HomeMy WebLinkAboutPR 15773: EDC/MC-O CONSTRUCTION FIRST AMENDMENT & LOAN AGREEMENTInter®ffice
1VIEMORAI~IDUIVI
To: Mayor, City Council, City Manager
From: 'Floyd Batiste, CEO
Date: 'March 3.2010 '
Subject: P. R. No. 15773; Council Meeting of Ivfarch 9, 2010
Attached is P. R. No. 15773 approving a First Amendment
to the Economic Incentive Contract & Loan Agreement between
City of Port 'Arthur Section 4A Economic Development
Corporation and Mc-00, Inc. d/b/a Mc-O Construction.
P.R. No. 15773
March 3,.2010
RESOLUTION NO.
A RESOLUTION APPROVING A FIR5T AMENDMENT TO
THE ECONOMIC INCENTIVE CONTRACT & LOAN
AGREEMENT BETWEEN CITY OF PORT ARTHUR
SECTION' 4A ECONOMIC DEVELOPMENT
CORPORATION AND MC-00, INC. D/B/A MC-O
CONSTRUCTION
WHEREAS, Mc-00, Inc. d/b/a Mc-O Construction ("Mc-O"), a Texas corporation, has
received an Economic Incentive Contract & Loan Agreement (the "Contract") from the City of
Port Arthur Section 4A Economic Development Corporation {the "PAEDC") to expand its Port
Arthur shop and field fabrication and assembly operations ("Mc-O Facility"); and
WHEREAS, under the Contract, Mc-O was to add additional staff to generate payroll to
expand business opportunities in the City of Port Arthur, Texas (the "City"); and
WHEREAS, Mc-O has received a $1 credit for each $5 of additional payroll distributed
to its employees who are City residents which credit has been applied against the $300,000 grant
F
which was provided by PAEDC to Mc-O for the purchase of real property improvements and
fixtures at the Mc-O Facility; and
WHEREAS, due to the regional slow down in petrochemical and marine industries, Mc-
O has not reached the payroll of City residents required under the Contract and has requested an
extension of the Contract to allow it the opportunity to continue to employ City residents and
achieve the credits for the unsatisfied grant obligation of $96,931.64; and
WHEREAS, Mc-O has agreed to an amended Performance Milestone Schedule under
the Contract, all as specified in the First Amendment to the Contract(the "First Amendment");
-,
WHEREAS, on the 22nd day of February, 2010, the Board of Directors of the PAEDC
approved the First Amendment.
NOW, THEREFORE, BE IT RESOLVED BY.THE CITY COUNCIL OF THE
CITY OF PORT ARTHUR:
Section I. That the facts and opinions'in the preamble are true and correct.
Section 2. That the PAEDC is authorized to enter into the First Amendment to Economic
Incentive Contract & Loan Agreement with Mc-00, Inc. d/b/a Mc-O Construction.
Section 3. That a copy of this Resolutiori shall be spread upon the Minutes of the City
Council.
READ, ADOPTED AND APPROVED on this _ day of A.D., 2010,
at a Meeting of the City. Council of the City of Port Arthur, Texas, by the following vote:
AYES: ~.
Mayor
Councilmembers
NOES:
DELORIS "BOBBIE" PRINCE, MAYOR
ATTEST:
TERRI HANKS, CITY SECRETARY
#751777 Page 2
APPROVED:
FLOYD BATISTE, PAEDC CEO
TO FORM:
APPROVED AS
GUY N. GOODSON, PAEDC ATTORNEY
APPROVED AS TO FORM: -
~~ ~~ -
LECI . TIZENO, CITY ATTORNEY '
,~
k757373 Page3
FIRST AbIENDiVIENT
ECONOMIC INCENTIVE COiV'I'RACT & LOAN AGREEMENT
BETWEEN CITY' O&PORT ARTHUR SECTION 4A
ECONOMIC DEVELOPMEN"I' CORPORATION AND
` MC-00, INC. D/B/A IVIC-O CONSTRUCTION
The Economic Incentive Contract and Loan Agreement between-City of Port Arthur
Section 4A Economic Development Corporation (the "PAEDC") and Mc-00, Inc. d/b/a Mc-O
Construction (hereinafrer "Mc-O") approved by Resolution No. cic-37tc (the "Original
Agreement") is hereby amended to revise the promised performance by Mc-O and to revise the
Performance Milestone Schedule.
Except as specified herein, all terms, conditions, performance, obligations, covenants and.
agreements of Mc-O or the PAEDC as specified in the Original Agreement are ratified and
affirmed, and each party covenants and represents that there are„ no defaults in the Original
Agreement except as may be specified herein.
' Under the Original Agreement, Mc-O was to expand its Port Arthur shop and field
fabrication and. assembly operations ("Mc-O Facility") requiring the addition of staff that would
generate payroll to expand business opporturiities in the City of Port Arthur, Texas. b1c-O has
received a $1 credit for each $5 of additional payroll distributed to -its employees who reside in
Port Arthur which credits have been applied against the $300,000 grant which was provided by
PAEDC to Mc-O for the .purchase of real property improvement and .fixtures at [he Mc-O
Facility. ,
Due to the regional slow down in projects in the petrochemical and marine industries, Mc-
O had not achieved. the creation of payroll for Port Arthur residents by the end of its initial term
of the Original Agreement on January 1, 2010 to satisfy the grant obligations. Mc-O has
requested an extension of the Performance Milestone Schedule to allow additional time to create
payroll for Port Arthur residents at its Port Arthur Facility to achieve credits to offset the balance
of the grant provided by the,PAEDC to Mc-O. After giving credit for all payroll earned on or
before January 1, 2010, Mc-O still had an unsatisfied grant obligation of $96,931.64.
Upon approval of this First Amendment, Mc-O will be given additional time to,receive
credits for payroll distributed [o its employees who reside in Port Arthur to satisfy the grant, or
the grant shall (as required in the Original Agreement) convert to a loan (liquidated damages).
Executive Summary
Mc-00, Inc. d/b/a Mc-0 Construction (hereinafter. "Mc-O") is a local company which
expanded their Port Arthur shop and field fabrication and assembly operations ("Mc-O Facility").
Currently, Mc,O expanded i[s customer base in order to bring new dollars into the Port Arthur
economy. Mc-O builds or fabricates at the Mc-O Facility forms, cages,. structural steel and pipe
for installation at its customer facilities. The City of Port Arthur Section 4A Economic
Development Corporation ("PAEDC") assisted Mc-0 with expansion of the Mc-O Facility. .
PAEDC' provided a $300,000 grant to Ntc-0 for the :purchase of real property
improvements. and fixtures at the~Mc-O Facility as part of its business expansion: ~ In return, Mc-
0 promised to increase its annual payroll by $650,000, bringing its annual payroll to $1,70,000
and retain said payroll through December 31, 2009, as measured by the Internal Revenue Service
(IRS) W-2 and W-3 forms. In addition, Mc-O promised at least half of its employees would be
Pon Arthur residents. Finally, Mc-O agreed to pay all of PAEDC's attorney fees and expenses
incurred for any modification of or amendment to the Original Agreement, including any legal
documents supporting the Original Agreement.
Additionally, in order to obtain first lien status;. PAEDC loan Mc-O the sum of
.$88,795.18 payable to Texas State Bank to payoff the current lien against the Mc-O Facility,. to
be paid back over ten years at prime rate plus one percent, with the first of the 120 payments due
three months after the Original Agreement was executed. Prime interest rate was calculated as of
the date the Agreement was executed. The $88,795.18 paid off the existing mortgage and granted
PAEDC a deed of trust on-the Mc-O Facility. In this way, PAEDC attained first lien priority
status.
If Mc-O breached the Original Agreement, PAEDC's grant of $300,000, minus any
credits earned, would automatically convert to a loan (liquidated damages). Any resulting loan
would have athree-year term, starting on the date of Mc-O's breach, an interest rate of ten
percent (10%), and will be secured by a Second Deed of Trust on [he Property.
Mc-O earned credits to reduce the duration of the Original Agreement or to reduce
liquidated damages in the event of a breach.' Starting on the effective date of the Original
Agreement, Mc-O received a $1.00 credit for each $5.00 of additional payroll distributed to its
employees who reside in Port Arthur.
Mc-O agreed to send PAEDC status reports on its physical expansion and its annualized
payroll, quarterly for the first year and twice .per year, thereafrer, for the life of the Original
Agreement.
Mc-O forfeits its credits for any reporting period for which it does not issue a report.
AMENDMENT REQUESTED
Mc-O has advised the PAEDC that due to businesses within the petrochemical and marine
' industries delaying plant expansions, Mc-O was not able to increase its business operations at the
Mc-O Facility by December 31, 2009 to meet the grant obligations. However, with plant
expansions now underway, Mc-O has requested an extension of its Performance Milestone
Schedule under the Original Agreement and has committed to employing Port Arthur residents in
order to create credits against the balance of $93,931.64 of grant obligations that remain
outstanding to PAEDC.
Mc-O has agreed to increase its current performance ;payroll of $1,550,000 to a total.
performance wage of $2,240,000. Additionally, Mc-O has agreed that 28% of its total annual
payroll or $490,000 annually for the period beginning 7anuary 1, 2010 through December 31,
2010 shall be payroll payable to Port Arthur residents. PAEDC has agreed to amend the credit
specified in the original grant to provide Mc-0 with a credit of $1.OO for every $5.06 of payroll
distributed to its employees who reside .in Port Arthur under the new annual total performance
p748874 Page 2
payroll. Mc-O has further agreed for the period January 1,..2011"through December 31, 2011 to
maintain its amended total annual performance payroll of $2,240,000 including the annual payroll
to Port Arthur residents of $490,000. _
Mc-O agrees to provide status reports as specified in this Amendment in the Performance
Milestone Schedule. In order to provide a modified. Performance Milestone Schedule, Section 8
of the Original Agreement is amended to read as follows:
MC-O'S PERFORMANCE MILESTONE SCHEDULE
Deadline
-t_ -- ---....- Milestone
_--
(a) May 31, 2010 - ----- -- ... ------._ -...--- -----. ----
Status report-from January 1, 2010 through Apri130, 2010 on (i)
projects underway at the-Mc-O Facility, (ii) number of
', permanent employees together with number of Port Arthur
employees and (iii) documentation of total annual payroll per
"amended annual payroll requirements of the First Amendment.
' (b) ;August 31 2010 ' ~
t
r
J
0
s
e
Mc
O Fac 1 tyu (ii)
together
number o
f permanent employee
with number of Port Arthur employees and (iii) documentation of
total annual payroll per amended annual payroll requirements of
_- j the First Amendment..
_
.__ --- ---- _
(c) !November 30, 2010 --...;
--- -..--- ___- _-._ ---._..-- _ _ -
!Status report through October 31, 2010 on (i) projects underway
at the Mc-O Facility, (ii) number of permanent` employees I
together with number of Port Arthur, employees and (iii)
I documentation of total annual payroll per amended annual.
j ;payroll requirements of the First Amendment.
(d) ;January 31 2011 .Status report verifying total annual additional payroll of
$490,000 (annualized showing achievement of amended ~~
j ;performance payroll of $2,240,000 for :the period ended
': December 31, 2010.
(e) ;April 30; 2011 Status report through March 31, 2011 on (i) projects underway
I at the Mc-O Facility, (ii) number of permanent employees
'I 'together with number of Pon Arthur employees and (iii)
documentation of total annual payroll per amended annual
I -payroll requirements of the First Amendment. {
-- -
(f) I July 31, 2011 -- ---- __ ..._ -------- --- . ---i
;Status report through June 30, 2011 on (i) projects underway at
~, the Mc O Facility, (ii) number of permanent employees together ;
' ~ with number of Port Arthur employees and (iii)- documentation of
total annual payroll per amended annual payroll requirements of j
'. the First Amendment. ~
p748874 Page3
(g)
October 31, 2011 Status report through September 30, 2011 on (i) projects
underway at the Mc-O Facility, (ii) number of permanent
employees together with number of Port Arthur employees and
(iii) documentation of total annual payroll per amended annual
payroll requirements of the First Amendment.
(h) ;January 31 2012 Issue a close out report to the PAEDC Board and CEO detailing
actual performance versus promised performance. After
presentation by Mc-O, the Board will take action to determine if
performance is complete; thereby, ending the Contract.
Paragraph 44 of the Original Incentive Agreement is modified to include a reference to the
EXECUTIVE SUMMARY as a part of the Original Incentive Agreement for all purposes and
constitutes promise performance by Mc-O and/or PAEDC as the case may be in accordance with
the Original Incentive Agreement.
ATTORNEY APPROVALS
APPROVED AS TO FORM:
Guy Goodson, General Counsel for PAEDC
VERIFIED AS CONSISTENT
WITH CITY COUNCIL RESOLUTION: Resolution Number:
Valecia R. Tizeno, Acting City Attorney
.p748874 ° Page 4
CONTRACT EXECUTION -
CITY OF PORT ARTHUR SECTION 4A ECONONIIC DEVELOPMENT CORPORATION
"~
SIGNED AND AGREED TO:
By:
President.
By:_
Date:
Secretary
Witness ~ Witness
MC-00, INC. D/B/A MC-O CONSTRUCTION
SIGNED AND AGREED TO:
By:
Eric J. McGuire, Vice President
Date:
Witness
mosa~a
By:
Wyman Ogden, Vice President
Date:
Witness
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