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Taking a SIP


OKC is negotiating a deal with Chesapeake Energy and Boeing Co. to receive financial incentives from the city’s strategic investment program.

Clifton Adcock April 6th, 2011

The city is in the process of drawing up agreements to offer two companies millions of dollars in incentives to bring hundreds of high-paying jobs to the city, which would have an estimated economic impact in the hundreds of millions of dollars.

At its March 29 meeting, the City Council gave staff permission to negotiate a deal with Chesapeake Energy and Boeing Co. to receive financial incentives from the city’s strategic investment program, in exchange for a combined 900 new jobs paying an average of more than $90,000 a year.

The strategic investment program, a $75 million local economic development incentive program approved by Oklahoma City voters in December 2007, is similar to the state’s quality jobs program.

Thus far, 12 companies or programs are scheduled to receive funding from the SIP, with obligations totaling almost $9.3 million in exchange for 2,240 jobs and a payroll of around $88 million. About $454,000 has been spent from the fund, according to city records.

The program is for new-to-market companies or companies already in Oklahoma City that are expanding, and requires that the companies create at least 50 new jobs that pay above average for the Oklahoma City metropolitan statistical area, said Brent Bryant, economic development program manager for the city.

“It’s not a retention program where someone says, ‘I’m going to leave if you don’t do this.’ It’s performance-based and for companies wanting to move into our market or expand,” Bryant said.

In a memorandum to the mayor and City Council, City Manager Jim Couch stated that Chesapeake plans to add 350 new jobs over the next one to five years, with an average first-year compensation of $105,000.

Couch stated that Chesapeake plans to develop a lot adjacent to its existing site across Francis Avenue because the current site “is essentially at capacity.”

The expansion will require capital improvements to the nearby streets, as well as water and sewer lines, which can be done prior to and during the expansion process, Couch wrote.

Chesapeake approached the city about the issue, Couch stated in the memo, and the city, along with the Greater Oklahoma City Chamber, has worked with Chesapeake to evaluate its expansion needs, the memo stated.

The expansion is expected to generate more than $293 million through capital investment, wages and state and local taxes during the first five-year period, and increase sales and property tax revenue by $2.2 million over the first four-year period, and at least $540,000 annually after that, Couch stated in the memo.

Couch recommended offering Chesapeake a SIP incentive package of $3.5 million, in exchange for the company creating 350 new jobs over five years.

It is estimated Chesapeake will spend about $50 million on a new building and construction equipment during the first year alone, as well as build any necessary public infrastructure improvements needed, turning them over to the city upon completion, Couch stated.

Meanwhile, Boeing decided last year that it would move its C-130 avionics modernization program and B-1 business operations from Long Beach, Calif., to Oklahoma City beginning this year.

The chamber played a key role in landing Boeing’s C-130 and B-1 operations, which are primarily focused on the modernization of avionics and cockpit infrastructure, and whose employees mostly write computer code to operate the aircraft platforms and weapons delivery systems, design and develop hardware and software for the products and perform simulations on the products, Couch wrote in a second memo to the council.

Boeing’s move is expected to bring 550 new jobs to Oklahoma City, paying an average of around $90,000 per year.

Couch wrote that the Boeing Co. has decided to lease office space near its current facility near Tinker Air Force Base. Boeing currently employs around 800 people around Oklahoma City and 945 in the state.

Couch stated the chamber recommended SIP funding of almost $1.5 million for the C-130 unit. That unit is expected to move this year, with the B-1 unit following next year.

The C-130 unit is projected to have an economic impact of more than $103 million, and will create 232 jobs over the first two years, Couch stated.

“The company considered a number of alternative locations for these jobs,” Couch wrote. “The state and local incentives were important in positioning Oklahoma City as a competitive location for this operation.”

Since 2007, Boeing has received around $3.8 million in business development incentives from the state’s quality jobs program, and is likely to receive more because of the upcoming move from California.

A third company relocating to Oklahoma City from Enid, Continental Resources, would likely qualify for the SIP program, Bryant said, based on its expansion plans.

A company moving its operations to Oklahoma City from other parts of the state would not qualify for SIP funds, although if that company expands once it arrives, it could qualify, Bryant said.

Continental has not yet applied for the SIP program, Bryant said.

The final determination on whether Boeing and Chesapeake receive the funds will be made by the City Council at a future meeting.

View Chesapeake’s SIP application, a map of campus expansion, a PowerPoint presentation and city negotiation memorandums.

 
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