News release from city on new Economic Development Plan:
2019 City of Fort Worth Economic Development 2019 Incentive Plan
You’ve got questions; we’ve got answers
In the Economic Development Strategic Plan for the City of Fort Worth (Plan), shared with the public in 2017, it was determined a new framework for granting business incentives needed to be established. Tuesday, Jan. 29, 2019, the City Council will consider the proposed changes and if approved, implementation will be effective immediately.
Generally, there are two forms of incentives: Tax abatements and Economic Development Program Agreements (Chapter 380), which authorize municipalities to offer incentives through loans and grants of city funds or services to promote development and stimulate business and commercial activity.
For your background information, we have drafted questions and provided answers. For additional information or comment, please contact Robert Sturns.
Question: Briefly, what was the genesis for the changes? Were there situations needing improvement, modifications based on a new business environment, attraction, retention?
Answer: While statements about incentives are peppered throughout the Plan, they are specifically addressed in recommendation 4.2 — Create new incentive tools to encourage business growth within target industries and to facilitate development and redevelopment in designated districts.
The new incentives are focused on the three goals of the strategic plan:
1) Establish Fort Worth’s competitive edge.
2) Become a hub for creative businesses.
3) Ensure community vitality.
The new incentives are designed to elevate the profile of Fort Worth at the regional, national and international levels; attract new investments and businesses into the community, focusing on target industries that align with Fort Worth’s assets; improve the competitiveness of existing businesses and help them remain and grow in the community; to enhance any designated Innovation Districts, and position such Districts to become the most productive in the U.S.; to build on the dynamic environment that embraces and fuels high-growth business in Fort Worth; to expand the connection between the arts community and tech entrepreneurs as well as established businesses; to align neighborhood assets (people, business and real estate) to benefit from and support city-wide economic growth; to accelerate downtown Fort Worth’s emergence as the premier mixed-use business district in Texas; and to support small business development.
Q: What are the highlights among the changes to the City’s guidelines?
A: The revised policies incorporate minimum investment levels, generally $25 million unless otherwise specified, and minimum wage requirements associated with the full-time positions. The minimum wage requirements are $43,992 unless otherwise specified. While the incentive policy applies to the entire city, there are some target investment opportunities in certain areas of the city, such as the new Designated Investment Zones and Central Business District.
Designated Investment Zones are the geographic area within the City containing those census tracts (1) that are eligible for community development block grants (CDBG), as defined and determined by the United States Department of Housing and Urban Development (HUD), meaning that fifty-one percent (51%) or more of residents have low-to-moderate incomes and (2i) those census tracts that have a poverty rate of 20% of higher. (Map is included)
Q: What do you see as key changes to help attract the Fortune 500-type companies, one of the stated goals of the Plan?
A: Target industries receive an enhanced level of incentive and corporate headquarters are included. The minimum wage levels required for incentives support Fortune 500 type companies. In addition to the incentives that support those areas of Fort Worth that have been attracting businesses, such as Alliance in north Fort Worth, there are also incentives specific to the attraction of businesses and creation of jobs in the Central Business District. These incentives are included as the Plan highlights the needs to accelerate downtown Fort Worth’s emergence as the premier mixed-use business district in Texas.
Q: What are the keys for assisting existing area businesses to expand?
A: The minimum investment level is $10 million, versus $25 million for new companies. Existing businesses are also eligible for other target incentives, such as Research & Development and the Technology program.
Q: Is there a thought as to whether attraction or retention is of greater value to the City?
A: Communities tend to look at economic development as a 4-legged stool focusing on attraction, retention, entrepreneurship and place-making. Without supporting those businesses already in your community, you typically aren’t able to attract new companies. Likewise, companies of all sizes like to locate in communities that have a strong entrepreneurial ecosystem.
Q: Is there a cap on any one deal? Is there a total cap?
A: There are various caps depending upon the specific category in which the project falls under. The majority of the incentives are based upon ad valorum taxes and the new incentive policy limits the percentage available to the companies.
Q: We know Facebook is a huge success? How does the City judge success and incentives that were not-so-successful?
A: All incentives provided by the City are performance-based upon the priorities identified for each incentive type. For example, general projects require job creation with wages at or above $43,992 depending upon investment level. $25 million is the minimum investment level for consideration. Central Business District projects require at least 50 positions at an annual wage of $54,876 in addition to potential investment level requirements. Catalytic projects, on the other hand, do not require a minimum number of jobs, but must be a mixed-use development in a Designated Investment Zone investing a minimum of $5 million.
The performance is reviewed annually so we can measure success. Additionally, incentives are intended to be investments so the City also monitors other non-incentive specific measurements to determine success. Examples of such general metrics include household incomes, educational attainment, poverty rates, tax base, corporate diversification and unemployment rate.
Q: Who oversees that the agreements and objectives are met?
A: The City has an annual compliance review process led by the Economic Development Department. The Internal Audit Department is also engaged in the process.
Q: What happens if they aren’t met? For instance, if a company moving here agrees to employ 700 within three years and only reaches 450, we aren’t going to send it packing.
A: Because all incentives are performance-based, a company doesn’t receive the incentive if they don’t meet the requirements outlined in the contract. The City also retains the right to terminate agreements.
Q: Are their different opportunities for incentives based on geographic areas of the city?
A: The new policy is for any project in the City of Fort Worth but does identify Designated Investment Zones, Transit Oriented Development, Innovation Districts and the Central Business District as specific areas for consideration.
Q: In addition to those items already discussed, any additional unique incentives to Forth Worth?
A: The new policy includes a strategy around Research and Development (R&D). While we have found other states that focused on this, we have been unable to identify other cities specifically investing in R&D opportunities.
Q: How would R&D incentives work?
A: Target Industry applicants are eligible to receive 380 Grants equal to a percentage of their Qualified Expenses relating to ongoing research and development activities that take place in the City of Fort Worth.
380 Grants may be made for a period of up to 10 years equal to up to 50% of Qualified Expenses reported for a given year. At no time will the amount of any 380 Grant exceed 35% of annual real property and Business Personal Property taxes received by the City in the preceding year from the subject property.
The maximum amount of each 380 Grant under this Section will be determined by the location in which the Target Industry research and development project is located, as set forth in the table below:
Central Business District/ Innovation District Equal to 50% of Taxes
Designated Investment Zones Equal to 35% of Taxes
Other Fort Worth Location Equal to 25% of Taxes
A Target Industry business receiving 380 Grants may assign, sell, or transfer its right to receive the 380 Grants to any party it wishes, subject to execution of a written agreement between the City, the Target Industry business, and the assignee party memorializing this arrangement.
The new City of Fort Worth Economic Development incentive policies contains the following key provisions:
1. The new policies are focused on city-wide opportunities except for three target areas: Designated Investment Zone; Transit Oriented Development; and the Central Business District.
2. The new policies outlines several targeted opportunities with minimum investment thresholds, as follows:
a) General and Target Industry Projects: $25.0 million
b) Target Industry Projects in the Central Business District: $100 million if new construction
c) Research and Development: No minimum investment
d) Existing Business Expansion Projects: $10 million
e) Mega Projects: $250 million if do not meet the total payroll of $150 million or the 1,500 full-time employee threshold (with the exception of data centers or other unique low employment/high capital investment projects, which must have a minimum investment of $50 million)
f) Technology Companies: No minimum investment
g) Catalytic Development Project: $5 million
h) Transit Oriented Development: $5 million
i) Redevelopment Projects on Central Business District Surface Parking Lots: No minimum investment
j) Full Service Hotels: No minimum investment
3. The new policies propose the minimum annual average employee salary as $43,992, which is 80% of the City Median Household Income. Exceptions to the minimum annual average employee salary of $43,992 are as follows:
a) Target Industry Projects in the Central Business District: $54,876 annually
b) Research and Development: No minimum salary
c) Mega Projects: Must have a total payroll of $150 million if do not meet the $250 million Investment Level or the 1,500 full-time employee threshold
d) Technology Companies: No minimum salary
e) Catalytic Development Project: No minimum salary
f) Transit Oriented Development: No minimum salary
g) Redevelopment Projects on Central Business District Surface Parking Lots: No minimum salary
h) Full Service Hotels: No minimum salary
4. The new policies have maximum incentive levels are capped at the following levels:
a) General Projects: 50% pending wage and investment levels
b) Target Industry Projects: 70% pending wage and investment levels
c) Target Industry Projects in the Central Business District: 80%
d) Research and Development: 50% if located in the Central Business District or an Innovation District; 35% if in the Designated Investment Zone; and 25% for all other Fort Worth locations
e) Existing Business Expansion Projects: 85%
f) Mega Projects: 85%
g) Technology Companies: 80%
h) Catalytic Development Project: 80%
i) Transit Oriented Development: 50%
j) Redevelopment Projects on Central Business District Surface Parking Lots: 45%
k) Full Service Hotels: 80%
5. The new policies state that the Incentive Benefit Term may not exceed ten (10) years for Tax Abatements or fifteen (15) years for the Economic Development Program Agreements (380), with the following exceptions:
a) Target Industry Projects in the Central Business District: Ten (10) years for incremental real property taxes in an existing building
b) Technology Companies: Five (5) Years
c) Transit Oriented Development: Seven (7) Years
d) Redevelopment Projects on Central Business District Surface Parking Lots: Five (5) Years
6. The new policies requires that all projects subject to an Economic Development incentive agreement must make a commitment to utilize Certified M/WBE Companies for all construction costs associated with the project. The applicant must work with the City’s Office of Business Diversity to establish a project goal for the development. In order to qualify for an economic development grant, the applicant will be required to demonstrate that it has met the Certified M/WBE Company goal established for the project or that it sufficiently made a good-faith effort to meet the goal. Failure to meet the goal or to establish that a sufficient good-faith effort to meet the goal was made will result in a reduction of the overall percentage of the grant available by 10 percentage points.
The new policies requires that all Mixed-Use Development Projects subject to an incentive agreement that contain rental residential units were required to make a commitment to provide affordable housing.