Saturday, September 24, 2011

Chinese deal stymies 'Made in Missouri' bill

Missouri lawmakers this week rejected something that sounded like a helluva good idea: A "Made in Missouri" law to provide incentives for job creation. According to Hugh McVey, president of Missouri's AFL-CIO, the bill would,
Invest in exporting Missouri products across the globe ... Bring new science and technology companies to Missouri ... Build high-tech computer centers that will create construction jobs across the state ... bolster and streamline job-training programs.
What's not to like? The bill passed the Senate with bipartisan support. This week, though, it failed to move in the House, which is winding down its special session.

Lawmakers may have gotten cold feet because "Made in Missouri" offered business deals like one with a Chinese company that just went bad.

It was in the old railroad town of  Moberly, population 14,000.  The town had hoped to generate more than 700 good-paying jobs by helping to build an artificial sweetener plant for a Hong Kong company called Mamtek.

The city announced the deal in July 2010. Private investors would put in $8 million. Moberly backed $39 million in bonds and the state provided another $17 million in tax credits and other incentives.

At first the project went well, according to the St. Louis Post-Dispatch. Soon after Mamtek broke ground,
It opened an office on the top floor of a building across from City Hall, hired a few managers and started soliciting job applications at the local unemployment office. It received 3,742.
Then things slowed down. The challenge of reconfiguring Chinese plant designs to fit U.S. regulations delayed construction, Mamtek said. So did nasty winter weather. The spring opening date got pushed back to summer. Still, work was under way. The plant was getting built...

The project kept moving forward, until Sept. 1. That was the day UMB Bank put out a statement saying Mamtek had missed the first $2.2 million payment on city-backed bonds. A reserve fund covered the bill, but the city was put on notice: Fix this or be in default on the whole $39 million.
Not to worry, city officials said. They own the land the plant is on and hold Mamtek's formula for sucralose. And while the bonds are in Moberly's name, the fine print states the city doesn't have to keep paying them if Mamtek doesn't hold up its end — though it's unclear who would pay them or how a default would affect the city's credit rating.
No one appears to be saying much, except UMB Financial Corp., which is based in Kansas City. In a disclosure statement, the bank said,

Mamtek is severely financially distressed and has very little cash." The company said it would need an additional $20 million to $44.5 million to finish the project. And, what's more, the company said that "intellectual property escrowed in connection with the financing" — the sucralose formula that was to be collateral on the bonds — "has very little value."
If past is prologue, the Mamtek hucksters are on another continent, the bank will be made whole and the taxpayers of Moberly will end up on the hook for the defaulted bonds, paying for jobs they never got.