SUBSTITUTE ORDINANCE NO. SO99-1679
A substitute ordinance authorizing The Industrial Development Board of The Metropolitan Government of Nashville and Davidson County to negotiate and accept payments in lieu of ad valorem taxes with respect to the Dell Computer Corporation Project.
Whereas, The Metropolitan Government of Nashville and Davidson County (hereafter referred to as "Metropolitan Government") is vitally interested in the economic welfare of its citizens and wishes to provide the necessary leadership to enhance this areas capabilities for growth and development; and
Whereas, the provision of jobs to area citizens by local business is both necessary and vital to the economic well-being of the Metropolitan Government; and
Whereas, pursuant to the Industrial Development Corporations Act, currently codified at Tenn. Code Ann. §§ 7-53-101 - 311 (such act, as heretofore or hereafter amended, the "Act"), the General Assembly of the State of Tennessee (the "General Assembly") has authorized the incorporation of public corporations known as "industrial development boards" in municipalities in the State of Tennessee (the "State"); and
Whereas, The Industrial Development Board of The Metropolitan Government of Nashville and Davidson County (the "Board") has been duly organized and incorporated in compliance with the Act; and
Whereas, the General Assembly has found and declared that the Board is performing a public function on behalf of the Metropolitan Government and that the Board is a public instrumentality of the Metropolitan Government; and
Whereas, the Supreme Court of Tennessee (the "Supreme Court") has found that the Board is an agency or instrumentality of the Metropolitan Government; and
Whereas, the Act expressly incorporates by reference the statement of public policy set forth in Section 3 of Chapter 209 of the Public Acts of 1955; and
Whereas, Chapter 209 of the Public Acts of 1955 states that the declared purpose of the Act is to do that which the State welfare demands and the State public policy requires to alleviate the problems of unemployment, to raise family income, to provide a means by which the citizens of the community may promote and develop industry in their area so as to obtain a balanced economic development highly essential to the welfare of the State, and to promote the development of commercial, industrial, agricultural and manufacturing enterprises by the several municipalities so as to be given local benefits peculiar to each and general benefits to the entire State; and
Whereas, the General Assembly also has declared that the purposes of the Act include maintaining and increasing employment opportunities by promoting industry, trade and commerce by inducing manufacturing, industrial, financial, service and commercial enterprises to locate or remain in the State; and
Whereas, the Supreme Court has held that the purposes of the Act include the promotion of industry and the development of trade to provide against low wages and unemployment and that such purposes are public in nature; and
Whereas, the Board is empowered pursuant to the Act to acquire, whether by purchase, exchange, gift, lease or otherwise, and to improve, maintain, equip and furnish, "projects" (as defined in the Act), and to lease such projects to others; and
Whereas, "projects" under the Act may include, without limitation, manufacturing, processing and assembly facilities and office buildings for use in connection with an industrial, commercial, financial or service enterprise;
Whereas, Dell Computer Corporation ("Dell"), a Fortune 500 company with its headquarters in Round Rock, Texas, has announced its tentative decision to locate computer manufacturing, assembly and distribution facilities and technological support operations within the boundaries of the Metropolitan Government (the "Project"); and
Whereas, the location of the Project within the boundaries of the Metropolitan Government will result in significant employment and other commercial opportunities for area citizens; and
Whereas, pursuant to Tenn. Code Ann. § 7-53-305, all properties owned by the Board are exempt from ad valorem taxation in the State of Tennessee; and
Whereas, pursuant to Tenn. Code Ann. § 7-53-305(b), the Metropolitan County Council (the "Council") has the power to delegate to the Board the authority to negotiate and accept from its lessees payments in lieu of ad valorem taxes, provided that such payments are in furtherance of the Boards public purposes; and
Whereas, in view of the benefits to the Metropolitan Government of the location of the Project within the boundaries of the Metropolitan Government, and in exercise of its powers enumerated above, the Board wishes to acquire, by purchase, exchange, gift or lease, property that will be used with respect to the Project, lease that property to Dell and certain of its suppliers, and enter into one or more agreements with Dell and certain of its suppliers to accept payments in lieu of ad valorem taxes with respect to the Project; and
Whereas, the Board is not able to negotiate and accept payments in lieu of ad valorem taxes without authorization from the Council.
Now, therefore, be it enacted by the Council of The Metropolitan Government of Nashville and Davidson County:
Section 1: The Council of the Metropolitan Government finds that the Boards acceptance of payments in lieu of ad valorem taxes with respect to the Project is in furtherance of the Boards public purpose of maintaining and increasing employment opportunities, as set forth in Tenn. Code Ann. § 7-53-102 and the other public purposes described above.
Section 2: (a) The Metropolitan Government hereby delegates to the Board the authority to negotiate and accept payments in lieu of all ad valorem taxes with respect to the Project for a period of 40 years, beginning on the date that the Board enters into a lease with Dell with respect to the Project. Subject to Section 2(b) of this Ordinance, the amount of the payment in lieu of tax (the "Payment") that shall be required with respect to each year under such arrangement shall be as follows:
(i) With respect to years one through ten, the amount of the Payment shall be zero percent (0%) of the Standard Tax (as defined below).
(ii) With respect to years 11 through 40, the amount of the Payment for any such year shall be the lesser of (A) two percent (2%) of the Standard Tax for each 15 Dell Nashville Employees (determined as set forth below) less than 1,500 Dell Nashville Employees that are employed during the immediately preceding year; or (B) 100% of the Standard Tax.
(iii) In the event the Boards lease or sublease to Dell exceeds 40 years in duration, for years 41 and thereafter, the amount of the PILOT Payment shall be one hundred percent (100%) of the Standard Tax.
The term "Standard Tax" shall mean the amount of ad valorem real and personal property tax that Dell would be required to pay with respect to a given tax year with respect to the real and personal property that is then subject to the payment in lieu of tax arrangement authorized hereby if Dell owned such property. Dell shall be permitted to challenge the assessment of any real or personal property that is then subject to the payment in lieu of tax arrangement authorized hereby in the same manner as if Dell owned such property. In determining the number of Dell Nashville Employees as of a given day or during a given period, each employee of any Dell Entity (as defined in Section 4 of this Ordinance) as of such day or period at any Dell Nashville Facility (as defined below) who is exempt from the minimum wage and overtime requirements under the Fair Labor Standards Act ("Exempt Employees"), shall be counted as one Dell Nashville Employee. In addition to the Exempt Employees, the number of Dell Nashville Employees as of a given day or during a given period shall be determined by (A) calculating the number of work hours as of such day or during such period of (I) all employees of any Dell Entity employed at any Dell Nashville Facility who are not Exempt Employees, including temporary employees, part-time employees and full-time employees of any Dell Entity, plus (II) all employees of independent contractors or temporary employment agencies who are assigned by their employers to provide services at any Dell Nashville Facility (the persons described in this clause (II) being referred to as "Agency Employees"), (B) making an appropriate increase to the number of work hours calculated pursuant to clause (A) to reflect all holiday, vacation day, sick day, paid time off, short term disability and other similar benefits paid to the persons described in clause (A) with respect to the given day or period, and (C) assuming that each Dell Nashville Employee works a 40 hour work week consisting of five eight hour work days. Notwithstanding the provisions of the preceding sentence of this Ordinance, regardless of the number of Agency Employees utilized at Dell Nashville Facilities as of any given day or period, for purposes of calculating the Payment required with respect to a given year, only twenty percent (20%) of the total number of Dell Nashville Employees for such year may be Agency Employees; this sentence shall not limit Dells right to use Agency Employees at any Dell Nashville Facility or otherwise affect the payment in lieu of tax arrangement authorized hereby. The term "Dell Nashville Facility" shall mean any facility located within the boundaries of the Metropolitan Government that is operated by any Dell Entity, including, without limitation, the Project, but shall not include any facility that is operated by a Dell Supplier (as defined in Section 4 of this Ordinance). The number of Dell Nashville Employees for each year shall be the greater of (A) the number of Dell Nashville Employees employed on December 31 of such year or (B) the average number of Dell Nashville Employees employed during such year.
(b) To the extent the leasehold interest of Dell (or any Dell Supplier) in the property that is subject to the payment in lieu of tax arrangement authorized by this Ordinance is assessed and taxed by the Metropolitan Government, the amount of the required Payment may be reduced by the amount of such taxes actually paid to the Metropolitan Government by Dell (or such Dell Supplier) by reason of said leasehold interest. Any such leasehold tax payments actually made by Dell (or such Dell Supplier) to the Metropolitan Government may be applied against the Payment, if any, that Dell (or such Dell Supplier) is required to make with respect to the year for which such taxes have been assessed or may be carried forward and applied against Payments with respect to any future year.
Section 3: (a) The payment in lieu of tax arrangement authorized by this Ordinance shall apply to all real property and personal property (tangible and intangible) comprising a portion of, or used at or in connection with facilities located on, the following properties:
(i) the approximately 150 acres of property generally described as the Middle Tennessee Mental Health Institute Property (the "MTMHI Property"), as shown on Exhibit A hereto;
(ii) the approximately 31 acres of property owned by the State of Tennessee that are contiguous to the MTMHI Property, as shown on Exhibit A hereto;
(iii) the approximately 490 acres of land owned by the Metropolitan Nashville Airport Authority ("MNAA") which is located to the east of Nashville International Airport, and the approximately 100 acres of land owned by MNAA which is located south of the MTMHI Property, as shown on Exhibit A hereto;
(iv) such other property that a Dell Entity designates as being subject to this Ordinance; provided, however, that in order to designate additional property in accordance with this clause (iv), a portion of the MNAA property described in clause (iii) above of comparable size must be released from the provisions of this Ordinance; and
(v) such other property that the Metropolitan Council designates as being subject to this Ordinance, which designation must be approved by a resolution of the Metropolitan Council receiving at least 21 affirmative votes.
(b) The payment in lieu of tax arrangement authorized by this Ordinance shall apply to all land, easements or other property rights, buildings, improvements, fixtures, construction in progress, equipment, furniture and other properties of any nature comprising a portion of, or used in connection with, facilities located on the properties described above. Such arrangement shall apply to such facilities and such properties in their current scope and configuration and to all replacements, enhancements, additions, expansions and improvements to such properties and facilities.
Section 4: The payment in lieu of tax arrangement authorized hereby shall apply to each of the properties and facilities described in Section 3 of this Ordinance and to each portion thereof so long as such property or such portion thereof is leased by the Board to (a) Dell, (b) any successor to Dell, including, without limitation, any corporation, partnership, limited liability company or other entity (i) that acquires, directly or indirectly, a controlling interest in Dell (whether through merger, stock purchase, stock swap or otherwise), (ii) that merges or consolidates with Dell, or (iii) that acquires substantially all of the assets of Dell, and (c) any corporation, partnership, limited liability company or other entity that is controlled by, or is under common control with, any of the foregoing (the entities described in Sections 4(a)-(c) being referred to collectively as the "Dell Entities"). Additionally, any Dell Entity may enter into a sublease or similar arrangement with one or more Dell Suppliers (as defined below), and each such Dell Supplier will receive the payment in lieu of tax benefits authorized by this Ordinance; provided that no more than 25% of the real properties described in Section 3 of this Ordinance may be subleased to Dell Suppliers; and provided further, however, that unless the goods or services provided by a Dell Supplier through its facilities located on any such subleased real property are provided predominantly to Dell Entities or to Dell Nashville Employees, such Dell Supplier shall not be eligible for the payment in lieu of tax benefits authorized by this Ordinance. Additionally, in connection with a lease financing or similar arrangement involving the Project (or any portion thereof), any of the entities described in the preceding sentences of this Section 4 may sell, transfer, assign or sublease its interest in the Project (or any portion thereof) to a third party, or may cause the Board to lease the Project (or any portion thereof) to a third party, without disturbing the payment in lieu of tax arrangement contemplated by this Ordinance with respect to the applicable portion(s) of the Project if such portion(s) of the Project are leased or subleased to, and operated by, an entity described in the preceding sentences of this Section 4. The term "Dell Supplier" shall mean any corporation, partnership, limited liability company or other entity that (A) is not a Dell Entity, and (B) produces, assembles, stores or manages goods that are utilized by the operations of any Dell Entity or provides services in connection with the operations of any Dell Entity (including services for Dell Nashville Employees).
Section 5: The final version of the payment in lieu of tax agreement authorized by this Ordinance must be approved by the Director of Law of the Metropolitan Government prior to being executed by the Board.
Section 6: All ordinances or resolutions, or parts thereof, in conflict with the provisions of this Ordinance are, to the extent of such conflict, hereby repealed.
Section 7: This Ordinance shall take effect from and after its passage, the welfare of The Metropolitan Government of Nashville and Davidson County requiring it.
Sponsored By: Charles Fentress
|Substitute Introduced:||June 15, 1999|
|Referred to:||Budget & Finance Committee|
|Passed Second Reading:||June 15, 1999|
|Passed Third Reading:||July 20, 1999|
|Approved:||July 21, 1999|