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• RESOLUTION
BE IT RESOLVED by the Common Council of the City of Rochester that the City adopt
amended Revolving Fund Policies for the City of Rochester. A copy of the policies is attached.
PASSED AND ADOPTED BY THE COMMON COUNCIL OF THE CITY OF
ROCHESTER, MINNESOTA, THIS /771+LDOF_ 0GCy5ZR- , 2011.
PRESIDENT OF SAlb COMMON COUNCIL
ATTEST
ITY CLERK
APPROVED THIS I DAY OF 2011.
MAYOR OF SAID CITY
(Seal of the City of
Rochester, Minnesota)
Real 01Adcpt RevFundPoHcyl
•
• Revolving Loan Fund Guidelines
City of Rochester
page 1
CITY OF ROCHESTER REVOLVING LOAN FUND POLICIES
I. BACKGROUND
Revolving Loan Funds (RLFs)have become an increasingly utilized business
financing tool because of their ability to leverage public and private dollars and
recycle funds within the community and also because of their flexible design and
simple operation. The RLF allows the City to provide businesses with direct loans,
loan guarantees, and other financial assistance. As the RLF receives principal and
interest from outstanding loans,these funds can then be loaned to another industry.
A RLF is intended to assist with the high cost and short supply of capital for
businesses by providing flexible loan terms. In most cases, the RLF can offer lower
interest rates, longer terms, and reduce the risk factor associated with a commercial
loan. By increasing the availability of capital, a RLF can assist existing industry in
• expanding, developing or remaining within the community and can also assist in
the start-up or relocation of new businesses to the community. By providing much
needed subordinate financing for a business,RLF's are typically combined with
other private and/or additional public dollars.
II. PURPOSE AND GOALS
The purpose of the revolving loan fund is to create new employment or to maintain
existing employment and for business start-up, expansions, and retention. This may be
accomplished by the following means:
1.) Creation or retention of permanent private-sector jobs in order to create
economic growth, which includes investments in technology and equipment that
increase productivity and provide for higher wages;
2.) Stimulation or leverage of private investment to ensure economic renewal and
competitiveness;
3.) Increasing the local tax base,based on demonstrated measurable outcomes, to
guarantee a diversified industry mix.
4.) Improving the quality of existing jobs, based on increases in wages or
improvements in the job duties,training, or education associated with those
jobs;
5.) Improvement of employment an economic opportunity for citizens in the region
• to create a reasonable standard of living, consistent with federal and state
guidelines on low-to moderate-income persons; and
• Revolving Loan Fund Guidelines
City of Rochester
page 2
6.) Stimulation of productivity growth through improved manufacturing or new
technologies.
Eligible Expenditures
RLF's may be used to provide assistance for infrastructure, loans, loan guarantees,
interest buy-downs, and other forms of participation with private sources of
financing,provided that a loan to a private enterprise must be for a principal
amount not to exceed one-half of the cost of the project for which financing is
sought.
Eligible Projects
Assistance must be evaluated on the existence of the following conditions:
1.) Creation of new jobs or retention of existing jobs, or improvements in the
quality of existing jobs as measured by the wages, skills, or education
associated with those jobs;
• 2.) Increase in the tax base;
3.) The project can demonstrate that investment of public dollars induces private
funds;
4.) The project can demonstrate an excessive public infrastructure or improvement
cost beyond the means of the affected community and private participants in the
project;
5.) The project provides higher wage levels to the community or will add value to
current workforce skills;
6.) Whether assistance is necessary to retain existing business; and
7.) Whether assistance is necessary to attract out-of-state business.
The grant or loan cannot be made based solely on a finding that the conditions in
clause 6.) or 7.) exist. A finding must be made that a condition in clause 1.), 2.),
3.), 4.), or 5.) also exists.
Eligible Activities
RLF's may be used for the following activities:
1.) Acquisition of land
2.) Construction or rehabilitation of manufacturing facilities
3.) Site improvements
• 4.) Utilities or infrastructure
• Revolving Loan Fund Guidelines
City of Rochester
page 3
5.) Machinery and Equipment
6.) Housing development when a business cannot find employees due to a shortage
of housing.
Ineligible Activities
RLF assistance may not be used for the following:
1.) Operation or expansion of a casino.
2.) Operation or expansion of a store which is used solely or principally for retail
sales.
3.) For a project related to a sports facility. "Sports facility"means a building that
has a professional sports team as a principal tenant:
Wage Goals
Businesses receiving RLF assistance must pay each employee total compensation,
including benefits not mandated by law,that on an annualized basis is equal to at
• least 110 % of the federal poverty level for a family of four. The federal poverty
level changes annually.
Other Eligible Uses of the Funds
The city has the authority to loan or grant RLF funds to a regional development
commission, other regional entity, or a state wide community capital fund as
determined by the commissioner of the DEED to capitalize or to provide the local
match required for capitalization of a regional or statewide RLF. The city must
request permission from the DEED before it can commit to providing funds to any
of these organizations. The city does not have the authority to turn over to another
entity, such as Port Authority, Economic Development Authority,Housing
Authority, etc. revolving loan funds for any purpose.
III MUNICIPAL RIGHTS,POWERS, DUTIES (MS 471.87-471.88)
A public officer of the city may not have a personal financial interest or personally
benefit financially from the business to be assisted.
IV BUSINESS SUBSIDIES (MS 116J.993, MS 116J.994, MS 116J.995)
A business subsidy greater than$75,000 provided by a state or local government
• agency must follow the requirements of these sections. These sections pertain to
• Revolving Loan Fund Guidelines
City of Rochester
page 4
the public purpose of the subsidy, subsidy agreements,wage and job goals,timing
of the project,public notice and hearing requirements, failure to meet goals, and
reporting of information regarding the outcomes of the subsidy to the DEED.
These sections repeal Minnesota Statutes 1998, section 116J.991.
V. FIRST SOURCE AGREEMENTS (MS 116L.66)
A business that receives grants or loans in an amount greater than$200,000 must
agree to list any vacant or new positions with the job services state workforce
centers.
VI SURETY DEPOSITS REQUIRED FOR CONSTRUCTION CONTRACTS (MS
290.9705
In the situation that the contract exceeds $100,000 and a non-Minnesota
construction contractor has been hired to perform the work,the city must do one of
the following:
a. Deposit with the Department of Revenue, 8 percent of every payment made to
• the contractor or
b. Have in its possession a Waiver of Withholding from the Department of
Revenue.
VII FINANCIAL ASSISTANCE LIMITATIONS; PREVAILING WAGE. (MS
116J.871
Laborers and mechanics at the project site during construction, installation,
remodeling, and repairs must be paid the state prevailing wage if the financial
assistance is greater than $200,000 for a grant or$500,000 for a loan.
All contracts for publicly owned infrastructure using the RLF must comply with the
prevailing wage provisions.
VIII. GOVERNMENT DATA PRACTICES. (MS 13)
Information contained in the application for assistance will become a matter of
public record with the exception of those items protected under the Minnesota
Government Data Practices Act.
• IX. LOCATIONAL
• Revolving Loan Fund Guidelines
City of Rochester
page 5
The determination of public support for a revolving loan fund project should
included a review of the following:
Documentation from the proposed business that "but for" the assistance or support
being provided,the project would not go forward or would locate in a different
area. Such documentation will require a letter from the company to that effect.
A review of the market activity of similar businesses in the community should
result in a positive statement that public support of a project will not result in
adverse competition without a clear statement of the extenuating circumstances or
conditions which warrant public subsidy or support.
Infrastructure requirements of the project and the location of those public utilities to
a particular site will be considered. Preference will be given projects locating in
fully improved, existing industrially zoned or planned areas or parks, or within the
downtown core, and the location of the project will also need to meet all planning
. and zoning,transportation and traffic requirements of the City.
X. CRITERIA OF USE OF RLF PROCEEDS
Applicants equity participation should equal a minimum of 10%of the total fixed
asset costs of the project.
The term of the loan should generally coincide with term of the private portion of
the financing but may be shorter or longer depending on the circumstances.
The interest rate of the RLF Than should be approximately three (3) points below
the current prime lending rate.
Revolving Loan Fund Guidelines
City of Rochester --
page 6
•
The applicant must meet the underwriting criteria of the private lender participating in the
project.
Generally, the maximum amount of the RLF loan will not exceed$100,000. However, each
project will be evaluated on its own merits and the economic benefits for the community fully
considered before the loan amount is set.
XI. OTHER REQUIREMENTS
The applicant must provide a copy of their current business plan for review. This plan should
include a discussion of the business, its products/services,the market, customers, competition,
historical (last three years) and projected(next two years) financial statements, as well as copies
of the current resume of all owners. The business plan will not be kept as part of the loan file
and shall be returned to the business following committee review.
The applicant must provide proposed project financial projections or proforma that detail and
support the businesses ability to repay all debt incurred.
The applicant must provide valid bids or quotes for the work or equipment proposed to be
financed or a signed purchase agreement for land and/or buildings to be purchased.
OI.REVIEW PROCESS
Requests for revolving loan fund assistance shalt be reviewed and approved by the City of
Rochester Common Council.
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