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  2.       
City Council Regular Meeting
Meeting Date: 05/03/2022  

BACKGROUND
Caterpillar Inc. is an American Fortune 100 corporation that designs, develops, engineers, manufactures, markets, and sells machineryenginesfinancial products, and insurance to customers via a worldwide dealer network. It is the world's largest construction-equipment manufacturer. Caterpillar Inc. is ranked number 78 on the 2022 Fortune 500 list and number 283 on the 2021 Global Fortune 500 list.  Their stock is a component of the Dow Jones Industrial Average. With more than 97,300 associates, the company operates 150 locations in 25 countries worldwide and delivers over 4 million Cat products to customers around the world. For fiscal year 2020, the company generated sales of more than $14.7 billion.

In 2010, Caterpillar Inc. established its Schertz, TX Facility at 6800 Doerr Ln. Caterpillar is a model corporate partner and has consistently participated in workforce development events such as Job Shadow Day, Manufacturing Day and other community events.

Currently, Caterpillar Inc. is operating elements of production in another country and is considering a $24,000,000 capital investment into its Schertz, Texas manufacturing facility with the addition of 24 new primary jobs consisting of $1,651,420 of new payroll. Caterpillar is seeking a personal property tax rebate to improve the return on investment for the project as incentives are one of the factors in the project’s financial analysis.

Under the agreement, Caterpillar Inc. must retain 145 team members with an annual base payroll of $6,775,000, create an additional 24 jobs by 2026. The company must maintain a total of 169 jobs and base payroll of $8,462,420 in 2026 and through the end of the agreement. It must also maintain a minimum of $50,000,000 in personal property investment for the life of the agreement. Upon certification of successful annual performance, the company will receive a grant from the Schertz Economic Development Corporation for personal property taxes paid to the City of Schertz on new tangible personal property at a percentage referenced in the following table and for no more than five of this agreement.

 
Performance Period Ending December 31  Full-Time Employees Created and Retained/ Minimum Payroll Minimum Retained Existing Personal Property  New  Certification Date  Grant on Incremental Tangible Personal Property Investment
Tangible Personal Property
Required & Max Rebate Base Value
Year 0 – 2023 Manufacturing equipment is located on-site by December 31, 2023  
Year 1 – 2024 145/ $6,775,000 $50,000,0000 $21,750,000 15-Feb-25 100%
Year 2 - 2025 145/ $6,775,000 $50,000,0000 $19,750,000 15-Feb-26 90%
Year 3 - 2026 169 /
$8,426,420
$50,000,0000 $17,750,000 15-Feb-27 85%
Year 4 - 2027 169 /
$8,426,420
$50,000,0000 $16,000,000 15-Feb-28 80%
Year 5 - 2028 169 /
$8,426,420
$50,000,0000 $14,000,000 15-Feb-29 75%
Year 6 - 2029 169 /
$8,426,420
$50,000,0000 $12,000,000 15-Feb-30 0%
Year 7 - 2030 169 /
$8,426,420
$50,000,0000 $10,000,000 15-Feb-31 0%
Year 8 - 2031 169 /
$8,426,420
$50,000,0000 $8,000,000 15-Feb-32 0%
Year 9 – 2032 169 /
$8,426,420
$50,000,0000 $6,500,000 15-Feb-33 0%
Year 10 - 2033 169 /
$8,426,420
$50,000,0000 $5,000,000 15-Feb-34 0%
GOAL
To grow the Schertz economy through Projects that focus on the creation/retention of Primary Jobs through partnerships with local industrial Fortune 500 companies to lower cost of expansion, making Schertz a community of choice for new investment and job creation.
COMMUNITY BENEFIT
This action helps to secure additional jobs, investment, and expansion prospects for the community through a partnership with Caterpillar Inc. Securing and maintaining working relationships with local Fortune 500 companies helps to ensure Schertz is a community of choice for future expansions and/or follow-on investment and job creation. In addition, the authority to enter into partnerships to lower expansion costs continues to be an essential tool for communities to remain competitive as corporations respond to the post-COVID market with expansions and consolidation activity.
SUMMARY OF RECOMMENDED ACTION

SEDC Staff recommends approval of Resolution 22-R-43 authorizing funding Agreement between Caterpillar Inc. and the City of Schertz Economic Development Corporation.
FISCAL IMPACT
Total new investment is estimated to generate a minimum of $670,000 in new personal property tax revenue over the life of the agreement. A grant of up to $398,000 will be issued annually based on personal property taxes paid to the City of Schertz.  This grant will be issued from the SEDC Reserve Fund.  Each annual payment is allocated through to the incentive budget approved by City Council each year. 
RECOMMENDATION
Staff recommends approval of Resolution 22-R-43 authorizing a program and expenditures as provided for in the Economic Development Performance Agreement between Caterpillar Inc. and the City of Schertz Economic Development Corporation.
Attachments
Resolution 22-R-43
SEDC Caterpillar Agreement
SEDC Res. No. 2022-3

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