Consider Loan Application for Restaurant Subsidy Program and Policy Amendment: Case of Stories Foundation 

Purpose / Background:
The purpose of this case is to review the proposed request for assistance and to consider amending the current Restaurant Subsidy Program.  Feedback from residents, businesses, visitors, and elected/appointed officials states that attracting more restaurants is a priority for Ramsey.  On February 8, 2021 the City of Ramsey adopted a new SAC/WAC Assistance program.   This Restaurant Subsidy Program is only for "new for-profit restaurants" but does have the ability to consider exceptions for existing businesses that are relocating or expanding.  The city has received an application from Stories Foundation to utilize the Restaurant Subsidy Loan relating to SAC and WAC Fees for a mixed use project. The Restaurant Subsidy Program would need to be amended to allow for non-profit applicants and flexibility relating to mixed use projects. 

The SAC Charge (Metropolitan Council) is estimated to be $37,275 and the WAC Charge (City of Ramsey) is estimated to be $19,965.  These fees total $57,240. Stories Foundation is requesting to utilize the 70% Restaurant Subsidy Program.  Staff supports the application and consideration for financial assistance.

N/A

Observations:
Project costs for this new mixed use project are approximately 2.2M.  The owner is securing $1.67M in bank financing, an injection of 558,071 in cash and a city SAC and WAC loan.  Staff supports approval of a 70%, 0% interest loan, forgivable loan for both the SAC an WAC Fees in the amount of $40,068; subject to satisfactory underwriting.  The applicant would also be required to pay $17,172 (30%) for the SAC and WAC charges upfront and closing costs estimated to be $500-$750.  The financing of this deal would likely include a loan agreement, and a subordinated UCC filing or mortgage against collateral owned by the applicant.   Staff will work with the applicant and CMDC to underwrite and put together the appropriate documents to secure the City interest.

The current Restaurant Subsidy Program would require an amendment or a City Council exception to allow for this non-profit business to be eligible. The program has been extended and/or modified multiple times in the past to address current economic conditions and City retail/restaurant goals. 

Alternatives:

Loan Approval

1. The EDA recommend to the City Council approval of 70%, 0% interest loan, forgivable loan for both the SAC and WAC Charges in the amount of $40,068 for Stories Foundation (would also need to amend the Restaurant Subsidy Program to allow for non-profit businesses to be eligible for the loan)
2. Something else

Restaurant Subsidy Program Changes

1. The EDA could recommend to the City Council to amend the Restaurant Subsidy Program to allow for non profit businesses to be eligible for loans. (see attached draft policy)
2. Something else

Funding for financial assistance would come from the City's EDA Cash Balance.  The EDA Cash Balance is estimated to be $1.137M.

 

Staff recommends

Loan Approval

The EDA recommend to the City Council approval of 70%, 0% interest loan, forgivable loan for both the SAC and WAC Charges in the amount of $40,068 for Stories Foundation

and; 

Restaurant Subsidy Program Changes

1. The EDA could recommend to the City Council to amend the Restaurant Subsidy Program to allow for non profit businesses to be eligible for loans. (see attached draft policy)

Motion to recommend to the City Council to amend the Restaurant Subsidy Program to allow for non profit businesses to be eligible for loans.

and;

Motion to recommend to the City Council approval of 70%, 0% interest loan, forgivable loan for both the SAC and WAC Charges in the amount of $40,068 for Stories Foundation; subject to satisfactory underwriting.