City Revolving Loan Fund Proposed To Warsaw Council
February 4, 2020 at 3:51 a.m.
City Revolving Loan Fund Proposed To Warsaw Council
By David [email protected]
Mayor Joe Thallemer told the council he asked City Planner Jeremy Skinner and Kosciusko Economic Development Corp. CEO Alan Tio to talk to them about creating an economic development incentive tool the city can use in the community.
Skinner said, “We have a lot of tools in our tool basket, and some of those tools work really well with different types of uses.” He listed “tools” such as tax abatements, economic development bonds and infrastructure improvements. “But one of the things we don’t necessarily have is something that would help those industries or those individuals that may not be making the type of commitment that we’re used to seeing. They may not be putting $10 million of personal property into a new development or $10 million of real property.”
So the question becomes, “how do we target and help provide some different types of incentives for those start-up companies that we want to see develop in Warsaw, whether they are orthopedic-related or other industry related?” he asked. “But we want to target those start-up type companies that may not be putting in the tens of millions of dollars that tax abatements can help incentivize.”
One of the ways to do that is the Revolving Loan Program, he said. It wouldn’t necessarily be tied to infrastructure improvements or personal or real property. It may be tied to developing a smaller company, employee incentives or job training incentives.
“Those different types of incentives would be more focused on this Revolving Loan Fund to help us fill in some of the gaps that we’re not hitting in terms of economic development incentives for some smaller-type of start-up companies or new establishments,” Skinner said.
He said over the last few years the city has had dealings with some companies just starting with the beginning phases, and the capital improvement to be gained by tax abatements may not necessarily be there.
“These type of incentives would help fill those gaps,” Skinner said.
He said he could see it working similarly to how the city does tax abatements, and the council has guidelines for tax abatements. The Revolving Loan Program could have its own set of guidelines, and the city council would have to vote to approve any loan.
He told the council that with guidelines they could “adjust” the loan, based on the investment and company what they think is prudent at the time.
“So it’s not telling you that you have to do X, Y and Z, but it gives you that flexibility and gives you some guidance on what you’ve done in the past and what thresholds you’d like to see in terms of investment from the company before you give those type of incentives,” Skinner said.
Tio said KEDCo has a Revolving Loan Fund. “So the proposal is, we could utilize that RLF to come up with incentives for specific projects on a case-by-case basis. It would really be my job to work with the perspective company, mayor and Mr. Skinner to come up with a recommendation to bring to council for you to consider of what that would look like.”
He said they’re out looking for and competing with other communities for high-growth, high-wage companies “so we’re looking to be competitive.”
Tio said the RLF is more upfront as opposed to a tax phase-in offered by tax abatement, and the community sees the benefit right away rather than over 10 years.
“With any company we’re working with, it’s a competitive situation. They have a competitive decision, whether to come to Warsaw, Kosciusko County or somewhere else in the state or Midwest. The state of Indiana is going to get involved through the Indiana Economic Development Corporation,” Tio said.
IEDC has two key “tools” in the toolbox, he said. One is based on job creation – a tax credit that gives a company back the income taxes generated through jobs. “So we’re all paying 3% income taxes. IEDC will say, ‘we’ll give the company some of that upfront to incentivize them to create the jobs,” Tio said. IEDC also has a training grant that reimburses 50% of training costs. “These are more upfront incentives tied to job creation.”
Tio said, “Like IEDC, we locally go through a cost-benefit analysis, so we actually use the same form IEDC uses in-house.”
Thallemer said the city has a municipal financial group, made up of himself, Council President Jack Wilhite, Skinner and Clerk-Treasurer Lynne Christiansen.
“What we’re asking you to consider is just to hear, see if you have any general questions after hearing the idea of the Revolving Loan Fund. The expectation is that it would be paid back at zero or low interest as an incentive,” Thallemer said. “Potentially, there could be options to forgive a portion of that if down the road they meet the goals that they originally set out.”
He asked Tio and Skinner to come back to the finance committee with a look at what the impact would be and their proposal for an RLF. Once the committee gives the plan its blessing, the RLF would be brought back to the full council and the council could ask more detailed questions.
Skinner said the biggest thing the council would have to consider if it went ahead with the program is what kind of “cap” the loan would have – a cap for how much funds were set aside yearly for the RLF, a cap for the incentive for each company.
“Through this incentive program, we’re not going to exceed X amount of dollars. I see this incentive more as a gap filler, not necessarily something that is going to build a wall or install millions of dollars in sanitary sewer,” Skinner said. “We have programs in place to do those. What we don’t really have is these smaller type of incentives for companies that are in their infancy.”
He said the loans wouldn’t be large dollar amounts, maybe $10-$20,000 a year. “These types of incentives are really focused more on a different set of industry or needs within an industry,” Skinner said.
Tio said, “These are more medical technology companies. They are not manufacturers. Talking about filling in gaps – engineers, designers, marketing people. So, again, just a little different approach of how we work with them and help them land here in the Warsaw area.”
Councilwoman Diane Quance asked where the funding would come from. Skinner said money from EDIT would be set aside to use as the RLF.
Councilman Josh Finch asked, “Is this being discussed as a current need, you’re saying, with businesses or is this more of an attraction piece? Or both?”
Skinner said both.
No action was taken on the RLF by the council.
Mayor Joe Thallemer told the council he asked City Planner Jeremy Skinner and Kosciusko Economic Development Corp. CEO Alan Tio to talk to them about creating an economic development incentive tool the city can use in the community.
Skinner said, “We have a lot of tools in our tool basket, and some of those tools work really well with different types of uses.” He listed “tools” such as tax abatements, economic development bonds and infrastructure improvements. “But one of the things we don’t necessarily have is something that would help those industries or those individuals that may not be making the type of commitment that we’re used to seeing. They may not be putting $10 million of personal property into a new development or $10 million of real property.”
So the question becomes, “how do we target and help provide some different types of incentives for those start-up companies that we want to see develop in Warsaw, whether they are orthopedic-related or other industry related?” he asked. “But we want to target those start-up type companies that may not be putting in the tens of millions of dollars that tax abatements can help incentivize.”
One of the ways to do that is the Revolving Loan Program, he said. It wouldn’t necessarily be tied to infrastructure improvements or personal or real property. It may be tied to developing a smaller company, employee incentives or job training incentives.
“Those different types of incentives would be more focused on this Revolving Loan Fund to help us fill in some of the gaps that we’re not hitting in terms of economic development incentives for some smaller-type of start-up companies or new establishments,” Skinner said.
He said over the last few years the city has had dealings with some companies just starting with the beginning phases, and the capital improvement to be gained by tax abatements may not necessarily be there.
“These type of incentives would help fill those gaps,” Skinner said.
He said he could see it working similarly to how the city does tax abatements, and the council has guidelines for tax abatements. The Revolving Loan Program could have its own set of guidelines, and the city council would have to vote to approve any loan.
He told the council that with guidelines they could “adjust” the loan, based on the investment and company what they think is prudent at the time.
“So it’s not telling you that you have to do X, Y and Z, but it gives you that flexibility and gives you some guidance on what you’ve done in the past and what thresholds you’d like to see in terms of investment from the company before you give those type of incentives,” Skinner said.
Tio said KEDCo has a Revolving Loan Fund. “So the proposal is, we could utilize that RLF to come up with incentives for specific projects on a case-by-case basis. It would really be my job to work with the perspective company, mayor and Mr. Skinner to come up with a recommendation to bring to council for you to consider of what that would look like.”
He said they’re out looking for and competing with other communities for high-growth, high-wage companies “so we’re looking to be competitive.”
Tio said the RLF is more upfront as opposed to a tax phase-in offered by tax abatement, and the community sees the benefit right away rather than over 10 years.
“With any company we’re working with, it’s a competitive situation. They have a competitive decision, whether to come to Warsaw, Kosciusko County or somewhere else in the state or Midwest. The state of Indiana is going to get involved through the Indiana Economic Development Corporation,” Tio said.
IEDC has two key “tools” in the toolbox, he said. One is based on job creation – a tax credit that gives a company back the income taxes generated through jobs. “So we’re all paying 3% income taxes. IEDC will say, ‘we’ll give the company some of that upfront to incentivize them to create the jobs,” Tio said. IEDC also has a training grant that reimburses 50% of training costs. “These are more upfront incentives tied to job creation.”
Tio said, “Like IEDC, we locally go through a cost-benefit analysis, so we actually use the same form IEDC uses in-house.”
Thallemer said the city has a municipal financial group, made up of himself, Council President Jack Wilhite, Skinner and Clerk-Treasurer Lynne Christiansen.
“What we’re asking you to consider is just to hear, see if you have any general questions after hearing the idea of the Revolving Loan Fund. The expectation is that it would be paid back at zero or low interest as an incentive,” Thallemer said. “Potentially, there could be options to forgive a portion of that if down the road they meet the goals that they originally set out.”
He asked Tio and Skinner to come back to the finance committee with a look at what the impact would be and their proposal for an RLF. Once the committee gives the plan its blessing, the RLF would be brought back to the full council and the council could ask more detailed questions.
Skinner said the biggest thing the council would have to consider if it went ahead with the program is what kind of “cap” the loan would have – a cap for how much funds were set aside yearly for the RLF, a cap for the incentive for each company.
“Through this incentive program, we’re not going to exceed X amount of dollars. I see this incentive more as a gap filler, not necessarily something that is going to build a wall or install millions of dollars in sanitary sewer,” Skinner said. “We have programs in place to do those. What we don’t really have is these smaller type of incentives for companies that are in their infancy.”
He said the loans wouldn’t be large dollar amounts, maybe $10-$20,000 a year. “These types of incentives are really focused more on a different set of industry or needs within an industry,” Skinner said.
Tio said, “These are more medical technology companies. They are not manufacturers. Talking about filling in gaps – engineers, designers, marketing people. So, again, just a little different approach of how we work with them and help them land here in the Warsaw area.”
Councilwoman Diane Quance asked where the funding would come from. Skinner said money from EDIT would be set aside to use as the RLF.
Councilman Josh Finch asked, “Is this being discussed as a current need, you’re saying, with businesses or is this more of an attraction piece? Or both?”
Skinner said both.
No action was taken on the RLF by the council.
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