Memorandum
City of Lawrence
City Manager’s Office
|
TO: |
Diane Stoddard, Interim City Manager |
|
CC: |
Casey Toomay, Assistant City Manager |
|
FROM: |
Britt Crum-Cano, Economic Development Coordinator |
|
DATE: |
December 30, 2015 |
|
RE: |
City Commission Consideration of Menard, Inc.’s Request for Public Assistance |
Overview
Menards, a nationally known home-improvement retailer, is proposing a manufacturing campus with multiple production facilities on a little over 90 acres at Lawrence VenturePark. Operations at the site will supply products to several retail stores throughout Kansas and neighboring states.
To assist in establishing the manufacturing operations at the site, the company is requesting a 10-year, 50% tax abatement, City and County assistance with defraying partial special assessment expenses, and the former Farmland Industries bulk warehouse building located on the parcel site.
Menards is proposing a cash transaction to purchase the land at market value and pay the total of 10 years of special assessments at the time of purchase. Anticipated capital investment for real property improvements is over $15 million (includes land and building), supporting an estimated 100 new, full-time, permanent positions with starting wages averaging $14.61/hour and annual average wages of $17.30/hour.
Company Background
Menards is one of the largest home improvement chains in the U.S., employing over 55,000 in approximately 295 stores within a 14 state region, including Ohio, Michigan, Indiana, Illinois, Wisconsin, Minnesota, Iowa, Missouri, Nebraska, Kansas, South Dakota, North Dakota, Wyoming, and Kentucky.
The company is headquartered in Eau Claire, Wisconsin and has remained a family-owned and operated business since its establishment in 1958. Menards sells lumber and home improvement products such as floor coverings, hardware, millwork, paint, tools, stock appliances, pet products, lawn and garden supplies, and groceries. All company stores have full-service lumberyards.
To supply products to its retail stores, Menards has manufacturing facilities located in Eau Claire, Wisconsin; Rochester, Minnesota; Holiday City, Ohio; Plano, Illinois; Shelby, Iowa; Shell Rock, Iowa; Valley, Nebraska; Terre Haute, Indiana; Iron Ridge, Wisconsin; Saginaw, Michigan; and Rapid City, South Dakota. These plants manufacture steel siding and roofing, interior and exterior doors, state of the art composite decking, environmentally friendly treated lumber, fasteners, stone and block, engineered roof & floor trusses, and countertops.
Project Description
Menards is proposing the construction of a manufacturing campus/production facilities at Lawrence VenturePark to produce and supply products for its home improvement stores in Kansas, Colorado, Missouri, and Oklahoma. Production facilities would comprise approximately 184,000 square feet and be located on a little over 90 acres at the Park, primarily on Block C, Lot 1 (Lot C1). The project would be the first at the redeveloped brownfield site of the former Farmland fertilizer plant, providing a large, nationally known anchor tenant for Lawrence VenturePark.
The property is currently vacant with infrastructure in place and has been the subject of past environmental remediation efforts by the City. The company plans to purchase the land at market (appraised) value and make an estimated additional $14.5 million in real property improvements to the site over the next 10 years. The production facilities are anticipated to support 100 full-time, permanent new jobs with starting wages averaging $14.61/hour and annual average wages of $17.30/hour.
Assistance Request
On November 17, 2015, Menard, Inc. submitted a request and Application for Economic Development Support/Incentives to the City of Lawrence. To help establish their facility and manufacturing operations within Lawrence, Menards is asking for a 50%, 10-year tax abatement on a little over 90 acres of property located in Lawrence VenturePark, City and County assistance with defraying partial special assessment expenses, and the bulk warehouse building (formerly owned by Farmland Industries) located on Lot C1 at the park.
|
Public Assistance Request |
|
|
Description |
Value |
|
50% Tax Abatement, 10 Years |
$1,256,270 |
|
City Grant (10 year, SA) |
$549,350 |
|
County Grant (10 year, SA) |
$200,000 |
|
City Bulk Warehouse |
$285,963 |
|
Total package value: |
$2,291,583 |
Note Menards will be paying the City approximately $794,000 for the VenturePark property at closing. With the 50% tax abatement on the property, the project is estimated to support approximately $2.7 million in additional real property taxes over the abatement period. This figure does not include the overall economic impact of this investment in the community, nor the effect that the project could have on development in the remaining parcels of Lawrence VenturePark.
|
Estimated Net New Real Property Tax Revenue |
|||||||||||
|
Net Property Tax Revenue |
Total over 10 Years |
Y1 |
Y2 |
Y3 |
Y4 |
Y5 |
Y6 |
Y7 |
Y8 |
Y9 |
Y10 |
|
Net Tax Revenue-Commercial[1] |
$1,256,270 |
$125,627 |
$125,627 |
$125,627 |
$125,627 |
$125,627 |
$125,627 |
$125,627 |
$125,627 |
$125,627 |
$125,627 |
|
Net Tax Revenue-Residential[2] |
$1,475,494 |
$141,031 |
$142,441 |
$143,866 |
$145,304 |
$146,757 |
$148,225 |
$149,707 |
$151,204 |
$152,716 |
$154,243 |
|
Total Net Tax Revenue |
$2,731,764 |
$266,658 |
$268,068 |
$269,493 |
$270,931 |
$272,384 |
$273,852 |
$275,334 |
$276,831 |
$278,343 |
$279,870 |
Eligibility Overview
The use of tax abatements is guided by the City of Lawrence Economic Development Goals, Process, and Procedures (approved March 24, 2009 and updated May 18, 2010) which outlines the guidelines for consideration of tax abatements and eligibility amounts. Given the policy guidelines, the proposed project and requested public assistance package appears to meet all policy criteria thresholds. The applicant’s request for a 50% tax abatement falls within the abatement percentage allowed under City policy.
Analysis Overview
Based on information received through the incentives application, staff conducted analysis of the costs and benefits associated with the project utilizing the City’s economic development cost-benefit model. The model outputs a ratio reflecting the comparison of estimated costs to estimated benefits returned to the jurisdictions as a result of the project.
|
Cost-Benefit Ratios |
|||||
|
Description |
City |
County |
USD 497 |
State |
Total Package Value |
|
50% Tax abatement, City provided bulk warehouse (~$286,000 value), City ($549,350 total value) and County ($200,000 total value) grants: total grant amounts to be divided by 10 and payable in equal, annual installments over 10-year abatement period. |
1.28 |
1.26 |
4.82 |
N/A |
$2,291,583 |
|
Assumes Menards purchases land at market (appraised) value and pays SA. |
|||||
With the requested public assistance, the cost-benefit ratio for all taxing jurisdictions meets the preferred 1.25 ratio. For additional detail, please refer to the Technical Report.
Development Agreement
If assistance is authorized, Staff recommends the City, County and Applicant enter into a development agreement where annual abatements and grant payments are tied to performance requirements for job growth, wages, health insurance benefits and capital investment to help minimize risk on the part of taxing jurisdictions.
The Development agreement would specify compliance targets as shown below, which would be subject to the City’s blended compliance schedule.
|
Performance Targets |
||||||
|
Abatement Year |
Tax Year |
Cumulative Real Property Capital Investment |
Cumulative FT Jobs |
Wage Floor |
Community Average Wage |
Healthcare Insurance Premium |
|
1 |
2018 |
$15,271,600 |
65 |
Company annual average wage for FT, permanent positions must meet or exceed the community annual wage floor. |
$30,380 |
For FT, permanent employees, company pays at least 70% of premium cost for a company-provided healthcare insurance policy OR pays FT, permanent employees a wage that is $1.50/ hr. above the wage floor. |
|
2 |
2019 |
100 |
Company annual average wage for FT, permanent positions must meet or exceed the community average for similar type jobs as per the Kansas Wage Survey |
|||
|
3 |
2020 |
Maintain a minimum of 100 FT, Permanent Jobs |
||||
|
4 |
2021 |
|||||
|
5 |
2022 |
|||||
|
6 |
2023 |
|||||
|
7 |
2024 |
|||||
|
8 |
2025 |
|||||
|
9 |
2026 |
|||||
|
10 |
2027 |
|||||
The agreement is currently in draft form and will need to be finalized. Once finalized, approval of the agreement would be considered at a future County Commission for County participation and City Commission meeting for City participation. The agreement would be executed by all parties no later than property closing.
Actions to Date
The City Commission received the request on December 1, 2015 and referred it Staff for analysis and PIRC for recommendation.
The Public Incentives Review Committee (PIRC) reviewed the Menard Inc., request at their meeting on Tuesday, December 8, 2015 (see attached draft minutes) and voted unanimously to recommend City and County Assistance as per the request.
The County Commission received PIRC’s recommendation for the Menard Inc., request at their meeting on December 9, 2015 and voted unanimously to authorize a County grant of $200,000 to be paid annually in equal payments over the 10-year tax abatement period.
Requested City Commission Actions
· Receive PIRC recommendations
· Conduct a public hearing to consider Resolution No. 7148 granting a 10-year, 50% tax abatement for the property at Lawrence VenturePark.
· Authorize Ordinance No. 9192 on first reading for a City grant of $549,350, to be paid over a 10 year period, subject to the terms and conditions specified within a Development Agreement, if appropriate. Staff Memo & Attachments
Future Actions
At the January 26, 2016 meeting, the City Commission will:
· Authorize the Mayor to execute a Purchase and Sale Agreement with Menard, Inc., for property at Lawrence VenturePark, if appropriate.
After the Development Agreement has been finalized and no later than property closing, the City Commission and County Commission will vote to authorize execution of the Development Agreement with Menard, Inc.
List of Attachments:
[1] Amount represents 50% of real property taxes.
[2] Assumes 48 local households created from direct employment and 31 local households created from indirect employment, as calculated within the cost-benefit model’s Employee Household Replacement Raking Model, which takes into consideration the project’s resident (City and County) and nonresident (commuting) workforce and employee turnover.