The Pipestone Economic Development Authority (EDA) at its August 9 meeting approved the preparation of a purchase contract to sell the Prairie Winds Apartments based on a counter-offer discussed in a closed-door session . The move follows a vote by Pipestone City Council at its August 2 meeting to cancel $ 686,324 in loans the city made to EDA for the construction of the Prairie Winds Apartments.
The EDA met behind closed doors, as state law allows, ahead of its decision on August 9 and in a special meeting on August 2 to discuss the possible purchase price of the property. At the August 2 EDA special meeting, EDA asked staff to enter into a purchase contract for the property subject to a counter-offer and cancellation of loans by the city.
City administrator Jeff Jones said the party interested in buying Prairie Winds first expressed interest earlier this year. The EDA first discussed it behind closed doors in April and Jones said he has been working on elements of the potential sale ever since.
EDA constructed the 18-unit Prairie Winds apartment building starting in 2008 for approximately $ 1.6 million to provide additional housing in the city for employees of large companies such as Suzlon.
âUnfortunately, by the time this facility opened, Suzlon was starting to downsize and you know the rest of the story there,â Jones said at the August 2 meeting.
Jones said the city had received grants to make the loans to the EDA to help finance the construction of the building. One was a $ 525,000 small town federal loan from the Minnesota Department of Employment and Economic Development (DEED). Another was a loan of $ 151,110 from DEED’s Minnesota Investment Fund. A third was for the city’s $ 10,214 which was Minnesota Investment Fund dollars that had been repaid to the city by a previous loan to Ellison Meats.
All three loans were deferred for 30 years until 2038 with zero percent interest. The EDA was to repay the funds to the city at that time and the city could keep the funds and use them for other economic development projects, according to Jones. Jones said the city could cancel the loans with no impact on its credit rating, no tax impact, and no effect on future grant eligibility.
“Probably the biggest downside or downside would be that these funds, if they were to be forgiven, would obviously not be returned to the city and would not be used for new projects,” Jones said.
Prairie Winds currently has $ 1.6 million in long-term liabilities, according to a balance sheet for the property that was presented to the EDA on August 9. Jones said that with the cancellation of the three loans by the city, the EDA would likely be in equilibrium if the property is sold to the interested party.
“It would be nice to see it in the hands of a private developer, but, again, why should we supplement the private developer purchase of this by forgiving them, because, in theory, that’s what we would, âCouncilor Dan Delaney said.
Delaney said it didn’t seem fair to forgive hundreds of thousands of dollars in loans. He suggested that the EDA find out what the appraised value of the property is and advertise the property to see if there would be a buyer who would cover all of the EDA’s unpaid debts. Delaney also said he felt the board did not have enough details on the potential sale.
Councilor Justin Schroyer said he had the same concerns as Delaney.
Other board members, who are also members of EDA, supported the cancellation of the loans. Mayor Myron Koets said the building’s maintenance costs would likely increase in the coming years as the building ages, adding to the EDA’s expense to operate it. Councilor Jim Stout said EDA should not be in the rental business and if the property is sold to a private party it would add to the city’s tax base. Jones said the EDA makes a payment in lieu of taxes for the apartment building that “is significantly less” than what a private owner would pay based on the property’s fair market value.
Delaney asked if there were any conflicts of interest regarding the potential sale of the property. Koets said there was none. Delaney said it calmed his mind.
After further discussions, Delaney and Schroyer said that after learning more information, they supported canceling the loans.