Local Development Finance Authority

CITY OF STERLING HEIGHTS Regular Meeting of the LOCAL DEVELOPMENT FINANCE AUTHORITY CITY OF STERLING HEIGHTS 40555 UTICA ROAD 586-884-9322 CITY COUNCIL CHAMBERS October 17, 2012 5:30 PM MEETING CALLED TO ORDER PLEDGE OF ALLEGIANCE ROLL CALL APPROVAL OF AGENDA APPROVAL OF MINUTES OF July 18, 2012 Regular Meeting and August 22, 2012 Special Meeting NEW BUSINESS 1. To acknowledge receipt of the Macomb-OU Incubator Quarterly report September 2012 2. To approve the Lease Termination Agreement between American Hydrogen and the Local Development Financing Authority (LDFA), subject to approval of the final agreement by the City Attorney’s office, and authorize the LDFA Chairperson to execute the approved Agreement on behalf of the LDFA. OLD BUSINESS BOARD MEMBERS REPORT PUBLIC COMMENT ADJOURNMENT  CITY OF STERLING HEIGHTS LOCAL DEVELOPMENT FINANCE AUTHORITY MINUTES OF THE REGULAR MEETING July 18, 2012– 5:30 p.m. 40555 Utica Road, Sterling Heights, MI 48313 586-446-2489 City Council Chambers Victor Martin called the meeting to order at 5:30 p.m. Pledge of Allegiance Members present at roll call: Stephan Cassin, David Corba, Richard Kincaid, John Lamerato, John Lettang, Victor Martin, Casey Sobczak , Orest Zachary, Members absent: Lori Doughty (excused), David Wilson (excused) Also in attendance: Denice A. Gerstenberg, Business Development Manager, Kasey Green, Economic Development Manager, Julie Gustafson, Executive Director Macomb OUIncubator Motion to Approve the Agenda Moved by Cassin, supported by Lettang, to approve the agenda as presented. Ayes: All Nays: None Motion carried. Motion to Approve the Minutes of Regular Meeting February 15, 2012 Moved by Lettang, supported by Zachary, to approve the Minutes as presented. Ayes: All Nays: None Motion carried. New Business Item #1 Mr. Martin opposed Section 30 of this lease. Ms. Gerstenberg stated that this was reviewed by the City Attorney, and indefinite meaning if the LDFA and Kosch mutually agree to the rate and lease term. Mr. Lamerato questioned the term of the Insurance. Ms Gerstenberg stated that these items do not always match, and that we are getting renewals as they expire. Motion to approve the Standard Lease Agreement between Kosch Catering and the Local Development Finance Authority Moved by Cassin, supported by Lamerato to approve the motion Ayes: 7 Nays: 1 Motion carried. Item #2(Moved to item #3) Mr. Lamerato stated that he thought the objective of the LDFA was to bring in high tech businesses. Ms. Gerstenberg stated that they are a start up, and they may not fit the high tech form, but they will be providing assistance to the other tenants, and they are using OU business services. Mr. Zachary stated that since we are looking for 100% occupancy is there a model of what percentage of each area we are looking to fill. Ms. Gerstenberg stated that, that question should be addressed to Ms. Gustafson. Mr. Corba questioned if OU staff would be here to present. Ms. Gerstenberg stated they were scheduled to be here, and we are not sure why they are not present. General discussion ensued regarding the processes of interviewing companies being selected to become tenants at the Incubator. General discussion ensued regarding the fact that the tenant has already moved into the building and the LDFA board has not approved the lease agreement, and the consequences if the board denies the lease, and what would happen. Ms. Gerstenberg stated that if the lease is not approved then the tenant will have to move out. Motion to table items #2 and #4 until representatives from the Macomb OUIncubator Moved by Zachary, supported by Corba, to approve the table items. Ayes: All Nays: None Motion carried. Item #2 Motion to approve the final payment to T.H. Marsh Construction, 32121 Woodard Avenue, Suite 300, Royal Oak, MI 48073 in the amount of $61,609.00. Moved by Lettang, supported by Zachary, to approve the motion. Ayes: All Nays: None Motion carried. Item #3 General discussion ensued with Ms. Gustafson regarding the high technology focus for the Incubator and how MangoTree fits into this mold. Motion to approve the Standard Lease Agreement between MangoTree Capital, LLC and the local Development Finance Authority. Moved by Lettang, supported by Zachary, to approve the motion. Ayes: All Nays: None Motion carried. Item #4 Ms. Green introduced this agenda item. Mr. Corba expressed how happy he was to receive this report. Mr. Corba asked who the current tenants are, what is the tenant recruitment plan. Ms. Gustafson stated the yes it will take about 2- 3 years to fill the incubator space. Ms. Gustafson would like more than the 50% she has stated in the report. Ms Gustafson explained the difference between the clients that the incubator is servicing. The board has requested a list of the tenants, Ms. Gustafson will provide it to the board. Ms. Gustafson has updated the board on all the programs and new initiatives that she is bringing forward at the Incubator. Mr. Martin asked what is needed to fill up the building, how many tenants and what rentable space is available. Mr. Martin asked how many new tenants will it take to fill up the building. Ms. Gustafson stated that 13-14 more tenants including cubicle spaces. Mr. Martin stated we have 2 new tenants in 6 months, and so it will take about 6 more tenants, to reach our goal this year. Ms. Gustafson stated she could get 7 by the end of fiscal year, so that she will have 4 more by the end of this calendar year. Mr. Martin asked what is the job creation so far and are we on pace to meet our goals. Ms. Gustafson stated she would have to look into it and get back to them. The board asked Ms. Gustafson to provide more metrics in her reports. Motion to receive the Macomb OUIncubator Bi-annual report of June 2012 Moved by Lettang and supported by Lamerato to approve the motion Ayes: All Nays: None Motion carried. Old Business None Board Members Report None Public Comment None Adjournment Moved by Wilson supported by Martin to adjourn. Ayes: All Nays: None Motion carried. The meeting adjourned at 6:25 pm TJ Minutes Approved 10/17/12 John Lettang Secretary  CITY OF STERLING HEIGHTS LOCAL DEVELOPMENT FINANCE AUTHORITY MINUTES OF THE SPECIAL MEETING August 22, 2012– 5:30 p.m. 40555 Utica Road, Sterling Heights, MI 48313 586-446-2489 City Council Chambers Victor Martin called the meeting to order at 5:30 p.m. Pledge of Allegiance Members present at roll call: David Corba, Lori Doughty (late) Richard Kincaid, John Lamerato, John Lettang, Victor Martin, Casey Sobczak, David Wilson, Members absent: Stephan Cassin, (excused), Orest Zachary, (excused) Also in attendance: Denice A. Gerstenberg, Business Development Manager, Kasey Green, Economic Development Manager, Julie Gustafson, Executive Director Macomb OUIncubator Motion to Approve the Agenda Moved by Sobczak, supported by Wilson, to approve the agenda as presented. Ayes: All Nays: None Motion carried. New Business Ms. Gerstenberg gave a brief overview of the new tenant Coliant corporation. General discussion ensued about the business, the sales office will be at the incubator, and the manufacturing will be done in Warren. Motion to approve the standard lease agreement between Coliant Corporation and the Local Development Finance Authority (LDFA) Moved by Lamerato, supported by Lettang to approve the motion Ayes: All Nays: None Motion carried. Old Business None Board Members Report None Public Comment None Adjournment Moved by Lettang supported by Wilson to adjourn. Ayes: All Nays: None Motion carried. The meeting adjourned at 5:35 pm TJ Minutes Approved 10/17/12 John Lettang Secretary  LDFA Business Sterling Heights, Michigan 10/17/12 AGENDA STATEMENT OMB AS03 Rev. 11/04 Item Title: Macomb-OU INCubator Quarterly- Report – October 2012 Submitted By: Kasey Green, Economic Development Manager Executive Summary In 2009 an Affiliated Party Agreement was executed between the City of Sterling Heights, City of Sterling Heights Local Development Financing Authority (LDFA) and Oakland University for the designation of an Authority District/SmartZone to promote the development of high technology businesses thru the development of a business incubator. In the Affiliated Party Agreement, the University agreed to consult with and seek guidance from the LDFA with regards to the operation. The Agreement requires the University to provide a bi-annual report to the LDFA and MEDC. The second report was submitted and presented to the LDFA in July 2012. At the July 17, 2012 meeting the board requested that Oakland University staff provide them with a quarterly report. Attached is the first Quarterly Report for LDFA review. Oakland University staff will be available for questions. Suggested Action: MOVED BY: SECONDED BY: RESOLVED, to acknowledge receipt of the Macomb-OU INCubator Quarterly Report – October 2012.  INCUBATOR REPORT Metrics Please complete the following chart for each quarterly report. Each line should be in the following format: List the actual number first followed by your goal in parentheses after for each quarter. Each quarter and year should have a specified goal, but the actual is added per quarter. Please color-code each cell such that red indicates below goal performance, yellow at goal performance and green above goal performance. Quarters run with the fiscal year starting on July 1- June 30. (Example: If the goal is to recruit 3-4 tenants each quarter and 12 per year, and 5 were recruited between July 1 and Sept 30, the report would read as 5/(3-4) in Q1 and would be shaded in green. Q2-Q4 would have (3-4) indicated, and annual would list (12)). METRIC Q1 Q2 Q3 Q4 ANNUAL Vacancy Rate 49% (leased sq. ft./ leasable sq. ft. – does not include common space) Total Leads Generated* NA Total New Client Tenants 2 (2 - 3) Current number of client tenants 6 (9-10) NA Conversion rate of leads to client tenants* NA Average number of leads generated by Macomb-OU NA events and initiatives* Jobs created by client tenants (See accelerator clients) 2 (5) Jobs retained by client tenants (Above for year with 15) 0 (1) Grants applied for/received 1 (0) Important Metrics for Accelerator Clients: Current number of accelerator clients – 15 Jobs Created by accelerator clients – 9 (fyi, job projections on 12/2011 report to LDFA included total jobs for both accelerator and tenant clients. Our projection was for 20-25 jobs per year or 4-5 per quarter. We did not break it out to separate categories for tenant and accelerator clients. Jobs retained by accelerator clients – 0 Number of Event Q1 Attendees – 492 *Process for capturing needs to be developed Additional Information 1. Include a list of current tenants at the Incubator with a brief (1 or 2 line) description of each. Complete the following chart for each tenant. Also, as applicable, list the number of any patents secured or research projects completed through Incubator support. Number of Lease Expiration Tenant Client Company Description FT Capital Raised – Q1 Date** Employees  Unique low profile, vertical Terra Telesis May 2013 0 $5,000 axis wind turbine Products aid paint adhesion and Sanza improve corrosion resistance May 2013 2 $0 on metal parts Real-Time embedded code and sensors that monitor vehicle Brar Technology health and provide prognostics, March 2013 1 $0 predict failures, report, and collect data Hydrogen technology used to American Hydrogen boost semi-trucks miles per February 2013 4 $0 gallon Independent Registered Investment Adviser firm Mango Tree June 2013 1 $0 offering investment advice and portfolio management Makes it convenient to connect electrical devices to power sports industry vehicles and equipment. The company Coliant September 2013 16 $2,500 (grant) manufactures rugged electrical devices and cables for the cold, wet and high vibration power sport environment **All leases are renewable The Macomb-OU INCubator is working with Terra Telesis on a project with Altair. The project is funded through the Business Accelerator Fund. Capital raise activities for accelerator clients in Q1: Plastomer Lighting Technology - $550,000 Native Green - $100,000 Great Little Spots - $24,000 Dynamic Intelligent Systems - $21,000 HoneyBee - $250,000 Logicoul - $24,000 Fan Tape - $175,000 Special projects with accelerator clients in Q1: Dataspeed $47,500 through the Business Accelerator Fund Total Capital Raised for all clients: $1,199,000 2. Bulleted list of Incubator driven events or initiatives. For each, identify the following:  a. Number of leads generated b. Number of any leads converted to tenants. Process for capturing needs to be developed. 3. Bulleted list of current service offerings through the Incubator. Note any changes, additions or deletions since the last report.  Business Advisory Board  Capital Raise Activities  Capital Raise Meet up  Lunch and Launch Series  Fireside Growth Series  Idea Hub (I-Hub) - (new program)  Diversification Series o Lean Black-Belt Certificate Program o Lean Green-Belt Certificate Program  Startup Lean - (new program) 3a. New Program Created:  Adopt-a-Biz  Executive in Residence 4. Provide a current budget summary of the sources and uses of funds in general (i.e. personnel***, not specific salaries). Note any newly received grant funds. The Macomb-OU INCubator can provide a budget summary for Q1 after Oakland University releases the September numbers which typically is the 10th of the month. The report will be forwarded as an addendum soon as possible. New Received Grants: Michigan Economic Development Corporation (MEDC) – Defense Advanced Research Projects Agency (DARPA) - Develop and operate DARPA program for the state On September 28, 2012, the MEDC, through the Michigan Strategic Fund, awarded the Macomb-OU INCubator a $766,036 grant to develop and administer a DARPA program for the state. This grant has four main project deliverables: 1. Assessment of the Current DARPA Activity in the State – commission a study of the current DARPA activity levels in Michigan 2. DARPA Training for Michigan Businesses and Universities – develop training geared towards businesses and academic institutions across the state in order to educate them on the DARPA program 3. DARPA Challenges and/or Sponsored Programs – subsidize the cost of Michigan universities participating in DARPA funded challenges and programs  4. DARPA Match Funds Program – develop a matching fund program for businesses and university faculty that receive DARPA funding in Michigan ***Please note that all personnel costs are covered through grant funding. 5. Provide a current updated staffing list with name, title, and FT/PT. Executive Director – Julie Gustafson (FT) Assistant Director – Larry Herriman (FT) Grant Research and Compliance Officer – Rachel Louzon (FT) Marketing and Communication Manager – Joan Carleton (FT) Executive in Residence – Commercialization Advisor – Wayne Blizman (PT) Senior Capital Advisor and Commercialization Specialist – Mike Brennan (PT) Market Development Manager – Stacey Frankovich (PT) Student Interns – Matthew Fruth and Kathleen Buchanan (PT)  LDFA Budget Summary for 1st Quarter Quarter 1 July 1, 2012 - Sept. 30, 2012 Revenues Program Revenue $ 8,337 Diversification Series (Black Belt, Green Belt and Startup Lean) $ 8,200 Small Business Administration Grant #2 $ 17,922 MEDC Start-up Grant #3 $ 46,018 MEDC Start-up Grant #4 $ 5,966 New Economy Initiative Grant $ 58,573 EDA Start-up Grant $ 41,425 Business Accelerator Funds (BAF) $ 14,192 Total Revenue: $ 200,633 Expenses - Personnel/Supplies/Services Personnel $ 148,455 Service Contracts (Defense Corridor Study) $ 7,500 Conference Fees and Travel $ 1,267 Supplies and Equipment $ 4,166 Building Expenses $ 10,243 BAF Services $ 14,192 Total Expenses: $ 185,822 Carry Forward: $ 8,339 * Net Total: $ 23,150 * * Majority of the cash balance is from the Diversification Series fund and it must be reinvested in the program  LDFA Business Sterling Heights, Michigan 10/17/12 AGENDA STATEMENT OMB AS03 Rev. 11/04 Item Title: Lease Termination Agreement for American Hydrogen Submitted By: Kasey Green, Economic Development Manager (586-884-9327) Executive Summary American Hydrogen and LDFA entered into a Lease Agreement dated February 1, 2012 under which American Hydrogen leased the premises identified as Lab #3D in Section 3 of 6633 18 Mile Road, Sterling Heights, Michigan from the LDFA for a term beginning February 1, 2012 and ending January 31, 2013. American Hydrogen has fallen behind in rent payments and currently owes $2,224 in past due payments. The City of Sterling Heights has been working with American Hydrogen regarding their past due rent, and that their company does not feel they can currently meet the obligations of the lease. Therefore, American Hydrogen has requested that the LDFA terminate the Lease at the earliest possible date, which termination date the LDFA has determined to be November 1, 2012. American Hydrogen has indicated that they would still like to work with the Macomb OUIncubator. If, in the future, American Hydrogen or Martha C. Theis wishes to lease any space at the Velocity Building after October 31, 2012, they shall be obligated to pay all outstanding delinquent charges owed the LDFA. Suggested Action: MOVED BY: SECONDED BY: RESOLVED, to approve the Lease Termination Agreement between the American Hydrogen and the Local Development Financing Authority (LDFA), subject to approval of the final agreement by the City Attorney’s office, and authorize the LDFA Chairperson to execute the approved Agreement on behalf of the LDFA. American Hydrogen Injection Distribution Company, LLC 6633 18 Mile Road Sterling Heights, MI 48313 (586) 634‐5739 Fax (586) 731‐6971 _____________________________________________________________________________________ October 11, 2012 City of Sterling Heights Local Development Finance Authority Board 40555 Utica Road PO Box 8009 Sterling Heights, Mi 48311-8009 Dear LDFA, We are requesting that you allow us to terminate our current lease at Velocity. Currently we are behind in our rental arrangements with your board. Our financial circumstances have changed and funding for our project is currently on hold. Thank you for your consideration. Regards, American Hydrogen Injection Distribution Company, LLC Martha C. Theis Martha C. Theis President  LEASE TERMINATION AGREEMENT This Lease Termination Agreement (“Agreement”) is made on October 17, 2012 between American Hydrogen Injection Distribution Company, LLC, a Michigan limited liability company (“American Hydrogen”), whose address is __________________________________________________________ and the City of Sterling Heights Local Development Financing Authority, a Michigan local development financing authority (“LDFA”), whose address is 40555 Utica Road Sterling Heights, Michigan 48314. RECITALS A. American Hydrogen and LDFA entered into a Lease Agreement dated February 1, 2012 (the “Lease”) under which American Hydrogen leased the premises identified as Lab #3D in Section 2 of 6633 18 Mile Road, Sterling Heights, Michigan (the “Premises”) from the LDFA for a term beginning February 1, 2012 and ending January 31, 2013. B. American Hydrogen has requested that the LDFA terminate the Lease at the earliest possible date, which termination date the LDFA has determined to be November 1, 2012. C. The LDFA is willing to terminate the Lease with American Hydrogen on the terms and conditions contained in this Agreement. D. The parties wish to set forth their understandings with respect to the termination of the Lease in writing. NOW, THEREFORE, the parties agree as follows: 1. Lease Termination. The LDFA agrees to terminate the Lease with American Hydrogen effective November 1, 2012 upon the condition that American Hydrogen vacate the Premises on or before 5:00 p.m. on October 31, 2012.  2. Qualified for Giving of Delinquent Lease Payments. Except as provided in Paragraph 3 of this Agreement, the LDFA forgives American Hydrogen with respect to any outstanding rent indebtedness under the Lease to pay rent, which amount is mutually agreed to be $2,224 through October 31, 2012. This forgiveness of indebtedness shall not be effective if American Hydrogen fails to vacate the Premises by 5:00 p.m. on October 31, 2012. American Hydrogen will continue to accrue rent obligations to the LDFA if American Hydrogen fails to vacate the Premises by 5:00 p.m. on October 31, 2012 and in that event, the forgiveness shall be null and void. 3. Future Lease of Premises at the Velocity Building. If American Hydrogen or any other corporation, limited liability company, limited partnership or other entity of which Martha C. Theis is a principal wishes to lease any space at the Velocity Building located at 6633 18 Mile Road after October 31, 2012, American Hydrogen or Martha C. Theis shall be obligated to pay all outstanding delinquent charges owed the LDFA in the liquidated amount of $2,224 before the LDFA will consider entering into a new Lease Agreement with any such entity. 4. Entire Agreement. The entire agreement of the parties with respect to the termination of the Lease is set forth in this Agreement, and no prior agreements, understandings, whether verbal or in writing, shall be effective. Any modification of this Agreement shall be in a written agreement approved by the respective parties. 2  5. Governing Law. This Agreement is made in the State of Michigan and shall be governed by its laws. AMERICAN HYDROGEN INJECTION CITY OF STERLING HEIGHTS LOCAL DISTRIBUTION COMPANY, LLC, DEVELOPMENT FINANCING a Michigan limited liability company AUTHORITY, a Michigan local development financing authority By: ______________________________ MARTHA C. THEIS By: ________________________________ Its: President Its: Chairperson And By: ________________________________ Its: Secretary J:\STERLING\LDFA (Local Development Financing Act)\Macomb OU INCubator SEE ALSO SmartZone\LEASE TERMINATION AGREEMENT.doc 10/12/2012 3