City OK's Performance Agreement with McCall's

Ada officials agreed recently to match up to 50% of the cost of installing equipment to support a new building sprinkler system at McCall’s Chapel, using Proposition 2 sales tax dollars.

The Ada City Council voted 4-0 Nov. 4 to approve a performance agreement with McCall’s Chapel, which serves people with intellectual disabilities. Councilman Guy Sewell was absent.

Under the agreement, the Ada Public Works Authority will provide a 50/50 cash matching incentive up to $35,518 to McCall’s to help cover the cost of putting in equipment to support a sprinkler system in a new building on the McCall’s campus. McCall’s will have 12 months to complete the work.

McCall’s Chapel is putting up a new building on its campus east of Ada, but construction stopped midway through the project because the building’s sprinkler system could not work properly due to a lack of water pressure, according to a memo from Ada Jobs Foundation President and CEO James Eldridge to the Ada Jobs Board. He said McCall’s is located in Rural Water District 1, but the water district was unable to provide additional water pressure for the site.

“After some research, McCall’s determined that they will need new equipment on their site to bring up water pressure to the building in order to meet state fire safety standards with a sprinkler system,” Eldridge said. “The estimated cost is approximately $72,000.”

Eldridge said McCall’s president/CEO, John Long, approached Ada Jobs with a proposal to match McCall’s spending on the new equipment, using Proposition 2 dollars. He said the proposed incentive was based on the amount of Proposition 2 sales taxes that McCall’s was likely to generate over the next five years, which would meet the requirements of the Proposed Ada Business Expansion and Investment Grant program.

Eldridge estimated that McCall’s generates about $13,658.60 in total sales taxes for the city each year. He said within that amount, McCall’s would generate a little more than $7,000 for Proposition 2 each year, or about $35,000 over five years.

The city has a special one-cent sales tax for public works projects and economic development, known collectively as Propositions 1 and 2. Proposition 1 dollars are earmarked for street upgrades and other public works projects, while Proposition 2 money is reserved for endeavors that would promote economic development.

New policy

Eldridge said McCall’s request led to a discussion about how any company’s capital improvements might benefit economic development in Ada. He said Ada Jobs Foundation officials realized that many of Ada’s export-oriented companies, such as Holcim and Flex-N-Gate, might have large, unforeseeable capital expenses that could affect their ability to hire Ada workers and contribute to the local tax base.

Ada Jobs’ existing incentive policy, known as the Ada Quality Jobs Incentive, that pays recipients based on the number of jobs they create each quarter.

But Eldridge said Ada Jobs’ work with McCall’s prompted the agency to develop a new incentive policy, which looks at recipients’ economic impact on the city’s Proposition 2 account over five years — not the company’s total sales tax contribution.

Ada Jobs uses the recipient’s estimated economic impact, with various multipliers, to calculate the amount that the recipient contributes to the Proposition 2 account.

“We decided to use that as sort of a cap and then look at paying for up to half of a capital expense over the course of five years, not to exceed this economic impact to Prop. 2 cap,” Eldridge said. “It sounds like a really complicated way of saying it, but it’s essentially looking at their economic impact, paying that money up front to help offset the cost of an existing capital expense issue, and then looking at doing clawbacks of up to 20 percent for the five-year period for every year they do not meet a 90 percent employment threshold.