So, instead, City/CHEDA leaders might this year focus instead on a smaller state investment in infrastructure for expanded Vertical Malt and the proposed soy innovation campus.
City of Crookston and CHEDA leaders are applying the brakes on efforts to secure $7 million in state bonding dollars from the Minnesota Legislature this year that would help cover around half the cost of the infrastructure necessary to build Epitome Energy on Crookston’s southern edge, after receiving a blunt assessment from legislators representing Crookston in St. Paul of their chances of having that much money included in the 2020 Capital Investment bill.
Instead, it appears that a scaled-back, potentially multi-phase bonding pursuit will be initiated, with the City in the 2020 legislative session initially seeking a smaller state bonding investment to help pay for the infrastructure needed for smaller economic development projects adjacent to the proposed Epitome Energy site, including Vertical Malt’s planned expansion and the proposed soy innovation campus that is complementary to Epitome Energy but not believed at this point to be dependent on the existence of the much larger soybean crush and biodiesel facility next door.
District 1 State Sen. Mark Johnson (R-East Grand Forks) and District 1B State Rep. Deb Kiel (R-Crookston) on Thursday attended a special Crookston City Council Ways & Means Committee meeting at city hall, with the City’s pursuit of bonding dollars the lone agenda item.
It’s estimated that the total cost for the infrastructure is approximately $14.2 million, with around $8 million of that involving earth-moving and the rest the actual roads and pipes and other utilities-related equipment that would need to be installed. While the thinking would be that $7 million in state funds would help cover most of the cost of moving dirt and that Epitome Energy would cover the remaining infrastructure costs, Epitome and its founder and CEO, Dennis Egan, have not committed to that in writing. When City Finance Director/Interim City Administrator Angel Weasner told Johnson and Kiel Thursday that the City, if Epitome Energy initially intended to but eventually did not cover an estimated $6.2 million in infrastructure costs after the state committed $7 million to the project, would not be in a financial position to cover the debt service on the $6.2 million, Johnson recommended that City/CHEDA leaders reconsider their approach.
The current approach, Johnson predicted, would not go over well if he pitched the City’s bonding request to Senate Capital Investment Committee leadership. “They’ll want to know about local money; they generally look if there’s any local match,” Johnson said Thursday. “Without local money it’s not going to float.”
While the City/CHEDA have committed $250,000 to help Epitome Energy pay for consultants and other costs related to the lengthy permitting process – local money that is also helping to free up dollars committed previously by the Minnesota Department of Agriculture – Johnson said touting a $250,000 local investment on a development expected to total around $225 million is not going to impress the powers-that-be in the legislature.
If he is unable to produce something in writing from Epitome Energy or any other stakeholders that indicate the costs of the remaining infrastructure will definitely be covered, Johnson said the proposal would likely be doomed. “They’ll want to know what the company is putting up, and if I say there’s no commitment letter but there is real interest (in covering the remainder of the infrastructure costs), that’s going to be the end of the conversation right now,” Johnson continued, adding one of the legislature’s chief concerns would be lowering the State’s risk. “Right now the risk profile is so huge, if this goes sideways, the City ends up looking the part of the fool and we look like we didn’t do our homework,” he said. “As time goes by and we don’t see more commitments, I get more and more nervous. Things that should be happening aren’t happening, so, now, if we make a huge ask, we’re really sticking our necks out. We have to look at the facts, and I’m not comfortable bringing something like this forward with the information we have.
“We all want to see (Epitome Energy happen in Crookston),” Johnson added. “But we need some goals, we need some mile-markers for Epitome to hit. I’ll just be laughed out of the office if I bring (a City bonding proposal) in this form.”
Speaking to the Times Friday, CHEDA Executive Director Craig Hoiseth, who attended Thursday’s meeting, said he’s not surprised by Johnson not sugarcoating the likely response from legislative leaders in St. Paul.
“You certainly gain attention in legislative committee as they see leverage being created. We completely understand that, and although neither the City of Crookston or Epitome Energy has the resources at present to support such high matching dollars, we wanted to make sure we did not miss an opportunity because of 2020 being considered a strong bonding bill year for Minnesota,” Hoiseth said. “We recognized we may be a bit early with such an ask.”
But a smaller ask might be more palatable. After years of continuous growth, father and son team Adam and Tim Wagner are poised to leave Valley Technology Park and construct a new facility for Vertical Malt on a small portion of the 106 acres the City owns across the road from Ingersoll Avenue. And the soy innovation campus, which last year was awarded $5 million from the State, would be a hub for all sorts of research and experimentation focused on maximizing the benefits of soy and other commodities grown in the region, while at the same time being envisioned as a much smaller version of Epitome Energy that would serve the larger facility when necessary.
Both of those smaller development projects need infrastructure as well. Johnson and Kiel said a smaller ask in 2020 focused on growing local business, furthering valuable research and benefiting farmers in the region by investing state dollars in needed infrastructure would likely be received better in the halls of the state capitol. Then, once Vertical Malt and the innovation campus are a reality on Crookston’s southern edge, Johnson said, if Epitome Energy is in a better financial position at some point along the way to help back a larger request of the State to help with the next phase of infrastructure work, things might continue to trend in the right direction.
What was by most accounts the worst across-the-board harvest in the region in 2019 that anyone can remember has made farmers especially hesitant to invest in things like Epitome Energy and, although details are hard to come by, it appears the poor harvest and farmer reluctance to take on more risk have combined to slow Epitome Energy’s equity drive. Given that, Hoiseth said he understands the recommendation from Johnson and Kiel to take a step back and explore a phased approach.
“If our state legislative team recommends we move forward in phases, that is great advice. They are in tune with the dynamics much more than we are, and is the reason we sought their support and wisdom at the meeting,” Hoiseth tells the Times. “Both Mark and Deb have been great champions for Crookston and the region, and we want to make certain we put them into winning situations as they sponsor and advocate on our behalf.”
“You can focus on growing local businesses and if Epitome becomes a part of that, even better,” Johnson said. “Then it has more credibility; you focus on the local (businesses) first, and then you can say, ‘Look how good this is.’ …Right now, if you could start with more of a sustainable, local type of project, I would bring that forward. It could be perfect. Then, if something (with Epitome Energy) happens between now and then, you could bring a bigger deal.
“You risk zero if you focus on smaller, local growth,” he continued. “With Epitome, there’s no track record, no existing business. That’s a big hill to climb.”
Johnson and Kiel said Thursday that if City and CHEDA leaders decide to go with a smaller State ask during the 2020 session, they’re going to need to come up with detailed figures and a detailed proposal within the next month.
Hoiseth said the Wagners are scheduled to offer the latest details on their expansion plans to the CHEDA Board of Directors later this month. And, prior to that, on Jan. 13, Hoiseth said the inaugural board meeting of the “Soybean Innovation Center” will take place. He said he’s been asked to serve on the interim board. “Certainly there are a lot of decisions to be made in the upcoming weeks, but certainly the Center will be compatible and complementary to having Epitome Energy next door,” Hoiseth noted.