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NEW ULM--The New Ulm Economic Development Authority (EDA) tabled a decision on a $50,000 loan to M&K Forestry & Land Management Services Tuesday, citing a need for more information.
M&K Forestry & Land Management is planning to start a new business and needs assistance with the down payment for a bank loan. The total loan package is $273,000 with loans from Bank Midwest and the EDA.
City Manager Chris Dalton said the $50,000 would help close a loan for equipment purchase. The equipment is currently on hold until the loan is approved.
M&K has two contracts pending once the equipment can be purchased.
The loan has a 2% interest rate and is for 10 years. Conditions of the loan require the owners to meet with Small Business Development Center (SBDC) consultants to refine their business plan and meet quarterly with consultants to help with financials and provide financials to the EDA.
The EDA board had concerns about approving the loan without additional questions. Board member Les Schultz said typically the EDA has approved loans for businesses with the promise of hiring extra employees. This is a new business where the two owners are the only employees.
EDA Chair Daniel Braam said he was reluctant to turn away a business, but the EDA was becoming a creditor and he worried approving $50,000 for this business would prevent the EDA from giving $50,000 to another business that would create more jobs.
Braam asked if the EDA needed to create different criteria for approving business loans or possibly set different terms for certain businesses.
City Attorney Roger Hippert said this was the first loan to come before the EDA with only owners and no employees. He said the loan could stimulate business, but it would not add jobs making it a different situation from past loan approvals.
Hippert also had concerns about the EDA being subordinate to the bank. If the business defaulted on the loan, the bank would be paid back first and the EDA might not collect any money back.
Board member Mark Petersen believed more information was needed from the owners. He felt they needed to meet with SBDC and present a business plan before the money was approved. If they were given the money before meeting with SBDC, he worried the owners would have no incentive to develop a business plan.
Dalton said M&K tried to reach out to SBDC before applying for the loan but had not been able to hold a meeting.
Board member Jessica Janni said she would be abstaining on the vote because she worked with the bank that was overseeing M&K's loan, and said she did not want to discourage businesses like M&K from applying for EDA loans in the future. She said it can be hard to establish a new business.
Braam said it would be easier to approve the loan if the board had more information on the business and could determine its trajectory.
Board member Andrea Boettger asked if the EDA does a credit check on the owners as part of the process.
Dalton said in this case, staff did not review credit because the bank is already giving a loan, suggesting M&K is creditworthy. If the EDA was the only financer, a credit check would have been ordered.
Boettger wanted to support entrepreneurs like M&K, but also wanted to make sure the company was being run responsibly and there was an opportunity to create a job.
Board member Susan Fix asked if the decision could be tabled.
Schultz suggested holding an emergency EDA meeting if approval was time-sensitive.
Dalton said the approval was time-sensitive because the equipment was being held pending loan approval. Without approval, M&K cannot begin fulfilling contracts.
Schultz questioned why the loan was only coming to the board now if it was this time-sensitive.
Fix was willing to give M&K a chance. She believed it was the EDA's purpose to help out entrepreneurs, but said the board could review how loans are approved using this test.
Dalton reminded the EDA that they were not a bank. He said one of the first loans they gave was to Red Dragon Gaming and no financial institute was willing to help except the EDA.
"Now they are thriving," Dalton said. "All it took was the opportunity from the EDA to help fund them."
In the case of M&K, a bank is already backing them.
Braam acknowledged the qualification for a bank approving a loan was more strict, but said in approving this loan, "we want to assure the greatest chance of success we can, but I think we are not doing that in this case because we don't have all the facts and details that we can to make a good decision."
Schultz made a motion to table the decision until a special meeting could be held with a second from Fix. The motion carried.
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The board received a letter of intent from Hope Housing Foundation for the development of two multi-family market rate workforce housing apartments. The apartment buildings would include 25-27 units. The development would be contingent on a tax increment financing (TIF) agreement, land price, land stabilization, finance approval and Minnesota workforce housing grant.
Hope Housing Foundation is currently looking at using an open lot near Garden Terrace. The land is owned by the EDA.
Schultz asked if Hope Housing Foundation was looking at any other locations.
Wendy Anderson, representative for the foundation, addressed the board on Zoom. She said the Garden Terrace lot was the only location presented to them by the city.
Schultz said he was dead-set against this from day one.
"I just don't like that location," he said. "I think it ruins the current views of the Garden Terrace apartments."
Braam said another concern was the remediation of the soil. The cost of this was unknown.
Boettger compared the proposed project with the new gymnastic facility at the Recreation Center. She said the location of the gym was changed from the original design because of costs. The proposed site for the building was on the same street as the gymnastic center. She asked if there was a point where the project became cost-prohibitive.
Dalton said there could be a point where this project is not feasible because of remediation costs.
Braam said finding less expensive land would be more feasible. He suggested getting a close estimate of the cost to build on this land and weigh this against other sites.
Anderson said they were willing to work with the EDA to find alternative sites.
Schultz said he supported the goal of the project, but not the location. He made the motion to accept the letter of intent but does not commit the construction to one site.
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The EDA reviewed a list of priorities the New Ulm Partnership recommended the EDA look into completing. The New Ulm Partnership members voted on goals they felt each partner should work on for the years. The Partnership, City of New Ulm, New Ulm Economic Development Corporation (NUEDC), New Ulm Chamber and District 88 were all given a list of goals. Three goals were chosen for the EDA.
The first goal was to develop policies regarding industrial land sales, utilities, use of tax increment financing or tax abatement and tax base density.
The second goal was to explore possible arrangements between the EDA and NUEDC to reduce the NUEDC’s holding costs for their property in the Airport Industrial Park.
The third goal was to plan and budget for downtown revitalization, housing, comprehensive plan and capital improvement plan.
Dalton said the EDA can choose to focus on any of the three goals, all the goals or none of the goals. The city was also given the goal of developing policies regarding the industrial land sale.
Braam said tax abatement and tax financing is clearly a function of the city and the EDA did not have the authority to do it. He asked if the EDA was being asked to list the criteria for setting tax abatement qualification.
Braam's concern with developing policies is he did not want to set rigid standards that would prevent them from being flexible for new businesses.
The board made the motion to approve the list of priorities recommended by the partnership. The approval means the EDA will work to finish the goals.
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The board approved the Broadway Haus furniture replacement project and authorized staff to solicit bids. The project would replace 40 chairs used in the common areas of the building.
The existing chairs were purchased in 2003. They are upholstered and need to be professionally cleaned periodically. As a result of the COVID-19 pandemic, housing authorities have been replacing upholstered furniture with healthcare-grade vinyl furniture that can be easily cleaned and disinfected by staff regularly.
Due to COVID-19, the community room has been closed since March 2020. The goal is to have the new furniture in place before opening the community room back up to tenants. The estimate is $15,000. The final bid approval will come back to the board at a later meeting.