01-0110R

RESOLUTION SUPPORTING APPLICATION OF NORTH STAR MACHINE AND TOOL, INC., FOR A STATE CHALLENGE GRANT.

BY COUNCILOR GILBERT:

        WHEREAS, pursuant to the Rural Development Act, local units of government are required to issue a sponsoring resolution on behalf of the business requesting financing through the Northland Foundation; and

        WHEREAS, the city of Duluth has received a request to issue a resolution on behalf of North Star Machine and Tool, Inc.; and

        WHEREAS, it is consistent with the purpose of this governing unit to encourage employment and increase tax base.

        NOW, THEREFORE, BE IT RESOLVED, that the city of Duluth supports this application for funding on behalf of North Star Machine and Tool, Inc.


STATEMENT OF PURPOSE:  The purpose of this resolution is to support the application of Northstar Machine and Tool Company, Inc., for a state challenge grant through the Northland Foundation in the amount of $50,000.

Northstar is a full service machine shop that specializes in OEM precision contract manufacturing of aluminum components and is able to work to extremely close tolerances and quality standards. The largest customer of Northstar is Cirrus, which accounts for over 75% of all company sales. In 2001, the company will begin supplying crew seats to cirrus and is expected to emerge as the sole supplier of these seats. Together with the machine parts and seats, Northstar expects record-breaking growth over the next several years.

Northstar doubled its sales in the year 2000 over the previous year and expects to triple its sales in 2001 over that recorded in 2000. This large sales expansion of the company will require additional equipment and working capital; thus, Northstar is requesting a $150,000 loan package that consists of a $100,000 working capital loan from a local bank and a $50,000 equipment loan from the Northland Foundation. Northstar has also received a $30,000 grant commitment from the city of Duluth's community job partnership program (community development division -- CDBG) for the purchase of additional equipment; the grant is linked to the hiring of low-income workers.

President of the company is John Eagleton; majority stockholder is Robert Mars, Jr. Northland's loan will be secured with a first position in the equipment and will have the personal guaranty of Mr. Mars; they will also have a subordinated position to inventory and receivables.

With their expansion, Northstar expects to add 5 new employees in 2001 and six new employees in 2002. Base wages for the new positions range from $9 - $14 per hour plus benefits.