Ethanol plant

The City Council voted unanimously in a special meeting Tuesday to allow the next payment of $587,500 in city sales tax funds to Spirit Ethanol on the advice of City Attorney Ken Dalsted.

Mayor Clarice Liechty scheduled the meeting to deny the Dec. 28 payment from the Jamestown/Stutsman Development Corp. Her motion said the payment should be denied “until such time the JSDC resolves their construction timeline issues and legal issues with Spirit Ethanol and the Newman Group, and the city has documentation of the other investors in the Spirit Ethanol plant.”

Dalsted told the council, if the Dec. 28 payment did not go ahead as scheduled, the JSDC and likely the city would be liable. The JSDC would be violating the terms of its contract with the Newman Group.

“By cutting off the JSDC in disbursement of the funds, they will be in default,” he said. “It’s imperative for the city not to do anything at this time.”

He explained the JSDC is taking the proper steps in its resolution that sets a date for the start of construction on the ethanol plant near Spiritwood. According to the resolution, the Newman Group must start construction by June 1.

Dalsted said state law allows the addition of a timeline in a situation where the contract originally lacked one. The only requirement is that it must be a reasonable timeframe. He said the June 1 deadline in the resolution is reasonable.

“They’re acting appropriately with a reasonable timeframe for commencement,” he said.

Jim Boyd, vice president of the JSDC Board, said the board agreed with Dalsted’s assessment of the situation. There is $1.875 million in the escrow account at this time and drawing interest, he said. Not following through on this fourth payment would put the JSDC in default of its contractual obligation.

“If June 1 comes and goes, is it JSDC’s intention to get the money released?” Dalsted asked.

Boyd said yes.

“It will be litigation or getting the funds back cleanly,” Boyd added.

Councilwoman Kelani Parisien asked what feedback JSDC had gotten from Spirit Ethanol.

“We’ve met with them a number of times. They haven’t made a decision,” Boyd said. “They haven’t said they’re not going ahead. However, they are making the land available for purchase.”

Without a clear statement of intent, he said, the JSDC Board felt it was necessary to establish a date and see how it goes. Everyone, including Harold Newman, would like to see an ethanol plant get built, he said.

“If it doesn’t make good business sense, it shouldn’t be done,” Boyd said. “He made a good decision not to start, given the economic conditions.”

The mayor objected to using the Newman Group, when, she said, the correct term is Spirit Ethanol, of which Harold Newman is the sole owner. After the meeting Connie Ova, JSDC chief executive officer, explained the Newman Group includes Newman, his family and the JSDC. The JSDC is included due to its $2 million equity investment. The partners in Spirit Ethanol were destined to be Great River Energy, Cargill Malt and the Newman Group.

Liechty asked again about the agreements made in 2007 and a list of the investors. She said she wanted to know about the relationship of the JSDC with Spirit Ethanol. Boyd said the JSDC is a partner to the city in economic development and the city approved the financial package for the ethanol plant.

“Don’t put the blame on us for this,” Liechty said.

Councilman Ken Schulz said he didn’t see how this related to what was on the table.

“It doesn’t matter what the agreement was,” he said. “On the advice from our attorney, denying payment would put JSDC and the city in default.”

Parisien called the question, saying “we need to be careful to make sure we don’t do anything that will shoot ourselves in the foot.”

In the end, all five council members voted against denying the payment.

Meetings of the Finance and Legal, Public Works, Building, Planning and Zoning and the Fire committees followed the special meeting.

In committee business:

* Finance and Legal renewed 4R’s Recycling contract and its subsidy for a year.

* Finance and Legal approved the city administrator’s contract, with the addition to his job description that he provide the council with a monthly planning and projects report and orientation for new council members. The mayor wanted more detailed additions to his job description. Her motion died for lack of a second.

* Finance and Legal unanimously granted city employees Dec. 26 off.

* Fire Chief Jim Reuther was given support by the Fire Committee for charging a flat fee in out-of-city rescue squad trips.

Sun reporter Toni Pirkl can be reached at (701) 952-8453 or by e-mail at tonip@jamestownsun.com

Tags: spirit ethanol, newman group, ethanol, energy, fuel