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Home My WebLink AboutMN-IURAED-2011-02-10Ithaca Urban Renewal Agency Approved May 10, 29011 108 East Green Street Ithaca, New York 14850 (607) 274-6559 (607) 274-6558 (fax) MINUTES IURA Economic Development Committee 3:30 PM, Thursday, February 10, 2011 Council Chambers, 3rd Floor, City Hall, Ithaca, NY Present: Leslie Ackerman, Martha Armstrong, Jennifer Tegan Excused: Doug Dylla Staff: Nels Bohn, Alice Vargo, Phyllisa DeSarno I. Call to order The meeting was called to order by acting Chairperson Armstrong at 3:35 p.m. II. Additions to or deletions from the agenda ‐ none III. Public comment (3 minute maximum per person) Philly deSarno, Deputy Director of Economic Development for the Planning Department extended an invitation to members to tour the Plantation building at 130‐132 E. State/MLK Jr. Street, which received Restore NY and IURA financial assistance. The second floor apartments are almost complete. IV. Review of minutes for January 11, 2011 meeting No action was taken on the draft minutes. V. Community Lending A. Request for loan assistance from Domenica Brockman & Justin Hjortshoj, dba Petrune, to establish and operate Petrune manufacturing on upper floors at 126‐128 E. MLK Jr./State Street – resolution Bohn reviewed that loan funding is requested to establish textile production on the vacant upper floors of the Petrune building. Members reviewed the credit report prepared by Bob Deemer Jr. of H. Sicherman & Co., Inc. and the projected cash flow statement for the project that shows the textile manufacturing division becoming profitable by year #3. Ackerman expressed skepticism about the assumption that 100% of production will be sold, but noted that the variable cost structure of the enterprise will allow expenses to match actual sales. Justin Hjortshoj reported that insurance proceeds covered all costs to repair building damage from the October fire and that all portions of the building are fully leased. Bohn noted that the Petrune retail business has a history of profitability that if continued would be sufficient to meet debt service payments on this loan. ED Minutes 2/10/11 Page 2 of 6 Tegan moved and Ackerman seconded: CD‐RLF – Loan Assistance for Petrune light manufacturing project Whereas, on October 4, 2010, Domenica Brockman & Justin Hjortshoj applied for $35,000 of loan assistance to develop a textile manufacturing division of Petrune as a component of a $390,000 real estate development project to renovate vacant upper floors of the Petrune building located at 126‐128 E. MLK Jr./State Street, and Whereas, supplemental information was received through January 2011, and Whereas, Domenica Brockman is the sole proprietor of Petrune, and Domenica Brockman and Justin Hjortshoj, husband and wife, jointly own the Petrune building, and Whereas, the primary objectives of the Community Development Revolving Loan Program (CD‐RLF) is provision of direct financing for economic development activities to create employment opportunities, facilitate the expansion of business activity within the City of Ithaca and expansion of the City’s commercial and industrial tax base, and Whereas, the light manufacturing project was developed after an original upper story redevelopment project to create three rental housing units was unable to secure lender financing, and Whereas, a fire occurred in the basement of the Petrune building in mid‐October 2010 requiring closure of the building and insurance proceeds have been sufficient to complete building repairs and clean‐up of fire damage to reoccupy the building in January 2011, and Whereas, a funding gap of at least $35,000 in project financing is projected, and Whereas, the proposed uses of project funds are: $260,000 demolition and construction $ 50,000 architect fees & soft costs $ 50,000 equipment & finish work $ 30,000 working capital $390,000 Total, and Whereas, the proposed sources of project funds are: $250,000 Restore NY grant $ 25,000 insurance proceeds $ 80,000 equity and/or private loan $ 35,000 IURA $390,000 Total, and Whereas, the project implements IURA policy to create new employment opportunities, facilitate expansion of business activity, expand the commercial tax base, and occupy formerly vacant upper floor space on the Commons, and ED Minutes 2/10/11 Page 3 of 6 Whereas, CD‐RLF financing policy establishes maximum loan amount of $50,000 for a retail business and $100,000 for a non‐retail business except where the IURA determines that the project will result in an extraordinary degree of public benefit, and Whereas, the light manufacturing project is projected to create one and one‐half (1½) full‐time equivalent (FTE) employment positions, of which at least 51% will be filled by low‐ and moderate‐ income persons, thereby meeting the CDBG public benefit test to generate at least one FTE job for every $35,000 of assistance, and Whereas, all new full‐time positions are projected to receive at least $12/hour with one silk‐ screening position to be provided with employer‐paid health insurance benefits, and Whereas, at their February 10, 2011 meeting, the IURA Economic Development Committee reviewed the loan application, the credit analysis prepared Robert Deemer Jr. of H. Sicherman & Co., Inc. and applicable provisions of the IURA Economic Development Policy Guidelines and Operating Plan, and recommended the following; now, therefore, be it RESOLVED, that the IURA hereby approves an IURA loan from the Community Development Revolving Loan Fund in accordance with the loan application, and the following terms: Borrower: Domenica Brockman dba Petrune, a NYS sole proprietorship established in 2001 and Justin Hjortshoj and Domenica Brockman, each individually Loan Amount: Up to $35,000 Project: Start up and operation of light manufacturing division of Petrune to produce textiles at 126‐128 E. MLK Jr./State Street, Ithaca, NY Total Project Cost: $390,000 Projected Use of IURA Funds: Professional fees, FF&E, and working capital Term: 5 years and 3 months Interest Rate: 3.5% annually, reset to2.5% upon submission of satisfactory job reports documenting that the job creation goal has been achieved for two consecutive quarters and borrower is in compliance with all other terms of the loan agreement. Repayment: Interest‐only payments for 3months, then level monthly principal and interest payments due to fully amortize the loan over the remaining 5 year term (approximately $637/month @ 3.5%). ED Minutes 2/10/11 Page 4 of 6 Collateral: 1. 1st security lien on all assets of Petrune sole proprietorship, including accounts, inventory, furniture, fixtures and equipment now owned or hereinafter acquired. 2. Assignment of rents and leases covering property located at 126‐128 E. MLK Jr. /State Street, Ithaca, NY. Guarantor(s): 1. Personal guarantees of Domenica Brockman and Justin Hjortshoj, each individually, unless waived upon advice of IURA legal counsel as not providing additional substantial security. Conditions: 1. Creation of at least one and one‐half (1 ½) full‐time equivalent employment positions of which at least 51% must be held by low‐ and moderate‐income persons. 2. Annual submission of federal income taxes and profit & loss statement for the Petrune manufacturing division. And be it further RESOLVED, that the Director of Community Development for the IURA is authorized to issue a loan commitment letter in accordance with this resolution. Carried Unanimously 3‐0 B. Request for loan assistance from Mia Noodle Bar and Restaurant, Inc. to establish and operate a new restaurant at 130‐132 E. MLK Jr./State Street – action was deferred until receipt of additional information. VI. 2011 HUD Entitlement Action Plan A. Review of Neighborhood Investment Committee recommendations There was a discussion on funding constraints & the IURA Neighborhood Investment Committee’s (NIC’s) recommendation for full allocation of CDBG and HOME funds. The NIC recommendation includes full funding for KTC “Next Steps” @ $80K, HI’s Work Preserve Job Training program @ $38K, and the ED loan fund @ $133K. B. Continued review of funding applications for economic development projects/programs – recommendation to IURA The EDC continued its evaluation of economic development funding applications. Unless an ED project creates permanent jobs, provides technical assistance to micro‐enterprises, or is carried out by CBDO, it is categorized as a “public service” activity, said Bohn. Total funding for “public service” activities cannot exceed 15% of the CDBG award ($133K). Following is a categorization of the ED projects submitted for funding: Economic Development Category  KTC Next Steps – CBDO activity ($80K)  ED Loan fund – creates permanent jobs ($133K)  eLab (TA to microenterprises for portion of proposal) ($122K) ED Minutes 2/10/11 Page 5 of 6 Public Service Category  JobsBuild Training Program ($48K, scalable in units of $12K)  Work Preserve Job Training ($38K)  Rebuilding The Wall Job Readiness ($107 request, but open to $30K pilot program) The current list of NIC‐recommended public service projects totals $103K (including Work Preserve), $30K below the public service cap. If non‐ED public services recommended by the NIC are retained there is a maximum of $68K available for ED public services, but any change will require reduced funding/elimination of some project recommended for funding by the NIC. Review of Projects The Committee discussed each proposed project and developed the following list of comments, questions, strengths and weaknesses for each application: JobsBuild – Strong administrative and technical capacity – Provides credentialed skill development – 9‐12 month training program – 51% of past participants were City residents – 48% of past participants are persons of color and/or of Hispanic ethnicity – 50% (13) of participants hired for jobs after completing training in Green Jobs/Early Childhood tracks – Scalable at $12K per beneficiary – Core program will most likely continue in 2011 with or without IURA funding Rebuilding the Wall – Willing to slim down program to $30K pilot program. – No plan for future financial self‐sufficiency. – New program – lots of feasibility questions. – Program addresses great need, but will it be effective? – Do they have skill set and organizational capacity? – Are partners, particularly employers, committed to program? Indicate that they have written commitments from 2 employers to interview their clients, but did not submit written documentation. – What is the value added? No portable accredited skills. – Outcome focused, measured in terms of job interviews, hiring, and job retention. ED Loan Fund – Assists business expansions and Strong economic impact has been provided with recent loans for business start ups, yielding longer lasting impact than many job readiness/training programs start‐ups that create permanent job opportunities. . – Repaid loan funds reused to make additional loans to small businesses. eLab – Too expensive and not sufficiently focused. Unclear exactly how program will operate or who beneficiaries will be. ED Minutes 2/10/11 Page 6 of 6 Work Preserve Job Training – Strong administrative capacity & program feasibility – Plan for financial self‐sufficiency based in increasing retail sales at Significant Elements – Established curriculum with modules of employment skills, but no transferable credentials – Low IURA cost per beneficiary KTC Next Steps – Strong administrative and technical capacity to operate program. – Plan for future financial self‐sufficiency through a fund raising campaign – smaller 2nd year funding anticipated, then self‐sufficient after 2 years. – Question on characteristics of trainees – do they have significant obstacles to employment? – High IURA cost per beneficiary due to trainee stipend expense. – Elimination of 1 trainee position would translate into savings of $16K. VII. Staff Report A. Project updates ‐ none B. Other ‐ none VIII. Next meeting date: Continuation Meeting February 15, 2011 Regular Meeting March 8, 2011 IX. Adjournment The Meeting was recessed by consensus at 5:05 p.m. until continuation at 3:30 PM, February 15, 2011 END Minutes prepared by A. Vargo, edited by N. Bohn j:\community development\admin files\minutes\edc\2011\2feb\ed minutes 2‐10‐11 nb.doc