ORIGINATING DEPARTMENT
To Committee(s)
| # | Committee Name | Meeting Date |
|---|---|---|
| 1 | Business, Inspections, Housing & Zoning Committee | Dec 8, 2020 |
Action Item(s)
| # | File Type | Subcategory | Item Description |
|---|---|---|---|
| 1 | Action | Loan | Approving the write-off of a $75,000 City of Minneapolis Community Development Block Grant loan to Wirth Cooperative Grocery, 2201 Golden Valley Rd. |
Ward / Neighborhood / Address
| # | Ward | Neighborhood | Address |
|---|---|---|---|
| 1. | Ward 5 | Willard-Hay | 2201 Golden Valley Rd, Minneapolis |
Background Analysis
This report seeks to write off a loan that is uncollectable. City staff is trying to clean up its accounting for such loans. City Council approval is necessary since the outstanding loan amount is more than $50,000.
On March 23, 2017 the City loaned $75,000 to Wirth Cooperative Grocery to open a new grocery store. For many years a group of residents had sought to establish a community-owned grocery store in north Minneapolis. After years of planning and increasing their membership base, in 2016 the cooperative agreed to lease ground floor space in the newly constructed Commons at Penn project at 2201 Golden Valley Road. The loan was used for build-out and start-up costs for opening the store.
The City funded its loan using federal Community Development Block Grant dollars. The loan featured deferred payments for the first three years with the chance for 100% loan forgiveness based on meeting hiring goals. Other sources of funding included loans from Sunrise Banks, Community Reinvestment Fund, and Shared Capital Cooperative along with grants from the US Department of Health and Human Services and Hennepin County and member equity. The collateral for the City’s loan consisted of a second position to Sunrise Banks in the leasehold improvements and business assets of the cooperative.
The Wirth Co-op Grocery was able to open in October 2017. By April 2018 the Co-op announced that the store would be closing temporarily to reconfigure its operations. During this time the City tried to help by supporting technical assistance to the Co-op. After 10 months the Wirth board announced that the store would not re-open. Different parties cite various reasons that led to this outcome. This report does not try to evaluate the factors that led to the end of Wirth Co-op.
After Wirth closed, the grocery store space has been used as a temporary community food shelf by the Northpoint Health and Wellness Center as it expanded its regular facility.
The outstanding principle amount of the loan remains $75,000 and has accrued some interest at 3% since earlier this year, three years following the closing. Since the store has gone out of business, the Wirth Co-op has ended, and there is no chance to recover collateral, staff is recommending that the loan be written off as uncollectable.