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HomeMy WebLinkAbout1984-12-31 Minutes360 MINUTES OF A SPECIAL MEETING OF THE BOARD OF DIRECTORS A special meeting of the Fayetteville City Board of Directors was held on Monday, December 31, 1984 at 11:30 A.M. in Room 326 of the City Administration Building, 113 West Mountain Street, Fayetteville, Arkansas. PRESENT: Mayor Noland; Directors Bumpass, Johnson, Lancaster, Martin, Noland, Orton and Sharp; City Manager Grimes, City Attorney McCord, City Clerk Kennedy, members of the press and audience CALL TO ORDER The Mayor called the meeting to order with all directors present. ACT 9 BONDS/SOFT DRINK BOTTLING PLANT 360.1 The Mayor explained that the Board, at its December 18 meeting, requested additional information from Fayetteville Associates 1/1, Ltd., regarding their request for the issuance of $6,500,000 in Act 9 Industrial Develop- ment bonds for financing the expansion of facilities for the bottling, canning and distribution of soft drinks. 360.2 Rick Ebersole, speaking for the company, addressed the Board. Ebersole stressed that bond documents now require the company to complete the acquisition before any bond proceeds can be utilized. Ebersole explained that First National Bank of Fayetteville would be serving as trustee and purchaser of the bonds. 360.3 City Attorney McCord pointed out that this was a continuation of the public hearing held on December 18 and that Notice had been published. McCord read, for the first time, an ordinance authorizing the issuance of the bonds. Director Bumpass, seconded by Johnson, made a motion to suspend the rules and place the ordinance on second reading. Upon roll call, the motion passed, 7-0. McCord read the ordinance for the second time. Director Bumpass, seconded by Johnson, made a motion to further suspend the rules and place the ordinance on third and final reading. Upon roll call, the motion passed, 7-0. McCord read the ordinance for the third and final time. 360.4 The Mayor asked if anyone present wished to speak in opposition to the passage of the ordinance. No public opposition was expressed. 1 1 December 31, 1984 Director Johnson noted that the ordinance did not include mention of the food service facilities. Director Orton commented that the request for financing of a beer distributorship was eliminated because it was felt it was not appropriate for the City to be a part of that type industry. Orton questioned whether it was appropriate for the City to spend a lot of money adding flouride to its water to protect children's teeth and then to issue bonds for a soft-drink industry. Orton commented that it was counter- productive to approve a project which would add cans and glass to the already existing solid waste and litter problems in the area. W CO Director Sharp pointed out that the criteria set by the Board in 1981 C for considering bond issue requests did not include judgment of a company's product. Sharp noted that, should the Board wish to include such considerations, they should be added to the list of criteria. Sharp commented he still did not feel this industry's product had 1 enough sales outside the area. At Director Bumpass' request, Director Sharp read the criteria established by the Board to be considered before making a decision: 1. Whether the proposed project will produce additional employment opportunities for residents of the City of Fayetteville; 2. Whether the company demonstrates in writing such financial and organizational capability that there is no risk of default on the bonds; 3. Whether the proposed project will secure and develop "industry" rather than commercial development. The term industry shall include, but is not limited to, manufacturing facilities, warehouses, distribution facilities, repair and maintenance facilities, agricultural facilities and corporate and management offices for industry; 4. Whether the proposed project will provide economic stimulation for the economy of the area; and 5. Whether all or a substantial portion of the end product or service produced locally is either consumed elsewhere or consumed locally by visitors drawn by the activity, rather than the end product or service being marketed solely to retail customers in the area. In answer to a question from Director Martin as to whether the appropriate- ness of the use of proceeds is tested in any way, McCord replied this is provided for in the closing documents. Martin commented that the proposal appears to meet the criteria and that the Board should not make judgments concerning the product. 361 361.1 361.2 361.3 361.4 361.5 362 December 31, 1984 362.1 In answer to a question from Director Johnson, McCord explained if the Board passes the ordinance, the bonds will be purchased by First National Bank today, but the closing documents provide that the proceeds cannot be drawn or utilized by the borrower until the acquisition of the facility (being privately funded) is closed. 362.2 Director Bumpass asked what interest rate would be earned on the bonds and it was clarified that the interest rate would be 75% of the prime rate, or 8.0625%. In response to Director Bumpass' comment that the City would be providing a "line of credit", McCord pointed out that all Act 9 bond issues are structured the same, in that proceeds are drawn down over a period of time. Director Bumpass asked if the Board had ever approved a bond issue to a company which had planned several different projects over a three-year period. McCord responded that he could not say whether the Board had done so, noting that, for past bond issues, the Board had never requested such detailed information on how the companies would expend the proceeds. Director Bumpass commented he would be more favorable towards the request had the acqui- sition already been completed and were the company already operating and managing the facilities before requesting the bonds. 362.3 Mayor Noland asked how the expansion of the canning line would change sales projections which now show about 61% of sales to be in Washington County or the City of Fayetteville. Ebersole estimated that, if the service area were to include Fort Smith, this could reduce the percentage of local sales by more than half. 362.4 Director Lancaster stated he was still not satisfied that the project met the criteria, he objected to the fact that the company did not own the facility, and he commented that, were the City to approve the bond issue, they would be contributing to a "concession" business that could be operated by someone else. 362.5 Director Bumpass asked what projects the company proposed to complete first. Ebersole listed those projects in order of priority: Food Service Warehouse Service Area for Vehicles Expansion of Product Line Beverage Warehouse Can Production Line Administrative Work Space 362.6 Director Martin asked what the status of the bond issue would be should the acquisition not take place. John Konvalinka, Bond Attorney, explained that the bond documents specify that, at closing of the issue, all proceeds be placed in a construction fund at the bank and there can be no disbursement from that fund unless three conditions are met, one of which is the acquisition of the facility. Konvalinka explained that the acquisition must take place within 180 days. 1 December 31, 1984 Mayor Noland asked how large a service area the food service warehouse would serve. Ebersole replied that the area could be further than 75 miles, depending upon transportation conditions Noland stated he would be more favorable to the request if he knew that, in five years, 60% of sales would be outside Washington County. Director Johnson asked if the company would be making payment -in -lieu -of - taxes. McCord explained that the company would be paying full taxes. 10 Director Johnson stated she was satisfied with the information provided N by the company, noting that there was no risk of default, that 99 jobs would be added in three years and that there would be potential, W in her opinion, for sales to go outside the area. CO Director Orton commented that, in the future, additional criteria should be added so that bonds could not be issued for industry which would be environmentally detrimental to the community. The City Attorney stated he would draft a proposal for additional criteria for review by Director Orton. Director Orton asked why the beer distributorship request for bonds had been withdrawn. Ebersole explained the company decided to withdraw the request after realizing it was unacceptable to the Board and to the community. Dirctor Martin indicated that that did not represent his position and that he wouldn't place a moral judgment on products; that the Board should deal with industry on the basis of fair laws which apply to everybody. Director Bumpass noted that, with other requests, the first step has been for the Board to approve a Memorandum of Intent. McCord explained the purpose of the Memorandum of Intent is to enable the company to recoup expenditures from bond proceeds. McCord noted that there have been projects for which no Memorandum of Intent was approved and other projects for which an ordinance was passed soon after the Memorandum of Intent was approved. Bumpass asked if interest earned by the fund would be available to the project. McCord stated that this was true and had been the case with other bond projects. Upon roll call, the ordinance failed to pass, 3-4, with Directors Martin, Noland and Johnson voting for the ordinance and Directors Lancaster, Orton, Sharp and Bumpass voting against the ordinance. ADJOURNMENT With no further business before the Board, the meeting adjourned at about 12:25 P.M. 363 363.1 363.2 363.3 363.4 363.5 363.6 363.7