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01-20-2012 (WEDC) Minutes Minutes Wylie Economic Development Corporation Board of Directors Meeting Friday, January 20, 2012 6:30 A.M. WEDC Offices—Conference Room 250 South Highway 78—Wylie, Texas CALL TO ORDER Announce the presence of a Quorum President Marvin Fuller called the meeting to order at 6:30 a.m. Board Members present were: Mitch Herzog, Chris Seely, Todd Winners, and John Yeager. WEDC staff present was Executive Director Sam Satterwhite and Senior Assistant Gerry Harris. Ex-officio member Mindy Manson was present. Also in attendance were City of Wylie Finance Director Linda Bantz, Assistant Finance Director, Melissa Beard, and Assistant City Manager Jeff Butters. CITIZEN PARTICIPATION There being no citizen participation,President Fuller proceeded to Action Items. ACTION ITEMS ITEM NO. 1 — Consider and act upon approval of the December 9, 2011 Minutes of the WEDC Board of Directors Meeting. President Fuller noted that the minutes reported Board Member Winners as absent and requested amending the same to accurately reflect his attendance. MOTION: A motion was made by Todd Wintters and seconded by John Yeager to approve the December 9, 2011 Minutes of the WEDC Board of Directors Meeting as amended. The WEDC Board voted 5 —FOR and 0—AGAINST in favor of the motion. ITEM NO. 2 — Consider and act upon approval of the December 2011 WEDC Treasurer's Report. Board President announced that the December 2011 WEDC Treasurer's Report would be discussed after Item No. 8. MOTION: A motion was made by Mitch Herzog and seconded by John Yeager to approve the December 2011 WEDC Treasurer's Report. The WEDC Board voted 5 —FOR and 0—AGAINST in favor of the motion. WEDC—Minutes January 20, 2012 Page 2 of 8 ITEM NO. 3 —Consider and act upon issues surrounding the 2011 WEDC Annual Report. Staff presented for Board's review the WEDC Annual Report for 2011. Staff noted that the draft had not been completed in time for submittal to Council in January; the City Manager had made an exception to the submittal requirements allowing the WEDC to include the report in the January 24th Council packet. President Fuller thanked the City Manager and remarked that it is important that the WEDC meets the requirement within its By-Laws that the report be submitted to the Council by January 31st. Staff reviewed issues pertaining to the WEDC's financial condition, redevelopment initiatives, retail activity, industrial/commercial activity, and 2012 goals & Objectives. The Board asked that staff add mention of the 2011 restaurant study, negotiations with Applebee's, the litigation with Sanden, progress with KCS, dirt contribution to the Parks Department, negotiations with Southwestern Chiropractic, and the WEDC cooperation with the Downtown Merchants Association Music Program. With those amendments, staff recommended that the WEDC Board of Directors accept the WEDC Annual Report and recommend it be presented to the Wylie City Council. MOTION: A motion was made by Todd Wintters and seconded by John Yeager to accept the WEDC Annual Report as amended and recommend it be presented to the Wylie City Council. The WEDC Board voted 5 —FOR and 0—AGAINST in favor of the motion. ITEM NO. 4 —Consider and act upon issues surrounding a WEDC Budget Transfer for FY 2011 —2012. Staff reported that the Audit & Legal Services Account for FY 2011 — 2012 is currently over budget by$752.67. This amount does not include the final billing from Abernathy for December 2011. Funds will be transferred from the Advertising Account - $1,100, community Development Account - $2,000, Travel & Training Account - $4,300, Engineering Account- $1,600, and Land Account- $11,000 for a total of$20,000. This will increase the Audit &Legal Services Account to $42,750, leaving$19,247.33 for the remainder of FY 2011 —2012. Other Budget Transfers are regarded as "clean-up" transfers after the Auditor's review of the Ascend project. The income from Ascend will no longer be booked as Rental Income (decrease $488,190) but will instead be booked as Interest Earnings ($278,260) and Lease Principal Payments ($209,930). While these changes do not affect the Revenue, they are required bookkeeping corrections. Board member Wintters asked why the Land Account is not used to offset the entire shortfall in the Legal Account. Staff responded that it is a personal goal to reduce spending in all other WEDC—Minutes January 20, 2012 Page 3 of 8 accounts aside from Incentives and Land if at all possible. The Board directed staff that for all future budget transfers, use the Land Account first. Staff recommended that the WEDC Board of Directors approve Budget Transfer Request EDC1- 11-12 in the amount of$508,190. MOTION: A motion was made by Todd Wintters and seconded by Mitch Herzog to approve Budget Transfer Request EDC1-11-12 in the amount of$508,190. The WEDC Board voted 5 — FOR and 0 — AGAINST in favor of the motion. ITEM NO. 5—Consider and act upon issues surrounding Gardner Regency,LLC. Staff presented the Performance Agreement with Gardner Regency, LLC (Savage Precision Fabrications) where the WEDC is obligated to reimburse Savage for moving expenses in the amount of $254,357. The grant is payable in five equal and annual payments of $50,871.40. The first installment was paid at the issuance of the Certificate of Occupancy on 1-9-09, the second payment was made on 1-15-10, the third payment was made on 1-21-11, with the fourth payment being submitted for the Board's approval. Per the Agreement, Savage must maintain a minimum of $4,331,737 in 2011 and maintain at least 35 full-time employees. As per the appraisal district, Savage was appraised at $4,355,212 in 2011 and employed 43 employees for 2011. The WEDC holds a note on the 3.87 acres sold to Gardner Regency in the amount of$421,433. Should there be no Default of the Performance Agreement,the WEDC shall forgive all payments associated with the Note over a seven year period in equal amounts beginning on the anniversary date Savage received a certificate of occupancy. With no event of Default identified, Payment #3 associated with the Note in the amount of$60,206.14 was recommended to be forgiven. With no event of default existing, staff recommended that the WEDC Board of Directors authorize payment #4 of $50,871.40 to Gardner Regency, LLC for reimbursement of moving expenses and further staff recommended that the WEDC Board of Directors forgive Payment #3 associated with the Real Estate Lien Note in the amount of$60,206.14. MOTION: A motion was made by Mitch Herzog and seconded by Chris Seely to authorize payment #4 of $50,871.40 to Gardner Regency, LLC for reimbursement of moving expenses and forgive Payment #3 associated with the Real Estate Lien Note in the amount of$60,206.14. The WEDC Board of Directors voted 5 — FOR and 0 — AGAINST in favor of the motion. ITEM NO. 6 — Consider and act upon issues surrounding a Real Estate Sales Contract between the WEDC and Duel Products,Inc. WEDC—Minutes January 20, 2012 Page 4 of 8 Staff presented an executed Real Estate Sales Contract between the WEDC and Duel Products, Inc. The Board had previously directed staff to negotiate for the purchase of the 0.5 acre tract. Staff was able to negotiate a purchase price of$125,000 and agreed to fund all closing costs and expenses associated with the closing. Closing costs for Buyer and Seller has been estimated at $2,500. Staff recommended that the WEDC Board of Directors approve a Real Estate Sales contract between the WEDC and Duel Products, Inc. having a purchase price of$125,000 and the WEDC being responsible for all closing costs save and except any legal fees incurred by Duel Products and further authorizing President Fuller to execute all closing documents. MOTION: A motion was made by John Yeager and seconded by Todd Wintters to approve a Real Estate Sales contract between the WEDC and Duel Products, Inc. and to authorize President Fuller to execute all closing documents. The WEDC Board voted 5—FOR and 0—AGAINST in favor of the motion. ITEM NO. 7 — Consider and act upon issues surrounding a Performance Agreement with CSD Woodbridge, LLC (Clark Street Development) and the WEDC. Staff presented the first draft of the Clark Street Development Performance Agreement. Clark Street anticipated closing on the proposed site on February 22, 2012. The grocer anchoring the site has a due diligence period that expires on February 10th with the Wylie City Council approving the site plan on February 14th. Staff's goal is for the WEDC to present its Performance Agreement to Council on the 14th as well. Staff reported that negotiations continue with Clark Street surrounding the terms of the default language. As presented, should Clark Street fail to meet any of the detailed performance measures which deal with square footage requirements, the entire agreement is voided and no further sales tax reimbursements are distributed. Clark Street has requested a middle ground with a possible pro-rated reduction for any default. The Board discussed several options associated with square footage requirements. Staff commented that the original requirements present to Clark Street may have been too lofty requiring the center to be 94% built out within six years. The square footage requirements were changed as follows: Phase I— From 123,000 square feet to 110,000 square feet, Phase II— From 143,000 square feet to 120,600 square feet, Phase III— From 150,000 square feet to 127,600 square feet, Phase IV— From 160,000 square feet to 134,200 square feet. In lieu of a pro-rated incentive should there be a default. the Board decided that in the event the square footage requirements are not met, the maximum Reimbursement Incentive will be reduced from $1.1 mm to $550,000. WEDC—Minutes January 20, 2012 Page 5 of 8 MOTION: A motion was made by Todd Wintters and seconded by John Yeager to authorize staff to amend the square footage requirements and default language and present the same to CDS Woodbridge, LLC. The WEDC Board voted 5 —FOR and 0—AGAINST in favor of the motion. DISCUSSION ITEMS ITEM NO. 8 — Discuss modifications to the WEDC Financial Report as recommended by Weaver& Tidwell, LLC (City of Wylie audit firm). Finance Director Linda Bantz and Assistant Finance Director Melissa Beard attended the WEDC Board meeting to explain to the Board what changes had been made at the direction of Weaver& Tidwell(City of Wylie auditors)to WEDC financials and the reasons for the changes. During the City Audit, the auditors made specific changes to the reporting of the revenue and expenses relating to the Ascend project. Most of the changes pertain to the Ascend lease and are simply separating Principal and Interest and changing how each are tracked. Staff presented a copy of the WEDC Direct Financing Lease Amortization Schedule. This schedule was generated by the Auditors and is a means of tracking the lease for bookkeeping purposes only. The schedule had nothing to do with the amortization schedule provided by the bank which tracks the loan. Staff also provided an email from John DeBurro, City Auditor, detailing a footnote to WEDC fmancials within the Audit detailing the Direct-Financing Lease. The proposed footnote states the total future lease payments are identified less the unearned income. The unearned income represents implied interest paid per the auditor's Direct-Financing amortization schedule. ITEM NO. 9 — Staff Report: review issues surrounding an Amended and Restated Performance Agreement between the WEDC and Woodbridge Crossing, Commercial Lease/Performance Agreement between the WEDC and ACE, City of Wylie 19-acre tract/sewer line extension, Leadership Wylie, Collin County Association of Realtors, Extension of Woodbridge Parkway, and regional housing starts. Woodbridge Crossing Woodbridge Crossing is currently in compliance with all terms of the Amended and Restated Performance Agreement. A Sales Tax Reimbursement Report was presented which identified all sales taxes generated through October 2011 within Woodbridge Crossing for the City General Fund, the WEDC, and the 4B. As a reminder, the City and WEDC will be reimbursing 85% of all sales tax generated within Woodbridge Crossing through September 2013. Beginning October 2013, 65% of all sales taxes generated will be reimbursed. Direct Development is currently in compliance with all terms under the Performance Agreement with the next performance measure of a cumulative 385,118 square feet due by September 1, 2013. There is currently 318,152 square feet in place within Woodbridge Crossing. Staff WEDC—Minutes January 20,2012 Page 6 of 8 understands that Ross and Rack Room are under contract and that Rosa's is making progress relating to site approval from Target. A summary of Direct Developments' Performance Obligations was presented for the Board's review. Ascend Commercial Lease and Performance Agreement An Ascend Custom Extrusion Critical Dates Analysis and Performance Agreement Monitoring Procedures was presented. Payment #1 of the Economic Incentives has been funded with Ascend meeting all Performance Obligations within Section A of the attachment. A final Certificate of Occupancy was issued on September 23, 2011. Ascend confirmed that their second press is in the port of Houston and should be delivered to Wylie by the end of January. Staff presented the avoided tax payments to the City and WISD on the January 16th. Superintendent Vinson indicated that it is his intent to identify a program that those monies be used for so that its specific use can be reported back to WEDC Board. City of Wylie 19-acre Tract/Sewer Line Extension On January 10, 2012 the Wylie City Council directed the Planning Department to pursue a zoning change on its 19-acre tract on F.M. 544 from Government/Open Space to Commercial Corridor. This direction from Council is important from the perspective that the WEDC should not expend monies on the sewer line extension unless it is certain that the future land use is for commercial purposes. At the same Council meeting staff presented information from City of Wylie Bond Counsel pertaining to the ability of the City to sell the 19 acres for private uses and how any sales proceeds must be used. Council was unanimous in its direction to the Planning Depai tment. Staff has begun approaching property owners on 544 which the WEDC will need easements from for the sewer line extension. As a reminder, staff believes that the WEDC will be ready to let the contract following council's final approval of zoning. At the February Board meeting, staff will have finalized easements and will be presenting bids for construction. Leadership Wylie On January 13th the WEDC presented an overview of its economic development program to the Wylie Chamber of Commerce Leadership Wylie class. Following the presentation, the class toured ACE and Savage operations. The WEDC continues to be active in this program each year as a continued effort to promote past and future WEDC activities. Entities represented in the Leadership class were Lake Point Hospital, City of Wylie, WISD, Parker Road Veterinary Clinic, Farmers Electric Coop, Birmingham Land Trust, Keller Williams, Nutrition Revolution, Synthetic Greenscape, and D's Enterprise AC & Heating. WEDC—Minutes January 20, 2012 Page 7 of 8 Collin County Association of Realtors On January 19th at Woodbridge Golf Club, staff presented an overview of Wylie economic development efforts to the Collin County Association of Realtors. There were approximately 50 real estate professionals from the area in attendance. Staff commits the time and expense to this function each year in order to promote Wylie from a residential and commercial perspective. Extension of Woodbridke Parkway Staff delivered the WEDC commitment to Commissioner Williams to fund up to $2 million for the extension of Woodbridge Parkway to the Sachse City limits. A meeting was held January ,nth 15 at Wylie City Hall with Wylie and Sachse Mayors, City Managers, EDC Directors, Mr. Don Herzog, and Commissioner Williams. Commissioner Williams indicated that she would present to the Court her support of the County funding up to 50% of the project. Sachse did commit to fund its 50% from existing developer agreements. Commissioner Williams indicated she would like to take the issue to the Commissioners Court in February. B&B Theatres B&B Theatres is still committed to close in March. Staff has no further information at this time but anticipates an update from B&B prior to the February Board Meeting. PM Realty Staff met with Time Warner and confirmed that they have cable on the Oncor poles from the Bayco property line to the corner of Sanden and F.M. 544. To bury that line Time Warner believes it will cost no more than $15 per linear foot. There is estimated to be 500 linear feet of Time Warner cable with an estimated cost to bury of $7,500 including any boring under F.M. 544 which may be required. Staff still has no fmal proposal from Oncor. Regional Housing Starts Ten homes were permitted in Wylie for December 2011. Sachse,Lavon and Murphy permitted a combined twenty-two homes over the same period. No action is requested by staff for this item. The WEDC Board took a short break at 7:58 a.m. EXECUTIVE SESSION The WEDC Board recessed into Closed Session at 8:02 a.m. in compliance with Section 551.001, et.seq Texas Government Code to wit: WEDC—Minutes January 20, 2012 Page 8 of 8 Section 551.087 (Economic Development) of the Local Government Code, Vernon's Texas Code Annotated (Open Meetings Act). • Consider entering into an economic development/loan agreement with Project Chiller. Section 551.072 (Real Estate) of the Local Government Code, Vernon's Texas Code Annotated (Open Meetings Act). • Consider the sale of WEDC property located at the intersection of Cooper Drive and F.M. 544. Section 551.071 (Consultation with Attorney) of the Local Government Code, Vernon's Texas Code Annotated(Open Meetings Act). • Receive legal advice concerning Cause No. 366-01521-2011 in the 366th Judicial District in the case styled Wylie Economic Development Corporation vs. Sanden International (U.S.A.), Inc. Board Member Mitch Herzog left the meeting at 8:39 a.m. RECONVENE INTO OPEN MEETING The WEDC Board of Directors reconvened into open session at 8:54 a.m. and took no action. ADJOURNMENT With no further business, President Fuller adjourned the WEDC Board meeting at 8:54 a.m. Marvin Fuller, President ATTEST: l Samuel Satterwhite Executive Director