ECONOMIC DEVELOPMENT MEMORANDUM

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ECONOMIC DEVELOPMENT MEMORANDUM January 8, 2018 TO: City Council FROM: Gale Price, AICP, EDFP, Economic Development Director SUBJECT: Consideration and action on a TIF Development Agreement with

1 ECONOMIC DEVELOPMENT MEMORANDUM January 8, 2018 TO: City Council FROM: Gale Price, AICP, EDFP, Economic Development Director SUBJECT: Consideration and action on a TIF Development Agreement with Northwoods Holdings III, LLC and United Alloy, Inc. for development of a new industrial structure and job creation at property addressed as 4000 Kennedy Road and located within TIF No. 25. (File Resolution No ) Relates to Strategic Plan Strategic Goal - Economy The use of TIF to create the City s industrial parks is one of the City s most important tools to help promote new industrial development within the community. File Resolution No authorizes a TIF Development Agreement for development of a new industrial building, Northwoods Holdings III, and creation of jobs by United Alloy, Inc. on property located at 4000 Kennedy Road. This project is a follow up to the issuance of Industrial Revenue Bonds for the project in December Executive Summary The City of Janesville has been in discussions with Tom Baer, representing Northwoods Holdings III, LLC (developer/property owner) and United Alloy, Inc. (tenant and manufacturer) which are related companies, regarding the development of a new 100,000 square foot industrial building to be located at 4000 Kennedy Road located within Janesville TIF District No. 25. The building will be owned by Northwoods Holdings III, LLC and occupied by United Alloy, Inc. which are companies under related ownership. The project entails the new building at 4000 Kennedy Road and a 7,500 square foot addition to the existing facility located directly north at 4100 Kennedy Road. The proposed TIF Agreement would provide the acre portion of industrial property located at 4000 Kennedy Road at the cost of $1.00, require the developer to construct a 100,000 square foot manufacturing building with a guaranteed value of $3.2 million, and require creation of at least 52 of the projected 66 living wage jobs on the property with a baseline job number of 180 jobs in the existing facility at 4100 Kennedy Road. The reflected job creation is in connection to the developer/manufacturer s agreement with the Wisconsin Economic Development Corporation and establishes a baseline job number that is 40 more jobs than the existing agreement with the manufacturer. 1

2 City Recommendation The City recommends that the City Council adopt File Resolution No approving the TIF Development Agreement between the City of Janesville and Northwoods Holdings III and United Alloy, Inc. Suggested Motion I move to approve File Resolution No authorizing the City Manager to enter into a TIF Development Agreement with Northwoods Holdings III and United Alloy, Inc. Background The City of Janesville has continued discussions with Tom Baer, representing Northwoods Holdings, LLC (the future property owner and developer) and United Alloy, Inc. (the manufacturer) to build a new industrial building on property located at 4000 Kennedy Road which is south of and adjacent to their existing facility located at 4100 Kennedy Road. The project would entail a 7,500 square foot addition to the existing facility and a new 100,000 square foot facility on the lot at 4000 Kennedy Road. The two facilities would be connected by an elevated enclosure which looks like a walkway but would be an equipment conveyor for the movement of parts to be painted within the new building. The new building would include an entirely new painting system that would occupy one fourth of the building. The remaining three fourths of the new building would be used for assembly and loading trucks for shipping out deliveries from the facility. The proposed project is being driven by the award of a new and significantly large manufacturing contract with United Alloy. In addition to the creation of the new manufacturing structure, the TIF Development Agreement would require the creation of an additional 52 jobs, which is 80 percent of the projected 66 jobs that United Alloy anticipates will be created by the project. In addition, the agreement establishes a baseline job number of 180 jobs for the existing United Alloy facility which is 40 more jobs than the requirement of the previous agreements for 4100 Kennedy Road. This approach is slightly different than the language of other agreements in the use of the 80 percent requirement and establishing the new baseline job number. This language is being used since it mirrors the language being utilized by the Wisconsin Economic Development Corporation for their agreement with the entities for the project. The City Council reviewed and approved at its December 11, 2017 meeting the issuance of $10 million worth of industrial revenue bonds for financing of a majority of the project. The current projected capital expenditure for the project which includes production equipment is $13.5 million. The bond issuance was completed on December 21, 2017 and the proceeds remain in escrow until the project is ready to move forward. Approval of the TIF Development Agreement is the final step in landing this project in Janesville versus the project being located in Texas. There have been a number of TIF Development Agreements with Northwoods Holdings and United Alloy for property directly north of this site. Each project has allowed United Alloy to further expand their manufacturing capacity, increase employment for living wage jobs, and increase the taxable increment of the City of Janesville and the Milton School District (this site, although located within the City, is also located within the Milton School District). TIF Development Agreement specifics: Sale of approximately acres of industrial property located at 4000 Kennedy Road to Northwoods Holdings III, for $1.00. The City Council policy value of the property is $568,789. Development incentive provided as a forgivable loan upfront of $234,000. 2

3 Job creation incentive provided as a forgivable loan upfront of $160,000. Requirement for development of a 100,000 square foot industrial manufacturing facility upon the property by the end of Developer guaranteed property value of at least $3.2 million upon completion of the facility. Developer guaranteed annual increment of at least $80,283 for the completed project. United Alloy s retention of 180 existing positions, and creation of an additional 52 livingwage-equivalent positions within two years of opening the facility, which is 80 percent of the projected 66 positions to be created by the project. The existing 180 positions is 40 more jobs than the existing guarantee for the company. 10 years for payment of the incentive. Options Adopt File Resolution No authorizing the City Manager to enter into TIF Development Agreement with Northwoods Holdings III, LLC and United Alloy, Inc. for development and jobs to be created at 4000 Kennedy Road and located within TIF No. 25. Amend the conditions of the TIF Development Agreement with Northwoods Holdings III, LLC and United Alloy, Inc. before approval. Defeat File Resolution No , thus not authorizing the TIF Development Agreement with Northwoods Holdings III, LLC and United Alloy, Inc. Analysis United Alloy Inc. continues to grow as an industrial manufacturer within the community. The City and United Alloy have partnered on several TIF development projects to allow for the creation of the initial facility on Kennedy Road and to make multiple expansions to the facility. United Alloy is a leader in the manufacturing of commercial tanks with numerous different applications. That has allowed United Alloy to be awarded another large manufacturing contract. Approval of this TIF Agreement will provide for the land for the project and close a project finance gap. Although there is a relatively high capital expenditure for this project, much of the production equipment is exempt from property tax since it is used for manufacturing. Furthermore, property values for new buildings do not reflect the actual cost of construction at this time, further defining the project gap. Approval of the resolution will authorize the City Manager to proceed with this proposed industrial project as previously outlined. Conclusions The proposed TIF Development Agreement between Northwoods Holdings, LLC, United Alloy, Inc. and the City is a continuation of the City s commitment to further expand and diversify the local economy and employment base. The project allows for further expansion of an existing, home grown manufacturer within the community while guaranteeing additional living wage jobs. The proposed agreement is consistent with City Council Policy 61A for Industrial Development. Subsequently, the City is recommending that the agreement be approved by the City Council. Restated City Recommendation The City recommends that the City Council adopt File Resolution No approving the TIF Development Agreement between the City of Janesville and Northwoods Holdings III and United Alloy, Inc. for a manufacturing project to be located at 4000 Kennedy Road. cc: Mark Freitag, City Manager Maggie Darr, Assistant to the City Manager 3

4 Resolution No A Resolution approving a TIF Development Agreement with Northwoods Holdings III, LLC and United Alloy, Inc. for the construction of a 100,000 square foot manufacturing facility and creation of jobs on property located within Janesville Tax Incremental Financing District No. 25 WHEREAS, Sections and of Wisconsin Statutes authorize cities to utilize tax increment financing to promote industry and implement economic development projects; and WHEREAS, the Janesville Common Council have authorized the use of Tax Incremental Financing Districts (TIDS) for industrial site development and TIF development agreements to facilitate the manufacturing, industrial, and overall economic benefit of the City of Janesville (CoJ) when they adopted Council Policy Statement No. 61 (Economic Development Policy) in 1994 and further modified as Council Policy Statement No. 61A (Industrial Economic Development Policy); and, WHEREAS, the Common Council of the CoJ created Tax Incremental Financing District No. 25 to stimulate industrial development projects in the CoJ's Kennedy Road corridor; and WHEREAS, Northwoods Holdings III, LLC (developer) and United Alloy, Inc., (tenant and manufacturer), which are related companies, and the CoJ have negotiated a certain TIF Development Agreement which, in major part, calls for the CoJ to provide the developer a property located at 4000 Kennedy Road for $1.00, a forgivable loan to the developer in a lump sum in the aggregate amount of Two Hundred Thirty Four Thousand Dollars ($234,000) to be used for development of the property and a job creation incentive of One Hundred Sixty Thousand Dollars ($160,000) also to be used for the development of the property; and WHEREAS, the Common Council of the CoJ hereby find that the approval of this particular negotiated TIF Development Agreement with the related companies of Northwoods Holdings III, LLC and United Alloy, Inc., to be in the best interest and of benefit to the CoJ, its citizens, residents, taxpayers, and the overall community; NOW, THEREFORE, BE IT RESOLVED, by the Common Council of the City of Janesville that the Administration s negotiated TIF Development Agreement with Northwoods Holdings III, LLC and United Alloy Inc., and the TIF development incentives described above are hereby approved and authorized, according to the terms and conditions set forth in the specific TIF Development Agreement, and BE IT FURTHER RESOLVED, that the City Manager, on behalf of the City of Janesville, and those he authorizes on his behalf is/are hereby authorized to negotiate, draft, modify, amend, review, enter into, and file all such other documents, papers, and agreements, take whatever other actions, and to make and enter into whatever other

5 Resolution No Page 2 changes and amendments to the TIF Jobs Agreement, and such other documents and agreements, which the City Manager may, from time to time, deem necessary and/or desirable to effectuate the intent of this Resolution. ADOPTED: APPROVED: Mark A. Freitag, City Manager ATTEST: David T. Godek, City Clerk-Treasurer Motion by: Second by: Councilmember Aye Nay Pass Absent Conley Farrell Gruber Jorgensen Marklein Williams Wolfe APPROVED AS TO FORM: Wald Klimczyk, City Attorney Proposed by: Economic Development Office Prepared by: Economic Development Office and City Attorney

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