5.0. HRSR 09-27-1999 ELK RIVER HOUSING AND REDEVELOPMENT AUTHORITY
• MEMORANDUM
TO: Housing &Redevelopment Authority
FROM: Marc Nevinski, Assistant Director of
417 Economic Development
DATE: September 27, 1999
SUBJECT: Micro Loan Fund Public Hearing
Issue
Revisions to the Economic Development Micro Loan Fund polices are now
complete. However, state law mandates that a public hearing be held on the
policies before they are adopted. The City Council and EDA held a public
hearing and adopted the polices on September 13, 1999. The HRA is asked at
this time to consider any comments the public may have before adopting the
revised policies.
• Overview
Two issues prompted modifications to the fund's policies. First, the need to
state clear guidelines for different loan fund uses (i.e. gap financing,
incentives, & redevelopment) required that various provisions of the policies
be restructured. Second, last minute passage of the Business Subsidy Law by
the state legislature placed restrictions on fund dollars and implemented
reporting requirements. The law also requires that each potential loan
grantor(i.e. City Council, EDA, HRA) hold a public hearing before adopting
its own set of policies.
Recommendations
Staff recommends that the Council and EDA consider any input provided at
the public hearing and then adopt the revised loan polices.
Attachments
• Notice of Public Hearing—Revisions to Micro.Loan Fund polices
• Revised Micro Loan Fund Policies
• Business Subsidy.Policy
•
13065 Orono Parkway • P.O.Box 490 • Elk River, MN 55330-1743 • (612) 441-7420 • Fax: (612) 441-7425
Equal Opportunity Housing and Equal Opportunity Employment
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For publication on September 8, 1999.
Please contact Marc Nevinski with any questions at 241-5526.
CITY OF ELK RIVER
NOTICE OF PUBLIC HEARING
The Elk River Economic Development Authority will conduct a public
hearing on Monday, September 13, 1999 at 6:00pm at Elk River City Hall,
13065 Orono Parkway, In accordance with Minnesota Statutes, Section
116J.993 through 116J.995 to consider revisions to its Economic
Development Micro Loan Fund policies.
IIIThe Elk River City Council will also conduct a public hearing to
consider the same matter on Monday, September 13, 1999 at 6:30pm at Elk
River City Hall.
The Elk River Housing and Redevelopment Authority will also conduct
a public hearing to consider the same matter on Monday, September 27, 1999
at Elk River City Hall at 5:00pm.
All interested persons are invited to attend the public hearing to
express their questions and/or comments. Hearing impaired persons
planning to attend who need an interpreter or other persons with disabilities
who require auxiliary aids should contact Sandy Peine, City Clerk, at 441-
4906 by September 8, 1999. If you would like information regarding the
above-described public hearing notice, please contact Elk River City Hall at
241-5526.
Marc Nevinski
Assistant Director of
Economic Development
•
13065 Orono Parkway • P.O.Box 490 • Elk River, MN 55330 • TDD & Phone: (612)441-7420 • Fax: (612) 441-7425
• Business Subsidy Policy
This Policy is adopted for purposes of the business subsidies act (the "Act"), which is
Minnesota Statutes,Sections 1167.993 through 1167.995. Terms used in this Policy are intended to
have the same meanings as used in the Act,and this Policy shall apply only with respect to subsidies
granted under the Act if and to the extend required thereby.
While it is recognized that the creation of good paying jobs is'a desirable goal which benefits
the community, it must also be recognized that not all projects assisted with subsidies derive their
public purposes and importance solely by virtue of job creation. In addition,the imposition of high
job creation requirements and high wage levels may be unrealistic and counter-productive in the face
of larger economic forces and the financial and competitive circumstances of an individual business.
With respect to subsidies,the determination of the number of jobs to be created and the wage
levels thereof shall be guided by the following principles and criteria:
• Each project shall be evaluated on a case by case basis,recognizing its importance
and benefit to the community from all perspectives, including created or retained
• employment positions.
Ill • If a particular project does not involve the creation of jobs,but is nonetheless found
to be worthy of support and subsidy,it may be approved without any specific job or
wage goals, as may be permitted by applicable law.
• In cases where the objective is the retention of existing jobs, the recipient of the
subsidy shall be required to provide reasonably demonstrable evidence that the loss
of those jobs is imminent.
• The setting of wage and job goals must be sensitive to prevailing wage rates, local
economic conditions,external economic forces over which neither the grantor nor the
recipient of the subsidy has control,the individual financial resources of the recipient
and the competitive environment in which the recipient's business exists.
• Because it is not possible to anticipate every type of project which may in its context
and time present desirable community building or preservation goals and objectives,
the governing body must retain the right in its discretion to approve projects and
subsidies which may vary from the principles and criteria of this Policy.
Adopted by:
Date of adoption:
• Date of public hearing:
1070590.1
• ELK RIVER ECONOMIC DEVELOPMENT
MICRO LOAN FUND POLICIES & GUIDELINES
Revised September 1999
City of Elk River Economic Development Authority
13065 Orono Parkway, P.O. Box 490
Elk River, MN 55330
(612) 441-7420
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 central business
districts. 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 central business district
to rehabilitate their existing buildings.
II. LOAN PROGRAMS
In order to meet the economic and community development objectives
of the EDA, three distinct loan programs exist within the Micro Loan
Fund to promote business growth in Elk River.
Supplemental Financing Program
Purpose: The Supplemental Financing Program is designed
industrial firms who have maximized their conventional
financing and equity resources and subsequently would be
unable to complete a project without EDA assistance.
Amount: Up to $50,000
Equity: Must match EDA loan with 1:1 ratio. Total loans not to
exceed 90% of project value.
Rate: Fixed; 1 point below the lowest prime rate published in
the Wall Street Journal the day the loan is closed.
• Term: Financing up to 3 years. Loans may be amortized up to 15
Micro Loan Fund Policy Guidelines Page 2
• years with a balloon payment.
Refinancing:The loan may be refinanced up to 2 additional years at a
market rate of interest.
Criteria: 1. Borrower must create one new full time job for each
$20,000 loaned within two years. Said jobs must pay a
minimum average wage of$8 per hour plus benefits.
2. Borrower must be an industrial firm and comply with
the provisions of the city's industrial and business park
zoning ordinances.
Redevelopment Financing Program
Purpose: The Redevelopment Financing Program is available to
business and property owners in the central business
district (CBD) for the rehabilitation and restoration of their
buildings.
Amount: Up to $50,000
Equity: Must match EDA loan with 1:1 ratio. Total loans not to
exceed 90% of project value.
Rate: Fixed; 2 points below the lowest prime rate published in
the Wall Street Journal the day the loan is closed.
Term: Financing up to 3 years. Loans may be amortized up to 15
years with a balloon payment.
Refinancing:The loan may be refinanced up to 2 additional years at a
market rate of interest.
Criteria: 1. At a minimum 20% of Micro Loan dollars must be used
for the improvement of the building's facade.
2. Borrower must be located in the Central Business
District (see attached map).
Industrial Incentive Program
Purpose: The purpose of the Industrial Incentive Program is to
encourage industrial development that supports the tax
base and brings quality jobs to the city.
10 Amount: Up to $100,000
2
Micro Loan Fund Policy Guidelines Page 3
• Equity: Must match EDA loan with a 3:1 ratio. Total loans not to
exceed 90% of project value.
Rate: Fixed; 4 points below the lowest prime rate published in
the Wall Street Journal the day the loan is closed.
Term: Financing up to 5 years. Loans may be amortized up to 15
years with a balloon payment.
Refinancing:The loan may be refinanced up to 2 additional years at a
market rate of interest.
Criteria: 1. Borrower must be an industrial firm and create one new
full time job for each $20,000 loaned within 2 years. Said
jobs must pay a minimum average wage of$10 per hour
plus benefits.
2. Borrower must locate in the West Business Park and
comply with the provisions of the city's industrial and
business park zoning ordinances.
III. 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
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
IV. 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,
3
Micro Loan Fund Policy Guidelines Page 4
• may be eligible for an Economic Development Micro Loan 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.
• Religious, political, and pornographic enterprises are not
eligible to use the Economic Development Micro Loan Fund.
V. MICRO LOAN FUND TERMS & CONDITIONS
1. Loan Structure
All EDA Micro Loans will be structured as participation loans and will
be serviced by the project's primary lending institution. 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.
2. Simultaneous Micro Loans
• The simultaneous use of different Micro Loan Fund Programs by any
one borrower or for any one project is prohibited.
3. 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 EDA
loan.
VI. REGULATION FOR NEW CONSTRUCTION AND IMPROVEMENTS
All buildings within which public funds will be used for construction or
renovation are to be brought into conformance with city codes and
policies. Repairs may include the following systems and portions or
real property:
a. Mechanical heating, plumbing, and electrical
b. Structural; including the facade of the structure and energy related
improvements.
VII. 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.
4
Micro Loan Fund Policy Guidelines Page 5
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.
VIII. 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.
IX. 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 micro 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 processing fee of 1% of the loan request. (The fee
is used to cover processing expenses and will be returned 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 lending
institution.
4. 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
IPgrants and/or loan programs.
5
Micro Loan Fund Policy Guidelines Page 6
IIb. Whether the proposed project will result in conformance with
41
building and zoning codes.
c. Whether it is desirous and in the best interests of the public
to provide funding for the project.
5. The EDA Finance Committee and EDA Commissioners will review
each application in terms of its consistency with the goals of the
Growth Management, Strategic, and Economic Development Plans
and in relation to the project's overall impact on the community's
economy. Redevelopment Loan applications will also be reviewed
by an HRA member in conjunction with the EDA Finance
Committee.
They will also 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 Micro Loan funds.
• Sufficient cash flow to cover proposed debt service as
demonstrated by financial statements and projections.
• Business must show 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.
c. All other information as required in the application and/or
additional information as may be requested by the Economic
Development Authority.
6
Micro Loan Fund Policy Guidelines Page 7
•• d. Project compliance with all city codes and policies.
e. Program Objectives - In addition to job and wage
requirements, the applicant must meet all Micro Loan 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.
6. 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.
4I°
X. 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.
XL COMPLIANCE WITH STATE STATUTES
Each company receiving assistance in excess of$25,000 from the EDA
Micro Loan Fund shall be subject to the provisions and requirements
set forth by state statute 116J.993 and summarized below.
Progress Reports
The borrower shall file a report annually for two years after the closing
of the loan or until all goals set forth in the application have been
meet, which ever is latter. Reports shall be completed using the format
drafted by the State of Minnesota and shall be filed with the City no
later than March 1 of each year for the previous year. Businesses
fulfilling job creation requirements must file a report with the city no
later than 30 days after the deadline.
7
Micro Loan Fund Policy Guidelines Page 8
•.41)
Maintain Facility
The borrower agrees to maintain and operate its facility at the site
where the loan is used for a period of five years after the date the loan
is closed.
Goal Attainment
In addition to attaining or exceeding the jobs and wages goals set forth
in section IV of the application, the borrower agrees to achieve at least
one of the goals for community development set forth in section IX, part
5, subdivision (e) (see page 6) of the Micro Loan Fund policy.
Redevelopment loans in the central business district are exempt from job
creation and wage goals stated in section IX, part 5, subdivision (e)
provided the loan amount does not exceed fifty percent of the project
cost.
Failure to Comply
Businesses failing to comply with the above provisions will be subject
to fines, repayment requirements, and be deemed ineligible by the
State to receive any loans or grants from public entities for a period of
five years.
XII. 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.
8
APPLICATION
ECONOMIC DEVELOPMENT MICRO LOAN FUND
• ELK RIVER, MINNESOTA
I. CONTACT INFORMATION
Company:
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 #
• II. NATURE OF LOAN REQUEST
Which Micro-Loan Program are you applying for?
Supplemental Financing Program
Redevelopment Financing Program
Industrial Incentive 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
Other
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:
III. 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:
•
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 Micro Loan $
Total Financing $
Comments:
•
Collateral Assignments
Lien
Description Position
To Bank 1
To Bank 2
To Private Sources
To Other Sources
To Federal Govt
To State
To EDA Micro Loan
• Comments:
Value of Collateral
Existing
Liens
•
1111
LandBuildingsMachinery & Equip.OtherOtherComments:
IV. JOB & WAGE GOALS Book Value
Present # of Employees Total Payroll
Jobs To Be Created* Cost
Please provide the following information on jobs you expect to create.
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.
Job Creation Timetable
Please indicate on the table below when individual jobs will be added to the firm.
Number Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr.
Job Title of Jobs 1 2 3 4 5 6 7 8
Comments:
N. PROJECT CONTACTS
Attorney
• Name
Address
Phone
Accountant
Name
Address
Phone
Financing Sources (lenders, partners, etc...)
Name
Address
Phone
Name
Address
Phone
Name
Address
• Phone
Name
Address
Phone
Name
Address
Phone
Parent Company
Name
Address
Phone
Others
Name
Address
Phone
Name
Address
• Phone
V. ATTACHMENTS CHECK LIST
Please attach the following:
•
.1111
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) Other
I) Other
J) Fee (1% of amount of loan request)
i
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.
DATE
APPLICANT NAME
BY
BY
•
•