DATE: November 10, 2015
TO: Board of Mayor and Aldermen
FROM: Eric Stuckey, City Administrator
Russ Truell, Assistant City Administrator/CFO
Vernon Gerth, Assistant City Administrator - Community/Economic Development
SUBJECT: .title
*Consideration of Resolution No. 2015-90 Entitled, “A Resolution To Approve A PILOT (Payment In Lieu Of Taxes) Program For The LEEKO III, LLC (Lee Company), As Requested By The Industrial Development Board (IDB) Of Williamson County, Tennessee (11/10/15 WS)
Purpose
The purpose of this memorandum is to provide information to the Franklin Board of Mayor and Aldermen (BOMA) concerning entering into a PILOT Program for the LEEKO III, LLC, related to investment and expansion of their business within the City of Franklin.
Background
Lee Company (LEEKO III, LLC) is looking to build a new corporate headquarters and expanded operations center in Franklin. Founded in 1944, Lee Company is the largest mechanical contractor in Tennessee. It has operations in various middle Tennessee locations along with facilities in Kentucky and Alabama. Lee Company provides a wide array of services to residential, commercial, and healthcare facilities. Due it strong performance, Lee Company has outgrown their current Franklin headquarters located on Mallory Station Road. In looking at their needs for expansion, Lee Company engaged the services of a site consultant and has examined a number of potential sites within the Franklin area and beyond. Lee Company has identified property in the Berry Farms development as a preferred site for their new headquarters and operations center. At this point, Lee Company is proposing an investment of approximately $20 million and the addition of 68 new full-time jobs.
In the site selection process, Lee Company approached the State of Tennessee, Williamson County, and the City of Franklin about possible development incentives. In response, the City and County jointly proposed local incentives that could be taken to the respective elected bodies (County Commission and BOMA) for consideration. The County has offered and will consider a property tax abatement of approximately 42% of the annual taxes for five years. This abatement level would “hold harmless” the amount of property tax currently dedicated to the funding of public education (WCS). [Note: this property is outside the Franklin Special School District.] Over five years, the proposed County property tax abatement would be “capped” at a total abatement of approximately $430,000. The City would match (with proper Board approval) the abatement level (42%) which equates to a five-year property tax abatement of up to $80,248. In the case of both the County and City, job creation and capital investment targets must be met in order to receive the property tax abatement.
The County and City have provided similar abatements for a defined period of time, a cap on total abatement provided, and with the portion of property tax for schools excluded from the abatement. Development assistance of this nature was provided to projects such as the Community Health System (CHS) corporate headquarters, Healthways corporate headquarters, Verizon regional operations center, and recently the Lampo Group. The County also provided a property tax abatement for the Jackson National Life corporate office development. The City did not provide a property tax abatement for the Jackson National Life development due to its location within the existing McEwen area economic development district (tax increment financing district). Instead, the City provided the match to a State of Tennessee infrastructure grant which resulted in an upgraded, dual electrical feed to the area.
Financial Impact
The property tax abatement provided through this agreement would be approximately 42% of property taxes paid on the subject property for five years. The total abatement is capped at $80,248 to be provided annually over a period of not more than five years. The property tax abatement is subject to meeting targets for job creation (68 new jobs) and capital investment (a minimum of $20 million).
If both Phase I and Phase II are fully developed, the City abatement of property taxes would be a maximum of $80,248 and the projected amount of property tax collected would be $310,564 over 10 years. The abatement formula would apply only to land and buildings; no fixtures, equipment or other personal property is included in the proposal.
Recommendation
Approval of the proposed resolution and PILOT program for the LEEKO III, LLC (Lee Company) is recommended.