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Cape city council acts to fill Dana Corp. building
The deal calls for the city to use industrial revenue bonds to finance the purchase.
The Cape Girardeau City Council, on a voice vote with one abstention, unanimously approved the first step in floating up to $5 million in bonds to finance the move of Schaefer's Electrical Enclosures to the city from Advance, Mo.
The vote puts the city on a path to assist the 21-year-old company in its bid to purchase the Dana Corp. building at 2075 Corporate Circle for $2.85 million. The additional funds in the bond issue would help pay for the additional equipment the company needs to increase production as it seeks to expand from about 100 to almost 150 employees.
Councilman Matt Hopkins, citing a business relationship with Schaefer's Electrical, abstained from the vote.
Along with the bonds, Schaefer's is seeking a break on property taxes on the industrial plant and equipment worth an estimated $342,000 over 10 years.
Schaefer's Electrical has been pursuing expansion for most of the last year, looking at industrial sites in the region and elsewhere. The company could have obtained far more lucrative terms if it had been willing to relocate outside the area, Schaefer's Electrical president Mark Diamond told the council.
"I am not going to try to strong arm anyone, but at the same time, from a competitive standpoint, we want the opportunities that are out there," Diamond said.
But that would have meant an interruption in production and forced the company to replace almost its entire work force, many of whom have worked for the company for far longer than Diamond and his partners have owned the business. The Dana Corp. building, empty because the company moved production from Cape Girardeau to Mexico as part of a bankruptcy reorganization, is ideal for the company's needs, Diamond said.
"A building is not a company," Diamond told the council. "It is absolutely essential that our employees come with us."
The deal crafted by Diamond, Cape Girardeau Area Magnet executive director Mitch Robinson and Cape Girardeau Area Chamber of Commerce president and chief executive officer John Mehner calls for the city to use industrial revenue bond authority known as Chapter 100 bonds to finance the purchase. As part of the deal, the city would become owner of the property and any equipment purchased with the bond proceeds.
Over 10 years, Schaefer's Electrical would make lease payments to retire the bonds. During that time, the company would also make payments equal to 50 percent of the property taxes that would be due on the building and equipment if it was in private hands. Even at the reduced rate, the payments would be about three times as large as the full property tax on the company's Advance facility.
The company would benefit by lower taxes and lower interest rates on the bonds, which are exempt from state income tax and possibly exempt from federal income taxes as well.
As he explained the deal to the council, Robinson emphasized that the city would have no obligation to repay the bonds in the event of a default by Schaefer's Electrical.
In promoting the deal to the council, Mayor Jay Knudtson noted that much of Cape Girardeau's economy is built on retail sales. The city has made major commitments of tax subsidies, more than $8 million in total, to support retail developments in recent years.
"While the retail component is clearly our lifeblood, and we get an A+ in retail, we get a C on recruitment of industrial facilities," Knudtson said.
If all goes as planned, Diamond said the company would not cease production for a single day and would be completely moved to Cape Girardeau by April 1.
335-6611, extension 126