With loans to developers, all was usually forgiven | Finance ...

In many cases, simply building a structure and occupying it was enough to get a loan forgiven under the two-year ?temporary authority to stimulate construction? that the Minnesota state Legislature created in 2010.

Thirty-five cities and local entities took $35.9 million in extra funds from their tax increment financing districts and used the money to help fund more than $510.6 million-worth in construction projects.

Out of 76 projects that received money, 24 were simply outright grants, and another 17 were forgivable loans where forgiveness was often tied to getting things built, according to a Finance & Commerce investigation.

Even though a goal of the state law was to create construction jobs, 13 of the 17 projects receiving forgivable loans either did not keep track of jobs or did not have the information readily available.

The situation begs the question: Does anyone ever pay back forgivable loans?

The forgivable loans and grants make up more than half the $35.9 million spent statewide: $7 million were forgivable loans and $12.9 million were grants.

A typical forgivable loan was the $1.25 million that Inver Grove Heights provided the McGough-led team that created the Argenta Hills retail development off Amana Trail, which includes a $15 million, 135,000-square-foot Target store that opened in July.

Inver Grove Heights did not require a specific number of jobs for the developers to keep the money, said City Administrator Joe Lynch. Rather, the developers got to keep the $1.25 million if the Target opened by December 2012, and stayed open for five years. Half of an additional 30,000-square-foot building also has to be available for occupancy by the end of the year.

The developer turned in invoices with construction expenses to get reimbursed for them.

?That?s why we went the route of a forgivable loan, so that if they didn?t construct and they didn?t complete and they didn?t open under certain time frames that the money would be given back to us,? Lynch said.

According to Lynch, basing forgiveness on getting buildings constructed and occupied was easier than counting jobs because retail jobs are often transient. One person might work 12 hours one week and another person 12 hours the next week, Lynch said.

St. Louis Park gave $605,000-worth of forgivable loans to three projects ? the largest being $500,000 for a $3.5 million renovation project that allowed aluminum anodizing company Hardcoat to move inside the city to a 30,000-square-foot building at 7317 W. Lake St.

So what does Hardcoat need to do to keep the money? ?They have to hold and maintain the property and not sell it for five years,? said Greg Hunt, St. Louis Park?s economic development coordinator.

Hardcoat turned in ?certificates? with expenses that could then be reimbursed with the loan.

Hunt said the city?s priority was to get more uses into vacant buildings and create full-time jobs.

?There were some projects we turned away because they weren?t going to result in new tax base. ? What I was looking for was something that was going to be a substantial return,? Hunt said.

With the building Hardcoat is occupying, Hunt expects the facility?s present $1.2 million value to double. And even though St. Louis Park is not tying job numbers to loan forgiveness, Hunt is still keeping track of construction and permanent jobs numbers to ensure accountability.

R.J. Marco Construction, for example, created at least five construction jobs at the Hardcoat site, and the company has created five jobs on top of the 15 it already had in the city, Hunt said.

Hunt thinks the best part of the program is that it gave cities such as St. Louis Park flexibility ? and he wishes state lawmakers had given cities even more time to use the money.

?Each community has its own projects that are going to come up,? Hunt said. ?The fact that it helped spur something is better than nothing.?

MORE ARTICLES ON THIS INVESTIGATION:

The great property tax free-for-all

Counting construction jobs proves difficult

How the TIF program worked, and how we reported it

Local officials have mixed views about jobs program

CHART:?Tracking construction and permanent jobs

CHART:?Following the money

This entry was posted on Wednesday, October 24th, 2012 at 7:24 am and is filed under Economic Development, The Great Property Tax Free-For-All. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

Source: http://finance-commerce.com/2012/10/with-loans-to-developers-all-was-usually-forgiven/

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