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City Electric Supply to jump-start the Tradition Commerce Center

Economic Development Done Right

Post Date:11/08/2017 9:43 AM

Tradition Southgrove

In the two decades since City Electric Supply first opened its doors in Port St. Lucie, it’s grown from occupying a single 50,000-square-foot building to 200,000 square feet spread across five buildings in St. Lucie West. 

So, when the company decided to consolidate and build a 400,000-square-foot manufacturing operation, it had a decision to make: Stay in Port St. Lucie, or move to a competitive site in either Dallas, Texas or Charlotte, North Carolina.

If City Electric Supply's subsidiarity, TAMCO, moved away from PSL, it would take 222 living-wage jobs with it.

"The Economic Development Council notified the City this summer that an unnamed company was considering Dallas, Charlotte and St. Lucie for a manufacturing distribution center. We suspected this might be a local company," Port St. Lucie City Manager Russ Blackburn said. "The EDC and its partners worked hard to make sure we didn't lose these jobs. We knew we needed to put our best foot forward."

But, in recent years, the idea of offering public incentives to promote private-sector investment has become a much-debated topic in Port St. Lucie. Here's why -- during the mid-2000s, City leaders were presented with two potentially game-changing economic development projects that were supposed to bring new industries and high-paying jobs to Port St. Lucie. The City, County and State all decided to invest big in these two companies, Digital Domain and the Vaccine and Gene Therapy Institute.

As many Port St. Lucie residents are aware, these companies did not succeed in the midst of the Great Recession. They left town after several years, and Port St. Lucie was left paying for their buildings.

In hindsight, the Great Recession fundamentally changed the way many Florida policymakers view economic development. Many will no longer support large, up-front cash incentives to lure these projects to the community. Port St. Lucie officials, the EDC and other local leaders took another approach with this project: They promoted the City's inherent strengths, and used low-risk tools, such as tax abatements, infrastructure improvements and expedited permitting.

"This is smart, low-risk, high-return economic development," Port St. Lucie Mayor Greg Oravec said. "And it bears no resemblance to the deals put together for Digital Domain and VGTI. In fact, it's the opposite."  

This approach worked.  Earlier this month, City Electric Supply leaders announced it will stay in Port St. Lucie. It will add 50 new jobs to the 222 that are already here - jobs that pay higher than the county's average wage.  It will invest $28 million in constructing the new manufacturing, distribution and administrative space in the Tradition Commerce Center. And It will invest another $10 million in machinery and equipment.

"This package was vastly different from the economic development packages that were submitted eight or more years ago," Blackburn agreed.

A big difference: The City will never be on the hook to pay for City Electric Supply's facility, even if for some reason, it moves out of Port St. Lucie in the future.  The City will not pay any taxpayer money out of pocket in this deal.

The package approved by the City Council relies on the standard tool of property tax abatement, which is authorized by voters. This means the company would be exempt from city and county property taxes for five years, followed by five years on a sliding scale. (It still would have to pay taxes to other agencies, such as the school district.) Tax abatement must be recertified every year, as authorized by the voters. The approved package also allows the mitigation of impact fees on the new building, which will be an important anchor for the Tradition Commerce Center.

The approved incentives do not make the City responsible in any way for City Electric Supply's new building. That's another significant difference from past economic development projects.

With Digital Domain and VGTI, the City guaranteed the businesses' borrowings through an instrument known as a "covenant to budget and appropriate." This is a guarantee on the bonds that financed the company's building. So, when the owners stopped paying the debt on the bonds, the City took the buildings as collateral and became responsible for paying that debt.

More than two and a half years ago, the City Council changed the rules to prohibit covenants to budget and appropriate on economic development projects. In short, that type of economic development cannot happen in Port St. Lucie anymore.

"My personal belief is that you will not see a Digital Domain or VGTI level mistake made here again in our lifetime and, hopefully, ever," Mayor Oravec said. "I believe that we have to learn from our past, but at the same time, we can't afford to get stuck in it. We can't think that every economic development deal is a Digital Domain or VGTI."

The City authorized the use of $1 million from the Tradition Economic Development Fund to construct infrastructure and a "loop" road to the site of City Electric Supply's new building.  This fund does NOT include property tax dollars, instead it was funded by developers to help spur the creation of jobs within Tradition. Even better, this loop road, paid for with developer money, will open up access to six developable "pads" in the Tradition Commerce Center. Instead of tax dollars being used to guarantee a private asset, as was the case with Digital Domain and VGTI, the City is using developer dollars to invest in infrastructure.

City Electric Supply is a well-established business with more than 440 branches, and it is the eighth largest electrical wholesaler in the United States. It's not a start-up company motivated by large cash incentives. In fact, it's a local business with roots already in place in Port St. Lucie.

Port St. Lucie officials said they are excited to welcome City Electric Supply to Tradition, and envision it as the catalyst to spur their long-term goal of creating a jobs corridor.

City Electric Supply (TAMCO) leaders told the Economic Development Council of St. Lucie County it looks forward continuing to grow in Port St. Lucie.

"We are excited to see such tremendous support from the city and county for TAMCO to stay in Port St. Lucie, and grow our business providing additional jobs to the local workforce," TAMCO General Manager Frank McShane told the EDC. "The potential consolidation and expansion of our facility is very exciting and focused on the long-term growth of our core business. The commitment of our people over the last 10 years is the key to our present success and we are looking forward to the positive impact this will have on each team member and their family."

The company anticipates breaking ground on its new facility on 38 acres in Tradition in the first quarter of 2018, with an opening expected in early 2019, at which time the 50 new employees will be hired.

The City of Port St. Lucie is proud to be a hometown where people live, learn, work and play, and celebrate all of life’s opportunities. With over 185,000 residents, Port St. Lucie is Florida’s eighth largest city by population (South Florida’s 3rd largest city). The City occupies an area of 120 square miles in St. Lucie County on Florida’s east coast, about 50 miles north of West Palm Beach, half way between Miami and Orlando. The City provides most traditional municipal services City of Port St. Lucie | 121 SW Port St. Lucie Boulevard | Port St. Lucie, FL 34984 | including law enforcement, water and sewer, and public works.
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