Local board expects to vote on Crown Labs incentives in September

David Floyd • Aug 27, 2019 at 10:00 PM

Officials expect an incentive package designed to generate 216 new jobs in Johnson City at an average hourly wage of $27.17 will receive final consideration from a local city board in September.

During an afternoon meeting on Tuesday, the Johnson City Industrial Development Board heard an update on the city’s incentives for skin care company Crown Laboratories, which include a $450,000 grant and a payment in lieu of taxes agreement, or PILOT, for the building at 207 Mockingbird Lane.

Johnson City commissioners gave the industrial development board the authority to enter into the agreement with Crown Labs during a special called meeting on Aug. 20.

The Industrial Development Board was initially going to meet Tuesday to vote on the incentives, but Andy Wampler, the board’s legal counsel, said Crown Labs and NN Inc., a global manufacturer which used to occupy the space at 207 Mockingbird Lane, are still working through details related to the building at Mockingbird Lane, which will act as Crown’s corporate headquarters.

“It’s in the works,” he said. “I think in the next few weeks we’ll have things wrapped up.”

Wampler anticipates the industrial development board should be able to vote on the agreement sometime next month or early October.

Mitch Miller, the CEO of the Northeast Tennessee Regional Economic Partnership, said the exact timeframe hinges on the closing date between NN Inc. and Crown.

“That’s out of our control,” he said. “It’s a little up in the air on that side. The anticipated idea would be end of September, early October.”

NN Inc. vacated the space at 207 Mockingbird Lane after it failed to meet the benchmarks of its own PILOT agreement with the city. Wampler said the company has agreed to pay 2019 property taxes on the building.

“The way the agreement works is they have job performance requirements, and if they weren’t met they paid a percentage of the equivalent of the tax for that year,” Wampler said. “What they’ve agreed to do is pay taxes for 2019. Instead of paying what the agreement requires, they’re going to be paying taxes for 2019 up until the time of their closing.”

Wampler said the board will wrap up its arrangement with NN Inc. at the same time as it puts the incentives in place with Crown.

Under the proposed PILOT agreement, Crown Labs wouldn’t pay property taxes on 207 Mockingbird Lane until December 31, 2029. According to the Northeast Tennessee Regional Economic Partnership, the PILOT incentive is worth about $113,000 annually.

The $450,000 grant will reimburse Crown Laboratories for the cost of buying and renovating the building on Mockingbird Lane. According to the city, NN Inc. will transfer the lease of the building to Crown Labs in exchange for the company paying NN Inc. the purchase price of the building. The industrial development board will lease the space at 207 Mockingbird Lane to Crown Labs, which will pay $1 per year.

Although Crown Labs won’t be required to meet specific benchmarks as a condition of their agreement until the end of the PILOT’s fifth year, the draft PILOT agreement does list a set of job and hourly wage projections starting in tax year 2020 through tax year 2024.

Crown Labs projects it will have 29 additional full-time employees with an hourly wage of $33.39 in 2020, 108 full-time employees at $28.14 per hour in 2021, 158 full-time employees at $26.81 per hour in 2022 and 192 full-time employees at $26.75 per hour in 2023. The new employees will be split between its facility at 349 Lafe Cox Drive and the new corporate headquarters at 207 Mockingbird Lane.

Crown Labs will have to maintain its goal of 216 new full-time jobs paying an average hourly wage of $27.17 starting in tax year 2025 and lasting for the remaining term of the agreement. If it falls below that figure, the company will have to pay back a portion of the incentives.