BELEN — As Arcosa Wind Towers moves forward in purchasing the old Keter facility in the Rio Grande Industrial Park south of Rio Communities, the city of Belen will be assisting the publicly-traded company to set up shop.
The Belen City Council unanimously approved a resolution spelling out its intent of issuing taxable industrial revenue bonds not to exceed $65 million for Arcosa.
The councilors also unanimously approved another resolution directing the city clerk to publish a notice of intent to consider an ordinance approving the Arcosa Wind Towers, Inc., proposal for economic development project under the Local Economic Development Act. That agreement will be between the company, the city and the state.
Municipalities issue IRBs to assist a company that might otherwise be unable to obtain financing for its industrial venture or is unwilling to undertake the project on its own. The proceeds from the bond are used to fund the acquisition, construction/reconstruction, expansion or improvement of property that qualifies as a manufacturing facility or equipment.
While the city would be the issuer of the bonds and intermediary, none of the city’s money can be used for the project assets or the debt of the bond. The city’s role would just to provide the tax break to Arcosa.
“Hopefully, this is the beginning of a very exciting event for the city and Valencia County,” said Steven Tomita, the city’s development services director. “The IRB will be an agreement between the city and Arcosa to fund the project.”
Justin Horowitz, with the Rodey Law Firm, wanted to thank and recognize the city and their response to the company.
“The action tonight … would not bind the city in any way,” Horowitz said. “This is just the first step in the process. The city and Arcosa must still negotiate acceptable bond documents … and then the council would adopt the documents by ordinance.”
In practical terms, IRBs are loans to businesses for start-up costs and equipment, which are repaid by the business to the investor buying the bonds and making the loan.
The bonds are issued by the city, so it holds the title to the property until they are paid off. Under state law, IRBs cannot be more than 30 years. Like any loan in New Mexico, the company can pay off the bonds early without penalty.
Because the city holds the title, as a government agency it’s exempt from property taxes. Once the bonds are paid and the company takes possession of the property, taxes are again imposed, collected and distributed to all taxing entities.
If a company does not pay back the IRBs, there are penalties and clawbacks. For instance, the city of Belen issued $40 million in bonds for Keter Plastics, the previous tenant in the facility Arcosa plans to use.
Since Keter closed down in the spring of 2020, well before it paid back the IRBs, Tomita told the News-Bulletin the company is now in the process of closing out the bonds, as well as reimbursing the city for associated legal fees.
“They also have to reimburse (Valencia County) for the (property) taxes they didn’t pay,” Tomita said, noting he wasn’t sure of the dollar amount Keter owed in property taxes.
Keter also received LEDA funds from the state, which it has fully reimbursed, he said.
If the Belen council approves the IRB package at its April 17 meeting, Arcosa will have until 2053 to pay back the $65 million and the city will hold the title to the property until the bonds are repaid.
The LEDA funding the company is requesting from the state comes with benchmarks and checks and balances.
The city will hold the funds until Arcosa proves it has hit predetermined milestones, Tomita said.
“They have to show they own the building, are doing improvements and they have to hire 25 employees initially,” he said. “This will be done in several tranches.”
As the company hits its promised goals, the city will release LEDA funds with agreement from the state.
“The state will pay us and authorize us to release the funds when (Arcosa) meets each category,” Tomita said. “We keep track of their employment and payroll, all the things required under the LEDA agreement. If they don’t meet them, the state has to decide whether to extend time or pull back the funds.
“We’re liable to make sure everything goes right. We have to provide all the documents from Arcosa … and submit all the records to the state saying they complied.”
The attorney said the city would not be responsible for the debt, the bonds that are issued or the cost of the project. Horowitz also said the city would have no financial responsibility for the $4 million LEDA incentive from the state except to act as the fiscal agent for those funds.
Hal Fonville, general counsel for Arcosa Energy, told the council last week Arcosa Wind Towers makes more than just wind towers — overhead traffic sign structures, barges for inland transportation and components for rail cars.
“Everything we do is structure related, and wind towers is one big piece of that,” Fonville said. “What we are proposing is to convert the Keter facility into a tower manufacturing facility. We plan on spending $60 million to acquire the property, a lot of construction work, and we plan to start delivering wind towers from that facility, hopefully, by June 2024. It’s very ambitious.”
Fonville said the project has moved very fast, praising the local government staff for being “unbelievably accommodating.” The attorney said the company is committed to the project because they’ve already made commitments to their customers.
“How, the demand (for wind towers) has materialized, and we’re excited to do it here,” Fonville said. “And we really look forward to being a community member of the Belen community.”
Fonville told the council they will need to hire 250 people, and said they want to hire them all locally.
“It’s going to be a challenge,” the attorney said. “We’re going to need the city’s help. It doesn’t make sense to bus people in or pay people to move here. We need all types of employees, from welders to machine operators.”
(News-Bulletin assistant editor Julia M. Dendinger contributed to this article.)