Tonight, the City Council will be discussing whether to offer a somewhat unique incentive to a local private business. Firefly Energy needs a loan, and they’ve been unable to secure it through the Small Business Administration (Caterpillar owns 35% of Firefly, hence they’re not small enough for an SBA loan) or Industrial Revenue Bonds (also ineligible).
So the plan is for National City to provide them a loan that would be secured by their equipment and a loan guarantee from the City of Peoria and Peoria County. For the City’s part, they are wanting to pledge $3.3 million in utility tax receipts.
This is organized more or less just like a Small Business Administration (SBA) loan. The SBA doesn’t directly loan money, but rather acts as guarantor, which reduces the risk for private financing companies and allow loans to be made that otherwise would not be approved. “The policy question for Council,” the council communication states, “is whether the City of Peoria should guarantee private debt to encourage economic development. Furthermore, if this approach is used what should be the guidelines for assistance? City and County staff could develop guidelines if the Council so desired.”
I expect this to be the question that gets the most discussion. This kind of incentive has apparently not been used before by the City. If the City approves using it tonight, you can bet they’ll be asked for such assistance again. What kind of precedent, if any, does this vote set? There are two parts to any precedent that may be set: (1) The use of this incentive at all, and (2) how much money they’re willing to guarantee.
It’s common for loan guarantees to be provided at the state level, but not as common for cities. My efforts at Googling such a situation at the city level only turned up one city that provides such incentives: New Brunswick, New Jersey. They’re a city of about 49,000 residents, and their program works like this:
New Brunswick provides a 50% guaranty to loans made through the program with participating banks. The guaranty permits banks to make loans they would otherwise decline. The borrower gets access to capital at reasonable rates.The Economic Development staff will also assist business owners in developing a business plan for presenting their loan ideas to bankers or hard money lenders.
Loan Term: 1-7 years
Loan Rate: Prime + 2 points. The rate is fixed at the time of closing
Loan Amounts: $25,000 – $150,000
I called the Peoria City Manager’s office and also talked to the Economic Development department, but neither of them could provide the names of other cities that provide similar programs. I didn’t talk directly to City Manager Randy Oliver, however, so it’s certainly possible he knows of other cities.
What I found interesting was the amount of the loan they guarantee in New Brunswick — the upper limit is only $150,000. According to this website, the average loan guarantee in Michigan’s Capital Access Program is $53,000. California’s Small Business Loan Guarantee Program “cover[s] up to 90% of the loan amount, with the guaranteed portion of the loan not exceeding $500,000.” Here in Peoria, we’re talking about $3.3 million — and that’s only the City’s share. The County is putting up an equal amount for a total guarantee of $6.6 million!
I’d like to see Firefly Energy stay in Peoria, and I’m not against providing them incentives, but this seems to be a rather large loan guarantee when compared to other state and local programs I could find. Considering the County won’t take up this issue until June, I would suggest the City not vote on it tonight. Discuss it, think it over, consider the ramifications, take up the staff’s offer to write up guidelines — this is too big to rush into.
The city’s budget was balanced by essentially taxing a non profit, AMT for $80,000+ but we have 3.3 million in tax dollars to back a new company. what gives?
Did the City get any stock in Firefly? Does the City ever get any loan guarantee fee? You know there are private entities that guarantee loans for a fee. Bet National City started by asking the 35% owner to make that guarantee. $3.3M is what percent of their revenue? How many small businesses could start up if they had a deep pocket to guarantee a loan just a fraction of that size? One final question, are there any guarantees that any jobs will stay in Peoria for x years or any investment be made here??
My question is why was Eric Turner allowed to vote on the Firefly issue if it is 35% owned by Cat? Isn’t that a conflict of interest?
Not just vote for it, but argue strongly in favor of it, without even acknowledging the inherent conflict. I thought that was highly improper.
Why hasn’t FireFly tried for the new Illinois State Treasurer’s programs? Employ Illinois and Community Development. These are loans that will go high enough to cover their needed funds and the interest rate is incredibly low. All they have to do is contact the Treasurer’s office for information on the programs. This would take it off the back of the local citizens and spread it out.
Firefly used space at the old Zeller, new ICC campus for how many years rent free? They’ve already burdened the tax payers of this city. They don’t manufacture anything here and they “employ” 30 people. How many of those individuals live in the city or are they like our cops and teachers and live in Dunlap, Morton and Germantown?
They recieved some pseudo state money (the authority isn’t funded by tax dollars, but the gov appoints the board members, I don’t quite get it)
http://www.il-fa.com/business/firefly.html
I don’t know why, but this whole thing really chaps my ass. There were no numbers in the “presentation”. There wasn’t even really a presentation. CAT owns 35%, 35% of what? How many shares are available? How much did they pay for their shares? How many other investors are there, what have they been promised if the whole thing goes under? Are they going to give quarterly financial reports to the council? How will we know if they are in danger of default? Will there be a warning or will they just miss a payment and bam the city has 5 business days to pay off the loan? What is the exact agreement? Why was the theme of the presentation “you will thank us for giving you the opportunity to give us your money.” I would love for that to be the case but that isn’t the approach to take when you are asking people for millions of dollars. The city was not treated as a legitimate business partner and no one on the council, aside for Manning, even seemed to care. There is no such thing as a sure thing, especially in an emerging technology market. If it is such a sure thing there are always people out looking to make a quick buck. I have a hard time believing this is the GREATEST THING EVAH but they still need the people of Peoria to do them a solid and vouch for the loan.
The free rental space costs taxpayers nothing. It was vacant space. I am guessing they didn’t go to the state because they are planning on manufacturing the new batteries in Missouri and Ohio, not here.
I am sure this will prove an economic boon to the Peoria area. The 30+ people who work there are probably going to spend alot of time at the new museum as well.
If the city council really wanted to do something beneficial to the Firefly program why don’t they assist in helping them establish a manufacturing plant in Growth Cell Two and bring all those jobs to Peoria?