PRESENTER: Presenter
Jeff Jewell, Economic and Community Development Director
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SUBJECT: Title
Discussion and possible action approving a resolution recommended by the New Braunfels Economic Development Corporation approving an economic development incentive, not to exceed $950,000, to Lefko USA, Inc., pursuant to Section 501.101 of the Texas Local Government Code.
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DEPARTMENT: Economic and Community Development
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COUNCIL DISTRICTS IMPACTED: 4
BACKGROUND INFORMATION:
Lefko Plastics started in 1957 and was established in 1974, first operating in concrete and plastic and now exclusively dedicated to custom plastic blow molding. A team of over 100 employees help support the production of blow-molded components as well as completely assembled, market-ready products. Lefko Plastics is headquartered in Magog (Quebec) Canada and is actively pursuing an expansion project of Lefko USA, Inc. into the United States. This expanded location would be a new custom blow-molded plastic parts, components, and products manufacturing facility which will serve customers in Mexico and Southern United States. The company has existing customers in these markets in which it currently serves from its location in Canada.
ISSUE:
Lefko Plastics is requesting an economic development incentive from the New Braunfels Economic Development Corporation to assist with the expansion location in New Braunfels.
The proposed incentive of $950,000 is to be delivered over a three (3) year period. The proposed terms would include:
- $450,000 (payment 1 of 3) estimated by December 31, 2026
o once the company receives their Certificate of Occupancy;
o and demonstrates at least $4M of investment in buildings, real property improvements, machinery and equipment, and business personal property
- $250,000 (payment 2 of 3) issued within 30 days of January 1, 2028
o with continued occupancy of the facility;
o at least 20 FTEs with an average payroll of $62,000/employee;
o and a minimum taxable value of $6M in in business personal property, machinery and equipment, and tenant improvements
- $250,000 (payment 3 of 3) issued within 30 days of January 1, 2030
o with continued occupancy of the facility;
o at least 50 FTEs with average cumulative payroll of $62,000/employee;
o and a minimum taxable value of at least $10.0M in business personal property, machinery and equipment, and tenant improvements
- The company would be required to complete annual compliance audits. After the January 2029 payment, the company is required to:
o employ at least 100 FTEs with average cumulative payroll of $62,000/employee;
o and a minimum taxable value of at least $10.0M in business personal property, machinery and equipment, and tenant improvements until the contract ceases (Year 10).
For each $500,000 per year that Company is below the Cumulative Investment obligation as set out above, Lefko will remit to the EDC $2,000 within 30 days of EDC’s request for repayment. For each qualified employee position per year that Company is below the Employment obligation set forth above, Lefko will remit to EDC $2,000 within 30 days of EDC’s request for repayment.
The Company will provide security for its repayment obligations in the form of an irrevocable letter of credit in the amount of $450,000. The letter will remain in effect for five years and may be drawn upon by the EDC in the event the Company fails to meet any performance requirements outlined in the Agreement.
The Company has agreed to a local hiring requirement. As part of the contract, the company agrees that not less than twenty percent (20%) of the qualified employees will reside in Comal or Guadalupe counties. It is proposed, however, that the Company is exempt from the local hiring requirement when the unemployment rate for Comal County is less than four percent (4%).
STRATEGIC PLAN REFERENCE:
☒Economic Mobility ☐Enhanced Connectivity ☐Community Identity
☐Organizational Excellence ☐Community Well-Being ☐N/A
FISCAL IMPACT:
The project will return a net fiscal benefit to all local taxing entities of between $1.34M to $1.8M over the project’s first 10 years. The project estimates between a 7%-9% annual rate of return to the City of New Braunfels. The proposed incentive of $950,000 is to be delivered over a three (3) year period.
Recommendation
RECOMMENDATION:
Staff recommends approving the resolution and the economic development incentive to Lefko USA, Inc.