SUMMARY OF PROPOSED PROJECT:

NUNAVIK, LLC

Kotzebue IRA will establish a for-profit subsidiary to be known as Nunavik, LLC. The company
will run an Expanded Polystyrene (EPS) Manufacturing Plant to manufacture and sell Structural
Insulated Panels (SIP’s) for residential/commercial construction and polystyrene boards for civil
applications. Kotzebue IRA will also provide training in using SIPs for construction to Alaska
Natives from each village where the plant’s products are to be used. The project will create both
year round and permanent seasonal jobs in Kotzebue as well as a steadily growing number of
temporary seasonal jobs in other communities as the plant’s business grows. Economic
development, job creation, reduced maintenance cost, a better building material, and Tribal
revenue are the benefits that will be realized by the community as a result of this venture.

This proposal is submitted under Funding Category 2) Support for Innovative Activities. The
purpose of the proposal is to cover the costs of specialized manufacturing equipment which will
be needed to set up the plant and begin operations.

1) CAPACITY OF KOTZEBUE IRA AND

RELEVANT ORGANIZATIONAL EXPERIENCE

a) Experience in Leveraging Other Funds

The Kotzebue IRA (KIRA) is a not-for-profit organization, whose primary function is to meet the
various needs of its' tribal members, located in Kotzebue, within the Northwest Arctic Borough of
the State of Alaska (see attached map). Per your limitations on the definitions of a "rural area", we
qualify as being an area outside an identified Metropolitan Service Area and with a population not
in excess of 20,000 (see attached map).

We recently accepted the challenge of providing affordable housing opportunities to our low
income tribal families using NAHASDA funds. We have vast experience in the operating and
reporting responsibilities of various federal grant programs. These include BIA's Home
Improvement Program, which is very similar to HUD's CIAP/CGP programs, Indian Child
Welfare Act (ICWA), General Assistance, Tribal Operations, Realty, Contract Support, and also
EPA's Environmental Assistance program.

b.ii) Support for Innovative Rural Housing and Economic Development Activities
(remember to change this to b.i in other proposal)

While the KIRA Council, which consists of seven tribal members, will be charged with the
ultimate responsibility of assuring that the awarded grant is followed per the contract agreement,
the technical responsibilities will be overseen by the Executive Director of the Housing
Department. The Director, Planner, and support staff will work in conjunction with the Finance
Department to assume the task of running the necessary daily operations required to attain the
organizations' goal.

The project directors will also work closely with two consultants who have direct experience with
expanded polystyrene manufacturing plants. Both the consultants and the relevant staff are
described in detail below.

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 ASSIGNMENT OF RESPONSIBILITIES

Consultants and Partners

William S. Bobbitt, of Bobbitt’s Manufactured Structures Group in Hershey, Pennsylvania, will
serve as the chief consultant for the project. Mr. Bobbitt has been involved with the building
industry since 1965 and has worked with numerous panelized housing manufacturing companies,
including: Scholz Design Homes, Kaplan Building Systems, American Mohawk Wood
Enterprises and Global Building Systems. Mr. Bobbitt assisted in producing the Business Plan for
the plant and will work closely with Roger Nettlow of KIRA’s staff on defining Mr. Nettlow’s role
as General Manager of the Plant, developing operational pro formas, salary and wage plans, new
business development and forward planning.

Charles D. Ward is the President and CEO of WardCo, Inc., an expanded polystyrene (EPS)
manufacturing plant based in Fairbanks, Alaska, and will serve as the primary consultant during
the start-up phase of the project. Mr. Ward holds a BS in Mechanical Engineering and is working
on an MS in Engineering Management. He is registered as a State of Alaska Mechanical
Engineer and has worked as a Project Engineer for Wardco since 1986. Mr. Ward has previous
involvement in construction and start-up operations of EPS plants in Guam, Fairbanks and
Nevada.

Wardco has been involved with the planning process for this plant and will continue to be involved
as a plant layout and training consultant. Wardco will provide training in Kotzebue so that
KIRA’s manufacturing plant personnel will learn proper operation and maintenance of all
equipment on-site in addition to specialized training that they may receive later through Insulspan
Corporation.

Insulspan Corporation, of Blissfield, Michigan, will provide KIRA with a license agreement.
Insulspan’s structural insulated panels are accredited by the National Evaluation Report, No.
NER-520, which encompasses the BOCA, SBCCI, and ICBO building codes. Insulspan panels
are recognized by HUD and Insulspan is an ally in the Environmental Protection Agency’s
ENERGY STAR Homes Program. KIRA will also enroll in this program, which will help to
guarantee the home buyer they are receiving the best protection from the elements that modern
technology can offer.

In addition, Insulspan will assist KIRA with training, engineering, and technical support in the
design and construction of SIP buildings. Insulspan offers regular workshops and seminars on
SIP manufacture and construction, which will be made available to the KIRA factory workers.

KIRA Staff
Overall project management will be conducted by Peter Tarruq Schaeffer (Inupiaq), Executive
Director of Kotzebue IRA. Mr. Schaeffer has had oversight for many Federally funded projects
during his term with KIRA, including a BIA Home Improvement Program, an Indian Child
Welfare Act Block Grant and an EPA Environmental Assistance grant. Mr. Schaeffer served as a
member of the Board for KIRA from 1986 through 1989 and as Chairman from 1989 through
1997, giving him a long-term familiarity with the organization, its staff, and the importance of
project management.

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Katie Cruthers (Inupiaq), serves as Deputy Director for Kotzebue IRA. She has worked for
KIRA in various capacities since 1992 and was promoted to Deputy Director in 1998. Ms.
Cruthers has extensive experience in carrying out state and federal contracts and grants. She has
held responsibility for all aspects of project management, including developing policies and
procedures, developing program and operating budgets, training employees, setting priorities and
delegating responsibilities.

Walter Porter (Tlingit) serves as the Executive Director of Tupiq Services, Inc., KIRA's Tribally
Designated Housing Entity. Mr. Porter is responsible for the administration of the Tribe's existing
NAHASDA funds, for negotiating home and land acquisitions by the tribe and for reporting
progress to the Council. Mr. Porter has served on the Board of Tlingit & Haida Regional
Housing Authority since 1991 and has worked as a laborer and foreman for numerous
construction companies. He also served as an ANA Project Director for the Yakutat Tlingit Tribe
from 1992 through 1996.

Roger Nettlow works as Planner/Construction Manager for TSI and will fill the Plant Manager
position once the Tribe's Manufacturing Plant is completed. He holds a BS in Manufacturing
Engineering from Arizona State University and has lived and worked in Northern Alaska since
1977. Prior to this position, he has worked as a City Inspector for the City of Kotzebue and as
Maintenance Director for the Northwest Inupiat Housing Authority.

Leonora Atienza is a Certified Public Accountant and holds a BS in Business Administration with
an emphasis in Accounting from The Phillipine Women's University. Ms. Atienza serves as
Accountant for KIRA. She has worked as a Grants Accountant for the City of Kotzebue, and as
Assistant Controller for Kikiktagruk Inupiat Corporation, Kotzebue's Village Corporation.

2) NEED AND EXTENT OF PROBLEM

The community of Kotzebue has a total population of almost 3,000, with more than 75%
recognized as tribal members. There are a total of 330 Alaska Native families in Kotzebue, 25
percent of these families are classified as low income, 59 percent are living in substandard housing
and 21 percent are living in over-crowded conditions (see Attachment A).

According to the Alaska Dept. of Community & Regional Affairs, Kotzebue’s unemployment level
is at 13.1%, compared to the State's 7.2% figure for March, 1999 (see Attachment B). Our
poverty rates are similar in nature, 12.7% for Kotzebue as opposed to the state level of 7.5% (see
Attachment B). The number of tribal families on some form of state or federal assistance is at 155
as of April 1 (see Attachment C). Our school drop out rate is at approximately 10%, or twice the
state average (see Attachment D). Please note that most of the supporting documents were
attained from various State agencies either from their website or by direct contact, and are in the
format received in response to our queries.

Northwest Inupiat Housing Authority (NIHA) was responsible for accommodating the com-
munities housing needs before KIRA assumed this responsibility in 1998. NIHA’s last housing
project here in Kotzebue was in 1995, and of the forty plus families on their waiting list, only 22
units were constructed. During KIRA's recent acceptance of applications for housing assistance, a
waiting list of 19 families, with an average household size of five, was added (see Attachment E).

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Approval of this grant application, and the subsequent purchase of the manufacturing equipment,
will allow KIRA to provide permanent positions for our tribal members and to create a product
which will reduce the overall costs of constructing affordable, energy efficient housing units
within our community.

The use of the manufactured building panels should reduce the overall construction costs by 15%
to 20%. These savings are due to the ability to use the product in creating the entire shell of the
unit, i.e. roof, walls, subfloor, etc., the time it takes to wall-in a building versus conventional stick
built methods, and reduced freight costs associated with the required building materials.

The project will impact many families by lowering the cost of home purchase and the cost of
utilities payments for both new construction and remodeled units. Currently, an 80' x 100' lot in
Kotzebue costs $35,000 and the cost of an average 1,250 square foot 4 bedroom unit is
approximately $185,000. The combined cost of $210,000 is out of reach for many middle class
Native families, let alone lower income families. Using manufactured building panels will reduce
the cost of materials and shipping substantially, reducing the overall cost of such a home by
$27,750 or more.

Fuel oil in Kotzebue costs $2.75 per gallon, and it is not uncommon for even a low-income family
to spend as much as $300 to $400 per month on heating fuel. Use of manufactured panels will
help residents save over 15 percent over what they would pay to heat a new stick-built house, and
up to 50% over what many families are paying in existing substandard units. This will save
approximately $2,000 annually that can be used for other family needs.

There are already several infrastructure and development project planned for the Northwest Arctic
Borough over the next 10 years, and the plant should stimulate the construction of further
projects by delivering an advanced technological product at a competitive price to the various
private and commercial entities in our community and region. KIRA’s business plan for the plant
calls for an ever increasing range of housing related products and services as the plant’s service
area expands and the number of projects within that area grows. An eventual goal is for KIRA to
be able to offer complete turn key construction services from choosing the lot to installing the
utilities, appliances and cabinets to painting the window trim. This will make it possible to
provide a greater number of manufacturing jobs at the plant and a greater number of construction
jobs in outlying communities as business increases.

The 4-6 initial employees of the plant will receive pertinent training in a new field of industry for
the community. For those tribal members who seek employment in the construction industry, it is
our intent to combine resources with our local vocational school, Alaska Technical Center, and
provide training opportunities for them to gain the skills necessary to build houses using structural
insulated panels. Opportunities such as workshops, limited scale pilot projects, plant tours, etc.,
are just a few of the training sessions planned.

Many of the jobs associated with construction of stick-built homes require a lengthy training
process which is only obtainable in urban centers such as Anchorage or Fairbanks. Homes made
from structural insulated panels are easier to build, in addition to being better insulated, and so it
is possible for residents to obtain training in just three weeks without leaving their community.

3) SOUNDNESS OF APPROACH

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a) Description of and Rationale for Proposed Activities

The creation of an expanded polystyrene manufacturing plant in Kotzebue will be an innovative

activity for rural Alaska generally, where economic development efforts have generally focused on
the international sale of natural resources such as timber or fish. Remarkably few communities
have chosen to pursue an industry which uses local labor to fulfill local needs.

Kotzebue fits the pattern described in the Rural Housing and Economic Development Notice of
Funding Availability as a rural area which experiences in-migration due to job opportunities but
does not have sufficient housing for the new residents. This has contributed to the severe
overcrowding which now exists, and the lack of housing has also prevented many residents from
outlying villages from applying for jobs in Kotzebue which they would otherwise pursue. For
example, Maniilaq Association, the health and social service agency for the region, recently built a
new hospital in Kotzebue, creating a variety of skilled and unskilled positions. However, Inupiat
from outlying villages who have looked into the option of moving to Kotzebue to take these jobs
have been discouraged by the lack of anyplace to live. Although Maniilaq Association built
worker housing to go with the facility, so far all of this housing has gone to skilled workers from
outside of the region.

Maniilaq Association is presently planning to build 8 new clinics in the surrounding villages and
increase their housing stock in Kotzebue by 100 units. They have assured KIRA that they will
take advantage of locally available products for these projects. In 1999, KIRA began work on a
new road in Kotzebue, which will open up additional locations where new houses can be built by
Maniilaq Association and other organizations over the next several years.

b) Management Plan and Method

The program will be managed by the consultants and KIRA staff described under the section on
Assignment of Responsibilities.

Following are the activities which have been completed to date towards establishing the
manufacturing plant and the projected dates of completion for the remaining activities.

Activities

Completed Activities Date Completed

Identify Project Director (Porter):
Identify Plant Manager (Nettlow):
Feasibility Study: 11/99
Business Plan: 3/00
Identify Primary Consultant (Bobbitt): 3/00
Identify SIP licensing agency (Insulspan): 3/00

Ongoing and Future Activities Start Completion

Marketing: 10/1/99 to Continuous

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Obtain Funding: 10/1/99 to Continuous
Locate Equipment: 3/1/00 to 4/30/00
Purchase Equipment: 4/1/00 to 5/15/00
Purchase Raw Materials (year 1): 4/1/00 to 5/15/00
Ship Equipment and Raw Materials: 6/1/00 to 7/15/00
Office Setup: 6/15/00 to 7/15/00
Plant Setup: 7/15/00 to 9/1/00
Plant Startup: 9/1/00 to 9/1/00
Train Core Staff: 9/1/00 to 10/1/00
Plant Listing (ICBO): 10/1/00 to 2/1/01
Manufacture Pilot Project: 2/1/01 to 2/8/01
Train Construction Workers: 2/1/01 to 4/1/01
Pilot Project: 2/8/01 to 4/1/01
Manufacture Panels: 4/1/01 to 8/1/01
Deliver Products: 4/1/01 to 8/30/01

c) Expected Outcomes

By 2002, KIRA will require a total of 15 staff to manage the plant. This will include 9
manufacturing plant staff and 6 administrative or support personnel. Three of these positions
currently exist, the general manager, accountant, and secretary, so twelve new jobs will be created
in Kotzebue.

The project will also create at least 10 construction jobs in Kotzebue and outlying communities
during the 2001 buiding season, and this number is expected to grow over time to as many as 25
construction jobs by 2005.

KIRA products will be used for the creation of new housing, the renovation of exisiting housing,
and the construction of clinics, schools, and recreational facilities. They will also be used for civil
applications such as insulating pipes and roadways from the underlying permafrost. They will
help to create homes which cost less to purchase initially and less to heat over time, making it
possible for more families to purchase a home rather than renting. KIRA products will boost the
level of construction activity taking place throughout the region by lowering the overall costs of
projects that were previously considered financially out of reach.

Five year financial projections for the plant show a profit of $140,000 in 2001 and over $200,000
each year beginning in 2002 (see Attachment ?). These profits will help reduce Kotzebue IRA's
dependency on federal and state monies and may be used for other social and economic needs of
the tribe.

d) Coordination and Cost-Efficiency

KIRA intends to convert an existing structure into the needed manufacturing plant. This will be
done by partnering with either NANA Corporation or Kikiktagruk Inupiat Corporation (KIC), as
both companies own buildings which would be appropriate for the purpose and are currently
vacant.

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KIRA is seeking to establish a Limited Liability Company in which the building value will
represent NANA or KIC’s investment in the project, providing them with equity interest in the
company. The financial projections in the Business Plan indicate that by reducing the up-front
costs in this fashion, it will be possible for KIRA to pay off bank financing within the first five
years of operations. After all loan payments are taken care of, KIRA will develop a plan for KIRA
to buy out the partner’s equity, obtaining sole ownership of the manufacturing plant no later than
2010.

e) Budget and Cost Estimates (talk about where the #’s come from, remember, this is
different from one grant to the other)

Estimates for the cost of manufacturing plant equipment are based on advice from both Charles
Ward of Wardco, Inc. and William Bobbitt of Bobbitt Manufacturing, Inc., both of whom are
familiar with start-up costs for similar plants in a variety of locations.

Detailed budget information is provided on the appropriate HUD forms.

f) Program Evaluation

Mr. Walter Porter, KIRA’s Housing Program Director, and Ms. Leonora Atienza, KIRA’s Grants
Accountant, will share the responsibility for tracking information that will be used to evaluate this
project. Both of these individuals have experience in grants management, including grants from
the Administration for Native Americans and HUD’s NAHASDA program.

Ms. Atienza will be responsible for creating a database of KIRA’s clients and trainees. This
database will be updated regularly with information on client satisfaction and trainee job
opportunities. Project success will be measured by the financial stability of the company in 2003,
the third year of full operations. Success will also be measured by the ability of construction
workers who have learned to use KIRA products to find work using these skills each construction
season.

g) Equal Opportunity Housing

20 percent of the Native families in Kotzebue are elderly, and an additional 34 percent are near
elderly (see Attachment A). Many Elders are subjected to the substandard housing and
overcrowded conditions prevalent in Kotzebue. This project will ease their burden by making it
possible for children and grandchildren to purchase homes of their own nearby.

KIRA’s housing department is currently using NAHASDA funds to provide weatherization,

renovation, and additions for existing homes to improve energy efficiency and better
accommodate large families. In the future, KIRA will seek additional funds to continue this work
making use of structural insulated panels from the manufacturing plant as a part of these efforts.

In addition, KIRA has entered into discussions with Cordes Development in regards to the
possible establishment of a residence for Seniors and Disabled individuals in Kotzebue.

4) COMPREHENSIVENESS AND COORDINATION

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 Kotzebue is located 30 miles above the Arctic Circle on the Baldwin Peninsula and serves
as the transportation and economic center for Northwest Alaska. The Northwest Arctic Borough
is one of the most culturally and economically unified regions in Alaska. The Borough population
of 6,844 is 87 percent Native American, comprised mostly of Inupiat whose ancestors have lived
in the area for thousands of years. Nearly half of the Borough's population lives in Kotzebue,
with the other half living in the villages of Ambler, Buckland, Deering, Kiana, Kivalina, Kobuk,
Kotzebue, Noatak, Noorvik, Selawik and Shungnak.

These 11 communities share close cultural ties and belong to the same regional service
organizations for a variety of purposes. These organizations include the Northwest Arctic Native
Association (NANA), the Northwest Inupiat Housing Authority, the Northwest Arctic Borough
School District, and Maniilaq Association, a health and social service provider. Because these
agencies all serve the same small population, there is frequent communication amongst them and
they are able to work on a variety of projects in an atmosphere of mutual support.

The proposed Expanded Polystyrene Manufacturing Plant is one such project. The
Kotzebue IRA intends to have a positive economic impact on the entire Borough through this
project and has received strong indications of support from regional organizations in the Borough.
Several of these organizations are planning construction projects over the next five years and have
expressed their support for the Tribe's plan. Maniilaq Association and the Northwest Inupiat
Housing Authority have both written letters of support stating that they would like to use the
Tribe's products in their future construction plans as a way to enhance local employment and
profits.

The project is strongly supported both by NANA Regional Corporation, a for-profit

corporation representing the Native population of the entire Northwest Arctic Borough, and
Kikiktagruk Inupiat Corporation, which represents Kotzebue. KIRA is currently negotiating with
both of these entities to form a Limited Liability Company (LLC) and carry out this project in an
equity-based partnership with one or both serving as contributing partners. Their support of our
project is evidenced by the attached letters of support, as well as those from the offices of the City
of Kotzebue and the Northwest Arctic Borough.