WAYS & MEANS SUPPORTS EPITOME ENERGY LOAN, LAND OPTION ONCE REGULATIONS ARE MET

During Monday’s nights Ways & Means Committee meeting, the recommended loan and land option by the Crookston Housing and Economic Development Authority (CHEDA) with Epitome Energy, LLC was discussed.  The committee voted to continue to move forward on the loan, and land option after due diligence and all statutory regulations are met. 

City Attorney Charles Reynolds was called on to explain why his legal opinion was that the city would need to enter business subsidy agreements with Epitome Energy before entering an option agreement on the Colburn Property.  “My reading of the statute regarding business subsidy is that when there is a contemplated business subsidy, the council needs to decide if that is going to occur, to what extent,” said Reynolds.  “There is a business subsidy statute which defines the elements that must go into a business subsidy.  It defines certain parameters such as what is the business purpose, what’s the impact on the city and therefore it’s my opinion that the council needs to be aware of the factors behind the proposed option agreement, how it’s going to impact the city and is there going to be a business subsidy.  And if there is, there needs to be a business subsidy agreement prior to entering into the option.”

Reynolds also said that the recommended terms with a zero percent interest on a $1.25 million loan make it a business subsidy in his opinion.  “It’s my opinion that at the terms that have been suggested with zero percent interest, that is a business subsidy flowing to Epitome Energy,” said Reynolds. “Therefore, again, you need a business subsidy agreement prior to entering into such a loan if that would be your wishes.  Again, negotiating terms, getting some specific facts about how this impacts the community, what kind of jobs are available, wage scale.  There are eight factors listed in the business subsidy statute that need to be addressed, and the city can add additional factors if it so chooses.”

The land option and loan would need separate subsidy analysis, as would, any potential future subsidy explained Reynolds. Councilman Jake Fee asked if the loan were offered for prime terms would the subsidy go away.  Reynolds said a loan at a commercially reasonable or retainable rate might well not have a subsidy as the recipient would not receive the money on terms that were more generous or different than from a commercial lender. 

Councilman Bobby Baird asked how long the working group process would work.  Reynolds said his understanding was that it could take several months to create the business subsidy.  “My understanding is it would take some months,” said Reynolds.  “It depends on how often they meet, how they go about their work.  No reason to believe that Epitome Energy wouldn’t cooperate and provide the data that’s requested.  I think you could get it done in three to four months if you met weekly and maybe even quicker.”

The staff recommendation based on Reynolds opinions and a memorandum from the firm of Kelly & Graven, who specializes in economic development issues, was to create a working group for the business subsidy and all other matters relating to the Epitome Energy development.  Internally the group would include Mayor Guy Martin, two council members, two CHEDA board members, City Administrator Shannon Stassen, Finance Director Angel Weasner, CHEDA Director Craig Hoiseth.  Externally the group would include Municipal Advisors Paul Steinman and Mikayla Huot from Springsted, who worked on the recent TIF District, along with specialized legal counsel James Strommen and Martha Ingram, bond counsel Dick Helde and Reynolds. 

Reynolds said his office wasn’t involved in constructing the recommended working group but did say he believed his office and the specialist that offered another opinion, as they do a lot of work in the area after Fee asked if so, much legal counsel was needed.  Reynolds also added that for each meeting, every member of that committee might not be required at each meeting and the city could take advantage of video and telephone conferencing to avoid travel time.  The committees approved motion didn’t determine the exact legal counsel that would be needed, nor the final makeup of the committee but did say they wanted to move forward. 

Fee asked if there was a way to speed up the process from three to four months to move Epitome Energy forward with the air permitting.  Reynolds said this is a big project and big money, but he doesn’t have the experience to say that the subsidy can be completed any quicker, adding that his timeline is just an estimate. “It still requires the consideration of those eight factors,” said Reynolds.  “And that depends on the speed on which the committee can be put together to meet.  Are they going to meet monthly? Are they going to meet weekly?  Are they going to have subcommittee assignments?  It depends on how you put that committee together and what the charge is to them gathering the data and getting the opinions.  I’d like to tell you we could get it done in 30 days.  I can’t tell you that because I don’t have the experience with how it works.”

Hoiseth said he agreed with everything the Reynolds said, adding that he believed the discussion was putting the cart before the horse.  “I agree and concur with everything the lawyer said every single thing,” said Hoiseth.  “There is not one thing that Corky [Reynolds] mentioned that I’m in disagreement with,  I do believe the cart is way before the horse here.  We’re only here to find out is the City Council interested in providing a loan to Epitome Energy for a $1.25 million.  That’s all we need to know.  The CHEDA board decision was simply put, yes; we recommend that loan comes forward.  Assuming the due diligence is done, the security is put in place, the collateral is there, the business subsidy.  All those things will be part of the due diligence.  All we need is the council to say, yes, we will certainly recommend a loan to Epitome Energy if all that due diligence falls in place which will include committees, business subsidies, all those things.”

Hoiseth said CHEDA would start the process immediately for a business subsidy agreement if the City Council indicated it was interested and concurred with the CHEDA board recommendation.  Asked for his opinion on how to move forward, Reynolds said his opinion was that if the sense of the council were to be supportive of the recommendation made by the CHEDA board than the motion should include the city would support the loan with the appropriate agreements. 

Epitome Energy’s Dennis Egan said a unique opportunity to get an early start on permitting is available if Reynold’s estimated timeline can be shortened.  “We have a unique opportunity that if we can in a short period of time leverage city dollars that are backed by state dollars passed this legislative session, we can get our permitting process started,” said Egan. “I’ve got a team in place ready to go in July if we can secure the funding for it, which then allows us to do that 10-12 month permitting process in the State of Minnesota.  So, June or July of next year we’d have our air permits which then allows us to move dirt.”

Egan believes Epitome has all the information that would be required, including two banks ready to move on the debt for the whole project once they know what the city will be looking for with the initial loan.  The small specialty crush plant could operational in 2020 if the city could loan the dollars quickly, but would likely be pushed out a year if the process takes three to four months.  “We’ve got some funding from the State of Minnesota that will allow us to purchase equipment for the small specialty crush,” said Egan.  “Epitome Energy has secured $1 million to build the building for that equipment.  We could move dirt, put footings in, and have this project moving and on its way.  But if it’s a four-month process for the city to get to the point where they say they can loan us the dollars then that puts us October of next year for our air permits.  Then it’s hit and miss in Crookston on how much work you can do November, December.  So it would push us out a year.”

The committee was also asked for the Council priorities for the five-year capital improvement plan with the committee stating they would wait for the department head recommendations.  The committee voted to amend a developer agreement with Bob Herkenhoff for a twin home that was recently constructed after splitting an existing parcel. City Finance Director Angel Weasner said that for the abatement to take effect, an amended agreement will need to be completed. “He had informed me that he had built a new twin home,” said Weasner.  “Our previous agreement didn’t list the parcel he built the twin home on.  We need to do an additional amended development agreement that includes the parcel that he added the new twin home too.”

City staff will approach Polk County and the Crookston School District as well regarding the additional tax abatement and creating a new amended agreement.  Weasner added that there wouldn’t be other changes, including the original abatement cap of $252,840.  

The committee was also presented with a public comment procedure referenced in the last meeting by Martin.  The suggestions come from the League of Minnesota Cities and state that the public doesn’t have the right to participate in discussions without restrictions.  Other tips include:

For Public

  • Sign in sheet and note cards for the individual to write down the nature of their comments in advance.
  • Time limit on comments 2-3 minutes per individual – 15 minutes total for public
  • Rules of decorum – Comments should be respectful and not make unwarranted accusations

For Councilmembers

  • Councilmembers will only listen, not engage during the comment time
  • Questions that arise from public comments will be directed to City staff or a future Ways & Means Committee meeting

Councilman Steve Erickson said he believed it was a good idea to have some standards in place, but thought the suggestion of signing in and filling out note cards in advance could discourage some.  Adding that he believed the forum was the public’s opportunity to engage with the council.  Councilman Dale Stainbrook suggested, and the rest of the committee agreed, to have a discussion on the topic when the League of Minnesota Cities is in Crookston to assist with training on the new code of ethics and conduct.

The final item on the agenda was the committee being given two options regarding the future of official publications for the city.  As the Crookston Times recently moved to a twice a week publication, it creates issues with the legally required publication of notices.  Weasner gave the example that the public hearings called for in the Monday night Council meeting can’t be held for a month, until July 22, because of the publication schedule of the next issue of the Times happening less than 14 days, the required time for notices, before the July 8 meeting. The committee passed a motion to designate the city website as the official source of city public notices which will still need to be approved by a resolution at City Council.  Notification of the change will need to be dually published on each notice for the next six months explained Weasner. “We have to have an official resolution designating the city’s website as our alternate publication source for legal notifications,” said Weasner.  “It will be dual posted in the Crookston Daily Times and every advertisement stating you can also find the information on the city’s website.