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HomeMy WebLinkAbout106-03 Ordinance RECORD OF ORDINANCES Dayton Legal Blank, Inc. Form No. 30043 Ordinance No. 106-03 Passed . 20 AN ORDINANCE AUTHORIZING THE PROVISION OF CERTAIN INCENTIVES FOR PURPOSES OF ENCOURAGING THE EXPANSION BY CARDINAL HEALTH, INC. OF ITS OPERATIONS AND WORK FORCE WITHIN THE CITY AND AUTHORIZING THE EXECUTION OF AN ECONOMIC DEVELOPMENT AGREEMENT. WHEREAS, consistent with the Economic Development Strategy (the "Strategy") approved by Dublin City Council Resolution No. 07-94 on June 20, 1994, this Council desires to encourage commercial office development and provide for the creation of employment opportunities within the City; and WHEREAS, consistent with the Strategy, the City and Cardinal Health, Inc. ("Cardinal") have heretofore entered into tax increment financing and economic development agreements on June 30, 1995 and September 20, 1999 wherein the City agreed to provide certain economic development incentives to induce Cardinal to locate certain of its operations within the City and expand its workforce; and WHEREAS, consistent with the Strategy, this Council finds that the provision of those prior economic development incentives has resulted in the creation of approximately 1,100 jobs and related employment opportunities in the City and otherwise improved the economic welfare of the people of the City; and WHEREAS, based on the results of Cardinal's recent comprehensive examination of workforce needs, Cardinal is desirous of expanding its operations and workforce within the City in consideration for the provision by the City of additional economic development incentives; and WHEREAS, this Council has determined to offer additional 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 Cardinal to further expand its operations and workforce within the City, to create additional 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, this Council finds that it is in the best interest of the City to provide those economic development incentives to induce Cardinal to expand its operations and workforce within the City and to provide for the execution and delivery of that Economic Development Agreement with Cardinal; NOW, THEREFORE, BE IT ORDAINED by the Council of the City of Dublin, Franklin, Union and Delaware Counties, Ohio, that: Section 1. The Economic Development Agreement by and between the City and Cardinal Health, Inc., in the form presently on file with the Clerk of Council, providing for, among other things, the provision of incentives to Cardinal in consideration for Cardinal's agreement to 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 this 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 this 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 the City Manager and the Director of Finance, for and in the name of the City, to execute any amendments to the Economic Development Agreement, which amendments are not inconsistent. with this Ordinance and not substantially adverse to this City. RECORD OF ORDINANCES Dayton Legal Blank. Inc. Form No. 30043 Ordinance No. 106-03 Passed _ Pa e~ 2 . 20 Section 2. This Council further hereby authorizes and directs the City Manager, the Clerk of Council, the Director of Law, the Director of Finance, 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 3. 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 4. This Ordinance shall be in full force and effect on the earliest date permitted by law. Signed: Presiding Officer Attest: ~ C~.-~~ct.,r,~~~ Clerk of Council Passed: C/~i~- , 2003 Effective: ~ o ~ , 2003 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. eputy Clerk of Council, Dublin, Ohio ECONOMIC DEVELOPMENT AGREEMENT THIS ECONOMIC DEVELOPMENT AGREEMENT (the "Agreement") is made and entered into this day of ,[~ovr,~r 2003, by and between the CITE' 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 CARDINAL HEALTH, INC., an Ohio corporation with its executive offices located in Dublin, Ohio ("Cardinal"), under the circumstances - summarized in the following recitals. RECITALS: WHEREAS, consistent with its Economic Development Strategy (the "Strategy") approved by Dublin City Council Resolution No. 07-94 adopted on June 20, 1994, the City desires to encourage commercial office development and provide for the creation of employment opportunities within the City; and WHEREAS, consistent with the Strategy, on September 20, 1999, the City and Cardinal have heretofore entered into the tax increment financing and economic development agreements on June 30, 1995 and September 20, 1999 (the agreement delivered on September 20, 1999 being referred to herein as the "1999 Incentive Agreement°) wherein the City agreed to provide certain economic development incentives to induce Cardinal to locate certain of its operations within the City and expand its workforce; and WHEREAS, consistent with the Strategy, the City finds that the provision of those prior economic development incentives has resulted in the creation of approximately 1,100 jobs and related employment opportunities in the City and otherwise improved the economic welfare of the people of the City; and WHEREAS, based on the results of Cardinal's recent comprehensive examination of workforce needs, and induced by and in reliance on the economic development incentives provided in this Agreement, Cardinal is desirous of expanding its workforce within the City; and WHEREAS, pursuant to Ordinance No. 106-03 passed October 6, 2003 (the "Ordinance"), the City has determined to offer economic development incentives described herein to induce Cardinal to expand its 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 Cardinal have determined to enter into this Agreement to provide these incentives to induce that expansion by Cardinal of its operations within the City; Now THEREFORE, the City and Cardinal covenant, agree and obligate themselves as follows: Section 1. Cardinal Agreement to Increase Employn ent. Cardinal represents that it, and its subsidiaries and affiliates, presently employs approximately 1,350 employees within the City. In -1- consideration of the economic development incentives to be provided by the City herein, Cardinal agrees that it will expand its present workforce of approximately 1,350 to approximately 2,100 over the period from calendar year 2003 to calendar year 2013. Section 2. City Agreement to Provide Incentives. (a) General. In consideration for Cardinal's agreement to expand its workforce and to increase the levels of Cardinal employment and associated payroll within the City, the City agrees to provide economic development incentives to Cardinal in accordance with this Section. (b) Payment Related to Prior Workforce Expansion. The 1999 Incentive Agreement provided that the City would make a payment to Cardinal in the amount of $701,300 (the "Final 1999 Incentive Payment") in consideration for Cardinal constructing an additional owner-occupied building containing at least 120,000 square feet of space. The City finds that due to current market conditions, Cardinal has determined it to be economically advantageous to lease space instead of constructing space. To date, Cardinal has leased approximately 60,000 square feet of space in the City of Dublin. The City finds that Cardinal's determination to lease space instead of constructing space has still resulted in the expansion of Cardinal's workforce. The City and Cardinal agree that in consideration for Cardinal's expansion of its workforce through leased space instead of constructing additional space, the City will pay to Cardinal one-half of the Final 1999 Incentive Payment in the amount of $350,650 and such payment shall be paid by the City to Cardinal no later than forty-five (45) days following the execution of this Agreement. The remaining one-half of the Final 1999 Incentive Payment shall be payable according to the terms of the 1999 Incentive Agreement. (c) Calculation of Actual Withholdings. On or before March 15 of each of the years 2005 through and including 2014, the City shall determine whether the payroll withholding taxes collected during the preceding calendar year by the City from all Employees (the "Actual Withholdings") exceed the Target Withholdings for that preceding calendar year, all in accordance with the schedules set forth below. For purposes of this Section 2, "Employees" shall include all individuals employed by Cardinal and working at a location within the City. Cardinal agrees that, in accordance with the Dublin City Code, the annual payroll reconciliation relating to Cardinal Employees will be provided to the City prior to February 28 of each calendar year. (d) Payments to Cardinal. If the Actual Withholdings exceed the Target Withholdings for the preceding calendar year, the City shall, on or before April 15 of the current calendar year, pay to Cardinal, solely from nontax revenues, an amount equal to the product of (i) an amount equal to the Actual Withholdings (net of refunds) minus the Target Withholdings, multiplied by (ii) the Incentive Factor (as defined below for each applicable year). The payments provided for in this Section 2 shall be made by the City to Cardinal by electronic funds transfer or by such other manner as is mutually agreed to by the City and Cardinal. -2- (i) Years 2004 through 2006. With respect to the Actual Withholdings collected during each of the calendar years 2004 through. 2006, the Incentive Factor shall be forty percent (40%). The Target Withholdings for each of those calendar years shall be calculated as follows: Calendar Year Target Withholdings 2004 Calendar Year 2003 Actual Withholdings multiplied by 1.025 2005 Calendar Year 2004 Target Withholdings multiplied by 1.025 2006 Calendar Year 2005 Target Withholdings multiplied by 1.025 (ii) Years 2007 through 2008. With respect to the Actual Withholdings collected during both of the calendar years 2007 and 2008, the Incentive Factor shall be thirty-eight percent (38%). The Target Withholdings i:or both of those calendar years shall be calculated as follows: Calendar Year Target Withholdings 2007 Calendar Year 2006 Target Withholdings multiplied by 1.025 2008 Calendar Year 2007 Target Withholdings multiplied by 1.025 (iii) Year 2009. With respect to the Actual Withholdings collected during calendar year 2009, the Incentive Factor shall be thirty-eight percent (38%). The Target Withholdings for that calendar year shall be calculated as follows: Calendar Year Target Withholdings 2009 Calendar Year 2008 Target Withholdings multiplied by 1.035 (iv) Years 2010 through 2012. With respect to the Actual Withholdings collected during each of the calendar years 2010 and 2012, the Incentive Factor shall be thirty-six percent (36%). The Target Withholdings for each of those calendar years shall be calculated as follows: Calendar Year Target Withholdings 2010 Calendar Year 2009 Target Withholdings multiplied by 1.035 2011 Calendar Year 2010 Target Withholdings multiplied by 1.035 2012 Calendar Year 2011 Target Withholdings multiplied by 1.035 -3- (v) Year 2013. With respect to the Actual Withholdings collected during calendar year 2013, the Incentive Factor shall be thirty-four percent (34%). The Target Withholdings for that calendar year shall be calculated as follows: Calendar Year Target Withholdings 2013 Calendar Year 2012 Target Withholdings multiplied by 1.035 (vi) Years 2014 throu hgh 2018. If, after the April 15, 2014 payment date, the aggregate payments made by the City to Cardinal in respect of years 2004 through 2013 do not equal the maximum payment of $7,500,000 as provided in subsection (f), the City agrees to present to City Council for consideration no later than May 15, 2014, legislation to consider extending the withholding calculation period set forth in this Section 2 from 2013 to 2018. The City and Cardinal acknowledge and agree that the City and the City Council will be under no obligation to determine to extend such period. If the City Council does determine to extend such period, the legislation providing for such extension shall set forth the Target Withholdings for each of the calendar years 2014 through 2018, inclusive. (e) City's Obligation to Make Payments Not Debt; Payments Limited to Nontax Revenues. Notwithstanding anything to the contrary herein, 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 Cardinal 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 nontax 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 nontax revenues. (f) Deficienc.~rryforward Amounts. If and to the extent the amount of nontax revenues are insufficient in a particular calendar year for appropriation and payment to Cardinal, the City will make payment to Cardinal in the amount of nontax revenues available for appropriation and payment to Cardinal. The difference between the amount required to be paid by the City to Cardinal pursuant to this Section 2 and the amount actually paid (referred to herein as a "Deficiency Carryforward Amount") shall be carried forward to the next succeeding calendar year and paid to Cardinal in addition to any other payment for that succeeding year required by this Section 2. This Agreement shall not terminate until the City has paid to Cardinal all Deficiency Carryforward Amounts required to be paid to Cardinal in accordance with this Section 2; provided, however, the aggregate of all payments to Cardinal pursuant to this Agreement shall not exceed the Maximum Payment Amount. (g) Surplus Carryforward Amounts. If and to the extent the annual payment to Cardinal as calculated pursuant to this Section 2 is greater than the Maximum Annual Payment, any such amount (referred to herein as a "Surplus Carryforward Amount") shall be paid by the City to -4- Cardinal in any future calendar year where the annual payment as calculated pursuant to this Section 2 is less than the Maximum Annual Payment; provided, however, the aggregate of that annual payment, together with any Surplus Carryforward Amount and excluding any Deficiency Carryforward Amount paid to Cardinal, does not exceed the Maximum Annual Payment. (h) Maximum Economic Development Incentive Payments. In no event shall (i) the amount of payments made by the City to Cardinal pursuant to this Section 2 in any one calendar year (excluding any Deficiency Carryforward Amount paid to Cardinal) exceed Seven Hundred Fifty Thousand Dollars ($750,000) (the "Maximum Annual Payment") or (ii) the aggregate amount of payments made by the City to Cardinal pursuant to this Section 2 during the term of this Agreement exceed Seven Million Five Hundred Thousand Dollars ($7,500,000) (the "Maximum Payment Amount"); provided, however, the limitation on payments as set forth in this subsection shall not include the payment to be made by the City to Cardinal pursuant to Section 2(b). (i) 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 ifhand-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 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) Cardinal at: Cardinal Health, Inc. 7000 Cardinal Place Dublin, Ohio 43017 Attention: Director -Enterprise Real Estate 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. -5- (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 Cardinal in other than his or her official capacity. No official executing or approving the City's or Cardinal's 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 Cardinal and its successors and assigns. (d) Recitals. The City and Cardinal 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 amended by written instrument executed by the City and Cardinal. (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. (g) Severability. In case any section or provision of this Agreement, or any covenant, agreement, obligation or action, or part thereof, made, 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. -6- (i) Governing Law 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 Cardinal, 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 Cardinal and the City in this Agreement shall survive the execution and delivery of this Agreement. (Signature Pages to Follow) -7- Itv WITNESS WHEREOF, the City and Cardinal 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 DUBLIN OHIO ~l Printed: Jane Brauti~am Title: Cit Ma a er ~ , By: Printed: Marsha I. Gri~y Title: Director of Finance Approved as to Form: B ~ Printed: Stephen J. Smith Title: Director of Law CARDINAL HEALTH, INC. By: V~ r Printed: C7~~~,ti` L.. ~/<1f'T/ ~''P Title:. l ~ iiy~}N~'//~~ ~~/i~;~i~ ~~F~~ ~G~~ -8- 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 during the year 2003 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: t~1~ , s , 2003 Director of Finance City of Dublin, Ohio -9- Office of the City Manager CITY OF DUBLIN 5200 Emerald Parkway • Dublin, OH 43017 Phone: 614-410-4400 • Fax: 614-410-4490 Memo To: Members of the Dublin City Council r From: Jane S. Brautigam, City Manager M~ Date: September 9, 2003 Initiated By: Michael Stevens, Director of Economic Development Re: Ordinance No. 106-03, Cardinal Health Economic Development Agreement Summary: Ordinance No. 106-03 authorizes the execution of an Economic Development Agreement with Cardinal Health Inc. for the purpose of encouraging them to expand their operations and workforce within the City. The attached Economic Development Agreement (the Agreement) provides for annual incentive payments for a period of 10 years based on Cardinal's future growth in Dublin. The Agreement will provide Cardinal with an economic incentive to direct a significant portion of its future growth to Dublin. This growth will lead to the creation of new jobs resulting in additional income tax withholding revenue and also will accelerate Cardinal's need to construct an additional office building. The additional office building will generate an increase in the service payments in the McKitrick TIF Fund and will be utilized, in the future, to fund a portion of Emerald Parkway east of Riverside Drive. The annual incentive payments will be based upon a percentage (the incentive factor) of the actual payroll withholdings in excess of the target payroll withholding. The incentive factors range from 40% for the first three years of the agreement to 34% in the final year. The target payroll withholding will be determined by using 2003's actual payroll withholding, currently projected to be $3.6 million, and increasing it annually by 2.5%, the average Consumer Price Index for the last 10 years, for the first five years of the agreement and 3.5% for the second five years of the agreement. The Agreement also provides for the acceleration of one-half of the final 1999 incentive payment. A payment of $350,650 would be paid to Cardinal Health no later than 45 days following the execution of the agreement. The remaining one-half of the final 1999 incentive payment would be paid according to the terms of the 1999 Economic Development .Agreement, which requires the completion of a 120,000 square foot building. The agreement does not contain any non-financial incentives. Ord. No. 106-03 Memo page 2 Recommendation: Staff continues to pursue job growth within our community. Using the incentive to encourage further expansion by Cardinal could result in an additional $19.5 million in income tax revenues over the 10-year period. Assuming Cardinal achieves the maximum incentive of $7.5 million, the City would net at least $12 million from this agreement. Staff recommends that City Council approve Ordinance No. 106-03 at its October 6, 2003 meeting. Attachments: Ord. No. 106-03 Economic Development Agreement 9/4/03 City Council Memo 8/25/03 City Council Memo 6/26/03 City Council Memo Office of the City Manager ~ ~ ~ ~ r ~ P 5200 Emerald Parkway o Dublin, OH 43017 Phone: 614-410-4400 o Fax: 614-410-4490 CITY 4F DUELIN Memo To:Members of the Dublin City Council From: Jane S. Brautigam, City Manager Date: September 4, 2003 ~I Initiated By: Michael Stevens, Director of Economic Development ~~J~ Re: Economic Development Update -Cardinal Health Update: As City Council is aware through previous memo correspondence (see attached June 26, 2003 and August 25, 2003 memos), staff has met with Cardinal Health on several occasions to discuss their potential future growth in Dublin. As a result of those discussions, a proposed Economic Development Agreement has been drafted and is attached for your review. Staff believes this economic incentive will result in Cardinal Health directing a significant portion of its future growth to Dublin. The proposed Economic Development agreement provides for annual incentive payments for a period of 10 years based on Cardinal's future performance. Annual incentive payments would be based upon a percentage (the incentive factor) of the actual payroll withholdings in excess of the target payroll withholdings. The incentive factors range from 40% for the first three years of the agreement to 34% in the final year. The target payroll withholding will be determined by using 2003's actual payroll withholding, currently projected to be $3.6 million, and increasing it annually by 2.5%, the average Consumer Price Index for the last 10 years, for the first five years of the agreement and 3.5% for the second five years of the agreement. The agreement is structured to encourage the growth to occur in the earlier years of the agreement. If Cardinal Health's actual payroll withholding fails to meet the target payroll withholdings, no incentive shall be paid out for that year. The maximum total of the incentive payments over the 10-year period is $7.5 million and the maximum annual payment is $750,000. The formula to establish the annual incentive payment is: Incentive payments = (Actual withholdings -Target withholdings) x (Incentive Factor) The proposed Economic Development Agreement also provides for the acceleration of one-half of the final 1999 incentive payment. A payment of $350,650 would be paid to Cardinal Health no later than 45 days following the execution of the agreement. The remaining one-half of the final 1999 incentive payment would be paid according to the terms of the 1999 Economic Development Agreement. The agreement does not contain any non-financial incentives. Cardinal Memo page 2 Conclusion: Staff strongly believes it is important to encourage job growth within our community. The proposed Economic Development Agreement will lead to the creation of new jobs and additional income tax withholding revenue. If Cardinal reaches the maximum incentive of $7.5 million the City will receive at least an additional $19.5 million in income tax revenues over the 10 year period, or a net of at least $12 million, a 160% return on the incentive. It is also anticipated the continued job growth also will result in the construction of Cardinal's next office building. This will result in additional service payments being generated from the McKitrick TIF district. The additional service payments, estimated to be $240,000 per year, will be utilized to fund a portion of Emerald Parkway east of Riverside Drive. The ability of the City to leverage a significant portion of the financing for this important roadway from these service payments is another benefit of this economic incentive agreement. Office of the City Manager 5200 Emerald Parkway • Dublin, OH 43017 Phone: 614-410-4400 • Fax: 614-410-4490 CITY OF DUBLIN Memo To: Members of the Dublin City Council From: Jane S. Brautigam, City Manager Date: August 25, 2003 Initiated By: Michael Stevens, Director of Economic Development Re: Economic Development Update -Cardinal Health UPDATE: As City Council is aware through previous memo correspondence, staff has met with Cardinal Health to discuss accelerating the remaining $701,300 economic incentive payment that is tied to the existing 1999 Economic Development Agreement (see attached June 26, 2003 memo). Cardinal also has asked that the City consider providing an additional economic incentive for its patential future growth. The remaining economic incentive payment is tied to Cardinal's construction of an additional owner- occupied office building of at least 120,000 square feet. Cardinal's existing building of 350,000 square feet is currently at capacity and they are leasing an additional 60,000 square feet in Dublin. As indicated in the June 26, 2003 memo, the current economic climate makes leasing space the most economical option for Cardinal at this time. In recognition of Cardinal's leased space in Dublin and keeping in mind the City's goal of tying the final economic incentive payment to the construction of an additional owner-occupied office building, staff has offered to accelerate 50% of the final economic incentive payment. The remaining 50°Io will be paid when the next building of at least 120,000 square feet is substantially complete. In recent years Cardinal has experienced phenomenal growth as evidenced by the statistics in the attached memo. As Cardinal Health continues to experience rapid growth through company acquisitions, it has the potential to relocate and add significant jobs to its Dublin headquarters. However, this continued growth also provides Cardinal with expansion options outside of Dublin. To further entice Cardinal and its business units to relocate jobs to Dublin, the City and Cardinal have discussed an additional economic incentive based upon Cardinal's future performance that will encourage the job growth to occur in Dublin instead of locations outside of Dublin. The incentive would be based on the creation of new jobs and additional income tax withholding revenues. Cardinal would receive incentive payments based upon a percentage of actual income tax withholding revenues over a set "target" for income tax withholdings. The target would be adjusted annually for inflation with Cardinal's 2003 income tax withholdings as the base year. Providing an additional economic incentive for Cardinal to direct their future growth to Dublin will expand the City's commercial tax base and generate additional income tax revenues for City operations. Cardinal's continued growth in Dublin also will result in their need to construct an additional office building, which will generate additional service payments that will assist the City in accelerating the construction of Emerald Parkway east of Riverside Drive. Cardinal Memo Pg 2 CONCLUSION: Squires, Sanders and Dempsey, the City's bond counsel, is drafting an agreement that will be made available to City Council in the September 5, 2003 packet. We currently are planning to have legislation to City Council for a first reading on September l5, 2003. Office of the City Manager 5200 Emerald Parkway • Dublin, OH 43017 Phone: 614-410-4400 • Fax: 614-410-4490 C1TY OF DUBLIN ` Memo To: Members of the Dublin City Council From: Jane S. Brautigam, City Manager Date: June 26, 20(?3 Initiated By: Michael Stevens, Director of Economic Development Re: Economic Development Update Summary: Staff has been contacted by Cardinal Health to discuss the terms of its 1999 Economic Development Agreement with the City. As you will recall, the City agreed to provide economic assistance to Cardinal Health in conjunction with their acquisition of what is referred to as the "South Campus", an approximate 28.7 acre parcel. The City has made three of the four payments as outlined in the Economic Development Agreement. Cardinal Health is looking to accelerate the remaining $701,30(} incentive payment. Currently the payment is tied to the substantial completion of an office building containing at least 120,000 square feet of space at a minimum construction cost of $9,600,000 on Cardinal's West Campus or South Campus. In the 1999 Economic Development Agreement, Cardinal Healih committed to pay cumulative payroll taxes of at least $7.3 million by December 31, 2005. As of March, 2003, Cardinal Health had exceeded that commitment by $4.7 million. In addition to its 350,000 square foot corporate headquarters, Cardinal Health has leased 60,000 square feet in the Atrium II building along Rings Road to allow for continued growth. Although Cardinal Health does not plan to begin construction of its West Campus in the near future, in part because the real estate market favors leasing over new construction, it did receive final development plan approval on a 450,000 square foot office building in May from the Planning and Zoning Commission. Cardinal's investment in that process demonstrates their commitment to the future construction of the additional facility. When the City and Cardinal Health entered into the first Economic Development Agreement in 1995, the company had 2571ocal employees. Currently, Cardinal Health employs 1350 at its Dublin offices. Conclusion: Staff-feels strongly that a portion of the remaining incentive needs to be tied to the expansion of Cardinal Health's headquarters site. Staff believes it is reasonable to discuss the terms of the existing Cardinal Health Economic Development Agreement due to the Company's extraordinary performance in job creation and local tax revenue generated. Staff will keep you updated on our discussions with Cardinal Health.