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HomeMy WebLinkAboutResolution - 2022-R0157 - LEDA Incentive Agreement with Leprino Foods Company 3.22.22Resolution No. 2022-RO157 Item No. 8.10 March 22, 2022 RESOLUTION WHEREAS, pursuant to Section 501.073 of the Texas Local Government Code the of Lubbock, as the corporation's authorizing unit, has the authority to approve all programs expenditures of the Lubbock Economic Development Alliance (LEDA); and WHEREAS, the City Council finds that it is in the best interest of the public to the program or expenditure, as proposed to the City Council by LEDA, as set forth in "A" attached hereto and incorporated herein by reference; NOW THEREFORE: BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: THAT the program or expenditure of the Lubbock Economic Development Alliance, the amount set forth in Exhibit "A" attached hereto and incorporated herein by reference, to provided to Leprino Foods Company is hereby approved pursuant to Section 501.073 of Texas Local Government Code. Passed by the City Council on ATTEST: ,Q,4, )r Rebe ca Garza, City Secr OVED AS TO March 22, 2022 DANIEL M. POPE, MAYOR Brianna Gerardi, Dir ctor of Business Development APPROVED S TO FORM: elli Leisure, Assistant City Attorney ccdocs/RES.LEDA Expenditure-Leprino Foods 3.16.22 Resolution No. 2022-RO157 RE 22-05 RESOLUTION APPROVING LEPRINO FOODS THE STATE OF TEXAS COUNTY OF LUBBOCK At a regular meeting of the Board of Directors of LUBBOCK ECONOMIC DEVELOPMENT ALLIANCE, INC., a Texas nonprofit corporation (LEDA), on Wednesday, February 23, 2022, held in conformity with the bylaws, after due notice as therein provided, a quorum being present and acting, the following resolution was unanimously adopted: WHEREAS, LEDA and Leprino have been engaged in discussions since August 2019 regarding Leprino's potential development of a new dairy -products manufacturing facility (the "Project") in or near Lubbock, Texas. WHEREAS, the Project, upon completion of construction, is expected to generate approximately 674 new Primary Jobs and as result approximately $870,000,000 in new capital investment. WHEREAS, Leprino has conceptually and initially decided to pursue the development of the Project in Lubbock, Texas on an approximately 258-acre site located east of the Lubbock Loop and on East 19`h Street. WHEREAS, LEDA presented to members of the Board the proposal of a possible Economic Development Grant and Contract to Leprino Foods Company. The terms and conditions of such Economic Development Grant and Contract, other than the normal terms and conditions applicable to all such Economic Development Grant and Contracts by the Corporation, are described generally as follows: LEDA will engage contractors directly and pay up to $100,000 for the following surveys for the Project, which will all promptly be provided to Recipient for review; topographic, Geotech, and Phase 1 Environmental. LEDA will ensure that Leprino is specifically named as a third -party beneficiary of all contracts LEDA enters into pursuant to this representation or, as alternative, provide at least equivalent protection to Leprino's interests in such agreements. Leprino will reimburse in a timely manner for any survey work completed by LEDA in excess of $100,000 not including any additional studies and/or clean up required as a result of Phase 1 Environmental. LEDA agrees to reimburse Leprino up to $12,500 for Leprino's procurement of pollution insurance coverage following conveyance of Property ("Pollution Insurance"), prior to conveyance of the property. LEDA agrees to convey approximately 258 acres of land located in Lubbock, Texas by Special Warranty Deed and pursuant to the terms and conditions as set forth in the "Purchase and Sale Agreement" to be executed by LEDA and Leprino. LEDA shall convey the Property to Leprino at a closing as set out in the Purchase and Sale Agreement. LEDA agrees, at its expense, to make or cause to be made the following infrastructure improvements, including the Treated Effluent Pipeline, gas supply, and road improvements, for the benefit of the Property and the Project (collectively, the "Infrastructure Improvements"). LEDA expressly acknowledges and agrees that each of the Infrastructure Improvements described below are critical path items necessary for Leprino's development of the Project, and LEDA acknowledges that Leprino may suffer irreparable harm to its business and incur substantial liability to third parties, including but not limited to, milk and other raw material suppliers, contractors, customers and others in the event that LEDA fails to timely complete construction of the Infrastructure Improvements consistent with the specifications set out below. LEDA acknowledges and represents that the costs associated with these Infrastructure Improvements are found by the LEDA Board of Directors to be required or suitable under Section 501.103 of the Act and are allowed under 504.103(b) of the Act to the extent that provision is applicable. Should it become apparent to Leprino, in Leprino's reasonable discretion, that LEDA is unlikely to be able to timely complete the Infrastructure Improvements according to the milestone dates set out below, Leprino may take over management of the Infrastructure Improvements and LEDA agrees to reimburse Leprino for all of the costs Leprino incurs to complete the Infrastructure Improvements. LEDA shall consult and coordinate with Leprino closely during the design and construction of the Infrastructure Improvements. Moreover, at Leprino's request, LEDA agrees that it will share with Leprino all contracts that it enters into for the design and/or construction of the Infrastructure Improvements. And further agrees that, to the extent possible, Leprino is a third -party beneficiary of any such contracts. LEDA has agreed to engage a contractor and incur all costs associated with the development and construction of a Treated Effluent Pipeline (including all legal rights, titles, and interests in and to any permanent rights of way and/or easements) capable of conveying up to 3.5 million gallons per day at a flow rate of 3,500 gallons per minute (peak demand) ("GPM") of treated effluent from the Property to a discharge point in Lubbock's Lake 6. LEDA has agreed to obtain, at its expense, all legal rights, titles, and interests in and to any temporary or permanent rights of way or easements necessary for construction and maintenance of the Pipeline. Upon completion of the Pipeline, LEDA agrees to convey, at no cost to Leprino: (1) thePipeline itself (including any pumps or other equipment necessary for operation of the Pipeline that are necessary for operation of the Pipeline along the Pipeline right of way (but not pumps required to be located at Leprino' s wastewater treatment facility)); and (2) all rights, titles, and interests in and to any rights of way or easements LEDA procured for construction and maintenance of the Pipeline. LEDA represents and warrants that its interest in any real property necessary for construction and maintenance of the Pipeline will be fully transferable and/or assignable to Leprino, upon completion of Pipeline construction. LEDA will reimburse Leprino or the natural gas company supplying Leprino up to $150,000 towards the cost of building improvements necessary to access and draw Gas Supply from the high- pressure gas line located adjacent to the Property upon proof of expenses incurred. LEDA has agreed, at its cost and expense, to construct Road Improvements deemed necessary by any governmental agency and/or Leprino to handle increased truck and passenger vehicle traffic that is directly or indirectly related to the development and operation of the Project. In addition, should any additional temporary or permanent rights of way and/or easements be required for the construction of the Road Improvements, LEDA will incur all costs associated with such additional rights of way, whether directly or as reimbursement to the City of Lubbock, Lubbock County, the State of Texas, or otherwise. LEDA agrees to grant to Recipient an incentive for reimbursement of Project Costs of $25,300,000 (through job creation and capital investment) with payments to be expressly made under terms and conditions. LEDA agrees to pay Recipient up to a maximum of $6,740,000 for Job Creation Incentives at the rate of $10,000 for each Full -Time Job created and maintained, to be paid out over a five-year period. The payments are conditioned upon the creation of Full -Time Jobs (as verified by Recipient in writing) under the terms and conditions of the Agreement. LEDA agrees to pay, as set forth herein, up to $19,300,000 of Project costs, beginning at the end of Year Two, and payable over nine (9) years (the "Capital Investment Incentive"). Subsequent annual payments made on or around the annual anniversary date of the first payment, in amounts equal to the following: Year Two $3,000,000 Year Three $2,300,000 Year Four $2,000,000 Year Five $2,000,000 Year Six $2,000,000 Year Seven $2,000,000 Year Eight $2,000,000 Year Nine $2,000,000 Year Ten $2,000,000 The Recipient has provided to LEDA an estimated capital investment cost of $870,000,000 with 850,000,000 anticipated to be expended by the end of Year Five in the form of new construction of a building (or buildings) and personal property. LEDA based its decision to grant the capital investment incentive to Recipient partly upon such capital investment. If the actual capital investment amounts are significantly lower (20% or greater) than the estimated capital investment, LEDA may reduce the Capital Investment Incentive by $280,000 for every $10,000,000 of capital investment below $680,000,000. In consultation with Leprino, capital investment will be measured either by documentation of construction or personal property purchased invoices or by the increased valuation of the Lubbock Central Appraisal District historic information reports. WHEREAS, The Board of Directors of LEDA finds that an Economic Development Grant and Contract offering Real Property Incentive, Infrastructure Improvements, Job Creation Incentive, and Capital Investment Incentive, meet and comply with the qualifications and purposes of the Corporation for the granting of such Economic Development Grants and Contracts. Upon Motion by Director, Mr. Barry Orr, and Seconded by Director, Mr. James Conwright, and unanimously approved by all Directors. IT WAS RESOLVED that LEDA offer and, if accepted by Recipient, enter into an Economic Grant and Contract with Leprino Foods Company. This Economic Development Grant and Contract will be on the normal terms and conditions of such Economic Development Grant and Contract offered by LEDA to existing businesses and business prospects and authorize the CEO to enter into and negotiate Performance agreement. WRP,L_ _ i c The Leprino Foods Deal From Leprino Foods: • Building an 850,000 square foot dairy processing facility to make mozzarella cheese • $870 million Investment over 10 years ($850 million over 5 years) • 674 jobs will be created over three years, with an average annual wage of $52,500 before bonuses, profit sharing and benefits o Total payroll will be more than $35 million annually at full production • Leprino Foods is planning to begin construction in June 2022; expecting to be producing cheese by the end of 2024 From LEDA: • Granting approximately 258 acres just outside the East Loop between 0 and 1Vh Streets, valued at $1,966,000. o LEDA agreed to ensure the property would be annexed by the City of Lubbock and zoned appropriately for the project o LEDA agreed to cover $12,500 worth of title insurance to the property o LEDA agreed to clean to the appropriate standard the trash pit found on the Carlton property, costing approximately $35,000 ■ To alleviate any additional environmental concerns going forward, LEDA agreed to reimburse $12,500 to Leprino Foods for an environmental Insurance policy • Job creation incentives of $10,000/job, paid over a 5-year period as the jobs are created ($6,740,000) • Capital investment incentive of $19.3 million, paid as follows: o $3 million paid at the end of year 2 (estimated to be Dec 31, 2023) o $2.3 million paid at the end of year 3 (Dec 31, 2024) o $2 million per year paid at the end of years 4 through 10 (2025-2031) • Will pay for the following surveys, up to $100,000 (currently, $80,185): o Boundary survey o Alta survey o Geotech survey o Drainage analysis o Phase I environmental survey • LEDA agreed to make all improvements to 19`h Street between the E Loop and the eastern boundary of the Leprino Foods property. This is currently valued at $5.9 million • LEDA agreed to reimburse Leprino Foods for $150,000 to ensure natural gas was located on site • LEDA agreed to build and then convey to Leprino a water effluent line from Leprino Food's wastewater treatment site to the City of Lubbock's Lake 6. This is currently valued at $3 million • LEDA agreed to support and advocate for Leprino Food's efforts to secure the tax abatements with both the City of Lubbock and Lubbock County • LEDA agreed to support and advocate for the City of Lubbock to build a water line and a sewer line capable of handling Leprino Food's needs at the new plant • LEDA agreed to advocate for South Plains Electric Coop to provide an electric supply capable of handling Leprino Food's needs at the new plant 0 LEDA agreed to provide assistance with workforce attraction • LEDA agreed to assist with the application for training assistance through the Skills Development Fund • LEDA agreed to pull together a site development briefing team, and to advocate for all the appropriate governmental approvals necessary for completion of the project • LEDA agreed to help coordinate the sustainability of the Project • Each incentive provided to the company has an appropriate clawback should Leprino Foods not perform to the specified level • Total cash to be expended: approximately $31 million o LEDA will receive $5 million from the County, and then expend approximately $12.6 million over the next three years; the remaining $23 million will be spread over 8 years Impact of Project: • As currently outlined, the project expects to o Support $578.3 million in annual economic output or sales for businesses in the region o This economic activity will result in an increase in gross area product of $243.8 million annually o The project will bring new workers, new residents, and new students to our City and to Roosevelt school district o Project as outlined in the contracts pays back in 12.9 years Leprino Foods believes their average wage will actually be closer to $62,000 per year Leprino Foods realizes now their investment will be closer to $970 million o They do not intend to reduce any part of the scope of their project as a result Leprino Foods is also looking to increase their warehouse space at the project o They would bring their warehouse space from Laredo and Dallas to Lubbock o This would increase inventory from approximately $37 million to $70 million