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HomeMy WebLinkAbout08-12-1993 Joint City Council/RDA Study SessionMIN[JTES JOINT CITY COIINCIL/REDEVELOPMENT AGENCY STODY SESSION CITY OF LARE ELSINORE 130 SOIITH MAIN STREET LARE ELSINORE, CALIFORNIA AOGUST 12s 1993 ae********sr*********t****************r*r******s********sra*****+e CALL TO ORDER The Joint Study Session was called to order by Mayor Washburn at 3:11 p.m. ROLL CALL PRESENT: COUNCILMEMBERS/BOARDMEMBERS: ALONGI, WASHBURN ABSENT: COUNCILMEMBERS/BOARDMEMBERS: CHERVENY, DOMINGUEZ, WINKLER (Mayor Pro Tem Dominguez arrived at 3:13 p.m.) Also present were: City Manager/Executive Director Molendyk, Administrative Services Director Boone, City Planner Leslie, Community Services Director Sapp, Engineering Manager O'Donnell, Special Projects Coordinator Wood, City Clerk/Clerk of the Board Kasad. DISCIISSION ITEM 1. Heritaae Companv Presentation. (F:134.10) City Manager/Executive Director Molendyk explained that this company is presently located in Dana Point, with a restaurant and brewery facility. He further explained that they first looked at another community in the area, but have expressed interest in the City of Lake Elsinore. He noted that assistance is being requested from the Redevelopment Agency by the applicant. He also explained that they produce special Ales for special clients which include the Claim Jumper Restaurants and the "Legends" sports bars. MAYOR PRO TEM DOMINGUEZ ARRIVED AT 3:13 P.M. Mr. Mole~dyk indicated that his understanding is that Ales are brewed more quickly than Lagers. He noted that they have e~cpressed an interest in a future facility adjacent to the Stadium site. He advised that they will also be selling home brewing kits out of this facility retail. He also noted that a side benefit of this consideration is that each bottle brewed at this facility will carry the Lake Elsinore name. John Stoner, representing Heritage, introduced Mark Mericle and Bill Rousey. He advised that Heritage was the first micro-brewery operation in orange County and has been in operation for four years. He further advised that they currently have distribution contracts in Orange, San Diego and Los Angeles Counties. He explained that are meeting with representatives currently to establish a distribution arrangement for Riverside and San Bernardino Counties. He also explained that they are currently a seven day a week operation and producing at maximum capacity. He noted that PAGE TWO - JOINT STUDY SESSION - AIIGII3T 12~ 1993 their Ales are on the shelves of Albertsons, Vons, Longs Drugs, etc. in Orange County; with a total of 153 retail accounts. He further explained that they currently market ales in 22 oz. bottles and on tap, but will be expanding to include 12 oz. bottles. He also noted that the micro-brewery industry is approximately 10 years old, and this would be the first such facility in Riverside Countye He advised that this facility will begin operating to serve a contract for "Wipe- Out" ale which is to be distributed in England, Australia, France, New Zealand, Germany and Spain. City Manager/Executive Director Molendyk questioned the number of barrels produced. Mr. Stoner indicated that their first year production was between 4,000 and 6,000 barrels, and they are currently producinq about Y5,000 per yearo He explained that they are processed 50 barrels at a time, noting that the micro-brewery industry works for small batches of high quality product. He also explained that their ales contain only four ingredients and local water, which has been highly filtered, will be used. Mr. Molendyk noted that each batch takes only 18 days to complete. Mark Mericle, representing Heritage, de~ailed ~he processing and timing. He noted that only the Beer and Wine Home Brewing Kits will carry sales tax. He also noted that in connection with those kits they will have a hotline to assist home brewerse Bill Rousey, representinq Heritage, advised that these kits produce between $40,000 and $60,000 in taxable sales per yeare Mayor Pro Tem Dominguez inquired what location is being considered. Mr. Stoner indicated they are looking for approximately 6,000 square feet to start, with later expansion to approximately 10,000 to 15,000 square feet, City Manager Molendyk noted that currently they are looking at the Industrial area, however, in the future they would look at the area of the Stadiumo He also noted that the Yieritage group had only approached the City in the last two weeks, but they eaill be proceeding quickly, as they need to start fulfilling recent contracts on January 1, 1994. Mr. Stoner suggested that this would be a classic Redevelopment operation. He stressed that this is a labor intensive industry, which will generate approximately 20 full time jobs. He noted that their existing "tap room" in Dana Point employs 35 people. He also stressed that their intent is to hire from the local community. City Manager Molendyk stressed the name recognition of the City's name being included on every label, Mr. Stoner explainecl the impact of Beer memorabilia and the interest in product information. He noted the correspondence received by the City of Dana Point after they received a gold medal for their "blonde ale". He stressed the effectiveness of getting a community's name out to the public. Mr. Rousey explained that all product materials are naturalo the water is recycled, and their only discharge is clean steam approximately twice a week. PAGE THREE - JOINT STIIDY SESSION - AIIGUST 12, 1993 Mr. Stoner noted that the bulk of this process is a sealed system. Mayor Washburn inquired whether the bottling operation would be done at this site. Mr. Stoner confirmed that it would. Mr. Stoner detailed the required licenses which requires thorough background checks, by the State and Federal authorities, noting that this license would be an add-on to their current licenses. He explained that the Alcohol, Tobacco and Firearms division of the Federal government places much emphasis on qiving back to the community. He further explained that they generally do two charitable events per month and detailed the types of activities and their contributions, and stressed their willingness to participate in like activities related to the City. Mayor Washburn questioned their ultimate space requirements. Mr. Stoner indicated that it would be approximately 10,000 to 15,000 in the area of the Stadium. He noted that this would be adequate for the next 5 to 10 years. He also noted their interest in proposals to use their product in connection with the Stadium. He also advised that the "Legends" sports bar organization also had an interest in this area. He further advised that in a facility which incorporates a brewery, no license could be received for hard liquor. City Manager Molendyk inquired why they currently only use the 22 oz. bottles rather than smaller ones. Mr. Mericle explained that bottling is labor intensive and the larger bottles make the operation more efficient. He also noted that the 22 oz. bottle is an appropriate serving for two people. Mr. Molendyk questioned the cost. Mr. Stoner indicated that it was currently being sold for about $2.89 per. bottle at Albertson's. He also noted that the retail home brew shop will be in the middle of the factory; with the only other shops to purchase these materials in Riverside, Orange and San Marcos. Mr. Molendyk noted the opportunity for the Stadium to serve local beer. Mr. Stoner noted that they have been approached by Anaheim Stadium, Irvine Meadows, etc., however the volume would be to large at those facilities. He noted their interest in participating with the Stadium in this area and stressed the relationship between baseball and beer. City Manager Molendyk commented that while more point of sale taxes would be helpful, the tourism, name recognition, etc. would be worth pursuing. Special Projects Coordinator Wood indicated that the financial assistance being requested is assistance in obtaining a letter of credit for $200,000 to serve as collateral for their Small Business Administration loan. He indicated that he has reviewed the business plan and the assets would far exceed the $200,000 after the SBA loan is paid. He stressed that the request is only in lending the City's name to the letter, as the applicant will pay all associated fees. He further stressed that this would be no out of pocket expenses for the City, and discussions have begun with First Trust Bank to provide the letter. City Manager Molendyk commented on the business plan and PAGE FOIIR - JOINT STUDY SEBSION - AOGUST 12~ 1993 assets of Heritage noting that they show excellent potential. He further commented that the other assistance would be in assisting them to process permits and open on timeo He recommended that this matter be listed on the August 24th agenda. Councilman Alongi inquired how the letter of credit would be secured. Mr. Wood explained that there would need to be filings with the Bank and Heritage would pay all of the fees. Ae further explained that the only risk is if they could not proceed and their assets could not handle the debt. Mr. Stoner e~cplained that the Small BusYness Administration loan for $445,000 has been secured, with a monthly debt service of $5,600, which is only one day's receivables. He stressed that the cash flow more than covers the debt. Mr. Wood commented that their business plan is excellent and the answers should be received from the bank next week. City Manager Molendyk noted that this would have gone directly to a Council meeting, however, the applicants wanted this opportunity to meet the Council and discuss their company and background. He indicated that the matter would be formulated and placed on the next agenda. Mayor Washburn questioned the number and types of employees that will be needed. Mr. Rousey noted that they have their own training program for employees. Mr. Stoner indicated that most positions will be full time; there will be a few retail jobs, office staff, bookkeeping, a sales force (which will assist with the facility set up) and manufacturing jobs. He further indicated that the packaging materials will be obtained locally as well as any other supplies they can obtain. Councilman Alongi emphasized the need to draw as many employees as possible from the community. Mr. Stoner indicated that would be their intent provided capable, qualified persons can be found. FIe noted that tfiey intend to move their residences to the community as well. Councilman Alongi questioned the salary ranges for the positions needed. Mr. Stoner indicated that they would range from around $5.50 for janitorial to the $40,000 range. Councilman Alongi inquired whether this was a union operation. Mr. Stoner indicated that it was not, however they might use up to five teamsters for deliveries. Councilman Alongi inquired how the hops and barley would be cielivered. Mr. Mericle indicated that it is transported by truck and blown in to the holding silo. Councilman Alongi questioned the capacity of the silos. Mr. Mericle indicated ~he capacity is 20,000 lbs. which will last for approximately two monthse Councilman Alongi inquired whether there would be any problems with outside silos as discussed. Mayor Washburn indicated with screening there should not be any problems. Mr. Stoner raoted existing CC & Ras for six foot fences and noted that the PAGE FIVE - JOINT 3TUDY SESSION - AIIGUST 12~ 1993 silos would be 12 to 14 feet high. He explained that they would be stainless steel and will help dress up the area for tourism. He noted that there would only be two silos. Mr. Rousey indicated he has discussed this with Assistant City Manager Rogers and she is checking the zoning on possible sites. Mr. Stoner indicated that a variance may be necessary for retail sales. Councilman Alongi requested clarification of the retail operation. Mr. Stoner indicated that it would only include home brew supplies and beer related memorabilia, and no six packs to go will be sold. Mr. Rousey noted that the bulk of their retail operation is by mail order, City Manager Molendyk questioned the type of inemorabilia. Mr. Stoner indicated that it includes pens, hats, shirts, golf ~ees, etc. Councilman Alongi questioned the alcohol content of ales they produce. Mr. Stoner explained the legal limitations for ales, lagers, etc. and indicated that they will produce some non- alcohol beverages, ales at approximately 5-1/2$ and an occasional spiced holiday brewing up to 12%. Mayor Pro Tem Dominguez summarized that they would range from 0 to 12~. Mr. Mericle confirmed and advised that they will produce mostly in the 4 to 5o range. Mr. Stoner noted that they also do special brews for events such as Oktoberfests. Councilman Alongi questioned the production of non-alcohol beers. Mr. Stoner clarified that they will produce a non- alcohol product which would be different from beere Mr. Stoner inquired what would be needed for the agenda consideration. Mr. Wood indicated that he would prepare an item based on the information provided. Mr. Molendyk clarified the process. MAYOR PRO TEM DOMINGUEZ LEFT THE MEETING AT 3:55 P.M. Councilman Alongi inquired whether operation would begin on January ist. Mr. Rousey indicated that they would be attempting to start operation in the next 90 days. Mr. Stoner e~lained the licensinq period and other time constraints. Mr. Wood indicated that the bank was only waiting for the City's latest financial materials. T E STUDY SESSION WAS ADJOURNED AT 4:06 P.M. ~~ I~~~-- ARY WASHBURN, MAYOR JIM WINKLER, CHAIRMAN CITY O., LAKE ELSINORE REDEVELOPMENT AGENCY ~ CLERK/ CLERK OF THE BOARD