City of Alexandria, Virginia
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MEMORANDUM
DATE: SEPTEMBER 7, 2016
TO: THE HONORABLE MAYOR AND MEMBERS OF CITY COUNCIL
FROM: MARK B. JINKS, CITY MANAGER /s/
DOCKET TITLE:
TITLE
Consideration of Acceptance and Allocation of $350,000 from the Commonwealth Opportunity Fund.
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ISSUE: Consideration of acceptance and allocation of $350,000 from the Commonwealth Opportunity Fund (COF) to support an economic development incentive grant to The Motley Fool.
RECOMMENDATION: That City Council authorize the City Manager to:
1. Accept a $350,000 grant from the COF that will be transferred to The Alexandria Economic Development Partnership (AEDP) and then to The Motley Fool (TMF), subject to the terms and conditions of the Performance Agreement among the City of Alexandria, the AEDP, and TMF.
2. Allocate the $175,000 in City economic development incentive monies set aside as part of the FY 2017 budget process as the City’s share of the COF matching grant requirement.
3. Execute a Performance Agreement among the City of Alexandria, AEDP, and TMF that outlines the disbursement and management terms and conditions of the COF grant and the City/AEDP grant.
BACKGROUND: The Motley Fool was founded in 1993 in Alexandria, and the company’s headquarters and a majority of its employees have been sited in the City ever since. They currently occupy space in the Carlyle section of the City, where they are completing a 10-year lease at 2000 Duke Street that began in 2006 to meet their expansion plans at the time. The Motley Fool’s operations are largely U.S. focused, but they also have offices in Australia, Canada, Germany, Singapore and the United Kingdom. TMF describes itself as a “multi-media financial services company” which includes publishing newsletters in order to enable “the world to invest better.”
As TMF evaluated their options as their lease expiration approached, they decided to look throughout the Washington, DC region to identify the best place for their next phase of planned growth. They identified a vibrant urban setting (i.e., no suburban locations) as their key criteria, and as a result, began weighing an expansion in their current location in Carlyle against a move to a more urban neighborhood in the District of Columbia or Arlington County. In their real estate search, they did not identify any other existing available office space in the City of Alexandria that met the flexible, large floor plate, high-ceiling environment needed by the TMF organization.
Economics were also identified as an important factor in their real estate decision, and The Motley Fool approached the two other jurisdictions under consideration to discuss potential economic incentive packages.
In order to assure TMF’s retention and growth in Alexandria, the AEDP approached the Virginia Economic Development Partnership (VEDP) which is the Commonwealth of Virginia’s main economic development organization to discuss the use of the Commonwealth Opportunity Fund. After the State concluded that TMF and their expansion project met the eligibility criteria for the incentive program, the Governor approved a COF in the amount of $350,000.
As a match requirement of the COF grant, Alexandria would provide a matching performance-based grant of $350,000 in cash ($175,000 from the City and $175,000 from AEDP), for a total State/City incentive package of $700,000.
DISCUSSION: The Performance Agreement will outline specific requirements that must be satisfied for the $350,000 COF grant to be transferred to The Motley Fool and for the disbursement of the City of Alexandria’s and AEDP’s matching contributions. The agreement will be in place for a period of three years. The Agreement would be signed by the City Manager on behalf of the City, the President & CEO of AEDP, and ownership of The Motley Fool.
The principal requirements outlined in the Agreement include the following:
• The Company will lease, equip, improve, and operate offices in Alexandria, and make or cause to be made a Capital Investment of at least $5,000,000, of which approximately $1,000,000 will be invested in furniture, fixtures, and equipment, and approximately $4,000,000 will be invested in the up-fit of the building; and
• The Company will create and maintain 60 new jobs, for which the Company will pay an average annual wage of at least $88,000, in addition to the existing 282 TMF jobs currently in the City.
In accordance with the Performance Agreement, Alexandria (the City government and AEDP) will provide the following incentives as a match to the COF grant:
• $350,000 in cash from the Alexandria Investment Fund which is a combination of City General Funds ($175,000) and Industrial Development Authority bond fee earnings held by AEDP ($175,000); and
• In-Kind public infrastructure improvements and operating enhancements in the Carlyle neighborhood over a three year period, Not-to-Exceed $450,000. These improvements are part of the Carlyle Vitality Initiative, efforts that contribute directly to the vitality and quality of life for those working, living and visiting Carlyle through physical and experiential improvements to the neighborhood. They are not required for the COF match, but have been included based on feedback from TMF and other commercial tenants in Carlyle as ‘must-do’s’ to assure the neighborhood is a place where employers can attract and retain talent. These initiatives were included in the FY 2017 adopted budget and are paid for from the PTO developer funded “trellis fund” and not City General Fund monies.
Upon execution of the Performance Agreement by all parties, the City will request of the Virginia Economic Development Partnership (VEDP) the release of the COF grant by not later than October 1, 2016. The COF Grant in the amount of $350,000 will be paid by the State to the City. Within 30 days of its receipt of the COF Grant proceeds, the City will disburse the COF Grant proceeds to the AEDP. AEDP will then disburse the COF Grant proceeds to The Motley Fool in three tranches based upon TMF meeting prescribed progress towards its $5 million investment and 60 job growth plans. Given the performance-based nature of this incentive, the Performance Agreement includes a provision that requires the TMF to repay the grant on a prorated basis if the targets outlined in the Performance Agreement are not met within the three year performance period. TMF will also be eligible for up to $60,000 in direct additional funding through the State’s Virginia Job Investment Program (VJIP).
FISCAL IMPACT: AEDP’s analysis of TMF’s proposal and additional company financial information concluded that the City will recoup the financial incentive investment within the first year of retention and growth. Over the course of the lease, the City will receive more than $4,000,000 in direct tax revenue.
STAFF:
Stephanie Landrum, President & CEO, Alexandria Economic Development Partnership
Kendel Taylor, Director of Finance