Rushford hits at Economic Development items

Rushford’s Economic Development Authority (EDA) had some new recommendations for the city council at the Monday, August 13 meeting. Both involve area businesses which have received EDA funding and both solutions were noted as a winning situation for both the city and the businesses.
For some time, the city has been working with Loken’s Rushford Inn owners Mike and Eileen Loken to review cash flow and several other factors. The city hired attorney John Abress, of Wendland/Utz, in April to provide options for the city to recoup the funding. Per EDA policy, the city provided default notice to Lokens June 19 once repayment on the EDA loan stopped in January. Payments to Rushford State Bank did continue as scheduled.
Abress provided four options to the city: (1) Foreclose the mortgage, (2) Accept a deed in lieu of foreclosure with the bank’s consent, (3) pursue litigation to collect the outstanding amounts due, or (4) wait for Lokens to fully satisfy the bank’s loan, but do nothing else for now. The costs associated with option one ranged from $3,500-6,000, option two from $1,500-4,000, and option three $4,400-10,0000.
“We felt we should make a decision one way or another. The EDA is recommending option four,” noted City Administrator Tony Chladek. “With every payment, principal and interest they make to the bank, we get a stronger collateral position and we earn more interest. As some point in time, the bank will be paid off and we’ll be in the first position. This loan is different than others because this business has a physical asset.”
Councilor Sally Ryman noted the city should be kept in the loop to be sure of the bank status and with property evaluation to make sure it continues to be an asset. The property is currently for sale.
Councilor Andrew Linder questioned the effect of a bankruptcy, should it go that route. “We didn’t want to push them into that situation,” responded Chladek. “We’re not in a strong collateral position. It doesn’t make sense.”
“This feels like a positive for the whole community; stronger for everybody,” added Councilor Terri Benson.
Ryman also noted Lokens continue to make steps to improve their business. Unfortunately, it was noted there is just not enough cash flow to pay both loans. “This just really feels like the right way to go,” added Ryman. The council approved the EDA recommendation unanimously.
Another EDA item on the agenda was the approval of a request from GForce for a limited, interest-only payment plan. The company has had a number of forbearances granted, while it works out its products and marketing. Per EDA policy, no additional forbearance can be granted on the loan.
The request was for an 18-month, interest-only schedule, with regular repayment schedule resuming after that time. The company’s Ridge Road Outdoors division is in a promising joint venture with HT Enterprises. The Chief Operating Officer of HT Enterprises, also a Certified Public Accountant, has been in contact with the city and is working with GForce to address financing. According to Chladek, this is a viable option for businesses trying to get themselves squared away financially.
“According to their banker, this is probably the best thing that could have happened to them. They’re getting assistance from several people with extensive business backgrounds,” said Chladek. “With this particular situation, the strongest tool we have in place is a notice of judgment. The long and short is, they have paid back tens of thousands of dollars.”
HT Enterprises specializes in ice fishing equipment, which is sells in big box stores, but the company is trying to pull that operation together with GForce’s marketing through Ridge Road Outdoors. “Based on the information I saw, it’s a strong presence,” added Councilor Terri Benson. “I think they’ll only make Ridge Road Outdoors clientele grow. It feels like a very realistic stepping stone. In the past [previous to recent loan repayment], it was sporadic at best. This feels very strong.”
The council opted to give GForce a 12-month, interest-only repayment schedule. After that time, review of the standing will determine whether or not an additional six-month period is needed.
“They put together the best deal based on the business. This is the right deal for the business,” added Chladek.
In other news, the council has approved the purchase of a used 2004 Ford F450 4×4 Diesel for the fire department. The current rig is a 1983 Chevy Modified 4×4 given to the city in 2012 thought a Department of Natural Resources (DNR) Excess Property program. The vehicle is outfitted as a wildland, grass-fire suppression unit.
Because this unit was purchased with federal money and given to the city, it may need to be given back to the department, rather than traded. The DNR has indicated to Chief Chad Rasmussen that it doesn’t want the rig returned. If it can be traded, it would net $3,000-4,000 that could be used to offset the cost of a replacement vehicle.
State bid prices for a new vehicle came in at $41,000-48,000. A used unit was identified for $15,000. If purchased, the department would hire Connaughty Sales to move the skid unit onto the new truck. Volkman’s Auto Body would be hired to paint the vehicle. Additional items such as truck identification lettering, installation of a radio and front emergency lights would also be needed. The cost for this work is not expected to exceed $8,000.
Funding for the purchase would be split 25%, department General Fund, and 75%, Fire Mill Rate Fund.
Councilor Andrew Linder noted problems with this line of trucks, unless a “bulletproofing” or “studding” is done to it. He estimated it can cost an additional $8,000-10,000. “It will be a very expensive truck to maintain. New diesels are just so finicky,” he noted.
The council approved the purchase of the vehicle with the caveat the Linder’s concerns be brought to the attention of the department prior to purchase. An email summary from City Clerk Kathy Zacher, following close of the meeting, indicated that after discussion with the department, it appears the truck has had the additional “studding” work already completed and that the department will be moving forward with the purchase.
The next regularly scheduled council meeting is Monday, August 27, at 6:30 p.m., at city hall. The public is encouraged to attend.