Written by The Business Journal Staff
Right now, almond trees grow on nearly 200 acres off Highway 99 and Avenue 7 in Madera County.
But in the next few years, county officials envision these orchards gone, replaced by an industrial center housing warehouses, light-manufacturing businesses, distribution centers or a combination of them all.
County officials already have worked to zone the area as an industrial park, and the property owner is working with Madera-based Span Construction & Engineering to plan out and construct the buildings they expect to fill this large parcel.
“It’s now a matter of finding the right tenants and the financing mechanism,” said Madera County Administrator Eric Fleming, who, along with other county officials, worked with the parties involved to get their county selected as the site of the planned industrial park.
That work included offering various incentives to the developers that included a new one — the creation of an enhanced infrastructure-financing district [EIFD].
“We are getting ready to get this in place, and we will likely be the first county in the state of California — or one of the first — to take advantage of this new funding mechanism,” Fleming said.
Gov. Jerry Brown signed into law Senate Bill 628 in September 2014, after the state eliminated local redevelopment agencies and the access communities had to redevelopment dollars to promote new housing and commercial construction.
With an EIFD, counties and cities can use a portion of the added property taxes that come from the value added to newly-developed parcels and use that money to reimburse themselves for infrastructure improvements for new commercial developments, or the money can be reimbursed to the developers if they incur costs to add or improve sewage and water systems, roads and other infrastructure.
Either method can serve as an incentive for developers to build in EIFDs, and Fleming said Madera County officials prefer partially reimbursing the developers because the county doesn’t have much extra money to cover major infrastructure upgrades without issuing bonds, which incur the additional expenses of paying interest to investors.
Madera county has used the promise of an EIFD as an incentive to bring the industrial park development to the county, as it has to help incentivize Community Regional Medical Center to build its planned medical center on 200 acres off Highway 41 and Avenue 12, in southeast Madera County’s Rio Mesa region.
“It’s kind of what they call ‘redevelopment light,’” said Fleming, noting that county officials can’t formally set up the EIFD for the planned Avenue 7 industrial park until a few of the future tenants sign on, so the estimated values of their new buildings can be determined.
“If we attract a large business, something that’s going to increase [value in] a piece of property if it is developed, the property tax is going to increase significantly, so what the county is committing is a portion of those added revenues to pay off the infrastructure over time.
“We are looking at establishing EIFDs in several places in the county, including one at the site of the planned hospital expansion, but that likely will occur farther down the road, Fleming said, as “Community Medical Center is still three or four years before they need the infrastructure.”
This comes at a time when Madera County and its cities are making hard pushes to promote new development, particularly of buildings that can house warehouses and light manufacturing businesses.
“Well over two years now, our vacancy rate is just under 1 percent, which is almost no availability at all for industrial buildings,” said Bobby Kahn, executive director of the Madera Economic Development Commission.
On the one hand, the high occupancy rate for such buildings is admirable, he said, but it also presents problems in attracting new businesses to the county.
“Basically, what happened is we started recovering from the recession, businesses started to rebound, companies started looking to come into the area,” but the agricultural market had stayed strong through the tough financial times, and a lot of food-processing businesses ended up moving into the vacant industrial buildings in the county, leaving few vacancies, he explained.
This included the former 480,000-square-foot distribution center in Madera for Gottschalks, which was shut down when the department store chain went out of business in 2009.
“It stood vacant for quite awhile, and then the Almond Company bought it and turned it into a processing and warehousing facility four years ago,” Kahn said.
So Madera County has gone from about a 15 percent industrial vacancy rate at the height of the recession to the current rate.
“And it’s enviable that our buildings are full, but when you turn that coin over, it’s difficult that we can’t attract new businesses because we don’t have [many] vacant buildings.”
The problem is that many businesses that need buildings larger than storefronts have deadlines dictating how fast they need to be up and running at a new locale, and some don’t have the time to go through a process that can take a year or more to put up a new building from the initial zoning and planning to completing construction.
“And a lot of businesses, there are a lot of cases where they are moving the entire company, and they aren’t going to shut down for three months or six months while they do it,” and some businesses are passing on Madera because they don’t have these sorts of industrial buildings that are ready to be moved into or require some modifications, Kahn said.
“What the cities are doing — Chowchilla and Madera — is making it more appealing to build more buildings,” whether it’s for specific businesses or “on spec” — buildings that can be converted to use for a variety of different tenants after they’re constructed, Kahn said.
The alternative is businesses passing over Madera County to locate or expand in favor of cities with more available industrial space and taking new jobs with them.
Fresno also has a low vacancy rate for industrial space, but post-recession building is more active there and in other Valley cities than it is in Madera County, said Tim Mitchell, president of Span, which currently is working on constructing a 37,620-square-foot building on spec.
“You can really attract the tenants if the smaller cities are willing to work with you — if you can offer incentives like larger cities like Fresno, Visalia and Modesto.”
The cities and the county all are working with the county EDC and are offering incentives to help attract these sorts of developments.
This has included the county’s planned EIFDs as well as the local governments streamlining the processes involved in reviewing and permitting development plans so construction can begin faster, Kahn said.
Fleming said that three years ago Madera County supervisors directed county staff to aggressively try to promote new commercial development, and that has included himself and other county officials meeting with potential developers, which included officials from Community Regional Medical Center. He said the fact the hospital is expanding into Madera County and a new industrial park is on the way shows these efforts are bearing fruit.
And the city of Madera essentially became a partner in the 100-acre Freedom Industrial Park, owning five of its 17 parcels with plans to sell it to businesses planning to built on the site.
“The city would sell finished lots that are curb ready and utilities installed, so they can be developed quickly” which would cut down the time for a business willing to build with some of the environmental studies, zoning and infrastructure already done, said David Merchen, community development director for Madera.
In addition, Madera and Chowchilla officials are discussing the possibility of deferring permitting fees and other fees the developers have to pay until their new buildings are occupied.
“This would be for spec buildings,” Kahn noted. “What the city is saying is, ‘Hey, if you are willing to risk building a building, we’ll put a little skin in the game.’”