HomeMy WebLinkAbout95-14 Resolution No. 95-14
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RESOLUTION
!XPRESSING THE INTENTION OF THE CITY OF ELGIN, ILLINOIS, TO
ASSIST IN FINANCING THE ACQUISITION, CONSTRUCTION, RENOVATION,
EXTENSION AND EQUIPPING OF AN ECONOMIC DEVELOPMENT PROJECT TO
BE USED BY ELGIN CORRUGATED BOX COMPANY, AN ILLINOIS
CORPORATION, AND APPROVING THE EXECUTION OF A MEMORANDUM OF
AGREEMENT RELATING TO THE PROJECT
WHEREAS, the City of Elgin, Illinois (the "City' ) , is a
duly organized and existing municipal corporation and home
rule unit of government within the meaning of Section 6 of
Article VII of the 1970 Constitution of the State of Illinois
(the "State" ) ; and
WHEREAS, the City is authorized to issue its revenue
bonds to finance in whole or in part the cost of the
acquisition, construction, renovation, extension and equipping
of economic development projects; and
WHEREAS, Elgin Corrugated Box Company, an Illinois
corporation (the "Borrower" ) , wishes to secure financing for
the acquisition, construction, renovation, extension and
equipping of an economic development project to consist of a
building approximately 63,000 square feet in size and related
machinery and equipment to be used by the Borrower in its
business of manufacturing corrugated boxes (the "Project" ) ,
which Project is to be located on the south side of Gasket
Drive, east of Gifford Road, in the Spaulding Center
Industrial Park, within the City; and
WHEREAS, the Borrower has requested that the City issue
its revenue bonds to provide funds for the acquisition,
construction, renovation, extension and equipping of the
Project; and
WHEREAS, this City Council considers it necessary and
desirable to finance the Project in order (a) to provide
increased employment opportunities and relieve conditions of
unemployment and underemployment within the City, (b) to
encourage the increase of industry and commerce within the
City, and (c) to increase the tax base within the City, and
thus to enhance the public health, safety and general welfare
of the City and its inhabitants; and
WHEREAS, the Borrower, in reliance upon the intention of
the City to finance the cost of constructing, acquiring,
renovating, extending and equipping the Project through the
issuance of its revenue bonds, has determined to locate the
Project within the corporate limits of the City; and
WHEREAS, such revenue bonds, when issued in one or more
issues or series, shall not be a charge against the general
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revenues or the taxing powers of the City but shall be payable
eolely from the proceeds of the revenue bonds issued to
financing the Project and the earnings on such proceeds and
revenues derived from the Project and the financing of the
Project; and
WHEREAS, a form of Memorandum of Agreement with respect
to the proposed issuance of such revenue bonds for the Project
has been presented to this meeting of this City Council; and
WHEREAS, it is intended that this resolution shall
constitute an official action toward the issuance of the
revenue bonds within the meaning of Section 1 . 103-8(a) (5) of
the Income Tax Regulations (the "Regulations" ) issued pursuant
to the Internal Revenue Code of 1986 as amended (the "Code" )
and that the bonds issued for the benefit of the Borrower
shall be reimbursement bonds for the purpose of Section
1 . 150-2 of the Regulations .
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF ELGIN, ILLINOIS:
1 . That this City Council finds that (a) the lack of
employment opportunities within the City is harmful to the
public health, safety, and general welfare of the City and its
inhabitants and (b) assisting the Borrower through the
issuance of revenue bonds of the City, the proceeds of which
will be loaned to the Borrower or its nominee and used to
finance all or a portion of the cost of the Project, will
provide increased employment opportunities and relieve
conditions of unemployment and underemployment within the
City, will encourage the increase of industry and commerce
within the City and will increase the tax base within the City.
2 . That the Mayor of the City is authorized to execute
and the City Clerk is authorized to attest and to affix the
seal of the City to a Memorandum of Agreement with the
Borrower in substantially the form as was presented to this
meeting or with such changes in it as shall be approved by the
officers executing the same, their approval to be evidenced by
their execution of the Memorandum of Agreement.
3 . That upon final determination of the details of the
financing, and subject to the terms and conditions of the
Memorandum of Agreement and to the availability to the City of
sufficient private activity bond volume cap to permit the
bonds to be issued, the City will take all further steps
necessary to issue its revenue bonds on behalf of the Borrower
or its nominee to finance all or a portion of the Project in
an amount now estimated at $3,800,000; provided, that on or
before May 1, 1995 (or such other date as shall be mutually
satisfactory to the City and the Borrower) , the City and the
Borrower shall have agreed to mutually acceptable terms for
said revenue bonds and the contracts, agreements and
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proceedings related to the bonds and referred to in the
Memorandum of Agreement.
4 . That said revenue bonds be reimbursement bonds for
the purpose of Section 1 . 150-2 of the Regulations and that the
proceeds of the bonds be used, in whole or in part, to
reimburse expenditures made prior to the issuance of the bonds .
5 . That pursuant to the provisions of Section 147 ( f) of
the Code, the City Council (as the "applicable elected
representative" of the City) approves the issuance of such
revenue bonds in the maximum aggregate principal amount of
$3, 800, 000 and the plan of financing of the Project for the
purpose of financing the costs of acquiring, constructing,
renovating, extending and equipping the Project.
6 . That the officers and employees of the City are
authorized to take such further action as is necessary to
carry out the intention and purpose of this resolution and of
the Memorandum of Agreement as executed and, subject to the
terms and conditions of this resolution and of the Memorandum
of Agreement, to cause revenue bonds of the City to be issued
to finance the Project, now estimated to cost approximately
$3,800, 000, upon the terms and conditions stated in the
Memorandum of Agreement with respect to the economic
development project described in the Memorandum of Agreement,
which Memorandum of Agreement is made a part of this
resolution.
7 . That all resolutions and parts thereof in conflict
with this resolution are hereby superseded to the extent of
such conflict, and this resolution shall be in full force and
effect from and after its passage as provided by law.
s/ George VanDeVoorde
George VanDeVoorde, Mayor
Presented: January 25, 1995
Adopted: January 25, 1995
Vote: Yeas 7 Nays 0
Attest:
s/ Dolonna Mecum
Dolonna Mecum, City Clerk
MEMORANDUM OF AGREEMENT
THIS MEMORANDUM OF AGREEMENT is between the City of Elgin, a
municipal corporation and home rule unit of the State of Illinois (the "City"), and Elgin
Corrugated Box Company, Inc., an Illinois corporation (the "Borrower").
1. Preliminary Statement. Among the matters of mutual inducement which have
resulted in this Agreement are the following:
(a) The City is authorized and empowered to issue revenue bonds and to loan the
proceeds thereof for the purpose of financing an economic development project.
(b) The Borrower proposes to finance the acquisition, construction and equipping of
an economic development project to be located within the corporate limits of the City (the
"Project"), which Project is to be used by the Borrower in its business of manufacturing
corrugated boxes. The Project is expected to cost approximately $3,800,000. The Borrower
wishes to obtain satisfactory assurance from the City that the proceeds from the sale of
revenue bonds issued by the City will be made available to finance all or a portion of the
cost of the Project.
(c) The City has determined that (i) the lack of employment opportunities within the
City is harmful to the public health, safety and general welfare of the City and its inhabitants
and (ii) assisting the Borrower through the issuance of revenue bonds of the City, the
proceeds of which will be loaned to the Borrower or its nominee and used to finance all or a
portion of the cost of the Project, will provide increased employment opportunities and
relieve conditions of unemployment and underemployment within the City, will encourage
the increase of industry and commerce within the City and will increase the tax base within
the City.
(d) The City fords that the financing as herein described will further the public
purposes of the City. Subject to (i) due compliance with all requirements of law, (ii) the
availability to the City of sufficient private activity bond volume cap under Section 146 of the
Internal Revenue Code of 1986, (as amended (the "Code") and the Illinois Private Activity
Bond Allocation Act, (iii) public approval as required by Section 147 (f) of the Code, (iv)
agreement by the City and the Borrower upon terms for the bonds and the form of all
agreements and proceedings related to the bonds, and (v) receipt of adequate assurance from
the Borrower that there are one or more purchasers for the bonds, the City, by virtue of such
authority as may now or hereafter be conferred, will issue and sell its revenue bonds in an
amount not to exceed $3,800,000 to pay all or a portion costs of the Project. It is the
intention of the City that the bonds be reimbursement bonds for the purpose of Section
1.150-2 of the Income Tax Regulations issued pursuant to the Code and that the proceeds of
the bonds be used, in whole or in part, to reimburse expenditures made prior to the issuance
of the bonds.
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'(e) The revenue bonds of the City shall be limited obligations of the City payable
solely out of the revenues and receipts derived with respect to the Project; the Project shall
be financed upon terms so that the payments shall be sufficient to pay the principal of and
premium, if any, and interest on such revenue bonds. No holder of any such bonds shall
have the right to compel any exercise of the taxing power of the City, the State of Illinois
or any political subdivision of the State of Illinois and such bonds shall not constitute an
indebtedness or a loan of credit of the City, the State of Illinois or any political subdivision
of the State of Illinois.
2. Undertakings on the Part of the City. Subject the conditions herein stated, the
City agrees as follows:
(a) That it will authorize the issuance and sale of an issue of its revenue bonds in
an aggregate principal amount equal to the then estimated cost of the Project, not to exceed
$3,800,000.
(b) That it will cooperate with the Borrower to endeavor to find a purchaser or
purchasers for the bonds, and if purchase arrangements satisfactory to the City and to the
Borrower can be made, it will adopt, or cause to be adopted, such proceedings and
authorize the execution of such documents as may be necessary or advisable for the
authorization, issuance and sale of the bonds and the loan of bond proceeds to the
Borrower, all as shall be authorized by law and mutually satisfactory to the City and the
Borrower.
(c) That the aggregate basic loan repayments (i.e. the amount to be used to pay the
principal, interest and premium, if any, on the bonds) payable under the loan or financing
agreement whereby the bond proceeds shall be loaned to the Borrower or its nominee shall
be such sums as shall be sufficient to pay the principal of and interest and premium, if any,
on the bonds as and when the same shall become due and payable.
(d) That subject to the condition set forth in Section 4(a) hereof, the City will not
authorized the issuance of, or enter into any agreement obligating the City to issue, any
revenue bonds which will reduce the private activity bond volume cap available to the City
under Section 146 of the Code during 1995 so that the bonds contemplated by this
Agreement cannot be issued.
(e) That it will take or cause to be taken such other acts and adopt such further
proceedings as may be required to implement the aforesaid undertakings or as it may deem
appropriate in pursuance thereof.
3. Undertakings on the Part of the Borrower. Subject to the conditions herein
stated, the Borrower agrees as follows:
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'(a) That it will use all reasonable efforts to find one or more purchasers for the
bonds in an aggregate principal amount not to exceed the amount as above stated.
(b) That it will enter into or cause to be entered into a contract or contracts for the
acquisition and construction of all items constituting the Project.
(c) That contemporaneously with the sale of the bonds it will enter into a loan
agreement or other financing agreement with the City under the terms of which the
Borrower or its nominee will obligate itself to pay to the City slims sufficient in the
aggregate to pay the principal of and interest and premium, if any, on the bonds as and
when the same shall become due and payable, such agreement to contain other provisions
required by law and such other provisions as shall be mutually acceptable to the City and
the Borrower.
(d) That it is recognized that additional instruments and agreements to provide
additional security for the purchasers of the bonds, including a mortgage on the Project,
may be necessary or desirable in order to successfully market the bonds.
(e) That it will take such further action and adopt such further proceedings as may
be required to implement its aforesaid undertakings or as it may deem appropriate in
pursuance thereof.
4. General Provisions.
(a) All commitments of the City under paragraph 2 hereof and of the Borrower
under paragraph 3 hereof are subject to the condition that on or before May 1, 1995, the
City and the Borrower shall have agreed to mutually acceptable terms for the bonds and of
the sale and delivery thereof, and mutually acceptable terms and conditions for the contracts
and agreements referred to in paragraph 3 and the proceedings referred to in paragraphs 2
and 3 hereof.
(b) If the events set forth in subparagraph (a) of this paragraph do not take place
within the time set forth or any extension of that time and the revenue bonds of the City in
an amount approximately equal to the amount stated above are not sold within such time,
the Borrower (i) acknowledges that certain fees and expenses will have accrued by reason
of the execution and performance of this Agreement and (ii) agrees that it will promptly
upon request reimburse the City for all reasonable and necessary direct out-of-pocket
expenses which the City may incur at its request arising from the execution of this
Agreement and the performance by the City of its obligations under this Agreement, and
will pay the fees and out-of-pocket expenses of bond counsel and counsel to the City, and
this Agreement shall thereupon terminate.
(c) The action of the City in executing and delivering this Memorandum of
Agreement, in fulfilling its obligations under this Memorandum of Agreement, in issuing or
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'in refusing to issue the bonds on behalf of the Borrower or in taking or omitting or refusing
to take, any other action whatsoever shall not result in any pecuniary liability on the part of
the City, members of its governing body, its officers, its employees and its counsel, except
as may be provided in the bonds or any instruments relating thereto.
IN WITNESS WHEREOF the parties hereto have entered into this Agreement by
their officers thereunto duly authorized as of the 3/riday of cP/t/V1t/L, , 199 S .
CITY OF ELGIN, ILLINOIS
By:
Mayor
Attest:
9 _7'
City Clerk
ELGIN CORRUGATED BOX COMPANY
By: ��l<
President
3014838
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A jonda Item No .
January 19, 1995
TO: Mayor and Members of the City Council
FROM: Richard B. Helwig, City Manager
SUBJECT: Industrial Development Bond ( IDB) Application
Review Process and Inducement
PURPOSE
The purpose of this memorandum is twofold:
1 ) to seek City Council approval of an IDB application
review process and;
2) to approve an Inducement Resolution with Elgin Corrugat-
ed Box utilizing the City' s annual IDB authority.
BACKGROUND
Provisions in the Federal Tax Code allow home rule cities to
issue private activity revenue bonds (also called industrial
revenue or industrial development bonds) not to exceed $50/
capita per calendar year. In Elgin' s case, this would amount
to approximately $3 . 8 million per year. Qualified "small
issue" private activity revenue bond financing permits a
state or local governmental entity to finance manufacturing
facilities for a business entity at a lower interest cost
than they could obtain by the issuance of their own taxable
debt . Interest on the bonds issued by the City of Elgin for
such purposes is not includable in federal gross income of
the bondholder.
When bonds are to be issued, the City would enter into an
agreement with the company in which they agree to acquire,
equip, renovate or construct certain manufacturing facili-
ties . Simultaneously, the City agrees to issue its bonds to
finance a portion or all of the costs of the project and the
entity agrees to make payments in amounts, and at time suffi-
cient to meet debt service on the City' s bonds . Since the
bonds are payable solely from revenues derived from the busi-
ness, it is the credit of the business (or if there is a
guaranty, an insurance policy or a letter of credit securing
the bonds , the credit of the guarantor, the insurer or the
issuer of the letter of credit) that will determine the inter-
est rate of the bonds .
Industrial Development Bond
January 19 , 1995
Pam- 2
In the recent past there has been no desire to use this fund-
ing vehicle and the City has ceded this authority back to the
State, who in turn utilizes it for other IDB projects . This
year Elgin Corrugated Box, through American National Bank -
Elgin, requested that the City ' s IDB authority help finance
their expansion.
Project
Highlights of the project are as follows :
- Elgin Corrugated Box, a company that manufactures corrugat-
ed boxes , proposes to fund the first of a three phase expan-
sion that will ultimately result in a 200, 000 square foot
box manufacturing plant . The first phase will consist of
1 ) constructing a $2 . 2 million 63, 000 square foot building
at Gasket Drive ( immediately east of the U. S . Can plant) 2 )
installing a $400 , 000 waste system and 3 ) purchasing a
flexo-folder-gluer box machine at a cost of $1 . 2 million .
The remaining phases are planned for completion over the
next 7-10 years .
- Ten new jobs will be created (an additional 14 will be
relocating from South Elgin) .
- Estimated increase in payroll = $330 , 000 .
- Estimated property tax yield to the City = $13 , 000 .
- Estimated assessed value of additional total real property
$700 , 000 - $800, 000 .
- Types of jobs - low level mechanics , customer service,
maintenance and assistant supervisor.
A copy of the preliminary application from Elgin Corrugated
Box is attached.
Approval Process
At one time the City had IDB applications reviewed by an
Economic Development Commission (this process was abolished
in 1986 ) . Prior to the Economic Development Commission (EDC)
the City contracted with Speer Financial , the City' s current
financial advisors , to determine the financial feasibility of
the firm as it related to the IDB financing.
Industrial Development Bond
January 19 , 1995
Page 3
Since the EDC is no longer functioning, no one individual or
group is in a position to review the "financials" of the
perspective IDB issuer. Given the sensitivity, should a
company be denied use of the City' s IDB allocation, it makes
sense to incorporate an outside independent group to perform
the financial review.
Speer ' s original review process incorporated an extremely
thorough analysis that was completed by Duff and Phelps (a
nationally recognized resource for credit analysis ) . This
analysis is the major reason the financing fee was $10 . 00 per
thousand dollars of bonds for the first $1 , 000, 000 of bonds .
On a $1 million issue, the fee would equal $10, 000 . Duff and
Phelps ' current review fee now starts at $15 , 000 . This siz-
able increase essentially prices Elgin out of the IDB pro-
cess . It would be as cheap to obtain the IDB from the State
as it would from Elgin. To reach a point where the City is
comfortable from a financial review standpoint and the fees
stay within reason, Speer Financial will perform an in-depth
financial analysis of the prospective company at a fee not to
exceed the initial $2 , 500 application fee . Though not as
extensive as the Duff and Phelps analysis , Speer will assure
the City that based on historical data and trends , the compa-
ny appears to be a going concern. Short of spending $15 , 000
r , , , or more, this type of analysis should suffice.
Additionally, American National Bank, who is actually lending
the money has completed a detailed analysis , sufficient
enough for them to feel comfortable that their loan will be
repaid. Speer' s report, which recommends approval of Elgin
Corrugated Box' s IDB application, is attached to this memoran-
dum.
In no way is the City responsible for the repayment of the
bonds . Should the company default, the actual lender of the
money (American National Bank) will suffer the loss .
An ordinance change is required to officially incorporate the
current ( Speer Financial ) review process into the IDB ordi-
nance.
COMMUNITY GROUPS/INTERESTED PERSONS CONTACTED
None.
FINANCIAL IMPACT
All costs pertaining to the IDB issuance will be borne by
Elgin Corrugated Box, the issuer.
LEGAL IMPACT
None.
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Industrial Development Bond
January 19, 1995
Page 4
RECOMMENDATION
It is recommended that 1) an Inducement Resolution be entered
into with Elgin Corrugated Box for $3. 8 million in Industrial
Development Bonds and 2) the proper ordinance be amended to
reflect the current practice of reviewing IDB applications .
Respectfully submitted,
• ta/i4 k-- t,/1/4-C1 k, '‘? ,
ir/ -
/ ames R. Nowicki
! /'Fo,--,-:_fr --,(-f---J7(_
n e Director
-_--)
Raymond H. Moller, Director
Business Services and Properties
S .
Richard B. Helwig
r ,;', City Manager
JRN:daw
Attachment
01/20/95 08: 54 $1 312 346 8833 SPEER FINANCIAL 1/002/008
CITY OF ELGIN
FINANCE DEPARTMENT
PRELIMINARY APPLICATION FOR
INDUSTRIAL DEVELOPMENT BOND FINANCING
Business Name: Elgin Corrugated Box Company
Address: 824 Raymond Street
City, State: Elgin, fl . 60120
Representative: _ _John R. Poole
Telephone: 741 - 2200 Date: 11/30/94
Location of Proposed Improvement: Gasket Drive, Elgin, I1 .
Amount of Proposed Bond Issue: _ $3 , 800, 000
Name of Bond Purchaser: American National Bank
Form of Organization of Borrower: Corporation
Federal Tax ID Number: 36 - 1035490
Name of Bond Counsel : David A. Saunders
Seyfarth, Shaw, Fairweather
Name of Corporate Lawyer: Roger Franzen
Brady, McQueen, Martin
Proposed Use of Proceeds: The proceeds will be used to fund
phase one of a three phase expansion that will ultimately re-
sult in a 200, 000 square foot box manufacturing plant. In the
first phase we will construct a 63, 000 square foot building at
at cost of $2, 200, 000, add a waste system to it at a cost of
$400, 0001and purchase and install a flexo-folder-gluer box
machine in our current plant at a cgst of $1, 200, 000. We plan
to complete the remaining phases over the next 7 - _10 years.
01/20/95 08:55 $1 312 346 8833 SPEER FINANCIAL a1 003/008
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Is proposal a new facility?: The building is a new _facility
that will consolidate a leased facility currently in South
$lgin and some of the manufacturing departments in our cur-
ent location. This will enable the company to continue to
to increase its sales volume in the future.
Is the proposal Industrial/Commercial/Retail? Industrial
What is the principal product of the company? j
The company manufactures corrugated boxes for many uses.
What are the proposed financing arrangements?
Industrial Revenue Bonds
Give the approximate dates of construction? 3/1/95-9/1/95
All supportive financial documents and information required by
the City of Elgin must be supplied before application will be
considered by the City Council of the City of Elgin.
The final fee to the city for authorizing the issuance of indus-
trial revenue bonds of $ will be payable at closing.
We agree to make payment of fee as outlined above and to all of
the conditions as specified in applicable city ordinances.
Signed: Signed:
Title:'C /d f /(., L�" 2 Title: r O
f
Chief Corporate Officer Chief Financial Officer
Date: ii/gi 91
ApIlicat;0/1- 2-
01/20/95 08:55 '$1 312 346 8833 SPEER FINANCIAL a004/008
INDUSTRIAL EVALUATION CHECKLIST
Note: Completion of the following form provides the information
in Section of Industrial Revenue Bond Ordinance
Business Name: Elgin Corrugated Box Company
Address: $Z4 Raymond Street
Elgin, Illinois 60120
Business Owner: Corporation
Representative: John R. Toole
Telephone: 708 - 741 - 2200
ECONOMIC
Financial Stability
Included as Exhibit "A" ;
- Audited financial report for past five year from
the audit firm of Deloitte Touche
- 1994 unaudited financial report as of 10/31/94 .
- Is any litigation pending by or against company?
Yes X No
If Yes, than explain
TYPE OF PRODUCT The company manufactures corrugated boxes
for a wide variety of industries and end users.
DESCRIPTION OF PRODUCT The company purchases paper from
mills throughout the United States and uses the paper to make
boxes that are used by our customers to ship their products
to market.
MARKET AREA SERVED The company sells boxes primarily in the
Chicagoland area, concentrating on Elgin and the surrounding
towns in the Fox River Valley.
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01/20/95 08:56 '$`1 312 346 8833 SPEER FINANCIAL [ j005/008
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gUMBER OF EMPLOYEES : (Present)
Men: 99 Full time: 101
Women: _ 5 Part time: 3
Managers: 3
Employees living in Elgin: 41
Note: The company also employs from an agency 8-15 workers
to cover the ups and downs in the normal flow of bus-
iness. Nearly all these individuals live in Elgin.
NUMBER OF NEW JOBS CREATED: 24 The company will relocate 14
jobs from South Elgin and create 10 new jobs immediately. As
volume grows, up to 40 new jobs will be created.
AVERAGE EMPLOYEE SALARY (Present) : $37 , 000 - for all lobs
YEARLY PAYROLL (Present) : $3, 850, 000 - for entire company
EMPLOYEE SKILLS REQUIRED: Initial jobs will be entry level
factory jobs with no special skills reguired. The individuals
may improve their skills through on the iob training to become
machine operators.
APPRAISED VALUE OF PLANT: $2, 200, 000 - a final value will be
determined after construction
ANTICIPATED CONSTRUCTION DATE: Construction is to begin
March 1, 1995 and end by September 1, 1995.
NUMBER OF PLANT RELOCATIONS (Since 1950) : 0
yNVIRONMENTAL
Location: The plant will be located on Gasket Drive in
the Spaulding Industrial Park Center. It will be located
immediately east of the US Can plant.
App cCA+)1 -
01/20/95 08:57 '$`1 312 346 8833 SPEER FINANCIAL Ci]006/008
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Land Size: 17 , 5 ac< 768 , 000 square feet
Present Plant: NA New Plant: 63 , 000 sq ft
Land Coverage: 8%
Number of Vehicles into Site per day:
Trucks: 40 Cars: 35
Proximity To Areas Zoned Residential, Schools and Parks:
Residential: The building site is the middle of an
existing industrial park. The site itself is sur-
rounded by either existing industrial facilities or by
unused land in the industrial park. The nearest resi-
is 0. 5 miles away. There are no schools or parks
nearby.
Pollution
Water/Sewer effluent domestic
X industrial
unusual wastes
Air/foreign or toxic substances: None
Odors: None
Glare: None
Noise: None
Pollution devices required: None
According to City Engineer, are there adequate number of
Water and Sewer Connections to the Site?
X Yes No
Note: This was determined at the time of the land pur-
chase in December 1989 .
LANDSCAPING/PROPOSED PLAN' PLANS
Sharp line drawings of the new plant, its floor plan and the
location of the flexo-folder-gluer in the existing plant
are included as Exhibit "B" .
01/20/95 08:57 $1 312 346 8833 SPEER FINANCIAL (it007/008
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NICIP?,. or R'v
Is the street adequate to accomodate the traffic your plant
generate?
Yes
Describe ingress and egress methods from your plant.
_ The plant will have tWg driveways both of which will open
Onto Gasket Drive.
Are there any safety hazards?
No
UTILITY REQUIREMENTS
Water used per day: 1500 gallons
Fire Protection adequate? Yes - building sprinklered
and a water retention pond will be created
Additional water or sewer requirements: No
Type of Sewage: _ Industrial
Projected annual electrical usage: 400, 000 KWH $30. 000
Projected annual gas usage: 40, 00Q therms $14 , 000
Will your project significantly increase school enrollment?
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CIVIC AWARENESS
Provide evidence of past civic activity: Elgin Corrugated
was stgrted in _glgin in 1886. The history of Elgin and
the Schmidt family who founded the companv are inter-
twined. The Schmidts help start the Elgin State Bank.
Trey have served as elected officials in the city. They
helped fund Sherman Hospital. Currently the company is
01/20/95 08:58 ' '1 312 346 8833 SPEER FINANCIAL Iin008/008
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" donating $10Q, 000 to help fund the expansion of the YMCA.
The company is a major contributor to the Elgin United Way
and many other local charitable organizations,
Will your company support local civic activities?
X Yes No
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iSPEER FINANCIAL, INC. PUBLIC FINANCE CONSULTANTS SINCE 1954
ELWOOD BARCE RICHARD A.PAVIA KEVIN W.McCANNA DAVID F.PHILLIPS LARRY P BURGER DANIEL D.FORBES
CHAIRMAN EMERITUS ° RMAN!CEiO PRFSIDEM R VIE PRESIDENT VICE PRESIDENT VICE PRESIDENT
January 19, 1995
The Honorable George Van De Voorde and
Members of the City Council
City of Elgin
150 Dexter Court
Elgin, IL 60120
Dear Mayor and Council:
Pursuant to the request of the City, Speer Financial, Inc. has reviewed the industrial revenue
bond application, and supporting documentation including audits, of Elgin Corrugated Box
Company. The Audits are on a calendar year basis and are prepared by Deloitte and Touche.
The 1993 audit letter lists no exceptions.
Elgin Corrugated Box is applying for City approval of a $3,800,000 industrial revenue bond,
to be sold to American National Bank. Proceeds will be used to construct a new 63,000 square
foot building for $2,200,000, add a waste system for $400,000 and equip an existing facility
with a $1,200,000 box machine. This is stated to be phase one of a three phase, decade long
enterprise. The project is located in an industrial park.
The product of the company is corrugated boxes. The market region is local. Some 100 people
work for the company, of which 43 live in Elgin. New job generation will be 10 positions upon
completion of all phases. The initial 10 positions will be a mix of full time jobs, with seven low
level, one customer service, one maintenance and one assistant supervisor paying a range of
$30,000 to $40,000 annually. Benefit to the City's tax base will likely be some $700,000 to
$800,000 of equalized assessed valuation. At a tax rate of$1.90 and $7.80 for the City and all
governments, expected revenues will be $13,000 and $54,000, respectively.
Financial Analysis
As the accompanying table indicates, the company has been a fairly steady performer over the
past six years. The range of sales has less than 7% fluctuation, with 1991 being the notable
downturn. Average sales revenues per 1000 square feet have consistently been in the$63 to $65
range. Costs per 1000 square feet have seen a wider range of fluctuation, but have still been
in a reasonable range of$57 to $61. Net income per 1000 square feet has fluctuated between
$4.45 and $6.54, with the low end occurring in the most recent two years (ignoring partial 1994
results which indicate a sales profitability upturn).
SUITE 3435.55 EAST MONROE STREET•CHICAGO,ILLINOIS 60603•(312)346-3700•FAX(312)346-8833
SUITE 500.531 COMMERCIAL STREET•WATERLOO,IOWA 50701•(319)291-2077•FAX(319)291-6787
SPEER FINANCIAL, INC.
-2-
Overall, this performance indicates consistency in changing markets, with better results likely
to occur 1994 - 1996, based on general economic forecasts.
It should be noted that as a Subchapter S, no federal income taxes at the corporate level are
paid. The company has consistently issued dividends of the major portion of projects to its
shareholders. Cash retained in the company at December 31 over the past three years has
averaged some $1,000,000, following dividend payouts averaging $1,200,000.
Average debt service will be under $400,000, a figure covered some three times by net income.
As of the December 31, 1993 audit, the company has no outstanding debt.
Suggestions
Whether by bond covenant, if possible, or by City (in)action on future IRB requests, some
consideration is suggested for review of future phases as the financing for such may dilute the
creditworthiness of this borrowing. It is unknown if the lender has such a requirement.
Similarly, as this is a closely held corporation, some minimum capital requirement is suggested,
to prohibit all cash being paid out in dividends or high salaries.
The tax revenues from the project are relatively modest. We would suggest that there be a
covenant for no special reductions.
These and other potential terms, are aimed at forestalling any dilution of credit.
Conclusion
In summary, we find the company, based on its audited information, to be financially stable.
The IRB project will expand and update the physical plant. We find this a good credit and
worthwhile project and recommend that the City proceed with the inducement resolution. We
would be pleased to discuss this with you.
Sincerely,
Kevin W. McCanna
President
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AUDITED CALENDAR YEARS
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1989 1990 1991 1992 1993 Partial 1994
(10 Months) y
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Thousand of square 257,497 255,196 240,575 247,776 241,663 217,162
z
feet of cardboard n
Revenue - Net Sales $16,783,641 $16,399,270 $15,205,782 $16,264,540 $15,319,150 $14,225,143
Expenses:
Direct Costs - $10,517,385 $9,964,802 $8,998,654 $9,855,606 $8,966,166 $8,638,728
Indirect Costs - 4,653,981 4,877,822 4,800,210 5,306,380 5,209,666 4,308,281
Total Expenses $15,171,366 $14,842,624 $13,798,864 $15,161,986 $14,175,832 $12,947,009
Other $70,854 $60,754 $56,362 $(826) $12,538 $39,125
Net Income $1,683,129 $1,617,400 $1,463,280 $1,101,728 $1,155,856 $1,317,259
Billing per 100 $65.18 $64.26 $63.21 $65.64 $63.39 $65.50
Square Feet
Cost per 1000 58.92 58.16 57.36 61.19 58.66 59.62
square feet
Net Income per 6.54 6.34 6.08 4.45 4.78 6.07
1000 square feet
_ (:(1F11
Direct Line 931-5660
January 30, 1995
Attention: Legal Group
Illinois Development Finance Authority
Sears Tower, Suite 5310
233 South Wacker Drive
Chicago, IL 60606
Re: Elgin Corrugated Box Company
#1673-IRB
Gentlemen:
On January 25, 1995, the Elgin City Council adopted
Resolution 95-14 approving the issuance of Industrial
Revenue Bonds for Elgin Corrugated Box Company.
In accordance with the directions contained in your
letter dated January 24, 1995, a certified copy of the
aforesaid resolution is enclosed.
Sincerely,
Dolonna "Loni" Mecum, CMC
City Clerk
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Enclosure
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