When the Jefferson City Area Chamber of Commerce sold its spec building May 18 to an Ohio plastics company, the group sold the building at a loss.
The chamber's last audit, dated May 19, shows the chamber sold the building and the land it sits on for exactly $1 million, or about $263,000 less than the group put into the building over the 10 years it sat vacant. According to documents from the Cole County Assessor's Office, the building had an assessed value of $1.038 million on Jan. 1; records from the Cole County Collector's Office stated the land at the site had an assessed value of $332,220.
In Missouri, commercial real estate is assessed at 32 percent of market value.
Randy Allen, Jefferson City Area Chamber of Commerce president, and Missy Bonnot, the Chamber of Commerce director of economic development, confirmed the building sold for $1 million on May 18.
Allen and Bonnot defended the decision to sell the building at a loss, saying 70 jobs will be created within three years, and 50 jobs will be created when an Ohio plastics company opens a factory in the building this October.
"The building was sold at a loss because that's exactly what it was built for," Allen said. "It was built to be an incentive."
Terms of deal were closed
Missouri is one of a handful of states where buyers and sellers are not required to disclose sales prices to government agencies. The News Tribune obtained the audit through Sunshine Law requests filed with Jefferson City over the past three weeks.
The News Tribune reported July 16 the chamber sold the building to New Albany, Ohio-based holding company PJP Holdings. Bonnot previously declined to name the sale price, deferring all questions about the sale price to Allen. Allen also refused to name the sale price, saying at the time he may release that information to the public when the company was ready to announce its plans.
As recently as Thursday, Allen declined comment and would not confirm the accuracy of the sale price to a News Tribune reporter, saying questions about the planned factory were leading to "misinformation."
Janet Weckenborg, chair of the chamber's Board of Directors Executive Committee, said at a chamber breakfast Thursday morning the chamber planned to make an announcement about the project "in the next 10 days."
"We did sell it to a private individual, and it is that private individual's desire to not talk about that," Weckenborg told about three dozen people at the breakfast.
Axium Plastics, which has links to PJP Holdings, plans to add a $400,000, two-phase renovation to the building. Building permits approved by the city June 16 show the first phase will install a 10-inch-high concrete floor and cost $182,000. During the second phase, a 75,000-square-foot warehouse will be added on to the building, blueprints obtained by the News Tribune show.
The final cost of the renovation will total at least $1.5 million, according to city officials and Allen.
Axium also has plants in the suburbs of Toronto; Atlanta; Los Angeles and Columbus, Ohio.
Planning for the spec building started in 2005, construction began in 2006 and the building was finished in July 2007 at a cost of $1.1 million, for which the chamber paid. Between then and when construction started at the site in late June, it never had a permanent tenant.
An economic development tool
The chamber built the building with an unfinished floor and wanted to make it as easy as possible for a new manufacturer to come into the building. Bonnot said 80 percent of manufacturers are looking for pre-built buildings. She said the building helped lure several companies to town including Bloomington, Illinois-based Morris Packaging in 2013.
Several other businesses, including a go-kart/laser tag business, looked at the building over the years. The Great Recession also killed a deal with a tenant the chamber lined up in 2007, Bonnot and Allen said.
"We have been very selective because we want a good return on our investment and the community's investment," Bonnot said.
Allen said previously the chamber marketed the building at an asking price of $1.8 million, and it recently asked for $1.5 million from prospective tenants. The chamber was picky with prospective tenants and did not move the price for tenants that wanted to turn the building into a warehouse, Allen and Bonnot said. It factored in the 70 jobs it says Axium will create when it decided to lower the asking price to $1 million, Allen said.
"Depending on the economic value you are bringing to that building, we will discount the price," Allen said.
Public's investment
In 2016, public funds made up 35 percent, or $335,000, of the chamber's $952,704 budget, according to a Feb. 27 presentation by Allen to the Jefferson City Council.
In 2015, as in 2016, Jefferson City paid the chamber $185,000 and Cole County paid the chamber $150,000 for economic development services. That total of $335,000 made up about 32 percent of the chamber's $1.04 million in revenue in 2015, the last year for which documents were filed with the Securities and Exchange Commission.
The chamber's investment arm, JC 21st Century Investment, paid $18,264.13 in property taxes on the land and building at the site last year, according to tax receipts filed with the Cole County collector. For tax years 2008-16, the chamber paid slightly more than $18,000 per year in taxes on the building and the land, according to tax returns. During that time, the chamber paid a total property tax bill of about $166,000 to the city and county.
Added incentives for buyer
Axium Plastics will receive two Chapter 100 tax abatements to move into the building: a 75 percent tax abatement on the real value of the property over 15 years and a 75 percent tax abatement on the value of personal property inside buildings on the site for seven years. The chamber estimated the tax abatements will equal about a $1.1 million tax abatement over 10 years.
Allen said local taxing entities used to give 100 percent tax abatements over shorter periods of time. With 75 percent abatements, though, taxing entities can still reap taxes from the site.
Axium will make an investment of about $25 million on the site. Of that, about $20 million worth, will be heavy machinery and other products that depreciate in value.
"Seventy-five percent is a better deal, even at a longer period of time, because personal property depreciates pretty well after seven years," Allen said. "So the schools, the city and county can reap the benefits of that early high value."
The chamber estimated the city, Cole County and JCPS will receive a net benefit of about $1.9 million in taxes over the next 10 years.
The Chapter 100 agreement between Axium Plastics and the city still had not been signed as of Friday morning, Jefferson City Counselor Ryan Moehlman confirmed. Allen said that agreement will be signed in the "early fall."
On May 10, an incentive task force, which is an advisory committee, sought input on the tax abatements from the Jefferson City Public School District, Cole County and city representatives. State law says when creating Chapter 100 tax abatements, governing bodies must invite school districts, community colleges, counties or cities to participate in the discussion.
Sam Bushman, Cole County presiding commissioner, represented the county at the meeting. Mayor Carrie Tergin and other city officials represented the city. JCPS Chief Financial Officer/Chief Operating Officer Jason Hoffman, JCPS School Board President Steve Bruce and JCPS Superintendent Larry Linthacum also attended. At a closed council session May 15, the council authorized the chamber to negotiate the property tax abatements.
An agenda for the May 10 meeting was not listed on the city's website, and Bruce said he could not recall one being made.
An agenda for the May 15 council meeting said a "negotiated contract" was being discussed during the closed session. State law prevents sealed documents and "sealed proposals and related documents or any documents related to an negotiated contract" from being released "until a contract is executed."
Allen said the council made the final decision to approve the abatements because the property resides within city limits. Tergin and Bruce also said while Cole County and JCPS gave input and could make strong suggestions during the discussions, the county and school district did not get a formal role in deciding whether to approve or deny the abatements.
Bruce and Tergin said the incentive task force actually opened communication between all three taxing bodies.
"In the past, that was not something that the district was made aware of," Bruce said of previous Chapter 100 abatement approvals by the city.
In this instance, Bruce said the school district played a part in the process even if in an informal one.
"They let us know of these possibilities and ask for input or feedback from us," Bruce said. "It's not something that the board took a vote for. They're giving us the opportunity to provide feedback to them."
Tergin said it's sometimes hard to connect all three taxing bodies.
"It's a way to connect all of us and to get all of us communicating," Tergin said.
Unlike tax increment financing, where the city subsidizes part of property development costs by paying a developer for a negotiated amount, Chapter 100 tax abatements are a simpler tax exemption.
TIF projects receive scrutiny from the 10 members of Jefferson City TIF Commission, which is comprised of council members, JCPS board members, Cole County members and other resident volunteers who all have voting power. The city also has to commission a study during TIF projects that lists the pros and cons of approval.
Moehlman said state law shows input from the county and schools is pretty limited in Chapter 100 cases.
"It's not like a TIF where they have a seat on the commission," Moehlman said.
Creating a 'critical mass'
In a news release Friday, Axium said it was happy to be opening a Jefferson City factory.
"The benefits associated with this location made Jefferson City the best option for our manufacturing facility," Tammy Hoffman, Axium chief operating officer, said in the news release. "We appreciate all of the support from the community and are excited about the opportunities that the Capital City will provide."
Some of that support will come from businesses already in the city. Axium makes plastic bottles for commercial use, including bottles used for 5-Hour Energy. It will be the latest of several plastics companies to relocate or expand in the area.
In 2015, Continental Commercial Products moved into a building on Wilson Drive. Continental manufactures a variety of goods including janitorial goods, food service and home goods. Morris Packaging, which makes bags made from plastic for commercial and residential uses, opened a factory in 2013 near the spec building at 6850 Algoa Road.
Unilever, which bottles personal products including Axe and Dove products, and Alpla, which makes water, soft drink and milk bottles, announced expansions in 2012 with the help of Chapter 100 tax abatements.
Sonoco Plastics also has had a presence in the city for years with its factory at 1621 Maytag Drive.
Bonnot said Unilever's presence in Jefferson City helped lure Axium Plastics.
"They have a customer that they serve in our region, so that plays a big part of it," Bonnot said. "We're also perfectly situated for them to serve their customers in St. Louis and Kansas City."
Allen said economic development leaders try to create these pockets of similar companies in similar industries.
"One of the things that you try to do in economic development and manufacturing is to create clusters," Allen said. "The cluster allows the critical mass to be created for employment."
Effect on JC workforce
Jobs at Axium plastics will pay $31,714 per year on average, or $15.24 per hour, and will include additional benefits, Allen said. Jefferson City had an unemployment rate of 3.5 percent in June, according to the Bureau of Labor Statistics. About 7.7 percent of Jefferson City's workforce is employed in manufacturing, according to a 2016 labor basin study conducted by the chamber. About 20 percent of the workforce works as general laborers when factoring other labor jobs and delivery jobs, the report said.
Allen acknowledged it will be difficult to find people for these jobs but said the chamber's goal is to keep bringing manufacturing jobs to the area and provide opportunities for people who choose not to go to college.
"We've got to take our people that are already here and train them up, or we've got to have people move in," Allen said.
He said though the unemployment rate is low in Jefferson City and Cole County, the chamber also wants to focus on finding jobs for under-employed people stuck in low-paying retail and fast food jobs.
Next economic development tool?
As of March 3, a different unnamed manufacturer was also looking at putting a 50-job factory in the spec building or in the Jefferson City West Commercial Park, according to the chamber's June economic development report that detailed the standing of projects as of May 31. The company also looked at making an investment of $16 million-$18 million in the spec building.
Sixteen buildings are listed for sale on the chamber's website. Most are old office buildings the chamber came to own after leases ran out or owners abandoned the buildings. The chamber also owns land at the Partnership Business Park on the city's southeast side, which is close to the spec building.
Bonnot and Allen conceded it may be tough to lure companies to Jefferson City with some of the buildings listed on its website.
The chamber will not build a new spec building immediately because, Allen said, spec buildings were a more popular tool when plans for this building were drafted in 2005.
Bonnot didn't rule out building a new spec building several years from now, though.
"In the future, down the road, potentially," Bonnot said.
She also said the city will be at a slight disadvantage without a spec building.
"We have been able to respond to buildings of that size in an industrial park," Bonnot said. "Now we won't be able to respond to those requests because we don't have that tool."