Mar 05, 2018 City Council on 2018-03-05 11:30 AM

Everybody to this meeting of the Denton City Council on Monday, March the 5th, 2018. Excuse me, we do have a quorum. It is 1132. And we'll move on through our work session item reports. Agenda item 1A is receive a report, hold discussion, give staff direction regarding an incentive request from United States cold storage. Good morning, Mayor and Council members. I'm Caroline Booth , Director of Economic Development. And I'm going to walk you through an incentive request from U.S. Cold Storage. And we do have a representative from U.S. Cold Storage with us this morning. If you do have questions, that would be better answered by a company representative. He is here and ready to come up and help out with that should we need it. As I said, I'm going to be presenting information on an incentive request from U.S. Cold Storage, as well as the Economic Development Partnership Board's recommendation regarding this request. As you had a chance to review in your backup materials, U.S. Cold Storage is a company that provides its clients with refrigerated and frozen food warehousing and transportation. They have 38 facilities in 13 states and about 2,500 employees. Some of their clients that we're all familiar with include Kraft, Kellogg's, and Butterball, as well as a number of other smaller and regional food distribution companies. And they also do handle some medical clients for medications that need to be refrigerated. The specific project in question is going to be a refrigerated warehouse that is on a 40-acre site on Jim Crystal Road, which is within the West Park TURS. And the facility is going to be, the initial phase of the facility is going to be about 200,000 square feet. As you did see in the backup, the land sale for the property closed on February 2nd. We'll go ahead and move into current conditions, as well as our projections for the project's ad valorem valuation and revenue. Currently, the land has an agricultural exemption, so the 2017 valuation you can see there at the top is slightly over $7, 000, which produces annual tax revenue to the city of Denton of about $45. Big time. The estimated new valuation when the property moves out of its agricultural exemption is about $3.6 million. And we did use the Denton County appraisal districts or Denton Central appraisal districts market value estimate for that number. Then the company itself estimates that the improvements, which includes the building, will be about $22 million and that their business personal property would be about $3 million. And all this information is contained in the application that the company completed, which was included as a part of your backup. And then as we move through, let's give me my mouse clicker here, we move into the gross annual city tax revenue estimates. You can see that the total there is about $182,000. And as I mentioned, this project is within the West Park TURS. So a portion of the tax revenue will go into the TURS fund and that's 40% of the tax revenue will be going into the TURS fund. So that's this number here, $ 65,000. And then the estimated net annual tax revenue to the general fund in this column is a little over $117,000. So is everybody good with those numbers or do you have a question? I don't know if this is the appropriate time to ask about the TURS fund. Would that be okay? All right. So what I'm curious about is have we already committed, for example, have there been some improvements made out there that the TURS fund is already committed to rebating back to the developer that put the roads in or the infrastructure in? Yes, phase one of the TURS project plan has been completed and phase one dealt with Western Boulevard, the north-south road that runs through West Park TURS. The road drainage, water and wastewater improvements have all been completed in phase one. And the developer of those improvements will be reimbursed out of the TURS fund for that. I would like to say though, since there was not any -- there weren't any improvements in the TURS until the WNCO distribution center project was built out there, that's what actually necessitated phase one of the improvements to be completed. The valuation for WNCO, it's only partially valued right now. So we're anticipating that this year they'll have full valuation that will produce revenue into the TURS fund with which to reimburse the developer. So there was no money in it because there were no projects out there, but now we've got a project and there's funding in it. And are there some projects that are pending right now that need to be done? As far as TURS projects -- Like finishing the other side of Western Boulevard or -- Phase one is fully complete, so everything is done on Western. This potential project with U.S. cold storage would kick off the improvements for phase two, which run along Jim Crystal, the East West Road. Okay. Thank you. You're welcome. Anybody else? Good. Okay. So sticking with this final column over here, what we're showing you here is the -- in red, this is the amount of revenue that can be used for tax incentive purposes. Land valuation under tax abat ements does not factor in, so we're just including this $84,000 and $19,000 add up to $103,000, a little over, that is available for tax incentives via a tax abatement. The staff analysis of the project request, we looked at a 25% tax abatement, which is what's applicable under our current incentive policy. We also looked at a rebate of the construction sales and use tax, should it be sourced to the City of Denton. And finally, in this case, we want to talk to you a little bit about DME 's economic growth rider, which is offered to new customers on certain rate schedules , and those rate schedules are actually the general service large and general service time of use rate schedules. Those are the -- for the highest or largest users on the DME system. It's offered to new customers whose electric demand exceeds a certain amount, and the load factor is greater than DME's system load factor. And so, basically, these are your largest customers, and if they meet those minimum requirements, they are automatically eligible for this economic growth rider program, and this is adopted as part of DME's rate schedule. And what that actually equates to is a reduction in the monthly billing demand for the customer of 50% in year one, scaling down to 10% in year five. Does anybody have any questions about that? Is that automatic? It is automatic should they meet the demand and load factor requirements. And this project, as estimated by the applicant, they would have 1.5 megawatts of demand a year, and that would put them in DME 's top 25 customer range, just for your reference. The analysis summary that's presented here for you, this was included in your backup, but you can see the assumptions that we made listed up there at the top, and then this is just a summary of what the 25% abatement would equate to over the six years that the project would be eligible for under the current incentive policy for a total of 154, slightly over $154,000 there. The construction sales and use tax rebate, that would be a payment that would happen within one year. It would not be spread out over time. We're estim ating that that would be $132,000. And then DME provided us with an estimate of what the economic growth rider would provide the company over the five-year sliding scale, and that would be a total of $300,000. And so I've totaled those three numbers right here for you. And then down at the bottom, I don't know if you can see that, but the the tax revenue, the net tax revenue that would be coming into the city over the six years of a potential 25% incentive would be $5 48,000 approximately. Yes. Is that net tax revenue figuring out the TERS contribution? Yes, correct. Thank you. Explain that to me. So this net tax revenue is what's coming into the general fund? Yes. Okay, so the TERS portion has already been taken in? Correct. Anybody else? I wanted to show you a project summary. When we're looking at the project overall, kind of the pros and cons of it as we see it. The City Council has identified target industries in the current incentive policy, and U.S. cold is not one of it is not in one of our target industries. It is bringing a significant amount of new value potentially to the tax rolls. That would be about $28 million. Employment wise, the majority of the jobs that they're going to have will be full time and benefits eligible. On the flip side of that, the majority of the jobs are not high skilled and their average salary is below the Denton County average salary of $45,300. I do want to point out that the average salary that was supplied in the application from the company was about $36,000. But then those of you who were in the Economic Development Partnership Board meeting will recall that they wanted to provide us with some additional information regarding the inclusion of overtime in a couple of different categories of positions. And so the company representative did provide that information back to us. It was included in your backup that that inclusion of overtime in two categories of positions revised the average salary up to $ 42,000 from $36,000. So I wanted to make sure that we pointed that out to you. It was provided after the initial application was made. I appreciate that. So question on that. I mean, overtime is just that overtime. It's not something that people are contracted for. So that could go away. It could not show up. It could be plus or minus what they're giving us. So have we ever really taken overtime into consideration when we're looking at the general wages? No. And that's why we don't include it in the application. But I will say that this information was pulled based on a couple of years of data from their Dallas facility. Oh, no, that's fine. So I just wanted to let you know where it came from. But that's not something that we solicit in the application or that we use for some type of benchmarking. Yes, Mayor Pro Tem. Did their Dallas facility get a tax abatement? I don't know the answer to that. I can find out and get back to you. Okay. Okay. Yep. Okay. As I mentioned, they're going to be a fairly significant electric utility user with an estimated demand of 1.5 megawatts annually. Regarding the TERS 2, we already touched on that, but it will the project will kick off phase two of the TERS improvements. And but on the other side of that, then tax abatement will reduce revenue that would go into the TERS fund that would reimburse the developer for those improvements. So question on that. So when you say it kicks off the phase two of the TERS. So if I remember correctly, phase one was we just had somebody who wanted to build a project, they said, we'll pay for the whole thing. And we figured out a way to make that work. Who's in this phase two, somebody 's gonna have to put in the roads, the infrastructure. So cold storage isn't doing that like W NCO did. In other words, the developer. Westray. The developers Westray. Yes. Gotcha. Okay. All right. So it's more of the conventional way that we structured it originally. Instead of Westray assigning it, they will take on the responsibility themselves. Okay. Okay, finally, in the recommendation phase, staff did not recommend an ad valorem tax incentive for this project, primarily because of its location within the West Park TERS. Now, I do want to say that, as some of you might have read in our clarification emails, this is a good project. We have helped this project through their due diligence, through their closing, through many questions that they've had about the development process. And this is both my staff and development services staff. We want cold storage to come to Denton. However, when we look at the totality of the project and the goals that the council has set forward for us, we do not feel that this project merits an ad valorem tax incentive. That being said, they would be eligible for the DME economic growth rider if they meet their demand threshold. So they would be eligible to receive that potentially $300,000 incentive from the city through DME. We presented this recommendation, all this information to the economic development partnership board. They chose to go in a different direction, and their recommendation was for a five-year, 25% tax abatement, as well as the construction sales and use tax rebate, which would be structured through a chapter 380 agreement, as well as the DME economic growth rider, which, again, is automatic if those thresholds are met. And the vote on that was to make that recommendation. That was a six to one vote of the economic development partnership board. Who is the dissenting vote? Oh, okay. All right. I didn't know. Sometimes it's just nice to identify. She's self-identified. Mayor Quintana. Okay. Oh, we have a question. I'm sorry. Oh, I'm sorry. What was the EDP board's justification for the incentives considering it doesn't meet a lot of our criteria, particularly the wage criteria? I think that the majority of the conversation revolved around the fact that WNCO was a similar project and a similar industry. I did point out that there were some differences in that project. It was literally the first project within the TERS that would actually kick off that infrastructure development. It's also almost a million square feet in size. So there were some differences there. But I think that the primary thing that I heard from the questions and the discussion was that it's a similar project to WNCO. And if we incentivized WNCO , what's the difference? Why aren't we offering an incentive to this project too? Okay. Thank you. Okay. All right. So questions? You ready for questions? Oh, of course. Yes. Oh, no, I didn't know if you were. I see nine of nine. Yes. Nine of nine. We're done. But the direction that we're looking for today is, how are you guys inclined to have us proceed regarding an incentive for this project? Oh, I'm going to go over here. I always go to the left. I'm going to go over here. Anybody have questions over here? Comments? No? Okay. Not yet. Okay. All right. Council member Riggs. I am still not in favor. Okay. I voted no because I am in agreement with staff on their decision. And I had a lot of questions about the DME growth rider because that was the first time I had heard about it. And was able to get confirmation that approving something like that would not negatively affect the residential rate payer, which was very important to me. So if that were the case with the growth rider, I was okay with that per se, but not the other two incentives. And also, they already own the property. So you're okay if the direction was we're okay with the growth rider, but the other two, the construction sales tax, and then you 'd be okay with the DME growth rider. As staff recommended. Okay. Yes. Okay. All right. Good. All right. We're just going to go down the line. Oh, you have a question? What? Okay. Is it a follow up to her? Okay. Yes. Isn't the growth rider automatic? It is. So that you don't need our approval. If they meet the threshold. Yes. Okay. Right. I just want to clarify. Oh, good. Thank you for that clarification. Yes. Council member. Oh, on one sheet, follow up on this or? No. Okay. We'll go to council member Ryan and then we'll just go around. In your presentation, you said that you do not recommend the ad valorem, but there was no recommendation one way or another on the construction use. Oh, I'm sorry if that wasn't clear. We did not recommend either a tax abatement, staff didn't recommend a tax abatement, or the construction sales and use tax rebate. Okay. Council member Gregory. A lot of times what we do with these incentives, they really are serving as a rebate for improvements that a business is going to have to make on the road to extend utilities, whatever. Are they going to have those same kind of costs involved or are a lot of those costs going to be paid for by the TERS? The second part, a lot of the costs that they would normally have had proportionally related to offsite improvements will be assumed by the TERS. And if I look at slide four correctly, and it could be that I'm not looking at it correctly, how much from this project, from the improvements here, are going to go into the TERS? Is it 65 annually? Annually for how many years? Until, well, so this is all an estimate based on the value that's provided in their application. So it's 40% of the assessed value of the land and improvement as determined by DCAD until the TERS terminates in 25 years. So the number will fluctuate over time because of changes in valuation. But as of right now, based on what they provided us in our application and what the tax rate is and the percentage that's dedicated to the TERS, that's the number for now. But I hope I'm being clear by saying it will, money will be continued, money will continue to be contributed into the T ERS fund for the life of the TERS from this project. But the exact number will vary based on DCAD 's determination of the value. Okay, thank you. Mayor Pro Tem, any comments, questions? They're already getting a rebate from DME and the TERS is essentially a rebate as well. So I agree with the staff analysis here. Yes, that's my husband. I have a question. Were we able to ask, I had a question about the extra space. Do I need to pose that directly myself or was that? You're welcome to pose that question. I was not able to reach my primary contact this morning about that potential request. Would you like me to invite that? First of all, what's the question? So the question is, I'd want to know if they're willing to, oftentimes we'll ask people to designate land, etc, etc. And so I cleared it with Caroline's office to make sure we could ask them to designate space, office space, if you will. And so one of the key things for me is if we're contributing taxpayer dollars, how does it reciprocate? And for me, if they're willing to do that, it matters because I'd like to have a police substation presence out there. One, we have an apartment complex going out there, we have Peter Belt there, we have a lot of growth out there, and have officers to be able to triangulate in that area and do their business and not have to go all the way back, which now as we're growing, all the way is a distance. Then that, to me, brings value to the taxpayers and it kind of becomes a cumulative nature. So if they're willing to contribute this and that, then it kind of shapes. Yeah, it helps you. It gives you some additional factors. Yes. Okay. So that's the question. So that's the question. One other thing, if I could say, it occurred to me after I responded to you that this would definitely be something we would want to check with the police department about. Was it something that they would want? That would be kind of the key factor in figuring that out. So I will step aside. So my name is Frank Monroe. I'm the general manager of the Fort Worth facility for United States Cold Storage. So your question is, would we allow a substation on property? Yes, sir. Yeah. Well, and so it would be, and I understand you may not have an answer today, but the question would be, yes, would you allow 500, 600 square feet, some sort of singular office space for Denton Police Department to utilize as a sort of a remote location? I couldn't answer that today. Certainly. I could see as that being a benefit for us just for security and having that there. I think that would be something we'd have to pose. By all means. If you would please. Okay. Thank you. Okay. Any other comments? Councilmember Hussbett? No, I just, understanding the timing of that answer, but I really am kind of central in this. I don't see it clearly one way or another. I don't see, I wasn't able to make that particular EDP meeting, but I don't think just because, I mean, just because WINCO did something, you know, obviously we should do the same, but on its merits, there's obviously, there's a significant value, so I don't really, I'm listening to see where the conversation goes. Okay. Councilmember Duff, any comments, questions? Well, I think I would go along with EDP. You know, I think we need the incentives. I think this is probably in the long term a good deal for it. All right. I'm going to go with staff recommendation, and I'm going to tell you why. I disagree that this is like WINCO. WINCO was the largest economic development as far as capital improvement, I believe, in the city at the time that it came to town. And it provided six to seven million dollars up front in money to build out all of the infrastructure. So to me, it's very different. Number two, they are getting an incentive of $ 300,000 estimate, which that's more than the tax incentive and the sales, the construction sales use tax . I'm concerned that, well, first of all, let me say this. I want Cold Stories to come here. There's no question about that. And I think that's why we have to be careful that these incentive discussions are not discussions about whether we want someone to be here or not. It's about is this maxim izing our tax dollars, giving the totality of the circumstances in order to provide an incentive to this particular company that's coming before us? So I want to make it very clear that we welcome them here in the fact that we've provided an automatic incentive that doesn't even apply. We don't even have to do anything that a three potentially $300,000 over five years for their utility rates. That comes right off every month off the bottom line. So I think that that's sufficient. I struggle with providing tax incentives that are solely based upon jobs. And if we do, then I think they need to reflect, you know, the kind of wages that we have because we've all talked about the problem of affordable housing here. And I'm expecting to get the look from Mayor Pro Tem that I 'm filibustering. But so we want to be mindful of that. So I'm okay with the $300 ,000 incentive. I don't think the 25% incentive is necessary. I don't think that's going to look at the word incentive. Is that going to be the thing that brings them here or not? I guess I'll be honest, I'll just say this in an open meeting. I was stunned when I saw in the paper that the land had already been purchased before it had even really come to Council. And that's okay that it was, but it sort of made a difference there. It's like, okay, if you're going to come, welcome you with open arms. But I think a $300,000 incentive for over five years is adequate. And because we are having a reduction of tax revenue in the TUR S, because we're wanting to spur the when we talked about the TURS, we said we are doing this T URS, which to me is the more appropriate use for a TURS, because there's nothing out there. We're going to have to rebate people anyway that come out here for infrastructure. So why don't we just go ahead and do it? And that we said during those discussions that it would make us less apt to give higher incentives if any, because most of them are, as Councilmember Gregory said, for reimbursement. So I don't want in any way to construe my comments about just being okay with staff recommendation to be taken as that there's not a desire to have the U.S. cold storage come here to Denton, because I think they'd be a great addition to our city and to that area out there. It's just the management of the tax incentives and things. So that's just where I am on it. And I can't remember really -- I know you sort of not said anything, Councilmember Husserlach, as far as where you are. I know Councilmember Duff, you were for the package, as suggested by the EDP board. You were okay with just the rider. I was okay with the rider. You were okay with the rider. I'm not sure where you were on it. I'm not for the ad valorem incentive. I would be okay with and could go either way on the construction tax rebate. But if the consensus is that all we're going to offer is the DME incentive, I'm fine with that. But if there were more that we're willing to do the construction of, I would vote along that line. Again, we don't have to make a decision on the DME. Yeah, I'm just trying to get a -- does this conversation continue or do we go on to the next item? I think it's really great for us to see how it applies in this particular case. And it makes me pleased that we have it in place and that, you know, I think we ought to keep it in place for future things. As far as the 25% ad valorem rebate, I'm not comfortable with it given the fact that we're already -- that's generally used to offset the cost that a business has for developing a site. And we're offsetting that cost through the TERS. We've already built that in. That's money that's not going to the city. It's going to directly help the -- all of the infrastructure that's going to directly benefit United States cold storage. I'm pleased that they're coming. I'm not -- again, like the mayor, I don't want this to be construed as we're ripping out the welcome mat because that's not what I want to be doing. But it seems that the tools in place to help United States cold storage to get here through the rebate is being actually achieved through the TERS. >> Let me modify mine as well. I'm sorry. >> I'm done. >> I don't have an issue. If there's a way to work out on the construction sales tax, what I would like to do is, you know, if we could participate 50/50 in that and let me tell you why. Because to do that means there has to be some type of process that says all of the construction materials will be -- I'm going to say floated through, somehow moved through the city of Denton. >> Sour ced to Denton. >> Sourced in the city. So there's no guarantee. So let's say, for instance, we just go with staff recommendation. Well, a lot of these things may be sourced outside of the city of Denton. So we're not going to see any of that sales tax whatsoever, most likely. So in order to try to, you know, participate in that, I certainly would be willing to look at a 50% or something -- I'm just throwing that out there to say, hey, you know, it would be worth us to help provide some relief in that regard if we're able to also participate in a little way. But it would mean that it all has to get sourced through Denton. So if we don't do anything and it just goes -- they get the DME override or whatever it's called. I forgot already. That's what happens. >> Growth rider. >> Growth rider. Whereas then if there's an opportunity for the city to enjoy maybe some additional sales tax and the partner also, you know, participate in that, I'm okay with that because we might not get any of it anyway. I mean, very little of it. If it's, you know, if it 's an outside contractor, I mean, they're steel buildings and so -- so I'm okay with that if we wanted to go down that route. But as far as the ad valorem piece of it, I don't think that's necessary. >> Okay. Let me give just a little further piece of information about that. On the construction sales and use tax, that's a process that involves paperwork from the comptroller's office as well as structuring the contracts for the project in a certain way separating labor and materials. And we've provided all of that information to the company. But what we can do is circle back to them and let them know what we heard from you all. Because ultimately it will be a decision that's up to them if they have the ability to correctly structure their contracts and they want to, you know, go through the process with the comptroller. And we have had two companies that have done that. We've assisted them through the process. So let me take the direction or the information that you've given today back to them. >> Which two were those that we did prior? >> O'Reilly and Wynko. >> Okay. So we're talking 60 million, 70 million on one, maybe more than that on the hotel convention center and over probably 100 million on the Wynko or close to it. >> Right. >> As far as total project costs. >> Right. Hard costs for the project. >> Large projects that would generate an enormous amount of raw material and sales tax. >> Correct. >> Okay. Any -- yes, Council Member Hutchins. >> No, I agree. Those two, you know, the one triggers automatically, but then the construction side of things, I think if they 're willing to go down that route and that process, I think that would be good to participate in my ways. I couldn't find my pom-poms when you were talking about stuff from Denton, but I'll bring them next time. >> I'm not -- yeah. >> I cannot wait to see that. >> Yes. >> We found some pom-poms that my wife had on her skates that I could -- >> I'm getting a lot -- yeah. >> But seriously, I 'm comfortable, by the way, with -- >> Participation. >> Participation in the construction. >> Okay. Yes, Mayor Portillo. >> So are you saying that if the materials are purchased in Denton that you would be in favor of giving them 50% of their sales tax back for Denton materials? >> Well, I think they -- I mean, I think from what I understand is the paperwork would be you could purchase them outside of it, but they're sourced through Denton, so you could technically have all your materials purchased through Denton and sales tax levied in there. >> Okay. So they could be purchased outside of Denton? >> Yes. It's the intricacies of where the tax is actually -- I mean, it 's where it's sourced, and they just have to put that down on this paperwork that they want it to be sourced to Denton, and it's an easy verification for us to do through finance because finance gets those sales tax reports. So it's a pretty straightforward verification process. >> Well, I guess maybe I'm confused because if the idea is that we would like to incentivize using our local businesses, but the project can actually source materials from anywhere, but I don't understand how that incentivizes Denton purchases. >> Let me clarify what I said. Now, you may have -- I wasn't necessarily saying to -- I mean, I think incentivizing the use of local contractors is a different issue for me. I'm simply saying that if sales tax is probably going to be collected on the materials no matter what, there's basically a paperwork, administrative process whereby you could design ate Denton as the source of those, and so the sales tax would be attributed to Denton. It has nothing to do with are you using local contractors or buying the products actually from local vendors. That's a very different issue. It's just a matter of if the sales tax are going to be generated and a couple pieces of paper or a couple minor processes would allow that to be sourced here to where Denton receives the benefit of that together with the project owner, I'm okay with that. Does that make sense? I wasn't really saying it from the standpoint of incentivizing local contractors. I'm not opposed to that. I mean, I'm not saying I'm not opposed to that, but that wasn't -- >> So if I understand correctly, let's say there's a steel purchase and the steel is purchased out of Pittsburgh. I'm just making some things up. So that means that the contractor or the developer can then say fill out some paperwork with the comptroller's office and say, you know, even though we purchased this steel from Pittsburgh, the sales tax portion of it is going to be attributed to Denton. I'm not confident with an out of state scenario, but within the state, they could buy it in Houston and source it here. I can find out from you on out of state . Brian, I'm getting -- >> Our infamous city manager. I'm sorry. Deputy city manager. >> Thank you. It's really just setting up the corporate structure for the procurement side of the company of where is that going to be sourced. If their corporate headquarters is in Dallas, their sales tax for those purchases is going to go to Dallas. They would have to set up a separate legal structure so it would be sourced to Denton. But as the mayor said, it's not about necessarily Denton products. It could be Houston or Austin or wherever they're buying materials from. But the sales tax would be collected here. So that's the process to do that. Typically, it's been something that's been reserved for these larger projects that you guys were talking about earlier, the Winkos, O'Reilly. They're spending millions and millions of dollars because there is a lot of paperwork and legal work that has to be done to set that structure up. So I'm not sure if it would be of value to this company or not. >> It would be their choice. >> For maybe, you know, we're talking $50,000 to $60,000. That's their choice. We could certainly go back to them. But I think the Winko one or the O'Reilly one was $800,000 to $ 1 million in just the portion for the sales tax. So it was much larger. But that's essentially how it's done. And I'm not sure on the question on the out of state sales, but definitely in inter state sales, it would be done that way. >> That's really helpful. Thanks. I don't think I understood any of how that actually works. So I appreciate that. >> So it sounds like the direction is, though, the growth riders, obviously, something we don't have to decide on, that had the conversation with the company that we'd be willing to -- if they're willing to work together on the source of sales tax. And it may not be worth it in the end. I don't know. So if they have a different proposal or something, I'm sorry. I just threw that out just because of, you know, just it was in the middle. So, yeah, I think that would be further conversation to have. >> Okay. >> I think that's the consensus. I mean, maybe not. I don't -- it looks like we've got a -- are you okay with that? I know you wanted something else. >> I'm okay. >> Okay. All right. I just want to check in with everybody. I don't want to be speaking for everybody. >> I don't have to be with little Charlie. >> Yeah. All right. Okay. Well, it doesn't hurt. >> All right. Thank you. >> Thank you. All right. The next item on the agenda is receive report, hold discussion, give staff direction regarding incentive requests from Fisher 59. >> Okay. Now I can say good afternoon because it's past noon. But you get to hear my presentation one more time. And this is an incentive request from Fisher 59. And I will be sharing what their request is as well as the economic development partnership board's recommendation. Fisher 59 is a company that distributes Miller Coors beverage brands to around 40 counties in North Texas and southern Oklahoma. They are an existing company in Denton. They are contemplating a new 205,000 square foot warehouse and distribution facility. And they did have their project presented to the economic development partnership board on February 14th. And after hearing the recommendation from the EDP board, the company did go ahead and close on the site that they were looking at in Denton. So there was a site in Denton and there was a site outside of the city limits further west down 380. Moving into the analysis, since there is an existing facility for Fisher 59 in Denton, there's a little bit more information in the current conditions chart than there was for our other project that we just discussed. Their current total valuation is about $6.4 million for their existing site. And that generates about $41,000 in annual tax revenue. Then we move over into their new project valuation estimation. You can see here that their total estimated new valuation is $16.8 million. And again, we take this information from what they provide us in their incentive application, which is included in your backup packet. Just like we looked at with the prior incentive request, we are only taking the pieces, improvements in business personal property that can be used for incentivization. So there's your total number of dollars available for incentives there, a little over $98,000 for this particular project. We did, again, look at a 25% tax abatement model. In this case, it was over five years per the policy. And we also looked at construction sales and use tax for this project too. So looking at a similar chart, but on a five-year time frame, a 25% abat ement on the incremental increase in value, because we want to take what their future project is. We want to subtract out the existing value that they're bringing from their current site. And that gives us a 25% abatement of a little over $14,000 for five years. Their construction sales and use tax rebate, we estimated at $59,000. And then there's a total there of those two potential incentive tools of $131,000. And then you'll see the net tax revenue. Again, this is just from the new project there across the bottom for the five years that the incentive would be contemplated. Our pros and cons chart, again, this is not a target industry as identified by the council in the policy. They would be bringing $16.9 million of new value with this project. Their average salary based on the information they provided in their application was slightly over $50,000. And they do provide benefits to their full- time employees. That's versus Denton County's average salary of $45,300. They would not be a significant utility user. They will, however, have LEED certification on their building. That was something that was a topic of discussion during the EDP board meeting. They're planning to try for bronze certification, but higher if possible. And then it is a headquarters facility. They have locations in Lawton, Ardmore, and Wichita Falls, but the Denton facility is their headquarters. And this is viewed as a business retention project since they were looking at a site outside of city limits. >> Got a question. >> Yes. >> You noted that they provided benefits for full-time employees. Do you have any idea of what percentage of their employees are full-time? >> I don't have that percentage in my notes. >> I'd like to know that. >> Okay. >> You're required to provide benefits for full-time employees. And a lot of people, a lot of businesses get around that by having a very minimal number of full-time employees. Everybody else is part-time. >> We'll find out. >> Yes, Mayor Pro Tem. >> How many -- I might have missed a slide, but how many new jobs are going to be created by the expansion? >> 67 over 10 years. >> Okay. And how many jobs are there now? >> They have -- oh, you know what, Dalton, I'm sorry, Councilmember Gregory, I think I do have the answer to that question. They have 120 full-time employees, I believe. And that's in their application. I'm just -- I'm going to have to flip through my pages here and find it. Sorry about that, y'all. >> I actually think as you're looking at that -- >> Oh, yes . Okay. >> That as we think down the road about criteria, that that might be a good criteria to have. >> Okay. >> To -- about percentages of full-time employees and benefits because if we brought a business in that was predominantly part-time employees, and all of a sudden it's putting a burden on other governmental agencies to actually provide the benefits that the company is not willing to provide. That really changes the pro forma of the whole operation. >> Okay. So this isn't exactly the answer you were looking for, but it can be, I think, a point of reference. Their existing number of full-time jobs, they have the total of 148 full-time jobs -- or jobs in Denton, 148 total jobs in Denton. 128 of them are full- time. >> That's a high percentage. >> 20 are part-time. >> So -- >> And I'm sorry, Councilmember Gary, what was your question? >> The number of new jobs. >> Right, the number of new jobs . You said 67 over the course of six years. >> Over the course of 10 years. >> And then I guess we don't know if those are full-time or part-time. >> That's correct. And so that was the other part of Councilmember Gregory's question. And so we'll find that out for you. >> Councilmember? >> Yeah, I think it was a mixture of full-time and part-time, because that was part of our discussion in the board. >> So the new salary of $50,922 is for a full-time worker? >> That's a weighted average based on the information that they provided. And that -- in the application, they are allowed to combine part-time jobs into full-time jobs. That's the way that we collect the information. >> Say that again? >> In the application, we allow them to combine part-time jobs into full-time. So we ask them, what is the number of new full-time jobs that you're going to create? And they can combine part-time jobs into FTEs. Okay? And so that $50,000 average annual wage is a weighted average based on the information that they provide about the number of jobs and what the actual salary is going to be. >> So when you say that they can combine part-time jobs into full-time jobs, are you saying like, if you've got two part-timers, they can say that equates to one FTE? >> Right. We should talk about it in terms of full-time equivalents or FTEs. >> Got you. Okay. >> Yes. That's the terminology that I should have started out with. But that's what it is. >> Anybody comments? I mean, I've got a couple, but I'm not going to feel a buster like last time . >> Well, I mean, it seems like on this one -- and this is where I get a little confused. Because on this one, the thing that really sort of leaps out is, okay, we're -- I mean, and the reason you noted it was because of, you know, it being a factor, and that is the salary level. But yet, when we -- let's say for discussion purposes, we do this. Is there going to be something in the contract which verifies and validates that that is what we're getting? Because I know in the past, we have not. >> Right. >> And that's not a criticism. That's just past practice a while back. So let me make sure I understand. They left. They shut down -- did you say they closed in February? I thought it said somewhere -- >> They closed on their new property in February. >> Okay. >> No, their existing facility is still open right now until they build their new one. >> Okay. So they closed in February -- >> After the EDP board meeting. >> That to me -- I mean, if they want to rely on that, then -- but they -- so they closed on the land already. And they're saying that they've got a potential of -- if you don't do it, then we're going to buy this other land outside of town and we'll just put it out there. Okay. >> So -- sorry. I feel like I need to clarify because when we made our staff recommendation to EDP, they had not closed on the land. So we've made our staff recommendation to EDP. We want to present to the council as a whole what our staff recommendation was and what the EDP decided. But then this new piece of information of the fact that they've actually closed came after that. That's why I pointed out to you. >> No, no, I understand. Yeah. >> Because if the situation had presented itself a little differently, you know, that was the recommendation that we made at the point in time with the information that we had. And we need to bring that to you guys. >> All I'm saying is I don't think that them closing on the land necessarily was precipitated by the recommendation from staff or EDP because ultimately the Denton City Council is the one that decides these policy issues. So I wouldn't imagine that they're much more savvy than to close on a piece of land without having gone through the full sort of entitlement vetting process. So that's all I'm saying. Councilmember Briggs. >> So I was in agreement with staff on this recommendation. And actually the other property that they had, what they were deciding on was the deciding factor in my yes being using the word incentive, an incentive for them to stay here in Denton and try to avoid like another DATCU type situation. >> This would be very different. >> I wasn't part of that. But along with that and then the LEED certification, the potential use of solar on their property and the energy efficient technology , I thought that this was a good project. >> Anybody else? I don't really have a problem with it. I guess we're going to need to have some policy discussion about construction sales and use tax because what I want to say is I don't mind them getting a $71,000 rebate. Is that over five years? >> Yeah. Right. >> I don't have a problem with that. And if it comes through construction sales tax and use tax rebate or the incentive, it's just when we start doubling up on all that, I mean, this is sort of a new -- this was injected new into our discussion because of the W ENCO and the O'Reilly situation. And I just -- so I mean, I'm not -- it's not that much money. But I'm okay with the five year, 25% abatement on incremental value. If everybody's agreeing to do construction sales tax and use tax rebate, I think we should participate in that. I don't think it should be 100%. >> Okay. >> That's just me. I just -- >> So we kind of skipped ahead. >> Oh, yeah. >> Well, it's okay. I just wanted to point out that this is what staff recommended. Construction sales and use tax, five year, 25% abatement. And the EDP board did concur with that. And Councilmember Briggs did a good job of summarizing why staff made that recommendation. >> Of course. >> It's retention. It's a LEED certified project. They're interested in -- you know, their salary is going to be higher, all of those kinds of things that she mentioned. So that was the reasoning behind the staff recommendation for this one. >> And staff's recommendation is that in the contract, those salary representations are verified on a yearly basis. >> Yes. I didn't get a chance to answer your question, but we have started including certificates of compliance in every contract. And our staff verifies those. And we absolutely are tightening up on the contract requirements based on the factors that went into the decision to award the incentive. >> So everybody okay with staff recommendation? Councilmember Mayer, put it in. >> So with the LEED certification, are they going to be required to get LEED certification then as a part of the contract? >> Absolutely. >> Okay. And then you mentioned the solar panels, but that 's not a requirement. >> No. It was just something they brought up and that they were investigating for their building and use. They were going to try to do that in our discussions. But that's not on the LEED. The energy efficient technology and the equipment that they're investing in is part of that. >> Okay. >> Where are we? Everybody okay? Staff recommendation? I mean, I'm okay with that. I'm not going to. >> I'm not. >> Okay. You're not? No. I forgot. Okay. Go ahead. I'm sorry. >> I'm okay if you wanted to take the construction cells and use out. I just thought for $131,000 total for the whole project that wasn't -- >> No, it's fine. Yeah, it's fine. I think we just need to have -- I'd like to have a conversation about that. Maybe there's a threshold in future meetings about that. I mean, a million dollars is a pretty big incentive for a project. But when you start getting down to $60,000, it's -- I mean, anyway. So I'm okay with this. I'm okay with the recommendation. Sounds like everybody but one is as well. >> Okay. So since we will be bringing this one forward as a tax abatement, there are going to be some posting requirements and public hearing stuff. And so we'll walk through all of that with you guys. But that's kind of going to be the next step on this one. >> Okay. All right. Yep. >> That it? >> Okay. >> Okay. Good. All right. >> Thank you. >> Okay. That brings us to our last agenda item, concluding items. Any concluding items? If you can -- you can probably save those for tomorrow as well if you like. Okay. I guess they didn't take the hand. Go ahead. I'm going to go with Councilmember Huss buss. >> Just briefly. I wanted to highlight how much I enjoyed the economic development application. And I'd like to see that utilized in the hot funds. I mean, it's a static number of pages. They can opine in the certain areas where they need to. But other than that, it's succ inct information. And so I thought that was easy to process. And I'd like to see that carried over. >> Okay. All right. Great. Councilmember Briggs? >> So I have a question more or less about council lunches, like what we have. Are they -- when did they start? And do we do them to eliminate -- like to lessen agendas? Or, I mean, are they necessary to continue? I'm just curious about the process of having a council lunch every month. It's the same time as my PTA meeting. >> Because it 's the first Monday of every month? Is your PTA meeting the first Monday of every month? >> Well, I'm just curious about when they started and how long council has been doing them. >> They 've been around for a while, I think, ever since I was on council. >> Oh. >> Do what? >> I don't think we can discuss it now. >> Sorry. >> But I think we can -- >> Staff report. >> Just a staff report about council lunches. Thank you. >> I got caught. I got to rattle your paper. Huh ? Yeah. Any other concluding items? Seeing none, we will stand adjourned at 1228. [ Silence ]