Dec 09, 2020 Economic Development Partnership Board on 2020-12-09 11:00 AM

Good morning, everyone. My name is John Baines, and I'm happy to chair this meeting of the City of Denton Economic Development Partnership Board, and we'd like to welcome the viewing audience to this meeting. And we have several items on our agenda today, the first of which is EDP 20-056, which is the approval of the minutes of November 11, 2020. And we'll give everyone a chance to re-familiarize themselves if needed with the minutes, and then we'll do a roll call to determine whether they pass or fail. Chair, I move approval of the minutes as submitted. We have a motion on the floor to approve the minutes as presented. Do I hear a second? Second. We have a second by Mark McClellan. Okay. Is there any discussion of the minutes? Seeing none and hearing none, we will now do a roll call of all of the voting members. John Baines votes aye. Jill Jester? Aye. Let's see. Jesse Davis? Aye. Tony Clark? Aye. Lee Ramsey? Aye. Martin McClellan? Aye. And then we have Steve Edgar joining us. I didn't know if Steve heard that conversation or not. What is the protocol on that, parliamentarian? I think Steve's still making his way in. Yeah, it's okay. If we've got his approval by that, it should be acceptable. He's not logged in yet, but I didn't know if we needed to wait or just go with what we have. If you have a majority vote at this point, you can move forward as approved. Okay. Thank you. And we'd like to welcome Steve Edgar to the meeting. We will acknowledge that the minutes are approved unanimously. We're now moving on to the next item on the agenda, EDP 20-058. We're going to receive a report, hold a discussion, and give staff direction regarding an incentive application for ranch land foods. And Jessica, who will be leading that discussion? So I will be doing the presentation this morning. I do want to let the board know that we are having some internet issues on our end. So if I freeze or for some reason cut out, someone flag us down or stop me so that we know. I'm able to watch myself, but I can't really see anything on my own screen right now. So this is going to be an interesting presentation. But before we get started, I also want to let you know that we have Ken Davis on the line with us. Ken Davis is the CEO of ranch land foods. And so after I finish my presentation, Ken will be available to answer questions about this project. And this project also includes a discussion about the DME Economic Growth Writer. And so we also have Elizabeth Ruiz from DME on the phone with us. She's going to be able to answer all of those questions that I wouldn't be able to related to electric. So with that, I'm going to share my screen. All right. Looks like we've got that working. All right. So for today, the board's consideration today is an incentive application that we received from ranch land foods. Ranch land is a food production and brand development company based out of Arizona. They're known for raising cruelty free cattle and using sustainable ranching practices. They produce all natural certified grass fed and grass finished Angus beef products, as well as high quality poultry and pork products. They ship thousands of packages weekly to customers nationwide, particularly customers that are looking for those all natural healthy meat products. They also serve as a third party logistics e-commerce fulfillment center for other companies. They are seeking to relocate their corporate headquarters in distribution and to north central Texas. Denton is one location that they are considering. And for this project, we are in direct competition with other cities in the Metroplex. And branch land is interested in Denton, particularly because of our location and their ability to expand their regional services. So the site and project itself, again, is a relocation of a corporate headquarters and distribution center that will be shipping food and meat products nationwide. It will serve as the centralized hub for their 3PL clients as well as some of their product lines. The facility that they are looking at is the old Miller facility as we know it on the right at the split of I-35 E&W right here that you see on the screen. And the goals that they express to us in their application is that they're seeking an incentive to reduce the impact of relocation and site improvements costs. They're making a significant amount of improvements to that facility that we'll talk about later, but also to encourage high wage job creation through their company's expansion. As we do with any project, we review this for compliance with our incentive policy. I kept it a little bit short this time, so the only provisions you'll see on the screen are the ones that apply specifically to this project. So in terms of our general and priority considerations, this project does create quality jobs and it is a targeted sector as they are a significant consumer of municipal utilities. In terms of our priority considerations, they did meet seven of our priority considerations. In this case, which we'll get into a little bit later, we look at really increasing jobs with wages above Ditton County's median and a high number of jobs paying $75,000 or more. For this project, we are proposing a chapter 380 incentive and with that, we wanted to make sure that we were in compliance with the chapter 380 policy. So this is a targeted industry cluster as a high user of municipal utilities. This would also meet the provision that allows us to use cash incentives when we are in direct competition with another city for a project, and again, increasing the percentage of jobs paying $75,000 or more. In terms of our other considerations, this project does have a net number of new jobs with wages above Ditton County's median, which I break down further in the presentation. And we'd also be looking at using the investment fund. They do meet two of the three criteria. They meet the higher wage or knowledge-based jobs criteria as well as the industry sector target criteria. So the application that was submitted by Ranchland Foods, again, a relocation of a corporate headquarters and distribution hub, they are a targeted sector. They are investing $5.7 million in capital improvements or business personal property at the location. Because the building is existing, it already has a property value of about $3.9 million, so they would be investing an additional $5.7 million above that. They are relocating or creating 140 total jobs with a weighted average of the jobs being $69,893 and total payroll at year 10, so full kind of growth and build-up of almost $10 million. I'm going to break down those jobs and job numbers a little bit further. This is something that you guys have been seeing as we've worked through a number of job grants. This one actually looks a lot more similar to our job grants that we've been looking at. So here you see the major categories of jobs and the estimated number. Here in the light blue line, you'll see the total jobs for each individual year. In this darker blue line, you'll see the cumulative jobs as we go. So about year eight, they estimate that they'll hit that 140 jobs. And then here's the growth in the estimated annual payroll. So we're looking at starting around $4.7 million and then eventually growing to that $9.8 million. Breaking down those average wages by job type, again, we know that the weighted average is important. So here's the general average wage by the sort of job category. So you'll see that almost all of the jobs, with the exception of the administrative and warehouse staff, exceed that $75,000 number. And what we've broken down here is that means 80 jobs of the 140 or 57% are jobs that are above $75,000. 90 jobs or 64% exceed the Denton County median and 80 jobs or 57% exceed the Denton County average. So in terms of the proposal that we've developed, again, very similar to the last proposal that you've seen for us, it includes a chapter 380 component that has three sub components, a performance based relocation incentive. That is to assist the company in their relocation expenses and to an incentive on their site upgrades that they're making. It also includes a stratified job based incentive that includes the residency bonus as you've seen before for that additional consideration for employees living in Denton. In total, the chapter 380 portion of this incentive is $218,500. The other components for this particular project is that because they are a significant user of municipal utilities, if they meet that one megawatt threshold on demand, they would be eligible for the DME economic growth rider. We've taken a look at the preliminary economic, excuse me, electric data that the company has provided. We think they'd be right around that one megawatt demand. And if they do, the value of that demand growth rider for them would be $197,000. This project also meets the general criteria of the Texas enterprise zone program. That is a state approval process. But because they do meet those criteria and we do have eligible nominations, we could nominate and we do, staff does recommend nominating this company to the Texas enterprise zone program. I'm going to break it down a little bit further for you in terms of the incentive versus the ROI. Again, what you'll see up here in this top column or these top rows here are the incentive numbers. We don't include the Texas enterprise zone program number that's hard to quantify. And also that being a separate approval process outside of our control, we're not looking at ROI from that. That also goes straight from the state to the company. So we're only looking at the city involved portions of this incentive, but we also look at property taxes that this project would generate over 10 years, sales taxes that this project would generate over 10 years and then the additional increasing ratio of the demand revenue to DME netted of the incentive of the economic growth rider. And with that, we have evaluated an ROI for this project. You'll see the gross and net revenue on your screen. We did both a five-year and a 10-year analysis. And we have found that this project has an ROI of about 6.47, which means for about every dollar that we invest in this incentive, we would see about $6 and 50 cents coming back to the city directly in terms of our fiscal impact. So I will have one last slide on this project in terms of both qualitative and quantitative benefits. So in terms of our qualitative benefits, again, this is a quality job creator project. This company has also indicated a strong desire to work with the universities, particularly the logistics program at UNT, to have a pipeline, internships, but really strong, indicated a strong desire to connect with the universities. This is the recruitment and expansion of a company, so a little bit of a two for the price of one on this project. And with this particular project, it will occupy a currently vacant building, which is great, especially a building that is highly visible. In terms of the quantitative benefits, as I mentioned before, it has an estimated ROI of about 6.47. And then I've broken down the 10-year revenues there for you. In terms of economic impact, we just finished our model this morning, but we did find that over a 10-year period, in addition to the direct revenue to the city, when we're looking at discretionary spending of employees for this company, we would see an additional $553,000 injected into our local economy over 10 years, which would actually increase the economic ROI to about 11.67. And with that, just a quick summary before we start our discussion. This would be a five-year performance-based incentive, very similar to ones that we've seen before, the relocation grant, stratified job-based grant, and a residency bonus. All of those would be included in a Chapter 380 agreement. We would also recommend nominating this company to the Texas Enterprise Zone program, with our staff assisting however they need us in developing and submitting that application, and then also consideration of the DME Economic Growth Rider. And with that, I will pause for questions. Do we have any questions from the floor? I have a few, but I didn't want to be the first. Okay. Counselor Jester has a question, please. Hi, thank you. So this question is for Ken Davis. Mr. Davis, can you hear me? I can. Thank you. All right. Well, first of all, thank you for being with us today to talk about this project. Obviously, you've got a really great company, and we think we've got a really great city, which is why we're all here today. One thing I did not see in the application that typically we see talked about a little bit is community involvement. That's something that's very big here in Denton, not only with the Chamber and supporting other businesses, but other nonprofit. Can you talk a little bit about what your current involvement is, and what is your intention, or do you have a history of community involvement, and what that might look like in the future if you end up coming to Denton? Yeah, very good question. As a matter of fact, that's a point that we actually discussed with Jessica and her team. We are highly involved in our community in Arizona, mostly with food bank organizations within the city. Obviously, because we're in the food industry, helping support not only financially, but also with products and time with our employees and assisting with community involvement. It's definitely something that we are very strongly involved with and something we see ourselves involved with in the city of Denton if we happen to relocate here. We made a point, actually, as a company to bring that up to the group because we wanted to find out who else was in the city, what organizations that are already here so that we can be a part of that. That's great, and that's great to hear. Again, I think obviously the plans that you have for relocation and expansion are very exciting and what you're going to be doing wherever you end up moving to. We certainly appreciate your interest here in Denton and think that it seems like a perfect fit for what you have planned. As a member of the Chamber of Commerce, I hope if you do land here that you will join the Chamber, and we look forward to your involvement in the community. Thank you, Mr. Davis. Yes, absolutely. Thank you. Do we have any other questions from the floor? I see Lee Ramsey, please, and Jamie Wilson. Mr. Davis, thank you guys. We're excited that you guys are looking at the city of Denton. Just one quick question. How many square feet is that existing building? It currently comes in right under 64,000 square feet. However, there is another 11,000 square feet that we're converting that's in a mezzanine to be the occupied space as well. So I think it will end up closer to 70,000 by the time it's all said and done. How much of that will be office and how much will be warehouse? The office portion of that right now is right at about 10,000 square feet, a little under. If we utilize the mezzanine space as office space, of course, that would increase that by another 10,000. Our primary objective obviously with the office space, of course, as COVID settles back down or whatever that process is, it is to house the majority of our team in and on site. We do, of course, remotely now, but the purposes of that particular building is because we do have a large staff that we'll be occupying on site. Perfect. You answered my next question. So thank you. We're excited you guys are considering Denton and thank you. I think you guys are a good fit for Denton. So thank you. Thank you, Mr. Ramsey. We have Superintendent Wilson and then we have Mark McCullin next. No specific questions, Mr. Baines and Chairman. I just wanted to say we're excited about the opportunity to see additional resources such as this come to our community and have a great community and look forward to having future partnerships if this does move forward. So thank you, Mr. Baines. Thank you, Superintendent. Mr. McCullin? A quick question about the staff that will be working at this location. Can you give us a little bit of sense of the nature of that? Is it the type of work they'd be doing, you know, hands on if you would? Sure. I'll start at our executive level staff. Most of these positions will not be coming from Arizona. Most of them are being created here by acquiring other high level executives from other food based companies. So this base will serve as our corporate operations for nationwide. So we'll have a strong executive staff that of course will operate the day to day operations as well as expansion of the business, investment in other farmland within this North Texas region and the possibility of another facility close to where we would be located if we're in Denton. The other positions are all mostly in the logistics with our 3PL division as well as our direct to consumer fulfillment. So we have several positions that will be in the warehouse, whether they're pulling and packing orders every day. We have a wholesale component where we deliver to hospitality and food service, restaurants, hotels within the region, also out of state. So the components of most of the workforce is primarily driven around logistics. At this facility will be no production of food. It'll mostly be in handling, shipping, delivering by trucks, that type of thing. Well, Kenny, University of North Texas really would look forward to an opportunity to partner with you. We certainly have a world class logistics team here. It's one of the best, certainly in the state, if not the region. And we have a lot of other technical capabilities too, including some around the food area that happens to be my personal focus is food science. So anyways, we hope that we can partner with you in terms of enhancing both operations as well as your search for a workforce. Absolutely. It's something we very strongly are consuming because of the university. We work very closely with the university in our city in Arizona and would like to do the same with UNT as well. Great. Thank you, Mark. I see Dr. Wilson, you have your hand still up or is that just wanting to take down? It's still showing as your hand is raised. So, okay. I have four questions, Mr. Davis. Does anyone else have questions before I ask mine? I didn't want to take too much, but I did have four. The first one, you don't mind me calling you Kenny, do you? No, that's fine. No problem. My first question has to do about being certified as a practicing, how would you say, my family and I are in the nutrition related lifestyle. And sometimes that certification comes and goes. Have you ever had any issues with that or has that been a consistent for your company? Since the very beginning, we sought out to get these designations and certifications based on our product, what we produce. Initially from our own ranches and then our ranching partners and farms that we work with. 90% of all of our product that has been certified from the beginning, whether it's certified grass fed, certified organic or certified non-gmo, we've held those from day one. We've never lost those certifications. We do obviously, if you know, have to reapply. And it's third party validated. So, we're tested, our animals are tested, our ranches are tested, and it's a designation we've never lost. Thank you, Kenny. My second question has to do with your overall operation. Where you process your meats, where are those locations? Since this will mainly be an administrative office, what do you do your processing? Very good question. So, we process depending on the line of products or the line of protein in three different locations. Most of our organic and grass fed stuff at this time is produced in Raleigh, California at a facility called OWB, One World Beef. They have handled the harvesting and further processing or fabrication of our product and then we move that product. Currently, right now, we'll be moving that product to Texas after this first quarter to be further processed into cuts for food service or consumers. We have several ranching partners here in North Texas as well in the Panhandle in the Amarillo region. We've also are purchasing a large ranch in the North Texas, Oklahoma region to start running cattle in this area as well because we process in Fort Worth our Texas animals at the Fort Worth Meat Packers facility. So, we regionally have been doing that for a while and what has prompted us to want to come to North Central Texas, obviously to be a little closer to the production of our product and to have access to our warehouse and distribution for a more centralized location for shipping. I will tell you that we are in the company already in the discussions of if we land here in Denton or whatever city we land in, we do know that we will be building a food processing facility close to whatever distribution facility that we have. That's a necessity that we already know as a company, an investment that we're already prepared to make, but it would be something we'd be building out new. Thank you Kenny for such an excellent answer. The third of my four questions is this, what's your timetable right now for making that decision and making the move? Yeah, very good question. I think I told Jessica, we are prepared to begin this move starting in mid-January. We've been making decisions here fairly quickly. We're down to probably within the next week or so. We understand that the different councils or groups or boards have to meet, but we plan on being operational as far as having jobs there and hiring by the first part of February. We'll bring in some of our executive staff in January. I've already hired several people or they'll be making their transition I should say from their current employers in January to our company. We hope to be operational by February. Thank you Kenny. My last question is this. It's kind of a compound question. How many other suitors do you have for your relocation? What strikes you as Denton being the best place for you? What attracts you the most here? Good question. We have currently one other strong suitor. We initially started looking at the four different site locations. We're down to just Denton and another city of course in this area. I will say that Denton is favorable to us because of its unique location for this facility and the ability to be able to expand. We feel we're a little bit landlocked in the other facility or location. Denton gives us access to both the east corridor of the Metroplex and of course the west corridor. Being in that location, being able to go 35 to Dallas and 35 to Fort Worth from our food service side and our wholesale side that we deliver to restaurants and hotels, etc., makes it very, very convenient. I'm not sure if Jessica told you, my family is originally from this area, from the North Texas area. I've had two kids that have gone to UNT. So Denton holds a special place just because of our family, but also mostly because of the location of the facility and the ability to be able to expand. Kenny, thank you for such a wonderful answer and I'll give you personally five stickers. How about that? Great answer. Did anyone else have questions for Mr. Davis? Okay, Jessica, we'll give it back to you, ma'am. I will add that if the Economic Development Partnership Board moves this forward, we do have this scheduled to accommodate Mr. Davis's very quick timeline for City Council at their first meeting in January. So if the Board does choose to move it forward, we are making every effort we can to meet his timeline. But with that, I welcome any questions from the Board regarding the proposal or if any Board member wants to make a motion. Any Board members? Okay, I see Jill Jester's hand. Counselor? Thank you, Chair. I would like to give a shout out to Ms. Rogers and her staff. I thought this was very well laid out. I thought the combination was very creative in trying to piece together the absolute best proposal that we can make and present to Council. So I just want to say thank you for all of the background work and I found it very, very helpful and laid out in a way that was easy to understand. And so I just want to say really excellent work there. And with that at this time, I will make a motion that we accept and recommend as the staff has summarized and presented. So we have a recommendation to accept the incentive application for ranch land foods. Do we have a second? I'll second. Lee Ramsey seconds. Any further discussion from the Partnership Board? Seeing none and hearing none, we will now do a roll call once again. We'll start with Steve Edgar. Aye. Thank you. Jimmy Mejia. I recommend it as well. Thank you, Jimmy. Mark McClellan. Aye. Lee Ramsey. Aye. Tony Clark. Exciting aye. Jesse Davis. Aye. Gil Jester. Aye. And John Baines says aye and it looks like we have a unanimous recommendation to accept the application for ranch land foods. So concluding items, do we have any concluding items we need to address today, Jessica? I do not have any. I will say your staff reports are not in here as typical and that's because we are working on a new report that hopefully you will see for the first time in January. So we're very excited to have a revamped and refreshed report for you. Thank you and it's the season to be jolly. We want to wish everyone a happy holiday season and we'll entertain a motion to adjourn the meeting if there's nothing further. Move adjournment. Do we have a motion? Second. Okay. All in favor of adjourning, signify by saying aye. Aye. Aye. Okay. Jessica, will that do? We didn't do a roll call. Is that okay? We're good. All right. Thank you all for your time and thank you to all the staff and our city manager and everyone for making this a great proposal and recommendation for our city. Everyone have a great one. Merry Christmas and happy new year. Merry Christmas, everybody.