Sunday, February 11, 2018

Economic Development Enters Tumultuous Year

Economic Development Director Roland Pena resigned two days after presenting the 2017 Development Corporation Annual Report to City Council.  His resignation will become effective at the end of the month.

It was interesting to hear him comply with COSADC bylaws by giving the annual report in the specified time frame, something Pena avoided for years while the City of San Angelo sued Hirschfeld Industries for nonperformance on the Martifer economic development agreement.

Director Pena seemed excited about two items in his report, ACT Work Ready program and the AEP development in the city's Industrial Park.  Might either of these organizations become his future employer?  Pena worked for AEP in the past.

Not mentioned were two potential challenges facing the Development Corporation in 2018.  MedHab's economic development agreement ends in August and Hirschfeld's obligation to construct a rail spur must occur this year.

Hirschfeld Industries new owner is Alleghany Capital, which bought the company from Insight Equity.  Alleghany merged Hirschfeld into another steel making affiliate, WWSC Holdings based in Oklahoma City.  Alleghany Capital acquired WWSC in April 2017 for $164.5 million. 

WWSC Holdings is "one of the largest structural steel fabrication and erection companies in North America.  Headquartered in Oklahoma City, Oklahoma, W&W|AFCO provides fabricated steel through six state-of-the-art facilities for use in large construction projects primarily in North America."
A SanAngeloLive story on the Hirschfeld-WWSC buyout  referenced the failed joint venture with Martifer

Not building wind energy towers, or hiring as many employees as promised, didn’t sit well with the City of San Angelo Development Corporation. The City wanted a refund from Hirschfeld for Martifer’s incentives.

Soon, the City hired a Dallas law firm and filed a lawsuit against Hirschfeld. Dennis said he felt blindsided by the lawsuit and the bad press his company was receiving from the City of San Angelo.
The recent COSADC board strategic planning session was not recorded for the public to view but  notes from the session show Mr. Pena saying:

Hirschfeld’s rail spur has to be built this year. They have to submit their fulfillment every year. They have until March to submit this. This year is the year for MedHab’s contract to expire as well.
It's not clear what impact Insight Equity's flipping of Hirschfeld Industries might have on their rail spur commitment and employment levels.  Companies merge in part for cost saving synergies.  WWSC does not need two corporate offices, one in Oklahoma City and another in San Angelo.

The addition of Hirschfeld places Alleghany Capital in position to profit from massive infrastructure projects envisioned by President Trump.  Alleghany Capital is a wholly owned subsidiary of Alleghany Corporation.  It oversees investments on behalf of its publicly traded parent.

It will be interesting to hear about Roland Pena's next move.  I bet it won't be with Hirschfeld or Alleghany Capital.  However, Texas Pacifico might need someone with Roland's connections.  That said, I've been wrong before and will be again.

Update 3-31-18:  New COSADC board member Elizabeth Grindstaff brokered the settlement with Hirschfeld that required construction of the rail spur.  Grindstaff is an executive with Texas Pacifico railroad.  It will be interesting to watch her role relative to Hirschfled's commitment, especially if they once again fail to meet their promise to the city.  Grindstaff is yet to make the Development Corporation website.

Update 6-14-18:  City Council discussed Hirschfeld's agreement in its June5, 2018 meeting, doing so in executive session.

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