6.0. EDSR 01-14-2008IEM # 6. ~ 7.
ver
MEMORANDUM
TO: Economic Development Authority
FROM: Catherine Mehelich, Director of Economic Development
DATE: January 14, 2008
SUBJECT: Consider Micro Loan Applications
- Waterfall Salon & Day Spa
- Nicole's Finishing Touch Salon
Attachments
• Finance Committee Minutes dated January 8, 2008
• Staff report to Finance Committee dated January 4, 2008
• Business Plan Letter for Nicole's Finishing Touch Salon Inc. dated 12/29/2007
• Background City Council Meeting Minutes 9/18/2006, 11 /20/2006, 12/17/2007
• City of Elk River Micro Loan Fund Policy
Background
On January 8`", the Finance Committee reviewed the following applications to the
Downtown Business Revitalization Micro Loan Program:
1) Waterfall Salon & Day Spa
- $25,000 Working Capital Loan, 3% interest, 2-year term
2) Nicole's Finishing Touch Salon
- $25,000 Working Capital Loan, 3% interest, 2-year term
The attached EDA Micro Loan Policy was amended in November 2006 to include the
Downtown Business Revitalization Program. The attached staff report to the Finance
Committee and attached City Council minutes provide additional background on the
establishment of the program which was designed to assist existing downtown businesses
(established when construction began April 10, 2006) during the construction period of the
new buildings (until completion December 31, 2007).
As stated in the past, the Downtown Business Revitalization Program should be considered
"high risk" lending, having the potential of not being paid back due to the nature of the
flexible application requirements and limited underwriting review. The loans are secured
only by personal guarantee of the business owner. Since the new program's inception
November 2006 one application has been awarded (Daddy O's Cafe -January 2007).
Consider Micro Loan Applications
January 14, 2008
Page 2 of 2
EDA Commissioners are asked to contact staff if they wish to receive a copy of the
application documents for review prior to the EDA meeting. EDA Commissioners Tveite
and Motin serve as representatives on the Finance Committee and can provide additional
background on the Committee's application review and discussion.
Actions Requested
I) Consider Micro Loan for Waterfall Salon & Day Spa
Waterfall Salon business owner Michael Scheevel was encouraged to attend the EDA
meeting to answer any questions of the EDA.
The Finance Committee recommends, as indicated in the attached January 8`" minutes, that
the EDA consider approval of the Waterfall Salon & Day Spa request fora $25,000
Downtown Business Revitalization Program Micro Loan with the following terms:
Rate 3% fixed
Term 2 ears
Monthl Pa ment $1,074.53
Securi Personal Guarantee
Structure Direct loan from EDA
2) Consider Micro Loan for Nicole's Finishing Touch Salon
Nicole's Finishing Touch Salon business owner Nicole Fox was encouraged to attend the
EDA meeting to answer any questions of the EDA.
Since Nicole's Finishing Tough Salon does not fit the "existing business" criteria the Finance
Committee was asked to consider the business's unique circumstances and hardship as a
result of the downtown construction as described in the applicant's attached letter dated
December 29, 2007. Prior to the application submittal, staff provided a brief summary of
the request to the City Council at its December 17, 2007 meeting, in which the Council
indicated a willingness to consider the request with further review and recommendation by
the Finance Committee and EDA (see attached Council minutes).
The Finance Committee recommends that the EDA consider recommending the City
Council waive the "existing business" criteria for this applicant's specific circumstance and
approve the apphcant's request fora $25,000 Downtown Business Revitalization Program
Micro Loan, contingent upon the applicant's full payment of the Micro Loan application fee
(which has since been received), and with the following terms:
Rate 3% fixed
Term 2 ears
Monthl Pa ment $1,074.53
Securi Personal Guarantee
Structure Direct loan from EDA
Due to the exception from the policy, the EDA's recommendation on the application from
Nicole's Finishing Touch Salon will be forwarded to the City Council for final consideration
and action.
MEETING OF THE EDA FINANCE COMMITTEE
HELD AT THE ELK RIVER CITY HALL
TUESDAY, JANUARY 8, 2008
Members Present: Chris Carlson, Cliff Lundberg, Paul Motin, Tom McNair, Larry Toth,
Dave Rymanowski and Dan Tveite
Members Absent: None
Staff Present: Director of Economic Development Catherine Mehelich, Finance Director Tim
Simon
1. Accept July 25, 2007 EDA Finance Committee Minutes
The July 25, 2007 EDA Finance Committee Minutes were accepted.
2. Micro Loan Fund Balance Sheet and Portfolio Report
Director of Economic Development Catherine Mehelich reviewed the Micro Loan Fund Balance
Sheet. She reported that the fund has an unaudited cash balance in the amount of $948,982.36 and
there are currently eight micro loans that remain active and receivable.
Consider Micro Loan Application: Waterfall Salon & Day Spa
Ms. Mehelich summarized the $25,000 FDA Micro Loan application from Michael Scheeval of
Waterfall Salon & Day Spa that was recei~-ed the last week in December 2007. This application is
the second Downtown Business Revitalization Loan Program application received in the past year
the program has been available. She provided an overview>of how the program was developed and
approved by the EDA and City Council in November of 2006: The primary purpose of the
program is to offer existing downtown business owners in the Downtown District ashort-term,
low interest operating loan that-could be used toward working capital, cash flow, business
sustainability and capital expenditures.
Applicant Michael Scheeval was in attendance and provided a brief history and answered questions
from the Coz~~mittee. He stated that he moved to Elk River with his business in 2001 prior to the
ne~~- downtown construction,
MOVED BY DAN TVEITE AND SECONDED BY CLIFF LUNDBERG, THE
FINANCE COMMITTEE RECOMMENDS THAT THE EDA CONSIDER
APPROVING THE LOAN REQUEST TO WATERFALL SALON & DAY SPA WITH
THE FOLLOWING TERMS:
RATE 3% FIXED
TERM 2 YEARS
SECURITY PERSONAL GUARANTEE
STRUCTURE DIRECT LOAN FROM EDA
THE MOTION CARRIED 7-0.
4. Consider Micro Loan Application: Nicole's Finishing Touch Salon
Ms. Mehelich summarized the $25,000 EDA Micro Loan application from Nicole Fox of Nicole's
Finishing Touch Salon that was received the last week of December 2007. She distributed to the
EDA Finance Committee Minutes
January 8, 2008
Page 2 of 3
Page 2
Committee a copy of the financial statements that were recently received from the applicant. She
reported that while the applicant's business does not fit the existing business criteria of the
program, that staff provided the City Council a brief summary of the request at its December 17,
2007 meeting and the Council indicated a willingness to consider the applicant's special
circumstances with review and recommendation by the Finance Committee and EDA.
Applicant Nicole Fox, and her father Brian, were in attendance to provide a brief summary of the
issues they encountered during the construction of the Bluffs, which delayed the business
relocation from Otsego, and the negative publicity on the foreclosure.. of the Bluffs which has
impacted the business's ability to attract stylists and customers. Ms Fox indicated she would like to
use the micro loan funds to increase advertising and other promotional activities.
Following some discussion it was the consensus of the Committee that applicant is a reasonable
exception to the "existing business" criteria of the program due to the delay encountered in
establishing the business due to construction timing of the building.
MOVED BY PAUL MOTIN AND SECONDED BY DAN TVEITE, THE FINANCE
COMMITTEE RECOMMENDS THAT THE EDA CONSIDER A WAIVER OF THE
"EXISTING BUSINESS" CRITERIA AND APPROVING THE LOAN REQUEST TO
NICOLE'S FINISHING TOUCH SALON, CONTINGENT UPON PAYMENT OF
THE FULL APPLICATION FEE, WITH THE FOLLOWING TERMS:
RATE 3% FIXED
TERM 2 YEARS
SECURITY PERSONAL GUARANTEE
STRUCTURE DIRECT LOAN FROM EDA
THE MOTION CARRIED 7-0.
It was noted-that applications to the Downtown Business Revitalization Micro Loan Program will
no longer be considered since the program's application deadline was December 31, 2007.
Consider Amendment to Micro Loan_Policv to include New Downtown Buildings
Ms. ~Iehelich reported that staff has received inquiries about the possibility of amending the micro
loan fund policy to consider applications from businesses in the new Jackson Place and Bluffs of
Elk River buildings downtown. The use of the micro loan funds would be toward leasehold
improvements and furniture, fixtures and equipment. Currently the Downtown Rehabilitation
Financing Program is targeted toward building rehabilitation and restoration of downtown
buildings, with a minimum of 20% that must be spent on building exterior.
She stated that the City Council referred the issue to the Finance Committee and EDA for review
and recommendation.
Comments and concerns raised by Committee members with specific regard to the request
included:
EDA Finance Committee Minutes
January 8, 2008
Page 3 of 3
Page 3
• Discussion on whether or not additional financial assistance/subsidy is warranted for the
downtown area, commercial vacancies are a result of market conditions overall, whether the
micro loan fund should have geographic limitations to attract businesses to one area over
another, and whether the project should be given more time to lease up before offering
subsidies to attract commercial tenants.
• Additional financial support would stimulate additional private investment in the downtown
area beyond the significant investment the city has already made to see the new projects and
downtown park to fruition; and that there is sufficient cash balance in the micro loan fund to
consider ways to provide loans where they are needed in the community versus sitting unused
in the account.
• Need for more stringent application review and standards uicluding credit history, written
business plan, requiring loans to be collateralized, working.. capital can be considered, but
prohibit refinancing of existing debt from eligible uses.
• Whether or not to allow loans to be provided directly to the applicant, as opposed to limiting
only as "participation" loans with a conventional lender in conjunction with_a project.
• Suggested establishing a "sunset" date of 2-years on the new program.
• Suggested application amounts be limited to not more than $50,000 and at an interest rate of
two points below prime rate, but not less than 3%.
• Allow existing businesses to apply for the new downtown loan program without a requirement
for building rehabilitation/restoration:
• Suggested the existing Downtown Rehabilitation Program be amended to increase the
application amount up to $100,000 (currently- $75,000).
While full agreement on a recommendation could not be reached, a majority of the Committee
members indicated'`a`willingness to consider establishing a new program with the suggestions
mentioned above, upon further direction from the EDA and City Council if they so choose to
authorize creation of a new program.
6. Cl
The EDA Finance Committee meeting ended at approximately 8:45 a.m.
Respectfully submitted by,
;~ %~~~,',~',~,~
Catherine Mehelich
Director of Economic Development
~~ti~
~-
iver
MEMORANDUM
TO: EDA Finance Committee
CC: Tim Simon, Finance Director & Lori Stich, Accountant
FROM: Catherine Mehelich, Director of Economic Development
DATE: January 4, 2008
SUBJECT: Special Meeting: Tuesday, January 8, 2008 at 7:00 AM City Hall
Attachments
• January 8, 2008 Agenda
• July 25, 2007 EDA Finance Committee Minutes
• Micro Loan Fund Balance Sheet - As of 12/31 /2007
• Application -Waterfall Salon & Day Spa
• Application -Nicole's Finishing Touch Salon
• City of Elk River Micro Loan Fund Policy -December 2006
• Background City Council Meeting Minutes 9/18/2006, 11/20/2006, 12/17/2007
Issues
Consider Downtown Business Revitalization Micro Loan Program Applications
Staff recently received the following applications to the Downtown Business Revitalization
Micro Loan Program:
1) Waterfall Salon & Day Spa
- $25,000 Working Capital Loan, 3% interest, 2-year term
2) Nicole's Finishing Touch Salon
- $25,000 Working Capital Loan, 3% interest, 2-year term
The EDA Finance Committee is asked to review the applications and provide a
recommendation to the EDA for approval or denial. The program was established in 2006
for the purpose of assisting existing downtown businesses during the construction period of
the new buildings (see attached background City Council minutes). Since the new program's
inception November 2006, one application has been awarded (Daddy O's Cafe -January
2007). Since Nicole's Finishing Touch Salon does not fit the "existing business" application
criteria, the Finance Committee is asked to consider the business's unique circumstances as
described in the application.
Both applicants have been asked to attend the Finance Committee meeting to answer any
questions.
EDA Finance Committee
January 8, 2008 Meeting
Page 2 of 2
Consider Amendment to Micro Loan Policy to include New Downtown Buildings
The Finance Committee is asked to consider an amendment to the Micro Loan Policy to
allow businesses within the new Jackson Place and Bluffs of Elk River buildings access to
the micro loan program. The intended use of the micro loan funds would be to supplement
conventional financing toward leasehold improvements and furniture, fixtures and
equipment. Currently the Downtown Rehabilitation Financing Program is targeted toward
building rehabilitation and restoration of downtown buildings, with a minimum of 20% that
must be spent on building exterior.
Following a brief description of the request, the City Council at its December 17, 2007
meeting indicated a willingness to consider the request further and referred it to the EDA
Finance Committee and EDA for review and recommendation.
The EDA will consider the Finance Committee's recommendation at its January 14, 2008
meeting.
Business P/an for
Nicole s finishing Touch Salon /nc.
12/29/2007
The p/an for Nico% s Sa/on in E/k River a//started in fa// of 2006 to move to
the B/uff's bui/ding in E/k River . This p/an was to grow as a sma//business owner and
adding a new chapter for us, as growing a lot in Otsego needing a larger spot and
increasing the income by two to three times in 3 year's from taking over the barber
shop that was there.
The plan's started to begin and we started the construction witch was pushed
back about 4 months and then /had to move out of the Otsego bui/ding May 11th
2007, so then we were out ofbusiness ti//August 31st. There was a/so some other
set backs that came up that we had no idea about the sac and Wac fees $10, 000 out
of my loan that l thought wou/d be for working capita/ extra fees on bui/ding and
not ha ving an open business 3 '/z months did not he/p us out. That is why / am
coming to you so we cou/d get some help with the working capita/ so we can make
a go of this and have what we show/d to start the new sa/on. The bui/ding getting
forec%sed on, dose not he/p when it was in the paper and did not Muenchen that
the business that are there are sti//going to be open and need the he/p of the city or
our side.
l would like to thank you for taking the time to read my concern about my
sa/on business. /hope Iwou/d get some he/p for the sa/on and make this work. l ha ve
had the sa/on for 3 '/z year's and /hope /can continue it for a long time, opened
when /was 21 year's o/d now l am 25 and am doing it a// on my own.
Nico% Fox
Sa/on Owner and Operator
Nico/e s Finishing Touch Sa/on /nc.
Cit~._~Atulcili~.t[iutes Page 3
~'~ ~, Se~tetnber I8, 200E :`'~
5.3. Street Disruption Permit for Tacl:son Street and i\-Iain Street
AIr. Clark reviewed multiple downtown issues regarding street closures and etnplo}'~~
parking as outlined in his staff report.
Councilmember Dierr. questioned ~vhy First National Baal: is using parking stalls in the city
owned Icing ilvenue parking lot when the}' have parking stalls in their otvn lot.
t~~Ir. Clark stated C'irst National Banl: used to o~vn a portion of property' in the cit}t-owned
parlang lot. He stated the banl, has given the city an easement in exchange for 23 stalls
dedicated to the bank.
Wendy Simonson, Kemper Drug-Stated she is opposed to the city- closing parking stalls on
Jackson revenue during the busiest time of the }-ear for retail. She suggested charging
Planner}- Construction a fee for each spot the}' need and to split those fees bct<veen the city-
and the affected businesses.
Fred McCoy, A-icCo}'s Restaurant-Questioned ~vh}~ the Rivers Edge Park construction
project couldn't wait until the Bluff Blocl: project «=as completed. IIe suggested the city wait
until spring to begin earl: construcaon. R~ir. 1VIcCo}'stated the streee lights have gone out a
few tunes do~vnto~vn. IIe stated when he contacted Lll: River Itlunicipal Utilities they
refused to come out until a latex date. IIe stated when the ligl-tts arc out it makes downtown
look closed. I Ie further expressed concern for the safety' of customers and emplo}'ees. I-Ic
stated he would like to see a parking ramp and he is unsure if his business can sut~*ive the
construction. it~Ir. I~fcCo}' questioned why the parking stalls in front of the park have to be
eliminated.
1\-lr. A4aertz stated the stalls are being eliminated due to safety• concerns u-ith the intersection
and vehicles backing up into the intersection.
Chief l3eahen stated the parlang stalls ue not Legal.
I1'fary VanVallenberg-Stated she is disappointed that the city- has a downtown parking
issue. Sloe stated the city' assured business owners there would be extra parking downtown
froth da}' one of construction.
Keith Holme-Kemper Drug-rlskcd each Councilmember to comment on these issues.
1\Ia}'or IClinzing stated she is concerned about ho~v downtown businesses are being affected
b}' constntction. She stated she is unsure how to solve these complex issues. She stated die
city can't deli}~ the projects; they need to be completed as soon as possible so as not to
affect business owners and- longer Chan necessary-. She liked the idea of charging the
COt1StCUCC1011 COtnpaily for ari}~ parking stalls that need to be closed. She suggested txucro
loans or grants for downtown businesses (that could prove hardship). A~fayor Ilinzing stated
she doesn't know ~vhy tl~e Rivers Ldge Park project couldn't have beets moved to a lacer
construction date.
Councilmember Farber stated he has been against tlus project from the begintung. Lie
stated the Council should consider a parlang ramp.
MOVED BY COUNCILMEMBER MOTIN AND SECONDED BY
COUNCILMEMBER FARBER TO APPROVE A STREET DISRUPTION
Citt> Council \Gnutes
September 18, ?006
Page =~
PERMIT FOR THE CLOSURE OF MAIN STREET FROM OCTOBER 2 TO
OCTOBER 23 PER THE CONDITIONS OUTLINED iN THE CSS BUILDERS
AND FLANNERY CONSTRUCTION, INC. MEMO DATED SEPTEMBER 12,
2006 AND AS ILLUSTRATED ON THE STREET DISRUPTION MAP DATED
SEPTEMBER 14, 2006 WITH THE FOLLO~~ING CONDITION:
i. NO EXCEPTIONS TO DEADLINE DATE.
I~-Iotion carried 7-0
MOVED BY COUNCILMEMBER GUMPHREY AND SECONDED BY
COUNCILItiiEMBER MOTIN TO APPROVE A STREET DISRUPTION
PERMIT FOR THE RECONFIGURATION OF JACKSON STREET FROM
OCTOBER 30 TO NOVEMBER 27, 2006 PER THE CONDITIONS OUTLINED
IN THE MEMO DATED SEPTEMBER 12, 2006 FROM FLANNERY
CONSTRUCTION TO THE CITY OF ELK RIVER, AND AS ILLUSTRATED
ON THE STREET DISRUPTION MAP DATED SEPTEMBER 14, 2006.1\~Iotion
carried ~-0.
MOVED BY COUNCILMEiVIBER FARBER AND SECONDED BY
COUNCILMEMBER GUMPHREY TO HAVE STAFF PRESENT TO THE CITY
COUNCIL IN 45 DAYS A REPORT ON ALTERNATIVE
RECOMMENDATIONS FOR EMPLOYEE PARKING ISSUES. MOaOIl Calrled J-O.
A MOVED BY MAYOR KLINZING AND SECONDED BY COUNCILI4IENIBER
GUMPHREY TO DIRECT STAFF TO DRAFT A MICRO LOAN OR GRANT
POLICY FOR OFFERING ASSISTANCE TO DO~Y~NTOWN BUSINESS
OWNERS. ~~Iotion carried 5-0.
MOVED BY MAYOR KLINZING AND SECONDED BY COUNCILMEMBER
FARBER TO DIRECT STAFF TO RESEARCH THE COST FOR DESIGNING
AND CONSTRUCTING A PARKING RAMP. D4otion carried 5-0.
Councilmember ?~Iotin expressed concern with the cit}' moi'ing fol.-ward on construction of
a parlung ramp because the cit}' doesn't have the power of etzunent domain over Ell: River
1\~teats.
1\Iayor lllinzing stated the cit}' is only considering its felSlblllt5' aC t111S po1nC.
l~tr. Maurer stated he has some parlang ramp data that was completed prior to downtown
construction that he will bring bacl: to Council.
5.=1. Presentation Regardin~193~~ ~lvenuc Corridor
AIr. il4aurer reviewed the following:
^ Project IiistoLy for the 193~~ .lvcnue corridor
^ T~vo possible alignment options and the pros and cons of each
^ Discussions he had with individual propert}' owners
^ Presented a ne~v option based on input From agencies and propert}' owners
Cit}-_Councl.,.\fuutes
..
\o\-ember ZQ, ?00G . ~
REGARDING ENFORCEMENT AND PARKING PERMITS WITH THE
FOLLOWING TWO APPOINTMENTS TO THE FOCUS GROUP:
^ LARRY TOTH
• KEITH HOLME
MOTION CARRIED 5-0.
MOVED BY COUNCILMEMBER GUMPHREYAND SECONDED BY
COUNCILMEMBER DIETZ TO PUT A TEMPORARY CAP ON PARKING
PERMITS. MOTION CARRIED 5-U.
~--- B. Loan Pro am
Page ~F
1\-Is. 1\lehelich stated the Council asked staff to consider a grant or loan program to assist
do\vnto\vn business o\vners. She stated staff had discussions wit11 the city's auditor alld legal
counsel regarding any issues with the city providing Financial assistance in the form of a
grant to businesses. She stated the auditor confirmed that the city has no statutory- authority-
to provide grants to businesses for dleir hardship as a result of a construction project. Ms.
It-lehelich stated the citti~ \vould need to establish findings for a public purpose on the grant.
IVis. 1\~lehelich revie\ved a draft loan program for existing businesses for downto\vn
rCVIC111`Latio2l \v1C11 rCCOInIIlendat1o1I5 b}' CIIC EDsI as outlined in the staff report. She stated
the city- has rccci\-ed limited interest on the loan program from the do\vnto\rn businesses.
Councilmember 1\Iotin stated the personal guaraucees the EDA is requiring are personal
Enancial statements of the owners.
MOVED BY COUNCILMEMBER GUMPHREY AND SECONDED BY
COUNCILMEMBER FARBER TO APPROVE THE DO~YfI~TTOWN BUSINESS
REVITALIZATION LOAN PROGRAM AS OUTLINED BELO~KI:
PURPOSE: THE DOWNTOWN BUSINESS REVITALIZATION
LOAN PROGRAM IS AVAILABLE TO BUSINESS
OWNERS IN THE DO~y/NTOWN DISTRICT {DD} AS
A SHORT-TERM, LOW INTEREST OPERATING
LOAN THAT COULD BE USED TOWARD WORKING
CAPITAL, CASH FLOW, BUSINESS
SUSTAINABILITY AND CAPITAL EXPENDITURES.
AMOUNT: UP TO $25,000.
RATE: 3%.
TERM: 2-YEARS.
CRITERIA: 1. PERSONAL GUARANTEE OF THE BORROWER
WILL BE REQUIRED.
Cin~ Council Minutes
November 20, 2006
2. APPLICATIONS TO BE ACCEPTED UNTIL
DECEMBER 31, 2007.
Page 5
3. IN ADDITION TO THE PERMITTED FUND USES
LISTED IN SECTION II(1) OF THE MICRO LOAN
FUND POLICY, THE PERMITTED FUND USES
FOR THIS SPECIFIC PROGRAM INCLUDES
~Y/ORKING CAPITAL, REFINANCING OF
EXISTING DEBT, AND INVENTORY.
4. BORROWER MUST BE LOCATED IN THE
DOWNTOWN DISTRICT (DD).
MOTION CARRIED 5-0.
6.2. Resolution for Redevelopment District No. ?and Project Plan for itledical Technology,
Center Elk Pads Iusiness Part: Third addition-PnLXic Hea~i,rv
It-Is. Mehelich stated Sherburne CounnT is requesting approval of the redevelopment
program For redevelopment district 2 and project plan for a technolog}• center for
Uiutedl-Iealth. She stated this project is suiular to the Target Technology Center drat vas
approved in Z00~.
A~fayor Itilinzing opened the public hearing.
Brian Benson, Sherburne Count}' ildministrator-Stated he is pleased with the support of
Elk River city staff and that the purchase agreement is contingent upon the cin- permitting
approvals.
A~Ia~-or Ilinzing closed the public hearing.
Councilmember Dietz questioned what the count}> intends to do with the rest of the
propern~ they o~vn.
A~Ir. Benson stated it would be for future count}' expansion.
1~Ia}'or Iilinzing expressed her congratulations to the ne~v business conung to Ells River.
MOVED BY COUNCILMEMBER GUMPHREY AND SECONDED BY
COUNCILMEMBER FARBER TO ADOPT RESOLUTION OG-226 FINDING
THAT THE SHERBURNE COUNTY HOUSING AND REDEVELOPMENT
AUTHORITY'S REDEVELOPMENT PROGRAM FOR REDEVELOPMENT
DISTRICT NO. 2 AND PROJECT PLAN FOR THE TECHNOLOGY CENTER
CONFORM TO THE GENERAL PLANS FOR THE DEVELOPMENT AND
REDEVELOPMENT OF THE CITY OF ELK RIVER. MOTION CARRIED 5-0.
Cin•.: Council. `Iinu[es
_w~
~... December '17, ?007
P:lge 1'1
Township preferred to hay>e the staff prop>ide information on changes that will happen
within the tlvo mile border of each cit<~.
MOVED BY COUNCILMEMBER GUMPHREY AND SECONDED BY
COUNCILMEMBER FARBER TO APPOINT MAYOR KLINZING AND
COUNCILMEMBER MOTIN TO A SUBCOMMITTEE AND TO 'CK~ORK ~~ITH
BIG LAKE TO~~/NSHIP ON TFiE FORMATION OF A JOINT PLANNING
BOARD. MOTION CARRIED 5-0.
'~ °--° r 8~ Other Business
D1sct15SlOt] pIl A'I1CY0 L01I1 PoltCv
R~Is. Johnson questioned if the Council would be interested in amending the D-licro Loan
Policy to include ne~v business in the dournto~vn. She stated there has been a request from a
business recently- relocated to downtown to access the working capital provision of the
Policy. She stated if the Council were interested in amending the Polic}~, Che next step in die
process «>ould be to call a meeting of the EDr1 Finance Committee to rep>ie~v the Polic}~.
Afayor Iilinzing stated it is worth considering in order to assist the businesses.
Counciltnembcr 1\4otin stated he was oka}- with reviewing the Polic}- but had concerns about
providing seed capital because the Policy vas originall}- created to assist existing business
owners who had to operate during the construction periods with the Jackson and Bluff
Blocks.
1\Is. -ohnson clarified that dais would be for current existing businesses. She stated a policy
rep>ision ma}- not allow working capital for ne~v businesses taut the leasehold capital tray be
allowed for them.
Councihncmbcr Farber stated given the econom}-, he would like to review the Policy.
This item vas referred to the EDr1 Finance Committee. i\'Is. Johnson stated it would come
back to Council for consideration after EDr1 review.
Council Updates
There ~~>ere 1-to Council Updates.
10. Sraff Updates
I\ds. Johnson noted the Council received a handout regarding the Council/Planlung Retreat
scheduled in Januat~-.
1\4s. Johnson stated she sent the Cowlcil information regarding the three plans for the TFI
10 Corridor Cotntnittee and noted that comments were needed by early January.
City of
..
Elk
Rimier
The Light Industrial Hub of the Northwest Metro
Economic Development
Micro Loan Fund Policy & Guidelines
And Application
Amended: December 2006
Amended: May 2006
Amended: June 2004
Adopted: September 1999
City of Elk River
Economic Development Division
13065 Orono Parkway
Elk River, MN 55330
763.635.1040
ELK RIVER ECONOMIC DEVELOPMENT
MICRO LOAN FUND POLICY & GUIDELINES
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 Downtown District . 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 Downtown District
to rehabilitate their existing buildings.
II. LOAN PROGRAMS
In order to meet the economic and community development objectives of the EDA,
two distinct loan programs exist within the Micro Loan Fund to promote business
growth in Elk River.
Industrial Incentive Program
Purpose: The purpose of the Industrial Incentive Program is to encourage
industrial and high technology business development that supports
the tax base and brings quality jobs to the city.
Amount: Up to $100,000 of secondary financing not to exceed 20% of the
project cost.
Equity: Must have private-sector conunitments for 50% of the project cost.
Borrower must provide 10% or more of project financing.
Rate: Fixed; 2 points below the lowest prime rate published in
the Wall Street Journal the day the loan is closed, or 3%, whichever is
greater.
Term: Financing with a balloon payment in 5-years. The balloon payment
must not be longer than the balloon payment of the participating
bank. Loans may be amortized up to the following limits:
20-years on real estate uses;
10-years on equipment uses.
Extension: In the event that the Borrower is unable to obtain conventional
financing to replace the Micro Loan at the end of five years, the loan
may be extended up to two additional years at a market rate of
interest.
Micro Loan Fund Policy & Guidelines Page 2 of 14
Amended December 2006
Criteria: 1. Borrower must be an industrial or high technology firm and create
one new full-time job for each $20,000 loaned within 2 years. Said jobs
must pay a minimum wage of $10.00 per hour excluding benefits
required by law. Loans in excess of $75,000 shall meet the attached
City of Elk River Business Subsidy Policy for the creation of new jobs
at a minimum wage of $15.00 per hour excluding benefits required by
law, as well as a 5-year location requirement.
In the case where the multiple sources of public financing are requested
(e.g. Micro Loan and Tax Increment Financing) job creation goals shall
not be double-counted.
2. Borrower must comply with the provisions of the city's Industrial
and Business Park zoning ordinances as applicable.
Downtown Rehabilitation Financing Program
Purpose: The Downtown Rehabilitation Financing Program is available to
business and property owners in the Downtown District (DD) for the
rehabilitation and restoration of their buildings.
Amount: Up to $75,000 of secondary financing (not to exceed 40% of the
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 2%.
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.
Extension: In the event that the Borrower is unable to obtain conventional
financing to replace the Micro Loan at the end of five years, the loan
may be extended up to two 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 facades.
2. Rehabilitation loans in the Downtown District are exempt from
job creation and wage goals since the loan amount does not exceed
$75,000 and does not qualify as a business subsidy by state law.
3. Borrower must be located in the Downtown District (DD)
(see attached map).
1~licxo Loan Fund Policy & Guidelines Page 3 of 14
Amended DecemUex 2006
Downtown Business Revitalization Loan Program
Purpose: The Downtown Business Revitalization Loan Program is available to
existing downtown business owners in the Downtown District (DD) as
a short-term, low interest operating loan that could be used toward
working capital, cash flow, business sustainability and capital
expenditures.
Amount: Up to $25,000.
Rate: 3%.
Term: 2-years.
Criteria: 1. Personal guarantee of the Borrower will be required.
2. Personal financial statements of the Borrower will be required.
3. Applications to be accepted until December 31, 2007.
4. In addition to the permitted fund uses listed in Section II(1) of the
Micro Loan Fund Policy, the Permitted Fund Uses for this specific
program includes working capital, refinancing of existing debt, and
inventory.
5. Borrower must be an established downtown business owner
located in the Downtown District (DD) as of April 10, 2006.
I11. 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
h. Investment real estate with a minimum of 50% of the space pre-leased
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
Micro Loan Fund Policy & Guidelines Page 4 of 14
Amended DecemUer 2006
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, may be eligible for an
Economic Development Micro Loan as further defined herein:
• Business must be afor-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 Economic Development 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. The agreement will include the following
provisions, among others:
If Borrower does not meet the job and wage goals specified in the Subsidy
Agreement, the interest rate will change to 2 points above the participating
bank's rate, effective from the two year anniversary of the loan closing.
Upon subsequent achievement of the jobs and wage goals, the interest rate
will revert back to the rate when the loan was originated, effective from the
date of attainment of the job and wage goals.
• If Borrower defaults on the loan, the EDA will collect all further payments
during the default based on a pro-rata basis with the participating bank
excluding the distribution of proceeds resulting from the foreclosure on
collateral.
The EDA may require additional agreements to be signed by the borrower (i.e.
security agreement, personal guarantees, subsidy agreement).
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 loan.
4. Late Payment Charge
Micro Loan Fund Policy & Guidelines Page 5 of 14
Amended December 2006
A late payment charge of 8% of the installment amount may be enforced.
V1. 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. Repairs
may include the following systems and portions of real property:
a. Mechanical heating, plumbing, and electrical
b. Structural; including the facade of the structure and energy related
improvements.
c. Hook-up to city services (i.e. water, sewer)
d. ADA (Americans with Disabilities Act) 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.
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, payable by anon-refundable 1%
processing fee, which is paid at the time of application.
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.
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 only 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.
Micro Loan Fund Policy & Guidelines Page 6 of 14
Amended December 2006
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 grants and/or
loan 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.
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. Rehabilitation
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.
1~licro Loan Fund Policy & Guidelines Page 7 of 14
Amended December 2006
e. Program Objectives - In addition to quality job and wage
creation/retention 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.
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 and will be returned if request is denied. The
application for an extension beyond the original term should include a letter of
denial from a conventional lender. Refinancing will not be allowed solely for the
purpose of reducing the interest rate due to lower market interest rates.
7. 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 axe consistent with the economic development goals set
forth by the City.
XI. 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.
XII. COMPLIANCE WITH MN BUSINESS SUBSIDY LAW
Each company receiving assistance in excess of $75,000 from the EDA Micro Loan
Fund shall be subject to the provisions and requirements set forth by Minnesota
State Statute 116J.993 and the attached City of Elk River Business Subsidy Policy.
i~ficro Loan Fund Policy & Guidelines Page 8 of 14
Amended December 2006
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Location Map N
ctY of
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R1Ver Case Number: DOWNTOWN DISTRICT (DD)
ELK RIVER ECONOMIC DEVELOPMENT
MICRO LOAN FUND APPLICATION
I. CONTACT INFORMATION
Legal Name of Business:
Address:
Ciry /State /Zip
Contact Person(s)
Business Phone
Home Phone
Check One:
Social Security No.
Federal ID #
Fax
Proprietor Corporation Partnership
State ID #
11. NATURE OF LOAN REQUEST
Which Micro-Loan Program are you applying for?
Industrial Incentive Program
Rehabiliation Financing Program
Downtown Business Revitalization Loan 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
Refinancing existing debt
Other
Micro Loan Fund Application
Amended December 2006
Page 9 of 14
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:
1~licxo Loan Fund Application Page 10 of 14
Amended DecemUex 2006
Proposed Sources of Financin
SOURCE NAME TERMS AMOUNT
Bank Loan $
Bank Loan $
Other Private Funds $
Applicant Contribution $
Other $
Fed Grant/Loan $
State Grant/Loan $
EDA Micro Loan $
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 Micro Loan
Micro Loan Fund Application Page 11 of 14
Amended December 2006
Value of Collateral
Book Value Cost Existing Liens
Land $ $ $
Buildings $ $ $
Machinery & Equip. $ $ $
Other $ $ $
Other $ $ $
IV. JOB & WAGE GOALS
Present # of Employees Total Payroll
Jobs To Be Created*
PIPSICP r1rf1V1C1P t11P f~llnwinu infnrmati~n nn iambs you expect to create Within 2-years.
ob Title
Number
of Jobs Average
Hourly
Wage
Annual
Salary Are the Jobs
Permanent or
Temporary? Expected
Hiring
Date
*If loan is for job retention only, please explain to liusmess Plan.
Program Objectives
(Check all that apply)
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.
Micro Loan Fund Application Page 12 of 14
Amended December 2006
IV. PROJECT CONTACTS
Attorney
Name
Address
Phone
Accountant
Name
Address
Phone
Financing Sources (lenders, partners, etc...
Name
Address
Phone
Name
Address
Phone
Parent CompanX
Name
Address
Phone
Others
Name
Address
Name
Address
Micro Loan Fund Application Page 13 of 14
Amended December 2006
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) Fee (1% of amount of loan request).
VI. 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 Comrruttee
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.
APPLICANT SIGNA
BY
DATE
1~licro Loan Fund Application Page 14 of 14
Amended December 2006