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4A Wichita Falls Economic Development Minutes - 05/09/2008MINUTES OF THE WICHITA FALLS ECONOMIC DEVELOPMENT CORPORATION MAY 9, 2008 PRESENT: Gary Shores, Chairman § Bo Stahler, Vice Chairman/Sec. /Treasurer § Gary McLendon § Members Dick Bundy § Lanham Lyne, Mayor § City Council Charles Elmore, Councilor, District 5 § Matt Benoit, Assistant City Manager § Bill Sullivan, City Attorney § Scott Taylor, Director of Public Works § City Staff Dave Clark, Dir. of Community Development § Linda Merrill, Recording Secretary § Tim Chase, President § Kevin Pearson, VP, Economic Dev. § BCI Jim Biggs § Biggs & Mathews David Dunn § Atmos Energy ABSENT: Dave Lilley § Member 1. CALL TO ORDER The meeting was called to order at 4:02 p.m. II. APPROVAL OF MINUTES — APRIL 11, 2008 Bo Stahler noted changes to be made to the minutes. Seconded by Gary McLendon, the minutes, as revised, were unanimously approved. The revisions were as follows: Exchange "the" for "this" in first line of the first paragraph under Article III. • Removal of the first sentence of the fourth paragraph under Article IV (deemed repetitive) WFEDC — Minutes of May 9, 2008 2 Change "an" to "a" in third line of third paragraph on page 5 (Mr. Stahler subsequently rescinded this revision) Removal of the word "are" from the first line of the fourth paragraph on page 5. III. CONSIDER A PRESENTATION AND POSSIBLE ACTION ON BIDS FOR THE EXTENSION OF NATURAL GAS IN THE BUSINESS PARK Kevin Pearson reminded the Board that on February 11, it approved $280,000 to extend natural gas throughout the Business Park. Atmos Energy's David Dunn prepared the bid documents. Five quotes were received, ranging from $169,000 to $316,000. Atmos cannot recommend one company over another, but they are all Atmos - certified vendors. MasTec submitted the lowest bid; today is the last day that quote is valid. Due to a significant increase in the cost of pipe, any re -quote of this bid could increase costs by $20,000. Dick Bundy moved to accept MasTec's bid. Chairman Shores asked if this company's bid requires the use of sand. Mr. Pearson noted MasTec's bid includes the cost of sand. Chairman Shores noted his question is whether the use of sand will be required. Vice Chairman Stahler noted that if sand is not required, then Texas State Utilities' bid is lower. Mr. Dunn noted there are strict requirements on the use of sand. If the soil is not sandy, the use of sand will be required. He cannot imagine putting in that many feet of pipe without the need of sand in at least some areas. An inspector will be onsite, and he will err on the side of caution. The Board unanimously pproved awarding the bid to extend natural gas throughout the Business Park to MasTec. Mr. Pearson informed the Board he will notify MasTec upon return to his office. Mayor Lyne and Vice Chairman Stahler urged that he notify them immediately, as the quote's validity ends today. Mr. Pearson left the meeting to contact MasTec via his cell phone. IV. CONSIDER A PRESENTATION AND POSSIBLE ACTION ON THE EXTENSION OF SANITARY SEWER AND PUMP STATION IMPROVEMENTS IN THE BUSINESS PARK Mr. Benoit noted that when the Board approved the economic incentive agreement for Old Dominion, it allocated $60,320 to extend sanitary sewer to that lot and to install pumps at the pump station. The actual cost from the same contractor who installed water and sanitary sewer in the Park is $74,893. In addition, Jim Biggs has a remaining fee of $5,440, and there is an additional $500 charge for construction staking. The actual total cost of $80,833 leaves a deficit of $20,513. Jim Biggs noted that presently there is not enough sewer line to reach Old Dominion's site. Additionally, when the lift station was initially installed, it was done so with minimal improvements, as no businesses were located in the Park. The pumps now need to be installed, and costs have risen. Chairman Shores asked if the pumps that are to be installed are big enough to handle most of the effluent. Mr. Biggs replied affirmatively, unless a large water user locates in the Park. Chairman Shores asked if it would be smarter to put in the maximum size pumps. He expressed concern that installing larger pumps to accommodate new tenants of the Park could be WFEDC — Minutes of May 9, 2008 3 an ongoing proposition. Mr. Biggs explained that if the entire street were to fill up with similar businesses, the proposed pumps will be adequate and cost efficient. If a business that uses a million gallons of water per day were to use the same pump station, larger pumps would probably be required. Tim Chase asked if electricity is currently available to the pump station. Scott Taylor replied it is not, but it will be established. Mr. Chase asked if the cost to get the electricity to the pump station has been incorporated in other actions the Board has taken. Mr. Benoit replied he would have to review past budget amendments to answer this question. Mr. Chase responded that he thought part of this adjustment would reflect an amount necessary to get electricity to the pump station. Mr. Chase believes the closest point where the pole is dropped in the ground at the Park entrance. There is another line coming down the back side of Wichita Clutch. Mr. Benoit expressed his opinion that that connection would be closer than the entrance; Mr. Chase feels it is a coin toss. Vice Chairman Stahler moved, seconded by Dick Bundy, to recommend to the City Council the expenditure of additional funding for the sewer line extension and pump installation at a total cost of $20,513. The motion unanimously carried. V. DISCUSSION AND POSSIBLE ACTION ON ANNEXATION VERSUS NON - ANNEXATION OF THE BUSINESS PARK Before proceeding to Item V., Mr. Chase stated to the Board that there is a bid of $6,500 for three soil borings, so that data would be available to tell prospects about the compaction rate, which equates to the cost to put in foundations. This process was called for in a previous budget amendment. Mr. Bundy asked where the borings were done. Mr. Biggs replied that he got a quote to do three 25' deep borings. He will stake them. Council Charles Elmore expressed surprise at the cost for the borings; Mr. Biggs explained that cost includes testing, and a full technical report. Mr. Benoit then discussed Item V. In the last several months, City staff and the BCI have discussed the best way to provide services to the Park. At some point, Old Dominion will want water and sewer services. These can be provided via annexation, or through a non - annexation agreement. The actions taken toward Old Dominion will directly affect the future direction of the Park. It will not be possible to analyze each business, and make individualized decisions on whether or not to annex their property. Mr. Benoit directed the Board's attention to his memo discussing the advantages of annexation, and reiterated the five advantages outlined therein: Maintenance of public facilities will be problematic if the Business Park is not annexed into the City. The City is prohibited by ordinance from maintaining infrastructure outside the City limits. The Association would have to contract with the City or another entity to provide maintenance of the water, sewer, roads, wastewater, and storm water. WFEDC — Minutes of May 9, 2008 4 2. Non- annexation agreements have terms of seven years. By the fifth generation (or 28`h year) of a non - annexation agreement, businesses are paying the same amount for water, sewer, and property taxes as if they were inside the City limits. However, they are not receiving the same services they would receive, were they in the City limits, such as maintenance of public facilities and police protection. 3. Because of State law and precedent, the City's current non - annexation agreements are, in effect, terminal. Mr. Benoit does not believe that was the original intent of the non - annexation agreements. The agreements clearly state that at the conclusion of the agreement, the property will be annexed. However, due to changes in State law, the City cannot do strip annexation. The non - annexation agreements for the various businesses expire at different times. 4. The City has been fortunate that the industries operating under non - annexation agreements have accepted the subsequent generation terms (water and sewer increasing from 150% to 175 %). Potentially, an industry could refuse to accept those terms. The only method of enforcement available to the City is to refuse to provide the services, and that's not a good situation for anyone. 5. In a perfect world, ay time a business is brought in, it would be nice to determine whether it is suited for annexation or non - annexation — whatever method results in a greater incentive. This is not possible, or the City would end up with a situation similar to that on I -44, only worse, as neighbors could potentially be operating under different types of agreements. Not one of the five reasons is adequate on its own, but together they make a compelling argument for annexation of the Business Park. He illustrated the differences between non - annexation agreements and tax abatement agreements by their effects on various industries. For larger utility users (such as St. Gobain and PPG), the effect of paying higher utility fees offsets the payment in lieu of taxes. Over the course of 28 years, smaller industries (such as AT &T and Sharp Iron) fare better with non - annexation agreements. Still, the greatest incentive occurs at the five- and ten -year periods. Vice Chairman Stahler asked if this result includes even the light users. Mr. Benoit replied affirmatively. Vice Chairman Stahler assumed that businesses anticipated to locate at the Business Park would fall under the light user category. Mr. Chase replied affirmatively. Mr. Benoit felt encouraged that the small utility easers at the five- and ten -year increments were coming out better than with the non - annexation agreements. Mr. Bundy asked what has changed to make non - annexation agreements not the preferred method of incentive. Mr. Benoit presumes when the City entered into these types of agreements 28 years ago, the ability to exercise annexation at the conclusion of several generations of an agreement was a 60 -day, two - ordinance process. At this point, however, the State Legislature has limited the City's ability to jump from outside the City limits to an island annexation, without cutting a trail in between. WFEDC — Minutes of May 9, 2008 Mr. Bundy asked what additional costs a potential business might incur if the Business Park is annexed, other than permitting costs. He observed that the State requires compliance with the International Building Code (IBC). If the Park is not annexed, no building official would have jurisdiction. Mr. Chase replied that may not be true. Dave Clark concurred with Mr. Bundy. Non - annexation agreements typically require construction to conform with the IBC. Inspections are performed at no charge. Mr. Chase noted there are no "teeth" to these agreements if they do not comply, other than to withhold water and sewer. Mr. Bundy stated that early versions of non - annexation agreements did include building code requirements. Even if an industry were mandated to comply with the IBC, no authority would have jurisdiction. Bill Sullivan asked Mr. Bundy if the lender did not require compliance with the IBC. Mr. Bundy stated that annexation agreements probably allowed for projects to come together more quickly. Mr. Chase said he would bet a premium was not required for water and sewer in the early agreements. Mr. Sullivan said he does not know what other incentives would have been available at the time the City entered into these agreements. He does not think tax abatement agreements were locally available at that time. Mr. Benoit noted there is one factor that he cannot figure into his analysis. Companies outside the city limits do not pay franchise taxes on gas and electricity, which range between 4.5% and 5 %, based on usage. That would be a significant cost for users such as Howmet and PPG. Mr. Chase interjected that a large process manufacturing plant would stay on the I -44 corridor; the Business Park is ideally suited for smaller, less energy companies. Mr. Chase prepared a list of pros and cons for annexation. He, too, recommends annexation, depending upon the recognition of three conditions which need to be thoroughly discussed. The current tax abatement policy is a 55% discount over 10 years. The current non - annexation agreement yields 73% over that same 10 -year period. If annexation is to occur, the City and County must agree to a new abatement policy that gives latitude up to a 75% discount. Having the ability to increase or decrease an abatement in relation to the needs of a particular project is akin to using cash for jobs to make the deal. 2. It is conceivable that a long -range discount would be desirable for the company. If the City is competing against another location that offers that long -term discount, the 4A Board would then use its resources to help level the playing field. 3. The covenants and creation of the Business Park Association must prevail over City requirements regarding land use and the construction materials used. Mr. Clark sees no issue with item 3 above, if the Business Park wants to keep higher standards than required by the City. Mr. Chase replied that higher standards is what they would shoot for, but the language gives this Board the ability to throw out that higher standard to make sure the deal is done. Mr. Clark says the City would be concerned that any industry meet the statewide building code requirements. Mr. Chase observed that if land use, setbacks, signage, or WFEDC — Minutes of May 9, 2008 6 landscaping were to deviate from the City's ordinances, that could only be accomplished through the City's waiver process. This process includes a staff recommendation, an appearance before a Planning and Zoning (P & Z) Commission meeting, and potentially City Council intervention if the P & Z Commission does not act in favor of the requestor. Mr. Sullivan stated this Board cannot contractually bind the P & Z Commission and the City Council regarding waivers. To the extent the Park would have higher standards, that is not an issue. But if the City has a 25' setback rule, and the Covenants and Restrictions call for only a 20' setback, that would require a waiver from the City. The City is not obligated to grant waivers simply because the property has been annexed into the City. It may very well happen, but his concern is that he does not want this group to say today that because it is going to be annexed, whatever the Business Park needs would automatically trump the requirements in the City Code. Mr. Bundy stated the Association will still have the Review Board. Mr. Chase countered that Board would be in control only if the decision enhances the City ordinance. If the desire is to reduce the standard, then the City is in control. He wants everyone to understand this. Mr. Bundy does not feel that will be a problem; the Association will control the materials and finishes. Mayor Lyne said he would not want to drop below the covenants and restrictions. Chairman Shores felt Mr. Chase was concerned about losing a certain amount of flexibility that could be used to attract a business; Mr. Chase agreed that is true. Mr. Bundy asked the City's requirements for paving. Mr. Taylor stated that concrete or asphalt is required for streets, and an impervious surface for parking lots. Mr. Chase asked about storage yards. Mr. Taylor replied that it is not a parking lot; Mr. Clark added that is a little more complicated. Mr. Chase said the Board had requested he research how other communities have handled the issue of annexation. He contacted 18 communities in Texas and around the country; 14 replied. Question: Do you use non - annexation agreements for facilities located outside the city limits yet served by city infrastructure? Response: Most were unfamiliar with this tool, but thought it would be a great idea if the occasion arose. Question: Do you grant tax abatements on improvements on a case -by -case negotiating basis, or do you follow a fixed policy? Response: Four have a fixed policy; 8 use case -by -case negotiations; Two operate primarily through a fixed policy, but have the ability to deviate. Chairman Shores asked if potential customers are aware of non - annexation versus abatement agreements. Mr. Chase stated that the majority are unaware; they hire consultants to walk them through the process. The CFO of a company would want incentives in a three- to five - year horizon, but the CEO of a company would say it is smarter to have discounts carried out a bit longer, but none of them seem to go past 10 years. WFEDC — Minutes of May 9, 2008 Mr. Chase suggested that the tax abatement agreements be front -end loaded a bit differently. An abatement of 100% could be done for a period of several years. Or, the company could be asked what works best for them if they were to receive a total discount of "x" percent over the life of an abatement. Mr. Bundy stated the only factor of determination missing is the franchise tax on gas. He sought confirmation that there would not be big users in the Business Park. Vice Chairman Stahler noted it was his understanding that larger companies would go out on I -44. Based upon Mr. Benoit's analysis, the non - annexation agreement has some benefit to the smaller user, but after seven or eight years, it doesn't seem to matter much. Mr. Pearson said the BCI is dealing with a prospect at the current time that has the potential to be a big user. Mr. Chase added that it is not a big user in the terms of a Howmet, but big enough for location to be a factor. Vice Chairman Stahler thought it might be best to go with the recommendation of the BCI, as they are the ones who are responsible for selling the Park. Mr. Bundy stated that, from the standpoint of building codes, it makes more sense to annex the Park. Vice Chairman Stahler asked if this would affect the covenants and restrictions. Mr. Sullivan noted they were written with the assumption the Park would be outside the city limits; he knows there is a specific reference that the City's zoning ordinance is not applicable. Mr. Bundy acknowledged there will be a need for some minor tweaking. Vice Chairman Stahler moved, seconded by Gary McLendon, that the Board recommend to the City Council that the Wichita Falls Business Park be annexed into the City limits of Wichita Falls. The motion unanimously carried. Mr. McLendon asked the status of Old Dominion's move to the Park. Mr. Chase replied that the company has 36 projects across the country similar to this one in Wichita Falls. The project is moving forward; nothing has changed. VI. ADJOURN The meeting was adjourned at 5:05 p.m. Gard. ores, Chairman