DISCLAIMER

 

06-0189R


RESOLUTION AUTHORIZING WORK OUT AGREEMENT WITH SINEX AVIATION TECHNOLOGY D/B/A EMPOWERMX.

BY COUNCILOR GILBERT:

     RESOLVED, that the proper city officials are hereby authorized to enter into a work out agreement, substantially in the form of that on file in the office of the city clerk as Public Document No. ___________, with Sinex Aviation Technology, d/b/a EmpowerMX (developer), pursuant to which developer will pay a prorated portion of an amount previously loaned to developer.


STATEMENT OF PURPOSE:  Developer is a Duluth-based company which produces software that tracks task and labor data for aircraft maintenance. In 2002, the city entered into an agreement with Sinex providing a forgivable loan in the amount of $250,000 to assist Sinex in expanding and relocating its operation into the Technology Village. In exchange, developer agreed to lease property in the Technology Village and create 75 new jobs (above its baseline of 28) within 15 months of occupancy at an average hourly wage of at least $21.63, excluding benefits.


When developer accepted the financial assistance offered by the city, it projected rapid growth of its business and, accordingly, its ability to create new employment positions. While developer has grown steadily, it has done so more slowly than projected and there has been limited employment growth. The contract has been extended twice to allow for the job creation goals to be met.

Under the current agreement, developer was to have created 47 new jobs by June 30, 2005, and an additional 28 new jobs by June 30, 2006. Developer was not able to meet its June 30, 2005, job creation goals and anticipates that it will be unable to meet its June 30, 2006, job creation goals. Under the agreement, if the developer creates less than 50 new jobs, the city may demand immediate and full repayment of its loan to developer. Creation of 50 to 75 positions is a special default in which repayment of $3,334 for each job less than the 75 goal is provided for.


Developer currently employees 47 people; 42 (40 FTE) are located in the Duluth headquarters. Developer is recognized as one of the leading firms in the Duluth technology economy. Developer is an active employer of interns from UMD’s computer science department.


Developer has proposed a work out agreement in which the city agrees to take no action based on the employment-related default in the agreement. Developer will make a calculation as of December 31, 2006, of its job creation impact and will provide that information to the city on or before January 15, 2007. For each job less than the original goal of 75, developer will repay the city $3,334. The developer will repay that amount at no interest in 36 equal monthly installments beginning February 1, 2007.


Staff and administration support the work out agreement.