Title
ECONOMIC DEVELOPMENT INCENTIVE LOAN AGREEMENT WITH APEX ENGINEERING INTERNATIONAL, LLC.
Presented by: Sherdeill Breathett, Economic Development Coordinator.
RECOMMENDED ACTION: Approve the resolution and authorize the Chairman to sign the agreement.
Body
Apex Engineering International, LLC (Apex) is an engineering and manufacturing company with a diverse assortment of complex 3, 4, 5, and 6 axis Computer Numerical Control (CNC) machines specializing in the commercial, military, and business jet industry. Customers include Cessna, Bell Helicopter Textron, Lockheed Martin, Gulfstream, and Spirit Aerosystems. The parent company of Apex, HM Dunn Aerosystems (Dunn), provides engineering design support, tool fabrication, complex machining, sheet metal fabrication, complex composite manufacturing, in-house processing, and complete assembly capabilities to the aerospace industry. The company has committed to invest significantly in the aerospace industry.
Dunn occupies 305,000 square feet between two facilities in Wichita (1804 W. 2nd - Apex, and 4201 S. 119th - Dunn). Through Apex and its predecessors, Dunn has operated in Wichita since the 1950s. Dunn currently also has locations in Euless, Texas and St. Louis, Missouri.
Dunn has recently won new work on the Cessna CJ4 line and is contemplating moving that work to Wichita from a Nova Scotia facility operated by another company. Concurrently, in order to gain operating efficiency Dunn is considering relocating machining work from its Euless and St. Louis facilities to Wichita. Finally, it is considering expanding production capacity by adding new metal processing equipment in order to secure additional contracts from aviation OEMs. The company is asking for approval of the Loan Agreement in the amount of $90,000 at this time to do this work in Wichita.
Sedgwick County and Wichita have partnered to offer economic development assistance to Apex, subject to governing body approval. The City and Sedgwick County will provide $90,000 each in loan funds to offset capital investment costs. Loan principal will be forgiven in equal annual installments at the end of each year, provided that the employment and wage commitments set forth in the agreement have been met. Any principal not forgiven will carry forward and any principal remaining at the end of the loan term shall be due and payable at that time. In the event Apex ceases operations in Wichita during the term of the loan, the entire original principal will be immediately due and payable, plus interest from the start of the loan at 12% annual percentage rate (APR).
In return, the company will add 108 new jobs to the existing 168 at the 2nd Street facility. The average wages for the new jobs will be $35,363 with the average of all jobs of $49,597 (compared to NAICS of $39,166). The company also pays for 50% of the employees' health insurance and additional benefits.
Job Creation: Year Jobs
1 90
2 18
3 0
4 0
5 0
Total New Jobs: 108
Capital Investment:
Real Property Improvements $ 200,000
Machinery & Equipment $ 5,700,000
Total Investment $ 5,900,000
Alternatives: Instead of relocating the work to its Wichita facility, Dunn could obtain operating efficiencies by moving the work to one of the company's other facilities in Texas or Missouri.
Financial Considerations: The proposed $90,000 loan to Apex will be provided from funds budgeted for economic development incentives in the Economic Development program after transfer from the Economic Development contingency account.
As required by the City-County Economic Development Incentive Policy, Wichita State University's Center for Economic Development and Business Research has calculated the return-on-investment for the proposed project, and has determined that the proposed loan will produce a benefit to the County of $1.30 for each $1.00 of cost.
Legal Considerations: The authority for this action is K.S.A. 19-101, et seq. A simple majority vote is required.
Policy Considerations: The proposed loan is consistent with the City-County Economic Development Incentive Policy.
Outside Attendees: N/A
Multimedia Presentation: N/A