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6.1 EDSR 11-18-2013 4l E Request for Action River TO ITEM NUMBER Economic Development Authority 6.1 AGENDA SECTION MEETING DATE PREPARED BY General Business November 18, Brian Beeman, Director of Economic 2013 Development ITEM DESCRIPTION REVIEWED By Update Microloan policy Jeremy Barnhart, Deputy Director CODD Action Requested Approve,by motion the updates to the Microloan policy including the updated downtown district map as recommended by the EDA Finance Committee. Background/Discussion At its November 5, 2013 meeting, the EDA Finance Committee reviewed proposed changes to the Microloan policy. Among those changes were the inclusion of non-profits, the non-eligibility of working capital, defining energy efficiency and setting a threshold of improvements required to be energy efficient in order to qualify, and defusing borders of downtown. The Finance Committee discussed each of the recommendations, and by general consensus, the proposed changes were approved as a recommendation to the EDA. Attached is a draft of the proposed microloan policy and application that includes all of the decisions that the Finance Committee made. Also attached is a map of the downtown. The draft policy is written to include all areas in the red bordered area on the map in the Downtown Revitalization microloan eligibility. The Finance Committee is recommending to the EDA the draft policy as is, or with any changes the EDA desires. Attachments • Draft Microloan policy and guidelines-Tracked changes • Downtown Map • Map Narrative I P O V E R E I .1 NATUR City of Elk Powered by Nature Economic Development Microloan Fund Policy & Guidelines And Application Amended: May 2011 EDA Amended: November 18, 2013 City Council Amended: November 18, 2013 City of Elk River Economic Development Division 13065 Orono Parkway Elk River,MN 55330 763.635.1040 www.elkrivermn.govieconomicdevelopment/tools ELK RIVER ECONOMIC DEVELOPMENT MICROLOAN FUND POLICY & GUIDELINES ii. PURPOSE The Economic Development Authority for the city of Elk River (EDA) recognizes the need to stimulate private sector investment into manufacturing facilities and equipment in order to create new jobs,boost productivity and retain existing jobs for local residents.Additionally, the need exists to encourage investment in the expansion and/or rehabilitation of commercial and retail buildings in order to maintain the economic viability of Elk River's Downtown District. Subsequently, the purpose of this program is to provide low interest,long-term (i.e. greater than one year) loans as incentives for industrial development within the city of Elk River and to encourage commercial and retail business owners in the Downtown District to rehabilitate their existing buildings. 214. LOAN PROGRAMS In order to meet the economic and community development objectives of the EDA, three distinct loan programs exist within the Microloan Fund to promote business growth in Elk River. Industrial Incentive Program Purpose: The purpose of the Industrial Incentive Program is to encourage industrial and high technology business development that supports the tax base and brings quality jobs to the city. Amount: Up to $100,000 of secondary financing not to exceed 20% of the project cost. Equity: Must have private-sector commitments for 50% of the project cost. Borrower must provide 10% or more of project financing. Rate: Fixed;2 points below the lowest prime rate published in the Wall Street Journal the day the loan is closed, or 3%,whichever is greater. Term: Financing with a balloon payment in 5-years. The balloon payment must not be longer than the balloon payment of the participating bank. Loans may be amortized up to the following limits: 20-years on real estate uses; 10-years on equipment uses. Extension: In the event that the Borrower is unable to obtain conventional financing to replace the Microloan at the end of five years, the loan may be extended up to two additional years at a market rate of Page 2of16 P~OMEBED BY MATURE interest. Criteria: Borrower must be an industrial or high technology firm and create or retain one new full-time job for each $20,000 loaned within 2 years. Said jobs must pay a minimum wage of$10.00 per hour excluding benefits required by law. Loans of$75,000 or more shall meet the city of Elk River Business Subsidy Policy for the creation of new jobs at a minimum wage of$15.00 per hour excluding benefits required by law, as well as a 5-year location requirement. In the case where the multiple sources of public financing are requested (e.g. Microloan and Tax Increment Financing) job creation goals shall not be double-counted. Borrower must comply with the provisions of the city's Industrial and Business Park zoning ordinances as applicable. Downtown Revitalization Financing Program Purpose: The Downtown Revitalization Financing Program is available to business and property owners in the Downtown District (DD)-as ma-ir,primarily for the rehabilitation and restoration of older buildings, as well as new business development. Non-profit organizations may be considered. The Downtown Area shall be defined as that area zoned Downtown District in the Zoning Ordinance. The EDA may consider the Core area of the 2012 Mississippi Connections Development Framework as the Downtown District. The downtown area or district is the area shown by the attached map and narrative of the boundaries. Amount: Up to $74,999 of secondary financing not to exceed 40% of the project cost. Equity: Must have private-sector commitments for 50% of the project cost. Borrower must provide 10%or more of project financing. Rate: Fixed at 2%. Term: Financing with a balloon payment in up to 5-years. Loans may be amortized up to the following limits: 20-years on real estate uses; 10-years on equipment uses. Extension: In the event that the Borrower is unable to obtain conventional financing to replace the Microloan at the end of five years, the loan Page 3of16 PONEBEO BY NATURE may be extended up to two additional years at a market rate of interest. Criteria: At a minimum, 20%of Microloan dollars must be used for the improvement of the building facades,with exceptions to be considered when it appears the facade improvements are not necessary. Financing of leasehold improvements will be considered at a limit of$25,000. Borrower must be located in the Downtown District (DD). Loans must be supported by sufficient collateral,which may include personal assets and guarantees. Energy Efficiency Improvement Program Purpose: The Energy Efficiency Improvements Program is available to property owners of commercial or industrial buildings in Elk River to provide capital to businesses to invest in energy efficiency and improve their profitability through reduced energy costs and enhance their ability to retain and create jobs. In addition, the program helps the city of Elk River use energy conservation as an economic development tool. Non-profit organizations may be considered. Amount: Applicants may apply for the cost of improvements up to $74,999 Eligible Uses: Energy efficiency measures installed in or on a building include: • Facility systems optimization (commissioning/re-commissioning) • Facility systems control improvements • Process efficiency improvements (CenterPoint Energy) • Lighting efficiency improvements • Heating,ventilation and air conditioning system modifications • Exterior envelope improvements • Motor and pump efficiency improvements • Ground-source heat pump systems used to heat or cool a facility • Installation of equipment or devices that use renewable energy sources to generate electricity or heat or cool a building including solar electricity (photovoltaic),wind turbine or solar thermal. Equity: Must have a minimum of 10% equity provided by the borrower. Rate: Fixed;2 points below the lowest prime rate published in the Wall Street Journal the day the loan is closed,or 3%,whichever is greater. Term: The maximum maturity date will be determined by the useful life of the improvement and the energy payback achieved. For projects that Page 4of16 P . U E B E O O Y NATURE 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. Criteria: At least 50% of microloan funds should be spent on energy efficiency improvements - -- - Applicant must agree to energy audits conducted under the utility company's Conservation Improvement Program (CIP). If warranted, engineering studies then are performed on facilities with conservation opportunities under the utility company's CIP Program. Energy efficiency is defined as improvements that are rebatable by the Elk River Municipal Utilities (ERMU) or the utility provider for the property if not ERMU. Proposed energy efficiency improvements that do not qualify for the utility's prescriptive rebate program will be reviewed and approved by the utility company servicing the upgrade measures (e.g. Elk River Municipal Utilities, Connexus, CenterPoint) along with a letter indicating eligible utility rebates. Utility rebates as applicable will be assigned to the Elk River EDA and applied toward principal repayment of the loan. An Elk River Energy City Commission member will be asked to participate in the EDA Finance Committee review and • recommendation of the application. The loans will be secured by personal and corporate guarantees, and if applicable a lien on equipment financed and subordinate mortgage on the property. Loans are not transferrable. Installation must be certified through a licensed contractor and electrician. New construction is eligible when participating with a utility company rebate program. Eligible costs shall include only incremental costs over industry design standards. • 31-14. USES 1. Permitted Fund Uses: a. Building construction b. Land acquisition c. Machinery d. Furniture, fixtures, and equipment (FF&E) e. Renovation and modernization of buildings f. Exterior renovation of retail, commercial and industrial buildings g. Public infrastructure needed for economic development expansions h. Investment real estate with a minimum of 50%of the space pre-leased Page 5of16 P O N E R E O O Y MATURE 2. Ineligible Fund Uses: a. Expenditures for the construction and/or renovation of residential units b. Working capital c. Refinancing of existing debt d. Inventory 41V. BUSINESSES ELIGIBILITY Any project meeting the above criteria, and located or proposed to be located within the city limits of Elk River as defined by this program, may be eligible for an Economic Development Microloan as further defined herein: • Unless otherwise stated,Bbusiness must be a for-profit corporation, partnership, or sole proprietorship,.- • Business must be a small business as defined by the Small Business Administration (SBA). • Business must have a positive net worth. • Religious, political, and pornographic enterprises are not eligible to use the Economic Development Microloan Fund. 5V. MICROLOAN FUND TERMS & CONDITIONS Loan Structure All Economic Development Microloans shall be structured as participation loans and serviced by the project's primary lending institution, rather than as a direct loan, unless otherwise approved by the EDA Finance Committee. Such an arrangement allows for the central distribution and collection of funds and simplifies the financing process for all parties involved. A participation agreement will be signed by the borrower,primary lender and the EDA. The EDA may require additional agreements to be signed by the borrower (i.e. security agreement,personal guarantees,business subsidy agreement). Simultaneous Microloans The simultaneous use of different Microloan Fund Programs by any one borrower or for any one project is prohibited. Call of Loan A loan shall become due and payable in full if a business relocates outside of the city of Elk River prior to the maturity date of the loan. Late Payment Charge A late payment charge of 8% of the installment amount may be enforced. 6W. REGULATION FOR NEW CONSTRUCTION AND IMPROVEMENTS All buildings which public funds will be used for construction or renovation are to be brought into conformance with city ordinances and state building codes. Repairs Page 6of16 POWERED RY NATURE may include the following systems and portions of real property: a. Mechanical heating,plumbing, and electrical b. Structural;including the facade of the structure and energy related improvements. c. Hook-up to city services (i.e. water, sewer) d. ADA (Americans with Disabilities Act) improvements 7VI4. LOAN SECURITY AND GUARANTEES Applicant must be able to secure the loan by providing the EDA with a minimum of a subordinate mortgage upon the building and/or assets or other approved collateral. Applicant must demonstrate the financial means to repay the loans, as determined by the Economic Development Authority. Whenever possible,personal guarantees will be made part of any loan agreement. Key person life insurance may be required as determined by the EDA Finance Committee based on loan amount and company ownership partners. 8V-114. TIMING OF PROJECT EXPENSES No project should commence until the Elk River Economic Development Authority has approved the loan application. Any costs incurred prior to the approval of the loan application are generally not eligible expenditures. No building construction should commence until the required city permits are secured. The applicant will be responsible for all legal,recording, and other fees required for protection of a security interest in the loan, payable by a non-refundable 1% processing fee,which is paid at the time of application. In addition to the non-refundable 1%processing fee, all legal and filing fees shall be paid by the borrower at loan closing. 91X. PROCEDURAL GUIDELINES FOR APPLICATION AND APPROVAL 1. All applicants shall first contact a primary lending institution to determine if additional equity is needed, and if so, how much. 2. The applicant and the primary lender shall then meet with city staff to obtain information about the Microloan program, discuss the project, and obtain application forms. 3. The applicant shall complete and submit an application form to the city, along with a processing fee of 1% of the loan request. (The fee is used to cover processing expenses and will be returned only if application is denied.) The applicant must provide evidence of their ability to meet the equity requirements or provide a letter of commitment for conventional financing from the primary Page 7of16 P0 ■ E O E O 0 NATURE lending institution. 4. The EDA is a governmental entity and as such must provide public access to public data it receives. Data deemed by Applicant to be nonpublic data under State law should be so designated or marked by Applicant. See Minn. Sat. Sections 13.59, Subd. 1,respectively. 5. The application will be reviewed by the city staff to determine if it conforms to all city policies and ordinances and to consider the following: a. The availability and applicability of other governmental grants and/or loan programs. b. Whether the proposed project will result in conformance with building and zoning codes. c. Whether it is desirous and in the best interests of the public to provide funding for the project. 6. With written permission granted by the applicant, the application will be submitted by city Staff to the Small Business Development Center (SBDC) as advisory consult for staff and EDA Finance Committee. Applicant will be asked to execute a Release of Information form with SBDC. To make an appointment with the SBDC,call 320.308.4842. 7. The EDA Finance Committee and EDA Commissioners will review each application in terms of its consistency with the goals of the city's Comprehensive Plan and Economic Development Strategic Plan and in relation to the project's overall impact on the community's economy. Downtown Revitalization Program applications will also be reviewed by a Housing&Redevelopment Authority Commissioner in conjunction with the EDA Finance Committee. Energy Efficiency Improvement Program applications will also be reviewed by an Energy City Commissioner in conjunction with the EDA Finance Committee. The EDA Finance Committee will evaluate the project application in terms of the following: a. Project Design- Evaluation of project design will include review of proposed activities, time lines and a capacity to implement. b. Financial Feasibility-Availability of funds,private involvement, financial packaging and cost effectiveness. • Appropriate ratio of private funds to Microloan funds. • Sufficient cash flow to cover proposed debt service as demonstrated by financial statements and projections. • Ability to demonstrate a positive net worth. • Letter of Commitment from applicant pledging to complete the project during proposed project duration,if the loan application is approved. • Letter of Commitment from other financing sources stating terms Page 8of16 0 11 E 1 E 1 1 INATUREI and conditions of their participation in the project if applicable. • Sufficient collateral. c. All other information as required in the application and/or additional information as may be requested by the Economic Development Authority. d. Project compliance with all city codes and policies. e. Program Objectives - In addition to quality job and wage creation/retention requirements, the applicant must meet all Microloan Fund criteria and demonstrate how the proposed activities will meet at least one of the following objectives: • The project contributes to the fulfillment of the city's approved and adopted economic development and/or redevelopment plans. • The project prevents or eliminates slums and blight. • The project increases the local tax base. • The project brings a structure into compliance with an existing building code violation. 8. A written request for an extension shall be accompanied by a copy of current financial statements and a$500 upfront processing fee. The processing fee is used to cover processing expenses and will be returned if request is denied. The application for an extension beyond the original term should include a letter of denial from a conventional lender. Refinancing will not be allowed solely for the purpose of reducing the interest rate due to lower market interest rates. 9. The EDA Finance Committee will recommend the approval, denial,or request a resubmission. A recommendation from the Finance Committee will be forwarded to the EDA for final action. 10X. LOAN POLICY REVIEW The above criteria will be reviewed on an annual basis to ensure that the policies reflected in this document are consistent with the economic development goals set forth by the city. 1 1x-F. RIGHT OF REFUSAL The Elk River Economic Development Authority may deny any project which it deems inappropriate according to the guidelines established in this document. I 2X-14.COMPLIANCE WITH MN BUSINESS SUBSIDY LAW Page 9of16 POWERED 01 NATURE Each company receiving assistance in the principal amount of$75,000 or more from the EDA Microloan Fund shall be subject to the provisions and requirements set forth by Minnesota Business Subsidy Law Statute 1161993 and the city of Elk River Business Subsidy Policy. Page 10of16 POWERED Oi MATURE ELK RIVER ECONOMIC DEVELOPMENT MICROLOAN FUND APPLICATION II. CONTACT INFORMATION Legal Name of Business: Project Site Address: City / State / Zip Contact Person(s) Business Phone Fax Home Phone Email Check One: Proprietor Corporation Partnership Social Security No. Federal ID # State ID # 214. NATURE OF LOAN REQUEST Which Micro-Loan Program are you applying for? Industrial Incentive Program Downtown Revitalization Financing Program Energy Efficiency Improvement Program Amount Requested: $ Total Project Cost: $ Type of project: New construction for a start-up business. New construction for an existing business. On site expansion Equipment purchase Remodeling: (circle one)Commercial / Retail / Industrial Refinancing existing debt Other Page 10of16 P 1 / ERE 1 1 1' NAIURE Please give a brief summary of your business and its products or service: Please give a brief summary of the project: Please describe how this loan will impact your project: 3 . FINANCING Project Costs Land $ Site improvements $ Buildings (attach plans & costs) $ Equipment/Machinery/Fixtures (attach list and estimated costs) $ Remodeling $ Industrial Inventory/Working Capital $ Other (attach description) $ Total Costs $ Comments: Page 11of16 P O / E O E O 11 NATURE Proposed Sources of Financing SOURCE NAME TERMS AMOUNT Bank Loan $ Bank Loan $ Other Private Funds $ Applicant Contribution $ Other Fed Grant/Loan $ State Grant/Loan $ EDA Microloan $ Tax Increment Financing $ Tax Abatement $ Total Financing $ Collateral Assignments Lien Description of Collateral Position To Bank 1 To Bank 2 To Private Sources To Other Sources To Federal Govt To State To EDA Microloan Page 12of16 PBWEREB BY NATURE Value of Collateral Book Value Cost Existing Liens Land $ $ $ Buildings $ $ $ Machinery& Equip. $ $ $ Other $ $ $ Other $ $ $ 41-V. JOB & WAGE GOALS Present# of Employees Total Payroll Jobs To Be Created* Please provide the following information on jobs you expect to create Within 2-years. Average Are the Jobs Expected Number Hourly Annual Permanent or Hiring Job Title of Jobs Wage Salary Temporary? Date *If loan is for job retention only,please explain in Business Plan. Program Objectives (Check all that apply) The project contributes to the fulfillment of the city's approved and adopted economic development and/or redevelopment plans. The project prevents or eliminates slums and blight. The project increases the local tax base. The project brings a structure into compliance with an existing building code violation. Page 13of16 P O W E R E D 1Y NATURE 5V. PROJECT CONTACTS Attorney Name Address Phone Accountant Name Address Phone Financing Sources (lenders, partners, etc...) Name Address Phone Name Address Phone Parent Company Name Address Phone Others Name Address Phone Name Address Phone Page 14 of 16 P+O I E R E O O Y INALUPE 6V-I. ATTACHMENTS CHECK LIST Please attach the following: A) Written Business Plan: 1. Description of Business 2. Ownership 3. Management 4. Date Established 5. Products/Services 6. Future Plans B) Financial Statements for Past Two Years C) Financial Projections for Two Years D) Resume of Owner/Management E) Personal Financial Statements of Proprietor,Partners, Guarantors F) Letter of Commitment from Applicant Pledging to Complete During the Proposed Project Duration G) Letter of Commitment from the Other Sources of Financing, Stating Terms and Conditions of their Participation in Project H) Fee of 1% of amount of loan request 7\41. AGREEMENT I /We certify that all information provided in this application is true and correct to the best of my/our knowledge. I /We authorize the city of Elk River and the Finance Committee to check credit references and verify financial and other information. I / We agree to provide any additional information as may be requested by the city and the Finance Committee. APPLICANT SIGNATURE BY DATE Page 15of16 POWERED DC MATURE L j r iCR 11 9Y AVE_ F \ �r __,c, - , „,1 ; 13�sr r I \ —�; i �k,x t` t \1 \ ` d 190th CIR t`\`\� \ t c- \ \`+\ $R .� y f. ICE ARENA N � v,H 1, C (3T^ �_ IV 'N'',� •.•y�e0 I x~ \y oAr:F vANOENtu3tc;f Y LINCOLN Ets+R a t'+` ----1 q! ELK RIVER UBEMARY O/�F �v� \f� AN fMO MIDDLE SCHOOL HIGH SCHOOL < SCHOOL SCHOOL 4 y�(Vyy� '1'" 'P d i `.fi x ""_ " SCFr��L L� E�X NI S(R � x z I LARK„ _! Z �, orb i G, 13 ST rc u y 7Q ToR' 7th ',. o k,, ,,_,L.4 v % A° f ,s!°r awn 1` 54 P f +,\qty\ �fA 'Q)' 5Lg 01' s. 2 yIRtii I1 - L ,! v �� `1`\ - of � E1! z� ,y, 01 ;--.-- I,--•-`,-__I- `ef,, 1.K RtilR i1 __. h70 , 6+n:ST 6,h ST LIONS Y C) 6 PO p° `, _ PARR -> 2'nd.p e a = a� OO„ zER•_ z T ® Blh 5 h ♦ PLA r T x ti yq µa+ <upol stn sr , ® Gf o 1nt oR " 1 � A S,1 7on p s } 5 AR°lA` 1 r. `J athls'i plsj0 arf. . 1 Y n SbpOL �� T. J ?' •` Fal�llipN 2 NILE _'„! : _ M I Sr A° 1 1 111 1 Pi NI p 3 S MANOR MISSISSIPPI RIVER Q PLACE 2� r ulna ,i '. 1 a' d 1 T \ \\\■ V 9 illik, OP o 4, v 1' i 78Th! '9 -11,\\,,,��._ t ; i \ � ELK RJ17EJ Mississippi Connections Downtown Area 4-------, Downtown Core DOWNTOWN AREAS River Downtown Zoning District Downtown Mississippi Connections boundaries: Start following the south side of School Street to Freeport,west border of Freeport to north lot line of parcel 75-401-0445. North corner of lot 75-401-0445 follow east lot line south along east lot lines of parcels 75-401-0445,75-401-0435, 75-401-0430,75-401-425,75-401-0420, 75-401-0415 to 3`d Street. Continue along the south side of 3rd street to Evans Ave; continue along the north side of parcel 75-544- 0004 to the eastern property line.Continue along the east property lines of parcels 75-544-0004 and 75- 551-0110 to Main St. Continue East along the south side of Main Street approximately 75 feet to the eastern edge of parcel 75-670-0105. Continue south along the east property line of parcels 75-670-0105 and 75-430-0135 to the southeast corner of parcel 75-430-0135. Continue along the south side of parcel 75-430-0135 to 2"d Street and Follow north side of 2"d street to railroad drive. Continue northwest along the eastern edge of railroad drive to the north side of Main Street. Continue along the north side of Main Street to the Western Edge of Parish Avenue and follow the west side of Parrish Avenue to the high-water mark of the Mississippi River.Continue west along the high water line of the Mississippi River to the confluence of the Elk River and Mississippi Rivers. Continue along the generally northern high water mark side of the Elk River to the east side of Main Street,just below the Lake Orono Dam. Continue north east along the south east border of Main Street to the intersection of Tipton Ave and Main Street.Continue in a generally easterly direction to west side of parcel 75-409-0415. Continue north along the western property line of parcel 75-410-0540 to the south edge of Hwy 10. Follow the south side of Hwy 10 to the east edge of Quinn Ave. Follow the east edge of Quinn Ave north, across Hwy 10,to the northwest corner of parcel 75-403-0070. From this line continue east to the south side of the rail road tracks; continue to the east side of Proctor Ave. Continue north along the east side of Proctor Avenue to the south corner of School Street. Inside these boundaries consist of the Downtown Mississippi Connections area. Elk - Request for Action River To ITEM NUMBER EDA Finance Committee 2.3 AGENDA SECTION MEETING DATE PREPARED BY November 5, Brian Beeman,Director of Economic 2013 Development ITEM DESCRIPTION REVIEWED By Update Microloan policy Jeremy Barnhart,Deputy Director CODD Action Requested Recommend to the EDA an updated version of the Microloan policy Background/Discussion At its June 20 meeting,the EDA Finance Committee discussed possible changes to the Microloan policy. Among those changes were the inclusion of non-profits,the eligibility of working capital,defining energy efficiency and setting a threshold of improvements required to be energy efficient in order to qualify, and defining borders of downtown. The Finance Committee discussed each of the recommendations,and came to the following conclusions: • Non-profits should be included • Microloan dollars should not be used for working capital • Energy efficiency should be defined as improvements rebatable by Elk River Municipal Utilities (ERMU) or the utility provider for the property if not ERMU • At least 50% of microloan funds should be spent on energy efficiency improvements for energy efficiency loans • A map should be provided comparing the current downtown district to the downtown area as defined by the Mississippi Connections Redevelopment Framework Attached is a draft of the microloan policy and application that includes all of the decisions that the Finance Committee made. Also attached is a map of the downtown. The purple portion labeled the "core downtown" is what is currently considered by the policy to be the Downtown District. The draft policy is written to include all areas in the red bordered area on the map in the Downtown Revitalization microloan eligibility. The Finance Committee should recommend to the EDA the draft policy as is,or with any changes the committee desires. The EDA will consider the item at is November 18 meeting. Attachments POWERED lit [NATURE • Updated Microloan policy and guidelines • Downtown Map Mississippi Connections • Downtown Map DD CI .>"(4* Elk. REQUEST FOR ACTION iver TO ITEM NUMBER Economic Development Authority Finance Committee AGENDA SECTION MEETING DATE PREPARED BY June 20,2013 Clay Wilfahrt,Assistant Director of Economic Development ITEM DESCRIPTION REVIEWED By Discuss the Microloan Policy and recommend changes Brian Beeman,Director of Economic Development REVIEWED BY Jeremy Barnhart,Deputy Director Community Operations and Development ACTION REQUESTED Discuss the Microloan Policy and recommend changes. BACKGROUND/DISCUSSION The stated purpose of the microloan policy is to encourage private sector investment,create jobs, and rehabilitate buildings. The Microloan is broken down into three categories,an Industrial Incentive Program, Downtown Revitalization Program,and Energy Efficiency Program. The attached policy has details on each of the programs. In the past several months,staff has become aware of several issues with the Microloan Program including: eligibility of non-profits,funding working capital and other expenses,percent of the loan to be used for energy efficiency,and defining energy efficiency. Staff has conducted research via surveys and discussions at meetings in order to gather input and information to help direct the future of the policy. In December of 2012,staff collected 30 surveys asking a variety of questions regarding the microloan policy. 73% of the respondents were aware of the program,and only 27 were not. 50% of all respondents said that they would be willing to make energy efficiency improvements in order to get a microloan.40% of respondents said that there were ineligible expenses that would prevent them from seeking a microloan. Several people listed working capital and residential improvements as ineligible expenses that they would consider financing if they were eligible. 27% of the respondents said that they were excluded because of business eligibility. Exclusion of non-profits was mentioned a couple of times, as was the geographic restriction to downtown. Of the 30 respondents, 14 said that they have no concerns working with the city on a microloan. Several noted that the approval process seemed longer than necessary,several noted eligibility concerns,and a few more feared that changes in administration could affect their loan. Staff presented information about the Microloan to the Energy City Commission(ECC) and asked for input on the program and any recommendations for changes. The ECC brought up that non-profits are not INATUPE eligible,there is no way to distinguish how much energy efficiency must be tied into a project, and the fact that non-energy efficiency costs are tied into energy efficiency loans. The commission came to the consensus that it was appropriate to use eligibility to the ERMU rebate program as a measure of what was energy efficient and that tying in non-energy efficiency costs to fund a larger project is appropriate. The most common ideas and concerns that have been brought up and that staff would like the input of the Finance Committee on are the following: 1. Should non-profits be allowed to apply for microloans? 2. Can Microloan dollars be used for working capital or residential improvements? 3. 'What constitutes energy efficiency? 4. Should there be a threshold percentage of dollars of the loan that are used for energy efficiency? Staff is seeking input from the finance committee on these issues. Following input from the finance committee, staff will update the Microloan Policy,bring to the Finance Committee for final review and approval,and take it to the EDA in late summer of 2013. ATTACHMENTS • Microloan Policy and Guidelines • Draft Minutes of the April 17,2013 Energy City Commission meeting • Survey Results N:\Departments\Community Development\Economic Development\EDA\Adminstrative\Agenda\EDA Agenda\Year2013\11-18-2013\6.1 at 3. 2.3 at 2 Microloan Policy EDA Finance RFA 6-20-2013(2).docx MEETING OF THE EDA FINANCE COMMITTEE HELD AT THE ELK RIVER CITY HALL THURSDAY,JUNE 20, 2013 Members Present: Paul Motin, Cliff Lundberg,Dan Tveite, Chad Vitzham Members Absent: Larry Toth,Nate Ovall Staff Present: Assistant Director of Economic Development,Clay Wilfahrt,Tom Sagstetter,ERMU Others Present: Annie Deckert,Decklan Group Call Meeting to Order ,_ Assistant Director of Economic Development Clay Wilfahrt cad the . D g to order at 7:30am 2. Consider Industrial Incentive Microloan for PreferredPowder Coating %/ Mr.Wilfahrt reviewed the staff report. Mr. Lundberg asked if the jobs required as part of the oth$ ubsidy projects would overlap with the jobs required for the microloan. Mr.Wilfahrt explained that Pre • Powder would be required to create a certain amount of jobs for each that was easily covered by the •er they plan to create. Mr. Lundberg also asked if our subsidy policy requires that the business have a • lic hearing at Council,but Mr. `,�� Wilfahrt stated that it was tied to statute. 4„ MOVED BY LUNDBERG AND SECONDED BY TVEF 'I TO RECOMMEND APPROVAL OF THE APPLICATI ' AN INDUSTRIAL INCENTIVE MICROLOAN FOR PREFERRED POWDER ING MOTION FAILED 3-0, COMMISSIONER VITZHAM ABSTAINED. �� 3. Discuss the Microloan Miry and 'commend Changes Mr.Wilfahrt ��r ��r � ed the staff report ' , iz The committee discus"sCd how much of the energy efficiency microloan should have to be used for energy/efficiency improve nts. The consensus of the committee was that 50% of the loan should be used foti� ergyefficienc ! e definition of energy efficiency i /o s to be the same as what ERMU and other area ties use. 4%%%% The committe-;• ussed using microloan funds for working capital, and the consensus of the committee was to not fund vi i i capital. The committee also came to a consensus that non-profits should not be excluded as long adiey meet the other requirements of the policy. The committee requested that staff compare the current downtown area with the downtown area as defined by the Downtown Plan. Staff will draft revisions to the policy and bring to the next Finance Committee meeting for review. 4. Closing The EDA Finance Committee meeting ended at 8:17 a.m. EDA Finance Committee Minutes Page 2 mit January,30,2013 Page 2 of 2 Respectfully submitted by, Clay Wilfahrt Assistant Director of Economic Development \ ,\ ‘‘, X441- . „, ‘‘. N:\Departments\Community Development\Economic Development\EDA\Adminstrative\Agenda\EDA Agenda\Year2013\11-18-2013\6.1 at 4,2.3 at 4 Finance Committee Minutes 6 20 2013(2).doc MEETING OF THE ELK RIVER ENERGY CITIY COMMISSION HELD AT THE ELK RIVER CITY HALL WEDNESDAY,APRIL 17, 2013 Members Present Chair Setala,Commissioners Dennis Chuba,Bruce Sayler,Ryan Setterholm, Tim Steinbeck,Matt Westgaard,Tim Rybak,Tom Sagstetter and Scott Hagen Members Absent: Steve Rohlf Staff Present: Environmental Administrator Rebecca Haug,Economic Development • Assistant Clay Wilfarht,Economic Development Director Brian Beeman, Planner/Park Planner Chris Leeseberg,Cable Coordinator Jacob Pace Others Present: Philipp Muessig,MPCA MN GreenStep Cities Coordinator • 1. Call Meeting To Ordet Pursuant to due call and notice thereof,the meeting of the Elk River Energy City Commission was called to order at 8:33 a.m.by Chair Setala. 2. Consider April 17,2013 Energy City Commission Agenda MOVED BY COMMISSIONER SAYLER AND SECONDED BY COMMISSIONER STEINBECK TO APPROVE THE AGENDA. MOTION CARRIED. 3. Consider March 20,2013 Ivlinutea MOVED BY COMMISSIONER CHUBA AND SECONDED BY COMMISSIONER SAYLER TO APPROVE THE MARCH 20,2013 MINUTES. MOTION CARRIED. • 4. General Business • 4.1 Presentation by Chris LeesebeT Park Planner/Planner Mr.Leeseberg gave an overview of the city's new website with a focus on the Energy City section and pertinent information for the commissioners. • 4.2 Presentation by Philipp Mwessis.MPCA MN GreenStep Cities Coordinator • Mr.Muessig discussed the history of the MN GreenStep Cities program and informed the commission that 54 cities in MN are participants in the program which was launched in 2010. The program is similar to Tree City USA but looks at environmental sustainability. The program encourages civic engagement and is built around 5 categories. There are 6 partners in the program:League of MN Cities (WC),Clean Energy Resource Team (CERTs),Great Plains Institute,Izaak Walton League,Urban Land Institute,and Division of Energy Resources. Within the 5 categories,there are 28 best practices. Depending on the size of a community determines what category it fits into. Elk River is classified as an"A" category city and has completed enough actions to be recognized as a"Step 3" city which is • the highest level at this time. Cities can participate in the Regional Indicators Initiative for $1,000/year. This program will track the city for four years and utilize the B3 Benchmarking database to see how public buildings are performing. 4.3 Presentation by Clay W/itfarbt.Economic Development Assirtata Mr.Wilfarht presented on this city's Microloan Fund Policy specifically on the Energy Efficiency Improvement Loan section. He explained that it is low interest rate loan and P.S. Dance Studio took advantage of the loan. There are challenges with determining what constitutes energy efficiency and that the cost of the improvements can outweigh the interest rate. A possible solution is to make a portion of the loan forgivable. This could be done by using the Energy City High Five scale and forgiving portions of the loan based on the level achieved. Commissioner Chuba asked about non-profits being eligible and Mr.Wilfarht explained that if there is job creation and it is promoting the downtown,non-profits may be eligible. Commissioner Setterholm asked where the money comes from and the maximum term. Mr.Wilfarht explained that the money comes from the EDA balance through a levy and the term is a minimum of 10 yr.up to 20 yr. Chair Setala asked how the energy efficiency will be measured and how to make a distinction between standard energy efficiency and high energy efficiency. Commissioner Sagstetter explained that rebates vary depending on the efficiency and the rebates buy down the initial cost. Mr.Wilfarht stated that the program is aligned with the rebates. Mr.Sagstetter questioned where the baseline gets set and how much loan amount can be used for build out. Commissioner Setterholm explained that in commercial/industrial businesses the main driver is payback. Mr.Wilfarht asked in the ECC approves of tying the loan into the entire cost. Consensus of the commissions stated it was appropriate. 4.4 H.ockg Day MN 2014 Ms.Haug announced that Elk River will be the host of Hockey Day MN 2014 on January 18,2014 in the Handke Stadium. This event has a lot of media coverage and may be a good opportunity for Energy City to have a demonstration and have an electric and natural gas vehicle displayed. The event is promoted for the entire week. Commissioner Westgaard will keep the ECC informed of how the ECC can participate in the event • 4.5 Subcommittee Updates • • ec, dee o The Education Subcommittee met on Tuesday,April 9 via conference call • between Ms.I-hug and Commissioner Setterholm. During the call,discussion • focused on partnering with the schools and determining what opportunities are available. Commissioner Rybak indicated that the subcommittee should meet with the principles and discuss making Energy City tour a requirement for students for science and technology. Commissioner Rybak explained that bussing is a major factor in where schools go. Commissioner Rybak offered to speak with_farina about setting up a meeting with all of the principles. • Enetyy Design Subcommittee o Mr. Sagstetter and Commissioner Chuba informed the ECC that the flier in the packet is being revised to look similar to other handouts from the city. • Demonstration Subcommittee o The subcommittee is meeting immediately after the ECC meeting. Commissioner Setterholm suggested looking at the Natural Gas fueling station in South Minneapolis as a demonstration. • .••• • Visionay Subcommittee • o Chair Setala discussed the subcommittee's plan of using the city of Vancouver's "Greenest City Action Plan"to develop goals for the city and commission. The Energy City Plan will be presented to the city council to receive feedback 5. Other New arnomic Development Director—Brian Beeman Mr.Wilfarht introduced the city's new Economic Development Director,Brian Beeman. Mr.Beeman introduced himself and discussed his previous work experience. Number of Weed figs Councilmember Westgaard asked Ms.Haug to ask the commission if the ECC meetings should be reduced due to the number of subcommittee meetings. The consensus of the ECC is that the subcommittee meetings are getting close to the point where they could be every other month but the ECC meetings should remain monthly. 6. Schedule Next ECC Meeting and Identify Agenda Items The next meeting will be held May 15,2013 at the Elk River City Hall in the Upper Town Conference Room at 8:30 a.tn.Items for the agenda include: • Approval of the April 17,2013 Minutes • Presentations by Connexus,Elk River Municipal Utilities and Centerpoint Energy • Subcommittee Updates 7. Adjournment There being no further business,Chair Setala adjourned the meeting of the Elk River Energy City Commission at 10:33 a.m. Minutes Prepared by Rebecca Haug. John Setala,Chair Tina Allard,City Clerk