HomeMy WebLinkAboutContract 46133-A1 CITY SECRETARY ,
GUNTRACT NO. 2f
AMENDMENT NO. 1 TO
CITY SECRETARY CONTRACT NO. 46133
ECONOMIC DEVELOPMENT PROGRAM AGREEMENT
WITH AMERICAN AIRLINES, INC.
This AMENDMENT NO. 1 TO CITY SECRETARY CONTRACT NO.
46292 ("Amendment") is made and entered into by and between the CITY OF FORT
WORTH (the "City"), a home rule municipality organized under the laws of the State of
Texas, and AMERICAN AIRLINES, INC. ("Company"), a Delaware corporation.
RECITALS
The City and Company hereby agree that the following statements are true and
correct and constitute the basis upon which the City and Company have entered into this
Amendment:
A. The City and Company previously entered into a Tax Abatement
Agreement (City Secretary Contract No. 46132) (the "Tax Abatement Agreement") and
an Economic Development Program Agreement(City Secretary Contract No. 46133) (the
"EDPA" or the "Agreement").
B. The Tax Abatement Agreement requires, among other things, that
Company expend at least $55,000,000.00 in Construction Costs (as defined in the Tax
Abatement Agreement) for an Integrated Operations Center on approximately 47 acres of
property adjacent to Company's Southern Reservations Office (the "Project") at 4700
American Boulevard (the "Land") by December 31, 2015 and that New Taxable
Tangible Personal Property having a value of at least $33,000,000.00 be installed on the
Land as of January i, 2016. in return, Company would be eligible to receive a maximum
85% tax abatement for the 2016 tax year. In addition, contingent on completion of the
Project in accordance with the Tax Abatement Agreement, Company would also be able
to receive 14 annual economic development program grants, beginning in 2018, in
accordance with the terms and conditions of the EDPA.
C. Company actually expended approximately $69,000,000.00 in
Construction Costs for the Project. However, due to lower-than-expected costs of the
New Taxable Tangible Personal Property installed in the Project, the value of that New
Taxable Tangible Personal Property as of January 1, 2016 was only approximately
$24,500,000.00. As a result, Company is ineligible to receive the tax abatement that the
parties originally anticipated.
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Amendment No. 1 to CSC No.46133 OFFICIAL REC1000'
Economic Development Program Agreement between City of Fort Worth and American Airlines,Inc.(r0 ) i
CITY SECRETA T
FT. WORTH o°X
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D. In expending an aggregate of at least $93,500,000.00 for the Project and
New Taxable Tangible Personal Property installed on the Land, Company actually
exceeded its minimum $88,000,000 combined investment requirement under the Tax
Abatement Agreement and EDPA. As a result, in order to permit Company to receive the
full amount of the incentive that it would have received under the Tax Abatement
Agreement and the EDPA, combined, the parties wish to amend the EDPA to allow
payment of the economic development program grants to begin one year earlier (starting
in 2017 instead of 2018) and that the amount of the grant payable in 2017 equal the value
of the tax abatement that Company would have received under the Tax Abatement
Agreement for the 2016 tax year. The parties also wish to amend the EDPA to redefine
the Project as one simply requiring an overall investment of at least $88,000,000.00.
E. Recital A of the EDPA states that Company owns the Land. Subsequent
to execution of the EDPA, Company, as part of its restructuring, discovered that Dallas-
Fort Worth International Airport actually owns the Land and leases the Land to
Company. The parties wish to amend the EDPA as necessary to reflect that Company
owns a leasehold interest in the Land and owns all improvements located on the Land,
but that it does not own the Land itself.
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained in the Agreement and this Amendment and for other good and valuable
consideration, the receip� and sufficiency of which is hereby acknowledged, the City and
Company agree as follows:
AGREEMENT
1. Recital A of the Agreement is hereby amended to read as follows:
A. Company is a major commercial airline engaged in the carrying of
passengers and cargo domestically and internationally. Company's
corporate headquarters are located in the City. Under a lease with Dallas-
Fort Worth International Airport, Company is also the owner of a
leasehold interest in approximately 47 acres of property in the City that is
adjacent to its current Southern Reservations Office at 4700 American
Boulevard, a portion of which is more specifically described in Exhibit
"A", attached hereto and hereby made a part of this Agreement for all
purposes (the "Land"). Company wishes to expand its operations by
constructing and operating a new Integrated Operations Center (the
"Project"), and is interested in locating this Project on the Land.
Page 2
Amendment No. 1 to CSC No.46133
Economic Development Program Agreement between City of Fort Worth and American Airlines,Inc.(IOC)
2. Recital D of the Agreement is hereby amended to read as follows:
D. The Tax Abatement Agreement serves as the first
component of the City's economic development incentive to Company.
Under Section 312.206 of the Code, execution of the Tax Abatement
Agreement between the City and Company will also make Company
eligible to receive a tax abatement for real and personal property in the
Zone from certain taxing jurisdictions other than the City, although
Company understands and agrees that the City cannot and does not
guarantee that any of those other taxing jurisdictions will actually grant
Company such a tax abatement. This Agreement is the second
component of the City's economic development incentive to Company.
Under this Agreement, if Company completes the Project in accordance
with this Agreement, Company will be eligible to receive certain
economic development grants from the City for a period of fifteen (15)
years, as more specifically set forth in this Agreement.
3. Section 2 of the Agreement (Definitions) is hereby amended so that the definition
of"Program Source Funds" and the definition of "Program Year" read as follows:
Program Source Funds means an amount equal to the City' s ad
valorem taxes received by the City during the Twelve-Month Period
ending in each Program Year on the value of any improvements on the
Land, or a leasehold interest in any improvements located on the Land,
(but not on the Land itself) and on the value of New Taxable Tangible
Personal Property located on the Land, less Three Thousand Fifty-Nine
and 73/100 ($3,059.73), which is the collective amount of such ad valorem
taxes due to be received by the City from Company for the 2014 tax year
on the basis of the value of any improvements on the Land and on the
value of New Taxable Tangible Personal Property located on the Land.
Program Year means a calendar year in which the City is
obligated pursuant to this Agreement to pay Company a Program Grant,
beginning with the 2017 calendar year (Program Year 1).
4. Section 3 of the Agreement (Term) is hereby amended to read as follows:
3. TERM.
This Agreement shall take effect on the date as of which both the
City and Company have executed this Agreement (the "Effective Date")
and, unless terminated earlier in accordance with its terms and conditions,
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Amendment No. 1 to CSC No.46133
Economic Development Program Agreement between City of Fort Worth and American Airlines,Inc.(IOC)
shall expire on the date as of which the City has paid the fifteenth (15th)
annual Program Grant pursuant to and in accordance with this Agreement
(the "Term").
5. The introductory paragraph of Section 4 of the Agreement (Company's
Obligations and Commitments) is hereby amended to read as follows:
Company must invest at least Eighty-eight Million Dollars
($88,000,000.00) in the Project through any combination of (i)
Construction Cost expenditures for the Project made on or before the
Completion Date and (ii) value of New Taxable Tangible Personal
Property that is in place on the Land as of January 1, 2016, as determined
solely by the appraisal district having jurisdiction of the Land at that time
and reflected in the certified appraisal roll received by the City from that
appraisal district for the 2016 tax year. Company has also committed to
expend a certain amount or percentage of Construction Costs with Fort
Worth Companies and Fort Worth Certified M/WBE Companies, as set
forth in the Tax Abatement Agreement. In addition, Company hereby
agrees to the following annual commitments for purposes of this
Agreement:
6. Section 4.3.1 (Employment Report) is hereby amended to provide that the first
annual employment report required thereunder will be due on or before February 1, 2017
instead of February 1, 2018.
7. Section 4.3.2 (Supply and Service Spending Report) is hereby amended to
provide that the first annual supply and service spending report required thereunder will
be due on or before February 1, 2017 instead of February 1, 2018.
8. Section 5.1 (Program Grants) is hereby amended to read as follows:
5.1. Program Grants.
Subject to the terms and conditions of this Agreement, Company
will be entitled to receive from the City fifteen (15) annual Program
Grants. The amount of each Program Grant will equal a percentage of the
Program Source Funds, which percentage will equal the sum of the
Overall Project Percentage, Fort Worth Construction Percentage, the
M/WBE Construction Percentage, the Overall Employment Percentage,
the Fort Worth Employment Percentage, the Central City Employment
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Amendment No. 1 to CSC No.46133
Economic Development Program Agreement between City of Fort Worth and American Airlines,Inc.(IOC)
Percentage, the Fort Worth Supply and Service Percentage, and the
M/WBE Supply and Service Percentage, as defined in Sections 5.1.1,
5.1.2, 5.1.3, 5.1.4, 5.1.5, 5.1.6, 5.1.7, and 5.1.8, respectively, as follows:
9. Section 5.1.1 (Completion of Project) is hereby amended to read as follows:
5.1.1. Completion of Proiect (30%).
If the City determines that Company invested at least Eighty-eight
Million Dollars ($88,000,000.00) in the Project through any combination
of(i) Construction Cost expenditures for the Project made on or before the
Completion Date and (ii) value of New Taxable Tangible Personal
Property that is in place on the Land as of January 1, 2016, as determined
solely by the appraisal district having jurisdiction of the Land at that time
and reflected in the certified appraisal roll received by the City from that
appraisal district for the 2016 tax year, each annual Program Grant will
include thirty percent (30%) of the Program Source Funds (the "Overall
Project Percentage").
10. Section 5.2 (Deadline for Payments and Source of Funds) is hereby amended to
read as follows:
5.2. Deadline for Payments and Source of Funds.
The first Program Grant payable hereunder (in other words, the
Program Grant payable for Program Year 1) will be paid by the City on or
before June 1, 2017, and each subsequent Program Grant payment will be
paid on or before June 1 of the Program Year in which such payment is
due. It is understood and agreed that all Program Grants paid pursuant to
this Agreement will come from currently available general revenues of the
City and not directly from the Program Source Funds themselves.
Company understands and agrees that any revenues of the City other than
those dedicated for payment of a given annual Program Grant pursuant to
this Agreement may be used by the City for any lawful purpose that the
City deems necessary in the carrying out of its business as a home rule
municipality and will not serve as the basis for calculating any future
Program Grant payment or other obligation to Company.
Page 5
Amendment No. 1 to CSC No.46133
Economic Development Program Agreement between City of Fort Worth and American Airlines,Inc.(IOC)
11. Section 6.6 (Sale or Conveyance of Land to a Third Party) is hereby amended to
read as follows:
6.6. Sublease of Land to a Third Party.
If Company subleases or otherwise assigns its leasehold interest in
the Land to any other person or entity other than an Affiliate, and this
Agreement has not been assigned to that person or entity in accordance
with Section 10 of this Agreement, this Agreement will terminate on the
effective date of the sublease or assignment.
12. Section 10 (Assignment and Successors) is hereby amended to read as follows:
10. ASSIGNMENT AND SUCCESSORS.
Company may not assign, transfer or otherwise convey any of its
rights or obligations under this Agreement to any other person or entity
without the prior consent of the City Council, which consent shall not be
unreasonably withheld, conditioned on (i) the assignee or successor will
sublease the Land, all improvements located on the Land, and own or
lease all New Taxable Tangible Personal Property; (ii) the prior approval
of the assignee or successor and a finding by the City Council that the
proposed or successor is financially capable of meeting the terms and
conditions of this Agreement; and (iii) prior execution by the proposed
assignee or successor of a written agreement with the City under which the
proposed assignee or successor agrees to assume and be bound by all
covenants and obligations of Company under this Agreement. Any lawful
assignee or successor in interest of Company of all rights under this
Agreement shall be deemed "Company" for all purposes under this
Agreement. Notwithstanding the above, the City hereby agrees and
consents to any merger, stock transfer, asset transfer, or other internal
corporate restructuring of Company (including without limitation, that
involving American Airlines, Inc. and American Airlines Group, Inc.
("AAL") and/or any other wholly-owned subsidiary of subsidiaries of
AAL or similar internal restructuring within Company's organization) (an
"Internal Restructuring") and any related assignment or transfer of this
Agreement that may occur or may be deemed to occur as a result of any
such Internal Restructuring, and City waives any right it may have to
terminate, amend or modify this Agreement and any claim of breach or
default hereunder arising directly in connection with or as a result of any
such Internal Restructurings.
Page 6
Amendment No. 1 to CSC No.46133
Economic Development Program Agreement between City of Fort Worth and American Airlines,Inc.(IOC)
o
13. All capitalized terms used but not defined in this Amendment shall have the
meanings ascribed to them in the Agreement.
14. This Amendment contains the entire agreement between the parties with respect
to the matters set forth herein. All provisions of the Agreement that are not specifically
amended by this Amendment shall remain in full force and effect.
EXECUTED to be effective as of the later date below:
CITY OF FORT WORTH: AMERICAN AIRLINES, INC.,
a Delaware corporation:
By: ,/ By:
Jesus J. Chapa Name:
Assistant City Manager Title:
Date: l✓ l� Date:
APPROVED AS TO FORM AND LEGALITY:
By:
Peter Vaky
6;1-
Deputy City Attorney
M&C: C-27850 08-09-16 P ;
oo-o°po
°
Form 1295 Cert. No.: 2016-857514?
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Ronald P. Gonzales,Asst City CITY SECRETARY
FT. WORTH,TX
Page 7
Amendment No. 1 to CSC No.46133
Economic Development Program Agreement between City of Fort Worth and American Airlines,Inc.(IOC)
City of Fort Worth, Texas
Mayor and Council Communication
;COUNCIL ACTION: Approved As Amended on 8/9/2016
DATE: Tuesday, August 9, 2016 REFERENCE NO.: **C-27850
LOG NAME: 17AAlOC380AMEND
SUBJECT:
Authorize Execution of Amendment to Economic Development Program Agreement with American Airlines,
Inc., for the Construction of an Integrated Operations Center at 4700 American Boulevard to Modify the
Schedule for Payment of Economic Development Grants (COUNCIL DISTRICT 5)
RECOMMENDATION:
It is recommended that the City Council amend City Secretary Contract No. 46133, an Economic
Development Program Agreement with American Airlines, Inc., for its new Integrated Operations Center at
4700 American Boulevard, in order to modify the schedule for payment of economic development grants
under the Agreement.
DISCUSSION:
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 expend at least $55 million in real property
improvements on the project and for 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 expended $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. 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).
Logname: 17AAIOC380AMEND Page 1 of 2
The project is located in COUNCIL DISTRICT 5, Mapsco 56J.
FISCAL INFORMATION /CERTIFICATION:
The Financial Management Services Director certifies that this action will have a no material effect on the
City's fiscal year 2016 budget.
FUND IDENTIFIERS (FIDs):
TO
Fund Department ccoun Project Program ctivity Budget Reference # mount
ID ID Year (Chartfield 2)
FROM
Fund Department ccoun Project JProgram ctivity Budget Reference # moun
_J ID ID Year (Chartfield 2)
CERTIFICATIONS:
Submitted for City Manager's Office by: Jay Chapa (5804)
Originating Department Head: Robert Sturns (212-2663)
Additional Information Contact: Ossana Hermosillo (212-2665)
ATTACHMENTS
1. AA Form 1295.pdf (Public)
2. AA IOC Map20l6.pdf (Public)
Logname: 17AAIOC380AMEND Page 2 of 2
CERTIFICATE OF INTERESTED PARTIES
FORM 1295
10f1
Complete Nos. 1-4 and 6 if there are interested parties. OFFICE USE ONLY
Complete Nos, 1,2,3,5,and 6 it there are no interested parties. CERTIFICATION OF FILING
1 Name of business entity filing form,and the city,state and country of the business entity's place Certificate Number:
of business. 2016-85751
American Airlines, Inc.
Fort Worth, TX United States Date Filed:
2 Name of governmental entity or state agency that is a party to the contract for which the form is 07/18/2016
being filed.
City of Fort Worth Date Acknowledged:
3 Provide the identification number used by the governmental entity or state agency to track or identify the contract,and provide a
description of the services,goods,or other property to be provided under the contract.
46133
Economic Development Program Agreement-Amendment to City Secretary Contract NO,46133
Nature of interest
4
Name of Interested Party City,State,Country(place of business) (check applicable)
Controlling Intermediary
Dornic, Myron Dallas, TX United States X
Jackson Walker LLP Dallas, TX United States X
Kerr, Derek Fort Worth, TX United States X
Isom, Robert Fort Worth,TX United States X
Johnson, Steve Fort Worth,TX United States X
Kirby, Scott Fort Worth,TX United States X
Parker, Doug Fort Worth, TX United States X
American Airlines Group Fort Worth, TX United States X
5 Check only if there isNO Interested Party. ❑
�O, I,iiIIItf,,�,�
ti AFFIDAVIT ���W•' tY P % I swear, of perjury,penalty
swear,or affirm,underthat the above disclosure is true and correct.
F
�r•!T qFi+ eV Signature of authorized agent of c tracting business entity
OF
AFFIX NOTARY SYAN TAw%A1'I44VE
Sworn to and subscribed before me,by the said V<?AN,-MI`F=4A this the ti$ day oT
20�¢,to certify which,witness my hand and seal of office.
Signature of affiew aadtninis tering oath Printed narn istering oath Title of officer administbQbg oath
Forms provided by Texas Ethics Commission www.ethics.state.tx,us Version V1.0.277