2014-04-18 / Front Page

Business in the spotlight

Lampasans debate relocating company’s economic effect, incentives city plans to offer
Staff Writer

Questions of fairness and return on investment have fueled a debate about whether the city should give financial incentives to a company that plans to move from Merced, California to Lampasas.

The company’s effect on the area’s economy is one matter being scrutinized as residents react to a commerical property lease-to-purchase plan city officials have announced.

Citing an economic study and business owner Mike Jones’ plans for Lampasas Trucking and Redi-Mix, proponents of the economic development agreement have said the deal will boost the county’s economy. Critics, however, argue public incentives will give the trucking, concrete and crane company an unfair advantage without promising significant job growth for the area.

The city closed last week on the $375,000 purchase of a 3.9-acre property on U.S. Highway 281 that includes the former Nut Hustler building. The city and Lampasas Economic Development Corp. are contributing $50,000 apiece toward the purchase price, which means the relocating company will be able to buy the building for $275,000.

An economic development agreement with the company outlines a 15-year lease-topurchase at 3 percent interest. The company will rent the U.S. 281 property from the city for $1,951 per month, City Manager Finley deGraffenried said, and will be able to buy the building early once it satisfies an employment condition in the development agreement.

Lampasas Trucking and Redi- Mix must maintain 10 full-time jobs for five consecutive years before it may buy the former Nut Hustler property outright.

Heath Eckermann, a Lampasas business owner who has been a leading critic of the city and LEDC incentives, said that is not much of a guarantee in exchange for the public funds to be given.

“What am I missing here?” he asked in a letter to city officials.

Lampasas resident Ashton McCoy also questioned the city’s agreement with the trucking, crane and concrete company.

“Personally ... I think that if the city is going to help a company relocate, it should be one that will employ 50-100 and potentially bring millions of dollars to our economy rather than a company that will employ an average of 10 people,” he wrote on the Dispatch Record’s Facebook page.

Jones said he may create more than 10 jobs. The business owner said he is considering moving additional operations from California to Lampasas, and he said he could employ as many as 50 people in the city.

Over 10 years, Lampasas Trucking and Redi-Mix will create 40 permanent jobs and lead to the addition of 52 “spin-off jobs” in other companies, according to an economist’s study. The city commissioned an analysis by Austin firm Impact DataSource to determine whether incentives to Jones’ company made good business sense, deGraffenried said.

The study predicted Lampasas Trucking and Redi-Mix will have a total economic effect of $30.5 million on the Lampasas area in 10 years.

As part of its agreement with Lampasas Trucking and Redi-Mix, the city will annex the property the company is leasing and will require the business to purchase city utilities with no discount.

Cities can claim a property tax exemption on land and buildings they own, but Lampasas will waive its exemption on the U.S. 281 property to be leased, said Jo-Christy Brown, special legal counsel for the city of Lampasas. Lampasas Trucking and Redi-Mix will be required to pay all city, county and school district property taxes, officials said.

For the city, the company’s total net benefit -- including tax revenue, money generated from fees and utility revenue versus expenditures -- over 10 years will be $402,321, the economist’s study said. The county will reap $174,305, and the Lampasas Independent School District will gain $32,844, the study claimed.

The analysis predicted city utility revenue of $300,120, plus $6,617 in utility franchise fees. The cost of providing utilities to the business over 10 years will be $285,114, according to the study.

Also, the study said incentives of $100,000 -- the total the city and LEDC are contributing -- will be repaid in 2.7 years.

Jones disputed Eckermann’s claim that the trucking, crane and concrete company owner is “taking free money.” Jones said he will repay the city fully.

Based on the amortization schedule for a 15-year lease-topurchase deal, deGraffenried said Jones’ company will pay $343,000 -- including about $70,000 in interest -- for the U.S. 281 property.

The city’s $50,000 discount to Lampasas Trucking and Redi-Mix, the city manager added, is less than the $58,000 Lampasas loaned Prestwick Development for The Manor at Hancock Park, a senior citizen apartment complex on U.S. Highway 190.

The Manor at Hancock Park, financed by the sale of tax credits to corporate buyers, received a 15-year loan from the city at 3 percent interest.

In contrast to the residential development, deGraffenried said the Lampasas Trucking and Redi- Mix deal allows the city to retain a valuable asset -- the former Nut Hustlerproperty--ifJones’company goes out of business or ends its agreement with the city. If that were tohappen,whichdeGraffenriedsaid he does not expect, the city could sell the U.S. 281 property or use it to entice another company to town, the city manager said.

Jones said he is spending more than $1 million to move his company from California to Lampasas. The entrepreneur, a former law enforcement officer who had a company in California for 26 years, said he is moving to Texas to enjoy a healthy business climate. Jones said in the past 10- 15 years California regulations have imposed heavy burdens on businesses.

Jones added that people connected to his company already have bought three houses in Lampasas County. Since Jones announced he is moving his company to Lampasas, five other out-of-state business owners have looked at relocating to the area, he said. Jones said one of them recently bought half a block in Lampasas.

DeGraffenried and Mayor Jerry Grayson said the city’s economic development goals are to assist existing Lampasas businesses, as well as to bring in new companies that will increase the city’s tax base. A growing tax base, the officials said, will allow the city to provide its services while maintaining a low tax rate.

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