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HomeMy WebLinkAboutPUBLIC HEARING - 2018-04-30 - IFEC - MENARDS CITY OF LIVONIA PUBLIC HEARING Minutes of Meeting Held on Monday, April 30, 2018 ______________________________________________________________________ A Public Hearing of the Council of the City of Livonia was held at the City Hall Auditorium on Monday, March 30, 2018. MEMBERS PRESENT: Laura Toy, President Jim Jolly, Vice President Scott Bahr Brandon Kritzman Kathleen McIntyre Brian Meakin Cathy K. White MEMBERS ABSENT: None OTHERS PRESENT: Mark Taormina, Director of Economic Development Paul Bernier, City Attorney Bonnie J. Murphy, CER-2300, Certified Electronic Recorder The Public Hearing was called to order at 7:00 p.m. with President Laura Toy presiding. This is a Public Hearing regarding the subject of Menards. The City has received an application requesting approval of an Industrial Facilities Tax Exemption Certificate from Nick Brenner, Real Estate Representative for Menard, Inc., for the rehabilitation of the building and related property to operate as a truss manufacturing plant as well as a rail siding constructed to operate a lumber transload operation at their facility located at 12701 Middlebelt Road, Livonia, MI 48150, located in Industrial Development Overlay District #108. The public hearing is now open for comments. There was one person in the audience. Please state clearly your name and address before making your comments. Toy: We will now turn this over to Director of Planning and Economic Development, Mr. Mark Taormina. Taormina: Thank you. This tax abatement request, submitted on behalf of Menards, is for a new manufacturing operation that would be located adjacent to the Company’s home improvement store on Middlebelt Road. The site is part of the former Advantage Logistics facility and contains an existing 116,000 2 square foot industrial warehouse building that is located behind the Menard’s store along he CSX Railroad. The existing building was originally a part of a vast complex of buildings and structures that served as a regional warehouse, distribution, food processing and packaging center for the Kroger Company. In 2012, Menards acquired approximately 46 acres of the original 86 8acre Advantage Logistics complex. The acquisition included the main warehouse and distribution building that at the time totaled over 775,000 square feet. To make room for the new home improvement store, garden center, lumber warehouse and outside storage yard, all of which are now part of Menards’ retail operations, roughly 660,000 square feet of the aging warehouse and distribution center was demolished, and the easterly half of the property, where the store and lumber yard is now located, was rezoned to C-2 (General Commercial). What remains of the original warehouse, about 116,000 square feet, is located on the westerly half of the site and is still zoned Industrial, (M-1). Since the store opened about 5 years ago, Menards has been using this building for storage of merchandise. The company now intends to convert this building and the surplus land around it into a truss manufacturing plant. The new Midwest manufacturing facility would produce wooden trusses for distribution throughout the region primarily for the home construction industry. The capital investment that Menards plans to make in establishing the new production operation totals approximately $10.1 Million, including $3.4 Million in Real Property improvements, plus an estimated $6.7 Million in Personal Property. Included in the investment is a new rail siding, or spur, that Menards will use as part of its lumber transload operations. Additional real property improvements include remodeling the interior of the building as well as other site improvements, such as paving and lighting. In 2007, Livonia City Council established Industrial Development Overlay District #108, which covers all the industrial properties in Section 26, including the subject parcel. Menards is eligible for a tax abatement under PA 198 as a qualified “industrial property.” 3 As an industrial processor, Menards will not be liable for any personal property taxes, and instead will pay an Essential Services Assessment (ESA) on the Eligible Manufacturing Personal Property (EMPP). When finished and operational, the new facility will employ an estimated 17 full-time employees. Based on the projected real property investment and jobs, Menards qualifies for a full 12-year tax abatement pursuant to the City’s PA 198 Tax Exemption Duration Chart for Industrial Facilities. The True Cash Value (TCV) of the existing 116,000 square foot warehouse building is approximately $1.31 Million which translates to just over $11.00/square foot and generates about $38,750 in tax revenue. With the scheduled improvements, the Assessor estimates that the True Cash Value of the building will increase to about $43.00 a square foot, or roughly $5 Million dollars in total. Should the Industrial Facilities Exemption Certificate be approved, and based on the higher valuation, the taxes on the Real Property (not including land) will more than double to about $81,200. Additionally, the Michigan Economic Development Corporation (MEDC) is offering Menards a 6-mill State Education Tax abatement worth an estimated $15,000/yr., or about $180,000 over twelve years. Now, with both the IFEC and the SET abatements, Real Property Taxes would total $66,255, resulting in an annual tax savings of about $81,000. Real Property Taxes on the industrial building currently paid to the City total about $9,100. Factoring in the abatement, the additional property investment will generate about $17,000 in annual tax revenues to the City which is an increase of about 90%. With that, Madam President, I’d be happy to answer any questions. You have my notes on tonight’s presentation as well as some key factors and assumptions that provides some of the basics for some of the numbers I presented here tonight. Toy: Thank you, Mark. Questions for Mr. Taormina? Seeing none, can you come up to the podium and begin with your name and address. Brenner: Nick Brenner, 5101 Menard Drive, Eau Claire, Wisconsin 54703. Good evening, I just want to give you guys a brief summary of what Menards is all about. Menards has two components, one is the retail aspect you guys 4 are familiar with, the retail store. The less obvious is the manufacturing component of it. A lot of the material that you see in the stores is actually manufactured by Menards. We have concrete block plants, so all of the concrete block products that you see, the pavers, the edgers, the retaining walls, those are all manufactured by Menards. Pre-hung doors, countertops, cabinets, steel siding, steel roofing, those are all manufactured by Menards as well, that includes trusses as well. I don’t know if you asked the question, if you guys are wondering it, why are we thinking a truss plant here in Livonia. We do have a distribution manufacturing facility in Ohio just west of Toledo, but with the growing network of stores in this area, especially we have three new stores in the Detroit area that are going up right now, we are kind of reaching our capacity in that Ohio location. So there’s really two options that we have, one is to expand the existing facility to accommodate the new stores built, and the other option is to build a new facility and that’s what I’m here today for. We are trying to go with option number two, build a new facility here closer to a major metropolitan area where we can serve more of our stores a little bit more efficiently. And when we do that the transportation costs and the economy goes down, that passes down to the customers and makes our products more attractive. So I’m here today asking for the tax abatement. This is a huge program for us, it allows us to improve some of the costs that we spend on the project and that goes a long way and it’s always great when communities do that for us. A second part of the abatement that may go a little under the coverage here is how much this shows that the community wants Menards here, a lot of times we do take that into consideration, whether someone wants us here or not, we want it to be a good relationship with the City. This tax abatement again, will show the City’s willingness to want us here and our communications, beginning working with Mark, working with the Engineering Department, the City has been fantastic to work with, this whole process has been working since September or October and if you guys are willing to grant this abatement for us it will only just capitalize and show my words, what I’ve been communicating to my superiors. One other thing I wanted to mention, too, that is a very positive thing, Menards always, always is willing to expand its facilities. Not just retail stores, but industrial facilities as well. What this means is right now today it’s a truss plant and a railroad facility. A couple years down the road my managers may come to me and say, hey, Nick, I want to have a cabinet manufacturing plant in Michigan. Well, it makes sense as far as facilities, to have them close to each other. So Livonia goes to the top of my list in my eyes in trying to find a location for a future manufacturing plant. So 5 that is just something to look at as well as a future opportunity that Menards can offer you. If you look at any of our existing facilities, you can see that we’ve expanded multiple times on multiple facilities. So that’s just something else that I wanted to point out that’s very promising for the future. We like our stuff together, we have the employees, we know the area, it’s always a great opportunity. So with that, if you have any questions, want to know more about the project, ask away. Toy: Thank you. Any questions from Council? Meakin: Madam Chair. Toy: Councilman Meakin. Meakin: Can you explain how the rail line will help your decision to choose this location? Brenner: Yes. So, when we do an operation like this, we need rails. The reason why is because we ship our lumber products, whether it’s plywood, southern yellow pine, from all parts of the nation. CSX owns a lot of those down south, that’s where a lot of yellow pine. The Canadian National brings in other materials from Canada. So what we end up doing is the rail brings it on the site and it’s a little bit more convenient, you can bring bigger loads and we end up taking them off the cars on the train and putting them on the trucks to go to the different stores. So the rail is a must, we need it as part of the operation, some will go to the truss plant as well. Is that exactly what you’re asking for? Meakin: Do you see a greater need for rail lines in the future? Brenner: It’s possible. Depending on the – I mean obviously as far as stores go, keep being built, continuing to be successful, there’s more probability. With that being said, also what I just mentioned, if there’s ever an opportunity to bring in another manufacturing plant, cabinets, steel, whatever it may be in the future, again, we do bring that stuff in on rail as well, so yes, does increase the capacity of the rail and that makes this a very attractive site and it makes it easier to sell the company to go to that site because you have the infrastructure already established. You obviously have a long term relationship with CSX, this is the first time we’ve worked with then, but they’ve been very good to work with so far. Meakin: This is very exciting because in my twenty years this is the first group that’s ever said they needed the use of the rail line, no one has used it in twenty years. 6 Brenner: Yes, I can see that, it’s hit and miss, I suppose but every one of our sites has added it, whether it’s the CSX or Polk Southern, Short Line, we’re willing to work with them. Meakin: It’s pretty exciting to me so I’ll offer the approving resolution. White: Madam Chair. Toy: Councilwoman White. White: I have a question for Mr. Brenner, have you used up most of the available land, do you still have room to expand? Brenner: No, we don’t. The site is very packed, this is going to use up most of the remaining property. So, again, when I said if we have opportunity to bring more stuff in here, we would have to get some more property to do that. Theoretically, could we always shift something, yes, but I’ll most likely have to acquire something else in order to do that. But I don’t even know if there’s a square foot available, we really pushed it as much as we can to revamp everything, redevelop everything and use everything out there. White: Thank you. Bahr: Madam Chair. Toy: Councilman Bahr. Bahr: Is it typical to do this next to an existing store or is this just a convenient option for you because of this situation? Brenner: I’m going to say it’s rare and the only reason I paused there is I was trying to think if I could find, figure out another store and I don’t think there is. We like putting them in closer but we’ve never had one directly next to a store. And the reason why this one worked out so well is when we tore down that building, we tried to figure out if we should demo the whole building or if we should keep a portion of it. And we ended up deciding to keep a portion of it because why not. And then we listed it for sale and then if we don’t want to sell it maybe we could find an alternate use for it and a couple years later we finally find a use for it. So it just happened and there happened to be a rail line next to the store, that’s not too often, we might have a handful of those, too. So, everything kind of came together in an odd way for this and it’s unique. Bahr: I was on the Planning Commission when the Menards project came and I was a skeptic and I wondered why we were protecting the four out lots in 7 front of the store and I was obviously very wrong about that. I think they saw something I didn’t see. I have a question for Mark, if I can. Toy: Sure. Bahr: This Industrial Development Overlay District, is that a Livonia program or a state program or what? Taormina: Well, it’s something that the City undertook as a kind of proactive measure to help facilitate these requests for IFECs because as you know the statute requires first that the Industrial Development or Plant Rehabilitation District be established before engaging in the Facility Exemption Certificate. So in order to expedite the approval process, the City proactively established these districts throughout all six miles of industrial property in the City. So it’s really saved a lot of time, it’s boosted our ability to attract business. Bahr: And then another question for you, Mark, the property tax abatement that we’re offering here, how long does that last? Taormina: Well, that’s a decision that the Council makes and we have been relying on a tax duration chart, it’s a matrix that establishes the number of years based on the capital investment and the number of jobs created and it’s a sliding scale obviously with the greater investment and number of jobs we reached that twelve year threshold more quickly, in this case they do meet the minimum requirement for a 12-year abatement based on the number of jobs created and the total investment. Bahr: Okay, thank you. Kritzman: Madam Chair. Toy: Yes, go ahead, Councilman. Kritzman: Thank you, Madam Chair. Since Menards been introduced to Council, I think it’s been a very positive influence and as Councilman Bahr mentioned, this company came along at a time where it provided a nice shot in the arm from the economic development standpoint and was the first initial development in that area. And I wanted to check with you to see your thoughts and obviously you’re making an investment in the City and in turn you’re asking us to make an investment in you and one of the spots that bother me about the Menards complex is that detention basin area up front. It looks completely out of character with the rest of the development, and frankly it looks very unappealing. And I don’t think that 8 that is consistent with the friendliness and the approach that Menards takes on the rest of your projects. Has there ever been any thought given to landscaping around that detention basin? Brenner: Yes. I mean, we have talked internally about it. I went out today and it was just too cold. Kritzman: Nobody is faulting you for that, it’s just a big massive open area that collects geese and trash and not something that is very pleasant from an esthetics standpoint and really not consistent with the rest of your stuff. Brenner: Understood. And Menards tries to keep it in repair, you know, it’s a retail store, we want the property to look attractive. I’m not too familiar with the state of that, with that being said I’m more than willing to bring up the subject again, maybe once we get some warmer weather, I know it’s coming tomorrow finally, maybe if we can get some pictures and I can take a more in depth look at it and try to figure out what’s going on there and see what we can do to accommodate and make it look a little more appealing. Kritzman: And I know initially and I was trying to recall this conversation with Mr. Bahr or someone else on Council may remember, initially in one of the concepts and I haven’t seen them for a while but the concept of underground storage and even having additional pad sites back there but I don’t know if that’s anything that is even still in the works. Probably that ship has sailed by this point but I think that was part of the reason there was not a whole lot of attention paid to it because it was initially going to be a temporary situation. And I think it’s gone beyond being temporary at this point and I really would appreciate it, I know myself, if those got addressed to the point where they were in kind with the rest of your property there. Brenner: Yes, I can definitely look into that. I’m not too in depth on the history of the planning of the development, especially on the out lots, but I know people that are obviously, so I can definitely bring that up and ask questions and get you an answer. Kritzman: And Mark, I don’t know if that’s anything we can certainly tie to this? Taormina: I don’t think the resolutions that are acted on typically provide conditions that kind of fall outside of the issue at hand. Kritzman: What’s the process for approving the project tonight and then it goes on to a Regular meeting? Taormina: It will go on to a Regular with a resolution. 9 Kritzman: A Study? Taormina: No, just to a Regular meeting. You could potentially have a companion resolution that would refer the issue of the landscaping of the detention system to the Administration or something to that effect, we would go to the Law Department for the language on the second resolution. Kritzman: Madam Chair, I’ll offer that resolution. I think it’s a great project moving forward and I can see Councilman Meakin moving forward an approving resolution but I would also like to offer that companion resolution. Toy: You’ve got that, Bonnie? Murphy: Yes. Kritzman: And you’ll look into that and get back to us? Brenner: I absolutely will. Toy: Thank you. Congratulations on the Michigan Economic Development Corporation support, there are good people over there, it’s quite a feat in itself. I commend you on that as well. How is that store doing, by the way? Are the biggest in the country by any chance or the state? Brenner: I don’t know the updated facts on everything but this store does very well and the whole Detroit area actually does very well. We’re excited to be here in the area, we’re excited to be in Livonia, we’re excited to bring the truss plant here to Livonia and I just hope it’s a kick start to a great relationship moving forward. Toy: Well, I just wondered because you’ve got Home Depot over there and I was just wondering. Thank you again. Brenner: We’ve been very happy with the success of the Livonia store. Taormina: Madam President. Toy: Yes, Mr. Taormina. Taormina: If you could remind the Petitioner on the date of the Regular Meeting. Toy: I’m sorry, it’s not in my packet. Murphy: It would be the 5-21 meeting. Toy: 5-21. 10 st Taormina: May 21 and that will be a voting meeting at 7:00 p.m. here in this Auditorium and you should be here or somebody should be here as a representative. Toy: With that, the Public Hearing is adjourned. As there were no further questions or comments, the Public Hearing was declared closed at 7:21 p.m. SUSAN M. NASH, CITY CLERK