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EDSR MEMORANDUM 12-13-1994 ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY TO: ECONOMIC DEVELOPMENT AUTHORITY FROM: WILLIAM RUBIN, ECONOMIC DEVELOPMENT COORDINATOtc/ DATE: DECEMBER 8, 1993 SUBJECT: AGENDA MEMO FOR DECEMBER 13, 1993, EDA MEETING 5 . Financial Update The following is a summary from Finance Director Lori Johnson: Revolving Loan Fund - The Revolving Loan Fund had a cash balance of $177,002 . 63 on November 30. Of this amount, $101,250 has been authorized for loans to R & D Sales, Water Labs, Beaudry Convenience, Inc. , and Woodsmen Quality Products . The loan to R & D Sales was closed in December and it is anticipated that the loan to Beaudry will also be closed in December. The amount available for loans is currently just over $80,000 . As of December 9, all loans are current with the exception of Alltool, • PureSteam, and Indy Lube. ACTION REQUESTED This is an informational item only and no action is requested. EDA Statement of Expenses - A Statement of Expenses Payable to the City of Elk River in the amount of $25,226 .90 is included in the agenda packet. This covers expenses from October 1, to December 9, 1993 . Additional 1993 expenditures will be presented to the EDA for reimbursement in February. ACTION REQUESTED The EDA is asked to approve payment to the City in the amount of $25,226 .90 . 6 . Subordination Agreements At its meeting on September 13th, EDA Commissioners approved a $50,000 loan request from Ken and Carrie Beaudry (Beaudry Convenience, Inc. ) and a $17,500 loan request from Richard and Dawn Schulz (R & D Sales) . As 0 with other EDA loans, it is appropriate to authorize and execute a subordination agreement. Put simply, the EDA' s interests are subordinated to the mortgage from the P.O. Box 490 • 13065 Orono Parkway • Elk River, MN 55330-1743 • (612) 441-7420 • Fax: (612) 441-7425 Equal Opportunity Housing and Equal Opportunity Employment primary lender, regardless of whether the primary mortgage is entered into and/or filed of record before or after the . EDA mortgage. Since no reference to a subordination agreement was made during action on these two loans on September 13th, it is therefore appropriate to act upon them at the December 13th meeting. It appears as though a subordination agreement will be a customary document for subsequent EDA loans . Therefore, in future motions approving loan requests, specific reference will be made to agreements such as these. ACTION REQUESTED In separate motions, the EDA is asked to authorize a mortgage subordination agreement with the Beaudry loan request and the Schulz loan request. 7 Business Park Task Force Update Following City Council action on October 11th, wherein TIF funds were allocated towards the future purchase of land, additional progress has been made in other areas . For example, the Elk River Planning Commission reviewed the initial draft of the proposed business park zoning ordinance at its workshop on November 16th. This review has led to a few minor changes which the Task Force reviewed. These revisions dealt with a reduction in the minimum, lot size, a new landscaping section, a new sign section, and the handling and storage of hazardous substances (as a conditional use) . Task Force members felt that a conditional use for the handling and storage of hazardous materials is cumbersome; therefore, the Task Force is suggesting that this language be included with the "standards" section. In late December, the Planning Commission will review the proposed business park ordinance and make a recommendation to the City Council . In early January, the City Council will be asked to consider the new zoning ordinance and to initiate rezoning and the related land use plan amendment affecting the various properties along US Highway 10 in the western part of the community. Another area where progress has been made is that of identifying potential grant sources to defray infrastructure costs associated with a business park/industrial park development. On November 23rd, a box lunch meeting was held with three utility companies - UPA, Anoka Electric Cooperative, and Elk River Municipal Utilities. During the first quarter of 1994 , it is likely that a new Rural Electrification Administration (R.E.A. ) program will be coming on line which will enable R.E.A. borrowers (that is, UPA, AEC, etc . ) to access grants in • conjunction with low-interest loans to support community development projects like a business park or an industrial park. Representatives of AEC did not attend this meeting, and, although UPA is located in Elk River' s back yard, protocol suggests that the local cooperative be given the first opportunity to help Elk River access these R.E.A. funds. Therefore, a letter requesting AEC' s assistance has been submitted to its general manager. A copy of this letter is enclosed in the agenda packet. During the afternoon of December 13th, an Elk River delegation is scheduled to meet with representatives of AEC at its Anoka office. Hopefully, AEC will agree to participate in the development of an R.E.A. application. Should AEC elect not to participate, a second objective of the meeting is to seek AEC' s approval of allowing UPA to pursue the funds . A verbal update on the results of this meeting will be provided to the EDA Commissioners . Task Force Chair Pat Dwyer and other Task Force members may have additional updates at the EDA meeting. 8 . Update on Certified Development Company EDA Commissioners will recall that an SBA Certified Development Company (CDC) serving Elk River and/or the greater Sherburne County area was part of the 1993 work programa A great deal of time and effort was spent courting a potential relationship with the Coon Rapids Development Company (CRDC) . This included the purchase of stock in the CRDC organization - subject to it Oreorganizing to reflect an agency with a multi-county vision In the end, the CRDC offered to create a "paper" organization which would operate, say, as a subsidiary of CRDC. Proceeds from loans originated in Elk River and Sherburne County through this subsidiary would go to benefit certain marketing objectives in the Coon Rapids city limits only. Subsequent discussions were held with another local CDC whose service territory includes the seven-county metro area with the exception of Anoka County. This organization, Twin Cities-Metro CDC, desires to take on additional service territory and would be interested in serving Sherburne and Wright counties respectively. At its meeting in late July, EDA Commissioners adopted a resolution of support for the proposed Twin Cities-Metro expansion into Sherburne County. The Small Business Administration (SBA) governs and approves issues such as service territory expansions . We believe that a critical element to an expansion request is a resolution of support from the County Board. A "generic" resolution was adopted by the Sherburne County Board in early March. Because no reference in the resolution is made to Twin Cities-Metro specifically, it is likely not enough to enable SBA to consider the expansion request. • Further complicating matters is a new state-wide CDC known as Minnesota Business Financing (MI3FI) . This organization has subsequently relocated from St. Paul to. St. Cloud. MBFI Board members would likely resist any efforts by a local CDC to expand its operations into, say, Wright and Sherburne counties . This is suggested in light of the fact that a local CDC such as Twin Cities-Metro "packages" a loan request free of charge while MBFI will only accept a loan request that has been packaged by the small business operator or by a consultant retained by the small business . The Chair of the County' s Economic Development Council submitted an update on the status of a CDC by way of a letter dated November 28th. This letter is included in the agenda packet it suggests that a local CDC such as CRDC or Twin Cities-Metro currently have the capability of packaging loans in Sherburne County. We do not believe this is the case. Toward that end, the writer of this memo is attempting to arrange for a meeting with representatives of the SBA Minneapolis office, the County's Economic Development Council, Twin Cities-Metro, and MBFI to ascertain how this expansion issue can be resolved. 9 . EDA Board Composition In November and December of 1992, the EDA Commissioners 411 and City Council discussed the concept of adding at least one more non-elected resident to serve on the seven-member EDA in an at-large capacity. This discussion progressed to a December 7th public hearing that was conducted by the City Council . The hearing was continued to February 1, 1993 . Minutes from the February 1st meeting are included in the agenda packet. Following the public hearing, it was the consensus of the City Council for the EDA to remain as a seven-member Commission comprised of five elected members and two non-elected members for at least one year It was generally agreed that this issue would again be discussed in the future - at some time prior to the next municipal election. On this basis, the topic of modifying the composition of the EDA has been placed on the December 13th agenda. I hope that the newly-elected Councilmembers have found that the EDA does not operate unilaterally against, say, the direction of the City Council. In fact, most EDA projects require Council approval before they are implemented. In addition, EDA Task Forces such as the business park endeavor have included EDA Commissioners who serve in the non-elected at-large capacity as well as EDA Commissioners who are also City Councilmembers Hopefully, this ensures continuity with Council direction. Regardless of these observations, the Elk River EDA can continue as a seven-member Board with five members of the • City Council serving on it, or the EDA can be modified in such a way to have as few as two City Council members on it. An initiative to modify the EDA composition would require a public hearing by the City Council . ACTION REQUESTED Pursuant to the February 1, 1993, minutes, the Elk River EDA is asked to consider a recommendation to the City Council regarding the proposed modification of its Board. 10 . 1994 Work Program A draft of the 1994 Work Program has been included in the agenda packet. This item can be discussed at the December 13th meeting and will quite likely be carried over to the EDA' s annual meeting in January. 11 . Prospect Status Report The Prospect Status Report has been sent under separate cover.