EDA Agenda 11-28-1995_ AGENDA
i MONTICELLO ECONOMIC DEVELOPMENT AUTIIORITY
Tuesday. November 28, 1995 - 7:00 p.m.
City {fall
MEMBERS: Chairperson Ron Hoglund, Vice Chairperson Barb Schwientek. Assistant
Treasurer Harvey Kendall, Clint Herbst. Tom Perrault. Al Larson. and Bill
Demcules.
STAFF: Rick Wol(steller. EDA Treasurer
011ie Koropchak. Executive Director
GUEST: Bill Tapper, Tappers, Inc.
I. CALL, TO ORDER.
2. CONSIDERATION TO APPROVE THE SEIYITMBER 13.1995, EDA MINUTES.
(NOT COMPI ETE-D I -OR MAILING)
3. CONSIDERATION TO REVIEW FOR APPROVAL. THE PRELIMINARY GMFF
APPLICATION FROM APPLICANT, TAPPERS. INC.
4. CONSIDERATION TO APPROVE OR DISAPPROVE GMEF LOAN NO. 011
I -OR TAPPIiRS, INC.
5. CONSIDERATION TO DISCUSS' III POTENTIAL OFCONSOLIDATING THE
EDA AND THE IIRA FOR A RECOMMENDATION TO CITY COUNCIL-.
6. OTIIER BUSINESS:
a) Vector Tool Update
b) II -Window Update
c) Other
7. ADJOURNMENT.
r1
r MINUTES
MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY
Wednesday. September 13, 1995 - 7:40p.m.
City Hall
MEMBERS PRESENT: Chairperson Ron Halgund, Vice Chairperson Farb Schwientek.
Assistant Treasurer Harvey Kendall. Clint Herbst, Tom
Perrault. Al Larson. and Bili Demeules.
EDA STAFF PRESENT: Treasurer Rick Wolfsteller and Executive Director 011ie
Koropchak.
GUEST: Jim Harwood. Vector Tool & Manufacturing, Inc.
I. CALL. TOORDER
Chairperson Hoglund called the EDA meeting to order at 7:00p.m.
Al Larson made a motion to approve the July 25, 1995, EDA minutes. Tom Perrault
seconded the motion and with no corrections or additions, the EDA minutes were
approved as written.
Rem Wal U UPI LWARN V=9 CL40
�z FILM If WAIN K NJ 164 1 01� RL
Koropchak reviewed the recruitment process for Vector Tool beginning with a
contact from Brad Barger, a second partner of the company, and owner of Suburban
Manufacturing. Inc. The IDC Prospect Team toured the existing Vector Tool leascd-
facility in Dayton. •Mtc IIRA approved the land write-down of $63.000 of the
estimated market value of $96,000 for Lot 5, Block 3. DIP, Purchase price $33,000.
Land writedown was based on job creation and average weighted wages.
Additionally, funds arc being requested from the CMIF.
Koropchak continued by reviewing the loan application request with the GMEF
Guidelines and credit analysis as prepared by PRG. Inc. EDA members questioned
the change in the Days Receivables from June 1994 of 9.3days to June 1995 of 30.9
days and the Days Payable from June 1994 of 9.6 days and to June 1995 of 26.5
days. Mr. Marwood was unable to answer the question, having not seen the PRG
analysis prior to the EDA meeting. Koropchak was to followup on this.
Page t
EDA MINUTES
SEPTEMBER 13, 1995
Mr. fun Harwood informed the EDA members that Vector Tool recently signed a
three-year contract with Wagner Spray Tech, Inc. for manufacturing their products.
Wagner offers 63 different products. This along with the addition of seven other
new customers gives Vector a projected growth of 87% Realistically, Jim estimates
Wagner to be 30% of Vector's business. Vector's growth from its first year to this
year increased from $700,000to 1.5-1.7million.
The EDA found the Vector Tool project to encourage economic development and
that the GMEF application complied with the GMEF public purpose criteria and
policies. The EDA members felt the land writedown of $63,000 and the relocation
costs associated with production shutdown and moving was sufficient to meet the
Business Equity Requirement Provision of the GMEF Guidelines. Al Larson made
a motion to approve GMEF Loan No. 010 in the amount of $50,000for Vector Tool
& Manufacturing, Inc. This a real estate loan with a 6.75% fixed interest rate
amortized over 20 years, ballooned in five years. Loan fee was set at $750 and paid
at time of GMEF disbursal. GMEF legal fees the responsibility of the applicant.
The EDA preferred a shared second position with the CMIF; however, will accept
a third position behind the lender and the CMIF. GMEF Loan No. 010 becomes
null and void on March 13, 1996 if funds are not disbursed. GMEF is subject to
lender and CMIF commitment and approval. Collateral, guarantees, and other
condition requirements to be determined and prepared by the GM EF attorney. The
EDA will utilize the HRA attorney at Kennedy & Graven. Loan funds to be
disbursed from the Liquor Fund Appropriation account. Barb Schwientek seconded
the motion and with no further discussion, the motion passed 6.0-1 vote. The City
Council will review for ratification the EDA's approval of GMEF Loan No. 010 on
September 25. 1995.
J
9
Upon reviewing the closing documents for the H -Window expansion project with
John Babcock and Knut Flakk, it became evident that Steve Lemme was providing
a Personal Guaranty for the GML'P loan. With Mr. Lemme's retirement from the
company, the EDA was requested to consider the requirements of a Personal
Guaranty with the issuance of a $300.000 Letter of Credit. Hopefully, closings for
the approved State Grsnt/Loan of $250,000 and the GMEP loan of $50.000 will be
soon.
Page 2
r EDA MINUTES
SEPTEMBER 13, 1995
Al Larson made a motion to eliminate the Personal Guaranty for GMEF Loan No.
009 subject to the issuance of an Irrevocable Letter of Credit in the amount of
$300,000 from the Christiana Bank of New York for a period of at least through
December 31, 1997, to the City of Monticello and the Monticello EDA. Tom
Perrault seconded the motion and with no further discussion the motion passed
unanimously. A Corporate Guarantee from the North American Window Company
is still required by the State Grant Agreement.
The EDA meeting adjourned at 8:00 p.m.
04 K(A
011ie Koropchak, EDA Executive Director
Page 3
EDA AGENDA
NOVEMBER 28, 1995
3. Consideration to review for approval the preliminary GMEF
application from applicant, Tappers. Inc.
Bill Tapper, Tappers, Inc., dba Genereux Fine wood Products
and westlund Distributing, will be present at the EDA meeting.
A. Reference and Background.
GMEF LOAN REQUEST:
$100,000 real estate and MSE, 66 interest rate, amortization
over 20 years, balloon in 5 years.
PROJECT SUMMARY:
ORIGINAL PROJECT Genereux Fine wood Products and westlund
Distributing relocated to Monticello in 1990 from a leased
facility in the St. Michael area. They constructed a 27,000
sq ft office/manufacturing/ warehouse facility at 212 Chelsea
Road. Genereux is a cabinet manufacturer and westlund
distributes cabinet hardware. The company currently employs
45-50 full-time people. Average wage per hour is $8.30.
�? The original TIP assiotance was $74,000 of land write-down and
$15,500 of site improvements. Tile current property tax for
payable 1995 is $37,238.10 with a tax increment of $24,288.18.
The difference between the tax and tax increment results from
the 1990 tax rate of 81.8439 which is froze upon TIF District
certification and the 1995 tax rate is 113.0286. Also, the
commercial/ industrial classification rates have been reduced
somewhat.
GMEF Loan No. 001 was awarded in 1990 for $88,000 at 86 fixed
interest rate amortized over 20 yearn. The balloon payment of
$70,989.14 is due August 13, 1997. Tile loan wan for real
estate and M/E. The loan payback is current and as of
November 13, 1995, the outstanding loan balance is $76,176.80
per Marquette Bank who services thio loan.
EEPAN9ION PROJECT Bill and Barb Tapper propose to constrict
an 18,000 aq ft manufacturing addition and estimate an
increase of employment by 15 for a total employment of 65.
Construction to begin April, 1996, and completed by December,
1996.
On November 1, 1995, the HRA approved additional TIF
assiatance in the amount of $25,000 (upfront) for site
` ` improvements relating to the proposed expansion. Disbursement
EDA AGENDA
o NOVEMBER 28, 1995
upon 904 completion of the proposed minimum improvements. The
proposed expansion project is estimated to generate $22,000 of
additional annual taxes or an annual tax increment of $16,500.
The additional $33,000 of tax increment over two years
(District decertifies in February of 2000) is sufficient to
cover the $25,000 assistance. At the time of the approval,
the HRA was unaware of the collateral shortfall.
The proposed uses/sources of funds for this expansion project
are estimated as follows:
Uses of Funds
Building Construction *710,000
Equipment Purchase 190,000
Soft costs 75,000
SUBTOTAL $975,000
SBA Debenture Fees 13,000
TOTAL USES OF FUNDS $988,000
Sources of Fuilda
Marquette Bank $460,000
SBA 504 403,000
GMEF 100,000
TIF 25,000
TOTAL SOURCES OF FUNDS $988,000
The company currently has an SBA 504 loan on its existing
facility. The outstanding balances or those loans are as
follows;
Marquette Bank $300,554
SBA 338,236
Tile company received its first SBA loan in 1990 and has
therefore exceeded the three-year limitation regarding
seasoned loans.
The existing SBA 504 mortgages Complicate the proposed
financing. Existing mortgages must be subordinated to MBNA to
achieve the proper term collateral positioning covering the
building. Tile following OlitlilIC13 the filial mortgage
positions:
Page 2 ✓
EDA AGENDA
NOVEMBER 28, 1995
Overall Sources of Funds
Marquette Bank (first lien) $300,554
Marquette Bank (second lien) $460,000
(Prime + 1.254, 20 year amortization, 10 year maturity)
SBA 504 (third lien) 338,236
SBA 504 (fourth lien) 403,000
GMEF (fifth lien) 76,576
GMEF (sixth lien) 100.000
TOTAL OVERALL SOURCES OF FUNDS
OR TOTAL LOANS $.1,678,365
This expansion project would be structured as a participation
between Marquette Bank, SBA, GMEF, and TIF. The partners
would document their expenses associated with construction of
the facility and "draw -down" funds accordingly through a title
company.
As originally noted by Bill Endres, Marquette Bank, the total
collateral available of $1,625,000 less the total loans of
$1,678,365 creates a shortfall of $53,365. (See supporting
data.) Bill suggests the EDA disburse the GMEF loan at 50%
completion of the building expansion.
.1 A TEfLMQNTICELLO ENTERPRISB FUND (GMEF) GUDELIM
PUBLIC PURPOSE CRITERIA: Must comply with four or more of the
criteria listed below, criteria 41
being mandatory.
1. Creates new jobs: 15 immediate new (37.5 hpw) jobs
within two years. Average wage,
$8.30 ph.
2. Increases the community tax base: Annual Estimated
Market Value of
expansion, $475,000
or Annual Estimated
Taxes, $22,000.
3. Factors: Assist exioting industrial buoineoo to expand
their operations. The company's buoineoo
environment meets the City's industrial
objectives: nature of business, service and
product, no adveroe environmental offects, the
comprehensive plan and zoning policy.
Page 3
BOA AGENDA
NOVEMBER 28, 1995
4.
used as a secondary source to supplement conventional
financing: Approximately 898 of the total (Phase I
and 11) financial package is financed by
a lending institution (Marquette Bank)
and SBA. The GMEF and TIF makeup the
other 11%.
5.
used as gap financing: Used as gap financing (see item
# 6 below) and as an incentive
to encourage business retention
and expansion.
6.
used to assist other funds: Other sources of funds
used in addition to the
GMEF are SBA, TIF, and
the bank.
GREATER
MONTICELLO ENTERPRISE FUND POLICTU
1.
BUSINESS ELIGIBILITY:
industrial business: Yes.
Located within city limits: Yes, Zoned T-2,
Credit worthy existing business: To be submitted by
Public Resource Group.
$10,000 loan per each job created, or. $5,000 per every
$20,000 in property market valuation, whichever highest:
$150,000 or $118,750, respectively.
Request and Compliance; $100,000
11.
FINANCING METHOD:
Companion Direct.Loan: All such loans may be
subordinated to the primary lender(a) it requested by the
primary lender(s). The GMEF is leveraged and the lower
interest rate Of the GMEF lowers the effective interest
rate on the entire project.
RQqu68t1 Q=P Loan No. 001 in Sth position and WMP Loan
No. 011 in 6th position.
111.
USE OF PROCEEDS:
Real property development and machinery and equipment.
Page 4 ✓
EDA AGENDA
NOVEMBER 28, 1995
IV. TERMS AND CONDITIONS:
Loan Size: Maximum not to exceed 506 of the
remaining GMEF balance. Remaining annual
GMEF Appropriation Balance based on
disbursements, November 22, 1995,
$150,000. ($75,000) Remaining annual
GMEF Appropriation Balance based on
approvals, November 22, 1995, $100,000.
The H -window loan has not been disbursed.
($50,000)
Request: $100,000.
Compliance: $75,000.
Leveraging: Minimum 606 private/public non-GMEF.
Maximum 306 GMEF. Minimum 10% equity of
GMEF loan.
Marquette $760,554 (456)
SBA 741,236 (446)
GMEF 176,576 (106)
TIF 25,000 ( 1%) (146)
v.
(3006)
Loan Term: Real estate property maximum of 5 -year
maturity amortized up to 30 years.
Balloon payment at 5 years.
Request and compliance for real estate: Amortization of
20 years, balloon payment in 5 yearn.
Note: Generally, K&H is for life of equipment, 5-7
years.
Interest Rate: Fixed rate not less than 26 below
Minneapolis prime rate. Prime rate per
National Bank (First Bank) of. Minneapolis
on date of EDA loan approval. (Prime 11-
22-95, 8.75%)
Requests 6.0% interest rate.
Compliances 6.75% fixed interest rate.
Loan Fee: Minimum fee of $200 but not to exceed
1.56 of the total loan project. Fees are
to be documented and no duplication of
fees between the lending institution and
Lite GMEF.
Page 5
EDA AGENDA
W NOV M2ER 28, 1995
R
Request: $100,000 X .015 = $2,500 maximum.
Compliance: $75,000 X .015 - $1,125 maximum.
Prepayment Policy: No penalty for prepayment.
Deferral of Payments: 1. Approval of the RDA
membership by majority vote.
2. Extend the balloon if unable
to refinance, verification
letter from two lending
institutions subject to Board
approval.
What is Tappers, Inc. plan for the balloon payment of
$70,989.14 due August 13, 1997 relating to GMEF Loan No.
001?
interest limitation on guaranteed loans:
Subject to security and/or reviewal by EDA and
Attorney.
Assumability of Loan: None.
Business Equity Requirements:
Subject to type of loan; Board of Directors will
determine case by case, analysis under normal
lending guidelines.
No actual business equity, equity is $25,000 of TIF.
Collateral: Mortgage deeds, securities, and/or
guarantees as per the GMEF attorney.
Notes Collateral shortfall of 053,365. See supporting
data.
Non -Performance; This approved GMEF loan shall become
null and void if funds are not drawn
upon or disbursed within 180 days
from the date of RDA approval
(November 28, 1995).
Compliances Null and void May 28, 1996.
Recommendation, Disburse at 50% completion of
building construction.
GMEF Legal Fnea: Responsibility of the GMEF
applicant.
jj
Page 6
EDA AGENDA
NOVEMBER 28, 1995
B. Recomendation:
Recommendation is to review this information prior to the
EDA meeting for discussion and potential questions. The
financial analysis and annual debt service requirement
will be submitted at the meeting. Consideration to
approve or disapprove GMEF Loan No. 011 is the next
agenda item.
Items for discussion: Amount of loan size, collateral
shortfall, term length and rate, non-performance date,
and cashflow to debt service.
C. Supporting Data*
1. Copy of the preliminary application for GMEF.
2. Copy of the financial proposals of September, 1994
and October, 1995. Construction costs increased.
3. Copy of the information provided by Bill Endres,
Marquette Bank.
Forthcomming:
1, Copy of the Financial Credit Analysis by
PRG and
annual debt service payments.
2. Copy of the current financial statements.
page 7
SEF -14-'94 6ED 13:25 ID:BDS INC. TEL ND:786-9034 t$931 P02
f TAPPERS, INC.
EXPANSION PROJECT
USES OF FUNDS
Now Cottakacdoa (18,000 square feet) $390,000
Equipment 95.000
Soft Cost/Contingency 15-000
TOTAL USES OF FUNDS $700.000
SOURCES OF FUNDS
Bank (ARM, 20 yawn, Iat) $340.000
SSA SN (6%, 20 years, tad) 280.Wo
Equity
OMBP (696, 20 yaer anion., 3rd) 50.00D
(Up front TIP Assistance) 39M
TOTAL SOURCES OF FUNDS 5700.000
DEAT SERVlCB
Bank (Avg. 9.5%)
$3,170
SBA 304
52,340
OMBP
L=
TOTAL MONTHLY
$3,970
TOTAL ANNUAL
570.440
COST/SQUARE FOOT
$3.90/SF
Including Equipment
T
mar
GREATER MONTICELLO ENTERPRISE
250 EAST BROADWAY
MONTICELLO, MINNESOTA
PRELIMINARY APPLICATION FOR LOAN
,APPLICANT: Tappers, Inc.
FIRM OR TRADE NAME: Genereux Fine Wood Products 8 Westlund Distributing
BUSINESS ADDRESS: 21 Road MontigglX42. l'.j 55362
6 Streec) (City b State (Zip Code)
TELEPHONE: BUSINESS ( 1612-295-4222 HOME ( )612473-7919
DATE ESTABLISHED: business purchased 1984EMPLOYER I.D. f:41-1470393
SOLE PROPRIETOR x_ CORPORATION PARTNERSHIP
MANAGEMENT
NAME TITLE OWNERSHIP 9
William R. Tapper President 508
Barbara R, Taeper ,§ecretary 508
Lance Hartkoof General [4anager (Genereuxj 08
John Gammel General Manaqer (Westlund) OB
PROJECT LOCATION: Lot' 4; -Block 2 Oakwood Industrial Park
_
NIV, BUSINESS X EBISTING BUSINESS
TOTAL PROJECT COST ESTIMATE:' j}ft2:=n CA
PROPOSED USE'S: REQUEST:
8'i00.060
LAND $ AMOUNT OF LOAN _40-040
EXISTING BUILDING MATURITY i TEPM
CONSTRUCTION SAFF;9@0 4110.000 REQUESTED 5/68
MACHINERY CAPITAL - 46y06P 1 Qo . o e 0 APPLICANT'S 125 ,000
WORKING CAPITAL EQUITY ae.eee (TIP)
OTHER d LOAN PURPOSE Fluildina 6 Equip.
TOTAL USES $ zoq-reov 44q . 000
PROPOSED BEGINNING DATE: A-01 *9"— \ Qq to
ESTIMATED COMPLETION DATE: ,7a,ao-4ggS Sl��.,Jls+� %4.4tq
TITLE TO
PROJECT ASSETS, TO BE HELD BY: _ OPERATING ENTITY _.jL ALTER tGO
PARTICIPATING LENDER: nl Si36?
Mamu l Koss
nr ( 1 ona -2952
ontacc �nan (1vie
PRESENT 1 OF EMPLOYEES. _.�0 PROJECTED 1 OF EMPLOYEES 65
ADDITIONAL PROJECT INFORMTIO : r e�i icant notentiel for productivity
"1' arowhh,, i
APPLICANT SIGNA. - DATE SIGNED:
JAN -16-'00 ruyu 06:02 SD: TEL NO: -089 P03
PROJECT FINANCING
The following is a listing of the uses and sources of funds for the building
expansion project and the -purchase of new equipment:
Building Construction $710,000
Equipment Purchase 190,000
Soft Costs 75_a�Q
SUBTOTAL $975,000
SBA Debenture Fees 13.000
TOTAL USES OF FUNDS ,L$LM
�►� VQURrFSOF FUND
Marquette Bank $460,000
SHA 504 • 403,000
City of Monticello GMEF 100,000
City of Monticello TIF --ZLM
TOTAL SOURCES OF FUNDS UNLU
• Includes SBA Debenture Pricing
The company currently has an SBA 504 loan on its existing facility. The
outstanding balances on those loans are as follows:
lc Bank - $300,554
SBA • $33$,236
Im
:AN -le -'2c' -CN a6:a2 !D: TEL t,: ::063 Pe4
The company received its SBA loan in 1990 and has therefore exceeded the
three-year limitation regarding seasoned loans. Accordingly, the overall
sources of financing, with a subordination of the first SBA 504 loan, will be
as follows:
Marquette Bank (first lien)
$760,554
SBA 504 (second lien)
338,236
SBA 504 (third lien)
403,000
City of Monticello GMEF (fourth lien)
76,576
City of Monticello GMEF (fifth lien)
100,000
Following is a summary of the historical sales and profitability of the
company:
YEAR
SALES I NET INCOME BEFORE TAXES
HISTORICAL
1993
$2,949,412
S 55.377
1994
$3.443.747
S 86.657
1995
S4,239,755
S102.657
9/30/950
S2,07,165
5110,691 ,
pRO,�IFCTFI)
J I 1 1 J J
1996
$4,495.2.10
5205.858
1997
55,743,837
S249,635
1998
S7,112,935
5407,859
' Represents operations for the eight months ended September 30, 1995.
4 til S
AROUETTE BANK 295,4277
fi
MARQUETTE BANK
106 Pine SL
Monticello, MN. 55362
FAX COVER
Page t Job 488 Nov -22 well 08:55 1995
S H E E T
17NO
TIME:
-Z' I/
DATE:
November,2et 995
TO:
011ie Koropchak
PHONE:
City of Monticello
FROM:
Bill Endres
Business Banking
RE:
Potential GMIF loan
CC:
Page t Job 488 Nov -22 well 08:55 1995
S H E E T
17NO
TIME:
111AIR '-RM
PHONE:
FAX:
612-295-4404
PHONE:
612=271-6107
FAX:
612-2954277
Number of pages including cover aheet;.awef�,ry
The following information covers the potential building expansion -per phone
JLI discussion.
BUILDING PROPOSAL -
The proposed SBA 504 loan is fund a 18,000 square Mot addition to the Oakwood
Industrial Park building and fund an additional f190.000 machinery. The present 27.000
sq R conaguration has become inadequate to support the growing inventory, needs of
Wostlund Distributing and the increased spas requirements of Genereux for cabinet
manufacturing operations. Total ptOfeCf financing is outlined as follows;
USES OF FUNDS- SOURCES OF FUNDS -
Building Construction- $710,000 Marquette Bank- (term) $460,000
Equipment purchase- 3190,000 SBA 504- $403.000
Soft costs- $75,000 City of Monticello GMIF• $100,000
Total- s988,0o0 City of Monticello TIF" $25,000
Total- $988,000
'GMIFv$100.000 ban 0 6%, 6 year balloon --TIF-Ta. Increment initial Mancing
MARQUETTE BANK 295,4277
1
1 1 FART I - 11NTRODUC3M
r
SUMMARY OF PERTINENT DATA
Type of Property and Description:
Address:
Owner:
Client:
Valuation Date:
Site Size:
Zoning:
Building Size:
Building Age:
Value Fstlmated By:
Cost Approach:
Income Approach:
Salm Comparison Approwl:
Reconciled Value Fitimates:
Land Value:
Building Value:
Personal Property:
Total Value:
Page 3 Job 480 NOV-22 Wed 08:55 1995
Two-story single tenant office/ manufacturing
building
212 Chelsea Road, Monticello
Mr. Bill Tapper
Mr. William J. Endres, Vice President
Marquette Bank Monticello
May 10, 1995
330,000 square feet, 7.58 acres (per appraiser's
measurement of site plan)
1.2, Heavy Industrial
Existing - 26,228 square feet
Addition - 18-436 sauarc fat
Total - 44,664 square fat (per appraiser's
measurement of building plans)
Existing - 1990
Addition • 1995
Effective • 1992
$1,345,000
$1,295,000
51,275,000
11100,000
$1,185.000
Not Included
$1,285,000
T14s TAY1aa AMALS 4s. COMPANY 1
MARQUETTE BANK
f
t
295,4277 Page 2 Job 488 Nov•22 wed 08:55 1995
The existing SBA 504 mortgages complicate the proposed financing. E>nsting mongages
must be subordinated to MBNA to achieve the proper term collateral positioning covering
the building. The following outlines the final mortgage poswon5:
Marquette Bank first hen ( existing)
$300.553
Marquette Bank second lien (proposed)
5460.000
SBA 504 thud ken (existing)
5336.236
(includes $150,000 equipment financing)
SBA 504 fourth Lien (proposed)
$403,000
(includes $190,000 equipment financing)
City of Monticello GMIF fifth Win (existing) $76,576
City of Monticello GMIF sixth Win (proposed) $100,000
TOTAL LOANS $1.676,365
—The collateral for the building project on a combined basis is as follows: e, -lith
Appraised value of existing building with expansion $1.265.000
Equipment included in existing SBA ban $150,000
Equipment included In new SBA loan S111i1,000
TOTAL COLLATERAL AVAILABLE $1,625.000
LESS TOTAL LOANS $1,678,365
Shortage $53.365
MAROUETTE BANK 295,4277 Page 2 Job 498 NOV-22 Wed 14:18 1995
PROPOSEDINEW FACILITY -SBA 604 BASIS
�t CONSTRUCTION PERMANENT
r 2. BORROWER: William R. and Barbara R. Tapper
AMOUNT: $975.000 5460,000
PURPOSE: 18,000 sq. R building expansion project
and $190.000 new equipment
STRUCTURE
TYPE: Construction SBA 504 comm) RIE mortgage
MATURITY: 6 months 10 years/ 5 yr -call'
13ALLOONIRESIDUAL: N/A 10 years
AMORTIZATION: None 20 years
RATES AND FEES: Prime • 1.25%.1/2% Committment
BILLING CYCLE: Interest monthly P 81 monthly
REPAYMENT SOURCES
PRIMARY: Assignment of lease payments from Tappers, Inc.
SECONDARY: Liquidation of collateral
CONSTRUCTION COLLATERAL POSITION:
PRIOR TO 804 FUNDING (CONSTRUCTION PHASE ONLY)
MBNA COLLATERAL SOURCES
DESCRIPTION: 81,288,000 Industrial building, 1995 as built appraisal (includes existing building)
($300.553) Less existing MBNA 1st position lion
5984.447 Not building equity
$190,000 Equipment purchase
51,174,447 Total pledged during Construction phase
(5975,000) Construction note
5189.447 Net Equity during Construction phase
83% Advance rate during construction phase 8 prior to SBA funding
PERMANENT COLLATERAL POSITION: (AFTER 601 FUNDING)
MBNA COLLATERAL SOURCES
DESCRIPTION: 61.285,000 Industrial building
(5300,553) Loss oxlsting MBNA -1 Sl position lion
5984.447 Not building equity
(5460,000) Pormanent MBNA note- 2nd position
$524.447 Net Equity -MBNA bin position
59% Advance roto on combined 1st position REM (oxlsting) b proposed 2nd REM
$760.553 total MBNA REM / 51.285,000 appraisal
GUARANTORS: Toppers, Inc,
OTHER INFORMATIONI FUNDING SEQUENCE:
1. 8976,000-.#Aaalmum potendal advance under construction note
2, (525,000)—Reduction from Tax Iwoment Financing (TIF) Q,90% completion
3 (5100,000)—Roduction horn Grantor Monticello Enterprise Fund ® 50% completio&A
4. (5380,000)—Roductan from SSA 504 funding Q full completion
5, 5460,000— Not advance which converts to a term REM note
FEB -14-W rLIE ez:se ID: TEL NO: #257 Fat
WILLIAM R. AND BARBARA R. TAPPER
.TAPPER'S, INC.
D/B/A GENEREUX FINE WOOD PRODUCTS
" AND WESTLUND DISTRIBUTING
SBA 504 LOAN APPLICATION
EXECUT 4 SUMMARY . .
Tappers, Inc., which does business as Oenereux Fine Wood Products and
Westlund Distributing, is organized as a C•eorporation and is owned by
1�~ William and Barbara Tapper. The company began operations in 1984.
l 'lite company started doing business as Oenereux Fine Wood Products which
is a manufacturer of commercial and residential wood products. In 1987, it
opened a second division operating under the name of Westlund Distributing.
Westlund is a wholesaler of cabinetry hardware. The company's customers
are located primarily within the State of Minnesota.
The company is looted In the industrial park in Monticello, Minnesota and
occupies a 26,650 square -foot facility that was financed with an SBA 504
loan in 1990. The company has experienced strong growth since that time
and is now planning to expand the building by 18,000 square feet. The
parcel of land that was acquired in conjunction with the original project will
be sufficient for the construction of the expansion. The company is also
planning to purchase additional equipment as a part of this expansion.
k� The company currently employs 50 full-time employees. As a result of this
project, it will add 15 full-time positions in the next two years.
�.. FEB -14-08 TIIE 02:58 ID: TEL N0: a297 PB3 _. ..
ii
t
PROJECT FINANCING
~`
The following is a listing of the uses and sources of funds for the building
expansion project and the purchase of new equipment:
ttCFC OF FUNDS
Building Construction $710,000
Equipment Purchase 190,000
Soft Costs —75-000
SUBTOTAL $475,000
SBA Debenture Fees Is -
TOTAL USES OF FUNDS
El
t
SO tR _ S OF FUNDS
Marquette Bank $460,000
SBA 504 • 405,000
City of Monticello GMEF 100,000
City of Monticello TIF _._2L=
TOTAL SOURCES OF FUNDS
' Includes SBA Debenture Pricing
The company currently has an SSA 504 loan on its existing facility. The
outstanding balances on those loans are as follows:
Bank - $300,534
SBA - $338,236
�- FEB -14-•00 ?LIE 02:59 ID:
r�
rEL NO: 1297 PO4 - -
The company received its SBA loan in 1990 and has therefore exceeded the
three-year limitation regarding seasoned loans. Accordingly, the overall
sources of financing, with a subordination of the first SBA 504 loan, will be
as follows:
QVFRAI.t_ SOUR FS QF FUNDS
Marquette Bank (first lien) $760,554
SBA 504 (second lien) 338,236
SBA 504 (third lien) 405,000
City of Monticello GMEF (fourth lien) 76,576
City of Monticello GMEF (fifth lien) 100,000
FINANCIAL AV .RVI .W
Following is a summary of the historical sales and profitability of the
company:
YEAR
SALES
F
NET INCOME BEFORE TAXES
HISTORICAL
1993
$2.949.412
S 55.377
1994
$31443.747
S 86.657
1995
$4.2391755
$ 102.657
9/30/93•
$2,887,165
5110,691
1996
54,495.230
$205.858
1997
$5.7431837
$249,635
1998 (
57,112.935
$407,,859
C 0 Represents operations for the eight months ended September 30, 1995.
FE6-14-'00 TUE 02:59 ID: TEL N0: 0297 065
Rarance Sheet rnmm n a
All financial analysis is based upon the combined financial statements of
Genereux Fine Wood Products and Westlund Distributing. The interim,
internal financial statements show an intercompany transaction representing a
loan from Genereux to Westlund. This was originally set up to fund the start-
up of Westlund. Now, it is used to account for intercompany transactions.
Examples of some of these transactions include (1) Genereux buys
approximately $10-12,000 of product from Westlund each month, (2)
Genereux pays the sales tax and payroll tax for both companies, and (3)
Genereux pays Mr. Tapper's expense report which includes expenses relating
to the operations of both companies. The analysis in the loan application
cancels out these contra accounts.
Debt-tn-Net Worth Ratio
Based on the September 30, 1995 balance sheets, the debt -to -net worth ratio
is 1.51:1. The proforma debt -to -net worth ratio with the existing building debt
and the subordination of the officer note is 4.4:1. The industry average ranges
from 7.1:1 to 0.7:1.
Current Ratie
Based on the September 30, 1995 balance sheets, the current ratio Is 1.8:1.
The proforma current ratio with the existing building debt and the
subordination of the officer note is 1.7:1. The industry average ranges from
1.0:1 to 1.9:1.
Gash Flow Analysis
The cash flow coverage ratio based upon last year's earnings Is 1.56:1. This
is based upon adding back bonuses paid. The cash flow coverage ratio baud
upon projections is 2.24:1.
FEB -14-'00 TUE 03:00 ID: TEL N0: u297 P06 -
Ilk
The collateral for the project on a combined basis is as follows:
Appraised Value of Existing Building w/ Expansion
Equipment included in existing loan
Equipment included in new loan
TOTAL COLLATERAL AVAILABLE
Less: Bank Loan
TOTAL COLLATERAL AVAILABLE TO SBA
Less: Existing SBA Loan
Less: New SBA Loan
EXCESS COLLATERAL
$1,285,000
150.000
_134.41
$1,625,000
(260-554
S 864,446
.(338,236)
(405 000)
$121,210
The collateral for this loan puts the SHA in a 92 percent loan -to -value position.
CT
The borrowers for this loan will be William R. and Barbara R. Tapper.
Mr. Tapper is the President and oversees all aspects of the company's
operations. In addition, Barbara Tapper is the corporate secretary and
oversees the office functions. John Oamel is the general manager with
responsibility for purchasing, hiring of employees and supervision of the sales
staff. Lance Hartkopf Is the plant manager and coordinates shop production,
product delivery schedules and customer service.
Tapper's has continued to increase sales and profitability since its original
building project in 1990. This expansion will provide the company the
additional space its needs to further expand its market area and to capitalize on
new product opportunities.
t
FEB -I4-'00 TUE 03:01 ID: TEL N0: n297 P07
>v. An.na.i SwtlnW
mww 7Ar SmdUtp January 31 SMWnwo (dwok one): Amdlbd
(bMw_-,j(`_ C4niW2u-
SMAMCE SHEETASW ADJUSTMeNTS
ASL NN•NCIAL DATA
9SOUI1T1f�OT SD. 111118 Deeiw CrWmA
Sere FerntAl
A99P,T8
CAM
AM AM'. � �
000
713.2
M•enw v 8.11
5112
oatw y1.1.7
317
Total loot A -m 1 HU
1.1161111
F aad MMta 1291 1 Aw 111
1 75m.1
odlar Ames 7 Q 1a.o m
22.11
Total Anew 1 711¢4
WnRTM
UABILMER & MET
AOOoWn h7a0b %m aNUN
vt4 e
•
g
payAgx=
194 A
Tmn
TaaAA/IImWA 7
m'7
I
•' Pmraw 61104V low. PW 001 1 �•Q
M� 11
WA f•wfm P~)Q•1
olnr 2.7
m 2.7
Tew L1erSrtl USdn11S• T
006.4
Nom P47A81• .S 7ri�� tR1
164.6
www liner IV onion) 1�t$7
I 141
m 7627
m TL4j
SBA ((.T PoMon)
odw ( 177.2
m 173,9
nal worm 34.6
(1 822,q
( Tow U/1, A MM woml
1 346A
Au. Ratio MAWS (Un Pla Imran nOlwt)
BBC •4UA1I A -q- BBA u4A drill
0601/rwlwennA4do 4,4 jyj 0.7
tw1 womnp Capnr L212,1P
C.rnenl Poo 1.7 LDS 1 .9
other:
)an. "&nee Snom CAmwrAnD/AapjWWtj (o-0.000dtw8. LnUNWISS. w.l
(1) AramWo.ed Apptdod .AWA N IAotd and buadbt0111 ABAaa) Is" mw Wading *am (1781000) OW WAoffA w fame a waM trd 106
loan 111140M) bills mw WAW" a8 N■4w"m (SWSOSSf
(2) 80A dabomm 071144
121 CLTD- Bank leu.
(4I CLTD • SM IAn►
(1) CLTD • CMT N 1Nnd1WP 181n
(8) 2userdwOAn a1 *Umar no* • 4rewwAl PgnS•tt14 ADAwwA
(7) LTD • Bank leu (1uL14r) pAte "no" MAA dew f1800.OM1•
(8) LTD • w Ion (USUIS) on •d" SBA do" (UMAN),
(1) LTD • CMI M Id"WMw ISM 107}.10) PASS edWM CMI M MWWD*'b wM (FFSJM).
(1 a) 14.MY • Ory a IlenaeSW nr (MA00) PASS til SWM► ben sAler dMM w0erdMWen (11,8841•
J
• MneS Payable. MMM• any Saw" awrem "Few of wnpurn DOW.
•• Por IAndr • MM$ d ADS PraUn aM. 102 Prop and IDA'S MWe d 804 Pra18015 rwMId Of Wn1190 .thaw SB►
W •r. -0-.1n •...w•.—.— 4'
FES -14-00 TUE 03:01 10:` -- TEL NO: _ 1 6297 P08
PROFORMA INCOME STATEMENTS
1098 % 1997 % 1898 %
1 GROSS RECEIPTS $4.495.230.00 100.00% $5.743,837.00 100.00% $7,112,938.00 100.00%
COST OF GOODS SOLD
MATERIAL
2.292,867.30
61.00%
2.929.368.87
61.00%
3,627,698.63
31.00%
DIRECT LABOR
074.284.50
15.00%
832,86&37
14.50%
1,031,378.58
14,50%
EMPLOYEE BENEFITS,
112,380.76
2.60%
143,59593
2.50%
177,823.30
2.50%
SUBCONTRACTS
80.914.14
1.60%
103,389.07
1.80%
128,032.83
1.80%
RENT
04.464.00
2.10%
94,484.00
1.84%
04,484.00
1.33%
REAL ESTATE TAXES - EXISTING
33.300.10
0.79%
37,370.48
0.65%
39.248.60
0.66%
REAL ESTATE TAXES - NEW
0.00
0.00%
11,250.00
0.20%
23,82&00
0.33%
UTILITIES
60.686,81
1.35%
77,641.80
1,35%
08.024.62
1.36%
DEPRECIATION - EXISTING
35,804.00
0.70%
35,84.00
0.02%
35.004.00
0.50%
DEPRECIATION -NEW
0.00
0.00%
34.06&08
0.61%
34,988.08
0.49%
TRUCK EXPENSE
16,000.00
0.33%
18.000.00
0.28%
17.000.00
0.24%
FREIGHT OUT
67.420.46
1.50%
88,167.60
1.50%
100,64.03
1.50%
MANUFACTURING SUPPLIES
35,961.84
0.80%
45.050.70
0.60%
50.003.48
0.60%
BLDG 8 EQUIP MAINTENANCE
17,980.92
0.40%
22,975.33
0.40%
28,451.74
0.40%
M13CELLANEOLIS
50,000.00
1.11%
60,000.00
1.4%
70.000.00
0.98%
t Qatt W tttt�ttttYtQQaitttt0tattaaaaawawmtattamQQa
TOTAL COST OF 00005 SOLD 3,672,870.60
79.48%
W att.naattatettaatttttatmatamsa
4,531,507.18
TILW% 5,607,630.28
W
78.28%
tttttttMttaWaaialttittQatQiataaattWNttafQYQQOttOaaitQattCaatttltQtftOitOQQaaat)
GROSS PROFIT
$922.360.40
20.02%
$1.212,329.02
21.11%
$1.046.104.74
21.72%
EXPENSES
SALES SALARIES
107,790.12
4.40%
252,728.63
4.40%
312,980.14
4.40%
- OFFICE SALARIES
178,313.97
3.90%
224,009.84
3.00%
277.404.47
3.90%
EMPLOYEE BENEFITS
49.447.53
1.10%
63.182.21
1.10%
78,242.29
1.10%
RENT
10.406.00
0.23%
10,40&00
0.18%
10,498.00
0.15%
REAL ESTATE TAXES - EXISTING
3,935.48
0.09%
4,153.28
0.07%
4,361197
0.06%
REAL ESTATE TAXES - NEW
0.00
0.00%
1,250.00
0.02%
2,625.00
0.4%
UTILITIES
0,742.05
0.10%
8.613.78
0.15%
10,680.40
0.15%
DEPREC/AMORT - EXISTING
3.058.00
0.09%
3,058.00
0,07%
3,988.00
0.06%
OEPREC/AMORT-NEW
0.00
0.00%
3.887.34
0.07%
3,867.34
0.05%
VEHICLE EXPENSE
40.667.07
0.00%
61,694.53
0.00%
84,018.42
0.90%
EQUIPMENT RENTAL
600.00
0.01%
750.00
0,01%
1,000.00
0.01%
INSURANCC
35.900.00
0.80%
37,805.00
0.88%
39.680.00
0,60%
PROFESSIONAL PEES
35.000.00
0.78%
37,000.00
0.4%
39,000.00
0.55%
ADVERTISING
20,071.35
0.60%
34.483.02
0.80%
42.877.61
0.60%
TRAVEL AND ENTERTAINMENT
0.000.00
0.15%
9.000.00
0.16%
10.000.00
0.14%
MISCELLANEOUS
50.000.00
1.11%
80.000.00
1,4%
70,000.00
0.08%
INTEREST - EXISTING
45.000.00
1.00%
45.000.00
0.78%
45,000.00
0.63%
INTEREST - NEW
0.00
0.00%
80.330.00
1.40%
78,684.00
1.11%
UNCOLLECTIBLE ACCOUNTS
28.971.38
0.80%
34,483.02
0.80%
42.677.61
0.60%
uttuuuttotastotutuoeaanaaoawaaaaaaaaaeauuutuutuaau..�taoutrua�uauaun
TOTAL EXPENSES
$716.601.75
15.04%
5962,694.63
16,70%
51,137,248,23
15.00%
ututuutuutQtasauarruaauautwuaa:ataaauattoataae--enoautu�tnotQptt�wtauun
NCT PRCrIT
10209,057.09
4.58%
$2249.636.20
4.35%
$407,858.61
6.73%
C'
TAPP&R'S. INC.
FEB -14-00 TLE 03:02 ID: TEL N0: p297 P09
SIGNIFICANT ASSUMPTIONS
TO
PROFORMA INCOME STATEMENTS
BALES
The sales figures were calculated using the following annual increases for
each division:
XAM Genereux Wealuod
1996 (3)% 10%
1997 17% 35%
(_ 1998 17% 30%
The company has a series of new product lines to be released in FY 1997
which wil result in a minimum of $1,200,000 of business initially.
cot r OF nonns s0 m
The following accounts relating to cost of goods sold were calculated as a
percentage of sales:
Account P rent of Sales
Materials 51.0%
Direct Labor 14.5%
Employee Benefits 2.5%
Subcontracts 1.8%
Freight 1.5%
FEB -14-100 TUE 03:02 ID:
TEL N0: U297 F10
WILLIAM IL AND BARBARA R. TAPPER
TAPPER'S, INC.
D/B/A GENEREUX FINE WOOD PRODUCTS
AND WESTLUND DISTRIBUTING
SBA 504 LOAN APPLICATION
The following accounts relating to administrative costs were calculated as a
percentage of sales:
Sales Salaries
4.4%
Office Salaries
3.9%
Employee Benefits
1.1%
( Vehicle
•9%
Advertising
.6%
Uncollectible Accounts
.6%
Other expenses were increased based upon historical trends except for new
interest expense which was based upon the project financing.
The following expenses ane split, allocating 90 percent to cast of goods sold
and 10 percent to administrative expenses.
Rent - Amount charged by owner for existing facility.
FEB -14-•00 TUE 03:03 ID: TEL 1O: n297 P71 .._. .
( WILLIAM R. AND BARBARA R. TAPPER
TAPPER'S, INC.
D/B/A GENEREUX FINE WOOD PRODUCTS
AND WESTLUND DISTRIBUTING
SBA SO4 LOAN APPLICATION
Real Estate Taxes - Existing
New -
Based upon a five percent Increase each
year.
Real estate taxes on the addition are
expected to generate $25,000 per year.
The expansion will only be partially
complete 'as of January 2, 1996,
therefore, only partial taxes will be due
in 1997. This also assumes a five
percent increase each year.
Depreciation - Existing - This figure was based upon historical
amounts.
New - The building addition was depreciated
over 39 years and the new equipment
was depreciated over 10 years.
Utilities - Utilities have been projected at 1.5 percent of sales.
i
EDA AGENDA
NOVEMBER. 22, 1995
consideration to approve or disapprove GMEF Loan No. 011 for
applicant. Tappers Inc
Following discussion of the preliminary GMEF application for
Tapper, Inc.; the EDA is asked to consider approval or
disapproval of the requested $100,000 GMEF Loan. The
applicant requested a twenty year amortization, ballooned in
5 years and requested a 6% interest rate term.
First, the EDA needs to determine if the GMEF loan application
from Bill Tapper will encourage economic development.
Secondly, that the proposed Tapper, Inc. expansion project and
application complies with the GMEF public purpose criteria and
policies. As noted in agenda item number 3, several issues
need to be discussed and resolved: Amount of loan size,
collateral shortfall, term length and rate, non-performance
date, and cashflow, to debt service analysis. Remember, the
City Council has the right to reverse the EDA decisions if the
EDA is found to have approved a GMEF loan in violation of the
GMEF Guidelines.
Lastly, the EDA must determine the amounts of the loan,
interest rate and terms, service u.1d legal fees, and required
equity. Additionally, the EDA :gust determine necessary
collateral or any other conditions.
if the EDA approves the loan, consider disbursement from
either of the sources of funds: Balances of March 1995.
UDAG, $103,043.20 (earmarked H -Window $50,000 approval of
June, 1995, not disbursed.) SCRG-Aroplax, $64,404.27. GMEF
Cash Balance, January 1995, $2091584 .73. 1995 Liquor Fund
Appropriation, Novmeber 22, 1995, $50,000.
z
A motion to approve GMEF Loan No. 011 for Tapper, Inc.
Loan amount and terms as requested: $100,000 for real
estate and MaE at a 6.00% fixed interest rate amortized
over 20 years balloon in five years, sixth position.
A motion to approve GMEF Loan No. 011 for Tapper, Inc.
Loan amount and terms for compliance: $75,000 for real
estateJMSE at a 6.75% fixed interest rate amortized over
20 yearn, balloon in five years, sixth position.
Page i
EDA AGENDA
V
NOVEMBER 22, 1995
3. A motion to approve GMEF Loan No. 011 for the Tapper,
Inc. Loan amount and terms as determined by the EDA.
4. A motion to disapprove GMEF Loan No. 011 for Tappers,
Inc.
5. A motion to table any action, allowing time for
additional information.
C. $teff Recommendation:
Assuming the EDA determines that the proposed expansion
project complies with the GMEF public purpose criteria,
financial analysis is positive, and the collateral shortfall
is resolved; staff recommends Alternative No. 2. If the loan
is approved by the EDA, the City Council will consider
ratification of the EDA,s decision on December 11, 1995.
D. SuDnortina Data:
None.
Page 2
GDA AGENDA
NOVEMBER 28. 1995
5. Consideration to discuss the otential of consolidatine the EDA and the MRA for
a recommendation to Citv Council.
A. Reference and Backaround:
The IDC requested the City Council call a special meeting to consider consolidation
of the tiRA and the EDA and to define the role of the IDC as a possible
subcommittee of either organization. As a subcommittee of a governmental entity.
the IDC would be subject to the open meeting law and restrictions would apply to
expenditure of IDC funds. 1"he IDC officers felt their function was best served as
a subcommittee of the Chamber of Commerce for utilization of the Chamber's non-
profit tax exempt status.
'thereafter at an HRA meeting, the IIRA members further discussed the potential
of consolidation and based on their recommendation a letter was drafted and mailed
to Councilmembers. See attached letter.
'Me IrDA is requested to discuss the same issue f'ur a recommendation to the
Council. It is planned that the Council may review the recommendations at their
December I I meeting for a possible decision. This will allow time f'or Council to
consider candidates for annual appointment to the commission or commissions. This
generally occurs the second Monday in January or January X, 1996.
Also, enclosed are the minutes from the special Council meeting
Page I
StOA710ELL0 October 20. 199:
250 East Broadway
P.O. Bost 11=-
Ntontieello, 41\
55362.4:=5
Phone:1612) 295-2 711
Metro: (612) 333-:11-39
Fax: (612) 295-44C4
Dear Mayor Brad Fyle and Councilmembers:
At the HRA meeting of October a, 1995. we, the members of the Housing and
Redevelopment Authority (HRA) in and for the City of Monticello. discussed the
comparative powers and composition of the HRA and the Economic Development
Authority (EDA). Attorney Steve Bubul summarized the general powers of the HRA as
housing and redevelopment and the general power of the EDA as economic development.
This was a reiteration of the presentation of the special Council meeting held
September 27. 1995.
At the October ; meeting, each HRA member in attendance verbalized their opinion to the
strengths and weaknesses of the consideration to consolidate the HRA and the EDA.
Thereafter, we, the four members present, unanimously agreed and recommend that the
HRA and EDA gM consolidate and that the existing two-.ommission organizational
structure continue.
We, the HRA members. agreed that the continuation of the established HRA and EDA was
the best long-term organizational structwe for the City of Monticello because the two -
commission organizational structure offers a checks and balance system. Secondly, we. the
HRA members, agreed that the existing two -commission organizational structure has
worked well to the benefit of the developers and the city. Lastly. we. the HRA members.
agreed that the preservation of the HRA preserves the non•tan66ble HRA assets of
historical value. experience. and familiarity of projects.
If the City Council views the roles of the HRA and the EUA as a duplication of efforts and
elects to consolidate the HRA and the EDA. then. we. the HRA members. agreed and
recommend that the HRA be preserved and the EDA consolidate into the HRA.
Mayor Fvle and Cotmcllmembers
October 20. 1995
Page 2
We. the HRA members. feel the HRA is in a better position to address project issues
because of the HRA's historical value, experience, and familiarity of projects. Additionally.
we. the HRA members. feel preservation of the HRA would best retain the checks and
balance system. It is the legal opinion of Attorney Bubul that the HRA can administer the
Greater Monticello Enterprise Fund (GMEF) as per the established GMEF Guidelines,
modified to reflect the redevelopment goals of the HRtk.
Please do not hesitate to contact us for further discussion of the recommendations. The
HRA has moved forward to improve communications among the City Council and the HRA
by st>!»ag approved HRA minutes w Coutncilmembers. Additionally, the HRA
Chairperson suggests periodic meetings be held between the Council. HRA, and other
commission members to improve communications. to network, and to focus on commoa
goals.
We, the HRA members, appreciate the City Cotmcil having called the special meeting of
September 27 and agree the meeting outcome clearly outlined the comparison of the HRA
and EDA powers and composition. Additionally, the meeting outcome clearly defined an
orgnaimdonal direction for the Industrial Development Committee (IDC).
We, the members of the HRA, request consideration of our recommendations.
Sincerely,
HOUSING A,W REDEVELOPMHNf ALTHORTTY
IN
AND FOR THE C1TY OF MONTICELLO
At Larson Brad Barger Tom St. Hilaire Roger Carlson
Chairperson Vice -Chairperson Member Member
AUck
cc: ®C
EDA
City Administration
Attorney Steve Bubul
File
n i',X-
N-11INLTES
�II SPECIAL MEETL )G • ZMON TICELLO CPTY COUNCIL
�i- Wednesday, September 27, 1995 . 7 p.m.
Council Members Present: Brad Fyle, Shirley Anderson, Brian Stumpf, Tom
Perrault
N
Council Members Absent: Clint Herbst
Others Present: Al Larson, HRA Chair; Ken Maus, IDC Vice Chair; Kevin Doty,
MC Chair, Ron Hoglund, EDA Chair; Steve Bubul, HRA
Attorney
Staff Present: Rick Wolfsteller, City Administrator; 011ie Koropchak, Economic
Development Director, Jeff O'Neill, Assistant Administrator
A special meeting of the City Council was held for the purpose of discussing the
possibility of consolidating the Housing and Redevelopment Authority (HRA) and
the Economic Development Authority (EDA), and for the purpose of defining the
role of the Industrial Development Committee (IDC) as it relates to the City's
governing bodies.
IDC Chair Kevin Doty explained that the IDC is a marketing group for Monticello
and has received comments regarding the redundancy of presenting information to
so many committees during the process of relocating an industry to Monticello. It
was proposed by the IDC that by combining the HRA and EDA, prospective
businesses and industries would be better served by eliminating a repetitive step in
the process.
Economic Development Director 011ie Koropchak reviewed the history of the
establishment of the HRA in 1971 and the EDA in 1989. Assistant Administrator
OTleill reviewed structure options, noting that combining the HRA and EDA would
result in a more efficient link between the City Council and economic development
programs, coordination of finance packaging, and policy-making.
HRA Attorney Steve Bubul then presented information regarding the general
powers of the HRA and EDA as established by Minnrantn 4tnt +c s. He noted that
the EDA may exercise the powers of an HRA and the powers of a city in addition to
the powers of the EDA as established by the Statutes. The HRA may levy a tax on
all taxable property in the city subject to consent of the City Council. Similarly, at
the request of the EDA, the City may levy for the benefit of the EDA.
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Y
Special Council Minutes - 9/27/95
Bubul also reviewed the composition of each board, noting that an HRA consists of
five commissioners appointed by the Mayor and approved by the City Council, and
any number of Council members may be appointed as commissioners. In some
communities, the HRA is made up entirely of Council members. State Statutes also
require that HRA commissioners be residents of the city. The EDA, however, has
three options for board composition. A three-member EDA must include one
Council member, a five -member or seven -member EDA must include two Council
members. In some communities, the entire City Council serves also as the EDA.
Unlike the HRA, the Statutes do not contain a residency requirement for EDA
commissioners.
IDC Vice Chair Ken Maus noted his concern that if the HRA is eliminated, the
focus on housing will fade. He suggested that two subcommittees of the EDA be
formed, one to concentrate on business and industry and the other for housing.
Since the IDC's strength is marketing business and industry, perhaps the IDC
could be appointed as a subcommittee of the EDA.
Discussion focused on the current operation of the IDC. It was noted by Steve
Bubul that if the IDC became an appointed subcommittee of the EDA, they would
be subject to open meeting laws, and any fund-raising proceeds would essentially
become pan of the EDA funds and, as public funds, would likely have more
restrictions. He noted it may be beneficial to have three IDC members appointed as
a subcommittee to the EDA and continue to maintain the IDC as a separate
organization.
EDA Chair Ron Hoglund explained that when the IDC was created in the early
1980's, it was an entity of the Chamber of Commerce. Over the years they have
drifted span, but Hoglund suggested that if the MC returned to being a part of the
Chamber, the IDC/Chamber could raise and donato funds to the EDA for specific
economic development purposes and/or retain the funds for independent marketing
efforts or other economic development purposes. This would eliminate the public
funds restrictions but would continue to benefit the community.
HRA Chair Al Larson suggested that the EDA be allowed to have non-resident
members if the EDA and HRA are combined so that specific well-qualified
individuals can be appointed even if they do not live in the city. It was also
suggested that rather than a residency requirement, perhaps it would be sufficient
to require that members have a vested interest in the community such as owning
property within the city limits. The number of non-residents on the EDA could be
limited to a specific number as well.
r) 406 1-\
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Special Council Minutes - 9/27/95
Mayor Fyle expressed his support, and it was the consensus of Council to continue
investigating the consolidation of the EDA and HRA It was suggested that the
EDA, HRA, and IDC discuss this item, and staff was directed to outline the basic
program for reorganization and submit it to the affected committees for comments
prior to placement on a future Council agenda, possibly in January 1996.
According to the Statutes, a public hearing would be necessary to allow public
comments prior to consolidating the HRA and EDA into an EDA
There being no further discussion, the meeting was adjourned.
Raven Doty
Office lianager
4
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EDA AGENDA
w NOVEMBER 28. 1995
6. OTHER BUSINESS:
a) Vector Tool & Manufacturing, Inc. - The bank, GMEF, and CMIF closing
took place November 21, 1445 at the City llall. The $50,0(N)GMEF loan was
disbursed from the Liquor Fund Appropriation account as approved in
September. 'Me $750 GMEF fee was collected.
b) 1I -Window Company - Working with John Babcock at the II -Window, a letter
was drafted for Mayor Fyle and mailed to Brad Simenson, MTED. See
attached. Since, Mr. Simenson has requested current financial statements to
determine profitability of the company and amount of equity injected since
January, 1944. 'hat information is being provided today. Hopefully this
State and GMEF Loan of $5009) will close in December.
250 East Broadway
P. O. Sos
'147
,Monticello. MN
55362-92.15
Phone: (612) 295-2711
Metro: (612) 333-5739
Fax: (6 i 2) 295.4401
November 6, 1995
Mr. Bradley L. Simenson
Minnesota Department of Trade & Economic Development
500 Metro Square
121 7th Place East
St. Paul. MN 55101-2146
RE: Grant Number: CDAP-93-0266-H-FY94
Project Title: H -Window Company
Dear Mr. Simenson:
As Mayor of the City of Monticello, I request your assistance in expediting the closing of
the grant between the State of Minnesota Department of Trade and Economic
Development and the City of Monticello. The loan application of $250.000 originated back
in June of 1993 and was approved by Commissioner Peter Gillette, June 30, 1994.
It is my understanding the H -Window Company has met all conditions requested to set up
a closing date for the loan except one. The one primary obstacle to overcome is the timing
of the stipulated new equity injection by the II -Window Company shareholders. Again. I
understand the state has taken the position that the new equity had to be injected atter May
16. 1994. The H -Window feels the appropriate date should be from the point of application
in the summer of 1993.
The state grant was all part of a $2.075 million building and equipment expansion project
that was detailed in the 1993 application. The proportion of shareholder new equity to new
Page I
Mr. Simenson
November 6. 1995
bank financing changed over the course of the next several months, but the critical point
here to acknowledge is that the project could not afford to be delayed. The H -Window
expansion included doubling the size of the building, relayout of the manufacturing floor.
new equipment, and additional office space desperately needed in order to provide the
necessary capacity to meet the company's present and anticipated future market demands.
A project of this size and the importance of the H -Window's operations required immediate
action.
As detailed in the 1993 application, the shareholders anticipated their share of new equity
financing would be at $400,000. The shareholders of the H -Window Company in good faith,
and as per the terms in the application. started to inject new equity into the company
beginning in October of 1993 to get the project rolling. They continued to inject new
money in early 1994 to continue the expansion in anticipation of approval of the state loan
application.
When the H -Window and Trade & Economic Development officials met on May 16. 1994.
the shareholders investment had reached 51,000.000. It is my understanding the H -Window•
management discussed the SI.Omillion with the state officials. It appears the state officials
understood from the conversations that the million dollars had yet to be invested and
stipulated May 16. 1994, as the origination date for the new equity infusion.
While we recognize that timing is an issue, we believe that the commitment of the company,
through its long-term investment of $1 .000,000,is of primary importance to our City and the
state relative to its long -tent presence. Clearly, the company has complied with the intent
of the discussions of all of us since this project began.
All the capital expenditures for building and equipment detailed in the approved application
have been made and financed through banks and shareholders. The balance of the
approved state and city (GMlif) loans has been financed by the shareholders in the interim
period period while waiting for the loans to close.
llte financing requirements for release of funds are detailed in the July 11, 1995,
adjustment notice to the August 16, 1994, Grant Agreement. (See attachment.)
a) the $50,00(1 GMEF loan was approved by the authority and city council in
August 1995.
b) The new equity injection of SI.Omillion was accomplished in the fall of 1993
and early 1994.
Page
i Mr. Simenson
�- November 6. 1995
C) The Letter of Credit in the amount of $300,000 as security for the loan will
be accomplished by late October 1995. The H -Window is currently
negotiating a restructuring of their debt which will result in total debt
reduction of between $1.5 and $2.0 million. This will be accomplished
shortly. The $300,000 letter of credit is pan of those negotiations.
d) The Corporate Guarantee from North American Window Company is
available.
As Mayor of the City of Monticello, 1 request the State of Minnesota consider and accept
the timing of the new equity. The City and H -Window are positioned to contact Paul
Weingarden. Attorney at Law, to complete the closing documents and to set the closing date
for the first pan of December 1995. The loan is an impoT=t component of the future
growth plans for the H -Window Company, and the company is a benefit to both the City
of Monticello and the State of Minnesota.
Again, 1 request review of the timing of the new equity and assistance to expedite the
closing of the $250,000 Ion for disbursement of the funds. Please advise John F. Babcock
of the H -Window Company, 295-5305, or 011ie Koropchak, 295-2711, of the City of
Monticello if we can provide any further details. prank you in advance for your
consideration.
Sincerely,
Cl , F MONTICELLO
dley li. Fyle
Mayor
BF/ok
cc: John F. Babcock, II -Window Company
Paul Weingarten. Attorney at Law
Lenny Kircht, Public Resource Group, Inc.
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