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5.1 Valorum Turbine Specialties CITY OF SALINA REQUEST FOR CITY COMMISSION ACTION DATE 1/26/04 TIME 4:00 P.M. AGENDA SECTION NO: 5 ORIGINATING DEPARTMENT: DEAN ANDREW PLANNING AND COMMUNITY DEVELOPMENT APPROVED FOR AGENDA: ITEM NO. Page 1 Item 1 BY: BY: Consideration of application for property tax exemption submitted by Turbine Specialties. Backqround Turbine Specialties, a division of Cooper Energy Services, has filed an application for property tax exemption pursuant to the city's ad valorem tax exemption policy for economic development purposes. Turbine Specialties is requesting tax exemption for $1.7 million in building additions and improvements and $1 million in machinery and equipment for a relocation and expansion of their operation to 1648 West Magnolia Road. The company is proposing to consolidate its two Salina operations currently located at 1908 W. Old Hwy 40 and 429 N. Ohio Street but also to expand its operations and create 5 new jobs. The business and property are eligible for exemption under state law and the city's tax exemption policy. On December 15, 2003 the City Commission approved a deviation from Section 4.0.2. of the policy to allow permits to be issued and demolition and construction work on the site to proceed pending an analysis of the tax exemption application. 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, notify affected taxing districts and conduct a public hearing on the granting of the exemption. Assuming $2,742,000 of capital investment and 5 new jobs, a tax exemption of 64.28% during years 1 - 5 and 32.14% 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 $314,879 or 50% of taxes otherwise due. The project would generate an estimated $313,741 in property taxes over 10 years. After 10 years, the entire project would become fully taxable. A more detailed breakdown of the costs and benefits of the requested exemption is attached. Recommendation Following closure of the public hearing, if the City Commission wishes to approve the request, it should adopt the attached resolution granting a property tax exemption to Turbine Specialities company. CITY OF SALINA REQUEST FOR CITY COMMISSION ACTION DATE 1/26/04 TIME 4:00 P.M. AGENDA SECTION ORIGINATING DEPARTMENT: APPROVED FOR NO: 5 DEAN ANDREW AGENDA: PLANNING AND COMMUNITY ITEM DEVELOPMENT NO. 1 BY: BY: Page 2 Encl: Resolution #04 - 6035 Application and Supporting Materials cc: Roger Rochel, Turbine Specialties Gerald Cook, Salina Chamber of Commerce CITY OF SALINA, K.At~SAS APPLICA nON FOR PROPERTY TAX EXEMPTION 1. APPLICANT INFORMATION 1. Applicant Business Name and Address: Turbine Specialties, 429 N. Ohio, Salina, KS 67401 Cooper Cameron Corporation, 1111 WP!';t- T.nnp ~nllth, Sll'Lte 1700, N ate: Attach the narne and address of principal owners and officers of the business. Houston, TX 77027 2. N arne, address and telephone number of contact person: John Wasmuth, CCC, 1333 West Loop South, Suit-p- 1700 Houston, TX 77027, ~13 513-3365 II. BUSINESS INFORMATION 1. Type and nature of applicant's business: Manufacturer of t-lJrhnrhrlr'}prs and turbocharger p~rto, and repair of turbochargers. Note: Attach a general description of business history and experience. 2. Is this a new business or an expansion of an existing business? Expansion of existinq business " j. Principal competition in local market: LCM, McPherson, KS; ~xline, Salina, KS III. PROJECT INFORMATION 1. Location of the proposed project: 1 ó4R W Mrlgnnlia, Salina, KS 2. Name and address of the owner of the land and building to be occupied by the business: ~ooper Camp-ran ~orporrlt-i(")n 1333 West Loop Sollth, Suite 1700 Houston, TX 77027 3. General description of proposed project: Building improvements and 2500 sq it addition Note: Attach a site plan showing existing and proposed buildings improvements. " 4. Estimated capital cost of project: $ 3,500,000 (Buildings and Improvements) $ 1 000 000 . . (Machinery and Equipment) 5. Number of existing (full-time equivalent) employees: Ri> Note: If an existing business, attach the average total montWy employment figures for the past twelve months. 6. Number of new (full-time equivalent) jobs to be created: 5 Note: Attach a listing of the number and type of new jobs to be created. IV. TAX EXEMPTION IJ\TFORMATION 1. Amount or percentage of tax exemption requested: 71)~ 2. Why tax exemption is being requested: Please see attached statement Note: Attach a supporting statement explaining why the requested tax exemption is a critical factor in detennining 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. I further understand that failure to produce the stated economic benefits may result in a reduction or loss of tax exemption. Furthermore, I certify 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. . hflac /~oc/4 Signature /34/V7 //1~AÇb.~ Title //þ¡/þ3 Date ( ' / T ~ , "" '" City of Salina, Kansas Application for Property Tax Exemption Attachment 1. 1 COOPER CAMERON CORPORATION PRINCIP AL OFFICERS Sheldon R. Erikson, Chairman of the Board, President and Chief Executive Officer, 1333 West Loop South, Suite 1700, Houston, TX 77027 Franklin Myers, Senior Vice President of Finance and Chief Financial Officer, 1333 West Loop South, Suite 1700, Houston, TX 77027 R. Scott Amann, Vice President, Investor Relations, 1333 West Loop South, Suite 1700, Houston, TX 77027 John Carne, Vice President; President Cooper Cameron Valves Division of Cooper Cameron CO/poration, 16500 South Main, Missouri City, TX 77489 John Chapman, Vice President and formerly President Cooper Cameron Valves, 1333 West Loop South, Suite 1700, Houston, TX 77027 Jane L. Crowder, Vice President, Human Resources, 1333 West Loop South, Suite i 700, Houston, TX 77027 Michael C. Jennings, Vice President and Treasurer, 1333 West Loop South, Suite 1700, Houston, TX 77027 \ViIliam C. Lemmer, Vice President, Genera! Counsel and SecretaTY, 1333 West Loop South, Suite 1700, Houston, TX 77027 Jack B. Moore, Vice President; President Cameron Division of Cooper Cameron CO/poration, 4646 W Sam Houston Parkway N., Houston, TX 77041 Robert J. Rajeski, Vice President; President Cooper Tubocompressor and Cooper Energy Services, 10810 NW Freeway, Houston, TX 77092 Charles M. Sledge, Vice President and CO/porate Controller, 1333 West Loop South, Suite 1700, Houston, TX 77027 City of Salina, Kansas Application for Property Tax Exemption Attachment II. 1 Cooper Cameron Corporation d/b/a Turbine Specialties Business History and Experience Turbine Specialties (TSI) originated in 1972 in Salina, Kansas as "Turbine Specialties, Inc." (TSI). In 1993, TSI was acquired by the Elliott Company and the name was changed to Elliott Turbocharger Group Inc. (ETGI). In 2001, Elliott Turbocharger Group, Inc. was acquired by Cooper Energy Services, a division of Cooper Cameron Corporation and the name Turbine Specialties (TSI) was returned as the company name. The business began as a repair and overhaul facility for the popular makes and models of large engine turbochargers. In 1988, the company started to manufacture turbocharger replacement parts for use in the repair and overhaul business due to high costs and the extremely long delivery times from the original equipment manufacturer (OEMs). An entire manufacturing division was opened in Salina at 1030 E. North Street. Several years later, an 8,500 sq. ft. Salina building located at 429 N. Ohio was purchased for its office space, warehouse space and convenient location next to the manufacturing facility on North Street. Turbine Specialties has a long history in the turbocharger industry. Its former parent company (Elliott Co.) was the first manufacturer of turbochargers in the United States. TSI holds a leading turbocharger market share position in the oil and gas industry and have many major pipeline alliance contracts. TSI offers new and remanufactured turbochargers, retrofit packages, repair, upgrade/re-aero services, parts, training and a unit exchange program. TSI is the OEM for Elliott@, Delaval@, and Cooper turbocharger product lines. With these OEM product lines, TSI has the ability to build new turbochargers as spares, retrofits, or upgrades on existing engines to better enhance the performance. Turbocharger upgrades are available to increase airflow efficiency, improve engine fuel economy, reduce NOx emissions and/or boost horsepower. In addition to the OEM products, TSI repairs approximately twelve different manufacture makes of turbochargers. The product lines serviced are: Alco@, ABB/Brown Boverie@, Clark, Cooper@, Delaval@, Elliott@, EMD@, Garrett@, GE@, MAN@, Napier@, and Schwitzer@. TSI carries a large inventory of OEM and aftermarket parts. In addition, TSI maintains its own fleet of trucks which are focused on immediate pick up and delivery services. With this large inventory, and dedicated trucks, TSI can better serve the immediate needs of the industry plus provide the quick turnaround time that customers have come to expect. City of Salina, Kansas Application for Property Tax Exemption October, 2003 September, 2003 August, 2003 July, 2003 June, 2003 May, 2003 April, 2003 March, 2003 February, 2003 January, 2003 December, 2002 November, 2002 1. Mechanic 2. Mechanic 3. Mechanic 4. Mechanic 5. Welder City of Salina, Kansas Application for Property Tax Exemption Attachment III. 5. and 6. Cooper Cameron Corporation d/b/a Turbine Specialties 5. Average Total Monthly Employment Figures Past 12 Months 86 86 86 86 86 85 88 88 88 88 88 88 6. New Jobs to be Created City of Salina, Kansas Application for Property Tax Exemption Attachment IV. 2. Cooper Cameron Corporation d/b/a Turbine Specialties IV. Tax Exemption Information 2. Why Tax Exemption is being requested: Cooper Cameron Corporation, doing business as Turbine Specialties (hereafter "Turbine"), has been in Salina, Kansas for over 30 years. During that time, Turbine has developed a skilled workforce. The success of the Salina operations has encouraged Turbine to contemplate expansion of existing operations. Turbine currently maintains other facilities in McPherson, Kansas and Tulsa, Oklahoma. Turbine is requesting an exemption for a real estate expansion and the associated personal propeliy necessary to accommodate the consolidation of some operations. The exemption would assist Turbine in recouping some of the costs associated with the planned consolidation. The costs would include the purchase of the real estate, real estate improvements, and personal property, including the costs associated with relocating personal property from Oklahoma to Salina. The proposed project will also allow Turbine to consider future relocations to Salina, Kansas. The proposed site, unlike Turbine's prior sites, has ample land available for future expansions. The exemption will provide the necessary capital to complete this project. The resulting efficiencies in production from consolidation may encourage Turbine to relocate some of its other operations to Salina, Kansas as well. Without this exemption, additional capital will not be available to maximize this consolidation. This includes transferring some of the personal propeliy, as well as making certain real estate improvements. In addition, the absence of the exemption could delay, or even preclude future projects in Salina, Kansas. Turbiine Specialties 1648 1Hest Magnolia COMMERCE () m z -t m z z » r MAGNOLIA 210 0 420 , ! ! ! ! i . . ! i , i ! ! i i ¡ i ! ! ¡ ! ! ! ! i.. \ . ! i ! ! i ! ! i ! ! i , ! i : N W+E S 420 Feet COMMERCE Turbine Specialties 1648 West Magnolia :> -/ I((C~]I 0 -..., "- '" \ 320 160 0 . i i i . i ! ! ¡ ! i i ! ! ¡ ! i j ! ¡ i ! i i I : i ! ! \, , ¡ i i ! i i ¡ N :W+E ! s ! 320 Feet Company: TURBINE SPECIAL TIES Equipment Value: $1,000,000.00 Tax Abatement Analysis Building Value: $1,742,000.00 Mill Levy: 118.5740 Year 1-5 abatement: 64.28% Year 6-10 abatement: 32.14% Number of New Jobs: 5 Direct Payroll Increase $665,600 Wage/Hour $17.00 Equipment Yr Tax Value 25% Value Mill Levy Annual Tax Exemp. Taxes Abated USD #305 City County Library State Airport 1 $1,000,000 $250,000 0.118574 $29,644 64.28% $19,054 $8,020 $5,107 $4,346 $1,055 $284 $242 2 $857,000 $214,250 0.118574 $25,404 64.28% $16,329 $6,874 $4,377 $3,724 $904 $244 $207 3 $714,000 $178,500 0.118574 $21,165 64.28% $13,604 $5,727 $3,646 $3,103 $753 $203 $173 4 $571,000 $142,750 0.118574 $16,926 64.28% $10,880 $4,580 $2,916 $2,481 $602 $162 $138 5 $429,000 $107,250 0.118574 $12,717 64.28% $8,174 $3,441 $2,191 $1,864 $453 $122 $104 6 $286,000 $71,500 0.118574 $8,478 32.14% $2,725 $1,147 $730 $621 $151 $41 $35 7 $200,000 $50,000 0.118574 $5,929 32.14% $1,905 $802 $511 $435 $105 $28 $24 8 $200,000 $50,000 0.118574 $5,929 32.14% $1,905 $802 $511 $435 $105 $28 $24 9 $200,000 $50,000 0.118574 $5,929 32.14% $1,905 $802 $511 $435 $105 $28 $24 10 $200,000 $50,000 0.118574 $5,929 32.14% $1,905 $802 $511 $435 $105 $28 $24 TOTAL $138,050 $78,388 $32,996 $21,010 $17,878 $4,340 $1,170 $994 Building Yr Tax Value 25% Value Mill Levy Annual Tax Exemp. Taxes Abated USD #305 City County Library State Airport 1 $1,654,900 $413,725 0.118574 $49,057 64.28% $31,532 $13,273 $8,452 $7,191 $1,746 $471 $400 2 $1,654,900 $413,725 0.118574 $49,057 64.28% $31,532 $13,273 $8,452 $7,191 $1,746 $471 $400 3 $1,654,900 $413,725 0.118574 $49,057 64.28% $31,532 $13,273 $8,452 $7,191 $1,746 $471 $400 4 $1,654,900 $413,725 0.118574 $49,057 64.28% $31,532 $13,273 $8,452 $7,191 $1,746 $471 $400 5 $1,654,900 $413,725 0.118574 $49,057 64.28% $31,532 $13,273 $8,452 $7,191 $1,746 $471 $400 6 $1,654,900 $413,725 0.118574 $49,057 32.14% $15,766 $6,637 $4,226 $3,596 $873 $235 $200 7 $1,654,900 $413,725 0.118574 $49,057 32.14% $15,766 $6,637 $4,226 $3,596 $873 $235 $200 8 $1,654,900 $413,725 0.118574 $49,057 32.14% $15,766 $6,637 $4,226 $3,596 $873 $235 $200 9 $1,654,900 $413,725 0.118574 $49,057 32.14% $15,766 $6,637 $4,226 $3,596 $873 $235 $200 10 $1,654,900 $413,725 0.118574 $49,057 32.14% $15,766 $6,637 $4,226 $3,596 $873 $235 $200 TOTAL $490,570 $236,492 $99,548 $63,387 $53,936 $13,093 $3,529 $3,000 Base Exemption - CITY: ($100,000/3 jobs) 25.00% Investment of $100,001 to $1,000,000 exemption 18.00% Investment of $1,000,001 to $2,000,000 exemption 13.33% Investment of $2,000,001 and up exemption 4.95% 10 or less employees exemption 3.00% 11 or more employees exemption 0.00% TOTAL EXEMPTION Year 1-5 64.28% Year 6-10 32.14% Total Abatement $314,879 TURBINE SPECIALTIES Page 2 Tax Abatement Analvsis Benefits Secondary Spin-off Jobs (64% of direct) Secondary Payroll Increase ($14,500 annual average per job) Effective Buying Income Increase (.87 of payrolls) Retail Sales Increase (.30 of EBI) 3.20 $46,400.00 $705,968.00 $211,790.40 Property taxes paid after abatement: Yr Equipment Building Total 1 $10,590 $17,525 $ 28,114 2 $9,075 $17,525 $ 26,600 3 $7,561 $17,525 $ 25,086 4 $6,047 $17,525 $ 23,571 5 $4,543 $17,525 $ 22,068 6 $5,753 $33,291 $ 39,044 7 $4,023 $33,291 $ 37,314 8 $4,023 $33,291 $ 37,314 9 $4,023 $33,291 $ 37,314 10 $4,023 $33,291 $ 37,314 $ 59,662 $ 254,079 $ 313,741