8.1 Intent to Issue IRBCITY OF SALINA
REQUEST FOR CITY COMMISSION ACTION DATE TIME
2/26/01 4:00 P.M.
AGENDA SECTION: ORIGINATING DEPARTMENT: APPROVED FOR
NO. 8 AGENDA:
CITY MANAGER
ITEM
NO. 1 BY: Dennis M. Kissinger BY:~
Item:
RESOLUTION NO. 01-5693
A RESOLUTION EXPRESSING THE INTENTION TO ISSUE INDUSTRIAL REVENUE BONDS (IRBs) NOT TO
EXCEED $50,000,000 FOR FINANCING THE IMPROVEMENT AND EQUIPPING OF A RAYTHEON AIRCRAFT
COMPANY MANUFACTURING FACILITY IN SALINA.
Background:
The City of Salina has a long history of cooperation with Raytheon Aircraft (formerly Beech Aircraft) in its
successful aircraft manufacturing facilities in Salina at the Airport Industrial Center. Raytheon has been a
key economic development leader and jobs provider in Salina for a number of years.
In April of 1988, the City Commission approved Resolution No. 88-3970, expressing its intent to issue
IRBs not to exceed $20,000,000 for Raytheon (Beech) facilities, machinery and equipment in Salina.
The original period of that authorization was ten years, subsequently extended by the Commission to
2003. In 1989, the City of Salina, City of Wichita, City of Andover and Sedgwick County entered into an
Interlocal Cooperation Agreement to allow Sedgwick County to serve as the issuer of the bonds on behalf
of any or all of the agreement participants.
Through December 31, 2000, just under $10 million of the 1988 authorization has been used. The $10.3
million remaining will likely be exhausted by the major Salina project (Premier I business jet wing
assembly) announced by Raytheon on February 12. As Commissioners will recall, that project is
expected to bring 80-100 new jobs to Salina by the end of 2001. Prior IRB financed projects have also
brought additional employment in Salina.
With the expected completion of the original $20 million IRB authority, Raytheon is now requesting the
City of Salina approve a Resolution of Intent to issue up to $50 million in IRBs at various times over the
coming ten years. (See enclosed letter and application.) We anticipate that Sedgwick County would
continue to be the formal bond issuing government entity on our behalf, in accordance with the 1989
Interlocal Agreement (see enclosed).
Based on the application, we expect the primary use of the IRBs to be for machinery and equipment,
though some new or upgraded construction is also possible in the future as needed.
Due to the specific characteristics of Raytheon's use in Kansas of IRBs and equipment financed by this
method, it has been Salina's past practice and determination, along with the other cities and Sedgwick
County, to have the facilities, machinery or equipment constructed or purchased with these IRBs exempt
from property taxes for the ten years allowed by state law. City staff believes all the circumstances which
warranted that IRB/property tax status in the past remain in place regarding Raytheon's Salina operation.
Clearly the general economic welfare of Salina and State of Kansas have been enhanced by the use of
this financing method and associated tax exemptions.
CITY OF SALINA
, REQUEST FOR CITY COMMISSION ACTION DATE TIME
2-26-01 4:00 P.M.
AGENDA SECTION: ORIGINATING DEPARTMENT: APPROVED FOR
NO. 8 AGENDA:
CITY MANAGER
ITEM
NO. 1 BY: Dennis M. Kissinger BY:
Page 2
This resolution anticipates the ten year exemption as in past issues; however, formal consideration of the
tax exemption can only be made by the Commission following the state law required notice, cost/benefit
analysis, and public hearing. These will take place at a later date, with the cost/benefit analysis likely to
be performed by Wichita State University.
Industrial Revenue Bonds are not an obligation of the City and are not a risk to the taxpayers. No public
funds are used to repay IRBs; they are backed solely by the corporation and/or collateralized by the
facilities or equipment constructed or acquired with the bonds. In this case, it is likely that Raytheon will
either guarantee the bonds, or the Corporation will purchase the bonds themselves. IRBs may either be
federal tax-exempt or taxable. In this case, the bonds will be taxable; i.e. the bond interest earned by
buyers will not be exempt from federal income tax.
Recommended Action:
APprove Resolution No. 01-5693, expressing the City's intent to issue up to $50 million in Industrial
Revenue Bonds for financing the improvement and equipping of a Raytheon Aircraft manufacturing
facility in Salina.
Enclosure
Raytheon
Feb. 9, 2001
Raytheon Aircraft Company
9709 E. Central
P.O. Box 85
Wichita, Kansas
67201-0085 USA
Mr. Dennis Kissinger, City Manager
City-County Building
300 W. Ash
Salina, Kansas 67401
Re:
Proposed $50,000,000 Salina Kansas
Industrial Revenue Bonds (Raytheon Aircrat~ Company)
Dear Mr. Kissinger, Mayor Yflka, and Commissioners:
This letter is to request adoption by the governing body of the City of Salina, Kansas ora
Resolution indicating its intent to issue approximately $50,000,000 principal amount of Industrial
Revenue Bonds of the City on behalf of Raytheon Aircraft Company. The Bonds are expected to
be issued in several series over a period of time for the purpose of financing the cost of expansion
and improvement projects at Raytheon's Salina, Kansas manufacturing facilities as set forth
hereai~er in more detail. The amount of authority requested herein would be in addition to the
remaining balance of $10.3 million under the City's Resolution No. 88-3970 adopted April 1 l,
1988, as amended by Resolution No. 98-5380 adopted Nov. 23, 1998. The following information
is submitted to aid the Commission in responding to our request.
1. Name and Address of Tenant.
The Tenant of the Bonds will be Raytheon Aircraft Company, Wichita, Kansas 67201.
Matters concerning this application should be directed to James M. Gregory, Director-
Corporate Affairs, telephone number (316) 676-7689.
2. Principal Otticers.
Hansel E. Tookes
Chairman &CEO
Gary Hart
President
Raytheon Travel Air
Paul Schumacher
Vice President
Operations
Wayne W Wallace
Vice President
General Counsel
Karl Childs
Vice President
Sales & Marketing
Frank X. Clifford
Vice President
Human Resources & Administration
Richard Danforth
Sr. Vice President
Aircraft Business
Phillip R. Fletcher
Vice President
Quality Assurance
Daniel A~ Graflon
President
Raytheon Aerospace
Thomas Sarama
Vice President
Engineering
C. Doug Mahin
Vice President
Strategic Planning
James R. Siebauer
Vice President
Information Technology
David H. Riemer
Vice President
Government Business
3. A general description of the nature of business of the reqc~e~ino~ Tenant.
Raytheon Aircraft, based in Wichita, designs, manufactures, markets and supports jet,
turboprop and piston-powered aircraft for the world's commercial, military, and regional
airline markets. It had revenues of $3.2 billion in 2000. More detailed information
concerning the business of the Company appears in the exhibits accompanying this letter.
4. A general description of proposed projects.
Raytheon is introducing three new aircraft. The Raytheon Premier I is a new entry-level
business jet designed with Computer-Aided Three Dimensional Interactive Application
(CATIA) technology and built with state-of-the-art composite manufacturing for the aircraft's
entire fuselage. Raytheon Aircraf~ will produce the aircraft's wing at the company' s Salina
facility. The program has more than 300 orders, and customer deliveries will begin this year.
The Hawker Horizon is a super mid-size business jet also designed with CATIA and built with
composite manufacturing. The company plans rollout and first flight in 2001. The Hawker
450, announced in 2000, is a light mid-size jet that will lead its class in speed, range and cabin
size. The Hawker 450 also takes advantage of the company's industry-leading composite
technology.
In addition, the Company plans to upgrade its Salina facilities. Equipment investment for
these future projects would be substantial.
Long range plans of the Company include consideration of construction involving further
additions and improvements to facilities, the acquisition of additional new manufacturing
machinery and equipment, and upgrades to the Hawker 800XP and King Air family. The
Salina facility contributes to all of these aircraft. The estimates set forth in paragraph 7 of this
letter represent the Company's best estimation of those expenditures during that period based
upon the best present information
2
5. A statement ofpro_iect~ benefits.
The planned improvements ofRaytheon's Salina manufacturing operations are expected to
have a continuing rejuvenating effort on the economy of the community and of the State.
Overall, the program is likely to have a substantial effect over time on local Raytheon
employment. It is anticipated that Raytheon COmpany will either guarantee or purchase the
Industrial Revenue Bonds.
6. The dollar amount of the Bonds being requested
The total amount of the Bonds being requested is $50,000,000.
7. A breakdown of the proposed costs.
New and Upgraded Facilities
$7,500,000
Machinery and Equipment
$37,500,000
Miscellaneous &. Contingencies
Total $50,000,000
8. Name and Address of Bond Counsel
Hinkle Elkouri Law Firm L.L.C.
301 N. Main
Suite 2000
Wichita, Kan. 67202
Attn: Winton M. Hinkle
(316) 267-2000
9. Explanation of Selection of underwriters.
It is presently expected that the Bonds will be sold only to Raytheon Company, or to
institutional investors in private placements and not publicly offered. Accordingly, it is not
anticipated that the sale of Bonds will be underwritten. However, the Company may utilize
the services of one Or more brokerage firms as advisors, and if such advisors are employed,
that information will be furnished to the City Commission at that time.
10 Rea_uest for ad valorem tax abatement.
The Company requests that the property purchased or constructed with the proceeds of the
Bonds be exgra0ted from ad valorem taxes in the State of Kansas for the full ten (10) year
period permitted by Kansas law because such tax abatement will permit the Company to
3
proceed with these Projects and.'si/pdficantly enhance the Company's ability to realize the
growth and reSUlt.ant, public benefits outlined above.
11 A statement with respect to the Company's com_oetiti0n.
There are no' other general aviation' manufacturers located in the immediate Salina area. The
Company does not believe that issUance of the Bonds or approval of the ad valorem tax
abatement .b0ing requested will in any way create an unfair advantage over any other firm
located in this area.
12. Fi0ancial Information.
The .ao_companying exhibits include the Raytheon Company annual report. The annual report
in¢lhdes'detailed.fmancial information, including the audited financial statements of Raytheon
for the fiscal year ended December 31, 1999, together with a report of
PricewaterhouseCoopers LLP. Attention is particularly directed to the table appearing on
page.48 entitled "Business Segment Reporting." Raytheon Aircrai~ Company results are
reported under the heading "Aircraft."
13. Request for adoption of Res01ution.
In order that the Company may determine its growth and expansion plans in the Salina,
Kansas area, including making necessary financial arrangements and contractual arrangements
with respect to the projects, it is requested at this time that the Commission adopt a
Resolution .substantially in the form presented herewith whereby the City indicates its intention
to' issue not to exceed $50,000,000 of Industrial Revenue Bonds for the purposes described
herein.
Because these projects will represent a long term commitment for growth and expansion in
Salina,' Kansas on the part of Raytheon Aircraft Company, it is expected that both the
construction of the projects and issuance of the Bonds will occur over a period of several
years.' A .ccordingly, the Company requests that the Resolution be valid for a period of up to
ten (10) years. In consideration of the City's willingness to proceed in this manner, the
Company agrees to periodically make special reports to the Commission for the purpose of
updating them on the progress of the projects, as well as other information pertinent to the
growth and development of Raytheon Aircraft Company.
14. Exhibits.
(a) Raytheon CompanY Annual Report for 1999
(b) Resolution
(c) Application for Issuance of Economic Development Revenue Bonds
(d) Information on Raytheon Premier i entry-level business jet
'4
Raytheon Aircraft Company is aware that adoption of the Resolution is only an indication of the
intent of the governing, body of the Cityof Salina, Kansas to proceed with issuing the Bonds to
assist in financing these proposed projects and it remains to final agreement on the terms and
conditions of the suppOrting Bond Resolution, Lease and other essential related documents. We
appreciate your consideration of this request. Should there by any further questions of
information which would be helpful in..evaluating' this matter, we will be pleased to hear from you.
Respectfully submitted, ·
Sincerely,.
RAYTHEON AIRCRAFT COMPANY
/~irec~or - Corporate Affairs
Tim Rogers
Salina Airport Authority
Hansel To°kes
Chairman & CEO, Raytheon Aircraft
Winton I-tinkle
ffmkle, Eberhart, & Elkouri, LLC
,Feb-06-01 03:47P City of Salina City Mg~.
785 826 7248
P.02
APPLICATION FOR INDUSTRIAL REVENUE BONDS
GENERAL INFORMATION
Raytheon Aircraft Company
Name of Applicant Firm
02/09/01
Date of Request
10511 E. Central, P.O. Box 85, Wichita, KS 316-676-7689
Firm Address Phone Number
James M. Gregory, Director/ CorPorate Affairs Same as above
Contact person/title Phone Number
4. Names and addresses of other contacts.
None
316-676-8867
Fax Number
Fax Number
Name Address Phone/Fax
Name Address Phone/Fax
Name Address Phone/Fax
Names and addresses of the principal owners, officers and directors of the firm
requesting the Industrial Revenue Bonds:
Name Title Address
See Attachment - Letter of Request for Inducement ResOlUtion
Page I
,Feb-06-01
03:47P
City of Salina City Mgr. 785 826 7248 P.03
6. Wayne W. Wallace
Applicant's Attorney
7. N/A
Applicant's Underwriter (or Purchaser)
f-fi7f-R~ ] 5/8771
Phone/Fax Number
Phone/Fax Number
II.
Contact Person Address
NATURE OF PROJECT FINANCING (if refunding/refinancing, skip to section III)
I. Briefly describe the proposed financing.
See Attachment - Letter of Request for Inducement Resolution (No.
4)
Is the proposed project a new facility, expansion, or replacement of another existing
facility? The Proiect Will be an expansion, addition and upgradin? of
an existing facility.
Please state thc reason for the establishment of thc new facility, expansion or
r~placcmentoftheexisting facility: See Attachment - .Letter of Request ~for
for Inducement Resolution (No. 4)
Is it the applicant's understanding that the interest on the proposed issue is tax-exempt
or taxable7 (Consult Bond Counsel). The Bonds will be taxable.
Proposed number of years to amortize the bond issue 10 years.
Describe proposed call features: No optional redemption -- call if only a
change in circumstance.
Describe the proposed security for the-bOnds '(i.el Pledge 0f-"c0iiateral~'''
corporate/personal guarantees, debt service reserve fund, credit enhancements, etc.).
It is anticipated that Raytheon Company will either muarantee and/or
purchase the Bonds.
Proposed date of issue: This application is in connection with the issuance
several series of Bonds over a period not to exceed 10 years.
Page 2
. Feb'06-01
8.
03:48P City of Salina
No
Will thc bonds be rated?
City Mgr. 785 826 7248 P.04
Byv~?
10.
ti.
Interest rate to be fix~i for variable rate Adjusted Rate · If variable,
please describe: It is expected that the interest rate Will be adjustable
every six months based on the Prime lending rate of' ChaSe Manhattan Bank,
New York, N.Y.
Please attach proposed debt service schedule, if available. ~/A
Anticipated source and use of projec~ financing, ** (TheSe amounts encompass a
multi-year project
Sotlrc~:
Bond Proceeds $
Cash
Other -
Interest on Bond Proceeds during construction
TOTAL =
Land cost
Construction Costs (new & upgraded
Machinery/Equipment fac ilit ies)
Cost of Issuance (specify)
50,000,000
-0-
$~50. ooo, 000
7,500,000
37:500:000
--0--
10.
Capitalized Interest
Debt Service Reserve Fund
Underwriting Fee
Other (misc. & contingencies)
TOTAL =
5~:000,000
$ 50,000,000
Please indicate proposed Trustee: Intrust Bank, N,A.~ Wichita, Kansas
III.
REFUNDING/REFINANCING
(fill out this section if transaction is a refunding of an existing bond issue)
1. Which form of refunding is proposed
a) Advance Refunding
b) Current Refunding __
CurrentPrincipalOutstanding$
Page 3
-Feb£06-O1
4.
03:48P City of Salina City Mgr. 785 826 7248
P.05
Purpose of Refunding:
Interest Savings (attach proposed savings schedule)
Extend or Shorten Repayment (attach debt service schedule)
Change Indenture Covenants (specify)
Other (specify)
Was the City of Safina .the original Issuer? Yes
Original Date of Issue
NO
If an advance refunding is proposed:
Who is the proposed Escrow Trustee?
Who is proposed to provide escrow verification?
What is the length of escrow account?
When are the refunding bonds callable?
/ /
Mo Day Yr
Is the're a call premium? Yes
(if so %) No
List estimated sources and uses of refunding bond proceeds:
Sources: Uses:
I0.
TOTAL = $ TOTAL = $
Please list the proposed security of the refunding issue:
l 1. Proposed Offering Date of thc Bond Issuc:
Page 4
.Feb;06-01
03:48P City of Salina City Mgr. 785 826 7248 P.06
Please describe any material changes that have occurred to ~e company since the
original bond issue, (i.e. new products or services, increase or decrease in employment,
changes in sales revenue, net worth, profitability, new loc~tions, crc.).
IV.
PROPOSED USE
1. Location ofthe proposed facility: Not yet determined
2. Size of the proposed facility (Include size of building and amount of real property):
Not }~et determined
Name the Architect and Contractor if designated (name, address and phone).
Not yet determined
What business is proposed by the Applicant at thi_..~s location?
See attachment - Letter of Request for' Inducement Resolution' (No. '4)
List the products or services to be rendered.
of the. operation of the business):
(Include details of the nature and scope
See attachment - Letter of' Request for Inducement ResOlution (~Io. '4)
What percentage of the facility will be occupied by the Aoolicant? (If less than 100%,
please specifyotheroccupants): 100% use 15y app3_icant--
Describe type of building construction proposed: Not yet determined
Page 5
. Feb:06-01
Vo
03:48P City of Salina City Mgr. 785 826 7248
P.07
ORGANIZATIONAL
t. Describe the organi:,~tional structure of
subsidiary, corporation, not-for-profit, etc.)
Current zoning. Not yet de~termined
Anticipated date of completion: Not yet determined
the firm (proprietorship, parmership,
Corporation
4.
5:
6.
Is thc Applicant's stock publicly held? No
If so, which stock exchange? N/A
In what state' is thc Applicant incorporated? Kansas
Date of incorporation? September 21, 1993
Indicate Applicant's principal bank7 BankBoston N.A. 100 Federal St.) Boston~
MA 02110 '
WhichCPAfirmdocsthcaccoundng/audit? Price Waterhouse Cooper._ T.T.p
Contact Person Address Phone/Fax
Please indicate what company will be performing the environmental audit.
Not yet determined
Contact Person Address
Describe any pending or threatened litigation:'
1999 Annual Report
Phone/Fax
See attachment - Raytheon Co.
TotalEmploymentofApplicant: 18~000 (610 in Salina)
How many locations does applicant currently have? 5
(10,000 in Wmn.gng)
Page 6
· Feb 06-01 03:4gP City of Salina City Mgr.
List locations:
Principal Locations:
P. 08
Wichita, Kansas; Salina, Kansas; Andov~r, Kansas;
Little Rock, Arkansas; Madison, Mississippi.
In addition~ Raytheon operates aircraft sales and servicinm facilities
at numerous locations worldwide.
VII.
MARKETING OF THE BOND_S
I. Has the applicant retained a financial advisor, instead of or in addition to an
underwriter?. No.
Contact Person
If ~o, please indicate:
Company
Phone/Fax
o
Address
Please indicate the proposed marketing arrangement:
Retail public offering
Institutional offering
x Private Placement
Applicant Purchases issue (indicate %)
Other (please describe)
o
PropoSed date of issue: First issue 12/01_. with s~bseouent
issued during the month of December for the next l0 years.
Proposed date of offering: See No. 3 above
Proposed date of closing: See No. 3 above
is thc issue to be sold intcrstatc or intrastate? N/A
Page 7
~eb-D6-01 03:49P City of Salina City Mgr.
785 826 7248
P. 09
If other underwriters are going to participate in the offering please list:
Company Principal Location
N/A
VIII.'
MEASURE OF., ECONOMIC GROWTI-I AND BENEFIT
Number of expected new additionnl employees to be hired at this site:
Employment data to be supplied with cost/benefit analysis.
Year I - Year 2 Year 3
Professional
Technical
Clerical
Laborers
To be determined.
Please indicate any notable characteristics of thc employees for this facility:
Primarily highly skilled aerospace .machinists and assemblers
Describe the economic benefits to the City's economy if the transaction is completed.
See Attachment - Letter of ReqUest for Inducement Resolution (No. 5)
IX.
POTENTIAL CONFLICTS
Is any City Commissioner an officer, director or employee of t[~e
Applicant or hold an ownership interest in Apphcant's firm? If so, pleaac ,dcntify the
individual and the nature of the relationship.
No o
Page 8
,Feb~06-O1
03:49P City of Salina City Mgr. 785 826 7248 P.IO
Please dcsc~be any other known circumspects tl~t would crcnm n cont'lic~ of inmrcst.
None
PLEASE NOTE: Any potential conflicts as disclosed above do not necessarily negate
the approval of the Issue, but are pertinent for determining those conflicts for the
purpose of public disclosure.
OTHI~R INFORMATION
Specify below any other data or information you deem pertinent for the City's consideration
in passing upon the approval of the proposed project or financing:
Raytheon'Aircraft Company is a wholly-oWned subsidi~z..of'Raythe0n'ComPany~ a
publically-oWned corporation whose stock is traded on'the'New York Stock ExChange.
It is expected that the bonds will be sold to RaytheOn'ComPany~in a private
placement and Raytheon Company's annual report is providedherewith in plac_e__
of the financial information requested in Item XI below; In addition, the
publically available information relating to Raytheon Company can be found on
the internet at www. Raytheon.com. It is requested that the Bonds be issued under
and pursuant
to the Interlocal Cooperation Agreement dated Dec. 20, 1989, by and
amongSedgwick County, Kansas, the City of Andover, Kansas, the City of Salina,
Kansas, and the city of Wichita, Kansas and that such authority shall be in
XI.
addition' to any unutilized authority under Resolution' No. 98-5380.
TO fq.cilita, te. thc processing: of the ...application, please altech the following: items to
aoolication.
2.
3.
4.
Certified copies of applicant's financial audits for the past three (3) years.
Applicant's most recent annual or quarterly financial report.
Financial Statement, current to date, for each personal guarantor.
Pro forma statements for the first five (5) year~ of operation after issuance of Bonds,
including revenue projections, operating expense projections and a debt amortization
schedule.
Interim financial statements to date. for the current fiscal year.
XIi.
APPLICANT'S AGREEMENT
In consideration for the City's acceptance, processing and consideration of this Application,
Applicant agrees, represents and warrants as follows:
Applicant agrees and understands that Applicant shall be responsible for
paying all expenses incurred by the City for professional services pertaining
to this Application and Applicant's
Page 9
.Feb'-06-01 03:50P City of Salina City Mgr. 785 826 7248 P.11
0roiec~; ~L~nrdl_~_~ 0f whether or not the tmroject is anoroved or a closin~ on the sale of the
contemola!_ed bonds takes place. Applicant represents and warfares that all statements of fact
contained in this Application are true to Applicant's best knowledge and belief.
Partial completion of this application is permitted, however, prior to the adoption of the bond
ordinance, the remaining supplementary information to complete this application must be
furnished. Additional information may be required by Bond Counsel and the Financial
Advisor.
It is understood and agreed thc information required in Section X or any other information will
be disclosed to the financial team and may bc disclosed to thc public.
Date
,199
Title Date
Return this application to:
Judy D. Long
City Clerk
City of Salina
P.O. Box 736
Salina, Ks. 67q02-0736
Pace 10
Background Information
Salina (Raytheon) Industrial Revenue Bonds Issued 1988-
2000.
1989 Interlocal Agreement among Salina, Wichita, Andover
and Sedgwick County.
Salina Industrial Revenue Bonds
Year Resolutions Bonds Issued Balance
1988 $20,000,000.00 0 $20,000,000.00
1989 2,396,458.34 $17,603,541.66
1990 2,221,276.11 $15,382,265.55
1991 519,824.74 $14,862,440.81
1992 226,028.86 $14,636,411.95
1993 363,255.15 $14,273,156.80
1994 102,832.84 $14,170,323.96
1995 478,904.07 $13,691,419.89
1996 223,800.31 $13,467,619.58
1997 677,299.25 $12,790,320.33
'1998 388,066.13 $12,402,254.20
1999 709,909.01 $11,692,345.19
2000 1379325.68 $10,313,019.51
* 1998 Inducement Resolution extended five years (2003)
Salinal / IRBs
CITY OF SALINA
REQUEST FOR COMMISSION ACTION OATE TIME
12'7'~'~89 /~:00 P.M.
!AG~ SECTION: Administration ORIGI~TI~ DEPARTM~T: APPROV~ ~R
~. 8 AGE.A:
City Manager
ITEM
BY: Dennis Kissinger BY:
Resolution Number 89-qlq6
Beech Aircraft Corporation. - Interlocal Cooperation Agreement between City of
Salina, City of Andover, City of Wichita and Sedgwick County, Kansas.
Background
In April 1988, the Salina City Commission approved unanimously a Resolution of
Intent to issue up to $20,000,000 in Industrial Revenue Bonds (IRBs) over a period
of years for Beech Aircraft Operations in Salina. The IRB financing was to be used
by Beech primarily for machinery and equipment purchases to allow for expansion of
their manufacturing operations in Salina. At the same time, the company was working
with Wichita, Andover and .Sedgwick County on similar IRB issues. All machinery and
equipment acquired under this IRB financing was to be tax abated for ten years in '
accordance with Kansas law.
Later in 1988, before actual issuance' of any Salina/Beech IRB~, the company
approached the governmental agencies involved, as well as state officials, regarding
a method of IRB issuance which would lessen the company's issuance costs and
administration, while greatly enhancing their flexibility in Beech manufacturing
operations throughout Kansas. The City Attorney and I were involved in these
discussions representing Salina.
After some 18 months of effort, the Interlocal Agreement proposed here was approved
by the Attorney General and Board of Tax Appeals.
The only substantive effect of this agreement on our City is that the proposed
maximum $20,000,000 in equipment and machinery, etc. to be used at the Salina plant
would be purchased with IRBs issued by Sedgwick County, rather than the City of
Salina. All other tax and finance effects wOuld remain the same as approved by our
City in 1988.
COIv~ISSION ACTION
,',,lOTION 8Y S~OND BY
CITY OF SALINA
REQUEST FOR COMMISSION ACTION
DATE TIME
12/04/89 4:00 P.M.
AGENDA SECTION: Administration ORIGINATING DEPARTMENT: APPROVED FOR
ND' AGENDA:
City Manager
ITEM
NO.
BY: Dennis Kissinqer BY:
Ordinance No.
Page 2
Recommendation
Staff believes this Interlocal Agreement satisfies the needs and interests of all
parties and will enhance the economic health and expansion of company operations in
Salina and in their other locations in Kansas. Staff recommends approval of the
interlocal agreement ordinance.
Representatives of Beech Aircraft Corporation will be present at Monday's meeting
and will be prepared to answer any questions along with City staff.
CC,%941SSION ACTION
MOTION BY SECOND BY
TO:
Beech Aircraft Corporation
POBex85
Wichita KS 67201-0085 USA
316681 7111
Telex 71 203683
T2eechcmft
November 6, 1989
Mr. Dennis Kissinger
City Manager
City of Salina
City-County Building - 300 W. Ash
Salina, Kansas 67402
Re-
Beech Aircraft Corporation
Interlocal Cooperation Agreement
Dear Dennis:
Over the past several months we have met with various elected
officials and staff representatives of Sedgwick County and each of
the cities which previously have issued or have been requested to
issue industrial revenue bonds to finance certain facilities for
the Company's use. During those meetings we discussed a proposed
form of Interlocal Cooperation Agreement which was prepared by Bond
Counsel at the Company's request and a copy of which is enclosed
for your information and review.
Over the past year we have been working with public officials
and Bond Counsel to develop a comprehensive approach to the
issuance of Kansas industrial revenue bonds to finance facilities
which likely will be located within the boundaries of various
political subdivisions. The basic concepts were developed in
recognition of the fact that the Company's economic development
needs as a growing manufacturer of general aviation and aerospace
products were becoming increasingly difficult to address in the
traditional manner.
As you know, the Company has facilities located in Butler,
Saline and Sedgwick counties, portions of which have been financed
over a period of time through the issuance of bonds by Andover and
Wichita as well Sedgwick county. In addition the City of Salina
has approved a Letter of Intent to issue bonds in aha mount not to
exceed $20,000,000. The Company's manufacturing operations have
grown substantially in recent years and are interdependent upon
activities performed at the various plants which has made the need
for greater flexibility in utilization of assets become readily
apparent.
The Interlocal Cooperation Agreement was developed principally
fort he purpose of providing such needed flexibility and to reduce
the administrative burdens associated with present industrial
revenue bond financing methods. Under the proposed Interlocal
Cooperation Agreement Sedgwick County would be designated as the
issuer of all future industrial revenue bonds issued in Kansas to
finance the development of facilities to be utilized by the
Company, regardless of their location. At the same time the
agreement assures that policy decisions and decisions with respect
to ad valorem tax abatement remain under the control of the local
units of government which are directly affected. The agreement
also provides for periodic reporting and updating of information
to each governmental unit.
The form and underlying concepts of the Interlocal Cooperation
Agreement already have been approved by the Kansas Attorney
General's office and by the Kansas Board of Tax Appeals. We
believe that approval of the agreement by all part~es will provide
the necessary mechanisms to facilitate the continued expansion of
the Company's facilities in Kansas and urge you to consider our
request at the earliest opportunity. We would appreciate your
thoughtful consideration and approval of our request. Of course,
if you have any questions and desire further information in
addition to that furnished previously we will be happy to meet with
you at your convenience.
RESOLUTION NUMBER 89-4146
A RESOLUTION AUTHORIZING THE MAYOR TO EXECUTE AND THE
CITY CLERK TO ATTEST AN INTERLOCAL COOPERATION AGREEMENT BY AND
BETWEEN SEDGWICK COUNTY, KANSAS, THE CITY OF ANDOVER, KANSAS,
THE CITY OF SALINA, KANSAS AND THE CITY OF WICHITA, KANSAS
AUTHORIZING SEDGWICK COUNTY, KANSAS TO ISSUE ITS INDUSTRIAL
REVENUE BONDS PURSUANT TO K.S.A. 12-1740 to 12-1749a, INCLUSIVE,
RELATING TO BEECH AIRCRAFT CORPORATION.
WHEREAS, on April 11, 1988, the Board of Commissioners adopted
Resolution Number 88-3970, expressing the Intention of the City of Salina,
Kansas, to Issue industrial revenue bonds in an amount not to exceed
$20,000,000 for the purpose of providing funds for the construction,
improvement and equipping of additions to an existing facility and for the
purchase of machinery and equipment to be located thereon for Beech Aircraft
Corporation.
WHEREAS, the Kansas lnterlocal Cooperation Act, K.S.A. 12-2901 et
seq., as amended (the "lnterlocal Cooperation Act"), permits local governmental
units to make the most efficient use of their powers by enabling them to
cooperate with other localities, persons, associations and corporations on a basis
of mutual advantage and thereby to provide services and facilities in a manner
and pursuant to forms of governmental organization that will accord best with
geographic, economic, population and other factors influencing the needs and
development of local communities; and
WHEREAS, Sedgewick County, Kansas, the City of Andover, Kansas, :
the City of Saiina, Kansas and the City of Wichita, Kansas (hereinafter referred
to collectively as the "Participants") have each heretofore issued or proposed
issue certain revenue bonds pursuant to the Act for the purposes of financing
facilities which have been or are proposed to be leased to Beech Aircraft
Corporation (hereinafter referred to as "Beech"); and
WHEREAS, Beech has requested that the Participants cooperate with l
one another to facilitate the financing of certain new and additional improvements*
to Beech's facilities located within the boundaries of the representative=
Participants and to refund certain other outstanding revenue bonds previously
issued by the Participants pursuant to the Act, in order to secure to the
Participants and to Beech the economic and other benefits to be derived through
the orderly and efficient financing of facilities and refunding of outstanding
indebtedness issued for the purposes of financing certain facilities leased and to
be leased by the respective Participants to Beech; SO NOW, THEREFORE
BE IT RESOLVED by the Governing Body of the City of Saltna,
Kansas:
Section 1. That the Mayor is hereby authorized to sign and the City
. Clerk to attest an interlocal Cooperation Agreement, a copy of which is attached
:~ and incorporated as Exhibit #A", by and between Sedgwick County, Kansas, the
;'. City of Andover, Kansas, the City of Salina, Kansas and the City of Wichita,
=Kansas authorizing Sedgwick County, Kansas to issue its Industrial Revenue
!i Bonds pursuant to K.S.A. 12-1740 to 12-1749a, for the purposes financing
~. certain new and additional Improvements to Beech~s facilities located within the
.~ boundaries of the respective participants and to refund certain other outstanding
!.i revenue bonds previously Issued by the participants pursuant to the Act in
=~ order to secure to the participants and to Beech the economic and other benefits
Ii
~i to be derived through the orderly and efficient financing of facilities and
~i~i refunding of outstanding indebtedness issued for the purposes of financing
~: certain facilities leased and to be leased by the respective Participants to Beech.
,. Section 2. That upon approval of the Interlocal Cooperation Agreement
: by the Kansas Attorney General, the City Clerk is hereby directed to confirm
I= that a fully executed copy of the Interlocal Cooperation Agreement has been
i:
: recorded with the Office of the Secretary of 'State and' with the Office of the
Saline County Register of Deeds.
Section 3. That this Resolution shall be in full force and effect from
· and after its adoption.
Adopted by the Board of Commissioners and signed by the Mayor this
qth day of December, 1989.
[SEAL]
ATTEST:
Joseph A. Warner, Mayor
Jacqueline Shlever, City Clerk
EXHIBIT "A"
TNTERLOC~L COOPEI~TTON i~,GRE~I~..~.T
This Interlocal Cooperation Agreement pursuant to the
Interlocal Cooperation Act, K.S.A. 12-2901, et seq., as amended is
entered into by and between Sedgwick County, Kansas, the City of
Andover, Kansas, the City of Salina, Kansas and the City of
Wichita, Kansas authorizing Sedgwick County, Kansas to issue its
Industrial Revenue bonds pursuant to K.S.A. 12-1740 to 12-1749a,
inclusive (the "Act") for the purposes set forth herein.
WHEREAS, pursuant to K.S.A. 12-1740 to 12-1749a, inclusive,
as amended, (the "Act"), all cities and counties in the State of
Kansas are authorized to issue revenue bonds, the proceeds of which
may be used for the purpose of paying all or part of the cost of
purchasing, acquiring, constructing, reconstructing, improving,
equipping, furnishing, repairing, enlarging or remodeling
facilities for agricultural, commercial, hospital, industrial and
manufacturing purposes.
WHEREAS, pursuant to K.S.A. 12-1749(a), any city or county
which has issued revenue bonds under the provisions of the Act are
further authorized to issue refunding revenue bonds in the manner
prescribed by and subject to the provisions of K.S.A. 10-116(a);
and
WHEREAS, in accordance with the provisions of K.S.A.
12-1741(a) and (b) cities and counties have no authority to issue
such revenue bonds to finance facilities located outside the
issuer's boundaries except as specifically provided therein; and
WHEREAS, Sedgwick County, Kansas, the City ofAndover, Kansas,
the City of Salina, Kansas and the City of Wichita, Kansas
(hereinafter referred to collectively as the "Participants,,) have
each heretofore issued or proposed to issue certain revenue bonds
pursuant to the Act for the purposes of financing facilities which
have been or are proposed to be l~ased to Beech Aircraft
Corporation (hereinafter referred to as "Beech") as more fully
described in Exhibit A attached hereto and incorporated herein by
reference; and
WHEREAS, the Kansas Interlocal Cooperation Act, K.S.A. 12-2901
et seq., as amended (the "Interlocal Cooperation Act"), permits
local governmental units to make the most efficient use of their
powers by enabling them to cooperate with other localities,
persons, associations and corporations on a basis of mutual
advantage and thereby to provide services and facilities in a
manner and pursuant to forms of governmental organization that will
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accord best with geographic, economic, population and other factors
influencing the needs and development of local communities; and
WHEREAS, each Participant is a "public agency" as such term
is defined in K.S.A. 12-290-3(a); and
WHEREAS, Beech has requested that the Participants cooperate
with one another to facilitate the financing of certain new and
additional improvements to Beech's facilities located within the
boundaries of the respective Participants and to refund certain
other outstanding revenue bonds previously issued by the
Participants pursuant to the Act, in order to secure to the
Participants and to Beech the economic and other benefits to be
derived through the orderly and efficient financing of facilities
and refunding of outstanding indebtedness issued for the purposes
of financing certain facilities leased and to be leased by the
respective Participants to Beech; and
WHEREAS, pursuant to the Interlocal Cooperation Act, the
Participants are'authorized and empowered to enter into Interlocal
Cooperation Agreements and the governing body of each Participant
has duly authorized the execution and delivery on its behalf of
this Interlocal Cooperation Agreement for the purpose of
establishing the relationships and respective duties and
obligations of the parties hereto in accordance with the Act;
NOW, THEREFORE, in consideration of the premises set forth
herein, and of the mutual benefits to the Participants which shall
accrue by virtue of this Interlocal Cooperation Agreement, the
parties hereto agree as follows:
Section 1. This Agreement shall remain in full force and
effect until the principal of and interest on all revenue bonds
and all sums of money with respect thereto have been paid in full
or provision made for the payment thereof in accordance with the
provisions of said bonds and related agreements authorizing and
securing payment of said bonds; provided, however, that in no event
shall the term of this Agreement extend for a period longer than
forty (40) years commencing on the day hereof and terminating at
11:59 p.m. on .
Section 2.
agree that:
The Participants hereby severally covenant and
(a) The Board of County Commissioners of Sedgwick
County, Kansas, as issuer (hereinafter referred to as the
"Issuer") shall authorize and issue its revenue bonds pursuant
to the Act for the purpose of financing the construction,
reconstruction, improving, equipping, furnishing, repairing,
enlarging or remodeling of facilities located within the
boundaries of the respective Participants for commercial and
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industrial purposes to be leased to B~ech and to refund
revenue bonds heretofore issued by the Participants with
respect to facilities leased to Beech, all in accordance with
the Act.
(b) Ail bonds issued by Issuer shall recite therein that
said bonds are issued by Issuer on behalf of and with the
consent and approval of the City of Andover, Kansas, the
City of Salina, Kansas and the City of Wichita, Kansas,
respectively as Participants, and pursuant to the provisions
of this Interlocal Cooperation Agreement.
(c) The Issuer is authorized to execute and deliver on
behalf of the Participants, indentures of trust, leases and
such other documents and agreements as the governing body of
the Issuer may determine to be necessary or desirable to
secure payment of the bonds issued by Issuer and to evidence
Issuer's security interests in the facilities financed through
issuance of such bonds and that such other revenues or
property which may from time to time be pledged to secure
payment of said bonds. '
(d) The Issuer is further authorized to execute and
deliver such other documents, agreements or certificates as
shall be necessary to implement and carry on the intention of
this Interlocal Cooperation Agreement.
Section 3. The Participants hereby authorize the Issuer to
engage in any and all acts and to exercise all of the authority
and powers conferred upon the Participants by the Act and by the
Interlocal Cooperation Act and with respect to any property located
within the boundaries of the respective Participants including, but
not limited to, the respective Participants authority to issue
revenue bonds pursuant to the Act.
Section 4. Issuer covenants and agrees that it will take no
action under and pursuant to the terms of this Interlocal
Cooperation Agreement which would result in the abatement of ad
valorem taxes levied by Participants or by political subdivisions
located within the boundaries of the Participants on or with
respect to facilities leased to Beech without the express prior
written approva~ of such Participant in accordance with the
provisions of K.S.A. 12-1741(a) and 12-1741(b). Issuer further
covenants that any payments in lieu of taxes received by the Issuer
with respect to facilities located within the boundaries of the
respective Participants shall upon receipt be forthwith allocated
and transmitted to the Participants in accordance with the
provisions of K.S.A. 12-1742. The Participants agree that
abatement of ad valorem taxes already in effect in connection with
the issuance by the Participants of outstanding industrial revenue
bonds shall not be affected in any way in connection with the
-3- lO/89
execution of this agreement or by the issuance by Issuer of
refunding bonds for the purposes of refunding such outstanding
revenue bonds of the Participants.
Section 5. During the term of this Agreement, the Issuer
shall maintain a written record which shall allocate the amount of
bonds issued by the Issuer hereunder among the Participants__in~
~~an~e ~.t~..the ~nt of p~oceeds, of such bonds
p aue =aclll=les wl~nln the 3urisidlction of each Participant.
In no event may the total amount of bonds allocated to 'any
Participant exceed the total amount of bonds authorized by such
Participant pursuant to a letter of intent or inducement resolution
duly approved by its governing body. Each Participant reserves the
right to increase the amount of authorized bonds which may be
allocated to it hereunder by adoption of either an additional
letter of intent or inducement resolution.
Section 6. The parties acknowledge and agree that from time
to time machinery or equipment financed with the proceeds of bonds
issued hereunder may be moved by Beech from
th .... facilities located in
e ]urisaic=ion oz one of the Participants to facilities locate, d
an the jurisdiction of another Participant. The Issuer sh~ll
~q~_~e Be~ch ~o r~p%rtn? less often t~anannuallythe descriptxon
oz any SUCh reioca=e~ machinery or equipment and the amount of the
~st thereof ~l~an~ed ~{th the proceeds of b~nds issued hereunder.
· me. amoun= qz Donas al£ocated to the PartIcipant in which such
machinery and equipment was originally located shall be reduced.by
the amount of the cost of such machinery or equipment financed with
~s~?ndin~ly .~nc~eased to ~he -extent that--~-a~o-~[-
p_a_~a?.le .una%r.~ne .=~rms ?~ this Agre~m?nt for allocation to the
ar~aclpan=, ae£oca~ec macn~neryand equlpment~ichqualifi~s for
allocation to the Participant to which such machinery or equipment
_been shall be entitled to of ad valor
axes prev~ous£y approved by Participant ~n accordance w~thSection
%riod of abat ent with respect
_~_=_.t~"~m_=~"~=zT.a~u.~qulP~?n= ~na££ not be in any manner extended
p =~ou =o pe~loa o= =1me o~nerwlse allowed by law as a result of.::.-
~?k.r?loc~t~on...~.e Issuer shall a~ually s.~mit to each of ~
=ar~lc~pan=s. a wrl==en report of the allocations made under this
~gre.?~t,_ lnc½u~ing reallo?tions resulting from a ch~ge o~
£oca=lon oz machinery or equipment. ,
· . . ' : .1 ~':..~%.~:~-~n:._
~_ _S_~gn 7: I~.~s .not anticipated that the Issuer or any
uae ~ar=~pan=s w~££ lncure any significant o~e~a~-- -~
cXpense~.ln ~onnect~0n wlth.t~.e u~plementation of this Interlo~al..
.~o?era=}on Agreement. Participants hereby find and determine.~that
~m ~n asSOCla=lon nerewinn, t,-~
-4-
Section 8. If one or more provisions of this Agreement are
hereafter found void or unenforceable as provisions contrary to
law the remaining provisions shall nevertheless continue in full
force and effect, and only such provisions as are specifically
found invalid shall be null and without effect.
-5-
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EXECUTED AND DELIVERED this day of
1988
SEDGWICK COUNTY, KANSAS
Attest:
By:
(Seal)
CITY OF ANDOVER, KANSAS
Attest:
By:
(Seal)
CITY OF S~-LINA, KANSAS
Attest:
By:
(Seal)
CITY OF WICHITA, KANSAS
Attest:
By:
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