HomeMy WebLinkAboutIR 9281INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 9281
To the Mayor and Members of the City Council July 27, 2010
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• SUBJECT: AMENDMENT TO TAX ABATEMENT AGREEMENT WITH HEALTH
CARE SERVICE CORPORATION D /B /A BLUE CROSS BLUE SHIELD OF TEXAS
TO REDUCE THE MINIMUM REAL PROPERTY INVESTMENT AND TO EXTEND
THE COMPLETION DEADLINE TO DECEMBER 31, 2010
On February 26, 2008, the City Council entered into a Tax Abatement Agreement with Health Care
Service Corporation, d /b /a Blue Cross Blue Shield of Texas for the construction of a data center facility
located at Alliance Gateway Business Park. The agreement called for a minimum investment of $155.0
million in real property and $20.0 million in personal property by April 1, 2010. The agreement terms
include the following abatement components:
Abatement Component Maximum Percentage
Real and Personal Property Improvements of at least $175 million 40%
Certified Fort Worth MWWBE Construction Commitment 5%
Bonus Incentive for Every $1.0 million exceeded in the MWBE commitment 5%
In June of 2010, Health Care Services Corporation (HCSC) approached the City about the company's
performance under the tax abatement. HCSC has completed construction of the 260,000 SF data center
space, spent $153.7 million in real property improvements or 99.2% of the commitment and hired 24 full -
time employees. HCSC has not invested any money to date on personal property.
As a result of the downturn in the economy, HCSC generated savings on the real property investment
because of favorable construction contracts. As an example, HCSC was able to achieve $1.0 million in
savings on equipment costs for generators, transformers and uninterruptible power supply systems. Also
attributable to the slow down of the economy, the company was forced to delay the timing on the
investment of the personal property by a few months. Based on current projections, it is estimated that
HCSC will reach and possibly exceed the $20 million in personal property investment by December 31,
2010. The company also anticipates an additional investment in real and personal property of over $150.0
million at the facility in the 2011/2012 timeframe based on future expansion needs.
HCSC has requested that the City consider a reduction in the minimum investment due to the cost savings
realized and an extension of the completion deadline for the real and personal property improvements.
Staff recommends approval of the requested amendment to the agreement since there is no material
impact to the City. The incentive is based on the tax valuation to be made on January 1, 2011 and whether
the investment was made by April 1St or December 31St of 2010, the net effect on the tax rolls is the same.
In order to move forward with the request, an amendment to the existing tax abatement agreement will be
required to reduce the minimum real property investment to $153 million from $155.0 million and extend
the completion deadline from April 1, 2010 to December 31, 2010. All other terms and conditions of the
agreement would remain in effect. A M &C for consideration of the amendment will be on the August 3,
2010 City Council agenda.
If you have any questions or need additional information, please contact Jay Chapa, Housing & Economic
Development Director at 817- 392 -5804.
Dale A. Fiss or, P.E.
City Manager
ISSUED BY THE CITY MANAGER FORT WORTH. TEXAS