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4A Wichita Falls Economic Development Minutes - 02/09/2000MINUTES OF THE RECEIVED IN CITY CLERK'S OFFICE Date 09 �_�ad By Time a—./ WICHITA FALLS ECONOMIC DEVELOPMENT CORPORATION February 9, 2000 Members: Gary Shores, President Ray Clymer, Vice - President Ron Bullock, Secretary- Treasurer Bo Stahler Lou Rodriguez City Staff: Kay Yeager, Mayor Jim Berzina, City Manager Robert Powers, Assistant City Manager Greg Humbach, City Attorney Linda Merrill, Recording Secretary Guests: Ron Mertens, BCI Tim Chase, BCI Covercraft Industries, Inc. Marty Lichtmann, President Tom Simon, Chief Financial Officer I. Call to Order. President Gary Shores called the meeting to order at 4:00 p.m. II. Approval of Minutes (August 16, 1999) Ray Clymer moved, and Bo Stahler seconded, that the August 16, 1999 minutes be approved as written. The motion was unanimously approved. III. Deliberate The Purchase Of An Approximately 12.6 Acre Industrial Site Located At 2720 Market Street For Economic Development, As Authorized By Section 551.072 Of The TEXAS GOVERNMENT CODE Prior to discussion of this item, President Shores called for introductions around the room. After the introductions, Mr. Shores gave the floor to Tim Chase. Mr. Chase introduced Marty Lichtmann, President of Covercraft. Wichita Falls Economic Development Corporation February 9, 2000 Meeting Minutes Page 2 of 4 Mr. Lichtmann informed the Board that his company manufactures high -end vehicle protection products, serving both retail and original equipment manufacturing customers. Covercraft has been in business 35 years. It is a family -owned business, which started with just his father and a seamstress. It is one of the few privately owned companies of their size left in their industry. Mr. Lichtmann discussed the history of Covercraft. The company's headquarters moved out of California because of excessive governmental regulations. The company is now headquartered in Pauls Valley, Oklahoma. They wish to open an additional plant, and had looked favorably upon El Paso, as well as Wichita Falls. He praised the BCI's efforts toward this endeavor. The BCI showed him that the facilities and the people are here, and that Wichita Falls would welcome a good employer. In addition, there are advantages to opening a plant relatively close to their headquarters, including the ability to share resources. Mr. Lichtmann stated he sees a lot of growth in Covercraft's core business of car covers. His vision for the future is to alleviate his company's backlog, and to create a quick turnaround manufacturing facility. Mayor Yeager, along with some of the Board members, had previously visited the Pauls Valley plant. She noted the employees are scheduled to work four 10 -hour days. Mr. Lichtmann stated that they have been working more hours than their usual schedule to keep up with demand. It is not yet known what the hourly schedule would be for Wichita Falls, as it would depend upon the needs of the community. Mr. Stahler questioned how many different styles of covers the company manufactures. Mr. Lichtmann stated they have 52,000 different patterns, and can produce 130 different covers in a 10 -hour shift. While the company does work somewhat in bulk on some orders, the bread - and - butter of their business is in custom covers. Mr. Chase stated that the greatest importance, after workforce availability and quality was to find a suitable building. The Levi Strauss building suits Covercraft's needs, subject to a few interior modifications. The proposal before the 4A Board today is for the Board to recommend to the City Council to purchase the Levi Strauss building with 4A sales tax revenues, and enter into a lease /option agreement with Covercraft. Covercraft would agree to lease the building for 10 years. The option to purchase the facility would be available to Covercraft after the initial incentive period had been satisfied. Mr. Chase added that this venture would bring 100 jobs to Wichita Falls in the first year, with approximately 55 more openings available in the second year of operation. Bo Stahler questioned whether these positions would provide opportunities for former employees of Levi Strauss, and Mr. Lichtmann assured him it would. He also added that Covercraft would be making a $1 Million investment in equipment to get through the first phase of this venture. President Shores asked how many former Levi Strauss employees have not found other employment. Mr. Chase stated the Texas Workforce Commission has 300 people who have sewing experience listed on their job applications. When that qualification is narrowed to sewing experience of five years or more, the number of those employees drops to 180. Mayor Yeager pointed out that the former Levi Strauss employees' unemployment benefits will run out in April or May, as will their COBRA coverage. Wichita Falls Economic Development Corporation February 9, 2000 Meeting Minutes Page 3 of 4 Ron Bullock commended the company for its operations. He opined that the technology they use is second to none. Covercraft shares Wichita Falls' interest in safety for the employees. He feels it is a good company, and wants to help it move forward through this process. Mr. Shores asked Mr. Chase to discuss the structure of the lease and purchase option agreement. Mr. Chase noted there are several contingencies involved. The 4A Board must recommend to the Council to use 4A sales tax revenues to purchase the Levi Strauss facility, contingent upon Covercraft entering into a satisfactory lease agreement for 10 years. The BCI has been in negotiations with the Levi Strauss building owners, and has arrived at a price beneficial to all concerned, of approximately $600,000. The building consists of 82,600 square feet. Mr. Bullock asked about the market value of the structure. Mr. Chase replied that, while the purchase price is subject to final agreement by both parties in a purchase agreement, this was the figure used in a letter of intent. The tax office shows this building valued at $1.5 Million on the tax rolls. Levi Strauss estimates the market value to be $855,000, while its asking price was $925,000. Mr. Clymer queried about the terms of the 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. It would be to Covercraft's advantage to purchase the property early in the lease period to obtain a lower purchase price. President Shores noted that either party has the right to withdraw if the agreement is not satisfactory. Mr. Clymer moved that the 4A Board recommend that the City Council use 4A sales tax revenue funds to purchase the Levi Strauss building and enter into a lease /purchase agreement with Covercraft. Mr. Stahler seconded the motion, and it was unanimously approved. President Shores then discussed whether title to the property should be taken in the name of the Wichita Falls Economic Development Corporation (4A Board), or should a limited liability corporation be established to hold title to the property as protection from any future liability exposure. His thoughts on this matter reflect what he would do if he were an individual in this situation. It is not a reaction to this particular venture, but for future opportunities. If all properties are under one entity, then the entire asset base is exposed. Mr. Clymer felt this concern could be addressed through having Covercraft obtain adequate insurance coverage with the City of Wichita Falls named as an additional insured. Jim Berzina cautioned the Board to be careful about public perception. He does not want to do anything with these funds that might be perceived by the citizens as slipping the money away from them. He feels the best people to handle these funds are on this Board, and they Wichita Falls Economic Development Corporation February 9, 2000 Meeting Minutes Page 4 of 4 should be the ones to handle this. Mr. Shores replied that he did not envision a separate entity, but rather, an extension of the 4A Board. Greg Humbach opined that he is not sure this type of mechanism is allowed by statute for this Board. In addition, he agreed with Mr. Berzina's position about the perception of this action by the citizens would be a cause of some concern. He further went on to question Mr. Shores as to what type of liability he was envisioning, and whether it may be of an environmental nature. Mr. Shores said that is one possible scenario, but felt there may be other types of liability exposure in the future of which we may be unaware. Mr. Humbach assured the Board there is no personal liability for the members. In a worst -case scenario, there could be the potential for problems with the revenue stream. Mr. Lichtmann informed the Board that Covercraft does not use hazardous materials in the production of their covers, and he felt confident that Levi Strauss did not use toxic materials, either. Mr. Shores expressed a concern that if the Board continues to buy properties in this fashion, all property would be open to liability. Mr. Humbach replied that he hoped to have some input in the drafting of the agreement to guard against exposure. He is confident that the Covercraft team has enough insurance to address these concerns. President Shores moved to create a limited liability corporation to purchase the Levi Strauss property on behalf of the Wichita Falls Economic Development Corporation. The motion died for lack of a second. He noted that he made the motion so that this topic would be addressed in the minutes for the reference of future Board members. Mr. Stahler agreed that it is a valid question that will need some further discussion. The meeting adjourned at 4:50 p.tn. Linda Merrill, Recording Secretary Ron Bullock, Secretary- Treasurer