Agenda - Council - 12/18/2001 - Laserfiche WebLink

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I I I i I I I I '1 I I I I I I I Councilmember Hendriksen stated that the new jobs being created by Star Exhibits will be paying roughly $21.00 per hour including benefits and the City will be receiving $339,000 in taxes annually to pay back the business subsidy. He suggested that the City should think in terms of those figures when considering future projects. Case #3: Request for Sunfish Commons Revolving Loan City Administrator Norman stated that the City of Ramsey created a Revolving Loan Fund to fill the financing gap between project costs and project equity by making direct, low-interest loans for certain approved business activities within the Ramsey City limits. During the October 9, 2001 meeting, the City Council authorized the appropriation of $150,000 to the Revolving Loan Fund in order to allow an appl~tion and consideration for a direct low-interest loan. The multi- tenant retail faCility, knoWn~:~::~iil, nfish Commons, is now located on Highway #10 and to the west of Sunfish Lake B.qdl~ard. ?~? partners of Sunfish Commons requested the City consider an application for th~i:~;evolving L~ Fund. The Sunfish Commons Parmership met with the . . :,~ .... ~?~' . . . EDA dunng their reg~ar meetmgOf ©~tober 8, 2001. The EDA prowded d~rectmn to staff to further negotiate the speciacg;ij6fth~ !~an; SUch as interest rate, guarantees, terms, and payback position, prior to Council c0nsider~i~h of ~fi~matter. The EDA recommended the City Council approve the Revolving Loan A~Pii~a~i~ to Shnfish Commons if the terms of the loan are ageed to by the Partners. Economic Development Consultant':!ii~lulr~ne~!~S~i~}~' that he was asked to complete a credit analysis of the borrowers to determin~fl~'~:iS~i!~i%r repayment of the requested loan. When reviewing any loan request he recommends t~:~;i~he Ci~ pay attention to five critical factors. They include: Capacity, Capital, Collateral~i~:~md~}:;?~ Character. As it pertains to capacity, the project anticipates an effective ~s of ~i~},498 per year. The projected debt service is $262,299 per year. This yields a dgS't service?overgge ratio of 1.12. This ratio is w~thin ~ndustry norms for projects of this type. The project'appears ~iii~ave the capamty to cover the proposed debt. The capacity to repay a loan is what he consid~[~ e the most critical of all the credit analysis factors. The company has a positive cash fl~i e~bits a good probability of successful repayment of the proposed loan. As it perta *:Capital, capital invested by the owners is also an important consideration. With nothing ~ested, the borrower has nothing to lose. The borrower plans to inject a significant level of equity needed to complete the project financing and cover all project costs. The owners are proposing to invest at least $366,000 into the project or approximately 13 percent of the project costs. The project envisions a loan to value of approximately 87 percent. This level is somewhat high for a conventional loan. However, when revolving loan funds are used at the local level this amount of leverage is generally found to be acceptable. As it pertains to Collateral, adequate collateral for the loan is also important. The Ramsey Revolving Loan Fund in combination with a senior lender will normally finance 90 percent of the project cost or the appraised value whichever is less. The company is requesting financing for 87 percent of the cost of the project. As it pertains to Character, character is one of the final issues to consider. Mr. Mulrooney is familiar with many of the owners involved in this project as a result of his experience on other projects in this market City Council/November 27, 2001 Page 7 of 22 -29-