Financial Resources and Incentive Programs 

Click on the links to go to:  

Revolving Loan Fund / Gap Financing Tax Increment Financing Tax Abatement
 Website Development Program Historic Facade Improvement Program

Energy Incentive Loan & Rebate Program

Economic Development Utility Rate Demolition Program Employee Relocation Assistance / Discounted Residential
   
 

 

The Luverne Economic Development Authority has a number of financial resources available to assist business and industry. In this section, you will find some general information on how economic development projects are funded along with a summary of the financial resources available.

A Note on How Economic Development Projects are Financed:

The first rule of economic development finance is that “There is no free money”.
The days of grants for economic development projects, if they ever did exist, are few and far between. Today, economic development projects are funded primarily through owner equity and private bank financing, with economic development funds available for “gap financing.”
Many times, particularly with economic development projects, owner equity and conventional bank financing do not provide all the funding that is required. Typically, this occurs because the bank has lending limits they must adhere to, there is inadequate equity, there is insufficient collateral, or the business cannot afford market interest rates and/or term requirements.
Generally speaking, economic development financial tools exist to fill this funding “gap.”
 

Typically, an economic development financing deal looks like this:

Source

Notes

Owner Equity                    

Must be present in the package – should be at least 10% of the entire financial package. More may be required, and more is better.

Bank Loan

Another required element in any financial package – could be anywhere from 40% to 90% of the project’s funding.

Gap Financing

Only comes into play when needed and only in the amount necessary to make the deal work. Could potentially come from multiple sources and represent up to 50% of a project’s funding.

 

We do not compete with banks, and in no instance will economic development financing replace bank financing. Public financing exists solely to supplement private financing in order to move worthwhile economic development projects forward.


A number of resources are available to help finance economic development projects. In this section, you can access details on program requirements, eligibility, criteria, and other helpful information.

 

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Revolving Loan Fund / Gap Financing 

The Luverne Economic Development Authority Revolving Loan Fund is designed to provide gap financing for businesses. The purpose of the RLF is to promote job creation and job retention, stimulate private investment, and to support, diversify, and strengthen community vitality by providing financial assistance to new and existing businesses in Luverne.

Eligibility

  • Businesses must be located, or be willing to relocate, within the city limits of Luverne.
  • Luverne Area Chamber must be in support of the LEDA's assistance.
  • RLF shall act as gap financing not to exceed 20% of the total project cost.
  • Applicant's equity participation must be at least 10% of the total project cost.
  • Loan amounts shall range from $5,000 to $25,000 or an amount at the discretion of the LEDA with funding level dependent on funds available.

 

Requirements

 

  • At least two livable wage jobs shall be created or maintained.
  • Wages for jobs created must be at least $10.19 per hour, exclusive of benefits.
  • Funds may be used for, but not limited to: land & building acquisition, building construction and/or expansion, machinery & equipment, and facade improvements.
  • Funds may NOT be used for, but not limited to:  inventory and working capital, general remodeling, refinancing debt, and delinquent taxes.
  • Immediate repayment of the outstanding balance is required if the business relocates outside Luverne.

 

Rates/Terms

  • Rates are determined by the EDA Board. Typically rates will be similar to those available from a commercial lender.
  • Loan terms up to 10 years are available.
  • Loan amounts up to $25,000 are available.
  • Applicants creating a significant number of jobs or paying higher wages may receive preferential loan terms.
  • The EDA will typically subordinate to other financing sources when needed.

 

If you are interested in a Gap Financing loan, please contact Holly at 507-449-5033 or email hsammons@cityofluverne.org

 

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 Tax Increment Financing


The Luverne Economic Development Authority is willing to consider the employment of Tax Increment Financing (TIF) for eligible projects. In a nutshell, the difference between a property’s original property taxes and the property taxes due on a property after it has been improved (called the “tax increment”) can be captured and used to help finance the project.

TIF is used for two basic purposes:

  • To induce or cause a development or redevelopment that otherwise would not occur - for example, to convince a developer to build an office building, retail, industrial, or housing development that otherwise would not be constructed. To do so, the increased property taxes are used to pay for costs (ex. land, acquisition, or site preparation) that the developer would normally pay.

  • To finance public infrastructure (streets, sewer, water, or parking facilities) that is related to the development. In some cases, the developer would be required to pay for this infrastructure through special assessments or other charges. In other cases, all taxpayers would pay through general city taxes.

 

In all cases, the proposed project must pass what is called the “but-for” test, meaning that unless Tax Increment Financing is utilized, the project will not be economically feasible. In other words: if the project can be done without TIF, then it is ineligible for this assistance.

For economic development purposes, two types of Tax Increment Financing districts are available:  Economic Development TIF districts for new developments and Redevelopment TIF districts to help with the costs of renovating or replacing substandard buildings and redeveloping blighted areas.

Different rules apply to each type of TIF district (see below):

  • Economic Development TIF District – An 8-year district that can provide funds for land acquisition, infrastructure (street, water & sewer, parking, etc.), grading & excavating, and / or site improvements. Primarily for manufacturing and other industrial-type projects.

  • Redevelopment TIF District – A district that can go up to 25 years and will provide funds for the removal of blighted conditions on a lot (sub-standard buildings, site clean-up, etc.).

Eligibility

  • The Luverne City Council, following a public hearing on the proposed project, must approve all TIF Districts.
  • Economic Development TIF • Industrial, warehousing, research & development, and call centers are eligible.
  • Redevelopment TIF• Proposed district must contain existing “blighted” development.
  • At least 70% of the area must be occupied by buildings or other improvements.
  • At least 50% of the buildings themselves must be substandard, based upon an internal inspection. 
  • A building is considered substandard if it would cost at least 15% of a new building to bring the existing building up to current building code requirements. 
  • As long as the above requirements are met, any type of project (commercial, retail, industrial) is eligible.

 

Requirements

  • Economic Development TIF • The TIF district must promote new employment, tax base, or retain business in the state.
  • Redevelopment TIF • At least 90% of the tax increment generated must be used to correct the blighted conditions.

 

Rates/Terms

  • All TIF districts in the City of Luverne will be set up on a “pay-as-you-go” basis – meaning that tax increment will flow back to the developer in semi-annual payments. The developer will pay the up-front costs with their own funds. The increments, then, are used to reimburse the developer for these costs. 
  • If the project requires financing for the up-front, a loan may be secured from a private lender with the projected tax increment being pledged to service the loan.
  • Economic Development TIF • Districts can provide tax increment for up to 8 years.
  • Redevelopment TIF • Redevelopment TIF district can provide tax increment for up to 25 years.

 

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 Tax Abatement

Tax abatement is a tool used for development purposes. It is a tax rebate rather than an exemption from paying taxes. The City of Luverne and LEDA use this as an additional tool to lower initial start-up, relocation, or retention costs over a certain time period. Abatement levels are determined by participating jurisdictions (City, County, and School District).
With Tax Abatement, the city rebates its portion of property taxes back to the property owner who then uses it to help offset development and / or redevelopment costs. Tax abatement is simpler and less restrictive than tax increment financing and is quite useful for smaller projects.
In addition, the availability of tax abatement is limited – in any given year, for all economic development projects taking place, the city can abate an amount equaling no more than 10% of its current tax levy.
The Luverne City Council must approve all tax abatements.

Eligibility

  • Tax abatements can be provided for any type of property.                  

 

Requirements

The project must provide one or more of the following public benefits:  it must increase or preserve tax base, result in job creation, redevelop blighted areas, and / or provide services not currently available to the residents of Luverne.

 

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 Website Development Program

PROGRAM PURPOSE:

  • To offer financial incentives and technical assistance to business owners to create, develop, establish, and maintain a professional website.

 

PROGRAM GOALS:

  • Assist business owners with the process of collecting information needed to create a website
  • Connect business owners with a local, professional website developer
  • Incentivize businesses to establish and maintain a website

 

ELIGIBLITY:

  • Business must be located within the city limits of Luverne
  • Business must be willing and able to cover monthly hosting fee after setup

 

DISTRIBUTION OF FUNDS:

  • LEDA will provide a $750 grant toward website development
o   Business owner required to pay a portion of the down payment to begin website development
o   LEDA will pay balance due upon completion of the website
o   Business owner agrees to maintain website and cover monthly hosting fees after setup

 

PROCESS:

  • Business fills out application for Website Development Program
  • Business must complete Story Brand Worksheet
  • Business, LEDA, and Web Developer have a meeting to gather initial items, discuss process, and establish goals, terms, and conditions
  • Business pays initial down payment; LEDA pays remaining balance due
  • Website Developer creates website; communicates with Business and LEDA for review and comment
  • Website Developer bills client for any additional charges
  • Once the LEDA has provided technical assistance to help establish a website and the $750 grant is paid, all future decisions, agreements, and financial commitments can be made between the Business and the Web Developer

 

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 Historic Facade Improvement Program

To support the revitalization of Main Street and downtown Luverne, the city has created a program to encourage businesses to make history again- restoring buildings as closely as possible to their historic appearance from 1878-1948.
The Historic Facade Improvement Program offers FREE technical assistance for architectural design services as well as financial assistance in the form of loans and grants. As a part of this program, owners can drastically reduce the cost of restoring a building to its historic appearance with funding assistance as follows:
35% low interest loan
35% grant
30% owner contribution

Eligibility

Eligible properties must be located within the eight-block downtown area of which the boundaries are Estey on the west, Spring on the east, and include frontage on Main Street (to the alley)  

Requirements

 Funds may be used for, but not limited to:

  • Façade materials and construction
  • Windows and Doors
  • Awnings
  • Signage
  • Lighting
  • Landscaping

Rates/Terms

  • The interest rate will be at a rate determined by the LEDA.
  • Loan terms up to 7 years are available.
  • Loan amounts up to $21,000


Download the Historic Facade Improvement Program Application.

 

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 Energy Incentive Loan & Rebate Program

 

Loans up to $5000 offered at 0% interest for 5 years are available to businesses for qualified Bright Energy Solutions projects. 

Eligibility 

Eligible projects include lighting for new construction, lighting retrofits, heating and cooling, motors, pumps, VFDs, and custom incentives. 

 

Requirements 

As long as your project qualifies for Bright Energy Solutions rebates, it will be eligible for the loan program.  We can send a specialist directly to your business - at no cost to you-  to find the best energy efficient upgrades for you!

 

Rates/Terms

All loans are 0% interest

  • $1000 loan    1 Year                      
  • $2000 loan    2 Years       
  • $3000 loan    3 Years              
  • $4000 loan    4 years  


Monthly payments can be added to the customer's utility bill for added convenience.

 

Rebates

Missouri River Energy Systems (MRES) and Luverne Municipal Utilities

 

Clean Energy Resource Teams

  • CERTified Campaigns
  • Rebates for Residents and Businesses: e.g.- Programmable Thermostats, VendingMisers, Solar Thermal, etc  

 

Center Point Energy        

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 Economic Development Utility Rate

The City of Luverne benefits from a municipally owned electric utility which provides low electric rates. The Economic Development Utility Rate is an additional tool used by the LEDA to reduce costs for a business locating in Luverne beyond the existing low rates.

 

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 Demolition Grant Program

The purpose of the Demolition Program is to beautify the City of Luverne through demolition of irreparable and substandard structures, both commercial and residential.  Grants of $5000 (Commercial) and $3000 (Residential) are available to assist in the cost of removal of substandard or irreparable structures. 

Eligibility 

Applicant must make the case that the removal of the substandard structure will improve the overall value of the property. 

Requirements 

 The following items must be submitted with an application: 

•  Review of Building Demolition Code and pre-approval from the Building Official

•  Plot plan of property which must include legal description, street address, and lot dimensions

•  Copy of property's most current estimated market value, including a breakdown of land value and structure value 

•  Copy of Purchase Agreement or Deed showing total acquisition cost and proof of ownership

•  Bid/Estimate for demolition and disposal costs from contractor


 Download an application for a demolition grant.

 

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 Employee Relocation Assistance / Discounted Residential Lots

Employee Relocation Assistance may be provided to key personnel to assist in moving costs. Discounted Residential Lots are also available for key and regular employees in our new residential developments. We will strive to create a custom program and assistance package that specifically meets the needs of your start-up or expanding business! 

See the available lots

 

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Rural Business Assistance Loan

(RBEG Revolving Loan Fund) 

The RBEG Revolving Loan Fund is designed to provide gap financing for businesses. The purpose of the RBEG RLF is to support the development of small and emerging private business enterprises in rural areas, benefit the community as a whole through projects contributing to economic growth and community revitalization, and to create and retain jobs while increasing our tax base.

Eligibility

  • Small and emerging private business enterprises that employ 50 or fewer new employees and have less than $1 million in projected gross revenues.
  • Funds are available to all sectors (commercial, industrial, retail) that have a physical commercial location within city limits.
  • Funds cannot be used to produce agricultural products through growing, cultivation, and harvesting either directly or through horizontally integrated livestock operations except commercial nurseries, timber operations, or limited agricultural production related to technical assistance projects.
  • RLF funds will not be used to fund a part of a project which is dependent on other funding unless there is a firm commitment of the other funding to ensure completion of the project.
  • Applications by members of the loan committee and their immediate family members shall be ineligible for funding.

 

Requirements

  • Funds can be used for acquisition and development of land, easements, and ROWs
  • Funds can be used for acquisition, construction, conversion, enlargement, repairs, restoration, or modernization of building
  • Funds can be used for façade repairs, including awnings, signage, and lighting
  • Funds can be used for property improvements to include access streets and roads, parking areas, utilities, sidewalks, and landscaping
  • Funds can be used for technical assistance / architectural services for rehab of historic buildings
  • Funds can be used for working capital if the business is negatively impacted by COVID-19
  • Use of funds must create and/or retain jobs 

Rates/Terms

  • The interest rate will be at a rate determined by the LEDA
  • Loan terms up to 7 years are available
  • Loan amounts up to $5000 are available
  • Applicants must be willing to sign a Personal Guaranty as collateral
  • Loans to be made from the RBEG RLF will not exceed the level of available funding in the fund

 

If you are interested in the RBEG program, please contact Holly at 507-449-5033 or email hsammons@cityofluverne.org

 

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