8.3 IRB Agri Fuels Inc
~, ~
CITY OF SALINA
REQUEST FOR COMMISSION ACTION
DATE
12/22/1980
TIME
4:00 P.M.
AGENDA SECTION:
NO. 8
Administration
ORIGINATING DEPARTMENT:
City Clerk
ITEM
NO. 3
D. L. Ha r r i son
APPROVED FOR
AGENDA:
~
BY:
BY:
An amended application has been filed by James R. Ward, President of Kansas
Agri Fuels, Inc., for the issuance of Industrial Revenue Bonds.
Information has been provided based on the Commission's established policy. The
required $500 fee has been paid. It has been the City's policy in the past to
put the app1 ications on the agenda and then to convene into Executive Session.
It is our recommendation the applicant be required to pay all taxes, allowing
no exceptions.
COMMISSION ACTION
~TI0N BY
SECOND BY
TO:
..
CITY OF SALINA, KANSAS
APPLICATION FOR ISSUANCE OF INDUSTRIAL REVENUE BONDS
AMENDED APPLICATION
I GENERAL INFOR."1.ATION
1. Name and Address of Applicant
Kansas Agri Fuels, Inc.
2099 Hageman Avenue
Salina, Kansas 67401
2. Name, address and telephone number of responsible
person to contact regarding proposed bond issue
--
James R. Ward, President
2099 Hageman Avenue
Salina, Kansas 67401
(913) 823-7559
3. Name and address of attorney for Applicant
Ronald Barta, Esq.
Barta & Barta, Attorneys
611 East Iron Street
Salina, Kansas 67401
(913) 825-5413
Bond Counsel
Jerry T. Powell, Esq.
Stinson, Mag & Fizzell
Attorneys at Law
2100 TenMain Center
Kansas City, Missouri 64105
(81 G) 842-8600
4. Nature of Applicant's Business
Production of Fuel Grade Anhydrous Alcohol from fermen-
tation of agricultural products, including the production
of Dry Distillers Grains for use as a protein supplement
for cattle feed.
5. Name and address of Underwriter for issue
Applicant has engaged Lee F. Sutliffe to act as Financial
Advisor and Funding Consultant with respect to obtaining
a Municipal Bond Underwriter to rurchase the Bonds. An
application has been made through George E. Mueller, Esq.,
Naples, Florida, as Underwriter's Counsel, for approval
by an Underwriter. Applicant proposes to enter into an
Underwriting Agreement, copy of which will be submitted
for attachment to this Bond Application prior to its
consideration by the Salina City Council on December 22,
1980.
Names and addresses of representatives
George E. Mueller, Esq.
Attorney at Law
1207 Third Street South
Naples, Florida 33940
(813) 262-2235
Lee F. Sutliffe
6203 South Galena Ct.
Englewood, Colorado 80111
(303) 779-4494
6. Estimated Amount of Bond Issue
The estimated amount of the proposed bond issue is
Two Million Nine Hundred Fifty Thousand ($2,950,000) Dollars,
however, Applicant respectfully requests that the City of
Salina adopt an inducement resolution authorizing the
issuance of industrial revenue bonds up to a maximum of
$3,100,000.
Applicant's original application for $6,500,000 in revenue
bonds anticipated constructing a plant having a much
greater production capacity. Although the market potential
for Applicant's products has not diminished, Applicant
believes that its production objectives will be better
implemented by constructing an alcohol distilling plant
with equipment furnished by a manufacturer and supplier with
a proven production reco~d.
The proposed bond issue will include a parity bond provision
permitting the issuance of additional bonds at such time as
expansion of the planned facility is required. The new
equipment manufacturer and supplier will guarantee a minimum
200 gallon per hour anhydrous alcohol production.
II USE OF BOND PROCEEDS
1- Amount requested for purchase
of land $ 90,000
2. Amount requested for land and
site improvements and buildings $ 604,000
3 . l\mount requested for plant equipment $ 1,306,000
2
4. Will the lssue refinance an existing project?
No.
5. Is the proposed project an expansion or replacement
of another existing facility?
No".
III PROPOSED FACILITIES
1. Location of proposed facility
^ 5 Acre tract of land located adjacent to Interstate
Highway 35-W. The property is situated at the southeast
corner of a county road and the Atchinson Topeka and
Santa Fe Railroad tracks, approximately 1000' west of
Interstate HighwaY135-W, in Saline County, Kansas.
The property is approximately one and one-half miles
northwest of the corporate city limits of Salina, Kansas.
It is situated approximately one mile south of Interstate
Highway 70 and one-quarter mile north of the intersection
of Route 140 (State Street) and Interestate Route 135-W.
(see "Description of Property" on Page 7 of the
attached Information Surrunary)
2. What business is proposed by Applicant?
The Applicant proposes to acquire land and construct and
equip a high-grade alcohol distilling plant to produce,
market and distribute fuel grade ,Anhydrous Ethanol Alcohol
and Dry Distiller's Grain.
3. List the products or services to be rendered.
(a) The Applicant will produce fuel grade Anhydrous
Ethanol ^lcohol to be blended with leaded, premium
and unleaded gasolines ("Gasohol"); and
(b) The Applicant will produce Dry Distiller's Grains
("DDG") to be marketed as a protein supplement used
in cattle feed. DOG may also be marketed as a
fertilizer ingredient.
4. Will the Applicant be. in competition with any local firms?
No.
3
5. What percentage of the facility will be occupied by
the Applicant?
The Applicant will occupy 100% of the proposed facility.
Also, 100% of Applicant's gross sales will be generated
from the Facility.
IV. OWNERSHIP AND MANAGEMENT
1. Describe the organizational structure of the firm.
Kansas Agri Fuels, Inc. is a Kansas Corporation
2. List the names of the principal officers, directors and
shareholders of the applicant firm.
Shareholders:
James R. Ward
50% of the issued and outstanding
shares of stock
Eleanor M. Ward
50% of. the issued and outstanding
shares of stock
Additional shares of stock may be issued to solidify
marketing and distribution agreements and provide additional
working capital (see "Description of Applicant" on Page J
of the attached Information Summary) .
Directors
James R. Ward
Eleanor M. Ward
Shirley W. Keeler
Chairman of the Boa~d
Director
Director
Officers
James R. Ward
Eleanor M. Ward
James S. Ward
John Ward
President
Secretary and Treasurer
Vice President-Assistant Secretary
Vice President-Assistant Treasurer
V. FINANCIAL RESPONSIBILITY
1. How many years has Applicant been in business?
Applicant is a Kansas Corporation which has been organized
solely for the purpose of leasing and operating the pro-
posed Facility. The Corporation has no prior operating
experience or record.
4
2. Amount of equity capital to be furnished by Applicant.
The corporation has been capitalized initially for
$5,000 which has been paid into the corporation.
Additionally, the corporation will have a contributed
capital surplus of $100,000.
Additional working capital may be obtained by issuing
shares of stock to solidify marketing and distribution
agreements with EVCO, Incorporated and The Landes Companies,
both of Salina, Kansas.
3. What is Applicant's Dun & Bradstreet rating?
The Applicant is not listed with Dun & Bradstreet or any
other credit rating firm. Additionally, the Underwriter
does not intend to apply for any credit rating for the
proposed Bonds.
4. List assets Applicant will pledge to secure the proposed
revenue bonds.
The proposed revenue bonds will be secured by:
(a) A Lease and Development.Agreement between the
City of Salina, Kansas, as Lessor, and Kansas
Agri Fuels, Inc., as Lessee;-
(b) The Bond Ordinance which will convey a lien
and security interest of first priority to
the Fiscal Paying Agent for the Bondholders
(Planters Bank & Trust Co., Salina, Kansas)
(c) An Assignment fo'r the benefit of the City of
Salina and the Bondholders of all revenues,
income, avails and profits of Kansas Agri Fuels,
Inc. from the operation" of the Project.
5. List any person or firm who will act as guarantors for the
proposed bonds.
The proposed revenue bonds will be additionally secured
by:
(a) The Guarantee of Kansas Agri Fuels, Inc. as to
the revenue bonds; and
(b) By the Guarantee of James R. Ward, individually,
as to the Lease.
5
VI MARKETING OF BONDS
1. Will the proposed bonds be sold as a public offering?
Yes. The Underwriter will enter into a Bond Purchase
Agreement with the City of Salina to purchase all of
the bonds at the face amount thereof, less an applicable
bond discount. Thereafter, the Underwriter may re-offer
the bonds to other Municipal Bond Dealers or to the public.
It is not anticipated that any of the bonds will be
sold in Salina, Kansas unless the Underwriter should
develop a market in the area.
2.. Have arrangements been made to market the bonds?
Arrangements are pending. The Applicant has made appli-
cation to a Municipal Bond Dealer to market the bonds.
The Applicant expects to enter into an Underwriting
Agreement which will be submitted for attachment to this
Bond Application prior to the consideration of the Appli-
cation by the Salina City Council at its regular meeting
on December 22, 1980.
3. Has conventional financing been investigated?
Yes. Applicant has been unsuccessful in obtaining con-
ventional financing for the Project. Applicant has also
applied to Farmer's Home Administration to obtain a loan
guarantee, however, current conventional interest rates
for interim and permanent financing are prohibitive. A
Farmer's Home Administration guarantee cannot be used
in connection with the issuance of tax-exempt industrial
revenue bonds.
VII.
MEASURE OF ECONOMIC GROWTH AND BENEFIT
.
1.
What percentage of sales will be sold locally?
100% of Applicant's sales will be generated locally.
2. What is the estimated amount of merchandise, products
or services purchased locally per year?
(a) Local Purchases: $1,560,000 estimated during the
initial operating year (9 months)' increasing to
approximately $3,860,000 per year by the fifth year.
(b) Local Sales Volume: $2,700,000 estimated for initial
nine month operating period increasing to approximately
$6,600,000 by the fifth operating year.
6
3. How many people will the Project employ?
The Project is expected to initially employ 12 to
14 persons with an estimated annual payroll of
approximately $220,000 for the initial nine month
operating period, increasing to approximately $420,000
by the fifth operating year.
4. How many new jobs will be created?
100% of the employment opportunities will be created
by the construction and operation of the Project.
All new employees are expected to be residents of
Salina" Kansas.
VIII In order to facilitate the timely processing of the application,
please attach as part of the proposal, the following items:
1. Copy of the Applicant's audited financial statements for
the past two years.
Not Applicable. Applicant is a new Corporation which
has been organized to develop and operate the Project.
2. Interim financial statements, to date, for the current
fiscal year.
Not Applicable. The Company is not yet in operation.
Applicant has prepared and submits Forecast Statements
of Income and Expense for five fiscal operating periods
which are attached hereto as Exhibit "A" and included
on Pages 16 and 17 of the attached Information Summary.
IX Applicant further agrees as follows:
1. To waive paying a gift in lieu of annual real estate and
property taxes. Applicant elects to remain on the tax
rolls.
2. To provide all financial data required by the City ~n
connection with this Application.
Respectfully submitted,
December 10, 1980
Date of Amended
Application:
7
December 19, 1980
NOTICE TO NEWS MEDIA:
There will be no City Commission
meeting on December 29, 1980. It is
the fifth monday of the month.
News Media: Salina Journal
KSAL
Channel 6
KINA
KSKG