City Council

SPECIAL MEETING OF THE CITY COUNCIL, AUGUST 29, 2011 Meeting was called to order at 6:15 P.M. Attendance was taken by a roll call vote; all members were present. Councillor Marchand arrived late. A recess was called at 6:17 P.M. to continue an informational meeting with the Mayor and representatives from Bevovations LLC and to hold a Committee on School informational meeting. Meeting reconvened at 8:20 P.M. Upon recommendation of the SMALL BUSINESS AND ECONOMIC DEVELOPMENT COMMITTEE the following COMMUNICATIONS were GRANTED. Vt. 9/0 C-4 Dean J. Mazzarella, Mayor: Approve 320 Industrial Road as an Economic Opportunity Area (EOA) as shown on Assessor’s Map 255, Block 32 pursuant to M.G.L. c23A, Section 3R, and submit said application for approval to the Massachusetts Economic Assistance Coordinating Council (EACC). C-5 Dean J. Mazzarella, Mayor: Approve the proposed application by Bevovations LLC for acceptance as a certified project pursuant to M.G. L. c23A, Section 3F and authorize the submission of same for approval to the Massachusetts Economic Assistance Coordinating Council (EACC). Upon recommendation of the SMALL BUSINESS AND ECONOMIC DEVELOPMENT COMMITTEE the following COMMUNICATION was GRANTED. Vt. 8/1; Councillor Dombrowski opposed. C-6 Dean J. Mazzarella, Mayor: Approve a 10-year Tax Increment Financing Plan and Agreement, pursuant to M.G.L. c23A, Section 3A-F inclusive between 320 Industrial LLC, Bevovations LLC, d/b/a New England Apple Products Company and the City of Leominster for property located at 320 Industrial Road, Leominster, MA and authorize the submission of same for approval to the Massachusetts Economic Assistance Coordinating Council (EACC). A letter of recommendation from the Planning Director was read and is on file in the City Clerk’s Office. The following letter from Kopelman and Paige dated August 25, 2011 was read into the record. RE: Communication C-6- Proposed TIF Agreement for 320 Industrial Road Dear Ms. Bouchard: I am responding to the Small Business and Economic Development Committee’s request for an opinion on the above Communication. In the Communication, the Mayor seeks the Council’s approval of a tax increment financing (TIF) agreement with Bevovations LLC (“Bevovations”) to develop a small business at 320 Industrial Road. After submitting the Communication, the Mayor submitted an amendment. The change was due to information from the business owner, Steve Rowse, to the effect that instead of Bevovations LLC owning both the real property and the business, the real property would be held in the name of 320 Industrial LLC. The business itself would be incorporated as Bevovations LLC, d/b/a New England Apple Products. Mr. Rowse is the sole member and manager of each corporate entity. The Committee has asked why the company would be structured as two entities and whether there are any implications for the City with regard to the TIF agreement. In my opinion, having the two entities on the property and as parties to the TIF agreement will not have any effect on the City’s position or rights under the agreement. It is my understanding that Mr. Rowse’s decision to have 320 Industrial LLC own the property separate from the business was based on various legal and financial considerations recommended by his business advisors. I have no specific knowledge of the benefits the LLC’s may realize from this arrangement, but this is not an unusual circumstance, in my opinion. Many businesses have multiple corporate entities involved in its operation. There are likely tax considerations involved-not real or personal property taxes owed to the City under the TIF, but federal or state income tax, capital gains and the like. Many businesses also divide up their real and personal property (equipment, vehicles, etc.) in order to reduce assets for liability purposes. Such arrangements are both commonplace and legal, in my opinion, and this should not pose an impediment to reaching agreement on the TIF. The benefit to the City, of course, is the development of local industry, regardless of what specific corporate format is involved. The TIF agreement must also be approved by the Commonwealth’s Economic Assistance Coordinating Council. The TIF provides that if Bevovations and/or 320 Industrial fails to comply with the terms of the TIF agreement, the City Council may act to decertify the project with the Commonwealth and discontinue the TIF agreement. Examples of noncompliance could include a failure to create the designated number of jobs or to hire local employees, failure to make the promised monetary investments, or failure to file annual reports. In my opinion, the City would lose no rights or benefits under this TIF agreement as a result of the change to the agreement to add 320 Industrial LLC as a party. If you have further question, please feel free to contact me. Very truly yours, Brian W. Riley  2 SPECIAL MEETING OF THE CITY COUNCIL, AUGUST 29, 2011, continued Upon recommendation of the SMALL BUSINESS AND ECONOMIC DEVELOPMENT COMMITTEE, the following RESOLUTION was ADOPTED. Vt. 9 “yeas” RESOLUTION DESIGNATION OF 320 INDUSTRIAL ROAD ECONOMIC OPPORTUNITY AREA WHEREAS, Chapter 23A, Sections 3A through F as amended by Chapter 19 of the Acts of 1993, establishes the Economic Development Incentive Program (EDIP); WHEREAS, the EDIP is designed to promote increased business development and expansion in Economic Target Areas (ETAs) and Economic Opportunity Areas (EOAs) of the Commonwealth of Massachusetts. WHEREAS, the City of Leominster is part of the North Worcester County Economic Target Area (ETA); WHEREAS, the City Council of the City of Leominster strongly supports increased economic development to provide additional jobs for City residents, and industrial activity within the City to promote and develop a healthy economy and stronger tax base; NOW, THEREFORE, BE IT RESOLVED by the City council of the City of Leominster that: 1. The City Council hereby authorizes the submission of the City of Leominster Economic Opportunity Area application to the Massachusetts Economic Assistance Coordinating Council; 2. The City authorizes the designation of the following as an Economic Opportunity Area; 320 Industrial Road EOA as defined by the City of Leominster’s Assessor’s Map 255, Lot 32. The parcel of land located at 320 Industrial Road, Leominster, Massachusetts, containing approximately 3.46 acres. 3. The City Council hereby agrees to offer either tax increment financing or special tax assessment to a Certified Project located within the Economic Opportunity Area of 320 Industrial Road. ADOPTED BY THE LEOMINSTER CITY COUNCIL COMMUNICATION 4 Dated: August 29, 2011 /s/LYNN BOUCHARD, CITY CLERK APPROVED: /s/DEAN J. MAZZARELLA, MAYOR CITY OF LEOMINSTER _______________________________ Upon recommendation of the SMALL BUSINESS AND ECONOMIC DEVELOPMENT COMMITTEE, the following RESOLUTION was ADOPTED. Vt. 8 “yeas” and 1 “nay”, Councillor Dombrowski opposed. RESOLUTION DESIGNATION OF 320 INDUSTRIAL ROAD – BEVOVATIONS LLC (d/b/a New England Apple Products Company) TAX INCREMENT FINANCING WHEREAS, the proposed Certified Project is located 320 Industrial Road, Leominster MA which is within the boundaries of the 320 Industrial Road Economic Opportunity Area. WHEREAS, the City of Leominster has agreed to offer Bevovations LLC (d/b/a New England Apple Products Company) and its Affiliates, a Tax Increment Financing Agreement. Said Agreement is hereby approved by the City Council and the Tax Incrementing Financing Plan is incorporated by reference herein; WHEREAS, Bevovations LLC (d/b/a New England Apple Products Company) will invest $2,775,000 dollars over the initial twenty-four (24) month period (by completion of year 2), retain for transfer to the City of Leominster six (6) permanent full-time jobs, create an additional six (6) new permanent full-time jobs within the initial twenty-four (24) months (also known as by completion of year 2), for the City of Leominster and of the North Worcester County Economic Target Area (ETA). WHEREAS, the City Council of the City of Leominster strongly supports increased economic development to provide additional jobs for City residents, and industrial activity within the City to promote and develop a healthy economy and stronger tax base; NOW, THEREFORE, BE IT RESOLVED that the City Council of Leominster approves the Certified Project application for Bevovations LLC (d/b/a New England Apple Products Company) and forwards said application for certification to the Massachusetts Economic Assistance Coordinating Council for its approval and endorsement.  3 SPECIAL MEETING OF THE CITY COUNCIL, AUGUST 29, 2011, continued FURTHER, the City Council of the City of Leominster authorizes the Mayor to enter into a Tax Increment Financing Agreement between the City of Leominster and Bevovations LLC (d/b/a New England Apple Products Company). Said Agreement calls for an exemption from taxation specifically on the full assessed value of the property as a result of the redevelopment and investment as follows in the table shown below. Based upon current year (FY11) tax rate with an estimated project investment of $2,775,000 the estimated special tax assessment savings to Bevovations LLC (d/b/a New England Apple Products Company) in grand total over ten (10) is $42,000 excluding the varying tax rate and valuation of future years. REAL ESTATE – CAPITAL INVESTMENT ONLY The Agreement calls for an exemption from taxation specifically on the increased value of real estate property as a result of the redevelopment as follows in the table shown below. Based upon current year (FY13) tax rate, with an expected fluctuation in the annual tax rate, the estimated additional investment in the real estate property estimated of $525,000, the savings is $4,200 per year given the varying tax rate each year for a ten year (10) duration. YEAR DURATION Tax Exemption Formula Year 1 / FY13 July 1, 2012-June 30, 2013 100% of the increment Year 2 / FY14 July 1, 2013-June 30, 2014 100% of the increment Year 3 / FY15 July 1, 2014-June 30, 2015 100% of the increment REAL ESTATE – CAPITAL INVESTMENT ONLY YEAR DURATION Tax Exemption Formula Year 4 / FY16 July 1, 2015-June 30, 2016 100% of the increment Year 5 / FY17 July 1, 2016-June 30, 2017 100% of the increment Year 6 / FY18 July 1, 2017-June 30, 2018 50% of the increment Year 7 / FY19 July 1, 2018-June 30, 2019 50% of the increment Year 8 / FY20 July 1, 2019-June 30, 2020 50% of the increment Year 9 / FY21 July 1, 2020-June 30, 2021 50% of the increment Year 10 / FY22 July 1, 2021-June 30, 2022 50% of the increment PERSONAL PROPERTY ONLY The Agreement calls for an exemption from taxation specifically on the personal property value as follows in the table shown below. Based upon current year (FY11) tax rate, with an expected fluctuation in the annual tax rate, the estimated valuation of personal property totaling $1,350,000 multiplied by the current rates, the savings are: Years 1 thru 5 on average tax savings of $ 19,763.33 Years 6 thru 10 on average tax savings of $10,401.75 YEAR DURATION Tax Exemption Formula Year 1 / FY13 July 1, 2012-June 30, 2013 95% of the increment Year 2 / FY14 July 1, 2013-June 30, 2014 95% of the increment Year 3 / FY15 July 1, 2014-June 30, 2015 95% of the increment Year 4 / FY16 July 1, 2015-June 30, 2016 95% of the increment Year 5 / FY17 July 1, 2016-June 30, 2017 95% of the increment Year 6 / FY18 July 1, 2017-June 30, 2018 50% of the increment Year 7 / FY19 July 1, 2018-June 30, 2019 50% of the increment Year 8 / FY20 July 1, 2019-June 30, 2020 50% of the increment Year 9 / FY21 July 1, 2020-June 30, 2021 50% of the increment Year 10 / FY22 July 1, 2021-June 30, 2022 50% of the increment In accordance with the requirements and regulations established which govern the implementation of such Tax Increment Financing Agreements. The agreement will be in effect as of Fiscal Year 2013 (July 1, 2012) and will extend through Fiscal Year 2022 (June 30, 2022). ADOPTED BY THE LEOMINSTER CITY COUNCIL COMMUNICATION 6 Dated: August 29, 2011 /s/LYNN BOUCHARD, CITY CLERK APPROVED: /s/DEAN J. MAZZARELLA, MAYOR CITY OF LEOMINSTER Upon recommendation of the WAYS & MEANS COMMITTEE, the following APPOINTMENT was CONFIRMED. Vt. 9 “yeas” Conservation Commission-Daniel Brodeur-term to expire April 15, 2014 MEETING ADJOURNED AT 9:00 P.M. _____________________________ Lynn A. Bouchard, City Clerk and Clerk of the City Council