EDA Minutes - April 23, 2015

Date: 
April 23, 2015

CITY OF SAINT PETER, MINNESOTA
Economic Development Authority
MEETING MINUTES – April 23, 2015
Saint Peter Community Center – Governors Room

Call to Order

A regular meeting of the Saint Peter Economic Development Authority was called to order by President Bob Southworth at approximately 12:00 p.m.  Roll call was taken with Southworth, Marilyn Rundell, Chuck Zieman, John Kvamme, Cory Abels, James Dunn, and Jay Hansen in attendance.  Also in attendance were Community Development Director Russ Wille, Administrative Secretary Cindy Moulton, Visitors present were Marv Kottke (Spring Touch), Chelsie Salonek (Generations Boutique), Ed Lee representing the St. Peter Chamber of Commerce and Paul Tanis representing the St. Peter Development Corporation.

 Approval of Agenda

A motion was made by Zieman, seconded by Hansen to approve the agenda with the addition of extra reports.   All voting in favor of the amended agenda, the motion carried.

 Approval of Minutes

A motion was made by Dunn, seconded by Abels to approve the minutes of the March 18, 2015 and March 26, 2015 minutes.  All members voting aye, the motion carried.

 Public Hearing – Terms of Sale (430 Ritt Street)

Wille stated that the EDA must hold a public hearing when selling City real estate according to State Statue §460.105.  The notice of the public hearing has been posted in the Saint Peter Herald as required by law.  He said the public hearing would allow public input regarding the terms and conditions of the proposed sale of 430 Ritt Street to Marv Kottke.   

Southworth opened the public hearing at 12:06 p.m.

Ed Lee, Saint Peter Chamber CEO, 101 South Front Street, addressed the EDA.  He stated that the Chamber is in favor of the sale and it would be a great addition to the city.

Paul Tanis, President of the St. Peter Development Corporation, 922 South Fourth Street, addressed the EDA.  He indicated that the Development Corporation is supportive of the sale.  He stated that the City bought this building in order for the expansion of Creation Technologies giving another business the opportunity, to come to town.

 Southworth closed the public hearing at 12:11 p.m.

 Terms of Sale (430 Ritt Street)

Wille stated the sale price of 430 Ritt Street to Kottke is $930,000.  He said the general terms of the sale include a 4.4 acre parcel of land, a purchase agreement to be signed on or before July 1st, and the City and Kottke would each pay a pro-rated share of the taxes upon the closing of the loan.

 Wille indicated that the building needs heating and air conditioner repairs which amounts to $7,900.  He stated that whether the loan is approved or not the repairs need to be done.  A motion was made by Hansen, seconded by Abels to approve the $7,900 repair.  All voting in favor, the motion carried.

 Marv Kottke (Spring Touch) – Revolving Loan Request

Kottke has submitted a revolving loan fund request in the amount of $500,000 to partially finance the acquisition and renovation of 430 Ritt Street.  He also has requested that the note bear an interest rate of 3% and be due and payable in 10 years via balloon payment.

Wille stated that the First State Bank of LeCenter (Henderson Branch) has approved providing a loan of $652,000 and Mr. Kottke would contribute $131,677 from the equity he has established in his North Mankato property.  In order to consent to the loan, First State Bank of Le Center requires they are provided a first mortgage on the real estate as well as a first security position on the fixtures, furnishings, equipment, inventory and accounts receivable of Spring Touch.  The EDA would hold a subordinate mortgage and security position.

Wille indicated that the estimated cost of the building renovation is $353,677.  It is determined that when the renovation cost is added to the purchase price of $930,000, the total cost to successfully complete the project is approximately $1,283,677.

Kvamme stated that selling the building would be wonderful.  He said that Kottke has a very reputable business and it would be a nice addition to the community.  Kvamme also expressed some concerns.  He said that the City plans to sell the building for $930,000 and the $500,000 revolving loan request would be more that 50% of the selling price.  He stated that the business would not create a lot of jobs and would not be a large user of utilities.  He added that he would be more comfortable with a bridge loan.

Dunn suggested that #3 be added to the Resolution which includes Minnesota Statute 469.105 Subd. “1 POWER.  An economic development authority may sell and convey property owned by it within the city or and economic development district if it determines that the sale and conveyance are in the best interests of the city or district and its people, and that the transaction furthers its general plan of economic development.  This section is not limited by other law on powers of economic development authorities.”  Hansen and Abels agreed.

Wille said that Abels, Southworth, Hansen, and him self reviewed the financials.  They found nothing that would prohibit Kottke from obtaining the loan as requested.

Discussion was held.  Hansen stated that the City owns the building and felt the purpose of ownership was to enable a business to expand or to have a new business purchase it. He indicated Kottke has adequate cash flow.  Also that it would be a great addition to the community.

Kvamme said there is another way to structure the loan.  It was agreed that the role of the EDA is not to take business away from the banks.

Zieman suggested reviewing the Revolving Loan Fund guidelines.  He felt it was pointless to have a balloon payment in 10 years.

Southworth suggested reviewing the loan in 5 years and extending it after the 5 year review if appropriate.

Kottke indicated that he would prefer a 10 year balloon payment and have the EDA review the loan after 5 years.

It was proposed that the EDA provide a $500,000 loan to Kottke to partially finance the purchase and renovation of 430 Ritt Street.  It was also recommended the note bear an interest rate of 3% and that the loan be amortized on a twenty (20) year schedule with a balloon payment due after five (5) years.  It was also proposed the note be secured by a promissory note, mortgage and security agreement. 

A motion was made by Kvamme, seconded by Abels to introduce Resolution No. 2015-08 entitled, “A Resolution Recommending Approval Of A $500,000 Revolving Loan To Marvin Kottke (dba Spring Touch Lawn Specialists, Inc. To Partially Finance The Purchase And Renovation Of 430 Ritt Street” with the proposed amendments.  All members voting aye, the Resolution was passed and adopted.

Chelsie Salonek (Generations Boutique) – Revolving Loan Request

Chelsie Salonek has submitted a Revolving Loan request in the amount of $5,000 to partially finance the start-up costs of Generations Boutique.  She would like to open a women’s boutique in the former MacKenzie/Gustafson law office at 326 South Minnesota. 

Wille reviewed Salonek’s background.  She has worked in retail sales for the last four years.  She is most recently employed at Scheels as the manager of the Women’s Athletic Wear Department at the River Hills Mall in Mankato.

Salonek has identified the start-up costs of $16,000.  First National Bank has consented to providing a $9,000 loan and Salonek is able to contribute the remaining $2,000.  Wille stated that the bank would have the first security and the EDA loan would be unsecured.

The $5,000 loan would be charged an interest rate of 3% and amortized on a straight five year schedule.  Abels suggested the EDA loan her $7,000 so that she would have a $2,000 cushion to work with.  Hansen checked with the credit bureau and said her credit is satisfactory.

She indicated that she is working with the Small Business Develop Center.  Salonek said she will be marketing to all age ranges.  She will be advertising through facebook ads which would be a free on-line advertising.  She plans on maintaining her job at Scheels.  She mentioned that if that didn’t work out because of a non-competing clause she would find another place of employment.  She will be open four days per week.

A motion was made by Kvamme, seconded by Abels to introduce Resolution No. 15-09 entitled, “A Resolution Recommending Approval of a $7,000 Revolving Loan To Chelsie Salonek to Partially Finance The Start-Up Of Generations Boutique Located at 326 South Minnesota” Avenue” with the amendment of loaning $7,000 versus $5,000.  Members Southworth, Dunn, Kvamme, Rundell, Abels, Zieman voting in favor, Hansen abstaining.   The Resolution was passed and adopted with the amendment.

Municpal Parking Lot #5 – Purchase Agreement –Wille stated that there is a developer interested in developing parking lot #5.  He would like to have a four level building with commercial on the lower level and apartments on the top three floors.  Wille indicated that City Staff has met with the developers.

National Retail Properties –Condemnation – Wille reported that the City is authorized to obtain an appraisal for the portion of the Carquest property needed for the round-a-bout.

St. Peter Greenhouse – There is no news on the St. Peter Greenhouse Sheriff sale.  The City has a Mortgage and Personal Guarantee with Gerald Lunderberg.

MSLH –MSLH has a balloon payment due on June 1, 2015.  Laura Hulsebus and Mary Snyder (MLSH) plan on paying off the loan and will not ask for an extension.

Sam & Abe’s Daycare – The daycare was granted an Unconditional Conditional Use Permit.  They are doing some alterations to the building before opening.

Birthing Center – Approximately nine births have been reported at the birthing center.

Balloon Policies - Kvamme mentioned that the Revolving Loan Policies should be reviewed by the EDA.  Hansen agreed and said that we need consistency related to interest rates and terms.  Rundell added this would avoid discussion at meetings.  Dunn mentioned there could be exceptions such as job creation. 

 Adjournment

With no further business to conduct a motion was made by Abels, seconded by Dunn to adjourn.  The motion was approved and the meeting was adjourned at approximately 1:07 p.m.