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Following a work session Monday, the La Grande City Council is set to consider resolutions on micro-loans for small businesses and grants for tourism-related activities. The council met in the work session to fine-tune the micro-loan program rolled out by Community and Economic Development Director Charlie Mitchell, and a pair of grant programs awarding transient room tax money. The micro-loan program is designed to provide small-scale, short-term gap financing to La Grande businesses. About $40,000 became available to lend small business following repayment of a loan to the city. The micro-loans could be used for working capital, equipment purchase or lease, marketing and advertising, building improvements or acquisition, and workforce development. Mayor Colleen Johnson wondered what the city would do if a business defaulted on a loan. City Manager Robert Strope said the city might hire a collection agency to recover the money. He said he didn’t think it was a good idea to require an applicant to secure a loan with assets. “I agree we don’t want to get into into collateral,” he said. In further discussion, most of the council agreed that the city is taking a certain amount of risk in loaning money to small businesses. “These are high risk and we’re going to lose on some of them,” Strope said. The success of the program, however, depends on borrowers paying the money back. The city likely will not add more money to the loan fund in the future. “We have the $40,000 and it’s kind of like money from heaven. After that, no more,” Johnson said. As originally proposed, loans of up to $5,000 could be taken out for a maximum of 10 years. After discussion, the council reached a consensus that the term should be five years at most. “Ten years is too long, even for $5,000. At that rate, we’d be getting paid back about $54 a month,” Johnson said. The council tweaked language about interest rates as well. In the original proposal, the rate was not to be less than 5 percent, and generally it would be set five percentage points higher than prevailing rates of U.S. Treasury bonds. But after some discussion, the council decided to adopt the same language on interest that is used in loans made through the city’s local improvement districts. “We’ve had a policy with our LIDs that says the interest is above the commercial rate so we’re not competing with banks,” Johnson said. Councilor Dan Pokorney wondered whether the council might be able to start the loan program in time to help merchants with the holiday season. Strope said he didn’t think so because it will take time to form a loan committee and develop the loan application. Councilor Les Balsiger expressed some concern about language in the proposal that excludes businesses with “adult orientation” as a primary function. “I think some may interpret that as unconstitutional,” Balsiger said. Strope said he is conferring with City Attorney Jonel Ricker on the matter. In the second half of the work session, the council discussed the process for awarding transient room tax grants for tourism-related activities. The city has $25,000 in unallocated TRT funds in the current budget. Strope recommended that $2,500 be used for a mini-grant program, with the remaining $22,500 set aside for larger events and projects. As in the past, applications for mini-grants of up to $500 would be administered by Union County Tourism. That agency would review applications and make recommendations. Final approval would rest with the city manager. For amounts greater than $500, applications would be made to the city and the final decision on the applications would rest with the council. Applications would be considered in work sessions, held either annually or quarterly. According to discussion Monday, UCT would have the chance to review applications and make comments, though the council would have final say. Johnson said organizers of the Crossing the Blues summer festival plan to ask for some of the available TRT grant money. Strope added that he plans to request a portion to be used for upkeep and maintenance of the old fire hall that houses the Eastern Oregon Fire Museum and Learning Center. The council will consider adoption of the resolutions on the micro-loan program and grant programs during its regular session, 6 p.m. Wednesday at City Hall. |