7.1. SR 08-22-1994
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ITEM 7.1.
MEMORANDUM
TO:
MAYOR & CITY COUNCIL
FROM:
WILLIAM RUBIN, ECONOMIC
DEVELOPMENT COORDINATOfVrL-
AUGUST 22, 1994
DATE:
SUBJECT: FINAL PUBLIC HEARING ON DTED
GRANT/CITY LOAN TO TESCOM
CORPORATION
INTRODUCTION
On August 22, 1994, the City of Elk River will conduct a final public hearing
on the $250,000 Small Cities Economic Development Program Grant from
the Minnesota Department of Trade and Economic Development (DTED)
which was subsequently used by the City to assist with an expansion of a
local manufacturer.
The public hearing is a requirement of DTED and the notice, as published in
the August 10 Star News, is attached to this memo.
BACKGROUND
On October 15, 1992, DTED informed the City of Elk River that its
application for an Economic Development Program Grant in the amount of
$250,000 had been approved. A copy of this letter from DTED is attached to
this memo.
The grant award was made from federal Community Development Block
Grant (CDBG) dollars. As such, the activity or activities funded by CBDG
dollars must meet at least one of the following federal objectives:
a. benefit to low- and moderate- (LMI) persons;
b. prevention or elimination of slums and blight; and,
c. alleviation of urgent community development needs.
P.O. Box 490. 13065 Orono Parkway · Elk River, MN 55330 · (612) 441-7420 · Fax: (612) 441-7425
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Pursuant to a Loan Agreement dated May 18, 1993, the City loaned the
Small Cities funds to Tescom Corporation, 12616 Industrial Boulevard, Elk
River, Minnesota. The funds were used by Tescom to assist with the
financing of certain equipment needs associated with the expansion of its
high purity controls division.
. To further support this expansion, the City provided the following:
$1,500,000 Industrial Development Revenue Bond (IDRB) for the
project's primary mortgage financing;
. $153,000 from Tax Increment Financing (TIF) as a grant for land
write down ($100,000) and site preparation ($53,000); and,
. $50,000 micro-loan for equipment purchases.
Construction of Tescom's 28,000 square foot facility for its high purity
controls division began in mid-1993. A Certificate of Occupancy was issued
in late November and production in the facility began in December, 1993.
Pursuant to an Assessment Agreement, the project's finished market value is
$1,200,000. Tescom's industrial control division continues to occupy the
35,000 square foot facility.
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Tescom estimated that it would create 45 new permanent jobs as a result of
this expansion. Of the 45 newly-created jobs, it was estimated that 34 would
benefit LMI persons. To document this, all new employees are asked to
complete a Notice to Prospective Employee. This Notice provides a range of
total family income based on family size. An employee is then determined to
be either low-income (LI) or low- or moderate-income (LMI), or non-LMI. The
family incomes for these categories are derived from annual estimates from
the Department of Housing and Urban Development (HUD). A copy of the
current Notice, together with the latest HUD family income estimates, is
attached to this memo. Initially, family income estimates from the St. Cloud
Metropolitan Statistical Area (MSA) were used in the tracking of jobs that
benefit LMI persons. Since late May, 1994, the Minneapolis/St. Paul MSA
family incomes have been used. From the date of the grant award
announcement through June 30, 1994, Tescom estimates that it has created
61 permanent jobs. Of the total, 27 jobs have been taken by LMI persons. It
should be noted that the 61 jobs is not an indication of Tescom's true growth.
Some of the jobs have been filled through various vacancies in the
organization. A more reflective number of the newly-created positions is 44
jobs. Tescom has through December 31, 1994, to fulfill its obligation of
creating the permanent jobs as outlined earlier.
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The $250,000 loan to Tescom is structured as a 10 year loan. For the first
five years, the loan will carry an interest rate of 4.5 percent. In years six
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through ten, inclusive, the loan is adjusted to 6 percent on the remaining
balance. The City has collected an accrued interest payment and three
principal and interest payments on the loan. Payments are credited to a
block grant micro-loan fund. With Tescom's August payment, this fund has a
cash balance of $8,054.19. Subsequent loans that are made with these funds
must meet one of the three federal objectives outlined earlier. Unlike
previous DTED grants/loans, the City of Elk River retains 100 percent of
Tescom's principal and interest payments throughout the life of this loan.
Tescom's total principal and interest payments will provide $316,947.96 to
help capitalize the block grant micro-loan fund.
The $50,000 micro-loan to Tescom was disbursed III May of 1993. It is
performing satisfactorily.
ACTION REQUESTED
The City Council is asked to open the public hearing on the DTED Tescom
expansion project and solicit comments from persons attending the August
22, 1994, meeting.
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NOTICE OF PUBLIC HEARING
FOR THE CITY OF ELK RIVER
The City of Elk River will conduct a public hearing on Monday, August 22,
1994, at 7:00 p.m., to be held at the Elk River City Hall, 13065 Orono
Parkway, to consider the results of the $250,000 Small Cities Economic
Development Program Grant from the Minnesota Department of Trade and
Economic Development (DTED). Pursuant to an agreement dated May 18,
1993, the City of Elk River loaned the Small Cities funds to Tescom
Corporation, 12616 Industrial Boulevard, Elk River, Minnesota. The funds
were used to assist with the financing of certain equipment needs associated
with an expansion of Tescom's high purity controls division.
The public hearing represents an opportunity to discuss Tescom's expansion
project, the permanent jobs created to date, the status of the loan repayment,
and future uses of the repaid funds.
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All persons desiring to appear at the public hearing will be afforded an
opportunity to express their views. Interested persons may also file written
comments expressing their views with the City Administrator up to the date
of the public hearing. For further information, contact William Rubin,
Economic Development Coordinator, at the Elk River City Hall, 441-7420.
/s/ William Rubin
Economic Development Coordinator
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'1H'N I \f': i) NOV 0 4 1992
Minnesota Department of
Trade and Economic Development
Office of the Commissioner
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900 American Center
150 East Kellogg Boulevatd
St. Paul, MN 55101.1421
612/296.6424
Fax: 612/296.1290
October 15, 1992
Jim Tra 11 e
Mayor
720 Dodge Avenue NW
Elk River, MN 55330
Dear Mayor Tralle:
I am pleased to inform you that your application for a Minnesota Small
Cities Economic Development Program grant has been approved in the amount of
$250,000. As outlined in the approved application, the city will make a loan of
$250,000 to Tescom Corporation, Inc to assist in the expansion of its Elk River
operation.
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This grant is made from the federal Community Development Block Grant
Program. A grant agreement is being prepared by Community Development Division
staff. They will also provide you with additional information about your grant
award and will do all they can to help you achieve your community development
goals. Also, please note that your approved application becomes part of the
grant agreement. For additional information, contact Jennifer Engh, Acting
Deputy Commissioner, at 612/297-2515.
Finally, let me extend my congratulations to you and your staff for devel-
oping an approach which will effectively address your community development
needs.
Si ncej4Y' .
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E. Peter Gillette, Jr.
Commissioner
ED.GEN/l13-1
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An Equal Oppottunity Employer
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NOTICE TO PROSPECTIVE EMPLOYEE
AU6 1 2 1993
The development of this project and the creation of these jobs are being assisted with
Community Development Block Grant (CDBG) funds provided to us from the City of Elk River,
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which it receives from the M N Department of Trade and Economic Development. A
requirement of this assistance is that we collect data on the sex, ethnicity and income of
persons who apply for employment. Therefore, we ask that you answer the questions below.
This information will not be disclosed or released by this office without your consent,
except to the City of Elk River and to M N Department of Trade and Economic Development
(C IcY I ~o i
(DTED) and except as required or permitted by law.
Are you .......... _Male _Female Female Head of Household
Are you ......................... White (not Hispanic 1
"'--Black (not Hispanic
-American Indian or Alaskan Native
--Hispanic
Asian or Pacific Islander
Were you referred by ........ Jobs Training Partnership Act (JTPA)
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A. TAKEN BY:
What is the number of adults and children living in your household including
yourself?_
For the past year what was the total family income (before taxes) for all members of your
household? Please check the appropriate response across from the family size
you listed aoov~.
LOW-INCOME
LMI
NON-LMI
12"1''151 or more
~\I qOI or more
~' or more
or more
U or more
or more
o or more
1 or more
I member: $ 11,850 or less, 11 aSI - :z.1,l!~O
2 members: $zoO.tWO or less, 2.0,llOI - :?,/,qOO
3 mem bers: $ "Z.2.,q"O or less, n,q51 - ~lqOO
4 members: :z."','SOO or less, 2.5.501 - Zd. qOO ,
5 members: "1 50 or less, 1-1.551. - <11.'00
6 members: 7.q,,,,OO or less, $2.~,bOI : ~~iffi'"
7 members: "","00 or less, 3'.bt>1
8 members: '!>'>;,1050 or less, $"!,';//t)c, I -:z. ,
If requested, I would agree to make my financial records available to the
Cirl of Elk River or DTED for verification of the above information.
( 11,.11 L.oJ
I certify that the information above is, to the best of my knowledge and belief, a
true, correct and complete statement of my financial condition as of the date stated
herein.
S IY!ldL..Uf1:
DdLf:
Wamin~: Section 1001 of Title 18 of the United States Code (Criminal Code and
Crimina, h cedure) shall apply to the foregoing certification. Title 18 provides, among
other things, that whoever, knowingly and willingly makes or uses a document or writing
containing any false, fictitious or fraudulent statement or entry, in al1Y manner within
the jlj,risCIictlon of any department or agency of the United States, shan be fined more
than UO,OOO or imprisoned not more than five years, or both.
I Prospective Employee Stop Here
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This Page to be Completed by Company
and Grantee
B. AVAILABLE TO:
To be completed
I certify that
by company only:
, was hired for
(Juu LILle)
on
(t:llt~IUyt:!t:!)
(UclU: )
Total annual hours for this position are
Th~ jqbs aval1able meets that of the general LMI population based on the following
cr1tena:
o Skill level
o Education and experience
o Training provided py the employer
o Advertising, recruitment, and Other outreach efforts
I, , certify that. this position meets the above criteria.
\(.UlIIlJd.I1Y uWller or \..t..U)
C. GRANTEE CERTIFICATION:
To be completed by the Grantee:
I acknowledge that I have reviewed the above information and it meets the following
criteria: _ '
t:::j Referred by JTPA
t:::j "Taken By" an LMI person (See Section A)
t:::j "Available To" an LMI person (See Section B)
t:::r Non-LMI
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DctL.t:
For Retained Positions complete Sections A and C.
ED 1/25-(1-2)