Loading...
5.6. SR 09-13-1999 rei ---\) ( ); tli{ ITEM #5.6. MEMORANDUM River TO: City Council & Economic Development Authority FROM: 41,- DATE: Marc Nevinski, Assistant Director of Economic Development September 13, 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 are 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. TDD & Phone: (612) 441-7420 · Fax: (612) 441-7425 A./ ~\.( ( II eity of " Ell{ River e e 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. The 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 N evinski 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 116J.993 through 116J.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 payingjobs 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 oflarger 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. . 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 ofthe 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 ofproject 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 . . . REVISED ELK RIVER ECONOMIC DEVELOPMENT MICRO LOAN FUND POLICIES & GUIDELINES City of Elk River Economic Development Authority 13065 Orono Parkway, P.O. Box 490 Elk River, MN 55330 (612) 441-7420 I. 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 (Le. 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 Financinl!' Prol!'ram 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 J oumal the day the loan is closed. Term: Financing up to 3 years. Loans may be amortized up to 15 years with a balloon payment. Micro Loan Fund Policy Guidelines Page 2 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 Financinl!' Prol!'ram 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: Equity: Rate: Term: Up to $50,000 Must match EDA loan with 1:1 ratio. Total loans not to exceed 90% of project value. Fixed: 2 points below the lowest prime rate published in the Wall Street Journal the day the loan is closed. . 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 rehabilitation 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. Amount: Equity: Up to $100,000 . Must match EDA loan with a 3:1 ratio. Total loans not to 2 . . . Micro Loan Fund Policy Guidelines Page 3 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 ELIGmILITY Any project meeting the above criteria, and located or proposed to be located within the city limits of Elk River, may be eligible for an Economic Development Micro Loan. 3 Micro Loan Fund Policy Guidelines Page 4 . 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 anyone 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. 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 insti tu tion. 4. The application will be reviewed by the Ci~y 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. 5 Micro Loan Fund Policy Guidelines Page 6 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. d. Project compliance with all city codes and policies. . 6 . . . Micro Loan Fund Policy Guidelines Page 7 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. 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. XI. 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. 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. 7 Micro Loan Fund Policy Guidelines Page 8 Goal Attainment In addition to attaining or exceeding the jobs and wages goals set forth in section N 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, repay 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: . TERMS AMOUNT $ $ $ $ $ $ $ $ $ Proposed Sources of Financing . SOURCE NAME Bank Loan Bank Loan Other Private Funds Applicant Contribution Other Fed Grant/Loan State Grant/Loan EDA Micro Loan Total Financing Comments: . Collateral Assignments Description To Bank 1 To Bank 2 To Private Sources To Other Sources To Federal Govt To State To EDA Micro Loan . Comments: Lien Position ~ Value of Collateral Existing Book Value Cost Liens . Land $ $. $ Buildings $ $ $ Machinery & Equip. $ $ $ Other $ $ $ Other $ $ $ Comments: IV. JOB & WAGE GOALS Present # of Employees Total Payroll Jobs To Be Created* Please provide the following information on iobs YOU exPect to create. Average Are the Jobs Expected . Number Hourly Annual Permanent or Hiring Job Title of Jobs Wage Salary Temporarv? 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: IV. 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: . 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 ofloan request) . . . . AGREEMENT 1/ 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. 1/ We agree to provide any additional information as may be requested by the City and the Finance Committee. DATE APPLICANT NAME BY BY