Loading...
HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 07/19/2011 - RESOLUTION 2011-066 APPROVING AN AGREEMENT BETWEENDATE: July 19, 2011 STAFF: Josh Birks AGENDA ITEM SUMMARY FORT COLLINS CITY COUNCIL 27 SUBJECT Resolution 2011-066 Approving an Agreement Between the City and Avago Technologies US, Inc. to Provide Business Investment Assistance for the Building 4 Retrofit. EXECUTIVE SUMMARY This Resolution approves a Business Investment Agreement between the City and Avago Technologies. The Agreement provides two performance based investments: (1) a one-time use tax rebate on manufacturing equipment purchased as part of the expansion; and (2) a personal property tax rebate on the same equipment for ten years. Both investments relate to revenues the City would not otherwise collect if the expansion did not occur within the City. The total investment package has a value of approximately $3.2 million and includes both local and state investments. The total value of the use tax and personal property constitutes $2.912 million of the package value. NOTE: The value of the package has increased since the Council Finance Committee briefing on July 5, 2011. The increase is due to additional investment in manufacturing equipment by Avago. BACKGROUND / DISCUSSION In 2005, the City Council adopted the first Economic Action Plan to provide staff focus and direction regarding efforts to enhance the local economy. The Action Plan contains four key strategies: (1) job creation through business retention, expansion, incubation, and attraction; (2) be proactive on economic issues; (3) build partnerships; and (4) diversify the economy. Furthermore, City Council has given consistent and clear direction that all investment agreements be performance based. In 2006, the City commissioned a study to evaluate the geographic concentration and interconnectedness of companies within the community in order to determine potential industry clusters. The study identified several existing and emerging industry clusters. The identified clusters were modified into five targeted industry clusters, which became the focus of job creation activities. These clusters included: Clean Energy, Bioscience, Chip Design, Software, and Uniquely Fort Collins. On August 17, 2010, the City adopted Resolution 2010-055, authorizing and directing the City Manager to continue to support on behalf of the City participation in the formation and development of cluster initiatives relating to the identified targeted industries of the City, to work with regional partners and local business entities to develop strategic plans for the clusters, and to support the advancement of the plans as they are implemented for the purpose of primary job retention, expansion, and creation. Avago Technologies has a 50-year history of innovation dating back to origins within Hewlett-Packard Company (HP). The company began as HP's components division back in the early 1960s and thrived there for three decades. When HP spun off Agilent Technologies in 1999, the company became Agilent's Semiconductor Products Group (SPG) and expanded into new markets and applications. In late 2005, SPG was acquired by several private equity partners and Avago Technologies was founded. Over the years, Avago has assembled a team of over 1,000 design and product engineers and maintains highly collaborative design and product development resources around the world that have resulted in the development of numerous groundbreaking technologies. The Business Investment Agreement being offered to Avago Technologies is consistent with both the Action Plan strategies and City Council direction: • The proposed Business Investment Agreement rebates tax revenues generated by the project; without the project these revenues would not be received by the City. • The Economic Action Plan clearly identifies business retention and expansion as the primary goal for the City’s job creation efforts over business attraction; the proposed expansion supports this goal. July 19, 2011 -2- ITEM 27 • Plan Fort Collins call for creating a diversity of jobs that enables citizens and businesses to thrive; the proposed expansion provides an array of jobs and salary ranges. Most importantly, the expansion brings back much needed high-tech manufacturing jobs. PROJECT OVERIVEW Avago Technologies plans to expand its wafer manufacturing, which currently occurs only in Taiwan. The company evaluated expansion at facilities in Taiwan, Italy, and Fort Collins. Avago Technologies selected the City for expansion for several reasons, including: (1) low power costs, (2) progressive utilities willing to assist in the modernization of plant operations related to power and water consumption, and (3) a Business Investment Agreement as described in detail below. This expansion represents an opportunity to bring a type of chip manufacturing to Fort Collins that has occurred primarily off-shore. The wafer fabrication expansion includes: • The retrofit of the existing Building 4 (approximately 10,000 square feet); • $17 million in retrofit construction costs; • $57.5 million in wafer manufacturing equipment; • $5.7 million in equipment installation; • An increase in water use of approximately 20.0 million gallons, an estimated 10 percent increase (equivalent to annual consumption of approximately 300 average homes; no anticipated impact on peak demand or the physical plant); and • An increase of approximately 1.0 megawatts of electric capacity (equivalent to annual consumption of approximately 500 average homes; no anticipated impact on peak demand or the physical plant). Furthermore, the proposed expansion is anticipated to add approximately 92 jobs including: • 8 Engineers earning approximately $100,000 annually; • 14 Technicians earning approximately $70,000 annually; and • 70 Operators earning approximately $40,000 annually. BUSINESS INVESTMENT AGREEMENT On April 22, 2011, Economic Health Office staff provided Avago Technologies with an offer of assistance to support the retrofit of Building 4 for wafer fabrication (Attachment 1). The package was submitted to Avago Technologies confidentially. The item was scheduled for Council Finance Committee consideration (July 5, 2011) and City Council action (July 19, 2011). The meetings were scheduled after the Colorado Economic Development Commission (EDC) considered a request for assistance from its Strategic Fund. The EDC requests that all potential assistance packages remain confidential until it has an opportunity to consider the request. The EDC considered the request on June 16, 2011. The Council Finance Committee meetings and City Council action were scheduled shortly after this meeting in consultation with the City Manager. The City of Fort Collins uses a variety of local investments to assist primary employers with expansion efforts. The total value of the proposed investment package is approximately $3.2 million and includes both local and state investments ($2.9 million in local investments and $300,000 in state investments). The package includes the following items: • $1.725 million in Equipment Use Tax rebate on the initial manufacturing equipment investment associated with the project • Approximately $817,000 in Personal Property Tax savings on manufacturing equipment over a 10 year period • Expedited review and commitment by City staff to Avago’s desired timeline • Free Integrated Design Assistance valued at $20,000 to improve operating efficiencies • Assistance with building re-commissioning, valued at up to $150,000 to maximize building efficiency and reduce utility costs • Implementation of the evaporative cooling credit against sewer costs, creating approximately $20,000 annually or a total of $200,000 over ten years • $230,000 in Colorado Economic Development Commission’s (EDC) Strategic Fund assistance (subject to Board approval); and • $73,600 in Colorado FIRST Customized Job Training Funds. July 19, 2011 -3- ITEM 27 The Utility items listed above are available to any company within Fort Collins, whether expanding or continuing operations. They have been included in the package description because the competition may not offer similar utility assistance. FINANCIAL / ECONOMIC IMPACTS Martin Shields, Associate Professor of Economic and Regional Economist at Colorado State University prepared an Economic Impact Analysis (EIA) of Avago Technologies planned expansion (Attachment 2). The following summarizes that analysis: • New equipment will generate approximately $1.725 million in use tax revenue (offset by investment package) • The same equipment will generate approximately $163,000 in annual personal property tax revenue of $1.63 million over the ten year agreement period (partially offset by investment package) • Construction activity ($17 million retrofit and $5.7 million equipment installation) will support 228 direct jobs and 74 spin-off jobs throughout the anticipated 15-month construction period • Construction will generate approximately $323,400 in use tax revenue on materials • The 92 new jobs will support an additional 155 in spin-off secondary jobs at an average salary of $48,900 • The 92 new jobs will generate approximately $554,000 in sales tax revenue and $413,000 in property tax revenue over the next ten years; and • The EIA recognizes additional sales tax and property tax revenue will be generated by the spin-off jobs; however, the analysis provides a conservative estimate of economic impact and does not estimate these revenues. The proposed Business Investment Agreement will have the following impacts on the City of Fort Collins finances: • All of the estimated $1.725 million in use tax revenue collected on the purchase of the wafer fabrication equipment will be rebated • Half of the estimated $163,000 in annual Personal Property Tax revenue collected on the wafer fabrication equipment will be rebated for ten years for a total of approximately $817,000 • Utilities will invest approximately $170,000 in one-time energy and water efficiency design assistance • In addition, Avago will take advantage of the new evaporative cooling credit offered by the Fort Collins Utilities for a total savings of $200,000 over the course of ten years • However, the City would not have collected Use Tax or Personal Property Tax revenue if the expansion had occurred in Italy or Taiwan. • Net impact of the Business Investment Agreement is approximately $1.755 million, as shown in Table 1. July 19, 2011 -4- ITEM 27 Table 1 Estimated Revenue, Rebate, and Net Revenue Revenue Estimated Revenue Rebate/ Incentive Net Revenue One-Time Items Construction Use Tax $323,000 $0 $323,000 Equipment Use Tax 1 $1,725,000 $1,725,000 $0 Integrated Design Assistance $0 $20,000 ($20,000) Building Re-commissioning $0 $150,000 ($150,000) Subtotal $2,048,000 $1,895,000 $153,000 On-Going Items (Cumulative over 10 Years) Equipment Personal Property Tax $1,630,000 $817,000 $817,000 Spin Off Sales Tax $554,000 $0 $554,000 Spin Off Property Tax $413,000 $0 $413,000 Evaporative Cooling Credit $0 $200,000 ($200,000) Subtotal $$2,597,000 $1,017,000 $1,602,000 Total $4,645,000 $2,912,000 $1,755,000 1 Current City Code allows for a rebate of 1.5 percent of the 3.0 percent use tax. The proposed Business Investment Agreement increases the rebate to the full 3.0 percent; therefore the incentive provides a value of $727,500 above current Code. ENVIRONMENTAL IMPACTS Avago plans to make the following system upgrades as part of the retrofit of Building 4: • A site-wide HVAC retrofit. • A "free heating" project, which utilizes waste heat from HVAC Chillers to reheat incoming outside air for Building 4. Similar to a Building 2 upgrade that reduced natural gas consumption on site by approximately 5%. • Purchase and installation of a high efficiency chiller sized to handle the building’s base load conditions (in winter) and run at optimum performance. • Replace two boilers with two new very high efficiency condensing boilers matched to the building’s base load, which avoids running boilers to big to run efficiently. Based on the Fort Collins Utility assistance , the upgrades will help to reach 3 million kilowatt-hours of annual savings. This savings in energy consumption will have the following environmental benefits: • The project would comprise 14% of the City’s annual efficiency savings goal; • The project would avoid 2119 metric tons of carbon emissions annually; and • The carbon emissions savings are equivalent to the annual emissions of 415 cars or 264 homes or the amount of carbon sequestered by 54,333 tree seedlings grown for ten years. STAFF RECOMMENDATION Staff recommends adoption of the Resolution. BOARD / COMMISSION RECOMMENDATION Negotiations of the planned Avago Technologies expansion and related Business Investment Agreement were conducted confidentially. July 19, 2011 -5- ITEM 27 PUBLIC OUTREACH Negotiations of the planned Avago Technologies expansion and related Business Investment Agreement were conducted confidentially. ATTACHMENTS 1. Local Employment Investment Package, Building 4 Retrofit – Wafer Fabrication Expansion, prepared by City of Fort Collins, April 22, 2011 (This item is no longer confidential) 2. Company X, Economic Impact Analysis, prepared by Martin Shields, Colorado State University, April 26, 2011 3. Powerpoint presentation DRAFT Economic Health Office 300 LaPorte Avenue PO Box 580 Fort Collins, CO 80522 970.221.6505 970.224.6107 - fax fcgov.com CONFIDENTIAL LOCAL EMPLOYMENT INVESTMENT PACKAGE Building 4 Retrofit - Wafer Fabrication Expansion Prepared for: Steve Wolley Avago Technologies 4380 Ziegler Rd. Fort Collins, CO 80525 Prepared by: Economic Health Office City of Fort Collins April 22, 2011 DRAFT This Page Intentionally Left Blank DRAFT TABLE OF CONTENTS Investment Package Overview .................................................................................................1 Project Description....................................................................................................................3 Manufacturing Investments.......................................................................................................4 Equipment Use Tax Rebate..................................................................................................4 Personal Property Tax Rebate..............................................................................................4 Expedited Development Review ...........................................................................................5 Utility Investments.....................................................................................................................6 Integrated Design Assistance Program.................................................................................6 Evaporative Loss...................................................................................................................6 Building Recommisioning......................................................................................................6 Colorado State Office of Economic Development Letter...........................................................7 DRAFT This Page Intentionally Left Blank DRAFT 1 Investment Package Overview The City of Fort Collins uses a variety of local investments to assist primary employers with expansion efforts. The City does not employ a one size fits all approach to developing investment packages. Instead, the City chooses to work collaboratively with each primary employer and build a package that is specific to the individual needs. This approach typically results in a better outcome for all parties. A portion of this package is contingent upon City Council approval. Staff will seek City Council approval once Avago Technologies has made a decision regarding the expansion. The City of Fort Collins is pleased to propose a $2.8 million investment package including the following items:  $1.455 million in Equipment Use Tax rebate on the initial manufacturing equipment investment associated with the project;  Approximately $690,00 in Personal Property Tax savings on manufacturing equipment over a 10 year period;  Expedited review and commitment by City Staff to Avago’s desired timeline;  Free Integrated Design Assistance valued at $20,000 to improve operating efficiencies;  Assistance with building recommissioning valued at up to $150,000 to maximize building efficiency and reduce utility costs;  Implementation of the Evaporative cooling credit against sewer costs creating approximately $20,000 annually or a total of $200,000 over ten years;  $230,000 in Colorado Economic Development Commission’s (EDC) Strategic Fund assistance (subject to Board approval); and  $73,600 in Colorado FIRST Customized Job Training Funds. DRAFT 2 Table 1 Investment Package Overview Annual Total One Time Investments Manufacturing Equipment Use Tax Rebate $1,455,000 Utilities: Integrated Design Assistance $20,000 Utilities: Building Recommissioning $150,000 OEDIT: Strategic Fund Assistance $230,000 Total One Time $1,855,000 On-Going Investments Duration Manufacturing Equipment Personal Property Tax Rebate 10 Years $68,897 $688,974 Utilities: Evaporative Loss Credit 10 Years $20,000 $200,000 OEDIT: Colorado FIRST Customizable Job Training Funds 1 Year $73,600 $73,600 Total On-Going $88,897 $962,574 Grand Total All Investments $2,817,574 Source: City of Fort Collins - Economic Health DRAFT 3 Project Description Avago Technologies is seriously considering building a second source for wafers that currently come from Taiwan. There are several fabrication facilities throughout the world that could be equipped to meet this need. The City of Fort Collins has based its analysis of potential business investments upon the following project characteristics:  The expansion will include the retrofit of the existing Building 4 (approximately 10,000 square feet);  The project will include $17 million in retrofit of the existing building;  The project will include $48.5 million in equipment;  The project will include $5.7 million in equipment installation;  The expansion will require an additional 20.0 million gallons in annual water use; and  The expansion will require an additional 1.0 megawatts of electric capacity. Furthermore, the proposed expansion is anticipated to add approximately 92 jobs including:  8 Engineers earning approximately $100,000 annually;  14 Technicians earning approximately $70,000 annually; and  70 Operators earning approximately $40,000 annually. DRAFT 4 Manufacturing Investments Equipment Use Tax Rebate The proposed expansion includes approximately $48.5 million in equipment purchases. These purchases typically require a use tax payment of $1.455 million based on a 3.0 percent use tax rate; however, City policy currently rebates 1.5 percent of this tax. This package proposes rebating the full 3.0 percent. This would result in a $1.455 savings on project costs. The full rebate requires City Council approval. Table 2 Equipment Use Tax Rebate Item Factor Amount Estimated Equipment Cost $48,500,000 Local Use Tax Charge 3.0% $1,455,000 Less: Manufacturing Rebate 1.5% ($727,500) Less: Council Rebate 1.5% ($727,500) Use Tax Due $0 Source: City of Fort Collins - Economic Health Personal Property Tax Rebate The City will provide a Personal Property Tax Rebate for its portion of the personal property tax only. The rebate on installed equipment will include 50 percent of the Personal Property Tax for related to the expansion for a 10 year period. This equal approximately $69,000 in annual savings or nearly $690,000 over a 10 year period. Any level of Personal Property Tax Rebate requires City Council approval. Table 3 Personal Property Tax Rebate Item Factor Amount Estimated Equipment Cost $48,500,000 Assessed Value 29% $14,065,000 Annual Property Tax Charge 9.797 $137,795 Less: Manufacturing Rebate 50.0% ($68,897) Annual Property Tax Due $68,897 Value of Rebate 10 Years $688,974 Source: City of Fort Collins - Economic Health DRAFT 5 Expedited Development Review The City will commit to an expedited development review and building permit application process for the retrofit of Building 4. The City will assign a project manager to assist in moving the project through review and is committed to working within Avago’s timeline. DRAFT 6 Utility Investments Integrated Design Assistance Program The Utilities Integrated Design Assistance Program (IDAP) offers financial incentives and free technical support to those interested in delivering high-performance buildings that exceed building code requirements for energy performance. Owners, architects, engineers, site designers, maintenance personnel, energy consultants and others work together early in the process to create a design that integrates components to achieve optimal building performance. IDAP is available for new commercial buildings and major renovations. These buildings typically:  Cost less to operate  Reduced environmental impacts  Higher levels of occupant satisfaction Evaporative Loss In 2010, City Council amended City Code to allow Utilities to establish an alternate means for determining wastewater volume for typical applications used in manufacturing processes by some of the City’s industrial and large commercial customers. Examples include cooling towers and other equipment or processes where a measureable reduction in wastewater discharge can be determined and metered. The reduction would generally be established for a specific process rather than facility as a whole. Building Recommisioning Avago is expecting an industrial assessment report that will identify qualifying energy efficiency projects, including replacement of ventilation equipment that will reduce electricity use and overall operating costs. Utilities incentives help bring down the overall project cost, speed up replacement and improve the return on investment. DRAFT 7 Colorado State Office of Economic Development Letter DRAFT 8 This Page Intentionally Left Blank ����� � � April�21,�2011� � � Mike�Freeman� Chief�Financial�Officer� City�of�Fort�Collins� 300�LaPorte�Ave� Fort�Collins,�CO�80522� � Re:��Avago�Technologies� � Dear�Mike:� � Thank� you� for� taking� the� time� to� discuss� the� Avago� Technologies’� project� with� our� staff� Tuesday� afternoon.��Based�on�this�conversation,�which�included�a�$1:$1�local�match,�high�capital�investment,�and� wages�of�124%�of�the�county,�the�Colorado�Economic�Development�Commission’s�(EDC)�Strategic�Fund� may�provide�the�best�opportunity�to�provide�an�incentive�in�support�of�this�project.��The�Strategic�Fund� provides� incentives� for� net� new� full�time� permanent� jobs� (job)� created� in� the� amount� of� $2,000� $5,000/job�dependant�upon�available�funding.��The�jobs�must�be�maintained�for�one�year�and�annual� wages�(excluding�benefits)�for�these�jobs�must�be�at�least�110%�when�compared�to�the�county�average� wage�rate.��Please�note�that�business�decisions�clearly�moving�forward�without�assistance�from�the�EDC� will� not� be� considered� for� funding� if� an� announcement� is�made�prior�to�an�introduction�to�the�EDC.�� Based� on� the� average�wages�provided�by�the�company,� it� appears� that� the� company�may�qualify�for� $2,500�per�job�(with�wages�of�$49,783�or�124%�of�Larimer�County).��Please�see�the�attached�document� for�additional�requirements.��� � If�it�is�determined�that�this�program�is�of�interest,�OEDIT�would�need�to�complete�an�introduction�at�the� Colorado�Economic�Development�Commission’s�May�12,�2011�meeting.����Please�let�us�know�if�you�have� any� questions� regarding� this� information.� � We� are� excited� about� the� opportunity� that� this� project� represents�for�Colorado�and�look�forward�to�working�with�you.� � Best�regards,� � � � Alice�Kotrlik� Deputy�Director� � DRAFT This Page Intentionally Left Blank Strategic Fund Purpose The Strategic Fund provides a commitment to businesses that have met certain requirements under the Economic Development Commission’s (EDC) Strategic Fund. Funding Source This program will utilize a number of fund sources. The State’s Role The Colorado Office of Economic Development and International Trade (OEDIT) provides administrative support for the EDC. The EDC has oversight authority for this program. The OEDIT’s Business Development Division Director or Business Finance Staff may present a business introduction to the EDC. The Business Finance Staff will facilitate the application review process, application presentation with structuring recommendations to the EDC, and the contract implementation process. Requirements A business may receive funding consideration if it proposes to create net new full‐time permanent jobs (jobs) in Colorado that are maintained for at least one year. In addition, a business must materially meet the circumstances noted below: • Strong level of local matching commitments ($1:$1 requested) • Potential for economic “spinoff” benefits, such as attracting suppliers, generating tourism/travel activity, high prestige, or a large expansion initiative • Capital Investment, relative to the number of jobs (significant capital investment is $100,000 or > per employee) • Responds to a special local economic event, such as replacing recent lay offs • Inter‐state competitive factors • Headquarters in Colorado • Other unique conditions The business will need to demonstrate feasibility and financial capability along with the ability to create the number of jobs committed. Business decisions clearly moving forward without assistance from the EDC will not be considered for funding if an announcement is made prior to an introduction to the EDC. Businesses already receiving an incentive from the EDC may not receive an incentive from the Strategic Fund for the same net new full‐time permanent jobs. Incentive Tables The following tables reflect potential incentive levels based on the annual average wage rate of a businesses’ committed creation of net new full‐time permanent jobs compared to the county average wage rate (county source: QCEW Annual Tables provided by the Department of Labor and Employment). The annual average wage rate calculation does not include benefits. Enterprise Zone Non-Enterprise Zone Annual Average Wage Rate % $ Incentive / Eligible Job Annual Average Wage Rate % $ Incentive / Eligible Job 100% $2,000 110% $2,500 110% $3,000 130% $3,500 120% $4,000 150% or > $5,000 130% or > $5,000 Contact: Shela Tatro, Manager, Economic Development Commission Email: shela.tatro@state.co.us Secondary Contact: Alice Kotrlik, Deputy Director, Colorado Office of Economic Development & International Trade Email: alice.kotrlik@state.co.us 1625 Broadway, Suite 2700 Denver, CO 80202 Phone: (303) 892‐3840 Website: www.AdvanceColorado.com Contact: Shela Tatro, Manager, Economic Development Commission Email: shela.tatro@state.co.us Secondary Contact: Alice Kotrlik, Deputy Director, Colorado Office of Economic Development & International Trade Email: alice.kotrlik@state.co.us 1625 Broadway, Suite 2700 Denver, CO 80202 Phone: (303) 892‐3840 Website: www.AdvanceColorado.com Businesses that are considering multiple sites within the State will be provided several options based on the Incentive Tables. Additional Consideration Additional consideration may be given to businesses that do not meet the EDC’s minimum 100% annual average wage rate requirement (based on the Department of Labor and Employment’s QCEW Annual Tables) if the following criteria is met: • The business is located in (or will be located in) a designated Enhanced Rural EZ at the time of its introduction to the EDC; • The local community provides rationale to the EDC outlining the businesses’ economic importance to the community; and • The local community requests consideration for use of an alternative wage rate source and provides documentation that supports that the businesses’ annual average wage rate is higher that the annual average wage rate paid by private employer’s within their jurisdiction. Additional consideration may be given to businesses within targeted industries (Renewable Energy, Aerospace, Bioscience, IT) on a case‐by‐case basis. Process Businesses interested in requesting a Strategic Fund commitment should work with their local economic development representative and contact OEDIT’s Business Finance Staff. Once the application process is initiated, OEDIT Staff may complete a site visit. Applications will be reviewed by Business Finance Staff and then presented, with a staff recommendation, to the EDC for its consideration at one of the EDC’s bimonthly meetings. The business to be assisted and the local economic development representative are encouraged to participate in the EDC meeting. Upon receiving all necessary approvals, the Business Finance Staff will begin the contract implementation process. The EDC reserves the right to approve, deny or vary from these guidelines as necessary and appropriate and delay any decision due to budgetary constraints. 1 Company X’s Retrofit Economic Impact Analysis Prepared for the City of Fort Collins Martin Shields, Associate Professor of Economics Michael Marturana, Research Economist Colorado State University 26 April 2011 COMPANY X is planning to expand their current operations by purchasing and installing new computer chip manufacturing equipment and retrofitting their building. This proposed expansion has a $68.2 million budget. In this report we use information provided by the City of Fort Collins to estimate the potential impacts of the proposed project on 1) local employment and income, and 2) city revenue. The analysis below is broken into two parts (I) Construction and (II) Operations. Construction purchases are onetime expenses for building renovations and the purchase of new capital (e.g. computer chip manufacturing equipment) – the City will collect use taxes on these purchases. Once the retrofit is operational, and the new is equipment installed, COMPANY X expects to create 70 FTE operator jobs, with an average wage of $40,000. They also plan to bring an additional 22 FTE positions, with an average wage of $80,900, into the county. Combined, these 92 jobs will have an average compensation of approximately $49,783. By comparison, the average annual pay for a Larimer County job in 2010 was $39,250. I. Construction The construction phase of the COMPANY X’s retrofit contains two categories: (1) the purchase of new equipment and (2) the physical modification of the building itself. 1. New Equipment COMPANY X is expecting to spend $48.5 million on new equipment for their building. The City of Fort Collins will collect just under $1.5 million in use tax on this equipment ($48.5 million x 3.0 percent use tax). City of Fort Collins Use Tax Collection  Planned Capital Expenses: $48.5 million  Use Tax Rate1: 3.0 percent  Fort Collins Tax Collection: $1,455,000 Source: Authors’ calculations using budget information from The City of Fort Collins 1 Manufacturing equipment is exempt from the City’s 0.85 percent use tax increase and is therefore taxed at 3.0 percent. ATTACHMENT 2 2 2. Building Modification To estimate employment impacts for the physical building changes, we use the Larimer County version of the IMPLAN model (www.IMPLAN.com). IMPLAN is a widely used input‐output model that estimates how changes in final demand (i.e., output) ultimately translate into changes in employment (i.e., inputs) as well as associated compensation (wages plus benefits). The IMPLAN modeling system allows users to look at both direct and secondary – or spin‐off – impacts. Direct impacts are those directly attributable to spending on the project itself. Using the budget data from the City, we “shock” the IMPLAN model with $19.7 million in planned expenditures ($14.0 million for the building modification and $5.7 million for equipment installation). The results suggest that the building retrofit and equipment installation will directly support 228 one‐year FTE jobs in Larimer County during the construction phase, with an average annual compensation of $39,900. But the potential impacts are more substantial. The IMPLAN model also allows us to estimate two types of spin‐off impacts. First are the jobs created by purchases from local suppliers. For example, construction activities will involve significant purchases from local building supply companies. Second are jobs supported by direct and spin‐off employee expenditures on everyday purchases, such as housing, dining out and health care. We estimate COMPANY X’s building modification and equipment installation will support 74 spin‐off jobs in Larimer County during the construction phase. These jobs are estimated to earn $38,400 in average yearly compensation. Overall, the retrofit and equipment installation are expected to support a total of 303 one‐year FTE positions in Larimer County during the construction phase – with an average yearly compensation of $39,500. One Year Full Time Equivalent Jobs ($ Average Compensation per Worker)  Planned Expenditures for Building Modifications: $14.0 million  Expected Equipment Installation Cost: $5.7 million  Larimer County Impacts: o Direct: 228 ($39,900) o Spin‐off: 74 ($38,400) o Total: 303 ($39,500) Source: Authors’ calculations using budget information from The City of Fort Collins The City of Fort Collins will see additional revenue during the construction phase. This will be due to use taxes paid on building materials. We do not have information on how much of the $14.0 million construction budget will be subject to the local 3 use tax; therefore, we use the Insight model’s2 default value and assume 60 percent of construction costs will be spent on materials subject to the use tax. The values calculated below assume 60 percent of the $14.0 million construction budget, $8.4 million ($14.0 million x 60 percent), will be spent on materials subject to the use tax. These values also assume that the full $8.4 million will be spent in the City of Fort Collins, therefore the City is expected to receive $323,400 ($8.4 million x 3.85 percent) in use tax revenue. City of Fort Collins Use Tax Collection  Planned Construction Expenses: $14.0 million  Construction Materials Subject to Use Tax: 60 percent*  Expenses Subject to the Use Tax: $8.4 million  Use Tax Rate3: 3.85 percent  Fort Collins Use Tax Collection on Construction: $323,400 *Default value taken from the Insight model Source: Authors’ calculations using budget information from The City of Fort Collins and Insight assumptions II. Operations Per the City of Fort Collins, an average of 92 full‐time positions (with an average compensation of $49,783) will be created after the retrofit is completed and the new equipment is operational. Using the IMPLAN model we estimate that these jobs will support an additional 155 spin‐off positions in Larimer County. The average yearly compensation of these spin‐off jobs is expected to be $48,900. Combining the jobs from COMPANY X and spin‐off impacts, we estimate that 247 jobs will be supported in Larimer County, with an average compensation of $49,200. One Year Full Time Equivalent Jobs ($ Average Compensation per Worker)  Larimer County: o Direct: 92 ($49,800) o Spin‐off: 155 ($48,900) o Total: 247 ($49,200) Source: Authors’ calculations using IMPLAN based on the hiring forecast for COMPANY X from the City of Fort Collins Fort Collins will also collect tax revenue from these employees and business property tax. We calculated the following figures using the Insight model, assuming a 2 percent wage growth rate, with a 10‐year outlook. We estimate only those tax impacts from the positions within COMPANY X (i.e., direct impacts). The figures below detail additional tax revenue to the City. 2 The Insight model is a fiscal impact model originally developed for the state by Arthur Andersen. 3 As of 1 January 2011, the use tax rate in Fort Collins increased to 3.85 percent. 4 City of Fort Collins Sales and Property Tax Collection  Employee Wage (Year 1): $49,783  Wage Growth Rate: 2 percent  Income Spent on Retail Sales: 44 percent*  Retail Sales Purchases Made in the City: 60 percent*  Employees living within the City4: 44 percent  Cumulative Estimate: 10 years  Fort Collins Tax Collection o City Sales Tax Revenue Supported by Retail Sales from COMPANY X’s Employees: $554,050 ($55,405 per year) o Tax Revenue from Personal Property Taxes from COMPANY X’s Operations: $413,384 (41,338 per year) *Default value taken from the Insight model Source: Authors’ calculations using the Insight model 4 According to the US Census Bureau, 44 percent of Fort Collins’ workers in primary jobs live in the city. 1 1 AVAGO Technologies Building 4 Wafer Fabrication Expansion Presented By: Josh Birks 2 Project Overview • Significant Expansion of Wafer Fabrication for AVAGO • High Tech Manufacturing jobs (significant contraction since 2001/2002 in this industry sub-sector) • Competing against Taiwan (current location) and Italy • Preliminary selection of Fort Collins –Low Power Cost – Progressive Utilities – Proposed Business Investment Agreement ATTACHMENT 3 2 3 Project Details • $17 Million retrofit of existing Building 4 (10,000 SF) • $57.5 Million wafer fabrication equipment • $5.7 Million equipment installation • An additional 92 jobs – 8 Engineers @ $100,000 annually – 14 Technicians @ $70,000 annually – 70 Operators @ $40,000 annually • Bring high tech manufacturing jobs to Fort Collins 4 Project Timeline • April 22, 2011 – Assistance package offer, subject to City Council Action • Early June – AVAGO indicated Fort Collins preference • June 16, 2011 – Colorado Economic Development Commission reviews project; thumbs up • Week of June 20th schedule for Council Finance and City Council • July 19th – City Council considers resolution authorizing the Business Investment Agreement • August 2011 – October 2012 – AVAGO Construction/Hiring • October 2012 – Wafer Fabrication fully operational 3 5 Economic Impact Analysis • $1.725 Million in use tax revenue (offset) • $1.38 Million in personal property tax (partially offset) • Construction ($17 million retrofit and $5.7 million equipment install) = 228 direct jobs during 15 month construction period and 74 spin-off jobs • Operations (92 new primary jobs) = 155 spin-off secondary jobs at an average wage of $48,900 • Operations (92 new primary jobs) = $554,000 in sales tax revenue and $413,000 in property tax revenue 6 Complete Assistance Package • Equipment Use Tax: $1.725 Million rebate • Equipment Personal Property Tax: $817,000 rebate • Integrated Design Assistance: $20,000 value • Building re-commissioning: $150,000 value • Evaporative Cooling Credit: $200,000 value • Colorado Economic Development Commission Strategic Fund: $230,000 • Colorado FIRST Training Funds: $73,600 4 7 Net Impact to City 1 Current City Code allows for a rebate of 1.5 percent of the 3.0 percent use tax. The proposed Business Investment Agreement increases the rebate to the full 3.0 percent; therefore the incentive provides a value of $727,500 above current code. Revenue Estimated Revenue Rebate/ Incentive Net Revenue One-Time Items Construction Use Tax $323,000 $0 $323,000 Equipment Use Tax 1 $1,725,000 $1,725,000 $0 Integrated Design Assistance $0 $20,000 ($20,000) Building Re-commissioning $0 $150,000 ($150,000) Subtotal $2,048,000 $1,895,000 $153,000 On-Going Items (Cumulative over 10 Years) Equipment Personal Property Tax $1,630,000 $817,000 $817,000 Spin Off Sales Tax $554,000 $0 $554,000 Spin Off Property Tax $413,000 $0 $413,000 Evaporative Cooling Credit $0 $200,000 ($200,000) Subtotal $2,597,000 $1,017,000 $1,602,000 Total $4,645,000 $2,912,000 $1,755,000 RESOLUTION 2011-066 OF THE COUNCIL OF THE CITY OF FORT COLLINS APPROVING AN AGREEMENT BETWEEN THE CITY AND AVAGO TECHNOLOGIES US, INC. TO PROVIDE BUSINESS INVESTMENT ASSISTANCE FOR THE BUILDING 4 RETROFIT WHEREAS, Avago Technologies US, Inc. (“Avago”) will be modifying a building located on its business campus by retrofitting approximately 10,000 square feet for use as a wafer fabrication facility (the “Project”); and WHEREAS, the Project will enable the City to better maintain and attract high-paying primary jobs in the City; and WHEREAS, Avago estimates that it will invest over $80.2 million in the Project; and WHEREAS, Avago anticipates that the Project will create approximately 92 jobs paying an annual average salary of $49,800, which would provide significant economic development benefit to the community at large; and WHEREAS, according to preliminary estimates, Avago will also pay City fees and taxes related to the construction of the Project in the approximate amount of $448,000; and WHEREAS, City staff has been working with Avago to discuss ways in which the City can provide financial assistance to the Project that will enhance the likelihood that the Project will be pursued; and WHEREAS, City staff has prepared for City Council's consideration a proposed agreement between the City and Avago (the “Agreement”), which Agreement sets forth the terms and conditions upon which financial assistance will be provided to Avago by the City and is attached as Exhibit A; and WHEREAS, the Project is anticipated to increase annual property tax revenue for the City by approximately $138,000 over the ten-year term of the Agreement; and WHEREAS, the City Council has determined that providing financial assistance to the Project is in the best interests of the City and will serve the important public purposes of increasing employment in the City, stabilizing and improving the long term tax base of the City and providing additional economic development benefits to the City. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That the City Council hereby finds that providing financial assistance to Avago, upon the terms and conditions contained in the Agreement, is in the best interests of the City and serves the important public purposes of increasing employment within the City, stabilizing and improving the long-term tax base of the City, and promoting economic development within the City. Section 2. That the Agreement, in substantially the form contained in Exhibit A attached hereto and incorporated herein by this reference, is hereby approved by the City Council, subject to such modifications as may be deemed necessary by the City Manager, in consultation with the City Attorney, in order to further the purposes of the Agreement. Section 3. That the City Manager is hereby authorized to execute the Agreement on behalf of the City. Passed and adopted at a regular meeting of the Council of the City of Fort Collins this 19th day of July A.D. 2011. Mayor ATTEST: City Clerk BUSINESS INVESTMENT AGREEMENT FOR ECONOMIC DEVELOPMENT RELATED TO AVAGO TECHNOLOGIES BUILDING 4 RETROFIT THIS AGREEMENT is entered into this day of , 2011, by and between the City of Fort Collins, Colorado, a home rule municipal corporation (the “City”), and AVAGO Technologies US Inc., , a Delaware Corporation (“AVAGO”). RECITALS WHEREAS, AVAGO is the owner of property located at 4380 Ziegler Road in the City that is more fully described in Exhibit A and incorporated herein by this reference (the “Property”); and WHEREAS, AVAGO has committed to redeveloping the Property by retrofitting one of the buildings on the Property to include a 10,000 square foot expansion wafer fabrication facility within that building (the “Project”); and WHEREAS, the building on the Property to be retrofitted is known as Building 4 and is identified on Exhibit A as BLDG 4; and WHEREAS, the Project will consist of a construction expansion and remodel in addition to an investment in equipment; and WHEREAS, Project will enable the City to better maintain its place as the regional retail and business center of Northern Colorado in the face of competing facilities that could otherwise draw significant employment opportunities and retail sales revenues out of the Fort Collins community; and WHEREAS, AVAGO estimates that the total investment in the Project will total more than $80 million (including both construction and equipment purchases) and create approximately 92 jobs earning salaries ranging from $40,000 to $100,000 annually, and that will provide significant economic benefit to the community at large; and WHEREAS, the City’s Economic Health Office has concluded that the Project will generate a substantial increase in tax revenue for the City consisting of approximately (i) $323,000 in construction use tax; and (ii) $81,500 annually in new personal property tax in the first ten years and $163,000 in new property tax in the subsequent years; and WHEREAS, according to the Economic Health Office, the Project will prevent high‐ paying primary jobs from leaving Fort Collins to other sites in Northern Colorado and elsewhere; and 2 WHEREAS, according to the Economic Health Office, the Project will bring a type of chip manufacturing to the City that has primarily occurred off‐shore; and WHEREAS, AVAGO has requested that the City enter into a business investment agreement for economic development; and WHEREAS, based on AVAGO’s representations that the Project will (i) be a high quality wafer fabrication facility that will be owned and operated by AVAGO, (ii) generate new primary jobs, and (iii) have a reasonable expectation of long‐term operations in the City; and WHEREAS, in order to encourage the Project, the City Council has determined, through the adoption of Resolution 2011‐___ on ___________________, 2011, that it is in the best interests of the City to provide a package of financial assistance for the Project consisting of two components: the rebate of new use tax revenues generated by the Project and the rebate of personal property tax on new Eligible Equipment installed in Building 4 as part of the Project; and WHEREAS, the City Council has further determined, through the adoption of Resolution 2011‐___ that providing the financial assistance described in this Agreement to AVAGO will serve the important public purposes of increasing employment in the City, stabilizing and improving the long term tax base of the City, and providing additional economic development benefits to the City. NOW, THEREFORE, in consideration of the promises contained in this Agreement, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows. SECTION 1. DEFINITIONS Application for Use Tax Rebate means the application process for a use tax rebate using City approved forms consistent with the form attached as Exhibit B. AVAGO means AVAGO Technologies US Inc., a Delaware Corporation. Building 4 means that building located at 4380 Ziegler Road, Building 4. Certificate of Occupancy has the same meaning as set forth in the City of Fort Collins Land Use Code. Charter means the Home Rule Charter of the City. City means the City of Fort Collins, Colorado, a home rule municipal corporation. Code means the Code of the City of Fort Collins. 3 County Assessor means the Larimer County Assessor. Development Agreement means that agreement required when plans, profiles and specification have been approved by the City pursuant to the Land Use Code. Eligible Equipment means new manufacturing equipment and electronic equipment installed no later than December 31, 2012, and that is necessary for the construction and operation of the Project. Land Use Code means the Fort Collins Land Use Code. Project means AVAGO’s retrofit of existing Building 4 by 10,000 square feet for use as a wafer fabrication facility and other improvements that provide significant energy savings and represented on page 2 of Exhibit A as Area of Work. Wafer Fabrication Facility and Facility mean a 10,000 square foot wafer fabrication facility built in Building 4 as a result of the Project. SECTION 2. REPRESENTATIONS AND COVENANTS 2.1. The City represents and covenants that: 2.1.1. The City is a home rule municipal corporation of the State of Colorado. 2.1.2. There is no litigation or administrative proceeding pending or, to the knowledge of the City, threatened, seeking to question the authority of the City to enter into or perform this Agreement. 2.1.3. The City reasonably believes that it has the authority, and assuming such authority, the City Council has properly and regularly authorized the City to enter into the Agreement. 2.2. AVAGO represents and covenants that: 2.2.1. AVAGO is a corporation, duly organized and validly existing under the laws of the State of Colorado, is authorized to do business in the State of Colorado, is not in violation of any provisions of its organizational documents or, to its knowledge, the laws of the State of Colorado. 2.2.2. AVAGO has the power and legal right to enter into the Agreement and has duly authorized the execution, delivery and performance of this Agreement by proper action, which Agreement will be enforceable against AVAGO in accordance with its terms. 4 2.2.3. The consummation of transaction contemplated by this Agreement will not violate any provision of the governing documents of AVAGO or, to its knowledge, constitute a default or result in the breach of any term or provision of any contract or agreement to which AVAGO is a party or by which it is bound. 2.2.4. To its knowledge, there is no litigation, proceeding, or investigation contesting the power of authority of AVAGO with respect to the Project or this Agreement, and AVAGO is unaware of that any such litigation, proceeding, or investigation has been threatened. 2.2.5. AVAGO will submit a Site Plan to the City in accordance with all applicable procedures set forth in the Land Use Code. AVAGO will redevelop the Property with appropriate care and diligence and cause the Project to be constructed in a manner consistent with the Site Plan, as approved in accordance with the Land Use Code. 2.2.6. In redeveloping the Property and Building 4, AVAGO will comply with all applicable zoning and land use requirements and other applicable federal, state, county, and City statutes, rules, regulations and ordinances. 2.2.7. AVAGO intends to operate, or cause to operate, Building 4 as a high quality wafer fabrication facility for a period of not less than ten years following the earlier date of the issuance of a Certificate of Occupancy or December 31, 2012. 2.2.8. AVAGO will cooperate with the City in taking reasonable actions to defend against any litigation brought by a third party concerning the Project or this Agreement. SECTION 3. REIMBURSEMENT OF USE TAX REVENUES 3.1. The City will collect the Use Tax Revenues from AVAGO’s initial Eligible Equipment investment associated with the Project and retrofit of Building 4 in a manner consistent with the City’s overall efforts to collect use tax revenues. Nothing in this Agreement will be construed as imposing upon the City any obligation to exert special efforts in the collection of these revenues. 5 3.2. To the extent permitted by the constitution and laws of the State of Colorado and the Charter, the City will rebate to AVAGO a portion of the Use Tax Revenues under the terms and conditions set forth in paragraph 3.3.1, 3.3.2, and 3.3.3 below. If, as presently contemplated by the parties, the contingencies described in those paragraphs are satisfied, the total amount of Use Tax Revenues to be paid by the City will not exceed One Million Seven Hundred Twenty‐ Five Thousand Dollars ($1,725,000) (the “Maximum Use Tax Reimbursement”) for the period beginning with the execution of this Agreement and ending on December 31, 2013. The Application for the Use Tax Rebate on Eligible Equipment shall be filed between August 1 and December 31 of each year for which a rebate eligible. 3.3. The payments of Use Tax Revenues referenced in paragraph 3.2 above will be made by the City to AVAGO after the City issues a certificate of occupancy for the Project and AVAGO has actually generated and remitted to the City use tax revenues for the minimum periods of time specified below. If either of these contingencies has not been satisfied on or before the dates specified, the payments will not be made. 3.3.1. A payment will be due and payable on March 31, 2012 (the “First Payment”) based upon an Application for Use Tax Rebate made by AVAGO for use tax revenues remitted by AVAGO to the City between the execution of this Agreement and December 31, 2011, provided, however that if AVAGO has not remitted use tax revenues to the City during this period, the First Payment will not be made. 3.3.2. A payment will be due and payable on March 31, 2013 (the “Second Payment”) based upon an Application for Use Tax Rebate made by AVAGO for use tax revenues remitted by AVAGO to the City between January 1, 2012 and December 31, 2012, provided, however that if AVAGO has not remitted use tax revenues to the City during this period, the Second Payment will not be made. 3.3.3. A payment will be due and payable on March 31, 2014 (the “Final Payment”) based upon an Application for Use Tax Rebate made by AVAGO for use tax revenues remitted by AVAGO to the City between January 1, 2013 and December 31, 2013, provided, however that (i) the equipment for which the rebate is requested will have been delivered to the Property no later than December 31, 2012; (2) that this rebate request for that equipment is reduced by any rebate already returned to Avago or waived due the failure to remit use tax as required by 3.3.2; and (3) if AVAGO has not remitted use tax revenues to the City during this period, the Final Payment will not be made. 3.4. The City, in its sole discretion, may pre‐pay any amount of Use Tax Revenues without prepayment penalties. 6 3.5. The City’s payment obligation under this Section shall be limited to the amount of the Use Tax Revenues indicated in paragraph 3.2 above. AVAGO agrees to assume the entire risk that the Project will be unable to begin and remit use tax on new manufacturing equipment invested in the Project by December 31, 2013 to qualify for the Maximum Use Tax Reimbursement. 3.6. Interest earned, if any, on Use Tax Revenues held by the City until payment is made to AVAGO will belong to the City. 3.7. Notwithstanding the Maximum Use Tax Reimbursement, the City will not be required to pay to AVAGO any Use Tax Revenues greater than that actually collected and remitted to the City. AVAGO acknowledges that the generation of Use Tax Revenues is entirely dependent on AVAGO’s investment of Eligible Equipment in the Project and Building 4 and agrees that the City is in no way responsible for the amount of Use Tax Revenue actually collected. 3.8. The parties agree that the obligations of the City do not constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation or provision. The obligations of the City for payment of the Use Tax Revenues under this Agreement are from year to year only and do not constitute a mandatory payment obligation of the City in any fiscal year beyond the present fiscal year. This Agreement does not directly or indirectly obligate the City to make any payments of Use Tax Revenues beyond those appropriated for any fiscal year in which this Agreement is in effect. The City Manager (or any other officer or employee at the time charged with the responsibility of formulating budget proposals) is hereby directed to include in the budget proposals and appropriation ordinances submitted to the City Council, in each year prior to expiration of this Agreement, amounts sufficient to meet its obligations hereunder, but only if it receives such amounts in the form of Use Tax Revenues, it being the intent, however, that the decision as to whether to appropriate such amounts is in the discretion of the City Council. SECTION 4. REIMBURSEMENT OF PERSONAL PROPERTY TAX REVENUES 4.1. The City shall collect the Personal Property Tax Revenues from the Project in a manner consistent with the City’s overall efforts to collect personal property tax revenues. Nothing in this Agreement will be construed as imposing upon the City any obligation to exert special efforts in the collection of these revenues. 4.2. To the extent permitted by the constitution and laws of the State of Colorado and the Charter, the City will pay AVAGO a portion of the Personal Property Tax Revenues under the terms and conditions set forth in paragraph 4.3 below. If, as presently contemplated by the parties, the contingencies described in paragraph 4.3 are satisfied as to each of the ten payments provided for therein, the total amount of Personal Property Tax Revenues to be paid by the City will not exceed Eight Hundred Seventeen Thousand Dollars ($817,000) and the annual payments will not exceed Eighty One Thousand Seven Hundred Dollars ($81,700). 7 4.3. The payments of Personal Property Tax Revenues referenced in paragraph 4.2 above will be made by the City to AVAGO as follows: 4.3.1. The assessed personal property value certified by the County Assessor for tax year 2010 will be the baseline measurement (“Baseline Personal Property Tax”). 4.3.2. For ten consecutive years, beginning with tax year 2011, fifty percent of any increase in the assessed personal property certified by the County Assessor for the then current year over the Baseline Personal Property Tax will be reimbursed by the City to AVAGO. 4.3.3. The payments contemplated by this Section will be paid by December 31 of each year, starting in 2012, for the previous tax year. 4.3.4. The Personal Property Tax Revenues will only be eligible for reimbursement as described above if AVAGO continuously operates Building 4 as an Wafer Fabrication Facility as described in this Agreement and has actually generated and remitted to the City personal property tax revenues for Building 4. 4.4. The parties agree that no less than twice a year the City may require AVAGO to make available to the City all documents that verify the purchase of personal property installed in Building 4, including the County Assessor’s certification of value. The City agrees that such documents constitute privileged information and confidential financial data within the meaning of the Colorado Open Records Act, and, to the extent permitted by law, the City shall deny the right of inspection of such documents to any third party without the consent of AVAGO. 4.5. The City, in its sole discretion, may pre‐pay any amount of Personal Property Tax Revenues without prepayment penalties. 4.6. The City’s payment obligation under this Section shall be limited to the amount of the Personal Property Tax Revenues indicated above. AVAGO agrees to assume the entire risk that the Project will be unable to begin and maintain operations at the levels sufficient to generate the level of personal property tax identified above and that one or more payments will be forfeited unless the requirements of this Agreement have been satisfied. 4.7. Interest earned, if any, on Personal Property Tax Revenues held by the City until payment is made to AVAGO will belong to the City. 8 4.8. The parties agree that the obligations of the City hereunder do not constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation or provision. The obligations of the City for payment of the Personal Property Tax Revenues under this Agreement are from year to year only and do not constitute a mandatory payment obligation of the City in any fiscal year beyond the present fiscal year. This Agreement does not directly or indirectly obligate the City to make any payments of Personal Property Tax Revenues beyond those appropriated for any fiscal year in which this Agreement is in effect. The City Manager (or any other officer or employee at the time charged with the responsibility of formulating budget proposals) is hereby directed to include in the budget proposals and appropriation ordinances submitted to the City Council, in each year prior to expiration of this Agreement, amounts sufficient to meet its obligations hereunder, but only if it receives such amounts in the form of Personal Property Tax Revenues, it being the intent, however, that the decision as to whether to appropriate such amounts is in the discretion of the City Council. SECTION 5. CITY’S RIGHT TO WITHHOLD OR OFFSET PAYMENTS 5.1. AVAGO agrees to comply with all City codes, ordinances, resolutions and regulations, and to pay all taxes, fees and expenses due to the City under the Code, the City’s Land Use Code or this Agreement, subject to any variances or modifications of standards that may be granted to AVAGO under the Code or the Cityʹs Land Use Code, and to comply with the terms and conditions of the Development Agreement. If AVAGO is in violation of the provisions of the Code, the City’s Land Use Code, this Agreement or the Development Agreement, the City will provide written notice to the Developer of such violation, and allow the AVAGO a period of ninety (90) days in which to cure such violation. The City may thereafter withhold any payments of Use Tax Revenues or Personal Property Tax Revenues due to AVAGO under this Agreement until such time as the violations are cured or abated. 5.2. In addition to the foregoing, the City, at its option, may, after the notice and after the expiration of the cure period if such violations have not been cured or abated, apply any Use Tax Revenues or Personal Property Tax Revenues that would otherwise be payable to AVAGO under this Agreement to any unpaid amounts theretofore due and payable to the City by AVAGO under this Agreement, the Code, the Land Use Code, or the Development Agreement, in which event AVAGO will be credited with the full amount of any such payments. SECTION 6. RECORDS AND AUDITS 6.1. AVAGO must keep true, accurate and complete records of all equipment installed and operated in Building 4, which records will be available for inspection by the City without unreasonable delay and without expense. AVAGO agrees that the City has the right, through its duly authorized agents or representatives, to examine all such records upon ten (10) days notice at all reasonable times, for the purpose of determining the accuracy and propriety of the financial representations which have been made by AVAGO. This right of review terminates 9 upon termination of the later of the Cityʹs payments of Use Tax Revenues as provided in Section 3 of this Agreement and the payments of Personal Property Tax Revenues as provided in Section 4 of this Agreement. In the event that the City becomes the custodian of any such records which may contain trade secrets or confidential or proprietary information, and are so marked, the City will, to the extent permitted by law, protect the confidentiality of such information and deny any request for inspection of such records. 6.2. The City will keep, or cause to be kept, true, accurate and complete records of all calculations relating to the Sales Tax Revenues; the Personal Property Tax Revenues; interest credited to these amounts; and such other calculations, allocations and payments required by this Agreement, and will make such records available for inspection by AVAGO upon ten (10) days notice at all reasonable times, to the extent permitted by law. SECTION 7. RESTRICTIONS ON ASSIGNMENT 7.1. The qualifications of AVAGO are of particular concern to the City. Therefore, no voluntary or involuntary successor in interest of AVAGO shall acquire any rights or powers under this Agreement except as expressly set forth herein and AVAGO will not assign all or any part of this Agreement except as follows: 7.1.1. with the prior written approval of the City Council; or 7.1.2. as collateral to a lender in connection with the financing of the Project; or 7.1.3. after the City’s payment obligations as described in Sections 3 and 4 of this Agreement have terminated. 7.2. AVAGO must notify the City within fifteen (15) days of any and all changes whatsoever in the identity of the parties in control of AVAGO, or the degree thereof, of which it or any of its officers have been notified or otherwise have knowledge or information. SECTION 8. EVENTS OF DEFAULT; REMEDIES 8.1. Default or an event of default by AVAGO mean one or more of the following events: 8.1.1. Any representation or warranty made in this Agreement by AVAGO was materially inaccurate when made or shall prove to be materially inaccurate; 8.1.2. AVAGO assigns or attempts to assign this Agreement in violation of Section 7 of this Agreement; or 10 8.1.3. AVAGO fails to substantially observe or perform any other material covenant, obligation or agreement required under this Agreement. 8.2. Upon the occurrence of any event of default, the City shall provide written notice to AVAGO. AVAGO must immediately proceed to cure or remedy such default, and in any event, such default shall be cured within thirty (30) days after receipt of the notice, or such longer time as the City and AVAGO agree in writing. Upon the failure of AVAGO to so cure any such default, the City shall have all remedies available to it, in law or in equity, including, but not limited to, specific performance. 8.3. Default or an event of default by the City shall mean one or more of the following events: 8.3.1. Any representation or warranty made in this Agreement by the City was materially inaccurate when made or shall prove to be materially inaccurate; 8.3.2. The City fails to pay the proceeds of the Sales Tax Revenues or the Personal Property Tax Revenues as and when provided in this Agreement (except to the extent such failure is the result of the action, inaction or failure of AVAGO to document liability for, collect, account for or pay the Sales Tax Revenues or Personal Property Tax Revenues). 8.3.3. The City fails to pay or perform any other material covenant, obligation or agreement required of it under this Agreement. 8.4. Upon the occurrence of any event of default, AVAGO will provide written notice to the City. The City must immediately proceed to cure or remedy such default, and in any event, such default shall be cured within thirty (30) days after receipt of the notice, or such longer time as the City and AVAGO agree in writing. Upon the failure of the City to so cure any such default, AVAGO will have all remedies available to it, in law or in equity, including, but not limited to, specific performance. SECTION 9. NOTICES 9.1. All notices required or permitted hereunder shall be in writing and shall be effective upon mailing, deposited in the United States Mail, postage prepaid, and addressed to the intended recipient as follows. Any party can change its address by written notice to the other given in accordance with this paragraph. 9.1.1. City of Fort Collins: City of Fort Collins Attention: City Manager 300 LaPorte Avenue, PO Box 580 Fort Collins, CO 80522‐0580 9.1.2. With a copy to: City of Fort Collins 11 Attention: City Attorney 300 LaPorte Avenue, PO Box 580 Fort Collins, CO 80522‐0580 9.1.3. AVAGO: AVAGO Technologies Attention: General Counsel 350 W. Trimble Road San Jose, California 95131 9.1.4. With a copy to: Steve Wolley AVAGO Technologies 4380 Ziegler Rd. Fort Collins, CO 80525 SECTION 10. MISCELLANEOUS 10.1. Binding Effect. This Agreement inures to the benefit of and is binding upon the City and AVAGO and AVAGO’s assignees which are permitted pursuant to Section 7 of this Agreement. 10.2. No Third Party Beneficiaries. The City is not obligated or liable under the terms of this Agreement to any person or entity not a party hereto except any assignee permitted pursuant to Section 7 of this Agreement. Further, the City is not bound by any contracts or conditions that AVAGO may negotiate with third parties related to the Project. 10.3. Interpretation, Jurisdiction and Venue. This Agreement is being executed and delivered and is intended to be performed in the State of Colorado, and the laws of Colorado govern the validity, construction, enforcement and interpretation of this Agreement. Exclusive jurisdiction and venue for resolution of any dispute arising hereunder will be in the Larimer County, Colorado District Court. 10.4. Entire Agreement. This Agreement embodies the whole agreement of the parties concerning financial assistance by the City the Project. Although it is anticipated there will be at least one other agreement governing general development issues related to the Project, there are no promises, terms, conditions, or obligations other than those contained herein exist with respect to the financial assistance package. This Agreement supersedes all provisions, communications, representations, or agreement, either verbal or written, between the parties with respect to the financial assistance package. 12 10.5. Waiver of Breach. A written waiver by either party to this Agreement of the breach of any term or provision of this Agreement will not operate or be construed as a waiver or any subsequent breach by another party. 10.6. Article and Section Captions. The captions of the articles and sections of this Agreement are set forth only for the convenience and reference of the parties and are not intended in any way to define, limit, or describe the scope or intent of this Agreement. 10.7. City and AVAGO Not Partners. Notwithstanding any language in this Agreement, the City is not a member, partner, or joint venturer of AVAGO, and the City shall not be responsible for any debt or liability of AVAGO or its contractors or agents. AVAGO is not responsible for any debt or liability of the City or their contractors or agents. 10.8. Severability. If any portion or portions of this Agreement are determined to be illegal or unenforceable, the remainder of this Agreement will not be affected thereby and will remain in full force and effect as if such illegal or unenforceable portion or portions did not exist. If all or any portion of the payments required by the terms of this Agreement are determined, by a court of competent jurisdiction in a final non‐appealable judgment, to be contrary to public policy or otherwise precluded, and if the decision of such court clearly indicates how the payments may be made differently and in a manner that is legal, valid and enforceable, then the Parties will utilize their reasonable, best, good faith efforts to promptly restructure and/or amend this Agreement in accordance with such court decision, or to enter into a new agreement, to assure, to the extent legally permissible, that all payments are made to AVAGO as contemplated by this Agreement. 10.9. Originals. This Agreement may be simultaneously executed in any number of counterparts, each of which will be deemed original but all of which constitute one and the same Agreement. 10.10. Joint Draft. The parties agree they drafted this Agreement jointly with each having the advice of legal counsel and an equal opportunity to contribute to its content. IN WITNESS WHEREOF, the City and AVAGO have executed this Agreement as of the date first above written. Signatures on following page. 13 CITY OF FORT COLLINS, COLORADO a municipal corporation By: Darin A. Atteberry, City Manager Attest: City Clerk Approved as to form: Assistant City Attorney AVAGO TECHNOLOGIES US Inc. a Delaware corporation By: Name and title State of ) )ss. County of ) The foregoing was acknowledged before me this _________ day of 2011, by as AVAGO Technologies US Inc., a Delaware corporation. Witness my hand and official seal. My commission expires: Notary Public 14 EXHIBIT A FORT COLLINS COLORADO BUILDING 4 ICBD GENESIS IV T C H N O L O I 15 City of Fort Collins Economic Development - Use Tax Rebate Application 2010 Company Name Mailing Address Contact Person Project Information: Date Project Operations began in Fort Collins Briefly describe project operations? 2008 property tax valuation 2009 property tax valuation Employee Information: Rebate Information: Signature of Taxpayer Title Date A claim by an agent must be accompanied by power of attorney. Number of full time equivalent employees as of January 1, 2010 __________________ Median Annual Wage ______________ Number of full time equivalent employees as of December 31, 2010 _______________ Median Annual Wage ______________ Number of temp., seasonal & contract employees as of 12/31/10 ____________ Median Annual Wage ______________ I hereby authorize the City to review and consider sales and use tax records, vendor records, contract and other information available regarding the company's eligibility for a rebate under this program. I further authorize the City to release to the public information contained in this application, as well as information regarding any rebates issued to the company under this rebate program. I declare under penalty of perjury that this claim (including any accompanying schedules and statements) has been examined by me and to the best of my knowledge and belief is true and made in good faith for the stated purpose. Further, I represent and warrant that I have the necessary authority to execute this application on behalf of the company, and to make the above certifications, authorizations, and declaration. I certify that the company requesting this rebate is in compliance with all Federal, State and local laws and regulations for the manufacturing facility located in Fort Collins. I also certify that the company is current with all City of Fort Collins contractual, payment and sales and use tax obligations. 2009 personal property tax valuation _____________________ Square footage of Project facility _________________________ The following information is mandatory for the rebate process. All financial information contained in this application will be confidential. Who is your natural gas provider? ___________________________ Annual Gas Consumption ______________ Purchase price of Eligible Equipment purchased in 2010: __________________________________ Amount of rebate requested: ____________________________________ EXHIBIT B Phone Number __________________________ Fort Collins License Number ______________ 2008 personal property tax valuation _____________________ Square footage of entire Fort Collins facility _________________________________ 16 OTHER INFORMATION You must provide a list of the Eligible Equipment purchased that includes the following: 1. Invoice number 2. Invoice date 3. Vendor name 4. Description of machinery purchased 5. Intended use of the machinery 6. Date the use tax was paid to the City of Fort Collins 7. Purchase price of the equipment 8. Amount of purchase subject to Fort Collins tax 9. Amount of Fort Collins use tax paid You are not required to submit copies of the invoices for which the rebate is requested. However, in the event that there are questions regarding the eligibility of certain equipment, supporting documentation, including invoices, will be required. Submit applications and list of equipment purchased to: City of Fort Collins Financial Services P.O. Box 580 Fort Collins, CO 80522-0580 For specific questions regarding the rebate program or general sales and use tax questions, call the Sales Tax Office at (970) 221-6780. Application may be submitted between August 31, 2010 and December 31, 2010