6.2 EDSR 04-17-2017Request for Action
ToItem Number
Economic Development Authority6.2
Agenda Section Meeting DatePrepared by
General BusinessApril 17, 2017Amanda Othoudt, EDD
Item Description
Reviewed by
EDA Jobs Incentive Microloan Program and PolicyCal Portner, City Administrator
Reviewed by
Action Requested
Approve, by motion, theEDA Jobs Incentive Microloan Program and Policy.
Background/Discussion
Staff, in conjunction with the EDA Finance Committee, our attorney and financial advisor, reviewed and
revised the EDA loan programs and policies.
The Jobs Incentive Microloan Program is a program that is seeded by a separate fund account utilizing
former state MIF dollars.
This program was included in the general microloan policy. Staff has separated this program into a
separate policy because funds for this program need to follow spstate guidelines, which includejob
listing and prevailing wage requirements.
Financial Impact
None
Attachments
Jobs Incentive Microloan Program Policy
Powered by Nature
Economic Development
Job Incentive Microloan
Guidelines, Policy & Application
(Seeded by State MN Investment Fund Awards)
March, 2017
City of Elk River
Economic Development Division
13065 Orono Parkway
Elk River, MN 55330
763.635.1040
1
ELK RIVER ECONOMIC DEVELOPMENT
JOB INCENTIVE MICROLOAN
GUIDELINES, POLICY & APPLICATION
GENERAL PURPOSE AND GUIDELINES
The purpose of the RLF is to provide financial and technical ass for the creation and retention of new
employment. These objectives may be accomplished through the follow means:
1.Create/retain permanent private sector jobs to fuel above-average economic growth.
2.Investment in technology and equipment that increase productivit wages;
3.Leverage of private investment to ensure economic renewal and competitiveness;
4.Increase the local tax base to guarantee a diversified industry mix;
5.Improve the quality of existing jobs, based on increases in wage
in the job duties, training, or education associated with those jobs;
6.Improve employment and economic opportunities and create a reas
and
7.Enhance productivity growth through improved manufacturing or ne technologies.
One way to meet these objectives is to assist businesses that haof Elk River.
These firms bring income into the state and raise the overall st living.
ELIGIBLE EXPENDITURES
The MIF-seeded funds may be used in a variety of ways include example noted below. More information is
available in Minn. Stat. 116J.8731 and through conversations wit officer.
1.Provide loans, and other forms of participation, ensuring that R
private financing/owner equity.
2.Fund strategic investments in renewable energy market development. Any expenditure for
external marketing for renewable energy market development is not subject to the
matching requirements listed above.
3.Provide entrepreneurs with training, other technical assistance, and financial assistance as
defined by federal guidelines.
ELIGIBLE PROJECTS
Assistance must be evaluated on the existence of the following c116J.8731:
1.Creation or retention of jobs, or the improvement of jobs as measured by wages, skills or
knowledge;
2.Increase in the tax base;
3.Attraction of private funds to the project;
4.Incapacity of local communities and finance partners to finance project;
5.Results in higher wage levels or workforce skills;
6.Supports development of microenterprises, as defined by federal
technical assistance or financial assistance.
7.The project promotes or advances the green economy.
8.Need for assistance to retain existing business;
9.Importance of assistance to attract out-of-Elk River business; and
The assistance cannot meet solely 8 or 9; other conditions must also be present.
2
ELIGIBLE ACTIVITIES
RLFs may be used to fund a variety of business activities including:
1.Acquisition of land
2.Construction or rehabilitation of facilities
3.Site improvements
4.Utilities or infrastructure
5.Machinery and Equipment
6.Training
Advance approval from DEED is necessary if the local government
activities not listed above. Approval is more likely to occur in projects that relate to busine
and involve other local government funds.
INELIGIBLE ACTIVITIES
In contrast to federal MIF funds, there are industry limitations
MIF RLFs may not be used for the operation, construction or expa
that has a professional sports team as a principal tenant or any firm engaged in retailing merchandise. All
assistance should follow the approved RLF guidelines. Please calthe Economic Development Director to
discuss any prospective financing.
WAGE GOALS
Businesses receiving RLF-State MIF assistance must pay each employee total compensation, including
benefits not mandated by law, shall be the greater of $15.00 per hour or 150% of state or fede
wage, whichever is greater, exclusive of benefits required by la
OTHER ELIGIBLE USES OF THE FUNDS
Minn. Stat. 116J.8731 allows local governments to loan or grant
commission, other regional entities, or a certain statewide comm
match required for capitalization of a regional or statewide RLF.
CONFLICT OF INTEREST
Minn. Stat. 471.87 and 471.88 provide guidance on conflict of in
conflict of interest shall be deemed to exist when a decision on
duty to another party or if special advantage is deemed to occur. Poteshould also
be considered.
BUSINESS SUBSIDY LAW
As mentioned on page 1, Minn. Stat. 116J.993 and 116J.994 must be followed in the administration of RLF-
State MIF. These sections pertain to the definition of a business subsidy, public purpose of the subsidy,
criteria, subsidy agreements, wage and job goals, timing of the project, public notice and hearing
requirements, failure to meet goals, and reporting of information regarding the outcomes of the subsidy.
JOB LISTING REQUIREMENTS
Per Minn. Stat. 116L.66, a business that receives grants or loan
agree to list any vacant or new positions related to the financithe MinnesotaWorks.net job
bank website.
3
PREVAILING WAGE
Per Minn. Stat. 116J.871, laborers and mechanics at the project site during construction, installation,
remodeling, and repairs must be paid the state prevailing wage if the financial assistance is greater than $2,000
for a loan. All contracts for publicly owned infrastructure using the RLF must comply with the prevailing
wage provisions.
DATA PRIVACY
The provision of any information related to any applications for. 13.591,
particularly Subd 1 and 2. Other applicable state and federal laws and rules must also be followed.
JOBS INCENTIVE MICROLOAN PROGRAM
Purpose: To assist existing businesses with expansion and attract new bus
whose local operations will help expand the Citys economy throu
creation and maintain/grow the Citys tax base. The purpose of the Jobs Incentive
Program is to encourage the creation of high paying and quality jobs
Amount: Up to $200,000 of secondary financing not to exceed 20% of the t
Equity: Must have private-sector commitments for 50% of the project cost. Borrower must
provide 10% or more of project financing.
Rate: Fixed at 3%.
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.
MICROLOAN FUND TERMS & CONDITIONS
Loan Structure
All Economic Development Microloans shall be structured as direc
approved by the EDA Finance Committee. If a participation loan i
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
Simultaneous Microloans
The simultaneous use of different EDA microloan programs by any
project is prohibited.
Loan Repayment
Jobs Incentive funds, including principal and interest received
restaurant, retail, casinos, or sports facilities.
Call of Loan
4
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 will be en
grace period of 10 calendar days.
REGULATION FOR NEW CONSTRUCTION AND IMPROVEMENTS
All buildings which public funds will be used for construction onovation are to be brought into
conformance with city ordinances and state building codes.
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 colla
loan.
Applicant must demonstrate the financial means to repay the loan
Whenever possible, personal, corporate, and/or entity guarantees will be
agreement.
Key person life insurance may be required as determined by the E
loan amount and company ownership partners.
TIMING OF PROJECT EXPENSES
No project should commence until the EDA has approved the loan a
prior to the approval of the loan application are not eligible e
No building construction should commence until the required city are secured.
The applicant will be responsible for all legal, recording, and
security interest in the loan, payable by a $2,000 processing fe
application. In addition to the processing fee, all legal and filing fees shall be paid by the borrower
at loan closing.
Closing of the Microloan should be simultaneous with the borrowe
should be given two weeks notice before closing.
PROCEDURAL GUIDELINES FOR APPLICATION AND APPROVAL
1.All applicants shall first contact a primary lending institution
equity is needed, and if so, how much (if applicable).
2.The applicant shall then meet with city staff to obtain informat
program, discuss the project, and obtain application forms.
3.The applicant shall complete and submit an application form to t
$2,000 processing fee. The fee is used to cover processing expenses and any remain
5
funds will be returned to the applicant. The applicant must pro
ability to meet the 10% equity requirements or provide a letter
conventional financing from the primary lending institution.
4.The EDA is a governmental entity and as such must provide public
it receives. Data deemed by Applicant to be nonpublic data unde
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
policies and ordinances and to consider the following:
a. The availability and applicability of other governmental grants and/or
microloan programs.
b. Whether the proposed project will result in conformance wit
zoning codes.
c. Whether it is desirous and in the best interests of the pub
for the project.
6.The EDA Finance Committee and EDA Commissioners will review each application
terms of its consistency with the goals of the citys Comprehens
Development Strategic Plan and in relation to the projects over
communitys economy. Downtown Revitalization Loan applications will also be
reviewed by a Housing & Redevelopment Authority Commissioner in
the EDA Finance Committee. Energy Efficiency Improvement Loan a
also be reviewed by an Energy City Commissioner in conjunction with the EDA Finance
Committee.
The EDA Finance Committee will evaluate the project application
following:
a. Project Design - Evaluation of project design will include review of proposed
activities, time lines and a capacity to implement the project.
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.
Letter of Commitment from applicant pledging to complete the pro
during proposed project duration, if the loan application is app
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 a
as may be requested by the Economic Development staff.
6
.
d. Project compliance with all city codes and policies
e. Microloan Objectives - In addition to quality job and wage creation/retention
requirements, the applicant must meet all Microloan Fund criteri
demonstrate how the proposed activities will meet at least oneof the following
objectives:
The project contributes to the fulfillment of the citys approve
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
violation.
7.A written request for an extension shall be accompanied by a cop
statements and a $500 upfront processing fee. The processing fee is used to cover
processing expenses. The application for an extension beyond th
include a letter of denial from a conventional lender.
8.The EDA Finance Committee will recommend the approval, denial, o
resubmission. A recommendation from the Finance Committee will be forwarded
EDA for recommendation of approval, denial to the City Council f
MICROLOAN POLICY REVIEW
The above criteria will be reviewed on an annual basis to ensurecies reflected in this
document are consistent with the economic development goals set
RIGHT OF REFUSAL
The EDA may deny any application if it is found not consistent w
Comprehensive Plan and Economic Development Strategic Plan and in relation to the projects
overall impact on the communitys economy.
AGREEMENT TO PAY COSTS OF REVIEW
It is the policy of the City of Elk River to require applicants
reviewing and acting upon applications, so that these costs are
City. These costs include all of the Citys out-of-pocket costs for expenses, including the Citys costs
for review of the application by the Citys Financial Consultant
consultants, recording fees, and necessary publication costs.
The application processing fees cover anticipated costs; costs incurred above the application fee will
be invoiced as they are incurred, and payment will be due within
are not refundable, though any unused portion is returned at the
payment is not received as required by this agreement, the City may su
process and may deny the application for failure to comply with
application. Payment for costs will be required whether the application is granted or denied.
7
The undersigned has received the Citys policy regarding the pay
understands that reimbursement to the City of costs incurred in
required, agrees to reimburse the City as required in the policy and make payment when billed by t
City, and agrees that the application may be denied for failure
provided in the policy.
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 th
credit references and verify financial and other information. I
information asmay be requested by the city and the Finance Committee.
The undersigned has received the citys policy regarding the pay
that reimbursement to the city of costs incurred in reviewing thagrees
to reimburse the city as required in the policy and make payment
that the application may be denied for failure to reimburse the
policy.
APPLICANT SIGNATURE
BY
DATE
8
ELK RIVER ECONOMIC DEVELOPMENT
MICROLOAN FUND APPLICATION
1. CONTACT INFORMATION
Legal Name of Business:
Project Site Address:
City / State / Zip
Contact Person(s)
Business PhoneFax
Home PhoneEmail
Check One:Proprietor CorporationPartnership
Federal ID #State ID #
2. NATURE OF LOAN REQUEST
Which Microloan Program are you applying for?
Jobs Incentive Loan (Funded by State MIF Funds)
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
9
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:
Proposed Sources of Financing
10
SOURCENAMETERMSAMOUNT
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 $_________
Collateral Assignments
Lien
Description of Collateral Position
To Bank 1
To Bank 2
To Private Sources
To Other Sources
To Federal Govt
To State
To EDA Microloan
11
Value of Collateral
Book Value Cost Existing Liens
Land$_________$___________ $__________
Buildings $_________ $___________ $__________
Machinery & Equip.$_________$___________$__________
Other__________ $_________ $___________ $__________
Other__________ $_________ $___________ $__________
4. JOB & WAGE GOALS
Present # of Employees_____________ Total Payroll_____________
Jobs To Be Created*
Please provide the following information on jobs you expect to c-years.
Average Are the Jobs Expected
Number Hourly Annual Permanent orHiring
Job Titleof Jobs WageSalaryTemporary? Date
*If loan is for job retention only, please explain in Business P
12
5. 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
13
6. 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 Three Years and Year to
1.Profit & Loss Statements
2.Balance Sheets
_______C) Financial Projections for up to Three Years
_______D)A Project Proforma to include:
1.Projected revenues,
2.Operating expenses,
3.Net Operating Income, and
4.Annual Debt Service and Loan Payments.
_______D) Resume of Owner/Management
_______E) Personal Financial Statements of Proprietor, Partners,
Guarantors
_______F) Letter of Commitment from Applicant Pledging to Compl
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) Letter of Commitment from the Applicant committing to
requirements.
_______H) Processing Fee of $2,000
14
7. AGREEMENT
I / We certify that all information provided in this application
my/our knowledge. I / We authorize the city of Elk River and th
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 Comm
The undersigned has received the citys policy regarding the pay
that reimbursement to the city of costs incurred in reviewing the application will be required, agrees
to reimburse the city as required in the policy and make payment
that the application may be denied for failure to reimburse the he
policy.
APPLICANT SIGNATURE _______
BY
DATE
15
MICROLOAN APPLICATION SCORING WORKSHEET
TO BE COMPLETED BY CITY STAFF
1. The project meets the criteria set forth in the appropriate the .
a) Meets at least one of the microloan objectives in Section 7; 6(e
c) Consistent with all city plans and ordinances.
d) Meets the wage requirements as defined in the citys business su
2. Ratio of Private to All Public Investment in Project: Points: _____
$ Private Investment 5:1 5
$ Public Investment 4:1 4
Ratio Private: Public Financing 3:1 3
2:1 2
Less than 2:1 1
3. Job Creation in the City of Elk River:Points: _____
Number of new jobs as a result of the project. 25+ 5
Number of existing/retained jobs 20+ 4
Total 15+ 3
10+ 2
Less than 10 1
4. Ratio of Public Investment to Job Creation: Points: _____
$ Public Investment $8,000 or less 5
Number of new jobs created/retained $10,000 or less 4
$ of Public Investment per new job $12,000 or less 3
$15,000 or less 2
Over $15,000 1
5. Wage Level of jobs created/retained or relocated Points:
_____
Minimum hourly wage Over $21/ hour 5
of jobs created/retained: $18-21 / hour 4
$15 / hour3
6. Project size: Points: _____
The project will result in the construction 40,000+ 5
of square feet 30,000+ 4
20,000+ 3
10,000+ 2
10,000 or less 1
16
7. Market Value/Tax Base Generation:Points: _____
The project will result in a per square foot Industrial Commercial
estimated market value (land and building) $80/sf+$110/sf+ 5
of$70/sf+$100/sf+4
$60/sf+$90/sf+3
$50/sf+$80/sf+2
$40/sf+$70/sf+1
8. Type of Project:Points:_____
100% Owner Occupied 5
Mix Owner Occupied & Investment 4
Investment Property 3
9. Use:Points:_____
Industrial or Business Park Project 5
Commercial/Retail Rehabilitation/Redevelopment 4
10. Likelihood that the project will result inPoints: _____
unsubsidized, spin-off development. High 5
Moderate 3
Low 1
3´¡ - 4®³ « 0®¨³² ®¥ ¯®²²¨¡«¤ ¯®¨³²
11. Point AdjustmentsPoint Adjustments:
The project contributes to the goals of Energy City. 5 points
Product promotes sensible use of energy, OR
Project utilizes significant energy efficient design &/or
materials in construction.
:
Total Points
Overall project desirability: High50-35 points
Moderate34-29 points
Low28-20 points
Not Eligible 19-0 points
17