ORDER NO. 29466 AUTHORIZE LETTER TO SUPPORT KERR ECONOMIC DEVELOPMENT FOUNDATION TO ASSIST BA PRODUCTS, INC. TO EXPAND AND REMAIN IN KERR COUNTY Came to be heard this the 14th day of November, 2005, with a motion made by Commissioner Williams, seconded by Commissioner Nicholson. The Court unanimously approved by vote of 4-0-0 to: Authorize letter of support for the strategy development by the Kerr Economic Development Foundation to assist BA Products, Inc. to expand its facilities and remain in Kerr County. 1,`~ ~9y(o (~ COMMISSIONERS' COURT AGENDA REQUEST PLEASE FURNISH ONE ORIGINAL AND NINE COPIES OF THIS REQUEST AND DOCUMENTS TO BE REVIEWED BY THE COURT. MADE BY: Commissioner Williams OFFICE: Precinct 2 MEETING DATE: November 14, 2005 TIME PREFERRED: SUBJECT: (Please be specific). Consider, discuss and take appropriate action to authorize a letter of support for the strategy developed by Kerr Economic Development Foundation to assist BA Products, Inc. to expand its facilities and remain in Kerr County. EXECUTIVE SESSION REQUESTED: NAME OF PERSON(S) ADDRESSING THE COURT: Commissioner Williams, Guy Overby ESTIMATED LENGTH OF PRESENTATION: 10 minutes. IF PERSONNEL MATTER-NAME OF EMPLOYEE: Time for submitting this request for Court to assure that the matter is posted in accordance with Title 5, Chapter 551 and 552, Govermnent Code, is as fo-lows: Meeting scheduled for Mondays: 5:00 P.M. previous Tuesday THIS REQUEST RECEIVED BY: THIS REQUEST RECEIVED ON: All Agenda Requests will be screened by the County Judge's Office to determine if adequate information has been prepared for the Court's formal consideration and action at time of Court meetings. Your cooperation is appreciated and contributes toward your request being addressed at the earliest opportunity. See Agenda Request Rule adopted by Commissioners Court. Confidential Economic Impact Analysis Project: BA Products Expansion Kerr County, Texas The following analysis has been conducted using the IMPI,AIV model developed by Minnesota Implan Group (MIG). The model uses economic theory combined with historical trends to anticipate changes in direct, indirect and induced employment and income generated due to the presence of a new business. The results of this analysis are strictly for the use of its recipients and are not to be published for general viewing. This analysis reflects the anticipated county and regional impacts of a corporate expansion or relocation. The output and analysis from IMPLAN simulations are theoretical in nature and are contingent on the quality and quantity of data as Developed By Lower Colorado River Authority Community and Economic Development October 25, 2005 -1- Economic Benefits Analysis Executive Summary The BA Products is a business that has been within the Kerr County community for over 5 years. The company has asked the Kerr Economic Development Foundation and the City of Kemille for assistance in developing a new plant due to an expansion in their operation. The Kerr Economic Development Foundation requested an evaluation of the potential economic impacts of the project. Specifically, this analysis quantifies impacts in two key areas of interest: o Local Economic Impacts. The extent to which the development will create jobs and increase spending in Kerr County during the construction and expanded operation of the facility. o Revenues. The extent to which the development will also increase tax revenues for Kerr County, the Kerrville Independent School District and the City of Kerrville. The LCRA Community & Economic Development Department evaluated the potential economic impacts and incentive package to be offered to the BA Products expansion project utilizing several different analysis techniques. Local economic impacts were estimated utilizing IMPIr1N, an econometric model designed by the University of Minnesota. The model is used to determine the increased spending associated with new business investment. Tax revenues and city revenues were estimated from projections based on local property tax rates. Our analysis suggests the following key findings: KEY FINDINGS BA Products expansion will result in $2 million economic impact and create 12.5 new jobs. 2a The 60,000sgft. facility will add $64,655 in property tea revenues annually. This additional revenue will flow to Kerr County, Kerrville ISD and City of Kerrville. 2b The 85,000sgft. facility will add $78,799 in property tax revenges annually. This additional revenue will flow to Kerr County, Kerrville ISD and City of Kerrville. Developed By Lower Colorado River Authority Community and Economic Development October 25, 2i)OS -2- Economic Benefits Analysis Economic Benefits to Kerr County KERB COUNTX ECONONIIC IMPACT ANALYSIS The BA Products expansion project will create jobs and increase spending in Kerr County during the construction and expansion of operation of the facility, As shown in Table 1, the construction of the facility and operation of the BA Products expansion will increase spending in Ken- County by $10 million. Table la: Summary of Economic Impact for Kerr County Construction Current Expansion Total lOYear b0,000sq ft Operation Total Direct 1,641,000 4,000,000 1,636,364 7,277,364 58,004,640 Indirect 645,582 833,169 340,841 1,819,592 12385.682 Total $2,286,582 $4,833,169 $1,977,205 $9,096,956 Table lb: Summary of Economic Impact for Kerr County Construction Current Expansion Total lOYear RG_OOOsn ft flneratinn Tnkul Dtrect 2,325,000 4,000,000 1,636,364 7,961,364 58,688,640 Induect 914,672 833,169 340,841 2,088,682 12,654,772 Total $3,239,672 $4,833,169 S1,971,205 $10,050,046 $71,343,412 Table 2a: Summary of Jobs Created for Kerr Coun Construction Current Expansion Total 60,000sq ft Operation Direct 18.0 22.0 9.0 49.0 Indtrect 7.3 8.6 3.5 19.4 Total 25.3 30.6 12.5 b8.4 Table 2b: Summary of Jobs Created for Kerr Coun Construction Current 85,000sq ft Operation Expaosion Total Direct 25.5 22.0 9.0 56.5 Indirect 10.3 8.6 3.5 22.4 Total 35.8 30.6 12.5 78.9 The construction phase of the project will result in approximately 35.8 full or part time jobs in the County, 25.5 directly involved with the construction of the building and 10.3 spin-off jobs. Wages during construction will be $1,377,938 due to the hiring of local construction workers and the increases in services needed to support the construction work. Spending will continue in the local economy during the expanded operation of BA Products, once the construction phase has ended. Though the facility will employ 9 additional workers, the expansion will create additional employment of 3.5 full or part Developed By 2 October 25, 2005 Lower Colorado River Authority Community and Economic Development -3- Economic Benefits Analysis time jobs in Ken County. Annually, the expanded operations at the BA Products will "- increase wages by $333,925 in Ken County. Estimated Construction Costs and Assumptions a. The estimated cost to construct the new facility is $1.641 million. o Building RPC of 88.3% b. The estimated cost to construct the new facility is $2.325 million. o Building RPC of 88.3% Estimated Operating Costs and Assumptions • Retention of 22 jobs with 535,920 in wages • Expanded employment is 9 jobs with 235,440 in wages ESTIMATED TAX BENEFIT The second component in this analysis is to estimate the impact on tax revenues for the taxing authorities. The construction of the new facility will increase tax revenues for multiple taxing entities. (Note: this analysis does not attempt to estimate the increases in cost or the provision of public services.) As shown in Table 3b, $78,799 in property taxes will be returned to the community after the expansion. Table 3a: Annual Tax Benefit Summary Source Land Market Value Inventory Property Total Kerr County 623 $2,701 $6,818 $10,142 City of Kerrville 845 3,b61 9,242 13,748 Kerrville ISD 2,505 10,855 27,405 40,765 Total $3,973 $17,217 $43,465 $64,655 • Estimated Expanded Tax Appraisal: $2,441,000 o Land Value of $150,000 o Inventory of $650,000 o Building of $1.641 million Table 3b: Annual Tax Benefit Summary Kerr County $2,701 $9,660 $12,361 City of Kerrville 3,661 13,094 16,755 Kerrville ISD 10,855 38,828 49,683 Total $17,217 $61,582 $78,799 • Estimated Expanded Tax Appraisal: $3,000,000 o Inventory of $650,000 o Building of $2.35 million Developed By Lower Colorado River Authority Community and Economic Development October 25, 2005 -4- Economic Benefits Analysis Cost-Benefit to Kerr County and its Partners Table 4: Cost-Benefit Analysis Cost Amount EIC KEDF Total Cost -A $1,050,000 Amount Tax Revenues $64,655 Construction Impact $2,286,582 Expansion Impact $1,977,205 Total Benefit $4,328,442 Return Ratio 1:4.1 First Year Benefit - B Tax Revenues Construction Impact Total Benefit ,,_ Return Ratio $78,799 $3,239,672 Note: The assistance provided to the BA Products facility will retain the current employment of 22 workers Return on Investment $5,295,676 1:5.0 Economic impact analysis evaluates new investment on a macroeconomic level. The true and total benefit of a new facility, like the BA Products Expansion facility, benefits the entire regional economy. As has been demonstrated, there will be a $10 million economic impact on the regional economy from the expansion. The IMPLAN model does not intend to measure all benefits to a community such as: • New Home Construction • Added Property Tax -due to new home construction • Increase in Utility Revenues -due to new home construction • Sales Tax Collections - on goods and services purchased Developed By 4 Lower Colorado River Authority Community and Economic Development October 25, 20(15 -5- BA PRODUCTS KERRVILLE, TEXAS Tax Base Summary Inventory Analysis Inventory (1-3 years) Base Rate Taxes County $650,000 0.4155 2,701 City of Kemille $650,000 0.5632 3,661 Kerrville ISD $650,000 1.6700 I0,855 Total Inventory Taxes $17,217 Inventory (4-6 years) County I ,000,000 4,155 City of KerrvIlle 1,000,000 5,632 Kerrville ISD 1,000,000 16,700 Total Inventory Taxes 26,487 Inventory (7-10 years) -- County 1,250,000 5,194 City of Kerrville 1,250,000 7,040 Kerrville ISD 1,250,000 20,875 Total Inventory Taxes 33,109 Additional (4-6 years of operation Base of $1,000,000 Inventory) County 4,362 City of Kerrville 5,913 KISD 17,535 Total Inventory Add $ 27,810 Additional (7-10 years of operation Base of $1,250,000 Inventory) County 7,479 City of Kerrville 10,137 KISD 30,060 Total Inventory Add $47,676 3A Tata1 Tax Benefit Summary 64,644 x 10 years = $646,550 Additoona- Inventory 4-6 years 27,810 Additional Inventory 7-10 47,676 Tota! 10 year Tax Benefit $722,036 First we work-then we play. •-~--- 1700 Sidney Baker, Suite 200 #4 Kerrville, Texas 7""""_ • (830) 896-1157 Business (830) 896-1175 Fax Email: information~kerredf.orc - 6 Website~, www.kerredf.org ECONOMIC DEVELOPMENT FOUNDATION Additional Benefits: • 1994 Airport Loop Road (10,000 square feet at 1.80 sq ft. administrative building leased through May 2007. Eighteen months at $1,800.00 monthly for total of $ 32,400.00 due CitylCounty. In Ju of 2007 plans to locate administrative offices in new facility increasing improvement value of property and creating building inventory at airport for lease for new business development. • Kerr County/City of Kerrville Personal Property & Inventory Tax $1,477.00 • Center Point ISD will receive $3,465.00 through May 2007 • $41,250 sales tax generated on $1,641,000 new building construction Total Add Benefits: $78,592 TOTAL 10 year Taa Benefit $800,628.00 ADDITIONAL FUTURE INVESTMENT • 20 YEAR RETURN ON EIC CONTIBUTION FOR BUSINESS EXPANISION AND RETENTION OF KERRVILLE/KERR COUNTY BUSINESS. • FUTURE ACQUISTIONS AND EXPANSION WILL LOCATE IN KERRVILLE/KERR couNTY • SOLID COMMITMENT FROM BA PRODUCTS AND PARTNERSHIl' WITH ECONOMIC PARTNERS FOR TEN YEARS AND FOR MANY YEARS AFTER. First we work-then we play. •~-- 1700 Sidney Baker, Suite 200 #4 Kerrville, Texas 7nma (830) 896-1157 Business (830) 896-1175 Fax Email: information~kerredf on - 7 - Website: www.kerredf.org ECONOMIC DEVELOPMENT FOUNDATION