County board debates approval of zip line loan
After a motion to approve a county revolving fund loan for Superior Zip Lines failed for lack of a second at the county board meeting on July 23, 2013, a heated debate broke out, but it resulted in a favorable outcome for the applicant.
Hal Greenwood of the Cook County Revolving Loan Fund Committee brought a recommendation to the board for a loan of $250,000 to Matt Geretschlaeger for the construction of Superior Zip Lines, to be located just off the Gunflint Trail above Grand Marais.
Last July, the county board approved the loan upon the recommendation of the Revolving Loan Fund Committee. Three months later, the board approved a revised loan agreement that reflected changes in financing. That agreement was contingent upon Geretschlaeger securing a loan of $350,000 from the Iron Range Resource and Rehabilitation Board (IRRRB).
On July 23, Geretschlaeger returned to the board for a renewal of its approval because his financing had not been finalized within six months as required by county guidelines and because it was different from what had been stipulated: Geretschlaeger had not gotten a loan from the IRRRB, but he did get a grant of $191,000 instead. He also got a loan of $266,000 from the U.S. Small Business Administration.
The total project cost, including the land, will be $825,000 and will be done in phases. Geretschlaeger said he had contracts in place with fixed prices for construction. He expects to seasonally employ up to 26 people part-time and two people full-time.
Geretschlaeger had three pieces of property he would be using as collateral for the Revolving Loan Fund loan. The county would be in second position on Geretschlaeger’s home, valued at $535,000 last summer when the business plan was presented to the county board. The county would be in first position on two other pieces of property valued at $46,800 and $82,400.
On July 17, 2013, the Revolving Loan Fund Committee unanimously approved a $250,000 loan at 6.18 percent interest over 20 years. Geretschlaeger told the committee that he expected construction to begin in the fall for a May or June 2014 opening.
After the board was updated on where the project stood, the commissioners started asking questions. Commissioner Heidi Doo-Kirk questioned the feasibility of the project in an area as remote as Grand Marais.
Geretschlaeger explained that he had retained Geronimo Construction to build the two zip lines, saying that Geronimo had build 14 zip lines in remote places like this. The business only needs to make 50 percent of its projections in order to meet expenses. They have passed the scrutiny of the Small Business Administration, Geretschlaeger continued, which is known for scrutinizing business proposals. “In every case, we have passed the muster,” he said. “They asked the tough questions.”
In regard to some specific questions, Geretschlaeger referred to his business plan, which was given to the commissioners last July when they originally approved the loan but which he did not have with him at this meeting.
Commissioner Sue Hakes said she had the same questions as Commissioner Doo-Kirk and said she was concerned that he couldn’t answer all the questions off the top of his head.
Commissioner Bruce Martinson, who is on the Revolving Loan Fund Committee, said the committee had the business plan in front of them when they approved the loan. They had never had someone get a Revolving Loan Fund loan with as much collateral as Geretschlaeger, he said.
After some discussion, Commissioner Martinson made a motion to accept the recommendation of the committee and offer the loan to Geretschlaeger. The motion died for lack of a second.
Commissioner Gamble said it sounded like Geretschlaeger had been conservative in his projections, but he worried that revenue projections might not be realistic for this community.
Geretschlaeger said he thought the Revolving Loan Fund Committee did the legwork so it could give informed recommendations to the county board.
Gamble said he wanted to see the business plan before approving the request.
“He’s taking a lot of risk,” Commissioner Martinson said. Financial projections are subjective, even when made by experts, he said. He pointed out that Geretschlaeger had a lot of collateral, however.
“I have minimized my risk,” Geretschlaeger said. “I don’t choose to lose my home.” He said his projections were conservative.
The county board is responsible for protecting the public from risk, Commissioner Gamble said, adding that he wanted to see this endeavor succeed but wanted to be responsible. “I apologize for the angst that this creates,” he said.
Greenwood said that he was trying to help a business get started and that the Revolving Loan Fund has a good track record. “This is the first time this has ever happened,” he said, referring to the board not endorsing a recommendation from the committee. “If you do this today, this will kill it.” When discussions arise about a lack of jobs in Cook County, he said, “just think what you’ve done. …What are you thinking about?”
Greenwood took issue with comments about Geretschlaeger not being able to answer specific questions from his business plan off the top of his head. He referred to questions about the $9.5 million Cook County Community YMCA project, saying, “Why don’t you answer the questions when you’re fooling around with the community center?” he asked.
“I don’t think it’s our fault that you didn’t bring the business plan for us to review at this meeting,” Commissioner Hakes said.
Commissioner Jan Hall took her fellow commissioners to task at this point, saying they should have read the board packet they received ahead of time and sought out additional information they felt they needed in order to be prepared to make a decision.
“I have no agenda,” Commissioner Gamble said. He said that he just felt he would need more information before approving the loan and that he feels it’s his role to ask questions.
“This is the most difficult county to work with in my 40-plus years in business,” Geretschlaeger said.
County Auditor-Treasurer Braidy Powers reminded the board that they had approved the loan last October, contingent on obtaining other financing, which Geretschlaeger had done.
Gamble said he should have sought out the information he felt he needed ahead of time. “My intent is to try and make well-informed decisions,” he said. He said he did not want to prevent projects that would improve the county’s economy.
Commissioner Doo-Kirk said she would be willing to second another motion to approve the loan. Commissioner Martinson made the motion, and Doo-Kirk seconded it.
We are spending $9 million on a community center that is projected to operate at a loss, Commissioner Hall said, and that loss will be born by everybody. This is a loss that would be born by Geretschlaeger.
Commissioner Hall called for the vote, and the motion passed 4-1, with Commissioner Sue Hakes voting no. She said she voted no because she did not think the collateral would be enough to cover the county’s risk.
The Revolving Loan Fund is in place as an entrepreneur fund to help when other funding sources that are more conservative won’t take a chance on a business, Geretschlaeger said.
Commissioner Hall said she thought the new commissioners needed to look at the history of the board so they would be prepared to make informed decisions.
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