City panel to consider expansion at Jennie-O
WILLMAR — The Willmar City Council’s Community Development Committee this afternoon will consider a land write-down proposal for the first phase of Jennie-O Turkey Store’s proposed two-phase expansion project.
The land pricing write-down policy, approved by the council in 2013, calculates any write-down on the asking/listing price for property as calculated and offered by the city.
Bruce Peterson, planning and development director, said the city has been talking with Jennie-O for the past six to eight years, looking at potential development in the new industrial park on the former airport property.
“Now there are a couple of parcels that we are proposing to transfer to Jennie-O Turkey Store,’’ Peterson says.
Under the project’s first phase, Jennie-O would buy the two parcels for its proposed corporate headquarters expansion.
The two parcels are located between the south end of the Public Works maintenance property, which was severed by the realigned Willmar Avenue Southwest, and Kandiyohi County Road 5. Both parcels total about 8 acres.
The first parcel is known as Outlot B, which is land on which the city provided an easement to the state for right of way for state Highway 40. That part of the highway was turned back to the city some years ago, and the city recently vacated its right-of-way easement in anticipation of Jennie-O’s office expansion. Outlot B was valued by a private appraiser at $156,131.
The second, smaller parcel is known as Lot 1, Block 5. It adjoins Outlot B and was valued by a private appraiser at $81,941.
Both parcels have a combined value of $238,072.
Besides selling the two parcels, Peterson is proposing the council grant a 10-year first right of refusal on a nearly 30-acre parcel in the industrial park to Jennie-O for possible future expansion of the turkey processing plant.
According to Jennie-O Turkey Store President Glenn Leitch, the company has nothing specific planned at this time for a future plant expansion. But he said the company would like to be able to act quickly should the company need to expand production and/or distribution capabilities.
Based on square footage and estimated cost for the office expansion, the City Assessor’s office estimates the market value of the building, parking and miscellaneous improvements at $4 million.
In addition, the company estimates it will add a minimum of 90 headquarters jobs.
The first part of the city’s land pricing write-down policy provides for an employment credit of $10,000 off the listing price per job created. Job creation goals are to be stated in a formal agreement between the buyer and the city.
Based on 90 new jobs at $10,000 per job, the employment credit is $900,000.
The policy also provides a tax base credit under which a qualifying project is credited $25,000 off the listing price per $1 million of estimated market value created as determined by the City Assessor’s office. Tax base creation goals will be included in a formal agreement between the buyer and the city.
Based on $4 million of estimated market value, the tax base credit is $100,000.
Together, the two credits total $1 million. Applying that $1 million total against the $238,072 purchase price leaves a credit in excess of the cost, Peterson said, amounting to excess credit of $761,928.
“This really sets the stage for phase 2,’’ Peterson continued. “It’s a future project for Jennie-O Turkey Store.’’
Peterson proposes the city sell the 30-acre industrial park parcel for $1,435,852, based on a private appraisal. The first right of refusal for phase 2 of Jennie-O Turkey Store’s expansion project would be written in the amount of $1,435,852, less the $761,928 credit balance from phase 1, for an amount due of $673,924.
“This is based on Jennie-O Turkey Store creating the market value and jobs that they claim they will create in phase 1,’’ Peterson said. “Whatever happens in phase 1 will impact the purchase price for phase 2.’’
Also, Peterson is recommending a 10-year first right of refusal during which Jennie-O can purchase the 30 acres. He said the right ties up the property for a period of time. In this case, Peterson said he believes Jennie-O is the logical future buyer, based on the company’s historical development.
He said the 10-year period is not unheard of.
“Typically there is some remuneration so that the buyer pays something for the privilege of tying up the property. That amount has not been negotiated yet. We’ve had that discussion with them. They will be prepared to answer some of these questions (today),’’ he said.
Peterson said there has been no negotiation with Jennie-O on prices or other factors.
“There has been an exchange of information and a sharing of information, but no negotiations,’’ he said.
The proposal has the support of Steve Renquist, executive director of the Kandiyohi County and City of Willmar Economic Development Commission. He also said there’s been no negotiation.
“All Bruce and I have ever done is interpret the city policy to the company and here’s what we think they will do. There has been conversation. We’re not empowered to negotiate,’’ said Renquist.
“All we’ve said is based on the city’s subsidy policy, based on the present price of the industrial park, based on the write-down policy and also what makes good economic development sense, here’s what we will recommend and we think they will do. Now we come to the council and now we’d like you to do what your own policy states that you will probably do.’’