6.1. EDSR 04-20-2020Request for Action
To Item Number
Economic Development Authority 6.1
Agenda Section Meeting Date Prepared by
Public Hearing April 20, 2020 Amanda Othoudt, EDD
Item Description Reviewed by
Jobs Incentive Microloan Modification for Orluck Cal Portner, City Administrator
Industries, Inc.
Reviewed by
Action Requested
1. Open public hearing to consider comments on the first amendment to the loan agreement for Orluck
Industries, Inc.
2. Following the public hearing, the EDA is asked to consider adoption of the attached resolution
approving an amendment to the Jobs Incentive Microloan. The EDA may recommend approval,
approval with conditions, or denial of the request.
Background/Discussion
At their July 16, 2018, meeting, the City Council approved a $200,000 Jobs Incentive Microloan for Orluck
Industries, Inc., an aerospace manufacturer of seating, cargo, sensors, propulsion, and engine parts. They also
provide medical, locomotive, and manufacturing industry services.
Upon approval of the loan agreement, Orluck committed to the creation of 10 new jobs by July 20, 2020, and
retaining 54 existing jobs as a result of the project. They are also required to meet the requirements of the city’s
Business Subsidy Policy for the creation of new jobs, as well as a 5-year location requirement.
On March 6, 2020, Orluck indicated they would not be able to fulfill its commitment of adding 10 new
positions within two years of receiving their loan from the EDA. As of October 2019, Orluck reported 65
employees, meeting their goal. However, by the end of 2019 they experienced a significant drop in demand and
between lay-offs and attrition were down to 55 employees.
Orluck has requested an extension of the benefit date for up to one year and amend the loan agreement to reflect
the extension of the benefit date as described in a first amendment to the loan agreement. All provisions of the
loan agreement will stay the same.
A public hearing must be held to invite comments for any modification to the loan agreement for business
subsidies in an amount greater than $150,000.
Financial Impact
N/A
The Elk River Vision
A welcoming community with revolutionary and spirited resourcefulness, exceptional
service, and community engagement that encourages and inspires prosperity
Attachments
Original Loan Agreement
First Amendment to Loan Agreement
Resolution
EL185-56-648271.v1
FIRST AMENDMENT TO
LOAN AGREEMENT
BY AND BETWEEN THE
ECONOMIC DEVELOPMENT AUTHORITY
OF THE CITY OF ELK RIVER, MINNESOTA
AND
ORLUCK INDUSTRIES, INC.
April __, 2020
EL185-56-648271.v1
THIS FIRST AMENDMENT TO LOAN AGREEMENT (the “First Amendment”) is
made and entered into this ____ day of April, 2020, between the ECONOMIC
DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER, MINNESOTA a public
body corporate and politic of the State of Minnesota (the “Lender”),and ORLUCK
INDUSTRIES, INC., a Minnesota corporation (the “Borrower”), and their permitted assigns.
RECITALS
WHEREAS, on July 17, 2018, the Lender and the Borrower entered into that certain
Loan Agreement (the “Original Agreement” and, together with this First Amendment to Loan
Agreement, the “Loan Agreement”) whereby the Lender agreed to provide the Borrower with a
loan in the amount of $200,000 (the “Loan”) to assist with financing operating costs and
investments associated with an expansion of the Borrower’s existing aerospace manufacturing
business located at 13422 Business Center Drive, Elk River, Minnesota in anticipation of new
long term contractss received by the Borrower;
WHEREAS, capitalized terms used in this First Amendment and not otherwise defined
herein have the meanings given to them in the Original Agreement;
WHEREAS, the Agreement contained a Business Subsidy Agreement (the “Subsidy
Agreement”) which set forth certain job and wage goals in accordance with Minnesota Statutes,
Section 116J.993 to 116J.995 (the “Business Subsidy Act”). The Subsidy Agreement required the
Borrower to meet certain job and wage goals within two years after the closing on the Loan (the
“Compliance Date”);
WHEREAS, in accordance with the Business Subsidy Act, the Lender may, after a public
hearing, extend the Compliance Date by up to one year;
WHEREAS, the Lender has determined, after a duly noticed public hearing held on April
20, 2020, to extend the Compliance Date;
WHEREAS, the Lender and the Borrower desire to amend the Original Agreement to
extend the Compliance Date;
NOW, THEREFORE, in consideration of the premises and the mutual obligations of the
parties hereto, each of them does hereby covenant and agree with the other as follows:
1. Amendment to 24(a) of the Agreement. Section 24(a) of the Agreement is
amended to read as follows.
(a) In order to satisfy the provisions of Minnesota Statutes, Sections 116J.993
to 116J.995, as amended (the “Business Subsidies Act”), the Borrower acknowledges and
agrees that the amount of the “Business Subsidy” granted to the Borrower under this
Agreement is the amount of the Loan which is $200,000 and that the Business Subsidy is
needed because the project is not sufficiently feasible for the Borrower to undertake
without the Business Subsidy. The public purpose of the Business Subsidy is to help an
existing business expand in the City, increase the tax base in the City and stimulate the
creation and retention of high-quality jobs. In consideration of the Business Subsidy
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EL185-56-648271.v1
provided to assist with operating costs and investments associated with an expansion of
an existing aerospace manufacturing business in the City, the Borrower represents that it
will cause meet following goals (the “Goals”): the Borrower shall create 10 full-time
equivalent jobs in Elk River, Minnesota, at the Loan Property at an average hourly wage
equal to $15.00 per hour exclusive of benefits, or 150% of the state or federal minimum
wage exclusive of benefits, whichever is greater, by the three (3) year anniversary of the
date of closing on the Loan (the “Benefit Date”).
2. Any capitalized terms used herein but not otherwise defined shall have the
meanings assigned to such terms in the Original Agreement. Any references to the “Agreement”
or “this Agreement” in the Original Agreement shall refer to the Original Agreement, as
amended by this First Amendment, and as may be further amended and supplemented.
3. The amendments made to the Original Agreement, as amended by this First
Amendment, shall be effective as of the date hereof.
4. Except as hereby amended, all other terms and conditions of the Original
Agreement shall remain in full force and effect.
S-1
EL185-56-648271.v1
IN WITNESS WHEREOF, the Lender and the Borrower have caused this First
Amendment to Loan Agreement to be duly executed in their names and on their behalf, all on or
as of the date first above written.
ECONOMIC DEVELOPMENT
AUTHORITY OF THE CITY OF ELK
RIVER, MINNESOTA
By
President
By
Executive Director
S-2
EL185-56-648271.v1
ORLUCK INDUSTRIES, INC.
By
Its ______________________
First Amendment to Loan Agreement
EL185-56-648181.v1
ECONOMIC DEVELOPMENT AUTHORITY
OF THE CITY OF ELK RIVER, MINNESOTA
COUNTY OF SHERBURNE
STATE OF MINNESOTA
RESOLUTION NO. 2020-____
RESOLUTION APPROVING COMPLIANCE DATE EXTENSION
WITH RESPECT TO BUSINESS SUBSIDY PROVIDED TO
ORLUCK INDUSTRIES, INC.
WHEREAS, on July 17, 2018, the Board of Commissioners (the “Board”) of the Economic
Development Authority of the City of Elk River, Minnesota (the “EDA”) provided a loan to Orluck
Industries, Inc., a Minnesota corporation (the “Borrower”) in the amount of $200,000 (the “Loan”)
to assist in financing operating costs and investments associated with an expansion of the
Borrower’s existing aerospace manufacturing business located on certain real property in the City of
Elk River, Minnesota (the “City”) for new long term contracts received by the Borrower; and
WHEREAS, on July 17, 2018, the EDA and the Borrower entered into a Loan Agreement
(the “Loan Agreement”), pursuant to which the Borrower, among other things, agreed to certain
terms and conditions under which the EDA made the Loan to the Borrower; and
WHEREAS, the Loan Agreement included a business subsidy agreement under Minnesota
Statutes, Sections 116J.993 to 116J.995, as amended (the “Business Subsidy Act”) which set forth
certain job and wage goals to be satisfied by the Borrower prior to the benefit date set forth in the Loan
Agreement (the “Benefit Date”); and
WHEREAS, the Borrower has requested an extension of the Benefit Date for up to one year;
and
WHEREAS, the Board of Commissioners of the EDA held a duly noticed public hearing as
required by Section 116J.994, subdivision 5 of the Business Subsidy Act regarding the extension of the
Benefit Date; and
WHEREAS, the EDA and the Borrower desire to amend the Loan Agreement to reflect the
extension of the Benefit Date as described in a First Amendment to the Loan Agreement (the
“Amendment”); and
WHEREAS, the EDA believes that approval of the Amendment is in the best interest of the
City and its residents.
NOW THEREFORE, BE IT RESOLVED BY THE BOARD OF COMMISSIONERS OF
THE ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER,
MINNESOTA, AS FOLLOWS:
1. The recitals set forth in this resolution are incorporated into and made a part hereof.
EL185-56-648181.v1
2. The Amendment is approved and the President and Executive Director are
authorized and directed to execute the Amendment in substantially the form on file in City Hall,
subject to modifications that do not alter the substance of the transaction and are approved by these
officers; provided that execution of the document will be conclusive evidence of their approval.
3. The President and the Executive Director are authorized and directed to execute any
documents or certificates necessary to carry out the transactions described herein.
4. EDA staff and consultants are authorized to take all further actions necessary to assist
the EDA in performing its obligations under this resolution and the Loan Agreement.
Approved by the Board of Commissioners of the Economic Development Authority of the City of Elk
River, Minnesota this 20th day of April, 2020.
President
ATTEST:
Executive Director