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HomeMy WebLinkAboutcc min 1996/08/20 RDAMINUTES OF A JOINT MEETING OF THE CITY COUNCIL/ REDEVELOPMENT AGENCY Tuesday, August 20, 1996 8:00 p.m. Council Chambers Public Services Building CALL TO ORDER ROLL CALL: PRESENT: ALSO PRESENT: Council/Agency Members Alevy, Moot, Padilla, Rindone, and Mayor/Chair Hotton John D. Goss, City Manager/Director; Ann Moore, Acting City/Agency Attorney; and Beverly A. Authelet, City Clerk. IT HAS BEEN REQUESTED THAT THE FOLLOWING ITEM BE CONSIDERED AT A TIME CERTAIN OF 7:00 P.M. 2. REPORT REPORT ON THE REPAYMENT OF ONE PARK APARTMENT LOAN MADE FROM THE LOW AND MODERATE INCOME HOUSING FUND--On 10/17/85 the Agency approved an $850,000 deferred loan made to One Park Limited which covered cost for the underground parking lot for the 94- unit residential rental project in Town Center I. Over the pest year, staff has been negotiating with the Developer for the repayment of the loan which became due in May 1996 and is now in default. The Developer has presented proposals for alternative payment plans which were not acceptable to staff. The Developer has requested to appeal to the Agency. Staff recommends the Agency support the terms ou~ined in Exhibit E of the staff mpert. (Commlmity Development Director) Chiis Salomone, Director of Community Development, presented the staff report. He reported on two positive events that had occurred since the agenda packet had been sent out. One of those was that the Developer had provided a counter offer that was substantially better than the one that was in the report. In addition, the Developer had given staff a Cashier's check in the amount of $125,000 which was taken in the spirit of their commitment to a resolution of the problem and not accepted on any condition of any particular deal. He asked Council to allow the applicant to speak, then adjourn to Closed Session so staff, with their consultant, Steve Delaney, could briefly review the new counter proposal, present staffs response, and hear Council's wishes on the issue. Council/Agency member Rindone asked what the basis was for this to be heard in Closed Session. Ann Moore, Acting City/Agency Attorney, responded that it would be to discuss the strengths and weaknesses of pursuing possible litigation; in this case, foreclosure proceedings. · Cheryl Cox, 647 Windsor Circle, Chula Vista, representing the applicant, Zogob Enterprises, spoke in favor of the staff recommendation. She presented an overhead, stating that at present they were talking about an $850,000 loan. The $125,000 check was an attempt to present the intense desire of the applicant to resolve the outstanding indebtedness. A new note would be created whereby the City would receive a payment per quarter on the principal, with interest on the outstanding principal, and a stipulation that within three years either One Park Apartments was refinanced, sold, or the mount of the outstanding indebtedness was paid. There was accrued interest on the $850,000 principal balance, and the applicant was asking that it be established at $400,000 so the total amount of the outstanding indebtedness was approximately $1.3 million. They were proposing that the terms on the $400,000 be the same as the terms on the initial note of $600,000, that included the principal paydown and quarterly interest payments; again, all due within three years of signing the agreement. A benefit to that would be the City would receive instent funds of $250,OOO, $125,000 of which the City had just received. Theapplicantwouldliketobegin paying down the principal. The property owner would have three years, which is sufficient time, to pursue refinancing the property, or if need be, sell the property in order to pay off the outstanding indebtedness which would be approximately $700,000. Furthermore, the property owner pledged to distribute no further funds to its investors until the outstanding amount was paid. Minutes August 20, 1996 Page 2 ® Richard Zogob, 344 'F" Street, Suite 101, Chula Vista, representing One Park Apartments, spoke in favor of staff recommendation. · Luis Maizel, 2111 Via Ladeta, La Julia, rapresenting One Park Apartments, spoke in favor of staff recommendation. Council/Agency member Rindone stated that while the project was good and had benefitted the City in many ways, Council was also responsible for ensuring that the fiscal responsiveness and the interest of all tax payers were adequately addressed. He stated that in the new counter proposal them was a request to add to the principal balance $400,000 in interest, but as reported to Council/Agency, interest on the principal balance as of 5/1/96 was $452,000. He requested an expiation of the per annum payback on the interest. He stated that un page 2-3 of the staff report it stated "The above described pmposels were found unacceptable by staff bocause they ask the Agency to be very lenient and accepting of the fact that the Developer withdrew $600,000 out of the project and distributed to the Developer's partnership as profits before paying off debt' and asked for a response to that. Mr. Salomone responded that the $450,000 was as of May 1995 and that the actual current estimate of the accrued interest was $521,000. Mr. Maizel responded that the money withdrawn was actually just under $600,000 which was about 40 percent of their investment as equity over a ten year period. It included not only a distribution for partners, but also for work done as general parlners in maintenance of the property. So the amount that was withdrawn was just over three percent of the equity invested on a per annum basis. Mr. Salomone said staffs counter proposal was very similar to the proposal already shown to Council/Agency in that One Park Apartments would pay a $125,000 principal paydown. They had already submitted a check in the amount of $125,000 and would pay the additional $125,000, totaling $250,000, upon signing a definitive agreement with the City. They will then execute a note for $600,000, secured against the property with a six porcent interest rate and a quarterly paydown of $12,500, all due in three years. Staff felt that the amount of the accrued interest should be exact and estimated that to be at present between $521,000 and $529,000. A note for the accrued interest should be secured against the property with the same terms and conditions, including a principal paydown, as outlined in the note for $600,000. Proofwastobeprovidedofalladjastmentsoftheinterestrateonthe FirstTrust Deed for the life of the loan within five business days. There was an additional interest called a "kicker" and that was for the City to be able to sham in the upside. Staff would like that additional interest to be written as a new loan secured against the property, accruing interest at six percent, all due and payable within three years. In the event there had been no default on the other loans, the kicker loan would be forgiven at the time the other Agency loans were paid in full. The owners would not make any distributions of any kind to themselves or to any related parties until the Agency loans were paid in full. He was certain they had that in their proposal so it was not new and there should be a cross default between all three loans. In his opinion, the project was a good project, it had been managed well and had been ~scally successful. Mayor/Chair Hotton said that when the agreement was first initiated in 1985, the report reflected that the two bedroom units would be renting for $458. She asked what the current rent was and what the square footage was. Mr. Maizel responded that there was a formula to calculate affordable housing rents and they were charging $125 to $150 below that. The rents go from the low $600's to the high $600's. They have two different two bedroom layouts. One was co-mingles, which were two master bedrooms with a living area in the center and the other was more traditional with a larger master bedroom and a smaller second bedroom, all are around 900 to 950 square feet and all have two bathrooms. Minutes August 20, 1996 Page 3 Mayor/Chair Hotton stated tho Council/Agency would m~t m closed ~sion to diaGuas contemplated initiation of litigation pursuant to Government Code Section 54956.9. Council/Agency adjourned to closed session at 8:55 p.m. and reconvened at 8:58 p.m. Acting City/Agency Attorney Moore reported that the Council/Agency had decided to direct staff to pursue other methods other than litigation at present and to come back within 90 days. ~ne Joint Meeting of the City Council/Redevelopmant Agency recessed at 8:58 p.m. and reconvened at 11:46 p.m 3. APPROVAL OF MINUTES: June 25, 1996 (Adjourned Rsgular Joint M~{sting); Juns 25, 1996 (Special Joint Meeting) MSC (Alevyatorton) to approve the minutes of June 25, 1996 (Adjourned Regular Joint Meeting) and June 25, 1996 (Special Joint Meeting) as presented, approved 3-0-2 with Moot and Rindone absent. 4. WRITTEN COMMUNICATIONS: None. CONSENT C~,L'ENDAR - None. PUBLIC HEARINGS AND RELATED RESOLUTIONS AND ORDINANCES 5. PUBLIC HEARING: JOINT PUBLIC HEARING OF THE CITY COUNCIL AND REDEVELOPMENT AGENCY TO CONSIDER AN AMENDMENT TO THE DISPOSITION AND DEVELOPMENT AGREEMENT WITH BROADWAY VILLAGE BUSINESS HOMES, L.P., DATED AUGUST 2, 1995 TO PROVIDE FOR AN AGENCY LOAN FOR PERMIT AND PROCESSING FEES AND SHARING OF SOIL REMEDIATION COSTS - The Disposition and Development Agreement was approved by the Agency/Council on 8/2/95 for redevelopmerit of the former Fuller Ford site. Due to protracted processing time and added expense, the Agency is requested to defer payment of permit fees. The Agency conceptually approved a loan for this purpose and authorized staff to negotiate specific terms. Staff reconunends the Agency/Council hold the public hearing and approve the resolutions. [4/Sths Vote Rettuiredl Continued from the meetin~ of Aut, ust 6, 1996 (Community Development Director) AGENCY RESOLUTION 1512 and COUNCIL RESOLUTION 18421 [1] APPROVING THE FIRST AMENDMENT TO THE DISPOSITION AND DEVELOPMENT AGREEMENT BY AND BETWEEN THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA AND BROADWAY VILLAGE BUSINESS HOMES, L.P., AUTHORIZING A LOAN TO COVER THE COSTS OF DEVELOPMENT PERMITS AND PROCESSING FOR PHASE I OF THE BROADWAY BUSINESS HOMES PROJECT AND EXTENDING THE TERMS FOR SHARING IN SOIL REMEDIATION COSTS TO COMPLETE REMEDIATION; [2] APPROPRIATING FUNDS FROM THE OTAY VALLEY ROAD PROJECT AREA LAND SALE PROCEEDS TO BE LOANED TO THE SOUTHWEST PROJECT AREA AT THE COUNCIL APPROVED INTEREST RATE FOR INTRA-CITY LOANS; [3] APPROPRIATING FUNDS PROM SOUTHWEST PROJECT AREA FUND TO BROADWAY VILLAGE BUSINESS HOMES, L.P. AND TO FINANCE THE AGENCY'S PORTION OF ADDITIONAL SOIL REMEDIATION COSTS; (4) AUTHORIZING STAFF TO CONTRACT FOR SERVICES TO COMPLETE SOIL REMEDIATION Mr. Salomone presented the staff report. Minutes August 20, 1996 Page 4 This being the time and place as advertised, the pubtic hearing was declared open. · Josef Citron, 765 Bangor Street, San Diego, requested that the item be handled this evening with the four Council/Agency members present approving the resolution because the item required a 4/5th's vot~. They were ready to break ground, and the groundbreaking had been scheduled for the following Tuesday; the construction lender was ready to fund; and they had an all cash buyer for the first unit who would be putting in a flower shop, subject to the project being started. Council/Agency member Rindone stated that when the project was initially presented before the Council/Agency, there had been a four to one vote in support. He respected his colleagues any time they disagreed with a project because that was why there were five members on a council, to allow the opportunity for each to give their thoughts in the evaluation of projects and proposals and sometimes they agreed and sometimes they disagreed. He encouraged Council/Agency member AIevy to state how he felt on the project, but asked that ha join the majority of Council/Agency in making the project possible. Mayor/Chair Herton concurred and stated that Council/Agency member Moot's absence from this portion of the meeting was due to the fact that he had to go to Los Angeles on business. Had she realized sooner, she would have taken the item out of order, while Council/Agency member Moot was still present, thus ensuring a 4/5th's vote. Council/Agency member Alevy stated that he had problems with the business aspects of the project from the beginning and still did. He had discussed these with the Citrons, Mr. Salemone, other members of staff, and Council/Agency. He would vote in favor of the project because it was the will of the Council/Agency, therefore, the will of the City. He understood that every pwject needed to be looked at separately and stood behind his support of progressive things taking place in the City. He had some problems with the business arrangements and thought that every time they looked at the project, they saw a dwindling net figure. He was bothered by the increased cost of the units and hoped they would sell. He was also bothered by the company that did the soil testing and felt that someone should have checked the soil where the hydraulic lifts had been, not just where the cars had been parked, If someone had made amistake, everyone wouldpay for it. He felt there should be some remediatinn from the people that put the hazardous material in the ground in the tirst place. Mr. Salemone responded that the City was bound under the Development Agreement to pursue the perpetrator, a meeting was scheduled with him that week and they had asked for their insurances. Staff felt it was a dear cut case and would pursue that. The repayment of the loan would be due and payable in lanuary 1998, whether or not the units sold by then. The City would not take less than a second position lien on the property to secure the loan and reserved the right to withhold building permits for Phase II of the project in the event that there was a default on the loan. Glen Googins, Deputy City Attorney, stated that a couple of the items Mr. Salomone had pointed out were not actually included in the agreement. There were some clarifications. He proposed minor amendments to Section 4.2.6 and 4.2.7 of the agreement which would be included in staff' s recommendation. Added on to the end of 4.2.6 would be the following phrase: 'only to a monetary lien arising from prior acquisition indebtedness in the appruximata of $200,000 and non-monetary liens and encumbrances reasonably approved by the Agency', then add the following phrase on the end of Section 4.2.7: 'Co) Agency shall havo the right to withhold building permits and/or certificates of occupancy for business home units on lots 7 through 18 of Parcel 1. ' That was only in the event of a default of the loan. There being no further public testimony, the public hearing was declared closed. AGENCY RESOLUTION 1512 AND COUNCIL RESOLUTION 18421, AS AMENDED BY STAFF, OFkI~RED BY COUNCIL/AGENCY MEMBER RINDONE, reading of the text was waived, heading read, and approved 4-0-1 with Moot absent. Minutes August 20, 1996 Page 5 6. PUBLIC HEARING TO CONSIDER A SPECIAL LAND USE PERMIT TO ALLOW THE ESTABLISHMENT OF AN AUTOMOBILE AUCTIONHOUSE AT 780 BAY BOULEVARD LOCATED WITHIN THE BAYFRONT REDEVELOPMENT PROJECT AREA FOR A PERIOD OF ONE YEAR SUBJECT TO CONDITIONS AND TO CONSIDER A COASTAL DEVELOPMENT PERMIT FOR THE ESTABLISHMENT OF AN AUTOMOBILE AUCTIONHOUSE AT 780 BAY BOULEVARD LOCATED WITHIN THE CHULA VISTA COASTAL ZONE SUBJECT TO CONDITIONS-BAHA International proposes to establish an automobile auctionhouse in an existing industrial building at 780 Bay Boulevard. Activities would include two auctions per week and smog checks, minor me-ups, and car washing related to the auctioning of vehicles. The project is exempt from CEQA but requires a Redevelopment Agency Land Use Permit and a Coastal Development Permit. Staff recommends adopting the resolutions subject to conditions. (Director of Commttnity Development) AGENCY RESOLUTION 1513 ISSUING A SPECIAL LAND USE PERMIT TO ALLOW THE ESTABLISHMENT OF AN AUTOMOBILE AUCTIONHOUSE AT 780 BAY BOULEVARD FOR A PERIOD OF ONE YEAR SUBJECT TO CONDITIONS COUNCIL RESOLUTION 18422 ISSUING COASTAL DEVELOPMENT PERMIT NO. 71 FOR THE ESTABLISHMENT OF AN AUTOMOBILE AUCTIONHOUSE AT 780 BAY BOULEVARD FOR A ONE YEAR PERIOD SUBJECT TO CONDITIONS Mr. Salomone recommended that Condition Number 32 on the Special Use Permit and Coastal Development Permit be changed to read: "that in the event of a legitimate legal challenge, the applicant will abandon the use immediately." Council/Agency member Rindone asked if there had been a review by the Police Department. Mr. Salomone responded that the Police Department had reviewed it, and they had the right to go on the premises to inspect the vehicles at any time. AGENCY RESOLUTION 1513 AND COUNCIL RESOLUTION 18422 OFFERED BY COUNCIL/AGENCY MEMBER RINDONE, reading of the text was waived, heading read. This being the time and place as advertised, the public hearing was declared open. There being no public testimony, the public hearing was declared closed. VOTE ON RESOLUTIONS: approved 4-0-1 with Moot absent. ORAL COMMUNICATIONS - None. ITEMS PULLED FROM THE CONSENT CALENDAR - None. OTHER BUSINESS CITY MANAGER'S/DIRECTOR'S REPORT(S) - None. MAYOR'S/CHAIR'S REPORT(S) - None. Minutes August 20, 1996 Page 6 9. COUNCIL/AGENCY MEMBER COMMENTS - None. Couueil/Agency adjourned to closed session to discuss conference with legal counsel, contemplated initiation of litigation by the Re. development Agency pursuant to Government Code Section 54956.9(e), Chula Vista Auto Park developers - South Bay Chevrolet and Fuller Ford/Honda/Kia vs. the City/Redevelopment Agency based on administrative claims filed on 11/15/95, and subsequent requests for Preference Proceedings under the Disposition and Development Agreement at 12:10 a.m. ADJOURNMENT Meeting adjourned at 12:10 a.m. CLOSED SESSION 10. 11. 12. CONFERENCE WrrH LEGAL COUNSEL REGARDING: Contemplated initiation of lifigation by the Redevdopment Agency pursuant to Government Code Section 54956.9(C) · Redevelopment Agency versus One Park Limited, et. al. CONFERENCE WITH LEGAL COUNSEL--ANTICIPATED LITIGATION: Contemplated initiation of litigation by the Redevelopment Agency pursuant to Government Code Section 54956.9(c) Chula Vista Auto Park developors - South Bay Chevrolet and Fuller Ford/Honda/Kia v. City/Re, development Agency based on administrative claims filed on November 15, 1995, and subsequent requests for Preference Proceedings under the Disposition and Development Agreement. REPORT OF ACTION(S) TAKEN IN CLOSED SESSION Respectfully submitted, BEVERLY A. AUTHELET, CMC/AAE, City Clerk Carla J. Griffin, Acting Deputy C~y/Clerk