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7.0. EDSR 05-12-2003 ITEM # 7. City of Elk -�-� River MEMORANDUM TO: Economic Development Authority FROM: Catherine Mehelich, Director of Economic Development DATE: May 12, 2003 SUBJECT: Consider Micro Loan Extension — M & A Investments, LLC Attachments • Correspondence from M&A Investments,L.L.C. dated January 31, 2003. • Minutes from April 29, 2003 Finance Committee Meeting. • Proposed Amortization Schedule. • Background In March 2000 the EDA awarded a$50,000 Micro Loan at 7.75% to Mark&Alma Rothfork, owners of Ultra Image Powder Coating. The Rothforks own a multi-tenant building in the McChesney Industrial Park, of which the company occupies 13,500 square feet. The Micro Loan was used to expand the building. The loan was structured as a participation loan with First National Bank of Elk River. The balloon payment on this loan in the amount of$44,227.21 was due March 15, 2003. Prior to the due date Mr. Rothfork provided staff the attached written request for the EDA's consideration of a two-year extension. In addition,Mr. Rothfork's lender has submitted a letter regarding its inability to refinance the Micro Loan portion at this time based on the project's loan to value. In April the EDA granted a 3-month extension to allow the Finance Committee time to review the extension request. The Micro Loan Fund Policy allows for a 2-year extension at a market rate of interest. Finance Committee Recommendation The Finance Committee reviewed and discussed the extension request at its April 29th meeting. There was much discussion by the Finance Committee due to the precedence that this request may have on a policy regarding the use of the Micro Loan Fund for"investment property"-property that is not owner-occupied by an eligible business. Mr. Rothfork has indicated his intentions to relocate his business, Ultra Image Powder • Coating to a building that he has constructed in the Big Lake Industrial Park. The reason for Micro Loan Extension Request—M&A Investments May 12,2003 EDA Page 2 of 2 • the move is due to a lack of space in his Elk River building for equipment necessary to the business operation. Mr. Rothfork currently leases out 5,000 square feet to light industrial tenants. His intentions are to continue to own the building and to lease out the space that Ultra Image will be vacating. It was the consensus of the Finance Committee to recommend that the EDA approve a 2-year extension of the Micro Loan to M&A Investments,L.L.C. with the following conditions: • M&A Investments,L.L.C. to guarantee, on behalf of tenants, that the original Micro Loan job creations goals of 8 full-time equivalent positions at a minimum wage of $9.00 per hour, exclusive of benefits, are maintained over the 2-year extension period. Job and wage status would be certified annually upon request by the Economic Development Department staff. • Interest rate of 7.75%be continued and EDA staff to consider an increase adjustment to the monthly repayment schedule. Action Requested Staff requests that the EDA consider approval of a 2-year extension of the Micro Loan to M&A Investments,L.L.C. with the conditions recommended by the Finance Committee. • or 15 03 10: 04a ULTRA IMAGE 612-441 -5822 p. l ■ ■ .n APR. 14. 2003: 12: 13PM L ELK._,RJVER_C?TY_HALL 6x2-4a1 'sallo. 620 P. 3 p. I • ■ ■• U . ■ M&A Investittents, LLC 4985 135' Ave Clear Laktm, MN 55319 January 31,2003 Catherine Mehellch Director of Economic Development 13065 Orono Parkway Elk River, MN 55330 Uear Catherine, This letter is to request an extension to the Mico Loan given to M&A Investments, LIC in Marth 2000 that ends Marsh 15,2Q03, As I explaine0 the lrttent of Ultra Image Powder Coating, Inc. is to relocate to a larger facility. I have met and exceeded all requirements this ken has requested and would like to repent the sam goals again but with muttlple tenants. At this time we have 4 prospects interested. The location and diversified Srse a and accommodation should suit most tenants. Therefore, I would like the EDA Committee to consider extending my loan. ryseifoe .„ Mari(G Rothfork M&A Invetments, LLC c s 0, 0 /-efS Alo tA.J u" iiautt. a/ a v Eea sect 3000 Sly _ . 0 f 1 0 ("n/v— A/11 �.✓ RA-TVA) 71 y ���� AOge a�.� ,� a ./ Ro 6a/-- S 710 5-5-`)/ k s 110 EDA Finance Committee Meeting Minutes • Tuesday, April 29, 2003, 4:30 PM Elk River City Hall Committee Members/Staff x Cliff Lundberg Jim Simpson x Dan Tveite x Chris Carlson x Jeff Gongoll _Tom McNair x Paul Motin x Catherine Mehelich-Staff x Heidi Hall-Staff Consider Loan Extension Request— M&A Investments, L.L.C. Director of Economic Development, Catherine Mehelich presented a summary of the loan and request being made by Mark Rothfork of M&A Investments,L.L.C. for a 2-year extension of his Micro Loan. In March 2000 the EDA awarded a$50,000 at 7.75% Micro Loan to Mark&Alma Rothfork, owners of Ultra Image Powder Coating. The Rothforks own a multi-tenant building in the McChesney Industrial Park. The Micro Loan was used to expand the building. The loan was structured as a participation loan with First National Bank of Elk River. The balloon payment on this loan in the amount of$44,227.21 was due March 15, 2003. Prior to the due date Mr. Rothfork provided staff a written request for the EDA's consideration of a two-year extension. Mr. Rothfork's lender has submitted a letter • regarding its inability to refinance the micro loan portion at this time based on the loan to value. Staff has recently received Mr. Rothfork's submission of current financial statements. The Finance Committee is asked to review the request and provide recommendation to the EDA regarding the extension. Ms. Mehelich stated that Mr. Rothfork has indicated his intent to relocate his business,Ultra Image Powder Coating to a facility he owns in Big Lake due to space constraints in his Elk River building. She indicated that Mr. Rothfork intends to continue to own the Elk River building and lease to multiple light industrial tenants. Staff notified and invited Mr. Rothfork to attend the meeting but he was not present. The Finance Committee discussed the following issues related to the extension request: • Review of the letter of request from Mr. Rothfork, financial statements, and letter of denial from First National Bank of Elk River. The Committee directed staff to verify the bank's loan to value on the project;has there been a recent appraisal? • The objective of the Micro Loan Fund is to create,boost and retain manufacturing jobs in the City of Elk River. Although the original job creation goals have been met and exceeded by Mr. Rothfork and his current tenants, the original job creation goals established for the loan should be certified annually and maintained over the 2-year extension period. If the job and wage goals are not met the EDA may have the right to call the loan immediately due. The original job goals include the creation of 8 full time equivalent positions at a wage of$9.00/hour exclusive of benefits. Mr. • Rothfork would be asked to guarantee the job and wage goals on behalf of his new tenants. EDA Finance Committee Meeting April 29,2003 Page 2 of 2 • • The loan has an interest rate of 7.75%. The Micro Loan Fund policy allows for a 2-year extension at a market rate of interest. It was the consensus of the Committee that the extension period maintains the original interest rate of 7.75%in recognition that the company,which applied for the loan,is now relocating. Committee members indicated that while it is valuable for the building to be made available for light industrial tenants, the loan application was directly tied to the business growth of Ultra Image Powder Coating in Elk River. • Committee members suggested that staff consider an increase adjustment to the monthly repayment amount on the loan. The current monthly payment is $473.33. A monthly payment amount of$650.00 was suggested depended on the owner's sufficient ability to cash flow the project. Following the discussion,it was the consensus of the Finance Committee to recommend that the EDA approve a 2-year extension of the Micro Loan to M&A Investments,L.L.C. with the following conditions: • M&A Investments,L.L.C. to guarantee, on behalf of tenants, that the original Micro Loan job creations goals of 8 full-time equivalent positions at a minimum wage of $9.00 per hour, exclusive of benefits, are maintained over the 2-year extension period. Job and wage status would be certified annually upon request by the Economic Development Department staff. • • Interest rate of 7.75% be continued and EDA staff to consider an increase adjustment to the monthly repayment schedule. Hearing no other business the meeting was adjourned at 6:30 p.m. Catherine Mehelich Director of Economic Development • ULTRA IMAGE POWDER COATING 110 MARK ROTHFORK $50,000 EDA MICRO LOAN Amortization Schedule Dated: March 31,2000 Payable to: City of Elk River Amount: $50,000.00 Due: Fifteenth of Each Month Interest Rate: 7.75% Term: 3 yr. Balloon -180 Months Amortization Payments: Monthly Principal &Interest Starting April 15,2000 Payment Total Unpaid Date Period Payment Principal Interest Balance Paid 50,000.00 4/15/00 25 473.33 204.23 269.10 49,795.77 4/7/00 5/15/00 30 473.33 151.73 321.60 49,644.04 5/11/00 6/15/00 31 473.33 142.02 331.31 49,502.02 6/12/00 7/15/00 30 473.33 153.63 319.70 49,348.39 7/14/00 0 8/15/00 31 473.33 144.00 329.33 49,204.39 8/15/00 9/15/00 31 473.33 144.96 328.37 49,059.43 9/14/00 10/15/00 30 473.33 156.49 316.84 48,902.94 10/18/00 11/15/00 31 473.33 146.97 326.36 48,755.97 11/15/00 12/15/00 30 473.33 158.45 314.88 48,597.52 12/19/00 1/15/01 31 473.33 149.01 324.32 48,448.51 1/29/01 2/15/01 31 473.33 150.00 323.33 48,298.51 2/12/01 3/15/01 28 473.33 182.20 291.13 48,116.31 3/12/01 4/15/01 31 473.33 152.22 321.11 47,964.09 4/11/01 5/15/01 30 473.33 163.56 309.77 47,800.53 5/18/01 6/15/01 31 473.33 154.33 319.00 47,646.20 6/4/01 7/15/01 30 473.33 165.61 307.72 47,480.59 7/19/01 8/15/01 31 473.33 156.46 316.87 47,324.13 8/13/01 9/15/01 31 473.33 157.51 315.82 47,166.62 9/13/01 10/15/01 30 473.33 168.71 304.62 46,997.91 10/25/01 11/15/01 31 473.33 159.68 313.65 46,838.23 11/21/01 12/15/01 30 473.33 170.83 302.50 46,667.40 1/4/02 & 1/7/02 1/15/02 31 473.33 161.89 311.44 46,505.51 2/14/02 2/15/02 31 473.33 162.97 310.36 46,342.54 2/14/02 3/15/02 28 473.33 193.99 279.34 46,148.55 3/11/02 4/15/02 31 473.33 165.35 307.98 45,983.20 4/15/02 5/15/02 30 473.33 176.36 296.97 45,806.84 6/3/02 6/15/02 31 473.33 167.63 305.70 45,639.21 6/13/02 7/15/02 30 473.33 178.58 294.75 45,460.63 7/25/02 • 8/15/02 31 473.33 169.94 303.39 45,290.69 8/14/02 9/15/02 31 473.33 171.08 302.25 45,119.61 9/19/02 10/15/02 30 473.33 181.93 291.40 44,937.68 10/22/02 11/15/02 31 473.33 173.43 299.90 44,764.25 11/14/02 Payment Total Unpaid Date Period Payment Principal Interest Balance Paid III 12/15/02 30 473.33 184.23 289.10 44,580.02 12/4/02 1/15/03 31 473.33 175.82 297.51 44,404.20 1/9/03 2/15/03 31 473.33 176.99 296.34 44,227.21 2/18/03 3/15/03 28 473.33 206.74 266.59 44,020.47 3/15/03 4/15/03 31 473.33 179.55 293.78 43,840.92 4/9/03 5/15/03 30 473.33 190.19 283.14 43,650.73 6/15/03 31 650.00 358.69 291.31 43,292.04 7/15/03 30 650.00 370.41 279.59 42,921.63 8/15/03 31 650.00 363.56 286.44 42,558.07 9/15/03 31 650.00 365.98 284.02 42,192.09 10/15/03 30 650.00 377.51 272.49 41,814.58 11/15/03 31 650.00 370.95 279.05 41,443.63 12/15/03 30 650.00 382.34 267.66 41,061.29 1/15/04 31 650.00 375.97 274.03 40,685.32 2/15/04 31 650.00 378.48 271.52 40,306.84 3/15/04 28 650.00 407.04 242.96 39,899.80 4/15/04 31 650.00 383.72 266.28 39,516.08 5/15/04 30 650.00 394.79 255.21 39,121.29 6/15/04 31 650.00 388.92 261.08 38,732.37 7/15/04 30 650.00 399.85 250.15 38,332.52 8/15/04 31 650.00 394.18 255.82 37,938.34 9/15/04 31 650.00 396.81 253.19 37,541.53 0 10/15/04 30 650.00 407.54 242.46 37,133.99 11/15/04 31 650.00 402.18 247.82 36,731.81 12/15/04 30 650.00 412.77 237.23 36,319.04 1/15/05 31 650.00 407.62 242.38 35,911.42 2/15/05 31 650.00 410.34 239.66 35,501.08 3/15/05 28 35,715.07 35,501.08 213.99 0.00 1)iiiiiik t 4 ,, fdNINTH DISTRICT FEATURE /y 2oo3 Manufacturin employment down 'z^'°'"'�`�'��`;��'28r in urban and rural areas •Egtwee. 22% •.5747Q,,e%pi;/3 /s V '2u.bh.� jP `/CA 5°7, By ROB GRUNEWALD overall Minnesota trend in urban/rural with MSAs in the mid-1990s and deeper Regional Economic Analyst manufacturing employment include fab- rates of decline in mid-2001 through ricated metal products, industrial 2002. © GO1111 The recession in the U.S. economy dur- machinery and equipment, instruments In July 2 ing 2001 hit the manufacturing sector and related products, paper and allied Visit minneapolisfed.org for detailed charts vacancy hard nationally and in the Ninth District. products, and rubber and miscellaneous of district manufacturing employment. Februar' Over 117,000 district manufacturing jobs plastic products. All of these industries percent, were lost between the sector's peak in demonstrated stronger growth in rural Eva Lassemo, research assistant, contributed The Sio August 2000 and December 2002, a 4.4 manufacturing employment compared to this article. the nati( percent annual decrease. national However, recent declines in manufac- slow ecc DISTRICT MANUFACTURING' EMPLOYMENT wring employment come in the context . labor m of an industry that has displayed softManufacturing Employment as a Percent Annual Percent Change uncertai employment growth for decades. of Total Nonfarm Employment During Decade moving Manufacturing employment hasn't kept 35 3.5 money. par th overall employment. From Employment But a: 195 o 2000 district manufacturing 30 IN Percent Change 3 0 least,wa employment increased 1.1 percent at aning boo] 2.5 annual rate, while total nonfarm 25 permits employment increased at a 2.2 percent20 1 I IIII 111111111111112 0 ble the fi annual rate. In addition, the percent15 ® to an o share of district manufacturing employ- 5 accordin 1. ment as a percent of total nonfarm1Low is employment decreased from 30 percent 0 1 •® ' PI 1 0 cal quirt in 1950 to 17.5 percent in 2000. 5e. IN In 5 cally low Some have expressed concern that renters I recent declines in manufacturing UTI1ing to a employment have hurt firms in rural 0 0 rental u areas more than manufacturers in urban 1950 1960 1970 1980 1990 2000 make it areas. However, recent decreases in dis- finance trict manufacturing employment were plexes, a generally spread evenly, among urban MINNESOTA MANUFACTURING EMPLOYMENT doing ju and rural areas. (Based on manufactur- (Percent Change from a Year Earlier) 133 new ing employment numbers for district 8 2003, co states and metropolitan statistical areas6 A 1 two mon (MSAs), two-thirds of manufacturing iiii! Rural rwvklit dirA jobs were located in MSAs during 2000.) 4 'f 411 From the mid-1990s through 2002, 2 r t f Grow manufacturing employment in urban 0 B 2025, and rural areas increased and decreased Urban y at s' rates in all states, except Minn- -2 y rural Sol esoere non-MSA employment grew _4 or olde about 3 percent faster than manufacturing increasir employment in MSAs from 1991 to 1997. -6 find the However,from mid 2001 to 2002 manufac- _g there's e turing employment in rural Minnesota IV, i —10 ' Dakota's decreased about 4 percent more than 1992 1994 1996 1998 2000 2002 MSA manufacturing employment of every Source.U.S.Bureau of Labor Statistics a„t