STRATEGIC PRIORITY: Economic and Neighborhood Vitality
AGENDA DATE: August 12, 2020
COUNCIL DISTRICT(S): 8
DEPARTMENT: Office of Economic Development
EXECUTIVE: Dr. Eric A. Johnson
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SUBJECT
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Authorize a real property tax abatement agreement with C5LC at Bonnie View, LLC, a Delaware limited liability company or an affiliate thereof and KeHE Distributors, LLC or an affiliate thereof for a period of ten years in an amount equal to the City ad valorem taxes assessed up to 90 percent in connection with a build to suit distribution facility located on approximately 80.897 acres at the southeastern corner of Bonnie View Road and Logistics Drive in Dallas, Texas, in accordance with the City’s Public/Private Partnership Program - Estimated Revenue Foregone: up to $5,932,759.00 over ten years
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BACKGROUND
City staff has been in discussions with KeHE Distributors, LLC (“KeHE” or “Company”) regarding the development of a new food distribution facility (“Facility”). The only site under consideration in Dallas is an approximately 80.897 acre site at the southeastern corner of Bonnie View Road and Logistics Drive (“Project Site”) upon which will be constructed an approximately 995,000 square foot facility (“Site”).
Headquartered in Illinois, KeHE is an employee-owned distributor of dairy, natural foods, confectionery, nuts, grains, seeds, snack mixes, and vitamins to over 30,000 stores across North America. KeHE has been in operation over seventy years and has a network of food distribution facilities in cities including Portland, Oregon, Stocton, California, Atlanta, Georgia and Calgary, Alberta, Canada.
The proposed project will involve the consolidation of two existing distribution facilities located in Dallas and Flower Mound. Construction is expected to commence by Quarter 3 2020, with operations to begin approximately 12-16 months after groundbreaking.
Total estimated investment capital investment of approximately $81 million will be made at the Bonnie View Site, which will include investments by the property owner C5LC at Bonnie View, LLC (“C5LC” or “Owner”) and the Company as tenant.
The $81 million investment includes construction and other real property improvements costs of $76 million ($72 million in construction costs by Owner and $4 million in tenant improvements by Company) Additionally, the Company will invest $5 million in business personal property (Furniture, Fixtures & Equipment).
The Company will relocate 500 permanent, full-time jobs (“Jobs”) to the Bonnie View Site by December 31, 2021. Additionally, the Company intends to create 75 new jobs at the Bonnie View Site, with hiring by December 31, 2022. The average annual wage for Company employees will be $40,000, not inclusive of overtime, bonuses, benefits, or other non-salary items.
To facilitate the project, staff is recommending City Council consideration of a real property (“RP”) tax abatement for ten years in an amount equal to the City taxes assessed on up to ninety 90% of the increased value of the Company’s real property at the Bonnie View Site (the “Abatement”).
The Abatement will begin on January 1 of the year after the Company confirms completion and occupancy of the new facility on the Bonnie View Site and that it has hired the minimum required number of employees (“Minimum Employee Count” - described below). The amount of the abatement in any year will be determined by the percentage of employees of the abatement recipient who are residents of the City of Dallas.
(a) 40% or greater percentage of Company’s full-time equivalent (“FTE”) employees who are residents of the City of Dallas at the new facility, Owner’s real property tax abatement shall be 90% for the year applicable.
(b) 30% to T39% of Company’s FTE employees who are residents of the City of Dallas at the new facility, Owner’s real property tax abatement shall be 75% for the year applicable.
(c) 29% or lower of Company’s FTE employees who are residents of the City of Dallas at the new facility, Owner’s real property tax abatement shall be zero for the year applicable.
As conditions to receipt of this incentive, the following key provisions shall be met (among other related contractual terms):
(a) Company’s lease of the 995,000 square foot fulfillment center (“Facility”) on the Bonnie View Site by June 30, 2021.
(b) Complete construction by Owner (as developer of the Facility) or at Company’s direction on behalf of Company of a minimum 995,000 square foot fulfillment center on the Bonnie View Site no later than June 30, 2022, as evidenced by a certificate of occupancy.
(c) Operation of the constructed fulfillment center shall commence no later than June 30, 2022, and Company shall continuously occupy and operate the entire facility during the term of the Abatement.
(d) Minimum Employee Count: Company shall retain and/or create a minimum of 575 FTE Jobs at the Bonnie View Site by June 30, 2023. The minimum employee count must be continuously maintained throughout the term of the Abatement.
(e) Minimum Salary Requirement: All employees of Company in Dallas shall be paid a minimum wage of $15.00/hour. This amount does not include overtime, bonuses, benefits, or other non-salary items. The minimum salary requirement is applicable throughout the term of the Abatement.
(f) Average Annual Wage: Company’s employees shall be paid an annual average wage not less than $40,000.00. The minimum annual average wage requirement is applicable throughout the term of the incentive agreements.
(g) Minimum Capital Investment: A total minimum capital investment of $76,000,000.00 of real property (building) capital investments shall be made associated to the new facility. This investment shall not include any amounts spent on developer fees or other profit line items, attorney fees, or the purchase price of the Bonnie View Site land.
(h) Job Fairs: Company shall conduct or participate in one job fair by December 15, 2022, at locations in the City of Dallas approved by the Director of the Office of Economic Development (“Director”) to facilitate the recruitment and hiring of residents of the City of Dallas. Company should coordinate with the Director on how to properly document this requirement (usual documentation includes on-line posting, newspaper ads, video, sign-in sheets, etc).
(i) Minority/Women-owned Business Enterprises (“M/WBE”): Company shall undertake a good faith/best effort to comply with the City’s Business Inclusion and Development goal of 25% participation by MWBE for construction and construction-related expenditures incurred by or on behalf of the Company in Dallas, which includes construction of the facility to be leased to the Company. Compliance will be coordinated with the City’s Office of Business Diversity, and Company shall meet with the Office of Business Diversity prior to executing any incentive agreement.
(j) Workforce Development: On or before December 31, 2021, the Company shall either (i) execute agreements with both the Dallas Independent School District and the Richardson Independent School District to participate as an Industry Partner in the Pathway to Technology Early College High School (P-Tech) programs of each school district, or (ii) negotiate another workforce training or educational program with one or more local high schools, community colleges, or universities that is acceptable to the Director of the Office of Economic Development.
Office of Economic Development staff are available to make introductions to any such educational partners.
In the context of the City’s Market Value Analysis (“MVA”), the proposed project site is surrounded by residential clusters identified as MVA Market Categories F, G, H and I and is proximate to several Racially/Ethnically Concentrated Area of Poverty(R/ECAP) areas.
PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS)
City Council was briefed in Executive Session to discuss the offer of a financial or other incentive for C5LC under Section 551.087 of the Texas Government Code on August 3, 2020.
FISCAL INFORMATION
Estimated Revenue Foregone: Up to $5,932,759.00 over a ten-year period
TENANT/LEASEE
KeHE Distributors, LLC
Jon Mollman, Vice President of Operations - East Region
OWNER/LEASOR
C5LC at Bonnie View, LLC, a Delaware limited liability company
Linda D Booker, Chief Financial Officer
MAP
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