Council approves incentive package for Andy’s

Construction of a new headquarters for Andy’s Frozen Custard was given the green light by Springfield City Council last night after it approved an incentive package for the project.

With the decision at its July 27 meeting, council approved the issuance of $32 million in Chapter 100 industrial development bonds that will allow the local company to build its new home in northeast Springfield. Andy’s has been in leased space in downtown Springfield since 2016, according to past Springfield Business Journal reporting. CEO Andy Kuntz has previously said the company is outgrowing its current 18,000-square-foot headquarters at 211 E. Water St.

By Andy’s utilizing the bond proposal, the city would take ownership of the 10-acre property the company previously purchased at the corner of East Division Street and North LeCompte Road for the 25 years of the agreement. That allows the company to 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. Through the deal, Andy’s would receive about $4.4 million in property tax abatement and sales and use tax exemptions over the 25-year agreement.

The real and personal property tax abatement will be incremental, with 90% abated on the improved value in the first 10 years. The percentage moves to 75% for years 11-15, 60% for years 16-20 and goes down to 50% abated in the last five years of the 25-year span.

Chapter 100 of the Revised Statutes of Missouri allows local governments to issue bonds to provide property tax abatement for industrial development projects and certain types of commercial development for private corporations, partnerships and individuals, according to past reporting.

The vote, which was not unanimous, came after multiple amendments to the bill failed to gain majority support from council. The bill for the industrial development project passed 7-2, with Councilmembers Brandon Jenson and Bruce Adib-Yazdi voting in opposition.

Amendments proposed
Jenson and Adib-Yazdi proposed changes to the package prior to the final vote at last night’s meeting that were unsuccessful.

An amendment proposed by Adib-Yazdi sought to require the general contractor to solicit bids from local subcontractors and seek a goal of 50% local labor participation for construction.

“I’m asking us to just simply track the locations and the ZIP codes of the people that are working on the job sites,” Adib-Yazdi said. “Should be relatively painless. I know that general contractor will have to do some more paperwork and some more tracking in order to do this.”

Councilmember Heather Hardinger said she supports the idea of tracking local labor participation in big projects but wants the city to look into it as more of a policy approach versus tracking a one-time project such as with Andy’s. Council voted down the amendment 5-4 with Adib-Yazdi, Monica Horton, Craig Hosmer and Jenson in support.

After Adib-Yazdi’s amendment failed, Jenson followed with a motion to postpone a vote on the bond proposal until the council’s Sept. 21 meeting to allow city staff time to negotiate an incentive package that would keep Andy’s headquarters downtown.

Amanda Ohlensehlen, the city’s director of workforce and economic vitality, said staff had previously visited with Andy’s officials about staying downtown.

“The footprint that they have is a 10-acre site,” she said of Andy’s land purchase at Division and LeCompte. “It is really difficult to find contiguous sites within downtown that would be able to accommodate that and also be consistent with the comprehensive plan and the downtown plan.”

The new headquarters project by Andy’s would maintain 54 jobs and add another 16 – figures CEO Andy Kuntz previously told SBJ were conservative, with more hires anticipated. The new jobs would have an annual starting wage of $94,766.

“I think we need to consider whether the opportunity cost of $4.4 million in tax revenue is worth the creation of less than 20 new jobs,” Jenson said.

Jenson was the lone vote in support of his amendment, which was defeated 8-1.

Jenson’s second motion was to amend the development plan to limit property tax abatement to 50% over a 10-year period. He said that is in line with the city’s Economic Development Incentives Policy Manual, which indicates that Chapter 100 tax exemptions will typically be granted at 50% for 10 years. He further cited that the manual says the city will not extend its sales tax exemption for purchases unless council finds there to be “an extraordinary public benefit.”

“But, like most economic development nowadays, we are engaging in a race to the bottom in terms of incentives and giving away tax dollars to fund really critical needs that we have here in the city,” Jenson said. “And we don’t even have another competitor at the starting line.”

The amendment failed by a 6-3 vote, with only Adib-Yazdi, Jenson and Hosmer in support.

The Andy’s construction project is expected to be completed in two phases, starting with the first two office buildings to be built in 2028. That will be followed by the third office building and the industrial warehouse building, estimated to be complete by 2033, according to officials.

The Chapter 100 incentive has been used elsewhere in the city of Springfield. According to past SBJ reporting, developer Opus Northwest LLC in 2009 negotiated $21.5 million in Chapter 100 bonds to construct what would become the Forvis Mazars building at 910 E. St. Louis St., with 100% abatement for the first 10 years and 50% abatement for the next 15.

Council has also approved Chapter 100 bonds three times for expansions of production lines at Kraft Heinz, with up to $26 million OK’d in 2012, $36 million in 2016 and $48 million in 2020, according to past reporting.