4A Wichita Falls Economic Development Minutes - 10/19/2016MINUTES OF THE
WICHITA FALLS ECONOMIC DEVELOPMENT CORPORATION
October 19, 2016
PRESENT:
Reno Gustafson, Secretary -Treasurer
Leo Lane
Darron Leiker
Dave Lilley
Glenn Barham, Mayor
Stephen L. Santellana, Councilor, District 1
Jesse Brown, candidate for Councilor,
District 4 (unopposed)
Woody Gossom, Jr.
Jim Dockery, Deputy City Manager
R. Kinley Hegglund, Jr. City Attorney
Linda Merrill, Recording Secretary
Henry Florsheim, CEO
Kevin Pearson, VP, Economic Development
Travis Haggard, V.P., BR&E
Darah Soria, Ec. Dev. Marketing Coordinator
Ray Roberts
Josh Roberts
§ WFEDC Members
§ Mayor and City Council
§ County Judge
§ City Staff
§
§ Chamber of Commerce and Industry
§ Chantex Manufacturing, Inc.
Terry Patton, Dean, Dillard College of Business § Midwestern State University
John Martinez, Professor, Dillard College of Business §
Samuel Pak
John Ingle, Business Editor
ABSENT:
Dick Bundy, President
1. Call to Order
§
§ Times Record News
§ WFEDC Member
Reno Gustafson called the meeting to order at 11:30 a.m.
2. Approval of Minutes (September 30, 2016)
Leo Lane moved to approve the minutes. Seconded by Dave Lilley, the motion carried.
3. Financial Report
Jim Dockery noted the Board had $7.5 million in unreserved funds. Darron Leiker noted
that the sales tax payment received for sales that occurred two months ago was the largest increase
in a couple of years, of almost 9%.
4. Discussion and Possible Approval of Incentives for Chantex Manufacturing, Inc.
Travis Haggard introduced Ray and Josh Roberts of Chantex Manufacturing. The WFEDC
has offered an incentive of $128,000 in the form of a zero interest forgivable loan over a period of
seven years for the acquisition of two new 20 -ton cranes, provided the company hire and maintain
an additional 16 employees over this seven-year period. The purchase price of the cranes is
approximately $170,000.
Chantex manufactures pressure vessels for the natural gas industry. They have been doing
business with PECOFacet in Mineral Wells for two years. That company has requested that
Chantex take on even more work with them. In order to do so, they need to grow their company in
terms of employees and equipment. To that end, they have begun construction on a new 7,500
square foot building for their company.
They currently employ 12 people at this family-owned business; the 16 employees that
Chantex would hire under this agreement would include 12-13 welders making $18 per hour, and
helpers earning $11412 per hour, depending upon qualifications.
Mr. Lane asked about the structure of the company's agreement with PECO. Ray Roberts
said the agreement PECO wants them to sign would be for 1,200 hours per month for one year.
PECO does not normally enter into agreements, but they are that committed to working with
Chantex.
Stephen Santellana asked if they fear rapid growth of their company will result in a loss of
quality. Ray Roberts said they do not, because two large welding shops have closed in North Texas,
and quality welders are looking for employment. They will be able to hire only the best.
Mr. Leiker asked how the cranes fit into their business plan, and how they plan to get the
money if their request is not granted by this Board. Ray Roberts said they initially thought the
purchase of the cranes was going to be covered through Chase Bank, but after several weeks,
corporate officials told them that Chase was not investing in oil this year. American National Bank
stepped in to help with the building construction, but not with the crane purchases. It was then
suggested they contact the WFEDC. They do not have a Plan B, but they will find the money.
Mr. Hegglund asked for confirmation that the WFEDC would be given a first lien on the
cranes and that no other entity would have a lien? Ray Roberts said the only other lien the company
has is through the bank on the building itself. He added that the WFEDC could include the railings
on the lien, as the bridge crane and running rails are not included in the building lien.
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Mr. Dockery asked if the company is located outside the city limits, and if so, how it was
getting water. Ray Roberts confirmed that it is outside the city limits, and it gets water through the
Wichita Valley Water Supply Corporation.
Mr. Pearson thanked the Roberts brothers for their presentation. He also thanked Sam Pak
for referring them to the WFEDC.
5. Discussion of Economic Impact Model
Mr. Gustafson introduced John Martinez and Terry Patton. Mr. Pearson stated that the
model he uses to determine the economic impact of a potential project was discussed at the
September 30 meeting, and some members requested that Mr. Martinez come discuss how it
works.
Mr. Martinez said he came to Wichita Falls 20 years ago to teach at Midwestern State
University; he also worked with the BCI. He formulated this economic model over 4-5 years. It is
an input/output analysis; a matrix where inputs for one industry require inputs from all other
industries. The key is the final demand, or those things that are finally purchased.
The Bureau of Economic Analysis provided information on 37 industries in a 10 -county
region surrounding Wichita County to form the basis of his economic impact model.
It is important to look at the ratios of taxes, or cash flow to the city, county and school to
see the revenue generated from sales and output. As a result of direct impact from a particular
industry, workers will get paid, and in turn will spend money. Some of that money will be spent
in retail sales, resulting in sales taxes. He indicated ratios that capture the revenue going to local
governments.
Employment brings a direct impact; the multiplier effect brings about an indirect effect,
and there is also an induced effect where money is spent locally, thus inducting the creation of
other jobs. That is a smaller effect.
Mr. Pearson said this model was similar to other economic impact models he had seen; all
have input/output and multipliers. It is not an exact science, but it is the best tool to use in order to
justify funding expenditures based upon this economic analysis.
Mr. Lane asked what was meant by economic impact. Mr. Martinez said "income" referred
to actual income generated; "employment" was self-explanatory; and "output" meant total sales.
Mr. Leiker said Sheppard AFB estimates its economic impact on the community at $750
million; he asked if it uses the same or a similar model. Mr. Martinez said Wichita Falls has a $7
billion economy; he estimates Sheppard's impact to be at least $1 billion of that.
Jim Dockery asked if the model could show the taxing entities the return on their
investment. Mr. Martinez said it would show sales taxes, property taxes, and school taxes. Mr.
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Leiker asked if the particulars of the Chantex plugged project could be ed into this model as a way to
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show a return on the investment of the taxpayer dollars. Mr. Martinez agreed.
Mr. Lilley asked how to read the data in order to make the determination as to whether
something is a good investment`? He may not want to invest if he is only going to get a 2% return
on investment, but would be more interested in -a 7% return as a private investor. Mr. Martinez
said to be careful about making individual investment decisions. It is not always necessary to show
a profit because the indirect effect is still very positive, The police department is pure cost, but its
value is much higher.
Mr. Dockery said almost anything on this analysis would be determined to be a good
investment if it came out with a dollar more than what the city put into it. Mr. Lilley said that
would be a fine strategy if the WFEDC had infinite resources, but that is not the case. What is
going to be the Board's floor on the retuni on investment`?'
Mr. Pearson said the model could be revised to include the impact on the city, county, and
ISD taxes to give the Board a better feel for each project.
6. Executive Session
Mr. Gustafson adjourned the meeting' into executive session at 1:25 p.m. pursuant to TEXAS
GOVERNMENT CODE section 551.087. He announced the meeting back into regular session at 2:11
p.m. The subjects posted in the Notice of Meeting were deliberated, and no action was taken on
these items in executive session.
Mr. Lilley moved to Uprove the $128,000 no -interest forgivable loan to Chantex
Manufacturing, Inc., under the terms as found in the incentive letter presented to Chantex dated
October 11, 2016 from Wichita Falls Economic Development Partners. Seconded by Mr. Lane,
the motion carried.
The next meeting was .,set for Thursday, November 17 at 3:30 p.m. Dave Lilley said he
wished to set aside some time during this meeting to discuss strategic planning and a mission
statement.
7. Adjourn
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