EDC to develop incentives to attract mid-level companies

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By WAYLON CUNNINGHAM

Hoping to encourage capital investments, create jobs and relieve tax burdens on homeowners, the City’s Economic Development Corp. has taken the first steps toward creating an incentives program aimed at recruiting mid-level businesses and retail chains.

An EDC workshop on Wednesday saw board members discuss the still prospective program in broad strokes and agree on a basic outline. A special board meeting later that day authorized Executive Director Lance Dean to begin talks with city lawyers on a proposal draft.

“At this point, just getting on the field is important,” Dean said, emphasizing that fine-tuning the program could come later. “When a business asks if we offer incentives, I need to be able to say at the beginning, yes or no.”

“It would do us well to have it, even if we never use it,” said Director John Clark.

As now proposed, the program would target incoming businesses that meet certain numerical standards associated with public benefits, and offer a level of incentives based on how much it exceeds those minimums.

Standards proposed by Dean and discussed at the workshop include the amount of jobs created, capital invested into a site, and the projected sales tax and ad valorem tax revenue.

Board members agreed that having a consistent framework — “being able to plug in numbers and get a generated number back,” as EDC President Bill Chapman said — is essential for any incentives program.

“To justify this kind of investment, we need to be able to show the return to the community,” Dean added.

Chapman offered an example that a retailer moving in with a $2 million capital investment could in one year generate $50,000 in revenue for the city through sales and property taxes. He hopes to target companies that would have a “shelf life” of at least 20 years in a location.

Generating more tax revenue from commercial entities is important, said Director Chad Pirtle, who is also an Assistant Superintendent for Liberty Hill ISD. He said the current tax base is lopsided toward homeowners, due to rapid residential development causing “rooftops” to outpace businesses.

Several aspects of the program as discussed so far are designed to make investments less risky.

A “clawback” provision would allow the EDC to reclaim the incentive if a business does not meet its schedule for those projected numbers, following similar programs established by EDCs across the state.

In Buda, for example, a Cabela’s store had to pay back a total of $56,830 to the Buda EDC after missing job targets for the third year in a row.

Though Chapman discussed putting in place a first-year review of businesses given incentives, specific details of any clawback provision was not firmly established.

Also to insure adequate returns on investments, board members agreed that a program should not target those who operate out of leased space.

The “transient” nature of tenant businesses makes them a more risky investment, Dean said.

Minimum eligibility standards were established to help focus on mid-sized commercial targets.

For retailers, for instance, Dean’s initial suggestions were to set a minimum capital investment of $1 million, requiring at least 10 jobs be created, and that those jobs have an average salary of $25,000.

An increasing amount of incentives would be given as determined by how much the business would exceed those minimums.

A prospective cap for investments was also discussed at $25,000, though what form incentives would take was not discussed.

The EDC’s 2017-2018 fiscal year budget includes $40,000 for an incentives program.

Dean also said that these numbers would change as the city grows, even within months. Incentives for retailers would also not be necessary once the community is large enough.

Board members also agreed that a large-scale commercial entity would probably not be interested in an incentives program, and would go above the EDC to appeal directly to the City Council.

While much of the “placeholder” details of the prospective program discussed were supplied by Dean, board members offered input that would focus efforts.

Clark pushed for focusing the program on specific business types.

“If our sweet spot as the EDC is that $1 or $2 million business, what kind of those do we want to get? Let’s line those out,” he said.

Director John Johnston, who co-owns Dahlia Cafe, said that he likes the idea and the format for the program, but that “unique situations” of particular businesses might require a case-by-case decision.

Director Jamie Etzkorn, an attorney who took her place on the EDC board last month, said that research should be done into what incentives the Leander EDC offered around 10 years ago, when it was in a similar position to Liberty Hill.

The city has in the past given money to new commercial entities in Liberty Hill as a way to spur capital improvements.

Council Member Liz Rundzieher, who participates in EDC meetings as a non-voting member, said that Chicken Express was reimbursed for costs associated with building exits and entrances to its lot, which it was required to do. Major’s Burger Company was reimbursed for a fire hydrant it was required to install across State Highway 29.

Chapman says he “could in the future” have conflict, offers to recuse himself

Chapman read a letter near the beginning of the workshop describing his feeling that the incentives program “may influence or benefit some buyer or some property in which I have an interest.”

In light of that possibility, Chapman offered to recuse himself from the workshop and any future discussions of the program if the board wanted to declare a conflict of interest.

“It’s not happening this moment,” Chapman said, “but it could.”

No action was taken.

As board president, Chapman does not vote except to break ties.

He emphasized that he has “a big interest in seeing the program created for other people’s property and other people’s users,” and that he believes his experience with retailers would be a boon for discussions.

Chapman has for years invested in and sold properties for commercial uses.

Rundzieher said that as long as the discussions do not pertain specifically to his properties, there should not be a conflict.

Pirtle said he “appreciates the transparency.”

“I keep telling Lance [Dean], as long as we’re always doing the right thing, I don’t think anybody’s ever going to prove otherwise,” he said.
Board agrees to raise Dean’s salary

Dean’s salary has been raised to $90,000, following recommendations made by the independent consulting firm Ray Associates in a study commissioned by the City Council earlier this year.

The study compared the salaries of Liberty Hill employees to their counterparts in 18 other cities considered to be Liberty Hill’s competitors in the job market.

Results indicated that the salaries for most city employees were below market, anywhere between 16.5 to 74 percent.

City Administrator Greg Boatright was found to have the largest gap between his current pay and the market midpoint for the responsibilities in his position.

The EDC Executive Director was found to have a midpoint salary at $96,844. At the time of the study, Dean was paid $73,500.

Rather than issue immediate raises across the board, the Council has stated their goal as bringing the city’s salaries to a market mid-point in phases.

The Council had asked the EDC to evaluate their own director for a recommendation.

The decision at Wednesday’s EDC meeting was approved following a 50-minute executive session, for which city attorney Linda Sjogren was reportedly present by phone.

Dean was present for the first portion of the closed door session.

EDC to change meeting time

The EDC Board will now meet on the second Thursday of the month instead of the third. Newly-appointed EDC Director Etzkorn said she has a standing conflict on the third Thursday.

Meeting times are at 5 p.m.

The EDC will meet next in January. The December meeting will be skipped due to the holiday season.

Waylon@LHIndependent.com

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