#3 Act on request 25% local match for EDA Business Incubator grant application
Economic Development Department Memorandum
September 13, 2010
TO: City Council
FROM: Vic Grassman, Economic Development Director
SUBJECT: Action on a request to commit $400,000 as a 25% local match for
an EDA Business Incubator grant application.
Executive Summary
On January 26, 2010, the City of Janesville submitted an application to the U. S.
Economic Development Administration (EDA) for construction funding to build a
24,000 s.f building at 2901 Beloit Ave, (SE corner of Beloit Ave and Venture Dr.)
The City Council authorized this application to go forward in September, 2009.
The construction budget for the facility is $1.6 million with $1.2 million coming as
an EDA grant. The required 25% local match or $400,000 in land and cash
would be coming out of TIF 22.
An independent appraisal was conducted by L.A. Duesterbeck & Associates
which appraised the 4.17 acres of city land donated for this project at $125,000.
The balance of $275,000 would be taken from TIF 22 in cash to be used as
working capital for this project. TIF 22 is projected to have a positive cash flow in
2012/2013 pending any new projects that occur in the near future and will have a
projected balance of $5.0 million in 2021.
Request
This request is for formal commitment by the City Council to provide this local
match of $400,000 match and is required by EDA for the application to move
forward in their approval process.
City Manager’s Recommendation
The City Manager recommends approval.
Economic Development Director’s Recommendation
I recommend that formal commitment be given to this project using $400,000 of
TIF funding ($125,000 land contribution and $275,000 working capital) as the
25% local match.
This entity will be a fundamental part of Janesville’s long term economic
development program. Entrepreneurship has and will continue to be a significant
factor in Janesville’s economic growth. (There are currently 18 contestants in
Rock County’s 5.0 “Accelerate Your Business” plan contest.) There will be some
short term operating expenses that would need to be covered by TIF 22, but in
the long run is expected to be economically self-sustaining. Local institutional
support services for incubator clients will be the UW-Whitewater Innovation
Center, Blackhawk Tech College and UW-Rock County.
Combined with other economic development initiatives, this will allow Janesville
to move forward on all three foundations of a city-focused economic development
program. (Business Attraction, Business Retention/ Expansion and
Entrepreneurship)
Background
In early July 2010, the City was notified that this application was formally being
considered for funding. Since then we have responded to EDA’s informational
needs and questions including:
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Construction budgets
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Preliminary engineering and site plans
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Preliminary business plan
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Environmental approvals from several federal agencies
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Demonstration of internal project and financial management capabilities.
Projected timeline for the Rock County Business Innovation Center (tentative
name)
If the application is approved during the fall of 2010, RFP’s for architectural and
engineering services will be let out and a professional firm selected.
Construction bids will be let out during spring of 2011 with an approximate 4-5
month construction period occurring during the summer of 2010.
The 24,000 s.f. facilities will have approximately 4,000 s.f. of leasable space for
offices and 19,000 s.f. for manufacturing with 1,000 s. f. reserved for common
areas. The building will meet parking and ADA requirements, as well as other
code and permit issues.
City responsibilities for this project will include:
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Project management during the construction period including issuing
REP’s for architectural and engineering services, construction bidding
processes and monitoring of EDA reporting requirements.
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Development and implementation of the site plan
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Marketing, tenant selection and building management of the facility unless
subcontracted out.
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A twenty-year commitment is required by the City to EDA to keep this
facility as an incubator. If the City chooses to sell the facility before the
twenty years is up, it must pay EDA back its grant of $1.2 million.
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Preliminary operating costs are projected to be $54,120 per year. Since
there will be no mortgages involved, cash flow resulting from Tenant
leases would only need to cover these costs. The application indicated
that a two year lease up period would be needed with TIF 22 paying these
expenses until revenues broke even. Although specific rental rates have
not been determined, a financial goal of this facility is to be at a breakeven
point at 60% to 70% of leasing capacity. The long term goal from a
financial perspective is to have a self sustaining economic entity.
cc: Eric Levitt
Jacob Winzenz