IEDC Explores Adding Economic Development Programs

IRONWOOD, MI - Wednesday, December 8, 2010 - The Ironwood Economic Development Corporation (IEDC) board met on Tuesday morning in the Community Development Conference Room for the first time since June 8, 2010.  Prior to the meeting, City Clerk Karen Gullan administered the oath of office to Mark Ruppe. Ruppe re-applied for the IEDC and was re-appointed by Mayor Burchell and the Commission at their last meeting.

At 10:00 AM, when Chairman Jim Huss uncharacteristically failed to appear, Vice-Chairman John Wyssling called the meeting to order. Roll was taken. Present for the meeting were: Joe Cayer, Sr.; John Wyssling; Dave Ramme, Sr.; Mark Ruppe; Jim Peterson; and City Manager (Ex-Officio member) Scott Erickson. Tom Schneller; Bob Schonberg; and Jim Huss were absent. Jim Lorenson opted not to re-apply. No media was present excepting yours truly.

Following the recording of the roll, the Board unanimously approved the minutes for the June 8th meeting and the Agenda/Docket for the meeting they were about to hold. Vice Chairman Wyssling asked the audience (me) if there were any Citizens Wishing to Address the Corporation. No one expressed an interest.

Review of EDC Board Status of Members, Vacancies - Community Development Director Merritt Bussiere told the Board that he received a letter of resignation from Jim Lorenson stating that he had moved to the township, so he would no longer be able to serve on the IEDC. Bussiere checked the bylaws and the Articles of Incorporation for the IEDC and he discovered that a township resident could still serve on Ironwood's EDC if he so desired. Bussiere said he emailed Lorenson informing him that he was still allowed and welcome to serve, but Lorenson didn't respond tho Bussiere's email.

According to City Manager Scott Erickson the opening on the IEDC has already been posted in the media. For the record, no such posting was ever submitted to the Superior Chronicle. According to Erickson, the City has not received any applications as a result of the Globe posting. Erickson said, "If you know anybody... put the word out!"

Request by Toohey to decrease the interest rate charged on her equipment/working capital loan - Bussiere told the Board that he spoke with Hans Larson with the Michigan Economic Development Corporation (MEDC). Bussiere said the MEDC is very reluctant to change the interest rate or term of any established loan. According to Bussiere, the MEDC believes a change in terms or interest rate should be made by apply for and writing a new loan.  Dr. Marsha Toohey requested that the IEDC lower the interest rate on her equipment/working capital loan in an effort to assist her during these lean financial times.

Bussiere told the Board that certain changes could be made without having to create a new loan, however. He suggested increasing the balloon payment at the end of the loan, thereby reducing the monthly payment. He said he spoke with Dr. Toohey and she explained that business is down and that she is having a tough time financially. Bussiere noted, however, that Toohey's payment history has been exemplary.

Toohey's payment on her obligation is approximately $247/month and her interest rate is 7.25% over 13 years. According to IEDC records, Toohey has an outstanding balance of approximately $19,000.

Bussiere suggested that the balloon payment be increased, and because of her exceptional payment history, when the balloon payment comes due, amortize that payment into monthly payments. This would satisfy the MEDC requirements of keeping the existing interest rates and terms without forcing Toohey to go through the re-application and full loan process.

Bussiere explained to the Board that Toohey's loan was initiated back in 2007 and she has paid more than she is required ($250 although the required payment is approximately $247) each and every month. He said she has never missed a payment.

Jim Peterson made a motion to adjust the balloon payment amount so that the monthly payment amount is reduced to $200/month. His motion included a review of the account in twelve months. Bussiere informed the Board that he would provide the members with a new amortization schedule and information demonstrating the restructuring of the loan. The Board unanimously voted to approve Peterson's motion.

Request by Black River Dental to increase loan term from three to five years - Bussiere explained that Black River Dental recently expanded his loan over a three-year term in order to purchase new equipment. They had a smaller loan, but borrowed more money to expand the business. The company manufactures dentures and related dental products.  The current loan obligation requires a $750/month payment.

Black River Dental was requesting an extended term to lower the payments. Bussiere again explained that the MEDC won't allow changes in terms or interest rate. Bussiere noted that, just like what was done to Dr. Toohey's account, adjustments can be made by adjusting the balloon payment amount.

According the IEDC records, Black River Dental has an outstanding balance of $19,000. The last payment received on the account was back in August. Currently the account is in $3,000 in arrears (4 months behind).

Bussiere told the Board that Black River Dental technically had a balloon payment at the back end of their loan. At the end of the term, instead of paying the usual $750, the final required payment is approximately $822. Bussiere proposed an example of what could be done to make the loan more manageable. He said an adjustment could be made that would include a 10 month balloon payment of $7,572. By subtracting that amount from the outstanding balance under the same terms (3 years at 5%) the financed amount is reduced to $11,428 -- thereby dropping the monthly payment obligation to $342.51. Bussiere pointed out that the ballon payment can be amortized when it becomes due as well.

According to IEDC records the current loan was first established in 2009.

The Board generally agreed that reducing the monthly payments might make the loan more manageable and could help the borrower from defaulting. Bussiere pointed out that equipment loans are typically taken for 7 years or more. Shorter terms of 3 years, like this loan, are generally for working capital only. Had the loan been written over a longer term to begin with, the payments would have been much lower and perhaps more manageable for the borrower. Bussiere suggested that the IEDC establish a standard protocol that makes certain that the life of a loan matches the life of the asset being financed.

The Board agreed that the owner of Black River Dental needs to be contacted and he needs to approach the Board to initiate new arrangements.

Staff requests permission to develop additional standard policies and procedures for loan pre-applications, portfolio management, and problem loans. Draft policies and procedures to be presented to EDC for review and action at their next meeting - Bussiere explained that he's only been the Community Development Director in Ironwood for two months. He said, however, that he has worked with other EDCs in the past and that the IEDC was somewhat "informal." He said that he noticed several loans that were granted without business plans, or even financial statements.

John Wyssling spoke out in the Board's defense and said, "I don't know where they're hiding, but I would tend to override that." He told Bussiere that many times people have approached the IEDC with loan requests and the Board listens to the idea. Most of the time the matter is tabled the first time, but the people come back with enough facts for the Board to make a valid decision. He went on to say that not all loan requests have been accompanied by business plans, but financial information has always been provided. Wyssling did agree, however that a formalized set of policies and procedures was a good idea.

Bussiere suggested that standard procedures be followed for late payments; for making certain that assets be properly insured; that applications are standardized; etc.

The Board agreed to allow Bussiere to draft a list of policies and prcedures and to bring it back at a later meeting for approval.

Non-performing RLF loans - The owner of Sears in Ironwood has an outstanding balance of just over $11,000. The monthly scheduled payment amount is $594. The amount past due is $3,560. No payment has been received since June.

Scott Erickson explained that the borrower was over $8,000 behind in his payments prior to June. Erickson contacted the owner and he fully caught up with his payments.

The Board asked Erickson if he could contact the borrower once again. Erickson agreed.

There are no other delinquent outstanding loans at this time.

Discuss other potential Economic Development programs besides the RLF. Discuss possible trip to the Ashland Area Development Corporation - Bussiere asked the Board if they would be interested in expanding into other programs that would help with economic development. He presented a list of possible programs the IEDC could use as additional development tools. The Board agreed to move forward to explore new programs.

Bussiere explained to the Board how the DIDA met with the Ashland Area Development Corporation during its recent field trip to that city. He told the Board that it was his belief that meeting with Ashland's Corporation could be beneficial to the IEDC. The Board agreed to organize an open table discussion with the Ashland Area Development Corporation. Bussiere agreed to set up a date and time for a meeting and get back to the Board members with that information.

Citizens Wishing to Address the Corporation on Non-Agenda Items (3 Minute Limit) - No citizens made comments.

Project Updates/Staff Updates -  Tula Toilets previously approached the IEDC for possible funding. Processing of their loan took an inordinate amount of time. The original application was made in April and no action was taken on the matter until October. Bussiere explained that the bulk of business is in the warmer months for a business like Tula Toilets. Because of the delays in financing, the owner of the business decided to wait to purchase the business until spring. Bussiere explained that there are many other funding sources that are also available to him.

The Board scheduled their next meeting for Tuesday, January 18, 2010, at 10:30 AM.

Other Business - John Wyssling explained to the Board that Parks and Recreation (IP&RC) had just discussed a plan that is in the works that would allow for the acquisition of both railroad grades (Chicago & Northwestern and the Soo Line) from Wakefield to the Wisconsin border. The plan would create both motorized and non-motorized trail systems along the grades. Wyssling referred to the possible acquisition as the "centerpiece" for most recreation in the area. Bessemer and Wakefield are also participating in the plan to purchase the property.

Wyssling explained that the attorney fees to do the needed title work are estimated at approximately $25,000. He told the Board that the IP&RC made a recommendation that the City participate in the project by paying $10,000 of those fees. Wyssling said he was bringing the matter before the Board to see if it was legal for the IEDC to help fund these costs through the revolving loan fund.

Bussiere further explained that the actual purchase of the property would be through the Michigan Department of Natural Resources, and that the MDNR has the funding available already. Once the title work is completed, the property could be immediately purchased.

Wyssling said the IP&RC wanted the City of Ironwood to "take the lead" to get the project up and running. He said if Ironwood put up $10,000, it would be very likely that Wakefield and Bessemer (and possibly the County) to do the same.

Jim Peterson suggested that no action be taken until Wakefield and Bessemer agree to commit similar funding. Wyssling said that putting up the money will show that Ironwood is willing to take a leadership roll.

Scott Erickson told the Board that fundraising efforts were already in place. He also said that some of the MDNR funding "might possibly" be available to pay for title research.

Mark Ruppe asked if there was enough money in the RLF to allow the IEDC to offer funding. He also asked if doing so was legal. According to Bussiere there is approximately $84,000 in the RLF. Erickson told Ruppe that research can be done to see if the IEDC has the right to use funds in this manner.

The Board asked that the matter be investigated and that it be added to the Agenda of their next meeting.