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HomeMy WebLinkAbout12851RESOLUTION NO. 12851 A RESOLUTION APPROVING AN AGREEMENT BETWEEN PUEBLO, A MUNICIPAL CORPORATION, AND KURT MANUFACTURING COMPANY, INC., A MINNESOTA CORPORATION, RELATING TO A JOB CREATING CAPITAL IMPROVEMENT PROJECT, AUTHORIZING THE PRESIDENT OF THE CITY COUNCIL TO EXECUTE SAID AGREEMENT AND TRANSFERRING $1,475,000 FROM THE 1992-2016 SALES AND USE TAX CAPITAL IMPROVEMENT PROJECTS FUND THEREFOR BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO, that: SECTION 1. The City Council finds and determines that the expenditure of $1,475,000 for the job creating capital improvement project with Kurt Manufacturing Company, Inc. (“Kurt Manufacturing”) described in the attached Agreement, meets and complies with the criteria and standards established by Section 14-4-85 of the Pueblo Municipal Code and will create employment opportunities justifying the expenditure of public funds. SECTION 2. The Agreement dated December 9, 2013 between Pueblo, a Municipal Corporation and Kurt Manufacturing relating to a job creating capital improvement project, a copy of which is attached hereto ("Agreement"), having been approved as to form by the City Attorney, is hereby approved. The President of the City Council is authorized to execute and deliver the Agreement in the name of the City and the City Clerk is directed to affix the seal of the City thereto and attest same. SECTION 3. Funds in the aggregate amount of $1,475,000 are hereby authorized to be transferred, expended and made available out of the 1992 – 2016 Sales and Use Tax Capital Improvement Projects Fund for the sole purpose of the job creating capital improvement project authorized herein and in the manner described in the Agreement. The funds hereby authorized to be transferred and expended shall be held by the City and released, disbursed and paid by the Director of Finance to Kurt Manufacturing. SECTION 4. The officers and staff of the City are directed and authorized to perform any and all acts consistent with the intent of this Resolution and attached Agreement which are necessary or desirable to effectuate the transactions described therein. SECTION 5. This Resolution shall become effective immediately upon final passage. INTRODUCED: December 09, 2013 BY: Ed Brown Background Paper for Proposed RESOLUTION DATE: DECEMBER 9, 2013 AGENDA ITEM # Q-1 DEPARTMENT: Law Department Daniel C. Kogovsek, City Attorney TITLE A RESOLUTION APPROVING AN AGREEMENT BETWEEN PUEBLO, A MUNICIPAL CORPORATION, AND KURT MANUFACTURING CO., INC., A MINNESOTA CORPORATION, RELATING TO A JOB CREATING CAPITAL IMPROVEMENT PROJECT, AUTHORIZING THE PRESIDENT OF THE CITY COUNCIL TO EXECUTE SAID AGREEMENT AND TRANSFERRING $1,475,000 FROM THE 1992-2016 SALES AND USE TAX CAPITAL IMPROVEMENT PROJECTS FUND THEREFOR ISSUE Should City Council approve an agreement with Kurt Manufacturing Co., Inc., a Minnesota corporation (“Company”) with an eight year employment commitment of twenty-five (25) additional employees and a five year employment commitment of thirty-four (34) additional employees and the expenditure of $1,475,000 from the 1992-2016 Sales and Use Tax Capital Improvement Projects Fund (“Half Cent Tax Fund”)? BACKGROUND The Company came to Pueblo in 1986 and currently employs 20 workers. The Company is proposing a two phase expansion of its Pueblo manufacturing facilities. Phase 1 is a $1 million capital investment resulting in 25 new jobs for 8 years. Phase 2 is an additional company investment of $750, 000 resulting in 34 additional jobs for a minimum of 5 years. The $1,475,000 incentive payment will be used to acquire manufacturing equipment. The City will retain a security interest in the production equipment purchased with the incentive proceeds. The Company’s full-time employees’ annual compensation and benefits shall average at least $57,400. The Company qualifies for incentives under the City’s Half Cent Tax Fund criteria ordinance because the vast majority of its products will be sold outside of Pueblo County. RECOMMENDATION PEDCO recommends that City Council approve the agreement. FINANCIAL IMPACT Payment of $1,475,000 in Half Cent Tax Funds to Kurt Manufacturing Co., Inc. AGREEMENT THIS AGREEMENT ( "Agreement ") is entered into as of December 9, 2013 between Pueblo, a Municipal Corporation (the "City ") and Kurt Manufacturing Company, Inc., a Minnesota corporation (the "Company "). WHEREAS, Company has expressed a willingness to expand a manufacturing facility within the City of Pueblo or in the Pueblo Memorial Airport Industrial Park, and in furtherance thereof has, through the Pueblo Economic Development Corporation, made application for funds and other economic incentives to the City, and WHEREAS, Company's business plan is centered on the metal machining of products for distribution outside of Pueblo County, with some minimal level of sales in Pueblo County ( "Company's Business "), and WHEREAS, the City has determined that Company' s Business will create primary jobs and will not materially and substantially compete with any existing activity or business within the City, and WHEREAS, in connection with its application, Company has committed to invest not less than U.S. $1,750,000 in fixed assets in a manufacturing facility it will locate within the City of Pueblo or the Pueblo Memorial Airport Industrial Park, and to provide the employment described in section 4 of this Agreement; and WHEREAS, the City has approved such application and will make certain funds and other economic incentives available to Company subject to and upon the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, City and Company agree as follows: 1. The following terms as used in this Agreement shall have the following meaning unless the context clearly indicates otherwise: "Effective Date" means the date of approval of this Agreement by City Council of City. "Employment Commitment Date" means January 1, 2016. "Equipment" means the manufacturing equipment, including metal machining equipment and other related machinery to be acquired, installed and maintained and used by Company in the Facility and listed on Exhibit A attached hereto and incorporated by reference. "Facility" means a manufacturing facility located within the City of Pueblo or the Pueblo Memorial Airport Industrial Park, wherein Company will conduct its manufacturing operations for production of goods for distribution and sale outside of Pueblo County, Colorado. 2346011.3 "Full -Time Employee" means a person who actually performs work at the Facility for not less than thirty -five (35) hours per week whether employed by Company or by an outside entity acting as an agency to provide Full -Time Employees for Company. The term "Full -Time Employee" does not include independent contractors nor employees of independent contractors except employees performing work at the Facility who are employees of an independent contractor acting as an agency to provide Full -Time Employees for Company. "Quarter" means three consecutive calendar months commencing January 1, April 1, July 1 and October 1 of each calendar year. "Quarterly Employees" means the sum of the aggregate number of Full -Time Employees on each business day of a Quarter, divided by the sum of the aggregate business days in such Quarter. "Salary" means base pay, overtime compensation, bonuses, employee stock ownership compensation and redemptions, vacation and holiday pay, and Company -paid health insurance, paid to or for the benefit of an employee. "Security Agreement" has the meaning set forth in Section 6 of this Agreement. 2. If Company is not in default hereunder, City will, after the Effective Date, disburse, for the benefit of Company, funds in an amount not to exceed One Million Four Hundred Seventy Five Thousand U.S. Dollars ($1,475,000) ( "City Funds "); subject to and contingent upon the following conditions and covenants which Company agrees to perform and comply with: (a) City Funds will be disbursed by City to Company solely for reimbursement for the acquisition of Equipment by Company at fair market value from a reputable vendor in an arms- length transaction. Company shall grant to City a perfected first security interest in all Equipment for which Company receives reimbursement from City by execution of a Security Agreement which identifies the Equipment in accordance with Section 6 of this Agreement. (b) Company shall file in the office of the City Clerk copies of the following: (i) Company's certificate or other evidence of authority to transact business in the State of Colorado issued by the Colorado Secretary of State, together with Company's certificate of good standing issued by the governmental jurisdiction of Company's formation, (ii) certified copy of the resolution of the governing board of Company approving this Agreement and authorizing its officers to execute and deliver this Agreement and related documents in the name of Company, (iii) this Agreement executed by authorized officers of Company, and (iv) evidence reasonably satisfactory to City that Company will expand manufacturing operations at the Facility. A plant tour by representatives of the City after the Equipment is installed will satisfy the requirement set forth in Subsection 2(b)(iv) of this Agreement. The date of the last to occur of the filings required under (i), (ii), (iii), and (iv) of this section 2(a) shall be referred to herein as "Closing ". If either the Effective Date or Closing does not occur on or before June 30, 2014, or such later date as Company and City shall mutually agree, City, at its sole option, may terminate this Agreement and City and Company shall thereafter be released and discharged from all obligations hereunder. 2 (c) As conditions precedent to the disbursement of City Funds for the purchase of manufacturing equipment, (i) Company shall file with the City Clerk the documents described in subsection (a) above, and (ii) Company shall file with the City's Director of Finance periodic written requests for payment, certified to be true and correct by an officer of Company, representing that the amounts included in the request for payment have not been included in any prior request for payment and are for the actual cost of manufacturing equipment, identifying the specific equipment for which payment is sought, including paid invoices therefore and certificates of delivery and installation in the Facility. Company shall not submit requests for payment which exceed in the aggregate U.S. $1,475,000. The City agrees to disburse funds within thirty (30) days of submission of the Company's written request for payment, accompanied by supporting documentation as set forth herein. 3. City and Company stipulate and agree that the total economic incentives provided by City to Company under this Agreement shall not exceed U.S. $1,475,000 (the "Total Economic Incentives "). 4. (a) Company acknowledges and agrees that the primary purpose of City in entering into this Agreement and the sole benefit to the City for making the Total Economic Incentives available to Company hereunder is the creation of additional jobs within the City. Therefore, Company represents, covenants, and agrees that Company will continuously conduct its business operations at the Facility and employ the number of Full -Time Employees set forth below whose annual Salary shall average at least U.S. $57,400 (collectively, the "Employment Commitment "): Employment Commitment Dates Minimum Number of Employees 1 -1 -16 through 12 -31 -18 45 1 -1 -19 through 12 -31 -23 79 (b) Company will use good faith efforts in accordance with its sound business practices to (i) employ residents of the City of Pueblo or (ii) residents of the County of Pueblo as Full -Time Employees including, without limitation, engaging in reasonable programs and posting of employment openings in the City of Pueblo. 5. Notwithstanding anything contained in this Agreement to the contrary, if Company shall for any reason default in its Employment Commitment, Company shall repay to City a pro -rata share of the Total Economic Incentives based upon the number of Full -Time Employees employed by Company at the Facility (the "Repayment Obligation "), as follows: (a) During the eight (8) year period starting on the Employment Commitment Date and ending ninety -six (96) months thereafter (the "Repayment Period "), Company shall pay to City a compensating amount for each Quarter in the Repayment Period calculated by subtracting the number of Quarterly Employees actually employed at the Facility from the employment commitment stated in Section 4 supra. and then multiplying the result by $781.25. For example, if for the second quarter of 2018 the number of Quarterly Employees is 39, the amount payable by Company to City on or before the fifteenth (15th) day of the next calendar 3 month would be (45 - 39) x $781.25 = U.S. $4,687.50. In no event will Company's repayment obligation exceed the amount of the economic incentive paid to Company. (b) Company's Quarterly Payments, if any, shall be paid to the City without notice, demand, deduction or setoff on or before the fifteenth (15th) day of the month following the end of each Quarter during the Repayment Period at the office of the Director of Finance of City, 200 S. Main Street, Pueblo, Colorado, 81003, or such other person or location as the City may designate. All past due Company's Quarterly Payments shall bear interest at the rate of eight percent (8 %) per annum ( "Default Interest ") until paid. (c) Within fifteen (15) days after the end of each Quarter after the Employment Commitment Date and for one calendar month after the Repayment Period, Company will submit to City's Director of Finance Company's statements showing the Quarterly Employees for the preceding Quarter and their annual Salary, together with the basis upon which Quarterly Employees and Company's Quarterly Payment, if any, were computed, certified by an officer of Company to be true and correct. For purposes of verifying Company's employment and salary, for a period of three (3) years after receipt of a Quarterly Statement from the Company, City shall have access to and the right to audit Company's records relating to Company's employees employed at the Facility. (d) If Company defaults in any of its obligations under this Agreement including, without limitation, its Repayment Obligation, and such default is not cured within thirty (30) days after written notice specifying the default is given by City to Company, then in such event, the entire balance of Company's Repayment Obligation shall become due and payable, without notice, notice being hereby expressly waived, together with Default Interest from the date of default. City may accelerate payment of Company's repayment payments and Company shall pay to City in a lump sum the amount of all repayment payments which have become due and would have become due during the remainder of the Repayment Period, calculated based upon there being no Quarterly Employees for the duration of the Repayment Period. Company's Repayment Obligation is absolute and unconditional and shall not be abated, reduced, diminished, modified, withheld or otherwise offset for any cause or reason whatsoever. 6. Company's Repayment Obligation under this Agreement shall be deemed to be a debt of Company payable to City until Company performs and discharges its obligations hereunder including, without limitation, its Repayment Obligation. Company's obligations under this Agreement including its Repayment Obligation shall be secured by a perfected first security interest in the Equipment, which Equipment shall have a fair market value of not less than the amount of the City Funds requested for reimbursement for Equipment at the time placed in the Facility. Prior to any disbursement of funds by City for Equipment, Company shall execute and deliver to City, Company's Security Agreement, Financing Statement and other documents required to perfect a first security interest in the Equipment all in form and content approved by City's Attorney (the "Security Agreement "). Company may be permitted from time to time to substitute items of replacement Equipment for items of Equipment removed from the Facility, provided that an amended Security Agreement meeting the requirements of this section is executed and delivered identifying the substitute items of Equipment and deleting the item of Equipment being replaced. 4 7. (a) Prior to instituting any proceeding to enforce Company's Repayment Obligation, City shall notify Company in writing of its intention to institute such proceedings. Company may request relief from its Repayment Obligation by delivering to City within twenty (20) days after date of City's notice, Company's written request for relief specifying the grounds upon which such relief is sought together with documents supporting said grounds. Within ninety (90) days after receipt of Company's request, City will schedule a meeting with the City Council of City ( "City Council ") at which meeting Company may appear. City will notify Company of the time and place of the meeting. Failure of Company to timely deliver its complete written request for relief or to appear at the scheduled meeting with the City Council shall entitle City to immediately institute proceedings to enforce Company's Repayment Obligation. (b) City Council may or may not, in its sole and absolute discretion, relieve Company, in whole or in part, from Company's Repayment Obligation. Any action taken by the City Council relating to a request for relief shall be final and binding on Company, and not subject to judicial review. Any such action by City Council is, and shall constitute, a legislative measure. Nothing contained in this section 7 shall grant or be construed to grant to Company any right or claim to relief from its Repayment Obligation or hearing with respect thereto. (c) No delay by the City in scheduling a meeting, or failure by City to exercise its right to enforce this Agreement, including Company's Repayment Obligation, and no partial or single exercise of that right, shall constitute a waiver of that right. 8. In the event of any litigation arising under this Agreement, the court shall award to the prevailing party its costs and reasonable attorney fees. Exclusive venue for any such litigation shall be Pueblo County, Colorado. All such litigation shall be filed in the District Court in and for the County of Pueblo, State of Colorado and each party submits to the jurisdiction of such District Court. To the extent allowed by law, each party waives its right to a jury trial. 9. This Agreement expresses the entire understanding of the parties and supersedes and abrogates any and all prior dealings and commitments, whether oral or written, with respect to the subject matter of this Agreement and may not be amended or modified except in writing signed by City and Company. Any waiver of any provision of this Agreement must be in writing and signed by the party whose rights are being waived. No waiver of any breach of any provision hereof shall be or be deemed to be a waiver of any preceding or subsequent breach of the same or any other provision of this Agreement. The failure of any party to enforce or seek enforcement of the terms of this Agreement following any breach shall not be construed as a waiver of such breach. 10. This Agreement shall be construed in accordance with and be governed by the laws of the State of Colorado without regard to conflict of law principles. 11. Any notices hereunder shall be sufficiently given if given in writing personally or mailed by first class, registered, or certified mail, postage prepaid, addressed: (a) if to City, City Manager, City of Pueblo, 200 S. Main Street, Pueblo, CO, 81003 with a copy to City Attorney, 1 City Hall Place, 3 Floor, Pueblo, CO 81003; 5 (b) if to Company, Steve Carlsen, President, 32500 Excellence Avenue, Pueblo CO 81006; or to such other person or address as either party shall specify in written notice given to the other party pursuant to the provisions of this section 11. 12. Time is of the essence hereof. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, provided Company may not assign this Agreement or any interest herein without the express written consent of City, which consent shall not be unreasonably withheld. Any assignment or attempted assignment of this Agreement by Company without such consent shall be null and void. No such assignment nor City's consent thereto shall release or discharge Company from any obligation or liability under this Agreement. 13. The persons signing this Agreement in the name of and on behalf of Company and City each represent and warrant that they have the requisite power and authority on behalf of their respective entity to enter into, execute, and deliver this Agreement, and that this Agreement is a valid legally binding obligation of Company and City enforceable in accordance with its terms. 14. (a) Company represents and warrants that no person, entity, or organization has been employed or retained or will receive or be paid, directly or indirectly, any commission, percentage, contingent fee or any other remuneration, payment or receipt of which is contingent upon approval of this Agreement or City providing the Total Economic Incentives hereunder, or any part thereof. For breach or violation of this warranty, City shall have the right to terminate this Agreement, or recover the full amount of such commission, percentage, contingent fee or other remuneration, and /or to seek such other remedies legally available to City, which remedies shall be cumulative. (b) Company agrees to indemnify, defend and hold City, its officers, agents and employees harmless from and against all claims and actions arising from the purchase, installation or use of the Equipment at the Facility. 15. In no event shall City, its officers, agents or employees be liable to Company for damages, including without limitation, compensatory, punitive, indirect, special or consequential damages, resulting from or arising out of or related to this Agreement or the performance or breach thereof by City or the failure or delay of City in the performance of any covenant or provision under this Agreement on its part to be performed. In consideration of City entering into this Agreement, Company hereby waives and discharges City, its officers, agents and employees from all claims for any and all such damages. Except for the City's disbursement of City Funds for the benefit of Company as provided in Section 2 above, no breach, default, delay or failure of City under this Agreement shall be or be construed to be a waiver, discharge or release of Company's Repayment Obligation. 16. If any provision of this Agreement is declared by a court of competent jurisdiction to be invalid or unenforceable, such determination shall not affect the other provisions of this Agreement which shall remain in full force and effect. 6 17. None of the parties shall be, or hold itself out as, agent of any other party or as a partner or joint venturer under this Agreement. 18. Each party acknowledges that this Agreement was fully negotiated by the parties and, therefore, no provision of this Agreement shall be interpreted against any party because such party or its legal representative drafted such provision. 19. The provisions of this Agreement are for the exclusive benefit of the parties hereto and their successors and permitted assigns, and no third party shall be a beneficiary, or have any rights by virtue of this Agreement. 20. This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed for all purposes to be an original, and all such counterparts shall together constitute but one and the same original. Executed at Pueblo, Colorado, the day and year first above written. [S E A L] Attest: — �.�t.��.J�, Puebl • i •oration City rk C I ,./►— "'��esident of the City Council [S E A L] Kurt Manufacturing Company, Inc., a Minnesot o •oration f � / Attest: By Name: �,u�Q � Q-. Name: Steve Carlsen Title: Title: President SHIRLEY M KLEIN Notary Public • Notarial Seal My Commission Expires January 31, 2019 7