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5.0. 6.0. 7.0. 8.0. EDSR 05-10-1999 ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY • MEMORANDUM TO: Economic Development Authority FROM: Paul Steinman,Director of Economic Development DATE: May 6, 1999 SUBJECT: Agenda Memo for May 10, 1999 Meeting 5. 1998 Annual Report Presentation Staff will present its 1998 Annual Report at the regular EDA meeting. 6. Energy City Presentation 4111 Chris Engelman, the new Energy City Coordinator,has an Energy City presentation prepared for the EDA. This presentation, including questions & answers, will last approximately 20 minutes. This is the first in a series of presentations being developed for Energy City. The presentation for this meeting is to be used to introduce people to Energy City (i.e. prospective committee members, boards and commissions, etc.). EDA input on the presentation will be helpful as it is still in the process of being developed. 7. Brown/Kirkeide Purchase Brown Purchase - It appears as though Bud Storm of Evergreen Land Services has reached an agreement for the city/EDA to purchase Leroy and Ruth Brown's property in east Elk River. The Brown's attorney is putting together a purchase agreement at this time. Staff proposes to outline the parameters of the deal and ask that the EDA authorize execution of the purchase agreement based upon those parameters. If the EDA is uncomfortable with this, the alternative will be to hold a special meeting during which a purchase agreement would be presented for approval by the EDA. • 13065 Orono Parkway • P. O. Box 490 • Elk River, MN 55330-1743 • (612) 441-7420 • Fax (612) 441-7425 Equal Opportunity Housing and Equal Opportunity Employment Economic Development Agenda Memo May 6, 1999 Page 2 What follows are the parameters of the Brown purchase: • $1.13 million purchase price(includes moving expenses) • Subtract $650,000 (federal funds) • Remaining equal s $480,000 (to be funded from development fund) The $480,000 remaining to be funded through the development fund is proposed to carry a 7 percent interest rate, a 5 year term, with semi annual payments due. Additional financial responsibilities of the EDA upon purchase of this property include: • Pay off approximately $250,000 in assessments against the Brown property. (Proposed development fund expenditure) Staff will review the issue of the assessments against the property in November or December 1999, and make a recommendation to the EDA regarding either paying those assessments off in one lump sum or making annual payments. Staff believes it is important to wait until Aik• November or December of this year to'look at the precise situation of the development fund prior to making a recommendation on the assessment issue. Recommendation Staff recommends the EDA authorize execution of a purchase agreement with the Browns based upon the parameters outlined above, contingent upon the City Council authorizing the EDA's use of the development fund for this purpose. Kirkeide Purchase At this time it appears a deal cannot be worked out with the Kirkeides for the purchase of their property. The property is not absolutely essential to the eastern area utility/road project, however, the 2.5 acres will lie directly in the center of the business park and at some point the EDA or private developer will likely want to use their property for some type of business park development. No action is required on the Kirkeide purchase at this time. • Economic Development Agenda Memo May 6, 1999 Page 3 • 8. Community Venture Network Program Staff has attached information regarding the Community Venture Network Program. The City of Elk River EDA was a member of this program in 1998, but due to some restructuring of the company running the program, CVN was delayed until this time. Several months ago staff felt very positive that a plan could be worked out with the county economic development office whereby Sherburne County would pay $4,000 to join the program and the cities of Becker, Big Lake, Princeton, and Elk River would each pay $500 to the county to access this program. This concept appeared to have been worked out with Pelstring Capital Corporation, the company running CVN. Since Michael Darger's departure as economic development coordinator for Sherburne County, it is now highly unlikely this scenario will come to fruition. The restructuring of CVN also makes the "sharing" concept less likely to happen. Staff is a strong supporter of the EDA's membership in CVN. It is a method of gaining face to face contact with a minimum of 24 prospects • per year. Prospects through this program, based upon past experience, may include any businesses from pre-incubator stage to existing bankable companies. Protectorcare is one of our business incubator member companies which was introduced to the City of Elk River through CVN. Recommendation Staff recommends the EDA authorize execution of the attached contract to join Community Venture Network for one year beginning June 1, 1999,°and ending May 31, 2000, at a total cost of$3,950. APR 14 1999 • t PELSTRING CAPITAL CORPORATION 1200 Osborne Road00 Fridley,MN 55432 April 12, 1999 Mr. Paul Steinman Elk River EDA 13065 Orono Parkway Elk River, MN 55330 Dear Mr. Steinman: Enough reflection, analysis and soul searching...THE COMMUNITY VENTURE NETWORK is BACK !!!! • After encouragement from a number of key communities and staff people, we are reformulating the Community Venture Network ("CVN"). The new "CVN" can be a key element of your marketing program, effective June 1, 1999. The staff of Public Resource Group and Pelstring Capital Corporation are now appropriately "re-aligned" to support the program. Dennis Welch and Leonard Kirscht have joined the SBA staff of Signal Bank and Rob Tryon is an investment banker with John G. Kinnard. They are each in a good position to support the program through prospect referrals and potential project financing. Pelstring Capital Corporation will support the program with an additional full time, professional, staff person. Applications for this position are currently being reviewed and we hope to have this person on staff, prior to the first meeting, early in June. We will be "combining" the Midwest Community Venture Network (serving Iowa, the Dakotas and Wisconsin) and the Minnesota Community Venture Network into one CVN, and limiting the program membership to 18 communities/development organizations. • (612)792-4227*800-642-6258 Git'(612)792-4236 Faxct@ pelstring@earthlink.net • The program will be similar to previous years, with four seminars each year, showcasing six different companies at each seminar. The fee will be consistent with previous memberships, with a total fee of$3,950 per community/organization for the year. We expect to hold our first session in early June and follow with sessions in September, January and April of each year. We have not selected a site, as yet, but we anticipate a Southern Metro hotel/conference center, with reasonable access to the airport. We have enclosed two copies of executed contracts (one for your files and one to be returned as evidence of your membership) and a program summary for our review. We are now located in Fridley, MN. Please note the new address and phone numbers on the letterhead. Our national watts line is still the same, at (800) 642- 6258. We look forward to working with you. • - _-rely, P, • NG, • ' A CORPORATION e I Patrick W. Pelstring President • • G Y 1 PELSTRING CAPITAL CORPORATION 1200 Osborne Road*Fridley,MN 55432 AGREEMENT FOR PROFESSIONAL SERVICES between ELK RIVER EDA and PELSTRING CAPITAL CORPORATION This Agreement, made this th day of 1999, by and between Elk River EDA (hereinafter referred to as "member") and Pelstring Capital Corporation, a Minnesota Corporation, (hereinafter referred to as "PCC"), is an agreement for membership in the Community Venture Network (hereinafter referred to as "CVN"). SECTION I Professional Services . PCC shall provide the following services to the member: A) PCC shall professionally manage the CVN. 1) Provide support staff services and materials at regularly scheduled meetings of the CVN. 2) Notify members of dates of meetings, prepare agendas and necessary materials, and conduct all activities relative to the meetings and functions of the CVN. B) PCC shall conduct an active outreach program. 1) Emphasize the availability of member's economic development resources to the business community. 2) Maintain continuous contact with accountants, attorneys, venture capitalists, business brokers, and the private banking community to generate referrals. 3) Initiate and maintain a business prospecting program. 1111 C) PCC shall recruit prospects/presenters for CVN presentations. (612)792-4227 800-642-6258 Gito(612)792-4236 Fax ore pelstring@earthlink.net 1) CVN will identify business prospects in one of the following categories: • a) "Development stage" companies with existing product lines and seeking expansion capital. b) Business acquisitions. New business owners seeking additional equity or expansion capital. c) Expansions and/or relocations of existing, profitable businesses. d) Businesses who will provide high quality jobs e) Present a minimum of twenty-four (24) business prospects through four regularly scheduled meetings throughout the year. D) PCC shall conduct preliminary review and screening of CVN prospects. 1) Assess financial and support service needs of prospects. 2) Prepare uniform summaries of applicants that address prospects' needs. 3) Schedule follow-up meetings with member community to arrange for • contacts with prospects. SECTION II Payment for Services A) Members/client shall pay, upon execution of this contract, an annual fee of$3,950. B) PCC shall notify members/client at least 60 days in advance of the end of any program service year of any changes in annual fees and/or significant program characteristics. C) PCC may charge member communities for direct expenses associated with the performance of this agreement. These direct expenses may include, but are not limited to travel expenses of prospect and PCC staff for community visits, direct associated production expenses (i.e. photo copying, tape reproduction, etc.). Member communities shall be advised of these costs in advance and payment shall not be due until receipt of a direct invoice. • 2 i SECTION III • Term of Contract This is an annual agreement with the service year beginning June 1, 1999 and ending May 31, 2000. Either party shall have the right to terminate this agreement upon 60 days written notice. In case of such notification, PCC shall return to the member, on a pro-rata basis, the unearned balance of the year's membership fee, SECTION IV This agreement may be amended by mutual written consent of both parties hereto duly exercised and signed by both. SECTION V Each party to this agreement binds themselves and their partners, successors, executors, administrators, and assigns to the other party of this agreement and to the partners, successors, executors, administrators, and assigns of such other party, in respect • to all covenants of this agreement. Nothing herein shall be construed as giving any rights or benefits hereunder to anyone other than the parties to this agreement. PCC reserves the right to assign their interest in this contract to a related entity, so long as the performance and terms of the program remain as outlined herein. In witness whereof, the parties have executed this agreement on the day of , 1999 Pelstr Trapital Cor tii Elk River EDA By By Patrick W. Peistring, President Its Attest Its • 3 • PELSTRING CAPITAL CORPORATION 1200 Osborne Roads Fridley,MN 55432 COMMUNITY VENTURE NETWORK • Ar: S MATCHING BUSINESSES WITH GREAT COMMUNITIES (612)792-4227 cf'o 800-642-6258 ci (612)792-4236 Fax t'pelstring@earthlink.net o ! u ,> 4111 ), PELSTRING CAPITAL CORPORATION 1200 Osborne Road*Fridley,MN 55432 Overview Pelstring Capital Corporation is recognized as a leading financial consultant for companies in the Upper Midwest. The development of businesses is our business. We use a broad range of sophisticated public and private financing tools to create vital links between growth-oriented communities and expanding businesses. Through this process we have assisted hundreds of businesses meet their capital and expansion needs. Capabilities The staff of Pelstring Capital Corporation has extensive, "hands-on" experience in finance consulting, business development and public affairs. We have provided funding for companies of all sizes and through various stages of corporate growth. Our efforts represent companies in a wide variety of industries including manufacturing, medical technology, biotech, computer software and hardware, healthcare, communications, agricultural and food processing, recreational, entertainment and leisure, specialty retail, banking, real estate, and finance. Professional Services Our professional services include Location/Economic Analysis, Site Selection, Community Economic Development, Business Financing, Venture Capital Investment, • Loan & Grant Packaging, Revolving Loan Funds, SBA Loan Packaging, Tax Increment Financing and Real Estate Development. Clients Our Client Portfolio represents experience in many industries and includes companies such as American Telecare, APA Optics, Brown & Bigelow, Cirrus Aviation, Damark International, Super Valu, Inc. Deflecta-Shield, Excelsior-Henderson Motorcycle, First Banks (now, US Bank), Heartland Fibers, HOM Furniture, Lund Industries, Minnesota Sports Federation, Northern Hydraulics and Vallon, Inc. (612)792-4227$@ 800-642-6258 oto(612)792-4236 Fax*pelstring@earthlink.net • Pelstring Capital Corporation What are clients say, . • Excelsior-Henderson APA Optics HOM Furniture Motorcycle Company $20 million total $ 8.5 million total $ 6.5 million total finance financing package with finance package with the package with the City of the City of Belle Plaine City of Aberdeen and the Coon Rapids and the State U.S.D.A.,and the State of State of South Dakota. of Minnesota. Minnesota. • "Their experience in the "Pelstring Capital "Pelstring Capital public sector gives them Corporation worked with Corporation assisted with an excellent perspective our company for over a the tax increment financing for determining what year, researching and a SBA loan for our new types of financing will financial assistance 175,000 square foot provide the best fit for packages from several building that now houses both the company and different cities in four our corporate head the community. " states for our new fiber quarters, a regional optics production distribution center and Daniel Hanlon — facility. They helped me retail showroom. They Founder, Excelsior- understand the various understood our needs and Henderson Motorcycle proposals and helped know what doors to open to Company negotiate what I believe get them met. They saved was the best financial us a lot of time because package possible. " they knew what would fly and what wouldn't. " Dr. Anil Jain — CEO, Wayne Johanson — CEO, APA Optics HOM Furniture COMMUNITY VENTURE NETWORK PELSTRING CAPITAL CORPORATION • INTRODUCTION AP rincipal reason for economic development in outstate areas is to foster growth of small to medium sized businesses. Emerging businesses find that the reduced operating costs, lower labor rates, and unified community support provide the maximum opportunities for successful business growth. Many communities have established "revolving loan funds" and/or"equity capital" programs for. purpose of fostering this type of growth within their communities. Too often, however,the community and the entrepreneur never find each other. Community Venture Network(CVN), originally founded in 1991, has been formed to assist communities in identifying these potential prospects. CVN conducts an active outreach Program to identify these emerging businesses and educate them on the benefits of seeking "outstate" community "investments." CVN S SHAT IS "COMMUNITY Community Venture Network is a consortium of TENTURE NETWORK?" communities with business investment funds or loan funds, seeking to promote development within their communities. VHA�IS COMMUNITY CVN seeks to "match" its prospects with its member VENTURE NETWORK'S communities to facilitate the location of the business in the 'URPOSE? community. 1VH0 MANAGES CVN is professionally managed by Peistring Capes � based economic development VENTURE Corporation, a Mmneapo 4ETWORK? Consulting and business fimancing company. WHAT TYPES OF CVN seeks to identify prospects in one of the following COMPANIES DOES categories: COMMUNITY VENTURE NETWORK RECRUIT? 1. 'Development Stage"companies withexisting product lines,but seeking expansion capitaL 2. Business Acquisitions. New business owners seeking additional equity or expansion capital to complete the purchase of successful,existing companies. 3. Spin-Offs/Business Expansions. Existing divisions of • ongoing compan1eS that are available for sale which might constitute a business opportunity for Community Venture Network members'existing business base. HOW DOES COMMUNITY CVN conducts an active outreach program emphasizing the VENTURE NETWORK availability of its member community's capital program. IDENTIFY ITS PROSPECTS? Continual contact is maintained with accountants, attorneys, venture capitalists, and the private banking community to generate referrals. HOW DO MEMBER Pelstring Capital Corporation and its referral sources COMMUNITIES conduct a preliminary review and screening of all potential PARTICIPATE? prospects for CVN communities. All member communities are invited to attend-prospect presentations, held every three months. Prospects are given up to 30 minutes to present their company and proposal Follow-up meetings with individual communities are then scheduled as requested. All final funding decisions are made at the sole discretion of the member community. member *AT OTHER SERVICES The professional staff of PCC can also directly ARE AVAILABLE communities hi structuring and negotiating community THROUGH THE investments and/or loans. The PRG staff will also assist in COMMUNITY VENTURE coordinating and preparing participatory government and/or NETWORK? private financing materials. WHAT DOES IT COST? Each member community pays an annual flee of$3,950. In addition, a Contingent Fee Agreement is executed by each company participating in the Cody Venture Network. This fee depends upon the level of assistance required and the complexity of the package. • • O • • SERVICES OFFERED Our Services Include: Location/Economic Analysis Loan & Grant Packaging/Business Financing Venture Capital/Equity Capital Investment Community Economic Development Real Estate Development Tax Increment Financing Investment and Consulting SBA Loan Packaging Manage the Community Venture Network Facility and Site Selection • • PRINCIPAL BIO Patrick W. Pelstring Mr. Pelstring, the founder of Pelstring Capital Corporation has over 20 years of assisting businesses with raising expansion capital. Mr. Pelstring has taken an active role in conducting community analysis, labor studies, economic development marketing programs, and management of local development companies. Patrick, who started his career as a commercial loan officer • for a Twin Cities bank, previously had been the Economic Development Coordinator for the City of Coon Rapids, Minnesota. Since starting his consulting and finance business interests in 1983, he has worked on behalf of over 80 communities in Minnesota, Wisconsin, Iowa, North Dakota and South Dakota. He has completed over $500,000,000 of business financing projects in sixteen states throughout the country. Mr. Pelstring is a graduate of Bemidji State University and has conducted advanced studies at the University of Minnesota, as well as extensive banking, Small Business Administration, and public finance coursework. Patrick is often a speaker at public/private finance seminars and workshops and has appeared on several area television and radio programs. • CLIENT PROFILES APA Optics APA Optics, a small publicly held company in Minneapolis, is a research firm specializing in binary optics and optoelectronics. APA Optics is recognized for innovation and holds many awards for technological advancements. After careful consideration of 17 prospective cities in four states, the City of Aberdeen, South Dakota was selected to be the new home of APA Optics. With the assistance of Pelstring Capital, APA Optics has completed an$8.5 million funding package with the City of Aberdeen and the State of South Dakota to support this new project. APA Optics will create 215 jobs in Aberdeen over the next five years. Vallon, Inc. IDVallon, Inc. is a software development company that focuses on providing content related products and services to the rapidly growing internet market. The Company had been privately funded but needed to consider an expansion in order to reach its full potential. Pelstring Capital convinced Vallon, Inc. to implement a four-state site search and consider expansion into an outstate community as part of its funding package. Pelstring Capital successfully negotiated a $1.7 million incentive package with the City of Aberdeen and the State of South Dakota. The company currently employs 22 employees consisting of management personnel, software development professionals and administrative staff. The company anticipates hiring an additional 25 to 30 people in 1997, with approximately 50 more new hires in 1998. • _. S CLIENT PROFILES Super Valu Super Valu, a publicly held company, is one of the largest grocery product distributors in the country. In 1998/99 Super Valu constructed a 550,000 sf warehouse/distribution center near its corporate headquarters in Hopkins, MN. Super Valu retained Pelstring Capital to negotiate local tax increment assistance for this project, as well as future phases of a potential $40M to 50M redevelopment project. Future phases are anticipated to include additional office space, dry storage and cold storage distribution space. Excelsior Henderson Originally founded in 1876, Excelsior Henderson was one of the "Big Three" American motorcycle manufacturers and a fierce competitor until 1931. In • 1993, brothers David and Daniel Hanlon bought the rights to this company and established a new motorcycle company that will produce an American made, premium valued, high quality motorcycle. Excelsior Henderson forecasts 4.5% marketshare and revenues of$250 million within the next five years. Excelsior Henderson retained the services of Pelstring Capital in order to secure a site location and financing package. Pelstring Capital conducted a 12 state site search and secured financing totaling $10 million with the City of Belle Plaine and the State of Minnesota. The company will create approximately 500 jobs over the next five years. HOM Furniture HOM Furniture sought Pelstring Capital's assistance in site location and structuring a $8.5M consolidation of the company's warehouse and distribution center into a new 220,000 sf facility in Coon Rapids, MN. The new facility includes the company's corporate office, a 45,000 sf retail store. Overall, over • 200 people work out of this location. MAY c 3 '229 GARRETT GROUP, LLC. • April 30, 1999 Mr. Paul T. Steinman Director of Economic Development City of Elk River 13065 Orono Parkway Post Office Box 490 Elk River, MN 55330 Re: Northstar Die Casting, LLC. Dear Mr. Steinman: Thank you for taking the time to meet with me to discuss the outstanding loan with Northstar Die Casting, LLC. As we discussed, Badger Die Casting, LLC. would be willing to pay off the balance of this loan on the following terms and conditions: • • New Loan Amount $43,065.22 • Interest Rate 4% • Loan term 7 years. • First payment date: May 15th, 1999. If this is acceptable, please have a new note drafted to reflect the name Badger Die Casting, LLC. If you have any questions, I can be reached at (414)425-2907. Very truly yours, GARRETT GROUP, LLC. J1166k Steven Whiting President SEW/ML • 200 SOUTH EXECUTIVE DRIVE • SUITE 101 • I3ROOKFIELD, WI 53005 • PHONE: (414) 789-2773 • FAX: (414) 425-0376 • oft, Elk River May 4, 1999 Mr. Steve Whiting, President Garrett Group, LLC 200 South Executive Drive Suite 101 Brookfield, Wisconsin 53005 Dear Mr. Whiting: Subject: Northstar Die Casting, LLC Micro Loan This letter is in response to your letter dated April 30, 1999, proposing an • assumption of the EDA Micro Loan by Badger Die Casting, LLC. Your proposed terms as outlined in this letter are unacceptable to the Economic Development Authority. The primary point of our meeting on Wednesday, April 21, 1999, was that I indicated I may consider recommending that the EDA reduce the interest rate on this loan to 5 or 6 percent. I will recommend to the EDA that all other aspects of the current note remain the same and that there specifically be no reduction in the current amount of principal and interest due. The EDA's alternative is to either sue on the personal guaranty or for us to agree upon a structure which I can then recommend to the EDA. The details I propose are as follows: • Loan amount equals all principal and interest due to date - as of 5/1/99, this amount is $44,688.39 • Interest rate of 5.5 percent (reduced from 8.5 percent) • Loan term equals amount of time remaining on current loan - as of 5/1/99 there would be 47 payments remaining • First payment due: May 15, 1999 It appears in your best interest to come to terms with this proposal as the interest continues to accrue at 8.5 percent and the due date for the balloon • payment on April 1, 2003, continues to draw near. 13065 Orono Parkway • P.O. Box 490 • Elk River, MN 55330 • TDD &Phone: (612)441-7420 • Fax: (612)441-7425 Mr. Steve Whiting May 4, 1999 Page Two I will be faxing this letter with a hard copy to follow as I believe it is in your best interest to respond as soon as possible. If I hear from you by Thursday, May 6, 1999, I should be able to take a proposal and recommendation to the Economic Development Authority at its regular monthly meeting on Monday, May 10, 1999. Otherwise, the issue will wait until the June meeting of the EDA. The EDA is continuing to pursue its legal avenues of collection until an agreement can be executed. I can be reached at (612) 441-4905. S' ere , •aul T. t-' man Director of Economic Development Attachment: Northstar Die Casting Amortization Schedule c: Economic Development Authority Lori Johnson, Finance Director • Pat Klaers, City Administrator 411 NORTHSTAR DIE CASTING, LLC $50,000 EDA MICRO LOAN • Amortization Schedule Dated: January 29, 1998 Payable to: City of Elk River Amount: $50,000.00 Due: First of Each Month Interest Rate: 8.5% Term: 60 Months Loan Payable: April 1, 2003 Payments: Monthly Principal & Interest Starting May 1, 1998 • Payment Pymnt Total Unpaid Date Period Rmnq Payment Principal Interest Balance Paid Rec. # $50,000.00 1-May-98 59 1,257.88 671.66 586.22 49,328.34 5/12/98 8/23/86 1-Jun-98 58 1,025.83 676.42 349.41 48,651.92 6/30/98 31966 1-Jul-98 57 1,025.83 681.21 344.62 47,970.71 7/9/98 32039 1-Aug-98 56 1,025.83 686.04 339.79 47,284.67 9/1/98 32426 1-Sep-98 55 1,025.83 690.90 334.93 46,593.77 9/18/98 32536 1-Oct-98 54 1,025.83 695.79 330.04 45,897.98 11/12/98 1-Nov-98 53 1,133.00 807.89 325.11 45,090.09 11/16/98 1-Dec-98 52 1,133.00 813.61 319.39 44,276.48 12/11/98 • 1-Jan-99 51 1,133.00 819.37 313.63 glign557 1/15/99 1-Feb-99 50 1,025.83 718.01 307.82 42,739.10 1-Mar-99 49 1,025.83 723.09 302.74 42,016.01 1-Apr-99 48 1,025.83 728.22 297.61 41,287.79 1-May-99 47 1,025.83 733.37 292.46 40,554.42 1-Jun-99 46 1,025.83 738.57 287.26 39,815.85 1-Jul-99 45 1,025.83 743.80 282.03 39,072.05 1-Aug-99 44 1,025.83 749.07 276.76 38,322.98 1-Sep-99 43 1,025.83 754.38 271.45 37,568.60 1-Oct-99 42 1,025.83 759.72 266.11 36,808.88 1-Nov-99 41 1,025.83 765.10 260.73 36,043.78 1-Dec-99 40 1,025.83 770.52 255.31 35,273.26 5// [317 0 • C 0