Agenda - Economic Development Authority - 01/12/2017

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*10 year term,third lien, about$70,000. NOTE: staff has received conflicting information on the minimum required term for the EDA RLF. Staff has the perspective to attempt to minimize the city's loan term. There is a chance the EDA RLF will be required to match the SBA 20 year term. In that scenario,we would also need to have an exception to our EDA RLF Guidelines on maximum loan term (from 15 years to the SBA required 20). This question (RE term)will be answered if/when an actual application is brought forward(i.e. February). Funding Source: EDA RLF: about$300,000 balance. Recommendation: Attached to this case is a MEMO/recommendation from ACG/Mike Mulrooney(the City's Economic Development Consultant). Generally speaking,both staff and ACG are comfortable with this policy exception. However,we would note the items below, and importance of good credit analysis (this policy exception isn't a loan approval). On the plus side: .This amendment would allow for use of these dollars in more traditional economic development scenarios (i.e.the commonly used SBA 504 situations). This fund is not used often today. .This scenario still requires 5%owner equity--some level of owner equity is always highly recommended in any project. .This still requires strict underwriting, and a credit-worthy tenant--this is always highly recommended, and would be by staff/ACG for this loan. On the minus side: .This puts the city in a greater position of risk (lower equity means greater chance of not being paid back in the event of a default).* .The city's position would be third in SBA deals (which again,puts the city in a higher position of risk)* *NOTE: these items are not unique to this specific situation. The very essence of why the City EDA RLF exists--is to cover financing gaps that the private sector would not normally fund alone (i.e. riskier situations). The question here is shades of grey/or various levels of comfort RE risk tolerance for the City. Are we okay with 5%equity rather than 10%on SBA deals--both are generally risky levels of equity--one is more risky. Action: Motion to Recommend the City Council: Allow for an exception to the EDA RLF Guidelines,to allow for minimum equity, in the amount of 5%, for American Print&Digital. -and- Direct staff to bring back a future case to discuss updating the EDA RLF Guidelines. Process for American Print&Digital: (1) EDA consider allowing policy exception (01/12/2017) (2) City Council consider allowing policy exception(01/24/2017) (3) EDA consider application/underwriting/awarding loan (02/09/2017) (4) City Council consider application/underwriting/awarding loan (02/14/2017) Attachments EDA RLF Guidlines ACG MEMO