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The Park Rapids City Council voted to give the project a second $150,000 loan once the first note is repaid. (Anna Erickson / Enterprise)

City votes to give Armory project second $150,000 loan

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news Park Rapids, 56470
Park Rapids Minnesota PO Box 111 56470

Each trip outside the Armory building reaffirms to Alan Zemek he's embarked on a meaningful mission to save the geriatric structure from the wrecking ball.

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He's turning the 1928 structure into Park Rapids' crown jewel.

"If I'm standing out in front of the Armory talking to a contractor, everybody who walks down the street, people I don't even know, will say, 'Oh I'm so happy to see something happening here. I played basketball here when I went to school... I went to sixth grade here in the classrooms... My Mom was at the craft show.'

"Anyone of adult age in Park Rapids seems to have a personal memory associated with that building," Zemek said of the positive reinforcement he's gotten over the lengthy renovation that began with asbestos and lead paint removal.

Tuesday the Park Rapids City Council voted to give the developer a much needed injection of funds to move the project forward.

The council already has advanced Zemek $150,000 from an Economic Development Authority revolving loan program. As repair bills come in, the city sends those on to the state and is eventually reimbursed from a state grant. To date $80,000 in invoices has been forwarded for reimbursement.

However, in a quirky vote, the council essentially voted to lend Zemek that same $150,000 back once it's been repaid to keep the project going.

That could entail months of paperwork. To date, the city has not received any of the state monies back, although they are guaranteed.

The problem is that Zemek wants the process moving along more speedily.

"They specified when Alan repays the current loan that's out then they would advance that money back to him under a different instrument, a different loan," City Administrator Bill Smith said.

"The second 150,000 will come once the first 150,000 is spent and reimbursed," he reiterated of the council vote.

"That's what the city council said," Smith said. "I'm not sure they understood they said that. They collectively are wanting this to go forward and go forward quickly."

The terms of the second $150,000 installment will be five years at 1 percent interest, with full amortization of the loan in 20 years. It is anticipated that some type of balloon payment would go into effect after five years.

Mayor Nancy Carroll said the city needed to act on the loan to prevent the project from stalling.

"The community is in favor of this," she said.

The loan will be secured through the increment financing that will come via the tax district created for the project. As a backup, Zemek and his wife personally guaranteed payback for added security on the note.

Zemek said he's renovating the building's garage for retail space, which will be the first step of the development.

"We're developing a couple of different (retail) concepts but the development plan from the beginning has envisioned a mixed use of the property," he said. "The garage space we're working on now, we're bringing that floor up to street level so we can create some commercial space on that corner and that would be an anchor to start from to develop the rest of the property."

Zemek said as purely an events center, the facility may not earn enough to pay off the loans and TIF district.

"The building is really too big for one single dedicated user," he said. "The problem we'd have with any community-based activities in the gymnasium part, it's hard to generate revenue to keep those activities going.

"So basically the goal of the first phase of the redevelopment is to get something on the corner that's commercially viable that will help cash flow the investment cost of the loans and that will kind of be our launching point for the development of the rest of the project," he said, thanking the council.

In other business, the council voted to reimburse the cost of replacing sprinkler systems in the southwest part of the city that were damaged during recent street and sewer construction.

Although the sprinkler systems were in the city right-of-way, residents said they spent anywhere from $200 to $1,000 for repairs.

Although the city has not traditionally reimbursed those costs, Carroll suggested in this case it might be warranted as a gesture of good will.

The city will evaluate all of the bills and reimburse only replacement costs, not for upgrading property owners' sprinkler systems.

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