By DERRICK GINGERY, Greater Fort Wayne Business Weekly
Indiana Bio-Energy is not likely to build its ethanol plant in Wells County since the county council and company officials have failed to reach an agreement on public financing.
The Wells County Council voted last week to pledge money available through the county economic development income tax (CEDIT) — perhaps $500,000 per year — to help back bonds for the project. But that was not enough for Indiana Bio-Energy, which had wanted the county to guarantee $1.5 million per year.
Now company President David Dale said he is scheduling talks to potentially take the project to another county in Indiana or possibly northwest Ohio.
“We’re done unless they come up with something,” Dale said of the Wells County negotiations. “We’ve exhausted every avenue we can think of.
“If we stumble on to a way it can be done in Wells County, we will do it in Wells County,” Dale said. “Instead of limiting our effort to Wells County we have to broaden it.”
The privately-owned $134 million plant would produce about 100 million gallons of ethanol a year.
Indiana Bio-Energy had asked for some local government backing of bonds for the project in case of default.
After a proposal to use property taxes was met with heavy public opposition, the company suggested the county pledge a portion of its CEDIT and County Adjusted Gross Income Tax (CAGIT) money to help back the bonds.
The company also wanted the county to create a tax increment financing district for additional funding.
CEDIT funds are local income tax revenues that can be used for economic development. A tax increment financing district is a similar tool that freezes a property’s value for other taxing purposes for several years, allowing incremental property tax revenue to be collected to finance development.
CAGIT also is local income tax revenue, but is generally used to control property tax rates.
The public portion of the project’s bond backing would amount to about $1.5 million of the estimated $3.4 million in annual debt service if the company failed.
The county would not make any payments unless the company defaulted on the bonds.
Dale said another investor is willing to assume a portion of the risk and income from several other sources would be used to cover the rest.
Twelve local investors so far have committed $1.32 million for the ethanol plant. Dale said none of them indicated during a board meeting last week they were contemplating giving up on the project. But he said the company will lose $10,000 to $20,000 in land purchase options if the project is not built in Wells County.
State resources also were not fruitful in filling the gap.
Andy Miller, Indiana director of agriculture, said the state does not want to guarantee those bonds because state officials want to ensure the plants are viable on their own first. He said he preferred tax incentives once the plants are running.
Miller said his department has received inquiries from many companies about investing in ethanol plants in Indiana. But he has been unable to connect any of them with Indiana Bio-Energy.
“Up until recently they were wanting to do it on their own,” he said.
Wells County Council President Pete Cole said he was bitter and somewhat disappointed no agreement could be reached.
“I’m not totally convinced they explored all avenues,” Cole said. “We have pledged every economic development dollar we have available to us. We will not back it with the (property) tax rate.”
Cole also said there were concerns the ethanol deal could lead to proposals from other businesses for publicly-backed loans.
“Once you open the door I don’t think you can close it,” he said.
Wells County received about $862,000 in CEDIT revenue this year. About 44 percent of that distribution is used to offset the county’s loss in revenue from the abolished state inventory tax.
Dale said 11 counties already have shown interest in locating the plant there. He said Adams County is one of them, but he would not reveal any others.
Mike Ripley, executive director of the Adams County Economic Development Corp., said EDC and Indiana Bio-Energy officials have discussed the project.
“No decision has been made on anything,” Ripley said. “We’ve had subsequent discussions of the idea and we find it very intriguing.”
The proposal for public financing will not change when Indiana Bio-Energy presents the project to other counties, Dale said. And given the interest level at other locations, the plant still could be under construction in the spring.
“We already have preliminary indications other counties are willing to give us land and other incentives,” he said. “It’s a matter of where the best deal is going to be now. There are counties willing to roll out the red carpet for all this.”
State funds are being used to help pay for an ethanol plant in Lima, Ohio, but Wells County and Indiana Bio-Energy officials said they are not aware of any examples of local financing for an ethanol plant.
Fagen Inc., an ethanol plant builder based in Granite Falls, Minn., has a letter of agreement to build a plant in Wells County if the financing can be arranged. But there are at least 57 ethanol plants on the company’s roster that have not broken ground, and Indiana Bio-Energy officials are worried Fagen could delay their project if it doesn’t see progress soon.