HomeMy Public PortalAboutA 1989-12-13 LYNWOOD LOCAL DEVELOPMENT COMPANY .. .:.:.,.
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LYNWOOD LOCAL DEVELOPMENT COMPANY
` BOARD OF DIRECTORS � �. � .
RECEIV�
Wednesday, December 13 , 1989 ��TY OF LYNWOOD I
CITY CLERKS OFi-ICE
s:oo p.m. DEC 11 lggg
AM '
7i8i9i1�i11�12�1�2i3i4�s 6
City Council Chambers
Lynwood City Hall d� +�� �
11330 Bullis Road ;� �y� _/
Lynwood, CA. 90262 �
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BERNARD LAKE LEIGHTON HULL
SECRETARY-TREASURER PRESIDENT
CELIA ARROYO LA VONEIA STEEL
MEMBER VICE PRESIDENT -�,
HARRY PRINS M1'�;
MEMBER j
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I. OPENING CEREMONIES:
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A. CALL TO ORDER `, �
1. Flag Salute
2. Roll Call •'.°
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B. Certification of Agenda Posting
II. APPROVAL OF MINUTES - November 15, 1989
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III. ITEMS FOR CONSIDERATION ,
A. J& A EXPRESS REQUEST FOR ASSISTANCE '"-'�
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IV. STAFF ORALS �`,
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V . BOARD ORALS � � ; ;.
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VI. ADJOURNMENT — January 20, 1989 ��;
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LYNWOOD LOCAL DEVELOPMENT COMPANY
MINUTES ��+
� November 15, 1989 ,'��
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LLDC Board Members Present: Chairman Leighton Hull �'•e':
Bernard Lake
Harry Prinz
Excused: La Voneia Steele '
Absent: Celia Arroyo
City Staff Present: Vicente L. Mas, Director .
Community Development Director
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, OPENING CEREMONIES: �'f";;
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The meeting of the Lynwood Local Development Company was called '`'
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to order at 3:00 p.m. In the absence of the flag, the flag =,�
salute was waived. �;:=
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APPROVAL OF MINUTES: ,
Bernard Lake pointed out the fact that Mr. Prinz's name was
misspelled on the minutes of October 24, 1989, and with that Y
correction moved that the minutes be adopted. Seconded and ;�,;
passed.
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ITEMS FOR CONSIDERATION:
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1. Approval of Agreement for consulting services. '
Mr. Mas explained to the Board the function of the consulting �
services and how it would benefit the Board. Mr. Lake asked if
we didn't already have a contract with Economic Development y`-
Corporation (EDC), and Mr. Mas explained that we do not, but they
had been contracted in the past and we need to budget for their
services. A motion was made, seconded and passed to contract
with Economic Development Corporation for consulting services.
Mr. Hull requested a copy of the executed agreement with EDC for °�4:
his files.
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BTAFF ORALS
1. Mr. Mas explain to the Board the difficulties in getting °
another Economic Development Specialist. He stated that Mr.
Karefa-Johnson is still working with the elegibility list and �;.
conducting interviews for the position.
2. Mr. Prinz asked if anything had happend with the request from
J& A Express. Mr. Mas said Mr. Karefa-Johnson was handling this .��
matter and he would ask him to phone Mr. Hull with an update when '
he returns. �'
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3. Mr. Prinz asked about Peerless Stationers. Mr. Hull said `_"'�
Peerless is status quo at this point.
4. Mr. Mas updated the Board on his conversations with Chrome ``*,•
Nickle Plating. n��-
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ADJOURNMENT ,;?
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With no further business come before the Board, a motion was
unanimously carried to adjourn to the next regular meeting of ;y��
December 13, 1989 at 3:00 p.m. _€
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Economic Development Corporation of Los Angeles Cowzty
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221 South Figueroa Street, Suite 100
� Los Angoles, CalifoFnin 90012,
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December 7, 1989 i. �; ��; '� Jl�� �I
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Mr. Kenrick Karefa-Johnson ��-'�=`` '' �'
Redevelopment Manager �± ia,
City of Lynwood a;: E,g.;; '
City Hall
11330 Bullis Road '
Lynwood, CA 90262 �
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Dear Kenrick: ,
Enclosed please find my report on J and A Express, Inc. If you ;
have any questions about this report, give me a call.
Sincerely, �
,i'Lt,�.t-� ��P_.;. I
Lance Stevenson '�
LS/jp �
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Analysis of J and A Express Inc.'s
request for financial assistance �
From: Economic Development Corporation
of Los Angeles County
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221 S. Figueroa Street� Suite 100 '
; Los Angeles, CA 90012
213/625-7752
By: Lance Stevenson
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REVIEW OF J AND A SXPRESS
. J and A Express is formed as a corporation with six shareholders.'
Mr. Gene Johnson is the majocity shareholder with 558 of the�.
stock. Five of the six shareholders are from minority grouQs
including Mr. Johnson. These shareholders are friends and family;
members to Mr. Johnson, and other than Mr. Johnson no;
shareholders are involved in the day to day operation of the�
business.
Proposed Project
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Mr. Johnson is seeking a$20,000 loan from the City of Lynwood
through the LDC program. Roughly $18,700 of this loan amount
would be used to purchase two ovens, a Steelman Baking Oven and a
Ace Burnout Oven. The balance of the funds would be used to pay:
installation costs and to pay for the appropriate permits. Mr.,
Johnson may also apply for a$2,500 grant from the City of
Lynwood to cover additional costs and expenses associated with;
this equipment acquisition.
These ovens are an essentially aspect of Mr. Johnson's business:
electric motor repair and service. Presently, since Mr. Johnson
does not have the ovens, he is forced to farm out this aspect of;
his operations to other businesses. Mr. Johnson believes that he'
lost approximately $5,000 to $6,000 in potential revenues by�
farming out this procedure. Thus, additional revenue would have;
been available to Mr. Johnson if he had this equipment in place
last year, and additional revenue will be available in the future
once this equipment is purchased.
' Another advantage to Mr. Johnson once he has the equipment would
be the ability to appear as a more legitimate business in the
eyes of his customers. According to Mr. Johnson a substantial
number of his clients stop by his business facility, and his
operation would seem more substantial with these ovens. The'
opportunity to increase his revenues would likely result with a_
' more positive image displayed by his business.
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Management
Mr. Johnson is the manager of this operation. He has over 20
years of experience in the motor repair industry. He has,
demonstrated substantial stability since he has worked for only,
two repair companies during 23 years prior to opening his
business. He has successfully run his own business since
incorporating at the end of 1987. •
Mr. Johnson seems to have good knowledge of his industry and his.
understanding of basic business principals appears to be fairly
sound. J and A Express ia growing substantially but does not
seem to be growing faster than Mr. Johnson can handle.
Marketing
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' Mr. Johnson is responsible .for securing accounts. He is
utilizing the contacts that he developed over the years to obtain
work for his business. As he demonstrates that he is able to �
perform his services in a timely and professional manner, the '
quantity of jobs is increasing. This explains the roughly 71$ :
expected growth in the business revenues from the first fiscal '
year end to the second year end. '
J and A Express has performed services for major clients. These ,
include some of the major companies based in Los Angeles, such
as, ARCO, UNOCAL, McDOnnell Douglas, as well as, numerous cities
within Los Angeles County in addition to the County of Los ;
Angeles itself. '
Based upon our discussion, it appears that new opportunities are �
developing for J and A Express and that Mr. Johnson is pursuing �
these. For example, gas stations are being forced to upgrade
their existing underground pumps and many, if not a11,'of these
gas stations could utilize his services. At least one station
- has utilized J and A's services thus far. �
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Financial Analysis
For my analysis I had one tax return for year end 11/30/88. In�
addition, I had only one set of financial statements for nine{
months ending 8/31/89. A phone call to J and A's accountant
could not produce a more recent financial statement within my
time constraints in writing this report. The accountant did,
mention that he should be able to fax an 11 month statement to me
within the next several days. If any adverse change is observed'
once this financial statement is received, I shall be sure to
contact the City of Lynwood. �
Because this organization has been in operation for only two
years, limited historical date is available. This could be an
extremely important point. For example, the SBA will not
consider a loan to a company which has not been operating for at
least three years. Further, SBA then requires sufficient
collateral to secure the entire loan amount. In this case J and,
A Express has no collateral available to secure a loan. .
�
J and A Express is seeking a$20,000 loan at the available terms,
of seven years at 38 interest. Assuming these payments are
compounded monthly then the monthly payment for this company will'
be roughly $264. This equals an annual payment of $3,168. Mr.'
Johnson felt that he would have no problem in making payments of
$264 to the City of Lynwood.
The year end financial statement showed a gross revenue figure of
$55,587 and total operating costs of $60,727. Thus, the net,
income before taxes was <$5,140>. Once non-cash expenses were
added back to this fiqure� the income available to service debt
, would have been $1,966. With a proposed annual debt service of;
$3,168, the first year of operations did not generate sufficient�
revenues to service all of the debt.
The more recent nine month financial statement showed gross sales
to be $71,568. If these figures were continued out for the ,
remaining three months, then one would expect a year end gross
sales figure of roughly $95,000. (Mr. Johnson believes this�
figure ia going to be somewhat accurate.) Sales would then have.
increased approximately 71$ from year one to year two. Net
operating income is carried out for 12 months and is estimated at
$13�768. Taxes estimated at 25$ would result in a net income
after. tax figure of $10�326 which is in excess of the proposed
$3�168 annual debt.
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It should be noted that the SBA prefers in the analysis of a
company's financial statement that an organization demonsCrates:
adequate debt service ability for each of the three years being'
analyzed, although exceptions are made especially for companies,
with substantial growth projections. Also, another relevant
point is that J and A's rental expense increased by $324 a month
beginning September lst of this year.
Public Benefit
The SBA loan program looks for one job to be created or retained
for every $15,000 of funds loaned under its 504 loan program.,
The 502 and 7a loan programs are less rigorous, and do not have,
specific number requirements.
A recent study conducted by NADCO on behalf of CDCs involved in.
the 504 program supports the laxing of the 504 loan program to'
one job for every $35,000 of loan proceeds. The Industrial
Development Bond program is more generous. It only requires one
job c;reated or retained for every $50,000 loaned.
Mr. ,7ohnson expects to hire one full time secretary in the near
future, as well as, an additional part time employee. Currently,.
J and A Express has two full time employees plus five part time
skilled laborers who are utilized on an as needed basis.`
Additional employees are expected to be hired as J and A Express'
conti.nues to grow. Mr. Johnson expressed a willingness to work'
with the City of Lynwood to obtain these new employees.
Conclusion
Assuming J and A Express falls under the guidelines of Lynwood!s ,
LDC orogram, I believe that this loan proposal could be a good,
risk for the City. A longer track record for J and A Express
would be beneficial. However, Gene Johnson has over 20 years
experience in this field and has demonstrated substantial job�
stability. Also, the potential to hire additional employees is'
present. The City should attempt to guarantee that these new.
employees come from the City of Lynwood to further assist'
Lynwood's economic base. �
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Based upon the above, I would be inclined to support the funding.
of this loan with one major contingency. The credit reports of J
and A Express and Gene Johnson should be outstanding. In,
addition, I would give serious consideration to retaining our
organization to do an in depth consulting project to further,
guarantee the likelihood of repayment assuming this loan is�
approved.
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Econ�omic Development Corporation of Los Angeles County `"'
`C:�
� . ' - 221 South Figueroa Street, Suite 100 �
� Los Angeles, Califomia 90012 � �' � °
� (213) 625-7752 Fs�c: (213) 625-7820 � . . ..��:'.��
. . � }'A f�� .
t
December 1, 1989 ,
' -.: ,
Mr. Stephen Groasman � ":i�
Peer.less Stationers
11324 Long Beach Boulevard
Lynwood, CA 90262 '`'
,;
Dear Mr. Grossman:
+ r�
,, It is my understanding from our discussion on December 1 that +
your organization is no longer pursuing the acquisition of "
Airport Manns Office Supply, and thus, do not require financial �'�_„
assistance from the City of Lynwood at this time.
' '' ��
,':
If you need assistance in the future� do not hesitate to call the :,;-�;`
City of Lynwood or our corporation. `
`� ^�
, ,.:;..
Sincerely, ' � � � �;^�,��
. �� ��-��
Lance Stevenson
ute
LSJJP
cc: Kenrick Karefa-Johnson
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DIRECI'ORS: Cheirmen, Phillip ft. Nicholson; Cox, Costle b Nicholson • Vice Cheirman, Ro6ert E. Bush; CBC. Inc. • Secrelary & Treesureq Q Robert '� �'�
Iangslet;PodaJLongHeach•AssisleniSecrefery,GaryJ.Faw1a�:FowleAmestmenLS,Inc.�5heldonl.Ausman;ArthurAndersenbCo.•Michael�.Choppin; � �'"
� . IDMC `'�7
•s�i;
Foods,lne.•RodrlgoT.Gercie;GVDiversiJied,lnc.•JohnHe�cock;SecurilyPaciJicNationalBonk•)emesC.Henkle;CityoJLongOeach•�onelC.Hi11; ,,,,,q��
� � Sa�tlhernColiJnrniaGasCn.•WilllemT.Huslon;R'alsonlnndCompany•RobertJ.Lowe;LoweEnterprises•DennisLuna;McCulchen,Black,Verleger - .?t
� 6Shea•Wi11�omA.MacGillivrey;HughesAircrvJfCompony•�nmesP.Miscoll;BnnkoJAmerica•Eugene�.Moscarol;MoscarelAssociatns•I'atricle � `: ,C�,�•
� • Nottleship;NOrlhPaci/icConstructionManagementCo.•�er.kR.Rodmen;KennethLevenlhalbCo.•IienitoA.Sl�claic;BenilaA.SinclairbAssociates - ':�y?{'
, . •ThomnsC,W��Iff,�r.;ThclM14ilffCompnny�Inrry7ndnn;flcnmontlnveslmn.nLs•SnndrnJ.Ausmnn,SnndrnN.Dnvie,Rlcherd0lxm�.�amasHxrtl,Dxvid ''`�
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