STRATEGIC PRIORITY: Economic and Neighborhood Vitality
AGENDA DATE: February 24, 2021
COUNCIL DISTRICT(S): 14
DEPARTMENT: Office of Economic Development
EXECUTIVE: Dr. Eric A. Johnson
______________________________________________________________________
SUBJECT
title
Authorize an economic development agreement with Digital Realty Trust, L.P., approved as to form by the City Attorney, granting: (1) a business personal property tax abatement exempting 50 percent of the taxes on the added value to the net new tangible personal property for a period of five years Estimated Revenue Foregone: City ad valorem business personal property taxes up to $252,929.00 over a five-year period; and (2) a Chapter 380 Economic Development Grant in an amount of $200,000.00 in consideration for job creation and a multiphase expansion and renovation of Digital’s offices located at 2323 Bryan Street, Dallas, Texas in accordance with the City’s Public/Private Partnership Program - Not to exceed $200,000.00 - Financing: Public/Private Partnership Fund
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BACKGROUND
Digital is a leading global provider of data center solutions for customers across a variety of industries ranging from cloud and information technology services, communication and social networking to financial services, manufacturing, energy, healthcare, and consumer products.
Digital currently owns a 26-story 477,107 square foot office tower located at 2323 Bryan Street in Dallas’s central business district. To support its global growth, Digital has proposed to renovate parts of the Bryan Street location to expand both the data center capacity and the office area. The expanded facility would be considered one of Digital’s “Centers of Excellence” for cybersecurity, IT, legal, procurement, data center operations, human resources and accounting.
Digital is considering an 8-year plan with four phases of development totaling approximately $126 million. However, the incentive agreement is tied to the capital spending for building improvements and job creation planned for the years 2021-2025, totaling $104.5 million and 143 net new full-time positions, respectively.
• Digital would invest a minimum of $87.5 million for the mechanical and electrical plant improvements in the Bryan Street facility for expansion of its existing customer IT deployments and new customer IT installations, including generators, switchgears, transformers, uninterruptable power supplies, power distribution units, and static transfer switches.
• Digital would invest approximately $14.7 million in the renovation of three floors of the office building to accommodate new employee growth, including approximately $5 million in furniture, fixtures, and equipment.
• Digital would invest approximately $2.4 million to upgrade the common areas of the building, including the parking garage, elevators, and lobby.
Digital requests and Office of Economic Development (OED) staff recommends City Council consideration of economic development incentives to secure Digital’s selection of Dallas for the expansion. Proposed incentives include:
1) An economic development grant equal to $1,000.00 for each permanent, full-time job created in Dallas by December 31, 2025, up to an amount not to exceed $200,000.00 subject to the requirements described below. For purposes of the job creation requirements, the average annual salary will not include benefits, bonuses, overtime or other non-salary items.
• If the minimum creation/relocation requirement is met, the job grant will be $143,000.00.
• If Digital accelerates expansion in Dallas, however, the job grant may be increased up to the maximum grant of $200,000.00.
2) A business personal property (“BPP”) tax abatement for a period of five-years in an amount equal to the City taxes assessed on 50% of the value of Digital’s net new BPP investment at the Dallas site.
• The BPP tax abatement will be contingent upon Digital documenting a total capital investment of $104 million at the Bryan Street facility by December 31, 2025, and ongoing compliance with the job, salary, local hiring, and other term sheet requirements.
• The abatement will begin on January 1, 2026 and continue for five years.
• The estimated value of the BPP tax abatement is $252,929.00.
As conditions to receipt of these incentives, the following provisions shall be met:
a) Digital shall relocate and/or create a minimum of 143 full-time jobs at the Dallas site by December 31, 2025 with a minimum average annual salary of $120,000.00. Additionally, once those jobs are created, Digital shall continually maintain at least 200 total jobs in Dallas earning the minimum average annual salary through December 31, 2030.
b) Digital shall invest a minimum of $104 million in capital expenditures as follows:
1) $87.5 million for the data center upgrades;
2) $14.7 million in office upgrades; and
3) $2.4 million in updates to the common areas to include the parking garage, elevators, and lobby.
c) A minimum of 35% of all Digital employees at the 2323 Bryan Street property shall be residents of the City of Dallas. Further, Digital shall provide a written report to the Director outlining the type of skills and jobs that will be available at Digital, so that the City may play an active role in coordinating with community partners to support filling the local jobs. Such communication shall be provided to the City no later than December 21, 2022.
d) Digital will conduct or participate in two job fairs by December 31, 2023, at locations in the City of Dallas approved by the Director of OED to facilitate the recruitment and hiring of residents of the City of Dallas.
e) Digital shall make best efforts to execute agreements with Dallas Independent School District (DISD) and Richardson Independent School District (RISD) by December 31, 2021, to participate as an Industry Partner in the Pathway to Technology Early College High School (P-TECH) programs of each Independent School District.
f) Digital shall undertake a good-faith effort to comply with the City's Business Inclusion and Development goal of 32% participation by Minority/Women-owned Business Enterprises for construction and construction-related expenditures incurred by CBRE or any affiliate thereof in Dallas.
g) Digital shall, upon request, provide access to staff from the Office of Economic Development to review Digital’s records and documents related to the obligations contained herein to monitor compliance with the City incentive agreement.
h) Digital shall provide written annual reports to the OED documenting compliance with the City incentive agreement.
i) Failure to comply with the terms of the incentive agreement may result in recapture and/or repayment of the incentives.
j) The Director, in his or her sole discretion, may extend any of the completion deadlines for up to six months.
k) In the event of a force majeure, Digital shall, in writing, notify Director of such an event. Director shall make a decision as to whether a force majeure event under the terms of this Agreement is occurring within 30 days of notice from Digital. A force majeure event pauses a party’s performance obligation for the duration of the event, the termination of the event being determined solely by the Director, but does not excuse it. After the termination of the force majeure event, all deadlines occurring during the force majeure event shall be extended pursuant to the length of the force majeure event.
PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS)
City Council was briefed in Executive Session to discuss the offer of a financial or other incentive for Digital or an affiliate thereof under Section 551.087 of the Texas Government Code on February 1, 2021.
FISCAL INFORMATION
|
Fund |
FY 2021 |
FY 2022 |
Future Years |
|
Public/Private Partnership Fund |
$0.00 |
$0.00 |
$200,000.00 |
Estimated Revenue Foregone: City ad valorem business personal property taxes up to $252,929.00 over a five-year period
OWNER/PROPERTY OWNER
Digital Realty Trust, L.P
Digital - Bryan Street Partnership, L.P.
Camilla Harris, Chief Accounting Officer
MAP
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