Paul Johnson wishes he could have broken ground by now on a 60,000 square-foot building for his hydraulics cylinder manufacturing business.
Instead, the president of Aggressive Hydraulics was in front of the East Bethel City Council 10 years to the day that he founded the company to see if the city could close a funding gap that would enable him to move from Blaine to East Bethel.
“This is tough,” Johnson said. “I never thought we’d be having this conversation.”
The council took no official action at its July 5 meeting, but was favorable to at least working with Aggressive Hydraulics on coming up with a solution.
City staff set up a July 11 meeting that involved Greater MSP and the Minnesota Department of Employment and Economic Development (DEED), according to City Administrator Jack Davis. He said there is some optimism that a couple of DEED programs could close Aggressive Hydraulics’ funding gap. The council may be discussing this further at its Aug. 1 council meeting.
The proposal calls for a 60,000 square-foot building now, but there would be enough space to accommodate a 40,000 square-foot expansion on the north side, according to Johnson. The facility would be on a 6.06 acre parcel at 18800 Ulysses St. N.E.
Aggressive Hydraulics opened July 5, 2002 in Blaine. The business engineers and manufacturers hydraulic cylinders for various types of equipment used for numerous tasks from mining to forestry to on and off-shore oil drilling to railroad maintenance to recycling and garbage trucks and so on, according to Johnson.
About 50 people currently work at Aggressive Hydraulics, but Johnson said they are already starting to hire more people and are “bursting at the seams” with regards to space needs. He estimated they would add around five to six employees each year and could have up to 100 employees within 10 years.
The funding gap
Johnson assured the city in a June 28 letter that his company “came to the table for this project qualified for financing the project in full providing the appraisal of the project was in line with the actual costs associated.”
The problem was the appraised value came in much lower than anticipated. The land and building appraisal was estimated at $4,843,971, but the appraised value came in at $3.65 million. With the appraised value coming in so much lower than the estimated construction costs and with the lenders capping their combined financing to 90 percent of the actual costs, there is a funding gap.
The funding gap as of July 2 was estimated to be $481,058. Johnson did not specifically request that the city cover this full amount and he did not give a drop-dead date for the council to make a decision. At one point, he said he would rather wait two to four months and get something done rather than not getting anything done.
“It would be disingenuous, and I think disrespectful, if we were to just pull the plug and say, “Hey Curt we can’t do it,” Johnson said, about an owner of the property Johnson wants to buy and the owner of the Classic Construction company that would build the new Aggressive Hydraulics facility.
The funding gap was once $908,971, but reductions in the land sale price and the contingency amount and a $300,000 new loan offer from another agency allowed the funding gap to decrease to $481,058, according to Johnson.
The $300,000 amount would be the biggest loan ever distributed by the Metropolitan Consortium of Community Developers (MCCD), according to Iric Nathanson, who worked with Johnson on setting up this loan. MCCD is an association of nonprofit community development organizations that started in 1989.
Nathanson said rather than each organization offering its own loan program, they would work together to have a joint program. A few of the organizations involved include Habitat for Humanity, Project for Pride Living and the Neighborhood Development Center.
Since 2003, MCCD has loaned over $6.7 million to over 500 entrepreneurs for business start-up or expansion projects under its Open to Business program.
“We want a new plant. We want to build in East Bethel,” Johnson said. “We don’t have our hand hanging out… We’re trying to find out what the opportunities are.”
Why a new building?
Aggressive Hydraulics’ Blaine site has three unattached buildings totaling 40,000 square feet. Besides adding an additional 20,000 square feet by moving to the more wide open East Bethel lot, Johnson’s business would be under one roof. This will make the business more efficient and the extra space will be better for the large cranes, some of which are 30 feet long, he said.
Johnson said there was no “fluff” added to the designs that drove up costs. For example, he said the office floors have colored concrete instead of ceramic tile. The construction company he is working with got at least three bids for each subcontract when applicable.
East Bethel was an attractive location for Johnson not only because he lives in East Bethel, but because a “lions share” of Aggressive Hydraulics employees live in the north metro.
Johnson said there were some options south of the metro area, but that would have been too far a drive for the employees. He said the fact that East Bethel is getting sewer and water ultimately made it possible to move here.
He mentioned that they looked at buying an existing facility in the north metro instead of building new, but did not locate anything that met their needs. A new facility can be customized.
“I’m real interested in making this a success for you,” Councilmember Heidi Moegerle said to Johnson at the July 5 meeting. “I think you’re an important community member as a resident, but would be great as a business. I’m open to considering whatever we can do, within reason.”
Eric Hagen is at firstname.lastname@example.org