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4A Wichita Falls Economic Development Minutes - 05/19/2022 MINUTES OF THE WICHITA FALLS ECONOMIC DEVELOPMENT CORPO TION May 19, 2022 Present: David Toogood, Vice President § WFEDC Members Phyllis Cowling, Secretary-Treasurer § Darron Leiker § Brent Hillery § Paul Menzies, Assistant City Manager § City Administration R. Kinley Hegglund, Jr., City Attorney § Jessica Williams, Chief Financial Officer § Terry Floyd, Director of Development Svcs § Chris Horgen, Public Information Officer § Paige Lessor, Recording Secretary § Henry Florsheim, President, and CEO § WFCCI David Leezer, V.P. Business Attraction Taylor Davis, Dir of Bus Retention&Expansion § Karen Bivona, Office Manager § Jana Schmader, Executive Director § Downtown Development Steve Sage, Plant Manager § Howmet Castings Matt Bitsche, President § Wichita Falls Brewing C . Russ Reynolds, V.P. § Lynn Walker, Writer § Times Record News Absent § Leo Lane, President § WFEDC Member 1. Call to Order David Toogood called the meeting to order at 2:30 p.m. Mr. Toogood asked that the strategic discussion item be moved from item number two to item number five. 2. Discussion and possible action related to Wichita Falls Brewing Compai y expansion project Ms. Taylor Davis addressed the Board and introduced Mr. Matt Bitsche an ell Mr. Russ Reynolds and the project with a PowerPoint presentation. Ms. Davis explained that the Wichita Falls Brewing Company is looking to grow its current downtown location through a three-phase expansion, including creating an in-house canning line, increasing its cold storage capacity, and purchasing and remodeling its building. The expansion will bring additional employment, increase its outside sales in the Wichita Falls region,and reflect a$1.2 million investment in real and personal property. Mr. Reynolds introduced himself and Mr. Bitsche to the Board, explaining that they are the WFEDC Minutes 5/19/2022 Page 1 of 6 founders and,operating managing partners at Wichita Falls Brewing Company. He gave a brief history to the Board, explaining that the two partners met in 2015 when he moved to Wichita Falls on an Air Force assignment.Mr. Bitsche had just moved back from Austin to Wichita Falls,his hometown,to start the WF Brewing project. Mr. Reynolds and Mr. Bitsche lived in the same neighborhood and shared a love for homebrewing and craft beer.Mr.Reynolds explained that much of his master's research was in the brewing industry. After discussing Mr. Bitsche's project and helping Mr. Bitche with the business planning, Mr. Bitche offered a partner position to Mr. Reynolds. He said they started the project at 701 Indiana in early 2017,using their own money to do what they could while looking for other funding sources. Mr. Reynolds explained that they created a crowdfunding campaign, found investors, entered the ideaWF competition,took out personal and commercial loans, and eventually got to where they are today. Mr.Reynolds presented a slideshow of photos,explaining that in March 2018,they had the grand opening and soft opening.During the last four years,the'company has won an award for its interior space and awards for its beer. He explained that they are happy with where they are now, but they do not want to stop their progress. They would like'to make a space that is even more inviting and more of an attraction and destination spot for downtown. Mr. Reynolds explained the three-phase improvement plan, which includes purchasing a canning line, purchasing the building, and increasing the cOld storage capacity. He stated that their cold storage is at maximum capacity for small package distribution. They are currently distributing cans to Gainesville, Lewisville,Denton,Wichita County,and surrounding counties up to Lawton,Oklahoma. Mr.Reynolds explained that there is loose quality control with their small packages with the current canning process because a mobile carrier comes in and hooks up to their equipment. Also, they keep the canned beer for much longer than other companies because they have to can so much at one time. Mr. Reynolds displayed a)photograph of their cold storage cooler on a typical mobile canning day.To be cost- effective,they must can 300 cases or more at a time. The distributor only picks up a few cases a week, so the cooler becomes full, limiting the keg distribution. The cooler is shared with the kitchen side of the house,which is owned by another entity.All the food and cans must be moved out of the cooler to handle the kegs then it all must be moved back in.When the pallets are full of cases of canned beer,they can weigh hundreds,possibly thousands of pounds.For these reasons,they would like to avoid moving them often. He explained to the Board that they could help the brewery grow in the canning line.He displayed a photo of a canning line/similar to the one they would like to purchase and explained how it worked and the canning process.He said they would buy one either used or new,depending on the market,but it would be smaller and more mobile than the one in the photograph. He explained that this type of canning line would give them much more flexibility. He said they have increased their serving capacity by 83% with five new serving tanks and doubled their fermentation capacity, limiting the space and the cold storage. With their own canning line,they could can 20 to 30 cases at one time instead of 300 cases at a time with the mobile canning line. They could keep their retail coolers full and distribute more/brands of their own product. The design'would give them more space for keg distribution and more small packaged brands. Also,they would like to move'the kitchen cooler into a separate cooler in the future. ' Additionally,Mr.Reynolds discussed the building space issue.He said the brewery is entirely full over 100 days of the year.Because they are limited on seating space downstairs,they would like to expand into the upstairs. Mr. Reynolds then discussed the second-floor renovation and displayed a photo of the area.The second story is an unoccupied space,measuring approximately 3,000 square feet,and will be used for overflow seating. The plan is to build a new bar, new restrooms,and two new staircases. He presented a preliminary drawing of the renovation plan. He stated they also have a pipe dream of having a rooftop ' bar, which he believes would be a significant attraction downtown.He believes the possibilities for events and meetings are endless and that people love their space and the culture centered around the brewery.He explained that they have to turn down rental requests frequently.He believes the extra space would bring a WFEDC'Minutes 5/19/2022 Page 2 of 6 L. good deal of income to the City. Mr. Reynolds then began discussing the contingencies of the proposal and stated that they would commit to hiring two new full-time employees.He gave a brief overview of their currently employed staff. The average age of their employees is 30.1 years old, and the average salary earned is over $43,000 per year. He stated that they had a history of raises, promotion, and employee retention. He said that even though the brewery was not a traditional manufacturing company, only half of its employees ever stand behind the bar and serve beer. The ones that do also have additional jobs at the brewery. The two new employees would be on the distribution,packaging,and manufacturing side of the business,and they would also potentially help out with sales and cellaring of the beer. Mr:Reynoldsstated that they did have a significant financial burden with this three-phase project, and they are looking to take out an SBA 504 loan to purchase the canning line,purchase the building,and complete renovations at the same time. The estimates are not exact, but they are pretty close and will be finalized in the next few months. He stated that they had paid off over$450,000 in debt over the last four years, except for their$150,000 economic injury disaster loan from the SBA. He said that they would be debt-free on June 1.He stated that they are a safe bet, and they would be good stewards of the equipment. Mr. Reynolds closed his presentation (by saying that the brewery has a history that has been awesome for downtown and the City.Last month;the brewery brought in over$9,000 in sales tax,with the kitchen included.They have expanded outside the local area, and they have kept some young professional employees that are the future of Wichita Falls. He stated that the support of the Board would help them grow substantially and make the City a better place.He then asked the Board if they had any questions. Mr. Leiker asked Mr. Reynolds if the company provided any health insurance or retirement to its employees. Mr. Reynolds said the company currently did not. Ms. Cowling asked, in addition to the two new full-time employees, are the current six employees full time as well. Mr. Reynolds replied that yes, they were full-time.Mr.Hegglund asked for clarity regarding the possible collateral for the loan mentioned in the paperwork submitted. Mr.Reynolds stated he believed the collateral would be the equipment itself, but the Board would take the second position behind SBA. He said that he did not know the exact details of how that would work,but he would find out and answer back. 3. Discussion and possible action related to Howmet Oberlin filtration project Ms.Davis introduced Mr. Steve Sage,Plant Manager at Howmet Aerospace of Wichita Falls,and their water filtration system project.Ms. Davis reminded the Board that they provided support to Howmet for an Oberlin water filtration system last year. She explained that the water filtration system would help improve the Howmet facility's wastewater quality. During Howmet's recovery from COVID,the company has hired 80 new employees since last September-and is ready to re-engage its secondary facility. A secondary filtration system needs to be added to reopen the second plant. Their first filtration system was recently,installed, and the company would like to add the second before bringing in new employees to its secondary facility. Mr. Sage addressed the Board and thanked them for all they had done for the company. He presented(a slide show which included photos of the new filtration unit that was just received this week.He stated that he didn't spend enough time talking about Howmet in his last presentation to the Board, so he wanted to take a few minutes to do that. Mr.Sage explained that the company manufactures structural components and engine components. He stated that the industry is going with thinner blades and veins and more efficient engines right now. He said that over 90%of all engines being used have Howmet's structural rotating engine components and the company is well known in the industry.Howmet's customer base thinks highly of the Wichita;Falls facility. 95%of the products manufactured in Wichita Falls are commercial aerospace,and 44%of Howmet's total production is commercial aerospace. Covid caused Howmet, including the Wichita Falls facility,to take a WFEDC Minutes 5/19/2022 Page 3 of 6 r big hit, but the company is working to remedy that with the Department of Defense. Mr. Sage stated that Howmet employs about 20,000 people in 581o\cations and 20 countries. Mr. Sage presented a photo of the Wichita Falls facility, showing Plant 1 and Plant 2. Plant 1 is where all the work is currently concentrated. During Covid, the company had to shut down every part of Plant 2 to survive. Currently,they are "running a bit of wax" in Plant 2 because it has special equipment. Additionally,one of the sister facilities in Laporte,Indiana,has asked the Wichita Falls facility to help with its production,which is about a year's worth. Mr. Sage stated that Howmet Wichita Falls is certified AS9100, and 77 audits were conducted during Covid with eight minor findings. The facility measures about,200,000 square feet, has been in operation for 42 years, has 36 customers worldwide, and employs about 635 people. Mr. Sage went on to explain the type of product that is manufactured in Wichita Falls. He said that Wichita Falls is the only Howmet facility that is 100%Equiax and they manufacture the blades and veins on tle jet engine. Mr. Sage then displayed a diagram showing the pre-COVID trends explaining that the numbers in the first quarter of 2020 were up 10%over 2019. COVID was pretty hard on Wichita Falls. 1,150 people were employed with Howmet before COVID, and employment dropped by 430 people in one year. Mr. Sage spoke about the Texas Work Share program, which helped the company in Wichita Falls survive COVID. The program allows a company to "temporarily lay off' employees. Instead,of an employee working five days per week,,they may be able to work three days,and the state pays for the other two days the employee did not work. The program allowed the company to limit its employment reductions based on revenue. Mr. Sage then went on to describe the project plan. He displayed a photo of the first filtration ; system authorized on October 26,2021.The estimated completion date was March 11 2022,but this week, the system finally arrived due to supply chain issues. He is estimating the system to be inservice on June 2. The unit measures 50 to 60 square feet, so the department's layout had to be modified to accommodate the equipment. He stated that the company is now working on the second filtration system, and that is why he is before the Board today.He then presented a photograph of test samples of the wastewater from the facility. The picture depicted an unfiltered sample,a sample run through the,filtration system,and the solids filtered from the water. He stated that the company believes this project aligns with its partnership with WFEDC and the City of Wichita Falls.He noted that the City helped with the NEWT system, and the company is currently using that system to help with water conservation.He explained that these new Oberlin Filtration Systems help conserve water, saving about 600 gallons per day. He explained that he felt like this was a proactive step, even though Wichita Falls is not currently regulating solids content. Still, most communities and Wichita Falls will most likely regulate it in the future.The second system would be for Plant 2.He said that the company sees the revenue increasing,which is very promising.Howmet is up 65%from last year's run rate, and the company tries to anticipate customer demand and make sure they can fulfill the orders. The plan is to have Plant 2 start up in the fourth quarter of this year, and if the timeline for the first unit is an indication of how the second one will go,the company is looking at December 5,so Mr.Sage believes that now is the time to start the process. Mr. Sage displayed a photo of the first filtration system.He stated that he feels it is fundamental to the integrity of Howmet and the City;,helping the environment and conserving natural resources. The project will enable the company to grow and expand into Plant 2 again. He thanked the Board and asked if there were any questions. Mr. Leiker asked about the life expectancy of the filtration systems. Mr. Sage stated seven years. Mr. Leiker then wondered if the company would build the replacement costs and depreciation into its WFEDC Minutes 5/19/2022 Page 4 of 6 budget.Mr.Sage said that Howmet would build the cost into its budget.Mr.Toogood clarified that Wichita Falls does not have any regulations forcing the company to install these systems. Still,Howmet recognized the solids going into the wastewater,and the filtration system is the way to clean it up.Mr. Sage confirmed that Mr. Toogood's statement was correct and explained that some sister facilities are located in communities with these regulations. Also, several times per year,they go down into the storm drains and try to clean some of that out. Still, we assume that some solids are eventually transported to the water treatment facility,so if the number of solids can be reduced,it should help the water treatment facility.Mr. Leiker clarified that the City does have an industrial pretreatment program in which there are limits on hazardous waste.Mr.Sage agreed that this solid waste is/not hazardous. ' Ms. Davis thanked the Board and asked if there were any questions about the two projects. Ms. Cowling asked about the details of the Howmet agreement in 2021. Ms. Davis replied, stating that the agreement was a forgivable loan over one year for the addition of 73 new positions and retaining the 529 existing positions. The loan was for 75% of their total project cost, $97,000. So the loan amount was $72,500 to be paid back at a rate of$1,000 per employee that was not retained or added as a new position. Mr.Toogood asked if this machine was the same as the previous one purchased.Ms.Davis responded that it was the same machine, but it now costs $114,000, and the chamber is recommending a loan of 50% of the total project cost.This agreement would be based solely on the retention of 609 employees. 4. Strategic Discussion Mr.Florsheim updated the Board on the process of updating the community-wide strategy to grow Wichita Falls.The Falls Future team has met four times now with Matt DeVeau,and they are working their way through the process with one more meeting during the second week of June. At that point, the team should have an implantation plan and can start working on implementing the new pieces of the strategy. Mr.Florsheim addressed the Board about the budget proposal process.He stated that Ms.Cowling had sent out a proposed template for requests so the Board could standardize the information received from anyone requesting operational type funding.Mr.Florsheim asked if a timeline had been discussed because the requesters needed to know when to prepare their proposals.Ms.Cowling stated that she recalled talking about having the requesters come in July, so they should submit their requests a couple of weeks before that. Mr. Leiker asked Mr. Menzies if that timeline worked from the staffs standpoint. Mr. Menzies said yes, and Mr. Leiker said it was suitable for council. Mr. Menzies said the idea is that the Board would review the proposed budgets in July, vote on them in August, and then in September, the council would consider it as a part of the regular budget approval. Mr. Florsheim stated that they would abide by whatever format the Board wanted. He said the discussion had been to have the proposals due July 1, so the Board would have some time to review them before the July EDC meeting. Then if some additional information was needed or a proposal needed to be tweaked,the requesters could provide that at the August meeting.The Board agreed with that timeline.Mr. Florsheim asked if the Board wanted to use the form template Ms. Cowling generated. Ms:Cowling said to give it a shot and give some flexibility during the first year of using it because it is new for everybody. Mr. Florsheim asked if Ms. Cowling could send the spreadsheet, and she stated that she would email the Excel file and Word document. Mr. Florsheim noted that he would share that with Jana Schmader with DWFD,Glenn Barham with SMrAC,and ideaWF. 5. Consent Agenda Mr.Toogood stated that the Board would like to move the Consent Agenda to the first item on the agenda for the next meeting and all future meetings. a.Approval of minutes from 5/5/2022 Mr. Leiker moved to approve the minutes. Seconded by Mr. Hillery,motion carried 4-0. WFEDC Minutes 5/19/2022 Page 5 of 6 b. Financial Report Mr. Menzies stated that the financials continue to do well, and revenues are trending very well. If the Board did not spend any additional funds this year,close to $9 million would be available for new projects. He also discussed sales tax and noted several ways to look at it. He stated he would give the Board one perspective. He explained that sales tax lags two months behind, and the sales tax received in May reflects March sales.Compared to last year at this time,revenue is down 8.5%. To add perspective on that number, he said last May's revenue was up 50%. It was one of the highest-grossing months ever had as a community. Also, April's payment, which is based on February sales,was almost$200,000 more than March's payment. But last month,revenue was up 31%compared to the year before. He said that it might look like revenue is down year to year,but compared to last month, it has increased by $200,000. The bottom line is revenue is still running 10%ahead for the year. 6. Executive Session Mr. Toogood adjourned the meeting into executive session at 3:09 p.m. pursuant to Texas Government Code §§ 551.087 and 551.071. He announced the meeting back into regular session at 4:1 7 p.m. The subjects posted in the Notice of Meeting were deliberated, and no votes or further action, \\ere taken on the items in executive session. 7. Motions Wichita Falls Brewing Company expansion project. Mr. Leiker made a motion to approve a forgivable loan for Wichita Falls Brewing Company in the amount of$20,000 for the creation of two full-time jobs and the retention of the six existing full-time jobs,contingent upon the creation of an in-house canning system and increased storage capacity in a form approved by the City Attorney. Seconded by Ms. Cowling,motion carried 3-0. Mr. Toogood stated that Mr. Hillery may have a potential conflict and has recused himself from voting on this matter. Howmet Oberlin filtration project. Ms. Cowling moved that WFEDC provide a one-year forgivable loan to Howmet in the amount of$57,462.50 to support the company's purchase of a new filtration system, contingent upon the retention of the 609 existing full-time employees. Seconded by Mr. Hillery,motion carried 4-0. 8. Adjourned. The meeting adjourned at 4:20 p.m. bawd ra a �'c.. rcvs►4 WFEDC Minutes 5/19/2022 Page 6 of 6