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8.0. EDSR 01-12-1998 THE ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY AND THE ELK RIVER CITY COUNCIL 1111 FOR THE ESTABLISHMENT OF TAX INCREMENT DISTRICT NO. 19 (Hohlen) (a redevelopment district) Schedule December 22, 1997 Receive formal TIF Application January 12, 1997 EDA requests City Council to call for a public hearing to be held on June, 1998 to establish Tax Increment Financing District No. 19. January 26, 1997 City Council calls for a public hearing to be held on June 1, 1998 to establish Tax Increment Financing District No. 19. March 16, 1998 Letter sent to County Commissioner of the area within which the Tax Increment Finance District No. 19 is located (at least 30 days prior to publication of public hearing notice) March 27, 1998 Complete Plan. • March 30, 1998 Plan forwarded to School District and County Board(at least 30 days prior to public hearing) April 13, 1998 EDA approves Plan. April 28, 1998 Planning Commission reviews Plan for compliance with the comprehensive plan. May 6, 1998 Send public hearing notice and map to local paper May 13, 1998 Date of publication of hearing notice and map (at least 10 days but not more than 30 days prior to public hearing) June 1, 1998 City Council holds public hearing on the establishment of Tax Increment Financing District No. 19 and passes resolution approving Plan. June 2, 1998 Send Plan to County/State for certification • TI19sch 12%30/97 11:52 V4417425 CITY/ELK RIVER 03002 ECONOMIC DEVELOPMENT MICRO LOAN FUND ELK RIVER, MINNESOTA 79,95,APPLICATION APPLICANT tJoir+qa ' " *. 1 •e • ADDRESS 824o I•I_ imaw CITY_ l cla STATE ( .n ZIP CODE 55 32 . CONTACT PERSON(S) Lard. , V _dr . BUSINESS PHONE b L2 Q4-gig4 HOME PHONE AMOUNT REQUESTED 50,1wo TERMS REQUESTED SOCIAL SECURITY NUMBER _FED in # 411 - ‘84 4484 Z STATE ID # 1. Type of Project: X Construction/New Building Expansion/Existing Building _Equipment/Machinery Purchase Remodel/Commercial Retail/Industrial • x IndustrialInventoryWorking Capital Other K 14CW an* CA-hert e_01:4 v_Com''4' LA-31.11A Al AA* s_ *As' x•_10 � ctin to e vtc.Jeka s ekc. 2. Describe Project: t ea-��oh .(prom Iiv rk4 , - t e C�s ► jai ,c. /4 JL4 (SooK4e. be e ed, v� • 12/30/97 11:52 $4417425 CITYiELK RIVER j003 3. Purpose of Loam: p`rrd' es c ion p( is molded rr_ . • • / ,li . .t • rte.. tha CLVvend 416.1t5 t • . rig r416► r _ L .a A . A u /. e S-kt ; MOM 4-rGSh My" V6 S OM UI panel . _ A ' a ' v1eeLI • ►. i. ►_• G`� 1" elAaLL f Qir .rru ea " /'h Grp. Ca • _A .,. tier.( rice taaelkiet leas aye ;, re.u)i irk ' r _ .�• r A ®it Al ■ _,u P •L Ice- el ♦ L tut _ (4 £dAf. S I i As 4r .? 4D I co.. ..Dial- Ie'` . id . • ) h _ej +. .,>. 446 A. be or b , r st r. 4,4diftomi r1/ i.0 t • !utr-ed 445 r ry\oV i etc( e e 4. Coat of Project: A) Land $ B) Buildings (attach plans & costs) $ C) Equipment/Machinery/Fixtures (attach list f1� and estimated costs) $_ r>" ° D) Remodeling V -t1a i on - $ E) Industrial Inventory/Working Capital $� • F) Other (attach description) r cer- i40;,p(y- $ Q2' Mover— - reit.ate©t4rr o a o TOTAL COSTS aSS.nakca t Gos-rs $ 5eo, © 5 . Proposed Financing: SOURCE NAME TERMS AMOUNT _ A) Bank Loan — $ B) Bank Loan $ C) Other Private Funds $ D) Applicant Contribution $ E) Other F) red Grant/Loan _ $ G) State Grant/Loan $ . - H) This Loan eDC . J \lecv $ ?,opo TOTAL FINANCING $ -2- 12/30 '97 11:52 'x`4417125 CITU/ELK RIVER 004 6. Collateral to ne asalgnea (!..e*crille dila 1511VW 111511 r•V�141V1t� A) To Bank: B) To Bank:_ ------__— C) To Private Funding Source:411 -. D) To Other Source:� E) To Federal Oovt: F) To State: G) To This Loan: 7. Value of Collateral: COST BOOK VALUE EXISTING LIENS A) Land B) Buildings C) Mach. & Equip. $ $ ` Iq.`j).�iD2 $ -- D) Other- riA6c. ,._ $ $_ ,fJ $ E} Other (,L0$ $ I C c7,0 $ 8. Employment*: Present: # of Employees 27 Total PayrollC314CxXn 411 Atter Project: * of Employees 35— Total Payroll 1,213 OOO *If Loan is for Job Retention Only, Explain in Business Plan. 9 . Attorney, Accountant (Names, addresses, phone) : ®td�m,� w► Af�oe +es , t--� QAd5v1Arkiq .aaLm,d,Ps1 UAwn ea..t' M 0-54O_ 34o-'i trw,Ls1 S'e1� '-m. b'C„req Kevv�.p (QA, tOob 5G►�krd h kc„a j `LLAk€. j 0Q4. L cDW s 4 c&r k., Pvhn 5-5424 544- 114 10. Bank and Other Credit References (Names, addresses, phone) : �Y anckst- r ("n„n�v►�rr�aI 1C -P, C ,:_"II r(33-6. ti;ld raul a 4-i es} k 3t arc Ave- ain nea 11 1M n 5.432_ 541-ab'lZ -3- 12/30%97 11:53 04417425 CITY/ELK RIVER Z1006 • • I/We certify that all information provided in this application ie 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 12 L3©1q LL Applicant Name L►1 ; !r YIP. - �♦ L. L.(1, AiPorBy 4, �� � lees/dont Ey . • _5_ ILL 12(30/97 11:53 'x4417425 CITY%ELK RIVER 0005 11. Attach and include the following: )( A) Written Business Flan: 1. Description of Business 2 . Ownership 3 . Management 410 4 . Date established 5. Products/Services 6 . Future Plans B) Financial Statements for past two years 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 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) -4- • Northstar Die Casting, L.L.C. 1997 Calendar Year Business Plan Copy Number 1 This document contains confidential and proprietary information belonging exclusively to Northstar Die Casting, L.L.C. • Larry M. Lawson President& Chief Executive Officer 8290 N.E. Main Street Fridley, MN 55432 The enclosed document is a business plan and should not be construed as a securities offering • Executive Summary • Mission Statement Northstar Die Casting, L.L.C. continuously strives to assure its customers and prospects alike that they will receive the highest quality aluminum or zink die castings, delivered on time at the lowest possible price. Our employee shared commitment to excellence, which is ISO and QS compliant, is the foundation for the company's growth and continued success. State of the Aluminum Die Casting Industry The aluminum die casting industry is comprised of approximately 450 foundries producing an estimated 10 billion in total revenue. The major companies, because of their extensive investment, will only accept contracts from major OEMs requiring long production runs. Smaller parts runs are taken by smaller company's, like Northstar Die Casting. Northstar's distinctive advantage is its commitment to quality through its continuous pursuit of QS and ISO certification, strategic alliances with key tool makers, on time delivery and maintaining a very competitive position in terms of pricing. Given that there are no macro economic indicators signaling run away inflation or spiraling interest rates, industries requiring aluminum die cast parts remain stable and • demand continues to be very strong. Competitive analysis reveals that most other die casters are very busy and running at capacity. Company Background Northstar is the successor company to Cedarbrook Engineering Corporation by virtue of its acquisition the company's assets in August of 1996. In June of 1996, The Garrett Group was brought in by Cederbrook as consultants to assess the possibilities for recovery and or reorganization. Since the Garrett Group is also a private investment firm, it saw tremendous opportunities, given Cedarbrook's very loyal, extensive and satisfied client base. Furthermore, it immediately recognized the need for re-engineering many of the operating processes and place the company on a new balance sheet that would assure successful future operations. The Garrett Group subsequently agreed to take over Cedarbrook and formed Northstar Die Casting, L.L.C. to acquire the assets of the precedent company while reorganizing and eliminating the major portion of its otherwise insurmountable debt. This process provided a new line of management and ownership with the focus and financial where with all which will make Northstar Die Casting a world class provider of aluminum die casted parts. Northstar Die Casting, a financially healthy corporation, is well positioned to provide quality and fast delivery to its customers while conforming to ISO-9002 and QS-9000 certification standards, which are benchmarks by which most world class automotive parts • providers are measured. Northstar is currently providing several major automotive OEM • manufacturers parts which are found on both foreign and domestic passenger cars. The company also continues to provide MIL-spec parts to its military contractors as well as consumer products for customers such as 3M, K-Tel and many others. Cedarbrook had, as its legacy, a long list of customers which covered government agencies, consumer products and automotive business dating back to 1978. Northstar strives to improve on Cedarbrooks successes by providing a die casting service that accommodates smaller runs at very competitive pricing. There are many die casting companies in the upper mid west, however most major companies, due to their high investment costs, focus their marketing efforts toward obtaining business that requires long runs and high dollar volume. Most other companies lack a focus and find themselves struggling to get whatever is available and never achieving the process improvement that will make them more competitive. Objectives Northstar's projected revenues for fiscal year 1997 are expected to be $3.5 million with annual growth projected at 25%per year through 2002. We feel that this growth is sustainable can be financed internally. It is also felt that within 5 years, Northstar Die Casting will be in a suitable position for further expansion, an initial public offering or profitable acquisition. Our objective, at this time, is to propel the company into a prominent market position. Capital Requirements According to the opportunities and requirements of Northstar Die Casting, described in this business plan, and based on what we feel are sound business assumptions, our first -. year requirements for growth will be funded primarily through asset based lenders backed by the company's substantial sales and accounts receivable. This method of financing will continue through the first half of 1998 where upon conventional bank financing will be secured. To accomplish this goal we have developed a comprehensive plan to intensify and accelerate our marketing and sales activities, manufacturing, quality control and customer service. To implement these plans we will require the following: A new facility that will allow us to provide machining and casting without the space restrictions currently facing the company. Maximize sales with an extensive campaign that includes increasing our effective sales representative population while improving customer perception and overall company visibility through trade publication and interne advertising. • Reinforce Customer Support/Quality Service/Inspection capabilities to handle the • increased demands created by the influx of new orders and broader coverage of existing accounts. Augment company staff to support and sustain prolonged growth under the new marketing plan. The above changes require capital, but for the most part funding will be through operating cash flows. The building expansion will require an outside investor who will either participate as a second mortgagor or build the building entirely and lease it back. Northstar would however stipulate that it reserves the right to purchase the building within a five year period if leased. Investment Strategy The basic technology for die castings has changed very little over the past 20 years, however process controls such as computerization for die set ups, production diagnostics for quality control, production analysis etc. have changed dramatically. Productions cycle times are being reduced while quality and efficiency is unparalleled by the changes in the state of the art. Northstar Die Casting has recognized the need for technological change as essential in its competitive strategy to succeed for the balance of the 20th century and beyond the year 2000. One of the highest production cost associated with die casting is the use of power, rather gas or electric, the cost is extremely high. In an effort to reduce IPthese cost, there have been technological break through in terms of holding furnaces for molten aluminum. These furnaces can melt faster, run cheaper and provide 100% investment capture in as little as 6 months. Northstar has begun to replace all of its holding furnaces to address this very real need for production efficiency. Furthermore, negotiations are being conducted on a new state of the art die casting machine that will be fully automated. Both investment projects should be completed and on line by the summer 1998. A precursor if not tantamount to new equipment is a functionally efficient building that facilitates reduced labor inputs, while providing a safe working environment for the employees. Northstar Die Casting is currently leasing a 21,400 sq. ft. facility, which is far to small for the company's growth requirements and does not allow machining beyond its current capabilities. Efforts are being made to relocate the operations to a new facility, enhancing the company's image with customer prospects and existing accounts as well. The new facility is seen to allow the company to grow in the short term (1-3 years) to 6 million spurring personnel growth by 50% over the same planning period. Management Team Our management team consists of 5 men and women whose accumulated backgrounds consist of 40 years of marketing and business development with both small and large corporations; 32 years in operations and quality management and 10 years of finance and • accounting experience. Larry M. Lawson-President and CEO Mr. Lawson controls 20% of Northstar's stock and has over 25 years of sales, marketing and general management experience, ten years of which was as CEO for a closely held subsidiary of Kone Corporation, a $1.5 billion multinational conglomerate located in Helsinki, Finland. He is a graduate from the University of Minnesota, with a MBA in Strategic Management. He also holds undergraduate degrees from the University of Missouri in Marketing, Finance and in Accounting. Randy Lubben-Vice President of Marketing and Sales Mr. Lubben has over 10 years of sales and marketing management experience, 2 years of which are in the die casting industry. He has achieved remarkable sales results both with Northstar and the other companies for which he has worked. He is a graduate of Moorhead State University with a BS degree in Marketing. Pam Monson-Controller Ms. Monson has over 12 years as a full charge bookkeeper and has extensive experience in job costing and all other interdisciplinary functions of accounting. She is very well • versed in Management Information System and very informed in network systems. Mark George-Manager of Quality/Assurance Mr. George has over 16 years in quality assurance and inspection. His extensive experience in die casting and inspection is an asset not easily found in this industry. Jay Dittel -Plant Superintendent Mr. Dittel started as a die casting operator over 16 years ago and has worked his way up the corporate ladder to where he is today. He has attended many management seminars and has displayed an innate talent for motivational management which augments his extensive task knowledge of foundry operations. • Outside Management Support • Steve Whiting, Chairman of the Board and controls 80% of the voting stock of the company. Mr. Whiting has over 15 years experience in merger/acquisition work and over 100 business turn arounds to his credit. He is a graduate of the University of Wisconsin- Appleton with a BS degree in Business and own several other companies in addition to his controlling interest in Northstar Die Casting, L.L.C. Greg Kemp-CPA, MBA, BS...Tim Myslajck, LTD. CPA's and Consultants. Mr. Kemp continues to be an important asset for tax, accounting and financial advise. He is periodically used for Northstar matters and other holdings of Steve Whiting and The Garrett Group, Inc. Scott Goldsmith, Corporate Attorney, JD Princeton University, 25 years experience in corporate law and litigation and an invaluable legal resource in terms of contracts and account recovery. Additionally, our outside management advisors provide tremendous support for management decisions and creativity. Production and Delivery Northstar's production process allow flexibility to react quickly to our customers' • changing demands. However with our manufacturing currently currently located at 8290 NE Main Street, Fridley, Minnesota, production is seriously constrained for lack of space. Because of the increased demand in customer part requirements Northstar will not be able to sustain those requirements with its existing facility. Given the company's aggressive and customer sensitive culture, a new facility will eliminate the added handling of parts and exorbitant set times it currently faces. Market Analysis and Segmentation Northstar's market encompasses all O.E.M.'s that require aluminum or zink die castings weighing 8 pounds or less. Furthermore the company in focusing on minimum annual part runs of 50,000 or more parts. The 8 pound and under part market segment comprises approximately 80% of the total market or 8 billion in 1996 revenues. This segment has been growing at double digit rates for over 10 years. The automotive market comprises 24% of this segmentation • Customer Profile Northstar Die Casting, L.L.C.'s target market includes, but is not limited to automotive related customers. The company's typical automotive customers are Tier 2 providers manufacturing sub assemblies for the major tier one companies such as Ford, GM etc. Some of Tier 2 customers are: 1. Brose Corporation 2. Federal Mogul 3. Gates Rubber These Corporations buy from Northstar because the company is quick to respond to their needs; assists in the engineering of their products; and provides world class quality at competitive prices. Some of Northstar's other customers have been mentioned earlier. Competition Companies that compete in Twin Cities market are Tool Products, Twin City Die Casting, Hartzell Manufacturing, Versa Die Casting. These companies are much larger in terms of facility, assets and revenues. Typically these companies deal directly at the Tier 1 level • and require extremely large part quantities and larger part prices to justify their capital investment in automated work cells, which are normally required from Tier 1 customers. Therefore, there is a strong market opportunity to provide parts to satisfy demand in the venues of 50,000-150,000 parts per year. Machine cost per hour to address this type of demand is usually much lower than one would find at the competitors stated above. Northstar's distinctive competency is to react quickly to our customers needs, implement the necessary process to satisfy their demands without compromising quality and yet remains flexible to remedy any situation to assure on time delivery. Now this doesn't sound like a great leap in technology or a huge innovation in process engineering, but compared to the competition of like size, it sets Northstar in a very competitive light. Northstar has added $1,000,000 to its revenue base in just one year. Our strategy for meeting/dominating the competition is [lower price, bigger/better, -- your unique selling proposition]. Marketing Plan Responses from customers indicate that our manufacturing capabilities are enjoying an excellent reputation and we fully intend to continue this trend. Inquiries from prospective customers suggest that there is considerable demand for it. Relationships with leading • OEMs (Original Equipment Mfgs) substantiate the fitness of Northstar for considerable • growth and accomplishment in our industry. Northstar's marketing strategy is to aggressively enhance, promote and support the fact that our manufacturing capabilities are setting a standard by which other casting companies of like size are being measured. Sales Strategy Careful selection criteria is being implemented to find productive and aggressive manufacturing representatives to fill territories throughout the United States. Northstar's sales policy is to sell through manufacturer representatives and support them in their efforts to fulfill their customers needs. Furthermore, Northstar works very closely with each representative to assure both his and Northstar's success. Distribution Channels Advertising and Promotion Our advertising and promotion strategy is to position Northstar Die Casting, L.L.C. as a leading aluminum die casting and machining service for the upper mid west. This is not to say that the mid west is the geographic area of concentration. We are currently shipping parts Brose International in Gueretero, Mexico for window assemblies for most of G.M. and Ford cars sold in North America • We will utilize the followingmedia and methods to drive our message home to our g customers: 1. We maintain a Web page on the World Wide Web at http://www.northstardc.com. We have sold over$500,000 in new business since opening the page 9 months ago. 2. We will have over 244 advertisements in the Thomas Register for 1998, listing Northstar Die Casting under every possible source for Purchasing Agents throughout the world. 3. The budget set for these media is $15000 for 1998. We will track, wherever possible, the incremental revenue generated from our advertising, promotion and publicity efforts. We anticipate at least $[x] of sales will be generated directly from our promotions, and possibly an additional $[x] of indirect increase in sales through our various channels. Financial Plan see attached • Conclusion • Northstar Die Casting, L.L.C. enjoys an established track-record of excellence in terms of quality products and customer support. Our customer's expressions of satisfaction and encouragement are numerous, and we intend to continue our advances and growth the marketplace. • •