CCR1994239COMMON COUNCIL - CITY OF MUSKEG0
RESOLUTION #239-94
APPROVAL OF REVOLVING LOAN FUND APPLICATION
FOR SPECTRUM ALUMINUM FINISHING
WHEREAS, the City of Muskego is a participant in the Revolving
Loan Fund (RLF) Plan; and
WHEREAS, a pre-application form was submitted to the City by the
applicant and approved on October 25, 1994 by the Common Council
of the City of Muskego through Resolution #228-94; and
WHEREAS, Spectrum Aluminum Finishing has submitted an application
form requesting a loan in the amount of $45,000; 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 application form for $45,000
submitted by Spectrum Aluminum Finishing.
BE IT FURTHER RESOLVED that the Mayor and Clerk are authorized
to sign any documents in the name of the City
DATED THIS 8TH DAY OF NOVEMBER , 1994.
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
City of Muskego.
Resolution #239-94 which was adopted by the Common Council of the
11/94 jmb
MEMORANDUM
TO : City of Huskego Finance Committee and City of Muskego Common Council
FROM: Philip L. Cosson, Principal Economic Ikvelopent Planner vL
Southeastern Wisconsin Regional Planning Commission
SUBJECT: Recommendation on City of Muskego Revcllving Loan Fund Project:
Spectrum Alurninum Finishing, UC
DATE : November 3, 1994
The purpose of this memorandam is to provide tr summary of a Commission staff
analysis of a proposed loan to be made by the City of Muskego Revolving Loan Fund
to Spectrum Aluminum Finishing, LLC. As you know, consideration of this loan
request has been placed on :he agendas for the Nlwember 8, 1994, meetings of the
City of Muskego Finance Committee and Common Council.
As documented in the attached City of Muskego Revolving Loan Fund application,
Spectrum Aluminum Finishing is requesting that the City provide a $45,000
business loan from the City loan fund program. This loan would be used to pay
for a portion of the firm's machinery and equipnent needs.
A description of the business proposal and the findings of a Commission staff
analysis baaed upon the City Revolving Loan Fund Plan are presented below:
Fundina Reauuest
Proposal: To obtain $45,000 in financing from the City, $45,000 in financing
from Citizens Bank of Hukwonago, and $150,000 in owner's equity from
the two principals.
Analysis: The request for $45,000 is within the funding limits of the loan
fund program. The provision of $195,000 in private financing and
equity provides e 4:1 ratio of privs.te sector to City financing, a
ratio that exceeds the minimum stand.ards for this program. It is
recommended that the $45,000 be provided contingent upon the terns
and conditions described balov.
Memorandum
Page 2
Use of
Proposal: To use the Oity loan to pay for a portion of the firm's machinery
and eguipnent needs.
Analysis: The proposed use of City funds 16 a permitted loan fund activity.
Loan Term and Interest RatQ
Proposal: To provide a 10811 term of five years, with an interest rate of 6
percent for the first Wo years and 9.75 percent for the balance of
Mukwonago will be for five years.
the loan tern. The financing beinl: provided by the Citizens Bank of
Analysis: The financing of machintry and equipment with a 5-year term loan is
within the guidelines of the loan fund program, as long as the
financing provided by Citizens Bank of Mukwonago in the amount of
$45,000 has a minimum term of five years. It is recommended that
the City loan be provided for a tern of five years.
In accordance vith the loan fund plan, the request for a 6 percent
interest rate for the first two years of the loan term has been
evaluated on the basis of need for 1:he interest reduction using the
firm's projected profit margin tnd an analysis of the firm's
business plan.
Projected
Year
Industry
199 5
Profit Marnint Averape*
15,1%
1996 16.5%
3.3%
1997
3.3%
19.8% 3.3%
* the projected profit margin is the earnings before tax as a
percent of sales, and the industry average is based upon the ,1993
Robert Morris Associates, Annual -Statement Studies, for Standard
Industrial Classification (SIC) Code 3471.
It is racomended that the requested interest rate of 6 percent in
the first two years be reduced to one year, with the interest rate
for the balance of the loan term fixt!d at 9.75 percent. The reduced
shortage in cash flow often experienced by many start-up businesses.
interest rate in year one is recommended due to the potential for a
Collaterr~
Proposal: To accept a purchase security intErosc on nev equipnent being
purchased not to exceed $45,000 and a second lien on all business
principals, Larry D. Johnson and Mar:< A. Cartwright.
asaets, along with an unlimited pe::sonal guarantee from the two
Memorendum
Page 3
Analysis: The collateral is within the proposed guideline6 of the loan fund
program and should be adequate .to secure the requested City funds.
It is recormnended that the City accept the offered colleteral.
Job Crestion/Retantion
Proposal: To create a total of seven new full-time equivalent (FTE) jobs, of
which four would be made 8vailab:le to low- and moderate-income per-
sons. The jobs would be retaine'd for a minimum of 12 months.
Analysis: The proposed job creation/retention component of this project meets
the requirements of the loan fund program. It ia recommended that
the job creation/retention propowl be accepted,
Continnrncies
The recommendation for approval of the w' application is based upon the
folloving contingencies: 1) evidence satisfactory to the City thet all permits
required for the operation of the busineas in the City have been received: and
2) evidence satisfactory to the City that II bank loan consistent with the
Spectrum AlUinU Finishing proposal has been provided.
Conmission staff is available to answer any questions the Finence Cormnittee or
Common Council nay have regarding this matter.
SPEC5