Tyler Economic Development Council 315 N. Broadway, Suite 300 Tyler, Texas ext. 250 Fax
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1 Tyler Economic Development Council 315 N. Broadway, Suite 300 Tyler, Texas ext. 250 Fax MEMORANDUM TO: FROM: SUBJECT: Smith County Commissioners Court Felecia Herndon, Vice President Finance Request for Tax Abatement for Wyoming Machinery Company 1. Conduct public hearing to consider creation of Wyoming Machinery Reinvestment Zone 2. Adopt Order creating the Reinvestment Zone 3. Consider approval of request for tax abatement BACKGROUND For nearly 50 years, Wyoming Machinery Company has been the Caterpillar dealer within the state of Wyoming. In the coming weeks, Wyoming Machinery Company will be expanding its operations with a new dealership focused on Cat mining product distribution and support business. Headquartered in Casper, WY, Dragline Service Specialties (DSS) a division of Wyoming Machinery Company will operate out of two main facilities; Gillette, WY and Tyler, TX, providing optimal support to the mining industry across the United States. Wyoming Machinery Company s new division will be responsible for approximately 37 small Draglines and approximately 64 active large Draglines. Dragline Service Specialties (DSS) a division of Wyoming Machinery Company will be the premier dealership providing world class product support: parts and service for all dragline needs. Mirroring their parent company, Dragline Service Specialties (DSS) will operate on the same great core values: Safety, Integrity, Excellence, Teamwork and Commitment. DSS plans to purchase a building and property located at Hwy 64 W., Tyler, TX. The building includes 13,250 Sq. Ft of warehouse and office space and 14.2 acres of land. In the coming months, DSS plans to build a 34,600 Sq. Ft shop on the property to provide welding, machining, warehouse parts storage, and administrative services. The company will also purchase equipment to use in its operations. This includes service vehicles, forklifts, machining equipment, technical equipment and welding tools. In addition, DSS will be purchasing computer and office equipment, and installing other information system infrastructure for the Tyler facility.
2 DSS plans to create 88 jobs for the Tyler facility: nine managers, seventy-one production employees and eight support positions and expects to begin operations August 1, 2018 with 34 employees. These positions will consist of welders, mechanics, electricians, machinists, engineers, warehouse technicians, technical service reps, safety specialists, and administration staff. The average hourly pay for these positions, with benefits, is estimated to be $30-$68/hour. Approximate annual salaries and benefits for the DSS Tyler facility will be $10,000,000. On July 16, 2018 the Smith County Tax Abatement Committee recommended a fiveyear abatement for this $14.9 million project that will create 88 new jobs as follows: FISCAL/OPERATIONAL IMPACT Years % Years % Year 5 50% TEDC estimates Smith County could forego up to $201,597 over the five-year period, at the current tax rate. RECOMMENDATION That the Smith County Commissioners Court: 1. Conduct a public hearing to consider the creation of a reinvestment zone at Hwy. 64W 2. Create Wyoming Machinery Reinvestment Zone 3. Approve the tax abatement agreement with Wyoming Machinery Company, and authorize the County Judge to sign all documents necessary to implement the tax abatement agreement Submitted by: Felecia Herndon Vice President Finance July 16, 2018
3 THE STATE OF TEXAS COUNTY OF SMITH AGREEMENT This Agreement is entered into by and between the County of Smith, Texas, duly acting herein by and through its County Judge, hereinafter referred to as COUNTY; the Tyler Junior College District, duly acting herein by and through its President of the Board of Trustees; the Smith County Emergency Services District #2, duly acting herein by and through its President of the Board of Commissioners; hereinafter referred to collectively as TAXING UNITS; and WYOMING MACHINERY COMPANY duly acting by and through its Managing Director, James Thorpen, hereinafter referred to as OWNER. WITNESSETH WHEREAS, on the 24 th day of July, 2018, the County Commissioners Court of Smith County, Texas, passed an Order designating the Wyoming Machinery Company Reinvestment Zone, County of Smith, Texas, for industrial tax abatement, hereinafter referred to as the ORDER, as authorized by Chapter 312 of the Texas Tax Code, as amended, hereinafter referred to as STATUTE; and WHEREAS, the COUNTY has adopted a resolution effective May 9, 2017, stating that it elects to be eligible to participate in tax abatement (the POLICY); and WHEREAS, the POLICY constitutes appropriate guidelines and criteria governing tax abatement agreements to be entered into by the COUNTY as contemplated by the STATUTE; and WHEREAS, in order to maintain and/or enhance the commercial/industrial economic and employment base of the Smith County area to the long-term interest and benefit of the COUNTY and TAXING UNITS, in accordance with said ORDER and STATUTE; and WHEREAS, the contemplated use of the PREMISES, as hereinafter defined, the contemplated improvements to the PREMISES in the amount as set forth in this Agreement, and the other terms hereof are consistent with encouraging development of said Wyoming Machinery Company Reinvestment Zone, in accordance with the purposes for its creation, and are in compliance with the POLICY, ORDER, and similar guidelines and criteria adopted by the COUNTY and all applicable law; NOW, THEREFORE, the parties hereto do mutually agree as follows: 1. The property to be the subject of this Agreement shall be that property belonging to OWNER and located on the premises described on EXHIBIT A, and shown on the map attached hereto as EXHIBIT B, and made a part hereof, and shall be hereinafter referred to as the PREMISES. The PREMISES are located entirely within Smith County and within the Wyoming Machinery Company Reinvestment Zone. 7/12/2018 Page 1 of 6
4 AGREEMENT COUNTY/TAXING UNITS/WYOMING MACHINERY 2. The OWNER shall commence its Production and Capacity Improvements on the PREMISES (hereinafter referred to as IMPROVEMENTS) with total building, equipment and associated improvement costs of not more than Fourteen Million Nine Hundred Thousand Dollars ($14,900,000) which will be subject to abatement under this agreement as further described in EXHIBIT C, made a part hereof. The OWNER shall have such additional time to complete the IMPROVEMENTS as may be required in the event of "force majeure" if OWNER is diligently and faithfully pursuing completion of the IMPROVEMENTS. For this purpose, "force majeure" shall mean any contingency or cause beyond the reasonable control of OWNER, including, without limitation, acts of God or the public enemy, war, riot, civil commotion, insurrection, governmental or de facto governmental action (unless caused by acts or omissions of OWNER), fires, explosions or floods, and strikes. 3. The proposed kind, number, and location of all IMPROVEMENTS are described in EXHIBIT C. In addition, floor plans showing the location of the new construction and equipment as planned and described in EXHIBIT C will be provided to the office of the Smith County Appraisal District prior to commencement of equipment installation. After completion of IMPROVEMENTS, the OWNER shall provide the Appraisal District with floor plans showing the IMPROVEMENTS as built and with the location of the new equipment, and shall certify in writing to the Smith County Tax Abatement Committee the costs of the building, equipment and other tangible personal property and costs associated with installation of that property. Such certification shall be deemed to be incorporated by reference herein and made a part hereof for all purposes. OWNER s abatement may be denied or reduced for failure to provide the floor plans and certification in a timely manner (also see Paragraph 6). 4. The OWNER agrees and covenants that it will diligently and faithfully, in a good and workmanlike manner, pursue the completion of the IMPROVEMENTS as a good and valuable consideration of this Agreement. OWNER further covenants and agrees that all installation of the IMPROVEMENTS will be in accordance with all applicable state and local laws and regulations or valid waiver thereof. In further consideration, OWNER shall thereafter continuously operate and maintain during the term of the Agreement, except as excused because of "force majeure" events as defined above in Paragraph 2, the PREMISES as the production facility of OWNER. The PREMISES and the IMPROVEMENTS constructed thereon shall at all times during the term of this Agreement be used in a manner that is consistent with the County's general purpose of encouraging development in the Zone. 5. The OWNER agrees and covenants to show reasonable progress toward the creation of 88 new full-time Tyler-based JOBS by December 31, 2021, according to the conditions in Paragraph 12. OWNER will provide employment information as of December 31 each year. Formal announcement of company closure may be cause for immediate termination of this Agreement. 2 7/12/2018 Page 2 of 6
5 AGREEMENT COUNTY/TAXING UNITS/WYOMING MACHINERY 6. Compliance with this tax abatement agreement will be monitored by the Smith County Tax Abatement Committee on at least an annual basis. The OWNER will be required to provide written documentation to the Committee on or before March 1 each year that reasonable progress has been made toward all of the requirements set forth in this agreement. Each year's abatement during the term of this agreement shall stand on its own. If the conditions for abatement are not substantially met for a year, the taxing entities may choose to terminate this agreement, continue the agreement without any abatement for that year, or reduce the amount of abatement according to the conditions in Paragraph In the event that (1) the IMPROVEMENTS and additional JOBS for which the reinvestment zone has been created are not completed substantially in accordance with this Agreement, and subject to the conditions listed in Paragraph 12, or (2) OWNER allows its ad valorem taxes owed the COUNTY or TAXING UNITS to become delinquent and fails to timely and properly follow the legal procedures for protest and/or contest of any such ad valorem taxes, or (3) OWNER breaches any other material terms or conditions of this Agreement, then this Agreement shall be in default. In the event that the OWNER defaults in its performance of (1), (2), or (3) above, then the COUNTY or TAXING UNITS shall give the OWNER written notice of such default and, if the OWNER has not cured such default within thirty (30) days of said written notice, or if such default cannot be cured by the payment of money and cannot with due diligence be cured within a ninety (90) day period owing to causes beyond the control of the OWNER, this Agreement may be terminated or modified by the COUNTY or TAXING UNITS. Notices shall be in writing and shall be delivered by personal delivery or certified mail to OWNER at its Tyler, Texas, address of record. As liquidated damages, in the event of default, all taxes which otherwise would have been paid to the COUNTY and TAXING UNITS without the benefit of the abatement under this Agreement (but without the addition of penalty; interest will be charged at the statutory rate for delinquent taxes as determined by Section of the Property Tax Code of the State of Texas) will become a debt to the COUNTY and TAXING UNITS and shall be due, owing, and paid to the COUNTY and TAXING UNITS within sixty (60) days of the expiration of the above mentioned applicable cure period as the sole remedy of the COUNTY and TAXING UNITS, subject to any and all lawful offsets, settlements, deductions, or credits to which OWNER may be entitled. In the event a debt is created, the Smith County Tax Abatement Committee shall consider all factors in determining whether to recommend the debt be collected and the terms of that collection. The parties acknowledge that actual damages, in the event of default and termination, would be speculative and difficult to determine. 8. The COUNTY and TAXING UNITS each represent and warrant that the PREMISES does not include any property that is owned by a member of their respective councils or boards, agencies, commissions, or other governmental bodies approving or having responsibility for the approval of this Agreement. 3 7/12/2018 Page 3 of 6
6 AGREEMENT COUNTY/TAXING UNITS/WYOMING MACHINERY 9. The terms and conditions of this Agreement are binding upon the successors and assigns of all parties hereto. The Agreement cannot be assigned by OWNER unless written permission is first granted by the COUNTY and TAXING UNITS, which permission shall be at the sole discretion of the COUNTY and TAXING UNITS, except under the following conditions: A. Assignment to a wholly-owned subsidiary of OWNER or its parent company is permissible. B. A transfer of interest, under a "Sale and Lease Back", is permissible wherein OWNER shall continue to conduct business on the subject premises. 10. It is understood and agreed between the parties that the OWNER, in performing its obligations hereunder, is acting independently, and the COUNTY and TAXING UNITS assume no responsibilities or liabilities in connection therewith to third parties, and OWNER agrees to indemnify and hold COUNTY and TAXING UNITS harmless therefrom; it is further understood and agreed among the parties that the COUNTY and the TAXING UNITS, in performing their obligations hereunder, are each acting independently, and OWNER assumes no responsibilities or liabilities in connection therewith to third parties, and the COUNTY and TAXING UNITS agree to indemnify and hold OWNER harmless therefrom, to the extent allowed by applicable state law. 11. The OWNER further agrees that the COUNTY and TAXING UNITS, their agents and employees, shall have reasonable right of access to the PREMISES during normal business hours to inspect the IMPROVEMENTS in order to insure that the construction of the IMPROVEMENTS is in accordance with this Agreement and all applicable state and local laws and regulations or valid waiver thereof. After completion of the IMPROVEMENTS and until the expiration of this Agreement, the COUNTY and TAXING UNITS shall have the continuing right to inspect the PREMISES during normal business hours subject to reasonable security requirements to insure that the PREMISES are thereafter maintained and operated in accordance with this Agreement. 12. Subject to the terms and conditions of this Agreement, and subject to the rights and holders of any outstanding bonds of the COUNTY and TAXING UNITS, a portion of ad valorem real and personal property taxes from the PREMISES otherwise owed to the COUNTY and TAXING UNITS shall be abated. Said abatement shall be an amount equal to a fixed percentage as defined below of the taxes assessed upon the increased value of the IMPROVEMENTS up to Fourteen Million Nine Hundred Thousand Dollars ($14,900,000) over the value in the year in which this Agreement is executed, or the appropriate depreciated value thereafter, and in accordance with the terms of this Agreement and all applicable state and local regulations or valid waiver thereof; provided that the OWNER shall have the right to protest and/or contest any assessment of the PREMISES and said abatement shall be applied to the amount of taxes finally determined to be due as a result of any such protest and/or contest. Said abatement shall extend for a period of five (5) years beginning the 1st day of January, In accordance with the above, the abatement shall be 100% for tax year 2019, provided at least 34 jobs are created by December 31, Subject to the review and recommendation of the Smith County Tax Abatement Committee, for tax year 2019, the percentage of abatement up to 100%, shall be based upon the previous year s employment at December 31 divided by the job goal of 34. (Example: If OWNER has 30 jobs at 12/31/18, that would be 30/34 = 88% for tax year 2019.) For tax year 7/12/2018 Page 4 of 6 4
7 AGREEMENT COUNTY/TAXING UNITS/WYOMING MACHINERY 2020, the percentage of abatement, up to 100%, shall be based upon the previous year s employment at December 31 divided by employment goal of 59. (Example: if OWNER has 48 jobs at 12/31/19, that would be 48/59 = 81% for tax year 2020). For tax years , the percentage of abatement for each year up 80%, shall be based upon the previous year s employment at December 31 divided by employment goal of 74. (Example: if OWNER has 58 jobs at 12/31/2020, that would be 58/74 = 78% for tax years ). For tax year 2023, the employment goal of 88 total jobs is expected with maximum abatement allowed of 50%. Notwithstanding the above and in accordance with Section 6 of this agreement, in the event OWNER fails to achieve at least sixty percent (60%) of the new job compliance on December 31 of the prior year, the Smith County Tax Abatement Committee shall be mandated to discuss and then vote as to a recommendation to the taxing entities for termination of this agreement. job requirements by abatement for tax year create 34 jobs 12/31/ % for 2019 add 25 jobs (total 59) 12/31/ % for 2020 add 15 jobs (total 74) 12/31/ % for add 14 jobs (total 88) 12/31/ % for The term shall be from January 1, 2019, through December 31, This Agreement was authorized by the Minutes of the Commissioners Court of Smith County, Texas, at its meeting on the 24th day of July, 2018, whereupon it was duly determined that the County Judge would execute the Agreement on behalf of Smith County. 15. This Agreement was authorized by the Minutes of the Board of Trustees of the Tyler Junior College District at its Board Meeting on the 30th day of August, 2017, whereupon it was duly determined that the Board President would execute the Agreement on behalf of the Tyler Junior College District. 16. This Agreement was authorized by the Minutes of the Board of Commissioners of the Smith County Emergency Services District #2 at its Board Meeting on the 27th day of August, 2018, whereupon it was duly determined that the Board President would execute the Agreement on behalf of the Smith County Emergency Services District # This Agreement was entered into by Wyoming Machinery Company by authority granted under a Certification of Authority whereby James Thorpen, Managing Director, is authorized to execute this Agreement on behalf of Wyoming Machinery Company, a copy of which Certification is attached hereto as EXHIBIT D. 18. This shall constitute a valid and binding Agreement between the COUNTY and Wyoming Machinery Company when executed in accordance herewith, regardless of whether any other TAXING UNIT executes this Agreement. If a TAXING UNIT executes this Agreement, this shall constitute a valid and binding Agreement between such TAXING UNIT and OWNER when executed on behalf of said parties, for the abatement of such TAXING UNITS' taxes in accordance therewith. 5 7/12/2018 Page 5 of 6
8 AGREEMENT COUNTY/TAXING UNITS/WYOMING MACHINERY The Agreement is performable in Smith County, Texas. Witness our hands this Day of, ATTEST: COUNTY CLERK COMMISSIONERS COURT OF SMITH COUNTY COUNTY JUDGE APPROVED AS TO FORM: ATTORNEY FOR COMMISSIONERS COURT OF SMITH COUNTY, TEXAS ATTEST: SECRETARY, BOARD OF TRUSTEES TYLER JUNIOR COLLEGE DISTRICT PRESIDENT OF THE BOARD OF TRUSTEES APPROVED AS TO FORM: ATTORNEY FOR TYLER JUNIOR COLLEGE DISTRICT ATTEST: SECRETARY, BOARD OF COMMISSIONERS SMITH COUNTY EMERGENCY SERVICES DISTRICT #2 PRESIDENT OF THE BOARD OF COMMISSIONERS APPROVED AS TO FORM: ATTORNEY FOR SMITH COUNTY EMERGENCY SERVICES DISTRICT WYOMING MACHINERY COMPANY JAMES THORPEN, MANAGING DIRECTOR 6 7/12/2018 Page 6 of 6
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12 Exhibit B
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14 Tyler Proposed Site Plan
15 Building & Equipment Investment Breakdown Building 34,600 Sq. Ft for welding, machining, parts storage $5,000,000 Land Improvements $550,000 Vehicles, Equipment, Tools $9,000,000 Computers & Hardware $300,000 Office Furniture and Equipment $50,000 Total Investment $14,900,000 DSS will invest approximately $3,000,000 in dragline parts inventory to support our customers which is not included in the above numbers.
16 Exhibit D Certificate of Authorization Wyoming Machinery Company As of Wyoming Machinery Company, Inc., I can certify that James Thorpen, Managing Director for Wyoming Machinery Company, has the authority to sign the Agreement for Tax Abatement on Wyoming Machinery s new facility. Wyoming Machinery Company
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