Oak Park village trustees Monday approved a request for up to $250,000 for the Sugar Beet food cooperative from the Madison Street Tax Increment Finance District, but with a caveat: the store must pay back part of the money once it’s up and running.
Trustees agreed to pitch in $250,000 in TIF money to build-out the store, which is expected to open at 820 Madison St. in February. The board also agreed to cosign on a $250,000 line of credit as a contingency in the event the co-op needs additional operating capital.
The Oak Park Economic Development Corporation presented the Oak Park village board with the OPEDC’s funding recommendation.
Sugar Beet co-founder Cheryl Munoz said in a telephone interview that the request for $250,000 for the build-out is contingent on the group raising $800,000 in a $1.8 million capital fundraising campaign launched earlier this year. The co-op would have until the end of 2015 to raise the money in order to receive the $250,000 in TIF dollars.
Munoz said Sugar Beet organizers already have raised $400,000 in loans from their members and another $100,000 in membership dues. The store has not opened and the co-op already has some 530 members, Munoz said.
“Our goal is to raise another $400,000 (in loans) from our members … and have 1,000 members by the time we open the store in February,” she said.
Memberships are $250 for families and $50 for seniors, students and low-income customers.
In addition to the membership dues and member loans, the co-op seeks financing through sources such as banks and cooperative development funds, Munoz said, referring to the mishmash of financing sources as “lasagna financing.”
Trustees took co-op organizers by surprise with the suggestion that Sugar Beet pay part of the money back. The details of the partial repayment were not set at the Monday meeting.
“If we were to approve the distribution tonight, might it be possible in the agreement that’s coming at a later date to say, ‘Having received this money, having met your expectations, your projections, having made your member owners whole … might it be reasonable for the village to request a little bit of money back that we can put into the corridor at large?'” said Trustee Adam Salzman.
Village President Anan Abu-Taleb agreed, adding that 20 percent of the loan could be repaid to the business district.
“It could be 10 years from now, but once (Sugar Beet’s financial) expectations are met, if they’re asking the village to help them out to get through this, then I think it’s proper to ask them to help the village later on,” Abu-Taleb said. “It seems to me it’s a reasonable thing to ask for.”
Sugar Beet organizer and former village trustee Greg Marsey said he agreed with the concept, but would want to get approval from the co-op board before making a commitment.
“What I can say tonight is we have seven board members here tonight, myself included, and they have all said, ‘Yes,’ so it’s an unofficial forum and an unofficial unanimous vote,” Marsey said.
In an interview last week with Wednesday Journal, Village President Anan Abu-Taleb expressed general support for the co-op but raised some caution as to the amount of the money being recommended by OPEDC. As a businessperson, he said, he always wants to see greater “skin in the game” from entrepreneurs.
John Hedges, OPEDC executive director, said in telephone interview the $250,000 line of credit from a bank would be backed by the village but would not be needed if the business is successful.
“It’s likely never going to be used,” he said.
Hedges said he believes the group is well on its way to raising the $800,000 needed for the matching TIF money.
“I think they are pretty close to raising $500,000; it looks like they’re off to a good start,” he said. “I expect they’ll meet that ($800,000) goal sometime this year. We’re (suggesting the village give) them until the end of 2015, which would be more than enough time.”
Munoz said she believes that the business will be an anchor for business development on Madison. She said if the co-op does fail, the money used for the build-out of the store could be applied to the next business that comes along.
“That ($250,000) investment stays with the property,” she said. “It won’t go to stock our shelves or buy grocery carts.”
Hedges noted that the store is projected to generate $4 million to $5 million in sales per year and that the village would recoup its investment in sales and property taxes in a couple of years.
The OPEDC recommendation estimates that the village will annually realize approximately $62,000 in sales tax and $42,000 in property tax from the venture.
The store is expected to create 15 full-time jobs and five part-time jobs, according to the proposal.