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EDSR MEMORANDUM 01-12-1998 ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY • MEMORANDUM TO: Economic Development Authority FROM: Paul T. Steinman, Director of Economic Development DATE: January 8, 1998 SUBJECT: Agenda Memo for January 12, 1997, Meeting 5. Annual Meeting Items a.) Election of Officers Pursuant to the EDA bylaws the following offices are to be filled through the election process at the annual meeting of the Economic Development Authority: • President 1997 - Pat Dwyer • Vice President - 1997 - Tom Bender • Treasurer 1997 - Larry Farber • Secretary 1997 - Daryl Thompson • Assistant Treasurer - 1997 No appointment b.) Appoint Executive Director Pursuant to the EDA bylaws, the appointment of an Executive Director is required at the annual meeting of the Economic Development Authority. c.) Designate Official Newspaper The EDA's current official newspaper is the Elk River Star News and staff recommends at this time redesignation of the Elk River Star News as the official EDA newspaper for 1998. 110 13065 Orono Parkway • P. O. Box 490 • Elk River, MN 55330-1743 • (612) 441-7420• Fax (612) 441-7425 Equal Opportunity Housing and Equal Opportunity Employment EDA Agenda Memo January 8, 1998 Page 2 up d.) Designate Official Depositories Past practice has been for the EDA to designate the identical depositories which are designated by the City of Elk River. For 1998, the City of Elk River designated the following banks/institutions as depositories for its funds: • The Bank of Elk River • First National Bank of Elk River • 4M Fund • Norwest Bank • FirstBank, N.A. Staff recommends designating the above-referenced banks/institutions as EDA official depositories for 1998. e.) Consider Commission Appointments/Assignments The EDA currently maintains the following four committees: Business • Incubator Finance Marketing R& D Advisory Lloyd Brutlag Elaine Anderson Cliff Lundberg Hank Duitsman Jim Simpson Brian Moran Larry Toth Jeff Gongoll Tom McNair Mike Leary John Oliver Daryl Thompson Bud Houlton Don Heinzman Carol Mills Larry Hickman Tom Bender Jerry Hagen Dick Gongoll Kermit Bode Rod McArdle Rich Duggan Paul Ammerman Jim Barthel Jack Mowry The EDA may consider dissolving the Marketing and R&D Committees which have not been active throughout 1997 or 1996. It is also appropriate for the EDA to discuss the following issues regarding the Finance Committee: • Bank representation on this committee • Increasing the number of EDA members on the committee to two for a total number of six on the committee. Staff has had several opportunities to witness minor conflicts with the current makeup of the Finance Committee. This EDA Agenda Memo January 8, 1998 Page 3 conflict is related to the fact that some of the microloan • applicants also are working with one of the banks being represented on the Finance Committee. This has meant in some cases that either one or two members of the Finance Committee representing the local bank have been unable to vote on certain applications. It would be most appropriate and effective for the Finance Committee to be able to have full discussion of each application and to be able to vote on a recommendation to the EDA. In order to address this issue, the EDA can simply remove members who are representing our local banks. This may not be appropriate however, given the importance of bank participation in the past. Bank representatives have general knowledge of issues related to applicants,and their requests and it would be best to keep this input on the committee. Staff feels however, that bank representation should be more even throughout the committee membership. Without representatives of our local banks, there would need to be some outside e ertise for anal sis of the applicants financial issues. � Y If the EDA feels it appropriate, a decision on the makeup of the Finance Committee can be delayed until the February meeting: Staff recommends reappointment of the current membership of the Business Incubator Advisory Committee at this time. f.) Discuss Enabling Resolution/Bylaws for Suggested Changes, If ALyi The EDA annual meeting also provides this opportunity to review the bylaws and enabling resolution, which are attached, for suggested changes. 6. West Business Park Marketing/Development Agreement-Final Attached to this report is the final revised copy of the..contract for initial marketing, sale, and development from City Attorney David Sellergren regarding Outlot B, Country Crossing, and Tony Emmerich. This final agreement provides the EDA with the exclusive ability to market the remaining 14 acres of Outlot B in Country Crossing Business Center, 2nd Addition. The EDA will agree to prepare marketing materials for this property and construct on site signage advertising the availability of this property for business park users. • The agreement grants the EDA the exclusive right to market or EDA Agenda Memo January 8, 1998 Page 4 purchase the property for a period of 24 months from the date of the . agreement. The agreement also provides for brokerage fees to be paid on the property by the owner, should a broker bring forward a business prospect. The primary focus of this agreement is that the owner will be guaranteeing a purchase price of the property of$1.00 per square foot. This purchase price includes the amount of special assessments currently levied against the property. The owner also will agree to escalate the price, only by an amount equal to the amount of real estate taxes paid each year on the property during the term and any extensions of the term of this agreement. The proposed agreement with Tony Emmerich provides a good format for future similar development agreements which staff would propose to begin to negotiate with the Wilson family and possibly Chuck Christian in 1998. Recommendation Staff recommends approval of the final draft of the attached contract for initial marketing, sale, and development to be entered into with Tony Emmerich, Country Ridge Partnership. 7. Request City Council to Call for a Public Hearing to be Held to Establish TIF District No. 19(Hohlen Property) Attached to this memo is a draft schedule for establishment of TIF District No. 19. A draft Tax Increment Financing Application Form from Associated Builders will be presented at the meeting on Monday, January 12. At this point there have only been very preliminary discussions with the applicant regarding the tax increment request. Staff, Springsted (financial consultant), and Associated Builders have planned to meet on Friday afternoon, January 9, after completion of this EDA packet. Staff will be able to update the EDA at its Monday meeting regarding more detail of the proposed application and overall project. Staff feels it would be appropriate at this time, even though only preliminary information has been received, to proceed with requesting the Council to call a public hearing for this TIF District and adopt the draft schedule for establishment of the District as attached to this • memo. EDA Agenda Memo January 8, 1998 Page 5 Recommendation Staff recommends the EDA request the City Council to call for a public hearing to be held on June 1, 1998, to establish Tax Increment Financing District No. 19. 8. $50,000 Microloan Request-Northstar Die Casting, LLC The Microloan Finance Committee met on Thursday, January 8 at 3:3.0 p.m. to review a request from Larry Lawson, Northstar Die Casting, LLC, in the amount of$50,000 to facilitate the companies move from Fridley to the Roma Tool building. Mr. Lawson presented information regarding his and his partner's buy out of Cedarbrook, Inc. in an effort to turn a failing company into a profitable entity. He discussed that several events occurred since that time including examination of completing a new construction project of 30,000 square feet in Ramsey. Their current operation is approximately 21,000 square feet and they feel part of the reason for previous failure of the company is due to space limitations. eh At the time of finalizing the project in Ramsey, Mr. Lawson was notified of the availability of the Roma Tool building. At that time he began to negotiate a purchase of the Roma building with Milo Hennemann. It appeared an outright purchase would not be agreed upon by the two parties, however a lease arrangement with an option to buy seems to be a viable option at this time. The Finance Committee questioned Mr. Lawson regarding the method of Northstar's buyout of Cedarbrook, Inc. and the various secured creditors of the company. Mr. Lawson indicated the EDA would have a secure position on equipment, however, this position would be second to all other secured creditors. He estimated there would be approximately $430,000 in available assets of the company after paying current lienholders, if it were to liquidate at this time. As indicated on the application,the funds would be used to move the current machinery from Fridley into the Roma Tool building and to construct additional ventilation in this building. Milo Hennemann has tentatively agreed to provide approximately$60,000 in electrical improvements to the building prior to leasing to Northstar Die Casting. EDA Agenda Memo January 8, 1998 Page 6 The Finance Committee members present at this meeting were Jim Simpson, Tom McNair, and Bud Houlton. These members discussed the following issues prior to making a decision on a recommendation to the EDA: • non bankability of the business in its current financial condition • level of security/collateral to be provided to the EDA • being consistent with recommendations made on other loans • having the equipment appraised to show the EDA's proposed collateral. After discussion of these various issues the committee members agreed upon a recommendation to the EDA which is as follows: • that a $50,000 loan to Northstar Die Casting be approved at a prime interest rate and a five year term with the following conditions: 0 principal and interest due the EDA would be due upon sale of Northstar Die Casting 0 personal guarantees from Larry Lawson (20% owner) and,Steve Whiting(80% owner) • 0 personal financial statements are to be reviewed by the Finance Committee prior to acceptance of personal guarantees. Two members of the Finance Committee who were unable to be present at the meeting indicated verbal support of requiring personal guarantees of the owners of Northstar Die Casting. At the time of writing this memo, staff had not discussed the details of the Finance Committee's recommendation with Northstar.- Staff will provide this update to the EDA at its meeting on Monday evening. 9. Prospect/Activity Reports These reports will be provided to the EDA at its meeting on Monday.