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Officials hope for growth at Janesville Innovation Center

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Jim Leute
October 12, 2013

JANESVILLE—Six months after opening the Janesville Innovation Center, city officials admit they need to do a better job marketing the facility.

Three of the 13 spaces are occupied in the business incubator that opened in April.

“We need to do a better job, and we will,” said Jay Winzenz, acting city manager and one of the center's board members.

Andrea Rubash had the run of the center in April when she moved her business into the incubator on Janesville's south side.

Her business, That's Kinda Cool!, provides website templates for photographers and other boutique businesses and was the first tenant in the center.

Six months later, Rubash has one neighbor in the office suites of the facility and another neighbor in manufacturing space at the far end of the building.

Combine the three tenants, and the center's occupancy rate is 21 percent.

Some observers aren't surprised, saying marketing and promotion of the facility have been nearly nonexistent since it opened.

Center leaders agree, saying a high level of turnover at City Hall this year has pushed promotion efforts down the ladder of priorities.

“We know we need to increase awareness about the center,” Winzenz said.

One area real estate broker said he has never been approached by the center's leadership to visit and learn about the property. He said he and other area brokers could be a valuable marketing arm for the facility, if they're ever asked.

Another observer agreed, saying the center lacks a solid marketing program.

“It's like they built it and then completely forgot about it,” the broker said.

Mike Mathews, the center's operation manager, agrees with the need for more marketing. The center's board is putting together a brochure that will be direct-mailed to prospects.

The board also is organizing a speaker bureau and has invited several outside groups into the facility for meetings.

Winzenz said Mathews is working with one of the center's tenants, Novak Networx, to set up a dedicated website. They also are investigating the use of social media in reaching an entrepreneurial audience that often flies well below the radar.

Winzenz  also has kicked around the idea of an entrepreneur fair at the center to showcase the center and the resources it can offer young companies.

Mathews said the three tenants are businesses started in Janesville homes. The center, he said, has a letter of intent for a fourth and an application from a fifth.

It's a slow process, he said, one that should improve as the economy improves and more entrepreneurs come out of the woodwork.

A slow start for incubators is not uncommon, said Richard Telfer, chancellor at UW-Whitewater.

Telfer was heavily involved in the launch of the Whitewater Innovation Center.

“We had a couple of tenants right when we opened our doors, but after that, it really does take awhile,” Telfer said. “A slow start is pretty normal.”

Tom Eckert, president at Blackhawk Technical College and the chairman of the Janesville Innovation Center board, said he was involved with an incubator in another state.

“It does take awhile to get off the ground,” Eckert said. “You have to go into it with a certain patience level, and you have to be careful about who you select.”

Like Whitewater's center, Janesville got off to a fast start with three tenants, including a manufacturer that the board didn't expect to find so quickly, Winzenz said.

HELPING HAND

The center recently got a boost from The Janesville Foundation, which approved a $27,500 grant to improve shared services for the center's tenants.

“This is a good project,” said Ron Ochs, president and chief executive officer of the foundation that launched in 1944. “We've widened our scope to some degree. We've always been interested in community development, and that includes economic development.

“This project certainly has a component of that, and we think the grant will help attract more tenants.”

The center has three main goals:

-- Support start-up companies that have the capacity to create jobs and move to a larger Janesville location.

-- Provide short-term space to existing companies that need more room for product or process development.

-- Provide space to companies that have decided to locate in Janesville and need temporary space while their facilities are built or renovated.

The three tenants fit that bill, Mathews said.

ABOVE MARKET RATES

Tenants at the innovation center pay higher rent than is common in the Janesville market, real estate agents and city officials agree.

Simply Solutions, for example, is paying annualized rent of about of about $5.68 per square foot, which one area real estate broker said is higher than local market rates.

Winzenz agreed market rates for similar space is $3.50 to $4 per square foot.

Those rates, he said, do not include advantages found at the innovation center, including shared facilities such as a conference room, break room and other amenities.

The one-year leases are flexible, giving either side opportunities to opt out, he said. They also provide for additional space, if available.

In addition to the expectation of creative synergies between young, start-up companies, technical assistance also is available. The center's board includes representatives from area educational institutions and professional service firms that can help tenants understand opportunities and challenges and find the resources to address both.

Winzenz said the center's pricing was set to be close to market rates.

“The idea is that when the center is fully leased up, it will cash flow, it will pay the operating expenses,” he said.

The city built the center with a $1.2 million federal grant and its own contribution of $850,000 in TIF funds for a total cost of about $2.05 million.

“We did receive a federal grant, and the city did incur debt to build the center,” Winzenz said. “I don't believe the debt service is part of the center's operating budget.”

INNOVATION CENTERS TENANT VOWS TO SETTLE TAX ISSUES

JANESVILLE--The owner of a company at the Janesville Innovation Center says he will pay the state every penny he owes to settle warrants over unpaid sales taxes.

John Goepfert said the unpaid taxes stem from years of running a different business in a tough economy and they are not connected in any way to Simply Spolutions.

“It got to the point that there wasn't enough money to go around, and some things that should have been paid were not paid,” Goepfert said. “I have been making payments, and I will continue to make payments until the debt is paid.

“These debts don't go away. You pay it off or you die with a huge debt.”

The state Department of Revenue lists Goepfert as a delinquent taxpayer, owing just shy of $160,000.

Goepfert said the actual amount of sales tax he owes is closer to $60,000, and the balance is interest, penalties and fees.

Goepfert is an owner of Simply Solutions, which makes lubricants for personal and medical uses. It moved into the innovation center earlier this year.

Jay Winzenz, acting city manager and a member of the center's board of directors, said the board was aware of Goepfert's financial situation before it signed the lease.

“As part of the lease review process, we did check credit lines and the issue of past bankruptcies and payment of sales taxes came up as a concern,” Winzenz said. “It was addressed with the lessees, and the lease was structured to protect the interests of the innovation center.”

The most notable, he said, is that the lease is with A.R. Goepfert, John Goepfert's father.

According to the lease signed by former City Manger Eric Levitt, the company pays $1,800 a month for 3,800 square feet. The company also pays for its own gas and electrical services.

In addition, Winzenz said, Simply Solutions financed and paid for extensive renovations to its space that would become the property of the center if the company ever defaults on its agreement.

Winzenz agreed an argument could be made that local taxpayers—through the construction of the center—should not be subsidizing a businessman with ongoing tax issues.

The board, he said, addressed the issue before signing the lease. The revenue department, he said, last filed a warrant against Goepfert on Oct. 1, 2012, well before he and his fellow investors applied for space at the innovation center.

“People in this country are allowed second chances,” Winzenz said.

Winzenz said he was unaware that the department filed a new tax warrant against Goepfert on Oct. 1, 2013.

Goepfert said the most recent warrant was the result of an internal state audit that corrected a mistake the department made in 2005.

He said he will make good on his debt.

“I'm not afraid of it,” he said. “I've made mistakes in business and in life, and I'm a much better person because of it.

“What happened sucked, and it wasn't a real fun time in my life. I'm making payments and trying to do the right thing and not dodge it. I'll make it good, and I hope with this company we can make things better for the community.”



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