7.1. EDSR 12-21-2020 - Laserfiche WebLink

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bakertitty MUNICIPAL ADVISORS Memo Colleen Eddy, Economic Development Specialist, City of Elk River To: Elk River Economic Development Authority City Council of the City of Elk River From: Mikaela Huot, Director Date: December 21, 2020 Subject: Scott Morrell, LLC Request for Microloan Extension Background The City of Elk River provided a $200,000 jobs incentive microloan to Morrell Trucking in 2015. The company utilized the funds to aid in the acquisition and construction of an expansion to their existing facility. The company also received tax abatement assistance in the incentive package. The project was completed as proposed following award of both the microloan and tax abatement. The company met the job creation goals of 8 new jobs as required pursuant to the City's business subsidy policy and terms of the assistance agreement. Action Item The City received a request to extend the terms of the loan repayment by 2 years. This request and subsequent consideration for granting, is authorized under the terms of the policy, subject to EDA and City Council approval. The company has been making monthly payments on the loan consistent with the repayment terms of the microloan policy over the past 5 years (August 2015-August 2020) with a 2% interest rate and 25- year amortization. Based on current terms of the loan, final payment on the loan was to be made August 1, 2020 and the outstanding balance as of that date was $157,129. The company provided a letter from the Bank of Elk River dated September 17, 2020 requesting that the EDA consider a 2-year extension of the loan to Scott Morrell, LLC as the bank was unable to match the terms. Following receipt of that letter, we requested additional details from the bank to better understand the request. The bank followed up with a letter dated November 18, 2020 providing more details on the request to extend the loan for 2 years. The interest rate the bank could offer for this type of loan is expected to be greater than 4%, and higher than the current microloan rate of 2%. It would also require additional evaluation steps that takes time and money. The bank has indicated the loan would continue to be paid down over the next 2 years, consistent with the past 5 years, and a balloon payment using company assets will be made when the final payment is due. Continued payments on the existing loan structure would provide additional capital and cash flow for the owner to invest in its employees and company during the extended period. Monthly Annual Rent from MO Inc 12,000 144,000 Bank Loan Payments 10,860 include 130,320 City Loan Payments 1,012 12,141 Total Loan Payments 11,872 142,461 Debt Coverage 1.01 1.01 Thank you for the opportunity to be of assistance to the City of Elk River. Please contact me at 651-368-2533 or mikaela.huota-bakertilly.com with any questions or to discuss.