City hears enterprise zone request from coal mine

County could see funds for major road project with coal mine expansion

[November 11, 2008]  City of Lincoln aldermen heard on Monday evening how providing the Lincoln and Logan County Enterprise Zone designation to the coal mine located south of Elkhart could be helpful. The company has been mining coal there since 1982.

Phil Mahler, who is the Logan County Regional Planning Commission director and enterprise zone manager, introduced Andy Hamilton and Steve McClure, who are representing the mine in the enterprise zone request.

McClure recalled that some years ago the enterprise zone was extended to Elkhart, and an area was reserved for an energy company project. They have checked, and Corn Belt Energy is not planning to go through with that project.

McClure said that the mining company would like to expand its operation if it can get into the enterprise zone. The mining expansion would entail a $20 million reinvestment in the area. The enterprise zone area reserved for the energy project would be transferred for use by the coal mine expansion project.

The mine has only one direction still open to expand. This expansion would be westward under Interstate 55, placing it two-thirds in Logan County and one-third in Sangamon County.

McClure reviewed the pertinent details, including the value of the project and the effects the designation would have, as seen below:

Request to Expand the Lincoln/Logan County Enterprise Zone
in Logan & Sangamon Counties
to Assist ICG Illinois, LLC
November 2008

Purpose for Expansion of the Lincoln/Logan County Enterprise Zone

• Assist International Coal Group ICG Illinois, LLC with a $20 million expansion.

• The Elkhart Mine was established in 1982 and currently employs over 260.

• 48 of these employees reside in Logan County.

• 18 additional jobs would be added with this expansion.

• The total annual payroll exceeds $10,000,000, with an annual economic impact to the area exceeding $750,000,000.

• They mine over 2.8 million tons of coal each year.

• They plan to mine coal reserves near Williamsville in Sangamon County.

• The timeline is to start in January 2009 and be complete by September 2011.

• They are requesting less that one square mile be added to the zone, mostly in Logan County (1,000 acres Logan and 500 acres Sangamon).

Enterprise Zone Exemption from State Sales Tax on Building Materials

• The Enterprise Zone allows for an exemption on the state sales tax on building materials which would amount (to) a one time savings of $625,000 on a $10 million investment in materials.

• This long time employer requests placement in the Enterprise Zone to qualify for the exemption.
  This will help level the playing field with their competitors across the country and around globe.

• There are 94 legislatively created Enterprise Zones and no new Zones are currently available.

Lincoln Logan County Property Tax Abatement and Waiver of Fees:

• The renovations have an estimated cost of at least $20,000,000.
  Any abatement shall not exceed the amount of the construction.

• Abatement allowed only for commercial, industrial, or manufacturing.

• Abatement: 100 percent of the value in years one through five ($220,000).
  50 percent of the value in years six through ten ($110,000).

• No building permit fees will be charged for improvements.

Total Enterprise Zone Benefit

The total benefit to ICG over the ten years will be approximately $955,000 and the company has agreed to pay an annual enterprise zone administrative and promotion fee of $20,000 ($10,000 to Logan & $10,000 to Lincoln). This equates to 21% of the incentives going back to the County and City for zone promotion

How the Expansion Process Works

Each of the units of local governments involved in the Enterprise Zone is asked to pass an identical Enterprise Zone Resolution and Intergovernmental Cooperation Agreements. These documents will then be submitted to the Illinois Department of Commerce & Economic Opportunity for certification.

[Indented text copied from file supplied by Steve McClure]

The main major benefit the company would see would be from the sales tax relief on the building materials. The sales tax exemption would apply to building materials that are purchased anywhere in the state of Illinois. The bulk of those costs would be in specialized materials that are not purchased locally.

The request was presented to the Logan County Regional Planning Commission Wednesday and received unanimous approval.

In a side consideration, there is a road project that the expansion of the mine could help. The Elkhart-to-Mount Pulaski blacktop goes right past the mine.

During the planning commission meeting, Logan County highway engineer Bret Aukamp spoke favorably for the assistance that the coal company has lent in completing paperwork for funds that would assist the county in the renovation of the road. Aukamp said that there is no connection between the enterprise zone approval and the road project.

Aukamp said that this is probably the biggest road project that the county has seen. He did not know yet how the project will be funded, but the project will go forward, he said.

However, "if that money from IDOT would not go through, we would not be able to make that full project," he said.

McClure pointed out that expansion of the mine would help leverage the road funding request, as the state is favorable toward building projects associated with economic improvements.

Monday night, city engineer Mark Mathon said that the city of Lincoln saw some funds from that program when Sysco went in. The funds were used for the new roads that lead out to I-55.

Beyond promoting area economic health, the company is offering to pay both the city and the county $10,000 a year for administrative or development promotion costs.

During the presentation Mahler updated the council with a bundle of good news and factored it into the discussion.

The agreements for the Rail Splitter Wind Farm came through Monday, when the lawsuit against the county was dropped, and that project can now move forward.

The city passed enterprise zone designation for wind turbine locations earlier this year, and that contract provides the city with $5,000 a year in fees.

Mahler also recalled that the state had given final approval on the enterprise zone extensions to Monsanto's Farmer City and Illiopolis sites a couple of weeks ago, and those agreements bring $20,000 each for the city and the county. The wind farm and Monsanto fees are on top of the $10,000 a year still being paid by Formosa.

If the council would approve the mine's request, the city would then be receiving $35,000 a year just from the fees offered from Formosa, Monsanto, Rail Splitter Wind Farm and International Coal Group.

The fees have been used for the city's participation in the regional planning commission, which includes participation in the enterprise zone.

Additionally, the city pays $25,000 a year to the Lincoln & Logan County Development Partnership.

McClure proposed that the city could use these fees for anything related to economic development, including its development partnership dues.

City attorney Bill Bates was apprehensive about that suggestion, but he planned to look at that possibility.

If approved, over 4 acres would still remain available in the current Lincoln and Logan County Enterprise Zone, which expires in 2017.

It was pointed out that if more area was needed for the enterprise zone before it would expire, and if Formosa has not started a building project, that enterprise zone acreage could be reclaimed. The same is true with other designated areas where building has not begun.

Though it is unlikely that the city attorney and council would have enough time to review an agreement, the representatives said that it would be completed and submitted this week; and it was decided to place the matter on the council's next voting session, which will be on Monday.

[By JAN YOUNGQUIST]