MIDDLEBURY -- The Town Council Monday night approved giving Jayco Inc. a tax abatement for expansion.
Jayco will build a 30,000-square-foot addition on its Plant No. 41 building on the company's campus in Middlebury. The addition will allow Jayco to increase production of Class A motorhomes to meet increased demand.
In its commitment agreement to the town, Jayco said that in 2009, payroll for Plant 41 was about $1 million, and it will increase payroll by at least $2 million by the end of 2011. The town agreed to give Jayco a 10-year abatement on the property and a three-year abatement on manufacturing and IT equipment.
"We looked at leasing a separate facility for this expansion, or doing it off-site at another Jayco facility," said Wilbur Bontrager, chairman and CEO of Jayco. "We decided the best course of action was to add on to one of our buildings on our Middlebury campus. That's when we approached the town to see if we could get some help to do it here."
Preliminary planning and ground clearing has been done for the expansion after the Middlebury Town Council's preliminary approval of the abatement at its Jan. 18 meeting.
"You're welcome, and good luck," said Councilman Jack Korte after the abatement was approved Monday night.
"We appreciate you being good neighbors," said Council President Gary O'Dell.
Jayco's plans to increase production come as the motorized segment of the recreational vehicle industry is still recovering from a substantial drop. For 2009, retail sales of motorhomes were off 34.8 percent and from 2004 to 2009, fell nearly 70 percent, according to Statistical Surveys Inc.
Yet during 2009, the market improved significantly -- retail activity was down only 12.4 percent in the fourth quarter from a drop of 49.8 percent in the first quarter. Tom Walworth, president of Statistical Surveys, predicted motorhome sales will cross into positive territory this year.
"It might look crazy," Walworth said of Jayco's expansion, "but, shoot, everybody has been throwing dirt on the industry for years. But they came back."
Demand for Jayco's Class A Entegra Coach motorhomes is driving the manufacturer's growth. The current production facility provides enough space to build up to four units each week while the expansion will inflate the maximum capacity to 20 per week, said Sid Johnson, marketing director at Jayco.
For Middlebury, Jayco's expansion will bring 50 new jobs in the next 12 months and 25 more in the following year or two, Johnson said. Most of the positions will be on the production line and carry an average wage between $18 and $20 per hour.
Jayco entered the Class A market in 2008 when it acquired the assets of the former Wakarusa-based Travel Supreme Corp. It continues to cater to the traditional Travel Supreme customer by building 36-foot to 45-foot luxury motorhomes that retail for $250,000 to $600,000 each, Johnson said.
Noting that air travel is becoming less popular as airlines charge for extra bags as well as blankets and meals on the plane, RVs could be seen as the cheaper and more convenient travel alternative, Walworth said.
The decline in motorhome sales was largely caused by climbing interest rates and rising fuel prices, Walworth said. Since then, the industry has shifted to building smaller, more fuel-efficient units.