Easton City Council endorsed a new lease agreement with Crayola Wednesday night, a move that will cost the city $300,000 over the next three years but will keep the Crayola factory downtown for at least another decade.
“There was a time Crayola was [thinking about] leaving our city,” said Mayor Sal Panto explaining the importance of the 10-year-plus deal that was finalized only hours before the meeting. “Their commitment to the city is what’s keeping them here.”
The deal calls for Easton to pay McDonald’s Corp. $100,000 per year over the next three years in order to allow Crayola access to the entire building.
McDonald’s has leased 3,200 square feet on the first floor in the front of the building for one of its restaurants since the building opened.
The restaurant had four more years left on its lease, but Crayola wants to use that square footage immediately because it fronts directly on Northampton Street. If the fast-food giant had not opted to allow the city to terminate its agreement, the Crayola Experience would have moved away, according to the mayor.
“McDonald’s conciliatory attitude has allowed us to keep a Fortune 100 company in the city. It also pays off our building,” said Panto.
“It’s going to cost us some money but in the long run, it’s a good investment,” added Councilman Michael Fleck.
The lease begins immediately but the public will have a chance to express concerns about individual elements of it, specifically the McDonald’s payments, when the city adopts ordinances dealing with the financial provisions on Sept. 12.
Panto argued that not only is the Crayola Experience a major downtown tourist draw, but the expansions Crayola is planning should significantly increase revenue to the city and more than pay for the termination of McDonald’s lease.
The mayor said the company estimates that the changes and expansions it plans will increase the number of visitors annually by 50 percent -- from 300,000 to 450,000.
As a result, the municipality should see an increase in fees, taxes and other revenues resulting from the center of $221,444 per year, or $2.55 million over the life of the lease.
The lease on the approximately 88,000-square-foot building, owned by Easton’s Redevelopment Authority, expired 10 months ago. Since then, the city, through its Greater Easton Development Partnership (GEDP), a municipal entity devoted to stimulating economic growth, has executed a series of one-month leases as the company explored its options.
The original lease on the property was done when it was constructed in 1996. The new lease is a 10-year, 10-month agreement that allows Crayola, owned by Easton-based Binney & Smith, to continue to operate its crayon museum/exhibition center in the city-owned building in exchange for the company making the monthly mortgage payment of $12,500, according to Panto, who helped negotiate the lease.
At the end of the lease period, the mortgage, estimated by the mayor to be in the $4 million to $5 million range, will be paid off. The new lease contains a 10-year renewal option at its conclusion.
Panto said that if Binney & Smith had elected to move to another municipality, the city would have been stuck paying off the rest of the mortgage on the building. He said that Binney & Smith had not informed him of any specific cities where they had planned to move, but he gathered in negotiations the seriousness of their intentions.
The lease calls for Crayola to pay all taxes and expenses associated with the property. The amount of taxes generated will be somewhat more this time around, Panto said, as the Canal Museum, which until December occupied the upper floors, has moved out and the entire building will be occupied by Crayola and designated a for-profit property.
Crayola has agreed to spend between $7 million and $9 million expanding and renovating the center. For the expansions, the city ensured all permits will be in place no later than Nov. 1. Panto said the upgrades the company is planning should be complete sometime in 2013. As of now, Crayola occupies about half the facility.
McDonald’s will close up its store in the building on Sept. 3 and will be completely out by Sept. 13. As an additional concession, the city granted the fast-food icon the right to some sign advertising in its Third and Pine streets parking garage. Additionally, no other prepared food vendors would be allowed in the building.
“That’s something we particularly like [that provision],” said the mayor. “It should be a reason to have people go and visit our Mom and Pop local restaurants.”
According to Panto, the money Easton will use to pay McDonald’s will not come out of the general fund. He said money the city receives from the county’s deal allowing table games at the Sands in Bethlehem should be able to cover the entire amount.
In addition to the $300,000 over three years to McDonald’s, the GEDP will provide Crayola a $200,000 loan to be paid back over 10 years to fix the building’s HVAC system. (Total budget for that project is $600,000.)
Although the GEDP runs the property for the city, the council, at Binney & Smith’s request, negotiated and endorsed this deal because it is the permanent municipal entity, Panto said.