HomeMy WebLinkAboutMN-IURAED-2013-03-14Approved: 4/9/13
Ithaca
Urban
Renewal
Agency
108 E. Green Street
Ithaca, New York 14850
(607) 274-6559
(607) 274-6558 (fax)
MINUTES
ITHACA URBAN RENEWAL AGENCY
Economic Development Committee (EDC)
9 AM, Thursday, March 14, 2013
Common Council Chambers, 3rd Floor, City Hall, Ithaca, NY
Present: Leslie Ackerman, Heather Filiberto, Jennifer Tegan
Excused: Doug Dylla
Vacancy: 1
Staff: Nels Bohn, Sue Kittel, Charles Pyott
Guests: Joe Dickson, Chief Operating Officer, e2e Materials, Inc.
I. Call to Order
Vice‐Chairperson Ackerman called the meeting to order at 9:06 A.M.
II. Agenda Additions/Deletions ― None.
III. Public Comments (3‐minute maximum per person) ― None.
IV. Review of Meeting Minutes: February 12, 2013
Filiberto moved, seconded by Tegan, to approve the February 12, 2013 minutes, with no
modifications. Carried Unanimously 3‐0
V. Community Lending
A. Request from e2e Materials, Inc. for Loan Modification (CD‐RLF #27)
Tegan recused herself from discussion and consideration of this agenda item, due to a
conflict of interest as her employer is an investor in e2e Materials, Inc.
Dickson recapitulated the salient details of the proposed loan modification, including a
brief overview of e2e Materials’ history and current status, as reflected in Dickson’s
2/15/13 letter to Bohn.
IURA EDC Minutes
March 14, 2013
Page 2 of 9
Bohn indicated that e2e Materials is current on its loan and has actually been paying
both principal and interest to the IURA. Bohn recommended granting the loan
modification. He clarified there is one change that needs to be made to the language of
the proposed resolution: the financial reporting requirement should be changed from
“audited 2012 financials” to “compiled 2012 financials.”
Ackerman indicated she sees no advantage in denying the request and supports the
modification.
Filiberto moved, seconded by Ackerman:
1st Modification to e2e Materials, Inc. Loan (CD‐RLF #27)
WHEREAS, on November 22, 2011, the IURA issued a $100,000 loan to e2e Materials,
Inc. (e2e) for machinery and equipment to establish a prototyping facility for
production of molded biocomposites located at 239 Cherry Street, Ithaca, NY, and
WHEREAS, on February 15, 2013, e2e requested a loan modification to extend the
interest‐only payment period for an additional 12 months, and
WHEREAS, e2e reports that they did not transition to profitability in 2012 as
projected, resulting in E2e management re‐examining their manufacturing
technology, product offerings and target markets, and a decision to focus on OEM
products utilizing a generation 3 manufacturing process to produce high‐volume,
reliable products, and
WHEREAS, the 5‐year loan bears a 9% interest rate and provided an 2‐year interest‐
only period and monthly payments due to amortize the loan balance over the
remaining 3‐year period, and
WHEREAS, the IURA loan is secured by a shared 1st security interest in machinery and
equipment with Tompkins County Area Development, which provided e2e with
$125,000 of loan financing, and
WHEREAS, as of 1/31/13 e2e is current on the IURA loan, which has an outstanding
principal balance of $97,530.03, and
WHEREAS, e2e has submitted job reporting to the IURA documenting the creation of
5 full‐time jobs filled by low‐ and moderate‐income persons, and
IURA EDC Minutes
March 14, 2013
Page 3 of 9
WHEREAS, e2e further reports they now have 16 full‐time employees working in
Ithaca and have committed to keeping corporate headquarters, research and
development, and sales and marketing function in the City of Ithaca for the
foreseeable future, and
WHEREAS, e2e has requested modifications of terms from lenders and landlords, and
WHEREAS, at their March 12, 2013 meeting, the IURA Economic Development
Committee considered this matter and recommended the following, now, therefore
be it
RESOLVED, that the IURA hereby approves a 1st modification of the loan to e2e
Materials, Inc. (CD‐RLF #27) as follows:
• Loan repayment schedule: establish an additional 12‐month period of interest‐
only payments;
• Loan term: extend loan term an additional 12 months (from 60 months to 72
months);
• Reporting: require submission of (1) status reports to meet internal milestones,
(2) shareholder reports no less than quarterly, and (3) accountant‐compiled
2012 financials by 5/1/13, and
• Event of Default: add cross default provision so that default in TCAD loan triggers
default in IURA loan, and be it further
RESOLVED, that the IURA Chair, upon the advice of IURA legal counsel, is authorized
to execute all necessary and appropriate documents to implement this resolution.
Carried Unanimously 3‐0
B. Request from ItalThai, LLC Seeking IURA Support for Assignment of Loan of
Restore NY Grant Funds for Plantation Building, from City to IURA
Bohn explained that the core impetus underlying the request was the cost overrun
associated with the project, including some unanticipated additional costs incurred in
order to comply with the requirements to syndicate historic rehabilitation tax credits.
Bohn explained that the original Restore NY grant had been converted to a loan in order
to maximize tax credit equity necessary to close the project funding gap. The owner’s
debt amounts to well over the value of the building, so the owner cannot approach a
bank for further financing, since he would be categorized as “underwater”. The owner
had expected at this point in the project he would own an asset, in the building.
IURA EDC Minutes
March 14, 2013
Page 4 of 9
Bohn noted that the owner has to manage the financing he now has. He has asked that
the loan from the City be conveyed to the IURA and subordinated to future loans ― and
eventually designated by the IURA as a grant or a deferred loan. It is important to note,
Bohn remarked, the loan was originally intended as a grant, but converted to a loan as
the only feasible way to close the funding gap.
Ackerman asked why the grant was converted to a loan. Bohn replied that the
calculation of tax credits excludes grants from the tax basis of the project. The tax basis
is not affected by a loan. So the project could attract several hundred thousand dollars
more from historic preservation tax credits if the Restore NY assistance was packaged as
a loan rather than a grant.
Bohn recounted that the original underwriting indicated the project required a $1.15
million Restore NY to be financially feasible. New York State awarded $900,000 and
suggested the gap could be made up with historic tax credits. The owner subsequently
discovered, however, that Restore NY funding is less, as a grant, than as a loan; so, for
that reason, he asked that the grant be converted to loan when he exhausted all other
sources of funds to close the project’s funding gap. He noted that by assuming the
Restore NY loan, the IURA would assume the liability of a potential State clawback
should the property be sold within the first 5 years.
Tegan observed the $900,000 cost overrun seems particularly substantial. Bohn
explained historic tax credits come with numerous requirements, which greatly
contributed to the cost overrun. As a result, the restaurant’s timeline was also delayed
by approximately 6 months, which added substantial interest and holding expenses.
Bohn noted that he is asking the owner to review the financial summary to verify that
the figures are correct.
Filiberto informed the committee the owner had also approached Tompkins County
Area Development (TCAD), which agreed to lend the owner a small amount. She noted
that, when he bought the building, the owner received estimates for the work that
would be needed; however, when the construction began, it was discovered the entire
back wall of the building was rotted out. He was also required to restore the tin ceiling
tiles. Bohn added that a second, asbestos ceiling was also discovered during
construction, which needed to be removed and once again added to the cost.
IURA EDC Minutes
March 14, 2013
Page 5 of 9
Filiberto remarked that the owner had originally envisioned merely purchasing the
building and launching his restaurant; however, the City informed him of numerous
additional options and encouraged him to consider upper story renovations to make the
project eligible for Restore NY assistance. As a result, the project ultimately became too
much of a financial burden. She observed the upcoming Commons redesign project will
only place a greater financial burden on the owner, due to the anticipated traffic
reduction.
Ackerman suggested the owner apply for the Downtown Construction Loan, should it be
funded.
Bohn remarked there is no real disadvantage for the IURA to approve the ItalThai
request, other than the clawback provision mentioned earlier; and there is language
already in the agreement with ItalThai that prohibits the sale of the property during the
clawback period. He added that, at one point, the project been intended to be an IURA
loan, to begin with. The IURA is very familiar with this project, already administers a
portfolio of loans, is actively monitoring the project and is able to consider requests for
loan subordinations in a non‐political environment.
Filiberto remarked she thinks the IURA is a logical place to house a project like this.
In light of the committee’s comments, Bohn noted he would return to the owner and
ask for more information, in time for the next committee meeting.
C. Review of January 2013 Lease & Loan Report
(Not reviewed, due to time considerations.)
D. Loan Pipeline
(Not reviewed, due to time considerations.)
V. HUD Entitlement Program
A. Review of Summary List of 2013 Funding Applications Received
Bohn noted that this meeting serves as the committee’s opportunity to provide its
recommendations to the IURA, regarding the current funding applications. (In 2012, he
remarked, the committee created a detailed scoring system, which it is free to do again,
or it could simply rank the applications numerically in order of preference.) Bohn noted
it is a very competitive process ― all four economic development loan applications will
not necessarily be fully funded.
IURA EDC Minutes
March 14, 2013
Page 6 of 9
Ackerman asked if the application materials mentioned anything about partial funding
awards at all. Bohn replied, no. That is the kind of question that is asked at the public
hearings.
HOSPITALITY EMPLOYMENT TRAINING PROGRAM (GIAC)
Filiberto remarked she did not entirely understand the Greater Ithaca Activities Center’s
(GIAC) Hospitality Employment Training Program application (e.g., who would perform
the training?). Ackerman agreed that it is not clear.
Bohn noted that the GIAC application represents more of an embryonic program; the
application deadline may have come a little sooner than the applicant was prepared for.
Its strength, however, lies in its collaboration with other well‐established local
organizations.
Kittel agreed, noting that Workforce NY was mentioned at every single meeting with the
applicant and is in fact, one of the collaborators on the program.
If the program is successful, Bohn noted, the current application would probably
represent the first year of funding.
Kittel noted that the underlying idea for the program is that its participants would end
up with a solid resumé, along with connections to the hospitality industry (e.g., akin to
the national Hospitality Star model) and work experience in the field.
Ackerman expressed her concern that the applicant is asking for too little funding, for
the number of participants. Kittel explained that is largely because the sponsor wanted
to start off with some realistic expectations.
Ackerman observed that the proposed partnerships do seem like a particular strength of
the application, although she would imagine it would take at least 1‐2 years for them to
fully coalesce.
Bohn observed that the program would help meet EDC’s own job placement goals
(which have suffered, since the lapse of the Commercial Driver’s License training
program).
WORK PRESERVE & WP2 JOB TRAINING PROGRAM (Historic Ithaca)
Filiberto asked how successful the Historic Ithaca program has been. Kittel replied,
since December 2012, it has placed four participants in private employment; so far, the
program’s retention rate has been good.
IURA EDC Minutes
March 14, 2013
Page 7 of 9
Bohn indicated that Historic Ithaca always meets its numbers and has been quite
successful. The WP2 portion of the program would be taking the program and moving it
one more step forward. He noted a 40% success rate is good for this kind of program
which enrolls participants with little to no work experience. He added that Historic
Ithaca’s Board of Directors is also much more robust than in the past; it now has
expertise in areas more directly relevant to the program.
Filiberto remarked that the Historic Ithaca program seems to better meet the funding
criteria than the GIAC one.
Kittel noted that the Historic Ithaca program has made considerable progress since it
was first established.
DOWNTOWN CONSTRUCTION LOAN PROGRAM (DIA)
Bohn noted the Downtown Construction Loan Program’s ultimate impact really depends
on how much negative impact the Commons redesign project will have on retailers. If
the negative impact would be considerable, then he believes there is definitely a need
for the program.
For this kind of program, Bohn indicated it will be very important to ensure it is well‐
structured. One area of possible modification, he suggested, would be to focus on
ground‐floor retail businesses (especially if there is less funding available). Another area
of possible modification would be to focus on primary Commons businesses, rather than
ones further out from the Commons. Bohn remarked that Tompkins Trust Company’s
(TTC) underwriting standards are rather rigorous, so the loans are not likely to be high‐
risk. He also reported he had spoken about the project to IURA consultant Harry
Sicherman, who mentioned he knew of several other programs like it in the state (e.g.,
loans assisting businesses impacted by bridge replacements).
Ackerman observed it is difficult to assess how much difference IURA funding would
make, with this program. Bohn replied it depends on the size of the loans made; but it
is difficult to predict (e.g., the number of applicants eligible for Small Business
Administration loan guarantees would affect the amount of IURA funding required).
GENERAL DISCUSSION & COMPARISONS
Tegan noted she likes all the applications.
IURA EDC Minutes
March 14, 2013
Page 8 of 9
Bohn observed the IURA Board may be the least familiar with the Downtown
Construction Loan Program, so more feedback from the committee on that particular
program would probably be helpful. Filiberto noted it is a good partnership program
and demonstrates the community’s support for the businesses. Bohn added it is also a
good precedent of collaboration with a bank. Ackerman and Tegan both agreed the
Downtown Construction Loan Program is the strongest application.
Of the other two programs, Filiberto noted, the Historic Ithaca one seems the strongest.
Tegan agreed, noting that the GIAC program may need more development (e.g.,
identifying the manager and/or a job description).
Ackerman agreed more information is need for the GIAC program, although she would
actually prefer that program, since it addresses a training area she would like to see
addressed.
Kittel suggested the IURA could fund a smaller start‐up portion of the proposed GIAC
program and assess its outcomes, before funding it any further.
Tegan remarked she would also like to see more industry support for the hospitality
program.
With the number of new hotels being developed over the next few years, Filiberto
observed, there will definitely be increased demand for hospitality workers.
Ackerman asked if the Work Preserve2 program is new. Bohn replied, yes. Ackerman
suggested the committee recommend the IURA fund either one or the other, and ask
the applicant to identify a source of funding for unfunded portion.
Bohn asked if there were consensus to that approach. Tegan replied, yes. She would
like to know the impact of the Work Preserve2 program.
Bohn noted that if IURA does not fund the Work Preserve2 program, Historic Ithaca
would most likely choose to fund the original Work Preserve program, if it had the
choice.
Ackerman noted she is inclined to fund both job training programs at the same level.
Filiberto remarked that Historic Ithaca has better leverage, with more clients, and a
larger impact, so it seems Work Preserve should rank higher than the Hospitality
Employment Training Program.
IURA EDC Minutes
March 14, 2013
Page 9 of 9
B. Recommendation to IURA on Proposed Economic Development Projects Submitted
for Funding Through 2013 Action Plan:
The committee agreed to make the following recommendations to the IURA:
Hospitality Employment Training Program
• fund the program, at less than the full requested amount if necessary
Downtown Construction Loan Program
• a top‐ranked project ‐ fund the program, at less than the full requested amount
Work Preserve & WP2 Job Training Program
• fund the program, at less than the full requested amount
• ask the applicant about program scalability
ED Loan Fund
• fund the program
VI. Other Business
A. Staff Report
(Not presented, due to time considerations.)
VII. Adjournment (Next Meeting Date: 3:30 PM, Tuesday, April 9, 2013)
The meeting was adjourned by consensus at 10:50 A.M.
— END —
Minutes prepared by C. Pyott, edited by N. Bohn.