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Lead Lok Still the Mayor’s Priority

The city council continues to pick winners and losers in business, often going into direct competition with local businesses.

Lead Lok

Lead Lok Still the Mayor’s Priority

Sandpoint City Council Re-Cap 6/15/16

By Anita Aurit

The mayor began the meeting with a moment of silence in remembrance of the Orlando terrorist victims. Well, I should say he didn’t use the word “terrorist”, nor did I expect him to.

A Hero Honored
There was a presentation of a lifesaving medal to Lt. Rob Dressel of the Sandpoint Police Department for saving a man with hypothermia after his boat was submerged in Lake Pend Oreille. 

Business As Usual
The normal bill approvals followed (in amounts over $1 million dollars)

The new sustainability committee members were approved. You can read each application by clicking here if you’re interested in who these folks are who will be making decisions on your behalf.

keep-calm-it-s-only-tax-moneyIt’s Only Tax Money
The meat of the meeting then began. In the last council meeting, a lease had been approved for Lead-Lok and councilmen Camp and Snedden requested that the lease approval be reconsidered. The mayor noted that for “full disclosure” there had been a private meeting regarding this issue. He did not disclose the results of that meeting.

Councilman Snedden began the discussion with a few statements:

  • Lead Lok’s previous lease was at 48 cents per square foot.
  • In order for improvements to be made for Lead Lok to occupy the space, existing tenants were evicted.
  • The new lease (approved at the previous city council meeting) makes the city an investor in a private business
  • The city is competing with other landlords in the city and using tax money.
  • Councilman Snedden wants to see the land go on sale next June and recommend that the city continue with the current lease until next June and then offer the building for sale.

Councilwoman Williamson asked where Lead Lok would go if they didn’t buy the building. Councilman Snedden said there were a few options such as the Tech Center. When asked “Isn’t that in Ponderay?” Councilman Snedden responded by noting that the goal was to keep jobs in the community. Councilman Snedden also noted that with the SURA monies Lead Lok would be receiving, their new rental rate would be 26 cents per square foot. Councilwoman Williamson asked if there would be an opportunity for Lead Lok to buy the building and the answer was definitely yes.

BMI-LogoChris Healy from Lead Lok (now Graphic Controls) answered questions from the council. Here are the highlights.

  • They toured the old CWC building and didn’t think it presented the image they wanted.
  • Graphic Control (the parent company) has headquarters in Buffalo, NY with about 500 employees. They also have a location in Vermont with roughly 60 employees. He said the state of Vermont “came up with $500,000.00.” And said that if the lease issue wasn’t resolved at the meeting tonight, they’d probably have to move. Councilwoman Ruehle noted that state funds are a different thing than tax monies from a small municipality.

He was asked what Lead Lok’s investment had been in the building. Rather than responding to this question Healy said the company had added a 401K plan and dental insurance. He said they employed 83 people, and when asked about the company’s projected employee number the answer was “we hope to have 100.” He also stated that with the pressure to stay competitive in the market (China for example), meant that they were looking at using more automation in the production area. (And what will happen to those employee numbers when production people are replaced with automation?)

Healy pointed out the building was originally built with a grant. My interpretation was that he was insinuating that this meant the city was making good money. This infuriated me. A grant comes from taxpayer monies and that building was an incubator for entrepreneurial businesses and was intended as something that would benefit the entire entrepreneurial community, not one business.

When asked again about salaries the council  was told that there were about 40 production workers at about $20,000.00-$25,000.00 : 40 Mid-level salaries at about $35,000.00-$45,000.00 and about 3 people at the executive salary level. In his defense, he did not have specific salary information on hand.

Healy hinted several more times that if the lease was amended or they had to renegotiate, they might not be able to stay in Sandpoint.

When asked if Lead Lok would buy the building if and when it was put up for sale he said that they were in an “aggressive acquisition phase and “We want to keep our cash ready for acquisitions.”  (Well of course they do, if I had a 14 year lease at 26 cents per square foot and taxpayer funds to do improvements, I wouldn’t be interested in buying the building either.)

Councilwoman Ruehle asked the question I had been wondering about; she wanted to know what the city had paid for and what Lead Lok had paid for.  City Administrator Jennifer Stapleton said the city had done HVAC improvements with a GEM grant (translation=tax monies). When councilwoman Ruehle asked what Lead Lok had paid for there was some hemming and hawing and the comment that they had done a lot of “cosmetic things”. She reiterated that the building had built as an incubator, that Lead Lok had passed the incubation stage and that there were community businesses that were displaced and many who left our community for Lead Lok to move in.
When asked what Lead Lok’s long term vision was and why wouldn’t the company want to own their own destiny and purchase the building, the response again was that they would “have to consider leaving” and that their capital was going into acquisitions”.

Councilman Aiken noted that if the building was put up for sale, a prospective buyer might be deterred with the kind of lease Lead Lok had as the rate was below market value and would not make the purchase appealing.
There were a few moments of the Mayor’s typical “economic boost” speech; he painted the dark picture of Lead Lok leaving. “Yes, it’s slightly below market but we’ve dramatically reduced our risk and the fact that the SURA board is in favor of this project is important. The $325,000.00 we’re putting into this building adds value to our asset. I understand the council members who want to move away from being a landlord but we don’t want to lose the business.”
 (Note to mayor, SURA is always in favor of spending taxpayer monies on the projects they deem worthy and it’s not YOUR money….it’s the tax payers money!!)

I almost stood up and cheered when councilman Snedden said, “If not now, then when?” The city has invested $142,000.00 in 2014 and now the city wants to invest $325,000.00.

Councilwoman Ruehle
Councilwoman Ruehle

Councilwoman Ruehle then asked Stapleton how many companies have contacted the city looking for manufacturing space in a building like the one Lead Lok is in. The response was that requests have come in from businesses looking for the exact type of facility that Lead Lok is in.  My next almost standing and cheering moment came when councilwoman Ruehle said that she was very concerned about the SURA money “because in the end, it’s tax dollars. In a sense it’s favoritism.” She also noted that there were other businesses in the city that could benefit from SURA money.  The city attorney pushed back by saying that the SURA monies go to “their” building.  Councilman Aikens said that Lead Lok was taking manufacturing space and making it into office space (Lead Lok wants to get rid of the commercial kitchen). He also noted that the city “wanted to be good stewards of the taxpayer’s money.” (Another silent cheer!)

The mayor’s response, “Lock them in for 5 years, they get the benefit of the SURA monies and we’ve got all options on the table for 5 years.”

Jennifer Stapleton noted that the original building funding would have to be considered. She believed it was built with Federal monies and there would be specific rules for selling the building. There is a possibility that a pass through would be required and that not having a 14 year renewal term would give us more options. (Note, the original lease approved by the city allowed Lead Lok to renew at their discretion for 14 years).
The 3-year versus 5-year topic was debated again and a 5 minute recess was called.

After the recess there was discussion as to whether the subject of the revision of the Lead Lok lease be tabled until the next city council meeting on July 6th.

Councilman Aiken asked for clarification as to what would be done prior to the next meeting as did councilwoman Ruehle.  The council voted to table the decision until the July 6 meeting and that during that time staff would research what would be involved in the sale of the building.

Other Business:
The council moved on to other business, a bid approval for a trenchless treatment for the city sewer project and the council voted to approve the contract to be awarded to Planned and Engineered Construction for the amount of $215,000.00.
The local professional services agreement for stage 2 of the bridge replacement project at Schweitzer Cut Off was voted upon. The council approved the $278,000.00 figure which is federally funded with a 15% match ( $41,700.00) that will be split with the city of Ponderay leaving a cost to the city of Sandpoint at $20,850.00.

my2centsMy Two Cents:
The city built an incubator to benefit local entrepreneurial enterprises and probably used Federal monies (taxpayer monies)  to do it.

The city then evicted the businesses in the incubator building to accommodate a local private business (Lead Lok). The then city manager defended the evictions by referring to those businesses as “hobby businesses”.
Now that “local” business which has been acquired by a company based in Buffalo, NY is being offered taxpayer monies for improvements (they want to take out the commercial kitchen and put in offices) and a lease rate of 26 cents per foot. When the city council debates that offer, the company makes a veiled threat to leave.

I am a small business owner and if someone was providing monies for all my building renovations, charging me 26 cents per square foot and providing this deal at my discretion for the next 14 years, why in the world would I buy the building? From a business perspective, I understand Lead Lok’s position but as a tax paying citizen of the city and a city business owner I am furious that the city council continues to pick winners and losers in business, often going into direct competition with local businesses.

The one very bright light in all of this is the members of the council who expressed their discomfort with providing taxpayer funds consistently to one business and ignoring other local business as well as the fact that the city should not be in the landlord business, especially when they are offering leases rates considerably under market value and competing with other city landlords.

A big shout out and thanks to council members Snedden, Aiken, Camp and Ruhele. Thank you!

 

Anita Aurit is the owner and operator of
The Office Sandpoint.

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