To: Honorable Mayor and Members of Town Council
From: Marcus Notheisen, Castle Rock Economic Development Council
Title
Resolution Approving an Economic Assistance Agreement with HEI Civil and MCG Civil, and Providing Temporary Use of Town-Owned Open Space [5460 Montana Vista Way]
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 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. The policy 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.
Applicant
HEI Civil is owned and operated by Dan Hudak and has officed in Castle Rock for 46 years. Their core services include; civil general contracting, utility construction and earthmoving. HEI Civil currently employs over 500 people with 43 full-time employees located at the Castle Rock office. This past year HEI purchased two civil construction companies and is rapidly expanding through an acquisition and consolidation strategy. Over the next two years HEI plans to acquire additional civil contracting companies in the Nashville, Phoenix and Tampa Bay markets. With Castle Rock slated to headquarter the administrated side of the operation, HEI Civil will require additional office space.
Challenges to the Castle Rock Expansion
While HEI Civils first choice is to stay in Castle Rock and expand at their current location, this would require HEI Civil to construct a new building (Building#2) on the Montana Vista site. One of the challenges associated with this option is that HEI Civil only needs around 6,000SF to accommodate the current expansion and the site for building #2 is designed for a 16,000SF office product. This will require HEI Civil to lease the remaining 10,000SF until such time as they are able to occupy the balance. Additionally, the site development costs associated with the grading specific to this site make it difficult to construct a 16,000SF building with 10,000SF of unoccupied speculative office space, especially when considering that Castle Rock’s office absorption takes longer, and lease rates are lower than neighboring communities.
Grading / Parks and Rec. Trail Access
In order to mitigate the costs associated with the construction of a retaining wall, HEI Civil worked with the Town’s Parks and Rec. Department to see if they could extend a portion of their grading onto the Town’s open space (See Attached Site Plan). In return, the Town requested a permanent easement through HEI Civil’s site to access the open space (of which there is not one currently) and the ability to construct additional parking spaces tied in to HEI Civil’s current parking lot, dedicated exclusively for trail access.
Incentive Request
HEI Civil has requested the following support from the Town in order to keep their current expansion in Town.
• Permit and fee rebate not to exceed $99,999.
• A request that the Town grant HEI Civil temporary access and a license that allows grading on the Town’s open space (State parcel #2351-264-05-001) to the west of Montana Vista. This request reduces the cost of the overall project by eliminating the need to build an onsite retaining wall. The grading will be conducted in accordance with an approved erosion control plan, which includes stripping the existing topsoil, replacing topsoil after grading activities are complete, reseeding and establishing vegetation on the disturbed areas in accordance with all Town ordinances, criteria, and regulations. HEI Civil will be responsible for obtaining all necessary permits and approvals for the grading and erosion control. However, Town shall not charge any additional Town Fees if this work is performed concurrently with construction of the Project.
In return for this support the Town would receive:
• A commitment by HEI Civil to construct a 16,000SF class A office building of which they will occupy up to 6,000SF, hire 10 additional employees, and bring to market 10,000SF of leasable office space to Castle Rock.
• HEI Civil will also provide the Town a permanent easement through the site to access the open space (of which there is currently not one).
• HEI Civil will construct additional parking spaces (on the HEI Civil site) of which 6 spaces will be dedicated exclusively to trail access and provide signage indicating “Parking for Open Space Only”. As consideration for the Access and Parking Easements, Town shall pay $54,000 toward the cost of construction of the parking spaces and access drive.
Recommended Incentive
The EDC supports the use of incentives to ensure that HEI stays in Castle Rock, adds 10 employees and develops 16,000sf of class A office space. With increasing regional competition, it is important for Castle Rock to create and maintain an exceptional business climate specifically in that area of primary employment. HEI Civil’s request aligns with the Town’s Economic Development Policies to use a permit and fee reimbursement as a means to support additional office development and represents a reasonable request given the challenges outlined in the EPS report.
The Town of Castle Rock and Castle Rock Economic Development Council (EDC) executed an Economic Development Strategic Plan with the assistance of Economic Planning Systems (EPS), which summarized a vision for growing the Town’s economy and providing a set of guiding principles based on the Town’s economic strengths and weaknesses. The analysis identified three major initiatives and presented notable findings.
Major Initiatives
1. Continue to focus on attraction and growth of primary employment within the EDC’s target industries.
2. Improve the market position of office development in Castle Rock and continue to incentivize office development in the Town.
3. Increase the number of people that live and work in Castle Rock.
Notable Findings
• 80% of Castle Rock residents are employed outside of the community.
• Castle Rock has the lowest office square footage per capita of the 10 aspirational communities compared.
• Castle Rock has the lowest percentage of primary employment out of the 10 aspirational communities examined.
• Castle Rock office development includes additional risks that are unique to Castle Rock.
o Slower lease up times.
o Smaller tenant make up.
o Higher than average commercial land cost, compared to Lone Tree, Parker and Centennial.
o Higher development fees for large office and medical office than the competitive set of peers, Lone Tree, Parker and Centennial.
Attachments:
Attachment A: Resolution
Exhibit 1: Economic Assistance Agreement
Attachment B: SDP Site Development Plan
Attachment C: Building #2 (Artist Rendering)
Attachment D: HEI Civil's Request and Grading Document