HomeMy WebLinkAboutCouncil Provided Information - 10/1/2024COUNCIL STAFF REPORT
CITY COUNCIL of SALT LAKE CITY
TO: City Council Members Item Schedule:
FROM: Allison Rowland Briefing: October 1, 2024
Public Hearing: N/A
Budget & Policy Analyst Potential Action: October 1, 2024
DATE: October 1, 2024
RE: ORDINANCE: ECONOMIC DEVELOPMENT LOAN FUND LOAN TO BOTANIKA SLC,
LLC, AT 353 WEST 200 SOUTH
ISSUE AT -A -GLANCE
The Council will consider approving a loan from the City's Economic Development Loan Fund (EDLF) to a
business called Botanika SLC, LLC, at 353 West Zoo South, for a small-scale grocery selling non-alcoholic wines,
beers, spirits, mixers, and cocktails, along with healthy foods. The City's Economic Development Loan
Committee recommends the Council approve a $1oo,000 loan at an 9.5% fixed interest rate over seven years.
This loan will assist in the creation of one new job in the next year, and retention of one existing job. Funds will
pay for renovation, working capital, equipment, furniture and fixtures.
The interest rate reflects the 8.5% prime rate at the time of the application plus the standard EDLF four
percentage points, though the project did qualify for a three percentage -point reduction based on location within
a priority area (CDBG low/moderate income census tract), being owned by a socially and economically
disadvantaged individual, and sustainability (see section B below).
Council staff reminder: EDLF loans are now scheduled for a vote on the same day as the briefing, so this is
scheduled for action on the October 1 agenda.
Goal of the briefing: Consider a potential $1oo,000 loan from the Economic Development Loan Fund to a
business called Botanika SLC, LLC.
CITY COUNCIL OF SALT LAKE CITY
451 SOUTH STATE STREET, ROOM 304 SLCCOUNCIL.COM
P.O. BOX 145476, SALT LAKE CITY, UTAH 84114-5476 TEL 801-535-7600 FAX 801-535-7651 00
ADDITIONAL AND BACKGROUND INFORMATION
A. Interest Rates. For context, the nationwide median small business commercial and industrial loan rates
for the first quarter of 2024 (the most recent data available), were 7.85% for fixed-rate loans at urban banks,
and 8.79% for variable rate loans, according to the most recent U.S. Federal Reserve Small Business
Lending Suruey.i In the second quarter of 2022, these rates were 4.50% and 5.55% respectively. Interest
rates for EDLF loans consider an assessment of the risk level of different applicants, among other factors,
and include potential interest rate reductions. Interest rates have ranged from 7.25% for nearly all 2022
EDLF loans to an average of 9.55% in 2023 and 2024.
B. Interest Rate Reductions. The bases for potential reductions are as follows:
1. Location within a priority area: RDA Project Area; Opportunity Zone; West of I-15; or
Neighborhood Business Improvement Program (NBIP, previously known as Facade Improvement)
target area.
2. Socially and Economically Disadvantaged Individuals (SEDI)-Owned Businesses: 51%
of the business is owned by at least one SEDI individual.
3. Low Income Business Owner: Income does not exceed 8o% of Salt Lake County average
median income (AMI) as defined by U.S. Department of Housing and Urban Development (HUD).
4. Sustainability: Either,
a. Membership in SLC Green's E2 Business Program; or
b. Loan proceeds will be used for the purchase of electric vehicles, electric vehicle
charging stations and infrastructure, renewable energy including but not limited to
wind and solar, heat pumps, high efficiency equipment, and/or energy efficiency.
C. Program. The EDLF is a program administered by the Department of Economic Development, which is
charged with maintaining the corpus of the EDLF in a manner sufficient to perpetuate the goals of the
program. Each loan application is pre-screened, and an underwriting analysis and economic impact
statement are completed before an application maybe recommended for Loan Committee (see below)
review. Information on successful applications is transmitted to the Council to consider for final approval.
D. Available balance and amount of outstanding loans. The Department reported that the Fund's
available balance was $8,300,000 in August 7, 2024. Outstanding loans totaled $3,205,765 on July 30.
E. EDLF Committee Membership. The Department of Economic Development lists nine members of the
EDLF Committee as follows:
City Employees
Finance Director, Community and
Neighborhoods Department
Representative of the Mayor's Office
Salt Lake City employee at large
Representative of the Division of Housing
Stability
Director, Department of Economic
Development
Community Volunteers
Salt Lake City Business Advisory Board (BAB)
member
Banker
Community lender
Business mentor
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POLICY QUESTIONS
1. The Council may wish to have a policy discussion with the Administration about interest rates charged by
the City from this and other loan funds, and whether it makes sense to re-evaluate how interest rates are
determined for lenders, especially since the City typically offers loans as a lender -of -last -resort.
2. The Council may wish to ask the Administration whether the EDLF Committee considered any other unique
information about this business that would help Council Members with their own evaluations of how this
application compares to others. For example, are there risk factors that are evaluated for each company, like
outstanding loans, years in business, etc.?
3. What outreach does the Department do to ensure a diverse pool of businesses successfully applies to the
EDLF? Are applications from diverse owners, particularly those whose businesses are located on the
Westside, offered additional support through the application process? Does EDLF staff have ideas for
improving access that would benefit from program changes or additional funding?
4. The Council may wish to request a more general update on EDLF use and processes. This could include the
number of applications, review criteria used, loan program goals, etc.
' Source: Small Business Lending Survey, New Small Business Lending Declines as Credit Standards Continue
to Tighten. Consulted on July 1, 2024, at https://www.kansascityfed.org/surveys/small-business-lending-
survey/new-small-business-lending-declines-as-credit-standards-continue-to-tighten/.
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