HomeMy WebLinkAboutR-2000-047 ClientLogic agreement for CDBG fundsr
RESOLUTION NO. R -2000-
A
47
RESOLUTION authorizing and directing the City Manager to execute a Grant
Agreement with ClientLogic Operating Corporation for a grant of
federal Community Development Block Grant funds to assist
ClientLogic to establish a customer relationship management
services operation involving at least 400 employees within two years
in the City's CDBG Target Area.
WHEREAS, the City has received and is responsible for administration of annual
Entitlement Grants of Community Development Block Grant ("CDBG") funds made
available through the United States Department of Housing and Urban Development
(HUD) and authorized by Title I of the Housing and Community Development Act of
1974, as amended; and
WHEREAS, federal regulations governing the use of CDBG funds for special economic
development projects allow the City to use such funds to provide grants to assist
private, for-profit businesses with projects that provide an appropriate level of public
benefit; and
WHEREAS, ClientLogic Operating Corporation ("ClientLogic") is a private for-profit
international provider of marketing, customer contact management and fulfillment
services focused on electronic commerce and technology companies. ClientLogic refers
to its services collectively as customer relationship management services; and
WHEREAS, ClientLogic is interested in establishing a customer relationship
management services operations involving at least 400 new jobs in the City's CDBG
Target Area.
WHEREAS, the City has reviewed the financial statements of ClientLogic and has
determined that the CDBG grant assistance described in the attached Grant Agreement
is necessary and appropriate as an economic incentive to ensure that ClientLogic
establishes a customer relationship management services operation in the City's CDBG
Target Area; and
WHEREAS, establishment of customer relationship management services in the City's
CDBG Target Area would provide substantial appropriate public benefits to the City,
particularly by creating new jobs; and
WHEREAS, it is in the best interests of the City to assist ClientLogic to establish a
customer relationship management services operation in the City's CDBG Target Area
by using federal CDBG funds as an economic incentive performance grant to
ClientLogic of up to $700,000 over the course of five years at the rate of up to $140,000
per year to reimburse ClientLogic for eligible economic development expenses; now,
therefore,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKIMA:
The City Manager is authorized to sign the attached Agreement between the City
of Yakima and ClientLogic Operating Corporation for a CDBG Economic Development
Performance Grant for a Customer Relationship Management Services Operation in the City of
Yakima's CDBG Target Area.
May
ADOPTED BY THE CITY COUNCIL this 2nd day of 1, 2000.
ATTEST:
City Clerk
y Place, Mayor
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AGREEMENT BETWEEN THE CITY OF YAKIMA
AND CLIENTLOGIC OPERATING CORPORATION
FOR A CDBG ECONOMIC DEVELOPMENT PERFORMANCE GRANT
FOR A CUSTOMER RELATIONSHIP MANAGEMENT SERVICES OPERATION
IN THE CITY OF YAKIMA'S CDBG TARGET AREA
I. PARTIES
THIS AGREEMENT is made and entered into by and between the CITY OF
YAKIMA (the "City"), a first-class city incorporated under the laws of the state of
Washington, and CLIENTLOGIC OPERATING CORPORATION, a Delaware
corporation having its principal place of business located at 699 Hertel Avenue,
Buffalo, New York 14207 ("Grantee"). The City and Grantee are referred to in this
Agreement collectively as the "Parties."
II. RECITALS
Grantee is a private, for-profit international provider of marketing, customer contact
management and fulfillment services focused on electronic commerce and technology
companies. Grantee refers to its services collectively as customer relationship
management services.
Grantee is interested in establishing customer relationship management services
operations involving 400 new jobs in the City's Community Development Block Grant
("CDBG") Target Area.
The City has received and is responsible for administration of annual Entitlement
Grants of CDBG funds made available through the United States Department of
Housing and Urban Development (HUD) and authorized by Title I of the Housing and
Community Development Act of 1974, as amended.
Federal regulations governing the use of CDBG funds for special economic
development projects allow the City to use such funds as an economic incentive to
provide grants to assist private, for-profit businesses with projects that provide an
appropriate level of public benefit.
The City has reviewed the financial statements of the Grantee and has determined that
the CDBG grant assistance described below is necessary and appropriate to ensure that
Grantee establishes a customer relationship management services operation in the
City's CDBG Target Area.
Establishment of customer relationship management services in the City's CDBG Target
Area would provide substantial appropriate public benefits to the City, particularly by
creating new jobs. Accordingly, the City wants to encourage Grantee to establish such
an operation in the City's CDBG Target Area as a special economic development
project. The City is willing to use CDBG funds to assist Grantee by a performance grant
of up to $700,000 over the course of five years at the rate of up to $140,000 per year, as
described in the following agreement.
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III. AGREEMENT
In consideration of the benefits to each, the Parties promise and agree as follows:
1. THE PROJECT: CUSTOMER RELATIONSHIP MANAGEMENT SERVICES
OPERATION AND WORKFORCE LOCATED IN CDBG TARGET AREA. Grantee
shall, beginning June 2000, or as soon thereafter as appropriate workspace may be
ready, establish a customer relationship management services operation focused on
electronic commerce and technology companies in the City's CDBG Target Area (the
"Operation") and shall maintain that Operation in the City's CDBG Target Area for at
least five years. The establishment and maintenance of the Operation in the City's
CDBG Target Area for at least five years shall be known as the "Project." The City shall
consider the creation of new jobs to be the primary deliverable for this Grant
Agreement.
The Operation shall involve:
A. A Workforce comprised of at least 400 full-time equivalent (FTE)
permanent jobs providing customer relationship management services to
electronic commerce and technology companies. Such services shall include:
• Marketing services. Creation of customized marketing programs which help
Grantee's Internet -based clients profile and target new customers and
increase the loyalty of existing customers. Grantee's marketing services
include developing, maintaining and providing access to customer
information databases and analyzing this information to identify and address
specific needs of clients' customers.
• Customer contact management services. Grantee provides customer service
and technical support to its clients' customers 24 hours a day, seven days a
week through e-mail, online chat, fax, phone and mail. Grantee's ability to
communicate with its clients' customers through multiple channels enables it
to more effectively respond to their inquiries and needs.
• Fulfillment services. Grantee conducts its clients' order and payment
processing, warehousing, inventory management, picking, packing, shipping
and returns processing activities. Through these services Grantee distributes
its clients' products to their customers efficiently and cost effectively.
B. The Workforce shall include 70 management positions paid from $24,000
to $150,000 annually. The balance of the Workforce shall be customer service
representatives who will earn $7.50-$11.50 per hour. Wages for the entire
Workforce shall average at least $11.25 per hour.
C. Beginning as soon as appropriate workspace may be ready or earlier,
Grantee shall build its Yakima Workforce to at least 200 FTE's by the end of the
first year and then to 400 FTE's by the end of the second year. Afterwards,
Grantee shall maintain an average 400 FTE's per quarter.
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D. Grantee shall establish one or more training programs to assist people to
become qualified to work in the Operation. Such training programs may be
established in conjunction with local educational institutions, for example
Yakima Valley Community College; Heritage College; Central Washington
University at Ellensburg, Washington; and school districts in the region.
E. Grantee shall provide clear employment opportunities for promotion and
advancement for low- and moderate -income persons, as defined by federal
regulations applicable to CDBG economic development programs. The City
shall help Grantee understand HUD and other applicable statutes and
regulations.
F. DIVERSITY OF THE WORKFORCE. Grantee affirms, as an aspirational
goal, diversity in its Yakima Workforce comparable to the ethnic composition of
Yakima County and will use its best efforts to realize this aspirational goal. The
City will help Grantee affirmatively market opportunities in its Yakima
Workforce. The Parties understand and agree that this aspirational goal and
efforts related to it is not a contractual requirement and is not subject to any
contractual penalties.
2. PERFORMANCE GRANT. The City shall provide a Performance Grant to
Grantee of up to $700,000, awarded over the course of five years at the rate of up to
$140,000 per year, beginning in the year 2000, for the purpose of creating new jobs in
Yakima's CDBG Target Area by assisting Grantee to establish and maintain the
Operation as described above, in a facility located within the City's CDBG Target Area
and either owned by Grantee or leased for at least five years. The Grant shall be made
on the following terms and conditions:
A. The source of funds for this Grant Agreement is the City's CDBG
Entitlement Grant administered by HUD. Grantee shall be an assisted, private,
for-profit business under CDBG regulations for economic development
assistance. It is expressly understood and agreed by the Parties that the City's
obligations under this Grant Agreement are contingent upon the actual receipt of
federal CDBG funds adequate to meet the City's obligations under this
Agreement. If the City's annual CDBG Entitlement Grant is reduced to less than
$950,000 during the term of this agreement, the City shall not be obligated under
this agreement to make any subsequent grants to Grantee. If adequate funds are
not available to make payments under this Agreement, the City shall notify
Grantee in writing within a reasonable time, not to exceed thirty (30) calendar
days, after such fact has been determined. The City may, at its option, either
reduce the amount of its liability or terminate this Agreement.
B. Grant funds under this agreement shall be provided to Grantee only to
reimburse it for CDBG eligible economic development expenses including
without limitation employee outreach, recruitment, and training expenses, rent
subsidies, or purchase of equipment. Reimbursement shall be based upon
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invoices and supporting documentation submitted by Grantee to the City. Such
invoices and supporting documentation shall demonstrate the eligibility of the
expense(s) in question. Grant funds shall not be available to assist Grantee to
purchase, develop, rehabilitate or improve any real property unless Grantee and
the City have first agreed in writing to specific terms and conditions applicable
to such use of grant funds.
C. Grantee shall deliver to the City, within fifteen (15) days after its receipt of
any written request therefor, such information as the City may reasonably
require in its sole discretion necessary to determine whether the Grantee is
complying with its covenants and agreements contained in this Grant
Agreement. So long as Grantee commences the process of obtaining such
information and notifies the City of such action within the fifteen (15) day period
and proceeds diligently toward obtaining such information, Grantee shall have
an additional twenty (20) days from the date of the expiration of the initial 15 -
day period to furnish such information to the City.
D. It is expressly understood that, except for CDBG Entitlement Grant funds,
this Agreement shall in no way obligate any funds or resources of the City.
E. The City is not liable for the payment of any cost or portion thereof with
respect to the Project which:
1. Has been paid, reimbursed or is subject to payment or
reimbursement, from any other source other than Grantee's own funds.
2. Is not incurred in strict accordance with the terms of this
Agreement.
3. Has not been billed to City within sixty (60) calendar days
following billing to Grantee or termination of this Agreement, whichever
is sooner.
F. The City is not liable for any cost or portion thereof which is incurred with
respect to any activity of Grantee after the City has requested that Grantee
furnish data concerning such action prior to proceeding further, unless and until
Grantee is thereafter advised by the City to proceed.
G. The City shall not be obligated or liable under this Agreement for
provision of any goods or services or for payment of any monies to any party
other than Grantee.
H. The City shall make payment to Grantee within a reasonable time
following receipt of billing, provided it is complete and accompanied by
documentation as required in this Agreement.
I. Upon completion of the Project, should any expense or charge for which
payment has been made be subsequently disallowed or disapproved as a result
of any auditing or monitoring by the City or the United States Department of
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Housing and Urban Development, or any other Federal agency, Grantee will
refund such amount to the City within ten working days of written notice to
Grantee specifying the amount disallowed.
J. Refunds of disallowed costs may not be made from any CDBG, HUD, or
other federal funds received from or through the City.
K. Deobligation of Funds. In the event that actual expenditure rates deviate
from Grantee's provision of a corresponding level of performance, the City
hereby reserves the right to reappropriate or recapture any such under -expended
funds.
L. The term of this Grant Agreement shall commence on the date first above
stated and end five (5) years following the issuance of a City Certificate of
Occupancy for the Worksite.
M. Grantee shall submit a written report to the City during August of each
year during the term of this agreement that demonstrates Grantee's
establishment and/ or maintenance of the Workforce and Operation described in
this agreement. Grantee's report to the City shall describe the number and type
of jobs, FTE's, and employees in the Workforce, employee wages as a whole and
as distributed among different positions in the Workforce, employee training
programs, and other activities relevant to this agreement. Grantee agrees to
cooperate with the City or HUD in the development, implementation and
maintenance of record-keeping systems and to provide data reasonably
determined by the City or HUD to be necessary for the City or HUD to
effectively fulfill its monitoring and evaluation responsibilities under
24CFR570.506 and other applicable regulations.
N. Grantee must comply with all applicable federal and state statutes and
regulations. The City shall help Grantee understand HUD and other applicable
statutes and regulations. General and specific statutes and regulations which
may apply to the Project may include without limitation:
• Title VI of the Civil Rights Act of 1964 (42 USC 200(d));
• Title VIII of the Civil Rights Act of 1968 (42 USC 3601);
• Section 3 of the Housing and Urban Development Act of 1968, as
amended (12 USC 1701(u));
• Section 109 of the Housing and Urban Development Act of 1974, as
amended (42 USC 5309);
• Age Discrimination Act of 1975, as amended (42 USC 6101);
• Americans with Disabilities Act of 1990;
• Civil Rights Restoration Act of 1987;
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• 49 CFR Part 21;
• RCW 49.60;
• Davis -Bacon Fair Labor Standards Act (40 US27600000a-276a-5);
• Grant Agreement Work Hours and Safety Standards Act, as amended
(40 USC 327-333);
• Section 504 of the Rehabilitation Act of 1973 (29 USC 794);
• Architectural Barriers Act of 1968, as amended (42 USC 4151);
• Section 504 of the Rehabilitation Act of 1973, as amended (29 USC 792);
• Equal Employment Opportunity (Executive Order 11246,
September 24, 1965);
• Equal Opportunity in Housing (Executive Order 11063, as amended by
Executive Order 12259);
• The Hatch Act (5 USC 1501 et seq.);
• The National Environmental Policy Act of 1969;
• Uniform Relocation Assistance and Real Property Acquisition Policies
Act of 1970 and Amendments of 1987;
• Title IV of the Lead -Based Paint Poisoning Prevention Act (42 USC
4831);
• HUD Reform Act;
• Office of Management and Budget Circulars;
• A-87—Cost Principles for State and Local Governments and 24 CFR
Part 85, Administrative Requirements for Grants and Cooperative
Agreements to State, Local and Federally Recognized Indian Tribal
Governments;
• A-128 — Single Audit Act;
O. EQUAL OPPORTUNITY AND NON-DISCRIMINATION.
1. Grantee shall comply with all applicable equal employment
opportunity, affirmative action, and non-discrimination laws and
regulations in all material respects.
2. Grantee or its subcontractor(s) will furnish all information and
reports requested by the City and will permit access to its books, records,
and accounts for purposes of investigation to ascertain compliance with
such equal employment opportunity and affirmative action laws and
regulations.
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3. In the event of Grantee's or its subcontractor's non-compliance with
the non-discrimination requirements of this Agreement, this Agreement
may be canceled, terminated, or suspended in whole or in part upon
written notice by the City to Grantee.
P. SUBCONTRACTING. Grantee agrees that none of the work covered by
this Agreement may be subcontracted without the prior written approval of the
City. Any work or service that is allowed to be subcontracted hereunder shall be
subcontracted by written contract or agreement and shall be subject by its terms
to each and every provision of this Agreement, unless specific waiver is granted,
in writing, by the City. Performance and financing compliance by a
subcontractor is the responsibility of Grantee. Grantee agrees that no
subcontract placed under this Agreement shall provide for payment on a cost
plus a percentage of cost basis.
Q. In the event Grantee closes the Operation, but maintains the Workforce
and the Work as described in this agreement through the time of such closure,
Grantee shall be required to refund grant assistance only to the extent such
assistance exceeded $11,667 per month that passed before such closure.
R. If Grantee departs from the Workforce and/or Operation described
herein, the City may terminate this agreement. In the event of such termination
under this clause, Grantee shall immediately refund all grant assistance provided
by the City during the current 12 -month period.
3. GRANTEE'S EMPLOYEES NOT CITY EMPLOYEES. No agent, employee, or
representative of the Grantee shall be deemed to be an employee of the City for any
purpose, and the employees of the Grantee are not entitled to any of the benefits the
City provides for City Employees. The Grantee will be entirely responsible for the acts
of its agents, employees, servants, subcontractors, or otherwise during the term of this
Grant Agreement.
4. PERFORMANCE AND COMPLIANCE WITH ALL LAWS.
A. Grantee agrees to produce and deliver, at least annually until completion
of the Project, reports to the City regarding Grantee's fulfillment and satisfaction
of the terms and conditions of this Agreement. Such reports shall address in
reasonable detail the terms and conditions of Section 1 of this Grant Agreement.
Information about the Workforce and the establishment and maintenance of the
operation shall be summary in nature and shall preserve the privacy of
employees and Grantee's confidential and proprietary information. The City and
the Grantee shall develop an agreed report format, which shall specify the
information to be reported to the City. Such information shall include total
payroll by quarters, total FTE's by quarters, accounts of training programs and
training expenditures, distribution of types of jobs, length of employee tenure in
the Yakima Workforce, earnings and promotions history, and as available, age,
sex, ethnic background.
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B. It is expressly understood that Grantee's performance shall be in
substantial compliance with all federal, state, and local laws, regulations and
authorities and that any changes in applicable laws, regulations, or authorities
are automatically incorporated herein without specific reference. Without
limiting the foregoing and to the extent applicable, Grantee agrees to use the
funds provided hereunder in strict compliance with the federal program
requirements of 24 CFR, Part 570 (Federal Requirements), which in no way is
meant to constitute a complete compilation of all duties imposed upon Grantee
by law or administrative ruling or to narrow the standards which Grantee must
follow. Further, and to the extent applicable, Grantee agrees:
1. To carry out each activity in compliance with all federal laws and
regulations described in 24 CFR, Part 570, Subparts J and K, except for the
City's environmental responsibilities described in 24 CFR § 570.502 and
the City's responsibilities for initiating the review process under the
provisions of 24 CFR, Part 52.
2. In the event a question should arise as to the interpretation of the
federal regulations governing a particular aspect of the Project under this
Agreement, the City's interpretation shall prevail unless there is a
different interpretation issued by HUD, and Grantee shall not be deemed
in default under this Agreement for relying on the City's interpretation if
such interpretation is in writing and is later found to be incorrect.
3. Grantee understands and agrees that, without the written consent
of the City, all direct contact with HUD over any matter related to the
Project under this Agreement shall be made solely by the City.
5. REPRESENTATIONS AND WARRANTIES. Grantee represents and warrants
that:
A. All information, reports and data previously or subsequently requested by
the City and furnished to the City was complete and accurate in all material
respects as of the date shown on the information, data or report, and as of the
date of this Grant Agreement.
B. Any supporting financial statements previously requested by the City and
furnished to the City were complete, accurate and fairly reflect the financial
condition of Grantee as of the date shown on said report, and the results of the
operation for the period covered by the report, and since said date through the
date of this Grant Agreement there has been no material change in the financial
condition of Grantee which has not been disclosed.
C. No material litigation or proceedings are presently pending or threatened
against Grantee which have not been disclosed to the City.
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D. No provision of this Agreement contravenes or conflicts with the
authority under which Grantee is doing business or with the provisions of any
existing indenture or agreement of Grantee.
E. Grantee has the power to enter into this Agreement and accept payments
hereunder and has taken all necessary action to authorize such acceptance under
the terms and conditions of this Agreement.
F. Grantee is not in default on any obligations, covenants, or conditions
contained in any bond, debenture, note, or other evidence of indebtedness or any
mortgages or collateral instruments securing the same. Grantee also covenants
that the making of this Grant Agreement and the consummation of the
transaction contemplated herein will not violate any provision of law or result in
any breach or constitute a default under any agreement to which Grantee is
presently a party, or result in the creation of any lien, charge or encumbrance
upon any of its property or its assets other than as specifically may be allowed
under this Grant Agreement.
G. As applicable, Grantee shall promptly and completely file all tax returns
which are required and has paid or made provision for the payment of all taxes
which have or may become due pursuant to said returns or pursuant to any
assessments received by Grantee. Grantee covenants that no tax liability has
been asserted against Grantee by the Internal Revenue Service or any other
taxing authority for taxes in excess of those already paid or contested in good
faith, and Grantee knows of no basis for any such deficiency assessment.
H. Grantee shall promptly supply City with copies of its SEC 10(k) quarterly
reports and audited financial statements upon request by the City.
6. LEGAL AUTHORITY.
A. Grantee represents and warrants that it possesses the legal authority to
enter into this Agreement.
B. The person(s) executing this Agreement on behalf of Grantee represent
and warrant that they have been fully authorized by Grantee to execute this
Agreement on its behalf and to legally bind Grantee to all the terms,
performances and provisions of this Agreement.
C. In the event there is a judicial or administrative proceeding whereby the
legal authority of either Grantee or of the person signing this Agreement to enter
into this Agreement is disputed, City shall have the right, at its option, to either
temporarily suspend or permanently terminate this Agreement.
7. COMMERCIAL LIABILITY INSURANCE. On or before the effective date of
this Grant Agreement, the Grantee shall provide the city with a certificate of insurance
as proof of liability insurance in the amount of One Million Dollars ($1,000,000) that
clearly states who the provider is, the amount of coverage, the policy number, and
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when the policy and provisions provided are in effect. Any statement in the certificate
to the effect of "this certificate is issued as a matter of information only and confers no
right upon the certificate holder" shall be deleted. Said policy, or any replacement
policy, shall be in effect for the duration of this Grant Agreement. The policy shall
name the City, its elected officials, officers, agents and employees as additional insureds
and shall contain a clause that the insurer will not cancel or change the insurance
without first giving the City thirty (30) calendar days' prior written notice. Any
language in the clause to the effect of "but failure to mail such notice shall impose no
obligation or liability of any kind upon the company" shall be crossed out and initialed
by the insurance agent. The insurance shall be with an insurance company or
companies rate A -VII or higher in Best's Guide and admitted in the state of Washington.
8. WORKERS COMPENSATION. Grantee agrees to pay all premiums provided
for by the Workman's Compensation Act of the State of Washington. Grantee shall
furnish to the City evidence of the Grantee's workers' compensation coverage. Grantee
holds the City harmless for any injury or death to the Grantee's employees while
performing this Project.
9. INDEMNIFICATION AND HOLD HARMLESS. All employment, work and
services performed as part of the Operation will be performed or rendered entirely at
the Grantee's own risk, and the Grantee expressly agrees to defend, indemnify, and
hold the City, and all of its elected officials, officers, agents, and employees harmless
from any and all liability, loss, fines, penalties, or damage, including reasonable cost of
defense, they may suffer as a result of any claims, demands, actions, or damages to any
and all persons or property, costs, or judgments, against the City which result from,
arise out of, or are in any way connected with the activities of Grantee under or related
to this Grant Agreement.
10. CLAIMS. In the event that any material claim, demand, suit, or other action is
made or brought by any person, firm, corporation, or other entity against Grantee,
Grantee shall give written notice thereof to the City as soon as reasonably possible, but
not to exceed ten (10) calendar days after being notified of such claim, demand, suit, or
action. Such notice shall state the date and hour of notification of any such claim,
demand, suit, or other action; the names and addresses of the person, firm, corporation,
or other entity making such claim or that instituted or threatened to institute any type
of action or proceeding; the basis of such claim, action, or proceeding; and the name of
any person against whom such claim is being made or threatened. Such written notice
shall be delivered either personally, by mail, or by facsimile and shall be directly and
simultaneously sent to the City.
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11. CONDITIONS OF GRANT AND FUNDING OF GRANT. The making of the
Grant and the obligation of the City to advance any portion of the amount identified in
section 2 of this Grant Agreement are subject to the following additional conditions
precedent:
A. All of the representations and warranties contained in this Grant
Agreement shall be true and correct on and as of the time the Operation begins.
B. All actions undertaken in connection with the transaction contemplated
by this Grant Agreement and all documents incidental thereto shall be
satisfactory in form, scope and substance to the City, and the City shall have
received copies of all documents which it may have requested in connection with
said transaction in form, scope and substance satisfactory to it.
C. All necessary approvals or consents, if any such approvals or consents are
required of governmental bodies having jurisdiction with respect to the
Operation, shall have been obtained, and failure to have obtained such consents
prior to the issuance of the certificate of occupancy shall constitute default
hereunder.
D. If Grantee, or an entity constituting part of Grantee, is a corporation, there
shall be delivered to the City (with respect to each such corporation, if there be
more than one) a certified copy of the record(s) of minutes and Board Resolution
of the Board of Directors of each such corporation specifically authorizing its
officers to execute this Grant Agreement and all other documents necessary for
the consummation of this transaction. The record(s) of the minutes and
Resolution of the Board of Directors meeting shall be certified to be true by the
Secretary or Assistant Secretary of such corporation(s).
E. Issuance by the U.S. Department of Housing and Urban Development of a
Release of Funds which shall identify any additional requirements with respect
to the project, including but not limited to environmental conditions, restrictions
and mitigation requirements.
12. GRANT AGREEMENT—TERMINATION AND CLOSE OUT. If Grantee fails
to comply with the terms and conditions of this Grant Agreement, the City may pursue
such remedies as are legally available, including but not limited to the termination of
this Grant Agreement in the manner specified herein.
A. Termination without cause upon 90 days notice. Each Party may, upon 90
days prior written notice to the other Party, terminate this Grant Agreement.
B. Termination for Cause. The City may terminate this Grant Agreement in
whole or in part if Grantee fails to comply with the terms and conditions of this
Grant Agreement and any of the following conditions exist:
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1. The lack of compliance with the provisions of this Grant Agreement is
of such scope and nature that the City deems continuation of this Grant
Agreement to be substantially non -beneficial to the public interest.
2. Grantee has failed to take satisfactory corrective action as directed by
the City or its authorized representative within the time specified by it.
3. Grantee has failed within the time specified by the City or its
authorized representative to satisfactorily substantiate its compliance with the
terms and conditions of this Grant Agreement.
The City shall notify Grantee of the termination, the reasons therefore, and the
effective date, provided that the effective date must follow notice to Grantee by
at least 30 days, and may, within the exclusive discretion of the City, be extended
if Grantee demonstrates diligent efforts to cure any cause for termination. After
the effective date, no charges incurred under any terminated portions are
allowable.
C. Termination on Other Grounds. This Grant Agreement may also be
terminated in whole or in part by mutual agreement of the parties.
13. RULES OF CONSTRUCTION. In the event of an inconsistency in this Grant
Agreement unless otherwise provided herein, the inconsistency shall be resolved by
giving precedence in the following order:
A. Appropriate provisions of state and federal statutes and regulations including
HUD CDBG Regulations.
B. Any other provisions whether incorporated by reference herein or otherwise
provided that nothing herein shall be construed as giving preference to provisions of
this Grant Agreement over any provisions of law.
14. VENUE STIPULATION. This Grant Agreement has been and shall be
construed as having been entered into and delivered within the State of Washington,
and it is mutually understood and agreed by each party hereto that this Grant
Agreement shall be governed by the laws of the State of Washington, both as to
interpretation and performance.
Any action at law, suit in equity, or judicial proceeding for the enforcement of this Grant
Agreement or any provisions thereof, shall be instituted and maintained only in any of the
courts of competent jurisdiction at Yakima in Yakima County, Washington.
15. MODIFICATION. The City and Grantee hereby expressly reserve all rights to
jointly amend any provisions of this Grant Agreement, to consent to or to waive any
departure from the provisions of this Grant Agreement.
Either party may request changes in this Grant Agreement; however, no change or
addition to this Grant Agreement shall be valid or binding upon either party unless
such change or addition be in writing and executed by both parties.
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CITY OF YAKIMA-CLIENTLOGIC GRANT AGREEMENT
Last printed 05/02/00 4:56 PM
Page 12 of 13
16. SEVERABILITY. It is understood and agreed by the parties hereto that if any
part, term, or provision of this Grant Agreement is held by the courts to be illegal, the
validity of the remaining provisions shall not be affected, and the rights and obligations
of the parties shall be construed and enforced as if the Grant Agreement did not contain
the particular provision held to be invalid. If it should appear that any provision hereof
is in conflict with any statutory provision of the United States or the State of
Washington, said provision which may conflict therewith shall be deemed modified to
conform to such statutory provision.
17. CONFLICT OF INTEREST. No member, officer, or employee of the City, or the
Grantee, or assignees or agents, no member of the governing body of the City, and no
other public official of the City or such other localities who exercises any functions or
responsibilities with respect to the Project during his or her tenure or for one year
thereafter shall have any interest, direct or indirect, in any contract or subcontract, or
the proceeds thereof, for work to be performed in connection with a City CDBG-funded
program.
18. RETURN OF CDBG FUNDS. Grantee shall return to the City all monies
provided hereunder by the City to Grantee if Grantee materially changes the primary
purpose and scope of the CDBG Project as described on Exhibit "B". to the Grant
Agreement.
EXECUTED by the City EXECUTED by the Grantee
this .1rd day of Mai, 2000 this trday of ,,.,5-t,1,06" , 2000
THE CITY OF YAKIMA, WASHINGTON CLIENTLOGIC OPERATING
CORPORATION
By: ca,,
Attest:
Dick Zais, City Manager
By: /11C. Fs U 110 -4, ey
Name Printed: /% iifit
Title:Ce pa .-c.-Tc % ,J , G -
Karen Roberts, City Clerk
City Contract No. 2000-35
Resolution No. R- 2000-47
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CITY OF YAKIMA-CLIENTLOGIC GRANT AGREEMENT Page 13 of 13
BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
Item No.:
For Meeting of: May 2, 2000
ITEM TITLE: Conduct Public Hearing and Consider a Resolution Approving a
Performance Grant of $700,000 from the City's Community Development Block Grant (CDBG)
funds to ClientLogic Operating Corporation.
SUBMITTED BY: ' ''' ?am Cook, Director of Community and Economic Development
CONTACT PERSON/TELEPHONE: William Cobabe, Neighborhood Development
Services, Manager (575-6101)
SUMMARY EXPLANATION
ClientLogic is a private for-profit international provider of marketing, customer contact
management and fulfillment services focused on electronic commerce and technology companies
referred to collectively as customer relationship management services.
ClientLogic is interested in establishing a customer relationship management services operations
involving 400 new jobs in the City's Community Development Block Grant (CDBG) Target Area.
Establishment of customer relationship management services in the City's CDBG Target Area
would provide measurable public benefits to the City, particularly by creating new jobs.
Accordingly, the City wants to encourage ClientLogic to establish such an operation in the City's
CDBG Target Area as a special economic development project. CDBG funds are eligible as an
economic incentive to assist Grantee through a performance grant of up to $700,000 over the
course of five years at an amount not to exceed $140,000 per year, contingent upon the City's
annual receipt of federal Community Development Block Grant dollars and ClientLogic's
satisfactory completion of contract performance requirements.
The following summarizes the issues of notable interest in the attached agreement. Please note
that changes from the earlier draft sent to Council on April 21, 2000, are shown in underline for
new language and strikeout for deleted language. Your approval today would be of a clean
version based on all noted changes.
Continued on next page
Resolution X
Ordinance Contract Other Specify
Funding Source: Community Development Block Grant Funds
APPROVAL FOR SUBMITTAL:
A51\ -
City nager
STAFF RECOMMENDATION: Approve Resolution
BOARD/COMMISSION RECOMMENDATION:
COUNCIL ACTION:
1. Section III, 1., Paragraphs A through F (See page 2 of 13) describe the project (i.e.
"operation") which constitute the "deliverables" to the community in return for the
( DBG finding of pp to $700.000 provided by the City.
2. Included in the list of "deliverables" at subparagraph F (See page 3 of 13) is the
requirement of a best effort commitment by ClientLogic Operating Corporation to the
aspirational goal of hiring a diverse workforce. [Under state Initiative 200 the City is
precluded from making this goal a contractual requirement.]
3. The city will provide financial assistance to ClientLogic Operating Corporation based
upon terms and conditions as described in Section III, 2. (See page 3 of 13).
4. In addition to the requirements that ClientLogic 1)submit bills to be reimbursed after
verification of eligibility, and 2)report their performance each year before subsequent
annual commitments are finalized through the budget process, the attached contract
includes two subparagraphs (Section III, 2., Q and R on page 7 of 13) that provide
recourse to the City during any given year of approved funding if:
a) ClientLogic Operating Corporation closes their operation, or
b) ClientLogic changes their operation from the description in Section III, 1.
The proposed use of funds to create new jobs is authorized by CDBG regulations; it is a use
anticipated in the City of Yakima's 5 year Consolidated Pian; and it is provided for in the City's
current year Action Plan and Annual City Budget. No changes to any of these documents will
be required. The Public Hearing is needed because of the multi-year nature of the commitment.
The attached contract is authorized by state and federal law and has been reviewed by the Seattle
office of the U. S. Department of Housing and Urban Development (HUD). HUD comments
have been incorporated in the attached proposed contract.
DEPARTMENT OF FINANCE & BUDGET
129 North Second Street
Yakima, Washington 98901 Inter -Office Memo
April 27, 2000
To: Honorable Mayor and Members of the City Council
Dick Zais, City Manager
From: R.tyfAnson, Finance Direct L
e.
ook, Director of Community & onomic Development
Larry Peterson, Asst. City Attorney
Subject: ClientLogic
ClientLogic is proposing the establishment of a 40,000 square foot facility on the second
floor of the Yakima Mall and in the Great Western Building. Within 12 months of
beginning operations they intend to employ at least 200 and within 24 months, 400
employees earning an average of $11.25 per hour with benefits. ClientLogic is asking the
City of Yakima for $140,000/year in Community Development Block Grant (CDBG)
funds for a maximum period of five years. The present value of this investment would be
$700,000.
ClientLogic is an international service provider. They perform customer service and
inventory control functions and take and process customer orders for their clients. Their
clients are primarily electronic commerce and technology companies. They are
attempting to integrate this suite of services, possibly for the first time in the industry.
ClientLogic's specific services are as follows:
• Marketing services: ClientLogic creates customized marketing programs for
internet-based clients by maintaining and providing access to customer information
databases, obtained on the Net, and analyzing this information to address specific
needs of their client's customers. In 1999, ClientLogic derived 7% of their revenues
from these services.
• Customer Contact Management services: ClientLogic provides customer services
and technical support around the clock to their clients through phone, fax, e-mail and
chat rooms. This component comprised almost 74% of ClientLogic's revenue in
1999.
• Fulfillment Services: ClientLogic conducts order and payment processing, inventory
control and warehousing, shipping and return processing on behalf of their clients.
This segment accounted for 19% of their 1999 revenue base.
In reviewing ClientLogic's request for financial assistance in the form of Community
Development Block Grant (CDBG) funds, we have relied upon:
1. ClientLogic's financial information available through their Securities and
Exchange Commission Filing Statement.
2. Phone conversations with a Canadian stock analyst familiar with the
parent company, Onex, and ClientLogic.
1
Customer Service (509) 575-6080 • Finance (509) 575-6070 • Information Systems (509) 575-6098
Yakima
btai
NI-NnafuQry
1994
3. Phone conversations with three communities with existing ClientLogic
facilities: Albuquerque, New Mexico; Buffalo, New York; and
Huntington, West Virginia.
4. Meetings with ClientLogic representatives here in Yakima and subsequent
phone conversations.
5. ClientLogic's Corporate information available at their website.
6. Various newspaper articles from the above cities.
Note: This analysis is for internal use only. This analysis is not for the use of outside
investors, or potential investors in ClientLogic, and the City of Yakima makes no
representations to any such investor.
Thic report has been designed to cover five basic areas, a summary and recommendation:
1. Benefits
2. Business Risks
3. Financial risks
4. Internet/technology risks
5. Other Issues/Legal
6. Summary
7. Recommendation
The financial, business and technology risks have been compiled from data presented in
ClientLogic's Securities and Exchange Commission offering statement for an Initial
Public Offering of equity securities. Portions of that statement have been previously
furnished to Council. Since ClientLogic is still a privately held corporation, the filing
statement is the best known source of reliable information on ClientLogic.
I — Benefits:
1. All funding for this project from the City would come from federal
Community Development Block Grant (CDBG) dollars. No general fund or
other local dollars would be committed.
2. The Federal CDBG program guidelines authorize funding for projects such as
this and, in fact, encourages economic development and Job creation activities
such as the one the City is now contemplating.
3. The CDBG program allows funding of up to $35,000 per new job and in some
special cases, up to $50,000 per job.
4. The City's proposed contract with ClientLogic is structured as a five year (i.e.
$700,000 total) performance-based contract, which is reviewed and continued
annually based upon the grantee's evidence that they are adhering to the
contract. Assuming a total grant of $700,000 and 400 new jobs by the end of
the second year, HUD's investment in each job would be about $1,750.
2
5. Estimated Sales tax effects are as follows:
• Based upon benchmark economic assumptions of expenditure patterns
and money velocity it is estimated that the annual return to the City
from sales tax alone would be approximately $43,000 for each year of
full operation
• Developer cost to renovate space in the Yakima Mall is expected to be
in excess of $1.7 million. It is not known how much of the $1.7
million would be professional services, (engineers, etc.) and how much
is taxable construction work. Assuming 80% is construction, the one-
time sales tax to the City would be approximately $12,000.
• ClientLogic's cost to install and equip workstations with phone,
fiberoptics and electronics is estimated to be $10 thousand per seat
(i.e. workstation). We do not have the necessary data to accurately
estimate the one-time Sales Tax that would be generated from this
activity.
6. Annual gross payroll at full employment of 400 is estimated to be in excess of
$9 million dollars; approximately 75% of which will result in discretionary
income for employees to consume in the community. Traditional economic
assumptions would suggest this payroll would result in approximately $20
million of total cash flow within the Yakima Valley. (9,000,000*.75*3 =
20,250,000)
7. Parking for employees would be included in the lease and will be provided in
the Yakima Mall garage. This should alleviate concerns of ClientLogic
employees using all available street parking.
8. We have talked to the economic development departments of three cities that
have ClientLogic operations: Albuquerque, New Mexico; Huntington, West
Virginia; and Buffalo, New York:
• In Albuquerque, New Mexico, the city invested $1 million to construct
a parking lot to serve ClientLogic building. There is no contract and
no performance requirement connected with this assistance. The city
is very happy with their relationship with ClientLogic although they
(ClientLogic) have only been in Albuquerque one year. The city
indicates that ClientLogic has met all requirements and exceeded their
expectations including hiring and investment. (i.e. a new building is
currently in the design stages)
3
• In Huntington, West Virginia, ClientLogic purchased an existing
business and building. There is no financial assistance from the city of
Huntington.
• In Buffalo, New York, the city provided a loan to ClientLogic.'s
predecessor company. Terms of the agreement are unknown at this
time.
II — Business Risks:
1. The company has no track record with integrated operations of this nature.
The company was formed in September 1998 and made its key corporate
acquisitions in 1999.
2. A portion of the Company's business could be threatened or eliminated by
legislative proposals regulating Internet commerce and/or privacy.
3. In 1999 the Company's largest client made up almost 10% of their revenue
base, and the ten largest clients make up almost 50% of the firm's revenue.
4. The Company's contracts for services are generally teiininabie on short notice
(90 days or less).
5. Every dollar of ClientLogic equity is leveraged. Additionally all their debt is
at variable interest rates tied mostly to US Prime Rate. Prime rate is
and ted to continue increasing for the short to medium
increasing, is expected continue
term outlook.
6. The Company's business often requires that they have custody of their
customer's records or merchandise in many cases opening the Company to
liability.
7. This industry is very competitive. This could work for the Company as well
as against it.
8. The Company is a nearly wholly owned subsidiary of a Canadian Company,
they have no self-determination.
III — Financial Risks:
1. ClientLogic lost $2.7 Million in 1998 and $45.4 Million in 1999. Losses
are expected to continue while the Company refines its infrastructure
investment.
2. Cash flow from operations is not sufficient to fund their current operations
and external financing will be required for growth.
4
3. ClientLogic is in the process of issuing stock to the public for the first time
in order to generate operating revenues and pay off debt (i.e.: they are
planning an Initial Public Offering of stock or "IPO" as it is often called).
There is no guarantee regarding the success of this stock sale and without
the infusion of cash from this sale, ClientLogic will have difficulty
providing operating cash flow for their business over the near-term
without additional borrowings.
4. Approximately 30% of the Company's business in 2000 is anticipated to
be from foreign operations. ClientLogic does not engage in any hedging
activity to control its currency exposures.
5. ClientLogic discloses that its sales peak in the fourth quarter. This is
because most technology company's sales of computer hardware and
software are highest in the fourth quarter, resulting in increases in
fulfillment and customer support activities for those clients.
IV - Internet/Technology Risks:
1. Sales taxes and taxing authority of access and services of the Net, when
decided, could adversely affect the Company's business.
2. A breach of client or customer security could be devastating to the Company.
3. System failures can cripple this company's market instantly.
4. Rapidly changing technology could threaten the Company's markets.
5. If standardized Internet databases become available, need for the Company's
services will be diminished.
6. This company's business plan calls for a demand of out -sourced customer
relationship management services. If this segment of e-commerce does not
continue to grow, the Company could be negatively affected.
V - Other Issues/Legal:
1. ClientLogic could fail shortly after we reimburse them, making that annual
investment unrecoverable.
2. In the event that CDBG program funds are not spent in accordance with HUD
guidelines for economic development, the City of Yakima could be liable to
repay the grant from non-federal funds.
3. This proposed agreement is authorized by State and Federal law.
5
VI - Summary:
ClientLogic appears to be highly motivated to open a 40,000 square foot, 400 -employee
operation in downtown Yakima. This operation would provide services to technology
and electronic commerce based companies. These jobs are expected to bring
approximately $9 to $10 Million in direct wages or $6.5 to $7.5 Million in discretionary
income for employees to consume in the community. ClientLogic has asked the City of
Yakima to assist them in establishing an operation in Yakima by making available to
them financial assistance in the form of a Federal Community Development Block Grant
(CDBG) in the amount of $140,000 per year for up to five years.
One purpose of the Federal Block Grant program is to stimulate economic development
and :o1l c r do by assisting businesses rely this type of funding for their
i;�orb ^;,':t>: ;: j A.�;�xo��.�� v•a.z....,.�u.,.� thaton.____ _--______®__
existence. The Yakima economy is in need of economic development which will bring
jobs to our citizens and additional revenue to the City. ClientLogic is a highly leveraged
company with minimal cashflow for operations. Accordingly, the CDBG program
requirements appear to be met.
ClientLogic, itself, is a financially stressed company. They are in the process of issuing
stock to the public for the first time in order to generate operating revenues and pay off
debt (ie: they are planning an Initial Public Offering of stock or "IPO" as it is often
called). There is no guarantee regarding the success of this stock sale and without the
infusion of cash from this sale, ClientLogic will have difficulty providing operating cash
flow for their business over the near-term without additional borrowings. With or
W1thOUt the revenue generated from this IPO, ClientLogic is heavily dependent on their
parent company, Onex Corp of Canada. One Canadian analyst assessed Onex Corp is a
financially healthy firm with $5 Billion (US dollars) capitalization and no debt. They are
described as "one of the most successful holding companies in Canada" by the same
senior analyst with Nesbitt Burns of Toronto. The analyst stated that Onex is very
committed to ClientLogic as a member of their corporate family and perceives the
Internet to be the primary growth industry at this time.
The CDBG grant funding would be set up to be reviewed and allocated annually, not all
in one lump sum. Thus, ClientLogic must meet certain performance criteria, as set out in
the agreement document, in order to receive this funding over the next five years. During
this period of time, ClientLogic would infuse approx. 400 jobs, which pay above
minimum wage plus benefits, to our economic community and would provide technical
training to these employees. ClientLogic and Yakima Community College have had
discussions regarding the establishment of training programs in the college. These
programs would provide marketable skills to students and create a skilled workforce in
our community. ClientLogic proposes to locate their operations in the downtown mall
and in the Great Western Building. This will bring new activity to the downtown area
which would serve as a catalyst for more growth and the need for additional services (i.e.:
business opportunities) for our citizens. It will also assist in the preservation and
of historic building. business C1,entLogir proposes to bring
renovation this VUll�illl�,. The type of ��+�___��� �----------a-- proposes - �+
6
to Yakima is environmentally clean and ecologically sound and it will expand the
diversity of industries within our community.
VII - Recommendation
Since the financial assistance requested of the City by ClientLogic is in the form of a
federal grant, the City takes on minimal liability and offers no funding guarantees from
any City funds. Therefore, although ClientLogic's current financial situation is weak,
this is not unusual for a start up company and there appears to be some strong benefits to
the community and minimal risk to the City in providing this financial assistance.
Accordingly, based on the above report Staff recommends execution of this grant.
7