Jan 13, 2021 Tax Increment Reinvestment Zone No. 2 Board on 2021-01-13 11:00 AM (Special Called Meeting)

Good morning, ladies and gentlemen. My name is John Baines, CPA. I have the privilege of being the chair of the economic development partnership board. And I have a very prestigious group of board members and city employees with me this morning. And we're about to start our meeting. And the first item on the agenda is TURS 21-001. Consider approval of the meeting minutes of February 12, 2020. So that's a year ago was the last time we had the meeting. And we'll give everyone just a second to take a look at the minutes. And once you're ready, you can just wave your hand and then that way we can go ahead and proceed. If everyone's had a chance to read the minutes, we'll entertain a motion to accept the minutes as presented, please. John Baines, this is Jill Jester and I move approval of the minutes as presented. We have a motion on the floor from Jill Jester. We need a second. Mr. Chairman, Tony Clark, I will second that. Mr. Clark seconds. Do we have any discussion of the minutes as presented? Hearing none, we will need to take a verbal approval of the minutes as presented. And we'll start with, let's see, Jesse Davis? I vote aye. Tony Clark? Aye. Jason Tomlinson? Aye. Jill Jester? Aye. Lee Ramsey? Aye. Jimmy Mejia? I'm going to mute Jimmy. Is it up now? Yes. Yes. Can you hear me? Aye. Okay. Mark McClellan? Aye. And let's see, is Steve on? I know I've tended to ignore Steve a few times, I don't see Steve, and then John Baines approved the minutes. Did I get everyone? Selwyn? Selwyn, forgive me, Selwyn. Okay. So we have unanimous approval of the minutes. And with that, we'll go on to the next item on the agenda, TURS 21-002. We want to receive a report, hold a discussion, and make a recommendation to city council regarding the 2019-2020 tax increment reinvestment zone number two, the West Park annual report. And I believe Jessica Rogers is going to give us that report, please. I'm actually going to turn it over to Erica Sullivan, who many of you know, our economic development analyst, who has worked on the West Park TURS for, I believe, since its creation. So she's going to give the report to you. Thank you, Erica. I'm going to go to your report here. I'm going to start by sharing my screen. Well, good morning. As you heard, my name is Erica Sullivan, I'm the analyst here at the city, and I'm going to be providing presentation on the 19-20 annual report for the TURS. The objective today is provide an overview of the West Park TURS and the 19-20 annual report. As many of you realize, we typically meet one time per year to review the TURS annual report that's required by the state. So we have a new member, relatively new, so I wanted to provide a little background. So in 2012, the city council adopted an ordinance designating and describing the boundaries of West Park TURS. You'll see the city limits in red and the West Park TURS on the west side of the map outlined in black. This map provides a little bit more detail of the boundaries. And the TURS is comprised of approximately 800 acres and is located north of Airport Road in the largest industrial area within the city. So you'll see Airport Road, you'll see Jim Crystal, and then 380. The West Park TURS district has established in its project and finance plans a budget for public improvements and these are necessary to support infrastructure in the zone. And so we have street improvements at 8 million, utilities and drainage at 5 million, industrial projects, which includes Chapter 380 agreements at 1.3 million for a total of 4.3 million estimated project costs for the TURS. There are two taxing entities that participate in the West Park TURS, the city of Denton and Denton County, and both participate at a rate of 40 percent for a period of 25 years. Now the TURS board structure consists of 14 members, 12 are from our Economic Development Partnership Board. Denton County has a single board member and Razor Investments, the developer also is a representative. And this structure was designed to streamline the process as the same group would be reviewing incentive agreements. The annual report is required by the State Comptroller of Public Accounts and is supposed to report on the previous year's activities. According to Chapter 311 of the tax code, the report is required to include the base and appraised value, revenue in the tax increment fund from all the participating tax entities, the purpose of the expenditures, the amount of principal and any outstanding bond indebtedness interest due. The first table we're going to go over provides the city valuation summary. You'll see on the left-hand column you have the tax year, you have the certified value, then you have the supplemental value. For both of our TURS, the last supplement for the calendar year in December is used for our cutoff point. Then you see the increase, decrease, and then the contribution and adjusted incremental value, and these are both at a rate of 40%. And then in the final column, you see the total revenue. So for 2019-20, the revenue that went into this particular TURS is $281,041. You'll now see the county valuation summary, and you'll see that on the bottom line there $107,227 went into this for the revenue and contribution for the county. And then you see the third table, which is the total combined city and county revenue, and so you'll see on the bottom line that a total of $388,268 went in, and there was also $7,709 in interest for a grand total of $395,977 contributed from both taxing entities. Now, the majority of this increase was due to Winko Foods, U.S. Cold Storage, and Exeter's new spec building for the new Lowe's Distribution Center. The market value you can see is $175.5 million – I'm sorry, the net taxable, but the market value is actually $191.3 million. As I've been presenting this on annual basis, we've seen that disparity get smaller and smaller as more and more of the property becomes developed and the ag exemptions removed. I'd be happy to entertain questions. I'm going to go ahead and stop sharing. Do we have any questions from the floor? So Erica, I do have a couple of questions, please. So I guess I'm supposed to know this, but I don't. We've got this piece of property there, and you prepared this report. This is a required report to the state comptroller? That's correct. It's governed by Chapter 311 of the tax code, and it requires us to submit an annual report to the state every year detailing the previous year's activities. So what do they do with this information? Actually they have a registry that they put out biannually, and it summarizes all of the tax increment reinvestment zones in the state. It's a little bit outdated. So if you go today, you'd probably be a little bit behind, but they do it on a biannual basis. So the state of Texas has some type of reinvestment credit that goes to people who invest in these particular zones? They track it, and it's required by the tax code. So who provides the credit? Is it the taxing entity rather than the state, and the state is keeping an idea of what's going on in their jurisdiction? They're keeping an eye on what's going on. Basically what happens is they increment, in a tax increment reinvestment zone and tax increment financing in general, you create a base year, and anything that increases over that year goes into the tax increment fund every year to support projects in that zone. All the entities in there are paying the same tax rate as you would in any other part of the city. You're just dedicating money to support projects in that zone over a long period of time. And that's a good sell for developers saying that this city, no matter what council changes is going to, and what other management changes, they've dedicated this amount of funds to this particular area over this period of time, in this case, 25 years. Thank you. I don't know if this is out of order or not, Jessica, but I have a question for you, Selwyn, since you are a Razor Ranch investor, how have you felt about the turrets? Do you feel like we're doing okay there? What's your thoughts there? Okay. I think it was, and first of all, just to make sure that it's not Razor Ranch, because we sold Razor Ranch, and Razor has nothing to do with Razor Ranch except for our name, so I just want to be careful about that. I think it actually worked really well with the city. I do think that because going forward, we don't have a lot of property left to develop, and I think how our partnership worked with the city and developing it, and also putting in all the infrastructure, I think it could be a great roadmap for other areas, and obviously we don't own these other areas, but I think, you know, Phil and myself would be happy to help with other, you know, to be consultants or do something on, or be a third party to look at which things work for us and which things were challenging. You know, clearly we still need to revisit some of the documents, because, you know, in this process, it was fluid and we had to, you know, prices changed and needs changed for the city since 2012, so there have been some, you know, changes that haven't quite been finalized in the documentation, but I think in general it went really well. Thank you, Sheila. I agree, Erica. I agree. And you'll hear more about the development in the next staff report. Okay. Oh, okay. Okay. Thank you. Thank you. Any, I recognize your gesture. Thank you. I wanted to comment on the big leap that we have in between 2018 and 2019, and how encouraging that looks. I know that we're very early into the 25-year projections and expectations, but I'm sure that that is a good sign as far as getting a return of value for the city of Denton, as well as Denton County, and so, and luckily, you know, everything that I read in here is that we can continue to have high expectations for these next couple of years, so, you know, as expected, it was a little bit of a slow start. However, we are still very early in this investment, and so I think this is a really great indicator of things to come, and I'm very encouraged by that, and these numbers are very helpful, and so is the way that it's being presented, so I'd also just want to say thank you for the work that was put into the presentation that really simplifies it for those of us that don't do what you do for our living. Thank you. Thank you. Any other questions or comments from the committee board members? Hearing none, seeing none, let's see, Erica, have we handled all of the exhibits that were listed there? Are we complete with 21-002? Well we provided the presentation. We also have an annual report and then a funding balance sheet at the end of that. That was provided in your backup materials. No, so I was asking, are we done with this particular agenda item, are we ready to go to the next one? Yes, sir. Okay. Thank you. Do we have a motion to recommend approval of the annual report? Yes. I'm sorry. Sorry. Thank you. Thank you. As indicated, we need to recommend approval of this report, and we'll entertain a motion. Mr. Chair, this is Jesse Davis. I'll move to approve the report or recommend approval of the report. Thank you, Jesse. We have a recommendation to approve. Do we have a second? Chair, this is Mark McClellan. I will second. Okay. Mark McClellan seconds. Do we have any further discussion before we vote? Hearing none, seeing none, we'll do the verbal acknowledgement once again. Let's see. Jesse? Aye. Tony Clarke? Aye. Selwyn Razor? Aye. Jason Tomlinson? Aye. Jill Jester? Aye. Jimmy Mejia? Aye. Mark McClellan? Aye. Lee Ramsey? Aye. And, Lee, did we miss you the first time on the first vote? Nope. You got me. Okay. All right. All right. Good deal. And then John Baines approves the recommendation as well. So I believe we're unanimous, and I don't think we missed anyone. I believe Bob Eames has joined us, at least via phone. Okay. Okay. Thank you. Thank you, Jessica. Bob Eames, we have you. Can you unmute, please? Good morning, Bob. See, we don't quite have an audio for you, Bob. So how about we do this, Bob? We'll catch you on the next one. And we have another report, and by then, we should have all the technical difficulties taken care of. Okay. We're ready to go to the next one, Jessica? Yes, sir. Thank you. We're now on agenda item, TURS 21-003, receive a report, hold a discussion, and give staff direction regarding the industrial development and tax increment reinvestment zone number two. That's the West Park TURS. And I believe, Erica, you're up once again, please. Yes. Let me share my screen. My name's Erica Sullivan, and I'm the analyst here, and I'm going to be providing a report on the industrial developments in the West Park TURS. The objective of this presentation is to overview the current and future development in the West Park TURS reinvestment zone number two. The first project that was developed in the West Park TURS was Winko Foods, and they constructed a regional 800,000 square foot multi-state distribution facility on 77 acres in the zone. Winko wanted to control their timeline, so Winko agreed to execute phase one of the reimbursement agreement with our developer, Westray, and was awarded an economic incentive to reimburse these improvements. They have 165 full-time employees and 130 million capital investment. The next project was United States Cold Storage. This is a refrigerated warehouse on a 40-acre site. And they employ 67 full-time employees with a $34 million capital investment. And they generate 1.5 megawatts per year of power use, so they are a top 25 customer for Denton Municipal Electric. Another development in the TURS is the retreat at Denton. This is a multi-family development that has been constructed, and it includes 193 units, and it's on 22 acres in the southern section of the zone. This construction accelerated some of the improvements along precision. New and future developments, Tyson Sales and Distribution. This company is planning to construct 350,000 square foot, highly automated refrigerated distribution center, and they estimate 100 full-time employees with a $97 million capital investment. They're a 2 megawatt annual electric demand user, which will add another top 25 customer for Denton Municipal Electric. This project has been paused as the company reexamines and prioritizes their expansions due to COVID-19. We remain in contact with Tyson and will bring any additional information forward when available. Our speculative developments, Denton Crossing at I-35, also known as Ironwood. This is a, at full buildout, will be a 1.2 million square foot industrial spec space along western. There will be four buildings upon completion. Buildings one and two are in the concept plan stage, and buildings three and four are currently under construction. Industrial speculative development, Exeter, what I mentioned, has completed 649,000 square foot building that will be the home to the Lowe's Home Improvement, and this is a distribution center. Hunt Southwest is developing a 23 acre site, and it's planned to have a 250,000 square foot warehouse space with a proposed build-a-suit for another 227,420 square foot building. West Park Industrial is in the planning stages, and this is a 16 acre parcel on southwestern that will be divided into two sites that will each have 100,000 square feet. This is a map of the West Park Industrial area of what's been developed inside and outside the TURS. You'll see the TURS boundary in yellow, and then you'll see some of the projects that we discussed in purple, leased and spec space, and in red, recently sold and developed. Under contract is included in orange, available is included in green, and then finally on the southern portion of the zone, you'll see the police department in blue, and this gives you an idea of what's going on out there currently. And then the final thing is a summary of the West Park Industrial development. So you'll see in the first column, you have the development itself, the estimated square footage, the status, if there's any additional square footage available, a number of these are multi buildings, and then the project type. So that you can see at the bottom, the square footage, it's roughly 1.6 million has been constructed and/or occupied, there's a remaining almost 2 million that's still planned and under construction that we can market, and then the total square footage in the entire West Park TURS is close to 3.6 million. And this was just an update to give you an idea of what's going on there. I'd be happy to interchange questions. Erica, could you go back to that last slide where you have all of the different companies and the square footage, please? Sure. Summary slide. Yes. One more. It's blocked. Try resharing. Okay. Okay. Thank you. So board members, please feel free to prepare your questions. I did have a few I was going to ask. And then we'll continue if there are some more. Tell us about Exeter. What is Exeter, Erica, or who is Exeter? Exeter is a developer that's developed spec space in the zone. And so they completed a 649,000 square foot building. And that's going to be home to the new Lowe's distribution center. So they built spec space out there. I see. Okay. And Hunt Southwest, what are they doing? Okay. So they're developing on a 23-acre site. So they're developing two buildings, one 250,000 square feet. And then another build a suit on seven acres for another 227,420 square feet. So they'll be over 400,000 for both. So Hunt then will have the opportunity to have some tenants in their property. Okay. And then I saw on the next slide that U.S. cold storage had 92,000. I was thinking they had much more square footage than that. Actually, they have about 350,000. So what does this 93 represent? That is an error. It was probably done earlier and not updated. Okay. I apologize for that. I was thinking that they were a little bit larger than that. Yes, they are. Tyson and U.S. cold are very similar in square footage. I don't have it here, but I remember. Okay. Okay. I'm going to stop sharing. Okay. So we can discuss. Okay. Any other conversation or questions from the other committee members? We have one from Jesse Davis, please. Thank you, Mr. Chair. A year ago when we last met as this board and discussed this part of the world, we talked a little bit about some of the prospects for the remaining properties, some of the challenges specifically. And I wonder if, and maybe Selwyn is a question for you as well, if there are any particular challenges we foresee for future development out there and if there's anything that this board or, you know, wearing our other hats, members of this board ought to be thinking about for those remaining properties that we'd like to see developed out there. Sure. I think, Erica, you want to, can you put the map back up while I? Certainly. Maybe it'd be easier to look at it that way. I mean, I think what you're, we really have one large piece left in that. And it's, you know, it's south of the old, we'll refer to it as the Selwyn school site. And I mean, as you know, it just recently went under contract with Billingsley who I've had various conversations with. And we'll see, we'll get the picture. I mean, I think what you're seeing is that the least attractive sites are the ones that are left and most of them because of, you know, flood issues, floodplain issues. I think the Selwyn school site that, you know, there was this pond or I want to say legal pond, not really well, well managed water. Yeah. See where they stand are under contract. I want to point to my screen that the green 80 plus net acres there. Yes. I think depending on, you know, we were in conversations with many of the people that have already, you know, that have already purchased land from us that are looking at expanding there and potentially with Billingsley again, it's, it's most likely going to be, you know, warehouse, you know, space as well. But most of the problems there have been with, with flood issues. But I think if now that you have somebody taking it under control, the Selwyn school, they'll, they'll be able to manage that. And you know, I think it's just a matter of time at this point. We have strong interest in that. But again, what, what it's going to be most likely, I think similar to what Billingsley is doing north of us and what you've already seen in the, in the rest of West park. Thank you. That answers my question nicely. I appreciate it. Sure. We have any other questions from the committee. I would just like to add that we know that the cost of improvements is going to exceed the total amount that we estimated in the project plan and finance plans. So we are aware of that. You mean to finish out the development, Tony Clark? Yeah, Mr. Chairman, along those lines, Erica, I think there was something in our package that estimated those costs. Now I was curious as to what those costs are and what the city has, has budgeted or committed to infrastructure wise to continue to allow those properties out there to be developable. Is that a good way of putting that we have a number of that or idea? Thank you. Yes. The, the project cost involves street improvements for 8 million utilities and drainage for 5 million industrial projects for a little under 1.3 million for a total of $4.3 million. These were written generically and openly so we wouldn't have to amend the plan so, so many times. So street improvements, if you want the definitions for that, that includes construction and reconstruction of paving improvements capable of handling heavy truck traffic that can provide common turning radius for semi-trailers and may consist of it's not limited to primary secondary major arterial thoroughfares and collector streets. And this is to improve access utilities and drainage. We mentioned that a number of the properties are in the floodplain. This includes the extension of water, wastewater, because this was a undeveloped area, lines along the right of ways of the streets within the district. Water and wastewater lines will be built adequately accommodate the district build out. We discussed the floodplain and then there's also adequate storm water drainage as well. And then the final project category of industrial projects, this may include grants loans or Chapter 380s and services for public and private development, eligible tourist project costs are not limited to public uses specifically, including that stimulate economic development under Chapter 380, which I mentioned. And these are outlined in our project plan and finance plans. Does that answer your question, Tony? I think so. I guess maybe Jesse or Selwyn could just expand on that. Are we are we taking the right approach? Are we investing the dollars that we need to as a city to continue to make those properties attractive for developers to come in and continue to grow that area for us? I think at this point, we mean most of everything's I mean, unless I'm wrong here, just Jessica or Eric, I mean, the only thing that's left is really development within infrastructure and you'd probably be negotiating with Billingsley as opposed to us on on water issues on floodplain issues. I think a lot of it is just, you know, there's a negotiation between us about what becomes a price on what we net out, what is gross, what is net. And that's just kind of wheeling and dealing kind of discussions. But I don't really think anything now is substantial in our area within TURS. Now outside of our area, I think there is some other infrastructure issues, but I don't necessarily think within our what we consider West Park, there's much left to do, if anything. I can add a little bit more clarification for the board. It's probably been a long time since everyone's reviewed the project plan, but in the project plan itself, there is an identification of some more specificity in the projects. Western Boulevard is a great example of an improvement that was done in conjunction with this with the TURS. And so when WINCO needed that improvement to be made, they took on those improvements and they're now being reimbursed back through the TURS. And so those are the types of projects that we're going, Jim Crystal being precision being the other kind of major infrastructure projects that were identified. The city is aware that obviously Jim Crystal as development occurs will likely need to be improved sooner rather than later. And that's something that we look at pretty regularly and we're doing a little bit more of a deep dive into that particular roadway right now in conjunction with our capital projects department. And how do we get that roadway where we need it to be to support the development that's occurring. And then the other piece of that, like Selwyn mentioned, are those adjacent pieces. So there are roadways that are immediately adjacent to the TURS that get impacted by development within the TURS. The piece of Western Boulevard north of Jim Crystal, again, I'm sorry, if you're not looking on a map, it's kind of hard to visualize, but the piece that connects Western Boulevard, a piece of Western Boulevard that connects from Jim Crystal to US 380, lies outside of the TURS. And so it has not been improved. And so those improvements are also not supported by funds from within the TURS. And so there are adjacent impacts that occur that we're looking at in a really holistic level from our team of how does the TURS impact that development and how can we best situate properties that are influenced by the TURS for future development. These specifics are actually included in the reimbursement agreement. And we work with Kimley-Horn, that is the engineering firm that the developer uses, and they provide us with regular updates on that as well, on phasing and whatnot. Thank you guys for that. Good information. Any other questions from anyone? I'm sitting here with a couple, but I'm reluctant to ask, but I'd rather defer to someone else. Okay, we'd like to entertain a motion to accept the recommendation at this point. So no motion needed on this one. This was just a discussion. Last year, we recognized that there was probably a level of detail that needed to be provided to this board related to development that's not required as part of the annual report. So we wanted to give everyone the opportunity to discuss what's happening in sort of a more global perspective as opposed to what's statutorily required. So we're here to answer questions or take any guidance you have related to other information that might be helpful specific to the TERS, but no motion is necessary. Well, Jessica, with that being said, I think I will ask the question, just kind of to continue Tony Clark's question. And I hope this isn't a bad analogy. I think there was a movie called, what, "Seven Brides for Seven Husbands" at one time, and I'm thinking the seven of the husbands, excuse me, several of the husbands have been taken away and now we have the less favorable husbands left and it's going to be hard to dress them up and make it simpler. Yeah, you got it. Yes. They need to go to the gym. Yeah. Okay. All right. Well, good. Some of them, I think, are under construction. Okay. All right. Thank you. But they're beginning to look good because all the other ones are gone, so… All the good looking ones are gone, so now we're working on the ones that they were… Yeah, so they look pretty good, though. So they're beginning to look okay. I don't want to make a reference of 2 a.m. at the bar, but yeah, that's good. Thank you. Thank you. All right. All right, so do we have any concluding items according to the agenda? Okay. So we'll entertain a motion to adjourn the meeting. I'll make that motion. Lee Ramsey makes the motion. Need a second? Sure. Sal will make the second, too. All right. So thank you. So I'm just going to be brief here. If you feel good about this, just wave your hand, and we'll go from there. We'll go ahead and adjourn the meeting. And thank everyone for your participation today, and Happy New Year. Hope that 2021 is a good one for all of us. Thank you. Thank you. Thank you. Thank you.