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Nearly a billion in bonds: Chapter 100 financing has helped several projects in Cape County
Chapter 100 bonds have been used to entice new industrial development in Cape Girardeau County six times, with a seventh project in the works now with Procter & Gamble.
Last week, Cape Girardeau County commissioners approved a resolution of intent to issue industrial development bonds to fund a $300 million expansion at Procter & Gamble's Cape Girardeau County plant, which could bring up to 200 construction jobs and 35 full-time positions.
Chapter 100 of Missouri statutes allows counties and municipalities to issue bonds to finance the costs of industrial development projects for private corporations. Government entities can get the bonds at a lower interest rate than conventional financing corporations could receive.
P&G in Cape Girardeau County has benefited from nearly $1 billion in Chapter 100 bonds since 1998.
The county issued $600 million in Chapter 100 bonds for P&G in 1998. Those won't be paid off until December 2033. In 2002, $200 million in bonds were supplied for another P&G expansion. Those will come due in 2021. The following year, in 2003, $163 million in bonds were provided for another P&G expansion. Those will be paid off in 2029.
Nordenia USA will make the final payment in December on $17 million in Chapter 100 bonds issued in 2000 for an expansion of its plant on Highway 177, said County Treasurer Roger Hudson. Hubble Creek Development LLC, which owns Nordenia's new facility on U.S. 61 in Jackson, also benefited from Chapter 100 bonds last year. Those will come due in 2021.
The county's smallest Chapter 100 bond project -- $4.45 million -- was for Schaefer Electrical Enclosures in 2010.
For Schaefer Electrical Enclosures president Mark Diamond, Chapter 100 bonds kept his business in Southeast Missouri.
When his company outgrew its facility in Advance. Mo., and needed a better trained workforce, Diamond started looking at the cost of relocating. "If we were willing to relocate out of the area, there were places that would give me a building," Diamond said, "If you're packing 150 jobs and a $4 million payroll, people will throw a lot of incentives at you."
But Diamond said he didn't want to move to Arkansas or Indiana, he wanted to stay local.
"I came to Cape with Procter & Gamble and was about to be transferred out of town when I left P&G and bought this company. I chose to stay in Cape because the quality of life and the area we really like," he said.
By working with the county to finance the purchase of a new, larger location in Cape Girardeau with Chapter 100 bonds, Schaefer Electrical Enclosures stayed in the region and has since added 45 employees.
Chauncy Buchheit, executive director of the Southeast Missouri Regional Planning and Economic Development Commission, said Chapter 100 bonds help local governments compete with other places to land major economic development projects.
"Every time we have worked on one of these projects, it is a competition situation. The company is telling us we are in the running, but there are not assurances," said Buchheit, who also worked on a $1 billion Chapter 100 project in Ste. Genevieve County for the Holcim cement manufacturing facility, which opened in 2009.
As long as the bonds are outstanding, the companies benefiting from them can receive tax abatements. In the bond project currently under consideration, P&G will receive tax abatements worth $19,424,491 over the 25 years it has to pay back the bonds, according to the industrial development project plan prepared by the planning commission. This plan is being sent to the 10 taxing entities affected by the latest bond proposal.
The company will be required to make payments in lieu of taxes equal to a percentage of the actual property taxes that it would have otherwise paid. These payments are based on a steadily decreasing scale from 85.4 percent in the first year following the completion of the project, 2015, to 7.41 percent in the 25th year 2039.
"Businesses are looking at something they know is going to stay the same going forward. They don't want to come in and see an assessor go rogue on them and hit them with higher taxes," Buchheit said. "They like to have an idea going forward knowing exactly what the tax burden will be. That's a big part of doing business."
The Jackson School District is the largest taxing entity among those affected by this latest Chapter 100 bond project for P&G. Superintendent Dr. Ron Anderson has said he supports the project and is comfortable with the schedule of payments the company will make in lieu of taxes.
After the 25-year tax abatement is up, the district's tax base will increase and during the abatement period, the district will still receive additional revenue, Buchheit said.
"Half of something is better than all of nothing," Buchheit said.
Chapter 100 bonds also allow for a sales tax exemption on construction materials for the project, in this case estimated to total $888,250.
P&G is expected to spend $250 million on new equipment and $50 million to construct a new building. According to a permit application with the U.S. Army Corps of Engineers' St. Louis District, work will include constructing a manufacturing space, parking lots, loading docks, a warehouse space, a railroad spur, an access road and relocating Route J and constructing a bridge for that highway over Turkey Creek.
A permit is required from the corps because the project will affect 0.33 acres of wetlands and 4,600 linear feet of stream. The company's permit is still under review, according to the corps.
The resolution of intent to issue bonds approved by county commissioners last week is contingent on P&G obtaining all necessary government approvals for the project.
As with all Chapter 100 projects when the project is completed, the county will hold the title to the project and lease it to P&G. The company's lease payments will be used to retire the bonds.
The county is not liable for repaying the bonds if there is a default, according to the resolution adopted by commissioners last week. The bonds also do not contribute to the county's statutory debt limit.
"If there is a default, the holder of the bond is the one who is injured, not the county," Buchheit said.
Because P&G plans to purchase its own bonds, there would be no advantage to default, he said.
14484 State Highway 177, Cape Girardeau, MO