The Jamestown City Council voted Monday night to restructure a loan for the Jamestown Brewing Company that was originally approved in the spring of 2017.
The loan comes from the Jamestown Local Development Corporation and is for $180,000. It was one of several loans and funding sources the business owners – father-son duo John McLellan Sr. and John McLellan Jr. from Buffalo – requested in order to get their operation off the ground.
However, delays in the renovation effort of the building the business will renting have forced a delay in the opening.
As a result of the delay, all lending sources – both public and private – have made an effort to restructure their respective loans to accommodate the McLellans and ensure they have enough startup capital for its opening.
The city council is required to sign off on any JLDC loan or any changes to past JLDC loans are over $100,000.
On the recommendation from JLDC executive director and city development director Vince DeJoy, the council approved the new terms of the loan, which says the business won’t have to make a payment for the first six months after disbursement. The new terms also mean the business will only have to make interest-only payments for the first six months and its repayment term was extended from seven to eight years.
The vote wasn’t unanimous. Councilman Andrew Liuzzo (R-At Large) was against it on the grounds that most privately owned businesses are not given the ability to restructure their loans once they receive them and he felt the city shouldn’t give this business additional assistance.
“If this was a private venture and whatever pitfalls or short comes happen, that person – because he has skin in the game – would have to figure out how to manage his debt and how to repay his loans,” Liuzzo said. “I find it troubling that because it’s subsidized we are very eager to help. Of course we want them to be successful, but that doesn’t happen when someone is doing something on their own and its a private capital investment.”
“Quite frankly, there is private investment. It’s called Five Star bank and they are offering the same terms [as the revised JLDC loan],” DeJoy countered. “This is something that is somewhat routine that any private lender would offer their recipient of their loan. And let me make it clear that this money isn’t money that comes from the taxpayers of the city of Jamestown.”
It’s also worth nothing the redevelopment project of the building, and not the actual brewing business, is what’s being subsidized. While the property owner – G Patti Development – received significant state and federal funding for upgrading the building, the McLellans received little actual grants or tax subsidies for their business, with most of its investment coming from loans from both private and public sources.
The total project cost between G Patti Development and Jamestown Brewing Company was estimated to be $4,835,760. Of that, the total project cost attributed to just starting the Jamestown Brewing Company was estimated at $750,000. The JLDC loan covers about a quarter of the McLellan’s total cost. The McLellans also received a $100,000 Al Tech loan from the county IDA andnd the Greater Jamestown Zone Capital Corporation also acted on a $50,000 loan for the business. The remaining funding for the business was provided by a loan from Five Star Bank.
DeJoy also explained that the business was not being given any type of break on the amount it would have to pay back to the JLDC and if anything, the extension meant the business will have to pay more money through interest than what it had initially paid.
Mayor Sam Teresi also explained that the business owners to have “skin in the game” because they are putting their own assets up as collateral.
“The owner has a requirement of providing between 10 and 15 percent of the total product cost in the terms of cash equity,” Teresi noted. “So their bringing their own dollars to the project. They are on the hook for every penny of the money they are borrowing and they’re providing collateral in the form of not only their business assets, but their pledging their own properties as real estate collateral for the deal.”
There also seemed to be misunderstanding regarding state grants that were given toward the project.
Jamestown Brewing Company will be located in the former Lillian V. Ney Renaissance Center at the corner of W. Third and Washington Streets.
According to a March 2017 article by the Jamestown Post-Journal, the original plan was to have the business open in late 2017 or early this year.
No opening date has been announced yet. A post on the Jamestown Brewing Company Facebook page from Oct. 11 stated, “Every day we are closer to drinking beer with you. As soon as we have our official opening date, you guys will be the first to know!”
Once open the business is expected to employ between 30 and 40 people.