84 Lumber Boards Up The Business
Materials Supplier Shuts Down Hugo Warehouse
HUGO - 84 Lumber has closed up shop at its two Minnesota locations as of two weeks ago. Its supply centers in Hugo's Bald Eagle Industrial Park and in Lakeville, Minn. are no longer operating. The Hugo facility was operated primarily as a wholesale or a direct-to-builder materials supplier, with some retail sales.
The largest privately held building materials supplier to professional contractors in the country, 84 Lumber purchased the vacant Minnesota Union Builders Property in Hugo in a speedily orchestrated bid in May 2005. A grand opening was held in April 2006.
Company representatives said they were attracted to Minnesota because of projected housing starts. During the three winter months before 84 Lumber hung its shingle on the remodeled 94,000 sq. ft. building, Hugo issued 90 residential building permits.
The "priced-to-sell" land and building was likely another incentive; the property had gone into court receivership after Minnesota Union Builders defaulted on the loan for its building.
84 Lumber paid $121,264 in property taxes in 2007, according to City Finance Director Ron Otkin. Of that amount, $57,065 went to the city's TIF district in payment, most of which was earmarked to pay o the TIF note issued in 2002 on behalf of the Minnesota Union Builders project.
A default on future tax payments would have minimal financial effect on the city, Otkin said: "If no TIF is collected, then the bank holding the [TIF] note does not get paid." He estimates the annual financial impact to the city at $11,400, which he said will not impact its ability to make its annual bond payment.
"The true downside is the loss of jobs in the community," Otkin added. And there are implications to the railroad company providing service to the park, as well.
In 2006, Minnesota Commercial Railway constructed an additional railroad siding to accommodate 84 Lumber's needs, bringing the park's total to three. The 84 Lumber siding was designed to accommodate an estimated 200 rail cars per year if the company went ahead with plans to manufacture trusses in Hugo.
However, Minnesota Commercial Railway Chairman and President John Gohmann said that "terrible construction markets" have contributed to much lower-than-projected rail traffic at the facility. And the loss of 84 Lumber, he said, "coupled with the downturn [in] Schwieters traffic due to the depressed lumber markets, doesn't give us a strong enough economic base long term to continue rail service to Hugo."
The Schwieters Companies move raw materials via a public rail siding to its campus in the Bald Eagle Industrial Park.
"[This is] just another reminder that we are in one of the most severe downturns in the housing market any of us have ever seen," JL Schwieters Construction, Inc. President John Schwieters said. "[But] we are hanging in there, working hard at providing outstanding service."
Gohmann says he plans to be proactive in attracting a new rail user in the park. "It's a perfect place for a reload or manufacturing location or warehouse," he said.
Council Member Chuck Haas estimates that there will be little financial impact on the city due to the closure, adding, "It's an opportunity for the city to attract another quality business needing rail service."