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Loveland - February 6, 2011

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.

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

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.

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
.”  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

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.

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Left to right:  Council members Hugh
Mckean, Joan Shaffer and Larry Heckel
Councilors Go On Record
Over Future City "Jobs Development Program"
Subsidies/Loans To Businesses
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