The Crookston City Council met on Monday night and during the Crookston Forum, a portion of the meeting for individuals to address items not on the agenda, Brian LaPlante questioned why the City of Crookston was encumbering funds to support Epitome Energy, LLC when they had been involved in an equity drive for several months. “I’ve talked to a lot of folks, and we’ve kind of come to the same question that is kind of perplexing in regards to the Epitome Energy project,” said LaPlante. “It seems Epitome has been on an equity drive for I don’t know how long has it been – four, five, six months? There seems to be a lot of support from the community and throughout the state for the project. One of the questions I guess that I have is if that’s the case and the equity drive has been going on for as long is why wouldn’t Epitome, and why would the City Council approve funds for this permitting process? Why would you not use the equity that has been raised already? It’s not costing any money. Why would you encumber debt on your balance sheet at this point as a startup company for permitting process? If you have a pile of equity sitting there, why wouldn’t you utilize that? It makes no sense. This is managerial finance 101. Why would you encumber debt at this point when you have sufficient funds to cover it through your own owner equity drive. Why would you approve it as City Council? Why would you approve taxpayer dollars for this purpose? We’re running deficits, running into your reserves. We don’t have the luxury of allocating money for purposes like this. Why not use the equity that has been raised so far through the fund drive?”
Councilman Tom Vedbraaten asked Crookston Housing and Economic Development Authority (CHEDA) Executive Director Craig Hoiseth if he’d answer that. Hoiseth said, “I think the short answer Brian would be that the prospectus deals with an escrow account until the equity hits that escrow account number, which I don’t know if that’s public information or not. But if you get a prospectus, you can see that. Once they hit that escrow amount, they can start to use those funds for exactly that purpose.”
LaPlante then stated that by receiving funds from the City of Crookston, Epitome Energy should lose some of their privacy rights. “When you go from a company such as mine or anyone else, and you go from the private center sector for raising funds for your operation, and you go to the public you lose some of that privacy right,” said LaPlante. “Because now all of us as taxpayers are the bankers. A bank has a fiduciary responsibility to the money that it has in its reserves from people that deposit money or money they borrow from the fed reserve. And when you’re coming to the taxpayer, City Council, and me as a taxpayer, we all have a fiduciary responsibility as to how that money is being used. So, some of this privacy has to go away. I don’t know if there are nondisclosures in this. I doubt it, but how much money has been raised? How many investors are here to this point? We have a right to know this information.”
LaPlante went on to state that biodiesel is not generating money and that there was a worldwide surplus of soybeans. LaPlante also said the competitors to Epitome Energy are co-ops or LLCs; Epitome is an LLC. “Their competitors HSP and SDSP in South Dakota and four or five other states are co-op operations or LLCs,” said LaPlante. “One of them has 2,200 members. They have five or six crushing plants. They just opened another one in Aberdeen. Right now biodiesel profit margins are running 1.8 percent over the last five years. They are running a profit margin of only 59 percent of the time. Biodiesel is not generating any revenue folks. Brazil is ramping up production over the next ten years by 30 percent. We’re going to have an excess on soy worldwide and domestically. This proposal to the City and the taxpayers had better slow down. You better get your ducks in a row. You’re coming for permitting and getting this money from the taxpayer. What if this thing does the same thing as it did in Spiritwood? What’s going to cover this, what’s going to cover the $250,000? If there is such interest in this project by now after six, seven months of equity drive, they should have $10-15 million in equity already. If they aren’t near that, what the heck is going on?”
LaPlante continued to say that up to 16 car companies and several companies building farm equipment plan to stop using diesel engines within the next five years and told the Council he’d like to present information he has gathered for a project he is involved in on advanced biofuels in North Dakota. LaPlante said there would be a shift to hydrogen cell engines. “I’m going to donate it to the city,” said LaPlante. “It’s available to any farmer to read. I want it here for anyone else to read, and the City Commission should be known of this information. If Epitome has done a business plan, they should’ve done a SWOT analysis – your strengths, weaknesses, opportunities, and threats. We’ve all heard the opportunities are wonderful. The strengths and weaknesses we can all debate, but the threats are huge. There is a revolution coming in transportation models, and that should’ve been presented to all of you folks already. There should be a business plan from Epitome available.”
Mayor Guy Martin suggested that further discussion on the topic should take place at the next Ways & Means Committee meeting scheduled for September 23. A resolution to accept a business subsidy was also added to the agenda by City of Crookston Finance Director Angel Weasner. Councilman Dale Stainbrook asked what would happen if the Department of Agriculture didn’t match the $250,000 from the City and City Attorney Corky Reynolds explained that the business subsidy states the requirement that Epitome Energy show proof of $250,000 in funding from the Department of Agriculture and that if that money didn’t come a new or amended business subsidy could be considered.
APG DEVELOPMENT RESOLUTION
On the consent agenda for the City Council, Vedbraaten asked to remove a resolution calling for a public hearing on a business subsidy for the APG Development. Vedbraaten said he was concerned that a business subsidy was just happening and that the planning commission still needed to determine the land use on the proposed property while the variance had already been approved in July. Vedbraaten said he knows APG wants to start work this fall and it seems like Crookston is making it difficult for businesses by stretching things out. “We live in a climate that changes a lot,” said Vedbraaten. “And in the fall to try to get things done, it gets very costly to do it when the snow flies. And if we can speed this process up for a business coming in, that’s what we should be doing. They already came to ask for the variance. We should’ve had this in line if there was other things that needed to be done.”
Reynolds explained that each part of the disposition of land requires specific procedures to be followed by statute. “There are State Statutes that require us to do certain steps if we have a comprehensive plan,” said Reynolds. “We do have a comprehensive plan for land use and development of the city. The first step is you have to bring it to the Planning Commission to determine is the use compatible with our plan. They decide yes or no. Then if it involves some economic development there is a second step where it goes to the CHEDA Board saying here is our plan use, is there going to be subsidies, how’s this going to develop. They act on that and make a recommendation to City Council. Then it comes to the City Council, and they decide, as they must in the type of government we have, are we going to make the disposition of this land as it’s been presented or not. So, there are steps that are required to be done. It’s a very sequential, step-by-step process. It does stretch it out a bit, but that is for transparency and public input about the use of land.”
Reynolds also said that land use determination and variances could be decided upon sequentially in the same meeting, such as the one where the variance was approved in July. “They can be if they are set up sequentially to do that,” said Reynolds. “Yes, they can be.”
Vedbraaten said he hopes that APG will have all their approvals at the next meeting. “I hope that at our next meeting we have we can approve it,” said Vedbraaten. “And if everything is a go that they can get going on it and get their cement work in. Hopefully, October will be decent enough, yet so you can do some of that stuff, so then they can build this winter if they get all their cement work in.”
PRELIMINARY LEVY AND PETITION
The Council also approved the preliminary 2020 tax levy of 3% and general fund budget setting the Truth in Taxation hearing for December 9 at 6:30 p.m. The Council also approved a resolution declaring the adequacy of a petition and ordering the preparation of a feasibility report. Vedbraaten asked why they are required to get a report if it’s something the council isn’t ready to consider acting upon. Weasner explained the preparation of a feasibility report is required by statute for an adequate petition. “We do have to have a feasibility study done,” said Weasner. “It was a petition that had 100 percent of the abutting residents, owners of the property, sign the petition. So, we have to accept the petition and do the feasibility study. It is required by state statute. Then [the Council] can determine if they’d like to move forward with the project or not.”
Widseth Smith Nolting, the city’s engineer, will produce the feasibility study.
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