REPORT TO THE CITY COUNCIL
June 11, 2015
FROM: BRUCE RUDD, City Manager
BY: LARRY WESTERLUND, Director of Economic Development
SUBJECT
Title
Actions pertaining to Economic Incentive Agreement with J&D Meat Company, Inc., dba JD Food, and Certified Meat Products, Inc.
1. Adopt the environmental finding of Environmental Assessment No. EA-15-018, a finding of Mitigated Negative Declaration, dated May 21, 2015
2. Approve Economic Incentive Agreement with J&D Meat Company, Inc., dba JD Food, and Certified Meat Products, Inc., for an industrial development and expansion project in Southeast Fresno (District 5)
Sponsor: Economic Development Department
Body
RECOMMENDATION
The Administration recommends that the Council approve the attached Mitigated Negative Declaration and Economic Incentive Agreement between the City and J&D Meat Company, doing business as JD Food and Certified Meat Products, Inc. (collectively, JD Food). The agreement will provide performance-based financial incentives, via infrastructure reimbursement, for the expansion of JD Food distribution and processing facility at the new site at 4671 East Edgar Avenue (APN 487-042-13S) in Southeast Fresno.
EXECUTIVE SUMMARY
JD Food is an independent family owned food service distributor based in Fresno and is affiliated with Certified Meat Products, a processor and distributor of quality meat products who currently employ more than 144 employees. Both companies have experienced significant growth and need to expand a portion of their operation to a new site as soon as possible. Before considering offers from developers to provide a larger location outside the Fresno area, JD Food approached the City for assistance in their expansion.
In an effort to retain the 144 local jobs, and to foster the growth of additional new jobs, the Administration negotiated the attached "Economic Incentive Agreement." The incentive package would provide a total of no more than $411,743 from three revenue streams that would be used to reimburse JD Foods for the cost of offsite infrastructure improvements associated with a five (5) acre parcel in Southeast Fresno where JD Food would invest approximately $10.5 million in order to expand their current operations over the next 10 years.
BACKGROUND
JD Food is an independent family owned food service distributor based in Fresno. They are affiliated with Certified Meat Products, a processor and distributor of quality meat products. Both companies are owned by the same families and have been associated with multi-generational family businesses in Fresno since 1974. Both JD Food and Certified Meat Products have seen tremendous growth and now employ more than 144 employees. They have outgrown their shared facility on East Commerce Avenue in Fresno and must expand a portion of their operation to a new site as soon as possible.
Both JD Food and Certified Meat Products jointly occupy a warehouse and processing facility at 4586 E. Commerce Avenue. In 2001 they expanded from 42,000 square feet an additional 10,000 square feet and are now working at multiple sites. JD Food has doubled the number of employees in the last five years and now has over 144 full time employees. JD Food cannot expand any more at their current site and need to move some of operations to a new site as soon as possible. JD Food has been approached by developers from outside the area and has considered relocation.
After a nearly year-long search, JD Food has identified a site at 4671 E. Edgar Avenue that is currently in escrow. The subject property east of Maple and North of Edgar is zoned M-3 (Heavy Industrial). The property is planned for heavy industrial uses by the 2035 Fresno General Plan, Roosevelt Community Plan, and the former Southeast Fresno Revitalization Redevelopment Plan. The site is in the heart of an industrial area in Southeast Fresno and is ideal in that it is less than 500 feet from their current facility on East Commerce Avenue. JD Food and Certified Meat Products will operate both sites for the foreseeable future.
In an effort to retain the 144 local jobs, and to foster the growth of additional new jobs, the Administration has negotiated the attached "Economic Incentive Agreement" that would allocate no more than $411,743 from three revenue streams (impact fees, business and property tax) that will be used to reimburse JD Food for the cost of constructing various offsite infrastructure improvements (e.g., street, water, sewer). In return, JD Food would retain their current work force, invest no less than $10.5 million in capital, including the construction of a new 65,000 square foot facility as well as agree to double the size of its workforce over the next ten years.
The Economic Development Department engaged an outside firm, Impact DataSource, to analyze the level of public investment in this project and the potential return on that investment. A copy of their report and full analysis is attached. Impact DataSource analysis concluded that overall the City will receive approximately $598,591 in net benefits over the 10-year period. Furthermore, the addition of another 144 positions will also create 96 indirect and induced jobs over the same period
In addition to the forgoing Economic Impact Report, and as part of the City's due diligence, the City Controller, Director of Economic Development, and Deputy City Attorney have all reviewed JD Food financial statements for the last two years as well as interviewed their certified public accountant. The review and interview indicated that both companies are profitable going concerns.
ENVIRONMENTAL FINDINGS
The City of Fresno has conducted an initial study and proposes to adopt a Mitigated Negative Declaration for the above-described project. The environmental analysis contained in the Initial Study and this Mitigated Negative Declaration is tiering off of Master Environmental Impact Report SCH No. 2012111015 prepared for the Fresno General Plan ("MEIR"). A copy of the MEIR may be reviewed in the City of Fresno, Development and Resource Management Department as noted above. The proposed project has been determined to be a subsequent project that is not fully within the scope of the MEIR for the Fresno General Plan. Pursuant to Public Resources Code § 21157.1 and California Environmental Quality Act (CEQA) Guidelines § 15177, this project has been evaluated with respect to each item on the attached environmental checklist to determine whether this project may cause any additional significant effect on the environment which was not previously examined in the MEIR.
After conducting a review of the adequacy of the MEIR pursuant to Public Resources Code, Section 21157.6(b)(1), the Development and Resource Management Department, as lead agency, finds that no substantial changes have occurred with respect to the circumstances under which the MEIR was certified and that no new information, which was not known and could not have been known at the time that the MEIR was certified as complete, has become available.
LOCAL PREFERENCE
Local preference was not considered because this is not a competitive bid.
FISCAL IMPACT
The Agreement is based, in part, upon a "gain sharing" strategy through rebating property tax increment the City would not otherwise realize without the development of the new property. The general fund impact will be no more than $31,128 per year from rebated business tax from JD Food and Certified Meat Products for the life of the contract not to exceed ten years. While there is a onetime impact in the amount of $51,275 related to the elimination of development impact fees, the analysis shows the return of return of 14.5% and a payback period of 6.3 years.
Attachments:
Economic Incentive Agreement with Exhibits A & B
City Controller's Fiscal Schedule
A Report of the Economic Impact of JD Food/Certified Meat Products in Fresno, CA prepared by Impact DataSource dated June 3, 2015
Environmental Assessment No. EA-15-018