Minutes

of the

Regular Meeting Of

DETROIT LAKES DEVELOPMENT AUTHORITY

Tuesday, April 19, 2005

4:30 PM

Conference Room, City Administration Building

MEMBERS PRESENT:     Dixie Johnson, Mark Hagen, Tom Klyve, Matt Brenk, & Tim Olson

MEMBERS ABSENT:      Jim Anderson & Greg Hildenbrand        

OTHERS PRESENT:       Larry Remmen,  Pippi Mayfield, Richard Grabow, Leonard Heltemes, Ron Zeman, Bernie Sauer, John King, Kevin Shipley & Lou Guzek

I.       Call To Order:

          Chairman Dixie Johnson called the meeting of the Detroit Lakes Development Authority to order at 4:30 PM in the Conference Room of the City Administration Building, 1025 Roosevelt Avenue on Tuesday, April 19th 2005.  All members of the Authority having been duly notified of the meeting and the business to be transacted.

II.     Minutes:

        A motion was made by Commissioner Mark Hagen, seconded by Commissioner Matt Brenk and carried unanimously to approve the minutes of the regular meeting held March 22nd, 2005 as presented.

III.    Financials:

A.      A motion was made by Commissioner Mark Hagen, seconded by Commissioner Tim Olson and carried unanimously to approve the financial report and payment of claims for March 2005.

IV.    Old Business:

A.      None

V.      New Business:

A.      Public Hearing & Consideration To TIF Project 24-1 Lodge On The Lake

          Chairman Dixie Johnson opened the public hearing.  Larry Remmen reported that the Development Authority has been asked to consider establishing Redevelopment District 24-1 for Tax Increment Financing.  The request is from Pokegema Properties, LLP which is a partnership of Scott and Chris Mehlhaff and John & Kathy Holland.   The request is for $620,000 in pay as you go tax increment financing for a 55 units hotel called Lodge On The Lake.  The total project cost is estimated at $5,055,000.

          A report on substandard buildings has been prepared based on the interior inspection of all of the buildings.  It has been determined that all of the buildings are substandard and the cost to improve them would be greater than 15% of the cost of new construction.

        Larry Remmen also stated that the duration of a Redevelopment District was 26 years.  There was no public comment and the hearing was closed.

        A motion was made by Commissioner Matt Brenk seconded by Commissioner Tim Olson and carried without dissent, with Tom Klyve abstaining to approve TIF  District 24-1 and approve a Development Agreement for providing TIF assistances for Lodge On The Lake.

B.      Consideration To A Request Of The Detroit Lakes Regional Chamber Of Commerce For TIF Financing

          Larry Remmen reported that the Detroit Lakes Regional Chamber of Commerce has to move due to the Highway 10 Relocation Project.  They plan to construct a 5,000 square foot facility at 700 Summit Avenue.  The Chamber is requesting tax increment financing to assist them with construction of their new facility.  The total project coast is $450,000 and the Chamber is requesting $80,000 in TIF assistance.

        Larry Remmen explained that based on the assessor’s estimate of the taxes, about $50,000 in TIF on a pay as you go basis would be available for this project.  The justification for this project is to clean up this redevelopment area and assist a project impacted by the Highway 10 Project.

        A motion was made by Matt Brenk seconded by Tim Olson and carried unanimously to set a public hearing and develop the TIF Plans as stated.

C.      Consideration To MMCDC’s Request For TIF Financing For Long Bridge Heights Phase 2

        Larry Remmen reported that Midwest Minnesota Community Development Corporation was requesting $320,300 in tax increment financing for development of a 21 unit single family housing project.  The first phase was developed in 2001(District 8-8) and included 32 units and $435,000 in TIF Funds.

        MMCDC would like the City to sell bonds which would be paid using TIF Funds. MMCDC would also guarantee the bonds.  The $320,300 is the assessments for sewer water and roads.

        A motion was made by Director Mark Hagen, seconded by Director Matt Brenk and carried with Director Tom Klyve abstaining to set a public hearing and develop the TIF documents as stated.

D.      Consideration To Investment Alternatives For The OZAB Debt Service   Account

          Larry Remmen introduced Kevin Shipley from Community Development Bank.  Kevin Shipley stated that this proposal to finance the Lodge On The Lake Project involves using $2,000,000 from the QZAB Debt Service Account for a loan from the $5.2 million dollar Lodge On The Lake Project, which would be funded as follows:

                Equity:              $1,000,000

                SBA 504             $1,500,000  6% 20 years

                Bank                 $2,700,000  7% 20 years w/9 year balloon

        The bank and Development Authority would share a first lien position on the loan.

        Larry Remmen said that Lou Guzek can currently get 5% interest on investments.  This loan would help us get less than 2% interest on our money.  As the funds are paid back, we have to reinvest the funds.

        I am concerned about the risk, but also about getting enough interest to retire the OZAB Bonds.

        Lou Guzek felt that the investment could provide $250,000 to $300,000 more in interest over current investments but there is a significant amount of risk in making any loans.

        Kevin Shipley said the SBA loan process has been started.  Kevin mentioned that  he has been working with Bremer and Midwest Bank on this project.  CDB does not care who takes the lead.

        There are three things that influence a loan.  First is collateral, second is repayment ability and third is management.  Looking at those criteria, this is a good loan.  Kevin Shipley stated that the loan could also be made as a construction loan so the interest could start accumulating right away.

        The Board asked Lou Guzek what he thought.  Guzek said you have to look at the risk and see if it makes sense.  The assets seem to be enough to cover a 2.7 million dollar debt.  Kevin said there will be corporate guarantees and personal guarantees on this loan.  At the current rate of investment, the QZAB will be short about $8,000,000.

        Kevin asked about the process. Larry Remmen stated a loan application should be submitted along with a participation agreement.  Then the DLDA will take action at a regular meeting.

        A motion was made by Director Matt Brenk, expressing an interest in investing QZAB’s in this type of project and requesting more information.  The motion was seconded by Director Tim Olson and carried with Tom Klyve abstaining. 

E.      Consideration to the approval of a Development Agreement for TIF District 8-15 Pelican River Heights

        Larry Remmen reported that the Development Agreement for this TIF project was not completed when the TIF Plan was approved last month and needs to be acted upon at this time.  A motion was made by Tim Olson, seconded by Matt Brenk and carried with Tom Klyve abstaining to approve the Development Agreement for the Pelican River Heights Tax Increment Financing Project.

VI.    Adjournment

        There being no further business to bring before the Board, the meeting was adjourned.

                                                                Signed

                                                                Larry Remmen

                                                                Community Development Director