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06-19-2014 (WEDC) Minutes Minutes Wylie Economic Development Corporation Board of Directors Meeting Thursday, June 19,2014 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 6:40 a.m.Board Members present were John Yeager,and Todd Wintters. Ex-officio members Mayor Eric Hogue and Mindy.Manson were present. WEDC staff present was Executive Director Sam Satterwhite and Gerry Harris. CITIZEN PARTICIPATION With no citizen participation, Mr. Fuller proceeded to Action Items. ACTION ITEMS ITEM NO. 1 —Consider and act upon approval of the May 14, 2014 Minutes of the Wylie Economic Development Corporation (WEDC) Board of Directors Meeting. MOTION: A motion was made by John Yeager and seconded by Todd Wintters to approve the May 14, 2014 Minutes of the Wylie Economic Development Corporation. The WEDC Board voted 3 —FOR and 0—AGAINST in favor of the motion. ITEM NO. 2 — Consider and act upon approval of the May 2014 WEDC Treasurer's Report. MOTION: A motion was made by Todd Wintters and seconded by John Yeager to approve the May 2014 WEDC Treasurer's Report. The WEDC Board voted 3 —FOR and 0—AGAINST in favor of the motion. ITEM NO. 3 — {Remove from Table} Consider and act issues surrounding a WEDC Enrichment Grant Program. A motion was made by Todd Wintters to remove consideration of Item No. 3 from the table. Staff reviewed_that on April 22nd a concept was presented for a program to assist existing businesses enhance the structural and aesthetic appearance of their commercial buildings. A final Guideline & Application packet was presented to the Board which outlined the program purpose and benefits, qualified expenses, qualified businesses, non-qualifying businesses, WEDC—Minutes June 19, 2014 Page 2 of 8 approval process, and application procedures. The program has a budget of$50,000 and does not carry over to future fiscal years without specific budget approval by the WEDC Board. Staff proposed that the program be promoted via the Chamber of Commerce, Merchants Association, and The Wylie News. Board member Wintters suggested that staff mention the program at the upcoming Chamber luncheon. Staff recommended that the WEDC Board of Directors approve the WEDC Enrichment Grant Program Guidelines and Application. MOTION: A motion was made by Todd Wintters and seconded by John Yeager to approve the WEDC Enrichment Grant Program Guidelines and Application. The WEDC Board voted 3 —FOR and 0—AGAINST in favor of the motion. ITEM NO. 4 — Consider and act upon issues surrounding a Real Estate Sales Contract between the WEDC and Jerry D. Buchanan and Carolyn R.Buchanan. At the direction of the Board, the WEDC entered into a contract with Jerry and Carolyn Buchanan to purchase 1.246 acres located at 400 S. Highway 78 for the amount of $500,000. Located on the property are two structures of 10,350 square feet and 2,400 square feet. Exco Extrusion Dies (Texas), Inc. currently leases the property through January 31, 2015 with an option to extend the lease for an additional 12 months ending January 31, 2016. The Real Estate Contract and Lease Agreement were presented for the Board's review. The WEDC is currently drafting an Assignment of Lease document which specifies the WEDC's upcoming interest in the property and intent to honor the terms and conditions of the original Lease. The WEDC will be presenting Exco with terms addressing how their real property tax structure will change in regards to Leasehold Taxes and proposed Avoided Tax Payments similar to the Ascend Custom Extrusions project. The Real Estate Sales Contract calls for the WEDC to prepay all remaining lease payments due under the existing Lease Agreement (16 payments @ $5,000 = $80,000). The WEDC will then collect those same lease payments from Exco. Staff indicated that Exco is in the process of finalizing the expansion plans to the Commerce Street site in Wylie and is prepared to extend the Lease through January 31, 2016. President Fuller voiced significant concern over the lease prepayment beyond January 31, 2015 without an executed extension and further directed staff to either negotiate for an early extension or renegotiate the prepayment terms with Buchanan to fund the prepayment beyond January 31, 2015 at which time the lease is extended. Board members Wintters and Yeager agreed that the lease must be extended prior to funding any prepayment beyond January 31, 2015. A Phase I Environmental Audit of the property found no evidence of environmental concern. The WEDC requested a Commitment Letter from American National Bank to finance the purchase of the Buchanan property. Staff proposed a $400,000 note to ANB anticipating the payment of$100,000 in cash and the $80,000 in pre-paid lease payments to Buchanan in cash as WEDC—Minutes June 19, 2014 Page 3 of 8 well. Staff did not believe that it was necessary for this debt to go out for bid based upon the reality that any other institution financing this purchase would require a first lien position (currently held by ANB) and that the preliminary rates quoted by ANB being highly competitive. Further, should the WEDC progress with negotiations of a project to be discussed in Executive Session,the entirety of WEDC will go out for bid potentially within the next 12 months. Within the Commitment Letter, ANB provided two options for financing the Buchanan purchase. Option I reflected a five year fixed rate of 3.89% with a floating rate on the remaining 5 years at FHLB plus 2.5%. Option II reflected a ten year fixed rate of 4.5%. While not included in the Commitment Letter, staff requested a fixed rate with a five year amortization which was provided by ANB at 3.77%. Marvin Fuller, with unanimous support from the WEDC Board, directed staff to bring back to the Board loan documentation from ANB reflecting a 3.77% fixed interest rate with a five year amortization period with no prepayment penalty. Staff recommended that the WEDC Board of Directors ratify the Real Estate Sales Contract between the WEDC and Jerry & Carolyn Buchanan. MOTION: A motion was made by John Yeager and seconded by Todd Wintters to ratify the Real Estate Sales Contract between the WEDC and Jerry & Carolyn Buchanan. The WEDC Board voted 3 —FOR and 0 —AGAINST in favor of the motion. ITEM NO, 5 — Consider and act upon issues surrounding an Unimproved Property Contract between the WEDC and Wylie—PHS,LP. Staff presented, for the Board's review, a Contract to purchase approximately 0.951 acre from Wylie — PHS, LP. The tract is adjacent and north of the property being developed by First Choice Emergency Care near the intersection of F.M. 544 and State Highway 78. Proposed Lot 2R3 has direct frontage on Cooper Drive and is adjacent to property purchased by the WEDC from Randack. While the Lot has been approved for platting by the City of Wylie, it has not been filed as of yet with Collin County. The Contract requires that the plat be filed before closing. The Seller had requested a closing date of June 23, 2014, but with Stewart Title Company just receipting the contract on June 13th, it is unlikely to close on the 23rd. Staff is awaiting a Title Commitment and an updated survey. The property will complement the WEDC's current holdings along Cooper Drive. Staff reminded the Board that of the 0.951 acre being purchased, 0.599 acre is dedicated for water detention with 0.352 acre remaining for development under the current conditions. Staff also reminded the Board that after closing on the property the WEDC will be participating in a joint study with the City of Wylie to evaluate what the current drainage requirements are in the area so as to determine if the detention pond within the tract being purchased can be modified through off-site improvement so as to reclaim that property for development. WEDC—Minutes June 19, 2014 Page 4 of 8 Staff recommended that the WEDC Board of Directors ratify the Unimproved Property Contract and authorize President Fuller to execute all documents necessary to effectuate the purchase of 0.951 acre from Wylie—PHS, LP. MOTION: A motion was made by John Yeager and seconded by Todd Wintters to ratify the Real Estate Sales Contract between the WEDC and Wylie—PHS, LP, and to further authorize President Marvin Fuller to execute all closing documents. The WEDC Board voted 3 —FOR and 0—AGAINST in favor of the motion. DISCUSSION ITEMS ITEM NO. 6—Discuss issues surrounding the FY 2014—2015 WEDC Budget. Staff presented Draft #2 of the FY 14 — 15 WEDC Budget. Unlike previous years, staff presented a two year budget so that the Board could evaluate the impact of added expenditures, specifically increased debt service, on FY 15 - 16. While many line items within FY 15 — 16 are carried over from FY 14— 15 Budget areas such as Incentives and Debt Service have more detail being that staff can project that far in advance based upon current multi-year commitments. Staff, along with the Finance Department, estimates that sales tax receipts will increase at 4% for the balance of the fiscal year and grow at a 2% rate for FY 14 — 15 resulting in projected sales tax receipts of $1,947,992. As is customary, future sales tax receipts are budgeted conservatively. Rental income is budgeted at a constant for existing WEDC buildings with Exco receipts from the Buchanan purchase adding $60,000. Staff has provided the Finance Department with projected expenditures for the balance of the fiscal year which are used to calculate a Beginning Fund Balance as of 10-1-14 of$865,340. Total resources available to the WEDC in FY 14— 15 are estimated at$3,011,560. Staff has not significantly increased any program expenditures aside from debt service that staff anticipates incurring within the next 2 months (i.e. Buchanan, Woodbridge Parkway, and Jackson Street). The Board will also note that no funding is budgeted for the B&B Performance Agreement being that it is anticipated that B&B will be in default in FY 14— 15. Based upon existing program expenditures and identified commitments, the WEDC will have $812,023 dedicated to 'Future Projects' within the Incentive Budget for FY 14 — 15. Using the same assumptions and projecting a zero Beginning Fund Balance on 10-1-15, the WEDC will have $410,510 available for 'Future Projects' for FY 15 - 16. Staff had no recommendation and indicated that a final budget document will be brought to the Board for approval in July. ITEM NO. 7 - Staff report: review issues surrounding an Amended and Restated Performance Agreement between the WEDC and Woodbridge Crossing, Performance Agreement between the WEDC and ACE, Performance Agreement between WEDC and CSD Woodbridge, WEDC property located at 2804 F.M. 544, B & B Theatres Operating Company, EXCO Tooling WEDC—Minutes June 19, 2014 Page 5 of 8 Solutions, Dank Real Estate (Deanan Gourmet Popcorn, Swimcat(Jarrod Rush State Farm), The Rock Wood Fired Kitchen,extension of Woodbridge Parkway, and regional housing starts. Woodbridge Crossing The Sales Tax Reimbursement Report was presented which identified all sales taxes received through May 2014 within Woodbridge Crossing for the City General Fund, the WEDC, and the 4B. As a reminder, the City and WEDC reimbursed 85% of all sales tax generated within Woodbridge Crossing through September 2013 with the reimbursement percentage reduced to 65% thereafter. Due to the default under the Amended and Restate Performance Agreement, Woodbridge Crossing is only eligible to receive up to $6 million in sales tax reimbursement through September 2021 opposed to the maximum reimbursement of $12 million originally contemplated. $2,276,323.13 has been reimbursed through March with net receipts of $1,414,328.89 after reimbursements. As well, $1.9 mm has been paid in ad valorem taxes to the City of Wylie (excluding the WISD). Ascend Commercial Lease and Performance Agreement The Ascend Custom Extrusion Critical Dates Analysis and Performance Agreement Monitoring Procedures were presented. Payment#3 of 5 for the Economic Incentives has been funded with Ascend meeting all Performance Obligations within Sections A and B of the attachment. The Performance Agreement between the WEDC and ACE which was approved in December 2013 was also presented. Payment #1 of 4 has been funded with Ascend meeting all Performance Obligations within Section A of the attachment. CSD Woodbridge Performance Agreement On July 15,-2013 a certificate of occupancy (CO)was issued for Kroger Marketplace. Beginning October 1, 2013 and ending October 1, 2023, Clark Street Development is eligible to receive a 1/2 cent sales tax reimbursement from the WEDC (City of Wylie not part of sales tax reimbursement agreement). The WEDC has received two Comptroller monthly reports identifying two businesses paying sales tax on a consistent basis. The first reimbursement was made to CSD Woodbridge LLC in April 2014. Quarterly payments will be made to Clark Street based upon the data provided by the Comptroller. In addition to the $100,000 reimbursement incentive paid by the WEDC at CO, Clark Street is eligible to receive cumulative incentives of$1,100,000 over the life of the Agreement. WEDC Property Located at 2804 F.M. 544 Staff pursued eviction of Lighting Solutions and Service through the Collin County Justice of the Peace. The WEDC secured a judgment against Lighting Solutions for $6,400 which included unpaid rent and penalties. Lighting Solution was to vacate the property on or about June 1st but WEDC—Minutes June 19,2014 Page 6 of 8 staff received $3,700 in cash and Lighting Solutions waived all rights to the $1,850 deposit. Staff delayed filing the writ to finalize the eviction process based upon the rent payment received. and appearance that the tenant will be removing the significant amount of vehicles and equipment located on-site which would have been costly for the WEDC to remove. There remains only two pieces of equipment and 90% of the warehouse has been cleaned out. The process will be complete by June 20th. B&B Theatres Operating Company B&B was informed that once their appraised values have been certified they will be in default of the existing Performance Agreement and Retail Development Agreement based upon a 27% shortfall in the valuation requirement of$10 mm. B&B Director of Strategic Planning Dennis McIntire understands the WEDC initial position of not amending the terms of the Agreements, but inquired as to their ability to request any minor modification. While staff was clear as to the likelihood of modifying existing performance requirements, it was conveyed that the WEDC is always open to consider any request. Mr. McIntire was informed that formal,action will take place following certification by the CCCAD on July 25th and that any request from B&B should be received prior to that date. As reported previously, staff will recommend that the WEDC and City of Wylie adhere to the existing performance requirements and deny funding of a grant and sales tax reimbursements totaling approximately $62,000 in 2014. The $2.7 mm shortfall in appraised value represents a property tax equivalent of$67,000 based solely on the City and WISD tax rates. EXCO Tooling Solutions Exco met with general contractors on June 17th with staff understanding that relationship will be finalized in June. Staff is finalizing plat and zoning applications with the City of Wylie which will be complete in August. The current zoning is Corridor Commercial and while it does allow for limited light assembly, it does not allow tilt wall construction. While it has not been decided whether the new Exco facility will be tilt wall or not, Exco officials believes that tilt wall construction makes it easier to expand in the future. Therefore, a Planned Development Zoning District is being requested with a Light Industrial emphasis similar to what is developed in the 544 Industrial Park across Commerce Street to the west and existing uses to the south. Dank Real Estate (Deanan Gourmet Popcorn) Deanan is scheduled to pour their foundation on or about June 20th. With a maximum $30,000 incentive package, Deanan will qualify for a $15,000 payment should they receive a Building Permit valued at no less than $600,000 and receive a Certificate of Occupancy from the City of Wylie by 2-1-15. Swimcat:(Jarrod Rush State Farm) The foundation for the office building on Westgate will be poured by June 20th with the project complete by October 1st. Should Mr. Rush receive a Certificate of Occupancy from the City of WEDC Minutes June 19, 2014 Page 7 of 8 Wylie by November 1, 2014,he will qualify for a $15,000 incentive payment under the existing Performance Agreement. The Rock Wood Fired Kitchen The Rock has completed their soil preparation and is preparing to pour the"foundation. There has been no indication that their target completion date has changed from November 1st. WEDC representatives will be invited to The Rock Grand Opening at their Alliance location, date and time TBD. Woodbridge Parkway The WEDC is due to fund $900,000 in roadway improvements by July 31 st. The=WEDC has until August 15,2014 to draw upon the $1.4 million commitment from ANB. The note will go directly to permanent financing with the $900,000 being the limit of WEDC responsibility for the project. Staff will provide the Board with the draw request and a project summary at the July Board meeting. Regional Housing Starts Twenty-six homes were permitted in Wylie for May 2014. Sachse, Lavon and Murphy permitted a combined forty-five homes over the same period. No action was requested by staff for this item. EXECUTIVE SESSION The WEDC Board recessed into Closed Session at 7:40 a.m. in compliance with Section 551.001 et.seq. Texas Government Code to wit: Section 551.087 (Economic Development) of the Local Government Code, Vernon's Texas Code Annotated(Open Meetings Act). • Project 2013-9a Section 551.072 (Real Estate) of the Local Government Code, Vernon's Texas Code Annotated (Open Meetings Act). Consider the acquisition of properties located near the intersection of: • Oak Street&Jackson Avenue • Sanden&F.M. 544 Mayor Eric Hogue departed from the meeting at 7:50 a.m. RECONVENE INTO OPEN MEETING The WEDC Board of Directors reconvened into open session at 8:52 a.m. and took no action. WEDC—Minutes June 19, 2014 Page 8 of ADJOURNMENT With no further business,President Fuller adjourned the WEDC Board meeting at 8:52 a.m. Marvin Fuller,President Al"I T Samuel Satterwhite,Director