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City of Blaine
<br /> September 19,2005
<br /> .Page 2
<br /> Current TCCCF Membership/Capital Contributions
<br /> The TCCCF current membership includes five Class A members ($200,000), seven Class B members
<br /> ($100,000-$199,999), and twelve Class C members ($50,000-$99,999). Class A members consist of Burnsville,
<br /> Eagan, Minnetonka, Oakdale and Woodbury; Class B members consist of Cottage Grove, Dakota County
<br /> Capital Fund, Hastings, Norwood Young America, Rosemount, St. Paul Park and Shoreview; Class C members
<br /> consist of Belle Blaine, Brooklyn Park, Carver County HRA, Centerville, Cologne, Coon Rapids, Jordan,
<br /> Maplewood, Newport, Richfield, St. Louis Park and Waconia. The total member capitalization available to loan
<br /> against is $2,400,000. TCCCF began its operation with $227,500 of working capital ($215,000 in the form of a
<br /> 0% loan). The revenues to support TCCCF activities include a 1.75% loan origination fee and interest earnings
<br /> on the capital reserve accounts. The TCCCF projected operating proforma indicates an estimated level of loan
<br /> activity over a three year period. This level of activity is based on an average of twenty-two loans per year
<br /> averaging $400,000 per loan. Based on these projections and the operating costs that accompany this type of
<br /> loan activity, TCCCF will attain a cash balance at the end of three years of$240,000 (July, 2008). They indicate
<br /> the working capital will be repaid beginning on October 1, 2010, in four equal annual installments. The
<br /> repayment of the working capital loans could occur earlier as determined by the TCCCF Board of Directors.
<br /> TCCCF relies solely on the origination of loans by the members to become self-sufficient. However,a majority of
<br /> the expenditures are directly related to the activity of loan origination, which provides a level of cash flow
<br /> coverage to the extent the loan activity is less than that projected.The original members of TCCCF bear risk on
<br /> the repayment of working capital. Contrary,the City of Blaine bears no risk regarding working capital sine they
<br /> would be joining TCCCF after activation of the program.
<br /> The MCCF recently achieved a level of self-sufficiency, one year ahead of projections. The working capital for
<br /> MCCF was provided directly by the Blandin Foundation in the amount of $200,000, and was not granted or
<br /> loaned from the members as is the case with the TCCCF.The MCCF currently has$207,000 of net unrestricted
<br /> assets. If the performance of the MCCF is any indication, the TCCCF should have a greater chance of self-
<br /> sufficiency since larger individual loans can be originated. Another indication of performance is that the
<br /> members themselves have committed the working capital for TCCCF,and have implied a high likelihood of loan
<br /> origination.
<br /> What should Blaine consider before deciding whether to participate in this program?
<br /> To the extent there is a need for gap financing for businesses within Blaine, or wanting to relocate/expand in
<br /> Blaine, the loans could finance acquisition, building construction, leasehold improvements, renovation, working
<br /> capital, etc.,with a minimum loan size of$50,000 and a maximum of$2,000,000. The terms of the loan will be
<br /> determined based on the collateral and will typically match the terms of the participating bank. Required
<br /> underwriting will match the secondary market's requirements,and will be typical for the commercial lending area.
<br /> There is a loan origination fee of 1.75% charged for all loans, and also a 0.5% underwriting fee charged by the
<br /> secondary lender(CRF),which can both be rolled into the financing.The TCCCF loan officer will also work with
<br /> the business to establish the most advantageous overall financing package.
<br /> Public Sector Advisors
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