Rackspace vows to add 3,000 jobs
Web Posted: 08/01/2007 11:22 PM CDT
http://www.mysanantonio.com/business...e.34311c0.html
L.A. Lorek
Express-News Business Writer
The San Antonio City Council today will consider a package of economic incentives for Rackspace Managed Hosting to add more than 3,000 jobs and move its operations to the Windsor Park Mall.
The deal involves the city giving taxing rights for 221 acres, including the mall site, to the city of Windcrest and the Windcrest Economic Development Corp. The city and development corporation would then lease the mall back to Rackspace for 30 years.
"We feel like going to the mall is a crazy good idea," said Lanham Napier, Rackspace's chief executive officer. "It's great that we can go into an area that has been struggling and add economic vitality to it. We want to do to San Antonio what Dell did to Austin."
Rackspace provides Web hosting services to businesses and has grown quickly since its 1998 founding.
Under the deal being considered, Rackspace would locate 2,000 employees to the mall by the end of 2009 and would expand to 4,500 jobs, with an average salary of $51,000, by 2012. It has 1,300 San Antonio employees now.
If Rackspace does not meet the goals for jobs and average salary, it will have to pay its full tax bill.
Rackspace, which was started here by three Trinity University students, considered moving its operations to other Texas cities and to North Carolina before deciding on the Windsor Park Mall location, Napier said.
"We think it's the right long-term home," he said. "The first thing is that building was designed to create a sense of community once you are inside it. We think the mall has great infrastructure to it."
In addition to the Rackspace project, the Windcrest Economic Development Corp. has a contract pending on 111 acres south of the mall, said Ray Watson, director of the Windcrest Economic Development Corp.
It plans to sell the land to a developer, which will create a $225 million mixed-use project of residential and retail facilities, he said. It is in the process of selecting a developer for the project, part of a plan to create a campus-like atmosphere for technology workers.
The city of Windcrest, with a population of 5,000, and the Windcrest Economic Development Corp. have proposed a package of economic development incentives, including abating property taxes. Bexar County commissioners approved a similar plan during its July 24 meeting.
Today, the city will consider a boundary change agreement. The 221 acres would include the Windsor Park Mall site and surrounding properties and a strip along Interstate 35 from Walzem Road to Eisenhauer. The City Council will vote on that and other incentives.
"It's complex," said Robert Peche, the city's economic development director. "But it's something each organization involved has gone to the extent it could go to get this thing done."
The City Council has already approved an incentive package May 30. But in the past few months, the incentives have changed slightly, so the council will need to vote again, Peche said.
The boundary change agreement also falls under new state legislation, House Bill 3367, passed specifically for this project. Rep. Joe Straus, R-San Antonio, sponsored the bill.
"It's not unusual for legislation to be passed around the facts of a particular project," Peche said. "It allowed it to be a little bit of a simpler process for the two cities."
Rackspace plans to invest $100 million in property improvements to the mall building, said Randy Smith, the company's manager of real estate services. Under the incentive package, Rackspace would receive a 14-year tax exemption from paying taxes beginning Jan. 1, 2009. However, it would make payments in lieu of taxes to the North East Independent School District, Smith said.
The deal still needs the Bexar Appraisal District to approve Windcrest Economic Development Corp. as a tax-exempt organization representing the mall property.
It also guarantees that the city of San Antonio will be reimbursed at least $4.1 million during the next 30 years, according to documents filed with the city. That's the amount it would have collected in property taxes at the site. In the best-case scenario, it could receive $34.5 million.
That's because the city of San Antonio and Windcrest would share equally all sales and property taxes from the Eisenhauer mixed-use development for 30 years. In addition, San Antonio and Windcrest will split a Rackspace payment in lieu of taxes for 16 years of its 30-year lease.
Rackspace is a fast-growing technology company with $224 million in revenue for 2006 and a 60 percent rise in revenue projected this year. The company now has 1,800 employees, including 1,300 in San Antonio.
"The community is making a big show of support for Rackspace," Napier said. "With that investment, you have an expectation of performance. We want to deliver for you thousands of high-paying jobs."