Frustrations ran high Tuesday as the Marion City Council hosted a contentious public hearing on a development deal for Café Valley and failed to take action to avoid a third meeting.
Afterward, Café Valley officials left the possibility open that they could look elsewhere to build a factory to serve as their eastern U.S. operations.
The Phoenix-based baked goods supplier chose Marion out of 50 potential locations and plans to invest about $48 million to build a 250,000-square-foot on the former Thomson plant site, which Mayor Wayne Seybold called a “sweat deal.”
“We’ve always been considering other cities and states,” said Larry Polhill, Café Valley principal partner and board member. “We’re a while down the road with this so we’d like to do this. We’ll do what we need to do because we need to have a facility east of the Mississippi.”
City and company officials hoped the city council would suspend the rules and approve two bond packages that would help acquire the Thomson property, build the facility and incentivize future growth.
However, the council’s 5-3 vote failed to receive the necessary two-thirds majority to suspend the rules, meaning the deal will be revisited on March 5. Council President Don Batchelor was not present.
Seybold said it is a good possibility the company could ask for a special meeting to be called before then because there are “timelines” to meet by Feb. 28.
He said council members Fred Troxell, D-1st District, and Joselyn Whitticker, D-At-large, had a political agenda as they questioned the company about aspects of the deal that were discussed in previous meetings.
Troxell said during the meeting he wasn’t against the project but was “gun shy” because of prior projects that failed to come to fruition. He said the city couldn’t afford any more “hand outs” to companies.
“We have a lot of questions out there and we’ve been shot out of the saddle before,” he said.
Whitticker said she was concerned about burdening citizens with a deal that could put the city on the hook.
The city council is considering approving two bond packages — an up to $14.5 million Series A and an up to $12 million Series B — that would not only incentivize the bakery project, but also help the Grant County Economic Growth Council acquire the entire former Thomson plant for redevelopment.
Rob Young, business development manager for CME Corporation, which helped in site selection, said it should be noted and repeated that Café Valley’s own property taxes would go toward most of the Series A bonds.
Bond attorney Bruce Donaldson with Barnes and Thornburg said the project’s taxes are expected to pay 110 percent of debt service on the bonds. If that doesn’t happen, Café Valley has agreed to make up the difference. The city has also pledged county economic development income tax (CEDIT) funding and general obligations after that point.
If Café Valley expands beyond its initial plans, the Series B would cycle property taxes generated by that new development back to the project.
About $2 million of the Series A bonds consists of a refinancing of CEDIT that banks required to help sell them. The city used CEDIT to back a bank loan to Earthbound Recreational Vehicles and would still be responsible for paying the debt over 25 years.
Café Valley is seeking federal New Markets Tax Credits and has lined up to $5.8 million in state community revitalization enhancement district tax credits.
Whitticker asked how close Café Valley was to receiving the New Markets Tax Credits.
Polhill said Café Valley already had $20 million in an old New Markets Tax Credits allocation lined up, and is seeking up to $30 million from the new allocation approved in the federal government’s “fiscal cliff” deal.
“The intake forms have been taken, the due diligence has been processed, it is ours to lose at this point,” he said. “The whole project has to come together before you close, and that’s when they’re actually awarded.”
At times, Polhill showed frustration as he clarified aspects of the deal and Troxell and Whitticker kept drawing the discussion back to previous development deals.
“I don’t want to be a victim of prior circumstances, which I had nothing to do with. So do you want the project or not?” he said at one point.
After the meeting, Polhill said he believed some on the city council didn’t understand the deal.
“I think there is a very significant lack of sophistication on the city council, if I can be that bold,” he said.
Young said the Café Valley players understood the city council’s concern with past failed projects. He said details of the project have been presenting four times before the council and also to other boards.
“When the questions are asked and answered, when we go back and cover ground that’s already been covered, it does get frustrating after a while,” he said after the meeting. “But this company chose Marion over 50 other sites in three states. Meetings like this cause companies to re-evaluate that choice. I’m not saying that Marion is off the table — we’ll see what happens in two weeks.”
Public comment was a mix of support for the project and people raising concerns about the city’s potential obligations.
Jim Gartland, president of Atlas Foundry, said his company is the oldest employer in Marion and thanked Polhill and Café Valley for putting $20 million of their own money on the line to build the facility.
Grant County Democratic Central Committee Chairwoman Lucinda Caudill said the issue wasn’t whether the deal was good for Marion but whether the city could afford it if Café Valley failed.
“We’ve got a lot of skin in this game too,” she said.
Lynn Johnson, who was the Democratic candidate for mayor in 2011, asked questions on New Markets Tax Credits and the bond market. She said the last five bonds the city issued were not sold, which Seybold disputed, saying they didn’t go into the bond market.
He then called a point of order.
“This has nothing to do with this project,” he said.
Before the vote, Seybold made a statement that drew gasps from the audience and caused a commotion among the council.
“You all should be embarrassed, you two,” he said, referring to Troxell and Whitticker. Brad Luzadder, R-At-large, called a point of order, but the mayor pressed on.
“I’m going to have my say,” he said. “Everybody that’s come up here this evening has done so in a political way. This company that’s going to invest a lot of money and bring a lot of jobs … has been put through the ringer because of your political agendas and you should be embarrassed.”
Some in the audience booed at this comment as Luzadder tried to redirect the conversation back to Café Valley.
“I cannot believe we are sitting here arguing about basically jobs coming into this community with an established company that is currently doing it in Arizona,” he said. “That doesn’t make sense why we’re going to crucify a new company for what happened in the past. If you live in the past, you can never live in the future.”
Afterward, Luzadder said the exchange could have been handled better by his colleagues and the mayor.
“I called a point of order because I don’t think there should be any name calling backwards and forwards,” he said. “We need to stick to business of the council and that was Café Valley. I don’t think either one was directly right.”
Seybold said Troxell and Whitticker, as well as Caudill and Johnson, had a political agenda.
“This is the type of thing that will kill economic development,” he said. “Rob Young is a site selector. The next time he has a company that looks at Marion do you think he’s going to suggest Marion? It wasn’t the questions that were asked, it was the tone of the questions. It was the innuendo. It was the disrespectfulness. And it was by four people and it’s a shame those four people can’t see the benefit of 500 jobs for our community.”