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03-27-2006 (WEDC) Minutes Minutes WYLIE ECONOMIC DEVELOPMENT CORPORATION March 27, 2006 Board Members Present Marvin Fuller John Yeager Merrill Young Staff Present Samuel Satterwhite, Executive Director Others Present Mark Roath, City Manager(departed at 6:11 p.m.) Larry Williamson, Finance Director(departed at 7:41 p.m.) Gary Bowland With notice of the meeting posted in time and manner required by law and a quorum of Board members present, the Board of Directors of the Wylie Economic Development Corporation (WEDC) met in Regular Session on March 27, 2006 in the Conference Room of Inwood National Bank located at 200 South Highway 78, Wylie, Texas. The meeting was called to order by President Marvin.Fuller at 5:30 p.m. ITEM NO. 1 —• Consider and Act Upon Approval of the March 10, 2006 Minutes of the Wylie Economic Development Corporation Board of Directors Meeting. Mr. Roath commented that he left the March 10th meeting prior to Executive Session. President Fuller requested that staff amend the minutes to reflect that Mr. Roath departed the meeting at 7:29 a.m. MOTION: A motion was made by Merrill Young and seconded by John Yeager to approve the March 10, 2006 Minutes of the Wylie Economic Development Corporation Board of Directors meeting as amended. The WEDC Board of Directors voted 3 —FOR and 0—AGAINST in favor of the motion. ITEM NO. 2 — Consider and Act Upon the Election of Officers to the WEDC Board of Directors. Staff indicated that with the resignation of Mr. Gary Bowland from the WEDC Board of Directors, the office of Treasurer is vacant. Staff noted that current officers are Marvin Fuller— President, Merrill Young—Vice President, and Gary Bartow— Secretary. Staff also informed the Board that the WEDC By-laws allow for two offices to be held by one individual except the offices of President and Secretary. MOTION: A motion was made by John Yeager and seconded by Merrill Young to elect Gary Bartow to the office of Secretary/Treasurer for the Wylie WEDC—Minutes March 27, 2006 Page 2 Economic Development Corporation Board of Directors. The WEDC Board of Directors voted 3 — FOR and 0 — AGAINST in favor of the motion. ITEM NO. 3—Consider and Act Upon Issues Surrounding the WEDC Treasurer's Report. Staff informed the Board that the City auditor's recommended several hundred audit adjustments to be made City-wide. These audit adjustments will somewhat impact the WEDC Balance Sheet and the Finance Department has not been able to prepare an accurate report to date. Staff did present however a February Treasurer's Report which itemizes expenditures for the month. President Fuller noted that the Finance Director had committed to complete the reports and deliver the same to the WEDC no later than the 10th of each month. President Fuller directed staff to review the February Balance Sheet and determine if the WEDC Board should amend any prior month Treasurer's Reports. The Board directed staff to bring this item back as the Balance Sheet is completed. MOTION: A motion was made by John Yeager and seconded by Merrill Young to table the February, 2006 Treasurer's Report for the Wylie Economic Development Corporation. The WEDC Board of Directors voted 3 —FOR and 0—AGAINST in favor of the motion. ITEM NO. 4 — Consider and Act Upon Issues Surrounding a Formal Request for Information from Mayor John Mondy Relating to the City Auditor's Comprehensive Annual Financial Report, Management Letter, and a Memorandum from the City's Finance Director. Staff reviewed a letter from Mayor Mondy which requested a response to several areas of concern involving the WEDC as identified in the City Auditor's Comprehensive Annual Financial Report and attached documentation. Material weaknesses identified by the Audit surround the State Open Records Act, the Public Funds Investment Act, Related Third Party Transactions, Financial Reporting, and other concerns. Staff began by identifying WEDC minutes that had not been generated by staff or approved by the Board. Those minutes identified were for 2-2-05, 3-21-05, and 5-6-05. Staff recommended that to prevent a reoccurrence, staff present minutes for consideration no later than the next possible Board meeting and following approval, present the same to the City Secretary the next day for posting on the City of Wylie website. Staff also recommended that the WEDC begin tape recording all Board meetings. President Fuller directed all Board members to retrieve their records from the meetings in question and present their notes to staff. Staff continued its analysis by presenting the auditors findings that "at September 30, 2005, the WEDC had amounts in excess of the federal deposit insurance corporation limits ($100,000) at a bank other than the City's depository (ANB)." The recommendation from the auditor is that all WEDC—Minutes March 27, 2006 Page 3 "excess funds be deposited with the City's depository to insure that amounts are properly insured." Staff stated that while a gap in coverage did occur, the auditor's findings were not completely accurate. On September 30, 2005, all excess monies deposited with Inwood were secured by a $1,200,000 security pledged to the WEDC by The Texas Independent Bankers Bank. The auditors indicated that there was a request for support documentation pertaining to the pledge made to Inwood. Inwood had no record of such request. Staff commented that in developing a paper trail of the pledged securities, it was determined however that a gap in coverage did occur. The WEDC deposited into the Inwood money market $1,269,320.93 from the sale of WEDC property to Shafer. The Finance Department was made aware of this transaction. The deposit was made on 2-14-05. Upon determination by staff and local Inwood personnel that pledged securities were not in place, the proper securities were pledged to the WEDC on 2-28-05. Thus, a 14-day gap in coverage did occur. Staff indicated that WEDC counsel, Richard Abernathy, had provided the opinion that the WEDC can maintain separate accounts outside of the City of Wylie depository. However, the WEDC must first obtain City Council approval to do so per Section 23 of the Development Corporation Act. Staff indicated that this process was inadvertently not followed. Furthermore, staff violated the Public Funds Investment Act by not having the proper certification as a Certified Public Investment Officer. This certification is required to invest any public monies. The City of Wylie Finance Director, Mr. Larry Williamson, made staff aware of this requirement several months ago and volunteered to perform all future transactions under his certification. Mr. Williamson was present to confirm this conversation. The WEDC Board commented that assuming the WEDC was still receiving an advantageous interest rate over that received from TEXPOOL or Logic (City short-term investment accounts), it will be in the best interest of the WEDC to approach the City Council and request ratification of the investment account held at Inwood National Bank and provide the Finance Department with safekeeping receipts of pledged securities as required. Mr. Williamson indicated that Texpool was currently earning in excess of 4% interest. Mr. Bowland (past WEDC Board member) commented that when the account was opened, the WEDC was earning over 2.5% over the previously held American National Bank money market rate and at least 1% over the previous Texpool rate. President Fuller commented that with the Inwood account only earning 3.125%, there is no reason to approach the Council for ratification and the funds should be moved to the City depository so that they can be included within the City's pooled investment account. In reviewing the auditors and Mr. Williamson's concerns over Related Party Transactions, the WEDC Board disagreed with the findings. However, the Board did not disagree that related party transactions did occur. Specifically at issue by Mr. Williamson was the perception that Mr. Fuller was too close to the bid process undertaken by the WEDC to borrow funds to purchase industrial property and make improvements to the same. Mr. Williamson contended that regardless of Mr. Fuller removing himself from the meeting in which the bids by American National and Inwood were reviewed, and identifying his conflict of interest, Mr. Fuller's mere WEDC—Minutes March 27, 2006 Page 4 membership on the Board influenced the decision by the Board to award the package to Inwood. Board members present indicated the most advantageous interest rate was the factor in awarding the package, not Mr. Fuller's service to the WEDC. Mr. Williamson also believed that the evaluation of the bid was skewed in Inwood's favor. Mr. Williamson contended that the request by the WEDC for a "fixed interest rate with a maximum number of years" was not responded to properly by Inwood and should have not been considered by the Board. Staff reviewed that Inwood provided two, 5-year fixed interest rates while American provided one, 10-year fixed rate. The point was discussed that the two rates provided by Inwood were `fixed', thus meeting the request stated in the RFP. Staff recommended that to provide more expertise in bid formulation and analysis in the future, the WEDC employ First Southwest as future loan packages are considered. Staff also provided Attorney General's Opinion No. JC-0338 which provides that the board of an economic development corporation is not prohibited by law from entering into financial transactions with a member of the board or with an entity in which a board member is interested if it complies with the provisions of the Texas Non-Profit Corporation Act governing transactions between corporation and directors. The provisions, as listed in the AG's Opinion, speak to the requirement that the business interest, or relationship, is fully disclosed or is known to the members entitled to vote. Staff commented that in the case of the Inwood loan, Mr. Fuller stated the obvious conflict and removed himself from the discussions and vote. Considerable discussion was held surrounding questionable expenses as identified in the Finance Director's memorandum. Specific expenditures identified were for the Reach for a Star Program and a golf outing with the City Manager and Finance Director which was expensed by the WEDC Executive Director. Staff asserted that while the City Council has the ultimate authority to approve and disapprove expenditures, the Attorney General supports an EDC Board of Directors ability to determine that an expenditure is "promotional" via AG Opinion No. GA- 0086. Mr. Williamson presented new information to the Board which he summarized by indicating that no EDC monies can be expended without a contract and that no gifts of public funds can be made (Reach for a Star, Blackland Prairie, etc.). Mr. Williamson presented AG Letter Opinion No.'s 97-061 and 94-037. The Board questioned why the WEDC has never been advised of this perspective over the past ten years being that the WEDC's community development has always been very extensive. Mr. Williamson commented that the Finance staff never expressed their concerns because they were not comfortable expressing the concern to their superiors. The WEDC Board and staff expressed their surprise and disbelief in this statement. Other items of concern, within the memorandum from the City's Finance Director, included accounting and administration, the WEDC's relationship with administrative departments and insurance premium payments. Staff commented that, even though a bill was never presented, the WEDC had never reimbursed the City for its general liability or E&O insurance. That oversight has been rectified. At issue with the administrative relationships was the WEDC approaching City departments directly to request information or the provision of services. Staff commented that the concern has been addressed through the most recent version of the City/WEDC Interlocal WEDC—Minutes March 27, 2006 Page 5 Agreement. Finally, it was identified that the WEDC should be presenting financial reports to the City Council on a monthly basis as per the WEDC By-laws. The format for presenting that information was provided to the Board for their review. Mr. Young, while supporting the monthly reporting, pointed out that is was the Finance Department who has been creating WEDC Treasurer Reports over the past several years. Finally, it was stressed by the auditor's and concurred by staff that the WEDC must provide transactional information to Finance in a timelier manner in order for those transactions to be posted properly. The Board directed staff to finalize the WEDC's response to the mayor and request further information from WEDC counsel regarding promotional expenditures. President Fuller also directed staff to formally notify the Mayor and Council of the WEDC's progress and indicate that the WEDC response will be delivered no later than April 5, 2006 MOTION: A motion was made by Merrill Young and seconded by John Yeager to table consideration of a formal request for information from Mayor John Mondy relating to the City Auditor's Comprehensive Annual Financial Report, Management Letter, and a memorandum from the City's Finance Director. The WEDC Board of Directors voted 3 — FOR and 0 — AGAINST in favor of the motion. ITEM NO. 5—EXECUTIVE SESSION: The WEDC Board of Directors convened into Executive Session at 7:45 p.m. Convene into Executive Session to Hold Deliberations Regarding Real Property (Purchase of Real Property Located on Industrial Court by the WEDC) as Authorized in Section 551.072 if the Local Government Code, Vernon's Texas Code Annotated (Open Meetings Act). Convene into Executive Session to Hold Deliberations Regarding Personnel Matters (Evaluation of the Executive Director) as Authorized in Section 551.074 if the Local Government Code, Vernon's Texas Code Annotated (Open Meetings Act). ITEM NO. 6—Reconvene into Open Meeting. The WEDC Board reconvened into Open Meeting at 8:29 a.m. The Board of Directors reviewed discussions held in Executive Session surrounding the purchase of 0.735 acres located on Industrial Court from Mr. Don Hughes. With two industrial facilities located on the property, the Board believed that the purchase of the site would accomplish two goals: the availability of two mid-size facilities for smaller companies to relocate to Wylie and transition into expanded facilities, and the protection of the Highway 78 corridor. WEDC—Minutes March 27, 2006 Page 6 Small businesses locating to Wylie will now have the potential for WEDC assisted short to mid- term lease space until a permanent facility is located or constructed. Also, the WEDC will be able to directly impact the redeveloping frontage of State Highway 78 similar to its involvement with the `Extruders' property. Staff informed the Board that the contract presented reflects changes to the inspection period (90 days) and conveyance of Collin County right-of-way (fronting the site) to the WEDC at the seller's cost. Staff also informed the Board that following the execution of the contract and delivery of earnest money to the title company, the WEDC will be presenting the issue to the Wylie City Council being that their authorization is required to spend in excess of$50,000 and enter into debt. MOTION: A motion was made by John Yeager and seconded by Merrill Young to authorize President Fuller to enter into a contract with James L. Hughes for the purchase of 0.735 acres of property located on Industrial Court in Wylie for a purchase price of$425,000. The WEDC Board of Directors voted 3 —FOR and 0—AGAINST in favor of the motion. The Board took no action regarding Personnel Matters. ITEM NO. 7—Citizen Participation. There being no citizen participation, President Fuller proceeded to Item No. 7. ITEM NO. 8—Adjourn. There being no further business, the meeting was adjourned at 8:31 p.m. 174 Marvin Fuller, President Attest: Samuel D.R. Satterwhite Executive Director