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4A Wichita Falls Economic Development Minutes - 01/25/2008MINUTES OF THE WICHITA FALLS ECONOMIC DEVELOPMENT CORPORATION January 25, 2008 PRESENT: Gary Shores, Chairman § Bo Stahler, Vice - Chairman/ § Secretary/Treasurer § Dick Bundy § Members Dave Lilley § Gary McLendon § Matt Benoit, Assistant City Manager § Linda Merrill, Recording Secretary § City Staff Tim Chase, President § Kevin Pearson, VP, Economic Dev. § Warren Ayres, Board of Directors § BCI Gordon Drake § Oncor Electric Delivery Neal Blanton § Brenda Kays § Vernon College I. CALL TO ORDER The meeting was called to order at 4:01 p.m. II. APPROVAL OF MINUTES — NOVEMBER 2, 2007 Linda Merrill noted that she had referenced James Lane (rather than Leo Lane) on page 4, but had corrected the minutes presented for signature today. There being no further corrections, Dick Bundy moved, seconded by Gary McLendon, that the minutes be approved. The motion unanimously carried. III. DISCUSSION OF ITEM - CARTER COPTER Tim Chase noted that the 4A Board granted Carter Copter up to $10,000 to hire a consultant to decide if their patents were worth taking to market. They have had reasonable success and great interest in the technology. They are in the process of applying for a $3 Million grant from the Governor's Emerging Technology Fund. That process has hit a snag, and their presentation will be postponed. In the meantime, they will work on aspects of their business plan to make a better case. WFEDC — Minutes of January 25, 2008 2 IV. DISCUSSION ITEM — VERNON COLLEGE Kevin Pearson prefaced Brenda Kays' presentation by reminding the Board that it had approved an MOU on September 5, 2006, for the machinist training program at the Vernon College Skills Training Center. That MOU specifies that $4,850 would be allocated to the program in year two, and $69,745 would be allocated in year three. However, due to the growth and success of the program, the College is requesting that the allocations of years two and three be switched. Brenda Kays expressed her pleasure to meet with the Board again, especially since she can show success in the program. When she first appeared before the Board, the College had a part-time instructor in the machining program, and only four students. Forty-five students are enrolled for the spring semester. She is here to request a switch in the allocations between years two and three, because the technology is needed now in the program. They are looking for a combination mill /lathe machine made by Hawn. Mr. Pearson added that it is a CMC 3 axis, state -of- the -art machine. Dick Bundy asked if Vernon College would also flip its allocations for years two and three, and contribute $10,000 at this time. Ms. Kays replied that could be done, and the College will no doubt spend more than that to replace some of its current equipment. They also anticipate expanding the classroom and lab in order to accommodate the new equipment. Chairman Shores asked if the cost for the machine will include programming, to which Ms. Kays replied affirmatively. Vice - Chairman Stahler moved to approve the switch of the allocations for years two and three under the MOU with Vernon College, so that $69,745 is granted in year two, and $4,850 is granted in year three. Seconded by Mr. Bundy, the motion unanimously carried. Chairman Shores asked the length of the program. Ms. Kays replied the advanced certificate takes 12 to 18 months, depending upon how much time a student can commit to each semester. Most of the students attend on a part -time basis. A number of students enroll in the early start college program offered to high school juniors and seniors. When they graduate from high school, they also receive a basic certificate in machining. Chairman Shores asked if most of them continue on to obtain the advanced certification. Ms. Kays replied that the College does stress continuing education, but it depends upon how fast these students are snatched up into the marketplace. Vernon College would like to expand the certificate into an Associate's Degree in the future. Tim Chase noted that part of the program calls for the instructor to recruit, teach and place, and questioned whether he has had success in placing everyone, and whether he will be able to place the 45 students currently enrolled. Ms. Kays replied there has thus far been only one graduate. She is confident the College will be able to meet today's needs with the current enrollment, and also expects expansion of existing WFEDC — Minutes of January 25, 2008 3 companies, as well as the need to fill jobs due to attrition. She hopes that more companies will come into town due to the fact the City will have this well- trained workforce. Mr. Chase offered BCI's assistance if the instructor needs help making contacts. Mr. Pearson noted that the TV ads that were initially shown have stopped. They were well done, he added, and asked if they would continue. Ms. Kays noted they are run in conjunction with registration. She thanked the Board for their continued assistance with the program. Mr. Pearson noted it is a success story for 4A and Vernon College. V. DISCUSSION AND POSSIBLE ACTION ON EXTENSION OF UTILITIES FOR THE WICHITA FALLS BUSINESS PARK Mr. Pearson noted that the need to get utilities to Old Dominion had precipitated this discussion. It is necessary to (1) address that issue, and (2) decide the most effective way to bring utilities to the entire Park. It is contemplated that overhead lines, rather than underground facilities, will extend electricity to Old Dominion, at a cost of around $26,000. This will also provide a partial backbone to serve the tenants in the most probable places in the Park. Mr. Bundy asked if the overhead lines would be permanent. Gordon Drake of Oncor replied that they would. This cost scenario was prepared at BCI's request. No utilities exist within the Business Park proper at this time. If the BCI or a prospective client requests underground lines, that cost will be figured at that time. It would depend on several factors, such as how much land is involved, and how the tract was platted. Mr. Bundy asked how much it would cost to come in underground. Mr. Drake replied that the cost would be probably four times the cost of overhead lines. Providing electricity via underground service requires a lot of expensive equipment. At this point, the Board does not know what type of clients may locate in the Park. Old Dominion will have a small electric load, but a client such as Delphi or Cryovac would not. Neal Blanton agreed, stating that the Board would lose its flexibility if it opts to go with underground installation. Once the underground installation has been completed, and the lots are platted, it may very well be necessary to alter the facilities. Mr. Drake added that a client could spend almost as much rebuilding its service as it cost to initially install the electricity. Mr. Bundy asked if the lines will be underground along Midwestern Parkway. Mr. Drake noted that, due to the nature of those tracts, the buildings will be centered on their property, surrounded by parking lots or paved areas. The lines will serve everything from the rear. There will not be a pole line running east to west along Midwestern Parkway. WFEDC — Minutes of January 25, 2008 4 Mr. Chase noted there is a rise of land in the park, and added that by the time buildings are constructed, the lines will not be that obvious. Mr. Bundy expressed the desire to keep the sight lines fairly clean, but he understands this is merely the backbone for the Park. Gary McLendon asked if the poles will be wooden or metal. Mr. Drake replied they will be standard wooden poles. Mr. Chase asked for confirmation that the sum of $26,521.52 is the exact amount to do what has been explained. Mr. Drake confirmed this figure, adding that this sum covers approximately 1,700 feet of line. Chairman Shores asked if anyone who locates on the south side of the Park will be served from this point on the north. Mr. Drake replied that, more than likely, that will be the only piece of distribution that will extend into the Park. The only other distribution near the Business Park in that general area is the line that runs up and down Hammon Ranch Road. That plan could change, however, depending upon what users move into the Park. If a million square foot plant locates there, they'll reinvent the entire wheel. If it stays at a three megawatt -type customer, this will be sufficient. It is not always business size, however, but rather the type of business, that dictates. Chairman Shores asked if the overhead lines will require easements. Mr. Drake replied that as the properties are platted, utility easements will be required on the perimeters, at the very least. The company might also execute written easements directly with consumers. The plat on which Old Dominion will be located has been filed, and there is an easement running along the north and east/west line of that particular lot. The adjacent lots east and west are still unplatted, but there is an easement along the north side of the Business Park property that is already platted. There is also a platted easement that runs where the City paid to bury the line up near the flagpole that exists to serve the City's lift station. Mr. Chase noted that a budget amendment is needed for the $27,000 for installation of electricity, and an amendment for the gas installation, as well. He asked whether they should be combined in one amendment. Mr. Benoit replied either way would be fine. Chairman Shores noted that gas and telecom services are still to be discussed. He asked if Old Dominion will require gas service. Mr. Pearson stated the company has not yet submitted an application to Atmos, but he believes they will need gas service based upon preliminary conversations. Mr. Drake interjected that Old Dominion had not yet contacted Oncor regarding its electrical needs, either. Mr. Bundy stated that even if Old Dominion does not need gas, another company will, and suggested they all be approved by one budget amendment. Mr. Chase noted there is an issue which will delay the telecom discussion. He asked Mr. Pearson if representatives from Atmos are going to attend today's meeting. Mr. Pearson noted they were supposed to be here, and went out to see if they had arrived. In light of the telecom postponement, Mr. Bundy observed that the Board ought to take action on the items separately. Chairman Shores agreed. WFEDC — Minutes of January 25, 2008 5 Mr. Chase stated there is confusion as to whether the cost to run electricity to the sewer lift station has been authorized. Mr. Benoit replied that there was no understanding of electricity service when the $60,000 was approved, unless Jim Biggs had included it. Mr. Chase thinks Mr. Biggs included the mechanical, but not the electricity. However, there must be power to feed the lift station. The City has to request its Retail Electric Provider to notify Oncor of its need for wires and poles. The Board needs to decide if that should be an overhead or underground installation. There are massive poles in the area, so it probably would not matter if there were a couple more. Besides, if the electricity is installed underground, it would be probably have to be rebuilt a second time for any future users of the property. Mr. Drake pointed out that if those lines were buried, the cost to get service to any user who might buy a small tract would be astronomical. Mr. Benoit noted that there are no pumps in the lift stations now. But as users dictate, the pumps may be upsized. He asked whether that would be problematic. Mr. Drake replied probably not, but it would depend on the size of the pump. He is not aware at this time what size pump is contemplated being installed. However, the City does not typically triple the size of its pumps, although there might be a possibility that the motor could be switched out. Mr. Bundy commented that it would be fine with him if those lines are overhead. Mr. Drake stated the people that would be hurt by underground installation would be the user who buys the property between the lift station and the service road and expressway. Once those lots get platted, every time one gets sold, he would have to cut the cable and rewire it. It is all in a pipe. They do not splice the conductor; rather, the wires have to be pulled in both directions every time it is cut. And every time that action is performed, it will be charged to that customer. Chairman Shores suggested the Board go forward with the electricity item, and table the discussion on gas until representatives from Atmos can be present. Mr. Chase asked Mr. Pearson if he could make the presentation to the Board concerning gas service. Mr. Pearson noted the letter from Atmos explains that it would take 4,800 feet to serve only Old Dominion, but approximately 8,100 feet to serve the entire Park. Randy West and David Dunn, an engineer for Atmos, recommend that the gas installation be done once, for the entire Park, because of the way the gas gets into the Park. There will be two access points, and it is a looped system. Even for only Old Dominion, it would be a looped system. Mr. Chase added that the letter provides two options: (1) serve only Old Dominion at a cost of $120,000 to $168,000, or (2) spend another $80,000 to $120,000 and loop all the way along Midwestern Parkway. Mr. Bundy opined that the entire Park should be serviced. Vice - Chairman Stahler asked why it is so much more expensive to provide the Park with gas versus electric service. Even with everything going underground, Oncor's cost (at four times the cost for overhead lines) is $100,000. Mr. Pearson replied that Atmos is burying 8" pipe as WFEDC — Minutes of January 25, 2008 6 opposed to providing overhead service. Vice - Chairman Stahler replied that the cost is still significantly higher than the more expensive version of electricity installation. Mr. Chase observed that the linear footage is three to four times more than is required for electricity. Mr. Bundy reiterated that it makes sense to loop the entire Park, but feels the Board needs to have someone explain this better before authorizing the expenditure. Mr. Chase asked if the Board wished to meet again, or simply desired a letter from Atmos that clarified the matter. He expressed his opinion that there is a stronger selling point to loop the entire Park. Vice - Chairman Stahler countered that if gas service is not needed at the present time, then a lot of money is being thrown at the Park that is not necessary. Mr. Lilley noted that it will not get any cheaper to do, while Mr. Bundy added that the Park will not be complete without gas service. Vice - Chairman Stahler noted he is confused as to the $70,000 variance in cost for option 1, and $40,000 for option 2. Mr. Bundy stated that Atmos is offering that they perform the installation or put it out for bid. Mr. Pearson agreed that is a big reason for the variance. Either Atmos could be the engineer, put the specs together, bid it out, and put in the line. Or the 4A Board could be the general contractor, bid it out with the help of Atmos, and have a certified contractor install it. The second option saves about 49% of the cost. Either way, a lot of "fat" will be built into the contract because they will not know where all of the irrigation lines are for landscaping. Mr. Chase added that if the entire Park is not looped at one time, any time gas service was installed, it would disrupt the landscaping. Mr. Bundy stated the company would not tie down its price until it is designed. Mr. Chase noted the cost is $25 to $35 per foot. Multiply that out over 8,100 feet would lead to the price variance. The linear foot is the function of whether they hit a stone as big as a car. Chairman Shores asked why it would even be a consideration to have Atmos do the work, if the Board could save 49% by acting as its own general contractor. Mr. Pearson stated the only price in the letter is for the Board to act as the general contractor. The question remains whether to serve the entire Park or only Old Dominion. Chairman Shores expressed the desire to have representatives from Atmos at the meeting. Mr. Chase noted that if the Board desires to meet again, it should be done in the next couple of weeks, and the telecom service could be discussed at that time, as well. Warren Ayres noted that the overall cost to loop the entire Park will be significantly less than just serving Old Dominion. His company does a lot of pipeline work, and nearly every bid they get contains ranges similar to this. The company doesn't know whether it will have to bore through rock. Their letter mentions the tariff it will have to pay on taxes. If they design it and pay for it, they pay a tax on a tax, and will require reimbursement for that, which will add 30% onto the cost. Vice - Chairman Stahler moved, seconded by Mr. Bundy, for approval of a budget amendment of $27,000 for the installation by Oncor of overhead electricity lines at the Business Park. The motion unanimously carried. WFEDC — Minutes of January 25, 2008 7 VI. DISCUSSION ITEM — ANNEXATION VS. NON - ANNEXATION OF THE WICHITA FALLS BUSINESS PARK. Mr. Chase noted that the issue of annexation versus non - annexation of the Business Park has been debated at length. It is important to maintain as must flexibility as possible to maintain the highest return on investment when the CFO of a company calculates whether to locate here. The net present value of incentives is the determining factor. Non - annexation provides flexibility to negotiate the City's portion of property tax up to 45 years, if the property remains outside the city limits. If the property is inside the city limits, Texas law allows a maximum of 10 years for the city to discount a portion of a company's property tax. On the surface, it seems like a no- brainer to continue with non - annexation agreements. There is still a question as to who owns and maintains the infrastructure moving forward. It will fall to the Association to maintain if it is not annexed into the city limits and dedicated to the City. Scott Taylor was going to see if the City paid for or had a role to play in the sewer line going to the prison outside the city limits. There is a question as to whether the roads, sewer and water could be dedicated to the City, but not the Park, and whether the City can maintain that infrastructure outside the city limits. Mr. Bundy believes that was done for the prison. If the Park remains outside the city limits, fire protection would be provided by a rural volunteer fire department, which operates at a different rating than does the City's Fire Department. Fire ratings drive the premiums for insurance costs. Rural fire department ratings result in significantly higher costs. Fire Chief Earl Foster is confident the City will be at a Class 2 rating the next time it is reviewed. There are only five or six Class 1 ratings in the state, so a Class 2 rating is outstanding. Outside the city limits, the first responder for police protection is the sheriff. That is fine unless there are serious crimes which require ongoing investigations. The sheriffs office does not have the staff or resources of a police department. Mr. Bundy asked if companies such as Cryovac and PPG have experienced any problems with police and fire protection. Mr. Chase stated that they operate under a non - annexation agreement which includes fire protection by the City. They are not served by the police. That has only been an issue when there were occasions of some union activity at PPG. Mr. Chase asked one of the best industry consultants for his opinion, and was told the net present value drives decision making, and not the term. He noted that it is subjective how many years would be considered in the calculation, be it three, five or ten. He opined probably not more than 10 years. WFEDC — Minutes of January 25, 2008 8 One option would be to annex the property and utilize the 10 -year abatement policy. If more incentive is needed, then 4A funds could be used to level the playing field against any competing community. Mr. Bundy's gut reaction is to not annex the property right now. Mr. Benoit stated that, from the time non - annexation legislation came about until now, the City's ability to annex, forcefully or at the request of a company, has been diminished. The law requires that the City have some contiguity to the piece of property to be annexed. The City reserves the right at any time to annex the companies upon the termination of the non - annexation agreements, but it does not have the necessary contiguity to annex them, even if they asked for annexation. Mr. Lilley asked if not making a decision is, in effect, making a decision? Mr. Benoit replied negatively. Mr. Chase noted that a decision needs to be made so that either (a) Old Dominion enters into a non - annexation agreement, or (b) it is annexed into the city. Mr. Benoit noted that several years ago, the City Council passed a resolution prohibiting the City from serving property outside the city limits with utilities. At some point, a user at the Park will need a water met set. The City cannot do this unless it is in the city limits, or there is a non - annexation agreement for that property. It is contemplated that only portions of the Park would be annexed, so that those parts would have contiguity to just about every lot, so that annexation could occur at some future date. In a perfect world, it would be best to handle each situation on a case -by- case basis. Mr. Chase stated there are still some unanswered questions: (1) whether the City can maintain infrastructure outside the City limits; and (2) does the fact that Wichita Clutch abuts the Park property at the northeast corner on two sides satisfy the contiguity requirement, or does the City have to run some kind of strip down the center of the Park to ensure its ability to do that. Paul Stillson of the Community Development Department was going to research the laws regarding annexation to determine if that would be sufficient contiguity. Mr. Bundy asked the trend in other communities. Mr. Chase replied that he had never heard of non - annexation agreements until he came here. The norm is that companies are included in the city limits. Other states do not have the 10 -year cap on the ability to abate as does Texas. For example, Oklahoma can abate county, city and school district taxes. Mr. Benoit asked if Mr. Chase's consultant friends did not shed much light on the issue. Mr. Chase responded that the deciding factor is the net present value. Mr. Benoit asked the net present value of how many years, as Mr. Chase himself had noted that was subjective. If it is never more than ten years, the ten -year tax abatement should be adequate. WFEDC — Minutes of January 25, 2008 9 Mr. Chase suggested that, instead of the current form of tax abatement agreements, the City could give companies 100% abatement for 10 years, or at least for the first four to five years. If the three -to -five year horizon is the decision - making period for a company, then load all the dollars possible early in the project. Then, he added, if more incentive is needed, and there are serious negotiations being conducted, 4A funds could be used. Vice - Chairman Stahler noted the Council would have to approve that. Chairman Shores observed that this decision will need to be made soon. VII. DISCUSSION AND POSSIBLE ACTION ON AN AMENDMENT TO THE WICHITA FALLS ECONOMIC DEVELOPMENT CORPORATION BYLAWS. Mr. Benoit noted that an issue arose when the NEW deal was consummated at MSU. Chairman Shores had to leave the meeting early, but the agreement needed to be signed. There was a question as to whether Vice - Chairman Stahler had the authority to sign the agreement in his stead. At the November 2 meeting, the 4A Board elected Mr. Shores as President, and Vice - Chairman Stahler as Vice President/Secretary/Treasurer. Vice - Chairman Stahler pointed out the title is Vice Chairman. Mr. Benoit stated the bylaws do not call for a vice president, but do allow for the corporation to create any positions it desires. However, there must be a secretary/treasurer. He drafted one sentence to amend the bylaws: "In the absence of the present, the secretary/treasurer shall perform the powers and duties conferred upon the president." This amendment has been approved by the City Attorney. Should Mr. Shores be unable to sign, then Mr. Stahler would have that ability. Vice - Chairman Stahler asked if this also protects the fact that he has signed documents in the past as Vice Chairman, which was not authorized in the bylaws at that time. Mr. Benoit replied that he does not think anything can be done retroactively to cure those actions. However, nothing that he had signed as Vice Chairman is now in question. Mr. Bundy moved, seconded by Mr. McLendon, for approval of the amendment to the bylaws. The motion unanimously carried. VIII. DISCUSSION ITEM — NEW CUSTOMER SERVICE Kevin Pearson noted that NEW, (the work -at -home operation servicing DIRECTV accounts) has now hired 125 people. They currently have 115 on the payroll, and 16 are scheduled for training at MSU. The company plans to hire another 120 employees in 2008. Mr. Chase stated that the second six -month agreement with MSU carries with it a lease payment, so that will generate some income for the college. Chairman Shores asked whatever happened on the money that was advanced to NEW to install the infrastructure. Mr. Chase replied that, when the company comes to the 4A Board for WFEDC — Minutes of January 25, 2008 10 reconciliation, the $10,000 will be deducted off of that. Chairman Shores asked if the Company is aware of this. Mr. Chase replied that he has had conversations with Rebecca regarding that, but he is unaware if she has told her supervisors. Chairman Shores noted there was a misunderstanding regarding who was to pay for the infrastructure, so the 4A Board paid to get the project underway. Mr. Chase added that it was assumed that, since the building was new and wired, it would not require extra infrastructure. However, a separate system needed to be installed that paralleled MSU's system, as the IT folks could not build a strong enough firewall to separate the two. Chairman Shores asked what will happen with the infrastructure once the contract runs out. Mr. Chase replied that the system will stay in place. Some switches may still have some life left in them. Mr. Bundy observed they would more than likely be depleted by then. IX. ADJOURN The meeting adjourned at 5:19 p.m. lJ ary SK6res, ihairman