Title
Authorization to Enter into a Development Agreement with Fender Musical Instruments Corporation (Ordinance S-50337)
Description
Request authorization for the City Manager, or his designee, to enter into a Development Agreement (Agreement), and to execute any other instruments or documents as necessary with Fender Musical Instruments Corporation (Fender), and its affiliates or subsidiaries or its City-approved designees, for a performance-based job training reimbursement. Further request authorization for the City Controller to disburse funds in an amount not to exceed $250,000 with this action.
Report
Summary
Fender, a privately-owned company, was founded by Leo Fender in Fullerton, California in 1946 and was sold to CBS in 1965. In 1985, the management team formed Fender Musical Instruments Corporation and bought the company back from CBS. Today, Fender is the world's leading guitar brand with an estimated 43 percent market share. Fender estimates that 80-90 percent of artists use Fender branded guitars, basses, and/or amplifiers. Notable artists include Jimi Hendrix, H.E.R., Eric Clapton, Bonnie Raitt, and Stevie Ray Vaughan.
In addition to its success in the music industry, Fender is dedicated to promoting art and music education for children. The Fender Play Foundation has provided over 100,000 students with access to musical instruments, with the goal of giving one million students across the United States the opportunity to learn a new instrument by 2030.
Fender currently has two headquarters office locations. The first is a smaller approximately 24,500 square foot (SF) headquarters in the heart of Hollywood, amongst industry decision makers. The second, is located in Scottsdale and houses certain executive, research and development, and back-office functions.
The Scottsdale location will be replaced with an anticipated 88,000 SF build-to-suit office campus located at PV Reimagined (former Paradise Valley Mall site). This new corporate co-headquarters location will accommodate the existing Arizona workforce (approximately 200 employees), with the intention to hire up to 100 new employees. The Hollywood office will remain open and remain a headquarters location.
According to a third-party economic analysis, the expansion will create $456.9 million in economic output and $4.2 million in tax revenue over a 10-year period. The City recognizes the economic impacts from Fender’s expansion efforts to the City and region and to remain competitive on a national level, while ensuring these quality job positions are created in Phoenix, staff is recommending to enter into an Agreement with Fender for the creation of a new U.S. corporate co-headquarters in Phoenix. The proposed terms of the Agreement are as follows:
- Fender agrees to locate its corporate co-headquarters to the City of Phoenix, in a newly constructed office building of approximately 88,000 SF, in the area known as PV Reimagined along Tatum Blvd. and E. Paradise Village Parkway (Site).
- Fender intends to locate its approximately 200 existing Arizona jobs to the Site and to create a program model estimate of 100 additional new jobs within five years of completion of the new project. The City recognizes that the number of new jobs is an estimate and the Agreement will not be contingent upon the exact total job creation.
- The City will offer a performance-based job creation reimbursement through the Strategic Economic Development Fund (SEDF). The City will provide $2,500 to Fender, in arrears, for each net new job created and located at, reporting to, or taking oversight from the Site. The average annual salary of the new jobs is estimated at $100,000. Certain other terms and conditions will be outlined and captured in the Agreement. The total reimbursement amount will not exceed $250,000 over the term of the Agreement.
- Entering into the Agreement and participation in the job creation fund does not preclude Fender from working with the City's Workforce Innovation Opportunity Act (WIOA) Program or any other local and/or state program.
Contract Term
The Agreement term will be for six years to allow for final reporting and payment. Term will be calculated from completion of the building.
Financial Impact
The total contract amount will not exceed $250,000 over the six-year period. The Community and Economic Development Department has funding available within the SEDF.
Location
Tatum Boulevard and E. Paradise Village Parkway
Council District: 3
Department
Responsible Department
This item is submitted by Deputy City Manager John Chan and the Community and Economic Development Department.