GFOAT Maximizing Economic Development Incentives Jay Chapa, Housing and Economic Development Director City of Fort Worth
Agenda Outline Economic Development in Fort Worth Provide you with a basic understanding of incentives most utilized by the City to promote private investment and economic development Provide examples of projects that have received incentives Show how incentive agreements have been successful in promoting City goals/produce outcomes
What is economic development? Economic development is a program, group of policies, or activity that seeks to improve the economic well-being and quality of life for a community by creating and/or retaining jobs that facilitate growth and provide a stable tax base. -International Economic Development Council
Why does economic development matter? Creation of jobs Increased human capital Infrastructure improvements Private investment Growth and diversification of tax base Better economic conditions Improved quality of life
Fort Worth, Texas Cowboys, culture, and so much more
Quick Facts: Fort Worth 16 th largest city in the United States 3.9% annual average population growth rate Could exceed 1 million people by 2030 Ranked among the top places in the nation to work, live and do business by Money, Fortune, Site Selection, and Newsweek magazines Cost of living 14% below the national average Recently named as having the #1 Downtown in the nation Source: Fort Worth Chamber of Commerce
City of Fort Worth: Housing & Economic Development Department 5-Year Goals Preserve and increase the number of quality, affordable, accessible housing units; Increase job growth and commercial investment; Increase investment in targeted neighborhoods and increase the proportion of low- to moderate-income persons served by our programs; Create mixed-income, mixed-use development in urban villages and transit-oriented development (TOD) areas; and Be recognized as a leader in business and housing development by our peers and customers. Source: City of Fort Worth
Use of Tax Incentives in Fort Worth
Use of Incentives City incentives focus on promoting development projects that: Conform to the City s Comprehensive Plan and Strategic Goals Meet the But for test Avoid negative fiscal impacts Effectively leverage private dollars Provide quality, sustainable job opportunities Have verifiable financing gaps Create contract opportunities for Fort Worth companies Capitalize on near or mid-term market opportunities and niches Provide preference for projects in targeted Central City areas and that create mixed-use activity centers
Priority Preference Area Central City Area established by the City Council within Loop 820 consisting of: All CDBG-eligible census block groups; and All state-designated enterprise zones; and All census block groups that are contiguous by 75 percent or more of the perimeter to CDBG eligible block groups or enterprise zones.
Incentives Tax Abatements Chapter 380 Economic Development Grants Tax Increment Financing Districts Neighborhood Empowerment Zones Enhanced Community Facilities Agreements Enterprise Projects
Example Projects
Bell Helicopter - Textron
Proposed Project Expansion/consolidation of current Fort Worth facilities at the main headquarters operation located south of Hwy 10 and north of Trinity Blvd. and at Centreport distribution facility Project consist of a new headquarters facility, employee center and training academy at the headquarters site This project will be constructed in four phases Effort is to improve efficiencies that will allow Bell to stay competitive in the long term Company was considering two other area cities for potential consolidation
Bell Operations in Fort Worth Area Plant 8A (Fort Worth) Training Academy / Customer Service Center, Bldg. 63 / Military Programs Center (MPC) Plant 8B (Roanoke) Bldg. 55 / Logistics Center, Repair and Overhaul Center (ROC) Plant 1 & 2 (Fort Worth) HQ, Rotor Systems Center (RSC), Advanced Composite Center (ACC) Plant J (Fort Worth) Warehouse Plant 3 (Fort Worth) Central Distribution Center (CDC) Plant 5 (Grand Prairie) Drive Systems Center (DSC) Bell Helicopter Facility Facility to Consolidate Facility to Remain in Current Location Plant 6 (Arlington) XworX
Development Commitments Investment Minimum investment of $235 M by December 31, 2015 Fort Worth Construction Minimum of 30% Fort Worth M/WBE Construction Minimum of 25% Jobs Retain 4,500 FTE from Dec. 31, 2014 through Dec. 31, 2020 Maintain 20% of FTE with Fort Worth residents Maintain 5% of FTE with Central City residents Supply & Service Fort Worth contractors minimum of $1 million Fort Worth MWBE contractors minimum of $500,000
Development Commitments by Phase Phase I-- $5 M Construction of a new employee center by December 31, 2012 Phase II -- $5 M Relocation, consolidation and renovation for the repair and overhaul activities as well as relocation of inventory to the central distribution center at CentrePort by December 31, 2013 If the additional new investment is not met the program grants will be reduced by 15% for the remainder of the agreement Phase III --$50 M Construction of a new main headquarters and administration building and associated infrastructure at Hwy 10 and Bell Spur by December 31, 2014 If the additional new investment is not met the program grants will be reduced to a maximum of 50% for the remainder of the agreement Phase IV --$15 M Construction of a new training academy at Norwood Drive and Trinity Blvd by December 31, 2015 If the additional new investment is not met the program grants will be reduced by 5% for the remainder of the agreement $160 million in personal property to be invested by 12-31-2015
New Administration Building Consolidated campus Center for administration, engineering, human resources, program offices Traditional design Intra-building connectivity 18
Training Academy Consolidated campus Utilizes existing facility resources for training, ROC, and warehousing World class integrated training facility Flight training and airfields in a location less affected by metroplex growth 19
Proposed Incentives Incentive proposal is for the City to enter into a 1-year tax abatement and 19-year, Chapter 380 Economic Development Program agreement to abate/refund up to 80% on incremental Ad-valorem taxes created within Fort Worth Waiver of development fees associated with the project
Proposed Incentive Terms Company Commitment Potential Abatement Real and Personal Property Investment 30% Fort Worth Contractors 10% Fort Worth M/WBE Contractors 5% Overall Employment 5% Employment of Fort Worth Residents 10% Employment of Fort Worth Central City Residents 10% Utilization of Fort Worth Companies for Services and Supplies 5% Utilization of Fort Worth M/WBE Companies for Supplies and Services 5% TOTAL 80% Failure to meet investment deadline for Phase 1 results in default and termination of agreement and other phases have reduction of abatement/grant Failure to meet a commitment will result in a reduction of the corresponding component of the grant for that year proportional to the amount the commitment was not met
Development Summary Private Investment Minimum $235 M in real and personal property Employment 4,500 by December 31, 2020 Public Investment for abatement and 380 grant capped at 10:1 ratio private investment to public investment Est. Benefit $13,500,000 Est. Ratio 17:1 Norwood Infrastructure ECFA: $1,000,000 CFW Tax Revenue (20 yr projection) Est. New RP & BPP $ 5,875,000 Existing RP & BPP $43,325,000 Total Revenue $49,200,000
Waterside Development Project 23
Development Proposal 74 acre mixed-use development Surface and garage parking Public infrastructure including bridge, riverfront park and trail Retail Office Residential Hotel 24
Waterside Plan Required Bridge 25
Proposed Incentives Overview Proposed $185 mil. total investment (excl. land) $19.0 million in required public infrastructure $3.0 million in structured parking Phase 1 $90 M investment Minimum 465,000 SF Commercial: 140,000 SF Residential: 325,000 SF (approx. 400 units) Phase 2 $35 M additional investment Minimum 150,000 SF commercial or residential (approx. 400 units) Phase 3 $60 M additional investment Minimum 200,000 SF commercial or residential Costs to construct single-family, non-rental housing will count towards investment minimum but will not be counted toward SF commitment or grant payments 26
Proposed Incentives Overview Chapter 380 grant for 15 years equal to an average of 75% of the incremental real and personal property and 75% of the one cent sales tax revenue with an overall cap based on the level of investment. Grant percentages: 80% years 1-5, 75% years 6-10, 70% years 11-15 Value of incentive is capped at $18.5 Mil. NPV at highest level if investment levels are met (3 phases): Minimum Investment Maximum Incentive Level 1: $ 90 M $ 9 M/PV (12 M gross) Level 2: $125 M $12.5 M/PV (18 M gross) Level 3: $185 M $18.5 M/PV (30 M gross) 27
Waterside Contracting Commitments 30% of hard construction costs to be spent with FW contractors for 25% of grant 25% of hard construction costs to be spent with FW MWBE contractors for 25% of grant Spend $200k annually on supply and service contracts with FW companies Spend $100k annually on supply and service contracts with FW MWBE companies 28
Waterside Affordable/Workforce Housing Developer prefers proposed alternative to substitute funding for set aside units Annual grant payment reduced $200 per unit, per year for term of grant agreement deposited by City directly into housing trust fund to be administered by Fort Worth Housing Finance Corporation Estimated annual revenue to FWHFC: $150,000 400 units x $200 per yr x 15 yrs 400 units x $200 per yr x 13 yrs Estimated total revenue to FWHFC over term of agreement: $2,250,000 29
Proposed Incentive Terms Company Commitment Potential Abatement Real Property Investment 30% Fort Worth Contractors 10% Fort Worth M/WBE Contractors 10% Overall Employment 10% Utilization of Fort Worth Companies for Services and Supplies Utilization of Fort Worth M/WBE Companies for Supplies and Services 10% 10% TOTAL 80%
Waterside 15 Year Tax Projection (Maximum Incentive) General Fund: Tax Projection Total Tax Developer CFW FWHFC* Property $22.6 M $13.65 M $ 7.7 M $1.25 M Sales Tax 17.6 M 12.10 M 4.5 M 1.00 M Total: $40.2 M $25.75 M* $12.2 M $2.25 M Other Tax CFW Crime District The T County Hospital College Water District FWISD $ 8.8 M $ 8.8 M $ 6.9 M $ 6.0 M $ 3.9 M $ 0.5 M $35.0 M Total Local Tax Benefit: $110.1 M (CFW $12.2 M) Total to FWHFC for housing trust fund: $2.25M 31
Measuring Progress: Audits
Measuring Progress: Audits Commitments verified, findings used to determine annual incentive levels Minimum investment levels met Number of jobs created or retained through incentive projects Number of Fort Worth/Central City residents employed at companies receiving incentives Value of Fort Worth and Fort Worth MWBE contracts through incentive projects Required affordable housing set aside met (if applicable) 33
Measuring Progress: Audits 2012 Review Summary Tax Abatement Agreements 13 agreements were reviewed Economic Development Program Grant Agreements 22 agreements were reviewed 34
Measuring Progress: Audits 2012 Employment Summary 35
Measuring Progress: Audits 2012 Fort Worth Business Participation In Millions 36
Measuring Progress: Audits 2012 M/WBE Business Participation In Millions 37
Measuring Progress: Audits Collected Tax Abatements Agreement vs. Projection $ Value to Company $ Taxes to City Estimated Per Agreements $3,038,240 $ 776,386 Awarded Value Per Audit $1,873,316 $1,941,310 City collected $1,164,924 above projected. 38
Measuring Progress: Audits Review Findings for Economic Development Program Agreements 39
Measuring Progress: Audits Economic Development Agreements Company Grant Max. Grant Earned Value to Company Value to City Acme (2038) Sales 100% 100% $622,374 $311,187 Cabela s (2025) BPP, Sales, Inventory 67% 67% $417,012 $462,061 ER at Alliance (2022) BPP 80% 70% $6,981 $2,992 La Gran Plaza (2027) RP, BPP, Sales 80% 80% $321,179 $436,098 Montgomery Plaza (2029) RP, BPP, Sales 100% 100% $904,513 $239,450 Museum Place Dev. (2025) RP, BPP, Sales 55% 55% $185,362 $179,616 Oliver s Fine Foods (2032) Sales 100% 100% $9,652 $4,826 Omni Fort Worth Hotel (2026) RP, Sales, HOT 100% 100% $2,702,074 $67,118 40
Measuring Progress: Audits Economic Development Agreements (Continued) Company Grant Max. Grant Earned Value to Company Value to City Pier 1 (2025) RP, BPP 90% 80% $448,334 $174,352 Parole Office (2022) RP 100% 100% $10,390 $0 Presidio Hotel (2029) HOT 100% 87% $510,556 $76,290 RadioShack (2016) RP, Sales 100% 100% $162,761 $9,163 Railhead Business Park (2015) RP 90% 90% $459,731 $0 Renaissance Worthington (2024) Sales, HOT Target at Montgomery Plaza (2031) RP, BPP, Sales 100% 100% $93,845 $45,032 100% 100% $588,012 $189,349 The Tower (2015) RP 100% 100% $764,702 $43,000 Trinity Bluff Phase 1 (2024) RP 100% 100% $193,650 $94,805 41
Measuring Progress: Audits Economic Development Agreements (Continued) Company Grant Max. Grant Earned Value to Company Value to City Trinity Bluff Phase 2 (2030) RP 50% 50% $37,802 $37,802 Trinity Bluff Phase 3 (2030) RP 100% 100% $286,350 $0 West 7 th Development (2026) RP, BPP, Sales 70% 64.5% $948,512 $667,344 TD Ameritrade Inc. (2022) BPP 50% 50% $12,195 $12,195 TTI, Inc. (2017) Road Project 100% 100% $116,941 $0 42
Measuring Progress: Audits Economic Development Program Grants: Summary Total Taxes Collected $15,173,629 Total Grants $ 9,689,095 Net Revenue to City $ 5,484,534 43
Comparison of Incentives to Total Ad Valorem Taxes CFW total appraised value of real & personal property: $ 59.8 Billion Estimated total real & personal property taxes: $374.7 Million Estimated sales taxes: $113.4 Million Estimated total ad valorem & sales taxes: $ 488.1 Million Total taxes abated/granted: $ 11.6 Million Percent of taxes abated/granted: 2.4% Total Private Investment Leveraged $1.4 Billion Percent of City Participation on Private Investment:.83% Private to Public Ratio: 122:1 44
Recap Project being considered furthers the community s goals Meet the But for test (but for public funds, the project as proposed will not be realized) Avoid negative fiscal impacts (no impact to existing tax base) Effectively leverage private dollars (FW model is minimum 1 to 10) Provide quality, sustainable job opportunities Have verifiable financing gaps on development projects and competition on corporate developments Show direct positive impact to existing tax payers 45
Questions?