Fort Worth Could Be the Future of Energy 2.0 With a New First-of-its-Kind Partnership

June 5, 2020

A public/private partnership between Fort Worth and Linear Labs could make the city home to the smart electric motor industry. And, Linear Labs could get around $70M for R&D from the city to do so

By Alex Edwards

The City of Fort Worth is one step closer to becoming the home of Energy 2.0 with a public/private partnership—one that’s never been done before.

At a City Council session on June 2, members discussed the details of an alliance between Fort Worth and Linear Labs, the next-generation smart electric motor maker.

If approved, the deal could bring thousands of skilled jobs to the city over the course of the next 10 years. That could involve anyone from software engineers to electrification and robotics.

At the same time, Fort Worth could make its statement as a global force in tech innovation.

“We see Fort Worth as the burgeoning global hub of Electrification 2.0,” Brad Hunstable, co-founder and CEO of Linear Labs, told Dallas Innovates. “There is a world-class talent pool as well as globally ranked universities in the area. As a Fort Worth local, I see an immense opportunity to spur innovation and economic development in an effort to co-shape a prosperous future for our city.”

The proposed economic development agreement between the two involves an incentive package to create two facilities—one for smart electric motor manufacturing with advanced automation and the other research development—in Fort Worth.

This brings jobs and manufacturing facilities to the area, spurring other companies to build infrastructure in the same place and create a hub for Energy 2.0.

Robert Sturns, Fort Worth’s Economic Development Director, outlined the details of the agreement at the City Council session:

In simple terms, what we’re doing is providing a grant payment based on the real property and R&D expenditures that the company can either utilize themselves as they would under our normal incentive policies or transfer the value of that grant payment to a third party. The key element is then that third party, in order to redeem that credit, would have to develop new real property to generate the incremental taxes and redeem that credit over time.

Linear Labs’ primary growth challenge is that it has a significant number of orders and needs to ramp up production very quickly. Though the company has existing manufacturing operations in Mexico, the team prefers to develop the tech in Fort Worth, which provides a new set of challenges.

That’s where the deal would help.

“This incentive is an attempt to take care of some of those challenges that linear is currently facing,” Sturns said. “The proposed project would cause Linear to locate their headquarters and manufacturing and R&D facilities to Fort Worth and allow them to build out their product R&D division, as opposed to locating that element in other proven tech areas like San Francisco, Boston, or New York.”

The space being explored is the American Airlines Maintenance Center near I-35.

Here’s a basic overview of the proposal, according to Sturns:

The proposed incentive would be a 15-year economic development program agreement, which would provide grants on 25% of the eligible R&D costs spent in the first 10 years. In order to achieve the maximum amount of the grant, which is capped at $68.9 million gross, Linear Labs is going to have to invest at a minimum $614 million in new R&D expenditures. So this is a performance-based contract, they have to hit those numbers in order to generate the available grants for the project.

Linear Labs could get around $70 million in city grants if they spend $614 million on research and development over 10 years. They also have to spend $4 million in outfitting the existing facility for production and R&D manufacturing over the first three years.

Linear is looking at the AllianceTexas mobility innovation district in Fort Worth, which is currently in the planning stages with Hillwood.

The total job commitment would around 1,200 jobs over the first eight years of the project, with average wages of about $70,000 for exempt employees. R&D jobs, which actually encompass a majority, would be at $90,000 and any non-exempt employees at $15/hour with full benefits.

The incentive assignment has a structure that allows Linear Labs to capitalize on potential incentives earned through assignment. Incentives are only redeemable with corresponding incremental ad valorem, and cannot be applied to residential property. Earning credits are handled separately from redeeming credits; credit use cannot exceed 75 percent of incremental ad valorem by the company or assignee.

Sturns said this type of agreement is an innovative new tool in Fort Worth’s economic development toolbox. Since it isn’t duplicated anywhere else in the nation, he “wanted to be selective about the first type of project brought forward for consideration.”

“The main advantage of this type of program to the City is that this allows us to support high wage, high impact projects that conventional incentives really couldn’t support,” Sturns said. “This is not a project that has a huge expenditure from the standpoint of real, business personal property, but they are making a significant investment in R&D expenditures and that’s how we’re trying to base the overall grants.”

Sturns lauded Linear Labs’ technology and innovation capabilities, CEO Brad Hunstable, and it being a homegrown Fort Worth company as drivers of the proposed agreement.

“We want to ensure that, as we develop these types of companies, we provide them an opportunity to continue to grow here in Fort Worth,” he said.

Linear Labs manufactures the revolutionary next-gen Hunstable Electric Turbine (HET), which offers high-performance power for sectors such as automotive and generators to HVAC and robotics. All the raw materials and components needed for HET manufacturing are accessible locally and are available around the globe, creating a regionally agnostic supply chain.

The vote on the proposal will be considered during a scheduled session on June 16.

At Tuesday’s briefing, Council members seemed to be on board.

Brian Byrd (District 3) noted the wage levels, continued growth in the Alliance area, and the addition of Linear, which is getting worldwide press.

“This is a tremendous amount of money for the City to spend, and yet we should do this. The runoff effects—not just the tax revenue that this will generate—are enormous,” he said. “This makes very good sense for us to do this, I support it, and I thank you for your work on it.”

Mayor Betsy Price thanked Sturns for his creativity on the proposal—especially during a pandemic..

“As we get calls from businesses who are looking to leave other areas that have been hard hit hard by COVID-19 or look to reshore from other areas, we will have more of these very creative, innovative financing packages to attract the level of business that we’re going to need to replace some jobs that are lost,” she said. “We’re just going to have to.”

 

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