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09-28-2006 (WEDC) Minutes Minutes Wylie Economic Development Corporation Board of Directors Meeting Thursday, September 28, 2006—6:00 P.M. Inwood National Bank—Conference Room 200 South Hwy. 78—Wylie, Texas CALL TO ORDER Announce the presence of a Quorum. President Fuller called the meeting to order at 6:01 p.m. Board Members present were: John Yeager and Mitch Herzog. Staff present was Executive Director Sam Satterwhite and Administrative Assistant Gerry Harris. Others present were Ex-officio Member/ Mayor John Mondy and City Manager Mindy Manson. 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 September 7, 2006 Minutes of the WEDC Board of Directors Meeting. MOTION: A motion was made by John Yeager and seconded by Mitch Herzog to approve the September 7, 2006 Minutes of the WEDC Board of Directors Meeting. The WEDC Board voted 3 — FOR and 0 — AGAINST in favor of the motion. ITEM NO. 2 — Consider and Act Upon Issues Surrounding Approval of the August 2006 WEDC Treasurer's Report. Staff reported that a Notes Payable and Inventory- Land Sub-ledgers have been provided to create a more detailed analysis of the lump sum Inventory and Notes Payable line items in the Balance Sheet. These reports were provided being that the INCODE system does not provide that level of detail. Staff also reported that the Balance Sheet has been completed and in staffs opinion is free from error and omissions. The only adjustments which will be made in the future will be a monthly entry for interest earned. The Finance Department is designing the process for monthly entries which should be implemented in the next 60 days. WEDC—Minutes September 28, 2006 Page 2 of 8 Staff noted that the Notes Payable within the Balance Sheet and the Notes Payable Sub- ledger has a difference of$50,000. The difference is a result of the Deferred Charge of $50,000 on the Asset side of the Balance Sheet being offset within the Notes Payable on the Liabilities side of the Balance Sheet. The Deferred Charge identifies the anticipated payment to Southern Fastening Systems as their last installment within the Incentive Agreement between Southern and the WEDC. Staff also pointed out that the April through June Treasurer's Reports have been provided in subsequent Action Items for removal from the table and consideration. The same reports were tabled because each Balance Sheet was not accurate. Staff inquired with Finance as to the need to go back and amend each month's Balance Sheet. While this process would take a great deal of time, Finance is willing to complete the task if necessary. Staff believes that while it was necessary at the time to table the Reports, there is no reason now to have them all amended. Staff believes this to be the case because the Auditors only look at the year end numbers in their analysis. The Auditors will note however that the reports were not accurate throughout the year, but that will be a reflection on internal accounting processes of the Finance Department and not the WEDC. Staff recommended that the Board not request the Finance Department to amend April through June Balance Sheets. Mayor Mondy and City Manager Manson believed that Finance should make the necessary changes to prior WEDC Balance Sheets. Staff reiterated its point that amended balance sheets will not take away from the fact that there was a significant lag in timely recordation of WEDC transactions. Furthermore, the completion of the Balance sheet and implementation of timely reporting will provide the WEDC and City auditors with accurate year-end data and strengthened accounting processes. The WEDC Board agreed with staffs viewpoint. Finally, President Fuller requested that within the Inventory — Land Subledger, the `Value' of land should more accurately be labeled as 'Cost Basis'. MOTION: A motion was made by John Yeager and seconded by Mitch Herzog to approve the August 2006 Treasurer's Report as amended. The WEDC Board voted 3 — FOR and 0 — AGAINST in favor of the motion. ITEM NO. 3 — (MOTION TO REMOVE FROM TABLE): Consider and Act Upon Issues Surrounding Approval of the April 2006 WEDC Treasurer's Report. MOTION: A motion was made by Mitch Herzog and seconded by John Yeager to remove the April 2006 Treasurer's Report from the table. The WEDC Board voted 3 — FOR and 0 — AGAINST in favor of the motion. WEDC—Minutes September 28, 2006 Page 3 of 8 A motion was made by John Yeager and seconded by Mitch Herzog to approve the April, 2006 Treasurer's Report noting an incomplete Balance Sheet with corrections finalized in September 2006. The WEDC Board voted 3 — FOR and 0 — AGAINST in favor of the motion. ITEM NO. 4 — (MOTION TO REMOVE FROM TABLE): Consider and Act Upon Issues Surrounding Approval of the May 2006 WEDC Treasurer's Report MOTION: A motion was made by Mitch Herzog and seconded by John Yeager to remove the May 2006 Treasurer's Report from the table. The WEDC Board voted 3 — FOR and 0 — AGAINST in favor of the motion. A motion was made by John Yeager and seconded by Mitch Herzog to approve the May 2006 Treasurer's Report noting an incomplete Balance Sheet with corrections finalized in September 2006. The WEDC Board voted 3 — FOR and 0 — AGAINST in favor of the motion. ITEM NO. 5 — (MOTION TO REMOVE FROM TABLE): Consider and Act Upon Issues Surrounding Approval of the June 2006 WEDC Treasurer's Report. MOTION: A motion was made by Mitch Herzog and seconded by John Yeager to remove the June 2006 Treasurer's Report from the table. The WEDC Board voted 3 — FOR and 0 — AGAINST in favor of the motion. A motion was made by Mitch Herzog and seconded by John Yeager to approve the June 2006 Treasurer's Report noting an incomplete Balance Sheet with corrections finalized in September 2006. The WEDC Board voted 3 — FOR and 0 — AGAINST in favor of the motion. ITEM NO. 6— (MOTION TO REMOVE FROM TABLE): Consider and Act Upon Issues surrounding Approval of the July 2006 WEDC Treasurer's Report. MOTION: A motion was made by John Yeager and seconded by Mitch Herzog to remove the July 2006 Treasurer's Report from the table. The WEDC Board voted 3 — FOR and 0 — AGAINST in favor of the motion. A motion was made by Mitch Herzog and seconded by John Yeager to approve the July 2006 Treasurer's Report noting an incomplete WEDC—Minutes September 28, 2006 Page 4 of 8 Balance Sheet with corrections finalized in September 2006. The WEDC Board voted 3 — FOR and 0 — AGAINST in favor of the motion. ITEM NO. 7— (MOTION TO REMOVE FROM TABLE): Consider and Act Upon Issues Surrounding WEDC Legal Services. MOTION: A motion was made by John Yeager and seconded by Mitch Herzog to remove the Legal Service Action Item from the table. The WEDC Board voted 3 —FOR and 0—AGAINST in favor of the motion. At the September 7th WEDC Board Meeting, this Action Item was tabled until which time the entire Board was present. Staff did not ask Mr. Houser or Mr. Moore to attend this Board Meeting. Mr. Herzog stated that consideration of alternative legal counsel in no way indicates a concern of potential differences between the WEDC and City of Wylie. Along with Mr. Herzog, Mr. Yeager expressed that this process has evolved into which firm will best represent the WEDC in the creative design of incentive packages and development of contractual agreements to support the same. Mr. Yeager and Herzog both believe that Mr. Houser and Mr. Moore will provide the WEDC with the best resources available. Staff again recommended that the WEDC Board of Directors maintain its relationship with Abernathy, Roeder, Joplin, and Boyd for the provision of legal services. Staff cited a history of quality service and a positive working relationship. Staff also emphasized that Mr. Abernathy provided impeccable legal representation during the period in which the WEDC was cited by the City of Wylie Auditors and Finance Department for having poor financial practices. Mr. Herzog and Mr. Yeager believed it was in the best interest of the WEDC to wait until all members of the Board were present to make this decision. MOTION: A motion was made by Mitch Herzog and seconded by John Yeager to table consideration of WEDC legal services. The WEDC Board voted 3 —FOR and 0—AGAINST in favor of the motion. ITEM NO. 8 — Consider and Act Upon Issues Surrounding a Budget Transfer Request for the WEDC FY 2005—2006 Budget. Staff presented budget transfers involving Computer Services ($1,000), Community Development ($2,500), Rental Expenses ($1,100), Dues ($50), Engineering ($2,500), Land ($175,230), Furniture & Fixtures ($2,000), Utilities ($250), Audit and Legal Services ($500) totaling $185,130. To offset increased expenses, staff recommends that Incentives be reduced by$185,130. WEDC—Minutes September 28, 2006 Page 5 of 8 MOTION: A motion was made by John Yeager and seconded by Mitch Herzog approving budget transfers in the amount of$185,130. The WEDC Board voted 3 FOR—0 AGAINST in favor of the motion. ITEM NO. 9—Consider and Act Upon Issues Surrounding a WEDC Strategic Plan. At the September 7th Board of Directors Meeting, the Board directed staff to set up an interview with TIP Strategies and solicit additional information from Tip surrounding a retail element. Mr. Tom Stellman met with available Board members on September 27th to answer questions surrounding the proposal which was submitted and to further describe services available for a retail component to the Plan. TIP had presented a contract amount of$60,000 plus expenses for services. Staff reported that additional funds necessary to develop a complimentary retail component to the Plan will result in an additional $15,000, creating a total contract of$75,000 plus expenses. Staff noted that the total contract amount is $10,000 over the budgeted $65,000 for strategic planning services. President Fuller inquired as to the potential for City of Wylie assistance in the amount of $10,000 being that the City of Wylie has such a vested interest in economic development in general and the additional retail component specifically. While unable to commit the Wylie City Council to a course of action, Mayor Mondy supported the presented strategic plan with retail component and recommended that the WEDC bring the request to the Council. Ms. Manson indicated that her office would assist in any way possible in development of the request to Council. MOTION: A motion was made by John Yeager and seconded by Mitch Herzog to enter into a contract agreement with TIP Strategies, Inc., for $75,000 to develop a Strategic Plan and Market Study along with a complimentary retail component. The WEDC Board voted 3 FOR— and 0 AGAINST in favor of the motion. ITEM NO. 10 — Consider and act upon issues surrounding a Loan Agreement between the WEDC and Brad D.Jacoby and Catherine G. Jacoby. Staff indicated that since Action Item 10 and 11 are so closely related they should be discussed together with any action taken to be done so separately. Staff reported the extensive discussions have been held surrounding the amendment of the Loan Agreement and the purchase/sale of the Best Circuit Board (BCB) 3.2 acres. BCB has requested the following: 1. BCB agrees to sell the WEDC±3.2 acres for$1.90 per square foot; and 2. On behalf of BCB, the WEDC will approach the City of Wylie to replat the 13.6 acres currently owned by BCB with the primary intent of foregoing Parkland Dedication Fees; and WEDC—Minutes September 28, 2006 Page 6 of 8 3. The WEDC renegotiate the Loan Agreement between Brad D. Jacoby and Catherine G. Jacoby to reflect the following: a. The square footage requirements for Building two reflect a minimum 20,000 square feet opposed to the existing 40,000 square feet; and b. The deadline for the completion of Building Two be extended to April 1, 2009; and c. Forgiveness of Payment 5, and applicable interest, associated with the Loan Agreement is forgiven at the completion of Building Two. As an ancillary issue, staff indicated that Moulding Associates (MAI) has developed a new expansion plan which identifies 84,958 square foot facility east of its existing facility. President Fuller voiced his concern with the decreased square footage BCB is proposing and the complete departure from the Loan Agreement and security provided by the $147,000 securing Payment 5. The Board was in agreement that should BCB want to decrease the square footage, the $147,000 (plus accruing interest) should be made part of the 3.2 acre purchase. More specifically, a purchase agreement be entered into between BCB and the WEDC to purchase 3.2 acres for±$265,000. In lieu of an all cash purchase and assuming an accrued principal and interest of$200,000 relating to Payment 5 of the Loan Agreement, the WEDC fund $65,000 of the purchase and enter into a note for $200,000. Following completion of Building Two within a predetermined time period, the WEDC will pay the note in full. Should BCB not complete Building Two, all debt associated with the note will become null and void. Staff was directed to take the above terms back to BCB. No formal action was taken. ITEM NO. 11 — Consider and act upon the purchase of f3.2 acres from Best Circuit Boards, Inc. No formal action was taken. ITEM NO. 12 — (MOTION TO REMOVE FROM TABLE): Consider and act upon issues surrounding an incentive agreement between the WEDC and Extruders division of Atrium Companies, Inc. MOTION: A motion was made by Mitch Herzog and seconded by John Yeager to remove consideration of issues surrounding and Incentive Agreement WEDC and Extruders division of Atrium Companies, Inc. from the table. The WEDC Board voted 3 FOR and 0 AGAINST in favor of the motion. At the July 20, 2006 WEDC Board of Directors Meeting, staff presented the Board with proposed amendments to the Incentive Agreement between the WEDC and Extruders WEDC—Minutes September 28, 2006 Page 7 of 8 division of Atrium Companies, Inc. At the time, the Board chose to table the item to receive further information. As a review, the WEDC entered into an Incentive Agreement with Extruders division of Atrium Companies on July 27th, 2005. The package is partially comprised of an $80,000 grant for construction of the expanded facility and purchase of a new paint line. The Balance of the package totals $150,000 over the next three years should Extruders maintain total employment of 480 individuals each year and submit to the Collin County Central Appraisal District (CCCAD) a combined fair market value for real and personal property of$26,248,935. The minimum appraised value was established by combining the existing real property valuation of $9,815,768 and the personal property valuation of $13,133,167. These figures were ascertained from the Appraisal District as of July 12, 2005. Combine these figures with commitments to add $600,000 in real property improvements and $2,700,000 in personal property improvements and a combined minimum valuation of $26,248,935 was established. Staff has established that erroneous figures were utilized to establish the $26,248,935 million benchmark. Property Tax Statements have been provided to support the final appraised value established for the 2005 tax year were $22,948,935 which creates an inflated benchmark by$3,044,717. Staff believes that the valuation benchmark should be lowered to reflect those actual values upon which taxes were paid for the 2005 tax year being that their inaccuracy will severely hamper Extruders ability to receive their remaining three payments of$50,000. The intent of the Agreement was for Extruders to add $3,300,000 in new value. An inflated benchmark takes away from the intent of the Agreement. However, the data which must remain constant is the employment figures and the commitment to increased property values by $3.3 million. Staff recommended reducing the existing valuation benchmark of$26,248,935 to $23,204,218. Since the July 20, 2006 Board Meeting, certified values have been established by the CCCAD. Extruders has been assessed at $8,288,878 for real property and $15,038,278 for personal property for a combined total value of$23,327,156. Additionally, Extruders has submitted documentation evidencing 387 full time employees and 93 temporary employees for a total of 480 employees. Temporary employees are hired through an agency and then brought on full-time as Extruders becomes comfortable with individuals skills and commitment. Again, staff asserted that had accurate data been presented in 2005, existing value of $19,904,218 would have combined with a commitment to add $3.3 million in new value to create a benchmark of$23,204,218. President Fuller agreed with staffs' analysis of the issue and requested that an amended Incentive Agreement be brought before the Board. WEDC—Minutes September 28, 2006 Page 8 of 8 MOTION: A motion was made by John Yeager and seconded by Mitch Herzog to reduce and permanently amend the valuation benchmark to $23,204,218. The WEDC Board voted 3 FOR and 0 AGAINST in favor of the motion. ITEM NO. 13 — Consider and act upon issues surrounding meeting dates and time for regularly scheduled WEDC Board Meetings. After researching the issue of when area economic development corporations hold their meetings, it was conclusive that the majority hold meetings in the morning rather that the evening. After conferring with the City of Wylie City Secretary and WEDC counsel, staff indicated there are no local or state regulations requiring EDC's to hold meetings in the evenings. Staff did not have a recommendation. MOTION: A motion was made by John Yeager and seconded by Mitch Herzog to continue holding regular Board Meetings on the third Thursday of each month, but to change the meeting time from 6:00 p.m. to 6:00 a.m. The WEDC Board voted 3 FOR and 0 AGAINST in favor of the motion. ADJOURNMENT With no further business, President Fuller adjourned the WEDC Board meeting at 8:37 p.m. Consensus of the WEDC Board was to adjourn. Marvin Fuller, President ATTEST: Samuel D.R. Satterwhite Executive Director