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HomeMy WebLinkAbout06-21-2007 Council Economic Development Committee AGENDA City of Iowa City City Council Economic Development Committee Thursday, June 21, 2007 8:30 a.m. Lobby Conference Room City Hall 1. Call to Order 2. Approval of Economic Development Committee Minutes, May 29, 2007 3. Extend the Dream Lease - CDBG application, deferred from May 29,2007 4. Update on Discerning Eye - CDBG application 5. Update on La Reyna - CDBG application 6. Downtown Market Niche Analysis - Staff update 7. Committee time 8. Adjournment MINUTES CITY COUNCIL ECONOMIC DEVELOPMENT COMMITTEE MAY 29,2007 COMMERCE BUILDING, LARGE CONFERENCE ROOM Preliminary Members Present: Regenia Bailey, Connie Champion, Bob Elliott Members Absent: None Staff Present: Wendy Ford, Tracy Hightshoe, Steve Long, Jeff Davidson Others Present: Brenda, Tom Walz, Jeff Edburg, Allan Young (Extend the Dream Foundation); Connie and Alex Legaspi (La Reyna, Inc); Joni and Sam Schrup (Discerning Eye); Melissa Mailloux, Eleanor Matthews, Mary Bosch (Marketek); Nancy Quellhorst, Lorin Ditzler (Area Chamber of Commerce); Gigi Wood (Corridor Business Journal) RECOMMENDATIONS TO CITY COUNCIL: Extend the Dream Lease Elliott moved that the issue be deferred to the June meeting; Champion seconded. Motion carried. La Revna Workina Capital Champion moved to support La Reyna at an amount that can be fully secured by equity they have in their building, up to a cap of $100,000; Elliott seconded. Motion carried. Hightshoe will report to Council. Discernina Eve Workina Capital Champion moved, and Elliott seconded to fund at $35,000 and a 3.2% loan. Motion passed. Hightshoe will present at the next Council meeting. CALL MEETING TO ORDER Chairperson Regenia Bailey called the meeting to order at 10:32 AM. APPROVAL OF MINUTES FROM APRIL 6 AND APRIL 12 Minutes of April 6 and April 12 were approved as distributed. CDBG ECONOMIC DEVELOPMENT FUND APPLICATIONS Extend the Dream Lease Hightshoe provided funding history for the Extend the Dream Foundation lease for the south Gilbert street location. 100% funding was provided for the first three years and 50% for the following three years. The current request is for $10,000 for one year. Extend the Dream Foundation is working with a consultant (Marlene Perrin) on financial management issues, and provides business training for disabled persons. Hightshoe recommends that if sufficient sustained efforts are made to address the financial management issues, and the Foundation could secure additional sources of funding, a lease option would be preferred. Elliott inquired as to the federal government's intent in providing the funds. Hightshoe said that HUD provided funding to communities by formula, but did not dictate how the funding was used. We choose to use a portion of the funds on business development. The committee expressed support and acknowledged the importance of the project to Iowa City. However, concerns were expressed about on-going support with economic development funds since the organization is a non-profit and primarily serves a social need within the community, given that the project will always require a subsidy. Bailey said that she wanted Hightshoe to see the fundraising plans before the committee moves forward. Elliott moved that the issue be deferred to the June meeting; Champion seconded. The motion passed. Extend the Dream Prooertv Acquisition Hightshoe reported that Extend the Dream leases the property at 2218 F Street. It is zoned commercial but contains a rental unit. Hightshoe provided a brief update of the two micro- enterprises currently at the property, Mick's Workshop and RAMP UP. Hightshoe stated that there is a concern that if the property is to be used solely for commercial purposes, the property would have to be upgraded to current commercial building codes. Hightshoe stated that as this project deals with a rental unit that may trigger lead based paint and uniform relocation assistance, Davis Bacon requirements to update the property to commercial standards, and increased reporting/financial management requirements that the project be deferred until occupancy and other related issues are resolved. The organization is an all volunteer organization and compliance with all the applicable regulations will be difficult. Walz provided further background on the current and projected uses of the building, the positive effect on the neighborhood, and the positive reception by the community. Currently rented by the Foundation, the building is located across the street from the building purchased two years ago with CDBG funds (2203 F Street); Walz stressed their great opportunity to acquire the sister building. It is a no-risk situation; 2203 F Street has jumped $100,000 in value in the two years they have owned it. Purchase of 2218 F Street would allow them to occupy the building at $300 a month rather than the current rent of $1,200, and would therefore allow them some operating capital. Hightshoe asked if the rental income from this unit appears in the submitted profit and loss statements. Walz replied that no rent is received from the tenant. The tenant is the owner of Mick's Workshop. Walz stated if this request is granted, Mick would move to the property across the street they own. The Foundation is applying for grants from other venues in addition to this one. The committee concurs with the importance of the project to the community, but is concerned at providing a $100,000 grant, and also does not see the project as economic development; rather, it fits better with public service. This grant will not move forward; no follow-up is needed. La Revna Workinq Caoital Hightshoe explained the background work she does before making a recommendation. Hightshoe stated that when evaluating these proposals, like lenders, she looks at the 4Cs: character, capacity, capital, and collateral. La Reyna is a family-owned specialty grocery store (Latin American cuisine) established in Iowa City in 2004. They request one-time assistance for working capital. These applicants have a good history, having been in business since 1985 in Chicago and then Columbus Junction. They have had great recent growth, their forecasts were completed with the assistance of the Small Business Development Center and seem realistic given the assumptions used, and the owners qualify as mid to lower income. They do have high debt but have a history of being current in their payments. Hightshoe recommends that they be funded to the amount of equity they have in the building or to the extent collateral is available. In order to help them get to the point where they can accurately report financial information and obtain private lender financing at a lower interest rate, she recommends that one of the owners be required to take a class on accounting/financial management reporting (Quick Books) and retain an accounting firm to provide ongoing support, such as 8 hours every month for a certain period of time. Applicant has been denied funding in the past due to reasons such as incomplete financial information. Discussion ensued around the cash flow problems, the result of outstanding loans and two years of lag time between purchase of the building and start of the business. Paul Heath at the Small Business Development Center provided considerable assistance in writing a business plan and preparing to apply for regular lower interest financing. Champion moved to support the La Reyna at an amount that can be fully secured by equity up to a cap of $100,000; Elliott seconded. Motion carried. Hightshoe will report to Council. Discerninq Eve Workinq Capital Hightshoe reported that these applicants provided thorough information. Hightshoe met with their commercial lender, who strongly supports this applicant and states they have the capacity to run the business. Applicant's son and business manager has a BS degree from Iowa and completed the Technical Entrepreneurial Certificate Applicant received a SBA loan, but can't obtain further financing. The commercial lender has a mortgage on the owner's personal residence. They have high debt, but are current on payments and have a history of paying the obligations entered. They are experience a cash flow problem as the build out was significantly more expensive than anticipated and depleted their funds for working capital. The applicant leases the space and has little to no collateral available. The project will retain one position that is paid above the CEBA threshold and does not require more than a high school diploma. Hightshoe recommends full funding of $35,000 with a seven-year loan at 1 % (interest paid monthly or quarterly), with annual principal payments due every December, their highest revenue month. Discussion centered on competition with established businesses. Champion considers competition to be good. J. Schrup pointed out how they differentiate themselves in the eyeglasses market; that they have a more stylized, higher end product, for people looking for something different. Champion moved, and Elliott seconded to fund at $35,000 and a 3.2% loan. Motion passed. Hightshoe will present at the next Council meeting. At 11 :50 a.m., there was a 15 minute recess to allow the consultants time to arrive. DOWNTOWN MARKET NICHE ANALYSIS - CONSULTANT REPORT Meeting reconvened at 12:05. The Downtown Market Niche Analysis is a joint effort of the City of Iowa City, the Iowa City Area Chamber of Commerce, the Downtown Association of Iowa City. Mary Bosch and Eleanor Matthews provided an update on their activities, distributing a schedule of their site visit which detailed the plans for focus groups and the public meeting, for which flyers have been distributed. Ford will make introductions and opening remarks for the city at tonight's public meeting. It was noted that the creative sector is quite different from the other focus group. In first four hours today Marketek did driving and walking tours of the area. They were surprised to discover Coralville, not knowing it existed as such a thriving community. Coralville has a widely dispersed business area, but does not really have a downtown. Iowa City, on the other hand, has a traditional town center, with parking facilities. Unlike others, the Iowa City pedestrian mall works, primarily due to the connection to the university. Marketek will comment on the best and worst of downtown at the Thursday meeting with the council. On first impression they like the downtown, and found it pretty and clean. They also like the square grid layout. Elliott mentioned that perceptively Iowa City has three downtowns: the day time, evening, and late night versions. Bosch asked for someone who knows the properties to walk the town with them. After some discussion, it was determined that Davidson and Ford would go, along with a banker. There isn't much vacant space, but some of the other buildings on the fringes of downtown have steps leading to the entrance-way; which is not viable in the long-term, but can be good for start-up retail business since rent is cheaper. Other vacant spaces tend to be too big for most establishments, and rents are high. The intention is to extend downtown southward, incorporating that area into the downtown area Bosch inquired about signage, such as the blue sign on Dubuque Street because there is not a clear indication where downtown starts or that you have arrived. Davidson indicated that current signage is a University initiative which the Economic Development Committee is coordinating. Quellhorst responded to an inquiry about banners, flower baskets, etc., saying that students leaving bars at 2:00 AM. create too much destruction. Matthews stated that this is a typical college town, and that it is not necessary to spend a fortune. Marketek then distributed an extensive handout of area population characteristics. We do want to include high school students in the survey, which is ready to launch. Ford will work to get to the survey posted on school and university net works. Six weeks are allowed for completion of the survey because that is approximately the time it will take for some people to receive the survey announcement via their utility bills. In other discussion, the committee noted the city's good relationship with the university, but also mentioned that Johnson County is not a favorite with state legislators; because it is considered too liberal. Johnson County is, however, one of 5 growing counties in the state (out of 99 counties), and growing without casinos. Drinking age and bar population is a local issue that will soon be a referendum requiring people to be at least 21 toe in a bar after 10:00 PM. As an employment area, Iowa City is an Island of growth and financial stability. People come from 60 plus mile radius for employment and shopping. Someone will talk to Nancy Quellhorst to enlist employers in having their employees complete the survey. Adiournment Bailey moved to adjourn and Elliott seconded. The meeting adjourned at 1 :02 PM. .Next meeting is scheduled for Thursday, May 31, 12:00 noon, in the Commerce Building, large conference room. Submitted by Carolyn Kohler Council Economic Development Committee Attendance Record 2007 Term 1/23 2/09 2/20 2/27 3/06 3/12 4/06 4/12 5/29 Expires 01/02/08 X X X X X X X X X 01/02/08 X X X X X X X X X 01/02/08 X X X X X X X X X Key: X Present o Absent OlE = AbsentlExcused AbsentlExcused s/pcd/mins/ecodev/2007/5.29-07 ed pt1.doc