA to secure personal guarantee • EDA to obtain subordinate lien position on building and subordinate lien on machinery financed The loan will be forgiven upon completion of all of the goals and requirements set forth by the Forgivable Loan Policy,and the jobs created as a result of the forgivable loan program are retained for a minimum of one year. In this case, Orluck Industries will need to complete their expansion,create a minimum of six jobs,and retain them for one year. Four of the jobs must be awarded to Low to Moderate Income employees. The Finance Committee also requested that staff determine if the city would become eligible for state grants upon committing the dollars,as well as the ramifications of a situation where the city loaned P 0 f E 6 1 0 0 Y I IV AU dollars and then recouped them due to an applicant failing to fulfill the requirements set forth in the policy. Following a conversation with the Department of Employment and Economic Development, staff determined that the city is eligible to apply for state grants upon committing the funds. Should the money be recouped by the city,there would be no penalty;however,the dollars would need to be committed again in order for the city to apply for state grants. Once the EDA makes a recommendation,the City Council will call a public hearing on April 15 for its May 6 meeting. At the May 6 meeting,the City Council will hold a public hearing and take final action on the loan application. FINANCIAL IMPACT The Forgivable Loan fund balance is $703,679. The financial impact of approving the loan would be $200,000 with the applicant paying all legal and filing fees at closing. ATTACHMENTS • EDA Finance Committee Meeting Minutes dated March 29,2013 • EDA Forgivable Loan Policy and Guidelines • Staff report to EDA Finance Committee re: Forgivable Loan Application dated March 29, 2013 Action Motion by Second by Vote Follow Up N:\Departments\Community Development\Economic Development\EDA\Administrative\Agenda\EDA Agenda\Year2014\4-21-2014\6.1 at 1 EDA 4-8-13 Orluck Forgivable Loan Minutes.docx Economic Development Authority Minutes Page 2 April 8,2013 MOVED BY COMMISSIONER DWYER AND SECONDED BY COMMISSIONER BURANDT TO APPROVE A DOWNTOWN REVITALIZATION MICROLOAN FOR BLUE EGG MARKET WITH THE FOLLOWING TERMS AND CONDITIONS: ■ $74,500 AT 2%INTEREST,10-YEAR TERM, 10-YEAR AMORITIZATION. ■ EDA TO SECURE PERSONAL GUARANTEE. ■ EDA TO OBTAIN SECOND LIEN POSITION ON 707 MAIN STREET AND 713 MAIN STREET AND FIRST POSITION ON ALL EQUIPMENT. MOTION CARRIED 6-0. 6. Consider Forgivable Loan Application from Alliance Machine Mr. Wilfahrt presented his staff report. MOVED BY COMMISSIONER DWYER AND SECONDED BY COMMISSIONER MOTIN TO RECOMMEND APPROVAL OF THE FORGIVABLE LOAN APPLICATION IN THE AMOUNT OF$200,000 FOR ALLIANCE MACHINE TO THE CITY COUNCIL. MOTION CARRIED 6-0. 7. Consider Forgivable Loan Application from Orluck Industries Mr. Wilfahrt presented his staff report. MOVED BY COMMISSIONER DWYER AND SECONDED BY COMMISSIONER WESTGAARD TO RECOMMEND APPROVAL OF THE FORGIVABLE LOAN APPLICATION IN THE AMOUNT OF $200,000 FOR ORLUCK INDUSTRIES TO THE CITY COUNCIL. MOTION CARRIED 6-0. 8. Consider Forgivable Loan Application from Preferred Powder Coating Mr. Wilfahrt presented his staff report. MOVED BY COMMISSIONER MOTIN AND SECONDED BY COMMISSIONER WILSON TO RECOMMEND APPROVAL OF THE FORGIVABLE LOAN APPLICATION IN THE AMOUNT OF$200,000 FOR PREFERRED POWDER COATING TO THE CITY COUNCIL. MOTION CARRIED 6-0. 9. Authorize Write-off of Nicole's Salon Microloan Mr. Wilfahrt presented his staff report. MOVED BY COMMISSIONER WESTGAARD AND SECONDED BY COMMISSIONER DWYER TO ADOPT RESOLUTION 13-03 AUTHORIZING THE WRITE-OFF OF THE OUTSTANDING LOAN BALANCE OF $6,894.28 OWED BY THE FORMER NICOLE'S FINISHING TOUCH SALON TO THE CITY OF ELK RIVER'S DOWNTOWN BUSINESS REVITALIZATION MICRO LOAN FUND. MOTION CARRIED 6-0. City Council Minutes Page 3 May 6,2013 Councilmember Westgaard stated the Council needs more background information in order to complete a review and response to these issues and he suggested a discussion at a worksession meeting. Mr.Barnhart clarified that there are three issues to review. 1. The easement,which needs to be addressed between Elk River Municipal Utilities and the property owner. 2. A comparison of the rates. He stated the city did complete a rate study in approximately 2006 but the challenge with these studies is that each city's wastewater infrastructure systems are different and have different cost amounts; therefore it can be difficult to compare rates. 3. The ratios can be compared. He stated there may be an opportunity to look at the ratio. He stated the city could look at the national model to see if there has been a change in the turns per day ratio. Attorney Beck stated he has looked at the easement issue,and preliminarily Mr.Leadens may be correct. Councilmember Motin stated this issue can't be addressed during the open forum because Council needs more information in order to make a decision.He further noted that the Met Council may not charge for water because they may not regulate water. Council consensus was to do a history of the SAC/WAC charges over the last 10-15 years along with a comparison of some neighboring cities. Attorney Beck explained that the Met Council does not provide water and therefore does not charge WAC fees.He further stated fees are based on usage.He stated the rates are based on the volume of the use. Mr.Leadens questioned the up-front fees. It was noted these fees are used to pay for the infrastructure of the systems,such as for trunk mains and water towers. Mr. Portner stated staff will bring this discussion back to the next worksession.He stated background information will be brought forward for both the SAC and WAC fees Walter Cleath, 17241 Yale Street-Asked about Item 8.2 and its removal from the agenda. Mr.Barnhart stated the request was redrawn by a neighbor who was requesting to do a lot split. 6. Awards/Recognitions/Presentations There were no awards/recognitions/presentations. 7.1 Forgivable Loan Applications Mr.Wilfahrt presented the staff report for all three items. City Council Minutes Page 4 May 6,2013 A. Preferred Powder Coating Mayor Dietz opened the public hearing for all three of these items.There being no one to speak to these items,Mayor Dietz closed the public hearing. MOVED BY COUNCILMEMBER MOTIN AND SECONDED BY COUNCILMEMBER WILSON TO APPROVE THE FORGIVABLE LOAN FOR PREFERRED POWDER COATING'S CONSTRUCTION PROJECT. MOTION CARRIED 5-0. B. Alliance Machine MOVED BY COUNCILMEMBER WESTGAARD AND SECONDED BY COUNCILMEMBER BURANDT TO APPROVE THE FORGIVABLE LOAN FOR ALLIANCE MACHINE'S CONSTRUCTION PROJECT. MOTION CARRIED 5-0. C. Orluck Industries MOVED BY COUNCILMEMBER MOTIN AND SECONDED BY COUNCILMEMBER WILSON TO APPROVE THE FORGIVABLE LOAN FOR ORLUCK INDUSTRIES' CONSTRUCTION PROJECT. MOTION CARRIED 5-0. 8.1 Hire Consultant to Complete 2013 Comprehensive Plan Update Mr.Barnhart presented the staff report. Councilmember Motin expressed the following. 1. Will the plan start from the beginning or from the last Comprehensive Plan update? 2. How much with the full City Council get to review the progress of the Plan? 3. Will a new housing study be completed and what will the relationship be to the visions/goals? Mr.Barnhart stated the current Comprehensive Plan update will start from the 2004 Plan. He stated WSB is reviewing the vision/goals.He further stated there will be a review section by section once the foundation is laid.Mr.Barnhart stated the proposal includes two reviews to the Planning Commission and two to the City Council. He stated the existing housing study will be utilized. Council consensus was there should be more check in with the Council in regards to the progress of the Citizen Action Committee and Mayor Dietz suggested a monthly update. MOVED BY COUNCILMEMBER WILSON AND SECONDED BY COUNCILMEMBER WESTGAARD TO HIRE WSB AND ASSOCIATES TO COMPLETE THE 2013 COMPREHENSIVE PLAN UPDATE. MOTION CARRIED 5-0. Council consensus was to appoint Councilmembers Burandt and Motin to serve on the Citizen Advisory Committee. City of Elk=' Request for Action River To Item Number Economic Development Authori 6.1 Agenda Section Meeting Date Prepared by General Business April 21, 2014 Brian Beeman,Director of Economic Development Item Description Reviewed by Orluck Industries Forgivable Loan Extension Jeremy Barnhart,Deputy Director, CODD Reviewed by Action Requested By motion, approve a Forgivable Loan extension for Orluck Industries in the amount of$200,000 and recommend to the City Council on same. Background/Discussion On April 8, 2013, the EDA and City Council approved a Forgivable Loan for Orluck Industries to help fund a 12,000 sq. ft. expansion that will create six new jobs and induce $1.2 million in private investment. The loan was for$200,000 at 3%interest, 5 year term, 20 year amortization,with the EDA to secure a personal guarantee and subordinate lien position on the building and machinery financed. The loan is to be forgiven upon completion of all the goals and requirements set forth by the Forgivable Loan Policy, and the jobs created as a result of the forgivable loan program are retained for a minimum of one year. The initial expansion project was to be completed in 2014. Due to the Federal Sequestration and the announcement of military cutbacks, Orluck Industries has experienced some contract reductions. This has caused Orluck to reconsider its options and has decided not to peruse the expected 2014 expansion project. Instead, Orluck is requesting that the EDA extend the approved Forgivable Loan to allow the project to begin in 2015. A new letter of commitment will be provided at the meeting. Department of Employment and Economic Development has confirmed that an extension is permissible. Peter Orluck, the CEO will be present to answer any questions. If the EDA considers an extension beyond 2015,DEED has requested that they be notified before proceeding. Financial Impact The Forgivable Loan fund balance is $311,155.13. With $111,155.13 allocated to Sportech. The financial impact of approving the loan extension would be $200,000 with the applicant paying all legal and filing fees at closing.This would close out the account in 2015 as requested by DEED. Attachments ■ March 29, 2013 EDA Finance Committee Minutes,April 8, 2013 EDA Packet, &May 6, 2013 City Council Minutes for Orluck Industries Forgivable Loan P a w E A E U s r NaA f RE]