7.3. EDSR 04-20-2020
Request for Action
To Item Number
Economic Development Authority 7.3
Agenda Section Meeting Date Prepared by
General Business April 20, 2020 Amanda Othoudt, EDD
Item Description Reviewed by
Modification to the Jobs Incentive Microloan Policy Cal Portner, City Administrator
funded by State DEED money
Reviewed by
Action Requested
Approve, by motion, a modification to the Jobs Incentive Microloan Policy.
Background/Discussion
Per Executive Order 20-15: Effective immediately, in an effort to make more resources available to businesses
impacted by Executive Orders 20-04 and 20-08 (certain business establishment closures), any local unit of
government or lending partner that has revolving loan funds provided by the State Minnesota Investment Fund
program appropriations or Minnesota Investment Fund Disaster program appropriations, may issue loans to
retail and service providers over the next 90 days.
The EDA attorney suggested the following change to our existing policy:
COVID-19 EMERGENCY PROVISIONS
Notwithstanding anything herein to the contrary, loans may be made under this program for retail
and service businesses in accordance with Governor Walz’s Executive Order 20-15 issued on March 23,
2020. The expanded use of this program shall expire on June 21, 2020. All other provisions of this policy
remain the same.
This policy change would reflect that for a short period of time loans can be made for retail and service
industries in accordance with the Governor’s emergency executive order due to the COVID19 pandemic. The
other provisions of the program still apply, wage requirements, equity financing match, etc.
Financial Impact
None
Attachments
Jobs Incentive Microloan Policy
The Elk River Vision
A welcoming community with revolutionary and spirited resourcefulness, exceptional
service, and community engagement that encourages and inspires prosperity
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Economic Development
Job Incentive Microloan
Guidelines, Policy & Application
(Seeded by State MN Investment Fund Awards)
April 17, 2017
City of Elk River
Economic Development Division
13065 Orono Parkway
Elk River, MN 55330
763.635.1040
1 EDA & City Council Approved April 17, 2017
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 assistance for the creation and retention of new
employment. These objectives may be accomplished through the following means:
1. Create/retain permanent private sector jobs to fuel above-average economic growth.
2. Investment in technology and equipment that increase productivity and provide for higher 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 wages or improvements
in the job duties, training, or education associated with those jobs;
6. Improve employment and economic opportunities and create a reasonable standard of living;
and
7. Enhance productivity growth through improved manufacturing or new technologies.
One way to meet these objectives is to assist businesses that have location options outside of Elk River.
These firms bring income into the state and raise the overall standard of 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 with your loan officer.
1. Provide loans, and other forms of participation, ensuring that RLF funds are matched by
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 conditions as noted in Minn. Stat. 116J.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 guidelines, through
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 EDA & City Council Approved April 17, 2017
ELIGIBLE ACTIVITIES
RLF’s 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
7. Working Capital
Advance approval from DEED is necessary if the local government would like to provide financing for
activities not listed above. Approval is more likely to occur in projects that relate to business development
and involve other local government funds.
INELIGIBLE ACTIVITIES
In contrast to federal MIF funds, there are industry limitations on how state MIF RLFs may be used. State
MIF RLFs may not be used for the operation, construction or expansion of a casino, a sport facility that
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 call the 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 federal minimum
wage, whichever is greater, exclusive of benefits required by law.
OTHER ELIGIBLE USES OF THE FUNDS
Minn. Stat. 116J.8731 allows local governments to loan or grant RLF funds to a regional development
commission, other regional entities, or a certain statewide community capital funds to provide the local
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 interest in a MIF transaction. An actual
conflict of interest shall be deemed to exist when a decision on a MIF transaction would compromise a
duty to another party or if special advantage is deemed to occur. Potential conflict of interests should 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 loans in an amount greater than $200,000 must
agree to list any vacant or new positions related to the financial assistance on the MinnesotaWorks.net job
bank website.
3 EDA & City Council Approved April 17, 2017
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
$500,000 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 assistance is guided by Minn. Stat. 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 businesses to the City
whose local operations will help expand the City’s economy through job retention and
creation and maintain/grow the City’s tax base. The purpose of the Jobs Incentive
Program is to encourage the creation of high paying and quality jobs to the city.
Amount: Up to $200,000 of secondary financing not to exceed 20% of the total project cost.
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 direct loans unless otherwise
approved by the EDA Finance Committee. If a participation loan is requested, an agreement will be
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 agreement).
Simultaneous Microloans
The simultaneous use of different EDA microloan programs by any one borrower or for any one
project is prohibited.
Loan Repayment
Jobs Incentive funds, including principal and interest received may not be used to support
restaurant, retail, casinos, or sports facilities.
Call of Loan
4 EDA & City Council Approved April 17, 2017
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 enforced following a
grace period of 10 calendar days.
REGULATION FOR NEW CONSTRUCTION AND IMPROVEMENTS
All buildings which public funds will be used for construction or renovation are to be brought into
conformance with city ordinances and state building codes.
COVID-19 EMERGENCY PROVISIONS
Notwithstanding anything herein to the contrary, loans may be made under this program for retail
and service businesses in accordance with Governor Walz’s Executive Order 20-15 issued on March
23, 2020. The expanded use of this program shall expire on June 21, 2020. All other provisions of
this policy remain the same.
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 equal to the amount of the
loan.
Applicant must demonstrate the financial means to repay the loans, as determined by the EDA.
Whenever possible, personal, corporate, and/or entity guarantees will be made part of any loan
agreement.
Key person life insurance may be required as determined by the EDA Finance Committee based on
loan amount and company ownership partners.
TIMING OF PROJECT EXPENSES
No project should commence until the EDA has approved the loan application. Any costs incurred
prior to the approval of the loan application are 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, payable by a $2,000 processing fee, which is paid at the time of
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 borrower’s primary funding. The EDA
should be given two weeks’ notice before closing.
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 (if applicable).
5 EDA & City Council Approved April 17, 2017
2. The applicant shall then meet with city staff to obtain information about the microloan
program, discuss the project, and obtain application forms.
3. The applicant shall complete and submit an application form to the city, along with a
$2,000 processing fee. The fee is used to cover processing expenses and any remaining
funds will be returned to the applicant. The applicant must provide evidence of their
ability to meet the 10% equity requirements or provide a letter of commitment for
conventional financing from the primary lending institution.
4. The EDA 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
microloan 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.
6. The EDA Finance Committee and EDA Commissioners will review each application in
terms of its consistency with the goals of the city’s Comprehensive Plan and Economic
Development Strategic Plan and in relation to the project’s overall impact on the
community’s economy. Downtown Revitalization Loan applications will also be
reviewed by a Housing & Redevelopment Authority Commissioner in conjunction with
the EDA Finance Committee. Energy Efficiency Improvement Loan applications will
also be reviewed by an Energy City Commissioner in conjunction with the EDA Finance
Committee.
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 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 project
during proposed project duration, if the loan application is approved.
6 EDA & City Council Approved April 17, 2017
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 staff.
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 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.
7. A written request for an extension shall be accompanied by a copy of current financial
statements and a $500 upfront processing fee. The processing fee is used to cover
processing expenses. The application for an extension beyond the original term should
include a letter of denial from a conventional lender.
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
EDA for recommendation of approval, denial to the City Council for final action.
MICROLOAN 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.
RIGHT OF REFUSAL
The EDA may deny any application if it is found not consistent with the goals of the city’s
Comprehensive Plan and Economic Development Strategic Plan and in relation to the project’s
overall impact on the community’s economy.
AGREEMENT TO PAY COSTS OF REVIEW
It is the policy of the City of Elk River to require applicants to pay costs incurred by the City in
reviewing and acting upon applications, so that these costs are not borne by the taxpayers of the
City. These costs include all of the City’s out-of-pocket costs for expenses, including the City’s costs
for review of the application by the City’s Financial Consultant and City Attorney, or other
consultants, recording fees, and necessary publication costs.
7 EDA & City Council Approved April 17, 2017
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 thirty (30) days. Application fees
are not refundable, though any unused portion is returned at the request of the applicant. If
payment is not received as required by this agreement, the City may suspend the application review
process and may deny the application for failure to comply with the requirements for processing the
application. Payment for costs will be required whether the application is granted or denied.
The undersigned has received the City’s policy regarding the payment of costs of review,
understands 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 when billed by the
City, and agrees that the application may be denied for failure to reimburse the City for costs as
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 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.
The undersigned has received the city’s policy regarding the payment of costs of review, understands
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 when billed by the city, and agrees
that the application may be denied for failure to reimburse the city for costs as provided in the
policy.
APPLICANT SIGNATURE
BY
DATE
8 EDA & City Council Approved April 17, 2017
ELK RIVER ECONOMIC DEVELOPMENT
MICROLOAN FUND APPLICATION
1. CONTACT INFORMATION
Legal Name of Business:
Project Site Address:
City / State / Zip
Contact Person(s)
Business Phone Fax
Home Phone Email
Check One: Proprietor Corporation Partnership
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 / Industrial
______ Working Capital
Other
9 EDA & City Council Approved April 17, 2017
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:
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:
10 EDA & City Council Approved April 17, 2017
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 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 EDA & City Council Approved April 17, 2017
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 create within 2-years.
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.
12 EDA & City Council Approved April 17, 2017
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 EDA & City Council Approved April 17, 2017
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 Date
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 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) Letter of Commitment from the Applicant committing to prevailing wage
requirements.
_______H) Processing Fee of $2,000
14 EDA & City Council Approved April 17, 2017
7. 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.
The undersigned has received the city’s policy regarding the payment of costs of review, understands
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 when billed by the city, and agrees
that the application may be denied for failure to reimburse the city for costs as provided in the
policy.
APPLICANT SIGNATURE _______
BY
DATE
15 EDA & City Council Approved April 17, 2017
MICROLOAN APPLICATION SCORING WORKSHEET
TO BE COMPLETED BY CITY STAFF
1. The project meets the criteria set forth in the appropriate the Microloan policy.
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 city’s business subsidy policy.
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 / hour 3
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 EDA & City Council Approved April 17, 2017
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/ Redevelopment 4
10. Likelihood that the project will result in Points: _____
unsubsidized, spin-off development. High 5
Moderate 3
Low 1
Sub - Total Points: of a possible 45 points.
11. Point Adjustments Point 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: High 50-35 points
Moderate 34-29 points
Low 28-20 points
Not Eligible 19-0 points
17 EDA & City Council Approved April 17, 2017