6.0. EDSR 03-10-2003 Item # 6
•
City of
Elk -�-�
River
MEMORANDUM
TO: Economic Development Authority
FROM: Catherine Mehelich, Director of Economic Development
DATE: March 10, 2003
SUBJECT: Sportech, Inc. Expansion
Attachment
• Staff Report to City Council regarding Sportech, Inc. Expansion, dated 2-18-03.
Issue
Staff has been working with local manufacturer, Sportech, Inc. on the company's proposed
expansion project. Sportech, Inc. wishes to expand with an additional 20,000-square foot
freestanding building. The attached staff report dated February 18, 2003 to the City Council
• provides details of the project costs.
Staff presented the proposed project to the City Council on February 18, 2003. The City
Council unanimously approved authorizing staff to proceed with an application to the MN
Department of Trade &Economic Development MN Investment Fund grant in the amount
of$200,000. The grant to the City will be used to provide a sub-prime loan to Sportech, Inc.
for the purchase of equipment. Staff requests the EDA provide a recommendation on the
financing terms for the City Council's public hearing regarding the grant application
scheduled for March 24, 2003 at 6:30 p.m.
The terms of the loan are negotiable between the City and the company. DTED officials
advised staff that typically the interest rate and term is reflective of the community's micro
loan program. The City Micro Loan program includes a program to provide industrial
financing up to $100,000 at an interest rate of 4 points below prime. The Finance
Committee has recently discussed recommending that the EDA establish an interest rate
floor of 2% for all micro loan programs.
Recommendation
Staff recommends that the EDA consider recommending the following loan terms to the
City Council for the purpose of providing a loan to Sportech, Inc. with funds from the MN
Investment Fund grant:
Loan Amount: $200,000
• Loan Purpose: Equipment Financing
Term: 7-year amortization at an interest rate of 2%
Security: 1st lien position on the new equipment
F:\SHRDOC\Industrial Siting\Sportech Expansion\3-10-03EDA.doc
Item 1 4 . 6 .
6L,
City of (J
Elk
River
MEMORANDUM
TO: Mayor & City Council
CC: Economic Development Authority
FROM: Catherine Mehelich, Director of Economic Development '
DATE: February 18, 2003
SUBJECT: Consider MN Investment Fund Grant Application for
Sportech, Inc. Expansion
Attachments
• MN Investment Fund, Fact Sheet
• • Article: "Sportech Inc., Rank 14", The Business Journal Growth 50. Oct. 18, 2002.
Background
Local manufacturer, Sportech, Inc., designs, produces and markets snowmobile and ATV
accessories. The company's operation is located in the southeast corner of Elk River on
Jarvis Street. The attached recent article provides additional information about Sportech,
Inc.'s history and success. The company was founded in 1993. Sportech, Inc. has made
several expansions over a series of recent years in Elk River. The first expansion was from
the founder's garage to a 10,000-square foot industrial building in 1998. The second
expansion took place in the year 2000 with the addition of another 10,000-square feet.
Currently, Sportech, Inc.wishes to expand with an additional 20,000-square foot
freestanding building to be located adjacent to its present facility.
Issue
Sportech's expansion project includes the construction of a 20,000-square foot light
industrial facility to house a screen-printing operation, and the purchase of equipment
necessary for the screen-printing operation. The project includes the following elements for
financing:
Building Construction $ 750,000
Equipment + 250.000
TOTAL PROJECT $ 1,000,000
Sportech, Inc. currently employs 27 full-time, in addition to approximately 16 temporary
employees. The company anticipates hiring, within 2-years of the project, up to 15 new full-
time employees at a wage of not less than $12.00/hour plus benefits.
et_Trade & ,
conomc
Development
Minnesota Investment Fund
Purpose To create new and retain the highest quality jobs possible on a state wide basis with a focus on
industrial, manufacturing and technology related industries;to increase the local and state tax base
and improve the economic vitality for all Minnesota citizens.
How It Works Grants are awarded to local units of government who provide loans to assist expanding businesses.
Eligible Cities, counties,townships and recognized Indian tribal governments.
Applicants
Minimum All projects must meet minimum criteria for private investment, number of jobs created or retained
Requirements and wage thresholds.
Eligible Projects Loans for land, buildings, equipment and training are eligible. Funds may also be used for
• infrastructure improvements necessary to support businesses located or intending to locate in
Minnesota.
Ineligible Working capital, retail business and industrial park development.
Projects
Maximum $500,000. Only one grant per state fiscal year can be awarded to a government unit.
Available
Other Funds At least 50% of total project costs must be privately financed through owner equity and other
Required lending sources.Most applications selected for funding have at least 70%private financing.
Interest Rate Negotiated.
Terms Real estate a maximum of 20 years; machinery and equipment a maximum of 10 years.
Collateral Negotiated. Personal guarantees may be required.
Requirements
Applications On a year-round basis using the Business and Community Development application.
Accepted
Approving Minnesota.Department of Trade and Economic Development
40 Authority
-over-
.
•
500 Metro Square • 121 7th Place East • 1Pul, Minnesota 55101-2146 ■ USA
www.dted.state.mn.us 651-297-1291 • 800-657-3858 • t ' 9'6-4772 ■ TTY/TDD 800-627-3529
•
Disbursement As costs are incurred but prorated with other sources of funding.
of Funds
Contact Your regional representative at the Minnesota Department of Trade and Economic Development at
1-800-657-3858, or the office of Business Finance at 651/297-1391.
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