HomeMy WebLinkAboutIR 9910 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 9910
To the Mayor and Members of the City Council August 2, 2016
r� Page 1 of 1
�i
�i7 Y
*a SUBJECT: AMENDMENT TO ECONOMIC DEVELOPMENT PROGRAM
rrn AGREEMENT WITH AMERICAN AIRLINES, INC. TO MODIFY THE PAYMENT
TERMS
On June 10, 2014, the City Council authorized a one-year Tax Abatement Agreement with
American Airlines, Inc. (City Secretary Contract No. 46132) and a 14-year Economic
Development Program Agreement (City Secretary Contract No. 46133) for the development of a
new Integrated Operations Center on approximately 47 acres of property adjacent to its Southern
Reservations Office located at 4700 American Boulevard. Under the Tax Abatement Agreement,
American would receive its sole tax abatement for the 2016 tax year and then 14 annual
economic development grants beginning in 2018.
The Tax Abatement Agreement required American to spend at least $55 million in real property
improvements on the project and at least $33 million in business personal property to be installed
in the new facility, for a total minimum investment of $88 million. During an audit of the project
this year, City staff determined that American actually spent $69 million for the facility, but that the
value of the business personal property installed in the facility equaled only $24.5 million. As a
result, although American exceeded its overall minimum investment commitment by
approximately $14 million, under the terms of the Tax Abatement Agreement, American is not
eligible to receive a tax abatement this year because the cost of the business personal property
will be less than the $33 million breakout specified in the Agreement.
American has explained that the cost of the business personal property it installed in the new
facility was less than originally anticipated due to cost breaks and lower IT expenses. Because
American actually exceeded the overall investment commitment, American has requested that
the Economic Development Program Agreement be amended to allow American to receive the
full incentive that the parties originally anticipated. City staff agrees with this request, and
recommends that the Economic Development Program Agreement be amended to allow
American to receive 15 annual grants, instead of 14, and that payment of those grants begin in
2017 instead of 2018. This would allow American to receive a grant in 2017 that is equal to the
value of the abatement it would have received in 2016. The amendment would also establish the
project simply as an overall $88 million investment, rather than dividing that investment out
between real property improvements and business personal property expenditures ($55
million/$33 million).
Staff will place an M&C for City Council consideration on the August 9, 2016 agenda.
If you have any questions concerning this information, please contact Robert Sturns, Economic
Development Director at 817-212-2663 or robert.sturns@fortworthtexas.gov.
David Cooke
City Manager
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS