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City agency to help erect building

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A Franklin city board will be responsible for as much as $580,000 of the costs of a new industrial building, but the goal is to get as much of that money back as possible.

The Franklin Redevelopment Commission is partnering with a Shelbyville developer on a shell building, which will be constructed but left unfinished and built without a specific business in mind.

The board approved spending up to $100,000 on expenses such as taxes and interest and $480,000 for 12 acres of land. The city board oversees the spending of property tax money collected from certain businesses, which typically is set aside for economic development projects.

As part of that approval, the board also is putting a lien on the property, so the redevelopment commission would have some guarantee of being paid back when the building sells, according to Rob Schafstall, the board’s attorney.

Runnebohm Construction, the developer constructing the building, would be first to be paid back in a sale. That money would be used for the developer’s costs of erecting the building, including any construction loans. The city board would be second in line to be paid back for its $580,000 investment, Schafstall said.

The agreement ensures that the city board has some say in what happens with the facility, such as to whom the building is sold and for how much, board member Rob Henderson said.

But he said that arrangement also could mean that the city board would not recoup all of its costs, depending on how much the property would sell for or if it never sold.

Since announcing plans for the building, the city, state and the county’s top business recruiter have received multiple calls and contacts from interested companies, he said. When the building is sold to a business, the city will benefit from the value of the building and new jobs, he added.

“The risk of not moving forward is we would lose those leads by not having a shell building in the works,” Henderson said.

The city board began considering a shell building after hearing from the Johnson County Development Corp. that few vacant manufacturing facilities were available, but companies repeatedly were asking for them when looking to expand or relocate.

Members of the redevelopment commission decided to work with Runnebohm Construction, which plans to erect a 50,000- to 60,000-square-foot building that easily could be expanded in the future.

The city board pledged to spend up to $100,000 on costs including surveys, title work, property taxes for the land and interest on a construction loan. And the board pledged to pay for the 12 acres of land the facility is being built on, at a cost of $40,000 per acre.

But the landowner has agreed to wait until September 2015 before asking for payment for that land, which is in the Franklin Business Park.

If the building sells before then, the city board would not have to pay that amount. But the city board could have to pay for part of that land price if the facility sells for less than expected, Henderson said.

By having the lien on the property, the city board will be involved in decisions about its future. He said the board will know who is looking at the property and how they plan to use it.

He said he considers any money the city board pays to be an incentive to a company that would move in. That doesn’t include any incentives, such as property tax breaks, that the city economic development commission is considering approving for the building.

And if the board doesn’t like a proposed sale or the amount it would get in the deal, members can reject it, Henderson said.

“We effectively will have veto power,” he said.

The board also would have a say in whether Runnebohm Construction could enter into a long-term lease of the building, instead of a sale, Henderson said. Members of the board agreed they don’t want to be involved in a long-term lease arrangement, so if that was what the developer decided to do, the company would need to find a way to repay the redevelopment commission, he said.

With the agreement from the city, the developer can start the process of constructing the building. Depending on weather, the facility could be built by mid-May, Henderson said.

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