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#07 Recycling4U Final Council Memo Economic Development Memorandum Date: June 15, 2009 TO: City Council FROM: Doug Venable, Director of Economic Development SUBJECT: Action on a Resolution Approving a TIF Development Agreement with Recycling4U, LLC and Authorizing a $15,000 TIF Development Loan for Recycling4U, LLC Located in within ½ Mile of TIF No. 33 at 615 N. Parker Dr. (File Resolution 2009 – 619) I. Summary Mr. Jamin Arn, owner of OfficePro has contacted staff about the possibility of a small $15,000 TIF Loan to help start a new business called Recycling4U LLC. The new company would collect, recondition, re-load, and sell laser printer cartridges to office supply businesses. The company would be located on the second floor of the building at 615 N. Parker Dr. that is now leased by OfficePro. II. Recommendation Staff feels that supporting entrepreneurial efforts to start new businesses is a critical component in any economic development program. Mr. Arn has had a great track record in starting and growing OfficePro. Staff has negotiated a standard TIF Development Loan Agreement with Recycling4U for a $15,000 forgivable loan, linked to job creation commitments. While Mr. Arn’s project is small, it will create new jobs and has the potential to grow into a nice small business. The proposed TIF Agreement will provide initial financing to start the Recycling4U business and create four (4) new full-time jobs within four (4) years. III. Suggested Motion I move the adoption of Resolution 2009 – 619, approving the TIF Development Agreement with and authorizing a $15,000 TIF Development Loan to Recycling4U. IV. Recycling4U Project Jamin Arn is an entrepreneur in Janesville, who successfully created OfficePro in July, 2003. In the past 6 years, he has grown this company to $5 million in sales and has been honored by Forward Janesville as the Small Business of the Year. OfficePro has a number of separate and distinct business niches. The company retails office and ??? Economic Development Department Box 5005 Janesville, WI 53547-5005 755-3180 TIF Development Agreement Recycling4U – TIF No. 33 Page 2 cleaning supplies. They collect used office paper and documents for shredding. They also purchase and resell used office equipment. In looking to provide a full range of products to his customers, OfficePro currently purchases remanufactured printer cartridges. Mr. Arn collects used printer cartridges from his customers to facilitate their recycling efforts. He feels that he can start his own business, Recycling4U, to remanufacture the printer cartridges. Initially, he will sell his remanufactured printer cartridges to OfficePro, but as the business gets going, he plans to be an OEM manufacturer of recycled printer cartridges to other office supply companies. He plans to locate the business in the second floor of the building at 615 N. Parker Dr. that is leased by OfficePro. He estimates that he will be able to start the business with one full time employee and two part-time employees. He feels that as sales grow, he will need 2 – 3 additional full time employees. In order to start this new business, Mr. Arn estimates total expenditures of $20,000, and proposes to use $5,000 of personal equity and to receive a $15,000 forgivable TIF Development Loan. V. TIF Development Agreement Staff has negotiated a standard TIF Development Loan for the Recycling4U project. Under the terms of the Agreement, the City would make a $15,000 forgivable loan to Recycling4U. The TIF loan would be made at the City’s cost of borrowing (4.25%) over 10 years. The annual debt service payment of approximately $1,875 would be linked to job creation. The Agreement calls for Recycling4U to employ one full-time worker in year one; a second full-time worker in year 2; and so on until employment reaches 4 full-time workers Fifty percent (50%) of the annual debt service must be repaid each year. Each year that Recycling4U meets or exceeds the employment commitments, the remaining 50% of that year’s debt service would be forgiven and that portion of the loan turned into a grant. If Recycling4U employs fewer workers than their commitment, then the debt service payment due would be prorated and repaid to the City for that year. If Recycling4U closes its doors or decides to relocate to another community, then the unpaid principal balance of the TIF Development Loan would become due and payable. This project will be located within ½ mile of newly created TIF No. 33 which was developed around the recent expansion at Mercy Health Systems’ campus on Mineral Point Road. The Project Plan for this TIF District included funds in support of development projects located within ½ mile of the TIF boundary. The first development project in TIF No. 33 was the recent 30,000 SF office expansion at Mercy Health Systems. The expected TIF increments from the Mercy TIF Development Agreement Recycling4U – TIF No. 33 Page 3 project should be sufficient to cover the onetime cost of the forgivable $15,000 TIF Development Loan and to pay for the cost of converting N. Franklin St. to two-way traffic behind the Mercy campus. Doug Venable Cc Mr. Eric Levitt, City Manager Mr. Jay Winzenz, Dir. of Administrative Services Attachments: Location Map Resolution 2009 – 619 Summary of TIF Development Agreement j:\development\economic development\tif districts\tif 33 - mercy tif\Recycling4U\Recycling4U final council memo.doc Resolution 2009 – 619 A Resolution Approving a TIF Development Agreement with and Authorizing a $15,000 TIF Development Loan to Recycling4U, LLC. -- TIF No. 33 WHEREAS, Sections 66.1105 and 66.1101 of Wisconsin Statutes authorize cities to utilize tax increment financing to promote industry and implement economic development projects; and WHEREAS, the Common Council has authorized the use of Tax Increment Financing Districts and TIF Development agreements for development projects when the Council adopted amended Council Policy Statement No. 61 (Economic Development Policy) on the 14th day of November, 2006; and, WHEREAS, on January 12, 2009, the Council adopted Resolution 2008 – 531 approving the Project Plan for TIF No. 33 to allow for the expenditure of TIF incremental revenues on development projects located within ½ mile of the TIF No. 33 boundary; and WHEREAS, Recycling4U, LLC. (“Recycling4U”) has announced plans to start a laser printer cartridge recycling facility and to hire Four (4) additional workers, if Janesville can provide financing to help cover its start-up capital investment costs; and WHEREAS, the City and Recycling4U have negotiated a TIF Development Agreement a copy of which is attached hereto and incorporated herein as if fully set forth, and which Agreement provides for the City to make a forgivable $15,000 TIF Development Loan to Recycling4U at 4.25% interest amortized over 10 years using funding from TIF No. 33; and WHEREAS, the Common Council of the City of Janesville finds the approval of the TIF Development Agreement and the making of a $15,000 TIF Development Loan to Recycling4U in TIF No. 33 to be in the best interest of and benefit to the City, its citizens, and the overall community; NOW, THEREFORE, BE IT RESOLVED, by the Common Council of the City of Janesville that it hereby approves the TIF Development Agreement with and authorizes a $15,000 TIF Development Loan to Recycling4U, LLC according to the terms and conditions set forth in the attached TIF Development Agreement and Promissory Note, and BE IT FURTHER RESOLVED, that the City Manager, on behalf of the City of Janesville, is hereby authorized to negotiate, draft, modify, amend, review, and file all such other documents, papers, and agreements, to take whatever other actions, and to make whatever changes and amendments to the TIF Development Agreement and Promissory Note, and such other documents and agreements which the City Manager may, from time to time, deem necessary and/or desirable to effectuate the intent of this Resolution. Resolution 2009 – 619 Page 2 ADOPTED: Motion by: Second by: APPROVED: Councilmember Aye Nay Pass Absent Brunner McDonald Steven E. Sheiffer, City Manager Perrotto Rashkin ATTEST: Steeber Truman Voskuil Jean Ann Wulf, City Clerk-Treasurer APPROVED AS TO FORM: City Attorney Proposed by: City Manager Prepared by: Economic Development Director Summary of TIF Development Agreement and Promissory Note Between City of Janesville and Recycling4U, LLC for a $15,000 TIF Loan for a Development Project in TIF No. 33 I. Parties A. City of Janesville B. Recycling4U, LLC. (Developer/Promissor) II. Description of the Property -- 615 N. Parker Dr., Janesville, WI, within ½ mile of TIF No. 33 III. Purpose of the Agreement -- Support capital equipment and training costs for Recycling4U start-up business IV. Terms of the Agreement A. The City shall make a $15,000 TIF Development Loan to Recycling4U: B. Recycling4U shall: 1. Lease space at 615 N. Parker Dr. 2. Obtain an Occupancy Permit for leased space 3. Submit financial documentation for City review 4. Commit to use best efforts to create and retain one (1) new full-time job in first year; two (2) full-time jobs in second year; three (3) full-time jobs in third year and four (4) full-time jobs thereafter. C. Developer contingencies to be met by August 1, 2009: 1. Receipt of all plan approvals and building permits for leasehold improvement. 2. Corporate approval of capital investment. D. City must receive waiver or satisfaction of contingencies before being bound to Agreement. E. Recycling4U has the right to prepay TIF Development Loan TIF Development Loan Terms and Conditions 1. Loan Amount: $15,000 2. Loan Purpose: Equipment and employee training costs at 615 N. Parker 3. Loan Term: 10 years 4. Interest Rate: 4.25% 5. Annual Debt Service: $1,872.45 ( 50% may be forgiven if job commitments are met). 6. Job Commitments: Create one (1) new job during first year; two (2) new full-time jobs in the second year; three (3) full-time jobs the third year; and four (4) full-time jobs for year 4 – 10. 7. Debt Service Forgiveness: ? For each year Recycling4U meets job commitments, the 50% of the $1,872.45 debt service payment may be forgiven for that year. ? For each year that Recycling4U employs less than less than job commitment, Recycling4U will repay a pro rated share of the annual debt service payment. 8. Loan Closing: Upon the issuance of an Occupancy Permit for Recycling4U space at 615 N. Parker Dr. 9. Timing of Debt Service: Recycling4U to submit job documentation 30 days prior to anniversary date of loan closing. City to calculate debt service forgiveness and invoice amount due. 10. Personal Guarantee: Jamin Arn to provide personal guarantee of TIF Loan repayment. 11. Closing of Facility If Recycling4U closes the facility at 615 N. Parker Dr., then unpaid loan balance is immediately due and payable. However, Recycling4U can move to another Janesville location as long as it meets the job commitments.