Ms. Hatanpa moved and Mr. McLaughlin seconded a motion to approve the Economic Development Authority minutes of the Regular Meeting of August 10, 2026, as written. The motion carried unanimously.

Mr. Bornholdt reported on a $2,095 change order for Project 11139, Orness Plaza Heat Pumps Phase 3, as required under Section 2-8 of the Mankato City Code. He noted that the change order covered modifications to incompatible existing ductwork, replacement of faulty electrical outlets, and replacement of an inoperable condensate pump. He indicated that the increase was approximately 2% of the original $118,800 project budget, bringing the total project cost to $90,125, which remains within budget. Construction began in June 2025 and is now complete.

No action required; report only.

Mr. Bornholdt stated that the project originally included replacement of appliances, LVT flooring, concrete patios, driveways, sidewalks, electrical upgrades, and fire alarm systems at various Mankato EDA properties. He indicated that the scope was based on capital needs assessments conducted by Dominion Due Diligence Group (D3G) and covered the first two years of a 20-year capital improvement schedule. He mentioned that the EDA approved moving forward with the project in October 2025 and awarded the construction bid to Wilcon Construction in April 2026.

Mr. Bornholdt reported that Change Order No. 1 adds the replacement of 26 water heaters and five furnaces at several EDA properties, incorporating additional capital needs identified by HUD in the original schedule from Years 3 and 4. He commented that the change order also extends the contract completion date to March 26, 2027, due to delays in HUD’s property closing process. He explained that the additional work will increase the project cost by $105,270, or roughly 49% of the original project cost, and HUD requires the work to be completed as part of the RAD closeout. Staff recommended that the EDA approve the change order and continue with the RAD closeout process.

Mr. Laven moved and Mr. McLaughlin seconded a motion to approve Change Order 1 on Capital Improvement Project 11204; Mankato Scattered Sites EDA RAD Conversion Improvements. The motion carried unanimously. 

Ms. Kramlinger indicated that the Developer, Old Town Riverfront Properties, LLC, is seeking tax abatement assistance for a proposed 63,000-square-foot office and indoor organic production and processing facility at 1961 Energy Drive. She stated that the facility would be used by Verdant Organics for the cultivation, processing, packaging, and distribution of mushrooms and microgreens. She noted that the estimated project cost is $13.56 million, with construction anticipated to begin in late 2026 or early 2027. She added that the project is expected to create approximately 17 jobs in its first year and 75 jobs in its second year.

Ms. Kramlinger explained that the Developer initially sought assistance through a tax increment financing (TIF) district, but the project does not qualify under state law as Verdant Organics does not meet the statutory definition of a manufacturing business for purposes of an economic development TIF district, and the site is a greenfield property, making it ineligible for redevelopment TIF. She commented that the Developer therefore requested a 15-year property tax abatement of $126,000 annually. She noted that the city would provide the assistance through a pay-as-you-go note, funded with 90% of the city's share of the increased property taxes generated by the project.

Ms. Kramlinger reported that the city hired Ehlers Public Finance Advisors to independently review the project's financial feasibility, including construction and land costs, rental rates, financing, developer fees, and projected cash flow.

Stacie Kvilvang from Ehlers stated that some level of tax abatement is necessary for the project to proceed. She noted that based on their analysis, if the land value of $6 per square foot is considered reasonable, the project would require about seven years of abatement totaling $178,700; however, if the land value were reduced to $4.50 per square foot, it's estimated that approximately five years of abatement totaling $122,400 would be sufficient.

Ms. Kvilvang commented that the distinction between five and seven years is significant because state law requires a business subsidy agreement when city assistance exceeds $150,000. She noted that a seven-year abatement would therefore require such an agreement, including job and wage goals, while a five-year abatement would not. She stated that Ehlers also recommends a three-part “lookback” provision allowing the city to revisit the abatement based on actual project costs after construction, project performance and investment returns once stabilized, and the property's financial results if it is sold.

Ms. Kramlinger asked if the Council would like additional information for review at a future meeting, or if they wanted staff to prepare materials for a hearing on September 28, 2026, regarding the tax abatement assistance and approval of a business subsidy agreement.

The consensus of the Council was to proceed with setting the date of hearing.

Ms. Kramlinger presented a request from Verdant Agritech LLC for a $300,000 economic development revolving loan to purchase equipment for Verdant Organics. She stated that the company, in partnership with the property owner, plans to develop a 63,000-square-square-foot indoor farming facility at 1761 Energy Drive to produce organic microgreens and blue oyster mushrooms year-round. She noted that the project includes approximately $2.6 million in equipment costs, with the requested loan representing a portion of that investment.

Ms. Kramlinger reported that under the revolving loan guidelines, the proposed loan would have a 7-year term at 70% of the prime rate, currently resulting in an interest rate of 4.725%. She commented that Verdant has requested that interest payments begin when the facility becomes operational, with both principal and interest payments beginning after the facility has operated for one year. She summarized that project financing would also include $500,000 in private funds, $1.4 million in existing equity, and $400,000 from a Minnesota Growth Fund loan.

Ms. Kramlinger indicated that the loan program requires job creation based on the amount borrowed; therefore, a $300,000 loan would require at least six permanent full-time equivalent jobs, with wages meeting program requirements. She noted that Verdant anticipates creating 17 jobs in the first year and 75 jobs in the second year, exceeding the program's minimum employment and wage requirements. She added that because the requested assistance exceeds $150,000, state law also requires a business subsidy agreement to be approved by the Council.

Ms. Kramlinger mentioned that the project is intended to address food service and retail challenges such as inconsistent supply, limited shelf life, and food waste through controlled-environment cultivation and extended-shelf-life packaging. She concluded that overall, the revolving loan is intended to support business development, job creation, private investment, expansion of the local tax base, and economic opportunity in Mankato. The requested action is to set October 13, 2026, as the public hearing date to consider the loan request.

It was requested that information be provided to the Council regarding the current fund balance.

Ms. Hatanpa moved and Mr. Laven seconded a motion setting October 13, 2026, as the date of hearing to consider a loan request from Verdant Agritech LLC (DBA Verdant Organics) to purchase equipment. The motion carried unanimously. 

Mr. Konz explained that the city established an Economic Development Authority (EDA) levy in 2007 under Minnesota Statutes, Section 469.107. He stated that the levy, reflected in the Economic Development Fund, has historically supported economic development, redevelopment, building rehabilitation, and community partnerships. From 2013 through 2020, the levy was set at $225,000 and funded initiatives such as the Southern Minnesota Initiative Foundation, City Center Partnership, Arts and Culture District, Greater Mankato Growth (GMG) regional services, City Center redevelopment, and building rehabilitation. He noted that investments have generally focused on infrastructure and redevelopment projects intended to encourage additional public and private investment, expand the tax base, and preserve the City's building stock.

Mr. Konz indicated that beginning in 2021, the EDA levy increased to $365,000, largely to accommodate rising partnership costs. A significant increase has been in the city's fee for GMG services through the Regional Economic Development Alliance (REDA), which grew from $99,714 in 2009 to $195,733.44 in 2023. He commented that under a new REDA Joint Services Agreement approved in October 2023 and effective through 2029, Mankato's fee is expected to decrease to $186,581.29 in 2027. He added that historically, savings from reductions in the REDA fee have been redirected to building rehabilitation and other economic development initiatives. He mentioned that from 2021 through 2026, EDA levy proceeds supported GMG/REDA services, the Southern Minnesota Initiative Foundation, City Center and arts and culture initiatives, building rehabilitation, and affordability partnerships.

Mr. Konz reported that for 2027, the preliminary request is to maintain the EDA levy at $365,000, which establishes the maximum levy being requested at this stage and does not represent final approval of specific expenditures. He stated that the 2027 budget would include the $186,581.29 REDA fee, while the remaining funds would be considered through the EDA and the city's budget process. He pointed out that as with the overall property tax levy, the preliminary EDA levy can be reduced during the budget process but cannot be increased after it is established.

Mr. Konz indicated that the proposed resolution formally requests the $365,000 EDA levy under state law but does not commit the city to spending allocations. The final levy amount and decisions regarding how the funds will be allocated are expected to be determined during the September–December 2026 budget process, when the City Council and EDA can evaluate current community needs, funding options, and economic development priorities.

Mr. Dieken moved and Ms. Hatanpa seconded a motion to approve the Resolution requesting the establishment of a property tax levy for the Economic Development Authority for property taxes to be collected during the 2027 fiscal year. The motion carried unanimously. 

Ms. Cunningham reported that the 2027 PHA Annual Plan is the Economic Development Authority’s roadmap for managing public housing and Housing Choice Voucher programs while addressing local affordable housing needs. She commented that it aligns with the community’s broader housing and strategic plans and emphasizes partnerships, fair housing, community services, and strategies to meet housing goals.

Ms. Cunningham touched on key components which included annual program reviews, special voucher programs, community-based preferences, and capital improvements. She added that major policy and program changes involved HOTMA compliance, an expanded service area, and public housing repositioning.

Ms. Bokelmann stated that the plan also goes beyond the core voucher and public housing programs by addressing affordable housing, homelessness prevention, and community development. She noted that it tracks progress under the Affordable Housing Action Plan and the City's Strategic Plan.

Ms. Bokelmann indicated that overall, the plan highlights the EDA's ongoing work in administering housing programs, preserving and creating affordable housing, managing the Housing Trust Fund and CDBG funds, preventing and ending homelessness, educating the community, engaging landlords, supporting domestic abuse survivors, and strengthening community partnerships.

Chair Massad opened the public hearing. There being no one wishing to speak, Chair Massad closed the public hearing.

Mr. McLaughlin moved and Ms. Melby-Kelley seconded a motion to approve the Resolution approving the 2027 Annual Agency Plan. The motion carried unanimously.