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7.0. EDSR 05-10-2004 ITEM Ii 7. . City of Elk River MEMORANDUM TO: Economic Development Authority CC: Lori Johnson, Finance Director FROM: Heidi Steinmetz, Assistant Director of Economic Development DATE: May 10, 2004 SUBJECT: Micro Loan Application: Display Solutions, Inc. Attachments • Finance Committee Minutes, May 4,2004 • Staff memo to Finance Committee, May 4, 2004 • Application—Display Solutions, Inc. • City of Elk River Micro Loan Fund Policy Issue On May 4, 2004, the Finance Committee reviewed a Micro Loan application from Tom Buchta,Bob Michalek and Jim Studee of Display Solutions. The company is a start-up manufacturer of two product lines: store fixtures and point-of-purchase displays. The Finance Committee unanimously recommended that the EDA consider awarding Display Solutions a$50,000 Supplemental Micro Loan. The loan will be used to purchase machinery and equipment necessary for Display Solutions to begin operations in Elk River. The loan is proposed to be structured as a participation loan with American National Bank. The Finance Committee's recommendation was contingent upon the bank not charging a servicing fee for the participation loan. American National Bank has agreed to waive the servicing fee. Representatives from Display Solutions will be available at the EDA meeting to discuss the proposed project and answer questions. Action Requested Staff requests that the EDA consider approval of the application from Display Solutions for a $50,000 Supplemental Micro Loan per the recommendation of the Finance Committee with the following terms: • Personal guarantee from owners and spouses • Additional financing sources secured Micro Loan Application: Display Solutions,Inc. EDA—May 10,2004 .11111 Page 2 of 2 • Secured by 2nd lien position on equipment • Term: 10-year amortization, 3-year balloon payment @ 1 point below prime with a 2% floor • Structured as participation loan with American National Bank • Job performance agreement (7 full-time jobs @ no less than $12.00/hour within 2 years) D � A C�� O MEETING OF THE EDA FINANCE COMMITTEE HELD AT THE ELK RIVER CITY HALL TUESDAY, MAY 4, 2004 Members Present: Dan Tveite,Tom McNair,Steve King,Cliff Lundberg and Jim Simpson Members Absent: Jeff Gongoll,Paul Motin and Chris Carlson Staff Present: Assistant Director of Economic Development Heidi Steinmetz 1. Presentation by Tom Buchta and Bob Michalek of Display Solutions,Inc. Mr. Buchta and Mr.Michalek provided an overview of the project. The Finance Committee asked the company questions regarding the following issues: • Jobs to be created • Product details including product style and price • Competitors • Project timeline • Product shipping/delivery • Origination of the company • Machinery • Company lease • Company name • Non-compete clauses held from Mr. Buchta's prior company • Accounts receivable Steve King of American National Bank provided details of the bank loan. Mr.Buchta and Mr.Michalek were excused from the meeting,allowing the committee to discuss the application and determine a recommendation for EDA consideration. Per Mr. King's committee membership,he was also excused from the discussion. 2. Finance Committee Discussion The committee discussed the bank's request for a.5% servicing fee for the proposed participation loan. It was of committee consensus that a servicing fee was not appropriate since the Micro Loan would be secured by a 2nd lien position on the equipment in addition to Micro Loan criteria and the interest rate being offered by the program. The following terms for the Micro Loan were accepted by the committee: • Personal guarantee from owners and spouses • Additional financing sources secured • Secured by 2nd lien position on equipment • Term: 10-year amortization,3-year balloon payment @ 1 point below prime with a 2% floor • Structured as participation loan with American National Bank • Job performance agreement(7 full-time jobs @ no less than$12.00/hour within 2 years) EDA Finance Committee Minutes May 4,2004 DRAFO:3 Page 2 • •i MOVED BY TOM MCNAIR AND SECONDED BY DAN TVEITE,THE FINANCE COMMITTEE RECOMMEND THAT THE EDA CONSIDER AWARDING DISPLAY SOLUTIONS A$50,000 SUPPLEMENTAL MICRO LOAN CONTINGENT UPON THE BANK NOT CHARGING A SERVICING FEE FOR THE PARTICIPATION LOAN. THE MOTION CARRIED 4-0. 3. Micro Loan Portfolio Report The committee reviewed the report. Discussion was held regarding Roma Tool's delinquency. Staff stated that Roma Tool submits payments each month but is not current. Staff added that the City submits all Roma Tool payments directly to the Dept. of Employment and Economic Development(DEED) since the City was able to keep the first $100,000 of the loan repayment due to the criteria of the state's Small Cities Development Program grant. 4. Closing The EDA Finance Committee meeting ended at 5:20 p.m. Respectfully submitted by, Heidi Steinmetz Assistant Director of Economic Development • City of Elk River TO: EDA Finance Committee NDUM A CC: Lori Johnson, Finance Director FROM: Heidi Steinmetz, P Assistant Director of Economic Development DATE: May 4, 2004 SUBJECT: Micro Loan Application: Display Solutions, Inc. Attachments Issue • City of Elk River Micro Loan Fund Policy • Application—Display Solutions, Inc.,including the following attachments: o Business Plan o Resumes of owners/management 11°. o Personal Financial Statements of owners/management o Commitment letter from applicant Owners of Display Solutions, Inc.,Tom Buchta,Bob Michalek and Jim Studee have submitted the attached application for a Supplemental Micro Loan in the amount of$50,000 to be used for the purchase of equipment. The loan is proposed to be structured as a participation loan that would require a .5% servicing fee with American National Bank in Elk River. Steve King of American National Bank will be present at the meeting but will abstain from the Finance Committee's discussion to determine a recommendation to the EDA. Mr. King became a member of the Finance Committee in January 2004. Background Display Solutions is a start-up manufacturer of two product lines: store fixtures and point- of-purchase displays. The company's target market is retail customers with new store openings and/or store remodeling projects. Co-owner Tom Buchta has over twenty-five years experience in the professional woodworking field and has owned and operated a store fixture plant for over nine years. The company has identified 4,500 square feet of lease space in the M &A building (former Ultra Image space) as its manufacturing operation upon financing approvals. The applicant proposes to use the Micro Loan funds to purchase items listed on pages 6 and 7 of the attached business plan. The company has a financing commitment of$150,000 Micro Loan Application: Display Solutions,Inc. EDA Finance Committee—May 4,2004 Page 2 of 2 • from American National Bank and$100,000 in equity. The sources and uses of the project are as follows: Bank Loan $ 150,000 Working Capital/Equipment Private Equity $ 100,000 Working Capital/Equipment EDA Loan $ 50,000 Equipment Total Project $ 300,000 The applicant has proposed that the EDA take a personal guaranty and a second position on the equipment. The company currently employs the three owners and one administrative support person. The applicant proposes to create seven full-time jobs at estimated wages ranging from $12.00-18.00 per hour within two years. Micro Loan Criteria In addition to the financial criteria that must be considered, the Finance Committee must also consider to what degree the applicant satisfies the criteria set forth in the attached Micro Loan Fund policy. Micro Loan Criteria Display Solutions, Inc. *Max. Loan Amount: $50,000 *Amount requested: $50,000 • * Interest Rate: 1 below prime * Rate requested: 1 below prime * 1 job created per $20,000 loaned * 1 job created per$7,143 loaned *Min. average wage of$8 per hour *Average wage of$13.86 per hour As in past Micro Loan meetings, the applicant will be given an opportunity to present the project and application. Following the presentation the Finance Committee may ask questions of the applicant. The applicant will then be excused from the meeting, allowing the committee to discuss the application and determine a recommendation for EDA consideration. ELK RIVER ECONOMIC DEVELOPMENT III MICRO LOAN FUND APPLICATION I. CONTACT INFORMATION Company: _ Display Solutions Inc. Address: 18983 York St. N.W. City / State / Zip Elk River, MN 55309 Contact Person(s) Tom Buchta / Bob Michalek / Jim Studee Business Phone (763) 274-0609 Fax: (763) 274-1282 1 Home Phone (763) 753-1859 Email: tombuchta@msn.com ) Check One: Proprietor V Corporation Partnership (Tom)474-76-5158 (Bob) 471-50-0342 (Jim) 390-70-5942 Social Security No. 0 Federal ID # State ID # � l II. NATURE OF LOAN REQUEST Which Micro-Loan Program are you applying for? Supplemental Financing Program Redevelopment Financing Program F:) Industrial Incentive Program Amount Requested: $ 50,000 Total Project Cost: $ 3 a o,o mo Type of project: :, New construction for a start up business. r New construction for an existing business. On site expansion ✓ Equipment purchase Remodeling: (circle one) Commercial / Retail / Industrial Other Please give a brief summary of your business and its products or service: DSI will design, engineer, manufacture and distribute two product lines. Store Fixtures and Point-of-Purchase displays. DSI will also outsource through local venders to provide our customers a fulfillment program. Outsourced items are typically stored at our location and shipped in conjunction with our manufactured product. Please give a brief summary the project: DSI is seeking financing to start manufacturing store fixtures in Elk River,g50,000) from the EDA micro loan fund,0/50,000) from American National bank in Elk River and the founders will contribute(100,000). Initially, DSI will start will 5 employees. The founders hope to grow the company to 35 employees. Please describe how this loan will impact your project. This loan is necessary to purchase the equipment to manufacture our product in an efficient manner. III. FINANCING Project Costs Land $ Site improvements y 000 I $ 1. Buildings (attach plans & costs) $ Equipment/1\lachinery/Fixtures (attach list and estimated costs) $ �C 02,000 Remodeling $ Industrial Inventory/Working Capital $ 88_,o oo Other (attach description) $ ) Total Costs $ 300, 000 Comments: Elk River Economic Development Authority i. ro I. .111 Hind l \1,;,lir.uHm Proposed Sources of Financing • SOURCE NAME TERMS AMOUNT Bank Loan American National Bank le R S $/3T0, 000 Bunk Loan $ Other Private Funds $ Applicant Contribution $ /00,0 00 Other $ — Fed Grant/Loan $ State Grant/Loan $ 3 EDA Micro Loan Elk River(MCCF) Loan $ 50,,000 Total Financing $ 300,,000 Comments: . a Collateral Assignments Lien Description of Collateral Position To Bank 1 American National Bank ToBank2 • 6111-+ 7 To Private Sources ' To Other Sources To Federal Govt To State To EDA Micro Loan Elk River(MCCF) Loan2 Comments: • -�c�-u p'n Elk River Economic Development Authority Micro Loan Fund Application Page 3 of 7 Value of Collateral • Existing Book Value Cost Liens Land $ $ $ Buildings $ $ $ Machinery&Equip. $t.42 15,000 $ iO 0 00 $ 15" Other $ $ $ 1 r -' Other $ $ $ Comments: " IV. JOB & WAGE GOALS Present # of Employees 3 Total Payroll I f' ,©O O Jobs To Be Created* t • Please provide the following information on jobs you expect to create. ,;1 Average Are the Jobs Expected ') Number Hourly Annual Permanent or Hiring Job Title of Jobs Wage Salary Temporary? Date Rec,rartontisr 1 14.0° SHOP Su Pit 1 18,°C) Ass ern LE 2 IaG ° N1Ac AIN G .2 , 13 SHIPPING I , I5 "G " *If loan is for job retention only,please explain in Business Plan. Job Creation Timetable .— Please indicate on the table below when individual jobs will be added to the firm. F.. .) - Number Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Job Title of Jobs 1 2 3 4 5 6 7 8 ASSEm di„E { I 1 I 1 I 1 SiiiPPiNG I REciEVI ,JG PURL NASiNE I • /4C C O v,./TI 06 I Elk River Economic Development Authority Micro Loan Fund Application Page 4 of 7 IV. PROJECT CONTACTS 41: Attorney Name _ Motin Law Office Address 327 Main Street Elk River, MN Phone_ (763) 241-9400 Accountant Name_ Arlyce Richardson L.T.D. J Address 332 E. Co. Rd. D Little Canada, MN Phone_ (651)482-0122 Financing Sources (lenders, partners, etc...) Name_ American National Bank Address 305 Jackson Ave. Elk River, MN Phone_ (763) 241-1300 Name : ' Address Phone Name 1 Address Phone fbName Address 1 Phone t i Parent Company Name Address Phone Others J Name Address Phone Name Address Phone III Elk River Economic Development Authority Micro Loan Fund Application Page 5 of 7 V. ATTACHMENTS CHECK LIST Please attach the following: A) Written Business Plan: 1. Description of Business 2. Ownership 3. Management 4. Date Established 5. Products/Services 6. Future Plans A/" " B) Financial Statements for Past Two Years V C) Financial Projections for Two Years D) Resume of Owner/Management E) Personal Financial Statements of Proprietor, Partners, Guarantors F) Letter of Commitment from Applicant Pledging to Complete During the Proposed Project Duration Aft ler G) Letter of Commitment from the Other Sources of Financing, Stating Terms and Conditions of their Participation in Project H) Other I) Other ✓ J) Fee (1% of amount of loan request) Elk River Economic Development Authority Micro Loan Fund Application - Page 6 of 7 VI. AGREEMENT I / We certify that all information provided in this application is true and correct to the best of my/our knowledge. I /We authorize the City of Elk River and the Finance Committee to check credit references and verify financial and other information. I / We agree to provide any additional information as may be requested by the City and the Finance Committee. DATE -20 -0'7/ APPLICANT NAME Tom Buchta Bob Michalek Jim Studee BY1 BY ` By _ Air" ) ( ) ( ..) r ( ,e S Elk River Economic Development Authority Micro Loan Fund Application Page 7 of 7 Display Solutions Inc. Contact Information: 18983 York St.N.W. Elk River, MN. 55309 (763) 274 0609 (763)274 1281 Fax Tom Buchta. (763)753-1859 (612) 803-3714 Cell tombuchta@msn.com `• Bob Michalek { ) (952) 892 0139 (651)226-0185 Cell rkmichalek@frontiernet.net Jim Studee (763)477 5618 jlstudee@aol.com This document contains confidential information. It is disclosed to you for informational purposes only. Its contents shall remain the property of Display Solutions Inc. and shall be returned to Display Solutions Inc. when requested. This is a business plan and does not imply an offering of securities. • Table of Contents 1. Executive Summary 1 Business Opportunity Product/Service Description Current Business Position Financial Potential The Request 2. Company Background 4 Business Description Company History Current Position and Business Objectives Ownership 3. Products 5' Product Overview Suppliers and Inventory 4. Operating Plan 6 Location Facility • Operating Equipment Suppliers and Vendors Personnel Plan 5. Management, Organization and Ownership 9 Professional Consultants Ownership and Boards 6. Financial Assumptions 10 Assumptions 7. Appendix 13 DSI's Financials Product Photos Personal Tax Returns Personal Finacials Resumes Letters of Commitment EDA Loan Application IP ._, Display Solutions Inc.411 1. Executive Summary Thomas Buchta, a Twin Cities native,has over 25 years in the professional woodworking field and has owned and operated a store fixture manufacturing plant for over 9 years. He successfully revamped production to take the business from a$800K lose to $550K profit the third year. Mr. Buchta's duties consisted of sales, quoting,computer design and day-to-day operations. Most clients we're fortune 500 companies such as: Chucky Cheese,Pillsbury, Reebok, Sears,Target,AT&T, Weight Watchers,Jenny Graig and Ulta Cosmetics. Bob Michalek, an experienced professional in management,marketing,and sales;with demonstrated strengths in strategy,new business development,and building customer relationships. Bob held the position of V.P. Sales and Operations at Fairway Foods, a { $800M food wholesale company and also National Account Manager at Sara Lee. Jim Studee also has over 13 years in the woodworking industry. Jim was most recently employed at Dura Supreme Inc. as the Engineering Manager where his duties included plant lay out,material handling systems design, equipment procurement,machine-jig-fixture design, operations improvement and supervision. Jim also has a Mechanical Engineering degree from the University of Wisconsin Madison. The large demand for store fixtures and point-of-purchase(P.O.P.)displays has remained steady for decades and having worked in this industries for twenty five years,Mr. Buchta, Mr. Michalek,and Mr. Studee have developed a strong relationship with many companies giving us a distinct advantage. This is why Display Solutions Inc., (DSI)a newly formed company headquartered in Elk River,MN chooses to design and manufacture store fixtures and P.O.P. displays. In order to start this business the total cost of equipment, and operating capital for 6 months is approximately$300,000. DSI is seeking a relationship with American National bank in Elk River to acquire a loan in the amount of$150,000 for equipment. DSI will also try to secure a loan from Elk River City Economic Development in the amount of$50,000. The three owners will provide cash investment of$100,000 for office and manufacturing equipment. 1.1 Business Opportunity DSI will engineer,manufactures and distribute two product lines. Store fixtures and P.O.P. displays. The constant requirement for store fixtures for new store openings and the frequent remodeling that retailers often do to maintain customers interest, will help us maintain a stable operating stance due to market demand. 1.2 Product/Service Description DSI will provide a wide range of services.Not only will the company design and manufacture store fixtures, we will provide our customers a fulfillment program by outsourcing acrylic, graphics and more through local venders. These items are typically stored at our location and ship just-in-time in conjunction with our manufactured product. Display Solutions Inc. 2 Product photos are included in the appendix. • Point-of-Purchase and Store Fixtures are sold on a contractual basis and available upon demand. Manufacturing (June 2004 release). Prices based on individually negotiated contracts. 1.3 Current Business Position DSI is a newly formed S corporation that is now leasing space in Elk River. DSI will be owned and operated by three champions of the store fixture and manufacturing business: Thomas Buchta, Bob Michalek, and Jim Studee. 1.4 Financial Potential Display Solutions Inc. has projected sales as follows: Sales Forecast For years ending March-2005, 2006,2007 Sales Category Year 1 Year 2 Year 3 FIXTURES/P.O.P DISPLAYS 852,500 1,695,000 2,000,000 Total Sales 852,500 1,695,000 2,000,000 This sales forecast is based on past actual sales form Mr. Buchta's former company. Based on sales prediction and costing projection, our fmancial position will be: Financial Position For years ending March-2005, 2006,2007 $800,000 $600,000 Arm;; $400,000 11111111 *4K 1173"— $200,000 1.7 4-4 {a .., �' ---� vee x $0 Year 1 Year 2 Year 3 ■ Assets F Liabilities I< Equity Display Solutions Inc. 3 1.5 The Request DSI principals are willing to invest an additional $100,000 and are seeking funding of $200,000. The owners will also provide for collateral: $14,000 in office and manufacturing equipment. The individual sources are: Elk River City Economic development low interest micro loan$50,000 American National Bank of Elk River$150,000 Cash Investment from owners $100,000 The funds will be used to purchase equipment,renovate, advertise, and fund the projected negative cash flows during the first few months of operations. 4111 Display Solutions Inc. 4 110 2. Company Background The founders of DSI have many years of experience in the wood manufacturing industry and sales of product. Each of the three principals bring their own unique experience and expertise into DSI: Mr. Buchta has expertise in engineering, computer aided design and has owned and operated a 65,000 square foot manufacturing plant for over 9 years. Mr. Michalek is experienced in sales,marketing, strategy,new business development and building customer relationships. Mr. Studee has expertise in manufacturing,mechanical engineering,procurement, operations, and plant layout. Along with the above qualifications all three of the owners possess a strong work ethic, management expertise,and a strong business acumen to ensure the success of DSI. 2.1 Business Description DSI is a Elk River, Minnesota based S Corp. The company will design,manufacture and distribute store fixtures and P.O.P. displays. Sales will be achieved through a variety of design houses, commercial contractors and retailers such as: Ulta Cosmetics and Sears. DSI will also provide a fulfillment program. This will consist of providing our customers )40 a wide range of products outsourcing through local manufacturers. This product will ship just-in-time and in conjunction with DSI manufactured product. 2.2 Company History DSI is a new business venture that was incorporated on March 6th 2004. It is now leasing space in Elk River,MN. DSI will be managed by its three founders: Tom Buchta, Bob ry Michalek and Jim Studee 2.3 Current Position and Business Objectives DSI is seeking financing to start manufacturing store fixtures in a 4,500 sq. ft. building on the west side of Elk River. With expectations to grow the annual sales to 5M dollars in five years, the company hopes to rapidly outgrow this 4,500 sq. ft. space and when sales demand,the founders intend to build or lease a larger building in the Elk River industrial park. The company hopes to employ an approximated 20 to 30 workers at the new location. 2.4 Ownership The principals Thomas Buchta, Bob Michalek, and Jim Studee are the sole stockholders in the company. The company currently has no debt. Display Solutions Inc. 5 4) 3. Products DSI will provide a product that has been in existence for decades. Wood store fixtures will continue to be the top pick in the retail sector for decades to come, allowing DSI to maintain a stable operating stance due to market demand. Along with designing and manufacturing store fixtures and P.O.P displays,DSI will also provide a wide range of services such as on-time-delivery and a complete fulfillment package. Customer testimonial is included in the appendix. Product photos are included in the appendix. 3.1 Product Overview DSPs product is made with melamine covered partial board,particle board and laminate. Manufactured to tough consumer specifications for firms in retail sales and services. DSI's product will be shipped just-in-time throughout the US. 3.2 Suppliers and Inventory The main component of our product is available through a variety of distributors in the area at a competitive price. Other items such as hardware, acrylic,metal and packing materials are also purchased from a variety of venders. We typically have on hand y ($25,000)in inventory. a Display Solutions Inc. 6 • 4. Operating Plan DSI is seeking financing to start manufacturing store fixtures in Elk River. The company will be managed by the three founders and employ approximately 6 people the first six months of business. The company expects to rapidly outgrow this location and intends to build or lease a larger building in the Elk River, industrial park. DSI will employ approximated 20 to 30 workers at the new location. DSI's business plan requires a total of$300,000. The funds will be used to purchase equipment,renovate, advertise, and fund the projected negative cash flows during the first few months of operations. 4.1 Location DSI's proposed manufacturing site is located in a light commercial district in Elk River r Minnesota. The area is properly zoned by the city to allow DSI to conduct all of its ` manufacturing and related activities. The site is located on a major highway, allowing excellent truck access for shipping finished product.. The site also is close to a major airport hub connecting all national and international locations. Also,being centrally located in the US will give us an advantage with national accounts. 4.2 Facility The facility is a newer building of 4,500sq. ft. of the total space. 1,000 square feet is finished office space,which will be used for sales and administration. The remaining fah space will be used for manufacturing, assembly, shipping,receiving, and storage. `era The facility is not a showroom for potential clients or customers. It is utilized exclusively for product assembly,marketing, and internal corporate administration. The facility is located in the hometown area of the company's owners. The company does not own the building,but has negotiated a year lease with an option to f early out to accommodate expected growth. The short term lease was established anticipating the need for additional space. If the building proves adequate,the lease term may be extended. The annual lease rate is $5.33 per square foot,which is a lower rate between comparable office and industrial space in the area. 43 Operating Equipment The company needs to secure some manufacturing equipment to implement full-scale manufacturing of store fixtures. Below is a listing of the equipment required by DSI and their respective costs: CNC Router (130,000) Edge bander($34,000) Compressor($7,000) Dust collector($4,000) Fork Lift($8,000) ID Table saw($3,500) Display Solutions Inc. 7 Radial saw($2,500) Hinge machine($2,500) Pallet racking($500) Drill press($500) Metal band saw$350) Pallet Jack($350) Carts($1,000) Panel saw($500) Laminate slitter($1,900) Assorted hand tools ($5,000) Edge Sander($2,500) Pocket Screw Machine($1,900) Band Saw($475) Contact Sprayer($1,200) TOTAL: ($207,675) 4111 x _ `' This equipment is necessary for the manufacturing of our product in an efficient manner. , DSI principals already own the office equipment, including a telephone system,personal computers, desks,chairs, filing cabinets, and miscellaneous items. 40 4.4 Suppliers and Vendors The material requirements are met through established contracts with our primary vendors. The main component in our product is particle board,laminate and melamine covered panels(MCP)and is available thru a variety of distributors in the area at a competitive price. Other items such as hardware and acrylic will be purchased through a variety of local and out-of-state venders. 4.5 Personnel Plan Mr. Buchta will resume duties he performed in his former business. This will consists of design, engineering and day-to-day operations. Mr. Michalek will perform duties of business development, customer relationships, and national sales account manager. Mr. Studee will be in charge of the procurement, manufacturing, shipping,and overseeing the accounting. All three principals live in Minnesota and recently established a S Corporation in this state. The company has completed the necessary registration with the State of Minnesota and with the IRS to enter full-scale operations.Staffing for the operation includes the three owners who will handle marketing, sales, procurement, design and day-to-day operations. IIIOne person will be hired on a part-time bases for administrative support. Display Solutions Inc. 8 Other personnel needs for the operation will consist initially of four persons. One will be hired for shop supervisor. Another person will be trained to operate the CNC panel saw and other equipment. One more will be hired to assemble and be cross-trained to operate equipment and one more to do light assemble and shipping. The administrative support person will be compensated at an approximate wage level of $15 per hour. Operating personnel will be paid approximated$18 per hour, a competitive non-union wage rate in the area. Assembly personnel will be hired at approximated$9.00 to $16.00 per hour. S Display Solutions Inc. 9 5. Management, Organization and Ownership 5.3 Professional Consultants The company will retain two outside consultants to assist in professional corporate duties. Mr. Paul Motin, a local attorney, will handle the company's legal matters. Arlyce Richardson, LLC, a accounting firm, will handle the companies accounting and filing requirements. All financial duties, including payroll,will be performed inside the company. The company uses National Insurance Company for its business insurance needs. 5.4 Ownership and Boards Tom Buchta, Bob Michalek, and Jim Studee are the sole owners,officers and directors of the company r ) • 410 1 Display Solutions Inc. 10 ID 6. Financial Assumptions The enclosed financials are based on several assumptions. They assume the owners will invest an additional $100,000 of their own funds and Display Solutions Inc will be able to align a financing for an additional $200,000.No distributions have been included in this forecast. Depending upon performance, distributions will be made when appropriate. 6.1 Assumptions Below is a summary of the assumptions used to forecast the next 36 months of Display Solutions Inc. planned operation. Beginning Balance Sheet (- Beginning Balance Sheet For year beginning April,2004 ( Assets: Current assets: E Cash 107,000 Inventory 25,000 CTotal current assets 132,000 Property,plant and equipment(net) 223,000 Other assets(net) 9,000 ' i Total assets 364,000 Liabilities: Current liabilities: Accounts payable(inventory) 25,000 (_. Current maturities of long-term liabilities 35,101 Total current liabilities 60,101 Long-term liabilities(net) 164,899 Total liabilities 225,000 z. ) Equity: Contributed cash 125,000 Assets transferred in 14,000 Total equity 139,000 Total liabilities and equity 364,000 Debt-to-equity ratio 1.62 i;; Cash- The amount of cash remaining after the anticipated$300,000 infusion, $100,000 by the founders and$200,000 from aquired loans. Of this amount, $208,000 will be used to purchase equipment, $4,000 to perform some building improvements and the remaining $89,000 for operating capital. Property,plant and equipment(net) -This includes the planned purchase of$211,000 of equipment and building improvements. The owners contribution consists of$14,000 of office and manufacturing equipment. 1111 100 000 will be made bythe founders. Contributed cash-A cash investment of$ a Display Solutions Inc. 11 ill Profit& Loss Profit&Loss Statement For years ending March-2005,2006,2007 rTh Year 1 Year 2 Year 3 Sales 852,500 1,695,000 2,000,000 Less cost of sales: Material 298,375 593,250 700,000 j Labor/benefits/taxes 208,010 413,580 488,000 Total cost of sales 506,385 1,006,830 1,188,000 Gross profit 346,115 688,170 812,000 Operating expenses: Advertizing 1,900 1,200 1,200 ( ) Automobile 0 7,200 7,200 / Bank charges 695 540 540 Travel 15,000 12,000 12,000 Insurance 5,900 8,800 11,200 r Legal!Acct. 1,700 2,600 2,400 Office supplies 900 2,400 2,400 (` Utilites 8,000 9,200 9,200 Telephone 2,700 2,400 2,400 4 Rent 24,600 49,500 54,000 Repair&maintenance 6,000 7,200 8,400 0 Landfill 6,000 9,600 10,800 Officers Salaries 162,260 226,920 256,200 i'-'1Office Salaries 40,211 65,587 102,480 Bad debts 6,820 13,560 16,000 Amortization 1,600 1,600 1,600 Depreciation 44,371 44,371 44,371 Total operating expenses 328,658 464,679 542,391 Operating income 17,457 223,491 269,609 ) Interest expense 11,751 9,473 7,030 Net income 5,706 214,018 262,579 Insurance -Display Solutions will be establishing business and product liability insurance. Legal&accounting-Legal and accounting expenses assume fixed monthly retainers for Display Solutions legal counsel and accountants. Manufacturing Personnel-Display Solutions plans to immediately hire three full-time ,.v workers at a average rate of$14 per hour. A payroll burden of 22 percent has been added to cover taxes and benefits. Rent-Monthly rent is calculated based upon an annual established lease agreement for ., DSI current 4,500 square foot facility. The negotiated rate per square foot is $5.33. Salaries- The three partners will receive a fixed salary of$48,000 a year. Travel -These funds will enable DSI personnel to visit new and old customers as well as attend trade shows. MUtilities-Utilities are based upon DSI own historical average for building occupancy in Display Solutions Inc. 12 their former business. Depreciation-Depreciation is calculated on a straight-line method based upon the associated life of Display Solutions assets. Computers and telephones are depreciated over 5 years, office furniture is depreciated over 7 years and manufacturing equipment is depreciated over 5 years. ,111 Estimated taxes-The annual amount estimated to cover taxes is calculated at an average ` percent of 22 percent of net income before taxes. This amount is computed on a monthly basis. Balance Sheet Balance Sheet For years ending March 2005, 2006,2007 Year 1 Year 2 Year 3 Assets: Current assets: Cash 46,136 251,866 516,274 Accounts receivable(net) 95,040 126,720 134,640 Inventory 25,000 25,000 25,000 Total current assets 166,176 403,586 675,914 PPE(net) 178,629 134,257 89,886 Other assets(net) 7,400 5,800 4,200 Total assets 352,205 543,644 770,000 F40 Liabilities and equity: Current liabilities: Accounts payable 42,600 57,400 61,000 Current maturities 37,379 39,823 42,443 t Total current liabilities 79,979 97,223 103,443 Long-term liabilities(net) 127,519 87,697 45,254 Total liabilities 207,499 184,919 148,697 Equity 144,706 358,724 621,303 Total liabilities and equity 352,205 543,644 770,000 �vzti Display Solutions Inc. 13 411 7. Appendix This section contains the following information and supporting documentation: • DSI's Financials • Product Photos • Personal Tax Returns • Personal Finacials • Resumes • Letters of Commitment • EDA Loan Application 3 Display Solutions Inc. • Store Fixtures & P.O.P.Displays April 7,2004 To Elk River EDA commission: Please take this letter pledging our commitment to complete this project during the proposed project duration.We will run this company with the highest prof..,..sional standards and will comply with all state and federal employee guide lines. ) Thank you for your consideration. , ez›--)-7 3 , Tom Buchta: / -,V Bob Michalek: /7/ #< ( /1/7-- • ' • Ji ,, m Studee.. ,,,,i4o, .„, III 05/07/2004 08:56 FAX 763 241 1313 AMERICAN NATIONAL BANK [ ]002 I TO: Display Solutions Inc. 18983 York St.N.W. Elk River, MN. 55330 DATED: 5-1-04 CONDITIONAL LOAN COMMITMENT American National Bank of Minnesota is pleased to outline the following conditional loan commitment for your review and consideration. This non-binding loan commitment does NOT constitute an enforceable credit agreement pursuant to Minnesota Statute §513.33. It does, however, represent American National Bank of Minnesota's commitment to move forward in the loan process and prepare loan-closing documents consistent with the following general terms: I. Loan 1) Borrower Display Solutions Inc. 2) Loan Amount $150,000.00 3) Loan Purpose Equipment Purchase 4) Interest Rate (3 months@6.25%) (60 Months @ 6.25%) 5) Fixed or Variable Variable Rate 6) Amortization Period(Interest Only) 3 months Interest only 7) Term after 90 days 60 Months 8) Payment(estimate) $2,917.39 9) Prepayment Penalty NONE 10) Late Charges 5%(after 10 days) 11) Other (added to principal) 1%origination fee plus all associated costs U. Collateral 1) Guaranty(s) Thomas and Pamela Buchta, James and Linda Studee, and Robert and Kathleen Michalek 2) Security Agreement/Financing UCC filing on All Business Assets Statement • Conditional Loan Commitment Letter 1 06/21/01 05/07/2004 08:56 FAX 763 241 1313 AMERICAN NATIONAL BANK 21003 • III. Conditions of Lending 1) Loan Documentation — All loan documents must be prepared and executed in a fashion satisfactory to American National Bank of Minnesota. 2) Articles of Incorporation/By-Laws/Certificate of Good Standing IV. Other Loan Terms and Conditions 1) Warranties and Representations of Borrower in a form acceptable to American National Bank of Minnesota. 2) Financial Reporting Requirements Annual Corporate Financial Statements, Corporate Tax Return and Annual Individual Financial Statements and Annual Individual tax Returns by each guarantor. 3) Prior to funding requirements Establishing the Corporate DDA at ANBofMN. Aggregate investment deposit of $75,000 • by corporate officers. Approval and closing of a $50,000 subordinated loan from the Elk River EDC/EDA 4) Funding Protocol Equipment will be funded via presentation of purchase order receipt with serial numbers. Proceeds shall be made payable to the corporation and equipment dealer/seller. V. Estimated Fees and Closing Costs 1) Loan Origination Fee e$1500 2) Document Preparation Fee e$55 3) Lien Searches e$20 4) Credit Investigation Fee e$55 5) SBA Fee e$1125 6) Other UCC1 Filing/Release fees e$40 e Conditional Loan Commitment Letter 2 06/21/01 05/07/2004 08:57 FAX 763 241 1313 AMERICAN NATIONAL BANK 1 ]004 • VI. Expiration Date Conditional Loan Commitment Expiration Date 7-1-04 This Conditional Loan Commitment of American National Bank of Minnesota to make the loan is based upon the financial and other information furnished and representations made to American National Bank of Minnesota by the Borrower or on behalf of the Borrower, and American National Bank of Minnesota has relied on the accuracy of that information. This Conditional Loan Commitment is subject to preparation and completion of all loan documentation as may be required by American National Bank of Minnesota in a form and upon terms acceptable to American National Bank of Minnesota legal counsel. The Borrower understands, and by signing this Conditional Loan Commitment, the Borrower agrees, that the Borrower shall pay for all costs and expenses paid or incurred by American National Bank of Minnesota in connection with the described loan transaction whether or not the loan transaction is in fact completed. Please indicate your acceptance of this proposal by signing the enclosed copy of this letter and returning it to me along with a good faith deposit of$75.00, which will be used by American National Bank of Minnesota for payment of costs and expenses incurred. If any portion of the • deposit is not used,it will be refunded to the Borrower. American National Bank of Minnesota looks forward to working with you on this loan transaction and anticipates your return of a signed copy of this letter and your good faith deposit. Sincerely, American National Bank of Minnesota Dated: 5-4-04 ww(• I By: even C. King, Its V.P., MANAGER S Conditional Loan Commitment Letter 3 06/21/01 05/07/2004 08:57 FAX 763 241 1313 AMERICAN NATIONAL BANK 8 005 • Request to Proceed The Borrower requests American National Bank of Minnesota to proceed with the loan transaction on the basis outlined in the foregoing letter and encloses $75.00 payable to American National Bank of Minnesota as its good faith deposit. Dated: s y By Its fikes.i Oe�•7"" • • Conditional Loan Commitment Letter 4 06/21/01 Thomas u 2290 169th Lane Andover. 55304 (7 3) 753-1859 tt mhuc .ta ;ms .com. Successful manager with over 15 years of expertise in operations, engineering and production of store ft.rtures and ',O.P. displays* SUMMARY "S • Demonstrated expertise in value engineering,dramatically reducing cost while increasing productivity. • Responsible for engineering product for national retailer companies such as:Chucky Cheese, Pillsbury,Reebok,Adidais,Nabisco,Culligan,Sears,Target,AT&T and Weight Watchers. • Proactive, ds-on sty=le,interacting into the design better yields and lower cost material., • Extensive communication skills helping personnel understand the project in detail. • Proven ability to improve profit while reducing E .r cost and eliminating waste, PROFESSIONAL A K ROUE T&R Displays Inc. Chanute,KS Store fixture manufacture with S4.5M in annual revenue. President(1994—2803) • Increased sales from K to$3M in the first three years. • Utilize customer service skills,focused on establishing trust with clientele and promoting repeat business. • Successfully revamped uction to take the business from a 200K loss to$550K profit in the third year. • Oversee all facets of operation for 65,000 sq.ft.manufacturing plant:direct and schedule 35 personnel. • Conducted or supervi all sales negotiations with clientele, • Schedule and facilitated meetings to track and discuss progress. • Performed or supervised all aspects of product design,engineering and bidding for multibillion-dollar corporations, Displays Solutions Inc. Chanute,KS Store re and P.O.P display manufacturing. Operations tan er(1991 -1994) • Utilized technical and problem-solving skills to identify glitches and quickly implement solutions, • Managed projects for key customers. • Performed or supervised all aspects of product design,engineering and bidding. • Streamline work processes to decreasemanufacturing cost. Project manager/drafting(1989-1991) • Management projects for key customers. • Performed all aspects of architectural design,drafting,engineering and bidding. • Prosided technical support to all departments. Manufacturing Fixtures lne.(l Coon Rapids,MN Store Fixture Manufacturing Com y. Sub-contractor/o .er(19 —1989) • Managed and assisted union installing crews,installing fixtures f retail stores,schools and churches. • Conducted all on-site repairs and remodeling of fixtures,saving MFI the cost of rework and shipping bad or damaged product back and forth. AdditionalExperience:Ten years in custom woodworking.building products like:desks,credenzas,conference tables.store fixtures and P.O.P.displays. ucation Anoka Technical Institute:(woodworking)AutoCAD training:Chicago,IL Computer Skills: AutoCAD,3D-AutoCAD,Ward_Excel,Power Pointe Carel.Windows XP 200NT Activities:Golfing,Scuba Diving,Fishing and camping with my family, Keywords: Value Engineer,Project Management,Manufacturing Techniques.Detailed,Product Deselopment S BOB MICHALEK 9710—185th Street West Lakes ille,Minnesota 55044 (952)892-0139 rionichalek4i frontiernetnet SUMMARY OF QUALIFICATIONS An experienced professional in management,marketing, and sales. A leader with demonstrated strengths in strategy,new business development,and building customer relationships. Expertise in organizing, motivating,and mobilizing staff to achieve goals,along with a reputation for improving staff professionalism and performance. Strong interpersonal skills and a proven ability to relate to personnel at all levels of an organization. Excellent communicator, both oral and written. • Proven record of increasing sales. • Ability to resolve delicate issues with customers, resulting in"win-win"conclusions, • Significant influence on team problem solving efforts and improving team member performance. • Excellent track record in client development and customer relations. • Understands sales,trade and marketing concepts and how they arc used in the selling environment. • A communicator, (verbal and written)at ease in interaction with diverse populations, EMPLOYMENT EXPERIENCE SARA LEE, Minneapolis,MN 2000-2003 Account Exec/Trade Development/National Account Manager Managed National Sales to Holiday Companies, Super Tarect, Nash Finch and executed Corporate I leadquarter calls on key customers in the retail food industry: Burn-Save, Wal Mart, Sam's Club and Coborns, • Increased overall sales for accounts 19%by customer penetration and follow through, • Increased private label(store brands)penetration 9%by demonstrating qualityvalue, and increasing bottom line profit for the customer, • Built strategic partnerships with customers. • integrated market data that increased sales and profits for retail outlets and Sara Lee. • Designed and executed special events and local marketing programs. • Developed, maintained, and built strong positive headquarter relationships with key customers. • Regular review of account status with customer groups. a Analyzed data from multiple information sources to develop customer specific tactical plans and options. • Lxperienee in contract negotiationscategory management and product merchandising strategies. S BOB"MIMI,EK Page 2 FAIRWAY FOODS INC.(HOLIDAY COMPANIES)Minneapolis' ,MN 1982-2000 III Vice President of Sales and Operations, 1994-2000 Responsible for strategic planning and new business development. Supervised managers and sales staff of 70-hired,reviewed, and terminated. Oversaw stores in nine states. • Responsible for over$750,000,000 in annual sales. • Created and developed.Cost-to-Serve Report Result Improved performance of 70 retail counselors and specialists. • P.and I- Responsibility • Des doped and implemented Profit Improvement Plan(P.I.P.)program to improve problem stores' bottom-lines. Result: Turned 11 problem stores into profitable operations in one and a half years and saved over $4..000,000 in profits. • Created monetary incentives for retail stores. Result New business development and the successful acquisition of numerous large accounts. New business growth&over 18 %. • Organized and orchestrated Strategic Partners Meetings and Share Group meetings. Result: Customers became partners in future planning and more loyal clients. • I Iired and trained staff • Worked closely with legal department to handle details of retail acquisitions, closings., business sales, and negotiations. Senior Director of Sales and Operations, 1992- 1994 Worked with existing accounts and called on new accounts in four divisions. • Directly supervised sales managers and retail counselors in all divisions. • Developed and implemented programs, so all counselors and all divisions operated under the same procedures and guidelines. Division Director of Sales,Northfield Division, 1990- 1992 Directly supervised retail counselors and worked with over 150 independent store operators. • Responsible for$280,000,000 in annual sales. • Increased division sales in excess of 10%by focusing on customer penetration and do eloprnent. EDUCATION BA,UniN ersity of St.Thomas, St Paul, MN Graduate Work in Guidance and Counseling President,College Class President, Kappa Delta Gamma fraternity PROFESSIONAL AFFILIATIONS Board of Directors, Faribault Chamber of Commerce Executive Committee,National American Wholesale Grocers' Association 0 Executive Committee. International Foodservice Distributors' Association Resume of James S. Studee 305 Halsey Avenue NE,Buffalo,MN 55313 (763)477.5618 ilmudeeat aol,mET1 Objective: To use my manufacturing,engineering and management skills to set up and grow efficient operations in a start-up woodworking company. Employment History: 1995-Present Dura Supreme Inc. (Kitchen Cabinet Manufacturer,Howard Lake MN,400 employees) Engineering Manager. Duties include plant layout,material handling systems design,equipment procurement, machine-jig-fixture design,operations improvement and supervision of one engineer and one machine builder. Highlights of employment: -Plant layout of most of the 120,000 square foot facility. -Developed an optimizing program that drives a CNC beam saw. -'Wrote computer programs to develop bills of material and organize materials. -Designed and supervised construction of many machines,jigs and fixtures. , III 1988-1993 A&G Engineering (Industrial Engineering Consulting Firm, Shakopee, MN) Engineer. Duties included developing engineered time standards,developing and training supervisors to use shop floor control systems,plant layout and facility productivity improvement audits. Clients included manufactures of pacemakers, injection moldings,diecastings,aluminum extrusions,electronic assemblies, 10 grain handling equipment, kitchen cabinets,electrical generation equipment and foam rubber components. Clients also included service industries in direct mailing and industrial laundries. 1984-1987 SolariumSystems Inc. (Aluminum Glazing Manufacturer, Mound, MN) 1986-1987 Engineering Manager. Duties included generating cut lists for production, communicating with customer on scope of projects,generating prints for customer approval,equipment procurement, plant layout,jig and fixture design, product design and supervision of two engineers and two technicians_ 1984-1986 Engineer. Duties included generating cut lists for production,communicating with customer on scope of projects,generating prints for customer approval.. 1981-1984 Mastercraft Industries, Inc. (Kitchen Cabinet Manufacturer, Rice Lake,WI) Engineer. Duties included developing drawings for tooling purchase, maintaining time standard documentation,new product design and 4 implementation. Education BS Mechanical Engineering, University of Wisconsin Madison, 1981. Computer AutoCAD,Design CAD,Excel,Access, Word Interests Family,sailing,lake living,and woodworking. References Available upon request III 2 ala :4:4; ,, , CI' ---ii, ".",,',, _._.. .,., , „ . 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L _ ddr ♦ iii S t,' .. . • PURPOSE ELK RIVER ECONOMIC DEVELOPMENT MICRO LOAN FUND POLICY & GUIDELINES Revised April 2003 The Economic Development Authority for the City of Elk River (EDA) recognizes the need to stimulate private sector investment into manufacturing facilities and equipment in order to create new jobs, boost productivity and retain existing jobs for local residents. Additionally, the need exists to encourage investment in the expansion and/or rehabilitation of commercial and retail buildings in order to maintain the economic viability of Elk River's central business district. Subsequently, the purpose of this program is to provide low interest,long-term (i.e. greater than one year) loans as incentives for industrial development within the City of Elk River and to encourage commercial and retail business owners in the central business district to rehabilitate their existing buildings. II. LOAN PROGRAMS In order to meet the economic and community development objectives of the EDA, three distinct loan programs exist within the Micro Loan Fund to promote business growth in Elk River. Supplemental Financing Program . Purpose: The Supplemental Financing Program is designed for industrial firms who have maximized their conventional financing and equity resources and subsequently would be unable to complete a project without EDA assistance. Amount: Equity: Up to $50,000 of secondary financing (not to exceed 40% of the project cost. Must have private-sector commitments for 50% of the project cost. Borrower to provide 10% or more of project financing. Rate: Fixed; 1 point below the lowest prime rate published in the Wall Street Journal the day the loan is closed, or 2%,whichever is greater. Term: Financing with a balloon payment in up to 3-years. Loans may be amortized up to the following limits: 15-years on real estate uses; 10-years on equipment uses. Extension: In the event that the Borrower is unable to obtain conventional financing to replace the Micro Loan at the end of three years, the • loan may be extended up to two additional years at a market rate of interest. Elk River Economic Development Authority Micro Loan Fund Policy&Guidelines Page 2 of 8 • Criteria: 1. Borrower must create one new full-time job for each $20,000 loaned within two years. Said jobs must pay a minimum wage of$9.00 per hour plus benefits. Borrower will also be required to meet certain provisions of the City's Business Subsidy Policy. 2. Borrower must be an industrial firm and comply with the provisions of the city's industrial and business park zoning ordinances. Redevelopment Financing Program Purpose: The Redevelopment Financing Program is available to business and property owners in the central business district (CBD) for the rehabilitation and restoration of their buildings. Amount: Up to $50,000 of secondary financing (not to exceed 40% of the project cost. Equity: Must have private sector commitments for 50% of the project cost. Borrower to provide 10% or more of project financing. Rate: Fixed;2 points below the lowest prime rate published in the Wall Street Journal the day the loan is closed, or 2%,whichever is greater. Term: Financing with a balloon payment in up to 3-years. Loans may be amortized up to the following limits: 15-years on real estate uses; 10-years on equipment uses. Extension: In the event that the Borrower is unable to obtain conventional financing to replace the Micro Loan at the end of three years, the loan may be extended up to two additional years at a market rate of interest. Criteria: 1. At a minimum, 20% of Micro Loan dollars must be used for the improvement of the building's facade. 2. Borrower must be located in the Central Business District (see attached map). Industrial Incentive Program Purpose: The purpose of the Industrial Incentive Program is to encourage industrial development that supports the tax base and brings quality jobs to the city. Amount: Up to $100,000 of secondary financing (not to exceed 40% of the project cost. Equity: Must have private-sector commitments for 50% of the project cost. Borrower to provide 10% or more of project financing. Elk River Economic Development Authority Micro Loan Fund Policy&Guidelines Page 3 of 8 Rate: Fixed;4 points below the lowest prime rate published in the Wall Street Journal the day the loan is closed, or 2%,whichever is greater. Term: Financing with a balloon payment in up to 5-years. Loans may be amortized up to the following limits: 15-years on real estate uses; 10-years on equipment uses. Extension: In the event that the Borrower is unable to obtain conventional financing to replace the Micro Loan at the end of five years, the loan may be extended up to two additional years at a market rate of interest. Criteria: USES 1. BorrowUses:er must be an industrial firm and create one new full-time job for each $20,000 loaned within 2 years. Said jobs must pay a minimum wage of$10.00 per hour plus benefits. Loans in excess of$75,000 shall meet the City's Business Subsidy Policy for new job and wage goals, as well as location requirements. 2. Borrower must locate in the West Business Park (see attached map)and comply with the provisions of the city's industrial and business park zoning ordinances. III. 1. Permitted Fund a. Building construction b. Land acquisition c. Machinery d. Furniture, fixtures, and equipment (FF&E) e. Renovation and modernization of buildings f. Exterior renovation of retail, commercial and industrial buildings g. Public infrastructure needed for economic development expansions h. Investment real estate with a minimum of 50% of the space pre-leased 2. Ineligible Fund Uses: a. Expenditures for the construction and/or renovation of residential units b. Working capital c. Refinancing of existing debt • d. Inventory IV. BUSINESSES ELIGIBILITY Any project meeting the above criteria, and located or proposed to be located within • the city limits of Elk River as defined by this program, may be eligible for an Economic Development Micro Loan as further defined herein: Elk River Economic Development Authority Micro Loan Fund Policy&Guidelines Page 4 of 8 • Business must be a for-profit corporation,partnership, or sole . proprietorship. • Business must be a small business as defined by the Small Business Administration (SBA). • Business must have a positive net worth. • Religious, political, and pornographic enterprises are not eligible to use the Economic Development Micro Loan Fund. V. MICRO LOAN FUND TERMS & CONDITIONS 1. Loan Structure All EDA Micro Loans will be structured as participation loans and will be serviced by the project's primary lending institution. Such an arrangement allows for the central distribution and collection of funds and simplifies the financing process for all parties involved.A participation agreement will be signed by the borrower, primary lender and the EDA. The EDA may require additional agreements to be signed by the borrower (i.e. security agreement,personal guarantees,job performance agreement). 2. Simultaneous Micro Loans The simultaneous use of different Micro Loan Fund Programs by any one borrower or for any one project is prohibited. 3. Call of Loan • A loan shall become due and payable in full if a business relocates outside of the city of Elk River prior to the maturity date of the EDA loan. 4. Late Payment Charge A late payment charge of up to 8% of the installment amount may be enforced. VI. REGULATION FOR NEW CONSTRUCTION AND IMPROVEMENTS All buildings which public funds will be used for construction or renovation are to be brought into conformance with city codes and policies. Repairs may include the following systems and portions of real property: a. Mechanical heating,plumbing, and electrical b. Structural;including the facade of the structure and energy related improvements. c. Hook-up to city services (i.e. water, sewer) VII. LOAN SECURITY AND GUARANTEES Applicant must be able to secure the loan by providing the EDA with a minimum of a subordinate mortgage upon the building and/or assets or other approved collateral. Applicant must demonstrate the financial means to repay the loans, as determined by • the Economic Development Authority. Whenever possible,personal guarantees will be made part of any loan agreement. Elk River Economic Development Authority Micro Loan Fund Policy&Guidelines Page 5 of 8 VIII. TIMING OF PROJECT EXPENSES • No project should commence until the Elk River Economic Development Authority has approved the loan application. Any costs incurred prior to the approval of the loan application are generally not eligible expenditures. No building construction should commence until the required City permits are secured. The applicant will be responsible for all legal, recording, and other fees required for protection of a security interest in the loan, payable by a 1%processing fee,which is paid at the time of application. IX. PROCEDURAL GUIDELINES FOR APPLICATION AND APPROVAL 1. All applicants shall first contact a primary lending institution to determine if additional equity is needed, and if so, how much. 2. The applicant and the primary lender shall then meet with City Staff to obtain information about the Micro Loan program, discuss the project, and obtain application forms. 3. The applicant shall complete and submit an application form to the City, along with a processing fee of 1% of the loan request. (The fee is used to cover processing expenses and will be returned if application is denied.) The applicant must provide evidence of their ability to meet the equity requirements or provide a letter of commitment for conventional financing from the primary lending institution. 4. The application will be reviewed by the City staff to determine if it conforms to all City policies and ordinances and to consider the following: a. The availability and applicability of other governmental grants and/or loan programs. b. Whether the proposed project will result in conformance with building and zoning codes. c. Whether it is desirous and in the best interests of the public to provide funding for the project. 5. The EDA Finance Committee and EDA Commissioners will review each application in terms of its consistency with the goals of the Growth Management, Strategic, and Economic Development Plans and in relation to the project's overall impact on the community's economy. Redevelopment Loan applications will also be reviewed by an HRA member in conjunction with the EDA Finance Committee. They will also evaluate the project application in terms of the following: • a. Project Design - Evaluation of project design will include review of proposed activities, time lines and a capacity to implement. Elk River Economic Development Authority Micro Loan Fund Policy&Guidelines Page 6 of 8 b. Financial Feasibility-Availability of funds,private involvement, financial packaging and cost effectiveness. • • Appropriate ratio of private funds to Micro Loan funds. • Sufficient cash flow to cover proposed debt service as demonstrated by financial statements and projections. • Business must show a positive net worth. • Letter of Commitment from applicant pledging to complete the project during proposed project duration,if the loan application is approved. • Letter of Commitment from other financing sources stating terms and conditions of their participation in the project if applicable. • Sufficient collateral. c. All other information as required in the application and/or additional information as may be requested by the Economic Development Authority. • d. Project compliance with all city codes and policies. e. Program Objectives - In addition to quality job and wage creation/retention requirements, the applicant must meet all Micro Loan Fund criteria and demonstrate how the proposed activities will meet at least one of the following objectives: • The project contributes to the fulfillment of the city's approved and adopted economic development and/or redevelopment plans. • The project prevents or eliminates slums and blight. • The project increases the local tax base. • The project brings a structure into compliance with an existing building code violation. 6. A written request for an extension shall be accompanied by a copy of current financial statements and a $500 upfront processing fee. The processing fee is used to cover processing expenses and will be returned if request is denied. The application for an extension beyond the original term should include a letter of denial from a conventional lender. Refinancing will not be allowed solely for the purpose of reducing the interest rate due to lower market interest rates. Elk River Economic Development Authority Micro Loan Fund Policy&Guidelines Page 7 of 8 7. The EDA Finance Committee will recommend the approval, denial, or request a resubmission. A recommendation from the Finance Committee will be forwarded to the EDA for final action. X. LOAN POLICY REVIEW The above criteria will be reviewed on an annual basis to ensure that the policies reflected in this document are consistent with the economic development goals set forth by the City. XI. COMPLIANCE WITH STATE STATUTES Each company receiving assistance in excess of$75,000 from the EDA Micro Loan Fund shall be subject to the provisions and requirements set forth by Minnesota State Statute 1161993 and the City's Business Subsidy Policy summarized below: Progress Reports The borrower shall file a report annually for two years after the closing of the loan or until all goals set forth in the application have been meet,which ever is later. Reports shall be completed using the format drafted by the State of Minnesota and shall be filed with the City in March of each year for the previous year. Maintain Facility The borrower agrees to maintain and operate its facility at the site where the loan is used for a period of 5-years after the date the loan is closed. Goal Attainment In addition to attaining or exceeding the jobs and wages goals set forth in Section IV of the Application, the borrower agrees to achieve at least one of the goals for community development set forth in Section IX,part 5, subdivision (e) of the Micro Loan Fund Policy. Redevelopment loans in the central business district are exempt from job creation and wage goals stated in Section IX, part 5, subdivision (e) provided the loan amount does not exceed 50% of the project cost. Failure to Comply Businesses failing to comply with the above provisions will be subject to fines, repayment requirements in accordance with the state statute, and be deemed ineligible by the State to receive any loans or grants from public entities for a period of 5-years. XII. RIGHT OF REFUSAL The Elk River Economic Development Authority may deny any project which it deems inappropriate according to the guidelines established in this document. S Elk River Economic Development Authority Micro Loan Fund Policy&Guidelines Page 8 of 8 TechTrends e-Newsletter I April 2004 _ Page 1 of 5 2004 411. � � � T C re n d s Cover try x Print Close • £ a publication of • Volume 5, Issue 4 April Q This issue of Tech Trends is sponsored by RMC Project Management. Nom na. p y irect Illanagernant 0101 1010 RMC Project Management is a Minnesota-based company that has been training project managers for 12 years. Our courses were developed by Rita Mulcahy, PMP, the author of PMP Exam Prep. We offer a combo-class in Minneapolis, which includes the Project Management Tricks of the Trade (3-day) and PMP Exam Prep (2-day) courses. These are fast-paced intensive courses that guarantee you will pass the PMP exam. With the class you get Rita's RMC PMP Exam Prep system—PMP Exam Prep, PM FASTrack exam simulation software, and Hot Topics flashcards. Register today at www.rmcproject.com and use promo code EMMTMA4 to get $100 off tuition. Sign up for RMC e-mails with future classes, products and free project management tips at www.rmcproject.com. What Do OEMs Want? For potential small suppliers, knowing the answer makes all the difference. On the surface, it's not that complex: Large companies evaluate their current and potential suppliers on how they meet three traditional metrics: quality, on-time delivery, and price. Given the prevalence of cost-effective overseas outsourcing, Minnesota's small manufacturers are challenged to meet an OEM's (original equipment manufacturer's) bottom line. At the same time, the traditional metrics of value have changed. Quoted price is only one factor in sourcing decisions these days. More and more, large companies view the supply chain as a series of strategic partnerships—and it pays to know your role. OEMs have discovered that the most desirable suppliers share traits that are not always easy to quantify in dollars or hours. According to a recent MTI business forum presentation by the Toro Co., these traits include: http://www.minnesotatechnology.org/publications/techtrends/2004/April/printVersion.asp 4/21/2004 TechTrends e-Newsletter I April 2004 Page 2 of 5 • A commitment to improving manufacturing processes 111111 • A long-term strategic plan • . Reliable communication • Strong I.T. In other words, large companies want their supply partners to be stable, responsive, and innovative at every stage of the manufacturing cycle. And they're • willing to focus their resources to nurture a few valuable suppliers, rather than v jumping from one low quote to the next. In supply management lingo, it's called Extended Enterprise . Back in 1999, Daimler-Chrysler trademarked the term, • defined by John Deere's Paul Ericksen and industrial engineering professor Rajan Suri as the process of"extending business relationships by providing process management consultation and workshops to suppliers in order to reduce cycle time , to minimize system cost , and to improve the quality of the goods or services provided by suppliers."The OEM offers the strategic supplier nearly as much guidance and technical support as it would an internal department; in exchange, the supplier participates in its industry's best practices and takes an active role in enhancing its products for the OEM. Both the OEM and the supplier conduct regular audits and self-assessments to make sure that cycle-time goals are met. It's a "give-give" relationship, in which both parties strive to stay close to the end-product customer while limiting waste. Mike Klonsinski, center director for Wisconsin's Manufacturing Extension Partnership (WMEP) in Madison, emphasizes the latter. "Lean is the underlying ideology," he says, noting that large OEMs expect potential suppliers to be well-versed in lean from the outset, "and Manufacturing Extension Partnerships have become a valuable tool—we bring lean expertise, an outside perspective, a relationship to the OEM, and links to support resources." By participating in supplier-development workshops and seminars (such as those sponsored by MTI or the WMEP), small manufacturers can gain insight into large- company supplier relationships before approaching the OEM. After all, knowing what the buyer wants is the critical first step for any sale. • U Tech Notes Technology business news from around Minnesota. Twenty of the state's manufacturing associations have joined to form the • Minnesota Manufacturing Coalition , as announced earlier this month at the • "Manufacturing Tomorrow" summit held in Minneapolis. Erick Ajax , former district director of the Precision Metalforming Association , and Charles Arnold , • executive director of the Minnesota Precision Manufacturing Association , will lead the group. The coalition grew out of the state's Department of Employment and Economic Development roundtable discussions convened last fall by Governor Tim Pawlenty . The group, which will meet bimonthly, will be hosted by the Minnesota Chamber of Commerce . Minnesota's exports of manufactured goods set a new record in the fourth quarter of 2003, rising 17.3 percent over the same quarter of 2002 to $2.9 billion. http://www.minnesotatechnology.org/publications/techtrends/2004/April/printVersion.asp 4/21/2004 TechTrends e-Newsletter I April 2004 Page 3 '24'5 f 5 Total national exports grew by 8.6 percent in the same period. Minnesota's top two 111 export sectors were computers/electronics and medical devices. Mississippi Topsoils , a Cold Spring-based compost manufacturer, has announced that it will expand its product line of composts made from community tree trimmings and poultry processing coproducts, which the company acquires from the adjacent Gold `n Plump poultry plant. The company also supplies organics recycling services to private and public agencies. Northfield's St. Olaf College , a private college with 3,000 students, has received approval from the Minnesota Public Utilities Commission to start its own telephone company. According to St. Olaf's director of communications Craig Dunston, the college plans to sell its services to Northfield's businesses, but could expand to residential service if successful. The as-yet unnamed company will publish phone rates once it completes negotiations with Qwest Communications International , from which it will lease its phone wires. Detroit Lakes-based S)E Rhombus , a manufacturer of liquid level controls, has debuted a new line of pump control panels, Installer Friendly SeriesTM. The new • panels will be available for simplex, duplex, timed dose, and demand applications. San Jose, Calif.-based Calpine Corp. has entered into a 20-year agreement to provide electric power to Minneapolis-headquartered Xcel Energy . Still subject to approval from the Minnesota Public Utilities Commission , the agreement was awarded to Calpine after a bidding process initiated in 2001. Under the contract, • Calpine will build, own, and operate a new electric power plant in Mankato, reports Xcel. Service from the 365-megawatt plant is scheduled to begin in 2006. Northfield's Carleton College will purchase a 1.65 megawatt wind turbine, reports the college's Board of Trustees. Scheduled for construction this summer on farm • land 1.5 miles east of campus, the turbine is expected to begin operation in September 2004. According to the college, the turbine is projected to produce more than 5 million kilowatt-hours of electricity annually. Carleton plans to sell the energy to Xcel Energy for use on its power grid. Pequot Lakes-based Hunt Technologies Inc. has been chosen by the Habersham • Electric Member Cooperative in Clarksville, Ga., to install its power line meter- reading units throughout the Clarksville service area. Hunt Technologies manufactures cost-effective automatic meter-reading systems for the utilities market. Habersham Electric joins more than 450 Hunt Technologies customers • worldwide. • Earlier this month, Hibbing and Virginia Public Utilities initiated a plan to produce biomass energy by converting wood-based fuel to power boilers in both towns. Under the plan, Virginia and Hibbing would supply 15 and 20 megawatts of power, respectively. The companies estimate that shared up-front development costs for the project will run between $763,000 and $1.28 million. If completed, the project will create around 100 new jobs and preserve 70, report the parties. CaLendc • MTI Consulting Services Overview The following free meetings offer a concise way to learn about MTI's wide range of consulting services and how they can help your business. http://www.minnesotatechnology.org/publications/techtrends/2004/April/printVersion.asp 4/21/2004 TechTrends e-Newsletter I April 2004 Page 4 of 5 • Value Stream Mapping: Executive Overview • Dates: 4/23 . Times: 11:30 a.m.-1:30 p.m. Rosemount Locations: 4/23—Dakota County Technical College, Rosemount, Minn. • Cost: $39 Rosemount (includes lunch) Contact: Teressa Svoboda, 612-373-2900 Best Business Practices: Business Systems Selection Executive Overview Date: 5/11 Time: 7:30-10 a.m. Location: Pearl Conference Room, Minnesota Technology, Inc. Cost: Free Contact: Teressa Svoboda, 612-373-2900 Leap of Strength: The CEO Adventure Dates: 4/19, 4/20, 4/21 Times: 9 a.m.-12 p.m. Owatonna; 8-11 a.m. Bloomington; 9 a.m.-12 p.m. St. Cloud Locations: 4/19—Owatonna University & Business Center, Owatonna, Minn. 4/20— Normandale Community College, Bloomington, Minn. 4/21—Holiday Inn, St. Cloud Cost: $149 Registration deadline: April 14 Contact: Teressa Svoboda, 612-373-2900 Great Lakes Biomedical Conference: From Vision to Reality—Taking Emerging • Technologies to the Marketplace Date: 6/4 • Time: TBA Location: Medical College of Wisconsin, Milwaukee Cost: $175 before 5/14; $225 after 5/14 Contact: www.eng.mu.edu/glbc; 608-833-5963 This event will focus on emerging technologies under development at leading research institutions in the Midwest, and identify strategies for driving these technologies to the marketplace. Perspecove • Search Engine Optimization Tips Want the world to see your Web site? Make sure search engines can see it first. Inverse relationship: As the Internet continues to grow exponentially, the chances of a single Web site getting noticed diminish. In short, the Web is so big and so complex—more than 4 billion pages at last count—that it's extraordinarily easy for a company's Web site to get overlooked. And that's a problem, as even the most • superbly designed, well thought-out Web site is useless unless the world sees it. One solution: Search engine optimization. In a nutshell, the term refers to designing a Web site in a way that will allow and encourage Google, Hotbot, AltaVista, and other search engines to rank it high in their search results. What makes that so • important? T he Web search is the most common way for Internet users to dig up information. More than 150 million people use the Web in the United States, and 76 percent of them use search engines on a regular basis. http://www.minnesotatechnology.org/publications/techtrends/2004/April/printVersion.asp 4/21/2004 TechTrends e-Newsletter j April 2004 Page 5 of 5 How can you make sure your company's Web site appears in search engine results? Consider these four tips as a starting point: 1. Choose the right keywords —i.e., the ones that accurately describe your business—and emphasize them on your site in ways that search engines will notice. Search engines work in part by examining page names and onscreen text. Words that appear frequently or near the top of the page receive special attention, as do terms set apart as section headings, or in boldface. 2. Find the right title tag. A Web page's title tag—the little tag at the top line of a Web browser —for your page is a crucial element, as most engines place a high level of importance on keywords that are found in it. 3. Go easy on the sizzle. While dynamic content and multimedia files will add flash and pop to your site, they also can make it harder for search engines to find it. In fact, many search engines can't index multimedia and dynamic pages. 4. Keep it fresh. Search engines favor Web sites with up-to-date information. Regular, substantial site revisions can keep your pages at or near the top of search result lists. These are by no means the only tactics you'll need to make sure your site gets seen. For more information, check out these sites: • http://www.searchenginestrategies.biz/ • http://www.searchengineguide.com n • http://www.webworkshop.net/search engine optimization basics.html • http://www.search-this.com/ • http://websearch.about.com/library/weekly/bl-seo101.htm? pm=ssll websearch • http://dir.yahoo.com/computers and internet/internet/world wide web/ site announcement and promotion/search engine optimization seo / MTI also can help; our Internet technology/e-business solutions team specializes in helping manufacturing and technology companies harness the power of the Web. For more information, go to www.minnesotatechnolooy.org/business/IT ebusiness.asp , or call (612) 373-2900 or (800) 325-3073 and ask for Craig Berdie or Jan Hepola. a NIST Network MIP Affiliate Home I Contact Us I Site Map I Privacy Policy I Terms of Use © 1994-2004, Minnesota Technology, Inc., All rights reserved webmasterOmntech.org 111 PHONE: 612-373-2900 FAX: 612-373-2901 http://www.minnesotatechnology.org/publications/techtrends/2004/April/printVersion.asp 4/21/2004 0 Nillk Sherburne County ADMINISTRATOR BRIAN BENSEN 13880 Highway 10 Elk River, MN 55330-4601 April 23,`2004 (763)241-2701 01-800-433-5229 website: www.co.sherburne.mn.us To: SCEDA Members email:'admin@co.sherburne.mn.us Economic Development Associates From: John Babcock, SCEDA Chair Brian Bensen, County Administrat y, Re: Alex Wikstronl As some of you have heard, Alex resigned from his position with Sherburne County this week. <Although change can be surprising and difficult at times, we can take this as an opportunity to review our programs and efforts. The issues involving Alex's decision are not based on any change in County policy or support of economic development efforts. The County remains committed to growing a balanced tax base. Your help and expertise are very important. We have a SCEDA meeting next Wednesday at 7 AM at the Government Center(Maple Room) which will go on as planned. In addition to on-going business,we will have an opportunity to discuss our' suggestions for Mr. Bensen in providing staffing for SCEDA in both the short and long term. See you Wednesday. An Equal Opportunity Employer 41) City of Elk -�-1 River MEMORANDUM TO: Economic Development Authority FROM: Catherine Mehelich, Director of Economic Development (7 DATE: May 10, 2004 SUBJECT: 2003 Annual Report Attachment • Economic Development section of the City 2003 Annual Report The 2003 Annual Report was presented to the City Council at its May 3,2004 meeting. The attached Economic Development section includes a summary of the EDA's activities during 2003. The entire Annual Report is available online on the city's Website, at www.ci.elk- river.mn.us and will be broadcast on the city's cable channel. • • ECO DEVELOPMENT EE ' MISSION STATEMENT: Our mission is to actively participate in economic development by utilizingEconomic Development available2003Annual Report resources to leverage viable and healthy investments in our community. Such investments will create diverse job opportunities as a result of a stable and growing business and industrial base. We will strive to provide quality services, maintain a favorable tax rate, supply full-cycle housing options for our residents, and foster an environment that will result in substantial growth of our local economy. In addition, the strategic industrial marketing mission is to become the Light Industrial Hub of the Northwest Metro. YEAR IN REVIEW ECONOMIC DEVELOPMENT AUTHORITY 2003 Inquiry/Prospect Report The Economic Development Department responded to a total of 75 inquiries in 2003. Approximately 61% of the inquiries were industrial related. Most of the inquiries were regarding medium size buildings (10,000— 29,000 square feet) requesting equally land/buildings or lease space. The 2003 inquiry total is consistent with the 2001 total. • While the total amount of inquiries was down in 2002 (46 total) the increase in 2003 is a positive reflection in the economy. Many 2003 inquiries were merely preliminary or early stage site searches. 2003 Advertising & Public Relations Campaign The advertising campaign in 2003 was consistent with 2002 advertising in order to make a stronger impression on Elk River as the Light Industrial Hub of the Northwest Metro. Advertisements were place in the MN Real Estate Journal, The Business Journal, and MN Real Estate Journal's Leasing Guide. The advertisements featured all new photos of Cymbet Corporation, Tescom, E& 0 Tool and Plastics, Metal Craft Machine & Engineering, and Sportech. A new economic development newsletter was developed in 2003. January, May and November editions highlighted issues important to manufacturers and site selectors. New Partnership Program with MN Technology, Inc. A new incentive program was developed in partnership with MN Technology, Inc. (MTI) thanks to a $5,000 matching grant to the EDA from the Initiative Foundation. This program, the Technical Assistance & Operations Consulting Program, provides companies up to $2,000 for technical assistance services. The purpose of the program is to improve the city's industrial retention and recruitment efforts by providing existing and prospective Elk River manufacturers the skills for workforce productivity and profitability. Companies must contribute 25%towards the services. • Economic Development 2003 Annual Report S In October, the City of Elk River participated with the MN Department of Employment & Economic Development(DEED) in the recognition of MN Manufacturing &Technology Week. The recognition event included tours of Cymbet Corporation and Marketech, followed by a luncheon/keynote speaker address at Elk River Country Club. Elk River was honored that DEED Commissioner Matt Kramer attended the event. In addition, a full-page advertisement was featured in the Elk River Star News thanking the list of local manufacturers for their contributions to the community.The Economic Development booth was also rotated in four local banks. The booth featured photos and a list of local manufacturers. In November, the City of Elk River participated as a co-sponsor of the MN Real Estate Journal New Urbanism and Redevelopment conference.The conference focused on new urbanism design, redevelopment trends and opportunities and challenges faced when considering the development of a new project in a community. The Director of Economic Development was a presenter highlighting the Elk River Downtown Revitalization Project. Participation in the event was a strategy for building relationships with key accounts including, Colliers-Towle, Opus NW, CRESA Partners, Northco, United Properties, Cushman &Wakefield, Welsh Companies, Ryan Companies and Kraus-Anderson. Energy City Marketing °le Marketing Events Staff coordinated the Rogers High School Open House event for Energy City. The high school was recognized as a high-performance and Energy City's 2003 demonstration site. New Energy City brochures (informal and formal) were designed in 2003 as well as the Energy City Web site. The informal brochure and Web site were updated several times in 2003. Economic Development Web Page Updates were made throughout 2003 to the Economic Development page of the City's Web site located at www.ci.elk-river.mn.us. A link was added to the City's home page for Industrial Sites information. The Economic Development Web page includes: • Site Location Assistance (listing of Business Park and Industrial land details) • Business Financing Information • Business Incubator Program • Downtown Redevelopment Activities • Housing Rehabilitation and Assistance Referrals • Energy City • Community Profile • Economic Development Newsletter Economic Development Micro Loans The EDA approved one new loan application in 2003. A $50,000 loan was provided to Lake Assault Custom Boats for the purchase of machinery and equipment necessary to begin operations in Elk River. The company operates within the Decker Building located on East Highway 10. The loan is structured as a participation loan with The Bank of Elk Economic Development 2003 Annual Report • River. The company committed to creating 2.5 new full-time jobs at no less than $17.00/hour within 2 years. Several previous loans were paid off and closed out in 2003, including Carpe Kairos (Custom Cutter), Sportech, Beaudry Convenience, David Decker, Ink Wizards, Pro-Tech Engineering, Riverside Manufacturing, and Tescom. The EDA agreed to and received a final settlement with the owner of Northstar Die Casting. Two loans were granted two year extensions, including Barder (Olde Main Eatery Building) and M&A Investments, LLC (Ultra-Image Building). Seven micro loans remain in current standing. The loan fund ended with an approximate $789,273 cash balance in 2003. The EDA Finance Committee also provided recommendation and EDA approved several amendments to the Micro Loan Policy, including: • Established an interest rate floor of 2% for each financing program. • Revised wage goal for the Supplemental Financing Program from a minimum wage of$8/hour to $9/hour. • Addition of"investment real estate" as a permitted fund use, with a 50% pre-lease requirement. • Addition of hook-up to city services as an improvement that may be required for the request of public funds for building expansion/improvement projects. MN Community Capital Fund Participation Staff remains an active participant of the MN Community Capital Fund, including the Director of Economic Development's election to the Fund Board of Directors for a 3- year term. In 2002 the City became a member of the MN Community Capital Fund (MCCF). The MCCF is a new non-profit membership corporation established to increase the lending capacity of economic development groups specifically throughout Greater Minnesota. The City's membership deposit of$50,000 allows the City the capacity to originate multiple loans of up to $500,000. The program provides the City the flexibility to fund large housing and economic development projects that would otherwise not be possible through the City's typical micro loan program. In addition, the loan applicants may request the partnership and sponsorship of Sherburne County, Great River Energy along with the City membership for a maximum loan up to $1, 075,000. Sportech, Inc. Expansion Project A highlight of 2003 was the Sportech, Inc. expansion project. Local manufacturer, Sportech, Inc., designs, produces and markets accessories for the recreational vehicle industry. The project marked the company's third expansion in Elk River since it was founded in 1993. Sportech doubled their operations by constructed an additional 20,000- square foot building on its I0-acre site located along Jarvis Street. Economic Development staff coordinated a MN Investment Fund grant application to the MN Department of Trade & Economic Development for $200,000 that would be provided as a 2% loan to Sportech, Inc. for the purchase of new equipment necessary to the expansion. The loan supplemented other sources of private financing and leveraged city participation in the project. Sportech, Inc. committed not only the tax base increase from • the building project, but also to the creation of up to 15 new jobs at not less than Economic Development 2003 Annual Report • $1 2/hour wage. At the end of 2003 the company had hired at least half of the new positions. In addition, Sportech, Inc. was recognized as the Chamber of Commerce 2003 Manufacturer of the Year. It is important to note that as Sportech, Inc. repays the loan to the city, the city is allowed to revolve the funds for other economic development uses. Industrial/Business Park Development In early 2003 the EDA directed staff to work with Ehlers &Associates to complete an analysis of the industrial/business Park development options, including privately owned and city-owned properties. The analysis was in response to staff experiencing two primary barriers to successfully recruiting small to medium sized light industrial developments in Elk River. The two barriers are availability of 1.5 — 2 acres lots and land costs. The EDA Marketing Committee participated in the analysis. The EDA directed staff to work with the landowners of the following business parks for their interest in participating in a competitive marketing strategy for light industrial development: o Elk Path Business Center—west business park o Elk River Business Park—east business park The landowners have indicated interest in participation and staff continues to work closely with Ehlers &Associates to prepare a master development agreement between the EDA and the two private business parks. Industrial Business Retention & Expansion Visits The Assistant Director of Economic Development and EDA Commissioners completed eight visits in 2003. Per the 2002-2004 Strategic Industrial Marketing Plan, the format of the visits was changed to informal breakfast or lunch visits, followed by plant tours. A two-year rotating scheduled was also developed so that companies are not contacted too often. The purpose of the visits is to assist in the fulfillment of the City's goal to retain and grow existing industries in Elk River. Business Incubator Program The EDA has been operating the Business Incubator Program in conjunction with Genesis Business Centers since 1976. The goal of the business incubator program is to develop long-term relationships with young, growing companies that have an emphasis on new technologies and to help these companies become established in Elk River. Since the program's inception, 9 companies have entered the incubator to further develop their products and grow their business. In early 2003 the EDA approved a 2-year extension on the Business Incubator lease with Mr. Larry Hickman. The extension term expires April 15, 2005. The EDA reduced the number of leased suites from six to three. The renewed lease rate includes a fee for building maintenance and cleaning to be managed by Mr. Hickman rather than the city. In addition the EDA approved a payment increase for professional services provided by Genesis Business Centers/Harlan Jacobs. Two renewals were granted in 2003 to Incubator tenant, KnowledgeNetica Corporation. KnowledgeNetica develops intelligent software to interpret and translate written and Economic Development 2003 Annual Report • spoken human languages. The software has a number of key applications for commercial, government, military, and personal use. In September, the EDA welcomed a new Incubator tenant, Lap2 Technology Corporation. Lap2 is a developer of high-end, integrated web server and data management software suites targeted to specific businesses, consumers, and organizations. The software suites standardize web and data management functions, which today are realized only through the use of outside consultants and custom-built, one-off web sites and databases. In 2003 staff continued to maintain a close relationship with incubator graduate, Cymbet Corporation for their anticipated expansion project in Elk River. HOUSLNG & REDEVELOPMENT AkUTHORITY Housing Work Plan A Housing Work Plan was developed in early 2003 to gather information and examples of housing programs and partnership possibilities. The following presentations occurred each month to accomplish this goal: • Minnesota Housing Finance Agency • • City of Fridley • St. Cloud HRA • Central MN Housing Partnership • Tri-CAP • Habitat for Humanity • Housing stock inventory/analysis of Elk River presented by the Planning Department • Informal/non-scientific survey of Elk River manufacturers and retail/service businesses regarding housing availability and affordability issues. Downtown Revitalization Project In late 2001 the HRA developed goals and objectives for the Downtown Revitalization Project. The goal of the project is to enhance downtown Elk River as a vibrant retail, commercial and residential area and revitalize private investment downtown. Objectives of the project include retaining the traditional character of downtown, better utilize the riverfront, ensure safe pedestrian and vehicle movement, and provide sufficient parking. Following a request for proposals and interview process the HRA selected MetroPlains Development as the project developer in August 2002 and entered into a preliminary redevelopment agreement together. In early 2003 the HRA held a joint meeting with the Heritage Preservation Commission regarding recommendations of local historic significance in the downtown area. While the HPC noted many of the buildings in the downtown are of local historic significance, • the HRA directed the developer and staff to proceed with the original proposal area— including the west Brick Block (east King Avenue and the northeast corner of King and Economic Development 2003 Annual Report i Main), and the Bluff Block(southwest corner of Main and County Road 42 Bridge). The HRA also provided feedback regarding the draft downtown district zoning standards. A fair amount of time was taken to work with the west Brick Block to see if it could be made to work. When it didn't work, the developer's focus changed to one of its original RFP concepts for the Jackson Block where issues existed, including I) replacement parking, 2) concern of historic significance. Mid-2003 MetroPlains presented the HRA and Council the design concepts for the Brick Block(Nadeau's through The Jungle) and Jackson Block(northeast corner of Main Street and Jackson Ave). The plan for the Jackson Block includes about 10,000 square feet of first floor commercial along Main Street and Jackson Avenue; approximately 66 underground parking stalls, and two stories above the commercial space holding 32 rental housing units. The plan for the Bluff Block includes about 10,000 square feet of commercial space along Main Street; a three-to-four story building with 70 to 80 underground parking stalls; 52 units of for-sale housing, and a river walk connection to a city park built along the river. The HRA directed MetroPlains to proceed in taking the design concepts to a public open house for feedback. Staff researched and responded to a list of issues including, but not • limited to replacement parking options, residential tenant mix, and Jackson Block title. The HRA directed staff and MetroPlains to begin work out the details of a development agreement. In addition MetroPlains submitted application and was awarded a Multifamily and Housing Tax Credits from the MN Housing& Finance Agency for the residential component of the proposed Jackson Block project. In support of the Jackson Block residential component and downtown property rehabilitation, the City submitted a Small Cities Development Program application to the MN Department of Employment & Economic Development. Grant funds awarded from the application would be used toward commercial and residential rental rehabilitation and the proposed new residential rental construction in the Downtown Revitalization Project Area. The next steps will involve working out issues as part of a development agreement that would then authorized the proposed projects to proceed through the regulatory process for land use, DNR, and TIF approvals. Communication with the public has been a key component of the Downtown Revitalization Project. The multiple means of communications continued in 2003 to including the following • Project updates on the City Website • Q &A inserts and project coverage in the Star News • Project update articles in The Current • Monthly updates to River's Edge Downtown Association group • • Monthly HRA/Council meeting updates • Direct mailing of meeting notices 2003 Annual Report • DEPARTMENT STAFF Catherine Mehelich June 2000 Dec. 2001 Director of Economic Development Executive Director, Economic Development Authority Executive Director, Housing& Redevelopment Authority Heidi Steinmetz Assistant Director of Economic Development Support Staff Tina Allard, Executive Secretary Jessica Miller, Secretary Debbie Huebner, Administrative Planning Assistant Economic Development • • Economic Development 2004 GOALS 2003 Annual Report • The Economic Development Strategic Plan will be updated jointly by the EDA, HRA, and the City Council in early 2004 for implementation years 2004—2007. The most recent (1999) Economic Development Strategic Plan includes the following major goals: I. Industrial Base • Attract new business to increase the city's industrial base II. Business Retention and Growth • Retain and grow the city's existing business/industry III. Marketing Strategy • Create and implement an industrial strategy to develop the city's business parks IV. Develop/Redevelop East Highway 10 and the Central Business District • Undertake activities that facilitate development/redevelopment on East Highway 10 and in the Central Business District • • Economic Development 2003 Annual Report • The Strategic Industrial Marketing Plan will assist the city in addressing several major issues and goals identified in the City of Elk River Economic Development Strategic Plan. CITY OF ELK RIVER STRATEGIC INDUSTRIAL MARKETING PLAN GOALS 2002—2004 MARKET STRATEGY,OBJECTIVES AND POSITIONING • To establish the City of Elk River as the hub for light manufacturing firms in the northwest metro region of the Twin Cities by 2005. • To build out East and West Business Parks with a range of building sizes that meets the City of Elk River's design standards by 2010. • To target the following Standard Industrial Classification sectors: Industrial Machinery, Fabricated Metal and Electronic Equipment. CORE STRATEGIES • Product Offering To provide excellent location site services, attractive land locations, and pricing that reflects a good-value and competitively priced product. • Competitive Strategy To collect and maintain current information on key competitive communities including land price, available land with utilities, and local incentives. • Key Account and Lead Generation Strategy To establish the City of Elk River as the place to site a light-manufacturing firm with economic development key influencers, leaders, and providers. • Promotion and Advertising Strategy To promote that the City is "Open for Business"and to generate leads for the East and West Business Parks. • Public Relations Strategy To create awareness that the Gty of Elk River is a business-friendly community for light manufacturing firms. • Strategic Partnership Strategy To establish strategic partnership to support long-term Economic Development in the area. • Business Retention Strategy • To retain and expand the current industrial base in the City of Elk River. S Purpose 2003 Annual Report • Downtown Revitalization Project Project Goal & Objectives Economic Development For more than 30 years, various studies and proposals have examined the need to redevelop Elk River's downtown business district. Investment in the downtown has stagnated and area businesses and residents alike are concerned about the need to revitalize downtown and attract people there. Neighborhoods age, and change will occur whether or not the city intervenes. Controlling that change through revitalization and redevelopment will ensure that the types of changes that occur in downtown Elk River are the ones people want those that will keep our community vital and flourishing. Primary Goal To assure the long-term viability of downtown by making a connection to the rest of the community and by utilizing the riverfront location. Redevelopment will enhance downtown Elk River's role as a residential, retail, and commercial area and also revitalize investment in the downtown business district. Development Objectives • Mixed Use (residential/retail/service) • Consideration of the historic context study results • Strengthen connection to the community • Traditional downtown design elements • Brick, stucco, stone materials with visual breaks in the building design • Increased residential density • Pedestrian orientation • Increase exposure to the riverfront • Recognize those buildings that have potential for rehabilitation • Replace market/economic obsolete buildings • Multiple types of housing products (i.e. townhomes, senior rental coops, market rate apartments) • ,/, LC�f�li City ofPROJ ION Elk -�--, JULY 2003 Enhancing Downtown Elk River's Role As a Vital Retail,Coil In and Residential Area Primary Goal of Downtown Revitalization Project: To assure the long term viability of downtown by make ing a connection to the rest of the community and by -411, talk k utilizing the riverfront location. Redevelopment will enhance downtown Elk River's role as a residential, retail and commercial area and also revitalize invest- ment in the downtown business district. -: E Development Objectives: p Stw• Mixed use(residential/retail/se t; • Consideration of the historic context study results � 44. t �_, • Strengthen connection to the community � �� : � . • Traditional downtown design elements M , t • Brick, stucco,stone materials with visual breaks ina. the building design • Increased residential density , et �`= ` • Pedestrian orientation • Increase exposure to the riverfront ��- • Recognize those buildings that have potential for rehabilitation ♦BLUFF BLOCK DEVELOPMENT • Replace market/economic obsolete buildings • Multiple typesof housing products (i.e.townhomes, senior rental coops, market rate apartments) �s < • + BLUFF BLOCK DEVELOPMENT — 10,000 s.f. commercial on first floor along Main Street($13/s.f.avg. rent) — 52 units of for-sale housing iii Er • — 3 and 4 stories — 70 80 below grading parking stalls for housing �• - ( &commercial residents t _ �� , „f — Connection to City's Riverwalk development ♦ JACKSON BLOCK DEVELOPMENT0. f�.e 4-4 , � � Att — 10,000 s.f. commercial on first floor along ° g� 35e+Ybas " i k er: 'e` k • Jackson Street and at the corner of Jackson = "� 1.0,1 I c'. • and Main � � — 32 units rental housing (16 1-bedroom units at $600 per month &16 2-bedroom units ,. at$700 per month) • • - 3 stories " — Up to 52 below grade parking units for housing residents and commercial and 18 surface units ♦JACKSON BLOCK DEVELOPMENT w F ii r0. • !1a1�/1 o �✓ Q1 O N air bi 0 N tri_24, Gam"0 .,Q 0fc' 44I • A.,> 4S' IC C°034 W • NOS Dbr C 1 O imi °./, ,y,,,,/,:;:c.,/,,, ie—,, II H • N 9r / ,4,,,• ,,T /� 0 I H „:::::,,,,7: SIVSIN 21.1 H • O � w ll, 4IS All 41 flpilitiiiiiira4V IcCY i .. p• 01 maiiimaississ Economic Development 2003 Annual Report • STATISTICS Inquires 80 75 75 0 2001 70 2002 _ 60 • -- ❑ 2003 — 48 50 40 30 29 34 30 2017 21 — l0 10 — � 0 o Total Inquiries Commercial Heavy Light Industrial Industrial Light Industrial Size 20 III 16 15 13 13 11 M 2001 to 1 , 5 1 9 66 6 2002 ❑ 2003 II II li Small Medium Large Other Nature of Light Industrial Small 30 28 (< 10,000 SF) 2001 Medium 20 (10,000 SF—25,000 SF) 12L 13 9 11 2002 Large 10 _ g I 0 5 ❑ 2003 (30,000 SF+) 0 1 I Other (Spec/info) Lease Space Land/Building Other/$ •