Agenda - Council - 02/14/2017 - Laserfiche WebLink

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within a $1.4 million project budget. The company has indicated to city staff that they have the ability to inject 5% equity into the project. As Ramsey's Economic Development Consultant I have been asked to provide my perspective on whether the EDA should consider this request for an exception to policy or consider amending its RLF policy to allow for 5% minimum equity injections. Policy Exceptions Ramsey's RLF loan Policy has been around for some time and has undergone many changes since it was originally written. Records indicate that no changes have been made since 2005. After reviewing the current policy I have found that it does not provide any provision for exceptions. Exceptions to loan policies are common. Even fundamentally sound credits may need policy exceptions from time to time as such credits may not always conform to all aspects of a loan policy. There may be mitigating circumstances that would justify the loan's approval. Ideally the loan policy should establish processes and procedures for presenting nonconforming or exception loan requests received from creditworthy borrowers. Having the ability to approve exceptions for solid credits would give the EDA the ability to approve a loan request or propose an alternative structure. Keep in mind that frequent approval of policy exceptions may indicate a loosening of credit underwriting criteria and/or a policy that is too restrictive. The underlying reasons behind frequently granted exceptions should be assessed and appropriate actions should be taken to ensure the policy is appropriately conveying the risk profile desired by the EDA and City Council. In short, the EDA and/or City Council may want to consider amending the Ramsey RLF Policy to establish review and approval procedures for exception loans, including loans with loan -to -value percentages in excess of desired limits. The American Print & Digital Request The type of request that American Print & Digital is making is not unusual. It is common for gap financing programs offered by cities involved in economic development to assist with increasing leverage beyond what other financing tools may provide. It is equally common and wise to require some level of equity on the part of any borrower to insure that risk is shared between all parties including the borrower as well as the lender. The art of economic development lending involves designing a plan that accomplishes the goals of the city while at the same time minimizing the risk. 2