7. EDSR 03-11-2013 J
El REQUEST FOR ACTION
River
To ITEM NUMBER
Economic Development Authority 7.
AGENDA SECTION MEETING DATE PREPARED BY
March 11, 2013 Clay Wilfahrt,Assistant Director of
Economic Development
ITEM DESCRIPTION REVIEWED By
Energy Efficiency Improvement Program Microloan Suzanne Fischer, Community
Application, Soul Coffee Shop and Fitness Studio Operations &Development Director
REVIEWED BY
ACTION REQUESTED
Energy Efficiency Improvement Program Micro Loan Application, Soul Coffee Shop and Fitness Studio
BACKGROUND/DISCUSSION
The attached staff report to the EDA Finance Committee dated March 5,2013, and committee meeting
minutes provide background regarding the Microloan request from Kacey Bottineau, owner of Soul, a
proposed coffee shop and fitness center in downtown Elk River.
The Energy Efficiency Improvement Microloan Program is available to property owners of commercial
or industrial buildings in Elk River wishing to invest in energy efficient modifications that reduce energy
costs,improve profitability and increase their ability to retain and create jobs. The program also supports
the City using energy conservation as an economic development tool.
The EDA Finance Committee recommends the EDA deny the Energy Efficiency Microloan request for
Soul due to the level of risk associated with the business plan and the limited experience of the owner.
The committee also expressed concerns with an inequitable amount being spent on energy efficiency
improvements compared to the total project cost.
The Finance Committee further recommended the applicant solidify a client-base, build experience, and
seek private financing from a source such as the SBA. Staff will assist with Ms. Bottineau to move her
project forward in this direction.
ATTACHMENTS
• EDA Finance Committee Meeting Minutes dated March 5, 2013
• Staff report to EDA Finance Committee re: Soul Microloan Application dated March 5, 2013
Action Motion by Second by Vote
Follow Up
r Ir r E B E 1 I Y
NATURE
MEETING OF THE EDA FINANCE COMMITTEE
HELD AT THE ELK RIVER CITY HALL
TUESDAY, MARCH 5, 2013
Members Present: Chad Vitzthum,Larry Toth,Paul Motin, Nate Ovall,
Members Absent: Cliff Lundberg,Dan Tveite
Staff Present: Assistant Director of Economic Development,Clay Wilfahrt,Tom Sagstetter, ERMU
Others Present: :yv
vvv -N
1. Call Meeting to Order
Assistant Director of Economic Development Clay Wilfahrt call th v�.eting to order at 7:30am
2. Consider Enerti Efficienc Im.rovement Pro'ram Micr. oL A.'.lication ,Coffee Shop and
Fitness Studio � ��\
Mr. Wilfahrt reviewed the staff report. Kacey Botti :%u submitted an applicationy ' n Energy
Efficiency Microloan. She requested a loan amo le's„�,, 2,304 at 3% fixed rate w4(.',...-°ven-year
amortization. \\ \"
Ms. Bottineau informed the committee of her business plat. .J.en a coffee shop and fitness studio.
She stated that she has spoken with areap.pa� 'zations to start-•Wing classes.
Ms. Bottineau left the meeting. \� �`v,��,,
The Committee discussed the application. Bo.. Mrs va • 6.Vitzthum expressed concerns about
the business plan and thvl o' experience of applicant. r. Vitzthum also expressed concern about
getting away from tl gap final, and moving`t ward a direct loan.
'`
Mr. Motin asked if the .. •tte would be interest .'in working with Ms. Bottineau on just the energy
efficiency improvements o‘.,,, s,...,. .av _ . cludv that the applicant should seek to strengthen the
business pun . c re-ap 4,;a._:. The co :.• also suggested that the applicant seek private
fman \\� ` \`
'�\s.mmittee further �.ssed tl .'e Finance Committee policy should define what constitutes
ener flciency improve , \',„t in the`Microloan Policy and whether or not the loans can cover just the
cost of t1 .fficiency impr.'e' ents or if the entire project can be funded by a microloan.
MOVED BY ; H D SECONDED BY OVALL TO RECOMMEND DENIAL OF THE
REQUEST O, ' ' ER EFFECIENCY LOAN FOR SOUL COFFEE SHOP AND
FITNESS STUDIO;MOTION CARRIED 4-0.
3. Executive Director's Update
Mr.Wilfahrt outlined the status of outstanding microloans. Mr. Wilfahrt also reviewed plans to
reconsider the Microloan policy and application.
4. Closing
The EDA Finance Committee meeting ended at 9:00 a.m.
Respectfully submitted by,
EDA Finance Committee Minutes Page 2
January,30,2013
Page 2 of 2
Clay Wilfahrt
Assistant Director of Economic Development
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City of
Elk REQUEST FOR ACTION
River
TO ITEM NUMBER
Economic Development Authority Finance Committee
AGENDA SECTION MEETING DATE PREPARED BY
March 4, 2013 Clay Wilfahrt,Assistant Director of
Economic Development
ITEM DESCRIPTION REVIEWED By
Energy Efficiency Improvement Program Micro Loan Suzanne Fischer, Community
Application, Soul Coffee Shop and Fitness Studio Operations &Development Director
REVIEWED BY
ACTION REQUESTED
Energy Efficiency Improvement Program Micro Loan Application, Soul Coffee Shop and Fitness Studio
BACKGROUND/DISCUSSION
Soul is a coffee shop and fitness studio proposing to locate in Granite Shores in downtown Elk River. A
full service cafe will serve coffee, lattes, smoothies, and snacks. Soul will offer membership access to the
fitness center, studios, and tanning, and will host various classes and trainings. Soul's CEO,Kacey
Bottineau,has been working with Community Education and local Senior Activities Directors to schedule
classes.
Ms. Bottineau met with the Matt Wells, a consultant for the Small Business Development Center to
review the attached business plan. Mr. Wells was satisfied with the projections as laid out in the plan,but
he did note that the EDA would want to ensure the existence of the $50,000 line of credit in the event
that sales don't pick up as fast as the business plan indicates. With the $50,000 in place,Mr. Wells was
comfortable with the business plan.
The space Soul will occupy in Granite Shores is not finished or built to suit Soul's proposed use. Ms.
Bottineau is requesting$62,304 in an Energy Efficiency Microloan for build out and equipment which
includes HVAC,water heater,lighting, and a washer and dryer. The total cost of the build out is
estimated to be $70,800 and is detailed in the attached estimate. Aside from the Microloan dollars,Ms.
Bottineau is contributing$10,000 and the property owner is contributing$44,991.
Tom Sagstetter of Elk River Municipal Utilities and the Energy City Commission met with staff and Ms.
Bottineau. Mr. Sagstetter recommended the following energy efficiency improvements as part of the
build out:
• Lighting—T8,T5 or LED lighting to be used in all fixtures
• Electronic ballasts for lighting
• Washer and dryer should both be energy star rated with the washer having a water factor of 5.5 or
less
• An on-demand water heater
• If the unit has an independent furnace,it should be 95% or greater efficiency
INATURE ei
• The waste heat from the tanning beds should be considered in design of air circulation
• Occupancy sensors for lighting and optimizing natural daylight
• Programmable thermostat
• Energy efficient ice maker
• Use of recycled and organic cups,plates, etc.
• Participation in organics recycling program
Following approval of the loan and the start of the project,Mr. Sagstetter will work with Ms. Bottineau
to implement as many of the changes as are possible within Ms. Bottineau's budget. All rebates received
will be applied towards the principal of the Microloan.
Since there is no other source of financing, the EDA would obtain a first position on all furniture,
fixtures and equipment. A personal guarantee will also be required.
In addition to the financial criteria that must be considered, the Finance Committee must also consider to
what degree the applicant satisfies the criteria set forth in the Micro Loan Fund policies outlined below:
Micro Loan Criteria- Energy Efficiency Improvement Program
• Max. Loan Amount: $74,999
• Interest rate: Fixed at 3% or 2 below prime,whichever is greater
• Equity: 10% or more of project
• Term: The maximum maturity date will be determined by the useful life of the improvement and the
energy payback achieved. For projects that have a shorter length of payback (2-5) years as calculated
according to energy savings, the loans will have an initial maturity of up to 5 years from the date of
closing. Longer life improvements (6-15 years) may apply for a longer maturity of up to 10 years.
• Improvements must be eligible as outlined in Micro Loan Policy or as approved by applicable utility
provider
• Utility rebates as applicable will be assigned to the Elk River EDA and applied toward principal
repayment of the loan
• The loans will be secured by personal and corporate guarantees, and if applicable a lien on equipment
financed and subordinate mortgage on the property
• Exempt from job creation and wage goals because the loan amount does not exceed$150,000 and
does not qualify as a business subsidy by state law
SOUL
• Amount requested: $62,304
• Rate requested: Fixed at 3%
• Equity proposed: $10,000
• Term: 7-year amortization/5-year balloon
• Improvements include HVAC improvements,lighting,water heater,washer and dryer
• Improvements for lighting,washer and dryer, and water heater may be eligible for rebates. Rebates
will be applied to principle of loan
• The EDA will obtain a first position on all furniture, fixtures and equipment associated with the
business
The EDA will consider the Finance Committee's recommendation at their March 11 meeting.
If recommending approval, the following terms and conditions will apply:
Participation Loan: Not Applicable
Loan Amount: $62,304
Interest Rate: 3% fixed
Term: 7-year amortization/5-year balloon
Security: First position on all furniture, fixtures and equipment
ATTACHMENTS
• Construction Quotes
• Micro Loan Application
• Business Plan
Action Motion by Second by Vote
Follow Up