EXECUTIVE SUMMARY

Georgia-Pacific LLC (Georgia-Pacific or GP) and Prologis are seeking Local Economic Revitalization Tax Assistance (LERTA) for the development of a Township approved 1.5 million square foot warehouse/distribution facility in Southampton Township, Cumberland County. LERTA will help generate over $2,211,188 of revenue to the Shippensburg Area School District over the next seven years. Further, after expiration of the LERTA in 2021, the School District will annually receive property tax revenue in the amount of approximately $597,134 from the developed property, a vast increase from the taxes currently incurred as a vacant lot.

LERTA

Established in 1977, LERTA is a tax incentive program which permits local taxing authorities to allow temporary tax relief to construction improvements to spark demand, while spurring economic development and increasing a community’s overall tax base. The improvements result in an immediate increase in property value and higher local taxes. The adjusted schedule of real estate taxes within an established LERTA zone typically permit a ten (10) year straight line, phase-in of a 10% increase per year on the assessed value of the improvements to the LERTA approved site. After a period of ten (10) years, the taxing authority receives 100% of the real estate taxes on the fully assessed property. To better align with the proposed lease term of seven (7) years for the warehouse/distribution facility, we are requesting a seven year (7) abatement period, with a 100% abatement on year one (1), with a 10% decrease in the abatement percentage each year. After a period of seven (7) years, the taxing authority will receive 100% of the real estate taxes on the fully assessed property.

THE PROPERTY

Prologis Shippensburg is a proposed industrial warehouse/distribution complex located at 234 Walnut Bottom Road, Shippensburg, PA. The property consists of 110.40 acres located within the C-M Zone. This property is located along the I-81 corridor within a quarter mile of exit 29, in South Central Pennsylvania. This location is in close proximity to one of the nation’s largest intermodal yards which is operated by Norfolk Southern. An additional intermodal yard operated by CSX, is within several miles of Prologis Shippensburg. This location allows access to over 50% of the U.S. population within a ten hour truck commute. South Central Pennsylvania is one of the fastest growing industrial real estate markets due to its convenient access to I-83, I-78 and the Pennsylvania Turnpike (I-76).

THE DEVELOPER AND PROPERTY OWNER – PROLOGIS

Prologis is the owner of the land for the proposed development site, and will act as the developer of the new warehouse/distribution center. Prologis is the leading global provider of industrial real estate, offering customers approximately 574 million square feet of distribution space in markets across the Americas, and . The company leases nearly 3,000 industrial facilities in 21 countries to more than 4,700 customers, including third-party logistics providers, transportation companies, retailers, manufacturers and other enterprises. Prologis has 94.5% occupancy in its owned and managed operating portfolio, and has $2.5 billion in liquidity comprising $2.3 billion of availability on its lines of credit and $189 million in unrestricted cash and cash equivalents. Prologis leased 33.7 million square feet in the operating and development portfolios and commenced $172 million of development across three continents in the first quarter of 2014. Prologis is listed on the under the symbol “PLD”.

THE CONTRACTOR – R.S. MOWERY & SONS, INC.

Prologis has selected R.S. Mowery & Sons to construct the warehouse/distribution center. R.S. Mowery & Sons is locally based in Mechanicsburg, PA, and was founded in 1925 on the principles of quality, integrity and value, and is proud to say that the commitment to these ideals is as strong today as it was when first started. This dedication to core principles has allowed R.S. Mowery & Sons to become one of Pennsylvania’s premier construction companies. R.S. Mowery & Sons provides general construction, construction management and design/build services for major industrial, commercial and institutional projects. Its specialties include industrial warehousing, distribution facilities, education, senior care communities and office complexes. R.S. Mowery & Sons is a financially sound company that is debt-free with substantial working capital. Its five year average annual revenue is $100 million. Since its inception in 1925, R.S. Mowery & Sons has never been in litigation with a project owner.

THE CONSTRUCTION PROCESS

The construction itself will generate about $10 to $12 million in payroll, and there may be more than two hundred (200) tradesmen working on the construction project at any given time. This project has already begun generating considerable local impact. For example, local subcontractor and supplier John Gleim Excavating and Valley Quarries has performed several million dollars of pad readiness and PennDot improvements. Additionally, numerous service contractors such as engineers and architects were engaged in the entitlement and acquisition process. Further, additional materials such as steel and HVAC supplies will be sourced locally for the project. Outside of the construction costs, the hidden impact will include significant purchases by the subcontractors’ respective workers of gas and travel expenses to/from the site, food and ancillary purchases, as well as major ongoing capital purchases of equipment, along with parts and repairs, needed by the various trades. Volvo, for example, may be a beneficiary of this project inasmuch as some of the trades may be using Volvo-built machinery.

POST-CONSTRUCTION LABOR NEEDS

The warehouse will be staffed by a yet to be chosen third party operator, and will employ 50 to 60 people. The jobs will consist of supervisory positions as well as other warehousing professionals. Generally, third party operators of distribution centers pay competitive wages and benefits, and the ongoing post-construction economic benefit includes the purchase of professional services like insurance coverage, auditing and accounting services, professional cleaning services, facility maintenance and repair. These expenses are likely to be purchased locally and are in addition to the impact of the tenant employee wages and benefits. MARKET DYNAMICS

When selecting a property, major corporations evaluate and compare location, rental rates and costs of occupancy including real estate taxes prior to any commitment to a new facility. Since the plan for the Prologis owned pad-site at Shippensburg Exit 29 was approved by the Southampton Township Board, a number of new facilities have moved their operations to Cumberland and Franklin Counties along the I- 81 corridor. Proctor & Gamble, , , Exel Logistics and Office Depot are some of the most notable companies to bring new facilities online. Although the Prologis site at Shippensburg meets a number of the requirements for Georgia-Pacific to locate in the area, the fully assessed tax burden creates the possibility of exploring other site options in the competitive logistics and distribution market. To compete with other sites and ensure a well-established and dedicated company, like Georgia-Pacific, locate in the Shippensburg area, Prologis is seeking a LERTA to help the Prologis site at I-81 Exit 29 better compete for such corporate users and the certain tax revenue associated with occupied facilities. As sites open up throughout the region, the Shippensburg area has an opportunity to take the necessary steps to position itself as a leader in corporate attraction.

CONCLUSION

The report herein identifies in further detail the LERTA process, current tax conditions for the Prologis Park 81 at Shippensburg, the proposed development plan and projected revenue implications for the property under the LERTA program.