Consider Loan Application for Restaurant Subsidy Program:  King Baguette

The purpose of this case is to review the proposed request by King Baguette for financial assistance utilizing the Restaurant Subsidy Program.  Staff has received a mostly complete application and is asking the EDA to review the business type to see if they would qualify for the program.  Upon review from Staff there are facets of the project that meet the intent of the program but others that are uncertain.  Feedback from residents, businesses, visitors, and elected/appointed officials states that attracting more restaurants is a priority for Ramsey.   The city has received an application (mostly complete) from King Baguette for financial assistance relating to the 5 units of SAC and WAC Fees for a new restaurant build-out in the vacant building located at 7912 Sunwood Drive NW, Unit 100 in Northstar Marketplace. Staff is asking the EDA to provide feedback to Staff and the City Council as to whether this business qualifies for the restaurant subsidy program and if the EDA is supportive of providing SAC and WAC deferral assistance to the project.

King Baguette Background
King Baguette provides a combination of take-out, drive thru and dine-in services focused on the Vietnamese Banh Mi Sandwich, Vietnamese Pho, Boba Tea and Bakery.  There is over a 450K investment for the applicant as shown in the application.  This is a new restaurant concept for Ramsey and would be a nice alternative to traditional American cuisine.  Staff has spoken with Thao Do (co-applicant) regarding the operation of the restaurant.  She has indicated that customers will be able to order their food at the counter but will also have wait staff taking orders at tables if they prefer. This combination of ordering does not fully embrace the "Full Service" restaurant style that normally comes to mind; it is more of a hybrid in Staff's opinion.  However, Staff would like to have the EDA and City Council determine if they feel it meets the spirit of the program or not.  Below are a few excerpts from the program.  The full policy is attached to this case.

• A full-service restaurant is defined as one that has washable plates, cups and utensils, wait staff, food served at tables, and whose projected SAC/WAC fees are charged at a rate of X unit per seat. 
• Eligible applicants are for-profit restaurant businesses considering new, additional or the expansion of existing restaurants in The City of Ramsey.  Eligible businesses must devote a majority of their floor space to the restaurant concept.  All applicants must be a permitted use in compliance with all laws, zoning ordinances, rules and regulations applicable to the business.  The Ramsey EDA will review each application on a case-by-case basis and reserves the right to exclude activities not consistent with the City’s Comprehensive Plan, or if the concept does not benefit the health, safety and welfare of the community.

The applicant has not provided complete financial information and staff has not worked with a 3rd party (CMDC) to conduct a review of the loan.  The applicant is waiting to get feedback to see if it would qualify for the program before  investment in the restaurant build-out of the space and paying for the building permit; including the SAC and WAC charges.  They have signed a lease and the Landlord has commenced construction of a demising wall for the space at the cost of the Landlord.  King Baguette hopes to open in June.  Staff has been working with the restaurant for over a year and thinks they would be a great addition to the community.
  

None required

The proposed 453K investment would help bring a 1600 SF with Drive Thru King Baguette concept to Ramsey.    The full SAC Charge (Metropolitan Council) is estimated to be $12,425 and the WAC Charge (City of Ramsey) is estimated to be $7,405.  These fees total $19,830. King Baguette is requesting a loan of $13,881 (70% of the Total SAC AND WAC Charges) from the Full Service Restaurant Subsidy Program (See attached). As previously mentioned, King Baguette has an executed lease but has not pulled its restaurant build-out permit and paid the SAC and WAC fees at the time this case was written.  

The project will result in approximately 10+ jobs coming to Ramsey with an average wage of $18/hr.  

The owner is securing $30,000 in private bank financing, providing an injection of cash and is requesting a city SAC and WAC forgivable loan.  If the restaurant qualifies for the SAC and WAC Deferral Program, Staff supports approval of a 70%, 0% interest loan, forgivable loan for both the SAC and WAC Fees in the amount of $13,881; subject to satisfactory underwriting by CMDC.  The proposed funding sources for the loan would be the City Water Fund (WAC) and the EDA Fund (SAC).  The applicant would also be required to pay $5,949 (30%) for the SAC and WAC charges upfront and closing costs estimated to be around $1000.  The financing of this deal would likely include a loan agreement, and a UCC filing against collateral owned by the applicant since King Baguette is not the owner of the real estate.  The applicant leases the space and a real estate mortgage would not be obtainable in this circumstance. Staff will work with the applicant to gather necessary financial information necessary to complete underwriting of the loan if the Loan is recommended for approval by the EDA.  The Applicant has already provided some financial information/projections needed to complete underwriting but a few more pieces of information are needed.  If the EDA supports determines that the project qualifies for the Program, Staff would bring this to the City Council, for consideration.  The applicant does not want to move forward with underwriting of the loan if they do not have approvals by the EDA and Council that qualify them for the program.

Loan Approval / Qualification Recommendation

1. The EDA recommend to the City Council approval of a $13,881 (70%) SAC and WAC loan to King Baguette. 
2. The EDA recommend to the City Council approval of a $________ (__%) SAC and WAC loan to King Baguette. 
3. Something Else

$5,183.50 - City Water Fund
$8,697.50 - EDA Fund

The unencumbered EDA fund currently has balance of approximately 1.4M