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HRAM 02/04/2016 CITY OF FRIDLEY HOUSING AND REDEVELOPMENT AUTHORITY COMMISSION February 4, 2016 Call to Order: Chairperson Pro Tem Gabel called the HRA Meeting to order at 7:00 p.m. Roll Call: MEMBERS PRESENT: Pat Gabel Stephen Eggert William Holm Gordon Backlund MEMBERS ABSENT: Lawrence Commers OTHERS PRESENT: Paul Bolin, HRA Assistant Executive Director Wally Wysopal, City Manager ACTION ITEMS: 1.APPROVAL OF EXPENDITURES MOTION by Commissioner Holm to approve the expenditures. Seconded by Commissioner Eggert. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON PRO TEM GABEL DECLARED THE MOTION CARRIED UNANIMOUSLY 2.APPROVAL OF JANUARY 7, 2016 MEETING MINUTES Chairperson Pro Tem Gabel “financial”. noted on page 3 is misspelled in the first paragraph MOTION by Commissioner Holm to approve the minutes as amended. Seconded by Commissioner Backlund. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON PRO TEM GABEL DECLARED THE MOTION CARRIED UNANIMOUSLY 3.APPROVAL OF COMMERCIAL LOAN PROGRAM POLICY & GUIDELINES Paul Bolin, HRA Assistant Executive Director, stated that the purpose of this program is to stimulate private investment to create new jobs, boost productivity, retain jobs, encourage expansion and rehabilitate buildings to maintain the economic viability of the City. The uses of the loans could be for machinery and equipment, building construction, land and building acquisition, renovation and modernization, signage or site improvements. Housing and Redevelopment Authority Commission Meeting of February 4, 2016 2 Mr. Bolin said that the program goals of the loan funds must help the City achieve the following goals:  Job creation or retention  Improve, diversify, stabilize Fridley economy  Stimulate other business development  Bring new income into Fridley  Assist manufacturing firms  Revitalize HRA project area  Expand exports  Expand business owned by women, veterans, minorities  Increase productivity and competiveness  Modernize & upgrade th Mr. Bolin reviewed that City Council held a public hearing on January 25 and the public th hearing was continued until February 8. City Council proposed a language change. The language is as follows: e. Any commercial loan program adopted by the Housing and Redevelopment Authority, providing a loan does not exceed $150,000. Council would like HRA to confirm loans are capped at $150,000 prior to amending the ordinance and adopting the resolution in the packet does that. The RLF General Terms are as follows: Amount: $50,000 - $150,000 – not to exceed 45% of pc Equity: Private sector – 50% ; Borrower – 5% or more Rate: Fixed; 2pts below prime (WSJ) or 4% Uses: Fixed assets Term: Generally 10 yrs for equipment; 20 yrs real estate Prevailing Wage: The HRA’s prevailing wage Resolution No.13-1997 shall not be applicable Mr. Bolin stated that the HRA Committee will evaluate the project in terms of: Project design – review of activities, time line and capacity to implement Financial feasibility – availability of funds, private involvement, financial packaging & cost effectiveness Ratio of private funds to RLF Cash flow to cover debt service Positive net worth LOC from applicant – project completion LOC from other financing sources – terms & conditions Sufficient capital Compliance with City codes and policies The HRA Finance Committee will recommend approval, denial, or request a resubmission. A recommendation will be forwarded to the HRA for final action. Mr. Bolin said that CMDC will service loans on behalf of the HRA. CMDC is responsible for routine servicing, including: Review of borrowers annual financial statements Housing and Redevelopment Authority Commission Meeting of February 4, 2016 3 Monitoring status of borrower and RLF collateral Assuring borrower makes insurance premium payments and pays all taxes when due Filing renewals and extensions of security interests Responding to requests for loan modifications Notify HRA when loan is more than 3 months past due Work with HRA to cure defaults and initiate workouts. Staff recommends approval of the resolution “Adopting a Commercial Loan Program”, including the attached Schedule A, “Policy & Guidelines”. The proposed loan program provides long term benefits through increased property values, retaining existing jobs, creating new jobs, and improving the appearance of the City’s commercial and industrial properties. th Commissioner Backlund asked on page six, schedule A if the 5 line should be bolded. Mr. Bolin replied no. Commissioner Backlund asked if the HRA Finance Committee is defined anywhere else in documentation or if is this is the first time this has come up. Mr. Bolin replied that this term is a group the Authority can define at any time; the purpose of that group is to review the loans. Chairperson Pro Tem Gabel added that the Authority has never had a subgroup of any kind in the past. Commissioner Backlund thought that if a subgroup would be used at some point in time it should be defined somewhere in the structure. Commissioner Holm said that there will be exceptions and asked what would happen if there was an excellent opportunity for a loan of $175,000 and it exceeds the maximum amount. He asked if there would be any way to pursue this loan or would the Authority just say no, we can’t accommodate that loan. Mr. Bolin replied that is a concern staff have with putting a cap on this loan program. There may be a loan request for $175,000 and at that point we could keep our share at $150,000 and they would finance the rest somewhere else. The only way to loan money above the $150,000 would be to go back to City Council to change the dollar amount exempted from prevailing wage, or to require prevailing wage on this particular loan. Chairperson Pro Tem Gabel asked if other cities had caps on their loans. Mr. Bolin stated that the Authority has the ability to loan any amount they want but the guidelines are $150,000. A decision could be made to authorize $175,000 for a project loan. The prevailing wage ordinance would kick in on a larger loan unless it went back to Council to raise the limit. Commissioner Holm asked if a loan was for purchasing new automated equipment for $175,000 where there is no wage issue if the Authority could do that. Housing and Redevelopment Authority Commission Meeting of February 4, 2016 4 Mr. Bolin replied that the state of Minnesota does keep a separate pool of money from the federal government that does have prevailing wage requirements attached to it. Those funds are in a separate pool that is used for machinery loans. Chairperson Pro Tem Gabel said that these are small business loans as they are defined; we have not discussed if the loan request would be above $150,000. Commissioner Backlund thought the Authority could approve this but in subsequent time the Authority and staff should research contingencies that fall outside of the rules and how to deal with it. Chairperson Pro Tem Gabel thought to protect the prevailing wage the wording “providing the loan doesn’t exceed $150,000” should be added. If larger loans are requested the Authority will have to look at a different program. Commissioner Eggert noted that each community is different; he asked what the experience was of larger loans. Mike Mulrooney confirmed that every community is different and some loans are $200,000- 250,000. Different sources can be brought to the table to package different financing scenarios. Some will have private financing along with local community based financing. Communities can bring requests before the Authority and ask for exceptions to the policy and that is not uncommon. Chairperson Pro Tem Gabel thought this sounded like a reasonable place to start. She noted that may, shall and should are used and thought the document should be more consistent. She asked on page 5, number 15, if “should” be changed to “shall”. Commissioner Holm thought that there may be extenuating circumstances where someone may withdraw their loan application and there should be some flexibility there. Commissioner Backlund added like if there were a tornado. Chairperson Pro Tem Gabel asked if in that situation the Authority should bear the cost. Commissioner Holm noted that it may not be the borrower’s fault that the application is being withdrawn. CommissionerEggert agreed that sometimes it could be related to circumstances. Chairperson Pro Tem Gabel noted on #1 A, “land/and” is missing the “d”. MOTION by Commissioner Backlund to approve the Commercial Loan Program Policy and Guidelines as amended. Seconded by Commissioner Eggert. Commissioner Holm asked if this would satisfy Council’s request. Housing and Redevelopment Authority Commission Meeting of February 4, 2016 5 Mr. Bolin replied yes, it spells out the maximum loan amount and the addition to the prevailing wage. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON PRO TEM GABEL DECLARED THE MOTION CARRIED UNANIMOUSLY INFORMATIONAL ITEMS 1.HOUSING PROGRAM UPDATE Paul Bolin, HRA Assistant Executive Director, reported no loans went out for January, there was one remodel advisor visit and 10 Home Energy Squad visits. 2.HOME & GARDEN SHOW REMINDER th Paul Bolin, HRA Assistant Executive Director, announced that on February 6 the Home & Garden Show will be at the NSC Sport Expo from 9:00 a.m. to 3:00 p.m. 75 vendors are booked and there will be kid’s activities and seminars. ADJOURNMENT MOTION by Commissioner Backlund to adjourn. Seconded by Commissioner Eggert. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON PRO TEM GABEL DECLARED THE MOTION CARRIED AND THE MEETING ADJOURNED AT 7:43 P.M. Respectfully Submitted, Krista Peterson Recording Secretary