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HomeMy WebLinkAbout04-28-14 'It -ARZENHILLS Approved: September 8, 2014 CITY OF ARDEN HILLS,MINNESOTA ECONOMIC DEVELOPMENT AUTHORITY MEETING APRIL 28,2014 6:00 PM—CITY HALL CALL TO ORDER/ROLL CALL Pursuant to due call and notice thereof, President Grant called to order the Economic Development Authority meeting at 6:00 p.m. Present: EDA President David Grant; EDA Commissioners Brenda Holden, Fran Holmes, Dave McClung, and Ed Werner Absent: None Also present: Secretary Patrick Klaers; Treasurer Sue Iverson; Executive Director Jill Hutmacher; Associate Planner Matthew Bachler; and City Clerk Amy Dietl 1. APPROVAL OF AGENDA MOTION: EDA Commissioner Holmes moved and EDA Commissioner Werner seconded a motion to approve the meeting agenda as presented. The motion carried unanimously (5-0). 2. APPROVAL OF MINUTES A. January 27, 2014 EDA Commissioner Holmes requested a change to the minutes noting that Item 3A should read 2013 EDC Annual Report. MOTION: EDA Commissioner Holmes moved and EDA Commissioner Holden seconded a motion to approve the January 27, 2014, Economic Development Authority minutes as amended. The motion carried unanimously (5-0). 3. CONSENT CALENDAR ARDEN HILLS EDA MEETING—APRIL 28, 2014 2 A. 2014-15 EDA Work Plan Secretary Klaers reviewed the 2014-2015 work plan with the EDA. He discussed how some projects can cross over and involve the EDA, City Council, and EDC. EDA Commissioner Holmes recommended the EDA meet twice a year instead of quarterly. EDA President Grant and EDA Commissioner McClung agreed with this suggestion. MOTION: EDA President Grant moved and EDA Commissioner McClung seconded a motion to approve the Consent Agenda as presented. The motion carried unanimously (5-0). MOTION: EDA Commissioner McClung moved and EDA Commissioner Werner seconded a motion to cancel the July EDA meeting. The motion carried unanimously (5-0). 4. NEW BUSINESS A. EDA 2015 General Fund Budget Parameters Treasurer Iverson stated that the EDA is a blended component unit of the City of Arden Hills which makes EDA Funds Special Revenue Funds of the City. Annually, the City is required by the State to set budgets for the General Fund and all Special Revenue Funds (which includes all the EDA Funds). These EDA Funds are: EDA General Fund EDA Revolving Loan Fund EDA TIF District#2 Round Lake EDA TIF District#3 Cottage Villas EDA TIF District#4 Presbyterian Homes Treasurer Iverson stated that overall the EDA General Fund is in good financial condition for 2014 with an estimated reserve balance of$208,166. She noted that the EDA and City Council do need to identify dependable, reoccurring revenue for EDA activities in the future as the primary funding source of revenues from the Round Lake Road TIF District will be done in 2014. The main reason the EDA General Fund is in good condition for at least 2014 is because of the transfer of Conduit Fees into this fund for operating expenses. Treasurer Iverson commented that expenses for economic development related activities are going to exist regardless of whether they are in the City General Fund budget or if they are in the EDA General Fund budget. Today, these economic development expenses for Personal Services and for Other Services/Charges are estimated to be in the $100,000 per year range. ARDEN HILLS EDA MEETING—APRIL 28, 2014 3 Treasurer Iverson indicated that the fund balance being projected at the end of the year includes funds that are intended to be used for the gateway sign program. Tax revenues are likely the only reoccurring source of funding for EDA activities. Given this situation, it may be appropriate to start slowly. Maybe $10,000-15,000 in tax revenues for the EDA should be put in the 2015 budget and then this amount can increase in future years as needed. Staff is seeking EDA input regarding the budget before beginning the budgeting process as this will be included as part of the City's overall budgeting process. It was noted that the EDA will review the final budget at its October meeting. EDA Commissioner McClung questioned if an EDA levy would show up separately on property tax statements. Treasurer Iverson stated that this was the case. EDA Commissioner Holden asked how much the City planned to set aside for gateway signs in 2015. Secretary Klaers indicated that in 2015, staff was going to propose the transfer of only $15,000 from the PIR reserve for gateway signs. This amount is lower than past years because it is assumed that the EDA will use some of the EDA General reserves that have been accumulated over the last few years. He estimated the fund balance for signs at approximately$40,000. EDA Commissioner Holden recommended that the EDA consider purchasing the former Carroll's property if it was not purchased soon. She stated that this is an important property in the B-2 District. EDA Commissioner McClung understood that this is an important property, but did not want the EDA to take any action until the current potential buyer's offer was investigated further. EDA Commissioner Holmes did not believe that the EDA had enough funds available to consider purchasing this property. Further discussion ensued regarding the vision for the B-2 Zoning District. EDA President Grant recommended that staff stay engaged with the potential buyer and report back to the Council if there are any developments on the former Carroll's property. Treasurer Iverson stated that staff would report back to the EDA with a budget in October. 5. UNFINISHED BUSINESS A. EDA Revolving Loan Fund ARDEN HILLS EDA MEETING—APRIL 28, 2014 4 Associate Planner Bachler stated that the EDA discussed the City's Revolving Loan Fund (RLF) at two previous meetings on April 29, 2013, and again on August 26, 2013. At these meetings, staff provided general background information on the history of the RLF and the EDA discussed its goals and priorities for the future use of the funds. Since then, staff has discussed this topic with the Economic Development Commission (EDC) and has met individually with several local bankers to discuss the revisions proposed by the EDA in more detail. Associate Planner Bachler explained that based on the feedback provided by the EDA, staff will work with the EDC to draft revised RLF Guidelines that will be reviewed at a later meeting. Prior to final approval by the EDA and City Council, the revised RLF Guidelines are required to be reviewed by the Minnesota Department of Employment and Economic Development. Associate Planner Bachler reviewed the goals and principles of the RLF program. He indicated that the RLF Guidelines should include a list of goals that clearly define the purpose of the program. Businesses applying for loans should be able to easily evaluate whether their projects would be consistent with the City's objectives. Specific goals might include: • Support projects that encourage redevelopment of and investment in commercial and industrial buildings and properties. • Support projects that will result in property maintenance and aesthetic improvements, such as landscaping or commercial facade improvements. • Focus on projects that will assist in the retention and expansion of established Arden Hills businesses. • Provide affordable financing that could not otherwise be secured in the private capital market. • Support projects that advance other public policy goals adopted by the City Council, including energy conservation and sustainable building practices. Associate Planner Bachler stated that the City should set a maximum loan amount somewhere between $50,000 and $75,000. This number should be set in part based on the type and number of projects that the City sees itself financing. For example, a lower maximum amount would allow the City to support more projects, but the projects being undertaken would likely be at a smaller scale. Associate Planner Bachler commented that if the City were to set the RLF interest rate at two percent, these loans would be very competitive with commercial lending rates. Currently, commercial rates average at least five percent. The EDA could consider setting the interest rate as high as three percent, which would increase the amount being repaid into the RLF while still being competitive with commercial rates. Associate Planner Bachler reported that the private lender should set the term length, but the City could still put a limit on the maximum number of years for a loan term. Terms are determined by the amortization period. Projects requiring less capital investment (equipment acquisition) usually have a shorter amortization and term, while projects with a larger investment ARDEN HILLS EDA MEETING—APRIL 28, 2014 5 (real estate acquisition) have a longer amortization and term. If the goal is to see a quicker return of loan repayments, the City should focus on projects with short-term amortization periods of ten years or less. The following types of projects should be eligible for loans issued through the RLF: • Real property improvements - Internal fixed improvements (walls, ceilings, floors, lighting, windows, doors) - Streetscape and landscaping improvements - Plumbing, electrical, and mechanical systems - Air conditioning - Roofing - Parking lot surfacing and lighting -Accessibility improvements -Energy conservation and energy retrofits • Commercial fagade improvements - Cleaning and painting of exterior surfaces - Repair or replacement of windows, doors, cornices, masonry, awnings, and decorative details - Sign removal, repair, or replacement • Fixed asset equipment - Production equipment Associate Planner Bachler reported that the revolving fund loans should act as gap financing for loans being made by a private lender. For each bank participating in the program, a Lender Agreement would be signed with the City. This agreement would outline the general requirements of the RLF program and what the expectations are of the bank in partnering with the City. A Participation Agreement would also be created for individual loans, providing specific details and responsibilities for each deal. The lender would prepare the note and collateral documents and the City would issue a check from the RLF to purchase a participation in the note. The lender would be responsible for disbursing the loan funds and collecting payments for both the City and private portions of the loan. Monthly payments would then be submitted to the City. Associate Planner Bachler indicated that the bank would also be responsible for doing the necessary underwriting for the entire loan package. Since banks are risk-averse, if an applicant meets a bank's underwriting requirements the City can be confident about the risk level associated with the loan. The City should primarily rely on the financial criteria used by the participating bank to screen loan applications. Additional recommendations included: • Require that a minimum of 50 percent of the project be privately financed. • Many projects would likely not receive a high score using the City's Grading and Report Card for public financing proposals, as this tool is largely focused on redevelopment ARDEN HILLS EDA MEETING—APRIL 28, 2014 6 projects. Consider exempting projects receiving financing through the RLF from being reviewed using this evaluation tool. • The job creation requirements in the existing RLF Guidelines should be revised considering that certain projects such as fagade improvements and equipment acquisition may not meet this required criteria. • Be willing to take on some risk recognizing that the City will likely see a direct benefit from a completed project regardless of whether the loan is repaid in full (for example, improvements to landscaping or public frontage fagades). Associate Planner Bachler explained that the application process for obtaining revolving loan funds should be streamlined and transparent. The City should set a goal of completing the necessary evaluation and deciding on a loan request within 30 to 45 days of receiving a completed application. A long approval process will make the program less attractive to businesses interested in participating. While the City should request financial records from the applicant, if possible these documents should not be included in the public records for meetings. Associate Planner Bachler stated that the City should consider establishing a special committee comprised of members of the EDA, the EDC, and staff that would be responsible for evaluating applications and making recommendations to the City Council. A detailed list of criteria should be created so that businesses have a level of certainty that a project will be approved by the City Council if it successfully makes it through the committee approval process and meets the required criteria. A schedule similar to the one used by the City to process land use applications could be developed so applicants are aware of the loan approval timeline from the beginning. Because the City is unlikely to receive a large number of loan applications, this committee could have a set regular meeting time every month, but only convene on an as needed basis. Associate Planner Bachler requested that the EDA provide feedback and direction on proposed changes to the EDA Revolving Loan Fund. EDA Commissioner Holden questioned how grants were factored into this program. Executive Director Hutmacher reported that there were not a lot of grants available for businesses, and that any grant a business received would not change the requirement that the City's loan be a match to private bank financing. Associate Planner Bachler believed that the City would be willing to partner with businesses on a loan if they had also received a grant to help finance a project. EDA Commissioner Holden thought that this was a great policy for existing Arden Hills businesses, but did not want to see it made available to new businesses on the TCAAP site. EDA President Grant agreed and suggested that applications for the revolving loan fund go through the EDC, with recommendations then made to the EDA. ARDEN HILLS EDA MEETING—APRIL 28, 2014 7 Executive Director Hutmacher discussed the process preferred by local banks, noting a smaller subcommittee was recommended to streamline the process. EDA Commissioner Holmes questioned how the $155,000 in the Revolving Loan Fund would impact local businesses. She asked if the money should be given back to DEED. James Ostlund, Financial Planning and & Analysis Committee, suggested that the decision making process be outsourced to Central Minnesota Development Company (CMDC) or that banks be allowed to decide. He believed that the loans would impact small businesses and should proceed. EDA President Grant agreed that the EDA did not have a lot of additional time to review these matters. He did not want future loan requests to become `analysis paralysis'. He supported the requests being reviewed by the FPAC or EDC, or having the requests come straight to the EDA. EDA Commissioner McClung did not want to overwhelm staff by these requests either. He encouraged the loan review process be streamlined as much as possible. EDA Commissioner Holden suggested that staff and a banker review the requests and that a recommendation be made to the EDA. Executive Director Hutmacher stated that CMDC would be an option that would reduce the need for additional staff time and subcommittee review. EDA President Grant supported this recommendation. EDA Commissioner McClung recommended that the loans be tied to job creation or job retention. Secretary Klaers reported that the EDA would review this information again at a future meeting. 6. EDA COMMISSIONER COMMENTS None. 7. STAFF COMMENTS None. 8. ADJOURN MOTION: EDA Commissioner Holden moved and EDA Commissioner Werner seconded a motion to adiourn the Economic Development Authority meeting. The motion carried unanimously (5-0). ARDEN HILLS EDA MEETING—APRIL 28, 2014 8 EDA President Grant adjourned the special Economic Development Authority meeting at 6:54 p.m. 0// �4 z2a"V lw� Jill H coacher David Grant Exe tive Director EDA President