HomeMy WebLinkAboutMN-IURAED-2014-01-14Ithaca
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)
3:30 PM, Tuesday, January 14, 2014
Common Council Chambers, 3rd Floor, City Hall, Ithaca, NY
Present: Doug Dylla, Leslie Ackerman, Heather Filiberto, Heather Harrick, Jennifer Tegan
Excused: Chris Proulx
Staff: Nels Bohn, Phyllisa DeSarno, Charles Pyott
Guests: Deirdre Kurzweil, Revolving Loan Fund (CD‐RLF) Applicant
I. Call to Order
Chairperson Dylla called the meeting to order at 3:31 P.M.
II. Agenda Additions/Deletions ― None.
III. Public Comments (3‐minute maximum per person) ― None.
IV. Review of Meeting Minutes: November 12, 2013
Tegan moved, seconded by Harrick, to approve the November 12, 2013 minutes, with
no modifications. Carried Unanimously 5‐0.
V. Community Lending
A. Request from Deirdre Kurzweil for Loan Assistance from Community Development
Revolving Loan Fund (CD‐RLF) to Establish New Retail Store at 123. S. Cayuga Street
Bohn noted the proposed store would be situated at the corner of Cayuga and Green
Streets (in the former Morgans location). It would be a $150,000 project, with $50,000
from the IURA and $125,000 from M&T Bank. The remaining $25,000 would be equity.
The project would create 1.5 living wage FTE positions. IURA consultant Sicherman
reviewed the proposal and determined it would involve a higher level of risk, given that
it is non‐essential retail. Bohn noted the applicant has operated a similar business
before and works in the consumer research field. Another positive aspect of the
proposal is that both owners would retain their day jobs and their shared income is
enough to meet the debt service, at least on a short‐term basis. M&T Bank would hold
1st lien position on business assets.
IURA EDC Minutes
January 14, 2014
Page 2 of 11
Bohn noted that the primary collateral for the project would be the owners’ personal
guarantees. The storefront is a high‐profile location that has been vacant for 1.5 years.
It would also be woman‐owned, which is a plus. Bohn noted both he and Sicherman
recommend approval, since it seems a reasonable risk ― a project with a strong vision
and a committed owner with a background in retail operations.
Kurzweil remarked she has had experience running a retail business headquartered in
Maryland, which eventually led her to realize she would love to be a part of the
downtown business community. She has really missed being part of the retail
environment. She served on the Downtown Ithaca Alliance (DIA) Board of Directors for
a number of years, so she has been a part of the strategic planning process for the
downtown area. The concept for the store emerged from her wondering why Ithaca
does not have a retail store devoted to visitors/tourists, and local products and
interests. The location is a gateway location and fills a very important visual space. The
store would not only sell Ithaca‐made and ‐marketed items, but also items from around
New York state, the Finger Lakes, etc. Kurzweil noted she loves the “Shop Local”
movement, which would be a big component of the business. At some point in the
future, in a number of years, she plans on leaving her day job and devote all her time to
the store.
Harrick observed it would be 1 full‐time and 1 part‐time position. She asked if the full‐
time employee would manage the store. Kurzweil replied, yes, although that person
may not manage the store from the very beginning. She stressed she woud like the
store manager to love and know the local area.
Dyllla asked the applicant about her target market. Kurzweil replied she conducted
considerable market research and wants to make sure she does not commit too much to
any single target audience. In terms of marketing, she believes she has enough friends,
colleagues, acquaintances, etc., that it should be a relatively natural process of
leveraging that network. She has also been in the process of identifying her marketing
budget for establishing a presence on the appropriate guidebooks, maps, web sites, and
similar resources necessary to draw visitors. The store opening would take place on
April Fool’s Day, which would be made as special and memorable as possible (including
special events, family activities, musicians, etc.). One of her most critical objectives
would be to establish a high degree of consistency for the store’s operating hours/days.
Tegan observed the location has not had much success and asked if the applicant had
investigated the reasons for that. Kurzweil replied it was her understanding the last
business in the location had some special circumstances that required it to leave. Also,
heretofore, the new Commons had not been completed and there was a certain degree
of ambiguity in terms of the future of the downtown retail market. In her opinion,
locating the store in that location makes perfect sense. She added that the business
before Morgan’s was actually largely successful, but relocated to New York City.
IURA EDC Minutes
January 14, 2014
Page 3 of 11
Ackerman responded that there were occasions when Morgans struggled (e.g., after
Urban Outfitters opened, after the installation of the new crosswalk, when a lot of foot
traffic shifted a block east). Kurzweil replied she thinks the impacts from those changes
are temporary and that there is now a considerable amount of foot traffic in the vicinity,
which will only increase when the Tompkins‐Cortland Community College farm‐to‐bistro
site opens up, as well as other projects, like the renovated Holiday Inn. Kurzweil noted
she has also discussed collaboration opportunities with a local tour group.
Dylla observed there used to be a Made in NY store on East State Street. Kurzweil
replied she is familiar with it; however, that particular store was somewhat different
from the one she proposes. She also plans on avoiding excessive overlap with similar
businesses in the area and establish a good synergy/balance with them.
Ackerman indicated she examined the cashflow forecast and asked the applicant what a
typical sale would be. Kurzweil replied, approximately $15. Ackerman responded that
in peak months the store is listed as making approximately $1,000 a day. That breaks
down to around 70 customers a day, which seems a little high. Kurzweil replied that $15
may be too conservative a figure.
Ackerman observed that the proposed payroll lists both gross wages and payroll
expenses, which work out to be 3% of gross wages; however, she believes payroll
expenses like disability insurance, worker’s compensation., etc., would more likely add
up to 20%, not 3%.(e.g., 6.75% just for Social Security). Bohn suggested it may be closer
to 10%. Ackerman noted, in either case, it does not appear the applicant would be
covering all the necessary payroll expenses.
Kurzweil replied she cannot answer that particular question at this time. She did speak
with True Insurance about the figures and she employed their own figures in her
projections. She does know that when she calculated her own numbers, the numbers
ended up being workable.
Ackerman noted that if the applicant did in fact underestimate the payroll expense, it
would add many thousands of dollars to operating costs, affecting overall cashflow.
Kurzweil responded she appreciates Ackerman’s concern and would check all the figures
to ensure they are realistic.
Tegan asked where the applicant’s own compensation is listed. Kurzweil replied she
does not plan on being compensated for 5 years (or until the loans are paid off), since
both she and her husband have other sources of income.
IURA EDC Minutes
January 14, 2014
Page 4 of 11
Tegan asked what makes the applicant certain the store fits a unique and viable niche.
Kurzweil replied that almost every market similar to Ithaca includes a store like the one
she proposes. Locating all the kinds of items she anticipates selling in a single place is
valuable. The handful of other local stores that carry some of the items she would be
selling are not so easily identifiable/brandable and visible.
Dylla asked if the resolution shoud include a condition requiring a second review of the
projected income and expenses. Bohn replied he would ask the underwriting consultant
to do that.
Moved by Ackerman, seconded by Harrick:
Loan Assistance from Community Development Revolving Loan Fund (CD‐RLF)
to Establish New Retail Store at 123. S. Cayuga Street
WHEREAS, on December 30, 2013, Deirdre Kurzweil applied for a $50,000 IURA loan
to assist in a $125,000 project to establish a new retail store at 123 S. Cayuga
Street, tentatively titled “Memory Box: NY”, and
WHEREAS, the business will sell gifts, clothing, souvenirs of Ithaca and the Finger
Lakes and locally crafted art and food products, and
WHEREAS, the primary objectives of the Community Development Revolving Loan
Program (CD‐RLF) are 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 project is projected to fill a high‐profile, vacant storefront and create
1.5 (one and one/half) full‐time equivalent (FTE) employment positions, of which at
least 51% will be filled by low‐ and moderate‐income persons, and
WHEREAS, the proposed use of project funds is:
$10,000 Leasehold improvements
$20,000 Furniture, fixtures and equipment (FF&E)
$44,200 Working capital
$10,000 Marketing
$30,000 Inventory
$4,500 Professional fees
$6,300 Other
$125,000 Total, and
IURA EDC Minutes
January 14, 2014
Page 5 of 11
WHEREAS, the proposed sources of project funds is:
$50,000 Bank loan (40%)
$50,000 IURA (40%)
$25,000 Equity (20%)
$125,000 Total, and
WHEREAS, the loan proceeds will be used for the purchase of furniture, fixtures &
equipment and working capital, and
WHEREAS, CD‐RLF financing policy establishes maximum loan amount of $100,000
for a non‐ retail business project provided the project creates at least one FTE job
for every $35,000 of loan assistance, and
WHEREAS, the IURA particularly seeks to assist projects that generate living wage
jobs ($12.62/hour plus health benefits or $13.94 w/o health benefits), fill vacant
storefronts, and assist Minority and Women‐owned businesses (M/WBEs), and
WHEREAS, Kurzweil projects 100% of the employment positions created will earn a
living wage of $13.94/hour, and
WHEREAS, the storefront at 123 S. Cayuga St. has been vacant for over 18 months,
and
WHEREAS, the new business will be 51% woman‐owned, and
WHEREAS, the proposed project will locate in an existing building and IURA funding
will not be used for any construction activities, therefore the project is a
categorically excluded activity pursuant to 24 CRF 58.35(b)(4) of the National
Environmental Protection Act (NEPA) and the loan constitutes a Type II action
under the City of Ithaca Environmental Quality Review Ordinance, and is not
subject to further environmental review, and
WHEREAS, at their January 14, 2014 meeting, the IURA Economic Development
Committee reviewed the loan application, a credit analysis prepared by H.
Sicherman & Co., Inc. and applicable provisions of the IURA Economic Development
Policy Guidelines and Operating Plan, and recommend the following; now,
therefore, be it
WHEREAS, at the request of the Committee the payroll expense line in the
projected cash flow projections have been confirmed by Kurzweil with the Small
Business Development Center staff at SUNY‐Binghamton to include all appropriate
expenses, including FICA, Medicare, Unemployment and Disability, and
IURA EDC Minutes
January 14, 2014
Page 6 of 11
RESOLVED, that the IURA hereby approves a loan from the Community
Development Revolving Loan Fund (CD‐RLF) in accordance with the loan
application, and supplemental submissions, subject to the following terms:
Borrowers: A to‐be‐formed New York State limited liability company
controlled by Deirdre Kurzweil
Loan Amount: Up to $50,000
Project: Establishment of a new retail store at 123 S. Cayuga
Street, Ithaca, NY.
Total Project Cost: $125,000
Projected Use of IURA
Funds:
Purchase of furniture, fixtures and equipment and
working capital or any other eligible non‐construction
project cost.
Term: 5 years, 3 months (63 months)
Interest Rate: 3.5% annually, reset to 2.5% 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 3 months, then level monthly
payments of principal and interest in order to fully
amortize the loan over the remaining 60 month term
(approximately $910/month).
Collateral: 2nd lien on all business assets of the borrower LLC to
include accounts, inventory, furniture, fixtures and
equipment now owned or hereinafter acquired, behind
only a lien by M&T Bank
Guarantor(s): Personal guarantees of Deirdre Kurzweil and Todd
Kurzweil, joint and several.
IURA EDC Minutes
January 14, 2014
Page 7 of 11
Job Creation
Requirement:
Creation of at least 1.5 (one and one/half) FTE
employment positions of which at least 51% must be held
by low‐ and moderate‐income persons. At least one FTE
position must be created no later than 10 days after the
store opening as a condition of further loan
disbursements.
Living Wage Requirement: Payment of at least a living wage ($13.94/hour) to each
employee hired as a result of the project.
Conditions: 1. Evidence of bank financing commitment in sufficient
amount to complete the project.
2. Evidence of receipt of $20,000 gift to fund equity
commitment.
3. IURA Review and approval of the executed lease
agreement for the lease space at 123 S. Cayuga
Street.
Reporting: 1. Annual submission of accountant‐prepared federal
and NYS tax returns (personal and LLC) and copies of
any additional financial reporting as required by M&T
bank.
2. IURA job reporting, including reporting on wage levels
of jobs created.
3. Documentation of project match funding.
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, and be it
further
RESOLVED, that the IURA Chairperson, upon the advise of IURA legal counsel, is
hereby authorized to execute all necessary and appropriate documents to
implement this resolution.
Carried 4‐1
Tegan opposed
IURA EDC Minutes
January 14, 2014
Page 8 of 11
B. Request from J.G. McGuire, Inc., Operating as Lot 10 Bar & Lounge, for Modification
to Loan Agreement to Change Job Creation Goal to Match Current Stabilized
Employment Level
Bohn noted the applicant is requesting a reduction in the official job count for the
business. Since its launch, it has evolved into a bar with only a modest amount of food
service. Originally, the project was projected to create 10 FTE positions and, until it
reached that goal, it was obligated to provide quarterly reports. At this point in time,
Lot 10 has essentially ended the restaurant portion of its operations and is now
profitable. Lot 10’s employment rolls have stabilized at 6, which meets the CDBG
requirement. So at this juncture, the quarterly reporting is essentially ‘busy work’. Lot
10 would like to amend the original agreement from 10 FTE to 6 FTE.
Ackerman remarked that Lot 10’s letter also refers to a reduction in the loan rate, but
that is not in the resolution.
Bohn replied the loan rate would remain at 4% interest. If Lot 10 had met its original job
goal, it could have gone down to 3.0%; however, Bohn is not recommending reducing
the interest rate.
Moved by Dylla, seconded by Ackerman:
J.G. McGuire, Inc., Operating as Lot 10 Bar & Lounge, Modification to Loan
Agreement to Change Job Creation Goal to Match
Current Stabilized Employment Level
WHEREAS, JG McGuire, Inc. requests a loan modification to reduce the job creation
goal to 6 FTE jobs and to be released from further job reporting; and
WHEREAS, on February 24, 2012, the IURA issued a $64,500 loan of CDBG funds to
JG McGuire Inc. (McGuire) for a $194,5000 project for start up and operation of the
Lot 10 Kitchen & Lounge, a restaurant, lounge and performing arts venue located at
106‐112 S. Cayuga Street, Ithaca, NY, and
WHEREAS, McGuire projected creation of at least 10 FTE jobs and initial job
reporting indicated the business was creating more than 10 FTE jobs, and
WHEREAS, McGuire reported that sales during 2012 fell short of projections leading
management to refocus the business on the bar and lounge business, and de‐
emphasized the restaurant component of the business, and
IURA EDC Minutes
January 14, 2014
Page 9 of 11
WHEREAS, McGuire reports the business has achieved profitability in 2013, though
employee count has declined to approximately six (6) FTE employment positions,
and
WHEREAS, the IURA loan agreement requires the borrower to submit quarterly job
reporting until the job goal is met for at least two consecutive quarters, and
WHEREAS, the job count has stabilized at a little over six (6) FTE jobs for three
consecutive quarters, and
WHEREAS, IURA staff agree that employment levels at Lot 10 Bar & Lounge have
stabilized at 6 FTE employment positions and that further job reporting will not yield
substantial new information, and
WHEREAS, the 6 FTE jobs created results in a ratio of $10,750 of IURA loan
assistance per job created, well below the CDBG public benefit test requiring at least
one job created for every $35,000 of loan assistance, and
WHEREAS, McGuire is current on loan repayments to the IURA, and
WHEREAS, at their January 14, 2014 the Economic Development Committee
reviewed this matter and recommended the following; now, therefore be it
RESOLVED, that the IURA hereby approves a modification to the loan agreement
with JG McGuire to modify the job creation goal to 6 FTE jobs from 10 FTE jobs and
release JG McGuire, Inc. from further job reporting; and be it further
RESOLVED, that the IURA Director of Community Development is authorized, subject
to review by IURA legal counsel, to execute a letter amendment to the loan
agreement to implement this resolution.
Unanimous 5‐0
C. Economic Development Accomplishments vs. Goals Report
Bohn drew the Committee’s attention to the following figures in the report:
IURA EDC Minutes
January 14, 2014
Page 10 of 11
Bohn noted the IURA is falling short on the Living Wage Jobs and Job Training Leading to
Job Placement goals, but doing well with the other goals. The IURA should expect to see
some progress on the job placement goal over the next 12 months, because of the
Learning Web hospital job placement program. In terms of the living wage goal, Bohn
surmised that most of the reason the IURA is falling short is that it primarily funds retail
projects, which tend to be dominated by lower‐income and minimum wage positions.
He indicated the IURA Board did express interest in providing additional financial
incentive(s) for its applicants to provide living wage.
Dylla observed there was a significant drop‐off in 2013, in terms of the number of loans
that were made. Bohn replied that is partly due to the considerable amount of time
spent on the former Masonic Temple loan application. It was also partly due to the
natural local economic cycle. By its nature, the IURA deals with a slightly higher‐risk
segment of the market, so there is a balance to be made between approving loans and
ensuring funds are dedicated to sound projects. Bohn indicated the IURA should see an
active year in 2014.
Filiberto observed the TCAD loan record over the past several years is very similar to the
IURA’s.
Dylla asked if the Committee could review the report semi‐annually. Bohn replied, yes.
D. December 2013 Lease & Loan Repayments Report
Bohn reported that all IURA leases are current, although its loans are in a little worse
shape. He has contacted many of the delinquent parties. Art & Found, the State
Theatre, and the Bandwagon Brew Pub are all now current; however, he has not yet
received any form of communication from Diane’s Downtown Auto. The Argos Inn is
still waiting to close on its final round of tax credit equity, which is not expected to take
place until February 2014. Neighborhood Pride is currently planning on repaying its own
loan from the proceeds of a property sale, which Bohn needs to determine the status of.
Regarding the Finger Lakes Wine Center, Bohn is waiting to close that account out based
on its final accounting, which included some cash in a checking account. Bohn does not
anticipate receiving any more significant payments from it.
E. Loan Pipeline
Bohn announced that a shoe store that has been successful in another community has
been seeking to finalize a lease in the downtown area. In addition, a local chiropractic
firm is seeking to expand downtown.
IURA EDC Minutes
January 14, 2014
Page 11 of 11
VII. Other Business
A. HUD Entitlement Program ― Call for 2014 Funding Proposals
Bohn noted that the Call for Funding Proposals process will be similar to last year’s. All
economic development funding proposals will be reviewed by EDC, before the formal IURA
Public Hearings.
B. Staff Report
Bohn indicated he is working with Steven Lipinski to finalize the listing agreement for
Cherry Street. Lipinski appears to have developed a good marketing plan for the
property.
VIII. Adjournment (Next Meeting Date: 3:30 PM, Tuesday, February 11, 2014)
The meeting was adjourned by consensus at 4:44 P.M.
— END —
Minutes prepared by C. Pyott, edited by N. Bohn.