Baked goods supplier Café Valley plans to make a $48 million investment to build a facility on the former Thomson site — after the city of Marion puts forth about $4.2 million for property acquisition and demolition.
Officials say the company has made a commitment to repay city-issued bonds through tax revenue as the project takes off. If it fails, the company has made a commitment to a “taxpayer agreement” to make Marion whole on the bonds before the city would have to tap tax money to repay them.
This information, and more, was presented Tuesday to the Marion City Council during a public information meeting about Café Valley’s plan and what they might mean for the former Thomson plant, 3301 S. Adams St.
Mayor Wayne Seybold said final details of the project are coming together like the pieces to a puzzle.
Rob Young, business development manager for CME Corporation, which helped select the site from 50 candidates in three states, said the company plans to hire about 100 workers when it opens in 2014 and double that number by the end of the year. The company projects having about 500 employees within the first five years and paying them the market average wage in Indiana, which he said was about $12 an hour.
The size of the facility could also expand. Initially, the company plans to build a 253,000-square-foot building, but has planned for an additional 83,000 square feet in space.
Seybold said Café Valley was seeking incentives at the federal, state and local levels for the project. He said it was looking for a New Markets Tax Credits allocation from the federal government and —at $5.8 million — it received the largest community revitalization enhancement district (CReED) tax credit pledge the Indiana Economic Development Corporation has ever made.
“Now it’s our turn to step up and be the three-legged stool in this situation so we can redevelop a property that’s been a blight on our community since the company closed the doors almost 10 years ago,” he said.
Young said the “project is a ‘go’ pending finalization of all the moving parts,” including the New Markets Tax Credits allocation, which has not yet been approved. He said the company expects them in the first or second quarter of this year.
“However the company cannot wait for that final piece and has asked the city of Marion and the Grant County Economic Growth Council to move forward with the acquisition and partial demolition of the Thomson Consumer Electronics campus,” he said.
Young said the company fully expects to move forward on the project, but has committed to make the city “whole” and cover the debt on the acquisition and demolition.
“Basically the company is saying, ‘Look, we’re asking you to move forward quickly, you’re meeting our schedule (and) we realize that comes at some risk to the city. We’ll cover that risk for you through this taxpayer agreement,” he said.
Reese said the entire local incentives package was totaled at $26.5 million and broken into a “Series A” and “Series B” bonds for two distinct purposes.
At up to $14.5 million, he said Series A is the “meat” of the deal. The bonds will go toward several purposes:
o$4.2 million for the Growth Council to purchase the property from current owner Lester Lee, buy AMVETS Post 5 and perform demolitions.
o$5 million for Café Valley’s site and building preparation.
o$2 million to refinance county economic development income tax bonds related to Earthbound Recreational Vehicles.
oAdditional money set aside for capitalized interest, a reserve fund and fees.
Tax raised from the project itself would be cycled back to pay the bonds.
Reese said Café Valley agreed to cover whatever is issued out of the Series A bond issue, minus the Earthbound bonds.
“The strongest thing we have from this is the commitment from the company itself. We have not seen that in the past,” he said.
Reese said the city did have some exposure by planning to commit county economic development income tax (EDIT) as security for the bonds.
In 2010, the city of Marion backed a $2 million bank loan for Earthbound Recreational Vehicles with EDIT money. The company recently shut down and the city is on the hook for paying back the bulk of the loan.
Reese said the financial institutions that will be involved in the deal did not want to split off the $2 million loan and incorporated it into the Café Valley deal through a bond refinancing.
He said Café Valley would not be responsible for the Earthbound debt and $12.5 million of the Series A bonds would go toward the current project, with the rest being Earthbound.
To protect the city, he said the Series A bonds also had a built-in reserve fund and an interest arrangement that would pay for them for two years in case Café Valley does not come through.
“We’ve got a series of monies that would support the bond payments if the project doesn’t go and that’s all based on how much is drawn down,” Reese said after the meeting. “We may not have to pay the entire amount of the Thomson purchase until all the (demolition) is done. We’ll draw it down as necessary, not just all at once. We’ll minimize our exposure and minimize what our paybacks will have to be as we go.”
Seybold said the city wasn’t incurring long-term debt to issue the bonds. He said it would have multiple layers of protection for the city “if all else fails.”
“That doesn’t become debt of the city,” he said after the meeting. “It’s not like we go out and take a bond to build something. This is all based on the property tax and the ability of the company to pay their property taxes. …
“If the project were not to happen, then the company would cover those bond payments until someone else came along. As long as the taxes are paid, then the bond gets paid. If they don’t get paid — if there’s a shortfall — then the company covers that.”
Grant County Economic Growth Council Executive Director Tim Eckerle said the $4.2 million for property acquisition and demolition discussed at the informational meeting may “expand and contract” but will be for the entire Thomson property.
Reese said the up to $12 million Series B bonds were ‘the carrot’ for Café Valley to remain and expand in Marion. He said it would help a tax increment financing deal that captures property taxes generated by new development by Café Valley and cycle it back toward the site.
“That will be completely on their own,” Reese said. The total could end up being any amount, from nothing to $12 milion. “The likelihood of the $12 (million) is in our wildest dreams.”
Eckerle said the Growth Council had an agreement to inform the city council about any changes or possible other projects at the property.
Reese said the city was interested in the entire facility to catalyze development of an “in town industrial park.” He said the city, through the Growth Council, would make sure other future tenants on the remaining acreage and 380,000-square-feet of building space would not negatively affect Café Valley.
Seybold said the reason why the city and the Growth Council are purchasing the entire 64 acre property was to keep control over it and protect Café Valley.