Fort Worth changing tax incentive policy to focus on central city
June 23,2016
Reposted from the Star-Telegram
By Sandra Baker
FORT WORTH
In a push to attract development to the inner city, Fort Worth officials are considering significant changes in the city’s economic development incentive policies.
The proposed changes come at the recommendation of the city staff and a 13-member advisory committee that met several times since last fall. The current policies are good but can be better, said Robert Sturns, the city’s economic development director.
Robert Sturns, Fort Worth’s economic development directorGlen E. Ellman Courtesy photo
The proposals, too, come after city officials learned in the latest audit of some agreements that companies didn’t receive their full tax incentive because they could not meet requirements for hiring minority- and women-owned businesses for construction jobs and as suppliers.
That hasn’t happened for several years, Sturns said. For 2015, the companies committed spending $282 million in construction costs with minority and women-owned businesses but ended up spending $219 million, 22 percent less.
Robert Sturns, Fort Worth’s economic development director “It is concerning,” Sturns said. “We are typically above the commitments.”
The City Council needs to renew its policies under state law every two years. The council is expected vote on the new policies Tuesday. The city offers abatements and grants under two chapters of the state tax code.
Sturns said the new policies are the first step in an overall revamping of several incentive programs, including those offered through tax increment finance districts and empowerment zones. All will be designed to drive a stronger, healthier economy across Fort Worth, but also to provide greater flexibility for the staff to negotiate deals, he said.
Among them, the city will begin only offering incentives on retail projects with the central city, or inside Loop 820. For example, if the two outlet mall projects in the Alliance corridor in far north Fort Worth that have received agreements asked for incentives today, they would not qualify.
The retail projects in the inner city are “truly serving our underserved communities,” Sturns said.
Base levels for abatements and minimum investment thresholds are changing, but companies will be eligible for boosts based on such things as employee numbers, wages paid and whether a facility is energy efficient. The numbers are different for targeted areas of the city and outside those areas. The incentive goes up if numbers go up, including for jobs and work with minority- and women-owned businesses.
Councilwoman Kelly Allen Gray said she likes the ideas of offering the enhancements but added, “I don’t want us to find ourselves in a position where we are always doing away with the MWBE piece. That’s really important to me.”
Last year, Fort Worth collected $24 million in taxes from the companies with incentive agreements, and $14.9 million of that was returned to the companies, netting the city $9 million it might not otherwise have, Sturns said.
When it came to construction spending overall, the 45 agreements reviewed showed a 22 percent increase in construction spending over what was committed, or $398.9 million spent when $326.2 was committed. Also, the audit found that the companies created 14,092 jobs, above the 11,399 that were pledged, the city said.
Tight market
Sturns said industry figures show that Fort Worth is in one of the tightest construction markets nationwide, which may have affected the companies’ ability to attract minority- and women-owned businesses. Nonetheless, the city did reduce incentives.
“It’s not for lack of trying,” Sturns said. “American Airlines in particular, the three years I’ve been over the MWBE, that was one of the more aggressive and proactive approaches towards MWBE participation that I’ve seen. These companies realize that this is a hard commitment. It’s not a good-faith effort that we have in our business diversity ordinance. If they don’t hit that number, that incentive gets reduced.”
In 2014, American Airlines received approval for a 15-year, 85 percent real and personal property tax abatement for its new Integrated Operations Center south of Dallas/Fort Worth Airport.
Last year was the first year the company was eligible to receive its abatement. and it received 65.25 percent of it. The city audit shows that American didn’t meet the required spending of $125,000 with minority- and women-owned businesses and spent only $6.8 million in construction costs with minority- and women-owned businesses when it was required to spend $14.9 million.