C&S Wholesale Grocers Capital

FOR CONSIDERATION January 20, 2012 TO: The Directors FROM: Kenneth Adams SUBJECT: Chester (Mid-Hudson Region – Orange County) – C&S Wholesale Grocers Capital – JOBS Now Program (Capital Grant) REQUEST FOR: Findings and Determinations Pursuant to Section 10 (g) of the Act; Authorization to Adopt the Proposed General Project Plan; Authorization to Make a Grant and to Take Related Actions; Determination of No Significant Effect on the Environment General Project Plan I. Project Summary Grantee: C&S Wholesale Grocers, Inc. (“C&S” or the Company) ESD* Investment: A grant of up to $1,353,000 to be used for a portion of the cost of construction, machinery and equipment expenditures. * The New York State Urban Development Corporation doing business as the Empire State Development Corporation (“ESD” or the “Corporation”) Project Location: 1 Elizabeth Drive, Chester, Orange County Proposed Project: Purchase an existing 175,000 square-foot facility, construct a 345,000- square-foot refrigerated addition, and acquire and install machinery and equipment to expand the Company’s NYS operations, including retaining and creating jobs. Regional Council: The Mid-Hudson Regional Council has been made aware of this item. ESD Incentive Offer Accepted: November 26, 2007 (initial offer); November 19, 2009 (revised offer) Project Completion: June 2011 Number of Employees at Project Location: Initial employment at time of ESD Incentive Offer: 285* Current employment level: 285* Minimum employment through January 1, 2015: 730* * Includes at least 330 new Full-time Permanent and up to 115 new Full- time Contract Employees Grantee Contact: Sunny McPherson, Real Estate Manager 7 Corporate Drive Keene, NH 03431 Phone: (603) 354-5876 Fax: (603) 354-4694 Anticipated Appropriation Source: JOBS Now Program ESD Project No.: V776 Project Team: Origination Paul Taxter Project Management Jill Wolfeld Affirmative Action Denise Ross Finance Jonevan C. Hornsby Design & Construction Peter Topor Environmental Soo Kang 2 II. Project Cost and Financing Sources Financing Uses Amount Land Purchase $4,680,000 Real Estate Acquisition 8,100,000 Construction 47,198,661 Site Preparation & Infrastructure 57,222 Machinery and Equipment 3,376,099 Telecom & Information Equipment 1,139,548 Soft Costs 2,044,084 Total Project Costs $66,595,614 Financing Sources Amount Percent ESD-Grant $1,353,000 2% Company Equity 65,242,614 98% Total Project Financing $66,595,614 100% III. Project Description A. Background Founded in 1918, C&S began as a family-owned, grocer in Worcester, Massachusetts. Today, the Company is the largest wholesale grocery distributer, and the 10th largest privately held company in the United States as ranked by Forbes magazine. C&S provides wholesale and distribution services to the retail grocery industry. From distribution centers located in the Northeast, mid-Atlantic, Southeast, West Coast and Hawaii, the Company delivers food and non-food products to approximately 3,900 grocery stores across the United States. Through subsidiaries and affiliates, the Company also provides third- party logistics solutions to large food manufacturers, operates retail grocery stores, licenses certain trademarks for use in the retail grocery business and develops technologies for use in automated warehouses. As distributers of food products, C&S must comply with all state and local regulations and also meet an established food safety program integrated into each warehouse. The Company’s customers include: Koninklijke Ahold N.V., The Great Atlantic & Pacific Tea Company, Inc., Safeway, Bi-Lo LLC and Tops Friendly Markets. Major competitors include Supervalu Inc., Wakefern Food Corporation, Unified Grocers, Inc., and Nash Finch Company. In 2007, C&S approached ESD to discuss options to expand its facilities and to increase its capacity to house perishable products. The company considered expanding at or near its existing Lower Nazareth Township, Pennsylvania site. ESD offered the Company a $1,353,000 3 capital grant incentive to encourage it to carry out the project in New York, which it accepted in November 2009. As a result, C&S will retain 285 existing full-time and contract employees and create 330 full-time permanent and 115 full-time contract jobs by January 1, 2015. Without ESD assistance, the Company would have likely relocated to Pennsylvania. B. The Project In May 2008 C&S’s affiliate, Chester Logistics LLC, purchased leased land for C&S, and the existing 170,376-square-foot building for its warehouse business along with 62 acres of additional land on which to expand the building and parking lot. Shortly thereafter, site preparation and construction began. Through a competitive bidding process, C&S chose Whiting-Turner of Baltimore, MD to complete construction. The Company purchased racking, forklifts and battery chargers to be installed in the expanded warehouse to move products. Computers and phone systems were also purchased. The project was completed and is fully operational. Evaluated over a seven-year period, the following are anticipated project impacts (dollar values are present value): . Fiscal benefits to NYS government from the project are estimated at $16,407,730; . Fiscal cost to NYS government is estimated at $1,353,000; . Project cost to NYS government per direct job is $3,940; . Project cost to NYS government per job (direct plus indirect ) is estimated at $1,978; . Ratio of project fiscal benefits to costs to NYS government is 12.13:1; . Fiscal benefits to all governments (state and local) are estimated at $28,834,774; . Fiscal cost to all governments is $1,353,000; . All government cost per direct job is $3,940; . All government cost per total job is $1,978; . The fiscal benefit to cost ratio for all governments is 21.31:1; . Economic benefits (fiscal plus total net resident disposable income from project employment) are estimated at $150,337,066, or $219,770 per job (direct and indirect); . The economic benefit to cost ratio is 111.11:1; . Project construction cost is $49,299,967, which is expected to generate 381 direct job years and 195 indirect job years of employment; . For every permanent direct job generated by this project, an additional 1.02 indirect jobs are anticipated in the state’s economy; . The payback period for NYS costs is one year. (See Project Summary Benefit-Cost Evaluation attached for detail and definitions.) C. Financial Terms and Conditions 1. Upon execution of the grant disbursement agreement, the Company reimburse ESD for all out-of-pocket expenses incurred in connection with the project. 2. The Company will demonstrate no material or adverse changes in its financial 4 condition prior to disbursement. 3. The Company will be required to contribute a minimum of 10% of the total project cost in the form of equity contributed. Equity is defined as cash injected into the project by the Company or by investors, and should be auditable through Company financial statements or Company accounts, if so requested by ESD. Equity cannot be borrowed money secured by the assets in the project. 4. Prior to disbursement, the Company must employ at least the number of Full-time Permanent Employees set forth as the Baseline Employment in the table below. A Full-time Permanent Employee shall mean (a) a full-time, permanent, private-sector employee on the Grantee’s payroll, who has worked at the Project Location for a minimum of thirty-five hours per week for not less than four consecutive weeks and who is entitled to receive the usual and customary fringe benefits extended by Grantee to other employees with comparable rank and duties; or (b) two part-time, permanent, private-sector employees on Grantee’s payroll, who have worked at the Project Location for a combined minimum of thirty-five hours per week for not less than four consecutive weeks and who are entitled to receive the usual and customary fringe benefits extended by Grantee to other employees with comparable rank and duties. A Full-time Contract Employee is a full-time private sector employee (or self-employed person) who is not on the grantee’s payroll but who works exclusively for the grantee at the project location for a minimum of 35 hours per week for not less than 4 consecutive weeks, providing services that would otherwise be provided by a Full-time Permanent Employee. The position held by a Full-time Contract Employee must be a year-round position. 5. Up to $1,353,000 will be disbursed to the Grantee in three installments as follows: a) an Initial Disbursement of an amount equal to 50% of the grant ($676,500) will be disbursed upon documentation of project costs totaling $55,000,000, and documentation of the employment of at least 285 employees (including at least 237 Full-time Permanent Employees and up to 48 Full-Time Contract Employees) at the Project Location, assuming that all project approvals have been completed and funds are available; b) a Second Disbursement of 25% of an amount equal to the grant ($338,250) will be disbursed upon documentation of the employment of at least 507 employees (including at least 402 Full-time Permanent Employees and up to 105 Full-time Contract Employees) at the Project Location, provided Grantee is otherwise in compliance with program requirements; c) a Third Disbursement of an amount equal to 25% of the grant ($338,250) will be disbursed upon documentation of the employment of at least 730 employees (including at least 567 Full-time Permanent Employees and up to 163 Full-time Contract Employees) at the Project Location, provided Grantee is otherwise in compliance with program requirements. 5 Payment will be made upon presentation to ESD of an invoice and such other documentation as ESD may reasonably require. Expenses reimbursed by ESD’s grant must be incurred on or after November 26, 2007, to be considered eligible project costs.

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