HomeMy WebLinkAboutCity Council Resolution 1997-0500
CITY OF PLYMOUTH
RESOLUTION 97- 50
FINAL APPROVAL OF PLYMOUTH ECONOMIC
DEVELOPMENT FUND GUIDELINES
WHEREAS, on May 15, 1996, the Plymouth City Council approved submission of an application
to the Minnesota Department of Trade and Economic Development for an Economic Recovery
Program loan and grant to assist Value RX with its plans to relocate its business to property in
Plymouth located at 4700 Nathan lane; and
WHEREAS, proceeds of the program will be used to capitalize the Plymouth Economic
Development Fund to encourage economic development by supplementing conventional fir-ancing
sources available to existing and new businesses; and
WHEREAS, on May 15, 1996 the Plymouth City Council adopted Resolution 96-288, giving
preliminary approval of guidelines for implementation of the program by the Plymouth Housing
and Redevelopment Authority (HRA), pending approval of the grant and review and comment by
the HRA board; and
WHEREAS, the HRA has reviewed and revised the draft guidelines and has recommended their
approval;
NOW, THEREFORE, BE IT RESOLVED that the Plymouth Economic Development Fund
Guidelines, Attachment A to this Resolution, are hereby given final approval.
Adopted by the City Council on January 22, 1997.
STATE OF MINNESOTA)
COUNTY OF HENNEPIN) SS.
The undersigned, being the duly qualified and appointed City Clerk of the City of Plymouth,
Minnesota, certifies that I compared the foregoing resolution adopted at a meeting of the
Plymouth City Council on January 22, 1997, with the original thereof on file in my office, and
the same is a correct transcription thereof.
WITNESS my hand officially as such City Clerk and the Corporate seal of the City this
day of
City Clerk
a,p1en\st&ffrep\res\ma97\1oengu1d
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Loan Fund Guidelines, As Recomm _nded by HRA
8/1/96
PLYMOUTH ECONOMIC DEVELOPMENT FUND GUIDELINES
CITY OF PLYMOUTH
3400 Plymouth Boulevard
Plymouth, Minnesota 55447-1482
(612) 5095000
I. INTRODUCTION
The purpose of the Plymouth Economic Development Ft nd (PEDF) is to encourage economic
development by supplementing conventional financing sources available to existing and new
businesses. The Plymouth Economic Development Fund (PEDF) is administered by the Plymouth
Housing and Redevelopment Authority (HRA), subject to the PEDF guidelines as approved by the
Plymouth City Council. 'through this program, the HRA works with participating lending
institutions) to make loans to businesses to help them meet a portion of their financing needs. Itis
the responsibility of the HRA to assure that loans are consistent with the objective 3 of the program
and comply with all other PEDF policies as defined in this document
"he Plymouth Economic Development Fund is operated as an equal opportunity program. All
applicants shall have equal access to PEDF funds regardless of race, sex, age, marital status, or
other personal characteristics.
Revolving loan funds (RLF's) have bet ame an increasingly popular business financing tool because
of their ability to leverage public and private dollars and recycle funds as well as their flexible
design and simple operation. RLF's provide firms with direct loans, loan guarantees, interest
subsidy and other financial assistance. As the RLF receives the principal and interest from
outstanding loans, the money is made available to another borrower. This recycling of funds makes
RLF's particularly valuable in light of the growing scarcity of development fiords.
RLF's are designed to alleviate the high cost and short supply of capital for community businesses
by providing flexible loan terms. Typically, RIT s lower the rate, !zngther the term, or reduce the
risk of a loan, increasing accessibility to capital, RLF's help flrms expand, develop or remain in
the community. By providing critical subordinate financing for a loan package instead of 100
percent direct financing, RLF's are an effective tool for leveraging. RLF loans are typically
combined with other public or private dollars.
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Loan Fund Guidelines, As Recommended by HRA
8/1/96
It is anticipated that the PEDF revolving loan fund will initially be funded by an Economic
Recovery Grant for the 1996 Value Rx expansion Project.
III. PEDF PROGRAM OBJECTIVES AND CRITERIA
All activities funded through the RLF will mect at least one of the following objectives:
• Benefit to low and moderate income persons;
• Prevention or elimination of slam:: and blight;
• Alleviate urgent community development or redevelopmentneeds.
All projects funded by the RLF are intended to create or retain jobs that are taken by or available to
low and moderate income persons. At least 51% of all jobs created and/or retained will be either
taken by LMI (Low and Moderate Income) persons or considered to be available to LIvII persons.
In addition to meeting one or more of the PEDF program objectives, all loans must meet two or
more of the following criteria:
A. To provide loans for credit worthy businesses that create new jobs.
B. To provide loans for credit worthy businesses that would increase the community
tax base.
C. To assist new or existing industrial and commercial businesses to improve or
expand their operations.
D. To provide loans to be used ac a secondary source of financing that is intended to
supplement conventional financing (bank financing).
E. To provide loans in situations in which funding gap exists.
F. To provide funds for economic developmentthat could be used to assist in obtaining
other funds such as Small Business Administration loans, federal and state grants,
etc.
A. BUSINESS ELIGIBILITY
• Industrial businesses or
• Commercial businesses which enhance the community, but do not compete with an
existing commercial business within Plymouth.
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Loan Fund Guidelines, As Recommended by HRA
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B LOAN AMOUNT
• $10,000 loan per each job created, or $5,000 per every $20,000 increase in property
market valuation, or $5,000 per every $20,000 increase in personal property used for
business purposes, whichever is higher; subject to fund availability and loan fund
guidelines.
C. FINANCINGMETHOD
• COMPANION DIRECT LOAN
• PARTICIPATIONLOAN
• LOAN GUARANTEES
D. USE OF PROCEEDS
Example: Equity 20%, PEDF 30%, and bank
50%. (All such loans maybe subordinated to
the primary lender(s) if requested by the
primary lenders(s). PEDF loan is leveraged
and the lower interest rate of the PEDF
lowers the effective interest rate on the entire
project).
PEDF buys a portion of the loan. (The PEDF
is not in a subordinate position, no collateral
is required by the PEDF, and the loan
provides a lower interest rate).
PEDF guarantees a portion of the bank loan.
(Personal and real estate guarantees handled
separately).
• Real property acquisition and development.
• Real property rehabilitation(expansion or improvements).
• Machinery and equipment.
• Working capital.
• Business buyouts, only in circumstances in which such assistance is deemed by the
City as essential to retain an existing Plymouth company in the area.
E. TERMS AND CONDITIONS
• LOAN SIZE
K
Fifty percent of the remaining loan fund
balance or $15,000, which ever is greater.
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Loan Fund Guidelines, As Recommended by HRA
8/l/96
• LEVERAGE Minimum 60% of private/publicnon-PEDF
Maximum 30% public (PEDF)
Minimum 10% equity
• LOAN TERM Personal property term not to exceed life of
equipment (generally 7-10 years). Real estate
property may be amortized up to 30 years.
Balloon payment at 10 years, as appropriate.
• INTERESTRATE Fixed rate not less than the average rate of
return on funds invested by the City of
Plymouth over the 6 month period prior to
loan approval.
• LOAN FEE Minimum fee of $200, but not to exceed 1%
of the total loan project. Fees are to be
documented and no duplication of fees
between the lending institution and the
PEDF. Loan fee may be incorporated into
project cost. HRA retains the right to reduce
or waiver loan fee or portion of loan fee.
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• INTEREST LIMITATION ON
GUARANTEEDLOANS
• ASSUMABILITYOF LOAN
• BUSINESS EQUITY
REQUIREMENTS
• COLLATERAL
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No penalty for prepayment.
Subject to security and/or review by HRA.
Subject to HRA approval.
Subject to type of loan; HRA will detenrine
case by case analysis under normal lending
guidelines.
• Liens on real property in project
(mortgage deed).
• Liens on real property in business
(mortgage deed).
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Loan Fund Guidelines, As Ra ommended by HRA
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COLLATERAL, cont. Liens on real property held personally
(subject to HRA approval -homestead
exempt).
• Machinery aad equipment liens
(except equipment exempt from
bankruptcy).
• Personal and/or corporate guarantees
(requires unlimited personal
guarantees).
F. PARTICIPATING LENDINGINLOTITUTION(S)
s
Partizipating lending institution(s)shall be determined by the PEDF applicant.
• Participating lending institution(s) shall cooperate with the HRA and assist in
carrying out the policies of the PEDF as approved by the HF,A Board.
Participating lendaig institution(s) shall analyze the formal application and indicate
to the HRS`, tli,, level at which the lending institution will participate in the finance
package.
V LOAN APPLICATION AND ADMINISTRATIVE PROCEDURES
The HRA desires to make the PEDF loan application process as simple as possible. However,
certain procedures must be followed prior to the 1IRA consideration of a loan request. Information
regarding the pro,3ram and procedures for obtaining a loan are as follows:
A. HRA STAFF DUTIES:
The HRA Executive Director shall carry out PEDF operating procedures as approved by the
HRA Board on the City Council. Stats' is responsible for assisting businesses in the loan
application process, and will work closely with applicants in developing necessary
information.
B. APPLICATION PROCESS:
Applicant shall complete + preliminary loan application. Staff will review
application for consistency mih the policies set forth in the PEDF Guidelines. Staff
consideration of tate pwliminary loan application should take approximately one
week.
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Luan Fund Guidelines, As Recommended by HRA
8/1/96
2. Staff will ask applicant to contact a lending institution regarding financing needs
and indicate to applicant that further action by the HRA on the potential loan will
require indication of support from a lending institution.
3. If applicant gains initial support from lenc:ing institutions, and if the preliminary
loan application is approved, applicant is then asked to complete a formal
application. If the preliminary loan application is not approved by staff, the
applicant may request that the HRA consider approval of the preliminary
application at the next regularly scheduled meeting of the HRA Board.
4. ,f the preliminary loan application is approved, applicant shall complete a formal
application. Formal application shall include a business plan which will include its
management structure, market analysis, and financial statement. Like
documentation necessary for obtaining the bank loan associated with the proposal is
acceptable.
S. Attached with each formal application is a written release of information executed
by the Ivan applicant.
6. Staff will meet with applicant and other participating lender(s) to refine the plan for
financing die proposed enterprise.
7. Staff shall analyze the formal application and financial statements contained therein
to determine if the proposed business and finance plan is viable. Stats may, at its
discretion, accept the findings of a banking institution regarding applicant credit and
financial viability of the project. After analysis is complete, staff shall submit a
written recommendation to the HRA Board. A decision regarding the application
shall be .rade by the Board within 45 days of the submittal of a completed formal
application.
8. The HRA shall have authority to approve or deny loans; however, within 21 days of
HRA decision, the City Council may reverse a decision to approve or deny a loan if
it is determined by Council that such loan was issued or denied in violation of
PERF guidelines,
9. Prior to issuance of an approved loan, the City Attorney shall review all contracts,
legal documents, and intercreditor agreements, After such review is .-omplete, the
HRA shall issue said loan.
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Loan Fund Guidelines, As Recommended by HRA
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C. REPORTING
Staff shall submit quarterly summaries and an annual report detailing the status of the
Plymouth Economic Development Fund.
D. LOAN ADMINISTRATION
1. Staff shall service the loan, shall monitor the HRA's position with regard to
the loan, and shall assure HRA compliance with intercreditor agreement.
Up to 50% of interest portion of loan payments shall be available to offset
administration costs of this RLF program.
2. All loan documents shall include an intercreditor agreement which must
inchtde the following:
A. Definition of loan default, agreements regarding notification of default.
B. Agreements between lending institution and city regarding reproduction
of pertinent information regarding the loan.
3. All loan documentation shall include agreements between borrower and lender
regarding release of privacy regarding the status of the loan.
E. APPLICATION REQUIREMENTS
Sufficient information shall be included in a loan application for the HRA to determine that
the assistance provided to a for-profit business is actually needed to snake the project work-
and
orkand is not excessive in the amount of assistance.
In order to accomplish this determination, for-profit businesses applying to the PEDF shall
provide the following:
I. A detailed feasibility study both from a, narrative and descriptive basis as
well as financial projections for three years into the future (i.e. cash flow pro
forma, projected balance sheets and profit and loss statements, etc.).
2. A market analysis demonstrating the opportunity for the product, or
increased demand for the product an expansion of an existing business).
3. A management plats and background of key management personnel.
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Loan Fund Guidelines, As Recommended by HRA
8/1/96
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4. The number, types, and wage levels of job; to be retainer: and/or created,
including an estimate of the net increase in jobs to the State of Minnesota.
5. Estimated increases to the tax base of Plymouth.
6. Any other peripheral development which may occur as a result of the
project.
F. ADDITIONAL INFORMATION REQUIRED
The PEDF will also require information necessary to allow the hRA to make the following
determinations.
I. Whether project costs are reasonable in comparison to similar projects or
industry standards.
2. Whether pro forma projections are reasonable when compared with
historical date (if any) or with industry standards (i.e. RMA, etc.).
3. Documentatio.i of private and bank funds that are committed to project
costs.
4. Terms of any loan proceeds that are part of Project.
5. Documentation that a financing "gap" exists and financial assistance is
necessary.
6. Documentation that the rate of return is unsatisfal.tory and financial
assistance is required to improve said rate of return.
7. Demonstration that a location preference of Plymouth versus some other
community (in State or out of State) exists and financial incentives are
necessary to cause Project to remain in or locate to Plymouth.
(Note that items 5, 6, and 7, will be required to the extent they aro the basis for the request
for assistance. Further, the PEDF may waive in certain instances, some of the information
and documentation required as may, in certain instances, require additional documentation
or information for matters not covered above.)
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Loan Fund Guidelines, As Recommended by HRA
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VI: OTHER REQUIREMENTS
A. In the event the PEDF funds are used that are subject to "Program Income"
requirements, the HUD Program Income Regulations will be followed.
B. In the event PEDF Funds are used that are subject to Davis/Bacon requirements,
businesses assisted will be so informed and the HRA will be responsible to insure
that Davis -Bacon Guidelines are complied with.
C. Businesses assisted with PEDF funds must provide valid bids for construction work
to be done or equipment to be acquired in whole or in part with PEDF funds to
verify cost effectiveness.
VII. FUND GUIDELINES MODIFICATION
No substantial changes to the PEDF guidelines shall be instituted without prior approval by the
City Council.
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