HomeMy WebLinkAboutIR 23-1782 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 23-1782
To the Mayor and Members of the City Council December 5, 2023
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SUBJECT: RESULTS FOR INCENTIVE AGREEMENTS REVIEWED IN FY 2023
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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 on Tax Year 2022 commitments with
abatements and grants in Fiscal Year 2023. For purposes of incentive review, payments for Fiscal Year
2023 are calculated from taxes generated the prior year (in this case Tax Year 2022).
The City of Fort Worth considers several potential types of economic development incentives that are
targeted and further the City's economic development goals and strategies. Incentives are typically for
projects that would not occur in the City "but for" the incentive. Reviewing performance by those who enter
into an incentive agreement with the City is an important part of the process.
The primary incentive tools that are utilized for business attraction and job creation are tax abatements and
Chapter 380 Economic Development Program Agreements. Tax abatements provide a full or partial
exemption from new incremental ad-valorem taxes on real and/or business personal property for up to 10
years. The exemption is based on performance terms under the agreement and is applied before the
company pays any taxes. Chapter 380 agreements allows the City to provide grants that are based on a
percentage of the new incremental taxes (combination of real property, business personal property, sales,
hotel occupancy tax based on specific project requirements) created by the project. The grants are paid
from new taxes generated the previous year and are based on meeting the defined performance criteria
under the agreement. The City generally limits the term of Chapter 380 agreements to 15 years, but there
is no defined term limit under State law.
This year staff reviewed eight tax abatement agreements and thirty-five economic development program
agreements (Chapter 380). Of the agreements reviewed, one Chapter 380 was new and this year
represented a review of the first construction report, and one Chapter 380 was an existing agreement being
reviewed for the second phase of construction.
Agreements Reviewed
u) 33 35 34 35
c 35 31
E 30
25
Q 20
0 15 10 10 10
(D 10 9 8
= 5
Z 0
2018 2019 2020 2021
■Tax Abatement ■Chapter 380
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 23-1782
To the Mayor and Members of the City Council December 5, 2023
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SUBJECT: RESULTS FOR INCENTIVE AGREEMENTS REVIEWED IN FY 2023
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Construction Completion Review
All companies with either a Tax Abatement Agreement or Economic Development Program Agreement must
submit a construction completion report and supporting documentation upon completion of construction or
phase. The Economic Development Department verifies construction documentation for projects that are
newly completed and reviews 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. In addition to
minimum dollar amounts of construction investment requirements, incentive agreements historically tied a
portion of the possible incentive to spending with Fort Worth Businesses and Fort Worth M/WBE's.
Agreements negotiated since 2019, tie a portion of possible incentives to construction spending with
Business Equity Firms (BEF) due to revisions in the incentive policy to align with the Business Equity
Ordinance.
The additional gross revenue generated by the 43 agreements totaled $61.5 M with $56.5 to the General
Fund and $5.0 M to the Culture and Tourism Fund. Overall, this constitutes roughly eight percent of the
City's total revenues from the corresponding tax categories.
Tax Abatement Chapter 380
Revenue Source Projects Projects TOTALS
Levied Taxes Levied Taxes
TY22 TY22
Real and Business Personal Property and Sales Tax $6,155,535 $50,399,087 $56,554,622
Hotel Occupancy Tax $ - $ 5,042,152 $ 5,042,152
Total $6,155,535 $55,371,580 $61,527,115
Two agreements involved project or phase completions:
• Majestic Stockyards (Fort Worth Heritage Development, LLC)
• Champion Circle Roanoke (Roanoke 35/114 Partners, L.P.)
Fort Worth Heritage Development's minimum project private investment for Level 2 construction was $100.0
M, and their actual capital investment was $132.7 M. Fort Worth Heritage Development earned 24.81% out
of the available 30% construction incentive on property taxes and 54.61% out of the available 65%
construction incentive on sales taxes. Fort Worth Heritage Development did not achieve the maximum
construction incentive due to their lack of performance on construction participation with Fort Worth M/WBE
companies, which reduced the construction incentive by 5.19% for property taxes and 10.39% for sales
taxes.
Roanoke 35/114 Partners' minimum project private investment was $150.0 M, and their actual capital
investment was $157.4 M. Roanoke earned 100% out of the available 100% construction incentive on sales
taxes for their first program year which will decrease to 70% out of an available 70% in the remaining
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 23-1782
To the Mayor and Members of the City Council December 5, 2023
Page 3 of 7
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SUBJECT: RESULTS FOR INCENTIVE AGREEMENTS REVIEWED IN FY 2023
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program years as annual commitments come online in 2023's review. Roanoke achieved the maximum
construction incentive due to their performance on construction participation with Fort Worth M/WBE
companies.
Overall Capital Max Base Base Incentive
Company Investment Incentive Earned
Fort Worth Heritage Development, LLC $132,675,736 30% PT; 65% ST 24.81% PT; 54.61% ST
Roanoke 35/114 Partners, L.P. $157,411,114 70% 70%
Total Capital Investment $290,086,850
APT= property tax; ST=sales tax
The cumulative private capital investment delivered from the economic development program peaked in
2022 at about $5.8 billion as shown in the chart below.
Cumulative Capital Investment
$7.00
0 $5.54 $5.78
0
= $6.00 $5.37
m
$5.00 $4.60
$4.00 $3.56 000
$3.00
$2.00
$1.00
2018 2019 2020 2021 2022
The combined construction costs and business personal property value has been steadily increasing
throughout the years even as older project's incentive term completed and are taken out of the incentive
review purview. The cumulative capital investment has risen by about $2.2 billion in the last five years. This
increase in capital investment paired with a relatively consistent number of agreements in review also gives
an indication of growth in the scope and quality of newer projects.
For Tax Year 2022's construction spending, Fort Worth businesses received $132.2 M in construction
spending, which more than doubled the$67.5 M committed, and Fort Worth M/WBE's received nearly$39.2
M in construction spending from economic development projects which fell short of overall commitments by
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 23-1782
To the Mayor and Members of the City Council December 5, 2023
Page 4 of 7
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SUBJECT: RESULTS FOR INCENTIVE AGREEMENTS REVIEWED IN FY 2023
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$17.1 M. In the past few years, we have seen the gap tightening on FW M/WBE construction commitments,
but the gap widened again in 2022 with the underperformance towards this commitment by the Majestic
Stockyards project, which spent $10.2 M towards the $33.1 M commitment. This reduced their annual
incentives by 17% until their Level 3 construction phase is reviewed in 2025.
2022 Construction Particpation
$140.0 $13 2.2
o $120.0
$100.0
$80.0 $67.5
$60.0 $56.3
$
$40.0 39.2
$20.0
$_ I 1 0
FW Business FW MWBE
Committed ■Verified
In 2021, new policies for tax abatements and Chapter 380s were approved to align with city ordinance
transforming the FW M/WBE construction commitment into the Business Equity Firm (BEF) construction
commitment. This opened up the geographic eligibility requirements for a certified firm from the corporate
City limits to the six-county area in which Fort Worth serves. We expect to see the local equity spending
commitment gap to close as more projects under newer incentive policies complete construction. We saw
the first project completion with the new BEF construction commitment complete in 2021, which significantly
surpassed its commitment. We are also continuing discussions with our Department of Diversity and
Inclusion to determine the most effective way to engage our Business Equity Firms on these projects to
increase our overall participation. The charts below depict these results:
Fort Worth M/WBE Construction BEF Construction
Committed vs.Actuals Committed vs Actuals
$60.0 $56.3 $600.0 $557.4
o $50.0 $46.2 c $500.0
$40.0 $39.7 $39.0 39.2
$36.3 c $400.0
$30.0 F- $300.0
$20.0 $16.5 $2000
$8.9 �; .
2.4 $87.7
$10.0 .:•0 $100.0
2018 2019 2020 2021 2022 2021 2022
Committed FW MWBE ■Verified FW MWBE Committed BEF ■Verified BEF
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 23-1782
To the Mayor and Members of the City Council December 5, 2023
Page 5 of 7
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SUBJECT: RESULTS FOR INCENTIVE AGREEMENTS REVIEWED IN FY 2023
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Annual Review
In addition to construction spending, ongoing employment and business supply and service participation
commitments are reviewed against applicable requirements under the agreements. All companies with City
incentive agreements must submit an annual report and supporting documentation by February 1st
All categories of the employment commitments had verified numbers that well exceeded minimum
commitments. The 2022 Employment figures across all projects are illustrated below:
2022 Employment
30,000
25,000 24,236
20,000 16,603
O 15,000
Q
W 10,000 6
5,330 ,833
5,000 1,894
1,158
0 —
Total Jobs FW Jobs Central City Jobs
Committed ■Verified
Under previous policies, there was not a specific commitment to meet a defined wage threshold for new jobs
created. In 2019, Economic Development's updated tax abatement and Chapter 380 policies began to
include a minimum average wage requirement for all new projects which was set at $43,992. The current
wage threshold is $55,000 and is reviewed every two years when the tax abatement policy is adopted. Two
of the projects reviewed had annual average salary commitments, Ariat and Linear Labs. Both projects were
verified to have exceeded the minimum average salary threshold. The salary review results are displayed
in the following table:
Average Salary Average Number
Project Commitment Salary Verified of Jobs
Ariat $43,992.00 $ 68,747.14 637
Linear Labs $70,000.00 $127,108.00 39
With regard to supply and service commitments, the verified spending with Fort Worth Businesses was
204% of the committed value, while the verified Fort Worth M/WBE spending was 70% of the committed
value. Reported supply and service numbers for Tax Year 2022 are shown in the chart below. For spending
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 23-1782
To the Mayor and Members of the City Council December 5, 2023
Page 6 of 7
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SUBJECT: RESULTS FOR INCENTIVE AGREEMENTS REVIEWED IN FY 2023
1875
with Fort Worth Businesses, the McLane and Majestic Stockyards projects had the highest performance.
McLane spent 110 times its committed level and Majestic Stockyards spent 41 times its committed level. On
the Fort Worth M/WBE supply and service spending side, Montgomery Plaza Kimco and American Airlines
HQ were the top performers relative to their commitment. Montgomery Plaza Kimco spent 12 times their
committed level, and American Airlines HQ spent 9 times their committed level. Projects that did not meet
their supply and service commitments for the year received reductions to their annual incentive.
2022 Business Supply and Service
$so
o $70 $67.0
$60
$50
$40 $32.8
$30
$20 $15.1 $10.6
$10
$0
FW Business FW MWBE
Committed ■Verified
Based on the projects' annual performance towards capital investment, employment, and supply and service
commitments, the projects were entitled to receive approximately$39.1 M in TY22 under their contracts with
the City. The table below shows the detailed breakdown of the grants and abatements:
Tax Chapter 380
Revenue Source Abatements
Granted TOTALS
Granted
Real and Business Personal Property and Sales Tax $848,459 $33,966,416 $34,814,875
Hotel Occupancy Tax N/A $ 4,045,703 $ 4,045,703
Total $848,459 $38,012,119 1 $38,860,578
*Excludes$305,000 grant payment made to the FW Housing Finance Corporation for projects in lieu of an affordable housing
commitment at$200 per residential unit on the project site.
• $157,800 -Clearfork Project
• $147,200 -Waterside Project
After payment of the grants and abatements, projects with active economic development agreements
provided almost $22.7 M in new net tax revenue to the City in Tax Year 2022 of which $21.7 M went to the
General Fund and $1.0 M to the Culture and Tourism Fund. This represents approximately 2.86% of the
City's total revenues from the corresponding tax categories.
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 23-1782
To the Mayor and Members of the City Council December 5, 2023
Page 7 of 7
xA.
SUBJECT: RESULTS FOR INCENTIVE AGREEMENTS REVIEWED IN FY 2023
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Summary of 2022 Taxes Collected from Companies with Incentive Agreements
Total Granted or
Project Tax Abated Net to City
Revenues
Real and Business Personal Property and Sales Tax* $56,484,963 $34,814,875 $21,670,088
Hotel Occupancy Tax $ 5,042,152 $ 4,045,703 $ 996,449
Total $61,527,115 $38,860,578 $22,666,537
*Sales Tax includes only companies with an incentive based on sales tax.
The private investment leveraged by the economic development program totaled $5.8 billion, making the
City's total incentive participation 0.67%, resulting in a private to public investment ratio of 149:1.
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