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EDA commits to purchase Armory Square

Renovation of Armory Square continues as the Park Rapids Economic Development Authority on Tuesday approved a conditional purchase agreement with the developer. The city will now submit paperwork to the state required to receive a $2.5 million grant. (Kevin Cederstrom / Enterprise

In a split vote Tuesday the Park Rapids Economic Development Authority and city council committed to purchasing Armory Square.

The council voted 3-2 to accept and conditionally approve a purchase agreement and submit other required documents to the Minnesota Department of Management and Budget (MMB) for review.

Taking ownership of the historic facility is necessary for the city to receive a $2.5 million grant from the state and proceed with the project. The city will own the building and  lease it to the Park Rapids Community Development Corporation doing business as the Upper Mississippi Center for the Arts. This is a local, non-profit organization that will raise money for operations.

Paul Utke made the motion Tuesday, seconded by Erika Randall. Rod Nordberg joined them in voting in favor of the motion, while Ryan Leckner and Mayor Pat Mikesh voted against.

Mikesh said he is concerned if the project fails the city and its taxpayers are stuck maintaining the building. He said his primary responsibility is to look out for the taxpayers of Park Rapids and does not want this to be a tax burden.

Leckner stated during the discussion he would have liked more time to study the updated information regarding the PRCDC’s operating budget proposal presented Tuesday before making a decision.

Although he voted against the motion on Tuesday, Mikesh acknowledged the potential economic development benefits to the city in having a successful arts and events center downtown.

"This is our city project now and I stand behind our council’s decision," Mikesh said. "It’s something we’ll have to work together as a community to make successful."

Now that the council and EDA approved the purchase and committed to owning Armory Square, Mikesh added the community needs to get behind the project and support it as an arts and events center for the Park Rapids area.

The state MMB must approve the submitted documents and plan before awarding funds.

The state legislature in 2014 allocated $2.5 million in bonding to renovate Armory Square into an arts and events center. This is a grant, not a loan, and in the event the city does receive the money it does not have to be paid back to the state.

The city can use the appropriated grant money, up to $2.5 million, to purchase the building. The bonding legislation requires the building be used as arts and public events center.

Under the proposed purchase agreement the city would purchase Armory Square from Armory Square Management Corporation and Alan Zemek.

 The building has undergone extensive renovation including lead, PCB and asbestos abatement, ADA compliance issues, new multi-zone heating/ventilation/air conditioning system.

The developer has secured a loan for the estimated $350,000 needed to complete the project.

If the state approves the plan, awards the $2.5 million grant and the city takes ownership the PRCDC would then be in charge of running the facility.

Lowell Wolff, one of the PRCDC directors, presented information prior to the EDA’s decision. Wolff said the PRCDC will use a number of workgroups to operate the Armory until enough funds are secured to hire staff. Those workgroups include Promotions & Marketing, Finance & Development, Facility, Education Development, and Gifts & Gallery.

Prior to making a decision the council toured Armory Square to see the renovation and determine what needs to be completed as part of the purchase agreement.

Not included in the purchase agreement is the installation of an elevator that would reach all levels of the facility. At an estimated cost of $200,000 the PRCDC has made this a priority for its capital campaign now that the city has agreed to purchase the facility.

A number of those in attendance at the meeting were in favor of the city purchasing the building and the PRCDC move forward with the project as an economic development asset to the community.

Kathy Grell, along with David Collins, as part of the PRCDC’s finance and development group presented an updated financial plan to the council for the meeting.

The overall financial plan included budget, proposed funding sources and capital campaign information.

"The capital campaign is very, very important but it’s also important to make sure this building is the face of the community," Grell said. "It will be an economic driver in drawing people from around the area and garner more support from our seasonal people that come here spring, summer and fall. It’s going to be a big plus to this area."

Flo Hedeen told the council, "I look at this as an investment that the city makes in our community. You do take risks when you make an investment. As a taxpayer in the city of Park Rapids I look at this as an investment."

Randall agreed this is an investment because the city will own the building and the EDA needs to shift from thinking it will not cost the city anything to looking at the project as an investment.

Butch DeLaHunt, president of the Park Rapids Area Chamber of Commerce, said he believes strongly the city and community can make this project successful.

A frequent question and concern among city council members and taxpayers is, what happens if the project fails?

The process of being approved for the grant has safeguards to assure Minnesota Management and Budget that the project can operate successfully, according to information presented at Tuesday’s meeting.

If the PRCDC fails to generate enough money to operate the Armory, the city would still own the building and could lease the space. The city could sell the building with a portion of the money from the sale likely returned to the state.

Vallarta’s Mexican restaurant is not part of the Armory purchase. The bonding requirements state that the public entity, in this case the city, owning the building cannot own a for-profit operation. That portion of Armory Square will remain with the developer.