8.0. EDSR 01-14-2008ITEM # 8.
t~ver
MEMORANDUM
TO: Economic Development Authority
Mayor & City Council
FROM: Catherine Mehelich, Director of Economic Development
DATE: January 14, 2008
SUBJECT: Consider Finance Committee Recommendation on Micro Loan
Policy Amendment
Attachments
• City of Elk River Micro Loan Fund Policy (see previous agenda item)
• City Council Minutes dated December 17, 2007 (see previous agenda item)
• Finance Committee Minutes dated January 8, 2008 (see previous agenda item)
Issue
Staff has received a request from the banking community 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 anticipated use of the loan funds
would be toward leasehold improvements and furniture, fixtures and equipment. Currently
the only program available to businesses in the downtown requires 20% rehabilitation or
restoration of the building's exterior.
Following a brief summary of the request to the City Council at its December 17, 2007
meeting, the Council referred the issue to the EDA Finance Committee and EDA fox review
and recommendation.
EDA Input Requested
The EDA is asked to provide additional review and make recommendation for consideration
by the City Council.
The attached Finance Committee minutes indicate the following comments and concerns
discussed:
• 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
Consider Recommendation on Micro loan Policy Amendment
~anuary 14, 2008
Page 2 of 2
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 including 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.