By Jim Davis <i>HBJ Editor</i>
Business owners can apply for a slice of $25 million in low-interest loans that’s aimed to spur job growth in Everett.
The money originally was intended to be used on two major projects in town. But the developers on those projects backed out of using the funds.
That means the money is freed up to be used on smaller projects. Whidbey Island Bank is administering the loans.
“We have the ability to break it up into smaller loans,” said Bryan McDonald, president and CEO of Whidbey Island Bank. “You know $500,000 or $1 million instead of a $10 million loan or $12 million loan. We could do both.”
Businesses only need to pay interest on loans for the first seven years and the interest is about half of the typical amount for a business improvement loan — or about 3 percent instead of about 6 percent.
At the end of those seven years, the businesses can either pay off the loan amount with a balloon payment or refinance the total.
The city of Everett asked the federal government for the money in 2009 under a program called New Markets Tax Credits, which is aimed at spurring job growth in low-income areas based on Census tracts.
It was originally intended for the Riverfront project, a development of hundreds of homes and businesses east of I-5 along the Snohomish River. But that project changed hands from San Diego developer OliverMcMillan to Polygon Northwest based in Bellevue.
Polygon Northwest can’t use the money at this time, said Tim Benedict, Everett’s assistant city attorney.
Another portion of the money was to be spent on a eight-story hotel being planned by Seattle developer Touchstone Corp. And that developer can also no longer use the money at this time.
The city has a deadline of awarding the money by the end of this year. If the money isn’t used, the city will be downgraded when it applies for the federal program in the future.
“We had to use them in a timely manner finding projects that qualify within the right Census tracts in a timeline that’s appropriate,” said Lanie McMillan, the city’s Economic Development executive director. “And that was becoming an issue for us.”
The city has been looking to pair the money up with a developer for the past few years. Businesses have been interested at first, but backed out once they learned about the complexity and paperwork involved, Benedict said.
“It’s been this economic development tool that we essentially landed,” Benedict said. “We’ve just been looking around to find a place to put it and it’s just been a very difficult task.”
In stepped Whidbey Island Bank.
The bank has handled these New Markets Tax Credit loans once before working with a developer renovating the Goose Community Grocer shopping center in Langley. The loan was given out seven years ago and just concluded in September.
Whidbey Island agreed to administer the loans and handle the paperwork and loan out the money in more a traditional manner.
The first priority is for the loans to go to Everett businesses, McMullin said. The second priority is to distribute the loans to businesses within the city’s urban growth area.
If the deadline approaches and there are still funds remaining, the loans will be given out countywide.
McDonald said his bank has researched the eligible Census tracts and found that most of downtown Everett is eligible to receive the money.
They’ve also researched the property owners and potential projects that could use the money. But they haven’t moved much further on it.
“We haven’t gone out and marketed it heavily since it isn’t ready to disburse,” McDonald said.
He said the money should be available to start loaning in February.
He said the deal aims to help out both the city, the bank and the business community.
“In the end, what is the city’s interest?” McDonald said. “It’s to promote economic development in the city. For the business owner, they’ll benefit from a debt burden that is close to a third of a full loan payment.”