DEPARTMENT: Economic Development Department
DEPARTMENT HEAD: Rene Dominguez
COUNCIL DISTRICTS IMPACTED: 1 and 5
SUBJECT:
An Ordinance authorizing amendments to agreements between the City of San Antonio and Oracle America, Inc., and Site B Data Services LLC.
SUMMARY:
Staff is requesting City Council action to approve amendments to agreements of the City of San Antonio (City) as follows:
A. First Amendment to a Chapter 380 Economic Development Program Grant Agreement with Oracle America, Inc. (Oracle) passed and approved on May 15, 2014; and
B. First Amendment to a Chapter 380 Economic Development Program Grant and Loan Agreement with Site B Data Services, LLC (Site B) passed and approved January 14, 2010.
ITEMS FOR CONSIDERATION:
A. ORACLE
BACKGROUND INFORMATION:
Founded in 1977 and headquartered in Redwood City, CA, Oracle is a global provider of enterprise software and computer hardware products and services with $37 billion in revenue in 2016. A Fortune 500 company, it employs over 136,000 people worldwide.
In response to continued growth due to the acquisition of new customers and the expansion of existing client relationships, Oracle chose to expand at the facility located at 613 NW Loop 410 in City Council District 1 and create 200 new jobs.
On May 15, 2014, City Council approved a Chapter 380 Economic Development Program Grant Agreement with Oracle America, Inc. (Oracle Agreement). The Oracle Agreement provides for a grant payment of $5,000 per full time job, contingent on the company creating and maintaining a minimum of 200 jobs earning a minimum annual salary of $70,000, excluding benefits, by December 31, 2016. Currently, the company is exceeding its job creation requirements at the San Antonio site; however, it miscalculated the wages that it is required to pay all employees under the Oracle Agreement and has requested an amendment to its grant agreement. No grant payments have been made to Oracle thus far.
ISSUE:
Oracle is considering expanding its operations at its current location, and to accommodate the expansion and newly formulated wage thresholds, staff is recommending amending the Oracle Agreement to require the creation of an additional 150 new full time positions at the project site by December 31, 2019, all of which substantially exceed the City’s living and all industry wage requirements (for a total of at least 350 full time jobs). Under the amended agreement, Oracle will be eligible for a $2,500 grant payment for each job at the project site with wages of at least $50,000 annually, and a $5,000 grant payment for each new job at the project site with wages of at least $70,000 annually, up to the original $1 million approved in the grant agreement. The amendment also provides an incentive to increase annual salaries to at least $70,000 for those making less, and extends the agreement term by 2 years, thereby extending the job maintenance commitment. City Council approval is required to amend the Oracle Agreement.
ALTERNATIVES:
City Council could choose not to approve the First Amendment, which may affect Oracle’s decision to maintain and grow its business operations in San Antonio and would leave the City with the option to terminate the Agreement.
B. SITE B
BACKGROUND INFORMATION:
Site B Data Services Inc. (Site B) converted the existing Frio Street Building at 911 North Frio into a data center specializing in providing bandwidth, storage, security and management of enterprise level data. The data center is a 27,000 sq. ft. facility with 15,000 sq. ft. serving as the actual data center space.
Site B now operates as an unaligned data center, which allows businesses to locate their data and have a choice of several telecommunication providers to supply connectivity.
On January 14, 2010, City Council approved a $200,000 economic grant and loan agreement with Site B (Site B Agreement). The company committed to a capital investment, full time job creation milestone, and the use of significant CPS energy demand.
ISSUE:
As a result of industry changes concerning its colocation data center, Site B has requested and staff is recommending a loan and grant modification requiring Site B to create at least 5 full time jobs, make a capital investment of at least $750,000, and use at least 2.4 MW per year of electricity. The City will secure repayment of the loan and the grant in the event of a default by maintaining a first lien on the data center equipment and creating a first lien on the Site B building. If Site B fails to meet and maintain the terms outlined in the amendment, the City may avail itself of the remedies under the amendment. By amending the Site B Agreement, the City and Site B will be able to continue their partnership, fostering continued growth for small business.
ALTERNATIVES:
City Council could choose not to approve the First Amendment, which will result in the potential closure of a small business located in a targeted area of the city providing services in the technology industry.
FISCAL IMPACT:
There is no direct fiscal impact to the City as a result of the approval of the recommended amendments.
RECOMMENDATION:
Staff recommends City Council action to approve amendments to agreements of the City as follows:
A. First Amendment to a Chapter 380 Economic Development Program Grant Agreement with Oracle America, Inc. passed and approved on May 15, 2014; and
B. First Amendment to a Chapter 380 Economic Development Program Grant and Loan Agreement with Site B Data Services, LLC passed and approved January 14, 2010.