The city of Atascadero’s Redevelopment Agency has pledged to partially guarantee bank loans of up to $1 million in total for restaurant owners to strengthen the city’s core as eateries continue to close because of the economic downturn.
The agency’s board of directors, which approved the 18-month program Dec. 14, is made up of the Atascadero City Council.
“Everybody is saying we need more restaurants. That is the hue and cry of Atascadero,” said Karyn Sturtevant, president of the Atascadero Main Street board of directors.
In the last year, at least six restaurants have closed in the city, including the Village Cafe, Morning Star Cafe, Denny’s and The Carlton Bar & Grill, all on El Camino Real.
One of the few bright spots, where eateries are concerned, was the opening in the fall of Shockley’s at The Carlton in the bar and grill’s former space.
The financing plan
Members of the city’s Redevelopment Agency, seated by City Council members, designed the short-term taxpayer backing in hopes of creating jobs, sales tax revenue and a buzzing commercial center from downtown to areas off El Camino Real, which comprises the redevelopment zone.
The backing can only be used for loans to pay for construction of new buildings or the renovation of an existing building, according to the city. Individual projects could receive loan guarantees up to $500,000 to assist a restaurant owner in qualifying for financing from lenders, according to city documents.
The city won’t disperse the money, officials said, as the lending bank will administer everything.
The idea, Assistant City Manager Jim Lewis said, is to help qualified applicants who need that last boost in getting the banks to approve their loans.
“Essentially, Atascadero is standing behind (a) business, giving the thumbs-up so banks feel a little easier about lending out money in this economy,” Sturtevant said.
The move comes from a fall request by the agency’s board directing city staff to develop short-term financial assistance options after continued complaints from residents who said they leave the city to find good dining.
The taxpayer pledge, designed after the city’s $1.5 million backing of the Colony Square retail plaza in 2008, is the next step in Atascadero’s mission to become more business friendly, officials said.
The loan marks the expansion of the city’s existing restaurant stimulus program, which provides marketing and promotional opportunities in the downtown area.
The loan expands that program to all restaurants in the district.
Some members of the public have expressed concerns that the city is ignoring the needs of other businesses by favoring eateries. Advocates say the loan program is a way to start.
Atascadero also has a similar micro-loan program for startup businesses in any industry, as do other local cities, through the nonprofit Economic Vitality Corporation of San Luis Obispo County.
Officials have set up rules meant to protect the Redevelopment Agency’s finances, including the collection of a one-time 2 percent loan guarantee fee.
If the restaurant owner’s business fails, the agency may also pursue a judgment against the participant’s assets, according to city documents.
“We aren’t on the hook for the full debt (like a cosigner),” Lewis said, “but we are on the hook if something happened to the restaurant for the amount in which we guarantee.”
Construction jobs and the purchase of local materials and services are some benefits of the program, City Manager Wade McKinney said.
Criteria for determining eligibility for the financial backing include the number of jobs to be created, the restaurant’s size and the amount of annual sales tax generated.
“I think in the economy, every city is struggling, and we are trying to give our city an edge to get restaurant owners to our town,” Mayor Tom O’Malley said.
Advocates say they hope the loan guarantees will be as successful as those made through the Economic Vitality Corporation, which has helped establish new Atascadero businesses such as Kaleidoscope Kids Preschool-Daycare, Spa Central Coast and the Wine Haven.