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HomeMy WebLinkAbout03-20-2012 Council Economic Development CommitteeAGENDA City Council Economic Development Committee Tuesday, March 20, 2012 8:00 a.m. Helling Conference Room City Hall 1. Call to Order 2. Welcome and Introductions 3. Consider request for Financial Assistance for plant expansion at Alpla located at 2258 Heinz Road 4. Staff time 5. Committee time 6. Other business r '�iF._,4 CITY OF IOWA CITY �__�4"Mqk1 MEMORANDUM To: Economic Development Committee From: Wendy Ford, Economic Development Coordinator Date: March 15, 2012 Re: Consider Economic Development Grant Request from Aria Introduction Alpla is a plastic bottle manufacturer located in the Heinz Road Industrial Area. The company is headquartered in Austria and employs 12,000 people worldwide. They opened an Iowa City plant in 2003 with 35 employees, and now employ 190 with an annual payroll of approximately $9.4 million. They are an interstate commerce business and supply businesses around the world and down the street with extruded and blow -molded plastic bottles. They have been a supplier to the Iowa City P&G plant since opening and among others, are also a supplier to Dasani Water. Alpla is developing another new technology in bottle closures that will require expansion at one of their facilities and they are comparing state and local incentives available at both at their Jefferson, Missouri plant and at their Iowa City plant. Missouri is offering tax abatements, training and forgivable loans. The purpose for Alpla's application for public assistance is to evaluate these two locations for expansion, a part of which, will be based on competitive incentives available at each. Iowa City policy dictates applicants must meet the "but for" test which requires that without public assistance, the project would not happen.. In cases except those of interstate commerce, the consideration is that "but for' assistance to fill a financial gap, the project would not happen otherwise. With interstate commerce, the consideration becomes "but for" the assistance to provide a competitive advantage with another out -of -area site, the project would not happen. History/Background The City of Iowa City assisted Alpla when they located here in 2003, and again in 2007. The first project was for the construction of an additional 86,000 square feet that enabled warehousing and distribution at the plant, and Council approved a 5 year TIF rebate with a cap of $510,000. Performance measures to maintain 35 full time employees and increase the assessed value of the property were met and exceeded. The second project involved construction of another 82,200 square feet of manufacturing space, for which Council approved a 4 year TIF rebate with a cap of $600,000. Again, performance metrics of valuation and employment numbers were exceeded. Today, Alpla's assessed valuation of $9 million is $5.4 million more than it was in FY 2005. Discussion of Solution The expansion they plan will require a capital investment of $12.2 million. Approximately $1 million will be taxable valuation while the rest is in machinery, equipment and people. While the taxable value of the addition to Alpla is modest by comparison, the new jobs and the research and technology going in to the new product is substantial. March 16, 2012 Page 2 The expansion will create 34 new jobs with a payroll of more than $1 million. 20 of the new jobs will exceed the Johnson County median hourly wage of $16.09. By the end of the third year of operation, the jobs will see a 9% increase in pay, and the average of all the new jobs will exceed the county median. In keeping with the past two projects, if the City were to provide 4 years of TIF rebates, the company's property tax savings could be figured to be approximately $170,000. Recommendation Alpla is an innovator of new technologies and consistently seeks to compete in their industry. They are a responsible corporate citizen, having addressed and corrected neighborhood concerns of noise by installing baffles and screening. Assisting Alpla is aligned with the Iowa City Strategic Plan goal of striving to expand and diversify the economic base of the community, particularly in existing planned commercial and industrial areas that have established supporting infrastructure. It is also consistent with our adopted Economic Development Policies of attracting new development, retaining existing businesses, and encouraging and fostering spin-off business. For these reasons, staff recommends proceeding with a development agreement that would provide 4 years of TIF rebates capped at $170,000. Performance metrics may include: • Building the 10,000 square foot addition • Retaining 190 full time equivalents • Creating at least 12 full time equivalents in the first year Please be ready to discuss this application at your meeting on March 20. Mr. Michael Koenig, Chief Financial Officer of Alpla will be in attendance. In the meantime, please feel free to call me with any questions. IOWA C',cfJ o'fll DEVELOPMENT Debi V. Durham, Director Iowa Economic Development Authority Business Financial Assistance Application Business Finance Business Development Division Iowa Economic Development Authority 200 East Grand Avenue Des Moines, Iowa 50309-1819 www.iowahfechanging.com Telephone: 515.725.3133 businessfinance(&- iowa.gov v.7.11.2011 Application Instructions To Complete Electronic Form: Click on TEXT BOX to add text. Double click on YES/NO boxes and select "Checked". 1. All applicants must complete the Business Financial Assistance Application and attach onlvthose additional sections for the components to which the applicant is applying. Direct Financial Assistance - STATE of IOWA ❑ 130% Component (noSupp) ❑ 100% Component (no Supper) ❑ Entrepreneurial Component (and Supplement) Supplerr� irffwrratim required Tax Credits - STATE of IOWA ❑ Enterprise Zone Program (EZ) Supplemental i4&m- zwt mTdred Direct Financial Assistance - FEDERAL ❑ Economic Development Set -Aside Program (EDSA) Supplerru irfw nuim r Tdied ❑ Infrastructure Component (no supp ) ❑ Value -Added Agriculture Component Supplen� it &mitim reTd d ❑ Disaster Relief Component Supplerre i &MItim r*nd ® High Quality Jobs Program (HQ) (no Supper ❑ Public Faclities Set -Aside Program (PFSA) 2. Please visit the IEDA Web site at wwwdowalifechanging.com or contact IEDA at 515.725.3133 to confirm that this is the most current application version. 3. Before filling out this application form, please read all applicable sections of the 2009 Iowa Code and Iowa Administrative Code (rules). www.legis.state.iaus/IowaLaw.html 4. Only Wed or computer -generated applications will be accepted and reviewed. Any material change to the format, questions, or wording of questions presented in this application will render the application invalid and it will not be accepted. 5. Complete the applicable sections of the application fully. If questions are left unanswered or required attachments are not submitted, an explanation must be included. 6. Use clear and concise language. Attachments should only be used when requested or as supporting documentation. 7. Any inaccurate information of a significant nature may disqualify the application from consideration. 8. The following must be submitted to Business Finance at IEDA in order to initiate the review process: • One original, signed application form and all required attachments • One electronic copy of the application form and all required attachments Facsimile cgpies will not be accepted. Business Finance Telephone: 515.725.3133 Iowa Economic Development Authority businessfinance&iowa gov 200 East Grand Avenue Des Moines, IA 50309-1819 Applications are must be submitted to IEDA Business Finance before 4:00pm on the fourth Monday of the month. Applications will be reviewed by the IEDA Board on the third Thursday of the following month. IEDA - Business Financial Assistance Application 2 v.7.11.2011 Public Records Policies Information Submitted to IEDA. The Iowa Economic Development Authority (IEDA) is subject to the Open Records law (Iowa Code. Chapter 22 . Treatment of information submitted to IEDA in this application is goveined by the provisions of the Open Records law. All public records are available for public inspection. Some public records are considered confidential and will not be disclosed to the public unless ordered by a court, the lawful custodian of the record, or by another person duly authorized to release the information. Confidential Records. IEDA automatically treats the following records as confidential and they are withheld from public disclosure: • Tax Records • Qtt 7wdy Ioun E rrp*r's Contrilacom and Payratl Report prepared for the Iowa Workforce Development Department • Payroll Registers • Business Financial Statements and Projections • Personal Financial Statements Other information supplied to IEDA as part of this application may be treated as confidential under Iowa Code section 22.7. Following are the classifications of records which are recognized as confidential under Iowa law and which are most frequently applicable to business information submitted to IEDA: • Trade secrets [Iowa Code §22.7(3)] • Reports to governmental agencies which, if released, would give advantage to competitors and serve no public purpose. [Iowa Code §22.7(6)] • Information on an industrial prospect with which the IEDA is currently negotiating. [Iowa Code §22.7(8)] • Communications not required bylaw, rule or regulation made to IEDA by persons outside the government to the extent that IEDA could reasonably believe that those persons would be discouraged from making them to the Department if theywere made available for general public examination. [Iowa Code §22.7(18)] Information supplied to IEDA as part of this application that is material to the application and/or the state program to which the applicant is applying including, but not limited to the number and type of jobs to be created or retained, wages for those jobs, employee benefit information, and project budget, are considered open records and will not be treated as confidential. Additional Information Available. Copies of Iowa's Open Record law and IEDA's administrative rules relating to public records are available from the IEDA upon request. IEDA - Business Financial Assistance Application 3 v.7.11.2011 Applicant Information Name of Business: Alpla, Inc Address: 289 Hwy 155 South City, State & Zip Code: McDonough, GA 30253 Contact Person: Michael D. Koenig Title: CFO Phone: 770-305-7639 Fax: 770-305-7200 Email: Michael.Koenia&la.com Federal ID Number. 58-2611718 NAICS Code for primary business operations: 326160 US DOT Number. Does the Business file a consolidated tax return under a different tax ID number? ❑Yes ®No If yes, please also provide that tax ID number. Is the contact person listed above authorized to obligate the Business? ® Yes ❑No If no, please provide the name and title of a company officer authorized to obligate the Business: If the application was prepared by someone other than the contact person listed above, please complete the following: Name of Business: Address: City, State & Zip Code: Contact Person: Title: Phone: Fax: Email: Sponsor Information Sponsor Organization: City of Iowa City Official Contact (e.g. Mayor, Chairperson, etc.): Wendy Forts Title: Economic Development Coordinator Address: 410 E. Washington Street City, State & Zip Code: Iowa City, IA 52240 Phone: (319) 356-5248 Fax: 319-356-5217 Email: wend3,ford@J*OV,7a-city.org If IEDA needs to contact the sponsor organization with questions, should we contact the person listed above? ® Yes ❑ No, please contact the following person: Name: Title: Address: City, State & Zip Code: Phone: Fax: Email: If necessary, please list information on additional sponsors in an attachment. IEDA - Business Financial Assistance Application 4 v.7.11.2011 Certification & Release of Information I hereby give permission to the Iowa Economic Development Authority (IEDA) to research the Business' history, make credit checks, contact the Business' financial institutions, insurance carriers, and perform other related activities necessary for reasonable evaluation of this application. I also hereby authorize the Iowa Department of Revenue to provide to IEDA state tax information pertinent to the Business' state income tax, sales and use tax, and state tax credits claimed. I understand that all information submitted to IEDA related to this application is subject to Iowa's Open Record Law (Iowa Code, Chapter 22). I understand this application is subject to final approval by IEDA and the Project may not be initiated until final approval is secured. I understand that IEDA reserves the right to negotiate the financial assistance. Furthermore, I am aware that financial assistance is not available until an agreement is executed within a reasonable time period following approval. I hereby certify that all representations, warranties, or statements made or furnished to IEDA in connection with this application are true and correct in all material respect. I understand that it is a criminal violation under Iowa law to engage in deception and knowingly make, or cause to be made, directly or indirectly, a false statement in writing for the purpose of procuring economic development assistance from a state agency or subdivision. For the Business: Signature Michael D. Koenig - CFO Name and Title (typed or printed) For the Sponsor(s): March 13, 2012 Date Signature Date Name and Title (typed or printed) Pkase use the following if num dun one spomor is inquired For ocanple, use this if a signature f vm the local E nterprise Zow Ca mwsion is ngwied in adcli6m to floe signature firan floe Mayor of dv spomonng atyi Signature Date Name and Title (typed or printed) IEDA will not provide assistance in situations where it is determined that any representation, warranty, or statement made in connection with this application is incorrect, false, misleading or erroneous in any material respect. If assistance has already been provided prior to discovery of the incorrect, false, or misleading representation, IEDA may initiate legal action to recover incentives and assistance awarded to the Business. IEDA - Business Financial Assistance Application 5 v.7.11.2011 Business Information Provide a brief description and history of the Business. Include information about the Business' products or services and its markets and/or customers. Alpla is a manufacturer of plastic packaging solutions. Products include plastic bottles and caps. We have been manufacturing products in Iowa for the past eight years and in the U.S. for ten years. We service major customers that include but are not limited to P&G, Unilever, Reckitt Benckiser and Clorox. Business Structure: ❑ Cooperative ® Corporation ❑ Limited Liability Company ❑ Not for Profit ❑ Partnership ❑ S-Corporation ❑ Sole Proprietorship State of Incorporation: Georgia Identifythe Business' owners and percent ownership: 100 Does a woman, minority, or person with a disability own the Business? ❑ Yes ® No If yes, is the Business certified as a Targeted Small Business? ❑ Yes ❑ No List the Business' Iowa locations and the current number of employees at each location. 2258 & 2309 Heinz Road, Iowa City, Iowa. Locations are adjacent buildings - Total employment is 190 full time employees. What is the Business' worldwide employment? Please include employees of parent company, subsidiaries, and other affiliated entities in this figure. 12,000 Project Information Project Street Address: '2309 Heinz Road Project City: Iowa City Type of Business Project: ❑ Startup ❑ New Location in Iowa Project Gounty Johnson ® Expansion of Iowa Company ❑ Relocation from another State Briefly describe the proposed project for which assistance is being sought. (Include project timeline with dates, facility size, infrastructure improvements, proposed products/services, any new markets, etc.) We propose to expand the current building to fit additional machinery and equipment. Process will incorporate new technology. Product is proprietary and will be disclosed to the market at a later date. We will expand the current building 10,000 sq/ft, purchase two new machines and assembly equipment. Project Timeline add additz mw as ActivityCompletion Date New contract with customer April 15, 2012 Obtain board approval for expansion site April 30, 2012 Break ground/Order machinery and equipment/Begin training new employees June 1, 2012 Begin production -September 1, 2012 Please identify the project management for the project location and experience. John Anderson - Plant Manager 20 years of experience. Has any part of the project started? ❑ Yes ® No If yes, please explain. . Identify the Business' competitors. If any of these competitors have Iowa locations, please explain the nature of the competition (e.g. competitive business segment, estimated market share, etc.) and explain what impact the proposed project may have on the Iowa competitor. None - This is a new product introduction and will not replace current business or compete with any Iowa based business. Will any of the current Iowa employees lose their jobs if this project does not proceed in Iowa? ❑ Yes ® No IEDA - Business Financial Assistance Application 6 v.7.11.2011 If yes, please explain why and identify those jobs as "retained jobs" in the Project Jobs section. IEDA - Business Financial Assistance Application 7 v.7.11.2011 Project Budget AMOUNT BUDGETED Use of Funds Cost Source A Source B Source C Source D Source E Source F Source G Land Acquisition $0 $0 Site Preparation $300,000 $300,000 Buil ' Acquisition $0 $0 Buil ' Construction $900,000 $900,000 Budding Remodeling $0 $0 Mfg. Machina &E ui . $11,000,000 $11,000,000 Other Machine & E ui . RacIting, Shely' , etc.' Computer Hardware Computer Software Furniture & Fixtures Working Capital Research & Develo ment job Training TOTAL $12,200,000 $ $ $ $12,200,000 $ $ $ 1 Racking, shelving and conveyor equipment used in distribution center projects only Does the Business plan to lease the facility? ❑ Yes ® No If yes, please provide the Annual Base Rent Payment (lease payment minus property taxes, insurance, and operating/maintenance expenses) and the length of the lease agreement. PROPOSED FINANCING Source of Funds Amount Form of Funds Rate and 'Perm Commitm ent Status Conditions/Additional Information Include when funds will be disbursed; If loan, whether payments are a level term, balloon, etc (List tax benefits separately below, not as a source of direct financing) (Loan, Grant, In -Kind, Donation, etc) Source A IEDA* $ Source B: Other State (Community College, IDOT, etc) $ Source Q Local Government Source D: Business $12200,000 12,200,000 Level payments Source E: Other Private Sources $ Source F: $ Source G: $ TOTAL $12,200,000 * Identify the collateral used to secure IEDA funds: TAX CREDITS AND INDIRECT FINANCING Source of Funds Amount Description Investment Tax Credit $160,000 Sales, Service & Use Tax Refund $30,000 Research Activities Credit 3%/ 10% Withholding Local Property Tax Exemption Tax Increment Financing $170,000 TIF - 4 years rebate, 100% 260E job Training Funds In -kind Contribution Other TOTAL $360,000 What measures were analyzed to determine the amount and form of assistance needed? Is the Business actively considering locations outside of Iowa? ® Yes ❑ No If yes, where and what assistance is being offered? State of Missouri, offering tax abatements, training and forgivable loans. IEDA — Business Financial Assistance Application 8 v.7.11.2011 There are three general justifiable reasons for assistance. Check the box next to the reason why assistance is needed to complete this project. ❑ Financing Gap - The Business can only raise a portion of the debt and equity necessary to complete the project. A gap between sources and uses exists and state and/or federal funds are needed to fill the gap. ❑ Rate of Return Gap - The Business can raise sufficient debt and equity to complete the project, but the returns are inadequate to motivate an "economic person" to proceed with the project. Project risks outweigh the rewards. ® Location Disadvantage (Incentive) - The Business is deciding between a site in Iowa (site A) and a site in another state (site B) for its project. The Business argues that the project will cost less at site B and will require a subsidy to equalize costs in order to locate at site A The objective here is to quantify the cost differential between site A and site B. IEDA - Business Financial Assistance Application 9 v.7.11.2011 Project Jobs List the jobs that will be created and/or retained as the result of this project. (A retained job is an existing job that would be eliminated or moved to another state if the project does not proceed in Iowa.) For jobs to be created, include the s =mr and final hourly wage rate. For retained jobs, include the current hourly wage rate. Is the hourly wage rate based on a 40 hour work week, 52 weeks per year? ® Yes ❑ No If no please explain: Full -Time CREATED jobs Addadckw" rasa as Job Title Number of CREATED jobs StarHourly Ho `Wage Wage at End of Year Three Machine Operator 12 16.50 18.02 Machine Packer 14 11.54 12.61 Maintenance 4 19.71 21.54 Forklift Operator 4 16.10 17.59 Total CREATED jobs 34 Full -Time RETAINED jobs Addaddit� mw as Job Title Number of Current Hourly RETAINEDJobs Wage Total RETAINED jobs IEDA — Business Financial Assistance Application 10 v.7.11.2011 Employee Benefits - Please see attached documents. We have several plans ___-11 —1 _ L--- f- .. Aaaa 1,--A Heal fnr iin fill nr in nnrri hvthe Business. 1 1Ga se luGlllu au G41. •v " v Total Annual Cost - -- - -- -- Portion of Total I -- - Employee (show on a per Annual Cost Paid Plan Provisions Benefits Provided employee basis) b the Business (Include coinsurance %, office visit co - by Business Employee Family Employee Family Deductible payments, annual out-of-pocket maximums, face amounts, etc. Employee 750 Out of pocket max $3,000 - Single Medical Insurance 3,800 11,400 3,000 8,300 Out of pocket max $6,000 - Network $35/office visit Fly 1,500 Rx- 10/35/50 Employ>:e Q All cleanings covered, all other work Dental Insurance 264 890 104 604 covered at 80% to a max of Fly Q $3,000/ ar/covered individual Em to a Offered but covered by employee Vision Insurance N/A N/A N/A N/A f70/ ar for single and $205/year for Family Alpla pays 100% at Ix salary up to Life Insurance 60 N/A 60 N/A $150,000. Short-term N/A 40 N/A Alpla pays 100% Disability40 Long-term 49 N/A 49 N/A �P Pays 100% Disability Alpla pays 100% of contribution. Health Savings 1,000 1,500 1,000 1,500 Employee has the option to contribute Account to account Does the Business offer a pension plan, 401(1� plan, and/or retirement -plan? ® Yes ❑ No If yes, please indicate the amount contributed on a per employee basis by the Business to the plan for the last three years. For 401W plans, please provide information on the company match and indicate the average annual match per employee (show average as a percentage of salary). Year Ending Average Actual Match r Employee /o 2009 2 2010 2 2011 2 Three- ear Avers e: 1 2 Current Match is - 100% on first 3%, 50% on next 2%, and 100% on next 2%. If the employee puts in 7% of wages, Alpla will put in 6% of wages. Does the Business offer a profit-sharing plan? ❑ Yes ® No If ves, please indicate total amount paid out each year for the past three years and then, determine the average annual bonus or contribution per em to a for that three year period. Year Ending Average Actual Share r Employee $ Three-year Average: Note: Alpla offers educational assistance to all employees with a limit of $5.000/year. IEDA - Business Financial Assistance Application 11 v.7.11.2011 Rosiness Taxes IEDA is required to calculate the return on state and local government investments in this project. Data from other parts of the application will be combined with the estimates requested below to calculate the required return on investment information. Please read the following directions carefully: • IEDA is asking for a best estimate on the increase in taxes associated with this project. • Estimates should only include the expected increase in tax liability resulting from this project. • At minimum, IEDA needs estimates for the first three years of the project. • Show data as if no tax abatements or tax credits awarded for this project were taken. • For partnership forms of ownership (e.g. limited partnerships, s-corporations, LLC, etc), please estimate the partners' increase in Iowa tax liability due to this project. • Sales and use taxes refer to the taxes paid on materials, etc. that the Business purchases, not taxes you collect from sales to your customers. • Applicants will not be held to these numbers with respect to any award from or contract with IEDA • This page of the application will automatically be treated as confidential. Increase in Tax Collections Associated with this Project State Business Taxes Year 1 Year 2 Year 3 Year 4 Year 5 State Corporate Income Tax* 116,000 116,000 116,000 116,000 116,000 State Business Sales and Use Tax 1,000 1,000 1,000 1,000 1,000 *Insurance Companies: Provide State insurance i renuum i ax Local Business Taxes Year 1 Year 2 Year 3 Year 4 Year 5 Local Real Estate Property Tax 41,000 41,000 41,000 41,000 41,000 Local Option Sales Tax CONFIDENTIAL IEDA - Business Financial Assistance Application 12 v.7.11.2011 Attachments Please attach the following documents: Al Business Plan At a minimum, include: • Marketing study • Feasibility study • Projected profit and loss statements for three years into the future • Project budget • Production operations • Management structure • Personnel needs • Descriptions of product or process • Status of product/process development • Patent status (if applicable) (Any information outlined above not included in the business plan should be submitted as supplemental information via a separate attachment.) A2 Copies of the Business' Quarterly Iowa Employer's Contribution and Payroll Report Summary Page (Page 1) for the past year and a copy of the most recent payroll report for one pay period. The copy of the most recent payroll report for one pay period must be in Excel format and include the following information: • Company name, date of payroll and source of payroll information • Employee name and/or employee identification number • Current hourly wage - do not include bonuses or other benefit values • Indicate if the employee is full time (40 hours per week, 52 weeks per year) or part time. A sample Excel spreadsheet can be found at http://www.iowahfechanging.com/applications/bus_dev/payrolLtemplate.xls A3 Affidavit that states the Business has not, within the last five years, violated state or federal statutes, rules, and regulations, including environmental and worker safety regulations, or, if such violations have occurred, that there were mitigating circumstances or such violations did not seriously affect public health or safety or the environment. A sample affidavit can be found at http://www.iowalifechanging.com/applications/bus—dev/sampleaffidavit.doc. A4 Financial Information (Existing Businesses Only) • Profit and loss statements and balance sheets for past three year -ends; • Current YTD profit and loss statement and balance sheet; • Schedule of aged accounts receivable; • Schedule of aged accounts payable; and • Schedule of other debts. IOWA econ r k DEVELOPMENT IEDA — Business Financial Assistance Application 13 v.7.11.2011