Plans for Café Valley come to their first Marion City Council vote next week, and officials are outlining the public’s potential obligations for the deal.
The Phoenix-based baked goods supplier plans to initially invest $48 million in a new facility — that could eventually hire 500 workers — built on the south portion of the former Thomson Consumer Electronics property, 3301 S. Adams St.
The company is looking to line up federal, state and local incentives before it builds a 300,000-square-foot facility that will be operational starting in 2014.
Café Valley is currently seeking a federal New Markets Tax Credits allocation that is necessary for the project to go forward. The state has pledged up to $5.8 million in community revitalization enhancement district (CReED) tax credits.
Larry Polhill, principal partner and board of directors member, said Café Valley received an initial allocation on the federal tax credits. He said the company has already received preliminary bids on construction and is “excited and confident” the project will happen.
“It will not get done without the help of the city,” he said.
The city of Marion is proposing up to $26.5 million in incentives for the project, and hopes it will spark further redevelopment on the 64-acre property. It plans to acquire the entire property and prepare the land for Café Valley through the Grant County Economic Growth Council.
City Development Director Darren Reese said the city’s acquisition of 20 acres for Café Valley’s planned building was part of the incentives to draw the company to Marion.
“It was something they wanted us to achieve,” he said.
Bonds for Thomson property
To draw Café Valley to Marion and redevelop Thomson, the city has outlined a plan where it would issue up to $14.5 million in economic development revenue bonds to acquire and demolish the property and assist the company with site and building preparation work.
These 25-year “Series A” bonds would be paid back through taxes generated by the project and potential future development within the larger Thomson property.
This will happen through a tax increment financing (TIF) district around the property. Essentially, taxes on future development will cycle back and pay for the bonds.
If Café Valley fails to achieve its goals, it has pledged to cover the debt the city incurs and if it can’t the city has made a pledge of its own to tie its economic development income tax (EDIT) funds and general obligations (GO) to the bonds.
Reese said the particulars of the bond issue would be presented Tuesday to the Marion City Council.
Assuming the city council passes the proposed ordinance to a second reading, a public hearing will take place Feb. 19.
If approved, about $4.2 million of these bonds will be used for the Grant County Economic Growth Council to purchase the entire 64-acre Thomson campus and relocate AMVETS Post 5, which sits within the facility’s planned footprint.
Commander Ron Piper said Mayor Wayne Seybold offered some buildings as potential future locations for AMVETS Post 5.
“(Seybold) offered to give us a building and buy our building from us,” he said. That would give AMVETS some extra money for moving and repairs at a new building. “The general feeling is I think the city wants to be fair with us and we want to be fair with the city.”
Piper said the AMVETS membership would have the ultimate vote on the proposal.
Including AMVETS, the Growth Council would clear about 20 acres for Café Valley.
The city plans to issue another $5 million, more or less, in bonds to help Café Valley with its site and building preparation work.
The rest of the Series A bond issue will go toward fees and reserve funds that may come into play if Café Valley fails to meet its goals.
The city council is also considering up to $12 million in “Series B” bonds to help Café Valley capture TIF revenue from further development.
Obligations down the line
The bond agreement assumes Café Valley will meet its goal of building a $48 million facility. If this happens, the city stands to lose no money and gain jobs.
To sell the bonds, the city is proposing putting tax money on the line — far down the line, officials say.
During a Tuesday informational meeting for the Marion City Council, Seybold said it was similar to another development deal approved for the Marion Rehabilitation and Assisted Living Center. He said there were “levels of protection” before city funds were tapped.
Rob Young, business development manager for CME Corporation, which helped Café Valley select Marion, said Tuesday that the company will provide a “taxpayer agreement” to reimburse the city for bonds it issues if the project fails to materialize.
Growth Council Executive Director Tim Eckerle said this “taxpayer agreement” offered by Café Valley to cover the city’s costs will be made before the bonds are issued.
The “enhancement” of the bonds with tax money was to make sure they sell, Reese said. Bonds backed by municipalities are seen by banks and investors as more secure.
“Those are things we don’t normally do,” Reese said. “What it will do is all but ensure the purchase of these bonds.”
He said the EDIT and GO security will only be used to fill the “gap” between what the taxpayer agreement covers and what remains to be paid.
However, part of the Series A bonds actually reflects a previous deal in which the city put tax money on the line, and stands to lose it.
Reese said $2 million of the total $14.5 million bond issue is actually separate from Café Valley. He said because the deal involves EDIT funds that financial institutions have requested a refinancing for the city’s obligation for Earthbound Recreational Vehicles.
The city backed a $2 million bank loan to the travel-trailer manufacturer with EDIT funds in case the company failed. Eventually, it became clear that the company couldn’t meet its obligations, leaving the city to pay back the bulk of the loan and sell collateral in the deal to reduce its losses.
Reese said the city’s obligation to the $2 million Earthbound loan remains the same after the refinancing and would not be shared by Café Valley.
“Café Valley increment has nothing to do with debt from Earthbound,” he said. “That is a liability with the EDIT income.”
The bonds also have a reserve funds to pay for two years of payments in case Café Valley doesn’t come through.
Reese said this also includes “capitalized interest” — a payment reserve — that goes toward the bond payments during the first year of the project.
“That is a first year of bond payments that will be borrowed … because the project will not be done and generating taxes until the second year,” he said.
Café Valley plans to open its facility in 2014 with an initial 100 workers. The company plans to double that number by the end of 2014 and reach 500 in five years.
Polhill said the company plans to pay the market average wage in Marion, which during the Tuesday meeting was said to be about $12 an hour. This will be about $25,000 annually.
He said the pay level would depend on the job.
“We’ll pay what we have to do to get the right people for the right jobs,” he said. “We don’t want to be the lowest paid employer in town.”
According to Café Valley’s website, entry level workers in Phoenix are paid $7.65 an hour, are paid weekly and are offered insurance after six months of employment.
Polhill said some Café Valley jobs in Marion may be “close to minimum wage” but stressed again that nothing was set and other positions needed to be competitive.
Tom Lewandowski, president of the Northeast Indiana Central Labor Council, said it was important to know whether a company pays enough to support a household.
He said a city needed to look into whether wages would actually support the workers or whether the residents would end up “at the trustee’s office” for assistance.
Councilwoman Joselyn Whitticker, D-At-large, posed a similar question.
“To say we are involved in $26.5 million deal and only receive a few jobs and those jobs aren’t enough to move the economy what we have given in TIF, then I really question whether it is worth it,” she said.
Seybold said Tuesday that the local benefit went beyond Café Valley because the company would seek local sources for its construction, machinery and trucking.
For example, Mike Bartrom, president of Computer Age Engineering, 867 E. 38th St., which will be neighbors with Café Valley, said last week he has talked with the company and plans to visit their facility in Arizona.
“We put in automation and robots and control systems for factories,” he said. “A big bakery is a factory.”
Reese said the ultimate benefit of Café Valley was the opportunity for it to spark further development at the former Thomson plant that — with the exception of plastic pallet manufacturer TriEnda, which closed operations in 2010 — has been vacant since 2004.
Young said Tuesday that in his experience a project like Café Valley could have a “ripple effect” on a long-dormant industrial site.
“It’s hard to redevelop a campus that size short of a catalyst project,” he said.
Café Valley is set on the agendas for four different public meetings Tuesday — 3:30 p.m. Marion Redevelopment Commission; 5 p.m. planning commission; 6 p.m. Marion Economic Development Commission; and 7 p.m. Marion City Council.