HomeMy WebLinkAboutIR 030 (3) INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 23-030
To the Mayor and Members of the City Council February 7, 2023
Page 1 of 6
xA.
SUBJECT: OVERVIEW ON PERFORMANCE OF ACTIVE INCENTIVE
1875 AGREEMENTS
The purpose of this Informal Report is to explain the annual review process for active incentive agreements
and present findings from active tax abatement agreements and economic development program grant
agreements.
The primary tools the city uses for incentives are tax abatements (governed under Chapter 312 of the Texas
Tax Code) and economic development program agreements (governed under Chapter 380 of the Texas
Tax Code). The general purpose of both programs is to attract new private investment and job creation in
our target industries that would not otherwise locate with the City. Both incentives provide a reduction in
incremental taxes for companies with active agreements. Tax Abatements reduce the taxable value of real
property or business personal property tax accounts before taxes are calculated and levied and are limited
to a period of 10 years. Economic Development Program Agreements (Chapter 380) generally grant a
percentage or set amount of collected city property tax, sales tax, or hotel occupancy tax back to the
company and provide much greater flexibility on length and project type. Both incentives programs are
performance based and the amount of incentive provided is reduced when commitments are not achieved.
All companies with City incentive agreements must submit an annual report and supporting documentation
by February 1st. The Economic Development Department verifies construction documentation for projects
that are newly completed and reviews annual performance documentation for all other 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 the terms of the agreement.
Failure to meet the proposed investment levels for an agreement is a condition of default and the agreement
is subsequently terminated. In addition to minimum dollar amounts of construction investment requirements,
incentive agreements generally tie a portion of the possible incentive to spending with Fort Worth
Businesses and Fort Worth Minority/Women Owned Business Enterprise (M/WBE) or Business Equity Firm
(BEF). Failure to meet these commitments result in an automatic reduction of incentive over the life of the
project. Finally, incentive agreements will consist of annual commitments which must be met in order to earn
additional levels of incentives up to the maximum percentage provided in the agreement. The results of the
annual compliance review are provided to City Council each year. Currently, the city has a total of 46 active
agreements consisting of 9 tax abatements and 37 economic development program grant agreements.
Active agreements span multiple policies that have been amended over time and contain different
requirements. The policies were last updated after adoption of the Economic Development Strategic Plan
and an extensive analysis of competitive cities. Revisions as a result of this review included 1) removal of
the central city hiring commitment and adding a minimum salary requirement with a focus on Fort Worth
jobs, 2) requiring a hard commitment of 15% on Business Equity Firm participation with a 10% automatic
deduction for the agreement term if the goal is not met, and 3) removal of supply & service commitments
and expanded overall construction commitment to include both hard and soft costs. The newly instituted
salary requirement began at $44,392 and is increased every two years. The majority of competitive cities
have either no specific wage requirement or a living wage requirement between $15.00 - $17.00 per hour.
Fort Worth salary requirement is currently set at $52,300 ($25.14/hr.) with a plans to raise the minimum to
$55,000 ($26.44/hr.) under the new policy updates. Any project seeking economic development incentives
must meet wage the minimum established wage requirement in order to be eligible.
Tax Year 21 Performance
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 23-030
To the Mayor and Members of the City Council February 7, 2023
Page 2 of 6
xA.
SUBJECT: OVERVIEW ON PERFORMANCE OF ACTIVE INCENTIVE
1875 AGREEMENTS
For the tax year 2021 review the staff analyzed 9 tax abatement and 34 economic development program
(Chapter 380 Grant) agreements. These include four newly completed projects.
TY21 Project Completions
Overall Max Base
Company Capital Base Incentive
Investment Incentive Earned
Ariat International, Inc. $139,240,194 25.00% 15.00%
Ben E. Keith Company $ 22,694,451 35.00% 20.10%
714 Main Real Estate Holdings, LLC (Kimpton) $ 56,047,869 43.00% 43.00%
Raider Express, Inc. $ 70,151,748 1 20.00% 1 16.50%
Linear Labs $ 2,111,535 35.00% 35.00%
Total Capital Investment $290,245,797
For Tax Year 2021's construction spending, Fort Worth businesses received $46.1 M in construction
spending, which more than tripled the $14.8 M committed. Fort Worth M/WBE's received $13.6 M in
construction spending from economic development projects which fell short of the commitment value of
$20.4 M. Companies that did not meet their M/WBE or BEF commitments had their incentive reduced by
their terms outlined in their specific agreements. In reviewing the last seven years of performance on M/WBE
utilization, the revision in policy and coordination with the Department of Diversity & Inclusion is closing the
gap on commitment spending with minority-owned firms.
TY21 Construction Participation
$50.0 —
$45.0 —
$40.0
$35.0
$30.0
o $25.0
$20.0 $13.6
$15.0
$10.0
$5.0
$0.0
FW Business FW MWBE
Committed Verified
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 23-030
To the Mayor and Members of the City Council February 7, 2023
paTA;?t- Page 3 of 6
x�
SUBJECT: OVERVIEW ON PERFORMANCE OF ACTIVE INCENTIVE
VA AGREEMENTS
Construction with M/WBE Companies Performance
$100
$90 $84.6 $85.9
$80 $71.2 $72.5
$70 $64.1 $64.4
c$60
0
=$50
$40 $37.6
$so $28.1
$20.4
$20 $12.7 $13.6
$10 $3.0$0.4 ,$6.0
� 1
2015 2016 2017 2018 2019 2020 2021
■Committed ■Actuals
TY21 Employment
25,000
22,471
20,000
16,475
15,000
10,000
7,264
5,115
5,000
1,227 1,601
Total Jobs FW Jobs Central City Jobs
■Committed Verified
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 23-030
To the Mayor and Members of the City Council February 7, 2023
Page 4 of 6
xA.
SUBJECT: OVERVIEW ON PERFORMANCE OF ACTIVE INCENTIVE
VA AGREEMENTS
TY21 Supply & Service Spending
$160
$140 $134.7
$120
$100
cn $80
0
0
$60
$40 $38.4
$18.8 $18.9
$20
$0
FW Business FW MWBE
■Committed ■Verified
After payment of the grants and abatements, projects with active economic development agreements
provided approximately $22.3 M in new net tax revenue to the City in Tax Year 2021.
Summary of 2021 Taxes Collected from Companies with Incentive Agreements
Total Project Granted or Net to City
Tax Revenues Abated
Real and Business Personal Property and Sales Tax* $55,891,685 $34,454,997 $21,436,688
Hotel Occupancy Tax $ 3,768,636 $ 2,936,547 $ 832,089
Total $59,660,321 $37,391,544 $22,268,776
*Sales& HOT Tax includes only companies with an incentive based on sales tax.
Total Active Project Performance
Attachment A of this report provides a complete overview of performance by each company. The chart is
broken down to show commitments on project completion and a seven-year review on annual commitments.
Due to the fluctuation in performance over time with each annual commitment, we have provided an average
to provide a truer picture of how these companies are meeting commitments on an annual basis. The tables
below provide a recap on the overall performance shown in the attachment.
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 23-030
To the Mayor and Members of the City Council February 7, 2023
Page 5 of 6
xA.
SUBJECT: OVERVIEW ON PERFORMANCE OF ACTIVE INCENTIVE
VA AGREEMENTS
Capital Investment Commitment
Requirement No. of No. of Companies % Meeting
Companies w/ Meeting Commitment
Requirement Requirement
Overall Investment Amount 41 41 100%
Business Personal Property (BPP) Investment 22 20 91%
Both Real Property& BPP Investment 4 4 100%
Not meeting overall investment commitment is a condition of default.
Construction Participation Commitment
Requirement No. of No. of Companies % Meeting
Companies w/ Meeting Commitment
Requirement Requirement
Construction with Fort Worth Companies 38 27 71%
Construction with Fort Worth M/WBE or BEF 43 12 28%
Companies
Failure to meet the construction commitments results in an incentive reduction over the term of the agreement.
Annual Commitments (7 Year Avg.)
Requirement Overall FIN Central City Salary FIN FIN MBE
Employment Employment Employment Commitment Supply& Supply&
Service Service
Total Projects w/ 38 27 27 5 32 37
Requirement
Exceeded 29 20 15 4 25 18
Commitment
(>10%)
Met Commitment 6 3 0 1 0 3
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 23-030
To the Mayor and Members of the City Council February 7, 2023
Page 6 of 6
xA.
SUBJECT: OVERVIEW ON PERFORMANCE OF ACTIVE INCENTIVE
1875 AGREEMENTS
Did Not Meet 3 4 12 0 7 16
Commitment
Percentage 92% 85% 56% 100% 78% 57%
Exceeded or Met
Commitment
Companies not meeting their annual commitments have the incentive for that year reduced.
In summary, the revisions to policy as a result of the Economic Development Strategic Plan are showing
good results as staff continues to focus on the objectives of attracting high investment and job growth in our
target industries. New private investment leveraged by the economic development program overall totals
approximately $5.5 billion. There are still performance gaps in construction spending with Business Equity
Firms, but it is anticipated these numbers will continue to close through our shared efforts with the Diversity
& Equity Department.
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
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