Nobody on the selling end wanted to take a loss on a $1.6 million industrial site sale in York County. Yet the group holding the shortest end of the stick, or the longest end of the tab, isn’t crying foul.
“We need product, especially on the western side of the county,” said Marc Howie, vice president of York Electric Cooperative. “The spec building was a good way for us to get a lot of looks.”
On July 15, York County finalized the deal to sell the 40,000-square-foot East York Industrial Park spec building to real estate group Five Star Holdings. The almost 12-acre property sold for $1.6 million. Problem is, it cost York County and several investors about $2.2 million to build it.
“Unfortunately we’re selling it for less than what it cost to build it,” said York County Councilman Robert Winkler, who serves the district where the building sits. “I would love to have gotten $4 million, but it’s not going to happen where it’s at and what it is.”
The 1725 Genthe Court spec building isn’t the first to bring county and outside investment dollars together. It is the first such spec building to take a loss.
“We had great success until this one,” said Councilman Britt Blackwell.
In the red
The county general fund, however, didn’t take a hit. The economic development plan stated taxpayer money would be paid back first with sale proceeds.
The investor with the biggest red number is York Electric. While York County is putting about $685,000 back into its economic development fund and about $220,000 the county spent to move a retention pond and for a construction management company, York Electric is losing about $350,000 of the almost $700,000 total loss.
Building spec sites is tricky, he said. York Electric has partnered in three. One sat for five years, another sold before it was finished.
“It’s kind of hit or miss,” Howie said.
Howie agreed with council members blaming location because it’s “a little off the beaten path.”
Kevin Madden, assistant county manager in charge of finance, said the county and partners made money on other spec sites.
“The idea of this spec building again was to generate more economic development,” he said. “This was not a good location. Hindsight is always 20-20.”
Much of the project funding came from grants and proceeds from another spec building sale. York Electric money was from a state rural development fund that can improve roads, utilities and related needs critical to business development.
“If we don’t use that money locally, we have to send it to Columbia,” Howie said.
York Electric members, he said, aren’t the ones who will feel the loss.
“No Co-Op members are going to foot the bill for anything, the money for the grant,” Howie said. “That’s totally different.”
The sale at a loss is part of a bigger picture. East York Industrial Park overall is more than 460 acres. The development has brought hundreds of new jobs through companies such as American Eagle Wheel, McClean Power Systems and Bluestar Silicones, now Elkem Silicones.
Blackwell said the spec project predates some members of council and staff. Marketing information lists the building as a 2015 construction.
“When I started on the council there were no jobs anywhere,” said Blackwell, elected in 2010 on the heels of the 2008 recession. “Developers could not finance spec buildings. The only way that we could start a spec building was to build it ourselves. And that’s what got the county in the business.”
Blackwell says the county met a need.
“We got involved because nobody else would,” he said. “Nobody else could. I think we need to kind of, hopefully, drift out of it.”
Following the sale decision Monday night, Council voted on a separate amendment for a tax incentive agreement with Elkem.
“This is an additional $10.8 million investment by this company,” Winkler said. “And 50 additional jobs with an average salary of $67,688 a year. So this is not $10 an hour jobs.”
The bigger question remains: What do spec building sales mean for future economic development?
Councilwoman Christi Cox said the county shouldn’t be so quick to offer incentives for spec buildings. She cast the only vote against the sale based on how money went back into county funds, but agreed it was time to make a move.
“It’s time to cut the bleeding off,” Cox said. “If we don’t sell it for something, then the taxpayers are out all of it.
“Apparently that’s the most we’re ever going to get out of this. And either we sell it to a private entity and start making tax money on it, or we continue to hold it and it’s costing us money,” she said.
Councilman William “Bump” Roddey said one setback shouldn’t control the county’s future plans.
“I don’t think one project failure should be indicative of our economic development strategy,” he said. “No one loves to see any business venture or any project lose its money.
“But first and foremost, we’re here to protect York County’s dollars. If York Electric wants to sink money, lose money, put money here or there, that’s not for us to control,” he said.
Roddey supports such economic investments.
“We can learn from some of our mistakes and do better the next time, but I don’t think we should stop pursuing economic development because if we do, we’ll become the next county over that can’t get anybody,” he said.
Investing in the future
Location is important to development partners. Many of the more than 54,000 customers York Electric serves live and work on the western side of the county. Howie said when the spec building project began, about 75% of companies looking at the area wanted existing buildings rather than build their own.
The challenge, Howie said, is investors may build a 40,000 square feet building to learn a company wants twice that amount.
“It’s always a gamble on the size of a spec building,” he said.
Still, in the end, a business will occupy the space bringing jobs and generating tax money.
“It’s a good marketing tool to get people to look at the area,” Howie said.