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EDA Agenda Memo <br /> November 9, 1998 <br /> Page 3 <br /> • <br /> • Manufacturing business approved for $500,000 loan <br /> • 10 investors are called upon to purchase $50,000 each in CDs <br /> with the designated bank <br /> • The designated bank then in turn lends the "new money" to the <br /> business at a rate of 7% <br /> • The CDs which are purchased by the investor are for a <br /> minimum term of 5 years. <br /> There are several issues in this example which are variable, including <br /> that the City of Elk River, as an investor in the program, may be called <br /> upon to purchase any dollar amount of CDs at a designated bank up to <br /> its pledge of$250,000. There may be other instances where the City of <br /> Elk River, as an investor, is not called upon at all to purchase CDs for a <br /> specific project. In that instance, the specific project may be entirely <br /> funded by the city in which it will locate its operations. <br /> Conclusion <br /> City staff has encouraged the formation of this interest buy-down <br /> • program at the county level for approximately one year. It is one more <br /> valuable tool that Elk River will be able to take advantage of as well as <br /> other communities in Sherburne County. This tool will not only help <br /> grow businesses in Elk River, but build tax base for the entire county <br /> through participation from major stakeholders in Sherburne County. <br /> Staff feels Elk River is in a good position to get its share of businesses <br /> through this program, and will work hard to do so. Other investors who <br /> have committed to the program include Sherburne County, in the <br /> amount of$ 1 million, The Bank of Elk River, and First National Bank <br /> of Elk River. In staffs view, every investor, taxpayer, and economic <br /> development organization in Sherburne County stands to benefit from <br /> the results of this program, regardless of the location of the new <br /> business or business expansion project. <br /> Recommendation <br /> Staff recommends the EDA request the City Council to participate as an <br /> investor in the Sherburne County Business Development program by <br /> pledging to commit $250,000. <br /> • <br />