Johnny Ross' Robust Partnership with San Angelo

The Standard Times ran a thank you column from MedHab's CEO Johnny Ross:

As CEO of MedHab, I wanted to reach out to let you know how excited MedHab is to partner with San Angelo to grow our business.

Our incentive package with the city, although robust, places very little risk on San Angelo. The package is designed only to reimburse MedHab for work performed and jobs created. There are no upfront costs to San Angelo so MedHab would have to reach performance levels to receive reimbursements.

Some of the "work performed" is spending money to make MedHab a real business. That includes getting office space, garnering and equipping a production facility and hiring employees. To date Angelo State University served as MedHab's research and development function, the Workforce Commission as its Human Resources Department and City Council as MedHab's non-debt, non-equity capital injector.

Oddly, Ross failed to mention Mayor Alvin New sits on MedHab's board of directors and has a financial conflict of interest.  That seems a material thing to disclose, at least in an arena of robust ethics.

MedHab Gets StepRite Trademark

Trademarkia.com reported:

On Wednesday, November 09, 2011, a U.S. federal trademark registration was filed for STEPRITE by MedHab, LLC, Mansfield, TX 76063. The USPTO has given the STEPRITE trademark serial number of 85468794. The current federal status of this trademark filing is NOTICE OF ALLOWANCE - ISSUED effective June 19, 2012

MedHab has 6 months to activate the StepRite trade name or ask for an extension.

Refiners Go Offline for Hurricane Isaac

BusinessWeek reported:

About 1.3 million barrels a day of refining capacity--nearly 8% of the country's total--is offline, the U.S. Department of Energy said Monday, as refiners remove employees in anticipation of Tropical Storm Isaac making landfall within the next few days.

Valero Energy Corp. (VLO), Phillips 66 (PSX) and Marathon Petroleum Corp. ( MPC) have all started taking offline refineries in Louisiana, where Isaac is forecast to land by early Wednesday after strengthening into a hurricane. Royal Dutch Shell PLC (RDSA.LN, RDSA) and Motiva Enterprises LLC have scaled back operations in Louisiana and Alabama by an unspecified amount.

The storm is "certainly a refinery issue more than a crude oil issue," said Energy Management Institute analyst Dominick Chirichella.

Issac's track takes it over BP's Deepwater Horizon 2010 Oil Spew.  How much Macondo well oil will be stirred up by wave action and be pushed further inland?  Will Isaac be Obama's Katrina squared?

Will people harmed by moving BP oil be able to file a claim for damages?  BP's November 1, 2012 deadline doesn't allow much time for those impacted to apply.

Also, what happens when dispersed oil, toxic to the Gulf of Mexico food chain, moves around?  Any settlement by the Obama White House might wish to take these events and possibilities into account.

Update 8-29-12:  First indication of Obama's Katrina Squared came from the Weather Channel website, "Officials expect some tar balls to be dredged up by Isaac. They'll assess the beaches as weather improves."

9th West Texas Legislative Summit to Solve Water Ills?

State and local leaders will gather Tuesday to talk about legislative issues important to West Texans.  Past versions of the West Texas Legislative Summit focused on a wide variety of issues.  The 9th West Texas Legislative Summit is all about water.

Surely, this group talked about water before, given our regular drought cycling.  Flash back eight years to find Twin Buttes Reservoir at 4% of capacity, where it sits today.

More ominous is the 2010 Summit which focused on education.  The 2011 Texas Legislature decimated education funding at all levels.

Looking at the 2010 pictures, I hate to  think what this crew can do with water.  Note that Angelo State University is no longer a Summit sponsor.  Was that due to budget cuts or a promoted University President generally disinterested in local issues?

 A report to the Legislature in dry 2004 had this to say on water supply:

Water flowing in Texas creeks, rivers, and bays is state water.  Its use may be acquired through appropriation via the permitting processes established in state law.

Other words in the 2004 report include "access to capital", "water regionalization" and "radionuclide."  It seems all three are in our future.

The West Texas Legislative Summit costs $120 to attend, given the early bird discount is long gone.  A dinner with Senator Robert Duncan and Representative Drew Darby is available the night before for $35 a head.

Citizens looking for a free update on water can attend an event Thursday evening.  It won't have the "see and be seen" appeal of the Legislative Summit, but it'll be about water just the same.

MedHab's Coming to Town!

The Standard Times reported on a City of San Angelo press release.  It stated:

MedHab, a medical device company, has agreed to establish a plant that will create up to 227 jobs in San Angelo following Tuesday’s approval by the City Council of an incentive package that could earn the company $3.54 million in performance-based assistance.

City Public Information Director Ty Meighan called it months ago as San Angelo's to lose. Angelo State University President Dr. Rallo stated MedHab was coming in the Summer edition of ASU Magazine.

Council approved the contract on Tuesday. Mayor New's MedHab got one heck of a nondebt, nonequity capital injection from San Angelo taxpayers. That has to help the odds of mezzanine financing.

Someday MedHab will update their news page on their website, which missed the company's last fourteen months of news stories.

 MedHab has a new logo.  How long before they reveal their new website?

I find it interesting how the cast of characters changed between January, when council approved the MedHab incentive, and August, when council officially approved the contract.  Gone are City Manager Harold Dominguez, COASDC's Donna Osborne and Public Information Director Ty Meighan. 

New Public Information Director Anthony Wilson issued press releases despite not officially entering the role until September 1.  Anthony's early work will center on informing the community of his potential new bosses.  A new City Manager could be announced September 5.

Anthony's start might not be as exciting as Ty's, when popular Mayor J.W. Lown resigned his position after being re-elected for the fourth time.  Lown skipped the induction ceremony for personal reasons.  That move gave us Mayor Alvin New and his MedHab Board slot and equity stake.

Funny, the public loved J.W., but didn't appreciate Council's chess moves enabling the Mayor to keep his position and MedHab stake.  I wonder how New's investment will perform given a $3.6 million potential capital injection, courtesy of San Angelo taxpayers? 

City's Secret Health Insurance Kitty

Interim City Manager and Chief Financial Officer Michael Dane spoke to using health insurance funds for other purposes for the first time in the budget cycle.

Dane said health insurance money may be available for other uses like raises in the coming budget.

Excess funds arose from the City's health insurance strategies the last two years.  Their first move charged employees, retirees and dependents more for health insurance. Council socked dependents with massive increases.  Passing the lion's share of increases on resulted in the self insurance fund having over $950,000 at year end.

The second move required employees, retirees and dependents to utilize San Angelo Community Medical Center and its affiliated physicians.   Keeping the lion's share of savings enabled the City to spend $925,000 less than budgeted YTD.

Add these two figures and nearly $1.9 million in health insurance money could be available.  That's not counting nearly $350,000 in federal ERRP money, which city leaders plan to use in the current fiscal year.

For the coming year the city will budget $1 million less than the current budget.  It still results in an excess of $415,000.  Adding ERRP and the 2012-13 excess and that's an excess $2.65 million in a category repeatedly dubbed "a beast" by City leaders.

City Council previously stated they would publicly vote on moving any funds from this account.  I expect them to live up to that commitment.

MedHab Update

MedHab's promised summer launch leaked into "by the end of the year," according to a recent update from ASU's Small Business Development Center.

The City of San Angelo will entertain an economic development contract with MedHab at its August 21 Council Meeting.  The contract details the first five components of the city's offer, as presented in early January.  Not included are tax rebate commitments or the value of foregone rent.

MedHab has a new logo and could garner a nearly $2.8 million non-debt, non-equity cash injection, courtesy of San Angelo taxpayers.

Will the public recall Council changing conflict of interest standards which allowed the Mayor to keep his job, his MedHab equity stake and Board of Director position?  

How has public sentiment changed since January?  Regardless, the deal is ready to be done.

Update 8-21-12:  The Standard Times ran a piece on MedHab's incentive agreement.

MedHab's Back on City Council Agenda

San Angelo's City Council will consider executing an economic development agreement worth $2.8 million in cash to MedHab LLC.  This is follow up to Council's initial action which approved a $3.6 million total package.  The $800,000 dollar difference is in noncash subsidies, a substantial benefit that does not require the city to cut a check, but still costs taxpayers...

,

Two leaders, Mayor Alvin New and City Manager Harold Dominguez were absent when City Council took up economic development incentives for MedHab LLC in early January.  Mayor New was in Australia, while Harold dreamed of the Colorado Rockies, even though he was physically present.

With his mind fogged by high altitude visions, Harold allowed city staffers to misrepresent the Mayor's Board of Director position with MedHab as purely advisory.  Board members have a much higher fiduciary duty than mere advising.

In addition Harold failed to produce signed affidavits spelling out the Mayor's declared conflict of interest. Council quickly covered New's investment backside by changing conflict of interest standards such that MedHab could garner economic development money without New having to shed his MedHab stake or resign his Mayoral role.

That brings us to August 21, when Council will consider the $2.8 million nondebt, nonequity capital injection, courtesy of San Angelo taxpayers.  Time may show how these funds help the Mayor's investment.  Then again, it may not. 

Harold's Longmont Update

Former San Angelo City Manager Harold Dominguez unpacked two familiar moves in his new position in Longmont, Colorado.  The first concerned a tight budget and the use of "one time money."

Dominguez said that untangling the ongoing expenses from the one-time money will probably be a two-year process

San Angelo workers and retirees heard Harold opine on federal "one time money" intended to keep health insurance affordable for retirees.  Harold and City Council sat on that money while premiums soared for retiree dependents in 2011.

Harold's second familiar move involved adding chiefs in the midst of a tight budget.  In Longmont Dominguez plans to add two assistant city manager positions and named Sandi Seader to one post.

The move is part of a re-organization by new city manager Harold Dominguez, who said he's been looking for ways to make the city's organization more flexible and interdependent, and to free up some of its managers -- including himself -- to work more on the big picture. 

Work more on the big picture?  I find it hard to believe that anyone can add two top jobs in today's world.  Some leaders can do the work, others can't.   Those who can't need someone to make them look good, as well as serve the locus of blame.  Longmont, it's your first clue. 

ASU VP Penry Headed to Different ASU

Vice President for Development & Alumni relations for Angelo State University Jason Penry is leaving for Arkansas State University where Penry will serve as Chief of Staff to Chancellor Tim Hudson. Hudson served as Vice Chancellor for Texas Tech from June 2011 to May 2012, before being named Chancellor for Arkansas State. 

Penry served as ASU's alumni fundraising star.  Angelo State was recently named a top performer in fundraising.  Penry's leaving came as six endowed faculty chairs were terminated.  It's not clear if major donors stopped their commitments or if investment returns were unable to support faculty chairs as expected.  Either way it points to a chink in the development armor. 

There are other concerning developments of a financial nature at Angelo State.  Five employees of Residential Life lost their jobs due to a financial snafu.  Rumor has it nearly $1 million dollars got misplaced, with most it being spent by the temporary holder.  If this is true, another Vice President's job could be at risk.  Tenure isn't a word associated with Angelo State Vice Presidents. 

ASU Finalist to Come from TTU Regents' Meeting?

The Texas Tech Board of Regents named an interim President for Texas Tech University at their meeting in El Paso.

Texas Tech University regents announced Friday that Lawrence Schovanec, dean of the College of Arts & Sciences, will serve as interim president of the university while a replacement is being sought for Guy Bailey, who has resigned as president.

Might they also come up with a finalist for Angelo State's Presidential position, given their:

past practice of the Chancellor and the Board of Regents reviewing the recommendations of the Presidential Search Committee and making a determination of which finalist will be publicly announced.

Stay tuned.  If it doesn't come out of August's meeting in El Paso, it would need to come at a scheduled or called Board of Regents meeting.  Scheduled dates for 2012 are:

• October 12, 2012
• December 13-14, 2012

Internal candidate, outsider, only Chancellor Hance will know for sure.  It's literally his decision.

Update 8-13-12:  Texas Tech is still taking applications for ASU President.  They plan to narrow the search to eight, before recommending three candidates to Chancellor Kent Hance.

WTU Plant Property Zoned Out of Industrial?

San Angelo City Council will discuss the former WTU power plant on Lake Nasworthy.  Council will consider a zoning change from Industrial to Transitional.  The information packet presented background information.  An Assistant City Manager stated:

... the owner of the property is likely looking for some support from the city as per her discussions with the owner, and their ambitions for the property moving forward were not industrial in nature.

This leads to Councilman Hirschfeld's hot topic, the Master Developer for Downtown San Angelo.  Might a lake project become a development teaser or icing on the cake? 

Should the City join forces with the transitional property owner, a developer would have access to over 300 acres at Lake Nasworthy.  Mixed residential and commercial might optimize returns for a developer.

How much will the city subsidize private development in downtown and at the lake?  It remains to be seen.

Update 9-25-12:  City Council awarded $335,000 to Gateway Planning Group to make plans for Lake Nasworthy development.   Gateway Planning is part of joint venture that submitted the only bid for the City's Downtown master developer.  Gateway is at the core of San Angelo development.  Interim City Manager Michael Dane said the developer would cost something.  I would suggest there are initial costs.  What often follows are various forms of public subsidy, direct and indirect.  I expect these numbers to dribble out over time.  Who will total them so the public can view a running tally?

Town & Country's PEU Stripes

Susser Holdings purchased Town & Country Food Stores in 2007, then re-branded the stores as Stripes.  Susser Holdings is an affiliate of Wellspring Capital Management LLC, a New York City based private equity underwriter (PEU).

Town & County sold out a year after Hirschfeld Steel became an affiliate of Insight Equity, another private equity firm.  Blog readers may have noticed comments made regarding Hirschfeld Steel's dramatic tax reduction after being acquired by Insight Equity.  Insight turned Hirschfeld into a limited partnership, where the tax obligation is passed on to partners.

Susser plans to do the same with their petroleum division, slated for a $200 million independent public offering (IPO).  Predecessor Susser Petroleum LLC will become Susser Petroleum Partners.  The new company should experience dramatic federal tax reductions, along the lines of Hirschfeld Steel.

Yet, there 's a potential local impact.  Stripes gas prices could go up to ensure profitability at both Susser (parent) and Susser Petroleum (which formerly delivered gas at cost to Stripes convenience stores).

SHC's existing stores will ... be supplied by us at cost plus a fixed profit margin of three cents per gallon

Also, Susser Petroleum profits will grow at any of the 75 stores Susser plans to sell to Susser Petroleum and lease back.  These will bring "incremental income from motor fuel sales."  Sales/leasebacks are one of many PEU ways to monetize a company's physical assets.

Financial engineering exists at a local level.  It could hit area citizens in the wallet at the gas pump. Consider it PEU stripes.