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Home My WebLink AboutIR 8789INFORMAL REPORT TO CITY COUNCIL MEMBERS �,1►�aTFq�b r ps w1ra 1075 To the Mayor and Members of the City Council No. 8789 Date: July 25, 2006 Page 1 of 5 SUBJECT: Tax Abatement Audit Report for the 2005 Calendar Year Overview — All Active Agreements The City's Tax Abatement Policy requires that an annual audit be conducted on all active tax abatement agreements. Eighteen tax abatements were audited for the 2005 calendar year. Companies submitted all required and relevant employment and vendor spending information to the City's Economic and Community Development Department, per the agreement. This information was then analyzed by the Internal Audit Department. The full report will be presented as part of the Tuesday, July 25, 2006, Pre - Council agenda. There are two categories of tax abatement: 1) those approved before July 1998, which do not prescribe a specific remedy if the applicant fails to meet the terms of the agreement and 2) those approved during or after July 1998, which specifically describe the reduction of abatement if terms BIB not met. This type of tax abatement agreement has been called a "performance specific" In 2001, the City Council asked that staff develop a standard reduction formula for all non- performance specific agreements, which has been utilized since 2001. Currently, there are only five tax abatement agreements that are non - performance specific. The audit findings (on page 3) reveal the majority of the non - performance specific agreements met all of the terms of the respective agreements. Benchmarks: For many years, the City of Fort Worth's Tax Abatement Policy has had three primary areas of emphasis: 1. Employment Opportunities 2. Fort Worth Business Participation 3. Minority and Woman -owned Business Enterprise (MWBE) Participation The 2005 audit reflects the following results in relation to these three areas of emphasis: Employment % of Commitment Contractual Commitments 3,438 Actual Performance 3,671 +107% ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS To the Mayor and Members of the City Council No. 8789 Date: July 25, 2006 Page 2 of 5 SUBJECT: Tax Abatement Audit Report for the 2005 Calendar Year Fort Worth Resident Commitments 2,042 Actual Performance 2,257 +111% Central City Resident Commitments* 611 Actual Performance 1,047 +171% * Seventeen agreements contain this contractual requirement. Fort Worth Business Participation Construction Component ** Fort Worth Contractual Commitments $ 79.6 million Actual Performance $147.3 million +185% Goods and Services Component Fort Worth Contractual Commitments $ 24.3 million Actual Performance $ 43.4 million +179% Minority & Woman -Owned Business Enterprise Participation Construction Component ** MWBE Contractual Commitments * ** $ 39.5 million Actual Performance $ 66.9 million +169% Goods and Services Component MWBE Contractual Commitments * ** $ 9.9 million Actual Performance $ 13.2 million +133% ** The construction figures reflect the expenditures that occurred during the construction phase of the agreements, which may have occurred prior to the current audit period. * ** For tax abatement purposes, the City of Fort Worth MWBE "marketplace" was a nine county area which included Tarrant, Parker, Johnson, Collin, Dallas, Denton, Ellis, Kaufman, and Rockwall. However, in 2002, the "marketplace" for tax abatement purposes was reduced to reflect only Fort Worth MWWBE businesses. ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS paza. lip, AL �► ra. 1073 To the Mayor and Members of the City Council No. 8789 Date: July 25, 2006 Page 3 of 5 SUBJECT: Tax Abatement Audit Report for the 2005 Calendar Year Audit Findings and Recommendations Performance Specific Agreements The 2005 audit findings show the results of the following companies that have performance specific agreements and the year of expiration. Abatement Abatement Estimated Annual Company Maximum Earned Taxes to be Abated • Ben E. Keith (2010) 75% 75% $181,650 • Bell Helicopter - Textron (2010) 80% 80% $301,564 • Chase Operations Center (2015) 90% 35% $160,465 • Coca Cola Enterprises (2014) 90% 85% $ 39,678 • ConAgra Foods (2013) 90% 25% $ 25,244 ® • Corning Cable Systems (2012) 100% 30% $ 8,617 • Cott Beverages (2015) 100% 60% $275,070 • Cotton Depot Lofts (2015) 100% 75% $ 89,925 • JCPenney Distribution Center (2009) 90% 90% $737,859 • Mattel, Inc. (2012) 100% 94% $166,746 • Montgomery Plaza — Target (2015) 100% 100% $ 88,727 • Mother Parker's Tea & Coffee (2010) 80% 50% $ 89,135 • Tech Data (2006) 50% 0% $ -0- Non - Performance Specific Agreements The companies below have non - performance specific agreements and have met all tax abatement agreement commitments and are in full compliance for the audit period. Abatement Estimated Taxes Company Percentage to be Abated • Blackstone Hotel (2010) 100% $ 15,364 • Firestone Apartments (2009) 100% $230,395 • Hillside Apartments (2007) 100% $ 56,225 • Villas by the Lake (2010) 75% $ 38,751 The audit results indicate the company below, which has a non - performance specific agreement, had performance deficiencies. ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS To the Mayor and Members of the City Council No. 8789 Date: July 25, 2006 Page 4 of 5 SUBJECT: Tax Abatement Audit Report for the 2005 Calendar Year Southwest Office Systems (SOS) (2007) Recommendation: Reduce abatement from 25% to 16.37 %, estimated amount of taxes to be abated is $2,151. Council consideration of this recommendation is scheduled for August 3, 2006. % Deficient Deficiency: Fort Worth Supply & Service Spending $147,838 Actual Performance $128,832 13% Deficiency: Utilization of MWBE Companies $ 45,162 Actual Performance $ 26,696 41% Deficiency: Total New Employment 97 Actual Performance 70 28% Deficiency: Employment of Fort Worth Residents 42 Actual Performance 19 55% Deficiency: Employment of Central City Residents 24 Actual Performance 7 71% Other Relevant Information: • The company has one more year of abatement benefit. • The reduction calculation is below. 2005 Recommended ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS Abatement - Category Weight Requirement Actual Performance 2006 Supply & Service — Total 4.17% $ 193,000 $ 307,717 100% 4.17% Supply & Service - Ft. Worth 4.17% $ 147,838 $ 128,832 87% 3.63% Supply & Service - MWWBE 4.17% $ 45,162 $ 26,696 59% 2.46% Employment — Total 4.17% 97 70 72% 3.01% Employment - Ft. Worth 4.17% 42 19 45% 1.88% Employment - Central City 4.17% 24 7 29% 1.22% Total 25% 16.37% ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS To the Mayor and Members of the City Council No. 8789 Date: July 25, 2006 Page 5 of 5 SUBJECT: Tax Abatement Audit Report for the 2005 Calendar Year Terminated Tax Abatement Agreements: The following is a brief summary of the tax abatement agreements that terminated in 2005 and the estimated value that was returned to the tax roll in 2006 as a result of these projects. Haggar Pre - Development Employment Total Taxes 2006 Estimated Property Value Committed Actual Abated Property Value $2,200,741 475 570 $1,934,417 $18,033,131 Minvard Food Stores Motorola Nokia Pre - Development Employment Total Taxes 2006 Estimated Property Value Committed Actual Abated Property Value $441,740 160 101 $224,556 $6,213,000 Pre - Development Employment Total Taxes 2006 Estimated Property Value Committed Actual Abated Property Value $15,934,804 1500 1160 $6,047,356 $78,164,190 Pre - Development Employment Total Taxes 2006 Estimated Property Value Committed Actual Abated Property Value $17,902 1800 859 $6,470,048 $20,409,836 Phase One of the American Airlines tax abatement expired in 2005. Final information regarding the American Airlines project is pending from the Tarrant Appraisal District and will be provided to Council at a later date. 0 6_L &" Charles R. Boswell City Manager ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS