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4A Wichita Falls Economic Development Minutes - 01/12/2023 AMENDED MINUTES OF THE WICHITA FALLS ECONOMIC DEVELOPMENT CORPORATION January 12,2023 Present: Leo Lane, President § WFEDC Members Phyllis Cowling, Secretary-Treasurer § Darron Leiker § Paul Menzies, Assistant City Manager § City Administration Kinley Hegglund,City Attorney § Terry Floyd,Director of Development Services Chris Horgen, Public Information Officer § Paige Lessor, Executive Legal Assistant § Ron Kitchens, CEO § Wichita Falls Chamber of Commerce Taylor Davis, Dir of Bus Retention&Expansion § Tracy Sharp § Boyette Strategic Advisors, LLC Mickey Fincannon, Commissioner § Wichita County, Texas Lynn Walker, Writer § Times Record News Absent David Toogood, Vice President § WFEDC Member Brent Hillery § WFEDC Member 1. Call to Order Mr. Leo Lane called the meeting to order at 2:30 p.m. 2. Consent Agenda a. Approval of Minutes (December 15, 2022) Ms. Cowling moved to approve the minutes. Seconded by Mr. Leiker, the motion carried 3-0. b. Financial Report Mr. Menzies addressed the Board, stating that the sales tax report reflects November receipts and that sales tax is running 3% ahead of last year. He said this rate would generally be good,but we would like to see it slightly higher,considering CPI and inflation.The Fed announced that annualized inflation ended up at 6.5% through December. Mr. Menzies stated that he heard an analyst's opinion that there might be no inflation by summer or fall. He told the Board their bottom line is approximately$10 million in unencumbered money. Under the open projects, there is a $237,990 expense. That amount should be reported under the WFEDC Minutes 01/12/2023 Page 1 of 4 MPEC parking lot, not i.d.e.a.WF. 3. Discussion and possible action regarding amending performance agreement language for P&WC Aerospace (US)Inc. related to primary job creation. Ms. Taylor Davis addressed the Board and reminded them about the approval of an incentive for Pratt and Whitney to develop a new product line at their Wichita Falls facility. With this project, they are looking to retain 125 full-time employees, add 30 full-time employees, and generate about $10 million in capital expenditures and $2.5 million in new payroll. Ms. Davis is requesting clarification of the terms of the Company's hiring milestones. The Company will incrementally add positions over seven years but will retain 125 full-time employees from the start. In year one, they will add ten new employees. Then, they will add five new full-time employees each year in years two and three. Next, they will add three new FTEs each year in years four and five. Finally, they will add four FTEs each year in years six and seven. By the end of year seven, the Company will employ a total of 155 FTEs. Mr. Lane stated the matrix would make it easier to reconcile later. 4. Discussion and possible action regarding recommendations by Boyette Strategic Advisors LLC related to proposed guidelines for economic development incentives. Tracy Sharp with Boyette Strategic Advisors, LLC, attended the meeting via video teleconference to make a presentation to the Board to walk everyone through the incentive guidelines to encourage new business location decisions and ensure continued business retention. These guidelines should be used case by case during the project negotiation process. Ms. Sharp displayed potential incentive program offerings. She recommended consolidating some of the existing incentive programs, such as the Cash for Jobs Program, the Relocation Incentive Program, and the Forgivable Loan Program, into one program called Jobs and Investment Grant Program. Qualifying companies will receive $5,000 to $15,000 per new job created and/or 3%to 12% of total investment. The options will depend on the project's value to the community. The grants can be used for land purchases, site or building improvements,purchases of M&E, training of employees, relocation costs, and infrastructure improvements. Ideally, they would only be awarded on a performance basis, meaning the company would have to meet specific performance requirements, which may be tied to job creation, investment, or both. Therefore, the company would not get the funding until it met those performance requirements. Exceptions can be made for cash upfront in certain circumstances, but securitization would be required. Also, Reduced- Cost Land would continue to be an incentive offered. Ms. Sharp reviewed the next slide, which included Training Cost Reimbursement and a Remote Worker Incentive Program. She also discussed the Potential Partner Incentive Program. The main one in this.category would be the City and County Real and Personal Property Tax Abatement. Previously this would be offered for seven or ten years with a declining benefit. Ms. Sharp recommended offering up to 100%of taxes on real and personal property, excluding school taxes from five to up to 20 years. The extended abatement period would make it a little more competitive and in line with competing cities' offerings. Specific job, investment, and wage requirements are assigned to that offering. The other incentive programs include Triple Freeport Exemptions, Fee Waivers or Reductions, and Fast-Track Local Permitting. Ms. Sharp suggested advertising fast-track local permitting because it is currently being offered, and a seven to ten day WFEDC Minutes 01/12/2023 Page 2 of 4 turnaround is impressive. Ms. Sharp then discussed the minimum thresholds for job creation,wages,and investment. For a position to be eligible to be counted toward the job creation requirement,it must be a benefit- eligible employee working at least 37.5 hours per week for at least six months. And they must pay the Wichita Falls MSA mean or average wage, currently$43,046 annually or$20.70 per hour,not including bonus or benefits. To meet the minimum threshold, they must create at least five new positions and invest at least$500,000. Then Ms. Sharp discussed the maximum incentive benefits for the New Job Creation Incentive. There are four different levels of this incentive. At Level 1, the company can receive up to $5,000 per job if they have five full-time primary jobs, the capital investment is at least$500,000, and the wage must meet the base $43,046 mean or average wage. Then, the company must create or retain at least ten jobs at Levels 2, 3, and 4. The investment amount at each level differs, and the wages increase at each level. At Level 2, wages should be 105% of the MSA mean or average wage. Then it should be 110% at Level 3 and Level 4 125%. The incentive per job would increase at each level. Ms. Sharp then explained the maximum amount of incentives based on the percentage of investment. Level 1 starts with at least five jobs with 3% of investment. At Level 2, the company would have to create at least ten jobs and invest between $2 million and $10 million. The wage and percentage of investment increase at each level. These maximum grant amounts can be combined to get a more significant total incentive to offer. Level 5 would be used when a project meets the minimum or exceeds the wage requirement but also creates a substantial number of jobs and makes a significant investment. If a project would create or retain at least 200 primary jobs, makes at least$25 million capital investment, and pays at least 105% above the average wage,the company would receive a job incentive of up to $20,000 per job and a per investment incentive of up to 12%. Ms. Sharp then discussed real and personal property tax abatement at the city and county levels. Tax abatements would have to be approved by the city and county. The abatements are set up on four levels with different ranges of capital investment,job creation, and wage requirements. Level 1 would require $5 million to $10 million in capital investment, ten jobs at the MSA mean or average wage, and the company could get up to 100% of real and personal property tax abated for up to five years. The abatement could be offered at 100% for all five years, or there could be a declining scale over the five years. Competitor cities have been offering a more competitive tax abatement incentive. Level 2 would require the company to make a $10 million to $25 million capital investment, 25 jobs at 105% of the MSA mean or average wage. Then the company could receive a ten-year abatement term. Level 3 would require $25 million to $50 million capital investment and 100 new jobs at 110%of the MSA mean or average wage.Then the company could receive a 15-year abatement term. Level 4 would require a capital investment of over $50 million and 200 jobs at 125% of the MSA mean or average wage. Then the company could receive an abatement term of up to 20 years. Ms. Sharp then explained the incentive process and compliance. Some of these things are already in place, but she suggested reviewing them to ensure they work the way the Board would like. She recommended ongoing maintenance and annual review of the guidelines with changes requiring approval by the Board. They should be reviewed and approved every three years by the Board. The Chamber will continue to be responsible for determining prospect needs,working with the Board to offer the packages within the guidelines, negotiating the package, and seeking any necessary approvals from the Board and other partners. There should also be standard documentation and procedures which is already in place. But she recommended having an WFEDC Minutes 01/12/2023 Page 3 of 4 application or questionnaire for each prospect, a cost/benefit analysis, a format for a conditional incentive offer letter, a performance agreement, and a report for companies to complete annually. Ms. Sharp reiterated that these are guidelines and not ironclad requirements. Any deviations would require approval of the WFEDC Board and the city, county, and other partners, as appropriate. These guidelines help the Chamber negotiate incentive offers while working with the WFEDC Board. Ms. Sharp concluded her presentation and asked if there were any questions. Mr. Kinley Hegglund said the tax code states that tax abatements cannot go more than ten years by law, and he was trying to figure out how to get to the 15 and 20-year mark. He asked if it was some combination. Ms. Sharp explained that other Texas cities had granted these more extended tax abatements. Mr. Hegglund wondered if some form of a 380 agreement granted the money that would have been tax abatement for years 15 or 20. Ms. Sharp explained that the Chamber has all the supporting documentation and that she could research that a little more. Mr. Leiker suggested that the other cities' EDC could have calculated the property tax and then reimbursed the company for that amount. Everyone agreed they must research how these cities are going about these more extended abatements. Mr. Kitchens explained that these cities are doing "reverse taxes in lieu." Reverse taxes in lieu means the city or county agrees with the company that they will owe property taxes, so the government entity will reimburse the money at that time. Ms. Sharp explained that the information they reviewed was pretty definitive that these abatements were happening,but in what form is up to question. She said once the structure is determined, they can always modify the guidelines as needed. 5. Executive Session Mr. Lane adjourned the meeting into executive session at 2:58 p.m. pursuant to Texas Government Code §§ 551.087, 551.071,and 551.074. He announced the meeting back into regular session at 3:33 p.m. The subjects posted in the Notice of Meeting were deliberated, and no votes or further actions were taken on the items in executive session. 6. Motions P&WC Aerospace (US) Inc. performance agreement amendment related to primary job creation. Mr. Leiker moved to amend the P&WC Aerospace (US) Inc. Performance Agreement terms such that a seven-year full-time new job chart is incorporated into the agreement stating that the Company agrees to maintain 125 FTEs over the seven years and to add ten FTEs in year one, five FTEs in both years two and three, three FTEs in both years four and five, and two FTEs in both years six and seven for a total of 155 FTEs maintained and created through the seven-year term. No further discussion or comments from the public were made regarding this agenda item. Seconded by Ms. Cowling, the motion carried 3-0. 5. Adjourned. The meeting adjourned at 3:35 p.m. Leo Lane, President WFEDC Minutes 01/12/2023 Page 4 of 4