Council accepts Kawasaki bond plan
TONY BROWN/DAILY FORUM
The Maryville City Council this week passed a resolution expressing its intent to issue $25 million in Industrial Development Revenue Bonds on behalf of Kawasaki Motors Manufacturing Corp. U.S.A. The Maryville small engine plant intends to use proceeds from the bonds to finance a 100,800-square-foot expansion that will allow the factory increase production and add as many as 30 new jobs. Pictured from left are City Attorney Taryn Henry, City Finance Director Denise Town and council members Tim Shipley, Jeff Funston, Renee Riedel, Rachael Martin and Jerry Riggs.
The Maryville City Council this week unanimously adopted a “resolution of intent” to proceed with the issuance of $25 million in Industrial Development Revenue Bonds that will be used to finance a major expansion at the Kawasaki Motors Manufacturing Corp. U.S.A. factory, which self-annexed into the city limits last month.
City Manager Greg McDanel said the 100,800-square-foot expansion could create as many as 30 new jobs at the factory, which produces small, general-purpose gasoline engines. The new addition will house additional production space for motor components.
According to McDanel, this is the first time the city of Maryville has ever issued IDB bonds, also known as Chapter 100 bonds. He added that such financing is a common economic development tool that has been used by a number of cities across the state.
IDBs differ from traditional government revenue bonds in that they are issued on behalf of a private-sector business or corporation.
Such bond issues, which do not require voter approval, are arranged by the sponsoring government with proceeds used by the partner enterprise to finance any number of expansion-related improvements, including offices, warehouses, distribution facilities or entire plants. In conjunction with such projects, bond proceeds can be used to construct or install buildings, fixtures and machinery.
The business is responsible for bond repayment, and the sponsoring government holds title to the underlying collateral until the debt is paid in full.
This arrangement is advantageous to the private-sector partner because it provides tax-exempt status for whatever expansion or improvements are undertaken.
The sponsoring government is not responsible for bond repayment, and the bonds do not affect the government’s credit rating, meaning that Maryville’s ability to borrow money on its own behalf will not be diminished.
McDanel said IDBs typically carry a lower interest rate due to their tax-exempt status and are generally financed over 10 years.
The Kawasaki Motors Manufacturing Corp. U.S.A. plant operated just outside Maryville’s south city limits for the past 25 years before voluntarily annexing into the city about a month ago, a move that city officials estimate will produce significant new tax revenue from sales and property taxes on the facility as it now exists.
Anticipated annual revenue totals $134,952 for the city proper, $35,738 for Maryville Parks & Recreation and $15,770 for the Maryville Public Library.
That projected revenue will not be affected by the city-Kawasaki financing scheme, McDanel said.
Kawasaki Motors Plant Manager and Vice President Steve Bratt said the planned expansion is the 12th since the Maryville factory opened. He added that this is the first time the company has requested any kind of tax abatement or development incentive.
But the time has come, he said, when such public assistance is needed in order for the plant to take full advantage of anticipated growth.
“Our business has gone bonkers over the last three years,” Bratt said. “We can’t make enough product.”
Bratt said that business is currently so strong that he has been forced to turn down customers, and that his responsibility now is “to do everything I can to increase production.”
Bratt said acquiring IDB financing was an essential part of Kawasaki’s plans for future growth.
“It’s important that we get this break in order to be able to invest even more on top of that,” he said.
In addition to passing the resolution stating its intent to issue the bonds, the council on Monday also passed an ordinance setting up a funding agreement with Kawasaki that will allow the city to cover the cost of retaining specialized outside legal counsel.
Under the agreement, Kawasaki will deposit a minimum of $30,000 with the city to be used for consulting fees and all other out-of-pocket expenses. The company must then provide additional funds should the account balance fall below $5,000.
