Travis County Commissioners Court
June 3, 2008
Item 30
30. Receive presentation of capital area council of governments' analysis of Travis County economic development agreements with home depot, hewlett packard, samsung and domain.
>> good morning.
>> [indiscernible] Travis County planning and budget office. I’m here to introduce betty and bryan of capital area council of governments. They have worked very hard on a economic development report on the four tax abatement and tax rebate agreements that we have. Let us indicate that we have betty voight with us, the executive director of capcog. Our annual dues are paid up, we are in good standing with capcog today. Welcome.
>> good morning.
>> good morning. I’m bryan kelsey, community and economic development director at the capital area council of governments. I’m quite sure you don't like seeing powerpoint slides at 10:00 a.m. In the mortgage as I did. I’m passing around, there should be hard copies coming around of this presentation.
>> can you move that microphone to your left so you can speak directly into it. How is that? Is that better?
>> better.
>> first off I would like to thank you all for the opportunity both to give this presentation this morning and work on this project with you. It's been a lot of fun. And I know we'll have some questions today, I’m looking forward to answering them as best we can. So let's go ahead and jump into this. I apologize the screens, the presentation doesn't show up exactly clear on the screens. If you have any questions please feel free to jump in and interrupt me if you can't see something. What I’m going to cover today, I’m going through a quick introduction of the project, why we did this, what the time line looked like. Talk a little bit about the methodology, briefly discuss findings, including stepping through how we analyzed the domain as an example of the projects we looked at. And give a summary of the findings from the other projects and then pause at the end for some question and answer. But as I said, please feel free to interrupt me as we go along. I want to tell you a little bit about some background on capcog so you know where we are coming from in an economic development standpoint. We are -- we are federally funded by the u.s. Economic development administration. We have a regional economic development program that focuses on issues of competitiveness. For example, one of the things that we try to do is generate awareness between issues such as economic development, transportation, natural resource conservation, talk about all of those things in a very holistic way to show how they are interrelated and affect one another. A big part of my job is to enhance the capacity of local governments and partner organizations. This can be everything from working with the central Texas sustainability indicators project under data collection to helping individual cities and counties on their economic development marking and planning. And really our goal is to emphasize objectivity, transparency and collaboration on planning projects. We like to market our operation there as a source for unbiased and objective data and support for planning projects. What we can know we'll tell you, what we can't know we'll also tell you. As we go through this presentation, I’m going to be very clear about the assumptions we made to do these projects, run this analysis, and how they affect how you might interpret the results. Briefly the time line for this project, Travis County as you know contacted us for assistance in October 2007. That was the first conversation that we had about looking at these projects. Work began in earnest in December 2007 with the meeting here. We worked very closely with katy and her colleagues in planning and budget. They were very helpful. They guided us on how to interpret the county budget, how it should play a role, how we analyze these projects. We also requested input from companies that entered into the contracts with the county. We were successful in speaking with home depot and samsung. We were successful in speaking with hewlett packard and anybody representing the domain. Both the county and capcog made several attempts to contact each company. Our reports preliminary findings were presented in may. And here we are today doing this presentation. One explore the feasibility of applying fiscal impact analysis to economic development contracts. This is a trial run. The first time that we have done a project like this using this particular software program and approach. So I would consider this very much a pilot project. Two, recreate the conditions and information available when the contracts were signed. This is not a look back to see what actually happened with these projects. What we did was try to the best of our ability to create, recreate the circumstances that the county was facing and with the information they had available, when the contract was signed with the company. Finally conduct a cost benefit analysis for each project as proposed and outlined in information provided by the companies and not independently verify bid capcog. Outside of what feedback we did receive from the two companies we mentioned. To determine the likely impacts on the Travis County budget. How did we do this, we used a software program called web loci, created and licensed by georgia tech. Created by researchers there. Designed for cities, counties, school districts and economic developers. There's more than 300 users of this program nationally. They are quite ai knowed with us with all of our technical assistance questions over the past five months working on this, I hope that we are not worn out our welcome with them. It's very straightforward. I would like to point out as we told Commissioner eckhardt that the program is available if anybody would like to come over to capcog. Publicly accessible. If anybody has staff that would like to check it out, run some numbers, thisser Monday than free to do so. What were our data sources? At first economic development contracts and reports from the companies. What they said they were going to do, what the county signed in terms of the agreement. Budget information from Travis County. We relied on guidance from planning and budget there. Employment and commuting patterns from the u.s. Census burro, Texas workforce commission and the u.s. Bureau of economic analysis. All public use data sources available online. We used multipliers, I will discuss these later from both the webloci program from georgia tech, also another data source company called esi, also available at capcog. Finally of course supporting data from companies as I mentioned before. What's included here, first I want to be very clear, this is only about the impacts on the Travis County budget. In other words, we only analyzed benefits and costs that were relevant to the county. For example, we never included an analysis of sales tax revenues because the county does not have a sales tax. And so this is only strictly about what impacts the county budget. On the benefits side, benefits and revenue, I’m going to use these words interchangeably. Property taxes, fines, fees. I believe in the backup, correct me if I’m wrong, but there should be a breakdown of what's included in the fines and the fees toward the end of the packet if you have any questions about that. Costs, expenditures, operating reports, another term for the incentive or the rebate. Public works, recreation libraries, court system, general government, health, public safety and other. These are all taken directly out of the county budget. 7 the fund budget used to estimate the benefits and costs of the new house holds to the county, let me pause here and explain this because this is important. To get at a cost figure we had to break down what the county spends on average per household. In other words, what is the all funds budget divided by the number of households in Travis County. Per area of the budget. So we had to do that to come up with some way to estimate the costs of a new house hold in Travis County. Okay. Assumptions and limitations, this is not by any means an exact science. Anybody that tells you that fiscal or economic analysis is an exact science is either lying or trying to tell you something. This is an inexact science to say the least. These are estimates, but on the other hand this is about the best you can do using the most transparent software program out there. Second., it's virtually impossible to know true impacts of these projects without primary data and full cooperation. By that I mean -- let me give you a couple of examples as an illustration. It's impossible to know how many new employees or how many net new jobs were created by an economic development project unless you actually talk to all of those employees and find out did you move here for this job. Are you commuting from another place for this job when you weren't before or did you simply leave another company in the county to take this job? There are ways to estimate all of those things. But without speaking to people directly, it's impossible to know for sure. The -- the second point that I want to make, it's impossible to know whether or not these employees take advantage of county services without asking them. That was not part of the scope of this project. It could be done if you had cooperation of course from companies and those employees. But that was not accounted for here. We simply assumed that every household uses county services and you can break down the cost to the county on average per household.
>> plus wouldn't that take an incredible amount of time and, I mean, the cost of putting this thing together if you were to try to go to the domain and interview 2200 employees or whatever, I mean that would be pretty costly and time consumpive.
>> your membership dues to capcog would go way up
>> [laughter] you also run into confidentiality problems. For example you can't get sales tax data on individual companies from the comptroller because it violates the agreement the company has with the state. So a mayor of a city can request them but we cannot. And so unless we went through an extraordinary amount of work, there's really no way to get at that with 100% accuracy. One point about the domain analysis. As I noted in the cover memo, there was no significant destination retail incorporated into this analysis. One of the arguments that you will hear for retail centers is that they attract significant numbers of shoppers from outside a jurisdiction. In other words, resulting in a net increase instead of just somebody spending their retail dollars in one place in the county versus another. We contacted several people associated with the domain to find out if there was a way that we could look at this issue. We got no response. Absent of that response we decided not to treat this as a destination, quote unquote, destination retail center much like an outlet mall would be considered in san marcos or Round Rock. There was no way to do that without somebody with intimate knowledge of the project. Finally with the county's guidance we assumed a 2% annual appreciation rate for real property and improvements. We felt and the the county felt this was a conservative estimate and so all of these projects received a 2% annual appreciation over the life of the contract. Other key considerations I want to point out before we get to the findings. Fiscal impact analysis is an accounting exercise. Not a policy study. This study simply looked at the benefits and the costs that impact the county's budget. There were no other considerations taken directly into account. I will give you an example of this. Sometimes jurisdictions will put clauses within their economic development agreements that stipulate a certain percentage of new employees be hired locally. So whether it's unemployed people or people who are underemployed perhaps the jurisdiction is looking at that, perhaps they are looking at things like affordable housing, that they would like that as part of the contract. None of those things were considered in this analysis. It's simply an accounting exercise. I’m -- findings should not be interpreted as supportive or critical of incentive agreements. This is not a value judgment. All we did was run the numbers to the best of our ability. And so we are not saying any of these contracts are good or bad. Or anything else about them. All -- the question that we were concerned with was how did it come out on the county budget. But as I said, the methodology we used could be used to evaluate policy alternatives. If -- if a city or county would like to -- to evaluate things like affordable housing or a stipulating a certain percentage of local hires, you could use this methodology to look at those issues if you wanted to. All right. Let me get to a summary here. First point that I want to make is that this is a feasible approach in our opinion for analyzing incentives as long as you can live with the limitations. Of fiscal and economic impact analysis. These are estimates after all, I have been pretty clear about the limitations. As long as you can live with those, this is a pretty good approach to use if you want to analyze the impact of projects in the future. It is time and labor intensive. More so than we anticipated actually. So -- so one thing that we need to be taking into account is if you wanted to use this program going forward, partnering with us or with some other entity, it would need to be incorporated early on in the process. Just to give you enough time to get to the results that you are happy with. All of the projects that we looked at had estimated positive net present value for Travis County. Meaning the county came out in the black in our judgment on all of these projects. Some more so than others, I’m going to go through those right now. I’m going to do that by using the domain as an example. I’m not going to go through all of these projects because I don't want to take up that much of your time. I’m going to go through the domain in a little detail, in the end I’m going to offer summary information about the other projects. With the domain, the contract was signed in 2003. And this phase was complete completedin 2007. The 20 year agreement we looked at was 2007 to 27. The contract stipulated a 50% property tax rebate with a 5 million cap. Whenever the rebate reached 5 million in net present value or discounted value rather then that's when the abatement or the rebate, other, the rebate would stop. We analyzed 130 million-dollar in investment. That was the project value we used for this study. 1100 jobs. And we counted all of these jobs for the sake of simplicity as retail. If you were doing this, if you had more resources and time it would be worth it to break out the jobs into low wage, high wage, I know there's going to be hotel employment in the area, that would be very worthwhile. But given our time constraint and the purpose of this, we counted all of these jobs as retail. Year 1, you have these in your packets. There's a coverage page on each project report. We included just a snapshot of year one to show you how the benefits and costs are broken out in the analysis. The top portion of this table is the benefits to the county. Again as property tax revenues, fine goes and fees, this is year one for the domain. Total benefits for year one is roughly $138,000. Now, if you break out the costs along all of the categories that I described earlier and then estimated how many new house holds, I will get to this in a minutes, how many new house holds are being created by the domain's investment and look at what that might cost the county, this is how it breaks outs. So all of these budget categories, there's a value of associated with what it's going cost the county in terms of new house holds, new services, new infrastructure. The total cost in year one were estimated 823 -- roughly $823,000. So the net benefit to the county in year one was about $15,000. If you look at the entire 20 year agreement, do a net present value calculation, the county comes out ahead about $1.9 million. Along the life of the contract. The five million rebate cap is reached in year 14. There's 1330 total new jobs, this includes direct and spinoff. And with retail there's very little multiplier impact because these are local service jobs, it's not like manufacturing where you are exporting something outside of the region. So there is a smaller impact in terms of spinoff benefits here than if you look at samsung, for example. Retail activity, it's impossible to know, but a good portion of it is people simply substituting shopping in one location to another. We estimated that there should be approximately 433 new house holds created over the life of the contract. Let me just simplify this as a way to try to explain this. Say for example there is -- you create these jobs at the domain, you have a certain percentage of people who move to the county. So that's new house holds directly. Say, for example, people leave jobs at high land mall to take -- say higher paying jobs at the domain in retail. The jobs at highland mall still have to be filled by somebody. So you get more new house holds there. Again, an estimate, but this is the process we went through to try to get our arms around this. Over the life of the contract, if you go through those iterations, we estimated with the help of this software approximately 433 new house holds.
>> 20 a year?
>> approximately.
>> this estimate discounts for the estimated number of, as you said, households that weren't created, simply a shift from one job to another.
>> yes.
>> to the best of our ability.
>> right, I understand.
>> like I said, I didn't want to go through all of this projects. The information is in the packet. I did want to provide a snapshot summary here at the end. I already talked about the domain. The other projects we looked at were samsung, hewlett packard, data centers there and for home depot. If you look to the far right of this table npv is net present value. Domain roughly $1.9 million over the life of the contract, samsung office obviously much higher, 42.8 million net present value, hewlett packard, 5.7 million, home depot 1.1 million. I include information on the contract and the rebate value there.
>> is there any benefit on looking at the net present value against, very large number was samsung for instance, 42 million against domain of say 1.9 million. It's there a benefit to comparing the -- the net present value against the net present value of costs for instance just to see the scale that we are looking at. Samsung is net presents value of 42 million. That represents about -- home depot the net present value of the cost of the benefit is only 10% of the overall cost. Just to show the -- what I’m getting at, I suppose is that because this is a -- a rough estimate dealing with gross numbers, that an error rate in a circumstance where the benefit is 50% of the cost versus 10% of the cost, looking at the error rate, even though the benefit for home depot is only 1.13, the probability of us getting it right is higher because it's just 10% of the overall costs.
>> doing, going through the net present value does internalize looking at costs in that what. What you could do is do a sensitivity analysis to see what would happen if we tweaked something here or there. Would it impact the results or not.
>> right, the benefit evaporate or dump exponentially.
>> you could do that, yes, there would be value in that, absolutely.
>> > npv. Is there any way to break down, you may have it here embedded somewhere, but I just haven'ted run across it. When we looked at entering into agreement was these particular companies, one thing that I -- that I continued to stress over and over again, was to make sure that -- that the economically disadvantaged and those that -- that did not have -- have a lot of opportunities towards employment for these companies would be employed. The reason why I posed that question was because of the fact that -- an example in the precinct which I represent is the -- is the poorest precinct economically in Travis County. Our folks there are poorest than anybody in the county. Running a close second is Commissioner Gomez's precinct, precinct 4. If you look at the location of some of these facilities, they reside in the area where the poor live. My question to you is there any embedded analysis that have been geared to see if there has been any relief in the employment of those persons who need jobs the most? And has that been looked at and if it is direct me to where it is embedded in here.
>> it's not embedded in these projects, no. I was getting at that when I was saying that -- that this was not a question of policy. It was simply a question of looking at the benefits andthe costs.
>> even so, benefits and costs can be equated to relieve, in my opinion. Relief. It would be something that I guess that -- that I would need to know because the folks that -- that -- in the intuitive relationship with Travis County, they probably are listening to what I’m saying now. The Commissioner did echo that very vividly that he was supporting relief situations for the poor. And -- and that was one of the premises of -- of one of my premises as far as entering into these relationship was these companies. So if that goal isn't achieved then -- then the benefits, in my opinion, isn't what it should be. And I’m just basically relying on maybe having something like that to show that the benefits -- the overoverall benefits are actually directed as far as cost is concerned to relieve factors that would accommodate -- you mentioned sales tax benefits, folks got job, spend money. But economy -- sales tax incentive. But accommodate the -- the persons that are working poor, those that are seeking employment. So I’m just trying to -- kind of curious about that.
>> no, you are absolutely right. It would be hugely beneficial if any of these projects provided opportunities for people to either get in jobs when they didn't have them before or for folks who are under employed who have skills that are not being tapped into currently. You are right. And there are -- there are studies that have looked at which cities and counties around the united states have actually made that a stipulation in their economic development agreements.
>> well, I didn't know exactly when -- when we mandated such, but I can still hear the echo and the reverberation of the echo that -- that was very -- very mindful and very adamant about that particular type of data, so how do I -- as an elected official -- representing precinct 1 and of course dealing with the poor and those that are under employed, those that are unemployed, get some type of relief in my mind to say these persons that -- that said they were going to do what they do as far as employment opportunities under -- under employed and also unemployed, the working poor, how do we acquire that to make sure that this is working? As far as what -- as far as what I’m interested in.
>> [one moment please for change in captioners]
>> I imagine so, but I have no expertise in how the technical details of these contracts --
>> right. We would forego the opportunity to independently verify the data we were getting from the corporation, but it would certainly be a step in the right direction to receive aggregate blind data from the corporation to verify the types of jobs be that were created.
>> it's very similar to the way some people are doing commute studies, so if you want to know the impact that commuting or traffic impacts of a new location, it's fairly strayed forward. Look at where employees live and look at where they're commuting to work. But it's not always the company that doesn't want that information we leased. A lot of times it's also employees that want it. If there's an agreement, if you find a way to do it, we'd be happy to look at it.
>> in regard to Commissioner Davis' concerns, you had mentioned that since this is a mathematical tool essentially, not a policy tool, so this isn't going to tell us what industries we should invest in in order to create the kind of jobs that will higher the unemployed or the underemployed. This is only going to tell us matsmaticly what we can measure in the moment when we're trying to decide.
>> yes. This is a decision-making tool for when you are looking at impacts on the county budget. There are programs and we have them available to us at capcog that can help you think through which industries might give people better opportunities than others by looking at labor market availability and --
>> right. But this isn't that tool.
>> no, it's not.
>> but I laid that out on the table to make sure that when we talk about benefits, let's talk about all of it, and that's not all of it as far as my thinking as far as what we are deferring as far as our taxes and studying the concern to allow these contractual arrangements, what do with you get out of it. And of course part of what I was suggesting, what I made my support of the contractual relationship is to give must relief of the unemployed and also underemployed -- unemployed as far as the poor folks of Travis County. So that's where I’m still leaning.
>> Commissioner Davis, if you want that information, you ought to address it to pbo. By the time we cut those deals and you want the information is when we vote on them. That's when we need the people who sign by the contract. And every one of these things we had a menu of things that we said that we needed to have in order to move forward. So all of that stuff is available. So if you want it, I mean, I think that we have a department that we ought to say I’d like to know where we are with what we thought that we were going to get, and quite frankly, the reason we got to this is because the league came to us and said, you know, we would like to see the statistics on this. But we have the ability to do that. Now, it's not an easy thing to do, and the question that I was going to have with pbo is had we done this and capcog not have done it, what would it have cost? We knew going into these things that you've got to follow up and you've got to get in and you've got to dig. Now, maybe y'all weren't the people to ask hewlett packard and the domain, but since Travis County participated in all of these, then I would think that that information ought to be forth coming. Now, obviously I would think that the Travis County could ask that and say, hey, this is what we signed up. We knew that you all wanted to us do this deal and we told you these were the things that we were going to enter into this agreement, predicated on these kind of things happening. So I think, Commissioner Davis, you ought to go to pbo and say I’d like to have that information.
>> and I have gone to pbo on it, Commissioner. Anyway, go ahead with this deal. I messed around and got this young man off track.
>> he had raised some of the issues that came up from our very earliest economic development agreements, and one of the very first ones we had, there was a two-pronged benefit and the company eventually let go of the second level of benefit because the data was too difficult, time consuming and costly because of confidentiality, because of privilege, because of legal issues involved with their employees, they couldn't do that. And it was costing them more than they were even going to get. And so that's kind of set a tone for later agreements that the logistics and the practicality of putting requirements in that companies cannot meet, that there were instances where they said if that's the requirement, we know we can't do it, so we can't agree to that because it will cost us more than we will gain in benefits. So some of the data and the statistics that we would like to have and some of the requirements we would like to include have been hedged back some because of legal restrictions on data requirements so that the company could never provide us with certification documentation that they had met those requirements.
>> but those things that you're talking about are not things that would cause the numbers that you all have brought us today, bryan. I mean, the things that Commissioner Davis -- they are in his right. I distinctly remember him asking the kind of questions what is this going to do to my side of town employmentwise.
>> income level, questions like that about employees, the record keeping. There are both confidentiality andrew mcintosh just the logistics from of keeping the data on every employee that comes and goes and even our own ability from pbo to monitor and evaluate and keep records on details became where the cost of that is going to out weigh the benefit that we can.
>> [overlapping speakers] then presumely, answer me this, based on that kind of aggregated data, extrapolations could be made statistically about how many jobs -- how many of those jobs were created versus transfer jocks? Am I correct?
>> I’ll answer that this way. Whatever more specific data you can give us is better our results are going to be.
>> but even with broad data that's snapshot of total number of employees and the county goers with range of salary in each of the categories, extrapolation could be made from that that would be useful.
>> that's right.
>> can I mention one thing? I want to make sure that everyone understands that the requirements in each one of these economic development agreements that the court signed are reviewed and verified by pbo each year as required under the agreements. So I didn't want all of this discussion to lead someone to believe that we are not monitoring the requirements, because we are monitoring. The companies are providing the information that they are required under the agreements and we are certifying that on an annual basis.
>> I have a couple of question about this tool specifically. Does this tool or some other tool in cap -- condition -- witn capcog's reach have a market shift due to aabate. In a region?
>> what do you mean about market shifts?
>> if we were to try to exceed a particular type of market, say in the samsung abatement, to seed the semiconductor market, is there an analysis of whether or not we were successful in getting a company to locate here that -- a type of company that would otherwise not have?
>> that's the-million-dollar question.
>> of course all of this comes down to even if the return on the investment is 50%, it's not really a return on investment if they would have come here anyway and paid the tax.
>> there's an entire site selection committee that brings up these issues.
>> so while this is an excellent tool, I want to caution that even if these numbers are showing a 50% return on investment, if they were going to locate here anyway, then we just forewent a -- beaucoup bucks.
>> [ laughter ]
>> I have a couple of questions.
>> yes, sir?
>> what we tried to in all of these was to retain whatever revenue we were getting from the site before the agreement. So we abated part of the incremental revenue. And in all of these we really looked at the capital investment thinking that there would be a great increase in the real property value. Do you see what I’m saying? So in my view the question was what additional revenue are we looking at? And even after we rebate or abate part of it, what's Travis County left with? And indeed, we were looking at fairly high number. Which apparently are borne out because the investments were made and the employees were hired. That is one of the findings, right?
>> yes, that is correct.
>> the problem is that if we look at the cost and follow the georgia tech model, we are allocating really a whole lot of cost that kind of surprised me. And I guess my question would be is if you look at these costs as a pull from the county budget, what if the -- what if, say, half of these line items really showed a reduction in the following year. Let's say it was some amount before the company got here, and then after the company got here, some of the line items were smaller, we decreased them? And I guess that happens. So what would the models do with that?
>> I’m not sure how you would attribute it to specifically that company if you saw an overall decrease in the county's budget. You would have to know -- I would have to know more about that because there would no way to isolate the impacts of one given company as opposed to the other thousands of companies.
>> if we're spending, say, $100,000 on one of these line items before the company gets here, then the company is here and we spent $105,000, the actual cost increases 5,000, but when we allocate it, we allocate a part of 105,000. That's because the model says do that basically. And the model is not perfect, but we believe it's the best model available to analyze these financial incentives.
>> I can tell you this, I’ve look at every single tool available that I know about out there. This is -- two points I’ll make. One, it's developed by academics. It was not developed by consultants or the private sector, so it's as transparent as you're going to find in terms of a software tool to do these analyses. And it's also very affordable. So that played a role into which one we chose.
>> your honor, could I ask a question?
>> any other comments from the court? Then we have some in the audience that may want to give comments.
>> I have a question that dove tails on the junk's question. In terms of a specific piece of property that's being developed, we'll use the domain as an example, could this tool be utilized to run a no action scenario for a specific piece of property based on its highest and best use?
>> tell me a little bit more about that.
>> like if you were to take -- you know, let's take a specific piece of property, we'll take domain out of it because I don't want to load it up with baggage. Let's say it's a piece of property near northeast Austin that is -- that is an industrial -- zoned industrial inside the city of Austin. And someone wants to come in and do something with it that is considered a public good. Let's say it's some sort of -- some sort of green collar industry. And they would like an abatement. Is there a way that we could utilize this tool to take that same piece of property and say from a real estate market perspective, it's highest and best use is industrial use, so pick a generic industrial use for which no abatement is given and run a no action, no abatement scenario against the abatement scenario for the industry that's perceived as a policy good.
>> yes. You could do that as long as you could provide us with direction about how to measure the economic value of that policy decision. So if you want to wait -- however you define the green industries as having a higher or a larger benefit, then we would need explicit direction on how to do that because there's no way to assign a numeric value.
>> right. Because presumebly with two industrial uses, one being green collar and another just being generic is industrial, it should be a market wash. I mean, I would assume that this tool would show that it's a market wash except for the tax abatements that the county forewent. So you have to figure out that the tax abatement, the policy benefit was worth the tax abatement.
>> yes, that's correct. It could be used that way.
>> now, anybody else here to give comments on this? Please come forward. If you would give us your name, we would be happy to get your comments.
>> hello. I’m bryan (indiscernible). I have something to pass out to you folks.
>>
>> [ inaudible ].
>> my name is bryan rogers, I’m with stop domain subsidies and I represent 450 local businesses and 20,000 people who signed a petition to put a ballot measure on the November ballot to remove the subsidies from the domain and any other development that contains a retail component. When I first saw this come on the county Commissioner agenda, I was -- first I was a little alarmed, but then the more I understood what's going on, I applaud the Commissioners for doing this. Rarely does a government look back and try to analyze what they've done to see if they can do something better. And I think this is a really good exercise. I’ve been through the program by mr. Kelsey and I have some comments that I think are very relevant to this. And of course I don't think anybody knows the domain as well as I do, or a handful of people do, so I have an advantage here. But I’d like to talk about, number one, if you would open the -- I have an exhibit a here I would like to talk to you folks about. The computer models should not replace common sense. For instance, the domain project never needed county subsidies. If you look on the first page of exhibit a, the value. Improvements as revealed by the developer was 158 million. The cost, which is a completely different number, was 130. So this project was $28 million in the black before the incentives. So the county subsidy was not needed, neither was the city subsidy. So that's a calculation that I think you could make do and dispose of this one right off the bat without even having to runny calculations. Number two, the capcog calculations fail to account for lost opportunities for the land's use. As Commissioner eckhardt said, after all, something will be built on that project, on that land eventually, so those benefits should be deducted on a net present value from the accumulation of benefits of the subsidized project. The salaries used by capcog, number three, average $27,000. Endeavor real estate at the time of 2003 promised a 35,000-dollar annual compensation. So I think that simon properties should have to meet those criteria before the subsidies are paid out. All promises and representations made before the court to get the taxpayer money should be part of any agreement and that's exhibit b that has the promise of 35,000-dollar a year jobs. So capcog used 27,000 probably because those may be industry standard figures, but I think promises need to be kept. Number 4, the 1100 new permanent full time jobs that capcog salary -- that capcog used came from simon. Simon has yet to submit their compliance numbers. They have not to the city. They're seven or eight months late with the city. They haven't done it with the county. So although the county wants to be on top of this issue, I don't think they are. Simon has only verbally given the number of jobs, so all we can do is talk about if they're true, there are a great many of these jobs that were existing, okay? The county shouldn't count jobs that moved in from across mopac. And if you look at exhibit number c, there's a company called direct impact. Direct impact moved from stone lake boulevard across mopac three blocks away and into the domain. That was 140 jobs back in September of 2007 that they brought to the domain, but the company has since had layoffs and now they're down to just 30. So I don't know -- counting those jobs and putting that sort of -- these aren't considered new households, these are existing households, but they can't even be counted in as new salaries because they were existing salaries, just relocated. The same goes for some of the other retailers that were brought into the domain, such as the saint thomas boutique. They were just relocated from simon's other shopping malls. So I think all those wages would need to be put into this. And like bryan has said, what he's done has done a first run. In the future when a subsidy package is before the Commissioners, they should be ableist tweak that program for like you said a sensitivity analysis to see how this thing fairs in a real world situation. Capcog inserted property tax earned by the county from the domain, but as you will see in exhibit d, it doesn't take into account what other unintended consequences there are. In 2006 the highland mall was valued at $82 million. But in 2007 when the domain opened, the value dropped by 12 million, so now it's worth $70 million. I suspect that highland will be probably closed in the next three or four years. As the domain ii opens, they put in dillards, so there are unintended consequences that I don't think the capcog program made reference to. And again, that could be done with a more detailed analysis. There's one thing about number 6 that capcog calculations interpreted the domain agreement limits to five million dollars as a can. But that is not five million dollars in my reading of the contract of gross cap. That's five million dollars brought net present value to August 26th of 2003. So the total value of the county's obligation is really eight million dollars, using the same calculations as capcog did. So in other words, they cut off all the value at year 14 because you had a simple summation of the amounts paid. But you do a net present value and as you will see, on exhibit e that the net present value is -- is only 2.9 million. And they started in year 2008 as year 1. If you look on the right side of the equation, there were -- it's really taking five years before the project was built, and so the net benefits to this county rather than being 1.000000000 are really # 816,000. So it wouldn't take much to extinguish any of the benefits if there were a drop in neighboring properties or if the lost opportunity costs were included in these figures. Let me talk about some of the statistical looks capcog is having and the -- statistical problems that capcog is having and the Commissioner. I can tell you where everybody lives at the home depot plant in a day. You sit in the highway and look at their license plate numbers and you make a big tally and you take it to the county and say tell me which county these folks live in. So without a doubt you know where the cars are registered. And the same thing for destination retail. If you went through the floodplain before it opened, you could go through the employee parking and take down the license plate numbers and run them and you would know where these people lived. Then on a Saturday, very crowded day, you could also run all the plates and figure where these people came from to son. So I think there are ways to -- came from to son. I think there are ways to get around that. I’ve enclosed a boot let, good jobs first, from the university of illinois called the ideal deal, how governments can get more from their economic development dollar. And it includes different clauses that y'all can put in the agreements so that you can have different claw back provisions and improve the position of the taxpayer. It does say on page 6 that a survey of local economic development practitioners showed only 24 percent possessed quantitative techniques for analyzing deals. So the county is ahead of the other 76% of the country in trying to do quantitative analysis and I think that's -- it's a really good exercise. And lastly, I wanted to say two things about local hiring. Before the domain was done or any of these other deals, you could have a local hiring ordinance so that a certain percentage of jobs came from particular zip codes. And when the company comes to town, you have a job fair where the first job fair local hiring first, they must hire all of their quota from -- initially from the initial jobs fair and then it's opened up to the rest of the population. I think that's one way that disadvantaged neighborhoods could get ahead of the line.
>> legal, we don't have the authority do that. I don't think we have the authority to do that. The city does. The city does.
>> negotiating it contractually.
>> can it be --
>> [ inaudible ].
>> do we have authority to require that.
>> as far as what he initially stated, though. He initially stated, according to what I’m hearing, is that he said that -- roger is your name, right?
>> bryan rogers.
>> he stated that when the -- let's say a market as far as looking for a first opportunity persons to enter into the job market as the hiring officials or the hiring company can be done first in the disadvantaged areas. Those that need the jobs the most. Can that -- the question is can that be done contractually since we do not have ordinance making powers to govern that particular setting?
>> I’d have to do some research. Again, I don't know if there are legal limitations on eliminating certain people from getting jobs.
>> I think the suggestion is the contractual agreement to conduct a job fair in specific zip codes.
>> and I think we did some of that on some of our very first ones. And I can go back and get you some information on that.
>> can we do that?
>> let's let mr. Rogers finish, please.
>> and then that's pretty much it. I think the city of east san jose did that with ikea. When they came they said, okay, well, we'll give you some incentives but here's what you have to do. So the first 30% of your employees would have to come from disadvantaged zip codes and they had a job fair, and at the job fair before the disadvantaged folks came in, they were told about the company, they were, let's say, groomed for this particular and weeded out and made it so where it was very successful for both. And I think now that ikea has over 38 percent of people from those zip codes. So it can work. And this is only for projects with incentive money. This doesn't have to do with just a general blanket hiring policy imposed on folks.
>> all right. Thank you.
>> very informative.
>> anybody else? Please come forward. We have four seats available. Please come forward.
>> I’m frances mcentire, president of the Austin league of women voters. And I want to thank the court for ordering this capcog report. It's indeed an effort in transparency of county government, and the league and the public appreciate that. Thanks.
>> thank you. And let's give capcog another big round of applause.
>> [ applause ]
>> thank you again for offering us this opportunity. It's been really fun. And I hope that in the future we can work together and continue doing some of this work.
>> thank you very much.
>> I didn't want to cut you off.
>> I really want to say that I appreciate you all going through this process. Because being an economic development -- being in economic development 26 years, we have asked cities and counties for years and years to look at the fiscal impact of the decisions they make to do economic development projects, and like the gentleman just noted, there's only about 30% that actually do that. But I think the point that bryan made without being an advocate because that's really not his place, is that policy really comes before the fiscal impact. So ultimately whether you decide whether you want jobs that are going to be targeted at certain incomes or certain areas of the region or whether it's green building or whether it's high wage, high skilled jobs, those are discussions you all should have in advance and then make a decision whether it's an investment and what kind of return you need on it, whether you need a big return because you want projects like samsung or you settle for a little bit less return because you're really trying to target certain types of people that have less skills. And we're certainly willing to help you all with that if you get to the point where you want to go through that.
>> thank you.
>> let me say this before we conclude. The problem is that -- to me, the problem for me is that I have to take the hiring company's word that they are hiring from the disadvantaged community. Now, there are instances that I know of, persons that are actually being hired. It is happening. I’m just trying to put in the situation where we will have a better handle on it as far as hiring in those disadvantaged areas. So that's what I’m talking about. Thank you.
>> thank you.
>> bryan, we'll recommend a big pay insurance for you.
>> [ laughter ]
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Last Modified:
Tuesday, June 3, 2008 12:51 PM