Sugar Land Development Corporation

Agenda Request

Agenda Of:

10-03-06

Agenda Request No:

IV A

Initiated By:

Joe Esch

Responsible Department:

business and intergovernmental relations

Presented By:

Joe Esch

Department Head:

joe esch, executive director *

 

 

Additional Department. Head (s):

 

Subject / Proceeding:

Policy granting economic development incentives to qualifying companies

Approve resolution 06-09-02

Exhibits:

resolution 06-09-02

Clearances

Approval

Legal:

Meredith Wilganowski,

Assistant City Attorney

Executive Director:

N/A

Recommended Action

Review policy and approve resolution 06-09-02

Executive Summary

Approximately two years ago the City developed and implemented the direct incentive program through the Sugar Land Development Corporation.  This program operated using informal guidelines in the evaluation and recommendation of acceptable projects.  The program has been very successful resulting in projects like Thermo Electron, Sunoco Logistics, Industrial Information Resources and Bechtel Engineering.  With this success comes increased interest and numbers of requests from the private sector to participate in the program.  In order to assist in communicating the expectations of the City and the Board of the SLDC we have identified the need to formalize the policy we have been using. 

 

At the September board meeting we reviewed the outline for the formal policy and received board input.  Based on those discussions and earlier efforts the attached policy has been provided for the board’s consideration and action.

 

Exhibits

 

 

RESOLUTION NO. 06-09-02

 

A RESOLUTION OF THE SLDC OF DIRECTORS OF THE SUGAR LAND DEVELOPMENT CORPORATION ADOPTING A POLICY ON GRANTING ECONOMIC DEVELOPMENT INCENTIVES TO QUALIFYING COMPANIES. 

     

WHEREAS, the SLDC wishes to adopt a policy for providing financial incentives to encourage certain businesses to locate or expand in the City of Sugar Land; NOW, THEREFORE,

 

BE IT RESOLVED BY THE SLDC OF DIRECTORS OF

THE SUGAR LAND DEVELOPMENT CORPORATION:

 

 

Section l.  That the SLDC adopts the following policy:

 

 


Economic Development Incentives 

 

                                                                                       Adopted by Res. No. 06-09-02

                                                                                                            Date of adoption: 9/__/06

Effective date:  9/__/06

 

 


PURPOSE

 

To provide funding incentives for the location on new businesses and the expansion of existing businesses within the City of Sugar Land to stimulate the local economy by providing additional employment opportunities and by expanding the tax base.

 

DEFINITIONS

 

            Act means the Development Corporation Act of 1979, as amended.

 

SLDC means the Sugar Land Development Corporation.

 

Company means the business entity to which Incentives are granted under a Performance Agreement in accordance with this Policy.

 

Incentives means SLDC funds provided to the Company under a Performance Agreement

 

Performance Agreement means the agreement entered into between the SLDC and the Company under which the SLDC provides Incentives to the Company in consideration of the Company’s complying with the terms of the Performance Agreement.   

 

Primary job means a job as specified by the Act that is available at a company for which a majority of the products or services of that Company are ultimately exported to regional, statewide, national, or international markets infusing new dollars in the local economy.

 

Project means the Company’s purchase, lease, expenditures, or construction involving land, buildings, equipment, facilities, or improvements to provide for the location or expansion of the Company within the City. 

 

Targeted Business or Industry means a business or industry that meets the Act’s requirements for receiving Incentives and which the SLDC determines falls into one or more of the following classifications:     

 

1.    Corporate Headquarters (national, regional or division);

 

2.    Software development;

 

3.    Electronics development and manufacturing;

 

4.    Biotechnology research and application;

 

5.    Pharmaceutical development and manufacturing;

 

6.    Medical technology research and application;

 

7.    Petrochemical research and product development;

 

8.    Companies engaged in the development or manufacturing of measuring, analyzing or controlling instruments;   

 

9.    Advanced material development; or

 

10.  Aerospace development and manufacturing.

 

POLICY

 

A.        Statutory Requirements in Granting Economic Development Incentives.  In addition to any requirements imposed under this policy, SLDC Incentives provided to a Company under this Policy and a Performance Agreement must meet the following requirements of the Act:  

 

1.   That the jobs created by the Company will be Primary Jobs, as defined by the Act.

 

2.        That the Incentives made are required or suitable for the development, retention, or expansion of:

a.   Manufacturing and industrial facilities;

b.   Research and development facilities;

c.   Distribution centers;

d.   Small warehouse facilities;

e.   Primary job training facilities for use by institutions of higher education;

f.    Regional or national corporate headquarters facilities (defined as “buildings proposed for construction or occupancy as the principal office for a business enterprise’s administrative and management services”); or

g.   Recycling facilities.

 

3.  That the Incentives are provided under a Performance Agreement that includes: 

a.   A schedule of the additional payroll or jobs to be created or retained;

b.   A statement of the minimum capital investment to be made; and

c.   A default provision that provides that upon default the SLDC will be

                        repaid the incentives provided, with interest.

 

B.        Qualifications for Receiving Incentives.  To receive Incentives under this Policy, the Company must meet the qualifications of this section.  The SLDC may waive a qualification, other than compliance with the Act, if the Company will clearly provide other benefits to the City that offset the qualification waived.          

 

1.   The Project must meet the Act’s requirements for receiving Incentives, as stated in preceding paragraph A; 

 

2.      The Company will create at least 50 Primary Jobs; 

 

3.   The average annual salary of the Primary Jobs created will be at least $50,000, excluding benefits;

 

4.   The Project will include a minimum capital investment of $10,000,000; 

 

5.   The Company receiving the Incentives has a credit rating of “A” or equivalent;

 

6.      The Company’s Project will produce economic benefits to the City in an amount that are equal to or greater than the total Incentives paid to the Company within the earliest the following time periods:    

 

(a)    Ten years from the permanent occupancy of the Project; 

(b)    The duration of the Performance Agreement, or

(c)  For the duration of the Company’s lease if the Performance Agreement requires the Company to lease space as a tenant to receive the Incentives; and        

 

7.   The Project will maintain at least a 10.5% annual rate of return during each year of the Performance Agreement.

 

      C.  Factors Considered in Granting Incentives.  To determine whether to grant Incentives for a Project that meets the minimum qualifications under this Policy, the SLDC may consider any of the following:   

 

1.   The type of Project and its value and productive life;

 

2.   The amount of local payroll the Project will create;

 

3.   The amount of local sales taxes the Project will generate;

 

4.   The Company’s use of local higher education resources;

 

5.   The Company’s corporate citizenship;

 

6.   Whether the Company is in a growth industry or targeted business or industry;

 

7.   The risk of the Project’s success or failure;

 

8.    The City’s costs in providing services to the Project; and

 

9.    The City’s grant of tax abatement to the Project.

 

D.       Excluded Projects. The SLDC will not grant Incentives to start-up or early stage Companies or Projects or any Project in which City or SLDC participation would expose the City or SLDC to undue risks including financial, legal and political.

 

E.       Program Funding. Each fiscal year the SLDC will adopt a budget that has an Incentives fund of approximately $2,000,000 to be used for Incentives under this Policy.  Any Incentive funds not spent or committed from the previous fiscal year will be carried over to the following fiscal year to reduce the amount of Incentive funds that will need to be budgeted.   Funding is subject to the availability of funds within the SLDC’s budget and will be used in accordance with applicable State law. If all funds in a given year are spent or committed to Projects, the SLDC may appropriate additional funds should a Project of substantial and compelling interest be identified.

 

F.                Terms and Conditions.  The Business Incentives Committee (BIC) may recommend and the SLDC may impose any other conditions in a Performance Agreement that the SLDC deems necessary to promote the purposes of this Policy.  

 

G.  Application for Incentives.

 

1.   Any person may request a direct Incentive by filing a written application with the City on forms provided by the City for that purpose.

 

2.   The City’s Economic Development Department will review the application and make its recommendation to the BIC.  In special cases concerning Project timing, the SLDC Board may meet in executive session to discuss the Project. The BIC is responsible for reviewing the applications and making recommendations to the SLDC. The BIC may develop policies and procedures for processing applications that are not inconsistent with this Policy or State law.

 

3.  The BIC will review all applications it receives.  If the BIC believes the SLDC should grant Incentives to the applicant, it will submit the application to the SLDC along with its recommendation of the terms and conditions under which Incentives should be granted.  If the BIC believes Incentives should not be granted to the applicant, no further action will be taken on the application unless the applicant requests in writing that the BIC submit the application and its negative recommendation to the SLDC.

 

4.  A Performance Agreement must be approved by the affirmative vote of four or more SLDC members at a regularly scheduled meeting. 

 

           

 

PASSED AND APPROVED on   _________________, 2006.

           

 

                                                                                                _________________________

                                                                                                President

 

ATTEST:

 

_____________________________

Glenda Gundermann, City Secretary

 

Reviewed for Legal Compliance: