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4B Sales Tax Corporation Minutes - 11/04/2021 MINUTES OF THE WICHITA FALLS 4B SALES TAX CORPORATION (4BSTC) November 4,2021 Present Tony Fidelie President § Members Glenn Barham Vice President § Rick Hatcher Secretary Treasurer § Dave Clark § Darron Leiker § Nick Schreiber § Mayor Stephen Santellana § Mayor and Council R Kinley Hegglund Jr City Attorney § City Staff Blake Jurecek Assistant City Manager § Paul Menzies Assistant City Manager § Paige Lessor Recording Secretary § Jana Schmader § DWFD Carter Wallace § Backdoor Theatre Dusty Potter § Carol Sales § WF Alliance for Arts and Culture John Ferguson § Kristen Shiplet § Will Kelty § The Kate Lynn Walker § Times Record News Absent § Michael Mills § 4B Member 1 Call to Order Tony Fidelie called the meeting to order at 3 01 p m 2 Approval of Minutes of 9/2/2021 Dave Clark moved to approve the minutes Seconded by Darron Leiker the motion carried 60 3 Financial Report Paul Menzies reported that sales tax is still doing well It is still performing 13% above budget Mr Menzies continued to explain that even though the fiscal year ended September 30 the state returns sales tax to cities in a two month lag time Sales tax receipts that are received next week will be for the end of September which should close out the Fiscal Year 2021 The financial report is reflective of the budget year Available cash for new projects is$4 million This amount takes into account all of the items that the Board has approved and encumbered related to the MPEC Conference Center and Hotel Project Page 1 of 7 4 Public hearing regarding a funding request from Backdoor Theatre to assist in fire suppression system repairs and upgrades as part of the renovation of the existing building at 501 Indiana Ave Downtown Mr Fidelie opened the public hearing at 3 03 p m Carter Wallace Artistic Director of Backdoor Theater addressed the Board He explained that the Backdoor Theatre presented this request to the Board in September Mr Wallace noted that the Board requested their organization obtain more bids for the repairs Mr Wallace told the Board that the Theatre reached out to three different companies The only company to submit a bid was Firetrol for$126 550 SNB Mechanical and APS never returned an estimate Mr Wallace stated that the organization is requesting assistance in $104 632 for repairs to be made The Theatre is planning to spend a large amount of money to stay in the building that they currently occupy The building is 100 years old and the organization is 50 years old Mr Wallace told the Board that the Backdoor Theatre has been providing entertainment and theatre arts education to the City of Wichita Falls for over 50 years and they want to stay downtown That means many rehab projects for the facility The flood in 2020 brought to light an assortment of repairs and maintenance that need to be done to the facility Updating the fire suppression system is one of the first steps in maintaining the building Mr Wallace stated that they are excited to continue to provide theatre experiences and education downtown and asked if the board members had any questions Mr Fidelie asked a question regarding the cover letter to verify that the amount in damages was $671 000 due to a water line break Mr Wallace explained that the cast iron pipes blew to a pressure issue and hooking that part up to the fire suppression system will cost over$20 000 He said that James Lane determined that the building is not up to code regarding fire suppression Mr Wallace further stated that upgrades to the system are needed to keep the building standing and audience patrons and volunteers safe Mr Fidelie again verified that $671 000 was the cost of the damage from the flood and confirmed that the request letter later states that the organization will invest$1 1 million in repairs and renovations Mr Wallace confirmed that $671 000 was the amount of damage done from the flood However the flood led to the assessment of other repairs that need to be done An estimate of over $265 000 has been given to repair the brick and mortar The fire suppression line that blew alone caused $671 000 in damages Dusty Potter President of the Backdoor Theatre Board of Directors explained that the $671 000 does not include repairs to the suppression system That amount is only to get the facility running and operating again For that to happen the building must meet code requirements Mr Potter further explained that roof repairs are also needed and that the renovation will be an ongoing project The brick and mortar repair that is required will not happen right now but it is not far down the road Mr Fidelie closed the public hearing at 3 08 p m 5 Public hearing regarding a funding request from the Arts Council Wichita Falls Area,Inc to assist in the Kemp Center for the Arts renovation project at 1300 Lamar St downtown Mr Fidelie opened the public hearing at 3 08 p m Carol Sales CEO of the Arts Council of Wichita Falls introduces John Ferguson and Kristin Shiplet to the Board and gives a brief history and summary of the renovation needs for the Kemp Center She described the Kemp Center as a one hundred year old building that has become Page 2 of 7 a great tourism site and a welcome for all that have moved away from Wichita Falls Daily guests come in to see the building In 1917 Joseph Kemp originally constructed the building as a gift to the City In 1968 the original Otis elevator was installed and is still in use today The North and South wings were added at that time as well In 1994 the Arts Council was formed as a 501c3 non profit organization In 2000 the Arts Council entered into a yearly lease agreement with the City of Wichita Falls for $1 00 to save the building from demolition The Arts Council then began renovation The air conditioning was replaced and added the roof was updated and replaced and the grounds irrigation system was installed In 2002 a quarterly grounds maintenance stipend of $3000 was established and provided by the City and remains today The historic drought of 20I0 through 2015 brought change to the surrounding landscape The grounds were modified and adapted to incorporate a native and sustainable garden In 2012 the Arts and Culture Plan results were published and three initiatives were embraced These initiatives were to establish a distance learning classroom for art lessons throughout Region 9 schools have a performance center for the community and provide a meeting place for other organizations(60 member organizations today) In 2018 the Arts Council received a grant from Green Mountain Energy Sun Club to update a portion of the lighting to LED Iighting Ms Sales stated that the funds for the 2022 renovation and upgrades are being requested today Ms Sales listed the following repair and renovation expenses Reroofing through Lydick Hook for $125 000 Lighting through Willen Electric for $11 650 to upgrade lighting to LED throughout the entire building Landscaping for $10 000 through North Texas Design and Landscape to work on the outer perimeter of building to replace damaged landscape from the drought and Snow mageddon Air Conditioning and Water Heater Upgrade for $191 324 through Ferguson Veresh to include twelve air conditioning units Elevator upgrades for$134 790 through Otis EIevator and Contingency in the amount of$12 000 The Art Council s 4B request is $120 000 of the total amount of the renovation Ms Sales gave an overview of the Art Councils building expenses The management of the two buildings cost $285 000 of an $861 000 budget Utilities cost 22% repairs and maintenance run 27% security makes up 2% telephone and Internet run 8% landscape is 11% and insurance is 29%of the total budget The Art Council s income to manage the buildings every year comes from the following membership 20% ground maintenance fund from the City 10% Annual Fund 35% other donations 29%to 30% memorials 4% Ms Sales concluded by asking the Board if they had any questions Mr Fidelie asked about the other donations category He noted that the category was a large percentage of the total income and wondered whether the money came from foundations or ifpeople rented the building and provided revenue in that regard Ms Sales stated that the category is probably a combination of their foundation and pillars Mr Barham referred to the Kemp Center 2022 Project Budget sheet and asked if Priddy Bridwell and Bryant had already made the donation amounts listed Ms Sales stated that they had not but their answer should come by year end The Board had no further questions and Ms Sales closed her presentation by presenting a four minute video about the Kemp Center for the Arts Mr Fidelie closed the public hearing at 3 19 p m Page 3 of 7 6 Public hearing regarding a funding request from Will Kelty dba Petroleum Building Wichita Falls LLC to assist in fire suppression system upgrades as part of the proposed renovations at the existing building at 726 Scott Ave downtown Mr Fidehe opened the public hearing at 3 19 p m Will Kelty thanked the Board for seeing him again He stated that he recently requested help with the 713 Indiana Project and provided an update He said that within a week of the Board s commitment and support the gutting of the building started The demolition took two to three weeks and the surrounding walls were able to be saved It took six weeks to develop structural engineering plans to put on the roof and now that has been approved by the City Now they are in a Covid holding pattern waiting on steel As soon as steel is here they will begin putting the roof back together An architect is working on drawings to build the inside to construct a usable space that a tenant could rent out Mr Kelty thanked the Board for their support Mr Kelty said that Downtown still faces some of the issues it has had for several years He explained that there is plenty of office space and retail but there is a housing shortage He stated that as soon as the City Center opened it filled up very quickly and remained at 100 % occupancy He showed a similar slide from 20I6 explaining that when he first came to Wichita Falls he saw a division between the entertainment and business districts The divider is located around 8th and Scott The entertainment district is located between Scott and the railroad tracks and the business district is located at Scott and away from the railroad tracks Since Mr Kelty has been here activity has increased Downtown new players have come in and things are starting to grow He told a story about standing at the corner of 8`h and Scott at 6 p m and he saw a fox run across the street and there was no traffic whatsoever However you do not find that to be the case today He believes that Downtown is continuing to grow He explained that he originally came to the 4B Board with a vision to create thirty lofts above the 8th Street Coffee Shop but when he got into the finances of the project it was not feasible without 4B support 4B came to the table with a forgivable loan of$250 000 He stated that the project would not have happened without 4B support Mr Kelty displayed a photo of the 713 Indiana project while explaining the updates on the building Mr Kelty further went on to explain why he came to the Board today He wanted to start this project several years ago but funding became an issue and he had to put it on the backburner The original plan was to complete the pioject in three phases The first phase is the ground floor then the next four floors as student housing and finally apartments on the top five floors The project has been stalled Mr Kelty explained the state of the building stating that it had been vacant for a decade vandals had stripped all the copper and vagrants had been living and starting fires in the basement He was able to restore the power and the rest of the utilities reasonably quickly He has now leased out some of the spaces The Highlander occupies space on the ground floor and there is a Wells Fargo ATM and three other retail spaces that include a dance studio a hemp shop and a liquor store The ground floor retail is ready to go and he needs to get going on other floors Mr KeIty described his vision of bringing the school downtown to make Wichita Falls more of a collegiate town He believes that would be an attractive thing for Downtown Therefore the lower floors are earmarked for attracting students Mr Kelty explained further that this project is a problem to finance It would cost $14 5 million to complete this project which does not jive with resale value Traditional banks will not loan the money because the collateral does not support the loan He went down the low income housing tax credit route but was disqualified due to the student housing aspect He was able to get the building on the historic building registry and the National Park Service has approved Part B Page 4 of 7 of his application meaning that they have approved all the plans to develop the building He stated that a traditional bank would only lend $5 million for this project and the resale value is around $6 to $7 million He explained that the budget breakdown is in the PDF file He pointed out the historical relevance of the building and told about being a big fan of mid century He stated that his grandfather was an old circus photographer and rehabbed old houses He displayed a photograph of a chair designed by Mies van der Rohe while he discussed traveling to a foreign country to photograph a pavilion designed by Mies van der Rohe A student of Mies van der Rohe designed this building He stated that he wants to rebrand the building from the Petroleum to The Kate Hotel giving homage to The Kemp Hotel He stated that he had three requests for the 4B Board The first request is to cover the cost of the sprinkler system The second request is to freeze property taxes at the current levels and the third request from the financer involves parking spaces The financer will fund the loan for five to seven years and then they want out and want to make sure the loan can be refinanced There is a four story parking garage located one block away with a bridge connecting it to Big Blue Mr Kelty requested 4B grant him 150 parking spaces in that parking garage Mr Kelty believes that he can have floors two through five online within a year and the upper floors up and running in 18 months The upper floors will take longer because they will be gutted and built from scratch The National Parks Service requires that the project be completed within 24 months Further Mr Kelty explains that when he came to the 4B about three years ago he was initially trying to finance the City Center Project and this project which included the request to pay for a sprinkler system He wanted to clarify by explaining that the building was originally built with four floors of hotel and five floors of office Mr Kelty stated that when he designates those lower four floors as student housing it changes from transient to permanent housing This change causes the requirement of a sprinkler system And the same change happens when the upper floors are designated as apartments rather than office space Mr Kelty explained that when he came to the 4B last time he had a term sheet from a bank FNB They had given him a commitment letter and he felt confident about acquiring the funding but the bank essentially backed out citing environmental concerns He was told that upper management got cold feet Since then he has contacted over forty four lenders before going down the historic tax credit path Now he has a bank that is willing to lend on this It is a complicated process and involves multiple players One bank is providing a construction loan that has already been approved He has a bridge loan to cover tax credits to which he has been committed He has a federal tax credit buyer Commerce Bank and a state tax credit buyer PNC They both have committed The appraisal came in and it squeaked by at a minimal number He has the historic tax credit part A and part B complete He has an independent auditor that keeps track of all the financing and has submitted the information to the bank He has a law firm specializing in historic tax credits and they have been driving this process The Iaw firm included the requested caveats in their commitment letter Mr Kelty said he is confident that if 4B does support him on this project he believes he will have the funding by the end of November As soon as funding is in place then he will have 24 months to complete the project He believes it will take about 14 months to complete the lower floors and I8 months to finish the upper floors Mr Kelty concluded by asking if anyone had any questions Mr Fidelie stated that Mr Kelty gave the Board a lot of information He confirmed that Mr Kelty s request is threefold including the sprinklers parking and property taxes and those items are non negotiable He confirmed that those things have to happen to get the deal done Mr Kelty confirmed that the deal would not happen without them Then Mr Fidelie explained that the 4B Board has no control over property taxes and asked Mr Kelty if he had gone before Page 5 of 7 the City Council Mr Fidelie then wondered if the financers require a freeze on just the city taxes or the county and school district taxes Mr Kelty said the property taxes were about $14 000 to $15 000 per year and explained that his budget model would allow them to increase up to$30 000 He explained that the bank would balk if the taxes went any higher than $30 000 He explained that the property tax authority would know that $14 5 million is going into this building and if they decide to tax it at amount the property will go bankrupt Mr Fidelie further stated Mr Kelty would need to convince three diffeient boards on the property tax issue Mr Fidelie noted that the Board would have control over the parking and could grant the funds for the fire suppression system Mr Fidelie verifies again that all three contingencies would need to be met for the project to happen in 14 months Mr Kelty said that he asked them to spell it out in their offer letter to clarify their requirements to him and everyone else Mr Kelty noted that if he could not do the project the property taxes would stay where they were Mr Kelty stated that he loved the community and the idea of revitalizing Downtown but it has been a personal sacrifice in time and money Still he is betting in the long term that the City will thrive and the project will be profitable in the end Mr Fidelie then reconfirms that the tax credits are done and the funding amount he has been loaned is $4 million And once the funding is approved Mr Kelty has 24 months to complete the project Mr Kelty said no it is going to be a combination He explained a construction loan is harder to obtain and a bridge loan is easier to acquire He went on to explain the bridge loan process He explained that the tax credits have a certain amount of value and that value can be essentially traded The bridge loan is relatively easy to get because the financer is banking PNC and Commerce Bank purchasing those tax credits so the bank knows those entities will buy it The financer of the bridge loan is Just buying them at a cheaper rate He explained the values of the tax credits with an example of getting a million dollars in tax credits For the state tax credit his value is 83 cents and the federal tax credit value is 79 cents on the dollar Mr Kelty stated that if he can end up with a$5 million loan he will be good He said that was his goal Mr Leiker stated that he had no questions and that the Board appreciated Mr Kelty coming in He asked if Mr Kelty had copies of the construction loan letters of approval Mr Kelty said that they should be in the PDF file mailed to Mr Menzies He said if the Board could not find it let him know and he could email It He also stated that he was not sure if term sheets from PNC and Commerce were in the packet but that he could get those to the Board Mr Schreiber verified that the construction loan was the more complicated loan to obtain and it was the one with the caveats Mr Schreiber further confirmed that the bridge loan was easier to acquire Mr Kelty said yes he had three banks willing to lend a bridge loan and the terms were similar He stated he had one bank willing to do the construction loan and for the past six months they speak via telephone every Wednesday at 9 00 a m He stated that he finally received the final appraisal on Monday or Tuesday and he received final approval from the National Park Service He went on to explain the process of the National Park Service tax credit He explained that first a request is submitted to the state explaining that this property has historical relevance then the state approves it and forwards the request to the National Park Service Then the NPS approves the request Plans then must be sent to the state and with an explanation of the changes to be made He stated that the NPS would not allow him to make some of his planned changes The process started in January or February and as of yesterday he was notified that the plan had been approved and he could start on the changes Mr Clark asked if the configuration of the student housing would be similar to the current layout Mr Kelty said yes that is why he can get going quicker He will not change any of the walls on the lower floors but he does have to restore all of the plumbing The electricity and HVAC also have to be completely restored Some of the sewer lines can remain and some will Page 6 of 7 need to he replaced. The \SalI configuration can remain the same on floors two through five. He stated that he already had asbestos testing done throughout the building, and rernediation had been done in the basement and equipment room. The only asbestos found on the upper floors is in 9x9 tiles. Mr. Kelty went on to describe what had been abated and what had not. He described some woodwork in the corner executive office on the tenth floor that the NPS would like maintained. lie further explained that only the bathroom in that room would he demolished and remodeled to a full bathroom with a shower. He stated that there is popcorn ceiling in that office with asbestos. but it will he painted over. The popcorn ceiling must stay and cannot he disturbed. Mr. Fidelie thanked Mr. Kelty, and Mr. Kelly thanked the Board. Mr. Fidelie closed the public hearing at 3:50 p.m. 7. Executive Session. Mr. Fidelie adjourned the meeting into executive session at 3:50 p.m. pursuant to Texas Government Code section 551.087. He announced the meeting hack into regular session at 4:11 p.m. The subjects posted in the Notice of Meeting were deliberated, and no votes or further action were taken on these items in executi'.c session. 8. Consider a funding request from Backdoor Theatre to assist in fire suppression system repairs and upgrades as part of the renovation of the existing building at 501 Indiana Ave Downtown. Mr. Leiker moved to approve a grant of S 104,642 to the Backdoor Theatre to assist in fire suppression repairs and upgrades as part of the renovation of the existing building at 501 Indiana Avenue, contingent upon the organization providing evidence that they have raised the remainder of funds needed for the renovations. totaling $567,000, within 12 months. Seconded by Mr. Schreiber. the motion carried 6-0, 9. Consider a funding request from the Arts Council Wichita Falls Area, Inc. to assist in the Kemp Center for the Arts renovation project at 1300 Lamar St. downtown. Mr. Clark moved to award a grant of S120,000 to the Arts Council Wichita Falls Area, Inc. to assist in the Kemp Center for the Arts renovation project at 1300 Lamar Street contingent upon the organization providing evidence that they have raised the remainder of funds needed for the renovations, totaling $365.000. within 12 months. Seconded by Mr. Ilatcher. the motion carried 6-0. 10. Consider a funding request from Will Kelty dba Petroleum Building Wichita Falls LLC to assist in fire suppression system upgrades as part of the proposed renovations at the existing building at 726 Scott Ave. downtown. No action was taken. Mr. Fidelie advised Mr. Kelty to visit with Paul Menzies after the meeting. 11. Adjourn. 7 Mr. Fidelie adjourned the meeting at 4:14 p.m. .,<*cit„,k,..,_ Guy "T n " idelie. Jr., President Page 7 of 7 WICHITA FALLS 4B SALES TAX CORPORATION BOARD OF DIRECTORS CERTIFIED AGENDA OF THE EXECUTIVE SESSION NOVEMBER 4, 2021 At the beginning of the session, I announced a closed meeting began on November 4, 2021, at 3:5t o'clock p.m., and the sections of Chapter 551 under which this meeting was held were as follows and as otherwise described in the agenda of the Wichita Falls 4B Sales Tax Corporation. Executive Session 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 business prospect that the 4BSTC seeks to have, locate, stay, or expand in or near the territory of the City of Wichita Falls and with which the 4BSTC is conducting economic development negotiations for creation and retention of primary jobs (as defined by TEX. LOCAL GOV'T. CODE §501.002). At the end of the session, I announced the date and time were November 4, 2021, at 4:1 1 o'clock p.m. The subjects described above were deliberated, and no further action or votes were taken on these subjects in executive session. I. Tony Fidelie, President of the Wichita Falls 4B Sales Tax Corporation Board of Directors, certify that the above is a certified agenda of the proceedings of the executive session of the Wichita Falls 4B Sales Tax Corporation Board of Directors. GUY . "TONY FIDELIE, VICE PRESIDENT WICHITA FALLS 4B SALES TAX CORPORATION