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Home My WebLink About8A - NBC Products MEETING DATE: AGENDA #: PREPARED BY: August 17, 1998 8A Donald Rye, Planning Director AGENDA ITEM: PUBLIC HEARING TO CONSIDER MINNESOTA INVESTMENT FUND GRANT FOR NBC PRODUCTS DISCUSSION: History- On January 5, 1998, the City Council approved a modification to TIP District 2-6 which is the NBC Products development in the Business Office Park.. This modification allowed the purchase of an additional 1.03 acres of land which allows for an expansion of the existing building from 19,600 square feet to 36,700 . square feet. Current Circumstances- The attached document entitled Project Narrative(FP-2b) Economic Development Program provides the background for this project and the reason for the request to apply for a grant from the Minnesota Investment Fund on behalf of NBC Products. The grant to the City in the amount of$75,000 would be loaned to NBC Products to make up the required equity participation by NBC Products. As the loan is repaid, the money will be deposited in the Economic Development Authorities' Revolving Loan Fund and would be available for other economic development activities. The Issues- The grant approval procedures require that a public hearing be conducted prior to approval of the application. The issue is whether the Council feels it is appropriate to utilize this mechanism to allow the development of an expanded manufacturing facility which will provide an additional 15 jobs in the City. The Economic Development Authority has already endorsed the proposal .This arrangement is the same process which was followed in providing the loan to EM Products. FISCAL IMPACT: Cost Recovery Analysis- Because this involves a loan to the company, the City will recover the grant money over a 10 year period. As noted above, these funds will be available as they are repaid to assist in future development or redevelopment activities. Budget Impact-None 162<<l~E~~(!kl~~oocE., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER ALTERNATIVES: RECOMMENDED MOTION: REVIEWED BY: L:\ECONDEV\CC8172-6.DOC 1. Adopt Resolution 98-XX authorizing submission of the application for $75,000 to the Minnesota Department of Trade and Economic Development on behalf of NBC Products 2. Do not authorize submission of the application 3. Other action as directed by the City Council 1. Alternative 1- Adopt Resolution 98-XX authorizing submission of the application for $75,000 to the Minnesota Department of Trade and Economic Development on behalf of NBC Products and authorizing the Mayor and City Manager to execute the grant application. 2 RESOLUTION 98-_XX_ RESOLUTION PROVIDING FOR AUTHORIZATION TO SUBMIT AN APPLICATION FOR $75,000 TO THE MINNESOTA DEPARTMENT OF TRADE AND ECONOMIC DEVELOPMENT ON BEHALF OF NBC PRODUCTS AND AUTHORIZING THE MAYOR AND CITY MANAGER TO EXECUTE THE GRANT APPLICATION MOTION BY: SECOND BY: WHEREAS, the Minnesota Department of Trade and Economic administers the Minnesota Investment Fund whose purpose is to stimulate the creation and retention of jobs in manufacturing and technology industries; and WHEREAS, grants are awarded to cities which provide loans to assist expanding businesses; and WHEREAS, NBC Products wishes to construct a 17,100 square foot addition to its' existing building; and WHEREAS, NBC Products needs an additional $75,000 to complete its' financial commitment to the project; and WHEREAS, the City Council is desirous of assisting NBC Products in completing its' financial arrangements so the proposed addition can be constructed; NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, City staff is hereby authorized to submit the application for $75,000 to the Department of Trade and Economic Development on behalf of NBC Products. BE IT FURTHER RESOLVED That the Mayor and City Manager are hereby authorized to execute the grant application. CCRES2-6.DOC 1 16200 Eogle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER Passed and adopted this 17th day of August, 1998. YES NO MADER MADER - KEDROWSKI - KEDROWSKI PETERSEN - PETERSEN - SCHENCK SCHENCK - WUELLNER WUELLNER Frank Boyles, City Manager City of Prior Lake {Seal} CCRES2-6.DOC DR 2 Forms Package Project Narrative (FP-2b) Economic Development Program Applicant Name: City of Prior Lake NBC Products, Inc. was established in 1976 by Walt Bishop, Steve Tolvstad, David Shaefer, and Ted Zubeck. The company is currently owned by Anthony Shanks who has been with the company since 1977. The company manufactures Electronic Air Cleaners which it sells almost exc1usivCly to Honeywell. The borrower currently owns a 19,600 SF facility in Prior Lake and leases approximately 9,000 additional SF of offsite space. The project entails the construction of a 17,100 SF addition to the current building in Prior Lake, Minnesota. The cost for the proposed expansion is $717,000; however, since the project involves the addition to an existing facility, the bank will restructure the first mortgage based upon the entire value of the real estate. The following Use and Source of Funds statement reflects this arrangement: USES OF FUNDS Original site and improvements Existing debt Land Building Professional fees Contingency TOTAL $281,000 644,000 50,000 595,000 30,000 42.000 $1,642,000 SOURCE OF FUNDS Bank MnDTED Equity TOTAL 1st REM 2nd REM $1,237,500 75,000 329.500 $1,642,000 Anthony E. Shanks will own the real estate personally. Mr. Shanks is 100 percent owner of NBC Products, Inc. Mr. Shanks is active in managing all aspects of the business. Fifteen new jobs will be created and eighteen jobs retained over the next two years as a result of this project. The minimum wages for the jobs to be created is $10/hr plus fringe benefits. NBC Products, Inc. has had tremendous growth in the past year. Revenues over the last six months of 1997 nearly matched revenues for the year ended 6/30/97. Due to the explosive growth, the company is planning to expand its existing facility. Financial ratios appear solid. Proforma debt to worth is 2.3:1, cash flow coverage is adequate based on six months historical earnings. The company has had small losses in 1995 and 1996 while sales were flat. The company has a significant concentration of sales to one customer (Honeywell). Prospects for continued growth appear likely. Forms Package Financing and Affordability (FP-3b) Economic Development Program Applicant Name: City of Prior Lake The project requires MnDTED assistance due to the inability to leverage private financing. Liberty State Bank is prepared to provide a first mortgage in the amount of $1,237,500 contingent upon subordinated debt/equity of $404,000. Mr. Shanks can provide $329,000 of equity based upon a current real estate appraisal of the proposed "as built development" and cash injection. There remains a $75,000 financing gap in order to leverage the bank loan. This project was originally proposed to be financed via a SBA 504 loan but was rejected by SBA due to the fact that the company presently relies heavily on its account with Honeywell for revenue. The company intends to diversify its market but requires an expansion to service its primary account and gain capacity for manufacturing product for new customers. But for the MnDTED grantlloan, this project will not go forward and the company's existing revenues via Honeywell will be jeopardized. NOTICE OF PUBLIC HEARING The City of Prior Lake, Minnesota, will conduct a public hearing at 7:00 p.m. on August 17, 1998, in Fire Station City Council Chambers, 16776 Fish Point Road, to consider a submission to the Minnesota Investment Fund Grant program. The purpose of this public hearing is to discuss submission of a . Minnesota Investment Fund Grant in support of an expansion project by NBC Products, Inc., a manufacturer of electronic air cleaners. The purpose of this program is to create employment opportunities for low and moderate income persons. If the project is successful, it is anticipated that up to 15 new employment opportunities will be created and 18 jobs will be retained. . Persons wishing to be heard regarding the grant program will be provided the opportunity. If unable to attend, written testimony may be offered and should be given to the City Clerk prior to 4:30 p.m. on the day of the hearing. Prepared this 22nd day of July, 1998 by: Planning Department City of Prior Lake (Published in the Prior Lake American on Saturday, July 25, 1998; No. 3476) Affidavit of Publication Southwest Suburban Publishing State of Minnesota) )SS. County of Scott ) Stan Rolfsrud, being duly sworn, on oath says that he is the publisher or the authorized agent of the publish~r of the newspapers known as the Shakopee Valley News, Jordan Independent, Prior Lake Amencan and Savage Pacer, and has full knowledge of the facts herein stated as follows: (A) These newspap~rs have c~mplied with the requirements constituting qualification as a legal newspaper, as provIded by Mmnesota Statute 331A.02, 331A.07, and other applicable laws, as amended. (B) The printed public notice that is attached to this Affidavit and identified as No.l39'~ was published on the date or dates and in the newspaper stated in the attached Notice and said Notice is hereby incorporated as part of this Affidavit. Said notice was cut from the columns of !he ne;vspaper. specified. Printed below is a copy of the lower case alphabet from A to Z, both mcluslve, and IS hereby acknowledged as being the kind and size f type used in the composition and publication of the Notice: abcdefghijklmnopqrstuvw z Subscribed and sworn before me on GW~;;::~;~~'''~l NOTARY PUBUc-MINNESOTA MY COMMISSION EXPIRES 1-31.00 RATE INFORMATION Lowest classified rate paid by commercial users for comparable space...... $11.50 per column inch Maximumrate allowed by law for the above matter.................................. $11.50 per column inch Rate actually charged for the above matter................................................. $8.37 per column inch