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EDA Agenda 04-28-1992AGENDA MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY Tuesday, April 28, 1992 - 7:00 PM City Hall MEMBERS: Chairperson Ron Hoglund, Barb Schwientek, Bob Mosford, Brad Fyle, Clint Herbst, Harvey Kendall, and A] Larson. STAFF: Rick Wolfsteller, Jeff O'Neill, and 011ie Koropchak. 1. CALL TO ORDER. 2. CONSIDERATION TO APPROVE THE FEBRUARY 5, 1992 EDA MINUTES. 3. CONSIDERATION TO REVIEW AROPLAX LETTER OF INTENT AND PREVIOUS APPROVED LOAN TERMS. 6. CONSIDERATION TO REVIEW FOR RECOMMENDATION AN AMENDMENT TO THE GMEF GUIDELINES: A NON-PERFORMANCE PROVISION. 5. CONSIDERATION OF PROSPECTIVE GMEF LOANS: a) Modern Molding, Inc. b) A -Q Thermo Process, Inc. r 6. OTHER BUSINESS. 7. ADJOURNMENT. ' MINUTES MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY Wednesday, February 5, 1992 - 7:00 PM City Hall MEMBERS PRESENT: President Ron Hoglund, Barb Schwientek, Clint Herbst, Brad Fyle, Bob Mosford, and Al Larson. MEMBER ABSENT: Harvey Kendall. STAFF PRESENT: Rick Wolfsteller and 011ie Koropchak. STAFF ABSENT: Jeff O'Neill. 1. CALL TO ORDER. President Hoglund called the EDA meeting to order at -7:02 PM. The annual meeting was rescheduled from the original date of January 28th to February 5th due to a lack of quorum. 2. CONSIDERATION TO APPROVE THE OCTOBER 29, 1991 EDA MINUTES. Clint Herbst made a motion to approve the October 29, 1991 EDA minutes, seconded by Bob Mosford, and with no corrections or additions the minutes were approved as written. 3. CONSIDERATION TO ELECT 3992 EDA OFFICERS. To comply with the EDA Ordinance Amendment which states that the authority must elect officers annually, President Hoglund opened the floor for nominations. He inquired of Barb Schwientek's interest as president of which she declined. Al Larson recommended the continuation of the current officers. Barb Schwientek made a motion to close nominations and to re- elect Ron Hoglund, President; Barb Schwientek, Vice President; Rick Wolfateller, Treasurer; Bob Mosford, Assistant Treasurer; and 011ie Koropchak, Secretary. The motion was seconded by Al Larson and with no further discussion the motion passed unanimously. 4. CONSIDERATION TO REVIEW AND ACCEPT THE YEAR-END EDA FINANCIAL STATEMENTS. Assistant Treasurer Moeford reviewed with members the EDA Year -End Financial statements as prepared by Mr. Wolfateller, Mr. Mosford, and Koropchak. The December 310 Balance Sheet reported a cash on hand balance of 315,818.52 plus notes and appropriations receivables for total assets of 0350,005.28 which equals the total liabilities and fund equity of $350,005.28. Theoretically thin is our equity. The EDA asked when the Tapper and Muller loan balances were due, either five years (ballooned) from the loan closing date for real property or seven years for M & E. The Income Statement reported 1991 revenues from the Liquor Fund, UDAG and interest income for a total of $148,857.64. Expenditures were service fees and interest expense for a total of $585.74. The interest expense was a 1990 fund deficit as this amount was allocated and transferred after reporting of the 1990 financial statements. Excess revenues over expenditures were $148,271.90 for a beginning year fund balance of $201,733.38. The interest income - notes is interest from approved loans only and is not interest from approved appropriations as appropriation funds are not transferred until a loan is approved and closed. Clint Herbst asked of the EDA's 1992 $200,000 appropriations budget request. Koropchak noted as recorded in the October EDA minutes that the October 23 City Administrator's Memo to the City Council for the 1992 proposed budget included the EDA's request for Council to commit additional dollars from the Liquor Funds (if necessary) to maintain a GMEF appropriation balance of $200,000. Council approved this. Mr. Mosford reiterated the EDA's objective which is to become self- supporting. Next, Mr. Mosford reviewed the 1992 Cash Flow Projections starting with the January cash balance of $15,818.52. He noted since loan requests are an unknown, Appropriations - Expected, are estimates only, as well as, the interest income and loan fees. Notes Amorization payments are actual projections for beginning balance and receipts total of $182,420.00. Expenditures include Aroplax loan of $55,000 plus other loans, and legal and service fees for a total of $153,480.00. This gives an expected December 1992 cash balance of $28,940.00. In theury we'd have $28,940.00. The EDA views the GMEF as a good program but has not seen the need to be an aggressive loan making entity. With no further questiono, A] Larson made a motion to accept the 1992 GMEF's Balance Sheet, Statement of Revenues and Expenditures, and Cash Flow Projection Statements as reported by Assistant Treasurer Mosford. Seconded by Barb Schwientek and with no further discussion the motion passed unanimously. Said financial statements to be submitted to the City Council by March 1st. CONSIDERATION TO HEAR THE YEAR-END STATUS OF GMEF LOANS, Koropchak reported both approved GMEF loans for Tapper's Inc. and Muller Thenter are current as accounted for in the year- end statements. EDA MINUTES r 2-5-92 6. CONSIDERATION TO HEAR STATUS REPORT OF THE AROPLAX CORPORATION PROJECT AND OTHER INDUSTRIAL PROSPECTS. In the agenda supplement, Koropchak outlined the June 26, 1991 approved GMEF loan and the financial proposal for Aroplax Corporation. Original GMEF was for $30,000 at 6.5% over 7 years for Machinery & Equipment. Loan fee of actual costs or not to exceed $450.00. The loan was never closed. Original Proposal New Proposal Bank $462,500 Bank $300,000 SBA $381,000 SBA $300,000 GMEF $ 30,000 GMEF $ 55,000 TIF (Equity) S 70,000 TIF (Equity) S 70,000 Econ Recov Gr $170,000 CMIF' $ 30,000 TOTAL $936,000 TOTAL $925,000 Also, enclosed was a letter of intent as prepared by BDS, Inc. which Is to be executed by Aroplax prior to any further application process preparations therefore the EDA need not take approval action but only to consider this as an update. Koropchak noted to the EDA the GMEF amount of $55,000 (increase of $25,000) with estimated terms of ten years at Gib. The EDA inquired of the city's dollar amount invested in this project to date and if the GMEF Guidelines has a provision which designates length of time between loan approval and loan closing before loan agreement becomes null or void. Barb Schwientek made a motion directing staff to research the dollar amount invested in the Aroplax project; the current GMEF Guideline provisions for expiration date of approved loan agreement; and if necessary, outline said provision options for EDA consideration to amend the GMEF Guidelines prior to any action of the adjusted Aroplax Corporation loan request. The motion was seconded by Al Larson and with no further discussion the motion passed unanimously. 7. OTHER RUSINESS. The EDA acknowledged receipt of the 1991 Ecomonic Activity Report. Page 3 EDA MINUTES 1 2-5-92 f ADJOURNMENT. The EDA meeting adjourned at 8:00 PM. 011ie Koropchak, EDA Executive Secretary Page 4 EDA AGENDA 6-28--92 CONSIDERATION TO REVIEW AROPLAX LETTER OF INTENT AND PREVIOUS APPROVED LOAN TERMS. Reference and Backqround. Enclosed you will find a copy of the executed Letter of Intent for Aroplax Corporation. As you will note the GMEF loan request has increased from the original approved amount of $30,000 to $55,000 to $85,000. The loan request was first increased to compete with the Brooklyn Park financial proposal and secondly, as time lapsed Mr. Schoen felt his original projected numbers were under -budget. Therefore, if there are any cost overruns, the GMEF portion would be reduced proportionally (see enclosed letter). Also, enclosed is a copy of the approved loan terms as executed by the Schoens for $30,000 at 6.5% interest rate over seven years for machinery and equipment, dated June 26, 1991. At this time, no action Is required of the EDA on the loan request. A special meeting will be called to address the loan request and this information is provided as a lead-in for the next agenda item. CPage 1 13DS _ `i Business Development Services, Inc. I March 20, 1992 Mr. Jerry Schoen Aroplax Corporation 2318 Chestnut Avenue West Minneapolis, MN 55404 RE: FINANCING PROPOSAL MONTICELLO, MINNESOTA Dear Mr. Schoen: Per our conversation of March 19, 1992, I would propose that we approach the Monticello Enterprise Fund for an additional 530,000 in financing. Baud on the existing financial structure, this would increase the Monticello Enterprise Fund portion to 585,000. As we discussed, the purpose of these funds would be to mitigate any cost overruns in this project. As such, should the project be completed at or under budget, this increase in the Monticello Enterprise Fund portion of the financing would be reduced proportionally. Please let me know if you have any questions. I look forward to working with you. Sincerely, nny Kirscht Community Economic Development Specialist LPK/mat cc: 011ie Koropchak ___. a.'r.- .. :r..v�Sw'ed3p�t:.rcec�!:a .,. .:—.:r.• ,^e d'�:Ed•5r5rn�_ ---.- MOt"fICELLO 250 East Broadway P. O. Box 1147 Monticello, VIN 55362.9245 Phone: (612) 295-2711 Metra: (612) 333.5739 Fax: (612) 295-4404 Nu. Kcnntth \1�3 a. c -di Dan Blonigm Shir!ev Anderson Brad F.le Clint Hcrbu Ad --- Rick 11'01/stctln A.vw Admin— 6 1� Commuwr Dn 1l ;, rm le f O;udill P,bhc W." John Simla Bwldlns OF d Gal Andmtnt C- 0-Apn= 011ie Komxhak An- 41040P April 14, 1992 Mr. Jerald Schoen President Aroplax Corporation 2318 Chestnut Avenue West Minneapolis, MN 55404 RE: City of Monticello LETTER OF INTENT TO PROVIDE ASSISTANCE TO AROPLAX CORPORATION Dear Mr Schoen: The City of Monticello is pleased to have an opportunity to review your plans for the growth of your company and the potential for locating your firm in our community. The City of Monticello has had an opportunity to meet and prepare this Letter of Intent which serves as evidence of our commitment to seek direct assistance to facilitate your expansion to Monticello. As a basis for this Letter of Intent, it is important to review our understanding of your proposed project, the company's potential and its growth plans. It is also important to recognize that this Letter of Intent represents a commitment from the City of Monticello to seek assistance as outlined within this letter. Although the Committee is directly linked to the various local agencies, it docs not have the ability to grant final approval for assistance. Direct City assistance will be subject to final review and approval with the appropriate bodies. In addition, we are proposing to seek assistance through various regional, statewide and federal programs. We have reviewed the likelihood of funding and feel confident that our proposal is reasonable and obtainable, however, we cannot commit the funds on behalf of any of these agencies. Mr. Jerald Schoen Page 2 It is our understanding that Aroplax Corporation is a plastic injection molding company founded in 1959. The company has also recently developed products used in the water filtration industry and is initiating production of these proprietary products. The company's expansion into Monticello will require an estimated 23,000 square feet. In addition, the company is also seeking assistance to fund an estimated 5255,000 for equipment acquisition. The City of Monticello proposes to provide assistance designed to meet the direct needs of the company. We are proposing the use of various local, federal and statewide financing programs which will provide long-term, attractively priced financing. We anticipate that the company will provide a minimum of $75,000 equity for working capital and the appropriate corporate and personal guarantees. USES OF FUNDS: Land Acquisition S 70,000 Building Construction 550,000 Equipment Acquisition 255,000 Soft Costs 50,000 Working Capital Needs 75.000 Cost Overrun Contingency 30.000 TOTAL USES OF FUNDS: $1.030.000 Sn_URCFS OF FUNDS: Construction Land, Tax Increment Financing S 70,000 Bank Financing (20 Years, 9.5 %) 300,000 SRA 504 Loan (20 Years, 8.5%) 300.444 Subtotal Construction Sources of Funds: S 670,000 Eauioment Central Minnesota Initiative Fund (10 Years, 6%) S 30,000 Economic Recovery Fund Grant (10 Years, 6;°0) 170.000 Monticello Enterprise Fund (7 Years, 6%) 85.000 Subtotal Equipment Sources of Funds: S 285.000 Working Capital Aroplax Corporation 5 75-000 TOTAL SOURCES OF FUNDS: SL.030-000 z L, R Mr. Jerald Schoen Page 3 These costs represent estimates at this time, and may be adjusted once the final project costs have been determined. Based upon these assumptions, however, it is anticipated that monthly and annual debt service associated with this structure would be as follows: Monthly Annual t Service peht Service Bank $2,614 $ 31,368 Small Business Administration 2,396 28,756 Economic Recovery Grant 1,887 22,648 Central MN Initiative Fund 333 3,997 Monticello Enterprise Fund 1.242 14.904 TOTAL PAYMENTS: Slim $101.67' An overview of the financing programs proposed is as follows: SBA 504 LOAN PROGRAM A local development company (LDC) which has been certified by the Small Business Administration (SBA) can aid in the financing of small business expansions and start-ups. The LDC, in conjunction with private lenders, can provide long-term, low-interest, fixed rate financing for up to $750,U00 in fixed assets. CEN`MI. MINNFSOTA INITIATIVE FUND The Central Minnesota Initiative Fund is a private non-profit rural development corporation committed to providing financial assistance to programs which promote and strengthen central Minnesota. The fund is one of six in Minnesota seeking to address the needs of rural residents throughout the state. The fund is largely supported by the McKnight Foundation and provides financing to businesses located in the counties of Benton, Cass, Chisago, Crow Wing, Isand, Kanabec, Mille Lacs, Morrison, Pine, Sherbume, Stearns, Todd, Wadena, and Wright. _ hir. Jerry Schoen Page 4 Loan Criteria + Loans are made to `for-profit" firms only, in order to promote economic development and job creation and to enlarge the tax base. • Loans are made to small businesses, those with less than S4 million in gross annual sales and with SO or fewer employees. • There are no restrictions regarding type of business --retail, wholesale, franchise, on or off farm, manufacturing --except that enterprises with political, religious or pornographic purposes will be ineligible. + No loans are made where reasonable alternative financing is possible. + A business is eligible at any stage—start-up, existing, or expanding. + The enterprise must be located with the 14 -county arca, and the owners must reside in this arra. + Loans can be made for working capital, machinery and equipment, real estate, and research and development. + Rates and terms are negotiable between the business and CMIF. MINNESOTA SMALL CITIES ECONOMIC RECOVERY GRANT The Minnesota Small Cities Development Program is designed to address critical economic development needs throughout the State of Minnesota. Currently, the program is administered by the new Minnesota Department of Trade and Economic Development. Grants are awarded to communities and townships to help them meet local economic development needs by providing loans to businesses planning expansions. For purposes of the Minnesota Small Cities Development Program, economic development is defined as a stimulation of private investment in order to expand, maintain, or start a business. The desired result of the program is the creation of new jobs or the retention of 'endangered" ones. This program is designed to assist in providing the necessary incentives to stimulate private investment, thereby creating and keeping jobs in Minnesota. It is not intended as a substitute ., for conventional financing, nor should it be used in place of other specialized programs that may exist in state or federal agencies. Instead, grants from this program are intended to be used in situations in which a funding 'gap" exists and alternative sources of public and private financing are not adequate. Mr. Jerry Schoen Page 5 It is important to keep in mind that this process will involve a grant to the City of Monticello who, in turn, will provide a loan to your company to supplement primary financing. MONTICELLO REVOLVING LOAN FUND The City of Monticello will seek the approval through the Monticello Economic Development Authority (EDA) for a $85,000 equipment acquisition loan to assist Aroplax Corporation. the City of Monticello would propose that the funds be lent to the company over a seven-year time period. These programs represent funding which we can seek immediate assistance and receive reasonable assurance within a relatively short time period of the availability of funding. The City of Monticello's offer of assistance goes beyond the direct funding. For instance, in the case of the Minnesota Small Cities Economic Recovery Grant, SSA 504 Loan and Cental Minnesota Initiative Funding, technical assistance will be provided by the City's consultants, Business Development Services, to facilitate the applications for these programs. It is anticipated that this will greatly enhance the likelihood of the receipt of approval for these programs. The City of Monticello firmly believe in their ability to perform on the financial assistance programs outlined in this Getter of Intent. The negotiations will be initiated directly by the City. Nothing herein, however, can be constructed as a binding commitment. The City of Monticello agrees to assist in the preparation of the appropriate applications. This effort will be initiated at considerable time and expense on the City's pan. Aroplax Corporation, upon acccptance of this proposal, agrees as follows: To locate and operate in the Oakwood Industrial Park in the City of Monticello. 2. To cooperate with representatives of the City andtor its economic development consultant in providing information in a timely manner necessary to complete applications for funding as outlined in this proposal. MR i Mr. Jerald Schoen `2 Page 6 3. Aroplax Corporation agrees that it will not seek altemative locations for financial assistance for a period of 184 days. 4. Aroplax Corporation agrees that it will reimburse the City for an amount not to exceed $5,000 for the preparation of loan applications, should Aroplax Corporation withdraw from the project. It is the purpose of this Litter of Intent to provide a framework for which a firm project financing and facility package can be confirmed. Your consideration of this information is greatly appreciated the City of Monticello stand ready to move forward with you. CITY OF MONTI LLO f}� f L/ � Dated t,/ii/ O i f Mayo { Q3ss -i- \e d' ;�-✓'"g, Dated 4/21/92 Economic Development Director Accepted By: AROPLAX CORPOPUTJON Jertl Schoen, Presi nt Dated GREATER MONTICELLO ENTERPRISE FUND V - ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF MONTICELLO Preliminary Loan Application approval 4-14-91 Loan terms negotiated and agreed upon between the developer, the EDA, 1Fiii8dYtgcN76l:iS)t1)EYkl;, and the EDA Executive Director 6/26/91 Formal loan application and financial statements analyzed by the lending institution and/4X)AjV4*yji� BDS. Inc 6/26/91 Formal loan documents reviewed by,city staff 6-21-o1 Building permit approval or construction commitment Loan documents reviewed by the City Attorney 6/25/91 Economic Development Authority approval or disapproval: Loan Number GMEF No. 003 Loan approved Yes Borrower Ar lax Corporation Address ZJ101 Lnestnut Ave. W. ,als 55405 Loan disapproved Loan Amount $30,000 Rate 6.5, Date 6126/91 Terms 7 years (M&E) Subject to aanK commicment an naA approval. Loan fee of actual costs or not to exceed $450.00. A motion was made by EDA member Barbara Schwientek to (approve - df4Vp'VY'QK GMEF in the amount of $30,000.00 dollars and cents to developer Aropinx Corporation (Jerald J and Mary E. Schoen) this 26 day of June 1991 Seconded by EDA member Al Larson YEAS: Ron Hoglund NAYS: None Absent: Bob Mosford Bred Fyle Harvey Kendall Clint Herbst Al Larson Rarb Schvientek GMEF disbursed 19_ by Check No. EDA Treasurer City Council may reverse an EDA loan decision within twenty-one days of EDA approval. July 8. 1991 Council Agenda. Reviewed and confirmed. ACCEPTANCE OF TERMS ,r (we) hereby accept the terms aims stated above as approved by the Economic Development Authority in and for. he City of Monticello. � r v i Dated: 6/26/91 /%%((1 (/ (� . �J� �L/LP t ✓ EDA AGENDA C-28-92 CONSIDERATION TO REVIEW FOR RECOMMENDATION AN AMENDMENT TO THE GMEF GUIDELINES: A NON-PERFORMANCE PROVISION. Reference and Backaround. At the February EDA meeting, staff was directed to research the city's dollar amount invested Into the Aroplax project and to research options for consideration to amend the GMEF Guidelines with regards to the length of time between the date of EDA loan approval and the date of loan closing/fund disbursement if or when the approved loan should become null and void. It was the wish of the EDA to rcommend and seek Council approval to a GMEF Guideline Amendment prior to any request for action by Aroplax. Note: Original appoved Aroplax loan was dated June 26, 1991 with no closing or fund disbursement to date, ten months later. First option, if this loan is considered null and void, Aroplax would need to resubmit a new loan request of $8,5,000 for EUA approval. Second option, it the $30,000 approved ]gran is not considered null and void or is viable, Aroplax would need to submit a request for an additional $55,000 for EDA approval. Loan terms are estab.l.(shed at time of loan approval by the EDA as per GMEF Guidelines. Dollars invested by the Housing and Redevelopment Authority for Tax Increment Finance Dintrict No. 1-12 is $3,050 to I]US for TIF pian preparation; $50 for County certification; and $808,82 legal tees for Development Contract preparation. Engineering tee of $69.75 rind financial packaging fee of $3,937.03 to HDS, Inc. for a total of $8,715.60. The following option is prevented to the EDA for approval and recommendation to the City Council for consideration to amend the GMEF Guidelines, ALTE•'RNATIVE ACTION AND HECOMMF_NDATIoN. 1. NON-PHRFORMANCF: An approved GMEF loan shall be null and void If funds are not. drawn upon or diGburaed within one -hundred twenty (120) days from date of EDA loan approval. Stall recommends the above non-performance provision, however, the EDA may wish to consider 90 ur itlo days instoad ct the 120 days. Staff recommends a non-performance expiration date which allows accountability of Lite GMEF financial records. r Page 2 EDA AGENDA .-20-92 SUPPORTING DATA. Copy of the current GMEF Guidelines. f CPage 3