5.1 Ad Valorem Exemption - REMA CITY OF SALINA
~EST FOR COMMISSION ACTION DATE TIME
12/21/92 4:00 P.M.
AGENDA SECTION: Public Hearings and Items ORIGINATING DE~R~ENT: APP~VED FOR
~. 5 Scheduled Ar a Certain Time COMMUNITY DEVELOPMENT AGE,A:
Planning Division
ITEM Roy Dudark
gl
BY: BY:
Item
Consideration of application for property tax exemption submitted
by REMA Bakeware, Inc.
Background
On December 1, 1992, REMA Bakeware, Inc. filed an application for
property tax exemption pursuant to the' city's ad valorem tax
exemption policy for economic development purposes. The company
is requesting tax exemption for a new $900,000 manufacturing
facility and $900,000 of machinery and equipment. The expansion
is expected to create 30 new jobs. The business and property is
eligible for exemption under state law and the city's policy.
Prior to granting a tax exemption, the governing body is required
by state law to analyze the costs and benefits of the exemption,
establish a procedure to monitor compliance with terms and
conditions and conduct a public hearing on the granting of the
exemption.
Assuming $1,800,000 of capital investment and 30 new jobs, a tax
exemption of $100% during years 1 - 5 and 50% during-years 6 - 10
results under the city's adopted policy formula. The exact
exemption will depend upon actual capital expenditures and jobs
added prior to project completion. Based on these figures, the
amount of property taxes exempted over 10 years is estimated to
be $250,376 or 80.8% of taxes otherwise due. The project would
generate an estimated $59,422 in property taxes and $198,400 in
sales taxes for a total of $257,822 over 10 years. After 10
years, the entire project would become fully taxable.
A more detailed analysis of the costs and benefits of the
requested exemption is contained in the attached staff report and
application and supporting materials.
C~MISSION ACTION
MOTION BY SECOND BY
TO:
CITY OF SALINA
REQUEST FOR COMMISSION ACTION DATE TIME
12/21/92 4:00P.M.
AGENDA SECTION: ORIGINATING DEPARTMENT: APPROVED FOR
NO. COMMUNITY DEVELOPMENT AGENDA:
Planning Division
ITEM Roy Dudark
NO.
BY: BY:
Page 2
Recommendation
Following closure of the public hearing, approve the attached
resolution granting a property tax exemption to REMA Bakeware,
Inc.
Encl: Resolution #92- 4535 cc: Glen Trotter
Staff Report
Application and Supporting Materials
COMMISSION ACTION
MOTION BY SECOND BY
TO:
STAFF REPORT
REMA Bakeware Tax Exemption Request December 21r 1992
Introduction
REMA Bakeware, Inc. filed an application for property tax exemption
on December 1, 1992. On December 7, 1992, the City Commission
referred the application to city staff for a report and set
November 21, 1992 as the date for public hearing to consider the
request. The following report outlines the nature of the request,
amount of exemption requested, financial costs and benefits of the
project, and recommended terms and conditions of granting the
exemption.
Nature of Request
REMA Bakeware, a division of Anchor Hocking Corporation, is
requesting tax exemption for the construction of a building
addition and acquisition of machinery and equipment associated with
the expansion of their existing business. REMA Bakeware
manufactures aluminum cookware and bakeware. The company was
founded in 1983. In 1988, Anchor Hocking Corporation purchased the
assets of REMA Bakeware from local owners. Annual sales have grown
from $12 million in 1988 to $42 million in 1991. The company
currently employs 129 people and has averaged 131 during the last
12 months.
The proposed building addition consists of a 25,000 sq. ft.
manufacturing facility to be located on land owned adjacent to
their existing operations at 625 E. North Street. The proposed
building site is lot 2, Block 13, Northeast Industrial Park and is
within the special redevelopment area of the city (north Salina).
The estimated capital cost of the project is $900,000 for the
building and improvements and $900,000 for machinery and equipment.
REMA Bakeware is qualified for the exemption as a business engaged
in manufacturing articles of commerce. The building improvements
are eligible as they will be newly constructed and an addition to
the tax base. The machinery and equipment is eligible as it
represents newly acquired tangible personal property.
The company is requesting an exemption of $241,695 which was an
estimate based on assessed value ratios in effect prior to a
constitutional amendment passed by voters on November 3, 1992. The
company states that the exemption could be a deciding factor in
determining whether the expansion costs are justified in Salina.
Staff Report
REMA Bakeware Tax Exemption
Page 2
Project Costs
The city's tax exemption policy is structured to produce a level of
exemption in direct relationship to the number of new jobs created
and the amount of capital investment in new plant and/or
equipment. REMA Bakeware is proposing to create 30 new jobs and
invest $1,800,000. This results in the following calculations:
Base Exemption
$300,000 of investment and 1 job 25%
Incentive Exemption
$700,000 added investment @ 24%
0.3% per $15,000 and
$800,000 @ 0.2% per $15,000
29 additional jobs @ 2% 58%
107%
Location Premium (North Salina)
50% of base and incentive 53%
Total Per Adopted Formula 160%
Total Exemption Allowed 100%
While the tax exemption formula calculates to 160%, the tax
exemption may not exceed 100% during years 1 - 5 and 50% during
years 6 - 10. It should be noted that the city's tax exemption
policy is keyed to actual performance or results. An assessment
will be made at the time of project completion review and the
exemption will be fixed for the term of the exemption. A review
will be conducted in January of 1994. If construction is completed
but the hiring process is not, the company may elect to take a
partial exemption for year one. At any rate, the project will be
considered complete no later than 18 months from initial approval
and the exemption will be fixed no later than January, 1995.
As shown on the attached spreadsheet, the total tax exemption over
10 years is estimated to be $250,376 or 80.8% of the taxes
otherwise anticipated. Due to the descending scale, the bulk of
the taxes exempted ($190,955) will occur during years 1 - 5. The
exemption figures result from the following property valuation
calculations:
Building Replacement Cost $900,000
Depreciation Factor (.95) $855,000
Assessed Value (25%) $213,750
Equipment Replacement Cost $900,000
Depreciation Factor (Straight
Line over 7 yrs. or .143/yr.)
Assessed Value Year 1 (25%) $225,000
Staff Report
REMA Bakeware Tax Exemption
Page 3
The tax exemption request will affect five taxing districts in
proportion to their respective mill levy. The largest impact will
be to the State Education Fund, which with a 1992 mill levy of
32.000 or 31.4% of the total levy, would not receive revenues
totaling $78,507 over the 10 year period. The City of Salina would
have the second largest impact of $73,447. Such "lost" revenues is
predicated on the assumption that the project would occur without
the tax exemption. Upon completion of the project, the percentage
of exemption will be fixed by ordinance in accordance with actual
capital cost and number of new jobs created. The actual dollar
amount of the exemption will depend upon final assessed values and
future mill levies.
REMA Bakeware will also receive the following additional economic
incentives:
State Job Tax Credits ($1,500/employee) $ 45,000
State Investment Tax Credits ($1,000/$100,000) 18,000
State Sales Tax Exemption ($1,260,000 x 6.9%) 86,940
City Waiver of Building Permit Fees 2~433
Total $152,373
While not quantifiable with available information, the project will
require an increase in local governmental expenditures to provide
public services to the manufacturing facility as well as the new
households and school age children resulting from the added
employment and population growth.
Project Benefits
The proposed manufacturing facility will produce both economic and
fiscal benefits to the community. Economic benefits are both
temporary and permanent. Temporary benefits involve the purchase
of materials and employment of workers to construct the building as
well as the purchase of machinery and equipment. These benefits
are reflected in the $1,800,000 cost of the project. Permanent
benefits include direct expenditures for wages as well as induced
activity in the form of retail sales. REMA Bakeware intends to
hire 30 employees to fill the position of production worker. Each
position will receive $7.00/hr. for an annual wage of about
$14,500. Economic benefits flow from this direct annual increase
in payroll as follows:
Direct New Jobs Created 30
Direct Payroll Increase $435,000
Secondary Spin-off Jobs (.64 of direct) 19
Secondary Payroll Increase ($15,000 avg.) $285,000
Effective Buying Income (.65 of payroll) $468,000
Retail Sales Increase (.43 of payroll) $310,000
Staff Report
REMA Bakeware Tax Exemption
Page 4
The manufacturing facility and related economic activity will also
generate fiscal benefits through taxation of property and retail
sales. Estimated tax revenue resulting from the project over the
10 year period is shown below.
Property Taxes Sales Tax
City $17,409 $ 37,200
County 12,657 9,300
U.S.D. 305 25,551 -0-
Library 2,911 -0-
State 893 151,900
Total $59,422 $198,400
Additional financial benefits resulting from the project include
property taxes collected on new dwelling units to house employee
families and state aid received for new students in the school
system. These revenues will help offset the increased public
service costs.
Terms and Conditions
In granting a tax exemption, the City Commission may impose any
terms or conditions as deemed necessary to fulfill the purpose and
intent of the tax exemption policy. Recommended terms and
conditions are included in the resolution and encompass such items
as exempt property, base employment, term of exemption, payment of
taxes not exempted, and revocation of exemption.
Conclusion
REMA Bakeware appears to meet the criteria for tax exemption based
on the class of business, demonstration of economic benefit and
type of property involved. An analysis of the estimated costs and
benefits of the project has been provided. Notification of the
public hearing to consider the tax exemption has been published and
mailed to the primary taxing jurisdictions affected by the
request. The Board of City Commissioners may, at its discretion,
approve a tax exemption for economic development purposes when
deemed to promote the best interests of the City of Salina.
Attachment: Tax Exemption Calculations
ATTACHMENT
REMA Bakeware Tax Exemption Request 12/21/92
Total Taxes Percent Amount ................ Amount Exempted ..................
Year Anticipated Exemption Exempted City County USD 305 Library State Ed. State Misc.
1 $ 44,755 100% $44,755 $13,113 $ 9,533 $ 5,211 $ 2,193 $14,034 $ 671
2 $ 41,473 100% 41,473 12,152 8,834 4,829 2,032 $13,004 622
3 38,191 100% 38,191 11,190 8,135 4,447 1,871 11,975 573
4 34,909 100% 34,909 10,228 7,435 4,065 1,710 10,946 524
5 31,627 100% 31 627 9,355 6,736 3,683 1,550 9,917 474
6 28,345 50% 14 172 4,152 3,019 1,650 694 4,444 213
7 25,086 50% 12,543 3,675 2,672 1,460 615 3,933 188
8 21,804 50% 10,902 3,194 2,322 1,269 534 3,419 164
9 21 804 50% 10,902 3,194 2,322 1,269 534 3,419 164
10 21,804 50% 10~ 902 3 ~ 194 2,322 1,269 534 3,419 164
Totals $309,798 $250,376 $73,447 $53,330 $29,155 $12,267 $78,507 $3,757
Mill Levy 29. 849 21. 718 11. 882 5. 057 32. 000 1. 500
Share of Total Levy 29.3% 21.3% 11.6% 4.9% 31.4% 1.5%
Valuation Data Tax Exemption Data
Cost of Buildings & Improvements $900,000 Base Exemption 25%
Estimated Appraised Value (.95) 855,000 Added Jobs Above Base 58
Assessed Value (25%) 213,750 Added Investment Above Base 24
Cost of Equipment (Dept. over 7 yrs.) 900,000 Sub-Total 107
Assessed Value (25%) 225,000 Location Premium (50%) 53
Total Mill Levy 102.006 Total Calculated Exemption 160%
Total Allowed Exemption 100%
/~/l~ REMA
625 EAST NORTH STREET PHONE (913) 823-1682
T~u~. qroup . P.O. BOX 2240, SALINA, KS 67402-2240 FAX (913) 823-3840
November 30, 1992
Board of Commissioners
300 West Ash
Salina, KS 67401
Dear Commissioners:
We respectfully request that you approve attached request
for tax exemption.
The REMA Company wishes to grow in the City of Salina.
We hope that by approving this request, REMA will continue to
have a long and prosperous stay in Salina.
Respectfully yours,
/~en T~ot~e~
Director of Operations
REMA Bakeware
625 East North St.
Salina, KS 67401
gt/lh
J C:TY OF SALINA, KANSAS ~.) i~~
~PPLICATIOIt FOR PROPERTY TAX EXEMPTION ~ r~
:'. ~PPL ICANT T~'iFORMATION
1. Applicant Business Name and Address:
Note: Attach the name and address of principa) uwners and officers of the
business. ~~
Name, address and telephone number of person to contact in regards to this
application:
II. BUSINESS iNFOR~YiON
Hote: Attach a general description of business his;ory an~ experience.
2. Is this a new business or an expansion of an existing business?
3. Principal ccmpe~ition in local market:
III. PROJECT INFORMATION
1. Location of the proposed project'
2. Name and address of the owner of the land ~nd building occupied ur to be
occupied by the business:
3, General description of proposed project:
Note: Attach a site plan sho~ing existing anU proposed buildings
and improvements. ~ ~
4. Estimateo capit~l ccst of project:
S .. ~)~)~ ~d 6 (Buildings and Improvements)
S .... ~y, ~) d ~Machinery and Eauipmen~)
5. Number of existing (full-time equivalent) employees:
Note: If an existing business, attach the average total monthly
employment figures for ~he past twelve months.
6. Number of new (full-time equivalentJ jobs to be created:
Note: Attach a listing of the number and type of new jobs to be
created.
IV. TAX EXEMPTION INFORMATION
. 1. Amount or percentage of tax exemption requested:
...,..~'.:.. ~,~-, 2. Why ~ax exemption. ~s ~e~n9 ~eques~ed:
Note: Attach a supporting statement explaining why the requested
tax exemption is a critical factor in determining whether
the proposed project is to be completed.
V. APPLICANT CERTIFICATION
I certify that the above information 'and statements are true and
correct to the best of my knowledge and belief. I understand that this
information will be available for public inspection under the Kansas
Open Records Act. T further understand that failure to produce the
stated economic benefits may result in a reduction or loss of tax
exemption. Furthermore, I ~ertify that the requested tax exemption is
a critical factor in the achievement of the stated economic benefits
and, if not granted, could prevent the realization of the business
location or expansion.
/
Titl~
(Jan. 1990)
ANCHOR HOCKING CORPORATION
Directors and Officers
William P. Sovey, Chairman of the Board 29 E. Stephenson Street
Freeport, Illinois 61032
Thomas A. Ferguson, President 29 E. Stephenson Street
Freeport, Illinois 61032
William T. Alldredge, Vice President-Finance 29 E. Stephenson Street
Freeport, Illinois 61032
Clarence R. Davenport, Vice President & Treasurer 29 E. Stephenson Street
Freeport, Illinois 61032
Roland E. Knecht, Vice President & Secretary 29 E. Stephenson Street
Freeport, Illinois 61032
Dale R. Matschullat, Vice President-General Counsel 29 E. Stephenson Street
Freeport, Illinois 61032
Clarence R. Davenport, Assistant Secretary 29 E. Stephenson Street
Freeport, Illinois 61032
Shirley K. Martin, Assistant Secretary 29 E. Stephenson Street
Freeport, Illinois 61032
Rema Bakeware, Inc. is a division of Anchor Hocking Corporation which is a
subsidiary of Newell Company.
II. Business Information
In December of 1988, Anchor Hocking Corporation (a subsidiary of
Newell Co.) purchased the assets of REMA Bakeware, Inc., located
in Salina, Kansas. REMA is a manufacturer of aluminum cookware
and bakeware and sells its products primarily under the brand
names of Airbake and Cushionaire. Annual sales have grown from
approximately $12 million in 1988 to $42 million in 1991.
III. 5.
Full Time Employees
January 114
February 115
March 113
April 142
May 141
June 140
July 140
August 138
September 136
October 134
November 129
December 129
III 6.
The 30 full time employees added because of this project
will be Production/Direct Labor Employees.
Ail of our employees are the same labor grade and class.
IV. Tax Exemption Information
Anchor Hocking Corporation is considering expansion of its
facilities in Salina, Kansas or utilizing existing capacity in\
its facilities located in Wisconsin. Expansion of the facilities
in Salina would help the company become a more efficient producer
of its bakeware products, however, the expansion costs must be
justified to the corporate officers. Property tax exemption
would be considered an incentive to the company over the next ten
years to expand in Salina and could be a deciding factor whether
or not to expand in the city. The new addition would provide the
community with approximately thirty permanent new jobs. In
addition, $1.8 million will be invested in the expansion of the
plant and new machinery. Property tax exemption would benefit
the city of Salina and provide an incentive for Anchor Hocking
Corporation to expand in Kansas versus Wisconsin.