Bond proposal for new Andy’s HQ given first reading by Springfield City Council

Springfield City Council held a first reading and public hearing on a measure to issue $32 million in industrial development bonds to Andy’s Frozen Custard at its meeting last night. A vote is set for July 27.

The measure was immediately on the heels of a vote at council’s last meeting, on June 22, to signal the body’s willingness to issue the bonds for a headquarters to be built near the city’s east boundary, moving it out of its current downtown location.

Last night, council heard a presentation on the bond proposal, which would use Chapter 100 of Missouri law. The idea is that the city takes ownership of the subject property at the corner of East Division Street and North LeCompte Road for the 25 years of the agreement so that the company can take advantage of the city’s tax-exempt status to build 43,200 square feet of office space to be spread among three buildings, plus a 9,600-square-foot industrial warehouse.

Matt Schaefer, Springfield’s assistant director of Economic Vitality, offered a summary of real property tax impact from the proposal over the bond period. Without the project, the property would generate $98,835 for taxing jurisdictions. With the project, the company would remit payments in lieu of taxes amounting to $1.6 million in the same period, a figure that is abated $3.7 million from total projected taxes of $5.3 million.

The taxing jurisdiction that would receive the largest amount of revenue from PILOTs is Springfield Public Schools, which stands to receive $73,474 if there is no project but $974,847 in PILOT payments if there is a project, according to city staff estimates presented by Schaefer. If there were no abatement, the school district would receive $3.3 million in taxes from the development, but Andy’s officials told Springfield Business Journal in past reporting that the headquarters project is contingent upon it receiving the incentive.

Other taxing jurisdictions that would receive heightened revenue through PILOT payments are the city of Springfield, the Springfield-Greene County Library District, Ozarks Technical Community College, Greene County general revenue, Greene County road and bridge fund, senior services, Abilities First and the state of Missouri. There is also a commercial surtax.

One issue that arose during council discussion was the desire by some members to be engaged earlier in the process of negotiating tax incentives.

A real estate attorney for Andy’s, Curt Peterson of Kansas City-based Polisinelli PC, said the company had been working with the city for about six months to put the bond package together.

Councilmember Brandon Jenson expressed the desire for council to be brought into the process earlier.

“We didn’t even find out about this until at our last meeting when the resolution was brought forward, and now there’s a fully-built-out package ready for our approval,” he said.

Jenson was echoing a concern voiced by Councilmember Abe McGull, who told Schaefer that the Chapter 100 bond program encourages business development in the community.

“We’re on the back end of this,” McGull said. “By the time it gets to us, all the terms and conditions have already been met.”

McGull said the 25-year abatement could have instead been a 20- or 15-year agreement.

“We have to set policies to give you, staff, direction, instead of us being on the back end,” he said. “If it’s more than 10-year abatement, then it should go to the Finance Committee for further discussion to see if the terms can be worked out with the developer.”

He expressed approval for the cost-benefit analysis breaking down PILOT revenue from the project.

“That’s the kind of cost-benefit analysis that we should do on every project in this city,” McGull said. “I think it’s important for the citizens to see that so they know.”

He said he was voting for the proposal, but he wants to see changes where staff are given direction in the future.

Councilmember Craig Hosmer agreed, though he noted that the council has an opportunity before the next reading of the bill and the subsequent vote to make changes.

The proposal by Andy’s would maintain 54 jobs and add another 16 – figures CEO Andy Kuntz told SBJ were conservative, with more hires anticipated. Maintaining and establishing those positions are a condition of the bond agreement, with the requirement that the jobs are valued at one-and-a-half times the county average wage. The proposal as submitted estimates that the 16 new positions would earn an average of $95,000.

Kuntz spoke to council to discuss his company’s history, and he expressed a desire to stay in Springfield. Jenson asked if he was willing to delay consideration of the proposal to consider a campus-style development within the downtown area, and Kuntz said he was not.

On another area of concern expressed by Jenson, Kuntz said he did intend to use local contractors in the work. Jenson had asked for the use of local contractors to be included as a provision of the agreement, but it is not included in the terms as they currently stand.