Opinion ID: 1578403
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Heading Rank: 8

Heading: Big Stone Projects and Community Benefits

Text: 61. On December 28, 1983, a Memorandum of understanding between the Authority and Big Stone detailing the respective obligations of the Authority and Big Stone in connection with loans to be made to Big Stone to be made by the Authority was executed by David C. Kraus, President of Big Stone, Inc. The loans are to be financed by the issuance by the Authority of revenue bonds, by the payment by the Authority of certain fees, and by the establishment by the Authority of reserve funds and bond insurance accounts with respect to the bonds. Ex. B; Kraus Aff. 62. Big Stone will contribute at least ten percent of the total capital costs of the projects in the form of an equity contribution of $68,400 to fund the projects. Ex. B; Kraus Aff. 63. Big Stone is ready, willing and able to proceed with the projects upon the terms and conditions set forth in the Memorandum of Understanding. Kraus Aff. 64. On December 20, 1983 Dougherty, Dawkins, Strand & Yost, Inc. (hereinafter Dougherty) together with Van Kampen Meritt, Inc., entered into a commitment to underwrite the Big Stone bonds. Ex. R. Dougherty would not have entered into the commitment if the bonds were not to be insured. Peterson Aff. Dougherty continues to be ready, willing and able to fulfill this commitment. Peterson Aff.; Ex. R. 65. Van Kampen Merritt, Inc. continues to be ready, willing and able to fulfill this commitment. Van Kampen Merritt, Inc., would not have entered into the commitment to purchase the bonds if the bonds were not to be insured. Trim Aff.; Ex. R. 66. On December 6, 1983, Victor R. Haen, the treasurer of Big Stone, submitted an application to the Authority for financial assistance for a business development project, a pollution control project and an energy conservation project. Kraus Aff. 67. Each of the projects is within the corporate purposes authorized by the Articles of Incorporation of Big Stone. Mr. Haen was authorized to submit the application on behalf of Big Stone. Kraus Aff. 68. The business development project at Big Stone consists of installation of equipment to freeze vegetables in bulk for later processing into canned bean salads; canned peas and carrots; and canned mixed vegetables. The project will be located at Big Stone's facility in Ortonville, Minnesota. Kraus Aff. 69. The ability to freeze vegetables for later canning will enable Big Stone to increase its efficiency by using its own raw vegetable stocks rather than purchasing frozen vegetables from other processors. The total estimated cost of the proposed project is $234,000. Kraus Aff. 70. Project costs include $64,000 for a 7 to 10 ton tunnel freezer, $25,000 for compressors and other equipment; $75,000 for building modifications for a cold holding room; $10,000 for totes (containers for frozen vegetables); and $60,000 for electrical, plumbing and equipment installation. Kraus Aff. 71. The project will provide 6 summer season jobs with an increase to the annual payroll of $27,300. The jobs created are new jobs and the project will not have the effect of transferring jobs from one area in Minnesota to another area in Minnesota. Kraus Supp.Aff.; Auger Aff. 72. The estimated useful life of the business development project is between 10 and 20 years. Kraus Aff. 73. No additional public facilities will be needed to support the business development project. Kraus Aff. 74. The pollution control project at Big Stone consists of the installation of a forcemain and irrigation system to provide wastewater treatment which will enable the company to meet state and federal water pollution laws and rules at its facility located in Arlington, Minnesota. Installation of the pollution control project is required as the result of a stipulation agreement entered into between Big Stone and the Minnesota Pollution Control Agency (hereinafter PCA), effective February 23, 1983. Kraus Aff.; Gardebring Aff.; Ex. U. 75. The PCA has determined that the existing pollution control facilities used by Big Stone do not provide acceptable waste treatment. The PCA has documented that overspray and runoff of waste water has occurred. Two fish kills have occurred in nearby surface waters because of the runoff from the spray field. Gardebring Aff.; Ex. U. 76. The PCA has previously granted Big Stone an extension of time for compliance with pollution control permits due to economic hardship to Big Stone if immediate compliance was required. Gardebring Aff.; Ex. U. 77. The PCA stipulation agreement requires Big Stone to construct the new spray field in three stages. If the system is not completed by 1985, the PCA is prepared to enforce the stipulation agreement. Gardebring Aff.; Ex. U. 78. Construction of the Big Stone pollution control project will improve water quality through the abatement of pollution. The improvement in water quality will improve the environment and help perserve public health. 79. The energy conservation project at Big Stone consists of the installation of equipment to use hot discharge water from the canning process for boiler infeed water. The total estimated cost of the proposed project is $30,000. Project costs include $20,500 for custom equipment; $1,500 for engineering and design; and $8,000 for installation. It is estimated that the project will save $15,075 per year in natural gas costs and $1,200 per year in water costs. Kraus Aff.; Dumagan Aff. After prorating these project costs, it will cost the Big Stone $.81 to avoid consuming each one million BTU of natural gas, which would cost $5.50 if it were consumed. Therefore, the net gain from the investment is $4.69 per one million BTU of natural gas conserved. Dumagan Aff. 80. The impact of the Big Stone project on the community of Ortonville will be as follows: a. Expansion of Local Tax Base. While the assessed value of the City of Ortonville increased by approximately 27% between the years 1979 and 1983, local taxes collected increased less than 9% during the same period, according to data obtained from the Minnesota Department of Revenue. The reason for this inconsistency is a decrease in the mill rate and an increase in state tax credits. The taxes collected in Ortonville have, in fact, decreased from $750,175 in 1979 to $704,163 in 1983. The proposed Big Stone business expansion project, a $165,000 capital improvement, will generate approximately $2,310 in new local property taxes to be shared by the city, county, and school district. b. Creation of New Jobs. The proposed business development and expansion by Big Stone is expected to create six part-time positions in the City of Ortonville. The net impact is expected to benefit low and moderate income persons at entry level wage scales. The freezer will also help to turn what has, in the past, been a seasonal business cycle into a year round operation that will help to balance out demands on other phases of production. Each new part-time position will consist of 1,300 workhours per year. c. Benefit To Low and Moderate Income Persons. A major state and federal objective of economic development assistance programs is to provide direct benefits to low and moderate income persons. Low and moderate income is defined as 80% of the median income for the area. The median family income for the City of Ortonville in 1979 was $17,064. Big Stone, Inc., proposes to hire six part-time employees (3.75 full-time equivalents) to operate the freezing equipment on a seasonal basis. Wages for these positions will be approximately $3.50 per hour, which is equivalent to $7,270 per year. Thus, these positions will tend to be filled by persons of low and moderate income. It is also anticipated that the positions created may provide sources of supplemental income for underemployed area residents. d. Secondary Impact of Project. The secondary impact of the Big Stone Project will include temporary construction jobs ($60,000), and local spending within the Ortonville economy which will result from the increase in the payroll of Big Stone at its Ortonville plant. Auger Aff. 81. Conventional commercial financing for the business development, pollution control and energy conservation projects is unavailable on the terms set forth in the Memorandum of Understanding with the Authority. Kraus Aff. The availability of financing from the Authority is a substantial inducement for Big Stone to undertake the projects to be so financed. Kraus. Aff.