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HomeMy WebLinkAboutMinutes - 09/05/2017 - Finance and Personnel CommitteeFINANCE AND PERSONNEL COMMITTEE MEETING REPORT Monday, September 5, 2017 Municipal Center Classroom, 5:30 PM In Attendance at Roll Call: Chairperson Alderman Curry, Alderman Schaefer and Alderman Mihevc, and Mayor Jett. Also in Attendance: J n Lynch, Human Resources Manager Ann Campanella, Director of Economic Development Douglas Martin and City Clerk Lynzi Nevitt. 1. Call to Order: The meeting was called to order at 5:30 pm. 2. Public Comment: None. 3. Motion to approve July 17, 2017 Revolving Loan Committee Meeting Report Motion made by Schaefer, second by Mihevc, to approve the July 17, 2017 Revolving Loan Committee Meeting Report. All voting aye, motion carried. 4. Motion to approve March 6, 2017 Revolving Loan Committee Meeting Report. Motion made by Mihevc, second by Schaefer to approve the March 6, 2017 Revolving Loan Committee Meeting Report. All voting aye, motion carried. 5. Review of Revolving Loan Program Application, Process, and Proposed Amendment to Municipal Code, Chairperson Curry reported as discussed at the last meeting, he reviewed information from Marengo, made comments, and distributed a list of Revolving Loan Fund Criteria to the Committee. Director Martin also provided information in the supplement. Chairperson Curry opened the floor for comments. Alderman Schaefer said he had a few ideas and thoughts based on the information received from other areas and asked Director Martin if the information included in the packet was the existing city policy. Director Martin answered yes, and there is a draft application included in the packet. Alderman Schaefer said he would like to see the example in the packet with all the logos on it pared down a bit to make it less complicated for the applicant to complete. In addition, as discussed at the last meeting, if there was some way of knowing if there was a substantial previous investment, i.e. Smith's Central Garage and Plum Garden, it should be weighted heavily. Alderman Schaefer then asked if an applicant could get a loan elsewhere and why should it matter if they come to the city. Director Martin referred to page 3 and asked if this was the type of information Alderman Schaefer was seeking or did he want more. Chairperson Curry said he thinks it matters if an applicant can get a loan elsewhere because the city is not in the banking business and if an individual has gone to a bank and is unable to obtain a loan that is when they should come to the city. The city is just an ability to fund for people who do not have access to the funds otherwise. Finance and Personnel Committee September 5, 2017 Page 2 In the past, some of the materials indicated that this process was designed for business owners who do not necessary qualify for a commercial bank loan. In addition, we would not know that unless we ask. Alderman Schaefer said the bank would tell us and perhaps we should not involve a bank in this process if the applicants are people who cannot get a loan at a bank. Alderman Curry responded that the city relies on the bank to provide their opinion outside of the commercial lending criteria as to how much risk the city would be taking on. Banks are black and white — if you do not comply, you do not get the loan. However, he does want the city to know we are loaning public money to someone who can stand on his or her own without our assistance. What is the purpose otherwise? Alderman Schaefer noted he disagrees stating most business owners will receive a loan these days unless they are mortgage to the hilt. Director Martin said he agrees that money is cheap but he does not agree anyone can get a loan. When someone is approved for a Revolving Loan and there is an article in the newspaper, he receives a call the next day from a business owner requesting funds from the city for various reasons. He believes there is a perception that this is a path of less resistance, less red tape. Director Martin said the Committee should determine the purpose of the Revolving Loan program. Is it a TIF standard, is this to supplement or replace a conventional loan? A discussion ensued on clarifying application item #4 regarding the applicant's recent capital investment. Alderman Schaefer suggested it would be beneficial to know what other sources of funding the applicant has pursued. Although he does not believe the city should act as a bank as the bank will give us an idea of the risk for an individual however, the city should determine how deep we want to get into the applicant's financial status. Alderman Mihevc noted it would be beneficial to know where the city stood in relation to the applicants possible outstanding loans. Chairperson Curry stated he thinks the city should ask for verification of some sort that the application tried and failed to obtain a commercial loan. The city should determine if the applicant has demonstrated that a regular commercial loan is not attainable or feasible. Not just because it is not feasible to pay 7% when the city charges 5%. The city is charged with the task of selecting applicants that are not too big of a risk because when the money is all loaned, someone will be denied who may be a good candidate. A discussion ensued on the language for the application regarding this point. Alderman Mihevc noted that underwriting standards might be different for example if it is not feasible to get a bank loan, but knowing the explanation, the city maybe willing to make the loan. The application should request an explanation. A verbal explanation could suffice, as Mr. Busse would follow up on it. Finance and Personnel Committee September 5, 2017 Page 3 Alderman Schaefer commented that perhaps business owners could only apply if they have first applied for a bank loan. Chairperson Curry said maybe we should just verify on the application that the applicant has applied and been denied a commercial loan for this specific project. Alderman Schaefer noted Mr. Busse said the city could charge whatever rate they choose, not just prime. Director Martin said this is the x-factor for why the city gives these loans. A business owner may not be able to qualify for a bank loan and high interest rates. Alderman Schaefer said the perception is that the city giving money free when in reality it is a loan. Chairperson Curry asked the Committee if they had any questions regarding the goals of the Revolving Loan Program. As an example, Director Martin provided the Committee with a copy the Economic Development Strategy adopted by the Council in 2011, which contains criteria for submitted an Economic Incentive Agreement. Chairperson Curry said he would not make a decision to approve a loan based on the amount of income or sales tax the city will receive based on retail sales of the applicant. Director Martin said a goal could be as simple as business expansion, retention, and attraction. Alderman Schaefer asked if the city would want to target specific areas or projects for the loan program. Director Martin said that is why he included the Assessment on page 4 of the application, which included underutilized buildings or land, brownfields, downtown district, etc. Alderman Schaefer said if we used a point system of some kind, the criteria would be helpful. Chairperson Curry asked the Committee if there was any additional information to include in the overall goals of the program. Alderman Schaefer said something should be included regarding property and sales tax. Chairperson Curry referred to the Criteria distributed at the meeting; goal #4 is "Positive impact on economic development." Therefore, if a loan is approved for a business that results in a positive impact for the city, we should not be concerned with how much sales or income tax is generated from the business. Mayor Jett added this is not different then a bank asking a loan applicant how much revenue is expected, what are your expenses, what is your profit. Director Martin stated the city should have a diversified tax base. When the economic downturn occurred in 2008, sales taxes were down and the city had always relied on sales taxes for revenue. However now the city has health care facilities such as Centegra, retail on North Richmond Road, and manufacturing. A diversified economy is a healthy economy. Finance and Personnel Committee September 5, 2017 Page 4 Director Martin further stated one consideration of the loan program should be to grow our local economy and to keep it strong. Chairperson Curry was not in favor of having this as a goal stating it should be in the evaluation. City Clerk Nevitt left the meeting at approximately 5:40 PM. The Committee continued to review the Criteria provided by Chairperson Curry and the draft application provided by Director Martin. Chairperson Curry asked each member of the Committee to contact Director Martin with any additional thoughts or question they may have regarding the proposed revisions suggested today. Based on the input, Director Martin and Finance Director Lynch were directed to compile the information and present the Revolving Loan Program Criteria, and Application as revised, and an Ordinance amending the Municipal Code authorizing review of Revolving Loans under the scope of the Finance and Personnel Committee to the full City Council subsequent to review by the City Attorney. 6. Staff Reports Director Lynch provided the Committee with a copy of the Fy 2017/2018 budget report through August 31, 2017. Nothing significantly changed from last month. Water/Sewer sales are caught up and the new rates went into effect. 7. Any Other Business. None 8. Motion to Adiourn: Alderman Schaefer made a motion, second by Alderman Mihevc, to adjourn the meeting at 64 pm. All ayes, motion carried. Respectfully submitted by Marci Geraghty, Executive Assist/Deputy Clerk. Reviewed and this r°ay of ,®�G���- 2017.