Agenda - Economic Development Authority - 10/14/2010

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MEMa TQ: Mayor Boynton Champlin City Council FROM: John• W. Gox r1! Deputy City. ;' iais ator DATE: August 4, 200 RE: Water Connection Loans FULL-S>;RVICE RESTAURANTS In July„ board members discussed the: merits of establishing a finance program to reduce water connection fees for restaurants. Outlined-below is a program. that reduces fees for full-service restaurants. The Program As proposed, the City would provide low interest, deferred loans to eligible full-service restaurants for the piupose of financing their water connection fees. The maximum loan<arriount would be 80% of a restaurant's connection fee.. The loan cap insures that the restaurant will pay a minimum connection fee that is equal to or greater than a typical. business. The oan would carry an interest rate of 3%, would be recorded as a subordinated mortgage and would be forgivable if the restaurant remained in good standing with the'City for five years. In establishing the loan amount, the City would consider two factors. The factors are (1) size of the.restaurant's investment and (2) quality of the restaurant's concept. Restaurants that would not be eligible for the program would be fast food. (McDonald's, Wendys), quick delivery service (Gulvers, Pancheros) and ]imitedserVice (Buffalo Wild Wings, 5-8 Clula) restaurants. The Impact Over file next threeyears, staff estimates That the City could attract as many as five full: service restaurants. Assuming maximum loan amounts of 80%, the loan program could result in lost connection fee revenues of $200,000 over the nextthree years. A review of the City's 2002 water rate study suggests the City can. afford the;. program. Over the past tiuee years, the City has collected:an average of 265 connection unitslyear. The City's cun•entwater plansequires I35 uuitslyear to meet budgetary needs. Attached is an excerpt of-the rate study.