5.0. 6.0. 7.0. EDSR 08-10-1998 - Laserfiche WebLink

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EDA Agenda Memo August 5, 1998 Page 2 0 • These CD's are federally insured and, by law, municipalities are allowed to purchase CD's as investment instruments. • This "new money" in the amount of$500,000 is now available at the bank to be loaned to the approved business development fund applicant at a reduced interest rate. • The interest rate which has been discussed to be provided to the applicant is 7 to 7.5 percent. • The investors purchase five year CDs, thereby committing their proportionate share of dollars to that investment instrument for a minimum of five years. • Investors may take a small hit on the interest rate with this type of investment versus a more traditional five year investment. • If the City of Elk River is called upon to purchase $50,000 in a five year CD at 5.25 percent versus a five year investment at 6.5 percent, this would mean a loss in interest income in the amount of approximately $4,000. • The participating lender is also possibly going to take a small hit on its interest rate on the loan also. The participating lender however, has the ability to keep the business loan • when it is refinanced at the end of five years at its market interest rates. This is just one scenario of the use of the business development fund program. City staff feels this program can be another advantage in attracting companies from outside Sherburne County or to help existing companies grow and expand. 6. Consider Resolution 98- Approving TIF District No. 20- Supermats, Inc. TIF District No. 20 is scheduled to be before the City Council at a public hearing on August 24, 1998. This Council action is the last formal action for approval of TIF District No. 20. TIF No. 20 is proposed to be used to reimburse the EDA for its purchase of the last remaining lot in the Elk River Industrial Park. The request by Supermats is for the lot to be provided to the project up front at no cost. The amount of equity this lot will provide to the project will be determined by an appraisal of the lot as part of the overall project. This lot appraisal will also determine the maximum level of reimbursement which the EDA can receive from TIF for this • lot.