CDA votes on bond issue for Kimoto Tech equipment now headed for next step: sales.

Lease agreement keeps CDA as equipment owner until bonds paid

The new upgrades being sought by Kimoto Tech are one step closer now that the Cedartown Development Authority has given their stamp of approval to a deal to sell bonds covering their $6 million equipment purchase up front.

Kimoto Tech announced their intention to upgrade equipment and improve manufacturing at their Cedartown plant back in late July as they sought a tax abatement deal from several local governments over the next 10 years on that equipment.

For now, the work is mainly still in the planning stages according to Kimoto Tech president Miguel Leal, who oversees operations locally for the parent company Kimoto Co. Ltd headquar- tered in Tokyo.

“We’re still meeting with Japanese contractors and installers, and that process will probably continue through October and at that point we should have the final drawings,” he said. “Anytime you have a project this big, it entails a lot of work and coordination, and certainly a lot of planning.”

With taxes scaled back by the City of Cedartown, Polk School Ditrict and Polk County on the equipment’s overall worth, the next step in the process for Kimoto Tech was getting a bond agreement on the equipment through the Cedartown Development Authority.

City manager Bill Fann said the board met on Aug. 22 and gave their unanimous approval for the deal, and now soon after one more vote to approve the actual bond package the money will be available to finish the upgrade process.

Until the bonds are paid off, the Cedartown Development Authority (CDA) will be the owner of the equipment since the bonds are sold under their authority based on the agreement approved between the company and the city. So the CDA will act as owner leasing the equipment to Kimoto Tech for the next 10 years.

This complicated arrangement is setup in this way since Kimoto Tech has no legal authority of their own to offer bonds up on the market. Instead, the Cedartown Development Authority will sell the bonds on their behalf, and then the payback on those bonds will come from Kimoto Tech’s annual profits based on sales of their film coating products manufactured locally but shipped worldwide for a variety of uses.

Kimoto Tech in turn will have to still pay some taxes on the equipment and bonds, and they’ll also have to hold insurance and ensure that proper maintenance is being maintained on their new manufacturing lines.

A schedule of paybacks on the bonds will come once the bonds are offered up on the market. Any shortfalls in the bond sales covering the $6 million pricetag will be the responsibility of Kimoto Tech, according to the lease agreement that was approved by the CDA.

Lease payments will be due starting on March 1, 2017, and at the beginning of each March and September following the first installment until the principal and interest on the bonds are fully retired.

The agreement between Kimoto Tech and the CDA will expire on Dec. 31, 2025 unless it is updated and approved again should Kimoto Tech need more time to pay off the bonds.

If bonds are paid off earlier, then Kimoto Tech will get to take ownership of their equipment sooner. Rent abatements are also in place in the agreement between the CDA and Kimoto Tech for any early repayment of bonds.

Bond sales will still have to go up for final approval before being sold by the superior court, and though aren’t being backed by any government funds do require the go-ahead of a judge to be offered up on the market.

A public hearing will also be scheduled to allow for local residents to have their say on the deal before any bond sales are finalized and put up on the market.

The lease also includes instructions and requirements for how to handle any default that could come about as a result of Kimoto Tech coming under financial difficulties and unable to pay off the rest of the bonds. That includes who might qualify to sublease the equipment or purchase it outright in order to finish paying off what would be owed on the bonds if such a mishap were to play out.