Committee Minutes

Minutes of Grand Forks City Council/Growth Fund
Authority (JDA) - Monday, November 20, 2006____

The city council of the city of Grand Forks sitting as the Growth Fund Authority met in the council chambers in City Hall on Monday, November 2002 006 at the hour of 7:00 p.m. with Chairman Gershman presiding. Present at roll call were Council Members Brooks, McNamara, Glassheim, Christensen, Bakken, Kreun, Gershman, Mayor Brown - 8; absent: none.

PRESENTATION BY LM GLASFIBER

Blake Seas of LM Glasfiber made a brief presentation on LM Glasfiber, about their company, that they are the leading producer of rotor blades world-wide, there are that many wind turbines throughout the world, that more than 1 in every 3 wind turbines in the world has their blade on it and that they are well positioned for manufacturing all the markets throughout the world, and improving technology to stay ahead of all the competition. He noted that the United States is the fastest growing market throughout the world, that they are in China, India, Spain, Germany, Denmark, Netherlands but biggest market now is Spain, US is #3 as far as plant capacity, will probably be #2 by the end of next year. They had $331 million in sales, that 3 blades go on one turbine, one turbine makes 1.5 megawatt, so sales last year would be about 2,000 turbines based on what they make in Grand Forks. He stated they have over 3500 employees. He noted reasons they are so busy - issues with fossil fuels, climate change going on, global warming and wind power has become very competitive in price and in many areas of the country cheaper than conventional sources of electrical energy, demand is going up at the same time and a lot of big companies involved - GE, John Deere, etc. are involved in wind energy and are becoming our customers. He noted with the development of oil prices and natural gas prices help them.

He noted their employment in Grand Forks, that last year had about 300 people working for them, and now about 500 and by the end of this year wants to be at 720 people, and after that level out for awhile; they are absorbing 25 to 50 people per week. He stated they used to have the reputation of hiring and laying off because the business was up and down, not that way any more, just growth and are here to keep things moving forward. Making major improvements to indoor air quality, want to get dust and odors out and want a very clean plant and a place where people like to work, and a place where people stay and a premier manufacturer in the region. Building control system to regulate heating and cooling, will install air conditioning in both plants next spring, major investment. Reward and recognition systems - gave two pay increases in October, gave two 5% increases. He stated their starting pay at $11.00/hour and goes up to $15.00/hour for production technicians, 3 weeks paid vacation, unpaid time off for flexible use of 40 hours per year, 80 hours of paid holidays, 401K program, and full health and dental insurance benefits.

Sales - he stated 1 megawatt can power 300 homes and could power 300,000 homes with the number of blades they will make this next year at the plant in Grand Forks. He noted they have increased plant size 50% and have gone from 150,000 sq.ft. to 225,000 sq.ft. in Phase I and now working on second phase and increasing plant size by another 20% and will be at 267,000 sq.ft. That at the beginning of this year they had 5 molds, used to make blades and takes one day to make a blade and made 5 blades a day 5 days a week, and by next year operating 8 different molds 24-7 and still not keeping up to demand. Max. blade size is 42.5 meters.

Future prospects and outlook: they are looking at growth of 15 to 20% per year and that is on the low side, that in Grand Forks saw 100% growth; globally as company grown about 40% per year.
He stated that the fiberglass business is known to be very dirty and have been told that they are one of the cleanest they have seen, still have long ways to go, continued improvements to indoor air quality; more customers and more variety in blade sizes and see where the market goes.

He thanked representatives of Grand Forks Economic Development Corp., Urban Development, Grand Forks Growth Fund (JDA), city council, employees and customers.

Council Member Kreun asked with expansion and growth if there will be period of time where blades wear out, and if they are in the market of refurbishing older farms. Mr. Seas stated so far they haven't been as life cycle or expectancy is 20 years and because the industry is so new and some of the older turbines are being retrofitted with bigger blades or being replaced with bigger turbines and doesn't believe there is an aftermarket yet, they do go out and service them. He noted they are 85% booked for next year and expect to fill that up in the next two months; that in 2008 have orders from one customer and are working on the second one and in next 3 weeks should have that completed; and are talking about 2009 and 2010 already.

APPROVE LOAN TO GRAND FORKS REGION
ECONOMIC DEVELOPMENT CORPORATION ON
BEHALF OF LM GLASFIBER

The staff report from the urban development director relating to EDA RLF Loan to the Grand Forks Region Economic Development Corporation on behalf of LM Glasfiber, with recommendation to hold a public hearing, approve a $500,000 loan to the Grand Forks Region Economic Development Corporation (EDD) on behalf of LM Glasfiber from EDA Revolving Loan Fund (RLF).

Keith Lund, Grand Forks Region Economic Development Corp., stated that LM Glasfiber is growing and managing growth in several facilities in several countries, that LM Glasfiber in Denmark recently allocated $16 million for the Grand Forks facility for capital expenditures and they are going to exceed that, the local team tried to find a way to help LM Glasfiber manage those capital expenditures and are proposing to fund $500,000 of their capital expenditures with a loan from the Economic Development Revolving Loan Fund to the EDC to fund equipment at the LM Glasfiber facility; the EDC's ownership interest in the building makes that possible and that the EDC issued a $5 million industrial revenue bond for construction of that facility, the original manufacturing plant, and also took out a $350,000 EDA loan as a supplement to construction and are proposing that the EDC secure a $500,000 loan at 4% for 40 months ($13,375/month), and 80% of that would be recovered from LM Glasfiber through lease payments by the end of their lease which is June 15, 2009, and the balance of that loan would be recaptured after they renegotiate their new lease after the initial lease term is expired.

Council Member Bakken stated that after 2009 how much do we have to pay on those building if empty, and what would be our contingency plan if we had to pay for that. Mr. Lund stated that after LM Glasfiber's lease expires in 2009 the balance of the Industrial Revenue Bond would be approx. $2.1 million and the balance on the EDA Revolving Loan Fund would be about $130,000 and the balance on the two loans for the fit-up of the Amazon.com facility will total $2 million and talking about $4.2 million. He stated that LM Glasfiber isn't going anywhere but if that happened they would seek another tenant and refinance that if necessary to lower the monthly carrying costs to make the rent more affordable, but LM Glasfiber is doing nothing but growing and anticipate that will continue in the future. He stated they have made a commitment and are looking at blade orders in 2010 and renewable energy and wind energy is going up. He stated the term of the debt remaining on those buildings will be 5 years on original building and the fit-up of the Amazon warehouse was financed rather aggressively at a 7 year amortization so there would be 4 years remaining on that and would be quite easy to refinance.

Chairman Gershman opened the public hearing, there were no comments and the public hearing was closed.

It was moved by Mayor Brown and seconded by Council Member Glassheim that the recommendation be approved. Upon roll call the following voted "aye': Council Members Brooks, McNamara, Glassheim, Christensen, Bakken, Kreun, Gershman, Mayor Brown - 8; voting "nay": none.

APPROVE CHANGE ORDERS FOR LM GLASFIBER
PHASE I EXPANSION

The staff report from the urban development director relating to LM Glasfiber Phase I Expansion change orders, with recommendation to approve the change order requests: Change Order #2 for McFarlane Sheet Metal to install air compressors, revise air/ac piping, etc. in the amount of $50,124; and Change Order #2 for Baukol Builders for HVAC foundation, etc. in the amount of $17,330.00

It was moved by Council Member Brooks and seconded by Council Member Glassheim that the recommendation be approved. Upon roll call the following voted "aye" Council Members Brooks, McNamara, Glassheim, Christensen, Bakken, Kreun, Gershman, Mayor Brown - 8; voting "nay": none.

TABLE BIDS FOR CORPORATE CENTER FIT-UP FOR
GENERAL SERVICES ADMINISTRATION

The staff report from the urban development director relating to General Services Administration (GSA) tenant fit-up, with recommendation to award contract for Corporate Center fit-up.

Council Member Brooks moved to table this matter until the November 27, 2006 meeting as need more time to consider bid tabulations. Mayor Brown seconded the motion.

Mr. Hoover reported that the bids came in over budget and they have been working with the General Services Administration and Social Security Administration to whittle that down, and that within the next several days have that cost within the approved budget, and if not will come back with alternatives to move that forward.

Upon call for the question and upon voice vote, the motion carried 8 votes affirmative.

ADJOURN

It was moved by Council Member Brooks and seconded by Mayor Brown that we adjourn. Carried 8 votes affirmative.

Respectfully submitted,


John M. Schmisek
City Auditor