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Sugar Land Development Corporation |
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Agenda Request |
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Agenda Of: |
11-6-06 |
Agenda Request No: |
III A |
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Initiated By: |
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Responsible Department: |
economic development |
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Presented By: |
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Department Head: |
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Additional Department. Head (s): |
jennifer brown assistant fiscal services director |
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Subject / Proceeding: |
consideration of economic development performance agreement
between the sugar land development corporation and tramontina usa, inc. |
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Exhibits: |
economic development performance agreement between the |
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Clearances |
Approval |
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Legal: |
eugenia cano, assistant city attorney
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Executive Director: |
joe esch, business & intergovernmental relations |
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Recommended Action |
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Approve Performance Agreement between the SLDC and Tramontina USA, Inc. |
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Executive Summary |
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Tramontina The Company has received additional contracts from major
retailers necessitating additional facilities. They are currently constructing an
additional 175,000 sq.ft., which will bring their total
Phase One: This facility would be a build to suit, 299,346 sq. ft. facility, improvements of $8.4 million, personal property of $500,000, inventory of $13 million and 20 jobs. Phase Two: Secure site for future expansion: 315,284 sq. ft. facility, $10 million in
improvements, $500,000 in personal property, $15 million in inventory and 60
jobs. (projected to be built within 5-years). Both Phase I and II qualify for 700% abatement. In addition, the SLDC is proposing a direct incentive of $800,000 paid over four years to assist in securing a site for Phase II of this expansion program. During the 7-year abatement the Company would be providing over $85,833.00 in tax revenue based on their inventory values, which would be greater than the savings. The City would realize over $600,831.00 during the life of the abatement incentive for 7 years. The City would realize full taxed value revenues during the remaining 3-year life of the agreement or $145,611 annually/$436,833 total. Ten-year abatement agreement tax impact for City is $1,037,664 in ad valorem revenue. Based on these revenue projections for the City and the
additional creation of new jobs, staff recommends a direct incentive from the
SLDC of $800,000 ($200,000 per year for 4 years) and tax abatement of 100%
for 7 years. The estimated
net benefit from the project provides to the City - including incentives -
was measured over ten years. The net
benefit is greater than the incentive and the annual rate of return on
investment exceeds 10.5%. As the
revenue projection and return to the City anticipates a 10-year time frame,
both the tax abatement agreement and direct incentive agreement are also ten
years to maximize the opportunity for the City to receive the full value
anticipated from the project. The City Council’s Business Incentive Committee has reviewed the project and concurs with staff’s recommendation. |
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Exhibits |
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ECONOMIC DEVELOPMENT PERFORMANCE AGREEMENT
BETWEEN THE SUGAR LAND DEVELOPMENT CORPORATION
The City of Sugar Land adopted an economic development sales tax and created the Sugar Land Development Corporation (the “SLDC”) to promote economic development activities as authorized by section 4A of the Development Corporation Act of 1979 (the “Act”). The SLDC and Tramontina USA, Inc. (“Tramontina”) wish to enter into this Performance Agreement providing for economic incentive payments by the SLDC to Tramontina in consideration of Tramontina performing the obligations imposed upon it as specified in this Performance Agreement.
The SLDC and Tramontina agree as follows:
ACOAC means the City’s
average cost of annual capital.
Agreement means this Agreement.
Company means Tramontina USA, Inc., a
City means the City of Sugar Land, Texas.
Phase I Employee means a person who:
(1) Is an employee of the Company; and
(2) Regularly works at least 40 hours a week at the site of the Phase I Improvements, excluding time taken for holidays, vacations, sick leave, or other regular leave.
Phase II Employee means a person who:
(1) Is an employee of the Company; and
(2) Regularly works at least 40 hours a week at the site of the Phase II Improvements, excluding time taken for holidays, vacations, sick leave, or other regular leave.
Phase I Improvements means a building to be used as a warehouse, distribution center, and light assembly facility located on the Phase I Land and containing approximately 299, 346 square feet of floor space, and any sidewalks, parking lots, outdoor lighting, landscaping and other improvements to serve the building, all as shown in Exhibit A, attached to and incorporated into this Agreement by reference.
Phase II Improvements means a building to be used as a warehouse, distribution center, and light assembly facility located on the Phase II Land, and containing approximately 315, 284 square feet of floor space, and any sidewalks, parking lots, outdoor lighting, landscaping and other improvements to serve the building, all as shown in Exhibit B, attached to and incorporated into this Agreement by reference.
Phase I Land means the approximate 17.665 acre tract of real property as described in Ordinance No. 1591, which created Reinvestment Zone No. 2006-06.
Phase II Land means the approximate 17.862 acre tract of real property as described in Ordinance No. 1591, which created Reinvestment Zone No. 2006-06.
Phase I Personal Property means any property classified as tangible personal property by the District, other than inventory or supplies, that will be located within the Phase I Improvements required to be constructed under this Agreement.
Phase II Personal Property means any property classified as tangible personal property by the District, other than inventory or supplies, that will be located within the Phase II Improvements required to be constructed under this Agreement.
Revised Phase II Tax Abatement Schedule means the revised tax abatement schedule attached as Exhibit C to the Tax Abatement Agreement and filed by the City with the Fort Bend County Central Appraisal District under Section 6(a) of the Tax Abatement Agreement.
SLDC means the Sugar Land Development Corporation, a non-profit economic development corporation created by the City as authorized by section 4A of the Development Corporation Act of 1979.
SLW means SL W. Airport, LTD, a Texas Limited Partnership.
Tax Abatement Agreement means
the Standard Tax Abatement Agreement among the City, Tramontina and SLW attached as Exhibit C.
Year of this Agreement
means, unless the context clearly indicates otherwise, from January 1 to
December 31st.
2.
SLDC Findings. By approval of this
Agreement, the board of directors of the SLDC finds:
(a) That the jobs to be created
by Company will be “primary jobs” as defined by section 2 (18) of the Act;
(b) That the expenditures made
by the SLDC are required or suitable for the development of manufacturing or
industrial facilities or a regional or corporate headquarters facilities, as
specified by section 2 (11) (A) of the Act; and
(c) That this Agreement complies
with the requirements of section 40 of the Act that any direct
incentives provided to a business enterprise requires a written performance
agreement that includes:
(1)
A schedule of additional payroll or jobs to be created or retained;
(2)
The capital investment to be made; and
(3) The terms of repayment upon default.
(a) Phase I Improvements. The Company agrees that:
(1) the Phase I Improvements will be completed by September
30, 2007;
(2) on January 1 of each year from January 1, 2008 through
January 1, 2017, the Phase I Improvements, will have a minimum value of $8,400,000
and the Phase I Personal Property, when combined with the Value of the Phase
I Improvements will have a minimum value
of at least $8,900,000;
(3) the Phase I Improvements
will be constructed in substantial compliance with the plans shown in Exhibit A
and in conformity with the City’s ordinances;
(4) the Company will
continuously lease or own, occupy, and use the Phase I
Land and Phase I Improvements as a warehouse, distribution center and light
assembly facility from January 1, 2008 through December 31, 2017;
(5) by September 30, 2007 the
Company will provide to the City a copy of the certificate of occupancy for the
Phase I Improvements and a fully executed copy of the lease agreement between
it and SLW for the Phase I Improvements;
(6) beginning on January 1,
2008 and continuing through December 31, 2017, Company will have at least 20 Phase
I employees;
(7) on January 1 of each year
from January 1, 2008 through January 1,
2017, the Company will have taxable inventory on the Phase I Land that has a
minimum value of at least $13,000,000;
(8) That if the requirements of paragraph 3(a)(2)
(relating to the Value of the Phase
I Improvements and Value of the Phase I Personal Property with the Phase I
Improvements) and the requirements of paragraph 3(a)(7) (relating to the Value
of Inventory) are not met for any of the specified years, the failure will not
be a default of this Agreement if the Company pays to the City when due, in
addition to all other taxes owed by the Company, an amount equal to the taxes
that would have been assessed had the minimum specified Values been met for
that year.
(b) Phase II
Improvements. The Company agrees
that:
(1) the Company will acquire
title to the Phase II Land by December 31, 2006 and submit a copy of the deed
to the City within 30 days after the Phase II Land is acquired;
(2) the Phase II
Improvements will be completed by December 31, 2011;
(3) on January 1 of each year
for a ten year period beginning on either (i) January 1 of the first year of
tax abatement shown in the Revised Phase II Tax Abatement Schedule if filed with the
Fort Bend County Central Appraisal District as part of the Tax Abatement
Agreement or (ii) January 1, 2012 if the Revised Phase II Tax Abatement Schedule
is not filed, the Phase II Improvements will have a minimum value of
$10,000,000 and the Phase II Personal
Property, when combined with the Phase II Improvements, will have a minimum
value of at least $10,500,000;
(4) the Phase II Improvements
will be constructed in substantial compliance with the plans shown in Exhibit A
and in conformity with the City’s ordinances;
(5) the Company will
continuously own, occupy and use the Phase II Land and Phase II Improvements as
a warehouse, distribution center and light assembly facility for a ten year
period commencing on (i) January 1 of the first year of tax abatement shown in
the Revised Phase II Tax Abatement Schedule if filed with the
Fort Bend County Central Appraisal District as part of the Tax Abatement
Agreement; or (ii) January 1, 2012 if the Revised Phase II Tax Abatement
Schedule is not filed.
(6) Company will have at least 60 Phase II Employees for a ten year period
beginning on (i) January 1 of the first year of tax abatement shown in the Revised
Phase II Tax Abatement Schedule if filed with the Fort Bend County Central Appraisal District
as part of the Tax Abatement Agreement; or (ii) January 1, 2012 if the Revised
Phase II Tax Abatement Schedule is not filed.
(7) on January 1 of each year
for a ten year period beginning on either (i) January 1 of the first year of
tax abatement shown in the Revised Phase II Tax Abatement Schedule if filed with the
Fort Bend County Central Appraisal District as part of the Tax Abatement
Agreement or (ii) January 1, 2012 if the Revised Phase II Tax Abatement
Schedule is not filed, the Company will have taxable inventory on the Phase
II Land that has a minimum value of at
least $15,000,000.
(8)
That if the
requirements of paragraph 3(b)(3) (relating to the Value of the Phase II Improvements and Value of the
Phase II Personal Property with the Phase II Improvements) and the requirements
of paragraph 3(b)(7) (relating to the Value of Inventory) are not met for any
of the specified years, the failure will not be a default of this Agreement if
the Company pays to the City when due, in addition to all other taxes owed by
the Company, an amount equal to the taxes that would have been assessed had the
minimum specified Values been met for that year.
(c) Use of Sugar Land Hotels. For each Year of this Agreement, Company will
rent at least 100 rooms for at least one night at one or
more hotels located within the City of
(d) Reimbursement
for Failure to Maintain Required Number of Employees. If Company fails to maintain the minimum
number of Phase I Employees or Phase II Employees for each Year of the
Agreement as required by this Agreement, the SLDC may not declare an event of
default if the Company, within 60 days of the end of the Year of the Agreement
in which Company failed to maintain the required number of employees for that
year, makes a reimbursement payment to the SLDC in an amount determined as
follows:
(1) Using the actual number of
Phase I Employees or Phase II Employees, as applicable, maintained compared to
the number of Phase I Employees or Phase II Employees required, calculate the
percentage decrease below the number of Phase I Employees or Phase II Employees
required, using the average number of Phase I Employees or Phase II Employees
maintained in the Year of the Agreement;
(2) Multiply that percentage decrease
by the dollar amount of all prior economic incentive payments made by the SLDC
to Company under this Agreement for which no reimbursement payment was
previously made by Company under this Agreement;
(3) Multiply that amount by 2.5%
to obtain the amount of the reimbursement payment; and
(4) Add on interest at the City’s
ACOAC from the date the SLDC made the payment to Company to the date of
Company’s repayment. Upon ten days prior
written request from Company the City shall provide the ACOAC to Company for
its review and audit.
(e) Company
Reimbursement Payments for Breach of Agreement. If the SLDC terminates this Agreement because
of Company’s breach of any provision as permitted by this Agreement, Company
will, within 60 days following termination, reimburse the SLDC for all payments
the SLDC had made to Company under this Agreement, excluding any reimbursement
payments previously made by Company under this Agreement. The reimbursement payment includes interest
on each SLDC payment at the City’s ACOAC from the date the SLDC made the
payment to Company to the date of Company’s repayment. Company’s obligation to
reimburse the SLDC payments made to Company if Company breaches this Agreement
survives termination of this Agreement.
(1)
Within 60 days
following each Year of this Agreement, Company will certify to the SLDC that it
has complied with the terms of this Agreement and provide sufficient written
information, records, and documents, to support its certification of
compliance.
(2) Within 30 days of the end of
each quarter, Company will provide to the City the latest Texas Workforce
Commission records available that show the number of Phase I Employees and
Phase II Employees during the prior quarter;
(3)
Upon the City’s written request, Company will promptly provide to the City any
additional information reasonably necessary for the City to determine if
Company has complied with this Agreement.
(4)
Company will allow the City access to the Phase I Land and Phase II Land during
regular business hours to inspect the premises and improvements to verify that
Company is complying with this Agreement.
4. SLDC Economic Incentive Payments.
(a) The SLDC will make economic incentive payments to
Company in the following specified amounts within 30 days following the
specified dates, if Company has, as of each specified date, fully complied with
this Agreement and provides to the SLDC written evidence of its full compliance
with the terms of this Agreement to that date:
(1) $200,000 on October 1, 2007;
(2) $200,000 on October 1, 2008;
(3) $200,000 on October 1, 2009; and
(4) $200,000 on October 1, 2010.
(b) The SLDC is funding this Agreement exclusively from
economic development sales taxes it receives under the provisions of the
Development Corporation Act of 1979, as amended (Tex. Rev. Civ. Stat. Ann.
article 5190.6). Should any legal
impediment arise during the term of this Agreement, including a change in law,
that prevents or prohibits the SLDC from making future incentive payments under
this Agreement, either party may terminate this Agreement without further
liability to the other.
5.
Term. This Agreement is effective on the date the
Tax Abatement Agreement is effective as shown in Exhibit C, and unless
terminated earlier as provided in this Agreement, terminates on either (i) ten
years after January 1 of the first year of tax abatement shown in the Revised
Phase II Tax Abatement Schedule if filed with the Fort Bend County
Central Appraisal District; or (ii) December 31, 2021 if the Revised
Phase II Tax Abatement Schedule is not filed.
(a) Either party may
terminate this Agreement during its term as provided in this paragraph if the
other party fails to comply with its terms.
The party alleging the default will give the other party notice of the
default in writing. If the party in default fails to cure
the default within 60 days of the date of the notice, the party giving the
notice may terminate this Agreement by written notice to the other party,
specifying the date of termination.
(b) If the City terminates the Tax Abatement Agreement in accordance with its provisions because of the default of Company or SLW, the City’s termination of the Tax Abatement Agreement is a breach by Company of this Agreement for which the SLDC may terminate this Agreement by giving written notice to the Company specifying the date of termination.
(c) No party may be deemed to be in default of this
Agreement if performance of this Agreement is delayed, disrupted, or becomes
impossible because of any act of God, war, earthquake, fire, strike, accident,
civil commotion, epidemic, act of government, its agencies or offices, or any
other cause beyond the control of the parties during the time
but only for so long as the event of force majeure reasonably prevents
performance.
(a) Remedies Cumulative.
The rights and remedies provided in this Agreement or under other laws
are cumulative and the exercise of any particular right or remedy does not
preclude the exercise of any other right or remedy.
(b) Law Governing and Venue. The laws of the State of
(c) Notices.
Any notice required to be given by one party to another must be given in
writing addressed to the party to be notified at the address set forth below,
(1) by delivering the notice in person, (2) by depositing the notice in the U.
S. Mail, certified or registered, return receipt requested, postage prepaid,
(3) by depositing the notice with Federal Express or another nationally
recognized courier service for next day delivery, or (4) by sending the notice
by telefax with confirming copy sent by mail.
Notice deposited in the U.S. Mail is deemed effective on the date of
deposit. Notice given in any other
manner is effective when received by the party to be notified. For the purposes of notice, the addresses of
the parties to whom notice is to be given, until changed by given notice to the
other as provided herein, is as follows:
Sugar Land Development Corporation
c/o Director of Economic Development
Company: Antonio J. Galafassi, President
(d) Assignment. Company
may not assign this Agreement to any other person or entity unless the SLDC
consents in writing to the assignment.
(e) City Authority. The
City’s city manager or any employee authorized by the city manager is
authorized to act on behalf of the SLDC in the administration or enforcement of
this Agreement.
SUGAR LAND DEVELOPMENT TRAMONTINA USA,
INC.
CORPORATION
By: ______________________________ By: ___________________________
President
Antonio J.
Galafassi
President
and CEO
Date: ________________________ Date:
_____________________________
Glenda
Gundermann, City Secretary
Reviewed
for Legal Compliance:
Attachments: Exhibit A – Phase I Improvements
Exhibit B – Phase II
Improvements
Exhibit C – Tax
Abatement Agreement
Exhibit B
