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8.0. EDSR 11-12-2002 Item 8 . City of Elk . .. River MEMORANDUM TO: Economic Development Authority FROM: Catherine Mehelich, Director of Economic Developmen 4 DATE: November 12, 2002 SUBJECT: Business Finance Programs Update Attachments • Article "DTED revises Minnesota Investment Fund proposal",League of MN Cities 10/23/02. • MN Community Capital Fund Membership Update 11/6/02. • MN Investment Fund The MN Department of Trade and Economic Development (DTED) administers the MN Investment Fund,which provides low interest loans to new or expanding businesses via a grant to local units of government. DTED has been considering potential changes to the program due to legislative direction. The attached article summarizes the potential changes. In the past the City of Elk River has utilized programs such as the MN Investment Fund to leverage local funds provided for business development projects. DTED business finance programs were provided to both Roma Tool and Tescom. In both instances the City of Elk River has been able to retain a portion,if not all, of the grant funds as the loans are repaid. Repayment of the Tescom loan in particular has allowed the EDA to fund the Business Incubator Program. Staff will continue to monitor changes in DTED's program for the impact on future business development projects in Elk River. MN Community Capital Fund In July 2002 the City Council authorized its participation in the MN Community Capital Fund (MCCF) in the amount of$50,000. The city's membership level allows the city to originate loans up to $500,000. MCCF was required to raise $2.5-million from memberships by October 31, 2002 prior to activating the loan program. Upon the request of MCCF, staff recently issued a 90-day extension of the initial member enrollment period in order to give interested organizations more time to secure local approvals. As of the end of October membership commitments included 46 organizations and totaled just over$2-million. The • attached Membership Update provides a list of member communities/organizations. S:\EDA\MicroLoan\Nov02Update.doc Membership Updates Page 1 of 2 MCCFHome pond DevelopmentAbout Membership Benefits Member - SrNNE or .OMMU\IT AP .t. FUND Minnesota Community Capital Fund Membership Update The following communities and organizations have made commitments to become members of the MCCF: Class A Members Carlton County Faribault County Great River Energy Itasca Development Corporation Prairieland Economic Development Corporation St. Cloud HRA St. Louis County Winona Class B Members Becker County • Brainerd Lakes Area Development Corporation Cloquet Detroit Lakes East Central Energy East Range Joint Powers Board Elk River Fergus Falls Hibbing Mille Lacs Area CDC (Willow River, Hinckley, Sandstone &Pine County EDC) Mille Lacs Electric Cooperative New Ulm Pipestone County Sleepy Eye Class C Members Babbitt Big Lake Buhl Cannon Falls Chatfield Chisholm • Dodge County EDA(Claremont, Dodge Center, Hayfield, Kasson, Mantorville & West Concord) Economic Development Partnership of Wright County Hutchinson http://www.mncommunitycapitalfund.org/updates.cfm 11/6/02 Membership Updates Page 2 of 2 Jackson • Jackson County Kandiyohi County Economic Development Partnership Kenneth L. Kellar Foundation Lake Crystal Luverne Madelia Moose Lake New Prague Sherburne County Tower Tracy Warroad Port Authority Worthington [Home] [Fund Development] [About] [Membership Benefits] [Member Updates] [FAQ] [Contact] • • http://www.mncommunitycapitalfund.org/updates.cfm 11/6/02 DTED revises Minnesota Investment Fund proposal Andrea Hedtke • With a potential state budget deficit Over the summer,DTED held to replenish its funding base,while also in excess of$3 billion,programs that a series of meetings with various preserving local capacity to operate are dependent on the state general interested parties,including local local revolving loan funds.Addition- fund are at risk.One of these at-risk government representatives,to discuss ally,a business's loan repayments would programs is the Minnesota Investment potential changes to the MIF program. be returned to the local government Fund(MIF).This grant program, At these meetings,a number of grantee and to the state simultaneously administered by the Dept.of Trade positive comments were made in (currently,the grantee receives the and Economic Development(DTED), support of the activities that local entirety of its share before returning provides financial assistance to new governments have been able to any funds to the state).Finally,"forgiv- or expanding businesses.Grants are undertake with revolving loan funds able"loans would be limited to awarded to local units of government, created and replenished with retained exceptional circumstances authorized which,in turn,make loans for specific funds.Accordingly,DTED has revised by the Commissioner. business projects or to finance public its proposal. DTED is also proposing to infrastructure improvements. The new proposal would still increase the flexibility of the MIF. Local government grantees allow local government grantees to While the goal of job creation would appreciate the fact that the law retain a portion of the repayment remain a primary criterion for assistance, currently allows the first$100,000 dollars,but it would also allow DTED the program would permit the use of repaid by a business to be retained by to recapture the balance of the repay- funds for projects that emphasize the local government.These retained ment dollars to create a permanent productivity investments that may by funds are used to create and replenish state revolving fund dedicated to more focused on company competi- local revolving loan funds.During the making additional MIF grants. tiveness and support job retention. 2002 legislative session,in an effort to Essentially,the new proposal substitutes Further,DTED is proposing to ensure the long-term viability of the a 20 percent amount for the current increase the maximum levels of • MIF,DTED sought legislation that $100,000 amount.For loans made assistance per job in order to target would have redirected the $100,000 after July 1,2003,20 percent of a dollars where they are most needed. amounts currently retained by local business'loan repayment would be The League is interested in your governments to a state revolving loan retained by the local government feedback on this new proposal.If you fund in order to recapitalize the MIF grantee and 80 percent would be have any comments or questions, program.Some local units of govern- returned to DTED. please contact Andrea Hedtke®LJ 0 0 ment expressed concern with this The underlying rationale is that I I IAl IOU®UUm000MI Immm initial proposal. this will ensure that the MIF has funds ® 0®®4 i October 23, 2002 Page 7 Business-Financial Assistance- Business Financing Programs-Minnesota Investment Fund Page 1 of 2 Fact Sheet Minnesota Investment Fund Program Purpose To create new and retain the highest quality jobs possible on a state wide basis with a focus on industrial, manufacturing and technology related industries; to increase the local and state tax base and improve the economic vitality for all Minnesota citizens. How It Works Grants are awarded to local units of government who provide loans to assist expanding businesses. Eligible Applicants Cities, counties, townships and recognized Indian tribal governments. Minimum Requirements All projects must meet minimum criteria for private investment, number of jobs created or retained and wage thresholds. Eligible Projects • Loans for land,buildings, equipment and training are eligible. Funds may also be used for infrastructure improvements necessary to support businesses located or intending to locate in Minnesota. Ineligible Projects Working capital, retail business and industrial park development. Maximum Available $500,000. Only one grant per state fiscal year can be awarded to a government unit. Other Funds Required At least 50% of total project costs must be privately financed through owner equity and other lending sources. Most applications selected for funding have at least 70% private financing. Interest Rate Negotiated. Terms Real estate a maximum of 20 years; machinery and equipment a maximum of 10 years. . Collateral Requirements Negotiated. Personal guarantees may be required. Applications Accepted http://www.dted.state.mn.us/01x02x01x04.asp 11/4/02 Business- Financial Assistance- Business Financing Programs-Minnesota Investment Fund Page 2 of 2 On a year-round basis using the Business and Community Development application. • Approving Authority Department of Trade and Economic Development. Disbursement of Funds As costs are incurred but prorated with other sources of funding. tContact DTED Regional Representative Print This Page Copyright©1999-2002,Minnesota Department of Trade and Economic Development.All rights reserved. S i http://www.dted.state.mn.us/01x02x01x04.asp 11/4/02