HomeMy WebLinkAbout[09b] Revolving Loan Fund, Prego IncCM OF ST. JOSEPH
MEETING DATE:
AGENDA ITEM:
SUBMITTED BY:
Council Agenda Item
December 3, 2009
Administrator Reports — Revolving Loan Fund, Prego Inc.
St. Joseph Economic Development Authority
BOARD /COMMISSION /COMMITTEE RECOMMENDATION: The EDA has received an application for the
RLF Program from Jeff and Stacie Engholm, Owners of Prego Properties LLC dba The Local Blend. A copy
of the application is attached for review. Supportive materials including profit /loss statements and
projections have been received and reviewed by the EDA RLF subcommittee (Finance Director Lori
Bartlett, EDA Member Jacobson, EDA Member Skahen, a Representative from the Applicant's Financial
Institution, Doug Danielson, and EDA Director Strack).
The EDA RLF subcommittee finds the loan application complete, the proposed terms acceptable,
proposed security acceptable, and creditworthiness of the Applicant acceptable. The EDA Subcommittee
recommends approval of the RLF application. Draft loan documents including a loan agreement,
promissory note, mortgage, and personal guaranty have been drafted with closing expected in
December. The maintenance project is expected to begin and be completed in 2009.
The EDA accepts the EDA RLF subcommittee recommendation and finds the proposed project meets the
eligibility guidelines with the exception of being less than one -half the cost of the project. The EDA
discussed the one -half the project cost criteria applicability at its regular meeting on October 28, 2009
and made the following findings: (a) the project scale is much smaller than that originally envisioned
when crafting the revolving loan fund guidelines; (b) there is a demonstrated need for the project; (c)
the project will positively impact the tax base; (d) the project is consistent with and supportive of the
"Let's Go Downtown" revitalization project; (e) issuance of the loan will retain at least one (1) full time
equivalent job in the downtown, (f) the Applicant proposes a second mortgage as security and not the
purchase of business property such as restaurant equipment, tables, chairs, and the like, and (g) the
property owners will provide a personal guaranty.
The EDA recommends the City Council approve a loan to Prego Properties LLC d.b.a. The Local Blend
from the EDA Revolving Loan Fund in the amount of $24,000 for a term of seven years at a interest rate
of three percent and authorize execution of loan documents.
It is noted the recommended loan is exempt from the business subsidy policy due to the size of the loan.
BACKGROUND INFORMATION: In 2002 the EDA /City established a Revolving Loan Fund (RLF) after a
grant from the Minnesota Investment Fund was secured in conjunction with the construction of the
Fabral (formerly VicWest) facility. The RLF has an audited balance as of December 31, 2008 of $52,648.
RLF guidelines are attached for your information.
Prego Properties LLC is requesting a $24,000 loan from the RLF to complete facade /maintenance
improvements including: storefront window replacement, tuck - pointing, lighting, awning repair, and
new signage. The project estimate is $25,000. The EDA subcommittee is recommending approval of the
$24,000 loan contingent on the filing of a second mortgage on the real property at 19 West Minnesota
Street and a personal guaranty from Stacie and Jeff Engholm. The requested term is seven (7) years;
requested rate is three (3) percent interest. The proposed loan to value ratio, based on an appraisal
from April, 2008 and the existing mortgage balance is less than .90:1. A personal guaranty will be
provided.
BUDGET /FISCAL IMPACT:
ATTACHMENTS: St. Joseph Economic Development Authority Revolving Loan Program
Guidelines, Application for Revolving Loan Fund, Narrative for project.
REQUESTED COUNCIL ACTION: Approval of a loan from the EDA Revolving Loan Fund for Prego
Properties LLC dba The Local Blend in the amount of $24,000 for a term of seven years at a interest rate
of three percent and authorization of execution of loan documents.
Applicant:
APPLICATION FOR REVOLVING LOAN FUND
CITY OF ST. JOSEPH, MINNESOTA
Address:
1 l U M 1444 -snM4
S'1— T!0 7 -'k 3 b
City: '}t
TO<OP A
State: 'V Zip Code:
S 13 7 q
Contact Person(s):
Business Phone: 320- 3%3 -(01 k Home: 3-23 -3W--1Z Cell: -763'W -) '333
Name of Business: Le [pct, B L&\Q
Principal(s) of Business:
State ID #: -19 ( 0 56 a Fed ID # or S.S. #: 10 3 U L1 2 q -7
Business is a:
Type of Business:
Proprietorship
Partnership G
Corporation 0 Cl k—Date of Incorporation
Present location: M WAJ &,C ^ak �T p
Owned Rented Sq. ft. of present building: , o
Proposed Location (if different from above):
Owned Rented
Type of project:
Construction /New Business
Equipment/Machinery/Fixture
Other:
Sq. ft. of present building:
City of St. Joseph — Revolving Loan Fund Program Application
Expanding /Existing Business
Re modeVCommercia VRetaiVI nd.
Page 1
Describe Project:
A. r /c -.
Estimated Project Costs:
Land: $
Site Improvement: $
Construction/Rehab: $ ft S-0000
Machinery/Equip.: $
Bldg.: $
Other (Specify): $ ��00� ` NUAW ")
TOTAL: $ 2-G-. O O J
Proposed Financing:
Source Term /Interest Amount
Bank
Equity
Other- describe 1� 000 - (WAArrl
city F,04 LA A/ ZN,W3
TOTAL: $ ja r &V 0
-
Describe of collateral available to secure loan, including market value and prior liens:
I00gr aoi"wn1i A SJ6NlF)tAr -T &M0✓N-1 OF F-QVIT}' 1Af OU9-
CrJ t (�';QyitMrn/'� G5L , A4 0 DU i t.4.N60,
N�1 IXIUJ)oti1/6 QAaL 600iso 91' 1PLIC67
Purpose of loan:
If wo
rte 4% ' 1 IM, ... T » (aa
Maw as p .i
Po S Tca-I
r
City of St. Joseph - Revolving Loan Fund Program Application Page 2
Amount requested: $
Terms requested: $
Present number of full -time employees:
Anticipated jobs created or retained within twelve (12) months of project completion:
Total # of
Position Name Jobs
1`s ?A 10
BVi sThs
(Use additional sheets i
Annual Anticipated Hiring
Hrs. /Job Date
coV a
1� 0 L�IJ C I1lJ, T rJ ) ( Z O( o
I,S b0
TA')
F necessary)
If redevelopment: estimate market value of the subject parcel(s) prior to project and
estimated market value following project completion.
EMV Present:
EMV Post Project Completion:
Attach and include the following if requested:
A. Written Business Plan
• Description of Business
• Ownership
• Date established
• Products /Services
Management
• Future plans
B. Financial statements for the past two (2) years
C. Financial projects for three (3) years
D. Resume of all principals
E. Personal financial statements of proprietor, partners, guarantors
F. Letter of commitment for applicant pledging to complete during the proposed project
duration
G. Letter of commitment from other sources of financing, stating terms and conditions of
their participation in project
H. Written quotes from contractors and vendors for all cost estimates listed above
I. Site plan for new construction
City of St. Joseph - Revolving Loan Fund Progrem Application Page 3
J. Authorization for release of information
K. Other:
L. Other.
M. Fee: (1 % of amount of loan request)
Attach an explanation if any answer to the following is yes:
1. Have you or any officer or owner of your company ever been involved in bankruptcy or
insolvency proceedings?
Yes No
2. Are you or any officer or owner of your business involved in any pending lawsuits or
judgments?
Yes A— No
3. Does your business have any subsidiaries or affiliates? (INCLUDE: financial statements with
explanations as requested)
Yes V N
4. Do you buy from, sell to, or use the services of any concern in which someone in your
company itself has a significant financial interest?
r
Yes No ,
-�
Ovns Sn r W Str,�� �S Vic t -Pns
City of St. Joseph — Revolving Loan Fund Program Application Page 4
To the best of my knowledge, the information provided in this application is true and
correct.
Date: b 2-1 0
Date: 0 LZ-71a�)
Date:
Date:
Date:
NOTE. ff this application is for leasehold improvement, the owners(s) of the building must
also sign this application.
City of St Joseph — Revolving Loan Fund Program Application Page 5
Discoveryour homes potential
REMODEUNG
PROFESSIONALS
OF St CLOUD INCORPORATED
Project Estimate:
P.O. Box 420 - Avon, MN 56310
320.845.4984 p • 320.845.2494 f
www.RemodelingProfessionals.net
W,2M53570
October 27, 2009
Clients: Jeff and Stacy Engholm
Minnesota Street _l
St. Joseph, MN 56374 CvLt)
Projects: Replace/Repair, re- tuckpoint entire brick face of building
Install new Awning, higher, over existing wood panel. `'
Install new aluminum storefront w/ Clear Insulated Glass per dwg.
New interior trim and millwork at new storefront
Currently no electrical work planned or included.
All related project management
Total Estimated Price: $18,500 —$20,000
Timeframe- Contractor estimates 1 — 2 weeks to complete this work. Scaffolding would be in place
during one full week for brick work. After that time, one day will be required to demo and install new
glass, store front. During the scaffolding portion, traffic would be able to access through the front of
the shop.
Th
Chris Schellinger
Remodeling Professionals, Inc.
6-u-
5DO
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OP ID ND DATE (MMMONYM
ACORD_ CERTIFICATE OF LIABILITY INSURANCE REWD-1 1 09/24/09
PRODUCER
Mahowald Insurance Agency
P'. 0. Box 129
St. Cloud MN 56302
Phone: 320 - 251 -3751 Fax: 320 - 251 -2373
THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATIO
ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE
HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR
ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW
INSURERS AFFORDING COVERAGE
NAIC #
INSURED
Remodelin Professionals Inc.
2077 Frontaggee Rd N Ste 14
Waite Park 1iII'T 56387
INSURER A Continental Western Ins Co
UwTS
INSURER B:
INSURER C_
CWP 2630960
IN�ER O
04/15/10
INSURER E
PReASESIEao-cc'um s 100000
COVERAGES
THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING
ANY REOUREMIENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR
MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS. EXCLUSIONS AND CONDITIONS OF SUCH
POLICIES. AGGREGATE LWTS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
LTR
TYPE OF WSURANCE
POLICY NUMBER
POILICY EFFECTIVE
DATE (MMMUM
DATE PAMODIM
UwTS
A
GENERAL LIABILITY
% C�MMERCIALGENBIALL7MM -ITY
JCLAMS MADE I " ] OCCUR
CWP 2630960
04/15/09
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PReASESIEao-cc'um s 100000
MED EXP (Any one peem) 155000 —
PEIMNALaAINKIURY s 11 000000
GENERAL AGGREGATE i S 2000000
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DESCRIPTION OF OPERATIONS I LOCATIONS I VEHICLES I EXCLUSIONS ADDED BY ENDORSEMENT I SPECIAL PROVISIONS
CERTIFICATE HOLDER CANCELLATION
BTaA=0 0 I SHOO D ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATM
DATE THEREOF, THE ISSUING INSURER WILL ENDEAVOR TO MAR. 10 DAYS WRTTEN
NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT, BUT FAILURE TO DO SO SHALL
IMPOSE NO OBLIGATION OR LIABILITY OF ANY KIND UPON THE INSURER, ITS AGENTS OR
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ST. JOSEPH ECONOMIC DEVELOPMENT AUTHORITY
REVOLVING LOAN PROGRAM
PURPOSE
The overall goal for the St. Joseph Economic Development Authority's (EDA's) Revolving Loan
Program is to stimulate St. Joseph's economy by providing low interest loans to small and
medium sized businesses. Revolving loan funds are to be used for business start-ups, expansion,
and retentions where jobs are created or retained. This may be accomplished by the following
means:
1. Creation or retention of permanent private sector jobs in order to create above average
economic growth;
2. Stimulation or leverage of private investment to ensure economic renewal and
competitiveness,
3. Increase in local tax base,
4. Improvement of employment and economic opportunity for citizens in the region to create
a reasonable standard of living;
5. Stimulation of productivity growth through improved manufacturing or new technologies
ADMINISTRATION
The St. Joseph EDA and City Council are the policymaking and loan approval bodies for the
Revolving Loan Program. The EDA is responsible for revising guidelines and recommending
loan approval to the City Council. The City Council is responsible for authorizing loan. EDA staff
and their assigns will be responsible for day to day administration, working with applicants on
proposed projects, collecting data, performing pre -loan analysis, overseeing loan processing,
preparing agreements and monitoring projects progress.
ELIGIBLE APPLICANTS
Eligible applicants include most industrial businesses, commercial businesses and technological
service businesses.
ELIGIBLE LOAN ACTIVITIES
1 Loan funds may be used for acquisition of land and /or buildings(s), rehabilitation of
building(s), reconstruction, new construction, site improvements, utilities or infrastructure,
and purchase of industrial equipment in connection with starting a new business or
expanding an existing business.
Land and building must be privately owned, taxable property and proposed for
commercial and /or industrial activities.
3. If building(s) are being purchased or rehabilitated with funds from the Revolving Loan
Fund any /all building code violations must be remedied. The project must comply with the
St. Joseph City Code including standards relating to land use.
Revolving loan fund assistance can be for no more than one -half of the cost of the project.
Ineligible activities include the operation or expansion of a casino, sports facility when the
principal tenant is a professional sports team, housing projects and operating expenses.
City of St Joseph — Revolving Loan Fund Program Page 1
APPROVAL CRITERIA
The grant or loan shall be based on the following criteria:
1. A gap in project financing is demonstrated.
2. The business must locate, remodel or expand within the corporate limits of the City of St.
Joseph.
3. The project will result in the creation or retention of existing jobs.
4. The project will result in an increase in tax base.
5. The project can demonstrate that the investment of public dollars induces private funds.
6. The project can demonstrate an excessive public infrastructure or improvement cost
beyond the means of the affected community and private participants in the project.
7. The project provides higher wage levels to the community or will add value to current
workforce skills;
8. Assistance is necessary to create new or retain existing businesses.
9. Job /wage goals must be consistent with the City of St. Joseph Business Subsidy policy.
SECONDARY LOAN ACTIVITIES
Loans may not be used for refinancing existing indebtedness or projects begun prior to loan
application.
LOAN TERMS /CONDITIONS
Financial assistance from the Revolving Loan Program is designed to make projects
economically feasible. Loan terms and conditions are determined by the information submitted in
the loan application. The following are the loan conditions:
1. Loan Amount - Maximum loan amount is 90% of the available RLF balances but shall at
no time exceed the gap demonstrated in project funding.
2. Interest Rate - The interest rate shall be set at the time of issuance and dependent upon
qualifications.
3. Term - Machinery/equipment: up to seven years. Land /buildings: up to 15 years. Terms
for other purposes will be flexible.
4. E uit - Each applicant must supply a minimum of 5% of the total project cost as cash
and /or fixed assets.
5. Security - The business owner will be required to provide personal guarantees for the
loan amount.
6. Project Initiation - All loan funds must be expended within six (6) months from the date of
the loan approval. An applicant may request a six (6) month extension.
7. Loan Fees - A processing fee of 1% of the total loan amount is payable at closing.
Loans may be prepaid without penalty or additional charge.
City of St. Joseph - Revolving Loan Fund Program Page 2
The Revolving Loan Program is intended to be flexible and assistance is customized to meet the
particular needs of individual projects.
APPLICATION PROCESS
The City of St. Joseph shall process and administer each loan in a manner which is usual and
customary with regard to other loans under similar circumstances. The basic steps for securing a
loan are as follows:
Applicant meets with St. Joseph EDA staff to discuss proposed project and loan program
guidelines. If project meets program objectives and other eligibility items, then applicant
completes the attached application which includes:
A. Statement describing nature of business and proposed plans;
B. Project description - purpose of loan and expected benefits. Itemize and provide cost
estimate for building improvements and /or equipment;
C. Sources /Uses proforma for the project;
D. Complied profit and loss statement for the past two (2) years (if applicable);
E. Personal financial statement(s) (for use in connection with applicant's equity
requirement);
F. Any other pertinent data
2. A sub - committee comprised of the St. Joseph Finance Director, a Member of the EDA
and the EDA Director shall review the application to determine whether or not it is
complete. If the application is determined to be complete, the subcommittee shall
formulate a recommendation to the full EDA concerning the fiscal impact (if any) on the
City and the appropriateness of the amount of assistance requested.
The St. Joseph EDA will review the application and make a recommendation to the City
Council. Upon approval, a Development Agreement and all other necessary documents
in connection with the loan will be prepared by the St. Joseph EDA staff and shall be
executed by the Director of the EDA. The City /EDA may work with a conventional lender
to review the creditworthiness of the applicant and the loan application.
TIMETABLE
Applications may be submitted at any time.
City of St. Joseph - Revolving Loan Fund Program Page 3
CITY OF ST. JOSEPH
RESOLUTION 2009 -028
RESOLUTION APPROVING APPLICATION TO REVOLVING LOAN FUND FROM
PREGO PROPERTIES, LLC (D.B.A. THE LOCAL BLEND) AND AUTHORIZING
EXECUTION OF LOAN DOCUMENTS
WHEREAS, in 2002 the EDA/City established a Revolving Loan Fund (RLF) after a
grant from the Minnesota Investment Fund was secured; and,
WHEREAS, the Revolving Loan Fund has an audited balance as of December 31,
2008 of $52,648; and,
WHEREAS, the EDA received a completed application for the Revolving Loan Fund
from Jeff and Stacie Engholm, Owners of Prego Properties LLC dba The Local Blend;
and,
WHEREAS, the loan application was reviewed by a subcommittee of the EDA as
required under City of St. Joseph Revolving Loan Fund guidelines; and,
WHEREAS, the subcommittee recommended approval of the loan application to the
full EDA; and,
WHEREAS, the EDA at its November 18th regular meeting approved a motion
recommending the City Council approve the loan application; and,
WHEREAS, the EDA and City Attorney have created loan documents.
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF ST. JOSEPH,
MINNESOTA:
1. The Council hereby approves an application to the Revolving Loan Fund
submitted by Prego Properties, LLC (d.b.a. The Local Blend) as per the
attached loan agreement.
2. The Mayor and the City Administrator are hereby authorized and directed to
execute the loan agreement.
Adopted by the Council 3rd day of December, 2009.
Alan Rassier, Mayor
Judy Weyrens, City Administrator