Explanation
BACKGROUND: Columbus City Council (COUNCIL), by Ordinance No. 1948-2018, passed July 23, 2018, authorized the City of Columbus (CITY) to enter into an Enterprise Zone Agreement (the AGREEMENT) with OBM HQ, LLC, FDP Investments I, LLC & FDP Investments II, LLC (collectively the OWNER) and CoverMyMeds LLC (the future office tenant), for a real property tax abatement of one-hundred percent (100%) for a period of fifteen (15) consecutive years in consideration of a proposed $225 million investment in real property improvements, the retention and relocation of approximately 592 existing full-time permanent positions with an associated annual payroll of approximately $43,162,000 and the creation of approximately 1,032 net new full-time jobs with an associated annual payroll of approximately $75,000,000 related to the construction of one (1) new approximately 200,000 square-foot Class A office building, ancillary campus amenities and surface parking (“PHASE 1”) and subject to market conditions, the construction of another one (1) Class A office building of up to approximately 200,000 square feet along with one or more associated parking structures containing up to approximately 1,150 parking spaces at a later date (“PHASE 2”) (collectively the building or buildings, related amenities, and parking structures that are actually constructed shall be referred to as the “PROJECT”) eighty-six (86) parcels shown in Attachment 1 of the AGREEMENT (referred to in Section 1 of the AGREEMENT as Exhibit B) located along McKinley Avenue west of North Hartford Avenue within the City of Columbus and within the Columbus Central Enterprise Zone (The PROJECT SITE). The AGREEMENT was made and entered into effective February 6, 2019 with the abatement for PHASE 1 to commence no later than tax year 2022 nor extend beyond tax year 2036 and the abatement for PHASE 2 to commence no later than tax year 2030 nor extend beyond tax year 2044.
Paragraph thirteen within Section 6 (Program Compliance) of the AGREEMENT states that the “AGREEMENT is not transferable or assignable without the express, written, approval of the CITY and subsequent authorization by Columbus City Council” and that “such approval and authorization shall not be unreasonably withheld, conditioned or delayed.”
In a letter dated January 19, 2019 and received by the CITY on February 22, 2019 from Joann Chen, Vice President/Controller of CoverMyMeds LLC, five major points were noted and subsequent requests made.
First, it was noted that CHI Franklinton LP was scheduled to acquire the PROJECT SITE from the OWNER (per the AGREEMENT) on January 23, 2019 and that CoverMyMeds LLC was scheduled to enter into a lease agreement with CHI Franklinton LP in January 2019, so that “a need exists to amend the Agreement to replace Owner with a single entity name of the new owner - once the sale of the Project Site is completed and documentation is shared with the City.”
Secondly in that same letter, it was noted that CoverMyMeds LLC was now a wholly-owned subsidiary of McKesson Corporation and that “the need exists to amend the Agreement to add McKesson Corporation as an additional business entity associated with the employment and investment commitments related to the Agreement.”
Third, it was noted that in addition to the current “Primary Site” and “Secondary Site” per the Agreement, CoverMyMeds LLC has leased additional space at 2836 West Broad (the “Tertiary Site”) and that “a need exists to amend the Agreement to include the “Tertiary Site” as a site at which eligible New Employees, as defined in the Agreement can first be employed.”
Fourth, it was noted that “companies like McKesson commonly undergo some form of corporate reorganization and entity changes” and so they seek “the flexibility to make such fundamental corporate decisions without potentially impacting the Enterprise Zone exemption” and that “a need exists to amend the assignment provision, as contained in Section 6 of the Agreement, as such, when requested in writing ‘by Enterprise,’ City Council extends authority to the Director of Development to transfer or assign the Agreement to (i) the Columbus-Franklin County Port Authority, and (ii) any entity controlling, controlled by, or under common control with McKesson Corporation” and that “all other assignments or transfers of the Agreement would be authorized at the discretion of Columbus City Council.”
Fifth and finally, it was noted that the parcels currently comprising the PROJECT SITE were to be consolidated into just two or three tax parcels following the acquisition of the PROJECT SITE by CHI Franklinton, LP and that “a need exists to amend the list of tax parcels and the map of Project Site parcels in Exhibit B.”
In an email received by the City on March 6, 2019 with an “Affidavit of Facts” attached, the City was advised that “Cambridge acquired the membership interest of FDP Investments I, LLC and FDP Investments II, LLC, which entities held title to the property” and that “those entities were then merged into CHI Franklinton, LP.” Additional email correspondence indicated (i) that in addition to the removal of FDP Investments I, LLC and FDP Investments II, LLC as OWNERS per the AGREEMENT, OBM HQ, LLC should also be removed as well and (ii) that based on a parcel combination process, the amended list of tax parcels would be comprised of parcel 010-000423 (retained parcel), parcel 010-299408 (wedge parcel) and (iii) that a third parcel was expected to be created from a split of the retained parcel in the future.
Additionally, Columbus City Council, by Ordinance No. 3221-2018, passed March 13, 2019, authorized the Director of Development to establish a fee schedule that supports the Department’s administrative and project costs associated with administering Department programs with one of those fees being an Amendment Fee.
This legislation is to authorize the Director of Development to amend the AGREEMENT for the first time to (1) assign all of the benefits and obligations from OBM HQ, LLC, FDP Investments I, LLC and FDP Investments II to CHI Franklinton, LP; (2) to add McKesson Corporation as an additional business entity associated with the employment and investment commitments related to the AGREEMENT; (3) to add 2836 West Broad Street as the “Tertiary Site” at which eligible New Employees, as defined in the AGREEMENT can first be employed; (4) to amend Attachment 1 to the AGREEMENT (also referred to in the AGREEMENT as Exhibit B) from the list of eighty-six (86) parcels to only two (2) parcels, the retained parcel and the wedge parcel, and indicate that a third future parcel was to be created from the retained parcel; (5) that the assignment provision as contained in Section 6 of the AGREEMENT be changed to indicate that City Council would extend authority to the Director of Development to transfer or assign the Agreement to (i) the Columbus-Franklin County Finance Authority, and (ii) any entity controlling, controlled by, or under common control with McKesson Corporation and that all other assignments or transfers of the Agreement would be authorized at the discretion of Columbus City Council; and (6) to add language requiring an Amendment Fee for future Grantee-initiated Amendments.
This legislation is being presented as an emergency measure in order for this amendment to be legislated in as expedient manner as possible so that this amendment to the AGREEMENT might be fully executed prior to the commencement of the PROJECT so that the OWNER is able to move forward with the real property improvements as described in the AGREEMENT.
FISCAL IMPACT: No funding is required for this legislation.
Title
To authorize the Director of Development to amend the Enterprise Zone Agreement with OBM HQ, LLC, FDP Investments I, LLC, FDP Investments II, LLC and CoverMyMeds LLC, to (1) assign all of the benefits and obligations from OBM HQ, LLC, FDP Investments I, LLC and FDP Investments II, LLC to CHI Franklinton, LP; (2) to add McKesson Corporation as an additional business entity associated with the employment and investment commitments related to the Agreement; (3) to add 2836 West Broad Street as an additional site at which eligible New Employees can first be employed; (4) to amend the parcel list shown in Attachment 1 to the Agreement which defines the Project Site; (5) that the assignment provision as contained the Agreement be revised; and (6) to add language requiring an Amendment Fee for future Grantee-initiated Amendments; and to declare an emergency.
Body
WHEREAS, the City of Columbus (CITY) entered into an Enterprise Zone Agreement (the “AGREEMENT”) with OBM HQ, LLC, FDP Investments I, LLC, FDP Investments II, LLC and CoverMyMeds LLC, approved by Columbus City Council (COUNCIL) on July 23, 2018 by Ordinance No. 1948-2018 with this AGREEMENT made and entered into effective February 6, 2019; and
WHEREAS, the AGREEMENT granted a 100%/15-Year abatement on real property improvements; and
WHEREAS, the incentive was granted in consideration of an approximately $225 million investment in real property improvements, the retention and relocation of 592 employees and the creation of 1,032 full-time jobs with an annual payroll of approximately $75,000,000 related to the construction of two (2) new Class A office buildings of up to approximately 200,000 square feet each along with ancillary campus amenities, surface parking and one or more associated parking structures totaling approximately 1,150 parking spaces in two (2) phases described as PHASE 1 and PHASE 2, collectively referred to as the PROJECT to be constructed on eighty-six (86) parcels located along McKinley Avenue west of North Hartford Avenue within the City of Columbus and within the Columbus Central Enterprise Zone (the PROJECT SITE) with the abatement for PHASE 1 to commence no later than tax year 2022 nor extend beyond tax year 2036 and the abatement for PHASE 2 to commence no later than tax year 2030 nor extend beyond tax year 2044.
WHEREAS, within Section 6 (Program Compliance) of the AGREEMENT it states that the “AGREEMENT is not transferable or assignable without the express, written, approval of the CITY and subsequent authorization by Columbus City Council” and that “such approval and authorization shall not be unreasonably withheld, conditioned or delayed;” and
WHEREAS, in a letter dated January 19, 2019 and received by the CITY on February 22, 2019 from Joann Chen, Vice President/Controller of CoverMyMeds LLC, five major points were noted and subsequent requests made; and
WHEREAS, it was noted that CHI Franklinton LP was scheduled to acquire the PROJECT SITE from the OWNER (per the AGREEMENT) on January 23, 2019 and that CoverMyMeds LLC was scheduled to enter into a lease agreement with CHI Franklinton LP in January 2019, so that “a need exists to amend the Agreement to replace Owner with a single entity name of the new owner - once the sale of the Project Site is completed and documentation is shared with the City;” and
WHEREAS, it was noted that CoverMyMeds LLC was now a wholly-owned subsidiary of McKesson Corporation and that “the need exists to amend the Agreement to add McKesson Corporation as an additional business entity associated with the employment and investment commitments related to the Agreement;” and
WHEREAS, it was noted that in addition to the current “Primary Site” and “Secondary Site” per the Agreement, CoverMyMeds LLC has leased additional space at 2836 West Broad (the “Tertiary Site”) and that “a need exists to amend the Agreement to include the “Tertiary Site” as a site at which eligible New Employees, as defined in the Agreement can first be employed;” and
WHEREAS, it was noted that “companies like McKesson commonly undergo some form of corporate reorganization and entity changes” and so they seek “the flexibility to make such fundamental corporate decisions without potentially impacting the Enterprise Zone exemption” and that “a need exists to amend the assignment provision, as contained in Section 6 of the Agreement, as such, when requested in writing ‘by Enterprise,’ City Council extends authority to the Director of Development to transfer or assign the Agreement to (i) the Columbus-Franklin County Port Authority, and (ii) any entity controlling, controlled by, or under common control with McKesson Corporation” and that “all other assignments or transfers of the Agreement would be authorized at the discretion of Columbus City Council;” and
WHEREAS, it was noted that the parcels currently comprising the PROJECT SITE were to be consolidated into just two or three tax parcels following the acquisition of the PROJECT SITE by CHI Franklinton, LP and that “a need exists to amend the list of tax parcels and the map of Project Site parcels in Exhibit B;” and
WHEREAS, in an email received by the City on March 6, 2019 with an “Affidavit of Facts” attached, the City was advised that “Cambridge acquired the membership interest of FDP Investments I, LLC and FDP Investments II, LLC, which entities held title to the property” and that “those entities were then merged into CHI Franklinton, LP.” Additional email correspondence indicated (i) that in addition to the removal of FDP Investments I, LLC and FDP Investments II, LLC as OWNERS per the AGREEMENT, OBM HQ, LLC should also be removed as well and (ii) that based on a parcel combination process, the amended list of tax parcels would be comprised of parcel 010-000423 (retained parcel), parcel 010-299408 (wedge parcel) and that a third parcel was expected to be created from a split of the retained parcel in the future; and
WHEREAS, due diligence has been undertaken by the CITY in that CHI Franklinton, LP has agreed to fully assume the terms and commitments of the OWNER pursuant to the AGREEMENT, and that McKesson Corporation as an additional business entity has agreed to fully assume the terms and conditions associated with the employment and investment commitments pursuant to the AGREEMENT and all other pertinent information has been reviewed and vetted; and
WHEREAS, Columbus City Council, by Ordinance No. 3221-2018, passed March 13, 2019, authorized the Director of Development to establish a fee schedule that supports the Department’s administrative and project costs associated with administering Department programs with one of those fees being an Amendment Fee; and
WHEREAS, an emergency exists in the usual daily operation of the Department of Development in that it is immediately necessary to authorize an amendment to the AGREEMENT so that it may be fully executed prior to the commencement of the PROJECT so that the OWNER is able to move forward with the real property improvements as described in the AGREEMENT; thereby preserving the public health, peace, property and safety; NOW, THEREFORE,
BE IT ORDAINED BY THE COUNCIL OF COLUMBUS:
SECTION 1. That the Director of Development is hereby authorized to amend the Enterprise Zone Agreement with OBM HQ, LLC, FDP Investments I, LLC, FDP Investments II, LLC and CoverMyMeds LLC (the AGREEMENT) to remove OBM HQ, LLC, FDP Investments I, LLC, FDP Investments II, LLC as OWNER and parties to the AGREEMENT to be replaced with CHI Franklinton, LP as OWNER and to add McKesson Corporation as an additional business entity associated with the employment and investment commitments related to the AGREEMENT.
SECTION 2. That the Director of Development is hereby authorized to delineate through assignment and assumption which certain sections of the AGREEMENT will be the responsibility of the new parties to the AGREEMENT.
SECTION 3. That the Director of Development is hereby authorized to add 2836 West Broad Street as the “Tertiary Site” at which eligible New Employees, as defined in the AGREEMENT can first be employed.
SECTION 4. That the Director of Development is hereby authorized to amend Attachment 1 to the AGREEMENT (also referred to in the AGREEMENT as Exhibit B) from the list of eighty-six (86) parcels to only two (2) parcels, the retained parcel and the wedge parcel, and indicate that a third future parcel was to be created from retained parcel.
SECTION 5. That the Director of Development is hereby authorized to amend the assignment provision as contained in Section 6 of the AGREEMENT to indicate that City Council would extend authority to the Director of Development to transfer or assign the AGREEMENT to (i) the Columbus-Franklin County Finance Authority, and (ii) any entity controlling, controlled by, or under common control with McKesson Corporation and that all other assignments or transfers of the AGREEMENT would be authorized at the discretion of Columbus City Council.
SECTION 6. That the Director of Development is hereby authorized to amend the modification provision as contained in Section 6 of the AGREEMENT to indicate that any requested amendment or modification to any of the terms of this AGREEMENT made to the CITY by the OWNER or any other potential Grantee associated with this AGREEMENT shall require the payment to the CITY by the OWNER or any other potential Grantee an AMENDMENT FEE in the amount of $500.
SECTION 7. That this FIRST AMENDMENT FOR ASSIGNMENT AND ASSUMPTION to the City of Columbus Enterprise Zone Agreement be signed by CHI Franklinton, LP, CoverMyMeds LLC and McKesson Corporation within ninety (90) days of passage of this ordinance, or this ordinance and the incentive authorized herein shall be null and void.
SECTION 8. That for reasons stated in the preamble hereto, which is hereby made a part hereof, the ordinance is hereby declared to be an emergency measure and shall take effect and be in force from and after its passage and approval by the Mayor or ten days after the passage if the Mayor neither approves nor vetoes the same.