Armory Square project moving forward, awaits city acquisition decision
The Armory Square Project received a vote of confidence from a hired business consultant as the project works toward fulfilling grant fund requirements. The Park Rapids Economic Development Authority held a workshop discussion Tuesday to discuss the project as the city considers taking ownership, as long as redevelopment goals continue to be met. The Upper Mississippi Center for the Arts (UMCA) presented its pro forma, or business plan, to the city Tuesday. The pro forma fulfills one of the requirements for the city to receive a $2.5 million grant from the state, if the city assumes ownership. Grant Oppegaard, a business consultant Small Business Development Center, was hired to review the pro forma.
“I believe that this project has a much higher likelihood of success than other projects that I have been asked to give a business assessment on their operations.” Oppegaard said. “This is mainly because of the no-debt load assumption in remodeling of the Armory Square with the $2.5 million state grant to the city.”
Nicole Lalum, representing the Upper Mississippi Center for the Arts (UMCA) board, helped put the pro forma together. “We have a plan in place now that includes a multitude of revenue streams, everything from food and beverage to ticket sales to event space rentals, grants, contributions, memberships, and sponsorships,” Lalum stated at the meeting. “There’s a multitude of ways to bring in revenue to cover expenses.” “The most important thing is for the plan to flexible and adaptable,” she said. The plan is to do numerous things on the drill floor like film festivals, theater productions, banquets, weddings, that sort of thing.
John McKinney, city adminstrator, said in order for the city to proceed, a number of things will have to happen. One being, the city would have to have an agreement with the Minnesota Management and Budget for the grant. The city recently contracted a firm as compliance council to help the project meet the requirements of the state. One question is how much of the existing facility would be included if the city decided on the aquisition. Since the state is going to provide the $2.5 million grant as a tax-exempt bond, McKinney said the city needs to stay in compliance with the treasury regulations with the U.S. government. That will be required on several levels. Since the funds would come from a tax-exempt bond the Mexican restaurant currently leasing space in the building is a private activity and would not be part of the acquisition, but would remain under ownership of the redevelopment group. In May, 2014 the Minnesota Legislature approved an appropriation for a grant of $2.5 million to the EDA to acquire the Armory Square project for use as the UMCA.
Alan Zemek, representing the redevelopment group informed the EDA and council they have secured contingent financing in the amount of $325,000 from Midwest Community Development Corporation (MCDC) to provide construction financing to complete the project to the point that a certificate of occupancy can be secured. In order for the city to take ownership of Armory Square, and ultimately receive the state grant a number of tasks must be completed. The city council has not yet made a decision on ownership but continues to work with developer Zemek and the UMAC to fulfill the state grant requirements.
That process is set out in two phases, with work in phase one nearly complete. McKinney stated some point soon the city needs to say if it’s committed to the project or not. In order to do that the EDA and city council are looking for evidence of sustainability. Legal counsel advised, the EDA needs to determine whether it wants to move forward with ownership of the project and taking the required steps to finalize the end grant agreement to receive the state grant funds. Factors to be determined include availability of funding necessary to complete the project and feasibility of the project going forward. Business consultant Oppegaard calls the 5-year pro forma plan a “realistic” projection and a “low risk” of this business operation requiring any cash infusion from the city during the next five years.
“I believe there will be significant positive economic impact on the downtown and surrounding area businesses,” he stated