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4A Wichita Falls Economic Development Minutes - 03/12/2004MINUTES OF THE WICHITA FALLS ECONOMIC DEVELOPMENT CORPORATION Meeting of March 12, 2004 Present: Members: Bo Stahler, Vice - President Ray Clymer, Member Jim Berzina, Secretary- Treasurer Lou Rodriguez, Member Elected Officials: Bill Altman, Mayor City Staff: Matt Benoit, Assistant City Manager Linda Merrill, Recording Secretary Absent: Gary Shores, President BCI Staff: Tim Chase, President Todd McDaniel, Vice President of Economic Development Guests: James Frank, Sharp Iron Mark McMullen, Sharp Iron I. Call To Order. Vice - President Bo Stahler called the meeting of the Wichita Falls Economic Development Corporation ( WFEDC) to order at 4:05 p.m. II. Approval of Minutes — November 7, 2003. Lou Rodriguez moved that the minutes of the meeting of November 7, 2003 be approved. The motion was seconded by Ray Clymer, and carried unanimously. III. Consider an Economic Development Incentive Agreement with Sharp Iron, Inc. Tim Chase introduced James Frank and Mark McMullen of Sharp Iron, Inc., noting that approximately five months ago, discussions were held regarding the possibility that the WFEDC and the City would help Sharp Iron after its acquisition of Custom Metal Services. Sharp Iron was invited to come back before the WFEDC after the acquisition, so that any agreement would be between the WFEDC and a new corporation. James Frank of Sharp Iron noted that Sharp Iron bought the note on Custom Metal Services on March 2, 2004, foreclosed on those assets and put them into the I� f Wichita Falls Economic Development Corporation March 12, 2004 Meeting Minutes Page 2 new company. Custom Metal Services is no more, and Sharp Iron has been in operation for the past five months. Sales are up 40% over last year's averages. A total capital of $900,000 cash has been put into the company post- bankruptcy. Mr. McMullen stated the company is currently leveling out at between 40 -45 employees, with an improved sales - per - employee ratio. They have achieved an almost break -even in profitability in the past five months. Vice - President Stahler asked if the company had kept all of Custom Metal's customers. Mr. Frank and Mr. McMullen stated some businesses were in the process of moving to other companies, but Sharp Iron has filled the void, as most companies have preferred to stay. Mr. Frank stated that one major customer is still going to move. Vice - President Stahler asked if they have raised production quotas with the existing employees. Mr. Frank stated there has been some reduction in staff, based on performance as well as the company was over - staffed. Mr. McMullen stated at the time of the takeover, sales were running around $60,000 per employee, while they were enjoying $130,000 per employee at the two other plants. They are now up to $100,000 per employee at Sharp Iron. He believes they may reach the point where there are 40 good jobs at the company. Mr. Frank interjected that the economy is picking up, and the orders are reflecting that turnaround. Mr. Frank noted they have 15 employees making over $14 per hour; 17 employees in the $11 -$14 per hour range; seven in the $10 -$11 range; and four in the $9 -$10 range. There are some temporary employees who may be coming on the payroll; the number of employees is fluid at the moment. Mr. McMullen added that these are high -end jobs, with an average salary of $13 -$14 per hour. Mr. Frank, in response to Vice - President Stahler's query, stated that the break - even point is $250,000 gross profit each month. He stated that it depends upon the sales, adding that ABB Control is a good customer. Mr. McMullen stated that ABB is doing well. Tim Chase stated that, within six months of the date of the Memorandum of Understanding, Sharp Iron will prove up the number of retained jobs and will be paid according to a certain scale for those jobs. The scale is reflective of what the Corporation has paid in the past. There is a clause that states that 100% of this incentive will be refunded to the Corporation by Sharp Iron within 60 days if the business closes. This is not a terribly onerous condition, as it expires at the end of 12 months. Jim Berzina asked if this dollar around is not pro- rated. Mr. Chase replied no, but it is a shortened length of time. Todd McDaniel interjected that what is important is that Wichita Falls Economic Development Corporation March 12, 2004 Meeting Minutes Page 3 this agreement is performance based. Legislative changes forced the way these matters are now handled. This procedure will provide for a full cash repayment. Mr. Berzina reflected that, without Sharp Iron stepping in to fill the void, Custom Metal would have closed and those jobs would have been lost. This payment is to retain the jobs, now that there is a change of ownership. He wants to insure that the Corporation is protected from requests from companies who may be flailing. Mr. Chase stated this was the reason the proposal was not brought to the Corporation until Custom Metal was not associated in any way with this new Memorandum of Understanding. Vice - President Stahler asked if the amount in question is $172,000. Mr. Frank replied affirmatively. Mr. Chase added that if Sharp Iron exceeds that, they will be paid additional monies; therefore, there is good incentive for growth. Vice - President Stahler then noted that his bank has had some business with Sharp Iron, so he decided to recuse himself from any vote on this MOU. Mr. Clymer moved that the Corporation enter into this MOU with Sharp Iron. The motion, seconded by Lou Rodriguez, carried. IV. Consider an Amendment to the Fiscal Year 2003 -2004 Budget for Engineering and Landscape Architect Services for the Wichita Falls Business Park. Scott Taylor informed the Board that he had requested proposals for engineering services to design Phase One of the Business Park, which included construction of parts of Fisher Road, Production Parkway, and Midwestern Parkway, as well as the drainage, water, and sanitary sewer improvements for the lots served by those streets. The engineers' estimate for construction is $2.5 million for those improvements. He then showed various maps to the Corporation members, noting where the work would be performed. Lots 3 -8 will all receive service. He also noted that the design for the entire roadway is completed, whether or not the construction is accomplished at one time. Vice - President Stahler asked how Mr. Taylor arrived at the lot configurations. Mr. Taylor stated the configurations are based on the Master Plan, but they could still be subject to change. Mr. Taylor stated that Biggs & Mathews was the engineering company he selected to perform the job. The cost is $193,000, based on $47,600 for the water and sewer, and $145,400 for the roads and drainage. He also retained the services of a landscaped architect. Isaac Manning said to have the landscape performed by a separate entity. The landscape architect would be retained to design the entrance as a whole. However, it would be built out in phases. Three firms submitted bids; two Dallas firms and one local firm. Mr. Taylor chose Mesa Wichita Falls Economic Development Corporation March 12, 2004 Meeting Minutes Page 4 Design Company from Dallas. This company had worked with Mr. Manning on a previous project, and their bid of $41,000 was lower than the other two companies' bids. Vice - President Stahler asked if the BCI had received any inquiries regarding the Business Park. Mr. Chase stated that no inquiries had been made in the past 45 days. Prior to that, four companies had investigated the site. Interest is picking up, and proposals are being sent out this month. Two companies have been following the Business Park's progress; one being semi -local (local investors looking to move a business here), and one local business needing a place to expand. Mr. Rodriguez asked what type of reaction had been received. Mr. Chase stated the reaction has been positive about: (1) location relative to the various companies' needs, and (2) quality of the development. The one downside, according to the companies, is that it is not here today. Vice - President Stahler asked if enough progress has now been made on the Business Park. Mr. Chase stated it gets it to the point of construction. The Corporation now needs to decide if it is going to invest in building. Mayor Altman addressed the Corporation members, stating that a substantial investment has been made in this project. Time has been a factor for virtually all interested prospects. It is important to take this step; it is a relatively small cost to save a few months that might just make the difference. Mr. Chase agreed that time is critical. He states that only one company that has been recruited to Wichita Falls built their own facility; all others found an existing building and retrofitted it to suit their needs. However, the inventory of existing buildings today is very low. Mr. Taylor stated it will take about six months to get the streets constructed, and Mr. Berzina replied that timeframe ties in with most building plans. He then moved that the Corporation approve the necessary funds of $240,000 for engineering and landscape work. Mr. Clymer seconded, and the motion carried. Mr. Berzina indicated that the Board had essentially taken the first step in designing streets and utilities that, when constructed, will be added to the city's street and utilities system. He offered that unless the board wanted to assume the responsibility of maintenance, instruments to convey ownership of streets and utilities within the designated easements could be considered by the Corporation and the City Council at the time money is appropriated for construction. Mr. Chase added that the mesquite trees had been plowed up and stacked. The next step is the stop erosion and plant grass. Sheriff Callahan has offered his labor source to handpick the mesquite stumps out of the ground, and the City has agreed to the use of a front -end loader to grind those stumps. Mr. Chase then noted that Todd McDaniel had done a complete marketing plan. The costs attributable to the 4A Corporation will be those specific to the Business Park. An advertisement for the Park has run in the National Site Selection magazine, as well Wichita Falls Economic Development Corporation March 12, 2004 Meeting Minutes Page 5 as in the Dallas Business Journal, in a section which recognized the year's most successful projects (office, manufacturing, and convention centers). Mr. Chase stated that two inquiries have been received from the automotive industry. He said he is unsure if the automotive assembly line business will stay in the U.S., or move to Mexico or elsewhere. China is the largest growing automotive industry at this time. Mr. McDaniel stated he is heading to the Industrial Asset Management Council meeting in Arizona as part of the Texas Marketing Team. He believes the City is taking a fairly aggressive approach, but conservative in advertising dollars. Mr. Chase states he is often asked to speak at various club meetings around town. He talks about the Business Park, and has met with nothing but enthusiastic and excited reactions from the community. V. Other Business. There was no other business to come before the Corporation. VI. Adjourn. The meeting adjourned at 4:45 p.m. Linda Merrill, Recording Secretary Bo Stahler, Vice - President MINUTES OF THE WICHITA FALLS ECONOMIC DEVELOPMENT CORPORATION Meeting of March 12, 2004 Present. Members: Bo Stahler, Vice - President Ray Clymer, Member Jim Berzina, Secretary- Treasurer Lou Rodriguez, Member Elected Officials: Bill Altman, Mayor City Staff: Matt Benoit, Assistant City Manager Linda Merrill, Recording Secretary Absent. Gary Shores, President BCI Staff: Tim Chase, President Todd McDaniel, Vice President of Economic Development Guests: James Frank, Sharp Iron Mark McMullen, Sharp Iron I. Call To Order. Vice - President Bo Stahler called the meeting of the Wichita Falls Economic Development Corporation ( WFEDC) to order at 4:05 p.m. II. Approval of Minutes — November 7, 2003. Lou Rodriguez moved that the minutes of the meeting of November 7, 2003 be approved. The motion was seconded by Ray Clymer, and carried unanimously. III. Consider an Economic Development Incentive Agreement with Sharp Iron, Inc. Tim Chase introduced James Frank and Mark McMullen of Sharp Iron, Inc., noting that approximately five months ago, discussions were held regarding the possibility that the WFEDC and the City would help Sharp Iron after its acquisition of Custom Metal Services. Sharp Iron was invited to come back before the WFEDC after the acquisition, so that any agreement would be between the WFEDC and a new corporation. James Frank of Sharp Iron noted that Sharp Iron bought the note on Custom Metal Services on March 2, 2004, foreclosed on those assets and put them into the Wichita Falls Economic Development Corporation March 12, 2004 Meeting Minutes Page 2 new company. Custom Metal Services is no more, and Sharp Iron has been in operation for the past five months. Sales are up 40% over last year's averages. A total capital of $900,000 cash has been put into the company post- bankruptcy. Mr. McMullen stated the company is currently leveling out at between 40 -45 employees, with an improved sales - per - employee ratio. They have achieved an almost break -even in profitability in the past five months. Vice - President Stahler asked if the company had kept all of Custom Metal's customers. Mr. Frank and Mr. McMullen stated some businesses were in the process of moving to other companies, but Sharp Iron has filled the void, as most companies have preferred to stay. Mr. Frank stated that one major customer is still going to move. Vice - President Stahler asked if they have raised production quotas with the existing employees. Mr. Frank stated there has been some reduction in staff, based on performance as well as the company was over - staffed. Mr. McMullen stated at the time of the takeover, sales were running around $60,000 per employee, while they were enjoying $130,000 per employee at the two other plants. They are now up to $100,000 per employee at Sharp Iron. He believes they may reach the point where there are 40 good jobs at the company. Mr. Frank interjected that the economy is picking up, and the orders are reflecting that turnaround. Mr. Frank noted they have 15 employees making over $14 per hour; 17 employees in the $11 -$14 per hour range; seven in the $10 -$11 range; and four in the $9 -$10 range. There are some temporary employees who may be coming on the payroll; the number of employees is fluid at the moment. Mr. McMullen added that these are high -end jobs, with an average salary of $13 -$14 per hour. Mr. Frank, in response to Vice - President Stahler's query, stated that the break - even point is $250,000 gross profit each month. He stated that it depends upon the sales, adding that ABB Control is a good customer. Mr. McMullen stated that ABB is doing well. Tim Chase stated that, within six months of the date of the Memorandum of Understanding, Sharp Iron will prove up the number of retained jobs and will be paid according to a certain scale for those jobs. The scale is reflective of what the Corporation has paid in the past. There is a clause that states that 100% of this incentive will be refunded to the Corporation by Sharp Iron within 60 days if the business closes. This is not a terribly onerous condition, as it expires at the end of 12 months. Jim Berzina asked if this dollar around is not pro- rated. Mr. Chase replied no, but it is a shortened length of time. Todd McDaniel interjected that what is important is that Wichita Falls Economic Development Corporation March 12, 2004 Meeting Minutes Page 3 this agreement is performance based. Legislative changes forced the way these matters are now handled. This procedure will provide for a full cash repayment. Mr. Berzina reflected that, without Sharp Iron stepping in to fill the void, Custom Metal would have closed and those jobs would have been lost. This payment is to retain the jobs, now that there is a change of ownership. He wants to insure that the Corporation is protected from requests from companies who may be flailing. Mr. Chase stated this was the reason the proposal was not brought to the Corporation until Custom Metal was not associated in any way with this new Memorandum of Understanding. Vice - President Stahler asked if the amount in question is $172,000. Mr. Frank replied affirmatively. Mr. Chase added that if Sharp Iron exceeds that, they will be paid additional monies; therefore, there is good incentive for growth. Vice - President Stahler then noted that his bank has had some business with Sharp Iron, so he decided to recuse himself from any vote on this MOU. Mr. Clymer moved that the Corporation enter into this MOU with Sharp Iron. The motion, seconded by Lou Rodriguez, carried. IV. Consider an Amendment to the Fiscal Year 2003 -2004 Budget for Engineering and Landscape Architect Services for the Wichita Falls Business Park. Scott Taylor informed the Board that he had requested proposals for engineering services to design Phase One of the Business Park, which included construction of parts of Fisher Road, Production Parkway, and Midwestern Parkway; as well as the drainage, water, and sanitary sewer improvements for the lots served by those streets. The engineers' estimate for construction is $2.5 million for those improvements. He then showed various maps to the Corporation members, noting where the work would be performed. Lots 3 -8 will all receive service. He also noted that the design for the entire roadway is completed, whether or not the construction is accomplished at one time. Vice - President Stahler asked how Mr. Taylor arrived at the lot configurations. Mr. Taylor stated the configurations are based on the Master Plan, but they could still be subject to change. Mr. Taylor stated that Biggs & Mathews was the engineering company he selected to perform the job. The cost is $193,000, based on $47,600 for the water and sewer, and $145,400 for the roads and drainage. He also retained the services of a landscaped architect. Isaac Manning said to have the landscape performed by a separate entity. The landscape architect would be retained to design the entrance as a whole. However, it would be built out in phases. Three firms submitted bids; two Dallas firms and one local firm. Mr. Taylor chose Mesa Wichita Falls Economic Development Corporation March 12, 2004 Meeting Minutes Page 4 Design Company from Dallas. This company had worked with Mr. Manning on a previous project, and their bid of $41,000 was lower than the other two companies' bids. Vice - President Stahler asked if the BCI had received any inquiries regarding the Business Park. Mr. Chase stated that no inquiries had been made in the past 45 days. Prior to that, four companies had investigated the site. Interest is picking up, and proposals are being sent out this month. Two companies have been following the Business Park's progress; one being semi -local (local investors looking to move a business here), and one local business needing a place to expand. Mr. Rodriguez asked what type of reaction had been received. Mr. Chase stated the reaction has been positive about: (1) location relative to the various companies' needs, and (2) quality of the development. The one downside, according to the companies, is that it is not here today. Vice - President Stahler asked if enough progress has now been made on the Business Park. Mr. Chase stated it gets it to the point of construction. The Corporation now needs to decide if it is going to invest in building. Mayor Altman addressed the Corporation members, stating that a substantial investment has been made in this project. Time has been a factor for virtually all interested prospects. It is important to take this step; it is a relatively small cost to save a few months that might just make the difference. Mr. Chase agreed that time is critical. He states that only one company that has been recruited to Wichita Falls built their own facility; all others found an existing building and retrofitted it to suit their needs. However, the inventory of existing buildings today is very low. Mr. Taylor stated it will take about six months to get the streets constructed, and Mr. Berzina replied that timeframe ties in with most building plans. He then moved that the Corporation approve the necessary funds of $240,000 for engineering and landscape work. Mr. Clymer seconded, and the motion carried. Mr. Berzina indicated that the Board had essentially taken the first step in designing streets and utilities that, when constructed, will be added to the city's street and utilities system. He offered that unless the board wanted to assume the responsibility of maintenance, instruments to convey ownership of streets and utilities within the designated easements could be considered by the Corporation and the City Council at the time money is appropriated for construction. Mr. Chase added that the mesquite trees had been plowed up and stacked. The next step is the stop erosion and plant grass. Sheriff Callahan has offered his labor source to handpick the mesquite stumps out of the ground, and the City has agreed to the use of a front -end loader to grind those stumps. Mr. Chase then noted that Todd McDaniel had done a complete marketing plan. The costs attributable to the 4A Corporation will be those specific to the Business Park. An advertisement for the Park has run in the National Site Selection magazine, as well Wichita Falls Economic Development Corporation March 12, 2004 Meeting Minutes Page 5 as in the Dallas Business Journal, in a section which recognized the year's most successful projects (office, manufacturing, and convention centers). Mr. Chase stated that two inquiries have been received from the automotive industry. He said he is unsure if the automotive assembly line business will stay in the U.S., or move to Mexico or elsewhere. China is the largest growing automotive industry at this time. Mr. McDaniel stated he is heading to the Industrial Asset Management Council meeting in Arizona as part of the Texas Marketing Team. He believes the City is taking a fairly aggressive approach, but conservative in advertising dollars. Mr. Chase states he is often asked to speak at various club meetings around town. He talks about the Business Park, and has met with nothing but enthusiastic and excited reactions from the community. V. Other Business. There was no other business to come before the Corporation. VI. Adjourn. The meeting adjourned at 4:45 p.m. Linda Merrill, Recording Secretary Bo Stahler, Vice - President