It is recommended that the City Council adopt the attached Resolution establishing an Economic Development Program and a new Economic Development Program Policy, including guidelines and criteria governing certain economic development loans and grants made by the City of Fort Worth, as authorized by Chapter 380 of the Texas Local Government Code.

Chapter 380 of the Texas Local Government Code authorizes the governing body of a municipality to establish and provide for the administration of one or more programs for making loans and grants of public money and providing personnel and services of the municipality to promote state or local economic development and to stimulate business and commercial activity in the municipality (a "Chapter 380 Economic Development Program"). The City of Fort Worth first established a Chapter 380 Economic Development Program on January 30, 2001 pursuant to Resolution No. 2704, which was continued and expanded on March 10, 2009 pursuant to Resolution No. 3716-03-2009.

On December 12, 2017, the City Council accepted the Economic Development Strategic Plan (M&C G-19192). As part of the Economic Development Strategic Planning process, it was evident that the current tools and resources available in the City of Fort Worth needed to be reconsidered. Feedback from the stakeholders highlighted that the incentives available in Fort Worth were not competitive, and the anecdotal statements were supported by research completed and incorporated into the Economic Development Strategic Plan (Plan) by TIP Strategies.

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.

Economic Development staff researched incentive policies from across the country for examples and best practices associated with the specific recommendations. Special attention was paid to other Texas communities, particular those within the DFW Metro and other large cities, as well as the eight domestic benchmark communities.

The Plan also highlighted some local best practices and staff reviewed those programs. These reviews often included discussions with economic development colleagues to ensure an understanding of the program.

Staff was specifically seeking details on key thresholds – minimum investment levels, wage criteria, and number of job requirements – while also seeking unique opportunities to further support opportunities that are uniquely Fort Worth, all while being cognizant of stakeholder feedback and the Plan recommendations.

Staff also considered the best practices associated with economic and community development incentives and those particularly focused on responsible incentive practices, inclusive incentives, and transparent incentive practices. Staff met with a variety of local professionals to discuss specific concepts, garner feedback, and get a sense for potential opportunities and challenges associated with specific proposals. Finally, staff met with a stakeholder group to review the final drafts of all incentive proposals and their recommendation are being presented for consideration.

The new Economic Development Program Policy contains the following key provisions:

1.  The new Policy is focused on city-wide opportunities; however, additional incentives are available in three target areas:  Designated Investment Zone; Transit Oriented Development; and the Central Business District.

2.  The new Policy 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:  $100.0 Million if new construction
c) Research and Development:  No minimum investment
d) Existing Business Expansion Projects:  $10.0 Million
e) Mega Projects:  $250.0 Million if it does not meet the total payroll of $150.0 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:  $5.0 Million
h) Transit Oriented Development:  $5.0 Million
i) Redevelopment Projects on Central Business District Surface Parking Lots: No minimum investment
j) Full Service Hotels:  No minimum investment

3. The new Policy proposes the minimum annual average employee salary as $43,992.00, which is 80% of the City Median Household Income. Exceptions to the minimum annual average employee salary of $43,992.00 are as follows:

a) Target Industry Projects in the Central Business District:  $54,876.00 annually
b) Research and Development:  No minimum salary
c) Mega Projects:  Must have a total payroll of $150.0 Million if do not meet the $250.0 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 Policy has 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 Policy states that the Incentive Benefit Term may not exceed fifteen (15) years, 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 Policy requires that all projects subject to an Economic Development Program 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.

7.  The new Policy requires that all Mixed-Use Development Projects subject to an Economic Development Program Agreement that contain rental residential units were required to make a commitment to provide affordable housing.

Once adopted, the proposed Economic Development Program Policy will be effective January 29, 2019, and will replace the previous Chapter 380 Economic Development Program adopted pursuant to Resolution Nos. 2704 and 3716-03-2009.

This M&C does not request approval of a contract with a business entity.