Nov 10, 2015 City Council on 2015-11-10 2:00 PM

Good afternoon. Wanted to welcome everyone to this Tuesday, November the 10 th, 2015 meeting of the Denton City Council here at 215 East McKinney Street. We do have a quorum. So we will proceed on to our first agenda item in our work session, which is, before we do that, we don't have any, I guess, clarification. I just wanted to sort of share with the council. We have a proclamation for Veterans Day this evening. I'm going to sort of deviate a little bit from the normal process as I'm up there before I read the proclamation. I just want to give all the council members an opportunity, if they want to say something during before that. You're certainly welcome to. You don't have to. But I know sometimes I'm the one talking, but I think there 's some things that you guys want to add as well. And Mayor Pro Tem, if you wouldn't mind, if people call in, you know, request to speak during that time, if you wouldn't mind running that part of it. >> Thank you. >> You bet. Thank you. >> Thank you. >> Thank you. >> Work session report A is receive report, hold discussion , give staff direction regarding a proposed economic development, chapter 380 agreement with O'Reilly Hotel Partners, Denton, for convention center and hotel development to be located in Raisin Ranch Town Center. And a proposed third amendment to the economic development program grant agreement between the city of Denton and Allegiance Hillview, which is red development. And I presume these will be presented together. >> Correct. They will. And I'll ask Mr. John Fortune, our assistant city manager, if he would present his item to the mayor for your consideration. >> Sure. >> Okay. >> Thank you, Mayor, members of the council. I appreciate the opportunity to be before you again this evening to talk about this project. As you know, we have been talking about the convention center for some time. And so tonight we've put together, this afternoon we've put together a presentation to explain to you the proposed chapter 380 agreement for the convention center project, as well as the necessary revisions that would be required to the red development 380 agreement should we move forward with this project, as well as a management agreement that is a component and integral part of the chapter 380 agreement proposal. We also have with us today Tim O'Reilly with O'Reilly Hospitality Management, Scott Wagner with red development, and Kim Phillips with the convention and visitors bureau. So we have some resources in the audience and here with us today should there be any questions that we can't respond, staff can't respond to, perhaps they'd be happy to address them as well. So with that, I will tell you that I'm going to be giving the first part of this presentation and Amy is going to step up and join us for the second part as we go through the red 380 agreement. So just in terms of background for those who have been with us for a while, I know you've had a lot of background on this, but some folks watching may not be as familiar with this project as others. And we really, when we talk about the proposal today, we often tend to want to compare it to the previous project, the previous proposal. What we're really referring to is a project that started in 2013 when the council approved a master development agreement with the University of North Texas and O'Reilly Hospitality to construct a convention center on the UNT property. And that particular project, I'm going to go through the differences between it and that proposal and today's proposal here in just a few short minutes, but I wanted to kind of set the stage as to where this project really generated from. The council may remember that after you approved that master development agreement in December of 2013, that started a feasibility period by which the council started a number of activities. And I lose my, I'm not touching it. We started a number of activities. One was the design of a convention center. We started actually, we engaged an architect to help us design the convention center. We had established and developed a contract to hire a construction firm. We also were, we also created a tax increment reinvestment zone and we were taking a lot of steps that were necessary as it was laid out in the master development agreement to help us get to the point where the council could get to what was called the financing viability period. And it was during that period, in the October, September, October, November time period last year where the council was asking a lot of questions about how the project would be financed. We solicited and sought from staff a number of documents of financial performance and scenarios that we provided to you at that time. I would also just like to point out that we provided some of those back to you today at the request that the council gave us last week. So I'm just trying to set the stage for where we are today. That project didn't move forward the council's direction and shortly thereafter we were approached by the R Riley group to consider a fairly similar project with similar terms as the previous project only in the sense that we can talk about the same revenue that we had previously committed. And so that is kind of setting the stage for today and I'd be happy to go into that in a little more detail here in just a few minutes. So the proposal today is we're talking about a Convention Center project that would be located on the Razor Ranch development project. And if you can bear with me, I'm sorry this is not facing north. This is US 380, this is I-35. North is, well if you can see it, north is where the arrow is here and we're talking about a 13-acre development site within the Razor Ranch development. The current schematic drawing of the hotel and Convention Center, I've got a couple of renderings here. This would be looking from the town center toward the hotel and this would be the east and west view of the hotel. So this just kind of gives you an idea of what we're talking about as a very large building. It's a 318-room hotel and a 70,000 square foot Convention Center. And these are the same size hotel and same size Convention Center that was contemplated last October when we were talking to you previously. What I'd like to do though is spend a few minutes just talking about the then and nows. As I've just mentioned, the project is on the Razor Ranch town center as opposed to UNT. UNT's no longer would be a part of this particular project. We've talked about the size of the Convention Center. We'll talk a little bit now about the public financing or the public debt. The previous project, if you remember, the city to fund the Convention Center was going to issue municipal bonds to be able to do so. And we were going to issue the debt. We were going to finance the construction of the Convention Center. We would be responsible for the debt payments. But what we had agreed to do or what we had contemplated doing in the Master Development Agreement was to take all the project revenue, the hotel tax, the property tax, and the sales tax and offset the debt with those revenues. The balance of anything that we received from those project revenues, O'Reilly Hospitality Group had committed to paying a base rent to the city so that we would have our rent, our debt payments taken care of and essentially satisfied through those revenue streams. Now under the current proposal, the city would no longer be asked to issue any financing for the project. It would be privately funded project. The O'Reilly Hospitality Group would fund and own the Convention Center. And they would be responsible for issuing the financing instrument to do so. And the city would no longer be asked to issue any public financing. It's a pretty significant difference. But also in the previous project, we had agreed to create a tax increment reinvestment zone. The principal objective of that would be to apply, take the growth in the property value and apply it toward the project debt. That included revenue from the city's property taxes, school district debt, a portion of the school district's debt tax, as well as a requirement from the request to the county. Toward the end of the last year, the county and the school district declined to participate in that agreement. So we disbanded that TURS. But this particular project, the proposal we're talking about today, does not require, would not contemplate the creation of a TURS, which is a significant difference. I've already talked about the ownership. In the previous, last week somebody asked me about what are the project revenues that we're talking about for this project versus the previous project. The primary difference is, I've talked about the big three, the hotel occupancy tax, property and sales tax, coming from the project boundaries itself. The previous project contemplated additional hotel occup ancy taxes coming from other hotels throughout the city, a small portion, as well as the TURS revenue. Whereas now we're not talking about that. The only difference between, you know, the only new revenue that we're talking about now is the construction sales tax component. And that would be the capturing the sales tax tied to construction activities that we typically would not capture. It's not revenue that we're getting today. It's all new revenue. I mentioned a few minutes ago that in order for the city to be able to participate in the use of hotel tax funds, that we would have to have a management responsibility for the convention center. Now this is a very limited responsibility. O'Reilly Hospitality would be responsible for the day-to- day management oversight of the facility. They will hire the employees. They will be responsible for booking rooms and booking events. And they will be responsible for marketing on a very broad scale the type, the facility, the convention space, the room space, and those type of things. But the city would, in order to ensure the use of our hotel occupancy tax dollars are spent in accordance with the state statute, we would need to have a limited responsibility. And we contemplate that those responsibilities would be somewhat isolated to sales and marketing. The type of assistance that the CVB currently provides to try to assist conventions or some type of entity wanting to host an event here in the community, we would just expand that type of activity for the convention center through our contract with the CVB. So that's really the purpose of the management agreement. And that kind of gives you, in a sense, the differences between what the city's limited role would be versus O'Reilly. The management agreement that I've provided for you in the backup, and I realize I've given you an awful lot of information, has a very detailed breakout with the city's responsibility would be versus O'Reilly's in regard to the management agreement. One of the things that I also would like to talk to you about is the overall economic impact. I know that just from studying this for some period of time , that the average convention delegate spends two to two and a half more times in a community what just a daily visitor would spend in a community. And so for the convention center, the average daily expenditure we estimate based on just the surveys and the anecdotal type of research that we've done, it's estimated to be about $140 per day. So you take that $140 per day times the annual room nights related to just conventions that we anticipate would be booked through the convention center . Not leisure travelers, not folks just passing through on their way somewhere else in the state, but those coming to Denton for specific convention bookings, we estimate that to be $6.5 million a year. Can I ask a question about that? So when we're talking about that, part of that money is going to the hotel itself for the room. Part of it may be going to that hotel for meals, but part of that is going for what else? Shopping, entertainment, meals at other restaurants. That's really what kind of provides some nice synergy with the location in the Razor Ranch town center is the proximity to all the other shopping and entertainment that would be accessible. And these numbers that we're using here, they're coming from what source? I worked with the Convention and Visitors Bureau, and Kim, I don't remember the source, if it's your number or if it was from another national source or something. So perhaps you could, we can get that in. You'll have to come up here. Sorry to call you up so quick. I just don't remember that. It's taken from a formula that is used by the Texas Association of Convention and Visitors Bureaus and at a national scale from the Destination Marketing Association International. And so for destination marketing organizations like us, Convention and Visitors Bureaus, that's the formula that we use to figure out economic impact. So this isn't a local formula, it's a national formula. It is a national formula, but to your point, it is, you break it down by population and how far you are from major metropolitan areas and so forth. So the expenditure is actually much higher than that in, for instance, if you're in a place that's isolated where you're either in that city or you're not. Whereas in a place like Denton, you've got so many options around you, so we stay with a much lower conservative number. All right. And as they do those kinds of formulas and things, is there any work that's done on formulas to estimate what that means in terms of, aside from the hotel, the money, the tax money from the hotel, which is going to go to the project. Do you have tax monies or does it say anything about the jobs, the number of jobs that that kind of spending creates? Well, I know that from the hotel and Convention Center, we 're talking about 200 jobs. Just in the hotel itself. Just in the hotel and Convention Center. And I think your question kind of leads to this second part , the national average economic multiplier for Convention delegates is $2. So it's two. So every dollar that's spent of that $6.5 million, we estimate that it has a trickle effect into the economy of another $6.5 million. So a total of $13 million on an annual basis. And that is jobs in other places and other materials and supplies and goods and services. And so just conservatively, if you just take the $6.5 million figure and you multiply that over a 25-year term, that equals $162.5 million of economic activity that we would anticipate being generated through this project coming to the community. Real quick question. On the 140, you said that that does include the room night typically. What? I mean, so I think it's very I think this is a very conservative number. I think it's actually a lot higher than 140. When you consider the room night is going to be approximately 140. Okay, I just want to make sure that we were just taking an extremely conservative approach. And I didn't want to come up with a number that we couldn't support from some standard that Kim could provide. Sure. Okay. And that's based on. You have to come back up here, Kim. Yeah. That number is based on the average daily rate in a Denton hotel, not the average daily rate of a hotel. Okay. All right. Which is what? The average daily rate right now is about $78. Okay. That average daily rate though is figured on all the hotels in Denton, not just the convention delegate. Sure. Hotels. Right. Which if you limit it to just that, we're looking at about $90. Right. For average daily rate. But right now in Denton, our hotels, our brands are actually commanding the rates that they should be or very close to what they should be for their brands, which is the first time ever in Denton that that's been the case. So based upon what you said, if we're using about $80 in that 140 formula to represent it. So you're saying about $60 per delegate per night is spending other than just the room, at least based upon the Denton numbers. Okay. And that's figured into, it's a big picture. It's not just how much do they spend going out to eat, but it's also a cost per head for how much the meeting planner spent on paying someone to put tech cloths on the table or buying flowers or centerpieces or other expenses, printing their programs or what other expenditures may occur in the, in specifically related to that meeting. And then on top of that is what delegates spend outside of that meeting putting gas in their car, going to the store and picking up science medication because they got a cold. Sure. And then they start adding up. Okay, great. All right. I think that's helpful. Thank you. Well, and just if we could add to that, how does that affect the tax base then? That's $60. Is there a way to see what that amount is or just a guess? Well, it would be a guess at this point because we don't know how much would have, you know, translate into, translate into jobs where people would pay income tax or buy a home and pay property tax or buy goods and services and pay sales tax. But we do have a pretty good feel that that's going to generate a sizable amount of tax revenue. But, you know, I would want to point out it's not $162 million in new taxes. It's economic activity. Okay. Yes, ma'am. Councilman Wasney. Not all convention centers are economically viable. So what protection to the city do we have in this agreement if this convention center fails? Yeah, that's a really good segue into this next slide. And I appreciate the question. You know, as we talked about previously, the city was responsible for issuing the debt. And so long term, if the rally group were to somehow no longer be able to operate the convention center in the previous project, the city would still be, had been responsible for that debt. We still would have been responsible for paying the obligations that we had for the $28 million of debt plus the interest. Under the current proposal, the city is not issuing that, so that any funding for this project. So right there, we're already at much lower risk from a financial standpoint. And second of all, if you remember the type of revenue that we were talking about, just project generated revenue. It's the hotel tax, sales tax, and property tax. The way the Chapter 3D agreement is written, if they don't generate hotel tax, property tax, and sales tax, they don't get a rebate. So they're going to be very incentivized themselves to be able to generate that revenue. And so the city's protected in the sense that if they don't generate it, we don't give them a dime. We don't give them any type of revenue unless it comes from this project. If they don't get that incentive, they're not likely to do this project. So it's kind of a win-win. So here's an opportunity for the city to use the revenue that we were contemplating using previously on a concept that provided some level of risk to the city on a project now that produces virtually no risk to the city and is only, we 're only obligated to provide it if it's generated by the project itself. And so I don't know if that answers your question exactly, but I mean that's how I'm viewing the differences in the risk for the city. >> Let's just say the economy turns and goes south and the project is half finished and the developer walks. Not anything that we want to see, but it certainly is. When I talk about protecting the city, it's about protecting that whole economic development area that we call Razor Ranch that we have high hopes for. So in terms of, are there any protections that can be written in in terms of, because we would be stuck with a shell or half a shell economic blight in that part of Razor Ranch. If it didn't work, where is the entire risk on O'Reilly and not the city? >> Yeah, it's really since it's not a city facility in this instance. In this current proposal, the city would be in the same position we would be if there was another major anchor tenant in the community who decided that they needed to move on or had to close their doors. We would certainly be interested in trying to make that project successful. We would certainly work with whoever the entities would be that we could to be able to make sure that that would be a successful project to moving forward, but at the point of that unexpected event to occur, the city would not have any responsibility for that project . >> Thank you. >> Okay. I think I've covered most of this. I did want to just make the point from this slide that given the fact that we're talking about a 25 year term, that's the same similar term of debt that we were talking about previously in the life of the master development agreement that we had contemplated. Even though the principal and interest payments that we would be putting into eligibility to be reimbursed is $54 million. We estimate based on the current pro forma, and again, I hesitate to even call it anything but just a best educated guess at this point. Because it's such a long term period, we're trying to predict what's going to happen between now and 25 years from now. We estimate based on current projections that that's really only going to be about a $35 to $40 million return that we would have to provide to, a rebate that we would be providing during that time period . I did mention the construction sales tax earlier. What we're talking about is during the construction period that any sales tax would be generated from the purchase of construction materials. Up to $850,000 would go back through the incentive. And after that $850,000 is captured, which I think is based on talking to Tim O'Reilly, we don't know that we would even get to that level of reb ate. But anything over that would go to the city 50% and to the developer at 50%. Now, I asked Caroline to make a copy of this for you because I sense that we're losing the visual here. And so I wanted to, this was in your backup, this next slide was in your backup. But I wanted to make sure that you had a copy in front of you. What I wanted to do is take a few minutes and put all the numbers on one page to be able to help illustrate for you the differences financially from the city's perspective with this current proposal and what we were talking about previously. And so the basis for this information came from the detail that I provided to the council last Friday. If you recall, I gave you a very long, Joey's got it in front of him, it's a very long set of, a large set of long spreadsheets. And those were financial performance, there was a set of 13 of them that the council had requested that we run last year. So when we were contemplating this project last year in terms of the financial viability, these represent the most current set of financial performance that we were looking at at the time. There was one of the performance, which we call the baseline performance, was actually the March performance, March 2014 that we were working from. And then that represents the left column. And then the second column from the left in the blue, that represents the lowest financial impact scenario that the council had asked us to look at. And then the third blue column from the left represents the highest financial impact scenario that the council had asked us to look at. So I'm trying to give you the baseline and kind of a low option and a high option. So what I'd like to do is walk through this with you if you will. If you remember, we were talking about 25 years at that time and looking at a 6% interest rate. That would generate a principal amount of project revenue, $28.85 million. And interest approximately of $25.6 million for a total principal and interest debt payment obligation that the city would have of $54.4 million. Then kind of walking to the next set of section, you're looking at the total project revenue. That tells you that what we were looking at in terms of hotel occupancy tax from the project itself, the $2.6 million was revenue for hotel occupancy tax that was coming from other projects or other hotels in the community. The property tax itself from the project, the sales tax. And then you can see there's a $2.7 million, almost $2.8 million figure there that was established or created from the contemplated TURS revenue that would come from the school district in the county. Total project revenue was $43.2 million in that baseline scenario. From there, if you were to kind of go back up to the debt amount and think of $54 million, and I'm really sorry I can 't show this to you on the screen. But if you think about the $54 million minus that project revenue, that left a gap of $11.2 million. And you'll see that in the next section of numbers. That $11.2 million represented the rent payment that O'Re illy was going to pay to the city to make sure that all of our debt was taken care of. And that was the way we were trying to minimize the risk at that time. So the very bottom column represents the city's obligations . So you take the revenue that we listed in the second grouping of boxes, this revenue right here. And you take the asset replacement funds that the city was setting aside for the long term maintenance and upkeep of the convention center. We knew that over a 25 year period we were going to have to replace a roof. We knew that we were going to have to replace the air conditioning system. Every seven years we had to update the carpet and redo some of the interior pieces of the facility. We had a financial commitment over that 25 year period of just under $7 million. So the total city commitment that we contemplated under our baseline scenario was $49.9 million, almost $15 million. So using the same approach, looking at the lowest financial scenario, we had the council asked us to look at a 4% interest rate over 25 years. You can see that generated a $45 million all in principal and interest payment obligation for the city. The revenue numbers dropped a little bit because at that point in time, the council asked us to assume no revenue from the TURS, no school district or county participation. And so that changed the numbers a little bit. So if you go back to the bottom line again, under this scenario, the city's obligation would have been $46.5 million as opposed to the $49.9 million under the baseline scenario. Then just without going through a whole lot of details and repeat that, the high scenario looked at a 30 year debt term and a 6% interest. And that brought our, with the same foundation principle of how we calculated these numbers, that brought your total all in at $60.4 million. And so the time that we were looking at this project last year, we were looking at a pretty broad range of obligations that the city would have had we moved forward with that particular project. Under the current proposal that we have before you, the private financing is estimated, the cost of the convention center is estimated to be $20 million and so using the private financing models that we 've been discussing, the interest on that equals about $54 million. That favors almost right in the middle of where we, it equals the baseline scenario that we had been contemplating and falls within the $45 to $60 million range that we had previously looked at. Under this particular proposal, there is no other hotel occupancy tax revenue, so that's not revenue that would go into this project as was previously, but we do have the construction sales tax contribution, which is the $850,000. So the city's revenue that we would be committing over a 25 year period is estimated to really be about $37 million. And again, that's the lowest city contribution of all of these high and low scenarios in the baseline from the previous proposal. Under this particular proposal, since this is O'Reilly debt , the $54 million in the city contribution of 37.4 or 37.1 million, that leaves this 16.9 left that would be an obligation of O'Reilly. Whereas previously that would be a rent payment coming to the city, that's something that they're going to use to satisfy their debt obligations, their debt requirements. >> Excuse me, John. >> Yes, sorry. >> Thank you. >> Sorry. >> All right, there are a couple of different numbers in that second box on tax revenue. We've eliminated the other hot funds because we were anticipating needing to pull some money from hot funds generated by other hotels. And we're not going to have to do that anymore. And that should make the other hoteliers happy. This chart shows a little higher amount for the property tax. Is that because it's not on tax exempt property, but it's on taxable property? >> I think these are just updated estimates that we've had more time to look at it. We've, it's fairly close. Over a 25 year period, this is, I would consider that a fairly similar estimate. It is a little higher. I'd have to just go back and look. I know like the 7.9 million is because it's a 30 year term versus a 25 year term. >> Why do we estimate the sales tax to be at the higher end ? >> Well actually I can answer the question. The property value is based off occupancy and average room rate. >> Okay. >> And over a 25 year period, I believe that the scenario of the performance we've looked at now has dropped the occupancy rate a percentage or two in some of the out years. And so that equated to a lower calculation of property tax. On sales tax, I believe honestly in looking at this with Caroline, I don't believe we included the restaurant sales tax on the previous proposal in our assumptions. I think this includes that. >> Okay, thanks. >> Quick question for you. John, you talked about, and I have some others, but I just, while you're here. You just said that we weren't going to be paying other hot funds, other than what was generated by the project. And I think that was one question I had. So I'll, is, we basically, and I'm going to call it Convention Center version one. We had allocated through hot funds, through the Convention Visitors Bureau, some additional amount, about $150,000 a year for sales and management kind of activities for version one. Version two, we're still going to have some of those. So my first question is, what's the difference between version one and version two from the CBB's obligations? And number two, are you saying that we're not going to be requesting any more additional hot funds to go towards the CBB budget to handle those management activities, that's not what you're saying. >> That is not what I'm saying. And I was going to close this chart by talking about the CB B. But I can address it right now if you like. I mean, we had anticipated a baseline increase in the CBB budget last year for Convention Center one, project one, of approximately $180, 000, $175,000, $180,000 a year. I was going to go to hiring additional staff for marketing and for sales. And if you remember, at that time, we were going to actually have a fairly large CBB office housed and located at the Convention Center. Under this proposal, while it's contemplated there would be an office, we're certainly not looking to man and staff it at the same level that we had previously. Though, in talking with the CBB, there is a level of work that we're asking them to do to promote this Convention Center. And through our management arrangement, we believe that there is some synergy and associated with their continued involvement at that same level. So we could certainly continue at the same level, Mayor, and fund them at the same contemplated staffing increase that we looked at at the last project, which is about $180,000, which is not in these numbers here. Or we can, through discussing this with them and with the council and the Hotel Occupancy Tax Committee, we can certainly evaluate what level of funding we want to go to. I don't think it would be more than the last project. I somewhat suspect that it would be significantly less, depending on what level of activity we ask them to do. I think, based on the management agreement, what they currently do today, they could certainly handle that. Although, Ken may disagree with me. If we want to do a really good job and do a really enhanced and take advantage of the amenity in the facility we have, I think it would be to our best interest to try to look at providing some additional resources to them to be able to do that. >> So you just lost your chart. >> And I'm probably- >> No, no, that's good. So in your chart where you have other hot funds under the three city financed, is included in that, I know we had the $100,000. >> That's just that $100,000. >> So it's not the one- >> That's not, that has nothing, there's no CVB numbers in this figure. And the reason why I didn't do that, Mayor, is cuz we hadn 't really determined what level yet that would be for next year if we move forward. >> Sure. >> So I didn't have an apples to apples way of being able to compare those. >> Okay. >> So I didn't wanna confuse the issue. >> Sure, but there will be some- >> There will be some, and the way I'm answering your question is it was $180,000 roughly for the previous project if we started there as a base, use that as a guide. It could be that or less is the way I'm looking at it. >> Sure. >> Okay, yes, Kevin. >> Sorry for my tardiness. Thanks to technology, I was able to stream the audio on my way over here from ATC. But just on this chart, and I'm sorry, it's not up there. And I think just cuz this is a public document, and I think there still is some confusion between, what do you call it? Convention Center one, Mayor, concept? >> Yeah, or version one. >> Version one, yeah. >> Yes. >> When we use the terms city obligation, which makes a lot of sense for the first three columns given that we were financing it, the OHPD financing. It's not technically an obligation, which gets to her. >> No, it's not an obligation. It would be- >> It's a contribution if the revenue's there. >> It's a rebate if it's there, you're right. >> And so all the obligation really is on the person holding the debt, and they're gonna have to perform. So just because this is a public document, and I don't know if we're gonna be using this in the future as we discuss this, but just that terminology certainly makes sense for the third. It might be confusing for that fourth column. >> We can certainly look at revising it. >> Yeah, and I'm sorry, I don't even have a solution of another term. I'll think about it. >> Yes. So to back up to the hot funds in CVB and the monies that are going to be needed to operate CVB- Convention Center. The proposal before us means those monies have to come from someplace else. That the pro forma we have right now, the monies to run CVB are not coming out of the hot funds generated by the Convention Center Hotel. >> That's right. We would treat the CVB, since the benefit to the Convention Center benefits all the hotel, the entire city, we would treat the CVB allocation through the Hotel Occupancy Tax Committee as a request like you consider every year. And it would be based on their total allocation coming from all of the hot funds. >> Even though they're asking to hire additional staff specifically to run the Convention Center. >> Well, it's not to necessarily run the Convention Center. It would be to help assist in the marketing and sales for the Convention Center. >> Marketing and coordinating, why? >> But what includes, and I didn't go through this detail. One of the elements that would be in their contract, it is in the management agreement with O'Reilly, is that the city would be responsible through the CVB of helping to place delegates that could not physically be housed in the Convention Center Hotel in other hotels. In other words, their activity would include not just marketing the Convention Center Hotel, but all of the hotels. What I've learned from working with Kim is that so often that, especially in a Convention Center this size, not everybody's going to be able to stay in the same hotel. And so there will be a need for coordination and a need for working with those other hotels. And that would certainly be an element of their activity. >> But that's my point. Those people are generated because they're coming to a convention. So I think it would be a logical move that hot funds collected through a convention. A for whatever CVB expenses there are that are going to be piled on top of this. So that it becomes more of a pro forma where it pays for itself, rather than dipping into other funds, other hot funds, other city funds to run this. So just a suggestion and thought on that one. >> Thank you. >> Councilmember Riggs. >> And in regards to the performance measure that you mentioned, the 380 agreement has. Where can I find that? Is there an occupancy number or total sales or what? >> The pro forma that I was referring to? Actually, we provided it in the back out. It is represented on those sheets that were very long spreadsheets that we provided to you Friday. The occupancy, I think the max occupancy of the project is 76%. And I think the average room rates in the 140 to 150 range over the average over the life of the pro forma. >> To continue to get the rebate, those are things that have to be met? >> No, no, no, those aren't things that have to be met. That's just, when we say pro forma, that's just the financial plan of what they anticipate generating. The incentive for it in the 380 agreement is if they produce the revenue, they can get it. If they don't produce the revenue, they don't get it. And that's really the pure piece of it. Now, there are other elements in the 380 agreement, which is in the back up, that talks about the condition and the quality of the hotel. >> Okay. >> The quality of the convention center to make sure that we're not incentivizing something that's a lesser standard than what we were previously contemplating or that we would want in our community. So the chapter 380 agreement that we provided to the city council and it's in your back up has a list and a fairly complex number of requirements that they would have to meet in order to continue to receive the rebate. It's not just revenue they produce, but it's maintaining the facility in a quality condition. >> Councilmember Hawkins. >> Yeah, I want to go back to the CVB. John or maybe Kim can answer this too. Can you explain how the CVB will work kind of in tandem? It almost seems like their center location will be downtown and these will almost be like satellite locations. Everything will be working in tandem. >> I think Kim could answer that question better than I could. >> That might explain. Thanks Kim. >> Yeah, our mission as the Convention of Visitors Bureau is to sell the whole city. So the convention center is just another asset with which, a tool with which we will sell the city of Denton. So I don't know exactly if you're wanting me to talk about- >> Well, are we already doing this? I mean, this isn't even a new idea. Don't we have a location at the Golden Triangle Mall where we kind of do this a little bit or? >> For the welcome center, we do. >> Okay. >> Yeah, we do. And that will expand at Golden Triangle Mall first and then eventually at the razor ranch in the lifestyle center that they'll be building there on the south side. >> Sure. >> And so yes, there will be that presence. But I think what the convention center, the discussion that I think you all are having is, what is it we're going to be doing that we're not doing now ? >> Right. >> What is that activity? And it's not just staffing. That's, for instance, I'm looking at a proposed budget. I guess they have that in their, okay. I'm looking at a proposed budget that we provided to city staff as a way to look at what is our activity going to include, specific to the fact that we have this asset in our community. We do group marketing right now. To give you an example, our group marketing right now is minimal. Our total sales marketing effort for groups right now excluding staff is right now, well if you include staff, it's $166,000, okay? That's for group tours. That's for small meetings. Which, by the way, just to give you an example, from January through June, we, the CVB itself dealt with 107 different groups, group business, without a convention center, okay? If you add a convention center on top, you're adding a whole layer of business that's not something we do at all right now. We don't market it and we don't service it because it doesn 't exist. This is a whole nother product, a whole nother type of business that would be unfolding in Denton. And it requires sales, which we do see as a partnership with O'Reilly. And in fact, we've already met for the Convention Center one, or for version one and version two. We've already been in discussions with Tim's sales team, Bob Fugazi in particular, and looking at what their sales activity will be. And again, just to give you a visual of what this looks like, we're talking about not just buying ads in a magazine and hope somebody sees it and goes, oh, gee, I'm going to plan a meeting and go to Denton. It's not shot in the dark like that at all. It's very, very targeted to specific types of meetings markets. Where we've talked with the O'Reilly group so far is that their focus would be in a much larger scale. Of national and international type of business where the CV Bs would focus primarily in the state market, which is for instance the state association market, which we've talked a lot about through all these projects. Because that really will be the primary business of this convention center. The size, the size of the groups, and the fact that there's so much available right here in Texas. And we see a partnership with them if you look at, well you can't, but looking at our budget for instance. If we were to do the Connect Texas trade show, that's one. The Connect Texas trade show, the price tag on that is around $3,000. That's just one. And so if we were to look at that expenditure to generate leads and business, that would be something that we go after, whereas the O'Re illy group may be going after international government meeting planners or some such like that. There are thousands upon thousands of associations like that in Texas and then beyond. So we would divide and conquer. That would be our strategy. There are some things, for instance there's one called meeting planners international trade show. That would make perfect sense for us to perhaps co-op on completely. Half and half or O'Reilly purchases the actual admittance, the exhibit space if you will and we send the staff that actually works the show and brings the leads back. There will be a lot of that. That's the unknown at this point. What will we do? We've got to look at their budget, look at ours, where can we share? What are the resources that we're going to have to work with? But that is money that does not exist in our budget right now. We've never budgeted or expended monies to go after that kind of business because we got nowhere to put it. So it's a whole new layer of marketing that we've not ever done. >> Go ahead, yes. >> So then to be clear, if this happens and you now have a convention center to market and to coordinate with those folks, it's going to mean that you're going to need more money in the CBB budget. >> Yeah. >> And we've all discussed that in version one all the way through. And to be clear, the money that will go to do that is not from any city tax funds, it's from the hot funds. That's the only place that it will come from, is that correct, Chad? >> That is. >> Okay, no other place. >> And the hot funds are dedicated to promoting the city, not specific hotels. >> In fact, required by law. >> Yes. >> And very limited in their uses. >> Right, and so the convention center is- >> You can't use those funds to repair potholes. >> That's exactly right. >> All right, just to follow up. >> I'll go fast. >> And just to follow that up, that's kind of where I was getting, this is more of an investment. >> You think we are growing our hot funds by spending this money? >> Absolutely. And having a product like O'Reilly at the average daily rate level and the convention rate levels that we know they're going to be able to command, it brings everybody's rates up. And that's what we're seeing right now without even having O'Reilly on the page. You bring O'Reilly on the page and those rates get way up where they need to be, especially when we're talking convention business. >> Councilmember Wasney. >> You actually justified my point. And my point was, the convention center is going to generate a lot of money in terms of hot funds. The way the plan is structured today, 100% of those hot funds go to the developer, correct, yes or no? >> Off of his property only? >> Yes. But if that's the plan to give him 100% of those hot funds, my plan is to keep some of those hot funds, justifiably so, to help pay for the increase in work that CVB is going to undertake. because you just spent five minutes telling us everything in addition that you guys are going to have to do. My point is, if it's hot funds convention center, then it needs to fund CVB in terms of that additional responsibility and workload that you all are going to do that you don't have right now today without a convention center. >> Question, was that? >> Yeah. >> Okay, Councilmember Briggs. >> It's okay, she can. >> I'm good. >> Anybody else? Yes, Councilmember Rodin. >> What's the price tag we're talking about in terms of increase of expected funding? I mean, I've got the budget open looking at Chamber of Commerce, CVB since 2013 all the way through this last proposed budget. Of course, we did also agree to an additional $200,000 because of the new welcome center. When we're talking about in real dollars and cents, the increase via staff or programming or whatever, do we have an anticipated budget for that? >> It was, at the same level that we had last time, was $180,000 increase over what we currently have in the CV B budget today. >> And that's not currently reflected in the current budget ? Or is it? >> It's not, it's not. >> So it's an anticipated increase starting what year do we think we're next year? >> You would want to start next year. We'd start at a limited basis next year to start ginning out for, during construction, some of the pre-sales activities. But really 2017 would be your first full year that you would have the full 180 in the budget. >> Yeah, I mean my understanding of being on the Convention and Visitors Bureau Committee or what, I don't know what the proper term for that. >> That's good enough. >> Is that these guys aren't focused on one thing. And as they're selling the city, which they do quite well, they're going to be promoting all the hotels. In fact, several other hotels sit on that very board. And so I'm quite comfortable with the idea of just hot funds in general. I mean this is precisely what hot funds were created for, is this sort of marketing of a city to put heads in beds. So if it comes out of a general stock of hot funds, which we all anticipate are going to increase, I think that's as fiscally responsible as any plan we have. >> Go ahead. >> Okay, well, I would like to conclude, just in my final comparison here, you can see the city and Kevin pointed out obligation, but the amount of revenue that the city would be putting forward in terms of a rebate. Here's $37 million compared to the 49, 46, or 60 in the different scenarios that we looked at previously. So just to give you some basis for comparing the options. >> Go ahead, Council Member Briggs. >> And is that money that would fix potholes? >> No, ma'am, because this is all generated from this project. The only thing that you could use for general purposes would be the sales tax and property tax. And that's revenue that we probably wouldn't get if the project doesn't go forward. So if the project doesn't go forward with the incentive, that's not revenue we would have anyways. >> But we're not going to have it anyways. >> Not during the term of this agreement. >> Right, yeah. >> But I would like to point out that it's estimated, and we talked about the turge previously, and I know it's not city revenue that's being generated, but we do estimate approximately $17 million in additional property taxes to the school district and the county during this time period. And so I think that is an element that would be a positive for the community that we don't show on this particular- >> Say that again, the number. >> That $17 million in new property taxes for the school district and the county. >> That's correct, it's like 14 something for the school district and two something for the county. >> Councilmember Johnson. >> Yeah, so having been one of those road warriors for 15 years, I was on the convention circuit working trade shows all the time, and that's $60 a day. Basically, if you back out of the 80 bucks for the room, the 140, that's $60 a day. And what the average person would spend outside of their hotel room, I think, is pretty light. And I left that world ten years ago, so I think it's very light. What I was thinking about, Kathleen, when you were talking about the people that are going to, that 180,000 bucks we spend for the CVB people that are in there should be funded by it. For a month there, I was tracking, and then I got to thinking about, part of the issue we have today as a CVB, and we've talked about it a lot in the chamber board and on the CVB board is we have a visitor, they walk into the lobby of the hotel and they ask the person behind the desk, where's a good place to go eat? And you have varying degrees of knowledge base standing behind the counter in terms of knowledge of, well, what do you like to eat, or how much do you want to spend, or whatever it is. When you go to a convention, you've got that information resource there, right? Which typically aren't people that are necessarily employed by a given convention or by the hotel, but they're somebody that has knowledge of the city. And I think it's typically CVB people. And you're asking for, I want to go eat, where's a good place to go see a movie, are there any live shows in town tonight, is there any live music? Am I going to a great sports bar, whatever it is. Those are the type of people that you, in my mind, that you want there, right? Because they're promoting the city, the people are saying what's a good place for this or that. And so I started thinking, I liken that to the visitor center. I mean, we've got our new visitor center downtown and we all got behind that because for obvious reasons you want people to go there and have a resource for them to get good information about all the things that are available to them in our city. So that's kind of how I would think about these people. I understand we call it a management agreement, but what they really are is they're there to sell the city to all of those unique visitors. Cuz it may be the only time that people ever come to our city is to come to this convention. And that may bring them back or it may not. But if I back out the money for the hotel at 60 bucks a head, at 46,500, that's 2.8 million bucks, which again, I still think that 60 bucks is light. I want somebody who would spend per day cuz frankly they're traveling on the company dime, for the most part. The self-employed guy is the guy who doesn't stay at the hotel convention center. He goes and stays at a lower cost hotel. But he's still gonna go out and eat and so on. So I look at that almost as an investment in, I think we wanna have control of who those people are and what they're doing and what their skill level is. And I see that as coming back to us when those people go spend money elsewhere. Just like the visitor center or what we do at the mall or whatever. So I'm good with that. >> Go over here and then go over here. >> Okay. >> Yeah. >> So a question on developer debt. I see a principal of 28 million. But I see interest of 26 million based on 6%. Interest rates are at historic lows. Why are we using 6%? >> Well, I think initially their interest rate would be lower, but they're expecting an increasing interest rate over the life of their debt. And so the average is approximately 6%. I think that's high and I think- >> Well, I can let Mr. O'Reilly speak to that if you'd like . >> Yeah, let him speak to that. And it depends on how a commercial project is financed and structured. But I think the 6% is extremely high. And good business people will lock in long term debt for as long as they can, for as low as they can. So I do question the 6%. >> Well, I'm thinking back to the hot funds. Because we've been involved in these kinds of discussions for years. And I'm trying to recall back to the days when the other hotels in town were not as enthusiastic about this. And part of what I recall is that they were involved in, well, we're going to be using these hot funds to actually pay for O'Reilly or before that, the other group to build their hotel for them. And once they understood that wasn't the case, then they were more relaxed. Then they got a little bit concerned again also about other issues with using the hotel occupancy tax funds generated by their hotels to go to this project. But now, that doesn't seem to be the case. All we're going to be using hot funds for from those other hotels is to market the city. Market the convention center, market other aspects of the city that they're going to benefit from. And I think the evidence that they're not bothered by that is that I haven't had a single communication from any of the hotel iers in town indicating opposition to this current plan. So it seems like that the new pre-natural agreement, I used a wedding reference when this thing looked like it was falling apart before. That we were in the church but we hadn't made it to the altar. We now have a new pre-natural and it seems to have satisfied nearly all of the objections from all of the family members. The uncles over there and neighborhoods that were concerned about this and the aunts that were concerned about that and for the most part, it seems like most everything has been worked out through this plan. >> I'm really wondering what my title is in that family. I'm afraid to even ask. >> [LAUGH] >> No, no. >> [LAUGH] >> We'll let that one go. A couple of questions and observations. First of all, I appreciate your work on this and I certainly appreciate everybody's work over the last few months, six months, seven months, whatever it's been, to at least come again to council to present this. So when I was thinking about this, I want to try to put it, and this isn't about me saying yes or no, it's just about observing the context. Because when we talked about this last time in version one, it was at a location where part of, I think, the rationale for providing all of the revenue from the project was because that probably is the only project that would ever be located on university land. Which means we weren't going to get any money from that at all unless it was a project such as that. So I can understand that rationale. This is a little different. The context of this is a little different. Directly, I mean this is land that's coming out of the razor ranch development area, which has been slated to, and I'm sure we're going to hear in the next presentation, as far as the incentive or the amendment and then some of the numbers associated with that, and we'll see that. But on this particular one, if the convention center hotel project does not come, there probably will be something that is retail oriented. That's what this is slated for, is retail oriented. Which under our current agreement, city gets half the sales tax, but red gets the other half. So now we're down to only half of what would be there. And now we would get all the ad valorem taxes. And I thought about that and I thought, well, I want to make sure I factor in maybe what we don't get. So that's going to be interesting to see those numbers. But when I also broke this down, and I'm really, I know we haven't talked about it. I know you've talked about, well, it's 54 million is what the principal and interest combined is. And what you think the performance is 37 million based upon the performance projections of those three or four components. So we've not talked about is there a mechanism whereby we cap some of that, some of that potential revenue from the city. In other words, if we had some number on that, or after so many years, one of those may drop off. That's just, I'm just talking out loud. But when I broke this down, if we use the 37 million number , and that's the one I'm working with. Okay, I'm not working with the 54 million because that's what you're giving us. You basically have about $11.5 million over the 25 year term that's coming from sales tax and >> Property tax. >> Property tax. Now, if you wanted to, you could maybe add back in half of that because that's what we would be getting. It's that lost opportunity. But I didn't do that. I think you can just do the math and do that. So when I subtract that by 300, which is 300 months, I think it is. Is that right? No, 25 years. I developed about 25 years. Is $460,000 a year. All right? And the reason I sort of extrapolate that is because $37 million sounds like a lot of money. And by golly, it is a lot of money. And so when people see that, they go, that's a lot of money . That is a lot of money. But over, I'm math right? 70%, close to 70% of that number is generated by a hotel motel tax revenue that is coming directly from that project . In other words, if that project was not there, we would not be getting that revenue. And now it's restricted to hotel motel funds which have statutory restrictions on them. So when I look at that, I go, okay, so what is it that the city general fund may be quote unquote missing out on? From this project, which is what we use to fix potholes, which is what we use to fix streets, which is what we use to pay our public service, public safety people, staff, and so on. So it's $460,000 a year, which is $11.5 million over 25 years. I'm not saying that to say, I'm okay with that. I'm trying to put it in context to say, it is a lot of money. But when you see where most of it's coming from, it truly is the self generated that if it was not there, we wouldn't have that revenue. And so most of that incentive, 70% of it that's going back to the developer is truly revenue that they are generating that we wouldn't have opportunity to have in not only the hot funds, but we certainly don't have the opportunity to have it in the general fund. And then the $460,000, you have to wonder, okay, $460,000, that's a lot of money too. $460,000 isn't anything to sneeze at. So you could say, well, we only want to pay 50% of that. Let's just say of those components. Are we going to get $460,000 worth of benefit a year from a project like this, not only through people spending directly in other places, through the added synergy at Razor Ranch? And it's helpful to me, and you know me, I like to always. >> Try to? >> Get something, and that doesn't mean I'm not going to in this situation. But I wanted to make sure that I contextually understood really what it is. And so I think part of what will be interesting to hear from Amy's presentation is okay, if this wasn't here, what have been the projections that would be there? What would be the projections that that revenue will generate? And then we'll have, I think, a more clear picture of where we're looking here yet. When I really broke it out into a yearly revenue stream, which again, don't hear me saying $460,000 is not a lot of money, because it is. But we also have incentivized some other people with that amount. And if you strip out the hotel motel tax, that incentive becomes, conceptually you could say, yeah, it's 100% of the sales tax, it's 100% of the property tax. But most of the lion's share of that total incentive is coming from hot funds. So I say that just to try to put it in a little bit of context based upon what the old project was. Never would have gotten any money off that. This one, we do have an opportunity if this isn't here. And how does that all factor into this equation? What is the intangible value of having that product sitting there in that location with this great city that we have? I think we have a lot to offer, so I appreciate the indul gence from my colleagues in that regard. >> Yes, Council Member Rodin. >> Data check on that. So your $460,000 a year, you were just taking from the 11, 000 between property and sales tax. >> Yes. >> You're subtracting the hot funds. >> Yes, yes. I was just trying to get an idea. >> No, that's helpful. >> To segregate those between. What is a restricted use of funds, which is hot funds, and that is truly being generated from the project. >> Right. >> Whereas sales tax and property tax, if this project isn 't there, we'll have something. Now whether it rises to that amount, I don't know. We'll have to hear from our next presentation on that. And then we'd only get half of the sales tax, and I don't know what the projected sales tax are either, so. >> No, I appreciate that analysis. I think that's helpful. As I heard the concerns with the last convention center project, which is why it's helpful to kind of look at this in comparison, convention center one A versus B. >> No, there's concerns over location, and some of that concern was neighborhoods. Some of that concern was what does this generate in terms of additional economic opportunity around there. I think when UNT's plans were starting to change, that started affecting the overall landscape. Certainly for me, as I thought about it. So location was one. But the overriding concern I heard from most citizens that was a common thread for folks who were critical of that plan was what are we sticking in terms of financial risk? To the taxpayers. Which is why everyone was so concerned with this pro forma and whether or not what we're thinking about in terms of average daily rates and economic impact to surrounding areas and all that became crucially important that we were looking at that because we were trying to make a debt payment. Now granted O'Reilly was willing to contribute the difference of that, which is why that plan was more palatable to a lot of folks . But to that particular concern of what are we sticking to the taxpayers of debt, this plan completely alleviates that in my estimation. We're helping get a project done not on the back of the debt of the city, but on the back of the debt of the developer with city helping contribute the funds brought about through that particular project. So I do commend everyone. I mean no one really thought as we were talking about that project that something like this, both in change of location and in terms of change of financing, was really a possibility on our own horizon. So I think it took a lot of creativity, obviously a lot of negotiation and a lot of working together to make this happen. So I think we've got something good here and I do appreciate the presentation and all your hard work on it. Okay, we're gonna go here, then here, then there. Okay. >> And then sometime we've gotta get Amy to come up and do her presentation. >> Right, I just wanted to address you Mayor when you were, I'm glad that you did the math for the amount. But I don't think the issue is with the incentive, I think it's with 100% for 25 years. >> Okay. >> I think that's a lot of the emails and concerns that I got was that it was for so long and for so much. So I just kinda wanted to put that out there. >> I appreciate that, thank you. >> Councilmember Wasney. >> One, I will echo that sentiment that I've just heard from a lot of people, both by phone and by email, same thing. Objections to the 100% and for the 25 years, because red development is 50%, correct? >> 50%, yes. >> Yeah, so this is double that. And then, See I get sidetracked. No, I'm going to pass and then come back. >> Okay. All right, Councilmember Hawkins. >> Well, I wanted to address a few emails I got too. They were saying why would we give incentives to an out of town developer to help him pay for his whole project? And just to clear that up, I'm sure everybody knows that in this room. He will still, if this whole plan worked out, he would have still paid for his hotel, Hoolahands, and the incentive would just cover the cost of the convention center plus the interest charges on that. >> That's right, he's going to be making a $93 million investment. >> Yeah. >> And the hotel is a $64 million hotel and the Hoolahands restaurant is a $1.3 million restaurant. The balance of that is convention center related and that equates to the $28 million. >> And I get the emails too, he will benefit with the convention center being there. But I just wanted to clear that up because I got three separate emails all conveying that message and thank you. >> The other point was I wanted to be clear that the developer is paying for $5 million in infrastructure costs, is that correct? >> I'm going to let Amy talk a little bit about the infrastructure costs and how that equates to the convention center itself versus the entire razor range development. It's not just for the convention center, there's other development that will benefit from the infrastructure. >> I just have a couple of questions on the agreement specifically. >> Yes sir. >> On the language. It's more, this is an odd note, but I'll read it out loud. I have a note here, has he agreed to this, meaning O'Reilly Hospitality Management? And the only reason I ask that is because I'm sure it has to be there and I'm not saying I want it to be removed, it just seems pretty interesting. I love that word. It talks about that grantee also acknowledges that while not anticipated to occur if it is found by a court of competent jurisdiction or other official administrative body, is it okay for me to be reading this? >> Yes. >> It's an open session. >> It's an open session. >> Okay. By a court of competent jurisdiction or other official administrative body that the city does not have the legal authority to enter into this agreement regarding the use of the hotel occupancy tax. In other words, that's sort of the nuance here about because we're managing it instead of. Then such determination shall cause the incentive involving the use of hotel occupancy tax funds to cease under this agreement. And I'm assuming that that's pretty heavy. I mean, as I said, that's about 70% of the incentive. So. >> Yeah, Mr. O'Reilly and I talked about that and he had agreed to it. >> Okay, all right. >> We actually had a signed document to you last week, but since then we've made changes to the dates once the project got delayed to today. So we need to re-sign the agreement, but yes, he's agreed to it. And I guess I have a question, maybe this is for city manager, staff, or even legal. On page eight of the agreement under terms, paragraph three , A1. >> We're talking about the 380 agreement? >> I believe this is the 380 agreement, yes. >> And what page? >> 3A1, first paragraph, so A1. About midway down, it starts out after a closed perent after ad valorem tax grant. The ad valorem, how to move this note. The ad valorem tax grant shall be paid on or before the 60 days, etc, etc. The taxable assessed value shall be determined by the Dent on County Appraisal District. Such grant shall be subject to annual appropriation by the city council of the city in the annual budget. The city's obligation on this agreement should not constitute a general obligation of the city or indebtedness under the constitution or laws of the state of Texas. Help me understand, is that just simply saying that this grant of property taxes is a yearly grant during the budget process for subsequent city councils? Is that, what does that mean, I guess is my, I'm trying to understand what that's telling me. >> This was language that we had used previously in the previous agreement. And it meant to imply that we just can't pay that grant without there being an obligation of funds. Just like we have with all of our other agreements right now. If you recall, we have an annual budget for all- >> Yes. >> For RANS 3D agreement. For all the other incentives that we have, and this is just in reference to the same process we currently use. >> Okay, fantastic. Yes. >> One last. >> Yes, Council Member. >> One last, and this has to do with the language also. There's a line in there that says that the convention center will be managed in whole or part by the city. And what I heard today in your presentation that it was very specific that it would only be a part. And so because of the work in managing a convention center, that's language like that that I think we need to go back and really sift through. So that what we're saying is exactly what's in black and white in the agreement. >> If I could refer you to the management agreement, and it 's actually on page three and four of the management agreement. >> Which exhibit is that? >> That is exhibit- >> Is it two, is it- >> Five. >> Five, exhibit five. >> Okay, I didn't go down far enough, I'm sorry. >> So if you go to exhibit five and on page two, you'll see very explicit description of what O'Reilly's responsibilities would be under the management of the convention center. And then on page three, you'll see the city's responsibility. So we've tried to make that as explicit as we could so that it would be clear and unambiguous. >> All right, anybody else on at least this portion of the presentation before we move on to the second part of the presentation? >> Well, if there are any other questions later, I'd be happy to come back and certainly have other folks who can answer questions too, but if not, why don't I go ahead and have Amy come up and talk a little bit about the impact of the red 3D agreement that this particular proposal has and how we would address that. >> Thank you. And the last few slides in your backup will speak specifically to the red incentive. We have an existing 380 agreement with Red Development on this project that has to be amended if we are going to adopt the incentive agreement for the convention center and hotel project. The reason that it has to be amended simply stated is that right now, the revenue that we're contemplating allocating to the convention center and hotel project, part of that is already dedicated to Red Development's incentive agreement. So what I want to start with is walking through what their incentive agreement is today. This is a case where the city is proposing an amendment to that agreement in order to facilitate the development of the convention center and hotel. So today, what the agreement that we have with Red is basically a sales tax rebate. Simply put, it's a 50% sales tax rebate. So whatever revenue we collect in sales tax, we split it evenly with the developer. It's split into stages, and the stages vary slightly. The north side, which is the project that's on the ground today with the academy and the Walmart and the Sam's, is a straight 50% rebate for 20 years. They had to meet a threshold of square footage on the ground before they could start collecting that rebate. And they triggered that threshold in 2012, and we have been paying them monthly a rebate of sales tax since that time. Right now, and this is a ballpark number, that project on the north side is generating approximately $200,000 a month in sales tax. And so we collect that, and then we cut a check back monthly for half of that. On the south side, we have an agreement that has not triggered yet, that is a 50% rebate on sales tax revenue for 25 years. It's tiered in two thresholds. The initial threshold is they have to get 300,000 square feet of retail on the ground, and then they can trigger a portion of their reimbursement. But in order to get all of their reimbursement, they have to get a second 300,000 square feet on the ground before they can trigger the remainder. So this is in three different tiers, three different phases , but the total reimbursement under the entire agreement is 68 million. And that is all for public infrastructure costs. And their actual public infrastructure costs are going to be well above the 68 million, closer to 90 million, I believe. And I also want to point out that they currently have an overlay zoning district that takes, defines what uses can go where within the development, and sets out design criteria that's above and beyond what the base zoning requires. So the convention center project becoming a part of the razor ranch project is essentially causes a lost revenue opportunity for red development. And so I want to walk you through a few numbers here of what that looks like. And I do have a spreadsheet that I will distribute for you as well. That specifically speaks to this slide. So there's a standard formula in retail development where you can take the number of acres that you have, and know how much square feet of retail you can get on the ground out of that. So this is a 12 acre project. We're essentially taking 12 acres that could be retail and we're turning it into a convention center and hotel. And so it will be non-retail use, which means it's not generating revenue for red that it would generate if they developed it in retail. So if you take that 12 acres and you assume a 20% coverage of retail, which is the standard in the industry, then red has lost the revenue opportunity of 104,500 square feet of retail. If you take a conservative estimate, that retail would have generated $200 a foot in sales annually. And we actually anticipate when this project is finished for it to be 350 feet. So this is a conservative number with a 3% growth rate for 25 years. This total sales tax generated for that 104,000 square feet would be almost $11.5 million. Now, red would receive 50% of that in a rebate, which would be $5.7 million approximately. The spreadsheet that you have in front of you details that out. The first two rows are years one through 25, total sales tax revenue collected, and then the 50% rebate to red that they would receive if they developed this project for retail. And then down at the bottom, we'll talk about the proposed incentive in a moment. But before we do, I want to talk a little bit more about the impacts that this development has on red. They're also selling the land at well below market rate. And they anticipate that this would go on a normal development project for $8 a foot market rate. And then they would charge $1.50 a foot to bring the infrastructure to the site, which in this case they're doing. So they estimate the market value of the land to be $9.50 a foot. At 12 acres, that would be $4.9 million. What they're actually selling the land for is $5.50 a foot, approximately $3 million. So this is an additional loss revenue opportunity of almost $2 million. So the proposal to amend- >> You have a question? I'm sorry, go ahead. >> Okay, he was first, go ahead. Maybe the same question. >> Go ahead. >> Okay. >> Well, on the previous, why is their sale price to this particular entity, and then giving them such a great discount apparently, why is that a city issue to make up for? >> We're not making up for it. I'm just showing all of the impacts that this project has. >> Because at the end of the day, the total amount isn't up to that. >> Right, right. This is not addressed in terms of the incentive. >> You're just trying to give a comprehensive picture. >> Yes, that's correct. >> That's my break. >> That was exactly what I was going to say. >> Okay. >> Should have let you go. >> So we're proposing to amend the red agreement. It has to be amended if we're going to adopt any of these other agreements. And the Economic Development Partnership Board has looked at this and they have made a recommendation to add an additional 15% rebate on the entire project. Until a $5 million cost recovery is reached. So that the term would be limited to when they fully recover $5 million, or fully receive $5 million. The cap of $68 million remains. So we're not giving them any more than we ever were. We're just creating a new source of revenue that allows them to capture that lost revenue. Because we've essentially carved out a piece of the project . So this is not an additional incentive. This is an additional source of revenue to help them still receive the full incentive that we gave them originally. >> So this actually just allows them to recoup that investment for the infrastructure sooner. >> Yes. >> Okay. >> Yes. >> Councilmember Walsh. >> But to be clear, red couldn't build in this part of Raz or Ranch anyway right now. There's no infrastructure. There's no water, sewer, road base, there's nothing. So yes, I know we're looking at what is it costing red. But it's also helping red development because that's why I brought up that $5 million in infrastructure. Which is going to open up now the bottom one third of Razor Ranch to other businesses. And red will benefit from the other, as will the city, that comes in on the heels of the convention center construction. So I don't want to structure all of this that, this is so harmful to red development because I really think the two kind of need each other right now. Red needs the convention center in the southern part of Raz or Ranch. And red needs the infrastructure that this hotel convention center will put in to allow other development to come in. Is that correct? >> You're absolutely right that red wouldn't be doing this deal if it wasn't something that helps their development. It does bring density to the project, it helps with leasing activity. It generates excitement and helps facilitate the rest of the project being built out. It does however come at a cost to them that impacts their incentive agreement. However, I do want to point out and stress that red is paying for the infrastructure improvements to service not only the convention center but that entire southern portion. So that is not being paid for by- >> So say that one more time. >> Red is paying for the infrastructure. >> Yes. >> Not the developer for the hotel convention center. >> That is correct. And red is paying for it. It is infrastructure that's already built into the $68 million reimbursement cap. But it's infrastructure that they wouldn't be putting in for several years if it weren't for this development. So they're accelerating their expenses and we're trying to find a way to help them recoup that. >> Good to know that, thank you. >> Yes. >> Councilmember Rubin. >> On your- >> Technology. >> Stupid iPad. >> On your analysis, if you go back a couple slides, I can 't find it on my own. Stupid. The one that, yes, that one. Is that assuming that every developable spot would be retail in this particular section? When you say 12 acres at 20%, that's assuming other types of uses as well. >> That's correct. >> It's just that 20% of that 12 acres. >> Is the saturation of that 12 acres in retail. >> That helps because I actually, when I was reading this actually on the plane this weekend, I pulled up the website and wanted to look at the future use of this section. And it has entertainment/mixed use, mix of entertainment uses which will include state of the art, movie complex which is already planned to go in there so that's not changing. And other indoor and outdoor activities. Then it has a bullet point, multi-family and office space available in that section. So my only thought is I'm thinking about that. Again, there's no even concept of buildings in this particular, maybe we'll get a chance to hear. I just don't want to overreach the anticipated retail opportunity, especially if A, they could have gotten another hotel project in there. There could have been a large multi-family project since that's kind of called out as a possibility in that section, which would have generated no sales tax in the traditional sense, property tax of course. So maybe I'll have some questions when we get a chance to talk to them about anticipated future uses of this and whether or not we're going too far with that particular figure. But I don't know if you have any response that you've been working on this for a while. >> Go ahead. >> I fear that you've given us so much information that it 's confusing it. Or maybe I'm just too simple. Because what I think I'm hearing you say is we had this formula to come up with this figure. But the fact is, all that we're doing is adjusting the 380 agreement with RED in order for them to recoup that money that they're putting in for infrastructure sooner. It's not ever going to go over the max amount that we agreed to in the original agreement? >> That is correct. It's really to recoup a lost revenue source though. So the infrastructure is, 68 million speaks to the infrastructure. But when we carve out the convention center, we've carved out one of their revenues forces where they wouldn't get to 68 million unless we had another. >> Right, so when we anticipated the 68 million originally, we anticipated that that was going to be retail use. And that's how we came up with that figure. And because we're carving this out for a separate 380 agreement that we're just needing another way to get that infrastructure covered. >> That's correct. >> Okay. >> I think I saw it. >> You said that we would be making up for their lost revenue, giving them money. Where would that be coming from? >> If you look at the bottom piece of your spreadsheet. If you look at, I'm sorry, if you look at the spreadsheet that I handed out here. What the EDP board has recommended, if I can find it, there it is, okay, is an additional 15% until 5 million is reached off of that 15%. So if you look at the spreadsheet down at the very bottom, we anticipate that that will take between 10 and 11 years. If they perform better, they would recoup that amount faster. But we just go from 50% to 65 for a short amount of time to accelerate that payment. >> I've got a, you have a follow up? >> I'm just trying to figure out. >> Okay, all right. >> Yeah. >> I can, there was a NFL quarterback who had the same thought about his iPad, I think, during the Green Bay game, and I think he destroyed one of their iPads, so feel free to. >> Wait, this one's mine. >> And so, Council Member Rowden, I want to make sure that I sort of follow your train of thought, and I think it sort of dovetails into what Mayor Pro Tem said, and that is, you just read off the uses. And so it sounds like what you're saying to me, and correct me if I might have misinterpreted, is that we're saying that this whole 12, this whole 13 acres would be quote unquote retail, taking the standard 20%, calculating the sales tax off of that. But what I hear you saying is, well, that's assuming that that's exactly what it would be, and that's a pretty large assumption, at least. I don't know if, you didn't say that, but based upon the uses in that particular zoning area, are we waiting too heavily on that? Okay, all right. Yes, I'm sorry, go ahead. >> Well, and again, if we're talking about, as you mentioned, we're attempting to kind of make up for anticipated lost revenue on this section, given that all of the projected sales tax from this project is going towards the project. I mean, superimposed on this conversation, if we're really talking about potential lost revenue, then we almost have to have the same conversation John had earlier on economic impact of convention center. And that is, if truly these folks are getting out and spending 140 bucks a day, a lot of that's going to be spent right around there in this particular development project. In a way that it wouldn't if that project wasn't there, or they'd have to find it from other sources. But my guess is, higher end hotel with convention center is a huge benefit to this project. Not just in terms of the ability to draw an additional revenue for the existing tenants. But my guess is, is as they're thinking about or marketing this entire project to potential retail outlets, that all of a sudden they've got this great shining star now and they can draw in better, bigger and better, which is great for everybody in terms of what's going on there. So to me, it's just a more complex discussion than just simply, it's not arbitrary, but let's put a number of 20% retail and say it's going to be lost. Well, there's also a potential economic boom from this particular project that would have to be factored in before . I'm comfortable saying, let's help make up for some revenue loss. >> I can speak a little bit to the first part of your point . We've been able to run hard numbers based on occupancy rates for the hotel and convention center and assumed that each of those occupants would spend $60 a day in Red Development Project. It increases annual sales by 1%. So it's not as big of an impact as you might think, just from a general sales volume. And even if we assumed that they spent that entire $140 a day in Razor Ranch, it would increase total sales by 2%. As far as how the synergy increases leasing activity, I'm not sure there's a way that we can quantify that. It certainly does, but it would be difficult to measure that. >> Councilmember Johnson. >> So as I recall, Mayor Pro Tem, this will be the second time today that I have violently agreed with you. >> [LAUGH] >> Or recall, everyone say it. >> The, if I'm understanding this, because I think we're suffering from analysis paralysis, to be honest. They're going to spend 5 million bucks on infrastructure, right? >> Yes. >> And then we're going to pay them back. >> Yes. >> And the cap of 68 million remains whether we pay them back over 15 years or 11 years or five or whatever, right? >> Correct. >> So I guess in my, I'm sitting here thinking, okay, they 're going to go put a sewer line in. And then they're going to be able to sell pads or release something or whatever else it is. So as the project was originally designed, they put infrastructure in. Tenants come and buy things and build things, open things, and then they get reimbursed out of the sales tax. What we're saying now is, they're going to put infrastructure in and they're going to get reimbursed for their infrastructure through a modification to the agreement because it allows them to get it sooner rather than later. Because this project is happening. >> Correct. >> Right? >> And they're putting the infrastructure in for a project that's not going to generate any revenue for them to help repay that infrastructure. We're trying to find another source for that. >> Right, so I think we may be, just from my perspective, overanalyzing it a bit when we're talking about lost revenue. Meaning, all they're trying to do is get, they're trying to get their money back. I put in a street and a sewer line and a water line, and then I get that money back over time. Whether it comes to a sales tax incentive rebate or it comes through some other way, all they're doing is getting back their money that they invested in infrastructure that then belongs to the city. >> Correct. >> All right? So I guess that's how I'm looking at it. It requires an amendment to their existing agreement because they're putting it in now. And they wouldn't have otherwise developed this portion of it right now. >> Correct, and it requires an amendment because we cannot execute the agreement with the convention center project. >> Right. >> And allocate the revenue to two different gr antees. >> Right, so that's what I'm saying. I'm trying to frame it in my mind to where we're not doing an amendment because they want more or we're reimbursing them for something different. It's a reimbursement for infrastructure that will be city owned property once they put it in the ground. >> Yes. >> Got it, thank you. >> I was confused too. >> So if we did a 50% incentive, the other 50% would go to them and we wouldn't have to amend that, is that correct? >> I'm not sure I'm understanding your question. >> The reason we have to amend this is because our incentive is 100%, is that correct? >> Yes. >> Right. >> Yes. >> Okay. And they get 50% of that and they can't if we're letting them get 100% back. >> We can't give 100% to the convention center and 50% to the red, that's correct. >> Okay, thank you. >> No, we don't need to pay the check. >> [LAUGH] >> That would be not a good return on investment report from me. >> [LAUGH] >> I'm sorry. >> No, go ahead, go ahead. >> I do have a couple of more points that I want to walk through. But I am at the very end here. RED has made a couple of requests and it's currently reflected in the agreement that's proposed. Just in your backup, there's a challenge associated with the timing of the convention center. And whether or not that counts towards their 300,000 square foot threshold. So the convention center, their timing in terms of their obligation of when they have to open is beyond the amount of time that RED has today to meet that threshold. Their deadline to meet the first 300,000 square feet is January 1st, 2018. The convention center won't be open by then. But they have asked that the ground floor of the hotel and that the convention center count towards that 300,000 square foot threshold. It's about 115,000 of it. And so then they would still meet the 300,000 threshold. The way that their agreement reads today, it says 300,000 square feet of commercial and/or retail development. So technically, we could make an argument that it would count today, but they've asked that we call it out specifically. That it would count towards the 300,000 square foot threshold. And that we either extend their deadline from January 1st to include the timing of the convention center. Or that we just count it automatically. If the project is under construction, they've got 115,000 counted towards their 300. >> Well, I had a question on that. Through this amendment, aren't we kind of changing the boundary? Did I read that right? Of the original agreement, like where the boundary is? Or is the convention center still going to be in that? >> Well, we are carving that boundary out in terms of allocated revenue. So we're cutting the revenue all out of that. In terms of actually changing some physical boundary that this is no longer a part of that project, I don't think it 's that technical. >> Okay. >> Couple questions. So help me understand again. The current agreement is 300,000 square feet of retail. >> Or commercial. >> Okay, and it says that. >> It says it today, yes. >> Okay. All right. And you're saying that, and their deadline to hit that without any of this. If none of, we weren't having this conversation. When is the deadline? >> January 1st, 2018. >> 2018. Okay, so another couple years. >> Mm-hm. Scott, am I right? >> Okay. >> Okay. >> And so what they're asking for is that of that 300,000, it'd be 115, 200 would go towards that for the convention center. So how much square feet? And so they've got some square foot coming up on the ground as it is. All right. Which means probably between what's coming up or closely thereafter plus this, it equals that threshold. >> Close, 60,000 short. >> Which by the time 2018 gets here, most likely that's gonna be taken care of. So do I, yeah. So my hesitation to include it as a hard amendment is because we're already, the 15% sales tax, when does that begin? When does that additional 15, let me ask that question first. When does that additional 15% sales tax begin to pay back? What triggers that? >> I believe it's the CEO of the convention center. Is that correct, Scott? >> The, okay. All right, so that's really my question too is if somehow there's an agreement to reimburse on a faster track for this particular component, I'm not sure how that, I mean because they still have to meet a deadline of 2018 if this wasn't on the table, right? So, and that would be the 50%, 50%. With this coming on the scene, if they're building the infrastructure up to it, which they wouldn't have to do at this moment, so that's an additional cost. And it's a lost revenue at whatever the formula is. And we're saying we're going to start paying you back sooner for that. We're going to accelerate that component because you've helped facilitate this. I'm not sure, it's almost as if this is happening exclusive of any other part of the development occurring. In other words, within the next two years, this is the only thing that's going to be going in out there. And nothing else is going to be happening to achieve that 300,000. Almost just see it as two separate things. So giving you an accelerated repayment for this component, which is sort of the consideration for doing this. But the 300,000 can still be triggered. And if we want to give an extended time, I know Red, they 're going to do, I mean if they built this and stopped, they're never going to be made whole. I'm just struggling with, and struggle is not the right word, I'm really just trying to grasp. Okay, we're going to be giving them the accelerated repay ment. But we're also saying that this applies to that, which you say it could be interpreted as that anyway. You're saying they could come up and say, well, you know what, it doesn't matter. If you don't want to do it at all, we'll use that as a trigger. Which I would almost rather that conversation occur. It's like, okay, you got till 2018, this is part of it. If you don't do the rest and this 15% doesn't really kick in, because I think there's a 15% kick in after the 300,000 threshold is reached. >> Yes. It's after they've triggered the south side, which means they're going to have to have the 300,000 square feet. >> Whether it includes this or not. >> Yes. >> Okay. >> It triggers at the same time the rest of the- >> The south side. >> Okay, okay, all right. So yeah, I think I'd feel, now I do want to point out, I appreciate the numbers. That because if we're saying, and this is sort of counter to your discussion about the formula-matic approach to the sales taxes being lost. But let's assume that that's true. Well, that means the city would not be getting that revenue either. And that means that also whatever would be built there, whether it's retail or some other kind of commercial, we're forgoing the property tax, the ad valorem tax revenue from what else could be there in lieu of for the convention center. Because we think that would be a better use of those funds. So I just wanted to tie those two together. >> That's correct. The convention center incentive is for the amenity of having a convention center. >> So in summary, if we don't make any decision on the last bullet point about including it, you're saying per the agreement right now, there could be an argument that it's included. >> Yes. >> And so in 2018, they could come up and say, hey, we've got it, or 17 or 16 if this all gets met. They could say we're triggering it, and then that additional 15% begins whenever that trigger is pulled. >> That's correct. >> Okay, thank you. >> I will say that I think that this request is really to provide them some flexibility in when they choose to trigger. For financing purposes, I think that, I mean, I can tell you that we've issued multiple building permits for the south side this week. So there's several projects about to be under construction on the south side. >> Go ahead, Mike. >> I'll tell you, I'm okay with it. I would think that they would think hard and long about pulling the trigger too soon. Because if they pull the trigger too soon before they're generating a lot of sales tax, they're not going to hit their desired amount in the 25 years. So I have no heartburn about this at all. >> Councilmember Rodin. >> That's helpful and kind of ties into my question a little bit. And that is, talk to me about, in a contract like this, back when it was originated, what is the purpose of a 300,000 square foot trigger? What's the city's interest in that? >> It's to- >> Can I share that? >> Sure. >> Because I'm the one that proposed that. Or was it 150,000? It was multi-family. Never mind, go ahead. >> Okay. >> It was 150,000 for multi-family. Never mind, go ahead. >> So it's your fault. >> No, no, no, mine was 100,000 multi-family. Go ahead. >> The purpose was that we wanted to see a performance level. We have a threshold in every one of our agreements. They're usually a capital expenditure threshold, but we wanted to see them deliver retail, not multi-family and projects that weren't going to generate that sales tax. So at that point in time, it was determined that their performance measure, their threshold that we wanted them to meet was square footage on the ground. >> Gotcha, and it's understandable. And that's just my slight hesitation, although this last conversation, I think, puts that into perspective. But again, the city gets nothing off of that 115, well, we get a convention center, but in terms of that revenue. >> Mm-hm. >> And so if the goal is to kind of make sure that this is performing and there's things moving along, then it's in the city's interest to make sure that that square footage is generating a certain amount of revenue for the city. That's my slight hesitation at thinking through this, but again, the incentive is such that it's in everyone's best interest to keep rolling with this project. So that's why I'm thinking out loud. >> I'll stop. >> It's okay. >> The 300,000 square feet was put in there for a reason. >> Mm-hm. >> And that was to keep the developers feet to the fire to produce commercial and retail. This community is expecting commercial and retail. So I'm not happy with over one third of that 300,000 commitment that is already part of the original agreement to go towards the hotel and convention center. I still would like to keep in the 300,000 because that's the way it was written. That's the commercial retail and it provides incentives to the developer to stay on task to bring in these. The city has waited a long time for all of this to come together. I don't want to go soft. I'd rather hold to that 300,000 per the original agreement. >> I'm sorry, Joy, go ahead. >> Well, I'm curious on that if by agreeing to this agreement, if we will accelerate and get retail to happen faster. I'm just wondering, I know that would be an opinion, but maybe to possibly hear from Red. >> Sure. I can say that to Kevin's point, we're not going to get any revenue off of that 115,000. Neither is Red. They're motivated to get as much retail on the ground as quickly as possible. That's how they're going to generate their reimbursement. And if they could trigger it with only the convention center on the ground, they don't get any revenue off of it, so this doesn't demot ivate that need for retail. >> Yes. >> Well, you know what's interesting about this as you think about it, back to your earlier point, Kevin. So if you put a distribution center or some other thing that was going to have people just coming to work every day, right? You'd say, man, we're losing out big time. But if those numbers are correct with 46,000 some odd unique visitors coming to the city and those people do go spend 60 bucks, right? It's almost like you look at that same square footage and go, if I had 115,000 square feet of retail sitting right here. What would people spend in it, right? What would the average annual sales tax generated off of it sitting there? Well, with this thing sitting here and it drawing outsiders to come into the city, if the amount is right and they spend 60 bucks a day, you get 46,500 people. They may not spend it in that 115,000 square feet, but they 're still spending. So it's kind of a weird one, because when you look at it on the surface, you would say, yeah, it's really taking away the retail. But the purpose of the retail is to generate sales tax. Well, with it sitting here, it is generating sales tax. They just may not spend the money right there. They may spend it at the next store over or downtown or wherever it is. So it's just a different way to look at it. I think sometimes we can get so blinders on in the math. So I would offer that as a counter way to think about it is , while we're missing out on the retail, it could have been there. By including, and whatever the number is, whatever that number is, in terms of square footage that we would credit towards the 330,000. If you didn't credit it and it didn't happen, well then the sales tax don't happen either. So who really wins? Nobody. If nothing happens on it and it doesn't trigger their incentive or trigger their minimum of 330,000, well if they don't hit that, they just lose, but we don't win. So I see it as a win-win. I really don't have any problem with it because it's a reimbursement for an actual expense and their cap doesn't change. So I think I'm good with it. Just thinking out loud. >> You had mentioned in sort of giving the, I'll call it legislative history, for the 300,000 square foot that it was primarily meant for retail. So, but when you say it's commercial slash retail, that seems to, I mean, that just doesn't seem to make sense in the sense of if our motivation was to make it 300,000 square feet of retail, because we're interested in the generation of sales tax, which is what the 300,000 square feet, the intent of that was, was to generate sales tax. So- >> It's the way the agreement was drafted. >> Okay. >> In a project like this, you're going to have some uses that are commercial that aren't retail, and I think it was just intended in terms of meeting that threshold to allow the development as the shopping center piece to be counted towards the threshold. >> Sure. >> Obviously, it doesn't generate the sales tax to count towards the reimbursement, but it- >> And I might have somebody check my math, because I took, was it 460,000, 46,000 unique visitors per day is that, or per year, is that what we're saying this will generate? >> So 46,500. >> 46,500 times $60. >> It's 2.8 million. >> Okay, yeah, 2.8 million. And our sales tax, let's say that's all sales tax. The total sales tax is at point, is it 8.5%? And then the city gets a percent? >> One and a half percent. >> One and a half percent. Okay, so that comes to about, let's see, 2.8 million. Let me do this again. I should have had my HP 12C here. Times, so just 1%, right? >> One and a half. >> One and a half, okay. 0.015. Okay, that's 42,000 a year, if I'm doing that correctly. >> If they're only there one day, because you've got unique visitors, but that's not- >> No, that's not yearly. >> That's unique visitors per year, but they're not going to come and just spend for one day. They'll be here for more than one day. >> Okay, so they could be, okay, gotcha. That's where that calculation is flawed. >> The 46,000 is just for unique visitors related to convention center business. That doesn't account for the other 60% of the rooms that will be available for other. >> So you could multiply that times the 46,000 times, two days, three days, and then that would give you a little bit more accurate calculation. >> Okay, thank you, I appreciate that. That helps me in that regard. Before, any more discussion for staff's presentation? because I know I think we want to give Mr. O'Reilly and Redd a chance to either respond or answer questions, but I 'd like to take a break. Yeah, take about a five minute break, come back. Do we have any more questions for staff? All right, it's about a little bit before four, let's come back at 4.05. And I guess, sort of with the presentations out in the 6.30 meeting on these, if they could be pretty abbreviated, because we, and then is there, if we don't have any questions for Tim or Redd right now, we could also always ask those out in the open session at 6 .30. Well, this is already an open session, but so what's the council's pleasure on that? Y'all want to wait till then. Is that okay, gentlemen, to field those questions out in the 6.30 meeting? >> I'm gonna be out at 8 o'clock. >> Okay, so you're not gonna be able to be here at 6.30. So any questions for Mr. Riley or Tim, if you got a very brief, just kind of, because I do want to be able to hear from you and have counsel, the ability to ask questions. Scott, are you okay with the 6.30? >> Sure, unless there's questions, I'd like to, I have prepared answers for several of the questions, but- >> Okay. Okay, come on up. Yep, Mr. Riley. >> Thank you, Mayor and council members. Just a few quick comments and things I think I need to communicate about where we are in this deal. And I appreciate you all inviting me and appreciate your attention to this project and your questions are exactly the way this process should work . I mean, everybody should be thoroughly vetted and it is an important project to you all, the city, myself, my family. Couple of clarifications, I just want to make sure, people keep referring to he, he does this, he does that. I just want to make sure, I represent a family of investors , much like you all have brothers, sisters, dads, uncles, aun ts. That's our group of investors, okay? My mother, Marybeth O'Reilly, my dad, Charlie O'Reilly, my aunt, Rosalie, my brothers, Pat and Ryan. So we're a unique group of investors, I think, and they all have been to Denton and liked Denton a lot. And that's kind of why I'm still here and still interested in this project. The issue with kind of the history of this project that you all went through and where it is now is one that, while I certainly appreciate the thorough analysis of it, this deal was something as it was before with the city building the convention center and then we altered. And whenever last January, I think, we started talking with Red Development, it's been a great process talking with Red and working with them and trying to reach a deal. But we tried to back into a deal that would work based on this new paradigm of no city investment other than the tax rebates. And that worked in a way that I would characterize as thin as possible. And so we started working with Red under the paradigm that we had a financial situation that we had to cover a return for the people that would be stable enough to weather an economic downturn and things that would make it very implausible that we would leave a building, a shell that would be there. And so I just want to make that point that we're at a point with this 100% of these particular incentives that is as thin as it will go and this project remain. So, and I do want to make a point, it is still definitely plausible. We have financing committed by a group of lenders that came here in this very room and had a presentation. And they are needing to close and start construction this year in 2015. We have our architects that we've paid for the full project design already working and are going to finalize by mid, or I'm sorry, by early December. We'll finalize the entire design of the convention center and the hotel. And then we have our general contractor, Clark Construction , that is already out obtaining pricing for this project. And so we really see it as a partnership with the city, and it truly is a partnership. If you, Kim Phillips and I have talked a lot and our team has talked with Kim. And while there is this investment that CVB has some additional salaries they have to pay and some things. On the other side of the coin, we are also selling Denton. I'm going to hire a lot of people, a huge sales and marketing task force that will bring people to Denton and sell this community and this area. And that will bring a financial impact that's not stated in any of the charts we've seen. Just because some people come and they don't stay at the hotel, or they don't stay at our hotel, they stay at other hotels. And so we have the capacity to have 750 delegates at each one of our meetings that are multiple night stays. We're talking three to four night stays. So if we have 318 suites, there's another 400 people that will be staying at all these other hotels around town that aren't in Razor Ranch. That are in, by different restaurants and by different retail facilities. So when I look at it, I see it as a win-win. And I see it as something where we're doing a lot to sell Denton and to market Denton and the CVB contributes and we all work together in a true partnership. A couple things that I don't think have been said. The, after 25 years, this facility has at least a 50 year lifespan. And that's been proven again and again with these types of concrete facilities. And so this structure after 25 years will have 100% tax reb ate that hasn't been figured in as well. So that's one thing that was kind of glaring to me that after 25 years, it's going to be a significant tax benefit to this community and hopefully a benefit to our family as well. A couple of the other things is the reason we picked Denton as a place. And that is your commitment to sustainability, the arts and culture that are here. All of these things are going into the construction and the design of this facility. We have part of the facility is going to be dedicated to all local art. That all the local artists of Denton will be placing their artwork in our facility and we'll work it in with the scheme of the hotel. It will be LEED Gold certified. We'll have solar energy initiatives over the whole convention center. Have up to 10% of the power that will be needed for the facility generated by solar panels, photovoltaic panels . It's really an incredibly efficient building and it's, I think, going to be a remarkable asset to the community. And not to mention our UNT partnership where we still will have a partnership with them and a living laboratory that boosts their enrollment and then visits to Denton economic growth, economic impact. So those are just a few short points I wanted to make. We're excited to start this project. We're ready to start it. And for the first time, there are absolutely no barriers to this. And if we agree to go forward in a partnership, I think it 'll be, as I said, a fantastic win-win where we can all benefit. So. >> Councilmember Briggs has a question. >> So you heard me mention earlier that I've received several emails and phone calls about the incentive being 100% and for so long. And a lot of the comments were, if this is a profitable good investment, why do they need such great financial assistance from the city? Can you kind of address that for our constituents? >> Sure, yeah. In our industry, a convention center and a hotel convention , or a convention hotel and a convention center almost never pencil out because of the size of the facility that's required. And it always benefits a city to have a large convention center, obviously, to bring more people to the area. And so if you look around the country and even very close locally in Frisco and San Marcos and Lincoln, Nebraska, La Vista, Nebraska, all the places where similar facilities to what we're contemplating, they are all a public-private partnership with incentives of some type. So I can tell you that a facility like this does not pencil out without government incentive, without a city partnership and this type of incentive. So I guess in other conversations, in other cities that I 've been in, the focus was on what does this bring to the community, which is exactly what you all are talking about. What's the return on the quote unquote investment? And a lot of communities have made that decision and it's been very beneficial to most that my team has been a part of. So does that answer your question? >> Okay. >> Councilmember Wasney. >> So I asked this question of staff and they asked me to defer it to you. Why 6% for financing when we're at historic lows for financing? >> Well, a project like this, we can't lock in for 25 years , okay? If this was a stabilized project, we might be able to lock in for 10 years. So if you average out in a situation where with construction risk and a facility of this magnitude, I think our interest rate is going to be right around 4 to 4.1% interest at this point. It's a five year loan, okay? And I think all economic indicators look to that. Interest rates will rise at some point and there's a lot of indication that they would rise dramatically at some point in the next 25 years. So to try to predict when that is and after our first five years of loan and then the next ten years and how you step that up, there's going to be a step up from 4%. And so in talking with several financial folks in the financial world with the way this loan will step up, it's not like a home loan. You can't get a 30 year loan on a hotel. It's five years, seven year increments, ten year increments . There's going to be an interest rate rise. And so it was felt that 6% is a very reasonable place to be over a 25 year period. >> And the reason it's important is that we're looking at the incentives based upon what we expect the cost will be to you long term to build it. So that's why it was important to get an answer to that question. So if I'm hearing you too, the 100% in tax incentives for 25 years is non-negotiable in terms of 50%, which is what RED development has for fewer years. Would you address any flexibility in the percentage and the number of years? >> The word non-negotiable or the phrase non-negotiable is a little negative. But what I'm trying to do is just be open and honest with you all that how we came to this point and with the history of the project that we just, the reason you're seeing the things that RED is willing to do and the positive impact to their project and the cost to their project, as well as what we're willing to do, I think to take a lot less of a return on the project, has really made us reach a point where the incentives that are in that agreement are the ones that are required for me, I think, to bring my investors along on this ride anymore. Okay, I have, again, aunts, uncles, brothers, that although they trust me and they like the hotel development, spending three and a half years getting extensive emails and spreadsheets and budgets, it's not going to last forever. And so I think we're at that point where the agreement that we have right now is the agreement that I'll need to carry this project forward. So that's all I'm trying to say and I'm not trying to say this is a hardcore ultimatum of any sorts or non-negotiable or anything like that. I'm just trying to be open and honest. >> Thank you. >> Well, so thanks for not quitting. Because I remember sitting here, I don't know, it was about a year ago or whatever, where it's like we're done. And for me personally, it wasn't that I didn't want a convention center, I didn't want this convention center, I didn't want an embassy suite, and I didn't want O'Reilly Development, it was I didn't want the city to tote the note . I mean, that's when we met personally, said, well, I don't want us to be your lender. Well, that was the program that was presented to you early on, and so I totally get it. So I appreciate the comments you've made about our city and the fact that you guys have spent the kind of money you've spent to still try to make a deal. But what I remember was location wasn't right, the city shouldn't tote the note. And I'll just, for public record, what I said to you was, I have no problem with an incentive based plan that gets you your money back on the convention center, but I want you to take all the risk. And I thought, honestly, I fear you'd never come back. But it says a lot about our city, and a lot about our staff and the way they work with you. So for me, I'm sitting over here looking at the deal and the points, and I'm going, okay. So now we're not taking any of the hot funds from other hotels, which was a negative for me before. We're not toting the note, so our taxpayers have no risk. The project has to stand on its own. If you don't generate the dollars, you don't get them. But your bank really doesn't care about that. Your bank isn't going to expect you to make your payments on time. So the only way you get to recoup any of your money is if you perform. So that gives me comfort. I'm not crazy about ultimately you owning the asset and we have paid for it, right? And then I go, well, but if that's what happens, then that means it performed. It means all those people came, and all those people then spent money elsewhere. So net, net, we still win. So I am completely comfortable with this deal, because you've addressed everything that I said I didn't want in the other one. And I would expect you to call me out on it if I didn't. So I just want to make those comments. Thanks. >> Thanks. >> I too just wanted to thank you. And earlier Dalton gave these wedding analogies. We had a pretty bad break up. And the day after, I had a lot of people call me and said you just blew the one chance we had to get a convention center here. So this is pretty cool. I love the way that it's structured too. And just wanted to thank you for just staying at it. And the biggest thing I like about this one is the other one felt so landlocked. And it was really, there was a neighborhood right there that they did not see a good future for themselves with that being there. Anyway, I'm just very happy about this one. I hope it passes and I hope we get to see it built finally. So thanks. >> Thank you. >> Yes, Council Member. >> So you may have addressed this, but so when do you plan to have this investment paid off, like in what year, and what year do you feel this will be profitable for you and your family, the convention center? Will it start to be profitable? >> Well, the way we have, I don't have the pro forma in front of me, but the way we have a model, I mean it carries some amount of profit over debt in the very beginning, not a whole lot. We also have an interest only loan at the beginning and then principal kicks in I think year two. So that ends up making a lot less profitable. As far as when the debt is paid off itself, we'll have a 25 year mortgage on that. In reality, that never happens because things are refin anced and they're changed. And that debt is carried on a lot farther than 25 years. So it's hard to say. But the way the original note is going to be set up, it will be a 25 year amortization, but then there's going to be a refinance in year five. And so a lot of that depends on how we ramped up, how we performed, how much debt we were able to pay down, all those sorts of things. As to what our amortization is after the first five years. >> Thank you. >> Okay. >> Councilmember Roby. >> Since you won't be here tonight, I too wanted to thank you for sticking with us and your investment in Denton and your interest in here and your families, I guess, to clarify. Now the city's getting an amenity with this without the risk that we were looking at before. I mean, the fact of a convention center, which has been on the city's radar in terms of plans for the last, what, 20 years. Certainly from the Chamber of Commerce perspective, the Convention and Visitors Bureau. And so I do, I appreciate your creativity and your willingness. I appreciate, I know the mayor had a lot of leadership in rethinking this and others as well and the staff of working with all of these random thoughts that you're getting from council. So just thank you before you head off and go back home. Thanks for the time coming here today and thanks for this potential project that I hope passes tonight. >> Thank you. >> Any other questions? Thank you, Tim. Appreciate it. Appreciate you coming by and sharing with us. Thank you very much. We got one more. >> Just want to clarify that there is risk to the city, Kevin. Convention centers fail all over the country. And so I just want everyone to go into this with that realization that it is a numbers game. There is no guarantee that a convention center in Denton, Texas is going to be successful. If you do your homework on convention centers around the country, they have failed in amazing numbers. And then it's a eyesore in a part of the city that we are trying to really work hard to make productive. So yes, the financial risk is yours. But it's still, for anybody to say there is no risk in building a convention center in Denton, Texas, there is because convention centers have failed, they continue to fail. They are successful in some cities, they are not successful in all cities. >> Any other comments? >> I do have one question maybe. And if we could, oh, did somebody, who did? >> Kevin. >> Go ahead, I'm sorry. >> I was just going to clarify. My point was no risk to the taxpayers. >> Yes, financial. >> But any business can come in and fail. >> Yes. >> And leave a quote unquote eyesore. But to say that's a risk to the citizens is perhaps a stretch. >> Not a stretch. >> Okay, if maybe when we go out to the work session, because I think there was something in the agreement if there is an insolvency or something like that, there's some special handling of that with the incentive. So any other questions for Mr. O'Reilly? All right. Thank you, sir. Appreciate it. Thank you so much for coming by. >> Thank you. >> You bet. Have a safe flight back. Scott. >> Thank you, Mayor. Scott Wagner with Red Development. I think it's great dialogue. The city's done a lot of due diligence, a lot of fact finding. The last process, version one. So I'm very thankful that we were given the opportunity to consider a site. We looked at the convention center five years ago when we first bought the property. Tim O'Reilly and his group have been great to work with. We've worked hand in hand the last nine months. We came up with a great site plan. I think it's a great amenity to the project. We are working hard to get plans ahead of time so we can go deliver the nest, if you will. We're responsible for selling the land, for managing the property, the master plan, the 400 acres. Building the infrastructure necessary for those guys to open and operate, which is what we're working on right now. That phase of development will actually be closer to a $20 million project. It'll cost us about $10 million of hard cost of infrastructure. We've only allocated a share of those to the conventions and portion to address some of the concerns or issues you had about. We do benefit from the other money spent, but it's a $20 million investment to bring this out of the ground. That's tough to finance. We don't get much revenue. We've done a subsidized land deal as Amy's slide showed. We did that to try to align our interest with the city and O'Reilly and make it as comparable as possible to the UNT site. The UNT site had a ground lease, if you will. We talked about a ground lease. We thought a sale would be better. There was only so much capacity in his deal to actually purchase the property at market rate. So we talked to him and the deal is thin. He's at his limits. I believe he's at his limits. Convention centers are very risky. A very break even proposition and very difficult to finance for those purposes. So for TEMMA's group to be able to make that viable, take on the debt, we understood that. So we've tried to do two things, namely build the infrastructure along with the land subsidy and then also carve them out of the 380 agreement so they could get those property taxes and sales taxes flowing to their project instead of to us. >> Scott, can I just ask one question? Because you mentioned the word and I just wanted before you . So we heard about risk, convention center risks and the taxpayers aren't at risk, but there is a risk. So really the greatest risk of this failing really rests upon your development. I mean if it fails, it's going to probably hurt your development more than, I mean, if you thought there was that high of a risk of this failing to hurt your development. If it becomes an eyesore, if it becomes an albatross, it's going to have direct potential impact on red. Is that correct? >> It would impact us, but it certainly impacts the person holding the note and the guarantee dramatically more so. >> No, no, but I'm just saying that really it affects them, but I think what Councilmember Wasney was talking about, we understand that the risk falls there, but what are the other sort of cascading risks? >> Right. >> And from a financial perspective, I mean with a blight, if that's what it turned into, that whole development and you guys are the ones that are doing that development. >> Yeah, and I wanted to bring that up. That's a great, one of my points. Kevin, I think you mentioned it, every project is a risk. We built 700,000 square feet on the north side. Every one of those tenants is a risk. We turn over tenants on a regular process 10% a year. That's market. So you do have empty buildings. The nice thing about having this located at Razor Ranch from our perspective is the synergy, the density and the proximity. We think it's the right place for it. The economic boom to us is mathematically doesn't show quite the economic boom as far as sales, conversion to sales tax, coming back to our pockets as it's not much different than having another retail user. Or we've always thought about having a hotel, so that's not a new boom. The convention center is an interesting one that they do come and we're very, very hopeful they spend money and they shop. I think that benefits everybody. If they come to Razor Ranch or they come to the city, I think that's the whole point. That's what we're all trying to do. We're trying to afford that opportunity. But as far as benefit of being at Razor Ranch as opposed to a standalone site, if that project went dark, if the convention center is no longer viable. We have CCNRs in place that has to be maintained in a nice looking place. You guys have a master plan and a zoning ordinance that maintains those qualities. And we're going to work with them as a project partner to figure out something else to do with that space. I mean, their performance driven with our land deal as well . We're part of a master plan community that has shared facilities. We have shared roads and shared detention basins and the zoning quality and what not. So we certainly think it's going to have the best chance of being a successful project. And if the markets dictate that something goes dark, I think it's one of the best places to be. And we're willing to take that risk, build that nest, and then profit from it when we're profitable. And we'll manage it if it's not. God forbid, we don't want it to be unprofitable, but no one knows that from a market standpoint. A couple other quick questions. I do think, and many of you mentioned it, others, the 68 million, we're not asking for additional. The actual cost is 20. The cost to us out the door is more than the 5 million. We thought it was a fair number. We do want to build the nest. We do have to come up with a lot of money. I'm not sure yet where that finance is coming from and the land values and the land sale. We need that help. We need the help to ensure that we get that money back in a timely fashion and that we're not sitting out another 5, 10 million short and not be able to generate the revenue, the sales tax. So there is a risk in timing as much as the revenue side and the cost side. But I think the fact that the 68 million held as the cap was a good compromise on that. So it weren't for the legal carve out necessary for the Hotel and Convention Center 12 acres. We would undoubtedly, 100%, always have believed a hotel is a commercial use. So when we said a shopping center with retail or commercial use, it's always been envisioned that that's exactly what that phrase was for. So that there's not an argument over whether does hotel generate retail? Well, we think it's very conducive. It's mixed use. We want a mixed use project. We want it vibrant. We want multi uses. We've talked about the north side when I've tried to get a mix of uses to make that shopping experience better. Well, having a hotel and convention center and a theater and multifamily and a grocery store and that's all part of that mixed use, but it's certainly commercial. If it were not for that carve out, the legal definition that it's no longer mending it to carve out, I wouldn't be worried about whether we get the square footage for the commercial use. But I am, two things, I'm a little concerned with the carve out someone's interpretation two years from now when we're up against punch line that it's not. We're concerned about that. That's a significant risk that we're not willing to take if not for the legal carve out. And the legal carve out is a, we're trying to facilitate that project. Certainly thinking convention centers and amenity to Denton , that's pretty much the basic. If it's a benefit, we found a structure, a very unique structure to make it happen. We're happy to be part of that. The city could build the infrastructure or we could figure out a way if Tim's company could build the infrastructure for that convention center if it were in a different part of the city. We are here, we have a unique opportunity, we have the 380 agreement, we're willing to do that. We just want to make sure that we get paid back, that we can earn that back. And I think the project will be a success. >> Just about what I had, I'm open to questions. We're ready to get going as well. We've been working in the background with platting and legal descriptions and, like I said, CCNRs and the purchase contracts with O'Reilly and his group. >> Okay, any questions for Scott? See none, thank you. >> Thank you. >> Oh, did you, oh. >> Well, I was just gonna make a comment that a hotel is 100% no doubt about it, a commercial use. And I'm remembering the very early meetings about Razor Ranch when I attended council meetings. And it was always talked about what the city wanted was mixed use. We didn't want car dealerships and we wanted mixed use. So I personally would, I mean, I can't imagine anybody would push back on that. But hotels in the real estate world, hotels are all absolutely commercial uses and they do generate a lot of revenue, so I would certainly have a problem with that. >> And to add to that, I distinctly recall that in one of the earliest iterations of this, there was discussion of the potential of a hotel as part of the property. So this is actually fulfilling one of the earlier goals. And at that time, we had discussed hotel as being one of the anchors. >> Thank you. >> This is fitting in. I really appreciate Riley Group and Rad working together. You figured out ways to give a little in order to get a little and the city's doing that also. >> All right, any other comments, questions? Thank you. >> Thank you. >> All right, we have no more looks like presentations for that agenda item. We will now move on to our other agenda item on my agenda. It is Work Session B, which is Receive Report, Hold Dis cussion, Give Staff Direction on the Denton Renewable Plan and Activities Related to Future Power Supply Plans to Meet the City's Growth and Needs. >> Mayor? >> Yes? >> Mayor, I have a gentleman here, Mr. Smith, and I was wondering if I could call up on him before this presentation to speak for four minutes? >> Sure, and I'm going to put that before the council. I did meet with Mr. Smith and Council Member Briggs with Phil Williams and Howard Martin. Sorry, Howard. >> I met with him. >> Yes, and you met with him. Okay. >> I met with him this morning. >> Okay. >> We also met with him this morning. >> Okay. >> Okay. So I guess the question to council is, what's the council's pleasure on a four minute presentation? Is that what we're saying, four minutes? Is that- >> I just assume that since that's what the citizen comments were, that that would be a four minute- >> Yes, Council Member Rhoads. >> I don't know anything about this gentleman or what it contributes to this particular discussion. Can someone give me some background so I can- >> Sure. >> Know what my particular interest is? >> I guess, Council Member Briggs, you can do it. Or if, I think Mr. Williams has had many years of- So if you could just sort of give us a little background from Mr. Smith. >> And somebody corrected me if I misquoted these things. But Tom Smith has been with public citizen for a number of years in the station now of Austin. And has been an advocate for environmental concerns and rate concerns for utilities. He's testified in front of the Texas legislature probably thousands of times, Energy and Natural Resources Committee. And also commented on several programs by Austin Energy in their direction towards renewable energy. >> He seems to be an expert in what he advocates, is my understanding. So everybody okay with that? >> Yeah. >> All right. Mr. Smith, if you'll come forward and state your name and address for the record, and your time will begin. And Jennifer, is it a ding or what's the- >> [INAUDIBLE] >> You'll hear a little, the trap door will open up and you 'll be gone. >> Good afternoon, Mayor, members of council. My name is Tom Smith and I prefer to be called Smitty. I'm director of Public Citizens Texas Office. We're a consumer and environmental group based down in Austin, Texas. We also have offices in Washington DC. Most of you have a blue packet or have seen this material in the past. So let me just kind of visit with you a little bit about my background. One of the reasons I'm here is because I was appointed by the city council in Austin to serve on a citizens commission. It was looking at exactly this issue. How can we maximize the amount of renewable energy and do we need to build a gas plant? And in the materials you have are the recommendations from that commission where we said, let's not build a gas plant, but instead let's do 600 meg awatts of renewables. And about 800 megawatts of renewable energy due storage and a number of other things instead. Because we simply thought that the gas plant was too risky. And we're not alone. I think it was yesterday, Bloomberg came out with an article that's in your packet talking about their analysis and saying, gases now are risky fuel and renewables are cheaper . And it's not just Austin, Georgetown has recently made that decision. And as the mayor so quotably said, we haven't been taken over by environmental activists. What we realize is that a fixed rate product that we can get from solar and wind is a better economic deal for the city because you don 't have fuel price risks. Now in this packet is a one pager and then a lot of backup materials that basically outlines what I see the risks are and I would like to suggest to you that before that you go ahead and do the renewables because you've got a significant time deadline with the expiration of federal tax credits. But that you pull together a commission of the smartest people in Denton that you can find. Whether it be environmentalists or business people or folks from the university and study whether this is a good business idea for you. The three risks that I see are the costs. The question of is this outmoded technology on the gas plant side that are being talked about. And are we at a moment similar to when people were building land lines in the past and cell your telephones were now beginning to be on the market and eventually took over. And that's the technology risk. And then the third is the environmental risk. So let me run through some of these very quickly. The cost of producing energy from these kinds of engines is , we believe, above the market price in ERCOT. And the estimates I've seen, it's about $80 a megawatt. The average market price is about $40.64. And even ERCOT says if you build a new gas plant, it isn't profitable in today's low energy prices because the cost of renewables has come down. So the question you're asking is, will this plant pay for itself? And you should ask that question and find some ways to do it. This depends on natural gas prices remaining stable for this to be a good deal. I'm an old man now, I think 11 times in the last 35 years I 've been doing it's been above $8 when consumers start to scream that our electric bills are going up. Six times in the last five years. Pardon? Time's up, okay. Well, in that case, I would urge you to read the fact sheet and put together a study group because I think you'll find that the results are of interest. And that you'll be able to find some reasons why you might want to push the pause button on this. >> Thank you. >> Thank you very much. >> Any questions that anybody has? >> Questions? >> Yeah. I do not have cards, but my stuff is in here and I will email you my contact information. >> We do have a question from Councilmember Rogen. >> You know, a lot of people sending us emails saying look at Austin, look at Austin. I looked at their website and they're at 23%, is that correct? Renewables? >> Absolutely. >> And you guys are clearly beating them currently. And we will be at 55% pretty quick. But this plan that you all have to go to 70% renewables. It goes far beyond where we are. And I want to acknowledge the fact that you are one of the most progressive utilities in the United States. And that have a lot of respect for the management of the Denton Municipal Utility. They've done a lot of good thinking and are trying to resolve a problem of how do we balance these renewables? And do we want to go and build a big gas plant or should we have a lot of little gas plants to make this work? And I think there's a lot of wisdom to that. But I'm not sure gas is a good answer anymore. And that's, I think, the issue before you. >> Councilmember Pro Tem. >> Thank you. Another question, and I asked you this earlier when we met, but I want to ask it again. DC and our DME has made this proposal as the next step towards 100%. And, But we know that there are times when the sun doesn't shine. There are times when the wind doesn't blow. And that today, the technology is not quite there. To store energy at a utility scale to fill the gap. But I asked you, even looking 20 years out, if you anticipate that by 20 years from now, there are going to be no more conventional generation facilities. And what is your answer to that? >> So my crystal ball is about as cloudy as yours. But what certainly is happening is that we are at that cusp where energy storage is being deployed all over Texas. There are plants down in Presidio and No Trees. The folks at Encore are looking at a $5 billion, 5,000 meg awatt build. And just think about battery storage and cars or cell phones. Who would have ever thought that we would have this kind of battery power in something this small ten years ago or five years ago that you'd be able to build a Tesla that is as fast as it is and is able to store that energy. Now, that's where we are is at a technological cusp. And the other thing that you asked me this morning, which I thought was a good question, is are we at the point where we can buy the batteries now and it'd be cost effective? And I think the answer is, I don't think so yet. But in between now and the time you would have to build something, I think we will be very close to that. And then you can buy off the market for the short term until such time as those technologies are available. We do have big natural gas storage facilities all over Texas. And one of the storage proposals is to build compressed air energy storage. It works exactly the same way as a big natural gas storage facility does. And it's like a big balloon, it lets out hot air and turns a generator. That's being proposed for Anderson County and there's another one out in West Texas. And there are a whole lot of opportunities we expect will come up to be able to buy into larger storage projects or to put them on your side of the distribution grid and to reduce the risk of buying power, as you asked the other day, Mayor, from a company that comes to you with a package deal that has the storage and renewables, but then you've got added cost of transmission. And that makes sense to me. >> But my memory of your question, because I wanted to get it on the record, on the public record, is that when I asked you about conventional generation that you indicated to me, as I recall, that it was, that was one I hadn't anticipated. That it's a game we're playing, I'm sorry. But as I recall, you'd said that you thought that there probably would be conventional generation still necessary for the overall grid in the foreseeable future 20 years out. >> I did say that, and I guess the question is, you're looking now at a 20 year build that's going to cost you $250 million and a 20 year note. And the question is, if you were sitting here making the decision to buy that now, given what you know about the technology, why take the risk? Why not let other people in the market take the risk? And when you look at the number of times over the last four years that a gas plant would have paid off, using City of Austin numbers, it was one year out of the last four, one year out of the last six, that you would have made money and enough money to have paid for that investment, according to the analysis we did. And when you look at the risk of gas prices popping up and with the risk of those being increased by LNG exports, the risk of a gas plant, we think, is higher than the risk of buying on the market or owning a gas plant is higher than the risk of buying on the market or, frankly, continuing to invest significantly renewables and buying storage down the line. >> Thank you. >> Councilmember Johnson. >> Johnson. >> Sorry. >> Great Johnson. >> Good seat. >> Well, Smitty, we met this morning too and I appreciate your insight. And I think we would all agree, if you go spend $250 million, you can't recall it, right? I mean, it's spent. So I'll ask the question to you here in public that, because I kept pressing you for this answer, because you acknowledge Phil and not to public accolade, but I think what you said is he's probably the most progressive guy who runs an energy plant in the state. >> Certainly one of them. >> One of them. >> Yeah. >> I tried, Phil, to get you at the top of the heap. >> I will say he's got more renewables than almost anybody except Georgetown. >> So here's the question that I pose, because I think we have an expert, we have experts, right? And I certainly acknowledge your expertise after being in the business for 30 or 35 years. And the question I posed to you was, okay, sitting where we are today, you got sun and you got wind. Can't count on those two to provide you 100% of what you need. If you're eliminating coal and you're saying don't build a gas plant, then what do we build or buy? Because in my mind, saying we'll just get the rest of it on the open market has far too much risk for our rate payers. Because if it's not sunny and it's not windy, so you have to go to the open market for even more, well so does everybody else. Right, because that's where we're going as a country, which is a good thing. So if not gas, because the battery technology is not there yet, right? Well, whatever we do, it's going to take time. So we're sitting here on the, we're about to be 2016. So I'm not saying we got to figure it out today. But your proposal of get a group of citizens together to go study this, well, if that guy and you aren't the smartest people in this room about this topic, we don't know what getting a group of our citizens together is going to teach us about this topic. So what I'm saying to you as an expert, what do you recommend? And what you said was get a group together, do a study, investigate things. I'm just saying, what is it? If it's not gas, what is it? >> So I think one of the things we did talk about this morning is what's called demand side management. You have done quite a bit of that. I think from my, and I've only been looking at this hard for Denton for about less than a week, about five days. Is that there is a tremendous amount of opportunity to use new electronic controls to reduce peak energy use. And to shift its time that it's used from peak to non-peak times or to mitigate those micro spikes and drops that occur with renewables by using new electronic controls to say we're not going to heat that water heater right now, we're going to postpone that for five minutes. Or to delay for a few minutes the start up of a major air compressor on an air conditioning unit. And there are dozens of examples like that. >> Let me clarify though, I'm sorry to cut you off, I don't want to be rude. So because we did talk about demand management, we have a program today and how many people are adopting it or using it or whatever. I'm not talking about trying to decrease the amount that's consumed. I'm talking about how do we make more. Because we're going to, at the growth that we are as a city , we'll never save our way to prosperity. We're going to have to make more power. >> Sure. >> With coal being eliminated for sure. So that's what I'm getting at is that how do we go make more if we're not going to use gas and the battery technology's not there yet? >> So I think- >> Why don't the open market would be the only option then? >> Yeah, partially that's true. And I think the other thing that we visited about is an example that each of us uses in managing our portfolio. And you have wind, and a lot of it, and you're looking to buy more. But one of the things is making sure that you have a diversity of where those renewable resources are. And one of the advantages of having, and renewables are not all the same. The stuff that you have and you see out in West Texas typically produces most at night, spring and fall. On the other hand, if you buy down on the coast, that produces right at peak from say three to seven on most every summer day. And if you have it in different locations, you find that it produces just about every day at peak enough to be able to help you manage that peak. And then there's the question of what happens when that begins to drop off around eight and there's a big beach ridge that was built millions of years ago, along I-35 down between San Antonio and Laredo, where you have what they call post peak winds. And so by balancing your renewable buy, you can pretty much assure you've got renewables 24 hours a day, seven days a week. Now, the question you asked, and it's a good one, is what happens on those days when it's all flat? And it just doesn't happen very often in Texas, but if it does, and you're in the situation like everybody else of having to get on the market. And by developing a robust demand management program and making sure that the carrots are good enough, you can help mitigate that risk significantly by reducing the amount of peak demand. Now this is a problem every electric utility that is trying to resolve at the same time. And there are a lot of smart people who can help do this, but you've got large institutional users like UNT. You've got folks like Target. If you look at the way HEB, the huge grocery short chain, is managing their energy. They're looking at ways to reduce their demand costs by managing their air conditioning and their freezer loads. And there are a lot of people I think you could bring to the table to say, what else could we do that Denton has not done and come up with a program? And that's what I'm suggesting to you. >> Okay, all right. Joey? >> Yes, Councilor Hawkins, yes. >> And Austin right now is at 23% and you said that hopefully soon you'll be at over 50, is that right? >> Yeah, 55 I think it is by 2020. >> And how is Austin doing that? Or what's the plan to do that? >> So basically we are talking about retiring our oldest and dirtiest gas units. We have just made an agreement to build 100. We have a lot of wind, I think it's about 800 and something megawatts. We are going to buy more wind. And then just about 20 days ago now, passed an agreement to buy an additional, we have 150 megawatts of solar under construction, 300 up. We're going to build another 600 megawatts by 2019 of utility scale solar. And do about 200 megawatts of rooftop solar and do some sort of solar farms for local people. They call it community solar that will be within the distribution system of the city of Austin. So we've got this fairly large and ambitious plan. We're also looking at doing some storage. Just in to deal for a small storage unit at 1.5 megawatts to get our hands around this technology. That's a Tesla battery. >> So those are some of the things we're doing, the recommendations of the generation plan are attached here on the back of the multicolor chart. >> Okay. >> One question I have is, and just pretty brief is, so you're building all this, it sounds like Austin is itself building these renewable sources. >> Some they're building themselves, some they're buying on the market through PPAs. And so Austin has to plan for some type of backup procedure when those are not. And I understand Austin still has a tremendous amount of generation capacity. >> Sure. >> So is that really what they're counting on at least today, at least in this technology? Because you said you're only getting 1.5 megawatts of storage, so it's certainly not storage. But it sounds like they're replacing their prime generation component with solar, but they still have that generation capacity to back up what they're building in case somehow. Is that my understanding of how that's working? >> It's partially right. They are planning on retiring their oldest gas units. They will still have some gas peekers left. And they will have a coal plant and a share of a nuclear plant that are the base load units that they will continue to have operating. But they are planning on retiring their big coal plant like you are, several years later in 2023 at this particular moment is the date they have scheduled for retirement of that plant. So they're looking at the same equation and trying to figure out how to do it. What they have in addition have done a really aggressive job on demand side management and have the capacity to drop significant load on the hottest summer days. >> Okay. >> And that's one of the things they're continuing to exploit. And it's not just Austin that's doing it. If you look at say San Antonio, they're in the same position. And being a municipal utility, they have greater opportunities to do this in an integrated way than say an investor on utility. >> Okay, I'm going to let this, unless somebody has a real burning question, let this be the last, at least for you so we can hear from Mr. Williams. >> Sure, please. >> Ms. Kessamin-Wasney. >> So to confirm, Austin had a citizen task force, but they also hired an independent consultant to come in. >> That's right. >> And advise the city on alternative methods and what paths were available to them. >> That's right. >> Second question, does Austin sell electricity? >> Yes. >> They do. >> And that report from that independent consultant should be out sometime soon. But then it would have to go to the city council for some sort of affirmation as to whether they should build a gas plant or not. And I suspect that decision will be made sometime next month. >> Okay, all right. >> Thank you all for your time. >> I'm going to call you Smitty. Thank you very much, Smitty. >> Thank you. >> For your time and your information. >> Thank you, Smitty. >> Now we're going to hear from one of the experts, top experts and innovative DME. >> Or one of the most progressive. >> One of the most progressive, I'm sorry, please, that's correct. >> Enough. Thank you, council. I know it's been a long afternoon for you. Thank you for your patience to get to this point. And we'll try to move through this very briskly, but certainly we'll answer all your questions about the renewable debt plan. The renewable debt plan is in response to council direction . The direction has been to increase renewables, maintain competitive rates, and continue to maintain or improve reliability. And DME has done that, and our response has been this renewable debt plan to do that. With it, we bring 70% renewable energy. We replace the coal generation, or at least give us a good option to replace the coal energy. The renewable debt plan also has a positive effect on rates in the future. We get to the point where we offset future increases in costs that we would have on business as usual, and even be able to have some rate decreases starting in 2020. Also, it reduces our portfolio of emissions by 75%, which is significant. We have included that plan to energy centers, which are quick start units, and space around those centers that would be available to do other testing of other renewable sources in the future. As Mr. Smith said earlier, one of the keys to developing an energy portfolio is divers ification. And what this shows is the different colors we have here of the different types of renewable energy. While certainly most of the discussion we've had, or a lot of discussion we've had about the renewable debt plan has been about a quick start facility. Recall that 70% is going to be provided by renewable energy . And we're looking at diversifying that by looking at pan handle wind, North Texas wind, West Texas wind, coastal wind, solar in different locations to gain the diversity to ensure we can get the most renewable energy we can out of Texas. And that would be our first source. And what would enable us to obtain that renewable energy at the lowest cost, would be able to have a quick start facility that backs that up as available. We have had previous discussions with the public utility board and the council regarding renewables and backup generation. We looked back to 2009 for all the discussions that we've had concerning about what we're going to do about TMPA. What we wanted to be in position for. And we just started counting presentations that we discussed either TMPA generation or renewables and counted up 46 discussions. Since 40% renewables was achieved in May of 2009, we've looked at numerous options. One of the things that happens when you put yourself out there, as we did in 2009, of having more wind energy per capita than anybody else in the United States, we're receiving a 2011 Department of Energy Wind Power Award. People, when they Google renewable energy, they see you. And they start calling on us. And so we've had waves of input, waves of inquiries from different people providing renewable products. That I'll discuss later in the presentation. So we haven't only looked at the renewable options since we produced this renewable plan. We've been looking at different options as people have brought them to us. And the different industry, people in the industry have brought us many different options. And many of those options are very viable options. One that we should continue to look at and monitor and see when they become cost effective. A lot of them aren't scalable to be utility scale. But they're certainly something that could help us in the demand side management program or in helping us to offset peak load. So this is just a listing of some of the presentations in 2014 and 2015 so far as first generation briefings and looking at TM PA. Some of the comments that we've made in that, in those past presentations, some of the bullet points out of those, was just looking at realizing, hey, we have this issue and we've got to look at how we solve this issue. And that's what we strive to do through this renewable different plan. To try to find a balance between balancing rate impact and providing most renewables we can. So with that, we asked the renewable different plan. Brian's going to come and give me a break here for a few minutes before I go into other presentation and talk about the public outreach program and what the results and comments we've received from citizens has been. >> Well, good afternoon. As Phil said, I'd like to give you just a brief update as to where we are right now regarding public feedback. So we went on October 6th to a press conference and announced this to Denton and to the world. And so we've gotten a lot of feedback from that. We've had the website open since the same time we've had those open houses. I mentioned other meetings up there and I know Council Member Briggs and Roden both had meetings. And of course we're speaking to the PUB and to you as well. Of course this doesn't list exhaustively all the ways that this plan has been discussed. I know it's been in the newspaper and on social media and I know you've had one on one individual conversations. So those are important as well, but here I'll be able to give you some quantified feedback that we've gotten from the website. So we had the press conference, as I said, on October 6th. Three members of the media were there, but we also had the Periscope app that let people watch remotely. And so we had 100 different people tune in for that. And as you can see, we've had at least these eight different media channels put out a story on it. And so some of those multiple stories. So we've had a good bit of media attention on this plan so far. The websites need, and the comment forms as well, because they offer some quantifiable feedback. So this graph along the top shows visits to the website. So you could almost take that as a proxy for discussion of this plan. You can see an intense interest in the beginning and then some bumps along as we had the open houses. And then here more recently we've gotten certainly less visits to the website. However, selling sneakers or something, I'd be worried people are getting less and less interested in my sneakers, but not as worried here. Any questions? There's a lot of information. Are there any questions on that? All right. So this shows visits to the website and this shows people filling out the comment form. So there's a big spike there in the middle. That's our first open house meeting. And then it sort of trails off. Although I should say, I couldn't fit the whole graph on here. Further to the right, there are a few more. So three people have filled out comment forms since then. So you'd see a little bump if I could go further, but I just couldn't show the whole thing. And I'd like to give the, there were some yes/no questions on that comment form. So I'm going to go through those and show you what people have said so far. So you would have seen this in an email, but this one's even updated a little bit to add a couple more in. So mostly we had residents of Denton filling out the comment form. And almost everyone was in favor of increased renewable energy. So we had a majority of people understand why the Denton Energy Center was needed to back up the renewables. And then a majority of people found the information helpful on the website. We did get some good feedback from citizens along the way. They'd say, hey, I didn't see this on the website. I didn't see this at the open house. Can you include this next time? And so it was good to have that feedback and then to be able to include information as we went along. So this one's interesting. Do you believe that we've considered all relevant options? And it's a dead tie, 50/50. So there could be numerous reasons for this, but I'll tell you, I kind of had a lessons learned from this. If half of the people thought we didn't consider all the relevant options, I think if I had to do over again, I would have an exhibit at the open house that would say, here's some of the options we've considered. But we didn't do that, and as I say, if I had it to do over again, I would certainly include that. So here I've tried to do something which is sort of difficult to do. We had 72 people fill out these comment forms, and they gave us qualitative information. And I've tried to try to wrestle that into some quantitative information and say, what are people talking about? So you can see the top one there says, in favor of the plan , and I put 23 people. Now you have those comments in your backup. I encourage you to look at them, and maybe you come to a different conclusion than I did. So that includes people who said, hey, I like this plan, good job, guys. And it also includes people who went through and said, yes, I understand why this is needed. Yes, the information's helpful. No, I don't have any input or additional questions or anything like that. So people just gave positive impact, or rather input, without leaving a comment. I mark them as in favor of the plan. And then next in line we have people who asked for more than 70% renewable energy. So 16 people, that's a good amount of feedback. And then you can see several mentions about concerns about the gas plant, remarks regarding a vote. Some people said, hey, pay attention to the rates and reliability, and I don't care as much about renewables compared to that. And then people mentioned two technologies in particular, batteries and rooftop solar. Sir? >> Do you have a question? >> Do you have another slide with more comments? >> No, this will be the only one. >> Well, it would have certainly helped me if I had known you were going to do that analysis. Because I sat and did tick marks for a good while. But one that I don't see that you have on there, that I had at least five comments, was from citizens saying it's important for us to keep the cost down. >> Right, yes sir, that's what I saw here. Rates and reliability, I rolled those together, rates and reliability being- >> Okay. >> And a couple of those came just today, so some of those are brand new and they wouldn't even been in your backup. >> And question of clarification, do you think they make cost of the plant or rates? >> Rate. >> Okay, all right. >> Rate. >> Okay, just Council Member Freed. >> So on the survey, I just kind of wanted to go on record saying I kind of took a little issue with it and talked to Phil about it. I kind of feel like the questions are a little leading in that for me the main issue in this process or this plan are the gas plants. And there wasn't one direct question about those or about the cost of them, about the environmental effect of them in our city. And so I just kind of wanted to put that out there and I wished I would have seen one of those because that to me is the issue of this plan for the most part that we're discussing. >> Thank you. Thank you. Yes. >> There was some concern from citizens about the personal information that was included. >> Right. >> That was in just in terms of online identity issues. >> Okay. >> I think that's something in the future as we move forward for the city to be very sensitive to. >> Okay. >> Tally up the stuff, but let's keep their personal information personal. >> Sure. >> Just because we live in a world with a lot of dangerous people trolling the internet every day looking for anything they can. >> Sure. >> So let's help our citizens protect that privacy . >> Understood. And in fact, you mentioned the online security. And so we took out the IP addresses and we took out email addresses and we took out phone numbers to protect that. We thought, and it was a judgment call and I appreciate the feedback, but of thinking when people get up in front of council, they give their name and phone number, or rather their name and address. And so we thought we'd leave those in. But they'd be certainly easy enough to take out in the future. >> Or simply make sure that there's clear information. Because when people provide information that comes to council, it becomes public record. >> Right. >> It's just public record. Like when they get up and speak, it's public record. And so what we might want to do is just put some type of a notification that's clear on surveys like that. So that they would know that the results would be shared with council and that could be public record. >> Okay. Any other thoughts on the comments or questions there? All right, so that does it for the website. And then the open house events, some of you would have been there to experience those in person. But we sent out about 50, rather 45,000 invitations. And those hit the mailboxes on the 10th of last month. We had 73 people in attendance in the first open house and then that fell to 39 in the second. So you almost see the same trend among the website visits, the billing out of the comment forms, and then the attendance of the open house. Greater interest at first and then diminished interest as we moved on. So that concludes my portion. Are there any questions or remarks about the public involvement thus far? >> Right here. >> Can you give us an up to date amount that has been spent so far on this plan? >> For public outreach or for- >> For marketing. >> Okay, well, I don't have the number at my fingertips. So that's something I'll have to put together for you. >> Other questions? >> Yes, sir. >> As it relates to the environmental impact, that was one of my questions for later. So Phil, I'd like to know what the environmental impact is of a gas-fired power plant, assuming production of same, same kilowatt hours to a coal plant. >> Right. >> Here's why I want to know, because there's been a lot of talk about them being a non-attainment area. That's not because of what we do here. That's because of what we're next to. I mean, if you look at our industry here, it's very clean, the production, right? We just happen to sit at the apex of the 235s and we measure out by the airport. So you've got tons of cars on the 235s, you've got the airport, and then we're unfortunately in the wind pattern from a lot of manufacturing. And yeah, not to mention Mexico. So what I'm trying to figure out here is, because putting a gas-fired plant here or not putting one here is not going to have an impact on whether we're non- attainment or not, I can't imagine. But I want to know is what, because I don't really care just about Denton, I care about the whole state and everywhere else. If you're producing the same amount of kilowatt hours with a gas plant or a coal plant, what is the impact emission wise, the difference, if you're comparing the two? >> And I have a slide later on that I'll get to that will come close to addressing that. But I'll address now just this statement of just because we don't have a generating facility here doesn't mean we don't have an impact on it. We're consumers here. And I'm having to get it from somewhere. >> Right. >> And right now I'm getting it from 100 megawat ts, megawatts we own of a coal power plant and off the market, which that market's furnished by mostly gas, coal, and nuclear. And so the slide I'll have in here talks about what the emissions are off the ERCOT market. And so I think it'll help address that question. >> Thank you. >> Before you move on, dinner is out there. Obviously, this presentation could probably go for 30, 45. So what I'd like to do is take a five to ten minute break. Get your dinner, no lollygagging around so we could not close in on us eating our dinner. I'd appreciate that, Billy. I'm just kidding. Yeah, you bet. All right, Mr. Williams. >> So just a reminder, here's our current energy portfolio mix. We're at 41% renewables. We have signed an additional 5% of solar that will come on in 2019. We're using coal and market energy purchases now. >> Phil, sorry, real quick question. On that solar that we just signed, or is that, do they provide the backup or do we provide the backup? >> We provide the backup. >> Okay. >> That's why we did the size we did. We didn't go for more than we did in the net, was for that reason. >> That was my question. How come we just went for 5% of solar? >> Because for that, I can cover 5% as far as providing backup, going into the market. We didn't think that market risk was too great. We didn't want to go any further than that without figuring out what we're going to do for backup. >> And then the solar that we've just made a contract for that puts us up to 49% renewable. >> 45. >> 46%. >> 46%, that says what date? >> That's supposed to go online in 2019? >> Yeah, early 2019. >> Okay, thank you. >> Councilmember Hawkins. >> And then the portfolio makes, when we say market 30, I'm assuming that's futures, is that correct? >> No, market means going into the ERCOP market and buying, they had market or buying ahead from different bilateral contracts with other people that sell energy in the wholesale electric market. >> Okay, I'll ask about futures then later and how that works. >> Thank you. Okay. So where we're trying to get to, 70%, it would greatly increase our wind and solar pieces using a quick start plant to back it up and a bigger percentage is still out of market. What would determine whether that's market or plant would be based on the cost of the market. In other words, our first purchases will be to try to take all the renewable energy we can. But then when the renewable energy is not available, then we would go to the market first if the price is correct. If the price is more than, or if the price of the market is more than our units, then we'd use our units. So that's what this graph would show. >> So getting back. >> Sorry. >> I'm sorry. >> Can we go back one slide? >> Yes. >> So to be clear, we're already using the market for 17%. And so- >> We're already using the market for 30%. >> No, go back to the slide that we just saw with the quick start plant. So that the quick start plant, gas fired plant, both of them, at a cost of 225 million or 250 mill, wherever it comes in, would cover, that cost would be to cover 13% of our energy cost. Is that correct? So the value of those plants isn't just to provide energy for that 13%. To me, the value of that plant is to allow me to buy renew ables because they're implemented when they provide power. Is to go out and buy that energy in the most effective form . >> To back that up. >> To back that up. And so the intent is not to run these units more than we have to to back that up. >> But you say that the intent is not to run these more than we have to, only for when we need it. But from my understanding is that if we have it, we have to use it if ERCOT says so. >> Right, and that would be a statement. If I said that statement, I wish I could add in there. That's really a statement for all of ERCOT. I mean, ERCOT's going to take the same position of they're going to try to utilize all the renewables they get also. And they're going to have to market there with other generators. And then we would send us a signal to run our plants when they come up in the bid stack. >> Right, but I'm talking about Denton and I'm talking about Denton citizens and what we're going to have to endure. That's what I'm talking about. >> Right. >> Bill, real quick. When we look at the 17% of the market in this graph, and we look at 30% of the market in the other graph. Yeah, the one before. When you say market, I'm assuming that whether it's 30%, whatever else we're getting that energy from, or it's this 17%, those costs are going to probably be similar. If we're going out to the market, whether we're buying 30% or whether we're buying 17%, the cost for that megawatt hour could be comparable. Maybe some slight variation depending on time and all that, but some slight variation. >> Correct. >> Okay, all right. I mean, each of these renewable sources, as that graph I showed before, each of those different renewable sources has a low profile of how they're going to provide energy. And so when we contract for them, they provide us that low profile of what they expect to provide out of a solar farm or out of a wind farm. So then we can offset that and plan ahead for what we need to buy for whenever they wouldn't be available. So this is getting to your question on the emissions. Our current portfolio stacks up with NOx, product matter, participant matter, SO2, and what's the VOC stand for? Volatile compounds. >> A question on that. >> A question on that. >> Yes, just my pretend. >> When I would imagine 100% renewable, I would imagine no emissions whatsoever. So could you explain why there are some? >> Certainly. So this is our current day. Renewable didn't plan to what we proposed. The 100% renewable, the reason, and we've had this point out by citizens that saw this at open house of, hey, you have a mistake in your chart. You're showing emissions when it's 100% renewable. Well, even when someone's 100% renewable like Georgetown, that they do have some hours that they're going to have to buy energy off the market. And one of the things you'll see in another slide is that the market emissions are higher than even our TMPA coal plant. And so our coal plant, which is using Wyoming Power River Basin Coal, and is using scrubbers, has less emissions per megawatt hour than the market does. And so that's why there's some emissions even to 100% renewable. So then looking at this other graph here of, we've had some questions by citizens. We want an option of 70% renewable without building the plants. Go and get in, instead of that 13%, get it off the market. And so if I get that off the market, it makes it higher than the plan we proposed. >> Go ahead. >> Does this chart take into account the new EPA reductions requests? Like when you're saying buying from the market, right now there is a lot of dirty coal, but in the future those things may close because of the fact of the EPA regulations. >> So this is taking a snapshot of a year in 2020. >> Okay, so that's accounted for, the 75. >> Well, the EPA regulations probably won't take effect until sometime after that. >> Okay. Okay. >> Yes, Council Member Johnson. >> So Phil, so I think we kind of hit on this earlier, but I think it's just important to be said as we talk about all these options is, just like we're in a non-attainment area not because of what we produce here, but because what's produced around us for the most part, right? And what's headed our direction. This kind of gets back to, what do we stand for, right? So I don't want to do something that is, that is makes things feel great and cleaner here, but we're causing more of a problem somewhere else. So for example, buying on the market, do we get to say exactly what plant it comes from when we buy power? >> No, sir. >> So I think it's important for the conversation. Certainly, our current portfolio going to renewable dentin or 100%, any of them is going to be a drastic improvement. But when I hear the comments from some of the emails we're getting about the gas-fired power plants, you would think that we're pumping poison like crazy out into the sky from these things, and that's not what I'm seeing. So I think it's important to, number one, I think it's important to highlight that. And secondly, I think it's important to highlight, okay, well, if we don't do that, and we say we're just going to buy off the market, which I would never advocate for because you're just, you're at the mercy of the market for what you have to charge your rate payers, then conceivably, we're causing more pollution somewhere else. >> Yes, sir. >> By going to the market. So I think most of the negative, certainly I would say for me, most of the negative feedback I've gotten, very little in person, mostly via email, is about either environmental concerns or just the amount of money, right? Which we're going to get to the money and I think there'll be a lot of questions. But from an environmental standpoint, I don't see it. I don't see that the concerns that, certainly, that I've read are valid. >> Well, I think that is an important question for the council. Is the difference in emissions between what we're proposing and 100% renewable, is that difference in emissions worth additional cost to the rate payers? >> Have a, and this may be too convoluted, so if one of my colleagues feels like I've run off the rail, just tell me to come back on the rail. >> Yeah. >> Yeah. Thank you. I probably need that. I guess that the thing that has struck me about this whole discussion, not just about the Denton renewable plan, but renewables in general, emissions and things such as that, is like Council Member Johnson mentioned, we can't guarantee when we do the market where we're getting that electricity from. Correct? I mean, we can't do that. We can't say it's coming from this plant or this plant. And that's really the same way. I mean, basically, all generators throw this stuff out on the grid. And then you have this very elaborate mathematical calculation of who's attributed to whose load, so correct me if I'm wrong. The reason why we're saying the emissions for the renewable plan is at this level, is because we're saying, number one, that this helps us with the renewable energy portfolio, which is renewable energy credits. If we didn't have those credits, we could say contract with the wind farm. But if we didn't contract to get the credits, we could not claim renewable energy. Is that correct? So when we put the generation out on the grid with the gas plants, say, that are here, it just gets assumed into this current market portfolio, as far as the emissions. We can't, I mean, I don't know how we can say, because we 've got these gas plants that are, let's say, 200 megawatt, and we're backing up this renewable energy. Now, we can say the renewable energy has a certain amount of, but it's really almost like a paper issue as well, because none of this electricity from this plant may come to our substations, may not. I mean, we throw it out there on the grid, and we get to say we're 70% renewable, because we've executed contracts where we retain the renewable energy credits with these different types of either wind farm or solar farm. Now, when I hear that Georgetown is 100% renewable, because there's another issue, or not issue, an observation, that our wind farm contract, I think you've said what it is. I don't think that's proprietary. How many megawatts is the wind farm? Is it 60? 60. 60 megawatts is what we've contracted for. But yet, our actual load that we receive from that wind farm is only 40% of that? Isn't it 40% factor? It's 112 megawatt capacity farm, and we take 40% of the credits from that. OK. And it's the credits that define, so we may not get 112 meg awatt of load, because there's a capacity factor there, is my understanding. So, I mean, sometimes I have a hard time understanding these comparisons to begin with, because a lot of it's just based on those legal definitions of credits. You know, people are putting generation out on the grid. We're going to-- let's say we're running this thing at full capacity, and it's throwing off, you know, 120 megawatts an hour, whatever that is. Well, we get credit for our load on that. So correct me if I'm wrong, but that doesn't mean that the electricity comes out of that plant, goes into the transmission line that then goes to our distribution line. I mean, it goes out on the grid. Am I wrong in that? You've got two or three statements in there that I need to address. Please do. OK. I'm trying to keep up with them here. No, no, that's fine. One of them is-- and recognize you're talking to a non- engineer-- but electricity goes the path of least resistance. And load serving entities are responsible for securing an equal amount of generation equal to their load. They either do that through a qualified scheduling entity, or they do it through themselves. So what do you mean by security? You mean making sure that we have contracted capacity, either bought it or contracted for it, from the grid, from ERCOT, for that load. Right. And so if you're short, then ERCOT sells it for you. And you're buying whatever the ERCOT real-time price is. Sure. If you're long, you just sell at that real-time price. And so minute by minute, you're looking and you're balancing your load with some generation source. Somewhere. Somewhere. So you're pouring in-- somewhere, somebody has to be pouring in that much energy to equal your load. And so that's how the system works. When you say contract on a market-- let me guess that'd be in two or three places. You're contracting-- you're getting at ERCOT real-time. If you didn't arrange for enough, you just bought an ERCOT in real-time market. If you're a day ahead, you buy it in ERCOT day ahead market . Or you can have bilateral contracts with other people to buy pieces. And in that case, when I said you don't know exactly which generator it's coming from, if I'm buying from a large generator that has multiple generators, I don't know which generator it came from. I do know a source for-- I can't look at their source of generation and know it came from one of their sources. But those electrons aren't coming directly from-- No. You're saying the source is put into this big bucket of which you're pulling out of. Right. It doesn't have a highway coming down through here over to -- No. But I guess what I'm saying is the source we had to go buy contract from-- so when we say we just went and bought to the market, there's two or three ways to fulfill that market. It's either real-time in ERCOT, day ahead in ERCOT, or you have a bilateral contract with an approved entity that we've approved to do business with to buy it from one of their plants or sources they have. And so their sources, such as with Nextera, has a mixture of wind and gas power generation. If I'm dealing with another company that may have a mixture of coal, nuclear, wind, different people have different sources of energy. When I buy from them, I don't know which source they're getting it from. I'm just buying so many megawatts at a price. OK. Yes, Council Member Reed. So why do we need two gas plants? Why do we need two of them? So what we've looked at in preliminary was 12 units. And initially, we looked at putting all 12 units at one site. And after we started doing our due diligence, we found advantages from separating those units into two different sites to put six units at one site and six units at a second site. The plan-- we didn't increase the megawatt hours we were talking about or the megawatt capacity we were talking about, but we just separated it for reliability reasons. If you have them spread apart, then it helps as far as if a tornado comes through, you only have a possibility of hitting one and not both of them. Or if there's a transmission problem that would limit the output of them, you're improving your viability that they'll both be able to run. If there's some issue with gas production coming into the plant, you're separating that. It also spreads the emissions. That was my question. Did it have anything to do with permitting? Permitting, certainly there's an advantage of spreading the emissions. It's certainly favorable for permitting. I'm going to go ahead. Council member Rhoads. I guess the following the off the rails-- Are you following me there? I mean, I think what's important about this is you're right . And I'm sure the former president of TMPA and vice chair of the US Conference of Mayor Energy Committee understands this stuff more than anybody. Hold on a second. Here's this knife right here. Let me turn my back a little bit. That was a compliment, sir. I know, honey. That was a compliment. It's about what you're investing in, right? Because we have an option in terms of what we're investing in. The more cities that head in this direction, that can, that own their own municipal electric company and can direct their future, the more investment we do in renewables changes the game in terms of emissions across the whole grid. Which is why there's so many plans to say by 2050, let's try and get to this. Or let's try and reduce our dependence on fossil fuels by this. And I think you'll find that municipal utilities are leading the market in that. Because they can't-- I mean, even though they only represent 15% in Texas, using round numbers plus or minus percent, the Texas market is divided in 70% investor on utilities, 15% co-ops, and 15% municipal utilities. I think you'll find municipal utilities, San Antonio, Austin, ourselves, Georgetown, certainly taking a leading role in getting to a better energy future. Which is why this is still a part of moving the needle forward in terms of global emissions, which is the issue, right? Global climate change is the concern. And to the extent that we're able to reduce our dependency on fossil fuels, increase our investment in renewables, we're changing the game. So to me, the place of any particular power plant or not, it's not the issue as much as what are we investing in, in terms of the totality of our investment from our rate payers. And so from that point of view, we're clearly moving the needle forward on emissions. And if we could get-- I mean, if every other city that was able to do this in the state of Texas pursued a plan like this, I mean, the emission change across the grid or across the state of Texas would be astronomical. And so even as I see some of the plans, NextGen has put out a plan following the president's clean-- what does he call it-- clean power-- Clean power plan. Which it's trying to get people to go 50% renewable by 2050 . We're doing 70% precisely for this reason, to reduce the emissions, to reduce the impact on climate issues. So to me, the way the grid works, yeah, that's the way it is. But what we're investing in is helping push this forward. Councilman Wasney. So if I heard you correctly, 15% of the electricity in Texas is produced by city utilities. Is that correct? 15% of the electric sales are by city and utilities. I don't think that a lot of municipal utilities, smaller ones, don't have their own generation. They're buying. And so it's only the larger ones that have their own generation. Which means 85% of the rest of Texas is out there buying their power. Is that correct? Buying-- sorry, rephrase your comment. OK, so the 15% was the first time I'd heard that figure. And we classify that as city municipal-owned power plants generating power. So what do the other 85% do? Do they just buy it on the grid? No, 85%-- I'm saying the total electric sales in ERCOT, including all-- or 85% or-- excuse me-- 70% are investor-owned utilities, like Encore. They're providing net electricity. 15% are co-ops, like Courserve, are providing another 15%. Then municipal-owned utilities like ourselves are other 15% of sales. So city-owned utilities are a minority in terms of all of the power generated in Texas. Correct. In the last 20 years, do you know of any cities who have actually sold their city electric company? And if they did, who are they in? And is there any information on that? Do you know if anyone has sold? No one in Texas has sold, as far as I can remember back. There in all of the United States, there's usually one or two a year that consider it. And there's one or two a year that consider going the other way, like Boulder. Boulder, Colorado is looking at trying to buy out the investor-owned utility assets and become a municipal-owned utility. And so there seems to be some movement-- one or two out of 1,900 municipal-owned utilities across the United States, there seems to be one or two each year that go either way. So very small. Very small. I mean, to add to that, since market deregulation in Texas, any municipal-owned utility has had the opportunity, if they wanted to, opt in to the deregulated market. And today, no one has. And explain to me what's going on in Georgetown now. Then everybody keeps bringing up that town. Is that a municipally-owned utility? It is. Georgetown, we're about a 350 megawatt peak. And Georgetown is a 145 megawatt peak. So they're roughly a little bit less than half the size. So are they backing up theirs with the market? Yes. And everybody finds themselves in different situations with their power supply. Georgetown found themselves in a very unique place in that they had had a long-term contract with a river authority to furnish all their power. And they had been involved in a lawsuit with them and had, as far as some of that lawsuit, was no longer going to be receiving their energy through a power sales contract from that river authority. So all of a sudden, they found themselves with no generation obligations and clean slate to be able to start over as far as power supply in the future. When they looked at the market, they saw-- and part of what we describe here is they saw that there were people out there now. Solar had finally come down in price to the point that it was very comparable to other gas-based electric prices. And wind power certainly had come down in price also. So they bought more megawatt hours than they'll use. And certainly, they have bought enough megawatt hours to very certifiably call themselves 100% renewable, more than 100% renewable. And by buying that megawatt hours, they're saying that the wind's going to blow enough and the sun's going to shine enough that they think there'll be a minimum number of hours that they'd have to buy off the market. And so they've also secured, I understand, a contract for that backup energy to back that up. Their rates, according to their contract where they come off, a little bit higher than ours. But that allows them the price to go ahead and pay this and lock in their prices. Their mayor said they saw this as an economic deal, the ability to lock in and not have any fuel variability to their costs for the next 20 years. That's what they wanted to take advantage of. So interesting about Georgetown. Would we be in the same classification once we sell the coal plant that we would be free and clear and be in the same position that Georgetown was to be able to really look at the landscape and start over again? So I guess the differences in our position in Georgetown's is, one, we do have a coal plant. We've got to figure out what our options are in that contract going forward. But then the other is a difference in our rates. Georgetown's rates, having been dealing with a wholesale provider that charged them higher rates in the past, their rates are currently higher. And so that gives them a little more headroom to be able to afford a higher cost. How much higher? I want to say their cost was 3% higher currently. And I don't know what-- of course, that's competitive information as far as what the rates will be in the future. Council Member Johnson. I appreciate that. And I too had a question about that, Joe. A lot of the emails we get seem to compare us to Georgetown or some city in Colorado. And if you're at the bottom of a mountain with a raging river coming at you, you got hydro as an option. We don't have that. Georgetown has like 50,000 people in it and basically no industry. So I think it would be-- because we've heard people say-- I've certainly gotten emails from people saying, you can raise my-- I would gladly pay $40 a month more. Well, if you look at the demographics of Georgetown, the impact of $40 a month don't impact them. If you look at the demographics of Denton, $40 a month makes a difference. But more importantly, if you go to Peter Bilt or Flowers Bakery or UNT or any of our large employers, TWU, hey, how's a 10%, 20% increase in power grab you? All of a sudden now we're talking about job loss. Because Peter Bilt can't charge more for their trucks. Flowers can't charge more for their cookies. So I think it's important when we're doing comparison conversation to say, let's make sure we compare an apple to an apple. Because to compare Denton to Georgetown, Texas is really not a realistic comparison. 50,000 population, bedroom, community with no industry versus 120,000 population with tons of industry and very, very large employers. So we're to a city in Colorado, well, why don't we have Hyd ra? Well, it's pretty dang flat around here. So I think it's important when we talk about comparisons that we understand what it is we're comparing to. And I wouldn't mind paying more. The good thing is we have that program right now. If people want to be 100% renewable, all they got to do is click a button on the DME website and they can pay the difference and they can be 100% renewable. Our citizens all have that option. So I think it's important for everybody to know the thousands that are watching at home, if it's important for you to be 100% renewable, you have that option today. How many are opted into the program so far? We've seen an increase since we started talking about this program. And we've added 11 more. I think we're up to 79 to 79. And in addition to that, we have 19 city accounts also on that program. So your city utilities are powered by renewable energy also. I mean, I'm not trying to make a joke. I mean, that's good. And I think a lot of times people just don't know things are available. But I also think people don't know things are available in terms of information. So doing a comparison to Georgetown is real easy to do in a conversation. But when you compare the two cities on paper, the comparison really kind of ends there, right, in terms of what are the concerns that we would deal with versus what they would deal with. So I just wanted to share that. I think that's important. Councilmember Hawkins. And to add to that, the other half of my emails I'm getting are from ratepayers. And they tell me my job on council is to provide basic services to this town and keep costs down. When we're going through our budget talks, that's a big thing, being physically responsible. And just hypothetically, if this is a long drawn out answer , you don't have to give it. But what would happen if tomorrow every DME customer hit that button, went to Green Sense? We would have to go buy a lot more renewable credits. And I've got a slide further in here that talks about the price difference between these different variations of 70% renewable, 70% renewable backed by market, 100% renewable. It talks about the rate impact on residential citizens and on our top 20 customers as an average. Mayor Pro Tem. Thank you. It's interesting that a lot of what we're doing right now is kind of reacting to feedback that we've gotten from citizens, which is exactly what we're supposed to do. So I've gotten feedback that-- an interesting question is, why is DME cramming this plan down our throat? I thought that was an amazing thing, because as I recall, when I got on council back in 2009, we just-- right after that, we rolled out the 40%. And by 2010, if my recollection is right, if I'm recalling correctly, in a committee on the environment session, we said, we can't sit and rest on our accomplishments. We've got to start working right now with the plan. 2010. It's almost 2016. And from time to time, you guys have reported back to us. During that process, we agreed in council meetings and committee on the environment and council meetings that three prong approach, that we wanted more renewable because of the responsibility to reduce emissions. We wanted it to be reliable, because everybody expects reliability. Everybody expects to see the lights come on when we flip the lights. And we wanted the good rates. We wanted competitive rates. Now, I define competitive rates as at the average of our market or below in our region. And I would even like to shoot for down the road affordable rates, which I define as in the bottom 25%. And I think we can get there. And I think that the renewable dent in plan, I'm going to 70%, is not anything opposed to being 100%. People are trying to put this out as, well, you're either 100% or 70%. And you've got to be 100%. Well, we're getting there. And friends, we're getting there faster than almost any other city in the country. And we're getting there with better rates. I'm amused at the notion of following Austin's model of getting a consultant and getting a big committee of folks, because that produced a plan that isn't nearly as aggressive and as satisfactory as the plan that I see before us right now. So I'm really pleased with what I've seen and with the cost, and I would love for you to go to the cost sheet. And let's look at that, because the cost is, as Mr. Johnson said, the cost for our rate payers are the folks who own fixed incomes or who are just barely scraping by. A difference in rates that we are imposing on people is really important. And the rates for keeping business here and attracting new business is crucial. And the reason that we're interested in that is because that diversifies the tax base, and it takes tax pressure off of our homeowners. So we're looking at a big picture here. We're looking at reducing emissions by 70% and keeping our rates competitive. So I thank you for the plan that you brought. Can you go to that slide now on rates? Because I'm afraid we're going to run out of time, and I think that's a very important slide. Let me just go through. I'm going to get there quickly. But I don't have to start over. As I talked before, we have many alternatives we've looked at. Some of these have been brought to us more lately by citizens. Many of these came to us during 2009 when we put ourselves on the chart, everybody came to us with, hey, here's my great idea. Some of these-- not saying no to all these, just many of these are scalable. Many of these are certainly not their time. Many of these would be something we keep an eye on. We looked at different options, other strategies. 100% renewable without quick start backup. 83% take out the 13% and get you there without quick start. 70% without quick start backup. And 70% renewable backed by a counterparty contract. Conservation and then wait and see. This is a difference in energy expense. As you can see, the renewable debt plan we have here, including making the debt payments on the power plant, is less than 100% renewable debt plan backed by market. Which we contend has more risk contained to it, as Councilman Johnson pointed out earlier. Would you say that again, please? So the 100% renewable plan backed by the market is still more than-- as far as more cost. And we perceive-- staff perceives more risk, as Councilman Johnson had pointed to earlier, as far as the market risk, what the market prices can do. It has lower cost even than what our business as usual plan is, but it has-- up front, it's more costly. It has a short term rate impact that we don't think would be desirable. So business as usual. This is the rate pieces. We have rate increases coming our way already. We have the TMPA debt that we need to pay off. And we have the rate increases coming way to citizens that between '27 and 2019, not all at one time, but ultimately would mean $9 a month for residential citizens. And for our top 20 customers, we're talking about that turns into $14,000 a month. And business as usual doesn't have the savings in it. And even with that, we have excess energy at times we're having to sell back into the market. Renewable debt and plan. We have the same prices coming up the next two years, because it's the same TMPA debt I got to pay off. But after 2019, when the plan goes in place, we have the fixed price contracts for the renewable energy. Then it gives us over $500 million worth of savings for the next 20 years. Even with 70%, we're going to have some times where we have 190,000 megawatt hours of excess energy of renewable energy that we purchased that we'll sell back into the market. But it does result in rate decreases beginning in 2020. We're talking like 2 and 1/2% a year each year for several years after 2020. The 100% renewable plan, we're talking about rate increases that would be more between now and then. And so we're talking about $21 a month for average residential customer, $35,000 a month for our top 20 customers. It's $215 million more expensive than our renewable debt and plan. And we would have a significant increase in the amount of excess energy purchases that we'd have to sell back into the market. 83%, same story, just a little bit different numbers. Still larger rate increase, more expensive than renewable debt and plan. And there would still be a sizable number of megawatt hours we'd have to sell back into the market. 70%, without quick start backup, we're going to back it up off the market. Same story. 9% increases, $19,000 a month, $400 million more expensive than the renewable debt and plan. We think there's market risk to it and it has higher emissions. And if we went back and didn't take that market risk by going to market, instead we went back by counterparty contracts, we got some addictive pricing on what those contracts would cost. And that would cost even more, because you're paying somebody else to take their generation and leave it off for you to run when you need it. And so they're forgoing the opportunity cost of what they would make in the market, and that would cost us even more. Yes, Council Member Wood. I stopped by a booth at National League of Cities. The Department of Energy was there and they had this great display, new website. You can find out all about your energy portfolio and your city, which is interesting. They said, are you doing anything interesting in terms of energy and debt? And I said, yes, I am. Or yes, we are. And so we got talking about it and they said, it's interesting, there's so many cities getting a lot of praise for having a 100% renewable plan, but the implementation is maybe 10% or something like that and they've got something moving forward. In terms of policy in the city currently, do we have anything on the books that is guiding where we're heading? So we've got here, because of clear council direction, since 2009, as Dalton has spoken about, in terms of moving forward and guiding our energy future, because I agree with Council Member Gregory that at the end of the day, I think everyone's goal is to move forward. What would it mean if we, in addition to moving forward with a plan like this, also adopted a policy, similar to how other cities have, that says something to the tune of our goal is to, at some point in the future, reach 100% renewable and that we will pursue that by this, this, this, or this means. Some put target dates on it, some don't, some talk about when things come available, some are more ambiguous than others. Is that a help to you from a policy direction to get that sort of clarity from the council in terms of what we do from here? And then I have a follow-up question to that. I think it certainly is, as clarification, as council changes, of what the direction is. I mean, we've received direction from council in the past through our meetings and through Committee on the Environment, through other places. I believe the 2030 comp plan had some general discussion as far as what the goal was for the city and how to move forward. And so there has been direction that would just be another place to provide clear direction we could point to of, hey, this is what our direction for council has been and what we're trying to achieve. And so my question is-- and I think that might be something we might want to consider as a council. Do we enact some sort of policy document attached to this particular plan that shows what our ultimate goal is in the future? And we might need to talk about what that might look like. But it might address the concerns of the citizens, which are, we ultimately want to go to 100% and we're able to put in the policy. We agree with you. And that's where we're heading. And in fact, this is the path we're taking. So my question is this. If we were to adopt this plan, the renewable dent plan, and five years, 10 years, 15 years, 20 years into the future, technology has reached a point to where we figured out how to scale storage, battery backup of renewables to the extent that it's utility scale. We don't have any issue any longer with when the wind didn't blow and the sun didn't shine, and we figured that out. Say that's 10 years out, hypothetically. And Denton looks at that and says, man, it would be nice to be able to take advantage of that. But we have these existing gas plants. I think one of the concerns is, are we investing in something that immediately is going to be outdated or at some point is going to be outdated at the point where we have that sort of new technology? So hypothetically, that's the scenario. 10 years in the future, we have the backup capability. The council at the time wants to push to 100%. What do we do with our existing gas plants? And are they still-- I guess the word that's used a lot-- are they still relevant at that point? I believe so. I guess at that point, you're talking about a future and what ifs there. Totally hypothetical. Totally hypothetical. But making a transition of what would that cost of that battery technology be? And how would it be implemented? What size? Is it something you have to manage the generation site? As Duke has in West Texas at No Trees, appropriately named, where they put in, I believe, 34 megawatts of battery technology that they have there. And I think that's the thing we're seeing is, yes, we're hearing lots of conversation about battery technology, but we haven't seen it at a 200 megawatt scalable size yet. Very few place. I mean, yes, it's out there. It's on the cusp. It's something that's going to happen. I think, as I stated in a previous council session, to me, battery technology is where solar was in the past. I think it will come around. But the adaptation of that, using that battery technology, will be just that, adapting. The price will have to compete, and it'll still get there. Encore has proposed a plan to implement battery technology. And they've put it out there and they're investigating it. They've modeled it. They have a microgrid to experiment with it. But as far as how would you tie in the battery technology and still tie in traditional fossil fuel sources, well, right now, there's, I believe, 14,000 megawatts of wind capacity out there. There's certainly plans on the table to eventually go up to 20,000. ERCOT generation load is around 65,000 or 70,000. And so even with renewables increasing, even if you had all that renewable energy pumping it into batteries during off-peak hours, there still wouldn't be enough capacity out on the market yet to completely do away with all the fossil fuel generation. I think you'd see a transition to that. Council Member Johnson. Could we sell all the power we can make? I don't know how to define all the power we can make. So I mean, it's probably too simple of a question, right? Well, one of the comments I've heard is you're going to build this plant. There's going to be some new emerging technology that will certainly be on the market within five to 10 years. And you won't need them anymore. So you will have not recouped half of the money, right? Well, I think about-- I'm just thinking about other technologies. So my dad still has the flip phone. That's just anecdotal if you're watching dad. So what I'm saying is, Texas is the fastest growing state in the country. Caribou migration is happening from both coasts. The projections are staggering. We're going to double in population in the state. So my question is, if some emerging technology or the battery stuff comes online, we really can go store power for off peak. Could we still sell the power that we could make in order to pay off the debt of the gas-fired power plants? Yes. Because what I'm getting at is if my cost-- Give it a try today. This is back to just typical manufacturing operational theory, right? It's a make versus buy analysis. That's all this is. Am I willing to take the risk of buying my power, my excess power needs, that which I can't make? What's the risk? None of us-- if any of us could predict what electricity is going to cost 10 years from now, we wouldn't be sitting here. So we don't know. If you make it, you know what it's going to cost you other than what your own material costs. If you're buying on the open market, you're at the mercy of the market. So I'm not comfortable going to that spot just because of what it could do to our rate payers. But I don't think the argument of if you build these and some other technology comes along that you want to adopt, they're now obsolete and you can't use them. I don't think that holds water either. Because you could always sell power at a lower price just to recoup your debt. Well, and there's a lot less-- there's a lot more less efficient, older, more expensive technology out there that would roll off first before these would. Right. There's certainly a lot of generation that doesn't have as good a heat rate, doesn't have as high efficiency as what this does. Right, so that was my other question was, when coal is gone, what percentage of the total power supplied now in our market area is from coal? Jim, do you remember what the total-- Those who can also buy from us. About 36% of ERCOT-- 36% ERCOT capability right now is coal. And a portion of that is two new units that come on more recently, Spruce II by San Antonio and Sandy by Brass's, or the two newer ones. Most of that is pretty-- is the same age as our Gibbons Creek plan. OK, just sort of housekeeping. We've got about 15 minutes for our session. We have-- we've got a couple more questions at least queued up, Councilmember Briggs, Councilmember Wozni. I think most of our closed sessions that we have, we can-- a couple of them we can put off till the next time . And I just want to be cognizant of our time, because I know we've got a proclamation. We've got several residents out there with that pro clamation. So once we get through with the questioning and the presentation, then we'll decide what we're going to do in the closed session. But I want to try to get that 630 numbers quickly as possible. Because I don't think this is the only discussion we're going to have on this. I mean, this isn't a do or die tonight. So OK, go ahead. I'm sorry. Councilmember Briggs. My question is about the frequency and the amount we're going to-- the production that we're going to run these plants. As constituents sent me numbers in math, and it appears that we're going to be increasing our production of energy 55.19% more than we're getting from Gibbons Creek. Is that because we're planning on-- does that account for the amount we're planning on selling it? So as far as the generation numbers of what we're getting in the future from Gibbons Creek and what we get from these, we have a spreadsheet that, of course, refers to council that we'll discuss in closed session. I'd prefer to answer that question in closed session. OK, well this is all public information. So but-- OK. Public information of what? Well, on the amount of usage, because we own 21.3% right now, and approximately received 430,005 megawatts this year. And if you do the math on the megawatt that we're getting, and the amount of time we're running it, it equals about 55.19% more energy than we currently need from our backup at Gibbons Creek. And so I'm wondering, is that the 55% more is pretty significant? Is that for-- are we accounting for that much growth? So Gibbons Creek is certainly a much different technology than these plants. Gibbons Creek was built as a baseload unit and has to run a number of hours just to be available during peaking hours. And so it has to run much differently than these units would run. These units would be much more up and down based on the current market conditions of what they would be. But it's 55% more megawatts that we're going to be generating than what we are getting currently from our Gibbons Creek. And I guess I assume that these quick starts were intentionally to replace the Gibbons Creek that we're going to try to get out of. Well, they're to do more than just replace Gibbons Creek. They're to back up our total load that we're having to back up with market purchases now. But they're there to provide backup for when the renewable energy sources are available. I'm trying to make the switch to get most of our energy from renewable sources. All that we think we economically can, these units are going to run to back that up, which has a different purpose than what Gibbons Creek is running now. No, I'm not answering your question. I don't mean to not answer your question. I'm just not sure how to answer your question. OK, thank you. Well, and you all might get together offline and make sure that he understands the numbers. And yeah, that'd be great. Council Member Wozniak. Because the agenda item says to get council direction, one of the things I'd like our council to consider is to slow things down, number one, pull together a citizen task force so that we do include our citizens in this discussion. We have two universities here. Three, I'd like council to consider a request for qualification. It's like an RFP, except it's for qualifications, to start looking for a consultant who's a specialist in energy issues and consulting cities. Other cities do this. Seven council members-- we're not engineers. I don't think we're qualified to really study all of this and make a decision that's going to impact the debt and the future of our city for 20 years. Take our time. Make a decision. It may be that this is the plan we come back to. But at that point, we can be rest assured that we have vetted it totally. We have included our citizens in the discussion and that we have the benefit of a third party, non-partial, who can stand here and answer some questions and quite possibly put some things on the table that we don't even know are out there. So we're looking at one of the biggest decisions that we're going to make on this council. And I think that's the way to make an excellent decision, to make a careful decision. And I think it behooves us to give that some careful thought. And that's my recommendation for this council. OK, any other-- Phil, do you have a couple more slides? Just going over conservation, people have been talking about conservation for a long time. We can serve our way out of this. I think Councilman Johnson already said we can't-- we're not going to be able to serve our way out of growth. We talked about waiting and seeing. So by waiting and seeing, we talk about this program producing revenue or producing savings. And so essentially $36,000 a day. Emissions reduction, 3.7 metric tons a day of these types of emissions. Reduction opportunity for CO2, 1.9,000 metric tons a day. So we're talking about higher rates. Then what we talk about, and by not going forward, we're talking about limiting. We have a decision to make in 2016 of what we're going to do with Gibbons Creek in 2018. And so certainly, my reason for showing you this slide is not to put pressure on you to say, you've got to make a decision tonight. That's not the answer. But the reason for me showing you this is I think I would not be doing my duty to not say there is an impact. A non-decision is a decision. And there is a consequence of it. I just want to show the consequences of it. That's all I'm showing here. So these are the approval processes. These are the decisions. These are the things we've got to decide on going forward. If we go forward, then these are the decisions of deciding within the plan. We can talk about these in close session later time. Sure. Any other-- yes, Councilmember Rhoads. To the point of the timeline, I think when we started this conversation, I think even on the website, I think it says something about a December go date. I mean, are we still kind of-- I guess it's up to the council to some degree. I mean, my suggestion is we head in that direction. I think we've gotten citizen input. I think we've gotten expert input. We were told you're the most expert, most progressive person in Texas. So I'm not quite sure why we'd spend additional money for consultants when we've got some pretty capable folks who've been doing this for decades and thinking through this for the last six years, it seems, since we started this game of renewable energy. So I'm content that we've got the expertise in-house. So my direction is let's continue this discussion, and let's head towards that December decision date. Yes, Councilmember Hoffman. Can you go back some slides there? Brian had a slide where you guys sent out a bunch of invitations to an open house or something. OK, thank you. So you guys sent out almost 45,000 invitations to an open house. And I'm doing the math here in my head, but about 110 people came? Yes. And some of the 39 would be people that came to the first one. So some of the 39 were counted in the 73. Sure. Well, if I'm giving direction, too, I'd follow Kevin's lead on that. I think we need to stay the course. And just I'm very impressed with you guys in all the data that you give us and the emissions and all that. So I'm always welcome to hearing any kind of input, but that's a pretty eye-opening slide right there. So thank you. I agree with Kevin and with Joey. I've had input from citizens since before I got on council. And the three goals that we have set of more renewables, reliability, and affordable rates, that's been consistent. And some want more of one, and some want more of the other. But that's a balanced plan. And I don't think that we need a consultant to come up with a plan that we already have. I mean, we're there. And it's not rushed. It's been a five, six-year process. And I know some of the folks at the table have not been here all that amount of time. Some of us have. And I think the best idea about memorializing a goal of 100% is so that in a few years when everybody sitting at this table is new, there's documentation that that's been a goal. Because the same conversation will come up. Well, when did we set that goal? Well, it was set a long time ago. Council Member Briggs. My direction is to slow it down and wait. I mean, there are a few people, several people in this room , that in 20 years will be dead. And a few people making the decision may not live to see us go to 100% renewable. So we need to think about that. I mean, what do you want to see in your lifetime? What kind of goals do you have for your future? I mean, these are things that are real. I mean, this decision is going to affect a lot of people. And I've had a lot of people approach me and not one person is excited about a gas plant for many different reasons. So I just think that we need to think about that. Council Member Johnson. So lastly, first I'm counting. I'm trying to figure out which 20% are ahead of me. Get a little nervous after first count. So I would not advocate for hiring a consultant. I'm done with consultants. And frankly, it's because I think we have-- if we had a DME leadership that was fighting renewables, that was saying it's coal all the way, right? Or it's all natural gas. Then I would say, well, maybe we don't have enough progressive thinkers, right? But we're like one of the top in the country. So I don't know what kind of consultant we're going to find . Meaning you can find a consultant who's going to have a-- probably a particular bent. So to me, I think we're already heading in the right direction. The question really comes down to do we spend the money on this, or do we take our chances in the open market? That's really what we're talking about here. So it's a return on investment conversation is all this is. I don't think it's an environmental question. I really don't. Because if you look at the elimination of the coal, it's a drastic improvement going to the gas. And if we buy on the market, we don't have any way of knowing whether we're not making a worse contribution to the environment. So it doesn't track for me on the environmental angle. I mean, certainly if we said, hey, as long as we don't do it in our backyard, it doesn't matter. I don't know that I'd buy into that, right? So I don't advocate for hiring a consultant. I don't think there's anything wrong with us saying, let's continue to discuss it amongst us as we-- over the next three or four or five meetings or whatever it is. But I do think it would be naive for us to say, we don't really have to make this decision any time soon, because we have 2018 looming. And whatever we do, it's going to take a year. You can't build a stinking office building in Denton, Texas in a year. Or most places for that matter. That wasn't a shot at Denton, Texas. It takes time to build things and order all the stuff. So I wouldn't feel so strong to say we have to make the decision in December if we feel like there's new information. But frankly, I don't feel like there's any new information. And I feel like we often throw out the term the citizens. So I just want to keep it in perspective. How many and who? Because there's always going to be some percent of your population that's going to completely disagree with anything you do. And we know that sitting in this room. Every time we vote, we piss off somebody. It's just the way it is. So we sent out 45,000 invitations and 73 show up. And I'm certainly hearing from plenty who are saying, don't make a decision that's going to raise my rates. So I would advocate for the next time around, let's have a public hearing. Let's hear from all the citizens. Let's have everybody come and tell us what they think, what their ideas are. Maybe some citizen has an idea we haven't seen yet. And we can hear it. That's happened in the past. But I don't think that to say, let's just slow down. Let's don't do anything yet. Let's form a group of citizens to go and study this. I don't think a group of citizens is going to come back with anything different than what we've heard from experts from Austin or from our own. So I think we need to keep meeting. I think we need to have a public hearing. Let's hear from all the citizens in that room what their ideas are and what they want. OK. A couple of comments. As far as the timeline, I'm just for making sure that we have the information we need. And we've got a closed session, which I don't know if we'll get to. But I think we need to-- I need some discussion. And I want to have it with this body. As far as the numbers, I've really been looking through that spreadsheet and have some questions. Because we're really basing this decision on the projections. And I'm not saying the projections are right. I'm not saying they're wrong. I just want to understand the paradigm in which they were created to ensure that when we look at these numbers-- because that's really what we're making this decision on-- is the numbers. Yes, it's an environmental decision to some degree. But when we look at a chart that says you're going to save half a billion dollars over 20 years, and then we're told in a budget meeting, when we're considering the budget every year, that once you get five years out, it's all sort of fuzzy math anyway. That's not to be critical. So I'm trying to make consistent these paradigms that we're asked to approach some of these decisions with. So if that takes only three weeks, if it takes five weeks, I'm OK with that. Some of you may be OK with the numbers, and that's fine. I just want to make sure that we have that discussion. And wherever that falls, I certainly think we need to have a, whether you call it a complementary, cursory public hearing, or however you couch that, I certainly think we need to provide the citizens an opportunity to come before this full body on the record to talk about this. I know we've had open houses. I know we've all had emails. But how can it hurt? Yes, we see this impact of delay, but this is a decision we want to make sure that we really get-- whether you're comfortable with it or not, you want to get really uncomfortable with it, or you want to get really comfortable with it based upon the information. Some of you may already have the information you need, and I certainly respect that. But I think we've got a couple more discussions or iterations here with some official public comment. Because this is the first time we've really discussed this in a public forum with the full body. And good heavens, we had a $30 million convention center that we discussed for two years. I understand the impact of this, the potential consequences of waiting on this are larger, and that's not what I'm advocating for. So however long it takes, I'm OK. I just want to be able to still have a couple discussions that are important to me with this body. And they are related to competitive matter specific numbers. So that might be something that we consider next time, or we can come back after the public session. So you had-- Councilmember Briggs? Do you have a question? It can wait for a later discussion. OK. Good. Any other questions on this? I guess we need to go into closed session to decide what we want to do in closed session? Well, let me just ask this question. The only action item that we have that's related to a closed session posting is the incentive agreement for the convention center. Is there any council member that needs to ask some questions in closed session that we can get answered? Anyone? OK. Then what we're going to do then, we'll just adjourn the meeting. And we'll take up in our 630 session. And then if we have a desire to come back with the closed sessions we've got, then we'll make that decision there. Is that, Mr. City Manager? My only comment was on the other items, the Project Cartoon and the McKinney Street property, those are not critical. So you don't need to come back now. If you want to wait and decide that later, we can have staff stay for that. Otherwise, we could send them home. What's the council's pleasure? Y'all want to-- Decision. Yes. C and D we can put off. See how long this meeting takes. OK. All right. So yes. All right. OK. So we'll now adjourn into our regular open meeting. [MUSIC PLAYING] Hey, good evening. Welcome you to this Denton City Council meeting, special call meeting. We usually don't meet on the-- is this the second Tuesday? Yeah. Anyway, yeah, second Tuesday. But tonight we are because we have a special proclamation to read as well. And I would ask that you join me in the US flag and the Texas flag and all our veterans here who are with us tonight. I pledge allegiance to the flag of the United States of America and to the republic for which it stands, one nation, under God, indivisible, with liberty and justice for all. Honor the Texas flag. I pledge allegiance to the Texas, one state, under God, one nation, indivisible. We've got a proclamation that I'll come down and read. We've got one pro-- is this on? Yes, it's on. We've got one proclamation to read, and it's a proclamation for Veterans Day. And I want to ask any of the veterans that want to come up here and stand as we read this, and we get some comments from council, just come on up. And whoever wants to join me? Yes. Absolutely. Absolutely. [APPLAUSE] Fantastic. Well, thank you all very much. I tell you, I've got chill bumps right now, to be honest with you. What a great acknowledgment of the sacrifice and bravery that our men and women who have served our country and paid the ultimate sacrifice with their families. And I'm just humbled and honored to be here to read this proclamation. And before I do, we're going to sort of deviate a little bit. Because typically, I just read it and get someone to speak, and we're still going to do that. But seldom do council members have an opportunity to talk about proclamations. But I really want to take this opportunity to allow my fellow colleagues on council to address you all in just the importance and significance of the day we celebrate tomorrow and what it means for our country. So Mayor Pro Tem, if you will, as people line up to request to speak, if you would just call on them and we'll move forward. Everybody's lined up. I put my name in first. I'll go last. Ms. Briggs. Well, I tried to shake as many of your hands as I possibly could. I wanted to say thank you for all that you've done and for your service. And I appreciate it. And my children appreciate it. Thank you so much. Mr. Johnson. Thank you, Mayor Pro Tem. So Veterans Day makes me think of my two grandfathers a lot . My grandfather on my dad's side lost a leg on the beach at Normandy. And he would never talk about it. He would just say, did what I was supposed to do. And every now and then he'd pull the leg off and tease us with it and have fun with it. That was long before modern prosthetics. My grandfather on my mother's side was in the belly-- he was the gunner in the belly of the B-12-- B-17. He enlisted when he was 16, got caught when he was 17, sent back home, re-enlisted when he was 18, and had a military career. And I'd work with him on his farm. And he taught me about Jesus. And he taught me about how to treat a woman. He taught me about a lot of stuff. And I could never get him to talk about the war. And I never could understand it. He just said, well, that's what you're supposed to do. And you look at men like you and you didn't brag. You just did what you were supposed to do. And so I'm very grateful for you. Thank you. We're going to go to Mr. Rode. And I do want to point out that we're missing one of our staff members, our city attorney. Anita Burgess is standing with the veterans. I should say Colonel Burgess, US Marine Corps, retired. All right. Mr. Roden. Well, thank you. Thank you all for standing in the gap on behalf of us. You guys are the best of the best of American citizenry. And not just you guys, but there's folks right now that are standing in the gap, making sure that we're safe. Because of that, I can have a house, a wife, a kids, three kids who don't worry at all a single minute of their day about whether or not they're going to be harmed by the enemy. And it's because of you guys and your sacrifice. So thank you. You deserve more than a day of recognition. But thank you for all you've done. Mr. Hawkins. Thank you. I'm overwhelmed right now just getting a chance to talk to you guys. If I was honest, I don't think enough about the sacrifices that your generation made and that you guys made. And it's pretty amazing that I have never had to do that. Or my kids probably won't have to do that, too. And I just really thank you very much. I really appreciate it. You're the reason our country is what it is. So thanks. Ms. Wasney. We salute you. We honor you. And we thank you. My dad served in World War II in the South Pacific, the island hopping. Thought everything was over and got called up for Korea. When I was born, he was missing in action. So everybody says, gosh, Kathleen, where do you find your strength? And it's because my mom was very strong. My dad did not get home till I was three. So it's about the sacrifice that you make. But it's about the sacrifice that your families make. And the families continue to make as we speak. And we're here tonight. Men and women are on front lines all over the world. And their families sit in an empty chair and wait. So I can't thank you enough. It was an honor for me to be involved in the invitation for you to come tonight. And that's very special for me. There's one more Vietnam vet in the audience that is not down here. And I would ask him to stand. My husband is here. He was a combat engineer. [APPLAUSE] He was a combat engineer in Vietnam and then went on to serve in West Germany during the Cold War. So thank you. And you made my day. You made my night. We appreciate you. Thank you. Well, words can't-- how do words sufficiently say thanks for what you've done and for how you put yourself forward? And it continues to be an inspiration to me, especially in days when we have folks that are unwilling to even lift a finger, people who complain about paying taxes for our roads or for our military. And when I see you, I'm reminded of the final words of the Declaration of Independence, which I always carry, along with the Constitution. And when our founding fathers signed this document, they knew that it was all or nothing. And these are the words that they said. It says, "And for the support of this declaration," and I might add, "the country, with a firm reliance on the protection of divine providence, we mutually pledge to each other our lives, our fortunes, and our sacred honor." Gentlemen, you've lived that, and thank you for it. Yes. I want to give an opportunity. And Dan, if you want to say a few words, I do want everybody to take an opportunity to introduce themselves. So-- Yes, my name's Dan Worshburn. I'm the president of the Vietnam Veterans Chapter here in Denton, Texas. And we're just tickled as to be here. This is not something that's handed out to veterans organizations very often, from what I can tell. And we're just pleased as punch that we've been asked. You know, our organization is pretty strong. We're pretty active in the community. I think if you go into any of the parades in town, whether it be UNT, Homecoming Parades, the Fourth of July Parades, we're always in those parades. We've got our vehicles. And we just try to support the community. Saying that, we wouldn't be successful without a good community to be in. The community has to start with the city, the city council, the mayors, the leadership, the city, the businesses. And that's where the community grows. This city has been very generous to the Vietnam veterans. The businesses have been exceptionally generous with us and to show their support. And our goal in life now, we're getting kind of old. We're moving kind of slow. But we're just trying to give back. Our primary purpose now is trying to support these young veterans returning. We haven't given up on ourselves or the World War II, the Korean. We help them out as well. We're just trying to give back to the community. We spent four years rebuilding an old school out in Aubrey, Texas. It was falling down. And we're giving that back to the community, different veterans groups using it, different churches. We've had weddings, funerals. And it just gives us something to do. And so once again, I salute the city and the council. And we appreciate your all thoughts. Thank you. Let's start down here at the end for introductions so that the mic will wind up back at the-- yes, you're welcome. I'm Anita Burgess, and I'm your city attorney. I'm also a retired colonel in the United States Marine Corps. So thank you to every veteran for your service. And happy birthday to the United States Marines. John Lawrence, first sergeant, US Army, return. Horace Prudka, civilian for the US Army in Berlin from 1970 to 1985. Gary Reins, standing next to Anita. [LAUGHTER] Lloyd Kennison, US Army. Bill Barnett, been here for 50 years. I enjoyed the city. But most of all, I'd like to thank the young people who are supporting the young men and women as they come off the plains now. That wasn't what we received when we got off the plains. We're glad there's been a change in attitude in the country . Martinez, Army, '74. Mike Leeper, infantry, '69, Army. Steve Davis, US Army. Jerry Anderson, vice president of the Vietnam chapter here in Denton. I'd just like to say that the Vietnam Veterans of America is a national organization. We're 70,000 strong. In the state of Texas alone, we have 37 chapters. We are the fifth largest chapter in the state of Texas. I know there are Vietnam veterans in the audience. We are an open chapter. We invite you to come out, see what we're all about, and join us. Thank you for this evening. And Gail Roberts, US Navy, retired, air traffic control. I'm Lieutenant Commander Rex King. I was a squadron commander of riverboats in Vietnam, taking Fort Shrecon Marines upriver. I didn't know that. Eric Harmon, United States-- well, I guess it was United States Army. Airborne Special Forces, Secretary of the Chapter. And Mr. Waskne, we would love to have you as a member. We didn't lose sight of that. We feed you, too. Oh, when we meet, we eat. That's right. Well, I told my wife that we all had three things in common -- breakfast, lunch, and dinner. And it shows. But I want to take this time to recognize my family. My dad was a decorated World War II vet. My uncle served at the Battle of the Bulge. I have four brothers that was in during the Vietnam War. I spent a year in Vietnam. My oldest brother spent a year in Vietnam, and I lost him to Agent Orange. I spent 21 years in the armed forces serving this great country. And I just want to pay tribute to those. And thank you, Mr. Mayor and the city of Denton, for this recognition. Mark Hanna, Captain, Marine Corps. My dad was not in the service, but he was Mayor Denton in 1950 to '54. So I've been here all my life. I appreciate him. I've lived here always. Thank you. I'm Bob Hunt. I was a Staff Sergeant of the Army in Vietnam. And I'd like to make one pronouncement here. We won the war. Remember that, please. We won the war, politicians lost it. I'm Franchi Rayall, Air Force retired Air Traffic Controller. Anybody else? Ray, we got you, Ray. We got you, Ray. Bill? No, we got to get a name. What's the name? Leo Perez, US Army. All right, thank you, Leo. Well, thank you all. Thank you all for your service. And I'm just moved by this. And so I really appreciate the sacrifice that you guys and ladies have paid for our country and the families of those who've supported you. So thank you very much. It's with honor and humility that I read this proclamation. And I want to thank Council Member Wasney for also-- I think it was on the night out, the neighborhood night out , who made some contacts. So just really, the whole community came together. So I would just thank everybody. This is proclamation-- I'm not going to say by the mayor of the city of Denton. This is by the citizens of the city of Denton. Whereas in honor of Veterans Day, November the 11th, the proclamation is for the Vietnam Veterans of America chapter number 920, Denton, Texas. And whereas let it be known that they are part of a national organization with 75,000 members encompassing 49 states, 650 chapters. And whereas their contribution to veterans includes, but is not limited to, ongoing support and care packages sent overseas for local military units that are deployed, assistance and monetary support to veterans in need, assisting with over 400 military funer als and advocating for quality health care for veterans and other issues important to veterans. And whereas their contribution to our local community includes, but is not limited to, the restoration of the historic Green Valley Schoolhouse near Aubrey, Texas , a project that took four years and 15,000 voluntary hours-- 15,000 volunteer hours-- preserving Texas history and creating a modern facility for use by the community and all veterans. And whereas their contribution to our local community includes support to the Denton County Veterans Court, toys for Tots Drive, and support for local parades, including the Medal of Honor Parade. Now therefore, I, Chris Watts, Mayor of the City of Denton, urge all citizens to honor our veterans on Veterans Day and all days and join me in thanking them for their service and their sacrifice. Let's do that one more time. [APPLAUSE] [INTERPOSING VOICES] Thank you very much. Thank you all very much. Thank you for coming out. Thank you for the kind words. Thank you. Thank you very much. Yes, yes, absolutely. Absolutely. Good to see you, Mark. Keep it up. Thank you. Thank you. Hello. Hey, I don't care who other people-- Oh, no, I'm sorry. [INTERPOSING VOICES] What happened to him? [INTERPOSING VOICES] Take care, Steve. [INTERPOSING VOICES] [INTERPOSING VOICES] OK. We'll move forward with that. And I want to thank my colleagues for that. Thank you all very much for participating in that. That is wonderful. Thank you. We'll go on to agenda item three. We all ready? We'll go on to agenda item three, which is items for individual consideration. Agenda item A is considered option of an ordinance approving an economic development under chapter 380 of the Local Government Code to promote economic development and to stimulate business activity in the city of Denton. Do you want me to call all three of you? Just sort of as a note of procedure, the next three agenda items are all related. So I'm just going to go ahead and call all three. And then we've got some cards filled out wanting to speak on the items. And then staff will make a presentation on all three items. And then we will need to vote on each item individually. That's my understanding. So the next item to be called is item 3B, considered option of an ordinance of the city of Denton, Texas, approving a third amendment to the economic development program grant agreement dated June 15, 2015, between the city of Denton and Allegiance Hillview. And agenda item 3C, consider adoption of an ordinance of the city council of the city of Denton, Texas, authorizing the city manager to execute a management agreement between the city of Denton and O'Reilly hotel partners. And we have a couple of cards. The first card will be Deborah Armator. If you'll come down and state your name and address, your time will begin. Can I show some transparency? Yes. There are transparencies. If you set them right there, they should be able to pull them off on the overhead. So my name is Deborah Armator, 2003, Mistywood Lane, Denton, Texas. I looked up Convention Center Cartoon on Google Images. It's kind of a little hard to see. Convention Center Coming Soon Psychic Fair. And then underneath it says, I knew that. Here's one. And this is from Shreveport, Louisiana. And these are from cities that had Convention Center deals that were controversial. And-- They'll bring it in. They're trying. And here, the poor mayor is hammering the boards. Here's another one from Phuket, Thailand. I wrote that. I had to remind myself how to pronounce it, so I didn't say something inappropriate. And he's saying the project will go on and on and on and on . And then here's another. And I don't even remember where this one is from. I'll just put this one up while I'm talking. I was actually thinking that there would be many people here speaking about the Denton Convention Center. And so what I had planned was to give it a brief national perspective on Convention Center deals. I found one resource that explained that many cities have been considering similar deals. And that they're all told by X, Y, and Z trade show associations that they were not picked because of the lack of headquarters hotel or their headquarters hotel was not adequately sized and are presented with videos by those associations describing how they would have picked that city otherwise. They all use the same one to three consultants to justify their proposal to use public funds. They all say they have unique and desirable features that will bring the conventioneer to their city. They all estimate a large increase in attendance, et cetera, et cetera. We sent the-- here's a quote from another article. "The convention business has been waning for years. Back in 2007, before the current economic slowdown, a report from the Destination Marketing Association International was already calling it a buyer's market. Phrases like caveat, mtor, rising supply, decreasing demand are all over the place in articles about these convention center deals happening all over the country." I'm not going to pretend to be an expert on this. But when I have a friend who is about to be taken in on a scam, I get worried. And I do a lot of research on that scam. And I've sent you all some links, which obviously I didn't have the time to go into in detail. Again, I thought there would be many people. I would be able to go through and highlight all my links. But anyway, that's just what I wanted to show you. All right, thank you. We have a question. Council Member Briggs. It has to be informed in the question. So do you email? Do I email? Yes, in fact, I emailed you while you were all in the work session. Well, you assumed a lot of people would be here. And I believe the reason they're not is because they all emailed us. And so they assume that their voice has been heard already without a need to show up. So I just kind of wanted to answer why you feel-- Oh, yes, I know. I know. And I've been-- yes. I know that many citizens have spoken on it in many different ways. And we're all busy. Thank you. Thank you. Thank you very much. Thank you. You bet. We have another card wishing to speak. Is it Lucas Hall? Yes, if you'll come down and state your name and address, then your time will begin. Hi, everyone. My name is Lucas Hall, L-U-C-A-S-H-O-L-L. I live at 815 Cresto Place, Denton, Texas, 76209. First of all, thank you all for honoring the veterans. I think that's a really awesome gesture. Second, very happy that about 10 days ago, I emailed the entire city council on this issue, urging you to vote no tonight. Or at that time, it was October 30. And I was pleasantly surprised to see that six out of seven you responded. So awesome. Thank you. I'm here again to urge you to vote no tonight. If not permanently, at least table this thing for an extended time for the people of Denton, Texas to give this thing a full-fledged consideration and to possibly abandon the idea altogether or to severely reduce the incentives being offered. I don't even know how to put it into context. $54 million over 25 years for an enterprise that is, in my estimation, should be a private enterprise, hotel and convention center. By the way, I won't go into the magnitude. A 1,700-person ballroom, that's overkill. I've not seen enough evidence to suggest that Denton actually needs this. So let's go into that threshold question. This should not be a publicly subsidized, whether it's funds or tax incentives deferred. It should not be subsidized by the city of Denton, by the people of Denton, unless there is severe cause that justifies the support. The people have not shown overwhelming support, by my estimation. I realize that some staff have worked very hard. And I appreciate their efforts. I admire everyone who works on behalf of Denton. But I don't believe that the people have really evidenced a great desire for this thing. If it were so, we could put it to a vote. We know how to vote on single issues in this city. So why not that? Second, the market has not justified this thing. Why does Norman, Oklahoma get to-- Norman, Oklahoma is host to a convention center and hotel privately funded. The city didn't bend over backwards. Why is Denton bending over backwards? It's a comparably sized city. It's a big university town outside of a metroplex. If it's happening on private development terms in other places, why is Denton offering this long term big incentive? We don't need that. And at very least, we haven't had sufficient proof that we need it. We've heard the stories that XYZ people called, said, hey, Denton, can we host your convention? Oh, you don't have enough space. Well, OK, if that's really true-- maybe it is, maybe it's not-- let's see a list of the last five years. Which trade organizations, professional organizations, have called and said, Denton, we really want you, but we couldn't use you. Here's where we went. Here's how many people came to our convention. Let's see hard evidence on specific organizations. I urge you again, vote no permanently, or at least table this thing for an extended period of time for the people to continue discussing this controversial topic. Thank you for your time. Thank you, Luke. Oh, we have a question. I'm sorry. Never mind. Yeah, I think I misspoke. I'm sorry. We have a white card which indicates a desire not to speak, so I'm going to call the name. And if you want to speak, then feel free to come on down. Jody Ismert? If you want to speak, come on down. State your name and address, and your time will begin. Jody Ismert, 819 Anna. That's OK. So I agree with the last guy 100%. I think we should table this, but no. I am absolutely opposed to spending so much money for private enterprise. I don't think it's justified to have to spend such public funds for private enterprise. I don't want to subsidize this. I didn't prepare anything, so that really truly was. A card saying that I didn't want to speak. Oh, OK, I'm sorry. But I do want to speak. So I do want to openly say, please oppose this. We do have a question. Sure. Councilmember Johnson. Thank you, Mayor. Thank you for coming out. So what's proposed now is quite different from the original concept on the Convention Center. I just want to make sure, because the gentleman Lucas before, and you as well, talked about public funding and public support, public incentives. Are you aware-- because I do have to only ask a question. So are you aware that the only money that goes back to the Convention Center in the way of an incentive is money that was generated-- In taxes from-- Yes. --from the hotel, right? So in other words, if it doesn't happen, it's a zero sum game. Or if they don't perform. So if they don't generate the revenue, generate the hot funds, then the revenue doesn't come back. So I was opposed to it previously, too, because of the city was going to be the lender. So I just want to make sure that the understanding is all the money that goes back to them comes from them. Yes. No, I'm definitely aware of that. I just think that these should be funds that should be spent internally within debt. And I think we need the funding more than they need the funding. OK, thank you. OK, seeing no other questions, thank you very much. Thank you. You bet. Thank you. I have no other cards. So I guess we are ready for staff presentation. Correct. Mayor, I'd like to ask John Fortune, our assistant city manager-- excuse me-- to outline these three items for your consideration. Thank you, George. Mayor, members of the council, this evening I'm going to present to you the basic concepts for the incentive agreements that are before you. As we have been discussing at length for a period of time, it feels like just a few months. But really, we've been talking about this project since 2012 in one form or a fashion. And so tonight, we're here to talk about a very specific proposal. The project itself is a 70,000 square foot convention center. It would hold conventions for delegates of up to 750 people and also have a grand ballroom that would be sufficiently sized, as previously stated, for 1,700 people. This is an amenity, a facility that's been in the vision for the community for a period of years, going back to several vision documents well over 15 years ago. And so the culmination of a lot of conversations, a lot of debate in the community has led us to this point tonight , where I'm happy to present to you an incentive agreement that is purely just what it says. It's an incentive. And it's for the city to take the revenue associated with the hotel occupancy tax, property tax, and sales tax that's derived from this specific project itself and make that available to the developer as an incentive to build this project, to build this convention center. And so as previously stated, the revenue is not generated. There is no incentive that goes back to this project. We are also going to be talking this evening about a management agreement with the convention center developer. It's O'Reilly Hospitality Management. And this is a limited management contract that simply provides the city the mechanism to be able to monitor and track the use of our hotel occup ancy tax funds and make sure that we're staying in compliance with state law. It is very limited in this scope. And we will not be responsible for the data team management and operations of the convention center. That would be handled by O'Reilly Hospitality Management. And so there is one other element, one other agreement that is before us this evening. As you know, the location of this convention center is at the Razor Ranch development. And we currently have an economic development incentive for Razor Ranch. And because the hotel is going to be located in that development, we will need to carve out a component of the acreage, 12 acres approximately, from the red development 380 agreement, as well as provide a mechanism for them to be able to recapture the cost of some infrastructure that they will be putting in place sooner than what they had originally anticipated in their development agreement. So we have also the third item, one of the three items tonight, is an economic incentive to amend the current existing red 380 agreement. I've gone over that with you in extensive detail previously . So I'm happy to go into more details on any of that if you would like me to. But I'm happy to answer any questions that you may have. We do have a question. Council Member Briggs. So my question is about the incentive. Has the city ever done anything like this before, 100% for that many years? Not for that many years. But we have used 100% for a smaller number of years. Is that correct? I believe we have. A smaller number of years. For a much shorter period of time. So my concern is that we're setting a precedent. We're setting a benchmark here in that other developers are going to want or ask for the same thing. Is that a concern for economic development? Are you guys-- I would just respond by saying that under a typical project , I would not see the staff recommending or proposing to you necessarily 100% reimbursement. Because of the history of this particular project, the fact that the city at one time was contemplating itself funding this project. We were looking at this from a perspective that we were going to fund 100% of it through the revenue that we generated from it, matching-- including a rent payment from a developer. This particular proposal essentially takes the concepts that we were originally looking at and shifts the risk from the city to the developer. So that's not something we typically would do for a normal or typical economic development project. So I would say that from my perspective, it wouldn't be something that would be a precedent for a typical economic development project. This is specifically related to a public amenity that the community has expressed a desire to have for some time. Council Member Johnson. Thank you, Mayor. John, one thing I think it would be valuable to share here with the citizens that are here is in all these conversations we've had, we've always talked about just the math around the project. What we've never really gotten in terms of good, hard numbers, because it's hard data to collect, is what's the economic impact to the rest of the city, right? Not just what's happening at that site. And I think what you shared with us in the work session today was it's 46,500 unique visitors per year. So and then kind of industry average, very safe conservative information was that those people would spend $60 a day outside of the hotel room. So if I do that right, and the average was three nights, that's $8.3 million that they would spend outside of the hotel and convention center, whether it be on meals or entertainment or drinks or going to see live music or whatever it is. So I think it's important to highlight that, because you refer to as an amenity, right? Well, when we're incentivizing something, whether it be a retail store or a manufacturer to create jobs or whatever it is, to me, that's a little bit of a different kind of incentive thought process than this, which is really, this is a-- we're creating a portal to bring unique visitors to our city that have never been here or they come once a year, whatever it is. So I just don't want to lose sight of the fact that it's not a zero sum game for the city, meaning it's not we're paying them back through an incentive, whatever it is they generate. What we get, our restaurateurs get, and our entertainment establishments and our retailers get is 40 something, 46,000 people, I think a conservative estimate, come into our city. So if those numbers are right, and even if you cut it in half, well, that's $4 million a year in additional money being spent in the city just on those trips, not to mention if they come back or whatever else. So I don't think that's really been shared in any of the presentations other than the work session today. And so I thought it would be good to highlight that. If you want to elaborate-- Yeah, I can certainly-- I certainly think you can do that. The information that Councilmember Johnson's referring to is some data that we developed in working with the Convention and Visitors Bureau and looking at some industry metrics. It's anticipated or it's projected that a convention center delegate will spend approximately $140 a night, or $140 per day on a specific stay. And we know that in the particular projections for this convention center that's tied to similar facilities, which was mentioned a few minutes ago, Norman, San Marcos, Frisco, those type of facilities. We know we anticipate approximately 46,000 unique room nights associated with convention business. That doesn't represent the full occupancy of the hotel. This only represents about 40% of the hotel. But if you just take those convention center delegates and apply the $140 per day spending that they do, that equates to $6.5 million annually in new spending in the community. Now, Councilmember Johnson, you're referring to kind of taking away a portion of that that's tied to the hotel room itself and looking at unique spending possibly on entertainment or retail or any restaurants and things of that nature. And so that's the information that we've been able to learn as a result of looking at this from an economic impact standpoint. I will tell you also that if you consider the fact that this is a 25-year proposal and you take that $6.5 million of economic activity per year, that equates to $162 million in economic impact over that same period of time. So I think that's a pretty conservative figure. I think, Councilmember Johnson, looking at it at $60 a day and looking at it in terms of what that would generate on an annual basis is a pretty significant paradigm as well . So I think we've been able to demonstrate that there is going to be a tremendous benefit to the community from this project. Councilmember Rodin. I think we're hung up a little bit when people cite the history of convention centers. I think we're a bit hung up on convention per se. If you just think about the sense of-- and there is a question coming-- if you think about the sense of just meeting space and how many large-scale events that are just even debt-based that I've had to go outside of the city to attend because there's no place within the city or there's a limited stock of them once they're filled up. And so I think there's a lot of ways of thinking about that , not to mention music venues space. We have no significant scale of size of music venue that this could very easily create space for larger concerts. And certainly Denton has a market for that. So I think there's a lot of reasons why Denton has been thinking about doing this for a while and why we finally found a deal that I think a lot of people can get behind because-- so that's the questions I want to ask because I think as I'm reading the emails, hearing some of the comments, I still continue to believe there's a fundamental confusion between the previous plan that eventually the entire council, some sooner than later, got off board on. And this one, which I think a lot of us are much more excited about. So are taxpayers paying for this? That's been something that's been frequently commented in the emails that I've gotten in the last few days. Are taxpayers paying for this directly? Are we raising taxes? Are we taking money out of already existing property tax funds, sales tax funds, in order to pay for this? No, there is no diversion of any existing revenue that would be directed toward this project. Only the tax is generated by the project itself. So if someone is spending, buying something in the restaurant, at the hotel-- Who's taking advantage of-- Taking advantage of being there would be paying for it, but not any other citizen. So there's also concerns, and we heard it tonight, about supposed failure rate of a certain type of convention center. So if this happens to fail, doomsday scenario, is the city left holding the bill? Now unlike the previous project, where the city was going to issue and be the financier for the convention center, this project has the developer being the financier for the project. So if, for whatever reason, the project is not successful or the hotel or walks away from the project, city has no financial obligation or financial responsibility left for the project. So there's no risk to the taxpayers from that perspective? The risk is definitely shifted off of the city and onto the private developer. Thank you. Councilmember Wasney. I have done my homework on convention centers, because I did fight this project the first time it came down the pipeline. And I was in a lot of meetings with staff, a lot of meetings with the developers. And my concerns are still bedrock. In the matrix, the convention centers do fail. They have failed all over the country. And one of our citizens brought up the consultants tonight. That's exactly what happens. Same consultants go all over the country, and they come in, they get paid, and they say, oh, boy, this is good for you. Then they're gone. They're paid. They're finished. And the city is left holding the bag. So my question is, is this good for Denton? And I'm not certain that it is, because I am fearful that it will fail. Are we financially on the hook for it? No. But the city is on the hook for it with the failed convention center. So a question, is the developer building an asset here? He's building an asset for himself, yes. So when it's finished, he can sell this asset. Is that correct? It would be his to sell in the future. His to sell. During the term of the agreement, there is some-- So he can build it. We can pay for it through tax incentives. But he still has an asset that he can sell. And also, there is revenue to the developer. So he's not building the convention center to give back to the city. He's building it for himself. It's a business. There are revenues through the rent of the facility. Hotel revenues. Will there be revenue from the restaurant as well? Yes, ma'am. Yes, all to the developer. So my point is, the tax incentives are paying for 2/3 of this hotel convention center. And I think I'm correct on that math, approximately. No, ma'am. The convention center is 90-- the total project is $93.3 million, of which the convention center is only $27 million. It's still a lot of money. Yeah, it's like a third of what the total cost is. And he's asking for 100% of the property tax, 100% of the hotel tax, 100% of the sales tax for 25 years. And at any point in that matrix, he will have an asset built, solid, that's an asset, that if he wants to sell it, he can. And my point is, we're going down a path on a matrix that I think has not been studied. Staff has studied hotel rates, occupancy rates. But have you really shown council-- because I've never seen it-- a matrix coast to coast of the numbers of convention centers in cities like Denton, 130,000, that have made it, and how many have failed, and if they failed, why? So I do think we're premature in jumping off the cliff here , because we haven't seen those numbers. We're in a bubble that says, we love Denton, therefore, everybody is going to want to come to Denton. We're in competition with the rest of North Texas. North Texas has a vast number of venues, opportunities. So my concern is building something, and they don't come. Whether we're financially on the hook or not, that is my deep-seated fear. It was then. It still is. Councilmember Hawkins. Thank you, Mayor. So what type of product does the O'Reilly Group have to deliver, and how much is that on their end that they're going to invest in this project before any of this incentive kicks in? Well, they're going to build what's called an upscale hotel. And it's an NBC Suites product. It's very similar to-- well, it's a similar product to what you see in Norman, Oklahoma, San Marcos, or even Frisco. Convention Center is smaller than those three facilities, but it's an upscale facility. We have certain specific conditions related to the quality of the hotel and the Convention Center in the agreement. Joanne, I'm sorry. I forgot your second question. How much is the hotel and restaurant going to cost? That's right. The total project is $93.3 million. That's the Convention Center hotel and restaurant, of which the hotel represents $64 million of that, the restaurant $1.3 million, and the Convention Center $28 million. So there's almost $65 million of the O'Reilly Group that they are investing in the hotel and restaurant. And the incentive that we are giving them is purely performance-based on that project alone. That's correct. And we are not on the hook at all. No taxpayers on the hook financially at all. This is a completely different deal from the other one. That's completely different. Thank you. OK. Mayor Pro Tem Gregory. Thank you, Mayor. I don't recall, because this actually started before I got here. What I think I recall hearing is that when our current city manager was hired, one of his directions was we need a Convention Center. That was direction by council and by some other groups. Is that correct? Thank you, Mr. Gregory, for pointing out that nine years ago, I was asked to be sure that that occurred. Yes, sir, that is accurate. It was a high priority at the time I was hired. All right. And as I recall, in subsequent meetings with you for your annual performance review, and even when the version one project at UNT kind of went away, there was still a direction given to you by council to see if there's another way that we could move forward with this. Clearly, that's the case, Mr. Gregory. The council has had this type of a project, preferably without it being funded by the city directly as a high priority, at least for the 10 years or over nine years that I've been associated with the city. And it's been consistently expressed as a high priority each of those years during that time. OK. So I think because I hear from time to time, and I've seen in some of the emails, by people that I think are just misinformed, that this is a project that was pushed by staff. It's been foisted on council, which is exactly the opposite of what the case has been, because it's been a project that has been promoted by council, a variety of councils over a number of years. It's been a goal of councils. It's been the goal of the chamber. We've seen it on various iterations of long-range plans. Version one, we heard, was in the wrong location. Mr. Fortune, have we moved the location? Location has moved. OK. Version one, we heard that it was wrong, because the city was going to be issuing debt. Is the city issuing debt in this proposal? No, sir. OK. Version one, people were against it, because they were uncomfortable with a partnership between us and the University of North Texas. Do we have a partnership with the University of North Texas ? No, sir. Version one, people were uncomfortable, because since we were owning the convention center, and O'Reilly was owning the hotel, it put us in a partnership with them. And there were lots of questions about what happens if O'Reilly backs out of the hotel. Is there a partnership, a business partnership, between us and O'Reilly? Not in terms of ownership, only in terms of management. All right. So in version one, some people were against it, because Denton would get a convention center. And in version two, does Denton get a convention center? Yes, sir. So folks who were just against it, because they're against a convention center, are going to be against it. So it seems like that we've addressed almost every concern that people have raised, except the concern that some people have, a legitimate concern. I understand for some. But I agree that we incentivize the things that we feel like bring value to the town. And we don't incentivize the things that we don't think would bring value, or that don't need to be incentivized. I know for a fact that Texas Women's University, North Texas State University-- no, excuse me, the University of North Texas-- wow. Age is creeping up. That they have conferences on a regular basis. Some have annual conferences that cannot be held in Denton, because there's no facility large enough to handle them. I know that there are philanthropic groups that have events every year. And they've outgrown every facility in the city. And they've had to move outside the city. So this gives us an opportunity for those groups that have been holding conventions that could be here, holding meetings that have been here, they can bring them back. And then in addition, it gives us an opportunity to bring in new folks to town who would not otherwise be here. And we're anticipating that that could generate what kind of spending in the city? Well, as we spoke to earlier, at least $6 and 1/2 million per year. And then there's some kind of a figure that the convention bureau folks calculate about the fact that once that gets spent at restaurants and to hire the 200 people that will be working at the hotel, that there is a multiplier of this. There's another idea you would double that. You would expect, based on those metrics, that the $6 and 1/2 million would turn into about $13 million of economic activity on an annual basis. And while it's definite that we're partial, that I'm partial to Denton, I will point out that a number of organizations that have no reason to be partial have identified Denton as a great place to go to, like Rand McNally, the name Denton, the number one small city in the United States. So I think that we may be on to something, that folks might indeed want to come here. And I think probably after working on this for nine long years, we're probably not rushing into it. Thank you. Council Member Johnson. Thank you, Mayor. Having a little trouble with name recall over there, Nelson ? Sorry. Well, I'm in the real estate business, so a little bit about potentially blighted real estate. So when we're looking at this deal with the O'Reilly company, you're looking at somebody as a developer and saying, how well capitalized are they? What are their chances of success? How much skin do they have in the game? And while there could certainly be a remote possibility that they walk away, it's $93 million. And my understanding is they're putting somewhere on the neighborhood of 25 to 30 million-- 20 million. 20 million of their own money in it. It's hard to walk away when you got 20 million in it, especially when you signed a personal guarantee with your lender. So you don't just get to walk away. Your lender still wants you to pay them. So I think while there's always a chance that somebody could walk away and leave it blighted, so to speak, that would be one hell of a beautiful blighted building. And what the bank's going to do is they're going to say, next guy up. Who can I sell it to now? But by the way, I can sell a $90 million property for $60 million and get my money back. And that's what banks do. So I don't think that there's much of a chance that as a city we'd be left with a vacant blighted building for long, because the next hotel operator is going to step right up. And by the way, that lender is going to provide financing for them. It's very attractive to get it off their books. So I don't see much there. Secondly, it's in the razor-ranged development. Red development is not going to allow a vacant blighted building. They're going to step in, partner with somebody, repurpose the structure, and move on. Because no matter who the second guy is, he got it really cheap. That's what happens in that world. I don't feel like we're jumping off a cliff into this. I certainly was opposed to the first version. I think there's been a lot of work done since then. And just to speak to be really, really clear, there is no risk to our citizens in this. The risk to any citizen would be I could drive by and see a vacant building there for a while until somebody else is operating. There's no risk to our taxpayers having to foot any sort of a bill for this thing if they walk away . And that's what's different about it now versus the last version. That's why I opposed the last version, and that's why I will support this one. Because there is no risk to our taxpayers. We don't take any of the hotel occupancy tax funds from our other hotels, which that one did, the other version did. And so in my opinion, in this deal, all ships rise. I mean, certainly we're going to rebate them back what they generate, but they don't get what's generated elsewhere. I mean, I guess I think about it in terms of what would we do to attract 46,000 new people to our city every year? We spend all kinds of money right now as a city to attract people. This project is going to do it, and it's a zero expense to the city and zero risk to our taxpayers. That's what's different about it this time around. Councilmember Wasney. So to be clear, the Razor Ranch master developer has a 50% tax incentive, but the convention center hotel developer is asking for 100. That's correct. And then I was incorrect in thinking that the hotel convention center developer was actually putting in some of the infrastructure. He is not. Is that correct? That's correct. That the Razor Ranch master developer is paying for and putting in all of that infrastructure. So while some of the argument initially was, well, let's give him some incentive money because he is putting in infrastructure, but in fact, he's not putting in infrastructure. Is that correct? He's only contributing-- the only incentive that he's asking for is to reimburse him for the hotel-- excuse me, the convention center. Convention center. But it's 100% for 25 years. Of the revenue that's generated from this project. Thank you. Councilmember Riggs. I just wanted to go on record before we take a vote and say that I'm not imposed to incentives when they're done for the right reasons and done well. And I'm not opposed to this hotel and convention center, but I am opposed to the 100% 25 year rebate incentive. O'Reilly mentioned in our work session that it is a partnership. He does view it that way. But it doesn't really feel like a partnership because usually it's 50/50 kind of deal there. So I would be doing a great disservice to my constituents by voting yes on this project. Not one citizen sent an approval email to me. So I know that staff has worked really hard and long on this, and I appreciate all the work. And I hope that this development is truly a great success for our city. And I'm sure that we will have-- Kim will do a great job booking for the center. But I want our citizens' voice to know that it's been heard , and that's why I'm going to vote the way that I am. I have some comments, but you've got a couple more items, I think. I'm done. I can-- OK. I think everybody knows that the first convention center, whether we call it version one, iteration one-- I'm not sure what we call it-- that I was very concerned and skeptical about that and its location and us owning and financing debt, and sort of led the charge. I mean, I hate to say it, but I sort of did in trying to ferret out some of these things. And I know there was a big concern when we decided not to do it and that somehow this will never happen again. I felt certain that there would be some dialogue, some conversation later on, because if they'd come this far with us, I didn't think that they-- and I also knew that there was an opportunity with Red because of the timing, because the economy had improved. And I thought that that could create some real good synergy . So while I don't like, quote unquote, the 100% 25 years, we have given 25-year incentives, maybe up to the 50% or 60% level, some 75% for 20 years. I think what really has done it for me is because when we think of the incentive and we think of the 100%-- yes, it is 100% of the sales tax. It's 100% of the property taxes. It's 100% of the hotel/motel tax. But when you break that out, as I did in the work session-- and I'll just repeat it here-- you come out with that the hotel/motel tax is over 70% of that incentive. And the hotel/motel tax is a restricted tax. We can only spend that on certain items, that as it comes into the hotel/motel tax fund. By state law, we can only spend it on certain things. And we would not have that additional revenue, but for the room rental in that hotel. Now, someone could argue, if that hotel's not there, they're going to go somewhere else, possibly here in Denton , and provide some revenue that we do have some discretion in spending through the hotel/motel tax fund. But my understanding is 40% to 50% of the room nights, whether or not I agree with it or not-- that's the projection-- is going to be coming from convention center related business. But I will tell you the thing that really makes me OK with this project. And that is being in the real estate business, also know that when people spend a lot of their own money, they have a vested interest in making sure that that money is returned, and that that money is at as little risk as possible. And so when you've got someone spending $20 million of their own cash-- now, you might say, well, they have tons of cash, so $20 million to them may be a drop in the muck. $20 million is $20 million to anybody. And additionally, which hasn't been talked about much, we've talked about O'Reilly and his partnership to spend the $20 million, and that that really is-- they put skin in the game. And what we've got in the game of property taxes and sales taxes is a total of $11 million over 25 years, which is $450,000 a year. The rest of that coming from the Hotel Motel Tax Fund, which the general fund could not use at all. But what is sort of forgotten or kind of missed because they like to keep a low profile and because it is sort of tangential on the outside, is we have a major developer who's invested, I don't know, $20 million on the north side in infrastructure, has a tremendous amount of their own cash in the north side with the Sams and the Walmart and all the development that has exploded over on that side . And they're sinking additional money and their own cash-- I don't know to the tune of how many millions of dollars-- into their signature product, which is the south side, of which this would be part of. And I would think that a developer that's been around for 20, 30 years has quality projects all around the country if they really thought that this was a risk that would put their capital at risk, that would put their entire project at risk. We're not just talking about the risk of the convention center. We're not talking about the risk of the hotel. We're talking about potentially the risk of the whole project. Well, I will tell you, they have a lot more at stake than I do. And I think the citizens of Denton do in the sense of economically. And it would be in their best interest to ensure that whatever they put on the ground out there, they can have some kind of predictable certainty that it's going to go. However, having said that, I went back and read the agreement pretty explicitly and quite in detail. And so the concern is, what if it goes dark? What happens? How do we protect ourselves? What happens with the product? What happens with us? Well, it's my understanding, and the city attorney can correct me if I'm wrong on this. My interpretation is incorrect. But there's a section called default. And it lists several default terms, or several things that can happen that will constitute a default of this agreement, one of them being bankruptcy, one of them being if they just let the property just totally deteriorate. There's several in there. It's on page 11 of 68 of our backup. And the most important thing is that default's one thing. But what's important is, well, what happens if there is a default? What happens if these catastrophic things happen, the worst case scenario that we can think of? Well, I'll sort of paraphrase it. And if I'm incorrect, our esteemed retired colonel, who has, just to tell you, has told me to stand down on occasion. So that's been a very interesting-- it wasn't ever in his council meeting. But upon the currents and continuation of a default, the city has to give a certain amount of notice in order to provide them an opportunity to cure that default. One of those, I think, is eight, or four or five, or something like that. But if that happens, and they do not cure it, it says, if any event of default shall occur and grantee fails to cure such a default as provided herein , all commitments of the city under this agreement, including without limitation all grant payments, shall immediately terminate with respect to the year or quarter in which the notice of event of default is given and for all future years or quarters. So what that tells me is, if the worst thing happens-- and I'm not talking about if they sell it to someone-- but if they sell it to someone-- and I'm understanding that these default terms still apply -- it applies to any successors and/or signs, most likely-- that if that happens, then this agreement terminates. And we no longer have an obligation to refund any sales tax, to refund any property tax, or to refund any hotel motel tax. In fact, in the agreement, it says there's a clawback provision of that year, I believe, that the default exists, that they are required to pay that back. It doesn't say they're required to pay them all back, but it's my understanding it's the year or the quarter of the default. And I could be a little off on that. Point being, that if the unspeakable occurs and there's some kind of incident, there's some kind of financial calamity, we're through with the incentives. We're through with the agreement. And then that gives us an opportunity to go in and rehabilitate, to what extent, with someone else. So I'm comfortable with that in the sense that if they don't perform and if they terminate or if they commit a default according to the terms of the agreement, that we have a remedy that basically absolves us of any future payments to them. This is a tough decision. It is a large incentive. I understand that, Council Member Briggs, it could be seen as precedent setting. But the great thing about that is it comes before this body, whether it's us or subsequent councils, to make a decision on any incentive that's granted by this city. So for that reason, I'm going to be supporting it. I could try to tweak it, try to get some lower price. To me, I would just be really talking about things that do I want to lose this opportunity for a couple hundred thousand dollars a year. I think we'll more than make up that amount over the course of the 25 years. So that's a long dissertation. And I apologize for that. But those are the reasons why I'm comfortable with this agreement. So I see no more speakers requesting to speak. Council Member Rodin. Thank you, Professor. I mean, Mayor, if you want. I know what people think. Never mind. Denton is the best city in the United States, undoubtedly. And it's not just people in Denton that say that. Go downtown any given weekend night, there's a ton of people from out of town, because we've created a pretty grand community. We have significant academic institutions that would like a place to be able to host significant academic conferences. Major research entities in both of our two major universities. Significant businesses that would love the ability to host conventions right here in the city of Denton. So there's a million reasons to do this. I'm proud of our city for going through this exercise for the last several years of trying to meet the goal of finding a viable convention center project that was fiscally responsible for the city. And I think we've found it. So with that, I gladly move approval of agenda item 3A. Council Member Hawkins. Thank you. Before I second, I just honestly never thought I'd have this opportunity to do this again. So with great joy, I second this motion. Thank you. All right, let's vote on the board, please. The motion carries 5 to 2. We will now move on to agenda item D. Oh, we've got to vote on each one. That's right. I'm sorry. Yes, agenda item B. We will go to agenda item B. I've already read the caption. Council Member Hawkins. I move approval of item 3B. Council Member Rodin. Second. Let's vote on the board, please. The motion carries 5 to 2. Agenda item 3C, please. Council Member Johnson. Thank you, Mayor. Before I make the motion, I would just like to also remind us all that the United Way Dancing with the Stars event will now have a home in Denton, where our esteemed colleague, Council Member Hawkins, was the inaugural winner. And as I recall, I was last year's winner. So I move approval of item-- sorry. 5C. No, 3C. Mayor Pro Tem. As I second, I'm trying to not recall some of the dances that I saw, because they're just burned in my brain. Inside here, there's a skinny guy with some moves, man. All right, we have a motion and a second. Let's vote on the board, please. Motion carries 5 to 2. Now we will move on to agenda item 3D, considered option of ordinance of the city of Denton, providing for authorization-- for authorizing and approving the purchase of playground equipment for the Eureka 2 Playground Project. Thank you, Mayor. And I'm going to ask, I guess, Mr. Emerson-Vole, if he would present this item for your consideration. Thank you. Thank you, Mayor and Council. First off, I apologize for my informal appearance this evening. Hey, I like it. I got to spend the day with about 250 staff and volunteers out at South Lakes Park working on Eureka 2 today. And it was a beautiful day and a great day. There are some pictures being shown right now from today. And if you even pay some close attention, you can notice the difference between when we started this morning and what it looked like close to 5 o'clock when the sun started going down. Fantastic day out there on the build today. We had a great day and made a lot of progress. We really slogged through the three days of the pre-build and the rain that we had. It was miserable, to be quite frank with you, being out there almost knee deep in the mud. Real proud of the folks that came out to work and our staff that came out and worked and got the preliminary work done. Today was much nicer. In case there's a question, my name is Emerson. I am skilled and can operate power equipment, is what that red armband tells you. What we're asking you for tonight is a requesting authorization to fund the sole source purchase of half of the equipment for the Eureka 2 playground. As you'll recall, the Park Foundation committed to raising $500,000 for this project. As of today, they have funds and commitments, the total $4 30,000. So they've done a great job of fundraising for this project . They kept it off of the last CIP. Some of the commitments we'll still fund this year. Some of them are scheduled to fund in 2016. The Park Foundation has already paid for half of this equipment. And what we're talking about is literally the playground equipment, the slides, the swings, the zip line that you see there, this rocking toy that you see in front of you in this picture right here, those types of pieces of equipment, the swings. The Park Foundation's already made the initial payment for half of this equipment. We're asking you to allow us to use some city funds to pay for the other half of this. And then the Park Foundation will reimburse us as those funds come in. Since this seems to be the topic of the hour, I'll go ahead and address the question now. What happens if the Park Foundation doesn't raise those funds? Well, first off, I'm very, very confident that they will. But even in the long shot that they don't, I've just paid for the equipment that we were going to pay for anyway. So there is no net loss in this deal. The zip lines are up. The sum of the swings are up. The several slides are up. We invite council to come out with us and work with us on Friday afternoon, if at all possible, come out and enjoy this. It is a fantastic event. It's a great opportunity to be out there working with the citizens. We had a bunch of college-- pardon me for being an old man-- college kids out there today working with us. We had a lot of citizens, a lot of volunteers. It's kind of hard to explain. The folks from Play-By-Design that are our consultants have said this all along, that it's kind of hard to explain . You have to be part of it. I've been part of it now. And it is hard to explain. Come on out and experience it is what I would challenge you to do. I'll take any questions. Councilmember Briggs. Well, I do believe we are scheduled to come on Friday at 1 o'clock. It's on my calendar. So I'll be there. Me too. I wanted to thank you for your fundraising and thank you for all your help. It's great to see the community come together in a project like this. And I did actually have an email from a constituent saying that we should actually make O'Reilly do some fundraising and work for his part on his convention center. So I appreciate all that you've done. And you've done a lot of work. So thank you. Thank you. Mayor Pro Tem. Ms. Tamke, we probably can get you Mr. O'Reilly's address. And congratulations for the great work so far. Emerson, I'm just curious. We were told in some backup that there would be some soil testing after the old equipment was removed. Have we gotten the results back from that? The results are back, yes. And we came back well within all state and federal limits. And how did those compare-- did they do some of the soil testing like 100 feet away or 100 yards away like they've done in the past? We always did some testing. We always asked the firm that tested to do some testing outside the perimeter fence. And our numbers inside came back lower than or comparable to the tests that we pulled outside. All right, that's great news. Thank you. Council Member Hawkins. Yeah, who do I need to speak to about fundraising? Who's been leading that? All right, Molly. So we're $95,000 short. So what other opportunities do we have to raise some funds here? Well, actually, we're $70,000 short. We're $70,000 short, OK? So I can't believe how much you've raised. But just for anybody watching, I mean, I've heard that there's either pickets or-- There are. You can purchase a picket for $50. And there are 1,500 of them out there. And you can ask that it be engraved with whatever you want. Did I just steal Pete's line? Sorry. OK. But you can have those. And they're $50, like I say. And it's a wonderful way to raise money. And it's a wonderful way to honor your children or your grandchildren or whatever. We certainly welcome just undesignated gifts. There are also a number of pieces of equipment that still need sponsorship. You can find those on our website, which is Eureka2Denton.com. So if you feel moved to sponsor a bench or another piece of equipment, call me up. Go to our website. And you can reach us and make a gift and help us close that gap. Great job on fundraising. That's amazing. Thank you very much. Councilmember Wozni. And I think it's the city's responsibility to help build parks. So I told you walking in, you need any money? You come to this council. And we'll make that bridge. We just had an email that our sales tax projections are up because people are shopping and spending. So those are additional funds that are in. And I see no better purpose for that than to spend it on this park. So again, thank you for hard work, grit, determination, and the whole team that got behind this. It is a team effort. But just so you know, this city council is here to help with whatever you need. Mayor Pro Tem Gregory. The first Eureka lasted how many years? It had a 20-year expected lifespan. And it lasted 21. 21. What do we expect on this one? We're hoping for 30. Well, you know, when the old one went down, we got three of the slats with all three of our daughter's names on it. Yes, sir. And I think I've been issued a challenge earlier today that I'm not going to be around in 20 years. But I plan to be around in 30 years and pick up the new slats with my granddaughter's name and all those others. We'll hold them for you. Thank you. And we have one card wishing to speak for Mayor Pro Tem Pete Kemp. Come on up. I'll take this disposition any day. Seriously. My name is Pete Kemp. I live at 110 Fryer Tuck Circle in Denton. And first, let me just thank you guys. I mean, seriously, each and every one of you have spoken for this project. Molly and Emerson have done a great job. I'm just here simply to support it. One of the very few things I have said yes to in the last year and a half was joining the park board. It's near and dear to my heart. Always has been. We have a great foundation. And obviously, all we're asking for is a loan to get us past this. We'll pay it back. It is a fabulous community project. Really want to see all you guys out there. I know I'm not supposed to mention names, but thank some of you already for your contributions. Still have pickets available. And as Molly was saying, we have about 70,000 to go. And we'll take a check individually from anybody for $70,000. We can always do that. But seriously, one other thing. You are our leaders. If you would please use your social media presence. Kevin, done a fabulous job with that. All of you have. Facebook. Use Twitter. Use your emails. We need volunteers now. And we need donations. And as the week goes on, we really need skilled volunteers. OK, skilled. That's very important. Because just the work gets a little more complicated as we go along. It does. We welcome you. Obviously, you can sign up online. But we welcome people coming by to help. But Molly's right. Skilled volunteers. I've offered to carry water. But being out there with your citizens is truly important. And look forward to seeing all of you guys on Friday. Be happy to answer any questions if you have any more. Councilmember Rodin. What's life like on Tuesday nights out in the real world? Thank you. Done a lot of traveling. Mayor Pro Tem Gregory. For skilled volunteers, do you bring your own tools or do you use the tools that are there? Great question. The Parks Foundation has purchased the tools. So you do not have to bring work gloves. That's all you got to bring. All right. I will be out there most likely tomorrow night because I'm out of town on Friday. So I'm not sure if I would be labeled as skilled labor. But I have swung a hammer, I guess. A few times. Yes. Wanting social media evidence of that, please. No. No, there's none. Councilmember Wozni. I'd like to make a motion. Item 3D. Consider adoption of an ordinance of the city of Denton, providing and authorizing and improving the purchase of playground equipment for Eureka 2, et cetera, et cetera. Mayor Pro Tem Gregory. Second. All right. We have a motion and a second for approval of agenda item 3 D. Let's vote on the board. Maybe better say seven. Carry 770. Thank you guys so much. Thank you. Thank you all very much. Thank you. Thank you for all your hard work. We will now go to concluding items, agenda item number 4, concluding items. I've got one, unless I see anybody pop up. And I just want to announce-- it was-- well, yeah, Johnson will go. I wanted to announce that it was reported to me that the Animal Adoption Center, the Linda McNaght Animal Care and Adoption Center, recently has had a live release rate of 90%. 90%. So I really want to thank all the staff and all the volunteers and the Denton Animal Support Foundation for really just the work that they're doing to really make that shelter shine and to show what it was really meant to be. So I want to thank everybody for that. Councilmember Johnson. Thank you, Mayor. I was just trying to look up the time. There's always an event on Veterans Day on the courthouse lawn, I think, downtown. It's 11 o'clock. So if you could make it, please come out and help us to support our veterans and thank them for their service . Councilmember Briggs. This new business? Yes, ma'am. The city of Allen approved a resolution that establishes 1130 as their hour of adjournment and would require a council vote to continue beyond 1130 PM. And we have had several that go beyond that. And so I kind of would like staff to look at that resolution and see how that works and if it's effective. And also, the Denton Recreation Chronicle had an article about the most dangerous intersections in Denton. Did any of you guys see that? And I wondered if the city was aware of these and if we have a plan to look at what we can do to make them less dangerous. OK, thank you. All right, seeing no other requests, we have a question to decide. I mean, we've got a couple of items for a closed session. Is the council up for going back and resolving those? OK, all right. Then we will-- do I need to call the closed session now? I'll call it now. OK. We will now convene in closed session in the work room-- work session room at 815 under Texas government code section 551.086, which was competitive matters. Texas government code section 551.087, economic development negotiations. And under Texas government code section 551.072, regarding real property and consultation with the Texas government code section 551.074.