5. EDSR 02-08-2010'^/i
~lk\ „~ REQUEST FOR ACTION
River
o Item urne~
Economic Develo anent Authori
Agenda ec~i®n N~ee~~n ale ~ea~e y~
February S, 2010 Catherine Melielicl~, Director of
Economic Develo anent
~~em esc~~pi®n e~vievued by
Consider EDA Resolution Authorizhlg the EDA to Subf~~it
Application for Energy Programs in Co~n~aaercial & industrial Reviewed by
~3uildtngs Revolv~.~.g Loan Program
,Action eq.ues~ed
Approve attached EDA Resolution Autlaorizit.~g the EDA to Submit Application for Energy Programs in
Commercial & Industrial Buildings Revolvitlg Loan Program
ac~ unds iscu~ssi®n
The American Recovery and Reii~vesttnent Act of 2009 ~ARRA~ federal stimulus bill gave money to state
governments ear~narl~ed for ezaergy-savings initiatives. Tla.e MN Dept of Commerce Office of Energy
Security ~~ES~ is accepting proposals to provide economic developrnen.t autla.orities to establish and
operate revolving loan programs to finance cost-effective energy efficiency anal renewable energy
ii-nprovements it1 commercial, itldustrial and nonprofit facilities. The funds are intended to promote
activities that have t11e greatest impact on energy savitlgs, renewable energy deployment and jobs created
or retained. Funds are provided on a drawdown basis based on executed loan documents and must be
expended by June 30, 20I ~ .
As a benefit to the City, the program opportunity provides a f~.~.ancial tool that compliments the existing
technical assistance resources and ~no~nentu~n created by the Energy City Program, ~~~. addition, the
program compliments the existing Micro Loan Fund to provide a financing mecllaiusm for existing
con~.nercial, industrial and nonprofit facilities to install energy itnproveme~a.ts.
To respond to tlae DES RFP, staff proposes the Ells River EDA establish a X500,000 revolving loan fund
program for this purpose by leveraging an DES grant request of X235,000 with a ~natcl~.ag com~nitlnent
from the EDA Micro Loan Fund up to ~2G5,000. The EDA's matching coirn~nitinent will be reduced by
any applicable utility rebates and a 1 % load origination fee paid by progra~~1 applicants. Tn addition, the
ED.A ,would provide in-bind admiflistiative and advertising/marl~eting support of the program. Upon
grant award, staff proposes the EDA contract with S.E.H. E~a.gineers for professional ser-vices i~1
ad~riifustelirig the Davis-Bacon reporting and compliance as required by ARRA. This cost is an eligible
expense under the grant.
The proposed loan structL~re and ter~~ns are outlined in the attacla.ed informatio~a.. The program would be
operated within tl~e loan application and review process of the EDA's existi~lg Micro Loan program, but
subject to applicable ARRA federal regulation and guidance.
1~:111Ct10111~cq~lested.doC
Financial mac
Appioval of the ~esoluti.on authorizes the coilvnitinent of up to $2G5,000 fiam its Micro Loan Tend to
be used as matching funds ~egL~ed fog the application. The EDA Micio Loan Fund has a cash Valance
of appioxiinately ~84G,000. In addition the EDA has a ~394,OOO cash Valance fioin MN Dept of
Etnployment & Economic Development ~DEED~ loan funds leveraged f~:ozn the Spo~:tech expansions.
~~achmen~s
® Resolution 1001 EDA Resolution Authorizing the EDA to Suh~nit Application foi Energy P.~ogiams
in Commercial & ~ndustLial 13L~ildings Revolving Loan P~og~am
~ Proposed Loan StluctL~ie and Te~fns
C~~®n Nlotiofl U~r Second by Vote
®~~®~V Up
l~,~Action Requestec~.dnc
I~ES~LIJTI~N I ~~01
A RESOLUTION ~~` THE ECN~MIC ~E'VELPNIENT A.~UT~IORIY
~a THE CITY r E~~~ I~vER
A RESOLUTION AUTHORIZING THE ECONOMIC DEVELOPMENT AUTHORITY
FOR THE CITY OF ELK RIVER (ELK RIVER EDA) TO SUBMIT AN
APPLICATION FOR ENERGY PROGRAMS 1N COMMERCIAL & INDUSTRIAL
BUILDINGS REVOLVING LOAN PROGRAM
WHEREAS, Elk River is designated as ElZergy City of Milulesota since 1997, and is a
leader iI~ the State of Minnesota for the delnollstration of enelgy efficient and renewable
energy systems; and
WHEREAS, the Elk River EDA is committed to el~couraging and promoting
opportunities for energy ef.~ICiency and Renewable elaergy systems iI1 commercial and
industrial buildings; and
WHEREAS, the Ells River EDA has the financial capability to Inatch up to $25,000
tluough its EDA Micro Loan Fund, II1~kiI1d staff and advel~tisil~glmarketil~g suppol-t, alld
applicant loan origilaation fees for the purpose of implementing the program; and
WHEREAS, the Ells River EDA has the Inaliagelnelat capacity and experience to develop
and operate a revolving loan fiend program for the purpose of financing energy efficiency
improvements in commercial, industrial and nol~proflt facilities; and
NOW, THEREFORE, BE IT RESOLVED upon approval of its application by the
Milulesota Department of Commerce Oflrce of Energy and Security, the Elk River EDA
may enter into an agreela~ent with the Milll~esota Departlaaellt of Commerce Office of
Energy and Security for the Energy Programs in Commercial and Industrial Buildings,
and the EDA Executive Director is hereby authorized to execute such agreements as are
~aecessary to implement the program on behalf of tlae Elk River EDA.
Passed and adapted this Sal' day of Febr~~ary 2010.
Patrick Dwyer, President
ATTEST;
Catherine Mel~elich, Executive Director
ELK RIVER EDA
C®MMERCIAL ~ INDUSTRIAL BUILDING ENERGY EFFICIENCY
REVOLVING LOAN PR®GRAM
PROPOSED LOAN STRUCTURE AND TERMS
Eligible Applicants and Activities:
As established by OES under the Energy Programs in Commercial and Industrial Buildings-ARRA
~attached~
Haan Amounts:
Applicants may apply far the cost of improvements with a minimum loan amount of $10,000 and a
maximum loan of $100,000 per project. Project loans exceeding $100,000 may be considered on a case
by case basis.
Interest Rates:
Loans will be provided interest-free.
Equity Reguire_men~s;
Loan app icants must demonstrate an acceptable level of project equity, with a minimum of 10% equity
provided bythe borrower,
Fees and C11ar~es:
A 1% loan origination fee will be charged to all borrowers and payable at the time of closing. The fee
will be used to cover processing of applications credit review and legal.
Loan Maturity:
The maximum maturity date forthe improvement loans will be determined by the useful life of the
improvement and the energy payback achieved. For projects that have a shorter length of payback ~2-5~
years as calculated according to energy savings, the loans will have an initial maturity of up to 5 years
from the date of closing. Longer life improvements ~5-15 years} may apply for a longer maturity of up to
10 years.
Credit standards and risk management factors
Applicants must demonstrate credit worthiness and repayment ability. The loans will be made from the
EII~ River EDA and secured by personal and corporate guarantees, and if applicable a lien on equipment
financed. installation must be certified through a licensed contractor and electrician. Installation
certificates and project inspection reports will be required in addition to compliance with Davis-Bacon
requirements.
Repayrnent:
Monthly installment payments will be made to the Ellc River EDA according to the amortization schedule
approved as part of the loan. Loan repayments will be returned to the revolving loan fund as available
loan funds. Utility rebates, as applicable, will be assigned to the Ellc River EDA and applied toward
principal repayment of the loan.
Eligible#y~asestablished by0E5}
Eligible Applicants
Owners of commercial, industrial and nonprofit facilitiesIocated in Elk River, Minnesota areeligibleto applyfor
funds, For the purposes of this program the following definitions apply:
Faci[it -- a structure located in Minnesota that is ~1}depreciable property; ~2} wholly or partially enclosed within
exterior walls, or within exterior and party walls, and a roof, affording shelter to persons or property; and ~3}used
for business purposes by an industrial, commercial ar nonprofit entity. For the purposes of this program, a
residential structure is not used for a business purpose unless it has no fewer than 1D dwelling units and no fewer
than 4 stories above grade.
Industrial - a business operation relating to, concerning, or arising from the manufacturing, fabrication, assembly,
finishing, packaging and/or processing of goads.
Commercial - a business operation relating ta, concerning, or arising from ~1}the purchase, sale or provision of an
article, substance, commodity or service; ~2}the maintenance or conduct of offices, professions or recreational
enterprises conducted for profit; and ~~}the leasing or renting of rooms, business offices or sales premises.
No~ n~ro~it - an entity organized under section 5014c} ~3} of the Internal Revenue Code.
~li~ible Activi#ies and_l.imtations
Eligible applicants may propose one or more of thefollowingactivities;
1, Energy efficiency measures including:
a. Facility systems optimization (commissioning ar re-commissioning};
b. Facility systems control improvements;
c. Lighting efficiency improvements;
d. Heating, ventilation and airconditioningsystemsmodifications;
e. Exterior envelope improvements;
f. Motor and pump efficiency improvements;
g. Ground-source heat pump systems of no more than 5.5 ton rated capacity used to heat or coo[ a
facility; and
h. Thermal biomass systems 3 MMBtu or smaller with appropriate Best Available Control
Technologies installed and operated.
A proposed energy efficiency measure must ~1} have a simple paybaclcthat is no less than 2 years and no greater
than ~.5 years; ~~) have a useful life greater than its simple payback period; and (3} be installed in or on a building
or facility that has a useful life greater than its simple payback period.
2. Installation of equipment or devices that use renewable energy sources to generate electricity or
heat orcool a buildingorfacilityincluding;
a. Solar Electricity/Photovoltaic-Building-mounted systems appropriatelysized to load; ora 60 ItIN
system or smaller installed on the ground within the boundaries of an existing facility.
b. Wind Turbine-35 KW or smaller.
c. Solar Thermal -ground mounted systems are limited to 4D0 collector square feet; building
mounted must beappropriatelysized to buildingload.
A proposed renewable energy measure must ~1} have a simple payback that is no greater than 15 years or be
proposed in conjunction with one or more energy efficiency measure such that the simple payback of the
proposed measures in combination is no greater than 15 years; ~2} have a useful life greater than its simple
payback period; and ~3} be installed in or on a building or facility that has a useful life greater than its simple
payback period,