Preparation for IBM's coming kicks into high gear

Wednesday, May 19, 2010 | 12:01 a.m. CDT

COLUMBIA — The process of implementing key agreements in the sweetheart deal that saw IBM commit to opening a service center in Columbia went into high gear hours after the Monday announcement.

The Columbia City Council held a first reading Monday night for a resolution that seeks to appropriate a down payment of $500,000 for the purchase of a vacant building at 2810 LeMone Industrial Blvd. in which the new center will be located.

The public will have an opportunity next Monday to comment on the ordinance that authorizes the city to spend money on a project that is expected to create about 800 new high tech jobs in Columbia and Boone County.

City Manager Bill Watkins and Regional Economic Development Inc. President Mike Brooks said that IBM had reserved the right to pull out of the project if the state and local government did not meet its part of the bargain by availing all incentives promised to the international IT firm.

Top among the incentives was that the City Council would spend $3 million to purchase the building that will house IBM’s operations and a further $10 million would be availed under the Missouri BUILD tax credit program to renovate the building.

Though there is no indication that the project, which is expected to boost Columbia’s economy by $44 million per year in payroll dollars, could be derailed, both officials warned that if the city doesn't meet any of the obligations in the contract with IBM, the company could technically exercise the exit option.

“IBM has the right to withdraw,” Watkins said.

Timothy Shaughnessy, senior vice president for IBM’s Global Technology Services, said during the Monday announcement that IBM intends to start recruiting workers for the project this summer while operations are scheduled to start in November.

Brooks of the Regional Economic Development Inc., a public-private partnership that promotes business development in Boone County and was instrumental in luring IBM to Columbia, said the city was expected to fulfill a series of obligations to seal the deal.

In addition to acquisition and renovation of the building, IBM has also requested temporary offices from which it can operate before the official November opening.

Brooks said one of the partners involved in the initiative dubbed “Tiger Project” had agreed to donate the temporary office space.

Promoters of the project also committed to assist in the employees' recruitment process and identification of a training space for the initial workers, whom Shaughnessy estimated would number about 100.

“There are a couple of contracts that we are supposed to meet,” Brooks said, adding that promoters of the project and IBM “were going to be involved in a series of activities in the next six months.”

The state and local government put together an unprecedented raft of incentives valued at more than $31 million to attract IBM to Columbia.

It will become the third such center the technology company has opened in the U.S. in the past 18 months.

The others are in Lansing, Mich., and Dubuque, Iowa.

Watkins said the Columbia Area Jobs Foundation, a nonprofit organization, would buy and renovate the building on behalf of the city as part of an arrangement that is meant to comply with legal requirements for delivering the tax incentives promised to IBM.

The city will only pay $3 million for purchase of the building while IBM will repay the $10 million renovation bill through the Missouri BUILD tax credit program.

The building will, however, revert to city’s ownership at the end of 10 years after exhaustion of the tax credit incentive offered to IBM.

The company will pay an annual lease bill of $1 for 10 years under a contract with the city, renewable for an additional five years.

The county government will also forgo a projected $5.4 million in tax exemptions on real estate, personal property and sales taxes, according to a breakdown by REDI.

Part of the property tax exemptions will be in the form of Chapter 100 bonds that will allow IBM to spend up to $3.5 million on furnishings and fixtures and $1.5 million on computers, but only pay half the annual property tax that would normally be chargeable on the property.

Speaking at the Monday announcement, Mayor Bob McDavid termed IBM’s decision to move in “the second most important public-private partnership in the history of Columbia,” exceeded only by the founding of MU.

Public schools, the city and county government are all expected to reap millions in new tax revenues, while an influx of new employees is expected to stir the real estate market.

The Columbia IBM center will be one of an estimated 80 such centers in 20 countries around the world, including some in emerging economies China and India.


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