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17-R-30 - EDC Incentive PolicyWHEREAS, Chapter 380, Texas Local Government Code, as amended, allows the governing body of a municipality to establish and provide for the administration of one or more programs to promote state and local economic development and to stimulate business and commercial activity in the municipality; and WHEREAS, the Development Corporation Act of 1979, as amended (Section 501.001 Texas Local Government Code, formerly the Development Corporation Act of 1979) (the "Act ") authorizes a development corporation to fund certain projects as defined by the Act and requires development corporations to enter into performance agreements to establish and provide for the direct incentive or make an expenditures on behalf of a business enterprise under a project; and WHEREAS, the City of Schertz Economic Development Corporation ( "SEDC ") Board approved and recommended that the City Council authorize the Schertz Incentive Policy set forth on Exhibit A attached hereto and incorporated herein at the SEDC's Board meeting on March 23, 2017; and NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SCHERTZ, TEXAS: Section 1. The City Council hereby authorizes the Schertz Incentive Policy as set forth in Exhibit A. Section 2. The recitals contained in the preamble hereof are hereby found to be true, and such recitals are hereby made a part of this Resolution for all purposes and are adopted as a part of the judgment and findings of the City Council. Section 3. All resolutions, or parts thereof, which are in conflict or inconsistent with any provision of this Resolution are hereby repealed to the extent of such conflict, and the provisions of this Resolution shall be and remain controlling as to the matters resolved herein. Section 4. This Resolution shall be construed and enforced in accordance with the laws of the State of Texas and the United States of America. Section 5. If any provision of this Resolution or the application thereof to any person or circumstance shall be held to be invalid, the remainder of this Resolution and the application of such provision to other persons and circumstances shall nevertheless be valid, and the City Council hereby declares that this Resolution would have been enacted without such invalid provision. Section 6. It is officially found, determined, and declared that the meeting at which this Resolution is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Resolution, was given, all as required by Chapter 551, Texas Government Code, as amended. Section 7. This Resolution shall be in force and effect from and after its final passage, and it is so resolved. PASSED AND ADOPTED, this 2ND day of May, 2017. CITY OF S Z, TEXAS el R. Carpenter, Mayor ATTEST: �� -a- cc �Br6ffda Dennis, City Secretary (CITY SEAL) is � . All economic development opportunities are encouraged to visit with the Economic Development Department to see how they fit into the overall efforts of creating a stronger business community. This policy is intended to act as a guideline for economic development incentives, specific Project details and amounts will be determined by the positive economic impacts created for the City of Schertz. Purpose The Schertz Incentive Policy has been created to increase job opportunities, add taxable value, create high quality of life, and diversify our local economy. The Schertz Incentive Policy will guide and ensure consistency between the City Council, the SEDC Board of Directors, and the Economic Development Department when engaging new and expanded business activities within the City of Schertz and its extraterritorial jurisdiction. Organizations Affected The City Council, SEDC Board of Directors, City Manager's office and Economic Development Department. Definitions Chapter 380 Incentive Agreement — formalized written agreement between the City of Schertz and a Company named to reflect the authorizing statute found in Chapter 380 of the Texas Local Government Code. Chapter 380 Incentive Agreements enact incentives authorized by the City of Schertz Chapter 380 Incentive Policy as defined in Section 3 of the Policy. City of Schertz Economic Development Corporation — abbreviated "SEDC" is a Texas, non - profit industrial development corporation. City Staff— Includes employees of all city departments. Company —a business enterprise. Economic Development Department — Under the Direction of the City Manager, the Executive Director and department staff are responsible for all economic development activities of the SEDC. Administrative expenses will be paid by the SEDC through the "Agreement For Provision Of Professional Services Between The City of Schertz and the Schertz Economic Development Corporation" which will be approved annually. Development Fee Grant — incentive for all or part of the fees paid to the City of Schertz in connection for a new or expanded business location. A Development Fee Grant is awarded by the SEDC through a Performance Agreement. Infrastructure Grant —incentive for infrastructure improvements which shall be limited to: streets and roads, rail spurs, water and sewer utilities, electric utilities, or gas utilities, drainage, site improvements, and related improvements; telecommunications and internet improvements. An Infrastructure Grant is awarded by the SEDC through a Performance Agreement. Performance Agreement — formalized written agreement between the SEDC and a Company. The Performance Agreement must include: a schedule of additional payroll or jobs to be created or retained and capital investment to be made as consideration for direct incentives provided or expenditures made by the SEDC under the agreement; and the terms under which repayment Approved: May 2, 2017 Page 1 of 7 must be made if the Company does not meet the performance requirements specified in the agreement. Performance Grant — a one time or multiyear incentive given in consideration for the creation or retention of Primary Jobs. A Performance Grant is awarded by the SEDC through a Performance Agreement. Primary Jobs — defined by Chapter 501 of the Texas Local Government Code: (A) a job that is: (i) available at a company for which a majority of the products or services of that company are ultimately exported to regional, statewide, national, or international markets infusing new dollars into the local economy; and (ii) included in one of the following sectors of the North American Industry Classification System (NAICS): 111 Crop Production 112 Animal Production 113 Forestry and Logging 11411 Commercial Fishing 115 Support Activities for Agriculture and 211 -213 221 311 -339 42 48 -49 51 (excluding 512131 and 512132) 523 -525 5413, 5415, 5416, 5417, and 5419 551 56142 922140 Forestry Mining Utilities Manufacturing Wholesale Trade Transportation and Warehousing Information (excluding motion picture theaters and drive -in motion picture theaters) Securities, Commodity Contracts, and Other Financial Investments and Related Activities; Insurance Carriers and Related Activities; Funds, Trusts, and Other Financial Vehicles Architectural, Engineering, and Related Services; Computer System Design and Related Services; Management, Scientific, and Technical Consulting Services; Scientific Research and Development Services; Other Professional, Scientific, and Technical Services Management of Companies and Enterprises Telephone Call Centers Correctional Institutions (B) a job that is included in North American Industry Classification System (NAICS) sector number 928110, National Security, for the corresponding index entries for Armed Forces, Army, Navy, Air Force, Marine Corps, and Military Bases. Approved: May 2, 2017 Page 2 of 7 Project — defined in Chapters 501 and 505 of the Texas Local Government Code. Real and Personal Property Investment Grant — a one time or multiyear incentive given in consideration for an increase in the Total Taxable value and the ventures overall positive economic impacts to the City of Schertz. The Real and Personal Property Investment Grant is awarded by the City of Schertz through a Chapter 380 Incentive Agreement. Sales and Use Tax Grant —a one time or multiyear incentive given in consideration for gross retail sales and use tax that is subject to local collection and the company's overall positive economic impacts to the City of Schertz. The Sales and Use Tax Grant is awarded by the City of Schertz though the Chapter 380 Incentive Agreement. Small Business Grant — a one time or multiyear incentive given in consideration for the creation or retention of Primary Jobs or new Total Taxable Value. A Small Business Grant is proportionally greater than a Performance Grant; however, the overall amount is not as large. A Small Business Grant is awarded by the SEDC through a Performance Agreement. Total Taxable Value — Includes Real Property (land and improvements) and Tangible Personal Property (machinery and equipment, inventory) as found on the official county appraisal district tax roll. Background The City of Schertz, Texas and the SEDC are focused on growing our local economy through the attraction and retention of Primary Jobs and by attracting new capital investment throughout the City of Schertz and within its extraterritorial jurisdiction. Since the City of Schertz' incorporation in 1958, Schertz has grown rapidly utilizing various tools to promote economic development. On August 9, 1997, Schertz residents voted to establish the SEDC and to collect one -half of one percent of sales and use tax to be used for economic development. Over the past 20 years, the City of Schertz and the SEDC have partnered to bring about multiple projects that have benefited the residents of Schertz. The partnership involved leveraging incentive tools such as abatements, rebates, grants and loans to strategically invest in infrastructure for our industrial parks, create loans for emerging industries, and to provide grants for both small and large companies who made significant capital investment within our City and created jobs for our residents. Today, the City of Schertz and the SEDC continue to present a partnered approach towards economic development; however, as we move forward greater focus will be placed on utilizing SEDC resources for economic development incentives to ensure that City resources are utilized for basic city services and quality of life amenities. Through this practice, our community will have greater ability to achieve the Schertz Complete City Model which includes the simultaneous accomplishment of the three key areas: Economic Engine, Core Services and Quality of Life. Programs Under the direction of the City Manager, the Economic Development Department will implement the following initiatives and processes. 1. Assistance Center— Information is critical to making business decisions. The Assistance Center is a collection of resources needed to learn more about the Schertz market, find the best location, start or expand a business, lower operating costs, or connect with area partners. The Assistance Center is a free resource available to new and expanded businesses seeking to pursue a Project within the City of Schertz and its extraterritorial jurisdiction. The information will be available Approved: May 2, 2017 Page 3 of 7 online at www.schertzedc.com or by contacting the Economic Development Department. The Assistance Center consists of the following: a. Site Selection Data — local Schertz information used to make preliminary site decisions. i. Market Information —aerial imagery, demographic reports, consumer spending, labor trends, traffic counts, education attainment, and other datasets to better understand the Schertz market. ii. Available Property Information —Commercial real estate listings. iii. Utility Information — water, wastewater, electricity, natural gas, and telecommunications capacity, availability and rate information. iv. Tax Information — local property and sales tax breakdowns. b. Schertz Development Assistance —development and business codes for constructing and opening a business in Schertz. i. Local Development Codes — reference library to Schertz Unified Development Codes, building and fire codes. ii. Development Guide — general procedural overview for opening a business in Schertz. iii. Predevelopment Meetings — a preliminary meeting and review of development and construction documents by the Engineering, Fire, GIS, Marshal, Parks, Planning & Community Development, and Public Works departments to ensure a quicker permit review timeline. c. Existing Local Tax Exemptions — a list of local tax exemptions that are available to lower business operating costs in Schertz. Freeport Exemption - a property tax exemption by the local jurisdiction on inventory that is detained in Texas less than 175 days. Properties within Schertz are entitled to a triple freeport exemption because of the participation by the City of Schertz, the County and the School District. The following jurisdictions participate in the Freeport Exemption: City of Schertz, Bexar County, Comal County, Guadalupe County, Comal ISD, and SCUC ISD. (Texas Tax Code Chapters 11.251 ii. Manufacturing Exemption — a state and local sales tax exemption on leased or purchased machinery, equipment, replacement parts, and accessories that are used or consumed in the manufacturing, processing, fabricating, or repairing of tangible personal property for ultimate sale. Additionally, Texas businesses are exempt from paying state sales and use tax on labor for constructing new facilities. (Texas Tax Code Chapters 151:318 iii. Natural Gas & Electricity Exemption — companies that use over 50% of their electricity or natural gas consumption in manufacturing, processing, or fabricating tangible personal property are exempt from paying state and local sales and use tax on electricity and natural gas. (Texas Tax Code Section 151:318; 151:3185 d. Partner Resources — Alamo area partners that can help create, grow and improve your business. Approved: May 2, 2017 Page 4 of 7 L Local Chamber of Commerce — Schertz has multiple regional chambers serving our area which help support their members through training and networking opportunities. ii. Regional, State and Federal Programs — list of governmental programs to assist entrepreneurs, small businesses, non - profits, and industry specific organizations develop business plans, access new markets and obtain financing for new product lines. iii. Trade Organizations — created to help that assist businesses and owner's network, advocate and gain industry specific education. 2. SEDC Incentive Policy — On August 9, 1997, Schertz residents voted to establish the City of Schertz Economic Development Corporation and for the collection of one -half of one percent of sales and use tax to be used for eligible economic development Projects. The SEDC was established as a Type B corporation under the Development Corporation Act, as amended (Title 12, Subtitle C1, Texas Local Government Code), and other applicable laws. The SEDC is governed by Chapter 501, 502 and 505 of the Local Government Code which give cities the discretionary ability to finance new and expanded business enterprises. The SEDC can fund all allowable Projects that are authorized for a Type B corporation. The Economic Development Department is responsible for identifying Projects and their economic impacts to the community. The SEDC Board of Directors is responsible for making a finding that a Projects and programs are within the constraints of the law. The City Council is responsible for authorizing all programs and expenditures for the SEDC. The SEDC Board of Directors and City Council will utilize all tools authorized by Chapters 501, 502 and 505 of the Texas Local Government Code to structure performance based incentives. Additionally, the following categories and guidelines will be used to consider individual Projects: a. Company Direct Incentives — in connection with the creation and retention of Primary Jobs, the SEDC will evaluate companies under the following categories: i. Existing Businesses — a business with at least 3 years of operation within the City of Schertz or its extraterritorial jurisdiction may receive a Performance Grant and /or Development Fee Grant to help create or retain Primary jobs in Schertz and to encourage new capital investment. ii. Small Businesses — a business with fewer than 50 full -time jobs or annual sales less than $10 million that seeks to establish or expand operations in Schertz may receive a Small Business Grant. Each year, the SEDC will budget $500 thousand to be used exclusively for Small Business Grants. iii. Large Impact Businesses — a business that seeks to create Primary Jobs and increase the Total Taxable Value in order to maintain and diversify our local economy may receive a Performance Grant. A Performance Grant will be used exclusively for all Projects with a Total Taxable Value of up to $100 million. iv. Extra Large Impact Businesses — for those Projects that exceed a Total Taxable Value over $100 million, the City and SEDC will use a combination of a Performance Grant and /or a Chapter 380 Incentive Agreement to leverage the creation of new Primary Jobs and Total Taxable Value. Approved: May 2, 2017 Page 5 of 7 b. Infrastructure Incentives — Certain infrastructure improvements, such as streets and roads for retail or office developments, may qualify for an Infrastructure Grant if the infrastructure expenditures adheres to state law and are found by the Board of Directors to be necessary to promote or develop new or expanded business enterprises. c. Other Authorized Projects — The SEDC retains its right to utilize any Project authorized for Type B Corporations. All Projects will be subject to the execution of a Performance Agreement. 3. Chapter 380 Incentive Policy— in accordance with Chapter 380.001 of the Texas Local Government Code, the governing body of a municipality may establish and provide for the administration of a program to promote state or local economic development and to stimulate business and commercial activity in the municipality. Chapter 380 Incentive Agreements allow for the provision of loans and grants of city funds, as well as use of City Staff, city facilities or city services, at minimal or no charge. Under the direction of the City Manager, City Staff is responsible for the administration of the Chapter 380 Incentive Policy. City Staff will identify ventures that align with the policy and demonstrate the positive economic impacts that will be created. The SEDC Board of Directors will review Chapter 380 Incentive Agreements and make recommendations to the City Council on the venture's overall ability to positively impact the City's economic conditions. Chapter 380 Incentive Agreements will be approved by resolution at the sole discretion of the City Council by a majority vote. For best practice, Chapter 380 Incentive Agreements should be used in combination with an SEDC Performance Agreement incentive. Additionally, the City of Schertz prefers to continue the practice of utilizing performance based tools such as abatement /rebates over other tools; however, the City Council retains its ability to utilize every tool available. The City Council must find that a Chapter 380 Incentive Agreement meets the following program guidelines: a. Real & Personal Property Investment —Ventures that create a minimum of $100 million in new Total Taxable Value may qualify to receive a Real & Personal Property Investment Grant. b. Gross Sales and Use Tax— Retail ventures that create a minimum of $35 million in annual gross retail sales, that is subject to local sales and use tax collection, may receive a Sales and Use Tax Grant. Incentive Process Incentives are used on a discretionary basis to stimulate economic development and create a positive economic impact for the City of Schertz. Prior to the purchase of property, execution of a lease, or submittal of a permit for an expansion a Company must execute a Performance Agreement or a Chapter 380 Incentive Agreement. Additionally, within 30 days of the execution of Performance Agreement or Chapter 380 Incentive Agreement, the Company will be required to provide documentation of their commitment to proceed. The following is an outline of the incentive process: 1. The Company will contact the Economic Development Department to discuss and review possible incentive programs. The Company will provide basic Project information such as the number of jobs, anticipated capital investment, project timeline, and demonstrate the positive economic impacts of the project. Approved: May 2, 2017 Page 6 of 7 2. The Economic Development Department will complete an impact analysis for the Project and /or venture. 3. As appropriate, The Economic Development Department will meet with the SEDC Board of Directors and /or City Council in executive session to deliberate potential economic development negotiations. 4. The Economic Development Department will submit a preliminary incentive offer to the Company. 5. The Economic Development Department will draft a Performance Agreement and /or Chapter 380 Incentive Agreement with the specified terms. The agreement will be submitted to the Company for execution. 6. The SEDC Board of Directors and /or the City Council will meet in open session to execute the SEDC Performance Agreement and /or Chapter 380 Incentive Agreement. 7. Once the Performance Agreement and /or Chapter 380 Incentive Agreement is in place, the Economic Development Department will monitor the Company's compliance and continued success in Schertz. Open Meetings Act and Public Information Act The City of Schertz and the SEDC are subject to the Texas Open Meetings Act and the Public Information Act. The City and SEDC will to the extent allowed by law, keep all Company information and documentation confidential. In the event that an information request is made, the City and SEDC will make a good faith effort to notify the Company so that an appeal can be made to the Attorney General of Texas to withhold information. (Texas Government Code Chapters 551; 552) Approved: May 2, 2017 Page 7 of 7