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CITY COUNCIL AGENDA ITEM NO. 24 

Meeting Date: August 27, 2002

Subject/Title: Consider a Request for Planned Employment Center (PEC) Funds and a Deferred Fee Agreement from New Point Development, LLC.

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 and a Deferred Fee Agreement from Ellison Framing. If approved, authorize the City Manager to execute a Development Agreement and Standard Development Fee Payment Agreement that specifies the terms described in this Staff Report.

PREVIOUS ACTION

 Recommendation of the Economic Development Sub Committee at the April 18, 2002 meeting to grant the Ellison project $100,000 in PEC funds and approve a standard fee deferral agreement.

 City Council referred this item back to the Economic Development Sub Committee at the March 26, 2002 City Council Meeting.

 Previous approvals 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 $ 90,000.00

Current PEC Fund Account Balance $221,226.90



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 cumulative rating possible in the Jobs category is ten points and the highest cumulative 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, New Point Development, LLC, is developing a 50,000 square foot (s.f.) office complex on Guthrie Lane in Harvest Business Park comprised of two 19,984 s.f. buildings and one 10,032 s.f. building. The project owner will own a health club occupying one of the 19,984 s.f. buildings and anticipates leasing the other two buildings. The project is consistent with the General Plan and Zoning Ordinance and the Planning Commission has approved a design review application for the site and one building. The approved building is the health club and has obtained the necessary conditional use approvals.

The following analysis is a numerical evaluation of the project.

Jobs (5)

• 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. (3) Office use will have some of this level of compensation.

Facility (2)

• Businesses that own their building will be given preference. (2)

• Businesses locating in the Downtown or other Redevelopment Areas will be given preference. (0) It is not 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 (7)

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.

The Economic Development Sub Committee recommendation for assistance to this project was based on its job creation potential. This project is expected to produce approximately 155 jobs and the proposed PEC contribution of approximately $645 per jobs is substantially less than the $1,500 to $2,500 per job that was granted to the Precision Cabinet and the $2,126 per job granted to Purcell Brackets. The proposed grant amount is more in the order with the $590 per job granted to Strauss and the $848 per job granted to Jeffry. Both of these projects provided speculative space that is similar to the 30,016 s.f. portion of the Ellison project that is projected to be leased. An analysis of projects that received both PEC or RDA contributions and Fee Deferrals shows that the Strauss, Jeffry and two of the Sand Creek Business Centers’ buildings benefited from both sources.

If Council approves the $100,000 grant for the PEC Fund Staff recommends that a Development Agreement be prepared that outlines the following terms. The Council may wish to consider further conditions regarding items 2 and 3.

1. 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 approximately $667 per job to a total maximum of $100,000. The building’s infrastructure fees would then be credited according to the following schedule.

2. No timeline has been established for the construction of these buildings.

3. There is no guarantee regarding the ultimate use or actual number of jobs that these buildings will produce.

 Building A: 19,984 s.f. $ 39,968

 Building B: 19,984 s.f. $ 39,968

 Building C: 10,032 s.f. $ 20,064

 Total 50,000 s.f. $100,000

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 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. The infrastructure fees for the proposed Ellison are approximately $7.50 per s.f. as reflected in the following table.



Project S.F Total Fees Less Fees Due Deferred
Fees PEC at Permit Fees
Bldng. A 19,984 149,909.98 109,941.98 10,994.20 98,947.78
Bldng. B 19,984 149,909.98 109,941.98 10,994.20 98,947.78
Bldng. C 10,032 75,255.04 55,191.04 5,519.10 49,671.94
Total 50,000 375,075.00 275,075.00 27,507.50 247,567.50

FISCAL IMPACT
Expend $100,000 of the PEC fund. Delay of Infrastructure Fee payment to 10 equal annual payments.
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