Supervisors approve of Co-Line’s proposed $1.5M industrial expansion

To assist the expansion of a local manufacturer located in the outskirts of Jasper County, the board of supervisors on May 18 accepted a tax increment financing proposal that JEDCO Executive Director Jeff Davidson says will pose “very little” financial risk to the county.

Co-Line Manufacturing, of Lynnville, approached JEDCO about construction a new 50,000-square-foot building north of their existing campus in Jasper County. Despite the Lynnville mailing address, all of Co-Line’s buildings and facilities are currently located in Mahaska County, Davidson said.

However, approximately half of metal fabrication business’ 207-employee workforce are residents of Jasper County.

In addition to being Co-Line’s first manufacturing facility in Jasper County, the proposed building would be associated with a new product line to be manufactured by the company and distributed throughout the United States. Davidson could not disclose what the product was at the supervisors meeting.

“I will say even though we can’t disclose the product, it is a product for which if much comes to pass the way it looks like it’s going to with the federal stimulus money that is being talked about in Washington right now, it would be a product that would have a very heavy use with some of those stimulus dollars,” he said.

The Jasper County building would include 10-15 new skilled production positions added to Co-Line’s workforce. If sales develop as predicted, it is possible an additional second production shift could be implemented in the facility. There is also ground to accommodate more expansions, but none have been committed.

“There will be an additional building in Mahaska County that will be built at the same time,” Davidson said. “So I think it’s fair to say we’re in a competitive environment. Economic development is always a competitive environment. The state gives us basically one tool: and that is tax increment financing.”

TIF funding will finance about 25 percent of the construction expenses for the expansion, currently estimated at $1.5 million. Davidson said this arrangement similar to what Co-Line received for its Mahaska County projects.

Davidson said what makes TIF so attractive is the decision making remains local, so long as the state-established parameters are met.

“The way TIF works is you take the piece of property and look at it as it exists currently, and that all remains fixed,” he said. “Nobody receives less taxes than they are currently receiving in terms of the distribution of property taxes to, principally, the county and the school district in this case.

“But there’s also the community college and some lesser levies that are there as well. Those taxes are fixed and continue to be distributed.”

Currently, the existing property where the new facility is being proposed produces $3,100 in property taxes annually. Of note, the TIF arrangement would persist for 12-13 years. The new building would pay approximately 10 times that amount, or roughly $30,438 per year starting 2035.

“Co-Line would pay their property taxes for their new building and then have them rebate it back to finance the 25 percent of the construction costs,” Davidson said. “And it is only the new increment that is distributed back to them.”

Co-Line was first established as a welding shop with two employees in 1979. Ever since then the manufacturer’s steady growth has resulted in the development of an entire manufacturing campus. Production growth has been especially robust in the past three-and-a-half years.

“They’ve approximately doubled their production,” Davidson said. “So the growth has really been phenomenal.”

Which will be beneficial for Co-Line, which is financing the majority of the funding for this project. The TIF rebate will be used for the last quarter of the construction loan — about $375,000 — as Co-Line pays property taxes on the new building. Jasper County is also not being asked to provide any upfront money.

Oftentimes businesses don’t have “the financial wherewithal” to get the construction loan that’s needed to build a facility for TIF projects.

“So they have to have money up front, and what that means is the municipal government has to finance that money up front,” Davidson said. “The city or county has to sell a bond and give those proceeds to the company so they can do their construction. And that introduces a whole lot of risk into the project.”

Davidson said what differentiates Co-Line’s project is the county is not being asked to provide that initial funding.

“We are fortunately working with a company who can finance the construction of the project,” he said. “So there is very little risk to the county in doing a project like this where it is a rebate-only. If they don’t pay their property taxes on the new building for whatever reason that might be, then there is no increment.”

On the other hand, if Jasper County financed the project up front by selling a bond then Davidson said there would be a hole in the county’s financing for paying that bond off. The county “will not have that situation” with this project. Co-Line would have the new property taxes rebated until the $375,000 is paid off.

Even though Davidson conservatively estimated 12-13 years, he entertained the TIF could be lifted sooner.

“We are really interested in establishing a Jasper County presence for this fine, Central Iowa company that’s in a great growth mode,” Davidson said. “You hear all kinds of positive things about this company … I really think they are a very, very reputable group for us to hitch our wagon to.”

Receptive to the proposal, the Jasper County Board of Supervisors unanimously approved the TIF agreement in principle, which will lead to the drafting and execution of the actual TIF agreement. Jasper County Supervisor Brandon Talsma said it’s a “great opportunity” to help a local employer continue to grow.

“To expand on the right side of the county road this time, I might add,” Talsma said. “I said it in the last campaign. It seems like we spend a lot of time and a lot of our efforts trying to attract outside entities into Jasper County instead of shifting focus onto our local employers, our local businesses.”

Co-Line is one such employer that has continued to grow and is projecting more growth, he added. With half of its workforce consisting of Jasper County employees, Talsma said that is something to keep in mind, too. Still, if there was money up front it would have been a tougher pill to swallow, he said.

Contact Christopher Braunschweig at 641-792-3121 ext. 6560 or cbraunschweig@newtondailynews.com