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industry. Thc city acts as a conduit for the IRB financing. Consultant Mulrooney advised as a <br />result of the tax-exempt status, rates on IRBs are substantially lower than conventional financing <br />because the interest income earned on the IRB by the bondholder is exempt from Federal income <br />taxes. Thc resultant savings are passed on to the business entity in the form of a below market <br />rate loan. <br /> <br />Consultant Mulrooney advised it is important to note that the "full faith and credit" of the City of <br />Ramscy is not being pledged through the issuance of these types of bonds. Bondholders look to <br />thc operating company for repayment, not the city or issuing authority. He indicated the owner <br />of' Sign-Zone has created a passive real estate investment holding company for this transaction. <br />Thc name of the company is Kilkenny Limited Liability Company. All documentation related to <br />this transaction reflects the name of this company. Kilkenny LLC will lease the facility to the <br />operating company named Sign-Zone, Inc. Sign-Zone, Inc. is the Twin Cities' leading provider <br />of custom business signage and graphics displays. Recent projects have included the Best Buy <br />Corporate Headquarters, American Express and the Rainforest Caf& Sign-Zone, Inc. has four <br />divisions. The combined operating divisions currently employ approximately 120 people. <br />Following the relocation to the new building in Ramsey, many more jobs will be added. He <br />advised staff recommends the approval of the following documents: <br /> 1) A Loan Agreement between the City of Ramsey and Kilkenny, LLC. <br /> 2) Certification of the City. <br /> 3) A resolution authorizing the issuance of a Note in the principal amount of $70,000 to <br /> provide funds to the Borrower for its use in paying issuance Costs related to the Bonds. <br /> 4) A resolution authorizing the issuance of $3,810,000 Variable Rate Demand Industrial <br /> Development Revenue Bonds to finance the acquisition of the building and complete <br /> necessary improvements. <br /> <br />Councihnember Elvig asked if there is a personal guarantee with the bonds, and if there are <br />limits to thc City for the IRB bonds. <br /> <br />Mary Ippel, Briggs and Morgan Attorney, replied the bonds are backed by a letter of credit. The <br />City can issue industrial revenue bonds for any qualified project, which must be a manufacturing <br />project. There is a limit that no more than 10 million dollars can be issued for any project. This <br />must include capital expenditures of the company three years before the date and three years <br />after thc issuance of the bond. There is a limit statewide on the amount of industrial revenue <br />bonds that can be issued in the state of Minnesota of over 70 million dollars. This year about 60 <br />million dollars is remaining. There has not been the same volume as previously in the last three <br />years because there have not been many manufacturing projects undertaken in the state of <br />Minncsota in that time. Prior to that, the bonds were used up very quickly. <br /> <br />Councilmember Elvig asked if the City is working with any other companies for this type of <br />financing. <br /> <br />Consultant Mulrooney replied the City is not currently in discussions with any other <br />manufhcturcrs interested in industrial revenue bonds at this time. <br /> <br />City Council / June 28, 2005 <br /> Page 8 of 24 <br /> <br /> <br />