R2007-151 2007-10-15RESOLUTION NO. R2007-151
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND,
TEXAS, AUTHORIZING THE PEARLAND ECONOMIC DEVELOPMENT
CORPORATION TO ENTER INTO A MEMORANDUM OF
UNDERSTANDING WITH THE ZT GROUP AND AUTHORIZING STAFF TO
COMPLETE ALL NEGOTIATIONS AND BUDGET AMENDMENTS
RELATED TO THE MEMORANDUM OF UNDERSTANDING.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS:
Section 1. That certain Memorandum of Understanding by and between the
Pearland Economic Development Corporation and the ZT Group, a copy of which is
attached hereto as Exhibit "A" and made a part hereof for all purposes, is hereby
authorized and approved.
Section 2. That City staff is hereby authorized to complete all negotiations and
budget amendments related to the Memorandum of Understanding.
PASSED, APPROVED and ADOPTED this the 15th day of
APPROVED AS TO FORM:
0, Gyk_____
DARRIN M. COKER
CITY ATTORNEY
__</n4J
TOM REID
MAYOR
Exhibit "A"
Resolution 2007-151
07-0078
MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding ("MOU") is made and entered into by and between
Pearland Economic Development Council ("PEDC") and ZT Group Business Center One
(Pearland), L.P. ("ZT Group").
ZT Shadow Creek Partners, L.P. ("ZT") owns approximately 7.546 acres of real property
located in Shadow Creek Ranch area in Brazoria County, Texas (the "ZT Land"), and has developed
a master plan pursuant to which it intends to subdivide the ZT Land into three tracts. Such tracts are
to be sold individually, two (2) for office development, and one (1) for retail development. ZT and
ZT Group have entered into a Contract pursuant to which ZT Group has agreed to purchase from
ZT one of the three tracts, i.e. a 3.569 acre tract, for the purpose of constructing an office building
(the "Building"). The Building will be a four (4) story, 80,000 square feet office facility located off
Shadow Creek Parkway. The Building will be considered Class "A" space in a suburban
metropolitan area such as Pearland, setting itself apart from other local office complexes through its
architectural appeal and construction methods. The Building will be constructed from structural
steel, with exterior concrete pre -cast panels, low -e insulated windows, complete with state -of- the -
art electrical, mechanical, and life safety components. The exterior design and building components
will be accented by high quality interior finishes which will first be seen upon entering the spacious
lobby; these include imported granite, custom millwork, vinyl wall coverings and stainless steel
trim. By combining these elements with the site's access off HWY 288 and proximity to residential
developments, the Building will attract high quality tenants and set the bar for future office
development in Pearland.
The Building as currently planned meets 9 of 23 (39%) credited points needed to be a LEED
certified building. These include points for Heat Island Effect Roof, Optimizing Energy
Performance to 10.5%, Elements of Green Power, 10% use of Recycled Content, 10% use of
Regional Materials, Increased Ventilation, Low -Emitting Paints and Coatings, Low -Emitting Carpet
Systems, and finally design by a LEED accredited professional.
In addition to the afore -mentioned points the project team is evaluating gaining other points
such as Enhanced Refrigerant Management, 50% Diverting of Construction Waste Management,
Tenant Design and Construction Guidelines, Water Efficient Landscaping, Energy Measurement
and Verification through Tenant Sub -Metering, Outdoor Air Delivery Monitoring, a Construction
IAQ Management Plan, Low -Emitting Adhesives and Sealants, and Indoor Chemical & Pollutant
Source Control. The costs associated with these LEED credits are currently being determined and
they will be incorporated to the project as the budget permits.
PEDC desires to encourage businesses and industries (including corporate headquarters) to
relocate to the City of Pearland, Texas (the "City"). ZT Group has advised the PEDC that a
contributing factor that would induce the ZT Group to construct the Building would be an
agreement by the PEDC to provide economic assistance by entering into a Master Lease Agreement
for the Building, and PEDC is willing to provide such economic assistance by entering into a
Master Lease Agreement.
The parties desire to reduce to writing their understanding regarding the terms of the economic
assistance that PEDC will provide to the ZT Group. Accordingly, the parties hereby confirm the
following:
1. PEDC agrees to provide economic assistance to the ZT Group by entering into a
Master Lease Agreement for one hundred percent (100%) of the gross area of the
Building for a twelve (12) month period, at a rental rate of fifteen dollars ($15) per
square foot. The rent under the Master Lease Agreement shall commence on the date
on which the core and shell of the Building has been substantially completed and a
"shell final approval" (green tag) inspection for the Building has been issued by the
City. The Master Lease Agreement shall automatically terminate when 50% of the
total leasable area of the 'Building is leased to other tenants. The Master Lease
Agreement shall be in such form as is acceptable to PEDC and ZT Group.
2. ZT Group shall commence construction of the Building on or before six (6) months
after the date on which the Master Lease Agreement is signed, and shall complete the
construction of the core and shell of the Building on or before twenty-one (21)
months after the date on which the Master Lease Agreement is signed. Construction
will be deemed to have commenced upon the issuance of a building, permit for
construction of the Building, by the City of Pearland. Failure of ZT Group to comply
with the timelines contained herein shall terminate the responsibility of the PEDC to
provide any economic incentives contemplated by this Memorandum of
Understanding or the Master Lease Agreement referenced herein.
3. In the event that more than fifty percent (50%) of the Building is leased on or before
the date on which the Building is substantially completed so that the Master Lease
Agreement terminates, and PEDC does not have to pay any rent under the Master
Lease Agreement, then and in that event, PEDC shall provide the following
economic incentive to the ZT Group: PEDC shall pay the ZT Group $1,500 per job
for each employee of a tenant that has its primary work responsibilities performed
on-site in the Building ("Job Incentive"), i.e. $1,500 multiplied by the number of
employees of the tenants leasing space in the Building, up to a maximum amount of
$600,000.The number of employees counting toward the Job Incentive shall be
calculated on the 30th day after issuance of a Certificate of Occupancy to a tenant by
the City of Pearland. The Job Incentive shall not apply to tenant employees hired
more than 30 days following the issuance of the Certificate of Occupancy. ZT Group
intends to give a portion of the Job Incentive to the leasing agent as a bonus, and
may also use such Job Incentive for tenant inducement. The Job Incentive shall apply
only to "new jobs", i.e. if an employer with an office in Pearland relocates to the
Building so that no new jobs are created, then the Job Incentive shall not be payable
with respect to the employee's of such employer. Furthermore, in order to qualify for
the Job Incentive, the total average salary for "new jobs" must be equal to or greater
than $40,000 annually.
4. After the Building is leased to seventy-five percent (75%) capacity, the ZT Group
intends to construct another building (the "Second Building") containing at least
80,000 gross square feet of office space on the second tract of ZT Land, i.e. the land
adjacent to the land on which the Building will be built, if market conditions warrant
the construction of such Second Building. If more than fifty percent (50%) of the
Building is leased on or before the date on which the Building is substantially
completed so that the Master Lease Agreement terminates, and PEDC does not have
to pay any rent under the Master Lease Agreement, and if the Building is leased to
seventy-five percent (75%) capacity, and if ZT Group intends to construct the
2
Second Building, then ZT Group shall notify PEDC that it intends to construct the
Second Building, and PEDC shall have forty-five (45) days within which it will
notify the ZT Group whether or not PEDC shall provide the ZT Group the same
economic assistance with respect to the Second Building that it provided for the First
Building (for example, a similar master lease agreement as well as the same
economic incentive on a $1,500 per new job creation basis up to a maximum amount
of $600,000). In the event PEDC agrees to provide the same economic incentive with
respect to the Second Building that it provided for the first Building and the Second
Building is constructed, ZT Group shall complete the construction of the core and
shell of the Building on or before twenty one (21) months from the date on which the
master lease agreement for the Second Building is signed between PEDC and the ZT
Group.
5. PEDC and ZT shall take all appropriate actions to enter into a Performance
Agreement and the Master Lease Agreement on or before October 1, 2007.
6. Except as otherwise expressly provided in this MOU, the provisions hereof shall inure
to the benefit of, and be binding upon, the heirs, administrators, executors, personal
representatives, legal representatives, successors and assigns of the parties hereto. This
MOU may be executed in multiple originals or counterparts, each of which shall be
deemed to be an original but all of which shall constitute one and the same document.
A copy or facsimile of this MOU shall have the same force and effect as that of an
original.
EXECUTED as of the? day of September, 2007.
Pearland Eco o is Development Corporation
dal
By:
Fred Welch, Executive Director
ZT G
By: Z
usine
em
By:
enter 0
L.L.C.,
(Pear
is ge
and), L.P.
ral partner
Taseer dar, President : Manager
3
Exhibit "A"
Resolution 2007-151
07-0078
AMENDMENT NO. 1 TO MEMORANDUM OF UNDERSTANDING
This Amendment No. 1 to Memorandum of Understanding (this "Amendment") is made and
entered into by and between Pearland Economic Development Council ("PEDC") and ZT Group
Business Center One (Pearland), L.P. ("ZT Group").
WHEREAS, PEDC and the ZT Group have entered into that certain Memorandum of
Understanding, dated September 26, 2007 (the "MOU"); and
WHEREAS, PEDC and the ZT Group desire to amend the terms of the MOU.
NOW THEREFORE, in consideration of the premises PEDC and the ZT Group hereby amend
the MOU as follows:
1. The Building shall meet at least 13.8 of 23 (60%) credited points needed to
be LEED certified building. If the PEDC provides Economic Assistance in
connection with the Second Building, then the Second Building will exceed
the (60%) credited points needed to be LEED certified.
2. PEDC and ZT shall take all appropriate actions to enter into a Performance
Agreement and the Master Lease Agreement on or before October 25,
2007.
3. All capitalized terms used herein, which have not been defined herein, shall
have the same meaning as is ascribed to such terms by the MOU. All of the
terms of the MOU shall remain in full force and effect except as amended
hereby.
4. This Amendment shall be binding upon the parties and their respective
successors and permitted assigns.
5. This Amendment may be executed in multiple originals or counterparts,
each of which shall be deemed to be an original but all of which shall
constitute one and the same document. A copy or facsimile of this
Amendment shall have the same force and effect as that of an original.
EXECUTED as of the a day of October, 2007.
Pearland Economic Development Corporation
By:
Fred Welch, Executive Director
ZT Group Business Centerne (Pearland), L.P.
By: ZT
By:
L.I/C., its general partner
Tase'Badar, President & Manager
A Report of the
Economic Impact from
Project ZT
in Pearland, Texas
September 12, 2007
Prepared for:
Pearland Economic Development Corporation
3519 Liberty Drive
Pearland, TX 77519
Prepared by:
Jerry Walker
Impact DataSource
4709 Cap Rock Drive
Austin, Texas 78735
(512) 892-0205
Fax (512) 892-2569
jwalker@onr.com
ImpactData
Table of Contents
The Report:
Introduction 3
Description of Possible Facility and its Operations 3
Economic Impact of the Facility and its Employees 3
Costs and Benefits for Local Taxing Entities Over the First 10 Years 4
Incentives that Could be Offered to the Firm 5
Conduct of the Analysis 6
About Impact DataSource 7
Data and Rates Used in the Analysis 8
Schedules Showing the Results of Economic Impact Calculations 15
Schedules Showing the Results of Costs and Benefits Calculations:
City of Pearland 20
Brazoria County 23
Alvin Independent School District 25
Alvin Community College 28
TIRZ 28
Page 2
A Report of the Projected Economic Impact from
Project ZT
Introduction
This report presents the results of an economic impact analysis performed by Jerry Walker, Impact
DataSource, Austin, Texas. The analysis was to determine the impact that the Project ZT and a
tenant of the facility have on the economy of the Pearland area and costs and benefits over the next ten years
for the City of Pearland, Brazoria County, Alvin ISD, Alvin Community College and the TIRZ in which the
project is located.
Description of the Proposed Facility and its Operations
The Project ZT is a planned 80,000 sf class A commercial building in Pearland. The land and development
cost for the building is $15 million. At a 60% building lease, the developer will commit to construct a second
facility of at least 80,000 sf at a similar development cost.
Tenants in each building expect to have 350 workers with average annual salaries of $37,000. In addition,
tenants in the two buildings will have furniture, fixtures and equipment with an estimated value of $4 million.
How the office building and the tenant company and its workers will impact the Pearland area economy is
discussed next.
Economic Impact of the Facility and Its Employees
The facility, its employees and workers in spin-off jobs created in the community will have the following
economic impact on the Pearland area over the next ten years:
Economic Impact Over the
First Ten Years of Operations
Total number of new direct and indirect jobs to be created 1,125
Number of people who will move to the City 638
Number of new residential properties to be built in the city 36
Number of new students expected in Alvin ISD 182
Salaries to be paid to direct and indirect workers $437,373,749
Taxable sales expected in the City $159,914,073
The value, in Year 10, of new residential property to be built for $7,098,850
direct and indirect workers who move to the City
Taxable assets at the facility in Year 10 $34,357,960
How this economic impact translates into additional costs and benefits for local taxing entities is shown
on the following page.
Page 3
Costs and Benefits for Local Taxing Districts Over the First 10 Years
The TIRZ in which the project is located and the City, County, School District and the Community College can
expect to receive the following net benefit over the first 10 years from the facility, its employees and workers
in indirect jobs created in the community:
Net Benefits Over the First Ten Years of Operations
Alvin
City of Brazoria Community
TIRZ Pearland County Alvin ISD College Total
Additional revenues:
Sales and use taxes $2,398,711 $799,064 $3,197,775
Property taxes $7,274,135 $1,801,032 $236,927 $959,561 $136,260 $10,407,915
Utilities $2,311,911 $2,311,911
Utility franchise fees $325,437 $325,437
Hotel occupancy taxes $6,128 $6,128
Other taxes and user fees $114,428 $114,428
Building permits and fees $0 $0
Additional state and federal school funding $6,784,449 $6,784,449
Total additional revenues $7,274,135 $6,957,648 $1,035,991 $7,744,009 $136,260 $23,148,043
Additional costs:
Costs of services to new residents
Costs of providing monthly utility
services
Costs of educating new students
Reduction in state school funding from
new property being added to the
district's tax rolls
$953,569
$2,150,078
$2,959,016
$849,820
$953,569
$2,150,078
$2,959,016
$849,820
Total additional costs and reduction $3,103,646 $0- $3,808,836 $0 $6,912,482
in state school funding
Net benefits $7,274,135 $3,854,001 $1,035,991 $3,935,173 $136,260 $16,235,560
The discounted cash flow over the first ten years for each local taxing district is as follows:
Discounted Cash flow
Over the First Ten Years of Operations
TI RZ $5,258,930
City of Pearland $2,784,442
Brazoria County $747,796
Alvin ISD $2,816,445
Alvin Community College $97,944
Page 4
Discounted cash flow or present value of net benefits is a way of expressing in today's dollars, dollars to be
paid or received in the future. Today's dollar and a dollar to be received or paid at differing times in the
future are not comparable because of the time value of money. The time value of money is the interest rate
or each taxing entity's discount rate. This analysis uses a discount rate of 6% to make the dollars
comparable -- by expressing them in today's dollars or in present value.
Analysis of Incentives that PEDC is Considering for the Firm
The Pearland Economic Development Corporation is considering possible incentives for the firm.
PEDC is considering a master lease for 50% of gross area for 12 months at $100,000 a month declining as
space is leased in facility and going away once 50% leased. The full term of the lease may be provided as
incentives, would be negotiated with the tenants.
If the incentives are granted as proposed, PEDC may grant the following incentives:
Guaranteeing a master lease of 50% of the gross area of 80,000 sf or $1,200,000
a guarantee of $100,000 a month for 12 months
Any incentives that PEDC may grant to the firm on behalf of the City may be considered an investment
that the City is making in the firm. The returns on that investment are the additional net benefits that the City
will receive from the firm and its direct and indirect workers. Net benefits for the City will be the additional
revenues, such as from sales, property and other taxes, less additional costs for the city.
A possible range of incentives could be between:
1. The discounted cash flow for the city over seven years -- discounted at a rate of 6% -- and
2. 30% of the discounted cash flow for the city over ten years -- also discounted at a rate of 6%.
The discounted cash flow for the City over the first ten years is shown below.
Discounted Cash Flow for the City
Net Benefits
or Cash
Flow for the Annual Cumulative
City Discounted Discounted
(Non -discounted) Cash Flow Cash Flow
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
$244,749
$410,732
$356,696
$366,618
$381,386
$392,540
$404,253
$417,437
$432,125
$447,466
$230,896
$365,550
$299,489
$290,396
$284,994
$276,725
$268,851
$261,905
$255,774
$249,863
Total $3,854,001 $2,784,442
$230,896
$596,445
$895,934
$1,186,330
$1,471,323
$1,748,048
$2,016,900
$2,278,805
$2,534,579
$2,784,442
Page 5
Therefore, if incentives guidelines are followed to provide incentives equivalent to the discounted cash flow
for the City (1) received over seven years and (2) 30% of the discounted cash flow over ten years, then the
following are ranges of these possible incentives:
Possible Range of PEDC Incentives
Incentive
Annual
Rate of
Return on
Investment
Payback
Period,
in Years
Master lease for 12 months on building 1 $1,200,000
32%
3.5
The discounted cash flow for the city over seven years
30% of the discounted cash flow for the city over ten years
Range of possible incentives:
Low
High
$2,016,900
$835,332
$835,332
$2,016,900
Conduct of the Analysis
This analysis was conducted by Impact DataSource using data, rates and information supplied by the
Pearland Economic Development Corporation and Impact DataSource estimates and assumptions.
Using this data, the economic impact from the facility and the costs and benefits for the TIRZ, the City of
Pearland, Brazoria County, Alvin ISD and Alvin Community College were calculated for a ten year period.
In addition to the direct economic impact of the firm and its employees, spin-off or indirect and induced
benefits were also calculated. Indirect jobs and salaries are created in new or existing area firms, such
as parts suppliers, that may supply goods and services to the firm. In addition, induced jobs and
salaries are created in new or existing local businesses, such as retail stores, gas stations, banks,
restaurants, and service companies that may supply goods and services to workers and their families.
To estimate the indirect and induced economic impact of the facility and its employees on the Pearland
area, regional economic multipliers were used. Regional economic multipliers for Texas are included in the
US Department of Commerce's Regional Input -Output Modeling System (RIMS II).
Two types of regional economic multipliers were used in this analysis: an employment multiplier and an
earnings multiplier.
An employment multiplier was used to estimate the number of indirect and induced jobs created and
supported in the Pearland area. An earnings multiplier was used to estimate the amount of salaries to
be paid to workers in these new indirect and induced jobs. The multipliers show the estimated number
of indirect and induced jobs created for every one direct job at the facility and the amount of salaries
paid to these workers for every dollar paid to a direct worker at the facility. The multipliers used in this
analysis are below:
Employment multiplier 0.6072
Earnings multiplier $0.5036
Page 6
About Im 'act DataSource
Impact DataSource is a thirteen -year-old Austin economic consulting, research and analysis firm. The firm
has conducted economic impact analyses of numerous projects in Texas and fourteen other states. In
addition, the firm has developed economic impact analysis computer programs for clients, such as the
League of Kansas Municipalities and the New Mexico Economic Development Department.
The firm's principal, Jerry Walker, performed this economic impact analysis. He is an economist and has
Bachelor of Science and Master of Business Administration degrees in accounting and economics from
Nicholls State University, Thibodaux, Louisiana.
Data used in the analysis, along with schedules of the results of calculations, are on the following pages.
Data and Rates Used in the Analysis
Page 7
Community information and rates:
City of Pearland sales tax rate
Brazoria County sales tax rate
City of Pearland hotel occupancy tax rate
Property tax rates:
City of Pearland
Brazoria County (.321701) and Road and Bridge Fund (.06)
Alvin ISD
Alvin Community College
All tax increment will go to the TIRZ in which the facility is located. However, the
city will retain 64% of the tax increment for maintenance and city services, such as
police and fire.
Expected inflation rate over the next 10 years
Discount rate used in analysis to compute discounted cash flows
Average taxable value of a new single family residence in the community
that will be built for individuals moving to Pearland
Page 8
1.5%
0.5%
7%
$0.690
$0.38170
$1.5459
0.219521
3.5%
6%
$165,000
Percent annual increase in the taxable value of residential 2%
and commercial property on local tax rolls over the next 10 years
Marginal cost of providing municipal services, excluding $500
utilities, to each new household
Estimated other city revenues per new household -- $60
those revenues in addition to sales, hotel/motel and property taxes,
utilities, sanitation and utility franchise fees
Annual increase expected in other city revenues and marginal costs 2%
Estimated average annual water, wastewaster and solid waste, per household, by $1,164
city -owned or city -provided utilities
The city's annual cost of providing water, wastewater and sanitation $1,083
collection per household (estimated at 93% of billings)
Annual increase expected in utility billings 2%
Estimated annual utility franchise fees collected from each household in the city $89.73
Annual increase expected in utility franchise fee collections 2%
Utility franchise fee percentages for utilities provided by
outside service providers:
Electricity 4%
Natural gas 2%
Cable 5%
Telephone:
Residential ($.79 per line charge per month)
Nonresidential ($.79 per line charge per month)
Alvin ISD rates:
Annual state aid for each new child enrolled
in the school district
Estimated average annual cost of providing services to each
child in the school district
Estimated marginal cost of providing services to each new student
for a small number of new students -- estimated at 30% of average
costs for existing students
Information on the Facility and its Employees:
Page 9
$3,400
$6,800
$2,040
Value of assets at the facility to be added to local tax rolls:
Buildings and Furniture,
Related Fixtures and
Land Improvements Equipment
Total
Year 1 $2,000,000 $13,000,000 $2,000,000 $17,000,000
Year 2 $13,000,000 $2,000,000 $15,000,000
Year 3 $0 $0 $0
Year 4 $0 $0 $0
Year 5 $0 $0 $0
Year 6 $0 $0 $0
Year 7 $0 $0 $0
Year 8 $0 $0 $0
Year 9 $0 $0 $0
Year 10 $0 $0 $0
Total $2,000,000 $26,000,000 $4,000,000 $32,000,000
Depreciation schedule used to calculate the taxable value of furniture, fixtures and equipment:
According to the Brazoria County Appraisal District, furniture, fixtures and equipment are
depreciated using a 10 year life and a 30% residual value. Therefore, the depreciable or
taxable value of the firm's FF&E assets will be as follows:
The firm's utilities:
Percent of
Asset Cost
that will be
Taxed
Year 1 90%
Year 2 80%
Year 3 70%
Year 4 60%
Year 5 50%
Year 6 40%
Year 7 30%
Year 8 30%
Year 9 30%
Year10 30%
Page 10
Annual Monthly
Usage Usage
Water $6,000 $500
Wastewater $6,000 $500
Solid waste $12,000 $1,000
Electricity $240,000 $20,000
Natural gas $36,000 $3,000
Total $300,000 $25,000
Estimated annual increase in utility rates and usage:
Water
Wastewater
Solid waste
Electricity
Natural gas
Estimated number of telephone lines for calculating line access fees
that will be collected by the City
Expected taxable sales by some tenants in the facility:
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
$850,000
$1,759,500
$1,900,260
$2,052,281
$2,216,463
$2,393,780
$2,585,283
$2,792,105
$3,015,474
$3,256,712
5%
5%
5%
5%
5%
200
Estimated annual increase in taxable sales afar year 2 8%
The facility's estimated local taxable purchases of supplies, materials and services:
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Page 11
$125,000
$250,000
$262,500
$275,625
$289,406
$303,877
$319,070
$335,024
$351,775
Year 10 $369,364
Annual increase in local taxable purchases of supplies, materials and services
after the first year
Number of new workers at the facility:
5%
Total
New Workers New
Hired Workers at
Each Year the Facilities
Year 1 350 350
Year 2 350 700
Year 3 700
Year 4 700
Year 5 700
Year 6 700
Year 7 700
Year 8 700
Year 9 700
Year 10 700
Total 700
Estimated number of workers who will move to Pearland to work
at the facility (about 20% of new workers):
Expected annual payroll:
Year 1 70
Year 2 70
Year 3 0
Year 4 0
Year 5 0
Year 6 0
Year 7 0
Year 8 0
Year 9 0
Year 10 0
Total 140
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Page 12
$12,950,000
$26,806,500
$27,744,728
$28,715,793
$29,720,846
$30,761,075
Percent of expected increase in average salaries and wages after Year 1 3.50%
Multipliers for calculating the number of indirect and induced jobs and earnings in the community:
Earnings
Employment
This cost -benefit analysis uses the above multipliers to calculate the
number of spin-off jobs created in the community and their earnings.
Percent of the employees to be hired in spin-off jobs created in the community
who will move to Pearland
Percent of workers who move to the community that will require the building
of new residential property in the first ten years
$0.5036
$0.6072
10%
20%
The number of people in a typical worker's household 3.5
The number of school children in a typical worker's household: 1.25
Percent of retail shopping by a typical worker in the city 70%
Spending during construction and purchases of furniture, fixtures and equipment:
Estimated building and other construction costs:
Year 1 $13,000,000
Year 2 $13,000,000
Year 3 $0
Year 4 $0
Year 5 $0
Year 6 $0
Year 7 $0
Year 8 $0
Year 9 $0
Year 10 $0
Percent of construction costs for:
Materials 50%
Labor 50%
Percent of construction materials that will be purchased in the city and subject 50%
to sales tax
Percent of taxable spending by construction workers in the City 30%
Page 13
Percent of furniture, fixtures and equipment that will be purchased in the city 15%
Out-of-town visitors to the facility:
Estimated number of out-of-town visitors to the facility each year 75
Average increase in the number of out-of-town visitors 5%
Average number of days that each of these visitors will stay in the city 2
Estimated daily visitor spending in the City, excluding spending on motels $50
Estimated number of nights that a typical visitor will stay in a motel in city 1
Average daily motel room rate of a Pearland hotel/motel $80
Page 14
Schedules Showing the Results of Economic Impact Calculations
Page 15
Number of local jobs and worker salaries:
Direct Indirect Total Direct Indirect Total
Year Jobs Jobs Jobs Salaries Salaries Salaries
1 350 213 563 $12,950,000 $6,521,037 $19,471,037
2 350 213 563 $26,806,500 $13,498,547 $40,305,047
3 0 0 0 $27,744,728 $13,970,996 $41,715,724
4 0 0 0 $28,715,793 $14,459,981 $43,175,774
5 0 0 0 $29,720,846 $14,966,080 $44,686,926
6 0 0 0 $30,761,075 $15,489,893 $46,250,969
7 0 0 0 $31,837,713 $16,032,040 $47,869,752
8 0 0 0 $32,952,033 $16,593,161 $49,545,194
9 0 0 0 $34,105,354 $17,173,922 $51,279,276
10 0 0 0 $35,299,041 $17,775,009 $53,074,050
Total 700 425 1,125 $290,893,083 $146,480,666 $437,373,749
Number of new direct and indirect workers and their families who will move
to the area and their children who will attend Alvin ISD schools:
Year Residents Students
1 319 91
2 319 91
3 0 0
4 0 0
5 0 0
6 0 0
7 0 0
8 0 0
9 0 0
10 0 0
Total
638 182
Page 16
Local taxable spending on which sales taxes will be collected:
Year
The Facility's
Direct and Local Purchases
Purchases and Indirect Gross Taxable and
Spending during Workers' Visitors' Sales at the Taxable
Construction Spending Spending Facility Utilities Total
1 $3,932,500 $5,451,890 $7,500 $850,000 $401,000 $10,642,890
2 $4,232,500 $11,285,413 $8,111 $1,759,500 $539,800 $17,825,324
3 $0 $11,680,403 $8,772 $1,900,260 $566,790 $14,153,225
4 $0 $12,089,217 $9,487 $2,052,281 $595,130 $14,743,114
5 $0 $12,512,339 $10,260 $2,216,463 $624,886 $15,363,949
6 $0 $12,950,271 $11,097 $2,393,780 $656,130 $16,011,279
7 $0 $13,403,531 $12,001 $2,585,283 $688,937 $16,689,751
8 $0 $13,872,654 $12,979 $2,792,105 $723,384 $17,401,122
9 $0 $14,358,197 $14,037 $3,015,474 $759,553 $18,147,261
10 $0 $14,860,734 $15,181 $3,256,712 $797,530 $18,933,157
Total $8,165,000 $122,464,650 $109,426 $22,821,858 $6,353,139 $159,914,073
Local spending by visitors on lodging:
Spending
Year on Lodging
1 $6,000
2 $6,489
3 $7,018
4 $7,590
5 $8,208
6 $8,877
7 $9,601
8 $10,383
9 $11,230
10 $12,145
Total $87,541
Page 17
Number of new residential properties to be built in the community:
New
Year Properties
1 18
2 18
3 0
4 0
5 0
6 0
7 0
8 0
9 0
10 0
Total 36
Taxable value of new residential property built for some direct and indirect workers who move to
community and the facility's property on local tax rolls:
New Total
Residential Property at Taxable
Year Property the Facility Property
1 $2,970,000 $16,800,000 $19,770,000
2 $6,058,800 $31,700,000 $37,758,800
3 $6,179,976 $31,866,000 $38,045,976
4 $6,303,576 $32,043,320 $38,346,896
5 $6,429,647 $32,232,186 $38,661,833
6 $6,558,240 $32,432,830 $38,991,070
7 $6,689,405 $32,645,487 $39,334,892
8 $6,823,193 $33,070,396 $39,893,589
9 $6,959,657 $33,707,804 $40,667,461
10 $7,098,850 $34,357,960 $41,456,810
Page 18
Schedules Showin ! the Results of Costs and Benefits Calculations
ill
Page 19
Costs and Benefits for the City of Pearland:
Benefits:
Sales tax collections on spending:
Year
The Facility's
Spending by Local
Purchases and Direct and Gross Taxable Purchases
Spending during Indirect Visitors' Sales at and Taxable
Construction Workers Spending the Facility Utilities Total
1 $58,988 $81,778 $113 $12,750 $6,015 $159,643
2 $63,488 $169,281 $122 $26,393 $8,097 $267,380
3 $0 $175,206 $132 $28,504 $8,502 $212,343
4 $0 $181,338 $142 $30,784 $8,927 $221,192
5 $0 $187,685 $154 $33,247 $9,373 $230,459
6 $0 $194,254 $166 $35,907 $9,842 $240,169
7 $0 $201,053 $180 $38,779 $10,334 $250,346
8 $0 $208,090 $195 $41,882 $10,851 $261,017
9 $0 $215,373 $211 $45,232 $11,393 $272,209
10 $0 $222,911 $228 $48,851 $11,963 $283,952
Total $122,475 $1,836,970 $1,641 $342,328 $95,297 $2,398,711
Hotel occupancy taxes collected from visitors to the facility:
Year
Hotel
Occupancy
Tax
Collections
1 $420
2 $454
3 $491
4 $531
5 $575
6 $621
7 $672
8 $727
9 $786
10 $850
Total $6,128
Page 20
Costs and benefits for the City of Pearland - Continued:
Property tax collections on:
Year
The Facility's Property
New Residential Property Less Taxes Taxes
Property Taxes Abated Collected Total
1 $20,493 $115,920 $0 $74,189 $94,682
2 $41,806 $218,730 $0 $139,987 $181,793
3 $42,642 $219,875 $0 $140,720 $183,362
4 $43,495 $221,099 $0 $141,503 $184,998
5 $44,365 $222,402 $0 $142,337 $186,702
6 $45,252 $223,787 $0 $143,223 $188,475
7 $46,157 $225,254 $0 $144,162 $190,319
8 $47,080 $228,186 $0 $146,039 $193,119
9 $48,022 $232,584 $0 $148,854 $196,875
10 $48,982 $237,070 $0 $151,725 $200,707
Total $428,292 $2,144,906 $0 $1,372,740 $1,801,032
Utilities and utility franchise fees collected by the city from the facility and from new
residents and miscellaneous taxes and user fees collected by the city from
new residents and building permits and fees
Year
Utility Misc. Taxes Building
Franchise and User Permits and
Utilities Fees Fees Fees Total
1 $112,219 $22,300 $5,475 $0 $139,994
2 $222,986 $27,404 $11,169 $261,560
3 $227,635 $28,112 $11,393 $267,139
4 $232,386 $28,848 $11,621 $272,854
5 $239,673 $33,795 $11,853 $285,321
6 $244,758 $34,802 $12,090 $291,650
7 $249,959 $35,852 $12,332 $298,143
8 $255,280 $36,948 $12,579 $304,807
9 $260,724 $38,091 $12,830 $311,645
10 $266,293 $39,285 $13,087 $318,665
Total $2,311,911 $325,437 $114,428 $0 $2,751,776
Page 21
Costs and benefits for the City of Pearland - Continued:
Costs for the City of Pearland:
The costs of providing municipal services to new residents and the costs of utilities:
Year
Costs of
Providing
Services to New Costs of
Residents Utilities Total Costs
1 $45,627 $104,363 $149,990
2 $93,078 $207,377 $300,455
3 $94,940 $211,700 $306,640
4 $96,838 $216,119 $312,957
5 $98,775 $222,896 $321,671
6 $100,751 $227,625 $328,376
7 $102,766 $232,462 $335,228
8 $104,821 $237,411 $342,232
9 $106,917 $242,473 $349,390
10 $109,056 $247,652 $356,708
Total $953,569 $2,150,078 $3,103,646
Net Benefits for the City of Pearland:
Net Cumulative
Year Benefits Costs Benefits Net Benefits
1 $394,739 $149,990 $244,749 $244,749
2 $711,187 $300,455 $410,732 $655,481
3 $663,336 $306,640 $356,696 $1,012,177
4 $679,575 $312,957 $366,618 $1,378,795
5 $703,057 $321,671 $381,386 $1,760,180
6 $720,916 $328,376 $392,540 $2,152,720
7 $739,481 $335,228 $404,253 $2,556,973
8 $759,669 $342,232 $417,437 $2,974,410
9 $781,515 $349,390 $432,125 $3,406,535
10 $804,174 $356,708 $447,466 $3,854,001
Total $6,951,520 $3,103,646 $3,854,001
Page 22
Costs and Benefits for Brazoria County:
Benefits:
Sales tax collections on spending:
Year
The Facility's
Spending by Local
Purchases and Direct and Gross Taxable Purchases
Spending during Indirect Visitors' Sales at and Taxable
Construction Workers Spending the Facility Utilities Total
1 $19,663 $27,259 $38 $4,250 $2,005 $53 214
2 $21,163 $56,427 $0 $8,798 $2,699 $89 086
3 $0 $58,402 $0 $9,501 $2,834 $70, 738
4 $0 $60,446 $0 $10,261 $2,976 $73,683
5 $0 $62,562 $0 $11,082 $3,124 $76,769
6 $0 $64,751 $0 $11,969 $3,281 $80,001
7 $0 $67,018 $0 $12,926 $3,445 $83,389
8 $0 $69,363 $0 $13,961 $3,617 $86,941
9 $0 $71,791 $0 $15,077 $3,798 $90,666
10 $0 $74,304 $0 $16,284 $3,988 $94,575
Total
$40,825 $612,323 $41 $114,109 $31,766 $799,064
Property Tax Collections on:
The Facility's Property
New Residential Property Less Taxes Taxes
Year Property Taxes Abated Collected Total
1 $11,337 $64,126 $0 $0 $11,337
2 $23,127 $120,999 $0 $0 $23,127
3 $23,589 $121,633 $0 $0 $23,589
4 $24,061 $122,310 $0 $0 $24,061
5 $24,542 $123,031 $0 $0 $24,542
6 $25,033 $123,796 $0 $0 $25,033
7 $25,534 $124,608 $0 $0 $25,534
8 $26,044 $126,230 $0 $0 $26,044
9 $26,565 $128,663 $0 $0 $26,565
10 $27,096 $131,145 $0 $0 $27,096
Total $236,927 $1,186,540 $0 $0 $236,927
Page 23
Net Benefits for the County:
Net Cumulative
Year Benefits Costs Benefits Net Benefits
1 $64,551 $0 $64,551 $64,551
2 $112,213 $0 $112,213 $176,764
3 $94,327 $0 $94,327 $271,090
4 $97,744 $0 $97,744 $368,835
5 $101,311 $0 $101,311 $470,146
6 $105,034 $0 $105,034 $575,180
7 $108,923 $0 $108,923 $684,102
8 $112,985 $0 $112,985 $797,088
9 $117,232 $0 $117,232 $914,319
10 $121,672 $0 $121,672 $1,035,991
Total $1,035,991 $0 $1,035,991
Page 24
Costs and Benefits for the Alvin ISD:
Property taxes to be collected on new property added to tax rolls:
Year
Property Tax Collections on:
Total
New Residential The Facility's Property Tax
Property Property Collections
1 $45,913 $0 $45,913
2 $93,663 $0 $93,663
3 $95,536 $0 $95,536
4 $97,447 $0 $97,447
5 $99,396 $0 $99,396
6 $101,384 $0 $101,384
7 $103,412 $0 $103,412
8 $105,480 $0 $105,480
9 $107,589 $0 $107,589
10 $109,741 $0 $109,741
Total $959,561 $0 $959,561
Reduction in State Aid to the School District as a Result of New Property Being
Added to Tax Rolls:
Year
Reduction in
State Aid
1 $0
2 $45,913
3 $93,663
4 $95,536
5 $97,447
6 $99,396
7 $101,384
8 $103,412
9 $105,480
10 $107,589
Total $849,820
Page 25
Costs and Benefits for Alvin ISD - Continued
Additional State Aid for New Children who Move to the District.
Additional
Year State Aid
1 $309,400
2 $637,364
3 $656,485
4 $676,179
5 $696,465
6 $717,359
7 $738,880
8 $761,046
9 $783,877
10 $807,394
Total $6,784,449
Costs of educating children of new workers who move to the district:
Costs of
Educating Children
Year of New Resident Workers
1 $148,512
2 $299,994
3 $302,994
4 $306,024
5 $309,084
6 $312,175
7 $315,297
8 $318,450
9 $321,634
10 $324,851
Total $2,959,016
Page 26
Costs and Benefits for Alvin ISD - Continued
Net Benefits for Alvin ISD:
Reduction in
State Aid
and
Additional Net Cumulative
Year Benefits Costs Benefits Net Benefits
1 $355,313 $148,512 $206,801 $206,801
2 $731,027 $345,907 $385,120 $591,921
3 $752,021 $396,657 $355,364 $947,285
4 $773,626 $401,560 $372,066 $1,319,351
5 $795,861 $406,531 $389,329 $1,708,680
6 $818,743 $411,571 $407,172 $2,115,852
7 $842,291 $416,681 $425,610 $2,541,462
8 $866,526 $421,861 $444,664 $2,986,126
9 $891,467 $427,114 $464,352 $3,450,479
10 $917,135 $432,440 $484,695 $3,935,173
Total $7,744,009 $3,808,836 $3,935,173
Page 27
Costs and Benefits for Alvin Community College
Net Benefits:
Property Tax Collections on:
Year
New Residential The Facility's Total Property Net Cumulative
Property Property Tax Collections Benefits Net Benefits
1 $6,520 $0 $6,520 $6,520 $6,520
2 $13,300 $0 $13,300 $13,300 $19,820
3 $13,566 $0 $13,566 $13,566 $33,386
4 $13,838 $0 $13,838 $13,838 $47,224
5 $14,114 $0 $14,114 $14,114 $61,339
6 $14,397 $0 $14,397 $14,397 $75,735
7 $14,685 $0 $14,685 $14,685 $90,420
8 $14,978 $0 $14,978 $14,978 $105,398
9 $15,278 $0 $15,278 $15,278 $120,676
10 $15,583 $0 $15,583 $15,583 $136,260
Total $136,260
$0 $136,260 $136,260
Property Taxes to be Collected by the TIRZ
School College
County District District Total
Year City Taxes Taxes Taxes Taxes Collections
1 $39,911 $64,126 $259,711 $36,880 $400,627
2 $66,845 $120,999 $490,050 $69,588 $747,483
3 $53,086 $121,633 $492,616 $69,953 $737,288
4 $55,298 $122,310 $495,358 $70,342 $743,307
5 $57,615 $123,031 $498,277 $70,756 $749,679
6 $60,042 $123,796 $501,379 $71,197 $756,415
7 $62,587 $124,608 $504,667 $71,664 $763,525
8 $65,254 $126,230 $511,235 $72,596 $775,316
9 $68,052 $128,663 $521,089 $73,996 $791,800
10 $70,988 $131,145 $531,140 $75,423 $808,695
Total $599,678 $1,186,540 $4,805,523 $682,394 $7,274,135
Page 28
Analysis of Possible Incentives Using Rate of Return on Investment for
Project ZT
September 12, 2007
An Explanation of Possible PEDC Incentives and Rate of Return on Investment:
Any incentives that PEDC may grant to the firm on behalf of the City may be considered an investment that
the City is making in the firm. The returns on that investment are the additional net benefits that the City
will receive from the firm and its direct and indirect workers. Net benefits for the City will be the additional
revenues, such as from sales, property and other taxes, less additional costs for the City.
Rate of return on investment is the City's average annual rate of return from additional net revenues that the
City will receive on the investment of incentives that the City will be making in the firm's facility. Payback
period is the number of years that it will take the City to recover the costs of incentives from the additional
net revenues that it will receive from the project.
Possible Level of Incentives and Rate of Return on Investment:
PEDC is considering a master lease for 50% of gross area for 12 months at $100,000 a month declining as
space is leased in facility and going away once 50% leased. The full term of the lease may be provided as
incentives, would be negotiated with the tenants.
If the incentives are granted as proposed, PEDC may grant the following incentives:
Guaranteeing a master lease of 50% of the gross area of 80,000 sf or $1,200,000
a guarantee of $100,000 a month for 12 months
Possible levels of incentives and corresponding average annual rates of return on investment over each of
the next ten years and the investment payback periods on the possible PEDC/City investment in the
facility are shown below.
Possible Range of PEDC Incentives
Annual
Rate of
Return on
Incentive Investment
Payback
Period,
in Years
Master lease for 12 months $1,200,000 32%
3.5
The discounted cash flow for the city over seven years
30% of the discounted cash flow for the city over ten years
Range of possible incentives:
Low
High
$2,016,900
$835,332
$835,332
$2,016,900