HomeMy WebLinkAboutResolution 1997 (41) ,c, 7
A RESOLUTION TO APPROVE THE POLICIES AND PROCEDURES GUIDELINES
FOR ADMINISTRATION OF A REVOLVING LOAN FUND ESTABLISHED
WITH FUNDS FROM A DEPARTMENT OF COMMERCE GRANT
RESOLUTION NO.
St. Croix County, Wisconsin
WHEREAS, the Wisconsin Department of Commerce awards grants to local units of government,
including counties, under the Community Development Block Grant Economic Development
(CDBG -ED) Program; and
WHEREAS, said grants are paid back to the respective local unit of government according to the
terms and conditions of the loans; and
WHEREAS, if St. Croix County is awarded a grant, it will establish an economic development
revolving loan fund under the guidelines of the Wisconsin Department of Commerce; and
WHEREAS, St. Croix County has prepared policies and procedures guidelines, a copy of which
is attached to this resolution, to oversee administration of all program income which may accrue
to a special revolving loan fund account to be held by St. Croix County.
THEREFORE, BE IT RESOLVED, by the St. Croix County Board of Supervisors that:
1. The policies and procedures guidelines relating to the administration of
a Revolving Loan fund established with a grant from the Wisconsin
Department of Commerce are hereby approved;
2. The Loan Advisory Committee shall have responsibilities as specified in the
revolving loan fund guidelines to carry out the administration of the program.
Dated this day of , 1997
Offered by: Administration Committee
NEGATIVE AFFIRMATIVE
4
Daryl Stan er
Lee KellaheK
•
Lin t ck , /
//
omas Cr 'liana
ST. CROIX COUNTY
f -� WISCONSIN
r . ,� ,. �� COUNTY BOARD OFFICE
' ° s� _ ST. CROIX COUNTY GOVERNMENT CENTER
1 „y l� ' ; ., .. l i b 1101 Carmichael Road
+.;.e:-, ' ;' i 'l +�
�'�:` :' "' 'OS IleLMi" e4 u:uriiii,■ _ Hudson, WI 54016 -7710
'f . -- —` (715) 386 -4610
TO: Honorable Robert Boche, Chair
St. Croix County Board of Supervisors
DATE: April 15, 1997
FROM: ' Daryl Standafer, Chair 'i--.
St. Croix County Administration Committee
RE: Outline of Potential Policies and Procedures
County Administration of a Revolving Loan Program
Introduction
At its April meeting, the County Supervisors will consider various elements to a proposed policies
and procedures manual in the event St. Croix County chooses to participate in the administration
of a supplemental Revolving Loan Fund to support business expansion and job creation
throughout the county. These concepts were approved at the Administration Committee's April
1st meeting, with the expectation that the County Board of Supervisors would consider them at
its meeting on April 15th.
Background
The Wisconsin Community Development Block Grant (CDBG) Program is administered by the
Wisconsin Department of Commerce. It provides local units of government with federal dollars
for use in supporting economic development projects, such as facility expansions or for the
purchase of new machinery and equipment. These funds, received from the US Department of
Housing and Urban Development (HUD) are used to provide grants to local units of government.
The local unit of government uses the funds to provide supplemental financing to an expanding
business. In return for the use of the public funds, the business provides private investment
towards the assisted activity (i.e. plant expansion, equipment purchases, etc.). The exact amount
of the CDBG supplemental loan is determined by the number of new jobs that the business can
create, principally for the benefit low and moderate- income persons and families in a twenty four
month period.
also designate a Revolving Loan Fund (RLF) administer who shall explain the program to
prospective applicants, provide written information, assist applicants in completing requests, and
process requests for financing. Together, the RLF administrator and loan review committee shall
periodically review all financial statements and loan amortization schedules of RLF loan
recipients, review and approve documentation of business expenditures financed with RLF
proceeds, record RLF security instruments, maintain the RLF accounting records (which shall be
segregated from other county accounts), and report annually to the Department of Commerce
regarding the use of the RLF funds.
Loan meetings shall be held on an as- needed basis. Official actions must have the support of the
majority of the total loan review committee. Written records of all program activities including
program meetings, loan applications, and related documents, shall be maintained in appropriate
files. Reasonable administrative funds may be withdrawn from the RLF to cover personnel costs
and other administrative expenses. Local funds may be used in situations when loan repayments
are insufficient to cover administrative costs. Administrative Expenses up to fifteen (15) percent
of program income may be used for direct loan administrative costs. In addition to paying costs
for a RLF administrator, these funds may be used for a) legal costs, b) consulting fees for credit
analysis, business plan reviews, and technical assistance, c) office supplies, typing, copying,
mailing, and related, d) training costs, and e) reasonable expenses, including mileage claims and
per diem claims, of the Loan Advisory Committee. To generate additional revenue, the county
may also establish loan origination fees, closing fees, servicing fees, and other fees to cover
charges directly related to either processing an application or servicing a loan. All fees collected
go to the RLF account.
Loan Application: Requests for a RLF loan shall be made on an application prepared by St.
Croix County. In addition to the application, the business shall submit company financial
statements, personal financial statements, pro formas (including a balance sheet and income
statement and cash flow statement which covers a three (3) year period based on the assumption
that the business will receive the requested loan), credit reports, business plan documents, and
other supporting loan information, including all applicable correspondence. These documents are
considered confidential and are to be used only in conjunction with the review of the RLF
application.
Eligible Applicants/Businesses: Applications may be submitted by a sole proprietor or chief
executive officer of any business wishing to expand an existing operation or establish a new
operation in St. Croix County. No member of the governing body, loan review committee, or any
other official, employee, or agent of the county who exercises decision - making functions or
responsibilities in connection with the implementation of this program is eligible for financial
assistance under the St. Croix County RLF program. No loans will be made which are in
conflict with Wisconsin Statutes (i.e. private interest in a public contract prohibited). Applicants
shall not be disqualified based on age, race, religion, color, handicap, sex, physical condition,
development disability, sexual orientation or national origin.
Eligible Activities: Program loans shall be available to eligible applicants for the following
activities: 1) The acquisition of land, buildings, and fixed equipment; 2) Site preparation and the
loans shall have a maximum term of twelve years which can amortized on a twenty year basis with
the option of refinancing for an additional eight years; and d) In any case, the loan shall not have a
term longer that the terms of the private financing in the project.
Repayment: Terms may include loan amortization schedules with balloon payments.
Amortization schedules shall be established for monthly payments. Payment of principal and or
interest may be deferred for up to one (1) year if merited in the loan application. Interest shall
accrue during the deferment period and may be paid in full or added to the principal of the loan.
Following the deferral, interest and principal shall be paid for the remaining term of the loan.
Prepayment: There shall be no prepayment penalties.
Collateral: St. Croix County shall seek to have the best possible collateral position to ensure
that RLF loans are adequately secured.
Commitments from Private Lenders: Private lenders are required to submit a letter of
commitment in conjunction with a request for a RLF loan. Lender commitment letters should
include a) description of the type of loan being made by the lender (first mortgage, permanent
financing, construction financing, etc.), and b) the amount of the loan, interest rate, term, and
security availability, and repayment schedule and amounts. These commitments shall be obtained
currently with the negotiation of the terms and conditions of the RLF loan to ensure the interests
of St. Croix County are secured.
Action Requested
The St. Croix County Supervisors are asked to:
- Approve the conceptual policies and procedures guidelines of a RLF Program,
thereby giving the supervisors the opportunity to evaluate the applicability
of the policies to a future applicant.
Attachments
- Conceptual Illustration
- Editorial, River Falls Journal
- Pierce County Grant Award, River Falls Journal
- Polk County Grant Award, Hudson Star Observer
A4 River Falls Journal Thursday, December 26, 1996
0 1111 111
Block grant program helps
businesses, communities
Pierce County has
another tool to help new Used wisely, the
and expanding businesses. can be a
St. Croix County doesn't. program
Last Tuesday both plus for both
boards took another look
at a Community Develop- counties.
ment Program, funded by
the U.S. Department of Housing and Urban Development.
The program asks cities, villages, towns and counties to
serve as sponsors follow interest loans to businesses.
The municipality's responsibility is limited. With the
help of advisors, it prepares an application that is reviewed
by Wisconsin Department of Commerce. There is some
administrative work involved, and the loan provides money
to cover those costs.
The Pierce County Board agreed to participate in the
program; the first company to benefit will be The Tile
Shop in the town of Martell.
The St. Croix County Finance Committee's reaction to
the program bordered on hostility. Committee members
objected to giving 4% interest loans to businesses and
complained that other businesses have not had those loans
available to them. They also worried about getting in-
volved in the loan- making business.
Apparently a municipality's role in the program isn't too
complicated: A couple of local cities and towns are already
sponsoring loans and have good things to say about their
experiences.
Last Tuesday St. Croix supervisors had some questions
about the program. They want to know more about the
success and failure rate.
Those questions weren't answered last week, and they
do need to be answered.
Another question faces both boards: Why should a
county help businesses grow?
The answer is simple: Money.
Part of the loan process is a commitment from the
business to create more jobs in the county. At the Tile Shop
many of those jobs will pay $10 to $ 14.50 an hour.
Business growth also means added property tax dollars.
A member of the St. Croix County Economic Develop-
ment Corporation phrased it succinctly: "The only way we
get ahead of the game is with industry." He pointed out that
because new homes usually mean more kids and more
school costs, encouraging housing development isn't cost
effective. But, he said, businesses pay more than they cost.
The grant program isn't without pitfalls. Companies with
borderline potential for success should be weeded out. The
jobs that are created should pay living wages. And; quite
frankly, there are some types of businesses that don't mesh
with the quality of life we want here.
But used wisely the Community Development Block
• Grant program can be a plus for economic development in
both counties.
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I S '( - (,(t I N � o -1 kiorr D PROCEDURES GUIDELINES
Lp � � Pc1----t-A1)(kb evolving Loan Fund
roix County, Wisconsin
Loan Advisory Committee: A seven (7) member loan review committee, comprised of five non-
elected residents from different parts of St. Croix County and two county supervisors shall have
the authority to review, select, and recommend loan applications to the full County Board of
Supervisors for final approval. A minimum of four of the five non - elected committee members
shall possess a lending, accounting, or financial background. All non - elected committee members
shall be appointed by the County Board Chair and shall serve staggered terms. The county shall
also designate a Revolving Loan Fund (RLF) administer who shall explain the program to
prospective applicants, provide written information, assist applicants in completing requests, and
process requests for financing. Together, the RLF administrator and loan review committee shall
periodically review all financial statements and loan amortization schedules of RLF loan
recipients, review and approve documentation of business expenditures financed with RLF
proceeds, record RLF security instruments, maintain the RLF accounting records (which shall be
segregated from other county accounts), and report annually to the Department of Commerce
regarding the use of the RLF funds.
Loan meetings shall be held on an as- needed basis. Official actions must have the support of the
majority of the total loan review committee. Written records of all program activities including
program meetings, loan applications, and related documents, shall be maintained in appropriate
files. Reasonable administrative funds may be withdrawn from the RLF to cover personnel costs
and other administrative expenses. Local funds -nay be used in situations when loan repayments
are insufficient to cover administrative costs. Administrative Expenses up to fifteen (15) percent
of program income may be used for direct loan administrative costs. In addition to paying costs
for a RLF administrator, these funds may be used for a) legal costs, b) consulting fees for credit
analysis, business plan reviews, and technical assistance, c) office supplies, typing, copying,
mailing, and related, d) training costs, and e) reasonable expenses, including mileage claims and
per diem claims, of the Loan Advisory Committee. To generate additional revenue, the county
may also establish loan origination fees, closing fees, servicing fees, and other fees to cover
charges directly related to either processing an application or servicing a loan. All fees collected
go to the RLF account.
Loan Application: Requests for a RLF loan shall be made on an application prepared by St.
Croix County. In addition to the application, the business shall submit company financial
statements, personal financial statements, pro formas (including a balance sheet and income
statement and cash flow statement which covers a three (3) year period based on the assumption
that the business will receive the requested loan), credit reports, business plan documents, and
other supporting loan information, including all applicable correspondence. These documents are
considered confidential and are to be used only in conjunction with the review of the RLF
application.
Eligible Applicants/Businesses: Applications may be submitted by a sole proprietor or chief
executive officer of any business wishing to expand an existing operation or establish a new
operation in St. Croix County. No member of the governing body, loan review committee, or any
other official, employee, or agent of the county who exercises decision - making functions or
responsibilities in connection with the implementation of this program is eligible for financial
assistance under the St. Croix County RLF program. No loans will be made which are in
conflict with Wisconsin Statutes (i.e. private interest in a public contract prohibited). Applicants
shall not be disqualified based on age, race, religion, color, handicap, sex, physical condition,
development disability, sexual orientation or national origin.
Eligible Activities: Program loans shall be available to eligible applicants for the following
activities: 1) The acquisition of land, buildings, and fixed equipment; 2) Site preparation and the
reconstruction of buildings or the installation of fixed equipment; 3) Clearance, demolition, or the
removal of structures or the rehabilitation of buildings and other such improvements; 4) The
payment of assessments for sewer, water, street, and other public utilities if the provision of the
facilities will directly create or retain jobs; and 5) Working capital (inventory and direct labor
costs only).
Ineligible Activities: Program loans shall not be available for the following activities: 1)
Refinancing or consolidation of existing debt; 2) Reimbursement for expenditures prior to loan
approval; 3) Specialized equipment that is not essential to the business operation; 4) Residential
building construction or reconstruction; 5) Routine maintenance; 6) Professional services such as
feasibility and marketing studies, accounting, management services, and other similar services
(legal services incurred in the closing of a RLF loan are eligible); and 7) Other activities that the
loan review committee may identify during the administration of the program.
Ineligible Businesses: Program loans shall not be available for the following businesses:
1) Speculative investment companies; 2) Real estate investment companies; 3) Lending
institutions; 4) gambling operations; 5) Non -public recreation facilities; and 6) Other businesses
not serving the interests of St. Croix County.
Private Funds Leveraged: Loan amounts are subject to the availability of program funds. The
applicant must leverage a minimum of one dollar ($1.00) of private funds for every one dollar
($1.00) of loan funds requested. Higher leverage may be required at the discretion of the loan
review committee.
Loan Funds Per Job Created: At least one (1) full -time position or full -time equivalent
must be created for every $15,000 of program funds requested. The loan review committee may
require lower cost jobs where warranted (i.e. taking into consideration type of jobs, hourly wage,
job training required, and business start-up endeavors).
Financial Feasibility and Business Viability: The applicant must demonstrate that the
proposed project is feasible and the business will have the economic viability to repay the funds.
Low- and Moderate - Income (LMI) Benefits: The project shall provide permanent
employment or will retain existing jobs which would have been lost locally. Of the jobs created to
retain the project, at least fifty one percent of these jobs must be made available to low- to
moderate - income persons as defined by household incomes published by the US Housing and
Urban Development and available through the Wisconsin Department of Commerce.
Interest Rates: The interest rate shall be established by the loan review committee and may
be adjusted during the duration of the loan. As a guideline, the committee shall establish the
interest rate equal to the prime rate as found in the Money Section in the Wall Street Journal , the
day the loan closes.
Loan Terms: a) Working capital loans shall have a maximum term of three years; b) Loans for
machinery, equipment, and fixtures shall have a maximum term of seven years; c) Real estate
loans shall have a maximum term of twelve years which can amortized on a twenty year basis with
the option of refinancing for an additional eight years; and d) In any case, the loan shall not have a
term longer that the terms of the private financing in the project.
Repayment: Terms may include loan amortization schedules with balloon payments.
Amortization schedules shall be established for monthly payments. Payment of principal and or
interest may be deferred for up to one (1) year if merited in the loan application. Interest shall
accrue during the deferment period and may be paid in full or added to the principal of the loan.
Following the deferral, interest and principal shall be paid for the remaining term of the loan.
Prepayment: There shall be no prepayment penalties.
Collateral: St. Croix County shall seek to have the best possible collateral position to ensure
that RLF loans are adequately secured.
Commitments from Private Lenders: Private lenders are required to submit a letter of
commitment in conjunction with a request for a RLF loan. Lender commitment letters should
include a) description of the type of loan being made by the lender (first mortgage, permanent
financing, construction financing, etc.), and b) the amount of the loan, interest rate, term, and
security availability, and repayment schedule and amounts. These commitments shall be obtained
currently with the negotiation of the terms and conditions of the RLF loan to ensure the interests
of St. Croix County are secured.
Adopted this day of ,1997