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HomeMy WebLinkAboutAgenda - 06-21-2016 - 5-k - Contract Amendment to the Existing Interlocal Agreement between Orange County and the Town of Chapel Hill for the “LAUNCH Chapel Hill” Small Business Incubator 1 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: June 21, 2016 Action Agenda Item No. 5-k SUBJECT: Contract Amendment to the Existing Interlocal Agreement between Orange County and the Town of Chapel Hill for the "LAUNCH Chapel Hill" Small Business Incubator DEPARTMENT: Economic Development ATTACHMENT(S): INFORMATION CONTACT: Steve Brantley (1) Memorandum to BOCC from Director, Economic Development Launch Chapel Hill's Program (919) 245-2326 Manager, Dated June 8, 2016 (2) Current Interlocal Agreement Between Orange County & Town of Chapel Hill to Support a Small Business Incubator PURPOSE: To amend the existing Interlocal Agreement between Orange County and the Town of Chapel Hill enabling LAUNCH Chapel Hill to add space to the incubator facility's existing office to accommodate more start-up companies, and thereby increase the County's shared cost to support the facility. BACKGROUND: Attachment 1 is a memorandum from Ms. Dina Rousset, who oversees LAUNCH Chapel Hill as the program manager. The memo outlines the current activity of the facility and its companies, and UNC's close coordination to expand the University's commitment to entrepreneurial development. In the past month LAUNCH has learned of an opportunity to nearly double operating space, and has now made a funding increase proposal to its key partners: Orange County, Town of Chapel Hill, UNC and the venture capital supporter "Becker family" of Chicago. LAUNCH seeks to add 3,700 square feet of adjacent, available space to the incubator facility's existing 4,000 square foot office. This on-site expansion opportunity will allow LAUNCH to accommodate more start-up companies as it completes the initial accelerator program. The expansion of LAUNCH will increase the County's shared cost to support the facility, which will be paid from Article 46 sales tax funds, and thereby requires an amendment to the current Interlocal Agreement. The proposal would modify the current 3-year economic development relationship between Orange County and Town, which each share the lease cost of the "LAUNCH Chapel Hill" innovation center located at 321 West Rosemary Street. Currently, Orange County's $10,000 2 quarterly financial commitment (or $120,000 over 3 years under the Interlocal Agreement extending from January 1, 2016 to December 31, 2018) is paid from Article 46's entrepreneurial development category. The proposed facility expansion will increase the County's financial obligation by an additional $8,375 per quarter, or $33,500 annually for up to 3 years ($100,500 total over 36 months). This item has been included in the County Manager's FY2016-17 Recommended budget as an amendment. The current Interlocal Agreement (Attachment 2) is attached for review. The Chapel Hill Town Manager is presenting this contract proposal later this month to the Chapel Hill Town Council for review. Also, the UNC's Chancellor's Budget Committee officially informed LAUNCH on June 8, 2016 that it has agreed to provide funding at $33,500 per year. Timeline • As part of the Board of County Commissioners strategic planning in 2011 to utilize Article 46 funding to support key economic development priorities, the importance of growing and retaining entrepreneurial start-up talent in Orange County was included. The Board sought to reverse the historic trend where promising, growth-oriented start-up companies originating out of the University of North Carolina would eventually relocate to adjacent counties over time. Orange County contracted with UNC Chapel Hill's Department of City & Regional Planning department head, Dr. Emil Malizia, in 2011 & 2012, who conducted a regional real estate assessment of average lease costs, ideal space needs and working environments that start-up companies seek throughout their developmental life span. A key recommendation from the consultant report highlighted a severe shortage of competitively priced incubator facilities here in the County, and suggested the development of an innovation center to better retain entrepreneurial talent coming out of the University and from the local community. • In March 2012, available property located at 321 West Rosemary Street in Chapel Hill was identified as a potential incubator location, and the Town of Chapel Hill and Orange County began working collaboratively to support further development of an innovation center at this site. • On April 3, 2012 the Board of County Commissioners received a summary of the potential economic development project during closed session. Following this report, the Board agreed to continue moving forward on this opportunity. • In July 2012, Orange County prepared a draft Interlocal Agreement outlining the commitments of both parties. The final version of the Interlocal Agreement was signed by the County and Town in late 2012, establishing an initial 3 1/2 year term where both local governments would provide a 50/50 co-share of the lease cost for the facility. The County's cost, paid by Article 46 funds, was $10,000 per quarter, or $140,000 total. "Launch Chapel Hill" eventually took form at 321 West Rosemary Street, accepted the initial group of student tenants, and officially opened on May 1, 2013. In addition, UNC Chapel Hill's close mentoring support expanded and the University became a financial backer, and attracted private venture capital support by the Becker family. • On November 4, 2015 the University of North Carolina at Chapel Hill was recognized among the top five best performing university business accelerators in North America, based on a 2015 benchmark study by UBI Global, a thought leader in performance analysis of business incubators around the world. 3 • On November 17, 2015 the BOCC approved a new 3-year Interlocal Agreement starting on January 1, 2016 and expiring on December 31, 2018. The County's cost remained at $10,000 per quarter, or $120,000 total over 36 months. FINANCIAL IMPACT: The proposed new Interlocal Agreement requires Orange County to contribute an additional $8,375 per quarter (or $33,500 annually) for up to three (3) years, or up to $100,500 total. This is an increase in Orange County's current level of funding the BOCC approved on November 17, 2015 to co-fund LAUNCH with the current Interlocal Agreement with Chapel Hill. County funding is provided by Article 46 proceeds dedicated for entrepreneurial development, and not from the General Fund. SOCIAL JUSTICE IMPACT: The following Orange County Social Justice Goal is applicable to this agenda item: • GOAL: ENSURE ECONOMIC SELF-SUFFICIENCY The creation and preservation of infrastructure, policies, programs and funding necessary for residents to provide shelter, food, clothing and medical care for themselves and their dependents. RECOMMENDATION(S): The Manager recommends that the Board receive and review the amended Interlocal Agreement proposal, direct the County Attorney to coordinate with the Chapel Hill town attorney to draft a contract amendment to the current Interlocal Agreement, and authorize the Manager to sign. Attachment 1 4 4611111111111111 11111111111111111111 munge .10 111111 1111111 1111111 0111 1111111 1111111 MEMORANDUM To: Orange County Board of Commissioners Orange County Manager's Office From: Dina Rousset Program Manager-LAUNCH Chapel Hill &Associate Director, Center for Entrepreneurial Studies University of North Carolina at Chapel Hill, Kenan-Flagler Business School Subject: Launch Chapel Hill Funding Request Date: June 8, 2016 Overview and Accomplishments In early 2012 members of the Becker family and UNC's Kenan-Flagler business school began discussing the idea of a student business incubator at UNC. In May 2012 this was formalized into a proposal that was followed by commitments from UNC's Chancellor's office, the Town of Chapel Hill, Orange County and a Chapel Hill digital marketing company (3 Birds) to establish Launch Chapel Hill. The stated mission at the time was to "serve as a physical space where students and recent graduates come together with the broader entrepreneurial community to engage in innovation and entrepreneurial efforts. The high-profile space will offer resources to innovators and entrepreneurs who do not have a natural home in a specific campus unit and will serve as a common facility that celebrates and supports our campus wide innovation culture." Four years later Launch Chapel Hill is a best-in-class accelerator program serving students, faculty, staff and the wider community. Launch Chapel Hill has delivered on each of the objectives set in the original proposal as well as on many other important objectives of the Town Of Chapel Hill, Orange County and UNC. Launch has been lauded as a major success by the town and county, by UNC, by the local and regional press and also by UBI Global, the leading global agency that ranks university incubators and accelerators. In their biannual ranking released in November 2015 UBI Global ranked Launch Chapel Hill as the 4th best University based accelerator in North America. To date, Launch Chapel Hill has served 55 companies and every six months accepts another 8 to 10 companies into the program. The vast majority of these companies remain in business. Almost all businesses have received outside funding and are continuing to build their companies. Total funding is approaching $10 million. These companies have also contributed to enhancing the student learning experience at UNC by hiring interns, presenting in classes and offering project based learning opportunities to students at both the undergraduate and graduate level. The companies are also moving back out into the community leasing space and adding jobs. As more 5 companies move through the accelerator program the impact is increasing exponentially. Unfortunately we as a community are still losing many of these companies to our surrounding communities, Durham and Raleigh due to the fact that Chapel Hill does not have a co-working space (like 1871, American Underground or HQ Raleigh) UNC and Chapel Hill's Long-Term Vision The Chancellor's Office of Innovation and Entrepreneurship and the Center for Entrepreneurial Studies are working with the UNC Facilities Department, Campus Real Estate Office, and renowned Baltimore based architecture and planning firm Ayers Saint Gross to develop an Innovation Space Program and development strategies for a 150,000 square foot Innovation Center at the edge of campus as part of the 2016 University Master Plan. The Town and County are also key partners in this process. Ayers Saint Gross will be presenting to UNC's Board of Trustees within the next few months and the goal is to open this cutting edge space within the next 3 to 5 years. In the meantime, there is a need for space to support our growing businesses. Bridge While UNC is poised to develop an impressive 150,000 square foot innovation center within the next 3 -5 years, that we believe will have Launch Chapel Hill at its' heart, in the meantime the entrepreneurial ecosystem at UNC, Chapel Hill and Orange County continues to grow and we seek to continue to be a leader in the ecosystem. We have an opportunity to develop an additional 3700 square foot of space that can be leased to growing companies in the same building as our current facility. We are therefore proposing that the key partners in Launch support an expansion of space at our existing location to accommodate companies that complete the accelerator program. We currently lose some of our most promising companies to neighboring towns as Chapel Hill does not have an 1871 style co-working facility for companies as they graduate from the Launch accelerator program. We have just learned of an opportunity to add 3700 square foot of space in our existing building at a highly attractive rental rate ($14 per square foot plus CAM). We have outlined below the total cost over 3 years of adding this space. Much of the cost is at the outset to up-fit and furnish the space. Going forward the vast majority of operating expenses including staffing will be covered by rents from the tenant companies, as a result we have only shown the differential that we would look to the partners to support. The total cost is approximately$101,500.00 per year or$304,500.00 total over 3 years. On Monday afternoon we presented a proposal to the Becker family requesting their support at$25,500.00 per year. We have been told to expect a response in the next two weeks. Given the urgency and the benefit to the Town of Chapel Hill, Orange County and the University of North Carolina we are herewith requesting that the County as well as the Town and UNC support at $33,500.00 per year for up to 3 years, or$101,500.00 each over the next 3 years. The Town of Chapel Hill has now incorporated the $33,500 of annual funding into their budget. Today the UNC Chancellor's Budget Committee reviewed the $33,500 per year request and were advised by the provost it looks promising. You should hear something official very soon." If the Becker family also responds favorably to our funding request we could together determine whether to reduce the Town, County and UNC commitments or to simply extend the term covered by the commitment. Thank you for your consideration. 6 ce July 2016-June 2019 (3 year 2016/17 2017/2018 2018/2019 Total) Site upgrades Partitioning of offices $60,000.00 $0.00 $0.00 $60,000.00 Lighting and wiring $20,000.00 $0.00 $0.00 $20,000.00 Flooring and paint $10,000.00 $0.00 $0.00 $10,000.00 Total upgrades $90,000.00 $90,000.00 Modular Furnishings $60,000.00 $0.00 $0.00 $60,000.00 Ili.$150,000-00 . $O Operational Expense Differential Lease $25,000.00 $25,750.00 $26,522.50 $77,272.50 Personnel $25,000.00 $25,750.00 $26,522.50 $77,272.50 Total Operational Expense Differential $50,000.00 $51,500.00 $53,045.00 MIMI iota' Expenses IIMM IMAM $51,500.00 $53,045.00 $304,545.00 Total Funding Required : $304,545.00 Annually for 3 years: $101,515.00 7 Attachment 2 I STATE OF NORTH CAROLINA INTERLOCAL AGREEMENT COUNTY OF ORANGE This INTERLOCAL AGREEMENT("Agreement")is hereby made and entered into this the day of ,2015,by and between ORANGE COUNTY,hereinafter referred to as("County"), and the TOWN OF CHAPEL HILL, hereinafter referred to as ("Town") pursuant to N.C. Gen. Statute 160A-460 et seq., 160A-17.1 and other applicable laws. WITNESSETH: WHEREAS, County and Town desire to continue with a partnership initiated through a 2012 interlocal agreement between the Parties whereby local startup businesses have more opportunities to remain in Orange County and Chapel Hill. NOW, THEREFORE, in consideration of the mutual covenants, promises and agreements contained herein, the parties hereto agree as follows: 1. County Grant. County shall grant to the Town one hundred twenty thousand dollars ($120,000.00). This grant shall be payable quarterly in installments of ten thousand dollars ($10,000.00). Town acknowledges and agrees the full amount, which shall not exceed one hundred twenty thousand dollars ($120,000.00), shall be expended by Town for the sole purpose of establishing and maintaining a small business incubator/joint working space at 321 West Rosemary Street, Suite 110, Chapel Hill, North Carolina (the "Small Business Incubator"). County and Town agree this grant is the full extent of the County's contribution. Town shall be responsible for conducting any statutorily required public hearing prior to the expenditure of any grant funds. 2. Town Obligation. Town shall be responsible for payment of the rental obligation of the Small Business Incubator property using the County grant, together with Town resources, in order to maintain the property's availability for lease and sublease as a Small Business Incubator. 3. Term. The term of this Agreement shall commence the 1st day of January 2016 and shall continue for a period of thirty-six (36) months. This Agreement may be renewed for up to two additional three-year terms. Any such renewal, or any other modification, shall be accomplished through a mutually agreed upon written amendment to this Agreement and may be approved and executed by the managers of the County and Town. 4. Reporting. Town shall on or before July 1 annually during the term of this Agreement provide a report to the Orange County Manager detailing the expenditure of the grant funds described in Section 1 above. Upon request by County,Town shall provide County with any audit or underlying documents necessary to verify the contents of the annual report. In the event such report or documents are not provided County may suspend grant installments until such time as the report or documents are provided. 5. Force Majeure/Emergency Non-Appropriation. In the event Town or County should be delayed in, or prevented from,performing or carrying out any of the agreements, covenants, or obligations made by, and imposed upon, said Party by this Agreement, by reason of or through any cause reasonably beyond its control and not attributable to its neglect, including but not limited to condemnation, order of any court granted in any bona fide adverse legal proceeding or action, explosion, fire or other act of God or public enemies, and/or emergency non-appropriation, then, in each such case or cases, the affected Party shall be relieved of performance under this Agreement. 6. Termination. The County and Town may terminate this Agreement upon mutual written agreement approved by the County's and Town's managers. Either County or Town may terminate this Agreement 8 upon a material breach by the other. Material breach includes but is not limited to the failure by Town to expend grant funds as required by this Agreement. Effective the date of termination any termination of this Agreement relieves County of any further responsibilities or obligations established by this Agreement. IN WITNESS WHEREOF,the parties have caused this Interlocal Agreement to be executed as of the day and year first above recorded. FOR ORANGE COUNTY FOR CHAPEL HILL By: By: Bonnie Halnmersley Roger Stancil Orange County Manager Chapel Hill Town Manager This instrument has been pre-audited in the manner required by the Local Government Budget and Fiscal Control Act. Orange County Chief Financial Officer This instrument has been pre-audited in the manner required by the Local Government Budget and Fiscal Control Act. Town of Chapel Hill Finance Director 2