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HomeMy WebLinkAbout5.b. MCCD Proposal 4 ROSEIVIcUI\TTr EXECUTIVE SUMMARY PORT AUTHORITY Port Authority Date: July 17, 2012 AGENDA ITEM: Metropolitan Consortium of Community AGENDA SECTION: Developers Proposal Old Business PREPARED BY: Kim Lindquist, Deputy Director AGENDA NO. 5.b. ATTACHMENTS: Revised Proposal APPROVED BY: D4) RECOMMENDED ACTION: Review and Provide Comment. ISSUE On May 15, 2012 Staff brought a proposal from the Metropolitan Consortium of Community Developers (MCCD regarding a business development assistance program. At that time, the Port Authority expressed some reservations about the cost allocation and requested additional information about the programs and people served. Some of this information is provided in the Q &A included in the packet. Please also note that it is intended that the program will be evaluated annually and MCCD is not looking for a longer term commitment from Dakota County. Administrator Johnson indicated that the program was also discussed at a recent City Administrators meeting. He indicated that most of the cities were supportive of the program and intended to budget funds for 2013 to allow participation. Under the current draft budget, Rosemount would have funds to participate at the $5,000 level (CDA picking up 1/2 of the cost allocation). The County has approved the 2013 budget which would provide for the '/z cost match. A representative from MCCD is willing to attend a future Port Authority meeting if the Commission desire. Please let staff know and we will make further arrangements. RECOMMENDATION Discussion Item. MCCD Open To Business Proposal Follow Up Questions 1. Past Success. Business start-up success in Hennepin County? The following (and attached report) is a response from Lee Hall, MCCD CFO: Getting back to you on the program results, I am attaching our 2011 loan report. This report outlines the financing we provided last year, broken out by city. As we've been developing the program, we have done financing in cities that are not Open to Business cites, so there's quite a range of locals listed. This report also lists total number of clients and hours for technical assistance. While it does not break those numbers out by city, the vast majority of our work- both assistance and financing- was in Hennepin county, so taking the reported results as a whole I think gives a fair picture of the kind of impact the program can have in the county. Open to Business as a brand /approach really began in 2011. Specifically, we operated programs in Brooklyn Park, and Minnetonka from the beginning of the year, and St Louis Park and North St Paul from 2nd quarter on. We saw the following clients in each of those cities: Brooklyn Park- 75 clients, 5 direct loans, $87,5000 in financing Minnetonka- 44 clients, no direct loans St Louis Park (3 quarters)- 15 clients, no direct loans, $50k in facilitated private financing North St Paul (3 quarters)- 13 clients, 2 direct loans, $110k in financing Customer counts and financing vary pretty widely from city to city, so it's hard to say what's "typical Any new program will take some time to promote and build momentum. Those 1st year programs all renewed, and they are busier now than the program cities that began in 2012. For instance; in the first 5 months this year we've spent 88 hours on St Louis Park clients, and 108.50 on Brooklyn Park clients vs. 30 -40 hours in each of the new programs cities. In our experience, how much activity an individual city gets will depend largely on how the city markets the program. Population size certainly plays a role, but you can see from the numbers above that the city of North St Paul generated similar clients and more financing requests than St Louis Park with approximately 1/3 the total population- largely as a result of the city staff's efforts to make its business community aware of the program. 2. Inclusion of Carver County. Question the link between Carver and Dakota and whether it is the right fit. Is the fee /staffing demand insufficient to serve only Dakota? If another county is included in the service area for an expanded program, is there more synergy /geographic consistency with Hennepin? Where would the staff person be located when serving Carver county residents /businesses /potential businesses? MCCD confirmed that there is no link between Carver and Dakota. This was an internal issue that shouldn't have been reflected in our proposal. MCCD confirmed that Dakota County will receive the services of an F.T.E. While the staff person located in Dakota County might provide services to Carver County, MCCD's other staff will be available to ensure FTE services to Dakota County. 3. Need better understanding of service allocation among DC cities. a. Identify an amount of time (e.g. '/z day every 2 weeks) staff is available to hold office hours at the individual cities? b. Estimate for what each city can expect for their fee. Number of business visits, number of loans MCCD established minimum and maximum service hours when they started the Open to Business program in Brooklyn Center. They found it to be an inefficient and less effective method than simply responding to demand. They are not establishing minimum levels of service for each city, but are also not establishing caps. They view this service as a two -way street, expecting cities to promote the services widely. The goal is to ensure that everyone has the opportunity to access services and that businesses and potential startups countywide have the help and support they need. 4. Is MCCD asking for a minimum time commitment (e.g. 1 year? 2 years The initial contract will be for a 1 year period. MCCD is not asking for commitment beyond this. 5. Fee for small cities and townships. Several comments that $20,000 for rural areas too high. MCCD will reduce this to $10,000 6. Long term commitment. Question for MCCD: If, after one year, some cities want to continue program and others do not. How could MCCD restructure its services to continue to provide services to cities with longer term commitment to the program? All cities in Hennepin County re- committed for a second year, as did North St. Paul. MCCD is confident that the service will demonstrate value and that there will be sufficient demand to continue a program in Dakota County. In the event that some or several cities choose to not renew the service, MCCD will make every possible effort to continue services in some form to cities that want to participate in future years. That said, depending on the participating city(ies), there may be geographical challenges that would require revising the service model. 7. Coordination with MN Community Capital Fund Absolutely. Will co- promote and/or coordinate with any other business lending group requested by the cities. MCCD at Meetings: Lakeville: June 26, 4:30 confirmed Hastings HEDRA July 12; 6:00 p.m. Others? 2011 Open to Business Lending Report „6u.3'k�rJJ Sr, "'rat Y re 0w *vwx,.9 n w S r .0. x 2011 Highlights MCCD helped 86 entrepreneurs secure capital a4 to start, expand or improve 8 1" their businesses. f ,tir` t These 86 entrepreneurs were located in 20 communities i. throughout the metro area. MCCD support enabled our *.Lb, f F. B entrepreneurs to access nearly ii NiCes LLC $5 million in capital for their inneapolis F business projects. 1111111111M1—=•111111 MCCD staff provided valuable technical assistance to 400 About MCCD's Open to Business Loan Program entrepreneurs. Small businesses provide the economic governments. Through our Open to lifeblood for their communities by Business partnerships, we help local Twenty seven metro area generating jobs, filling empty governments create their own business residents received credit storefronts, providing needed goods building loans. support programs targeted at residents and services, and creating wealth. and entrepreneurs in their communities. Credit building borrowers who MCCD has always been "Open to At the end of 2011, six suburban had completed the program Business" a term that describes our municipalities were Open to Business saw their credit scores on -going efforts to provide business partners with another 10 scheduled to increase an average of 33 advice and financing for emerging enroll in 2012. points. entrepreneurs in partnership with metro -area municipal 2011 Lending Program Report MCCD helped 86 entrepreneurs MCCD helped 30 businesses affected secure capital to start, expand or by the May 2011 tornado in north improve their businesses. Thirty -two of Minneapolis access business recovery MCCD's Mission: these entrepreneurs also received loans from the city to help with loans from MCCD. Altogether these 86 building repairs. MCCD also helped To work collectively to entrepreneurs created or retained 488 another 14 businesses obtain jobs for their communities. forgivable loans to help offset some of build strong stable their decline in sales as a result of the light rail construction. communities by Entrepreneurs by Ethnicity In 2011, MCCD provided nearly African 13% $730,000 in direct loans to leveraging resources businesses and leveraged another African American 33% $4.1 million in capital from other for the development Asian 8% sources including banks, our community lending partners, and of people and places. Caucasian 46% owner equity. Latino 1% Location of Businesses that Received Sources of Financing for Assisted Financing Businesses of Total Project Other Businesses MCCD Cost* $115,000 MCCD City Assisted Financing Other $729,902 Andover 1 7,400 Nonprofits $604,500 Blaine 1 40,000 1,070,000 Bloomington 2 65,000 235,000 Govern't Brooklyn Park 5 87,500 682,626 $488,951 Equity Burnsville 2 20,000 27,500 $962.826' Crstal 2 25,000 25,000 Elbow Lake 1 5,800 Golden Valley 1 25,000 25,000 Minneapolis 58 179,902 1,107,325 Bank North St. Paul 2 110,000 110,000 $1,939,471 Oak Grove 1 25,000 25,000 Plymouth 2 40,000 625,000 i Robbinsdale 1 25,000 110,000 Roseville 1 15,000 17,000 Pumphouse Creamery Corporation Saint Paul 2 47,500 615,500 Minneapolis St. Anthony 1 25,000 80,000 tpo+ „nh St. Louis Park 1 50,000 �`,.�"c' rd ra+ `d "'fi.. 4 s i. Wadena 1 7,500 f' White Bear Lake 1 7,500 Woodbury 1 7,500 t Total 86 $729,902 $4,840,651 fl Source: MCCD Loan Program *Includes MCCD Financing, Partner Financing and Owner Equity Technical Assistance 1R' Starting and growing a small business is not easy. Often the technical assistance that MCCD offers can be of more value to an entrepreneur than financing. In 2011 our staff provided over 1,650 hours of technical assistance to 400 With the help of a loan from MCCD, Barb Zapzalka entrepreneurs in the metropolitan area, helping was able to purchase new production equipment for them improve their planning, marketing, and her business, Pumphouse Creamery Corporation. financial management skills. Barb makes all- natural, handmade ice cream and home brewed root beer at her shop at 48th and Chicago in south Minneapolis. R. F. Beardsley Services LLC (pictured on page 1) Established in 1964 under the name CLG Enterprises to manufacture and market equipment and gear used by rodeo performers, the business was bought in 2003 by Richard Beardsley. The company has used its sewing expertise to shift its market focus from rodeo gear to medical gear. For example, the padded vests initially manufactured by the company to protect bull riders have been redesigned and adapted for use by individuals suffering from cystic fibrosis. The company employs a workforce of 20 at its south Minneapolis manufacturing plant. MCCD provided a loan for working capital. MCCD Open to Business L end i ng Report 2011. (612) 789 -7337 Transactional Financing Program Cash flow can be challenging for small contractors who have to buy supplies and pay their employees long before they can bill their customers for a At completed job. MCCD's transactional financing program provides a 44. tremendous benefit to P t contractors working with Salem, LLC community programs and .::4.,.. Brooklyn Park partners. Ilk MCCD partnered with the Greater Metropolitan Housing Corporation's (GMHC) Housing Resource Center to provide a cash flow loan for Salem, LLC, a residential remodeling contractor. The loan enabled the company to cover its early expenses for a GMHC- funded home rehabilitation project in the Phillips neighborhood of south Minneapolis. Salem's Willie McAfee is shown here in front of his company's completed project on 22 Avenue. Credit Building Program In 2011 MCCD worked in partnership with Project for Those borrowers who have been in the program for at Pride in Living's Center for Working Families, Lutheran least a year and at the same time continue to work Social Service's Eastside Financial Center, Build Wealth diligently to improve their credit are making great Minnesota and the Neighborhood Development Alliance strides. Twenty -one participants saw their credit to provide 27 credit building loans to area residents. scores increase by 33 points from an average credit This brings the total to 68 credit building loans since the score of 592 to 625 since starting the program. program started in 2009. Another 10 participants who started the program with no credit score were able to achieve an average Our partners provide financial counseling in conjunction score of 628, with two achieving scores of 700 or with small personal loans from MCCD. This combination better. of counseling with loans is helping program participants improve their credit scores. Better credit scores can mean lower interest rates on car and other loans, and better access to affordable insurance and housing. y r r d 55 IDs" "vr 4 t a fi fi r: w 2011 MCCD Open to Business Program a AnOKA r J ex 3 1 •F AA SfutaGr ON 1 t a V „Ewe,.7 •RAII SlY 1 ii. p M 'i J qpik t A a a 6k n �i f r' 0 CARI/ER t 1 4C'.( 4 A Cdy of Mmneapohs Achy dy DAKOTA Legend Scorr Business Recovery Loan Cental Corndor Forgivaole Loan 11 Credit Building Loan t Direct Loan .~,ti,J Facilitated Loan N J Technical Assistance n Souo•s CUO= '•e,.J∎S Partnerships MCCD has worked with the following partners to help small businesses obtain capital: African Development Center Metropolitan Economic Development Metropolitan Consortium of Association (MEDA) Bank Cherokee Minneapolis Department of Community Community Developers Brooklyn Park Development Corporation Planning and Economic Development BuildWealth Minnesota Neighborhood Development Alliance CCI Surety Neighborhood Development Center 3137 Chicago Avenue Minnesota Department of Employment and Northside Economic Opportunity Economic Development Network (NEON) Minneapolis, MN 55407 Housing and Redevelopment Authority of Northeast Bank the City of Saint Paul Project for Pride in Living Center for Latino Economic Development Center Working Families Unity Bank Phone: Lutheran Social Services Eastside Financial tY Center Venture Bank (612) 789-7337 Capital Sources a ;..;.n MCCD's loan program is funded from a variety of sources, including: Open to Business Program Community Development Financial Institution (CDFI) Fund Rob Smolund, (612) 789 -7337 Brooklyn Park Development Corporation ext.11 Minneapolis Community Planning and Economic Development Minneapolis Empowerment Zone Credit Building Program Minnesota Department of Employment and Economic Development Wells Fargo Community Development Corporation Mara O Neill, (612) 789 -7337 U.S. Bancorp Community Development Corporation OPEN ext. 10 William C. Norris Institute ro +uaNrSS MCCD Open to Business Lending Report 2011. (612) 789 -7337