Travis County Commissioners Court
September 21, 2004
Item 34
Number 34 is to consider and take appropriate action on request for economic
incentives agreement for advance technology development facility, inc., A
for profit subsid dare of sematech, inc., A nonprofit corporation engaged
in high technology research.
>> I知 a lawyer here in Austin with the firm of fulbright
and jaworski, and to my right is bob fall staff who is the in-house council
of international sematech. We're here today to talk about a for profit subsidiary
that you just articulated judge, advanced technology development facility,
a part of what has been operating as part of sematech and bob is going to
explain to you in a minute the technical separation that occurred both legally
and economically which will be the basis for our request to negotiate with
the county for a 381 local government code economic development incentive
package. We sent a letter on September 8th, which I understand was later distributed
to the entire court, which describes the prior action that was taken by the
city of Austin, and those were packages have been made available, excuse me,
to everybody on the court t city by a vote of 6-0 adopted a resolution or
ordinance which authorizes the city manager to negotiate a 380 local government
code agreement which will deal with both tax abatement and electric utility
issues that bob can explain in just a minute. It was a unanimous vote. Only
councilmember goodman was off the dais due to the fact that her husband was
having surgery. We also met with the del valle independent school about doing
a house bill agreement with them and that work is in progress and the filing
has occurred there, so that will be the first one that they have done and
it's 180 -- 120 day time frame this fall. Hopefully that will be done by the
end of the year, so we've engaged in conversations with all of the various
taxing jurisdictions and have been well received at each place. A word about
why this is important. This is all part of the Texas technology initiative
which we put together approximately two years ago to try to save sematech
initially but has now morphed or changed into a technology platform for the
future of economic development, not just of Texas but of this region, and
so this change in the operating status, in the for-profit status of the atdf
is significant as part of that future going forward. It is, I think most of
you know, we've been well received at the state and federal levels with this
program and we have a much more expansive program that will attempt to generate
in yet the next legislative session to take it to phase ii. We would like
to kind of brief you about that in the next few weeks after we get past this
round of conversations on the atdf. In conclusion before you yield to bob,
if that is appropriate, if there are no questions at the top, your honor,
judge Biscoe, I would say as we discussed with each of you an your stafs,
this is revenue equal, and the property taxes that would have been assessed
as a part of a tax program have been previously exempt due to the fact that
they were a nonprofit 051 c 6 entities. Bob?
>> thank you. Good morning, your honor and commerce inch
I wanted to take a few minutes to give you a little more detail on the operations
of the atdf itself and why it -- we feel it's necessary to form a for-profit
subsidiary. The atdf has been operating division of sematech. Provides test
wafers to other suppliers in the semiconductor industry. It's demonstrated
world class capability of helping accelerate the commercialization of advanced
technology and we think because of technical changes in the industry that
that capability can and should be made available to a broader range of nanotechnologies
beyond the semiconductor industry. We see a convergence of advances in material
science in particular, a lot of which will be done at the advanced materials
research center. The new organization set up with the university of Texas
and is supported by the Texas enterprise fund. But because of the expanded
scope of operations of the atdf beyond its traditional activities in support
of sematech, we feel that that needs to be done on a for profit subsidiary
rather than as part of a not for profit sematech. We think the public will
benefit substantially from this subsidiary and operations because of, again,
the expansion of the acceleration of commercialization to these other technology
areas and that will attract large and small companies to Austin to do that
work here with the atdf. That work can be done in a proprietary sense where
the companies that are working with the atdf will be able to maintain intellectual
property resulting from that work and the acceleration of that commercialization
will create new jobs in the area. It will divorcify the local economy into
a broader range of technology areas. And it will expand the tax base. We are
asking Travis County for essentially the same tax abatement that we asked
of the city of Austin. That would be a ten year abatement of all taxes on
property that is taxable to the atdf subsidiary. And as blake mentioned, the
city council has already approved an ordinance for that including an additional
million dollars of incentives from Austin energy or improvements to the atdf's
electrical infrastructure. The subsidiary plans over the next five years to
invest an additional $100 million in new capital equipment to extend and expand
its current capabilities. This equipment will significantly increase the atd.
If's capability and will complete our 300-millimeter tool set. Economist has
estimated that the total impact of the subsidiary on Austin an Travis County
and the surrounding area at $585.1 million in total expenditures, $295.4 million
in gross product, $196 million in personal income. $75.6 million in retail
sales, and 3,511 person years of employment. Now, the employment figure would
include all of the related jobs outside of the atdf. The atdf itself have
plans to increase its workforce over the next five years by about 100 to 125
new jobs. The average salary currently of personnel in the atdf is about $70,000
per year and includes a very extensive benefits package. We think this is
an excellent project for Austin, Travis County, both in the short and long-term.
In the short-term it will make our -- the a tdf's current considerable capabilities
available to a broader range of companies than at present. In longer term
it will result in significantly enhanced capability that is supporting a broad
range or nanotechnologies including the semiconductor industry and outside
the semiconductor industry. We think that will keep the Austin, Travis County
area, ahead of almost any other high technology development center worldwide
and we think it will make this area the place for many high technology companies
to come and do their accelerated commercialization and development work. In
addition, the new jobs in the capital investment at the atdf itself, and the
economic -- the capital investment will demonstrate as well a significant
economic benefit. Thank you for your attention. Do you have any questions?
>> questions?
>> not so much a question as just a clarification. We seem
to be making language of tax abatement with a performance-based economic development
agreement and I think what you are asking us for is a performance based economic
development agreement because we don't have a tax abatement policy in place
anymore. We had one. It expired. It no longer exists and I know that's what
you're asking for.
>> I mean I hope we said we were here for...
>> for clarification of the record, that this is a performance-based
economic development agreement. You will actually pay the taxes and get a
rebate back if you meet the terms and conditions of what you've laid out which
have to do with not only maintaining the sematech employment base but adding
to it and a certain kind of investment that will occur within the Austin area,
so for anybody that happens to be listening, we know what you're talking about,
we want to make it really clear that this is not a tax abatement, it's a performance
based economic development agreement which will mean a rebate back of taxes
paid if indeed you meet the performance based measures.
>> absolutely. That was our intention and sorry for the slip.
>> oh, no, no,.
>> using shorthand here, didn't mean to cause any confusion
to the court.
>> no, I知 all in favor.
>> always entertained to hear these presentations because
you always come up with something different from economists with regard --
I don't know that i've ever heard, you know, the generation of 3,000 person
years of employment, I知 trying to follow that. There's another measurement
of -- that's a new one on me. I mean... Of course, I mean, ray, or whatever
it is comes up with these things, I mean, you know, when you sell a durable,
let's find out all the statistics you can put in there.
>> that is a sensible mistake.
>> sematech has been here how long?
>> since 1988. 1988.
>> 1988?
>> yes injury Travis County, city of Austin, and other governmental
entities assisted with the creation of that entity.
>> that's correct.
>> and quite a bit of state and federal participation also?
>> that's correct.
>> that's correct.
>> this is a for profit spin off though.
>> yes. Subsidiary would be for-profit. We don't intend for
it to be a spinoff in the sense that sematech would sell the stock in the
subsidiary, tends to keep the atd. If as a wholly owned subsidiary and any
of the excess revenues that the atdf will make will be plowed back into buying
the new capital equipment for the atdf. So the for profit is the tax aspect
of it not the -- operationally we intend to -- the subsidiary does not intend
to may dividends to the parent.
>> I think that is an important point to amplify for a second,
emphasize that the profits, if there are any, and we hope there will be, will
be reinvested in buying more capital equipment and continuing operations so
we will grow the facility rather than try to take it off and put it either
with sematech or its member companies.
>> and it's important for it to be for profit because...
>> because of the scope of its operations. It's doing --
it will do more than just support sematech's internal technology abilities
and the related suppliers, because it's going to act in a more commercial
sense, if you will, we feel that has to be done in a for-profit subsidiary.
>> okay. Yes, sir?
>> I was waiting until uconn clued.
>> go ahead.
>> thank you, judge.
>> good morning. I had an opportunity I guess recently --
this past week i've had an opportunity to guilty out an visit and look around
out there and it's really phenomenal the things that on line as far as technology
is concerned. It's just really mind boggling to see the clean room and a whole
lot of other areas and look at the wafers and production of those things and
it's just really a mind boggling concept. And what is impressive to me, I
guess, is that here we are speaking about job creation, we're speaking about
job growth, is all intertwined in this job retention. All of this is intertwined
and I think you've heard us say -- I know i've said it over and over again.
This is the thing that we have to have in this community and I guess as we
look at job lost throughout the country, jobs are premium. I know that we
have been really looking at the economic development of scheme of things in
certain areas of the county. I know i've been -- we've been kind of leading
and trying to get ahead of this to make sure that we can put our arms around
and embrace job creation, job growth, and job retention. This past -- just
to show you an example of what I知 saying, this past Friday, there was an
invent of event open up for 11th street where they had just constructed and
had ribbon cutting for new buildings there, one was a bank, but the very ground
we were standing on and that zip code and that census tract had double digit
high unemployment. Double digit unemployment and I said to myself her is a
new bank and the people that is around this bank don't even have jobs to participate
to put money in the bank and of course that is kind of alarming to me, and
I just want to advocate very strongly that I知 really going to continue to
support the -- the -- the companies that are willing to put their foot forward
and work with this community to help us retain jobs, create jobs. It's very
important to the community. Because we have a lot of folks that are hurting
out there. As far as not having the opportunity to have employment. And my
hat goes off to you and all the others that come here to do just that based
on performance, so -- and this is something I think Commissioner Sonleitner
brought out, very -- she spoke very adamantly for describing what we're doing
here, based on performance, but, again, let's -- let's go ahead and mo on
down the road and take care of this. We've got a lot of folks that need some
jobs in the community and I thank y'all for coming to Travis County to assist.
>> all right. We appreciate you coming, taking the tour the
other day, we hope you'll come back many times. We hope the court will too.
>> does anybody have any questions? Anything else? -- I think
I need to chat with marietta between now and Tuesday find out exactly how
we need to tweak our policy to work this out. What schedule is the city on
in terms of coming up with an agreement.
>> fairly soon, we're expecting to see a draft agreement
from the city very shortly and then that would start the negotiations and
certainly hope to wrap it up in the next month or so.
>> okay. Next Tuesday we will expect to take action, know
exactly what we need to do, okay? By the way, we always -- we work a whole
lot faster than the city most of the time. [laughter]. Anything further today?
>> no, sir. Thank you very much for your consideration and
your time. We value working with this body very much. Look forward to working
with you in the future.
>> thank you.
>> thanks.
>> have it back on next week.
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Last Modified: Thursday, October 27, 2005 9:41 AM