CEDC - December 21st 2015

DRAFT
MINUTES OF THE COMMUNITY ECONOMIC
DEVELOPMENT COMMITTEE MEETING

Monday, December 21, 2015 – 6:30 p.m.
Mayfield Village Main Conference Room

 

Present: Joe Saponaro, Tom Marrie, George Williams, Steve Jerome, Brenda Bodnar, Mark Guidetti, Ted Esborn, Ron Wynne, Diane Wolgamuth, and Mary Betsa

The Meeting of the Community Economic Development Committee was held on Monday, December 21, 2015 in the Main Conference Room at the Mayfield Village Civic Center. Mr. Saponaro called the meeting to order at 6:30 p.m.

  • Approval of Minutes of November 16th, 2015

Mr. Marrie, seconded by Mr. Saponaro, moved to approve the Minutes of the Meeting of November 16, 2015.

ROLL CALL:

Ayes: All
Nays: None

Motion Carried. Minutes of November 16th, 2015 Approved as Written.

  • Program Updates

Mr. Esborn stated, I sent out an e-mail to all of the members of the CEDC at the end of November suggesting that tonight’s meeting be an end of the year conceptual review of the Economic Development Incentive Program that we have done a lot with in 2015. Specifically, I said that if no business opportunities popped up in the weeks between then and now, in which case I would bring the opportunity to CEDC, but if not we would have an in-depth conceptual review of the program and the agreement that goes with it. We did have a new opportunity. I have been working with the relatively new owners of 600 Beta which is at the bend of Beta Drive. It’s 93,000 square feet.   There is a company looking to locate there which is significant because the building has been vacant.

Mr. Marrie asked, who is in there now?

Mr. Esborn replied, no one. It’s been totally empty for 11 years. It would be a good opportunity tonight to tell CEDC a little bit about this company. I have a one-page handout that I will bring up on the screen. This company has not gone public with their relocation search. I won’t use their name. I have tried to remove any information that would identify them. In CEDC before, we have gone into Executive Session to protect confidentiality. In this case, that’s not necessary. I will let the Committee be the judge of that.

Mr. Wynne asked, are they looking at taking the whole building?

Mr. Esborn replied, no, 35,000 square feet. We are looking at this portion of the building right here. There’s a line right where the building would be divided. I talked to this company and the property owner last Thursday. It’s a manufacturing company that works with metal and electrical controls. There are 27 employees. Payroll is a million and a half. They are currently at 35,000 square feet in Lake County and are looking to relocate into 35,000 square feet at 600 closest to Beta. They want to move in by the end of the first quarter of next year. Right now they are looking at a 7 year lease. One of the two owners of the company is a Mayfield Village resident.

In my conversations with the Westin Company, the Ashers, they basically took over an ownership portion in the property from the Wests. This is a situation where if there is a new tenant in this building, it will allow the owners to make investments in the building that they have not made. The representative from Westin broke that down for me a little bit. It’s $1.2 million total with this first tenant. $650,000 of that would be general building improvements, $550,000 would be tenant specific improvements. If there is a second tenant they get for the portion of the building closer to 271, they are talking about another $1.3 million to invest in the property. They estimated it at $2.5 million if they get two tenants; with this first tenant, $1.3 million.

I was expecting their call because I had been talking to the owners. They asked about financial incentives in a general way that a lot of businesses do. I started by saying, here’s what we have done. Most recently we have utilized these grants that are based on income tax revenue and also most recently for example we have done 5 years at 20-30%. They asked if there is any assistance for upfront costs they might have in leasing the space. I said if you have a specific request about buildout costs, put that request in writing and CEDC will evaluate it. I told them that the next steps are, and this is consistent with what we have done with Mars and Freedonia and QED, I am going to continue gathering information until it gets to a point where I would make a recommendation to CEDC and then if CEDC approved of terms that I would let the company know those are the terms we were approaching Council with. I let the company know that CEDC was meeting tonight for the purpose of saying if there are any new directions that CEDC indicates for the economic development program in the coming year, I would update the company with that. Are there any questions or comments at this point?

Mr. Saponaro asked, when they are talking about the buildout, because we base it off of payroll, I am not saying we can’t entertain that and they can’t make that request, but are we sending a clear message of how we have typically done this? Everything we do is public so people will know what we have done with QED for example. However, QED was in this Village for a number of years before we got to that type of arrangement with them and it was built on that arrangement and that’s why we felt comfortable to do it.

Mr. Esborn stated, I wanted to point to these most recent deals we have made, but the situation with QED was one where they, because of their unique need, requested a modification to the program. I didn’t say to this company, here’s what else we can do.

Mr. Saponaro stated, understood. We need to understand what our reasoning is behind doing that. It was based on how they came into the Village initially and that they have hit and exceeded every mark and then moved into another building and that created a greater economic incentive. This was just a natural progression. There was a longstanding relationship with this company which has been very fruitful on both sides. I don’t know if it was actually out of the box, hey we are interested in buildout costs, or if it was just something they said tangentially along with any incentive programs.

Mr. Esborn replied, it was not out of the box. It was tangential. They started very generally what is available and then after I described what we have done most recently, they asked if there was any assistance for the buildout.

Mr. Saponaro stated, you will tell us what we need to do as you develop more with this company I would imagine. Does anyone have questions specific to the nature of this deal?

Mr. Marrie stated, QED was different, there’s no doubt about it. But on Freedonia and Mars, I think if we follow the same pattern and not stick our neck out on it, I personally think we should move on it based on that. I would let them come and tell us exactly what they want and offer nothing at this point.

Mr. Saponaro asked, how do you normally go through the process? You are just going through your normal process which is fine.

Mr. Esborn replied, if I were to go through the normal process with this company, I would at some point soon contact CEDC.

Mr. Williams asked, Ted, as it relates to bullet number 3 on the information from the property owner, $550,000, toward tenant specific improvements?

Mr. Esborn replied, that’s right.

Mr. Williams asked, does that relate to the buildout?

Mr. Esborn replied, yes. That does relate to the buildout. That’s a cost that the owner says they are going to pay. I have the same question. How much is the owner and how much is the company? The owner is saying they are willing to pay for the new offices, new lights.

Mr. Williams asked, does that answer the question about buildout costs?

Mr. Jerome stated, that’s part of the buildout.

Mr. Esborn asked, because the owner is paying for it?

Mr. Williams replied, yes.

Mr. Esborn stated, I will find that out as I continue to work with them.

Mr. Wynne asked, do we know what the tenant specific buildout costs are at this point or is it too early in the process?

Mr. Esborn replied, it’s probably too early. $550,000 is what the owner is planning to contribute to buildout for this tenant. But they are also planning to contribute to the general building improvements.

Mr. Saponaro asked, is this going to be more of a workshop warehouse or is it office? Do you have any idea what the footprint is going to look like?

Mr. Esborn replied, I believe it’s going to be mostly warehouse, mostly like shop floor.

Mr. Saponaro stated, because the buildout is going to be far less than it would be if it was going to be general office. You can have a $7 million buildout and it’s all office space.

Mr. Esborn stated, the owner sent drawings. I was concerned the drawings would indicate the company. The drawings suggest it’s mostly shop-like.

Mr. Saponaro stated, whatever their costs are, they have to do FF and E and everything else, so $550,000 might be the contribution and what they might be looking for is above that. Again, as we go forward, gather the information and come back to us and we can assess it along the ways of Mars.

Mr. Marrie asked, it’s $1.5 million payroll now. What would that mean to us?

Mr. Esborn replied, $30,000.   As I move forward to a recommendation from this Committee, the one thought is if we were to use the same terms for a deal with this company that we used for Freedonia and Mars, there would be factors supporting that. They are looking at a 7 year lease so a 5 year term on the grant would work well. I plugged their information into the rubric that we worked with before and it actually comes out recommending a 30% grant. If we want to go in that direction and do a very similar grant that we did with Mars and Freedonia, that would be supported by those facts. My second thought, and this is sort of more loose-ended, is that in this case the larger value is the investment in the property than the income tax revenue. I have been very concerned about this property for a long time. It’s been vacant for so long. We have had a string of companies applying for conditional use permits for this property that are low employee uses. The value of getting a manufacturing company in there and actually investing in the building and the property, I think we will see more from that than we will from this company’s payroll.

Mr. Saponaro stated, it adds to the rubric. What you are saying is true. Obviously, it is going to incentivize for others to come into that property and the values are going to increase. It’s just another level of support to support the rubric in support of the grant. Based on what we have done with this rubric, it’s not some unyielding type of rubric. You are looking at the basic information and these are the factors you would add to it that would help create and support something that makes sense in terms of a grant. Where are they are in the process? What do the next 30, 60, 90 days look like?

Mr. Esborn replied, the fact that they are saying they want to be in by the end of the first quarter indicates they are moving quickly. At the same time, the first conversation was just last Thursday. It’s rare that CEDC gets this kind of timing where we get to talk about a company so soon after the initial conversation. One of the interesting things about this situation is that I am not dealing with a broker.

Mr. Saponaro asked, who are you dealing with?

Mr. Esborn replied, the two owners of the company.

Mr. Saponaro stated, one of the questions to ask from the ownership is what does the landlord’s work look like in terms of weeks? Obviously if you are talking about the end of the first quarter, you have 12 weeks. No one is starting on January 1 I would imagine, so they must think it is going to take less than that. Maybe while they are doing work they are going to allow the tenant to work concurrently in the space as well to get the buildout completed. What’s their idea if something were to be inked? Does the landlord have a drop dead date in order to meet the potential tenant’s deadline? That would be helpful for us to know.

Mr. Esborn asked, what is the landlord’s timeframe for the work?

Mr. Saponaro replied, for the improvements which need to be done right away.

Mr. Esborn stated, if they are going to be in by the end of the first quarter, that would suggest that their lease has to end.

Mr. Wynne added, they are up against it.

Mr. Marrie stated, they don’t want a big gap between where they are operating now businesswise to when they start here.

Mr. Saponaro asked, when you request information, do you ever request a copy of the current lease that they have?

Mr. Esborn replied, I have not done that.

Mr. Saponaro stated, ask. The worst thing they can say is no. Just get the information. You are more interested in the term and how long they have been there.

Mr. Esborn stated, I thought you were going to mention about asking for some sort of information on payroll. I got that easily from Mars. I thought it was going to be difficult.

Mr. Saponaro asked, you mean the verification?

Mr. Esborn replied, yes.

Mr. Saponaro stated, you can’t throw numbers out and not be able to support them. That’s the whole point of the grant. Are there any other comments, questions or anything else to add?

Mr. Williams asked, did they say why they were thinking about moving?

Mr. Esborn replied, one of the owners lives in the Village. If I have learned anything in the last several years, it’s that companies make a lot of relocation decisions based on where the owner lives. These two owners recently purchased the company. I am sure there were other factors but they didn’t really mention any other factors.

Mr. Jerome asked, what is the total size of the building?

Mr. Esborn replied, 93,000. The current brochure puts it a 90,500, but I have always used 93,000. The company is looking at this portion right here on Beta. That would leave about a 55-58,000 square foot space back here. The owners told me they were showing that second space to a potential tenant this week.

Mr. Jerome asked, what about County dollars for the buildout?

Mr. Esborn stated, that’s a good question. I have been talking to the County recently about the anti-poaching. It depends on how expensive the buildout for the whole building is going to be. I am sure that Westin is really familiar. I can talk to them and I can talk to the County.

Mr. Saponaro asked, any other comments or questions? There were none.

Mr. Esborn stated, I have a couple more updates. The QED and Freedonia Agreement are both executed. The Mars Agreement is not executed yet. We were at QED earlier today. The owners of the building are working out a parking solution for the building to accommodate both QED and Mars. Mars has not signed the Agreement yet because they want to make sure the owners of the building come to a solution on parking before they sign. The owners are working with QED to potentially work out a deal with Mayfran to get some parking for 6655. That’s where things are now. They are trying to put together a deal with Mayfran to try and utilize some of their parking. QED has 150 employees. They have about 150 spaces now. They have 14,000 square feet in the middle of the building that they can expand into. Right now they can only go up to about 172 spaces.

Mr. Marrie asked, for the whole building?

Mr. Esborn replied, just for QED. Mars needs about 110. Right now there’s not quite enough room for parking for both companies.   They have had a few different ideas for how to get the parking in there. They are trying to accommodate both tenants. Mars wants their parking close to their entrance.

Mr. Saponaro stated, if they have expansion space options, they are not going to get the parking for that until they actually exercise that. They have to leave parking for whoever takes that space so they have to assign a certain amount.

Mr. Esborn stated, a potential agreement with Mayfran to use some of this parking area over here is really attractive because it would make both companies happiest.

Mr. Saponaro asked, do you think Mayfran is open to it?

Mr. Esborn replied, they are reaching out to them now. Premier is working with them.

Mr. Jerome asked, what about Progressive’s lot? Do they use all of the spaces in the back?

Mr. Esborn replied, I think so. Progressive uses all of these spaces. What makes this attractive is this is underused by Mayfran.

Mr. Wynne asked, what is brownish land right behind the building?

Mr. Esborn replied, it’s the stretch between the Church.

Mr. Wynne asked, who owns that?

Mr. Esborn replied, I believe the former owner of this building owns it. I can pull up a map that shows the property lines and the zoning.

Mr. Saponaro stated, that’s something we need to look at to see if it’s a potential option that we could help broker if it makes sense.

Mr. Esborn stated, I have been making overtures to Premier, Mars and QED asking if there is a role that Mayfield Village can play in making this happen. So far, not yet. I am going to reach out to my contacts at Mayfran. After talking to QED today, I am going to check into it to see if there is anything they can do. With regard to the land, it’s actually part of the Euclid Industries Property. Premier has told me that paving area back here to do parking in the rear is something they have looked at as well. They would rather have a solution on the west side of the building.

Mr. Saponaro stated, we would rather not have more paved areas if not necessary. Let’s utilize the spaces we have to come up with an agreement between them. What other updates do you have for us?

Mr. Esborn stated, I think that was it. I wanted to talk to you about this new company and give you the quick updates on our 2015 agreements with Freedonia, Mars and QED. I have a list of information that I am going to gather from this company. With Mars, I would e-mail CEDC. Is that okay?

Mr. Saponaro replied, sure. Obviously, everything is subject to public records requests, but we have to keep confidentiality, that’s my only concern. If there is a request, you have to redact or whatever you need to do. With regard to program updates or things you want to talk about?

Mr. Esborn replied, as we went through this year, working with QED, Mars and Freedonia, there were a lot of instances of concern with the agreement. When I sent the e-mail at the end of the November, I was envisioning getting out the agreement as it exists now and sort of going through it. That might take a long time, but I wanted to go over every concern.

Mr. Saponaro stated, I think from a higher level, even those of us who are attorneys are not practicing law here, we are the clients not the attorneys, it’s really appropriate for the attorneys to do that. Our concerns should be more of a bullet point such as upfront dollar exposure. How do we close those kind of loops? What are the mechanisms? Stand by letter of credit? What are we putting in place there that protects us? It’s more along notice provisions. How do we get notice? Give notice? What are we actually providing for them? It’s more of a case by case basis. It’s no different from any other contract from my perspective. Each company is going to look at something and there’s going to be a part of that contract that is a hot button for them which it may not have been for any other company. Everything we address in this agreement is really geared towards how do we protect the Village and if need be, if things did not work out, how do we get out of the agreement and protect the dollars so we are not sitting there and having a company that is owing us monies and no mechanism to retrieve it. There’s no foolproof way of doing anything but we can do our level best to get the security in place as much as we can. What are everyone’s thoughts?

Mr. Jerome asked, what is the fund total we are pulling money from?

Mr. Wynne replied, $200,000. The way Freedonia and Mars is structured, it takes the risk factor out of it.

Mr. Saponaro stated, my concern is if we are going to do something upfront.

Mr. Jerome asked, how much money do we have to work with? We have about $200,000 in there but some of that is earmarked for Freedonia.

Mr. Wynne replied, Freedonia’s money is going to be paid out of the money we will be receiving. It’s right here. It will be coming out of current income tax dollars. We will just be paying it out of that. To me, right now, it’s $200,000 and it will grow. It’s not really earmarked for anything.

Mr. Esborn stated, we have the Annual Meeting of M.C.I.C. at the opening of Council tonight. I might mention during the any other matters portion that M.C.I.C. has a role in these Economic Development Incentive Agreements and that Freedonia will be measured in 2016 and the first payment to Freedonia would be made in early 2017. M.C.I.C. will make the determination about the amount of payment to Freedonia in early 2017.

Mr. Wynne asked, has Freedonia committed to stay in the Village?

Mr. Esborn replied, they are committed to staying. Freedonia’s recourse was if things did not work out with their incentive, they were going to hold over for a quarter and reopen their search. When they signed the agreement, they basically said to me and Mark, we are good, we will stay.

Mr. Saponaro asked, Mark, is there any issue with the M.C.I.C. because Council holds offices, is there any issue for Council members on this Committee to not be an officer on M.C.I.C.?

Mr. Guidetti replied, no.

Mr. Saponaro asked, are there any other matters? There were none.

The meeting adjourned at 7:10 p.m.

Respectfully submitted,

Mary E. Betsa, Secretary
Community and Economic
Development Committee