8.1. SR 06-01-2015 �j
Elk = - Request for Action
River
To Item Number
Mayor and City Council 8.1
Agenda Section Meeting Date Prepared by
General Business June 1, 2015 Amanda Othoudt, EDD
Item Description Reviewed by
HRA Blighted Properties Forgivable Loan Program Cal Portner, City Administrator
Reviewed by
Action Requested
Approve, my motion, the HRA Blighted Properties Forgivable Loan Policy and Application.
Background/Discussion
Staff crafted the attached Blighted Properties Forgivable Loan Policy and Application at the direction of
the HRA at the April 6 meeting. The city attorney, Springsted, and the Finance Department have
reviewed the policy and application.
The policy addresses commercial, industrial, and retail properties as identified by a licensed structural
engineer as structurally substandard according to Minnesota Statutes Section 117.025, subdivision 7.
Properties can qualify for up to $200,000 in the form of a forgivable loan. The purpose of the program is
to reinvest in blighted properties to preserve or enhance local tax base and create permanent, private-
sector jobs to stimulate above-average economic growth. It is intended to leverage private investment to
ensure economic renewal and competitiveness, improve employment and economic opportunity for
citizens, create a reasonable standard of living, and stimulation of productivity growth through improved
commercial, retail, manufacturing, or new technologies. Applications will be accepted on an ongoing
basis and reviewed monthly.
The forgivable loan program is based upon the following criteria:
1. Creation of new jobs shall be the greater of$15 per hour or 150% of state or federal
minimum wage,whichever is greater, exclusive of benefits required by law;
2. The project can demonstrate that investment of public dollars induces private funds;
3. The project results in the sale and/or redevelopment of properties deemed structurally
substandard;
4. Increase in tax base;
5. The project provides higher wage levels to the community or will add value to current
workforce skills;
6. Whether assistance is necessary to retain existing business; and
7. Whether assistance is necessary to attract out-of-state business.
A Blighted Properties Forgivable Loan must meet Clauses 1.), 2.), and 3.). A loan cannot be made solely
on findings 1.), 2.), and 3.). A finding must be made that at least two of the remaining conditions also
exist.
p 0 W I R E a 0
NA UREJ
Blighted Properties Forgivable Loans are awarded to businesses that meet all project and job requirements
as outlined within. Projects are evaluated on a first-come, first-served basis and awarded based upon
meeting program criteria.
Other requirements of the loan include:
• Businesses receiving a principal amount greater than $75,000 shall comply with subsidy law
reporting requirements.
• Business shall be commercial, retail, industrial, manufacturing, or technology-based industry.
• The applicant shall provide 50% of funding from a different source.
• Shall retain created jobs for at least two years.
• Shall comply with all city code and policies.
• Shall demonstrate project financial feasibility.
• Applicants shall conduct an environmental review.
The loan will become forgivable after five years upon the completion of the job requirements. To receive
maximum loan amount of$200,000, applicant would need to reinvest in the blighted properties project
site including acquisition and site preparation at 100 percent or more of the assessor's current year's
estimated market value.
The Blighted Properties Forgivable Loan terms are set by the HRA. Projects which don't meet the terms
may be required to repay all or a portion of the loan as determined in the loan agreement. Repayment
terms will vary depending on the use of funds and collateral securing the loan. Specific repayment terms
will be defined in the loan agreement in the event repayment of part or the entire Blighted Properties
Forgivable Loan is required. However, all loans will 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 or if the jobs created are
not maintained for a period of 2 years from the date of closing.
An extension may be granted upon review of the Housing and Redevelopment Authority on a case-by-
case basis, except as otherwise required by law.
The application fee is a non-refundable fee set at $2,000 to cover processing the application. In addition,
to the non-refundable processing fee, all legal and filing fees shall be paid by the borrower at closing.
The time between application and approval of the loan is expected to take 6-8 weeks. Staff will review
applications submitted for compliance with program requirements. The application will then be
submitted to and reviewed by the city's financial advisor, and may be subject to further review by the
Small Business Development Center. Upon approval from the city's financial advisor and/or the SBDC,
the EDA Finance Committee will review the application to ensure compliance with applicable goals,
policies, and ordinances. Once a recommendation has been given, the HRA will review and ultimately
approve or deny the loan. Loan proceeds will be disbursed upon proof of expenditures.
Financial Impact
None
Attachments
■ Draft HRA Blighted Properties Forgivable Loan program
City of
r
Housing and Redevelopment Authority
Blighted Properties
Forgivable Loan Policy
Guidelines & Application
City of Elk River
Housing and Redevelopment Authority
13065 Orono Parkway
Elk River,MN 55330
763.635.1040
www.elkrivermn.gov
P 0 W E R E 0 0 Y
NATUWE It, er
ELK RIVER HOUSING AND REDEVELOPMENT AUTHORITY
BLIGHTED PROPERTIES FORGIVABLE LOAN POLICY
GUIDELINES & APPLICATION
I. OVERVIEW
The Housing and Redevelopment Authority for the City of Elk River (HRA)
recognizes the need to stimulate private sector investment to help spur new
construction, create and retain employment opportunities and promote the sale and
redevelopment of blighted or structurally substandard properties.
The focus is on commercial, retail, industrial, manufacturing, and technology-related
industries to increase the local and state tax base and improve economic vitality. The
program can be used toward the purchase of and reinvestment in properties deemed
blighted or structurally substandard.
II. TO APPLY
Applications will be accepted on an ongoing basis. Projects will be scored based on
the attached Application Review Worksheet. The applicant shall complete and
submit the attached application to the city, along with a processing fee of$2000 to
cover processing expenses. Once application is deemed complete, it will be reviewed
by the EDA Finance Committee and HRA (process may take up to six weeks) for
approval consideration.
III. PURPOSE
The Blighted Properties Forgivable Loan funds are to be used for business start-ups,
expansions, and relocations where blighted properties are being redeveloped, jobs
are created and tax base is generated. This can be accomplished by the following
means:
1. Reinvestment in blighted properties to preserve or enhance local tax base;
2. Creation of permanent private-sector jobs in order to create above average
economic growth;
3. Stimulation or leverage of private investment to ensure economic renewal
and competitiveness;
4. Improvement of employment and economic opportunity for citizens in the
region to create a reasonable standard of living; and
5. Stimulation of productivity growth through improved commercial, retail,
manufacturing or new technologies.
IV. PROJECT ELIGIBILITY AND REQUIREMENTS
The Blighted Properties Forgivable Loan must be based on the following criteria:
1. Creation of new jobs shall be the greater of$15.00 per hour or 150% of state or
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federal minimum wage,whichever is greater, exclusive of benefits required by law;
2. The project can demonstrate that investment of public dollars induces private funds;
3. The project results in the sale and/or redevelopment of properties deemed
structurally substandard;
4. Increase in tax base;
5. The project provides higher wage levels to the community or will add value to
current workforce skills;
6. Whether assistance is necessary to retain existing business; and
7. Whether assistance is necessary to attract out-of-state business.
A Blighted Properties Forgivable Loan must meet Clauses 1.), 2.), and 3.). A loan cannot
be made solely on findings 1.), 2.) and 3.). A finding must be made that at least two of
the remaining conditions also exist.
Blighted Properties Forgivable Loans are awarded to businesses that meet all project and
job requirements as outlined within. Projects are evaluated on a first-come, first-served
basis and awarded based upon meeting program criteria.
V. ELIGIBLE ACTIVITIES
1. Blighted Properties Forgivable Loan may be used for the following activities:
a. Property acquisition, demolition, soil prep, infrastructure, or building
construction.
b. Purchase furniture, fixtures, and equipment (FF&E) along with new
construction.
VI. 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 the
Housing and Redevelopment Authority Blighted Properties Forgivable Loan
program as further defined herein:
• Business 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.
• non-profit corporations, casino, sports facilities and sexually oriented
businesses are not eligible to use the Housing and Redevelopment
Authority Blighted Properties Forgivable Loan Program.
VII. BLIGHTED PROPERTIES FORGIVABLE LOAN TERMS &
CONDITIONS
Loan Amount
8. There is a maximum of$200,000 per Blighted Properties Forgivable Loan. To
receive maximum loan amount of$200,000, applicant would need to reinvest in the
blighted properties project site including acquisition and site preparation at 100
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percent or more of the assessor's current year's estimated market value.
Loan Structure
All Housing and Redevelopment Authority Blighted Properties Forgivable Loans
shall be structured as direct loans.
Applicant must provide at least 50% of project cost through other means. Equity
down payment requirements may vary depending on project and primary lending
institution. Blighted Properties Forgivable Loan funds may be used as equity upon
approval of primary lending institution
The HRA may require additional agreements to be signed by the borrower
(i.e. mortgage, promissory note, security agreement, personal guarantees, business
subsidy agreement).
Other HRA Incentives
Projects can combine the Blighted Properties Forgivable Loan with all other
incentives (i.e.: Micro Loan Program, Tax Abatement, TIF, etc.)
Evaluate Building(s) Existing Condition
An evaluation must be conducted to determine if the building(s) is structurally
substandard by a licensed structural engineer with experience in inspection and
facility assessment projects. Structurally substandard shall mean containing defects in
structural elements or a combination of deficiencies in essential utilities and facilities,
light and ventilation, fire protection including adequate egress, layout and condition
of interior partitions, or similar factors,which defects or deficiencies are of sufficient
total significance to justify substantial renovation or clearance.
Deliver a written narrative analysis of the property describing why the property does
or does not meet the criteria as "structurally substandard" as established in
Minnesota Statutes Section 117.025, subdivision 7.
Call of Loan
Blighted Properties Forgivable Loan terms are set by the HRA. Projects which don't
meet the terms may be required to repay all or a portion of the loan as determined in
the loan agreement. A extension may be granted upon review of the Housing and
Redevelopment Authority on a case by case basis, except as otherwise required by
law. Repayment terms will vary depending on the use of funds and collateral
securing the loan. Specific repayment terms will be defined in the loan agreement in
the event repayment of part or the entire Blighted Properties Forgivable Loan is
required. 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 or if the jobs created
are not maintained for a period of 2 years from the date of closing.
VIII. LOAN SECURITY AND GUARANTEES
Applicant must secure the loan by providing the HRA with a minimum of a
subordinate mortgage upon the building and/or assets or other approved collateral.
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Personal guarantees and entity guarantees may be made part of all loan agreements.
Key person life insurance may be required as determined by the HRA based on loan
amount and company ownership partners.
VIII. TIMING OF PROJECT EXPENSES/PROJECT TIMELINE
No project should commence until the Elk River Housing and Redevelopment
Authority has approved the loan application. Any costs incurred prior to the
approval of the loan application are generally not eligible expenditures. Applicant
must submit project timeline with application;timeline will assist in determining job
creation goal deadlines.
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 $2000
processing fee,which is paid at the time of application. In addition to the
non-refundable $2000 processing fee, all legal and filing fees shall be paid by the
borrower at loan closing.
X. 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 (if applicable) shall then meet with City
Staff to obtain information about the Housing and Redevelopment Authority
Blighted Properties Forgivable Loan program, discuss the project, and obtain
application forms.
3. The applicant shall complete and submit an application form to the City, along
with a non-refundable processing fee of$2000. 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 lending institution if
applicable.
4. The HRA 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.
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6. With written permission granted by the applicant, the application may be
submitted by City Staff to the Small Business Development Center (SBDC) as
advisory consult for staff and EDA Finance Committee. Applicant may be
asked to execute a Release of Information form with SBDC.
7. The EDA Finance Committee and HRA Commissioners will review each
application in terms of its consistency with the goals of the City's
Comprehensive Plan and Housing and Redevelopment Authority Strategic Plan
and in relation to the project's overall impact on the community's economy. 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 the Blighted Properties
Forgivable Loan 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
and conditions of their participation in the project if applicable.
• Sufficient collateral.
• Certificate of Good Standing from the Minnesota Secretary of State
c. All other information as required in the application and/or additional
information as may be requested by the Housing and Redevelopment
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 of the
Blighted Properties Forgivable Loan Program criteria and demonstrate
how the proposed activities will meet at least two objectives listed on page
two of this application.
8. The EDA Finance Committee will recommend the approval, denial, or request a
resubmission. A recommendation from the Finance Committee will be
forwarded to the HRA for final action.
9. Loan proceeds will be disbursed upon execution of the Blighted Properties
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Forgivable Loan documents. A closing to execute the Blighted Properties
Forgivable Loan documents will only occur upon the following: Evidence of
Applicant's portion of project funds have been disbursed or escrowed; or written
confirmation from the primary lender that Applicant has met equity
requirements for the project and primary Lender has either funded their portion
of the project;Lender has fully funded the project and is seeking take out
financing by HRA for HRA's portion of the project; or Lender is requesting
simultaneous closing for the funding of the project.
XI. 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 Housing and Redevelopment
Authority goals set forth by the City.
XI 1. RIGHT OF REFUSAL
The Elk River Housing and Redevelopment Authority may deny any project which it
deems inappropriate according to the guidelines established in this document.
XIII. COMPLIANCE WITH MN BUSINESS SUBSIDY LAW
Each company receiving assistance in the principal amount of$75,000 or more from
the HRA Blighted Properties Forgivable Loan Program shall be subject to the
provisions and requirements set forth by Minnesota Business Subsidy Law Statute
116J.993 and the City of Elk River Business Subsidy Policy.
All applicants will be required to submit annual progress reports to the Housing and
Redevelopment Authority until job creation requirements are met.
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ELK RIVER HOUSING AND REDEVELOPMENT AUTHORITY
FORVIABLE LOAN APPLICATION
I. CONTACT INFORMATION
Legal Name of Business:
Project Site Address:
City / State / Zip
Contact Person(s)
Aar
Business Phone Fax
Home Phone Email
Check One: Proprietor C tion artnership
Social Security No.
Federal ID # State I
II. NATURE OF LOAN REQUES
Does your project involve the redevelopment of structurally substandard property?
Yes
No
Amoun nested: $ Total Project Cost: $
Project timell
Please give a brief summary of your business and its products or service:
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Please give a brief summary of the project and how it complies to the criteria for approval of
the blighted properties forgivable loan program:
Please describe how this loan will impact your project:
III. FINANCING
Project Costs
Land
Site improvements $
Buildings (attach plans & costs) $
Equipment/Machinery/Fixtures t
(attach list and estimated costs)
ding $
Industrial Inventory/Working Capital $
r (attach des on) $
Tota is $
Comments:
Proposed Sources of Financing
SOURCE NAME TERMS AMOUNT
Bank Loan $
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Bank Loan $
Other Private Funds $
Applicant Contribution $
Other $
Fed Grant/Loan $
State Grant/Loan $
HRA Blighted $
Properties Forgivable Loan Program
Tax Increment Financing $
Tax Abatement $
Total Financing
Collateral Assignments
Lien
Description of Collateral;; Position
To Bank
To Bank 2
To Private 'ources
40
To Other Sources
Ilk
To State
To HRA Micro Loan
HRA Blighted Properties Forgivable Loan
Value of Collateral
Book Value Cost Existing Liens
Land $ $ $
Buildings $ $ $
Machinery& Equip. $ $ $
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Other $ $ $
Other $ $ $
IV. JOB & WAGE GOALS
How many employees do you currently have?
Jobs To Be Created* 16
Please provid e the followin g information on 'jobs y ou expect to create Within 2-years.
Average Are the Jobs Expected
Number Hourly Annual Permanent or Hiring
job Title of jobs Wa e Salary Temporary? Date
Program Objectives
(Check all that apply)
The project confi "utes to the Fulfillment of the city's approved and adopted
Housing and Redevelopment Authority 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.
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V. PROJECT CONTACTS
Attorney
Name
Address
Phone
Accountant
Name IAkk
Address
Phone
Financing Sources lenders partners, et
Name
Address
Phone
Name
Address
Phone
Parent Company
Name
Address
Phone
Others
Name
Address
Phone
Name
Address
Phone
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VI. ATTACHMENTS CHECKLIST
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 T ',� Years
t.
e
C) Financial Projections for Two Yars
D) Resume of Owner/Management
E Personal Financial Statements of Pro rotor,Partners,
p
Guarantors
F) Letter of Commitment from Applicant I'll, ng to Complete
the Proposed Project Duration
G) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in
Project
Processing Fee of$2000
I) Certificate of Good Standing
VI. 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
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APPLICATION REVIEW WORKSHEET
TO BE COMPLETED BY CITY STAFF
In the event of multiple applicants, and limited funds dedicated to the program,
the attached worksheet will be used to determine how the funds will be allocated.
The project meets the criteria set forth in Section IV of the Blighted Properties
Forgivable Loan Policy. Check those wb'
icb apply. Must meetfirstfourto score 20 points. 0
points if any of the first four boxes are unchecked.
❑ Creation of new jobs shall be the greater of$15.00 per hour or 150% of state or
federal minimum wage,whichever is greater, exclusive of benefits required by law.
❑ Increases tax base.
❑ The project can demonstrate that investment of public dollars induces private funds.
11 The project provides higher wage levels to the com nity or will add value to
current workforce skills.
❑ The project results in the sale and/or redevelopment of structurally substandard
properties as determined by a licensed structural engineer. (additional 900pointsgiven)
Subtotal Section 1(maximum 120 points)
2. Consideration of Capacity. Check those avhich apps. Must meet all four to score 20 points. 0
points if any boxes are unchecked.
❑ Applicant included a realistic implementation /project schedule.
❑ Applicant has the ability to administer and monitor project.
{'❑ Applicant has the ability to conform to city, state and federal requirements.
❑ Applicant has agreed to annual progress reports and submission of salary surveys for
all new hires. "*%
N Subtotal Section 2(maximum 20 points)
3. Impact Points
Number of new jobs as a result of the project:
*`Award five points per job created up to 950 points
Ratio of loan funds to jobs created/retained
$15,000 or less/job 80 points
$15,001-$24,999/job 60 points
$25,000-$34,999/job 40 points
$35,000 and over/job 20 points
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Increase in the local real estate tax base
>$500,000 20 points
$250,000 to $500,000 15 points
<$250,000 10 points
Immediacy of Impact
*20 points awarded iifproiect will begin within 6 months
Subtotal Section 3(maximum 320 points)
4minimum of 60 points must come from this section in order for project to be considered
4. Wage Level of new jobs created Points
Minimum hourly wage of jobs created/retained:
Over $21/ hour 5 poi
$18-21 / hour 4 po
$14-17 / hour 3 poin
$11-13 / hour 2 points
Below $11/ hour application disqualified
5. Project size:
The project will result in the construction o feet.
80,000+ 50 points''
65,000+ 40 points
50,000+ 30 points
35000+ 11, , 20 points
25,000+ 10 point
Subtotal Sections 4-5(maximum 55points)
Sub -Total Points: of a possible 465 points.
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