As the city commission was looking at creating a housing incentive program targeted at builders — and how to pay for it — a target of sorts got painted on a building at the Newton City/County Airport.
The commission was, in the eyes of some commissioners like Leroy Koehn, about $47,000 short on cash to create the housing program that will be capped at $100,000 per year.
And that's when payments on a bond for an industrial/commercial building — known as the ABI Building — at the airport came up.
“We would have that money if we did not have ABI,” said Donna Pickman, director of finance for the city of Newton. “Without that, we would have some money to do some things.”
ABI, the first tenant of the building, failed and was unable to make payments on the building. A second company trying to start up in the building has since failed as well. The city has been left to make payments on the building while the search for a new tenant or owner is underway.
Commissioner Glen Davis said that airport administration has been in contact with at least two companies interested in the building.
“I don't know if it is feasible or not,” Davis said.
City Manager Bob Myers said there has been meetings with companies interested in the building, however no one has signed a contract to rent the facility as of yet.
“We have identified some individuals who work in those industries,” Myers said. “We are getting leads from there to follow up. … We are in the process of getting a current appraisal of the building, so if we get down to someone willing to purchase the building we know, realistically, what it is worth. We want a realistic picture of what we can expect to get out of it.”
The city has found an appraiser who can do a industrial/commercial appraisal that could do that work in August.
In January, city manager Bob Myers told the city commission a new company at the City/County Airport was struggling, and the city is back to paying bond payments on the ABI building.
“Kansas Chemical Coatings is not currently able to meet its rental payment obligations under the lease, and the city is providing the funds necessary to ensure that the bond payment obligations on the building continue to be met,” Myers said.
KCC is the second company in the building that has struggled to make the rental payment. The building, constructed for ABI Chemicals in 2014, cost $5.24 million to build.
ABI opened the chemical coating plant at the Newton City/County Airport in 2014, and things have been difficult for the company, leading to the city of Newton to pay on debts associated with construction of the building.
After an agreement was reached initially with ABI Chemicals in late 2014 to lease a manufacturing facility and hangar space from the city, ABI immediately began to run into money issues, meaning it could not repay the debt service costs through its lease after the city-financed construction of a $5.24 million facility for the company.
According to city staff, in January the city had contributed $742,799.90 — $674,426 toward the bond payments for the building going back to May 2017, and $68,373 for insurance and utilities going back to 2016.
When Kansas Chemical Coatings took over in 2018, the company paid five month’s worth of the bond payments, a total of $175,000 from May to October.
However, the city has been making payments on the building since January.
The construction of the building was funded by Industrial Revenue Bonds. Industrial Revenue Bonds were established under state statute, K.S.A. 12-1740. While cities and counties issue the IRB, the bonds are financed by a trustee, typically a bank. The bonds for ABI Chemicals were issued to the Harvey County EDC and were the only IRBs guaranteed by the city in about 30 years. The result was a 20,000 square foot building.
When the project launched, it was projected that about 12 people would work at the new facility within its first year, growing to an estimated 20 employees by the fifth year.