HomeMy WebLinkAboutMN-IURAED-2019-03-12Approved: 6/24/19
108 E. Green St.
Ithaca, NY 14850
(607) 274-6565
MEETING MINUTES
ITHACA URBAN RENEWAL AGENCY
Economic Development Committee (EDC)
3:30 P.M., Tuesday, March 12, 2019
Common Council Chambers, City Hall, Ithaca, NY
Present: Chris Proulx, Chair; Doug Dylla, Vice‐Chair; Leslie Ackerman
Excused: Heather Harrick; Charles Hamilton
Vacancies: 1
Staff: Nels Bohn; Charles Pyott; Tom Knipe
Guests: Eric Amos, GreenStar Cooperative Market, Inc.
Brandon Kane, GreenStar Cooperative Market, Inc.
I. Call to Order
Chair Proulx called the meeting to order at 3:33 P.M.
II. Agenda Additions/Deletions
None.
III. Review of Meeting Minutes: February 19, 2019
Ackerman moved, seconded by Proulx, to approve the February 19, 2019 minutes, with no
modifications.
Carried Unanimously 3‐0.
IV. Economic Development Loan Fund Cash Flow Analysis
Bohn explained that the IURA is required by HUD to spend its Community Development Block
Grant (CDBG) Program funds below a certain threshold ― and over the past two years that has
included funds from the IURA’s CDBG Program Income and Revolving Loan Fund. The IURA made
considerable effort to meet the threshold, which it has been successful in doing (e.g., using CDBG
Revolving Loan Fund and Program Income funds for HUD Entitlement Program grants).
Unfortunately, this has also resulted in a significant reduction in the IURA’s available loan fund
balance. Bohn walked through the following “IURA ED Loan Fund Cash Flow Analysis.”
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March 12, 2019
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March 12, 2019
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Bohn noted the Loan Fund Cash Flow Analysis lists the IURA’s remaining loan fund commitments
and obligations. If approved, the $400,000 GreenStar Cooperative Market loan request being
considered today would result in two separate loan disbursements in late 2019, so the IURA would
be able to accommodate that. That would, however, bring the loan fund balance down to a very
low level, so the IURA could not consider new loan applications for up to 12 months. The Loan
Fund Cash Flow Analysis suggests the following approaches for addressing the issue:
Potential Actions:
(1) Earmark 2019 CDBG funds to the Economic Development Loan fund.
(2) Reprogram $125,000 of Housing Development Action Grant (HODAG) funds to replace
Economic Development Loan Funds obligated for the 2018 Chartwell House Phase 2 Project.
The HODAG fund has a balance of $713,600 as of 2/28/19.
HODAG funds may be used for rehabilitation of rental housing, such as Chartwell House.
HODAG loan repayments equal $2,200/month that will replenish the fund in 5 years.
Bohn noted probably the simplest solution would be to identify an activity/project already funded
in 2018 and assign a different source of funds for it. HODAG, for example, could be used for a
housing activity (e.g., Chartwell House).
V. New Business
A. Community Lending
1. GreenStar Cooperative Market, Inc. (GreenStar) Request for Loan Assistance to Relocate &
Expand Flagship Store to 770 Cascadilla St. (PB‐LF #11)
Bohn reported GreenStar applied for a $400,000 IURA loan for its project to relocate and expand
its flagship store to 770 Cascadilla Street. The project is expected to create at least 24 full‐time
equivalent (FTE) employment positions, of which at least 51% will be filled by low‐ and moderate‐
income persons. The IURA’s financial contribution to the project would be critical to the project’s
success. GreenStar has demonstrated considerable success in the community with high sales per
square foot in its stores. GreenStar does not possess any collateral, however, so it would be
expected to secure and pay the loan entirely from its income. The IURA Loan Review included in
today’s meeting materials is a good analysis of the proposal. Bohn recommends approving the
loan, due to the benefit to the community and GreenStar’s robust sales history. There admittedly
remains a moderate level of risk to the IURA.
Amos thanked the IURA for considering the application and stressed that GreenStar’s sales per
square foot are higher than most other co‐ops in the country. GreenStar needs the additional
space to meet unmet demand. Although it is committing to create at least 24 full‐time equivalent
(FTE) employment positions, GreenStar actually expects to create up to 40 FTEs.
Kane added GreenStar has been very conservative in generating the financial assessment of the
project.
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March 12, 2019
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Amos explained that, to reduce expenses, GreenStar will no longer provide the standard 2%
discount on purchases to its 13,000 members. Instead, GreenStar will institute an annual
patronage rebate or dividend system (disbursed in relation to its profits), calculated as a
percentage of store sales per member and the percentage a given member has paid in. GreenStar
is concerned about what would happen if it were not able to meet its debt service ratio, which is
based on EBITDA (earnings before interest, taxes, depreciation, and amortization). Since that does
not include the annual patronage rebate, GreenStar would have to make a choice between the
two.
Bohn noted the pertinent condition of the IURA loan commitment is listed on p.3 of the proposed
resolution, in the “Loan Covenants” section, which states:
“No payment of patronage rebates or other distribution of net profits based on patronage
may be made unless the Borrower is in compliance with loan covenants from all
borrowers, including debt service coverage ratios, and is current on all loan payments,
including payments on the IURA loan.”
Bohn explained the IURA would not want patronage rebates to be made if the IURA is not
receiving loan payments, especially since there is no collateral.
Proulx observed that particular language in the resolution may be overly prescriptive. As long as
the IURA is being paid, it should not matter. It would be simpler to amend the language to ensure
GreenStar is at least paying the IURA portion of its debt, before paying its annual patronage
rebate.
Ackerman asked the applicants what would drive the substantial anticipated increase in sales, to
justify the larger space and higher overhead costs.
Kane replied GreenStar’s analysis identified a significant number of potential customers currently
not being served, merely due to factors like a lack of parking capacity. In addition, the market
study identified considerable potential for GreenStar to increase its overall market share. At its
current location, GreenStar is hindered also by its limited product line, which could be significantly
expanded in a larger new space, therefore drawing new customers.
Proulx asked the applicants about the risks involved if the capital campaign does not meet its goals.
Amos replied GreenStar is confident it will reach its $1.5M goal, although it also has $500,000 in a
contingency fund. In addition, GreenStar will be partnering with a regional company to enroll
GreenStar members in solar energy installation plans, which will provide GreenStar with income for
each member it enrolls (as much as $400,000).
Proulx asked about GreenStar’s challenges with its construction budget. Kane replied that, when the
first bid came in, it differed from the schematic design drawings, so GreenStar had to re‐evaluate the
initial design. This resulted in a better design and a scope reduction. The public space was reduced
in size and some of back‐of‐house space was modified.
IURA EDC Meeting Minutes
March 12, 2019
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Dylla asked about the Collegetown store’s future, if the relocation project encounters significant
financial difficulty. Kane replied that sales per square foot at the Collegetown store are very good,
even though it is only in its second year of operation. It is well on its way to meeting sales targets.
Proulx observed the language in the resolution regarding the living wage commitment only requires
the applicant to commit to the “most recent” living wage rate. It is not written to account for future
revisions to the living wage rate. Bohn replied there has been no further discussion with the
applicants about that issue.
Ackerman suggested altering the language of the resolution to refer to the upcoming 2019 living
wage revision by Alternatives Federal Credit Union. No objections were raised.
Kane replied that should be feasible for GreenStar, as long as the employer‐paid health insurance
component is included.
Bohn replied he would make those changes to the resolution.
Proulx wondered if another condition should not be added, requiring GreenStar to have a formal loan
commitment letter from its other lender. He is slightly concerned about the possibility the capital
campaign may fall short of its goal.
Amos replied that GreenStar’s loan terms with its other lender already require raising $1.5M from its
capital campaign, before the closing can take place (probably by the end of May 2019).
Dylla suggested the IURA should include a similar condition. No objections were raised.
Bohn responded he would include language in the resolution to that effect, similar to the language in
GreenStar’s agreement with its other lender.
Ackerman moved, seconded by Dylla:
Loan Assistance to GreenStar Cooperative Market, Inc. (PB‐LF #11)
WHEREAS, on January 15, 2019, GreenStar Cooperative Market, Inc. (GreenStar) applied for a
$400,000 IURA loan for their project to relocate and expand their flagship store to 770
Cascadilla Street, Ithaca, NY; and
WHEREAS, the primary objective of the Ithaca Density District Priority Business Loan Fund
(PB‐LF) is to induce the creation, start‐up and expansion of specific priority business
enterprises in the designated Density District of the community that have been defined by the
community as highly desirable or substantially increases foot traffic thereby strengthening
downtown vitality; and
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March 12, 2019
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WHEREAS, the project site is located within the Density District and a grocery store is listed as
an eligible use for loan assistance through the PB‐LF; and
WHEREAS, the proposed uses of project funds are:
$2,618,432 New equipment
$1,044,792 Pay off existing debt
$521,764 Contingency/cost overrun
$532,052 Working capital
$524,000 Inventory
695,000 Leasehold improvements
484,188 Soft costs
466,911 Professional fees
209,474 Sales tax on equipment
$60,500 Interest during project
$7,157,113 Total, and
WHEREAS, the proposed sources of project funds are:
$2,035,239 Bank financing
$2,000,000 Proceeds from sale of existing building
$1,500,000 Preferred shares – Tier 2 (larger)
$500,000 Preferred shares – Tier 1 (smaller)
400,000 Owner equity – cash from operations
400,000 IURA loan
209,474 Sales tax abatement
60,000 New member equity raise
$52,400 Free fill
$7,157,113 Total, and
WHEREAS, the IURA Economic Development Policy Financing Guidelines and Operating Plan
for the Priority Business Loan Fund normally requires at least one FTE job for every $35,000 of
loan assistance and sets a maximum loan amount of $250,000, and
WHEREAS, the project is projected to create at least twenty‐four (24) full‐time equivalent
(FTE) employment positions, of which at least 51% will be filled by low‐ and moderate‐income
persons, resulting in $16,700 of loan assistance per job created, and
WHEREAS, sales are projected to increase by approximately $10 million dollars by 2021
resulting in significant sales tax revenue to the City, and
WHEREAS, the creation of twenty‐four “living wage “ jobs, increased sales tax revenue,
redevelopment of a vacant warehouse complex, and leverage of over $6.5 million warrants
consideration to waive the maximum loan amount; and
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March 12, 2019
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WHEREAS, as IURA loan proceeds will be used for professional fees associated with
rehabilitation of a non‐residential structure with an increase in size of less than 20%, the
activity qualifies at 58.35(a)(3)(iii) as a Categorically Excluded from the National
Environmental Protection Act (NEPA), but is subject to federal laws listed at 58.5, such as
flood hazard regulations, and
WHEREAS, the project site is not located within a 100‐year flood hazard area and complies
with all other federal laws listed at 58.5, and
WHEREAS, at its March 12, 2019 meeting, the IURA Economic Development Committee
reviewed the loan application, the March 7, 2019 credit analysis prepared by Elizabeth Krause
of H. Sicherman & Company, Inc., and applicable provisions of the IURA Economic
Development Policy Guidelines and Operating Plan, and recommend the following; now,
therefore, be it
RESOLVED, that the IURA authorizes an increase in the maximum loan amount of the Ithaca
Density District Priority Business Loan Fund (PB‐LF) to $400,000 for this project due to the
extraordinary public benefits resulting from this project; and be it further
RESOLVED, that the IURA hereby approves a loan from the PB‐LF in accordance with the loan
application, and supplemental submissions, subject to the following terms:
Borrowers: GreenStar Cooperative Market, Inc., a New York State
consumer‐owned cooperative corporation, established in 1983
Loan Amount: Up to $400,000
Project: Relocation and expansion of GreenStar Cooperative Market to
770 Cascadilla Street, Ithaca, NY.
Total Project Cost: $7,157,113
Projected Use of IURA Funds: Professional fees
Term: 126 months (10 years and 6 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 six (6) months, then level monthly
payments of principal and interest to fully amortize the loan
over 120 months (approximately $3,955.43/month) and
subject to a revised P&I amount upon rate reset.
Loan Collateral: General security interest lien on all business assets including
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March 12, 2019
Page 8 of 10
new equipment, furnishings and fixtures located at the
following three commercial locations:
770 Cascadilla Street, Ithaca, NY
215 N. Cayuga Street, Ithaca, NY
307 College Avenue, Ithaca, NY
Lien to be subordinate to filings of Cooperative Fund of New
England and the financial institution providing the new $2
million loan.
Personal Guarantor(s): None.
Job Creation Requirement: Creation of at least twenty‐four (24) FTE employment positions
of which at least 51% must be held by low‐ and moderate‐
income persons.
Living Wage Requirement: All 24 FTE Covered Jobs created shall be paid at least the
applicable “Living Wage” at the time of hire. The “Living
Wage” is established biennially by the Alternative Federal
Credit Union.
Loan Disbursement: Loan disbursement will occur upon receipt of invoices and cost
documentation as follows:
October, 2019: up to $200,000,
January, 2019: balance of loan amount.
Condition for Loan Closing: 1. Receipt of signed commitment for institutional financing in
an approximate amount of $2,035,239 on terms consistent
with the loan analysis prepared by H. Sicherman &
Company, Inc.
2. Receipt of a copy of the Cooperative’s patronage rebate
policy or written description of the program and how it is
being implemented.
Loan Covenant: No payment of patronage rebates or other distribution of
net profits based on patronage may be made unless the
Borrower is current on all loan payments to the IURA.
Reporting: 1. Annual submission of audited accountant‐prepared
financial statements.
2. Quarterly submission of internally prepared financial
statements during first two years of operations at the new
location, thereafter six‐month internal financial
statements shall be submitted.
3. Documentation of project match funding.
4. Submission of loan agreement in an approximate amount
of $2,035,239.
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
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March 12, 2019
Page 9 of 10
RESOLVED, that the IURA Chairperson, upon the advice of IURA legal counsel, is hereby
authorized to execute all necessary and appropriate documents to implement this resolution.
Carried Unanimously 3‐0
B. HUD Entitlement Grant Program
1. Review of 2019 Economic Development Funding Applications Received
Bohn explained the following economic development applications were received, which the
Committee needs to review and identify the ones it would recommend for funding to the IURA Board:
Project Applicant Request
Finger Lakes ReUse Job Skills Training Finger Lakes ReUse, Inc. (FLRU) $108,029
Work Preserve Job Training: Job Placements Historic Ithaca, Inc. $67,500
Hospitality Employment Training Program (HETP) Greater Ithaca Activities Center, Inc. (GIAC) $122,500
$298,029
Bohn encouraged the Committee not to reduce the requested IURA Economic Development
Revolving Loan Fund amount of $107,000. He would also advise against eliminating the Ithaca
ReUse Center Expansion project funding of $100,000 (forgivable loan).
Bohn observed all three organizations have been pretty successful with job placements, with HETP
possibly performing the best. On the other hand, HETP requested more funding in 2019, than any
prior year. Historic Ithaca has remained steady, both in terms of its funding requests and
performance outcomes.
Dylla asked how the remaining uncertainty around FLRU’s property acquisition would affect the
Finger Lakes ReUse Job Skills Training program. Bohn replied it very possibly could impact the
program, if the organization no longer has a base of operation in the city.
Proulx asked which project IURA staff would recommend eliminating, should the Committee
choose to eliminate funding for a project. Bohn replied he would most likely recommend
eliminating the Finger Lakes ReUse Job Skills Training project, since FLRU already operates a long‐
standing job training program. In addition, FLRU is only now launching its 2018 IURA‐funded job
training program, so the organization would have those resources to draw on, for a year or more.
Bohn added FLRU consistently demonstrates good job training and placement outcomes. It is a
dynamic organization with a large local economic impact.
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March 12, 2019
Page 10 of 10
Ackerman indicated she would prefer to reduce funding for FLRU’s project, even by a significant
amount, rather than eliminate it altogether.
Proulx suggested reducing HETP’s funding to last year’s level ($100,000), Work Preserve to
$60,000, and Finger Lakes ReUse Job Skills Training to $90,000.
Ackerman agreed with reducing HETP to $100,000, but suggested funding Work Preserve at
$37,000, and Finger Lakes ReUse Job Skills Training at $50,000.
Dylla noted he would prefer any funding reductions be as equitably distributed as possible.
Bohn remarked the Committee’s comments, questions, concerns, and suggestions can serve as the
basis for asking the applicants further questions at the April 4, 2019 Public Hearing about how
they would respond to receiving less than the requested funding. IURA staff could also perform
some calculations based on today’s recommendations and determine how best to allocate the
available funding. Additional information from the applicants may also be necessary.
Proulx noted that, since HETP has the lowest match of all three applications (and has had a low
match for years), the Committee might consider reducing its funding by $39,350. Finger Lakes
ReUse Job Skills Training could be reduced by $60,000 to $48,029.
Ackerman suggested reducing Work Preserve funding a little, also.
Proulx responded Work Preserve could be reduced by $7,500.
VI. Other Business
A. Staff Report
Bohn reported that the City of Ithaca’s Request for Qualifications for a Comprehensive Parking
Study was included in the meeting packet for the Committee to review.
VII. Adjournment
The meeting was adjourned by consensus at 5:05 P.M.
— END —
Minutes prepared by C. Pyott, edited by N. Bohn.