The Washington Economic Development Finance Authority has approved issuance of $110 million in non-recourse revenue bonds to Columbia Pulp, LLC.
The bonds will cover construction costs for the planned 449-acre wheat straw refuse recovery and paper pulp manufacturing facility to be located on Highway 261 near Starbuck, according to Columbia Pulp President John Begley.
“It still has to go through a fairly detailed process, which will probably take about eight weeks,” Begley told The Times on Monday. “We’re hoping to close these bonds mid-June and then break ground about 10 minutes later,” he joked.
Construction of the project should be complete within 12-13 months; Begley said he hopes the pulp plant will begin operations in June 2016. “When we close the bonds, we will bring on a couple of key management people,” he said. “In the fall we will start hiring the rest of the salaried work force. In the first quarter of 2016 we plan to begin hiring the operational work force.”
Columbia County Commissioners passed a resolution approving the issuance of the bonds last week during their regular board meeting. WEDFA will only issue bonds welcomed by the community, as evidenced by such a local resolution, according to a letter from the finance authority.
“We wish to emphasize that the only purpose of this resolution is to approve Columbia Pulp’s use of WEDFA financing for this project,” the letter from Rodney Wendt, executive director of WEDFA, reads. “It does not supplement or replace any portion of the normal permitting process. There is no liability against Columbia County created by issuance of WEDFA’s bonds.”
WEDFA is an independent agency within the executive branch of state government created by legislators to act as a financial conduit to businesses through the issues of non-recourse revenue bonds, according to the group’s website.
The agency has authority to issue bonds on both a taxable and tax-exempt basis in support of qualifying projects such as manufacturing, processing and waste disposal facilities (retail projects do not qualify). Columbia Pulp qualified as a solid-waste disposal facility, according to Begley.
Non-recourse loans and bonds, sometimes referred to as “industrial revenue bonds,” are from a bank or bond purchaser through WEDFA. The finance authority then lends the proceeds to the company (such as Columbia Pulp) in return for the company’s agreement to repay WEDFA an amount equal to debt service.
The biggest benefit to this type of financing is that the bank or bond issuer does not have to pay income tax on the interest they earn on the investment, according to information on the WEDFA website. This means they are willing to accept a lower interest rate. WEDFA passes on the lower interest rate to the borrower, reducing the borrowing cost.