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HomeMy WebLinkAbout11.c. Captial Assistance Grants - Materials Recovery, Inc.A CITY OF ROSEMOUNT EXECUTIVE SUMNARY FOR ACTION CITY COUNCIL MEETING DATE: OCTOBER 20, 1992 AGENDA ITEM: CAPITAL ASSISTANCE GRANTS AGENDA SECTION: MATERIALS RECOVERY, INC. NEW BUSINESS PREPARED BY: STEPHAN JILK AGENDI MA #11 ATTACMMTS: APPLICATION - CAPITAL ASSISTANCE OVE BY: GRANT - MATERIALS RECOVERY,'INC. The city is currently acting as a sponsor for two Capital Assistance Grants through the funding program provided by the Metropolitan Council. These two grants are: 1. Equipment purchased by Knutson Recovery Systems when their new Materials Recovery Center was built on 160th, and 2. Equipment purchased by Materials Recovery, Inc. when they opened their operation for recycling of demolition materials. As sponsor for these grants, the city provides a channel for the funding program between the Metropolitan Council and private industry. The way the program is set up is that the Met Council provides matching funds for equipment and other capital investment items to private and local government firms for projects which will reduce the landfilling of recyclable materials. A local.government agency must sponsor a private firm. The cost to the City of Rosemount is the time spent by city staff in reviewing the application, responding to certain "sponsor" related questions and then coordinating that review process for the application, and finally providing annual reports to the Metropolitan Council on the progress of the report. Materials Recovery, Inc. is desirous of expanding their operation to include the grinding of wood pallets which are now being burned or landfilled. This capital assistance grant would provide matching funds to purchase and install the necessary equipment. If the city does sponsor the application there would be follow -up -action required by the City Council to enter into an agreement, such as the one attached for the Knutson project between the city and the Metropolitan Council and between the city and Materials Recovery, Inc. These agreements formalize the "sponsorship" relationship between the agencies and the legal aspects surrounding the fact that the city will actually hold title to the equipment through the end of the grant period being three years from the date approved by the Metropolitan Council. RECOMMENDED ACTION: Motion to approve the sponsorship of the Capital Assistance Grant for Materials Recovery, Inc. and to direct staff to continue to process the necessary application documents for Metropolitan Council and City Council approval. COUNCIL ACTION: (Third Party) Contract No. SG -90-38' CAPITAL ASSISTANCE GRANT AGREEMENT BETWEEN THE METROPOLITAN COUNCIL AND CITY OF ROSEMOUNT ON BEHALF OF K'd[nm RIIRRTCH SFRVIrM INC THIS AGREEMENT is entered into this 23rd day of February , 1990, by and between the Metropolitan Council, hereinafter referred to as the "Council," and Citv of Rosemount , hereinafter referred to as the "Grantee." WHEREAS, the Council is authorized by Minnesota Statutes section 473.844 to make project grants from the Metropolitan Landfill Abatement Fund; and WHEREAS, the Council has approved a Capital Assistance Grant Program to assist in the purchase of machinery or equipment for landfill abatement in the Metropolitan Area; and WHEREAS, the Grantee has submitted an application for a Capital Assistance Grant as project sponsor on behalf of Knutson Rubbish Services Inc. ► hereinafter referred to as the "Implementing Third Party;"and WHEREAS, the Council has reviewed the application and desires to assist the Grantee by the award of a Capital Assistance Grant; and WHEREAS, the Grantee's project concepts are -not in conflict with Dakota County's Solid Waste Management Master Plan. NOW, THEREFORE, the Council and the Grantee agree as follows: I. AUTHORIZED USE OF GRANT PROCEEDS The Grantee agrees that the work program activities will be completed in accordance with the Grantee's contract with the Implementing Third Party and as described in the Grantee's application for grant assistance, attached hereto as Appendix A and incorporated herein. The Grantee is authorized to use.the grant funds only in payment of the line item costs as Specified in Appendix B, which is attached hereto and incorporated herein. No other use of grant funds is permitted. Grant and matching funds maybe used only for the actual purchase price of ' the machinery or equirment plus freight and applicable taxes. Grant and matching funds may not be used to pay for other expenses associated with the project. ) t, -4- B. Grantee's 2eLsMnsibility. The Grantee accepts full responsibility for completion.of the project as contemplated by this agreement between the Council and the Grantee. Failure of the Implementing Third Party to perform its obligations to the Grantee shall not excuse the Grantee's obligations to the Council under this agreement. In the event of the Implementing Third Party's default, the Grantee agrees to consult with the Council to determine the best course of action to insure that the equipment or machinery is used for landfill abatement activities during the Grant Period. VI. GENERAL CONDITIONS A. Grant Period. The Grant Period shall extend from the date of final execution oT this agreement to a date three (3) years thereafter. The Council encourages the Grantee to continue to use the equipment or machinery for landfill abatement activities beyond the three year Grant Period. B. Completion of Work Program Activities. The Grantee agrees to conduct the work program activities described in Appendix A during the Grant Period. Specifically, the Grantee agrees to place the equipment or machinery acquired into use for landfill abatement purposes within three (3) months of final execution of this agreement. The Grantee further agrees to deliver to the Council, within three (3) months of final execution of this agreentnt, copies of the paid invoice(s) covering the purchase of the equipment or machinery, freight costs, and applicable taxes. C. Title. Title to the equipment or machinery shall remain with the Grantee during the Grant Period. Accordingly, the Grantee shall take reasonable measures to protect and defend its title interest and shall keep the equipment or machinery free and clear of any liens, encumbrances, or other claims. D. Risk of Loss. -The Grantee bears the risk of .loss of, damage to, or destruction of the equipment. No such loss, damage, or destruction shall relieve the Grantee of its obligations under this agreement. E. Indemnification. The Grantee assumes liability for, and agrees to indemnify, protect and hold harmless the Council from any liabilities, obligations; losses, damages, claims, injuries, penalties, costs and expenses, including reasonable attorney's fees, arising out of the manufacture, use, condition, operation or ownership of the equipment or machinery. F. Repayment of Grant Proceeds. In the event that the machinery or equipment is not used for at least three (3) years from the date of final execution of this agreement for landfill abatement activities, the Grantee shall return the Council's pro rata share of grant proceeds within thirty (30) days of the date the machinery or equipment ceases to be used for landfill abatement activities. The Council's pro rata share shall be calculated by multiplying the Council's total grant amount by the number of months the machinery or equipment was actually used for landfill abatement activities, and dividing the product by 36. -5- G. Noncompliance by Grantee. If the Council finds that there has been failure to comply with the provisions of this agreement, the Council may terminate the agreement at any time following seven days' written notice to the Grantee and upon failure of the Grantee to cure the default within the seven-day period. Nothing herein shall be construed so as to limit the Council's legal remedies'to recover grant funds. H. Unauthorized Use of Grant Proceeds. Upon a finding by Council staff that the Grantee has made an unauthorized or undocumented use of grant proceeds, and a demand for repayment, the Grantee agrees to promptly repay such amounts to the Council. I. Amendments. The terms of this agreement may be changed or modified by mutual agreement of the parties hereto. Such changes or modifications shall be effective only upon the execution of written amendments signed by authorized representatives of the Council and the Grantee. J. Equal Employment Opportunity; Affirmative Action. The Grantee agrees to comply with all applicable laws relating to nondiscrimination and affirmative action. In particular, the Grantee agrees not to discriminate against any employee, applicant for employment, or participant in this project because of race, color, religion, sex, or national origin, and further agrees to take affirmative action so that applicants and employees are treated equally with respect to all aspects of employment and compensation. The Grantee further agrees to take affirmative action to include the participation of economically disadvantaged small businesses (EDBs) in the performance of work program activities, whenever possible. R. Publications. The Grantee shall appropriately acknowledge the grant assistance made by the Council in any promotional materials, reports, and publications relating to the work program activities. IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed by their duly authorized representatives on the day and year first above written. METROPOLIT CO'JNCI By David Renz, Executive Director GRANTEE f epn Jilk Its Ci y Admini ator LN261A � V Appendix A B. Capital Assistance Grant Work Program ACTIVITY/TASK PERSON/POSITION COMPLETION TIME Final Facility CRS December 15, 1989 Design Capital Acquisition Knutson Management, February 1, 1990 CRS MPCA Solid Waste Permit CRS April 1, 1990 General Contractor- Knutson Management,' April 1,_1990 Construction Agreement CRS Equipment Procurement • CRS April 1, 19x90 • Construction Management CRS September 1, 1994 Operator Training CRS October 1, 1990 Commercial Account Knutson Management October 1, 1990 Adjustment eration Facility Op, Knutson Recycling Ongoing Manager Financial Management Knutson Financial Ongoing ' Officer Bin 1 Appendix B SECTION D. INFORMATION ABOUT PROJECT FINANCES 1. Itemize the Capital Assistance Grant budget Project budget. format provided All project spon- below. The budget sors are required must show how the to use the grant funds and cash match will be used for the pur- chase of landfill abatement machinery or equipment. Total Project LocMatch Capital Ass istance rant Budget It Cost ____a_---- Purchase. Purchase $220,473 $110,237 21,825 $110,236 21,825 ,.,Equipment Machinery Purchase43,650 , (Rolling Stock) Freight Included Above ' Applicable Taxes Included Above $264,123 $132,062 5132,061 SUBTOTAL The following llowin costs are not eligible for grant or match funds, but are part of the total project costs: Salaries/fringes Contracted Labor $125,000 Travel Expenses Printing Equip/Mach.. Rent/Lease Other project Costs (Facility Procurement) $533,347 SUBTOTAL 5658,347 TOTAL 122,47 32,062 Anticipated Project Revenues, if any 5171 000 5335 000/vr_ 17 a13L,vvi MATERIAL RECOVERY FACILITY AGREEMENT AGREEMENT made this f_7= day ofE.h���/^� 19�; by and between the CITY OF ROSEMOUNT, a Minnesota municipal corporation ("City"), and KNUTSON RUBBISH SERVICES, INC., ("Knutson"). I. Background. Knutson, with its principal place of business in Rosemount, is in the rubbish hauling and recycling business. Knutson is seeking a capital assistance grant from the Metropolitan Council to construct a material recovery facility. Knutson has requested that the City be the project sponsor in accordance with the Metropolitan Landfill Abatement Fund Capital Assistance Grant program guidelines. 2. Grant Application. Knutson and the City shall apply for a grant from the Metropolitan Council substantially in the form attached hereto as Exhibit "A". The City shall be the project sponsor for the grant. - 3. Purchase of Equipment. If the grant is approved, Knutson shall purchase the equipment listed on Table 1 of the grant application ("equipment"). To the extent that the grant- does not cover the cost of acquisition of all the equipment, Knutson shall pay the cost. The City shall be the owner of the equipment. 4. Lease. Commencing with the purchase of the equipment, the City shall lease the equipment to Knutson for a three (3) year term. Knutson shall lease the equipment "AS is,, and without r12/15/89 b ) What are the costs associated with distribution? What channeis are used by the competition and why was this channel chosen by you? Would credit affect distribution? Could you provide credit if the use of credit increased sales and profitability? Distribution costs are easily defined. They are the trucking costs and container rental costs if used, associated with delivering the product. We would have no reason to extend credit to any consumer. c) What is the budget for advertising and promotion? What are the per-unit costs for advertising? What are the industry costs for similar products, processes or services? How much would be spent for media and print copy? Advertising and promotion would be minimal. We would offer our various proctuct sizes at a reduced price for a trial basis and let the consumer decide which product would be best for his application. 6. FINANCIAL PROJECTIONS a) Sales - What additional dollar volume of sales is projected for the first tnree years? What dollar volume of sales is necessary to provide a nreak even situation? When will the break even point be reacnea? what percentage of total market sales are projected to be captured? YEAR ONE (Approximately one trailer will be filled and ready for deiivery each day.) 260 OPERATING DAYS YEAR TWO TWO LOADS/DA'I YEAR THREE THREE LOADS/DAY $ 48,000 $ 52,000 $ 55,000 TOTAL $155,000 b) Capital How much total capital is required to carry the enterprise through its early years of operation? Please specify where the funds will come from and how they will be used. How will borrowed capital be repaid? Total capital required to initiate and operate the project is $186,880. The funds will come from the Met Council Grant, Mid- America Stank, Gopher Disposal, Eagle sanitation, and the small Business Administration. Borrowed funds will be repaid out of operating revenue and avoided disposal costs. any express or implied warrantie Payment s from. the City shall be $1.00 lease Kn nutso Per year, burin . The . agrees: 9 -the term of the lease, A• The equipment s Purpose set forth in be be used exclusively the grant a y for the ' B• The a PAlication, corporate liequspmenthshall not be removed City. from the C. No liens or encumbrances shall be to the equipment.. allowed to attach Working The equipment 9 order.. shall be kept P in good repair and E• effKnutson shall obtain ' ect during the following: term of theaat full force and lease, t its sole cost, the risk') Insurance customarily against loss by fire, endorsement y covered by standard lightning, mischief I together with coverage g', and endorsement a vandalism and the full replacement • all in an amount of malicious where the equipment is°st of the aqui equipment less than located, p and building coverin is 0Covering the a general public liability o r bodily injury, deia'thlity of Knutson against insurance in or about the and propertyaOccurring claims located in the property where tedequip occurring following amounts: equipment is (i) one Million and 00 Dollars /100.($1 and for injury or death oof'one of00) Person; Two Million and Dollars for 00/1fl0 ($2,0 0fl Person; and injury or death 00'000.00) more than one (iii) Five and ($500i000.00 Thousand and 00/100 Dollars for damage t0 the premises, (iv) Two -Million and umbrella coverage ($2,000 liability, '000.00 9e of comprehensive general such. insurance .insurance companies policies shall be insured es Xnu satisfactory written on forms Parties Knutson and the ycity to casyt shall andaS with name heir interests may -2- ecifically provide that the appear. All policies shall 3o s prior written notice City shall receive thirty (30) day , such policies. before cancellation of any of its In the event of material default by Knutson as to any der the City may, at is option, rescind the obligations hereunder , the equipment, and thereafter Knutson shall not lease and reclaim- however, shall i went. Knutson, have the right to purchase the equ P st thirty (30) days advance written notice during be given at lea tson may cure the default. which period Knu 5. Purchase. At the end of the lease term, the City shall convey title to Knutson for $1.00. Cit and its 6: gold garmless. Knutson shall hold the Y es laims .made for officers, employe , and agents harmless from c stained on costs incurred resulting from the City damages su . entering into this Agreement and leasing the equipment to Knutson. Knutson shall indemnify the City and its officers, or expenses which employees, and agents for all costs, damages, e Cit may pay or incur in consequence of such claims, th Y including attorneys' fees. 7. Contingency. Before proceeding with construction of the Resource Recovery Facility, Knutson must obtain all Material Reso and other land use approvals and the like from the City necessar y permitting agencies. this g. Termination. If the grant contemplated by 1, 1990, this Agreement is not received on or before June Agreement shall be void. -3- STATE OF MINNESOTA ) ( COUNTY OF�r<.r3 ss. ) 19 The foregoing instrument was acknowledged before me-this the day of� ►n .L• 1989, by_a� of Knutson Rubbish Services, on i behalf. Nor�a»nX f A AQL ,l NO ��A NOTARY PUBLIC -5- 9. Notices. Required notices to Knutson shall be in writing, and shall be either hand delivered to Knutson, its employees or agents, or mailed to Knutson by registered mail at the following address: 15120 Chippendale Avenue, Rosemount, Minnesota 55068. Notices to the City shall be in writing and shall be either hand delivered to the City Administrator/ Clerk, or mailed to the City by registered mail in care of the City Administrator/Clerk at the following address: 2875 - 145th Street West, P.O. Box 510, Rosemount, Minnesota 55068. CITY OF ROSEMOUNT BY: Rollo Hoke, Mayor AND /e,rpt. t e 1G- -ephan Ji1-k— Administrator/Clerk KNUTSON— BXSH SERVICES,',�NC. Its- Presic ft jF t STATE OF MINNESOTA ) ( ss. COUNTY OF DAKOTA ) The foreggi instrument was acknowledged before me this b _ day of �u �_1 1989, by Rollan Hoke, Mayor, and y Stephan Jilk, Administrator/Clerk, of the City of Rosemount, a Minnesota municipal corporation, on behalf of the corporation and pursuant to authority granted by its City Council. NOT Y ROBLIC -4- (:5 �' //0 b ) What are the costs associated with distribution? What channeis are used by the competition and why was this channel chosen by you? Would credit affect distribution? Could you provide credit if the use of credit increased sales and profitability? Distribution costs are easily defined. They are the trucking costs and container rental costs if used, associated with delivering the product. We would have no reason to extend credit to any consumer. c) What is the budget for advertising and promotion? What are the per-unit costs for advertising? what are the industry costs for similar products, processes or services? How much would be spent for media and print copy? Advertising and promotion would be minimal. We would offer our various proctuct sizes at a reduced price for a trial basis and let the consumer decide which product would be best for his application. 6. FINANCIAL PROJECTIONS a) Sales - What additional dollar volume of sales is projected ror the first tnree years? What dollar volume of sales is necessary to provide a break even situation? When will the break even point be reacned? What percentage of total market sales are projected to be captured? YEAR ONE ( Approximately one trailer will be filled and ready for delivery each day.) 260 OPERATING DAYS YEAR TWO TWO LOADS/UAY YEAR THREE; THREE LOADS/DAY $ 48,000 `: $ 52,000 $ 55,000 TOTAL $155,000 b) Capital - How much total capital is required to carry the enterprise through its early years of operation? Please specify where the funds will come from and how they will be used. How will borrowed capital be repaid? Total capital required to initiate and operate the project is $186,880. The funds will come from the Met Council Grant, Mid- America Bank, Gopher Disposal, Eagle Sanitation, and the Small Business Administration. Borrowed funds will be repaid out of operating revenue and avoided disposal costs.