75B - TAX SHARING TACENERGY - Laserfiche WebLink

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TACenergy Sales Tax Agreement March 3, 2020 Page 2 Therefore, it is proposed that the City enter into a sales tax sharing agreement with TACenergy to facilitate the continued operations of its main sales office in Santa Ana. During the term of the agreement, the City will share 50 percent of the sales tax generated by TACenergy, and increasing to 70 percent if more than $1.4 million in sales tax in generated in that year. The agreement term will terminate in 25 years (December 31, 2045) unless both parties agree to extend or the business has left the City. Based on TACenergy's projections, the cumulative total of sales tax generated during the term of the Agreement is estimated to be in excess of $50 million dollars. Of this amount, half will be paid to TACenergy, while the City will retain the remainder. This agreement will keep 30 jobs in the City of Santa Ana, with the expectation that the number of jobs will increase by an additional 15-20 within the next five years. Sales tax revenue is used by the City to fund police, fire, library, parks and recreational activities, and other general city services. Without this agreement, these general services may be cut or reduced. Public Noticing Government Code Section 53083 requires that the City Council must hold a noticed public hearing and, prior to the public hearing, provide information to the public through the City's website regarding the proposed economic development subsidy. As part of the approval process, an economic development subsidy report (Exhibit 2) must be completed and submitted detailing the structure of the public subsidy, projected tax benefits and estimated number of jobs that would be created by the subsidy. This report shall remain available to the public and posted on the City's website until the end date of the economic development subsidy. STRATEGIC PLAN ALIGNMENT Approval of this item allows the City to meet Goal #3 - Economic Development, Objective #3 (promote a solutions -based customer focus in all efforts to facilitate development and investment in the community), Strategy C (explore opportunities to encourage a business friendly environment within the city through the reduction of non -essential regulatory requirements, improved coordination between agencies for development review and addition of monetary incentives). FISCAL IMPACT There will be a positive fiscal impact associated with this action. The annual contribution of the continued sales tax to the General Fund from TACenergy is an economic enhancement to the City and will support services for the health, safety, and general welfare of residents of the City. The first sales tax sharing payment for the period covering April 1, 2020 through June 30, 2020 is estimated not to exceed $170,000. Funds are available in the General Fund, Sales Tax Rebate Agreement program, Sales Tax Rebate account no. 01118825-69300. Projected payments for future fiscal years will be budgeted in each respective fiscal year's budget. 75B-2