The Fort Worth Chamberletter

A bilateral trade partnership between Fort Worth, Germany’s Free State of Lower Saxony and its capital, Hannover, is taking shape in moves that may pay off within a year.

“Our goal is to have Fort Worth companies doing business with Germany by 2011,” said David Berzina, the Chamber’s executive vice president of Economic Development. “Germany is the No. 1 economy in the European Union. They have a history of producing quality product,” and their businesses and industries match up well with Fort Worth’s.

There’s also interest in expanding trade relationships between Fort Worth and cities in China, Berzina said.

China

In early May, representatives from the Chamber and the City’s Economic Development Department joined a six-day Fort Worth Sister Cities trip to Zhaoqing, China, just northeast of Hong Kong — a “small town” with a population of more than 4 million.

They also visited the modern, industrial “forest city” of Guiyang, population around 4 million, more than 400 miles farther northeast in the Guizhou Province. Guiyang’s green mountainous setting makes it one of China’s top tourist destinations.

Both cities were finalists to become Fort Worth’s eighth sister city. Guiyang won the recommendation.

Chamber Research Manager Lacy Kreger posted daily blog descriptions of developments as the delegation explored each city’s rich cultural and education strengths and business possibilities with help from Fort Worth executive Walter Chaing, CEO of CP&Y engineering consulting firm, who served as translator and advisor.

Germany

In Lower Saxony and its capital city of Hannover, the June 21-25 trade mission established numerous relationships that are opening a path to bilateral trade.

Berzina and Melonye Whitson, the Chamber’s director of Local Business Development, met with business, industry and university representatives who are key players in the state’s recovery from global recession-related challenges.

Ulrich Hartmann, a Hannover native who holds a B.A. and MBA from Texas Christian University and who considers Fort Worth as his second hometown, began discussion with the Chamber last year about the trade mission.

Hartmann supports and facilitates business development for key businesses in Hannover Region and Lower Saxony – a role that involves monthly trips to Fort Worth for meetings with business and industry leaders here.

“I have always been interested in seeing a business exchange between Fort Worth and Hannover Region since my days at TCU business school,” Hartmann said. “The dominant industry sectors in Fort Worth and Hannover Region are complementary: production technology, logistics, energy solutions, IT and communications technology.”

Whitson reported on the trade mission with daily blog posts on the Chamber website, including sessions with Deutsche Messe, which manages Hannover’s 11-million-square-foot, 27-hall convention complex, the world’s largest and home of CeBIT, the world’s largest computer trade show, and Hannover Fair, the world’s largest industrial show.

At every meeting, Chamber representatives “were enthusiastically welcomed, and the conversations were positive and productive,” Hartmann said. “We are encouraged.”

Deutsche Messe will share its massive database of participants with the Chamber and will assist with other details as Kreger, Whitson and Berzina refine matchups between businesses and industries here and in Lower Saxony and Hannover.

Hartmann will bring a trade delegation from Hannover and Lower Saxony to Fort Worth October 26. Part of the mission will include sessions on Texas accounting rules, laws, banking and real estate.

The Chamber is weighing a trade exchange in the spring of 2011, Berzina said, and is considering how to communicate with members who may want to participate in the 2011 CeBIT in March and Hannover Fair in April.

“You’ll see us get behind an awareness campaign with Germany,” he said, while searching for additional domestic and international business. “We’re out there looking for opportunity.”

###

Trade Mission details, Oct. 24-28

Hannover economic report.

Lower Saxony state profile.

In addition to generating revenue such as property tax and sales tax, Fort Worth businesses and industries pay the year-old transportation impact fee at 27 or 36 percent of the maximum allowable.

A recent city presentation showed how much four types of businesses are typically paying annually in impact fees and how much more they would pay if those fees rose to 50 percent of the maximum allowable as proposed by consultants. Discounts are possible within Loop 820 and along existing arterials, but here’s a look at non-discounted totals.

General office
(30,000-square-foot building)
Currently: $60,540 at 27 percent level
Proposed: $121,080 at 50 percent level

Drive-thru fast food
(3,000-square-foot building)
Currently: $30,801 at 27 percent level
Proposed: $61,704

Daycare facility
(4,000-square-foot building)
Currently: $27,404 at 27 percent level
Proposed: $54,900

Grocery store
(60,000-square-foot building)
Currently: $319,440 at 27 percent level
Proposed: $639,960

Source: City of Fort Worth

click to see full-size graphic

Fort Worth is considering innovative solutions to a projected $1.8 billion shortfall in revenue for much-needed transportation infrastructure over the next 10 years, but there’s a potentially fatal pitfall to avoid, the business community warns.

Ideas for tapping new revenue are based on several recommendations from Willdan Financial Services, a California-based consultant that recently reported results from the Development Costs and Transportation Infrastructure Funding Study.

“Willdan came back with a multi-layered approach to solving the infrastructure problem,” said Fort Worth developer Lee Nicol of Harris, Nicol & Welborn. “It’s balanced” but highly questionable in one area: a call for an increase in the transportation impact fee that was imposed last year on developers and other businesses to help fund infrastructure.

Willdan proposed increasing the fee for residential and non-residential projects to 50 percent of the maximum level established by the city after adopting fee levels defined in a comprehensive 2007 study by Kimley-Horn and Associates of Fort Worth.

Nicol and other business leaders, including Chamber Executive Vice President of Economic Development David Berzina and Dunaway & Associates Vice President Tom Galbreath, caution that recession makes it impossible to gauge the merits of either the current impact fee or the proposed increase, but an increase could drive developers to competitor cities.

The current fee should be kept for at least another year or two, they said, in order to get a clearer picture of its performance as a source of revenue and how it affects Fort Worth’s competitiveness.

“I’m not sure the opportunity cost in terms of lost-business potential was factored in when Willdan made the recommendation,” Berzina said.

As the study shows, he said, Fort Worth has “the highest property tax rate in the state,” driving up “the ongoing cost of business. We’re concerned about other competitors using the impact fees and other add-on costs of business against us. I’m hearing that’s already taking place on deals in which we’re competing.”

Willdan’s study was jointly funded by the Fort Worth Chamber of Commerce, local business community partners and the City of Fort Worth in a rare public-private sector partnership forged by urgency as Fort Worth’s growth rapidly outpaced resources to deliver adequate infrastructure.

As the study progressed, a wide range of business community stakeholders were brought together to collaborate with the City, Chamber and the neutral Willdan. “It was like inviting arbitration,” Nicol said. “They took input from everybody.”

Resulting analysis found that, even if all options were implemented, including a $5 per household user fee, the city still would realize less than $800 million for infrastructure, leaving a $1 billion deficit.

Consultants and business leaders noted that the controversial transportation impact fee, adopted in 2008, would raise just $161 million over the next 10 years.

They also emphasized that impact fee revenue can be used only for new infrastructure and only within planning areas in which the infrastructure exists and not for existing problematic situations or problems associated with federal Interstate highways. “It’s no panacea,” Berzina said.

Willdan proposed several revenue-enhancement paths, including revision of the City’s Transportation Improvement Plan that would help close the revenue gap by moving some infrastructure projects beyond the 10-year, $1.8 billion plan. City officials already have proposed deferring more than $140 million in street projects.

Three recommendations are particularly attractive, Galbreath said – “increasing debt for transportation, creating (citywide) street maintenance fees and promotion of Public Improvement Districts” in which an assessment would be levied on properties within a district and used to finance debt for infrastructure there.

Berzina agreed, saying the study found that large cities commit far more bonding revenue to transportation projects than Fort Worth and that the user fee alone, which could amount to $5.60 per month added onto water bills, is “a greater revenue source than impact fees.”

Such a fee would be fair, Nicol said, because the highly mobile public and businesses use infrastructure throughout the city. “This study suggests that everybody pitch in” to solve infrastructure problems, he said.

As the city prepares to consider Willdan’s recommendations this fall, Berzina said a coalition of the Chamber, Realtors and developers will lobby hard to keep the current impact fee unchanged for one or two years.

Raising the fee “would be a deadly mistake,” Nicol said. “Consider that there were 52,000 home starts, annualized, as of the third quarter of ’06. In the second quarter of ’09, annualized housing starts for Dallas-Fort Worth were fewer than 14,000. This is not the time to increase impact fees.”

More Links:

• Willdan’s report to the City of Fort Worth.
• Transportation Impact Fee ordinance.
• Willdan Financial Services.