Hitachi plant to be first built with pooled financing program
BY DEBBIE BLOSSOM The Oklahoman
A state incentive encouraging economic development that went into effect in July is one of four major initiatives passed in 2009 to bolster growth and help companies expand.
The Oklahoma Community Economic Development Pooled Finance Act targets job creation and infrastructure development assistance through a bond incentive issued through the Oklahoma Development Finance Authority, said Jonna Kirschner, Oklahoma Department of Commerce deputy director and general counsel.
The economic development portion of the program allows local government entities — such as cities, counties and economic development agencies — to work together and with private-sector partners that need financing to expand operations and add jobs.
The pooled finance incentive is being used for the first time to help Norman-based Hitachi Computer Products expand its state operations.
The company has broken ground on a new distribution center that will add jobs and consolidate the global company’s North American and South American distribution operations to Norman.
The Cleveland County Industrial Authority will borrow funds through the issuance of lease revenue bonds from the finance authority. Cleveland County will borrow up to $15 million from bond proceeds, Kirschner said, to build the 200,000-square-foot warehouse.
Hitachi will lease the facility from Cleveland County.
Enhance the economy
The Oklahoma Community Economic Development Pooled Finance Act is similar to measures legislators approved in 2002 for tiremakers Michelin and Goodyear to expand their facilities with assistance from bonds issued by the finance authority, Kirschner said.
But that legislation targeted only tire manufacturers, and one Oklahoma business leader believed the state needed an incentive to include other industries.
"I’m always interested in what we can do to enhance Oklahoma’s economy,” said Kell Kelly, president and chief executive officer of SpiritBank.
In 2008, Kelly started research with a goal of creating some unique financing for state companies, and he took that research to state Rep. Skye McNiel and commerce officials.
"We’re really disadvantaged in that we don’t have a pool of cash to offer companies,” Kelly said. "We wanted to be able to give Oklahoma a more competitive edge.”
The result was Bill 2067, which created the pooled finance act that allowed the private and public partnership "that previously we could not do,” Kelly said.
‘Limited pool’
Kirschner said the program is complicated, and with the reality of tight credit, "there is a limited pool that can take advantage of this.”
Local governments help companies apply for state assistance, and commerce officials review each submitted business plan and decide whether it "creates a new benefit position for the state,” which means it creates more revenue than what is being borrowed, Kirschner said.
Plans approved by commerce officials are referred to the development finance authority, which is responsible for issuing bonds for the project. The authority also determines, with the guidance of financial advisers, a market for the bonds and details such as interest rates.
The development finance authority has created a $100 million economic development pool to finance expansion projects. The bonds could be repaid in a number of ways: revenues generated from business activity, secured withholding tax revenues linked to new direct jobs created by the for-profit company, private guarantee or locally imposed sales or other taxes or a combination of these sources.
The pooled finance incentive "applies for any for-profit industry,” Kirschner said.
Source: The Oklahoman