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CITY OF RIVERSIDE REDEVELOPMENT AGENCY MEMORANDUM Honorable Mayor & Agency Members Date: June 6, 2000 Item No.: 5 Subject: Approval of Owner Participation Agreement by and between the Redevelopment Agency and TICOMP Enteprises Inc. - Merged Downtown/Airport Industrial Project Area--Additional Appropriation Background TICOMP Metal Forming, Inc. (the "Participant") is a processor of sheet steel coils, titanium, and other metals received by rail and truck from regional raw material manufacturers. The manufacturing processes involve annealing, re-rolling, slitting and grinding of various bulk materials to strict specifications as required for further utilization by customer OEM manufacturers, for inclusion in a highly diverse amount of finished products. Similar in nature to that of a large-scale machine shop, these processes utilize many large specialized pieces of machinery, which in turn consume large amounts of electricity. The Participant is proposing to develop and construct a new manufacturing facility (the "Project") on a 6.31 acre site located at Industrial Avenue and Freemont Street (near Jurnpa Avenue), currently owned by the Riverside Unified School District ("RUSD"). The Project location is consistent with the planned zoning and industrial use intended for the site. The Project would consist of approximately 50,000 to 100,000 sq. ft. of new building construction to be completed and in operation over the next 24 months. It is anticipated that the Project will generate 120 additional jobs as well as significant new tax increment and electric utility revenue to the Agency and City respectively. Although it is not contemplated in this Owner Participation Agreement COPA"), the Participant proposes to subsequently develop up to 150,000 sq. ft. of additional industrial facilities on the site within the next 5 years, representing a total investment of $35M, generating approximately 250 more jobs and new revenue to the Agency and City. Current Issue A critical component to Participant's operations is rail service. However, the location of the RUSD property to the existing rail line does not provide for the development of a rail spur directly from the line to the property. Without rail service, the Participant will be unable to complete its plans to locate the Project at this site. To accommodate rail service to the site, the Participant is proposing to acquire an adjoining 1.33 acre parcel for $180,000, an additional cost not originally contemplated in the Project budget. Through recent negotiations with the property owner facilitated by Agency staff. the participant is proceeding with acquisition 0fthis parcel. In consideration of the added Project cost, staff is proposing to provide financial assistance to facilitate the Project. A second critical component to Participant's operations is the cost of power. The manufacturing processes utilize many large specialized pieces of machinery, which in turn consume large amounts of electricity. First phase demands will be on the order of 650 Kva average, increasing to almost 9,500 Kva average at maximum capacity. The Participant must manage its electrical costs in order to achieve maximum efficiency. Therefore, the language of Sec. 1.2.3 of the draft OPA presented to the Development Committee has been substituted with language contained in various city agreements, which provides that Participant shall have no obligation to purchase any particular utility service from the City if the rate charged by the City for that particular utility service are more than two and one half percent (2 ½%) greater than the rate charged for that same service by another public or private entity. 5-1