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4A Wichita Falls Economic Development Minutes - 12/08/2020MINUTES OF THE WICHITA FALLS ECONOMIC DEVELOPMENT CORPORATION December 8, 2020 Present: Leo Lane, President § WFEDC Members David Toogood. Vice -President § Phyllis Cowling. Secretary -Treasurer § Brent Hillery § Darron Leiker § Bobby Whiteley, Councilor at Large § Mayor and Council Paul Meniics. A_,,i�,tant City Manager § City Administration Blake Jurecck. Astiistant City Manager § R. Kinley Hegglund, Jr., City Attorney § Russell Schreiber, Director of Public Works § Jessica Williams. Director of Finance/CFO § Andrea Kidd, PIO Administrative Clerk § Linda Merrill, Recording Secretary § Henry Florsheim, President and CEO § CCI David Leezer, V.P, Business Attraction § Shay Jones § Murphy Davis § Sentry Management Murphy Davis, Jr. § 1. Call to Order Leo Lane called the meeting to order at 2:30 p.m. 2. Strategic Discussion Henry Florsheim reminded the Board the drop box is up and operating. This is a fluid, living file storage system, and the Board is welcome to provide any feedback as necessary. 3. Sites and buildings update Mr. Florsheim said the Chamber had rebuilt its website. The economic development page has several sections. He directed the Board to the LOIS database (LocationOne Information Services). This platform is used to share information on various sites and buildings available in the area. It is used by real estate brokers and site consultants from all over the world. If they are searching in Texas and one of the area's buildings or sites meet their criteria, it will show up in the search results. The database includes photos, special features of buildings, the square footage, zoning, and other items. The big question, continued Mr. Florsheim, is whether enough buildings are available. There may be a need to discuss the spec building, as well as the future of this business park and the potential for others. Mr. Lane said the number one goal is to fill up the current business park. 4. Discussion/possible action related to infrastructure in the Business Park Jessica Williams provided an overview of the common types of vessels used to issue debt: • General Obligation bonds — secured by ad valorem or property taxes, and backed by full faith and credit of the City. Usually reserved for large capital projects, they require voter approval. • Revenue bonds — issued by a revenue -producing activity (such as receipt of sales tax revenues by the WFEDC). if issued in accordance with a project, it would not require voter approval. • Refinancing bonds — used to replace or pay off outstanding bonds to realize savings. • Certificates of Obligation secured with ad valorem taxes, they can be paid by other sources. Used for large capital projects, they generally do not require voter approval. The WFEDC will sell bonds to investors, promising them that it will pay such amount back by a certain date and at a certain rate of return (the coupon rate). The bonds will be secured by sales tax revenue. Bond counsel will determine whether they are taxable or tax exempt. Proposed Calendar of events: December 2020 — draft of the preliminary official statement is prepared for review by city attorney, bond counsel, underwriters, underwriters' counsel, and financial advisors. The final draft becomes the official statement that is used to sell the bonds. January 2021 — statement is sent to rating agencies; anything rated BBB and above is investment grade. Complete ratings calls (opportunity for city officials to talk with lending agency). February 2021 — parameters ordinance is approved by the WFEDC, and ratified by the City Council. It outlines the amount of issuance, the rating necessary to be achieved, identifies the project, timeframes and other details. From this point, the sale must be completed within 60 days. March 2021 — receive credit rating; create and complete the due diligence call; finalize the preliminary statement; pricing call; sale of tax revenue bonds. Closing and delivery of funds to the WFEDC by March 30, 2021. The bonds must be approved by the Attorney General. This is a very condensed schedule, but the team believes it can be done. Costs: 20-year debt: $75,000 per year for every $1 million issued ($10410.5 million over 20 years would cost between $750,000-$850,000 per year) 30-year debt: $55,000 per year for every $1 million issued ($10410.5 million over 30 years would cost between $550,000-$650,000 per year) Murphy Davis from Sentry Management noted this is an attractive time to issue debt due to the very low interest rates. Murphy Davis, Jr. said he would recommend locking in the lower rates with the 30-year term. He does not think the Federal Reserve will have changed anything by the spring, when these will be priced. Mr. Leiker asked if the 3.5% interest for 30 years would be tax exempt. Mr. Davis (Jr.) replied affirmatively, adding that includes attorney and underwriter fees. Mr. Leiker then questioned whether there is enough sales tax revenue to take this to market? Mr. Davis (Jr.) replied it is based on commitments and the debt service coverage ratio, adding that it is best to have 1 to 1-1/2 times debt coverage in the financials. Ms. Cowling asked if the structure of the bonds includes a provision for a call. Mr. Davis (Jr.) said there is generally a 9 or 10-year call. There is no advantage in not doing that. If the Board has excess funds after 10 years, it could pay it off early, or refund part of it. Once the 10-year period is passed, it is callable every month. In addition. the interest rate on the first year may be 1%, and could increase to 3.5% as time goes on. Mr. Lane asked what the interest rate would be for the 20-year issuance. Mr. Davis (Jr.) noted it would be about 3%; the interest payments would be compressed into that shorter term, with a higher principal payment. If the Board finds it needs less than $10 million, it would become a qualified tax exempt obligation (or bank qualified). That would make it more attractive to banks. Mr. Toogood asked if the WFEDC was still servicing debt on another bond. Ms. Williams said it is paying $140,000 per year on the airport through 2033. He asked whether refunding this bond should be considered. Mr. Davis suggests that if there is not a present value savings of at least 4% to 5%, there are too many fees associated with refunding to make it worthwhile. 5. Discussion and possible action related to Panda Biotech performance agreement Mr. Lane exited the meeting during this discussion regarding Panda Biotech. Mr. Florsheim said today's discussion regarding Panda Biotech was to discuss collateral. There has been a proposed change, as the current proposal will not work with their financing. Panda Biotech has suggested that almost $2 million worth of equipment be used as collateral for the $1.5 million, while another option is figured out for the remaining $500,000. David Leezer said the Board's packet contains a brief memo outlining the situation. In June of this year, incentives for a $2 million forgivable loan were approved, with the collateral being first position on the building. However, Panda Biotech is seeking State of Texas bonding of $150 million. Such financing requires that the bond holders hold first position and that there be no other attachments or liens on the building. He, along with Scott Poenitzsch and David Toogood, visited the plant. The equipment is not yet assembled and Panda Biotech has yet to acquire the building. They have intentions of replacing lighting and HVAC, thus making a large investment in the facility once acquisition is completed. Panda Biotech's plan is to close on the building by the end of the first quarter of 2021. They will assemble the machinery and be operational and hire employees by the end of the year. 3 They have hired one individual to work on overseeing placement and installation of the equipment. Mr. Toogood said it was apparent that Panda Biotech seems all in on this project. It is a very large facility, and they intend to use most of it. They are already contemplating building more facilities on the acreage in the future. The machinery was quality equipment. This is a well - financed group that intends to fully succeed in Wichita Falls. Mr. Leezer asked the Board if they were comfortable with the collateral change, and how they would wish to structure the remaining $500,000. Ms. Cowling said the core question for the Board is whether there is enough of a market for the decortication equipment that it could readily be resold. Mr. Leezer said Panda Biotech tells him they could sell the equipment at a profit. He personally has not yet found information on this machinery. He cannot guarantee a willing buyer, but this is a growing market. He thinks some entity from the cotton industry might be interested. Mr. Leiker said under the new terms, one component is cash for jobs. But he questions when the company would need the money. He asked if the Board could establish certain benchmarks for Panda Biotech to meet. Mr. Leezer said the Board can set the standards as they please. The machinery will not be picked up and moved. Panda Biotech moved the machinery in before acquiring the building as they did not want the expense of storing it and moving it again. Mr. Leiker wondered if the company needs the Board's incentive funds before it receives the bond money. Mr. Leezer said Panda Biotech has never said that if they do not get the money they are closing up. 6. Consent Agenda Mr. Toouood moved, seconded by Mr. Leiker, to approve the consent agenda. Mr. Lane wanted the minutes to reflect that he recused himself from discussion of Panda Biotech duriniz the executive session. The motion carried 4-0. 7. Executive Session Mr. Lane adjourned the meeting into executive session at 3:28 p.m. pursuant to Texas Government Code §§551.072 and 551.087. He recused himself from that portion of the executive session during which any discussions regarding Panda Biotech were held. He announced the meeting back into regular session at 421 p.ni. The subjects posted in the Notice of Meeting were deliberated, and no votes or further action was taken on the items in executive session. 8. Bond Discussion WFBP Infrastructure. Ms Cowling moved that the WFEDC request staff take the preliminary steps necessary toward consideration of early 2021 bond issuance for the Wichita Falls Business Park infrastructure development Seconded by Mr. Tooaood the motion carried 5-0. Panda Biotech Mr. Lane recused himself from all discussions regarding this matter. Mr. Leiker moved to restructure the forgivable loan to Panda Biotech in the following manner: $750 000 tied to milestone of completing/receiving State bond proceeds $750 000 tied to acquisition of the building and execution of a PILOT agreement $500 000 tied to the plant commencing operations. This would remain on a five-year forgivable period, and all other incentives previously passed would remain place Seconded by Brent Hillery, the motion carried 4-0 (Mr. Lane recused himself from voting). Adjourn The meeting adjourned at 4:25 p.m. David Toogood, Vice resident WICHITA FALLS ECONOMIC DEVELOPMENT CORPORATION CERTIFIED AGENDA OF THE EXECUTIVE SESSION December 21, 2020 At the beginning of the session, I announced a closed meeting began on December 21, 2020, at 3'E f q.. o'clock p.m., and the sections of Chapter 551 of the Texas Government Code under which the meeting was held were as follows and as otherwise described in the agenda of the Wichita Falls Economic Development Corporation (WFEDC) meeting: Executive Sessions: (a) In accordance with TEXAS GOVERNMENT CODE §551.072, to discuss or deliberate the purchase, exchange, lease, or value of real property if deliberation in an open meeting would have a detrimental effect on the position of the governmental body in negotiations with a third person; and (b) In accordance with TEXAS GOVERNMENT CODE §551.087, to discuss or deliberate the offer of a financial or other incentive, including modification to an existing agreement, for a territory of the City of Wichita Falls and with which the WFEDC is conducting economic development negotiations for creation and retention of primary jobs (as defined by TEX. LOCAL Gov'T. CODE §502.002). At the end of the session, I announced the date and time were December 21, 2020, at w o'clock p.m. The subjects described above were deliberated, and no further action was taken on these subjects in executive session. 1, David Toogood, Vice President of the Wichita Falls Economic Development Corporation, certify that the above is a certified agenda of the proceedings of the executive session of the Wichita Falls Economic Development Corporation. 72- David Toogood, Vice President