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Community Development Authority Packet - 4/18/2017 CITY OF MUSKEGO COMMUNITY DEVELOPMENT AUTHORITY AGENDA April 18, 2017 5:00 PM Muskego City Hall, W182 S8200 Racine Avenue CALL TO ORDER PLEDGE OF ALLEGIANCE ROLL CALL STATEMENT OF PUBLIC NOTICE APPROVAL OF THE MINUTES OF NOVEMBER 15, 2017. PUBLIC INPUT NEW BUSINESS 1. Revolving Loan Fund Request: Legacy Landscaping (S81 W18510 Gemini Drive). ONGOING BUSINESS MISCELLANEOUS BUSINESS AS AUTHORIZED BY LAW 1. Community Development Department Status Update ADJOURNMENT NOTICE IT IS POSSIBLE THAT MEMBERS OF AND POSSIBLY A QUORUM OF MEMBERS OF OTHER GOVERNMENTAL BODIES OF THE MUNICIPALITY MAY BE IN ATTENDANCE AT THE ABOVE-STATED MEETING TO GATHER INFORMATION; NO ACTION WILL BE TAKEN BY ANY GOVERNMENTAL BODY AT THE ABOVE-STATED MEETING OTHER THAN THE GOVERNMENTAL BODY SPECIFICALLY REFERRED TO ABOVE IN THIS NOTICE. ALSO, UPON REASONABLE NOTICE, EFFORTS WILL BE MADE TO ACCOMMODATE THE NEEDS OF DISABLED INDIVIDUALS THROUGH APPROPRIATE AIDS AND SERVICES. FOR ADDITIONAL INFORMATION OR TO REQUEST THIS SERVICE, CONTACT MUSKEGO COMMUNITY DEVELOPMENT DEPARTMENT, (262) 679-4136. Unapproved CITY OF MUSKEGO COMMUNITY DEVELOPMENT AUTHORITY MINUTES November 15, 2016 6:00 PM Aldermen’s Room – Upper Level of City Hall, W182 S8200 Racine Avenue CALL TO ORDER Director Muenkel called the meeting to order at 6:00 PM. PLEDGE OF ALLEGIANCE Those present recited the Pledge of Allegiance. ROLL CALL Present: Lana Arrowood, Barb Schroeder, Ald. John Engelhardt, Ald. Borgman, and Director Jeff Muenkel. Excused: Bonnie Johnson, Joseph Boschert and Dave Stevens STATEMENT OF PUBLIC NOTICE The meeting was noticed in accordance with the open meeting laws. APPROVAL OF THE MINUTES OF SEPTEMBER 20, 2016 Ald. Borgman made a motion to approve the minutes of September 20, 2016. Lana Arrowood seconded. Motion Passed 4 in favor. PUBLIC INPUT NEW BUSINESS Business Park Grant Fund: Tollefsen Steel & Fabrication Inc. (S82 W18664 Gemini Drive). Ald. Borgman made a motion to approve Business Park Grant Fund: Tollefsen Steel & Fabrication Inc. (S82 W18664 Gemini Drive) for the amount of $5,000. Lana Arrowood seconded. Motion Passed 4 in favor. Review Commercial Grant Program Lana Arrowood made a motion to make the following changes to the Commercial Grant Program: 1. No maintenance items can be approved. 2. Only one grant is allowed for a tenant or parcel. 3. The City attorney should add any other requirements for ineligible applicants as needed. Barb Schroeder seconded. Motion Passed 4 in favor. Loan Extension Request: SDS2 Management (S75 W17301-51 Janesville: Westwood Centre) Ald. Engelhardt made a motion to approve Loan Extension Request: SDS2 Management (S75 W17301-51 Janesville: Westwood Centre). Ald. Borgman seconded. Motion Passed 4 in favor. ONGOING BUSINESS Tess Corners Redevelopment District (#1) Implementation Downtown Redevelopment District (#2) Implementation Muskego Business Park Redevelopment District (#3) Implementation Mill Valley Redevelopment District (#4) Implementation Marketing Plan Implementation MISCELLANEOUS BUSINESS AS AUTHORIZED BY LAW Redevelopment District Development & Other Miscellaneous Information Updates Next Meeting Date ADJOURNMENT Ald. Borgman made a motion to adjourn at 6:55 PM. Lana Arrowood seconded. Motion Passed 4 in favor. Respectfully submitted, Kellie McMullen, Recording Secretary NEW BUSINESS ITEM #1: Revolving Loan Fund Request: Legacy Landscaping (S81 W18510 Gemini Drive) STAFF DISCUSSION Please find enclosed in the supplement an RLF application from Legacy Landscaping for the purchase of the property in which they are currently leasing and for the construction of a new 6,000 SF building with construction of outdoor bulk material storage bins for the business located at S81 W18510 Gemini Drive. As per policy, our representative from the Southeastern Regional Planning Commission (SEWRPC), Mr. John Meland, has put together a cover letter explaining the application and contingencies of the loan recommended. Overall, $125,000 of City RLF monies is requested as part of a combined $1,416,000 loan/equity package consisting of $1,274,400 in financing from Citizens Bank of Mukwonago and the Small Business Administration (SBA) 504 program, $125,000 City RLF loan, and $16,600 in owner’s equity. The loan will be dependent that Legacy Landscaping brings in seven (7) new fulltime equivalent jobs to the community of which 51% of the jobs must be for low to moderate income individuals. The term of the city loan would be 10 years with deferred principal payments for 12 months at an interest rate of 2.0%. Interest-only payment would be made on a monthly basis during the deferral period. The collateral available to secure the loan will include personal guaranties and junior mortgages on the residences of the two owners. More details are included in SEWRPC’s memo. Overall, staff believes that the proposal outlined is more than adequate and recommends approval subject to Mr. Meland’s stated contingencies from his letter attached herein. Further Note(s):  The amount requested tonight is more than the usual $100,000 maximum that the adopted RLF program discusses. However, the city is allowed to grant more than $100,000 at their discretion should they see fit, as was done for Alpha Plastics in 2008 and 2015. Staff finds the loan to be in an approvable form and looks forward to Legacy Landscaping expansion and addition of new employees. Staff believes that the $125,000 amount of the proposed loan be allowed to Legacy Landscaping based on the recommendations from John Meland of SEWRPC. For CDA reference, The last RLF loan awarded was in 2015. The past loans the City has given are as follows: 2015: Alpha Plastics up to $200,000 2013: Haven Salon and Spa up to $100,000 2009: DK Motors (Napa Auto) up to $80,000 2008: Alpha Plastics up to $200,000 2006: Stella And Chewy’s LLC $100,000 2005: Animal Doctor, Inc. $100,000 2003: Gorski Inc. $46,700 DENIED MEMORANDUM TO: City of Muskego Community Development Authority FROM: John R. Meland, Principal Specialist Southeastern Wisconsin Regional Planning Commission DATE: April 13, 2017 SUBJECT: REVOLVING LOAN FUND (RLF) REQUEST The purpose of this memorandum is to provide a summary and Commission staff analysis of the request from Schulew LLC, dba Legacy Landscaping LLC, for a loan from the City of Muskego Revolving Loan Fund (RLF) program. A description of the business proposal and the findings of a Commission staff analysis based upon RLF underwriting standards are presented below: Background Schulew LLC is a holding company that will purchase the real estate at S81W18510 Gemini Drive and lease it to Legacy Landscaping LLC. Both Schulew LLC and Legacy Landscaping are owned in equal shares by Daryl Schure and Scott Lewitzke. Legacy Landscaping is a full-service landscape business that currently leases one of the spaces in the 4-unit building at the Gemini Drive location along with the majori- ty of the outside paved area that is used for storage of landscaping equipment. In addition, to purchasing the real estate, funding for this project will allow Schulew LLC to construct bulk storage bins and add a new 6,000 square foot building that will also be occupied by Legacy. The remaining tenants will lease their space from Legacy Landscaping. Financial statements show sales of $1.4 million in 2016 with a projected increase to $1.6 million in 2017. Funding Request Schulew LLC is requesting that the City provide a $125,000 RLF loan to assist with the purchase of the real estate at the Gemini Drive location. The RLF loan would be matched with a loan from the Citizens Bank of Mukwonago of $708,000 and a loan from the Small Business Administration (SBA) 504 program of $566,400. The SBA 504 loan would be provided with a 12-month deferral of principal payments. In ad- dition, $16,600 of owners’ equity would be provided (see attached RLF application). The Company is requesting that the RLF loan be provided with a term and amortization of 10 years, a de- ferral of principal payments for 12 months, and an interest rate of 2.0 percent. The request is consistent with the underwriting standards for the RLF program. W239 N1812 ROCKWOOD DRIVE PO BOX 1607 WAUKESHA, WI 53187-1607 Serving the Counties of: TELEPHONE (262) 547-6721 FAX (262) 547-1103 KENOSHA MILWAUKEE OZAUKEE RACINE WALWORTH WASHINGTON WAUKESHA -2- The collateral available to secure the RLF loan would include personal guaranties and junior mortgages on the residences of the two owners. The mortgage on the residence of Daryl Shure in Racine County would be junior to a first mortgage of $116,718 on a property valued at $350,000. The mortgage on the residence of Scott Lewitzke in Waukesha County would be junior to a first mortgage of $216,898 on a property val- ued at $456,300. The Company has agreed to create seven new full-time equivalent jobs in exchange for the RLF loan with at least 51 percent of the jobs benefiting low- and moderate-income persons. The jobs would be recruited through the Waukesha County Workforce Development Center. This job creation goal meets the require- ments of the RLF program that requires one full-time equivalent job for each $20,000 of RLF investment. Contingencies Should the City decide to provide the requested financing, it is recommended that the approval be based on the following contingencies: 1. That a $125,000 RLF loan is provided to Schulew LLC. 2. That the RLF loan is matched with at least $1,274,400 in financing from Citizens Bank of Mukwonago and the Small Business Administration (SBA) 504 program, along with at least $16,600 in owners’ equity. 3. That the RLF loan is provided with a term and amortization of 10 years, a 12-month deferral on prin- cipal payments, and an interest rate of 2.0 percent. Interest-only payments would be made on a monthly basis during the deferral period. 4. That the RLF loan is secured with the collateral identified above. 5. That the Company creates seven new full-time equivalent jobs that are recruited through the Waukesha County Workforce Development Center. At least 51 percent of the new jobs would be provided to low- and moderate-income persons. 6. That the borrower provides to the City, or its designee, on an annual basis, semi-annual financial statements and signed copies of the borrower’s Federal income tax return. * * * JRM/jm LEGACY CDA MEMO Enclosures 1.Business Name: Address: Contact Person: Telephone No.: 2. RLF Debt Seller Owner's 3.Source and Use of Funds Financing Financing Financing Equity TOTAL a)Real Estate Purchase 125,000$ 924,400$ 16,600$ 1,066,000$ b)Building Construction 350,000$ 350,000$ c)Building Renovation d)Equipment e)Working Capital TOTAL PROJECT COSTS 125,000$ 1,274,400$ 16,600$ 1,416,000$ 4.RLF Assistance Requested: d) Principal Deferral (months) S81 W18510 Gemini Drive City of Muskego Revolving Loan Fund Application Schulew LLC, dba Legacy Landscaping LLC $125,000 ATTACHMENT A b) Interest Rate (percent) c) Loan Term (years) a) Loan Amount Muskego, WI 53150 (262) 370-3373 Brief Project Description: Purchase of building and land and finance improvements to grow existing Daryl Schure 12 months landscape business. 2.0% 10 years 5.Source of Private Debt Financing Name:Citizens Bank of Mukwonago Address: Contact Person: Telephone No.: 6. Job Creation and Retention Number Pay Range Number Pay Range Full-Time Jobs 7.0 $15-20/hour Part-Time Jobs TOTAL JOBS 7.0 7. I hereby certify that the information provided above and in the attached supporting documentation is to the best of my knowledge true and correct. s/ Daryl Schure 03/20/17 Signature Date This attachment is included for reference, and is subject to change upon the availability of updated information from the Wisconsin Department of Administration or SEWRPC. W230 S9125 Clark Street Big Bend, WI 53103 Jim Bodendorfer (262) 662-3561 Date Project Will Begin: New Jobs Spring 2017 Retained Jobs