HomeMy WebLinkAboutIR 10482 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 20-10482
To the Mayor and Members of the City Council September 22, 2020
Page 1 of 3
xA.
SUBJECT: 2019 REVIEW YEAR RESULTS FOR INCENTIVE AGREEMENTS
1q irn {
1875
The purpose of this Informal Report is to provide a brief overview of the incentive compliance review process
for economic development incentive agreements and results for Tax Year 2019.
All companies with City incentive agreements must submit an annual report and supporting documentation
by February 1st. The Internal Audit Department verifies construction documentation for projects that are
newly completed, and Economic Development Department staff review documentation for the rest of the
active agreements. The purpose of the review is to determine compliance with each requirement of the
agreement and calculate the percentage of taxes to be abated or reimbursed to the company based on
compliance achieved. This year staff reviewed 10 tax abatement and 33 economic development program
(Chapter 380 Grant) agreements. Results also include one relocation tax abatement.
Two of the Chapter 380 Grants involved project completions: Phase I of the Majestic mixed-use
redevelopment in the Stockyards and NT Window's new headquarters and manufacturing facility located at
2900 W Seminary Drive. In addition to requirements for minimum dollar amounts of construction investment,
incentive agreements generally tie a portion of the possible incentive to spending with Fort Worth
Businesses and Fort Worth MWBE's. Majestic had hard construction cost commitments for Fort Worth
Businesses and Fort Worth MWBE's while NT Window only had a hard construction cost commitment for
Fort Worth MWBE's. Majestic's minimum project private investment was $35.0 M, and their actual capital
investment was $38.7 M. Majestic earned 25.85% out of the available 30.00% construction incentive on
property taxes and 56.69% out of the 65.00% construction incentive on sales tax. Majestic did not achieve
the maximum construction incentive due to a shortfall in expected participation by Fort Worth MWBE
companies resulting in a reduction of 4.15% to their construction incentive on property taxes and an 8.31%
reduction to their construction incentive on sales taxes. The estimated reduction due to underperformance
in Fort Worth MWBE participation on Majestic's 2020 grant for property taxes would be $15,419.
NT Window's minimum private investment was $9.4 M, and their verified total private investment was $9.6
M. The Company earned 50% out of the available 50% construction incentive on property taxes and sales
taxes. However, NT Window more than doubled their expected participation of Fort Worth MWBE
companies. Staff is working to resolve a computation issue on the value of Business Personal Property tied
to the agreement and will bring back a separate action item for Council consideration.
For Tax Year 2019's construction spending, Fort Worth businesses received almost $31.4 M in construction
spending which more than tripled the $9.4 M committed, and Fort Worth MWBE's received almost $6.0 M
in construction spending from economic development projects. While the MWBE commitments were not met
fully in Tax Year 2019, we continue to see the gap tightening year over year as we have aligned our policy
with city ordinance. These results are shown in the 2019 Construction Participation graph.
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 20-10482
To the Mayor and Members of the City Council September 22, 2020
Page 2 of 3
xA.
SUBJECT: 2019 REVIEW YEAR RESULTS FOR INCENTIVE AGREEMENTS
VA
Y673
2019 Construction Particpation
$40,000,000
$31,377,647
$30,000,000
$20,000,000
$9,413,294 $8,905,432
$10,000,000 5,968,670
FW Business FW MWBE
Committed ■Verified
In addition to construction spending, employment and business supply and service participation are key
ongoing requirements for the economic development agreements. All categories of employment had verified
numbers that well exceeded the committed values of the agreements. The 2019 Employment figures across
all projects can are shown in the following graph.
20,000 2019 Employment
15,357
15,000
11,407
10,000
6,704
5,000 4,2
1,173 1,468
0
Total Jobs FW Jobs Central City Jobs
Committed ■Verified
In the supply and service commitments, the verified spending with Fort Worth Businesses was 706% of the
committed value while the verified Fort Worth MWBE spending was 70% of the committed values. The
results of the supply and service numbers for Tax Year 2019 are shown in the following graph. The large
over performance of total verified spending with Fort Worth Businesses compared to the committed value is
linked to two specific projects that have Fort Worth supply & services commitments. Alcon spent $70.7 M
with Fort Worth Business in supply and services while their annual commitment is set at $50,000, and Bell
Helicopter spent $58.7 M with Fort Worth Businesses in supply and services while their annual commitment
is set at $1.0 M. These two projects alone make up 80% of the verified supply and services spending with
FW Businesses in Tax Year 2019. Of the 27 projects that include a FW Business supply and service
commitment, seven projects did not meet the commitment. In Tax Year 2019, the projects that did not meet
their commitment for supply and service spending with FW Businesses had an average incentive reduction
of 2.75% from the maximum percentage that they could earn. The underperformance in supply and service
spending with FW Businesses reduced the grants and abatements by a total of$54,160.78 from the potential
grants and abatements that the projects could have received. For projects that did not meet the FW MWBE
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 20-10482
To the Mayor and Members of the City Council September 22, 2020
Page 3 of 3
xA.
SUBJECT: 2019 REVIEW YEAR RESULTS FOR INCENTIVE AGREEMENTS
1q irn {
1875
supply and service spending commitment the reduction from the maximum incentive percentage that could
be earned was 4.12%. The underperformance in supply and service spending with FW MWBE reduced the
grants and abatements by a total of$189,582.70 from the potential grants and abatements that the projects
could have received. Due to underperformance in supply and service commitments the total reduction to
grants and abatements was $ 243,743.48.
2019 Business Supply and Service
$200,000,000 $160,306,30
1
$150,000,000
$100,000,000
$50,000,000 $22 69q 728 $17,233,107
$12,089,166
$0
FW Business FW MWBE
Committed ■Verified
Businesses with active agreements in 2019 provided the following tax revenue to the City:
2019 Taxes Collected from Companies with Incentive Agreements
Levied Granted or Abated Net To City
Real and Business Personal
Property and Sales Tax* $42,418,148 $27,471,755 $14,946,393
Hotel Occupancy Tax 7%+2% $4,243,451 $2,790,606 $1,452,845
Total $46,661,599 $30,262,361 $16,399,238
"Sales Tax includes only companies with an incentive based on sales tax.
In Tax Year 2019, the City of Fort Worth received $827,323,288 in tax revenue. For tax year 2019, property
taxes abated or reimbursed totaled just over $27.4 million, which represents 3.3% of the City's total tax
revenue. In total, the City still retained $16.4 million of the taxes levied on the projects with an incentive
agreement.
The private investment leveraged by the economic development program totaled $4.6 billion, making the
City's total incentive participation 0.66%, resulting in a private to public investment ratio of 152:1 based on
overall public and private deal value delivered to date.
If you have any questions concerning this information, please contact Robert Sturns, Economic
Development Director at 817-392-2663 or robert.sturns@fortworthtexas.gov.
David Cooke
City Manager
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS