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City likely to keep business loan program with changes

Monday, February 2, 2009 by Austin Monitor

Last week, City Council members responded favorably to a presentation on the Business Retention and Enhancement pilot program, which was created in 2007. The program provides low-interest loans to local retail and restaurant businesses on Congress and East 6th Street. The program is aimed at businesses who want to locate into the area or existing businesses at risk of being displaced because of development. Art galleries, food sales, general retail, theaters, entertainment and restaurants can receive the low-interest loans, which they can use for improvements, acquisition of equipment and improved storefront facades.


The program was created to help the venerable downtown restaurant Las Manitas after it lost its lease.  The Perez sisters, who own Las Manitas, turned down that loan, but two other businesses took advantage of the program in 2008.  Apple Annie’s, a café, bakery and catering business, received a loan to purchase and renovate the first floor of 319 Congress Ave. They already have 23 employees, and plan to hire an additional 20 when they open in April. Their $250,000 loan will be repaid over 15 years at 6 percent interest. El Sol Y La Luna also took out a $250,000 loan for their lease and remodel on the first floor of 600 E. 6th Street. They plan to hire 8 new employees when they open in March. Their loan will be repaid over 5 years at 4.5 percent interest.


Rodney Gonzales, acting director of the city’s Economic Growth and Redevelopment Services Office gave council the presentation.  The EGRS office has been administering, monitoring and evaluating the program over the last 24 month period. “The program is an effective one that is meeting its intended goals,” Gonzales told the City Council.  “EGRS recommends continuation of the program.”


Gonzales reported that $661,805 to fund the program had been collected through December 2008, with $451,889 coming from fees generated by temporary use of right-of-way permits. After February, the city will also begin pulling in interest from the two loans, which will eventually provide an additional $156,369 for the program.


Gonzalez said that staff recommends the “special circumstances provision” be removed from the program. The “special circumstances provision” allowed certain businesses to get more than the $250,000 maximum loan amount. Specifically, an existing business in the BRE area moving to another location still in the BRE area could get up to $750,000.  The provision also allowed such businesses to be forgiven the outstanding debt. The city can forgive the balance of a loan after five years of successful operation and timely payments.


Council Member Mike Martinez asked why the special circumstances provision should be removed. Gonzales responded that the “BRE is a revolving loan program and…when you forgive them that also prohibits you from making future loans.”  Council Member Lee Leffingwell agreed. “I don’t think the forgivable aspect of this program adds anything to it,” he said. “In fact, it tends to deplete the fund over time.”


Martinez embraced the program. “This was something I wholeheartedly supported and I still do,” he said. “I think it’s turned out exactly as we intended.” He pledged to try and find additional funds for it in the future. Council Member Randi Shade also supported the BRE and had a few questions about the monitoring and auditing of the program. Mayor Will Wynn said he only regretted that it took so long to implement.  Council will vote on an ordinance on February 12 that will amend the program to make it ongoing, and eliminate the special services provision.

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