Loveland's City Council deliberated at length last week over a staff recommended change to the city’s investment and business development policies. While neither approved nor rejected, a proposal to divert up to $5 million from the city’s financial reserves into venture capital for favored local companies or start-ups received a mixed reaction. The devil was in the details as councilors found discrepancies in the documents presented to them on important criteria like the loan to value ratios and other figures.
Last November the council gave Alan Krcmarik, the city’s Executive Fiscal Advisor, the charge to develop a financial “tool” the council could use when committing city funds in hopes of bringing jobs to the community while avoiding the problems experienced with the failed vNet taxpayer subsidy. Mayor Gutierrez has been an advocate of the plan suggesting the vNet debacle could have been avoided if only the city used a better process.
Loveland’s Business Development Manager, Betsy Hale and Krcmarik set out to create the “Loveland Jobs Development Program.” They won unanimous approval for their plan by the mostly staff driven Citizens’ Finance Advisory Commission in December and presented the results to council during a study session in early January. The lack of commercial capital and loans in a bad economy is being cited as the primary driver for creating the program thus serving as the catalyst for the city’s proposed lending program.
The plan contemplates the city loaning certain businesses money from the city’s reserve funds through a formal process that will include a council appointed loan committee with a private company administering the program. During the past three months some members of Loveland’s council have flirted with the idea but failed to make any public commitment about handing out tax dollars. This has confused city staff who are trying to determine whether or not enough members of the council will ultimately vote for their proposed jobs plan. Until last Tuesday, most on council have been simply asking for more details.
Those details came to council last Tuesday by way of amendments to the city’s Municipal Code, Economic Development Policy, and Investment Policy. Staff also requested approval of a contract with the outside company to administer the plan. That agreement was presented as Exhibit B, “Copy of the Third Party Administrator Agreement” which was not made available to the public.
Councilman Hugh McKean wondered aloud last Tuesday if the city should be in the “banking business” when responding to a question posed to the council by Hale. A frustrated Hale, after answering many detailed questions regarding the proposed “Loveland Jobs Development Program” requested to know where each councilor stood to “get direction.”
McKean cited the Loveland Reporter Herald call-in line (RH Line) as evidence the community wasn’t in favor of the city acting like a bank while also raising his own doubts about a plan to transform local government into a business lending agency and whether that is consistent with his own political philosophy. McKean told his colleagues, “I am concerned about council having favored agendas and the loans going to places they shouldn’t be”
Councilwoman Donna Rice followed McKean’s comments by stating, “I certainly am not ready to pass on loans or the viability of a project.” She qualified her comments by saying she is willing to learn more, study more and listen while reiterating, “I am not sure it is the role of city council to be involved at all.” She emphasized how professional and hard working she believed the staff was in preparing the proposal before council but then questioned how much time the proposed new program will take away from staff’s time needed for providing essential functions of the municipality.
McKean suggested they consider a sunset clause that will allow the program to expire should the economy recover soon by 2015.
Councilman Klassen also expressed his concern for the public view of the city lending money to companies while noting that people he respected a great deal but didn’t want to name were not in favor of the proposed jobs subsidy program for Loveland. Almost as an aside, Klassen also stated, that another city gave a “$264 million break to Dell and it folded” arguing that makes Loveland's vNet debacle look a little better by comparison.
Reluctantly, Klassen told Hale he will support the jobs subsidy program but as if arguing substance over form advised staff that the words "economic development" should be used to describe the program. Klassen concluded his response to Hale’s question by saying, “This needs more explaining and refinement but I am on board with it.”
Councilman Kent Solt told Hale he was “leaning towards the views expressed by Daryle.” He suggested the details could be better addressed by the city’s investment committee while saying, “ I am slightly leaning towards it if we work out all the details.”
Councilwoman Joan Shaffer explained that like Solt she said she was “intrigued” by the idea and liked the idea of having a “tool” as Solt described it. Shaffer said she is willing to consider it but suggested “We probably need another study session to fine tooth comb.” Shaffer concluded her comments by telling Hale, “ I am willing to go forward with it but we really need some kind of more in-depth discussion.”
Klassen than asked Hale and Krcmarik if they had enough direction “we are down the road quite a bit...” and he encouraged them to “massage” the package more and bring it back to council when they finish. Kmzarik responded that staff had now been through the documents seven times while Hale suggested the council will probably need to see a “more visual” presentation to explain the program and help Council understand why legal documents “are so dry.” Hale also told Loveland's Council the legal documents “are that way to protect the city” implying such nuances may not be evident to uninformed observer.
Loveland City Manager Bill Cahill suggested there were two primary categories of council concern he observed coming from the Council. One he described as the specific technical questions regarding risk exposure, loan to value ratio and other specifics that will likely increase in number each time the time the proposal is presented again. The second group of questions Cahill described as primarily philosophical and perhaps something that could not be easily resolved by one more staff presentation.
Mayor Gutierrez complained the document contained too many loopholes and pointed to the fact residential development is included while that was never council's intent.
Tim Reeser, Chief Operating Officer, Cenergy--CSU's Clean Energy Supercluster, and also an executive of Lightening Hybrids (the company that promised to build 6,000 electric cars in Loveland annually) spoke to the council towards the end of their discussion in favor of the proposed jobs subsidy lending program. Reeser’s company received considerable media attention in 2009 when he obtained a subsidy from Loveland after wooing councilors by showing a prototype vehicle (parked outside city hall on display) to be manufactured in Loveland.
A Denver publication, 5280, even quoted the Loveland Reporter Herald in a July 2009 article stating,
“The Loveland-based company aims to manufacture 6,000 cars annually by 2013, according to the northern Colorado Business Report. The incentive, meant to help the city during recession, provides $50,000 up front and the other $50,000 so long as the company is able to show it is making progress, reports the Loveland Reporter-Herald.”
Lightening Hybrids later abandoned plans to manufacture a vehicle in Loveland but instead now distribute “adapter kits” from Loveland mostly for use in used vehicles. Loveland’s COLT transportation system was identified as an “early adopter” of this still new technology thus increasing the city's overall commitment to the company.
Lightening Hybrids' subsidy agreement (like vNet's agreement) centers on the number of jobs created by 2013 and not specifically the promise to manufacture electric or hybrid vehicles in Loveland as promised to the media. A number of residents who protested the Lightening Hybrid subsidy deal by Loveland were surprised later to learn the agreement was not violated when the plan to manufacture vehicles in Loveland was abandoned. Lightening Hybrid still employees people in Loveland for the adapter kits and is reported to be planning to hire more people before the 2013 deadline.
Reeser told Loveland’s Council that Golden, Colorado recently lost to Greensboro, North Carolina 1,400 high technology jobs by failing to implement a similar jobs program to that being proposed in Loveland. It is curious that earlier in the evening Councilwoman Carol Johnson, a former City of Golden Councilwoman, told her colleagues that Golden already had such a program (when advocating for passage of the plan as proposed) and claimed it worked well for that city when she worked on downtown revitalization. Johnson also acknowledged inviting Reeser to advocate for the jobs program at that meeting but failed to explain why he contradicted her claim earlier in the same meeting that a similar program was working well in Golden, Colorado.
LovelandPolitics attempted to verify the story Reeser testified to Loveland's Council but could only verify the "lost" company employs approximately 300 people in Greensboro, North Carolina. Reeser said people in coffee shops now refer to the state and local officials as "duffices" who failed to retain that company and warned Loveland officials of a similar scorn by the public if they don't pass the proposed Loveland "Jobs Program."
Despite Reeser's apparent attempts to scare the council into adopting the plan that evening, staff was directed to bring the jobs subsidy package back to Loveland's council after correcting a number of errors for another review and approval again in the near future.