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4A Wichita Falls Economic Development Minutes - 03/05/2001MINUTES OF THE WICHITA FALLS ECONOMIC DEVELOPMENT CORPORATION Meeting of March 5, 2001 Present: Members: Gary Shores, President Ray Clymer, Vice President Bo Stahler Lou Rodriguez City Staff: Jim Berzina, City Manager Robert Powers, Assistant City Manager Greg Humbach, City Attorney Linda Merrill, Recording Secretary Guests: Ron Mertens, BCI Leo Lane, Chairman, BCI William B. Eyster, Operations Manager, Wichita Falls Refurbishment Susan Couch, Vernon Regional Junior College Monica Wolfson, Times Record News Absent: Members: Ron Bullock, Secretary- Treasurer I. Call to Order. President Gary Shores called the meeting to order at 9:00 a.m. II. Approval of Minutes (February 5, 2001). Vice - President Ray Clymer moved the February 5, 2001 minutes be approved as written. The motion was seconded by Lou Rodriguez, and unanimously approved. Wichita Falls Economic Development Corporation March 5, 2001 Meeting Minutes Page 2 of 4 III. Consideration Economic Development Incentive Agreement with Wichita Falls Refurbishment (WFR) in Wichita Falls (Before the Board [WFEDC] is a proposed Memorandum of Understanding, prepared to outline each party's obligations toward Wichita Falls Refurbishment's new production line for industrial gas turbine engines. A copy of the Memorandum of Understanding is attached for further clarification.) President Gary Shores gave the floor to William Eyster, Operations Manager for Wichita Falls Refurbishment, to illuminate the Board on the ST5 project. Mr. Eyster stated he was pleased to appear before the Board. He noted that it had been a long time coming, as Wichita Falls Refurbishment (WFR) has been working the last few months with Ron Mertens and the BCI. He explained that WFR is a part of Pratt & Whitney Canada, which is part of the United Technologies Corporation. The new product in question is called the ST5, and is a ground turbine engine. It is the product of a partnership with DTE (Detroit Edison) and a United Kingdom company, Turbo Gen Set (which produces the high speed electric generator). Mr. Eyster then gave a slide presentation to the Board, which he had also given to WFR employees. The project is a stationary turbine with a power output rating of 333 KW. The turbines are combined in banks of four — three in operation, and one spare — which produce one megawatt of power. The targeted use is for distributed power generation (used for utility companies). Once completed, the unit weighs approximately 2,500 pounds - this is not an aerospace engine. It is fueled by natural gas. The prototype of this unit is being manufactured in Montreal. The program's plan is based on 300 engines produced per year. At present, there is a firm order of 100 engines (from DTE). Mr. Eyster stated they expect by December of next year to be producing 16 engines per month, the first to come in 10 months from today. They are on a very accelerated time frame. WFR will support the new product assembly, and provide full support of overhaul and repair, as well (referred to as the "after market "). In fact, Mr. Eyster noted that 50% of Pratt & Whitney Canada's revenues are derived from the after market. WFR will have site - testing capacity. Ron Mertens added that the aircraft business is very cyclical in nature, and that affects Wichita Falls Refurbishment's business. This product will help to balance out the aircraft operation. It is unknown where this product will lead, as it is a developmental product. The assembly business is undergoing change and expansion. This is a niche that Pratt & Whitney Canada is trying to develop. It is of mutual benefit. He added that this agreement is structured a bit differently than other agreements presented to the Board in the past. There are two partners in Wichita Falls Economic Development Corporation March 5, 2001 Meeting Minutes Page 3 of 4 this — DTE and Turbine Gen Set. Mr. Mertens stated the BCI would approach them to establish some or all of their operation in Wichita Falls, as well. Bo Stabler questioned how long the engines run prior to needing an overhaul. Mr. Eyster replied that they last approximately 6,000 hours (or five years) before overhaul. Lou Rodriguez asked how expensive is the training of manpower. Mr. Eyster stated WFR does not have assembly mechanics. WFR will look outside and within to fill this need. This will provide an opportunity for growth for current employees. This type of work calls for a different skill set — torquing, balance, clean room environment, etc. Once the employees have gained this skill, it will be a personal attribute. Fundamentally, the technology hasn't changed over the years. Mr. Stahler moved that the Wichita Falls Economic Development Corporation recommend the agreement as detailed in the March 5, 2001 Memorandum of Understanding to the Wichita Falls City Council. Mr. Clymer seconded, and the motion was unanimously approved. President Shores stated the Board looked forward to the project, and will gladly make the recommendation to the City Council. This project fills two objectives of the Board — to help existing companies expand their operations, as well as to welcome a completely new industry into town. IV. Consider Economic Development Incentive Agreement with Vernon Regional Junior College for a Machining Lab at the Skills Training Center. Susan Couch of the Vernon Regional Junior College gave a presentation toward this agreement. She stated that when VRJC developed their training center in 1997, it intended to establish a machining program. Funds were tight and that was the one program not put into action at that time. VRJC has worked with the WFISD to offer evening classes at Carrigan Center, but the program has outgrown the center. A state -of -the -art lab needs to be assembled for industries to use during the day for customized training. Carrigan's equipment is of World War II vintage. In addition, VRJC needs to hire a full -time position to provide this training and recruit students for this training. She provided a list to the Board members of the equipment needed for this lab. The list of equipment desired (copy attached) was prepared with the assistance of several local industries. Mr. Mertens opined that the main issue is the maintenance of Wichita Falls' manufacturing base. He urged the Board to think of the projects that have been brought before them — about half have been in the manufacturing realm. A very critical issue to growth and maintenance of these industries is the training and availability of skilled personnel. Wichita Falls Economic Development Corporation March 5, 2001 Meeting Minutes Page 4 of 4 Mr. Clymer commended Ms. Couch for the good relationship the Board has always enjoyed with Vernon Regional Junior College, and noted he was in favor of this proposal. Ms. Couch thanked Mr. Clymer. She added that VRJC hopes to work with other entities in this project. She has already spoken to Midwestern State University and the Wichita Falls Independent School District and offered for them to come into their program. If there is a partnership formed, it will be beneficial to the whole community. Mr. Clymer made a motion, seconded by Mr. Rodriguez, that the Wichita Falls Economic Development Corporation recommend to the City Council that 4(a) sales tax funds in the amount of $125,000 be used to help offset start -up costs for Vernon Regional Junior College's machining project. The motion was unanimously approved. The meeting was adjourned at 9:30 a.m. Linda- Merrill, Recording Secretary ary res, President Memorandum of Understanding March 5, 2001 This is a Memorandum of Understanding (MOU) between Wichita Falls Refurbishment (WFR) and the Wichita Falls Economic Development Corporation (WFEDC). The purpose of the MOU is to provide details of the respective party's intentions as they work toward establishing a new production line to assemble, maintain and/or repair industrial gas turbine engines (IGTE) in Wichita Falls, Texas. * For the purpose of this MOU, a new job is defined as one that is located in Wichita Falls Texas; has been in lace for a minimum of 6 months a ing a minimum of $12.00 per hour excluding overtime and benefits; and is a result of the addition of the new IGTE project. I. As part of establishing a new industrial gas turbine engine assembly, maintenance, and /or repair facility and the renovation of existing facilities in Wichita Falls, Texas, Wichita Falls Refurbishment will: A. Create between 12 and 49 new jobs related to the IGTE project that are separate from the jobs related to their existing business operations. B. Make investments of at least $1.3 million including building renovations, equipment purchases, and the possible installation of a test bench for the ST5 unit. C. Complete these improvements and job creation no later than December 31, 2006. D. Facilitate a meeting between the BCI and representatives from companies that might benefit from co- locating with WFR to discuss the potential for additional job creation and investment in Wichita Falls. E. Assist WFEDC in their efforts to secure incentives on behalf of WFR. Memorandum of Understanding Wichita Falls Economic Development Corporation — Wichita Falls Refurbishment Page 2 of 3 II. In an effort to encourage this project to be completed in Wichita Falls, the WFEDC will recommend to the Wichita Falls City Council that they approve the use of Section 4A Sales Tax proceeds as described below. A. Resulting from a presentation by WFR to the WFEDC evidencing the creation of 12 new jobs* and that at least $500,000.00 has been invested, the following scale will be used to calculate a payment by the WFEDC to WFR: Hourly Wages Payment Per Job $12.00 $3,000 $15.00 $4,000 $18.00 $5,000 B. Resulting from a presentation by WFR to the WFEDC evidencing the creation of an additional 5 new jobs* bringing the total new jobs* created to 17, the above mentioned Payment Per Job scale will be used to calculate a second payment by the WFEDC to WFR. The payment will be the sum of the five additional new jobs multiplied by the appropriate Payments Per Job. C. Subsequent presentations can be made by WFR to the WFEDC through December 31, 2006 and they will result in similar payments being made according to the same Payment Per Job scale for each additional new job above 17, until a maximum of 49 jobs* have been created. D. For each newly created position resulting from the IGTE project that earns between $50,000.00 and $100,000.00 per year, excluding overtime and benefits and that has been in place for a minimum of 6 months, an additional one -time payment of 5% of that position's annual salary will be paid. E. Following the same frequency as outlined above, a payment of $800.00 will be made for each job* that receives training not to exceed 49 trainees. This benefit is designed to supplement reimbursements from state training grants. III. Both parties acknowledge that the size and scope of this project could grow significantly if WFR, in partnership with other companies, establishes a test bench for the ST5 unit in Wichita Falls, Texas. To encourage the establishment of this test bench, the WFEDC will recommend to the Wichita Falls City Council that they approve the use of Section 4A Sales Tax proceeds in the following manner: Memorandum of Understanding Wichita Falls Economic Development Corporation — Wichita Falls Refurbishment Page 3 of 3 III. (cont'd) A. An additional payment of $1,000 per new job* created, not to exceed $175,000, will be paid to WFR. This per job incentive will be calculated using all jobs* created by WFR and their partner companies on the ST5 project beginning as early as March 1, 2001 and continuing through December 31, 2006. B. The first reconciliation and payment for this incentive will be made after the test bench becomes operational in Wichita Falls. C. Subsequent payments will be made each time WFR makes a presentation to the WFEDC evidencing that at least 5 additional jobs* have been created since the preceding reconciliation. D. No later than December 31, 2006, a final reconciliation will be made. The formula for this reconciliation will be as follows: The total number of jobs* - - not to exceed 175 -- resulting from the IGTE project that are in place on 12/31/06 multiplied by $1,000 minus all previous $1,000 per job payments. A positive number will represent the final amount to be paid to WFR by the WFEDC. A negative number will represent a refund to be paid to the WFEDC by WFR. IV It is understood that WFWs entrance into industrial gas turbine engine assembly may lead to the assembly of generators and associated equipment in Wichita Falls and may result in substantial growth beyond the 49 jobs referenced in this agreement. It is the intention of the WFEDC to encourage such future growth through the renegotiation or the extension of term in this agreement. Wichita Falls Economic Wichita Falls Refurbishment Development Corporation Gary Shores Chairman LOIN Title: