Brown County won’t pay for beef plant’s TIF bonds
Brown County is not liable to pay off Northern Beef Packers’ Tax Increment Finance bonds, though a bankruptcy judge might be able to alter an agreement between the county and the plant involving road improvements, commissioners learned Tuesday.
The commission had asked Larry Lovrien, state’s attorney, for an update on how the plant’s declaration of bankruptcy could impact the county.
The beef plant filed Chapter 11 bankruptcy protection on July 19. The company owes millions to 277 creditors locally, nationally and in South Korea, according to U.S. Bankruptcy Court documents.
Brown County voters approved a TIF district that allowed for the sale of $6.9 million bonds to help Northern Beef Packers pay for certain construction costs. In a TIF district, increased property taxes resulting from improvements — the increment — are put into an account and used to repay the bonds.
While Lovrien said the property taxes paid by Northern Beef Packers into the TIF account are exempt from bankruptcy proceedings, he said those payments might be slowed by the process. For instance, he said, if the plant were sold in a fire sale, the value could be decreased. And that would mean less in incoming property taxes.
If somebody new were to buy the plant, that business would be responsible for paying any delinquent property taxes, Lovrien said.
Now, Northern Beef Packers owes about $500,000 in back property taxes, according to the county treasurer’s office. That’s an overall total, not all payable to the TIF account.
Maxine Fischer, Brown County auditor, said there’s not enough money in the TIF account to make the next payment to bond buyers. That payment is set for Dec. 1, but the county won’t have to make it if there’s no money in the account. Instead, she said, those who bought the bonds would have to wait to be paid.
The plant has pledged to pay $950,000 toward putting a new surface on County Road 14W from County Road 10 west for a mile to U.S. Highway 281. But Lovrien suspects a bankruptcy judge could alter that agreement.
An Aug. 8 deadline has been set for the plant to file a statistical summary, a statement of financial affairs and other documents with the U.S. Bankruptcy Court for the District of South Dakota, according to court paperwork. The creditors, beef plant officials and the court will all have some say in the restructuring of debt.
Lovrein said it is good that the county hasn’t spent any money on that stretch of County Road 14W. Duane Sutton, commission chairman, said the county has no plans to work on the road until it has the beef plant’s money in hand.
Lovrien suggested that the commission hire an outside attorney who has expertise in bankruptcy law to represent it through the process, including looking into the contractor’s agreement that addresses the $950,000 in road money. Commissioners approved hiring an attorney.
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