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2008-06-03 Joint CC APFA CIC MinutesMINUTES OF THE SPECIAL JOINT CITY COUNCIL, ALAMEDA PUBLIC FINANCING AUTHORITY (APFA) AND COMMUNITY IMPROVEMENT COMMISSION (CIC) MEETING TUESDAY- -JUNE 3, 2008- -7:25 P.M. Mayor/Chair Johnson convened the Special Joint Meeting at 7:47 p.m. Vice Mayor/Authority Member/Commissioner Tam led the Pledge of Allegiance. ROLL CALL - Present: Councilmembers / Authority Members / Commissioners deHaan, Gilmore, Matarrese, Tam, and Mayor/Chair Johnson – 5. Absent: None. CONSENT CALENDAR Mayor/Chair Johnson announced that recommendation to authorize the Executive Director to enter into Contracts [paragraph no. 08-33 CIC] was removed from the Consent Calendar for discussion. Vice Mayor/Authority Member/Commissioner Tam moved approval of the remainder of the Consent Calendar. Councilmember/Authority Member/Commissioner Gilmore seconded the motion, which carried by unanimous voice vote – 5. [Items so enacted or adopted are indicated by an asterisk preceding the paragraph number.] (*08-230 CC/*08-32 CIC) Minutes of the Special Joint City Council and CIC Meeting, and the Special Joint City Council, Alameda Reuse and Redevelopment Authority and CIC Meeting held on May 20, 2008. Approved. (08-33 CIC) Recommendation to authorize the Executive Director to enter into Contracts with the Park Street Business Association, and the West Alameda Business Association for Fiscal Year 2008-2009. The Development Services Director gave a brief presentation. Chair Johnson stated that the Greater Alameda Business Association (GABA) Contract is a small amount; Park Street Business Association (PSBA) and West Alameda Business Association (WABA) members pay fees; understanding how GABA works is important. The Development Services Director stated GABA does general advertising and hosts different activities; a part-time person Special Joint Meeting Alameda City Council, Alameda Public Financing Authority, and Community Improvement Commission Meeting June 3, 2008 1 keeps the membership informed, maintains a database, and handles activities. Chair Johnson inquired whether GABA has membership dues. The Development Services Director responded that GABA does not have a Business Improvement Area (BIA); stated that she does not know about dues; members sponsor different projects. Chair Johnson stated it is important to know how much GABA contributes to expenses. Commissioner Matarrese stated the City’s investment in the Associations yields a return to the City in sales and business tax; the staff report notes that there is no impact on the General Fund and the Contract amounts are budgeted from tax increment funds; inquired whether funds come from the CIC budget, to which the Development Services Director responded in the affirmative. Commissioner Matarrese inquired what is the impact on the CIC budget; further inquired whether GABA businesses qualify since they are not in the redevelopment area. The Development Services Director responded GABA qualifies; stated funds are part of the 10% of the CIC budget that pays for general activities, staff, and basic overhead costs; there are very few miscellaneous activities that are being funded this year. Commissioner Matarrese inquired whether the matter should be discussed tonight since the budget has not been adopted. The Development Services Director responded staff is requesting authorization to do the Contracts; stated the Contracts would not be executed until the budget is adopted. Commissioner Tam concurred with Commissioner Matarrese; stated the budget sessions have been very painful; a 3% increase is not very much, but some employee contracts are not going to be increased next year; the proposed PSBA budget amount is $111,446; PSBA is proposing to levy assessments totaling $88,000; inquired whether PSBA’s entire budget would be the combination of $111,446 and $88,000. The Development Services Director responded in the negative; stated the budget includes fundraising also. Mr. Ratto stated PSBA would raise approximately $135,000 in special Special Joint Meeting Alameda City Council, Alameda Public Financing Authority, and Community Improvement Commission Meeting June 3, 2008 2 events this year. Commissioner Tam stated PSBA’s BIA annual assessment is $88,000 and the proposed City grant of $111,446, which is 20% over the annual assessment; stated WABA’s proposed grant is $101,146 and the BIA is approximately $32,000, which is almost 300% above; requested an explanation of the difference between the two ratios. The Development Services Director stated support is meant to take place of economic development activities; the business districts are disproportionate in size; staff is trying to build capacity and help the Associations keep enough staff and help with other contractual activities. Chair Johnson stated serious conversations need to take place with the business districts; WABA failed to increase assessments; the public contributed millions of dollars; the business districts need to help themselves and be part of the solution. The Development Services Director stated a classic challenge is trying to bridge the gap between property owners and business owners. Commissioner deHaan stated the Alameda Landing Disposition and Development Agreement (DDA) requires that businesses be Association members; GABA is a worthy cause and needs to put a budget together to justify the $12,000 [in grant funds]. The Development Services Director stated information provided by GABA shows the funds support the part-time staff activity. Commissioner deHaan stated that he would like to defer the staff recommendation until the CIC budget is adopted. Chair Johnson inquired whether deferring the item would have an impact on PSBA and WABA. The Development Services Director responded typically installment payments are made in July. Commissioner deHaan moved approval of continuing the item until adoption of the budget. Commissioner deHaan stated that he would like to have more defined information about GABA come back. Chair Johnson stated that she would like to know how much the Special Joint Meeting Alameda City Council, Alameda Public Financing Authority, and Community Improvement Commission Meeting June 3, 2008 3 members contribute to support the Association. Commissioner Matarrese stated that GABA is a worthy Association; inquired whether Contracts could be executed in time to meet the requirements if the budget is adopted by the end of the month. The Development Services Director responded in the affirmative; stated Contracts have been prepared; stated authority needs to be given to execute the Contracts. Commissioner Tam seconded the motion, which carried by unanimous voice vote – 5. AGENDA ITEM (08-231 CC) Resolution No. 14213, “Approving and Authorizing Execution of a Second Amendment of the Disposition and Development Agreement (Alameda Landing Mixed Use Project) with Palmtree Acquisition Corporation.” Adopted; and (08-34 CIC) Resolution No. 08-156, “Authorizing the Executive Director to Enter Into a Second Amendment to the Disposition and Development Agreement (Alameda Landing Mixed Use Project) with Palmtree Acquisition Corporation.” Adopted. The Base Reuse and Community Development Manager gave a Power Point presentation. Aidan Barry, Catellus Development Group, stated Catellus has entered into an agreement with the Navy and the Department of Toxic Substances Control (DTSC) which allows for the removal of covenants and restrictions that precluded the opportunity to do the mixed - use development; Catellus worked with the City to redesign the waterfront; the Stargell Avenue acquisition involves multiple parties; currently, negotiations are taking place with Target; discussions are continuing with Clif Bar. Councilmember/Commissioner Matarrese inquired where the hospital demolition is referenced in the report. The Base Reuse and Community Development Manager responded Page 12 of the Second Amendment, Section D. Councilmember/Commissioner Gilmore inquired when Catellus would acquire the UP right-of-way; further inquired where Catellus is in terms of deciding whether or not to proceed. Special Joint Meeting Alameda City Council, Alameda Public Financing Authority, and Community Improvement Commission Meeting June 3, 2008 4 Mr. Barry responded Catellus negotiated a term sheet with UP; stated Catellus is in negotiations on a draft purchase and sale agreement; he hopes to conclude negotiations this month; a formal due diligence effort needs to be done and should be concluded within sixty days; Catellus is running a parallel path of negotiations with the retailers. Vice Mayor/Commissioner Tam acknowledged the help of former Mayor Bill Withrow and General Counsel of the Peralta Community College District provided in negotiating the four-way agreement; stated that significant expenditures were made, such as the removal of the Faithful; funds were expended to fix some major water leaks; the City helped redesign the waterfront when it was determined that it was not financially feasible to seismically retrofit the area because of pier decay; stated State Transportation Improvement Program (STIP) funds must be requested by February 2009 in order to go before the California Transportation Commission (CTC); inquired what is the level of competition and availability for said funding. The Base Reuse and Community Development Manager responded assurances have been given that STIP allocations would not be impacted by the State budget. The City Engineer stated a lot of the projects are large; prioritization is based upon how many people are impacted by the project, how much safety will be enhanced, and where the projects are in the planning process. Mayor/Chair Johnson stated the question is whether the money is in jeopardy; money will be in serious jeopardy if the City does not move forward with the project. The Base Reuse and Community Development Manager stated larger projects will start to come on line as the Fiscal Year progresses; opportunities are maximized by getting in before the other projects. Councilmember/Commissioner Gilmore inquired whether the City would get the money if an application is submitted, to which the Base Reuse and Community Development Manager responded in the affirmative; the City could be in jeopardy if it waits until February 2009. Councilmember/Commissioner deHaan stated that he is concerned with the timeframe; inquired whether the Clif Bar parcel is pushed into Phase 2 now. Special Joint Meeting Alameda City Council, Alameda Public Financing Authority, and Community Improvement Commission Meeting June 3, 2008 5 The Base Reuse and Community Development Manager responded all of the office property would be in Phase 3; stated an early office parcel could be the first or second parcel developed. Councilmember/Commissioner deHaan inquired whether there is any likelihood of keeping the original deadlines, especially retail. The Base Reuse and Community Development Manager responded Palmtree Acquisition Corporation (PAC) requested that certain timeframes be extended for the performance milestones due to early expenditure of funds. Councilmember/Commissioner deHaan inquired how close the retail project would be to the original timeframes. The Base Reuse and Community Development Manager responded PAC’s immediate timeframe is a year and a half from now; stated PAC would need to commence with an alternative Phase 1; PAC has another five and a half years to commence on the retail. Councilmember/Commissioner deHaan inquired what would happen if the Stargell Avenue Extension Project is not constructed. The Base Reuse and Community Development Manager responded PAC would not have any time extensions; stated everything would go back to the original DDA timeframe. Councilmember/Commissioner Matarrese stated the most important aspect is obtaining the right-of-way; the stars have lined up and will not line up again; funds would be allocated to the project and would go towards covering upfront reimbursements for acquiring the right-of-way if the developer pulls out or the City terminates the Agreement. Councilmember/Commissioner Matarrese moved adoption of the resolutions. Councilmember/Commissioner deHaan seconded the motion with the caveat that the project has a rigid timeframe. Councilmember/Commissioner Gilmore requested more detail on the Operating Memorandum. The Base Reuse and Community Development Manager stated the existing DDA has a section that provides for an ability to do Operating Memorandum if there are technical details that the parties want to work out; the Operating Memorandum will look at Special Joint Meeting Alameda City Council, Alameda Public Financing Authority, and Community Improvement Commission Meeting June 3, 2008 6 property management issues and will deal with a scenario that may present itself in the future; the Operating Memorandum would deal with issues such as fewer lease revenues coming in than property management expenses and how to handle said situation. Councilmember/Commissioner Matarrese inquired whether the Operating Memorandum would come back, to which the Base Reuse and Community Development Manager responded in the affirmative. Vice Mayor/Commissioner Tam stated Section D on Page 12 notes that the developer would reimburse the CIC for the cost incurred if the City issues a demolition permit within sixty days; inquired how soon the hospital demolition can start. The Base Reuse and Community Development Manager responded the demolition would have to be authorized through the budget process; stated the demolition work could commence fairly quickly if funds are authorized; Catellus has already prepared the demolition plans. Vice Mayor/Commissioner Tam inquired what is the cost estimate for demolishing the hospital, to which the Base Reuse and Community Development Manager responded several million dollars. Mayor/Chair Johnson stated the Stargell Avenue Extension Project has gone on for years; she appreciates the cooperation of the Peralta Board; inquired whether the Board approved the project. The Base Reuse and Community Development Manager responded the Board would take action on June 10. On the call for the question, the motion carried by unanimous voice vote – 5. (08-232 CC) Adoption of Resolution Authorizing and Directing the Preparation and Execution of Certain Lease Financing Documents, Authorizing the Preparation and Distribution of a Preliminary Official Statement in Connection with the Offering and Sale of Certificates of Participation Relating Thereto, and Authorizing and Directing Certain Actions with Respect Thereto; and (08-02 APFA) Adoption of Resolution Approving, Authorizing and Directing Preparation and Execution of Certain Lease Financing Documents and Authorizing and Directing Certain Actions with Respect Thereto. Continued. The Finance Director gave a brief presentation. Special Joint Meeting Alameda City Council, Alameda Public Financing Authority, and Community Improvement Commission Meeting June 3, 2008 7 Mayor/Chair Johnson inquired what would be the cost of refinancing. The Finance Director responded the cost of the additional debt service over the new life of the issue is $594,658.75. Mayor/Chair Johnson inquired what would be the cost of issuance, to which the Finance Director responded $150,000. Mayor/Chair Johnson inquired whether the total cost would be $150,000 plus $594,000. The Finance Director responded the $150,000 is included in the $594,000. Councilmember/Authority Member Matarrese inquired whether $150,000 would be spent to save $203,000, extend the debt a couple years, and pay approximately $600,000 in interest. The Finance Director responded $600,000 would be spent over fifteen years in order to get the first year savings of approximately $600,000. Councilmember/Authority Member Matarrese stated that he has a hard time borrowing money and encumbering two extra years on someone in the future. Mayor/Chair Johnson stated the proposed refinancing would cost the City money. The Finance Director stated cash would be saved now and would be paid over the next fifteen years. Mayor/Chair Johnson inquired whether refinancing would cost $594,000. The Finance Director responded in the affirmative; stated approximately $600,000 would be saved in interest. Mayor/Chair Johnson stated that she would not call it a savings because the amount is deferred. Councilmember/Authority Member Gilmore stated that she totaled a $5.1 million debt; $6 million would be issued; inquired whether there is some minimum limit. The Finance Director responded $6 million is the approximate amount; stated $5,490,000 would be issued; interest rates change; Special Joint Meeting Alameda City Council, Alameda Public Financing Authority, and Community Improvement Commission Meeting June 3, 2008 8 the numbers are based on estimated interest rates; the interest rates are favorable now. Councilmember/Authority Member Gilmore stated the matter is a cash flow issue; approximately $600,000 would not be spent in the first year; $600,000 would be spent over fifteen years. Councilmember/Authority Member deHaan inquired whether the loans were refinanced already. The Finance Director responded only the Police Building was refinanced in 1996. Councilmember/Authority Member deHaan inquired why the Police Building was refinanced. The Finance Director responded because interest rates dropped significantly. Councilmember/Authority Member deHaan stated the City gets into trouble by deferring and refinancing. Mayor/Chair Johnson inquired when the Police Building was constructed, to which the Finance Director responded 1990. Mayor/Chair Johnson inquired what was the original planned bond issue. The Finance Director responded the $2.8 million bond was issued in 1990 with interest rates of 5.8% to 7.25%. Mayor/Chair Johnson inquired when the bond would have been paid if not refinanced, to which the Finance Director responded she would guess 2010. Councilmember/Authority Member Matarrese stated that he is not in favor; savings are not being made on the interest rates and future Councils will be burdened; debt will be deferred if not paid now. The Finance Director stated budget increases would be needed otherwise. Mayor/Chair Johnson inquired whether the Library Fund is paid out of the General Fund. The Finance Director responded approximately 50-55% of Library expenditures are supported by the General Fund, stated the Police Special Joint Meeting Alameda City Council, Alameda Public Financing Authority, and Community Improvement Commission Meeting June 3, 2008 9 Building Bond would have been paid off in 2015, if not refinanced. Councilmember/Authority Member Gilmore stated the first year savings is approximately $600,000; inquired how much cash would not be spent the second year, to which the Finance Director responded $367,000. Councilmember/Authority Member Gilmore inquired how many more years the repayment would be pushed out, to which the Finance Director responded two years. Mayor/Chair Johnson inquired what are the fees. The Finance Director responded $150,000 for issuance; stated the underwriter’s discount is $41,175. Mayor/Chair Johnson inquired whether the $41,175 is in addition to the $150,000, to which the Finance Director responded in the affirmative. Vice Mayor/Authority Member Tam stated fees would be rolled back into debt service. Mayor/Chair Johnson stated money would be borrowed to restructure borrowed money. Councilmember/Authority Member deHaan inquired what was the interest on the 1996 Police Building, to which the Finance Director responded 4% to 6%. Councilmember/Authority Member deHaan inquired what was the interest on the Golf Course, to which the Finance Director responded 3.9% to 5.75%. Councilmember/Authority Member deHaan inquired what the new interest rate would be, to which the Finance Director responded the all in true interest costs is approximately 5%. Councilmember/Authority Member deHaan inquired whether the interest rate is fixed. The Finance Director responded the interest rate varies over time; stated everything is taken into account with an all in true interest cost. Mayor/Chair Johnson stated money would need to be found elsewhere if refinancing is not done; she does not view refinancing as a way Special Joint Meeting Alameda City Council, Alameda Public Financing Authority, and Community Improvement Commission Meeting June 3, 2008 10 to balance the budget. Councilmember/Authority Member deHaan stated refinancing would be a one-time fix and a deferral. The Finance Director stated the proposed refinancing was a potential solution for not having sufficient budget capacity to meet all needs. Councilmember/Authority Member Gilmore inquired whether timing would be impacted if Council and the Commission decide to made a decision to go forward at the end of June. The Finance Director responded missing the August 1 call date for the Police Building might cost more money, but could be done. Councilmember/Authority Member Matarrese inquired how much is owed on the police bonds. The Finance Director responded $1.5 million; stated Library and Golf is 3.5%; 63% is for Library and 34% is for Golf. Mayor/Chair Johnson stated $1 million needs to be spent on renovating the driving range; the City is still paying off the construction debt. Councilmember/Authority Member Matarrese stated staff should look at paying early because there is no tax deduction for paying interest. The Finance Director stated the scenario could be reviewed; the net present value of the future debt service versus using the fund balance to pay it off can be reviewed. Councilmember/Authority Member deHaan inquired whether major refinancing was done in 2002-2003. The Finance Director responded in 2002 refinancing was done for reconstruction of City Hall; stated tax increment bonds were done for the CIC in 2003. Councilmember/Authority Member deHaan inquired whether refinancing was done for interest rates only. The Finance Director responded City Hall reconstruction bonds were refinanced in 2002 and were originally issued in 2000. Special Joint Meeting Alameda City Council, Alameda Public Financing Authority, and Community Improvement Commission Meeting June 3, 2008 11 Councilmember/Authority Member deHaan inquired what was the impact over the out years. The Finance Director responded the debt service was the same level every year; the prime motivation for the current proposal is not to get interest rate savings, but deferral. Mayor/Chair Johnson stated the City needs to look long-term; the report only looks at short-term. The Finance Director stated staff reviewed the matter from a perspective that the proposal is not good for the long-term, but is what needs to be done in order to have budget capacity for the next two years. Mayor/Chair Johnson stated direction has been given to always look at long-term. Vice Mayor/Authority Member Tam stated it does not make sense to spend down the fund balance if the same interest is earned on the fund balance. Mayor/Chair Johnson stated it does not make sense to use the fund balance because the City has so many other things to pay for with the fund balance, such as deferred health care retirement costs; the City needs to be living within its means and not defer payments. Councilmember/Authority Member Gilmore stated the amount of money being deferred over the first two years is slightly under a million dollars; the extra money that would be spent over the life of the loan is $600,000; payments would be extended for two more years; she would like to hear from the City Auditor and City Treasurer. Mayor/Chair Johnson inquired how much the payments are for the last two-year extension. The Finance Director responded the payments for total debt services for all three funds is about $573,000 each year. Councilmember/Authority Member Gilmore stated the deferred payments not being made over the first two years are slightly under a million dollars. Mayor/Chair Johnson stated the added interest and cost of restructuring is an additional $594,000. Special Joint Meeting Alameda City Council, Alameda Public Financing Authority, and Community Improvement Commission Meeting June 3, 2008 12 The City Treasurer stated bills should be paid when due. The City Auditor stated money needs to be spent to refinance; he does not see the benefit in pushing obligations into the future; tough decisions need to be made now. Councilmember/Authority Member Gilmore stated deferred payments over the first two years are approximately $1 million; $594,000 is the delta between what would need to be spent if nothing is done and what would need to be spent for refinancing; inquired whether the savings would be the difference between $1 million and $594,000. The Finance Director responded there is no savings because the $1 million is part of the calculation of the $594,000. Mayor/Chair Johnson stated the non-payment years cannot be counted as savings; inquired whether payments would be higher in the third year because of the restructuring. The Finance Director responded the payments go up to $567,00 in year three; in year three payments would be $610,000 as compared to $567,000; payments start to decline in 2017 because the 1996 Police Building debt would be paid in 2015; the existing debt service would decline to $369,000; the new debt service would stay in the $570,000 range. The City Treasurer stated the situation is whether to borrow money over the next two years to balance the budget and pay it back over the next twenty years. Councilmember/Authority Member Gilmore moved approval of tabling the item pending budget discussions. Vice Mayor/Chair/Authority Member Tam seconded the motion. Under discussion, Vice Mayor/Authority Member Tam stated that she appreciates the fact that there will be a challenge to define what it means to live within means. On the call for the question, the motion carried by the following voice vote: Ayes: Councilmembers/Authority Members deHaan, Gilmore, Tam, and Mayor/Chair Johnson – 4. Noes: Councilmember/Authority Member Matarrese - 1. Councilmember/Authority Member Matarrese stated that criteria needs to be set for when money is borrowed to balance the budget. Special Joint Meeting Alameda City Council, Alameda Public Financing Authority, and Community Improvement Commission Meeting June 3, 2008 13 Mayor/Chair/ Johnson requested that a policy regarding borrowing money be brought back. ADJOURNMENT There being no further business, Mayor/Chair Johnson adjourned the Special Joint Meeting at 9:29 p.m. Respectfully submitted, Lara Weisiger, City Clerk Secretary, APFA and CIC The agenda for this meeting was posted in accordance with the Brown Act. Special Joint Meeting Alameda City Council, Alameda Public Financing Authority, and Community Improvement Commission Meeting June 3, 2008 14