Presenter/Contact
Presenter
Victor Garza, Economic Development Manager
Contact Info
(830) 221-4621 -vgarza@nbtexas.org
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SUBJECT:
Title
Discuss and consider approval of a resolution recommended by the New Braunfels Industrial Development Corporation to provide up to $500,000 in financial incentives to Palfinger Inc. for the creation and retention of up to 200 new jobs.
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BACKGROUND / RATIONALE:
Palfinger is an Austrian based manufacturer for hydraulic lifting, loading and handling solutions. The company is a leader in their industry, with almost a third of global market share. The company currently manufactures three of its product lines, including lift gates, service cranes, and truck mounted forklifts, in other facilities. They are considering purchasing and renovating an existing vacant facility in New Braunfels to consolidate these efforts. The company is considering the former Vantem property located at 710 FM 306. The company will invest a total $7.7 million for leasehold improvements and equipment. The company will hire a total of 200 employees. A recommendation for a Chapter 380 Agreement will be presented at the February 26, 2018 City Council meeting. The Comal County Commissioners Court will hear a recommendation for a Chapter 381 Agreement in March.
Employment
In order to receive the per job financial incentives of $2,500/job, the company must employ a minimum of 167 full-time employees by the end of 2018. The Company must create 200 new full-time employees in New Braunfels by 2021 and must retain those jobs throughout the remaining term of the agreement. There will be a handful of employees relocating from other facilities but the overwhelming majority will be hired from our local area. Average wages are expected to be approximately $49,000.
ADDRESSES A NEED/ISSUE IN A CITY PLAN OR COUNCIL PRIORITY:
This project meets the following requirements contained within NBDIC Funding Guidelines:
I. ELIGIBLE PROJECTS
A. Company projects must first fall within the approved NAICS codes established by the Texas Legislature, and may be amended in future legislative sessions. In general, these companies will typically be manufacturing, warehousing/distribution, data processing, telecommunications services, home/regional office operations, certain financial services, research and development, information services, correctional institutions, water supply development, and other codes that result from subsequent amendments to the original House Bill 2912. Also included are projects in the mining, forestry, and agricultural occupations (see NAICS sector codes in Chapter 501.002). NBIDC members may prioritize their job creation category preferences from time to time.
B. The Texas Legislature created a second threshold used to determine eligibility for sales tax funding - the jobs must be “primary” in nature. The definition given is the following: “Primary Job means a job that is available at a company for which a majority of products or services of that company are ultimately exported to regional, statewide, national, or international markets infusing new dollars into the local economy.” For the most part, this definition eliminates retail and services from funding under the sales tax program for economic development.
C. Both new and existing companies are eligible for funding under this program.
II. WAGE RATES & BENEFITS
A. NBIDC will give priority consideration for projects that provide above-average wages for trained employees. For the purpose of defining “above-average wages,” NBIDC will use the Texas Workforce Commission’s Labor Market Information figures for the most recent annual average county wage. Eligible projects creating or retaining existing jobs paying less than the average county wage may be funded, but at a lower rate of reimbursement per job. (As an example, a company introducing a new employment sector may be given special consideration for a lower “trained” wage level to help advance this new economic sector.) Wage levels will be evaluated on a per job basis.
B. NBIDC will consider whether the company provides a benefit package - particularly health insurance for employees - when determining the value of proposed jobs being created.
III. JOB CREATION THRESHOLDS
Projects that meet the NAICS codes and provide “primary” jobs, should also meet the minimum job creation and investment thresholds established by NBIDC. They are the creation of at least 5 new fulltime jobs at or above the average county wage and new infrastructure investment of at least $125,000. NBIDC members may waive one or both of these thresholds when designing a performance-based incentive that is expected to be paid out at some future date when the thresholds are met. NBIDC may also waive these thresholds in the case of job retention projects, or when the assistance of NBIDC would help fund a new equipment purchase for a company that would increase their productivity and their competitiveness in the marketplace.
FISCAL IMPACT:
The company will generate $1,567,860 in net benefits to the City and NBIDC over a 10 year period.
The $500,000 incentive provides a payback period of 3 years. The NBIDC has adequate funds for this project expenditure.
Recommendation
COMMITTEE RECOMMENDATION:
The NBIDC met at a special called meeting on February 1st and voted 7-0 to approve the project expenditure with the following terms:
• By December 31, 2018, the Company will employ a minimum of 167 employees.
• The NBIDC will deliver up to $500,000 to the Company on a reimbursement basis.
• As long as the minimum number of jobs are fulfilled (167), the NBIDC will reimburse the Company $2,500 per job created.
• In the event the NBIDC or City ascertain there are less than one hundred sixty seven (167) employees between January 1, 2019 and June 1, 2028 of the contract term, the Company will provide a one-time reimbursement payment to the NBIDC of $2,500 per job below the 167 employee threshold.
STAFF RECOMMENDATION:
Staff recommends approval of the resolution.