2025-014 Catalyst Fund Date: December 13, 2024 Report No. 2025-014
INFORMAL STAFF REPORTTO MAYOR AND CITY COUNCIL
SUBJECT:
Expiring incentives for Economic Development.
EXECUTIVE SUMMARY:
This Informal Staff Report was prepared in response to a two-minute pitch by Council Member
Jester on utilizing expiring incentives as a funding mechanism for the Catalyst Fund.
BACKGROUND:
The City Council created the Economic Development Investment Fund in 2016 to increase the
City's competitiveness in the recruitment and retention of large or desirable companies. A total of
$150,000 of mixed beverage tax revenue served as the dedicated funding source.
In 2019, the City recognized the need to raise additional funds to support economic development.
Municipalities often raise such funds through an economic development sales tax. However, the
City reached its State set maximum sales tax in 2004 when voters chose to dedicate the City's
remaining 0.5% local sales and use tax to support the Denton County Transportation Authority
(DCTA).The City engaged economic development consulting firm TIP Strategies to lead Denton's
comprehensive economic development strategic planning process.
Staff and the TIP team worked together for more than a year to engage community stakeholders
and develop a strategic plan for economic development that outlines a specific vision for Denton,
as well as the strategies and tactics to bring the vision to fruition. The final plan was adopted by
City Council on Feb. 9,2021.A strategy outlined in the plan was the creation of the Catalyst Fund,
made up of contributions of various funding sources that would provide support for economic
development programs, incentives, and initiatives. The strategy focused on ensuring Denton was
well positioned to execute the recommendations and priorities laid out in the Economic
Development Strategic Plan.
Several funding mechanisms for the Catalyst Fund were reviewed during the work session on July
26, 2022. Following discussion, the Council gave direction to establish the Catalyst Fund. The
ordinance establishing the Catalyst Fund allowed Council to commit a portion of fees, taxes, and
other funds. The fund was authorized and approved in the FY2022/23 Budget for $7.3 million,
with the actual fund balance ending at $4.3 million. The Catalyst Fund was created on September
27, 2022 with the renaming and assigning of the Economic Development Investment Fund via
adoption of Ordinance 22-1803. Summaries of the approved flow of funds into the Catalyst Fund
since its creation can be seen below. As a Special Revenue Fund, the Catalyst Fund is included in
the City's annual budget but is separate from the Economic Development department budget
(which is funded through the General Fund).
Date: December 13,2024 Report No. 2025-014
Catalyst Fund FY 2022-23 Budget Actual
Beginning Fund Balance $1,023,834 $1,023,834
Resources Derinitions:
Mixed Beverage Tax $150,000 $150,000
Investment Income Interest on funds - 118,822
Water and Wastewater
Transfers In Planned line Funds, 7,000,000 3,000,000
Utility Line Funds and
Franchise Fee Returns
Use of Reserve 143,325 -
Total Resources $7,293,325 $3,268,822
Expenditures
Capital Outlay $7,000,000 $ -
Operations 293,325 -
Total Expenses $7,293,325 $ -
Ending Fund Balance $1,023,834 $4,292,656
DISCUSSION:
A funding mechanism that is being considered is re-dedicating dollars from sales tax incentives
as they terminate to the Catalyst Fund. A 10-year analysis of expiring incentives is detailed in
Exhibit 1. If this method of funding is used, eligible expiring Chapter 380 incentives (including
mixed beverage, sales tax, construction sales and use tax, and property tax) would generate $6.9
million for the fund over a 10-year period. In addition, if eligible expiring tax abatements were
included, the total would be $8.8 million.
ATTACHMENT(S):
Exhibit 1 —Expiring Incentive Analysis
STAFF CONTACTS:
Jessica Williams
Chief Financial Officer
(940) 349-8244
Jessica.JW illiamsAcityofdenton.corn
Brittany Sotelo
Economic Development Director
(940) 349-7259
Brittany.Sotelokcityfodenton.com
REQUESTOR: Council Member Jill Jester
Date: December 13,2024 Report No. 2025-014
PARTICIPTAING DEPARTMENTS:
Economic Development and Finance
STAFF TIME TO COMPLETE REPORT:
Five hours
Expiring Incentive Summary
Eligible Expiring Incentives Summary 1 - 6 7 8 9 10
TotalExpiring
Chapter 380 Ad Valorem $38,174 $55,991 $253,506 $336,596 $352,630 $369,466 $371,235 $389,797 $409,287 $429,751 $3,006,433
Chapter 380 Mixed Beverage and Sales Tax
$0 $28,542 $94,392 $99,111 $104,067 $109,270 $114,734 $120,471 $126,494 $3,102,006 $3,899,087
Total Ad Valorem, Mixed Beverage
and Sales Tax Rebate $38,174 $84,533 $347,897 $435,707 $456,697 $478,737 $485,969 $510,267 $535,781 $3,531,757 $6,905,520
i i i i
Expiring
Total
Tax Year 25 26 27 28 29 30 31 32 33
Tax Abatement Ad Valorem $0 $135,551 $142,329 $208,651 $219,084 $230,038 $241,540 $253,617 $266,298 $279,613 $15976,721
Total Tax Abatement Ad Valorem $0 $135,551 $142,329 $208,651 $219,084 $230,038 $241,5401 $253,617 $266,298 $279,613 $1,976,721
Incentive FY - i i i i2033-34 Eligible
Expiring
Total
Expiring Total 1 $38,1741 $220,0851 $490,2261 $644,3591 $675,7811 $708,7751 $727,5091 $763,8841 $802,0791 $3,811,3701 $8,882,241
Cumulative Total $38,1741 $258,2591 $748,4851 $1,392,8431 $2,068,6251 $2,777,3991 $3,504,9081 $4,268,7931 $5,070,8711 $8,882,2411 $85882,241
Ineligible Incentives Summary
Expiring
Total
Chapter 380 Job-based
Expansion/Headquarters/Relocation $0 $0 $0 $136,275 $117,525 $105,025 $105,025 $105,025 $105,025 $105,025 $778,925
Ineligible Total Chapter 380 Job-Based
Expansion/Relocation $0 $0 $0 $136,275 $117,525 $105,025 $105,025 $105,025 $105,025 $105,025 $778,925
Ineligible Incentives Summary includes the Chapter 380 Job-based Expansion/Relocation Grants, which are funded through the Catalyst Fund
New not Budgeted Incentives Total I $2,780,135
New not budgeted incentives included in their respective categories:Bloomfield(sales tax), Enginetech(ad valorem and Expansion/HQ/Relocation), and Southwire(ad valorem)