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HomeMy WebLinkAboutAgenda - 09-10-19 Item 1 - Public Hearing Regarding an Economic Development Recruitment Incentive for Medline Industries, Inc. (Project Tomorrow) 1 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: September 10, 2019 Action Agenda Item No. 1 SUBJECT: Public Hearing Regarding an Economic Development Recruitment Incentive for Medline Industries, Inc. (Project Tomorrow) DEPARTMENT: Economic Development Department, Manager's Office, Attorney's Office ATTACHMENT(S): INFORMATION CONTACT: A. Performance Agreement between Steve Brantley, Economic Development, Orange County & Medline (919) 245-2326 Industries Travis Myren, Deputy County Manager, B. PowerPoint Brief Summary (919) 245-2308 C. Public Hearing Newspaper Notice PURPOSE: To: 1) Receive and hold a public hearing on the issuance of a "performance-based" economic development incentive by the County to a private company; and 2) Consider approval of the proposed 5-year performance-based incentive agreement, with claw-back provisions, for the recruitment of Medline Industries' distribution center to Orange County, NC. BACKGROUND: Local and state government in North Carolina have the goal to promote economic development by encouraging the location of new businesses and the expansion of existing businesses. This activity serves to diversify the local tax base, increase employment opportunities and introduce desired job skills and related benefits to a community, and for the benefit of its residents. The Local Government Act, North Carolina General Statute (NCGS) 158-7.1 outlines the requirements of public hearings, and NCGS 158-7.1(a) specifically addresses the requirement that economic development appropriations "must be determined by the governing body of the city or county to increase the population, taxable property, agriculture industries, employment, industrial output, or business prospects of the city or county" This public hearing has been scheduled in compliance. Company Description: Founded in 1966, Medline Industries, Inc. is a privately held American healthcare company headquartered in Northfield, IL and is the largest privately held manufacturer and distributor of medical supplies in the United States, providing products, education, clinical programs and services with offices in 20 different countries. These distribution centers serve as regional hubs for next-day delivery service to hospitals, physicians' offices, surgical centers, care facilities, retailers and pharmacies. In 2019, Medline reached over $12 billion in overall company sales, having been ranked at number 32 on the Forbes 2016 list of largest privately held companies. 2 • Originally founded in Chicago in 1910 as "Mills Hospital Supply", and later renamed "Medco", the firm is now the largest privately held manufacturer and distributor of medical supplies in the United States. • Manufactures 80,000 medical products in 30 company-owned manufacturing centers. • Distributes 550,000 medical and surgical products in 7 countries. • Operates 43 medical grade distribution centers totaling 20 million sq. ft. in size. • Owns a fleet of 750 delivery trucks. • Serves many international customers in 90 countries. Employs 24,000 total employees worldwide (8,300 new positions added since 2014), to include 2,000 direct sales representatives. • Serves as a primary supplier to U.S. Homeland Security, EMS agencies and other first responders in cases of national emergencies. • Owns the CURAD line of sterile adhesive bandages and gauze pads. Regionally, the company operates two 400,000 sq. ft. distribution centers in Lincolnton, NC and Richmond, VA. • 40% of Medline's U.S. distribution centers are LEED (Leadership in Energy and Environmental Design) certified or pending certification, representing over 8.3 million square feet of warehouse space. All new Medline buildings worldwide are constructed to meet LEED "green" standards. A company representative has been invited and will be available for comment and questions. Project Description: (1) Investment — Medline Industries will increase real property valuation by up to $55,000,000 and up to $10,300,000 in new personal property, to generate a total capital investment of $65,300,000 over the first 5 years. 2023 Total Real $25,000,000 $30,00,000 $0 $0 $0 $55,000,000 Property Personal $3,000,000 $7,000,000 $100,000 $100,00 $100,00 $10,300,000 Property Total $28,000,000 $37,000,000 $100,000 $100,000 $100,000 $65,300,000 (2) Employment — Medline Industries will maintain employment consistent with the job chart below during the term of the incentive agreement. If annual job targets are not achieved, the incentive payment will be reduced proportionally. By year#5, the Company will create 250 new positions with an average salary of $35,468 per year. In addition, the Company forecasts eventual employment growing to 500 jobs in 8 - 9 years, and believes potential employment at full capacity of 600 jobs at or after 10 years of operation. Employment New Full Time 30 75 75 50 20 250 Employment 3 (3) Operation — Regional distribution center and some light assembly of a large inventory of medical products to be supplied to hospitals, medical professionals, surgical centers, extended and home health care providers, and EMS first responder agencies located across a multi-state area. Main Products: Advanced Wound Care Anesthesia Apparel Beds & Mattresses Central Sterile Diagnostics Durable Medical Equipment Environmental Services Equipment & Furnishings Foot & Ankle supplies Gloves Incontinence Infection Prevention Lab Supplies Nursing Supplies/Patient Care Nutrition Office Supplies Operating Room/Surgery Pharmacy Eye Punctal/Occlusion Respiratory Skin Care Textiles Therapy & Rehabilitation Urology & Ostomy Vascular Access Wound Care Foot & Ankle Surgery Product Services Device Reprocessing Consumer Brands (4) Facility — New construction of an environmentally efficient LEED-certified distribution center of 1.2 million sq. ft. in size, with a significant array of solar panels to be installed on the roof. (As an illustration, Medline's 1.1 million sq. ft. facility in Tracy, CA generates 35% of that operation's annual electricity needs). LEED (Leadership in Energy and Environmental Design) is an internationally recognized ecology-oriented green building certification program run under the guidance of the U.S. Green Building Council (USGBC). LEED designated building construction concentrates efforts on improving performance across five key areas of environmental and human health: energy efficiency, indoor environmental quality, CO2 emissions, materials selection, sustainable site development and water savings. The building will also incorporate a highly automated and intelligent robotic storage and picking system pioneered by "Swisslog" logistics technology. (5) Site Location — Medline's site in Orange County comprises six (6) adjacent parcels that are currently under option in the Buckhorn Economic Development District, totaling approximately 172.79 acres along the north side of West Ten Road (located between the Gravely Hill Middle School and Buckhorn Road). These properties are indicated on the aerial site map by the red boundary line. 4 Orange County,North Carolina Rohl/Surrounding Site r f T4 a ORANGE COUNTY NORTH GV[OL1Nn F tin•]GO fri A ®F. Q 350 ]QO Q Sfte of lnteresl onno.corer r,.r�.y a.d m.pKum Utility Lines on Site: Orange County,North Carolina Rohl/Surrounding Site ' 9.32 ac 7.99 ac `z a 43.02 at r U7 16.32 ac -3 3.37 8.75 0 43 ac 1 I 72 —12 ,+ _ 12 12" - Ublity Easements 3 —Gravity Sewer 3 Force Main Sewer ,.— —Water Line ORANGE COUNTY Stucan5 NORTH CAROI.INA Q Site of Interest ®F� Developable Areas � Q tsQ iw WASMPBA or.nue cam�arsaa gna msoeao. 5 The next aerial map illustrates the relation of the City of Mebane's current city limits (shown in dark gray shading) and extraterritorial jurisdiction (ETJ) area (light gray shading) in relation to Medline's site location (red boundary lines) within the County's Buckhorn Economic Development District. Orange County, North Carolina Rohl/Surrounding Site 41, i it 0 x r p _ Pti P 70 � NATHAN N R OARS OR ? 6VNRS}pNG7ON ST EXT o r Z�Y w ti 9 � t z o �k. r COUSIN OR g¢ 0 s w FRhDERD a pAKW 000 ST i_. / - n INDUSTRIAL DRqp Tom' V �. OLD CO UNYRYLN 7 WVLSON RD ``AA''tt �� �I j i gent RGry tryv _ . FP � O i z m DANNY DR a Ze rc - - v 'r wESTTEN RD 3 I{1 m 6°WMAN RP �5 s L p Za �EENA.CT � y 0 JONA1� �O JOHANN LANE �4i ORANGE COUNTY 0 Site of Interest �c?J� NORTH CAROLINA 0 Parcels / y 1 in=1,5601e¢I L S - W1N0} k 0000[==�Feet - Mebane City Limits '/ °aRs° _ 0 1,500 Mebane ETJ \� ! o,an cncy Pannln9 aid nsPeclion DC 8512019 (6) Competing Site Locations — GarnerMake County NC, Oxford/Granville County NC, Richmond VA, Knoxville TN Orange County's Performance-Based Incentive Proposal: The proposed economic development inducement incentive follows the County's current incentive formula that has been previously utilized with other industrial prospects. The incentive will be performance-based with respect to the County's annual verification of Medline Industries' targeted increases over a 5 year period in (1) employment, wages & benefits, and, (2) new taxable real & personal property additions, as the Company establishes its' Orange County presence. Incentives would only be paid following confirmation of the Company's required annual threshold growth in these measures, and, on a pro-rata reimbursement in case the company's targeted growth in any year lags current growth projections. 6 The proposed County inducement capped at $1,840,967 is a performance-based grant to be made to the Company over a five (5) year period, and is calculated in value at an amount equal to 75% of Medline's projected new investment in real & personal property tax valuation. This specific formula represents the County's current incentive policy which has been offered by the BOCC in the past to other industrial prospects. The formula ensures that annual property tax revenues from the new investment's additional property tax values, net of annual incentive payments, yield a positive cash flow in all years of the initial incentive agreement. IL Orange County Property 1 S'Year 2--d Year 3rd Year 41-'Year 5`—"Year 6`—"Year 2020 2021 2022 2023 2024 2025 TOTAL New Property Tax $243,012 $562,399 $555,630 $549,537 $544,045 $537,349 $2,991,972 Revenues Incentive 421 799 416 722 412 153 408 034 182 259 ($1,840,967) Payments Annual Net $243,012 $140,600 $138,907 $137,384 $136,011 $355,090 $968,745 Revenues * Note: There is no incentive payment scheduled for 2020 due to the company's request that payments begin after building completion. Orange County Property Projections 1 New Property Tax $5,086,350 Revenues Collected Incentive Payments ($1,840,96D Annual Net Revenues $3,245,383 State of North Carolina & City of Mebane — Supplemental Recruitment Incentives: The Company has also received financial inducement proposals from the State of North Carolina and the City of Mebane, as follows: 75tateMMorth Carolina — Incentives Discretionary Grant N.C. Department of Commerce ONE NC FUND $500,000 Workforce Development Support N.C. Community College System's Customized Training $225,000 Public Road Access Improvements to West Ten Road N.C. Department of Transportation $1,000,000 Total $1,725,000 City of Mebane - Incentives Performance Based Incentive — 5 years $653,000 Waiver of Development Fees $150,000 Total $803,000 7 City of Mebane — Incentives, Annexation & Rezoning • August 12, 2019 — Mebane Planning Board received the six () individual land owners' petition to request annexation, and rezoning (to M-2, light manufacturing & distribution), and voted unanimously to endorse and forward to the Mebane City Council. • September 9, 2019 - Mebane City Council is scheduled to meet and hold public hearings which are expected to authorize the City's approval of local incentives, and, annexation and rezoning of the 6 adjacent parcels (totaling 172.79 acres) representing Medline's preferred site, which is located north of West Ten Road in the County's designated Buckhorn Economic Development District. Benefits of Attracting Medline Industries to Orange County • Initial creation of 105 professional & blue collar jobs in the first two (2) years, rising to 250 jobs by year #5, and eventually 500 - 600 jobs in 5 — 10 years, paying at or above $15 per hour average wage with full health care, retirement, educational and performance bonus benefits. • Well-established national health care firm committed to building a green, environmentally conscious LEED certified facility, and precedent to fill the large rooftop with solar panels. • Good potential to attract Medline's in-house light manufacturing subsidiaries of medical products on both sides of the West Ten Road site. Company routinely refers to 2-3 likely vendors that may follow and co-locate. • Medline's $65.3 million investment would make the firm Orange County's largest manufacturing property taxpayer. • This distribution operation is a low water user and does not put heavy manufacturing related challenges on the environment. • The site connects to the County's Article 46-fund utility lines that were strategically placed in the Buckhorn Economic Development District to attract non-residential new business. • Establishes another successful public/private partnership between Orange County and the City of Mebane to grow the industrial tax base and new employment in a designated "Rural Census Tract" area. • Offers direct synergy with the County's existing regional health care presence by UNC Health Care, Duke Hospital, Veterans Administration Hospital, Wake Med & UNC Rex Hospital spread among the Triangle area. Other Local Governments, State of N.C. Agencies & Utility Partners • N.C. Department of Transportation (NCDOT) (will make road improvements to West Ten Road) • N.C. Community Colleges System & Durham Tech/Hillsborough Campus (will fund technical training of employees, and strengthen the health care focus of the Hillsborough campus) 8 • N.C. Department of Commerce and the Economic Development Partnership of North Carolina (will provide state incentives, and act a liaison on workforce development and pre-screening of applicants by NC Works, NCDOT road improvements, and community college technical training of Medline's new Orange County employees.) • City of Mebane (site annexation and rezoning, incentives & water/sewer service) FINANCIAL IMPACT: The attached "Performance Agreement" contract between Orange County and Medline Industries, Inc. outlines a total financial impact of up to One Million Eight Hundred Forty Thousand Nine Hundred Sixty Seven Dollars ($1,840,967.00), payable in five (5) annual installments. This Inducement Agreement will be performance-based, measured annually, and based on the Company's actual 5-year capital investment schedule that will generate new property tax valuation of at least Fifty Five Million Dollars ($55,000,000) in Real Property, and at least Ten Million Three Hundred Thousand Dollars ($10,300,000) in new Personal Property, reaching a combined Sixty Five Million Three Hundred Thousand Dollars ($65,300,000). The Company will also create at least Two Hundred Fifty (250) full-time jobs, with full health care and related employment benefits, and pay an average annual salary of $35,468 per year at the facility during the first 5 years. Other economic benefit multipliers to the County include enhanced job skills for those employees through advanced technical training to be provided by the Orange County campus of Durham Technical Community College in Hillsborough. Also, construction employment for the new distribution center will create many additional skilled trade employment opportunities. Annual incentive payments by the County will be paid from net new property tax revenues to be generated by Medline Industries, Inc. and from available Article 46 funds, as required. SOCIAL JUSTICE IMPACT: The following Orange County Social Justice Goal is applicable to this agenda item: • GOAL: ENSURE ECONOMIC SELF-SUFFICIENCY The creation and preservation of infrastructure, policies, programs and funding necessary for residents to provide shelter, food, clothing and medical care for themselves and their dependents. ENVIRONMENTAL IMPACT: The following Orange County Environmental Responsibility Goal impacts are applicable to this item: • ENERGY EFFICIENCY AND WASTE REDUCTION Initiate policies and programs that: 1) conserve energy; 2) reduce resource consumption; 3) increase the use of recycled and renewable resources; and 4) minimize waste stream impacts on the environment. • RESULTANT IMPACT ON NATURAL RESOURCES AND AIR QUALITY Assess and where possible mitigate adverse impacts created to the natural resources of the site and adjoining area. Minimize production of greenhouse gases. Medline's new distribution center will be constructed based on environmentally efficient LEED- certified building standards. LEED (Leadership in Energy and Environmental Design) is an internationally recognized ecology-oriented green building certification program run under the guidance of the U.S. Green Building Council (USGBC). LEED designated building construction 9 concentrates efforts on improving performance across five key areas of environmental and human health: energy efficiency, indoor environmental quality, CO2 emissions, materials selection, sustainable site development and water savings. The facility will also include a significant amount of solar panels installed on the roof. (For example, Medline's 1.1 million sq. ft. facility in Tracy, CA employs rooftop solar panels that generate 35% of that operation's annual electricity needs). In addition, Orange County's Planning & Inspections Department staff will administer the County's sedimentation control and storm water management regulations. RECOMMENDATION(S): The Manager recommends that the Board: (1) Receive the proposal to consider the issuance of incentives to a private company for the recruitment & expansion of Medline Industries, Inc.'s proposed facility to be located in Orange County; (2) Open and conduct the Public Hearing, and receive BOCC and public comments; (3) Close the Public Hearing; and (4) Approve the "performance-based" economic development incentive agreement between Orange County and the Company, Medline Industries, Inc., subject to final review by the County Attorney, and authorize the Chair to sign the agreement on behalf of the County. 10 Attachment A STATE OF NORTH CAROLINA ORANGE COUNTY PERFORMANCE AGREEMENT BETWEEN ORANGE COUNTY, NC AND MEDLINE INDUSTRIES,INC. This Agreement made and entered into this the day of , 2019 by and between Orange County, a body politic existing under the laws of the State of North Carolina("County") and Medline Industries, Inc., an Illinois corporation authorized to do business in North Carolina, with facilities to be located in Mebane,North Carolina("Company"), for the purpose of incentivizing Company's investment in Orange County and Mebane. Company is an Illinois Corporation situated and doing business in Northfield,Illinois. Company is the largest privately held manufacturer and distributor of medical supply products in the United States. Company's Mebane Facility shall distribute medical supplies throughout the eastern United States and central North Carolina. Company represents it is duly authorized to conduct business in North Carolina. It is understood that the levels of performance required by this Agreement are to be met by this group (Company and Medline Industries, Inc.) as a whole at its facility in Orange County(Mebane). Accordingly,the term"Company" as used in this Agreement refers to the entire group at such facility. WITNESSETH THAT WHEREAS,the County has offered to the Company an inducement package as hereinafter set forth; and WHEREAS, the State of North Carolina and the Town of Mebane,North Carolina have offered separate inducement packages to the Company; and WHEREAS,but for the offer of an inducement package the Company would not be locating its manufacturing facility within Orange County; and WHEREAS, the Company has agreed to meet and continue meeting the minimum investment and employment requirements as hereinafter set forth; NOW, THEREFORE,the parties hereto in consideration of these mutual covenants and agreements passing from each to the other do hereby agree as follows: 1. DEFINITIONS. As used in this Agreement the terms below will have the following meanings: A. "Affiliate." A company that the Company controls, controls the Company, or is under common control with the Company. B. "Commencement Date. The date in which the Company begins actual operations at the Subject Property, after having obtained applicable governmental approvals, certificates 11 of zoning compliance, and certificates of occupancy. The Commencement Date is anticipated to be no later than July , 2020. C. "Company." Medline Industries, Inc. includes its affiliates, successors, and assigns. D. "Eligible Property." Includes (a)the Subject Property(as defined in Exhibit B, Legal Description of Real Property), other real property in the County, and all improvements the Company or an Affiliate of the Company constructs or installs, or causes to be constructed or installed, at the Subject Property or such other real property, including all buildings,building systems, and building improvements, and(b) all personal property (as defined in Section I.I. below, Personal Property)the Company or an Affiliate of the Company purchases or leases and installs, at or relocates to,the Facility or such other real property. E. "Grant."An economic incentive grant to the County pursuant to Section 3 of this Agreement. F. "Minimum Taxable Investment." The aggregate investment amount in property and infrastructure the Company intends to make and that Company and County anticipate will result in a tax valuation of at least $65,300,000.00. G. "Orange County Facility" "Mebane Facility," or"Facility." The Company constructed and/or owned primary and secondary structures,utilities, and operations and service areas situated on the Subject Property in Mebane, Orange County,North Carolina in and on which Company conducts its business,manufacturing, and/or operations. H. "Person." Any individual,partnership,trust, estate, association, limited liability company, corporation, custodian,nominee, governmental instrumentality or agency, body politic or any other entity in its own or any representative capacity. 1. "Personal Property." All personal property the Company or an Affiliate owns or leases located at the Facility, including all(a)machinery and equipment, (b) furniture, furnishings, and fixtures, (c)property that is capitalized for federal or state income tax purposes, (d) all additions to any of the foregoing, and all replacements of any of the foregoing in excess of$100,000. J. "Qualifying Expenditure." All expenditures the Company, an Affiliate, or lessor to the Company or an Affiliate makes for Eligible Property which is subject to Tax in the County and is not subject to an exemption from Tax that the Company uses. K. "State." The State of North Carolina. L. "Subject Property." The property on which Company constructs and/or operates the Orange County Facility. M. "Tax"or"Taxes." Ad valorem property tax levied on real and personal property located in the County pursuant to Article 25, Chapter 105 of the North Carolina General Statutes Page 2 of 12 12 or any successor statute relating to ad valorem property tax the County levies on property. N. "Term" or"Full Term." The duration of this Agreement meaning , 2019 through and including January 31, 2026. 2. INDUSTRIAL INVESTMENT AND EMPLOYMENT AGREEMENT A. INVESTMENT 1. The Company anticipates it shall directly invest a Minimum Taxable Investment of sixty five million three hundred thousand dollars ($65,300,000.00), in accordance with the investment plan attached as Exhibit A, on or before January 31, 2024. If the Company does not make 80% of the Minimum Taxable Investment on or before January 31, 2021 (and as may be extended below), the amount of the Grants will be adjusted as provided in Subsection 2.A.3. 2. The Company shall maintain the Minimum Taxable Investment for a period of at least five years through and including January 31, 2026. 3. If total increase of taxable investment falls below the Minimum Taxable Investment levels, due to failure to meet the investment goals set forth in Exhibit A or removal of equipment, as assessed by the Orange County Tax Assessor,the amount of the following annual installment will be reduced by a pro-rata percentage of the shortfall. The baseline for measuring whether the investment goals have been met will begin with the date of performance agreement execution shall be adjusted(1)upward, if there is an increase in the assessment of the Company's real property and(2) downward,to reflect the natural decline in the value of the Company's personal property(existing in 2020 and acquired thereafter in the course of the new investment) as measured by the depreciation of such property in accordance with generally accepted accounting principles. 4. Should Company dispute the valuation of its property by the Orange County Tax Assessor, Company may register an informal complaint with the Tax Assessor requesting a re-evaluation of Company's property and resulting tax and the Tax Assessor shall work with Company to conduct such re-evaluation. Should Company dispute the results of any such re-evaluation the Company may appeal the resulting valuation under the same process and subject to the same requirements as any other tax appeal in Orange County. B. EMPLOYMENT 1. On or before January 31, 2026, at least 250 persons will be employed in full-time positions at the Mebane facility("Jobs Minimum"). The number of full-time positions shall be evidenced by one or more Quarterly Tax and Wage Reports (Form NCUI 101) filed with the North Carolina Department of Commerce's"NC Works" employment career center. If 80%of the Jobs Minimum is not achieved on or before January 31, 2026 (or as extended as provided below),the amount of the Grants will be adjusted as provided in Section 6. Page 3 of 12 13 2. During the first year of operation after commencement of this Agreement, Company and County agree Company shall hire 30 full time employees at its Mebane Facility. During the second year of operation the Company shall hire an additional 75 full time employees at its Mebane Facility for a total of 105 full time employees at its Mebane Facility. During the third year of operation the Company shall hire at a minimum an additional 75 full time employees for a total of 180 full time employees at its Mebane Facility. During the fourth year of operation the Company shall hire an additional 50 full time employees for a total of 230 full time employees at its Mebane Facility. During the fifth year an additional 20 full time employees shall be hired for a final and ongoing 250 full time employees at its Mebane Facility. At the expiration of this Agreement,the Company shall employ, at its Mebane facility in Orange County, at least the equivalent of 250 full time employees in accordance with Exhibit A. 3. Employees counted toward this total shall include only new employees of the Company employed and located at Company's Mebane Facility in Orange County,provided such employees are employed in Orange County on a full time basis. Employees of the Company will be eligible to participate in Company sponsored health insurance and retirement programs. For purposes of this section"250 full time equivalent employees" shall be defined as 250 actively employed individuals and shall not include vacant positions for which the Company is actively or otherwise recruiting. It is understood that vacancies occur and that when such occur the Company will immediately, or as soon as is reasonably possible thereafter, fill said vacancies. The average wage of the 250 new full time equivalent employees shall be, as of the last day of this Agreement, at the annual rate of$35,468. C. DEVELOPMENT GRANT PARTICIPATION: Where applicable,the Company agrees to partner, through the commitment to create new jobs,with Orange County and other applicable agencies to apply for development grants that will improve and/or add water, sewer,road or other necessary infrastructure in order to facilitate the successful completion of this project. The Company agrees to meet with program representatives, and to participate in the grant request process as necessary to secure the required funding. D. GUARANTEED MINIMUM LEVEL OF PERFORMANCE: The Company guarantees that its minimum level of performance pursuant to this Agreement shall be as set out in this Section 2. Company agrees that failure to meet the minimum level of new employment as reflected in Section 2.13. shall entitle the County to reductions in inducement installments paid to the Company in an amount of four hundred fifty dollars($450.00)per employee not hired as reflected in Section 2.13. and Exhibit A. Company further agrees that failure to meet the minimum level of direct investment as reflected in Section 2.A. and Exhibit A shall entitle County to pro rata reductions in inducement installments paid to the Company as set out in Section 3. E. STATUTORY COMPLIANCE: The Company understands that the County's participation is contingent upon authority found in North Carolina General Statute 158-7.1 and other relevant North Carolina General Statutes and that should such statutory authority be withdrawn by the North Carolina General Assembly County may terminate this Agreement without penalty to County and without further compliance with this Agreement. Page 4 of 12 14 3. INDUCEMENT PACKAGE A. COUNTY INDUCEMENT GRANT: The County,upon execution of this Agreement, shall provide to the Company an inducement to offset facility development, expansion, and acquisition costs in an amount not to exceed One Million Eight Hundred Forty Thousand Nine Hundred Sixty Seven Dollars ($1,840,967.00). This inducement shall be payable in five installments over a five year period, calculated as a performance grant equal to seventy-five percent(75.0%) of the actual property tax valuation for real and personal property taxes due in each year of the 5-year grant period. The first installment shall occur during of the 2021 calendar year upon receipt of proof, as described in Section 5 of this Agreement, that the minimum employment and investment numbers referenced in Section 2 of this Agreement have been met and that all local property taxes on the real and business personal property owned by the Company and located within Orange County have been paid. Subsequent annual installments will occur during the month of January for the term of this Agreement with the final installment occurring in January 2026. No installment shall be required to be paid until such time as County receives proof of the payment of all property taxes and verification of employment and investment levels has been submitted to the County. B. TOTAL COUNTY COMMITMENT: The total County commitment for the Inducement Grant outlined in Section 3.A. above shall not exceed One Million Eight Hundred Forty Thousand Nine Hundred Sixty Seven Dollars ($1,840,967.00). 4. EXPANSION OPPORTUNITY Participation in this Agreement shall not exclude the Company from consideration for additional inducements from the County either during or upon completion of this Agreement. Future projects shall be considered on a case-by-case basis and induced at the discretion of the County based on new taxable investment and job creation in excess of the minimum levels outlined in Section 2 above. Any such agreement shall require a separate"Performance Agreement"which shall conform to all relevant North Carolina Statutes and/or Orange County Ordinances, Policies or Resolutions, shall be in writing, and shall be mutually agreed upon by the Parties. 5. PROOF AND CERTIFICATION The officials of Parties to this Agreement shall furnish the necessary reports and certificates to verify that each Party's respective goals are met. Once the Company maintains its investment and employment goals for the term of this Agreement it will no longer need to furnish these reports. Acceptable forms of proof for taxable investment shall be the records of the County Tax Administrator. Acceptable forms of proof of payment of taxes shall be in the form of cancelled checks and receipts of payment from the County Tax Administrator. Acceptable forms of proof for employment numbers shall be in the form of a notarized statement from a North Carolina licensed Certified Public Accountant and shall be verified by the North Carolina Employment Security Commission. Page 5 of 12 15 6. REMEDY A. INDUCEMENT PACKAGE: If the County does not meet and maintain the terms set forth in the inducement package,the Company has the option to the rights set forth in Section 1 LA. of this Agreement upon thirty(30) days written notice to the County. B. DELAY OF INDUCEMENT PACKAGE INITIATION: If the Company does not meet employment and investment goals that are to be met pursuant to this Agreement by December 31, 2020, the onset of this Agreement may be delayed one (1)year, at the option of the Company. Written notification of a request to delay onset must be received by the County no later than December 31, 2020. In that event this Agreement shall initiate no later than December 31, 2021 and shall expire no later than January 31, 2026. C. INVESTMENT AND EMPLOYMENT PACKAGE: If the Company does not meet and maintain either the investment or employment goals within the annual timetable set forth in this Agreement, and does not opt to delay the onset of this Agreement as described above, then the county will reduce the annual installment payment as set forth in Section 2.D. of this Agreement until such time as the Company once again meets both the investment and employment goals. Reduction shall be computed, exclusively by the County,based on the percentage of the goal not met. In order to qualify for the full reimbursement, including recovery of any prior reductions, both investment and employment must meet or exceed the minimum standards outlined above prior to the natural termination of this Agreement. 7. SEVERABILITY If any term or provision of this Agreement is held to be illegal, invalid, or unenforceable,the legality,validity, or enforceability of the remaining terms, or provisions of this Agreement shall not be affected thereby; and in lieu of such illegal, invalid or unenforceable term or provision, there shall be added by mutually agreed upon written amendment to this Agreement, a legal, valid, or enforceable term or provision, as similar as possible to the term or provision declared illegal, invalid, or unenforceable. 8. COMPLIANCE WITH THE LOCAL GOVERNMENT BUDGET AND FISCAL CONTROL ACT OF NORTH CAROLINA GENERAL STATUTES All appropriations and expenditures pursuant to this Agreement shall be subject to the provisions of the Local Government Budget and Fiscal Control Act of the North Carolina General Statutes for cities and counties and shall be listed in the annual report submitted to the Local Government Commission by the County. 9. GOVERNING LAWS & FORUM This Agreement shall be governed and construed by the Laws of the State of North Carolina. Any action brought to enforce or contest any term or provision of this Agreement shall be brought in the North Carolina General Court of Justice sitting in Orange County,North Carolina. The Parties hereto stipulate to the jurisdiction of said court. Page 6of12 16 10. INDEMNIFICATION The Company hereby agrees to indemnify, protect and save the County and its officers, directors, and employees harmless from all liability, obligations, losses, claims, damages, actions, suits,proceedings, costs and expenses,up to the amount of the Inducement Grant including reasonable attorneys' fees, arising out of, connected with, or resulting directly or indirectly from the business, construction, maintenance, or operations of the Company or the Company's Mebane Facility or the transactions contemplated by or relating to this Agreement, including without limitation,the possession, condition, construction or use thereof, insofar as such matters relate to events subject to the control of the Company and not the County. To the extent authorized by North Carolina law the County hereby agrees to indemnify, protect and save the Company and its officers, directors, and employees harmless from all liability, obligations, losses, claims, damages, actions, suits, proceedings, costs and expenses, including reasonable attorneys' fees, arising out of, connected with, or resulting directly or indirectly from the performance of this Agreement attributable to the negligence or misconduct of the County, its officers or employees. The indemnification arising under this Article shall survive the Agreement's termination. 11. TERMINATION A. COMPANY: Upon Company's meeting its Employment and Investment obligations asset out in Section 2 above and upon Company's certification to such and certification of the payment of all real and personal property taxes, as set out in Section 5 above, then upon the occurrence of any of the following events, the Company shall have the option of terminating this Agreement: Failure of the County, to provide the initial inducement installment as provided in Section 3 of this Agreement; or, under the same circumstances, failure of the County to make future inducement installments, as provided for in Section 3 of this Agreement. Should the Company exercise its option to terminate this Agreement,pursuant to this Section for failure by the County,the Company shall be entitled to retain all funds paid to or for the benefit of the Company pursuant to this Agreement. Should the Company terminate this Agreement of its unilateral choice,regardless of any of the above incidences of default, the Company shall repay to the County all funds paid to or for the benefit of the Company pursuant to this Agreement. Thereafter,the County shall have no further obligation to make inducement installments annually or otherwise. Any such termination of this Agreement by the Company shall be in writing and shall meet notice requirements as set out herein. B. COUNTY: The County shall have the option of terminating this Agreement upon any Abandonment of Operations by the Company, without penalty to the County,which option shall be executed by giving written notice to the Company. Abandonment of Operations shall be defined as a period in excess of four(4) weeks during which the Company's level of Full Time Equivalent Employees or Direct Investment goes below twenty percent(20%) of the guaranteed minimum levels of performance commitments for either Full Time Equivalent Employees or Direct Investment as reflected in Section 2 above. Notwithstanding the foregoing, if the aforesaid decline in the number of full time equivalent employees or the Company's failure to make the required direct investments is attributable to a substantial overall national economic decline (as such may be recognized by the United States Bureau of Labor Statistics), this shall not be deemed an abandonment of operations entitling the County to terminate this Agreement, and the Company shall not be deemed in default. In such event,the Company's and the County's obligations shall be suspended for one year and resume thereafter. If after one Page 7 of 12 17 year the aforesaid substantial decline continues the County may declare an Abandonment of Operations and proceed as set forth herein. C. NATURAL: In any event,the above terms notwithstanding,this Agreement shall terminate upon the 31't day of January of the year in which the final financial inducement installment is made. 12. LIMITATION OF COUNTY'S OBLIGATION NO PROVISION OF THIS AGREEMENT SHALL BE CONSTRUED OR INTERPRETED AS CREATING A PLEDGE OF THE FAITH AND CREDIT OF THE COUNTY WITHIN THE MEANING OF ANY CONSTITUTIONAL DEBT LIMITATION. NO PROVISION OF THIS AGREEMENT SHALL BE CONSTRUED OR INTERPRETED AS DELEGATING GOVERNMENTAL POWERS NOR AS A DONATION OR A LENDING OF THE CREDIT OF THE COUNTY WITHIN THE MEANING OF THE STATE CONSTITUTION. THIS AGREEMENT SHALL NOT DIRECTLY OR INDIRECTLY OR CONTINGENTLY OBLIGATE THE COUNTY TO MAKE ANY PAYMENTS BEYOND THOSE APPROPRIATED IN THE COUNTY'S SOLE DISCRETION FOR ANY FISCAL YEAR IN WHICH THIS AGREEMENT SHALL BE IN EFFECT. NO PROVISION OF THIS AGREEMENT SHALL BE CONSTRUED TO PLEDGE OR TO CREATE A LIEN ON ANY CLASS OR SOURCE OF THE COUNTY'S MONEYS, NOR SHALL ANY PROVISION OF THE AGREEMENT RESTRICT TO ANY EXTENT PROHIBITED BY LAW,ANY ACTION OR RIGHT OF ACTION ON THE PART OF ANY FUTURE COUNTY GOVERNING BODY. TO THE EXTENT OF ANY CONFLICT BETWEEN THIS ARTICLE AND ANY OTHER PROVISION OF THIS AGREEMENT, THIS ARTICLE SHALL CONTROL. 13. LIABILITY OF PUBLIC OFFICERS No officer, agent or employee of the County or the Company shall be subject to any personal liability or accountability by reason of the execution of this Agreement or any other documents related to the transactions contemplated hereby. Such officers, agents, or employees shall be deemed to execute such documents in their official capacities only, and not in their individual capacities. This Section shall not relieve any such officer, agent or employee from the performance of any official duty provided by law. 14. MISCELLANEOUS A. ENTIRE AGREEMENT: This Agreement, including all exhibits attached, constitutes the entire contract between the parties, and this Agreement shall not be amended except in writing signed by the Parties. B. BINDING EFFECT: Subject to the specific provisions of this Agreement, this Agreement shall be binding upon and inure to the benefit of and be enforceable by the Parties and their respective successors and assigns. C. TIME: Time is of the essence in this Agreement and each and all of its provisions. Page 8 of 12 18 D. CONSTRUCTION: Nothing in this Agreement shall be construed to the effect that the County has any right to influence the Company's business decisions or to receive business information from the Company(except as expressly provided in Section 2B and Section 5 hereof). 15. NOTICES Any notices pursuant to and/or required by this Agreement shall be in writing and shall be delivered via United States Mail, certified, return receipt requested: If to Orange County; If to Medline Industries, Inc.: County Manager Director Tax Tax Department Three Lakes Drive 200 S. Cameron Street Northfield, IL 60093 Hillsborough,NC 27278 Any addressee may designate additional or different addresses for communications by notice given under this Section to the other Party. [SIGNATURE PAGE TO FOLLOW] Page 9 of 12 19 AGREEMENT REVIEWED AND ACCEPTED BY: By Medline Industries, Inc. Date Attest: Date Dmitry Dukhan Vice President of Real Estate Title: Medline Industries, Inc. By Orange County. Penny Rich Date Attest: Donna Baker Date Chair Clerk to the Board Orange County Commissioners Orange County Commissioners This instrument has been pre-audited in the manner required by the Local Government Budget and Fiscal Control Act. Chief Financial Officer Approved as to form and legal sufficiency. Office of the County Attorney Page 10 of 12 20 EXHIBIT A — Proposed Orange County Incentive Project Summary Form far State of North Carolina Incentive Review PROJECT SUMMARY FORM '_%Wlitha Industries, Inc. Key Dates; Eoterthe date that the Companyantiapatm a.?Asking the decision vhetherto locate the Project in NC 5 2019 e. Ins eking the ini6ial capital investment related to the Project 7 2019 c.Starting construction, expans�on,Or renpvationlupht of the Prulect faalrty 9 2019 d. H iring the first job related to the Project 7 2020 e.Commencing operations at the Project facility 10 2020 Average Wages A n: N `Lm evdJobs By Year S r 5•Year V�aQe aQe of DILL Um rtivm 250 New Aig.Annual 2020 2021 2�=- 20M 2024 TOTAL TOTAL Jabs wage 01jobs 30 7S 50 23 180 250 $35,468 $35,468 New InvesbrrentByYear 3-Year 5-Year 2019 2= 2Ct2t 2022 ;Z Z TOTAL TOTAL Real Property S25,000,000 S30,000,000 Sa 50 K 955,000,000 555,000,004 Tar, iiNAPetsonaI Pro p.i�rty 53.000.000 $7.003.003 5100,000 orm S'.13.1.11J $10,100,0001 514,30a000 TOM tnveWffent 528,000,004 S27"O,D(101 5100,0001 S100.000 $100.0001 S65,100.000 S65,300.000 Page 11 of 12 21 EXHIBIT B—Proposed Orange County Incentive Legal Description of Real Property Owner Property Identification Number(PIN) Acreage Collins, Donna G 9834657934 34.37 Collins Donna G Trustee Rohl Irell Trustee Etal 9834756858 62.51 Rohl, Robert D Whitfield,James H 9834853573 14.09 Allison, Gary L 9834856553 14.08 SL Efland Heirs LLC 9834868296 28 Brown, Martha S 9834955748 19.74 Wilson, Gail N 9834743184 14.14 Bruce Barclay Cameron Foundation Inc 9834846079 34.37 Page 12of12 zz I ORANGE COUNTY NORTH CAROLINA Medline Industries, Inc. " Project Tomorrow" Public Hearing for Incentive Proposal Southern Human Services Center September 10, 2019 23 Description of Medline's "Project Tomorrow" Investment: $65.3 million (majority in first 2 years) Employment: 250 new jobs in first 5 years $35,468 average annual salary, plus health care, retirement & educational benefits 500 jobs in 8-9 years, up to 600 jobs after 10 years Facilit Distribution center of 1 .2 million sq. ft. to supply medical products to hospitals, EMS agencies, home health care providers, surgical centers, and critical care clinics. Will be built to LEED-certified standards to promote environmental efficiency, with extensive solar panel placement on the building's rooftop; uses automated robotic inventory control technology ORANGE COUNTY NORTH CAROLINA 24 Outline of Orange Countv's Performance-Based Incentive Medline's New Capital Investment By Year Real Property $25,000,000 $30,000,000 $0 $0 $0 $55,000,000 Personal Property $3,000,000 $7,000,000 $100,000 $100,000 $100,000 $10,300,000 Total $28,000,000 $37,000,000 $100,000 $100,000 $100,000 $659300,000 ORANGE COUNTY NORTH CAROLINA 25 Outline of Orange Countv's Performance-Based Incentive Medline's New Employment By Year Full-Time 30 75 75 50 20 250 Jobs • $35,468 average annual salary, plus health care, retirement, educational & related employment benefits • Anticipated to reach 500 jobs in 8-9 years • Potential to rise to 600 jobs after 10 years ORANGE COUNTY NORTH CAROLINA to meet Dls�r ct mic Dee _° i horn c : = cw site N. _VVES.TEN RD CC C7 WG NORTH GAR•Q � 3 1 1 7� p19 i } 4 site of Interest 27 Description of Medline's "Project Tomor— Location: West Ten Road site (6 tracts totaling 172.79 acres) located in the County's Buckhorn Economic Development District, near interstate exit #157 at Buckhorn Road. This acreage was originally zoned by the County into the Buckhorn EDD as non-residential on 3/1 /94, and a 150" buffer was added around the nearest residential area on 8/20/96. Medline has requested annexation & rezoning (to M-1 light industrial & distribution) by the City of Mebane, with City Council review scheduled for Sept. gtn ORANGE COUNTY NORTH CAROLINA Site Location - Current Mebane City Limits & ETJ8 m m4 NR02 3 F ° o W U o N E n I m 70 a J NATHA9ARE OR ° A A LA J I � 9 WA$FIINGTOr y 41z '2J n N 57 EJ(7 7-0Y Y �-- A O 0- Lu O � A 2 CD z GOUSiN DR tSQ O SFRLJCE RD � wOOC,ST.� r0AK 1 INDUSTRIAL OR r OLEO)COUNTRY LN - NICSON RP ., H RUN L N - � m RP z v ° az ¢ z Z y�oN<o m4 FANNY OR=O S� 7 U m O O ., o x 1 � � n TTEN RD O (� T � 80�MAN RO a � . x A Za O�FNACT a 6JONA"�� �O JOHANtI LANE ��h1� ORANGE COUNTY ' j= Site of Interest �G�J? NORTH CAROLINA 0 Parcels 000 N 1in=1,50D feet -r N1\NDy >r Feet � YI - Mebane City Limits OAK ' 0 1,500 0 Mebane ETJ \ ' ange County Plan ning and Inspection �'�`�I 80 8/5/2019 Company History • Began in Chicago in 1910 as Northwestern AV • Garment Factory; was renamed Medline • Industries in 1966 and now based in Northfield, IL • Facility presence in 20 countries — Serves customers in 90+ countries • $12 billion in annual sales • 24,000 employees worldwide (8,300 new jobs added since 2014) • Largest privately held manufacturer and distributor of medical supplies in the United States: — 43 medical grade distribution centers totaling 20 million sq. ft. — 30 manufacturing centers producing 80,000 medical products — 50+ distribution centers worldwide, including North America, Europe, Asia and Australia, with 550,000+ Medline-brand and national brand products — 2+ month of Medline-brand product inventory is held for each customer to protect against unplanned demand increases and natural disaster response — Primary supplier to U.S. Dept. of Homeland Security — Fleet of 750 company-owned delivery trucks ORANGE COUNTY NORTH CAROLINA 30 Company History Regionally, the company operates two distribution centers in Lincolnton, NC and Richmond, VA. • 40% of Medline's U.S. distribution centers are LEED certified or are pending certification, representing over 8.3 million sq. ft. of distribution center space. All new Medline buildings worldwide are constructed to meet "green" LEED standards to promote environmental efficiency. f�� IIIfIF I � 9f7 1 Fed _ �, ORANGE COUNTY NORTH CAROLINA 31 Summary of State & Local Financial Incentives State of North One North Carolina Fund (Discretionary Grant) $500,000 N.C. Department of Transportation $1 ,000,000 (West Ten Road improvements) N.C. Community College System's $225,000 (Customized Workforce Training) Performance Based Incentive $1 ,840,967 • - • Plm erformance Based Incentive* $653,000 Waiver of Development Fees* $150,000 *Only available if the company is annexed into Mebane's city limits ORANGE COUNTY NORTH CAROLINA 32 Outline of Orange Countv's Performance-Based Incentive — County's proposed incentive of $1, 840,967 will be paid in 5 annual installments over 5 years of Medline's start-up operation. — Performance based, and will be measured annually against verification of Medline's actual history to create 250 jobs and invest $65,300, 000 in new property valuation over each of the initial 5 years, as proposed. — Net property tax revenue collected is positive in all years, after paying the annual incentive; ($1, 151, 003 net revenue in first 6 years; and, $3.2 million in first 10 years) ORANGE COUNTY NORTH CAROLINA 33 Outline of Orange Countv's Performance-Based Incentive Net Property Tax Revenues Collected (Projections) �J 2020 2021 2022 A 2023 2024 Total New Property Taxes $243,012 $562,399 $555,630 $549,537 $544,045 $537,349 $2,991,972 Received Incentive -$421 ,799 -$416,722 -$412,153 -$408,034 -$182,259 -$1,840,967 Annual $243,012 $140,600 $138,907 $137,384 $136,011 $355,090 $1,151,003 Net 1 -Year County Revenue Projection New Property Taxes Received $5,086,350 Incentive Paid -$1 ,840,967 Annual Net $3,245,383 • Note: There is no incentive payment scheduled for 2020 due to the company's request that ORANGE COUNTY payments begin after building completion. NORTH CAROLINA 34 Medline Industries, Inc. (Project Tomorrow) Questions and Discussion ORANGE COUNTY NORTH CAROLINA Attachment C 35 PUBLICATION INSTRUCTION: Please publish the following notice in the Special Notice Section of the Classified Advertisements as early as Tuesday, August 27, 2019 and by no later than Friday, August 30, 2019. The County Seal should be placed above the announcement. rq PUBLIC HEARING Tuesday, September 10, 2019—7:00 PM Southern Human Services Center 2501 Homestead Road Chapel Hill,NC 27514 NOTICE OF PUBLIC HEARING REGARDING PROPOSED ECONOMIC DEVELOPMENT INCENTIVE AGREEMENT FOR"PROJECT TOMORROW" Notice is hereby given that in accordance with North Carolina General Statute 158-7.1, the Board of Commissioners of Orange County (the "Board") will hold a public hearing on Tuesday, September 109 2019 at 7:00 PM at the Southern Human Services Center, 2501 Homestead Services Center, N.C. 27514. This public hearing concerns Orange County entering into an Economic Development Incentive Agreement with an undisclosed Company to encourage the business to select Orange County for a new light industrial operation currently code-named"Project Tomorrow". The Board will consider the appropriation of County general funds for the purpose of entering into an Economic Development Incentive Performance Agreement with the Company in an amount not to exceed One Million Eight Hundred Forty Thousand Nine Hundred Sixty Seven Dollars ($1,840,967.00), payable in five (5) annual installments over a five (5) year period. These funds will be used to encourage the Company to select Orange County for the proposed light industrial operation, and, assist the Company with start-up expenses, to include site development and facility construction costs, associated with "Project Tomorrow". Recruitment of the "Project Tomorrow" facility to Orange County will create immediate and long-term public benefits for the County, to include the creation of 250 new full time equivalent jobs, with health care and related employment benefits, and new capital investment of$65.3 million, in the first five (5) years of operation. Anyone interested in the Economic Development Incentive Performance Agreement or the nature of "Project Tomorrow" may appear and be heard at the public hearing. Anyone who wishes to make comments in writing prior to the public hearing may do so by mailing or delivering such comments to the Board of Commissioners of Orange County, c/o Clerk to the Board of Commissioners, 200 S. Cameron Street, Hillsborough,North Carolina 27278.