To: Honorable Mayor and Members of Town Council
From: Dave Corliss, Town Manager
Frank Gray, Executive Director, Castle Rock Economic Development Council
Title
Discussion/Direction: Master Magnetics, Inc. Public Incentive Agreement
Body
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Castle Rock Business and Development Incentive Program Overview
Economic vitality is a critical factor in ensuring Castle Rock’s long-term success and in achieving its Vision of being a Self-Sufficient Community; a Community in which Residents can Live, Work, Play and Purchase the Goods and Services they need; and Create a Tax Base adequate to support provision of Core Town Services.
With increasing regional competition, it is important to Castle Rock to create and maintain an exceptional Business Climate. A key component is the creation of an Expanded Business and Development Incentive Program.
The program includes elements to support core Castle Rock Economic Development priorities including: Attraction and Expansion of Primary Employers, Attraction and Expansion of targeted retail and investments in projects of economic significance or serving as economic catalysts. The program is designed to Create Jobs, expand the tax base, encourage existing businesses to make capital investments, and spur new office, industrial, and retail expansion and development. It is critical that all incentive programs create a net positive job or economic impact on the community.
The parameters in this program are for guidance purposes and each case will be evaluated on a case-by-case basis.
Executive Summary (Master Magnetics)
Master Magnetics is exploring an opportunity to purchase 1211 Atchison Court in order to consolidate and expand their entire Colorado operations, making Castle Rock its corporate Headquarters. The proposed project is significant by all standards, it includes the purchase of 1211 Atchison Court, a 99,000 SF industrial building originally built and occupied by New World Millworks. It is the largest industrial building in Castle Rock, representing just under 10% of the entire Castle Rock industrial market. Master Magnetics intends to consolidate its entire Colorado operations to the new facility in Castle Rock; this includes relocating 66 employees presently located off Gilbert Street and 19 employees that currently operate in Elbert County. It will also require vacating and repurposing 3 buildings in Castle Rock representing 39,322 SF and 5 buildings in Elbert County representing 45,668 Sf. Through the consolidation Master Magnets anticipates they will be able to grow by 8% per year, adding an additional 10-15 employees over the next two years.
Request
In order to proceed, Master Magnetics is requesting support from the Town of Castle Rock’s Business and Development Incentive Program. Specifically, they are requesting an incentive of $3,000 per employee for all employees retained (Gilbert Location), relocated (Elbert County) and hired as part of the consolidation (estimated at 10 to 15).
Master Magnetics History
Master Magnetics was founded in 1976 in Castle Rock and is owned and operated by Jack Nellessen and his daughter Jennifer Brown both of whom are Castle Rock residents. The company is headquartered at 747 S. Gilbert St, Castle Rock, CO 80104 and employs 66 full-time employees. Operations at this location include the corporate management team, manufacturing and distribution. In 2006, Master Magnetics purchased ground in Elbert County and moved a portion of their Colorado distribution out of Castle Rock. The Elbert County facility includes 5 buildings and employs 19 fulltime workers. Master Magnetics also has a distribution presence in Ohio and Florida.
Incentive History
In 2013, Master Magnets entered into an Economic Assistance Agreement with the Town to support an expansion of their business that included a new product line, the construction of a 5,000 SF addition and the hiring of an additional 10 employees. Terms of the agreement included:
1. Permit and Fee rebate up to 50% not to exceed $12,150
2. Primary Job Incentive not to exceed $25,000
Unfortunately, after the agreement was signed, Master Magnetics discovered that the proposed building expansion was determined to be in a FEMA floodplain. Upon hearing the news, the Town led by Bill Detweiler connected Master Magnetic to the appropriate representatives with FEMA where they were told that the flood plain was in the process of being reassessed and the proposed site would no longer be included in the newly designated floodplain.
Three years later, Master Magnetics received a clear to proceed and amended their contract with the Town to reflect significant changes to the project cost and timing that occurred over time as a result of the flood plain discovery.
Terms of the Amendment
Permit and Fees
• The Town Agreed to rebate 100% of the Town Permit, Fees and Use Tax not to exceed $30,000
Job Creation
• Maintain the “Effective Date” of the original Primary Jobs Incentive in order to capture eligible job creation that occurred between 2/20/2013 and the date of this amendment
• Extend an additional two years of job creation to run through 2018
• Raise the job creation cap to $50,000
In November 2016, Master Magnetics received a C of O on the 5,000 SF expansion and the Town reimbursed Master Magnetics $30,000 for their permit and fee payment. Since the inception of the 2013 agreement Master Magnetics has hired an additional 16 employees. To date, they have not made a request for job creation incentives and are requesting that we terminate the original agreement and its subsequent amendment in order to draft a final agreement that would support their current interest in 1211 Atchison.
1211 Atchison
1211 Atchison is a 99,000 SF industrial building that backs to Auburn Drive. It is Castle Rocks largest industrial building representing just under 10% of the total market. It’s important to mention the size and its interface with the Castle Highlands community because there is a need to be mindful of the impact some industrial uses may have on the residents in terms of traffic and hours of operation. With that said, Master Magnetics would represent one of the highest and best uses for this facility.
Recommended Incentive
The EDC supports the use of incentives to insure Master Magnetics is able to continue to grow in Castle Rock. Primary employers represent the most economically impactful jobs that a community can attract. Master Magnetics represents a qualified local manufacturer that has demonstrated the intent and capacity to grow. They also intend to purchase a strategic property in Castle Rock that represents just under 10% of our industrial market. Their willingness to agree to create jobs, consolidate their Colorado operations and invest in the purchase of 1211 Atchison Court demonstrates their commitment to Castle Rock. It is for these reasons that we strongly recommend an incentive based on the following terms.
Propose terms
Job Creation
• Base incentive of $3,000 per job (retained, relocated and created)
• Paid out over two years as defined in the Town’s Business and Development Incentive Program policies
• Total job creation incentives not to exceed $300,000
Total Incentive not to exceed $300,000
Attachments
Attachment A: Castle Rock Business and Development Incentive Program 2014