The Neighborhood STAR Program gives loans and grants to fund physical capital projects that allow businesses (and certain nonprofits) to enhance a property's value. This can be renovating or improving existing structures or new construction. Projects must ask for more than $5,000 in loans or grants. Neighborhood STAR usually funds around 20 projects yearly. The average amount approved in 2016 was about $100,000. Recent projects include a sidewalk and ADA ramp at MORE on Jackson and Wheelock, structural renovations to improve water drainage at the MN Humanities Center, and Cookie Cart's new location at a vacant building on Payne.

In previous years, STAR has required that all loans and grants be matched $1 to $1 with outside funds. This year, STAR is changing their policy so that small businesses can ask for full loans under $50,000 (no outside funding needed). According to Program Guidelines, all grants still need to be matched $1 to $1.

In a City Council press release, Planning and Economic Development (PED) Director Bruce Corrie said these changes send "a very clear message that the City is working together to grow small businesses." Small businesses are those with under $1 million in gross sales or fewer than 20 full time employees. Additionally, PED Project Manager Rick Howden says that these changes are focused on “helping businesses that demonstrate need, have a good project, but can't quite get a loan from a bank.” This sentiment applies to project proposals in general. Projects that can't fully fund their projects through private lending are encouraged to apply for Neighborhood STAR. Especially with the changes to smaller business loans, the city is “looking to take higher risk projects on,” says Howden.

"...a very clear message that the City is working together to grow small businesses."

Higher risk means more work to apply for and use STAR funding. Whereas private lenders focus on who asks for a loan and what their credit score is, the city focuses primarily on the merit and plausibility of a project. This makes applying to and implementing projects with Neighborhood STAR more involved and sometimes more costly. The ZoomGrants application asks for a “Statement of Work detailing the work to be performed, the source of leverage, total project and implementation timeline,” the number of jobs created through your project, the “public benefit of your project and how it will further the city's racial equity goals,” and a number of other logistical questions.

PED Project Manager for Dayton's Bluff, Marcq Sung says that a successful application demonstrates:

  • Specificity: ask,"What are you trying to do?" If it's a laundry list of small renovations and upkeep on your business, the application looks weaker. Be specific about what you need.
  • Cost estimates: businesses need to "look at bids, get quotes, get total project costs" from contractors and vendors, says Sung. See the City of St. Paul CERT list for suggestions.
  • Clear timeline: according to the STAR website, City Council approves proposals in mid to late July. Only then will loan/grant money be available. Projects that need funding, but not until after July are ideal.

Projects approved for grants or loans must also have greater obligations during implementation. Organizations funded by STAR must have or create an Affirmative Action/Equal Opportunity plan, pay a prevailing wage, and ensure sick and safe time when implementing their project. This is to comply with fair employment standards. However, it may cost businesses more than what they would usually pay for employees, without these compliance standards.

If you're thinking about going to STAR with a potential project, consider: 1) whether you can get funded by a private lender and 2) whether it's worth it to take on added time and effort of the STAR application and implementation processes. STAR Program Administrator Michele Swanson says that “a proposal may receive more favorable consideration during the selection process if it leads to filling vacant commercial storefront space within the city.”

Neighborhood STAR applications are due March 21st at 4:00 PM. If you are just now considering a capital improvement project, the STAR Program also has year-round funding for smaller projects. If you're interested in the Neighborhood STAR Program, applications open again in the beginning of February next year. You can contact the STAR administrators Michele Swanson at michele.swanson@ci.stpaul.mn.us or Austria Castillo at austria.castillo@ci.stpaul.mn.us for advise about applying. Additionally, ESABA members may contact Paris Dunning at paris@esaba.org or 651-621-2766. See the Neighborhood STAR website for additional information.