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Franklin board seeks to better monitor program

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More than $1.3 million in taxpayer dollars has been given out to Franklin businesses and organizations for building renovations, expansions and job growth, but a city board hasn’t been closely monitoring the progress of those projects.

During the past six years, the Franklin Redevelopment Commission has given cash to 12 businesses and organizations for projects. The money has been given out as a forgivable loans; and if the company or organization meets certain criteria, such as finishing a project in an allotted time or meeting job creation goals, the money doesn’t have to be paid back.

The loans, which come from taxing districts that set aside property taxes for economic development, are one way cities can offer cash to businesses for large projects. But cities potentially can lose money as has happened in Greenwood, where $2 million was loaned to a biotechnology company that the city is now suing.


The Franklin board recently forgave two loans after finding out the companies had met job hiring goals. But officials don’t have any information about three projects and haven’t been receiving updates on other projects that were funded more than two years ago.

Franklin community development director Krista Linke is reviewing agreements to figure out exactly how much money was given out and what the companies and organizations were required to do. And she is contacting each of those businesses and groups to find out whether the city can forgive the debt because the promises were kept or if the city has to start efforts to collect.

Each agreement has different lengths for the loan, requirements for what must be done for the city to forgive the amount and different reporting requirements, Linke said. Some groups haven’t made updates to the commission, and board members hadn’t actively checked, she said.

Greenwood has a similar forgivable loan program in place but requires companies to submit a report once per year and has been receiving those updates, Greenwood redevelopment commission president Mike Tapp said.

Franklin has loaned $1.8 million in nine loans since 2012. But Linke hasn’t been able to locate documents for three of those agreements and isn’t sure how much they’re for or whether the companies have exceeded the amount of time to complete their projects.

When that time limit on the loan is over, the redevelopment commission can forgive the loan if the company proves it met the requirements set out by the board, such as completing an expansion to a new building or meeting a hiring goal. Otherwise the city will ask for the money to be repaid.

Once she gets the information, Linke plans to keep a list of pending loans and set up a reporting system where redevelopment commission members would receive an update on one project per month.

Most of the loan agreements in Franklin were approved before

Linke began managing the redevelopment commission’s finances and programs at the beginning of 2012. Unlike city-approved tax breaks, which have to be reviewed once per year according to state law, no one was assigned to check up with the forgivable loan recipients. Companies haven’t submitted those updates, and board members did not follow up, she said.

The city also made the loans at different times with different requirements on how often a recipient needed to report, so board members wouldn’t be receiving updates on a regular schedule, such as once per year in January.

“Before anybody was really working as staff besides the attorney, there just wasn’t really anybody to follow up on them, and that’s not really a good thing,” Linke said.

Being a volunteer board that meets once per month, the commission wasn’t able to give the program the oversight it needed and lost track of the loans, board president Bob Heuchan said. That’s not an excuse, he said, and board members are now able to correct the problem with Linke’s help.

“We’ve got money out there, and someone needs to be tracking this stuff. It fell through the cracks, but we’re taking steps to make sure that doesn’t happen again,” he said.

Greenwood’s redevelopment commission also offers forgivable loans and has two pending. The first was $295,000 to One Click Ventures to help it purchase a building off Emerson Avenue and hire 109 people by 2017. The other was $2 million made to Elona Biotechnologies, which the city is suing to try to recoup that loan and other taxpayer funds given to that company.

The loan to Elona shows a case in which the program can backfire for a city, Tapp said. Greenwood is trying to collect about $8.4 million total given to the company through a court-ordered auction, and the experience has led redevelopment commission members to act more cautiously when considering how to give out loans. The board will likely request more financial information and not give out as large of a loan in the future to minimize the risk of losing funds, he said.

Without updates from companies, Franklin isn’t yet sure whether it may need to try to collect from businesses that didn’t meet the requirements of their loans or whether the debts can be forgiven, Linke said.

Some of the money hasn’t been paid out yet but is committed to the groups. For example, the redevelopment commission has promised up to $200,000 to the Franklin Elks Lodge No. 1818 to renovate the former G.C. Murphy building and $480,000 to pay for the land for the city’s shell building if a company doesn’t purchase that building within the next three years.

Companies did send information to the city when they met the requirements in order to get the loan amount forgiven so that company accountants could remove it as an outstanding debt. That recently occurred with Heartland Machine and Engineering and Electro-Spec, after both met job creation goals and wanted to be able to remove the debts from their ledgers. Those two loans accounted for about $550,000 of the $1.8 million total.

The $110,000 loan the city gave to Heartland Machine helped the company move into a new building with more square footage as the startup was rapidly expanding, owner Tom Goin said. That growth has continued, and the company is now planning a 20,000-square-foot expansion.

“We could have never had the building that we’re in if they hadn’t helped,” Goin said. “We were a startup company at the time, and it allowed us to expand sooner than we ever thought we would. They gave us three years to pay back the forgivable loan, and we achieved that goal plus more in about six to eight months.”

Both Franklin and Greenwood don’t have a certain criteria companies need to meet for the commission to consider a forgivable loan as an incentive. Board members consider the size and benefits of projects on a case-by-case basis and have the option to include a forgivable loan in addition to tax breaks or other incentives, Tapp said.

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