MOBERLY, Mo. (AP) - The city of Moberly has no plans to pay off $39 million of bonds issued on behalf of a failed artificial sweetener factory, opting to instead default and allow a bank to take over the project.
Moberly said it gave notice Tuesday to UMB Bank, which is the bond trustee, that the City Council will not appropriate money to replenish a debt service fund. The city said it is under no legal obligation to do so under the terms of the bond financing agreement.
The bonds issued by the city were intended to finance the construction of a facility for Mamtek U.S. Inc., which Gov. Jay Nixon had touted in July 2010 as a "cutting-edge global production facility" for artificial sweetener that could employ up to 612 people.
The company missed a bond payment due Aug. 1, and work has halted on the partially completed facility. The city has since been searching for someone else to take over the project.
Since no solid investor group is ready to assume control of the project, using city funds to make the bond payments that were supposed to be fulfilled by Mamtek would be "a temporary and risky fix that would not necessarily yield a successful project," the city said in a statement released jointly with the Industrial Development Authority of the City of Moberly.
The city's statement cited excerpts from bond documents that indicate the city is under no general obligation for the bonds, and which state: "nothing in the financing agreement shall be construed to require the City Council to appropriate any of its own funds to make payments."
The City Council "believes that the city's taxpayers under these circumstances should not bear the burden of Mamtek's failures or be asked to "bail out' their shareholders or investors," the statement said.
It remains possible that a new investment group could eventually take over the project. The news release said the city is exploring two proposals - one to acquire and complete the project on an even larger scale; the other to aid the city in finding an alternative use for the property and, if that fails, in liquidating the assets.
In addition to the local bond issuance, Mamtek received an offer of about $17 million of state incentives. But Missouri is not out any money, because the project fell apart before the state incentives could be paid.
Information from: Monitor-Index, http://www.moberlymonitor.com/