CCR1993073e
‘a
AMENDED
COMMON COUNCIL - CITY OF MUSKEG0
RESOLUTION #73-93
APPROVAL OF AMENDED REVOLVING LOAN FUND (RLF) PLAN
WHEREAS, the City of Muskego, upon the request of the
Department of Development, adopted a Revolving Loan Fund (RLF)
Plan on May 14, 1991, and
WHEREAS, SEWRPC has recommended several changes to the plan, and
WHEREAS, the Finance Committee has recommended approval.
NOW, THEREFORE, BE IT RESOLVED that the Common Council of the
City of Muskego, upon the recommendation of the Finance
Committee, does hereby approve the Amended Revolving Loan Fund
(RLF) Plan as attached, as further amended.
DATED THIS 23RD DAY OF MARCH , 1993
SPONSORED BY:
FINANCE COMMITTEE
Ald. Patrick A. Patterson
Ald. Edwin P. Dumke
Ald. David J. Sanders
This is to certify that this is a true and accurate copy of
Resolution #73-93 which was adopted by the Common Council of
the City of Muskego.
WHEREAS, the City of the request
of Development, Loan Fund
14, 1991, and
1 (RLF) PLAN
(RLF) Plan on May
of the Department
APPROVAL OF ENDED REVOLVING LOAN FUND \
WHEREAS, SEWRPC has changes to the plan, and
WHEREAS, the Finance approval.
NOW, THEREFORE, BE Council of 'the
City of Muskego,
Committee, does
(RLF) Plan as attached.
DATED THIS DAY OF
Ald. Edwin Dumke
Ald. David Sanders
\
This is to certify that this is a true and
Resolution #73-93 which was adopted by the
City of Muskego.
, City Clerk
3/23/93
REVOLVING LOAN FUND (RLF) PLAN
CITY OF MUSKEGO
Introduction
In February 1990, the Wisconsin Department of Development (DOD) awarded the City
of Muskego a $330,000 Wibconsin Development Fund (WDF) grant, that, in turn, was
The City and the Delta Group entered into an agreement on April 16, 1990. that
loaned to the Delta Group, Inc , for a business start-up project in the City.
provided for the repayment of the business loan over a term of fifteen years.
The loan term began on October 1, 1990, and the first loan payment is due on
November 1, 1990 Repayments on the Delta Group WDF loan, as well as repayments
on any future WDF loans, will be used to establish a low-interest revolving loan
fund (RLF) that will be available to local businesses The purpose of this plan
is to set forth the criteria for future loans from the RLF
Purpose of the RLF
The RLF has been established to create employment opportunities and increase
opment of new, businesses in the City. The RLF program includes interest rates
local incomes through the retention and expansion of existing, and the devel-
and loan maturities that are designed to encourage business development, while
providing for the recapitalization and growth of the RLF
Eligible Applicants
Eligible applicants for the RLF will be business establishments that are located
access the financing necessary for the start-up or expansion project through
in the City or will locate in the City as a result of an RLF loan and cannot
conventional sources.
Administration of the RLF
The City of Muskego accepts full responsibility for the appropriate administ-
ration of the RLF program, and has designated the City Treasurer and/or Deputy
City Clerk as responsible for day-to-day administration of the program Funding
decisions relative to RLF loans will be made by the City of Muskego Common
Council based upon a recommendation by the City of Muskego Finance Committee
The City will establish a separate checking/savings account inNovember 1990, and
reserve its use solely for the RLF program On an annual basis, up to 15 percent
maintenance of the RLF.
of the RLF will be made available for administrative expenses incurred in the
Availability of Funds
The Finance Committee, on a semi-annual basis, will determine whether a
sufficient amount of funds are available in the FLF to accept applications for
new business loans A minimum of $25,000 must be available in the RLF in order
for the Finance Committee to accept new applications Following a determination
methods for advertising the availability of the funds to the business community
on the availability of funds, the Finance Committee will determine the best
a
3/23/93 2
a Application Procedures
Businesses that are interested in applying for an RLF loan should submit a pre-
application form to the Director of Planning, W182 S8200 Racine Avenue, P 0. Box
description of the supporting documentation that is needed for each formal RLF
903. Muskego, Wisconsin 53150. A copy of the RLF pre-application and a
application are included as Attachment A to this plan. Following the submittal
ofthe pre-application, City staffwill examine the pre-application for complete-
ness and make a determination within 10 working days on whether or not the pro-
posed project conforms with IUF standards and policies as set forth in this plan.
The pre-application will then be forwarded to the City Finance Committee far
recommen-epprevel. If approved by the Common Council, the business would be requested
dation. to begin preparing the necessary documents to complete a formal application.
" - -
Once the necessary documents required for each formal application have been
completed, City staff or its designated agent will review the documentation
submitted for completeness, and, within 10 working days, the business will be
informed of any deficiencies, and requested to amend the documentation, if
necessary. Upon receipt of all requested documentation, the request will be for-
warded to the Finance Committee for consideration together with a funding recom-
mendation made by City staff or its designated agent. The Finance Committee will
consider the request and make a funding recommendation to the Common Council.
RLF Standards and Policies
The following standards and policies will be utilized in the RLF program
1 1 Cost Per Job A minimum of one full-time equivalent (FTE) job must be
created and/or retained for each $20,000 of RLF investment
2 Low- and Moderate-Income Requirement. At least 60 percent of the FTE jobs
that will be created or retained must be filled or held by low- and
moderate-income (LMI) persons as defined in Attachment B The City must
use the most recent LMI limits that are provided on an annual basis by the
Wisconsin Department of Development.
3 Recruitment Businesses participating in the RLF program will be required
to enter into an agreement with the Wisconsin Job Service and/or the local
Private Industry Council to recruit LMI persons for the jobs to be created
as a result of the loan
4. Private Sector Leverage Ratio, One dollar of private sector investment will
be required for each dollar of RLF investment. In addition, for each dollar
of FZF working capital funds the recipient business will be required to
provide one dollar of private sector working capital funds Private sector .
investment is defined as financing from a private lending institution, pub-
that is injected into the business as a part of the expansion project.
lic sector business loan programs other than the WDF program, or new equity
5. Eligible Activities: Activities eligible for funding through this program
include
a) land acquisition,
b) building acquisition,
c) building construction, including site preparation and demolition;
3/23/93 3
d) building rehabilitation or renovation,
e) machinery and equipment acquisition, with a depreciable life of at
f) leasehold improvements, where the lease period is for the term of the
g) working capital (direct labor and inventory only), and
h) buyouts by purchase of assets or stock.
least seven years,
RLF loan or five years, whichever is less,
6. Loan Size: A minimum loan size of $25,000 and a maximum loan size of
$400,000 for each individual borrower
7. Standard Terms: Standard terms for RLF loans will be as follows:
b) buildings and land--up to 10 years, and
a) machinery and equipment--2 to 10 years;
c) working capital--1 to 7 years.
The specific term for an individual borrower will be based on the useful
life of the asset, as well as the terms offered by the private sector
Committee retains the right to adjust individual loan terms in order to
financial institution participating in the project. However, the Finance
facilitate a successful RLF project
8 Interest Rate: The rate of interest may range from a minimum of 4 percent
to a maximum of the "market" rate (defined as the prime rate of interest--
as published in the Midwest Edition of the Wall Street Journal--plus 2 per-
cent). However, any reduction in interest below the market rate will only
before tax is below the industry average as evidenced by the applicant's
be provided during the first three years of the loan term when the earnings
financial projections. At such time as the projected earnings before tax
exceeds the industry average, the interest rate will increase to the market
rate for the balance of the loan term The interest rate will be fixed for
the entire term of the loan at the time a loan agreement is signed with the
City
9. Deferral of Principal and Interest. The RLF program has the option of
deferring principal and interest payments during the first two years of the
loan term upon demonstration of need by the recipient business However,
the deferral of principal and interest payments will only be used when a
firm's financial projections demonstrate that a deferral is required for
the firm to be competitive within its industry Interest will accrue
during the deferral period and may be paid in one lump sum at the end of
the deferral period or added to the principal of the loan and amortized
over the remaining term of the loan,
10 Equity Requirements: The RLF program may require an equity injection for
viduals that have made substantial equity commitments to the applicant
each RLF loan, when appropriate. Consideration will be given for indi-
business, as well as to individuals who do not have sufficient financial
resources to contribute to the RLF project
11 Collateral Requirements: The collateral requirements will be determined on
an individual basis by the Finance Committee and the Common Council and may
3/23/93 4
and liens on accounts receivable and inventory This collateral may be
include: mortgages on land and buildings, liens on machinery and equipment,
subordinated to private sector financial institutions participating in the
RLF project, if required Personal guarantees from the principals of the
business will be required. In addition, key-person life insurance coverage
naming the City as a beneficiary, with a declining balance equal to the
used where appropriate
outstanding loan balance, and junior liens on all corporate assets may be
Finally, businesses! receiving loans for fixed assets will be required to
obtain liability insurance for the appraised value of the property being
financed, and have the City of Muskego listed as an additional insured on
the insurance policy
12. General Policies for Restructuring RLF Loans, RLFloans maybe restructured
when restructuring will improve the borrower's ability to repay the RLF
loan, as long as the business is financially viable as evidenced through a
business credit analysis The City staff will work with the owner(s) of
the business to determine the need for restructuring, and, if appropriate,
the Finance Committee and the Common Council may restructure the RLF loan
to improve cash flow within the business. Restructuring can include
deferring principal and interest payments, adjusting the rate of interest,
or providing additional working capital
13 Coordination with SBA 504 Program: When a loan package includes both U S
Small Business Administration (SBA) 504 and RLF participation, the funds
that will be provided by these two programs will not exceed 50 percent of
the total project costs
14, Loan Application Fee: The City will require a loan application fee of $250
be identified as WDF program income and deposited in the RLF account.
to be paid at the time of loan application, The loan application fees will
with the RLE program.
These funds will then be used to pay for administrative costs associated
15 Loan Orisination Fees; The City will require a loan origination fee equal
to 1 percent of the loan amount plus payment of the City's attorney fees
for the RLF loan closing. The fees may be added to the principal amount of
attorney's fees, will be identified as WDF program income and deposited in
the loan and paid with RLF funds. All loan originacion fees, including
the RLF account. These funds will then be used to pay for administrative
costs associated with the RLF program
16. Availability of Funds. In those instances where the number of requests for
RLF funds exceeds available funding, RLF applications will be prioritized
based upon the date of receipt of all requested application materials, the
number of jobs to be created and/or retained, and the amount of private
sector leverage that is included in the project When feasible, the amount
of RLF funds contributed to each project will be reduced in order to " facilitate as many RLF loan requests as possible
17. Protect Initiation, No aspect of the proposed project may be initiated prior
to the approval of the RLF application by the City of Muskego.
3/23/93 5
Program Requirements
I
The
for
1
2
3
4
5
6
7
a
following program requirements will apply to all projects that are approved
funding
Loan Apreement: RLF loan recipients will be required to enter into a loan
agreement with the City of Muskego.
Labor Standards, All activities subject to federal labor standards will
comply with requirements regarding prevailing wage rates, payroll records,
permissible payroli' deductions, and overtime pay
Job Creation and Retention, Recipient businesses will be required to create
all new jobs within 18 months of the signing of the RLF loan agreement and
to retain all existing jobs immediately following the signing of the RLF
minimum of 12 months
loan agreement. All jobs created and/or retained must be maintained for a
Penalty for the Failure to Create or Retain Jobs, For each job that is not
created or retained and for each LMI job that is not created and or
retained during the specified time period as described above, the interest
rate of the loan will be increased, retroactive to the date of the loan
agreement, proportionately with respect to the total number of jobs that
were to be created or retained, with the upper limit of the interest rate
was signed plus 2 percent Interest penalties may be paid in one lump sum
increase equal to the prime rate of interest at the time the loan agreement
or added to the principal of the RLF loan and amortized over the remaining
term of the loan,
Records: Loan recipients will maintain those records that are necessary for
the City to determine if the performance of the business complies with the
terms of the loan agreement The records will include, but may not be
checks, and payroll records for new or retained employees that are a part
limited to, purchase orders, invoices, records of payments, cancelled
of the project. The City will have access to all records pertinent to the
project for the purposes of examination and transcription
Nondiscrimination: Recipient businesses will not discriminate against any
employee or applicant for employment on the basis of race, color, religion,
sex, national origin, age, or handicap.
Environmental Review, Recipient businesses will comply with all state and
federal environmental regulations regarding the use of RLF loan funds, and
the City will, when necessary, conduct an environmental review of the
proposed project to determine compliance with these regulations
Progress Reports: Loan recipients will be required to submit semi-annual
progress reports during the outstanding term of the loan that includes 1)
a description of current and projected employment; 2) an updated business
plan, and 3) financial statements for the preceding six months The City
will also make annual on-site inspections The City staff will submit
semi-annual progress reports to the Common Council and annual progress
reports to the Wisconsin DOD
3/23/93 6
RLF Plan Amendments
This RLF plan may be amended to meet the changing conditions or the future needs
of the City of Muskego only through a written agreement between the City and the
Wisconsin DOD.
*****
3/23/93 7
Attachment A
CITY OF MUSKEGO
Revolving Loan Fund Pre-application
1 Business Name
Address
I
Contact Person.
Telephone No
2 Brief Project Description:
3 Source and Use of Funds
a) Land Purchase ..
b) Building Purchase ..
c) Building Construction
d) Building Renovation .
e) Machinery h Equipment
f) Working Capital . ...
RLF
Financing
$
$
$
$
$
$
TOTAL PROJECT COSTS
4 RLF Assistance Requested
a) Loan Amount ..
b) Interest Rate (percent)
c) Loan Term (years)
Debt
Financing
$
$
$
$
$
s
Equity
Financing
$
$
$
$
$
$
s
3/23/93 8
0 5 Source of Private Debt Financing
Name
Address;
Contact Person:
Telephone No
6 Job Creation and Retention
New Jobs 2 ained Jobs
Number Pay Range Number Pay Ranpe
Full-time Jobs $ 5
Part-time Jobs $ 5
TOTAL JOBS __
7 Date Project Will Begin,
I hereby certify that the information provided above and in the attached
supporting documentation is to the best of my knowledge true and correct
Applicant Signature Date
For additional information about the City of Muskego RLF program, please
contact the Director of Planning at (414) 679-4100
Please submit the FLF application and supporting documentation to
Director of Planning
City Hall
W182 58200 Racine Avenue
P 0. Box 903
Muskego, Wisconsin 53150
*****
3/23/93 9
CITY OF MUSKEGO REVOLVING LOAN FUND
PROJECT DOCUMENTATION
Please include the following supporting documentation along with each economic
development loan fund application, All information must be signed and dated
1 A current business plan that includes a detailed description of the
proposed expansion' or start-up project (see Note 1 for business plan
requirements)
2 Financial statements for the past three years and a current interim
financial statement, including balance sheets and profit and loss state-
ments that are compiled by an independent accountant in accordance with
generally accepted accounting principles (GAAP) and include a discussion of
all significant assumptions (see Note 2 for business credit guidelines to
be used in evaluating loan fund projects)
3 Financial projections for the first three years of the project, including
balance sheets and profit and loss statements that are prepared by an
independent accountant in accordance with GAAP and include a discussion of
all significant assumptions (officers' compensation and direct labor costs
should be listed separately) In addition, start-up businesses should
provide quarterly financial projections for the first two years (see Note
2 for business credit guidelines to be used in evaluating loan fund
projects)
4 Personal financial statements for the principals of the business
5 A statement of the anticipated benefits to be derived from the proposed
without funding from the loan fund program
loan fund project and the reasons why the project will not take place
6 A letter of commitment from the financial institution or other source of
debt financing for the amount of debt financing that is a part of the
project,
7 Documentation of the availability of funds for the private equity injection
that is a part of the loan fund project
6. A letter from the chief executive officer committing the business to the
proposed project
9 Cost estimates for all machinery and equipment purchases, land and building
acquisition, and building construction or renovation that is a part of the
loan fund project
10 A lease or pre-lease agreement for rental property or an offer to purchase
11 A schedule of the jobs to be created and/or retained, with job titles and
for fixed assets that are a part of the project
a description of the qualifications required for the new jobs
3/23/93 10
12 A memorandum of agreement between the City, the recipient business, and the
local Private Industry Council or the Wisconsin Job Service documenting the
commitment to recruit low- and moderate-income (LMI) persons for the jobs
to be created
13 Documentation that the project is in compliance with local and state
building codes and zoning regulations and other applicable local and state
ordinances
14, A map showing the Gxact location of the project
15 Other documentation that may be required by the Finance Committee that is
deemed important relative to a determination regarding the loan fund
project "_""""_"""""""""""""""""""""""""""""""""~
Note 1: The business plan should present a detailed description of the business
that includes the following level of detail
1. A description of the firm, including a 4-digit SIC Code
A description of the ownership--corporate officers, shareholders with 2
3
5
6
I
E
9
10
number of shares owned, articles of incorporation, partnership agreements,
A discussion of the management team and its experience
agreements with other businesses, etc
A discussion of the marketing strategy, composition of the customer base,
identification of major competitors, and a list of all in-state competi-
A discussion of projected sales growth and the financing and capital
tors
requirements necessary to achieve the projected growth
A discussion of accounting methods applied to inventory and the aging of
inventory
A discussion of terms offered to customers and the aging of accounts
receivable
A discussion of agreements with suppliers and other trade accounts and the
A description of the debt structure, the status of outstanding debts, a
aging of accounts payable
schedule for all debt during the three-year projection period
listing of all assets currently pledged as security, and a debt service
A discussion of working capital needs and how working capital is generated
Note 2. Historical financial statements and financial projections will be exam-
ined to determine whether the applicant business conforms with the industry stan-
Annual Statement Studies, or other generally recognized source of industry
dards as set forth in the most recent edition of Robert Morris Associates,
determine whether or not there is sufficient cash flow to cover debt service and
financial information, In addition, the proposed project will be examined to
the additional expenses that will be generated as a result of the project. The
following business credit guidelines will be used to evaluate the financial
statements and financial projections of the applicant business
3/23/93 11
Balance Sheet Analvsis
1 Does the business adequately collect on its accounts receivable? * days accounts receivable vs. terms offered to customers * trends in days accounts receivable over time
2 Does the business pay its vendors in a timely fashion? * days accounts payable vs terms offered to vendors * trends in days accounts payable over time
* days inventory'vs. inventory cycle * trends in days inventory over time.
4 Are the officers committed to the business? * owners' equity in the business * profit after tax vs retained earnings * notes payable to officers * notes receivable to officers.
* growth in retained earnings. * debt to equity ratio
3 Does the business control inventory?
5 Does the business have a positive operating history?
Profit and Loss Statement Analysis
1 Is the business growing?
2 Does the business control profitability?
* historical sales growth
* cost of goods sold as a percentage of sales * gross profit margin
* selling, general & administrative expenses as a percentage of sales * use of selling, general & administrative expenses
* earnings before tax less other income * earnings before tax as a percentage of sales * cost of goods sold as a percentage of inventory
* excess officer compensation * depreciation expense * interest expense * rent expense
3 Does the business control expenses?
4. Is the business truly profitable?
5 Does the business have hidden cash flow?
*****
3/23/93 12
Attachment B
WISCONSIN DEVELOPMENT FLTND
1992 LOW- AND MODERATE-INCOME LIMITS
WAUKESHA COUNTY, WISCONSIN
........................
""""""""""""""""""."""""~
Household Size Household Income
........................
1 Person
2 Persons
4 Persons
3 Persons
5 Persons
6 Persons
7 Persons
8 Persons or
$23,400
26,750
30,100
33,450
36,100
38,800
41,450
More 44,150
........................
Note This income schedule will be updated
annually
Source Wisconsin Department of Development
and SEWRPC