2003-10-21 Regular CC MinutesMINUTES OF THE REGULAR CITY COUNCIL MEETING
TUESDAY - - OCTOBER 21, 2003 - - 7:30 P.M.
Mayor Johnson convened the Regular Meeting at 8:23 p.m.
ROLL CALL - Present: Councilmembers Daysog, Gilmore, Kerr,
Matarrese and Mayor Johnson - 5.
Absent: None.
AGENDA CHANGES
None.
PROCLAMATIONS, SPECIAL ORDERS OF THE DAY AND ANNOUNCEMENTS
(03 -465) Presentation by the Domestic Violence Task Force regarding
Domestic Violence Awareness Month activities.
Cindy Lambdin, Chairperson of the Domestic Violence Task Force,
submitted resource information to Council and gave a presentation
on domestic violence awareness activities.
CONSENT CALENDAR
Mayor Johnson announced that the recommendation to authorize the
Mayor to send a letter opposing Assembly Bill 1160 [paragraph no.
03 -4671 was removed from the Consent Calendar for discussion.
Councilmember Kerr moved approval of the remainder of the Consent
Calendar.
Councilmember 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.]
( *03 -466) Minutes of the Special City Council Meeting (Closed
Session) ; the Special Joint City Council, Community Improvement
Commission (CIC) and Housing Authority Board of Commissioners
Meeting; the Special Joint City Council, Alameda Public Financing
Authority and CIC Meeting; the Regular City Council Meeting; and
the Special City Council Meeting (Study Session) held on October 7,
2003. Approved.
(03 -467) Recommendation to authorize the Mayor to send a letter
opposing Assembly Bill 1160, Second Unit Ordinance Restrictions
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Alameda City Council 1
October 21, 2003
Regulation.
Councilmember Kerr stated AB 1160 is phrased to override local
zoning ordinances; it is important that cities maintain land use
control; the bill could seriously disrupt neighborhoods and is an
example of the State trying to overturn the autonomy of charter
cities.
Councilmember Kerr moved approval of the staff recommendation.
Councilmember Matarrese seconded the motion.
Under discussion, Councilmember Matarrese stated the Council should
represent the citizens directly in neighborhood decisions.
Mayor Johnson stated local control of zoning issues is very
important; thanked Councilmember Kerr for raising the matter.
On the call for the question, the motion carried by unanimous voice
vote - 5.
( *03 -468) Recommendation to approve Annual Report on Managed
Investment Portfolio. Accepted.
( *03 -469) Ratified bills in the amount of $3,158,078.58.
REGULAR AGENDA ITEMS
(03 -470) Resolution No 13640, "Reappointing Robert M. Wood as a
Member of the City Golf Commission." Adopted.
Councilmember Kerr moved adoption of the Resolution.
Councilmember Matarrese seconded the motion, which carried by
unanimous voice vote - 5.
(03 -471) Resolution No. 13641, "Reappointing Jay L. Ingram as a
Member of the City Recreation and Park Commission." Adopted.
Councilmember Kerr moved adoption of the Resolution.
Councilmember Matarrese seconded the motion, which carried by
unanimous voice vote - 5.
(03 -472) Resolution No. 13624, "Reappointing Bruce C. Reeves as a
Member of the City Recreation and Park Commission." Adopted.
Vice Mayor Daysog moved adoption of the Resolution.
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October 21, 2003
Councilmember Matarrese seconded the motion, which carried by
unanimous voice vote - 5.
(03 -473) Public Hearing to consider establishment of City of
Alameda Community Facilities District No. 03 -1 (Bayport Municipal
Services District); Adoption of Resolution of Formation of
Community Facilities District; Adoption of Resolution Calling a
Special Election; and Adoption of Resolution Declaring Results of
Special Election and Directing Recording of Notice of Special Tax
Lien. Continued to November 4, 2003.
Councilmember Kerr moved that the matter be continued to November
4, 2003.
Councilmember Matarrese seconded the motion, which carried by
unanimous voice vote - 5.
Special Counsel, Chip Eady of Nixon Peabody LLC, requested that
Council open the Hearing and then continue the Hearing until the
next meeting.
Mayor Johnson stated the matter is a Public Hearing regarding the
formation of Community Facilities District No. 03 -1 to be known as
the Bayport Municipal Services District; opened the Public Hearing;
inquired whether the Clerk has received any written protests or
speaker slips.
The City Clerk responded in the negative.
In a substitute motion, Councilmember Kerr moved that the Public
Hearing and matter be continued to November 4, 2003.
Councilmember Matarrese seconded the motion, which carried by
unanimous voice vote - 5.
(03 -474) Recommendation to approve a General Fund Loan for Alameda
Power and Telecom Financing.
The City Manager stated Alameda Power and Telecom (AP &T) is a City
department; the loan allows the project to continue at a reduced
cost to the City; reserves are available [in the General Fund]; the
City makes a number of interdepartmental loans; the loan is short -
term and will allow AP &T to finish construction.
Len Grzanka, Alameda, stated AP &T wants to borrow $7 million from
the City's reserves to finish the cable television infrastructure;
in the fiscal year ending June 2003, AP &T lost $7 million on cable
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October 21, 2003
television and ended up raising electric rates to cover AP &T's
contribution to the General Fund; AP &T will raise electric rates to
repay the loan; suggested that the Council direct AP &T to manage
cable television costs more closely and use revenues from cable
television operations to finance the buildout; provided a history
of AP &T entering into cable television; submitted a copy of his
comments to the City Clerk.
Karin Lucas, Public Utilities Board President, urged Council to
approve the loan; requested Consultant David Stockton of Uptown
Services, be permitted to discuss the feasibility study prepared
for AP &T.
Mr. Stockton stated his company conducted due diligence on the
business plan and current operation; the current operating
performance was reviewed and compared to larger cable systems and
other municipal utilities; the business plan forecast was
confirmed; no areas of operating performance were found which would
substantiate any unusual risk; provided a summary of the study's
metrics.
Vice Mayor Daysog stated the cost to buy out Vectren was $8
million; inquired whether the $7 million loan amount was in
addition to the $8 million buyout.
The AP &T General Manager stated that at the time of the buyout, the
remaining construction cost for system buildout was $10 million and
with additional costs, the total was $12.89 million; an operating
payment also must be made to Vectren over five years; construction
costs were included in the proposed $10 million; the loan changes
the vehicle AP &T will use to finance the costs; the original intent
was to refinance in the private market; the loan would be a
different vehicle with a lower interest rate.
Vice Mayor Daysog stated past comprehensive audits show AP &T's
sustained earnings are significant; inquired why AP &T needs to dip
into the General Fund reserves.
The AP &T Competitive Strategies and Administration Manager stated
the retained earnings represent the accrued investment in the
electric utility overtime; during the financing process, the City
Council established a requirement that there be no recourse to the
electric utility; said requirement prohibits AP &T from using
retained earnings.
Vice Mayor Daysog inquired whether the Council could revisit the
policy issue, to which the City Manager responded in the
affirmative.
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October 21, 2003
The City Manager stated originally, the idea was to create
financial firewalls; [no recourse to the electric utility] was one
of the firewalls created, which was a policy decision.
Vice Mayor Daysog stated former Mayor Ralph Appezzato insisted on
the firewall to ensure that the cable operation works on its own
and does not jeopardize the electric business; the firewall was a
wise idea; however, $7 million is needed for construction; the rule
should be revisited; subsidy is needed and he would rather it come
from AP &T's funds.
The AP &T Competitive Strategies and Administration Manager stated
that without recourse to the electric utility assets, AP &T would
have to use an un -rated private market, which has much higher
interest rates; electric utility assets could be used in a rated
market and would be able to secure an interest rate more
commensurate with the current bond market.
Vice Mayor Daysog stated there could be multiple flips; the City
could issue the bond and immediately have access to AP &T's retained
earnings in order to save $1 million in financing costs.
The AP &T General Manager stated there are no assets or customers
for the $7 million, yet; until buildout there are no assets or
customers.
Vice Mayor Daysog stated if $7 million is used from the General
Fund, AP &T should reimburse the City immediately.
The AP &T Competitive Strategies and Administration Manager stated
the retained earnings do not represent a cash balance.
Vice Mayor Daysog inquired what is AP &T's cash balance, to which
AP &T Competitive Strategies and Administration Manager stated $7 to
$8 million.
Councilmember Kerr stated part of the financing includes paying for
the original $16 million; inquired whether the cable business has
been able to generate any revenue to pay for capital infrastructure
costs.
The AP &T General Manager responded in the negative; stated revenues
pay for operating expenses; 16,000 customers is the breakeven
point; in 2006 -07, AP &T should be able to start repaying capital.
Councilmember Kerr stated the original estimate was 500 of
television owners in Alameda need subscribe to AP &T to breakeven;
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October 21, 2003
50% is the maximum number of households that have cable in line -of-
sight cities; the breakeven number has changed in every report and
seems to be a moving target; she is concerned about infrastructure
costs not being paid off from revenue; $16 million is still
outstanding; $7 million more is requested; that she supported the
firewall concept; using the electric rate payers for a loan is no
different than using municipal credit [General Fund money]; the
General Fund is being threatened; the City needs to pay for police
and fire services; a promise was made that telecom would be treated
as a business; borrowing from the General Fund is not treating it
as a business.
Mayor Johnson inquired what is the projected revenue upon buildout,
to which the AP &T General Manager responded around $13 million.
Mayor Johnson inquired how much revenue is needed to break even, to
which the AP &T General Manager responded $12 million.
Mayor Johnson inquired whether the loan would be used all at once,
to which the AP &T General Manager responded in the negative.
Mayor Johnson inquired whether AP &T plans to re -issue bonds, to
which the AP &T General Manager responded bonds would be issued on
the entire amount [$23 million] after five years.
Mayor Johnson stated the City's managed assets had a return rate
greater than 50; inquired whether managed assets are a comparable
source of money.
The Finance Director responded the managed portfolio earned about
60; however, the average return was 4.03% after taking into
consideration certificates of participation.
Councilmember Gilmore inquired what would be the interest rate for
the loan, to which the Finance Director responded the cap is 5%.
Councilmember Matarrese inquired how long the City's $7 million
would be tied up, to which the AP &T General Manager responded five
years.
Councilmember Gilmore inquired how long it would take to complete
buildout, to which AP &T's General Manager responded 20 months.
Councilmember Gilmore inquired whether the entire loan amount would
be for buildout, to which the AP &T General Manager responded in the
affirmative.
Councilmember Gilmore stated the Federal Communications Commission
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October 21, 2003
has mandated that everything go to HDTV [High Definition
Television] by 2007; inquired whether AP &T will review the matter
and how AP &T will pay for implementation.
The AP &T General Manager responded the costs have been included in
the operating costs and breakeven budget.
Vice Mayor Daysog inquired whether AP &T developed scenarios in the
event the Council changed the policy to allow AP &T to use its
[electric] money; inquired whether there might be a scenario using
some AP &T reserves and requesting less General Fund revenue.
AP &T Competitive Strategies and Administration Manager responded
relaxing the firewall would impact the electric utility's credit
rating; said matter would need to be analyzed.
Vice Mayor Daysog stated credit rating impacts should be analyzed.
Mayor Johnson inquired how much of the loan would be used during
the next six months, to which the AP &T General Manager responded
approximately one - third.
Councilmember Gilmore inquired what would be the impact of getting
a higher interest rate loan in the private market and whether
[telecom] rates would be raised.
The AP &T General Manager responded the higher interest rate would
be about $1 million, which would require AP &T to raise [telecom]
rates; higher rates become less competitive.
Mayor Johnson suggested that the City loan the amount needed for
the first six months while AP &T reviews the impacts of using
electric revenue.
AP &T Competitive Strategies and Administration Manager stated there
has been discussion of relaxing the firewall and a guarantee for
the loan repayment; if Council is willing to relax the firewall,
AP &T could guarantee $7 million in electric revenues; said scenario
assures repayment; AP &T believes said scenario would not be used
because there will be telecom revenue to repay the loan; at the end
of five years, AP &T will be in a good position to issue revenue
bonds for the full $23 million.
Vice Mayor Daysog stated residents want AP &T to be in the cable
television business; the rates and service are better; suggested
that the ideas raised tonight be reviewed and the matter return in
two weeks; that he prefers AP &T use its own money to the extent
possible.
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October 21, 2003
Mayor Johnson stated the longer the delay, the longer AP &T will be
operating in deficit.
The AP &T General Manager stated customers waiting for a long time
might choose to go with a competitor.
Mayor Johnson stated two weeks should not make a difference, but
there should be a plan to move forward shortly.
Councilmember Kerr stated that as an electric ratepayer, she does
not want to subsidize the cable television business; households can
live without television and computer connections, but cannot live
without electric power; electricity is a necessity; before the
energy crisis, there were concerns about the stability of the power
business.
The City Manager suggested that the matter be continued for two
weeks.
Mayor Johnson stated that more than $1 million in interest costs
should not be added to costs; installation needs to move forward;
until the system is built out, AP &T will be losing money.
Councilmember Gilmore stated that she is intrigued by relaxing the
firewall and guaranteeing the loan by [electric] revenues; she
would like to know if the timeline for repayment would be revised
if the electric revenues are used as a guarantee, e.g. could the
loan be repaid sooner and paid back in installments; that she would
like to know whether said plan would damage the electric utility's
bond rating.
Sebastian Baldassare, Public Utilities Board member, noted AP &T
getting a loan at 8% would damage the City and that AP &T
contributes over $2 million to the General Fund each year.
Mayor Johnson stated the consensus seems to be that the Council
does not want AP &T to get a loan at 80.
Councilmember Kerr stated enterprises, such as the golf course and
AP &T, are expected to contribute to the City's General Fund; AP &T
has not made a profit on above - ground infrastructure; noted the
next phase will require underground cabling, which is more
expensive; inquired how underground cabling will provide profit.
The AP &T General Manager responded the assumption has been that
buildout of the entire system would provide profit, regardless of
undergrounding.
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October 21, 2003
Mayor Johnson stated buildout would provide the number of customers
needed to surpass the breakeven point.
Councilmember Gilmore noted that she has the service, which is
excellent; in two years, she has never experienced an outage.
Councilmember Matarrese stated good questions have been raised;
there is too much invested not to complete the investment; the
service has become more of a necessity; there should be a way to
finance buildout without putting the City at undue risk; the City
should find a way around $1 million in financing costs.
(03 -475) Ordinance No 2907, "Amending the Alameda Municipal Code by
Amending Subsection 30 -57.7 (Exemptions) of Section 30 -57 (Alameda
Water Reuse), of Article IIIA (Alameda Water Reuse) of Chapter XXX
(Development Regulations) Relating to Water Reuse." Finally passed.
Councilmember Kerr moved final passage of the ordinance.
Councilmember Matarrese seconded the motion, which carried by
unanimous voice vote - 5.
(03 -476) Ordinance No. 2908, "Amending Ordinance No. 2776 N.S.
Granting a 5 -Year Extension of Non - Exclusive Cable Television
Franchise to United Cable Television of Alameda, Inc. d /b /a Comcast
Corporation." Finally passed.
Councilmember Kerr moved final passage of the ordinance.
Councilmember Gilmore seconded the motion, which carried by
unanimous voice vote - 5.
(03 -477) Ordinance No. 2909, "Approving a Purchase and Sale
Agreement with Harbor Bay Storage LLC and Joint Escrow Instructions
for Sale of Parcels 109 -5 (Harbor Bay Storage Leased Fee Interest),
Parcel 109 -2 (Old Maitland Drive), and Parcel 109 -4 (a Remainder
Parcel), and Directing the City Manager to Execute all Necessary
Documents to Implement the Transaction." Finally passed.
Councilmember Gilmore moved final passage of the ordinance.
Councilmember Matarrese seconded the motion.
Under discussion, Councilmember Matarrese stated hopefully the sale
will provide cash that might be used in the future to augment open
space.
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October 21, 2003
On the call for the question, the motion carried by unanimous voice
vote - 5.
ORAL COMMUNICATIONS, NON- AGENDA
(03 -478) Darlene Banda, Alameda, requested that when Council
discusses the Measure A study, speakers be required to indicate
whether they are Alameda residents or whether they represent
special interest groups.
COUNCIL COMMUNICATIONS
(03 -479) Consideration of Mayor's nomination for appointment to the
Civil Service Board. Held Over.
(03 -480) Consideration of the Mayor's nomination for appointment to
the Planning Board.
Mayor Johnson nominated Gina M. Mariani for appointment to the
Planning Board.
(03 -481) Consideration of Mayor's nomination for the Social Service
Human Relations Board.
Mayor Johnson nominated Robert A. Bonta for appointment to the
Social Service Human Relations Board.
(03 -482) Consideration of Mayor's nominations (5) for the Public
Art Advisory Committee.
Mayor Johnson nominated Cecilia Y. Cervantes, Katina Huston, Karen
T. Lee Schutz, K.C. Rosenberg and Peter T. Wolfe for appointment to
the Public Art Advisory Committee.
(03 -483) Vice Mayor Daysog stated that he previously raised
concerns about the bidding process for bond financing; requested a
review of the existing policies and establishment of a resolution
regarding bond underwriters bid in a competitive process; suggested
the resolution language allow leeway for Council to decide not to
use the competitive bid process; stated deciding not to use a
competitive bid process should be a Council decision.
The City Manager stated that he is in the process of reviewing the
City's financial policies.
Vice Mayor Daysog stated the City Council should have to
opportunity to make the decision of who underwrites bonds; if staff
recommends not to use a bid process, the decision should be made by
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Alameda City Council 10
October 21, 2003
Council prior to proceeding; there are going to be times when the
legal complexity requires selection without bid; however, it should
be a decision of the Council and a policy should be established for
future Councils.
(03 -484) Councilmember Kerr stated October 30 is the last date
that the tubes will be closed [for retrofitting]; the date is not
firm, but a celebration might be planned for October 31 at 11:00
a.m.; encouraged everyone to attend the opening.
ADJOURNMENT
There being no further business, Mayor Johnson adjourned the
Regular Meeting at 9:43 p.m.
Respectfully submitted,
Lara Weisiger
City Clerk
The agenda for this meeting was posted in accordance with the Brown
Act.
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October 21, 2003