4.9B SR 04-15-2013 Elk REQUEST FOR ACTION
River
TO ITEM NUMBER
Mayor and City Council 4.913
AGENDA SECTION MEETING DATE PREPARED BY
Consent April 15, 2013 Clay Wilfahrt,Assistant Director of
Economic Development
ITEM DESCRIPTION REVIEWED By
Call for a Public Hearing to Consider the Forgivable Loan Jeremy Barnhart,Deputy Director,
Application from Alliance Machine for Monday,May 6 Community Operations and
Development
REVIEWED BY
Cal Portner, City Administrator
ACTION REQUESTED
Call by motion a public hearing for 6:30 p.m. on Monday,May 6, 2013, regarding the forgivable loan
application for Alliance Machine.
BACKGROUND/DISCUSSION
At its April 8, 2013, meeting,the Economic Development Authority (EDA) reviewed a forgivable loan
application from Alliance Machine in the amount of$200,000. The project description and proposed
terms of the assistance,including job and wage goals, are included in the attached staff report to the
EDA. The EDA recommended that the Council approve the forgivable loan application.
Minnesota Business Subsidy Law requires public entities to hold a public hearing prior to granting a
business subsidy over $100,000. Staff recommends that the City Council call a public hearing for
6:30 p.m. on Monday,May 6, 2013, regarding the forgivable loan application.
A copy of the Forgivable Loan Policy and application will be provided at the Council's public hearing.
ATTACHMENTS
■ EDA Staff Report Dated April 8, 2013
Action Motion by Second by Vote
Follow Up
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ITEM NUMBER
Economic Development Authori T
AGENDA SECTION
MEETING DATE
PREPARED BY
April 8, 2013
Clay Wilfahrt, Assistant Director of
Economic Development
ITEM DESCRIPTION
REVIEWED By
Consider Forgivable Loan Application for Alliance Machine
Jeremy Barnhart, Deputy Director,
Community Operations and
Development
REVIEWED BY
ACTION REQUESTED
Consider Forgivable Loan application for Alliance Machine and request that City Council approve the
Forgivable Loan of $200,000
BACKGROUND /DISCUSSION
The attached staff report to the EDA Finance Committee dated March 29, 2013, and committee meeting
minutes provide background regarding the Forgivable Loan request.
The EDA passed the Forgivable Loan guidelines in February and set an initial application period of
February 15 through March 15. The program is designed to stimulate private sector investment, help
spur new construction, create and retain employment opportunities, and promote the sale of city -owned
property. Staff received three applications for the Forgivable Loan during the initial application period.
Alliance Machine currently occupies a 24,000 square foot facility in the city- developed Northstar Business
Park, and they are applying for the Forgivable Loan to help fund an 18,000 square foot expansion. The
expansion will bolster shipping and receiving capacity to build mass production capacity. The addition
will create six new jobs and induce $1.4million in private investment.
The Finance Committee recommends the EDA recommend City Council approval of the Forgivable
Loan for Alliance Machine with the following terms and conditions:
• $200,000 at 3% interest, 10 year term, 20 year amortization
• EDA to secure personal guarantee
• EDA to obtain subordinate lien position on building and subordinate lien on machinery financed
The loan will be forgiven upon completion of all of the goals and requirements set forth by the Forgivable
Loan Policy, and the jobs created as a result of the forgivable loan program are retained for a minimum of one
year. In this case, Alliance Machine will need to complete their expansion, create a minimum of six jobs, and
retain them for one year. Four of the jobs must be awarded to Low to Moderate Income employees.
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The Finance Committee also requested that staff determine if the city would become eligible for state
grants upon committing the dollars, as well as the ramifications of a situation where the city loaned
dollars and then recouped them due to an applicant failing to fulfill the requirements set forth in the
policy. Following a conversation with the Department of Employment and Economic Development,
staff determined that the city is eligible to apply for state grants upon committing the funds. Should the
money be recouped by the city, there would be no penalty; however, the dollars would need to be
committed again in order for the city to apply for state grants.
Once the EDA makes the recommendation, the City Council will call a public hearing on April 15 for its
May 6 meeting. At the May 6 meeting, the City Council will hold a public hearing and take final action on
the loan application.
FINANCIAL IMPACT
The Forgivable Loan fund balance is $703,679. The financial impact of approving the loan would be
$200,000 with the applicant paying all legal and filing fees at closing.
ATTACHMENTS
• EDA Finance Committee Meeting Minutes dated March 29, 2013
• EDA Forgivable Loan Policy and Guidelines
• Staff report to EDA Finance Committee re: Forgivable Loan Application dated March 29,
2013
Action Motion by Second by Vote
Follow Up
C:\ Users \jmMer \AppData \Local \Microsoft \Windows \Temporary Intemet Files \Content.IE5 \6PYY7YUM \Action Requested -EDA 48-13
Alliance.docx