01-0677R

RESOLUTION SUPPORTING APPLICATION OF METAL SERVICE, INC., FOR A STATE CHALLENGE GRANT.

BY COUNCILOR STENBERG:

        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 Metal Service, 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 Metal Service, Inc.



STATEMENT OF PURPOSE:  The purpose of this resolution is to support the application of Metal Service, Inc., for a state challenge grant through the Northland Foundation in the amount of $120,000.

Metal Service, Inc., is owned by Gayle McEnroe, a Native American woman who started the company in 1988 in St. Paul as a wholesale metals distributor. The company moved to Duluth in December 1999 and temporarily located in the former Clyde Iron facility. The company has expanded from metals distribution to providing metal fabrication and mechanical and welded subassembly. Currently, more than half of the company's revenues come from making 8-ton wheel assemblies for high speed rail cars. Ms. McEnroe is working to diversify the company's product line with the equipment manufacturing and construction industries--and leveraging her company's status as a minority/female owned business in obtaining work associated with government-funded projects.

As noted, Metal Service, Inc., located in one of the former Clyde Iron buildings until such time as they could find a building with a 10-ton overhead crane. The company's goal was to purchase its own building and such a facility has now been found that will meet the company's operating needs while also significantly reducing overall occupancy costs. The new building, previously occupied by Eastern Electric Corporation, is located at 9320 Grand Avenue in the Smithville/Morgan Park area and has adequate land for future expansion.

Metal Service, Inc., is assembling two simultaneous financing packages: the first is a $300,000 package for the building/land acquisition plus some equipment. This includes the proposed Northland Foundation loan ($120,000), a $150,000 bank loan plus owner's equity. Collateral includes the real estate mortgage, equipment liens and McEnroe's personal guaranty. The second package is an SBA working capital loan.

Metal Service, Inc., currently has eight employees and anticipates hiring an additional ten employees in the next two years. Wages are in excess of living wage requirements for positions that include clerical, assembly, fabricators and welders. It should be noted that Ms. McEnroe has an established track record, both in the cities and in Duluth, of hiring low to moderate-income individuals.