00-0542R

RESOLUTION AUTHORIZING AN AGREEMENT WITH UNITEDHEALTHCARE SERVICES, INC., FOR THE FORGIVABLE LOAN OF MINNESOTA INVESTMENT FUNDS IN THE AMOUNT OF $500,000.

BY PRESIDENT GILBERT:

RESOLVED, that the proper city officials are hereby authorized to enter into an agreement substantially in the form of that on file in the office of the city clerk as Public Document No. _________________, with UnitedHealthCare Services, Inc., for a forgivable loan of Minnesota investment funds in the amount of $500,000, payable from Fund 255.


STATEMENT OF PURPOSE: The purpose of this resolution is to request approval of a $500,000 forgivable loan by the city of Duluth to UnitedHealthCare Services, Inc.(UHS), a Minnesota corporation. The source of funding for this city loan is the Minnesota department of trade and economic development (DTED) Minnesota investment fund (MIF) grant program. As the recipient of this grant--the application for and acceptance of which the council approved on June 12, 2000--the city is now proposing to enter into a forgivable loan agreement with UHS.

Loan proceeds will be used by UHS for equipment for the new facility; collateral, therefore, shall be a lien against all equipment acquired by UHS for this new expansion. Total equipment purchased for the expansion is estimated at $2,350,810, with this MIF loan financing 21% of the equipment and UHS equity financing 79%. Loan proceeds will be provided to UHS on a reimbursement-basis, and at a rate that reflects the cost-sharing ratio of 21% city loan to 79% equity.

In order for the loan to be forgiven, job creation goals must be met by UHS. Those goals, as attested to by UHS staff in the application to the MIF program and as required in this loan agreement, state that 370 FTE jobs will be created that pay a minimum of $9.62 per hour exclusive of benefits. Further, that those jobs shall be created by June 30, 2003. If UHS fails to meet the job creation goal and wage level commitment by June 30, 2003, all or a portion of the loan will need to be repaid. The loan agreement also requires that their base employment of 655 be maintained through this same period. Further, that UHS must continue operations at this site until June 30, 2006; if they fail to do so, the loan will be payable in full.

Should all or a portion of the loan be repaid by UHS to the city, the city will retain the first $100,000 of principal plus interest; all subsequent principal and interest payments shall be returned to DTED. The rate of interest, in the case of default, is 12%, which is in excess of business subsidies law.

UHS will be required to provided job creation reports to city staff on an annual basis.