Loading...
HomeMy WebLinkAboutItem 10 Franz Bakery Company Request Regarding Enterprise Zone Extension in Springfield AGENDA ITEM SUMMARY Meeting Date: 2/5/2018 Meeting Type: Work Session/Reg. Mtg Staff Contact/Dept.: Courtney Griesel/CMO Staff Phone No: 541-736-7132 Estimated Time: 15 Minutes/20 Minutes S P R I N G F I E L D C I T Y C O U N C I L Council Goals: Community and Economic Development and Revitalization ITEM TITLE: FRANZ BAKERY COMPANY REQUEST REGARDING ENTERPRISE ZONE EXTENSION IN SPRINGFIELD ACTION REQUESTED: Discuss a three-year property tax exemption and extending the Enterprise Zone exemption an additional two years, for a total of five years, for an investment at the United States Bakery/Franz Family Bakery site in Springfield, OR. Discuss and recommend any desired financial contribution on the part of United States Bakery/Franz Family Bakery to the City as part of extending the Enterprise Zone exemption an additional two year. Regular Meeting: Approve/Not approve: RESOLUTION AUTHORIZING THE CITY MANAGER TO SIGN AGREEMENTS WITH LANE COUNTY AND THE UNITED STATED BAKERY D/B/A FRANZ FAMILY BAKERIES TO APPROVE A THREE-YEAR ENTERPRISE ZONE PROPERTY TAX EXEMPTION AND TO EXTEND THE ENTERPRISE ZONE PROPERTY TAX EXEMPTION AN ADDITIONAL TWO YEARS FOR A TOTAL OF FIVE YEARS FOR AN INVESTMENT AT ITS MANUFACTURING FACILITY IN SPRINGFIELD OREGON ISSUE STATEMENT: As co-sponsor of the Springfield Community Enterprise Zone with Lane County, consider approving the resolution to extend property tax abatement to United States Bakery d/b/a Franz Family Bakers (Franz Bakery) under the State Enterprise Zone Program, with a request for an additional two (2) year exemption over the state statutory three (3) year- program, totaling five years. Franz Bakery is proposing a $20 million plant expansion, including $10 million in additional building expansion and $10 million in equipment purchase and installation at the existing Springfield, Oregon site. No equipment will be removed or decommissioned as part of this expansion. Franz Bakery has requested that both sponsors of the Springfield Community Enterprise Zone (City of Springfield and Lane County) approve two-years of extended enterprise zone benefits in addition to the program standard three years. In addition to the $20 million estimated capital investment, the facility is also planning to create, at minimum, 45 additional new full-time positions. Currently, the site employs 214 full-time employees, earning over two times the average wage in Lane County. These positions will remain, bringing the total employment onsite to 259 or more once the investment is complete. The anticipated capital investment would expand the plant footprint by 43,700 sf, adding new food processing machinery for an additional breadline and to create capacity to manufacture in-house certain products which are currently outsourced. This equipment is in addition to existing machinery and equipment. The expansion project is part of a long-term growth strategy for the Glenwood site and company. The investment will increase the facility’s capacity and reflects the company’s decision to maintain a strong footprint as a Springfield employer. The EZ benefits will influence where Franz Bakery chooses to make future major investments and has been key to securing this potential expansion in jobs, manufacturing capabilities, and property values. ATTACHMENTS: 1: Council Briefing Memo 2: Enterprise Zone Letter Request from Franz Bakery 3: Enterprise Zone Application 4: Resolution DISCUSSION/ FINANCIAL IMPACT: See Attachment 1: Council Briefing Memo. Attachment 1, Page 1 of 4 M E M O R A N D U M City of Springfield Date: 2/5/2018 To: Gino Grimaldi COUNCIL From: Courtney Griesel, Economic Development Mgr BRIEFING Subject: United States Bakery d/b/a Franz Family Bakeries Request Regarding Enterprise Zone Extension in Springfield. MEMORANDUM ISSUE: As co-sponsor of the Springfield Community Enterprise Zone with Lane County, the City is asked to approve the request to extend property tax abatement to United States Bakery d/b/a Franz Family Bakers (Franz Bakery) under the State Enterprise Zone Program, with a request for an additional two (2) year exemption over the state statutory three (3) year-program, totaling five years. Franz Bakery is proposing a $20 million plant expansion, including $10 million in additional building expansion and $10 million in equipment purchase and installation at the existing Springfield, Oregon site. No equipment will be removed or decommissioned as part of this expansion. Franz Bakery has requested that both sponsors of the Springfield Community Enterprise Zone (City of Springfield and Lane County) approve two-years of extended enterprise zone benefits in addition to the program standard three years. In addition to the $20 million estimated capital investment, the facility is also planning to create, at minimum, 45 additional new full-time positions. Currently, the site employs 214 full-time employees, earning over two times the average wage in Lane County. These positions will remain, bringing the total employment onsite to 259 or more once the investment is complete. The anticipated capital investment would expand the plant footprint by 43,700 sf, adding new food processing machinery for an additional breadline and to create capacity to manufacture in-house certain products which are currently outsourced. This equipment is in addition to existing machinery and equipment. The expansion project is part of a long-term growth strategy for the Glenwood site and company. The investment will increase the facility’s capacity and reflects the company’s decision to maintain a strong footprint as a Springfield employer. The EZ benefits will influence where Franz Bakery chooses to make future major investments and has been key to securing this potential expansion in jobs, manufacturing capabilities, and property values. COUNCIL GOALS/ MANDATE: Encourage Economic Development and Revitalization through Community Partnerships Attachment 1, Page 2 of 4 BACKGROUND: Franz Bakery operates its Springfield plant on just under 15 acres in Glenwood and employs on average 214 full-time employees. The taxable value in FY17 of the land and facilities was approximately $34 million and total property taxes were about $472k. If approved, this would be Franz Bakery’s second enterprise zone authorization with a two (2) year extension within the Springfield Community Enterprise Zone, the Company’s first completed in 2011 following the relocation of the complete facility to the Springfield-Glenwood area. The value of this initial Enterprise Zone abatement is estimated at a total of $3.3 million over its duration. From 2012, the first year following the 5-year authorized abatement, through FY 17, Franz Bakery has paid total property taxes in over $3.3 million, and employed an average of nearly 200 full-time employees annually. The current project entails a substantial upgrade to the existing facility, including an anticipated $10 million in construction costs to expand the current facility footprint by 43,700 square feet (total facility size at completion of project expected to be just over 200,000 square feet) and an additional $10 million in machinery and equipment investment and installation. This expansion, anticipated to be complete and operational by August of 2018, will allow the facility to add a much needed additional bread line and enable the company to expand in-house production of currently outsourced products. The new square footage and machinery and equipment are in addition to existing machinery and equipment and will not be replacing equipment already located at the facility. The EZ application indicates the firm’s full-time employment on site averaged 214 employees over the previous 12 months. Franz Bakery fully anticipates its full-time employment would increase by 45additional new full-time positions, bringing the total onsite employment to 259 fte (zone requirements mandate an average employment of 228 fte at the Franz site for the duration of this abatement) and will receive average compensation which exceeds the 150 percent of the Lane County average annual wage. Franz Bakery’s proposed project of $20 million is eligible, by Oregon State statute, for 3-year Enterprise Zone benefits. The project may also be eligible for additional extended 2-year Enterprise Zone benefits (totaling up to five years) provided both Enterprise Zone sponsors (the City and Lane County) agree to terms and the firm signs an agreement that: 1. The firm agrees to compensate during the entire enterprise zone tax exemption period all new employees at an average rate of not less than 150 percent ($62,285) of Lane County’s prevailing average annual wage ($41,523) at the time of applying for authorization; 2. The firm signs a First Source Hiring Agreement with the Oregon Employment Division; 3. The firm maintains a mandatory minimum employment level of 228 fte throughout the five-year exemption period; and 4. The firm agrees to and complies with other reasonable conditions the sponsors request at the time authorization. 5. The firm and Zone co-sponsors agree to additional terms as identified by the Zone co-sponsors. Past additional terms have included financial contributions as a reasonable offset to general government agencies to support ongoing administration of economic development efforts. Past precedence has shown offsets totaling 0.5% of the estimated total investment. For this proposed investment, this contribution would total $100,000 and might be paid in a single installment or in five (5) annual installments over the duration of the exemption. Attachment 1, Page 3 of 4 This expansion continues to communicate the Franz Bakery commitment to maintaining a presence and growth in our region while also showcasing the Springfield community’s ability to be competitive as a location for existing companies to continue to reinvest and expand. This project is part of the Franz Bakery long-term growth strategy, continuing to showcase Springfield as a logical and economical location for positive return on company investment. The community’s ability to keep costs at reasonable levels and process requests within efficient timeframes has been, and will continue to be, key to the Franz Bakery decision-making process. With the proposed investment and wage level meeting two of the minimum qualifying requirements for the EZ exemption and the firm working on the First-Source Agreement, the Enterprise Zone sponsors – the City and Lane County – are asked to decide if they are willing (a) To agree on the requested additional two years of exemption and (b) Sign an acceptable agreement with the firm that acknowledges the minimum employment level and meets reasonable additional requirements from the sponsors. Financial Impacts of Enterprise Zone Extended Tax Abatement: The existing Franz Bakery plant and associated buildings, equipment, and property are currently valued at approximately $34 million, per the FY17 tax roll. Franz Bakery paid approximately $472k in property taxes to all public taxing districts that fiscal year. The financial impacts of extending the property tax abatement to Franz Bakery from the statutory 3 years to 5years on the City are estimated acknowledging depreciation of equipment over time and appreciation of property values over the same amount of time. After depreciation of equipment and appreciation of land over the five-year abatement, the project is estimated to add an additional $10.3 million in taxable value to the existing site (valued currently at approximately $34 million) in the first year the investment is placed back on the tax rolls. With the current tax code area rate of $19.687 per $1000 valuation, a total property tax exemption in the 00480 Tax Code Area for the statutory 3 years is estimated at just under $679,000 with the requested 2 year extension adding approximately $410,000 in tax abatement. The total tax abatement on this project forecasted for a full five years is estimated at $1,089,000 with the first year following the abatement adding approximately $200,000 to the annual taxes received. STATUTORY Enterprise Zone Estimated Tax Abatement Y1 – Y3 REQUESTED Enter prise Zone Estimated Extended Tax Abatement Y4 – Y5 Estimated Total Impact of 5 Year Enterprise Zone Abatement Y1 – Y5 Year 6 Estimated Additional Taxes Received from Project Y6 – Post Abatement $679,000.00 $410,000.00 $1,089,000.00 $200,000.00 Attachment 1, Page 4 of 4 RECOMMENDED ACTION: Approve the resolution a. Approving and extending the property tax exemption period an additional two years beyond the initial three years for a total of five-years for Franz Bakery’s $20 million investment in the Springfield plant; b. Set the guaranteed minimum level of employment at 80% of current full-time employment of 260 full-time employees or 208 full-time employees starting now and throughout the exemption period ending in 2022; c. Authorize the City Manager to sign agreements, including any additional terms as identified by the Zone co-sponsors which may include financial contributions as a reasonable offset to general government agencies to support ongoing administration of economic development efforts; and d. Forward the request and application to Lane County Commissioners. Attachment 2, Page 1 of 2 Attachment 2, Page 2 of 2 Attachment 3, Page 1 of 4 Attachment 3, Page 2 of 4 Attachment 3, Page 3 of 4 Attachment 3, Page 4 of 4 Attachment 4, Page 1 of 3 CITY OF SPRINGFIELD, OREGON RESOLUTION NO. ________ RESOLUTION AUTHORIZING THE CITY MANAGER TO SIGN AGREEMENTS WITH LANE COUNTY AND US BAKERY D/B/A FRANZ FAMILY BAKERIES TO APPROVE A THREE-YEAR ENTERPRISE ZONE PROPERTY TAX EXEMPTION AND TO EXTEND THE ENTERPRISE ZONE PROPERTY TAX EXEMPTION AN ADDITTIONAL TWO YEARS FOR A TOTAL OF FIVE YEARS FOR AN INVESTMENT IN ITS SPRINGFIELD PLANT WHEREAS, the City of Springfield would like to encourage investment in Springfield manufacturing and high technology facilities and has identified the food and beverage sector as a target sector; WHEREAS, the City of Springfield and Lane County established and are the sponsors of the Springfield Community Enterprise Zone; WHEREAS, the United States Bakery d/b/a Franz Family Bakeries (Franz Bakery) is located in the Springfield Community Enterprise Zone and is an eligible business under Oregon Enterprise Zone statutes; WHEREAS, Franz Bakery plans to make a $20 million capital investment in its Springfield facility and anticipates it will complete construction of the project upgrades to in 2018; WHEREAS, Franz Bakery has applied for an Enterprise Zone property tax exemption for a total of 5 years; WHEREAS, as part of its application Franz Bakery agrees to execute an agreement with the sponsors of the Springfield Community Enterprise Zone consistent with this Resolution; to comply with all applicable requirements of Oregon’s Enterprise Zone statutes and reasonable requests from the Springfield Community Enterprise Zone sponsors; WHEREAS, the agreement with the sponsors will include a commitment from Franz Bakery to compensate during the entire enterprise zone tax exemption period all new employees at an average rate of not less than 150 percent ($62,285) of Lane County’s prevailing average annual wage ($41,523) at the time of applying for authorization; WHEREAS, Franz Bakery will negotiate a First Source agreement with the Oregon Employment Division for referring qualified candidates to Franz Bakery for new job openings within the Springfield Community Enterprise Zone until the end of the five-year exemption period; WHEREAS, the Springfield City Council desires to increase both the number of family wage jobs and the wages paid to its citizens in new and existing economic sectors, assist in the diversification of manufacturing and high technology in the local economy, Attachment 4, Page 2 of 3 ensure competitiveness of future Springfield businesses, and provide for the long-term operation of existing employers like Franz Bakery; NOW, THEREFORE, BE IT RESOLVED BY THE COMMON COUNCIL OF THE CITY OF SPRINGFIELD: Section 1: The Springfield City Council, as the governing body of one of the sponsors of the Springfield Community Enterprise Zone, approves the three-year Enterprise Zone abatement and extending the property tax benefits of the Springfield Community Enterprise Zone for an additional two years to Franz Bakery, as requested in Exhibit A and incorporated herein by reference, for a proposed $20 million expansion in its existing facility, adding building square footage and machinery and equipment; Section 2: Franz Bakery through a signed agreement with the sponsors must meet the terms outlined below: a. Invest approximately $20 million in enterprise zone eligible equipment and buildings in the Springfield plant; b. Pay all its new employees, on average, compensation that will exceed the 150% of the Lane County average annual wage where the most recent data on prevailing Lane County average annual wage at the time of applying for authorization was $41,523 and 150% of that figure is $62,285; c. Enter into a first-source agreement with the Oregon Employment Division effective with approval of the enterprise zone authorization until the end of the five-year extended enterprise zone abatement period; and d. Maintain a mandatory minimum level of full-time employees equal to or greater than 110% of its annual average full-time employment of 214 at the time of authorization application at all times during the time from the authorization application until the end of the Enterprise Zone Exemption Period; and e. Pay to the City of Springfield $100,000 in $20,000 annual installments to be paid by July 1st in each year of the five-years of Enterprise Zone Exemption as a reasonable offset to general government agencies to support ongoing administration of economic development efforts, including enterprise zone management. Section 3: The City Manager is authorized to sign agreements with Lane County and Franz Bakery including but not limited to the terms described herein provided that Franz Bakery meets the terms of ORS 285C; Attachment 4, Page 3 of 3 Section 4: The City Manager is authorized to take appropriate action to facilitate the extension of the Property Tax Exemption as described herein; Section 5: This Resolution shall take effect upon adoption by the Council and approval by the Mayor. ADOPTED by the Common Council and approved by the Mayor of the City of Springfield, this _____ day of __________, 2018. Adopted by a vote of ____ for and ____ against. _________________________________________ Mayor ATTEST: _________________________________________ City Recorder