--------- Good morning. It is 8:00 a.m. on Tuesday, February 10th, 2026. I call the Economic Development Authority meeting of New Alm to order. Item number one is the roll call. We do have a quorum present. Item two is the approval of minutes.
>> I'll make a motion to approve the administrative uh EDA January 13, 2026 minutes. >> Second. >> We have a motion and a second. Any further discussion? All in favor say I. >> I. Opposed. Motion carries. Item number
3.1 is the administrative activities for January 2026. >> Good morning, Madame President, commissioners. um you have the report before you in your packet. Um I'll just highlight a couple things. Um notably under the public housing program, we are
currently preparing for a HUD inspection um that has been scheduled for next Wednesday, February 18th. Um it's been four years since we've had a HUD inspector come through our property. So we are um working very hard and preparing for that and hoping for a good
score. Um, and then I'll just note under the home buyer assistance loan program, one application was received in January and under the multifamily rental rehab loan program, we have received three applications. And so that pro that
program will be out of funds for the year if all three of those loans um move forward successfully. End of report. Being there's no questions. I'll motion to accept the econ economic development authority administrative activities for
the month of January 2026. >> I'll second that. >> A motion and a second. Any further discussion? All in favor say I. >> I. >> I. >> Opposed. Motion carries. Item 4.1 approve moving units into vacant HUD approved undergoing mon undergoing
modernization. All right, Madame President, commissioners, um this isn't something we do often. Um this is my second time bringing this request before the board. Um we recently had one of our scattered site um family
units vacated by a family. It's one of our single family homes. Um and there's going to be a lot of work um to get that in the condition it needs to be in to rent to a new tenant. So, because of the time it's going to
take us to prepare the unit, we are requesting to move it into a status called a vacant HUD approved undergoing modernization. Um, the HUD field office is in support of this request because the vacant units count against our public housing
assessment system or our FA score. Um part of that score is to have above 98% occupancy and having a unit vacant for you know 2 or 3 months um really can hurt that score. So um that's why we're
making the request. Um and part of uh approval for that is receiving um board approval. Um if approved, HUD would make the change effective back to the date the unit was vacated, which was February 1st. The unit would remain in this status until the necessary rehab has
been completed and the unit can be reoccupied by a new tenant. We do have another family lined up to move into the unit when it's ready, which is expected to be honor before May 1st. I'm hoping it'll be ready sometime during the month of April. I I think April 1st is a
little bit um too optimistic, but uh May 1st at the latest. I'll make a motion to approve moving unit into vacant HUD approved undergoing modernization for the scattered site family unit located at 1509 North
Minnesota Street effective February 1, 2026. I'll second that. We have a motion and a second. Any further discussion or questions for Heather? >> Um, I'm just curious if there's significant modernization that needs to take place or,
>> you know, it's kind of a misleading title. That's just what it's called. What um >> the situation is is the lease was terminated for repeated lease violations. The family's vacated, but they left behind
a lot of belongings. >> Okay. I mean, every room in the house is full of belongings. Full full. And um we have to legally store their belongings for 28 days by state law. So,
for the entire month of February, we can't even start the rehab. So, um that's why it's going to take such an extended amount of time. >> Okay. And then from there, we're assuming it's going to be just kind of some clean up and prep. >> It'll just be basic turnover. um getting
the house emptied, painting the entire house, cleaning the entire house. It's just going to take an extensive amount of time. >> And forgive me that I don't know the answer to this question, but who is responsible for removing all of the items and preparing the house?
>> For cleanouts like this, we use the picker uppers typically. Um junk removal. All of the charges will get charged back to the tenant family. um if they don't pay it, obviously their security deposit isn't going to be adequate to cover this. So, they'll be
sent a bill. If they don't um pay it or make arrangements to make payments on it, then we enter them into revenue recapture and we're able to get any um state tax returns or lottery winnings or anything like that. >> Okay. Fantastic. All right. That's gives
me comfort. Thank you. >> And we have six years in revenue recapture to try and collect the debt. To date, we've always been successful in getting completely paid back through revenue recapture. Um, I have some people in there now that I I don't know
if we'll get paid because they've moved out of state and once they're out of state, we >> lose the ability to get, you know, they're not filing Minnesota taxes. So, unless they move back, >> okay, >> to Minnesota, we may not. >> But we try.
>> Thank you very much, Heather. I have no other questions. I have a motion and a second. Are there any further discussion or questions? All in favor say I. I. >> I. Opposed. Motion carries. Item 4.2 is
the EDA February 10th, 2026 claims list. I looked it over and did the checks. I have no questions. So, I will make a motion to accept the EDA February 10th, 2026 claims list. >> Second. >> We have a motion and a second. Any further discussion? All in favor say I.
>> I. >> I. Opposed. Motion carries. Item 5.1 is the EDA 2025 annual report. >> All right. Uh Madame President, commissioners, um you have the report. Why can't I open this on the computer?
in the packet. Um, as well as everyone was um, given a paper copy of the report. Um, and Clay, there is one on the back table if you want one. Um, I can't open the link on the computer for some reason, so I'm glad I have the paper version. I'll just um, quickly go
through um, uh, we put in there some progress that's been made on housing um, in the community. As you know, housing is a great need for our community and we do have several projects now that have either already broke ground or plan to
do so in the spring when the ground um thaws that they're able to um do their dirt work. Um, under business attraction, um, progress made in 2025,
um, five small business incentive grants were awarded to new businesses. Four of the five are still open today, which is an 80% success rate. Um, we recognized 10 new businesses that opened um, in Newm last year.
business retention um progress last year. We continue to offer the annual child care provider training and appreciation event where providers um can get 12 hours of free um training. Um
family providers need 16 hours of training every year and so they're able to get almost all of their training done in one weekend at no cost to them. We partner with um the Southern Minnesota Initiative Initiative Foundation or Smith to sponsor that program. Um Smith
pays for the trainers and the catered meal and then the EDA um investment is mainly staff time to plan the event and um some in incidental expenses. Um let's see. The mayor and I also started
a new initiative to recognize businesses that are continuing to invest in the community with significant remodel projects. So, we visited um four um trying to remember what they all were. Alina Medical Center did a major remodel
of their surgical area. Um >> it all runs together. you remember uh Oak Hills Nursing Home is doing a major remodel um and modernization. Um Walmart did a major remodel. We visited out there and then the Chevy dealer uh uh
Wheelberg Chevrolet. Um and those were all multi-million dollar um investments in the community. So, um, we wanted to make sure we appreciate not only our new businesses, but also our long-term businesses that are continuing to invest
in new. Um, under workforce development, um, we continue to operate Westridge Place, renting space to child care providers who um, need space outside of their home to operate and um, offer child care to
our community. Um, as well as we continue to work with the CTE center. The mayor and I are currently on their um what are we calling it now? The development committee. Um and we are working on
um raising funds so that they can hire a coordinator um to continue to improve the CTE center for our high school students. Um the commercial commercial property rehabilitation loan program. Three loans
were granted in 2025 with a total of $88,000. Um, small business limited loans, three loans were awarded totaling $30,000. Um, as I mentioned prior, um, five small business grants were awarded in 2025.
Since that program started in 2019, we have a 79% success rate where 79% of businesses who received that grant since 2019 are still open today. A total of 48 grants have been awarded. Um 38 of those businesses
are still open and five of those businesses um since opening have expanded into a larger space. Under the home buyer assistance loan program, seven loans were awarded in 2025 totaling just over $65,000.
Um the getit ready single family rehabilitation loan, those are home improvement loans for homeowners. Um, five loans were awarded totaling just over $145,000. The multifamily rental rehab loan
program, um, that's for landlords that have rental properties, um, that need rehab. Uh, four loans were awarded totaling $150,000. And then some miscellaneous funding. Um, we pay Wendy Anderson to offer free business consulting for our local
businesses. her annual contract last year um totaled just under $40,000 um as well as a donation to New Brick in the amount of $50,000 um for their operation expenses.
Um and then I added into the annual report this year um I've been tracking our economic development website um activity and in 2025 we had um about 37 thou 3,700
unique website visits. Um so people are um finding that website and um seeing uh you know what the EDA offers, the incentives we have available and information about New Alm. And then we also have created a Facebook
page for the new Alm EDA and we have gained um 326 followers so far. Um and then um wrapping up the total community investment in 2025 was um just under
$618,000 um from the EDA. So um the EDA does invest a significant amount of money into the community every year and the annual report just highlights that for people who are curious about the different things that we do.
And I'm happy to take any questions if there are any. >> I have a question on the housing progress. Do we have like move in ready dates for when these different places will be completed and have people coming in?
>> Only one I have heard is Highland Apartments. That's the keepers project. Um that that's the one going up between the kids excel center and the public high school. Um I have heard that they are um targeting to start leasing in July. >> Okay.
>> They are moving rapidly. >> So um that's the only one that I have heard. Okay. >> So far >> I will make a motion to receive and order file the Economic Development Authority 2025 annual report. Second.
>> We have a motion and a second. Any further discussion or questions. >> Thank you to Heather for preparing that and all the work that she puts in. So, all in favor say I. >> I. >> Opposed? Motion carries. Again, thank
you very much for that report. Item 6.1, economic development activity report. I don't know why I can't open my link, so I'm gonna have to >> slow, but mine just opened. >> Borrow off the mayor's screen or some hers isn't opening either.
>> Oh, thank you. Lindsay's got hers up. Um, I'll just um run through this really quick. Um the new home partnership had a discussion um in at our January meeting on the there's a lot for sale right now by
the owner in the what you would call the grid of New Alm. Um so John Nisley put some information together on what it would cost to purchase that lot and put on a a starter home. Um you know and is that
affordable? Is that something maybe the partnership would want to try to accomplish? It it was just a discussion. No plans were made to move forward, but um good information and we'll see if anything happens on that front. Um the
child care team um we're continuing to finalize the annual training session. Um we just sent the flyer out to providers yesterday um so they could start registering for sessions. And I I get emails every time someone registers and
I think I've had about 10 already um register. We usually have approximately 50 providers attend that event every year. Um we offer it to all Brown County providers. Um so it's not just new, but um but we we usually get a good turnout.
They really enjoy that event and they really appreciate that we offer that for them. Um so that's moving along. um the small business incentive grant program. We have opened the application window. We'll continue to take applications through the end of March.
To date, I have received six uh applications. And then um I just wanted to note I think I mentioned last month that we were planning coordinated vis coordinated visits which is something new this year. Um Chris and I try to go
out to the large employers every year at the beginning of the year to touch base with them. And this year we invited along um Sarah Wara, chamber president and Steve Brown, executive director of Newick and did it as a coordinated
visit. We usually all do separate visits. And as you know the um executive directors that are large employers are very busy people. They really appreciated the coord coordinated visit where for them it was a one-stop shop to meet with all of us in one meeting. Um,
so those meetings went very well. We met with 3M, Craft Hinds, MVTL, and Alina. And I would say the state of all four organizations we met with, at least in their new locations, was strong. Um, everything's going well. They don't have
a lot of job openings. They're able to find the employees they need. um sales are strong. They really had no major concerns to report. So, um it was good meetings with all of them and um glad to hear they're all doing well because they
are the largest employers we have in our community. So, end of report. All right. I'll make a motion to accept the economic development activity report for January 2026 activities. >> Second. >> We have a motion and a second. Any
further discussion? >> I appreciate hearing that the partnership is moving along and more coordinated and working together. That was one of the uh recommendations in our EDA strategic plan was to do more collaboration. And so we are starting
the year off strong with um those coordinated visits to the major employers. And then in addition to that, we we as a group have um set a goal to meet with 150 businesses this year, splitting them up. Um we each agreed to
meet with 50. And so I've distributed the lists to um Sarah and to Steve and a list to myself of of the businesses we are tasked with meeting with. And then it's up to each individual to set those up and and get the visits completed and
get the information entered into our um software that we use to track those visits. And so we're just um now getting started on on scheduling those throughout the year. >> Great. Any further discussion or questions? All
in favor say I. I. I. Opposed. Motion carries. There being no further items on the agenda, this meeting is adjourned. We will meet again in a few minutes to start the work session. Yeah. Part: 2
I just jumped in. That's fine. Good morning. We are at the work session on and I forgot my date in front of me that I usually have um February 10th, 2026.
and I call the work session of the economic development authority of new alm to order and we are here to discuss two of our programs. All right, madame president, commissioners, um like I said, we're going to start with the review of the
EDA's commercial property rehab loan program. Um, this program's been around for several decades and um, I've invited community development director Schnebrook here to give us some history on this program.
>> Okay. Thank you. Good morning. Um, my name is Dave Schnowbrook. I serve as a community development director. Uh back in um June of 1977, I joined the city as the planning
housing assistant. And so half of my job was associated with planning, the other half was with housing. Our housing program at that time was 50 certificates and from that
uh the program grew. Anyway, in 1979, uh, the city again applied for a grant through the small cities development program that was federal money.
Um, and at that time we uh dealt with the HUD office in um, Twin Cities, which is probably the same office that Heather currently deals with. Uh the program has since been taken over
by the state of Minnesota deed. So that's who you would work with if u we were involved with the program today. And the program still exists. Um the city had made several prior
attempts to secure funding through this program and was unsuccessful. Um this time we were successful. uh we applied for what is called a comprehensive grant which meant that we um could uh finance multiple activities
and we also um had uh multiple years in which to expend that money. So in 1979 um the activities that uh we identified
uh that we wanted to finance were the construction of a senior center activity or a senior citizen activity center. So that's the building that's currently located on um North German Street. We
wanted to give assessment grants for the sewer separation project. At one time, the city of New Alm had a combined sanitary sewer storm sewer system that served
our downtown area as well as the periphery of the downtown. So, we had residential units that were part of the area as well as the core of the downtown. uh we were going to make a contribution
to the cost of that um improvement or that separation. We acquired the site for the Broadway house and finally we did housing
rehabilitation. Now the housing rehabilitation that we did we strictly used our own money for that. um over a 2-year time period, it totaled $115,000. And so in
October of 1981, we made our first loan. Uh we expended all of that money in a fairly quick t period of time. I I
should note that again we had a project area and that was the uh this um sewer separation project area. So it was limited to certain residences, certain
property owners. Um we um then in 83 um we transferred then I had to go and look at our records
and I hope this is accurate. we transferred $190,000 um into this particular program because of the amount of interest that we um had um at the time.
Um I should note that all of this money that we received was went to the city of Newm. City of New basically transferred the responsibility for the administration of the programs
um to what was then the new Alm Housing and Redevelopment Authority. Housing and Redevelopment Authority became the EDA in 94 I believe >> somewhere around there. Yeah. Um so
we um initially you know kind of focused on project area um and residential units within that area. Um and we kind of reached a point where we had um kind of saturated um that
particular um uh use and we in 80 let's see 84 uh or from 84 to 85 we had a um still a residential um rehab blown program.
From 86 to 91, we had a commercial residential loan program. At some point time in there, we expanded the program to include properties throughout the entire city. We didn't
think it was appropriate just to focus on the on the downtown area. And then from 91 to 2007, we turned it into the commercial property rehab loan program. And I believe that's where
you're still still at. >> Um, and so during that uh time, um, you know, I we've got a list of all of the loans that u that we've made. Um, and
you know, I don't we at some point in time, maybe 5 to 10 years ago, we were at 120 loans. I'm sure obviously it has increased uh since then.
Um, it was the loan repayments that built the balance um in the fund. Um we did have periods of time when we had limited interest in the program and so
we would adjust um terms and interest rates and activities to try to generate interest. We worked with the Chamber of Commerce to make the program um um you
know available or let people know about it. Um and um so it it um it hasn't stayed as a static
um program but has changed I guess basically to meet what we thought the demand was with within the community. Um, when we first started off, >> Dave, can I just jump in? Um, I just
pulled up our report from our meeting this month. Um, we have issued a total of 165 loans to date and there are currently 38 active loans. >> Yeah. When we when we first started off,
the very first program was um one that was based on the premise that if you stayed in your residence for 5 years, your loan was forgiven. If you stayed for four years,
you had to pay back 20%. If you stayed for three years, you had to pay back 40%. So, it was a graduated um schedule. The idea was that we didn't want people applying for the U program, being
successful, rehabbing a building, and then promptly putting it up for sale. That wasn't the purpose of the program. It was for uh to benefit the people that u that live there.
So that's kind of a capsule statement of um where we started from and um how it has um evolved um over time.
Be happy to um answer any questions if I can remember a good answer. Thank you. >> Any questions for Mr. Schnob? >> Thank you for your report. >> Okay. >> And diving into history.
>> Yes. >> For those of you who who don't know Dave, he is our historian. he he knows where to find all the history on all things city. Um,
I sent this uh the program guidelines out to you to review ahead of this meeting. Um, I also did uh I met with Dave um and John Nisley, city planner last week to get their input on the
program. And um we um have a few I wouldn't call them recommendations, but um topics of discussion, I'll call them um for today. But um I don't know if you want me to start with those or if you want to start with your You want me to
start with ours? Okay. So, um, one, um, note I made on this program is historically, um, since it started up until about maybe 5 years ago, we required there to be lender involvement, um, in order to get this loan. Um, you
had if you had a project, we'll just say for the sake of discussion, a $100,000 remodel project, you would borrow half of that from a lender, a local lender here in town, and you could borrow the other half from the
EDA. About 5 years ago, we changed the requirement that there didn't need to be a lender involved. you could self-fund half the project if you had the ability to do so and you could um still borrow half of the project costs from the EDA
up to our limit of $75,000. Um we had a discussion about potentially going back to requiring lender involvement and there's two reasons for that. One, they're vetted by a bank. They're considered to be a good credit risk. if the bank is willing to lend
them money, we feel safer, you know, in turn lending EDA funds. And then the second um thought I had on that is um to potentially make this a program that um is for gap financing only. So, if the
lender um can't borrow them the full amount of the project, you know, for whatever reason, and there's a gap that the lender would then refer them to the EDA um for gap funding,
that would be a change to the program. Um it's just something I'm throwing out there for discussion. I'm not saying that's what we should do. I just um it's a thought I had. That's the way the Brown County Economic Development Partners run their loan program from
what I understand. Um, you know, lenders will will say, you know, this person needs to borrow a little more money than we're willing to borrow them, so there's a gap. Can you lend them the rest? Um, so,
um, just throwing that out there. Um, if we're not going to go back to requiring bank involvement, then I would like the EDA board to set a minimum credit score. um that I would go by for loan approval. Right now, we don't have that. So, I have to decide if their credit score is
good enough um for us to make the loan. And I would feel more comfortable if there was a set criteria that I would go by. Um and then um right now, loans over $50,000 need to come to the board for approval. Um so, like I said, they can
borrow up to $75,000. I don't know I don't know why. um that was put into place about 10 years ago when we raised the amount from 50,000 to 75,000. Someone on the board felt like that's a lot of money that should have board
approval. I would like to consider removing that requirement because if the applicant meets all of the loan criteria, on what grounds would the board deny their loan anyway? And and it's never happened. I've I've brought it before the board. You know, they've
all been approved. it just just an extra step where they're having to wait until the next board meeting or we're having to call a special meeting. I I just don't see the point in it because if they qualify for the loan, why why would we deny it at a board meeting anyway? Um
and then um in the EDA strategic plan on page 57 in regard to this program, they wanted us to um consider adjusting the interest rate. It's currently at 2% for these loans. Um, do we want to consider
changing that to um what current interest rates are or do we want to leave it? Again, I don't I'm not saying we should change it. They just wanted us to have a discussion on it. And um you
know, Mike might have some input on that or Nicole um as far as what do we earn if the money is sitting in the bank versus what we earn for money that's out on the street and alone. um is that something we want to look at or do we want to leave it at 2%. So those were
the items I had for discussion. Um >> okay let's let's take those kind of one by one. The first one requiring involvement or sorry um that we have to have the bank involved as well. I did see when I was reviewing the documents
that you could self-fund the half and I had the same question. A bank is really good at vetting and underwriting and it's much more than just a credit score. I would be I would be okay with saying we need to have the bank do the other half of the financing just so that we
have more ability to understand what the what they're my words are not my friend today. Um just so that it's just an extra layer of pres preserving our money.
>> Is anybody self-funded? Um, we've had a few and I have to say we haven't had any issues with them. Um, whereas we do have a loan currently that was vetted by a bank that is in default and we are in court proceedings at at the moment to try to get a settlement on
that loan. So, it's not a 100% catchall that they're going to be creditw worthy um just because they've been vetted by a bank. And over the course of the years, there's been a few um loans that have defaulted and and the ones that are
longer ago before my time, those would have been vetted by a bank. So, it doesn't mean they won't default. Just throwing that out there. >> Go ahead, M. >> So, if the program I don't know if the program is intended to be a gap or not,
um to me, if you're self-funding, you probably don't need the gap, >> you know. So that's the other part you got to look at. Is this is this >> for anybody to rehab or is it for people that need the help to rehab? >> Because I would guess if you can selfund you can probably get the other half of the >> Yeah. Right now it's not meant as a gap.
Um would we want to consider going to that? And I'm not saying we should. I just >> wanted to see what the board's wishes were on that. Um I think in regards to requiring the
self-funding like I know that um we have an active um rehab loan uh commercial rehab loan that we self-funded um like 5 years ago. >> Are you talking Yeah. So we did some we had a kind of an emergency with some
brick and a tree growing out of the side of the building and so we self-funded. Um, I don't think that we as an EDA should put all of our eggs in relying on the banks to do the vetting for us for two reasons. Um, number one, the banks
and the credit unions, they're going to be looking out for their own risk, they're not looking out for the additional risk for us. um while it's a good thing to go on, you know, having them lend what they'll lend and then they can come to us for the rest and we
service kind of that gap like that puts a lot of risk on us even though it's you know we offer a lower interest rate. Um, so I would be I would I would say if somebody wants to self-fund a portion of that, but they need help coming up with
the rest and they're looking for something that they can do with a lower interest rate. They're going to be rehabbing a building um and investing, you know, I guess in their own business and the community, you know, I think I think we need to look and I've been seeing this for a long time. We need to look at how to assess our risk here. Um
so whether that's using like business credit reports or personal guarantees or a combination of both like if we are lending the money and we are the lender um we need to be assessing our own risk. And then just going back to um
um over the 50. Well, we'll get to that later, but but I do think that um we need to be careful about saying, "Well, let the banks lend them what they're comfortable to and then we'll kind of take on the risk of the risk and if the bank vetted them for this amount, they're probably good for the rest." You
know, that that is to me is not a good formula. And like I'm I'm very big on kind of risk assessments and that kind of stuff. So, I don't know, Mike, if you have anything to add to that. >> I It comes down to what's the program's intention. >> That's what the we need to decide.
>> Um, I could go either way on that. Um, >> are we professionals? Are we the bankers? >> You know, that's >> Well, that's a good place to start. What is the intention of the program? >> You know, when we get to the 5075, my only comment on that would be is what fiscal responsibility do we have as a
board? >> We're not making that decision. going to come back to us. >> Yeah. I mean, for all of our other programs, the EDA has set guidelines and criteria and they've left it up to staff to administer the loans. This is the
only program that if it's over that dollar amount, I have to bring it to the board. >> And I wouldn't bring it to the board if they didn't meet all the criteria for the program. So again, on what grounds would the board deny the loan at that point? You know, looking at the strategic plan
and what our planners wrote, they did write that it works addresses the capital for expansion by filling gaps with the lower interest rate and flexible >> terms. So, that seems to be their recommendation. Not that we have to follow their recommendation. We have to
do what's best for New Alm and what we know. But I do like that idea of filling gaps so that people who can do it on their own, they don't just rely on here's easy funding, but that we preserve that capital for truly in need businesses who
might not otherwise be able to expand or create a business here in New. And getting back to what Heather said, I think when you asked what on what grounds would you deny it, maybe kind of on the basis line of when we were doing
our $10,000 grants, do we need more daycarees versus um hair salons? That would probably be the only basis you would deny something. I mean, >> but then that would be have to be in the criterion before it ever got >> to this level. So that staff could vet
it according to what we say are the priorities of those. >> Yeah. So then there would probably be no need to bring it to the board. I agree >> if it's already meeting >> unless we change something. >> So >> did we jump from one subject to another?
>> We did. So, can I go back for a second to um can we use the example that you're dealing with right now with um a loan that went into default that also had you said a bank match, correct?
>> Well, and or a bank lender and the EDA. >> That's not one of these loans. That's just a loan, a loan the EDA has that's in default that was hypothetically loan >> the there's a bank lender and the EDA
and it's a match. The bank has first position. >> So the loan goes into default and now you're in court proceedings. You're trying to recoup. The bank is always going to be first. So in that scenario,
what what are the possible outcomes for the EDA? Is it even at what point are you confident that you're going to recoup anything? >> That's a depend on the loan and what
they put up for collateral. I mean, we could get a tractor and then have to sell a tractor and whatever that's worth at that point. Um, so it really depends. Um, you know, we try and do, you know, real estate mortgage, but we're always going to be second, third position
depending on what type of loans are on there. Um, you know, if it's for equipment, you know, collateral on that. Um, so nothing's guaranteed, at least on the EDA side, cuz we're always going to be in second position to everyone else. So then that maybe makes more sense to
be a gap funer knowing that there's at least going to be a little less risk or less loss >> should someone go into default. We're not matching the bank. We're we're financing a gap where and I mean any
time I've worked with the bank, they've also required at least some form of uh capital investment from myself too. So you have some skin in the game. So when you go through those channels, then
this would help someone who's I'm close but I'm not quite there. I need an extra 30,000 to make this whole project work. Um, on the opposite coin of that opposite side of the coin, um, if you're looking through the lens of the
borrower, this program definitely, if it's a match, is going to set you up for greater success when it comes to cash flowing your business because your interest rates are not fantastic. And this is a great way to save money. So,
is the intent to protect our own funds, which needs to be present to some level, of course, or is the intent to set the borrower up for the greatest amount of success um in terms of cash flowing a brand new business? Cuz if this is a
commercial program, it involves business, too. >> So, there's two sides to that. >> I would. >> So, this does not look like a match. were no >> funding 50% of the loan amount. >> It's up to 50%. So, uh or up to 75,000
um 50% whatever is >> But I'm guessing most people most borrowers are going to do the 50% to get the savings >> right the interest rate. So, yes, it's up to but >> even a bank is going to say, "Well,
let's match that and save you some money." And I would say, you know, my economic development brain um is always going to heir towards your second point. The whole point is to get people to rehab their building and whether they have money in the bank and we're, you
know, or money on hand and we're the other half of that to help them get there. um you know specifically with the cost of construction every you know the cost of you know property tax going up the values of their building um everything is being compounded and for
them to rehab their building is always going to be kind of bottom of the barrel if this gets people to rehab a downtown that is aging I mean walk in between Lola's and that building I mean I'm surprised that building hasn't fallen down yet at this point but that's kind
of what that money um is there for so people can take advantage of it because of the lower interest rate but again you know whether it's GAP or we still keep it the same I mean really up for this board to decide but um I'm always going to heir towards yes let's get the money
out there for the people that want to rehab their buildings >> so are you saying it's more of an incentive >> for people that could maybe do it financially but aren't going to but now they see an incentive with a lower percentage loan >> so then it wouldn't be gap as much as it
would be an incentive. >> Yeah. >> I just want to maybe offer a comment that um I was associated with the program probably through 2007208.
Tom McCaulay who was the administrative assistant assistant city manager at that time had primary responsibility for the program. Um, we always worked with the bank. Um,
uh, primarily because none of us had that type of experience on the staff to be able to make those kind of decisions. Um but we did have the discussion of um if someone wanted to bring in their own
uh funding to pay for their portion that that would be um acceptable. We never quite went that far. Uh the example that um sometimes would be brought up is that someone could um
uh take out a loan from a bank and the next day could after they closed on the loan, the next day they could walk into the bank and pay the whole thing off. >> It's true. you know, um we um
we also uh did not have a lot of defaults. Matter of fact, I have difficulty remembering more than one or two in that entire time period. So, we always had um
um good um good applicants uh and they paid their loans off. Um I do remember we did have one in which our collateral was a car.
So um you know you do have those kind of situations. Um, one other thing I wanted to follow up on I thought was a little bit of discussion about and that was this program originally kind of focused on the downtown area
and um when I look at the downtown area and Mr. Christian can speak much uh better to this issue that than I can. Um there's
there's the need for some help in that area. If we want to maintain, you know, historic structures, um we're going to have to come up with some way of doing, >> you know, comment. I'm going to follow
that with Dave. Dave, was it what 15 years ago? We got all that money for downtown renovation. Believe it or not, we gave some of the money back. >> There wasn't a lot of interest from our downtown owners to fix their buildings.
>> We were shocked that >> we had some take advantage of it, >> others basic free money, Dave. Right. >> Do we know why that is? It was a it was a combination of um there there was some loan there was a
part they were they had to put in their own equity and then there was ours >> right >> I mean we gave money back there was no interest so listening's comments here I want to go back to what's the purpose of the EDA on this program right >> I realize you're worried about
>> lending institution are we a banking facility technically yes technically no do take the gamble. I believe we should. It's economic development. I mean, >> are we going to lose once in a while? As Dave stated, we've had defaults. So have
banks, right, Mr. Lee? >> Absolutely. >> Listen. >> Yeah. >> In my mind, you know, we're trying to rewrite a program that has worked for the last 25 years. >> Mhm. >> I get the gap. I get all of that. But
>> I'd agree with that that the purpose of this would be to set people up for the greatest amount of success. And >> in my mind, those coming in that want to tackle a program are interested. I won't
name the buildings downtown. They had no interest at all. Buildings are falling down. They took no interest at all in the program. So, I mean, if if they're coming to the EDA or to the bank, they're serious about, I want to rehab. I want to try this.
>> Things go bad in today's economy. Sure they do. >> And some of those downtown buildings are finally starting to change hands and the new owners are wanting to rehab them. So, yeah, there's been um more downtown rehab in recent years, which is great
and it's what we want. So, um, so do we have a consensus on the first point of going back to requiring lender involvement? Um, >> excuse me. >> What way we want to go on that point?
>> I think Dave said it perfectly. You can force them to use a lender, but if they have the money, they can go in and they can pay off that loan the next day. And if they have, say, I'm just using the example like, okay, I have $10,000 and I need to put new windows in my building
um because one of them was broken or whatever. I have the money. I want to go get a lowinterest loan from the EDA for the other half. Why should I be punished and and be told you have to go through the hoops? We want to make this easy. The intention of the program is an open to the public opportunity for commercial
businesses to improve property, make repairs, and maintain their facilities. So, are we are we in a position to put roadblocks in front of people or do we want people to be able to come and and understand that these programs are here and incentivize them and encourage them
to make these repairs when they otherwise might not. And again, if we are lending the money like it or not, we need to assess our risk. Period. um we can't rely >> that you think banks are bad and our
interest rates are horrible. just you know point no you're saying you're coming in saying that putting them all through these hoops I >> our background mine is >> the EDA's background is not as a lender correct >> per se >> correct but if we are going to lend we
need to assess our risk I'm not saying don't go to the banks they're there for a purpose but if somebody has their own and they're coming to us to help we don't want to turn that away >> I have no problem with the self-unding pardon no problem with it >> the only uh issue I have with the
self-unding part is is that the is that the uh target the the people we're going for because we if they can do that and they don't need this then that's going somewhere where somebody who actually
does need more help does not have access to a program. Um, and that person might own a building and and want to do this work but can't because someone else came in who could potentially fund the whole thing themselves but are taking
advantage of this program. And that's where bank involvement and partnering with I mean banks are businesses. We're and collaborating and partnering is important on all those fronts. I think that having the bank involvement might
help us get to the kind of client that has more of a need for this type of program but is still not a huge risk. And the nice thing with the commercial program is even if you know
the banks got the lean on the building, well at least there's a building involved rather than you know the um some of the business only loans where you're looking at splitting up collateral based on equipment. That's not going to get you very far when a
bank's first and you're second. Here someone defaults. you have a building to work with versus a tractor, >> right? This program does require a mortgage on the property and we are behind the bank. The, you know, if the
bank also has a or if there's also a mortgage with the bank, we are behind the bank. Some of the properties that get this loan don't have a mortgage. For example, the chamber um took a small commercial rehab loan. Um they own their building outright, so there is no first
mortgage. So, we aren't behind a mortgage lender in that case, but that's >> they selfunded though. They would have selfund They would have had to have. >> Um, yes. Yes. >> I agree with Dave. I think the programs
work fine and I've used it in the past. I don't have a problem with the program. >> Um, the only issue I've had come up in the past and I don't know if they still do it. At one point I had we had to do a modification. Dave was involved then and it had to go to city council for approval at that point. Was that this
program? Um and I just knew that that there was a something that had to go and it was probably 10 years ago and I know my >> was that maybe a city revolving. >> Okay. >> That was the one where like well then I don't want to do it because it's
>> Yeah. Yeah. It's one of those things. Okay. Probably a different program then. >> Yeah. This program is all EDA, no city council approval for any of this. Um, if you do want to go still kind of status quo where they can selfund or use a bank, um, then I know Heather was asking
to set a minimum credit score. Um, so we can just have that in the >> okay >> in the eligibility guidelines >> to the for a bank. I mean, what do they use for that?
bad, ugly, I don't know. >> I can tell somebody how to manipulate that number to tell you what it's different one month from the next. >> Um I don't like I mean I've worked at places where literally whatever the credit score is, it's a yes or a no. >> Um I don't like that cuz you need to dive into it. >> What caused it?
>> Why? If it's low, why? You know, if it's high, it's >> I've seen people with 50,000 in credit card debt have a great credit score because they make their payment on time. They probably don't cash flow, but they make their payment on time. So, you you got to dive into it. >> That's why I don't like I mean, we could
set a minimum, but I think you need to look at it. Um, what if somebody missed a medical bill payment and all they have a collection item? It doesn't mean But every other payment's been made on time forever. >> That one miss is going to >> destroy their credit score. I think you have to look at it.
>> And again, that's I'm not a lender by trade, you know. So, >> so that's where I have a hard time. >> You want to leave it up to me to dig into their credit report and decide if they're creditw worthy or do you want to set some sort of criteria that I go by? I >> It's a lot to put on me to make the
decision when I'm not a lender. >> Um, >> and this would be just for the self-unding ones, right? >> Yeah. Just the self-unding ones. Yeah. >> So then I, you know, then we could pick something. And >> should there be self-funding opt an option for self-unding
or should it require a bank match? >> Yeah, I mean that that's the first question you have to decide. >> It doesn't now and I think it's working >> because I think what we've only had three or four out of all the loans that have been self-funded at this point. >> I don't know. >> How do you track that they put their
money into it? Just receipts and checks. I mean is that how you do it? Um, my only thing is >> they're having >> do they have to put their money in first? I mean, how do you >> send me quotes for the project that they want to do and we can borrow half of that? If they're not going to a bank for
the other half, you're assuming they're, you know, I don't make them prove that they're paying for their half, but I think it should require a bank match. If you can self-fund, then
you probably don't have as much of a need for this type of program. And it takes some it takes away extra work for Heather, extra vetting, trying to figure out criteria, trying to analyze credit scores. Selfishly, that's
the reason I would like to go back to having a bank involved because the bank is then doing that vetting. And if the bank is saying we're willing to fund half of this, then I'm more at ease saying the EDA will fund the other half because
I I'm not having to decide then if they're a good risk or not. >> Can you self could we sell? >> It's not half. >> It's not half and half though. Like if they lend a h 100,000, we would give 50,000 max 75 cuz it's no cuz it's 50%
of the total loan amount. So if the total loan amount is 100% we would only give 50,000. >> If the total loan is 100,000 you mean correct? Yes. Then we would only do 50 because we can only do 50%. But >> could we pick a smaller amount to self
fund? >> You know say if it's 20 grand or I'm just throwing numbers out there. 15 grand 20 grand or less. >> Mhm. >> Cuz I would look at it you know and from a business standpoint like you were saying. So, if I am a business owner and
I have 75,000 to do a repair and I can borrow 75,000 at 2%, but now you're requiring me to go get $75,000 from a bank. I'm going to have higher interest rate on money I didn't. >> But again, they could pay that bank loan off right away if they have if they have
the money. >> I mean, they could, but it's extra hoop. Then I have to pay the bank fees on top of that. >> Yeah, there are closing costs and >> you know, again, it's it's adding extra costs potentially for them to being funded. I'm going to do a credit report. So, they're going to get >> be charged anyway and they going to get that
>> either way, the credit check either way. >> So, again, it's it's it's do you allow someone who's a business owner that potentially has that cash and say, I need the other half to do the rehab or do you want them to go to the bank and do the things and potentially? Now,
that's again, that's that's a philosophical question. my economic development brain is always going to be the economic development side. But as a board, you have to weigh those, you know, weigh those and make that make that decision. But again, I'm fine if you want to send
a threshold of, you know, 25,000 for self-unding. That's what we'll selfund up to. >> I'm fine with that. You know, whatever whatever you as a board decide is the the direction for this program. I mean, in our situation, it was a $20,000 repair that needed to be done,
and we could come up with around 10,000, but we just couldn't wait. And so, that's where the EDA, you know, it came in. It allowed us to get the work done, >> you know, um, and so we weren't talking about a substantial amount of money. it
kind of is for our organization, but um but for others, you know, and it was nice to be able to have that option and to be able to get that quickly. So, I understand what you're saying, like you don't want to have to hop in, but I really like um Commissioner Lee's idea of doing up to a certain amount. Could
the criteria be um what the loan amount requests is? Because for the scenario you're throwing out there, that makes perfect sense. and to have to go to a bank for an extra $10,000 would just be
a hassle and not as necessary in your situation. But for larger projects, say a project that is over, you know, is it $75,000 or $100,000 project, then a bank
match is required. >> I do like that. I just I have a I have a question and I've I'm not asking it the right way for the a few times here, but in the Turner scenario, they should have only received
5,000 according to how this is written. >> No, it was a $20,000 project, >> right? So 10 10,000 should have been matched by 5,000 because it says 50% of the total 50% of 20,000 >> should say the total project not the
loan amount. >> Yeah. Yeah. There is some language cleanup that we need to do here which I will do once we decide where we're going and then it'll come back for approval and those things will be fixed. >> Right. So what I want to know is what
are we pay what are we actually this is a good amount point to get commissioner Lee's uh expertise is that if if it's going to be over a certain number requires a bank match
would you have a recommendation on what that number would be >> well I think the 50 is fine and I think it'll come down to the individual borrower there's some where they might need only 20% % you know it I get the interest rate thing so most of them are going to take the 50% because that's I
would too >> um I just think under C this isn't written the way the program is >> you know EDA will contribute 50% of the total loan amount it really should be 50% of the project >> that was true I think back when there was a bank match required
>> but I I I if they needed >> that's one of the things John Nely brought up in our meeting last week he's like that should be project. >> Yeah. >> Not loan. >> Cuz I know when we did it was always 50% of the project amount, but not
>> 50% of the loan amount, right? >> Yeah. >> So, yeah, John John Nicely brought that up as well, and I didn't include that in my notes cuz I just thought once we decide where we're going, I'll do that language cleanup before I bring it back for approval. But then once you once
you're at the bank, they don't typically want the EDA would not want to have more money in it than the bank. >> Correct. Yeah. >> And it could be a $400,000 project. We
aren't going to do half of that project because we max out at 75,000. So there could be cases where they're getting 325 from a bank and only 75 from us because we hit that cap. >> But then not always half of the project either
>> with a cap up to >> Yeah. Wouldn't you want the language to still read 50% of the total loan amount so that you're not coming in higher than the bank? >> We would >> up to >> Could we add Could we add another
>> 75,000 >> when there's a bank loan involved? This happens when it's self-funded. This happens. Then you can say 50% of project or you could say 50% of total loan amount.
I still don't think we're talking the same thing. Then you're really saying it's only funding 33% of the project, which is not the way the program's been. It's been 5050. It's 5050 75. I think the wording is just not accurate there.
Instead of loan amount, it should say project cost up to 75,000. Yeah. >> And you could put in there that the the EDA portion is not greater than the bank portion. >> Yeah. >> I mean, you could put that word in.
>> And if we really want to split hairs, it's up to $74,999 because it 75,000 triggers additional reporting requirements. So we always >> we'll come in at like 749 or you know >> to exceed then that's what you say. And
then just real quick in D I think that we we should move all that language. It says under special circumstances a longer amortization period can be negotiated but not to an exceed additional 5 years. That just opens another can of worms for us. I just I think it should be 10 years. If you can't get it done within 10 years like
we're not we're not your people. I was wondering about that too. I've never had anyone ask to go longer than 10 years. I didn't even an option until I started looking at this and I'm like what? >> Yeah, >> but yeah, I agree that maybe should be removed.
>> And then do we want to require a commercial real estate mortgage or required cuz we did one for a business that doesn't have a mortgage too. >> Yeah, >> that's a our mortgage that we're putting on the property. >> Okay. >> To cover our loan.
>> Okay. >> We require a a mortgage on the property. a promisory note and a personal guarantee. >> That makes sense. >> And then nobody touched on the interest rate. I just want to say that I still am good with 2% but if you wanted to move to something like a 2.5%
but to try to match you know we're I mean >> well the interest rate at the bank changes you know changes every month. >> Yeah. So I I have to evaluate it almost on an annual basis if >> I'm fine with because it's easy to communicate and
>> understand and calculate and everything else but I wouldn't be opposed to raising it to something else very adjacent to that number but and the 10 years can deter some people to to not take as much because you know
bank might go 20 or 30. Um, but I understand with us EDA being in a third position, let's call it, we want to protect that and get the faster repayment. I get that. Um, but that's another reason that >> maybe just because of the cash flow part of
it. So just to kind of recap what we have said, we do want to require a bank except people can self Did we say a number? Did I hear 50,000?
>> We haven't said anything, but we say a project cost up to or up to and less than 50,000. So on our portion would be 25. I'm just throwing that out there. We can right >> thoughts, commissioners. >> I think that sounds good.
>> Self funding. >> So for I just want to make sure I heard that right. For projects $50,000 and less, we would not require a lender and the EDA's loan would be $25,000 or less >> in those cases. Yep. Okay.
And do we want to give Heather guidance on how to vet those loans? Yeah. So on for those lower amount lower project amounts where we wouldn't require
a lender, could we set a minimum credit score? And Chris, I know Chris had thoughts on. >> Yeah, I mean >> that >> for me I would say at a bare minimum I would go probably around 600. Um but we
can set it a little higher and you know with let's go my limited um loan experience. I can dive into the credit report and dig through some stuff as well. But if you want to set just the bare minimum, so if we deny someone because it's below that um and we can't
find anything really discernible and maybe that's one that we would bring to the board if we find something in there that's like, yeah, they did they're below the threshold, but here's a couple factors. We can bring that to the board for approval. Um I could see something
like that where we find something. But um really whatever you kind of might lean on you, what's a >> six is low. >> Yeah, I know. I know. >> Um you know, I again I look my hat on. I'm like, you know, let's say 650, but
if my loan to value is less than 50%. Do I take that risk? Yeah, absolutely. >> You know, so it's more than just the credit score. Yep. >> But if we need something, I'd say at a minimum 650 and >> go from there. You >> can always bring it to the board. Yeah. >> Right. Or is that what you're trying to
get rid of? >> So, I could approve it if they had a credit score of 650 or higher, but I would have the option to bring it to the board for consideration if it's lower. >> Yeah. >> Perfect. And we have reason and we have
reason to bring it to the board or potentially approve it. >> So, board approval needed for lower. Okay. Okay. So, on the first question, going back to requiring lenderol involvement,
yes, unless the project is 50,000 or less or if or no, I guess we're talking two different things. Lender involvement. Okay. And we don't want to require we don't
want to go to the gap gap loan. We're going to just cross that off. We don't want to we don't want to have it be only if there's they can't get it from a bank and there's a gap. We don't want to go there, right? >> We're kind of serving that purpose anyways. It's just so
Okay. And then if not requiring bank involvement, minimum credit score of 650 um board approval if it's lower than that. So, we're good so far. Um, are we okay with removing the board
approval for loans over 50,000 if they meet the criteria for the program with it? >> Yes. >> Wonderful. >> And we're okay with the 2% interest rate. >> I would say the quick calculation difference between if you went from two
to three um over a 10-year period be about $4,000. If you wanted if you wanted to go to three, we'd roughly get and they maxed out at 75, you'd roughly get $4,000 more than you currently get at 2%. >> Nicole, just out of curiosity, what do
we get right now for the money sitting in the bank? >> It changes every month. It's based on the three-year Treasury. Um, and then we get 25 basis points above that. So, right now, we're just under 4%. as of February 1st. Okay. >> So, we do get more money in interest if
it's sitting in the bank. However, if it's sitting in the bank, it's not serving the community either. So, >> yeah. >> Right. And I think the huge advantage of course is the 2%. That's where we're really helping people. >> Yeah. And to me, at two, it helps blend the rate, too. So, if a bank is at five
or six, then you know, you're at eight. technically at 4% for the life of your loan, you know, blended rate. So, makes it a little more manageable. >> There's nothing stating we can't change that in the future, right? >> Yeah. I mean, we can look at this in an at
>> review it every month if you wanted to. >> No. >> Yeah. >> Thank you. >> Or maybe in January when we kind of refund the programs, we can add interest rates of our programs to that as well and have that discussion there, too. Did anyone else have anything else they
wanted to bring up for this program before we move on to the next? >> Um, I just had a question on the second page on number three. It says the loan amount must not exceed 100% of the eventual market value of the structure to be improved.
>> Just you can order. So, if you have a rehab loan or a remodel loan, you can get an appraisal as completed. Mhm. >> So it might be only worth 200 grand today, but after the what you say you're going to use the money for it's 400. So we might borrow 300 even though today it's worth 200 but in the future it's 400. >> That's what that's
>> Yep. >> So do do we feel like that I don't know that was the that was one thing I was just like what does that mean for us? Are we actually doing anything? >> I would say never had to use that calculus in approving a loan. Yeah, I would say, you know, one of the biggest
examples, um, you know, is the lamp lighter building, looking at remodeling that if you're going to do a kitchen and all that stuff, that loan is >> you're never going to get market value for that for that loan. You know, it's kind of getting us out of that business where we know if it goes under for
whatever reason, we may not get anything back. >> No speculation. >> Yeah. >> Right. Love it. Uh the only other you probably caught this already point is it refers people to the second floor of the city hall to get the documents. I'm
going to assume we go down here now. >> What page is that? Oh, I see that. Yeah, >> it's in the other one. In the other one, too. >> Oh, yeah. I did read that, too. >> Caught that as I went through this. So, I think we're in a good place um that I
know what I need to do to bring this for approval next month with the changes we talked about today. And we can move on to the small business loan, which should be a should be a
easier and shorter discussion. Dave wants to be out of here by 10. No, she's she's going to pass it out. Okay. She passing it out. >> Thank you. >> Government loan program. So, >> and there's ways to look up what and how you I mean, like you said, you have loan
experience, so you would probably know all this anyway. Okay, this is um now the small business loan program. Um this is newer. Um
started when Chris came on as economic development director if I recall. Um, >> so this one was just born out of um we had a limited loan program uh that was tied strangely enough the same
funding sources the commercial rehab program. It's like two loans in one. Uh, and when COVID hit, um, we really changed it and kind of pivoted to being a small business loan, you know, kind of a micro a microlo loan for businesses.
Um, because the limited program, limited loan program was was rarely used. Um, I know Heather's probably done a couple. Um, the best example that I had with the limited or the small business loan program was Red Dragon Gaming. They
needed $2,500. no bank was going to, you know, give them $2,500. Um, and we were able to get them the loan within 30 days and they were able to open. Uh, and
we're pretty successful um pretty successful business and we're able to repay the loan. Um, so part of a one thing that I know Heather's gonna ask at least for this loan program, um, is to carve out a portion of funding from the
commercial rehab and set this up as its own >> foring loan. Um, so it's not comingling. And if they're out of commercial rehab, then we can't do any small business loans. Um, and I don't know what what number that's going to be, but kind of carve it out so it's its own standalone
program because I would say out of all our programs, the small business loan is probably the one loan that will touch all our businesses. And what we hear the most is that we don't do enough to serve businesses that are currently up and
running. So, we can get them started, but we kind of don't have the gap years, you know. Um, and this program, um, in my mind kind of serves as that that gap, you know, after they're they're starting, um, kind of financing for
them. >> I think with part of the strategic plan initiative being um, helping with some of that gap financing that this program is a good opportunity to provide that. I will say though in terms of um small
businesses, if you're looking for gap financing or say you need to replace equipment because it's 10 years old or whatever, um 10,000 does not get you very far. Um, if there are funds
available, if this can be its own program that's a revolving loan that's not lumped into the commercial uh rehab loan that I my suggestion would be to raise that
um to at least 20,000. If it's possible to offer more, offer more. But and this is a 2% >> loan as well. 1% 1% >> 1% 5year >> okay so maybe it's 20,000
at 2% or 25,000 at 2% but this is um one of those things where you're at the bank you put this much in yourself you have bank financing you've got the EDA match and now you just need that last whatever
this could be very useful in that case I can tell you a couple examples that this program's been used for since I've taken it over. Um, we had a local restaurant who their um, walk-in cooler went out and they needed to replace it. That was an unexpected repair and restaurants
don't have a big profit margin, so they came to me for a loan and they were able to get that replaced. Um, similar situation, a local florist had their refrigerator go out and flowers need to be refrigerated, so they took the loan. Um, and then more recently, well, two
more. A local chiropractor wanted to buy um a piece of equipment to expand what they were able to offer, and they used the loan to purchase that equipment. Um, and then I had another um business that used it to cover payroll with um kind of the things that were going on with
tariffs and um cost of inventory spiking. um just wanted to kind of have that cushion to know that they could cover payroll if needed. So um and those are all existing businesses, not not startups, you know,
that had been in our community for many years that had a need and we were able to help them out and they really appreciated it. So, um, one easy way, I guess, or in my mind, an easy way to split this money out would
be to take the people that currently have one and just start as those payments come in, put them in its own account to create that revolving loan and when enough funds build up that I can loan it out. Um,
Nicole's nodding as the finance director. >> Do that. look at that and and >> you know, so rather than just take, you know, 50,000 of the available funds in the commercial rehab loan program and move those over, we could just start taking those monthly payments and
putting it into its own fund to be lent back out. Um, that would be one way to split the funds. So yes, that is my first ask is to split it into its own unique fund separate from the commercial rehab loan program
because it just gets, you know, one person comes in for a $75,000 commercial loan and then I can't give a small business loan for 6 months >> because the money's depleted and I have to wait for those um payments to come
back in. Um, another, um, suggestion I would make is currently we don't require a credit report for these loans, which, you know, at $10,000 probably was, you know, but if we're especially if we're going to look at increasing that amount to 20 or even
25,000, I would I would want to run a credit report and then have again a minimum credit score for approval. These right now are the quickest and easiest loans to get. they apply, I have money available.
I send the um information to the city attorney to prepare some simple loan documents and they can close within, you know, two weeks of application. So, they're very easy, maybe a little too easy. And um so like I say, I would recommend adding
that running that credit report just to make sure they're they don't have like a 400 credit score or something. I have a question on the two loans that we are talking about today and how it
aligns with our strategic plan because looking at the strategic plan when it talks about these two loans um it talks about the need for capital for expansions or startups and I'm wondering how we see these loans fit into the
needs of expansions or startups for business or do we say we don't want to do that we want to fund buildings And what is the purpose of these? What do we want to accomplish? >> And maybe it is that we're just being
friendly to business owners who aren't startups to help them with fridges and freezers. And if if so, you know, let's let's know that that's why we're doing this. But if we truly do want to expand expansions and startups,
do we need different criteria that that we talk about here? And I misspoke um in the gap financing portion for someone going and looking for funds to even get their doors open. This is right
now as it stands is for businesses that are currently already open. And I have denied applications. I've had someone trying to open a business and they want money for inventory or whatever and I've deni I've
said until you open your doors I cannot give you this loan. But the day you open your doors, you can apply. >> Well, I'm looking at the resources that we have for emerging businesses. I mean, we have Wendy Anderson and we have, you
know, um the chamber that businesses can lean on ahead of opening. Um but yeah, once they're once they're open, I would say, you know, looking at what we have here on how they can use
that loan. Like I'm picturing right now like doing some technology upgrades and so um you know that's kind of building improvement. So, I mean, it could technically be either loan. So, I mean, is there a way that we want to kind of better define this? I guess I I I agree
with Michelle a little bit on that. >> Starting with what's the intent of the loan? Is it for >> um keep your doors open? >> Yes. Right. >> Is it for more geared towards existing businesses or are we more gearing it for
anyone startups as well? Can it be all? >> I would think they would need to be open first. >> Yeah. >> And operated. That would be the main question. Are they open? >> And I'd like to see a threshold. You know, I don't I open my doors tomorrow and tomorrow I can apply.
>> Right. >> I mean, I would like to see the time loan stands now. That is >> No, that's what you know, we have resources for them to get off the ground on the right way. I mean, I do think they should be open for at least 6 months or 12 months or I don't know. You're the pro. I don't know.
>> I would say, you know, my my recommendation would be uh over a year. We allow them to apply for the startup grant within a year. So, this if you wanted to continue, this is for, you know, business continuing on. I would go, you know, at least after a year. So,
>> I like the one-year mark because if you can hit that one year mark, your chances of >> success, >> continued success are better. Yeah. Survival. >> It goes up after three years as well. >> Yeah. That first year is the >> the hard year.
>> And all of those scenarios you provided probably did not happen within the first year of operating for those >> businesses. I mean, >> that's probably a >> accurate statement. >> Pretty true statement. I can't 100% say
yes, but >> for the most part, yes. >> I have to put a different hat on when I look at this because this isn't, you know, it's, >> you know, rent is eligible reason for borrowing. You know, we talked about a risk assessment previously on the other
program. And if we're giving people money for their rent is >> we're risky if you're giving money for rent. I mean, it's a and I get there can be situations with the tariff thing or maybe it's a timing thing or a seasonal business, but but I I was on the Brown County one as well, so I have to look at
it a little differently. Um, but I I like the year thing. I'd like the interest rate to be consistent with the other program, 2%. >> Um, I I don't know if I'd like to go higher. Only reason I say that is
I have a problem when the government us try to takes over lending and other businesses. Um I'm just one of those that I think should be a separation. >> Um agree. That's just my thoughts. >> Well, yes, because we're not trying to compete with the banks. We're trying to
provide incentives. Economic development is all about going beyond that to give you an incentive to stay in business uh start up a business and and and un unwritten is not to compete with banks or other lending organizations.
>> I was just looking do they file a just says appropriate assets acceptable? What do you what do you take for an do you file a UCCC filing on their assets or do you just >> hand we have in the past. So specifically, you know, when we did the loan for Red Dragon Gaming, I had two
cars, cameras, equipment. We did do Yeah. I mean, we did the UCCC filing on on some of that stuff to collect the collateral if you know they went under. >> Is firstborn worth more than the third one? >> Sometimes you give them away. Sometimes
you give them away. So, just to clarify, this is not just for startups. It's also for existing, but they have to be in business for a year or whatever. >> That's what we're >> That's what we're looking at now. >> Currently, they just have to be open. >> Yeah. Okay.
>> But we're proposing changing that to open one year plus. >> Okay. Thank you. Also, it has to be a small business. Um, so lenders are still going to be there for the ones that don't qualify
um based on full-time equivalent employees. >> Um, >> I'm sure what's what's the question? >> I'm just saying medium to large employers that need a loan are still going to have to go to a lender because this is limited to small >> small business
>> businesses. I would I would is that what the strategic in lines with the strategic plan? I I mean I can't imagine we should be giving $10,000 to a place that has 40 employees. I just don't think that's >> what the EDA should do. >> Right. >> Someone else has other thoughts.
>> It's for small businesses. So yeah, 20 or less full-time equivalents. >> Yeah. I've also had a couple small businesses use this who um maybe used a credit card to make
purchases for the for whatever for their business equipment, computers, something like that. And then they'll use this loan to pay off that highinterest credit card, you know, to help their business better cash flow. >> Um I'm just trying to think of some
examples of how it's been used. I would agree with one year open increasing the interest rate to 2% to align it with the other one. It's still a very very excellent rate. Um and keeping that cap at 10,000. I mean, we're right. We're not, you know, we
it should be a smaller loan for a small business. I guess >> you do you want to keep it at 10 or go with a 15 or 20. >> How long has it been at 10? How old is this? >> Um, so we Yeah, 2020 is when we kind of
revamped it into the small business loan. Um, and usually >> it used to be 2500, then I think it increased to 5,000 and at some point to 10. >> 10. Yeah. Because when we looked at like a commercial um burner for like restaurants, I think
that was kind of the threshold and kind of we looked at >> I think Chris raised it from 2500 to 5,000 when he started as economic development director and then I think um when Audra was the economic development
director and and we were dealing with COVID, the decision was made to increase to 10 and I think leaving it 10 is fine because it is really just a microloan. If we if we start increasing it to 20 or
more, then I would want to require some sort of collateral. You know, right now we really don't, but I'm okay with leaving it at 10 for now. So, my only thought on that is, is a
$10,000 loan worth the time, work, energy, or could that be could that money be redirected to a program that's going to have a greater impact? I don't know. I mean, I do typically
three to five of these loans a year. So, on the business owner side, their time and effort, it it there isn't much time and effort involved to be honest. Um, and they must feel it's worth their while because they're applying for them and taking them.
>> I have a similar question. >> Not for the business owner. I'm saying for staff and the EDA. I >> these are the easiest for me to administer. I take the application >> um >> about two weeks >> even if we're adding the credit report
that's online instant and I send everything up to the city attorney and they prepare loan docs. So >> my question is the economic indep impact to new like we're making these loans is
it what's it doing to increase the impact? Well, I think it's helping our existing businesses stay open because if they're having, you know, an unexpected repair that's going to hurt their cash flow,
you know, we're keeping them open. A restaurant can't operate without a refrigerate, you know, a refrigerator. A florist can't operate without a refrigerator. A chiropractor needs equipment to offer services and but they could go to a
equipment loan potentially >> be tied up. They could have not in they might not be in the position to get another $10,000 loan for a quick fix because maybe they just got their loan for 200,000 >> and the 2% interest keeps that monthly
payment affordable too and again helps with their cash flow. >> I'm not saying I disagree with it. I just want to make sure >> we're doing it for the right reason, not >> to feel good. Yeah, I just think overall it barely
puts a dent in what >> I agree for those larger lead for those larger needs then they probably need to go your more traditional financing >> but then in like sh brought up if they can't
get that from a bank then so a walk-in freezer your example a walk-in cooler those costs like $30,000 So, this covered 10 of that. And then where'd they get the other 20? And this is just a
>> Well, hopefully they had some reserves, you know, in the bank if their business is profitable. They should have some savings. Well, along with what Lindsay is saying, I think we've seen an uptick in cost of
everything in these last years with inflation significantly for equipment. Uh, and so, uh, even going to 15 seems like more realistic if you're looking at, you know, I'm looking at a furnace replacement or let's say air
conditioning at the Unique Center. If I don't have air conditioning, I'm not going to have weddings in the summer. And uh the quote I have now is higher than 10,000. >> I don't think a lot of small businesses probably have a great reserve. Most
small business owners right now aren't even paying themselves. >> So again, it goes back to what's the intent and it could be left as is and that's fine. I'm just saying if you're looking at it through the lens of
someone operating a small business, it's it's very minor the amount of relief you get from a $10,000 loan to the point of almost being inconvenient. Not inconvenient, but is
it worth it? Do I then just say, "Okay, I'm going to go to the bank or try other avenues to get something that's going to be more impactful for my business or what's the extra leg work involved if I'm doing one loan at 10,000 and then
going to a bank to finance the other 20 for a piece of equipment." It's, >> you know, listening to the conversation, I'd be all right with going to 15, you know, economic development or is this loan to keep the economy going? >> Both.
>> Want to keep that business open or they just went to punk for 6 months. Can't quite afford that fix, >> then they're done. >> That's how I look at it. I I understand economic development, but also keeping the economy or the business owner open.
Mhm. >> Some of those impacts, they close. I don't have a freezer. I don't have >> We're not open five, six months. >> So, we're at 10% I'm sorry, 10,000 at 1%. Would we be okay with going to
20,000 at 2%. Would that help? >> I'm okay with keeping that across the board. We're 2% 2% for XYZ. >> All right. Well, then if we're going to stay at then, yeah, I think I think we should go up a little bit. we don't have to go if they need more then they can go
those other routes. Uh but this is really going to help again because a loan a bank's not going to give you one or 2%. So you're still really helping even if it is 10,000. Um, but we probably have more of an impact helping out at 15 or
20, I think, as well. you 10,000 will help, but that's a very short-term temporary band-aid. >> And that business might still close
>> 6 months later because it's just not it's hard to continue to put band-aids on in this. >> Yeah. And that's a good point. I mean inflation has really
>> Mhm. Yeah. >> changed things in the last couple years. So that is a good point. >> Are we comfortable with 20,000 15 was suggested too as a middle ground and reassess? But I don't know what.
>> So what's the purpose of this fund or this loan program? I mean to me it's it always seemed like it was sort of a gap or an emergency or a you know I go back we were talking about risk assessment the last program. Well we're going to increase this and this is
probably your riskiest program because what do you have? >> Yeah. So >> Mike, you're you're 100% correct. The the small business loan is always going to be your riskiest program in in in any EDA. It is you know for emer like most
of the stuff we get is for emergencies. I would look at this as, you know, hey, Christmas is coming. I need $10,000 so I can get more inventory, you know, to stock up the shelves and, you know, pay the loan back when I sell all my inventory. Um, things like that. Um, and
so that's why they're usually kept a little bit low. So, I I would agree if we're going to go up, 15,000 is probably where my risk threshold is. Um, but it it really is to help those businesses
that just need that little extra to help them do things. Um, but it's not there, you know, to be here's 15,000 so you can stay afloat for 30 days and then, you know, and maybe we take rent out as something, you know, look at what's
eligible activities and and kind of, you know, I would keep payroll in um, you know, the technology upgrades, stuff like that. Um, and maybe get rid of rent and utilities. Um, because if you can't pay rent and utilities, maybe that's a
risk we don't want to pay. But there's always unforeseen circumstances, too, right? Oh, I spent all my money getting my fridge. I need help paying rent utilities. But, um, you know what we can do? Um, you know, not that the conversation is over now, but we can between Heather and I, we can take the
feedback at least on this, draft something up, bring it to the next meeting, and if you're still not comfortable with everything there, we can still massage it and stuff. Um, but you know, it really is the purpose of this is really helping those businesses
that need that emergency influx to, you know, potentially purchase equipment or something bad happens or I need extra inventory that boosts cuz I know Christmas is coming or something like that. let me just get more inventory in my store that I know is going to sell so
they can be a little more profitable during holiday seasons and things like that. >> And just um I just want to say there are some small businesses who have taken this loan in the past who have closed but continue
making their payments. Um I haven't had one of these default. Sometimes I've had someone fall behind on payments, but you know, we work with them. They get caught up. Um I haven't had anyone straight out walk away from their obligation.
>> Yeah. Yeah. >> Cuz at 10,000 that's doable. I mean, you can >> That was my other point is if you keep going higher at some point, >> it's easier to walk away than throwing something. >> I would just D I know you said you were going to look at this on here. It says could include. Well, that's pretty
vague. It doesn't even say equipment. you know, it says, >> yeah, >> you know, so basically you can use it for whatever you want >> is kind of what we're saying. >> Yeah. >> But we can shore that up, make a more detailed list of stuff >> more not to include than what it
includes. >> I mean, once they get the money, I really can't dictate if they take the money and pay their rent with it. I can't >> We should still in there just to control that. But >> I think >> I think taking it out of there as examples
is good. Yeah, >> I would say do a credit report. Again, I mean, this is your riskier one. I would do the credit report. >> Yeah. And basically that would be adding a fee. I think I it's $12 for me to run a credit report. So, they would have to
give me a check for $12. Give me their social security number and what I need to run their credit report. And then, are we wanting to keep that minimum score of 600 like we did or sorry, 650? I would say again it's a risky loan and
we could it's it doesn't mean you couldn't do have a conversation and get a you know an in-depth review but you need to have at least 650 and and even then like Mike said there's so many things that go into that but knowing that 10 grand isn't going to make or
break a business is this a program we want to then keep because in the scenarios you brought up were very valid scenarios and and good scenarios. Um but if it's not going to
big picture keep that business around or or make a major impact in terms of retention. Could those funds be better used elsewhere
that has a broader, more long-term impact? I like the fact that there are some small caps on that that can help with some of those emergencies. So, like to roll this to kind of get rid of this and then roll it into like the whatever
small business rehab program or something like that where some of those things might not qualify, you know? I don't know. I I I still think that this serves a pretty good purpose just only based on the examples that you gave us. So
again, it goes to what do we want to accomplish with this? >> Yeah. Cuz I would pose that question to the board and and maybe that's food for thought over the next couple months. you know, really think about what is it, you know, because we always
said it's not making an impact. Well, what is the impact you want to make? I don't like again, I don't understand what that term that phrase means when you say it's not making an impact. >> I'm not and let me correct that. The
impact is short-term. It's a quick fix. >> Y >> is that the goal of the program? I'm not saying that's wrong. Is that the goal of the program? Or do we want to use funds to make a more long-term impact? Because
if you're a business that needs a quick two grand and uses this program, that's going to shortterm solve the problem. >> Long-term, those problems just get bigger. So >> eventually, >> you know, it's it's getting bigger for
business owners constantly. It's that's only getting worse. So, I'm not saying one is right and one is wrong. It's goes back to purpose and are we here for a quick fix
in a pinch or do we want to look at how we can make things more sustainable and efficient over time? I would think that even though we think of it in terms of quick fix, I look at it at some cases as an emergency like
Andre had brought up. You have a situation like or if a cooler goes out. It's not necessarily a quick fix as much as it's it's bridging you to you know what your cash flow is and if you could spread that out over the next five years
or even a couple of years >> uh it gets you to a place where you can be more viable. And so I look at it not necessarily a quick fix, but in some cases an emergency fix where you don't have that wasn't planned on and yet you
can get to another place with that. >> So do you think we should make this more specific to emergency? >> I mean >> I know we talked about emergency as one of the options. I don't know. I mean, you could you could go that route. And and you know, to your
original point, you know, the EDA as a whole, we're going to have to play both roles as a short-term and long-term cuz the business community es and flows, right? It's you have your long-term goals, you have your short-term goals. But what I think a program like this
does is it shows the business community because depending on who you ask, we are not a business friendly city. And we are a business friendly city. I know we're much more business friendly than Mano, but when you have programs like this, it shows the community that we care about
our businesses regardless of size, regardless of who they are, and it builds short-term into long-term because we're investing into the community. I mean, every year we're 600,000 at least into the community. Um, so again, it's like I understand, you know, the premise
of yes, it's potentially a band-aid for some and maybe those businesses don't last, but you know, when we look at our grant program since 2019, 10 of those have closed and a couple of them had been around for four or five years and then finally decided to call it quits.
Um, so, you know, looking at a program like this, we could put emergency provisions in there saying, "Yep, here's the thing." Um, but I do like it, you know, for businesses that want to bolster inventory for specific times of year. They just need that little bit of
influx. Um, cuz I was throwing around the idea of doing some type of, you know, I'm not going to call it a revolving like a line of credit for, you know, businesses during, you know, holiday season or something like that. But this program kind of serves as that purpose if they want to take advantage
of it in in that way. Um, you know, I do agree with the changes to do, you know, 2% just be consistent. Um, put a little more skin in the game. Um, you know, we can, if it's for equipment, we'll file the UCCc's to really cover us because it is a more riskier program and things
like that. Um, but when we look at economic development, it's a weird hat. It really is. And, and that's always the hardest thing cuz, you know, my banker hat and and I get that. I I have to think I'm on the opposite end when I'm in a room full
of bankers and I have to put on the banker hat and not the economic development hat when I sit on loan committees and I'm like wait okay no yes I understand what you guys are saying um you know and that's part of you know Michelle you bring up good points is it in line with our strategic plan you know
we all have valid kind of input on this and it's collecting that getting that collective and agreeing on something that's again going going to be help the business community and I think you guys do a good job of that and you bring up questions that we all have to to look
at. You know, it's different lenses, business owners, you know, nonprofits, you know, economic developers, city staff. Um, and so, you know, I look at this as just one of those ones where we have to be okay with the risk that's
there potentially and, you know, really look at it is a stop gap, but for some businesses, it's that initial contact with the city. They're like, yes, this city is behind me. I want to do business here. And then kind of spread that out over time. That's kind of that economic
gardening concept um with supporting the businesses we have rather than trying to recruit new. >> Um >> yeah, >> this is one way to do that. And uh you know I'm just looking at in your report and you can look at this on your own
time uh in the economic development report where we have the commercial loans. They're all on one spreadsheet right now because they're coming out of the same fund. So, any loan with the terms of 120 months, those are your commercial loans. The 60-month loans are
your small business loans, and those are mostly the $10,000 initial loan amount. Most of those businesses are still open. I I see two that are not. Um, but they are still making their payments even though they closed for whatever reason.
And I don't I don't think those two businesses that closed closed because the $10,000 loan wasn't enough to keep them open. I think they closed for other reasons, but they're still paying. They're still making their monthly
payments. Um, you know, like Chris said, we we get a lot of feedback that, okay, the small business grant is great for the new businesses starting up, but what about me? I've had a salon in town for 30 years. What about me? What are you doing for me? Well, this is one of those
programs we can say this is here for you if you need it. Any further discussion? >> Are we all right with upping it to 15? I know that was preliminary. >> Yeah, we we'll we'll draft it at 15 with
the new terms and and then we can have that discussion when we bring it back. Yeah. 2% >> interest and requiring a credit report with a minimum score of 650 open and >> open for one year and no rent or utilities
>> and then we'll do um UCCC filings on equipment just so that's in there and they know >> is that currently in here or do we need to add that? >> I think we need to add it. I know I know I've done it without it being in Yeah, the UCCC filing when they do equipment and stuff. Um but we'll make sure it's
in there so they know. Can you tell me what does the UCCC stand for? >> Uniform commercial code. >> Yeah. >> Okay. >> It says that it's like >> collateral. >> So you can take the equipment if they stop paying their loans. Okay. >> Boring section of your business.
>> Has to be filed >> credit report. >> Yeah. >> Yeah. >> Okay. >> It's a form that >> it's like 26 bucks or >> 20 bucks to file, 20 bucks to terminate. into that they'd have to pay that fee. I
think it just shows that like anybody else that pulls the credit report can see you know that they have collateral. >> We don't charge just so if it's a commercial purpose we just charge for the filing 20 bucks >> cuz after 5 years they lapse. >> Yep. >> So on a commercial purpose there's no
reason to continue them. >> Okay. >> If you continue them it's another 20 bucks. if you had a loan for more than 5 years. >> But on >> we just let even if they paid off in three years, we just let them out there and lapse unless they want it terminated and usually nobody does. It just goes away after 5 years. So
>> you can do whatever you want. >> Do you feel you have enough? So, so I'll um I'll bring the draft of these changes to you for consideration at the next meeting
and then if if they get voted I mean if they're approved great if we need to do some more tweaking we can do that and bring it back again. It'll just >> Yeah, >> we'll see how it goes. >> We on this last one I'm And maybe I missed it.
>> We have them sign a personal guarantee as well or not. I didn't don't think I saw that on here. I wonder if we should do that as well. I think we do. >> I think we do. I don't think it's stated in here, but I know we've done personal guarantees. I've done it on this one. Yeah, we can add that.
>> Um, it is in here on the very last page. E, city attorney will provide promisory note and if needed a personal guarantee. Well, maybe we take out if needed. >> You go. You got that. Just for clarification, when if this is approved,
do they go into effect in 2027 or immediately? >> Go into effect immediately upon approval. >> It would just be updated guidelines to the current programs. So any any loan that hasn't been approved or isn't
currently in the process would be subject to the to the new guidelines. Anyone that is currently being processed would be subject to the original ones. Okay. Thank you. >> Is part of what you'll prep be preparing
um having this be its own >> Yes. event. Okay. >> Oh, yeah. You're separating it out. >> Yep. >> Okay. Any further discussion? >> All right. Thank you for your input, everyone. This work session is
adjourned.