CITY OF HALLANDALE BEACH, FLORIDA

MEMORANDUM

 

DATE:          February 18, 2009

 

TO:               D. Mike Good, City Manager

 

FROM:         Richard D. Cannone, Director of Development Services

 

SUBJECT:   Digital Outernet Inc., Business Incentive Loan Applicant CAD# 005/02                                                  

 

PURPOSE:

 

Consideration of funding for Digital Outernet Inc. (DOI), through the CRA Economic Development/Business Incentive Loan Program (ED/BILP). 

 

BACKGROUND:

 

In FY1999-2000, the City Commission/Community Redevelopment Agency (CRA) Board of Directors approved the establishment of an Economic Development Incentive Program. In establishing this program, the City Commission/CRA Board of Directors directed that each request for incentive assistance be placed on the agenda for consideration. Award of an incentive would be considered if a new business was seeking to locate within the City/CRA or if an existing business was expanding.

 

Under the Economic Development Business Incentive Loan Program (ED/BILP) loan terms 15% of the loan is forgiven and the remaining 85% is payable at 4% interest over 10 years. The applicant will be required to sign a promissory note and mortgage documents, to secure the remaining 85% of the loan.

 

DISCUSSION:

 

On November 24th, 2008 staff received a Business Incentive Loan Program application, Letter of Intent and Business Plan from Digital Outernet Inc., a new start up venture, registered with the State of Florida. Digital Outernet, a digital sales and advertising company, is seeking financial assistance in the amount of $200,000, through the CRA Business Incentive Program.

 

The company seeks to install approximately 125—32” or 42” LCD screens in approximately 40 - 60 businesses, condominiums and (8) City facilities throughout the City, which will provide advertising and/or marketing material, through what the company identifies as the “City Channel” network. The company intends to create an additional 9 -12 new jobs. Currently, the corporate structure outlines five (5) board executives, which are as follows:

 

1.    Steve Fecske                       President

2.    John Hardwick                     Executive Vice President

3.    Albert Cohen                        Chief Technical Officer

4.    Steve Tcherchain                Director of Technology          

5.    Joe Kessel                           Vice President of Sales

 

Staff along with the City Manager have met with representatives from Digital Outernet over the course of 8 months to discuss the business plan and items related to the operations of the business. During these meetings staff discussed the following items: security (i.e. equipment and data protection), overall benefits to the City, the company’s financial stability, organizational ownership and responsibilities.

 

  1. Benefits: The benefits offered to Hallandale Beach are primarily intangible, and include:
    1. The City will receive free services from the City Channel’s production for signage creation.
    2. The City will be able to schedule special programming, such as events, fund-raisers and employment opportunities and advertise at no cost to the City.   
    3. The City Channel offers the City an additional media outlet to distribute pertinent emergency information to residents.

 

  1. Revenues: No additional revenues will be provided to the City, other than funds received from the loan repayments.

 

CRA PLAN COMPLIANCE:

 

As part of the Updated Community Redevelopment Agency (CRA) Plan approved in 2004, the approval of funding for this venture would support the following goal, objectives and policies of the CRA Plan:

 

  1. Goal #2: The CRA shall implement projects and programs addressing targeted needs as well as area-wide concerns within the CRA.

 

  1. Objective #2: The CRA shall strive to improve the overall visual appearance of the CRA and strengthen economic development and viability.

 

  1. Objective #3: The CRA shall strive to encourage public relations and public awareness of activities within the CRA.

 

  1. Policies:

 

1c. The CRA Plan shall be reasonably flexible in accomdating private sector initiatives and future economic trends and opportunities

 

2e. The CRA, in coordination with the City of Hallandale Beach, may implement one or more subsidized or outright grant programs for the exterior and interior improvements to the commercial property, for expansion of existing business and for new business location within the CRA.

 

Considering the current economic downturn seen on local, state and national levels, CRAs are instrumental in stimulating and promoting economic development throughout their local area and neighboring communities. The City and the CRA approach economic development from various fronts such as:

 

1. Creation - New businesses develop in the community through entrepreneurial activities;

 

2. Attraction - New industries come into the community, either through the relocation of existing businesses or the establishment of new branch locations;

 

3. Retention - Companies, which are already established in the community, remain in the community and do not shut their doors or move elsewhere;

 

4. Expansion - Existing business establishments expand and increase their production or services offered. This leads to enlarging the physical location size, hiring new employees, and purchasing additional materials and supplies.

 

The DOI business model could afford local participating businesses the ability to create economic development activities, such as increased foot traffic and market exposure, which in turn could sustain our local business economy.

 

CONCLUSION:

 

Under the current Business Incentive Program requirements, applicants are required to own the real property, in which they want to expand and/or relocate. This applicant does not own the real property, in which they are looking to operate this business. The proposed location of operation is 708 Foster Road, which is owned by the Williams Family Trust, whereby DOI is leasing the building. Due to the applicant not meeting the ownership requirement, staff is requesting the City Commission/CRA Board of Directors consider waving this requirement and allow the City Manager to negotiate other means of securing funding and repayment.

 

Based upon staff’s analysis of the information outlined in the DOI Letter of Intent and Business Plan, staff is requesting City Commission/CRA Board of Directors consider of the request for funding subject to the following conditions:

 

  1. Digital Outernet scale back their funding request to $125,000.
  2. Change their network name from “City Channel” as residents and business owners may think it is a City service.
  3. Establish a small business bank account before funding is awarded.
  4. Apply and obtain the proper Business Tax License, prior to the release of funding.
  5. Release funds similar to the Neighborhood Improvement Program (NIP).
  6. Waive real property requirement and allow the City Manager to negotiate other means of securing funding and repayment.
  7. Business to provide the Development Services/CRA Department with an audited Annual Performance Review every year during the funding term of 10 years.

 

For FY08/09 the City Commission/CRA Board of Directors approved the budget of $395,694, for the CRA Economic Development/Business Incentive program.

 

 

 

RECOMMENDATION:

 

The City Commission/CRA Board of Directors to approve the request from Digital Outernet Inc., for economic development incentives in the amount of $125,000, to assist in start-up expenditures, as presented. In addition, authorize the City Manager to negotiate the funding terms and disbursement of funds in the best interest of the City, subject to the following conditions:

  

  1. Digital Outernet scale back their funding request to $125,000.
  2. Change their network name from “City Channel” as residents and business owners may think it is a City service.
  3. Establish a small business bank account before funding is awarded.
  4. Apply and obtain the proper Business Tax License, prior to the release of funding.
  5. Release funds similar to the Neighborhood Improvement Program (NIP).
  6. Waive real property requirement and allow the City Manager to negotiate other means of securing funding and repayment.
  7. Business to provide the Development Services/CRA Department with an audited Annual Performance Review every year during the funding term of 10 years.

 

 

 

Prepared By: ____________________________­­

                      Bobby Robinson, CRA Manager

 

Reviewed:

 

_________________________                                                        _____________

D. Mike Good, City Manager                                                                       Date

 

 

___ Approved                                  ___ Denied                              ___ Hold for Discussion

 

Comments:

 

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