East Grand Forks to loan $149,999 for furniture store in former Shopko building

East Grand Forks city officials on Tuesday voted 6-1 to approve a $149,999 loan to St. Michel Rental, LLC to buy and renovate the former Shopko building on Gateway Drive. The city’s Economic Development Authority OK’d the plan earlier that day. Council member Clarence Vetter was the lone vote against the plan.

The company is set to divide the building into two segments: a 10,000-square-foot retail space, whose occupant has yet to be determined, according to documents supplied to council members, and a 31,000 square foot furniture store, the name of which “will be announced at a later date.”

On paper, it seems evident that the larger portion of the building is set to become the fifth in a chain of St. Michel Furniture stores with locations in Rugby, Bottineau, Devils Lake and Bemidji, Minn. Beyond the ready-made conclusion to be drawn from the names, state property and business records indicate that St. Michel Rental also owns the land on which the Bemidji store sits, and its principal address is the same as the chain’s Rugby, N.D. store. The Rugby store is owned by St. Michel Furniture, Inc., the registered agent of which is Robert St. Michel, who is the same person listed as the manager of the Bemidji store and the owner of the rental company.

But Paul Gorte, East Grand Forks’ economic development director, said that, even though Robert St. Michel owns several furniture stores, the one he’s working to set up in the old Shopko spot might not be a St. Michel-branded one.

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“He is negotiating with someone that’s a recognizable name that will have the nameplate on the store rather than St. Michel,” Gorte said. “He may operate it as a franchising-type thing.”

St. Michel himself could not be reached for comment after Tuesday’s meeting, nor could Ethan St. Michel, who’s listed as the rental company’s registered agent in Minnesota business filings.

The loan itself is a dollar short of $150,000 because Minnesota law classifies any loan at or above that threshold with a below-market interest rate to be a business subsidy, according to City Attorney Ron Galstad. The loan to St. Michel Rental is set to charge 4% interest over 10 years. Market rate, Galstad said, is 5%.

“As a business subsidy, there becomes a lot more detail that’s required, there’s a lot more work involved, and, in this case, it’s not a grant, we’re not giving money away. It’s actually a loan that needs to be repaid,” Glastad told Council members. “So, realistically, the difference is a limited amount of interest. Five, six thousand dollars over the life of the loan. And, economically, for the city and for the company, it doesn’t make sense to classify it as a business subsidy.”

Council member Vetter, who voted against the loan to St. Michel, objected to the owner of the building asking for the loan, rather than the furniture store company, per se.

“The furniture store could back out even before this deal is consummated, or they could back out a year or so from now and we still don’t have any new employees in town, then?” he asked, pointedly, of Gorte.

The store could, Gorte said, and the company asked under the aegis of the rental, rather than the store, because the loan would buy and renovate the building and be secured by a mortgage.

“I just don’t want to set a precedent,” Vetter said. “I don’t think we’re in the business (of) giving out loans for people to buy property. We’re in business to set up new businesses in town.”

The purchase and renovations are set to cost $2.32 million, according to city documents. Of that, St. Michel is set to borrow $2 million from other lenders and put up $150,000 himself. The store would mean the equivalent of seven full-time jobs, St. Michel claimed.

New Americans Integration Center, 10th Street rebuild

In related news, Council members:

  • Were briefed on the New Americans Integration Center, which seeks to bridge the gap that sometimes forms between longtime, mostly white, East Grand Forks residents and immigrants, many of whom aren’t white. The center offers translation, childcare, and other services to people who’ve recently moved to the United States, among other services.
  • Gave Steve Emery, a city engineering contractor, the go-ahead to authorize his firm to create a “report of feasibility” for the 10th Street Northeast reconstruction project city officials chose in April over a longstanding plan to build a roundabout on Rhinehart Drive. The study would produce sharper project costs, work to determine how much nearby property owners such as Burlington Northern Santa Fe railway and American Crystal Sugar would pay in special assessments, and so on.