06-25-18 Regular Meeting of the La Porte Development Corporation Board

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Scoring System Factors Economic/Fiscal Impact and Character of the Jobs La Porte’s primary considerations when evaluating whether or not to offer an incentive package is the potential aggregate economic and fiscal impact on the community and the character of the jobs to be created. Standard questions asked when evaluating firm-based incentives requests may include: What is the absolute size of the net benefit (economic and fiscal)? Is the firm a headquarters operation? Does it represent the “headquarters” of a new product line/service for the firm? Is the firm growing? Is the firm in a growing industry? How stable is the firm? Does the project represent a significant enhancement of the local tax base over and above the economic impact (i.e., a new entertainment/lodging facility that can choose whether or not to locate in the city limits)? Will the project make a disproportionate demand on the community’s environmental and infrastructure resources? Policy Guideline #3: Chapter 380 of the Texas Local Government Code, due to its flexibility and simplicity, is likely to be the preferred vehicle for any financial incentive agreement between La Porte and a potential recipient. Within this structure, sales taxes, property taxes, and other fees paid by the company could be eligible to be included in the agreement, although all should be returned, rather than waived/abated. Property taxes can be an incentive for existing space as well. For end-user purchase, La Porte can offer to structure an agreement that returns, on a performance basis, the taxes that accrue based on the incremental growth of the property over time. The same process could be applied to end-user tenants, since commercial/industrial leases can be written as “triple net,” where the tenant directly pays the cost of taxes, insurance, and utilities. What this structure does is to insure that La Porte covers its costs before offering incentives, while essentially forgoing the right to use the “profit” from the firm to cross- subsidize residents (as with utilities, commercial property taxpayers tend to provide a disproportionate share of revenue). At the same time, the community (and the city) gain in a number of additional ways, such as economic activity in the form of jobs and spending plus additional tax revenues. Policy Guideline #4: Financial incentives should not be “front-loaded.” Rather, the community should set an incentive policy based on returning taxes and/or fees paid by a company upon execution of a specific set of agreed-upon performance criteria between the applicant and the City. 24 Forward La Porte Economic Development Strategic Plan I 2009-2013