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2000-08-03CITY OF BEVERLY, MASSACHUSETTS PUBLIC MEETING MINUTES BOARD OR COMMISSION: Economic and Community Development Council SUBCOMMITTEE: DATE: August 3, 2000 LOCATION: Beverly Public Library MEMBERS PRESENT: MEMBERS ABSENT: Chairman Joyce McMahon, Vice-Chairman Bill Rodenbnugh, Dick Mooney, Wayne Mastin, Don Stacey, Deb Rosser, Brenda Spence ALSO PRESENT: City Planner Tina Cassidy, Councilor John Murray, Councilor Virginia McGlynn RECORDER: Karen Bradley Rodenbaugh calls the meeting to order at 6:13 p.m. Rodenbaugh explains that the Affiliated Management Group (AMG) who has recently purchased the former Loeb Estate at 655 Hale Sueet has filed a certified project application with the City and the State. Within that submission, AMG is requesting to enter into a Tax Increment Financing (TIF) agreement with the City of Beverly. Attending the meeting are two representatives for the Affiliated Management Group; Mr. Jonathan Speros, Senior Manager for Price Waterhouse Coopers, Attorney Mark Glovsky, and Mr. Dan Shea, Vice President of AMG. Chairman McMahon arrives at 6:16 p.m. Mastin: motion to approve last two meetings minutes, seconded by Rosser. All members in favor, motion carries. Rodenbaugh explains that the Mayor of Beverly has asked the Economic and Community Development Council to examine the proposed TIF and make a recommendation. He asks the AMG representatives what they would do differently if the proposed TIF were granted. Cassidy asks Mr. Speros to explain the process and background of the TIF program for the benefit of the newer members of the Council. He explains that he worked for the Weld/Cellucci administration to help implement this program for the State. He helped work with Cassidy and the Mayor on the very first TIF done in the City with the CP Clare Corporation- Speros explains that the purpose of this program was to: · encourage economic growth; · help companies stay here in tha State when facing cost competitive pressures elsewhere; · attract new companies to the region. Most of the projects have been approved for companies that are already in a particular area that need a little help to grow and expand. There have been over 500 TIFs approved over the last five Economic and Community Development Council minutes August 3, 2000 meeting Page two years. Speros also explains that the program was designed as a three-way partnership where the State, the community and the company all make some type of commitment. The company makes a long-term commitment to stay and make an investment in the community, and also to grow and hire people from the Economic Target Area (ETA). Once the company and the City reach an agreement, the State offers a special tax credit, the Economic Opportunity Area Credit, which is a 5% investment credit to offset the investment costs of the company and can he used to reduce the company's State income tax liability. The company then negotiates with the City to enter into a Tax Increment Financing Agreement (TIF) where the City offers a tax deduction on new real property created on the designated site. The existing property taxes on the designated site are not affected, they continue to be collected at 100%. Once the TIF Agreement is reached, the company then applies to the State for the Certified Project Application. Both benefits must coincide in length. Glovsky states that the community receives a long-term agreement with AMG that assures a relationship that will be mutually beneficial. Some of the benefits to the community are: · relatively low traffic generated by only employing a maximum of 60 employees; · offering a trail network for passive recreational use on the rear of the property; · conservation restrictions will be granted on the 90 acre site; · municipal services will not be required for the 40,000 square foot office building being proposed · commitment to on going financial support of municipal activities in local community endeavors. Glovsky explains thst these contributions will far exceed the proposed $16,000 savings in real estate taxes over the next 15 years. The project will generate $2.7 million in taxes over the next 15 years and of that $2.7 million, $16,000 is a small percentage to be given in respect to the benefits the community will receive. Glovsky states that AMG will be working with the City on the Beverly Farms Library Project and is particularly interested in the school system and supporting educational activities in the City. Rodenbaugh asks the question again, what will AMG do differently if the TIF is granted. Speros states AMG would be committed to the long-term growth of the company in the community as well as the many long-term benefits already explained. Glovsky explains that the relationship between AMG and the community would be more beneficial if the TIF were granted. Glovsky states that the President of AMG now lives in Beverly, and the Senior VP/CFO also just purchased property in Beverly Farms. Rodenbangh asks if there are any questions at this point. Stacey asks Speros what is the connection on the action the community takes on a TIF and the State granting the Investment Credit. Speros explains that the law is written in such a way that this has to be a three-way partnership between the community, the State and the company. In order to apply to the State for any tax credit, the company must enter into a TIF agreement or have a special tax assessment Economic and Community Development Council minutes August 3, 2000 meeting Page three with the community in place. Sporos put together a summary of all thc TIF agreements in thc North Shore Region for the Council's review. Rodenhaugh explains that this TIF is different than any other TIF that has been granted in Beverly. All the TIFs approved in Beverly have been for manufacturing organizations which receive a different tax credit (5%) than a service organization. For a service organization, a TIF creates the difference between 0-5%. Rodenbaugh reminds the Council that once a TIF is in place, no personal property taxes are collected. Speros states that the estimates, based on the size and type of building proposed, will create $2.8 million more in accessible property less the percentage that AMG proposing. Existing taxes on property will not change. The taxes on the new building will he approximately $65,000 per year. The exemption would be on that $65,000 each year using the 5%, 4%, 3%, 2%, 1% ...... method (see attached spreadsheet). Mooney asks when the property was purchased. Glovsky answers that the property was purchased a few months ago. He explains that construction has started and completion is expected mid-2001. Glovsky explains that the City Council could make a decision on this by early 2001. Shea explains that site preparation is going on now and plan to start operating at the site next year. Rodenbaugh asks what determined the length of the TIF. Speros explains that the long-term commitment is more appealing to ensure the State benefit as long a possible. State law requires a minimum of 5 years and a maximum of 20 years. Mastin asks if the TIF terminates if AMG moves out. Speros explains that it depends on the nature of the operation. Cnssidy states that with the Cummings TIF there is a provision that ownership cannot be transferred without the approval of the City of Beverly. A built in safety Rodenbaugh questions the number of employees per year through the period of the TIF. Shea states that the proposed building should house approximately 60 -70 employees. He further explains that if growth were to surpass that number, the proposed building would have to be reconfigured. Cassidy comments that the projected number of new jobs would be 30 new jobs over the next three years. McMahon explains that AMG needs to be clear and up front in the beginning, it would be more beneficiaI to them with respect to the City. Mastin states there are concerns on the impact in that area. Glovsky explains that there are zoning constraints at the site and cannot exceed those constraints. Cassidy explains that if AMG were to expand on the size of the building they could go back to the Zoning Board of Appeals and ask for a special permit to expand on the existing non-conforming use with a 25% maximum cap. Glovsky states that use on the Loeb property was permitted by variance, therefore the site is not zoned as a non-conforming use site. Stacey questions that if poor economic conditions occur and revenues for AMG decrease, what is AMG's plan. Shea explains that the nature of AMG's business is volatile, however AMG's Economic and Community Development Council minutes August 3, 2000 meeting Page four strategy is a diversified pool of investments which works well for their nature of business. Speros adds that by law, the agreement can be void if business turns bad. Mooney questions the unemployment level stated on Exhibit A of the Certified Project Application Speros emphasizes that this is only a draft at this point and is waiting for final numbers. Rodenbaugh asks if there are any more questions or comments. Rosser states that AMG should be more specific on the economic benefits that they have to offer the City. McMahon again emphasizes that AMG should be more specific on the benefits that AMG will offer the community. Glovsky states that this Certified Project Application will be redrafted in more specific terms. McMahon asks when the new draft could be available. Speros responds that the draft could be completed relatively soon. McMahon states that she would like to see more concrete facts before presenting any recommendation to the Mayor. McMahon thanks AMG representatives for their time. AMG representatives exit at 7:15 p.m. The members of the Council conduct an open discussion regarding the proposed TIF submitted by AMG. McMahon states that the Council's decision should be based on the maximum amount of information available to all aspects for the community. Rodenbaugh questions the length of the TIF and needs mom substantial information to approve the length of this proposal. Rosser states that the benefits to the City will be valuable and giving them the long-term agreement will only generate a positive attitude from AMG towards the community. Spence states that $16,000 is a small price to pay for the benefits the City will receive. Stacey states that this proposal if very desirable, however he recommends only a 10 year commitment. Stacey dismisses himself from the meeting at 7:40 p.m. McMahon recommends reviewing all the informntlon and will send out any additional and/or revised information that she receives from AMG. Cassidy states that she will distribute the Zoning Board of Appeals decision to the Council. She also states that she will ask the Board of Assessors what the determination was for the assessment change on the site. She states the change could be based on the purchase price from AMG and will investigate it further. Members decide to schedule the next ECDC meeting for September 12, 2000 at 6:30 p.m. The location is to be determined. The Council is in agreement that a decision will be on the AMG's TIF proposal will be made at the September 12th meeting. McMahon: motion to adjourn, seconded by Rodenbaugh. All members in favor, motion carries. The meeting is adjourned at 7:45 p.m.