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HomeMy WebLinkAbout01-115 Resolution No. 01-115 RESOLUTION OF INTENTION TO ISSUE INDUSTRIAL DEVELOPMENT REVENUE BONDS OF THE CITY OF ELGIN, KANE AND COOK COUNTIES, ILLINOIS, IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $3 , 000, 000 TO FINANCE ALL OR A PORTION OF THE COST OF THE ACQUISITION, CONSTRUCTION AND EQUIPPING OF A MANUFACTURING FACILITY FOR THE MANUFACTURE OF PLASTIC AND METAL FERRULES FOR GOLF CLUBS OR OTHER PRODUCTS TO BE OWNED BY CELL PARTS, INC. , OR ITS AFFILIATE OR ITS DESIGNEE; AUTHORIZING THE EXECUTION OF A MEMORANDUM OF AGREEMENT BY AND AMONG THE CITY AND SAID PARTY; AND RELATED MATTERS WHEREAS, the City of Elgin, Kane and Cook Counties, Illinois (the "Issuer") is a home rule unit of government pursuant to Section 6 (a) of Article VII of the 1970 Constitution of the State of Illinois (the "Act") and as such, may exercise any power or perform any function pertaining to its government and affairs; and WHEREAS, CELL PARTS, INC. , an Illinois corporation (together with any related party to the Company, the "Company") , wishes to finance all or a portion of the cost of the acquisition, construction and equipping of a manufacturing facility for the manufacture of plastic and metal ferrules for golf clubs or other products (the "Project") , all to be owned and operated by the Company, or its affiliate or designee, and all to be located in the City of Elgin, Illinois, as further described in the attached Memorandum of Agreement; and WHEREAS, the Company wishes to have the Issuer issue one or more issues of its industrial development revenue bonds in one or more series for the Company or its affiliate or designee, in an aggregate principal amount not to exceed $3 , 000 , 000 (the "Bonds") , to provide financing for all or a portion of the cost of the Project, all in furtherance of the purposes of the Act ; and WHEREAS, so as to accomplish the purposes of the Act, the Issuer proposes to issue its industrial development revenue bonds pursuant to the provisions of the Act, as then in effect, to finance the acquisition, construction and equipping of the Project ; and WHEREAS, a Memorandum of Agreement has been presented to the Issuer under the terms of which the Issuer agrees, subject to the provisions of said Memorandum of Agreement, to issue its industrial development revenue bonds to provide for the financing of all or a portion of the costs of the Project; and WHEREAS, all or a portion of the expenditures relating to the Project (the "Expenditures") (i) have been paid within the 60 days prior to this Resolution, or (ii) will be paid on or after the passage of this Resolution; and WHEREAS, the Issuer (based on information supplied by the Company, on which the Issuer believes it is reasonable and prudent to rely) reasonably expects to reimburse itself for the Expenditures with the proceeds of the Bonds or another borrowing. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN, ILLINOIS : Section 1 . The form, terms and provisions of the Memorandum of Agreement presented to this meeting are hereby approved. Section 2 . The Mayor of the Issuer is hereby authorized to execute, and the City Clerk of the Issuer is hereby authorized to attest and to affix the official seal of the Issuer to, and to deliver a Memorandum of Agreement with the Company in substantially the form of such Memorandum of Agreement as was presented to this meeting or with such changes therein as shall be approved by the officers executing the same, which Memorandum of Agreement is hereby made a part of this Resolution. Section 3 . The officers, employees and designated agents of the Issuer are hereby authorized to take such further action as is necessary to carry out the intent and purpose of the Memorandum of Agreement, as executed, and to cause not more than a combined aggregate principal amount of $3 , 000 , 000 of the Bonds to be issued upon the terms and conditions stated in such Memorandum of Agreement . Section 4 . The Company reasonably expects to reimburse the Expenditures with proceeds of the Bonds or another borrowing. Section 5 . The Issuer reasonably expects to reimburse the Expenditures with the proceeds of the Bonds or another borrowing, based on the expectation of the Company, on which the Issuer believes it is reasonable and prudent to rely. Section 6 . Subject to the provisions of the Act and the Memorandum of Agreement, the Issuer will issue its Bonds in one or more series in an amount sufficient to finance the costs of the Project; provided, that the maximum principal amount of Bonds expected to be issued for the Project is $3 , 000 , 000 . Section 7 . The City Clerk of the Issuer is hereby authorized to determine, in consultation with the Company, a date for a public hearing on the plan of financing of the Project through the proposed issuance of the Bonds, as required by Section 147 (f) of the Internal Revenue Code of 1986, as amended (the "Code") , and to publish a public notice of such hearing in such form as approved by the Company and bond counsel . Said public hearing date may be the date of any regular meeting of the Mayor and City Council of the Issuer or any special meeting for which notice is duly given, and the notice shall be published in such newspaper as the City Clerk of the Issuer, in consultation with the Company, may determine, in a newspaper of general circulation in the vicinity of the site of the Project and in the City of Elgin, Illinois . Section 8 . The Issuer hereby authorizes and approves the designation of Chapman and Cutler to act as Bond Counsel with respect to the issuance of the Bonds . Section 9 . All resolutions, resolutions, orders and parts thereof in conflict herewith are hereby superseded to the extent of such conflict . Section 10 . If any section, paragraph, clause or provision of this Resolution shall be held invalid, the invalidity of such section, paragraph, clause or provision shall not affect any of the other provisions of this Resolution. Section 11 . This Resolution shall be in full force and effect from and after its passage and approval as provided by law. s/ Ed Schock Ed Schock, Mayor Presented: April 25, 2001 Adopted: April 25, 2001 Vote : Yeas 5 Nays : 0 Attest : s/ Dolonna Mecum Dolonna Mecum, City Clerk A `���OF f�Ci ` � '� Agenda Item No. "1 City of Elgin roPL Ill, E L it I April 18, 2001 ' R ,�„ �.• ' 1 •a' 4"x: ' N � TO: Mayor and Member of the City Council "` - ECONOMIC GROWTH FROM: Joyce A. Parker, City Manager SUBJECT: Request from Cell-Parts Manufacturing Company For a portion of the City' s 2001 Annual Industrial Revenue Bond Authority PURPOSE The purpose of this memorandum is to present to the Mayor and members of the City Council a request from Cell-Parts Manufacturing for $1 . 7 million of the year 2001 Industrial Revenue Bond (IRB) authority. BACKGROUND The City has received a request regarding the availability of IRBs for business expansion from Cell-Parts Manufacturing. The company is requesting $2 .4 million in IRB capacity. The City is allocated $5 . 588 million from the State of Illinois . Funding in excess of the City' s $5 . 588 million must be secured from other municipalities or directly from the State of Illinois . $3 . 880 million of the City' s 2001 IRB capacity has been committed to Food Concepts Inc . Thus only $1 . 7 million in IRB capacity remains for Cell-Parts Manufacturing. Cell-Parts is currently located in the City of Rosemont . Their Rosemont location is being taken by eminent domain due to development plans . Proceeds from the land sale will be used to purchase land located at the Tollgate Industrial Park, on which a new facility will be built and new equipment installed. The proposed site has a land area of approximately two acres and the new facility will have approximately 32 , 300 square feet . The total estimated costs of the project are as follows : Construction $1, 750, 000 ; Equipment $195, 000 ; Land $405, 000 ; and Other $130, 000 . The project is expected to be completed by November 2001 . The Company, incorporated in 1955, manufactures and sells trim parts and inserts used in the production of golf clubs . Products include molded ferrules (a metal tube connection the shaft to the wedge of the golf club) , trim rings, washers, pins, end caps, end cap inserts and face inserts . IRB Cell-Parts Manufacturing April 18 , 2001 Page 2 The molded ferrules account for approximately 95% of the Company' s revenues. The Company sells to all but one of the top golf club manufacturers . The Company has been operating at its current location in the City of Rosemont, Illinois since 1961 . The Company currently has 18 full time employees and 6 managers . Currently none of the Company' s employees live in the City. The company expects to retain all of its current employees and create 24 permanent full time positions consisting of 3 clerical, 12 manual labor, 3 supervisory and 6 managerial . The total annual payroll is approximately $910, 000, exclusive of owner/officer compensation. The Company has not previously been involved in any civic activities while located in the City of Rosemont, but intends to become a member of the Chamber of Commerce, as well as sponsoring and promoting educational golf programs for schools and golf outings upon moving to the City. In 1999 the Company elected to be taxed as an "S" corporation and changed its taxable year end from August 31 to December 31 . Prior to 1999 the Company operated as a "C" corporation. As the accompanying tables indicate, the Company' s financials have been stable over the past three years. Total assets have remained at approximately $1, 500, 000 with a slight increase to approximately $1, 900, 000 as of June 30, 2000 . The ratio of current assets to total assets has averaged approximately 82% and has been increasing, indicating good liquidity. In addition, retained earnings as a percent of total liabilities and stockholders' equity has averaged approximately 90% . While retained earnings have been increasing, total liabilities have been decreasing. Over the past three years total sales has fluctuated from approximately $2 , 200, 000 to $3 , 000, 000 . Cost of goods sold and operating expenses have remained stable at approximately $1, 000, 000 and $800, 000, respectively. The important number for the Company, operating as an "S" corporation, is income after operating expenses . This has ranged from $449, 403 to $1 , 177, 933 . While the City of Elgin only has $1 . 7 million of the requested $2 . 4 million in bond capacity, the company has requested that the City submit a request to the Offices of the Governor of the State of Illinois for $700 , 000 in volume capacity. Such request many be submitted by municipality on June 1, 2001 . The City has requested supplemental funds from the Governor' s office in the past and has been successful in receiving the increased volume capacity. COMMUNITY GROUPS/INTERESTED PERSONS CONTACTED Request reviewed and supported by Development Review Team. IRB Cell-Parts Manufacturing April 18 , 2001 Page 3 , I FINANCIAL IMPACT /L�' Cell-Parts Manufacturing Company has paid the $2 , 500 IRB application fee . Furthermore, all costs pertaining to the IRB issuance will be borne by Cell-Parts Manufacturing Company. Speer Financial, Inc . found the Company, based on its unaudited financial reviews, to be financially stable . The IRB project will allow the Company to continue operations, enhance its business, create approximately 24 new jobs and increase the City' s property taxes by approximately $14 , 000 . Speer finds this a worthwhile project and recommends that the City proceed with the inducement resolution. The Internal Revenue Code stipulates that all assessments related to the IRB process must be completed prior to the end of the calendar year. LEGAL IMPACT None . ALTERNATIVES 1 . Authorize Cell-Parts Manufacturing to use $1 . 7 million of the City' s 2001 IRB capacity and direct staff to apply for an additional $700 , 000 in IRB capacity from the office of the Governor. 2 . Deny the request by Cell-Parts Manufacturing to utilize $1 . 7 million of the City' s 2001 IRB capacity. RECOMMENDATION It is recommended that an inducement resolution be adopted for Cell-Parts Manufacturing in the amount of $2 .4 million in Industrial Revenue Bonds and that the City of Elgin Fiscal Services Manager be authorized to conduct the TEFRA public hearing at an appropriate time and place . R ectfully submit d, a ( J ce A. Parker City Manager RHM: sp Attachment SPEER FINANCIAL, INC. PUBLIC FINANCE CONSULTANTS SINCE 1954 A KEVIN W.McCANNA DAVID F.PHILLIPS LARRY P.BURGER DANIEL D.FORBES BARBARA L.CHEVALIER PRESIDENT SR.VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT November 27, 2000 The Honorable Ed Schock and Members of the City Council City of Elgin 150 Dexter Court Elgin, Illinois 60120 Dear Mayor and City Council: Pursuant to the request of the City of Elgin (the"City"), Speer Financial, Inc. has reviewed the industrial bond application, and supporting documentation, including unaudited financial statements, of Cell-Parts Manufacturing Company(the"Company"). The Company's property is being taken by eminent domain due to development plans by the City of Rosemont. Therefore, the Company is applying for City approval of$2,400,000 industrial revenue bonds so that it may move its base of operations from the City of Rosemont to the City. The purchaser/bond placement agent is expected to be First American Bank. Bond counsel has not been determined. Proceeds will be used to purchase land located at the Tollgate Industrial Park,on which a new facility will be built and new equipment installed. The proposed site has a land area of approximately two acres and the new facility will have approximately 32,300 square feet. The total estimated costs of the project are as follows: Construction $1,750,000; Equipment$195,000; Land$405,000;and Other$130,000. The project is expected to be completed by November 2001. The Company, incorporated in 1955, manufactures and sells trim parts and inserts used in the production of golf clubs. Products include molded ferrules (a metal tube connecting the shaft to the wedge of the golf club),trim rings,washers,pins, end caps, end cap inserts and face inserts. The molded ferrules account for approximately 95%of the Company's revenues. The Company sells to all but one of the top golf club manufacturers. The Company has been operating at its current location in the City of Rosemont, Illinois since 1961. The Company currently has 18 full time employees and 6 managers. Currently none of the Company's employees live in the City. The Company expects to retain all of its current employees and create 24 permanent full time positions consisting of 3 clerical, 12 manual labor, 3 supervisory and 6 managerial. The total annual payroll is approximately$910,000, exclusive of owner/officer compensation. The Company has not previously been involved in any civic activities while located in the City of Rosemont, but intends to become a member of the Chamber of Commerce, as well as sponsoring and promoting educational golf programs for schools and golf outings upon moving to the City. Financial Analysis In 1999 the Company elected to be taxed as an"S"corporation and changed its taxable year end from August 31 to December 31. Prior to 1999 the Company operated as a "C"corporation. As the accompanying tables indicate,the Company's financials have been stable over the past three years. Total assets have remained at approximately$1,500,000 with a slight increase to SUITE 4100•ONE NORTH LASALLE STREET•CHICAGO,ILLINOIS 60602•(312)346-3700•FAX(312)346-8833 SUITE 500.531 COMMERCIAL STREET•WATERLOO,IOWA 50701•(3I9)291-2077•FAX(319)291-6787 SPEER FINANCIAL, INC. approximately$1,900,000 as of June 30, 2000. The ratio of current assets to total assets has averaged approximately 82%and has been increasing, indicating good liquidity. In addition, retained earnings as a percent of total liabilities and stockholders' equity has averaged approximately 90%. While retained earnings have been increasing,total liabilities have been decreasing. Over the past three years total sales has fluctuated from approximately$2,200,000 to $3,000,000. Cost of goods sold and operating expenses have remained stable at approximately $1,000,000 and$800,000,respectively. The important number for the Company, operating as an "S"corporation, is income after operating expenses. This has ranged from$449,403 to $1,177,933. The$2,400,000 of bonds are to be amortized over 20 years. The bonds will pay interest at a floating rate. Annual debt service at an average rate of 6.0%is approximately$210,000. The Company does not have any outstanding debt and owns its current facility. In addition,the Company does not know at this time the amount of compensation it will receive for its property being taken by eminent domain by the City of Rosemont. Debt service coverage is approximately 2.15x based on an income after operating expenses of$449,403 for the year ending August 31, 1999. Debt service coverage could be as high as 4.0x based on an income after operating expenses of$1,177,933 for the year ending August 31, 1998. The bonds are expected to be secured by a letter of credit issued by First American Bank. Conclusion In summary,we find the Company,based on its unaudited financial reviews,to be financially stable. The IRB project will allow the Company to continue operations, enhance its business, create approximately 24 new jobs and increase the City's property taxes by approximately $14,000. We find this a worthwhile project and recommend that the City proceed with the inducement resolution. We would be pleased to discuss this with you. Sincerely, nn._ CE,L (,J.N�c Ca... Kevin W. McCanna President KWM/wjk Enclosure SPEER FINANCIAL, INC. Cell-Parts Manufacturing Company Historical Balance Sheets Unaudited as of August 31, 1998 August 31,1999 December 31, 1999 June 30,2000 ASSETS: Current Assets: Cash $ 231,769 $ 344,997 $ 392,631 $ 706,462 Investments 569,746 574,234 581,346 598,182 Accounts Receivables 279,545 198,407 216,050 275,355 Miscellaneous Receivables 16,980 19,105 33,735 33,005 Due From Officer - - 47,688 - Inventory 100,729 78,472 67,220 67,220 Total Current Assets $ 1,198,769 $ 1,215,215 $ 1,338,670 $ 1,680,224 Fixed Assets(Net): Land $ 27,435 $ 27,435 $ 27,435 $ 27,435 Buildings 25,254 20,439 18,835 16,427 Machinery and Equipment 235,462 152,472 131,910 113,092 Automobiles 49,085 85,684 81,142 71,1E35 Total Fixed Assets $ 337,236 $ 286,(fl) $ 259,322 $ 228,339 Total Assets $ 1,536,005 $ 1,501,245 $ 1,597,992 $ 1,908,563 LIABILITIES AND STOCKHOLDERS'EQUITY: Current Liabilities: Accounts Payable $ 44,975 $ 35,781 $ 21,298 $ 6,202 Accrued Payroll 44,377 49,024 16,081 18,302 Accrued Real Estate Taxes 39,150 46,000 41,000 45,234 Accrued Income Taxes 1,918 1,028 2,207 - Accrued Payroll Taxes - 2,923 2,856 1,401 Accrued 401K Expense 1,842 2,242 3,709 3,793 Accrued Expenses - - - 4,000 Deposits - - 1,034 1,034 Due to Officer 50,980 2,832 - - Total Current Liabilities $ 183,242 $ 139,830 $ 88,185 $ 79,966 Stockholders'Equity: Capital Stock $ 27,500 $ 27,500 $ 27,500 $ 27,500 Retained Earnings 1,325,263 1,333,915 1,482,307 1,801,097 Total Stockholders'Equity $ 1.352,763 $ 1,361,415 $ 1,509,807 $ 1,828,597 Total Liabilities and Stockholders'Equity $ 1,536,005 $ 1,501,245 $ 1,597,992 $ 1,903,563 SPEER FINANCIAL, INC. Cell-Parts Manufacturing Company Historical Income Statements Unaudited for the Period of September 1, 1997 to September 1,1998 to September 1, 1999 to January 1,2000 to August 31, 1998 August 31,1999 December 31,1999 June 30,2000 Sales $ 2,986,605 $ 2,190,840 $ 675,333 $ 1,381,971 Cost of Goods Sold $ 1,031,957 $ 895,469 $ 277,718 $ 506,009 Gross Income $ 1,954,648 $ 1,295,371 $ 397,615 $ 875,962 Operating Expenses $ 776,715 $ 845,968 $ 237,984 $ 403,835 Income After Operating Expenses $ 1,177,933 $ 449,403 $ 159,631 $ 472,127 Other Income(Expense): Interest Income $ 31,444 $ 41,527 $ 10,769 $ 29,403 Officers'Salary (1,201,300) (478,850) (19,800) (82,740) Total Other Income(Expense) $ (1,169,856) $ (437,323) $ (9,031) $ (53,337) Income Before Taxes $ 8,077 $ 12,080 $ 150,600 $ 418,790 Income Taxes $ 2,441 $ 3,428 $ 2,207 $ - Net Income $ 5,636 $ 8,652 $ 148,393 $ 418,790 - , a SPEER FINANCIAL, INC. Cell-Parts Manufacturing Company Debt Service Coverage Income Debt Year Ending Available for Debt Service(2) Service December 31 Debt Service(1) Principal Interest Total Coverage 2001 $ 449,403 $65,000 $144,000 $209,000 2.15 x 2002 449,403 70,000 140,100 210,100 2.14 x 2003 449,403 75,000 135,900 210,900 2.13 x 2004 449,403 80,000 131,400 211,400 2.13 x 2005 449,403 80,000 126,600 206,600 2.18 x 2006 449,403 85,000 121,800 206,800 2.17 x 2007 449,403 95,000 116,700 211,700 2.12 x 2008 449,403 100,000 111,000 211,000 2.13 x 2009 449,403 105,000 105,000 210,000 2.14 x 2010 449,403 110,000 98,700 208,700 2.15 x 2011 449,403 115,000 92,100 207,100 2.17 x 2012 449,403 125,000 85,200 210,200 2.14 x 2013 449,403 130,000 77,700 207,700 2.16 x 2014 449,403 140,000 69,900 209,900 2.14 x 2015 449,403 150,000 61,500 211,503 2.12 x 2016 449,403 155,000 52,500 207,500 2.17 x 2017 449,403 165,000 43,20U 208,200 2.16 x 2018 449,403 175,000 33,300 208,X0 2.16 x 2019 449,403 185,000 22,803 207,800 2.16 x 2020 449,403 195,000 11,700 206,700 2.17 x Notes: (1) Based on income after operating expenses for the year ending August 31, 1999. (2) Debt service based on a par amount of$2,400,000 at an annual interest rate of 6.0%,for twenty years and level payments.