Distillery seeks city loan for expansion

Evanston-based distillery FEW Spirits is seeking a $250,000 loan from the city to pay for new equipment and materials to expand its operation.

The craft distillery, founded in 2010 by Evanston resident Paul Hletko, specializes in production of whiskey, bourbon, rye and gin products.

In part capitalizing on Evanston's history as a center of the prohibition movement, FEW has rapidly expanded its distribution and brings an average of about 75 distillery tourists a week to its tasting room at 918 Chicago Ave., according to a memo from the city's economic development staff supporting the loan request.

Hletko says that despite the high demand for the distillery's products, he's financially constrained to make the capital investment required to expand.

The loan would fund equipment to add another distillery production line and the city would acquire a security interest in the equipment.

The loan agreement, scheduled to be acted on by the City Council Monday night, calls for repayment over 10 years with 6 percent interest.

The city's Economic Development Committee recommended approval of the loan plan last fall on a 6-0 vote.

Comments

No private investment?

Apparently, our esteemed aldermen and city bureaucrats are better investors than all of the local bankers, private investors and Kickstarter.com taken together.

And, by the way, does acquiring "interest in the new distilling equipment" preclude the city from having a recourse to the rest of the assets? (as in a typical project finance arrangement)

 

Loan to distillery

What? Evanston offering loan to private business? Why not a bank? If it is too risky for a bank why should the citizens be carrying the risk? Tax bills are coming. This potential decision by council shows they are tone deaf.

Taxpayers aren't shareholders - Vote NO!

FEW is asking for a LOAN from City of Evanston, not an equity investment.

Therefore, taxpayers are NOT SHAREHOLDERS and will not receive any dividends.

Taxpayers are creditors, and will receive 6% interest on the $250,000 loan for 10 years.(Hopefully)

City Council members and taxpayers should ask ourselves, is this the role for our local government? City Council should also ask themselves and staff, what is the unique and differentiated skill set that enables them to approve a loan that puts taxpayers at risk, when there are many companies in Evanston and the surrounding area who's business it is to evaluate and extend credit to growing businesses like FEW.

If part of the argument for this loan is that FEW attracts 75 tourists a week to Evanston, then get out your checkbook, and start loaning money to Northwestern University which brings hundreds and some weeks, thousands, of people to Evanston. There are also many other businesses and organizations which bring "tourists" and "visitors" to Evanston each and every day. Are they also eligible for low cost loans from the City of Evanston?

This loan request is a slippery slope for City Government.

Vote NO !

Council Loans, TIFs and Gifts

Does the Council/Manager produce annual results of the income/loss [and over expense] to taxpayers ACTUALLY derived from the loans, TIF and gifts the Council makes ?

We deserve to know which loans/gifts actually produced net income to the taxpayers, how many of those businesses failed or moved out of Evanston. 

With TIFs which are generally the largest amount committments, do we know how many businesses supported stay in business ?  what is the excess tax revenue over if they had not been in a TIF ? Since TIFs are a long term contract, it is very important to keep track so it does not get forgotten or hidden.

In business you not only decide on a loan, venture, construction, new equipment, etc. but also what  is the return on investment OVER a 'hurdle rate'  and compared to the next best investment. E.g. rather than making a $X loan to a business, what are the other uses of that money including not having to tax individauls/businesses or rebating taxes to ALL businesses instead of just giving money to supposed "winners."

Good question

Nicely stated and well put reasonable request. When so much money is it stake, it makes sense to do an analysis. I think that is what the City Manager should certainly do.

Our custom is to give away $Millions but this is a decent risk

FEW is a good business and has done quite well establishing itself as a notable distiller. They should be complimented and if they can get a desirable loan from the city, why not? It appears the risk is quite manageable and I'm sure the council has done its due diligence and the City Manager has analyzed the risk.reward. It would be interesting to see that analysis. I, for one, 

I certainly agree with your point of view however, as the city has a history of making loans and grants to spurious and risky businesses in the past. FEW does not appear to be one of those, though.

Millions have been spent on many projects like a museum ($500K missing), a new roof for a restaraunt across from the police/fire station (it closed soon after the work was done), new facades for building owners downtown, bars, theaters (it never happened - $millions were spent buying a building on Howard street), restaraunts and the list goes on and on.

I agree the city SHOULD take some active interest in fledgling businesses that need help to start (city should have an equity stake) IF it is a desirable business (employs people, generates tax revenues, is interesting seed for an industry, etc.). I would consider FEW to be such a fledgling business.

How does the city evauate requests ?

When someone, a business or Council member, etc., asks for a loan, gift, tax break, how does the city evaluate the request ?

Do they use an independent agency with a proven record of project evaluation ? {I must admit that in itself could just be another way for the city to run up bils and pile on MORE contractors].

or

do they have a staff with extensive work experience in the private sector--bank loan departments, credit ageny [e.g. S&P], [forensic] accounting/investagators, lawyers with years of experience in air-tight contracts and recovery [if there is default, bankruptcy] ?  MBA/PhDs trained in finance esp. corporate ?

Banks have deep resources to evaluate loans and yes they make mistakes, but I bet they do much better than municipalities do.   If a firm cannot get a loan from a bank, I have a strong feeling something is wrong or their case is weak, or they feel the city will be more willing to forgive them if they can't pay or fail and the city should not make the loan.