DEPARTMENT: Economic Development
DEPARTMENT HEAD: Rene Dominguez
COUNCIL DISTRICTS IMPACTED: 3
SUBJECT:
Removal of a tract of land located at 4526 S. Loop 1604 from the South San Antonio Area 4 Limited Purpose Annexation Area, and consideration of an Industrial District Development Agreement and Basic Fire Services Agreement with Halliburton Energy Services, Inc.
SUMMARY:
This item includes the consideration of ordinances removing a tract of land located at 4526 S. Loop 1604 in southeastern Bexar County, consisting of approximately 150.260 acres and owned by Halliburton Energy Services Inc. (Halliburton), from the South San Antonio Area 4 Limited Purpose Annexation Area, and designating and approving a 10-year Industrial District Development Agreement, contingent upon Halliburton meeting the City’s job and wage requirements, contributing an annual payment, and financial support for community workforce development initiatives. These ordinances also approve a Basic Fire Services Agreement (FSA), which includes an annual fire services fee.
BACKGROUND INFORMATION:
Founded in 1919, and headquartered in Houston and Dubai, Halliburton is a Fortune 500 company and one of the largest oilfield service companies in the world. The company offers drilling and evaluation services, as well as completion and production services, and has 65,000 employees across the globe.
Halliburton’s San Antonio site, located at the Intersection of South Loop 1604 and I-37E, functions as the main base for the company’s Eagle Ford Shale operations and its nearly 1,000 associated employees. As of this year, the company has generated approximately $305 million in real ($28 million) and personal property ($277 million) value at the site, with the majority of the personal property value comprised of mobile field equipment.
The recommended ordinances present an effort to secure Halliburton’s continued presence and investment in San Antonio, and align with the long-term economic goals outlined in the City’s SA Tomorrow Comprehensive Plan, and the Forefront SA Strategic Plan for Economic Development, specifically in regards to the attraction and retention of major employers and high-wage jobs within the City’s Targeted Industries.
As of January 19, 2014, the property was included within the South San Antonio Area 4 Limited Purpose Annexation Area. However, during the sharp decline in global oil prices and increased economic pressure, Halliburton requested removal of the property from limited purpose annexation, contingent upon approval of a 10-year Industrial District Development Agreement and associated Basic Fire Services Agreement.
The City’s Planning Commission has reviewed the proposal and approved a resolution recommending the removal of the property from limited purpose annexation and approval of the Industrial District Development Agreement and associated Basic Fire Services Agreement.
ISSUE:
To attract businesses and jobs in the City’s ETJ, the Texas Local Government Code authorizes a city to designate a portion of its ETJ as an Industrial District and enter into a non-annexation agreement. Since 1986, City Council has approved the designation of six Industrial Districts and associated non-annexation agreements. Through the establishment of an Industrial District, the statute also allows municipalities to enter into basic fire services agreements with a company and charge a fee for such services. The current annual fee charged by the City is $40,000.
To be eligible for the proposed 10-year IDA, the company must maintain a minimum of 500 full-time jobs assigned to the project site, with a minimum of 200 full-time jobs solely located at the project site itself. 100% of the employees assigned to the site must be paid an annual cash “Living Wage” of no less than $24,876.80, and at least 70% of all employees assigned to the project site must make an annual cash wage of no less than $47,400, in addition to access to benefits, which exceeds the current Bexar County Average Weekly Wage standard of $47,307.
As part of the IDA, Halliburton must contribute an annual payment for 10 years to cover a portion of the ad valorem property taxes and direct pay sales and use taxes that would otherwise have been paid to the City, with an initial annual payment amount of $1,500,000. However, to account for fluctuations in the industry, the City shall undertake a payment review process in years 4, 7, and 10 to re-assess the annual payment for the following years during the term of the IDA.
In addition to the annual payment, the IDA includes a $2 million contribution towards community workforce development efforts. These funds - accessible by the company - will focus on providing certifications for incumbent workers to help fill skill gaps identified and validated by the community’s workforce development initiative, SA Works.
With a low local unemployment rate, the initial focus for use of the funds will be incumbent workers, who can be upskilled to fill a company’s existing, internal needs. This strategy assures a job for participants at the end of the occupational training and will open up entry level positions to other job seekers, encouraging both access and advancement. This local up-skilling effort, will take advantage of the Technical Institute that the Alamo Colleges recently launched to provide incumbent worker training. If all costs were covered for participants staff estimates the $2 million contribution would serve an estimated 200 workers as part of such a program.
As part of the agreement, Halliburton must provide an opportunity for City staff to review and comment on proposed land use and new construction at the project site, and comply with applicable City codes, ordinances, and associated processing and inspection fees. Upon the expiration of the term of the IDA, Halliburton must petition to be annexed by the City, which may be approved at the City’s discretion.
Finally, Halliburton must also agree to enter into a Basic Fire Services Agreement (FSA) for fire service protection services at the project site for ten (10) years, which includes a standard, annual Fire Services Fee of $40,000.
Removing the property from the South San Antonio Area 4 Limited Purpose Annexation Area, designating the Halliburton Industrial District, and providing the company a 10-year Development Agreement will retain the company’s presence and promote significant economic development activity in the City’s ETJ and Bexar County. Additionally, retaining the company’s presence will provide significant tax revenue for other taxing jurisdictions, such as Bexar County, Southside Independent School District (SISD), Alamo Colleges, and University Health System.
The proposed agreement is consistent with the City’s Annexation Policy concerning non-annexation agreements, as it provides that the owner will petition for annexation following the end of the IDA term, includes services in lieu of annexation to extend City regulations and requirements in anticipation of future annexation, and should be placed in the City’s annexation program.
ALTERNATIVES:
If City Council chooses not to approve the removal of the property from the Limited Purpose Annexation Area, designate and approve of the Industrial District Development Agreement, and the Basic Fire Services Agreement, the subject property would remain within the limited purpose annexation, to be considered by City Council for full purpose annexation with an effective date of December 31, 2016. Full purpose annexation of the project site will likely result in the company moving its operations, jobs, and personal property investment to another location currently owned by the company.
Staff does not recommend this alternative, since Halliburton’s planned investment and jobs will create a significant economic impact for the area and local taxing jurisdictions.
FISCAL IMPACT:
This ordinance authorizes an Industrial District Development Agreement and Basic Fire Services Agreement with Halliburton Energy Services. As part of this agreement, the City will receive $40,000 annually for Basic Fire Services for a total of $400,000 over the 10-year agreement term as well as an annual payment of $1,500,000, for the same 10-year time period for a total of $15,000,000. These payments will be deposited in the General Fund. Additionally, the City will receive a one-time, $2,000,000 payment into the City’s Economic Development Incentive Fund for the purposes of workforce development fund. The estimated revenue over the course of this 10-year agreement totals $17,400,000.
RECOMMENDATION:
Staff recommends approval of the ordinances removing the Halliburton project site, located at 4526 S. Loop 1604, from the South San Antonio Area 4 Limited Purpose Annexation Area, designating the Halliburton Industrial District, and approving a ten-year Development Agreement and Basic Fire Services Agreement with Halliburton Energy Services Inc.