6.0. 7.0. 8.0. EDSR 11-09-1998 - Laserfiche WebLink

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EDA Agenda Memo November 9, 1998 Page 2 • 7. Recommendation to Council on Sherburne County Business Development Fund Issue Michael Darger, Director of Economic Development for Sherburne County, will be available at this EDA meeting to request an EDA/Council commitment to the Sherburne County Business Development Fund. Staff is supporting this fund by recommending that the EDA requests the Council to approve the city's participation in the fund by pledging to invest up to $250,000 in FDIC insured certificates of deposit with area banks to create a pool of funds to attract/retain industrial and manufacturing businesses in Sherburne County. EDA action will be forwarded to the City Council for final approval on November 9, 1998. Background The Sherburne County Business Development Fund is an interest rate • buy-down program. There will be a number of"investors" in the program such as cities, the county, banks, utility companies, etc. Each investor will pledge to participate in the program by committing to invest a specific dollar amount at the time of approval of business applications to the fund. Sherburne County has agreed to pledge an investment of up to $1 million and other committed investors include the Bank of Elk River and First National Bank of Elk River. The investors will take a very minor reduction in the interest rate we could otherwise receive through other investments, thereby passing this savings along to the business. The business applicant will be able to secure a 5 year fixed financing rate at 7%. The difference between what the city could invest its dollars for in other instruments versus certificates of deposit may be approximately 1%. This 1% "loss" of interest income would approximate $12,500 over a 5 year term if all $250,000 of the city's pledge were to be called upon for use immediately. It is unlikely that all $250,000 of the city's pledge would be called upon immediately due to the number of investors in the program and the entire pool of funds which may be approximately $ 2 million. Business applicants are limited to $500,000 per business and staff would estimate the potential $ 2 million fund to last approximately 2 years. Staff also would encourage the EDA and Council to view the $12,500 not as lost • interest income, but as an additional investment in growing the tax base of Sherburne County. One example of a project may be as follows: