HomeMy WebLinkAboutMN-IURAED-2014-04-15Approved: 6/10/14
108 E. Green Street
Ithaca
Urban
Renewal
Agency
Ithaca, New York 14850
(607) 274-6559
(607) 274-6558 (fax)
MINUTES
ITHACA URBAN RENEWAL AGENCY
Economic Development Committee (EDC)
3:30 PM, Tuesday, April 15, 2014
Common Council Chambers, 3rd Floor, City Hall, Ithaca, NY
Present: Chris Proulx, Heather Filiberto, Doug Dylla, Leslie Ackerman
Excused: Heather Harrick, Jennifer Tegan
Staff: Nels Bohn, Charles Pyott
Guests: None.
I. Call to Order
Chair Dylla called the meeting to order at 4:05 P.M.
II. Agenda Additions/Deletions ― None.
III. Public Comments (3‐minute maximum per person) ― None.
IV. Review of Meeting Notes: March 11, 2014
Bohn noted the March 11, 2014 meeting did not have a quorum of Committee
members, so only unofficial notes have been generated.
V. Community Lending
A. Referral from IURA of Finger Lakes ReUse, Inc. Funding Request to Establish Retail &
Training Center at 214 Elmira Rd.
Bohn noted the IURA Board tentatively approved the Finger Lakes ReUse, Inc. project for
the initial draft of the 2014 Action Plan. There was strong support for the project;
however, the IURA had questions about whether the funding should be in the form of a
loan or a grant. The IURA formally asked that EDC determine what funding type would
be most appropriate for the project.
The original application was for a $105,000 grant; however, the IURA thought the
project may work better using another funding type(s). The applicant will need to have
the available funding in June 2014 to meet their schedule to open the enterprise by
September. Additional funding could be provided later for such things as signage,
fencing, lumber yard, etc.
IURA EDC Minutes
April 15, 2014
Page 2 of 6
Bohn noted that extracting certain financial figures from the application is a little
complicated, since only tentative projections are available for most major elements of
the project. No significant loan commitments have been secured to match IURA
financial assistance and collateral is thin. According to the sponsor’s budget projections,
the applicant would generate just enough revenues to repay the loan to renovate the
building, but the sponsor also needs to initiate a large capital campaign to pay off the
acquisition loan. Since there are so many unknown factors associated with the project,
if something went serious wrong, the applicant would have very little financial flexibility.
With no equity or cash on‐hand the applicant would have no resources to cover any
contingencies. If funding assistance took the form of a loan, the IURA’s collateral
position would be at best as a third mortgagee and in fourth position on the assets,
which is essentially worthless. In light of all this information, it may be more prudent to
treat any IURA funding assistance as a forgivable loan or outright grant.
Filiberto noted it would be an uphill effort for the applicant to raise all the money it
needs to buy the building in the next five years.
Ackerman asked what it would mean in practical terms to fund the project as a grant vs.
a loan, and if there would be a genuine expectation of repayment.
Bohn recommended funding it as a deferred loan, so it could be funded through the
CDBG loan fund and accompanied by some performance requirements (e.g., increasing
capacity, jobs, etc.). There would be no expectation of repayment, unless the applicant
sold the property or otherwise violated the terms of the contract. Implementing the
funding in this manner would give the applicant immediate access to the funding, which
would be critical for project success. A forgivable loan structure provides the IURA with
much more control over use of funds and compliance issues than a grant.
Proulx asked how the applicant believes it could double its revenue without decreasing
its revenue stream from its Lansing operations. Bohn replied the applicant actually does
project some decreased revenue from its Lansing operations. Proulx noted that when
one examines the increased revenue figures from the new site, that does not seem to
be the case. Bohn explained that the applicant would not open the new site until
September 2014. The Lansing site would presumably remain stable, while the new
Ithaca site would grow dramatically, including considerable revenue potential for sales
of building materials (which have been seriously hampered by the inherent restrictions
of the Lansing site).
Filiberto observed the applicant maintains excellent, thorough sales records.
IURA EDC Minutes
April 15, 2014
Page 3 of 6
Dylla noted the applicant has 7 FTEs listed for its Lansing site, which is a considerable
amount of overhead to carry while it launches the new site. Bohn noted he asked the
applicant if they would consider downsizing and they replied, yes, though they thought
the Lansing operation will be financially self‐supporting. It did not include that potential
scenario in its proposed budget, so that may represent a modest cash flow cushion.
Bohn noted that the applicant thinks it is important to be open 7 days a week in its line
of business, so it does have certain minimum staffing requirements.
Proulx noted that Bohn is recommending a deferred loan over a traditional loan, since it
is a high‐risk scenario. He asked if the IURA is not, in that case, conceding it does not
expect to be repaid. The IURA should at least place itself in the position of possibly
recouping its investment.
Bohn responded that it is the IURA’s experience in situations like this one (involving a
non‐profit with no financial reserves) that it tends to be a considerable effort for IURA
staff to manage a repayable loan. Furthermore, IURA does do not have any real
leverage to obtain repayment. In practical terms, any IURA loan would be an unsecured
loan with a large balloon payment due. A conventional loan would also risk
undermining the applicant’s efforts to obtain other loans necessary to undertake the
building renovation. Bohn suggested a 10‐year term for the loan. He noted the
applicant dedicates a large portion of its income to paying a living wage to staff, which is
a primary IURA goal.
Ackerman asked if there were any ‘wiggle‐room’ to enable making it a conventional
loan, but with a certain amount of flexibility if certain conditions can be met. Bohn
replied that the IURA has issued loans in the past for which the balance was reduced if
specific objectives were met (e.g., job creation, committing to repaying the IURA as a
percentage of operating income). This would be possible, if complicated.
Dylla noted it would definitely be preferable to use IURA funding assistance to
strengthen the applicant’s equity and assets, making it a much stronger organization
with more growth potential.
Ackerman observed that if the loan did not succeed from the outset, the IURA could
compel the applicant to re‐examine some of its overhead/operational costs.
Filiberto agreed with Dylla that the applicant would have formidable fundraising hurdle
to negotiate in order to succeed; and large‐scale fundraising is not something it has ever
done before. It is a lot of money for a small organization with a large portion of its
support already in the form of unearned income. She suggested providing funding
assistance as a forgivable loan and tying it to defined outcomes (e.g., job training, job
creation, etc.).
IURA EDC Minutes
April 15, 2014
Page 4 of 6
Dylla asked if there were not some significant overlap with the products/services the
applicant provides and those Significant Elements provides, and even Ithaca
Neighborhood Housing Services (INHS). He suggested there could be some
collaboration among the three organizations. Bohn replied that Significant Elements
identifies its products/services as more specialized than the applicant’s, so there are
probably few overlaps though collaboration may identify mutual benefits. Dylla asked if
INHS could be a major source of the applicant’s materials. Bohn replied, possibly.
Dylla suggested the City/IURA could facilitate the applicant’s access to materials by
requiring developers to offer it first access. Bohn replied the City already does some of
that kind of thing; however, that may not make enough difference to make the project
successful.
Filiberto remarked that she knows the applicant has received requests to disassemble
and remove abandoned structures, but it simply did not have the physical
infrastructure/capacity to store the materials, so it had to turn down the requests.
Bohn reiterated question of whether the Committee believes a loan to the applicant is
realistically feasible.
Proulx responded the answer would seem to be no. He asked how much of the RLF
would have been allocated, if the project were funded through a deferred loan. Bohn
replied it would reduce the ~$400,000 RLF balance by $105,000; however, the current
version of the 2014 Action Plan increases the RLF by ~$142,000 to replenish the fund, so
the RLF would ultimately be increased by ~$40,000. There would be no major impact to
the RLF, asuming IURA replenishes the loan fund as initially planned.
Proulx indicated he is still struggling with the application. The applicant is a successful,
creative, and growing organization; but it would be taking on a large burden to move up
to the next level of growth, and the process for doing so is complicated. There are many
unknown factors. He inquired into the likelihood that the City/IURA would not see any
benefit from the project. Bohn replied by noting that Historic Ithaca encountered some
of the same problems when it bought the State Theater, which drained many of its
resources; however, at this point, the whole endeavor has been successful from a
community development perspective.
Dylla remarked that the new space is unique and ideally situated. The prior owner
already structured generous acquisition financing advantageous to the Finger Lakes
ReUse. Dylla’s personal sense is that the prior owner may very likely be willing to work
with the applicant in five years to ensure the project remains viable.
IURA EDC Minutes
April 15, 2014
Page 5 of 6
Filiberto noted the applicant has a far better chance than many others would have in the
same situation. It is basing its future projections on things it already knows how to do
and it has built a very good track record.
Ackerman noted if the applicant cannot make the project work as planned, it should
simply close its Lansing operation and concentrate its efforts in Ithaca.
Proulx asked if the applicant could subdivide the property. Bohn replied it would need
to get approval from the primary mortgage holder to do that. The applicant is certainly
open to multiple uses on the site. It is conceivable it could have mixed‐uses on the site,
but that is very speculative.
Dylla suggested including a condition about the applicant’s increasing its net assets, net
income, and revenues over expenses, etc. Bohn replied he is sure the applicant would
want to increase those. It would be easier, however, to require the applicant to
perform a more functional task (e.g., submit a draft capital campaign outline within 12
months). At a minimum, the IURA would want to make funding contingent on the
applicant’s being in possession of the funds necessary to open and operate the new site.
Dylla suggested requiring the applicant to shift more resources from its Lansing site to
the new downtown site.
Filiberto agreed with asking the applicant to provide certain documents, like the annual
report and capital campaign status report, in addition to its annual financial reports.
Moved by Filiberto, seconded by Proulx:
Loan Assistance from Community Development Revolving Loan Fund (CD‐RLF)
to Open Ithaca ReUse Center at 214 Elmira Road, Ithaca, NY
WHEREAS, on April 15, 2014, the IURA Economic Development Committee reviewed the
loan application from Finger Lakes ReUse, Inc. for opening the Ithaca ReUse Center
(Retail & Training Center) at 214 Elmira Road, Ithaca, NY, and therefore be it
RESOLVED, that the IURA Economic Development Committee recommends to the IURA
that $105,000 in financial assistance be given to Finger Lakes ReUse, Inc. to be structured
as a 10‐year deferred loan in order to advance funds to the project on a timely basis
(June 2014) and as a means to safeguard the IURA’s investment. No repayment will be
required if Finger Lakes ReUse, Inc. complies with all loan terms, which include regular
reporting on progress of the capital campaign and annual income & expense
statements that track Ithaca and Lansing operations separately. No loan funds will be
disbursed until match funding is secured in an amount to complete renovations to open
the Ithaca ReUse Center.
Unanimous 5‐0
IURA EDC Minutes
April 15, 2014
Page 6 of 6
B. Lease & Loan Repayments Report: March 2014
Bohn explained that the loan repayment lines annotated in red are past due.
Neighborhood Pride is still negotiating with three prospective buyers of its property. It
has ceased payments to its primary lender. Ithaca Coffee Company encountered a
mailing address issue that was subsequently resolved. It has a consistent history of
paying on time. The State Theater is delinquent. Bohn will be contacting them about
the situation. One of the Band Wagon Brewpub’s payment checks was returned.
Although it has now made one payment, it remains 2 months delinquent. It may be
experiencing some cash‐flow problems, which may be a seasonal problem, although
other issues may also be involved. Its management has stated that there is no problem.
The Finger Lakes Independence Wine Center is defunct and those funds are
uncollectable.
Bohn reported that all parties are current on their leases, except Southside Community
Center’s Recycle Ithaca's Bicycles (RIBs) program, which is one month late. Bohn will be
following up with them. In ever other respect, the lease report is good.
VI. Adjournment (Next Meeting Date: 3:30 PM, Tuesday, May 13, 2014)
The meeting was adjourned by consensus at 5:03 P.M.
— END —
Minutes prepared by C. Pyott, edited by N. Bohn.