DEPARTMENT: Planning and Community Development
DEPARTMENT HEAD: John Dugan
COUNCIL DISTRICTS IMPACTED: 1, 2 & 5
SUBJECT:
An Ordinance authorizing the execution of a 380 Economic Development Grant Agreement for up to $233,907.00 of Inner City TIRZ Funding to Chelsea’s Catering and Bar Service for commercial kitchen equipment located at 217 Cactus Street.
SUMMARY:
City Council is being asked to consider an Ordinance authorizing the execution of a 380 Economic Development Grant Agreement for up to $233,907.00 of Inner City TIRZ funding to Chelsea’s Catering and Bar Service (CCBS) for new equipment at the company’s headquarters located at 217 Cactus Street. The new equipment will enable CCBS to hire twenty new full-time employees.
BACKGROUND INFORMATION:
On May 5, 2015, CCBS submitted a formal proposal to the Inner City TIRZ Board of Directors requesting $233,907.00 in TIRZ funding to support the purchase of commercial kitchen equipment for the company’s headquarters located at 217 Cactus Street.
CCBS, owned and operated by Tony Gradney, is a full service catering and beverage service. CCBS is the exclusive beverage provider for the Henry B. Gonzalez Convention Center and the Lila Cockrell Theater. Mr. Gradney recently purchased and renovated a property a 217 Cactus to be used as the company’s headquarters. Prior to the CCBS relocation, the property was vacant and blighted and had become a detriment to the community. 217 Cactus is in the Hackberry Corridor in the heart of the Denver Heights Neighborhood. The property is also is in the Inner City TIRZ boundary and the federally designated “Promise Zone”.
ISSUE:
To date, Mr. Gradney has invested $135,820.00 to rehabilitate the two-story 7,000 square foot facility and has recently moved his corporate headquarters into the second floor. Mr. Gradney intends to use the lower level as a commercial kitchen and warehouse for the company’s inventory and equipment. These renovations have eliminated significant slum and blight and are a significant improvement to the Hackberry Corridor a historically underserved area.
On August 14, 2015, the Inner City TIRZ Board of Directors approved a Resolution authorizing the commitment of $233,907.00 in Tax Increment funds and negotiation and execution of a Chapter 380 and Economic Development Grant Agreement.
In an effort to ensure consistency with established City policy, the TIF Unit utilized the Economic Development Incentive Fund (EDIF) Guidelines created by the Economic Development Department (EDD) as the basis for the evaluation of the proposed project. Based upon these criteria, the project is eligible for funding because of the following factors:
a) The project falls within the Inner City Reinvestment and Infill Policy (ICRIP) boundary and a City Designated Reinvestment Area as well as the Inner City TIRZ Boundary.
b) The proposed funding would enable the company, which currently employs 20 full-time staff, to expand operations increasing their current staffing to 40 full-time positions. The owners have agreed that all new full-time jobs created will meet or exceed the City’s “Living Wage” standard (Currently $11.66/hour) as per the EDIF Guidelines.
c) The owners have agreed that in addition to meeting the Living Wage standard, after one year of initiating full operations at least seventy percent (70%) of all new and existing employees, with at least one year of employment with the company, will earn at least $14.96/hour in compliance with EDIF Guidelines.
d) In accordance with the Guidelines the company will provide each full-time person employed at the project location and his or her dependents with access to a health insurance program within one year from date of employment.
e) This project will assist in the expansion of jobs by a local company that would not otherwise occur.
f) The project does not fall under any categories deemed ineligible by the guidelines.
g) The proposed funding is eligible because it will be used for the acquisition of equipment for the facility which will enable the creation/expansion of jobs.
In determining the proposed funding recommendation, TIF staff also considered factors not included in the EDIF Guidelines including; community involvement, tax increment generation, part-time employment and the removal of slum and blight within the zone.
Community Involvement:
In an effort to foster community partnerships and to encourage growth of the Hospitality and Culinary fields in the area, CCBS has begun discussions with the following entities:
a) Sam Houston High School Culinary Program
b) St. Phillips College Culinary Program
c) The University of Houston Hospitality Program at St. Paul’s Square
Through active cooperation with these entities, CCBS hopes to offer internships and full and part-time job opportunities to the students of these programs.
In addition, Mr. Gradney will offer available office space in the newly renovated building to community groups or small businesses as a business incubator.
Tax Increment Generation:
Because the previous owner of the project site was a tax exempt organization, the conversion of the property into a for-profit business will enable the Inner City TIRZ to earn tax increment from 100% of the assessed value. Any additional improvements to the facility will also increase that value adding to the total benefit to the Inner City TIRZ.
Part-time Employment:
In addition to the proposed 20 full-time positions made possible through the facility expansion, the increased capacity will enable CCBS to pursue additional projects and events. If successful, these events could enable CCBS to hire as many as 150 part-time employees during different events throughout the year.
Removal of Slum and Blight within the Zone:
The project site was vacant and had been neglected for more than 15 years. Mr. Gradney, using his own personal funds, has rehabilitated the building and moved his corporate offices into the second floor.
Funding:
Two factors were considered in determining the proposed funding for the project; evaluation of the proposal based upon the EDIF Guidelines and added benefit to the Inner City TIRZ as previously described under additional considerations.
Because the proposed facility expansion will serve as CCBS corporate headquarters and the site falls within the ICRIP, Promise Zone and Inner City TIRZ boundaries, in accordance with EDIF Guidelines, the project is eligible to receive incentives up to 1.5% of the total investment and up to $10,000.00 per job. Based upon the guidelines the project is eligible to receive a grant up to $206,070.91.
Taking into account the additional considerations of community involvement, tax increment generation, part-time employment and the removal of slum and blight within the zone, staff recommended there was sufficient additional benefit to the Inner City TIRZ to warrant funding the gap between the original proposal and the incentives prescribed under the EDIF Guidelines. This amounts to an additional award of $27,836.09 for a total award of $233,907.00.
ALTERNATIVES:
City Council could decide not to agree with the recommendation of the Inner City TIRZ Board of Directors to authorize the execution of the Agreement with CCBS but that action would prevent the creation of twenty new jobs. In addition it would prevent the expansion of a local business that has demonstrated a commitment to the historically underserved Hackberry Corridor and the Denver Heights Neighborhood.
FISCAL IMPACT:
This ordinance authorizes the execution of a 380 Economic Development Grant Agreement for up to $233,907.00 to Chelsea’s Catering and Bar Service for new equipment at the company’s headquarters located at 217 Cactus Street. Grant awards will be paid from the Inner City TIRZ fund.
RECOMMENDATION:
Staff recommends approval of the Ordinance authorizing the award of up to $233,907.00 of TIRZ funding to Chelsea’s Catering and Bar Service and directing staff to execute an agreement for the proposed project located at 217 Cactus Street.