10-24-2014 (WEDC) Minutes Minutes
Wylie Economic Development Corporation
Board of Directors Meeting
Friday,October 24,2014 - 6:30 A.M.
WEDC Offices Conference Room
250 South Highway 78—Wylie,Texas
CALL TOO ' i1 ER
Announce the presence of a Quorum
President Marvin Fuller called the meeting to order at 6:30 a.m. Board Members present were
John Yeager, Mitch Herzog, Demond Dawkins and Todd Wintters.
Ex-officio member Mindy Mason was present.
WEDC staff present was Executive Director Sam Satterwhite and Angel Wygant
CITIZEN PARTICIPATION
Lynn Grimes expressed her thanks to the WEDC Board for establishing the Enrichment Grant
Program that encourages business owners to repair and improve the building exteriors of their
businesses. She felt it was a wonderful program and that all merchants would benefit from the
improved aesthetics in the community.
ACTION ITEMS
ITEM NO. 1 — Consider and act upon approval of the September 19, 2014 Minutes of the
Wylie Economic Development Corporation(WEDC) Board of Directors Meeting,
MOTION: A motion was made by Todd Wintters and seconded by Demond Dawkins
to approve the September 19, 2014 Minutes of the Wylie Economic
Development Corporation. The WEDC Board voted 5 — FOR and 0 —
AGAINST in favor of the motion.
ITEM NO. 2 — Consider and act upon approval of the September 2014 WEDC Treasurer's
Report.
A question was asked by Demond Dawkins about Bank Note proceeds that were greater than
budgeted. Staff said they would get back to the Board with more detail on that account.
MOTION: A motion was made by Mitch Herzog and seconded by John Yeager to
approve the September 2014 WEDC Treasurer's Report. The WEDC Board
voted 5 FOR and 0—AGAINST in favor of the motion.
ITEM NO. 3 — Consider and act upon issues surrounding an amendment to a Performance
Agreement between WEDC and Swimcat,LLC.
WEDC—Minutes
October 24, 2014
Page 2 of 10
Staff reminded the Board that Swimcat, LLC (Jarrod Rush) had entered into a Performance
Agreement under which the WEDC is providing a one-time incentive payment of$15,000 upon
completely of a 3,800 square foot commercial office. Swimcat is required to show evidence of a
minimum construction cost of$375,000 and receive a certificate of occupancy from the City of
Wylie no later than November 1, 2014.
Staff also presented a letter from Mr. Jarrod Rush requesting an additional sixty (60) days to
complete the project Mr. Rush had originally requested a thirty (30) day extension with staff
advising that sixty (60) days would allow for additional delays.
Staff believes that Mr. Rush negotiated the terms of the original Agreement in good faith and is
pursuing completion of the project in the same manner.
Staff recommended that the WEDC Board of Directors provide Swimcat, LLC with a sixty (60)
day extension by which a certificate of occupancy must be received for the contemplated
improvements under the Performance Agreement.
MOTION: A motion was made by Mitch Herzog and seconded by Demond Dawlcins to
approve a sixty (60) day extension to Swimcat, LLC by which time a certificate of
occupancy must be received for the contemplated improvements under the
Performance Agreement. The WEDC Board voted 5 —FOR and 0—AGAINST in
favor of the motion.
ITEM NO. 4 — Consider and act upon a Performance Agreement between WEDC and
Sanden International(U.S.A.),Inc.
Staff reminded the Board that Sanden International (U.S.A.), Inc. had entered into a Performance
Agreement with WEDC on December 20, 2013. In summary, the Agreement calls for Sanden to
install a new piston line at a minimum cost of $17.7 million with the WEDC providing up to
$350,000 in incentives. After installing the piston line, Sanden was provided with a grant of
$100,000. Beginning with the 2014 tax year and continuing through 2018, the WEDC
committed to reimburse 50% of the property taxes paid by Sanden to the City of Wylie on value
in excess of$60,051,408. The $60 million figure was also established as the minimum valuation
threshold in order to qualify for current and future incentives.
The minimum valuation threshold was originally set at $58 million but increased to $60 million
after Sanden informed the WEDC of additional investment required for a Nissan product.
Sanden was making a case at the time for continued funding of the incentive package as an
original $24 million investment was contemplated within a RFP to surrounding communities was
reduced to $17 million.
The Collin County Appraisal District has certified real and personal values for Sanden at
$51,297,138. Values for land and improvements have remained constant with personal
property dipping by $9 million from 2013. Sanden officials have indicated that
aggressive depreciation schedules pertaining to inventory were utilized and were
concerned that this value reduction reflects poorly on them as a corporate partner. Staff
6
WEDC—Minutes
October 24, 2014
Page 3 of 10
did not press Sanden on the issue or request additional information pertaining to
depreciation.
Section III (i) Non-payment of Economic Incentives within the Performance Agreement
states that:
Notwithstanding anything herein to the contrary, WEDC shall have no obligation
to pay any of the Economic Incentive if(i) at any time during the term of this
Agreement that the ad valorem tax value of the Company's Real Property and
Business Personal Property located in the City as determined by the Tax Rate
falls below the value of$60,051,408...
WEDC Counsel advised staff that under the terms of the Agreement Sanden is in Default
with the Agreement calling for all future commitments to be voided. Should the Board
however desire to modify the terms of the Agreement to allow Sanden to earn a property
tax reimbursement in 2015 and beyond,the Board is within its authority to do so.
Since values have fallen below pre-piston line levels, Staff believed there was no
argument for modify the Agreement. Therefore, Staff recommended that the WEDC
board declare Sanden in Default under the terms outlined within the Performance
Agreement and void all future obligations.
MOTION: A motion was made by Demond Dawkins and seconded by John Yeager to
declare Sanden in default of the Performance Agreement and void all future
obligations. The WEDC Board voted 5 —FOR and 0—AGAINST in favor
of the motion.
ITEM NO. 5 — Consider and act upon a Performance Agreement between the WEDC and
All State Fire Equipment,Inc.
Staff presented a Performance Agreement between WEDC and All State Fire Equipment, Inc. as
directed by the WEDC Board of Directors in Executive Session at the September 19, 2014
WEDC Board Meeting.
The Agreement calls for a cumulative incentive of $60,000 payable in three installments of
$20,000 each.
Incentive Payment Number One calls for All State to (1) construct a 9,000 square foot
office/warehouse with a (2) construction cost of at least $788,000, (3) receive a Certificate of
Occupancy no later than December 31, 2015, and (4) be current on all property taxes due and
payable for the 2015 tax year.
Incentive Payment Number Two calls for (1) cumulative real and personal property value as
determined by the Collin County Central Appraisal District of no less than One Million One
Hundred Thousand Dollars ($1,100,000), (2) be current on all property taxes due and payable for
the 2016 tax year, and (3) provide documentation supporting the payment of at least Five
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October 24, 2014
Page 4 of 10
Thousand Dollars ($5,000) in sales tax to the Texas Comptroller of Public Accounts on behalf of
the City of Wylie for 2016. The minimum valuation was calculated by combining land value,
construction cost, and existing personal property value for All State operations in Dallas County.
Incentive Payment Number Three calls for (1) cumulative real and personal property value as
determined by the Collin County Central Appraisal District of no less than Nine Hundred
Thousand Dollars ($900,000), (2) be current on all property taxes due and payable for the 2017
tax year, and (3) provide documentation supporting the payment of at least Five Thousand
Dollars ($5,000) in sales tax to the Texas Comptroller of Public Accounts on behalf of the City
of Wylie for 2017. The minimum valuation was reduced to allow for depreciation.
Section IV allows for All State to be in default for a given year with the ability to earn an
incentive payment for a future year.
Staff recommended that the WEDC Board of Directors approve a Performance Agreement
between WEDC and All State Fire Equipment, Inc.
MOTION: A motion was made by Mitch Herzog and seconded by Todd Winners to
approve the Performance Agreement between WEDC and All State Fire
Equipment, Inc. The WEDC Board voted 5 — FOR and 0 — AGAINST in
favor of the motion.
ITEM NO. 6 — Consider and act upon issues surrounding the purchase of real estate from
the City of Wylie located at 100 West Oak and 108/110 Jackson Street,Wylie,Texas
Staff informed the Board that on October 6, 2014 at 4:00 p.m. the City of Wylie Purchasing
Agent opened the only submittal to an Invitation to Bid by the City of Wylie for the sale of
property located at 100 West Oak (Peddicord Center) and a parking lot located at 108 and 100
Jackson Street. The WEDC bid $338,300 for the Peddicord Center and$144,656 for the Jackson
Street properties for a combined purchase price of$482,956.
The Wylie City Council will award the bid at the November 11, 2014 Council Meeting. The
WEDC is required to provide the purchase price, less deposit of$24,147.80 already paid, to the
City of Wylie no later than December 10, 2014. Per the bid specifications, the WEDC is required
to lease back the Peddicord Center to the City for 12 months.
Staff informed the Board that there may be a need to request a Special Called meeting in early
November to approve financing for the purchase price so that the Wylie City Council can
authorize the pledge of sales tax receipts at their November 11th meeting since the next City
Council Meeting will not be held until December 9th due to the holiday schedule. The current
commitment by American National Bank for financing provides a 4.2% fixed rate for 5 years
with either a 5 or 10 year amortization. ANB has authorized 100% financing with staff
anticipating an 80%recommendation to the Board.
Being that all direction from the WEDC Board pertaining to the bid was discussed in Executive
Session, staff recommended that the WEDC Board of Directors ratify the bid of $482,956
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October 24, 2014
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submitted by the WEDC Executive Director along with a 5% deposit via cashier's check of
$24,147,80.
MOTION: A motion was made by Mitch Herzog and seconded by John Yeager to ratify
the bid of$482,956 as well as the deposit of $24,147.90 submitted by the
Executive Director, and to establish financing through American National
Bank with a 20% down payment and 10 year amortization. The WEDC
Board voted 5 —FOR and 0—AGAINST in favor of the motion.
ITEM NO. 7 — Consider and act upon amending a Performance Agreement between the
WEDC and B&B Theatres Operating Company.
Staff reminded the Board that, as discussed in May 2014, B&B Theatres Operating Company is
in default of a Performance Agreement and a Retail Development Agreement entered into with
the WEDC and City of Wylie on December 9, 2011. The Agreements identify a requirement that
B&B provide documentation supporting a $10 million appraised value for real and personal
property. The Collin County Central Appraisal District certified an appraised value for real and
personal property at $7,328,267.
The WEDC Performance Agreement states that B&B is not eligible to earn incentives for 2014
but can earn incentives in future years. With the Agreement having a valuation requirement in
2015, it is probable that B&B will be in default next year as well. The valuation requirement
falls off after 2015.
Unlike the WEDC Performance Agreement, the City of Wylie Retail Development Agreement
becomes null and void should B&B be in default.
As reported in May 2014 as well, B&B failed to meet the minimum valuation primarily due to
the real property improvements being valued by an income approach as opposed to the
construction cost of $8.5 mm which had been factored into the original Agreement Had the
minimum valuation been met, B&B would have been eligible for a $25,000 grant from the
WEDC and a $20,000 sales tax rebate from the WEDC and City of Wylie. The net result from
the reduced appraisal will provide B&B with a property tax savings from the City and WISD of
$67,000.
Staff has changed its position on this issue and believes that a thorough discussion regarding an
amended Performance Agreement is warranted based upon the following:
1. B&B and the WEDC acted in good faith in negotiating the Agreement(s) based on a
faulty assumption regarding the appraisal process for theatres in Texas.
2. Even though B&B is receiving a significant tax advantage due to a $2.7 mm reduction in
value,the negotiations would most likely result in the same incentive package based upon
the return on investment the community was receiving for a product which was in high
demand by the citizenry;
WEDC—Minutes
October 24, 2014
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3. Assuming the City of Wylie's '/2 cent sales tax reimbursement is voided by Council, the
breakeven factor is still reduced from original assumptions based upon sales tax receipts
exceeding projections;
a. Note: the attached analysis does not factor in the $0.47 I&S tax rate
which generates an additional$34,400 per year directly to the community
which reduces the breakeven factor to 2.4 years.
4. Based upon the City tax rate alone, the $2.7 mm reduced valuation results in a B&B tax
savings of$23,478 annually totaling $140,870 over the life of the Agreement. Assuming
the City Agreement is voided, $160,742 is being removed from the incentive package.
5. The B&B project is completely different than the Sanden issue in that Sanden dropped
below preexisting values. The B&B project is all new value.
Should the Board choose to keep the current Agreement in place, B&B will earn an estimated
$178,500 over the remaining three years of the Agreement in addition to the $100,000 which has
been paid. Based upon a$12 mm investment by B&B, incentives will represent 2.3%of the total
investment.
Staff recommended that the WEDC Board consider an amended Performance Agreement which
calls for a $7.3 mm valuation and allows for the reimbursement of sales taxes generated to the
WEDC and a $25,000 annual grant. The $385,742 amended incentive package being
recommended represents 3.2%of total investment.
Staff recommended that the WEDC Board authorize staff to modify the B&B Operating Theatres
Company Performance Agreement.
MOTION: A motion was made by Mitch Herzog and seconded by Todd Wintters to
authorize staff to modify the B&B Operating Theatres Performance
Agreement per the revised incentive plan proposed by staff. This
authorization is contingent upon The City of Wylie voiding its Retail
Development Agreement. WEDC Board voted 5 —FOR and 0—AGAINST
in favor of the motion.
ITEM NO. 8 — Consider and act upon issues surrounding the purchase of 6.6 acres from
Shirley Ann White.
Staff updated the Board on the progress of the purchase of 6.6 acres from Shirley Ann White.
The sale is proceeding as planned with no unexpected issues. The Feasibility period for this
transaction expires on November 17, 2014 with a closing set for no later than December 16,
2014. Staff will be recommending to the Board that $336,000 out of the $420,000 purchase
price be financed by American National Bank along with the Jackson Street properties.
Staff recommended no action at this time.
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October 24, 2014
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DISCUSSION ITEMS
ITEM NO. 9 — Staff report: reviewed issues surrounding Performance Agreements between the
WEDC and: Woodbridge Crossing, Ascend Custom Extrusions, CSD Woodbridge, The Wedge,
the WEDC Invitational, Dank Real Estate (Deanari), thoroughfare impact fees, sporting events,
1.2 acres purchased from Jerry Buchanan, extension of Woodbridge Parkway, and regional
housing starts.
Woodbridge Crossing
Attached for the Board's review was the Sales Tax Reimbursement Report which identifies all
sales taxes received through October 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 Restated
Performance Agreement, Woodbridge Crossing is only eligible to receive up to $6 million in
sales tax reimbursement through September 2021 as opposed to the maximum reimbursement of
$12 million originally contemplated.
$2,414,296 has been reimbursed through August with net receipts of $1,559,379 after
reimbursements. As well, it is estimated that $2.5 mm has been paid in ad valorem taxes to the
City of Wylie (excluding the WISD).
As shown on the Sales Tax Reimbursement Report, $93,678 was generated in sales tax in July
2014 versus $63,231 in July of 2013. This increase represents a 41% gain over 2013 receipts.
The Board will recall though that many businesses were not being tracked properly by the
Comptroller which was identified and corrected in February 2014.
Ascend Commercial Lease and Performance Agreement
Staff reviewed the Ascend Custom Extrusion Critical Dates Analysis and Performance
Agreement Monitoring Procedures. Payment #4 of 5 for the Economic Incentives has been
funded with Ascend meeting all Performance Obligations within Sections A and B of the
attachment.
Also reviewed was the Performance Agreement between the WEDC and ACE which was
approved in December 2013. 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 I/2
cent sales tax reimbursement from the WEDC (City of Wylie not part of sales tax reimbursement
agreement). 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,
WEDC—Minutes
October 24,2014
Page 8 of 10
Clark Street is eligible to receive cumulative incentives of $1,100,000 over the life of the
Agreement.
Along with a summary of the Performance Agreement, a Sales Tax Reimbursement Report was
included for the Board's review. The Board noted that the August receipts fell dramatically,
most likely due to Kroger not being included within the report. The only logical explanation for
the decrease is that Kroger must pay quarterly.
The Wedge
The Wedge is scheduled to open its Wylie location on December 22nd. A Certificate of
Occupancy is required by December 31st in order for the Wedge to receive the remaining
incentive of $137,500. The Wedge remains confident in their opening date with no need to
extend the December 31 st deadline. Staff encourages the Board to remain open to an extension
should the Wedge approach the WEDC in November. As the Board can see, the Wedge has
made significant progress in the last month.
WEDC Invitational
The WEDC held a successful networking event on October 21st with 72 individuals participating.
Entities represented were Oncor Electric, Wylie Chamber of Commerce, Intercon Demolition,
Packer Brick, The Weitzman Group, Cencor Realty, Edge Realty, American National Bank,
Inwood National Bank, Apex Valuation, Davis & Company, Hardesty Realty, Southern
Fastening System, Pella (Moulding Associates), Pulliam Construction Management, Wylie ISD,
J. Volk Consulting, Herzog Development Corporation, Lawyers Title, Mann Made, Thompson
Realty, Abernathy Roeder, Glenn Brothers Meats, K Hovnanian Homes, Bank of America,
Raymond Construction, Wylie City Council, Congressman Pete Session Chief of Staff, RLK
Engineering, among others.
Dank Real Estate (Deanan Gourmet Popcorn)
Deanan Gourmet Popcorn received its certificate of occupancy on October 14tb. Upon payment
of property taxes by Deanan, the WEDC will fund a $15,000 incentive payment. Deanan is
eligible to receive an additional $15,000 over the next two years should they remain in
compliance with the Performance Agreement.
Thoroughfare Impact Fees
As-reported via email, the Wylie City Council;approved situ'ficant changes to thoroughfare
impact fees for new development. To begin, Council equalized the fees charged to each zone
within the community with the dividing line for the zone being State Highway 78. The east zone
was higher than the west due to the potential for more development to pay for the infrastructure.
With the fees calculated by multiplying the service unit by the increased impact to traffic for a
particular use, the Wylie City Council has applied a flat service unit of$400 to each zone. The
west zone was previously$433 with the east zone $719. Whereas the thoroughfare impact fee
WEDC—Minutes
October 24, 2014
Page 9 of 10
for 5,000 square foot restaurant was $45,591 for the west zone and $75,335 for the east, now the
fee in each zone will be $41,940.
Sporting Events
Staff attached a spreadsheet by which the use of Mavericks tickets is tracked.
1.2 acres Purchased from Buchanan
Prior to the WEDC closing on the Buchanan tract, the purchase price was reduced by $22,630 to
offset a tax liability the WEDC was potentially committing to. As the Board will recall the
Collin County Central Appraisal District had not applied the City of Wylie tax rate to the
property for 5 years. Staff presented to the Appraisal Review Board that the WEDC is a
governmental entity and is financially responsible for the oversight, but the decision was made to
correct the oversight with back taxes due. Mr. Buchanan may approach Exco for reimbursement
of property taxes for the past two years.
Extension of Woodbridge Parkway
There will be a ribbon cutting ceremony on November 4th at 8:00 a.m.to celebrate the opening of
Woodbridge Parkway. Staff assumes the event will take place on the bridge, but will provide
more details at a later date.
Regional Housing Starts
Seventeen homes were permitted in Wylie for September 2014. Sachse, Lavon, and Murphy
permitted a combined thirty homes over the same period.
The Board will note the pending developments in Wylie that staff has provided at the bottom of
the attachment with updates in red.
No action is requested by staff for this item.
EXECUTIVE SESSION
Recess into Closed Session at 7:40 in compliance with Section 551.001, et.seq. Texas
Government Code, to wit:
Board Member Herzog left the meeting at 7:46 a.m. due to a conflict of interest relating to
Project 2014-9b.
Section 551.087 (Economic Development) of the Local Government Code, Vernon's Texas
Code Annotated(Open Meetings Act).
• Project 2014-9b
• Project 2014-10a
WEDC—Minutes
October 24, 2014
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CO NE 0 OPEN ET1NG
The WEDC Board of Directors reconvened into open session at 8:20 a.m. and took no action.
1.10 ' I NT
With no further business,President Fuller adjourned the P C Board meeting at 8:20 a.m.
Marvin Fuller,President
ATTEST:
Samuel Satterwhite,Director