The Beatrice City Council revised its LB840 agreement with startup company Rare Earth Salts to no longer require collateral on $326,000 in economic development funds.
A contract with Rare Earth Salts was approved Dec. 15 to provide the company with assistance as it launches a pilot program in Beatrice.
City Administrator Tobias Tempelmeyer said the original contract called for a UCC filing with the state for Rare Earth Salt’s equipment and receivables at its wet/dry lab at the Beatrice business campus.
The filing would have provided the City security similar to a mortgage or a deed of trust filed on a property. Tempelmeyer said he was unsure what the value would have been on the collateral.
Mayor Stan Wirth said Monday it was his understanding Rare Earth Salts CEO Allen Kruse was unauthorized to put up the equipment as collateral.
“There has been discussion that the item regarding collateral or security agreement be removed," Wirth said. “My opinion is that it appears Mr. Kruse does not have the authority to pledge the collateral.”
Kruse previously stated Rare Earth Salts has developed a new technique to harvest rare earth elements—which are primarily used in electronics and other high-tech devices—from would-be mining waste around the globe.
During the pilot program, mining waste will be brought to the plant for the process to be executed on a small scale, before efforts are amplified into a large-scale commercial operation.
Approved by voters in 2012, LB840 allows the city to collect $250,000 annually from 50 percent of one half of a one percent city sales tax to be used for economic development improvements.
The vote to remove the collateral requirement from the agreement was passed 5-1-1, with councilman Rich Kerr voting in opposition, Robert Morgan—who serves as the Council’s representative on the NGage board—abstaining. Councilman Ted Fairbanks was absent.
Kerr was the lone member of the Council to voice opposition to the revised agreement, questioning why the city seems devoted to giving Rare Earth Salts money.
“Why does he (Kruse) think that he can dictate to us the terms of this thing when we have the money and he should be working to satisfy what we think should be done here?” Kerr asked. “Every time I've went for a loan, I always had my hat in my hand. It seems like he wants us to come to him with our hat in our hands saying, ‘please, please, please take our money.’ It just rubs me the wrong way.”
Kerr also questioned why Kruse wasn't present at Monday’s City Council work session to explain why the revision to the agreement was needed.
Glennis McClure, director of the NGage economic development group, said the funds will still be paid out in stages.
“As far as skin in the game, they’re working on hiring the jobs,” McClure said. “The $6 million has to be raised before April 1 for part of it to be let out. There is $100,000 that is let out as soon as the jobs agreement is signed, but then there’s $75,000, and (another) $75,000 depends on the jobs and also the $6 million raised.”
Kruse previously stated Rare Earth Salts needs $10 million to launch the pilot program in Beatrice. About $4 million currently has been raised.
In addition to a $76,000 request for one year’s rent at the Beatrice business campus, a second request for $250,000 approved in December is to be distributed to Rare Earth Salts in three increments.
This phase is dependent on job creation and capital improvements.
The first $100,000 will assist in “speed to market” and will be used for incentive packages to draw employees.
The second phase of $75,000 will be for the creation of four additional jobs by April 1, 2015. These jobs include a chemical engineer, inorganic engineer and two lab technicians. The second phase of funds is also contingent on the company raising $6 million in capital by April of next year.
The final $75,000 is for creating four more jobs by July 1, 2015. These include an electrical engineer, analytical engineer and two additional lab technicians. As of Dec. 15, Rare Earth Salts had eight employees.