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7.1.B SR 05-06-2013 City of Elk REQUEST FOR ACTION River TO ITEM NUMBER Mayor and City Council 7.1.B AGENDA SECTION MEETING DATE PREPARED BY Public Hearings May 6, 2013 Clay Wilfahrt,Assistant Director of Economic Development ITEM DESCRIPTION REVIEWED By Consider Forgivable Loan Application for Alliance Machine Jeremy Barnhart, CODD Deputy Director REVIEWED BY Cal Portner, City Administrator ACTION REQUESTED 1. Open public hearing to consider comment on the proposed Forgivable Loan for Alliance Machine's expansion project. 2. Approve Alliance Machine's application for the Forgivable Loan following the public hearing. BACKGROUND/DISCUSSION Alliance Machine is requesting$200,000 from the EDA's Forgivable Loan program. The attached staff report to the EDA dated April 8, 2013, and meeting minutes provide background regarding the Forgivable Loan request. Both the EDA and the EDA Finance Committee have recommended approval of Alliance Machine's Forgivable Loan request. FINANCIAL IMPACT The Forgivable Loan fund balance is $703,679. There are a number of similar requests being considered by the Council. If all are approved as recommended, the fund balance would be $103,679. ATTACHMENTS • Staff report to the EDA re: Forgivable Loan Application dated April 8, 2013 • EDA Minutes dated April 8, 2013 Action Motion by Second by Vote Follow Up P O W E R E D BY NaA f RE] City of Elk REQUEST FOR ACTION River TO 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. NaA f RE] 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 N:\Public Bodies\Agenda Packets\05-06-2013\7 lb attl£docx Economic Development Authority Minutes Page 2 April 8,2013 MOVED BY COMMISSIONER DWYER AND SECONDED BY COMMISSIONER BURANDT TO APPROVE A DOWNTOWN REVITALIZATION MICROLOAN FOR BLUE EGG MARKET WITH THE FOLLOWING TERMS AND CONDITIONS: ■ $74,500 AT 2%INTEREST,10-YEAR TERM, 10-YEAR AMORITIZATION. ■ EDA TO SECURE PERSONAL GUARANTEE. ■ EDA TO OBTAIN SECOND LIEN POSITION ON 707 MAIN STREET AND 713 MAIN STREET AND FIRST POSITION ON ALL EQUIPMENT. MOTION CARRIED 6-0. 6. Consider Forgivable Loan Apt2tication from Alliance Machi ` Mr. Wilfahrt presented his staff report. MOVED BY COMMISSIONER DWYER AND SECONDED BY COMMISSIONER MOTIN TO RECOMMEND APPROVAL OF THE FORGIVABLE LOAN APPLICATION IN THE AMOUNT OF$200,000 FOR ALLIANCE MACHINE TO THE CITY COUNCIL. MOTION CARRIED 6-0. 7. Consider Forgivable Loan Application from Orluck Industries Mr. Wilfahrt presented his staff report. MOVED BY COMMISSIONER DWYER AND SECONDED BY COMMISSIONER WESTGAARD TO RECOMMEND APPROVAL OF THE FORGIVABLE LOAN APPLICATION IN THE AMOUNT OF $200,000 FOR ORLUCK INDUSTRIES TO THE CITY COUNCIL. MOTION CARRIED 6-0. 8. 40 Consider Forgivable Loan Application from Preferred Powder Coating Mr. Wilfahrt presented his staff report. MOVED BY COMMISSIONER MOTIN AND SECONDED BY COMMISSIONER WILSON TO RECOMMEND APPROVAL OF THE FORGIVABLE LOAN APPLICATION IN THE AMOUNT OF$200,000 FOR PREFERRED POWDER COATING TO THE CITY COUNCIL. MOTION CARRIED 6-0. 9. Authorize Write-off of Nicole's Salon Microloan Mr. Wilfahrt presented his staff report. MOVED BY COMMISSIONER WESTGAARD AND SECONDED BY COMMISSIONER DWYER TO ADOPT RESOLUTION 13-03 AUTHORIZING THE WRITE-OFF OF THE OUTSTANDING LOAN BALANCE OF $6,894.28 OWED BY THE FORMER NICOLE'S FINISHING TOUCH SALON TO THE CITY OF ELK RIVER'S DOWNTOWN BUSINESS REVITALIZATION MICRO LOAN FUND. MOTION CARRIED 6-0.