The URL can be used to link to this page

Home My WebLink AboutJST Manufacturing, Inc. Reimbursement Idaho Tax Reimbursement Incentive Item#14. C� fIEN DIA] :,, DAHO MEMO TO CITY COUNCIL Request to Include Topic on the City Council Agenda From: Victoria Cleary, Community Development Meeting Date: October 5, 2021 Presenter: Victoria Cleary Estimated Time: 5 minutes Topic: Community Match Agreement between the City of Meridian and JST Manufacturing, Inc. Supporting the Idaho Tax Reimbursement Incentive Act and Providing for the Reimbursement of$27,000 for Completed Public Infrastructure Improvements Recommended Council Action Approve Community Match Agreement ("Agreement") between the City of Meridian and JST Manufacturing, Inc. Background JST Manufacturing, Inc. ("JST"), is a 40-year old, Treasure Valley manufacturer of custom, specialty machinery serving global clients in the semiconductor, optoelectronics, biomedical, food processing, and other clean industries. City staff met with JST representatives in fall 2019 to discuss the consolidation of its three locations and expansion of its operations in Meridian, and review available sites. JST later identified the site at 4040 E. Lanark as a viable location to expand its operations. With few economic development tools available to directly assist companies seeking to locate and expand operations in local communities, staff involved the Idaho Department of Commerce, and JST was able to take advantage of the State's Tax Reimbursement Incentive ("TRI") program. The TRI program is a competitive program that can provide performance-based tax credits for new State revenues generated by companies seeking to expand or locate in Idaho. Companies expanding or locating in communities of more than 25,000 must commit to make a significant capital investment and add a minimum of 50 full-time jobs at or above the county average wage. Idaho Commerce evaluates the anticipated new jobs and the company's impact on the industry sector as well the local and State economy to determine the percentage credit available—up to 30 percent—on income, payroll, and sales taxes paid for a specified period of time, up to 15 years. The Governors' Economic Advisory Council reviews applications and proposed awards and, upon approval, a formal agreement with annual performance criteria is established. The TRI program requires a "meaningful community match" illustrating local support for a business' location or expansion. State statue allows for communities to provide monetary contributions, fee waivers, in-kind-services, and infrastructure improvements. Page 138 Item#14. While the City values the creation of new family-wage jobs, it is only able to provide a community match with a direct nexus to "public purpose" (see subsequent Meaningful Community Match section) and, as such, staff recommends approval of this Agreement that provides for a $27,000 "Community Match" in the form of reimbursement of verified public infrastructure "contributed capital" improvements installed. These improvements, required as a condition of development and beyond those necessary to serve JST's facility,will serve community development. JST Community Impacts JST (www.jstmfg.com) as a multi-national client base serving several industries.JST operations align with one of the City's four target industry sectors,Advanced Manufacturing. In addition to 50 jobs, at an average wage at or above the County average wage at the time of TRI approval ($50,464),JST's capital investment will result in direct, new City revenue. Development of the site at 4040 E. Lanark resulted in more than a five-fold increase in assessed real property value for the 5.18-acre site. JST occupies 80 percent of the 75,000-square-foot building. In addition to the $13.2 million real property valuation, JST's 2021 personal property tax assessment totaled $2.7 million. Estimated City Annual Real Property Tax Increase (@ 0.002928713 levy x 80%) $25,500 One-Time Building Permit Fees Paid (excludes fees paid to City third party contractors) $126,000 (includes Police Impact Fee of$9,000 and Fire Impact Fee of$26,250) Idaho Commerce Economic Benefit Summary New Jobs: 50 New Total State Revenue: $3.4 million Average Wage: $58,138 New Direct State Revenue: $1.8 Million Capital Investment: $4.7 million TRI Term: 8 years Total Project Wages: $19.1 million TRI Percentage: 16% Community Match Reimbursement Specifics Construction of public utility improvements, consisting of extension of a water main and installation of a fire hydrant, was a requirement of development documented by a Warranty Surety Agreement and surety deposit. The Public Works Department accepted the improvements which were logged by the Finance Department as "contributed capital" City infrastructure assets to be maintained by the City. Staff is recommending the $27,000 Community Match be disbursed in two equal installments following verification of compliance with annual performance criteria by Idaho Commerce. Alignment with Economic Development Action Plan and Citywide Strategic Plan The location of JST to Meridian aligns with three Economic Development Action Plan items: • Support the retention, success and expansion of existing businesses • Target the expansion and attraction of compatible industrial businesses • Target attraction efforts to recruit companies creating family wage jobs and new City revenue 2 Page 139 Item#14. This Community Match Agreement also meets the following goals and strategies identified in the Citywide Strategic Plan. Focus Area: Business and Economic Vitality Goal Strategy Deploy economic development resources and Recruit and retain businesses in the tools to targeted industries seeking to locate or professional service, technology, light expand in Meridian. manufacturing and health care industries to provide a balanced economic base. Identify existing business in desire trade and local sectors to be used in location conversations. Support business development that Support property owners in securing tenants that increases the number of family wage jobs to create family wage jobs. allow employees to live and work in Meridian. Assist new and existing business seeking to bring or expand family wage jobs. Meaningful Community Match, Economic Development Incentive Policy Community Development staff worked closely with the City Attorney's Office to prepare the JST Agreement and ensure it provides a defensible community match.While JST received preliminary approval as a TRI participant in November and held its grand opening in May, staff was awaiting completion of the final agreement with Idaho Commerce before bringing the Community Match Agreement forward. Pursuant to Idaho State Constitution Article XII, Section 4, and further clarified by case law and an Idaho Office of the Attorney General opinion, contribution of city funds must meet the "public purpose" doctrine. Job creation and capital investment alone are not sufficient"public purpose" to justify an expenditure of public funds. Further, the Office of the Attorney General analysis states difficulty in defending a contribution of funds or fee waivers in meeting the public purpose test,versus "improved or upgraded infrastructure,which would benefit the people within the local government." This Agreement is performance-based, with the match tied to contributions benefitting the community as well as annual performance compliance. Staff will work with the Finance Department and City Attorney's Office to revise the City's current Economic Development Incentive Policy to ensure it provides clear direction and that all future Community Match Agreements, and any Participation or Assistance Agreements between the City and a private entity meets public purpose doctrine. Budget There are sufficient funds in Community Development Department budget, Economic Development Fund 1930, Meridian Development Account 69700,to implement this Agreement. 3 Page 140 Item#14. COMMUNITY MATCH AGREEMENT BETWEEN CITY OF MERIDIAN AND JST MANUFACTURING,INC. THIS COMMUNITY MATCH AGREEMENT ("Agreement") entered into this 5th day of October , 2021 by and between the City of Meridian ("City"), an Idaho municipal corporation organized under the laws of the State of Idaho, and JST Manufacturing, Inc., an Idaho General Business Corporation ("JST"), collectively,the"parties." WHEREAS,) JST is an advanced manufacturer, providing wet bench and cleaning equipment to the semiconductor, optoelectronics, biomedical, food processing, and other clean industries; and, WHEREAS, JST expanded its operations to a 60,000-square-foot location at 4040 E. Lanark Street in Meridian with approximately 75 employees; and, WHEREAS, JST has the need to hire new positions, ranging from fabricators, welders and machinists to administrative support to multiple engineers, including chemical, electrical, mechanical, and software engineers to serve its growing client base; and has committed to add a minimum of 50 full-time, benefited positions through 2025 with an average wage at or above the Ada County median wage; and, WHEREAS, JST has committed to make a minimum capital investment of$4.7 million in facility improvements and equipment at its Meridian worksite; and WHEREAS, JST has been able to qualify for Idaho's Tax Reimbursement Incentive (TRI), a performance-based mechanism that promotes economic expansion, business retention, and job creation; and, WHEREAS, pursuant to Idaho Statute, Section 67-4739(lc), to be considered for participation in the TRI program, the applicant must secure a Community Match, which is defined as a commitment from the local government that demonstrates its active support of the applicant creating new jobs in the local community; and, WHEREAS, pursuant to Idaho Statute Section 67-4738(5), the Community Match may include a monetary contribution, fee waivers, in-kind services, the provision of infrastructure, or a combination thereof; and, Page 141 Item#14. WHEREAS, pursuant to Idaho State Constitution Article XII, Section 4, the "public purpose" doctrine set forth in Village of Moyie Springs v. Aurora Mfg. Co. (1960), and subsequent Idaho Office of the Attorney General clarification, such Community Match must provide a"public purpose," and, WHEREAS, as a condition of development, City required construction of certain public utility infrastructure improvements, beyond those needed to serve JST's facility, at a cost of$27,000; and, WHEREAS, the required public utility improvements will serve community development and are determined to be "contributed capital" City infrastructure assets to be maintained by City; and, WHEREAS,Meridian's Community Match is a show of support that the City has a partnership with the State of Idaho and JST, and is an effort to support JST's significant capital investment and creation of new job opportunities to utilize the Idaho TRI program and locate in Meridian. NOW, THEREFORE, in consideration of the foregoing, the City and JST do hereby agree as follows: 1. COMMUNITY MATCH CONTRIBUTION. Upon the satisfaction of the ongoing Condition listed below, City agrees to provide Community Match funds of $27,000 (Twenty-Seven Thousand Dollars), distributed in two equal installments over a two-year period. a. The Condition must be satisfied in each of the two years. Failure to fulfill the Condition shall be considered an Event of Default under Section 5 of this Agreement and shall relieve City of its agreement to fund any unpaid Community Match unless cured. b. CONDITION FOR COMMUNITY MATCH CONTRIBUTIONS. The City and JST are entering into this portion of the Agreement to provide a Community Match in anticipation of the satisfaction of a certain condition, which, if not satisfied, will frustrate the purpose of providing the Community Match. For purposes of this Agreement, the following shall constitute the"Condition": JST shall receive approval from the Idaho Department of Commerce for the Idaho Tax Reimbursement Incentive (TRI) program. JST must continue to be eligible for the TRI tax credits in each of the two years that it receives Community Match funds from the City of Meridian. 2. PAYMENT OF FUNDS. The first payment of$13,500 (Thirteen Thousand Five Hundred Dollars) shall be remitted to JST within 30 days or as soon as possible thereafter once City receives verification of approval from the Idaho Department of Commerce COMMUNITY MATCH AGREEMENT-Page 2 Page 142 Item#14. following the initial performance year compliance. A subsequent annual payment of $13,500 shall be made within 30 days as soon as possible thereafter once City receives verification of JST's continued eligibility for the TRI tax credits in the second performance year. 3. PUBLIC RECORDS. All books, figures, records, reports, statements, or similar items submitted to the City by JST are public information and are available for public review, subject only to specific exemptions in Idaho Code relating to Public Records. Should JST provide to the City information that it believes to be a trade secret or other proprietary information as defined in Idaho Code, it may mark such information "confidential." Prior to disclosing any information marked "confidential," the City shall provide ten days written notice to JST prior to City making a determination whether the information is exempt from disclosure. 4. APPROVAL OF AGREEMENT, INVALIDITY, AND APPROPRIATION OF FUNDS. The City is a political subdivision of the State of Idaho and is subject to state laws governing its activities. In the event that any portion of the laws authorizing City's local Community Match of the Idaho Tax Reimbursement Incentive Act is found to be invalid or unlawful, any portion of this Agreement which relies on the invalidated or unlawful portion of the TRI Act shall be null and void. Further, all funding set forth in this Agreement is subject to annual appropriation by the City Council pursuant to restrictions dictated by the Idaho Constitution. 5. DEFAULT. If JST or the City alleges that the other is in default of such party's obligations under this Agreement,the following provisions apply: (a) The party alleging such breach or default (the "Alleging Party") shall provide written notice to the other (the "Defaulting Party") identifying the specific nature of such alleged default (a "Notice of Default"), whereupon the Defaulting Party shall have thirty (30) days in which to fully cure the default (the "Cure Period"). (b) A party's failure to cure a default following a Notice of Default within the Cure Period shall be an"Event of Default"hereunder. (c) Upon an Event of Default, the Alleging Party shall have the right to terminate this Agreement as well as any and all rights and remedies to which the Alleging Party may be entitled in law or in equity. 6. AGREEMENT MADE IN IDAHO. The laws of the State of Idaho shall govern the validity, interpretation, performance and enforcement of this Agreement. Venue shall be in the courts in Ada County, Idaho. 7. NOTICES. Any and all notices required to be given by either of the parties hereto, shall be in writing and be deemed communicated when mailed in the United States mail, certified, return receipt requested, addressed as follows: COMMUNITY MATCH AGREEMENT-Page 3 Page 143 Item#14. To the City: Meridian City Clerk 33 E. Broadway Avenue Meridian, Idaho 83642 To JST: Cory Armstrong Chief Financial Officer 4040 E. Lanark Street, Suite 100 Meridian, Idaho 83642 Either party shall give notice to the other of any change in address for the purpose of this section by giving written notice of such change to the other in the manner herein provided. IN WITNESS WHEREOF, the parties have hereunto caused this Agreement to be executed, on the day and year first above written. CITY OF MERIDIAN,AN IDAHO MUNICIPAL CORPORATION Robert E. Simison, Mayor - - 021 ATTEST: City Clerk Chris Johnson 10-05-2021 JST MANUFACTURING,INC. Cory Armstr ng Chief Financial Officer COMMUNITY MATCH AGREEMENT-Page 4 Page 144