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HomeMy WebLinkAboutrda min 1996/02/20 (2)MINUTES OF A SPECIAL JOINT WORKSHOP/MEETING OF THE REDEVELOPMENT AGENCY/ CITY COUNCIL OF THE CITY OF CHULA VISTA Tuesday, February 20, 1996 8:40 p.m. Council Conference Room City Hall Building CALL TO ORDER ROLL CALL: PRESENT: ALSO PRESENT: Agency/Council Members Alevy, Moot, Padilia, Rindone, and Chair/Mayor Horton John D. Goss, Executive Director/City Manager; Bruce M. Boogaard, Agency/City Attorney; Chris Salomone, Community Development Director; Lyle Haynes, Principal Community Development Specialist; and Berlin D. Bosworth, Secretary to the Redevelopment Agency 2. APPROVAL OF MINUTES: None. BUSINESS 3.A AGENCY REPORT: REPORT OF FINDINGS RELATIVE TO THE APPROPRIATE LEVEL OF FUNDING FOR THE CITY'S ECONOMIC DEVELOPMENT PROGRAM FROM REDEVELOPMENT AGENCY TAX INCREMENT REVENUE--As part of the Mid-Year Budget Report, a necessary task was determining the appropriate level of funding for the City's Economic Development Program from Redevelopment Agency tax increment revenue. Staff recommends the Agency accept the report and approve the Joint Agency/Council resolution directing staff to make appropriate budgetary and financial adjustments associated with the current year and retroactive reduction back to FY 1989/90. (Community Development Director) B. AGENCY RESOLUTION 1484/COUNCIL RESOLUTION 18196 ESTABLISHING THE FUNDING LEVEL FROM REDEVELOPMENT TAX INCREMENT REVENUE AT 31.63 PERCENT FOR THE CITY'S ECONOMIC DEVELOPMENT PROGRAM FOR FISCAL YEAR 1995-96, AND ESTABLISHING A RETROACTIVE FUNDING LEVEL FROM REDEVELOPMENT TAX INCREMENT REVENUE AT 38.53 PERCENT FOR FISCAL YEARS 1989-90 THROUGH 1994-95 Community Development Director Salomone noted, in response to last year's budget process, staff was given direction by Council to develop a criteria for economic development funding that was attributable to the Redevelopment Agency. As a result, staff came up with a criteria based on land use acreage inside redevelopment areas, as opposed to the City at large, and arrived at a percentage of funding which staff was recommending. Staff analyzed particular activities performed by Economic Development staff such as the BECA program and the High Tech/BioTech Zone and excluded them from economic development funding as they were clearly outside the redevelopment areas. Staff also developed an assessment of the historic funding of economic development and recommended adjustments be made in the budget responding to that criteria. Additionally, staff developed a monitoring program pursuant to AB1290's Implementation Plans that would be updated annually and monitored during the budget process. Finally, staff looked at the amount of funding given to economic development since the beginning of the Economic Development program and was recommending and amount to be repaid from the General Fund to the Agency. Member Padilia wanted to get a better understanding of the nomenclature which was used to determine the amount of benefit a particular project area, or the combined project areas, would get from a development project or other potentially blight-eliminating influence Citywide and relate that to a particular area. He understood the direction staff was going, but wanted to know the specific tools that would be used to arrive at that percentage. Minutes Special Joint Workshop/Meeting February 20, 1996 Page 2 Mr. Salomone pointed out staff netted out projects Economic Development was funding and knew would not qualify for Agency funding, such as the High Tech/BioTech Zone in the EastLake Business Park and other activities not attributable nor where a nexus could be made to redevelopment project areas. Staff then developed the criteria whereby the amount of commercial and industrial acreage, which was what the City's economic development activities were concentrated on, excluding housing, that were in the five redevelopment areas and what percentage was that of the commercial and industrial area in the General Plan of the City. Member Moot asked if that excluded, for example, the High Tech/BioTech Zone. Mr. Salomone replied that included just the Zone. Member Padilia said on the one hand staff was saying that it was not a direct physical or direct nexus to a designated project area. But, on the other hand, staff was saying that part of those activities that may be somewhere, such as in the EastLake Business Center, could be funded partially, at least in part, through tax increment revenues generated in a project area on the other side of the City. He sought clarification on: (1) that there was no clear nexus, and (2) the Agency could still find a formula by which part of that activity could be funded by tax increment revenue from a project area. Was the Agency going to decide there was a nexus on a line of logic that there was an allocation based on the total gross receipts for something in terms of income over a given period of time or term, or was the Agency going to say no, there was not. Principal Community Development Specialist Haynes stated staff was making a critical distinction between those activities that are geographical-specific, like the High Tech/BioTech Zone, and those activities that were general in nature that could apply equally to derive benefits, and equally or proportionately as they do to the redevelopment areas as to a non-redevelopment area. Member Padilla was correct, in the sense that there was a kind of mixed bag in some respects. The logic was there. What staff was trying to do was set out a formula, a structure, by which economic activities could be evaluated. If economic development staff was going to be spending a certain amount of time on High Tech/BioTech that was geographically-specific to EastLake, then it was known there was no benefit or nexus to a redevelopment project area. But if they spend, say 20 percent of their time in doing other types of marketing materials or some other type of general business retention and expansion, then the land use factor would come into play. Member Padilla asked, aside from that, what were some of the components of the formula which staff would use to decide what amounts of general activity were being absorbed or impacted in the specific geographic area, such as a designated project area. Mr. Haynes said would be the general components that were within the Redevelopment Law which specifically identified economic blighting influences. It was not as if staff looked at, for example, the Microenterprise Loan Program and then determined that that would have an impact on reducing commercial vacancy rates. Member Padilia asked how staff connected a measurable impact that was being felt by a specific project area, or by the whole sum of the designated redevelopment areas. For example, in a marketing scheme that economic development activities were doing in a general sense but covered the whole City, how did staff arrive at what percentage or what amount/value of that activity was thus being absorbed by any particular redevelopment area. What means was staff using, or did staff have one? Mr. Salomone replied staff explored all the different criteria which was developed and it was not practical to do the types of analyses Member Padilia was alluding to. If one targeted marketing, created a Catch the Spirit brochure, attended trade shows, or tried to promote industrial development within the City, the question was then how to attribute that to redevelopment project areas. Staff did not have the ability, time, or felt that that was really a good use of staff time. Member Padilla asked if the percentage was a rough estimate of what was thought to be appropriate. Minutes Special Joint Workshop/Meeting February 20, 1996 Page 3 Mr. Haynes replied the percentage was a pure pro-rata share of general activities -- staff grouped general activities together which were non-geographically-specific -~ and staff was saying those activities would have benefit to the City as a whole and therefore would have a proportionate benefit m redevelopment areas. Some of the activities, as shown on the Attachment, would have certain influences on certain types of economic blight and some would not. Staff lumped the general activities into one type of account, ED-001. Staff then ferreted out those activities which were geographically-specific or were larger activities which absorbed a lot of staff time. Member Padilla asked if the general direction of AB1290 underscored the connection between the intent or purpose of Redevelopment Law and the designation of certain areas as blighted. The City had to designate a redevelopmerit area, at least under the existing structure. For example, the city he worked in got real creative and declared the whole City of Coronado a blighted area. What was the reason for having to designate a project area in the first place if cites could begin to interpret the nexus between the elimination of blight and tax increment revenues which were directed at any given area. If cities do not have to necessarily retain that within a given geographical area that was declared as blighted, but extended the premise of that to the whole City, either in whole or in part, it drew into question the whole reasoning why we originally have designated redevelopmerit project areas. Do you have some thoughts on that? Mr. Salomone responded by stating the five redevelopment project areas in the City of Chula Vista were classic redevelopmerit areas, the blight was quantified and identified. They all met the blight criteria quite well. Redevelopment across the state has been used in so many different ways and was not a clear law that it has been interpreted in different ways. Cities came to feel they had some leeway. In Chula Vista economic development actually started in 1991. At that point, funding part of it from Redevelopment Agency made sense because it was a small amount of money. As you know, Chula Vista has a very successful economic development program and now required a larger amount of funding. The City started with the general assumption that economic development helped the entire City -- for example, trying to target new industry to EastLake because of the layoff of 7000 people at Rohr and maybe some of them then went to work in EastLake. In the beginning that was the kind of thinking even though that was not a clear next. However, with AB1290, it became a very clear legal issue. Member Padilla thought everybody was trying to go after a particular objective and use whatever was available at the time that seemed reasonable. His concern was, in terms of a policy discussion, what the risks may or may not be that were realistic, and what was the wise policy approach if there was a lot of blight elimination -- perhaps all blight elimination activities could be classified as economic development. What was the wisdom of trying at certain times, in certain places, to draw the distinction between where they were separate and where they come together and where they overlap. What were some of the laws or procedures with regard to establishing a project area. Could the City justify blight as being economic in itself and designate another project area whereby the City got complete revenue out of or in to, so there would be no question about where the nexus was. Was that something staff thought about also? Mr. Salomone noted staff did that when the project areas were set up and staff was now looking at another potential project area. What was before the Agency tonight was the beginning of a process that would become more and more refined with each annual budget and review of the Implementation Plans. In last year's budget review the Agency charged staff to take a look at the issue, to develop criteria, to ascertain how much, historically, has been spent based on that criteria, and to make its recommendations as understandable and as reasonably legally defensible as possible. The City Attorney wrote accompanying memoranda which identified there was a risk. The risk was that if there were a lawsuit, the Agency could be found to be in noncompliance. Member Padilla asked if it was wise public policy, when there was any identifiable risk, unless it was completely minuscule, to take a somewhat more liberal approach when the Agency could take the more conservative approach and still get the Agency's objectives met. Mr. Salomone stated the video created by Economic Development was the kind of outreach in marketing that was attributable to development in redevelopment areas. Minutes Special Joint Workshop/Meeting February 20, 1996 Page 4 Executive Director John Goss added staff was certainly open to other ideas and suggestions on the approach to take. In terms of assessing the risk, that was a judgment call. It was staff's assessment that they did not see the potential for any lawsuits to be filed, not only as it would relate to Chula Vista, but staff was aware of some other communities that have been much more liberal in this area than Chula Vista and there have been no lawsuits filed there either. While a lawsuit could always occur and there was always the possibility of losing that lawsuit, the net result would be a paper transfer from the General Fund to the Redevelopment Agency. Member Rindone asked the amount of funding directly within the redevelopment areas which staff knew to be 100 percent legal in order for the Agency to know the parameters they were talking about. Mr. Goss stated while the Agency did not anticipate a lawsuit, no one could guarantee that. Mr. Haynes replied the extreme, if the Agency took the most conservative approach and each activity had to have a particular geographical connection to one of the project areas Member Rindone interjected, stating he did not believe the Agency had to go that far, it would have to have either a geographic connection or a direct nexus. Activity "x" , even if it was not in redevelopment areas 1 through 5, but could show that activity directly caused a business to locate in a project area that would seem to be as far out as the Agency would have to go. What was staff talking about, $1,000,000, $2,000,000 or was it $10,000,0007 What was the extent of the potential? Mr. Salomone noted the total impact retroactively, was $1.6 million of everything that was spent on economic development. Member Rindone said a lot of that was within the redevelopment areas. Mr. Salomone pointed out the total amount the Agency had spent on economic development was $2.1 million. Mr. Haynes asked that the Agency look at Attachment 5 to the staff report, page 4-15 of the 02/20/96 staff report. In the second to last column the Redevelopmerit Agency Combined Total was the $2.1 million, and the Combined Total Spent was $2.6 million. If Member Rindone was saying that one extreme would be that none of those dollars had any benefit whatsoever to the project areas, the maximum exposure would be $2.1 million. Member Rindone restated that the $1.6 million were dollars not spent in all five of the geographic redevelopment areas. Mr. Haynes agreed if the Agency was saying that none of those dollars had any beneficial impact to the projects areas. Member Alevy asked if those dollars were spent generically for redevelopmere-type activities throughout the City rather than in specific project areas. Mr. Haynes said that was correct. Member Padilia asked, if those monies were spent outside a project area on economic development activities what part, or whole, of the $2.1 million could be identified that went toward specific focus of elimination of blight. His understanding of the intent of Redevelopment Law was to direct those funds toward the elimination of blight and, economic development activities may or may not also fit in that definition. Member Padilla did not believe it was entirely correct to say that if the Agency spent outside project areas, and spent on economic development activities, that the Agency therefore necessarily spent all that money on the elimination of blight. The Agency may have to go back and look and at what part of that had an impact that could be blight eliminating. Minutes Special Joint Workshop/Meeting February 20, 1996 Page 5 Member Alevy asked if it was physical blight or economic blight. Member Padilia said the Agency would have to look at how blight was defined. Mr. Haynes stated there was economic blight and social blight and one of the things that AB1290 also did was that it went further along in that definition of blight. Unfortunately, the Legislature did not give the practioners the tools to work with in order to know how to link specific activities to specific tangible results in the elimination of blight. Member Padilia pointed out that if the Agency had specific objectives that could be tied to a redevelopment area then why couldn't the Agency delineate more redevelopment areas as needed thereby freeing the tax increment level and use tax increment revenue in that specific area until there was a very goal-specific, tangible set of objectives the Agency desired to achieve. Hypothetically, if the Agency could get away with defining a certain area in the City that it wanted to economically attract investment to as a blighted area, then why not just create a project area and have tax increment generated right into that area. Keep it simple. Was that way off course or was that even in the realm of possibility. Member Alevy asked if it was within the purview of the Agency to declare or determine that the whole City's economic blighted imerests was served by determining there was a nexus so that spending money on efforts to bring business to Chula Vista, be it the HighTech/BioTech Zone or anywhere else in the City, as those efforts were solving economic blight. Mr. Salomone thought under the law there was not. Chai-r/Mayor Horton stated it was difficult to quantify at a certain point in time. For instance, the HighTech/ BioTech Zone was excluded in the formula. However, someone could make an argument that the Zone could provide different types of benefits throughout the project areas as there were spinoff benefits -- there were support positions that would provide benefit to the entire community. Mr. Salomone noted that assumption was the beginning of staff's process. The law now said that cannot be done. However, a portion can be attributable to the project areas. The economic development division was doing general marketing and contacting many firms and it would seem, to attribute only one of those contacts, e.g., the Postal Encoding Service which brought 350 new jobs to a redevelopment project area, was being unduly narrow. Member Moot asked if getting the Postal Encoding Service to locate in the redevelopment area came out of the general economic marketing effort. Mr. Salomone said it did. Member Rindone asked if the 31.53 percem had any relationship to the $2.1 million or were those totally unrelated. Was the $2.1 million 100 percent. Mr. Haynes responded the $2.1 million was how much money the Redevelopment Agency had spent on those activities. The total spent by the Agency and the General Fund totalled $2.6 million (100 pement). If the Agency adopted staff's recommendation, then the Agency should have been reimbursing the General Fund at a lower rate. and would have spent slightly over $1 million, which would amount to 38.5 percent. Member Padilia asked of the $2.6 million spent on economic development activities in total, was $2.1 million of the $2.6 million funded out of tax increment revenue. Mr. Haynes replied that was correct. Member Padilia asked if the percentage of total economic development activities was over 80 percent. Minutes Special Joint Workshop/Meeting February 20, 1996 Page 6 Mr. Haynes stated it was at 75 percent in 1989-90 and 1990-91, from 1991-92 through 1994-95 it was at 85 percent, and in the current fiscal year, 1995-96 it was at 65 pement pending the outcome of this evaluation. Member Padilia stated he had no problem, in theory, with trying to find a way the Agency could allocate the general impact to be subsidized by tax increment revenue. The problem was that one got into this area of trying to find a way to do that, and trying to find formulae to break it down in light of the fact that the City could create other redevelopment project areas, then there was going to be some ambiguity about what was our current understanding of blight as it was defined, and was that different from economic blight. If it was economic blight, did that mean all economic development activities were therefore the elimination of blight. The City could get to a point where it was defined so loosely that one would call into question why the City had a separate Redevelopment Agency, why we have redevelopment areas in the first place. Why not just have a general revenue source that cities can freeze and collect and use that revenue throughout the City. While the risks may not likely occur, the City Attorney had analyzed them, they were there and they were real. If the Agency proceeded along that line of reasoning, where did one begin to draw the line. For example, where other areas of municipal activity now funded through the General Fund or the Operating Budget had some blight eliminating impact, or some economic impact because of their results, then we could find ways to justify using redevelopment tax increment revenue to start funding other things that the General Fund now paid for that may also have a blight eliminating impact. The prevention of crime has an economic impact. One could make a logical argument that that was a blight eliminating impact and start dissecting how the Agency could fund part of the Police Department crime prevention activities in a geographical area with tax increment revenue. The intent was good, the creativity was good. We all want to do the right thing, but are making it more difficult in the absence of better direction from Sacramento or better cases that have been decided to give us clear direction. We are muddying the water rather than trying to take the best course, being conservative, and we should not walk with our eyes open into any risks that we do not have to. We have other options if we want to find ways to use that revenue to fund economic development activities. We could look at other ways to designate new redevelopment areas, or we can make some decisions on the General Fund side that we seriously look at, as a Council, and come up with an economic development budget that was important as well as articulate some specific goals we want to accomplish so there was no mixing of the two. It would keep it safer and easier for everybody. Until we have some clarification, as a matter of policy, err on the side of caution until there was an understanding of the Redevelopment Law's intent to eliminate blighted areas and stick to spending tax increment revenue in the project areas and generate some blight elimination in those project areas as they were designed to do in the first place. There were other options to moving our economic development strategies that the Mayor has championed. We do not necessarily have to take part of that effort out of tax increment, especially when the area is so gray. It is better to err on the side of being conservative and ought not to be spending the tax increment outside the project areas until there was some clear parameters and clear ways to delineate that, Member Rindone said, for the sake of discussion, assume that assumption was made. How was the Agency going to pick up the other $2.1 million. That was what would have to be done. Was that correct? Mr. Hayes responded that it would be a paper write-off. Member Moot declared if most of the money being spent on economic development was not assigned to the Redevelopment Agency, then the City would to have to come up with General Fund money in order to keep doing economic development. A reduction in available General Fund money would mean having to lay people off or not doing economic development. Mr. Goss said the $2.1 million was a historical figure, or a paper transfer. The real question was how much was the Agency/Council talking about on an annual basis. What was the annual figure, what would have to be absorbed by the General Fund on an annual basis? Member Padilia clarified there were some economic development activities that were occurring within a designated redevelopment project area and if they were, that was fine. But if one was saying none of it was occurring in a designated area, then the Agency ought not be spending those revenues. Minutes SpeciM JointWorkshop/Meeting February20, 1996 Page 7 Member Rindone stated whatever was spent within the five geographic areas was fine. What was the annual amount of money being spent outside the project areas, what was the Agency looking at. Member Padilia said that BECA had to qualify to some extent. Mr. Haynes said BECA was outside the boundaries of any of the redevelopmerit project areas. Member Padilla asked if Mr. Haynes was saying there was no economic development activities currently, or in the past, that occurred inside any of the project areas. Was that true? Mr. Haynes stated to his knowledge, looking at those economic development activities, there was not a particular activity that had a particular geographical focus in any of the project areas. Member Rindone asked why the marketing plan could not be changed. Why not include in the literature and in the promotional materials availability of space and specifically refer to the redevelopment areas. Mr. Salomone said that was the direction staff was moving. Mr. Goss asked if staff was talking about such things as the money the Agency provided to sponsor the Arturo Barrios 10K Invitational which was in a project area. Mr. Salomone said that was fine. Member Padilia asked if the Arturo Barrios 10K Invitational was a blight eliminating activity. Mr. Goss replied to the extent it marketed and brought people to the Bayfront it was. Member Padilia said he believed that was thin, at best. It was great for the City, no doubt, but blight elimination? Mr. Salomone said he would argue that the demographic groups that came to that event and were exposed to the City, as well as the 12 international telecasts of our Bayfront, was wonderful public relations. Member Padilla asked if the Agency was challenged on that, would a judge decide that an Invitational promotional athletic activity in a project area was therefore the elimination of blight in accordance with the Redevelopment Law. Mr. Salomone thought that case could be made. Chair/Mayor Honon stated that when families with median to higher incomes were attracted to a project area, as they had more discretionary income and they were going to be spending it in the community, there has to be economic impact. Member Padilla replied it was clear there was an economic impact, but whether all economic impacts were the elimination of blight for the purposes of Redevelopment Law was the question, not whether there was an economic impact in general. There was always an economic impact in general, but whether or not that economic impact was the elimination of blight for which Redevelopmerit Law was designed was the question. Mr. Goss pointed out the current Redevelopment Agency's share was 65 percent of economic development, or $417,712. Should the Agency go with staff's recommendation of 31.53 percem, that would mean the Agency's obligation would be reduced from $417,712 to $203,265. If the Agency wanted to go to 0 percent, then the Agency's obligation would be reduced by that $203,265. That would be the additional absorption by the General Fund. The way the budget stood at present, there would be a shift from General Fund to the Redevelopment Agency of $214,447. The General Fund would be worse off by $214,447 and the Redevelopment Agency better Minutes Special Joint Workshop/Meeting February 20, 1996 Page 8 off to the tune of $214,447. If the 31 percent went to 0 percent, then there would be another $203,265 whereby the General Fund would be worse off and the Redevelopment Agency better off. The total for this fiscal year was in the range of $417,712. Member Moot stated he thought Member Rindone was asking for the reverse numbers. If no general economic development activities were assigned to the Redevelopment Agency, in other words if all the economic development budget was to be spent out of the General Fund, how would that reduce monies available in the General Ftmd. Mr. Goss raplied that would be $417,712. Staff was recommending that it go down by $214,447. Member Moot asked if the $417,712 was only 65 percent. Mr. Goss replied the other 35 per cent was already picked up by the General Fund. The total amount would be $642,634. Member Rindone stated he did not see that as a big number. Staff has gone a long way to get that down to $203,265, but that $203,265 represented what had been spent on economic development that was exclusively outside of the five redevelopment areas. Mr. Haynes said no, it was the pro-rata share. Finance Director Bob Powell commented Members kept saying that what was spent was spent totally outside of redevelopment project areas. That was not true. We are talking about money that was being spent on Citywide projects. It was not money spent outside project areas. It was money spent on Citywide projects of which the redevelopment project areas are a part of the City. Member Moot remarked that was the whole theory as to why staff did it that way. The assumption was that if money was spent Citywide, then a certain portion of that was going to benefit the redevelopment areas and the question was how to logically calculate that percentage. Mr. Powell stated it was not only "x" percentage of the City, but it was "x" percentage of commercial/industrial properties within the City. Member Moot stated if the Agency went before a judge and said here was the Law that Sacramento passed and it created no criteria for a city to actually make this decision, and you said this was the criteria the City developed and this was why it made sense, absent something specific in the legislation that was passed, how could the judge sit there and tell the Agency the way the Agency did it did not make any sense. One could poke holes in it, but to question it, absent specific criteria in the enabling legislation itself, who was to say the way the Agency developed its criteria was any better or worse than someone else. Member Padilia asked if the Agency did not have to designate a Plan under AB1290, how would the City tie general economic activities spent Citywide to the Specific Plan within a project area that went specifically toward eliminating blight. Member Moot said the theory was this: if you take a video tape that promoted economic development for Chula Vista and made the assumption that on a percentage basis it generated a business activity, then some of that cost could be attributable to a redevelopment area. What were the odds that a Citywide video tape that attracted business that came to Chula Vista was going to go into a redevelopment area as opposed to some other part of the City. Staff was saying the odds were 31 percent chance that it would go into a redevelopmerit area. Member Padilia asked why the Agency did not have an area within the budgets in the individual redevelopment project areas that called for doing some of these activities. Minutes Special Joint Workshop/Meeting February 20, 1996 Page 9 Mr. Salomone responded the Implementation Plans were fairly broad and spoke to what the Agency wanted to accomplish and that included promotion, public relations, and marketing. Member Padilla stated some of the general activity was having a specific impact. If some of the specific project areas had revenue already designated why then did they not have a niche carved out for specific marketing or economic development activities within that project area. Mr. Salomone responded there were other types of promotions the City did. In the video, for example, it talked about the redevelopment areas in the City, it showed them and talked about the Community Development Department being where one could go to get land writedowns. Staff was saying a detailed analysis was a very onerous task to do on every program, every project, every dollar, and so staff developed criteria it thought was understandable and logical which, over time, would be refined. Member Alevy pointed out the economic development video had a multipurpose use, it told several different stories within the same video. It was useable in more venues and it was a much more efficient method of using talent and resources. Member Rindone asked staff to explain one more time how they arrived at the 31 percent as Members were trying to get an understanding of the funding issue. Mr. Haynes referred the Agency to Attachment 3. Attachment 3 represented all current economic development activities being pursued and it represented, from the Economic Development Manager and the Senior Economic Development Specialist, their estimate of how much total aggregate time their staff would be working on each of the individual activities. Reading across, the key columns: Targeted Land Use for instance, the BECA Program had a targeted land use for industrial properties, industrial properties only, and they estimated they were going to spend 20 percent of staff time [Column (A)] on that activity. The Agency Land Use factor was 46.40 percent [Column 3(B)]. That figure was because -- looking at Attachment I which outlined what percentage of the industrial land lay in redevelopment project areas as opposed to the City as a whole -- it was a matter of simple multiplication: 20 percent times the Land Use factor and that came to the percentage of the Redevelopment Agency's share [Column 4(D)], or 9.28 percent. Going down the list of each of those activities staff assigned a Land Use factor to each activity and how much staff time would be assigned to that activity. Member Rindone noted for example, the first one, when staff said 20 percent of staff time, were they saying 20 percent of RDA staff time was related to this activity. Mr. Haynes replied that was correct, the combined total. Another point was that the thing being talked about was are all staff costs, there were some additional items that were in their budget, but those on the attachment were only staff costs. It needed to be understood that staff was looking at the staff costs. Some of the general activities funded by the Agency, such as the Arturo Barrios 10K Invitational, was a separate item and not considered in the calculation. The multiplier factor used only staff costs as a Percentage of Staff Activity. That worked out to be 31.63 percent. The reason why the percentages were a little different was that this took into account all of the activities. When particular activities -- for example, may be funded by CDBG, Section 108, and/or Microenterprise Loan Program -- are added in, that made up the difference between the 38 percent and the 31 percent. It calculated out that CDBG picked up that additional 7 percent. Section 108 and the Microenterprise Loan Program, under the Agency Land Use factor, show a zero. That was not because it did not apply to the properties, it was that CDBG picked up those costs. That brought the 38 percent number down. That might explain some of the confusion as to why the numbers were a little different. Member Rindone said okay. Staff has done a lot of work in this area which was very, very good. The issue was, was it legal to spend outside the project areas. If the Agency were to be challenged, what was before us tonight was good staff work in trying to develop a rationale. Let us say, for some crazy reason, we were wrong. The worst case scenario, sometime future, was $204,000 if we were wrong. Prior to pencilling that out, it really was Minutes Special Joint Workshop/Meeting February 20, 1996 Page 10 an arbitrary number and we just thought it was a guess, but staff has really done a lot more than that. Staff has taken the programs, taken 100 percent of staff time, and have divided that up, and then related it to the Land Use category and came up with a percentage, which was an excellent approach. Staff does have a rationale and pending some legal constraint or some future law, which was irrelevant because laws change, staff developed a rationale which the Agency did not have before. That was a very positive step in the right direction. We have a rationale. What was the extent of the decision the Agency had to make tonight: either accept or reject the report or redirect staff to come back with some other direction. If we are all five comfortable and we prove to be wrong two years from now, or five years from now, we know the extent would be $214,000. We would then have to make an adjustment by that amount in future years. We do not know of a direct legal constraint. We knew what was totally wrong and that was money being spent on something that was outside of the project areas that did not, in some way, benefit the area. That was not what was being discussed, that was not the issue before the Agency. The issue the Agency was debating was a very specific item. It was: what portion, if any, can the Agency take from the economic development activities and apportion that to redevelopment. Staff' s recommendation was saying: Council we have gone through this. We have taken all the staff time, we have gone through all the projects, we have apportioned each project to whether it was industrial or commercial, and this was our best estimate. We could be wrong, and if we were, we were $214,000 wrong. We have a rationale. He thought that logical, not irrational. Staff has done a lot of work, now the Agency can make a policy decision. Chair/Mayor Horton suggested Member Rindone offer the resolution and noted he had made a good point. Member Padilla stated staff needed to know he understood and appreciated their effort. He would personally prefer to go another route. He thought if the Agency could make even a barely reasonable argument, that what the Agency was subsidizing was benefitting within a project area, he could go along with that to that extent and no further. He would prefer not to do it at all and would be inclined to vote against it, but thought he could see where his colleagues were going and was willing to take the risk to support his colleagues, provided that that understanding was clear and that the Agency stayed on top of it. Member Rindone thought the other understanding was that if something came down from the Legislative arena or there was some new proposal, the Agency had a heads up and knew of nothing at this time that violated the law. Would you concur, City Attorney? City Attorney Bruce Boogaard said he thought the Agency had settled on a fair risk, an acceptable risk. Member Rindone thought that was what staff had done. The Agency could be conservative and go with zero funding, but then maybe the Agency would not be doing the best thing for the City. While staff did not have all the answers and was not sure they were 100 percent right, staff thought it was a reasonable risk. Member/Mayor Horton offered Agency Resolution 1484 and Council Resolution 18196, read the heading waive the text. Member/Mayor Horton said if something came up in the future then the Agency could refine the policy. Mr. Goss said if the Agency wanted to add that to the motion, as follow-up on some of the suggestions Member Padilla has made, that perhaps staff could become more focused and experienced on how to look at staffing the project areas in terms of promoting them. Staff can refine this as it goes through looking at next year's budget. Member Rindone asked if the Members accepted that amendment. MSUC [Horton/Rindone to approve Agency Resolution 1484 and Council Resolution 18196 and when something came up in the future, then staff would bring the policy back to the Agency for refinement, approved 5-0. Minutes Special Joint Workshop/Meeting February 20, 1996 Page 11 Mr. Salomone clarified for the Agency that staff prepared time cards for those projects in redevelopment areas, and projects such as Wal-Mart, the Auto Park, Palomar Trolley Center, etc. had a clear nexus to staff time. Member Moot commented if the Chula Vista Redevelopment Agency was not one of the most conscientious jurisdictions in doing this he would be surprised. This amounted to a very well thought out, very well documented process. If someone looked at what the Agency did and found the Agency was lacking in any manner or good faith he would be surprised. Mr. Goss noted an example of an unnamed jurisdiction in northern California. In looking at Chula Vista's split and formula, we thought that jurisdiction's split being 54 percent to 46 percent was terrific. We thought there might be some magic they had found. It turned out the magic was that that was all the money the Redevelopment Agency had to put into economic development. If they had more money, it would have been 100 percent. Member Rindone complimented staff on doing a lot of work to get to this point and in reasonable circumstances it should hold water. The City Attorney said it best, it was a reasonable risk. Member Padilla said it was good then that he raised all those points. Member Moot said that was the important process, as long as the Agency was satisfied they were acting in good faith. That was all the Agency was asked to do. Member Rindone said Member Moot was absolutely right. The Agency now had a handle on this and with the motion which just passed, the item would be brought back to the Agency periodically, not annually, but maybe in two years, three years, or when the law changes. 4. AGENCY REPORT: FISCAL YEAR 1995-96 MID-YEAR AGENCY BUDGET REPORT--The Redevelopmerit Agency Board adopted the FY 95-96 Agency budget on 6/27/95. As part of the budget, staff was directed to return with a Mid-Year Budget Report in order to update the Agency Board on the progress made toward the goal of restoring the Agency's depleted fund balances. Staff recommends the Agency review and accept the report. (Community Development Director) Mr. Salomone presented a brief staff report. Staff, at the direction of the Agency, took a number of steps, including selling property, to reduce the on-going deficit of the Agency. Other sales were pending, both to the Port District and private parties. Staff felt very confident about those sales. Two weeks ago the Agency was presented the Capital Improvement Projects with alternative funding sources for a number of projects that were to have been funded by the Redevelopment Agency. In addition to that, staff made some prudent operating budget cuts. With the completion of the property sales the Agency has moved from a negative $3.3 million to a possible negative of about $400,000 since the annual budget process last year. Staff felt there was some cause for optimism beyond that because of the other pending sales. Basically, what this report detailed was that the Agency was moving in the right direction -- out of deficit. It also showed how active staff was, there were a lot of projects proceeding. The report also showed the tax increment activity was very good. The property tax in the redevelopment areas was appreciating faster than the City, and the City was appreciating faster than other cities. That did not mean that it was great, and it did not mean there were not a good number of appeals on the books and those may impact tax increment revenue negatively. Basically, the picture was a good one and the direction the Agency was moving was positive. Member Rindone asked Mr. Salomone to share with the Agency what the annual debt service was. Mr. Haynes replied the total was $4.5 million and referred the Agency to Attachment 1 of the staff report, under Estimated Expenditures "Debt Service (+ COPS)". Member Moot asked how much Town Centre I and II made up of that $4.5 million. Minutes Special Joint Workshop/Meeting February 20, 1996 Page 12 Mr. Haynes stated the Tax Allocation Bonds for the Bayfront and Town Centre I was $2.4 million. Member Rindone asked if the annual projected revenues excluded one-time sales of properties. Mr. Haynes replied yes. If other operating expenses were added in, then no. That number, under Operating Surplus/Deficit, was about $340,000 in deficit from an operational standpoint. Member Rindone asked if the total debt service and operational expenses on an annual basis was exceeding annual income for all five redevelopment project areas, excluding one-time sales, of about $340,000. Was that a correct restatement? Mr. Haynes stated that was a correct restatement with the caveat that that did not include Housing, a restricted fund. Housing was doing fine, it was about $300,000 to the positive. Member Rindone asked if in the scenario the Agency was to do nothing next year and continue operating with the same projected revenues and expenditures, then would the $400,000 Agency debt then he $740,000. Mr. Haynes said that was correct. Member Rindone said the Agency could address that when the Agency got new projects and new revenues. The Agency was not out of the woods yet, but does have a clearer picture. Mr. Haynes said the deficit could be made up so easily with a good year or two in tax increment growth. Member Rindone said one could not make that assumption, the deficit would go the same every year, but just for discussion purposes until the year 2024. Member Moot said it was not unusual for a redevelopmere agency to run some kind of deficit. Mr. Salomone noted that was correct. Redevelopment agencies were typically 25 or 40 year projects. Member Moot said it was reasonable to assume, over a five year period, given an improved economic situation, that was a number which could be made up. MSUC [Alevy/Padilla] to accept the staff report, approved 5-0. ORAL COMMUNICATIONS None. OTHER BUSINESS 5. DIRECTOR'S/CITY MANAGER'S REPORT(S) None. 6. CHAIR'S/MAYOR'S REPORT(S) None. 7. AGENCY/COUNCIL MEMBER COMMENTS None. Minutes Special Joint Workshop/Meeting February 20, 1996 Page 13 ADJOURNMENT The meeting adjourned at 9:52 p.m. to the Regular Redevelopment Agency Meeting on March 5, 1996 at 4:00 p .m., immediately following the City Council meeting, in the City Council Chambers. Respectfully submitted, Berlin D. Bosworth Secretary to the Redevelopment Agency [C:\WP51\AGENCY\MINUTES\02 20-96.MI2]