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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 08/20/2013 - RESOLUTION 2013-073 APPROVING AN AGREEMENT BETWEENDATE: August 20, 2013 STAFF: Josh Birks SeonAh Kendall AGENDA ITEM SUMMARY FORT COLLINS CITY COUNCIL 26 SUBJECT Resolution 2013-073 Approving an Agreement Between the City and Custom Blending, Inc., to Provide Business Investment Assistance. EXECUTIVE SUMMARY The purpose of this item is to request business assistance to Custom Blending, a primary Fort Collins employer, by means of tax rebates of $43,500 over a 7-year period. Custom Blending, Inc., a primary employer in Fort Collins, CO, is seeking assistance of $43,500 for the expansion of its facility. The Custom Blending expansion will consist of adding an additional 34,000 square feet to its existing facility and making substantial equipment purchases, representing a total investment of approximately $5.9 million and adding an additional 16 full-time jobs with average annual salaries between $45,000 - $47,000. Based on information provided by Custom Blending representatives, City staff is estimating a potential business assistance package of approximately $43,500, which includes $31,100 in manufacturing use tax rebates and $12,400 in personal property tax rebates (over a 7-year depreciable useful life). Both investments relate to revenues the City would not otherwise collect if the expansion did not occur within the city. In terms of evaluating the investment agreement, the ratio of private investment to total public investment is $138:$1, or $2,719 per job. Additional savings that could not be estimated but could be provided include utility efficiency performance incentive and the Fort Collins Solar Program. STAFF RECOMMENDATION Staff recommends adoption of the Resolution. BACKGROUND / DISCUSSION The City of Fort Collins’ City Plan Policy EH 1.1 identifies the support of job creation as a priority to enhance the community’s economic base and job creation by focusing on retention, expansion, incubation and recruitment efforts that bring jobs and import income or dollars to the community. In June 2012, the City of Fort Collins adopted the new Economic Health Strategic Plan (EHSP) as a continuous evolution of the previous economic planning efforts. The new EHSP has identified four goals as the pillar of the plan: • Facilitate a stronger support network for existing employers, new businesses, and small business. • Enhance the innovation ecosystem and the economy that supports companies at all stages and aligns with City goals; • Create a system for talent development, retention and recruitment that responds to and anticipates employers’ needs; • Develop community assets and infrastructure necessary to support the region’s employers and talent. This Business Assistance Package addresses the Economic Health Office’s goal of facilitating a stronger business support network for existing employers, new businesses, and small business. The EHSP recognizes that the existing employers and small businesses are the backbone of the Fort Collins economy. The Economic Health Office believes that this assistance is a sound investment in strengthening the support network, and diversifying the employment and tax base of the community. Company Background Custom Blending, Inc. was founded in Colorado in 1986 and currently employs 35 full-time employees (a total of 65 full- and temporary-employees during the peak season). Custom Blending provides spices, flavors and proprietary August 20, 2013 -2- ITEM 26 blends to food service distributors, manufacturers, retailers and restaurants around the globe. In the past 10 years, the company has had significant, double-digit growth. With the increase in growth, Custom Blending has decided to take ownership of their manufacturing process. Custom Blending has determined that entering the manufacturing space requires an additional 34,000 square feet (Attachment 1). The expansion will allow the company to add an additional 16 full-time employees, totaling 51 full-time employees (a total of 77 full- and temporary-employees during the peak season). Project Overview Custom Blending has evaluated multiple sites, in and out of the City of Fort Collins. Sites evaluated include: Denver, Larimer County, the City of Fort Collins and St. Louis, Missouri. The City of Fort Collins has been asked to develop a business assistance package by Custom Blending. Specifically, Custom Blending has requested that they, as a homegrown company, be given consideration for their expansion. Custom Blending’s growth represents alignment with the Economic Health Strategic Plan’s (EHSP) first goal of facilitating a stronger support network for existing employers, new businesses and small business. Specifically, the EHSP recognizes that business retention and expansion are not just viable economic development strategies, but are essential for fostering a healthy economy. The City of Fort Collins recognizes the economic impact of a “primary employers.” A “primary employer” is defined as a company that creates a product or service that is principally (50% or more) sold outside the region, thereby generating new money and profits into the region. Custom Blending is a “primary employer.” Economic Health Office staff is proposing a performance-based package valued at approximately $43,500, which includes $31,100 in manufacturing use tax rebates and $12,400 in personal property tax rebates (over a 7-year depreciable useful life). The proposed package rebates the use tax paid on manufacturing equipment needed for Custom Blending’s expansion, which would otherwise not be purchases. Note: The use tax rebate is only for the non- dedicated portion of use tax, or 2.25%. Additional savings that could not be estimated but could be provided include utility efficiency performance incentive and the Fort Collins Solar Program. The package summary is shown in Table 1: Under the existing Manufacturing Use Tax Rebate (MUTR) program, Custom Blending is eligible for a rebate of approximately $20,750. This package is proposing an additional $10,380 in use tax rebates for a total of $31,130. Custom Blending will still be obligated to pay all dedicated use taxes such as Streets & Transportation, Building on Basics and Natural Areas and Parks (Table 2). August 20, 2013 -3- ITEM 26 In addition, EHO staff is recommending a personal property tax rebate (includes engineering and installation costs of machinery, which were not eligible for use tax rebates) of $12,395 over a 7-year period, based on the company’s depreciation schedule. See Table 3 below: FINANCIAL / ECONOMIC IMPACTS Impact DataSource, an economic consulting, research and analysis firm, contracted by the City of Fort Collins’ Economic Health Office performed an Economic Impact Analysis (EIA) on Custom Blending’s expansion. Impact DataSource has estimated that Custom Blending’s expansion will generate economic impacts during construction and operations. The one-time construction activity will support 46 workers in the area and generate $2.5 million in new earnings for these workers. The manufacturing operations are estimated to support 30 total workers and $1.4 million in workers’ annual earnings. Custom Blending’s expansion will also generate additional benefits and costs for local taxing districts, with a present value (using a discount rate of 5%) of net benefits for the City of Fort Collins, Larimer County and Poudre School District of approximately $780,000 (Attachment 2). August 20, 2013 -4- ITEM 26 ENVIRONMENTAL IMPACTS Custom Blending would like the City of Fort Collins to consider the allocation reservation related to the Fort Collins Solar Program. The City of Fort Collins' Utilities is considering this option, which is not included within this Business Assistance Package. Furthermore, a Triple Bottom Line Analysis Model (TBLAM) was performed with internal City staff (Attachment 3). BOARD / COMMISSION RECOMMENDATION The Economic Health Office presented a memo in regard to the Business Assistance Package before Council Finance Committee on July 15, 2013. The Committee supported the Business Assistance Package for Custom Blending. Furthermore, City staff presented the Business Assistance Package before the Economic Advisory Commission on July 17, 2013. After some initial inquiries in regard to use tax, the Economic Advisory Commission unanimously passed the Business Assistance Package for Custom Blending 7-0. (Attachment 4) PUBLIC OUTREACH City staff was invited to present the Custom Blending Business Assistance Package to the Fort Collins Area Chamber of Commerce Local Legislative Affairs Committee on August 2, 2013. ATTACHMENTS 1. Map - Custom Blending expansion 2. Economic Impact Analysis: Custom Blending, Impact DataSource, July 11, 2013 3. Triple Bottom Line Analysis Model, July 30, 2013 4. Economic Advisory Commission, July 17, 2013 5. PowerPoint presentation Custom Blending Fossil Ridge High School Intel Harmony Road Ziegler Road Lady Moon Custom Blending Expansion Map ATTACHMENT 1 Prepared for: City of Fort Collins 300 LaPorte Avenue Fort Collins, Colorado 80522 Prepared by: Impact DataSource, LLC 4709 Cap Rock Drive Austin, Texas 78735 www.impactdatasource.com A REPORT OF THE ECONOMIC IMPACT OF CUSTOM BLENDING'S EXPANSION IN FORT COLLINS, COLORADO July 11, 2013 ATTACHMENT 2 TABLE OF CONTENTS Executive Summary………………………………………………...…………………………………………………………… 3 Project Summary Introduction………………………………………………...……………………………………………………………………6 Description of The Project…………………………………………………………………………………………………6 Summary of the Economic Impact of the Project………………………………………………………………6 Analysis of Fiscal Impact Costs and Benefits for Local Taxing Districts………………………………………………………………………7 City of Fort Collins…………………………………………………………………………………………………………8 Larimer County……………………………………………………………………………………………………………9 Poudre School District…………………………………………………………………………………………………9 Summary of Incentives Summary of Possible City Incentives for the Project…………………………………………………………10 Methodology Conduct of the Analysis…………………………………………………………………………………………………… 11 Discussion of Economic Impact Calculations………………………………………………………………………11 Discussion of Fiscal Impact Calculations……………………………………………………………………………11 About Impact DataSource…………………………………………………………………………………………………14 Appendix A Data & Rates………………….…………………………………………………………………………………………………16 Appendix B Detailed Economic Impact Calculations…………………………………………………………………………… 27 Appendix C Detailed Cost‐Benefit Calculations for: City of Fort Collins.............................................................................................................. 35 Larimer County.................................................................................................................. 40 Poudre School District........................................................................................................43 Page 2 EXECUTIVE SUMMARY Project background Custom Blending, a spice manufacturer, is considering an expansion of its Fort Collins operations which includes building, equipping and operating a new manufacturing facility in the city. The company plans to purchase a piece of land in the city and invest $6.0 million in new buildings and equipment. The firm plans to initially purchase approximately $2.0 million in equipment for the facility and invest approximately $4.0 million in a new building. The expansion will result in hiring 16 additional employees in Fort Collins. These employees will have average annual compensation between $45,000 to $47,000. Economic Impact Custom Blending's expansion will generate economic impacts during construction and operations. The construction activities, occurring while the firm builds its new facility, will generate a one‐time impact for construction workers and businesses in the area. The on‐going operations of the firm will create annual economic impacts, employing workers in the community and supporting additional economic activity throughout the region. The one‐time construction activity will support 46 workers in the area and support $2.56 million in new earnings for these workers. The operations will include an expanded manufacturing facility. The manufacturing operations are estimated to support 29 total workers and $1.2 million in workers' earnings annually. Economic Impact Construction (One‐Time): Total Total Change in Jobs 46 Total Change in Earnings $2,557,501 Average Earnings per Job $56,184 Operations (On‐going)* Total Total Change in Jobs 29 Total Change in Earnings $1,214,584 Average Earnings per Job $41,882 * Total change in earnings during the first year of full employment. Fiscal Impact Custom Blending's Expansion will generate fiscal impacts for the City of Fort Collins, Larimer County, the school district and other local taxing districts. The table below provides a high‐level summary of the fiscal impacts for local taxing districts during construction and over the first 10 years of operations. Net Benefits During Construction and Over the First 10 Years for Local Taxing Districts Present Additional Additional Net Value of Benefits Costs Benefits Net Benefits** City of Fort Collins $816,878 ($475,424) $341,454 $289,698 Larimer County $285,134 ($97,497) $187,637 $150,110 Poudre School District $744,213 ($325,585) $418,628 $329,027 Total $1,846,224 ($898,505) $947,719 $768,835 ** This analysis uses a 5% discount rate. Note: The project will generate revenue for hospital/health, library, water and pest control districts, but because additional costs cannot be determined, these taxing districts are not included in the analysis. Page 3 EXECUTIVE SUMMARY Benefits and Costs for City of Fort Collins The table below provides more detail on the sources of the additional benefits and costs for the city during construction and over the first 10 years of the project. Appendix C contains the year‐by‐year calculations. City of Fort Collins: Benefits, Costs & Net Benefits During Construction & Over First 10 Years Additional Additional Net Benefits Costs Benefits Benefits: Sales and Use Taxes after rebates $203,474 $203,474 Property Taxes on the Firm's Real Property $115,552 $115,552 Property Taxes on the Firm's BP Property* $12,395 $12,395 Property Taxes on new Residential Property $3,535 $3,535 Capital Expansion Fees $9,234 $9,234 Building Permits and Fees $23,669 $23,669 Lodging Taxes $781 $781 Miscellaneous taxes and user fees $110,635 $110,635 City‐owned Utility Revenue $337,602 $337,602 Costs: Costs to provide city services, excl utilities ($165,396) ($165,396) Costs to provide city‐owned utilities ($310,027) ($310,027) Total $816,878 ($475,424) $341,454 Present Value (5% discount rate) $650,041 ($360,343) $289,698 * Net of 50% property tax rebate. The graph below depicts the costs, benefits and net benefits to the City of Fort Collins over the first 10 years. ($100,000) ($50,000) $0 $50,000 $100,000 $150,000 $200,000 12345678910 Year Net Benefits Over the First 10 Years Benefits Costs Net Benefits Page 4 EXECUTIVE SUMMARY Value of Custom Blending Custom Blending's project represents the expansion of the manufacturer in Fort Collins. The firm is considering locations outside of the city for possible relocation and expansion of its manufacturing operations. The company currently employs 37 workers in the city and supports real and personal property of $4.86 million. The firm's current operations represent approximately $317,000 in net revenues to the City of Fort Collins annually. The new construction and expansion would increase the company's impact on Fort Collins by approximately $341,454 over the next 10 years. In total, the value of Custom Blending's current operation and expansion represents approximately $658,226 in net revenues to the City of Fort Collins over the next 10 years. Custom Blending's Value to Fort Collins Net Revenues for Fort Collins Over 10 Years Average Annual Present Value* Existing Operations $316,772 $19,798 $243,209 Construction and Expanded Operations $341,454 $21,341 $289,698 Total $658,226 $41,139 $532,906 * This analysis uses a 5% discount rate. Therefore, the estimated value to Fort Collins if the manufacturer were to leave the city is a loss $658,226 over the next 10 years or a loss to the city of $41,139 per year on average or $532,906 million in present value. While the above is a summary of the results of this analysis, details are on the following pages. $0 $50,000 $100,000 $150,000 $200,000 $250,000 12345678910 Year Net Revenues for the City of Fort Collins Existing Operations Construction & Expansion Page 5 PROJECT SUMMARY Introduction This report presents the results of an economic impact analysis performed by Impact DataSource, an Austin, Texas based economic consulting, research and analysis firm. The report estimates the impact that a potential project in Fort Collins, CO will have on the local economy. The report calculates the costs and benefits for specified local taxing districts during the initial construction and over the first 10 years of operations. City City of Fort Collins County Larimer County School District Poudre School District Description of the Project Summary of the Economic Impact of the Project The project will have the following economic impact on the City of Fort Collins area over the first 10 years: Economic Impact Over the First 10 Years Direct Indirect & Induced Total Total number of permanent direct and indirect jobs to be created 16 13 29 Salaries to be paid to direct and indirect workers $7,923,689 $4,833,450 $12,757,139 Number of direct and indirect workers who will move to the City 448 Number of new residents in the City 10 10 20 Number of new residential properties to be built in the City 112 Number of new students expected to attend local school district 448 Taxable sales and purchases expected in the City $3,620,976 $947,218 $4,568,194 $238,600 $238,600 $477,200 The market value the firm's property in Year 1 $6,045,677 $0 $6,045,677 The year‐by‐year economic impacts can be found in Appendix B. How this economic activity translates into additional costs and benefits for local taxing districts is summarized next. The market value of new residential property to be built for direct and indirect workers who move to the City by Year 10 Custom Blending is a company that is considering expanding its manufacturing operations in Fort Collins, Colorado. The company plans to purchase a piece of land in the city and invest $6.0 million in new buildings and equipment. The firm plans to initially purchase approximately $2.0 million in equipment for the facility and invest approximately $4.0 million in a new building. The expansion will result in hiring 16 additional employees in Fort Collins. These employees will have average annual compensation between $45,000 to $47,000. Page 6 ANALYSIS OF FISCAL IMPACT Costs and Benefits for Local Taxing Districts The project will generate additional benefits and costs for local taxing districts. A summary of these additional benefits, costs and net benefits is provided below. The source of specific benefits and costs are provided in more detail for each taxing district on subsequent pages. Net Benefits During Construction and Over the First 10 Years for Local Taxing Districts Present Additional Additional Net Value of Benefits Costs Benefits Net Benefits* City of Fort Collins $816,878 ($475,424) $341,454 $289,698 Larimer County $285,134 ($97,497) $187,637 $150,110 Poudre School District $744,213 ($325,585) $418,628 $329,027 Total $1,846,224 ($898,505) $947,719 $768,835 *The Present Value of Net Benefits is a way of expressing in today's dollars, dollars to be paid or received in the future. Today's dollar and a dollar to be received or paid at differing times in the future are not comparable because of the time value of money. The time value of money is the interest rate or each taxing entity's discount rate. This analysis uses a discount rate of 5% to make the dollars comparable. Note: The project will generate revenue for hospital/health, library, water and pest control districts, but because additional costs cannot be determined, these taxing districts are not included in the analysis. City of Fort Collins 36% Larimer County 20% Poudre School District 44% Distribution of Net Benefits Page 7 ANALYSIS OF FISCAL IMPACT Benefits and Costs for City of Fort Collins The table below displays the estimated additional benefits, costs and net benefits to be received by the city during construction and over the first 10 years of the project. Appendix C contains the year‐by‐year calculations. City of Fort Collins: Benefits, Costs & Net Benefits During Construction & Over First 10 Years Additional Additional Net Benefits Costs Benefits Benefits: Sales and Use Taxes after rebates $203,474 $203,474 Property Taxes on the Firm's Real Property $115,552 $115,552 Property Taxes on the Firm's BP Property* $12,395 $12,395 Property Taxes on new Residential Property $3,535 $3,535 Capital Expansion Fees $9,234 $9,234 Building Permits and Fees $23,669 $23,669 Lodging Taxes $781 $781 Miscellaneous taxes and user fees collected from: New Households $47,290 $47,290 New Businesses $63,345 $63,345 City‐owned Utility Revenue collected from: New Households $144,218 $144,218 New Businesses $193,384 $193,384 Costs: Costs to provide city services, excluding utilities, to: New Households ($70,684) ($70,684) New Businesses ($94,713) ($94,713) Costs to provide city‐owned utilities to: New Households ($132,479) ($132,479) New Businesses ($177,548) ($177,548) Total $816,878 ($475,424) $341,454 Present Value (5% discount rate) $650,041 ($360,343) $289,698 * Net of 50% property tax rebate. The graph below depicts the costs, benefits and net benefits to the City of Fort Collins over the first 10 years. ($100,000) ($50,000) $0 $50,000 $100,000 $150,000 $200,000 12345678910 Year Net Benefits for the City Benefits Costs Net Benefits Page 8 ANALYSIS OF FISCAL IMPACT Benefits and Costs for Larimer County The table below displays the estimated additional benefits, costs and net benefits to be received by the county during construction and over the first 10 years of the project. Appendix C contains the year‐by‐year calculations. Larimer County: Benefits, Costs & Net Benefits During Construction & Over First 10 Years Additional Additional Net Benefits Costs Benefits Benefits: Sales and Use Taxes $27,409 $27,409 Property Taxes on the Firm's Real Property $132,808 $132,808 Property Taxes on the Firm's BP Property $29,074 $29,074 Property Taxes on new Residential Property $8,127 $8,127 Miscellaneous taxes and user fees collected from: New Households $33,204 $33,204 New Businesses $54,513 $54,513 Costs: Costs to provide county services to: New Households ($36,893) ($36,893) New Businesses ($60,604) ($60,604) Total $285,134 ($97,497) $187,637 Present Value (5% discount rate) $224,009 ($73,899) $150,110 Benefits and Costs for Poudre School District The table below displays the estimated additional benefits, costs and net benefits to be received by the school district over the first 10 years of the project. Appendix C contains the year‐by‐year calculations. Poudre School District: Benefits, Costs and Net Benefits Over the First 10 Years Additional Additional Net Benefits Costs Benefits Benefits: Property Taxes on the Firm's Real Property $322,501 $322,501 Property Taxes on the Firm's BP Property $70,600 $70,600 Property Taxes on new Residential Property $19,734 $19,734 Additional State and Federal Funding $331,378 $331,378 Costs: Costs to educate new students ($325,585) ($325,585) Total $744,213 ($325,585) $418,628 Present Value (5% discount rate) $574,839 ($245,812) $329,027 Page 9 SUMMARY OF INCENTIVES Summary of Possible Incentives for the Project from the City The city is evaluating the following of incentives for the project: Manufacturing Use Tax Rebate Manufacturing Use Tax Rebate City Proposeda Equipment Estimated Spend $1,978,561 Factor 70% Eligible Amount $1,383,561 Use Tax Due (3.00%) $41,507 Rebate Percent 75% Equipment Use Rebate Amount $31,130 a) City Proposed Use Tax Rebates assume 100% rebate of the 2.25% General Fund Use Tax Rate. Personal Property Tax Rebate Personal Property Tax Rebate Actual Value Starting Assessed Value City Taxes Tax Paid to Cityb Eligible Max Rebatec Year 1 $1,978,561 $573,783 $5,621 $5,509 $2,754 Year 2 $1,836,896 $532,700 $5,219 $5,114 $2,557 Year 3 $1,554,357 $450,764 $4,416 $4,328 $2,164 Year 4 $1,271,819 $368,827 $3,613 $3,541 $1,771 Year 5 $989,280 $286,891 $2,811 $2,754 $1,377 Year 6 $706,742 $204,955 $2,008 $1,968 $984 Year 7 $424,203 $123,019 $1,205 $1,181 $591 Year 8 $141,665 $41,083 $402 $394 $197 Year 9 $0$0$0$0$0 Year 10 $0 $0 $0 $0 $0 Total $25,296 $24,790 $12,395 b) Less 2% county fee. c) Based on a 50% rebate rate. Summary of Rebates Total Tax Rebate Amounts City Proposed Manufacturing Use Tax Rebate $31,130 Personal Property Tax Rebate $12,395 Total Use and Property Tax Rebate Amount $43,525 * City Proposed Use Tax Rebates assume 100% rebate of the 2.25% General Fund Use Tax Rate. In total, the city is considering $43,525 in tax rebates related to the project. The sales and property tax collections and resulting net benefits for the City of Fort Collins shown earlier in this report reflect the revenues to be received by the city after rebating the $43,525 in taxes detailed in the table above. Page 10 METHODOLOGY Conduct of the Analysis This analysis was conducted by Impact DataSource using estimates provided to the City of Fort Collins by the firm, local rates and information and assumptions by Impact DataSource. Using this data, the economic impact from the project and the costs and benefits for relevant taxing districts were calculated for a 10‐year period Discussion of Economic Impact Calculations The economic impact as calculated in this report can be categorized into two main types of impacts. 1. Direct economic impacts are the immediate economic activities generated by the firm or project. These impacts include the employment at the firm and salaries paid to the firm's workers as well as expenditures made by the firm. 2. Indirect and induced economic impacts represent the additional economic activity that is supported by the firm or project. Indirect jobs and salaries are created in new or existing area firms, such as maintenance companies and service firms that may supply goods and services to the firm. In addition, induced jobs and salaries are created in new or existing local businesses, such as retail stores, gas stations, banks, restaurants, and service companies that may supply goods and services to new workers and their families. Note: This report labels the combined indirect and induced impacts as simply "Indirect". To estimate the indirect and induced economic impact of the firm and its employees on the area, regional economic multipliers were used. This economic analysis utilized economic impact multipliers obtained an input/output model produced by from Economic Modeling Specialists Inc. (EMSI). The EMSI multipliers used in this analysis are specific to Larimer County and the Commercial and Institutional Building Construction (NAICS 236220) industry, and the spice and extract manufacturing (NAICS 311942) industry. Two types of regional economic multipliers were used in this analysis: an employment multiplier and an earnings multiplier. An employment multiplier was used to estimate the number of indirect and induced jobs created and supported in the area. An earnings multiplier was used to estimate the amount of salaries to be paid to workers in these new indirect and induced jobs. The multipliers show the estimated number of indirect and induced jobs created for every one direct job at the firm and the amount of salaries paid to these workers for every dollar paid to a direct worker at the firm. The multipliers used in this analysis are listed below: Manufacturing Construction Operations Earnings multiplier 0.34 0.61 Employment multiplier 0.64 0.81 Discussion of Fiscal Impact Calculations Calculation of Revenues for the City: The city's revenues from sales, property lodging taxes were calculated directly using data that the firm provided and assumptions about taxable construction spending and worker spending. Property taxes were calculated on the new residential property for some new direct and indirect workers who may move to the county and on the firm's property that will be added to local tax rolls. Page 11 METHODOLOGY Lodging taxes were also calculated on lodging sales, in local hotels/motels, to out‐of‐town visitors to the firm. Sales taxes were calculated on the taxable spending in the area by direct and indirect workers, the spending of out‐of‐town visitors to the firm, and on the firm's taxable sales and purchases of supplies, materials and services in the area. The firm was not asked for nor could reasonably provide some data for calculating some other revenues for the city. For example, while the city will likely receive revenues from fines paid on speeding tickets given to new workers at the firm, the firm may not reasonably know the propensity of its workers to speed. Therefore, some other city revenues were calculated using an average revenue approach. This approach uses two assumptions: 1 ‐ The city has two general revenue sources ‐‐ revenues from residents and revenues from businesses. 2 ‐ The city will collect (a) about the same amount of other revenues from each household of new workers that may move to the city as it currently collects from an average household of existing residents, and (b) about the same amount of other revenues from the new firm (on a per worker basis) will be collected as the city collects from other businesses in the city. Using this average revenue approach, revenues likely to be received by the city were calculated from the households of new workers who may move to the city and from the new firm using average city revenues per worker calculations. Utility revenues collected from new residents and new businesses were also calculated using the average revenue approach as shown in Appendix A. The total annual city revenues used to make average revenue calculations in this analysis were obtained from the city's latest comprehensive annual financial report. Calculation of Costs for the City: This analysis sought to answer the question, what additional monies will the city have to spend to provide services to households of new workers who may move to the city and to the firm. A marginal cost approach was used to calculate additional city costs from the new firm and its workers. This approach uses two assumptions: 1 ‐ The city spends money on services for two general groups ‐‐ residents and businesses. 2 ‐ The city will spend (a) about the same amount for variable or marginal cost for each household of new workers that may move to the city as it currently spends for an average household of existing residents, and (b) about the same amount for variable or marginal costs for the new firm (on a per worker basis) as it spends for other businesses in the city. The detailed assumptions to estimate the marginal cost per household and per worker are provided in Appendix A. The cost to provide city‐owned utility services to new residents and new businesses were calculated using the average cost approach as shown in Appendix A. Page 12 METHODOLOGY Calculation of Net Benefits for the City: Net benefits calculated in this analysis are the difference between additional city revenues over a 10‐year period and additional city costs to provide services to the new firm and its workers and indirect workers who may move to the city. Calculation of Revenues for the County: The county's revenues from sales and property taxes were calculated directly using data that the firm provided. Property taxes were calculated on the new residential property for some new direct and indirect workers who may move to the county and on the firm's property that will be added to local tax rolls. Sales taxes were calculated on the taxable spending in the area by direct and indirect workers, the spending of out‐of‐town visitors to the firm, and on the firm's taxable sales and purchases of supplies, materials and services in the area. Also, the model estimates other additional revenue to be received by the county from new residents and new businesses. An average revenue approach is used in the same way additional county revenues were calculated. Calculation of Costs for the County: The model estimates additional costs to provide services to new residents and businesses using a parallel methodology used for the city. Calculation of Net Benefits for the County: Net benefits calculated in this analysis are the difference between additional county revenues over a 10‐year period and additional county costs to provide services to the new firm and its workers and indirect workers who may move to the county. Calculation of Revenues for Public Schools: The school district's revenues from property taxes were calculated on the new residential property for some new direct and indirect workers who may move to the county and on the firm's property that will be added to local tax rolls. School district revenues from state and federal funds and other local funding were calculated using an average revenue approach. This approach used the assumption that the school district will collect about the same amount of these revenues for each new student in the household of a new worker who may move to the county as it currently collects for each existing student. Calculation of Costs for Public Schools: A marginal cost approach was used to calculate additional school district costs from the new firm and its workers. This approach uses the assumption that the school district will spend about the same amount for variable or marginal cost for each new student as it spends for each existing student. Calculation of Net Benefits for Public Schools: Net benefits calculated in this analysis are the difference between additional school district revenues over a 10‐year period and marginal costs for the school district to provide services to students in the households of new workers who may move to the county. The school district's total annual revenues and expenses to make average revenue and marginal costs calculations in this analysis were obtained from the school district's latest annual budget. Page 13 METHODOLOGY Special Taxing Districts The hospital/health district and other local property taxing districts will receive additional property tax revenue as a result of the project. In addition these special taxing districts may incur additional costs from new residents and from the new firm. The project will generate revenue for hospital/health, library, water and pest control districts, but because additional costs cannot be determined, these taxing districts are not included in the analysis. About Impact DataSource Impact DataSource is a 19‐year‐old Austin, Texas economic consulting, research and analysis firm. The company has conducted over 2,500 economic impact analyses of firms, projects and activities in most industry groups throughout the U.S. In addition, Impact DataSource has prepared and customized over 50 economic impact models for its clients to perform their own analyses of economic development projects. These clients include the New Mexico Economic Development and the Metro Orlando (Florida) Economic Development Commission. The New Mexico Department of Economic Development uses Impact DataSource's computer model to project the economic impact of new or expanding firms in the state and costs and benefits for the State of New Mexico and each local taxing district. The model also calculates the amount of eligible state and local incentives and calculates a rate of return and payback period for these incentives. Impact DataSource's team includes the following members: ‐ Jerry Walker, principal/economist, and ‐ Paul Scheuren, principal/economist. Jerry Walker is an economist and Impact DataSource's Principal. Over the past seventeen years, he has conducted economic and fiscal impact analyses and cost‐benefit studies of a variety of firms, facilities, projects and activities. He has also developed several economic impact analysis computer programs for clients to do their own economic impact analyses of firms, projects, activities and organizations. He also has a background in government accounting and auditing. Prior to his economic consulting career, he had a fifteen‐year career as a supervisory auditor with two federal departments – the U.S. Department of Education and the U.S. Department of Health and Human Services. He reviewed federal programs operated by states, local governments, colleges and universities, local education agencies, and nonprofit organizations in a six state area from Austin, Texas. He performed financial audits and operational reviews. During the operational reviews, the operations of the federal programs were reviewed for economy, efficiency and effectiveness. The financial audits included analyzing costs incurred for federal programs and components of indirect cost rates. He has also served as a part‐time accounting instructor at Austin Community College, Austin, Texas. Jerry has Bachelor of Science and Master of Business Administration degrees in accounting and economics from Nicholls State University, Thibodaux, Louisiana. Paul Scheuren is an Impact DataSource economist. Over the past three years, he has conducted economic and fiscal impact analyses and cost‐benefit studies of a variety of firms, facilities, projects and activities. Recently, Paul analyzed more than 30 renewable energy projects funded by the Iowa Power Fund, Iowa's energy‐related economic development fund. Prior to joining Impact DataSource, Paul worked as a compensation analyst at the Texas Association of School Boards where he supported compensation consulting projects and helped streamline data analysis for a statewide salary survey. Page 14 METHODOLOGY Paul has a Master of Arts in Economics from Clemson University as well as a Bachelor of Business Administration in actuarial science from Temple University. Data used in the analysis, along with schedules of the results of calculations, are on the following pages. Page 15 Appendix A Data and Rates Page 16 APPENDIX A Local Tax Rates: Sales tax rates: City of Fort Collins Taxable goods 3.85% Mfg equipment eligible for use tax rebate 3.00% Food consumed at home 2.25% Larimer County 0.60% Property tax rates, per $1,000 of assessment: City of Fort Collins 9.797 Larimer County 22.520 Poudre School District 54.686 Hospital/Health Services 2.167 Other (Water, Library, etc) 4.142 Downtown Development Authority 5.000 City lodging tax rate (in addition to sale tax): 3.00% Relevant City Rates: Miscellaneous Primary Government Revenue collected from households and businesses: Revenue and Expenditures from Fort Collins 2011 Comprehensive Annual Financial Report, Page 28 Primary Government Revenues In Thousands Charges for services $186,129 Operating grants and contributions $13,843 Capital grants and contributions $26,445 Sales and use taxes $97,589 Property taxes $17,742 Occupational taxes $2,433 Lodging taxes $909 Intergovernmental not restricted to programs $10,274 Investment earnings $5,520 Miscellaneous $2,517 Total Revenues $363,401 Primary Government Revenue Sources Estimated in the Model In Thousands Sales and use taxes $97,589 Property taxes $17,742 Lodging taxes $909 Total $116,240 Page 17 APPENDIX A Primary Government Revenues Excluded from Miscellaneous Revenue Calcluation In Thousands Charges for Services Power and Light $100,814 Water $24,308 Wastewater $19,149 Operating grants and contributions (exclude 100%) $13,843 Capital grants and contributions (exclude 100%) $26,445 Intergovernmental not restricted to programs $10,274 Investment earnings $5,520 Total $200,353 Miscellaneous Primary Government Revenue collected from households and businesses In Thousands Total Revenues $363,401 Less Sources estimated direct in Model ($116,240) Less Excluded Revenues ($200,353) Miscellaneous Revenue $46,808 Includes Primary Government Revenues not estimated in the model or excluded from from Miscellaneous Revenue Calculation City financial data and Impact DataSource calculations. Percent of miscellaneous revenues and fees collected from: Households 70% Businesses 30% Impact DataSource assumption. Number of households and workers in Fort Collins: Households 58,111 Workers 67,449 U.S. Census 2011 American Community Survey (Households), U.S. Census OnTheMap 2010 (All Workers) Estimated miscellaneous revenues to be received from households per new $564 worker household moving to the city Impact DataSource calculation based on above city data and assumptions. Estimated miscellaneous revenues to be received from businesses per new $208 worker in the city Impact DataSource calculation based on above city data and assumptions. Page 18 APPENDIX A Marginal Government Expenses imposed on the city by new households and businesses: Primary Government Expenses In Thousands Fixed Variable General Government $33,674 80% 20% Public Safety $51,313 60% 40% Cultural parks, recreation and environment $29,755 60% 40% Planning and development $11,053 60% 40% Transportation $38,540 60% 40% Interest on long‐term debt $2,523 100% 0% Storm drainage $8,407 0% 100% Golf $2,547 0% 100% Total Expenses $177,812 Total Marginal Costs $69,953 Impact DataSource calculation based on fixed/variable split for government expenses as determined through work with similar communities. Local expenditure data used in this analysis according to the city's 2011 CAFR. Percent of marginal costs attributable to: Households 70% Businesses 30% Impact DataSource assumption. Estimated marginal city costs attributable to households per new worker $843 household moving to the city Impact DataSource calculation based on above city data and assumptions. Estimated marginal city costs attributable to businesses per new worker in the city $311 Impact DataSource calculation based on above city data and assumptions. City‐owned Utility Revenue Collected from new residents and businesses: City‐Owned Utility Revenues In Thousands Power and Light $99,657 Water $24,101 Wastewater $19,020 Total City‐Owned Utility Revenues $142,777 Estimated cost per new household to provide city‐owned $1,720 utilities to new households Impact DataSource calculation based on above city data and assumptions. Estimated cost per new worker to provide city‐owned $635 utilities to new businesses Impact DataSource calculation based on above city data and assumptions. Page 19 APPENDIX A Costs to provide City‐owned Utilities to new residents and businesses: City‐Owned Utility Expenses In Thousands Power and Light $97,057 Water $19,941 Wastewater $14,163 Total City‐Owned Utility Expenses $131,161 Estimated cost per new household to provide city‐owned $1,580 utilities to new households Impact DataSource calculation based on above city data and assumptions. Estimated cost per new worker to provide city‐owned $583 utilities to new businesses Impact DataSource calculation based on above city data and assumptions. Rate of annual increase in the above expenditures and other revenue: 2% Impact DataSource assumption. Relevant County Rates: Miscellaneous Primary Government Revenue collected from households and businesses: Revenue and Expenditures from Larimer 2011 Comprehensive Annual Financial Report, Page 26 Primary Government Revenues In Millions Charges for services $43.63 Operating grants and contributions $55.64 Capital grants and contributions $2.13 Property taxes $91.22 Sales and use taxes $31.95 Other Taxes $5.50 Other Revenues $5.36 Total Revenues $235.43 Primary Government Revenue Sources Estimated in the Model In Millions Property taxes $91.22 Sales and use taxes $31.95 Total $123.17 Page 20 APPENDIX A Primary Government Revenues Excluded from Miscellaneous Revenue Calcluation In Millions Operating grants and contributions (75%) $41.73 Capital grants and contributions (75%) $1.60 Total $43.33 Miscellaneous Primary Government Revenue collected from households and businesses In Millions Total Revenues $235.43 Less Sources estimated direct in Model ($123.17) Less Excluded Revenues ($43.33) Miscellaneous Revenue $68.93 Includes Primary Government Revenues not estimated in the model or excluded from from Miscellaneous Revenue Calculation County financial data and Impact DataSource calculations. Percent of miscellaneous revenues and fees collected from: Households 70% Businesses 30% Impact DataSource assumption. Number of households and workers in Larimer County: Households 121,911 Workers 115,819 U.S. Census 2011 American Community Survey (Households), U.S. Census OnTheMap 2010 (All Workers) Estimated miscellaneous revenues to be received from households per new $396 worker household moving to the county Impact DataSource calculation based on above county data and assumptions. Estimated miscellaneous revenues to be received from businesses per new $179 worker in the county Impact DataSource calculation based on above county data and assumptions. Marginal Government Expenses imposed on the county by new households and businesses: Primary Government Expenses In Millions Fixed Variable General Government $33.88 80% 20% Judicial and Public Safety $63.13 60% 40% Streets and highways $25.42 60% 40% Recreation $16.65 60% 40% Health and Human Services $56.49 60% 40% Interest on long‐term debt $2.63 100% 0% Solid Waste $5.25 0% 100% Total Expenses $203.45 Total Marginal Costs $76.70 Impact DataSource calculation based on fixed/variable split for government expenses as determined through work with similar communities. Local expenditure data used in this analysis according to the county's 2011 CAFR. Page 21 APPENDIX A Percent of marginal costs attributable to: Households 70% Businesses 30% Impact DataSource assumption. Estimated marginal county costs attributable to households per new worker $440 household moving to the county Impact DataSource calculation based on above county data and assumptions. Estimated marginal county costs attributable to businesses per new worker $199 in the county Impact DataSource calculation based on above county data and assumptions. Rate of annual increase in the above expenditures and other revenue: 2% Impact DataSource assumption. Relevant School District Rates: The school district’s estimated marginal cost of providing services to each $3,896 new child in the district Impact DataSource calculation based on values below. Average annual cost of providing services to each child in the district $7,793 2013 Budget Poudre School District General Fund ‐ Estimated values for 2011‐12 Average annual cost for each new child, as a percent of average annual cost 50% Impact DataSource assumption. Estimated annual state, federal and other funding received by the district $3,966 for each child enrolled 2013 Budget Poudre School District General Fund ‐ Estimated values for 2011‐12 Relevant Community Rates: Expected inflation rate over the first 10 years 3.0% Impact DataSource assumption. Discount rate used in analysis to compute discounted cash flows 5.0% Impact DataSource assumption. Percent of the gross salaries a typical worker spent on taxable goods and services 27% Impact DataSource calculation from U.S. Bureau of Labor Statistics, Consumer Expenditure Survey Percent of the gross salaries a typical worker spent on taxable food consumed at home 6% Impact DataSource calculation from U.S. Bureau of Labor Statistics, Consumer Expenditure Survey Page 22 APPENDIX A Property tax asssessment rates: Nonresidential assessment rate 29.00% Residential assessment rate 7.96% Median value of a new residential property constructed in the city $238,600 U.S. Census American Community Survey 2011 Fort Collins, CO Percent annual increase in the taxable value of residential and commercial 0.0% real property on local tax rolls over the first 10 years Impact DataSource assumption. Depreciation rates: To estimate the annual taxable or depreciable value of furniture, fixtures and equipment owned by the firm, this analysis uses the following depreciation schedule. Therefore, property taxes on the firm's furniture, fixtures and equipment are calculated on the following percentages of the costs of such equipment purchased each year: Year 1 100% Year 2 93% Year 3 79% Year 4 64% Year 5 50% Year 6 36% Year 7 21% Year 87% Year 90% Year 10 0% Impact DataSource assumption. The Firm's Investments, Assets and Construction: The market value of investments at the firm's facility each year: Buildings and Furniture, Other Real Fixtures, Property and Land Improvements Equipment Total Year 1 $0 $4,067,116 $1,978,561 $6,045,677 Year 2 $0$0$0$0 Year 3 $0$0$0$0 Year 4 $0$0$0$0 Year 5 $0$0$0$0 Year 6 $0$0$0$0 Year 7 $0$0$0$0 Year 8 $0$0$0$0 Year 9 $0$0$0$0 Year 10 $0 $0 $0 $0 Total $0 $4,067,116 $1,978,561 $6,045,677 Page 23 APPENDIX A Spending During Construction: Estimated spending for construction and capital expansion fees (if applicable): Construction Capital Spending Expansion Fees Year 1 $4,067,116 Year 1 $9,234 Year 2$0 Year 2$0 Year 3$0 Year 3$0 Year 4$0 Year 4$0 Year 5$0 Year 5$0 Year 6$0 Year 6$0 Year 7$0 Year 7$0 Year 8$0 Year 8$0 Year 9$0 Year 9$0 Year 10 $0 Year 10 $0 Percent of construction costs for: Materials 50% Labor 50% Estimated percent of construction materials that will be subject to the city's use tax 100% Percent of taxable spending by construction workers that will be in the city 0% Percent of furniture, fixtures and equipment to be subject to 3% use tax rate: 70% Expected city building permits and plan check fees to be paid during construction, if applicable: Plan Check Total Permits Permit Fees Fees and Fees Year 1 $15,977 $7,692 $23,669 Year 2 $0$0$0 Year 3 $0$0$0 Year 4 $0$0$0 Year 5 $0$0$0 Year 6 $0$0$0 Year 7 $0$0$0 Year 8 $0$0$0 Year 9 $0$0$0 Year 10 $0 $0 $0 The above fees were estimated using the city's Building‐Combination Estimate of Fees web application. The estimate is based on construction with a $4.067 million valuation with subcontractors. http://www.fcgov.com/building/fees.php Page 24 APPENDIX A Activities During the Firm's Operations: The firm's estimated taxable purchases of materials, supplies and services in the community and the firm's estimated taxable sales that will be subject to sales tax in the city Taxable Taxable Purchases Sales Year 1 $595,000 $0 Year 2$0 $0 Year 3$0 $0 Year 4$0 $0 Year 5$0 $0 Year 6$0 $0 Year 7$0 $0 Year 8$0 $0 Year 9$0 $0 Year 10 $0 $0 New employees in Fort Collins each year: New New Total Headquarters Manufacturing New Employees Employees Employees added added each year each year each year Year 1 099 Year 2 077 Year 3 000 Year 4 000 Year 5 000 Year 6 000 Year 7 000 Year 8 000 Year 9 000 Year 10000 Total 0 16 16 Number of new workers who will move to the city to take job at the firm: Estimated percent of the newly hired employees moving to the city 25.0% Number of new employees moving to the city Year 12 Year 22 Year 30 Year 40 Year 50 Year 60 Year 70 Year 80 Year 90 Year 10 0 Total 4 Page 25 APPENDIX A Average annual salaries of new employees in the first year $46,000 Percent of expected increase in employee salaries after Year 12.5% Multipliers for calculating the number of indirect and induced jobs and earnings in the area during operations: Headquarters Manufacturing Earnings 0.3300 0.6100 Employment 0.6200 0.8100 This cost‐benefit analysis uses the above multipliers to project the indirect and induced benefits in the community as a result of the direct economic activity. The employment multiplier shows the number of spin‐off jobs that will be created from each direct job. Similarly, the earnings multiplier estimates the salaries and wages to be paid to workers in these spin‐off jobs for each $1 paid to direct workers. Percent of workers in new indirect and induced jobs that will move 25% to the city for the job Estimated percentage of workers moving to the city that will have new 25% residential property built for them the first year that they move to the city Household size of a typical new worker moving to the city: 2.50 Number of school children in a typical worker's household 0.95 Percent of taxable shopping by a typical new worker that will 55% be in the city Visitors to the Firm from Out‐of‐Town: Number of out‐of‐town visitor days resulting from the project: Includes vendors, customer audits and visiting corporate employees. Visitors Year 135 Year 240 Year 350 Year 450 Year 550 Year 650 Percent of annual increase in the number of visitors after year 60% Average daily taxable visitor spending, excluding lodging in the city $35 Percent of visitor days that will result in a night in a hotel/motel in the city 50% Average nightly room rate in a local motel $95 Page 26 Appendix B Economic Impact Calculations Page 27 APPENDIX B Number of local jobs added each year and worker salaries to be paid: Headquarters Direct Indirect Total Direct Indirect Total Year Jobs Jobs Jobs Salaries Salaries Salaries 1 0 0 0 $0 $0 $0 2 0 0 0 $0 $0 $0 3 0 0 0 $0 $0 $0 4 0 0 0 $0 $0 $0 5 0 0 0 $0 $0 $0 6 0 0 0 $0 $0 $0 7 0 0 0 $0 $0 $0 8 0 0 0 $0 $0 $0 9 0 0 0 $0 $0 $0 10000$0$0$0 Total 0 0 0 $0 $0 $0 Number of local jobs added each year and worker salaries to be paid: Manufacturing Direct Indirect Total Direct Indirect Total Year Jobs Jobs Jobs Salaries Salaries Salaries 1 9 7 16 $414,000 $252,540 $666,540 2 7 6 13 $754,400 $460,184 $1,214,584 3 0 0 0 $773,260 $471,689 $1,244,949 4 0 0 0 $792,592 $483,481 $1,276,072 5 0 0 0 $812,406 $495,568 $1,307,974 6 0 0 0 $832,716 $507,957 $1,340,673 7 0 0 0 $853,534 $520,656 $1,374,190 8 0 0 0 $874,873 $533,672 $1,408,545 9 0 0 0 $896,745 $547,014 $1,443,759 10 0 0 0 $919,163 $560,690 $1,479,853 Total 16 13 29 $7,923,689 $4,833,450 $12,757,139 Page 28 APPENDIX B Number of local jobs added each year and worker salaries to be paid: Headquarters & Manufacturing Direct Indirect Total Direct Indirect Total Year Jobs Jobs Jobs Salaries Salaries Salaries 1 9 7 16 $414,000 $252,540 $666,540 2 7 6 13 $754,400 $460,184 $1,214,584 3 0 0 0 $773,260 $471,689 $1,244,949 4 0 0 0 $792,592 $483,481 $1,276,072 5 0 0 0 $812,406 $495,568 $1,307,974 6 0 0 0 $832,716 $507,957 $1,340,673 7 0 0 0 $853,534 $520,656 $1,374,190 8 0 0 0 $874,873 $533,672 $1,408,545 9 0 0 0 $896,745 $547,014 $1,443,759 10 0 0 0 $919,163 $560,690 $1,479,853 Total 16 13 29 $7,923,689 $4,833,450 $12,757,139 Number of direct and indirect workers and their families who will move to the area and their children who will attend local public schools: New Workers Total Total Moving to New New Year the Area Residents Students 14 11 4 24 9 4 30 0 0 40 0 0 50 0 0 60 0 0 70 0 0 80 0 0 90 0 0 10 0 0 0 Total 8 20 8 Page 29 APPENDIX B Number of new residential properties that may be built in the city for direct and indirect workers who will move to the community: Total New Residential Year Properties 11 21 30 40 50 60 70 80 90 10 0 Total 2 Page 30 APPENDIX B Local taxable spending on which sales taxes will be collected: Direct and Taxable Indirect Taxable Taxable Construction Workers' Visitors' Sales by Purchases by Year Spending Spending* Spending the Firm the Firm Total 1 $2,033,558 $98,981 $2,888 $0 $595,000 $2,730,426 2 $0 $180,366 $3,399 $0 $0 $183,765 3 $0 $184,875 $4,376 $0 $0 $189,251 4 $0 $189,497 $4,507 $0 $0 $194,004 5 $0 $194,234 $4,643 $0 $0 $198,877 6 $0 $199,090 $4,782 $0 $0 $203,872 7 $0 $204,067 $4,925 $0 $0 $208,993 8 $0 $209,169 $5,073 $0 $0 $214,242 9 $0 $214,398 $5,225 $0 $0 $219,624 10 $0 $219,758 $5,382 $0 $0 $225,140 Total $2,033,558 $1,894,435 $45,201 $0 $595,000 $4,568,194 * Spending includes only expenditures on items subject to general sales tax. Manufacturing purchases subject to use tax and local taxable spending by direct and indirect workers on food consumed at home: Spending on Rebateable Food Manufacturing Manufacturing Consumed Year Purchases Purchases at home 1 $1,383,561 $1,383,561 $39,992 2 $0 $0 $72,875 3 $0 $0 $74,697 4 $0 $0 $76,564 5 $0 $0 $78,478 6 $0 $0 $80,440 7 $0 $0 $82,451 8 $0 $0 $84,513 9 $0 $0 $86,626 10 $0 $0 $88,791 Total $1,383,561 $1,383,561 $765,428 Page 31 APPENDIX B Local spending by visitors on lodging by out‐of‐town visitors: Spending Year on Lodging 1 $1,663 2 $1,957 3 $2,520 4 $2,595 5 $2,673 6 $2,753 7 $2,836 8 $2,921 9 $3,009 10 $3,099 Total $26,025 Page 32 APPENDIX B Market value of new residential property built for direct and indirect workers who move to the community and the market value of the firm's property: Value of Value of Firm's Firm's Business New Real Personal Total Residential Property Property Taxable Year Property Tax Rolls Tax Rolls Property 1 $238,600 $4,067,116 $1,978,561 $6,284,277 2 $477,200 $4,067,116 $1,836,896 $6,381,212 3 $477,200 $4,067,116 $1,554,357 $6,098,673 4 $477,200 $4,067,116 $1,271,819 $5,816,135 5 $477,200 $4,067,116 $989,280 $5,533,596 6 $477,200 $4,067,116 $706,742 $5,251,058 7 $477,200 $4,067,116 $424,203 $4,968,519 8 $477,200 $4,067,116 $141,665 $4,685,981 9 $477,200 $4,067,116 $0 $4,544,316 10 $477,200 $4,067,116 $0 $4,544,316 Assessed value of new residential property built for direct and indirect workers who move to the community and the assessed value of the firm's property: Value of Value of Firm's Firm's Business New Real Personal Total Residential Property Property Taxable Year Property Tax Rolls Tax Rolls Property 1 $18,993 $1,179,464 $573,783 $1,772,239 2 $37,985 $1,179,464 $532,700 $1,750,148 3 $37,985 $1,179,464 $450,764 $1,668,212 4 $37,985 $1,179,464 $368,827 $1,586,276 5 $37,985 $1,179,464 $286,891 $1,504,340 6 $37,985 $1,179,464 $204,955 $1,422,404 7 $37,985 $1,179,464 $123,019 $1,340,468 8 $37,985 $1,179,464 $41,083 $1,258,532 9 $37,985 $1,179,464 $0 $1,217,449 10 $37,985 $1,179,464 $0 $1,217,449 Page 33 Appendix C Cost and Benefit Calculations Page 34 APPENDIX C Costs and Benefits for City of Fort Collins Benefits: Sales and use tax collections: On Direct and Rebate On Taxable Indirect On Taxable Taxable On Taxable Construction Workers' Visitors' Sales by Purchases by Construction Year Spending* Spending Spending the Firm the Firm Spending Total 1 $78,292 $3,811 $111 $0 $22,907 $0 $105,121 2 $0 $6,944 $131 $0 $0 $0 $7,075 3 $0 $7,118 $168 $0 $0 $0 $7,286 4 $0 $7,296 $174 $0 $0 $0 $7,469 5 $0 $7,478 $179 $0 $0 $0 $7,657 6 $0 $7,665 $184 $0 $0 $0 $7,849 7 $0 $7,857 $190 $0 $0 $0 $8,046 8 $0 $8,053 $195 $0 $0 $0 $8,248 9 $0 $8,254 $201 $0 $0 $0 $8,456 10 $0 $8,461 $207 $0 $0 $0 $8,668 Total $78,292 $72,936 $1,740 $0 $22,907 $0 $175,875 * Tax collections prior to possible rebates. Sales and use tax collections: On Rebate on On Food Manufacturing Manufacturing Consumed Year Purchases* Purchases at home Total 1 $41,507 ($31,130) $900 $11,277 2 $0 $0 $1,640 $1,640 3 $0 $0 $1,681 $1,681 4 $0 $0 $1,723 $1,723 5 $0 $0 $1,766 $1,766 6 $0 $0 $1,810 $1,810 7 $0 $0 $1,855 $1,855 8 $0 $0 $1,902 $1,902 9 $0 $0 $1,949 $1,949 10 $0 $0 $1,998 $1,998 Total $41,507 ($31,130) $17,222 $27,599 * Tax collections prior to possible rebates. Page 35 APPENDIX C Costs and Benefits for City of Fort Collins ‐ Continued Property tax collections on: Firm Property New Real Prop. Business Real Prop. Business Total Taxes Residential Taxes Prop. Taxes Taxes Prop. Taxes After Year Property Collected Collected Abated Abated Abatement Total 1 $186 $11,555 $5,509 $0 $2,754 $14,310 $14,496 2 $372 $11,555 $5,114 $0 $2,557 $14,112 $14,485 3 $372 $11,555 $4,328 $0 $2,164 $13,719 $14,091 4 $372 $11,555 $3,541 $0 $1,771 $13,326 $13,698 5 $372 $11,555 $2,754 $0 $1,377 $12,932 $13,305 6 $372 $11,555 $1,968 $0 $984 $12,539 $12,911 7 $372 $11,555 $1,181 $0 $591 $12,146 $12,518 8 $372 $11,555 $394 $0 $197 $11,752 $12,125 9 $372 $11,555 $0 $0 $0 $11,555 $11,927 10 $372 $11,555 $0 $0 $0 $11,555 $11,927 Total $3,535 $115,552 $24,790 $0 $12,395 $127,947 $131,482 Page 36 APPENDIX C Costs and Benefits for City of Fort Collins ‐ Continued Other city revenues from building permits and fees, lodging taxes, miscellaneous revenue collected from new households and new businesses: Rebated Miscellaneous Miscellaneous Building Capital Capital Revenues Revenues Permits and Expansion Expansion Lodging Collected from Collected from Year Fees Fees Fees Taxes Households* Businesses** Total 1 $23,669 $9,234 $0 $50 $2,397 $3,328 $38,678 2 $0 $0 $0 $59 $4,602 $6,153 $10,814 3 $0 $0 $0 $76 $4,694 $6,276 $11,046 4 $0 $0 $0 $78 $4,788 $6,401 $11,267 5 $0 $0 $0 $80 $4,884 $6,529 $11,493 6 $0 $0 $0 $83 $4,982 $6,660 $11,724 7 $0 $0 $0 $85 $5,081 $6,793 $11,959 8 $0 $0 $0 $88 $5,183 $6,929 $12,199 9 $0 $0 $0 $90 $5,287 $7,067 $12,444 10 $0 $0 $0 $93 $5,392 $7,209 $12,694 Total $23,669 $9,234 $0 $781 $47,290 $63,345 $144,319 * Miscellaneous revenues collected from households is based on the number of new households moving to the community and the per household miscellaneous revenue collected from new households as calculated and discussed on page 19. **Miscellaneous revenues collected from businesses is based on the number of new workers in the community and the per new worker miscellaneous revenue collected from businesses as calculated and discussed on page 19. Page 37 APPENDIX C Costs and Benefits for City of Fort Collins ‐ Continued City‐owned utility revenue collected by the city from new residents and new businesses: City‐Owned City‐Owned Utility Utility Revenues Revenues Collected from Collected from Year Households Businesses Total 1 $7,310 $10,160 $17,470 2 $14,035 $18,783 $32,819 3 $14,316 $19,159 $33,475 4 $14,602 $19,542 $34,144 5 $14,894 $19,933 $34,827 6 $15,192 $20,332 $35,524 7 $15,496 $20,738 $36,234 8 $15,806 $21,153 $36,959 9 $16,122 $21,576 $37,698 10 $16,444 $22,008 $38,452 Total $144,218 $193,384 $337,602 Page 38 APPENDIX C Costs and Benefits for City of Fort Collins ‐ Continued Costs: The costs of providing municipal services and utility services to new residents: Cost of City Cost of City Cost of City‐ Cost of City‐ Services to Services to Owned Utility Owned Utility New New Svcs to New Svcs to New Year Residents Businesses Residents Businesses Total Costs 1 $3,583 $4,976 $6,715 $9,328 $24,602 2 $6,879 $9,199 $12,893 $17,245 $46,216 3 $7,016 $9,383 $13,151 $17,590 $47,141 4 $7,157 $9,571 $13,414 $17,942 $48,083 5 $7,300 $9,762 $13,682 $18,301 $49,045 6 $7,446 $9,958 $13,956 $18,667 $50,026 7 $7,595 $10,157 $14,235 $19,040 $51,026 8 $7,747 $10,360 $14,519 $19,421 $52,047 9 $7,902 $10,567 $14,810 $19,809 $53,088 10 $8,060 $10,779 $15,106 $20,205 $54,150 Total $70,684 $94,713 $132,479 $177,548 $475,424 Net Benefits for the City: Net Cumulative Year Benefits Costs Benefits Net Benefits 1 $187,042 ($24,602) $162,440 $162,440 2 $66,831 ($46,216) $20,615 $183,055 3 $67,579 ($47,141) $20,438 $203,493 4 $68,301 ($48,083) $20,218 $223,711 5 $69,048 ($49,045) $20,003 $243,714 6 $69,818 ($50,026) $19,792 $263,506 7 $70,613 ($51,026) $19,586 $283,093 8 $71,433 ($52,047) $19,386 $302,479 9 $72,474 ($53,088) $19,386 $321,865 10 $73,739 ($54,150) $19,590 $341,454 Total $816,878 ($475,424) $341,454 Page 39 APPENDIX C Costs and Benefits for Larimer County Benefits: Sales tax collections: On Direct and On Taxable Indirect On Taxable Taxable Construction Workers' Visitors' Sales by Purchases by Year Spending Spending Spending the Firm the Firm Total 1 $12,201 $594 $17 $0 $3,570 $16,383 2 $0 $1,082 $20 $0 $0 $1,103 3 $0 $1,109 $26 $0 $0 $1,136 4 $0 $1,137 $27 $0 $0 $1,164 5 $0 $1,165 $28 $0 $0 $1,193 6 $0 $1,195 $29 $0 $0 $1,223 7 $0 $1,224 $30 $0 $0 $1,254 8 $0 $1,255 $30 $0 $0 $1,285 9 $0 $1,286 $31 $0 $0 $1,318 10 $0 $1,319 $32 $0 $0 $1,351 Total $12,201 $11,367 $271 $0 $3,570 $27,409 Property tax collections: Firm Property New Real Prop. Business Real Prop. Business Total Taxes Residential Taxes Prop. Taxes Taxes Prop. Taxes After Year Property Collected Collected Abated Abated Abatement Total 1 $428 $13,281 $6,461 $0 $0 $19,742 $20,169 2 $855 $13,281 $5,998 $0 $0 $19,279 $20,134 3 $855 $13,281 $5,076 $0 $0 $18,356 $19,212 4 $855 $13,281 $4,153 $0 $0 $17,434 $18,289 5 $855 $13,281 $3,230 $0 $0 $16,511 $17,367 6 $855 $13,281 $2,308 $0 $0 $15,589 $16,444 7 $855 $13,281 $1,385 $0 $0 $14,666 $15,521 8 $855 $13,281 $463 $0 $0 $13,743 $14,599 9 $855 $13,281 $0 $0 $0 $13,281 $14,136 10 $855 $13,281 $0 $0 $0 $13,281 $14,136 Total $8,127 $132,808 $29,074 $0 $0 $161,881 $170,008 Page 40 APPENDIX C Costs and Benefits for Larimer County Other county miscellaneous user fees and taxes collected from new households and new businesses: Miscellaneous Miscellaneous Revenues Revenues Collected from Collected from Year Households Businesses Total 1 $1,683 $2,864 $4,547 2 $3,231 $5,295 $8,526 3 $3,296 $5,401 $8,697 4 $3,362 $5,509 $8,871 5 $3,429 $5,619 $9,048 6 $3,498 $5,731 $9,229 7 $3,568 $5,846 $9,414 8 $3,639 $5,963 $9,602 9 $3,712 $6,082 $9,794 10 $3,786 $6,204 $9,990 Total $33,204 $54,513 $87,717 Costs of providing county services to new residents: Costs of Costs of County County Services: Services: Year New Residents Businesses Total 1 $1,870 $3,184 $5,054 2 $3,590 $5,886 $9,477 3 $3,662 $6,004 $9,666 4 $3,735 $6,124 $9,860 5 $3,810 $6,247 $10,057 6 $3,886 $6,372 $10,258 7 $3,964 $6,499 $10,463 8 $4,043 $6,629 $10,672 9 $4,124 $6,762 $10,886 10 $4,207 $6,897 $11,104 Total $36,893 $60,604 $97,497 Page 41 APPENDIX C Costs and Benefits for Larimer County ‐ Continued Net Benefits for the County: Cumulative Net Net Year Benefits Costs Benefits Benefits 1 $41,099 ($5,054) $36,045 $36,045 2 $29,763 ($9,477) $20,286 $56,331 3 $29,044 ($9,666) $19,378 $75,709 4 $28,324 ($9,860) $18,464 $94,173 5 $27,608 ($10,057) $17,551 $111,724 6 $26,896 ($10,258) $16,638 $128,362 7 $26,189 ($10,463) $15,726 $144,088 8 $25,486 ($10,672) $14,814 $158,902 9 $25,248 ($10,886) $14,362 $173,264 10 $25,477 ($11,104) $14,373 $187,637 Total $285,134 ($97,497) $187,637 Page 42 APPENDIX C Costs and Benefits for Poudre School District Benefits: Property tax collections: Firm Property New Real Prop. Business Real Prop. Business Total Taxes Residential Taxes Prop. Taxes Taxes Prop. Taxes After Year Property Collected Collected Abated Abated Abatement Total 1 $1,039 $32,250 $15,689 $0 $0 $47,939 $48,978 2 $2,077 $32,250 $14,566 $0 $0 $46,816 $48,893 3 $2,077 $32,250 $12,325 $0 $0 $44,575 $46,653 4 $2,077 $32,250 $10,085 $0 $0 $42,335 $44,412 5 $2,077 $32,250 $7,844 $0 $0 $40,095 $42,172 6 $2,077 $32,250 $5,604 $0 $0 $37,854 $39,931 7 $2,077 $32,250 $3,364 $0 $0 $35,614 $37,691 8 $2,077 $32,250 $1,123 $0 $0 $33,373 $35,451 9 $2,077 $32,250 $0 $0 $0 $32,250 $34,327 10 $2,077 $32,250 $0 $0 $0 $32,250 $34,327 Total $19,734 $322,501 $70,600 $0 $0 $393,101 $412,835 Additional State and Federal school funding received: Additional State & Federal School Year Funding 1 $16,011 2 $31,043 3 $31,974 4 $32,933 5 $33,921 6 $34,939 7 $35,987 8 $37,067 9 $38,179 10 $39,324 Total $331,378 Page 43 APPENDIX C Costs and Benefits for Poudre School District Costs: Costs of educating children of new workers who move to the district: Cost of Educating New Year Students 1 $15,731 2 $30,500 3 $31,415 4 $32,358 5 $33,328 6 $34,328 7 $35,358 8 $36,419 9 $37,511 10 $38,637 Total $325,585 Net Benefits for the School District: Net Cumulative Year Benefits Costs Benefits Net Benefits 1 $64,989 ($15,731) $49,258 $49,258 2 $79,936 ($30,500) $49,436 $98,693 3 $78,627 ($31,415) $47,212 $145,905 4 $77,345 ($32,358) $44,988 $190,893 5 $76,093 ($33,328) $42,765 $233,657 6 $74,870 ($34,328) $40,542 $274,200 7 $73,678 ($35,358) $38,320 $312,520 8 $72,517 ($36,419) $36,099 $348,618 9 $72,506 ($37,511) $34,995 $383,613 10 $73,651 ($38,637) $35,015 $418,628 Total $744,213 ($325,585) $418,628 Page 44 Triple Bottom Line Analysis Map (TBLAM) Evaluated by: Adapted from the City of Olympia and Evergreen State College Sustainable Action Map (SAM). Economic Social Notes: Environmental Strengths Limitations Opportunities Threats Strengths Limitations Opportunities Threats Project/Decision: Community FLEX Strengths Limitations Opportunities Threats Strengths Limitations Opportunities Threats ATTACHMENT 3 MEMORANDUM Economic Advisory Commission 300 LaPorte Avenue PO Box 580 Fort Collins, CO 80522 970.221.6324 970.224.6107 - fax fcgov.com On July 17, 2012, SeonAh Kendall presented the proposed Business Assistance Package to Custom Blending. She explained the history of Custom Blending and that they produce and distribute spices, flavors, and proprietary blends. They are looking for assistance to start manufacturing vanilla in Fort Collins (this process is currently outsourced). She showed a map of the current location and expansion plans. She explained the proposed expansion plans, the average salary of employees, and the benefits package offered to full time employees. She explained the business assistance package, that would garner 16 new full time jobs. She described social contributions that the expansion would have to employees and the community, as well as the Economic Impact Analysis and net benefit over 10 years. The Economic Advisory Commission discussed the importance of providing jobs for locals and supporting local business. Meeting Comments/Discussion:  Jim Clark said we need to provide jobs for local people who aren’t high tech or engineers. He thinks this assistance package is great.  Sam Solt has known of this company for a long time. He sees this as setting a precedent for who the City invests in. It is consistent with any precedent we may set regarding who we want to select to make investments in as a community. He would like to see this technology park area built out.  SeonAh clarified that Custom Blending built the current facility to last 10 years, but they have seen double digit growth in the three years since they opened. Josh added that when they moved there the City helped them use Private Activity Bond financing, which allowed them to finance the project as a tax-exempt project. They are able to use that financing again but they are workign with the Colorado Housing and Finance Authority, so they will secure low cost financing for their expansion, which is part of the assistance package. DATE: August 12, 2013 TO: Mayor and Councilmembers FROM: Economic Advisory Commission Co-Chair Sam Solt CC: Darin Atteberry, City Manager RE: CUSTOM BLENDING ASSISTANCE PACKAGE ATTACHMENT 4  Channing Arndt asked if the $40,000 package is all related to tax that would be paid on the new manufacturing equipment. The answer was yes.  Sam Solt asked if Fort Collins is the only city in Colorado with use tax on new equipment. Josh said that the answer is no for the state, but yes in northern Colorado. Most of our neighboring cities charge a use tax, but exempt it on manufacturing equipment.  Ann added that Fort Collins considered an exeption in 1992.  Glen Colton liked the ideas of supporting jobs for people who already live here and supporting local business.  SeonAh Kendall said the Economic Impact analysis showed potentially one new employee coming from outside Fort Collins. She has been discussing with Custom Blending ways to work with Larimer County Workforce Center and Front Range Community College to hire the 16 new employees and train the existing employees. After thorough consideration and discussion, the EAC developed the following recommendation to the Fort Collins City Council: Jim Clark motioned and Ann Hutchison seconded. The Economic Advisory Commission recommends the City Council approves the Business Assistance Package for Custom Blending. Motion Passed: 7-0-0 1 Business Assistance Package SeonAh Kendall, CPA Business Retention Strategist skendall@fcgov.com 970.416.2164 ATTACHMENT 5 2 History • Founded in Colorado in 1986 and currently employs 35 full-time employees (a total of 65 full-, part- and temporary-employees during peak season) • Originally located in Larimer County • Provides spices, flavors and proprietary blends • Taking control of the vanilla manufacturing process 3 Location map of Custom Blending expansion 4 Expansion • Physical expansion – additional 34,000SF to the east • $4M building costs; $2M equipment cost • Allow the company to add an additional 16 full- time employees, totaling 51 full-time employees (a total of 77 full-, part- and temporary-employees during the peak season) • Average salary is $45,000 - $47,000 5 Request – Use Tax Rebate Item Factor Amount Estimated Equipment Cost $1,383,561 Manufacturing Use Tax Typical Use Tax Due 3.00% $41,507 Less: Standard MUTR -1.50% ($20,753) Typical Use Tax Due 1.50% $20,753 Item Factor Amount Estimated Equipment Cost $1,383,561 Standard MUTR $20,753 Requested Rebate $31,130 Request Above Standard MUTR ($10,377) Table 2 Use Tax Rebate Custom Blending Expansion Item Factor Amount Estimated Equipment Cost $1,383,561 Local Use Tax Charge Base Tax (General Fund) 2.25% $31,130 Streets & Transportation 0.25% $3,459 Building on Basics Projects 0.25% $3,459 Natural Areas and Parks 0.25% $3,459 Typical Use Tax Due 3.00% $41,507 Less: Rebate Requested 2.25% ($31,130) Estimated Use Tax Due $10,377 Source: City of Fort Collins - Economic Health 6 Request – Personal Property Tax Rebate Table 3 Assessed Year Payable Year Actual Value Starting Assessment Rate Assessed Value City Mill City Taxes County Fee Tax Paid to City Rebate Rate Eligible Max Rebate Depreciation Ending Value 2014 2015 1,978,561 29% 573,783 0.009797 5,621 2% 5,509 50% 2,754 141,665 1,836,896 2015 2016 1,836,896 29% 532,700 0.009797 5,219 2% 5,114 50% 2,557 282,538 1,554,357 2016 2017 1,554,357 29% 450,764 0.009797 4,416 2% 4,328 50% 2,164 282,538 1,271,819 2017 2018 1,271,819 29% 368,827 0.009797 3,613 2% 3,541 50% 1,771 282,538 989,280 2018 2019 989,280 29% 286,891 0.009797 2,811 2% 2,754 50% 1,377 282,538 706,742 2019 2020 706,742 29% 204,955 0.009797 2,008 2% 1,968 50% 984 282,538 424,203 2020 2021 424,203 29% 123,019 0.009797 1,205 2% 1,181 50% 591 282,538 141,665 2021 2022 141,665 29% 41,083 0.009797 402 2% 394 50% 197 141,665 - 12,395 Custom Blending Personal Property Tax Rebate Estimate 10-Jul-13 7 Total Business Assistance Package Table 1 Summary of Business Assistance Package Custom Blending Item Note Harmony Technology Park Rebate Savings Manufacturing Use Tax Rebate $ 31,100 Personal Property Tax Rebate 7 Year Value $ 12,400 Total Rebate Savings $ 43,500 Total Investment Package Value $ 43,500 Source: City of Fort Collins - Economic Health 8 Social Contributions • 90% Employer paid medical and dental insurance for full-time employees • 90% of college tuition reimbursement for classes related to business • Financial and Board Support – Larimer County Food Bank – Trees, Water and People – Junior Achievement – Neighbor to Neighbor • Numerous other fundraisers and volunteerism 9 Environmental Programs • Silver-level Climate Wise partner • Purchases Wind Power • Incorporation of numerous environmental efficient elements into current facility (radiant walls, industrial skylights, energy efficient HVAC systems) • Investigating participation in the Fort Collins Solar Program 10 Economic Impact Analysis • Jobs Created – One-time construction activity • 46 workers in the area • Average earnings of $56,200/job – On-going operations • 16 direct full-time employees • 13 indirect and induced jobs created • Average earnings of $41,900/job 11 Fiscal Impact Analysis Additional Benefits Additional Costs Net Benefits Present Value of Net Benefits City of Fort Collins $816,878 ($475,424) $341,454 $289,698 Assistance per job = $2,719 Ratio of private investment to public investment $138:$1 RESOLUTION 2013-073 OF THE COUNCIL OF THE CITY OF FORT COLLINS APPROVING AN AGREEMENT BETWEEN THE CITY OF FORT COLLINS AND CUSTOM BLENDING, INC., TO PROVIDE BUSINESS INVESTMENT ASSISTANCE WHEREAS, Custom Blending, Inc., is a vanilla manufacturer located at 3461 Precision Drive in Fort Collins; and WHEREAS, Custom Blending has committed to expanding its facilities to include a new 34,000 square foot expansion to be fully completed and operational by the end of 2013 (the “Project”); and WHEREAS, the Project will consist of an expansion and remodel in addition to an investment in equipment; and WHEREAS, Custom Blending estimates that the total investment in the Project will be more than $6 million (including both construction costs and equipment purchases) and that the completion of the Project will result in the creation of approximately 16 net new jobs with an annual average salary between $45,000 – $47,000; and WHEREAS, an independent economic impact analysis commissioned by the City has indicated that the Project will result in one-time construction activity that will support 46 workers in the area and generate $2.5 million in new earnings for these workers, and will generate total net tax revenues for the City and other taxing entities combined of approximately $780,000; and WHEREAS, according to the Economic Health Office, the Project will also help retain primary jobs in Fort Collins that might otherwise be lost to other sites in Northern Colorado and elsewhere; and WHEREAS, according to the Economic Health Office, the Project will bring vanilla extract manufacturing to the City that has previously occurred out-of-state; and WHEREAS, City staff has prepared for City Council's consideration a proposed agreement between the City and Custom Blending (the “Agreement”), which Agreement sets forth the terms and conditions upon which financial assistance will be provided to Custom Blending by the City and is attached as Exhibit "A"; and WHEREAS, based on Custom Blending’s representations, the Project will be a high quality manufacturing facility that will be owned and operated by Custom Blending; will generate new primary jobs; and will have a reasonable expectation of long-term operations in the City; and WHEREAS, the City Council has determined 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 City use tax revenues generated by the Project and the rebate of City personal property tax on new Eligible Equipment installed as part of the Project. 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 Custom Blending, Inc., as described herein, 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 City Manager is hereby authorized to execute the Agreement on behalf of the City, in substantially the form contained in Exhibit "A" attached hereto and incorporated herein by this reference, together with such additional modifications and additions as the City Manager deems necessary or appropriate, in consultation with the City Attorney, in order to protect the interests of the City or to further the purposes of the Agreement or this Resolution. Section 3. That the City Manager is hereby authorized to prepay in full or in part any rebate amounts due after December 31, 2015, to Custom Blending pursuant to the Agreement, provided that the City Manager determines that such prepayment or prepayments are justified in light of Custom Blending’s employment target performance and the efficiency and convenience of such prepayments. Passed and adopted at a regular meeting of the Council of the City of Fort Collins this 20th day of August A.D. 2013. Mayor ATTEST: City Clerk BUSINESS INVESTMENT AGREEMENT FOR ECONOMIC DEVELOPMENT RELATED TO CUSTOM BLENDING THIS AGREEMENT is entered into this day of _________, 2013, effective as of June 8, 2012, by and between the City of Fort Collins, Colorado, a home rule municipal corporation (the “City”), and Custom Blending, Inc., a Colorado Corporation (“Custom Blending”). RECITALS WHEREAS, Custom Blending is the owner of property located at 3461 Precision Drive in the City that is more fully described in Exhibit A and incorporated herein by this reference (the “Property”); and WHEREAS, Custom Blending has committed to expanding the Property by to include a new 34,000 square foot expansion to be fully completed and operational by the end of 2013 (the “Project”); and WHEREAS, the Project will consist of a construction expansion and remodel in addition to an investment in equipment; and WHEREAS, Custom Blending estimates that the total investment in the Project will be more than $6 million (including both construction and equipment purchases) and that the completion of the Project will result in the creation of approximately 16 net new jobs earning with an annual average salary between $45,000 – $47,000, 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 an increase in tax revenue for the City, including approximately (i) $ 203,000 in sales and use tax after rebates; and (ii) $12,400 in new personal property tax in the first ten years; and WHEREAS, according to the Economic Health Office, the Project will prevent primary jobs from leaving Fort Collins to other sites in Northern Colorado and elsewhere; and WHEREAS, according to the Economic Health Office, the Project will bring vanilla extract manufacturing to the City that has previously occurred out-of-state; and WHEREAS, Custom Blending has requested that the City enter into a business investment agreement for economic development related to the Project; and WHEREAS, based on Custom Blending’s representations that the Project will (i) be a high quality manufacturing facility that will be owned and operated by Custom Blending, (ii) EXHIBIT A 2 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 2013-XXX on August 20, 2013, 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 City use tax revenues generated by the Project and the rebate of City personal property tax on new Eligible Equipment installed as part of the Project; and WHEREAS, the City Council has further determined, through the adoption of Resolution 2013-XXX that providing the financial assistance described in this Agreement to Custom Blending will serve the important public purposes of maintaining and 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 forms provided by the City. Custom Blending means Custom Blending, Inc., a Colorado Corporation. Building Expansion means that building located at 3461 Precision Drive. 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. 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 that is installed or delivered to the Property and incorporated between August 20, 2013 and December 31, 2014, that the installation of which is necessary allow for operation of the Manufacturing Facility. All equipment must be newly installed and located within Custom Blending’s facilities 3 at 3461 Precision Drive, in Fort Collins, Colorado within the time period required in this Agreement. Employment Target means employment by Custom Blending of no fewer than 51 full-time employees at its Facility as of December 31, 2015. Facility means the approximately 34,000 square foot Building Expansion facility to be developed, constructed and installed beginning in 2013 and to be fully completed and operational in 2013. Land Use Code means the Fort Collins Land Use Code. Manufacturing Equipment Use Tax Rebate Program or Program means the program for generally available limited rebate of use taxes for manufacturing equipment, as described in Chapter 8 of the Code. Project means Custom Blending’s Building Expansion by the development of approximately 34,000 square feet for use as an Manufacturing Facility, pursuant to such building permit as may be issued by the City for the same, and shall include construction as well as acquisition and installation of the Eligible Equipment . Project Personal Property means the investments in Eligible Equipment and leasehold improvements made by Custom Blending as part of the Project. Use Tax Rebate means the rebate of use taxes to Custom Blending described in Section 3 of this Agreement. The Use Tax Rebate as described herein is intended to be in lieu of, and not a duplication of, the Manufacturing Equipment Use Tax Rebate Program, which Program Custom Blending agrees it is not entitled to participate in for the Eligible Equipment. Failure to execute this agreement does not exclude Custom Blending from receiving rebates from the Manufacturing Use Tax Rebate Program. 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 to enter into the Agreement, and, assuming such authority, the City Council has properly and regularly authorized the City to enter into the Agreement. 4 2.2. Custom Blending represents and covenants that: 2.2.1. Custom Blending 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. Custom Blending 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 Custom Blending in accordance with its terms. 2.2.3. The consummation of transaction contemplated by this Agreement will not violate any provision of the governing documents of Custom Blending or, to its knowledge, constitute a default or result in the breach of any term or provision of any contract or agreement to which Custom Blending 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 Custom Blending with respect to the Project or this Agreement, and Custom Blending is unaware of that any such litigation, proceeding, or investigation has been threatened. 2.2.5. In redeveloping the Property, Custom Blending will comply with all applicable zoning and land use requirements and other applicable federal, state, county, and City statutes, rules, regulations and ordinances. 2.2.6. Custom Blending intends to operate, or cause to operate, in Building Expansion a new, Manufacturing Facility through December 31, 2021. 2.2.7. Custom Blending 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. PAYMENT AND REIMBURSEMENT OF USE TAXES 3.1. Custom Blending shall pay to the City all use taxes due from Custom Blending for its Eligible Equipment investment associated with the Project to develop and equip the Manufacturing Facility. 5 3.2. To the extent permitted by the constitution and laws of the State of Colorado and the Charter, including but not limited to, applicable prohibitions on multiple fiscal year obligations and the condition all obligations be contingent upon the appropriation of funds sufficient and intended therefore by the City Council of the City, in its sole discretion, the City agrees to rebate the following amounts to Custom Blending up to seventy-five percent (75%) of City use taxes paid by Custom Blending for the Eligible Equipment for the period beginning August 20, 2013 and ending December 31, 2014, as described in Section 3.3 (the “Use Tax Rebate”), subject to a limit on the total use tax rebate amount for the Project, of Thirty-One Thousand, One Hundred Thirty Dollars ($31,130) (the “Maximum Use Tax Reimbursement”). Custom Blending shall not be eligible for a Use Tax Rebate for any use tax paid on any Eligible Equipment unless it has accurately designated and identified the Eligible Equipment on a separate schedule as part of the use tax submission for such Eligible Equipment. 3.3. The Use Tax Rebates here under shall be conditioned upon the full payment by Custom Blending to the City of all use taxes due and owing from Custom Blending, provided that all applicable conditions are met. If Custom Blending has not paid any use taxes owed to the City due to a good faith dispute as to whether such use tax is due, and such dispute has not been resolved by the time Company requests a Use Tax Rebate hereunder, or if Custom Blending otherwise fails to pay any use taxes owed to the City when due and such use taxes remain unpaid at the time the Company requests a Use Tax Rebate hereunder, then the City may reduce the requested Use Tax Rebate by the amount in dispute until resolution of the dispute, payment of the use tax or payment under protest of the use tax, as the case may be. 3.4. Custom Blending shall apply for the Use Tax Rebate in accordance with the provisions hereafter set forth. The amount of Use Tax Rebate payable by the City and the time when such rebate shall be paid are hereinafter set forth: 3.4.1. In order to be eligible for any Use Tax Rebate hereunder, Custom Blending shall submit an Application for Use Tax Rebate for rebate of City use taxes paid on Eligible Equipment, any such Application (and each such Application for Use Tax Rebate submitted pursuant to this Section 3.3) must identify each item of Eligible Equipment in a manner consistent with, and corresponding to, the manner in which such item of Eligible Equipment was designated and identified in connection with the payment of use taxes for said item. 6 3.4.2. No later than March 31, 2013 Custom Blending shall submit an Application for Use Tax Rebate for rebate of City use taxes paid on Eligible Equipment purchased between August 20, 2013 and December 31, 2014. The related Use Tax Rebate to Custom Blending for 2013 use taxes hereunder (the “Total Rebate Payment”) will be paid over a period of three (3) years, with the initial installment of thirty-three and one-third percent (33.3%) of the total amount of the Total Rebate Payment due and payable no later than June 30, 2014, with a second installment of the same amount due and payable no later than June 30, 2015, and with a final installment equal to thirty-three and one-third percent (33.3%) of the Total Rebate Payment due and payable no later than June 30, 2016. 3.4.3. The parties acknowledge that the intended effect of this Agreement is to increase net employment by Custom Blending at the Employment Target level. In addition to the specific requirements for net new jobs described below in Section 3.4.5, Custom Blending agrees to maintain no fewer than substantially the same number of employees within its Fort Collins facility (excluding the new jobs as contemplated hereunder) as Custom Blending employed in Fort Collins as of June 30, 2013, which, for the purposes of this Agreement, shall be deemed to have been thirty-five (35) employees. If this level has not been maintained at the time of any payment of Use Tax Rebate hereunder, the City will reduce the Total Rebate Payment amount due in a manner proportional to the difference between the then current Fort Collins employment and the initial employment level of 35. 3.4.4. In the event that the City determines that Custom Blending has not met the Employment Target, the City may reduce the amount of any Use Tax Rebate installment to be paid during the period of such non-compliance by the percentage of shortfall from the Employment Target. 3.5. The City, in its sole discretion, may pre-pay all or any portion of the Use Tax Rebate, without penalty. 3.6. Custom Blending assumes the entire risk that the Project will be unable to begin operations and pay use tax on Eligible Equipment by December 31, 2014, so as to qualify for the Maximum Use Tax Reimbursement, and further assumes all risk associated with legal contingencies limiting the City’s obligation to make any payments in future fiscal years and conditioning all future fiscal year obligations on the City’s discretionary appropriation of funds therefor. 3.7. It is not the parties’ intent that Custom Blending be paid or entitled to any interest or penalty on use taxes paid by Custom Blending, or any penalty or interest on Use Tax Rebate payments delayed or withheld by the City. 7 3.8. In addition to limit of the Maximum Use Tax Reimbursement, the parties further acknowledge and agree that the Use Tax Rebate for any Eligible Equipment will not at any time be allowed to exceed the amount of City use tax actually paid to the City on such Eligible Equipment. Custom Blending further acknowledges and agrees that the City is in no way responsible for the amount of City use tax actually paid or collected for the Eligible Equipment or any other equipment or corporeal property of Custom Blending. 3.9. The parties agree that the provisions of this Agreement do not constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation or provision. The commitment of the City to pay the Use Tax Rebate under this Agreement is from year to year only and does 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 payment of a Use Tax Rebate beyond those for which funds have been appropriated as of the date of this Agreement. The City Manager (or any other officer or employee at the time charged with the responsibility of formulating budget proposals) shall make a good faith effort to include in the budget proposals and appropriation ordinances proposed to the City Council, in each year prior to expiration of this Agreement, amounts sufficient to meet the City’s commitments hereunder, subject to the conditions and contingencies set forth herein. Notwithstanding the foregoing, the parties expressly acknowledge that the decision as to whether to appropriate such amounts is in the discretion of the City Council. SECTION 4. PAYMENT AND REBATE OF PERSONAL PROPERTY TAXES 4.1. Custom Blending shall pay to the City all personal property taxes due from Custom Blending Project Personal Property associated with the Project and Building Expansion to develop and equip the Manufacturing Facility. 8 4.2. To the extent permitted by the constitution and laws of the State of Colorado and the Charter, including but not limited to, applicable prohibitions on multiple fiscal year obligations and the condition all obligations be contingent upon the appropriation of funds sufficient and intended therefore by the City Council of the City, in its sole discretion, the City agrees to rebate to Custom Blending a portion of the City personal property taxes paid for the Project Personal Property under the terms and conditions set forth in Section 4.3 below (the “Personal Property Tax Rebate”). If, as presently contemplated by the parties, the contingencies and requirements described in this Agreement are satisfied as to each of the seven (7) payments provided for therein, and subject to the legal limitations as noted above, the City will rebate to Custom Blending up to the amount shown on the Payment Schedule defined below, of City personal property taxes actually paid for the Project Personal Property in the increments and for the time periods described therein, subject to a limit on the total amount of Personal Property Tax Rebate to be paid by the City of Twelve Thousand Three Hundred Ninety-Five Dollars ($12,395) in total, and a limit on each annual payment of Two Thousand, Seven Hundred Fifty-Four Dollars ($2,754). The parties acknowledge that the intended effect of this Agreement is to increase net employment by Custom Blending at the level described as the Employment Target. In addition to the specific requirements for net new jobs described below in Section 4.3, Custom Blending agrees to maintain no fewer than substantially the same number of employees within its Fort Collins facility (excluding the new jobs as contemplated hereunder) as Custom Blending employed in Fort Collins as of June 30, 2013, which, for the purposes of this Agreement, shall be deemed to have been thirty-five (35) employees. If this level has not been maintained at the time of any payment of Personal Property Tax Rebate hereunder, the City will reduce the Personal Property Tax Rebate amount due in a manner proportional to the difference between the then current Fort Collins employment and the initial employment level of 35. 4.3. The payments of Personal Property Tax Rebates referenced in Section 4.2 above will be made by the City to Custom Blending as follows: 4.3.1. Custom Blending has supplied a 7 year schedule of estimated personal property taxes to be paid in calendar years 2015 through 2022 for the Project Personal Property (“Payment Schedule”) associated with the Project as described in this Agreement, attached hereto as Exhibit B and incorporated herein by this reference. This Payment Schedule also provides the basis for a schedule of personal property tax rebate payments. 9 4.3.2. At its option, Custom Blending may, no later than December 31, 2014, submit one updated 7 year schedule of estimated personal property taxes to be paid in calendar years 2015 through 2022 for Project Personal Property installed during the Project (“Revised Payment Schedule”), subject to the City’s review and written approval, in its reasonable discretion. If a Revised Payment Schedule has been approved, it shall upon approval become the operative schedule for the purposes of this Agreement, and shall thenceforth replace the Payment Schedule originally attached hereto. If no such Revised Payment Schedule is submitted and approved by December 31, 2014, then no revision to the Payment Schedule shall be made, except as otherwise provided in this Agreement. 4.3.3. Custom Blending shall apply for each annual rebate payment using a form to be provided by the City. The annual Personal Property Tax Rebate contemplated by this Section will be paid by December 31 of each year, with the first such annual payment scheduled for 2015, as set forth in the Payment Schedule. 4.3.4. Custom Blending expressly agrees that no portion of the Personal Property Tax Rebate will be paid if, at the time specified for payment, the City determines that Custom Blending has not received a Certificate of Occupancy for the Project on or before December 31, 2013, and thereafter continuously operated the Manufacturing Facility as described in this Agreement. 4.3.5. The City may reduce the amount of any Personal Property Tax Rebate paid during any period non-compliance with any of the following requirements, by the percentage of shortfall from full compliance with each such requirement: (a) Custom Blending shall have actually paid to the City personal property taxes equal to or greater than two (2) times the combined total of all Personal Property Tax Rebates scheduled to be paid by the City to Custom Blending for that year under the Agreement; (b) Custom Blending shall have maintained no fewer than 35 full-time jobs in Fort Collins for the payment made to Custom Blending in 2015, and, for all subsequent payments, shall meet the Employment Target. 4.4. The City reserves the right to modify the Payment Schedule in the event that material change to the City’s mill levy or personal property tax assessment methodology would make the Payment Schedule provided herein inconsistent with the parties’ intent that the Personal Property Tax Rebate not exceed fifty percent (50%) of the amount of personal property tax actually collected by the City for the Eligible Equipment installed and operating as part of the Facility. 10 4.5. The parties agree that the City may, at its option, require Custom Blending to make available to the City all documents that verify the purchase of Project Personal Property installed in Manufacturing Building whether or not as part of the Project, including the County Assessor’s certification of value. The City agrees that, except as otherwise provided by law or applicable court order, 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 will deny the right of inspection of such documents to any third party without the consent of Custom Blending. 4.6. The City, in its sole discretion, may pre-pay all or any portion of the Personal Property Tax Rebate, without penalty. 4.7. Custom Blending assumes 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 the risk that all or any portion of the Personal Property Tax Rebate may be forfeited unless the requirements of this Agreement have been satisfied. Custom Blending further assumes all risk associated with legal contingencies limiting the City’s obligation to make any payments in future fiscal years and conditioning all future fiscal year obligations on the City’s discretionary appropriation of funds therefor. 4.8. It is not the parties’ intent that Custom Blending be paid or entitled to any interest or penalty on personal property taxes paid, or any penalty or interest on Personal Property Tax Rebate payments delayed or withheld by the City. 4.9. The parties agree that the provisions of this Agreement do not constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation or provision. The commitment of the City to pay the Personal Property Tax Rebate described in this Agreement is from year to year only and does 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 payment of any Personal Property Tax Rebate beyond those for which funds have been appropriated as of the date this Agreement. The City Manager (or any other officer or employee at the time charged with the responsibility of formulating budget proposals) shall make a good faith effort to include in the budget proposals and appropriation ordinances proposed to the City Council, in each year prior to expiration of this Agreement, amounts sufficient to meet the City’s commitments hereunder, subject to the conditions and contingencies set forth herein. Notwithstanding the foregoing, the parties expressly acknowledge that the decision as to whether to appropriate such amounts is in the discretion of the City Council. SECTION 5. RECORDS AND AUDITS 5.1. Custom Blending must keep true, accurate and complete records of all equipment installed and operated in Manufacturing Facility and identifying and document all equipment 11 and Project Personal Property installed or operated in the Manufacturing Facility, whether or not as part of the Project, which records will be available for inspection by the City without unreasonable delay and without City expense. Custom Blending 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 Custom Blending as well as the right to inspect and inventory the Project Personal Property in or associated with the Manufacturing Facility in order to confirm that the same is in place and in use as required in connection with any rebate hereunder. This right of review and inspection terminates upon termination of the later of the City's payments of Use Tax Rebate 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. 5.2. The City will keep, or cause to be kept, true, accurate and complete records of all calculations relating to the Use Tax Rebate; the Personal Property Tax Rebate and such other calculations, allocations and payments required by this Agreement, and will make such records available for inspection by Custom Blending upon ten (10) days notice at all reasonable times, to the extent permitted by law. SECTION 6. RESTRICTIONS ON ASSIGNMENT 6.1. The qualifications of Custom Blending to accomplish the objectives of the City hereunder are of particular concern to the City. Therefore, no voluntary or involuntary successor in interest of Custom Blending shall acquire any rights or powers under this Agreement except as expressly set forth herein and Custom Blending will not assign all or any part of this Agreement, except either: 6.1.1. with the prior written approval of the City, through its City Council, in its sole discretion; or 6.1.2. as collateral to a lender in connection with the financing of the Project. 6.2. Custom Blending must notify the City within fifteen (15) days of any and all changes whatsoever in the identity of the parties in control of Custom Blending, or the degree thereof, of which it or any of its officers have been notified or otherwise have knowledge or information. SECTION 7. EVENTS OF DEFAULT; REMEDIES 7.1. Default or an event of default by Custom Blending mean one or more of the following events: 12 7.1.1. Any representation or warranty made in this Agreement by Custom Blending was materially inaccurate when made or shall prove to be materially inaccurate; 7.1.2. Custom Blending assigns or attempts to assign this Agreement in violation of Section 6 of this Agreement; or 7.1.3. Custom Blending fails to substantially observe or perform any other material covenant, obligation or agreement required under this Agreement. 7.2. In order to exercise any remedy for default hereunder, upon the occurrence of any event of default, the City shall provide written notice to Custom Blending. Custom Blending 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 Custom Blending agree in writing. Upon the failure of Custom Blending to so cure any such default, the City shall have all remedies available to it, in law or in equity, excluding specific performance. 7.3. Default or an event of default by the City shall mean one or more of the following events: 7.3.1. Any representation or warranty made in this Agreement by the City was materially inaccurate when made or shall prove to be materially inaccurate; or 7.3.2. perform any nonmonetary, material covenant, obligation or agreement required of it under this Agreement. 7.4. Upon the occurrence of any event of default, Custom Blending 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 Custom Blending agree in writing. Upon the failure of the City to so cure any such default, Custom Blending will have all remedies available to it, in law or in equity excluding specific performance. SECTION 8. NOTICES 8.1. 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 Section. 8.1.1. City of Fort Collins: City of Fort Collins Attention: City Manager 300 LaPorte Avenue, PO Box 580 Fort Collins, CO 80522-0580 13 8.1.2. With a copy to: City of Fort Collins Attention: City Attorney 300 LaPorte Avenue, PO Box 580 Fort Collins, CO 80522-0580 8.1.3. Custom Blending: Custom Blending, Inc. Attention: General Counsel 3461 Precision Drive Fort Collins, CO 80528 8.1.4. With a copy to: [Need a new name] Custom Blending, Inc. 3461 Precision Drive Fort Collins, CO 80528 SECTION 9. MISCELLANEOUS 9.1. Binding Effect. This Agreement inures to the benefit of and is binding upon the City and Custom Blending and Custom Blending’s assignees permitted pursuant to Section 6 of this Agreement, if any. 9.2. 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 6 of this Agreement. Further, the City is not bound by any contracts or conditions that Custom Blending may negotiate with third parties related to the Project. 9.3. 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, excluding its conflicts of laws principles, 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. 9.4. Entire Agreement. This Agreement embodies the whole agreement of the parties concerning financial assistance by the City for 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. 14 9.5. Waiver of Breach. Any waiver of any requirement or obligation hereunder must be in writing to be effective. Any waiver by either party to this Agreement of any term or provision of this Agreement will be narrowly construed, and will not operate or be construed as a subsequent or continuing waiver of said term or provision. 9.6. 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. 9.7. City and Custom Blending Not Partners. Notwithstanding any language in this Agreement, the City is not a member, partner, or joint venturer of Custom Blending, and the City shall not be responsible for any debt or liability of Custom Blending or its contractors or agents. Custom Blending is not responsible for any debt or liability of the City or their contractors or agents. 9.8. 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 Custom Blending as contemplated by this Agreement. 9.9. 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. 9.10. 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. 15 IN WITNESS WHEREOF, the City and Custom Blending have executed this Agreement as of the date first above written. CITY OF FORT COLLINS, COLORADO a municipal corporation By: Darin A. Atteberry, City Manager Attest: City Clerk Approved as to form: Deputy City Attorney CUSTOM BLENDING, INC. a Colorado corporation By: Name and title Attest: Corporate Secretary CORPORATE SEAL 16 EXHIBIT A PROPERTY DESCRIPTION: LOT 2, HARMONY TECHNOLOGY PARK 3RD, FTC (20080034504) 17 Exhibit B Assessed Year Payable Year Actual Value Starting Assessment Rate Assessed Value City Mill City Taxes County Fee Tax Paid to City Rebate Rate Eligible Max Rebate Depreciation Ending Value 2014 2015 1,978,561 29% 573,783 0.009797 5,621 2% 5,509 50% 2,754 141,665 1,836,896 2015 2016 1,836,896 29% 532,700 0.009797 5,219 2% 5,114 50% 2,557 282,538 1,554,357 2016 2017 1,554,357 29% 450,764 0.009797 4,416 2% 4,328 50% 2,164 282,538 1,271,819 2017 2018 1,271,819 29% 368,827 0.009797 3,613 2% 3,541 50% 1,771 282,538 989,280 2018 2019 989,280 29% 286,891 0.009797 2,811 2% 2,754 50% 1,377 282,538 706,742 2019 2020 706,742 29% 204,955 0.009797 2,008 2% 1,968 50% 984 282,538 424,203 2020 2021 424,203 29% 123,019 0.009797 1,205 2% 1,181 50% 591 282,538 141,665 2021 2022 141,665 29% 41,083 0.009797 402 2% 394 50% 197 141,665 - 12,395 Custom Blending Personal Property Tax Rebate Estimate