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4B Sales Tax Corporation Minutes - 03/10/2006MINUTES OF THE 46 SALES TAX CORPORATION March 10, 2006 Present: Warren Ayres, President Benay Ayers, Secretary- Treasurer Ray Gonzalez Tommy McCulloch Bob Seabury Alan Donaldson Lanham Lyne, Mayor Jim Ginnings, Councilor At -Large Darron Leiker, City Manager Matt Benoit, Assistant City Manager Scott Taylor, Director of Public Works Jim Dockery, Director of Finance Dave Clark, Dir. of Community Development Jack Murphy, Dir. of Parks and Recreation Pat Hoffman, Property Administrator Linda Merrill, Recording Secretary Absent: Leon Mallonee, Vice - President I. Call To Order § Corporation Board Members § City Council § City Staff § Corporation Board Member President Warren Ayres called the meeting to order at 8:02 a.m. II. Approval Of Minutes (September 6, 2005) Tommy McCulloch moved, seconded by Benay Ayers, for approval of the minutes. The motion carried. III. Presentation From City Staff On Proposed Public Improvements Associated With The McGrath Creek Crossing Development Matt Benoit explained that, as development occurs in a TIF District, it would pay for the needed infrastructure. The problem occurs when it is not possible to wait for development to occur to build the things that are needed. Staff is appearing before the 4B Board to request some "gap" financing. This project is 4B eligible. 413 Minutes — March 10, 2006 2 Director of Public Works Scott Taylor then discussed the desired infrastructure improvements to the area. The proposed construction includes a 60' wide five -lane road, with medians in the residential areas, and a continuous left -turn lane in the commercial region. The cost for construction is estimated at $1.2 Million. In the 1990's, the Metropolitan Planning Organization and TxDOT performed a study to determine whether the extension of Maplewood to Lawrence Road could be funded by the State. It did not meet that level, but was still felt to be a viable project. The staff has revisited the study, and determined that the preferred route crosses from Kemp at Avenue Z, and proceeds westerly through TESCO Park to Lawrence Road. Initially, Keith Street was the preferred street to tie in to at Lawrence Road, but Trade Street, on the south side of Wal -Mart, is now felt to be the best route. Eventually, Trade will connect to McNiel at North Regent Drive. The City must purchase four houses on Avenue Z, as well as at least a portion of an auto repair /paint shop, for the project. In his cost estimate, Mr. Taylor assumed the full cost of the business, as it is unclear how much the acquisition will affect it. The City will also need to purchase eight feet of right -of -way on the east side of Lawrence Road. Crossing TESCO Park will require the removal /relocation of the softball fields. Typically, there is a reversionary clause for any land dedicated as a park, wherein if such land were no longer used as a park, it would revert back to the grantor (in this case, TXU Electric). However TXU will not invoke the reversionary clause in this instance. The cost for relocation of the softball fields is estimated at $500,000. Mr. Taylor avowed the continuous left -turn lane will reduce traffic congestion for the northbound traffic turning into Wal -Mart. Councilor Jim Ginnings asked if the left - turn lane would start at Call Field. Mr. Taylor replied that it would begin north of Call Field, where the lanes reduce from five to four, and end at the Home Depot. Bob Seabury asked how the property is zoned in that area. Dave Clark, Director of Community Development, replied that it is mostly light industrial. Mr. Seabury asked if property currently zoned as single family would continue with that zoning designation. Mr. Clark replied affirmatively. Benay Ayers asked where the softball fields would be relocated. Mr. Taylor replied that they would be moved to the softball complex. The cost estimate includes the relocation. Mayor Lanham Lyne added that the relocation of the fields increases the city's ability to have tournaments. City Manager Darron Leiker concurred, adding that it would be easier to man the fields at one location. Mr. Taylor added that the intent is to salvage as much from TESCO Park as possible, such as the lighting. Mr. Ayres asked if the City intended to sell the TESCO parkland. Mr. Taylor replied that the land will be used for drainage purposes. The land is in the floodway, and construction in the floodway is prohibited. Drainage improvements need to be made to move this area out of the floodway. 4B Minutes — March 10, 2006 3 A storm water utility fund was established in 1991 for drainage projects. This project is known as McGrath Creek Tributaries A and B, and is also identified as the Quail Creek Drainage Project. The project will begin at McNiel and work back south and east to boxed culverts at Midwestern Parkway. When Wal -Mart moved to Lawrence Road, the area behind it was identified as wetlands. Trade Street will need to be widened to match Maplewood, which will cut into the wetlands. The City proposes to build two detention ponds on the existing south softball field. It will become a wet bottom facility and offset the loss of the wetland areas. Another detention pond will be a dry bottom facility. This construction will alleviate floodway and floodplain issues, and make this area developable. The Parks Department will relocate shrubs and trees to this area as possible, and it is proposed a walk will be constructed in this parkland. Ms. Ayers asked if the drainage would consist of a concrete channel. Mr. Taylor stated that while he would prefer a green channel, a concrete channel would convey more water. The area west of Kemp toward Lawrence will be an open, concrete channel. It is too cost prohibitive to have a closed channel. Mr. Taylor estimates the cost for drainage to be $3.3 Million. The 4B Board encumbered $500,000 for drainage projects, earmarked for the area at 9th and Lindsey. That project will be more expensive than anticipated. He suggests dedicating that $500,000 to this project; the remaining $2.8 Million would come from the storm water drainage fund. This project will not delay the Faith Village project (Phases II and III). There is about $3.4 Million worth of bonds left from the Holliday /McGrath Creek Project allotted to Faith Village. Ms. Ayers stated there had been discussion in the past of the danger of having too many projects underway at one time. Mr. Taylor said the Faith Village project will disrupt the southern end of Kemp toward the end of the project, but disruptions will be minimized as much as possible. Mr. Clark then distributed the financial plan adopted by the Council last fall, which identified the boundary of the TIF district. Within that boundary, a base amount of the assessed valuations of the properties, and the amount of taxes currently paid to the City, County and School District, was established. If a new building is constructed on a vacant lot within that district, for example, any taxes paid above that base (the increment) are not distributed to the taxing entities, but are paid into the TIF fund. He noted the challenge will be to fill the gap to get going on projects. This TIF district was set up to provide infrastructure, as opposed to the downtown TIF district, established to encourage development. Mr. Clark reported that the area was economically stronger than anticipated in the plan, considering that certain projects identified in Phase 1 are already completed 46 Minutes — March 10, 2006 4 (Kohl's, McAllister's Deli, Mazzio's Pizza, etc.). He projects the increment available from investments in 2007 will be approximately $34,000. Logan's Roadhouse and a retail complex are also under construction. Phase 3 includes the construction of the McGrath Creek Shopping Center. The increments for each phase are conservatively estimated. The Ember Shop, constructed in the TIF zone, was not even considered in the financial report. He clarified that the school district will not participate in this TIF district due to legislative changes regarding the taxing formula that would preclude the school district from capturing the new increase. Jim Dockery, Director of Finance, then addressed the Board. He explained the handouts provided scenarios as to how the 4B fund might be financially impacted, if it chose to assist in financing the improvements. Scenario One assumes debt financing for all projects listed with the exception of the $500,000 earmarked for the Quail Creek District. The City would bond the $3 Million and have a similar arrangement with the 4B board to repay that debt service as was done for the public safety community system. This scenario illustrates the impact to the TIF fund, relying on Mr. Clark's estimation of annual increments, and assuming Phase 3 of the revenue income. The revenue estimated from the TIF fund from 2007 -2025 shows the annual increment that is in the Plan. The only expense to which the TIF fund is committed is repaying a portion of the Maplewood extension. In years 2006 -2008, the TIF fund has no available revenue. That is why the City is appearing before the Board today, requesting this advance funding. The 4B Board's annual debt service payment amounts to $242,000 for the $3 Million debt financing over a 20 -year period, beginning with the 2007 fiscal year. TIF funds would be paid to the 4B Board as they become available. A revenue stream is anticipated beginning in 2009, so there would be a reduction in the impact on 4B finances beginning that year. The 4B Board would not be made whole, as the cost would be $4,840,000, with interest on the bonds. This is based upon the assumption that we get only Phase 3 increment. This is a very conservative estimate, and thus reveals the 4B Board's maximum liability. Scenario Two assumes a half debt, half cash financing. The 4B Board would release $1.5 Million cash to allow Public Works to begin construction, and debt finance the remaining half of the $3 Million. The debt service payment does down to $121,000 per year, but the Board is funding the project up -front on a 50% basis. This would impact the Board significantly in 2006. In 2010, the Board will start to realize a profit 4B Minutes — March 10, 2006 u and repay itself for the financing. Essentially, the City's interest rate on borrowed funds would be the same rate at which the idle funds are being invested. Phase 3 in Scenario Two assumes the total cost of 4B funds is $3.9 Million. In Scenario One, the cost is $4.8 Million, because the Board would pay more interest. However, in Scenario Two, the Board would lose investment income potential by fronting the $1.5 Million. Ultimately, on a present -value basis, either scenario would result in about the same level of financing. Mr. Clark used County Appraisal District information to come up with the likelihood of future development over time. In 2015, it is assumed there would be a large increase in the increment. He utilized that increment as a revenue to the TIF fund, which enables it to pay everything back to the 4B Board. In Phase 4, the TIF funds will pay back everything the 4B Board expended with the exception of the softball field relocation. The fund would be made whole except for that $500,000 expenditure. Mr. Dockery then briefly addressed the last two scenarios, noting an increase in appraised values or additional developments beyond Phase 3. The $3 Million is fully debt financed, and the debt service payment would remain $242,000 per year for the life of the bonds. The 46 Board is made entirely whole except for the softball field relocation, and the TIF fund has money that could be used for improvements, at some distant point in the future. Otherwise, the TIF fund would no longer be required. Scenario Four is the same as Scenario Two, except that it assumes a higher level of income from the TIF zone. Mr. Seabury questioned how this expenditure would affect the 4B Board's ability to fund other projects. Mr. Benoit stated that three years ago, the 4B Board took on a $9 Million project (the two -way radio and CAD -RMS system). This project will involve the issuance of debt, and the Board's annual obligation would total about $250,000, while its annual income is a little over $3 Million. Mr. Dockery added that debt financing does not cost that much, except for the issuance costs. Mr. McCulloch asked if the TIF district would have the cash flow at some point during its existence that would allow it to get bonds itself. Mr. Dockery replied that it is the intent that the TIF fund pay back to the extent it is available. However, the district will never have cash for future projects unless there is substantial development in Phase 4. The goal is to make the 413 Board as whole as can be, and as quickly as can be, although admittedly it will take a number of years. Mr. Clark reiterated that the circumstances of this TIF district are different from the TIF downtown district, as that one did not have a public project. It took 10 years before that district had money. Now it brings in $220,000 each year. 4B Minutes — March 10. 2006 2 Mr. McCulloch asked how else could the City make this happen, if 4B funds are not used? Mr. Dockery stated the only source available would be the City's funding and potential bonding capabilities, if need be. He added that it is hoped this will not be necessary, as this project is 4B eligible. Mr. Seabury stated that the only people who stand to make money out of this project are the adjacent property owners. He asked why they are not asked to participate in some way. Mr. Taylor stated that the developer is paying for major utility relocations — a 36" sanitary sewer and an 18" water line run through his property, as well as smaller water and sewer lines. He did ask the City to finance the utility costs, but the City refused. The developer is benefiting from the road, but he also dedicated right - of -way for it, and is paying for two lanes of the road, although the City is rebating him half of that cost back. He has complied with the City's current development regulations. Mr. Leiker informed the board that by doing the project in the proposed manner, Wichita County pays for 36% of the cost. The Maplewood extension is on the City's current thoroughfare plan to be done in the future at 100% City expense, including drainage costs. The 4A and 4B funds will benefit from increased sales tax revenue. This project is a good match for 4B funding. Legally, 4B money could fund this project 100% (with the exception of the ballfield relocation) and not be repaid. However, it makes sense to have the TIF fund repay the 4B funds, and to capture the County's participation. Mayor Lyne noted there is no legal mechanism to force further participation from adjacent landowners. Mr. Leiker added that as development may occur in the future, the owners would still be asked to dedicate right -of -way. Mr. Seabury asked if 4A money was eligible for this project. Mr. Benoit stated that the use of 4A funds has been narrowed by the legislature. Mr. Leiker added that the only way to use the 4A funds is to finance jobs. Ms. Ayers noted that 4B funds had been used for infrastructure since the Board's formation. Mr. McCulloch noted that when he read about the action at the City Council meeting, it made him feel as if he was not really needed as a member of the 4B Board. It appears this project, and the use of 4B funds, has been on the City's drawing board for some time. He would have a problem with approving funding if the Board was not getting repaid. Ms. Ayers concurred, expressing her desire that the Board's input be brought into the picture earlier in the process. IV. Conduct A Public Hearing On Proposed Public Improvements Associated With The McGrath Creek Crossing Development Mr. Ayres opened the public hearing for discussions on the proposed development. He invited Councilor Ginnings to speak if he so desired. 4B Minutes — March 10, 2006 7 Councilor Ginnings stated that the 4B Board should not feel any funding source decision had already been made. The Council could take the same attitude when the staff brings forth a project for deliberation. It could be possible for the 4B Board to be notified by email that a certain project may or may not result in a meeting similar to the one being held today. The ball is in the Board's court; it can deny the funding request. He apologized if it seemed that funding from the 4B was taken for granted, but the Council cannot vote to expend 4B funds. Mr. Seabury stated it appeared from a newspaper article that the money was coming from 4B funds. Mr. Leiker expressed his displeasure with the article. It was made very clear (to the Times Record News reporter) that this was a request. The City had to ask the City Council for permission to approach the 413 Board for funding. Mayor Lyne agreed that when the use of 4B funds is considered, it would be worth sitting down with at least the chairman of the 4B Board to discuss it. Mr. McCulloch opined that it would be helpful for the City to inform the Board that a project is in the works, and that it might be approached at a later time in more detail. Mr. Ayres declared the public hearing closed. V. Consider Approval Of Proposed Public Improvements Associated With The McGrath Creek Crossing Development Mr. Ayres called the question on the proposal to consider approval of the McGrath Creek Crossing Development. Mr. McCulloch moved, seconded by Ms. Ayers, that such development be approved. The motion unanimously carried. VI. Presentation On Golf Course Comprehensive Plan Mr. Benoit stated the 4B Board awarded the City $25,000 to contract for the services of a golf course consultant. The City contributed $22,000 to his sum, and Golf Scapes /Sirius Golf Advisors was hired. The consultant's 225 -page draft includes a comprehensive plan and operational analysis. This review also looked at physical problems, and the feasibility of adding a driving range. There are five reasons renovation is recommended: 1. Wichita Falls is in a region that includes a lot of "value" golf courses. There is a market opportunity for a course between the value golf courses and the exclusive country club courses. 2. Tourism. There are 280,000 visitors annually to Wichita Falls. The National Golf Association estimates 42% of golfers play when they travel. Those tourists who do play while on vacation look for a course that is better than what they are offered at home. . 4B Minutes — March 10, 2006 3. The course's customers desire improvements, based upon surveys. u 4. This area has enough higher income families in the market who either do not play or are golfing at value courses as their only option. There are 9,000 households in the area that earn over $75,000, the income point at which golfing rates almost double. A typical $75,000 income household would play 34 rounds a year. 5. Renovation could make the course self- sufficient. If renovation does not occur, the general fund would have to subsidize the course. In the last fiscal year, this subsidy totaled $172,000, and $87,500 is budgeted for this fiscal year. If the course is renovated, the number of rounds could increase to 30,000, and up to 32,000 with the inclusion of a driving range. The course becomes self- sufficient somewhere between 32,000- 33,000 rounds of golf (depending on pricing). The consultant offered several renovation models, ranging from $3 Million to $5.5 Million. The low -end renovation includes drainage, irrigation, and new green and fairway surfaces. It does not include a driving range or any hole reconfigurations. The $5.5 Million renovation adds a driving range, and 18 new holes. There are two renovation models between these two options, which include a driving range and some hole reconfiguration. Mr. Benoit recommended the appointment of an eight to ten - member committee, composed of 4B members, golfers, non - golfers, and City Councilors. He has some individuals in mind, but needs to first visit with the Mayor. He plans to continue to review the models within the next few months. City staff would like to issue debt for renovation if the 4B Board is comfortable with that. As the committee meets, he would ask the golf course architect to do some hole reconfigurations. He will work on financing models to involve joint issuance of golf course renovation and TIF funding, and yet still allow the Board to work on other projects down the road. Mr. Seabury stated that if any number of projects were submitted to the public for a vote, such as improvements to Lake Wichita, a restaurant at the old pavilion, improvements to Murphy's Mountain, community centers, and improvements to the golf course, the course would come in a sad third of fourth. The other projects are eligible for 4B funds and are more attractive to the general public than is the golf course. Mr. Benoit stated the City Council and City staff just went through a strategic planning session. He agrees there are a lot of other viable projects. However, unless something is done about the golf course, it will account for a penny of the tax rate. When it does that, it takes money away from all the other things ahead of it on the list. It had been self- sufficient since 1997, and now is subsidized by half a penny on the tax rate, or $187,000 per year, and it is not getting any better. . 43 Minutes — March 10, 2006 9 Mr. Seabury stated that, as a member of the Homebuilders Association, he receives a list of the 100 most desirable cities in America. Of the ten most important criteria, jobs, education, and safety top the list. Fourth or fifth on the list are community centers. Golf courses are way down on the list. Mr. Leiker stated he is aware of that list, and quality of life issues are fourth or fifth on the list, not specifically community centers. He averred that golf courses play a role in that quality of life. The City benefits from tourism, and folks who organize conventions look at what opportunities registrants can have outside of their convention business. It is important that Wichita Falls have a quality golf course. If something is not done, the course will continue to drain the general fund, and take that money away from other opportunities. The City would recommend debt financing so that it does not take all the available resources of the 4B Board, so that it would still be able to consider other options. Mr. Seabury questioned whether Mr. Leiker would submit this question to the voters. Mr. Leiker replied that he would not recommend it, just as he would not submit for a vote the continued subsidization of the tennis centers at over $100,000 per year. Mr. Ayres urged the City staff to move ahead with the formation of the committee. Ms. Ayers initially felt it odd to have a non - golfer on the committee, but after listening to Mr. Seabury, feels it appropriate to include such a member. Mr. Ayres encouraged Mr. Benoit to email the Board concerning the progress of this matter. Mr. McCulloch requested that any materials over 50 pages be mailed to him, rather than furnished through email. Mr. Leiker questioned whether the Board is in agreement with the proposed composition of the committee. Mr. Ayres replied it is the City Council's decision. VII. Adjourn The meeting adjourned at 9:50 a.m. Warren T. Ayres President