TO: Honorable Mayor & Members of the North Port Commission
FROM: Jonathan R. Lewis, ICMA-CM, City Manager
TITLE: Request for temporary consideration from Adams Group
Recommended Action
Consider authorizing the City Manager to execute a modification of the Term to the 2010 agreement with Adams Group extending the agreement for 12 months.
Background Information
In 2010 the City of North Port, working together with the Economic Development Corporation of Sarasota County (Sarasota EDC) and Sarasota County (through the Business and Economic Development Department), successfully recruited Adams Group to relocate their headquarters and primary manufacturing facility to North Port. Subsequently, an Economic Development Agreement (agreement) was approved by the North Port City Commission on December 13, 2010 with a term of 6 years. Separately, the company secured an economic development incentive package from Sarasota County through the Sarasota EDC’s incentive program.
The City of North Port agreement allocated up to a total of $200,000 to incentivize Adams Group to create jobs in North Port. Recognizing the need to keep the company in North Port for the long-term and the public’s expectation for a reasonable return on the City’s investment into the company, several stipulations were required of the company which include:
1. Relocate its business within the city boundary;
2. Purchase the proposed parcel, renovate the existing building, acquire and install additional
machinery and equipment therein;
3. Invest an additional $4,495,000 on capital expenditures by December 31, 2011;
4. Exercise best efforts to purchase supplies from businesses located within the City of North
Port;
5. Exercise best efforts to use local contractors and encourage these local contractors to
procure locally;
6. Exercise best efforts to hire North Port residents;
7. Maintain an annual wage of $45,627 adjusted annually per the Consumer Price Index for All
Urban Consumers for the South Region (CPI-U); and lastly
7. Bring in the existing 62 jobs, and create an additional 102 net new jobs over the term of the
agreement.
An accounting of the ‘net’ new job creation was to be submitted quarterly to the City with the company receiving $2,000 per ‘net’ new job created in the quarter, up to a total amount of $200,000 for the term of the agreement. Net new job is the number after adding the new hires and subtracting the terminations or resignations. The decision to use the number of net new jobs metric (versus the number of new jobs) was innovative in the industry at the time. This stipulation was put in as a safeguard and a bond between the two parties to ensure the job creation program is sustainable and will exhibit a consistent growth over time.
Around the time period referenced in the letter from Adams Group (attached), the company started to report negative net new jobs in the quarterly reports for reasons explained in the letter. Meanwhile the quarterly reporting continued per the agreement and so, for the quarters in which net new jobs were created the company was paid the $2,000 per job as provided for in the agreement. For quarters in which the job number was either zero or negative (their employee number dropped below the base number), then the company did not receive any incentive for that quarter.
The incentive was provided to the company to encourage them to relocate to North Port so that they can continue to thrive - invest in their growth, create more jobs - and thereby help grow the North Port economy. At the time in which the agreement was written the company projections and audited financial performance pointed to a positively strong future for Adams Group, including the likelihood that they will not have an issue fulfilling the job creation schedule.
The agreement was crafted by the City’s legal team at the time and it did provide for a section for unforeseen circumstances that would preclude the company from fulfilling its obligations. It is this section (#10 Force Majeure), specifically paragraph c, which is the basis for this request from Adams Group:
“10. Force Majeure. Notwithstanding anything contained in the Act or this Agreement to the contrary, and subject to the terms of this Section, COMPANY's failure to perform its obligations under this Agreement, other than with respect to the payment of money or the giving of any notice required hereunder, shall not be a default, and no disqualification shall occur as a result thereof, if any such failure or delay is due in whole in part to one or more of the following…
(c) a Temporary Contraction, lasting no longer than twelve (12) months, due to a material adverse change in United States, world or applicable state or local market conditions with respect to the business of COMPANY and/or general business, economic or market conditions (including changes generally in prevailing interest rates, credit availability and liquidity, currency exchange rates and price levels or trading volumes in the United States or foreign securities or credit markets).
"Temporary Contraction” means a temporary curtailment in the operation of all or substantially all
of the Facility.
The time period in Section 5 shall be extended for a period of time equal to the delay
reasonably caused by the events described in subparts (a), (b) or (c) above, as applicable,
up to a cumulative maximum of twelve (12) months, so long as COMPANY shall have
furnished CITY on a timely basis, on the occurrence of such event, written notice of such
event.”
If Commission approves the company’s request, they will have the ability to replace the 19 jobs that they had already been paid for ($38,000), and possibly create more jobs.
If the agreement terminates without an extension, then Adams Group will be required to reimburse the City the amount of $38,000.
Current company business plans show a promising prospect for the next few years. In fact, they have an equivalent number of job postings in their website, and other workforce partners’ websites, as well as other recruiting activities in place, including partnering with the Suncoast Technical College and providing internships and training programs.
The company has been an asset to North Port since relocating their headquarters and manufacturing facility to the city, and has been a strong advocate of the growth of North Port’s economy, including helping recruit another manufacturer to relocate to North Port from out of state.
Strategic Plan
Toledo Blade and Sumter Interchanges as Major Destinations
Alive Activity Centers
Goal 1 Economic Development Strategic Plan - Foster Economic Growth and Expansion of Existing Businesses
Financial Impact
The company will be required to reimburse the City $38,000 if the request is denied. If the request is approved, then the company will likely be able to replace the 19 jobs (within the time period of the extension) and will not have to reimburse this amount to the City. If not all 19 jobs are replaced within the time period of the extension, then the company will be required to reimburse the City $2,000 for every one of the 19 jobs that they are not able to replace.
Procurement
Not applicable
Attachments:
1. Economic Development Agreement between the City of North Port and Adams Bros. Cabinetry, Inc. dba Adams Group
2. Letter from Ethan Adams, Chief Executive Officer
Prepared by: Ruth Buchanan
Department Director: Jonathan Lewis