All right. Good morning, everyone. I have been advised that we have a quorum. And so we will start the meeting. Thank you. We will start on this day, February 14th, 2024 at 11 a.m.
So we'll call the meeting to order. The first item of business is moving forward with approval of our minutes.
I believe these were sent out and probably are at your places as well.
I will need a motion and a second or any corrections if I identify.
So move. Thank you for the motion and the second.
Any discussion? We'll move forward. Everyone in favor signify by saying aye.
Any opposition? That passes. Thank you so much.
I do want to just note this is not on the script, but I had a lot of compliments for my red jacket. Happy Valentine's Day, everyone.
And just as a side note, I'm originally from Missouri and Kansas City is having their Super Bowl championship.
I don't know if we're familiar with that down here, but they do a parade when you win the Super Bowl, and they won. That's right. That's right.
So thank you. And we will start in our second agenda item is into our work session.
Moving into work session, I'll call item B EDP 24-017 receiving training and hold a discussion regarding economic development partnership board member orientation.
Good morning. My name is Erica Sullivan. I'm the economic development program administrator here at the city, and I'll be providing the documentation today.
So for those of you who were here last month, you had the intro orientation talking about our structure and our history.
Now we're going to delve into the strategic plan, the financing tools and follow a development district.
So there are five guiding principles to our strategic plan.
The plan was adopted in 2021, and they are core resiliency, future focused, inclusive growth, entrepreneurial spirit and cultural vitality.
And these provide a roadmap on how we perform our programs and operations.
And they were there was a lot of sessions coming to that cultivation of the strategic plan with a lot of stakeholders.
From the strategic plan, we have three major goals to accelerate recovery, to foster growth and to strengthen community inclusion.
And these provide the necessary roadmap and the action plan and initiatives that we need to achieve those goals.
The strategic growth areas, our previous policies had targeted industry sectors.
The strategic growth areas replaced those in our strategic plan, and they are connectivity, sustainability, creativity and competitiveness.
We are tracking our progress to strategies to create our strategic plan.
They gave us an implementation matrix, and we have incorporated that into a public facing document.
So this is available online and I'll have a link at the end of this presentation.
And it gives you the status and progress that we have on achieving all of the goals and initiatives.
So right now, on all of them together, we're 58 percent complete.
And you'll see the screen. This is what you would see when you were to log in and you can see the strategic growth areas we mentioned as well.
So we've done a lot of dealing with the strategic plan in alignment with our current policies.
We'll start with the tax abatement and incentive policy of 19th of 2020.
Our tax abatement policy, the tax abatement portion is required by chapter 312 of the tax code to be updated every two years.
So it came at a good time since the plan was adopted, our strategic plan in 2021.
So we staff went ahead and incorporated the strategic plan into our incentive policy.
We also included the city's core values at that time.
And so the incentive policy was changed into two separate policies, the tax abatement policy and the chapter 380 policy that this court approved and sent to council or recommended to council.
And it was approved in May of 2022.
In that policy, we had our incentive evaluation criteria.
We came up with the scoring matrix at that time and then we also have the infrastructure financing policy.
So this was our utility line funds, the 2M dollars from water and wastewater.
We went ahead and updated that policy. It went through the board and then to city council.
And then in 2016, we created our 1st cash grant. This was our investment fund. It was our deal closing funds.
So we could support different cash programs and priorities when we're looking at job based grants, that type of thing at that time.
It started with 150,000 dollars of mixed beverage taxes.
And then in 2022, after the strategic plan recommended that we create a catalyst fund, we went ahead and did that.
So that rolled over our utility line fund, the 2M. It rolled over the investment fund was actually renamed. So it rolled over the amounts that we had in our investment fund.
And then we also used ROI utility revenue, franchise revenue from Core Scientific to roll into that as well.
And we can go over that in more detail at the end of the presentation.
So we're authorized for about 7M, but we actually have about 4.3 because Core Scientific went into bankruptcy.
They actually came out of bankruptcy late last month, so we were pleased to hear that.
Now we'll move into financing tools. This first slide is the most common financing tools that we have.
Most people talk about tax abatements. Tax abatements in our policy, there's a minimum 5M dollar capital investment and there's a 10 year period by the tax code.
So the law limits us to 10 years. The way that this operates, the particular business will pay a reduced amount, whatever percentage the abatement is.
They pay that net on their tax bill and that's done through the appraisal district.
And then the next one is a Chapter 380 agreement. So this is a Chapter 380 is from the local government code.
It's very broad. It's literally half a page, one of the few very short regulations that we have.
And it just allows cities to give a loan or a grant and they receive an actual check from us.
So we might do a rebate, which functions like a tax abatement, but we pay it after they pay their property taxes the following spring or a little bit later,
depending on when we get the business personal property breakdown from the CAD.
This allows us to grant ad valorem, sales tax, hotel occupancy tax, mixed beverage and our job based grant.
So we do a lot under Chapter 380. And then we also are very fortunate to have a triple free foreign exemption.
So that's all the taxing entities participating. So you have the city, the county and the school district all participating.
So this is exemption from business personal property, specifically inventory that is moved outside, but is only held for 175 days.
The next financing tools broken down here is for utility. So we mentioned the infrastructure financing policy.
That's the first one. Infrastructure assistance. So this is the 1 million in water and wastewater funds.
And this is available for an ad for their aging infrastructure. And this is the plan line funds.
You'll see a picture of Winko here. Winko is the only, the distribution center, the only project that's received the utility line funding.
They took on all of phase one of the improvements in the West Barters to the tune of about 7 million.
So the 2 million helped as part of the package to help reimburse.
Then we have our economic growth rider. This is managed by municipal electric.
And this is for demand billing. It reduces their demand billing by 50 percent for a five year period.
And it's reduced 10 percent each year. So 50, 40, 30, 20, 10.
In order to be eligible, they have to have a meter of demand in excess of one gigabyte gigawatt or 1000 KVA.
And if it's expanding business, they actually have to have an additional addition to what they're currently producing.
The last is our creative financing tools. So we have the sales and use tax for construction is a very not very commonly used tool.
There's literally no nothing on the comptroller side about it. I had to talk to a whole bunch of people to come up with the guidelines for it.
But it's a state program that allows the sourcing of sales taxes.
So if a company purchases anything in the state of Texas, we can source it to the city of Denton and get sales taxes we wouldn't otherwise receive.
So then we can rebate all or a portion of that for the equipping of the facility.
And then the next one is the qualified hotel project. This is relatively new.
This is a state program that assists with hotel financing.
It's a rebate of hot or hotel occupancy taxes for qualified hotel projects for a period of 10 years.
And there are some limitations. It has to have 10000 square feet of event space.
It has to be within 1000 feet of a hotel.
And it's for all the uses you'd have in a hotel for parking the hotel itself for any restaurants, retailer that's involved in the hotel.
We're going to move to development districts and I apologize.
We are moving a little fast in order to finish by 12 o'clock so we can have our terms meeting.
The appointment was 1230, but we're posted for 12. So I'll be available for questions certainly.
But the 1st is tourist tax increment reinvestment zone. This is the regulatory is 311 of the tax code and we have a draft guideline in process and you'll see how that works.
So the base year you have evaluation and then as the increment as evaluation increases that increment, the yellow orange color goes to support projects in the zone.
It goes into a tax increment fund. So this particular project doesn't have an extra development district doesn't have an extra assessment or fee, which is kind of unique to this project.
And it's for mainly for public improvements. It does have provisions for chapter 380 for some mitigation and things like that as well at historic preservation.
Public and we have to we have 2 terms. So we have the downtown terms and then the West Park terms that for the next meeting that will follow West Park terms is in our industrial park area.
Public improvement districts. This is governed by chapter 372 of the local government code. We do have a policy in place and a draft updated policy in progress.
You can see allowable uses are very similar to the terms for public improvements. There is an extra assessment that is paid for the different amenities that the pit provides some examples that are not public improvements could be services as well.
So you might have solid waste service. You might have public safety. We're actually looking at doing this for for downtown with the new ambassador program in the future to help support that.
Exploring that we have 1 kid in the city and so that would be the raise a ranch.
Municipal management districts. This is chapter 375 of the local government code and codified legislation. We don't have a policy because it requires a legislature in order to be approved.
It's actually a separate political subdivision which makes it unique and it has different provisions beyond economic development has commerce tourism arts and safety that funds can be used for.
We have 1 municipal management district coal under ranch in the city.
Municipal utility district or mud. This is regulated by the tax, the Texas administrative code and the clean water act.
And they can levy taxes are much like a political subdivision as well with the municipal management district issue bonds charge for services condone property. They're typically in the.
The, we do have a policy. It's I have interim, but it's now been adopted by development services. They're the ones that head up this particular project and we have about 12 in the county right now.
And they provide the necessary infrastructure, typically water.
So we've covered a lot of ground. This is the matrix of all the different development districts. I've talked about and the advantages and disadvantages to each.
So, you'll see that in the pit and turns most of them are public infrastructure. Again, the mods in the and is particularly for water is a little bit broader things that it covers.
There's an additional levy or tax for all, but the terms you'll see in the 2nd row.
Then you can see the city's role and the flexibility that we have with that with the different development districts.
Some of the advantages where we have control, we don't have control and flexibility as well. And then some of the disadvantages, particularly with the pit and the municipal management district have some of the residents may not realize.
And see the additional value for it. And so it might be harder to pass certain bond elections and things like that. So that's something to consider.
One of the things I created another slide that I wanted to go over is the catalyst fund. It is a little bit confusing. So I created 2 things. This is the 1st dimension is what we are authorized for.
So, these are special revenue funds, and this is who we're received the funds in addition to economic developments, the streets, sustainability, and then a 1 time expense to the general fund.
And then the catalyst fund actual, I mentioned core scientific, so this is our actual fund balance. We're authorized for actually 7M when you count the utility line for a little over that with the roll over.
What we actually have is 3.7 that revenue last year, and that included 2M from water and wastewater utilities, 1M from the general fund, and then the remainder as mixed beverage tax.
So it's actually a fund balance of 4.3.
And then before I stop for questions, I have the economic development handbook here. It's also in the tools that was an attachment to it.
TML puts that out, Texas Municipal League is an excellent resource for all the different things that I've talked about and some that we don't currently utilize here in Denton.
And then another link to the strategic dashboard where you can see the progress and what we're implementing in our strategic initiatives.
So I'll be happy to entertain questions.
Erica, thank you. Any questions for Erica?
All right, wonderful. Thank you.
All right, the next item is 017 and we'll move forward, Christine, or 1-8 rather. Christine, please.
Okay, good morning, everyone. I'm Christine Taylor, the assistant city manager for the city, and I'm going to talk to you all today about an incentive opportunity that the economic development department will be bringing forward to city council in the coming months.
This is a recommendation for an incentive on the redevelopment of the Fine Arts Theater located in downtown.
So, before we kind of get into the presentation of what the project looks like, what we're recommending for incentive, we want to talk about why this opportunity is important.
A lot of city focus, a lot of what we heard in the strategic plan is to focus on the vitality of downtown. And as you can see, we're actively working several vacancies to remedy that so that we do have economic vitality and the proper and the square proper.
So, this incentive is important because we're talking about an opportunity for an anchor and anchors provide a very important piece in the community. They provide enhancing community identity. So, anchor stores, especially those like the Fine Arts Theater that are locally owned, have a unique character that contribute to the overall identity, the character of the community, and they become landmarks, residents, landmarks that residents and visitors associate with our downtown square.
So, a quick overview on the vacancies. This several things have changed and are working in the works. We're going to present a staff report, two items down where we'll talk specifically about what's taking place at McBrides and McNeals.
And there also has been some movement on the post office. So, everything in red is kind of indicating what those vacancies look like on the square. City Hall West is still vacant. That was an item that was put forth in the bond and did ultimately fail.
So, we'll be discussing in the future what potentially could happen in that location. The Fine Arts Theater 11,000 square feet has been vacant since the 80s. The Sherman building recently received new occupants. So, that vacancies going to come offline.
We still have the hole in the square, which is now formally for sale. It went on the market right before Christmas. That's currently vacant and then McNeals and McBrides, which we'll talk about in a coming report.
So, this project that we're talking about with you today is a proposed redevelopment of the Fine Arts Theater. It's 9,900 square feet structure situated in a 6,000 square foot footprint. The purpose is going to be a multi-use theater with live performances, music, special events, film festivals, concerts, and could be utilized for private rentals.
There are three stories proposed in the renovation. The 1st floor is going to have a lobby, bar concessions, and be a main theater that can seat 200. The 2nd floor is going to have 30 seats in a mezzanine. They're going to have a bar, and they're going to add in a component where there will be a balcony that overlooks the square.
That 3rd floor also will have a private theater that seats about 50. Here's a good rendering kind of the side. You cut the building in half, what that's going to look like.
So, pre-development activities. Oh, I missed. Who's doing the project? One second. It's important to note so that the theater, sorry, I'm missing one of my pages.
Okay, it's Northridge Realty who is a local developer. They've developed several projects in town, Station 222 on South Elm, which actually received the Texas Downtown President's Award Finalist, the Access Realty Group building on Elm, Freeplay, and then Guarantee Bank and Trust on University Drive.
So, the theater will be operated by the Texas Theater Group, who opened and has been operating the Texas Theater in Dallas since 2010. And that's an important piece that will play into when we talk about the vitality of the project.
So, pre-development activities, the property was purchased in 2018 for a little under 800,000 and since the purchase of that property, they've invested about 2.2 million dollars in pre-development activities, including the purchase, the engagement of an architect and an engineer.
They've done interior demolition and remediation activities. They've completed renovation plans and received their permits through the city and obtained approval for historic tax credits.
So, when this project was brought to the city about a year ago, the city hired a third party firm, an underwriting firm, to look at the project scope, their financials, and help us determine what is feasible.
Through that, we wanted to look at three different type of options of what type of incentives could work.
We ultimately have landed on one recommendation in your background, that full in your background data, that full underwriter report is available where we talk through each scenario, but I'm going to focus specifically on the one that we're at staff is going to be recommending.
So, the underwriting review focused on two areas of the project. There is an estimated capital need of around 1 million dollars, and this comes from on the left hand side, you can see pre-development activities that the developer has invested is 2 million dollars.
The proposed rehabilitation cost is around 5 million. Furniture and fixtures are included in there, which brings the total rehabilitation project cost to 6.9. So, that rolled in with their pre-development is a 9.9 million dollar project.
On the right hand side, we talk about what loan sources are going to have coming in. So, they have a remaining pre-development loan of a little under 700,000 dollars left, and they intend to get a construction loan for 6.9 million dollars.
On that prior slide, we talked about that they received approval for the sale of historic tax credits. So, with that, they will be selling those historical tax credits. We estimate around 2.7 million dollars to bring down that loan balance, and then the developer has infused additional cash into the project of about a half a million to get the loan pay down to the 4.3. That brings it down to 4.3, and the maximum loan value that they can receive is the 75%, the loan ratio value, which is 3.19 million.
What that ultimately equates to is that there is an estimated capital need for an incentive of about 1 million dollars on the capital side.
The other portion that we evaluate is what is it going to look like to operate the theater ongoing. The underwriter evaluated their estimated revenues and expenses for a period of 10 years, and the beginning, the first 7 years of the project, there is a deficit.
Which comes to about a 544,000 dollar need.
So, an overview of what we'll be recommending on their incentive, we're proposing a 1.6 million dollar incentive funded out of the downtown for 1 million of it is going to be a chapter 3 incentive grant.
It's important to note with each of these on the capital and the operating agreement, we are recommending that specific performance based metrics are in there to meet. So what that means is the 1 million dollars that would be paid for the project is not issued or provided to the developer until they have constructed the project and receive their certificate of occupancy.
And that portion will be used to pay down their construction loan principle to the 3.195 the project will be eligible to receive 50,000 dollars from a facade grant.
And then we are proposing up to 544,503 dollars and again, and a chapter 3, 80 incentive agreement funded over the 7 year period to cover the shortfalls between that profit and debt service.
And we are working through an incentive or a model on performance metrics of them hitting their revenue and expenses to be able to obtain those funds.
So, a couple advantages and disadvantages for the project advantages. Certainly we're redeveloping a historic vacant property, which increases density in a downtown for.
This aligns with our strategic plan is going to add culture to increase traffic and the quality of life in the downtown area.
The project confirm conforms with our project plan and other strategic clients from the city and will act as a catalyst to spur new private investment in the downtown area.
Another advantage is the initial cash grant is only paid after construction is complete and a certificate of occupancies in place and the developer is investing and leveraging other funding sources, including those historic tax credits.
They have indicated in their backup to that and educational arts and partnerships and plan to have community events.
For nonprofit organizations and what's important about our incentive piece is that.
When this is open, the city then will retain generate additional taxes that go into that fund.
The increased property value is going to increase the property taxes that get paid into the fund.
There's not been any sales or mixed average taxes since 1981 generating out of that. So, this is an opportunity to create that.
And then it's performance based. So, annual rebates are paid over time, incentivizing the theater to perform well.
Disadvantages we want to talk about this isn't your typical type of incentive that you likely have seen in the past.
It is a creative, a cultural arts incentive. So there are not significant jobs created and it doesn't significantly increase the tech space for the terms and the initial grant represents a about 25% investment with the church fund.
This chart indicates what we have in the church fund from from its creation and then forecast it on to the end of the term.
You have about 3.5M dollars sitting in the fund right now and they invest again. The incentive wouldn't be paid until they complete construction.
So, we're looking at probably at being at 4 and a half million by the time we get to the point of funding the project.
So, here's a couple key points that are important to point out is that this project aligns with our strategic plan.
It falls under the city's key focus area of fostering economic opportunity and affordability with the specific goal to increase tourism.
It aligns with our 2040 comprehensive plan. There was a key action called out specifically to identify opportunities to incorporate venues for art music and then specifically said, pursue the next steps for the race of city hallways and the redevelopment of the fine arts.
Later, it aligns with the city's economic development strategic plan, which talks about successful downtown development and how keeping the authenticity of the square is important.
And then we verify through each of our policies that the project qualifies. So, it falls under our chapter 380 policies again, pointing out this is the creative growth area and that scoring matrix that Erica talked about the project received 85 points, which puts it in the excellent category.
And again, the project aligns with the downtown towers project plan.
This additional information is what the community impact will look from this project in their project plan, which is included in the backup and in the underwriting, the developer focused on the drop training opportunities.
They'll be partnering with you and teach by training internships for film students, film and hospitality students. They're going to have community and special events, offer discounted rates to nonprofits, offer events at low or no cost related to cultural history screenings and partner with local festivals to provide.
So, if we receive multiple feedback for several of those festivals and operate downtown that this is going to provide an immense opportunity to expand those. And then the educational piece will be working with and neighboring districts for field trips and present and host educational productions.
So, based on looking at those 3 different types of incentives, staff will be bringing forward a recommendation to provide an incentive of 1.6M dollars. So 1M dollars on the capital side that they would receive at the completion of construction and issuance of the certificate of occupancy and an amount of up to 544,503 dollars that could be drawn down over the 7 year period as they meet specific performance indicators.
Next steps for staff are to do this presentation at the downtown church board and make a recommendation to utilize those funds. And then we are looking at bringing the full contract to city council in March of this year.
I am available for any questions and then Brad Andrews is here also who is a developer for the project and he's happy to answer any questions also.
Great, thank you. Any questions for Christine?
I do have a question for Brad if that's okay.
Any questions? Well, we are waiting for the questions.
Yes, sir. No, I do. Just give me a snapshot. I really like the balcony. I touched on that, but you weren't there. I mean, you know, in that discussion. But I want to hear your thought just briefly around that and what size it will be, what should we expect. I think that's a great opportunity to engage and kind of show people that it's activated, but I just want to know more.
It's a little tricky on that subject because we have to do everything we're doing on the renovation. Obviously, we're really needing the tax credits, the historic tax credits and Cameron could help us with this, but as we've discussed that with the groups that approve those tax credits, any significant changes you make to the facade may be ineligible for those tax credits.
Right now what we're showing or planning is just windows and this area that just kind of overlooks the courthouse, not that you can't, you know, you wouldn't be able to go out onto that balcony.
We're still working and investigating whether we could we could make that work. That's what we really like to do is make that where you can, you know, there's a door that you can actually go out onto that balcony. Basically, we've investigated that, you know, that that area that
facade that sits out there with the marquee signage and everything that's got the steel numberings in there that can't leave her back. This would be sufficient structurally to be able to go out onto it and make that usable in that way. But right now we're working through still on the whether that would disqualifies for the tax credits.
Okay, thank you. Could you go back to the slide showing the projected operating losses from the first seven years, I guess.
544,000. Yes, over a seven year period that bottom line variance adds up to the 544. So, you know, for me, I'm trying to balance the not a lot of respect for these guys, but trying to balance what the role here is for the city, you know, our liability versus the investors, how much, how much are we willing to try to, you know, augment or decrease their amount of equity they need to make this project work.
So I'm really struggling with this operating incentive myself. I think, you know, we as a city should not really take on operating losses projected out in a project like this. I can see that, you know, the capital expenditure that's necessary to help them do this project.
But for us to go out and if I'm reading this right to, you know, kind of guarantee or fund their seven years or operating losses, you know, I'm struggling with that. So help me through that.
Yeah, certainly the city views this as the property sat vacant since the eighties. So, as we continue to see it vacant, there's no sales tax revenue coming in. We have the lower value that the property tax is being generated on and then there's no mixed beverage tax going on.
And then the lack of the increased foot traffic that a theater would draw. So the city from our perspective is it is the right time to invest. There will be things in the contract in which we are going to require you have a public purpose to keep the theater open for the period of ten years, whatever we determine on.
But honestly, our review of the underwriting, it is a viable project after the seven year period. And these are the type of projects with that wouldn't happen without the but for without the city stepping in and making it vital because it is a cultural investment.
So we certainly see the project as it's the time to do it. It will just continue to sit there and make it and our losses are so much more by leaving it again. That was kind of my question is being new to this process. How do we quantify what those losses are? So basically, I'm trying to formulate in my head, like, what's the ROI? Like, when does this pay back on the turds or whatever the funding mechanism is?
Sure, we have it on the back up. I may need to pull that one of the opportunities we looked at on what could we do? Could we rebate the property tax portion? Could we rebate the mixed beverage tax? I'll have to pull that and send that in the back up. But I think it was around one hundred thousand dollars a year.
So certainly on the operating piece, that will be paid back into the tourist fund, probably over a ten year period, which we are putting into the agreement that that theater has to remain open.
So that part, yes, will be paid back. I don't have the ROI on the capital piece. I think Erica may have that. We can provide that. But it was either a twenty five year or thirty year before you get back to on the one million.
Well, I'm going back. So, you know, as a banker, if I look at a project and it does a cash flow for seven years, I'm really sure that's just that's just that's just it. Like as an investor developer, we won't do the project either.
Right. And so it is a unique situation and it's certainly different than anything we're typically involved in where we're trying to go in and this thing's got a cash flow possibly for at least from starting year two or three. Right.
And so this is that's what we presented the city and said, you know, based on the maximum loan amount that we think we can get at the end of this once we sell the tax credits, you know, back based on our maximum LTV, but also the debt service that we believe is this kind of project should comfortably be able to sustain.
There's still this shortfall, right? Operating shortfall. And so we're just presented to the city is this is our dilemma. We can't get comfortable moving forward based on these facts. And I know it's unique and so, but as we've met the city and had those discussions, this is kind of the recommendation.
I say to say let's let us help you get comfortable with those facts and get the project. I think the other piece, though, too, is what we were trying to focus on this is a different type of incentive and not uncommon in Texas.
There are several communities that invested in the cultural arts, the creative piece of it, which are not a typical business model, because there wouldn't be a need for an incentive if it wasn't so temple Texas, Louisville, San Antonio, Houston.
And Brenham, Dallas and Huntsville are other cities that have utilized some type of incentive program to restore historic theaters and their downtown areas.
Second question I have, I'm sorry, Tony, if I can just say, I mean, we, like, anytime we put together projections, and I think it's a banker, you can appreciate this week, try to be conservative. So we hope we knock this out of the park. And it's it's so much better than that. And that would limit that would reduce the amount that we can come back to the city for in those operating losses.
So, you know, we certainly have not put in here best case scenario. This is what we call, you know, that middle moderate case scenario. Right. So it's not worst case scenario either. And, you know, it could be could be could be worse than this.
But, you know, we're really excited about the the guys from Texas Theater in Dallas and their experience operating down there. And I mean, they've done a lot of different things through the years and trial and error of what works and what doesn't work.
One of the really cool things and kind of things mentioned about the cultural arts. This is this is the we believe we really feel this way. This is the community's building, you know, and so what what happens in that building, whether it's whether it's movies, concerts, you know, churches that meet there on Sunday, it's it's really driven by what the community wants.
And so in listening in the feedback group may put something out there that flops and okay, we'll never do that again. Or you got other ideas of what you want. So this is in the end at the end of the day, it's designed to be a for profit venture because there's a lot of tricky things about going nonprofit, especially as it relates to the tax credits that really are not eligible for at that point.
But it's it's kind of a nonprofit in the sense that we're trying to make it a community space that that ultimately, you know, is driven by what what the community wants to see have done there. And so that does translate to very low profits in some cases operate losses.
What about another concern I would have is parking, you know, I don't know what the plan is for. I know the city's done some things down with parking lots, but, you know, a venue like this man is critical that people have the ability to park and attend and I mean, what's your how do you how do you kind of get around that component of having an event center downtown where there's very little parking accessibility.
Right. We're working on a couple things. So, first of all, to talk about what parking is available, where can we talk to other businesses and share parking, but in conjunction with the downtown master plan, we are doing a parking study to talk about what infrastructure do we need to maintain the current level project for growth? So both of those have already been initiated in the coming in the coming months to city council.
So that could be additional costs to city that that to accommodate that parking. It could be why I'm sorry. It can be additional costs that the city would have to outlay to accommodate parking for this project. It depends in the orientation. We talked about other tools that we have in the toolkit. One of those that we did get approved for through the summer was the qualified hotel project. So, if there is a project like that, we have the opportunity to receive the state's portion of the hotel occupancy tax and a sales tax for a 10 year period, which can be used to pay for debt infrastructure for parking structures.
The other piece of that that we're talking about is with new buildings downtown. What parking can we expand? Where can we share? But our parking study is going to tell us what is the current situation? Are people having challenges? And then what improvements can we make to maximize what we have? And then what do we need to add as far as infrastructure improvements to increase capacity?
Once again, you guys showed a slide wall ago of all the vacancies downtown. I was I'm shocked. I didn't realize it was that substantial. A lot of us have had substantial movement. This we've created this slide about a month and a half ago, but there are several. Have you guys ensure the city has done some research? I mean, what is the what is the reason for the parking? Is it accessibility? I mean, what do we know about why there's this much vacancy?
Downtown, there's a mix of things. A lot of some of the anchor buildings specifically were family owned for a long period of time. And there wasn't necessarily the motivation to sell or need to sell. That's what we're seeing on some of the key anchors that were owned. Any of the restaurant industries or retail that were struggling, it was from effects coming out of COVID. I've not heard any feedback that it's related to parking.
But McBride's and McNeil's, those are fixing to be correct. So yes, we have that as a next staff presentation to update you on what downtown committee saw.
I'd just like to offer a couple of thoughts. It's an analysis that might be helpful. With a project that is fundamentally strategic, not so much like a project cash flow thing, where it's iconic, it's a draw. What you have to believe to make it pencil from the city perspective is that the lift on the surrounding activity will be enough to compensate the sales tax.
And has the analysis been done? Or could the analysis be done to say, within a relevant radius, how much of a lift would we need to see to have this holistically pencil out? Maybe I haven't looked at it quite that way yet, but maybe that's something that would help be a guide to judgment.
Sure. We have done a foot analysis estimates on what we think it will generate. And then there is a calculation kind of on what that projected economic impact beyond. The one that we were talking about the $100,000 a year was the direct generation from the theater, which he would be able to recapture. But the impact on what it will do to the restaurants, to the bars and the area and the retail. Yeah, we could provide some estimates on the tools of that. But that was certainly not included in what we're talking about would be eligible to be rebated.
And I would say there's kind of two ways to look at that. One is, well, what do we think it'll do? Okay. But then also, what would the threshold need to be? Right? That would be a test of your conviction. Like if it requires 20% left, you know, you probably see that the break even might be 3%, you know, the other just comment I want to offer is look at the parking, kind of like the way I look at income tax. I wouldn't say, please don't give me income, because
I don't want to pay income tax. I mean, like, if you're if you're going to have growth, however, we're gonna get it. We're gonna have to accommodate parking.
And for this project, not to say it won't spill into maybe some other businesses having challenges with parking, but we're not concerned about it. I mean, I shouldn't say that there's no concern. I mean, parking needs to happen. But, you know, it's, we're a little bit spoiled if we can't park
within, you know, two parking spaces of where we're going in, we're dissatisfied, right? And that's not the norm in a lot of downtowns. And so we've just got to expand our view of what's a reasonable parking space. And I think the city already done a great job on requiring and making some parking that's, you know, a block off the square or whatever. And so, and I really, I mean, it's hard to say for sure, but I believe that we'll end up seeing a lot of people get here from, you know, using Uber, you know, taking an Uber to go to a show.
Having dinner downtown and then taking an Uber back to the corner. So, hard to quantify that exactly.
If I may, Tony, one of the things when I was talking to staff about it, I think we can solve the problem of parking turns into a blessing. And here's how, that one side of the square struggles for foot traffic, right? That you've seen those businesses struggle there.
So if somehow we, and we've invested in the lights along Hickory, there along that stretch. So somehow we can incentivize people and make it attractive to park at the Carrollports building or the community market parking and make it easy for people to kind of get from there and be that utilizing the ambassadors or whatever.
But now you have this kind of coming and going foot traffic on the west side of the square, which is at a deficit as it is, right? So, so I envision activating for larger shows to say it's round numbers, 200 people or so. That's what I, I envision a, so that we don't have to invest in a whole bunch of infrastructure.
We already have the lighting there. It's just a plan, right? To, to have kind of added, make it more comfortable for people to park a block or so away and walk in and, oh, by the way, here's the store will pop in or pop out, you know, the bookstore and that, that sort of thing.
And then if I'm not mistaken, you're, you're not going to have a kitchen. Correct. Right. And so then that, that's that impact in your surrounding areas that, hey, we're going to eat something before the show and you don't have an option to just eat there.
They don't have an ability to just sequester those dollars. So that, that's good to me. And then to your point about the vacancies, you know, obviously some of those would be an activated, but I'm selfishly going to say in my estimation, but the ambassadors and just kind of that cleaning and visibility and just that awareness downtown will help with, with some of those concerns that I've heard about people not wanting to go downtown.
So I just think it touches a lot of things that kind of make it easier for people to make that trek and feel comfortable. Hopefully, I hope to be as a result of that infusion, more families down there, more comfortable with that sort of thing.
We've got, we'll come downtown to eat on an evening and then you leave the restaurant and think, well, let's walk around and shop a little bit. Everything's closed. And so, and again, I can't promise this with this project, but I'd love to see this project be a catalyst for some of these retailers thinking, let's stay open a little bit later and let's be open.
You know, maybe JT's is open when the show comes out, people are cruising around there or it's some of the other retailers. And so I think that I really believe that we'll see that kind of lift that you're talking about all in those restaurants, spaces, but also hopefully the retailers and that as you described it being that anchor of the square that really is a draw.
Okay, now we've got hundreds more people here on any given night and let's get them doing some things around the squares. They're here kind of keeping track.
Everyone, thanks for the conversation. Good discussion. Is this something we need a vote on? We do not. This is for information. Thank you for that. And Brad, thank you for being available to address questions as well. Aaron, I believe you're up next. Is that right?
It's hard to follow such an exciting announcement about the theater, but I will be brief because of time. At the January meeting, we discussed that in February, we would have an employment announcement. We do. We have hired our new director of strategic partnerships for the EDP. He's here today. Jamie Adams is with us. He is our new director of strategic partnerships. He's coming to us after 20 years with UNT and athletics, so you can just stand up and wave your hand.
He's here today, probably for the sake of time. But he's hit the ground running. He's on week two. It never hurts to feel good after attending a meeting where you say nothing. That's great. But he's hit the ground running. He's on week two. We spent the morning out at the airport. We shall air the FBO. So if you are a partner of the EDP, he will be visiting you. If you're not, we're coming after you.
But no, we had a really great time. He went through a couple interview process, obviously because our partnership with the city is essential to our success. He met with Christine, too, and so we're excited to get Jamie off and running. But we would be remiss to say it's Valentine's Day. So you do have a Valentine from the chamber and our partnership would not be as beneficial as it is without our partners. So thank you for your heartfelt leadership and thanks for your help in recruiting Jamie. So here we go.
I'll quickly give an update on the city side. We have continued to work with our recruitment firm to find the best candidate for the director of economic development. We did continue to conduct interviews the first part of January and then brought a candidate down last week for a full day. They spent the day in Denton, met with various stakeholders. They were able to meet with Steve, several city employees, and we haven't extended an offer. So I'm hoping at the March meeting that I'm able to introduce to you the new director of economic development.
Great. Thank you. I do want to just circle back. I had an opportunity to visit Christine after the last meeting, and I hope you feel the conversation today is one of the things specifically we discussed in regard to other projects that are going on that we may not necessarily need to have a photo, but we need to have an awareness and to be driving an engagement around as well. So we'll be doing that on an ongoing basis. We'll be laying out what those future plans are.
What future conversations are as well. Also, I want to remind everyone we roll right into the TURS. Congratulations if you weren't aware, you're part of the TURS board as well. So I found out I'm chair of that. So yeah, thanks, Tony. But we'll be continuing with that. Are there any other items that need to be brought before this board?
Oh, thank you. All right. Yes, for those downtown vacancies, we're going to look at those. I'm Kristen Pulido, and I am the main street program manager for the city of Denton. At the February meeting, two downtown properties were presented for the downtown reinvestment grant. A little backstory is, you know, after COVID, kind of had a slowdown in the downtown reinvestment grant. We had one in 2022, which was the chestnut tree, and then Bulls and Bikes in 2023.
Thankfully, we have seen an uptick in businesses applying. So we've been really working with the historical preservation officer, our city permitting team, the Texas Historical Commission, and I have been working together to create a more seamless structure for businesses to apply for these grants.
The two current grants are the first grant applications that include fire suppression, which the program was just updated last year to include fire suppression. Together, these projects will invest about $1.5 million, not including the tenant finish out and bring at least 75 jobs to downtown.
And then for every dollar invested by the grant program during fiscal year 21-22, we saw approximately $84 reinvested, or a rate of return of six times.
So first, we're going to start with McBride. In March 2023, Green Eggs and Ham LLC purchased the McBride Music and Pond Building. The building owner has been working with our historical preservation officer and the Texas Historical Commission architects to return the building to the 1938 facade.
They're going to do a new modern twist, and construction will remove, you can see on this drawing, construction will remove the retail display windows and recess entry on the street level facade and pull the entry to the sidewalk building edge.
While the sign will no longer be on the front of the building, they are going to do an homage on the inside of the building and have it hanging in there. Then all three of the buildings will be used by the new tenant who will take full advantage of the custom bifold windows on the second floor.
And the building will be retrofitted with steel beams in order to physically support the new use that requires 10 tons of HVAC that will sit on the roof. And this business will add about 45 jobs to the downtown area.
We'll move on to McNeils, and I'm sure many of you have seen the movement downtown happening. Pete Lettick, with Little Deep Properties, purchased the McNeils building, and he has been quite local and just ready to get going, which we appreciate.
He will move his engineering firm into the second story, and then the first floor will be a retail mercantile business, which they're keeping under wraps for now. The interior renovation includes updating the plumbing, mechanical electrical systems, removing asbestos, and retaining as much of the historical details as possible, tin ceiling, original wood floors, and multi-level.
As you've seen, he's started to remove that slip cover and replace the awning. They're going to repoint and repair the bricks, and the engineering firm will employ about 22 people, many of whom are UNT graduates, engineering graduates, and that a unique design plan is not closed off from the retail space, from the engineer space, allowing for more natural light to flood the space.
The timeline is very similar to Fine Arts. It will go in front of the church and then the city council, and then both are recommended for $50,000 for the grant applications. Any questions?
So I was going to make a comment. Obviously, I was in the committee on both of these, but on McNeil's, so the engineering firm she speaks of, it's an existing Denton business. They're buying their own facility. He's very passionate about his building and went through very, very good detail.
He's an engineer, and I got the sense that he was very motivated to get it back to the historical aspects of the building. And then on the other one, on Voodoo, it's a different concept, and then it will drive traffic to downtown.
It's a restaurant bar, pretty cool concept. But what I did in the meeting, I got a sense of the business owners, although it's difficult for them to take advantage of the fire suppression, except when there's a turnover of tenancy, there are other owners that would like to do this.
It's just they can't shut their business down to go through and do that. So this is a well-received grant that we're offering, and they're trying to take advantage of it. And these are two great examples, I think, of where we're doing that. And they're trying to keep the historical aspect.
And he can say that the signage on this building is that we're going back before that to the '30s to what that looked like. So there's pretty good support on keeping that history.
And then two more downtown businesses that will take away some of those vacancies.
So thrilled to see this kind of investment in the square. Good job. Here's one. I'm just curious, has Onfellows actually been officing up there, or are they going somewhere else?
They have not been officing out of there. I'm not sure where they've been officing out of, but that has been...
Just a sign.
Gotcha.
Any other conversation?
Questions? Thank you.
Okay. Future agenda topics. Thank you for sharing.
Okay. Last item before this meeting concludes. We're working. We heard your feedback last meeting that you're interested in additional topics.
More topics are being about, so there is a holistic kind of conversation and view on economic development activities happening in the community.
So we plugged in some future items, and of course, if there's additional topics you want to hear about, you can speak to the chair about that and we'll get those added.
So coming up, there was a request that came through for Atmos Gas Utility to come in and talk about, give an overview on their utility services, what they kind of do with weather issues, contingency, and potentially needing to turn off services.
So they're able to come into our April meeting. We're going to have Stoke, Heather Gregory, who runs our entrepreneurial hub, speak to the board twice a year just to give an update on the activity that that hub is generating.
And then the request from last meeting was to get the project information on the Loop 28 extension. So our transportation planning group is able to come to our April agenda.
So we'll be providing that with each meeting packet now so that you can see upcoming topics, and if there's additional things you want to talk about, we're happy to add those and get that plugged into an agenda.
I wonder if others would find this useful too. Mostly, you know, we're rightly on pretty granular topics, but this is an economic development topic. I'd be interested in hearing even a brief conversation on some future point.
The economic development strategy that was developed by a consultant that adopted, as we saw earlier in the presentation, had four main elements.
It was connected debt and sustainable debt and creative debt, and then a sort of aspirational one called competitive debt.
And what that was explained at the time, pre-COVID, was that we aspire to be competitive by having a Class A office space.
Since that time, you know, the main things I hear, not as a practitioner, are commercial global states, you know, potentially on the ropes.
As I look, you know, from 60,000 feet, I think I would expect to see some consolidation in that area and probably conversions to residential.
You know, short on residential and long on commercial. So I'm curious what this group would see, like if we were to add that fourth pillar to the economic development strategy, what would take the place of traditional Class A office space?
Would we still believe in that, or is it more mixed-use, live-work-play, innovative concepts? And, you know, does it help if we have a strategic target, you know, a vision for what that ought to be instead of commercial real estate office space?
You know, does that help in the recruiting effort, or does that help guide you in any way? So I don't know how to boil it all into like a little square on a spreadsheet, but is commercial real estate still the fourth pillar? Discuss, discuss.
I think I'll work with Steve on that and we'll get Steve on that.
Sure, the timeline for March was still kind of empty. Are we, is there anything slated for that or no?
We will, we don't have anything at the moment. What we plan, what I can plug into is that Kristen Fledo, our new downtown program manager, Main Street program manager, we want to talk about that holistic view, so I think in March she can give an update of the program.
We could certainly give an update on the ambassador program. If there are any other topics, some of the timing will depend on if the guests can attend. That was the situation with the Lou Petitier and Atmas. Yeah, and these are additional topics that we can add in.
So maybe a resource for me, because I'm learning, because I think it would help me with some background for the theater discussion is how does that tie strategically into the strategic plan, but then also like the downtown plan, right?
So is everything that we're talking about synergistic to something, the other things we're doing. So, for example, if you want to build a theater or renovate a theater and then you say, well, that's going to drive traffic for restaurants, you got to make sure your unoccupied buildings are going to be used for restaurants, not for something else, right?
If that's in your model to how you're going to generate revenue or whatever. Right. So when you're doing all that stuff, I think I don't know if that makes sense, but it'd be nice to figure out how to connect all those dots together somehow.
Are you talking about potentially like a work session or information on how we're looking at economic impacts?
Yeah, yeah, something like that. Or even like what we already have on the board and how it kind of ties into the plan that the consultants gave us. Right. So how's the theater tie into the plan?
Like that's a puzzle piece in this for for quadrant plan is this theater fits here and this is why and here's the other things around it that we're working on. So it all so it all works together. Right. Does that make sense?
Sort of in the presentation, we had kind of where it aligns in the different plans. So if it's more the hierarchy, so the hierarchy of kind of those plans are the comp plan, the land use plan for the city kind of drives, then those focus areas set by council and then the independent strategic plan.
So that's how it kind of takes down their hierarchy. But we could do a visual to demonstrate that and then follow up on the economic impact that's evaluated through that matrix scoring. Yeah, that would be good because I don't know that I necessarily understand the matrix scoring and in those things.
I think that would be good for me. I'm sorry. I'm going to engineer you to death. That's just how we do things. Actually, we've done that before with the matrix review.
Those have been on board a year or two and it is helpful just to see how those scores are ragged at. We have a little in the action that looks, you know, it might be a good place to look one of those great because we talked about last meeting is that we want this board to maintain quorum to meet every month and continue learning and meeting on items that are important, which is more than I said.
You want to know how tight the tolerances are for each number, right? I don't know that I need to go that. It'll help me. It'll help me ask smart questions, right? If we find or stand decisions are being made.
All right. Any other items for discussion for this meeting? All right, I'm going to go ahead and bring us to adjournment then. And do we have time to pivot before we get into the next? If anyone needs a what do you want to give me a few minutes break or if you want to grab lunch and come back in? Is that all right? Maybe 10 minutes. Let's do four.
I like it. All right. What I need to do ain't going to take 10. We're adjourned. Yes. And 1207.