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EDA Agenda 06-15-1994AGENDA MONTICELLO ECON014IC DEVELOPMENT AUTHORITY Wednesday, June 15, 1994 - 7:00 p.m. City Hall MEMBERS: Chair Ron Hoglund, Vice -Chair Barb Schwientek, Assistant - Treasurer Bob Mosford, Clint Herbst, Patty Olsen, Al Larson, and Harvey Kendall. STAFF: Treasurer Rick Wolfsteller and Executive Director 011ie Koropchak. GUEST: Steven Lemme, The H -Window Company 1. CALL TO ORDER. 2. CONSIDERATION TO APPROVE THE JANUARY 26, 1994 EDA MINUTES. 3. CONSIDERATION TO REVIEW THE DECEMBER 31, 1993 EDA BALANCE SHEET AND TO DEFINE THE MEANING OF APPROPRIATION SOURCES AND GMEF BALANCE FOR CLARIFICATION. 4. CONSIDERATION TO REVIEW GMEF GUIDELINES FOR AMENDMENT: LOAN TERM, NON-PERFORMANCE, LOAN FEE, AND GMEF LEGAL FEE. 5. CONSIDERATIO14 OF AN UPDATE ON THE MULLER THEATRE - GMEF LOAN NO. 002 PREPAYMENT AND STANDARD IRON GMEF CLOSING. 6. CONSIDERATION TO REVIEW THE PRELIMINARY AND FINAL GMEF APPLICATION FROM APPLICANT, THE H -WINDOW COMPANY. 7. CONSIDERATION TO APPROVE OR DISAPPROVE GMEF LOAN NO. 008 FOR THE H -WINDOW COMPANY. B. PROSPECT UPDATES: a) Fay -Mar Metal Fabricatoro b) Royal Engineering & Mtg.. Inc. Proposal 9. OTHER BUSINESS. 10. ADJOURNMENT. MINUTES MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY Wednesday, January 26, 1994 - 7:00 p.m. ' City Hall MEMBERS PRESENT: Chairperson Ron Hoglund, Vice -Chairperson Barb Schwientek, Assistant -Treasurer Bob Mosford, Al Larson, and Harvey Kendall. MEMBERS ABSENT: Patty Olsen and Clint Herbst. STAFF PRESENT: 011ie Koropchak. STAFF ABSENT: Treasurer Rick Wolfsteller and Jeff O'Neill. 1. CALL TO ORDER. Chairperson Hoglund called the EDA meeting to order at 7:00 p.m. 2. CONSIDERATION TO APPROVE THE NOVEMBER 9, 1993 EDA MINUTES. Harvey Kendall made a motion to approve the November 9. 1993 EDA minutes. Seconded by Bob Mosford and with no additions or corrections, the minutes were approved as written. 3. CONSIDERATION TO ELECT 1994 EDA OFFICERS. Harvey Kendall made a motion to elect the existing EDA officers as 1994 EDA officers: President, Ron Hoglund; Vice - President, Barb Schwientek; Treasurer, Rick Wolfsteller; Assistant -Treasurer Bob Mosford; and Secretary, 011ie Koropchak. Barb Schwientek seconded the motion and with no further discussion, the motion passed unanimously. 4. CONSIDERATION TO REVIEW AND ACCEPT THE YEAR-END EDA FINANCIAL STATEMENTS. ACTIVITY REPORT, AND PROPOSED 1994 BUDGET. Aseiotant-Treasurer Mosford explained the prepared financial statements with EDA members, starting with the Income Statement. Annual revenues totaled $139,410.00 and expenditures totaled 0:00.00 for a net income of $139,210.00. The beginning year fund balance was 0497,604.00 and the end year fund balance was $636,814.06. Under revenues, the $600 loan fee was from the Custom Canopy closing, only, as the Standard Iron approved loan has not closed. Under expenditures, no legal fees were expended as the applicants are now liable for those coots, the $200 service fee is for the two GMEF loans serviced by Marquette Bank, and no interest adjustment - notes was noted. Because the EDA's annual meeting is prior to the deadline for notification of tax C , Page 1 EDA MINUTES JANUARY 26, 1994 information, the Interest Income - Investment and Interest Adjustment - Notes numbers are taken from the City Ledger Accounts and are subject to an explanation of an audit. Under the assets of the EDA Balance Sheet, the remaining principal amounts of the five GMEF loans plus the approved and remaining appropriations totaled $636,814.08. With no liabilities, the EDA's net worth is $636,814.08. With a January 1994 cash balance of $70,504.21; projected receipts from the six GMEF loans, interest income - investment and loan fees of $250,316.89; and the projected expenditures of $201,250.00, the expected December 1994 cash balance is $119,571.10. Harvey Kendall made a motion to accept the 1993 EDA financial statements, proposed 1994 budget, and activity report. Barb Schwientek seconded the motion and without further discussion, the motion passed unanimously. 5. CONSIDERATION TO REVIEW YEAR-END BALANCES OF THE GMEF, UDAG. AND ERG. The year-end UDAG report indicated a cash fund balance of $71,170.80. The projected remaining principal and interest payback due through January, 2000 Is $165,497.45. In order for the EDA to utilize the UDAG dollars, City Council must authorize the expenditure of UDAG funds which were earmarked for economic development. Previously, tite EDA has requested funds from the UDAG upon approval of a GMEF loan and the request has been approved. The year-end SCERG report indicated a cash fund balance of $33,346.77. The projected remaining principal and Interest payback due through November, 1999 is $175,685.07, providing the applicant utilizes the entire approved $170,000. Of the remaining $175,685.07, the City is allowed to retain approximately $98,918.82. These dollars were designated in the grant application for GMEF use. Of the five approved GMEF loans, principal and interact paybacks are current. The approved GMEF Loan No. 007 tar Standard Iron has not been disbursed; however, its anticipated to close In March. Upon review of the 1994 Cash Flow Projections, the UDAG and SCERG cash fund balances, the original intent of the GMEF to be self -supportive and the potential for a change in the City Page 2 EDA MINUTES JANUARY 26, 1994 r Council mix and the established tract record of the EDA, the following motion was made. Barb Schwientek made a motion requesting City Council approve the UDAG cash fund and projected principal and interest payback dollars for GMEF use. If Council approves the requested UDAG expenditure, then the EDA requests a 1994 appropriation of $100,000 from the Liquor Fund, a reduction from the original $200,000 request. Al Larson seconded the motion and without further discussion, the motion passed unanimously. This would assure the EDA members and the community to the longevity of the city's revolving loan fund program and its commitment to economic development. The EDA members discussed the City's monthly record of receipt of the Muller payback payments as requested. Prior to consideration of whether to establish a late penalty period and fee, the EDA requested additional information as to the actual date of payments and the terms and conditions of the closing documents. Possibly, it could be a cash flow problem. 6. OTHER BUSINESS. a) Standard Iron & Wire works, Inc. Update - The loan io expected to close as scheduled. 7. ADJOURNMENT. Al Larson made a motion to adjourn the EDA meeting. Harvey Kendall seconded the motion and with no further comments, the meeting adjourned at 7:55 p.m. 011ie Koropchak, EDA Executive Director Pago 3 EDA AGENDA JUNE 15, 1994 1 Consideration to review the December 31 1993 EDA Balance Sheet and to define the meaning of annronriation sources and GMEF balance for clarification. Reference and Backqround: Although the City Council accepted the EDA's year-end financial statements, the counril requested a rlarification on the Balance Sheet, Appropriations Receivables, 1993 Liquor Fund of $157,500. why this amount if the $42,500 was transferred from the UDAG account and the $75,000 is earmarked from the Liquor Fund, and the annual appropriation was $200,0007 Secondly, again, the City Council did commit the projected [)DAG payback of $165,497 for GMEF use and did approve the 1994 liquor fund appropriation of $100,000 for the GMEF. It was my understanding that the EUA reduced the amount of requested Liquor Fund Appropriation because of the anticipated revenues from other funding sources and GMEF paybacks, and the assumption that the 1993 approved $75,000 for Standard Iron would be a consideration of the 1993 Liquor Fund Appropriation even Uirough not expended until 1994. Administrator/11DA Treasurer WulfGteller and Council saw it differently: therefore, in reality the 1994 liquor fund appropriation request was approved at $25,000. Since the February Council meeting. 1 noted page 6 of the G14EF Guidelines reads: City ohall transfer needed loan amount from existing accounts at such time that individual loans are approved.This should clarify the misunderstanding among individualo and means the appruved 1994 Liquor Fund Appropriation request is $100.000. This is meant as a c]ariflcat:ion Issue and not a disagreement issue. Lautly, for clarification and future budget planning, , discuss and consld-_r affirmation the followtnU: GMEF SOURCES OF FUNDING: Liquor Fund Appropriation meano annual requested Liquor Fund dollars approved by the City Council. GMEF Payback Appropriat.ton meano cumlative dollars from CHEF principal and Interest loan paybdeks and Income investment. CI'dge 1 EDA AGENDA JUNE 15, 1994 Other Payback Appropriations means cumlative dollars from UDAG and SCREG principal and interest loan paybacks and income investment. GMEF BALANCE: As a guide beginning January 1 of each year, the GMEF Balance is $200,000. Approved GMEr loan dollars are disbursed from either of the sources of fundings: Liquor Fund Appropriation, GMEF Payback Appropriation, and/or Other Payback Appropriations. SUPPORTING DATA. EDA Balance Sheet, February Council Minutes, and excerpt from the GMEF Guidelines. CPage 2 MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY GREATER MONTICELLO ENTERPRISE FUND (GMEF) Statement of Revenues, Expenditures and Changes in Fund Balance For the Year Ended December 31, 1993 REVENUES Appropriations - 1993 Liquor Fund S 75,000.00 1993 UDAG $ 42,500.00 Interest Income - Notes $ 18,245.59 Interest Income - Investment $ 3,064.41 Loan Fees S 600.00 TOTAL REVENUES EXPENDITURES Legal Fees $ 0 Service Fees $ 200.00 Int. Adjustment - Notes S 0 TOTAL EXPENDITURES Excess of Revenues Over Expenditures FUND BALANCE - Beginning of Year FUND BALANCE - End of Year C $139,410.00 S 200.00 $139,230.00 0497,604.08 636,814.08 U ti MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY GREATER MONTICELLO ENTERPRISE FUND (GMEF) Balance Sheet December 31, 1993 ASSETS Cash in Bank Notes Receivable - Tapper, Inc. Notes Receivable - Muller Theater Notes Receivable - SMM, Inc. Notes Receivable - Aroplax Corp. Notes Receivable - Custom Canopy, Inc Appropriations Receivables - 1993 UDAG Standard Iron and Wire Works, Inc 1993 Liquor Fund TOTAL ASSETS FUND EQUITY 7und Balance Reserved for Participation Loans (Economic Development) TOTAL LIABILITIES AND FUND EQUITY S 70,504.21 S 80,986.26 $ 46,450.47 $ 48,308.43 $ 73,824.50 $ 41,740.21 $ 42,500.00 $ 75,000.00 03157.500.00 ? $636,814.08 5636,814.08 $636,814.08 CITY OF MONTICELLO, MINNESOTA Statement B-9 ECONOMIC DEVELOMIENT AUTHORITY FUND STATEIVIT OF REVEMRIOS, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL For The Year Ended December 31, 1993 With Comparative Totals For The Year Ended December 31, 1992 1993 1992 Budoet Actual Actual Revenues Interest income S 18,345 $ 20,996 $ 13,909 Expepditures other 2,360 200 1.128 Oxcess of Revenues over Expenditures S 15,985 S 20,196 S 12,780 Other Financing Sources Transfers in 110.000 135.000 Excess of Revenues and Other Sources over Expenditures S 125,985 S 20,796 $ 147,780 Beginning Fund Balance 498.481 350,701 ENDING FUND BALANCE S 519.277 S 498.481 -40- cm Cr /10TR17.LG. 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W.111111r1 tali 1u1 I.lut.r TIM {ID1LIt111111 fill 1611[11 aws. t li-1 (111111 1111111 111 Itlu In1111t Illlt nut I1u1111 u.0 Itlabnull Lt� tuluun LVI LL U LLL 11111u"1m nnl"un nulutl Itun Inn nnlnlm 11t11tttr 1"nn� I"rn1• Ifinnt fiml 11LL-- JUL— irnt yIL-- U11-- 11_I I111,111 I 1,111 I 111,111 1 116,111 1 111111 1 111,111 1 11,111 1 11,111 1 1.111,111 1 1",111 111,111 111,171 111,111 I.n1 1,111 1,111 III 111 11,111 111 11 1,111 11,111 11,111 11,111 u,u1 n1,tw ul.w m,w In cal In IIL/D 111.111 a" 111.111 Ill.lp ❑I W Hf.1" 111 "1 U1-l.lL L"M LMW L"M 'MM 1 111.{11 Q=M tll 1 U0 1 If.111 1 IIIm 1 1.111.111 1 1.1�1.{If 1 P I 1" I 1,1" 1 Lpl 1 11.1" 111 111 111 f-11.111 111,111 1 11,1" 1 111111 1 1:.111 I{{,111 111,111 111.111 111.111 1 111.1.1 1 111.111 I 111,111 I 111.111 I 111,1{1 1 111.111 I 111,1{1 1 111.111 LJll.11l L 1.111 111.111 I Lfil L�ll.1LL LJ.lL l 111.111 1 1.111 1 111 nl 11.111 I nt.1" 1 111 111.111 111,111 111,111 1 111.111 I 11.111 I -t11 1 II1 111 "1.1{1 LJ11.111 L_Lin LWAL L-Llll nl L_ in 1 111.1u 1 111111 L ILLU l 11f.1n 1 11.111 LAW If1 1111 11.111.111 L11LLL1 L-1= L_1JLW LLJUA L LS W Ul 22➢ YEAR-END BALANCE COMPARISONS YEAR-END EDA DIFFERENCE AUDIT 1991 $350,005.28 ($695.72) $350,701.00 1992 $497,604.08 ($876.92) $498,481.00 1993 $636,814.08 ($117,537.08) $519,277.00 Council Minutes - 2/14/94 9. Consideration to review for acceptance the Economic Development Authoritv's (EDA) vear-end statement and 1994 budget. After discussion, a motion was made by Clint Herbst and seconded by Shirley Anderson to accept the EDA balance sheet, statement of revenues, expenditures, and changes in fund balance, 1994 cash flow projections, and the annual activity report as presented. Motion carried unanimously. 10. Consideration to review the UDAG and SCERG vear-end financial reports and consideration to avorove the EDA 1994 appropriations request. After discussion, a motion was made by Clint Herbst and seconded by Patty Olsen to commit the projected remaining UDAG payment of $165,497 to the GMEF and approve the 1994 liquor fund appropriation of $100,000 for the .GMEF. It is understood that under the $100,000 appropriation for the GMEF, the money is appropriated for use during 1994, and if the funds are not expended during that time, said funds are not automatically rolled over into the next year's appropriation. In other words, liquor fund appropriations made on an annual basis are not cumulative. Motion carried unanimously. 11. Consideration of erantine a seasonal 3,2 beer license to the Monticello Softball Association. After discussion, a motion was made by Shirley Anderson and seconded by Brad Fyle to grant the license contingent upon receipt of necessary insurance documents and appropriate fees, and direct City staff to work with the Parks Commission toward review of the fee structure for toumnment use of the NSP softball fields. Motion carried unanimously. 12. Considerntion of nnnointine two Council members to n Communitv Aron 111nnniner and Mnnneement. Committee. Assistant Administrator O'Neill noted that a committee made up of City, Town?hip, School District, and Arenn Associntion representatives is being fonr:ed to study the community arena facility issues. The purpose of the group is to establish preliminnry plans for the facility itself and site improvements with the goal of inventorying project costs and funding sources. The group would also prepare n community nrenn operations budget outlining revenue sources and expenses. The group will also discuss zoning issues and management of the facility onto it is constructed. The ad hoc committee will be responsible for making recommendations to the jurisdictions involved with the project. Page 4 r-) 5. City staff shall analyze the formal application and financial statements contained therein to determine if the proposed 1 business and finance plan is viable. Staff may, at its discretion, accept the findings of a banking institution regarding applicant credit and financial viability of the project. After analysis is complete, City staff shall submit a written recommendation to the EDA. A decision regarding the application shall be made by the EDA within 60 days of the submittal of a completed formal application. 6. The EDA shall have authority to approve or deny loans; however, within 21 days of EDA approval, the City Council may reverse a decision by the EDA to approve a loan if it is determined by Council that such loan was issued in violation of GMEF guidelines. 7. Prior to issuance of an approved loan, the City Attorney shall review and/or prepare all contracts, legal documents, and intercreditor agreements. After such review is complete, the City shall issue said loan. ORIGINAL REVOLVING LOAN FUNDING "LETTER OF CREDIT" FROM MONTICELLO CITY COUNCIL - $200,000 SOURCE - City Liquor Store Fund Ic ity shall transfer needed loan amount from existing accounts at such time that individual loans are approved Revenue created through this program shall be under the control of the EDA and shall not be transferred to City funds unless the City Council determines that reserves generated are not necessary for the successful operation of the Authority. If such is the case, such funds must be transferred to the debt service funds of the City to be used solely to reduce tax levies for bonded indebtednoss of the City (see Section 5 B of tho ordinance establishing the Monticello EDA). REPORTING Staff shall submit quarterly summaries and/or annual roport detailing the status of the Monticello Enterprise Fund. FUND GUIDELINES MODIFICATION At a minimum, the EDA shall review the Fund Guidelines on an annual basis. No changes to the GMEF guidelines shall be instituted without prior approval of the City Council. LOAN ADMINISTRATION 1. City staff shall service City loan, shall monitor City position with regard to the loan, and shall assure City compliance with intorcroditor agreement. GMEF GUIDELINES: 5/11/92 Pago 6 CASH BALANCES FOR GMEF USE �- JANUARY 26, 1994 GMEF Cash Balance $ 70,504.21 UDAG S 71,170.80 SCERG S 33.346.77 TOTAL CASH BALANCE $175,021.78 RECOMMENDATION: 1994 LIQUOR FUND APPROPRIATION REQUEST $100,000.00 It C EDA AGENDA JUNE 15, 1994 4. Consideration to review GMEF Guidelines for amendment: Loan Term, Non -Performance. Loan Fee, and Leoal Fee. A. Reference and Backqround. LOAN TERM "Personal property term not to exceed life of equipment (generally 55=7 years.) Real estate property maximum of 5 -year maturity amortized up to 30 years. Balloon payment at 5 years." For the purpose of loan closing document preparation (subordination or shared -position,) it would be best if the SCREG, CMIF, and GMEF Guilelines for machinery and equipment terms were consistent. when Public Resource Group, Inc. prepares a financial uses and sources proposal, they Inevitability propose the GMEF for equipment at a 10 year - term. If the shared -position loan defaults, the GMEF payback amount would be greater than the SCREG and the CMIF and this As not favorable to the state and region. Alternative Options,: L1. Amend to read: Personal property term riot to exceed life of equipment (generally 5-10 yearn.) 2. Amend to read: Alternative i with the, addition of a balloon payment in 7 years. 3. Deny amending. If you elect to amend the above, it is then suggested that the attached addendum be amended to read "with a uueful life of at least five years" NON-PERFORMANCE "An approved GMEF loan ahnll be null and vold if funder are not drawn upon or disbursed within 120 days from date of EUA approval." Recauoe a company .is unable to order the designated equipment. or machinery uut11 after the award or, approval of funding dollars and with the time necessary for deoign, product Son and delivery, the GMEF 120 days appears to ba insufficient. Additionally, sometimes a company in allowed another 30 -•day trial period prior to acceptance of the equipment. Thio waa 1Page. 1 EDA AGENDA JUNE 15, 1994 1 the case with Standard Iron. We did close on the June 1; however, the company expended dollars to establish an escrow with Norwest Bank inorder to meet the GMEF guideline. We cannot close without equipment ownership and thereafter complete the UCC filings. Alternative Options: 1. Amend to read: Within 180 days. 2. Amend to read: Within 365 days. 3. Deny amending. LOAN FEE This guideline is not critical to closing; however, the EDA may wish to reconsider its purpose of the loan fee. "Minimum fee of $200 but not to exceed 1.5% of the total loan project. Fees are to be documented and no dup]Icatfon of fees between the lending institution and the RLF. Loan fee may be incorporated Into project cost. EDA retains the right to reduce or waive loan fee or portion of loan fee." After adoption of the GMEF Gulde)Ines and one or two closings, the EDA agreed that the GMEF legal fees were the responsibility of the applicant; however, this wao not added to our guidelines. I have noted that the CMIF and the State do not have a loan fee. Generally, the. City Attorney prepares the closing documents for the State, CMIF and the GMEF funding sources Involved and are paid by the applicant. If the EDA Incurre no expense. Is the loan fee appropriate? Although you will note the exlst:ing guideline allows the EDA the right to reduce or waive the loan fee or portion of the loan fee, you may still wish to consider the following alternative options. Alternative Options: 1. Deny amending. 2. Amend to read: Any expennes incurred by the EDA pretaining to an asnociatted-approved loan becomes the responsibility of the GMEF app.11cant. 3. Amend to delete. tPage 2 EDA AGENDA f JUNE 15, 1994 LEGAL FEE As stated above the current GMEF Guidelines do not incorporate a legal fee policy. You may wish to consider incorporating a policy at this time, as any amendments approved by the EDA will be brought to the City Council for approval. It would be most apparent to incorporate a legal fee policy if the EDA elected to delete the above loan fee. Alternative Options: 1. Incorporate LEGAL FEE: Responsibility of the GMEF applicant. 2. Deny incorporation of a .legal fee. B. Recommendations: The following recommendations are made: Loan Term, alternative one allows for consistency with other funding sources and still allows EDA flexibility. Non -Performance, alternative one allows for reasonable time period (six months.) Loan Fee, no recommendation. Legal Fee, alternative one. C. Supportinq Data Excerpts from GMEF Guidelines. Page 3 IV. TERMS AND CONDITIONS • LOAN SIZE - Minimum of $5,000 and maximum not to C • INTEREST LIMITATION ON GUARANTEED LOANS - Subject to security and/or reviewal by EDA. • ASSUMABILITY OF LOAN - None. G14EF GUIDELINES: 5/11/92 Page 3 exceed 50% of the remaining revolving loan fund balance; for example, if the remaining revolving loan fund balance is $50,000, the maximum loan issuance is $25,000. LEVERAGING - Minimum 60% private/public non-GMEF Maximum 30% public (GMEF) Minimum 108 equity EDA loan LOAN TERM - Personal property term not to exceed life of equipment (generally 5-7 years). Real estate property maximum of 5 -year maturity amortized up to 30 years. Balloon payment at 5 years. INTEREST RATE - Fixed rate not less than 2% below Minneapolis prime rate. Prime rate per National Bank of Minneapolis on date of EDA loan approval. LOAN FEE - Minimum fee of $200 but not to exceed 1.5% of the total loan project. Fees are to be documented and no duplication of fees between the lending institution and the RLF. Loan fee may be incorporated into project cost. EDA retains the right to reduce or waive loan fee or portion of loan fee. PREPAYMENT POLICY - No penalty for prepayment. DEFERRAL OF PAYMENTS - 1. Approval of the EDA membership by majority vote. 2. Extend the balloon if unable to refinance, verification letter from two lending institutions subject to Board approval. • INTEREST LIMITATION ON GUARANTEED LOANS - Subject to security and/or reviewal by EDA. • ASSUMABILITY OF LOAN - None. G14EF GUIDELINES: 5/11/92 Page 3 • BUSINESS EQUITY REQUIREMENTS - Subject to type of loan; Board of Directors will determine case by case, analysis under normal lending guidelines. • COLLATERAL - • Liens on real property in project (mortgage deed). • Liens on real property in business (mortgage deed). • Liens on real property held personally (subject to Board of Directors - homestead exempt). • Machinery and equipment liens (except equipment exempt from bankruptcy). • Personal and/or corporate guarantees (requires unlimited personal guarantees). • NON-PERFORMANCE - An approved GMEF loan shall be null and void if funds are not drawn upon or disbursed within 120 days from date of EDA approval. The Greater Monticello Enterprise Fund is operated as an equal opportunity program. All applicants shall have equal access to GMEF funds regardless of race, sex, age, marital status, or other personal characteristics. ORGANIZATION The Greater Monticello Enterprise Fund is administered by the City of Monticello Economic Development Authority (EDA), which is a seven -member board consisting of two Council members and five appointed members. EDA members are appointed by the Mayor and confirmed by the City Council. Formal meetings are hold on a quarterly basis. Please see the by-laws of the EDA for more information on the structure of the organization that administers the Greater Monticello Enterprise Fund. PARTICIPATING LENDING INSTITUTIONS) 1. Participating lending institutions(s) shall be determined by the GMEF applicant. 2. Participating lending institution(s) shall cooperate with the EDA and assist in carrying out the policies of the GMEF as approved by the City Council. ]. Participating lending institution(e) shall analyze the formal application and indicate to the EDA the level at which the lending institution will participate in the finance package. GMEF GUIDELINES: 5/11/92 Page 4 a 3. 1 Under the GMEF Guidelines use of proceeds for real property acquisition and development, real property rehabilitation (expansion or improvements) and machinery and equipment. The following commentary is intended to assist developers with those costs typically considered eligible: Land Acquisition Engineer/Design/Inspection Fees Building Permit Fees Architect Fees Building materials Soil borings Construction labor Appraisal Fees Landscaping Legal Fees Grading Environmental Study Curbing/Parking Lot Recording Fees Title Insurance Personal property used as an integral part o acturin& or commercial business, with a useful life of at leaec t res yea a�lcquisition costs would include freight and sales taxes paid. As a general rule, office equipment would not qualify. JW -03-94 FRI 19:28 ID:HDS INC. TEL 10:7'86-9030 4049 P02 - H-WIIMM COMPANY MANKON PROJECT i7Sli4 OA A[1ND4 ' (23.000 up= Sew $6173,000 Site impovmmb 23,000 Equipmom AuChucs 350,000 /Soft c" lam SUNWAL F1W ASSM USES OF FUNDS SI,4W.OD0 Bulk - Uno of Credit 5130.000 working cow TOTAL USES OF FUNDS 81,80D,000 owwm MdngmeY) Bort (ARM, 20 yarn, IR m ltrMW 5330.000 Bquily 300.000 � t I Sm d Dsbmmft (0% - 5%. 10 ymm dented 1NmequoO OIdBP (3.96. 10 yeah, dww tWagwymmt) 550.000 30.000 --50.0m SUBTOTAL FD030 ASSETS SOURCES OF FUNDS $1,100.000 Bulk - Uno of Credit 5130.000 UMZ SUBTOTAL WORKING CAPITAL SOURCES OF FUNDS TOTAL SOUR® OF FUNDS S1.gMAD EDA AGENDA U ,a JUNE 15, 1994 PAGE i 5. Consideration of an update on the Muller Theatre - GMEF Loan No. 002 DreDavment and Standard Iron GMEF closing. A. Reference and Backaround. Mr. Mike Muller of Muller Theatres called the end of May and inquired of his interest to prepay the remaining balance of his GMEF loan. His plans are to construct or purchase another theatre in the metro area. GMEF Guidelines state no penalty for prepayment and mentions no need for commission action. Kevin Duty of Marquette Bank, who services that loan. Informed me that Muller has already paid -off the SBA and bank loan. According to the City's records as of June 7, the remaining principal balance of GMEF No. 002 is approximately $45,789.02, Interest paid is approximately $13,772.48. The $50,000 loan at 8% Interest rate was approved in 1990. City Attorney Paul Waingarden Is currently preparing necessary GMEF documents such as releases on the UCC filing and real estate mortgage. Prepayment anticipated mid-June or as -soon -as -possible. Secondly, GMEF Loan No, 007, the $75,000 equipment loan, to Standard Iron closed on June 1. Actually, an escrow account was setup through Norwest Bank Minnesota for the CMIF $100,000 and the GMEF $75,000. The SCERG $250,000 is paid after disbursement and verification of the equity, CMIF and the GMEF funds. To avoid postponing the closing date anti changing all the document dates again, we agreed to the establishment of an escrow account. The Horlzontal Machine Center has been on order and delivery expected momentarily. Thereafter, Standard Iron has a 30 -day operational trial period prior to acceptance of the machine. t EDA AGENDA JUNE 15, 1994 Consideration to review the nreliminary and final GMEF application from annlicant, the 11 -Window Comoanv. Reference and Backqround. On May 25, 1993, Pat Pelstring, Lenny Kirscht, and 011ie Koropchak met with the Norweyian Board members and Steve Lomme. The purpose of the meeting was tn develop a rupport between individuals and an understanding of the previous funding attempts, and to discuss potential financial options for the company's planned expansion. The proposed expansion being a 25,000 sq ft manufacturing addition, 4,000 sq ft second -floor office space, equipment, and the addition of 45 new jobs. In 1967, TIF 1)istr1rt 11o. 1-7 was rreated for NAWCO and provided assistance of $110,000 for land write-down of Lots 11 and 12, Block 2, 0111. The company completely financed the original 28,000 sq ft facility, balance of land cost, machinery A equipment, and necessary working capital. Current employment is 30. The first expansion financial proposal included the isuuance of $1,175,000 of G.O. TIF Bonds by the TDA, ,mall Cities Economic Recovery Grant (SCERG) of $500,000, equity of $400,000, and less annual Tax Increment Financing (TIF) revenues of $35,000 over B years for debt service retirement. On June 7, 1993, the EDA eloeted not to issue the bonds because In your opinion the projected bond rate of 7.G% was comparative to commercial lending and not a cufficlent savings to the ii -Window. Additionally, the EDA recommended maximum the of TIF, an AgUrusaive approach of the State's $500,000, and art explanation to Mr. Lemme of the EDA'o recommendation. The revised finan:ial proposal rent to Norway in-Auded the Game sources except the G.O. Dondo were replaced with commercial lending and the lrao annual TIF revenues reduced to $20.000. Thereafter, the Stnte rejected the proposed job forgiveness of $100,000 which was replaced with an application to the Central Minnesota Initial Fund (CMIF). Ori August 19 and after Public Resource Group recognized the one cannot decertify an extoting TIF DIatr.ict boundary and cet•t:ify a new dintrtct, the 1111A approved the use of the eotimatud additional tax increment from the District 170. 1-7 combined with HRA -TIF surplus dollar, in an amount not -to - exceed $160,000 ($113,000 net present value nt 7% for cite improvemen t;) pay- ao•yuu-uu assistance. The 1111A electod to Ftccept the TIF lout; in order to save emhal•ascment and show EDA AGENDA JUNE 15, 1994 Y support of the project. The 25,000 sq ft manufacturing addition has been completed; however, the 4,000 sq ft second -floor office_ has not received its occupancy permit. After discussion and numerous term and condition requests by the State, Mr. Lemme, Knut Flakk, Brad Simenson and Dentley Haugesag. MTED, and Koropchak met on May 4, 1994 to review the project. It is my understanding that Mr. Simenson will recommend to the State Board the approval of $250,000 SCERC based upon satisfying the terms and conditions as outlined in the enclosed letter. Note the total project cost has been reduced from $2,075,000 to $1,800,000 because some equipment has been purchased since the initial financial proposal. On June 1, I heard verbally from Jeanne Endahl. The Board of Directors denied approval of the $100,000 CMIF request based International ownership which does not meet their residency requirement of the 14 -county area or potential waivers. It was not denied because of any financial credibility issue. Therefore to meet the State's terms and conditions, the EDA is asked to review the pre:llminary and final GMEF application for approval of a $50,000 equipment loan. Another $50,000 of equity will be injected to make up the $100,000 gap created by the CMIF denial. The $950,000 construction and site improvement costs were funded through a bank, $550,000 and equity, $500,000. The $400,000 working cap.ttal need through a $150,000 Bank Line of Credit and $250,000 of equity. The $350,000 equipment funding Is proposed at $250,000 SCERG, $50,000 GMEF, and $50,000 equity. 9.Ince the construction financing Io history and the work capital a separate issue, 1 only uutlined the funding of the equipment. G14EF LOAN APPLICATION REQUEST: $50.000 for equipment, 5.0% interest rate over 10 years, --hared Ilrst.-position with the State.. USES OF FUNDS Equipment $350,000 TOTAL. USES OF FUNDS $350,000 i 1 EDA AGENDA JUNE 15, 1994 SOURCES OF FUNDS State of Minnesota, SCERG (0%-5%, 10 years, shared 1st/equipment) $250,000 GMEF (5%,10 years, shared 1st/equipment) S 50,000 Equity S 50,000 TOTAL SOURCES OF FUNDS $350,000 EXECUTIVE SUMMARY enclosed. GREATER MONTICELLO ENTERPRISE iUND (GMEF) GUIDELINES PUBLIC PURPOSE CRITERIA: Must comply with four or more of the criteria listed below, criteria al being mandatory. 1. Creates new jobs: 45 new (37.5 hpw) jobs over two years. Currently 30 full-time. 2. Increases the community tax base: Estimated Market Value of the e x p a n s i o n i s $ 6 9 1, 6 0 0 o r estimated Tax Capacity of $30,213. 3. Factors: Will assist an existing industrial business to expand their operations. The business and completed real estate project was compatible with the comprehensive plan and existing zoning policies. The company's product is unique and no potential adverse environmental effects are anticipated. 4. Used as a secondary source of supplement conventional financing: Although bank financing is not part of the $350,000 equipment package, of the $1,800,000 total package (Including the Line of Credit) Christiania Bank (New York) financed 38.8% or $700,000. 5. Used as gap financing: With the SCERG and TIF reduction and the CMIF denial, a "gap" in the financial package became apparent. The GMEF is 2.7% of the total $1,800,000 package. Page I EUA AGENDA JUNE 15, 1994 `L 6. Used to assist other funds: State Funds are being requested and Regional Funds were denied. G.O. Bonds were denied and TIF assistance reduced. GREATER MONTICELLO ENTERPRISE FUND POLICIES I. BUSIIIESS ELIGIBILITY: Industrial business: Yes. Located within city limits: Yes, Zoned I-2. Lots 11 and 12, Block 2, OIP Credit worthy existing business: Yes, real estate financing approved with Ch:•istIan.1a Bank, positive credit analysis by PRG and CMIF. ,7 $10,000 loan per each Job created, S5,000 per every $20,000 In property market valuation, or $5,000 per every $20,000 Increase in personal property used for buGiness purpose, whichever highest: $450,000, $172,900, or $87,500 respectively. Recommendation : $50,000 GMEF approval. 11. FINANCING MPTHOD: Participation Loan: The State and GMEF will share a first position on the equipment. 111. USE OF PROCEEDS: Equipment - Sae enclosed lint. IV. TERMS AND CONDITIONS: Loan Size: Maximum not to exceed 50% of the remaining G14L'F balance. Balance January 1904, $2.00,000. Maximum loan size. $100,000. Reeommendat.ion: $50,000 GMEF approval. Pege 2 EUA AGENDA JUNE 15, 1994 Leveraging: Minimum 60% private/public non-GMEF. Maximum 30% GMEF. Minimum 10% equity of GMEF loan. TOTAL. PROJECT Bank $700,000 (38.88%) EQUITY $800,000 (44.44%) STATE $250,000 (13.88%) GMEF S 50,000 ( 2.77%) TOTAL EQUIPMENT STATE $ 250,000 (71.42%) GMEF $ 50,000 (14.28%) EQUITY $ 50,000 (14.28%) (100%) Loan Term: Personal property term not to exceed life of equipment (generally 5-7 years). Recommendation: As per amended, 10 years. Interest Rate: Fixed rate not less than 2% below Minneapolis prime rate. Recommendation: 5.0% interest rate. Loan Fee: Minimum fee of $200 but not to exceed 1.5% of total loan project. $50,000 X .015 - $750. Recommendation: As per amended. Prepayment Policy: No penalty for prepayment. Deferral of Payment.: 1. Approval of the EDA membership by majority vote. 2. Extend the balloon if unable to refinance. verification letter from two lending institutions subject to Board approval. Interest Lim.ltation on Guaranteed Loans: Subject to security and/or revlewal by EDA. Asoumability of Loan: None. CPage 3 EDA AGENDA JUNE 15, 1994 Business Equity Requirements: Subject to type of loan as determined by the EDA. Collateral: Mortgage deeds, securities, and/or guarantees as per the GMEF attorney. Non-performance: The approved GMEF loan shall be null and void if funds are not drawn upon or disbursed with 120 days from date of EDA approval. Recommendation: As per amended. GMEF legal fees: Responsibility of the GMEF applicant. 13. Rpcommendat ion: Recommendation Is to review the enclosed Information prior to the EDA meeting for discussion and potential questions. Consideration to approve GMEF Is the next agenda item. C. 3iinuortinq Data: 1. Copy of the preliminary GMEF application. 2. Equipment list. 3. Copy of the executed Release of Information. 4. Copy of the formal GMEF Checklist. 5. Copy of letter from the State Outlining terms and conditions. 6. Copy of CMIF denial letter. 7. Updated executive summary. Supporting Data On -hand: 1. State Economic Recovery Grant Application. 2. CMIF Application. 3. Private RedovelopmellL Contract between the it -Window Company and the HNA. 4. Year-end Financial Statements. tPage 4 GP'.'TER MCIr:C '—O '-4-1MPR:SE 250 EAS' BRCADWAY MCN-:CT-LLO, li:NNESOTA Pv_r, _MI.J;,RY AP9L:C%TICN FCR LOAN i V APor:CA-')^: Tl)p N Window r—anv F_-V OR T.-ADE NAY°: Thr M I-ii nrtnw ECS:N-ESS ADDRESS: 1724 F 0,,L- rflri nril— 4-2tirPlln. MN 55367 (; 6 S.:eec) (C-ty 6 Stace) (Z-,p Code) TI-LFPHCNE: BUSINESS KIQ 295-5305 ECME ( 1-------- DATE ES7ULISHED: 1987 E"BLOYER I.D. 1: 3873080 SCLE PRCPK---OR x_ CORPORATION PARTN'ERSFTP MANACEMrr NAME T77LE Ol- JERSE:? I 51PVPn L=TTP P-idPnt/ General Manaaer ---- Gnillr� Tnlern�f:nnil 674 9la4 VTranTnlr.CTan a/c 1n-4 PRC.,ECT LCC%^_ICN: H Wi ndnw Fnri I iry (Mnnr i�n11o1 NEW BUSINESS x EY:S TNG BUSINESS TCI'AL PRC„-LC- CCS:' ES:IRATE: 5 1.800,000 PRCPCSM CSES: RECCE."_: LAND S AMOUNT. OF LOAN $50,000 EX:S-:NG BUILDING MATURITY 6 TEPMS CONS:ROCTION $950,000 REQUES-ED 5%. 10 years MACKM-- CAPI_AI. $350,_000 APPLICANT'S WORR:NC CAPITAL $400,000 EQUITY $50,000 OTHER $100,000 IRAN PURPOSE EQUIPNEN TOTAL USES $1,800,000 PROPOSED BEGINNING DATE: Fall 1993 ES:'::A':= C'MPLE^.ION DATE: .lnnusry 31. 1994 . :'0 PRO,;i.'C:' ASSETS ''0 BE HELD BY: OPERA-INC ENTITY AL; _4 EGO PAR-:C:PA-:NG LENDER:Chrietinnia Bank 11 WnIt 42nd ST. 7th Floor (14ame)New York, NY 10036 (AadreSS) MS 1%, 1Pn!-fP, q—Tann �l4 827-4800 (Contac. Person) lTe�pnono 0 PRESET.!" 1 OF E"pLOYEES: 45 PROJECTED 1 OF DTLOYEES 100• ACDIT:CNAL PPDJEC' I11FOR. AT:C : APP:70..0 S:GNA ME: DATE SICTD*. S 9 EQUIPMENT ITEM COSI 93AI1.6 H,2Hlu( 170.00 .60 S.E. TENONE; 1:8,777.00 OK6A END MILLS 110,900 00 SINGLE C40 TOOLING t9,030.G0 IMIECTION ROLLO TOOLING t17.6J0.G4 ALUMINUM SAW ANGLE STOPS 12,SOO.fA ALUM PUNCH DIES (FOY VALLEY) 17.190.00 ALUM PUMCN DIES 6 AUTO TEEoEA 111.556.00 OVERHEAD CRANE t7.t00.TA HINGE KNOCK OUT NACNINE 145.000.00 NAIL TABLES 11,00.40 WET GLAZE SYSTEM 110,500.00 AUTO EED SCREWCRIVER 17.000 .C-0 PROTECTION BEAD TOOLING, 12.SOO.14 DIE CUT FOAM TOOLING 1600.01 NAIL RIN TOOLING $4,500.00 STP,AP ANNA 1640.00 CONNECTOR PLATE TOOLIMG 1600.40 WEEP MOLE PUKCH TOOLING 11.160.00 WOOD SHAPER IT'S00.0) MITRE (HOP SAW 11SOAD GLAZING BENNSVTA6LES II.1100.00 umiNUM MILL TOOLING 17.I110.00 .'APE CLANG 165.000.00 AUTO RIVETER 17,500.00 ALUMINUM STORAGE SYSTEM 18.600.00 ALUMINUM BORING MEADS 12.000.00 THIRD ASSEMBLY LIKE 110,100.00 WEATHERST0IPYGLAIING MACHINE 11S.A80.00 I31A,S58.00 OCTOBER - DECEMBER 1993 Hinge Processing $45,000 Frame 10,000 Aluminum Saw 25,000 TOTAL $80.000 N, L Q' MONRCELLO 250 East Broadway P. O. Box 1147 AUTHORIZATION RELEASING INFORMATION Monticello, MN 55362.9245 Phone: (612) 295.2711 Metro: (612) 333-5739 Fax: TWi2)295-4404 CHRISTIANIA BANK Name of Financial Institution 11 WEST 42ND STREET 7TH FLOOR Street NEW YORK. NY 10036 City State zip OR MARQUETTE BANK - MONTICELLO. I hereby authorize any person to furnish to the Monticello Economic Development Authority, 250 East Broadway, PO Box 1147, Monticello, -i Minnesota 55362, any and all financial records, reports, statements, or other documentation or information in their possession regarding: THE H kJIV00.J Co„04M, Developer's name(s) 11W E, oAk.W000 M« . Developer's address S33tx Upon presentation of this authorization or an exact copy thereof, you are directed to permit the personal review, copying, or photostating of such records, information, and evidence and provide same to the Monticello Economic Development Authority. I, the undersigned, acknowledge the said above information may become public. This authorization shall be valid the entire term of/ the loan. Dated: Gh �Y e- , Authorized Signature Ono copy for each principal of a /( partnership or corporation as �1 well as the entity itself. G:IEF FOP -MAL APPLICATION MONTICELLO EDA CHECKLIST FOR THE H—WINDOW COMPANY J 3 XPreliminary CMEF Loan Application. Formal GMEF Loan Application -- Business Information: XHistory and Description of business. Resumes of principals and senior management. Financial Information: Personal financial statements -- all principals with 20 percent ownership or more and/or guarantors. XBusiness financial statements current within 60 days -- operating statement and balance sheet. Aging of existing accounts receivable and payables. / AX Schedule of existing debt. Operating projections for two years. Project Information: Purchase Agreement. X E Cost eat at s with supporting documentation. Project Appraisal. Collateral Listings. Business benefit analysis ••— job creation/efficiency. etc. Lander commitment letters or commitment agreement between landing institution and the EDA. Prior to Loan Closing: a �. X �` Qd\GA-1 Certificate of Cood Standing (verifies existence). Corporation Resolution (who is authoritad to borrow). Articles of Incorporation/By Lava (listing of do's and don't). Ficitious Name Statement. Equity deposti verification. Applicable permits end/or licensee. Lease Agreements %r -e% G Q-, yr i 'I; C Monticello EDA Checklist for THE H -WINDOW COMPANY Page 2 UCC I Filings: State (M&E) Date of Filings continuations UCC II Filings: County (Fixtures) Evidence of insurance — life and property. Preliminary title report. Certification of current status on employment compensation, workman's compensation, and state and federal tax withholdings. Partnership Agreement. Personal Guaranty(s) XAuthorization Releasing Information. i Loan Agreemant. Subordination Agreement. The EDA reserves the right to request additional information if so determined. I A - OPTIONAL REQUIUD ENTS Business Information: Business and marketing plan. Franchise Agreement. Financial Information: Honth-by-month cash flow. Source of equity capital. Personallbusiness federal and state tax returns. Proforma balance sheet. Project Information: City. state. fedeal review by Plans and specifications — city site plan review. MINNESOTA DEPARTMENT OF TRADE AND ECONOMIC DEVELOPMENT, Metros« � s'� 121 7th Placa Ent Saint Paul. Minnesota 55101.2146 USA' •.•@. , May 16, 1994 Ms. 011ie Koropchak City of Monticello P.O. Box 1147 Monticello, MN 55362-9245 RE: H -Window Company Dear Ms. Koropchak: I am not authorized to bind the Commissioner of the Department of Trade and Economic Development on the matters addressed in this letter, but assuming a common understanding as to the terms set forth below, I would be willing to recommend them to the Commissioner for his approval. If the terms of this letter are acceptable we can proceed to update the application and submit an authorization to the Commissioner for approval, rejection or approval with conditions. As Loan Officer to the Commissioner, 1 would recommend to the Commissioner the conditions be as follows: 1. The Initiative Fund lend H -Window $100,000 as pan of their investment into the project; 2. no City/State receive o first security interest in the equipment of H -Window; 3. H -Window secure bank financing in the amount of $650,000; 4. Parent company inject (1,000,000 of equity; 5. The Note Payable to the Norwebi.m Industrial Fund be subordinated (see attached Standby Agreement) to the "new" City/State loan; 6. The Note Payable to the shareholders in the amount of $427,248 be subordinated (see attached Standby Agreement) to the "now" City/State loan; 7. In lieu of the corporate guarantee of the parent to H -Window• we request a Letter of Credit in the amount of $100,000; 8. The Corporate Guarantee of the U.S. parent of H•Window. An Pqual opp~vy rmpk+,vn Ms. 011ie Koropchak g May 16, 1994 A. Page 2 Before we can proceed. the application must be updated. Please review the application and submit new documents which reflect the current status of the company. Please Note that H -Window may not start on or expend funds on activities for which state assistance will be requested until the formal application is approved by the Commissioner. If you have any questions, contact me at 296-1145. Sincerely, Bradley L. Simenson I SUN 08 '4a 12:15 CENTRAL M. 1.F P. 01 CE()AL a MINNrSOTA INITIATIVE F•U•N•D t June 8, 1994 Steven Letnme The H window Company P.o. Box 206 Monticello, MN 55762 Dear Mr. Lemme: The Board of Directors of the Central Minnesota Initiative Fund reviewed your request for a waiver of the owner residency requirement on loans considered by the Initiative Fund. The Initiative Fund's policy requires that business owners with 20% or more stock in a business seeking loan assistance must reside in the 14 county area. After careful consideration, the Board decided not to waive the residency requirement on this project. Thank you for your interest in the Initiative Fund. we wish you every success in completing your project. Sincerely, Yr e Endahl am Specialist cc Lonny Rirscht, Public Resourco Group 56:, :at 2^avv a} cr. Sm 39. l::.e FM. MN 483:5 (612) 832-9255 FA1(1612) 632 72..°9 Z- H -WINDOW COMPANY MONTICELLO, MINNESOTA EXECUTIVE SUMMARY The H -Window Company is a manufacturer of high quality custom window and door products targeted at the upper end of both the commercial and residential market segments in either new construction or replacement applications. The original H -Window concept was founded in Norway in 1959 and has been the leading window/door system throughout Northern Europe for the past 35 years. Today there are 44 facilities in 10 different countries manufacturing the H - Window concept around the world with annual sales revenue of over $150,000,000. H -Window operations began in the United States in 1987 as a division of the North American Window Company (NAWCO). The start-up operations began when DSV Investment Group financed and constructed the manufacturing facility located in Monticello, Minnesota. Over the last five years the H -Window Company has financed its facility and working capital requirements entirely from internal equity. ' This project involves the proposed 25,000 square foot expansion to H -Window Company's existing facility in Monticello, Minnesota. The prospect of this expansion is very exciting considering it is the first and only North American subsidiary of its very successful Norwegian parent company. The 25,000 square foot expansion represents a doubling in space of the company's existing facility which is approximately 28,000 square feet including office. Since the company's inception in 1987 and beginning of operations in 1988, it has recognized steady positive growth and has reached its break even point. Although this growth has been slower than initially projected, the company has reached its break even point and based on new orders and additional product lines it is poised to begin achieving significant positive profitability. Sales are estimated to be in excess of $4,000,000 in 1994 and over $12,000,000 in 1996. In order to accommodate this growth the H -Window Company has outlined its need to expand both its facility and employment. The company has outlined that it will add 45 new jobs within two years to its existing base of over 30 employees. Long term employment potential suggests that the company will reach approximately 100 employees in 1996. As previously stated the company intends to construct a 25,000 square foot building expansion to its existing facility located on its 10 -acre parcel of land located in the Oakwood Industrial Park. Following consultations with contractors the building cost will be approximately $925,000, plus $25,000 of required site improvements. In addition the company has outlined equipment and furniture and fixture needs of approximately $350,000 and working capital needs of approximately $400,000. !t has outlined additional site improvement and contingencies bringing total estimated project costs to S1,800,000. The H -Window Company is a wholly owner subsidiary of NAWCO which is owned by a group of Norwegian investors commonly referred to as DSV Incorporated. The ownership of DSV is broken down as follows: Spilka International 62% Broder Bockmann 19% Fjerdingstad 121 Total 100% The overall Uses and Sources of funding for this project are as follows: USES OF FUNDS FDMD ASSETS 'Construction (25,000 square feet) $925,000 Site Improvements 25,000 Equipment Purchases 350,000 Contingency/Soft Costs 100, SUBTOTAL FIXED ASSETS USES OF FUNDS 51,400,000 r' OTHER Working Capital 5400. QQ TOTAL USES OF FUNDS $1,800,000 Based on these Uses of Funds the Sources of Funds are identified as follows: SOURCES OF FUNDS FIXEb ASSETS Construction (includes contingency) Bank (ARM, 20 years, Ist on facility) $550,000 Equity 500,000 Equipment State of Minnesota (0% - 5%, 10 years, shared Ist/equipment) $250,000 GMEF (5.%, 10 years, shared IsUequipment) 50,000 Equity 50"000 SUBTOTAL FIXED ASSETS SOURCES OF FUNDS $1,400,000 WORKING -CAPITAL Rank - Line of Credit $150,000 Equity 250,QQQ SUBTOTAL WORKING CAPITAL SOURCES OF FUNDS TOTAL SOURCES OF FUNDS 51,800,000 The company's note payable to shareholders in the amount of $427,248 and the note payable to the Norwegian Industrial Fund, as noted in the financial information, will be subordinated to the 'new' city/state loans. In addition, the parent company will issued a letter of credit in the amount of $100,000. As a result of this project the H -Window Company will be able to expand its existing facility to accommodate its present and future growth. The present facility is approximately 28,000 Square Feet including office space. The new expansion will accommodate H -Window's immediate and long-term space needs thereby increasing their production capabilities and equipment capacity. With the utili»tion of automated CNC equipment the company will also be able to increase its efficiency and profitability. This project will serve to increase the local tax base in Monticello. In addition the project will result in the retention of over 30 existing positions at H -Window Company and the creation of at least 45 new positions. Of these new positions 23 will be available to low to moderate income persons. Future employment projections indicate that employment at the H -Window Company will reach 100 persons in 1996. This project will assist the City of Monticello to further enhance the existing economic climate within the community. The population of growth of the community has exceeded the growth of the State of Minnesota as a whole. From 1960 - 1980 the community experienced a growth of over 129%. The statewide population for the same period grew from 3,413,864 to 4,075,970 representing a growth rate of approximately 19.4%. From 1980 - 1990 Monticello's population grew by an additional 75% compared to statewide growth during the sane time period of 7.3%. In spite of this growth the community has not achieved equality with economic standards of the state. For example, in 1985 Wright County's average annual unemployment rate was 7% compared to the statewide average of 6%. In 1990 the county average annual unemployment rate was 6.1 % compared to statewide average of 4.8% for the same period. According to the Minnesota Department of Jobs and Training, the State of Minnesota's unemployment rate for the month of June 1993 was 5.5% compared with Wright County during the same period of 5.9%. In addition the medium family income is also lower in the community than that of the state. In 1979 Monticello medium family income was $19,813 compared to the state medium of 520,919. In 1986 the community's medium family income was $29,643 compared to the state medium of $30,547. This project will serve to create new permanent, private sector jobs for low to moderate income persons, increase the local tax base, and help to meet urgent community needs. This project is consistent with the goals and strategies of area development agencies and is considered to be a very high priority. The H -Window Company was founded as a wholly owned subsidiary of the North American Window Company in 1987. To date it is the first and only manufacturer of the H -Window concept in North America through NAWCO which is the subsidiary of DSV Incorporated, a Norwegian Company whose annual sales are in excess of $150,000,000. With the exception of trade payables, limited shareholder financing and Norwegian Industrial Development Funding the Company is operating with relatively low levels of debt and has achieved its break even point. The window manufacturing industry is characterized by moderate operating cycles and manufacture of custom products for a variety and of users. The operation is substantially cash intensive requiring significant levels of inventory and processing before final product can be shipped. Because of the effective management and strong customer service of H -Window Company coupled with the strength of its parent company DSV incorporated, the company has developed the strength to undertake this major expansion to accommodate its immediate and future growth. The need for assistance can be demonstrated in a number of different areas: 1. The H -Window's banking relationship with its bank in New York has secured necessary financing to undertake 100% of the construction needs of the company and also prepare for additional costs associated with the equipment acquisition. The bank will be providing the financing out of its service area because the funds are being secured through the relatively unpledged collateral of the building and the corporate guarantees of DSV Incorporated. The bank has limited its involvement with the project to �. $1,125,000 which is not sufficient to accommodate the financing needs of H -Window Company. H -Window Company will have significant up -front costs associated with this project. The company will require its cash flow to sustain the costs of expanding into new space and the intem slow period which will occur from machinery hook up, production glitches inherent to new facilities and training of new employees hired as a result of this project. The project has exhausted all available sources of funding including bank financing at $700,000, equity financing of $800,000 for working capital fixed assets and equipment. The City of Monticello is injecting $25,000 for site improvement assistance and the Greater Monticello Enterprise Fund (GMEF) will provide $50,000 of equipment financing. To accommodate this gap the City of Monticello is requesting the assistance from the State of Minnesota. The Central Minnesota Initiative Fund denied financing of $100,000 requested to assist in the equipment purchases due to the company's ownership being international and exceeding the geographic boundaries of the State of Minnesota. This project has been carefully analyzed by the company and by the community's economic development representatives and has been determined to have an acceptable level of risk with a reasonable assurance for success as presently structured. The expanded facility will improve the company's production process and work flow, accommodate it continuing growth, and allow for the utilization of automated CNC equipment. These new pieces of equipment will greatly enhance H -Window Company production capacity and ability to produce its existing product lines as well as the emerging niche products that have been developed through DSV Incorporated and will begin to be produced in the Northern American facility in Monticello, Minnesota. In addition the ability to pledge a First Purchase Money Security for equipment provided additional collateral and for the State portion of financing thereby additionally reducing risk. Because of the size and location of this project we have been unable to secure the necessary financing from conventional sources. As a result the available sources of alternative financing were approached in the limit of their involvement was determined. Based on these preliminary commitments that have been received a gap of $250,000 has been identified and assistance is being requested from the Economic Recovery Fund in the amount of $250,000. Based on projections of the company as found as an addendum to this application, there appears to be sufficient cash flow to meet all of the debt requirements of the company, immediately and into the future, thus showing repayment ability of the project. t EDA AGENDA JUNE 15, 1993 S 7. Consideration to anorove or disapprove GMEF Loan No. 006 for The H -Window CompanV• A. Reference and Rackaround: Following discussion of the preliminary and formal GMEF application for The H -Window Company; the EUA is asked to consider approval or disapproval of the recommended $50,OtiD GMEF Loan. The applicant requested terms of 5% interest rate amortized over ten years. First, the EDA needs to determine if the GMEF loan application from Mr. Lemme will encourage economic development, and that the proposed 11 -Window expansion project and application complies with the GMEF public purpose criteria and policies. Secondly, with the assumption the project application complies with the public purpose criteria and policies, the EDA must determine the amounts of the loan, interest rate and terms, service and legal fees, and required equity. Additionally, the EDA must determine necessary collateral or any uther conditions. it is suggested that the approved $50.000 be disbursed from IL the Other payback Appropriations, UDAG account. D. Alternative Actions: 1. A motion to approve GMEF Loan No. 000 for The H -Window Company. Loan amount and terms as recommended: $50,000 for equipment at 5.0% interest rate amortized over ten years. 2. A motion to approve GMEF Loan No. 000 for The H -Window Company. Loan amsunt and terms as determined by the EUA. 3. A motion to disapprove GMEF Loan No. 000 for The H -Window Company. C. Staff Recommendation: Assuming the EDA determines that the proposed project complies; with the GMEF public purpose criteria and policies, r.taff supports Alternative No. I. Additionally, the EDA must determine service/leg,+1 fees and equft.y/collateral requirements and any other condit.ions, and direct the City Attorney to prepare necessary clooing documents. Mutton Irage 1 EDA AGENDA JUNE 15, 1996 should be subject to final equipment funding approval by the State. D. Su000rtinq Data: Copy of the GMEF Approval Form. PaUe 2 APPROVAL OF GREATER MONTICELLO ENTERPRISE FUNDS BY ECONOMIC DEVELPMENT AUTHORITY IN AND FOR THE CITY OF MONTICELLO, MINNESOTA Preliminary Loan Application Approval. Yoe Loan terms negotiated and agreed upon betweeen the developer, the lending institution, and the EDA Executive Director. Developer, PRG, and Koropchek. Formal Loan Application and Financial Statements analyzed by the lending institution, 9139, E. c. or city staff. Public Resource Group, Inc. Building and Site Plan Preliminary and/or Final Review. Yes. iratnaye calculations completed and submitted to OSM. Building Permit approval or construction commitment. Yes Loan documents r -viewed and/or prepared by the City Attorney. ECONOMIC DEVELOPMENT AUTHORITY APPROVAL OR DISAPPROVAL: LOAN NUMBER CHEF Lonn No. OOB LOAN APPROVED BORROWER The H -Window ComnnnY ADDRESS 1324 Enst Oakwood Drive, Box206LOAN DISAPPROVED LOAN AMOUNT $50.000.00 Equipment Monticello, MN 55362 RATE 5% Fixed Interest Rnte DATE TERMS Amortized nver 10 vrara. FEE OVER A motion was made by EDA Commissioner to (approve - disapprove) Greater Monticello Enterprise Funds in the amount of dollars and cents to developer this day of Seconded by EDA Commissioner YEAS: NAYS: GMEF disbursed 19 by Check No. EDA Treasurer FROM OTHER PAYBACK APPROPRIATIONS - UDAG ACCOUNT CITY COUNCIL MAY REVERSE AN EDA LOAN DECISION WITHIN TWENTY-ONE DAYS OF EDA APPROVAL. 17 GMEF Approval '1_ Page 2 ACCEPTANCE OF TERMS I (We) hereby accept the terms stated above as approved by the Economic Development Authority in and for the City of Monticello. DATED: 1 C\ MAY -25-'94 WED 10:36 ID:BDS INC. TEL x0:'786-5034 0966 P02 PAY -MAR TUM PAIiRLCA7= Land - 3 am= RuDdWg - 13,000 agmm fm at 3V3P 84 Bat! Cowcon*pm TOTAL UM3S OF FUNDS Bank (ARM. 10 y=. Ist) SHA 304 (/.3 R, 10 ym% lad) RqWly 7v Bank (Avg. 9%) SEA 304 'DOTAL UMLPIELY TOTAL ANNUAL COS!/WARE POOR awluft oqwxm0 t $1,436 _LM $4.2" $30.928 $3.40/SgL= Fm $ 73,000 343,000 100,000 -.4m $333,000 $173,000 111,000 so,000 —UM $333,00o May 31, 1994 MONTICEU0 250 East Broadway P. O. Box 1147 Monticello, MN 55362.9245 Phone: (612) 295-2711 Metro: (612) 333.5739 Fax: (612) 2954404 Dave Curless Bob iollmer Rudy Buttweiler Royal Engineering a Mfg• Inc. 2101 108 Lane N.E. Blaine, MN 55434 RE: Monticello, MN Dear Messrs. Curless, Follmer, and Buttweiler: On behalf of the City of Monticello and Its Industrial Development Committee, I would like to express our appreciation In having you consider Monticello as a potential location of Royal Engineering. I am pleased to present this preliminary proposal for financing the project. Based on our discussion, we understand that Royal Engineering will require a 25,000 square foot facility located on a 6.2 -acre site in the Oakwood Industrial Park. We also understand that Royal Engineering is considering the purchase of new equipment. According to these assumptions, the uses of funds for this project arc estimated as follows: USES OF FUNDS Land - 6.2 Acres at $14,000/Acre $ 86.800 Building - 23,000 sq ft at $30/Square Foot $ 750,000 Equipment S 500.000 Contingency 8 75,000 TOTAL USES Of FUNDS $1,411,800 We have analyzed this project to determine the most time and cost effective mearta of completing the necessary financing. Based on this analysis, we suggest the following sources of funds: Messrs. Curless, Fullmer, and Buttweiler May 31, 1994 SOURCES OF FUNDS Bank (ARM, 20 years, 1st REM) $ 580,600, SBA 504 (7.5%, 20 years, 2nd REM) S 565,000 GMEF (5%, 20 Year Amortization 3rd) S 75,000 CMIF (6k, 20 years, 3rd) $ 50,000 Equity - TIP $ 86,800 Owner $ 54,400 TOTAL SOURCES OF FUNDS $1,411,800 Assuming the adjustable, rate mortgage on the bank financing averages 9% over the term of the loan, the associated debt service and cost -per -square foot are as follows: DEBT SERVICE Bank (Avg. 9%) S 5,225 SBA 504 4,550 GMIF 495 CMIF 360 rf TOTAL MONTHLY $10,360 TOTAL ANNUAL $227,560 COST/SQUARE FOOT 55.10/Square Foot (L ncludes Equipment) Based on our analys le of the future tax capacity of Royal Engineering's new building, the property tax increment will support the cost of land acquisition. Using this assumption, the City of Monticello, via its Housing and Redevelopment Authority (HRA) , will "write-down" these coots on an up -front basis. Through this mechanism, the HRA w111 recapture this investment over time through the now tax increment without additional assessments to Royal Engineering. SUMMARY Please be advised that this information utilizes estimates and we would expoct lower overall project costs. This financing structure requires minimum equity investment from Royal Engineering because of our ability to use Tax Increment Financing for over 50% of tho_ equity required by SBA. Based on our review of preliminary Page 2 Messrs. Curless, Follmer, and Suttweiler May 31, 1994 w._ information provided by your company, we do not anticipate problems with securing the financing as outlined; however, final approvals are subject to review by the lending agencies. If you have any questions or require additional information, please call me at METRO 333-5739 or (612) 295-2711. We look forward to working with you. Sincerely, 011ie Koropchak Economic Development Director CC: Leonard P. Kirscht, PRG HRA File Page 3