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HomeMy WebLinkAboutrda min 1987/04/21 (2) MINUTES OF A JOINT MEETING OF THE CITY COUNCIL/REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA Tuesday, April 21, 1987 4:00 to 7:05 (Reconvened at 9:30 p.m.) ROLL CALL Counci 1 Chamber Public Services Building MEMBERS PRESENT: Member Cox; Malcolm Members Nader, McCand1iss, MEMBERS ABSENT: STAFF PRESENT: Member Moore Executive Director Goss, Community Development Director Desrochers, Assistant City Attorney Rudolf, Director of Finance Christopher APPROVAL OF MINUTES for the meetings of March 19 and 26, 1987. 1. MSUC (Malcolm/Nader) to approve the minutes. Chairman Cox abstained from the minutes of ~1arch 19; Member Malcolm abstained from the the minutes of March 26. 2. WORKSHOP REPORT: PROPOSED DISPOSITION AND DEVELOPMENT AGREEMENT WITH THE HOMART DEVELOPMENT COMPANY In recappi ng the 1 ast workshop on thi s subject, Mr. Desrochers stated that the City's financial obligation to this project will be financed through Certificates of Participation. If interest rates are acceptable, the downtown parking structure financing may be included in the refinancing. A pro forma was submitted by Homart of the costs which was to be reviewed by the financial consultants. At the last workshop, at the suggestion of the Council/Agency, a committee was to be formed to advise the Counci 1 /Agency on the communi ty faci 1 i ty as part of or separate from the center. It was a1 so di scussed that the 1 ast date to consider a Disposition and Development Agreement (DDA) would be Tuesday, April 28, 1987. At the last workshop, staff was asked to assign a cost to Fifth Avenue and an appraiser has been obtained. Additionally, staff was asked to include the upgrading of Broadway and Sears into the DDA. Progress is being made towards having a fourth department store as part of the DDA. Minutes - 2 - April 21,1987 Director of Finance Christopher updated the Agency/Council as to the financing aspect. It is still planned to finance the City's contribution through Certificates of Participation that would be issued by the City. The debt service would be paid from increment property taxes as well as from increment sales taxes. Mr. Christopher stated he would like to point out changes that have taken place: (1) It is planned to include $1.3 million for the superior courts in the financing. (2) The municipal bond market has taken a turn for the worse. The interest rates have increased by over one percent which impacts the debt service schedule and the cash fl ow. Mr. Chri stopher i ntroduced Mr. Peter Ross of Dean Witter Reynolds, financial consultant to the City. He noted that Mr. Ross had an updated financing package to present. Mr. Ross stated his presentation is basically the same as was handed out to the Council/Agency at the last workshop. The numbers have changed to reflect (1) the increased bond amount due to the financing of the $1.3 million contribution to the County for the courthouse; and (2) modified revenues coming from the project in the form of tax increment revenue and sales tax revenue in accordance with the figures provided by the redevelopment consultant and project consultant with respect to the sales tax. Member Malcolm pointed out that the staff report states the City will be receiving $2.4 million representing the value of the Boys' Club land and Fifth Avenue. The report presented by Mr. Ross does not ref1 ect thi s amount. Mr. Desrochers referred to an attachment to the report titled "Calculation of Redevelopment Funding". He noted the full value of the City's contribution to this project is $11,100,000. That figures includes $7,150,000 (Certificates of Participation); $1,300,000: (Superior Courts); $1,300,000 (Value of Fifth Avenue); $1,200,000 (Value of Boys Club); and $250,000 (City Expenses). In responding to Member Malcolm's concerns, Mr. Christopher stated he has been working with bond counsel regarding reimbursing the City for the value of Fifth Avenue and the Boys Club. Preliminarily, bond counsel had concerns with including the value of the Boys Club and Fifth Avenue properties in the proposed financing with the Certificates of Participation. Until this problem is worked out, the proposal is not to include it in the Certificates of Participation. Dr. Claude Gruen of Gruen Gruen + Associates, economic consultants to the City/Agency, responded to questions of Member Malcolm. He stated that in 1978 when this project was being reviewed, his firm stated the Center would have a tough competitive environment. This is still true at this time. Mi nutes - 3 - April 21,1987 Mrs. Gruen of Gruen Gruen + Associates commented that when their fi rm di d the study in 1978 they were concerned about two factors: (1) The shopping center was old and deteriorating in quality which would be reflected in sales; and (2) that was at the time Plaza Bonita was becoming a full reality and would be competing with this center. ~'rs. Gruen further commented that if action is not taken at this time, sales will probably decrease. Responding to Member Malcolm, Mrs. Gruen stated, in her opinion, there is a very good probability that the center will be successful in terms of paying back the investment. Discussion regarding the financing and value of the Boys Club and Fifth Avenue properties followed. Chairman Cox clarified the discussion. He pointed out that Mr. Malcolm feels that the City should be compensated for the Boys Club site and Fifth Avenue. The Business Points Letter deals with assuming that the City/ Agency is agreeable to transfer the Boys Club site to the Redevelopment Agency. The Redevelopment Agency will be compensated in the manner that is specified in the Business Points Letter (page 4, item b). The Agency is being compensated, but not the City. If it is the desire to pursue compensating the City, it could be done in a variety of ways. One way could be by increasing the amount of the Certificate of Participation. Mr. Christopher stated the $11,100,000 figure does not have anything to do with the value of Fifth Avenue or the Boys Club. Member Malcolm asked if the City wanted to be compensated for the Boys Club and Fifth Avenue, would it be necessary to increase the Certificates of Participation? Mr. Christopher responded that basically this is true. Chairman Cox's suggestion of increasing the amount of the Certificates was discussed with bond counsel. Bond counsel preliminarily had concerns with increasing the amounts of the Certificates in order to pay for the value of Fifth Avenue and the Boys Club. Mr. Christopher commented that originally it was the intention of the City/Agency to close Fifth Avenue and pass over the Boys Club to Homart at no cost. In negotiating, it was decided that this was no longer acceptable to the City/Agency and a value needed to be assigned to this property. In response, Homart initially started out with $250,000 for a community center. This figure has since been raised to $500,000. Homart has put up an additional $750,000 that the City could allocate in any way it chooses in response to a need for a value for the property. Homart has committed $200,000 for the roadway and pedestrian path. Another $1 million has been offered by Homart as an incentive for acquiring a fourth department store. Minutes - 4 - April 21, 1987 Dr. Gruen asked i f i t i s correct that thi s money caul d be used to reduce the funding if desired? Mr. Christopher responded that is correct. Mr. Christopher stated in negotiating, the City/Agency emphasized that ultimate protection of the City's General Fund was desired. Because the Certificates of Participation to be issued by the City would be using the General Fund as security, staff wanted to be sure there wou1 d be very 1 itt1 e ri sk i nvolved. Staff 1 imi ted the revenues to pay back the debt service to the projections on the sales tax and property tax increment. Very conservative estimates on those fi gures were used. He further stated staff i s close to finalizing a guaranty by Homart whereby they will guaranty a certain level of projections of their sales tax increment through 1996 (90%). Member Malcolm asked Homart representatives if the Boys Club site was needed by them at thi s time. Mr. Mal co1m suggested 1 eavi ng the Boys Club at its present site until the fourth major department store would require use of the site. Mr. Thomas Gourguechon, representing responded that wi thout bei ng ab1 e to could work around the Boys Club Therefore, they would not enter into to buy it or trade for it. Homart Development Company, consolidate initially, they site and not require it. any agreement wi th the City Member McCand1iss asked if it would be possible to build into the agreement an either/or situation. If the Boys Club site becomes available to Homart, the City/Agency will be paid the agreed amount, or, if i t i s deci ded to keep the Boys C1 ub bui 1 di ng, then the City/Agency will not be compensated. Ms. McCand1iss noted she would like additional time to make this decision. There are a lot of i ssues that have not been addressed regardi ng the vi abi 1 i ty of that facility that would be more appropriately dealt with in a committee rather than built into this agreement. Mr. Gourguechon responded he is concerned that a decision is needed as soon as possible. He pointed out that all of their planning assumptions for the last 18 months have included the Boys Club parcel. This parcel is a fairly major component at a cri tical area of the si te i n terms of bei ng adj acent to Fi fth Avenue. Responding to Member Nader's question. Mr. Gourguechon stated they would need a decision within two weeks. Councilman Nader questioned page 3(a) where it states: the Business Points Letter i tem on "Redeveloper's cumulative obligation to pay City pursuant to the guarantee shall not exceed $1.5 million..." Minutes - 5 - April 21,1987 Mr. Desrochers stated the amount i s 1 imi ted to 10% of the bond issue due to the new tax law and upon the advice of bond counsel. Mr. Christopher noted this is still under discussion with bond counsel. Lonnie Thomas, 660 Telegraph Canyon Road, Chu1a Vista, representing the Girls and Boys Club of Chu1a Vista, addressed the Agency/Council. Mr. Thomas distributed a letter which he read to the Agency/Council. The letter expressed the desire of the Executi ve Board of the Gi r1 s and Boys C1 ub to work cooperati ve1y with the City to identify a viable solution to fill the void created by the relocation of the existing club facility. Chairman Cox questioned if the Boys Club facility could be retained, would the Boys and Girls Club be able to staff and maintain the facility? Mr. Thomas responded he has not been able to discuss this with the Executive Board, however, he has discussed the matter with the Executive Director. It would take approximately $110,000 a year to staff and maintain the facility. $33,000 is currently received from United Way from that location. Respondi ng to Member McCand1 i ss' questi on, Mr. Thomas noted the new site has a budget of approximately $160,000 with $70,000 coming from United Way. It was noted that the existing Girls Club site on "L" Street will be maintained as a day care center. Member Mal colm asked when the Executi ve Board woul d be ab1 e to meet and make a decision regarding the ability to staff and mai ntai n the faci 1 i ty? Mr. Thomas stated they woul d report back in one week. Member McCand1 i ss stated she waul d 1 ike to see documentation to the ability of the Girls and Boys Club to support three facilities. She further commented there is a need for youth recreational activities in that area. The Park and Recreation Department has been asked to look at all the recreational services needed for that area. ~1r. George Carney, 555 Naples Street, Chu1a Vista, spoke in favor of keeping the Boys Club site open. He stressed the strong need for the Boys Club in that area as a positive alternative for kids to go to. He pointed out that there is a gang problem developing in Chula Vista. Dr. Brewer Casey, 34 E1 Capitan, Chu1a Vista, distributed a letter to the Council/Agency which he read. Dr. Casey appealed to the Council/Agency to keep the Boys Club open at its present site. Minutes - 6 - Apri 1 21, 1987 Mr. Desrochers pointed out unresolved issues: (1) The Design Review Process - The developer feels they should not have an obligation to bear additional costs brought about by the design review process; City staff cannot concur. (2) The Fourth Major Department Store Staff is pleased that Homart will put forth $1,000,000 for a fourth major department store, however, this offer expires in 5 years. Staff wants to know what will happen after 5 years. (3) Broadway and Sears Staff wants as strong of language as possible in the agreement to insure the upgrading of these stores. Mr. Gourguechon stated regardi ng the fourth department store i ssue that Homart does not want to be saddled with a contingent liability beyond the 5 year period. Homart believes it is very possi b1 e to secure a major department store wi thi n that timeframe. Regarding the design review, Homart is looking for some potential relief in the process. They want to be sure their costs are kept under control. The Council/Agency recessed reconvened at 9:30 p.m. at 7:05 p.m. The Council/Agency 6. REPORT REGARDING COLORS. NATURE INTERPRETIVE CENTER At the Agency meeting of April 2, 1987, Members discussed the exterior color scheme of the Nature Interpretive Center. It was noted that the salmon color being utilized appeared to be pink, and staff was directed to review the records on approval of the color to ensure that the stucco being applied was the color approved by the Agency. Community Development Director Desrochers commented that salmon color used on the exterior seems to be brighter in sunlight than under fluorescent indoor lighting. the the Member McCand1iss noted that the architects have designed a beautiful building but she is disappointed that the color scheme does not fit in with the environment. She has talked to different people about this and has received various views and would like to see the architect be able to present some other concept. Minutes - 7 - April 21, 1987 The architect, Tony Cutri, stated that once landscaping is installed in the Center, the colors will not seem that prominent. He asked that once the exhibits are put in, if the City still feels that the colors are not appropriate then they can change the concept at that time. In answer to Member McCand1iss' question, Mr. Cutri stated he has no idea of what it would cost to repaint the building but indicated it would be very disruptive. MSC (Malcolm/Cox) to approve the report and the colors. McCandliss voted "no." Member 2. WORKSHOP: REPORT PROPOSED DISPOSITION AND DEVELOPMENT AGREEMENT WITH THE HOMART DEVELOPMENT COMPANY (Continued from 4 p.m. meeting) MSUC (Malcolm/Cox) to require the Redevelopers to go through the Design Review Committee. Agency discussion followed regarding the 20% condition: the Redeveloper would be precluded from leasing space in excess of 20% of the newly constructed floor area to any tenant transferri ng into the Center from another location in the City and that the Redeveloper shoul d not recei ve credi t for purposes of the sa1 es tax guarantee requirement for sales tax generated by any tenant transferring into this Center. Discussion ensued between Member Malcolm and Mr. Gourguechon regarding the financial aspects of the City allowing that 20%; noted the Redeveloper's position of leasing more than 20% of the square foot area to tenants transferring would be subject to a penalty; suggestion by Member Malcolm to give the Redeveloper the entire 20% credit but if he does not meet the income level, he wi 11 have to make up the di fference to the Ci ty and subtract the 20%. Member McCand1iss questioned the legal ramificaions if Homart reaches the 20% transfers and then other businesses want to transfer to the Center also. Mr. Gourguechon noted the penal ty c1 ause addi ng that they wou1 d have to turn the tenants away which is a legal concern. MS (Ma1co1m/McCand1iss) to accept staff recommendation on #16: In order to maximize the amount of sales tax increments generated by the expansion of the shopping Center which constitute new income to City and not a transfer of existing Minutes - 8 - April 21,1987 revenues from another location within the City, Redeveloper shall be precluded from leasing space in excess of 20% of the newly constructed fl oor area to any tenant transferri ng i nto the Center from another location within the City of Chu1a Vista and Redeveloper shall not receive credit for purposes of its sales tax guaranty requirement (obligation 3) for sales tax generated by any tenant transferri ng i nto the Center from another location within the City of Chula Vista. AMENDMENT TO MOTION (Nader/McCandliss) to amend the motion that it would be subject to Council's determination that it doesn't pose an anti-trust problem. The motion as amended carried unanimously. Agency discussion followed as to the assurances that Sears and The Broadway will be updated; discussion on getting the fourth major store and the costs associated with that estimate ~Ihich is from $13 to $15 million; the Redeveloper may need some participation from the City in getting the fourth major store in; Redeveloper havi ng i t acceptab1 e that they waul d put up the $1 mill i on to get the major store and it would be 5 years from the date of completion to get the store in; the DDA will address the fact that the Center will be a quality Center comparable to the University Towne Centre; the Redeveloper will be comi ng to the Agency shari ng their merchandising plan; questioned as to what will happen after the 5 years - what incentive would the Redeveloper have to bring in the fourth major store; if the City is giving up Fifth Avenue and the Boys' Club, they should have definite assurance that the fourth major store will come in. MSUC (Malcolm/Cox) to direct staff to include the 5 year clause in the DDA (that it will be from the date of completion). Mr. Gourguechon remarked that he wou1 d 1 i ke to restate and retract part of the offer he made earlier regarding the Boys' Club site. Chairman Cox stated that a report will be coming back next week on this item, along with the financial aspects. Further Agency discussion ensued with Perry Hall, also representing Homart regarding the building costs; the $6.7 million overhead development costs; suggestion to give the Agency 75% savings of any construction costs; Member Malcolm's statement that what the Redeveloper is offering the City is not a fair negotiation, it is only good for Homart and not the City. Minutes - 9 - April 21, 1987 ~1r. Hall noted the performa report, citing the figures based on the first draft. He added that Homart is taking all the risks on the construction costs, and if there are any savings here, it should be 100% to Homart. Member Malcolm stated he would like to see Homart put in legitimate costs such as hiring their architect, environmental people, etc. List all these "hard cost" then figure some type of split. Mr. Gourguechon responded that unless the Agency is willing to share the downside of the building costs, they should not be involved in sharing the upside. Homart is taking all the risk and because of this, they should have the freedom and ability to retain as much savings as possible. He added that they have gone through a great deal in trying to incorporate environmental i ssues; they tri ed to protect everyone and addressed all of the concerns of the City and the citizens; their letter of credit is as good as cash and would guarantee their performance. all their engineer, items and Mr. Hall stated there are other factors that playa big part such as Homart has 50% of their finances tied up in retail development. They are not trying to "pull the wool over the eyes of the Agency or the citizens" in any way, because if they did this, they would not be able to develop any other Center in the Country. Member Malcolm declared he is seriously concerned that the Redeveloper's are being honest; they are right in estimating their cost; they are willing to participate in their substantial savings; he would like to see the agreement specify that the Agency will be given the receipts for the construction costs and he wants to believe that the Redevelopers are here in the City to do a good deal. Chai rman Cox suggested that thi s matter be referred back to staff to work with the developer to bring this back next week. Member Nader stated he agrees wi th Member ~la1 co1m' s concerns and would like to see the agreement take care of those concerns. Mr. Gourguechon stated that by Fri day he waul d have to bri ng thi s back to his Board and to his leasing department who will have to work out the economic components. At the very minimum there is a fair deal here. They will consider the Agency's concerns but feel that they have gone overboard on many of these conditions. They wou1 d prefer to see no restricti ons by the Ci ty and the Ci ty involvement on their leasing. They are concerned with the legal implications but feel they can address those problems. Minutes - 10 - April 21, 19B7 **JOINT SESSION WITH CITY COUNCIL 3. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING CONVEYANCE TO THE REDEVELOPMENT AGENCY OF GRANT DEEDS FOR 495 I STREET AND SLIVER PARCELS LOCATED AT FIFTH AVENUE AND H STREET AND FIFTH AVENUE AND I STREET OF THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA APPROVING CONVEYANCE FROM THE CITY OF GRANT DEEDS FOR 495 I STREET AND SLIVER PARCELS LOCATED AT FIFTH AVENUE AND H STREET AND FIFTH AVENUE AND I STREET 4. RESOLUTION The Redevelopment Agency is in the process of negotiating a Disposition and Development Agreement (DDA) with the Homart Development Company for the expansion and renovation of the Chu1a Vista Shopping Center. The Boys' Club site, located at 495 I Street and two small sliver parcels, located at the corners of Fifth Avenue and I Street and Fifth Avenue and H Street, currently owned by the City, are important components of financing and redevelopment plans for the Shopping Center. This item is to convey those parcels from the City to the Agency for inclusion in the DDA for redevelopment of the Center. Community Development Director Desrochers added that this transfer of property from the Ci ty to the Redevelopment Agency i s one of the side issues which is involved in this transaction, which is not covered in the Business Points letter being transmitted separately to the Agency. This transaction mayor may not involve payment from the Agency to the Ci ty. Because of the evo1 vi ng nature of the total financial package involving the City, the Agency and Homart, a completed package of recommendations has not yet been developed. Action on these items, therefore, are not recommended for final action until the entire financial package is completed and presented to the Agency. Di rector Desrochers asked that items 3 and 4 be conti nued to the next City Council meeting. MSUC (Cox/Nader) to continue items 3 and 4 to the meeting of April 28. **REDEVELOPMENT AGENCY: 5. REPORT PROPOSAL FOR THE FORMATION OF A CITIZENS' COMMITTEE TO REVIEW PLANS FOR THE PROVISION OF A COMMUNITY FACILITY ASSOCIATED WITH THE RENOVATION OF THE CHULA VISTA SHOPPING CENTER Minutes - 11 - April 21, 1987 The Agency has expressed its desire to establish a committee comprised of interested citizens to review plans for the expansion and renovation of the Chu1a Vista Shopping Center in regard to the provision of a community facility. The purpose of the citizens committee will be to work with representatives from the Homart Development Company and City staff to develop recommendations for the provision of a multi-purpose community facility in connection with the expansion and renovation of the Chu1a Vista Shopping Center which can be used for a variety of community functions and activities including meetings, public forums, exhibitions, recitals, and community theater. COMPOSITION OF THE COMMITTEE The committee will be composed of seven members as follows: One representative from the One representative from the One representative from Association; One member from the City Council; Two members at large from the surrounding community; One member from the Chamber of Commerce. Town Centre Project Area Committee; Cultural Arts Committee; the Shopping Center Merchants Member McCand1 i ss stated that she woul d 1 i ke to see a change i n the format of the group. Rather than a member of the Chamber of Commerce, it should be a member from the community-at-large, such as someone from the Boys'/Girls' Club. At this point, she noted that the Agency has two weeks in order to make a decision so she is not sure they even need this Citizens' Committee at this time. Member Nader referred to his motion made at a previous meeting (March 17) where the Council agreed to institute this Citizens' Committee. He also noted that if the decision on the Boys' Club is satisfied, the Committee would still be a viable function. The intent of the Committee is that it would serve as an Advisory Committee to the Redevelopers to target what type of businesses should be put into that Center and what would meet the needs of the community. Member Malcolm stated that he is adamantly opposed to that type of Committee; he wants the Redeveloper to have a very successful Shopping Center and they do not need to be tol d what type of tenants they should have etc. MSUC (McCand1iss/Nader) to change the member from the Chamber of Commerce to a member of the community-at-1arge and not necessarily from the surrounding community; that the City Council member be a member representing the combined Boys' and Girls' Club Minutes - 12 - April 21, 19B7 organization and that the meeting of this Committee be held in abeyance unti 1 such time as the Agency gets the report back next week as to the retention of the Boys' Club. Chairman Cox suggested that the community group to advise Homart. Member Nader again referred to his previous motion made when the Council considered the closing of Fifth Avenue which included this Community Committee. He remarked that if the Council wished to change their mind about it, that motion should be reconsidered. Project Area Committee be the MSUC (Cox/Malcolm) to bring back the original motion made by Member Nader at the Public Hearing of the closing of Fifth Avenue and any subsequent meetings dealing with the Community Committee. 7. RESOLUTION APPROVING NATURE INTERPRETIVE CENTER 2" AND 8" HIGHLINE WATER SERVICE PLAN FOR BIDDING AND APPROVING FUNDS THEREFOR The permanent water service to the Nature Interpretive Center will be constructed with the south 1 evee road improvement. Unti 1 that project is implemented, temporary domestic water and fire service needs to be extended to the Nature Center. A plan for a temporary high1ine (above ground) facility has been prepared by Rick Engineering and is being presented for Agency and City Council consideration. The high1ine plan has been reviewed by the City Engineer and the project is exempt from CEQA Environmental Review under Section 15302 Class 2(c). The recommendation resolution: i s tha t the Redevelopment Agency adopt the 1. Approving the Nature Interpreti ve Center 2" and 8" high1 ine water service plan; 2. Authorizing the Ci ty Engineer to solicit bids fo r construction of said services; and 3. Approving therefor. the expenditure of $81,300 for construction RESOLUTION OFFERED BY CHAIRMAN COX, the reading of the text was waived by unanimous consent, passed and approved unanimously. Minutes - 13 - April 21, 1987 8. RESOLUTION EXTENDING AGREEMENT WITH LARRY 1. PEEPLES, INC. FOR CONSULTANT SERVICES IN CONNECTION WITH THE SECOND HARBOR ENTRANCE AND AUTHORIZING THE CHAIRMAN TO EXECUTE SAID EXTENDED AGREEMENT RESOLUTION OFFERED BY MEMBER MALCOLM, the readi ng of the text was waived by unanimous consent, passed and approved with Councilwoman McCand1iss out. 9. ORAL COMMUNICATIONS None. 10. DIRECTOR'S REPORT 11. CHAIRMAN'S REPORT None. None. 12. MEMBERS I CO~IMENTS None. The Agency recessed at 11 :45 p.m. to Closed Session to discuss Sierra Club v. r~arsh, Sierra Club v. Coastal Commission et. al. and items of potential litigation. The City Clerk was excused and the City r~anager reported that the Session ended at 12:05 a.m. ADJOURNMENT AT 12:05 a.m. to the regular meeting of April 28, at 7 ~;~ç¡: ~ity Cm,; 1 ."ti ã:~ ~~t~ C Recordi ng Secretary ~ C1 erk ¿J 0995C