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HomeMy WebLinkAbout09-428NOVEMBER 10, 2009 09 -428 RESOLUTION (CARRIED 7 -0 LOST LAID OVER WITHDRAWN ) PURPOSE: INITIAL RESOLUTION REGARDING INDUSTRIAL DEVELOPMENT REVENUE BOND FINANCING FOR KINGSBURY, INC. WHEREAS, Section 66.1103 of the Wisconsin Statutes (the "Act ") authorizes the City of Oshkosh, Wisconsin a municipal corporation organized and existing under the laws of the State of Wisconsin (the "Issuer"), to authorize the issuance and sale of bonds by the Issuer to construct, equip, re- equip, acquire by gift, lease or purchase, install, reconstruct, rebuild, rehabilitate, improve, supplement, replace, maintain, repair, enlarge, extend or remodel industrial projects; and WHEREAS, Kingsbury, Inc., a Delaware corporation (the "Borrower "), desires to complete a project consisting of the acquisition and installation of equipment to be located at the Borrower's existing manufacturing facility located at 455 W. Waukau Avenue in the City of Oshkosh, Wisconsin (collectively, the "Project "), to be owned by the Borrower, all of which would contribute to the well -being of the City of Oshkosh, Wisconsin; and WHEREAS, the cost of the Project is presently estimated to be greater than $3,000,000, and the amount proposed to be financed with one or more series of tax - exempt and /or taxable industrial development revenue bonds does not exceed $3,000,000; and WHEREAS, the Borrower has requested that the Issuer now approve an initial resolution (the "Initial Resolution ") providing for the financing of the Project in an amount not to exceed $3,000,000; and WHEREAS, the Issuer is authorized to enter into revenue agreements with eligible participants with respect to the Project whereby eligible participants agree to cause said Project to be constructed and to pay the Issuer an amount of funds sufficient to provide for the prompt payment when due of the principal and interest on said industrial development revenue bonds. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Oshkosh, Wisconsin, as follows: 1. Based upon representations of the Borrower, it is the finding and determination of the City Council that the Project is a qualified "project" within the meaning of the Act and that the Borrower is an "eligible participant" within the meaning of the Act. The Issuer shall: (a) Finance the Project in an amount not to exceed $3,000,000; and (b) Issue industrial development revenue bonds in one or more series of tax - exempt and /or taxable bonds (the "Bond(s) "), in an amount not to exceed $3,000,000 in order to finance costs of the Project 2. The aforesaid plan of financing contemplates, and is conditioned upon, the following: (a) The Bonds shall never constitute an indebtedness of the Issuer within the meaning of any state constitutional provision or statutory limitation; (b) The Bonds shall not constitute or give rise to a pecuniary liability of the Issuer or a charge against its general credit or taxing powers; (c) The Project shall be subject to property taxation in the same amount and to the same extent as though the Project were not financed with industrial development revenue bonds; (d) The Borrower shall find a purchaser for all of the Bonds; and (e) The out -of- pocket costs, including any trustee's fees, in connection with the issuance and sale of the Bonds shall be paid by the Borrower. 3. The aforesaid plan of financing shall not be legally binding upon the Issuer nor be finally implemented unless and until: (a) The details and mechanics of the same are authorized and approved by a further resolution of the City Council which shall be solely within the discretion of the City Council; (b) The City Clerk shall cause notice of adoption of this Initial Resolution, in the form attached hereto as Exhibit A , to be published once in a newspaper of general circulation in the City of Oshkosh, and the electors of the City of Oshkosh shall have been given the opportunity to petition for a referendum on the matter of the aforesaid Bond issue, all as required by law; (c) Either no such petition shall be timely filed or such petition shall have been filed and said referendum shall have approved the Bond issue; (d) The City Clerk shall have received an employment impact estimate issued under Section 560.034 of the Wisconsin Statutes; (e) All documents required to consummate the financing have been duly authorized and delivered; (f) The Issuer and the Borrower have resolved all land use and special use issues with respect to the affected property and the Project; (g) Prior to the issuance of the Bonds, this body, by further resolution, shall have authorized and approved all of the terms and conditions of the Bonds and the terms and conditions of the financing. (h) The Bonds shall be issued pursuant to the Act and the delivery of the Bonds shall be accompanied by the unqualified approving legal opinion of a nationally recognized firm of bond attorneys as shall be acceptable to the Issuer and the Borrower. (g) All out -of- pocket costs of the Issuer, including attorneys' fees in connection with the issuance and sale of the Bonds, shall be paid either from the proceeds of the Bonds or by the Borrower. (j) All documents in connection with the issuance of the Bonds shall have been duly executed and delivered by the parties. 4. Pursuant to the Act, all requirements that the Project be subject to the contracting requirements contained in Section 66.1103 are waived, the Borrower having represented that it is able to negotiate satisfactory arrangements for completing the Project and that the Issuer's interests are not prejudiced thereby. 5. The City Clerk is directed, following adoption of this Initial Resolution (i) to publish notice of such adoption not less than one time in the official newspaper of the City of Oshkosh, Wisconsin, such notice to be in substantially the form attached hereto as Exhibit A and (ii) to file a copy of this Initial Resolution, together with a statement indicating the date the Notice to Electors was published, with the Secretary of Business Development of the State of Wisconsin within twenty (20) days following the date of publication of such notice. 6. This Resolution is an official action toward the issuance of the Bonds for purposes of Section 103 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated hereunder. 7. The appropriate officers of the Issuer are hereby authorized and directed to publish or cause to be published in the Oshkosh Northwestern a Notice of Public Hearing substantially similar to that attached to this Resolution as Exhibit B in order to comply with the requirements of Section 147(f) of the Internal Revenue Code of 1986, as amended. 8. No Bonds shall be issued until the terms and conditions of any guidelines or resolutions governing the issuance of industrial development revenue bonds which may be adopted by the Issuer have been complied with. 9. This Resolution shall be effective immediately upon its passage and approval. Adopted: November 10, 2009. EXHIBIT A NOTICE TO ELECTORS OF THE City of Oshkosh, WISCONSIN TAKE NOTICE that the City Council of the City of Oshkosh, Wisconsin (the "Issuer "), at a meeting held at City Hall, 215 Church Avenue, City of Oshkosh, Wisconsin, on November 10, 2009, adopted an Initial Resolution pursuant to Section 66.1103 of the Wisconsin Statutes, as amended, expressing the intention to issue not to exceed $3,000,000 of industrial development revenue bonds of the Issuer (the "Bonds ") on behalf of Kingsbury, Inc. (the "Borrower "). The Bonds are for a project consisting of the acquisition and installation of equipment to be located at the Borrower's existing manufacturing facility in the City of Oshkosh, Wisconsin (the "Facility ") which will be used for precision metal machining and fabricating, to be owned by the Borrower, all of which would contribute to the well -being of the City of Oshkosh, Wisconsin. The Borrower has represented that the net number of additional full -time equivalent jobs which the Project is expected to create on the Project site is five (5). Pursuant to the terms of Section 66.1103 of the Wisconsin Statutes, all requirements that the Project be subject to the contracting requirements contained in Section 66.1103 are waived, the Borrower having represented that it is able to negotiate satisfactory arrangements for completing the Project and that the Issuer's interests are not prejudiced thereby. THE BONDS SHALL NEVER CONSTITUTE AN INDEBTEDNESS OF THE ISSUER, NOR SHALL THE BONDS GIVE RISE TO ANY PECUNIARY LIABILITY OF THE ISSUER, NOR SHALL THE BONDS BE A CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWERS OF THE ISSUER. RATHER, THE BONDS SHALL BE PAYABLE SOLELY FROM THE REVENUES AND OTHER AMOUNTS TO BE DERIVED PURSUANT TO THE REVENUE AGREEMENT RELATING TO SAID PROJECT TO BE ENTERED INTO BETWEEN THE ISSUER AND THE BORROWER. The Initial Resolution may be inspected in the office of the City Clerk at 215 Church Avenue in the City of Oshkosh, Wisconsin during business hours. TAKE FURTHER NOTICE THAT THE ELECTORS OF THE CITY OF OSHKOSH MAY PETITION FOR A REFERENDUM ON THE QUESTION OF THE BOND ISSUE. Unless within thirty (30) days from the date of the publication of this Notice a petition signed by not less than five percent (5 %) of the registered electors of the City of Oshkosh is filed with the City Clerk requesting a referendum on the question of the issuance of the Bonds, the Issuer will issue the Bonds without submitting the proposition for the electors' approval. If such petition is filed as aforesaid, then the Bonds shall not be issued until approved by a majority of the electors of the City of Oshkosh voting thereon at a general or special election. Pamela Ubrig City Clerk City of Oshkosh, Wisconsin EXHIBIT B NOTICE OF PUBLIC HEARING The City of Oshkosh, Wisconsin, will hold a public hearing at 6:00 p.m. on December 8, 2009 at City Hall, 215 Church Avenue, City of Oshkosh, Wisconsin, regarding the proposed issuance of the City of Oshkosh, Wisconsin, Industrial Development Revenue Bonds, Series 2009 (Kingsbury Inc. Project), in an aggregate amount not to exceed $3,000,000, pursuant to Section 66.1103 of the Wisconsin Statutes, to finance a project to be owned by Kingsbury, Inc., a Delaware corporation, (the "Borrower "). The project consists of the acquisition and installation of equipment at the Borrower's manufacturing facility at 455 W. Waukau Avenue in the City of Oshkosh, Wisconsin (the "Project ") to be owned by the Borrower. At the hearing, all persons will be afforded a reasonable opportunity to express their views, both orally and in writing, on the proposed bonds. , 2009 Pamela Ubrig City Clerk City of Oshkosh, Wisconsin CITY HALL 215 Church Avenue P.O. Box 1130 Oshkosh, Wisconsin 54902 -1130 City of Oshkosh o1HUJ1H TO: Honorable Mayor and Members of the Common Council FROM: Lynn A. Lorenson, City Attorney DATE: November 5, 2009 RE: Initial Resolution for Industrial Development Revenue Bonds for Kingsbury, Inc. BACKGROUND Kingsbury, Inc. is requesting the City of Oshkosh pass an initial resolution regarding Industrial Development Revenue Bond Financing. ANALYSIS The Initial Resolution would support the issuance of Industrial Development Revenue Bonds in an amount not to exceed three million dollars ($3,000,000.00) to finance the acquisition and installation of equipment at Kingsbury's facility at 455 W. Waukau Avenue in the City of Oshkosh. Attached to this Memorandum is a Summary provided by the Borrower's Bond Counsel which explains the requested action. The Summary identifies approximately $1.2 million of the anticipated costs which the Company would like to purchase by the end of this year. The additional $1.8 million is requested for assistance with the replacement of various computerized metal cutting machine tools currently in service which are anticipated to be replaced during 2010. FISCAL IMPACT There is no anticipated fiscal impact from the proposed borrowing. The initial resolution would provide the property owner with the opportunity to secure lower interest rate bonds in support of the proposed projects. The bonds would not be general obligations of the City of Oshkosh and do not count against the City's borrowing capacity. The City of Oshkosh would not be liable for payment of co Memo: IDRB's for Kingsbury, Inc.: 11/5/09: Page 2 principal or interest on the Bonds and would not have ongoing responsibilities for monitoring or reporting with regard to the bonds or the proposed projects. Even in the case of a default, the City of Oshkosh would not be liable for payment on the bonds. R espectfully Submitted, n A. Loren n City Attorney Approved: Mark A. Rohloff City Manager Kingsbury, Inc. Overview Kingsbury, Inc. has been doing business since 1912, based on a product known as a "tilting pad" fluid film bearing which is utilized in rotating equipment of multiple varieties. The "tilting pad" concept of fluid film bearing design was invented by the founder of the firm, Dr. Albert Kingsbury. Some of the specific applications using this industrial product are hydroelectric stations, U.S. Navy surface ships and submarines, steam turbines, gas turbines, pumps, and various styles of compressors. Fluid film bearings are normally utilized when the more common roller element bearings (ball bearings and such) are not mechanically feasible for a subject application. Kingsbury, Inc. provides for the sale, custom engineering, and manufacturing of its product. Kingsbury, Inc. is the world leader in this industry and in 2008 exported directly to thirty -two world nations. Kingsbury, Inc.'s corporate headquarters are based in Philadelphia, PA at which site are located the sales and marketing, design engineering, and large manufacturing groups. Approximately 110 employees are resident at that location. A repair and service division, which is dedicated to providing technical support and repair services for the firm's various product lines, is located in nearby Hatboro, PA with a regional facility in Yuba City, CA. There are approximately thirty -six employees at these two facilities combined. In Oshkosh, WI a dedicated manufacturing division was established to provide for product necessary across almost the entire market serviced by the firm. There are approximately 120 employees at that site, consisting of manufacturing engineering, administration, and manufacturing staff. Kingsbury, Inc. — Oshkosh Division The predecessor to the Oshkosh Division of Kingsbury, Inc. was a manufacturing jobbing shop known as Pine -Ihrig Machine, which was a primary supplier of machined component parts to Kingsbury, Inc, Philadelphia, PA for many years. In September of 1985, at the retirement of the owner of Pine -Ihrig Machine, Kingsbury, Inc. purchased the company and established the Oshkosh Division of the firm. Sales of product at the time of the purchase are estimated to have been approximately $8mm. As of end of business 2008 sales had reached a revenue status of over $32mm per annum. Due to the extremely competitive nature of manufacturing, Kingsbury, Inc. realizes that the equipment employed in the ongoing effort must be of "state of the art" capabilities if ongoing growth of revenues is to be expected. The firm has always been diligent in the purchase and utilization of capital manufacturing goods and intends to carry this means of doing business into the future. To that end, the following metal cutting machine tools are under consideration for near -term purchase: A Mazak Slant 50N CNC turning center identical to the one purchased and put into service in 2008. This state -of- the -art metal cutting lathe will be a replacement for a 1970's vintage Okuma LH -50 CNC lathe which recently had to be removed from service due to unrepairable mechanical failure. This particular piece of equipment was utilized by the production department virtually every production hour to rough machine material for subsequent manufacturing operations. Its departure from the available capacities proves to be a tough obstacle to overcome. The proposed new machine tool will not only be capable of rough machining product but will also provide for the most precise of finishing operations as well. As it is an exact duplicate of a CNC turning center placed into service last year, there is an outstanding source of CNC programs and the associated tooling available to allow for its immediate introduction into the manufacturing flow, and its impact on the production schedule will be immediate. A trained operator with experience on this particular machine tool is currently employed by the firm and another is expected to be hired in 2010. This machine tool is currently quoted at $300,000 with ancillary installation expenses (foundation, etc.) of approximately $50,000. • A Mazak Nexus VCN 510C/50 vertical 4 -axis CNC machining center identical to two machines purchased and put into service in 2008. This CNC machining center will provide for replacement capacity for an aging Makino FNC -106 vertical machining center which was placed into service for the firm in 1989. This new machine tool, by its redundant nature, has a wealth of CNC programs and associated tooling ready for immediate utilization. By the very circumstance of the generational gap of the new machine tool and the existing unit there will be an immediate manufacturing efficiency associated with its implementation, i.e., 6000 rpm spindle speeds vs. 3000, accelerated slide velocities, and increased rigidity for more rapid material removal. Due to modern servo - control technology the machine tool will also be inherently more accurate than its predecessor. An operator for this piece of equipment is currently retained by the firm, with at least one additional employee expected to be hired in 2010. This machine tool is currently quoted at $150,000.. • (2) Mazak Nexus HCN 6800 II CNC 4 -axis horizontal machining centers to replace two aging Makino CNC horizontal machining centers which were purchased and placed into production service in the late 1980's. The two existing machine tools are intrinsic to the daily manufacturing operations of the Oshkosh Division effort and are at great risk of being removed from production service due to electronic failure. Because of the age of these machine tools the electronic interfaces between the CNC control and the machine tool itself are not generally supported by the machine manufacturer. If certain circuit boards or other components fail, our maintenance department is forced to locate a third -party concern (if one can be located) and pay exacting premium for the replacement parts necessary. This represents not only an unnecessary expense to the firm, but also creates for untenable "down- time" for the demanding production schedule. Once again, due to the generational gap between the existing machine tools and the proposed replacements, there will be an unquestionable increase in machining efficiencies — higher spindle speeds and slide velocities. Three current employees are trained to run this type of machine tool and an additional two employees are expected to be hired in 2010. These two machine tools have been quoted at $650,000 for the pair. Expected ancillary expenses will occur at approximately $50,000.. In summary, the Oshkosh Division of Kingsbury, Inc. is an extremely viable metal goods manufacturing establishment which is intrinsic in its necessity for the success of the greater firm. With the anticipated acquisition of the machine tools mentioned above, a minimum of four employees will be retained by the company with an additional personnel enrollment of five more employees under consideration throughout 2010.