Department: Resource Management
Staff Contact: Dianna Wright/Emily Vincent
Subject: Consideration of Ordinance 19-70 authorizing issuance of the City’s taxable Industrial Revenue bonds in an amount not to exceed $15,850,000 to Fremato USA, Inc., Series 2019, for the construction of a 250,000 sq. ft. warehouse (Warehouse Project) and authorizing an Omnibus Amendment of documents relating to certain outstanding industrial revenue bonds.
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Item Description:
title
Consideration of Ordinance 19-70 authorizing issuance of the City’s taxable Industrial Revenue bonds in an amount not to exceed $15,850,000 to Fremato USA, Inc., Series 2019, for the construction of a 250,000 sq. ft. warehouse (Warehouse Project) and authorizing an Omnibus Amendment of documents relating to certain outstanding industrial revenue bonds.Body
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Summary:
On September 4, 2018 the City Council adopted Resolution No. 18-1076 (Attachment A), expressing the intent to issue an amount not to exceed $15,850,000 of the City’s taxable industrial revenue bonds (“bonds”) for the construction of a warehouse addition located at 16355 S. Lone Elm Road. (Fremato USA, Inc., also known as TVH Parts, Co.) This is a single series of bonds to be issued to cover the land, building costs, furniture, fixtures and equipment.
Previously on December 7, 2012 the City issued industrial revenue bonds to Accosys, Inc, Series 2012 not to exceed $7,000,000 for a prior addition at 16355 S. Lone Elm Road (TVH Parts, Co.) These bonds were then assigned to Fremato USA, Inc. on February 1, 2016.
In addition, on December 19, 2018 the City issued industrial revenue bonds to Fremato USA, Inc., Series 2018 not to exceed $8,000,000 for an office addition located at 16355 S. Lone Elm Road (TVH).
The Ordinance (Attachment B), prepared by the City’s Bond Counsel, Gilmore & Bell, P.C., will authorize the issuance of bonds not to exceed $15,850,000 for the warehouse expansion project. The bonds are a special obligation of the City, paid solely by revenues generated by the Project.
The Ordinance also authorizes an Omnibus Amendment (Attachment C) to amend the Series 2012 bond documents and Series 2018 bond documents. Currently, the City is the fee owner of a portion of the project financed by the Series 2012 and 2018 bonds and leases such portion of the project to Fremato, USA, Inc. Due to a change in the law relating to industrial revenue bonds, the City is no longer required to own the property to facilitate the property tax phase in.
The Omnibus Amendment anticipates the City deeding the property to the Company and entering into a Base Lease-Leaseback for the project (which is the approach employed for City industrial revenue bonds in recent years). This amendment will facilitate the continuation of the property tax phase in for the remaining terms associated with the Series 2012 and Series 2018 bonds, and also provide the legal structure for the issuance of the Series 2019 bonds and associated property tax phase in.
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Financial Impact:
All costs related to the issuance of the bonds will be paid by Fremato, USA, Inc.
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Action Needed:
Approve Ordinance No. 19-70 authorizing the issuance of industrial revenue bonds to Fremato, USA, INC. and authorizing the execution and delivery of the Omnibus Amendment of Bond documents.
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Attachment(s):
Attachment A: Resolution 18-1076 Attachment B: Ordinance No. 19-70
Attachment C: Omnibus Amendment