Agenda - Economic Development Authority - 12/09/2010

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CONSIDER RLF LOAN FOR MS HOLDINGS, LLC AS IT PERTAINS TO THE SALE OF THE PROPERTY AT 6690 SUNWOOD DRIVE NW Background: By: Aaron Backman, Economic Development/Marketing Manager Case # 1 MultiSource Manufacturing, a company based in Burnsville, MN, needs additional and better facility space to accommodate its growth. As EDA members are aware MultiSource has been considering purchasing the former Harber Industries building. There is a signed agreement between the bank holding the building and MultiSource with a projected closing date of on or before December 31, 2010. The company likes the Ramsey location and is interested in purchasing a portion of the City's vacant parcel that is contiguous to the Harber building. At the Special EDA meeting on November 18 the EDA discussed in closed session the sale of City property and potential financial assistance. A contract sale of the City's property and an RLF loan for fixed assets were reviewed. Tax Increment Financing (TIF) was considered but ruled out at this time based on previous TIF assistance on the property and the "but for" test. Following the EDA meeting a written proposal was provided by the Economic. Development/Marketing Manager Backman to Jay Lindgren, from Dorsey & Whitney and the consultant for MultiSource. The Company felt the proposal was not acceptable in a couple of areas: make the RLF loan available for equipment or building assets, make the land acquisition financing more favorable than 20% down and financed at 3.5% over five years. On November 29 after consultation with the EDA Chair and Vice - Chair, a revised proposal was sent to Mr. Lindgren. The proposed $250,000 RLF loan was 7 years for equipment or 15 years for the building. The interest rate remained at 3.5 %. The contract financing for the land acquisition was proposed as a $250,000 forgivable loan. The interest rate was also 3.5 %. The term would be a 15 year amortization with a five year balloon (monthly payments estimated to be $1,751.46). The outstanding loan balance at the time of construction would be completely forgiven provided there was a building addition of at least 40,000 sq. ft. and 10 additional jobs created. On November 30 the Economic Development/Marketing Manager Backman had a conference call with Gary Hadley, President/CEO and Bill Hibbs, Chairman of the Board for MultiSource. They indicated that the RLF Loan piece of the proposal was satisfactory and the Forgivable Loan piece was attractive, however, they asked if the balloon element could be for 10 years and if there could be a payment holiday for 12 months. They also indicated that the buyer of the property would be MS Holdings, LLC, a mirror entity created for that purpose. On December 1 I responded that the payment holiday was not possible, but that the EDA could consider an extended balloon arrangement if we have the ability to adjust the interest rate after the initial five -year period. Mr. Hibbs indicated, after consulting his partners, that MultiSource would not pursue the City's land purchase at this time, but did want to move ahead with the RLF Loan and the purchase of the former Harber Industries building if possible by the end of December.