PCDC aims to budget, spend more conservatively in new fiscal year

Hawaiian Falls in Pflugerville has been open since 2014.

Hawaiian Falls in Pflugerville has been open since 2014.

After ending fiscal year 2014-15 with around a $1 million deficit, the Pflugerville Community Development Corp. plans to budget more conservatively by establishing a reserve fund and dedicating less to recruitment and retention in FY 2015-16, according to budget documents.

The PCDC is funded through a percentage of Pflugerville sales tax and operates as a zero-sum business, meaning its purpose is not to maintain a profit but to invest profit back into the community, according to interim Executive Director Amy Madison. The PCDC began its new fiscal year in October and plans to whittle back expenses, although the corporation also expects to amend its budget quarterly to account for new recruitment and community projects,  Madison said.

“In this [fiscal] year’s budget we cut a lot of operational expenses,” PCDC board President Doug Weiss said. “In previous years we’ve taken some risks, which is what PCDC does. My goal with this budget is to make sure we were properly funded to accommodate those risks. We’ve got reserve funds identified in this budget, so if something goes wrong, we’re [covered].”

This fiscal year PCDC expects to place about $600,000 in reserves and has budgeted another $500,000 to a special reserve to back the corporation’s obligations to Hawaiian Falls  Pflugerville water park and adventure park, Madison said.

About $1.6 million of PCDC’s annual sales tax income is diverted directly to the $25 million Hawaiian Falls loan—for which PCDC is responsible—and is reimbursed through the water park company’s monthly lease payment of  $132,026, Madison said. In November, Hawaiian Falls’ parent companies notified PCDC they would miss the October lease payment and requested a deferment through the end of the year, so PCDC is using the $500,000 Hawaiian Falls interest contingency reserve to cover those missed payments, Madison said (see sidebar).

2014-15 initiativesPCDC aims to budget, spend more conservatively in new fiscal year

As a recruitment organization, the PCDC’s budget fluctuates more than the budgets of some other organizations, and the volatile nature of business development accounts for the PCDC’s $1 million loss in fiscal year 2014-15, Madison said.

Madison said when 130 Commerce Center tenant Tracking Point defaulted near the end of last year it put PCDC into a negative cash position.

“The process to resolve this issue and bring a new tenant into the sublease was not completed until October,” she said. “We will fully recover the cash flow in this fiscal year with the fully leased space and repayment of [what is owed].”

Madison said one of the PCDC’s biggest accomplishments in fiscal year 2014-15 was the completion of infrastructure for 130 Commerce Center—the corporation’s 860-acre mixed-use office park—and that budget priorities moving forward will be leasing new businesses in that space and elsewhere in Pflugerville.

Pflugerville Mayor Jeff Coleman said 130 Commerce Center has already added $74 million in property value to the city, and he expects Pflugerville to benefit further as the business park expands and affects related industries such as tourism and retail.

“The SH 130 Commerce Center development has created a hub for business and employment here in Pflugerville,” Coleman said in a statement. “In the future I envision more jobs and higher quality of life as we reduce commutes for residents with local employment and provide the daytime population to fund [the] restaurants and entertainment venues our residents desire.”

Industrial paints and coating company LifeLast is one of the newest tenants at 130 Commerce Center, and owner Jeff Buratto said he moved his business from Oregon to the Pflugerville business park this spring to be closer to his customers and suppliers.

Buratto said 130 Commerce Center is optimal for companies like his that need to transport a significant amount of material.

“Being right off the toll road works really well for us—it makes it much easier for the trucking companies to get to us,” he said. “Someone might call in at 1 p.m. and want a shipment to go out that day and if you’re off [I-35] you might not be able to do that.”

New deals and next stepsPCDC aims to budget, spend more conservatively in new fiscal year

In October, Pflugerville City Council approved three PCDC contracts for businesses at 130 Commerce Center and elsewhere.

On Oct. 13 the council approved a PCDC deal with California-based plastics company Medway Plastics Corp., which promised to bring 100 new jobs to Pflugerville. Medway is slated to open a manufacturing and research facility off Royston Lane. On the same night, the council approved a settlement that will allow firearms company TrackingPoint to remain a tenant at 130 Commerce Center and repay debt the company incurred when it failed to meet its PCDC performance agreement requirements.

On Oct. 27, City Council approved a PCDC deal with industrial 3-D printing company EOS of North America, which is expected to relocate its headquarters to Pflugerville in December and create 74 jobs during the next three years, Madison said.

Madison said there are more than 50 acres at 130 Commerce Center yet to be developed, and that there is still room to grow in the existing business park, known as Phase 1. In October, the 75-acre tract of land next to Phase 1 was rezoned from agricultural to urban center use, indicating it is ready to be developed. Although the PCDC does not presently own this land, it is identified as Phase 2 on PCDC documents.

Madison said Pflugerville’s rapid growth and the influx of new development projects places additional emphasis on the necessity of budgeting wisely.

“We’re not a small corporation anymore,” Madison said. “We have to begin to think more comprehensively in how our funds are being managed. The larger the city becomes, the larger the projects will become, and we want to be prepared for that.”

Hawaiian Falls defaults on payment

The Pflugerville Community Development Corp. confirmed Nov. 11 that Source Capital LLC and Horizon Family Holdings—the owners and operators of Hawaiian Falls Water and Adventure Parks—defaulted on the October payment for Hawaiian Falls Pflugerville and requested a deferment through the end of the year.

The PCDC backs the $25 million loan for the water park project, which is repaid through monthly lease installments of $132,026 by Hawaiian Falls’ parent companies.

At a Nov. 12 meeting the PCDC board agreed to accommodate the Hawaiian Falls parent companies on their lease deferment request.

“I am recommending we instruct staff to work with [Hawaiian Falls] toward a resolution while we proceed with all contractually agreed-upon provisions,” PCDC board President Doug Weiss said. “I do expect we get that cured by the end of the year.”

Hawaiian Falls opened in 2014 after PCDC incentivized the development by providing financing. In December 2014 the water park laid off 12 employees after a slow winter season, a spokesperson at the time said, and in May, Source Capital LLC announced the acquisition of Horizon Family Holdings, stating the move would help the water parks expand and grow. After the acquisition, the Hawaiian Falls lease payment schedule changed from annual payments to monthly payments, PCDC interim Executive Director Amy Madison said.

Pflugerville City Manager Brandon Wade said Hawaiian Falls’ lease payment lapses do not affect city finances because payments on the PCDC’s $25 million loan for the water park are taken directly from PCDC’s share of sales tax revenue.

When the Hawaiian Falls project was first discussed, city staff and officials realized there could be some challenges during the first years of operation because of the seasonal nature of the park, Wade said.

“Hawaiian Falls so far has put smiles on a few hundred thousand people’s faces,” Wade said. “It brings people to Pflugerville who otherwise wouldn’t come to Pflugerville. I think it has a very bright future ahead of it, and the city plans to work with Hawaiian Falls to make certain that bright future is there.”