In 2012, the City Council approved an Economic Development Incentive Agreement among the City of Schertz, the City of Schertz Economic Development Corporation (“SEDC”), Guadalupe County, and Amazon.com.kydc, LLC. (“Amazon”) (the “Agreement”). The Agreement includes two annual incentives that Amazon may qualify for including a Property Tax Grant and Sales Tax Grant.
Property Tax Grant: Under the Agreement and subsequent amendments, the City of Schertz agreed to provide six (6) annual Property Tax Grants worth 70% for the first three years and 60% for the next three years, on all New Ad Valorem Value. In consideration, Amazon agreed to construct a 1,261,980 square foot facility, create $166 million of New Investment, maintain at least $125 million of Taxable Property, and employ at least 380 full-time employees with at minimum Annual Payroll of at least $12 million.
On March 31, 2020, Amazon reported its compliance to the Agreement. Amazon has paid all real and personal property taxes for the 2019 calendar year (Exhibit A: Amazon.com Services, Inc. 2019 Annual Certification). As part of the Annual Development Incentive and Compliance Report, Amazon reported that it had:
- Maintained its operations in Schertz according to the Agreement.
- Employed an average of 924 Full-Time Jobs through the year including 982 Full-Time Jobs on January 1, 2019 and 1,051 Full-Time Jobs on December 31, 2019. The number of Full-Time Jobs exceeds the minimum requirement of 380.
- Paid $43,506,119.11 in Annual Payroll which is beyond the minimum Annual Payroll of $12,000,000.
- Reported $134,593,301 in Taxable Property Value (all property exclusive of land) which is beyond the minimum threshold of $125,000,000.
Sales Tax Grant: The Agreement provides a Sales Tax Grant if Amazon generates at least $100 million in Project Taxable Sales for the calendar year. In 2019, Amazon did not generate sufficient Project Taxable Sales, so they did not qualify for the 2019 Sales Tax Grant.
FISCAL IMPACT
Amazon paid $720,909.18 in property taxes to the City of Schertz for the 2019 calendar year. As part of the 2019 Property Tax Grant, Amazon will receive a rebate of $418,779.11 and the City will retain $302,130.06. The 2019 Property Tax Grant must be paid by the City of Schertz no later than July 14, 2020 per an extension granted by Amazon in communication with the SEDC dated April 28, 2020.
The methodology outlined in the Agreement was used to calculate the 2019 Property Tax Grant and includes the following:
- 2019 Property Tax Grant = New Ad Valorem Assessed Value * 2019 City of Schertz tax rate * Year 6 grant percentage
- The New Ad Valorem Assessed Value equals $135,632,567 which was calculated by adding $65,461,789 in real property and $74,629,384 personal property and subtracting the Base Ad Valorem value of $4,458,606
- The 2019 City Schertz property tax rate was $0.5146 per $100 of taxable investment.
- The Year 6 grant percentage was 60%
- Calculation: $135,632,567 * 0.5146 * 60% = $418,779.11
SEDC RECOMMENDATION
Under Section 4.2 (d) of the Agreement and the SEDC’s responsibility to administer the agreement, the SEDC has evaluated the Agreement and found that Amazon is compliant for the 2019 tax year. The SEDC has processed payment on behalf of the City of Schertz in accordance with the Agreement and issue $418,779.11 to Amazon.com Services, Inc. no later than July 14, 2020. Guadalupe County also processed their reimbursement in accordance with the Agreement and paid $270,098.69.
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