Travis County Commissioners Court

April 17, 2012 - Item 31
Agenda

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31 is matter involving proposed economic development with Apple Inc., we discuss this this morning and recommended changes to county staff to make for us over the lunch hour, and we do appreciate y'all skipping lunch to get this work done.
if the law allowed it, I would give you my credit card and let you go to the favorite restaurant and get lunch, but the law I work under doesn't allow that.

>> [laughter]

>> we do have a proposed -- a document containing proposed key terms. And would one of you like to walk through those?

>> yes; just to walk through the key terms. The agreement term is a term of 15 years.
the minimum investment that apple proposes to implement over the term of the contract, phase one, would be completed no later than December of 2015.
that's facility with 200,000 square feet, 56.5 million in terms of investment, phase two, to be completed no later than December of 2021, and that's 800,000 square feet, a 226 million-dollar investment and no payment at any given year which the investment requirement is not met.
in terms of job creation, the commitment is to retain an existing 3100 jobs throughout the agreement term that are already here in the Austin area, create create or maintain 3,635 new jobs by December 31 of 2025 and in the agreement, the annual job estimates that are made in accordance with apple's business plan are listed out there, year by year.
there was a question about the contract jobs, whether or not they would actually come with benefits and apple does contract with the firm that meets the benefits requirements and we will make sure that that is included in the contract.
on the agreement administration, in the event that construction deadlines may slip or the annual -- the annual employment schedule might be affected by any slippage in construction, certainly not going beyond December of 2025, the court will allow the county executive of planning and budget, whoever is in that position, when -- throughout the terms of the agreement to administer that.
payment term, first payment estimated to begin in January of 2016, again, through a 15-year period.
the base rate -- or the base rebate is 60% for the first ten years, 40% for the second ten years -- excuse me, the last five years.

>> five years.

>> so it's a total of 15, 60 for ten years, 40 for five and that receiving the base rebate will require the achievement of the minimum investment levels in the new job creation.
then there is an additional rebate allowed of of 5%, if any level of lead certification is achieved but no lead percentage would occur in the agreement until that certification is actually achieved.
and then, an additional 5% if 50% of the new jobs that are brought online are filled with Travis County residents.
we will be fo4wn?ing the city requirements for the mwbe contracting, for the project, and then just some other provisions related to lone star rail, that they a will participate in those discussions as lone star gets closer to planning for that project, that they will continue to offer encouragement for public transit, and to their employees and leave -- that's outlined in the agreement as well.
and then, finally, there have been a lot of discussion about recapture of clawback provisions and that's included in the agreement as well and that's related to if the job creation and if the minimum investment is not achieved, over the ten-year period, the county would be able to recapture two years of the rebate funds and they would be able to recapture -- we would be able to recapture are five years in it -- recapture five years if it had not been achieved by the end of the 15-year term so those are the key terms.

>> court members, questions or comments.

>> can you just explain, a little bit, what the are recapture phase does.
I think there may be persons that are listening to us now that may not understand what the recapture clause actually does.
can you maybe explain?

>> yes.

>> thank you.

>> if, in fact, at the end of the tenth year, which would be -- let's see.
oh, okay.
at the end of -- at 2025, if they had not hired the required number of employees, ie, the 3635 new employees, or if they had not, after the first ten years completed their investment, then there would be a 2 year of whatever we had paid the last 2 years of that term, they would forfeit.
if they had not met those requirements after the ten-year term.
if, in fact, after the 15-year term, they had not met, ie, on the investment side, completed at least 226 million of investment and hired a total of 3635 new full-time employees, that they -- we would recapture or they would need to pay us back five years of what they had received in their -- their rebait agreement.
so there are two stages to it, one after ten years and one after 15 years.

>> and on the 50% of the -- especially under your additional rebate, looking at the 50% of the residents must be from Travis County.
could you explain that?

>> that's correct.

>> just a little bit?

>> the -- the requirements to add an additional 5% to any year of the rebate period, ie, the 15 years, that, in order for them to get an additional 5% rebate, the basic rebate is 60% for the first ten years, and 40% for the next five years.
if, in fact, in year one, they were able to hire 50% or more of the new job s, their rebait percentage would go to 65%.

>> okay.
thank you.

>> uh-huh.

>> ms. Eckhardt.

>> this agreement is for 15 years?

>> yes.

>> the state's agreement is for ten only, correct?

>> yes.

>> and if city's agreement is for ten only, correct?

>> yes.

>> that's correct.

>> additionally, this is a provision that I have not seen until today that apple is able to count up to 25% of its job creation, utilizing contract, seasonal or project workers?

>> that is in the agreement, yes.

>> also, with regard to the 50% Travis County resident hire, that is not part of the base amount, ie, they don't lose their rebate.
they only get 5% taken off if they don't meet 50%?

>> that's correct.

>> actually the way this is written, they don't get the 5% added.
it's an additional rebate for hiring 50% or more within Travis County specific items.

>> so if they were to hire -- now, this is a hypothetical and it's not probable, but nevertheless, under this agreement, if they were to hire nothing but residents from other counties, they would still get the base rebate?

>> that's correct.

>> there is nothing in this contract -- although two weeks ago, and this is opening up a window into the negotiation, and I recognize that.
although two weeks ago there was language exchanged between apple and Travis County with regard to the hiring of economically disadvantaged individuals, that language is nowhere in this agreement, correct?

>> that's correct.

>> that's correct.

>> but I believe it was two weeks ago, apple had submitted language that they were willing to include with regards to the hiring of certified, with the language -- the way they defined it -- was certified.

>> workforce training.

>> workforce training program graduates.

>> and that was addressed by the county to apple.

>> oh, that wasn't their work product.
are we sure of that?

>> we termed it certified workforce training.

>> well --

>> I am referring to a sheet that looks distinctly like it came from apple, not from us.

>> the provision in one of the drafts, and during the negotiations.

>> I am not referring to a draft.
I am referring to a single sheet of paper that had language with regard to certified workforce training at the top and language with regard to lone star rail at the bottom that I was given to understand came from --

>> you are correct.
that did come from apple.

>> okay.

>> but the context of those targeted workers was in the context of an agreement that was an 80% agreement, not a 60% agreement.

>> but that 80% agreement also was -- left the term of whether it was ten year or 15 year up in the air, so the 80% was soft at that point, because of years, duration, correct?

>> my understanding is the court took a vote on February 29th to negotiate a 15-year agreement with apple.

>> thanks for answering those questions.
I know y'all worked really hard on this.
apple or any other business should not receive a tax subsidy to do what's in its economic self-interest, and in my opinion, and I am only one member of this court and I am -- I am very much aware of that.
in my opinion there is nothing in this document that does not ask apple to do anything that isn't in its economic self-interest and at 43 billion-dollars in gross profits this year, apple has a demonstrated success in making decisions in its economic self-interest.
I was willing to play along with the charade of our influencing apple's decision making process in exchange for apple's commitment to hire economically disadvantaged individuals.
I was willing to play along with this charade for an admittedly modest but verifiable number of economically disadvantaged tires by this company, because after all, Travis County has 37% low income residents, 41% housing cost burden residents and 22% uninsured residents.
these are the folks who could benefit the most from your jobs at apple.
I heard today for the first time that apple was no longer willing to consider this this commitment, and, therefore, I am no longer willing to entertain relieving apple of its tax responsibilities to Travis County.

>> any other questions or comments?
well, I have got to say, we negotiated several months and I think we did a good job and the best we could.
Commissioner Eckhardt was willing to do the things she just said.
they met with her more than they did with any other member of the Travis County Commissioners court so I think they were fair ability that.
I don't know a that we -- I think they were fair about that.
I don't know if we can blame the poverty rate or lack of insurance on apple.
in fact, in what I heard, regarding its treatment of 31 employees that work for them today they are doing a fine job and one of our best employers and I would think we do not have a requirement that should not be a successful company to get financial incentives from Travis County.
in fact, my belief has always been the opposite.
that if you were successful and in a much better position to do right by us and to do right by Travis County employees, I would like to say that, in addition, we started off at 80% for ten years.
we are now down to 60% with the additional to earn an additional 10% and get up to 70.
we were never fix on the exact percentage for years 11 through 15, but we end up at 40% with the ability to earn up to 50%.
in addition to that, the 20% or 30% that we get is a significant amount of money that comes to Travis County, and the impact of the school district will get a huge infusion of tax dollars, as well as the health care district and acc, I think acc is in that district, so you are talking about a huge amount of new revenue that will come to governmental entities in Travis County as well as to Travis County itself.
there is nothing magical about this.
I wished that we could get from the subcommittee on financial incentives a firm recommendation for us to look at and put in place.
that way we will know what the majority of the court supports from time to time.
so I would like to thank apple for working with us.
I think that they have been fair and open.
I never thought that they were negotiating for Travis County.
I thought they were negotiating for apple and that our representatives would negotiate for Travis County.
with that said, unless the other three members have comments.

>> I have a comment.

>> Commissioner Davis and Commissioner Huber.

>> let me say this.
the certified workforce, from my understanding, and of course you have -- maybe outreach as far as having some work and things of that nature where you actually have persons that are involved in this type of employment activity, and I know we do have very capable persons down here in the with relationship to our workforce entities out there, will be actually looking at this certified workforce type of scenario and I think that outreach may not be where we want to be, but I think that is a step in the right direction to make sure that those persons who have been left out of the system will now be included in the system, and when we send 50% of the county residents -- and working through certified workforce out there that we know are out there, I believe that those particular entities that are in place right now that deal with a lot of our residents within -- within Travis County who will become eligible for employment with apple will now have an opportunity to do that.
so I am going to support the motion to -- to -- what we have here for some of the key components that we have before us today, with the intent of ensuring and making sure that our workforce and the persons in Travis County who have been excluded and who have not been a part of this process will now be able to be a part of this process.
so I am going to support this motion.
thank you.

>> Commissioner Huber.

>> first, I would just like to say that I agree with everything the judge just said.
I would also like to add that I personally do have a problem with this competing nationally with tax incentives for economic development purposes.
it is a scenario that's out there that forces some -- often forces communities to have to play a game that they wouldn't want to play, but I would like to say, in this instance, I don't see -- seldom does a community get an opportunity to work with a company of the global significance of apple, and to me, this is not about whether or not there was another city that was competing for it.
it's not about the success of the company in its cash reserves.
it's about the opportunity to partner with a company of this significance for what they can bring in partnership to our community, and I believe that this -- these terms that we have laid out here today will be many times over rewarded to this -- to Travis County and I heartily support this.

>> any other comments?

>> judge, just very briefly, I think that on the budget subcommittee, the judge and I did have some visits with apple -- with our staff regarding this project.
I guess for me, being from -- representing folks east of i-35, the biggest thing that I can offer people is hope, hope that they will be -- there will be something there for them to reach for, and by Travis County investing in job training programs, such as a capital idea, which apple recognizes as a group that really trains folks to be ready for jobs that are out there, that gives me tremendous hope, that many people in this community, especially east of i-35, will be able to realize some kind of upward mobility in their lives, and so this this represents tremendous hope for me, and I wish that we could include those poverty rates that we are all very much aware of in everything that we do, but sometimes we miss the mark, and -- but hopefully we can still offer a lot of hope for folks, and so I am going to support this motion.

>> for those reasons, I move that we approve the proposed key terms that we direct county staff to work with appropriate representatives from apple to prepare a contract with specific terms and conditions for the court's review and action.

>> second.

>> any more discussion on the motion?
all those in favor?
show Commissioners Gomez, Huber, yours truly voting in favor.
Commissioner Eckhardt voting against.
thank you very much apple representatives, see you soon.

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