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HomeMy WebLinkAboutAgenda 10-19-2021; 8-f - Renewal of the Expiring Three-Year Interlocal Agreement between Orange County and Chapel Hill to Continue the Joint Funding for the “LAUNCH, Inc.” Small Business Incubator 1 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: October 19, 2021 Action Agenda Item No. 8-f SUBJECT: Renewal of the Expiring Three-Year Interlocal Agreement between Orange County and the Town of Chapel Hill to Continue the Joint Funding for the "LAUNCH, Inc." Small Business Incubator DEPARTMENT: Economic Development ATTACHMENT(S): INFORMATION CONTACT: New Three-Year Interlocal Agreement Steve Brantley, Director, Orange County between Orange County and the Town Economic Development, (919) 245- of Chapel Hill 2326 PURPOSE: To renew the current three-year Interlocal Agreement between Orange County and the Town of Chapel Hill that financially supports the LAUNCH, Inc. entrepreneurial small business incubator. BACKGROUND: The award-winning LAUNCH innovation center located at 306 West Franklin Street in Chapel Hill has been promoting the growth of small businesses in Orange County since its creation in 2012. The County's cost to participate in the 50/50 co-funding Agreement with the Town of Chapel Hill is paid directly from Orange County's Article 46 funds that support core economic development initiatives. LAUNCH also receives financial and mentoring support from the University of North Carolina. The attached proposed Interlocal Agreement between the Town and County replaces the current three-year Agreement that expires on December 31, 2021, and continues the joint economic development sponsorship that has been shared equally between Orange County and the Town of Chapel Hill since 2012. Orange County's current $18,375 quarterly financial commitment (or $73,500 annually) under the expiring three-year Interlocal Agreement has been paid from the County's Article 46 economic development category specifically designated to nurture entrepreneurial development. This expenditure was included in the County Manager's FY2021- 22 budget as one of the existing economic development initiatives funded from Article 46. The County's current annual payment of$73,500 over the previous three years is proposed to remain unchanged for the new proposed three-year renewal. The Town of Chapel Hill contributes the same level of funding as the County, with UNC Chapel Hill also providing significant financial support. Early History 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 2 entrepreneurial start-up talent in Orange County was included. The Board sought to reverse the historic trend where promising, growth-oriented tech start-up companies originating out of the University of North Carolina and Orange County were eventually relocating to adjacent counties. Durham's renowned "American Underground" incubator and co-working venture at the American Tobacco campus has historically been a significant competitor to draw local start-up talent away from Orange County. In response, Orange County contracted with UNC Chapel Hill's Department of City & Regional Planning department head, Dr. Emil Malizia, in 2011 & 2012. Dr. Malizia conducted a regional real estate assessment of average office 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 in Orange County, and suggested the development of an innovation center to better retain entrepreneurial talent coming out of the University and from the local community. Following passage of the successful Article 46 referendum in November 2011, the County gained a new revenue source that enabled it to join with the Town of Chapel Hill to establish the "LAUNCH Chapel Hill" incubator. A series of interlocal agreements were subsequently approved between Orange County and the Town of Chapel Hill. On June 25, 2018, Orange County, the Town of Chapel Hill, the Chapel Hill Downtown Corporation and the University of North Carolina at Chapel Hill agreed to continue all parties' mutual support of the LAUNCH incubator. Also in 2018, operational efficiencies were identified by the Town of Chapel Hill and UNC, leading to a recommendation that the LAUNCH structure among key stakeholders should ideally be shifted into a non-profit agency. This organizational change was approved by both the County, UNC and the Town, when the Orange County Board of Commissioners in February 2019 reviewed and approved the proposed nonprofit's new Bylaws and the County's joint participation as an executive board member on the "LAUNCH, Inc." executive board. "LAUNCH CHAPEL HILL", was subsequently transitioned into a nonprofit in November 2019 and renamed "LAUNCH, Inc. Notable Achievements & Positive Economic Impact on the Local Economy: Velvet Nelson, who has served since December 2019 as Director of the agency, provided the following statistics to illustrate the incubator's notable economic contribution to the local community for the period 2012 to 2020: • 153 companies have been accelerated since 2012 • 98 of those companies are still active 0 94% remained in business after 1 year; 64% remained in business after 2 years 0 31 companies began with UNC students as primary founders, and 7 remain in business • 802 total employees in 2020 • 202 jobs based in Orange County • 25 companies call Orange County home • $714,000 in total venture funding was raised in 2020, compared to $940,000 raised in 2019 • $69 million in total revenues earned in 2020, compared to $43 million raised in 2019 • 35 start-up firms participated in the accelerator program in 2020 o (47% minority-owned, 53% women-owned) • 12,150 square feet of total leased office space • $184,500 paid in rent • $99,000 in annual spending in downtown Chapel Hill • 88 engaged mentors in 2020 3 • 177 Zoom calls and 15 events completed in 2020 • LAUNCH directly contributed to the University of North Carolina at Chapel Hill being recognized on November 4, 2015 as ranking among the top five best performing university business accelerators in North America, based on a 2015 benchmark study by the incubator consultant firm UBI Global, which is a renowned leader in performance analysis of business incubators around the world. History of interlocal agreements between Orange County and the Town of Chapel Hill to jointly support LAUNCH Orange County and Town of Chapel Hill have provided joint financial support of the LAUNCH small business innovation center for the past 91/2 years via previous Interlocal Agreements, as follows: (1) First Interlocal Agreement between the Town and County (31/2 year initial term of 50/50 co-sharing of lease payments for 4,000 square feet, for the period July 1, 2012 to December 31, 2015) • The initial 3'/2 year (42 month) Interlocal Agreement between the County & Town to co- fund LAUNCH was split 50/50 in a mutual cost sharing. The County paid its portion from Article 46 funds ('/4 cent sales tax proceeds for economic benefit) dedicated to providing entrepreneurial support, at a level of $10,000 per quarter for 42 months, or a total cost to the County of $140,000 over the full 3'/2 year initial term. The Town of Chapel Hill provided an equal amount of financial support. This first Interlocal Agreement expired on December 31, 2015. (2) Second Interlocal Agreement between the Town and County (a 3-year renewal of financial support, at the same annual cost that was set during the first Interlocal Agreement) • On November 17, 2015, the BOCC approved a new three-year (36-month) Interlocal Agreement starting on January 1, 2016 and expiring on December 31, 2018. The County's financial contribution remained the same at $10,000 per quarter, or a total cost of $120,000 to the County over the initial three-year term. The County's payment was funded from Article 46. The Town also provided an equal level of financial support. (3) Amendment made to the Second Interlocal Agreement to permit LAUNCH to add 3,700 square feet for additional co-working space in the incubator's existing facility. • The second Interlocal Agreement was amended in June 2016 to permit an on-site expansion of the LAUNCH office, which required Orange County and the Town to contribute an additional $8,375.00 per quarter ($33,500.00 annual increase) for up to three (3) years. The amended annual cost to the County then increased to $18,375 per quarter, or a total of $73,500 per year. The Town also provided an equal level of financial support. The amended Interlocal Agreement expired on December 31, 2018. (4) Third Interlocal Agreement between the Town and County (a three-year renewal of financial support, at the same annual cost that was set during the second Interlocal Agreement) • The third Interlocal Agreement was amended on February 25, 2019 to set a new three- year term. The County and Town continued to provide an equal 50/50 co-share of financial support (each local government paying $18,375 per quarter, or a total of $73,500 per year). The amended Interlocal Agreement expires on December 31, 2021. 4 FINANCIAL IMPACT: The proposed new Interlocal Agreement requires Orange County to contribute $18,375 per quarter (or $73,500 annually) for up to three (3) years, or a total of up to $220,500 over the full 3 years. County funding is provided exclusively by Article 46's annual retail sales tax collections that support a variety of economic development activities to include the LAUNCH small business incubator. The annual payment amount proposed in the new Interlocal Agreement is already included in the County's fiscal year 2021-2022 budget to mirror the current Interlocal Agreement's identical annual contribution ($18,375 per quarter, or a total of$73,500 per year) under the existing Interlocal Agreement that expires on December 31, 2021. Therefore, there is no new budget impact. SOCIAL JUSTICE IMPACT: The following Orange County Social Justice Goal is applicable to this 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. ENVIRONMENTAL IMPACT: There is no Orange County Environmental Responsibility Goal impact associated with the proposed renewal of the LAUNCH incubator and new interlocal agreement. RECOMMENDATION(S): The Manager recommends that the Board: 1) Continue the County's contractual relationship with the Town of Chapel Hill by approving the new Interlocal Agreement renewing the County's joint funding arrangement of the "LAUNCH, Inc." small business incubator for an additional three (3) years at the same annual financial commitment level that has been in effect for the past three (3) years, and 2) Authorize the Manager to sign the Agreement. 5 STATE OF NORTH CAROLINA COUNTY OF ORANGE INTERLOCAL AGREEMENT This INTERLOCAL AGREEMENT ("Agreement") is hereby made and entered into this the day of , 2021,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 originally initiated through a 2012 interlocal agreement, and renewed in new 2016 and 2019 agreements between the Parties, whereby local startup businesses in the "LAUNCH, Inc." incubator 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 a sum of two hundred twenty thousand five hundred dollars ($220,500.00). This grant shall be payable in twelve (12) quarterly installments of eighteen thousand three hundred seventy-five dollars ($18,375.00). Town acknowledges and agrees the full amount, which shall not exceed two hundred twenty thousand five hundred ($220,500.00), shall be expended by the Town for the sole purpose of establishing and maintaining a small business incubator space located at 306 W. Franklin Street, Chapel Hill, North Carolina 27516 (the nonprofit LAUNCH, Inc.). 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. 6 2. Town Obligation. Town shall be responsible for receiving the grant from Orange County, and together with matched Town resources, remit them to Launch, Inc. for operation and rent to support a Small Business Accelerator to assist in the growth of businesses in Orange County. 3. Term. The term of this Agreement shall commence the 1 st day of January 2022 and shall continue for a period of thirty-six (36)months, expiring on 12/31/24. 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 Maieure/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 Parry 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 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. 7 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 TOWN OF CHAPEL HILL By: By: Bonnie Hammersley Maurice Jones 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