Title
APPROVAL OF A RESOLUTION AUTHORIZING A FORGIVABLE LOAN TO STARWOOD HOTELS & RESORTS WORLDWIDE, INC. OF WICHITA FOR ECONOMIC DEVELOPMENT INCENTIVES, AND AUTHORIZING THE INTRA-FUND TRANSFER OF BUDGET AUTHORITY.
Presented by: Sherdeill H. Breathett, Sr., Economic Development.
RECOMMENDED ACTION: Approve the resolution and authorize the Chairman to sign.
Body
Background:
Starwood Hotels and Resorts Worldwide, Inc. ("Starwood"), the owner of hotel brands such as Westin, Sheraton, Four Points and more, is developing a new customer service call center that will employ more than 900 people in the United States. To induce Starwood to place this operation in our community, Greater Wichita Economic Development Coalition ("GWEDC"), Sedgwick County, the City of Wichita and the State of Kansas have developed an incentive package, subject to approval by governing bodies, which includes forgivable loans from the county and city.
The company is asking for approval of the Economic Development Loan Agreements at this time. The city agreement is scheduled to be considered by City Council on May 21.
Analysis:
Starwood Hotels & Resorts Worldwide, Inc. is a hotel and leisure company with 1,134 properties in nearly 100 countries and 171,000 employees at its owned and managed properties. Starwood is a fully integrated owner, operator and franchisor of hotels, resorts and residences with the following internationally renowned brands: St. Regis®, The Luxury Collection, W, Westin, Le Méridien, Sheraton, Four Points by Sheraton, Aloft, and ElementSM.
Associates at the new center will handle calls and emails from customers regarding reservations and the Starwood Preferred Guest loyalty program. This includes all reservation related activities as well as resolving issues with hotel stays. Additional activities include enrollment into the loyalty program, inquiries on point balances and transactions, redemption of earned points for a variety of awards, and account maintenance.
In return for the offered incentives, Starwood has committed to the following job creation schedule and average annual salaries (the NAICS average for this sector is $23,019):
|
Year |
Full Time EquivalentsPer hr. Wage without overtime |
Average Wage |
Total Wage |
|
|
1 |
532 |
$11.45 |
$23,816 |
$12,670,112 |
|
2 |
617 |
$11.95 |
$24,856 |
$15,336,152 |
|
3 |
712 |
$12.50 |
$26,000 |
$18,512,000 |
|
4 |
807 |
$13.00 |
$27,040 |
$21,821,280 |
|
5 |
907 |
$13.40 |
$27,872 |
$25,279,904 |
Starwood has considered Texas and Washington State in addition to Kansas for location of this call center.
Sedgwick County and City of Wichita have partnered to offer economic development assistance to Starwood. Sedgwick County and the City will provide $200,000 each in forgivable loan funds to offset build-out and capital investment costs, subject to governing body approval. Loan principal will be forgiven in equal annual installments at the end of each year, provided that the employment and wage commitments set forth in the agreement have been met. Un-forgiven principal will carry forward and any un-forgiven principal remaining at the end of the loan term shall be immediately due and payable. In the event Starwood ceases operations in Wichita during the term of the loan, the entire original principal will be immediately due and payable, plus interest from the start of the loan at 12% annual percentage rate (APR).
Financial Considerations:
The forgivable loan of $200,000 will be provided to Starwood from funds budgeted in the General Fund for economic development incentives in 2013. No other local incentives, including property tax exemption, are included in this project.
Using an econometric model developed by the Center for Economic Development and Business Research at Wichita State University, the ratio of public benefits to public costs was calculated for the proposed incentive package.
City of Wichita 5.58 to one
Sedgwick County 3.17 to one
Legal Considerations:
The attached Forgivable Loan Agreement has been approved as to form by the County Legal Department.
Policy Considerations: The Economic Development Incentive Policy jointly approved by Sedgwick County and Wichita provides guidelines with which to determine the eligibility of companies for publicly-funded incentives and tax exemptions, and specifies a minimum expected return under normal circumstances of $1.30 of benefits for every $1.00 of cost to taxpayers from incentives. The proposed forgivable loan exceeds this minimum expected return.
Outside Attendees: N/A
Multimedia Presentation: NO