JOINT FINANCE COMMITTEE PACKET 05-14-2024
Special Meeting Notice
Joint Finance Committee
Tuesday, May 14, 2024
7:30 a.m.
Elk River City Hall
13065 Orono Parkway
Elk River, MN 55330
The purpose of the meeting is as follows:
▪ Administrative items
▪ Heritage Millwork incentive applications
Joint Finance
Committee
Special Meeting
Agenda
Tuesday, May 14th, 2024
7:30 a.m.
Elk River City Hall
▪ Special meeting in Upper Town Conference Room
1. CALL MEETING TO ORDER
2. CONSIDER AGENDA
3. CONSENT AGENDA
Considered to be routine and noncontroversial by the commission and will be approved by one motion. There will be no separate discussion of these items unless a
commissioner, staff member, or citizen so requests, in which case the item will be removed from the consent agenda and considered under t he regular agenda.
3.1 April 30, 2024, Meeting Minutes
4. GENERAL BUSINESS
General action items in which the commission receives information from city staff or consultants and after deliberation acts on the item under consideration. General Business
items are not opportunities to receive or provide public input. However, the commission may, at its sole discretion, solicit public feedback.
4.1 Heritage Millwork Project and Incentive Applications
4.2 Open Discussion
5. MOTION TO ADJOURN
Meeting Protocol
▪No sidebar discussions
▪No interruptions
▪State your concern
▪Ensure you understand
▪Don’t take things personally
▪Adhere to time limits
▪Come prepared
▪Ensure all are heard
Special Meeting of the Elk River
Joint Finance Committee
Held at Elk River City Hall
Tuesday, April 30, 2024
Members Present: Charlie Blesener, Ryan Hardin, Jim Gromberg, Chad Vitzthum, Dan Tveite, Tony
Sofio, Rhonda Magnussen (7:34 a.m.), and Nate Ovall (8:12 a.m.)
Members Absent: Lynn Caswell
Staff Present: Economic Development Director Brent O’Neil and Economic Development
Specialist Joshua Mollan
Others Present: Pat Menth – Heritage Millwork (HMI), Dave Menth – Heritage Millwork, Annie
Deckert – All Day Companies, and Mikaela Huot – Baker Tilly
1. Call Meeting to Order
Pursuant to due call and notice thereof, the meeting of the Elk River Joint Finance Committee was
called to order at 7:33 a.m. by Chair Tveite.
2. Consider Agenda
Moved by Blesener and seconded by Gromberg to approve the agenda. Motion carried 5-0.
3. Consent Agenda
Moved by Hardin and seconded by Gromberg to approve the August 29, 2023, meeting
minutes. Motion carried 5-0.
(Rhonda Magnussen joined at 7:34 a.m.)
4.1 Appoint New Member
Mr. O’Neil presented the staff report.
Sofio introduced himself to the committee.
Moved by Vitzthum and seconded by Hardin to approve the appointment of Tony Sofio to
the Joint Finance Committee. Motion carried 6-0.
4.2 Heritage Millwork Project (HMI) and Incentive Applications
Mr. O’Neil presented the staff report.
Pat and Dave Menth introduced themselves and the project to the committee.
Ms. Huot presented Baker Tilly’s financial analysis on the $1,375,000 land write down on 14 acres of
city owned land. Ms. Huot advised that the developer stated that without assistance being provided
upfront through a land write down, the project would not be viable due to the following factors:
• Using equity to pay for upfront land costs would impact HMI’s working capital.
• Bank would require higher equity investment from PLM Properties if upfront assistance
were not provided.
• Limitations on the level of bank financing the project can secure due to the size of the
capital investment and project.
Ms. Huot shared that after Baker Tilly’s analysis, upfront assistance with the support of TIF would
be necessary for this project to proceed as proposed.
Mr. O’Neil advised that the Council will consider interest rates of the TIF at their upcoming
meeting.
Pat Menth advised that they would be interested in starting the phase two expansion in three to five
years.
Moved by Blesener and seconded by Gromberg to approve the recommendation to the EDA
and City Council on the utilization of TIF for Heritage Millwork. Motion carried 6-0. Chad
Vitzthum abstained.
Mr. O’Neil advised that Chad Vitzthum has had a past banking relationship with HMI and this
project and may be considered a non-interested party in this discussion.
(Nate Ovall joined at 8:12 a.m.)
The committee discussed potential interest rates for the TIF.
4.3 Open Discussion
Mr. O’Neil asked if the committee would be able to meet outside of the regularly scheduled meeting
to discuss HMI’s loan request prior to the May 20th EDA meeting.
The committee was in favor of meeting again on Tuesday, May 14th at 7:30 a.m.
Mr. O’Neil asked the committee for their feedback on the interest rate that is set forth on the policy:
3% or 2% below prime, whichever is higher. Staff’s loan discussions with HMI have been built
around a 3% interest rate.
The committee was in favor of supporting a 3% interest rate.
5. Motion to Adjourn
Moved by Gromberg and seconded by Ovall to adjourn the special of the Joint Finance
Committee. Motion carried 8-0.
The meeting adjourned at 8:27 a.m.
Minutes prepared by Joshua Mollan.
___________________
Brent O’Neil
Economic Development Director
_____________________
Tina Allard
City Clerk
The Elk River Vision
A welcoming community with revolutionary and spirited resourcefulness, exceptional
service, and community engagement that encourages and inspires prosperity
Request for Action
To
Joint Finance Committee Meeting
Item Number
4.1
Agenda Section
General Business
Meeting Date
May 14, 2024
Prepared by
Brent O’Neil, Economic Development Director
Item Description
Microloan Application Review – Heritage Millwork
Reviewed by
Joshua Mollan, Economic Development Specialist
Reviewed by
Action Requested
Consider and provide recommendation to the EDA on a microloan application received from Heritage
Millwork, Inc. The Joint Finance Committee may recommend approval, approval with conditions, or
denial of the request.
Background/Discussion
The city received an application from Heritage Millwork, Inc. requesting a $200,000 job incentive loan
from the EDA revolving loan funds. The funds in this program are seeded from a previous Minnesota
Investment Fund award through the state Department of Employment and Economic Development
(DEED).
The Jobs Incentive Microloan Program goal is to encourage the growth of new jobs and the retention of
existing jobs. The company currently employs 70 employees in multiple locations, with 8 presently in Elk
River. The proposed Heritage consolidation of facilities in Elk River would result in all jobs being in Elk
River and the potential for job expansion opportunities as well. The average hourly wage is $32.41 per
hour for existing positions. The potential for six new positions would have an average wa ge of $23.00 per
hour.
Analysis
Purpose: To assist existing businesses with expansion and attract new businesses to the city whose local
operations will expand the city’s economy through job retention and creation and maintain/
grow the city’s tax base. The purpose of the program is to encourage the creation of quality,
high-paying jobs within the city.
Amount: Up to $200,000 of secondary financing not to exceed 20% of the project cost.
The total project cost is in excess of $21,000,000. The requested amount is
approximately 1%, less than the 20% maximum allowed.
Equity: Must have private-sector commitments for 50% of the project cost. Borrower must provide
10% or more of project financing.
https://coermn.sharepoint.com/sites/EconomicDevelopment/Shared Documents/Economic Development/EDA/Administrative/Agenda/Joint
Finance Committee/2024/05-14-2024/4.1 sr Heritage Microloan.docx
The applicant’s S/U statement indicates the company will be contributing $2,116,947
in cash equity, or 10% of total project costs. new equipment. This includes
approximately $12MM for facility construction and $5MM in equipment.
Criteria: All new jobs must be created within two years and retained for the period of the loan. Said jobs
must pay greater of $15.00 per hour or 150% of state or federal minimum wage ($15.12),
exclusive of benefits required by law. Any loans shall meet the city of Elk River Business
Subsidy Policy for the creation of new jobs, as well as a 5-year location requirement.
All positions are in excess of the wage requirement of $15.12, as the lowest hourly wage
for all positions is $21.00 per hour.
Summary
The applicant is eligible for a maximum loan of $200,000 per the city’s policy, meeting the equity, wage,
and job criteria requirements and the proposed fund uses are eligible expenses. The project scored 42 out
of 50 points, representing a highly desirable project.
Terms
The loan will be amortized over 10 years at 3% with a 5-year balloon payment. The EDA would retain a
3rd position on the equipment behind the principal lender First Bank Elk River and Small Business
Administration. Staff and the applicant have discussed securing the loan with a personal guarantee.
Financial Impact
If the committee agrees this loan meets the goals of the city and EDA, the loan funds could be funded
from the DEED account, which has a balance of $439,246.36. Similarly, it could be funded from the
EDA’s Business Microloan Fund which has a balance exceeding $1,000,000.
Attachments
▪ Microloan Application
▪ Scoring Worksheet
▪ Company Information
▪ Commitment Letter from the First Bank Elk River
▪ Microloan – Additional Information
▪ Company Financials (confidential, available at the meeting)
ELK RIVER ECONOMIC DEVELOPMENT
MICROLOAN FUND APPLICATION
I. CONTACT INFORMATION
Legal Name of Business: Heritage Millwork, Inc.
Project Site Addiess: Approximately 14 acres of PID: 75-00929-0020
Elk River, MN 55330
City / State. / Zip
Annie Deckert (All Day Companies), Pat Menth (Heritage Millwork)Contact Person(s)
Busmess Phone
319-214-5858 (Annie), 612-817-8025 (Pat)
Fax
Heine Phone
Check One: Proprietor x
Social Seciu-i^ No. alread on file with Cit
Federal ID # 41-1864718
Email already on file
Corporation Partnersliip
State ID #3129323
2. NATURE OF LOAN REQUEST
V^liicli JMicro-Loan Program are you applymg for?
x Industrial Iiiceutive Program
Downtown RevitaUzation Fmancmg Progi-am
Enei-g}- Efficiency Iinprovemeiit Program
Jobs Inceiitive Program
Anionut Requested: S $200,000 Total Protect Cost: $$21,461,000
T}-pe of project:
New constniction for a start-up biisiness
New constniction for an esistuig biismess
On site expansion
Eqiiipment purchase
Remodeling: (circle oiie) Cominercial / Retail / Indi-istiial
x Other relocation of existing business into City of Elk River on
City owned property
Page 11 of 17 POT ( R ED IT
N rOR
Please give a brief siimmaiy ofyoiir biismess and its products or sendee:
Established in the Spring of 1997 in Ramsey, Minnesota, Heritage Millwork Inc (HMI) has been
servicing the Upper Midwest Market as a distributor of moldings, millwqrk, intenqr doors; exterior
entry doors and stair parts. HMI supplies to more than 450 dealers in MN, Wl, SD and IA
Originally stocking only a few interior door designs in two wood species, HMI ow offers over 25
door designs, with unlimited special-order options. In addition to a wide selection of interior
doors, HMI also offers over 30 molding profiles in seven species including MDF, with special-
order molding profiles and a broad selection of stair parts. HMI provides wholesale products to
retail lumber dealers.
Please, give a brief suniaiaiy of the project:
HMI is proposing to acquire approximately 14 acres in city-owned Nature's Edge Business
Park II to construct a 113,000 square foot facility with room to expand another 40,000 sf.
(estimated 3-5 years after receiving CO). Currently located in Ramsey, MN, HMI has
outgrown it's current facility (leased) and would like to relocate to Elk River It currently has
two'offsite warehouses for excess material and product which causes inefficiencies and
lost revenue. Proposed groundbreaking is Summer 2024, with estimated project completion
Q1 2025.
Please describe how tl-us loan vi^iU iinpact your project:
It will help offset the cost of equipment and provide a savings on interest for the project.
3. FINANCING
Pro ect Costs
*See attached Sources & Uses
Laud
Site iinprovements
Biuldiiigs (attach plans & costs)
Eqmpmeut/Madiinery/Fixtiires
(attach list and estimated costs)
ReniodeUi-ig
Industrial Liveutoiy/Workiiig Capital
Other (attach descriptioii)
Total Costs
$
$
$
$
$
$
$
$
Coninients:
Page 12 of 17 F II II B T
Pro osed Sources ofFinancin
SOURCE NAME
Bank Loan
Bank Loan
Other Private Fluids
Applicant Contribution
Other
Fed Grant/Loan
State Grant/Loan
EDA .XIicroloan
Tax Iiicreinent Fiiiancmg
Tax ±'\bateinent
Total Financing
TERAIS AMOUNT
s
s
s
s
s
s
s
s
s
s
$
Collateral Assi nments
Descri 3tlon of Collateral
First Bank of Elk River - All Assets
To Bank 2
To Private Sources
To Other Soizrces
To Federal Govt SBA/Federal Government - All Assets
To State
To EDA ^croloan New Machinery/Equipment
Lien
Position
1
Page 13 of 17 PO » E REB B T
N JURE
Vahie of CoUateral
Land
BT.uldiiigs
Macliineiy & Eqmp.
Other
Other
Book Value
s
s
s
s
s
Cost
s
s
s
s
s
Existin Liens
s
s
s
s
s
See attached job creation spreadsheet for
r. j^ru »» »»*-i^>--»-^m-^ o^rlitiiinol rfotail
Present # of Employees 70.5
additional details
Total Pa^-oU
Jobs To Be Created"
Please provide the follo\\'ing information on jobs you expect to create witliin 2-years.
Average Are. tlie Jobs Expected
Nuiiiber Houdy Aiinual Pernianent or Hiring
Job Title of Jobs Wage Salary Tern oraiy? Date
:r:Ifloan is for job retendou oiily, please explaiii ill Biismess Plan.
Pro rani Ob'ectives This project will bring 70.5FTE to Elk River, averaging
$37.66/hr, and will create an additional 6.5FTE, averaging
$28.25/hr
The project contributes to die Ailflllnient of the city's approved and adopted
econonuc developnient and/or redevelopinent plans.
Tlie project prevents or eliii-uiiates slums and blight.
Tlie project iiicreases die local tax base.
Tlie project briiigs a stnictiire iiito conipliance with an existiiig biulduig code.
vlohtion.
Page 14 of 17 1 r
5. PROJECT CONTACTS
Attome
Naine Nate Alien
Address12725 43rd st NEi st Michael- MN 55376
Phoiie 763-497-3099, nate@glalawfirm.com
Accountant
Tom Barton, Barton Walker & Krier CPAName ."....-".-..
Addres^885 Sycamore Lane N., Maple Grove, MN 55369
Phone 763-367-7300
Financin Sources lenders artners etc...
Chad Vitzthum, First Bank Elk River
iName -..- - .--.-....
Address812 Main street Elk River' MN 55330
Phone 763-241-3600, cvitzthum@elkriver.bank
Name
Address
Phone
Parent Coin an T
Name
Address
Phone
Others
Name
Address
Phone
Name
Address
Phoiie
Page 15 of 17 N E R ED B»
6. ATTACHMENTS CHECK LIST
Please attach the foUo^-iiig:
on file At Written Busiiiess Plan:
1. Description of Busmess
2. Ownersliip
3. Managenient
4. Date Established
5. Prodiicts/Sen'ices
6. Futiire Plans
on file B) Fiiiaudal Statenieuts for Past Two Years
C) Financial Projections for T\vo Years
on file D) Resuiiie ofOwner/Mauagement
on file
E) Personal Financial Statemeiits of Proprietor, Partners,
Guarantors
x
F) Letter of Coniniitnient from Applicant Pledgiiig to Complete
Diu-iiig the Proposed Project Diiration
x
G) Letter of Coiiimitiiient from the OUier Sources of Fmancuig,
Statuig Terms and Conditions oftlieir Paiticipation m
Project
FT) Fee of 1% of amount of loan request
7. AGREEMENT
I / We certify that all information provided in tlus application is tnie and correct to the best
ofn-iy/our kiiowledge. I / \XT e authorize the citv of Elk River and die Fiiiance Committee to
check credit retereiices and verify fiiiancial and odier mformation. I / We agree to provide
any additional information as ma - be reqiiested by the city and the Fmance Committee.
APPLICANT SIGNATURE C^J.
gy Patrick Menth, Heritage Millwork Inc.
DATE ^f- > '
Page 16 of 17 PO » f REB IT
NArURE
Sources & Uses Statement
Project Costs
Cost
acres sq ft cost per ft
Land 14 609,840 $2.25 $1,372,140
Site Improvements: 177,125
Site prep, landscaping, parking, etc.
Building:estimate $12,000,000
SAC/WAC fees $104,707
Machinery & Equipment $5,160,500
see attached equipment list
Office Furniture and Fixtures $200,000
Contingency $1,300,000
Professional fees $255,000
Legal, Architect, Engineer, etc.
Other (Interest Reserve)$600,000
Total $21,169,472
Proposed Sources of Financing
Bank/SBA 504 $17,480,385
Cash Equity $2,116,947
TIF $1,372,140 (up front for land, total TIF request is 1,636,660
Industrial Incentive Microloan - City of Elk River $200,000
Total $21,169,472
New Equipment
DESCRIPTION QUOTE PURCHASED
994X DOOR MACHINE 717,950.00 717,950.00
HANDLER 68,350.00 68,350.00
ON-3D HANDLER DOUBLE STACK UPGRADE (ADD TO HANDLER)29,550.00
EFX CNC DOOR EDGE MACHINING 379,950.00
STEEL HANDLER 70,750.00
DL-NCD ENTRY DOOR LIGHT CUT-OUT MACHINE 276,450.00
965 FRAME ROUTER ENTRY DOOR JAMB MACHINE (REPLACE ANNY)197,500.00
JAMB ROUTER 30,000.00
PF 1,000,000.00
DOOR PICKER BARBARIC 1,300,000.00
CASING MACHINE 20,000.00
DOOR WRAPPER 100,000.00
TRASH COMPACTOR 20,000.00
RACKING 250,000.00
FURNITURE & FIXTURES 150,000.00
DUST COLLECTION 500,000.00
AIR COMPRESSOR 50,000.00
5,160,500.00
Employee Spreadsheet (Current & Future)
Position Title (i.e.: estimatng manager,
machine operator, medical assistant, office,
management, etc.)
Current FTE
(quantity)
Number of jobs
created within 2
years of building
completion
Year 1
(2025)
Year 2
(2026)
Year 3
(2027)
Ave. hrly
cash wage
rate*
Hourly
value of
benefits**
With
benefits
Total
Male
Total
Female
Ave base
wage
Average
Total
Wage
Customer Service 5.5 0 ($28.29) ($5.25) ($33.54) 58.5 11.5 ($32.41)($37.66)existing
Executive 3 0 ($75.00) ($5.25) ($80.25) $23.00 $28.25 created
Interior shop 9 5 ($21.92) ($5.25) ($27.17)
Outside sales 5 0 ($62.50) ($5.25) ($67.75)
Warehouse 9 0 ($24.16) ($5.25) ($29.41)
Sales Manager 1 0 ($62.50) ($5.25) ($67.75)
Order Processing 2 0 ($23.39) ($5.25) ($28.64)
Driver 8 0 ($29.67) ($5.25) ($34.92)
Supervisor 7 0 ($32.62) ($5.25) ($37.87)
I.T.1 0 ($51.00) ($5.25) ($56.25)
Marketing 1 0 ($36.82) ($5.25) ($42.07) 58.5 11.5
Inventory 1 0 ($34.00) ($5.25) ($39.25)
Purchasing 1 0 ($39.87) ($5.25) ($45.12)
Exterior Shop 5 1 ($25.38) ($5.25) ($30.63)
Service 1 0 ($26.00) ($5.25) ($31.25)
Accounting 1.5 0.5 ($29.00) ($5.25) ($34.25)
HMI PF 1.5 0 ($23.00) ($5.25) ($28.25)
Controller 1 0 ($62.50) ($5.25) ($67.75)
TFI 7 0 ($21.00) ($5.25) ($26.25)
($37.30) ($5.25) ($42.55)
TOTAL EMPLOYEES 70.5 6.5
* excludes benefits
**includes non-mandated benefits to employee; social security tax, unemployment insurance, workers comp and other benefeits must be excluded