2010R48 - The Capital Group CompaniesRESOLUTION NO. 10-R-48
A RESOLUTION BY THE CITY COUNCIL OF THE CITY OF
SCHERTZ9 TEXAS AUTHORIZING AN ECONOMIC DEVELOPMENT
AGREEMENT; AUTHORIZING CERTAIN BENEFITS BY THE CITY
PURSUANT THERETO; AND OTHER MATTERS IN CONNECTION
THEREWITH
WHEREAS, the City Council has determined that it is in the best interest of the City of
Schertz to enter into a Development Agreement with the City of Schertz Economic Development
Corporation and The Capital Group Companies, Inc.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SCHERTZ, TEXAS
THAT:
Section 1. The City Council hereby authorizes the City Manager to execute and
deliver the Development Agreement in substantially the form set forth on 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any provision of this Resolution are hereby repealed to the extent of such conflict, and the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.
Resol 10-R-_ (Capital Group Dev Agmt).doc -1-
PASSED AND ADOPTED, this 24th day of August, 2010.
ATTEST:
ity Secretary
(CITY SEAL)
Resol 10-R-_ (Capital Group Dev Agmt).doc -2-
EXHIBIT A
DEVELOPMENT AGREEMENT
Resol 10-R-_ (Capital Group Dev Agmt).doc A-1
DEVELOPMENT AGREEMENT
This DEVELOPMENT AGREEMENT (this "Agreement"), dated August 24, 2010 (the
"Effective Date"), is among the City of Schertz, Texas, a Texas home-rule city (the "City"), City
of Schertz Economic Development Corporation, a Texas non-profit corporation created by the
City (the "SEDC"), and The Capital Group Companies, Inc., a Delaware corporation ("Capital
Group") (the City, the SEDC, and Capital Group, each a "Party" and together the "Parties").
WITNESSETH:
WHEREAS, by Ordinance No. 09-T-02, the City has established a program (the "City
Program") under Chapter 380, Texas Local Government Code, as amended, to promote
economic development and to stimulate business and commercial activity in the City; and
WHEREAS, the SEDC has been established by the City to promote economic
development in the City by sponsoring and funding economic development projects; and
WHEREAS, Capital Group will build a data center facility on an approximately 5.02-
acre tract of land which Capital Group will purchase (the "Capital Group Development Site");
and
WHEREAS, the data center facility to be built by Capital Group on the Capital Group
Development Site will have the minimum building and supporting infrastructure characteristics
and operational and employment profile and will be implemented on the schedule set forth on
Exhibit A (the "Capital Group Development"); and
WHEREAS, Capital Group will install certain electricity infrastructure to serve the
Capital Group Development and the Capital Group Development Site (the "Capital Group
Electronic Infrastructure Project"); and
WHEREAS, the Parties are entering into this Agreement for the purpose of setting forth
their respective obligations with respect to the Capital Group Development and the Capital
Group Electronic Infrastructure Project.
NOW, THEREFORE, for and in consideration of the mutual covenants and agreements
set forth herein, and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties hereby agree as follows:
Section 1. Agreed Actions.
(a) Capital Group agrees to take the following actions:
(i) Capital Group will promptly close its purchase of the Capital Group
Development Site and, subject to Section 5(e), commence construction of the Capital
Group Development on the Capital Group Development Site with a goal of securing a
certificate of occupancy for such facility during or before July 1, 2012, (the "Completion
Date").
Resol 10-R-_ (Capital Group Dev Agmt).doc A-2
(ii) Capital Group will closely coordinate its construction activities relating to
the Capital Group Development with all appropriate City departments.
(iii) Capital Group agrees to pay al_1 costs of the Capital Group Electronic
Infrastructure Project incurred consistent with the Final Construction Plans as described
in Section 2 in excess of the CIED Payment, as described in Section 1(c).
(iv) Capital Group specifically acknowledges and agrees to the terms of
Sections 5 (Defaults; Remedies; Termination; Force Majeure) and 6 (Incentive
Recapture) of this Agreement.
(b) The City agrees to take the following actions:
(i) The City will provide Capital Group with aseventy-five percent (75%) tax
credit on the real and personal property located at the Capital Group Development Site
(the "Tax Credit") for a period of eight (8) years, commencing with the tax year
beginning January 1 of the year following the issuance of a certificate of occupancy by
the City. All of Capital Group's real and personal property shall remain subject to any
taxes assessed by other taxing jurisdictions, other than the City.
(ii) The City will take all reasonable means to expedite the City permitting,
inspection, and approval process for the construction aspects of the Capital Group
Development.
(iii) The City agrees to authorize the transfer of up to $100,000 to Capital
Group from the Community Infrastructure and Economic Development Fund (the "CIED
Payment") administered by City Public Service of San Antonio ("CPS"), based on CIED
eligible costs of construction of the Capital Group Electronic Infrastructure Project, to be
applied upon completion of construction of the Capital Group Electronic Infrastructure
Project and confirmation by CPS and the City Engineer of such CIED eligible costs of
construction of the Capital Group Electronic Infrastructure Project. If actual CIED
eligible costs of Capital Group Electronic Infrastructure Project are less than $100,000,
the City shall authorize the transfer of an amount equal to all such LIED eligible costs in
their entirety.
(c) The SEDC agrees to assist Capital Group in seeking tax abatements from
Guadalupe County, Texas relating to the Capital Group Development.
Section 2. Capital Group En ing Bering Project Desi~rl Coordination. Capital Group's
engineers will design the Capital Group Electronic Infrastructure Project to City standards based
on engineering parameters established by CPS and acceptable to Capital Group to serve the
Capital Group Development. Capital Group's Engineers will modify their Capital Group
Electronic Infrastructure Project plans as required by the City Engineer and approved by Capital
Group (the "Final Construction Plans"). Capital Group shall deliver to the City the initial
construction plans for the Capital Group Electronic Infrastructure Project as soon as reasonably
possible for their review. The City Engineer will provide comments to such initial construction
plan to Capital Group's Engineers in no more than five (5) business days after receipt of the
initial construction plans, and Capital Group's Engineers will provide proposed Final
Resol 10-R-_ (Capital Group Dev Agmt).doc A-3
Construction Plans to the City in no more than five (5) business days thereafter. Capital Group
and the City shall use commercially reasonable efforts in good faith to agree upon the Final
Construction Plans. The City and Capital Group will each pay the fees, respectively, of the City
Engineer ar~d Capital Group's Engineers.
Section 3. Representations and Covenants.
(a) Capital Group hereby represents and covenants as follows:
(i) Capital Group is a duly authorized and existing corporation, created and
operating and in good standing under the laws of the State of Delaware and is authorized
to transact business in the State of Texas.
(ii) Capital Group has taken all necessary corporate action to authorize its
execution and delivery of this Agreement and its performance of its obligations
hereunder.
(iii) Capital Group has available to it, without restriction, all funds required to
be expended by it under this Agreement.
(iv) Capital Group will use its best efforts to complete all of its obligations
under this Agreement when and as required.
(v) Capital Group has not entered into, and will not enter into, any agreement
(written or otherwise) with any person or entity that would prohibit or limit Capital
Group from performing all of its obligations under this Agreement.
(vi) As of the date of this Agreement, there is no litigation, claim, or
proceeding pending of which Capital Group has received written notice, nor to the actual
knowledge of Capital Group is there any litigation, claim, or proceeding threatened that
would prohibit or limit Capital Group from performing all of its obligations under this
Agreement.
(vii) Capital Group will not dissolve or take any action in furtherance thereof so
long as it has not performed all of its obligations under this Agreement.
(viii) Capital Group will not dispose of or transfer any of its assets to a person
or entity not a party to this Agreement if such disposition or transfer would materially
and adversely affect its ability to perform all of its obligations under this Agreement.
(ix) Capital Group covenants and agrees to use its reasonable efforts, subject to
Section 5(e), to complete the Capital Group Development by the Completion Date.
(x) Capital Group agrees to allow inspection of the Capital Group
Development by the City Manager or his designee(s) during the term of this Agreement.
Such inspection shall be to determine if the terms and conditions of this Agreement are
being met and for the purpose of assuring compliance with applicable City codes and
ordinances. Inspections will be made only after giving Capital Group a minimum of two
Resol 10-R-_ (Capital Group Dev Agmt).doc A-4
(2) business days prior written notice and will be conducted in such a manner as to not
unreasonably interfere with the operation of the Capital Group Development.
(xi) Capital Group will promptly notify the City in writing if it has actual
knowledge that it is in default of any obligation under this Agreement.
(xii) Capital Group agrees to certify annually in writing its compliance with the
terms of this Agreement, which shall specifically address compliance with part A of
Exhibit A. Such certification shall be filed with the City by February 15th of each year,
commencing February 15, 2012 through February 15, 2019.
(b) The SEDC hereby represents and covenants as follows:
(i) The SEDC is a duly authorized and existing special purpose non-profit
corporation, created and operating and in good standing under the laws of the State of
Texas.
(ii) The SEDC has taken all necessary corporate action to authorize its
execution and delivery of this Agreement and its performance of its obligations
hereunder.
(iii) The SEDC has available to it, without restriction, all funds required to be
expended by it under this Agreement.
(iv) The SEDC will use its best efforts to complete all of its obligations under
this Agreement when and as required.
(v) The SEDC has not entered into, and will not enter into, any agreement
(written or otherwise) with any person or entity that would prohibit or limit SEDC from
performing all of its obligations under this Agreement.
(vi) There is no litigation, claim, or proceeding pending of which the SEDC
has received notice, nor to the knowledge of the SEDC is there any litigation, claim, or
proceeding threatened that would prohibit or limit the SEDC from performing all of its
obligations under this Agreement.
(vii) The SEDC will not dissolve or take any action in furtherance thereof so
long as it has not performed all of its obligations under this Agreement.
(viii) The SEDC will not dispose of or transfer any of its assets to a person or
entity not a party to this Agreement if such disposition or transfer would adversely affect
its ability to perform all of its obligations under this Agreement.
(c) The City hereby represents and covenants as follows:
(i) The City is a duly authorized and existing Texas municipal corporation
and home rule city, created and existing under the laws of the State of Texas.
Resol 10-R-_ (Capital Group Dev Agmt).doc A-5
(ii) The City has taken all necessary action to authorize its execution and
delivery of this Agreement and its performance of its obligations hereunder.
(iii) The City has appropriated or expects to appropriate when required all
funds required to be expended by it under this Agreement.
(iv) The City will use its best effort to complete all of its obligations under this
Agreement when and as required.
(v) The City has not entered into, and will not enter into, any agreement
(written or otherwise) with any person or entity that would prohibit or limit the City from
performing all of its obligations under this Agreement.
(vi) There is no litigation, claim, or proceeding pending of which the City has
received notice, nor to the knowledge of the City is there any litigation, claim, or
proceeding threatened that would prohibit or limit the City from performing all of its
obligations under this Agreement.
(vii) The City will not dissolve or take any action in furtherance thereof so long
as it has not performed all of its obligations under this Agreement.
(viii) The City will not dispose of or transfer any of its assets to a person or
entity not a party to this Agreement if such disposition or transfer would adversely affect
its ability to perform all of its obligations under this Agreement.
Section 4. Cityy Program Determination. The City has determined, and hereby agrees
with all of the other Parties, that the intent and terms of this Agreement, and the obligations of
the City hereunder, are in accordance with and in furtherance~of the City Program.
Section 5. Defaults; Remedies; Termination; Force Majeure.
(a) If (i) Capital Group does not complete construction of the new facility by January
1, 2013 or (ii) during the term of this Agreement Capital Group should discontinue operations at
the Capital Group Development as described in parts A and B on Exhibit A for a period of ninety
(90) consecutive calendar days (each a "Termination Date"), then the City shall have the right to
terminate this Agreement in accordance with subsection (b) below.
(b) In the event the City determines that it has the right to terminate this Agreement
under the circumstances described in subsection (a) above, the City shall notify Capital Group in
writing at the address set forth in Section 8 of this Agreement, and, if the defaults specified with
reasonable particularity in such notice (including but not limited to a reference to which
provision of Section 5(a) the City is relying upon) are not cured within sixty (60) days after the
date of such notice, the City may terminate this Agreement effective immediately, subject to the
City's rights under Section 6, upon written notice to Capital Group, with a copy to the other
Parties; provided, however, that in the event such default(s) is susceptible of cure but is not cured
within such sixty (60) day period, so long as Capital Group is diligently and continuously
pursuing such cure, the City shall permit Capital Group an additional sixty (60) days to
effectuate such cure.
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(c) Upon termination of this Agreement under subsections (a) and (b) above, the City
shall have the rights set forth in Section 6(a) below.
(d) If the City or Capital Group determines that the City has defaulted in its payment
obligations, the City and/or Capital Group may seek specific performance against the City, or
seek such other remedies as maybe available at law or equity.
(e) Notwithstanding anything to the contrary set forth herein, the Completion Date
shall be extended one day for each day that Capital Group or its contractor was prevented,
delayed, or stopped from pursuing completion of Capital Group's obligations with respect
thereto due to war, terrorism, strikes, weather, natural disaster, or acts of God ("Unavoidable
Delays"); provided, however, that in order for Capital Group to claim the existence of
Unavoidable Delays hereunder, Capital Group shall be required to provide written notice to the
other Parties within 90 days with respect to any Unavoidable Delay claimed by Capital Group.
(f) Notwithstanding anything to the contrary set forth herein, Capital Group shall be
allowed to discontinue operations at the site for a period of 90 days or more without triggering
termination or default due to Unavoidable Delays; provided, however, that in order for Capital
Group to claim the existence of Unavoidable Delays hereunder, Capital Group shall be required
to provide written notice to the other Parties within 90 days with respect to any Unavoidable
Delay claimed by Capital Group.
Section 6. Incentive Recapture.
(a) If this Agreement is terminated by the City pursuant to Section 5(a)(ii), Capital
Group shall, within thirty (30) days after its receipt of notice of termination, pay the City
liquidated damages equal to the dollar amount of the personal property tax credit received by
Capital Group for the tax year preceding the Termination Date.
(b) Capital Group expects that the cost of the building, fixtures and personal property
on the Capital Group Development Site will be at least $29,750,000 on and after July 1, 2012
(the "Improvements and Personal Property Cost"). The Tax Credit granted by the City shall be
reduced from the amount stated in Section 1(b)(i), in increments of twenty-five percent (25%)
for each ten percent (10%) reduction in the Improvements and Personal Property Cost for that
taxable year, as follows:
Improvements Cost
At or above $26,775,001
$23, 800,001-$26,775,000
$20,825,001-$23,800,000
At or below $20,825,000
Tax Credit Reduction
0%
25%
50%
75%
Adiusted Tax Credit
75%
50%
25%
0%
(c) _ Capital Group further certifies and agrees as follows:
(i) Capital Group certifies that its operation within the City will not
knowingly employ an undocumented worker, as defined in Chapter 2264, Subchapter A,
Texas Government Code, as amended (the "Act"); and
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(ii) pursuant to the Act, if Capital Group is convicted of a violation under 8
U.S.C. Section 1324a(f) with respect to its operations in the City, after receiving all or
any portion of the "public subsidy" (as defined in the Act) authorized by this Agreement,
Capital Group shall (x) promptly give the City written notice of such violation, and (y)
repay the amount of the public subsidy for the period which Capital Group was in
violation with interest, at the rate of the prime rate of interest per annum of the City's
depository bank in effect on the date Capital Group notifies the City of the violation.
Such repayment shall be made not later than the 120th day after the date Capital Group
notifies the City of the violation.
Section 7. Representatives. Each Party will designate a representative for actions to
be taken by it hereunder and will notify all other Parties in writing of such designation and any
changes in such designations. Each Party's representative will be the contact person for such
Party to facilitate completion of its obligations under this Agreement. The initial designated
representatives of the Parties are Don Taylor or his designee(s) for the City, Jeff Jewell or his
designee for the SEDC, and Bill Brooks or his designee(s) for Capital Group.
Section 8. Notices. All notices and requests for information or action under this
Agreement shall be given in writing and delivered by personal delivery, registered mail, or
overnight delivery service to the following addresses:
If to Capital Group:
The Capital Group Companies, Inc.
6455 Irvine Center Drive
Irvine, CA 92602
Attention: Bill Brooks (BEER)
With mandatory copy to
The Capital Group Companies, Inc.
333 South Hope Street
Los Angeles, CA 90071
Attn: Maria Manotok (MRM)
If to the SEDC: Schertz Economic Development
Corporation
1400 Schertz Parkway
Schertz, Texas 78154
Attention: Director of Economic
Development
Facsimile: (210) 619-1071
E-Mail: jjewell@schertz.com
Resol 10-R-_ (Capital Group Dev Agmt).doc A-8
If to the City: City of Schertz, Texas
1400 Schertz Parkway
Schertz, Texas 78154
Attention: Don Taylor, City Manager
Facsimile: (210) 619-1050
E-Mail: detaylor@schertz.com
With a copy to: Michael Spain
Fulbright & Jaworski L.L.P.
300 Convent Street, Suite 2200
San Antonio, Texas 78205
Facsimile: (210) 270-7205
E-Mail: mspain@fulbright.com
Section 9. No Partnership or Joint Venture. Nothing contained in this Agreement
shall be construed to create or imply a partnership or joint venture between or among the Parties.
Section 10. Other Agreements. This Agreement supersedes all other agreements
between or among the Parties as to the subject matter hereof.
Section 11. Amendments. This Agreement may not be amended except in writing and
signed or acknowledged by all Parties.
Section 12. Severability. If any provision of this Agreement is determined by a court
of competent jurisdiction to be unconstitutional, illegal, or otherwise unenforceable, and the
Parties agree that such determination does not cause the remainder if this Agreement to fail to
accomplish the goals of the Parties, the remainder of this Agreement shall continue in effect.
Section 13. Counterparts. This Agreement may be executed in multiple counterparts
but will be considered as a single instrument when it has been finally executed by all of the
Parties.
Section 14. Governing Law and Venue. This Agreement is governed by the laws of
the State of Texas, and the Parties agree that venue shall be in the courts of Guadalupe County,
Texas.
Section 15. Term. This Agreement shall be effective on the Effective Date until the
earlier to occur of (a) December 31, 2019, or (b) this Agreement has been terminated pursuant to
Section 5.
[Remainder of page intentionally left blank.)
Resol 10-R-_ (Capital Group Dev Agmt).doc A-9
IN WITNESS WHEREOF, this Agreement is hereby approved by the Parties, as of the
Effective Date.
CITY OF SCHERTZ, TEXAS
B•
Don Taylor, City ger
SCHERTZ ECONOMIC DEVELOPMENT
CORPORATION
Steve White, President
THE CAPITAL GROUP COMPANIES,
INC.
By:
Name:
Title: S~_ ~ , ~Q~
Exhibit A -Capital Group Development
Reso] 10-R-_ (Capital Group Dev Agmt).doc A-10
EXHIBIT A
Capital Groin Development
A. Data Center Facility description:
Usable building space: minimum 50,000 square feet
Data center space: approximately 20,000 square feet of raised floor
Parking spaces: approximately 70-85 spaces
Total construction and personal property cost: approximately $35,000,000, plus or
minus $5,250,000
B. Employee Details:
Projected full-time equivalent facility-based employees by full operations (July 1,
2012): at least 2.
Average annual payroll by full operations (July 1, 2012): approximately $150,000
Capital Group will use reasonable efforts to recruit facility-based employees who are
residents of the City or otherwise residents of Guadalupe or Comal Counties.
C. Capital Group Estimated Development Timetable:
Data Center Facility site work to commence: January 1, 2011
Data Center Facility certificate of occupancy target date: June 30, 2012
Data Center Facility project completion date: July 1, 2012
Actual dates may vary based on processes required by the City with respect to the site plan, platting, and
permitting; dates noted assume no such undue delays.
Resol 10-R-_ (Capital Group Dev Agmt).doc A-11