Loading...
4A Wichita Falls Economic Development Minutes - 05/13/2002MINUTES OF THE WICHITA FALLS ECONOMIC DEVELOPMENT CORPORATION Meeting of May 13, 2002 Present: Absent: Members: Gary Shores, President Ray Clymer Bo Stahler Lou Rodriguez City Staff: Bill Altman, Mayor Matt Benoit, Assistant City Manager Jim Dockery, Director of Finance Linda Merrill, Recording Secretary BCI Staff: Tim Chase, President Todd McDaniel Guests: Larry Ballard and Debbie Wells (United Electric) Rakesh Malhotra and Greg Moers (Cryovac) Kathy Schubert and Clay Robinson (Cingular Wireless) Dr. Susan Couch (Vernon College) I. Call to Order. President Gary Shores called the meeting to order at 4:00 p.m. II. Approval of Minutes (September 17, 2001) Bo Stahler noted two corrections on page 4 of the minutes. The minutes, as corrected, were unanimously approved. III. Consider Certification of Project Completion for United Electric Company Appearing for United Electric (referenced hereafter as Magic Aire) were Larry Ballard and Debbie Wells. Mr. Ballard presented an overview of the Carrier Corporation, Magic Aire Division, reminding the Board that it manufactures air Wichita Falls Economic Development Corporation May 13, 2002 Meeting Minutes Page 2 handling equipment for light commercial applications. The equipment is distributed domestically and internationally, and sold under the Magic Aire name or other name brands, such as Carrier and Lennox. Mr. Ballard was pleased to report a 17% sales growth in 2001, which he stated was good in what is considered a down market. The Magic Aire wage impact for the community for 2001 was initially estimated to be $6,535,000. Mr. Ballard reported they actually increased this estimate by about 8% in payroll spending, with wages paid out in 2001 at $7,061,000. The wage base has grown by 14% since 1997, from $6 Million to $7 Million in wages paid. Mr. Ballard stated that Magic Aire currently employs 275 people. The Carrier Corporation has committed its company to Wichita Falls, as evidenced by the introduction of the VPAC product for manufacturing at Magic Aire. Magic Aire was selected from among all of Carrier's commercial manufacturing facilities to build this product. They expect sales to exceed about $5 Million in the next three to five years, so it has good growth potential. Magic Aire held a ribbon - cutting ceremony in October. A number of the City fathers attended this ceremony, which officials at Magic Aire appreciated. Magic Aire added two salaried engineers and 14 hourly employees for the VPAC project during 2001. Mr. Ballard believes Magic Aire has fulfilled its commitments.' They filed on and received tax abatement in the week prior to this meeting, and they are moving right along with the project. President Gary Shores stated he was very pleased to hear of these accomplishments, and extended the Board's congratulations to Carrier and Magic Aire. Mr. Ballard stated he appreciated the opportunity to grow with the City. Bo Stahler questioned whether the Board had to approve this prior to it being sent to the Council. President Shores replied affirmatively; therefore, Mr. Stahler moved, seconded by Mr. Lou Rodriguez, that the Board so approve the certification of project completion for United Electric Company. President Shores asked Tim Chase if he had anything to add prior to the vote. Mr. Chase stated that he had an opportunity to visit with the Carrier Corporation (Before the 4A Board today is a proposed Memorandum of Understanding, which would authorize 4A sales tax revenues in the amount of $30,000 be paid to Magic Aire. This payment would be contingent upon Magic Aire's creation of 15 new jobs and a minimum investment of $1 million no later than December 31, 2001.) Excerpt from the minutes of the August 24, 2000 4A Board meeting. Wichita Falls Economic Development Corporation May 13, 2002 Meeting Minutes Page 3 leadership at the ribbon - cutting ceremony. They echoed Mr. Ballard's comments about Wichita Falls being a good candidate for not only the VPAC project but also subsequent projects as their markets materialize. He felt encouraged by that sentiment. Mr. Stahler questioned whether Magic Aire had additional land for development. Ms. Wells stated they have 61 more acres available. The Board unanimously approved the certification of project completion for United Electric Company. IV. Consider Certification of Project Completion for Cryovac Corporation President Shores then noted the next item on the agenda concerned the Cryovac Corporation, and recognized Rakesh Malhotra (Plant Manager) and Greg Moers (Human Resource Manager) from Cryovac. Mr. Malhotra noted that, based upon the Memorandum of Understanding, Cryovac had made a commitment for 69 new jobs, as well as an investment of building and equipment upwards of $15 Million. Cryovac has exceeded the $15 Million investment limit; unfortunately, as far as total numbers of employment, they are 13 people short.Z Mr. Malhotra continued, stating that one of the reasons for the shortfall include the economic impact of the terrorist attacks of September 11, as well as the slowdown in the national economy. Cryovac had made its projections based upon (Before the 4A Board is a proposed Memorandum of Understanding, authorizing $276, 000 of 4A sales tax revenues be paid to Cryovac. This payment would be contingent upon Cryovac 's creation of 69 new jobs and a minimum investment of $15,000,000 no later than December 31, 2001. In addition, in the event Phases Two, Three, and Four of Cryovac's proposed expansion are implemented and completed prior to December 31, 2002, Cryovac will make additional investments of $6,000,000 and create an additional 32 jobs during each phase. The completion of each subsequent Phase will result in a payment of $128,000 by the WFEDC for each phase completed, depending upon employment and investment levels. Also, if requested by the City, the WFEDC will recommend that the City's portion of any sales tax refund due Cryovac resulting from an "Enterprise Project" designation be paid by Cryovac using 4(a) sales tax proceeds, estimated at $65,000.) Excerpt from the minutes of the November 10, 2000 4A Board meeting Wichita Falls Economic Development Corporation May 13, 2002 Meeting Minutes Page 4 projections from their own customers, who have in turn experienced slowdowns. However, Cryovac had committed to creating 69 jobs at $11.50 per hour; instead, they created 56 jobs today at $17 an hour. If you look at payroll dollars, they have exceeded the commitment they had originally made for payroll dollars. They are certainly hopeful that as the economy improves, they will be able to follow up on the Memorandum of Understanding and increase their investment and employment level at this plant. Cryovac has had a long history with the area. They have been in Iowa Park for about 25 years, and certainly intend to continue that tradition in Wichita Falls, as well. Reasons to site the plant in Wichita Falls include (1) Cryovac's history with the area and (2) the availability of a qualified labor force. They feel they have made the right choice. Mr. Stahler addressed the employment shortfall, noting that as far as he was concerned, if they have reached the payroll dollars requirement, he was satisfied. President Shores did not feel the employment requirement was chiseled in stone. In his opinion, the payroll dollars were well in excess of what was committed to, as well as the capital improvements. He did question whether the 56 jobs created were all new employees. Mr. Moers stated these employees were all new employees, and they anticipate the future hires will be, as well. He echoed Mr. Malhotra's comments, and stated that the company will continue to invest in this area because of the labor and the support from Midwestern State University and Vernon College in developing the labor force. Mr. Stahler questioned whether the market dictated that Cryovac pay $17 per hour for jobs, rather than the estimated $11.50 per hour, or did Cryovac find more qualified people to fill the positions. Mr. Moers replied that in the first quarter of 2001, they were still developing the qualifications and piecing together the various components of the jobs. As that process advanced, they recognized the value of those jobs was greater than had been projected. There is no real market comparison to these jobs; they include a combination of production, maintenance, and administrative responsibilities. President Shores asked whether the additional jobs would be at the same pay scale. Both Cryovac representatives replied affirmatively. Mr. Lou Rodriguez moved that they approve the certification of project completion for Cryovac. Mr. Stahler seconded. Wichita Falls Economic Development Corporation May 13, 2002 Meeting Minutes Page 5 President Shores asked whether Mr. Chase had anything to add. Mr. Chase stated that there is a synergy between what is being done at the 1 -44 plant and the one located in Iowa Park. The product that Mr. Malhotra laminates and prints is now being manufactured in Iowa Park, which has led to 32 additional jobs. Mr. Moers added that, as the 1 -44 facilities continues to expand, the raw materials used for the finished product will be manufactured at the Iowa Park facility. Mr. Malhotra expects the line in Iowa Park to start supplying the 1 -44 plant over the next couple of months, certainly by August 1. President Shores stated that Cryovac has been a very strong employer. The Board unanimously approved the motion to approve the certification of project completion for Cryovac. President Shores stated the Board would send this on to the Council with the Board's recommendation that it be approved. V. Consider Economic Development Incentive Agreement with Cingular Wireless LLC President Shores noted the next item on the agenda is a new project, as opposed to one that has been completed. He stated that it is always nice to have something new in the wings as other projects get completed. He then turned the meeting over to the representatives from Cingular Wireless, Kathy Schubert and Clay Robinson. Ms. Schubert expressed her pleasure to have the Board's time today, to provide some insight into what Cingular hoped to do at their Wichita Falls center. Their original agreement was to have about 700 jobs at their center. They reached that number in June of last year. What they are now hoping to do now is to add 75 more jobs to the center, add an extra exit out of the back of the building, and increase their number of parking spaces. They feel they have had a strong relationship here with the community. She noted that Tim Chase has been instrumental in a lot of the things Cingular has done in Wichita Falls. They look forward to expanding that relationship. Mr. Robinson agreed. He stated the BCI was very instrumental in keeping their focus on building this call center here. Cingular originally felt it would not be cost effective to build the center in Wichita Falls due to funding issues. But Wichita Falls came back with a great offer that helped Cingular make the decision to locate here. Without the BCI's help, they certainly would have looked elsewhere. Corporately speaking, Mr. Robinson continued, Cingular is very happy with the facilities they have here, and with management and employees. Ms. Schubert agreed, stating they have a very loyal, dedicated group of employees. Wichita Falls Economic Development Corporation May 13, 2002 Meeting Minutes Page 6 Mr. Stahler questioned whether the parking would be placed directly north of the building. Mr. Chase replied that it would be a 77 -foot wide strip that would run approximately the whole width of their current property, in the rear. Ms. Schubert stated that this center received the honor of Call Center of the Year for the entire Cingular organization last year. She stated they are one of the more unique centers within the company, as they handle multiple billing systems and multiple work functions. President Shores questioned whether Mr. Chase had anything to add. He clarified the terms of the MOU, stating the Wichita Falls Economic Development Corporation agreed to pay Cingular $2,500 per new employee, plus up to $200,000 for the additional parking. He stated that he and Robinson had talked about the mechanics of how that would actually come about. There will be reimbursements from paid invoices, and Finance Director Jim Dockery will oversee that process. Ms. Schubert stated they anticipate July 2003 to be the completion date. Todd McDaniel suggested Ms. Schubert inform the Board why this expansion is necessary. She stated that one of the main reasons is because their company is launching service to New York City and they are trying to get that work in their Center. Mr. Chase stated there is one other item on the MOU that bears mentioning: with the growth that Cingular has seen, it is believed they will at some point be looking for a place to locate an additional call center. The BCI wanted to convey a message to Cingular's leadership that, when that time comes, Wichita Falls needs to be at the top of the list. He therefore included language in the MOU to demonstrate this desire.3 There is some urgency in the offer; although Cingular does not have to "do a deal" by a certain time, they would have to make a written commitment that Wichita Falls is being considered. Mr. Stahler questioned the wage scale for these additional 75 new full -time jobs. Ms. Schubert stated that most of the jobs will be the representative level, which is probably $21,000, and there will be a portion, probably five to seven, that will be in the range of $32,000 - $33,000 (management/supervisory). "Additionally, in an effort to encourage Cingular Wireless LLC to build a minimum of 50,000 square feet of additional call- center space in Wichita Falls and create between 300 and up to 800 new jobs in addition to the base set above plus 75 jobs, the WFEDC will pay Cingular Wireless LLC $5,000 per new job created. This offer is contingent upon the approval of the Wichita Falls City Council. If a written commitment confirming that Wichita Falls is being considered for a possible expansion is not received by 12/31/02, this offer will expire." Wichita Falls Economic Development Corporation May 13, 2002 Meeting Minutes Page 7 Mr. Stahler stated that Cingular has been a wonderful addition to our community, and moved for approval. Mr. Rodriguez seconded, and it was unanimously approved. Mr. Chase stated there is one more piece of housekeeping. In the MOU, Cingular was asked to draw a base line. They have furnished such a letter, stating their current employment level. President Shores stated he looked forward to the next 50,000 square foot building constructed on Cingular's behalf. VI. Consider the Creation of an FAA - Certified Aircraft Mechanics School to Support the 80t' FTW at Sheppard AFB President Shores then gave the floor to Dr. Susan Couch of Vernon College (VC). Dr. Couch distributed documentation to support VC's request. She stated that VC has been working with Lear Siegler for almost 1'/2 years now. They were part of their bid to get the eight -year contract for aircraft maintenance. Because of the retirement age and the attrition expected over the next five years, VC helped develop a curriculum and three certificate programs in aircraft maintenance. They are working to have them become FAA- certified programs. These programs include Aviation Mechanic - General, Aviation Mechanic - Airframe, and Aviation Mechanic - Powerplant. Dr. Couch continued, stating that approximately 100 students will initially be sent through the program, or parts of the program through customized training. In addition, they need to attract people from the general public. The upgrade training primarily deals with helping to get FAA certification because of the new generation of aircraft. Mr. Stahler asked whether the 100 students she mentioned would be upgrades of those already employed by Lear Siegler. Dr. Couch said yes. In addition, she continued, VC wants to attract students for both day and evening programs from the general public. Because there is an FAA requirement of a one -to -eight ratio, VC hopes to buy enough equipment to have 16 students in a class. With both day and evening programs, there is the potential for 32 students in the fall not already employed by Lear Siegler or in the workforce. In the spring, another 32 students could enroll. Therefore, 64 students could go through the program in the first year. They would have to obtain the general certificate before they would be eligible to be hired at Lear Siegler. Wichita Falls Economic Development Corporation May 13, 2002 Meeting Minutes Page 8 President Shores asked whether there is a commitment from Lear Siegler to hire these people once they've attained that certificate? Dr. Couch said there is; that all had to be in place for the grant. Lear Siegler has to assure an interview to those completing the program, and give them preferential hiring status. Mr. Stahler asked about the wage scale. Dr. Couch replied the trainee wage would be $12.28 per hour. In six months, as they are unionized, the wages would increase to $18 to $20 per hour. Dr. Couch added that, through the grant, 15 students will receive a full scholarship. There has been a lot of interest in this program. President Shores questioned whether most of those calls were from Wichita Falls or the trade area. She said she assumed most were from Wichita Falls, and some from the trade area. It's been advertised in newspapers and through radio announcements. President Shores asked whether anyone in Wichita Falls' immediate vicinity offered this type of program. Dr. Couch replied the closest is in Waco and Tarrant County Community College. The Community College has a branch in Greenville that has received FAA approval. The Vernon College program will be the size of the Greenville program. This training will provide a lot of good jobs in the community and help Lear Siegler fulfill their mission, Dr. Couch declared. She added that she has received calls from active duty military who want to take certain FAA certification classes. Vernon College has also sought and received participation from the Municipal Airport and Kickapoo Airpark. They do not want to make this program just for Lear Siegler. This is for the general public. Lear Siegler simply contacted us because they knew they were going to need it so badly, and they are helping to get it started. They have actually loaned Vernon College a consultant for the past three months to help with the FAA certification and the curriculum. Lear Siegler has also mentioned the potential for more jobs available, with all the work there is to do. They have not given Dr. Couch a specific number, however. Dr. Couch hopes the general public will work through certificates of completion, which earn college credits. The students would then be eligible to work toward a BAAS at MSU. The general certificate is 32 semester hours long, so they can pretty easily do that in one year. President Shores had a few questions about the proposed budget. He noted that renovations, fire alarms and sprinkler systems totaled over $250,000. He further noted that the program is located in the old Sprague building, which is a County - owned facility. He asked whether the County is going to meet any proportionate part of the expense that will be paid to renovate that space, including the sprinkler system and fire alarm installation. Dr. Couch said the County is supplying a work crew from Wichita Falls Economic Development Corporation May 13, 2002 Meeting Minutes Page 9 the jail to perform demolition. In addition to that labor, the County has offered a reduced rent of 5'/2 cents per square foot, and building maintenance. Plus, the County just installed a $1 million roof. As far as sprinkler systems and the fire alarms, VC is doing all of that. There is also the addition of a restroom. There are already sprinkler systems installed in portions of the building. Dr. Couch believes that the jail is up to Code for the sprinkler system requirements. However, because the occupancy of the building will increase due to this program, it is required that sprinkler systems be installed for the entire building. Vernon College is allotted 50% of the building, and they currently occupy approximately 40 %. President Shores queried whether the County is meeting its commitment to the project through reduced rent and building maintenance. Dr. Couch reminded him of the demolition work currently being performed. She added that conversations with County officials reveal the County's position that this extra work and safety installations would not have had to be done were it not for the fact that Vernon College was occupying the structure. Mr. Stahler agreed, but questioned where the County would otherwise receive the revenue generated by Vernon College's occupancy of the building. He felt it should be viewed as a win -win situation for the County. Tim Chase interjected that the County evicted one of their tenants who had been paying 12'/2 cents per square foot. He asked Dr. Couch if the County had seen the final bid numbers, and she replied no. They really haven't had a dialogue regarding the specifics of the costs of the project. Mr. Chase informed the Board that the BCI looks at targeted industries. One of those deals with the transportation industry, and the obvious need for infrastructure of that industry in the airlines and aerospace sector. There is going to come a time in this country where a huge amount of investment has to be made in the airplane industry. Wichita Falls is close to American Airline's headquarters in Dallas, so we should be given consideration. This kind of school is a tool to go out to folks and say, here's not only the greatest place in the world to do this, but here is the support. This is long -term. Dr. Couch stated that another $4,000 ought to be on this list for air quality testing of the duct works. President Shores asked whether asbestos work has to be performed for the entire building. Dr. Couch replied no, just for Vernon College's space. Wichita Falls Economic Development Corporation May 13, 2002 Meeting Minutes Page 10 Upon questioning by President Shores, Dr. Couch agreed that $18,000 is a fair estimate of the County's share of the expenses for the necessary fire alarms and sprinkler systems. Mr. Stahler questioned how long was Vernon College's lease with the County. Dr. Couch replied they have a five -year lease, with two five -year options. She also noted they are coming up to the expiration of the first five years. Mr. Stahler suggested that Vernon College ought to use the payment of these renovation expenses as a negotiating tool to extend the terms of that lease. Matt Benoit interjected that, in lieu of a Memorandum of Understanding, the Board prepare a letter to Dr. Couch that outlines the elements of an agreement, such that as proof of payment is made for these items listed in the expenditures on the start -up costs report, the City would then reimburse Vernon College. President Shores concurred, noting this is all pursuant to City Council approval. He then expressed the Board's appreciation to Dr. Couch for all that she and Vernon College do for the community. VII. Consider the Status of Economic Development Incentive Memorandums of Understanding Currently in Place President Shores gave the floor to Tim Chase. Mr. Chase began by stating that this item echoes what the Board heard from Magic Aire and from Cryovac. When the Memorandums of Understanding were first drafted, an early version omitted a closure date. Thus, there was no way to end the agreement. The form was then revised to include a final date. This date was arrived at by asking the various companies their best estimate as to a completion date. Mr. Chase would then usually double or add 18 months to that date. Two companies (ABB and Blue Cross /Blue Shield) have passed that generous expiration date, but both are confident they will fulfill the terms of their respective MOU, if the Board will agree to an extension. He noted that EMD may request an extension, as well. The company's expansion plans are currently on hold, but the expiration date in the MOU has not yet passed. President Shores questioned whether the Board has the authority to grant the extension, or does this have to go before the City Council. Mr. Chase noted that he had a meeting with Mr. Benoit, Bill Sullivan, Jim Berzina, and Jim Dockery. It was decided that if the Board will pass an agreement to extend the companies' MOU's based upon their requests, that would be sufficient. No ratification would be necessary by the City Council. Mr. Stahler moved, seconded by Mr. Rodriguez, that such extensions be granted. The motion carried. Mayor Altman had questions about the approval of the certification of project completion for Cryovac. His concern was how to address the issue should members Wichita Falls Economic Development Corporation May 13, 2002 Meeting Minutes Page 11 of the public inquire about the fact that Cryovac did not specifically meet the terms of the MOU. Mr. Chase stated that when trying to determine an appropriate incentive for an investment in job creations, the BCI looks at the economic impact that that project will create. It takes into consideration the capital investment, the type of investment, payroll dollars and benefits. What Cryovac presented was a scenario that the economic impact of the project that they did exceeded the economic impact that was projected under the terms of the agreement. Mr. Altman continued, questioning how they can move on to Phase 2 under the agreement, if they only created 56 jobs, rather than the required 69. Mr. Chase said the MOU left them sufficient "wiggle room." Mayor Altman suggested they consider using language such as 69 jobs times 1.1.50, or a minimum total of "x" number of dollars. Mr. Chase states that they have resisted doing that in the past as they do not want to set precedence for a bounty on jobs. He would prefer to leave enough flexibility by not tying 10 jobs times "X" dollars, for example, although that would be quite a lot easier. VII. Adjournment. There being no further business, the meeting was adjourned at 5:10 p.m. Linda Merrill, Recording Secretary Gary ores, Vresident