by Mary Wilson
A public hearing was held in front of the Grandview Board of Aldermen on Tuesday, November 24, regarding a potential industrial project to be developed on 68 acres of land at 143rd Street and Botts Road in Grandview. Joe Lauber, the City of Grandview’s economic development special council, presented a staff and consultant’s report regarding the details of the industrial development plan.
The developer, Botts Road Property, LLC, plans to build twelve buildings on the property, totaling 737,000-square-feet in the industrial/business park. In addition to the buildings, the developer will also provide associated street, utility and other infrastructure improvements.
“I want to emphasize that this is just a plan,” said Lauber. “The numbers presented in this plan are estimates and projections based on what the applicant and what city staff and consultants believe to be future events. As we all know, as these plans unfold, sometimes there are differences.”
When a developer approaches the city requesting incentives, the city and consultants work to determine whether the developer’s numbers are justifiable and whether incentives are a necessity and if so, how much. According to Lauber, in the case of this proposal, Botts Road Property, LLC’s initial request was one that did not work well for the city or the taxing jurisdictions.
“To this applicant’s credit, they cooperated with us to arrive at a plan that was much more mutually beneficial to all parties,” said Lauber.
The incentive tool considered for the plan is the Chapter 100 Industrial Development tool. With a Chapter 100 plan, the statute creates a situation where the property that is subject to redevelopment becomes owned by the city during the time the incentives are in place. Because it is owned by the city, that makes the property tax-exempt. The owner, in this case Botts Road Property, LLC, will transfer the property to the city and become the tenant, creating abatement.
The applicant requested 100% exemption/abatement for 15 years per building. The abatements would only become eligible when a tenant proves that they have invested at least $50 per square foot in construction. This ensures that the city is not abating empty warehouses.
“This is a speculative project,” said Lauber. “It’s one where the applicant at this point does not have tenants lined up to come in, so we don’t know exactly what we’ll get.”
The applicant also agreed that there would be no new abatements after ten years of the initial exemption. The financing mechanism will be Chapter 100 Industrial Development bonds purchased by individual companies or their lender and paid through a lease-purchase agreement.
“It is not the type of project that would typically go out to the open market to be sold,” said Lauber. “It’s a very close transaction in that circumstance.”
While the city will own the property, the cost of constructing the buildings will be covered by the industrial development bonds. The debt service on that financing is then paid by the company that comes in the form of a lease payment to the city.
The city also worked with the developer to address issues regarding improvements included in the project. The developer will build and own all of the streets, drive lanes, parking and other public improvements, keeping them private. The city will then enter into a 40-year agreement with the developer to maintain the improvements. In order to cover the maintenance cost, the developer will pay additional rent for the services, equaling to 32.5 percent of the would-be tax bill.
“The city keeps 12.5 percent of that,” said Lauber, “with an additional 20 percent going to the developer to help attract businesses to come in as quickly as possible. The agreement then requires the developer to dedicate the improvements to the city after the 40 years.”
The city worked with the developer to ensure that all of the taxing jurisdictions affected by the development did see some tax benefit from the project. While the developer asked for 100-percent abatement originally, a 90-percent abatement agreement was negotiated.
“In other words, all of the taxing jurisdictions that are involved will be receiving PILOT (payments in lieu of taxes) payments in the amount of ten-percent of the tax bill during the entire time the property is being incentivized.”
Finally, an additional item ultimately benefitting the developer is a sales tax exemption on construction materials due to the property being city-owned. With the 10 percent PILOT, cumulatively over the abatement period, the taxing jurisdictions will receive approximately $1.4 million in tax revenues that are not currently being created. According to Lauber, the property currently provides $360 of cumulative property tax revenues for those jurisdictions.
“That is nearly 2,700 times more revenues that will be created once the abatement is over,” said Lauber.
Overall, the developer intends to invest approximately $52.5 million into the community of Grandview. Ultimately, the Board of Aldermen unanimously approved the industrial development project for Botts Road Property, LLC by ordinance.