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Council moves forward on Jorgensen hotel grant application after clarifying developer repayment terms
Summary
Council pulled item 7B (Resolution 16050) for discussion before approving it; members raised concerns that city could be liable if the developer did not complete the Jorgensen hotel project, and staff said any grant award would be paired with a development agreement shifting repayment responsibility to the developer.
The Hutchinson City Council on July 14 discussed and then approved part of Resolution 16050, the authorization to apply for a Minnesota Department of Employment and Economic Development redevelopment grant for the Jorgensen hotel project, after clarifying which party would carry repayment responsibility if the project failed.
A council member asked that 7B be pulled from the consent agenda, citing paragraph 4 of Resolution 16050 which he read as potentially making the city liable if the developer did not complete the project. He said: “I just wanted to be clear that in that it says that should the deal not be done in five years, that the city could be liable for up to 100% of the grant that may be awarded.”
City staff and the EDA director responded that state statute requires the city to be the applicant for certain grants and carries some administrative responsibilities, but practice and the city’s grant agreements place repayment obligations on the developer via a separate grant or development agreement. Staff told the council they would include terms in the development agreement that require the developer to repay the city if grant conditions were not met. “If we give that to you, then these are the requirements of you. And a part of that requirement will be the requirement of the developer to pay back the city,” staff said.
After that clarification—that a development agreement would be used to allocate repayment responsibility to the developer—the council voted to approve the item (excluding the pulled portion being handled per the discussion) on a motion and voice vote.
Why it matters: The discussion centered on limiting the city’s financial exposure for a multi-year redevelopment incentive. Council members pressed staff for assurance that the developer would be contractually responsible for repayment if the project failed to meet grant conditions.
Next steps: Staff will proceed with the application and incorporate appropriate grant and development-agreement language to protect the city from repayment liability, per the council’s direction.
