The proposed RailTech intermodal railport near Silvis received first-round approval Wednesday for up to $8.5 million in bond financing that developers hope to use to complete the project’s first phase.

The Quad Cities Regional Economic Development Authority approved a preliminary inducement resolution for RailTech LLC for construction on a 900-acre site north of Silvis’s 1st Avenue. RailTech LLC bought an abandoned rail yard previously owned by the Rock Island Lines.

The first phase of the $26 million project will include completing the Quad City Railport, which will be on 360 acres west of Illinois 5.

The railport will include concrete loading docks next to railroad tracks. Cranes will be used to lift containers to and from trucks and trains for shipment.
RailTech LLC hopes to develop the remaining acreage into a multiuse industrial park during the later phases.

The unanimous vote, which came during QCREDA’s monthly board of director’s meeting in Galesburg, clears the way for up to $8.5 million in moral obligation bonds to be issued in support of the project.

Under the vote, QCREDA agrees to apply for state moral obligation backing on the tax-exempt bonds if the project qualifies, which would further reduce interest costs on the project.

Moral obligation is a financial credit enhancement, based on the state’s bond-rating, that would save the borrower thousands of dollars in interest payments.
The financial tool also obligates QCREDA, as the bond issuer, to ask the state legislature to pay off bond-holders with state taxes if the borrower defaults.
The governor’s staff generally approves such an enhancement only on economically sound projects by financially strong companies.

“This project cannot fly on private financing alone,” said Frank Coyle, RailTech’s attorney. “There just isn’t enough margin there.”

An independent financial adviser will be hired to complete an advisory report before QCREDA make a final decision on the bond recommendation.

“The advisory report should be completed within the next 30 to 60 days,” said QCREDA executive director Andrew Hamilton. “There is no timetable for approval by the governor’s office.”

Mr. Hamilton said that appears that the project has ample support from state officials.

If the moral obligation bonds are approved, the funds could in essence be used to back a tax-increment-financing district established by Silvis last year for the site.

Mr. Coyle told the board the TIF bonds are ready to be sold, but first they need to be made marketable.

“The moral obligation of the state is needed to make this project fly,” he said. “Once that is secured, it should create a domino effect that will help everything else fall into line.”

Developers had hoped to have the initial phase of the railport project completed nearly two years ago. However, a solid contamination removal and containment project, started after the Illinois Environmental Protection Agency found manganese on the sit, has delayed construction.

Frank Coyle, RailTech LLC attorney, said it expects to receive word soon from IEPA that no additional work is needed.

Once completed, the $26 million project is expected to bring more than 300 new jobs to the area.


John Deere products transported throughout the midwest.

An east Moline business has paid off a loan from the Quad Cities Regional Economic Development Authority so the money could help other businesses expand
LinguiSystems Inc., 3100 4th Ave., East Moline, made a final payment of $94,660 on Dec. 18 to QCREDA before the loan was due. The company develops education materials. The regional authority, created by state lawmakers to provide long-range financial assistance to expanding companies, discussed ways it could help out other businesses during its monthly meeting Wednesday. Board member Jim Barnes suggested the authority provide gap financing for start up businesses

Others suggested creating a capital development corporation to finance other projects or use the loan fund to pay off a state loan given to QCREDA upon its creation in 1988.

LinguiSystems had borrowed $182,000 in a 20-year, low-interest loan on June 2, 1989 through a revolving loan fund originally created by the City of East Moline and then turned over to QCREDA for administration. The loan-fund proceeds were restricted during the life of the loan but are now unrestricted, according to QCREDA’s auditor. QCREDA can use the proceeds to fulfill its mission, which is to finance job-creating projects in Rock Island, Henry and Mercer counties. Jeff Scherer, LinguiSystems CFO, said Wednesday he was confident the board would use it in its best interest. He was pleased to hear the board discussed various options during its meeting.


Western Illinois University

Firm Expansion
QCREDA gets authority to sell bonds to help 2 firms expand.

The Quad Cities Regional Economic Development Authority (QCREDA) has received state authority to sell $1.5 million in bond financing to help finance two manufacturing projects creating about 92 new jobs in Rock Island.

The $1.5 million will be added to a combined $3.7 million in bonding authority QCREDA received in late April from the cities of Moline and Rock Island. QCREDA will sell more than $5 million in tax-exempt bonds to help IsoTech of Illinois Inc. and Nancy’s Pies expand their operations.

IsoTech, which makes protective bearings, wants to expand its operation in the Rock Island Industrial Park. The expansion would mean a 30 percent increase in its workforce of 46.

Nancy’s Pies Inc., which ships frozen pies nationwide from its operation on 11th Street, would add 80 jobs when its expansion is complete.
Bonds can fund infrastructure
The same tax-free bond-financing available for manufacturers can be applied to infrastructure for housing development, Quad-Cities area economic developers learned Thursday.

The cost of building roads, curbs, water, sewers, and lighting, as well as retention ponds and land reserved for schools and parks, can be financed with tax-free bonds, providing those costs are for public purpose, Frank C. Paul, senior vice president of First Albany Corp.’s Chicago office, said Thursday.

Mr. Paul was featured speaker at a forum of mostly economic developers and city officials Thursday hosted by the Quad Cities Regional Economic Development Authority (QCREDA).

The authority is considering developing this latest financing tool to help housing developers in much the same way it helps finance manufacturers in its three-county area, QCREDA executive director Andrew Hamilton said.

Infrastructure costs typically account for 25 to 30 percent of a total project, Mr. Paul said. QCREDA’s long-term, tax-exempt bond-financing usually saves a borrower 2 percent to 3 percent off conventional interest rates.

“This program has been long overdue, but now Rock Island, Henry and Mercer county real estate developers and contractors have a real cost-saving financial tool that should rekindle their interest in creating new housing subdivisions,” said QCREDA chairman Ken Schloemer, who could not attend Thursday’s gathering.

The financing tool would allow housing developers to use bonds to finance the parts of their project – such as streets, sewer, water and street lights – that would be turned over to a municipality. The rest of the subdivision development’s cost could be financed through conventional bank financing.

By removing infrastructure costs from the total project, developers would save money and could pass along lower costs to potential home owners.

The program would also help cities, such as Rock Island, which agreed to make infrastructure improvements with the Mel Foster Co. to develop the Foxwood Addition in southwest Rock Island several years ago. The project did not stimulate the expected housing boom, but the Foster Co. has been repaying the loan to the city with proceeds from the lot sales.

After Mr. Paul’s presentation, officials from Moline, East Moline and Rock Island and a local contractor indicated the QCREDA program had promise.
“It might have some application,” said Greg Champagne, Rock Island’s community and economic development director.

Craig Anderson, Moline’s community development coordinator, said the city has used tax-increment financing and special-use districts among its financing options, but they have disadvantages since they are tied to property tax assessments. The city has some potential liability in those financing tools, he said.

“This seems to have advantages, probably depending on the specific needs of the developer,” he said.

“Anything that will make that process more palatable and affordable is a step in the right direction,” he said.

Home-rule communities can issue the same tax-exempt bonds as QCREDA, but the municipalities also would assume the same risk, Mr. Paul said. QCREDA would require developers to obtain a letter of credit from a bank.

Public-use projects no smaller than $1.5 million or $2 million would realize attractive interest rates and the cost savings of issuing the bonds, Mr. Paul said.
The authority would probably want to pool a number of smaller projects to realize the same economic advantages as larger bond-issuances, he said.

QCREDA and another economic development authority in the St. Louis area are the only two regional authorities of the four with powers to issue bond-financing with both state and federal tax-exemptions.

Mr. Paul has 20 years of experience as an investment banker. He specializes in economic development projects. He developed this variation of tax-free bond-financing for public-use infrastructure projects about seven or eight years ago for the state of Illinois.
COBA gives ‘little guys’ bond clout
Two Quad-Cities are economic-development groups launched a new bond financing program Friday for small and medium-sized projects that would spark job growth in Henry, Mercer and Rock Island counties.

Officials of the Quad Cities Regional Economic Development Authority and the Quad City Development Group said the new Composite Bond Assistance Program, or COBA, would reduce interest-rate financing for companies’ expansions.

QCREDA provides long term, tax-free bond financing for manufacturing and other projects of $2 million to $10 million or more. COBA would pool several companies’ smaller projects if $500,000 to $2 million each to provide the same tax-exempt status and save companies 2 to 3 percent below conventional interest-rate financing.
Each applicant would obtain a bank’s letter of credit to back the project, QCREDA chairman Ken Schloemer said.

“The benefit of this program is that it provides a marriage of sorts between QCREDA and a local Quad-City bank to provide credit enhancement for the bond,” he said.

A number of local companies would like to obtain bond-financing for their projects but have had to scale back their projects or shelve them altogether because of the cost of conventional financing, development-group president John Gardner said.

He commended QCREDA for initiating the new product to help the Illinois Quad-Cities area grow.

About a dozen companies have contacted QCREDA for bond financing since December, but most of the projects were under $1.2 million and were too small to incur the costs of traditional bond-financing, QCREDA executive director Andrew Hamilton said.
No other economic-development authority in Illinois has this type of composite bond-financing program. The Illinois Development Finance Authority had such a program but dropped it 10 years ago, Mr. Hamilton said.

COBA charges a $1,000 non-refundable application fee and certain other closing costs. Banc One Capital Corp. will place the bonds by selling them to institutional investors, Mr. Hamilton said.

Each composite bond would be in the range of $10 million to $20 million and finance five to ten companies’ projects, he said.

COBA could be used to buy land or new equipment or to purchase or construct buildings. The program is open to manufacturer, not-for-profit organizations and certain solid waste projects.
Green light flashes for steel plant
The Quad Cities Regional Economic Development Authority Thursday paved the way for construction of an $11 million steel manufacturing and warehouse operation in Rock Island that would create at least 50 jobs.

Steel Warehouse Inc. of South Bend, Indiana plans to build its first Quad-Cities plant and warehouse on a 20 acre tract in Rock Island. The exact location will be disclosed during a media event Monday afternoon at Rock Island City Hall.
City and Quad City Development Group officials declined to give the projects location until Monday. The location also was omitted from QCREDA’s resolution authorizing the sale of $6 million in adjustable-rate industrial revenue bonds.
Steel Warehouse provides steel tubing on a just-in-time basis to the John Deere Harvester Works and Case Corp. plants in East Moline, company chief executive Dave Lerman told QCREDA members in September.

The family operation began in 1947 by Rock Island native Nathan Lerman, who moved to South Bend and started the steel company to supply Midwest customers. Two of his sons, David and Ted Lerman, have joined their father in the company, as well as two of their sons.

The new operation is expected to better serve the company’s existing farm-equipment customers in Iowa and Illinois and provide an opportunity to develop new customers in South Dakota, Nebraska, and farther west, David Lermer said previously.
The Lermans have been negotiating on sites with city officials in Rock Island and East Moline. They wanted to obtain financing this year and start operating locally by spring.

On Thursday, members of the authority congratulated executive director Andy Hamilton for working quickly and effectively to finance the deal. QCREDA and the Illinois Development Finance Authority raced to provide financing on the project.
The deal means QCREDA may close on two bond-financing deals totaling $12.5 million by the end of this year. The authority has given final approval on financing Plastics Products Co.’s $6.5 million acquisition and expansion project in Moline. Closing on that deal is scheduled on or near Dec. 18.

Mr. Hamilton obtained tentative approval for $4 million in volume-cap financing from Moline and Rock Island and another $4 million in additional cap financing from the Will-Kankakee and Upper River Valley Development Authorities to give the project up to $8 million in bonding authority.

The Moline City Council and the Will-Kankakee authority have approved the bonding-financing plan. The Rock Island council will address the question Monday night and the Joliet council will act on the request next week, Mr. Hamilton said.
The authority could not have financed the project without the cooperation of the other communities.

“We’ve opened up two important alliances for the future,” the authority’s chairman, Ken Schloemer, said.
A public hearing, as required before the bonds may be issued, will be at 9 a.m. Wednesday in the development group office, 1830 2nd Ave., Rock Island.
Closing on the transaction is scheduled Dec. 30.


QCREDA meets in Geneseo


Members of the Quad Cities Regional Economic Development Authority (QCREDA) met Thursday in Geneseo for the first time as part of a new effort to become better known throughout its three county region.

The authority was created by the Illinois General Assembly in 1988 to spur economic growth and create jobs in Rock Island, Henry, and Mercer counties.
QCREDA’s biggest advantage is its ability to offer long-term, tax-free financing for manufacturers.

“The authority’s bonding power can save businesses 2 to 3 percent a year on their borrowing cost”, QCREDA members said.

The authority previously met in the board room of the Quad City International Airport in Moline. Future meetings will be held in community centers or restaurants on a rotating basis in Henry, Mercer, and Rock Island counties, Mr. Schloemer said.
QCREDA’s most recent financing was a $2 million bond issued on behalf of Whitey’s Ice Cream Manufacturing Co. in Moline. The bond financing saved the family-owned company thousands of dollars in interest on its expansion QCREDA executive director Andrew Hamilton said.

Typically, Development Authority tax-exempt bonds carry floating interest of 4 to 5 percent and finance all of a project’s costs over 15-20 years, Mr. Hamilton said.
QCREDA’s board members are Harry Coin, Dean Foster, Thomas Getz, Richard John Sr., Gaylon Martin, Jennifer Rowe, Mr. Schloemer, and the director of the Illinois Department of Commerce and Community Affairs, represented by Gregg Fahey.