Having successfully established a Community Rehabilitation District last month in their bid to help speed the process for Whirlpool Corporation’s proposed $35-million expansion and renovation of their St. Joseph Technology Center in the Edgewater neighborhood, the stage is set for another major step in that deal tonight.
St. Joseph City Commissioners will be asked to support the actual Community Rehabilitation Exemption for up to 10 years tonight. Cornerstone Alliance President Rob Cleveland has been playing a major role in helping shepherd the project through the regulatory hoops and he tells me that it’s important to note that tonight is not the final step. He says, “It is the biggest step, but not the last.” He adds, “We are seeking support from the MEDC to bridge the gap for this project.” That bridge is needed inasmuch as Whirlpool facilities all over the world compete internally for capital outlays.
Cleveland says, “Our goal throughout this process was to put the SJ Tech Center in the most competitive position possible when decisions are made regarding where Whirlpool dollars will be spent. We are hopeful the MEDC will support this project, as well. The City of St. Joseph could take a huge step tonight by approving the CRE. The MEDC wants to see local support. Once we have the local support, we’re hopeful the MEDC will provide the support we need for a final decision.”
The entire process is a complicated one, and that’s why its helpful to have a professional like Cleveland and his team at Cornerstone to work with the various entities who need to put their stamp of approval on the project along the way.
Essentially, the Commercial Rehabilitation Exemption freezes the taxable value of the property, which is currently approximately $3.1M. Therefore, the exemption will NOT reduce the existing taxable value. So, this really is coming at a good time for the city. Around the time the CRE goes into effect (likely 2020), the Renaissance Zone will be expiring and the City of St. Joseph will begin collecting new revenue on the $3.1M of existing taxable value in that zone.
Cleveland says that when the Renaissance Zone is fully expired, the city could expect around $52,000 of new income ( or $3.1M of taxable value times 16.8 City mills) annually. When that happens, the total new annual tax revenue will be approximately $100,000 ($3.1M of taxable value times 31.8 total mills) to the City, County, local schools, RESA, and LMC.
Because the Rennaisance Zone is expiring at the same time that the Commercial Rehabilitation Exemption could go into effect, the City of St. Joe, the County, and other taxing entities, will be receiving new income.
Cleveland says, “As for the fiscal impact of the exemption, if the City approves it tonight, is far more difficult to predict, and is a more appropriate question for the City Assessor.” He adds, however, “Here is my take: Whirlpool has announced that they could invest up to $35M in renovations and new construction. That is a huge sum of money, but is not a direct correlation to taxable value. A significant portion of the investment will be furniture and fixtures. Then, it will come down to the assessed value of the new construction and renovations.”
Here is a scenario that Cleveland sees as being possible….”Just based on past experience,”:
Actual Cost of New Construction/Renovations (bricks and mortar): $18,000,000
- Sale Value of Property (my experience, this runs between 50% and 60% of real costs. Let’s say it’s 60%): $10,800,000
- Assessed Value (constitutionally set at 50%): $5,400,000
- Annual Impact of $5.4M to City (16.8 mills): $90,000
- Annual Impact of $5.4M total (31.8 mills): $171,000
Cleveland adds, “Bottom line, once the Ren Zone fully expires (12/31/2023), the city will be receiving over $50,000 in new revenue and the County will be receiving approximately $100,000 of new revenue, even with the CRE in place.”
“Finally,” says, Cornerstone’s Cleveland, “and most importantly, the schools. Based on the above scenario of $5.4M of new taxable value….When you consider the 24 school mills, Whirlpool will still be paying $129,000 in taxes for the schools.”
It’s also important to note, according to the economic development professional, “All of that will fluctuate based on the assessed value of the new construction.” He adds, “I will speculate that Whirlpool does not have the detailed engineering plans necessary for the City Assessor to give a close estimate of the assessed value at this time. I will also speculate that Whirlpool won’t have those plans drawn up until they know the City and State are on board, and the internal Whirlpool team approves funding.”
Stay tuned. The city is poised to take it up tonight, but as Cornerstone’s President reminds us…that’s just one more step, albeit a major one, in the process to move the project forward.
+++UPDATE+++
City Commissioners approved the exemption and the issue will be taken up next by the Michigan Economic Development Corporation for consideration.
