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4A Wichita Falls Economic Development Minutes - 06/08/20114, r- MINUTES OF THE WICHITA FALLS ECONOMIC DEVELOPMENT CORPORATION June 8, 2011 PRESENT: Gary Shores, President § Members Dick Bundy, Vice President /Sec.- Treasurer § Dave Lilley § Gary McLendon § Darron Leiker, City Manager § City Staff Kevin Hugman, Asst. City Manager § Jim Dockery, CFO /Asst. City Manager § Kinley Hegglund, Senior Asst. City Attorney § Linda Merrill, Recording Secretary § Tim Chase, President § Chamber of Commerce & Industry Randy Funston § Excalibur Paint Jason Turner § Albert Moving & Storage Randy Klein § Albert Moving & Storage ABSENT: Lanham Lyric § Member 1. CALL TO ORDER President Gary Shores called the meeting to order at 4:00 p.m. 2. APPROVAL OF MINUTES (MAY 19, 2011) Dave Lilley asked that the minutes reflect that his opposition to providing funding for the Transit Center Project was based on his position as a member of the WFEDC, and that he is not opposed to the project as a private citizen. Gary McLendon moved, seconded by Dick Bundy, that the amended minutes be approved. The motion carried. 3. PROPOSED MODIFICATIONS TO EXCALIBUR PAINT & COATINGS RETENTION AND EXPANSION PROJECT Tim Chase remarked that the WFEDC entered into a Performance Agreement with Excalibur Paint in September. The goal was to create 18 new jobs within 18 months of execution of the Performance Agreement. The Agreement stipulates that the first draw down against a loan of $500,000 would be made as soon as the Agreement was signed. Those funds could be used for operating expenses and payroll. Mr. Funston has yet to draw down any of the funds. H: \_legal \4A & 4B \4A Corp \Minutes \2011 \6.8.1 I .Excal.Albert\201 1.6.8 - 4a minutes.doc WFEDC — Minutes of June 8, 2011 Randy Funston said that one of his patents was approved on May 31; he hopes to gain approval of the second patent within the next 60 -120 days. He has shipped the first order to Cessna, with another order to be released in August. Two more water -borne products are set to be produced: (1) an insulation coating, and (2) a fireproof coating. Mr. Funston wants to retire the second mortgage on his property of $48,123. He has a line of credit with the bank, and has used this line of credit in the past 90 days to purchase inventory. He would like to use $250,000 of 4A funds to retire the mortgage and reimburse the recent inventory purchases, and use his line of credit to hire an outside sales force. Kinley Hegglund said this is not an authorized use of 4A funds, according to the way the Performance Agreement was written. However, the use of 4A funds for the outside sales force could be considered, provided more information is furnished. Mr. Funston said as an alternative, he could furnish invoices for the last four months of inventory purchases that would total more than $250,000. His building is appraised at $675,000; the first lien is $105,000. The Board would still have a second lien position in the building's equity of $570,000. Mr. Hegglund again expressed concern over whether the 4A funds could be used for that purpose. Paying off debt by definition is not considered working capital. Jim Dockery said working capital is defined as current assets less current liability. Long -term debt is not a current liability. The line of credit is short-term debt of 60 -90 days. Mr. Hegglund said the best way to proceed is to have the request in written form so that it may be properly reviewed. Mr. Funston reiterated that invoices from the past 120 days would more than cover the requested sum of money. Mr. Funston said the Performance Agreement allows for loan proceeds to be used for a "legitimate business purpose" (Phase 2, Paragraph Q. However, the language under Phase 1 is more restrictive. He would like to amend the Performance Agreement so that the language from Phase 2 replaces the language in Phase 1. In addition, the definition of product as a water -based polyurethane paint ties him to only that one product, and he now has two more products. Mr. Chase said Phase 1 of the Performance Agreement has an 18 -month timeline. Within that time, Excalibur agreed to create 18 jobs. Eight months have passed since execution of this document. If the draw down was made now, only 10 months would remain for Excalibur to create those jobs. Mr. Shores asked if the request is to revise the Agreement to start the clock at 18 months from the first draw down. Mr. Chase said he was going to propose 18 months from the signing of the loan documents, but starting the clock at the first draw down is preferable. 4. MOVING STAFFERS (A DIVISION OF ALBERT MOVING) PROJECT Mr. Chase said he and Mr. Shores met in December with Bobby Albert and Jason Turner of Albert Moving & Storage to discuss how 4A funds are used. Jason Turner thanked the Board for the opportunity to meet with them today. Albert Moving & Storage provides moving, storage and records management services, and this division is responsible for about 5% of the company's annual revenues. The company's two national businesses, Albert Moving and Moving Staffers, make up the remaining 95% of revenues. Albert Moving participates with the Department of Defense to move military members WFF,DC — Minutes of June 8. 2011 3 across the world. Moving Staffers is a third -party logistics company in the household goods industry. Over the past decade, containerized solutions have offered an alternative to the trailer or rental truck in the moving industry. Moving Staffers works with every alternative moving service provider, but has forged a close partnership with ABF Freight. ABF has a do- it- yourself moving service company called U -Pack; the company will drop off a trailer at a location; the individual will pack the trailer, and then U -Pack will transport the goods to their destination. Moving Staffers manages a network of providers across the country, providing administrative support, billing, and customer service. The close relationship forged with ABF Freight has led to the creation of a service called Move Builder. Move Builder offers customers the options of loading services, destination services, packing services, or full value protection. ABF handles the sales and marketing; Moving Staffers provides customer service, administrative assistance, invoices, and a labor network across the country. Although Moving Staffers is a moving /storage company, it has a call center environment. Its business has virtually nothing to do with its location; it could be in Wichita Falls or in Ft. Smith and perform the same functions. There is a valid business case to keep the companies in Wichita Falls, but there is also a valid business case to move these jobs to ABF's facility in Arkansas. A delegation from ABF will visit Wichita Falls next week, and the location of Moving Staffers is at the top of the agenda. ABF wants the division to move to its Arkansas corporate campus. They are out of space at their current Wichita Falls location. Mr. Turner is asking that the 4A Board help add some value propositions to staying in Wichita Falls. There are no red flags that the current location is not working. They have about 56 employees in the Moving Staffers space, and 4 -5 additional employees that are remote agents. Some of their 8 -acre property is undeveloped, but they were told by realtor Doc Anderson that expanding on this site may not be their best move. They have cobbled together working space that is not as efficient as desired. Sharp Iron's 26,000 sq. ft. facility is a good -sized space. He is assured by ABF that they have adequate space in Arkansas for this operation. Mr. Bundy asked if he is positive about the availability of the work force in Wichita Falls. Mr. Turner said they have had good results recently. Mr. Hegglund asked if Moving Staffers is a separate division or its own corporation. Mr. Turner said it is one of four divisions of Albert Moving & Storage. The labor is performed through contracted relationships; the jobs at the call center would consist only of the customer service representatives, supervisors, and executives. Mr. Chase said he would ask for guidance during the executive session how to proceed. Mr. Turner said it will help a lot to have had this meeting prior to his meeting with ABF staff next week. 5. PROPOSED INCENTIVE STRATEGIES Mr. Chase said the Chamber has an RFP for a project that is in the neighborhood of $800 million capital investment, with a possible creation of 850 jobs over five years. There has been no tie in to a project of this size in a long time — certainly not since the majority of the 4A funds WFEDC — Minutes of June 8, 2011 had been depleted. It appears the aggressive marketing of Wichita Falls over the past three years has had an impact. Mr. Chase requested guidance as to whether to pursue these types of projects. Mr. Bundy asked if Wichita Falls could compete for such a project, even if the 4A coffers were full. Mr. Chase said that, considering all incentives, most projects' incentives have equaled about 10% of the total project. In this instance, property tax abatement would be an enormous part of that 10% due to the large capital investment. There would also be the need for other incentives, such as cash for jobs, and infrastructure, although that could be done over time. Mr. Shores opined that the Chamber should pursue such projects, at least through an initial contact or RFP. Wichita Falls should not preclude itself from going forward until more is known. f). EXECUTIVE SESSION Mr. Shores adjourned the meeting into executive session at 5:07 p.m. pursuant to TEXAS GOVERNMENT CODE § §551.071, 551.072, and 551.087. He announced the meeting back into regular session at 6:07 p.m. He noted that the subjects posted in the Notice of Meeting were deliberated, and no action was taken on these items in executive session. Dave Lilley moved that the Performance Agreement between the WFEDC and Excalibur Paint be amended so that the language exhibited in additional loan terms in Section B, on pages 3 and 4, replace the loan language in sentence 1, Phase 1, and in sentence 2, Phases 2 and 3; in addition, this change should be made to the promissory note. Seconded by Dick Bundy, the motion carried. Dave Lilley moved to extend the time frame from the 18 -month period from the execution of the Performance Agreement to reflect the 18 month timeline begins at the first draw down of the loan in Phase 1 of the Performance Agreement. Seconded by McLendon, the motion carried. 6. ADJOURN The meeting adjourned at 5:40 p.m. Gary S res, President