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HomeMy WebLinkAbout[05a] Revolving Loan Fund, St. Joseph CooperativeCITY OF MT. JOSEPH MEETING DATE: April 21, 2011 Council Agenda Item 5(a) AGENDA ITEM: Revolving Loan Fund, St. Joseph Cooperative SUBMITTED BY: St. Joseph EDA BOARD /COMMISSION /COMMITTEE RECOMMENDATION: See attached memo PREVIOUS COUNCIL ACTION: BACKGROUND INFORMATION: The loan request has been reviewed by the Loan Review Committee and they recommend approval of a seven (7) year loan at a rate of 3% with adequate security. The loan documents are in the process of being drafted and are similar to that used for the local blend. BUDGET /FISCAL IMPACT: $ 26,000 reduction in revolving loan to provide assistance to a new downtown business venture. ATTACHMENTS: Request for Council Action .............................. 5(a):1 -2 MEMO — Cynthia Smith - Strack ........................ 5(b):3 -4 NOTE: Action on this matter is two -fold, first the EDA considers and makes a recommendation to the City Council and then the City Council takes action. REQUESTED EDA ACTION: First the EDA must make a motion in the affirmative and the Council must them make a motion authorizing execution of the loan documents for the term and interest rate identified above. REQUESTED CITY COUNCIL ACTION: After the EDA recommendation the City Council would affirm the decision of the EDA authorizing execution of the loan agreement for St. Joseph Cooperative in the amount of $ 26,000 for a term of 7 years with an interest rate of 3 %. THIS PAGE INTENTIONALLY LEFT BLANK DATE: April 13, 2011 MEMO TO: Honorable Mayor Schultz Administrator Members of the City Council Judy Weyrens Member of the Economic Development Authority Administrator Weyrens Mayor Richard Schultz FROM: Cynthia Smith - Strack Municipal Development Group Councilors RE: RLF Request: St. Joseph Cooperative (d.b.a. Minnesota Street Market), joint Steve Frank application with Prego Properties, LLC (Jeff /Stacie Engholm) Bob Loso Renee Symanietz Background: Dale Wick 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 EDA (formerly VicWest) facility. The RLF has an unaudited balance as of March 23, 2011 of $35,000 Carolyn Yaggie- of which $30,000 is available for a project. RLF guidelines are attached for your information. Heinen Chad Davey The EDA has receiving an application for the RLF Program from the St. Joseph Cooperative Al Rassier (d.b.a. Mainstreet Market) and Prego Properties, LLC (Jeff and Stacie Engholm). The Tom Skahen Cooperative will be leasing space at the former Loso Grocery Store from property owner Prego Dale Wick Properties, LLC. The loan in the amount of $26,000 will assist in the purchase of freezers /coolers for the Mainstreet Market, help with the purchase of a point of sale software system, help bring wood floors to useable condition, and for purchase of inventory. Mainstreet Market is to open in June of this year. The equipment, inventory, and accounts receivable will be used as security for the loan. Promissory notes will be provided by Jeff and Stacie Engholm and Prego Properties. UCC filings will security the proposed collateral. In addition, the project involves equity (cash) held by the St. Joseph Cooperative which was formally organized under Mn. Secretary of State's Office rules. The project envisions adding one full time job within two years. Eligible Loan Activities: Criteria Met 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. 2. 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. 4. Revolving loan fund assistance can be for no more than one -half of the cost of the project, unless the project is valued at under $50,000 as is the case with this 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. Approval criteria for RLF applications are as follows: 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. It is noted the project is exempt from the City of St. Joseph Business Subsidy Policy due to the value of the project being less than the statutory exemption of $150,000. The EDA at their March 30, 2011 reviewed the loan request and associated materials and found the request appropriate. The EDA authorized review of the loan application by a sub - committee. The $26,000 loan request has been reviewed by the EDA Loan Review Sub - Committee. The Loan Review Sub - Committee recommends approval of the loan based on security identified previously, a term of seven (7) years at a rate of three (3) percent interest. Loan documents and appropriate filings are being drafted. Jeff Engholm will be present at the joint meeting on the 21S`. ACTION If the EDA finds the proposed RLF request a MOTION to approve the loan application and recommend approval of the loan disbursement to the City Council is in order.