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City supports assistance for $10 million Sil-Pro expansion
Nov. 23, 2015

By Gabe Licht
Editor

DELANO, MN – As Sil-Pro plans a $10 million expansion, the Delano City Council is pledging support for financial assistance.

The council approved two resolutions Tuesday: one to support Sil-Pro’s application for $1 million from the Minnesota DEED Job Creation Fund and another declaring preliminary intent to assist Sil-Pro with about $9 million in Industrial Development Revenue Bonds.

Delano management analyst Bobby Schoen explained that the project is at the same site as a project receiving a $1 million Minnesota Investment Fund loan that is sponsored by the city.

“Sil-Pro is not obligated to pay back any of these funds, unlike the MIF,” Schoen said.

Job Creation Fund dollars would come in two parts.

“The first is capital expenditures,” Schoen said. “In this case, Sil-Pro is looking to put on a significant expansion . . . somewhere between $10 million and $12 million. That would let them obtain a 5 percent rebate the state allows for capital expenditures, and max that out at $500,000.”

The second part of the fund is based on how many, and what kind of, jobs are created.

“Sil-Pro is looking to add potentially 100 jobs in the next three to four years,” Schoen said. “They would also capture their max in the job creation fund, which is $500,000.”

In addition to passing a resolution of support, the city will also need to share information about Sil-Pro with DEED, but will not have any other responsibilities or liabilities.

The second resolution regarded allowing Sil-Pro to use the city’s tax-exempt status to secure $9 million in Industrial Development Revenue Bonds, which is expected to reduce the interest rate by about 1 percent.

“Sil-Pro will probably borrow those funds from a financial institute,” City Administrator Phil Kern said. “Under state law, cities are allowed to use the tax-exempt bond-issuance process to issue bonds for private entities.”

Landscape Structures used the program to build a new facility in 2010, and Ridgeview Medical Clinic has used the program twice.

“It’s a free way – it doesn’t cost us anything or create a hardship – to assist them,” Kern said.

Councilman Jason Franzen asked, “If, for some reason, they were to fail and not pay (the bonds) off, would it affect the city’s bond rating?”

Kern noted a default would not affect the city’s bond rating in anyway.

“The way we do IDRBs is we don’t issue the bonds,” Kern said. “It’s almost like we just loan them our tax-exempt card. The relationship is between Sil-Pro and the lender.”

Odds and ends
In other business, the council:

• reviewed the 2016 street improvement project feasibility study. The estimated cost of the project is $6.084 million, including about $4.34 million for streets, compared $3 million earmarked for streets in the comprehensive plan. The final feasibility study is set to have estimates for each street, so the council can decide which streets, if any, to remove from the plan to save money.

• reviewed applications for the Delano Planning Commission and the Public Safety Commission. There is one applicant for each position. Those applicants will be interviewed during a workshop Tuesday.

• declared existence of public right-of-way at Railroad Avenue between Fourth Street North and Tiger Drive in preparation for the 2016 street project.

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