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UPDATED: City authorizes incentive package for Crown Labs expansion at NN building

David Floyd • Updated Aug 21, 2019 at 11:05 AM

More than 200 new jobs paying an average hourly wage of $27.17.

That’s what Johnson City expects out of an incentive package the city’s commissioners authorized Tuesday morning for skin-care company Crown Laboratories.

“This is absolutely a great day for economic development in Johnson City,” said City Manager Pete Peterson.

During a special called meeting, commissioners gave the city’s Industrial Development Board, a body of appointed members that works to further local economic development, permission to award a $450,000 “jobs-creation grant” to Crown Labs and create a payment in lieu of taxes, or PILOT,  agreement at the company’s future corporate headquarters, 207 Mockingbird Lane.

The 216 new jobs would be in addition to the 175 jobs Crown Labs currently has in Johnson City. The company is planning a $27 million local investment, which includes expanding its manufacturing capacity at 349 Lafe Cox Drive.

“This is a very, very important project for the city and all of us who live here,” Peterson said, also calling the company a “proven, wonderful corporate citizen.”

The building on Mockingbird Lane was previously occupied by NN Inc., a global manufacturer that failed to meet the job creation goals included in its own PILOT agreement with the city.

NN recently vacated the building, which also had been the Hamilton Bank and later SunTrust Bank headquarters. SunTrust Bank will continue to lease space in the building.

Looking at the skin care company’s recent acquisitions, many of which they’re planning to bring to Johnson City, Mitch Miller, the CEO of the Northeast Tennessee Regional Economic Partnership, said Crown Labs is experiencing a period of high growth.

“I’m confident that (Crown Labs President and CEO Jeff Bedard is) going to do everything he can and will do a great job, especially filling in those jobs for that building,” Miller said.

Each year, the company will provide reports on the progress of its performance goals. Miller said the city attorney, Washington County attorney and industrial development board attorney will evaluate those reports.

“Looking at annual reporting and making sure where we are and getting adequate updates to elected officials,” Miller said. “To me that’s the most important thing.”

To qualify for these incentives, Peterson said Crown Labs would have to meet its job creation and hourly average wage goal by the end of the PILOT’s fifth year. According to city records, Crown will have to maintain those levels for the remaining term of the lease starting with the 2025 tax year or repay a portion of the incentives.

NN will assign its existing lease to Crown Labs in exchange for the company paying NN the purchase price for the building on Mockingbird Lane.

In a press release, NETREP said the company plans on closing the deal on the facility near the end of August with the hope of moving into the facility in September.

Under the terms of the PILOT, the industrial development board will lease the space at 207 Mockingbird Lane to Crown Labs, which will pay $1 per year, until Dec. 31, 2029. The business will not pay property taxes on the building during that period.

According to city records, the company will have the option to buy the office building from the industrial development board, which owns the building, at any time during the term of the lease for $1. At that time, the building would become subject to city and county property taxes.

The industrial development board will also reimburse Crown for up to $450,000 for the cost of acquiring and renovating the office building.

The company will have to provide the city and industrial development board evidence of the costs associated with the renovations and closing in order to qualify for the reimbursement.

The agreement also includes a method for the city to claw back the incentives if the company does not meet its goals.

If the outcomes don’t meet expectations, the company would be required to pay back a portion of the $450,000 and part of the property taxes abated during that five-year period. The exact repayments would depend on how close the company gets to its goals.

Bedard said 207 Mockingbird Lane was an appealing location because it allowed the company to house its corporate employees under one roof. Crown Labs will occupy the terrace and second and third floors of the building.

The renovations will occur on the fourth floor of the building, which will be “gutted to the studs and then rebuilt” to act as space for other tenants. Bedard said the company will also do some “light remodeling work” in the terrace and the second floor.

Crown Labs also plans to conduct a 100,000-square-foot expansion of its existing building at 349 Lafe Cox Drive, which will involve upgrades and expansions to the company’s manufacturing and distribution system. Bedard said that will likely start in about three years.

Bedard said the expansion became necessary in part because of the company’s acquisition of product lines from pharmaceutical company GlaxoSmithKline in the last 12 months.

Right now, Bedard said the company produces those items at contract manufacturing organizations, but he said Crown Labs wants to bring that manufacturing to Johnson City.

Bedard said the company has been in discussions with the city and local economic development organizations for more than a year now. The city’s approval of the incentive agreement is “a major milestone,” he said.

“Because ... we’ve kind of grown up here, our commitment to the community, we’re really pleased that the local commission has stepped up and decided to be part of our growth,” he said.

Bedard said there were some offers on the table to move the corporate headquarters to other locations, but the company decided that Johnson City was the best place.

Mayor Jenny Brock said during the meeting Tuesday that Bedard “took a risk on Johnson City,” having moved his business to the area in 2000 from San Diego.

“We’ve watched him grow, we’ve watched him weather the storms of the economy,” she said, “but he’s always kept his word and his promise that Crown Laboratories was going to stay here and grow.”

The industrial development board will meet at 3 p.m. Aug. 27 to consider the incentives.

Three commissioners were present at the meeting Tuesday morning — Brock, Commissioner John Hunter and Commissioner Larry Calhoun.

Although he said he’s supportive of the incentive plan, Calhoun recused himself because Crown Labs is a “significant partner and contributor” to the East Tennessee State University College of Pharmacy, where he works.

Reported earlier:

Two hundred new jobs paying an average hourly wage of $27.17.

That’s what Johnson City is expecting out of an incentive package the city’s board of commissioners authorized Tuesday morning for pharmaceutical company Crown Laboratories.

During a special called meeting, commissioners gave the city’s industrial development board, a body of appointed members designed to further local economic development, permission to award a $450,000 “job-creation” grant to Crown Labs and create a PILOT, or payment in lieu of taxes agreement, at the company’s future corporate headquarters, 207 Mockingbird Lane.

The building on Mockingbird Lane has previously been occupied by NN Inc., a global manufacturer that failed to meet the job creation goals included in its own PILOT agreement with the city. 

Crown Labs also plans to conduct a 100,000 square foot expansion of its existing building at 349 Lafe Cox Drive, which will involve upgrades and expansions to the company’s manufacturing and distribution system. Jeff Bedard, the company’s president and CEO, said that will likely start in about three years.

To qualify for these incentives, Crown Labs would have to meet its job creation and hourly average wage goal in a five-year period. The PILOT agreement will continue for another five years if Crown Labs meets that criteria. The agreement includes a method for the city to clawback the incentives if the company does not meet its goals.

Under the terms of the PILOT, the industrial development board will lease the space at 207 Mockingbird Lane to Crown Labs. The business will not pay property taxes on the building during that period.

The industrial development board will meet at 3 p.m. Aug. 27 to consider the incentives.

Three commissioners were present at the meeting — Mayor Jenny Brock, Commissioner John Hunter and Commissioner Larry Calhoun. Calhoun recused himself.

NN recently vacated the building, which also had been the Hamilton Bank and later SunTrust Bank headquarters.

Editor’s note: The early version of this article has been updated to clarify that Crown Laboratories does plan on performing a 100,000 square foot expansion at its 349 Lafe Cox Drive facility.

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