Adopt Resolution #25-068 Approving 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 City Council to confirm the business type qualifies for the program by approving the loan.  Upon initial 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 Council to confirm this business qualifies for the restaurant subsidy program and it it 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 but it really is pretty consistent with how many of today's restaurants are operating.    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 moving forward with the cost of underwriting the Loan and UCC Filing that would be required.  King Baguette has 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, paid for a building permit  (includes the SAC and WAC fees).  Approval of an SAC and WAC Loan would require a reimbursement of $13,881, execution of a 5-year forgivable loan and a UCC filing for equipment onsite.

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.  The EDA reviewed this request at the March 13th meeting and made a determination that the restaurant qualifies for the SAC and WAC Deferral Program,  Based on this recommendation 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 is required to pay $5,949 (30%) for the SAC and WAC charges, underwriting closing costs estimated to be around $1500.  The financing of this deal would 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 contingently approved by the Council.  The Applicant has already provided most financial information/projections needed to complete underwriting but a few more pieces of information are needed. 

Loan Approval / Qualification Recommendation

1.  Approval of a $13,881 (70%) SAC and WAC loan to King Baguette; contingent on satisfactory underwriting and city attorney review. (EDA Recommendation)
2.  Approval of a $________ (__%) SAC and WAC loan to King Baguette; contingent on satisfactory underwriting and city attorney review.
3. Something Else

Under the assumption of a 70% SAC and WAC loan of $13,881, the breakdown of funding would be as follows:
$5,183.50 - City Water Fund
$8,697.50 - EDA Fund

The unencumbered EDA fund currently has balance of approximately 1.4M