HomeMy WebLinkAbout8-26-13--
Dave McClung
Ed Werner
www.cityofardenhills.org
Arden Hills is a strong community that values its unique environmental setting,
strong residential neighborhoods, vital business community, well-maintained infrastructure, fiscal
soundness, and our long-standing tradition as a desirable
City in which to live, work, and play.
CALL TO ORDER
APPROVAL OF AGENDA
UNFINISHED BUSINESS
2.A.EDA Revolving Loan Program
Matthew Bachler and Jill Hutmacher
Documents:MEMO.PDF,ATTACHMENT.PDF
EDA MEMBER COMMENTS
STAFF COMMENTS
MEMORANDUM
DATE:
August 26, 2013
TO:
EDA President and Commissioners
FROM:
Matthew Bachler, Community Development Intern
SUBJECT:
EDA Revolving Loan Fund
Requested Action
Provide direction on the future goals of the EDA Revolving Loan Fund.
Background
The EDA Revolving Loan Fund (RLF) was discussed at two previous EDA meetings on April 29
and July 29, 2013. At these meetings, general background information on the RLF was provided.
Topics covered included the establishment of the RLF, the use of funds for business expansion
projects, the current financial status of the RLF, and how the Minnesota Business Subsidy Law
will impact the use of the RLF going forward.
The guidelines for the use of the RLF were first adopted in 1997 and since then have not been
updated. At the end of the July 29, 2013 meeting, the EDA began to discuss how the funds in the
guidelines should be updated to reflect changes in priorities.
Revolving Loan Fund Guidelines
Loans issued through the RLF will be regulated by the Minnesota Business Subsidy Law.
However, loans of less than $75,000 are not considered business subsidies and are exempt from
the provisions of this law. Any revised guidelines will need to be reviewed by the State
Department of Employment and Economic Development prior to EDA and City Council
approval. At a minimum, the updated guidelines will need to state that the Business Subsidy Law
applies to RLF loans.
(Financing Policy) and the Grading and Report Card apply to revolving fund loans. (See Section
5.A. of the attached Financing Policy.)
______________________________________________________________________________
City of Arden Hills
Economic Development Authority Meeting August 26, 2013
12
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Staff is requesting guidance on the following questions:
1.Do the minimum and desired qualifications for City financing established in the
2.What types of projects would the City like to support with revolving fund loans?
a.Business expansions
b.Equipment purchases
c.Commercial façade improvements
d.Large vs. small businesses
e.Established Arden Hills businesses vs. businesses that are new to the City
3. Grading and Report
Card?
4.The current Revolving Loan Fund Guidelines assume that loans would be issued in
collaboration with banks which would evaluate projects, determine credit-worthiness, and
administer the loans. Should the City continue to partner with private financial
institutions?
5.For certain, small-scale projects such as façade improvements, should loans be structured
to be forgivable? What private match should be required? Should other goals be
included?
Requested Action
Discuss City goals for the RLF and direct staff to draft policy revisions, if necessary, for further
EDA consideration.
Attachments
EDA Staff Report, April 29, 2013
City of Arden Hills, EDA Revolving Loan Fund Guidelines
City of Arden Hills Business Subsidy Criteria and City Public Financing Guidelines,
April 29, 2013
Public Financing Proposal Grading and Report Card
______________________________________________________________________________
City of Arden Hills
Economic Development Authority Meeting August 26, 2013
22
Page of
MEMORANDUM
DATE:
April 29, 2013
TO:
EDA President and Commissioners
FROM:
Matthew Bachler, Community Development Intern
SUBJECT:
EDA Revolving Loan Fund
Requested Action
Provide direction on the future goals of the EDA Revolving Loan Fund.
Summary
The EDA Revolving Loan Fund (RLF) was established by the City in order to participate in the
Minnesota Investment Fund (MIF) program managed by the Department of Employment and
Economic Development (DEED). Grant funding received through MIF in 1998 was used to
provide Cardiac Pacemakers, Inc. with a low-interest loan for an expansion project. A $100,000
portion of this loan was repaid to the City and was used to capitalize the RLF. The CPI loan
repayment and investment interest earnings are the only revenue sources currently represented in
The existing RLF guidelines should be updated to meet State Business
Subsidy Law requirements. Revisions to the RLF guidelines must be approved by DEED.
Background
The Department of Employment and Economic Development established the Minnesota
Investment Fund to provide industrial, manufacturing, and technology-related businesses with
low-cost financing to help create or retain high quality jobs. Loans are awarded to and
administered by local units of governments; to qualify for financing, a business must complete a
joint application with a local government. Generally, the program allows local governments to
retain a portion of the loan repayment to create an RLF.
In January 1997, the City Council authorized the City Administrator to execute an MIF loan
agreement with Cardiac Pacemakers, Inc. (CPI). A $100,000 portion of the state financing was in
the form of a low-interest loan that was repaid to the City. This loan had a 5-year term at a 3%
interest rate. The proposed use for the funds was a 47,000 square foot expansion project to
enhance research and development programs at CPI. The company estimated an additional 200
high-skill jobs would be created as a direct result of the investment.
______________________________________________________________________________
City of Arden Hills
Economic Development Authority Meeting April 29, 2013
12
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Prior to dispersing the MIF grant, the State required Arden Hills to adopt guidelines for the
revolving loan fund (attached). The regulations were designed to set parameters on the use of
funds development policies. The RLF guidelines
were approved by the EDA on August 25, 1997 and by the City Council on May 26, 1998.
The CPI loan principal plus accrued interest was paid off entirely as of December 31, 2003. At
this point the RLF cash balance was approximately $140,000. This number represents the CPI
loan principal, interest payments, and investment interest earnings. The RLF balance was
estimated to be $154,969 as of December 31, 2012. Growth in cash reserves in the RLF between
2004 and 2012 was derived entirely from investment interest earnings.
The City did administer a second MIF loan through the RLF for Guidant in 2004. However, none
of the funds currently in the RLF are associated with this agreement, as the City forgave its
portion of the Guidant loan. In April 2004, the City executed an agreement with DEED to
provide the company with $250,000 for the purchase of machinery and equipment. The City
committed to forgive its $100,000 portion of the loan if the company met certain job creation
numbers. Guidant complied with these set terms and its portion of the loan was subsequently
forgiven. On April 20, 2005, the City transferred the repaid loan principal and interest
($150,083.30) from the RLF to DEED.
Revolving Loan Fund Guidelines
The use of the EDA Revolving Loan Fund is regulated by the Minnesota Business Subsidy Law.
Loans of less than $75,000, however, are not considered business subsidies. The EDA may want
to consider revisions to the RLF guidelines that target loan funds to specific types of economic
development projects. At a minimum, the RLF guidelines should be revised to state that the
Business Subsidy Law applies to RLF loans. Any revisions made to the RLF guidelines will need
to be reviewed by the State Department of Employment and Economic Development prior to
EDA and City Council approval.
As staff drafts revisions to the RLF guidelines, guidance on the following questions is requested:
What are some types of business development projects the City would like to finance
using RLF loans?
What steps could be taken to educate the local business community about the availability
of RLF loans and other public financing tools?
Do the existing RLF g
regarding the use of RLF loans?
Recommended Action
Direct staff to draft revisions to the Revolving Loan Fund Guidelines in accordance with EDA
discussion on the goals of the RLF.
Attachments
City of Arden Hills, EDA Revolving Loan Fund Guidelines
______________________________________________________________________________
City of Arden Hills
Economic Development Authority Meeting April 29, 2013
22
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City of Arden Hills
Business Subsidy Criteria and City Public Financing Guidelines
APRIL 29, 2013
1.
PURPOSE AND AUTHORITY
A.The purpose of this document is to establish the criteria for the City of Arden
Hills for granting of business subsidies and for City public financing for private
development within the City. These criteria shall be used as a guide in processing
and reviewing applications requesting business subsidiesand/or City public
financing.
B.The City's ability to grant business subsidies is governed by the limitations
established in Minnesota Statutes 116J.993 through 116J.995(Statutes).The City
may choose to apply its Business Subsidy Criteria to other development activities
not covered under this statute.City public financing may or may not be
considered a business subsidy as defined by the Statutes.
C.Unless specifically excluded by the Statutes, business subsidies include grants by
state or local government agencies, contributions of personal property, real
property, infrastructure, the principal amount of a loan at rates below those
commercially available to the recipient of the subsidy, any reduction or deferral of
any tax or any fee, tax increment financing(TIF), abatement of property taxes,
loans from the City’s Revolving Loan Fund,any guarantee of any payment under
any loan, lease, or other obligation, or any preferential use of government
facilitiesgiven to a business.
D.These criteria are to be used in conjunction with other relevant policies of the
City.Compliance with the Business Subsidy Criteria and City Public Financing
Guidelines shall not automatically mean compliance with such separate policies.
E.The City may deviate from these criteria by documenting in writing the reason(s)
for the deviation. The documentation shall be submitted to the Department of
Employment and Economic Development with the next annual report.
F.The Citymay amend this document at any time. Amendments to these criteria are
subject to public hearing requirements contained in the Statutes.
2.BUSINESS SUBSIDY PUBLIC PURPOSE REQUIREMENT
A.All business subsidies must meet a public purpose with measurable benefit to the
City as a whole. Public purpose may include, but not be limited to, creating
needed services or facilities not currently available, providinga variety of housing
ownership alternatives and housing choices, redevelopingand removingblight
City of Arden Hills Public Financing Policy Page 1of 7
April 29, 2013
and encouragingredevelopment in the commercial and industrial areas of the City
in order to encourage high levels of property maintenance and private
reinvestment in those areas, retaininglocal jobs, increasingthe job base, and
providingdiversity in that job base, enhancingexisting jobs through increased
wages, encouragingadditional unsubsidized private development in the area,
either directly, or through secondary “spinoff” development, offsettingincreased
costs of redevelopment over and above those costs that a developer would incur in
normal urban and suburban development, and meetingother uses of public policy,
as adopted by the Council from time to time including the promotion of quality
urban design, quality architectural design, energy conservation, decreasing the
capital and operating costs of local government, etc.
B.Job retention may only be used as a public purpose in cases where job loss is
specific and demonstrable. The City shall document the information used to
determine the nature of the job loss.
C.The creation of tax base shall not be the sole public purpose of a subsidy.
D.Unless the creation of jobs is removed from a particular project pursuant to the
requirements of the Statutes, the creation of jobs is a public purpose for granting a
subsidy. Creation of at least oneFull Time Equivalent (FTE)job is a minimum
requirement for consideration of assistance.
E.The wage floor for wages to be paid for the jobs created shall be not less than
150% of the State minimum wage in effect at the time the subsidy is granted. The
City will seek to create jobs with higher wages as appropriate for the overall
public purpose of the subsidy. Wage goals may also be set to enhance existing
jobs through increased wages, which increase must result in wages higher than the
minimum under this Section.
3.SUBSIDY AGREEMENT
A.In granting a business subsidy, the Cityshall enter into a subsidy agreement with
the recipient that provides the following information: wage and job goals (if
applicable), commitments to provide necessary reporting data, and recourse for
failure to meet goals required by the Statutes.
B.The subsidy agreement may be incorporated into a broader development
agreement for a project.
C.The subsidy agreement will commit the recipient to providing the reporting
information required by the Statutes.
4.CITY’SOBJECTIVEFOR THE USE OF PUBLIC FINANCING
A.Asa matter of adopted policy, the City mayconsider using public financing
which may include tax increment financing(TIF), tax abatement, bonds, waiver
of City fees (excluding building permit fees),and other forms of public financing
City of Arden Hills Public Financing Policy Page 2of 7
April 29, 2013
as appropriate,to assist private development projectswhen such assistance
complies with all applicable statutory requirements to:
1.Remove blight and/or encourage redevelopment in designated
redevelopment/development area(s)per the goals and visionsestablished by
the City Council
2.To achieve thefollowing housing-related goals:
a.To provide a balanced and sustainable housing stock to meet diverse
needs both today and in the future
b.To ensure all housing is safe and well-maintained
c.To promote neighborhood stabilization and revitalization by the removal
ofblightand the upgrading of existing housing stock.
3.To retain local jobs and/or increase the number and diversity of quality jobs
4.To encourage additional unsubsidized private development in the area, either
directly or through secondary “spin-off” development.
5.To offset increased costs forredevelopment over and above thecosts that a
developer would incur in normal urban and suburban development
(determined as part ofthe But-For analysis).
6.To facilitate the development process and to achieve development on sites
whichcouldnot be developed without this assistance.
7.To meet other uses of public policy, as adopted by the CityCouncil from time
to time, includingbut not limited topromotion of quality urban design, quality
architectural design,energyconservation, sustainable building practices,and
decreasing the capital and operating costs of local government.
5.PUBLIC FINANCING PRINCIPLES
A.
The guidelines and principles set forth in this document pertain to all applications
for City public financing regardless of whether they are considered a business
subsidy as defined by the Statutes. The following general assumptions of
redevelopment shall serve as a guide for City public financing:
1.All viable requests for City public financingassistance shall be reviewed by a
third party financial advisorwho will inform the City of its findings and
recommendations.
2.The City shall establish mechanisms within the development agreement to
ensure that adequate checks and balances are incorporatedin the distribution
of financial assistancewhere feasible and appropriate, including but not
limited to:
a.Third party review of the “but for” analysis
City of Arden Hills Public Financing Policy Page 3of 7
April 29, 2013
b.Establishment of “look back provisions”
c.Establishment of minimum assessment agreements
3.TIF and abatement will be provided on a pay-as-you-go-basis. Any request
for upfront assistance will be evaluated on its own merits and mayrequire
security to cover any risks assumed by the City.
4.The City will elect the fiscal disparities to come from inside applicable TIF
district(s)to eliminate any impact to the existing tax payers of the community.
5.The City will target up to the maximum allowed by State Statute of tax
increment for administrative purposesonly.
6.The developer shall proactively attempt to minimize the amount of public
assistance needed through the pursuit of grants, innovative solutions in
structuring the deal, and other funding mechanisms.
7.Proposals should not be used to support speculative industrial, commercial,
office or housing projects. In general the developer should be able to provide
market data, tenant letters of commitment or financestatements which support
the market potential/demand for the proposed project.
8.Public financing will not be used in a project that involves an excessive land
and/or property price. This will normally be where the acquisition price is
more than 20% in excess of market value as determined by an independent
appraisal of the property (exclusiveof relocation benefits). The City shall
commission an appraisal and the cost will be paid from Developer’s escrow.
9.Public financing will not be used in projects that would give a significant
competitive financial advantage over similar projects in thearea due to the use
of public subsidies. Developers should provide information to support that
assistance will not create such a competitive advantage. Priority consideration
will be given to projects that fill an unmet market need.
10.TIF and Abatement will not be utilized for the construction of new rental
housing units. The City will consider waivers of various City fees for new
rental housing developments (building permit fees excluded).
11.Public financing will not be used for projects that would generate significant
environmental problems in the opinion of the local, state, or federal
governments. Priority will be given to projects that aim to clean-up existing
contaminated sites and would facilitate the location of an industry or business
that has anenvironmentally-sound track record, or that meets a housing need
in the City.
12.The City will not approve new TIF districts that would cause the percentage
of the City’s total tax capacity captured within TIF districts to rise above six
percent.
City of Arden Hills Public Financing Policy Page 4of 7
April 29, 2013
6.PROJECTS WHICH MAY QUALIFY FOR PUBLIC FINANCING ASSISTANCE
A.All new applicationsfor assistanceconsidered by the City must meet each of the
following minimum qualifications and will also be evaluated based on their
not
ability to meet the desired qualifications for assistance.However, it should be
presumed that aproject meeting any of the qualifications will automatically be
approvedfor assistance. Meeting the qualifications does not imply or create
contractual rights on the part of any potential developer to have its project
approvedfor assistance.
6.1Minimum Qualifications:
A.In addition to meeting the applicable requirements of State law, the project shall
meet one or more of the Publicfinancing objectives outlinedin Section 4;and
shalleither:
1.Remove blight and/or encourage redevelopment in the City in order to
encourage high quality development or redevelopment and private
reinvestment in those areas; OR
2.Facilitate the development process and to achieve development on sites which
would not be developed without this assistance.
B.The developer must demonstrate to the satisfaction of the Citythat the project is
not financially feasible “but for” the use of tax incrementor other public
financing.
C.Theproject must be consistent with the City’s Comprehensive Plan and Zoning
Ordinances, Design Guidelines or any other applicable land use document.
D.Prior to approval of a financing plan, the developer shall provide any requested
market and financial feasibility studies, appraisals, soil boring, private lender
commitment, and/or other information the City or its financial consultants may
require in order to proceed with an independent evaluationof the proposal.
E.The developermust provide adequate financial guarantees to ensure the
repayment of any public financing and completion of the project. These may
include, but are not limited to, assessmentagreements, letters of credit, personal
deficiency guarantees, guaranteed maximum cost contract, etc.
F.Any developer requesting assistance mustbe able to demonstrate past successful
general development capability as well as specific capability in the type and size
of development proposed. Public financing will not be used when the developer’s
credentials, in the sole judgment of the City, are inadequate due to past history
relating to completion of projects, general reputation, and/or bankruptcy, or other
problems or issues considered relevant to the City.
City of Arden Hills Public Financing Policy Page 5of 7
April 29, 2013
G.The developer, or its contractual assigns, shallretain ownership ofany portion of
theproject long enough to completeit, to stabilize its occupancy, to establish
projectmanagementand/or needed mechanisms to ensure successful operation.
6.2Desired Qualifications:
A.Projects providing higher than a3 to 1 ratio of privateinvestment to City public
investmentwill receive priority consideration.Private investment includes
developer cash, government and bank loans, conduit bonds, tax credit equity, and
land if already owned by the developer.
B.Projects meeting the following minimum building valuationwill receive priority
consideration:
Minimum Value
Use
Per Sq/Ft or Unit
Industrial$60
Commercial/Retail$125
Office$100
Rental Housing$100,000
C.Proposals that significantly increase the amount of property taxes paid after
redevelopment will receive priority consideration.
D.Proposals that encourage the following will receive priority consideration:
1.Provides significant improvement to surrounding land uses, the
neighborhood, and/or the City
2.Provides opportunities for development of restaurants
3.Attracts or retains a significant employer within the City
4.Provides opportunity for hi-tech, med-tech and R & D facilities/office
5.Provides significant rehabilitation of an existing apartment complex or
significant rehabilitation and/or expansion of existing office, commercial
or industrial facility
6.Provides opportunities for high end and/or specialty retail that is not
currently available to City residents
7.Redevelopsa blighted and/or challenged site
City of Arden Hills Public Financing Policy Page 6of 7
April 29, 2013
8.Provides opportunities for small businesses
E.Preference will be given to projects that meet good public policy criteria as
determined by the City Council, including:
1.High project quality (e.g. sound architectural design, quality construction
and materials, sustainable building practices)
2.Projects that meet financial feasibility criteria established by the City
3.Projects that provide the highest and best desired use for the property
7.PUBLIC FINANCING PROJECT EVALUATION PROCESS
A.The following fivemethods of analysis for all public financingproposals will be
used:
1.Consideration of project meeting minimum qualifications
2.Consideration of project meeting desired qualifications
3.Project meets “but-for” analysis and/orstatutory qualifications
4.Project is deemed consistent with City’s Goals and Objectives
5.Score of a “B” or higher on the TIF report card
Please note that the evaluation methodology is intended to provide a balanced review.
Each area will be evaluated individually and collectively and in no case shouldone
area outweigh another in terms of importance to determining the level of assistance.
Adopted by Arden Hills City CouncilApril 29, 2013
City of Arden Hills Public Financing Policy Page 7of 7
April 29, 2013
Public Financing Proposal
Grading and Report Card
Business and Commercial Redevelopment
FINAL GRADE:F
1Ratio of private investment to public investment in project:
Points:
0
Note: Private investment includes developer cash, loans from banks, conduit bonds, tax credit equity and land if already owned by developer
Private Funds/Public FundsPoints
$-3to11
Private Investment
$-4to12
Public Investment
#DIV/0!5to13
Ratio of Private/Public Financing
6to14
7 & Upto15
2Minimum Valuation threshold
Points:
0
Industrial ValuationPoints
$-$601
Building Valuation
0$61to$702
Building Square Footage
$0.00$71to$803
Value Per Sq/Ft
$81&Up4
Points:
0
Retail ValuationPoints
$-$1251
Building Valuation
0$126to$1502
Building Square Footage
$151to$1753
Value Per Sq/Ft
$176&Up4
Points:
0
Office ValuationPoints
$-$1001
Building Valuation
0$101to$1102
Building Square Footage
$111to$1203
Value Per Sq/Ft
$121&Up4
Points:
0
3Increase in real estate value:
Points:
0
Before/After Points
$-1to1.90
Value of site before redevelopment
$-1to21
Value of site after redevelopment
#DIV/0!1to32
Ratio of value before/after redevelopment
1to43
1to54
1&Up5
4Bonus Points (18 points total)
Points:0
Points
AvailAwarded
A. Project will add value to and likely stimulate further investment in surrounding neighborhood30
B. Provides opportunities for restaurant30
C. Project attracts or retains significant employer within the City30
D. Provides opportunity for hi-tech, med-tech and R & D facilities/office30
E. Provides significant rehabilitation or expansion of existing facility20
F. Provides opportunities for high end and/or specialty retail20
G. Project will redevelop a blighted and/or challenged site10
H. Provides opportunities for small business10
180
TOTAL
32 Total Points Available
5
TOTAL POINTS0Total PointsGrade:F
0to5F
6to10D
11to15C
16to21B
22to32A
1