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4A Wichita Falls Economic Development Minutes - 09/17/2001MINUTES OF THE CITY CLERK'S OFFICE Date 115 R Q.t,+ OR BY Time WICHITA FALLS ECONOMIC DEVELOPMENT CORPORATI Meeting of September 17, 2001 Present: Members: Gary Shores, President Bo Stahler Lou Rodriguez City Staff: Jim Berzina, City Manager Jim Dockery, Director of Finance Linda Merrill, Recording Secretary Guests: Tim Chase, BCI Leo Lane, Chairman, BCl I. Call to Order. Absent: Ray Clymer President Gary Shores called the meeting to order at 9:07 a.m. City Manager Jim Berzina noted that Ray Clymer had notified him that he would not be able to attend today's meeting. II. Approval of Minutes (July 3, 2001). Lou Rodriguez moved the July 3, 2001 minutes be approved as written. The motion was seconded by Bo Stahler, and unanimously approved. III. Financial Report. Jim Dockery presented a sales tax history of 4A funds. As of this date, 9 of the 12 payments for this fiscal year have been received, for a total of $2,029,970. This figure puts the 4A fund 2% ahead of last fiscal year at this same juncture. The projection for the end of this fiscal year, $2,702,382, would finish the year also at 2% ahead of last fiscal year. This projected increase is not as large an increase as has been reported in prior years, but is still an increase. Mr. Dockery then directed the Board's attention to the Preliminary Financial Statement (Jul -01), which reveals the Board's expenditures, revenue, and unreserved fund balance. Again, sales tax revenues total $2,029,970. Adding the interest income ($297,004) brings the total revenue to $2,326,974 through July 2001. Wichita Falls Economic Development Corporation September 17, 2001 Meeting Minutes Page 2 Mr. Dockery further explained that there is no expenditure for professional fees, but did note that $74,967 of the $89,960 allotted for the BCI contract has been expended. The ad valorem tax of $3,113 is for the Covercraft project. In the FY 2001 projection, the professional fees of $30,000, as well as the total for the BCI contract, were included, even though these expenses probably will not be incurred. The bottom portion of this form indicates activities that could take place, such as United Electric, Blue Cross/Blue Shield, and Cryovac. The unreserved fund balance totals $7,191,479. IV. Consider Approval of the FY 2001 -02 Budget. Mr. Dockery continued, stating that the next column of numbers on the Preliminary Financial Statement ( "FY 02 Budget ") will be on the September 18 Council agenda for adoption. The sales tax is budgeted at $2,702,382, with interest at $341,707, for total revenues of $3,044,089. These figures indicate the anticipated current projected amounts —not projected growth. This figure, therefore, is conservative compared to what will actually be accrued. He stated the BCI has requested an increase in funding from $89,960 to $115,000 for the next fiscal year. The sum of $15,000 in ad valorem taxes for the Covercraft building is included in the budget. This is the amount the 4A fund is obligated for in the 2001 tax year, which will be billed in the fall. Total expenditures, including a contingency amount of $288,089, totals $3,044,089. Bo Stahler questioned whether the $15,000 in ad valorem taxes is an ongoing expenditure. Tim Chase replied affirmatively, as long as Covercraft leases the former Levi Strauss building. He stated that, during the term of the lease, Covercraft would reimburse the 4A fund revenues beginning in the third year. For the first two years of their lease, the rental fee for Covercraft was $1.00.' He states the company has expressed their intention of buying the building in the third year. President Shores questioned whether the rental income should not be included in this year's budget, as it begins in the third year (2002). Mr. Dockery replied the Covercraft agreement was executed in February 2000. Mr. Chase stated that the lease actually began May 5 of that year; therefore, sometime after May 5 would begin the third year. Mr. Stahler stated that, if the Mr. Clymer queried about the terms of the [Covercraftl lease. Mr. Chase replied the proposed plan is for the City of Wichita Falls to purchase the building for $600,000, lease it to Covercraft for One Dollar a year for two years. The lease amount for the third year would reflect an amount equal to the carrying costs to the 4A Board of the $600,000. Each year thereafter, the lease price (and purchase price) would increase. (Excerpt from February 9, 2000 minutes of the Wichita Falls Economic Development Corporation) Wichita Falls Economic Development Corporation September 17, 2001 Meeting Minutes Page 3 4A Board is to receive rental in 2002, there ought to be an offset of this expenditure. Mr. Dockery stated that, between now and the Board's next meeting, the budget will be revised to reflect the appropriate rental income from Covercraft, and the City Council will be notified at its September 18 meeting to expect to receive an amended budget for the 4A Board at a later date. Mr. Dockery stated the contingency account would be used to transfer down into projects as they are approved. President Shores questioned whether the $11 million includes the contingency, and Mr. Dockery replied affirmatively. Mr. Stahler asked whether all of these pay -outs are to occur in 2001. Mr. Dockery replied negatively, rather, the projected amounts are simply carried forward. If they were to occur, the total would be reduced to $7,191,479. More than likely, these commitments will occur in the next fiscal year. Mr. Chase stated that United Electric has finished its project, and their $30,000 will likely be the first one to be paid.' President Shores asked Mr. Chase to go into more detail concerning the BCI's requested increase from approximately $90,000 to $115,000. Mr. Chase stated the BCI has increased their efforts in economic development. The requested amount has remained unchanged since 1998. This amount represents 22% of the total BCI budget. Back in 1998, the budgeted amount of approximately $90,000 represented 22% of the BCI's total budget, as well. Mr. Chase continued, stating what is really lacking in BCI's marketing program is a more effective way of getting their message out via the World Wide Web. He would like to see this changed, and have the properties that are available on the website, and, just as important, to have the website show up on the top 10 spots of the larger search engines. BCI has a money -back guaranteed agreement with a company that assures this accessibility. He also stated that two major organizations (IDRC and NACRE) that represent 85 % -90% of the brokered corporate development- related real estate are merging. The new organization is having a conference in Dallas next month. Mr. Chase would like to explore creating a link with that organization, although it is fairly expensive. The cost for membership, however, is included in the $115,000 requested. If they do not decide to join, however, there are other options available. President Shores noted that the salaries paid out of 4A funds are for economic development purposes only. Mr. Chase concurred, stating that the salary for the new economic (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 [a division of United Electric Company]. 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 August 24, 2000 minutes of the Wichita Falls Economic Development Corporation) Wichita Falls Economic Development Corporation September 17, 2001 Meeting Minutes Page 4 development employee will be 100% paid by the 4A funds, and his own salary will be funded 50 %. He stated that at least 50% of his time is spent on economic development. Mr. Berzina then asked Mr. Chase whom he was looking to hire for the economic development position — another "Tim "? Mr. Chase replied not necessarily. He personally had 10 years experience in economic development and national credentials. He also stated that he does not intend to stop his economic development involvement. Mr. Chase then announced he had already hired a man with five years experience, who will begin work in October. He has worked for Waco, Bryan, and College Station, and most recently the city of Alvin's economic development program. In fact, he is announcing to his board this morning that he is resigning. He will be employed full time in the economic development area. Mr. Berzina questioned whether this $115,000 is enough to do the job. Mr. Chase replied that if this were the only source of revenue for the BCI, he would say no. It's probably 57 % -60% of what it costs to operate an economic development program. But Mr. Chase added that it is not wise for the private sector to turn away from their obligation to fund economic development. In fact, he wants to increase the private sector's obligations and involvement. Mr. Stahler concurred, adding that we need to keep up retention efforts, as well. Mr. Chase agreed, stating that industry retention has to be the BCI's number one priority. BCI Chairman Leo Lane stated the BCI's membership drives would increase. At present, leads are down, and they are operating more on a one -on -one basis. Mr. Chase stated that the BCI has also hired a vice president on the "chamber" side. She starts October 1. She has 12 years chamber -side experience, working with membership recruitment for Lawton's Chamber of Commerce, Frederick, Oklahoma, and most recently, for Greenville, Colorado. Mr. Stahler questioned whether the BCI is still discussing an industrial park. Mr. Chase stated yes. Mr. Lane added the BCI needs inventory. Mr. Chase declared the BCI has been able to respond to all expressed needs by either sites or buildings. However, 67% of their inventory has been expended. It might take 6 -8 years to consume the remaining inventory. Mr. Berzina opined that he is very strong on developing an industrial park. This is not just to throw money away, but $11 million of unappropriated funds could be viewed as an embarrassing amount of unspent funds. He said he could think of no better place to spend that money than a long -range industrial park. Mr. Chase stated the BCI is developing a committee of architects, developers, engineers, and realtors. The question to answer is, should the future of Wichita Falls development include the railroad as a priority. Three sites have been identified for development, but there are sites available now for any urgent needs. Wichita Falls Economic Development Corporation September 17, 2001 Meeting Minutes Page 5 Mr. Stabler questioned how large an area Mr. Chase envisioned for an industrial park. He replied approximately 100 -150 acres, as the existing infrastructure is suited to that size. Mr. Berzina acknowledged that the Board has done such a good job — they've made more money than they've given out. Mr. Berzina stated that, historically, approximately $2.5 million is generated, and a lot of that goes to the bottom line. At some point, the citizenry will question why this money is not being spent. Mr. Stabler stated that he could not think of a project that has been brought before the Board that has been refused assistance. Mr. Chase said he could understand that having a large sum of unappropriated money on hand could be viewed as a negative. However, if we had not been able to have this growth, then we would have larger problems. He said there are issues on the horizon where $11 million is nothing. In addition, if an existing economic development engine in the area would falter, we could provide assistance. He believes if anyone wants to challenge this unappropriated fund balance, it is a fairly justifiable luxury. Mr. Stahler asked, assuming that land is acquired, if there were developers available to build spec buildings. Mr. Chase stated that generally, industrial development has not been something private developers have wanted to undertake. He feels that a partnership would probably need to be formed, using public funds to buy down the risk factor for private developers. President Shores stated that the Board and the BCI needs to maintain and promote the private sector for financing involved in the economic development that is this board's responsibility. In addition, he wants to emphasize that the board is not using funds for chamber - type activities. Further, the $11 million in unappropriated funds puts Wichita Falls in a position that other communities do not enjoy. Mr. Stahler moved that the budget for FY 2001 -02 be approved, Mr. Rodriguez seconded, and the motion was unanimously affirmed. V. Status Report of Budget Group Inc. Incentive Agreement. Mr. Chase noted that Budget Group took a bold step and eliminated all one -way extra charges, generally in the neighborhood of $250 -$280, to insure that everyone could reach their intended destinations (after the terrorist attacks of September 11.) In addition, they dropped their per day rental charges. Budget is very pleased with several aspects of their Wichita Falls operation, particularly their facilities and the available workforce. In fact, they are tempted to present a new compensation package to their agents, which would average $25,000- $30,000 a year income. Budget Group reached a total of 397 full -time equivalent (FTE) employees as of July 31. They have decided not to build out the second part of their operation, and thus will not meet the next threshold of 450 FTE's. Under the agreement with Budget Group, it was agreed that 4A Wichita Falls Economic Development Corporation September 17, 2001 Meeting Minutes Page 6 funds would not be used to recruit competition to their workface (call center). This decision not to meet the next threshold lifts that moratorium. Mr. Chase stated that while the Board and BCI would not rush out to find competition for Budget Group, it does give them the opportunity once again to look at call centers. VI. Adjourn. There being no further business, the meeting was adjourned at 9:51 a.m. (- -o 2B��� Linda Merrill, Recording Secretary Gary Shores, President