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4B Sales Tax Corporation Minutes - 04/10/2017MINUTES OF THE WICHITA FALLS 4B SALES TAX CORPORATION (4BSTC) April 10, 2017 PRESENT: Tony Fidelie, President Glenn Barham, Vice -President Rick Hatcher, Secretary -Treasurer Darron Leiker Michael Mills Derik Schneider Stephen Santellana, Mayor Brian Hooker, Councilor, District 3, Mayor Pro Tem Jim Dockery, Deputy City Manager R. Kinley Hegglund, Jr., City Attorney Blake Jurecek, Director of IT and Facilities Linda Merrill, Recording Secretary Henry Florsheim, CEO Antoine Long Will Kelty Gary Cooper Matt Bitsche Russ Reynolds Steve Wilkinson Colin McDonald Don Powell Sarah Pickard Ashley Loftis Elizabeth Lindburg Pamela Grayson Simon Harris IV Andrew Vedamuthu Kenzie Meek -Beck John Ingle ABSENT: Dave Clark § Members § Mayor and City Council § City Staff § § Chamber of Commerce and Industry § Buxton § Big Blue § Big Blue § Wichita Falls Brewing Co. § P-2 The Deuce Warehouse § Gatehouse Capital § BOKA Powell Architects § Pickard Design Studio § UEB Builders § Aimbridge Hospitality § KFDX-TV 3 § Times Record News § Member N:\_legal\4A, 4B, TIPS\4B Corp\4B Minutes\2017\2017.4.10\Minutes_4B_2017.4.10.doe WFEDC — Minutes of April 10, 2017 2 1. Call to Order Tony Fidelie called the meeting to order at 3:02 p.m. 2. Approval of Minutes (January 26, 2017) Rick Hatcher moved seconded by Darron Leiker for approval of the minutes The motion carried 6-0. 3. Financial Report Jim Dockery said the 4B Board has $4 million in revenues. Expenditures are at $3.6 million, leaving a net balance of $411,352. The sum of $757,000 is reserved for prior commitments, leaving an unreserved fund balance of $3.5 million. Four months into this fiscal year, sales tax receipts are 1.26% ahead of this time last year. 3.a. Administrative actions Mr. Dockery said the City Council has formed a new advisory committee to focus on downtown redevelopment. The Council would like two 4B Board members to serve on it. The committee will consist of 11 members: three Council members (the Mayor will chair); two 4B Board members; two Chamber representatives; two Downtown Wichita Falls Development representatives; and two at -large Central Business District property owners. The group will meet monthly or bi-monthly. Rick Hatcher expressed interest. Glenn Barham thought Dave Clark's planning experience would be invaluable. Mr. Leiker agreed, provided he has time to serve. Mr. Dockery asked that those interested submit their names to the City Clerk by April 20. 4. Progress Report from Buxton on Retail Recruitment Efforts Antoine Long of Buxton provided an update on the company's efforts. They have leaned heavily on the Chamber for recruitment and retention activities for this first year of partnership with the City. Using their own methodology, Buxton developed a list of the top 20 retailers they thought would be a good fit for the City, and have been reaching out to those retailers since last August. Based upon those efforts, one specialty store is finalizing a location in Wichita Falls. Other businesses contacted included restaurants, grocery stores, and department stores. Some businesses were not interested in Wichita Falls, or a "secondary" market; others did not like the demographics of the area; while others were not interested in expanding their business. The ICSC RECon, the largest retail trade show in the world, is to be held this May. Buxton will have 20-30 representatives at the show, and it is a good opportunity for cities and chambers of commerce to meet with retailers and see the trends happening in the industry. WFEDC— Minutes of April 10, 2017 3 Mr. Fidelie asked if having one committed business was considered a successful effort after a one year. Mr. Long said it was; many communities might only have serious conversations, but no commitments, within that same time span. This area of focus on was the McNiel area; there are other areas in the city on which Buxton could target, such as Sheppard AFB. The City's efforts in forming the downtown committee lets retailers know the community is proactive for development and redevelopment. 5. Discussion on Funding for Planned Renovations by Petroleum Building Wichita Falls LLC at 726 Indiana Will Kelty reminded the Board members that they had previously invested in fire suppression for 728 Indiana. Their progress with the building has been very slow due to the work of their architect, but they are now in the permitting process and hope to have tenants in about six months. He and his partner have brought new businesses to Wichita Falls, including Azure Spa, Odd Duck Coffee, a radio station, and a boutique store. Big Blue is about to be opened, after a full replacement of the elevators and HVAC. Mr. Kelty stated that their development has made an impact upon other growth in the downtown area. He then discussed the challenges of the Petroleum Building property. Floors 2-5 are designed to be a hotel. Vagrants stripped a lot of the building, including plumbing and electrical items. The ground floor is now operational, and houses The Highlander Pub. He wants to convert the upper floors to residential. The question becomes whether the building will be converted to apartments, senior living, or student housing. The cost to rehab the entire property is estimated at $7.4 million to $9 million, but the resale value is only $2 million. The income from the property to cover expenses is only $4 million - not enough to cover the cost of rehabilitation. There is some sort of partnership needed, but he is not sure of the answer. He may come back later with a request for such a partnership. 6. Discussion on Funding for Planned Renovations by Wichita Falls Brewing Company at 701 Indiana Russ Reynolds spoke on behalf of himself and Matt Bitsche. Mr. Bitsche is from Wichita Falls, and started a brewery in Austin that is now worth over $4 million. Mr. Reynolds is active duty in the Air Force until 2019. Their business will be a family-oriented establishment, even though it is an alcohol -based business. Phase 1 will include the sale and distribute of beer and wine. They will initially contract with a food truck to serve food to customers, and will also provide games and music. They envision this as a destination spot for other cities outside the three -county area, and will distribute outside the three -county area. They will have only the downstairs portion of the building available during this phase. W FEDC — Minutes of April 10, 2017 4 Phase 2, estimated for February 2018, opens the second floor of the building as an event space for groups of 50 to 300. Phase 3, to begin in January 2019, involves using the roof for construction of an outdoor patio and opening a kitchen. The business would create 3-5 new jobs for downtown. They are requesting $40,000 for the fire suppression system (downstairs: $27,500; upstairs: $6,500; tie-in to the main: $4,000; and taxes: $2,000). Michael Mills said he travels for his job, and found that in Brevard, North Carolina, the breweries were gathering spots for the community. He asked what percentage did they see being distribution versus at the facility. Mr. Bitsche said his first brewery was focused on distribution, and he wants this facility to be more on the retail side. However, the law allows for distribution, and it can grow as much as they want it to grow. They can triple capacity with very limited cost. Mr. Dockery explained that any grant of funds, if provided by the Board, would be provided only on a reimbursement basis. Mr. Fidelie added that it would be a five-year forgivable loan, with the 4B having a lienholder position on the building. Mr. Kelty, the property owner, stated he had no problem with the 4B having first position. 7. Discussion on Funding for Planned Renovations by P-2 The Deuce Realty, LLC at 1401 Lamar Steve Wilkinson spoke as co-owner of P-2. He and Keith Morton purchased The Warehouse last year, and they intend to renovate it and make it an event center. It would be the largest privately owned event center, with occupancy up to 1,000. The building is two stories with a basement, at 15,000 sq. ft. He thinks they can bring in an event every weekend. He projects $10,000 per month in revenues from rentals, and $60,000 monthly from the full service bar. They are requesting $65,200 in assistance, as follows: (1) Backflow/sprinkler heads - $17,000; (2) foaming the roof- $42,000; and (3) access ramp for disabled individuals - $6,200. Mr. Fidelie asked if he understood and agreed with the terms under which the 4B Board granted funds, should it decide to do so. Mr. Wilkinson replied affirmatively. Kinley Hegglund asked if the property had other liens. Mr. Wilkinson said it did not. Recess Mr. Fidelie recessed the meeting from 4:12 p.m. to 4:23 p.m. WFEDC — Minutes of April 10, 2017 5 8. Progress Report from Gatehouse Capital Corp. on the Planned Hotel and Conference Center Project BORA Powell Don Powell, principal of BOKA Powell, updated the Board on the architectural aspect of the hotel. It is consistent with Doubletree standards. It is an urban hotel but has connections to MPEC and the Coliseum. Arrival occurs at the end of Travis through a porte cochere, shared by the hotel and conference center. (Visitors can also come in off 4°i and Austin streets.) There is ample parking on two sides of the hotel. The loading functions of MPEC and the hotel are directly opposite one another. The hotel is modern, but its textures reflect the warmth of the community. The public space outside the conference center can be closed off to allow for pedestrian - only traffic. Mr. Mills asked if this area is intended to be left open otherwise to vehicular traffic. Mr. Leiker said it is an open question to figure out what works best. Pedestrian safety and public safety response are the number one concerns. If it makes sense to close this area, it can be done. Mr. Powell said from a hotel perspective, it will function properly either way. The swimming pool will get early morning sun therefore be able to be used throughout the day. The fitness center is adjacent to the pool. Guests can come from the elevator directly to those areas without having to enter the lobby. The 10,000 square foot ballroom can be divided into fourths or eighths, so it is flexible in its sizing. They have taken 10 feet out into the public way to ease some previous congestion in that room, to allow for 1,000 people to congregate. The men's and women's restrooms are sized accordingly. The hotel and conference center can each stand alone, from both financial and operational standpoints. The second floor reserves some house space for the hotel, but also houses guest rooms. Floors 3-6 are combinations of guest rooms and suites. There are 150 rooms, and there is the possibility to expand another 96 rooms, for a total 246. Pickard Design Studio Sarah Pickard introduced her team, Ashley Loftis, lead designer, Pamela Grayson, head of architecture, and Elizabeth Lindburg, junior interior designer. They felt it was important to know the City before beginning the design work, so they spent a day here, talking to locals, visiting museums, dining, and also visited the Hamilton Building. They wanted to incorporate the local story into the design process. Their design was inspired by movement, mainly by the Hotter'n Hell 100, World Wrestling Federation and other activities in the city. The color palette of terra cotta, browns, W FEDC — Minutes of April 10, 2017 grays, whites, and blues was based upon what they actually saw when they looked out upon the city. Each space in the hotel evokes, in a subtle, abstract way, some reference to movement or bikes — bike spokes, rusted chains, tire treads. They used natural brick and oversized furniture, with the goal of a casual, yet elegant, feel to the spaces. Mr. Fidelie said the Hotter'n Hell 100 is definitely a signature event for the City, but wondered if there was a way to incorporate references to Sheppard AFB or Midwestern State University. Ms. Pickard said she definitely does not want anyone to feel they are walking into a "bike" hotel. Once that theme was defined at the lobby, it was nice to carry the same theme throughout, but it could be possible to do something distinctive in the restaurant, as that could be more of a standalone area. UEB Builders Simon Harris said it is critical to make sure design is what it should be. He is familiar with a BOKA design; the only difference is the brand and the market. There are price variances across the state. He needs to have a good pulse on what the local subcontractors can bring to the project. Information is still coming in on the geotechnical services, and that is helping him get a clearer picture of the budget. The last time the Board met, the hotel contract was budgeted at $19.2 million. Today, it is budgeted at $20.1 million. He thought they would be able to use PTAC units under the window, but has since found that will not be allowed. That has cost implications. For the conference center, the last time around, the cost was about $5.6 million, and it is tracking about that today. The design is a bit different, but it is in line with the budget. He is nearing the point to bring in strategic partners — he cannot get to GMP without strategic partners. Mr. Leiker asked if there is a lot of interest from local contractors. Mr. Harris said more than enough. People who live here need to build this project. Colin McDonald apologized that he threw staff a curveball Friday when he posted final construction costs. They worked over the weekend on the numbers: Hotel construction development (excluding $500,000 interest reserves): $29.892 million They are facing unavoidable financing costs of around $250,000 ($192,000 in placement fees for an outside finance broker and 6% interest costs of $75,000). They anticipated $1.65 million last year for mandatory value engineering. Out of the current budget of $9.9 million, they are carrying a potential savings of $400,000. It is probably unrealistic to by to get $1.6 million from schematics through to the design development stage. WFEDC — Minutes of April 10, 2017 7 Mr. Dockery asked the original budgeted number. Mr. McDonald said it was $28.2 million in development costs, plus $500,000 of financing reserves, for $28.7 million. Now is it $29.9 million, less reserves. The conference center budget was $7.1 million; the current budget is $7.6 million. BOKA Powell has advanced the drawings considerably more than they were obliged to do, but that gives UEB more ammunition to reduce the unknowns. There are still sufficient operating revenues to cover the senior loan, the mezzanine loan and return the mezzanine principal and provide a surplus to the city. Although the interest rate has increased, there is still sufficient cash flow to support the senior loan. Local banks are still invited to participate in the consortium. Although the 4B revenue bond might be more expensive than anticipated, there is still sufficient cash flow to give 1.3 times coverage of the mezzanine loan. The interest split will cover the principal of the loan on the 10t" year and provide the City $3 million in excess funds. If Gatehouse were to hold the asset with the city over the 20 -year term of the bond, the economics improve greatly for the city. All concessions fall away after the 10`x' year, and the city starts to really benefit financially. The hotel is designed to be a longstanding value-added property. He and the team are prepared to move forward; more effort, time and cost have been expended than their fees have covered, and this is a project they would like to continue to pursue. Mr. Dockery said what is before the 4B Board is to consider extension of the agreement with Gatehouse for additional predevelopment funding. Further, there is an item to adopt a resolution directing publication of notice, project, and public hearing. It would start the time frame for issuing the city's portion of the mezzanine loan and any other costs associated with parking and costs of issuance. Mr. Mills asked if the GMP was close. Mr. Harris said the GMP is typically reached at the end of design development, the phase that is just about to start. He estimates GMP is about 90-120 days out on a project of this size. The `fast forward' button could be pushed, but it is important that everyone is comfortable with getting a price with one phase of the design still to be completed. He added that UEB is a 130 -person firm, with offices in Dallas, Scottsdale, and Seattle. It has a bonding capacity of $250 million, and will probably do $200 million worth of construction this year. Not all of those projects will be bonded, and he assured the Board that the bonding is secure for a project of this size. 9. Executive Session Mr. Fidelie adjourned the meeting into executive session at 5:39 p.m. pursuant to TEXAS GOVERNMENT CODE section 551.087. He announced the meeting back into regular session at 6:42 p.m. The subjects posted in the Notice of Meeting were deliberated, and no votes or further action was taken on these items in executive session. WFEDC — Minutes of April 10, 2017 10. Consideration of Funding for Planned Renovations by Wichita Falls Brewi Company at 701. Indiana I Mr, Leiker moved to_ap ire suppression system for prove up to $40,000 toward the f Wichita Falls Brewin- Company at 701 Indiana, under a five-year forgivable loan prorated annuallv, based on a Certificate of Occupancy, and secured by a lien on the property. Seconded by Glenn Barham, the motion carried 6-0. 11. Consideration of Funding for Planned Renovations by P-2 The Deuce Reaiq,, LLC at 1401 Lamar Mr. Fidelie moved tb. approved up to $6.200 for construction of a wheelchair ramp and access for P-2 The Deuce Realty, LLC at 1401 Lamar, upon the issuance of the Certificate of Occupancy. Seconded by Mr. Leiker, the motion carried 6-0. 12. Consideration of an Extension to the Development Agreement with Gatehouse Capital Corp. and Additional Pre -Development Funding Mr. Leiker moved to approve up to $323,000 as additional -ore-development funding and to extend the development agreement with Gatehouse Capital Corp. Seconded by Mr. Mills, the motion carried 6-0. Mr. Barharn urged Mr, McDonald to do better than 120 days on the GMP. Mr. McDonald said he will push them to do their best. 13. Consider and Adopt a Resolution Directing Publication of Notice of Project and Notice of Public Hearing Mr. Leiker moved to approve the resolution as presented; his motion was seconded by Mr. Barharn, Mr. Dockery said notice will be posted in the newspaper as required by statute for issuance of the 4B revenue bonds. In addition, a public hearing will be scheduled at 6:00 p.m. on May 1, 2017 in the Council Chambers, with subsequent action can occur 60 days following the notice. The motion carried 6-0. 14. Consideration of Funding for Biggs & Mathews, Inc. to Design Additional Parking for the Hotel and Conference Center Project Mr. Leiker moved to approve $85,000 for funding for Biggs & Mathews to design the necessary parking for the hotel and conference center oroiect. Seconded by Mr. Mills, the motion carried 6-0. 15. Adjourn. The meeting adjourned at 6-47 p.m. Guy A. "Tc@y"Fidelic, Jr., President