At the July 6 Detroit Lakes Development Authority meeting, Detroit Lakes Waterfront LLC developer Drew Olson was given a 12-day extension on his project, which this week, he was not able to meet.
Olson was given the extension specifically for his application regarding Recovery Zone Facility Bonds. The bonds are a "type of private activity tax-exempt bond...used to finance certain kinds of business development activities in areas of significant economic distress," according to the Department of Commerce website.
"The bond principal and interest is repaid by the revenues generated from the private project," stated the Saint Paul city website.
The Waterfront project, which is to be located at the corner of Washington Avenue and West Lake Drive, will clean up the distressed area of the Capri Motel. It will be a mixed-use building with condos on three upper levels and commercial space on the ground level.
"Drew withdrew his application for recovery zone bonds," City Administrator Bob Louiseau said. "It's my understanding that he is still trying to move forward with securing financing for the project, but as of yet, he has not finalized that."
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Olson assures that just because he missed the DLDA-set deadline doesn't mean he just gave them up and that he won't use the bonds if everything falls into place in the near future.
In a letter to the DLDA, Olson said that although they are losing the exclusivity to the bonds, "it's not because we cannot provide all requirements set forth by the city."
He said in a phone interview that the main concern is because if the project should be delayed or "worst case scenario this project should never happen," the project investors would end up paying the interest on the bonds for years to come.
"We could be in a position that we'd lose a tremendous amount of money for not using those bonds," he said.
Since Olson took the initiative to bring the recovery zone bonds to the city, the development authority has been patient in helping him with deadlines to get funding in order.
With the state bonds, Becker County had an allocation, and Olson said he went through the process to get those bonds to the city and designate a site as a recovery zone.
"It's a tight window," he explained of using the recovery zone bonds. "They have to be purchased by Dec. 31 of this year or they just go away."
The benefit of the bonds is that the interest rate is lower that a traditional loan.
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Now though, after an extension, the DLDA is offering the option of the $1.3 million in recovery zone bonds to other developers in town who may benefit from them.
"We are letting other developers know that they (the bonds) are available," Louiseau said, adding that the city will likely send out information on the bonds to developers next week.
To meet the deadline of July 27, Olson had a list of five items to complete before the DLDA would offer the bonds elsewhere:
He was asked to provide evidence that the land is under contract; evidence the project financing is in place; a detailed project schedule; design approval for the development authority (which he got at the July 6 meeting) and a completed application along with payment of the $5,000 application fee.
"I guess what I wanted to do is say, 'guys, if somebody else happens to step in, we think it's probably in the best interest of getting them used...'" Olson said.
If everything on the Waterfront project irons out though, he said they can still jump in and apply for the bonds.
"We wanted the development authority to know that we weren't being greedy and to keep dragging this along. Really at this point, we're not sure we'll use them or not," he said of the recovery bonds.
In the letter to the authority, he also offered to help anyone else apply for the bonds since he has done the legwork and understands what needs to be done.
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He said even if the bonds aren't used, he plans to go forward with the development. He had hoped to close on the land by the end of July, but hasn't yet.
The site is also designated for tax increment financing, which Louiseau said is good for two years from when the land was designated a TIF district, and that Olson has about a year left.
"We're right there. It's just a matter of tying up some loose ends," Olson said. "It's definitely not panic button time yet. We're just trying to make sure that all of our ducks are in a row."
