Residents frustrated with city proposal to award $7 million loan to West Louisville FoodPort

West Louisville FoodPort will include tenants such as vertical farm company FarmedHere. | Courtesy of FarmedHere

West Louisville FoodPort will include tenants like the vertical farm company FarmedHere. | Courtesy of FarmedHere

Using words including “frustration,” “insulted” and “irked,” residents of Shawnee and surrounding neighborhoods Monday let city officials know how they feel about Louisville-Jefferson County Metro Government’s proposed plan to award the nonprofit Seed Capital KY a $7 million loan for the West Louisville FoodPort.

Representatives from Louisville Forward addressed a crowd of roughly two dozen people at the monthly meeting for Louisville Metro Council District 5 to talk about where the loan would come from, how it would be paid back and why the city feels the FoodPort is a worthy project.

The six residents who spoke at the meeting were critical, or at least leery, of the city’s proposition to help the nonprofit further by contributing funds to its more than $50 million agriculture hub project. Back in February, Louisville Metro Council agreed to sell a 24-acre lot at 18th Street and Muhammad Ali Boulevard to Seed Capital KY for $1.

“Colored folk are tired of being colonized by people outside our community. …I don’t know how you have the nerve and audacity to come down here and propose such a ludicrous idea to us,” said a man who didn’t identify himself, except to say he is a Shawnee property owner and a silent partner in his sister’s restaurant Sweet Peaches.

Seed Capital KY’s co-founders Caroline Heine and Stephen Reily live outside the neighborhood.

“I am greatly insulted as an African-American that had all my years down here that you are going to bring in Caroline Heine and Stephen Reily and try to jam them down our throat,” the man said. “People in this room now can build small micro-businesses on that land.”

He criticized the city for being overly friendly with Seed Capital KY, providing the federal loan and the land for the West Louisville FoodPort. “Have you ever offered that to anybody in our community? No.”

Although few residents attended, the Rev. David Snardon, pastor at Joshua Tabernacle Missionary Baptist Church, said he believes that many people in the community agree with the sentiments the man expressed.

Responding to the criticism, Theresa Zawacki, ‎senior policy adviser for the city’s economic development arm Louisville Forward, countered that the city is trying to help a project that could have a substantial impact on the neighborhoods surrounding it.

“I am not sure that it’s favoritism. I think it’s an example of how the city can engage in a conversation about a project in the earliest stages and provide the support necessary to make that project successful,” Zawacki said. “From time to time, the city gets involved in other big development projects that have the opportunity to create a substantial and catalytic impact on a neighborhood, and we’ve done that by providing grant funding from our Brownfields Program …we’ve provided support for a number of businesses that have developed in West Louisville through our ability to use economic development incentives from the state.”

An untapped funding source

The $7 million loan would come from the U.S. Department of Housing and Urban Development’s Section 108 Loan Guarantee Program, which funds projects that primarily benefit low- and moderate-income people or “meet urgent needs of the community,” according to HUD. Private investors actually fund the loans, which HUD guarantees.

The money can be used for economic development, housing rehabilitation, public facilities and other physical development projects. In 2014, the Urban County Council approved a $6 million Section 108 loan to 21c Museum Hotel for its new Lexington hotel.

The federal government originally agreed to give Louisville the $7 million loan during the Clinton administration, and Louisville planned to use it to create a small business incubator, a job training and placement facility and expand Station Park Industrial Park. However, Zawacki said the city found an alternative source of funding with better terms.

Administrations both federally and locally changed, and the city forgot about the loan until 2015, when it received a notification from HUD saying the funding was still available. Although the $7 million loan was already approved nearly two decades ago, HUD must approve the new use of the funds.

A few speakers at the District 5 meeting Monday questioned how the city settled on the West Louisville FoodPort as the right candidate to receive the funding.

“Who is actually looking at these projects and making these decisions and when are these decisions being made,” asked Rev. Snardon. “I don’t think this has as much to do with Seed Capital as it does with the city. it seems as if the city is advocating for Seed Capital.”

“Quit making these decisions in the dark,” he added.

Zawacki said she, the mayor, the city’s chief financial officer, Louisville Forward chief Mary Ellen Wiederwohl, the city’s chief innovation officer, Ted Smith, and others reviewed projects that could benefit from the loan before settling on Seed Capital KY.

The FoodPort project had a solid plan in place when the city found out about the available loan funding, and the city had already agreed to sell Seed Capital KY the West Louisville property, Zawacki said.

The West Louisville FoodPort and the businesses that locating there are expected to create 250 jobs, and Seed Capital KY’s goal is to fill 75 percent of the FoodPort’s jobs with low- and moderate-income people, according to information provided by the city. The nonprofit is working with KentuckianaWorks, the Louisville Urban League, YouthBuild, TKT & Associates and others to find qualified workers.

Donovan Taylor, president of the Chickasaw Neighborhood Federation, said the city needs to make Seed Capital KY sign a guarantee that it will hit certain goals.

Zawacki told members of Louisville Metro Council’s Labor and Economic Development Committee Tuesday afternoon that as a term of the loan agreement, the city plans to require the FoodPort to fill at least 51 percent of its jobs with low- and moderate-income people.

In addition to job creation, city officials listed other benefits of investing in the FoodPort, including the revitalization of a formerly vacant property and the ability of the large-scale development to attract other businesses to the area, including shops and restaurants.

“This is a catalyst project,” said Scott Love, who works on small business development in West Louisville for Louisville Forward.

Projects funded using Section 108 loans usually have multiple funding source, Zawacki said. Seed Capital KY is seeking New Market Tax Credits and has received multiple grants to help pay for the development. It also will earn income by renting space at the West Louisville FoodPort to for-profit businesses.

“We feel confident, with the rent they will be charging tenants of the FoodPort, that they will have enough income” to repay the loan, she said.

The city and Seed Capital KY are working to identify items that the nonprofit can put up as collateral in the event it can’t make its loan payment. Ultimately, however, the city could be responsible for paying a portion of the loan back.

If Seed Capital KY can’t no longer make payment on the $7 million loan, HUD would collect the collateral, and if that did not cover the remaining payments, the city would have to use Community Development Block Grant funding to pay HUD back. Community Development Block Grant money funds low-income housing, shelters and the purchase of blighted property, among other uses.

Louisville Metro Councilman Kelly Downard, R-16, asked Tuesday if the city could go after Seed Capital KY to reimburse any lost block grant funds.

“It is certainly something that sounds reasonable,” Zawacki said, noting that she would have to consult with the city attorney.

The city views the Section 108 loan for the FoodPort as test run. Louisville is eligible to take out up to $50 million in Section 108 loans but has not taken advantage of that in past couple decades, Zawacki said. If the process works well with the FoodPort, she added, the city will consider starting a revolving loan fund using additional money from the Section 108 Loan Guarantee Program.

Louisville residents have until Aug. 26 to submit written comments about the loan proposal through email to [email protected] or by regular mail to Housing and Community Development, 444 S. Fifth St., Suite 500, Louisville, KY 40202.

The city expects to submit the application on behalf of Seed Capital KY on Sept. 1.