COLUMBIA — The Columbia City Council voted at a special meeting Monday night to approve a deal that would bring IBM to Columbia. Mike Brooks, president of Regional Economic Development, Inc., detailed the particulars of the negotiation, called Project Tiger, including the lease agreement and the benefits Columbia would receive from the deal. Here is a look at the deal REDI struck with IBM:
- The city will pay a $500,000 down payment to the Columbia Area Jobs Foundation in order to acquire the building IBM will use at 2810 LeMone Industrial Blvd. CAJF is acting as an agent of the city in purchasing the building. Once the building is complete and occupied, the property will be transferred from CAJF to the city. After this transfer occurs, the city will assume the obligation to pay the current owner's loan of $2,500,050, according to the city ordinance authorizing the purchase.
- The city will own the building and lease the building to IBM for a period of 10 years. As part of the lease agreement, IBM will pay the city a little more than $1 million per year. The lease payments are based on gradually paying off a $10 million loan that CAJF negotiated with a local banking consortium on IBM's behalf, Brooks said.
- IBM received an $8.6 million bond through the Missouri BUILD Program, which can be used to pay the lease. This bond is contingent on IBM maintaining certain employment numbers. However, the city's lease is not contingent on IBM receiving that tax credit, Brooks said.
- IBM will also be responsible for paying for the varying aspects of the building's operation, including snow removal, cleaning and building maintenance, among others.
- IBM has agreed to spend approximately $10 million on improving the building, including making it a sustainable structure.
- IBM is locked into its lease regardless of outside factors. First Ward Councilman Paul Sturtz raised concerns about clawback provisions in the agreement with IBM, asking if the company can pull out of its lease if the data center does not perform to expected standards. Brooks said the lease was ironclad and IBM was responsible to pay back the lease. "It's almost the perfect clawback because you don't have to do anything," Brooks said. "You own the building."
IBM's entrance into Columbia is expected to bring an increase in tax revenue with it. Here are the benefits Brooks said IBM's move would bring to Columbia:
- IBM is expected to bring $507,000-$660,000 in annual sales tax revenue to Columbia once the data center is fully staffed.
- REDI estimated IBM will bring $356,000-$464,000 in annual sales tax revenue to Boone County.
- REDI predicted an additional $700,000 revenue from property taxes by 2014 as a result of IBM's move to Columbia.
- The opening of IBM's Columbia facility is expected to generate an additional $17 million in retail sales, Brooks said.
The council expressed concerns about the housing market and IBM's impact on Columbia housing at the meeting. Brooks said he expects between 250 and 300 new homes to be built as a result of Project Tiger. However, he said to expect the employees coming from other IBM locations to rent, not buy.
Because of Columbia's designation as a college town, Brooks said Columbia is in a better position to handle more renters than Dubuque, Iowa, the site of IBM's last facility.