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4A Wichita Falls Economic Development Minutes - 12/19/2005MINUTES OF THE WICHITA FALLS ECONOMIC DEVELOPMENT CORPORATION December 19, 2005 Present. Members: Gary Shores, President Bo Stahler, Vice - President Bill Altman Dave Lilley Lou Rodriguez City Council: Lanham Lyne, Mayor Charles Elmore, District 5 City Staff: Darron Leiker, City Manager Matt Benoit, Assistant City Manager Scott Taylor, Director of Public Works Linda Merrill, Recording Secretary BCI: Tim Chase, President Kevin Pearson, Vice - President of Economic Development Kay Yeager Media: Robert Morgan, Times Record News I. Call To Order. President Gary Shores called the meeting to order at 4:00 p.m. II. Approval of Minutes — December 2, 2005. Bo Stahler moved, seconded by Lou Rodriguez, that the December 2, 2005 minutes be approved. The motion carried. III. Consider Approval Of An Economic Development Incentive Agreement With ATCO Structures, Inc. Kevin Pearson informed the Board that Tim Chase was currently at a meeting at Nortex, but would arrive as soon as possible. He stated that one constant in this project is the cash - for -jobs incentive, and explained the details of the Memorandum of Understanding: $500,000 will be paid to ATCO over a three -year period, providing ATCO: (1) creates a minimum of 100 new jobs; (2) invests a minimum of $800,000 in Wichita Falls; and (3) invests $1 million in raw material and work -in- progress inventory. The company is confident they will actually create 142 new jobs, but did not want to be held to that higher number under this agreement. All of the jobs will have benefits. Wichita Falls Economic Development Corporation December 19, 2005 Meeting Minutes Page 2 ATCO will not collect any money until the jobs have been in place for six months. If the company closes in the first year, the clawback provision requires the reimbursement of 100% of any money distributed; by the fifth year, the company would not be obligated to repay any money. President Shores questioned why the sum of $1.4 million is used in the MOU, as opposed to $1.2 million. Mr. Pearson replied that it was an "up to" figure, and based upon negotiations, he doubts that $1.4 million will be expended. President Shores asked what the $200,000 overage was based upon. Mr. Pearson replied it was for repairs to the building. However, negotiations were accomplished through attorney Ken Hines to pay the company $75,000 for building improvements. The company will be solely responsible for any repairs costing over that sum. Therefore, Mr. Pearson summarized, the decision was made to spend $1,135,000 on the building, and $75,000 as a one -time repair allowance. Mr. Stahler noted that figure could simply be changed to $1,210,000. President Shores urged that the figure be so changed, to which Mr. Pearson agreed. Mr. Stahler moved for approval of the agreement. Seconded by Mr. Rodriguez, the motion carried. IV. Consider Purchase of a Building at 2400 Burkburnett Road. President Shores asked for confirmation that there were no changes made to the purchase agreement, other than the price. Mr. Chase replied affirmatively. He noted that Fleetwood's president signed on December 15, initialing the agreed -to price of $1,135,000. Fleetwood also asked for a Special Warranty Deed as opposed to a General Warranty Deed. Mr. Hines did not see this as a source of concern. Mr. Stahler noted another change was the limit of repairs to $75,000. Mr. Chase concurred, and also noted the location of the closing was changed to Landmark Title. Mr. Altman expressed concern over this transaction, as there was only one realtor for both sides. The circumstances with this particular project were extraordinary, he acknowledged, but it makes him feel uncomfortable voting on a negotiated price. He stressed that his feelings are no reflection on the realtor (Doc Anderson). President Shores expressed agreement with this concern. Mr. Lilley noted it was his understanding that another realtor was going to become involved. Mr. Chase stated that he retained Ken Hines, who is representing the 4a Corporation's interests. Mr. Altman countered that Doc Anderson was still fully apprised on this transaction. Mr. Chase stated there are two things that need to be done differently next time, and having separate realtors for interested parties is the first. The next involves the purchase of property. He avowed that the purchase of property is an integral part of the economic development package. He believes the BCI should begin the purchase agreement, and write one that is assignable for any reason, and had an "out" for any reason. President Shores argued that if 4a funds are being committed, the Corporation Wichita Falls Economic Development Corporation December 19, 2005 Meeting Minutes Page 3 has to continue to be involved in that process. Mr. Chase commented that he has always kept the Corporation involved, and will continue such practice. However, in the event the 4a Corporation is not supportive of a project, then the BCI would have entered into a contract that had an out, and it would kill the deal. The BCI would not be presupposing a vote by either the 4a Corporation or the City. President Shores reiterated the need of the 4a Corporation to be kept apprised of whatever negotiations are occurring, if the use of 4a funds is being contemplated for the purchase of property. Mr. Altman moved in favor of the purchase, seconded by Mr. Rodriguez. The motion carried. Mr. Chase asked if there is a need to amend the budget request. Mr. Benoit replied that he would do it from the podium at the next day's Council meeting. V. Consider a Lease Agreement with ATCO Structures for the Use of a Building at 2400 Burkburnett Road.' Mr. Pearson stated there had been six weeks of negotiations with ATCO. Initially, the company's biggest concern was for a three -year "out" option in the lease. This request was denied as an imprudent use of taxpayer money. ATCO then suggested a five -year lease, which was acceptable. In the original proposal, $253,000 worth of free rent was included. Under the renegotiated lease, the sum of $71,200 is spread over the first year of the term, which in effect gives the company eight months of free rent. The company views this time as a "fixturing period," and will help them from a cash flow standpoint. The remaining $181,800 of that original sum is now spread out evenly over 115 periods. At the end of five years, ATCO can terminate the agreement with 90 days written notice. If they were to cancel in January at the end of five years, the outstanding principal balance on the building would be $779,184. Appraiser Jim Henderson performed a market value appraisal, assessing the value of the building at $1.4 million. Mr. Chase queried whether this appraisal included an income approach. Mr. Pearson stated he did not recall such an approach, and Mr. Stahler opined the value would be much greater had Mr. Henderson done so. President Shores asked if there were any changes made to the lease since he last reviewed it. Mr. Pearson stated there were minor legal terms, but he did not have the email with him that outlined the changes made. Mr. Chase began to address the changes from his memory. ATCO bids insurance for all assets at certain times throughout the year. Language was included to insure that if the company's insurance lapsed, the 4a Corporation would buy the insurance, and the company would pay for it (to insure continued coverage). Mr. Stahler asked if this was for any specified length of time. Mr. Chase replied it might be up to thirty days. The language was included to protect the 4a Corporation and the building; he does not envision this as a likelihood. 1 This item was discussed prior to Item IV. 1 Wichita Falls Economic Development Corporation December 19, 2005 Meeting Minutes Page 4 He also added there was an attempt for 4a to indemnify them on conditions regarding the building (other than environmental) that took place prior to their occupation of it. Neither he nor Ken Hines could think of a single circumstance where that would occur. But as Mr. Hines had a strong opinion that the 4a Board should not indemnify ATCO for any prior conditions, that request was stricken. Mr. Chase then telephoned Mr. Hines to confirm the third change made to the lease since review by the Board. He arranged for a marked -up copy and a final copy of the lease to be emailed to Matt Benoit. This item was tabled until such materials were available later in the meeting. (The matter was next addressed after the executive session, but is placed here for the sake of continuity.) With the copies distributed, Mr. Chase directed the Board to page 8, regarding a revision to the last sentence of Section 11, Indemnity and Insurance, to include the term "omission," and the phrase, "and Lessor's agents, contractors, employees, invitees or licensees." Next, Mr. Chase noted Item 12, Loss or Damage to Lessee's Personal Property. He explained that if the 4a Corporation sent a plumbing contractor onto the premises, for instance, that contractor is required to be bonded (in the event he damages something while on the premises). This section does not even address the issue that the 4a Corporation is not responsible for maintaining the building. The lease requires the contractor or the 4a Corporation to be responsible for damages that may occur on the premises through the actions of the contractor. The City requires a contractor to be licensed and bonded before he can be issued a building permit. Mr. Lilley noted that a bond is required for a contractor to be licensed in Wichita Falls. Mr. Pearson interjected that the 4a Corporation would not be hiring anyone to repair the building, because of the $75,000 one -time repair allowance. The next change is found on page 16, under Section 28.2, Indemnity by Lessee, to add the phrase, and not by any pre- existing condition on the Premises. The environmental report has been completed and accepted, per Mr. Chase. He then indicated there was a typographical error on page 17 under Section 38.1, (which are not paid or reimbursed by Le6seF Lessee pursuant to this Lease). Mr. Chase confirmed to President Shores that these are the only changes between the current version, and that version distributed last Wednesday. Mr. Altman moved, seconded by Mr. Rodriguez, that such lease agreement be approved. The motion carried. A Wichita Falls Economic Development Corporation December 19, 2005 Meeting Minutes Page 5 VI. Executive Session, as Authorized by Sections 551.087 and 551.072 of the TEXAS LOCAL GOVERNMENT CODE. The Board adjourned into executive session at 4:25 p.m., and reconvened the meeting at 5:15 p.m. VII. Consider Approval of an Economic Development Incentive Package for FutureGen, Texas. Mr. Stahler moved, seconded by Mr. Rodriguez, for the 4a Corporation's approval of a resolution in support of locating the FutureGen Project in Wichita Falls. The motion carried. VIII. Other Items. There were no other items to come before the Corporation. IX. Adjourn. The meeting adjourned at 5:33 p.m. ary_ ore , President