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4B Sales Tax Corporation Minutes - 06/25/2018MINUTES OF THE WICHITA FALLS 4B SALES TAX CORPORATION (4BSTC) June 25, 2018 PRESENT: Tony Fidelie, President § Members Glenn Barham, Vice -President § Rick Hatcher, Secretary -Treasurer § Dave Clark § Darron Leiker § Michael Mills § Stephen L. Santellana, Mayor § Mayor Jim Dockery, Deputy City Manager § City Staff James McKechnie, Senior Assistant City Attorney § Linda Merrill, Recording Secretary § Dee Van Winkle, Senior Sales Manager § CVB Steve Jackson § Joy Parsons § Jimmy Bankhead § Kevin Hunter § ABSENT: Derik Schneider § Member 1. Call to Order. Tony Fidelie called the meeting to order at 4:03 p.m. 2. Approval of Minutes of 6/6/18. Dave Clark moved seconded by Rick Hatcher, to approve the minutes. The motion carried 6-0. 3. Conduct Public Hearing in connection with the provision of a loan by the 413STC to a private developer to provide for acquiring a new full service convention center. Mr. Fidelie opened the public hearing at 4:04 p.m. Jim Dockery said this public hearing is required because the 4B Sales Tax Corporation (4BSTC) expressed intent to issue revenue bonds for a potential hotel/conference center. The bonds would be used for the hotel. This would be a public/private partnership with Gatehouse Capital. Gatehouse would build a 150-room Delta by Marriott on the grounds of the MPEC facilities. The facility would also include a City -owned conference center. Aimbridge Hospitality would manage both facilities through separate agreements. N:\_legal\4A, 4B, DDSC, TIFS\4B Corp\4B Minutes\2018\2018.6.25\Minutes_4B_2018.6.25.doc WFEDC — Minutes of June 6, 2018 2 Gatehouse would borrow $21 million from a lending institution; the 4BSTC has agreed to loan Gatehouse no more than $11 million. Those two funding sources would build the hotel. Gatehouse would repay the loan from the 4BSTC through proceeds from the hotel operation. The City is considering issuing certificates of obligation for $8 million to build the 12,000 square foot conference center. This would give the CVB another facility with which to attract conventions to the area. That $8 million has to be financed over 20 years at $600,000 in annual debt service. The 4BSTC will have these funds available, as $350,000 of outstanding debt has been retired, and the Board eliminated $400,000 in street repairs from its annual budget. The Guaranteed Maximum Price for the two facilities should be achieved within 90 days. Construction is anticipated to take 18-24 months. Mr. Fidelie called for comments from members of the public. Margaret Parsons, 4723 Augusta Lane. Mrs. Parsons is not convinced Wichita Falls is a draw for conferences as is the Metroplex, adding that the airport is limited. She questioned the City's backup plan to pay the indebtedness if the hotel's revenue proves insufficient. Mr. Dockery said they do not expect revenues to be insufficient. The CVB has done studies on conventions on which it would be eligible to compete if the City had a full -service hotel. An independent third -party consultant has determined, based upon existing hotel occupancy rates, that there is a need for additional rooms in the community. Also, there are legal mechanisms in place to protect the city's investment once the hotel is constructed. Darron Leiker added that the City's goal is to compete with its peer cities, such as Tyler, Abilene, Waco, and even smaller cities. Wichita Falls is losing business to them. The CVB keeps a list of conventions that it could bid on, if the city had a full -service hotel adjacent to MPEC. So far, the list totals 41 conventions. The proposed hotel would be a headquarters hotel. The remaining convention goers would stay at other hotels in the community. That is why almost all hoteliers in town are in favor of the project. A rising tide floats all boats. Ms. Parsons is concerned about property taxes. Mr. Leiker said the 4B sales tax was approved in 1997 for projects like this and others. The goal is to reduce the subsidy from the general fund and property taxes that goes to support MPEC now. If that trend is not reversed, the city will end up with nothing but local shows that don't pay the bills at MPEC. Mr. Fidelie said if the hotel opened and no one ever booked a room, the sales tax dollars allocated to this project would cover the costs; no property taxes would be involved. Mr. Leiker added that the hotel's construction would have an estimated $74 million economic impact on the community. Jim Bankhead, 14 Waverly Place. Mr. Bankhead said the City will invest $19 million, but Gatehouse will not have any skin in the game. Mr. Dockery acknowledged that no personal assets of the owners of Gatehouse are at risk. It will pay some of the principal and interest on both loans. But assuming it fell short, there are remedies for the lending institutions. The asset would be removed from Gatehouse if it defaults on payment, and bid out to a new owner. Mr. Fidelie added that Hardy Capital is offering a low interest rate and not requiring that the 413STC backstop the loan. This company is a global money lender, so he takes encouragement from that. Mr. Bankhead asked the interest rate. Mr. Dockery said it is a little over 4%. WFEDC — Minutes of June 6, 2018 3 Kevin Hunter, 1647 Hurst. Mr. Hunter questions whether MPEC will become another albatross like MPEC six years down the road. He has heard there was no title insurance on the property bought for MPEC. Mr. Leiker said the MPEC property was acquired through eminent domain, so it is clearly under city control. Mr. Hunter questioned what would happen if an unknown heir is found? Mr. Fidelie said it would naturally be a prerequisite for the 4BSTC and Hardy Capital to purchase title insurance. Mr. Hunter asked who will manage the convention center. Mr. Dockery said Aimbridge Hospitality will manage both the hotel and the convention center. Mr. Fidelie added that Spectra is on board with this scenario. Mr. Leiker said the hotel and convention center are different facilities than those at MPEC, so he does not anticipate competition. The City will own MPEC and the convention center, so it can ensure both Spectra and Aimbridge will work well together. Mr. Hunter said a woman named Marci, who schedules conventions for the Texas Department of Health, told him she would never schedule one here because there are no direct flights. Mr. Leiker said folks are used to coming to a regional airport and making connections at airports such as D/FW. The peer cities do not have direct service, either. The lion's share of those conventions the CVB could bid on if the city had a full -service hotel are in Texas, and most people would drive. He added that Wichita Falls will host a horseshoe pitchers' tournament next year that will have a $22 million economic impact and will require connecting flights. Mr. Fidelie added that Wichita Falls can offer a casino night minutes away - something no other city its size in Texas can offer. The CVB has said they need this facility, which has been backed up by an evaluation by an independent third party based on hotel occupancy. The Board is determining the best way to allocate sales tax dollars to better Wichita Falls. Steve Jackson, 727 Crescent Lane. He asked how much of the $8 million the City will borrow will be from property taxes. Mr. Fidelie explained that money will come from sales tax dollars. Mr. Jackson alleged that when MPEC was built, the City guaranteed it would not cost taxpayers any money. Mr. Dockery said MPEC was always to be 100% subsidized by hotel/ motel taxes, and that was the case until 4-5 years ago, when the City began losing some conventions because it does not have a full -service hotel. Now, it is being subsidized with some property tax dollars. He added that he was here at the time MPEC was promoted to the public; it was never promised that MPEC revenues would pay its operating costs. Mr. Leiker cautioned that convention centers do not make money; but the total economic impact of the events at MPEC equal more than $20 million. They offer a quality of life and the money that is spent in the community as a result of events held at these centers is incredible. Mr. Jackson expressed dissatisfaction with the sound and the quality of entertainment at MPEC. He then questioned the wisdom of spending $1.2 million of tax dollars on the facility. Mr. Dockery explained that the $1.2 million is a hotel occupancy tax. One has to have stayed in a local hotel to have contributed to that tax. Mr. Jackson asked how many cities the staff has contacted that have successfully done this. Mr. Leiker said they have spoken with Odessa, and Gatehouse has done a similar project in Midlothian. He again explained there is not a convention center that will actually make more in WFEDC — Minutes of June 6, 2018 revenues than expenditures. Glenn Barham added that Abilene passed a bond election to raise taxes to build such a facility. Wichita Falls is not using property taxes. Mr. Jackson then wondered if the City thinks it can get 7,000 people into the City with its current airport. Mr. Leiker said 10,000 - 12,000 people come here annually for the Hotter'n Hell. Mr. Jackson asked why local banks were not used to do this project. Mayor Santellana said there were several reasons. This is a specialized type of loan. A lot of the banks were getting close to their lending limits, and wanted to keep their funds for oil and gas or manufacturing lines of credit. Plus, getting three or four banks to agree on the same thing was difficult. In addition, the deals being offered were not attractive to the City. Mr. Jackson asked why this was not put before the voters. Mr. Leiker said the 4B sales tax was put before the voters in 1997. There is a guideline on what sales tax revenues can be used for, and the AG's office confirmed this was an appropriate use. Roy Stancliff, 4102 Seymour Road. He does not believe the hotel will be a losing venture, but if it is, then 4B money will be tied up for years when it could be used in other ways. Mr. Dockery said there are over 30 weekends a year when the MPEC Exhibit Hall is reserved for local events. That makes it difficult to schedule out-of-town conventions. Mr. Stancliff does not understand investing in something that will lose money. Mayor Santellana said there is direct and indirect money. There is not enough direct money to cover the costs of MPEC and the conference center. The City could continue to offer only local events, and citizens could continue to buy beef jerky and quilts off each other and never grow this town. Or, the hotel could be constructed and more conventions could be brought into Wichita Falls and the town could grow. This out-of-town money would not go directly toward the payment of the hotel or conference center, but it would indirectly affect the growth of the city. Wichita Falls is in competition with its peer cities; this hotel would give the CVB one more arrow in its quiver. Dee VanWinkle, Senior Sales Manager for the CVB, said it is challenging to bring in conventions, as they run out of hotel rooms. There is a need for a full -service convention hotel. Meeting planners for conventions want everything under one roof. Mr. Fidelie closed the public hearing at 5:20 p.m. 5. Executive Session Mr. Fidelie adjourned the meeting into executive session at 5:20 p.m. pursuant to TEXAS GOVERNMENT CODE section 551.087. He announced the meeting back into regular session at 6:07 p.m. The subjects posted in the Notice of Meeting were deliberated, and no votes or further action was taken on these items in executive session. 6. Adjourn. The meeting adjourned at 6:07 p.m. Guy A. "To " Fidelie, Jr., President DOCUMENTS OF RECORD RETENTION INFO. DEPT. TYPE OF DOCUMENT RETENTION RETENTION SCHEDULE NO. PERIOD LEGAL 6/25/18 minutes of the 4B 1000-03 PERMANENT Sales Tax Corporation