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HomeMy WebLinkAboutCity Council Committees - Economic Development Corporation - 12/04/1986 CITY OF KENT ECONOMIC DEVELOPMENT CORPORATION December 4, 1986 The reaular meeting was called to order at 7:30 a.m. by Chairman Berne Biteman. Present: BOARD MEMBERS: Berne Biteman, Chairman of the Board Tom Bailey, Vice-Chairman Steve Dowell Ted Knapp Walt Ramsey OFFICERS: Marie Jensen, Secretary of the Board Tony McCarthy, Treasurer Steve DiJulio, General Counsel Also Present: Brent McFall , City Administrator KENT DEVELOPMENT CENTER FOUNDATION - CONTRACT DiJulio presented the final copy of the proposed contract with the Kent Development Center Foundation for the Incubator Program. He described the changes from the draft copy, most of which were proposed by Anthony Retford, the Director. It was noted that Dowell and Knapp serve on the Board of the • Foundation, and, therefore, will not vote on this item. Bailey moved to approve the contract for signature. Ramsey seconded, and the motion carried, with Biteman, Bailey and Ramsey supporting it. FINANCIAL STATEMENT Treasurer McCarty presented a financial statement giving the history of the Corporation through November 30, 1986 showing net retained earnings of $41 ,371 .23. He pointed out that this did not include the payment of $10,000 to the Kent Development Center Foundation or the insurance bill of approximately $5,000. Throu h November, 1986 the Corporation has generated $82,549.38 in revenue with 941 ,178.15 shown as expenses. Revenue is generated through application fees, administrative fees, charges for services of the General Counsel and the Secretary, and accumulated interest. Additional renewal administration fees will be billed later this month. The financial statement has been filed by the Secretary. OUTLOOK DiJulio noted that Dowell had attended the seminar sponsored by the State Department of Economic Development. The Internal Revenue Code of 1986 will cause some changes for this Corporation. The exemptions for small industrial development bonds will be sunsetted on December 31 , 1986. Warehouses, research, and so forth will no longer be eligible to take advantage of industrial revenue bonds. Only manufacturing facilities will be eligible for • 1987, 1988, and 1989. He noted that SeaFirst Bank could not place the bonds for Northwest Bottling Company. Northwest Bottling could, however, proceed in the future if they are ab secure funding, since this is a manufacturing facility. DiJulio explained that the volume cap is imposed on all states and applicants must compete for available volume. The Governor has allocated the State of Washington volume cap, generally described as $75 per capita or $250 million on all private activity bonds. Volume of all private activity bonds in Washington will be limited to approximately $320 million for the period of August 16 to December 31 , 1986, with a similar amount for 1987. The volume cap was all used and last month there was a scramble to get in under the cap. Northwest Aluminum Products was successful and Northwest Bottling Company was not. Upon Bailey's questions, DiJulio explained a portion of the cap is set aside for certain purposes such as housing bonds, utility bonds, and so forth. Many traditional types of public financing will be considered private industry revenue bonds, so there will be more competition for the volume cap, thus affecting municipal financing. He noted that it appeared that LIDS would not be considered private activity bonds, but that is not absolutely certain. Sensitive areas will be water and sewer projects. As an example, DiJulio noted that we could not issue revenue bonds for construction of a golf course if we intended to have it privately managed. A checklist will be prepared by bond counsel and the process will be complex. Upon Dowell 's question, DiJulio noted that there has been some discussion that • the State will take up the entire volume and all issues will be combined issues out of Olympia, with none of the volume allocated to the local boards. He pointed out that bond counsel was confident that most of the traditional debt financing of cities will be tax exempt and not subject to the volume cap. He summarized that the only applications to be brought before this Board in the future would be for manufacturing projects. He also pointed out that instead of requiring that 910 percent of the issue be used for approved purposes, in the future it will be 95 percent, leaving only 5 percent for non-approved purposes such as office furniture. The percentage allowed for the purchase of raw land will remain at no more than 25 percent. In answer to further questions, DiJulio noted that the applicant is responsible for securing the financing, pointing out that this is usually done before the application is filed. Usually, the bonds have been purchased by the bank for their own accounts, but the advantage of holding tax free bonds has been greatly reduced. It could be that banks might eliminate tax exempt bonds from their portfolios. Upon Dowell 's question about arbitrage, DiJulio noted that in new bond ordinances the City will guarantee the bonds to be tax free, and in the unlikely event that the earnings limitations are exceeded, the City will pay the penalty so as to ensure that the bonds do not become taxable. McCarthy noted that on City bonds, the interest rate of the bonds is noted on the investment fol e—r to be sure that the investment interest is not higher than the bond rate. A state pool will be set up by the federal government to facilitate this. McFall pointed out that the investments will require more • attention in the future. If interest becomes taxable to the bond holders, the City will be unable to find a market for future bonds. - 2 - CHAMBER OF COMMERCE MEETING Knapp noted that next We nesday, on December 10, the Chamber will sponsor a lunch with a panel discussion with representatives of other Economic Development Councils, plus Penny Peabody of the King County Economic Development Council , and a representative from the State. The purpose is to network and to learn how these other groups operate. The State has "Team Washington" and it works down through counties and cities. It is hoped that King County will become more aware of what is available in Kent. The County has videos to show to industry and South King County needs to become better organized. It was pointed out that the lunch tickets would be an allowable expense of the corporation. The meeting adjourned at 8:25 a.m. NEXT MEETING e ecretary will advise as to the date for the next meeting. Marie ens k. Secretary a Board . 0024C-01C - 3 -