Title
RESOLUTION AUTHORIZING THE EXECUTION OF AN ECONOMIC DEVELOPMENT INCENTIVE LOAN AGREEMENT BETWEEN SEDGWICK COUNTY AND FIGEAC-AERO SUBJECT TO CONDITIONS, AND AUTHORIZE THE TRANSFER OF BUDGET AUTHORITY FROM THE ECONOMIC DEVELOPMENT RESERVE TO THE ECONOMIC DEVELOPMENT PROGRAM.
Presented by: Sherdeill Breathett, Economic Development Coordinator.
RECOMMENDED ACTION: Adopt the resolution and authorize the Chairman to sign.
Body
Figeac-Aero is a French company established in 1989 to supply parts to large aerospace customers. In 1994 the company was transformed into Figeac-Aero Group, a corporation now comprised of six European subsidiaries. Today the company has more than 500 employees. Within the past few years Figeac-Aero moved into North America by acquiring Sonica NMF, an aircraft part supplier located on 39th Street North in Wichita near the National Center for Aviation Training.
The company plans to develop a North American headquarters facility and expand its presence in this hemisphere. As it's North American business grows it is likely the company expansion that will be required to serve new customers will occur in the immediate vicinity of the headquarters facility. It has considered sites in Mexico, North Carolina, and Louisiana as well as Wichita for this project, and has received incentive offers from at least two of those sites. It offers to commit to placing the North American headquarters in Wichita in return for economic development incentives.
Specifically, the company requests a $250,000 loan from Sedgwick County, the same amount from the City of Wichita, and a five-year 100% abatement of property taxes on the new taxable property to be acquired in conjunction with the headquarters facility, in return it promises to (1) place its North American headquarters in this community, (2) invest $20.68-million in expansion of the existing production facility, the purchase of adjacent land, and the construction of two new 65,000 square foot buildings, and (3) add 200 full time jobs paying an average wage of at least $39,520 over the next 5 years.
The capital investment would include $810,000 for land acquisition, $12,870,000 for building construction, and $7,000,000 for furnishings, machinery and equipment.
The new jobs would be added over a 5 year period: 50 in the first year, 35 in each of the next three years, and 45 in the fifth year. Once all 200 jobs have been added, the average annual wage of $39,520 would produce new payroll of $7.9-million.
Alternatives:
The BOCC could decline to approve the Resolution. Figeac-Aero could alternatively locate its North American headquarters, the 200 jobs, and expected future expansion in North Carolina, Louisiana, or Mexico.
Financial Considerations:
The proposed economic development loan of $250,000 would be paid from the Economic Development Program after transfer of budget authority from the Economic Development Reserve, which is an account budgeted specifically to provide spending authority for incentive deals that are approved and spent within the same year.
The proposed county property tax abatement is valued at $473,729 over a 5-year period. Because the development site is located within the Wichita boundary, city council has the sole authority to approve the tax abatement.
The Center for Economic Development and Business Research has computed the present value of all county costs to be incurred over a 10-year period as $687,793, and the present value of all financial benefits to be received by the county during the same period as $1,005,627. Thus, CEDBR estimates the present value of the net public financial benefit of this deal for the county government will be $317,834.
Legal Considerations:
The Resolution has been approved as to form by the County Counselor. It authorizes execution of an agreement with Figeac-Aero in substantially the same form as the one provided with this agenda summary, after review and approval of the final agreement by the County Counselor.
Policy Considerations:
The proposed action is in compliance with the adopted joint Wichita / Sedgwick County Economic Incentive Policy. Figeac-Aero is engaged in the production of aircraft parts, and thus is in one of the industries targeted for expansion in this region. Wichita State University's CEDBR has conducted a benefit-cost analysis of the proposed incentives and has computed a return to the county of $1.46 for each $1.00 invested in the form of the loan or the abated taxes, well above the 1.3 to 1.0 benefit : cost ratio that is the target specified in the policy.
Outside Attendees: N/A
Multimedia Presentation: N/A