Janesville City Council to consider SHINE agreement
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Click here to visit the City of Janesville's website and view the entire developer's agreement.
JANESVILLE — The Janesville City Council on Monday will consider a $9 million incentive development agreement with SHINE Medical Technologies.
The city would guarantee SHINE about $5 million—including utilities, land and $1.5 million cash—if certain criteria are met, including property tax payments and employment.
The city also would agree to back $4 million in loans from a private party.
The council will consider the agreement at a 7 p.m. meeting at City Hall, 18 N. Jackson St. The agenda does not include a public hearing, but residents can speak at the start of the meeting.
It is the costliest development agreement to get this far in recent memory, although the council in 2009 was prepared to offer more to General Motors when it considered building a car line here. That car line instead went to Michigan.
The $5 million includes about $1 million in interest payments and other project fees.
One-tenth of the loans would be forgiven each year over a 10-year period if the company meets requirements. The 10-year clock begins a year after the city issues an occupancy permit.
If all goes well, the city eventually would get all its money back through property taxes boosted by the development, City Manager Eric Levitt said.
SHINE Medical Technologies, 2555 Industrial Drive, Monona, would relocate its headquarters and production facility to 4021 S. Highway 51. It would produce an isotope used in medical diagnostic testing. No United Sates company produces the isotope, and SHINE is one of four companies to be awarded $25 million in federal matching grants to do so.
If SHINE builds here, it expects to begin construction in 2013 or 2014 with production scheduled to begin in 2015. However, the nuclear regulatory review process could mean delays to 2017.
The city estimates receiving its first tax payment of $614,655 beginning in 2017.
According to the developer's agreement, SHINE would:
-- Build a 35,000-square-foot facility with an assessed value of $25 million. It would guarantee annual payments of about $583,000 for the 10-year term of the agreement.
-- Guarantee 125 jobs within five years of beginning production. Salaries are estimated at $60,000 a year.
The city would:
-- Give SHINE 84 acres of land. The city is buying the land on the city's south side for $1.53 million. It would annex the property and extend TIF No. 35 to include the new property. All the money the city would spend would come from the TIF.
-- Extend water and sewer to the SHINE property line at a cost of $1.26 million, with the TIF paying $343,636 for SHINE's share of utility costs.
-- Forgive the $578,000 stormwater assessment that would normally be charged to the development.
-- Loan $1.5 million to SHINE for site development and/or equipment. The loan would be forgiven if the employment targets and annual tax payments are met.
-- Guarantee $4 million in private loans to SHINE. While the money to guarantee the loans would come from TIF, the ability of TIF to cover the loan if the development falls through would be in question, Levitt said.
Levitt said risks are involved, and the agreement establishes benchmarks before the city disburses cash in an attempt to mitigate some of the risks.
Benchmarks include:
-- Needed approvals from the National Nuclear Security Agency.
-- Successful testing of production equipment.
-- Construction permits issued by both the Nuclear Regulatory Commission and the city.
-- Plans for storing and removing nuclear byproducts are approved by the Nuclear Regulatory Commission. The city would require the byproducts be removed within five years. The company's plan must be approved by a third party.
-- In addition to the benchmarks, the city would require certain mortgages and/or liens on equipment as security.
Levitt said the agreement could result in a positive development, but it's risky.
The positive outcomes include:
-- The creation of 125 jobs.
-- An increase in real property tax assessed value of approximately $25 million, which would depreciate over time. Annual tax payments are estimated at more than $550,000.
-- The potential that SHINE would expand.
-- The potential that other high-tech medical industries would locate to the area.
Risks include:
-- SHINE's need to meet federal regulatory requirements before building. The timelines are uncertain and could delay building. The majority of the city's direct financial incentives would not be spent until those requirements are met.
-- Environmental concerns. The company is in the early stages of the National Environmental Policy Act process, and SHINE has not yet developed a plan to address these concerns, Levitt said. Levitt plans to hire an outside consultant to advise the city through the process.
-- Uncertain technology. The four companies that received Department of Energy funding, including SHINE, have not proven their processes can work on a large scale, Levitt said. Levitt believes the city's money is at risk because it will be spent before the technology is proven.
-- The $4 million loan guarantee. Levitt considers that a significant risk. The loan guarantee doesn't kick in until the company receives its government licenses.
-- Competition from foreign countries where companies might get government funding.
Steeber: Agreement likely to pass
Janesville's development agreement with SHINE Medical Technologies likely has enough city council votes to pass.
But at least one council member remains concerned enough about the risks to be undecided.
President Russ Steeber believes the risk is worth what he called a "game-changing development" if the company locates here.
"This could really change the face of Janesville and redefine the area for the next century," he said.
But Councilman Tom McDonald has not decided how he will vote because of the risk it carries for taxpayers.
"It's got great potential upside, if everything works out," McDonald said. "It's a tremendous boost for Janesville and all of Rock County. If things don't work out, then Janesville is going to be in a world of hurt."
Steeber suspects the agreement has support from council members Kathy Voskuil, Deb Dongarra-Adams and Sam Liebert.
Council members Yuri Rashkin and McDonald have expressed the most concerns, Steeber said.
The seventh council seat is vacant because of the resignation of George Brunner.
"This could be a game-changer for the city of Janesville," Steeber said.
The city made vehicles starting in the early 1900s. That industry is no longer here, and Steeber said he does not know if it will ever come back.
"We have to redefine what Janesville and Rock County are going to be," he said.
SHINE represents a high-tech industry in huge demand. Other ancillary companies could come with it, he said.
Steeber said councils and staff have been working on this for two years.
"It took a lot of insight and a lot of guts to go after this project," he said.
Steeber agrees there is a "degree of risk," but that risk comes when any company locates, he said.
At some point, the city has to decide what it will be in the future.
"If the outcome is positive, the rewards are going to be huge for the city and the region," he said.
Rashkin said his major concern is the $4-million loan guarantee.
"I'm concerned that we are potentially putting Janesville taxpayers in a position of owing $4 million to a venture capitalist," he said.
Rashkin supports delaying the vote so residents can learn more about the agreement, as does McDonald.
McDonald didn't know how he will vote and wants input from the public.
McDonald said SHINE is a "tremendous" product that could be great for the city.
But the city would invest $9 million in a startup company: $5 million the city is guaranteed to pay and another $4 million if the project fails.
McDonald termed the project "extremely" risky. Possibly, that is why the city is guaranteeing the loan rather than traditional investors, McDonald said.
The city may have the equipment and building as collateral, but the building is a specialty building that will have little value to others. And the pricey equipment will become radioactive the first time it is used, he said.
McDonald said water rates likely will increase when the city expands utilities to the new parcel.
"I still may support it, but people need to be aware of the risks," he said. "It is one of the biggest and riskiest ventures the city of Janesville will ever take on."
City Manager Eric Levitt has not made a recommendation for the council but instead pointed out the benefits and risks of the agreement.
Vic Grassman, economic development director, recommends the council approve the agreement.
Feb 12, 2012 at 4:05 p.m.
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Page 55 of the agenda - "There are environmental concerns with the process. The company is in the early stages of the NEPA process and therefore SHINE has not yet developed a plan to address these concerns. (This will occur, but has not occurred yet.) (The City Manager anticipates hiring an outside consultant to advise the City through the process, although the agreement only provides narrow discretion for the City in the future.)"
There is an article printed in the March edition of Popular Science Magazine. Page 57, "The Boy Who Played With Fission".
The link below isn't the article, but the only info on the internet I can find about Taylor Wilson - the subject of the PS article.
http://www.mentalfloss.com/blogs/archive...
To quote this PS article - "Instead of creating those isotopes in multimillion-dollar cyclotrons and then rushing them to patients, what if he could build a fusion reactor small enough, cheap enough and safe enough to produce isotopes as needed, in every hospital in the world?"
They are working on this.....
Feb 11, 2012 at 12:51 p.m.
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woody, do you think city officials who put a zero value on farmland really care anything about future site clean-up?
beaner, that's old news but if you're implying that they will no longer request taxpayer assistance for their project - that's good news.
As much as people tend to focus on the TIF element of this agreement, I think it is the least offensive factor of the package providing it was used in conventional TIF terms and applications, which of course it’s not. In SHINE’s case however, not only are we applying TIF district financing to develop farmland, which is an abomination in itself, we’re giving the land away for free. Beyond the regular improvements and infrastructure that tax incremental financing normally pays for within the district, this agreement calls for paying SHINE’s share of utilities, stormwater assessment and $1.5 million for site development and/or equipment. Stating in the article that the city would receive its first tax payment of $614,655 beginning in 2017 without further elaboration of where and how that money will be dispensed seems like a deliberate attempt to butter up the deal. Again, understand this is a highly exploited TIF agreement. City taxpayers won’t see a dime for the life of this agreement and taxpayers outside the district will be picking up the tab this project would normally pay to the taxing jurisdictions.
But nothing should top the outrage that we are condoning the use of government power to leverage an advantage for a private-for-profit enterprise which is probably one of the most abusive and corruptive actions will could allow. This deal has roots in the economic injustice people are protesting all over the country.
Shame on us for turning a blind eye.
Feb 11, 2012 at 7:33 a.m.
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Who is going to pay for "site clean-up" when these guys leave town? The taxpayer! Do you really want radioactive waste in your county?
Feb 10, 2012 at 9:53 p.m.
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@RockEN: "TIF is a solution" is a false statement. "TIF is a mirage" would be more accurate. You just cannot make something out of nothing. Robbing Peter to pay Paul leaves Peter just as broke!
Feb 10, 2012 at 7:28 p.m.
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Janesvillean- Please read about allowable extensions to the length of TIF time. I believe the law says that such extensions take that time of not paying school tax up to 35 years. As a homeowner, I would like to be excused from paying school taxes for that length of time! M&I did, indeed, replace a "blighted" community area. However, I have always wondered why banks which hold so much money need our money to help them develop. If we are already getting benefits back from these TIFs, why doesn't The Gazette publish the results for area readers. We must not forget that additional infrastructure was put into many such districts and that costs tax monies additionally. Also, do I recall that the Gazette was a recipient of a couple of those TIFs? We taxpayers should have some really serious concerns in these matters.
Feb 10, 2012 at 5:50 p.m.
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youkillme, you're pretty vocal about this, but what's your alternate plan? Make a wish?
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RockEnvironmentalNetwork and luvujvl, I doubt that they can make a facility application or complete any environmental impact plans before securing a site. It just doesn't work that way.
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JohnWicket, the purpose of a TIF is _not_ tax relief, but tax base improvement, and as far as I know it's almost impossible for a TIF to make a "profit". The increment (the higher tax rate derived from the development of the property) must by law be used for specific purposes within or in close proximity to the district itself -- roads, sewers, and other infrastructure being the primary such investment, although broader community-benefiting improvements are also possible (e.g. developing a park). The ideal situation for a TIF is that at the end of the term (currently maximum 27 years) it closes out with a zero account. AFTER that point, the property taxes accrue to the general fund. It's quite likely, for example, that the M&I bank building -- in one of the first Janesville TIF districts -- began contributing to the general fund for its increased value some years ago already (after paying, for the duration, property taxes based on the blighted/undeveloped value of the site beforehand).
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The money for this subsidy package will, all things being nominal, come out of future property taxes paid into the TIF by SHINE. (Temporarily, the city will borrow against the future value of the TIF. But the biggest parts of the package won't even kick in until certain development milestones.) The risk is real, of course, that the process may not complete for some unforeseen reason, and the $4 million loan guarantee is thus one of the biggest potential losses for taxpayers to cover, but much of the remaining investment -- streets and sewers, for example -- would still be usable by any future successor resident in the business park. Again, this does not affect the current general fund directly. Those expenses get charged to TIF 35.
Feb 10, 2012 at 5:35 p.m.
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Blighted area does not include:
Predominantly open land area that has been developed only for agricultural purposes,
commonly called “Greenfield” development.
Feb 10, 2012 at 5:33 p.m.
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Keep in mind that TIF is a solution to encourage development in blighted areas, those that are
otherwise unlikely to develop/redevelop. The Tax Incremental Law, 66.1105 describes
blighted area to mean any of the following:
a. An area, including a slum area, in which the structures, buildings or improvements,
which by reason of dilapidation, deterioration, age or obsolescence, inadequate
provision for ventilation, light, air, sanitation, or open spaces, high density of
population and overcrowding, or the existence of condition which endanger life or
property by fire and other causes, or any combination of these factors is conducive to
ill health, transmission of disease, infant mortality, juvenile delinquency, or crime,
and is detrimental to the public health, safety, morals or welfare.
b. An area which is predominantly open and which consists primarily of an abandoned
highway corridor (blight elimination and slum clearance), as defined in s. 66.1333
(2m) (a) or that consists of land upon which buildings or deterioration of structures or
of site improvements, or otherwise, substantially impairs or arrests the sound growth of the community. http://www.uwex.edu/ces/cced/economies/T...
Feb 10, 2012 at 4:58 p.m.
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Janesville would be the perfect place to make a stand on this and reject these bad government wealth redistributive "incentive" deals. This would send a message to Madison that they have taken us down the wrong path by creating laws that allowed government to be lobbied as a tool to advantage the well connected and wealthy. If not now - when?
We want jobs. Not wealth redistribution and certainly not sprawl expansion over fertile farmland while existing buildings go vacant.
Feb 10, 2012 at 4:48 p.m.
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Why should we who pay taxes fund this? This isnt what I pay taxes for, this isnt a service to me, it isnt a utility to me, it isnt anything to me. Hang these council members please. We cant even afford the upkeep of our streets. Focus on supporting the people who pay taxes and the reason they pay them.
Feb 10, 2012 at 4:42 p.m.
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Currently, the NRC has no application for license on file from Shine. THEY HAVE NOT EVEN APPLIED FOR A LICENSE. It will be SEVERAL years before they can potentially receive a license to do business. The NRC will conduct an environmental review or an environmental impact statement for this project. At that time, there are two opportunities for public involvement and community input. I understand the pressure that our Economic Development team is under to produces jobs, jobs, jobs. But this is not the project. If you have not done so, please read the book "Small, Gritty and Green" by Catherine Tumber concerning small to medium cities that have lost their industrial base, and how we can succeed in a low carbon future. There are tons of ideas in the book on how to accomplish economic development, and ideas from other communities from the midwest and northeast. I know that Council wants to provide jobs to the community, but at what price to the community? As a private business owner, I am not interested in financing anyone else's business; it's hard enough operating our own. Janesville needs some fresh ideas.
Feb 10, 2012 at 4:40 p.m.
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The City/Council has had roughly two years knowledge of this project, and to give the public ONE week to learn about and review what we are getting into - is unfair to residents who are being asked to pay for this project.
1. The 4M loan guarantee (to venture capitalists) does not look at the cost of financing if this debt, if it has to be paid by the City. We will have to borrow for it. If approved, Council is asking the residents to assume a huge risk for this project.
2. There are bench marks that Shine would not agree to before getting this money. Who is in charge here? We are not desperate. Shine wants us to build them a new building, on virgin soils, purchase equipment for a non-proven technology. As a shareholder in the City of Janesville, I am not interested in bankrolling a start-up company that has only produced lab results, and nothing else. No one else is interested in taking this risk, why are we even considering it?
3. This does not fix our unemployment problem. If this facility opens, it will not create any jobs until 2015 or after.
4. Approval or not, there is no guarantee that this project will occur. The State has not given them authority to do business, at which point, the residents are on the hook for the land purchase, infrastructure, and building.
5. If we start giving money like this to private companies, every company will expect it - this is a slippery slope. As a current business owner in Janesville, we too need new equipment. What is to prevent us, and other companies from coming to the Council, (and we have a proven and operational business that currently provide jobs) and asking for financing to KEEP jobs here, or we will sell our business and job locations to the highest bidder. This is a race to the bottom.
6. The City, who can't maintain the infrastructure that we currently have, will be running MORE infrastructure, out PAST vacant land to this parcel - continuing to expand the City without thought for the long term expenses of maintenance. Using TIF money for this project is aggravating to me, as we could offer these funds to companies to open in EXISTING structures that are vacant, with infrastructure already in place. TIF money is my money. It is taxpayer money, and last time I checked, we were broke.
7. Water rates will again be hiked to pay for the infrastructure to this facility. If this is built, and the company does not succeed, the City is on the hook with ANOTHER vacant building with MILES of unneeded infrastructure.
Feb 10, 2012 at 4:16 p.m.
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I would like to know, from those with excess graymatter, how much money has been returned to our city (in the form of tax relief) over the history of the previous 34 TIF districts. When bonds are paid off how much money is returned to the homeowner-taxpayer? Or is it really all just promises and innuendo? I've read and studied the law over many years. What does it take to be truly informed? I understand why those who favor TIFs wish to browbeat ordinary citizens. Isn't a reasonable debate over the issue acceptable in an informed society? Don't try to divert attention by deferring to unrelated issues like welfare, the spotlight rightfully and squarely belongs on TIFs! What do other hard-working taxpayers think?
Feb 10, 2012 at 4:11 p.m.
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SHINE has secured private capital: http://shinemed.com/docs/MIR_ShineSecure...
Feb 10, 2012 at 3:53 p.m.
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graymatter, your double-talk is BS.
Feb 10, 2012 at 2:51 p.m.
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JohnWicket wrote: "Where is the money coming from?" Please. Burn 15 minutes of your life and read how TIF works so you can stop with the trifling, uninformed, senselessly foolish comments. The company agrees to pay $600K in property taxes annually going forward. Those new property tax dollars (the "Increment in TIF") are used to pay off the bonds sold by the City to create the incentive pool. If only all welfare worked this way, i.e., provide assistance paid back by the person/company receiving the benefit in an amount over time exceeding the amount of the assistance.
Feb 10, 2012 at 1:29 p.m.
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Where is the money coming from? If you are a homeowner, have you looked at your city/county tax bill lately? Did your taxes go down? Do we now pay more sales tax than we used to pay? More water tax? More garbage tax? Any special assessments? Did your state taxes go up or down? Did local school taxes go up because local businesses pay no school tax in the city's 35 TIF districts, thus forcing local homeowners taxes ever higher? Do homeowners bare all the burden? Taxes really help our city to SHINE. Have you asked your neighbors if they are enjoying Janesville's higher tax status? Why is it that Wisconsin was recently ranked by retired people as the #1 tax Hell? If you are happy about this predicament please write our governor or your city councilmen to thank them. Wisconsin is still open for business! Or is it "monkey business"?
Feb 10, 2012 at 1:16 p.m.
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This request for government assistance and capital coming at time of stock-piled private capital and record low interest rates should raise alarm bells. The pie-in-the-sky rhetoric from the CEO and company officials lead me to believe they wouldn’t take private capital if it were available. I would bet that if a local individual came forward and offered $9 million (the estimated cost of the hand-out) to invest in SHINE with the intention to offset and cancel this government deal but with the same promissory note other investors are in for, they would not accept it. They don't want more investors at this point to cut into profits. The CEO "saw a community that had been pummeled economically," my eye. They want our money. Free stuff. Welcome to the entitlement mentality.
Government is the solution to all of our problems.
Feb 10, 2012 at 10:20 a.m.
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What was the incentative for GM to move to Janesville back in the '20s? Should the city council offered nothing? What would have happened if GM hadn't come to Janesville?
Feb 10, 2012 at 9:10 a.m.
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Gubmint needs to leave it alone. Stay out of the private economy, all you will do is make things worse.
Feb 10, 2012 at 7:10 a.m.
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Janesville needs to meet, sit down and define what Janesville is and what Janesville wants to be. And people in Janesville need to do this without a consultant and without the current city council. There is an old saying, Plan your work and work your plan.
Feb 10, 2012 at 6:41 a.m.
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Are we truly this desperate for jobs? I'm all for job creation, but this isn't the way to get there. Free land (prime farmland at that), infrastructure, and $4 mil of free money - for unproven technology and a company who "has not yet developed a plan" to meet environmental requirements? Use your heads - you're being taken for chumps.
Feb 10, 2012 at 6:29 a.m.
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Oh but they have enough money to propose offering health care and funeral (whatever that is) benefits to domestic partners.
Feb 10, 2012 at 5:49 a.m.
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If this is such a hot ticket why would a private investor not want to make a loan. And why is the city manager sitting on the fence. And salaries of $ 60,000 don't seem that great to me. I would not trust the city council to spend more of my grandchildrens money if I were a Janesville resident. I am glad I am not, but I do have close relatives that are.
Feb 9, 2012 at 6:55 p.m.
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Where is all this money coming from????
We have to pay $40 to pick up our trash!
Why cant they just come on their own. We have to "pay" for everything?
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