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4B Sales Tax Corporation Minutes - 05/01/2017MINUTES OF THE WICHITA FALLS 4B SALES TAX CORPORATION (4BSTC) May 1, 2017 PRESENT: Tony Fidelie, President Glenn Barham, Vice -President Rick Hatcher, Secretary -Treasurer Dave Clark Darron Leiker Michael Mills Stephen Santellana, Mayor Jim Dockery, Deputy City Manager R. Kinley Hegglund, Jr., City Attorney Blake Jurecek, Director of IT and Facilities Lindsay Barker, CVB Director Linda Merrill, Recording Secretary Henry Florsheim, CEO Walter Lambert Norman B. Cochran Thomas Murray Stephen Garner ABSENT Derik Schneider 1. Call to Order § Members § Mayor and City Council § City Staff § Chamber of Commerce and Industry § Small Business Development Corp. § Member Tony Fidelie called the meeting to order at 6:05 p.m. 2. Approval of Minutes (April 10, 2017) Rick Hatcher moved seconded by Michael Mills for approval of the minutes The motion carried 6-0. 3. Conduct Public Hearing in connection with the provision of a loan by the 413STC to a private developer for a full service convention center facility Mr. Fidelie declared the public hearing opened at 6:06 p.m. Jim Dockery noted that on April 10, the Board approved a resolution expressing its intent to issued $11.1 million in 20-year revenue bonds for the hotel portion of the project. Tomorrow, the City Council will consider a resolution expressing its intent to issue $7.6 million in NA legal\4A, 4B, TIFS\4B Corp\4B Minutes\2017\2017.5.1\Minutes 4B 2017.5.1.doc WFEDC — Minutes of May 1, 2017 2 Certificates of Obligation for the convention center. Today's public hearing is a legal requirement for the $11.1 million in revenue bonds. Notice of this public hearing was published April 14. The next action to occur involves Murphy Davis, the City's financial advisor, getting the best interest rates for the debt service. This is anticipated to be $880,000. All market studies indicate that the operating income from the hotel will pay that debt service, as well as the debt service for Gatehouse's $20 million senior loan. The City will ask the 413 Board to assume the estimated $520,000 of debt service for the conference center portion of the project. He noted that $350,000 of existing debt will be retired about the time this comes on board. This is a 150-room hotel, with 12,000 square feet of convention center space. It will be adjacent to the Exhibit Hall and Coliseum. Additional parking improvements of approximately $1 million will address the parking spaces lost due to hotel construction. The $11.1 million will be in the form of a loan to the hotel developers/owners. Gatehouse Capital will be in a first lien position to have their senior note paid; the City is in a secondary position. Any additional profits will be shared 50150 between Gatehouse and the City. Mr. Fidelie called for comments from the public. Thomas Murray supports more modern hotels, but would prefer incentives be offered to repair the existing hotels in the area. A 150-room hotel is insufficient for the city's needs. The hotel's immediate proximity and being right in front of MPEC would essentially turn MPEC into the DoubleTree MPEC Center. He recommends it be moved to either side. Mr. Dockery addressed Mr. Murray's concerns. 1. The hotel is designed in such a way that it can be expanded to 240 rooms. 2. Existing hotels were approached with the idea of a public/private partnership without success. The City then formally sought potential hotel developers, and that is how its relationship with Gatehouse Capital was established. 3. Six sites were evaluated, all within walking distance to MPEC. Convention attendees want to be as close as possible to the convention center from their hotel. Glenn Barham said Abilene and Midland are doing similar projects. It has been in the works here since midway through his second mayoral term. It's the best option for the city. Norman Cochran is opposed to the project, regardless of its location. He questions why Gatehouse could not get loans from the local banks. He does not object to Wichita Falls growing, but he does not understand the necessity of this project. MPEC was not a good investment, and it has to be subsidized with general fund money. He will be at the Council meeting tomorrow. It only takes 5% of 55,000 eligible voters to oust the mayor. If the Board thinks it is not possible, it is. Mr. Dockery agreed that MPEC has been subsidized with general funds for the past four years because there has been a decline of revenue, largely due to a lack of outside use of the facility. To reduce the need for general fund dollars, the City hired Spectra to manage MPEC, and are contemplating this partnership with Gatehouse Capital for a hotel/convention center. WFEDC — Minutes of May 1, 2017 3 Mr. Fidelie said there are indirect revenues from having MPEC. Mr. Leiker agreed. When Hotter'n Hell 100 is here, folks buy fuel, and shop at the mall, and that money is not counted. If it were, MPEC may not even require a subsidy. All convention centers are subsidized. Mr. Cochran declared that people who come for the Hotter'n Hell 100 stay at people's homes; four guests stay at his home every year. Mr. Cochran continued, stating the latest economic statistics are negative, and the City has no sales tax revenues. He does not want this funded out of his pocket. Mr. Dockery said market studies suggest it will be paid back from the hotel's operating income, assuming it enjoys a conservative 65%-70% occupancy. Mr. Leiker said the project does not affect anyone's property tax. It comes out of the existing sales tax, and the City expects to get that paid back. Some communities provide multi -million -dollar cash grants that will not be repaid. However, if it is not done, MPEC will continue to decline and the property tax rate will be affected. Mr. Cochran asked why Wichita Falls compares itself to other cities. Mr. Leiker said it has to compare itself as it competes against other cities for companies and families to locate here. Mr. Dockery also said the lack of participation by local banks had nothing to do with Gatehouse Capital's financial strength. The banks wanted a down payment. The public/private partnerships are designed to take some risk off the developer so they'll make that investment. Lindsay Barker of the CVB spoke in full support of the project. Her sales staff members put together figures on conventions the City was not able to bid on last year due to lack of hotel/convention space. There were 20 events, 22,334 attendees, 19,308 room nights. Total estimated economic impact: $27 million. One specific example was the Golden Retriever Club of America. They would have required 1,800 rooms, with a total economic impact of $3.6 million. An event database for Texas CVBs shows there were 1,400 events last year that required a location with a full -service convention and hotel space. Ms. Barker added that the visitor spending in Wichita County for 2015, per the Governor's office, totaled $231 million. Michael Mills said MSU brought an event to MPEC 12 years ago. The two other hotels downtown were still in business. The group was positive about Wichita Falls and MSU, but said they would not return due to the hotel facilities. Henry Florsheim said it is important to give the CVB the opportunity to get these conventions. He goes to a number of conventions, and there has not been a single one where he has had to walk multiple blocks from his hotel to the convention center. He agrees that a 150- room hotel is not enough, but it is a start. He applauds the Board that this project does not burden the citizens with taxes, but uses the mechanism that the citizens voted for 20 years ago. The Board is doing what the citizens asked them to do when they voted for this sales tax. Steve Garner spoke in support. This project is to be paid out of tax money already collected. It is needed for Wichita Falls to compete in today's changing market. He would prefer WFEDC — Minutes of May 1, 2017 4 the hotel be located by the river, but he understands that now is the time to say yes or no, and he says yes. He thanked the Board for their efforts. Glenn Barham said if the City wants to continue to grow, this project needs to be done. Otherwise, the City will decline. It has lost so many conventions because it did not have a full - service facility. He fully supports the project. Mr. Fidelie offered a two -minute rebuttal, acknowledging the magnitude of the project. Mr. Cochran questioned who Mayor Barham told about the project when he worked on it during his term as mayor. Mr. Barham said there were public discussions in Council meetings and 4B meetings, which are open to the public with published agendas. The City went to hotels in this town, including the Hilton and Holiday Inn Express, and they declined. That is why the City put out a request for proposal. No additional tax dollars will be involved in building this facility. All studies show a positive increase with this facility. Mr. Fidelie said this project represents zero percent tax increase. The 4B Board has no authority to raise property taxes, but can only recommend to the Council how to spend sales tax dollars. This is an allocation of resources and the use of 413's bonding authority to make the City better. This project has been discussed in many board meetings, which are open to the public. Rick Hatcher said this project is structured in such a way that money is not being given away. On principal, he could not be more against this type of project, but it needs to be done. Municipalities operate in a different environment than they did even 5 years ago. Part of this project's contract demands that 4% is set aside every month for future renovations of the hotel. That will help down the line. He believes this has been structured in such a way that it will be a success. The 4B will repay $520,000 per year; about the time that begins, $350,000 in debt service payments will be retired, and before the $520,000 debt service payments are retired, another $400,000 in debt service payments will be retired. The money is already there. He supports the project. Dave Clark said he has been involved in municipal government in different communities for 50 years. It is important to invest to make things better. He marvels at what MPEC has brought to the community, and he very much supports the project. Mr. Fidelie declared closed the public hearing at 7:00 p.m. 4. Adjourn. The meeting adjourned at 7:00 p.m. Guy A. "T " Fidelie, Jr., President