Economic Development News
Chamber's Investment in Spec Building Pays Off Published: Friday, August 18, 2017 By: Randy Allen
THE PERFECT STORM
Most of us have seen the movie of the same title from the year 2000. Based on a true story, many factors came together in the Atlantic Ocean to create an event of great magnitude which endangered a fishing boat and crew.
The “Perfect Storm” expression is used, often in a positive way, to describe an actual phenomenon that happens to occur in a confluence of smaller events, resulting in an event of unusual magnitude.
Our recent perfect storm, the announcement of Axium Plastics purchasing the spec building & locating to Jefferson City, was created from a combination of events and activities that will result in a growing company, headquartered in Ohio, expanding its operation in Jefferson City and creating a minimum of 70 new jobs with an expected payroll of $2,220,000 each year with excellent benefits.
The Chamber will put to use the Spec Building it built in 2007 and marketed with the exact purpose of attracting a new company and providing a home to an owner such as Axium Plastics. As an incentive tool, a spec building is typically priced to entice a developer to locate and bring additional investments in building finishes and machinery and jobs. In addition to the purchase of the building, Axium Plastics will invest $25,000,000 in site improvements, building construction, and manufacturing equipment to make their company fully operational. (For information regarding the history of the spec building, see related story.)
Tax abatements are also offered to companies who are investing in a community as an incentive. In our area, the tax abatement model which is proposed to a company is approved by a joint advisory committee including representatives from the City, County, JC School District and Chamber of Commerce. Due to the structure of the tax abatements; 75% for 15 years for the Real Property (building, land and improvements), 75% for 7 years for the Manufacturing Equipment, (Personal Property), over the next 10 years, the City and County together will receive $40,076 and JC School District $154,710 in estimated net additional property taxes from Axium.
It is expected that the new 70 jobs will produce an additional $2,220,000 in payroll wages every year, which will in turn create new sales and property tax revenue of $554,379 for the City and County and $455,237 of new property tax for County schools over the next 10 years. The Return on Investment (ROI) model used to develop these revenue estimates is based on the correlation of growth of sales and property taxes to total wage increases in Cole County.
The City will also benefit from an estimated $700,000 received over 10 years from new Gross Receipts Utility Tax (GRUT) when the Company is fully operational. The GRUT is a tax levied on the gross receipts of persons, firms or corporations engaged in the business of selling and distributing natural gas, manufactured gas, steam, electricity, gas, telephone services, or telecommunication services for commercial, business, manufacturing, industrial, or for any other purposes within the city.
This tax is typically passed on to all users of these utilities. The GRUT tax is calculated at a rate of 6% of the monthly utility bill payed by the user, Axium Plastics. This tax has been in place in Jefferson City since 1968.
In total, this “Perfect Storm” will provide additional net new City, County and School tax revenue of $1,900,000 during the next 10 years. If the incentives were not offered and the company decided to locate elsewhere, no jobs would be added and this additional revenue would not be realized and our Spec Building would still be vacant.
This is an example of a “Perfect Storm” your economic development partners (Jefferson City, Cole County and the Chamber) should and did invest in for the economic benefit of our community.