Agreements help area businesses grow while benefiting community
On Nov. 5, Fallbrook Technologies Inc. announced plans to relocate its entire operation from San Diego to Cedar Park—where the majority of the staff is already stationed—by early 2013.
The move is propelled by Fallbrook's recent partnership with two global companies—Dana Holding Corp. and Allison Transmission—to commercialize locally developed, high-efficiency vehicle transmissions. Both the relocation and partnership are expected to create more jobs in Cedar Park, Fallbrook President Al Kammerer said, and accelerate Fallbrook's agreement with the city to have 125 employees on its payroll by the end of 2013.
"We have agreed on the projects that will be developed in Cedar Park but are presently negotiating the details, including the staffing," Kammerer said. "The majority of the positions will be engineers, but technicians and administrative staff will also be required."
The company is one of four businesses involved in active economic incentive agreements with the City of Cedar Park. In October, Fallbrook exceeded its 100-job employment benchmark set by the city, and Economic Development Director Phil Brewer said Fallbrook is an example of how incentives can work in the community.
"We have provided them a good launching pad in Cedar Park, and we have been very supportive of their growth since they initially came here with two employees in 2004," he said. "We've seen them grow, and those are true success stories, in our opinion."
State standard
Economic incentives are not new to the city or the state. The Legislature approved the use of tax abatements in 1981. In the early 1990s, Chapter 380 agreements were enacted, granting municipalities the ability to entice companies through new means, including grants and loans, commitments for infrastructure, and tax reimbursements.
But Chapter 380 agreements come with expectations, said Dr. Edward Mullen, Austin Community College government professor.
"When you have agreements with a developer or a large business, you have to have conditions, and those conditions have to benefit the city," he said. "They can be employment conditions, tax revenues through sales or some other benefit to the community like infrastructure."
Local implementation
In 1998, Cedar Park voters approved establishing 4A and 4B economic development corporations through a 1 cent property tax levy. The corporations fund economic and community projects, including incentives for developers and companies.
According to city documents, the Economic Development Department created an estimated 250 jobs in fiscal year 2012 and added $15 million in capital investments to the tax rolls. Its current budget for incentives is $1.5 million, some of which is already committed to companies including Fallbrook, BMC and Costco.
"When we are structuring an incentive agreement, we look at the number and types of jobs being created, the average salary of those jobs, the annual payroll of the company and what the impact of that payroll will have in the community," he said. "Then we are also looking at what kind of skin in the game the company has in terms of the capital investment."
City Council approved a 15-year development agreement with Costco in September, authorizing the split of sales and property tax collections up to $6 million. Brewer said the incentive agreement will help create approximately 200 primary jobs and the construction of a 150,000-square-foot building, with a performance measure to add another 100,000 square feet to the development by December 2018.
"All of the incentives that we do are performance-based," Brewer said. "You'll have certain points in an agreement where you have to meet the performance measure, and if you don't, you don't receive the dollars."
Company benefits
The economic development department has 18 ongoing expansion or relocation projects and aims to create 350 jobs in Cedar Park in the next year. While the city aims to support current and new businesses, not all incentives are financial.
"An incentive can be many things," Brewer said. "It can be expediting the permitting process or getting a rezoning on a piece of property; it could be extending or building a water or wastewater line or building a road."
The city approved a $1.6 million incentive agreement with Fallbrook in 2011. It established employment benchmarks and relocated jobs from Round Rock to Cedar Park.
Fallbrook's collaboration with the city improves the company, Kammerer said.
"The business benefit to us was the city helping fund the relocation, but actually what's turning out to be larger is, by working with the city as a partner, we are getting more notoriety in the area," he said. "It helps fundamentally improve our business by having good business partners in the area."
