Lockport Union-Sun & Journal Online

December 13, 2012

ONE-TREK MIND

Trek move isn't finalized but incentives are in the works

BY JOYCE MILES
Lockport Union-Sun & Journal

Lockport Union-Sun & Journal — Greater Lockport Development Corporation is on the verge of securing Trek Inc. as Harrison Place’s anchor tenant — but the deal is not done yet, development agency officials are cautioning.

Even as director R. Charles Bell said so Wednesday morning, however, major elements of a deal continued falling into place with the Niagara County Industrial Development Agency’s acceptance of a tax-relief application from 201 Walnut St. LLC, the GLDC subsidiary that “owns” Harrison Place.

According to Bell, GLDC and Trek are “close” to finalizing a 10-year lease deal, under which Trek would relocate to Harrison Place from Medina, bringing 72 manufacturing/assembly, technical and administrative jobs with it by next summer, and 24 new jobs within two years.

In exchange, GLDC would sink $4 million into renovation of three-story Building 4, mostly by two loans. The rent that Trek would pay remains to be determined after loan terms are finalized, Bell said; rent would be charged to cover those monthly payments, so that the agency is recapturing its investment over the life of the lease. The company would occupy the first two floors of the building and reserve the right to expand to the third floor within five years.

‘Stars lining up’ for Lockport

Wednesday morning at the IDA office in Sanborn, Trek President Michael Dehn also characterized the deal as tentative, but he seemed hard-pressed to contain his enthusiasm for the idea of moving to Harrison Place.

Trek has outgrown its 30,000 square foot current headquarters on Maple Ridge Road and it’s been looking for a new site, one big enough to accommodate future growth, for a while. Dehn said 20 or so sites were checked out in Orleans, Erie and Niagara counties, as well as the state of North Carolina and the city of Tokyo, where Trek Japan KK is based.

According to Dehn, Lockport came up the winner thanks in part to the persistence of Bell and Mayor Michael Tucker, who pulled out all the stops trying to make a city site financially attractive to the company.

Trek looked at two options in the city, including undeveloped acreage off Summit Street that GLDC earlier this year made arrangements to buy in the event the company wanted to build there. Dehn was pricing out that option when Bell and Tucker presented him with an outwardly improbable alternative: old Harrison Place, the “build-out” of which would actually cost more than a new build.

“It’s something that at first seemed really far-fetched,” Dehn said. “Chuck and Mayor Tucker did a great job of showing us the vision they had, and that it was possible. ... We’re really excited about the image (Building 4) will project, the message it will send to our customers” about innovation and success.

“Old manufacturing leaving, and new manufacturing coming in, is a wonderful story for Lockport,” added Gregory Sehr, a Trek consultant who’s aiding the company’s search for government support — grants, tax breaks and the like — during new-site selection.

Trek also likes Lockport for its proximity to the University at Buffalo, whose engineering graduates are ripe for recruitment, and proximity to Medina where 72 employees currently are based.

Relocating without putting those employees out of work is a company ideal, Dehn said, “but it has to make economic sense.”

More than 90 percent of the workforce would be able to make the daily drive to Lockport without major inconvenience, and thus keep their jobs, he predicted.

Trek relocation to Harrison Place is not a done deal due to unsettled financial and construction issues, Bell and GLDC attorney John Ottaviano stressed.

The agency loans that would underwrite Building 4 renovation are contingent on an appraisal that’s not finished yet; city planning and zoning approvals haven’t been obtained; and any environmental “surprises” uncovered during construction could also derail the project, Bell said.

It’s also still possible a competing site owner could sweeten its deal enough to trump Lockport’s, according to Ottaviano.

“The stars have to align. It’s between us and North Carolina,” he said. “The stars are lining up, but we’re not there yet.”

Tax relief portrayed

as critical to a deal

The NCIDA board will vote next month, after a Jan. 3 public hearing on the terms, whether to approve GLDC’s application for a deviated 20-year Payment In Lieu of Taxes deal for Building 4. That’s a three-floor, 96,000 square-foot standalone building along Walnut Street east of Locust Street.

The tax-relief package would consist of two types of PILOTs: a five-year Opportunity Zone pact first and a 15-year industrial PILOT afterward; and sales tax and mortgage recording tax exemptions throughout.

According to the application, Trek relocation is a $5.3 million project that would get 98 full-time employees working downtown — in production, finance, administration, technical work, engineering and human resources — within three years. Twenty-six of those jobs would be new and related to company expansion.

Already, 23 employees are working from the Trek Technology Center at 57 Canal St., where the company moved its research/development and design engineering departments last year. Trek would move them over to Harrison Place “eventually,” Dehn said; they are in addition to the 98 employees going to Harrison Place within three years.

Of the total project cost, Bell said, Trek would invest about $1.2 million, in new equipment, furniture and fixtures. That figure assumes the company receives a $500,000 grant from the state to acquire equipment for expansion; if the grant is not awarded, Trek would scale back its planned purchases, he said.

The PILOT would cut property taxes on the improved Building 4 by $720,000 over 20 years, according to projections by county IDA staff.

Harrison Place already is a 15-year PILOT recipient, since last year. However, the beneficiary is GLDC, a non-profit corporation, and according to NCIDA attorney Mark Gabriele, benefits cannot be passed on to a for-profit company like Trek. The agency is moving to subdivide Building 4 from the rest of Harrison Place and is applying for a 20-year PILOT for that parcel only.

While Trek is the tenant around which the request is made, GLDC is responsible for ensuring IDA requirements including employment levels and new-job creation are met over the term, Gabriele said. Supposing Trek left Building 4 before the PILOT expired, the agency would have to land replacement tenant(s) that can meet the numbers, or the IDA could revoke the tax breaks, he said.

According to Bell, the GLDC board of directors is meeting this morning to vote on additional “pieces” of the deal, including giving him authorization to make a final lease deal with Trek and awarding a construction bid for Building 4 renovations.

Municipal officials in Medina, who learned of Trek’s pending relocation to Lockport on Wednesday, were less than pleased with the news.

“It doesn’t seem right that (government) incentives can be used to facilitate a business moving 20 miles,” Mayor Andrew Meier said.

Orleans County Legislature Chairman David Callard, R-Medina, said it “makes sense” for Trek to consolidate operations that currently are in three counties, but that’s no consolation for Orleans, which ends up on the losing side of the deal.

“I’m disappointed. I hope we can retain the jobs in our county,” Callard said.  

An existing business in the village of Medina, Takeform Architectural Graphics, is set to purchase Trek’s Maple Ridge Road building and move its 85-employee operation there next year.

Reporter Jim Krencik contributed to this report.