CivicPlus, a local technology firm, is on track to continue its expansion with the help of an economic development package from the city. City Commissioners on Tuesday unanimously approved scheduling May 15 as the date for a final determination on the package.
Commissioner Rich Jankovich, who works for Commerce Bank, abstained from the discussion, citing a relationship between his employer and the firm.
The incentives would include a $750,000 forgivable loan, an option to issue up to $20 million in industrial revenue bonds (IRBs) and a 10-year tax abatement worth $2.24 million across all taxing jurisdictions (the city’s portion being $726,061). Essentially, the tax abatement brings the incentives package up to $1.4 million. The direct incentives (the forgivable loan) will effectively deplete the city’s economic development fund, though.
CivicPlus, which develops, designs and builds websites for local governments, is projecting roughly 40 percent growth in 2012. Its client base has already grown 285 percent since 2008. Ward Morgan, CEO of CivicPlus, said the firm needs to expand its workforce, and, in turn, needs to expand its offices to accommodate the growth.
“It’s all people in our business, and it takes a lot of people to build a lot of websites,” Morgan said. “To grow we have to have more people, and we have to have high-end people.”
Morgan said one of the major challenges to expanding the firm’s workforce is persuading people from larger cities and metropolitan areas to relocate to Manhattan.
“With that great need for great people, we found that the amenities, the work space, etc… is very important to our recruiting,” Morgan said. “We are competing at times to get employees who are considering job offers from Microsoft, from Google or, in Kansas City, Cerner”
The key piece to this planned growth would be a multi-story 50,000 square-foot office building at the corner of 4th and Pierre streets, where the Manhattan Appliance and Sleep Source store currently sits. Morgan has expressed interest in helping that business find another location.
The first floor is envisioned to be retail and restaurant space, while the remaining floors will be high-end CivicPlus offices. The project is designed to help the firm create 250 jobs, with an average hourly wage of $25.18, over a 10-year period.
“We want to build this new building downtown to provide a working environment that will help us attract and hire these candidates,” Morgan said.
Overall, commissioners were favorable toward the project, though there was a sticking point on the tax abatement. Commissioners approved of investing in a local company, especially one in a growing industry that will not compete directly with another firm receiving economic development incentives.
“I really like the idea that it’s a local company,” commissioner John Matta said. “I really like diversifying the industry base.”
Commissioner Jim Sherow said he saw it as a nice return on investment for the community. Sherow described CivicPlus as part of a “knowledge-based industry” that will bring quality jobs and people to the community.
“When I look at this the wage structure is one of the best I’ve ever seen in an economic development proposal,” Sherow said.
He added that the commitment CivicPlus is showing to downtown redevelopment will be important in attracting those quality people.
Lauren Palmer, assistant city manager, reviewed the details of the incentives.
The $750,000 forgivable loan will go toward the building. Palmer said the loan will be paid in four installments when performance targets are met, and payments will be forgiven over a 10-year period. The performance involve meeting the goals for capital investment, job creation, wage structure and benefits package.
The commitment to issue up to $20 million IRBs would also go toward the building. Palmer said the firm is required to make a minimum capital investment of $8.85 million before 2015. But she said it is requesting the option to issue IRBs to allow flexibility for an additional investment in the building.
The final piece is a tax abatement. Palmer said the abatement would be for a 10-year period, but it would not apply to any portion of the property used for purposes other than corporate business. Essentially, the first floor would not qualify, meaning about 80 percent of the building would be eligible for the abatement.
The current appraised value of the land and building on the corner of 4th and Pierre streets is $453,000. CivicPlus plans to make a minimum investment of $8 million toward the new building. The city anticipates even with a partial abatement, the value will be more than triple.
“When folks see property tax abatement of that size, it brings some concern to mind,” Commissioner Wynn Butler said.
Butler desired reassurances on several points related to the tax abatement. He said he wanted a guarantee that the first floor would bring in retail stores and restaurants, that those stores and restaurants would generate as much revenue for the city as the Manhattan Appliance and Sleep Source store, and that they would definitely be exempt from the tax abatement.
City staff said it would look at the tax abatement portion and make clarifications before the second hearing.