[AUG. 2, 2005] Officials are still gathering facts to find the
best resolution to a financing problem with the Robert Sysco Food
Service Inc. project. At Monday night's council meeting, city
attorney Bill Bates explained the issue that became apparent this
past week.
The city offered tax abatements and is covering costs associated
with infrastructure to the site. The county provided the purchase of
the land supplied.
Bates began by saying that according to plan the city was to
borrow $300,000 and the county would borrow $900,000 in the form of
debt certificates. A lawyer who specializes in this area, Kurt
Froehlich of Champaign, has been handling the debt certificates for
both entities.
According to plan $850,000 of the $1.2 million was to be
available for use upfront. It will take $820,000 to $850,000 for the
land purchases, which are expected to be completed next week.
However, it appears that the design of the agreement with Sysco
causes the money borrowed to be taxable income for the banks and
thereby reduces the amount that the city and county will receive
from the bond certificates. It will reduce the $850,000 to $740,000.
The multi-government agreement the city and county made with
Sysco includes "claw backs" provisions stipulating that construction
will be completed by a specific time and that Sysco will meet hiring
quotas over a period of time. It seems it is the provisions
terminology that takes it into a taxable income bracket.
Froehlich had not seen the contract until the problem cropped up
this past week. Bates said that Froehlich asked him, "Why didn't you
tell me you were doing that?"
And he said he responded to Froehlich, "Why weren't you asking
[me those questions] if that made a difference?"
Now the city and county will either have to figure how to come up
with $110,000 or how to make changes in the contract that will take
it out of the taxable income bracket, Bates explained. The added
expense could either be financed or supplied by some other fund, but
Bates said that a lot of expenses associated with the project will
be coming up. At this time he doesn't think taking it out of the
current budget would be wise.
Neither is taking the provisions out of the contract desirable,
as it would negate the security the city and county have in the
project.
He has been in contact with Froehlich, Logan County State's
Attorney Tim Huyett and Logan County coordinator Dewey Colter to
consider the options. He would also like to consult with city
finance chair Verl Prather, who was not present
The issue was left on the table to allow for additional
communications and information and then to consider how best to
proceed.
