Joint Finance Committee Packet 11-29-2022
Meeting
of the
Joint Finance
Committee
AGENDA
Tuesday, Tuesday, November 29, 2022
7:30 a.m.
Elk River City Hall
Upper Town Conference Room
1. CALL MEETING TO ORDER
2. CONSIDER AGENDA
3. CONSENT AGENDA
Considered to be routine and noncontroversial by the Economic Development Finance Committee and will be approved by one
motion. There will be no separate discussion of these items unless a Committee member, staff member, or citizen so requests, in
which case the item will be removed from the consent agenda and considered under the regular agenda.
3.1 April 26, 2022, Meeting Minutes
4. GENERAL BUSINESS
4.1 HRA Loan Proposal – Jackson Place (300 Jackson Ave)
4.2 Open Discussion Items
5. ANNOUNCEMENTS
6. ADJOURNMENT
Meeting Protocol
No sidebar discussions
No interruptions
State your concern
Ensure you understand
Don’t take things personally
Adhere to time limits
Come prepared
Ensure all are heard
Elk River Joint Finance Committee
Held at Elk River City Hall
Tuesday, April 26th, 2022
Members Present: Ryan Hardin, Rhonda Magnussen, Dan Tveite, Nate Ovall, and Jim
Gromberg
Members Absent: Chad Vitzthum, Larry Toth, Charlie Blesener
Staff Present: Brent O’Neil, Economic Development Director
Joshua Mollan, Economic Development Intern
1. Call Meeting to Order
Pursuant to due call and notice thereof, the meeting of the Elk River Joint Finance
Committee was called to order by Chair Tveite at 7:34 a.m.
2. Consider Agenda
Motion by Ovall and seconded by Hardin to approve the Joint Finance Committee
agenda. Motion carried 5-0.
3. Consent Agenda
Motion by Ovall and seconded by Gromberg to approve the November 30, 2021, Joint
Finance Committee meeting minutes. Motion carried 5-0.
4.1 Orluck EDA Loan
Mr. O’Neil requested guidance from the committee on the Economic Development
Authority’s loan to Orluck Industries. Mr. O’Neil noted that Orluck has been working with a
third-party consultant which assists companies in debt restructuring and company
reorganization. The EDA’s loan, originally at $200,000, is current, with about $100,000 paid
down. It is secured by two pieces of equipment. However, due to the potential restructuring
or wind-down, the equipment may be liquidated., which a recent appraisal shows is in line
with the current balance, but may be worth less on the open market due to factors such as
relocation. Mr. Ovall discussed some factors to consider, including priority lien position on
equipment. Mr. Tveite questioned how the process would work if the machinery were to be
sold. Mr. Ovall suggested that it would be ideal for the city to stay out of the sale of the
equipment due to the size of the machines and work with the principals or the consultant on
any sale.
Ms. Magnussen questioned the overall process and the committee’s role and action. Mr.
Tveite suggested that the committee advise staff to work with the relative parties involved to
work out the best outcome for the city. There was also discussion on whether EDA needed
to provide notice to Orluck regarding the city taking any actions regarding the equipment
and loan.
Mr. Ovall also suggested that Mr. O’Neil contact an attorney with expertise in work-outs and
UCC filings, and recommended Eric Sherburne at Eckburg Lammers.
Motion by Magnussen and seconded by Gromberg to direct staff to work with the
recommended legal firm and principals and senior lenders involved with the loan
and equipment to maximize recovery for the city and to bring any final action to the
EDA. Motion carried 5-0.
5 Announcements
Staff mentioned that a future item to bring to the committee consideration is an evaluation
of the review process for incentive programs. There was some discussion on working with
the council on developing a new process and policy criteria.
Staff also mentioned the possibility of looking at fees related to loans, particularly small
loans.
6. Adjournment
There being no further business, Mr. Tveite adjourned the meeting at 8:16 a.m.
Minutes prepared by Brent O’Neil and Joshua Mollan.
_____________________
Tina Allard
City Clerk
___________________
Brent O’Neil
Economic Development Director
The Elk River Vision
A welcoming community with revolutionary and spirited resourcefulness, exceptional
service, and community engagement that encourages and inspires prosperity
Request for Action
To
Joint Finance Committee
Item Number
4.1
Agenda Section
General Business
Meeting Date
November 29, 2022
Prepared by
Brent O’Neil, Economic Development Director
Item Description
HRA Loan Proposal
Reviewed by
Joshua Mollan, Economic Development Specialist
Reviewed by
Action Requested
Provide, by motion, a recommendation to the HRA regarding the proposal received from Metro Plains
Management.
Background/Discussion
In 2006, the Elk River Housing and Redevelopment Authority (HRA) contributed to financing the
construction of Jackson Place mixed-use development in downtown Elk River. Among the support, the
City/HRA received a grant of federal CDBG funds administered by the State of Minnesota. In turn, that grant
of $400,000 was provided to the Jackson Place development in the form of a 30-year deferred loan. Then loan
is now more than 15 years towards maturity. One-percent annual compound interest is to accrue and be
payable at maturity.
Metro Plains, the developer-owner-borrower, has reached out to the city about settling the loan early. We are
seeking advisement and a recommendation from the Joint Finance Committee to bring to the HRA’s
upcoming meeting. The attachments include the borrower’s proposed terms for closing out the loan.
Should the committee and HRA find an early settlement of the agreement worth pursuing, staff would work
with the legal team to ensure that provisions from the original loan documents remain in compliance. Of note,
a condition of the loan was tier to an income requirement in that all 32 residential units must meet the federal
affordability standard at 50% area median income. The borrower has indicated that the provision would remain
in place for the original 30-year period.
Financial Impact
The borrower would provide $160,000 to terminate its loan from the HRA.
Mission/Policy/Goal
The goal of the HRA is to promote certain housing and redevelopment projects.
N:\Departments\Community Development\Economic Development\EDA\Administrative\Agenda\Joint Finance Committee\2022\11-29-
2022\4.1 sr HRA Loan Proposal.docx
Attachments
Metro Plains Email
Loan Agreement
Promissory Note
Loan Payoff Proposal Spreadsheet
From:Larry Olson
To:O"Neil, Brent
Cc:Peggy Bonicatto ; Jason Moore; Larry Olson
Date:Friday, November 18, 2022 12:20:12 PM
Attachments:Copy of PV CDBG 400000 11-11-22 (1).xlsx
Brent – Thank you for your response to our meeting last summer.
Your CDBG funds allocated to Jackson Place were structured as a subordinate loan to allow Jackson
Place to utilize more housing tax credits from the State. We brought in a tax credit investor in 2007
to provide equity for Jackson Place. The Federal restrictions for the tax credits have a 15 year
compliance period after which the investor often elects to be bought out. Tax credit restrictions for
the state last 30 years. We purchased the investor’s interest in January 2022. Prior to this it was not
possible to restructure the debt on affordable housing projects.
This is the reason we met with you last summer. Our plans are a long term hold for Jackson Place.
When we settle subordinate debt for less than face value we have a taxable event adding to the cash
outlay by 40 to 45% in Minnesota. For this reason our offer to you is based on a 9% discount rate.
The offer is $160,000 per the attached calculation. If you have a high priority City initiative that this
fits into it may be an attractive opportunity. If not we are happy continuing our current relationship
until maturity in 2036.
Let us know how you want to proceed.
Thanks, Larry
Larry Olson
LWO Properties, LLC
MetroPlains Management, LLC
1600 University Ave. #212, St. Paul, MN 55104
651-523-1246 (Direct) 612-747-3728 (Cell)
metroplains.com
Our Values Inspire Our Vison
Disclaimer
The information contained in this communication from the sender is confidential. It is intended solely for use
by the recipient and others authorized to receive it. If you are not the recipient, you are hereby notified that
any disclosure, copying, distribution or taking action in relation of the contents of this information is strictly
prohibited and may be unlawful.
MDI #70 ‐ CDBG Loan
Due: Septemer, 2036
Rate: 1%
Cumulative
Amount: Principal Interest Interest TOTAL
Present
Value Cash Flows
Dec‐22 400,000 70,494 470,494
Dec‐23 400,000 4,705 75,199 475,199 ‐
Dec‐24 400,000 4,752 79,951 479,951 ‐
Dec‐25 400,000 4,800 84,750 484,750 ‐
Dec‐26 400,000 4,848 89,598 489,598 ‐
Dec‐27 400,000 4,896 94,494 494,494 ‐
Dec‐28 400,000 4,945 99,439 499,439 ‐
Dec‐29 400,000 4,994 104,433 504,433 ‐
Dec‐30 400,000 5,044 109,478 509,478 ‐
Dec‐31 400,000 5,095 114,572 514,572 ‐
Dec‐32 400,000 5,146 119,718 519,718 ‐
Dec‐33 400,000 5,197 124,915 524,915 ‐
Dec‐34 400,000 5,249 130,164 530,164 ‐
Dec‐35 400,000 5,302 135,466 535,466 ‐
Sep‐36 400,000 4,016 139,482 539,482 539,482
PV Rate 9%
Present Value 161,438
Rounded 160,000
The Elk River Vision
A welcoming community with revolutionary and spirited resourcefulness, exceptional
service, and community engagement that encourages and inspires prosperity
Request for Action
To
Joint Finance Committee
Item Number
4.2
Agenda Section
General Business
Meeting Date
November 29, 2022
Prepared by
Brent O’Neil, Economic Development Director
Item Description
Open Discussion Items
Reviewed by
Joshua Mollan, Economic Development Specialist
Reviewed by
Action Requested
Item presented for information and discussion purposes.
Background/Discussion
Staff will use this time to update the board on relevant topics.
Financial Impact
N/A
Mission/Policy/Goal
The goal of the HRA is to promote certain housing and redevelopment projects.
Attachments
None