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Min - Economic Development Corporation - 2005 - 02/16 - RegularALLEN ECONOMIC DEVELOPMENT CORPORATION (AFDC) BOARD OF DIRECTORS REGULAR MEETING February 16, 2005 Board Staff Guests Kurt Kizer Charisse Canfield Chris Klein Tim Wood Jennifer Grimm Michael Witkowski Ken Fulk Dan Bowman Jeffery Strickland Carl Clemencich Bruce Heller Maxine Sweet — Absent Robert Blanchard Mark Collins Chris Teesdale Fred Gans Tony Schmeck Chris Mason Call to Order and Announce a Ouomm Present With a quorum of the Board present, the Regular Meeting of the Allen Economic Development Corporation (AEDC) was called to order by President Kurt Kizer at 6:06 p.m. on Wednesday, February 16, 2005 at the AEDC Office. The following items were discussed: Approve Minutes of the January 19, 2005 Regular Meeting of the AEDC Board of Directors The minutes of the January 19, 2005 Regular Meeting of the AEDC Board of Directors were approved as submitted on a motion by Carl Clemencich, seconded by Ken Fulk. Consider and take Action for the Approval of Incentives Supporting the Retention and Expansion of Project Heart in Allen Project Heart, an existing Allen company, is a medical device manufacturer that also performs research and development for new products. The company located to Allen in 1994. The company has several locations including one in Alabama and a major new expansion in Florida. While they are considering an mternal expansion at the Allen location, they readily admit that the Allen location has the highest payroll costs and taxes. In addition, the State of Florida has been much more aggressive than the State of Texas in offenng incentives to recruit their business. Company officials appeared before the AEDC Board to request support to make it more financially favorable for them to expand the Allen facility. The expansion would involve an investment in additional capital and inventory and the hiring of additional employees at the Allen facility, but not an increase in the square footage of their building. According to the company's CFO, the company is also considering how and where future expansions/consolidations may take place. How the expansion in Allen is handled compared with the expansion in Florida will weigh in those future decisions. Allen Economic Development Corporation Regular Meeting, February 16, 2005 Page 2 On a motion by Ken Fulk, seconded by Tim Wood, the Board approved a $100,000 incentive grant to be distributed on the following schedule: • $50,000 payable within 30 days of the execution of the incentive contract. • $50,000 on the one year anniversary of the execution of the incentive contract. The AEDC Board President was authorized to negotiate the required number of employees and the required minimum taxable value of business personal property to be maintained for a period of S years. The President of the AEDC was also authorized to negotiate and execute the contract. Consider and take Action for the Approval of Infrastructure Incentives Supporting the Development of Twin Creeks Medical Center Two in Twin Creeks Business Park. JaRyCo recently completed construction on Medical Center One in Twin Creeks Business Park just southwest of Presbyterian Hospital. The master plan for the development includes the construction of three medical office buildings, each consisting of approximately 35,000 square feet with a central open landscaped area between the buildings. The first building was constructed and leased very quickly. JaRyCo did not request incentives for the first building since they expected to be in competition with other Allen landlords for tenants; however, the majority of the tenants in the first building were actually recruited from outside the area. JaRyCo is now ready to begin construction on the second building, which will be located to the south of the first building. Bruce Heller, JaRyCo, appeared before the AEDC Board to request assistance to offset some of the infrastructure costs associated with the project. Construction costs have greatly increased in recent months and the cost of the second building is expected to be higher than that of the first building. Heller outlined infrastructure costs associated with the second building, including storm and sanitary sewer line, water line and electric utility extensions. Heller also mentioned design and engineering costs associated with the project. In addition to helping him mainmin the same rates as the first building, the assistance would allow Heller to continue to be competitive with other new medical office projects in McKinney around HCA Hospital. With Medical Center One completely leased, Heller is confident that JaRyCo will find tenants to fill Medical Center Two. Heller plans to begin construction by late Spring 2005. On a motion by Ken Fulk, seconded by Carl Clemencich, the Board approved an infrastructure incentive up to $75,000 to be paid based on qualified receipts submitted for reimbursement. The incentives offered are contingent upon JaRyCo constructing Medical Center Two with the same building design standards as Medical Center One and having a $5 million initial taxable value on the building. A minimum number of employees is not required for the project. The Board agreed that JaRyCo did not need AEDC Board approval of the landscaping, lighting and architectural designs for the project. The Board authorized the AEDC Board President to negotiate and execute the contract with JaRyCo. Allen Economic Development Corporation Regula Meeting, February 16, 2005 Page 3 Consider and take Action for the Approval of Incentives Supporting the Recruitment of Project Fast to 601 Century Parkway. Project Fast designs, develops and manufactures signal processing equipment (intelligence surveillance) primarily for the defense communications industry. The company is seeking approximately 20,000-25,000 square feet of office/assembly space and is considering spaces in Allen, Plano and McKinney. The Allen space is located within the ICBS building. The company appeared before the Board to request relocation incentives. The ICBS space was recently vacated by Sunbelt Telecommunications and will require finishout to retrofit the space with lab areas and offices. The company outlined expected finishout costs including: • Installation of an outside aluminum wall for signal testing and large sound panels that will adhere to the wall with Velcro strips. • Painting the aluminum wall with special paint (containing no metals) in order to comply with City of Allen building standards. • Installing a shielded, triple -wall, expanded -ceiling building within the ICBS building. • Signal power upgrades to the facility. • Installing air conditioning in space previously not air conditioned in the building. The company agreed to construct the aluminum wall (as a temporary structure) a short distance from the existing outside wall of the facility and to place the roof elements in a position that will not be visible from Century Parkway. They will also paint the wall to match the building and store the sound panels when they are not in use. The company requested assistance to offset relocation costs and finishout costs for the ICBS building. They are on a very short timeframe and will make a decision in the next 45 days. They plan to sign a 5 -year lease with a 5 -year option for renewal. Company officials explained that a 10 -year lease would not be signed because the company may outgrow the space within 5 years. The Board took into consideration the intangible assets the project brings to Allen including the fact that it is a defense -related industry that will occupy existing vacant space and provide higher paying jobs. On a motion by Carl Clemencich, seconded by Tim Wood, the Board approved a relocation incentive of $60,000 to be paid following the issuance of a certificate of occupancy for space in the ICBS building. The incentive is contingent upon Project Fast signing a 5 -year lease with ICBS on approximately 20,000 square feet of space at 601 Century Parkway; providing the AEDC with a copy of the lease; and maintaining 6 employees and $250,000 in taxable business personal property value for the 5 -year period. The AEDC Board President was authorized to negotiate and execute the appropriate documents. Consider and take Action for the Approval of Incentives Supporting the Recruitment of Project New to Allen. Company representatives for Project New did not attend the meeting; therefore, no action was taken. Allen Economic Development Corporation Regular Meeting, February 16, 2005 Page 4 Re -Consider and take Action for the AWroval of Incentives Supporting the Recruitment of Project Security to the Southeast Comer of US 75 & Rideemont Drive. Project Security, a mortgage -related company, has commissioned Fred Gans, Cornerstone Development, to construct a two-story, 50,000 SF corporate office building on approximately 4.19 acres on the AEDC-owned Ridgemont tract (located at the SEC of Ridgemont Drive and US 75). The company plans to occupy approximately 30,000 SF in the building with a 10 -year lease. The Board previously approved an infmstmcture incentive of up to $100,000. Company officials appeared before the Board, explaining that their existing landlord has agreed to dramatically reduce their lease rate should they stay at their current facility, giving them a difference of $490,000 between locating to Allen and staying in their existing space. While company officials believe the Allen facility would be an asset to the company, the cost savings of staying in their existing facility would be effective immediately and financially favorable for their investors. Fred Gans, the developer for the project, has reduced his profit on the building and Chris Mason, the company's broker, is contributing the majority of his commission to the company in order to lower the company's cost of moving. The commission the AEDC is paying Chris Mason (approximately $50,000) is what he is contributing to the project. The Board took into consideration the likelihood that Fred Gans may also develop the second building on the Ridgemont Tract and that there are challenges involved with developing the property. On a motion by Ken Fulk, seconded by Tim Wood, the Board approved increasing infrastructure incentives with the developer, Cornerstone Development, to be passed through directly to the company, from $100,000 to $150,000. The President of the AEDC Board was authorized to negotiate and execute the appropriate documents. Fred Gans, Cornerstone Development, is planning to constmct a two-story, 50,000 SF corporate office building on approximately 4.19 acres of the AEDC-owned Ridgemont tract (located at the SEC of Ridgemont Drive and US 75) for Project Security. The AEDC has been in negotiations on contracts relating to the property including the Tax Abatement Agreement, the Incentive Agreement and the Purchase & Sale Agreement. The following items were discussed relating to the contracts. Gans requested the AEDC Board's consideration to lower the minimum taxable value for the building (listed as a condition in the Tax Abatement and Incentive Agreements) from $5 million to $4 million. Originally, it was stated that the minimum value would be for the building only; however, Gans misinterpreted "building" to include land. Gans stated that the lower value on the building will not alter the previously approved building design. On a motion by Kurt Kizer, seconded by Carl Clemencich, the Board approved reducing the minimum building value required in the contracts from $5 million to $4 million. The Board discussed the land Purchase & Sale Agreement. Several minor changes were discussed that are acceptable to Gans. The changes mostly related to clarifying certain definitions in the contract. On a motion by Carl Clemencich, seconded by Tim Wood, the Board approved the Purchase & Sale Allen Economic Development Corporation Regular Meeting, February 16, 2005 Page 5 Agreement (as distributed) with the changes as agreed to by Gans and authorized by the AEDC Board President. The Board further authorized the Board President to execute the necessary documents. "RESOLVED, that the Board of Directors ratifies the execution of any amendments to the Contract of Sale and any amendments thereto by and between the Corporation and Cornerstone Development Corporation; RESOLVED FURTHER, that the Board of Directors ratifies the execution of any amendments to the Contract of Sale, the Special Warranty Deed, the Closing Statement, and the other documents necessary to complete the sale of a portion of land (with no improvements) from an approximately 16 acre tract located at the south east comer of US 75 and Ridgemont Drive: situated in Collin County, Texas with said portion being approximately 11.216 acres of which approximately 7.026 acres is located within the Floodplain; by the President or other Officer of the Corporation; and RESOLVED FURTHER, that the Secretary of the Corporation is directed to certify the minutes of this meeting and the contents of this resolution and to deliver the certification in support of the authority of the officers named above to act on behalf of the Corporation." Minor changes to the Incentive Agreement were discussed. On a motion by Ken Fulk, seconded by Carl Clemencich, the Board approved the Incentive Agreement (as distributed) with the change of reducing the required minimum building value from $5 million to S4 million and other minor changes as agreed to by Gans and authorized by the AEDC Board President. On a motion by Ken Fulk, seconded by Tim Wood, the Board approved a recommendation for Tax Abatement to the local taxing authorities for consideration of a 50% tax abatement for 10 years on the building with a minimum required taxable value of $4 million on the building. Charisse informed the Board that the AEDC has been working with an architect in developing a concept plan on the portion of the Ridgemont Tract retained by the AEDC. In order to accommodate a 50,000 square foot, 2 story office building, the parking ratio would have to be 4.5:1000. The Board agreed that this ratio would be acceptable. Approval of AEDC Financial Reports Dan Bowman presented the AEDC financial reports. He also distributed budget adjustment sheets and updated the Board on approximate budget adjustments that the AEDC will have to make in order to compensate for recent incentive grants for which the AEDC had not originally budgeted. These adjustments will be included in the annual budget process that will occur over the next several months. On a motion by Tim Wood, seconded by Ken Fulk, the Board approved the AEDC Financial Reports as presented. Discuss Administrative and Marketing Activities of the AEDC Jennifer Grimm updated the Board on marketing activities of the AEDC and invited Board members to attend the Plain and Fancy Ball, a CCCCD event, on March 5, 2005. Jennifer distributed the insert for the "21 for the 21" Century'; a compilation of 21 Collin County figures selected by Inside Collin County Business for being strong leaders in their communities. Jennifer also informed the Board that Allen Economic Development Corporation Regular Meeting, February 16, 2005 Page 6 the International House of Pancakes (IHOP) is purchasing land north of Bennigan's on US 75 to construct a restaurant and a corporate office. Charisse updated the Board on recent development activities. Bruce Heller, JaRyCo, returned the fully signed and executed Master Lease Agreement to the AEDC. The second Blue Star groundbreaking (for the commercial portion of the development) will take place in July. Scheduling of Next AEDC Board of Directors Meeting The next Regular Board meeting was scheduled for Wednesday, March 16, 2005 at 6:00 p.m. The Board discussed the option of holding a Special Called Meeting to discuss incentives for the Montgomery Fars Development. The general consensus of the Board was to hold a Special Called Meeting on Much 23, 2005 at 6:00 p.m. at Montgomery Fars. Adioum. On a motion by Ken Fulk, seconded by Tim Wood, the meeting was officially adjourned at 9:46 p.m. These minutes approved this 161h day of March, 2005. Kurt Kizer, President Ken Fulk, Secretary