EDA Minutes June 25, 2015

Date: 
June 25, 2015

CITY OF SAINT PETER, MINNESOTA
Economic Development Authority
REGULAR MEETING MINUTES – June 25, 2015
Saint Peter Community Center – Traverse des Sioux Room


Call to Order:

The regular June, 2015 meeting of the Saint Peter Economic Development Authority (EDA) was called to order at 12:00 p.m. by President Bob Southworth.

EDA members Southworth, Jay Hansen, John Kvamme, James Dunn, Chuck Zieman, Marilyn Rundell and Cory Ables in attendance.  Community Development Director Russ Wille was also in attendance.

Agenda:

Motion by Dunn, seconded by Kvamme to approve the meeting agenda as prepared.  All voted in favor of the motion.  Motion carried.

Minutes:

Motion by Hansen to approve the minutes of the April 23, 2015 meeting of the EDA as prepared and presented.  The motion was seconded by Rundell.  All voted in favor of the motion.  Motion carried.

Revolving Loan Fund – Guidelines:

Copies of the existing EDA Revolving Loan Guidelines was distributed in the meeting agenda packet.  The Community Development Director also prepared an amended version of the guidelines to begin the EDA’s conversation regarding an alteration.

Wille noted that the Minnesota Department of Employment & Economic Development (DEED) determined that contrary to the desires of the City Council, the EDA does not have the authority to provide loans to businesses residing within the boundaries of Independent School District #508.  Only those businesses operating within the city limits would be eligible to receive EDA funding.

EDA members had previously questioned the process which establishes a loan’s rate of interest.  Wille explained that the EDA has generally charged a 3% rate of interest.  However, higher rates have been charged to projects considered to be of a higher risk.  Alternatively, those project demonstrating considerable job creation, new construction or utility consumption have often been provided lower interest rates.

The draft guidelines prepared by Wille suggest setting the rate of interest at the U.S. Prime Lending rate as published in the Wall Street Journal.  At this time the U.S. Prime rate in 3.25%.

After considerable discussion, the EDA determined that it would like to maintain the practice of establishing the applicable rate of interest based upon the perceived risk or reward of the project.  Wille noted that he will add language to the draft guidelines to provide the desired flexibility.

The EDA discussed the need for appraised values when considering loans secured by real estate.  The EDA wanted language added that will allow for the utilization of a “post-development” appraisal.  The EDA also added the ability to utilize a bank prepared estimate of value if the project is under $250,000.

The guidelines were to be altered to clarify the EDA’s practice of requiring that a private lending institution provide at least 50% of the project costs.  The EDA will also require that the borrower provide a minimum of 10% of the project financing via cash or equity.

The loan guidelines were proposed to be amended to require the payment of a 1% loan origination fee at closing.  The previous guidelines would have required the payment of the 1% at the time of application.  Previous City Council action had allowed for the collection at closing.  The policy change would bring the EDA’s practice in line with the written policy.

The EDA discussion then centered on the balloon payment extension process. It was determined that the borrower would need to have a letter of rejection for the participating private lender indicating that they are not able to extend additional credit or otherwise refinance the project.  The private lender shall explain the basis for their determination of denial.

Finally, it was determined that the financial performance of the borrower will be reviewed prior to consideration of a balloon extension.  The review shall be undertaken in the same manner as when the borrower made the original application for funding.

It was determined that the Community Development Director would incorporate the EDA discussion into a revised draft of the guidelines.  The EDA will plan to review the changes once again when they assemble in July, 2015.

Reports:

Wille reported that the July 17th closing of the sale of the 430 Ritt Street building to Spring Touch is proceeding as anticipated and scheduled.  Schwickert’s has completed the required repairs to the HVAC system.  MRCI is scheduled to vacate the property by the end of the month.

Wille reported that Cardon Development Group has withdrawn from the proposed development of Municipal Parking Lot #5. 

Wille noted that Saint’s Laundry has repaid their loan in full.

Wille noted that the City continues to negotiate the acquis ion of highway frontage for the construction of stormwater retention required by the MS4 rules of the State.

Adjourn:

With no further business before the EDA, Hansen moved to adjourn the meeting at approximately 12:56 p.m.  The motion was seconded by Zieman.  All voted in favor.  The meeting was adjourned.