City of San Angelo and Hirschfeld Settle Lawsuit Out of Court

At the City Council meeting this afternoon, officials announced that the City of San Angelo Development Corp. (COSADC) and Martifer-Hirschfeld Energy Systems have reached an agreement to resolve their legal dispute.

This agreement will result in the company maintaining its current workforce and tax rebate if it creates more jobs and invests $1 million in its steel bridge fabrication plant in the City.

According to a press release provided at the meeting, Martifer-Hirschfeld also agreed to repay the City and COSADC $1.4 million in economic incentives previously advanced to the company.

Those incentives were paid as part of a contractual commitment to invest in and create jobs at a renewable energy plant in San Angelo, stated the release. Additionally, the City and COSADC sought to recoup the incentives after Martifer Energia, the Portuguese energy company, suffered financial setbacks and Hirschfeld Industries converted the plant to production of steel bridge members.

“This is a fair resolution for all involved, including San Angelo’s taxpayers,” said the San Angelo City Council and the COSADC board in a joint statement. “The City is recovering a substantial sum that was funded through the half-cent sales tax for economic development. More importantly, this agreement ensures Hirchfeld’s continued presence, stability and growth in our community for years to come. The true winners of this agreement are the citizens who will benefit from the plant expansion and job creation at one of Hirschfeld’s three local facilities. Together, those plants provide jobs to approximately 370 San Angelo residents.”

CEO of Hirschfeld Industries Dennis Hirschfeld said, “We think this is a fair agreement for all involved. We appreciate the City and COSADC working with us. This agreement recognizes Hirschfeld’s economic impact locally, and further demonstrates Hirschfeld’s commitment to the San Angelo area.”

Overall, the terms of the agreement jointly discussed by the City Council and the COSADC board in executive session, and approved by each body in an open meeting, include the following:

• Martifer-Hirschfeld will pay the City and COSADC $1.4 million upon execution of the agreement.
• Hirschfeld will maintain current employment of 47 employees at existing payroll levels at its San Angelo steel bridge fabrication plant for five years. If Hirschfeld fails to maintain 47 employees at existing payroll level in any year during the five-year term, Hirschfeld will repay $6,000 per position lost.
• Hirschfeld may increase its workforce to 75 employees during the five-year period. If it does, so the company will earn property tax rebates for that given year of 75 percent in years one through three, and 50 percent in years four and five. The rebate will be lost for any year during which 75 employees are not maintained.
• The company will also make commercially reasonable efforts to build a railroad spur to its plant within 12 months, at an estimated cost of about $1 million. If Hirschfeld does not complete the rail spur within 24 months, it loses all rights to property tax rebates.
• These terms will be included in a new contract between COSADC, which administers the City’s half-cent sales tax for economic development, the City and Hirschfeld. The new agreement will terminate and supersede all prior contracts between the company, the City and COSADC.

After presenting the information and terms at the council meeting, Mayor Dwain Morrison read the resolution for a final vote.

“It is a resolution by the City of San Angelo City Council authorizing the City Manager to negotiate a settlement agreement on designated terms and execute all necessary documents, terminating litigation between the City of San Angelo and the City of San Angelo Development Corporation, as plaintiffs, and Martifer-Hirschfeld Systems, LLC ETAL, as defendants,” stated Morrison.

Morrison added that this authorizes the council of records to file any necessary documents, terminating the litigation of #B150116C, ratifying the settlement agreement authorized by COSADC and approved by resolution on May 3, 2016.

Morrison then made the motion to accept the resolution, which passed with a 7-0 vote.

After the announcement, Councilwoman Elizabeth Grindstaff, who assisted in the negotiations of the terms, said she, along with the representatives from Hirschfeld and COSADC, were very pleased with the outcome of the settlement.

“It’s a win-win for the citizens of San Angelo, for our industrial community, and for the entities mentioned,” said Grindstaff.

There are a number of performance issues, as well as $1.4 million that will be paid back to citizens, Grindstaff reiterated.

Grindstaff said these negotiations went on for several weeks, but the legal work has gone on for some time. She added that everyone came to the table to work out a solution rather than go through the courts.

“With open minds and a last chance, that’s what we did,” Grindstaff noted. “I expect the citizens to understand that the agreement reached is in their best interest, in the sense of we have over 400 employees at Hirschfeld throughout the community who have families here, own homes, rent properties, buy gas and buy groceries. Their children are in school, and we would not want to jeopardize that.”

She added that this company is nationwide, and it’s important to keep that legacy here in San Angelo. If Hirschfeld is going to grow and prosper, it can do so in San Angelo.

Jacob Balderas, executive vice president for Hirschfeld Industries, LP, said his client was also happy with the outcome.

“The economic value to Hirschfeld provides currently the potential of increasing manufacturing jobs here in San Angelo, which is extremely valuable to the City of San Angelo. We look forward to moving forward and hopefully continuing developing locally,” stated Balderas. The value of having and creating business in San Angelo is something every business strives for, he added.

Tommy Hiebert, with COSADC, said the development corporation strives to create jobs to increase San Angelo’s tax base, which impacts all citizens.

“We believe that, going forward, the resolution we reached does those things,” said Hiebert.

The $1.4 million helps alleviate what was paid out during litigation to San Angelo citizens, noted Hiebert.