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HomeMy WebLinkAbout22-05 Ordinance RECORD OF ORDINANCES Dayton Leal Blank, Inc. Form No. 30043 _ - 22-OS Passed , 20 Ordinance No. AN ORDINANCE AUTHORIZING THE EXECUTION OF AN ECONOMIC DEVELOPMENT AGREEMENT BETWEEN THE CITY OF DUBLIN AND CMHC SYSTEMS TO INDUCE THE RETENTION AND EXPANSION OF ITS OPERATIONS WITHIN THE CITY OF DUBLIN WHEREAS, consistent with its Economic Development Strategy (the "Strategy") approved by Dublin City Council Resolution No. 07-94 adopted on June 20, 1994, and the updated strategy approved by Dublin City Council Resolution No. 30-04 adopted on July 6, 2004, the City desires to encourage commercial office development and provide for the creation of employment opportunities within the City; and WHEREAS, CMHC Systems ("CMHC Systems"), based on the results of its recent comprehensive examination of workforce and facilities needs, and induced by and in reliance on the economic development incentives provided in this Agreement, is desirous of retaining and expanding its office and. workforce in the City; and WHEREAS, Dublin City Council has determined to offer certain economic development incentives, the terms of which are set forth in a substantially final form of Economic Development Agreement presently on file in the office of the Clerk of Council, to induce CMHC Systems to retain and expand its operations and workforce in the City, thereby creating additional jobs and employment opportunities and improving the economic welfare of the people of the State of Ohio and the City of Dublin, all pursuant to Section 718.08 of the Ohio Revised Code and Article VIII, Section 13 of the Ohio Constitution; and WHEREAS, Dublin City Council finds that it is in the best interest of the City to provide these economic development incentives to induce CMHC Systems to retain and expand its operations and workforce within the City and to provide for the execution and delivery of that Economic Development Agreement with CMHC Systems; NOW, THERFORE, BE IT ORDAINED by the Council of the City of Dublin, Franklin, Union and Delaware Counties, State of Ohio, ~ of the elected members concurring, that: Section 1. The City hereby finds and determines that the provision of certain economic development incentives as described in the Economic Development Agreement (as described below) is necessary, appropriate and in the best interests of the City to provide for the retention and creation of jobs and employment opportunities and to improve the economic welfare of the people of the State of Ohio and the City of Dublin, all as authorized in Section 718.08 of the Ohio Revised Code and Article VIII, Section 13 of the Ohio Constitution. Section 2. The Economic Development Agreement by and between the City of Dublin and CMHC Systems, in the form presently on file with the Clerk of Council, providing for, among other things, the provision of economic development incentives in consideration for CMHC Systems' agreement to retain and expand its operations and workforce within the City, is hereby approved and authorized with changes therein not inconsistent with this Ordinance and not substantially adverse to the City, and which shall be approved by the City Manager and Director of Finance. The City Manager and Director of Finance, for and in the name of the City, are hereby authorized to execute that Economic Development Agreement, provided further that the approval of changes thereto by those officials, and their character as not being substantially adverse to the City, shall be evidenced conclusively by their execution thereof. This Council further authorizes 1:he City Manager and the Director of Finance, for and in the name of the City, to execute any amendments to the Economic RECORD OF ORDINANCES Form No. 30043 Dayton_Le~al Blank, Inc. Ordinance No. 22-05 Passed Page •2,20 _ _ _ _ _ Development Agreement, which amendments a:re not inconsistent with this Ordinance and not substantially adverse to the City. Section 3. This Council further hereby authorizes and directs the City Manager, the Director of Finance, the Director of Law, the Clerk of Council, or other appropriate officers of the City to prepare and sign all agreements and instruments and to take any other actions as maybe appropriate to implement this Ordinance. Section 4. This Council finds and determines that all formal actions of this Council concerning and relating to the passage of this Ordinance were taken in an open meeting of this Council and that all deliberations of this Council that resulted in those formal actions were in meetings open to the public in compliance with the law. Section 5. This Ordinance shall be in full force and effect on the earliest date permitted by law. Passed this l day of ,1005. Mayor -Presiding Officer Attest: Clerk of Council I hereby certify that copies of this Ordinance/Resolution were posted in the City of Dublin in accordance with Section 731.25 of the Ohio Revised Code. ~U e uty Clerk of Council, Dublin, Ohio ECONOMIC DEVELOPMENT ~~GREEMENT THIS ECONOMIC DEVELOPMENT AGREEMENT (the "Agreement") is made and entered into this day of , 2005, by and between the CITY of DUBLIN, OHIO (the "City"), a municipal corporation duly organized and validly existing under the Constitution and the laws of the State of Ohio (the "State") and its Charter, and CMHC Systems ("CMHC") an Ohio corporation with its offices currently located at 570 Metro Place North, Dublin, OH 43017, under the circumstances summarized in the following recitals. RECITALS: WHEREAS, consistent with its Economic Development Strategy approved by Dublin City Council Resolution No. 30-04 adopted on July 6, 2004, the City desires to encourage commercial office development and provide for the creation of employment opportunities within the City; and WHEREAS, CMHC Systems desires to expand and retain its operations and related workforce of 163 employees within the City of Dublin; and WHEREAS, the City has determined to offer economic development incentives described herein to induce CMHC Systems to expand its operations and workforce within the City to create jobs and employment opportunities and to improve the economic welfare of the people of the State of Ohio and the City, all as authorized in Article VIII, Section 13 of the Ohio Constitution; and WHEREAS, the City and CMHC Systems have determined to enter into this Agreement to provide these incentives to induce CMHC Systems to locate its operations within the City. Now THEREFORE, the City and CMHC Systems covenant agree and obligate themselves as follows: Section 1. CMHC stems Agreement to Retain and Expand Jobs. CMHC Systems will employ and maintain at least 163 employees, and grow to total at least 201 by December 31, 2007 within the City of Dublin as part of its operations. The average annual wage of these employees for this period is estimated to range from $58,600 to $63,700 with total estimated payroll withholdings of $661,800 over athree-year period. Section 2. City Agreement to Provide Incentives. (a) General. In consideration for CMHC Systems' agreement to retain and expand its operations workforce and associated payroll within the City, the City agrees to provide economic development incentives to CMHC Systems in accordance with this Section. (b) Technolo~y Grant. CMHC Systems will update needed equipment, platforms and property as a result of its strategic growth plans. In consideration of that agreement to update such equipment and otherwise retain and grow its workforce within the City, -1- the City agrees to provide a grant to CMHC Systems in the amount of $180,000. The City will execute three annual payments of $fi0,000 each to CMHC Systems within the first 30 days of the Second Quarter of 2005, 2006 and 2007 should CMHC Systems meet targeted and predetermined employee counts and payroll numbers as outlined in Section 2(c) below. (c) Determining Targets for Payment. (i) Calculation of Actual Withholdings. On or before March 15 of each of the years 2006 thru 2008 the City shalll determine whether the actual payroll withholding taxes collected during the preceding calendar year by the City from all Employees (the "Actual Withholdings") meet or exceed the Target Withholdings for that preceding calendar year, all in accordance with the schedule set forth in subparagraph (iii) below. For purposes of this Section 2, "Employees" shall include all individuals employed by CMHC Systems in the City of Dublin and working at the Dublin facility. CMHC Systems agrees that, in accordance with the Dublin City Code, the annual payroll reconciliation relating to CMHC Systems' Employees will be provided to the City prior to February 28 of eac;h calendar year. (ii) Payments to CMHC Systems. If th.e Actual Withholdings meets or exceeds the Target Withholdings for the preceding calendar year, the City shall, on or before April 30 of the then current calendar year, pay to CMHC Systems, solely from non-tax revenues, $60,000 as set forth by the schedule in subparagraph (iii) below. (iii) Incentive Payments. With respect to the Actual Withholdings collected during each of the calendar years 2005 thru 2007 (three years), inclusive, the Target Withholdings and Incentive Payment to be paid in respect of each of those calendar years shall be paid ire accordance with the following schedule: Calendar Year Target Withholdings (1) Base Incentive Payment (2) 2005 $191,000 $60,OOO~i~ 2006 $214,600 $60,000~2~ 2007 $256,200 $60,000(3 (1) - If the 2007 Target Withholdings are not met or exceeded, CMHC will forfeit and repay in full the 2005 initial $60,000 payment. (2) -The 2006 payment is based on meeting or exceed the 2005 Target Withoholdings. (3) -The 2007 payment is based on meeting or exceeding the 2006 Target Withholdings. The payments provided for in this Section 2 shall be made by the City to CMHC Systems by electronic funds transfer or by such other manner as is mutually agreed to by the City and CMHC Systems. -2- (d) Additional "Extraordinary Performance" Incentives. The City and CMHC agree that CMHC will be entitled to an increase in incentive payments equal to fifty percent (50%) for only those withholdings exceeding the predetermined target withholdings. This annual "extraordinary performance bonus payment" will be capped at $12,500 annually, and will not exceed $37,500 over the term of the Agreement. A model is provided in Exhibit A to demonstrate how the "extraordinary performance bonus payment" is to be paid. (e) Forfeiture and Repayment of Incentive Payment. CMHC Systems agrees that if the Target Withholdings is not met, as set forth in 2(c)(iii) above for any given year, the City is not obligated to make any Technololry Grant incentive payment to CMHC Systems for the year in which the target(s) was not met. Failure to meet the Target Withholdings in any one incentive year does not prohibit CMHC Systems from receiving an Incentive Payment for any subsequent year in which the Target Withholdings is met. If Target Withholdings are not met for 2007, CMHC Systems must repay in full the 2005 installment payment of $60,000 by December 31, 2008. (f) CitX s Obligation to Make Payments Not Debt; Payments Limited to Non-tax Revenues. Notwithstanding anything to the contrary herf;in, the obligations of the City pursuant to this Agreement shall not be a general obligation debt or bonded indebtedness, or a pledge of the general credit or taxes levied by the City, and CMHC Systems shall have no right to have excises or taxes levied by the City, the State or any other political subdivision of the State for the performance of any obligations of the City herein. Consistent with Section 13 of Article `VIII, Ohio Constitution, any payments or advances required to be made by the City pursuant to this Section 2 shall be payable solely from the City's non-tax revenues. Further, since Ohio law limits the City to appropriating monies for such expenditures only on an annual basis, the obligation of the City to make payments pursuant to this Section 2 shall be subject to annual appropriations by the City Council and certification by the Director of Finance of the City as to the availability of such non-tax revenues. (g) Applicable City Payroll Tax Rate. For purposes of calculating the Actual Withholdings in each calendar year under this Section 2, the City's payroll tax rate shall be assumed to be two percent (2%). Section 3. Miscellaneous. (a) Notices. Except as otherwise specifically set forth in this Agreement, all notices, demands, requests, consents or approvals given, required or permitted to be given hereunder shall be in writing and shall be deemed sufficiently given if actually received or if hand-delivered or sent by recognized, overnight delivery service or by certified mail, postage prepaid and return receipt requested, addressed to the other party at the address set forth in this Agreement or any addendum to or counterpart of this Agreement, or to such other address as the recipient shall have previously notified the sender of in writing, and shall be deemed received upon actual receipt, unless sent by -3- certified mail, in which event such notice shall be deemed to have been received when the return receipt is signed or refused. For purposes of this agreement, notices shall be addressed to: (i) the City at: City of Dublin, Ohio 5800 Shier Rings Road Dublin, Ohio 43016-'7295 Attention: Economic; Development Director (ii) CMHC Systems at: 570 Metro Place North Dublin, Ohio 43017 Attention: The parties, by notice given hereunder, may designate any further or different addresses to which subsequent notices; certificates, requests or other communications shall be sent. (b) Extent of Provisions• No Personal Liability. All rights, remedies, representations, warranties, covenants, agreements and obligations of the City under this Agreement shall be effective to the extent authorized and permitted by applicable law. No representation, warranty, covenant, agreement, obligation or stipulation contained in this Agreement shall be deemed to constitute a representation, warranty, covenant, agreement, obligation or stipulation of any present or future trustee, member, officer, agent or employee of the City or CMHC Systems in other than his or her official capacity. No official executing or approving the City's or CMHC Systems' participation in this Agreement shall be liable; personally under this Agreement or be subject to any personal liability or accountability by reason of the issuance thereof. (c) Successors. This Agreement shall be binding upon and inure to the benefit of CMHC Systems and its successors and assigns. (d) Recitals. The City and CMHC Systems acknowledge and agree that the facts and circumstances as described in the Recitals hereto are an integral part of this Agreement and as such are incorporated herein by reference. (e) Amendments. This Agreement may only be annended by written instrument executed by the City and CMHC Systems. (f) Executed Counterparts. This Agreement may be executed in several counterparts, each of which shall be regarded as an original and all of which shall constitute but one and the same agreement. It shall not be necessary in proving this Agreement to produce or account for more than one of those counterparts. -4- (g) Severability. In case any section or provision of this Agreement, or any covenant, agreement, obligation or action, or part thereof, rnade, assumed, entered into or taken, or any application thereof, is held to be illegal or invalid for any reason, (i) that illegality or invalidity shall not affect the remainder hereof or thereof, any other section or provision hereof, or any other covenant, agreement, obligation or action, or part thereof, made, assumed, entered into or taken, all of which shall be construed and enforced as if the illegal or invalid portion were not contained herein or therein, (ii) the illegality or invalidity of any application hereof or thereof shall not affect any legal and valid application hereof or thereof, and (iii) each section, provision, covenant, agreement, obligation or action, or part thereof, shall be deemed to be effective, operative, made, assumed, entered into or taken in the manner and to the full extent permitted by law. (h) Captions. The captions and headings in this Agreement are for convenience only and in no way define, limit or describe the scope or intent of any provisions or sections of this Agreement. (i) GoverningLLaw and Choice of Forum. This, Agreement shall be governed by and construed in accordance with the laws of the State of Ohio or applicable federal law. All claims, counterclaims, disputes and other matters in question between the City, its agents and employees, and CMHC Systems, its employees and agents, arising out of or relating to this Agreement or its breach will be decided in a court of competent jurisdiction within Franklin County, Ohio. (j) Survival of Representations and Warranties. All representations and warranties of CMHC Systems and the City in this Agreement shall survive the execution and delivery of this Agreement. (k) Notwithstanding any clause or provision of this Agreement to the contrary, in no event shall City or CMHC Systems be liable to each other for punitive, special, consequential, or indirect damages of any type and regardless of whether such damages are claimed under contract, tort (including negligence and strict liability) or any other theory of law. -5- IN WITNESS WIIEItEOF, the City and CMHC Systems have caused this Agreement to be executed in their respective names by their duly authorized representatives, all as of the date first written above. CITY OF DUE~LIN~ OHIO By: Printed: Jane Brautigam Title: Cit~Manager Approved as to Form: By: Printed: Stephen J Smith Title: Director of Law CMHC SY'.~TEMS By: Printed: Title: -6- FISCAL OFFICER' S CERTIFICATE The undersigned, Director of Finance of the City under the foregoing Agreement, certifies hereby that the moneys required to meet the obligations of the City under the foregoing Agreement have been appropriated lawfully for that purpose, and are; in the Treasury of the City or in the process of collection to the credit of an appropriate fund, free from any previous encumbrances. This Certificate is given in compliance with Sections 5705.41 and 5705.44, Ohio Revised Code. Dated: , 2005 Marsha I. Grigsby Deputy City Manager/Director of Finance City of Dublin, Ohio -7- Exhibit "A" Extraordinary Performance Model 50% of Previous Assuming 10% Excess. Year's Excess Cap on Additional Withholdings Withholdings Extraordinary Extraordinary Calendar Base Target Withholding over Base Target over Base Target Performance Performance Year Withholdings Growth Withholdings Withholdings Payment Payment 2005 $191,000 $210,100 $19,10() $0 $0 $0 2006 $214,600 $236,060 $21,46() $9,550 $12,500 $9,550 2007 $256,200 $281,820 $25,62() $10,730 $12,500 $10,730 2008 $12,810 $12,500 $12,500 Totals $661,800 $727,980 $66,180 $33,090 $37,500 $32,780 -8- Economic Development 5800 Shier Rings Road, Dublin, Ohio 43016-12:36 CITY OF DUBLIN phone: 614-410-4600 • Fax: 614-761-6506 M e m o To: Members of Dublin City Council From: Jane S. Brautigam, City Managez~rw..~_S- ~a Date: April 13, 2005 Initiated By: Dana L. McDaniel, Deputy City Manager/Director ofEconomic Development Colleen M. Gilger, Economic Development Specialist Re: Ordinance 22-OS -Economic Development Agreement with CMHC Systems Update re~ardin~ the discrepancy between the employee counts listed in the State of Ohio incentive versus the Dublin EDA: CMHC Systems, at the time its company officials filled out the formal application for the State's Job Creation Tax Credit (JCTC), promised to retain 104 employees housed at its headquarters at 570 Metro Place North. It was not required of them to commit to retaining an additiona160 employees that are housed within leased space elsewhere in Dublin, although they HAVE committed to retaining a total of 163 total jobs in order to qualify for Dublin's technology grant. Since Dublin's negotiations took place at a different time, and considerably before filing their JCTC application with the State, CMHC has hired at least one new employee, taking their current head count to 164, versus the 163 used during Dublin's negotiation pihase. For JCTC approval, CMHC has committed to the State to creating 30 new positions within 36 months of their March 28, 2005 approval, giving them a deadline of March 28, 2008 to reach a goal of 194 total jobs; likewise, to quay for Dublin's grant offering, CMHC Systems is required to hit targets/goals. To qualify for Dublin's incentive payments, CMHC's payroll must be at least $9,550,000 in 2005; $10,730,000 in 2006; and $12,810,000 in 2007 -historically during incentive negotiations, Dublin is focused more with actual payroll growth in high- wage industries, versus tying a company to specific employee counts regardless of wage. To further the explanation, the 3 predetermined target payrolls for CMHC correlate to approximately 163 jobs in 2005, 175 in 2006 and 201 in 2007. So, in order for CMHC to qualify for each annual payment from Dubllin, their growth needs to occur in total payroll and total withholdings collected by the City; whereas to qualiiFy for State incentives, they must add actual new jobs to the State's economy. Often, City staff uses an employee count as a way to give Council and the public an idea of the anticipated growth relative to aggregate payroll targets. However, as stated previously, the City's primary focus is on total payroll growth. If you need further clarification regarding this issue, please let us know. Summary: Staff has been in discussions with CMHC Systems regarding the expansion of its corporate workforce in Dublin. CMHC Systems, Inc., the nation's leading information management solutions and services provider for behavioral healthcare organizations, owns its two-story, 31,000 sq. ft.. 570 Metro Place North facility and leases 12,000 sq. ft. of additional space across the street in another Metro Place facility. The company, should it pursue ;aggressive strategic growth model of increasing revenue from $23 million to $100 million and .;veloping/launching anew software suite, is in need of additional space (more than 60,000 sq. ft.) and additional resources. CMHC Systems currently employs 163 people in Dublin with an average salary of $55,500, equating to an annual payroll of more than $9 million. CMHC Systems anticipates adding 82: new, high-tech employees by 2009 and growing its payroll to nearly $17 million (with the average wage increasing to nearly $70,000). The majority of new jobs added include high-wage software engineers and product development specialists. The company faces a difficult decision of how to go about hiring and placing these new positions. As a pure financial decision, the company concluded it was in its best interests to create and offshore these new positions to India; from a logistics standpoint it's in the company's best interests to have the jobs under the same roof in Dublin. Together, the State of Ohio and City of Dublin are offering incentives to induce the job creation here. The company has secured a Job Creation Tax Credit (JCTC) from the State of Ohio (with a scheduled hearing date of 3/28/05) in addition to several training and technology-related grants and low interest loans. The attached Economic Development Agreement (EDA) offering by the City of Dublin would serve as the necessary local support component toward the State's nearly $1 million incentive package. Ordinance No. 23-OS legislates an Economic Development Agreement between the City and CMHC Systems that includes an $180,000 Technology Grant incentive to be paid in $60,000 increments over three years, which is tied to significant job and payroll growth targets. The City also offers additional extraordinary performance incentives should CMHC Systems consistently exceed each of its predetermined withholdings targets in those three years. Should CMHC Systems achieve all predetermined annual targets tied to job growth as set forth in the Agreement, the company could potentially receive a total incentive worth $212,780 (which includes the Technology Grant dollars and extraordinary performance payments). Over the term of this agreement and if all targets are met by CHMH Systems, the City is estimated to net approximately $515,200 in income tax withholdings. ^onclusion: Staff recommends the Economic Development Agreement and Ordinance No. 23-OS be accepted by City Council on April 18, 2005. r Economic Development 5800 Shier Rings Road, Dublin, Ohio 43016-1236 CITY OF DUBLIN phone: 614-410-4600 • Fax: 614-761-6506 Memo To: Members of Dublin City Council ( From: Jane S. Brautigam, City Manager V o"~"~ 5' Date: March 23, 2005 Initiated By: Dana L. McDaniel, Deputy City Manager/Director of Economic Development Colleen M. Gilger, Economic Development Specialist~~' Re: Ordinance 22-OS -Economic Development Al;reement with CMHC Systems Summary: Staff has been in discussions with CMHC Systems regarding the possible expansion of its corporate workforce in Dublin. CMHC Systems, lnc., the nation's leading information management solutions and services provider for behavioral healthcare organizations, owns its two-story, 31,000 sq. ft. 570 Metro Place North facility and leases 12,000 sq. ft. of additional space across the street in another Metro Place facility. The company, should it pursue its aggressive strategic growth model of increasing revenue from $23 million to $100 million and developing/launching anew software suite, is in need of additional space (more than 60,000 sq. ft.) and additional resources. CMHC Systems currently employs 163 people in Dublin with an average salary of $55,500, equating to an annual -payroll of more than $9 million. CMHC Systems anticipates adding 8:2 new, high-tech employees by 2009 and growing its payroll to nearly $17 million (with the average wage inere~asing to nearly $70,000). The majority of new jobs added include high-wage software engineers and product development specialists. The company faces a difficult decision of how to go about hiring and placiing these new positions. As a pure financial decision, the company concluded it was in its best interests to create and offshore these new positions to India; from a logistics standpoint it's in the company's best interests to have the jobs under the same roof in Dublin. Together, the State of Ohio and City of Dublin are offering incentives to induce the job creation here. The company has secured a Job Creation Tax Credit (JC"fC} from the State of Ohio (with a scheduled hearing date of 3/28/05) in addition to several training and technology-related grants and low interest loans. The attached Economic Development Agreement (EDA) offering by the City of Dublin would serve as the necessary local support component toward the State's nearly $1 million incentive package. Ordinance No. 22-OS legislates an Economic Development Agreemend between the City and CMHC Systems that includes an $180,000 Technology Grant incentive to be paid in $60,000 increments over three years, which is tied to significant job and payroll growth targets. The City also offers additional extraordinary performance incentives should CMHC Systems consistently exceed each of its predetermined. withholdings targets in those three years. Should CMHC Systems achieve all predetermined annual targets tied to job growth as set forth in the Agreement, the company could potentially receive a total incentive worth $212,780 (which includes the Technology Grant dollars and extraordinary performance payments). Over the term of this agreement and if all targets are met by CHMH Systems, the City is estimated to net approximately $515,200 in income tax withholdings. ~'onclusion: Staff recommends the Economic Development Agreement and Ordinance No.22-OS be accepted by ity Council on April 18, 2005.