Douglas Machine's expansion to receive tax help

ALEXANDRIA – An $11 million project that will redevelop and expand property being leased by Douglas Machine will receive tax increment financing.

At its Monday meeting, the Alexandria City Council approved an economic development TIF request from Innovative Enterprises of Alexandria, owned by Randy Roers and Scott Kluver. Situated on 7.63 acres of land at 3800 Minnesota Street, the manufacturing and warehouse property will be owned by Innovative Enterprises and leased to Douglas Machine for 10 years.

The project includes a 108,757-square-foot addition, along with remodeling a 38,900-square-foot building. It’s expected to create 10 full-time jobs.

Douglas Machine, an employee-owned business, manufactures custom-engineered secondary packaging equipment, primarily for food and beverage companies. It has 736 full-time employees.

TIF is an economic development tool that cities use to encourage development in areas that would not otherwise be developed.

With TIF, property taxes are frozen at the property’s current amount, for a specified amount of time, in this case, nine years. The tax difference between the undeveloped land and the land after development – the increment – is used to help finance the project.

The new TIF district will cover about $1.5 million of the project’s cost. The current annual property taxes are $43,516 and are estimated to increase to $186,079 once the project is completed.

The project is expected to increase the city’s tax base by $4.7 million.

Although no one from the public spoke at the TIF hearing, council members and Mayor Bobbie Osterberg asked Nicole Fernholz, director of the Alexandria Area Economic Development Commission a few questions, including if Alexandria has ever allowed a similar TIF request and if it would give Douglas Machine an unfair advantage over other local manufacturers.

Fernholz said the city approved a similar arrangement, where a developer did the project and then leased the property to the business. She said it happened in 2015 at the request of Beverage Wholesalers.

Fernholz added TIF is an excellent economic development tool and in this case would create well-paying jobs ranging from $33,000 to $66,000.

According to Innovating Enterprises, TIF will be used to improve Douglas Machine’s lease rate to make the project viable and will stimulate the company’s continued growth.

“This project allows Douglas Machine to grow and add manufacturing jobs in the city of Alexandria at wages above the area average,” the developers said in the TIF application. “It also creates growth opportunity for local businesses that support Douglas Machine. Lastly, the growth of the business brings to the Alexandria area many customers who come to Douglas Machine for site tours and machine inspections.”

The city will not be issuing bonds to assist in the project’s funding so it will not affect the city’s borrowing capacity, according to City Administrator Marty Schultz.

The continued use of the site for manufacturing and assembling is a legal use of the land, which is zoned as light industrial, according to City Planner Mike Weber.

The development contract includes several conditions. A building permit must be secured and construction must begin by June 30, 2022 and be “substantially completed” by March 15, 2023.

Innovative Enterprises must provide the city with paid invoices or other verification that show TIF covered eligible expenses, such as acquiring the land and improving the site. Innovative must also keep current on all tax payments.

The developer will lease the property to Douglas Machine for a target annual rent rate per square foot of $6.

As in past TIF projects, the city will retain 10% of the tax increment generated by the project to cover administrative costs.