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EDA wants new 3 Sisters contract | News, Sports, Jobs

Representatives of the Three Sisters Project, Deanna Lahre, Janie Hanson, and Don Lipps in discussion with the EDA.

An action-packed Blue Earth Economic Development Authority (EDA) board meeting on Thursday, Oct. 14, dealt primarily with a single topic: the fate of Rural Renaissance’s Three Sisters Project.

After receiving an update from project creator Janie Hanson at a regularly-scheduled Oct. 4 meeting, the Blue Earth City Council left the status of the project up to the EDA’s discretion.

The EDA has already expressed frustration at the project’s status. 

“We as a board have been strung along and our ears merely tickled with information of progress, yet no visible progress has been made, nor have either of the requirements been met,” said board member Lissia Laehn in a written correspondence.

At this meeting, the EDA’s primary goal was to determine whether the original terms of the development agreement with the Three Sisters Project have been adequately met, and if not, whether they will grant the organization additional time to fulfill the agreement.

Deanna Lahre, a member of the Rural Renaissance Project and partner of Hanson, brought a few requests to the EDA and to the City Council in light of the expiration of the project’s extended Sept. 30 deadline.

Lahre requested the two groups “approve that the terms of the development agreement have been met to the satisfaction of the EDA and Council.”

An additional request from Lahre asked that the boards “approve that ownership in (the Three Sisters Project) may be transferred from the non-profit Rural Renaissance Project at its sole discretion to private owner(s).”

Before agreeing upon terms, the EDA sought clarification from the Three Sisters Project representatives who were present: Lahre, Hanson, business consultant Don Lipps, and Three Sisters project manager Nathan Wright, who attended via Zoom.

EDA board president Peggy Olson first inquired why approval was being sought to transfer ownership to private owners.

Hanson replied, “There is a big concern for some of the financing. Options that are attractive right now require having a person own the property. We’re a non-profit.”

Hanson was not willing to supply specific names of parties who were interested in ownership.

EDA board member Bill Rosenau expressed concern at this, noting, “You can’t seek financing until you get your ownership group finalized.”

Hanson responded, “We don’t want to finalize an ownership group yet, because we’re not sure if the city is going to take the buildings back.”

Financing for the Three Sisters Project was another core concern expressed by the EDA.

Rosenau said, “One of the things I’m frustrated with is that we talked about financing at the last meeting. You were going to provide a letter to the city council on financing. But here we are, and you don’t have financing.”

Hanson explained, “We couldn’t get financing until we had the bid package all together. We’ve got a final one now, we’re just going through to make sure we have the final cost.”

Rosenau countered, “I’m concerned that you said you don’t even have your ownership lined up for this. Step one is to get financing.”

He added, “You’re not even started until you get your ownership group finalized. Do you have a date on when that’s going to be done?”

Hanson hazarded an estimate of 90 days, but was unwilling to commit to a specific date.

However, Hanson was willing to share the expected composition of the financial package she is pursuing.

“It will be a mix of equity investment and bank financing,” she explained. “We’re in discussions with lenders, and there’s a Shareholder Value Added (SVA) loan program available for this type of thing.”

Hanson was currently unwilling to share documentation of this with the board. “We’re not comfortable sharing that in public forum,” she said. “It has our business model.”

Lack of communication was a final bone which the EDA wished to pick with the Three Sisters Project representatives.

“Going into this today, my thought was we were going to take these buildings back because of lack of communication,” mayor Rick Scholtes admitted. “We gave you a six month extension, and now we are considering another one, and nowhere along the way has there been communication.”

The board was somewhat appeased by an update provided by project manager Wright. He was able to alleviate a few of the board’s concerns regarding the project’s construction progress.

Wright first clarified Three Sisters’s decision to contract with Knutson Construction, a large construction company which operates out of the Twin Cities.

“It’s important that Knutson is a larger company,” Wright explained. “They have the ability to gather people together for a project like this.”

Wright added, “My role is working with the contractor from Knutson and finding vendors to expedite things along. When you’re working on something with larger financial projects, things get held up with red tape.”

Wright also addressed project delays which both the EDA and City Council have been frustrated about.

“The issue is, when we were bidding, the entire project was running into labor shortages, particularly plumbers,” Wright said. “It’s also hard to find supplies and order supplies.”

Rosenau inquired about the status of the buildings’ HVAC equipment.

“The equipment has been paid for and purchased as far as HVAC goes,” Wright replied. “Furnace and oil has been ordered. The issue was RTs (rooftop units). They’re very difficult to find. They should be in by the end of the month.”

Wright responded to concerns about a lack of permitting applications seen at City Hall.

“I understand your concern, but also, when it comes to permitting, we don’t want to pull a permit too far in advance,” Wright said. “We want to make sure we are ready to go before we pull a permit so we’re not wasting anyone’s time.”

“I understand we’ve gone past deadlines, and that’s regrettable,” Wright concluded. “I wish I never had to miss a deadline. We’re all doing our best in the industry.”

Overall, the EDA was grateful to receive Wright’s update. “The information Nathan (Wright) brought in was excellent,” Scholtes said. “I got more information in the last 15 minutes than I did over the last two years. It’s frustrating.”

Scholtes continued, “Whether we take these buildings back or go forward, this is the type of communication we want to see.”

The board went into closed session to discuss the terms they were willing to offer the Three Sisters Project representatives.

“The proposal we’re putting forward would be a 60-day extension to provide us with some information,” Scholtes announced following the closed session.

“We’re going to want to see all the invoices you guys have acquired that show all equipment has been acquired throughout the process,” Scholtes said. “We want to see the ownership group list. Names, and percentage of ownership.”

He concluded, “We also want to see a commitment letter of financing from the bank. If all that is met, we will sign over the buildings. If it is not met, you will release us from all claims against the city of Blue Earth and all claims against the EDA.”

Hanson responded, “One thing that gives me pause is the commitment letter from the bank. Things are outside of our control for processes on when exactly the closing date would be.”

Rosenau said, “You need financing for this project. I would think within 60 to 90 days you should be able to receive a commitment letter from them.”

The EDA agreed to compromise with Hanson, offering terms which require a commitment of half a million dollars from the bank.

“Along with that, you have to show what your part is,” Scholtes added.

Hanson agreed to consider those terms and review the agreement at the next EDA meeting. City administrator Mary Kennedy will work with city attorney David Frundt to draw up documentation before that meeting.

“We’ve changed this whole agreement. It should be really simple for you guys to meet,” Scholtes concluded. “If you don’t get this done, we’re asking for a full release of everything.”

The motion to proceed according to these terms passed.

The EDA also addressed the following agenda items on Thursday morning:

• Presenting the Business Spotlight Award for October to Gartzke’s Floral and Gifts. Sarah Zabel, who bought the business along with her husband, Kevin Zabel, in February, was present to accept the award.

“It’s going very well,” Zabel shared. “It’s just a whole different level of busy-ness. Every day is different. I enjoy it very much.”

• Hearing updates regarding the search for local veterinarian Dr. Bob Bogan’s replacement following his retirement. EDA specialist Amy Schaefer said Bogan has narrowed applications down to two candidates for the position.

“It’s looking like we’ll have a new person in the clinic in January,” Shaefer said. “Fingers crossed it all works out smoothly.”

EDA wants new 3 Sisters contract