#07 Authorize TIF agreement with WW Grainger (File Res. #2010-689)
Economic Development Department Memorandum
April 12, 2010
TO: City Council
FROM: Vic Grassman, Economic Development Director
SUBJECT: Action on a proposed Resolution authorizing a TIF Development
Agreement in TIF 14 with W.W. Grainger to support job creation at
the Lab Safety facility, 401 S. Wright Road, Janesville, WI
(File Resolution No. 2010-689)
Executive Summary
W.W. Grainger, (Lab Safety facility) has/is highly regarded as both an excellent
place to work as well as an important economic job center for Janesville. In
recent times, there have been significant changes within the facility transitioning
from a Lab Safety distribution center to more of a headquarters facility for
Grainger’s specialty brands. This transition, in concert with Granger’s
reorganization of its logistical locations, has led to employee transfers, early
retirements and layoffs. On January 13, 2010 representatives from the City of
Janesville, Forward Janesville and Rock County met with facilities management
representatives to discuss the future of Grainger in Janesville and to stress the
City’s willingness to provide financial incentives to encourage Grainger to commit
to future employment growth at this facility.
On February 8, 2010, staff met with the City Council in closed session to ask for
authorization to begin negotiations with Grainger on an incentive proposal. The
successful results of these negotiations are before you to formally approve.
The Council authorized staff to offer $1,750.00 for each net new job that Grainger
can commit to in the near future. Grainger responded with an employment
schedule indicating that all of the transfers and early retirement actions would be
completed by June 30, 2010. Base employment as of July 1, 2010 will be 750
full time and 90 part-time positions. In addition Grainger has committed to the
following:
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16 new positions in 2010
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62 new positions in 2011
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52 new positions in 2012
The total commitment is 130 full time jobs. Since there is little tax increment
resulting from this expansion, (additional office space will be available at the
Janesville facility) this is primarily an employment incentive. Based on the
Council’s authorization of $1,750.00 /job this resolution provides Grainger with a
$227,500.00 forgivable loan at an interest rate of 7% and a term of 10 years.
Annual forgiveness with be based on maintaining and increasing employment
levels according to the terms of the TIF Development Loan Agreement. Grainger
has been asked to sign a mortgage for the above incentive which will be attached
to their Janesville facility. Grainger has also applied to the WI Dept. of
Commerce for Janesville Development Opportunity Zone tax credits.
Economic Development Director’s Recommendation
I recommend approval of this resolution to grant a forgivable TIf loan to W. W.
Grainger, Inc. for the following reasons:
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This financial proposal is consistent with the negotiating parameters
provided by the City Council in closed session.
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There is adequate funding in TIF 14 to cover a forgivable loan of
$227,500.
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This resolution will have a significant psychological impact internally on
Janesville’s residents; not only from increasing employment at Grainger
but also that the City is pro-actively working to keep keep/create jobs
within the city. Grainger has indicated that 90% of these new jobs will be
filled locally.
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The positive public relations impacts externally, will, once again reconfirm
that the City is proactively ready to assist both existing and new
businesses that create jobs.
Background:
Lab Safety became in independent subsidiary of W. W. Grainger Inc. in 1992 and
due to the productivity of the labor force, excess space and other economic
factors, has grown to be the headquarters facility for Grainger’s Specialty Brands
Division. In the past several years, Grainger has purchased 10 companies that
have important product lines but do not necessarily fit in with Grainger’s existing
distribution system, types of catalogues etc. These specialty lines require
different types of technical support and distribution processes than the traditional
Grainger products. Grainger has chosen to keep these new companies in their
existing locations but the overall management of these products lines will be at
the Janesville facility.
Grainger has indicated to us and has been confirmed by the media that the
company is reorganizing its distribution/warehousing system to create new
transportation efficiencies including establishing both east and west coast
warehousing capabilities. This has resulted in transfers and some early
retirements at the Janesville facility as their logistical system has been
reorganized to reflect the new product lines and increasing need for customer
service. This has resulted in warehousing positions that have been reassigned
elsewhere. The new positions will reflect a more office based focus. The
employment numbers provided by Grainger as a result of this can be seen below.
As of March 3, 2010 this facility had 774 full time and 91 part-time employees.
After June 30, 2010, a number of warehousing positions will be eliminated and
the result will be 750 full time employees and 90 part-time. All but 22 of them live
in Wisconsin, the remainder live in Illinois. The changing distribution structure
has been a key component for the transition of Lab Safety to a more office
focused environment. The employees impacted by these changes have either
relocated to South Carolina, took early retirements or severance packages.
Currently at the Janesville facility there are approximately 600 employees at
office jobs with the remainder on the distribution floor. In addition, although the
Janesville facility will locally be referred to as Lab Safety, its technical name was
changed on February 1 to GHC Specialty Brands with new signage occurring in
April.
From a local perspective, Ralph Howard, VP of Specialty Brands in Janesville
has worked hard to communicate these changes to employees, has rejoined
Forward Janesville and has encouraged staff to become more involved in
community activities.
Of the 130 new positions, 90% will be new hires to Grainger thus available to
local residents. All will include benefits. Projected salaries for these types are:
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Non-Exempt Employees – 115 (three years) - $13.90/hour
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Supervisors – 11 (three years) - $26.20/hr.
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Managers – 3 (three years) - $37.30 /hour
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Sr. Managers – 1 ( three years) -$50.50/hour
In 2009, W. W. Grainger, the leading broad-line supplier of facilities maintenance
products, had sales of $6.2 billion, over 18,000 employees and had a 6.9% net
profit.
The funding for this loan will be taken out of TIF 14 which, at the end of 2009,
had a positive balance of $1,125,199.
cc: Eric Levitt
Jacob Winzenz
Resolution 2010- 689
A Resolution Approving a TIF XIV Development Loan Agreement and Promissory Note
With W.W. Grainger, Inc., for $227,000
WHEREAS, the Common Council of the City of Janesville created Tax Incremental Finance
District No. XIV in accord with Wisconsin’s Tax Increment Financing Laws, Wis. Stats. Sec.
66.1105 and other applicable statutes, as from time to time amended or renumbered, effective
April 1995, in order to stimulate the development and redevelopment of industrially zoned
properties; retain and increase employment; construct, renovate and expand industrial facilities;
and otherwise provide for the overall economic health, welfare, vitality, and good of the
community; and
WHEREAS, the Project Plan for TIF District XIV includes industrial and manufacturing
development and redevelopment, improvements, facility construction, expansion, and
renovation, job retention and creation, and related financing, incentives, payments, loans, and
actions that effectuate and/or facilitate these public purposes and goals; and
WHEREAS, W.W. Grainger, Inc., a local major employer, desires to, promises to, and shall
renovate and expand its existing Facility located at 401 South Wright Road, Janesville, WI
53546-8729, retain current employment levels, and increase and maintain new jobs at its
Facility in Janesville, for the years, in the numbers, upon the terms, and in the manner set forth
in, and in consideration of, a certain TIF Development Loan Agreement and Promissory Note,
the terms, conditions, promises, and provisions of which are reiterated and incorporated herein
by reference as if fully set forth verbatim; and
WHEREAS, there are currently sufficient positive fund balances in the TIF District XIV
improvement and overall project accounts, and these expenditures fall within the allowable time
and scope for said Development Agreement and expenditures; and
WHEREAS, the Common Council hereby find that the City Administration has negotiated the
TIF Development Loan Agreement and Promissory Note with W.W. Grainger, Inc., upon terms,
conditions, promises, obligations, provisions, and purposes, consistent with the best interest of
and benefit to the City, all applicable laws, and Common Council industrial and economic
development policies, goals, objectives, and directives.
NOW, THEREFORE, BE IT RESOLVED, by the Common Council of the City of Janesville that:
1. Each and every of the above recitals are reiterated and incorporated herein by reference
as if fully set forth verbatim; and
2. The W.W. Grainger TIF XIV Development Loan Agreement and Promissory Note are also
reiterated and incorporated herein by reference as if fully set forth verbatim; and
3. The W.W. Grainger TIF XIV Development Loan Agreement and Promissory Note, and all
expenditures, terms, conditions, promises, obligations, and provisions set forth therein are
hereby found to be in the best interest of, and for the benefit of, the City, and, therefore, are
hereby both authorized and approved; and
4. The City Manager and/or his designee(s) is/are hereby authorized to execute, enter into,
and effectuate the TIF XIV Development Loan Agreement and Promissory Note with W.W.
Grainger, Inc., on behalf of the City of Janesville; and
BE IT FURTHER RESOLVED, that the City Manager and/or his designee(s), on behalf of the
City of Janesville, is/are hereby authorized to administratively negotiate, draft, execute, review,
enter in, modify, amend, record, file, and otherwise effectuate the above agreements and
promissory note, and/or to make and enter into any and all other agreements, contracts,
documents, papers, and forms, and/or to take whatever other actions that the City Manager
and/or his designee(s) may, from time to time and at any time, determine necessary and/or
desirable to effectuate the above transactions, agreements, and/or above all the intent and/or
purposes of this Resolution.
ADOPTED:
Motion by:
Second by:
APPROVED:
Councilmember Aye Nay Pass Absent
Brunner
McDonald
Eric J. Levitt, City Manager
Perrotto
Rashkin
ATTEST:
Steeber
Truman
Voskuil
Jean Ann Wulf, City Clerk-Treasurer
APPROVED AS TO FORM:
Wald Klimczyk, City Attorney
Proposed by: Economic Development Director
Prepared by: City Attorney