ANOTHER VIEWPOINT: Shell building is a smart investment

This editorial was originally published Sunday on KPC News’s website. 

Kendallville’s upcoming shell building project seems likely to pay fast dividends.

A developer approached the city willing to build a $2.2 million shell building at Weston Avenue and Ohio Street in Kendallville, erecting a 75,000-square-foot building with 30-foot ceilings.

Shell buildings basically consist of a floor, four walls and a roof, then are put on the industrial market looking for a buyer. Once one is found, they work with the contractor to build out the rest of the building, customized to their particular needs.

Noble County Economic Development Corp. Executive Director Gary Gatman has said that Noble County has to defer on upward of 80-90% of new business leads it receives from the state, because it has no properties available that fit the specs firms are looking for.

Economic development researchers know what, on average, most companies are looking for, hence the standard specs for a shell building.

Once built, Kendallville’s shell building could become one of the best vacant properties in not just Noble County but the northeast Indiana region as a whole. Ground hasn’t even broken ground yet and the local EDC is already getting pings of interest about the structure, Gatman said.

Shell buildings aren’t a unique concept; they’ve been built all over the state. They’re not commonplace, however, because of the risk a developer takes in building one. If it sells quickly, great, but if it doesn’t, they’re sitting out there with millions of dollars sunk into their speculative development.

But this is an area where government can play a supporting, or even leading, role in the process. Working with a builder to form a public-private partnership is one route, but local governments could even take the plunge and build themselves.

If the public-private route is chosen, counties, cities and towns could help developers by defraying the development cost by granting tax abatements (as Kendallville has given including 0% taxes for the first two years) and/or paying the cost to bring utilities to a site so a builder doesn’t have to.

But local governments could also simply fund the project themselves too. Tax increment financing is perfect for this type of endeavor, as communities could either fund the project outright from their TIF balance or use the existing TIF borrowing mechanisms to fund the initial investments.

Either way, the venture is low risk for government. As long as the building sells, communities can recoup their cost and more on the back end, as future investment in the building, equipment and local jobs will reap long-term tax dividends well beyond the input cost.

Although we question how a new firm is going to fill jobs when local industries already struggle to hire in a labor force too small for its current industrial base, the real property investments will not only bring new tax revenue to communities but also spur new growth, something most of rural northeast Indiana hasn’t seen a lot of in recent decades.

Kendallville is making a smart move in supporting this shell building project.

Other nearby communities should watch closely.

If the project is as successful as anticipated — and we have no reason to suspect at this point that it won’t be — local governments should take note and find ways to replicate the project in their own backyards.

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