Companies’ expansions help drive repurposing of former factory building


One tenant, LabConnect, expects to create 71 new jobs

Story and photos by Jeff Keeling

Mitch Cox and Shane Abraham at Silverdale Commons.

Mitch Cox and Shane Abraham at Silverdale Commons.

The $6 million renovation of a shuttered Johnson City factory, projected to create about 100 new jobs over five years, could be the first to qualify for tax incentives under the city’s new Capital Investment Program (CIP) approved Nov. 6. The project, which projects a near tripling of employment at LabConnect, a life sciences research support company, could net the property owners roughly $170,000 in tax incentives over five years.

The CIP program is, “designed to attract new business and help existing companies expand in the City.” It sets specific job growth and investment criteria for companies to qualify for various levels of “payment in lieu of tax” (PILOT) incentives.

The Industrial Development Board (IDB), which oversees the program, on Friday tentatively approved a PILOT proposal from local business owners Mitch Cox and Shane Abraham on the Silverdale Drive property where Traco Corp. ceased operations in 2009. In July, Cox paid $1.475 million for the 148,000 square feet of buildings and 15 acres of property, which they have renamed Silverdale Commons.

Cox and Abraham’s project includes the expansion of their own businesses and an even larger expansion of LabConnect, a Seattle-headquartered company with a 38-person operation currently located in Boones Creek. The proposal projects 71 new jobs at LabConnect, 16 at Mitch Cox Companies and 16 at Abraham’s business, Universal Companies.

LabConnect will move from a 15,000-square-foot building in Boones Creek to 41,000 square feet at Silverdale Commons.

“We’re building an expansion that is beyond our current needs because we see down the road needing a lot more space than we currently have,” LabConnect Chief Financial Officer Jonathan Siegel said Monday from Seattle. Siegel said the company analyzed the possibility of moving elsewhere as it prepares for 30 percent annual revenue growth over the next several years.

That process, he said, resulted in management recognizing this area’s workforce, business climate, tax structure, central location and cost of living all pointed toward staying put.

“It is a good value to be here,” Siegel said, adding that in terms of finding employees, “it’s definitely a benefit to us that it’s a university town.”

At its local site, the privately held company designs, builds and delivers testing kits for clinical trials, mostly for pharmaceutical and medical device companies seeking FDA approvals. Local employees also oversee the proprietary information technology infrastructure; receive samples, send them to the appropriate partner laboratories and order testing; and maintain frozen samples in a bio repository. Project management also is handled out of Johnson City.

Cox and Abraham’s CIP application projected 30 new production jobs through 2018 at LabConnect, paying an average of $11.50 hourly, along with 38 office positions averaging $20 an hour and three management jobs averaging $40 an hour.

Cox told IDB members all the companies should be moved in by mid-spring 2015, after an estimated $5.9 million worth of renovations. Universal Companies includes two subdivisions, one that produces tube bending and end forming equipment and another that specializes in multifamily and commercial construction. Cox runs a full service real estate company.

The combination of jobs and investment qualified the project for a five-year, Level II PILOT. As with all PILOTs, the owners will have to cede title of the building to the IDB for the PILOT’s duration. If job projections are met, the taxes paid on the increased value of the property will be 0 in the first year, 20 percent in year two, and 40, 60 and 80 percent in years three through five. At that point, title would revert to Cox and Abraham and property taxes would be levied at 100 percent.

The property’s current assessed value is $1,730,700. Abraham told News and Neighbor he expects the assessment to increase by at least $4 million after construction. The additional annual tax liability on that amount would be $57,280 at current rates. On that additional liability (payment would continue as normal on the previous value) the owners would pay $0, then amounts increasing by $11,456 a year for the next four years for a total incentive of $171,480. By that time, they would have paid $114,560 more in property taxes, even with the PILOT, than the property’s current tax bill would bring over the same period.

Cox also is leasing space to a distribution company and a recreation business. The recreation business, which will occupy about 10 percent of the total building space, became the source of discussion among IDB members as to how it should affect any CIP incentive. While the other elements of the Traco renovation are among the types of projects eligible for PILOT incentives, it is not.

The application scored well above the minimum for Level II, however, and members voted to make sure full approval met the scrutiny of Tom Trent, an attorney specializing in tax incentives, before it became final. If Trent advises a different approach, members agreed to pro-rate the PILOT and remove the property value associated with that business from the incentive amount.


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