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Technical Report
Menard Inc. Manufacturing Campus at Lawrence VenturePark
Overview Menards is proposing the construction of a manufacturing campus at Lawrence VenturePark to produce and supply products for its home improvement stores in Kansas, Colorado, Missouri, and Oklahoma. Production facilities would comprise approximately 184,000 square feet and be located on a little over 90 acres at the Park, primarily on Block C, Lot 1. (See Addendum A, Property Boundaries, at the end of this report.) The project would be the first at the redeveloped brownfield site of the former Farmland fertilizer plant, providing a large, nationally known anchor tenant for Lawrence VenturePark.
The company plans to invest an estimated $24.8 Million in the project, approximately $14. million for land and real property improvements at the site. The production facility is anticipated to support 100 full-time, permanent new jobs with starting wages averaging $14.61/hour and annual average wages of $35,979.
To help establish their facility and manufacturing operations within Lawrence, Menards is asking for a tax abatement, ownership of the on-site, existing bulk warehouse, and City and County assistance in defraying partial special assessment costs. The Company is self-financed and is proposing a cash transaction in which the company would purchase the land at full market price from the City and pay the total of 10 years of special assessments. Anticipated project development would start in 2016 with operations commencing in 2017.
Company Background Menards is one of the largest home improvement chains in the U.S., employing over 55,000 in approximately 295 stores within a 14 state region, including Ohio, Michigan, Indiana, Illinois, Wisconsin, Minnesota, Iowa, Missouri, Nebraska, Kansas, South Dakota, North Dakota, Wyoming, and Kentucky.
The company is headquartered in Eau Claire, Wisconsin and has remained a family-owned and operated business since its establishment in 1958. Menards sells lumber and home improvement products such as floor coverings, hardware, millwork, paint, tools, stock appliances, pet products, lawn and garden supplies, and groceries. All company stores have full- service lumberyards.
Midwest Manufacturing, the manufacturing and distribution arm of Menards has been in business since 1969. Plants are located in Eau Claire, Wisconsin; Rochester, Minnesota; Holiday City, Ohio; Plano, Illinois; Shelby, Iowa; Shell Rock, Iowa; Valley, Nebraska; Terre Haute, Indiana; Iron Ridge, Wisconsin; Saginaw, Michigan; and Rapid City, South Dakota. These plants manufacture steel siding and roofing, interior and exterior doors, state of the art composite decking, environmentally friendly treated lumber, fasteners, pavers and block, engineered roof & floor trusses, and countertops.
Incentive Request The City received an application for incentives and request letter (refer to Addendum B at the end of this report) on November 17, 2015. To aid in establishing manufacturing operations in Lawrence, the Corporation is requesting a 50% tax abatement, ownership of the on-site, bulk warehouse (formerly used by Farmland Industries), and City and County assistance with defraying partial special assessment expenses. Below outlines the request package.
Public Assistance Request Description Value 50% Tax Abatement, 10 Years $1,256, City Grant (10 year, SA) $549, County Grant (10 year, SA) $200, City Bulk Warehouse $285, Total package value: $2,291,
Eligibility Tax abatements are any economic development tool that can be used to encourage manufacturing, research & development, or warehousing and distribution companies to grow within the community and promote primary job employment^1. Tax abatements exempt a portion of real property taxes on improvements to land and buildings for up to 10 years, as per state statute.
The City of Lawrence Economic Development Goals, Process, and Procedures (approved March
24, 2009 and updated May 18, 2010) outlines the guidelines for consideration of a tax abatement and eligibility amounts. According to the policy (Section 1-2121), the City shall only grant a tax abatement to a business which meets the legal requirements for a tax abatement and which indicates in their application that they will fully comply with five requirements. The following table compares these five policy requirements to the project’s estimated compliance as per information provided by the applicant.
(^1) Primary jobs are those used to produce goods that are primarily exported out of the community, resulting in importing revenue in to the community.
The policy (Section 1-2123) provides a basic schedule that the City can use as a guideline in determining the percentage tax abatement to be granted. According to the policy, the governing body may vary the amount, maximum, and duration of the abatement provided the net abatement to a business shall not reduce the net tax revenues as would be received pursuant to the schedules to the local taxing units over ten (10) years.
The below table shows the Project’s tax abatement eligibility amounts with policy suggested thresholds.
Tax Abatement: % Eligible % Available Description^
Meets Requirement
Eligibility % Notes
50%
Company investing over $7M in 2009 adjusted dollars ($7,710,523 in 2015 dollars), minimum 30 new jobs created
Yes 50%
Over $15 million to be invested in building and other real property improvements. 100 new full-time, permanent positions to be created within first two years of operation. Company has been on the Douglas County property tax rolls for more than 3 years, is investing over $5M in 2008 adjusted dollars ($5,476,346 in 2015 dollars), minimum 20 new jobs created
10% Company has been on Douglas County Property Tax rolls for at least 3 years -- -- --
5%
Capital investments exceeds $10M in 2009 adjusted dollars ($11,015,033 in 2015 dollars)
Yes 5% Total real property capital investmentis over $15 million
5% Project constructed to LEED certification or Silver standards -- -- --
10% Project constructed to LEED Gold or Platinum standards -- -- --
5%
Unique site constraints or construction requirements make development difficult
Yes 5%
Site has multiple monitoring wells that will need continual accessibility to meet KS Health & Energy Department requirements. Applicant will need to design building and site area to accommodate city staff access for performing on-going environmental monitoring. Site has topological design challenges.
5%
Project is seen as a catalyst for future projects in an economic development area
Yes 5%
Project to be first large-scale development and will serve as anchor tenant at Lawrence VenturePark.
5%
Project located in a targeted development location or development- ready site
Yes 5% Located in Lawrence VenturePark
10% Project provides exceptional wages -- -- --
TOTAL Eligible Percentage 70%
As shown above, the applicant’s request for a 50% tax abatement appears to fall within the abatement percentage allowed under City policy.
Analysis Estimated fiscal impacts to taxing jurisdictions are examined through a cost-benefit analysis, which is required by State Statute and current City tax abatement policy. Based on information received through the incentives application, staff conducted analysis of the costs and benefits associated with the project utilizing the City’s economic development cost-benefit model. This model measures estimated fiscal impacts to four taxing jurisdictions: City, County, School District, and State. Furthermore, the model outputs a ratio reflecting the comparison of estimated costs to estimated benefits returned to the jurisdictions as a result of the project. (Model limitations are provided in Addendum D at the end of this report.)
Assumptions: Assumptions utilized within the model are shown below.
Assumptions Summary Building Size (sf): 184, Location: Lawrence VenturePark Lot: Block C, Lot 1+ Lot Size (ac): 90. Appraised Land Value: $794, Business Type: Industrial/Manufacturing (NAICS327331) Estimated Construction End: July 2017 First Full Tax Year After Construction Completed: 2018 Assessment Ratio: 0. Capital investment (New Construction): $14,477, Total Real Property Capital Investment, including land + existing warehouse + new construction on building (does not include machinery, equipment, or other personal property)
$15,557,
Special Assessments Value $1,084, Total value land + SA $1,878, Total FT Jobs over 2 years 100
Average salary without benefits $30,384 (starting wage) to $35,979 (1styear average)
Benefits:
Company paid 50% healthcare premium
- HSA contribution. Employees also eligible for dental and life insurance benefits (50% paid by company). Estimated Appraised Real Property Valuation for Taxing Purposes (per DG Appraisers): $7,837, Net City Costs on Land: $244, Appraised Warehouse Building Value (Aug. 2015): $285,
Capital Investment
Job Creation and Wages
The project anticipates adding 100 full-time, permanent jobs to the community. The company estimates average starting wages of $14.61/hour with earnings for new hires averaging over $17/hour in their first year of employment. For purposes of the analysis, starting wages were assumed.
Job Creation: Phase I
Year # Jobs Starting Hr. Wage^4 SUMProd
Site Manager 1 $18.19 $18. HR Coordinator 1 $13.84 $13. Plant Manager 3 $17.22 $51. Asst. Plant Manager 10 $16.71 $167. Controller 2 $15.17 $30. Manager Trainee 5 $16.20 $81. Maintenance 3 $14.91 $44. Area Superv 10 $15.17 $151. Production 65 $13.88 $902. Total 100 $1,460. Avg. Hr. $14. Avg. Annual $30,383.
Temporary and part-time positions were not provided by the applicant and were excluded from calculations. Typically, these positions have minimal impact on the local taxing districts and are not incorporated into the analysis.
(^4) Wages do not include overtime, premium pay (overtime, weekends, 3rd shift, equipment certifications), or bonuses.
Tax History
The property has been tax exempt since 2010 due to environmental remediation efforts. With the 2015 tax year, the property becomes taxable, with property taxes due from the City. Current property will be subject to taxes based on the 2015 mill levy, which has not yet been finalized.
Property Tax History Year Appraised Assessed Total Tax 2015 $808,550 $202,138 $26,225^5 2014 $1,494,220 Not Assessed Exempt 2013 $241,470 Not Assessed Exempt
Property Market Valuation and Special Assessments
The company is proposing to purchase a little over 90 acres of land at Lawrence VenturePark. The bulk of the area is within Block C, Lot 1. Additional acreage is being requested north of this parcel.
Market Valuation: Land^6
Block Lot Lot Size (Acres)^ Lot Size (SF)
Market Land Value
Special Assessments $/SF Total C (area with SA) 1 75.411 3,284,903 $661,584 $0.33 $1,084,
C (area no SA) 15.131 659,106 $132,745 $0.00 $ Total 90.542 3,944,010 $794,329 $1,084,
The company is requesting the bulk warehouse (formerly owned by Farmland Industries) located on Lot C1, as part of the project’s public assistance package. The value of the warehouse is shown below.
Market Value: Bulk Warehouse^7 Description Size Value Land 1.6 acres $14, Building 33,158 sf $285, Total Market Value: $300,
(^5) Source: Douglas County, Kansas, Online Valuation, data retrieved 8-25-15 from: www.douglas-county.com/mycounty/property- search 6. 2015 tax amount is projected based on 2014 mill levies.
7 Aul Appraisal, September 2014. Aul Appraisal, August 2015
Additional Policy Considerations In addition to the results of the cost-benefit analysis, the policy specifies that additional factors may also be considered (Section 1-2106) for granting property tax abatements, including:
- The degree to which the ultimate market for the business products and services is outside the community, recognizing that outside markets bring “new money” to the local economy.
Applicant estimates that 94% of the revenues at the new Lawrence facility will come
from outside of Lawrence/Douglas County.
- The potential of the business for future expansion and additional job creation
Applicant estimates that the project will add 100 net new jobs, expanding their
employee base from 0 current employees to 100 full-time employees over the
abatement period. Project also has the potential for future construction phases to
accommodate additional employment.
- The beneficial impacts the business may have by creating other new jobs and businesses, including the utilization of local products or other materials and substances in manufacturing and creation of niche businesses.
Applicant estimates that 57% of additional operating expenditures for the business will
be made in Lawrence.
- The benefits and impacts the firm has on environmental quality both to the region, and through its products, nationally, as well as any efforts the firm makes to promote sustainability or mitigate environmental harm.
As per Menards’ incentive application:
o Project will utilize energy star certified steel roofing, doors and lighting fixtures.
o Heat will be provided using efficient radiant floor heating from a boiler system
fueled in part by recycled waste wood generated by the facility.
o Defect and returned concrete blocks produced by the facility will be recycled and
reintroduced into the manufacturing process. The facility will produce zero waste
water and virtually no other waste (primarily limited to small amounts of post-
consumer waste from employees).
o A large portion of inbound raw materials are delivered by rail, reducing road
congestion and CO^2 emissions.
o One of the primary goals of the project is to reduce transportation distances to
Menards store locations throughout the region. This reduces truck traffic and
resulting emissions.
- The beneficial economic impact the business will have on a particular area of the City, including areas of needed revitalization or redevelopment.
o By occupying almost half the buildable area of VenturePark, Menards will be a
strong anchor tenant with a substantial presence.
o A major redevelopment at VenturePark by a well-known, large, national company
will serve as the catalyst for additional industrial development within and around
VenturePark.
o Company will be investing approximately $850,000 to rebuild the rail spur.
Menards has agreed to allow other park tenants access to the rail spur.
o Likely future expansion. Company has indicated initial construction of 184,
square foot facilities, with plans for future buildings on the site to accommodate
future employment opportunities.
o In addition to on-site company employment, production operations will support
10-15 local, full-time security and trucking jobs provided by third-party
employers.
o Trucking operations will directly benefit local gas stations and provide spin off
economic benefits for truck sales and services businesses.
o The concrete plant will use sand, gravel and cement purchased from local
suppliers, estimated at $500,000 in new raw materials sales.
- Compatibility of the location of the business with land use and development plans of the City and the availability of existing infrastructure facilities and essential public services.
Project is compatible with zoning, land use, and development plans of property located
at Lawrence VenturePark. Park has all necessary infrastructure and public services in
place.
It should be noted that the policy also encourages meeting certain economic development objectives, including:
- Recruit new companies from out-of-state and internationally.
Headquartered out of Wisconsin, the manufacturing campus will be the first within
Kansas and will provide products to stores within Kansas as well as in other neighboring
states.
- Encourage the location and retention of businesses which are good “corporate citizens” that will add to the quality of life in Lawrence through their leadership and support of local civic and philanthropic organizations.^9
As per the company’s incentive application, “Menards will be a strong corporate citizen
with a 60+ year history of commitment to and continual reinvestment in the
communities it calls home. Menards participates in many community projects and is a
regular sponsor of local events and groups, particularly those related to athletics.”
Finally, Horizon 2020 specifies that business within select industries should particularly be a focus of economic development efforts, including “Light Manufacturing and Distribution”, which is applicable for the current project under consideration.
(^9) City of Lawrence Economic Development Goals, Process, and Procedures, approved March 24th, 2009, updated May 18th, 2010, Section 1-2103, page 2.
Tax Abatement % Eligibility—The applicant’s request for a 50% tax abatement appears to fall within the abatement percentage allowed under City policy.
Model Results—Model results show that the cost-benefit threshold of 1.25 can be met for all taxing jurisdictions, given the applicant’s request for assistance.
Future Actions Public Incentives Review Committee (PIRC) to review request and provide recommendation to the City and County Commissions.
County Commission to receive PIRC recommendation(s) and if appropriate, authorize a County special assessment grant of $200,000 to be paid annually in equal payments over the 10-year tax abatement period.
City Commission to receive PIRC recommendation(s) and if appropriate, authorize a City special assessment grant of $549,350 to be paid annually in equal payments over the 10-year tax abatement period; authorize ownership transfer of the bulk warehouse, located on Lot C1, to company at no cost; hold a public hearing to consider a tax abatement request, and if appropriate, vote to adopt a resolution approving a 50%, 10 year tax abatement on the requested property at Lawrence VenturePark, Lawrence, Kansas.
Addendum A: Property Boundaries
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November 17,
City Commission, City of Lawrence, Kansas Attention: Diane Stoddard, Interim City Manager 6 East 6th Street Lawrence, Kansas 66044
RE: Project PIan for Menards/lVlidwest Manufacturing (^) - Lawrence Venture Park
Dear Mayor and Members (^) of the (^) City Commrssron,
I have been authorized on behalf of Menard, Inc. ("Menards")^ to submit the following project plan with
respect to the acquisition and development of an approximately 9O-acre parcel (^) within Lawrence Venture
Park. The following is a summary of Menards' proposal, including a brief history of the company, a
description of the project^ and facilities envisioned, and a surnmary of the benefits that the project would have for the community. Menards is proposing^ to purchase^ the property^ for its appraised value and to pay
the appropriate share of assessments for the Venture Park infrastructure in full at the time of closing on
the property. In order for the project^ to proceed,^ Menards is requesting that the Commission consider a lO-year, 50Yotax (^) abatement, a $549,350 grant, (^) and transfer of ownership of the existing bulk warehouse building on the site at no cost to help ofßet a portion of the development costs of the project.
Company Overview
Menard, Inc. is a family-owned home improvement retail company founded in 1960. It is headquartered
in Eau Claire, Wisconsin and currently operates "Menards" stores in approximately 295 locations in fourteen midwestem and plains states. The (^) company has (^) over 55,000 employees nationwide. (^) It is the third largest home improvement store chain in the United States by sales volume.
In addition to typical warehousing (^) and distribution operations, Menards also owns (^) and operates
manufacturing facilities to support its retail store network under its Midwest Manufacturing division.
Midwest Manufacturing operations include wooden truss, concrete block, countertop, steel siding and
roofing and door manufacturing, among others. Midwest Manufacturing operates industrial campuses
located throughout Menards' current store range, including major facilities in Eau Claire, WI; Plano, IL;
Holiday City, OH; Shelby, IA; and Valley, NE as well as smaller campuses in Iron Ridge, WI; Saginaw,
MI; Terre Haute, IN; Shell Rock, IA, Rapid (^) City, SD and Chester, MN.
The continued success of Menards' retail stores has resulted in steady expansion throughout the
company's history on both the retail and manufacturing fronts. In the past 12 years, the company has
added over seventy-five new stores and entered f,rve new states. It has also developed eight new industrial campuses in this same time period.^ Midwest Manufacturing currently has new industrial campus under
development in North Dakota, Missouri and Iowa and is also in the process of expanding several of its
existing facilities. Because the company still has a large number of new markets to enter and develop, all
indications are that this growth^ will continue into the foreseeable future.
Menards prides itself on its commitment to the communities it calls home and has a long history of reinvesting in and expanding its retail and industrial facilities once it becomes a corporate resident.
Menards is also committed to its employees and has a "promote from within" philosophy, which is
demonstrated by the multitude of team members who have begun their careers as part-time workers in the stores or production workers at a manufacturing plant,^ and who have turned a school or entry-level job into a lifelong career.
5101 MENARD^ DRIVE^ EAU CLA|RE, Wt 54703-9625 PHONE^ (715)876-5911^ FAX (715)^ 876-
Project Description
Menards is proposing to develop the Venture Park site with three primary (^) operations: a concrete block manufacturing plant, (^) a truss plant and a distribution cross dock building. The project (^) would also include
construction of a new rail spur into the property to bring in lumber both as a raw material for its truss
manufacturing facility and for transloading (^) of lumber from rail cars to semitrailers. The site would (^) also include some ancillary functions, including a fleet repair (^) shop, a wood recycling operation, (^) a
visitors/hiring center and administrative offices. Approximately 60 acres of the subject property are
proposed to be developed with buildings, product storage areas, parking and driveways. The balance of
the property^ will be used for buffer and screening purposes, landscaping, and storm water collection, with
approximately 20 acres set aside for future expansion and development of additional (^) manufacturing andlor distribution functions (^) as the need arises.
The above-described (^) industrial campus will serve current and future Menards (^) store locations throughout Kansas and western (^) Missouri, and may ultimately provide products to future locations farther west and south as Menards' store range continues to (^) expand. The facility will also be able to package and (^) ship materials directly to construction sites throughout this same (^) area. By (^) development of campuses such as this one, Menards (^) is able to reduce the distances trucks must travel to store locations and job (^) sites as well as the total number of truck loads because of the efficiency in loading various products together, thereby decreasing costs and service times to its customers.
The proposed operations are designed to minimize the possibility of negative impacts to surrounding
properties (^) and the environment. Grass berms will be used to screen views (^) of storage yards and other operations and to minimize light and sound impacts. The truss and block plants utilize sound dampening technology to prevent sounds of the manufacturing process (^) from emanating beyond the immediate
vicinity of the buildings. There are no process water discharges from the facility, it does not handle or
utilize dangerous materials or contaminants, and it does not produce significant amounts of (^) waste or other
by-products. The manufacturing operations are designed to conserve raw materials and recycle them
wherever possible.^ Small amounts of waste wood from truss manufacturing and broken pallets will
recycled on site or back-hauled to (^) other Menards facilities where they can be turned into mulch or fuel for wood fired boilers. Defect concrete blocks are ground and reintroduced (^) into the manufacturing process.
In fact, the site will be nearly zero-waste, with the largest source of landfill bound material coming from
consumer waste of employees (^) and truck drivers (food packaging, etc.).
Menards' tentative schedule is to commence construction of the project in the summer of 2016 with the
first of the facilities starting operation in the sunìmer of 2017. The proposed project would (^) be fully
complete and operational by the end of 2017 under this timeline. This schedule would require all due
diligence, design and permitting^ to be completed over the course of this winter, with permits ready for issuance by next spring.
Menards (^) would self-hnance the project (^) and has the ability to complete the investment (^) described herein
without the use of third party financing. As mentioned above, the company operates numerous industrial
facilities throughout the Midwest and beyond and has a dedicated team of in-house site planners,
engineers and project^ managers with extensive experience in the development of this type of facility. A
Menards representative will personally attend all City meetings for review of the project, will meet with
planning and engineering staff members (^) to review project plans and answer questions, and will (^) be available to the City and the community at large to help coordinate the completion (^) of the site acquisition, permitting and necessary planning and zoning approvals. A Menards project manager will (^) also be
assigned for the construction phase of the development to oversee all construction activities and to be
responsive (^) to any needs or questions that may arise.
Thank you (^) for your time and your (^) consideration ofthis request. Ifyou have any questions (^) or need any
additional information to complete your review of the application, please do not hesitate to contact me
directly using the information provided below.
Very truly yours,
Inc.
t R. Nuttelman Real (^) Estate Representative Phone: (715) (^) 876-
Fax: (715) 876-
Mobile:(715) 577- snuttelm@menard-inc. com
Enclosures
City of Lawrence, Kansas
Application for Economic Development
Suppo lncentives
complete.
Please provide data in the cells below. Applicant is encouraged to attach additional pages as neoessary to fully explain and support the an rs to each question.^ Note anything additional you wish the City to take into consideration for your request and provide supporting documentation.
Enter contatt infot ntotion (^) for the ro nt p o ny re p^ r e s e n tutiv e c ont¡t I e ti ng this application.
Ap¡tlicctble Terns: TIF: (^) Up to )O yedß TDD: Up to 22 yeãß TA: Up to 1O yeots (lD: (^) Up to 22 yeor (^) s
lRBs: lf a¡:plying (^) for lRBs, pleose entet the omount tltot will rcvet oll consttuctiott tosts (^) f¡ir the p!-ojÈct EntÈ-r (^) "n/o" (^) t'ot ter nt.
Exornples: City (^) ¡srovided woter nnin oloncl A8( Strec't (^) f rorn lst Stree't to 2nd 5trcet, entployec- trairrinq qtont (^) for 5 vpots ol 5 500/^ new^ e^ nryloy€e,^ etc,
Name: (^) Scott R. Nuttelman T¡üe: (^) Real Fstate Renrpsentativp Organization: (^) Menard, lnc. Address (^1) 5L0L Menard Drive Address 2: (^) Eau Claire, Wl Phone: (^) (7rsl876- Email: (^) sn uttelm (^) @ mena rd-inc.com Fax: (71s) (^) 876-s
Appl ¡cant Contact lnformat¡on
Clty ount lenn (¡n years) Tax lncrement Financ¡ng Distict (TlF) Transporlation Development Distict (TDD) Ne¡ghborhood Revitalization Area (NRA) Tax Abatement (TA)^ so% L0 years lnclustrial Revenue Bonds (lRBs) Commun¡ty lmprovernent Disùict (ClD)
Other (Please Des e):
5549,350 City^ Grant,^ paid^ over^ L0^ years 5200,000 County Grant, paid^ over^ L0^ years Transfer of "Bulk Warehouse Building" (^) at no (^) additional cost.
Economrc Development Support Requested
Applicaùon for ED Su Page I
