SUGAR LAND DEVELOPMENT CORPORATION. Annual Report Year Ending September 30, Prepared by: Office of Economic Development & Finance Department

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1 SUGAR LAND DEVELOPMENT CORPORATION Annual Report Year Ending September 30, 2016 Prepared by: Office of Economic Development & Finance Department

2 TABLE OF CONTENTS I. Letter from the President... p. 1 II. History of the Corporation... p. 2 III. Board of Directors... p. 3 IV. Economic Development Program Marketing... p. 4 Business Relocations & Expansions... p. 9 Tax Abatement Summary... p. 16 Direct Incentive Summary... p. 17 Strategic Projects... p. 19 Community Impact... p. 21 V. Revenues / Expenditures... p. 28 VI. Summary of Financials... p. 29 VII. CIP Summary... p. 30 VIII. Recognitions... p. 32 IX. Looking Ahead to FY17... p. 33 SLDC ANNUAL REPORT, FY16

3 LETTER FROM THE PRESIDENT Dear Sugar Land Community: On behalf of the Board of Directors of the Sugar Land Development Corporation (SLDC), I am pleased to present you with the Annual Report for Fiscal Year The City of Sugar Land is truly a remarkable place to live, work and visit, and it is our objective at the SLDC to support businesses and economic growth throughout the City, which translates into an unparalleled quality of life for our residents. Sugar Land has achieved its sustainable, strong local economy through an aggressive, focused economic development program that creates opportunities for new business investment and jobs. The City has become an economic powerhouse within the Houston region. Sugar Land is home to high-profile regional and international corporations housed in more than 26- million-square feet of commercial space, attracting everything from Fortune 500 companies to startups. Sugar Land now boasts more than 64,600 jobs a more than 40 percent increase in jobs since 2012, during which the City s residential population increased by less than 4 percent. Sugar Land s healthy economy and successful business growth not only provide more opportunities for employers to locate their businesses in Sugar Land, but it also provides residents with a higher quality of life and more leisure time through opportunities to both live and work in their hometown. Additionally, through commercial growth, the City s balanced tax base allows for continued investment in new quality of life amenities for residents and businesses alike. In 2016, the Office of Economic Development announced several significant relocations or expansions, including Fortune 500 firms that operate internationally as well as other national and local firms. Combined, these projects will result in more than $11.8 million in new capital investment, 548 new jobs and more than 118,175 square feet of newly constructed or newly leased space. Sugar Land also continued to receive regional, statewide, and national recognition. For the eighth year in a row, the SLDC was awarded a Certificate for Achievement of Economic Excellence from the Texas Economic Development Council. In addition, Sugar Land s pro-business climate was recognized by Global Trade Magazine, which named Sugar Land a top-10 city for the Best Business Environment in the country. As we look forward to our next fiscal year, the SLDC will continue to meet any economic challenges and will efficiently and effectively carry out its mission. Thank you for the opportunity to serve the City. Steve Porter FY16-17 President SLDC ANNUAL REPORT, FY16 1

4 HISTORY In 1993, the voters of Sugar Land created the Sugar Land Development Corporation (SLDC) under the Texas Development Corporation Act of 1979 for the purpose of promoting, assisting, and enhancing economic and development activities on behalf of the City. The SLDC accomplishes these goals by funding infrastructure and incentive projects with a ¼ cent sales tax, which has provided the City with more than $87 million in economic development funding since the SLDC was established in Since its creation, the Corporation has leveraged its revenues to commit more than $ million to 68 capital improvement projects in addition to the incentives paid to date for business recruitment and retention efforts. These improvements support the community by providing a more effective environment for economic activity ranging from public utilities to streets and drainage to primary employment expansion projects. Recent projects funded by the SLDC include direct incentives for Schlumberger, Nalco Champion, ABM Industries, and Team Industrial; the reconstruction of Industrial Boulevard; and the development of the Smart Financial Centre at Sugar Land which was specifically authorized as an SLDC-eligible project by voters in Previous projects also include the Telfair commercial district land purchase, Sugar Land Town Square infrastructure and various improvements to U.S. 59. It is important to note, however, that the estimated total 10-year direct and indirect/induced benefits over the first 10 years of any project receiving an incentive from SLDC must exceed the total direct incentives offered; these benefits come primarily from sales taxes generated by the company and their employees and visitors, hotel occupancy taxes generated by the company's visitors, as well as other direct and indirect revenues such as permit fees and franchise fees for utilities. SLDC ANNUAL REPORT, FY16 2

5 Sugar Land Development Corporation (l-r): Harish Jajoo, Amy Mitchell, Himesh Gandhi, Joe Zimmerman, Bridget Yeung, Steve Porter, Mary Joyce Board of Directors From June 2015 to June 2016 President: Vice President: Directors: Harish Jajoo Bridget Yeung James Thompson Joe Zimmerman Himesh Gandhi Steve Porter Amy Mitchell From June 2016 to June 2017 President: Vice President: Directors: Steve Porter Mary Joyce Joe Zimmerman Himesh Gandhi Bridget Yeung Amy Mitchell Harish Jajoo SLDC ANNUAL REPORT, FY16 3

6 Business Relocation & ExpansionProgram Marketing The City of Sugar Land has a reputation as a premier community providing excellent services and programs and needs to create a cohesive brand image to globally connect the many community assets, services and overall attractiveness of the community for business, residents, and visitors to external markets. The creation of a cohesive brand and the establishment of a strategic marketing plan will heighten the City s recognition in external markets, maximizing the marketing investments currently being made and expanding the City s exposure across the region, state, nation and world. In 2016, work continued on the marketing study to create a strategic city-wide branding and marketing plan, outlining the best messaging for brands by audiences and locations, how to streamline messaging across brands and leverage partnership opportunities with multiple funding sources. Additionally, as part of this study, the City s consultant completed an evaluation of the City s current marketing practices and provided high-level recommendations on how to better utilize marketing resources during the time frame prior to the completion of the full study. Therefore, the Office of Economic Development has continued to engage in limited marketing efforts examples of which are outlined below while working to complete a more comprehensive strategy and plan. SLDC ANNUAL REPORT, FY16 4

7 Annual Publications Texas Wide Open for Business The City highlighted the community in a two-page advertisement in the 2016 Texas Economic Development guide, Texas Wide Open for Business, which is distributed by the Texas Governor s Office of Economic Development & Tourism to all business inquiries and approximately 40,000 site selectors, brokers and incentive consultants. Houston Economic Development Guide This Greater Houston Partnership Houston Economic Development guide is a yearly print and online publication that showcases the regional marketplace for site selectors, consultants and entrepreneurs. Over 5,000 copies are distributed at economic development trade missions by GHP in conjunction with its 58 economic development councils located throughout the 10 county region. A twopage spread and back cover ad was placed in the 2016 issue, and staff has secured for placement in Quarterly Publications Here is Houston The Greater Houston Partnership s Here is Houston magazine is the primary source for new and soon-to-be Houstonians as they relocate to the region. Both the printed magazine and accompanying website provides an easy-to-use reference tool covering topics such as how and where to buy a house, renting and leasing, educational options, healthcare and attractions within the 10-county region. Here is Houston is published quarterly with approximately 80,000 copies distributed annually. The Office of Economic Development has purchased a fullpage ad in the magazine for the next four editions. The first ad appeared in the 2014 Fall issue. Opportunity Houston A year-round magazine is a showcase for Houston s lifestyle and business climate. News and features on people, places, and businesses. Each issue is themed to a key Houston industry and is a Greater Houston Partnership publication. SLDC ANNUAL REPORT, FY16 5

8 Continuing Print and Online Publications Area Development Area Development mails over 60,000 copies monthly C-level executives and manufacturing companies. The Office of Economic Development purchased a half page ad in 2016 Directory. Bisnow Bisnow.com is a website that delivers news about the local real estate market and seeks to bring partnerships together. The office contracted with Bisnow for a 26-week online advertising campaign as well as helped coordinate the Future of Sugar Land event held by Bisnow in November 2016 at the Marriott Sugar Land Town Square, which resulted in significant coverage of Sugar Land projects. Site Selection Site Selection is the magazine of Corporate Real Estate Strategy & Area Economic Development. The publication delivers expansion planning information to 45,000 audited subscribers (many of them employed by fast-growing firms) via state, country, industry and trend reports, project profiles and a series of widely referenced economic development rankings. Site Selection also publishes sponsored regional Investment Profiles. The Office of Economic Development purchased full page ads in the March and September 2016 issues. Southern Business and Development Southern Business & Development Magazine targets top executive readers in key markets and states located outside the American South. The Office of Economic Development placed a full page plus digital ad in the Winter 2016 issue. CoStar CoStar is a comprehensive source of commercial real estate research information worldwide and provides analytics and marketing services to the commercial real estate industry in the US, UK, France and Spain. The Office of Economic Development placed a digital ad on the home page of this online corporate real estate location tool. SLDC ANNUAL REPORT, FY16 6

9 Economic Development Website ( The Economic Development website is a powerful marketing tool. On www. SugarLandEcoDev.com, site selectors and other decision-makers have access to useful information such as demographics, available properties, research reports, site selection data, incentives, partner agencies and community/quality of life amenities. Information can be downloaded as PDFs. The site also highlights the City s major corporate businesses and top employers. Economic Development Online GIS The Economic Development website features an interactive, online Geographic Information System (GIS) research tool ( development/mappage1.aspx). This application greatly enhances the City s business attraction and expansion efforts by providing instant access to fundamental information required by businesses, site selectors and brokers when considering a commercial location. Since the application is available via the web, the general public is also able to utilize the tool. The application s features include the ability to search available sites and facilities, evaluate surrounding infrastructure and amenities, save custom maps to PDF format and print, and request custom, site specific demographic reports. In addition, users can access over 20 data layers including aerials, utilities, floodplains, appraisal district parcels, zoning, major retail centers, schools, parks, hospitals, and much more. GIS section of SugarLandEcoDev.com during FY16 SLDC ANNUAL REPORT, FY16 7

10 Website Performance Economic Development uses Google Analytics to track website performance. In FY15, the site was visited 11,341 times by 8,397 unique visitors who visited 2.76 pages per visit with 31,293 page views. In FY16, the site was visited 9,966 times by 7,177 unique visitors who visited 2.63 pages per visit with 26,224 page views. As part of the city-wide marketing study, the Office of Economic Development will be outlining strategies for improving the website including likely the addition of much more robust video and graphic content Sessions Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep FY16 Visitors FY16 FY15 FY15 Visitors 29% New 27% New 70% Returning 73% Returning Sessions % 9,966 vs 11,341 Users % 7,177 vs 8,397 Pageviews % 26,224 vs 31,293 Pages / Sessions -4.64% 2.63 vs 2.76 % New Sessions -2.55% 70.90% vs 72.75% Avg. Sessions Duration -2.78% 00:02.31 vs 00:02:35 Bounce Rate -1.84% 55.61% vs 56.65% SLDC ANNUAL REPORT, FY16 8

11 Business Relocations & Expansions Retention Special Events Events attended by Economic Development staff are another important component of the marketing program. These events allow staff to build direct relationships and keep a pulse on potential leads, market conditions, and the competitive environment. Events include: GHP s Opportunity Houston Recruitment Missions GHP s Opportunity Houston Site Consultant Events TexasOne Recruitment Missions TexasOne Site Consultant Events TexasOne Mexico Delegation Site Selectors Guild Annual Conference ICSC Texas Deal Making Conference Business Recruitment In order to expand Sugar Land s marketing reach and to leverage marketing dollars, the City partnered with a number of organizations to supplement its recruitment efforts. These included: Texas One: The Governor s marketing arm for economic development for the State of Texas. The City participates in Texas One business recruitment missions throughout the US. Opportunity Houston: An aggressive five-year marketing program developed by the Greater Houston Partnership that targets five major economic sectors: aviation and aerospace, energy and petrochemical, medical and biotechnology, information technology, and nanotechnology. The City participates in Opportunity Houston broker and site consultant events. Team Texas: Marketing arm through Texas Economic Development Council and promotes events with commercial brokers. Bisnow: The office of Economic Development also partnered with Bisnow over the past year to conduct a first ever Future of Sugar Land panel discussion focusing on commercial developments in the City. The event was held at the Marriott Sugar Land Town Square, and resulted in significant coverage of Sugar Land projects. Business Retention and Expansion Since the implementation of a formalized business retention program in 2015, Economic Development has conducted over 40 on-site business retention visits and has hosted the City s top primary employers at Constellation Field. The office of Economic Development also hosted the first ever business recognition luncheon titled Leadership and Legacy in partnership with the Sugar Land Legacy Foundation on December 16, 2016 (FY17). This inaugural event hosted approximately 200 business and community leaders at the Smart Financial Centre at Sugar Land. The Sugar Land Legacy Foundation presented the first SLDC ANNUAL REPORT, FY16 9

12 Sugar Land Legacy Awards to Les Newton and Fluor for their contributions to the economic prosperity of Sugar Land. Following the formal program held in the audience chamber of the venue, guests toured the facility and received a custom Hatch Show Print created for the event. As part of the ongoing efforts of business the retention and expansion program, the department will look to establish an industry roundtable series and continue the annual Leadership and Legacy business recognition luncheon. These expanded efforts further establish a strong working relationship with Sugar Land employers that will allow the City to monitor the health of the overall economic base, identify and address concerns or challenges, and recognize opportunities for new growth. SLDC ANNUAL REPORT, FY16 10

13 2016 Announcements New Jobs 548 Capital Investment $11.8M New Facility Construction / Leased SF 118,175 SLDC ANNUAL REPORT, FY16 11

14 FY16 Announced Business Relocation & Expansions Sugar Land has achieved its sustainable, strong local economy through an aggressive, focused economic development program that creates opportunities for new business investment and jobs. The City s growing economy provides an excellent location for relocating and expanding companies to thrive. In 2016, Economic Development announced several significant relocations, including Fortune 500 firms that operate internationally as well as other national and local firms. Combined, these projects will result in more than $11.8 million in new capital investment, 548 new jobs for the City and more than 118,175 square feet of newly constructed or newly leased space. New Projects Announced ABM, a Fortune 500 Company and a leading provider of facility solutions, has been serving Texas since 1945 and currently has more than 10,000 employees maintaining over 4,500 buildings throughout the state. In November 2016, the Investment Sugar Land Development Corporation approved an agreement with ABM relocating their corporate shared services operations to the City of Sugar Land. This project will result in more than $9.4 million in capital investment and the creation of approximately 390 over the next two years. The company will occupy approximately 62,000 square feet within the Sugar Creek on the Lake office Caption for photos building at Southwest Freeway. This iconic 515,000 square foot Sugar Land building is now more than 90% leased. Team Industrial Services, Inc., announced plans to expand their current corporate headquarters in the City of Sugar Land as part of its recent acquisition of the Furmanite Corporation. Team s merger with Furmanite approximately doubles the size of Team s mechanical services capabilities and establishes a deeper, broader talent and resource pool that better supports customers across standard and specialty mechanical services. In November 2016, the Sugar Land Development Corporation approved an agreement to secure the retention of 100 jobs and expansion of an additional 113 jobs in Sugar Land. As part of this project, Team will expend more than $2.4 million in capital investment and will occupy 59,000 square feet of office space at Dairy Ashford in Sugar Land, expanding its corporate headquarters. Amica, is a direct writer of personal insurance with auto, homeowners, personal excess liability and marine coverages, is expanding its current Sugar Land operations from 14,213 square feet to 22,719 square feet in Sugar Land Town Square. SLDC ANNUAL REPORT, FY16 12

15 MEGlobal Americas, Inc., a company created by a joint venture between The Dow Chemical Company (Dow) of the United States and Petrochemical Industries Company (PIC) of Kuwait, is a world leader in the manufacture, supply and marketing of merchant monoethylene glycol (MEG) and diethylene glycol (DEG). The co mpany is also the largest transporter of EG in the world, marketing in excess of 3.5 million metric tons from its world-leading supply partners. The company will relocate its corporate headquarters to 2150 Town Square Place occupying 9,129 square-feet and creating approximately 30 jobs. TRANMEX, LLC., a Mexico City based energy company, has opened a United States based office at 2277 Plaza Dr (The Plaza Building). The company will be occupying 4,540 square-feet on the 6th floor and create approximately 15 jobs. Major Projects Schlumberger, continues its plan to consolidate the company s U.S. headquarters to the City of Sugar Land as part of its long-term resource management and consolidation strategy. As part of this headquartersconsolidation project, the Fortune Global 500 company will reposition more than 500 jobs to its Sugar Land campus, construct more than 250,000 square feet of Class A office space and construct a new amenities building totaling approximately 100,000 square feet. The company will also be investing more than $200 million in capital improvements at its existing 200-acre Sugar Land campus along US Highway 90A to accommodate the move. Completed Projects Nalco Champion, an Ecolab Company, a specialty chemical company that delivers sustainable solutions to overcome complex problems for the upstream, midstream and downstream oil and gas operations through onsite problem solving and the application of innovative technologies, completed their new 130,000 square foot corporate headquarters office building. This project will ultimately result in more than $45 million in capital investment, the retention of 342 jobs, the recapturing of 247 jobs previously in Sugar Land and the addition of 862 new jobs. Applied Optoelectronics (AOI), a global leader in the design, development, and manufacturing of advanced optical devices, packaged optical components, optical subsystems, laser transmitters, and fiber optic transceivers completed a new, 102,000 square foot, three-story building to house manufacturing, R&D, and corporate headquarters and plus a new, 9,600 square foot, one-story building for manufacturing. This project resulted in approximately $39 million in capital investment and will lead to the creation of over 500 new jobs over ten years. SLDC ANNUAL REPORT, FY16 13

16 Heavy Construction Systems Specialists (HCSS), headquartered in Sugar Land, is a pioneer and leader in the development of construction software to help infrastructure, heavy/highway and utility contractors do their jobs even better by increasing their chances of winning profitable work, manage daily activities in the field, track labor and equipment, keep workers safe on the job, and much more. The company, which has been regularly acknowledged for its employee-centric culture, completed a 15,000 square foot expansion at West Airport Boulevard in the Sugar Land Business Park. The project, valued at $3 million, and will result in the creation of additional jobs to the more than 165 already in the City. Major Medical Projects Sugar Land is increasingly being recognized as a major world-class medical hub within the Houston region a major amenity for residents and the industries that support the medical community. The City is continuing to see expansion of the medical community, including the following major projects: Memorial Hermann Sugar Land Hospital, opened the doors to its brand new 155,000 square-foot, six-story patient tower in September The patient tower is the centerpiece of a $93 million expansion project on campus. An earlier phase of the project was completed in December 2015 which included the new 100,000 square-foot Medical Plaza 2. The building is now home to the Memorial Hermann IRONMAN Sports Medicine Institute in Sugar Land. In addition to the 255,000 square-feet of new construction on campus, the hospital has also undergone renovation to 30,000 square-feet of space in the existing west tower. The west tower renovation included adding six beds to the Neonatal Intensive Care Unit and a new MRI allowing pediatric MRI to be performed on campus. In addition, Memorial Hermann Sugar Land Hospital has been named a recipient of the 2016 Malcolm Baldrige National Quality Award, the nation s highest Presidential honor for performance excellence. U.S. Commerce Secretary Penny Pritzker made the announcement recognizing Memorial Hermann Sugar Land for its outstanding commitment to sustainable excellence through innovation, improvement and visionary leadership. Houston Methodist Sugar Land Hospital (HMSLH), opened its doors in 1998, it has grown into a 347-bed hospital with 27 operating rooms, performing the most advanced surgical and diagnostic techniques available, including brain surgery, open heart surgery and joint replacement surgery, to name a few all backed by a healing focus on compassion, hands-on care and outstanding service. In addition to a six-story patient tower completed in 2016, Houston Methodist Sugar Land s expansion projects included a 20,000- square-foot Heart & Vascular Center, adjacent to the hospital s emergency department, and a 75,000-squarefoot facility for Houston Methodist Orthopedics & Sports Medicine. SLDC ANNUAL REPORT, FY16 14

17 Major Retail Announced In addition to the strong retail development continuing within Telfair and Riverstone as well as the planned Imperial Market project, Dick s Sporting Goods held its grand opening in October 2016 at First Colony Mall. This specific retailer further confirms the individually identified targeted retail, entertainment, and hospitality prospect list that was developed as part of the City s 2014 retail analysis study. SLDC ANNUAL REPORT, FY16 15

18 Revenues / Expenditures Tax Abatement Agreement Performance Summary (Tax Year 2016) In May 2016, the Sugar Land City Council approved Resolution No strengthening minimum guidelines and criteria governing tax abatement agreements in the City of Sugar Land. The Office of Economic Development performs an annual assessment of the compliance performance for companies receiving tax abatements. Currently, the City has 13 active tax abatement agreements under contract for These companies comprise of approximately $233 million in real and personal property values. They also provide over $84 million in inventory values not subject to tax abatement exemptions. Active Tax Abatement Agreements: 13* Tax Abatements Awarded: 12 *Excluding Approved Agreements Not Yet Begun Active Tax Abatement Agreement Values Minimum Required Value (per Agreement) Certified CAD Value Percent of Required Value Real Property $82,590,000 $161,111, % Personal Property $52,550,000 $71,575, % Inventory $17,000,001 $83,576, % SLDC ANNUAL REPORT, FY16 16

19 Detail of Certified CAD Values Exempt Abated Value Taxable Value Real Property $101,529,929 $59,581,431 Personal Property $39,785,338 $31,790,212 Inventory $0 $83,576,220 The City of Sugar Land has exempted approximately $145 million in commercial property tax value in 2016 including tax abatements and other state required commercial exemptions; by comparison, more than $1.1 billion in residential property tax was exempted during the same period. This means that residential property values exempted from taxation within Sugar Land are more than eight times the amount of the exemptions for commercial property values. While corporate tax abatements are limited to no more than 10 years, the homestead, over-65, disabled persons and disabled veteran exemptions are permanent. It is important to note that the City does not lose anything through such value-added tax abatements, as the development would not have occurred without the tax abatement. The projects result in significant property tax value and revenue to the City after the abatement expires. Economic growth generated by these agreements fully benefits the local school districts, as they do not participate in abatements. Property Tax Exempted in 2016 $1,200,000,000 $1,000,000,000 $800,000,000 $600,000,000 $400,000,000 $17,276,073 $14,508,461 $382,925,189 $774,395,997 $145,251,074 $200,000,000 $0 Homestead Over Age 65 Disabled Person Disabled Veterans Commercial Direct Incentive Summary The Direct Incentive program has been a tremendous success for the City of Sugar Land. Since the first direct incentive program was implemented in October 2006, the tool has assisted in the attraction of fifteen major companies bringing to Sugar Land 5,028 new jobs, over $467 million in new capital investment, and more than $20 million in taxable purchase. In May 2016, the SLDC approved Resolution No adopting SLDC ANNUAL REPORT, FY16 17

20 changes to strengthen the SLDC policy on granting performance-based economic development incentives to qualifying companies. The effort was intended to ensure Sugar Land remains a leading location for primary employment and corporate headquarters. Direct Incentive Summary Incentives Obligated New Jobs New Capital Investment * Taxable Purchases ** Hotel Room Nights *** $250, $9,400,000 $2,000,000 2,000 $250,000 $300,000 $2,500,000^^ $750,000^^^ $1,550,000 $2,425,000-2, $240,000,000 $10,000, ,310 $300, $10,000,000-3,307 $560, $39,000, $2,500,000 $1,000,000^ 1,109 $45,400, $2,500, $35,000,000-7,500 $200,000 5 $7,500,000-10,400 $250, $2,400, $10,800,000 $6,125,000 15,000 $200,000 Paid in full 40 $3,250,000-1,000 $850, $3,900,000 $1,000,000 Generate > $50,000 in HOT and/or Sales Tax $800, $47,400,000-1,000 $500,000 Expired 12/31/2016 $1,334,347 Expired 10/15/ $3,700,000 $1,000,000 1, $8,000, TOTAL $17,444,347 5,028 $467,325,000 $20,125, ,517 * New value created as required by agreements for Real Property, Personal Property, and Inventory. ** Minimum value of new purchases subject to sales tax over the life of the agreement *** Minimum number of required hotel rooms over the life of the agreement ^ Infrastructure Grant for Rail Improvements ^^ Negotiations started in FY15 and the agreement was approved in FY16 ^^^ One-Time Sales Tax Reimbursement Grant Based on Actual Sales Tax Generated Negotiations started in FY16 and the agreement was approved in FY17 SLDC ANNUAL REPORT, FY16 18

21 FY16 Strategic Projects Update Development of an External City Marketing Program Phase II began in this year and this project s consultant produced drafts of the Value Proposition, taglines, and key messages. Staff is working to vet these items through an external stakeholder group, the Economic Development Committee, the Sugar Land Development Corporation, and Sugar Land 4B. The consultant is also working on a soft logo proposal. As proposed, although the City will continue to have its logo and seal for official purposes and publications, the soft logo would be used in more creative marketing materials such as tourism. The final deliverable of this project will be a brand strategy report. All items will be shared with City Council in FY17. Implementation of Performing Arts Center Planning and Development Construction of the venue now known as Smart Financial Centre at Sugar Land proceeded on time and in budget in FY16, along with the construction of the initial parking area, the marquee sign and the adjacent TIRZ No. 4 Plaza. Early in the new fiscal year, staff will be bringing forward the suite policy. Planning for the Grand Opening with Jerry Seinfeld on January 14 and the Public Open House on January 7 has been added to this project s plan for FY17. Planning for Possible Future Hotel / Conference Center Staff received City Council approval of changes to the 2015 Legislative Agenda. This allowed the proper due diligence for the State Rebate Program. As a result, staff notified the Sugar Land Marriott Town Square of the intent to begin the process of constructing a Hotel Conference Center in the City s 38 acres within Tract 5. City Staff also met with local Sugar Land hoteliers to receive support on the 2017 Legislative Plan to pursue the State Rebate Program. Towards the end of the year, staff went before the Intergovernmental Relations (IG) Committee for a review of the 2017 Legislative Agenda. Moving forward into FY17, this strategic project will be combined with TIRZ #4 Implementation Planning project. Therefore, this project will be known as: Planning for Overall TIRZ #4 Implementation and Development of City Owned Property. Planning for the Development & Commercial Utilization of the Festival Site In FY16, a workshop was held with City Council to share and discuss the proposed vision, utilization and fee structures at the Festival Site venue, including its relationship to the adjacent Brazos River Park. Staff also proposed the creation of a special revenue fund to capture the rental fee of the Festival Site and special event permitting fees. In FY17, staff City Council approved a special events ordinance by which special events will be accounted for, reviewed, and permitted. SLDC ANNUAL REPORT, FY16 19

22 Central Unit Land Acquisition & Business Park Development The scope, deliverables, team members, and milestones for the project were modified in July to reflect the expansion of work being done. Closing on the property was finalized on September 9. Some members of the team met with the Texas Department of Criminal Justice on Monday, September 12 to exchange keys and discuss other items associated with the transition of ownership. The City is now actively pursuing security and maintenance of the site. Additionally, the City is working to outline the next steps for moving forward, and the Airport is continuing to work on the Airport Master Plan to help outline uses for the 95-acre tract. Implementation of the Imperial Redevelopment Agreement During the third quarter, the City approved the Third Amendment to the Imperial Redevelopment Agreement. The agreement allows Johnson, and any other developer, the ability to use District and TIRZ debt to fund investment in the public improvements in the TIRZ Plan. Meanwhile, the City received a commitment from the District on the timely funding for the upcoming construction of the second phase of the University Boulevard north extension across Oyster Creek, a date-certain reimbursement for the District s remaining University Boulevard north extension costs, and expedited repayment for the advancement of funds that were used for infrastructure and parking associated with Constellation Field. The City also received appropriate assurances that any developer of the 26.7-acre historic refinery area will have sufficient financial tools and protections to create the mixed-use planned development envisioned by City Council. Further, in July, the TIRZ Board approved a Tri-Party Funding Agreement and amended TIRZ Plan to correct boundary errors in the sales tax collection area, clarify that the sales tax going into the TIRZ is one ½ cent of the City s 2-cent sales tax, and reflect necessary updates after the Third Amendment to the Redevelopment Agreement. The Tri-Party Agreement and Ordinance No were approved by the City Council in August. The District then approved, with City Council consent, the issuance of District Road Bonds and TIRZ Contract Revenue Bonds, which included $10.65M in funding for University Boulevard Phase II. TIRZ 4 Implementation Planning On July 28, a workshop was held with the P&Z Commission to discuss the Planned Development (PD) zoning of the Medical District within Tract 5. On September 13, staff met again with the P&Z to present an overview of the City s financial frame and strategy as it relates to planning and development for review of the established vision and expectations of the Tract 5 development, and the City s effort to create that vision. Staff began the Request for Statements of Interest (RSI) process in the fourth quarter. This process marked SLDC ANNUAL REPORT, FY16 20

23 the first step in the selection of a master development partner for the City s 38 acres in Tract 5, and included a legal services contract for RSI review. This partner will develop the Hotel Conference Center as well as surrounding office, retail, and open space. In addition, the Tax Increment Reinvestment Zone (TIRZ) #4budget was approved, and staff went before the Intergovernmental Relations (IG) Committee on September 19 to present completed Management District Legislation research as it relates to the 2017 Legislative Agenda. Additionally, the Telfair MUDs participating in TIRZ #4 (MUD 138 and MUD 139) approved the resolution to annex Newland s jughandle property. At the conclusion of FY16, this strategic project will combine with Planning for Future Hotel Conference Center. Therefore, the project will be known as: Planning for Overall TIRZ #4 Implementation and Development of City Owned Property. 5 Year Economic Development Strategic Plan and Targeted Industry Analysis This project continues to be on hold in order for the Office of Economic Development to focus on continuing to implement the existing Strategic Plan and other priorities. This project will be kicked off in FY17. SLDC ANNUAL REPORT, FY16 21

24 Community Impact In addition to helping recruit new primary employers and strengthen the already more than 64,600 jobs currently existing within the City, the City s focused but aggressive economic development program provides a significant number of new jobs within Sugar Land and furthers its reputation as a premier location for corporate headquarters. Through this program, the City s Office of Economic Development has been involved in the negotiation of agreements that are responsible for more than $949 million in commercial valuation growth and the creation of over 6,600 new jobs within the city. The attraction of primary employers is an extremely important driver of Sugar Land s economy. Jobs in Sugar Land generate demand for new retail services and result in the creation of new sales tax dollars, increased commercial property tax values and the capturing of additional Hotel Occupancy Tax revenues. With this boost to the economy, the City of Sugar Land is able to keep one of the lowest tax rates in the State of Texas, which already has one of the nation s lowest tax burdens. While the increase in commercial property tax values offsets the cost of providing public services to residents, the increase in restricted revenue funds, such as economic development sales taxes and Hotel Occupancy Taxes, may only be reinvested into projects that increase the quality of life in Sugar Land, such as pristine parks, support of higher education, cultural arts and entertainment amenities. Additionally, in FY16 the City of Sugar Land contracted with the Buxton Company, a customer analytics SLDC ANNUAL REPORT, FY16 22

25 company, to pinpoint the markets/communities where our visitors come from. The main purpose of the comprehensive report was to provide a unique opportunity for the City to better understand the economic impact of visitors and identify the sales tax revenues generated by non-sugar Land residents. Subsequently, it was determined that 66% of the City s largest sales tax generation sector came from non-resident sources. Attached in the comprehensive report, was a letter from Cody Howell, Senior Vice President with Buxton verifying the accuracy of the sales tax percentage generated by non-residents. This revenue source is important, as it lessens the demand for residential property tax. It is utilized to financially support the City s endeavors in attracting visitors to Sugar Land and in developing destination venues such as the Smart Financial Centre at Sugar Land. In 2008, Sugar Land residents voted to specifically authorize the SLDC to make the Smart Financial Centre at Sugar Land an eligible project for these restricted sales taxes funds. Destination venues such as the Smart Financial Centre at Sugar Land further establish a foundation for economic growth because they offer access to live performances from A-list artists and activities that make Sugar Land unique and attractive. Additionally, Sugar Land tourism brings new businesses to the city, creates and sustains jobs, bolsters a vital downtown atmosphere and supports a better quality of life for residents and visitors. SLDC ANNUAL REPORT, FY16 23

26 In FY16, the City of Sugar Land continued to see strong growth in employment, capital investment and commercial property inventory. Unemployment The City is consistently below county, regional and national unemployment rates. In September 2016, unemployment numbers show the U.S. at 4.8% and Sugar Land at 4.5% Sugar Land Fort Bend County Houston-The Woodlands-Sugar Land Texas United States Source: Texas Workforce Commision Employment Base Strength: Ratio of Jobs to Residents SLDC ANNUAL REPORT, FY16 24 Source: ESRI 2016

27 Employment by Occupation Sugar Land boasts a high quality employment as shown in the table below. More than 59% of Sugar Land s employment is in Management/Professional. Occupation Employment By Occupation 2015 Civilian employed population 16 years and over Sugar Land Fort Bend Houston MSA Texas United States Management, business, science, and arts occupations 59.1% 49.3% 24.5% 35.1% 36.7% Service occupations 8.2% 12.4% 22.1% 17.7% 18.1% Sales and office occupations 24.9% 23.6% 24.5% 24.4% 24.1% Natural resources, construction, and maintenance occupations Production, transportation, and material moving occupations 3.2% 6.5% 13.4% 10.9% 8.9% 4.6% 8.2% 15.5% 11.9% 12.2% Source: US Census Bureau, American FactFinder, Selected Economic Characteristics, American Community Survey 5-Year Estimates 2016 Educational Attainment (bachelors degree or higher) Population vs Job Growth 90,000 80,000 70,000 60,000 50,000 54,100 86,495 86,972 85,738 63,505 64, Median Household Income 40,000 30,000 20,000 10, Jobs Popluation Source: ESRI 2016 SLDC ANNUAL REPORT, FY16 25

28 Commercial Property Inventory From 2011 through 2016, the City s office, retail and industrial space continued to thrive. Commercial Property SF Office Occupancy Rate Retail Occupancy Rate Commercial Square Footage 1-Year Change Commercial Square Footage 5-Year Change Industrial Occupancy Rate Occupancy Rate 1- Year Change Source: CoStar 2016 SLDC ANNUAL REPORT, FY16 26

29 Net Assessed Value Since FY 2006, the total net assessed value of property in Sugar Land has increased over 77.9%. Increase from FY 2006 to 2016 in net assessed values was over $5.5 billion. From FY 2015 to 2016, commercial net assessed value increased over $200 million. In FY 2016, commercial property comprised 35% of City s net assessed value or $4.45 billion. Source: City of Sugar Land Finance Department SLDC ANNUAL REPORT, FY16 27

30 Revenues & Expenditures Total revenues are % of budget and lower than the prior year due to bond proceeds. Sales tax revenues are % of budget. TIRZ assignment received for $850,000 will be used to partially support the debt service of the sales tax revenue bonds used for Town Square infrastructure. Total expenditures are 81.77% of budget. Total economic development incentives are $ 607,323, of which $500,194 was direct incentive payments and $107,129 was sales tax reimbursements. Capital projects reimbursement for $6,639,706 includes $5,185,000 for TIRZ#4 Parking/Plaza, $991,682 for Westside Land Acquisition, $364,580 for Smart Financial Centre at Sugar Land, and $98,443 for Industrial Blvd reconstruction. Transfer to other funds totals $1,909,763 and includes $748,764 to the General Fund for salaries and administrative overhead allocation, $50,000 to the Airport Fund for international marketing, and $1,110,999 to the Debt Service Taxable Fund, which covered the interest payment for the debt service on the sales tax revenue bonds for the Smart Financial Centre at Sugar Land. FY16 debt service totals $4,227,746. The ending fund balance of $4,625,477 is $3,081,218 higher than the budgeted ending balance of $1,544,259. Staff will recommend carryovers of $2,873,456 into FY17 for planned but not completed CIP projects, Economic Development Program and incentives owed. SLDC ANNUAL REPORT, FY16 28

31 FY16 Schedule of Revenues, Expenditures and Change in Fund Balance* CITY OF SUGAR LAND SUGAR LAND DEVELOPMENT CORPORATION INCOME STATEMENT Revenues Sales Tax Interest Income TIRZ Assignments FY16 Budget FY16 Unaudited Actuals $ 6,526,500 $ 6,545,997 87, , , ,000 Miscellaneous - 10 Total Operating Revenues 7,464,043 7,497,333 Bond Proceeds - - Total Revenues 7,464,043 7,497,333 Expenditures Economic Development Program 575, ,194 Economic Development Incentives 1,963, ,338 Capital Projects Reimbursement 8,053,540 6,639,705 Reserve for Opportunities - Sales Tax Incentive Grant 92,140 80,985 Debt Service 4,226,346 4,227,746 Contractual Services 12,590 9,740 Transfers to Other Funds 1,798,932 1,909,763 Total Expenditures 16,722,400 13,674,472 Revenues Over/(Under) Expenditures (9,258,357) (6,177,139) Fund Balance-Beginning 15,992,627 15,992,627 Fund Balance-Ending 6,734,270 9,815,488 Accrued Sales Tax (1,048,559) (1,048,559) Debt Service Reserve (4,141,452) (4,141,452) Fund Balance-Available $ 1,544,259 $ 4,625,477 Source: City of Sugar Land Finance Department SLDC ANNUAL REPORT, FY16 29

32 Capital Improvement Project Summary The SLDC budgeted a total of $3,000,000 for three capital projects in FY 2016, which included $1,000,000 for the reconstruction of Industrial Boulevard, $1,000,000 for the TIRZ#4 Plaza, and $1,000,000 for the TIRZ#4 Marquee. Performing Arts Center: All of the SLDC funding for the Smart Financial Centre at Sugar Land, budgeted in FY15, has been spent by the end of FY16. The facility is 84% completed and scheduled to open in January Other Projects: The SLDC amended the CIP Budget by a total of $1,011,852 for the acquisition of approximately 121 acres of the 258 acres total property formerly known as the Central Prison Unit. Project Description FY16 Adopted FY16 Carryover & Adjustment FY16 Final New Projects budgeted in FY16: Industrial Blvd. Reconstruction TIRZ#4 Plaza TIRZ#4 Marquee Reconstruction of Industrial Boulevard between US 90A and Reed Road. The improvements will include the reconstruction of Industrial Blvd. from a two-lane open ditch roadway with a center turn lane to a four-lane divided concrete curb and gutter with storm drainage system. It will also include the relocation of existing waterline, sanitary sewer, traffic signal at new intersection, and reconfiguration of the intersection of Reed Rd. and Industrial Blvd. Design and construction of a plaza adjacent to the Smart Financial Centre at Sugar Land, which will include a water feature, restrooms, tree groves, grass and multipurpose stage with option for a pavilion to support the Performing Arts Center. Install a Marquee Sign for the promotion of the Smart Financial Centre at Sugar Land, events to be held on the premises as well as community messages. 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Subtotal New Projects 3,000,000 3,000,000 SLDC ANNUAL REPORT, FY16 30

33 Carryover from FY15 to FY16 PAC City Costs Funding for City costs on the Smart Financial Centre at Sugar Land that are not directly related to construction of the facility. 255, ,786 PAC - RPR Concert Venue TIRZ#4 Parking and Infrastructure Resident project representative to monitor construction and acquisition of Owner Direct Purchase items and FF&E in the budget of the Smart Financial Centre at Sugar Land Legal and city costs associated with development and lease agreements with ACE, LLC. Design and construction of infrastructure necessary to support the Performing Arts Center including parking for 2,500 cars, a public plaza area to facilitate ingress and egress from the facility; and an offsite LED marquee sign to promote events and activities at the facility. 531, ,653 $69,249 $69,249 3,185,000 3,185,000 Subtotal Carryover Projects 4,041,688 4,041,688 Mid-Year Budget Amendments: Westside Land Acquisition Central Prison Unit Acquisition City due diligence costs associated with potential acquisition of the Central Prison property, including a business park feasibility study. Acquisition of a portion (121 acres) of approximately 258 acres total from the Central Prison Unit, to be utilized for future business park development. 50,000 50, , ,852 Subtotal Mid-Year Amendments 1,011,852 1,011,852 Total FY16 Capital Project Funding $3,000,000 $5,053,540 $8,053,540 SLDC ANNUAL REPORT, FY16 31

34 TEDC Economic Excellence Recognitions At the Texas Economic Development Council s June 2016 conference, the Sugar Land Development Corporation was awarded a Certificate for Achievement of Economic Excellence. SLDC was one of the 34 organizations in the state of Texas that received the 2015 Economic Excellence Program recognition. TEDC created the program to highlight economic development organizations that meet a desired threshold of professionalism and to encourage continued professional development. Award received in 2016 SLDC ANNUAL REPORT, FY16 32

35 Looking Ahead to FY17 During Fiscal Year 2017, the City s economic development efforts funded by the Corporation will continue to realize significant new capital investment and job growth. The Board of Directors adopted a budget of $8.2 million for FY17, which includes funds for continued expansion of the City s marketing efforts, identifying future areas for industrial and office sector growth and a continued aggressive business recruitment and retention effort. Major Initiatives Major economic development initiatives for FY17 include: Development of an External City Marketing Program Planning for Small Business/Entrepreneurialism Update on 5 Year Economic Development Strategic Plan and Targeted Industry Analysis Central Unit Land Planning and Interim Development Planning for Overall TIRZ #4 Implementation & Development of City Owned Property Festival Site Management Development of a Special Events Ordinance Public Art Plan Implementation of Performing Arts Center Planning and Development The Corporation s assistance will play a significant part in the City s economic development efforts, both in the direct support of economic development operations, as well as in the overall enhancement of the quality of life for Sugar Land residents. SLDC ANNUAL REPORT, FY16 32