CLAREMORE — The Claremore City Council took a giant leap forward in economic development Monday night after months of preparation led to the final approval for the first TIF (tax increment financing) district in Claremore.
“This project is a great example of how economic development works at its best,” said Mickey Thompson director of the Claremore Economic Development Authority (CEIDA).
The TIF district will be used to fund the new $3.2 million substation that will supply the new $36.7 million R&D facility at the Baker Hughes Claremore plant.
The TIF is expected to open up other opportunities for growth and development in the area and has already sparked some interest beyond Baker Hughes.
An applied technology business in the natural gas industry is looking to make a $10 million investment and create approximately 100 new jobs in the area, according to officials.
The council fully supported the measure to move the TIF forward as the last item was to secure the financing for the district. The city will be financing the TIF district through the use of the Hospital Trust Fund as facilitated by the Claremore Public Works Authority.
The total debt service, principal and interest, on the fund will be $4.633 million with a 10-year term.
Payments will begin in June of 2014 providing time for construction on the facility to be completed and for revenues to be received by the city.
The city will use both ad valorem and electric revenues to repay the financed amount.
“This project will expand our (the city) electric revenue. It is expected to be $30,000 per month, plus the ad valorem on top of that,” said Councilor Bill Flanagan.
If revenues do not meet the payment obligations then the CPWA will ultimately be responsible for the fund, according to CPA Ron Kolker.
Kolker added that this is unlikely, but dependent upon interest rates and electric usage.
“The TIF will save the CPWA money regardless,” Kolker added.
“If the project fails then the public works authority would be required to repay the money,” said City Attorney Matt Ballard.
The council considered all aspects of the project before giving the final approval.
Councilor Paula Watson stated that even though she fully supports the expansion of Baker Hughes, she does not support this use of the Hospital Trust Fund.
Watson did not vote to support the measure.
“I just can not bring myself to support going into debt,” Watson said. “It is something personal with me, I don't support using this money in this way without the public’s say.”
Another aspect of the project that was discussed included the long-term benefit to the hospital trust fund.
Kolker outlined the approximately $463,000 in interest that the fund would gain through the financing.
“The idea is to loan the money in-house instead of going through a third party,” Kolker said.
“We don't have a lot of tools in Oklahoma for the financing, it is important to use the tools we have,” said Dan McMahan, TIF attorney.
“This is a great investment, it is on a short 10-year note,” said City Manager Jim Thomas. “We want to pay it off as soon as possible.”
The financing used by the city will not only provide the opportunities associated with the TIF, but will benefit the hospital trust fund, according to Thomas.
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