Travis County Commissioners Court

April 24, 2012 - Item 29
Agenda

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29, consider and take appropriate action on economic development agreement with Apple Inc.
there's a notation that the matter may be taken into executive session under consultation with attorney.
and the economic development negotiations exceptions to the open meetings act.
is there a brief overview of the proposed agreement?

>> the proposed agreement still contains those key terms that the Commissioner court approved at last week's meeting.
the agreement term goes from may 1 of 2012 through December 31st of 2030.
the capital investment that is outlined in the agreement still consists of two phases, phase 1 is approximately 200,000 square feet, or $56.5 million in -- in total investment.
phase 2, to be completed no later than 2021, is about 800,000 square feet and that's a $226 million investment.
the agreement which the attached agreement which has been posted with the item outlines the job target, the new job target of 36, 35 new full-time jobs by 2025.
that's outlined year by year.
in the proposed agreement.
and then in addition to that, as maintaining the existing job base that apple currently has of about 3100 employees here.
the base rebate is structured such that it is 60% over a period of January -- the first 10 years, basically, January 2016 through December of 2025.
following with the next five years at 40%, and that term would end on 2013 and then an additional rebate can be earned if 5% -- of 5% leed certification of the new facility is achieved and another 5% if 50% of the new jobs are filled with Travis County residents.
so those are the key terms. The agreement also includes some recapture provisions.
if job creation or the minimum investment is not achieved over the 10 year term, the county can recapture two years of rebate funds paid to apple or five years if -- if there's failure to achieve the investment and new jobs requirement by the end of the -- of the 15-year term.
leroy, do you have anything to add that --

>> I think that pretty well summarizes it.
we're happy to answer any questions.

>> any questions, court members?

>> I have a question.
this perhaps is not -- this goes to apple, but the purpose, my intent is to be more global for the future.
with regard to the web loci analysis, I am -- I confess I'm just now looking under the hood of web loci to try to understand how it is derived.
I note in -- katy thank you very much for responding to me late in the evening

>> [laughter] that -- that --

>> always on the.

>> brian:, she's always on the job it's amazing, one of the assumptions in the web loci has to do with the total number of households and total number of jobs as well as the commuting statistics from incorporated and unincorporated areas.
my concern is that are we calibrating that assumption of -- for how many jobs will be taken by current Travis County residents versus how many jobs will be taken by surrounding county residents versus how many jobs will taken by people newly moving into the area.

>> richter from the city of Austin is here, she actually ran the web loci for us for apple.
she can probably talk about some of the assumptions that we have.
just doing -- the fact that apple came up kind of quickly, there are some things in our web loci that I think we want to enhance and will spend a lot more time on.
we are working with capcog, we got a proposal from them to do that web loci analysis in the future.
I think there are some items where we couldn't quite get the correct demographic information.
I think they considered the county kind of as one big incorporated area for this kind of purpose to get some sort of analysis for apple.
but I'll let eve talk more about the assumption.

>> thanks for coming over, eve, I appreciate it.

>>

>> [indiscernible] these were numbers in the community profile which was provided to you this morning.
they are derived from capcog and does incorporate the you think operated versus unincorporated.
when you do the analysis you can choose if it's being run for a city or county, in this case we chose it was being run for a county.
the numbers do not take into account the number of people moving here from another state.
there's no way to account for that.
that's something that -- that we take into consideration just sort of as an outside factor.
the -- the company said x percent will be hired locally.
but that doesn't actually figure into the web loci analysis.
what that looks more at is people moving around regionally.

>> with regard to the demographic data, the demographic data that you sent over is not included in what I imagine is some version of a linear regression.

>> I think what it does is it takes -- this is how many people typically within the county, any given firm that opens a facility or hires in the county, on the whole, will hire this many from within the incorporated region, this many moving from outside of the incorporated region.

>> but outside of the incorporated region is still within the county.
is the assumption -- at least on its face, that's what it appears to me, that the assumption is based on -- on hires from within the county whether incorporated or unincorporated and their pattern.

>> it looks to me like that total is about 84%, so that I would guess that that means the remainder would be from completely without the Travis County area.

>> has this assumption been compared against the chamber of commerce's recent zip code origination study?

>> that would be a capcog question.
I get these numbers right from capcog.
we would have to get brian -- it's not brian anymore.

>> darn it.

>> [laughter]

>> well, the staff there is still excellent.

>> very good.

>> I understand.

>> changed the way that they pulled some of these numbers.
there have been some new studies and I know that the numbers they gave me this year were significantly different than past years.
I know there are new ways to get these numbers.

>> that would be good, because I think we do probably need to recalibrate this aspect.
with regard to the household and employment information, is this figured into the calculation as well?

>> it is.
there's two really thick binders that sort of show you how each item of data is used so it will be used in this output figure and the other output figure.
so all of these numbers here in the analysis in one form or another are likely to -- to impact what the -- what the analysis shows.

>> I need -- I confess, I need to understand this better.
as I am looking at the state or regional households for employees, that doesn't match up to the numbers above it.
the numbers above it would indicate a point 68 average households per employee.
I'm just wondering how these numbers work.
if it is part of the calculation, and we do find that we have a larger import of both jobs and individuals to take them, then actually the number of jobs available per household goes down.
for Travis County residents.
you see what I'm saying.

>> I would have expected if more people move in, you would have more new house holds.

>> you would have more news households, but your number of jobs, depends on what the numerator or the denominator is static.
I'm just not sure of how it's utilized in the formula.

>> it's actually where we -- when we starting using the web loci at the city, we had many, many, many meetings decided on our inputs with travis we sort of quickly -- we just kept the capcog numbers.
but I think that it's absolutely worthwhile to sit down and spend some time going over the input numbers to get -- I've always wanted to be and the to explain any number input, explain the assumptions we made, what the reason behind all of that was, I think that's an absolutely worthwhile expenditure of time.

>> it would also be nice to go back after the fact and compare what happens against what the web loci expectation was.

>> that's an excellent idea.

>> thank you.

>> you're welcome.

>> any other comments?
from anyone?
mr. Aleshire, I believe that you were wanting to do that as well as mr. Windler, do you all want to come up?

>> go ahead, judge Biscoe, Commissioners, my name is ed wendler, junior, a Travis County resident.
I'm thinking approximate changing my name to don quioxte, I think that I'm tilting windmills on this one.
but thank you for letting me speak anyway.
Austin and Travis County are interesting places, I mean that in a clinical and scientific way.
I don't mean that in a clinical or scientific way.
I mean that in sort of an ironic way.
if I didn't change my name to don quioxte and changed my name to mitt romney and said corporations are people too, my friend, then followed that with we need to reduce the capital gains tax rate and marginal tax rate on high income earners because they are the job creators, every good democrat in the area would raise a fuss.
yet when local governments cut property taxes on apple, because they create jobs, very few even raise an eyebrow.
when bill and I wrote our recent guest editorial, I got tickled reading the opposing piece, started out with an explanation of incentives, economic incentives, which is a -- which is a perfect textbook, george bush, explanation of conservative economic theory.
if that had been a presidential debate, every democrat in Travis County would have rolled their eyes and groaned.
on the other hand I have gotten some really irate emails from business associates and acquaintances arguing that I'm against apple.
and they parrot that apple is creating 3600 jobs and investing $300 million.
of course I asked if you read the contract and they all say no.
haven't even seen it.
and when I try to explain the exact terms, and the fact that it's really structured as a series of one-year options, they say they don't care, the details don't matter and that we shouldn't run apple off.
of course these are the same folks that will vote for romney because we need a tough, hard-nosed, detailed businessman in the white house.
so go figure.
we live in goofey place where left is right and yes is no.
without requirements that apple hire local residents and especially the underemployed and those who need training or those who just need a break, we are left making the economic argument that by cutting the apple's taxes they will create jobs and somehow we will all benefit and on a national and local level, there's great data to show that's just not the case.
so I want to take just one more joust at the windmill and ask all of you just to vote no.
being against corporate incentives is not the same as being against jobs or against apple coming to town or being a no growther.
I guess it's going to happen so I have some comments on the contract itself.
a lot of these I won't go through and I guess the attorney needs to look at some of -- there's some wrong cites in the contract, some wrong numbers in the -- in the contract, so -- so there's some cleanup that needs to be done.
I would like to go through a few.
in section 422-b-ii, there's a provision that the county may terminate the contract after you give notice to apple that it's in default after 90 days.
I think that you would be in a much better negotiating position if that was an automatic termination.
so if they have 90 days to cure, at the end of 90 days, if they haven't cured, the contract automatically terminates.
that doesn't mean that you can't reinstatenr the contract.
but the burden ought to be on apple to come in here and justify to the court and to the public why they defaulted and make a great case in front of this court that the contract ought to be reinstated and -- and I don't -- I don't -- I don't want you to take this personally, but it's hard for elected officials to say no sometimes.
so it's a lot easier if that contract -- ...

>> [one moment please for change in captioners] I would also make exhibit a and paragraph 511-c mesh better.
right now exhibit a says that they are required to build up to x number of feet.
and which means they could really build a much, much smaller building.
so the numbers in exhibit a and the numbers in the contract need to be exactly the same.
and actually, the language in that paragraph, 511-c, is much stronger for the county because it sets the number of square feet that you want them to build, not up to that number of feet.
in 512-b-3-i, it says that the county executive makes the decision on whether to extend the contract or not or to give them more time.
and I'm not sure exactly who the county executive is, but it seems to me that that ought to be the court making that decision, and not an executive that can do it with no vote and no input of the public.
so as a taxpayer I much police officer that if you're going to give them more time to either build the building or more time to hire the number of people that they say they're going to hire that an executive doesn't make that decision, that the court makes it.
and the court makes it after public input.
section 512-c, I'd add a definition of annual compensation.
and my guess is sort of as I understood it that would be base salary exclusive of the benefits.
and it's not defined.
so I guess in theory they could include benefits, which could be up to 23% out of the minimum amount.
you ought to define that as base salary and benefits are on top of that, if that's the deal, which I assume it is.
in section 522, I'd like to point out that there's no obligation for apple to hire any Travis County residents.
what it says is that they'll get a bonus if they hire 50% of their new employees as Travis County residents.
so there's really no requirement that they hire anyone from Travis County.
and if you're going to give them a bonus, why set it so low?
why 50%?
you're funding 100% of the incentive.
the plant is about a mile from the Williamson-Travis County line, and if they're going to give a bonus for hiring Travis County, make that bonus, you know, 90% or 75%.
just seems like 50% is an incredibly low number.
and then again I just add that the five percent incentive is not very much money.
and I doubt that it will have any impact on apple's hiring.
and I would like to go on also.
there's no provision anywhere in the contract that they hire unemployed or that they hire people that need training and train them or that they hire people from all over Travis County.
there's testimony by Commissioners that that was important, and there's still no requirement in here that all of Travis County residents be helped.
you know, next couple of things, just a few sites.
and like section 8-2.
thanks for including the call back section that I talked about last time.
I think as drafted you're back into that situation of where you name the price and then they name the terms. And seems to me -- you're giving them nine years to build the second phase of the plant and if they don't do it, you're only getting two years of claw back.
seems to me that ought to be five at least or prefbly all of the nine.
and then there's an extra provision that you get to go to the five-year claw-back, but you're giving them until the year 2030, an extra nine years to build the plant before you can claw-back for five years.
and I mean, I don't know -- the commitment was they build a plant by 1221 -- 12-31-20 or basically January 1, 21.
if you give them a claw-back, why would you give them nine extra years to do that?
the claw-back is a great provision to have in these, but you take the teeth away by giving them an extra nine years.
the commitment was 12-31-20.
don't give them another nine years.
then again, if you don't want to do that, at least require that you get interest on that money.
if you can't get that extra three years of claw-back until the year 2030, which is what the county now says, you ought to at least make them pay interest on the years that they've had that money.
so I'd say first you ought to get rid of the nine-year extension.
that is nuts.
and if you don't want to do that or feel you can't do that, then at least make them pay interest.
you're giving them nine years.
don't give them an interest free loan for nine years.
they have plenty of money.
anyway, thanks for listening to me.

>> what do you think of the provision that 25% of the employees counted towards the overall number could be contract workers?

>> I'm sorry?

>> what do you make of the provision that up to 25% of the employees to meet the employment number could be contract workers?

>> right now my wife is a contract worker for the state of Texas.
she has no benefits.
so what you're really saying is that 25% of their employees can be contract and receive no benefits at all.
so I guess to me that's the biggest argument, that it's a social argument.
that those 25% of the employees probably won't get benefits.
so that's not pleasing to me, one.
and then secondly, in effect those employees could live in california and contract.
I mean, there's no provision in there -- I'm not sure I'm addressing your question.

>> no, you are.
my concern is we could require that the contract workers have the same benefits as apple employees, which I believe we are working toward in the negotiation.
my concern is in the enforceability of it.
since we won't have privy -- I'm concerned --

>> another thing I would like to address is that the reporting sheet that's attached, there's not enough information there for y'all to ever learn.
and basically it says we've hired this many employees, we're paying them this much, and that's it.
and truthfully even if you don't want to make requirements of them, you ought to require that the information you get allows you to learn so that in the future the next time the next big apple or microsoft or whoever comes in, you will have the data on which to make a smart decision.
the information you're requesting from them doesn't get you anywhere.
and it doesn't include the information like that.
even if you agreed to go with the 25%, the next time a company comes in and says we want 40%, you won't have the data on which to look at that.

>> right.

>> thank you.

>> thank you.

>> any other questions?
judge aleshire?

>> good morning, judge Biscoe, members of the Commissioners' court.

>> morning.

>> I handed out to you a copy of the leed rating system, the latest one I was able to find was from 2009.
I'll reference that again in a little bit.
let me start with the backup that y'all were kind enough to send us, which included the web loci, the fiscal impact analysis that you alluded to, Commissioner.
I noticed after the meeting a couple of weeks ago when there was a vote here that Commissioner Huber indicated that she was supporting the apple incentive because it would pay for itself.
several times over.
and I'm wondering if this is the analysis that you relied on for determining that, this web loci.

>> my statement was made based upon my knowledge of economic development during my professional career and it goes far beyond the web loci.
when you have a company the size of a global company like apple and it coming to a community.

>> well, it looks like there's some questions that this impact analysis -- it comes off as being a black box kind of thing.
we don't know what went into it, we can't really be clear at this point at least.
this is really one of the important lessons to learn from this process.
and as Commissioner Eckhardt pointed out, not only on the front end of being able to do a better projection of what the benefits would be of having the company here under the terms of the agreement, but what the costs are as well.
and then also this could be a lesson to learn for the future to be able to provide some true-up information on the back end to see whether or not those things really happened.
the idea that this economic impact projection doesn't tell you or there's not an assumption that you've agreed to as to whether or not we're getting 3600 new residents in Travis County or 3600 transfers from arizona or california, makes a huge difference in terms of what the cost impact would be on your government.
you bring in 3600 new people and as the gentleman said here, where are they going to sit?
strangely worded question, but a great question.
if hundred new people -- if 3600 new people come here with their families, where are they going to sit?
what roads are you going to have this them, what parks, what water?
but if it's 3600 people living here and graduating from the universities, huston-tillotson and a.c.c.
and u.t.
and so forth, who are just staying here, it has a different kind of impact.
so I don't know -- without those kind of assumptions, I don't know how you can do an accurate cost estimate as to what its impact is on public works or recreation.
I noticed the court system is projected to have one of the largest costs, five million dollars.
I'm not sure if back room staff from apple, bookkeepers and hr people are litigious.
I'm not sure I understand that aspect of those cost estimate.
why would you have $5.9 million cost impact on your court system?
the property tax line, would somebody, if you can, explain to me, is year one, is that 2012?
is that the base year?
on this projection?

>> zero is 2012.

>> so we're having zero taxes?

>> no.
that's the baseline.

>> but it says zero taxes.
there are taxes being paid on the three tracts that are described in the agreement.

>> right.
right now we just -- we put a zero on there.
whatever everything else is an estimation on the increase upon the base value.

>> is the tax -- is there a projection of the tax rate increase in this 15-year outline?

>> no.
the current rate is used.
going back through our history of tax rates they've gone up and down depending on the effective tax rate.
so really there's no good projection to use, so currently, and this tends to be kind after universal thing with these projections is to use the current rate.

>> why would alcoholic beverages tax revenues increase because of apple in here?

>> what we've done with the revenues and expenditures is we've used what our budgets are and what our revenues have been and project a percentage.
I'm not sure how web loci uses the multiplier effect on those.
what we've done is say how much our mixed beverage tax is.
these are the fine revenues.
then when we add in a project of this size, what is the projected increase of these revenues?
the same thing with costs.
if we have a population increase or any major project of this size, in theory there would be a cost to county government.

>> well, the property tax number reflected there on the first line, is that after the rebate?
is that the net?

>> no, that's before the rebate.
and I think -- I'm not totally sure, but I think that does not include apple.
I think that includes a projection of increased values for everyone.

>> so that is prerebate?

>> yes.
and then support under cost is the rebate.

>> so you net out --

>> yeah.

>> but the rebate, for example, in year 10 is only shown as under support is $489,000 out of 3.5 million in property taxes.

>> right.

>> because it's only the county portion?

>> no.
property taxes doesn't just mean that apple property.
it means a general increase in property values from a project of this size coming in.

>> wait.
I'm not understanding.

>> so it includes multiplier?

>> so you would put in here in terms of the benefits the property taxes increase that somehow somebody has projected on property that is not the apple property?

>> right.
if you're located near or there would be road improvements.
am I saying anything incorrectly?

>> that needs a lot of work.
still seems like that's not something that you would want to stake your vote on and say this is going to have a 48-million-dollar benefit and only a 28-million-dollar cost.
that's -- I don't think we're quite there yet.

>> we would at least want to know through future study what our error rate was, which we don't know at this point because we never have gone back to double-check web loci projections against what actually occurred.

>> any additional responses?

>> just the property tax line includes both residential and business property taxes.
so that's for the households as well as the business.
there is a -- but the support line is only a percent of the property taxes attributable to the business property alone.

>> and county only?
county and city only?
that's the only part /being/( ing)about rebated?

>> yes.

>> okay.

>> and you can see what has to go into that.
you have to know how many new households, how many new homes there are in order to do a projection as a tax increase beyond just this property.
thank you.
is it anticipated that in the contract that when it refers to ad valorem taxes we mean on property owned by apple?
including in the base year 2012?

>> I think that is, right?

>> yes.

>> ma'am, would you like to have a seat at the end there?

>> I'm asking about the contract, but that's fine.

>> I think the answer is yes.

>> according to the appraisal district, apple doesn't own those tracts, the three tracts.
and the assessment date for 2012 is already passed, January 1st.
I couldn't find any kind of deed on file with the county clerk's office indicating that apple has purchased those three tracts as of today.
those tracts are owned biry atta advice -- riatt vista limited partnership.
if we're saying in 2012 in the base year that if you're looking to look at what the taxes would be in future years based on the base year of 2012, the amount of real property taxes that apple would pay on those three tracts would be zero.
so you're giving them a 60% tax break on starting with zero.
you're giving them a 60% tax increase -- tax break on the entire amount of tax they would pay, not the incremental amount of tax that they brought as a result of their construction.
if we're not careful, that's the way this reads because they don't own the property today.
I found that surprising.
I thought they would be the property owners in the base year of 2012.
maybe they're going to purchase it later this year.
maybe they'll pay the taxes all and be able to show you a receipt in 2013 that they've paid the property taxes on these three tracts.

>> and we would not rebate taxes that they have not paid.
so I think where you're headed with --

>> well, I agree with ed.
if they're going to default the first year and not have any taxes and you're not going to see this deal start, then as soon as they don't comply, you ought to do the same thing you would do with any other vendor of this county government, cancel the contract.
you would recognize that they're in default.

>> additionally, at least our draft policy speaks to leased properties.
because there is a consideration that if an operation of this size and this mobility is unwilling to purchase the dirt on which they're developing the office building, it calls into question their willingness to remain.

>> that's if fair.
and the way this contract is written, I suspect that apple could lease this property from riata vista, maybe even agree in the lease to pay the taxes and still get the tax rebate without being the owner of the property.
now, maybe you don't think there's anything wrong with that, but there's one other implication.
the entity getting the break is not apple, it's the landowner.
and your county ethics or contract policy, your key person's policy, the way this is written, is only asking about key persons doing business with apple.
you are not asking whether any of your key persons are doing business with riata vista limited.
that's the owner.
that's the beneficiary of the tax break.
I don't know what you intended by it, but that's one of the implications that this be okay to lease and them not be the property owner.
I agree with you it would make more sense to say are you going to invest permanently in the community and be a property owner.

>> me too.

>> beyond just the business personal property.

>> and we do address that in our draft policy, which has not yet been adopted, where in a leased facility circumstance the tax abatement or rebate agreement has been executed with both the lessor and the lise lessee.

>> section 1.7 makes reference to the city agreement and it says it's in attachment d.
I was real curious when I saw this, when I got this I wanted to run back and look at attachment d because all we've seen is a draft.
but it's not here.
did you get the city attachment d?
it wasn't attached to what was distributed?
I've never seen the final city agreement.
so if y'all don't have it --

>> we've circulated the agreement with marc ott's signature.
I don't know that we have the final agreement with apple's signature, but I believe that's what the city council approve.
we can certainly send that over to you.

>> okay.
I thought you might add it -- I don't know if you're going to vote today or if you're going to put it over so that the entire agreement so that the entire agreement can be seen.

>> the main reason that we attached the city agreement is there are a few provisions in the city agreement that the county is planning to follow.
one of those -- I think really the primary one is the local and minority participation related to the construction and the supplies and the materials related to the facilities.

>> well, that's true.
in section 5.11 d, you do make reference to the city agreement to section 1.04.
and if you don't have the city agreement with you and if they use the draft that was handed out, all that does is says for women and minority owned businesses you'll make commercially reasonable efforts to provide the mwbe's with an equal opportunity to participate in contracting.
that's pretty soft language.
and the other reference that is made to the city contract is in 5.1.2-d regarding recruitment.
and it refers to section 1.03 of the city contract, at least the draft contract that we got, which is that you'll make commercially reasonable efforts to work with the minority chambers of commerce.
not a real tough requirement.
in fact, it says it would be satisfied by advertising job openings in their news letters.
that's all they have to do under 1.03.
and then it also requires that you would have commercially reasonable efforts to recruit residents of the Austin area, which would include Williamson county.

>> it actually includes five counties.
the msa includes five counties.

>> the other more --

>> which is how the area is defined in that agreement is the msa.

>> which wouldn't do your county budget much good.
I don't understand the loose language in 1.9 on the completion date and defining the completion date it says the parties agreed that the completion dates will be expected to be as follows: and then these are four terms in your contract, that's where you come in with the $56.5 million and the 226-million-dollar requirements, and those deadlines.
why in the world don't you just say the parties agree the completion dates are as follows?
now, a construction delay I found interesting.
that definition of 1.1.
it makes reference to a force majure, which is usual.
if there's a construction delay as a result of an act of god and it just can't do it, then you understand there's a construction delay.
and perhaps you want to reconsider the timetable for them if they can't build a building, they don't have a place for the people to sit for them to be employed.
reasonable, I understand that.
but the last part of that I would recommend you strike it because it allows a construction delay to be included and therefore to extend this even further than you already have and delay their obligation to bring those jobs here on the, quote, inability of the company to obtain the necessary permits and approvals to the city of Austin and/or governmental entity in a timely manner.
now, do you really mean when you say inability to the company -- the reason I'm raising this here is because there's another more serious provision later on given the pbo director the authority to declare that it's an excused construction delay and therefore they don't have to comply with the agreement and you can extend the agreement.
but if you mean inability of the company because of something that's not their own fault or their own decision is to say -- they say I can't afford it.
we spent all that money we had in the bank, can't afford it now.
we're here 10 years later.
it's that inability of the company.
and on the eligible property there's another strange provision, 1.19, definition of eligible property.
I'm assuming that it means the property attached in attachment a, those three tracts, but it says that -- it means the real and personal property on the project that was not present in the base year, in other words, in 2012, and which is subject to assessment for ad valorem taxation by the county and excluding inventory supplies and the purchase price of the real property.
what does that mean?
why is that being taken out?

>> that means that you are not going to get credit for the purchase of the land.
that is the base.
that's establishing the base cost.

>> who is not going to get credit?

>> apple.
the idea is --

>> it won't count towards their --

>> their rebate.

>> you will have a base valuation for that base year and that all we're going to be eligible for a rebate are those incremental increases to that value.
and quite frankly, the supplies and inventory that we have learned through other agreements that we needed to specifically exclude those items in order not to be legally required to rebate them.

>> but you've agreed elsewhere in -- it says that's more fully described in this agreement.
elsewhere you've agreed to abate 60% of the business personal property, which includes inventory and supplies.

>> right.
but he's saying these are below the water line.
these are below the base.
we're only rebating the increments above water line.
so this is defining those items as below the water line, not to be calculated for rebate.

>> so you take the 2012 value taxes, and you subtract them?

>> subtract it from it.
the base year taxes --

>> that increases the amount on which they get the 60%.

>> that's how they increase it.

>> if you lower the base and then apply 60% to the difference, it's a larger difference.

>> but the eligible property for including in the amount that the calculation for the rebate is very specifically identified in this 1.19.
all real and personal property of the project, which was not present on the property as of the base year of this agreement and which is subject to assessment of ad valorem taxation by the county, that's very specific with our working with tcad, that is a very specific identification of what property is eligible for the calculation of the taxes that we're going to be responsible legally to rebate.
that's the intent of that.

>> one of the advantages of asking questions here on the record is you get some legislative intent as to what you're doing.

>> it also takes it out of the calculation of whether they've met their obligations for increased value, correct?

>> that's correct.

>> okay.
but if you look at the formula then in 4.1.1 for the rebate, it says that the calculation is the payment for the year that we're talking about, what the full tax payment would be, minus the base year, or 2012, ad valorem taxes paid.
that's both for real and personal property, right?

>> uh-huh.

>> but there's no adjustment here for the purchase price, as you were just describing.
so I didn't see how the formula worked in light of that definition.
anyway, it's just something that we're -- but it looks to me like the 2012 base year could be the way this is written, zero, which would increase the amount of the benefit of the 60% tax break.
if you don't intend to be it that way, you might make sure that you're not making reference in here to 2012 taxes that apple was assessed for -- that they were assessed for because based on the research I did about who owns the property, they're not assessed those taxes this year.
so their assessment on the real property would be zero.
and there's no personal property there yet either.
one of the things I was interested in seeing, if you will look at 4.4.2-a on the annual reporting form, it requires the company to notify and here's a strange phrase, tcad/Travis County tax assessor collector and pbo on the annual reporting form.
I think it would be very good and a reasonable requirement to require apple to report to the chief appraiser what they are saying is the value or their investment as it's referred to here on personal property and real property.
so that the chief appraiser will use that information in determining the value.
let me ask a more fundamental question.
is it the intent that the target, the 56 million, 226 million target, are not the amount invested or paid for by apple, but the amount that shows up as taxable value on the tax roll for these properties and the business personal property?

>> that is the intent.

>> the latter.

>> there's some loose wording then you might want to be careful about because when you use the word -- when you use the word invest in here, you might just instead of saying what apple invested, you might just say that is designated as the taxable value on the property and then you've nailed it.

>> so you would suggest we would say "as evidenced by tcad rendition":

>> not just evidenced by.
if that's what you intend is they have to reach a 56-million-dollar taxable value in order to make that target, and they've got to meet 226 million taxable value to make that other target, then say it like that.
don't say invested.

>> as tcad rendition evidences, that is --

>> I think there's another section in there that actually talks about the rendition.
so we'll go through.

>> we'll get to that.
but they only require under the tax code to render their personal property value.
they're not required to render the real property value.
that won't get that.
if you look at inability to comply, another startling provision, if the company cannot certify that it has complied with the agreement, then they give the county an explanation and then it says upon receipt of such explanation -- and this is an important phrase because it shows up two or three times.
of the county, the county may at its soul discretion agree to work with the company to develop mutually agreeable amendment to this agreement with which the company can comply or terminate.
when the word the county is used here, does that mean the Commissioners' court or does that mean the pbo director?

>> should mean the Commissioners' court.
that would be my assumption.

>> I would hope -- and you might consider putting a definition of the word county in the definition section that when you use that term, you mean this Commissioners' court because that would help solve part of the problem that ed everyday to earlier.
if you're going to amend this later, are you going to let them off the hook?
it ought to be done in this room on the record and they ought to come down here and explain why they didn't comply and why you're going to make the decision as elected officials to let them off on that.
another paragraph is the inspection.
this is part of your effort to try to make sure they comply with the agreement.
but the last sentence in that section says the inspection and monitoring visits will be made by the county executive of pbo or her did designee with the company's approval and will be limited to the reports and information used to verify the requirements of this agreement.
why would you agree in a contract that only one person from the county can go over there?
what if she needs a team of people to go over there and look through those records efficiently?
why would you have something that onerous to say that you can only bring one person.
and if it's not her, company, apple, has to approve who you send.
why should they have any say as to who you decide to send over there?
it may be a reasonable number that she wants to take a team with her, they could do it.
it would be like telling susan she's going to do an audit and has to do it by herself.
that ain't right.
that's not the way it's done.
if you'll look also at the next paragraph, three on monitoring, at the top of the next page or the middle of that paragraph, it says any additional review -- this is over and above the review that we just talked about -- will be mutually agreed to by the county and company and strictly limited to that information necessary to confirm the agreement compliance.
that makes your reporting form all the more important that you include everything in it that you want to see.
have they actually worked with the asian chamber of commerce or not?
because that's not on your reporting form.
and this says that it's strictly limited the information and they have to agree at 4.2.4 at the bottom it said should the company and the county be unable to agree to the verification process, if you haven't been able to verify compliance in 30 days, if you read on to the next page, it says you will pay them anyway.
if the county doesn't agree that you've been able to verify their compliance with the agreement, why would you go ahead and grant them the agreement funds to the company and then try to settle your differences later?
it seems to me until they satisfy you at least the Commissioners' court, if not the pbo director, that they've complied, why would you go ahead and pay them?

>> didn't we have this issue come up with domain, that we paid them anyway and then figured it out after the fact?

>> remember, you're rebating, so you've collected taxes.
you've got this money and you're paying it back.
why would you go ahead and pay it back until you're satisfied that that's an appropriate expenditure.
5.1.1-a on the location, note that the requirement for the location allows other locations.
do you really intend to allow apple to apply this tax abatement to other locations than the three tracks that are in attachment a?
because that's what it says, or other locations.
the ownership again, it says here that -- it says the property on which the current project is located is owned by the company or its affiliate.
to the best of my knowledge, riata vista limited is not an affiliate of apple and best that I can find in any public record, this statement is not true today, may become true, but it's not true now, that apple owns this property.
it also says that the project will be used for the company's americas operation center as more particularly described in attachment a.
attachment a gives no description whatsoever of what the americas operations center is supposed to be.
it repeats the name.
that's all it does.
it doesn't tell us what it is.
you can't read this agreement and find out what's going to be going on, what the activity is that you're give -- that you're giving a tax break for.
and then paragraph c below that is a good place, leroy, where I was suggesting where you're using the term invest a minimum of 50 and invest a minimum of 226 million, you might just put there, will result in taxable value equal to a minimum and it could lock it down.
okay.
ed made an illusion to 5.1.2-b, little 3, completion delay impact.
again, this says the company acknowledges that the foregoing employment schedule is based on the company's ability to construct the buildings.
again, do you really intend to raise with that kind of language the issue of whether or not apple at some point in time says I don't think we can afford to do this now.
we'll postpone the construction and these jobs.
you realize that the first job you're bringing with agreement is four years from now, 2016?
the first job is four years from now.
the county -- it says the county executives shall thereafter have the authority to extend the deadlines.
if there's a construction delay, this reads that the county executive will do it.
I would beg you to change that to require that to be the Commissioners' court.
if you're going to hear an excuse of why the construction was delayed and therefore the jobs were delayed even longer than they are, what's unique about this in my opinion from agreements that we used to do is that we used to have more near term employment.
we would get those jobs in the next year or two or three or four.
not 10 years or 15 years from now.
this is giving a tax break for employment promises, job promises that are way out.
even the first one is four years from now.
we used to give priority to people who would bring us jobs in the next three years.
and the first job here is in four years.
for goodness sake, if it's going to be extended, it really ought to be a decision by the Commissioners' court and ought to be done in public and with a hearing.
on the required annual compensation in the next -- I agree with the concern expressed by the Commissioner Eckhardt that you've got 25% of these jobs that there is no standard for what they'll be paid, but even worse, this is also the average, this 54,000 even for the full time employees is the average.
they can pay a lot of people a lot more and a number of them then a lot less than what you're seeing here.
you really couldn't even include in here a minimum that they pay a liveable wage?
it really couldn't bargain to contract here that at a minimum they would pay what would be considered a liveable wage here?
and I just -- I'm dumbfounded that there's nothing in some contract that requires that for any portion of the tax abatement that they must hire underprivileged people or people who have been unemployed in this community.
this is an opportunity to use your leverage to try to help you lower the cost in county government by trying to take care of people who are underprivileged.
you fund some of those programs for the underprivileged.
so you've got the public purpose and the legal ability to use public funds for that purpose.
you could sure as heck do it in this agreement and say look, we're going to -- I'm going to give you only 40% of a tax break unless you help us to give a job to underprivileged people.
I'm amazed that there's nothing in here along those lines.

>> and bill, is that something that the county government can demand?

>> sure.
you've got -- I have no doubt that you can -- you're not demanding them to do a thing.
could you go and require apple to hire them?
no, you don't have to.
you can't do that probably.
you can't tell them they have to.
but can you reward them if they do?
you probably can't --

>> county attorney's office, can we reward a company for achieving a certain percentage hire out of workforce development programs?

>> sure.
we can talk about it further in executive session and give you the statutory references and everything.

>> if the county has the authority -- the public purpose and the county has the authority to spend public funds like you're already doing to try to help underprivileged people to get a job, can you use this mechanism as well as a way to get that done.
the opportunity to correct deficiencies in paragraph f gives them 90 days so each if they don't hire the first 300 people four years if now, they get 90 more days, and then all they suffer is a claw-back for that year if they don't do it within the 90 days.
I noticed that there is nothing here that gives you the ability to say, okay, this is the second year you've done that.
you didn't meet it last year, didn't meet it this year.
we're terminating the contract.
I don't find that in here.
your opportunity to terminate this contract requires more than just that lack of compliance.
that's pretty weak.
the leed certification on the next page.
I don't know if you're aware of this, but as I pointed out to you here with the handout, there's a couple of things that -- if you look at the bottom, the leed system has levels, ratings going from certified to silver to gold to platinum.
apple has achieved platinum status before on some of its products and so forth, so it's not impossible.
this is very different.
this is a building in essence, but you're only requiring them to meet the very lowest levels of the leed certification.
and you're giving them a whopping tax break relatively.
and it would just seem to me that more than just telling them they need the leed certification, you ought to pick one of those silver, gold or platinum and tell them they need to meet that.
leed also has what are called regional priority credits and it's on the last page.
and for Austin the additional credits that they can try to achieve or you might want to require them to achieve, includes using 1 percent renewable energy and to resalvage 75% of their waste.
not unreasonable if you're going to give them a five percent cost break.

>> no.
and our draft policy requires at least -- again, it's a draft, but it requires for a five percent rebate that they achieve gold level.

>> that seems reasonable.
you had asked last time, judge, about comparing this to the draft policy.
this actually requires -- the way this contract is written right now, it requires them to meet a lower standard than your draft policy would in order to get that five percent.
at the bottom of that page the annual report filing, it goes on to the next page.
I would recommend you add a sentence like this: the parties agree that the information included in the reporting form is information to be disclosed to the public.
now, I suspect that reporting form would be public information of the tpia, but they might claim that they're proprietary information and send it over to the ag if you don't put something in here getting apple to commit right now that the reporting form -- I'm no the talking about the records that pbo went over and looked at at their if office, but the reporting form, they ought to agree here in this contract that it's public information.
not just public information, but it's information to be disclosed to the public.
this is where the rendition -- the next paragraph on the other information is where the rendition information comes up.
I suppose it's what you were referring to earlier.
again, just keep in mind that under the tax code the only requirement for them to render is their personal -- their business personal property.
and --

>> what number are you on?

>> b.
it's right before 5.3.2, it says other information, b.

>> bill, are you planning to take a few more minutes?

>> I'm almost done.

>> anybody else here on this item?
because I'm about to get sick unless I eat lunch.
and -- you're the only one?
okay.
let's let bill finish and then we'll take yours and then recess for lunch.

>> 5.3.
it, county monitoring of reports, that sentence again uses the term the county will only request such review upon a reasonable cause to question the accuracy of the report.
in my opinion you ought to strike that sentence.
if the county wants to verify you ought to be able to do that.
county in this case, do you mean pbo or otherwise.
otherwise?
under 7.0, 7.1, compliance with federal, state and local laws, the way this is written, the only requirement for them to comply with state or local or federal laws is in the performance of the services under the contract, which I guess means the operation of their back office in the americas center.
I wonder if you really don't -- usually I would think you would have that more broadly applied.
there's a suit filed last week for the Texas attorney general against apple that I understand some kind of price fixing or anti-trust.
I'm not understanding on the quality of that suit.
I have no idea whether that's valid.
apple may have every good reason in the world to do whatever they did.
but do you realize that if -- the way this is written, they don't -- if they are found to have done something anti-consumer or anything in the future that violates federal or state law, they still get the tax break.
and I wonder if you really intended to write it that way.
the termination by the county at the bottom, 8.1.38, just note that in order to -- this is the only way you can terminate the contract.
they have to do one of these four things.
they not only have to violate the requirement concerning the location or ownership, they have to violate both of them.
why is the word and there and the little I on the next page?
it seems to me if they violate the location or the ownership that ought to be grounds to terminate.
I mention to you again here's another term where you say invest instead of using the word that they failed to get the taxable value at that level.
and little item 3, this -- the way this reads, you really ought to -- instead of saying December 31st, 2025 if they fail to get the new jobs, you ought to tie it to the schedule that's in 5.1.2 this that if they don't meet that hiring schedule you can terminate the contract.
it doesn't mean you have to, but the way this is written you can't until -- until 2025 you wouldn't be able to terminate the contract unless they failed to meet the entire 3600.
they could have failed all the way along the way and you couldn't terminate the contract.
this needs to be tied back to that.
the -- again, on prohibitions on the key contracting persons, I pointed out to you that you may want to extend that to the current owners.
12.1 permits this agreement -- cannot be assigned to a new company without prior written approval of the county.
surely you intended that to be the Commissioners' court I would hope if you're going to allow this contract to be assigned.
on attachment a I'd point out to you that there's no description of the company of americas operations center, and as ed pointed out, this description only requires them to build up to the 200,000 square feet and the other.
finally on the reporting form itself, there's a mistake under the employees and the contract reference.
it says 5.1.1.
it should be 5.1.2-b under the total number of fte's.
the average salary should be 5.1.2-c, not the references that are there.
I would suggest to you on the value of improvements that you separate the business personal property value from the real estate values so that you can monitor those.
and there's no provision in here on the reporting to give you any kind of information you might need for web loci feedback.
it seems like that would be reasonable to add to allow them to get information from them that you need to feedback in to the web loci system.
there's no requirement that they report their efforts for working with mbe, wbe.
there's no requirement in this report that they say this is what they've done in working with the various chambers of commerce and there's no requirement that they report how many local hires they included.
I thank you for your time.

>> judge aleshire, may I ask you, would you work with us moving forward in coming up with some boilerplate language to include with regard to the hiring of economically disadvantaged individuals?
my understanding was that apple insisted we are under a time crunch even though this agreement doesn't begin until 2016 and therefore for whatever reason that I will not opine on at this moment, we were apparently unable to come up with the provision with regard to the hiring of economically disadvantaged individuals even though apple had provided some suggested language for inclusion.

>> sure.
I think there's got to be a practical way where that can be worked out if the intent is there and it needs to be tied to something meaningful so that you end up helping with the richest company around if you're going to give them a tax break, don't just trickle down as ed was pointing out.
and the piece that ed wrote, and I got to sign along with him, it's -- we said it's probably the biggest shame of all that our local officials have not negotiated tax rebates in a way that would provide jobs to those in our community who need them the most.

>> thank you.

>> could I make a short comment?
I think in addressing judge aleshire's issue in the ability of the county to terminate the contract, really that is the -- the intention is under 8.5, notice and opportunity to cure.
what that section says, the county some shall have the right to withhold the payment of agreement funds to the company pursuant to 8.3 million the default is cured by the company.
that was at least the county attorney's attempt to have some teeth in not paying out.

>> you could accomplish that on the previous page in item little i-3.
this that says if they don't have the new hires by December 31st, 2025, if they don't do the scheduling in 5.12.

>> okay.

>> judge, I thank you.
dave porter, senior vice-president with the Austin chamber.
I have nothing due due respect for these two gentlemen, judge, the time and effort that you have put into going through the contract being involved in this very public process.
they find it very odd that apple has not purchased this property, but it is still very much a competitive -- even though they may not disagree, they are still looking at other cities.
this is not a done deal for Austin, Texas.
they have not purchased the property because it's not a done deal for Austin-Travis County.

>> but they don't own the property under their current office building, which already houses 3100 employees.

>> I don't know that.

>> that's true.

>> they lease that property, but they have not -- they have not purchased or leased that property because they have not made a decision for Austin.

>> which again lose to my concern that we -- which leads to my concern that we discussed in principle before apple was on the scene with regard to providing rebates to leased facilities because of the transient nature of--

>> and I agree.
we would a lot rather have a corporate citizen own the property.
it shows longer term commitment.
and I have no idea if this is going to be a lease or if they're going to own the property.
from what I understand this is going to be the first property they're going to own in Travis County for an office complex.
regarding the web loci model, we went through a very public process, the city did anyway, several years ago, and in fact I think bryan kelsey came before the Commissioners' court to give you an update that the five incentive deals that you had previously done all came back cash positive, including the domain, by using the web loci model.

>> would you suggest that we use web loci on all of our corporate citizens and then provide a rebate to every single one of them that were cash positive?
because that would be more in keeping with the Texas constitution as far as the tax code that treats everyone equally.

>> we only go after certain targeted industry sectors, butt five incentive deals that the county has been involved with, bryan kelsey came in from capcog and did the analysis and every deal, including the domain, came back cash positive.

>> if we were to do web loci on your household, do you think your household would be cash positive?

>> no.
I don't make enough.

>> my point being --

>> let mr. Porter finish and then ask what questions you want to -- would you finish?

>> the web loci model was -- the web loci is a cab cog model from atlanta.
I know that's based out of georgia tech that capcog uses, the city of Austin uses it, and bryan rogers, there was a committee of people that seemed to be more against incentives involved and they all came to the conclusion that web loci was the best model to use to determine the cash value back to a local unit of government.
I believe last week we also talked about the contract workers that they are in fact paid very well.
I believe it was given the average wage and that they do receive benefits similar to what the apple employees.
also 90% of all the hires are going to be local.
and by our definition of local that's within the five-county metro.
so not all -- you aren't having 3600 people from california, arizona move here for the jobs.
90% is required to come from within our local metro.

>> mr. Porter, I appreciate your comments today and I really do, even though I am combative.
I concede.
and I do appreciate your quotes in the "austin american-statesman" this Sunday about, I hate incentives, incentives is part of what we do, it's part of the reality of economic development.
certain companies and certain projects are going to request and require incentives.
and you're just stating the reality.
and I recognize that.
my concern here, though, is that if -- if certain companies and certain projects -- and I think that it's fair to read into the word certain the largest and most wealthy can demand these incentives, that we should at least negotiate with them as strenuously as we can to vas advantage Travis County residents.
and as a subset of that our economically disadvantaged residents.
so I would really hope that we could continue to work, you and i, and mr. Lundguard.
I know we have an apple representative in the audience although we've never had an apple representative address the court, but I would ask mr. Lundguard and apple and the chamber to continue working with us to come up with that boilerplate language that is amenable all if we're going to continue giving out preferential tax treatment to the least needy of our resident.

>> we will take this item into executive session for further discussion this afternoon.
I move that we recess until 2:00.

>> second.

>> all in favor?
that passes by unanimous vote.

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