Monday, September 01, 2014

Ford dealer’s move gets boost with TIF deal

By DOUG CARDER, Herald Senior Writer | 10/5/2012

Advantage Ford plans to move its dealership in 2013 from North Main Street to a prime location near I-35 in Ottawa.

And the Ottawa City Commission paved the way for that move Wednesday night by passing an ordinance that adopted a redevelopment plan for Ford in the city’s South 59 Tax Increment Financing (TIF) District.

Advantage Ford plans to move its dealership in 2013 from North Main Street to a prime location near I-35 in Ottawa.

And the Ottawa City Commission paved the way for that move Wednesday night by passing an ordinance that adopted a redevelopment plan for Ford in the city’s South 59 Tax Increment Financing (TIF) District.

Advantage Ford plans to build a 26,645-square-foot dealership and service center on 3.9 acres of land southeast of the intersection of East 23rd and South Oak streets in a commercial district on Ottawa’s south side.

A report by the city’s financial advisor, Bruce Kimmel, showed the dealership has signed real estate contracts to acquire three parcels of land at a total price of $769,359 at 2330 S. Oak, 2320 S. Oak and 244 E. 23rd streets. With an estimated construction cost — including landscaping and parking lots — of about $2.2 million, the project’s total cost would be about $3 million, according to Kimmel’s report. Advantage Ford’s TIF request is for tax increments totaling $750,000.

The three parcels of land where the dealership would be built are bounded by East 23rd Street to the north, South Oak Street to the east, private property lines to the west and I-35 to the south. Ford’s proposed development is located within the city’s South 59 TIF District — 604 acres of developed and undeveloped tracts. The city established the South 59 TIF District in 2008.

Tax Increment Financing is a special financial tool that can generate money for economic development in a specific geographic district. TIFs are created by local municipal governments to provide incentives to lure private investment and help finance infrastructure improvements. TIFs work by capturing new property tax revenues from a specific area and re-investing those revenues in that area.

“A TIF is a program that allows new property tax increments, created by a new project, to pay for approved project costs within the TIF District,” Wynndee Lee, the city’s director of planning and codes, said during a recent city commission study session regarding Ford’s proposal. “Generally that’s infrastructure, but TIF funds also are eligible for acquisition costs and limited site development costs. In the case of Love’s [Travel Stop] project, it was the very high cost of putting in a sanitary sewer system.”

Lee reviewed Ford’s proposal for the city commission and audience members Wednesday night during a public hearing.

The owner of two hotels near the proposed dealership and a local farmer raised concerns about the project.

Sonny Patel, owner of the Super 8 and Comfort Inn hotels neighboring the development, said he was concerned about the noise generated by the construction project and the dealership’s service center.

“I think the noise would disturb my guests,” he said.

Scott Yeargain, a farmer in the area, expressed concern that taxpayers would essentially buy the land for the development through the TIF instrument. He also expressed concern about money the city would be out if Ford Motor Co. were to shut down the dealership — citing a GM dealership in Ottawa that lost its franchise.

“In today’s economy, I think that is a distinct possibility,” Yeargain said of a possible closure. “Then, what would the city do?”

He raised other concerns about what would happen to the dealership’s building on North Main Street if the dealership moved to the new location near I-35.

Wayne Pyrant, an owner and chief executive officer of Advantage Ford, addressed both men’s concerns.

On the noise issue, Pyrant said the dealership’s service center would be open from about 8:30 a.m. to 6 p.m., and that the dealership conducts all its service work inside the insulated building and not outdoors. He said the noise generated from the dealership’s service center would be minimal, even under the worst-case scenario.

As to the concern the city would be paying for the dealership’s land acquisition, Pyrant said that simply is not the case.

“We are writing the check for the land acquisition,” Pyrant said. “We are not asking the city for one dollar to purchase the land.”

Jeff Richards, city commissioner, reiterated that the city would not be out any money under this TIF proposal

“We would still collect property taxes on the site, we would collect 5 percent of the TIF [monies] to cover our administrative costs,” Richards said. “There is no financial risk on the part of the city.”

The city’s financial advisor Kimmel, a senior financial adviser with Ehlers, a Roseville, Minn.-based firm that specializes in public finance issues, estimated the TIF-captured assessed value of the Ford project to be $672,232 — which would be paid out to Ford in annual TIF reimbursements of $96,011, up to a total amount of $750,000.

Pyrant said these tax reimbursements would help the business generate enough cash flow to make the venture viable.

“With any new business venture [such as constructing the new dealership building], cash flow is more important than profit margin,” he said.

Lee told city commissioners Wednesday the reimbursements would be paid out to Advantage Ford over the course of about eight years. A TIF project plan is set for 20 years, Lee said, so tax increments collected during the remaining 12 years of Ford’s project could be reinvested in other projects within the TIF District.

City planning commission and city staff recommended approval of the Ford TIF project.

Financial advisor Kimmel concurred with Lee’s assessment of the revenue potential the dealership’s new location next to I-35 could generate for Ford and other businesses, as well as spur additional sales tax revenue for the city.

“The project would provide significant economic development for the city by, among other things, developing a substantial business activity on previously under-utilized parcels located in a commercial area of the city,” Kimmel said in his report.

Lee also talked Wednesday about the jobs that would be retained and potentially created by the new dealership. And Ottawa resident Tony De La Torre talked about all the civic contributions Advantage Ford has made to the Ottawa community.

Blake Jorgensen, Ottawa mayor, told the audience at First Friday Forum at Washburn Towers, 526 S. Main St., Ottawa, that the project was a win-win for Advantage Ford and the city.

“This economic development project will develop a piece of land that has been vacant for as long as I’ve lived here [the past 25 years],” Jorgensen said. “We are very excited about it.”

Once up and going at the more-visible location along I-35, Jorgensen said, Advantage’s sales also should help the city increase its sales tax base. 

Rick Nunez, general manager of Advantage Ford, said Thursday he was pleased the city approved the TIF plan and that the project could move forward.

“We hope to close on the land [acquisition] this month,” Nunez said, “and be ready to move to the new site by the end of 2013.”

Doug Carder is senior writer for The Herald. Email him at dcarder@ottawaherald.com

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