GOSHEN — Despite rising costs connected primarily to the COVID-19 pandemic, plans for the development of a large industrial campus on the city’s southeast side continued their march forward Tuesday during a meeting of the Goshen Redevelopment Commission.
At the meeting, commission members approved an amended development agreement and several contracts related to the construction of the industrial campus in the newly-formed East College Avenue Industrial Park, a 315-acre property located just southeast of the Elkhart County 4-H Fairgrounds on C.R. 36/ East College Avenue.
Made up of three parcels — known as tracts 1, 2 and 3 — the property is currently owned by development group Last Dance LLC.
As proposed, the project involves Last Dance LLC helping to establish the needed infrastructure at the site, after which the group has committed to constructing a total of six manufacturing buildings on the site over the course of several years.
INITIAL PLAN
As part of its initial plan to develop the property, Last Dance had committed to paying for up to two thirds of the needed infrastructure improvements at the site, such as water, sewer, etc., which initially had a projected cost of about $15 million. The city, in turn, would pick up the remainder of the bill.
In order to cover its funding obligations, Last Dance sought to purchase bonds from the city totaling $10.5 million that would then go toward funding most of that infrastructure work, while tax increment collected from the newly-established College Avenue Economic Development Area would be used to fund the remainder of the work.
When it came to the financing of the bonds, Last Dance planned on paying for the bonds up front, constructing the infrastructure with the bond proceeds, and then as the project developed and revenue was generated, that revenue would be used to repay the bonds.
Given the amount of investment planned for the project, an ordinance authorizing the city to issue $10.5 million in economic development revenue bonds needed in order for the project to proceed was approved in 2021. That agreement included a request by Last Dance LLC that 100% of the TIF revenue generated by the new industrial campus go toward repayment of the bond for a period of 20 years.
RISING COSTS
However, during Tuesday’s meeting, commission members were informed that cost projections for the project have jumped significantly in recent months, a fact due in large part to ongoing construction pricing increases and supply chain issues resulting from the COVID-19 pandemic.
According to Becky Hutsell, redevelopment director for the city, bids for several infrastructure contracts connected to the project were recently received, with all of them coming in higher than anticipated.
“Bids are high,” Hutsell told the commission’s members Tuesday. “You can all see the numbers.”
As such, commission members were asked to approve an amended development agreement with Last Dance LLC raising the maximum amount of the economic development revenue bonds from $10.5 million to $21.38 million.
Other aspects of the amended agreement included:
• Extending the 100% TIF pledge from the College Avenue TIF from 20 years to 25 years to maximize payment for the developer;
• The city will complete the College Avenue Reconstruction portion of the project as an LPA project, with Last Dance LLC committing to fund the city’s 20% contribution up to $1 million; and
• Last Dance LLC commits to annex four additional parcels of real estate adjacent to the previously annexed properties at the site.
“A year ago we were approved to bond for $10 million to the city. In addition, the city said, ‘Hey, we’re going to pay $5.35 million to do our part to help the city expand, and let us expand in the future, which was much appreciated — but obviously, since then, costs have went up, and went up, and went up,” Ryan Thwaits, co-owner of Last Dance LLC, said of the need for the amended agreement. “In this agreement now, Last Dance is going to bond for $24 million, which is about 2 1/2 times our original agreement, and that’s something that we have to do to move this project forward.
“And I can honestly tell you, three years ago, when we first talked about developing on the south side of Goshen, we never thought we were going to spend $24 million for all the buildings, infrastructure, everything that was going to go into the project,” he added. “So, this is a big-time commitment to the city.”
The commission’s members agreed, and the amended agreement was ultimately approved unanimously.
PROJECT CONTRACTS
Also Tuesday, the commission’s members approved four infrastructure contracts connected to the planned industrial campus.
First to be approved was a $5.35 million contract with HRP Construction of South Bend for the East College Avenue Project — Contract 1 Water Main Loop Construction Project, which includes infrastructure work along College Avenue, C.R. 31 and Kercher Road.
HRP was the low bidder for the project, beating out a $5.7 million bid by Niblock Excavating of Bristol. According to Hutsell, prepandemic estimates for the project had put the cost closer to $2 million, showing just how much construction prices have jumped in the post-pandemic world. A substantial completion date of Sept. 1, 2023, was set for the project, subject to material availability.
Next to be approved was a $11.78 million contact with Niblock Excavating for the East College Avenue Project — Contract 2, which includes various earthwork and pond projects connected to the development. Niblock was the sole bidder for the contract.
A substantial completion date of Dec. 31, 2022, was set for the project, subject to material availability.
Also approved was a $7.27 million contract with HRP construction for the East College Avenue Project — Contract 3, which includes subdivision, public roadway and utility loop work.
HRP was the lowest of three bidders for the project. Also submitting bids were Niblock Excavating with a bid of $7.3 million and Selge Construction of Niles, Michigan, with a bid of $9.2 million.
A substantial completion date of Sept. 1, 2023, was set for the project, subject to material availability.
“We structured the bids to allow for a material contingency line within the base bid,” Hutsell said of the three contracts. “We are also requesting an additional 5% contingency from the developer to be placed into escrow as part of the bond to cover project overages if they arise.”
Last to be approved Tuesday was a $250,000 contract with Elkhart County Gravel for the East College Avenue Project — No. 53 Compacted Aggregate contract.
“We typically would not bid aggregate material separately, but contractors are being limited on the quantity they’re purchasing,” Hutsell said of the contract. “Due to the fact that the three East College Avenue projects require approximately 22,000 tons, we solicited bids directly from suppliers to purchase the material.”
Elkhart County Gravel was the sole bidder for the contract.
Following their approvals Tuesday, Hutsell made a point of noting that the approvals are contingent upon the Goshen City Council’s approval of the amended development agreement.
The council is currently scheduled to review and vote on the amended agreement during a special meeting scheduled for 3 p.m. Friday.
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