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HomeMy WebLinkAboutItem 07 - Enterprise Zone ProgramMEMO TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: BRUNO RUMBELOW, CITY MANAGER MEETING DATE: MAY 3, 2016 SUBJECT: CONSIDERATION OF A RESOLUTION TO THE CITY'S ENTERPRISE ZONE PROGRAM CONCERNING THE NOMINATION OF AMERICAN AIRLINES, INC. TO THE OFFICE OF THE GOVERNOR, ECONOMIC DEVELOPMENT AND TOURISM, AS A TEXAS ENTERPRISE PROJECT RECOMMENDATION: City Council to consider approval of the attached resolution to nominate American Airlines, Inc. to the Office of the Governor, Economic Development and Tourism as a Texas Enterprise Project. FUNDING SOURCE: Economic development incentives in the form of sales and use tax rebates are derived from the state's portion of state sales and use taxes. None of the funding source will involve the local portion of state sales tax. The attached letter requests that the City nominate American Airlines as a Texas Enterprise Project for their DFW Cargo Facility, as well as various machinery and equipment upgrades. The DFW Cargo Facility is located at 1816 North Service Road and houses roughly 183 employees. Approximately 164 of the employees are fleet service, 16 are managerial and professional services and three are administrative. The DFW Cargo Facility is the main cargo and freight facility for American at DFW Airport. American is now in a position to upgrade well -used machinery and equipment. They have several improvements in the planning stages that had to be postponed due to the bankruptcy and merger. American is projected to spend approximately $5.17 million throughout the five-year project designation period, starting in January 2016 through June 2021. New equipment expenditures expected during 2016 include approximately $1.5 million for a material handling system and parcel services vehicles. Additional equipment upgrades of approximately $1 million are expected from 2017 through June 2021. Building construction of approximately $2.67 million is expected to commence in 2017 and continue through the first quarter of 2018. These investments are critical to the competitiveness of American as a whole, the viability of the Grapevine facility as a contributing asset in American's operating portfolio, and to creating as well as retaining jobs. The Enterprise Zone Program is a state incentive program designed to promote job retention and/or creation and capital investment. At the level of investment proposed by American Airlines for the currently proposed incentive, $5.17 million, the state will provide an incentive of $2,500 per job, a total of 183 employees, per year for a total incentive of $457,500 in state sales tax rebates for the five year period. In order to qualify for the proposed rebate, a minimum of 35% of American Airlines' new hires must be either residents of a state enterprise zone or economically disadvantaged as defined by the State Government Code. American Airlines must prove to the State Comptroller's Office that they are meeting the retention and hiring criteria required by state law, prior to rebates. The deadline for submission of the application to the State is June 1, 2016 and the selection process will take approximately 90 days. Chuck Allen Managing Director Government Affairs Bob Farley Economic Development Director City of Grapevine 200 S. Main Street Grapevine, TX 76051 June 1, 2016 Dear Mr. Farley: American Airlines On behalf of American Airlines, Inc. ("American"), we request assistance from the City of Grapevine, Texas (the "City") by passing a Resolution to nominate the American facility located in Grapevine, Texas, for a Half Texas Enterprise Project designation based on job retention. The DFW Cargo Facility is located at 1816 N. Service Road, Grapevine, TX 76051 and houses approximately 183 employees. The DFW Cargo Facility is the main cargo and freight facility for American at DFW Airport. American is now in a position to upgrade machinery and equipment that have been in existence for quite a while. They have many improvements in the planning stages that they had to postpone during the bankruptcy and merger. American projects to spend approximately $5.17 million over the next 5 years on a material handling system, as well as equipment and systems upgrades. This projected investment will occur throughout the 5 -year half project designation period, starting in January 2016 through June 2021. New equipment expenditures expected during 2016 include approximately $1.5 million for a material handling system and parcel services vehicles. Additional equipment upgrades of approximately $1 million are expected from 2017 through June 2021. Building construction of approximately $2.67 million is expected to commence in 2017 and continue through the first quarter of 2018. These investments will provide American the ability to retain its current employment base of 183 jobs through the 5 -year half designation period, and will allow the DFW Cargo Facility to remain competitive among the other facilities within American's operating portfolio. We believe that we meet the criteria under TX Govt. Code § 2303.402 (Chapter 2303.406 (a)(4)(D)) to be approved for a Half Texas Enterprise Project designation for job retention. As noted above, a City nomination is required to apply for the Program and we appreciate your consideration and assistance with this request. Sincerely, Chuck Allen Managing Director — Government Affairs 4333 Amon Carter Blvd MD -5673 Fort Worth, TX 76155 817 9312395 Office chuck. allen(&aa.com A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS, NOMINATING AMERICAN AIRLINES, INC. TO THE OFFICE OF THE GOVERNOR, ECONOMIC DEVELOPMENT AND TOURISM THROUGH THE ECONOMIC DEVELOPMENT BANK FOR DESIGNATION AS AN ENTERPRISE PROJECT ("PROJECT") UNDER THE TEXAS ENTERPRISE ZONE PROGRAM UNDER THE TEXAS ENTERPRISE ZONE ACT, CHAPTER 2303, TEXAS GOVERNMENT CODE WHEREAS, on August 3, 2010, the City of Grapevine, Texas (the "City") passed Ordinance No. 2010-38 electing to participate in the Texas Enterprise Zone Program, and the local incentives available under this resolution are the same on this date as were outlined in Ordinance No. 2010-38; and WHEREAS, the Office of the Governor Economic Development and Tourism ("OOGEDT") through the Economic Development Bank ("Bank") will consider American Airlines, Inc. (the "Company") as an enterprise project pursuant to a nomination and an application made by the City; and WHEREAS, the City Council of the City of Grapevine, Texas, desires to pursue the creation of the proper economic and social environment in order to induce the investment of private resources in productive business enterprises located in the City and to provide employment to residents of enterprise zones and to other economically disadvantaged individuals; and WHEREAS, pursuant to Chapter 2303, Subchapter F of the Texas Enterprise Zone Act, Texas Government Code (the "Act"), American Airlines, Inc. has applied for a second time to the City for designation as an enterprise project, the first time concerning different assets and successfully approved in the November 17th, 2015 City Council meeting; and WHEREAS, the City finds that American Airlines, Inc. meets the criteria for designation as an enterprise project under Chapter 2303, Subchapter F of the Act on the following grounds: 1. American Airlines, Inc. is a "qualified business" under Section 2303.402 of the Act since it will be engaged in the active conduct of a trade or business at a qualified business site within the governing body's jurisdiction located outside of an enterprise zone and at least thirty-five percent (35.0%) of the business' new employees will be residents of an enterprise zone or economically disadvantaged individuals; and Resolution No. 2. There has been and will continue to be a high level of cooperation between public, private, and neighborhood entities within the area; and 3. The designation of American Airlines, Inc. as an enterprise project will contribute significantly to the achievement of the plans of the City for development and revitalization of the area. WHEREAS, the City finds that American Airlines, Inc. meets the criteria for tax relief and other incentives adopted by the City and nominates American Airlines, Inc. for enterprise project status on the grounds that it will be located at the qualified business site, will create a higher level of employment, economic activity and stability; WHEREAS, all constitutional and statutory prerequisites for the approval of this Resolution have been met, including but not limited to the Open Meetings Act; and WHEREAS, the City Council deems the adoption of this resolution to be in the best interests of the health, safety, and welfare of the public; and WHEREAS, the City finds that it is in the best interest of the City to nominate American Airlines, Inc. as an enterprise project pursuant to the Act. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS: Section 1. That all matters stated hereinabove are found to be true and correct and are incorporated herein by reference as if copied in their entirety. Section 2. The City finds that American Airlines, Inc. is a "qualified business", as defined in Section 2303.402 of the Act, and meets the criteria for designation as an enterprise project, as set forth in Section 2303, Subchapter F of the Act. Section 3. The City nominates American Airlines, Inc. to the State of Texas for Enterprise Project status. Section 4. The enterprise project shall take effect on the date of designation of the enterprise project by OOGEDT and terminate 5 years after the date of designation. PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS on this the 3rd day of May, 2016. Resolution No. 2 0 .. RON on William D. Tate Mayor ATTEST: Tara Brooks City Secretary John F Boyle, Jr. City Attorney Resolution No.