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4B Sales Tax Corporation Minutes - 08/26/2016I MINUTES OF THE WICHITA FALLS 4B SALES TAX CORPORATION (4BSTC) PRESENT: Jim Ginnings, President Glenn Barham Dave Clark Tony Fidelie Rick Hatcher Darron Leiker Michael Mills Tim Ingle, Councilor, District 4 Stephen Santellana, Councilor, District 1 Jim Dockery, Deputy City Manager R. Kinley Hegglund, Jr., City Attorney Linda Merrill, Recording Secretary Henry Florsheim, CEO Dustin Nimz Eric Antill, Owner Shari Zaloski, Owner Cynthia A. Doten, Owner Dent Keltner, Owner Rick Graham, Investor Max Phipps Erik Shott August 26, 2016 § Members § City Council § City Staff § § Chamber of Commerce & Industry § Branch Enterprises/Half Pint III, LLC § R. C. Graham, Inc. § The Bell Building 1. Call to Order Jim Ginnings called the meeting to order at 3:00 p.m. 2. Approval of Minutes (May 23, 2016) Rick Hatcher moved, seconded by Michael Mills, for approval of the minutes. The motion carried. Financials — as presented by Jim Dockery The Board has an estimated $4.223 million in revenues, and $4.966 million in expenditures. Thus, it anticipates spending $743,000 more than was budgeted; however, the fund has a beginning cash balance of close to $3.9 million, leaving an estimated unreserved fund balance of $3.1 million. C:\Users\pburch\Desktop\4B Meetings\9-26-16\Minutes_413_2016.8.26.doc WFEDC — Minutes of August 26, 2016 Mr. Ginnings asked whether the performance agreements had been signed by City Center and Legacy 922, approved by the 4BSTC at its April 25 meeting. Mr. Dockery said the documents had been finalized, but neither had been executed. The lender for the Legacy 922 project has concerns with the 413STC being the primary lienholder. Rick Hatcher said he would agree to the 4BSTC being the second lienholder. Mr. Ginnings welcomed Mayor Glenn Barham as the Board's newest member (replacing Dustin Nimz). 3. Discussion and possible Action on Funding for a Downtown Redevelopment Project at 817 Ohio Dent Keltner spoke on behalf of Branch Enterprises/Half Pint III, LLC. They bought 817 Ohio in 2008, and intend to open "Red, White and Brews," a relaxing bar with food, specifically pizza, with a music hall in the back of the property. It will seat 120 in the front, and 180 in the back. They are asking the 413STC for $46,000 for fire suppression equipment and other items, including contractor fees, water meter, and fire alarm system. The business will create five full- time and 15 part-time jobs. They began pre -planning meetings with City staff about 1.5 years ago, and intend to open by March 2017. Mr. Keltner said they acquired an SBA loan four weeks ago. They put up 15% of the equity; the bank carries a 50% first lien on everything. They have $705,000 in loans, with a total project cost of $830,000. Rick Graham is providing his contractor services free of charge in exchange for a partial investment in the project. Phillip Townsend is their architect. Tony Fidelie asked if the group thought their lenders would see a problem with the 4B granting a forgivable loan with a first lien. Mr. Keltner said he thinks a first lien would be an obstacle, as the bank has the first lien, and the SBA is subordinate to the bank. Mr. Ginnings and Mr. Clark complimented the group on the thoroughness of their presentation. Mr. Keltner thanked them for listening to their request, and the group left. Mr. Clark moved for discussion, seconded by Mr. Fidelie. Darron Leiker asked Mr. Hegglund to discuss the clawback availability. He worries they are over -leveraged, and the 4B Board is third in line with any lien. Mr. Hegglund said the Board would not get their money back through a lien filing if the company defaulted. The limited liability company would have not assets. However, as the Board has done with the two prior projects, there could be a forgivable five-year loan, reduced each year by 20 percent. The funds would not be released until a Certificate of Occupancy (CO) is issued by the City's Building Official. He did note there is always the option to require a personal guarantee. Mr. Leiker said once the CO is issued, there is an up -to -Code building. That is probably the best protection, if they can hold out for the reimbursement. Mr. Dockery said the Board's risk is diminished significantly in that respect. That has not stopped the Kelty group, although they have not yet signed, but it may be stopping the grocery store. Michael Mills expressed discomfort accepting the third lien position; the Board is in effect giving grants. Mr. Clark said the Board in essence does give grants in the form of WFEDC — Minutes of August 26, 2016 3 forgivable loans. Mr. Hegglund said the lien is causing financing problems, as is seen with the grocery store project. It might not even be something worth using going forward. Mr. Clark said yesterday's presentation by Freese & Nichols showed what a positive effect a restaurant can have on downtown. Mr. Ginnings said he thought it was worth the risk. However, he felt the Board should only approve their request for the actual costs of the fire suppression system. The rest of their request is just the cost of doing business. Mr. Leiker moved to approve funding up to $30,000 in the form of a five-year forgivable loan, to be forgiven at a rate of 20% each year, to be reimbursed to Half Pint III, LLC, for the downtown redevelopment project at 817 Ohio as described in their proposal once it has obtained its Certificate of Occupancy. Seconded by Mr. Fidelie, the motion carried. 4. Discussion of Priorities for Future Projects Mr. Ginnings noted that he was not going to run for President of the Board this time, but he had made some notes about what he thought some of the priorities of the Board should be in the future: • Turn to state representative for assistance in getting laws passed • Make efforts to beautify downtown • The $50,000 spent for the downtown grant program has proved invaluable • The Board should always have an executive -level employee as a member • If the City enters into a public/private partnership for a hotel, the hotel should have "skin" in the game • The City recently granted money to the Iron Horse Saloon; it is a successful business, and he feels that money would have been better spent on a new venture • Parking should be improved at North Weeks Park • Museum boards should be consolidated into one, and 4B might consider subsidizing a director in order to maintain adequate volunteer staffing • A facility is needed for the fire and police museum, with regular hours of operation • 4B should monitor the progress of the Lake Wichita committee's progress, and take a meaningful position in financing some portion of the rehabilitation of Lake Wichita. 5. Election of Officers Darron Leiker nominated Tony Fidelie to serve as President. Seconded by Rick Hatcher, the motion carried. Tony Fidelie nominated Glenn Barham to serve as Vice -President. Seconded by Mr. Leiker, the motion carried. (Rick Hatcher left the meeting to attend to Hotter'n Hell festivities.) Mr. Leiker nominated Mr. Hatcher to serve as Secretary -Treasurer. Seconded by Mr. Fidelie, the motion carried. Mr. Fidelie thanked Mr. Ginnings for his years of service as President of the 4B Sales Tax Corporation. He noted that while all members have been prepared for the meetings, he has been far and away the most prepared, and took on this volunteer post as if it were his job. Mayor Barham said Mr. Ginnings had done a lot for the community. Mr. Ginnings thanked them and his fellow Board members and left the meeting for an appointment. (Mr. Leiker noted that he WFEDC — Minutes of August 26, 2016 received an email that the City Center documents had been signed and asked Mr. Ginnings to sign them as he was leaving, if he had time to do so.) 6. Discussion of Progress on the MPEC Management Contract and Convention Hotel Projects MPEC Management Contract Mr. Dockery said the 4BSTC did not provide funding toward this project, but it has approved some capital improvement projects for the facility. Once a management company is selected, that company will most likely call for more improvements to be made to the facility. Proposals were solicited three months ago. Four responses were received; two of them from companies that nearly corner the market - Spectra and SMG. The evaluation committee, consisting of himself, Glenn Barham, Stephen Santellana, Darron Leiker, and Lindsay Greer, evaluated the written proposals and interviewed them. At that point, the companies were even. They visited SMG's facilities at Shreveport, Louisiana, and Spectra's at Enid, Oklahoma. They were most impressed with Spectra, and felt that company really wanted the business. The agreement will be on the September 6 Council agenda, with the goal of opening October 1 under their management. Convention Hotel Mr. Dockery reminded the Board that it had approved $111,000 for the convention hotel project. Gatehouse Capital will be in Wichita Falls September 6 to meet with local banks and go over their recommendations. They will own the hotel, and will borrow upwards of $25 million for which the lender would have a first lien. The City's obligation is the cost associated with the conference center portion of the hotel. The City would enter into a management agreement with the same company Gatehouse would use to manage the hotel. The City may have two financial components — gap financing for capital construction of the hotel, with the largest share being that of the hotel, and the smallest being the City's. The profits made off the operation of the hotel would pay for the debt service that the City would essentially be gap financing, but not having to pay the debt service on. The numbers are not in place, but the City will look to the 4BSTC to help with the financing. 7. Adjourn. Mr. Leiker moved to adjourn. Seconded by Mr. Clark, the meeting adjourned at 4:44 p.m. Tony lQeiie, President