According to Meredith Richards, director of Community Development, the EDA is asking communities with so-called “legacy” revolving loan funds to submit paperwork that would revert those funds to local control. The EDA, Richards told Growth Fund Committee members at their regular meeting on Monday, March 22, wants to focus its attention on COVID-related loan funds as businesses work to recover from the coronavirus pandemic.
De-federalizing the existing revolving loan fund, created in 1997 after the flood that year, would give the city more flexibility on how those funds could be spent, as well as remove cumbersome federal reporting requirements. Specifically, Richards said those funds, which total more $1.3 million, could be put toward refitting the Herald building, part of the city’s effort to transform the location into a tech hub. The funds would make up the necessary 50% match required for a slightly more than $1 million EDA grant for that same purpose. The EDA has not yet given approval for that grant. In late September, the EDA denied approval for a $600,000 grant that would have been used to cover programming – mentoring and training – for tech start-ups that relocate to the city-owned Herald Building in downtown Grand Forks.
“I don’t want to be so premature as to ask for a match for a grant we don’t have, but I do want to get this request in while EDA is very eager to de-federalize these funds,” Richards said.
Growth Fund Chairman Bret Weber said the potential to revert the loan fund to local control is “astonishingly” good news.
Committee members also approved changes to the city’s COVID-19 Response Unmet Needs revolving loan fund, also known as C-RUN. The changes include raising the maximum loan amount from $50,000 to $200,000. City staff had requested the limit be raised to just under $350,000, the highest amount allowable by the EDA, but committee members requested the lower cap so as not to compete with local banks.
C-RUN was created in September after the city received $1.3 million in federal CARES Act money. The funds are used to give low interest loans to businesses that experienced “economic dislocation” because of the pandemic. The impending loss of the city’s legacy loan fund means city staff are looking into potentially using the C-RUN loan fund to provide gap financing to businesses.
But in the first application period for C-RUN, the city received only seven applications for loans, which came in at just over $300,000. According to Collin Hanson, community developer, the remaining $1 million needs to be loaned out by June 30, 2022, or the EDA could reclaim those unused funds and award them to other communities.
“We need to be spending this on a timetable that shows we are able to spend the funds,” Hanson said.
After seeking feedback from local businesses, some of which received C-RUN loans, community development staff recommended raising the loan amount cap, and extending the term from five to seven years, which will result in a lower monthly payment for businesses. The loan carries a 1% interest rate, and committee members extended the deferred payment window from six months to a year.
Members also expanded the range of how the loans could be spent, to include equipment purchases. Additionally, staff will work to better market the program, including making it easier to find on the city’s website, as well as a more traditional program of using billboards to get the word out.
All changes to the loan programs need to be approved by the city’s Jobs Development Authority at a subsequent meeting in April.
In other Growth Fund news:
- Committee members approved a C-RUN loan for $25,000 for crepe-maker French Taste, LLC. The loan will be used for payroll and the creation of a website, to facilitate online ordering. The business is located inside Ferguson Books & More in the Grand Cities Mall. This brings the number of C-RUN loans to eight. The loan likely will be modified to reflect an extended term and deferral period, approved by the committee on Monday evening.
- In what could possibly be one of the last uses of the legacy revolving loan fund, the committee granted a $225,000 loan to Sundog Mining LLC, to establish a cryptocurrency mining operation in Grand Forks. The loan accompanies a $153,656 loan from Gate City Bank, a $10,233 JDA loan, $40,000 of owner equity and a $19,000 Bank of North Dakota grant.
The company will use the funds to purchase a cargo container that will hold cryptocurrency mining machines. Sundog Mining has reached an agreement with Minnkota to buy, at a discount, surplus electricity to power the machines. At first, the container will be placed at a substation south of Grand Forks that is not operating at full capacity, due to the city not having fully expanded to the area.
The company’s clients can then make use of the machines, without having to invest in costly electrical infrastructure. When demand at the substation no longer accommodates the machines, the container can be moved to another substation that does not operate at peak capacity.