Local Development Finance Authority

CITY OF STERLING HEIGHTS Special Meeting of the LOCAL DEVELOPMENT FINANCE AUTHORITY 40555 UTICA ROAD 586-884-9322 CITY COUNCIL CHAMBERS October 22, 2014 8:45 AM MEETING CALLED TO ORDER PLEDGE OF ALLEGIANCE ROLL CALL APPROVAL OF AGENDA APPROVAL OF MINUTES OF May 27, 2014 Special Meeting NEW BUSINESS 1. To approve the Lease Agreement between Bleeding Edge Networks, LLC, dba Privicee and the Local Development Finance Authority (LDFA). 2. To approve the Lease Agreement between The United States Small Business Association and the Local Development Finance Authority (LDFA). 3. To approve the amendment of the 2014/2015 fiscal year budget; additionally to approve the transfer of $50,000 from the Microloan Program to Oakland University for operating expenses; additionally to approve the Formal Budget amendments for these transfers between Oakland University and the Local Development Financing Authority (LDFA). OLD BUSINESS BOARD MEMBERS REPORT PUBLIC COMMENT ADJOURNMENT  CITY OF STERLING HEIGHTS LOCAL DEVELOPMENT FINANCE AUTHORITY Draft MINUTES OF THE REGULAR MEETING May 27, 2014 – 8:30 a.m. 40555 Utica Road, Sterling Heights, MI 48313 586-446-2489 City Council Chambers Phil Hunsberger called the meeting to order at 8:36 a.m. Pledge of Allegiance Members present at roll call: Lori Doughty, Stephanie Eagen, Phillip Hunsberger, Richard Kincaid, John Lamerato, John Lettang, Victor Martin, Jill Tomyn Members absent: Stephen Cassin, David Corba, Paula Sorrell, Orest Zachary Also in attendance: Barry Hicks, Economic Development Manager, Jennifer Varney, Treasurer, City of Sterling Heights Motion to Approve the Agenda Moved by Hunsberger, supported by Lettang, to approve the agenda as presented. Ayes: All Nays: None Motion carried. Motion to Approve the Minutes of March 19, 2014 Regular Meeting Moved by Lamerato, supported by Kincaid, to approve the minutes as presented. Ayes: All Nays: None Motion carried. New Business To adopt the 2014/2015 Fiscal Year Budget for the operation of the Local Development Finance Authority (LDFA). Mr. Corba inquired with the rental income going to OU, what is the offset for the city? Mr. Hicks stated that when the incubator was first started many assumptions were made as far as operating expenses. Initially when the incubator opened operating expenses were going to be covered by rental income. As one of the three partners, with OU and the county, we are fulfilling our financial obligation by giving OU the rent and $50,000 from the MicroLoan program. There will be contributions coming from the other partners as well. We are now starting to see some tax increment financing coming from the Chrysler project now that it is complete. We will gain revenue from that source where we never have before so that is filling in the gaps for us. Mr. Lamerato inquired as to who is actually collecting the rent. Mr. Hicks stated that the city will collect the rent. However, there is an agreement being worked out between the legal councils of the university and the city where Oakland will collect the rent directly. Mr. Lamerato inquired that the proposed revenues total $628,600 for 2014/15. Mr. Hicks confirmed this amount noting that $128,000 is revenue captured for the BAE project that will be passed along to BAE for the completion of their project. We are looking at $500,000 in smartzone capture for operating expenses. This amount includes the $50,000 that we are giving OU from the Micro Loan program and the remaining $450,000 is what we are using for operating expenses, building maintenance and salaries. Mr. Lettang pointed out that we are showing $691,000 in expenditures. Mr. Hicks stated that the $250,000 in miscellaneous capital programs would be diving into some of our savings to redo the parking lot but stated that there is discussion to hold off on that and just do some more patch depending how pricing comes in. Therefore, we may not get up to that $691,000. Mr. Corba asked where does it come from if the expenses exceed the revenue. Mr. Hicks stated that you have a small portion of additional revenue put aside every year and saved for this kind of thing. It is not in the worksheets in front of you. I think it was at the last meeting and shows the fund balance that is remaining for the LDFA. If we go with this budget, I think you have $150,000 in your fund balance and this would go down to $75,000 so that is what the debate is over doing the parking lot. Mr. Kincaid confirmed that the city is collecting the rent but how will we generate revenue. Mr. Hicks said through the tax increment financing with the Chrysler facility we will actually capture over $500,000 in incremental income and we are capped at $500,000 but you will receive that full amount the next fiscal year. Mr. Kincaid said we are living off this Chrysler funding and what if that goes away. Mr. Hicks said there will probably be as much every year. Something is going on and I don’t know the details of it, but Chrysler is challenging what their tax rate is on that facility. If that goes through, we may lose a little of the revenue but I don’t know how much right now. It would depend on what the rate gets set at. If we get any other projects in the future that would be eligible for smartzone activity, I would recommend passing a plan that would allow for additional income to cover when things like the Chrysler plan goes offline. Mr. Kincaid inquired if we have looked into Macomb County to provide some of the services OU provides. Mr. Hicks stated that OU’s role in the partnership is to provide services to the tenants, recruiting, and assistance with grant funding, and the coordination of events. The revenues and Micro Loan transfer are the city’s contribution but there will be additional contributions by the university and Macomb County to support some of those operating expenses. Mr. Lamerato inquired that the county is not reflected in these financials. Mr. Hicks confirmed that it is not and he does not have the county’s budget and what their support is going to be. Mr. Lamerato asked that the county’s contribution is not coming in at all at this time. Mr. Hicks stated not to his knowledge and he does not know what the county’s support will be for the facility but their interest is still there. The economic development corporation has moved some of the defense center to our facility and those expenses for office space are going to be picked up by the county. Mr. Lamerato asked that the $128,000 for property tax is being transferred to BAE. Mr. Hicks confirmed the miscellaneous expense of the $128,000 being transferred to BAE. Mr. Lamerato stated this is not a balanced budget with close to $800,000 in expenditures. Mr. Hicks stated the expenditures are higher than the revenues due to the parking lot issues. We would be going into the fund balance and there would be additional expenditures beyond the $500,000 and I am excluding the $128,000 because it is just a pass through to BAE. Mr. Lamerato stated there should be a line item showing transfer. Mr. Corba stated that it makes sense but could the statements be revised to reflect these changes. Mr. Hicks suggested a fund balance worksheet. Mr. Corba said a fund balance worksheet would be acceptable so the numbers would be there and consolidated. Mr. Lamerato stated that this budget we are reviewing today is going to be amended because the $250,000 is in discussion to be cut back so this is not the final budget. Mr. Hicks stated the $250,000 is our best estimate and is a little high with a cushion for part of the parking lot that needs to be done. The question is do we dip into the fund balance to make the parking lot repairs. Mr. Lamerato stated that our expenses go up as rentals increase to capacity. Mr. Hicks stated that the building is at 91% capacity right now. Mr. Hunsberger stated a proposal to amend showing a transfer line item from savings. Mr. Hicks stated it sounds like the board would like to see the fund balance and a worksheet showing what this budget does to the fund balance. Mr. Lettang stated it would be beneficial to see the balance sheet. Mr. Hicks stated the key component missing is the fund balance. If that were there, it may make more sense. Mr. Corba asked if they will ever see the whole picture, not just the city portion, but the county and OU as well. Mr. Hicks stated he could probably provide that but he needs the cooperation of the partners to provide that. Mr. Hunsberger stated we have the rent piece since it is collected by the city. Mr. Hicks stated that the rent is reflected in here and the rent revenue for next year is zero and it is not included at all in next year’s budget. Moved by Lettang, supported by Kincaid to adopt the 2014/2015 Fiscal Year Budget for the operation of the Local Development Finance Authority (LDFA) Ayes: All Nays: None Motion carried. To approve the Lease Agreement between LogiCoul Solutions, LLC, and the Local Development Finance Authority (LDFA). Moved by Lettang, supported by Kincaid to approve the Lease Agreement between LogiCoul Solutions, LLC and the Local Development Finance Authority (LDFA) Ayes: All Nays: None Motion carried. To approve the Lease Agreement between Mango Tree Capital, LLC, and the Local Development Finance Authority (LDFA). Mr. Hunsberger inquired as to why Mango Tree is renewing their lease with a month-to-month clause. Ms. Quell stated that they are expanding to offices outside of Michigan and still would like to keep a base here in Michigan at the incubator. They are in discussion with OU about the possibility of sharing space with an existing tenant. Mr. Corba asked if Mango Tree provides any financial services to other tenants of the building. Ms. Quell stated she is not aware as to whether they work with any of the tenants. Mr. Hunsberger asked if they do any of the presentations. Ms. Quell stated that they do not and the incubator has executives in residence that give many of the presentations. Mr. Hunsberger asked if we have put any money toward facility renovations for this tenant. Ms. Quell stated that we have not. Moved by Kincaid, supported by Lettang to approve the Lease Agreement between Mango Tree Capital, LLC and the Local Development Finance Authority (LDFA) Ayes: All Nays: None Motion carried. To enter into an agreement for facilities maintenance of the Velocity Center located at 6633 Eighteen Mile Road in Sterling Heights, MI, between TJW Services, LLC and the Local Development Finance Authority (LDFA). Mr. Hicks stated that it is long overdue to have a maintenance person for the building. Tim Wosik, the owner and operator of TJW Services, LLC, is a former city employee. Mr. Hunsberger asked if this is in the budget. Mr. Hicks stated yes it is. Mr. Hunsberger stated the position is for $1500 bi-weekly. Mr. Hicks confirmed that yes; the amount is not to exceed $1500 bi-weekly. Mr. Corba asked if the position was competitively bid. Mr. Hicks stated yes and that one other proposal came in at twice as much money. Moved by Corba, supported by Kincaid to enter into an agreement for facilities maintenance of the Velocity Center located at 6633 Eighteen Mile Road in Sterling Heights, MI, between TJW Services, LLC and the Local Development Finance Authority (LDFA). Ayes: All Nays: None Motion carried. To approve the amendment of the 2013/2014 fiscal year budget; additionally to approve the transfer of rent revenue collected from January 1, 2014 and to transfer $50,000 from the Microloan Program to Oakland University for operating expenses; additionally to approve the Formal Budget amendments for these transfers between Oakland University and the Local Development Finance Authority (LDFA). Mr. Hicks stated that this is the official motion to transfer rent revenues collected since January 1, 2014 through no expiration date and then to transfer from your current budget the $50,000 from the Micro Loan Program. These transfers will go to Oakland University for operating expenses. Mr. Hunsberger asked if the Micro Loan is funds that have gone out and come back. Mr. Hicks stated this started before his time. Initially an action was taken at some point in time where the LDFA had decided to establish a Micro Loan program managed by Oakland University where you would give small loans out to businesses in the incubator and small businesses in the community. That never came to fruition and probably won’t. It is one of those things that was an idea someone had and has not been seen through. Mr. Hunsberger asked who came up with the initial $50,000. Mr. Hicks stated that the $50,000 is part of the LDFA original budget, part of the $500,000 from smart zone capture. Mr. Hunsberger stated that the $50,000 is city revenues and we are giving it over to Oakland University. Mr. Hicks stated that is correct, it is for operating expenses along with the rent money. All said and done, on an annual basis, next fiscal year, if the building gets filled up, about $140,000 will be transferred to OU. Mr. Hunsberger asked if the $50,000 is a one-time transfer. Mr. Hicks stated that the $50,000 is one- time and for this fiscal year. The same thing will happen next fiscal year. We budgeted for a Micro Loan program because none of these details had been worked out before that budget went to council. It’s clear now that we will transfer the $50,000 on next year’s budget over to Oakland and probably do that in subsequent years although we haven’t talked beyond 2014/2015. Mr. Lettang asked if Oakland would receive $140,000 annually. Mr. Hicks confirmed that, yes, it is $140,000 and this year is closer to $100,000 because they are not receiving all the rent. They are only receiving from January 1, 2014 forward to the end of the fiscal year, which is June 30, 2014. Mr. Corba stated he would like to get greater detail as to Oakland University’s expenses. Moved by Lettang, supported by Corba to approve the amendment of the 2013/2014 fiscal year budget; additionally to approve the transfer of rent revenue collected from January 1, 2014 and to transfer $50,000 from the Microloan Program to Oakland University for operating expenses; additionally to approve the Formal Budget amendments for these transfers between Oakland University and the Local Development Finance Authority (LDFA). Ayes: All Nays: None Motion carried. Old Business None Board Members Report None Public Comment None Adjournment Moved by Lettang, supported by Kincaid to adjourn. Ayes: All Nays: None Motion carried. The meeting adjourned at 9:14 am KQ  LDFA Business Sterling Heights, Michigan 10/22/14 AGENDA STATEMENT OMB AS03 Rev. 11/04 Item Title: To approve the Lease Agreement between Bleeding Edge Networks, LLC dba Privicee and the Local Development Finance Authority (LDFA) Submitted By: Barry Hicks, Economic Development Manager 586-884-9327 Executive Summary Attached for LDFA review is a November 1, 2014 to October 31, 2015 lease agreement between Leading Edge Networks, LLC dba Privicee and the LDFA. Bleeding Edge Networks, LLC has signed the standard lease agreement for space #3-I in section 3 of the building containing approximately 833 square feet of space. Monthly rent will be $694.00. . Suggested Action: MOVED BY: SECONDED BY: RESOLVED: to approve the Lease Agreement between Bleeding Edge Networks, LLC, and the Local Development Finance Authority (LDFA)  LDFA Business Sterling Heights, Michigan 10/22/14 AGENDA STATEMENT OMB AS03 Rev. 11/04 Item Title: To approve the Lease Agreement between The United States Small Business Association and the Local Development Finance Authority (LDFA) Submitted By: Barry Hicks, Economic Development Manager 586-884-9327 Executive Summary Attached for LDFA review is a October 16, 2014 to November 24, 2014 lease agreement between The United States Small Business Association and the LDFA. The United States Small Business Association has signed the standard lease agreement for space #3-C in section 3 of the building containing approximately 652 square feet of space. Monthly rent will be $0. The United States Small Business Association will open a temporary new office in the Velocity building to serve businesses and homeowners affected by the recent flood disaster. This office will allow individuals to come in person and talk about their claim with someone from the Federal government. The Velocity office will service claimants Monday – Friday from 8:30 am – 5:00 pm through November 24, 2014. . Suggested Action: MOVED BY: SECONDED BY: RESOLVED: to approve the Lease Agreement between The United States Small Business Association and the Local Development Finance Authority (LDFA)  LDFA Business Sterling Heights, Michigan 10/22/14 AGENDA STATEMENT OMB AS03 Rev. 11/04 Item Title: Motion to approve the amendment of the 2014/2015 fiscal year LDFA budget to transfer $50,000 from the existing Micro Loan Account to Oakland University for operating expenses at the Macomb OU INCubator and to approve Formal Budget Amendments for the above transfer as related to building expenses and incubator operation in compliance with the agreement between the Local Development Financing Authority (LDFA) and Oakland University. Submitted By: Barry Hicks, Economic Development Manager 586-884-9327 Executive Summary To honor the original agreement between the Local Development Finance Authority (LDFA), the City of Sterling Heights, and Oakland University, $50,000 that was earmarked for Oakland University operating expenses, and is currently in an existing Micro Loan Account will be transferred to Oakland University. Formal budget amendments will occur for the aforementioned transfer. Suggested Action: MOVED BY: SECONDED BY: RESOLVED: to approve the amendment of the 2014/2015 fiscal year LDFA budget; additionally to approve the transfer of $50,000 from the Microloan Program to Oakland University for operating expenses; additionally to approve the Formal Budget Amendments for this transfer between Oakland University and the Local Development Financing Authority (LDFA).