The competition is cutthroat among states and cities working to land major corporate names like Tesla, but the less visible fights among area municipalities to attract companies looking to move or expand can be just as intense.
That’s why the decision by CST Brands to keep its corporate headquarters in San Antonio is a big win for the City of San Antonio, Bexar County and the San Antonio Economic Development Foundation (EDF), which overcame significant efforts by the cities of Schertz and Live Oak to lure away the recently formed Fortune 500 company.
“In economic development, the grand prize is the corporate headquarters of a Fortune 500 company,” said Mario Hernandez, the EDF’s president and CEO. “CST had choices, but they’re a home-grown company and it was important to retain them. This is a great example of the city, the county, and the community coming together for a business retention project just as strongly as they’ve come together trying to attract a company from the outside.”
CST Brands (CST), which was spun off by Valero in May 2013 and trades on the New York Stock Exchange, operates the nation’s second largest chain of convenience stores and retail fuel outlets. The company had $12.8 billion in revenues last year, and operates more than 1,900 Corner Stores nationwide that employ more than 12,000 people.
City Council approved a 10-year, 80% tax abatement on CST’s incremental investments in the new corporate headquarters it will establish, and a Chapter 380 grant agreement worth $500,000. Council also approved a resolution nominating CST for a Texas Enterprise Project grant.
In return, CST agreed to maintain its current level of 305 full-time jobs at its San Antonio offices and add 100 new corporate jobs over the next five years. CST also will invest $27 million in its new corporate headquarters and distribution warehouse, a 77-acre site at 19500 Bulverde Road in District 10.
The City and County tax abatements will apply to the CST capital investment in the new headquarters. Pearson Assessments, a British-owned textbook and learning assessment company, currently is the lead tenant there with a lease that expires in March 2016.
“CST has been a tremendous corporate citizen since they spun off from Valero last year, and we want to make sure they continue contributing to our city in many different ways, from jobs and economic development to volunteerism and charitable giving,” Mayor Ivy Taylor stated in a press release before Thursday’s vote.
“The incentives package put together by the County and the City is a great example of how incentives can work to retain a great corporate headquarters and strengthen the community’s workforce in San Antonio,” said District 10 Councilmember Mike Gallagher. “CST Brands will be a great addition to District 10 and I look forward to our continued partnership.”
The City’s incentive package follows a vote by County Commissioners last week to give CST a 10-year, 75% abatement on its county taxes.
“We want CST Brands to continue to prosper and grow here,” said Precinct 3 County Commissioner Kevin Wolff. “There is no doubt in my mind that the return on investment is well worth the incentive.”
Kevin Sheehan, CST’s vice president for internal audit and risk management, was on hand with other company officials at Thursday’s Council meeting. He said afterwards that the competition among local municipalities was significant.
“We were in some pretty serious negotiations with developers in Schertz, which is the current location of our distribution center,” Sheehan said. “We had to go down parallel paths because we weren’t sure the Bulverde Road property owner, Lexington Realty Trust, would be willing to sell the property.
“At the time we approached them, there were five tenants on the property and we had to negotiate with each one of them,” Sheehan added. “It took the first half of this year to iron out an agreement. It was a complex deal. We had to have backup plans or other options, and frankly, there were some pretty good ones. If the City of San Antonio had said no to a deal because we were already here, that would have been a big factor in our decision-making process.”
Sheehan said CST’s development of its new corporate campus will occur in two phases. The company will renovate the 450,000 sq. ft. warehouse there and move its distribution center there from Schertz by March 2015. Two current warehouse tenants on Bulverde Road will remain there.
Renovations will begin on the 146,000 sq. ft. office building currently occupied by Pearson no later than March 2016, perhaps sooner if CST and Pearson can agree on other arrangements. Sheehan said CST will move into its new offices for third quarter next year or sooner.
“The city and county will end up receiving more tax dollars on the property in 2015 than in 2014 because our investment there will add so much value,” Sheehan said. “The abatement is on the incremental value of the property.”
City staff said Thursday that the estimated value of the abated taxes over the 10-year period is $915,746 along with the $500,000 Economic Development Incentive Fund grant, while the estimated positive fiscal impact to the City will be $2.5 million over the next 20 years.
*Featured/top image: Corner Store image courtesy of CST Brands.