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HomeMy WebLinkAboutCity Council Committees - Economic Development Corporation - 06/01/1984 (3) CITY OF KENT ECONOMIC DEVELOPMENT CORPORATION MEETING June 1 , 1984 The regular meeting of the City of Kent Economic Development Corporation was called to order at 8:00 a.m. on Friday, June 1 by Chairman Leahy. Present: Councilmember Tim Leahy, Chairman of the Board Councilmember Tom Bailey, Board Member Councilmember Berne Biteman, Board Member Michael Miller, Vice Chairman Leo Powers, Board Member Finance Director McCarthy, Treasurer City Administrator, Richard Cushing Steve DiJulio, General Counsel George Mack, Roberts & Shefelman, Bond Counsel City Clerk Marie Jensen, Secretary Biteman moved to approve the minutes of the last regular meeting held on February 3, 1984. Bailey seconded, motion carried. Chairman Leahy noted that the Economic Development Corporation had received an application from H & H Company, a Washington Partnership and its Lessee, Continental Mills Inc. , a Washington Corporation. He introduced John M. Heily, President and Chief Executive Officer of H & H Company and Robert W. Dye, Vice-President of Finance for Continental Mills Inc. Leahy noted that this was the first application to be received. George Mack stated that the application appeared to qualify under State law and that financing under Federal law would be classified as an exempt small issue. Mack prepared a resolution which he described as the first official action. He pointed out that Treasury regulations require that in order for interest on industrial revenue bonds to be exempt from federal income tax, the Issuer must adopt a bond resolution or take some other similar official action prior to the commencement of construction or the acquisition of the project to be financed with the proceeds of such bonds. He noted that one of the purposes of this resolution is to satisfy the requirements of such regulations. He stated that the resolution recognizes the applicant and its lessee, Continental Mills, will, by this project, contribute to the economy of the city and the state and further, that the resolution states that the public corporation will finance this project in an amount not to exceed $1 ,200,000 and that the money from the bond proceeds will be used to assist in financing the construction and acquisition of the project. The bonds will be paid solely from the revenue of the project. Mack explained that: (A) The Issuer (the City of Kent Economic Development Corporation) , the Company and the purchaser of the bonds shall have first agreed to mutually acceptable terms for the bonds and for the sale and delivery thereof and mutually acceptable terms and conditions of the loan or other agreement for the project; (B) All governmental approvals and certifications and findings required by the Act and other laws applicable to the bonds first shall have been obtained. He pointed Econo is Corporation Minutes • June , 1984 Page 2 out that these included approval by the State Department of Commerce and Economic Development that the project qualifies under State law and later approval by the City Council as the planning authority and that the City legislative body approves the financing of the project; and (C) The Company shall have agreed to reimburse the Issuer for all fees and costs incurred by the Issuer in connection with the financing of the project. This resolution is intended to constitute "some other similar official action" toward the issuance of bonds under the Treasury regulations. Mack pointed out that an exhibit to the resolution shows the proposed project to be for the construction of 32,000 to 42,000 square feet of warehouse space at 7851 S. 192nd at an estimated cost of $1 ,200,000. John Heily explained that H & H Company was basically a flour mix manufacturing company best known for the brand name Krusteaz. The firm has five divisions, four of which are in the Seattle area. He noted that one of the things this project might do is to bring a packaging operation from Chicago to Seattle along with the proposed warehouse. He stated that his firm was probably the most modern, automated flour mix manufacturing facility in the business. Bob Dye noted that the Company supplies products to the government through bids and that the Company has been growing, doubling on the . average of every four to five years. It was determined that the proposed expansion would be at the existing site located on S. 192nd in Kent. Heily explained the five divisions as follows: 1 . Retail Division which is Krusteaz products and primarily cakes and frostings distributed mostly in the Western states. Retail products for the grocery stores include Fisher products. 2. Food Service Division - distributed also in the Western states but now opening a market in the mid-West for restaurants, schools, etc. Private label products and specialty products are included in this division. 3. Beverage Division - consisting of Alpine Spiced Cider, a powdered mix packaged in Ghicago which division they would like to bring to the Seattle area. 4. Industrial Division - this is a new division created within the past year and consists of shortening sold to others for their own use and for resale. The Company is looking toward manufacturing breading mix such as is used in restaurants. 5. The Company is one of the largest producers of Fisher products and this is supplied to troops all over the world. Heily noted that the Company is growing swiftly, has about 120 employees and is competing with the largest food industry companies. Upon questions, he noted that the home base of operations was the Kent plant and the Chicago operation is only for the cider mix business. He stated that the Company hopes to be able to move this packaging operation to Kent after the expansion and that this would create more jobs for local people. Upon Miller's question Econo is Corporation Minutes • June 7, 1984 Page 3 Heily noted that the Company was working with Burlington Northern Railroad to acquire 2 to 4 additional acres. He clarified for Cushing that the size of the Kent operation was 130,000 square feet, outside dimensions and 115,000 square feet internally. McCarthy noted that he had received and reviewed the Company' s financial statement. Mack clarified that the Corporation should be satisfied that the bonds will be secure. DiJulio noted he had distributed copies of a letter from Rainier Bank. Dye explained that the government contracts were secured by bids and that this was a large operation. Heily explained the ownership of H & H Company as a family business with he and his sister as principal stockholders. Bailey moved to adopt Resolution 1984-6 prepared by George Mack entitled "A Resolution of the City of Kent Economic Development Corporation determining to sell bonds to provide funds to finance an industrial development facility for H & H Company and its lessee, Continental Mills, Inc. within the City of Kent and determining related matters. " Biteman seconded and the motion carried. (Page 5 of the Resolution was changed to reflect that this meeting was a regular meeting of the Corporation and not a special meeting. ) Mack described the next step as submitting the proper form to the State Department of Commerce and Economic Development, noting that his office would prepare the application. The State then must react within twelve days as to compliance with State requirements. H & H Company could proceed during this twelve day period and in the event that the State did not approve, they could then seek financing through conventional channels. Mack pointed out that the Rostenkowski Bill also known as the Dole Bill , proposes amendments to the Internal Revenue Code, Section 103. He described these as some kind of ceiling (CAP) on small issues of IRBs. The House version of the CAP is $150 per capita, which would be 600 million dollars in this State. He noted that efforts to date would indicate we would not come close to that CAP. Mack pointed out, however, that if electrical utilities or LID financing were interpreted as IRBs, the State could be in trouble regarding the CAP. He noted that his office recommends that a priority be given to public projects operated by public entities and he pointed out that there had been only a low number of private project applications for IRBs. He therefore did not foresee a problem with the CAP for 1984. Mack note that his office would be working with H & H and their counsel on construction financing and pointed out that the Senate version of the Tax Bill provided that any arbitrage profits would be "rebated to the Federal government." He stated that this means that if the borrowing occurs before the construction is complete and if the Company invests the money before construction, there will have to be some accounting and setting aside of the arbitrage profit. The effective date of the CAP is January 1, 1984. Mack noted that he would work with the Company and the lender and pointed out for • McCarthy that the City of Kent Economic Development Corporation is the Issuer and he, as the City's counsel will protect the City and the Corporation. He Economic Corporation Minutes • June x, 1984 Page 4 pointed out that Rainier Bank is local and known to the City and that the bonds will be secured by note and contract from H & H Company and also by some kind of assignment lease which will be recorded and which this Corporation will approve. A trustee will probably be arranged under which H & H would pay the trustee and the trustee, in turn, pays Rainier and also pays the contractor. Upon Biteman's question about time, Mack noted that this could be approved as soon as one month or six weeks or it could take as long as one year depending upon overcoming the problems, especially the arbitrage problem. He noted that after the State approves, the Corporation then authorizes execution of the application. At his suggestion, Biteman moved to authorize execution of the application, Leahy seconded and the motion carried. In answer to Cushing's question, Mack confirmed that the City Council would have to approve the financing documents and that a Resolution for that action could be prepared in advance by his office. He pointed out that a public hearing would be necessary before this Corporation and also before the City Council , in accordance with TEFRA laws. He explained that these hearings could be held jointly and both entities could approve at the same hearing. Cushing noted that the Council had approved IRBs processed through the Port of Seattle. Leahy confirmed that the Council ' s action would be to decide if the project was consistent with good planning for the City. He noted that the planning authorization portion of this project could go to the June 18 Council meeting and it was suggested that an officer of H & H Company could, at that time, briefly explain the project to the Council . There was no further business to come before the Corporation and the meeting was adjourned at 8:50 a.m. The next regular meeting is scheduled for Friday, July 6, 1984 at 8:00 A.M. in the second floor conference room of the Kent City Hall. R S R SECRETARY 0009C-01C