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HomeMy WebLinkAbout2022/06/13 - ADMIN - Minutes - City Council - Study Session Official minutes City council study session St. Louis Park, Minnesota June 13, 2022 The meeting convened at 6:30 p.m. Councilmembers present: Mayor Jake Spano, Tim Brausen, Sue Budd, Lynette Dumalag, Larry Kraft, Nadia Mohamed, and Margaret Rog Councilmembers absent: none Staff present: City Manager (Ms. Keller), Economic Development Manager (Mr. Hunt), Interim Director of Communications and Technology (Ms. Smith) Guests: Derek Reise, STEP Executive Director; Lisa Hartel, STEP board president 1. EDA loan to STEP Mr. Hunt presented the staff report. Mr. Reise, Executive Director at STEP, introduced Lisa Hartel, STEP board president. He explained STEP is requesting a $1 million loan from the city, as well as a $250,000 grant , which would be applied toward the loan. He noted they are doing a fundraising campaign as well to raise $2.7 million over the next three years, for building enhancements and programs. Mr. Reise explained the history of STEP and its partnership with the city over the years. He noted the limitations of the program currently with refrigeration, not enough space for partners to be hosted and lack of office space for current and future staff as well as staff and board meetings or volunteer training. Mr. Reise noted they had looked for a new building, but then the opportunity to purchase the building adjacent to STEP’s current site became available. He added this was the most cost- effective choice as well as the best location for the community. He stated the fundraising program is in the quiet phase now, and with a loan from the city and a grant, that would provide the security donors would need to pledge support . Mr. Reise stated the expansion will allow the food program at STEP to be improved, as well as provide more access hours for in-person shopping. He also noted additional improvements and staff that would be added to the program, explaining more neighbors will be served with these expansions. Councilmember Budd noted she appreciated the tour of the facility, and she is encouraged by the plans. She also stated she likes the model of the social workers’ expansion. Mr. Reise stated this will be a slight increase in staffing as well as an intern added. Councilmember Budd asked if STEP would increase their volunteers. Mr. Reise stated yes, and that there typically has been no challenge recruiting volunteers, but the challenge has been space. DocuSign Envelope ID: 2AB6CCDA-AF82-4E54-A3F6-C7D63BC8FC91 Study session minutes -2- June 13, 2022 Councilmember Rog asked if the city’s $1 million loan would be part of the $2.7 million being fundraised by STEP. Mr. Reise stated yes, and that involves the hard costs involved in construction. He added that STEP has financing with Citizens Independent Bank and a line of credit secured on the property to use for initial construction costs . Councilmember Rog asked if it will be primarily individual donors that will be supporting the campaign. Mr. Reise stated yes and noted when they did their capital campaign in 2009, the majority of funds came from community members. Councilmember Rog asked how much the city provides STEP currently. Mr. Reise stated the city supports STEP with annual operating general grant of a little over $50,000 and a $65,000 grant for housing stability as well. He also noted there are several joint projects with the housing authority that are smaller amounts. Councilmember Rog stated she has concerns about a full-time unpaid intern. She also asked about the clothes closet, who uses this, and why. Mr. Reise added he agrees and is also sensitive to unpaid internships but noted this is the norm in the social work area. He added they tried to offer a paid stipend a few years ago but ran into many legal roadblocks related to social work internships. Mr. Reise added with the clothing closet program, they have a wonderful crew of volunteers who run the program. He stated they have two bins that fill up each day, with 4-5 volunteers working four hours per day. He stated the excess items either get thrown out or go to the Epilepsy Foundation who take items STEP does not use. Councilmember Rog stated St. Louis Park has a Goodwill and asked if there is redundancy with the STEP program. Mr. Reise stated the two programs complement each other, noting Goodwill is a good place to go for low-cost options, and STEP program provides no-cost options. He stated they have a variety of items for all people and body-types, and it is a valuable resource for residents who are on a very tight budget. Councilmember Rog asked how long it has been since the clothes closet was in use. Mr. Reise stated since March 13, 2020. Councilmember Rog asked prior to that who were the top groups using the clothes closet . Mr. Reise stated before the pandemic they provided clothing to 3,7 42 people in St. Louis Park, much of that was winter coats to children and adults. He stated all ages utilize the clothes closet, for all needs. Councilmember Rog asked what happens if STEP cannot get the $250,000 grant from the city and if they are confident they will be able to pay back the loan. Mr. Reise stated yes, he is confident they will be able to pay back the loan, even if they do not get the grant . He stated it will take longer, and they may have to make operational decisions down the road to not do certain things. Councilmember Mohamed stated she is looking forward to the opening of the clothing program. She asked staff how this fits into the city’s budget especially considering recent DocuSign Envelope ID: 2AB6CCDA-AF82-4E54-A3F6-C7D63BC8FC91 Study session minutes -3- June 13, 2022 developments. Ms. Keller stated this funding would come out of the development budget, which is separate from the city’s general fund balance and the ARPA funds. She stated staff has no concerns about funding this loan. Councilmember Kraft stated with STEP’s expansion, they will have more staff and expense . He asked if they will be comfortable with this. Mr. Reise stated yes and noted STEP has grown significantly over the last 6 years and he believes they will get the community resources. He noted their budget increased from $750,000 in 2015 to $1.4 million in 2022. Councilmember Kraft asked how the quiet fundraising phase is going. Mr. Reise stated this is his first capital campaign, and noted they are using a consultant to assist implementing the plan. He stated so far, the plan is on track with good conversations with donors interested in giving six-figure gifts but added these conversations take time. Councilmember Kraft stated STEP is a treasure to the community and added he is asking his questions in the context of due diligence. He asked why STEP continues to partner with the city versus a bank. Mr. Reise stated with financing through the city and EDA there has been a more advantageous opportunity for STEP longer term. He added with a bank, higher interest rates would be a disadvantage, and a bank would have to be paid first. He stated the loan from the EDA provides a lot more room to get the full support from the community in terms of payback. Councilmember Kraft asked if STEP were not able to pay the city back on the loan, what happens. Mr. Hunt stated there are default clauses in the loan agreement, and the loan would be secured by the building. Councilmember Kraft asked how this would be handled in relation to the loan from Citizen’s Bank. Mr. Reise stated Citizens is first and the EDA would be second. Councilmember Kraft asked with other non-profits in the community, does this set precedent, related to the loan. Councilmember Budd asked if STEP has a special designation as a non -profit. Mr. Reise stated STEP is an independent non-profit, with no official relationship to the city. He stated STEP has had a close working relationship with the city from its beginning and have had former city councilmembers on their board. He added their service area is only St. Louis Park and the only one offering these kinds of services to the city. Councilmember Dumalag stated currently STEP services 3,000 individuals. She asked how this has changed over the past few years. Mr. Reise stated 6 years ago they served 3,800, so numbers have decreased. He noted 2012 was their last peak at 5,000, adding there has been a decrease, but in the last six months numbers have been going back up . Councilmember Dumalag asked if the decrease happened, was it for services that were no longer needed by that family, or they were lost because of geographic constraints. Mr. Reise stated some is related to losing people from the community, but there are more than 3 ,000 people living under the poverty line now and could benefit from STEP’s services. DocuSign Envelope ID: 2AB6CCDA-AF82-4E54-A3F6-C7D63BC8FC91 Study session minutes -4- June 13, 2022 Councilmember Dumalag asked if there are one or more services you see more frequently than in the past. Mr. Reise stated in recent months, food needs have increased as well as housing assistance needs, up from 40 households to 60 households for rental assistance . Councilmember Dumalag asked if housing assistance provides gap assistance. Mr. Reise stated it is emergency rental assistance of 1-3 months. Councilmember Dumalag asked if STEP gets funding from Hennepin County . Mr. Reise stated STEP received housing funding from Hennepin County this year of $25,000 from the county share of CDGB services. He added they have only gotten one-time funding from the county through ARPA, but otherwise they do not get ongoing support from the county. Councilmember Dumalag asked if STEP has any debt with the current building. Mr. Reise stated yes, they have a $450,000 mortgage that enable them to purchase the two new parcels. He added for the existing building, they have zero debt. Councilmember Dumalag asked what the construction costs will be . Mr. Reise stated about $1.5 million, which includes contingencies. She continued asking if the council does not approve the loan, will that push back the entire project, or is it temporarily on hold until you get the $1 million to commence construction. Mr. Reise stated if STEP does not receive the loan, construction will be delayed until they obtain at least some significant increase in funds in hand and a combination of a construction loan from a commercial partner to fund part of it . Mayor Spano confirmed staff has reviewed STEP’s plan. Mr. Hunt stated yes, and all looks reasonable. Mayor Spano asked if there are any administrative costs to the city. Mr. Hunt stated in the proposed loan agreement, there is a requirement for a $1,500 loan origination fee which should cover the EDA’s legal costs. Mayor Spano noted also setting precedent for supporting non -profits through a loan. He asked about other buildings in the city that might be available where operations could be moved during construction. Mr. Reise stated this was discussed in the past, but the challenge when you have a 13 person staff is you get stretched thin very quickly. Mayor Spano noted as STEP’s service grows, the requests for funding would grow also and he asked if Mr. Reise had any idea how much more they might need in future years. Mr. Reise agreed that as STEP grows, they would need more funding, as needs increase. He added they may also be able to find other funding opportunities, noting it is difficult to answer that question. He stated STEP would most likely not come back to the city for more funding. Mayor Spano stated the last few weeks have been difficult for the city as far as funding. He added while he is not suggesting what council might decide, they will need to have a very robust discussion about this. He added the council has no doubt about the efficacy of STEP and the services they provide, but he added he is having trouble committing to the grant, given all the things that are going on in the city currently. He stated he has a lot of questions in his mind about priorities broadly now. DocuSign Envelope ID: 2AB6CCDA-AF82-4E54-A3F6-C7D63BC8FC91 Study session minutes -5- June 13, 2022 Mayor Spano stated staff is supportive of th e loan and he asked what interest it would make for the city. Mr. Hunt stated it would generate 3% annual interest. Councilmember Dumalag asked if STEP has an endowment. Mr. Reise stated yes adding it has about $450,000 and it is basically an emergency fund. Councilmember Dumalag asked how people find STEP’s services. Mr. Reise stated through mainly Google, neighbors and family members, and referrals from clients, schools, and faith communities. Councilmember Dumalag asked about partnerships with STEP, such as Dress for Success and Second Harvest Heartland. Mr. Reise stated yes, they have partnered with both organizations over the years. Councilmember Budd asked if STEP coordinates with the police or fire related to social workers, adding they do get referrals from both departments. Councilmember Rog asked if this would be a revolving loan program . Mr. Hunt stated no. Councilmember Rog added this is not a loan program she has seen noted anywhere and asked for more details. Mr. Hunt stated this is a unique circumstance and the EDA does not have a loan program for non-profits. Councilmember Rog asked if there are opportunity costs to the city or EDA. Mr. Hunt stated the EDA would be utilizing $1 million for STEP’s expansion and as a result would not be able to use it for something else. Councilmember Rog asked how much is available approximately for loans. Mr. Hunt stated there are sufficient dollars available in the development fund and with the pending sale of a certain property, there will be substantial funds available . Ms. Keller stated this is a loan and the development fund will be made whole unlike when a property is purchased. Councilmember Rog asked if this is a long-term or short-term loan. Mr. Reise stated this is a long-term loan as most construction loans are two years versus this loan which would be five years to repay. Councilmember Rog noted increased food prices and supply chain issues along with a greater demand on food shelf resources now. She asked if there is any potential risk going to the community for capital funds. Mr. Reise stated there is always concern when doing a capital campaign. He stated the campaign is really focused on support from folks in excess of their regular gifts. He noted the impacts should not be major, adding most of their food is funded by grants and they have secured additional grants recently, so STEP is in an ok ay place for the food budget right now. He noted their challenges have been with meat and rice most recently. Councilmember Brausen stated he is supportive of this request adding this is about infrastructure for the city and a social services net. He added STEP does a wonderful job and the city using available resources for a loan makes perfect sense to him. He added this community continues to support STEP and they will continue to do so, while needs will go up substantially especially with the threat of recession. DocuSign Envelope ID: 2AB6CCDA-AF82-4E54-A3F6-C7D63BC8FC91 Study session minutes -6- June 13, 2022 Councilmember Mohamed stated she shares the Mayor’s concerns about the city’s funding. She added though that she also understands the services STEP provides and is supportive and confident STEP will be able to pay back the loan. Councilmember Dumalag stated she is also supportive especially with the support STEP offers in housing. She added this is a loan and she agreed with Councilmember Brausen’s points as well . Councilmember Brausen added having adequate food is not the issue, it is having the adequate system in place to get goods to the community. Councilmember Kraft added he is also supportive of the loan for STEP, noting this will, however, put the council into a new relationship with STEP. He asked if the council should now have a seat on the board. Councilmember Dumalag pointed out that does bring up a conflict-of-interest issue and who is the council serving. She asked how the loan would be monitored. Mr. Hunt stated the loan will require monthly payments and if payments are not received, staff follows up quickly and would know if there is an issue . Mayor Spano stated he is not too worried about the conflict-of-interest issue. He stated he is supportive of this also and is mostly concerned if delay of this would have impl ications on construction costs. He added when this comes back, he would like to discuss what the 3% gets the city and the implications of STEP’s annual operating ask of the city . He added when discussing this, he would like to know the downstream implications. Mayor Spano stated having some type of structure for this going forward and a policy in place to give guidance to staff would be helpful. Councilmember Rog stated the report to council in the past related to the city’s relationship with non-profits would be helpful to recirculate. She added it is good to know STEP has enough food and capacity with refrigeration helps provide people more choice and variety. She sees STEP as a formal partner in the city and given this is a loan, she does have confidence that STEP can raise the funds needed through community partners, and repay the loan, and she is supportive. Councilmember Budd added she is supportive as well, noting access can be a hurdle for families struggling. She added the number of volunteers and community members that are engaged is a grounding point, and she is happy STEP has this support. Mr. Hunt stated this formal request could be brought forward to the EDA as soon as Monday, June 20. Mayor Spano stated if staff can bring back information to the council on the 3% interest, what the fund balance is, and what Mr. Reise sees could be the growth of those served by STEP, this would also be helpful when making a decision. DocuSign Envelope ID: 2AB6CCDA-AF82-4E54-A3F6-C7D63BC8FC91 Study session minutes -7- June 13, 2022 Communications/meeting check-in (verbal) Ms. Keller noted the Parktacular event coming up this weekend, as well as the Juneteenth celebration on Sunday. She noted more information is available on Parktacular.org. The meeting adjourned at 7:55 p.m. 2. Monthly financial report 3. Community and Civic Engagement System wrap up 4. Juneteenth holiday recognition update ______________________________________ ______________________________________ Melissa Kennedy, city clerk Jake Spano, mayor DocuSign Envelope ID: 2AB6CCDA-AF82-4E54-A3F6-C7D63BC8FC91