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 CITY COUNCIL AGENDA ITEM NO. _____ 



Meeting Date: March 26, 2002

Subject/Title: Consider a Request for Planned Employment Center (PEC) Funds from Ellison Framing

Submitted by: Howard Sword, Director of Economic Development

Approved by: John Stevenson, City Manager


RECOMMENDATION 
Consider a Request for $100,000 of Planned Employment Center (PEC) Funds from Ellison Framing. If approved authorize the City Manager to execute a Development Agreement that specifies the terms described in this Staff Report.

PREVIOUS ACTION
Approval for use of PEC Funds:

Original PEC Fund Account Balance $588,000.00

§ Jeffry / Sciortino $101,773.10
§ Precision Cabinets $175,000.00
§ Commitment to Purcell Brackets $100,000.00

Current PEC Fund Account Balance $211,226.90

BACKGROUND
The PEC Fund Account was established in 1999 through funds paid by Kaufman & Broad to improve Brentwood’s Jobs / Housing Balance as a condition of approval to rezone planned employment property to residential zoning. The following criteria to evaluate requests for these funds were adopted by the City Council August 10, 1999.

Criteria

The Economic Development Sub-Committee will evaluate eligibility for this program on a case-by-case basis. The following criteria will be considered when participation in this program is requested. Funds for this program are finite and the Economic Sub-Committee reserves discretionary judgment for their use.

Each item under the Jobs and Facility category is worth one to five points. The highest rating possible in the Jobs category is ten points and the highest rating possible in the Facility category is ten points. The highest total rating is twenty points. The items listed under Program Structure will be used as factors in negotiating qualified proposals.

Jobs

· Manufacturing employment is a high priority.
· Research and Development employment is a high priority.

· Average wage compensation of $12.00 per hour or higher per employee with benefits is a high priority.

Facility

· Businesses that own their building will be given preference.

· Businesses locating in the Downtown or other Redevelopment Areas will be given preference.

· Businesses with long-term building lease will be considered.

Program Structure

· Using the local PIC as a hiring resource is a priority.

· Employing Brentwood residents is a priority.

Matt Ellison, Ellison Framing, is developing a 56,612 square foot (s.f.) office complex on Guthrie Lane in Harvest Business Park comprised of two 22,152 s.f. buildings and one 12,308 s.f. building. The project owner anticipates leasing the buildings. The project is consistent with the General Plan and Zoning Ordinance and a design review application for the site and one building has been submitted to the City. The building submitted has been pre-leased.

The following analysis is a numerical evaluation of the project.

Jobs (4)

· Manufacturing employment is a high priority. (0)

· Research and Development employment is a high priority. (2) Office use may have some association.

· Average wage compensation of $12.00 per hour or higher per employee with benefits is a high priority. (2) Office use will have some of this level of compensation.

Facility (5)

· Businesses that own their building will be given preference. (0)

· Businesses locating in the Downtown or other Redevelopment Areas will be given preference. (5) It is in the RDA Project Area.

· Businesses with long-term building lease will be considered. (0) The pre-lease business does not qualify in the Jobs criteria.

Total Points (9)

This project does not rank high in the numeric evaluation of criteria. However, the project does increase our very low inventory of space available for businesses to locate in Brentwood and would be a very nice addition to Harvest Business Park. It should also be noted that in the past three years no new commercial / industrial projects have been constructed without some form of assistance from the City.

If Council approves the $100,000 grant for the PEC Fund Staff recommends that a Development Agreement be prepared that outlines the following terms.

· A $100,000 job creation grant to be credited against infrastructure fees defined as Water, Wastewater and Community Facilities, Roadway and Administration fees. The grant is given as new building space is produced as defined by obtaining a building permit. The job creation formula will be structured by assuming approximately three jobs will be created for every 1,000 square feet of space built and the grant will credit $600 per job to a total maximum of $100,000. The building’s infrastructure fees would then be credited according to the following schedule.

§ Building One: 22,152 s.f. $ 39,400

§ Building Two: 22,152 s.f. $ 39,400

§ Building Three: 12,308 s.f. $ 21,200

§ Total $100,000

If the Council does not approve the $100,000 grant due to the relatively low numerical evaluation of the qualification criteria Staff recommends that it return with a Fee Deferral proposal for the project. The Fee Deferral program has been used by several developers of recent projects and has benefits that address the cash flow of the infrastructure fees. The infrastructure fees for the proposed Ellison are approximately $5.90 per s.f. as reflected in the following table.

§ Building One: 22,152 s.f. $130,697

§ Building Two: 22,152 s.f. $130,697

§ Building Three: 12,308 s.f. $ 72,617

§ Total $334,011

The Fee Deferral program could reduce the initial infrastructure fee payment to 10% with 10% payments annually for the following nine years at a very low interest rate. The developer, in this case, would eventually pay all the fees, however the cash flow at the beginning of the project when leasing is ramping up would be considerably better than the grant proposal.

FISCAL IMPACT
Reduces PEC Balance to $111,226.90.