County commissioners on Tuesday voted to terminate a tax abatement for Hulu, part of an economic incentive agreement that helped bring the streaming service’s call center here in 2017, because the Los Angeles-based company wants to change how it pays its employees.
The 90 percent tax abatement was worth an estimated $400,000 over 10 years. Two years ago, both the County and City offered incentives to attract Hulu to San Antonio and met with company executives in Los Angeles to win them over. The Texas Enterprise Fund also pledged a $1.28 million cash grant.
When the mayor’s office announced in April 2017 that Hulu had chosen San Antonio for its call center over Albuquerque, the incentive agreement called for the company to invest $15 million in its new viewer operations headquarters. It would also bring up to 500 new positions to the city, including call center, tech support, management, and software engineering jobs paying an average annual wage of $38,494.
A request to terminate the agreement came in a letter from Hulu to the county on June 3, but the company has been discussing the possibility for several months, said David Marquez, executive director of the County’s Economic and Community Development department.
“It’s not an unprecedented thing,” Marquez said. “It doesn’t happen often, we’ve probably had half-a-dozen companies that have asked us to terminate – we call it friendly termination because they are voluntarily giving it back.”
Hulu is seeking to change its employee compensation plan, he said, through a system based more on bonuses than on base pay.
The county’s incentive agreement required Hulu, within a year of its opening, to pay at least 70 percent of its employees $15.68 per hour, which the County considers a living wage. However, if Hulu pays fewer than 70 percent that base pay by implementing a bonus compensation program, then the company no longer qualifies for the tax abatement.
“Those employees might be making $18 or $20 an hour with the bonuses, but we don’t count the bonuses,” Marquez said. “They could be paying them less, but that’s where the market rate comes in, because they would have trouble hiring, I would suspect.”
Hulu has not disclosed to the County how much they are paying employees through this pay-plus-bonus compensation system, and did not respond to the Rivard Report‘s email request for more information. Hulu’s viewer operations center is located in northwest San Antonio.
County documents show it expects to recapture $5,940 in tax revenues with the agreement’s termination.
“At the end of the day, the contract protections for the public are there and they have effectively preserved our expectations,” Marquez said. “We’re not proceeding since they changed their end of the deal, and we’re fine with that.”
In 2017, the City also extended to Hulu a six-year, 100 percent tax abatement worth about $279,000. That deal required the company to create and retain 400 full-time jobs by June 30, 2019, with 65 positions paying an annual salary of at least $50,000 and the remaining jobs paying at least $11.83 an hour, the city’s living-wage standard.
The City would not say whether Hulu has asked to withdraw from that agreement.
“The City and Hulu have been in communication over the past several months,” Rene Dominguez, director of the City’s Economic Development Department, said in a statement. “We are exploring several options to find a mutually beneficial solution regarding their tax abatement agreement as Hulu continues to grow and thrive in San Antonio.”