HomeMy WebLinkAboutMN-IURAED-2011-04-12108 East Green Street
Ithaca, New York 14850
(607) 274-6559
(607) 274-6558 (fax)
DRAFT MINUTES
IURA Economic Development Committee
3:30 PM, Tuesday, April 12, 2011
Council Chambers, 3rd Floor, City Hall, Ithaca, NY
Present: Leslie Ackerman, Doug Dylla, Jennifer Tegan
Excused: Martha Armstrong
Staff: Nels Bohn, Alice Vargo
Guest: Gary Weissbrot, owner of Buffalo Street Books
Public: Brendon Callahan from WHCU
I. Call to order
The meeting was called to order by Chair, Doug Dylla at 3:30 p.m.
II. Additions to or deletions from the agenda
Bohn requested to delete IV. Review of February 10 and February 15, 2011 minutes.
III. Public comment (3 minute maximum per person) - None
IV. Review of minutes for February, 10 and February 15, 2011 meeting
Minutes were not included in packet
V. Community Lending
A. Request to assign IURA loan from Gary Weissbrot d/b/a Buffalo Street Books to
Buffalo Street Cooperative, Inc. to facilitate community buy-out of the bookstore
(project #9, 2004 CDBG) - resolution
Bohn gave an update on selling the book store to the co-op on condition that the IURA loan is
assigned to the coop and our mortgage on Gary's residence released. Gary wants to use sales
proceeds to repay his unsecured creditors (friends and family @ $67K) and accounts payable. Our
underwriter considers that a secured creditor (IURA) should be repaid before unsecured creditors
in what is essentially a loan workout, but the assignment request results in the opposite outcome
with the IURA remaining as a lender with only a security lien on inventory and FF&E.
There is an alternative proposal to have Gary pay off most of the IURA loan from the proceeds of
his sale of the business to the coop and allow him to become the lender to the coop. To help Gary
to payoff most of the loan rather than liquidate, we are recommending that the IURA accept $80K
as full payment on the $90K loan.
Ithaca
Urban
Renewal
Agency
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4-12-11
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Weissbrot stated that he was disappointed that the IURA has denied his request for a loan. He
also stated that he understood and that the IURA has helped him many times in the past, and he
plans to pay the full amount the IURA is asking. Weissbrot added that he feels there is a real
community desire to keep the bookstore open; he will continue to try to do so.
Motion by Ackerman, seconded by Tegan
Request to Assign loan from Gary Weissbrot d/b/a Buffalo Street Books (formerly
known as the ‘Bookery II’) to Buffalo Street Cooperative, Inc. to facilitate community
takeover of the bookstore (project #9, 2004 CDBG) Gary Weissbrot
Whereas, on March 4, 2011 Gary Weissbrot d/b/a Buffalo Street Books submitted a
request, pursuant to proposal for a community buy-out of the bookstore, to reassign the
IURA loan to Buffalo Street Cooperative, Inc., and discharge of a mortgage lien on
property located at 825 Hector Street, Ithaca, NY, and
Whereas, on May 3, 2006 the IURA issued a loan of $110,000 to Gary Weissbrot for a
$285,000 project to acquire and reopen the Bookery II independent bookstore located at
215 N. Cayuga Street, and create 7.5 FTE jobs at living wages, and
Whereas, on October 2, 2009 the IURA approved a loan modification to reduce monthly
loan payments down from approximately $1,190 to $400 until 2014 to allow full
repayment of all non-IURA business debt, and
Whereas, beginning in January 2014 the loan is scheduled to revert back to principal and
interest loan repayments at 4% interest based on a 10-year amortization schedule on the
remaining outstanding balance (projected to be $80,000, resulting in loan payments of
approximately $810/month), and
Whereas, as of March 31, 2011 the loan is current with an outstanding principal balance
of $88,900.99, and
Whereas, the IURA loan is secured by the following:
• 1st security lien on all business assets of Buffalo Street Books, including inventory
and furniture, fixtures and equipment (FF&E)
• 2nd mortgage on residential property located at 825 Hector Street, Ithaca, NY
• Assignment of $100,000 face value life insurance on Gary Weissbrot
• Personal guarantees of Gary Weissbrot and Elizabeth Weissbrot, and
Whereas, in February 2011, Gary Weissbrot announced his intention to close the
business, and
Whereas, a community appeal was issued by Assistant Manager Bob Proehl for a
community buy-out of this last independent, full-service bookstore in the community, and
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Whereas, as of April 11, 2011, the community appeal resulted in pledges of over
$300,000 of which $223,604.42 in cash has been received, and
Whereas, pledges were received from over 600 individuals of which approximately 400
persons have paid their pledge amount, and
Whereas, on March 24, 2011 the Buffalo Street Cooperative, Inc. (BSC) was incorporated
at the New York State Department of State as a domestic cooperative corporation, and
Whereas, the directors of BSC until the first annual meeting are:
• Bob Proehl
• Aaron Sacks
• Nina Miller
• George Sapio
• Asha Sanaker, and
Whereas, Weissbrot has reached a conceptual agreement to sell Buffalo Street Books to
BSC for $170,000 (including inventory, FF&E and other business assets and with no
liabilities except the IURA loan), contingent upon assignment of the IURA loan to BSC and
IURA discharge of the 2nd mortgage lien on property located at 825 Hector Street, Ithaca,
NY, and
Whereas, funds raised by BSC are insufficient to buy the business, fund a $50,000
permanent working capital fund account, and pay off the IURA loan, and
Whereas, Weissbrot plans to use sale proceeds to retire all non-secured business debt of
$67,000 and accounts payable, and
Whereas, Weissbrot has been tentatively hired by BSC as General Manager of the
cooperative bookstore, and
Whereas, acting as General Manager, Weissbrot has developed a 12-month profit and
loss projection that increases both revenues and expenses by approximately 19%, retains
all current employment positions and adds an additional ½ FTE position, resulting in a
breakeven budget before debt service, and
Whereas, projected increased revenues include the following:
$54,000 – increase sales of books by 10% to $597K (customer loyalty and growth of
“1st class” program)
$25,000 – annual fundraising by For Books’ Sale, Inc., a New York State not-for-
profit corporation created in 2010
$12,000 – annual new coop members @ $250 each
$ 7,000 – new café
$ 2,400 – room rental to art gallery, and
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Whereas, projected increased expenses include the following:
$75,000 – new GM position & ½ FTE cashier, salary increase to Asst. GM, and $0.40-
$0.65/hour wage increases to all other employees
WHEREAS, the Borrower fulfilled all original job creation goals and continue to pay living
wages to all employees, and
WHEREAS, the IURA underwriter, H. Sicherman & Co., Inc. has identified a number of
concerns with a loan assignment that reduces loan security to a 1st lien on inventory and
FF&E, and
WHEREAS, contemplated recommendations to address underwriting concerns for the
requested loan assignment include:
• professional appraisal of inventory
• documentation of collateral value of inventory
• approval of salary and wage levels until business performance goals accomplished
• semi-annual submission of independently audited financial statements to verify
inventory value and financial health of the business
• review and approval of projected pro forma and the business decision-making
process for the cooperative
• placement of net proceeds from the business sale into an escrow account
requiring IURA authorization for withdrawal until full repayment of the IURA loan
or retention of the 2nd mortgage lien and personal guarantees from the original
loan, and
Whereas, an alternative approach to facilitate the community buy-out of the bookstore is
to deny the requested assignment, but approve a discounted payoff of the loan from the
proceeds of the sale of the business, thereby allowing Gary Weissbrot to become the
lender to the BSC, and
Whereas, a discount is appropriate to induce Gary Weissbrot to make a substantial pay
off of the $88,900.99 outstanding principal balance on the IURA loan, avoid other IURA
expenses of a complicated loan assignment, and facilitate the on-going operation of the
bookstore under a cooperative ownership, and
Whereas, continued operation of the bookstore will retain 8 FTE jobs, generate over
$7,000/year in sales tax revenue to the City, prevent the loss of a downtown anchor retail
business and avert a prominent vacant storefront, and
Whereas, IURA staff in consultation with the IURA independent underwriter estimate that
fulfilling due diligence obligations to structure and monitor a loan assignment will require
the IURA to incur initial expenses that exceed $10,000 for IURA staff time, IURA legal
counsel, IURA underwriter consultant services, not counting out-year monitoring, and
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Whereas, the Economic Development Committee reviewed this matter at their April 12,
2011 meeting and recommended the following; now, therefore, be it
RESOLVED, that the IURA hereby denies the request from Gary Weissbrot d/b/a Buffalo
Street Books to reassign the IURA loan to Buffalo Street Cooperative and discharge the
2nd mortgage lien on 825 Hector Street, Ithaca, NY due to the reduction in the quality of
loan collateral, and be it further
RESOLVED, that the IURA hereby finds that facilitating transfer of ownership and
continued operation of the last remaining locally-owned independent full-service
bookstore in the community will improve the social, physical and economic
characteristics of the City of Ithaca, and be it further
RESOLVED, that to facilitate continued operation of the business and repayment of 90%
of the IURA loan, the IURA hereby recognizes receipt of $80,000 as fully satisfying all IURA
loan obligations of Gary Weissbrot and agrees to discharge the 2nd mortgage lien on
property located at 825 Hector Street and release the UCC-1 security lien on business
assets, and be it further
RESOLVED, that the IURA recognizes a loan loss of up to $8,900.99, and be it further
RESOLVED, that the IURA Chairperson is authorized, subject to advice of IURA legal
counsel, to execute any and all agreements to implement this resolution.
Carried Unanimously 3-0
VI. Public Authorities Accountability Law compliance
A. Review of IURA mission statement - discussion
Bohn introduced the new Mission Statement, just adopted by the Agency, but they are
also open to change. This was written by the NI Committee, the Agency would also like to
have input from the ED Committee.
B. IURA Performance measurements – possible recommendation to IURA
Bohn requested that the Committee to fill out the Authority Mission Statement and
Performance Measurements form. The Committee requested a spreadsheet with
information on loan amounts, the length of loans and where projects are located. This
would give them an overview of where money is being concentrated on. Ackerman
stated it would be helpful if they could get information on the history of past loans, who
the IURA helped, their payment history and where they are now. Bohn will have the
spreadsheet for the next meeting.
VII. Other New/Old business
A. Staff report
• Bohn reported there was a meeting with eLab. They wanted to know where they
were in the grant process. This was not a project that has been chosen to be
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funded. Bohn spoke with them about meeting with staff to help with the grant
process and trying to stay on focus. Bohn feels they will be reapplying. The
Committee suggests that they take on one venture at a time and stay focused.
• Bohn updated committee on the status of the Audit. Unfortunately the IURA
cannot send in the Audit, because they need to wait for the City to complete its
audit. The State will not accept the IURA loan without the City’s Audit.
• The City is going to be audited by the State Department
• Restore NY grant funding finally coming through
B. Other
Financial - Bohn gave an update on the following loans:
• Diane’s Auto - she keeps promising to bring in financial information, and to talk,
but hasn’t followed through. This loan is in serious arrears. The committee suggested
that a formal letter to go out to her.
• The Cayuga Wine Center - They are going through a slow period, which they
expected, otherwise they are holding their own.
• The P&C Building - This is on hold until they know more of what is going on. The
hopes are to open by late summer.
VIII. Next meeting date: May 10, 2011
IX. Adjournment
Meeting adjourned at 4:48 p.m.