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HomeMy WebLinkAboutcc min 1995/03/07 RDA MINUTES OF A SPECIAL JOINT MEETING OF THE REDEVELOPMENT AGENCY/ CITY COUNCIL OF THE CITY OF CHULA VISTA Tuesday, March 7, 1995 Council Chambers 7:48 p.m. Public Services Building CALL TO ORDER 1. ROLL CALL: PRESENT: Agency/Council Members Fox, Moot, Padilia, Rindone, and Chair/Mayor Horton ALSO PRESENT: John D. Goss, Director/City Manager; Bruce M. Boogaard, Agency/City Attorney; and Beverly A. Authelet, City Clerk 2. APPROVAL OF MINUTES: February 28, 1995 MSUC (Rindone/Fox) to approve the minutes of February 28, 1995 as presented. CONSENT CALENDAR (Items pulled: none) CONSENT CALENDAR OFFERED BY COUNCILMEMBER R1NDONE, reading of the text was waived, passed and approved unanimously. 3. WRITTEN COMMUNICATIONS: None. 4. REPORT REQUEST FOR PROPOSALS FOR THE DISPOSITION OF THE EL DORADO BUILDING AT 315 FOURTH AVENUE--At the request of the Agency staff prepared a Request for Proposals (RFP) for the disposition of the El Dorado Building. The Agency also requested a report on the current rent revenues generated and expenditures incurred in the building's operation. Both are contained in the staff report. Staff requests the Agency review the RFP and authorize staff to issue it. (Community Development Director) Chair Hotton questioned whether the sale of the El Dorado building was something the Agency wanted to pursue. Mr. Goss replied that it was up to the Agency. It was part of the work program presented to the Agency in August. Staff had outlined a way for the overall RDA budget to be balanced if the properties were sold in the current fiscal year. That was a short term measure and staff felt they would be looking at the same type of issue for next fiscal year although staff would be examining other parts of the operating budget of the RDA. Chair Hotton stated she was not sure it was the most prudent thing to be doing knowing the City utilized a large portion of the building and would continue to do so in the future. Mr. Goss stated the building was purchased by the RDA and its main benefit had been for expansion space of City Hall, including Otay Ranch Planning group, other parts of City operations, and space that could be leased ~ other entities. One concerns was that RDA funding had been utilized to the advantage of general operations and h> the disadvantage of the RDA. Perhaps it should be looked at to see if that should be shifted around or possibly sell the building to the City itself. He recommended that the Agency continue with the RFP realizing that nothing would be set in motion and the Agency could withdraw from the process. In looking at the history with the RDA, the Agency had to issue bonds and create debt service so they would not lose their tax increment under the law. As a result, the bends were issued, that cash became fixed assets in terms of property that was acquired and a lot of the process he was seeing was trying to transform those fixed assets into liquid assets to help support the operations of the Agency. One of the real issues was whether property revenues could be obtained for those investments and not take a loss. Staff had been focusing on those where they felt there was a good opportunity of obtaining back the value originally put into the property. Minutes March 7, 1995 Page 2 Chair Horton stated she was opposed to the sale of the El Dorado building as City Hall was "bursting at the seams ". She did support the sale of the other three properties. Mr. Goss replied there had been some retrenchment or retraction in the size of the City organization. He doubted the State would be giving back any of the revenues they had taken over the last several years and he did not feel the City would be replicating many of the one time revenues utilized annually. With the continuing recession there may be a need to link the general fund issues with the RDA's financial problems. There may be some downsizing in the overall City organization. Even if the building were sold the general fund would be stepping in and renting space for City operations so there would be space available if there should be growth. Chair Horton stated the scenario could change if the owner did not want to continue a lease with the City. She felt it might be more prudent to sell the building to the City. Mr. Goss stated if the RFP process was approved staff could look at producing a bid on the building also. Member Rindone felt it would be in the Agency's best interest to go out to bid. The Agency would retain the option to not sell the building. The building value was $1.4 million so there was a net increase of $400,000 and there would be the option of leasing office space. He questioned why one of the tenants listed on the chart in the staff report had the Agency paying their utilities. Miguel Tapia, Community Development Specialist II, stated the tenant was paying $1.29 sq. ft. which covered expenses. Mr. Goss stated he was a pre-existing tenant when the Agency purchased the building and his lease agreement was continued at the higher rate with the Agency picking up the utility costs. Member Moot stated he was prepared to go out with the RFP, but was concerned whether ultimately it would be a cost effective transaction for the City. Chair Hotton stated she would support it because she wanted the City to look at purchasing the building. PUBLIC HEARlNGS AND RELATED RESOLUTIONS AND ORDINANCES None Submitted. ORAL COMMUNICATIONS None ACTION ITEMS 5. REPORT REQUEST FROM AUTO PARK DEALERS FOR ADDITIONAL FINANCIAL ASSISTANCE--On 1/17/95 Council approved a conditional payout of $1.3 million to the Auto Park Developers for construction of public streets within the Auto Park under Assessment District 92-2. On 1/19/95 staff met with the Auto Park developers and their attorney to discuss financial problems associated with a lower Assessment District payout than anticipated. Staff recommends bringing this item forward to the Agency after receipt and analysis of the information. (Continued from the meeting of February 28, 1995) (Community Development Director) Chris Salomone, Director of Community Development, informed the Agency that the attorney had stated they would provide the information requested to the Agency and as soon as received staff would return to the Agency with a report. I I Minutes March 7, 1995 Page 3 MSUC (Fox/Horton) to continue the item indefinitely. 6. A. RESOLUTION 1447 and 17828 JOINT RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COUNCIL CHULA VISTA AND THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA ADOPTING ENVIRONMENTAL IMPACT REPORT ADDENDUM 89-10A FOR RANCHO DEL REY SPA III, APPROVING A LAND DONATION AND FUNDING COMMITMENT FROM HOME PROGRAM FUNDS ($160,000) AND THE LOW/MOD FUND ($378,280) FOR AN AFFORDABLE HOUSING PROJECT PROPOSED TO BE DEVELOPED IN RANCHO DEL REY SPA III, AND APPROVING A TRANSFER AGREEMENT WITH ORANGE HOUSING DEVELOPMENT CORPORATION (OR AN AFFILIATE THEREOF) IN CONNECTION WITH SAME--McMillin Companies is required to enter into an Affordable Housing Agreement with the City which provides a detailed plan for accomplishing their affordable housing program requirement to provide a minimum of 23 affordable units. McMillin proposes a for profit/non-profit joint venture which is requesting financial assistance from the Agency/City. Staff recommends approval of the resolutions. (Community Development Director) B. RESOLUTION 17829 APPROVING THE RANCHO DEL REY SPA III AFFORDABLE HOUSING AGREEMENT WITH RANCHO DEL REY INVESTORS, L.P., AND A TRANSFER AGREEMENT WITH RESPECT TO 2.97 ACRES OF PROPERTY WITHIN SPA lII PROPOSED FOR DEVELOPMENT INTO A 40 UNIT LOW INCOME HOUSING COMPLEX Agency/Council Member Moot stated he would abstain from participation as his firm did legal work for McMillin Company. Shelia Shanahan, Community Development Specialist I, stated the first issue was the affordable housing agreement with McMiIlin and the second was the affordable housing project proposed to satisfy their affordable housing requirements. She then reviewed the proposed agreements. The staff report referred to a "transfer agreement" and the Tax Credit Allocation Committee had made a determination that tbrm of an agreement would not be acceptable to them, but an "assignment agreement" would be agreeable to them. McMillin would transfer the land to the City and the City would then transfer the land to the non-profit, i.e. an assignment was an advantage to the City because they would not have to hold title of the land throughout the process. The land would revert back to the City if the process did not go forward. Agency/Council Member Rindone stated one of the major deal points was that the City net participation not exceed the cap of $10,000 and he questioned if that had been achieved. Ms. Shanahan replied that it would. The City's donation coupled with the sale of the housing tax credits would net $10,000. Glen Coogins, Deputy City Attorney, clarified that the City's initial contribution would total approximately $13 ,5O0. $10,000 was determined to be an acceptable level of City participation. There was a provision in the affordable housing agreement with McMillin whereby affordable housing credits were created, i.e. 17 credits above their required 23 units. The City would get a share of that reimbursed tbr the excess contribution, i.e. $3,5O0. Agency/Council Member Rindone questioned if the City would receive reimbursements when the credits wer~ sold. Mr. Coogins replied that the credits would be transferred through a three party agreement in which McMillin would be the seller, there would be a buyer, and the City would oversee the units. The units would be created but not be redeemable by another developer to which McMillin might transfer them until the City received $8,100 share of those units. Agency/Council Member Rindone questioned what time flame staff estimated. Mr. Coogins responded that it depended upon the projects and was hard to predict. Minutes March 7, 1995 Page 4 Agency/Council Member Rindone questioned what had been built in to guarantee that the City/Agency received their reimbursement in a reasonable period of time. Mr. Googins stated if the units were not sold the City/Agency would not receive their reimbursement, it would be at risk. Mr. Boogaard stated where the City/Agency normally contributed $10,000 per unit to an affordable housing project, with the proposal the City/Agency would be contributing $13,500 per unit to an affordable housing project. Mr. Googins stated staff originally proposed a provision which provided that in a period of time if the units were not sold a portion of those units would return to the City/Agency at which time the City/Agency would become the seller. That raised additional complexities and it was felt if the units were sellable McMillin was better able to sell them, sell them quickly, and get a good price for them. Mr. Boogaard stated staff had tried to mitigate the risk by trading off against the risk of not selling them by taking the first dollars off the sale for the City's benefit. Agency/Council Member Rindone questioned what the sale price would be per unit. Dave Gustafson, Assistant Director of Community Development, responded the market would dictate the price. It was estimated that they would be worth $25,000. If a developer had a need to provide affordable units and were challenged by doing so they could ask to pay an in-lieu fee. A general calculation of an in-lieu fee would be the difference between providing a market rate unit and an affordable unit. Staff calculated that at about $35,000. It was a new commodities markets but staff felt there would be takers. Staff felt they would sell within the next 2-3 years. Chair/Mayor Horton questioned if the Bayfront development could participate. Mr. Gustafson replied that they could be used anywhere throughout the City. Agency/Council Member Rindone questioned if there were other developers that had not fulfilled their affordable housing requirements. Mr. Gustafson stated that EastLake, Sunbow, Salt Creek, and Otay Ranch had to meet their affordable housing requirements. Agency/Council Member Fox questioned if the proceeds from the credits would be evenly split. Mr. Gustafson replied the City/Agency would be guaranteed the first $8,001 from the sale of the credits. Thereafter, any proceeds from the sale would belong to McMillin. Agency/Council Member Padilia questioned what happened if the value of each unit fell below the City/Agency guarantee. Mr. Gustafson responded if they sold for less the City/Agency was at risk of losing some of that reimbursement and contributing higher than $10,000 per unit. Mr. Booganrd stated if there was a sudden change in state legislation regarding the housing element of the general plan to void inclusionary zoning and the City no longer had a requirement for affordable housing, the market would go away. Agency/Council Member Rindone questioned if it was a 55 year provision. Mr. Gustafson responded that was correct. Minutes March 7, 1995 Page 5 RESOLUTIONS 1447, 17828, AND 17829 OFFERED AS AMENDED, reading of the text was waived. ("Transfer" language would be changed to "assignment" or whatever language deemed appropriate by the City Attorney.) Mr. Googins requested that the joint resolution be amended, page 6-16, Section 3 and 4, where the City set aside $160,000 of HOME Program funds and the Agency set aside $378,000 of Iow/mod funds, the term "set aside" should be changed to "appropriates". Agency/Council Member Rindone stated he would incorporate that into the motion. Mr. Boogaard stated due to the appropriation the motion would require a 4/5th's vote. VOTE ON MOTION: approved 4-0-0-1 with Moot abstaining. The Agency recessed at 8:18 p.m. and reconvened at 9:22 p.m. OTHER BUSINESS 7. DIRECTOR/CITY MANAGER'S REPORT(S) a. Negotiation between the City of Chula Vista and EastLake Development Company with raspeel to acquisition of Lots 3 and 4 by a private firm, through City incentives under the High Tech/BioTech ordinance, with EastLake Business Center. Mr. Goss stated staff indicated there would be a written report next week. b. Mr. Goss stated he would be serving on the nominating committee for the International City Management Association and they would be flying him to Washington D.C. on Thursday and Friday. While there he would be working on the issue of obtaining funding for the bio share proposal. Chair Horton stated Congressmen Bilbray and Filner stated they pledged their support to the City in their efforts. 8. CHAIRMAN/MAYOR'S REPORT(S) - None 9. MEMBER/COUNCILMEMBER COMMENTS Rindone: Redevelopment Agency C.I.P. Funds Report (Continued from the meeting of February 21, 1995) Mr. Goss stated on 8/23/94 the Agency took action to move forward on a work program to sell three properties and work on an RFP for the El Dorado building and return to the Agency with a mid-year progress report. The sale of the property in terms of balancing the budget was a short term fix at best. The Agency did have a lot of liquid assets in terms of bonds that were used for a lot of beneficial projects over the past years for the City and the Agency. Much of it had been put in land and it was recommended that those fixed assets be put back into liquid form. As staff went through the budget process they were looking at a lot of other options in terms of the Agency's operating budget, contract legal services, etc. He felt economic development needed to be pushed on the short term in the project areas to assist the RDA. In terms of the CIP expenses it appeared the Agency was committed for participation in the Otay Valley Road Street Widening Project of about $272,000. When Rohr made certain improvements there were certain contractual agreements that were made and it appeared that a portion of those would require funding in the current year. When the overall budget was reviewed for next fiscal year there may be projects that should be deferred due to the shortfall. It clearly had some impact on the bottom line. Minutes March 7, 1995 Page 6 Member Rindone stated he still did not have a list of the current CIP projects to be funded that was incorporated in the $869,113 and he requested it be forwarded to the Members. As to whether some of the CIP's could be deferred was a policy issue to be determined by the Agency/Council. He understood staffs intent in putting the best foot forward in understanding the situation, but he was very unhappy with the report. The assumptions of the sale of the three properties were included in the report, but it created a false sense of security. When the Agency tried to get a bettom line figure on the aggregate expenses versus the aggregate revenues of the five separate redevelopmerit projects they were unable to get it. The low/moderate income housing was a restricted fund and he questioned how that was applicable to the five projects. If it exceeded in one area and was not applicable to another the potential shortfall or expenditure could be greater. He wanted an understanding of what the restrictions were within the five projects, i.e. if there were funds that were available that exceeded the expenditures that could not be applicable to other projects. He questioned if staff was indicating in the report that if the sale of the three properties was completed in FY 1994/95 that there would be a positive ending balance of $295,067. Mr. Goss replied that was correct for the Redevelopment Agency as a whole. It was staffs understanding that there was a desire to see what the bottom line was for the Agency as a whole with the various project areas and other funds lumped together. If the three properties were sold it would be a short term fix. Staff was not prepared to discuss the balancing of the RDA budget for FY 1995/96 as they were working on a variety of things in terms of the operation as well as what interconnection there needed to be with the general fund supporting the RDA. Member Rindone stated if any or all of the three properties were not sold the ending balance could change significantly. He questioned if there were any other expenditures or responsibilities of the RDA that were not in the report that the Agency needed to be aware of. Mr. Goss stated he did not know of any. Mr. Salomone stated he was not aware of any that were not identified. Member Rindone referred to page 342 of the FY 1994/95 budget, payment from the RDA to the general fund of $1 million. He questioned where that was reflected in the staff' report. Mr. Goss stated it was reflected in the operating budget, but at the same time staff was looking at the overall issue in terms of the overall budget to the extent that it needed to be addressed for the next fiscal year. Member Rindone stated that did not make any sense. It clearly stated there would be a transfer in to help balance the general fund $1 million from the RDA. Even if the properties were sold there was only $295,067 which would create a shortfall of $705,000 in the general fund. Mr. Goss stated the Budget Manager needed to address his concerns. Revenues came into the general fund that was a transfer from the RDA. The Budget Manager advised him that staff was aware there was no money in the Agency to pay that and it was one of the adjustments being made in the general operations at the end of the year. That would not be shown as a revenue although there were a lot of revenues that made up revenues in the general fund. Member Rindone stated it should have been reflected in the report as he had asked specifically how it would impact the City or if it would jeopardize the general fund. If there was to be a payout from the RDA of $1 million and the money was not there that was a large amount to have to adjust. Mr. Goss stated perhaps staff had missed that particular question. One of the interactions would be that the $1 million would not be there for transfer. Member Rindone stated it was not his job to flesh out what the RDA was costing the City. The report still did not reflect that. He referred to page 9-5, Item 3, which stated ~The 8/23/94 report includes the aggregate amount of $9,745,000 and an aggregate expense of $13,539,000 for a differenee of $3,794,000~. Hequestionedwhetherthose were actuals for 1993/94. Ms. Herring stated they were actual expenditures of FY 93/94. Minutes March 7, 1995 Page 7 Member Rindone stated there was a shortfall of $3.8 million FY 93/94 which was the last year there was actuals. If any or all of the properties were not sold, plus the $1 million in the budget would result in another $4 million shortfall. Whether it was applied to the RDA or the general fund was not the issue, the issue was what it was costing the City to cover that. It was a cost to the year 2024. He referred to Item 6, which stated "Reference to a shortfall figure of $1,767,127 ". In the 8/23/94 report staff listed FY 94/95 annual revenue of $7,437,000 without the land sales nfinus the actual expenses with the CIP projects, i.e. $9,204,000 it showed an annual deficit of $1.7 nfillion without counting the $1 million transfer to the general fund. He referred to line 7 under Item 6, it stated "assuming the use of no one time property sales then the figure of $7,437,000 for revenue without land sales would be correct creating a possible annual shortfall of $1,767,000 ". He felt the Agency/Council needed to: 1) recognize there was a problem; 2) determine the depth of the problem; and 3) determine how to correct the problem. The Agency had serious financial debt and it was annual. He concurred with staff in selling the three properties. He felt staff should also be directed to develop a workplan for 3, 5, and l0 years to deal with the shortfall. A workshop should be held so priorities could be established. MOTION: (Rindone) to have an RDA workshop within 60 days to discuss solely the development of a short/long term work plan. Chair Horton recommended that the discussion be held during the regular budget sessions when staff was more prepared to give the Agency a full and detailed analysis. She agreed that priorities needed to be set. She did not want to sea it piecemealed together week after week, but have staff fully prepared to present all information and analysis during the budget hearings. Mr. Goss stated the overall budget was usually presented to the Council/Agency in May. There was a lot of work that was being done because there were a number of other issues due to the recession, state take-aways, and one time revenues not being replicated. The Council/Agency would have to look at the overall City operating budget as well and he may be coming forward with fairly major recommendations. The RDA budget could not continue to be in a deficit situation and selling property because it was only a short term fix. Staff was not trying to lull anyone into a false sense of security and if that was the implication of the report that was wrong. Obviously the RDA was not prepared to do that so that was probably not a source of revenue to the general fund. Fortunately, there was a windfall carryover from the refinancing on PERS that would make up for that in terms of the overall City budget. There was some interconnection between the general operating budget and the RDA budget. It was all being looked at and evaluated at the present time. He had challenged staff in the RDA and departments to come up with potential budget cuts as high as 10%. That was not to say he would recommend that everything be cut back by 10%, but it gave the raw material for staff to come up with a balanced recommendation to Council/Agency. The Community Development Director had indicated that he felt there were ways within the operating budget of his department to bring it more into balance. The budget staff would be reviewin~ that as well as any other proposals developed in the budget process. The progress report was turning into a detailed budget report which he felt was unfortunate as staff wanted to give the Council/Agency a detailed budget report in terms of what was going to be happening in the future. In the past there had been a lack of budget workshops, but he felt there should be more meetings than in the past because it would take more time to review the issues and proposals. Chair Horton questioned whether he would recommend meeting on Saturdays. Mr. Goss stated he was not opposed to meeting on Saturday. Member Rindone stated he wanted a specific workshop that dealt only with the Redevelopment Agency and no other issues. Member Fox recognized Member Rindone for his research on the matter. It was disturbing that the $1 million transfer to the general fund was not included in the staff report. If there was a better economy and if certain projects had developed the Agency would not even be having the discussion. He wanted to be sure that adequate resources were allocated to the Community Development Department to make sure projects would happen. He was convinced that was a large part of the answer. Mr. Goss felt it would be useful to have the Mayor/Council lobby to modify the law to return the take-aways by the state to the redevelopment agencies. Minutes March 7, 1995 Page 8 Chair Horton felt it important to recognize that the City was fortunate to have the redevelopment projects developed within the last several years. The City should be proud of the programs as they were the types of programs that would belp the Agency become solvent in the future. She was also proud of City staff. Member Moot felt the good needed to be shown with the bad in staff reports and he did not fieel the worse case scenario was being included. The report was based on assumptions and did not include the information as to what would happen if the projections did not go forward. Mr. Goss stated staff was not really clear that the Agency wanted it in that form. He tried to give the most realistic view of what was likely to happen with the budget. He did not try to be overly optimistic or pessimistic. Staff had the impression that there were too many tables in their last report so they tried to present one simple bottom line table. Chair Horton felt it was clear that the Agency wanted all the facts before them during the budget workshops. Member Padilla stated he had a great amount of respect tbr Mr. Goss and his staff, but the frustrations sensed by Member Rindone were not unreasonable and he was not alone in his observations. It should not be debated whether the misunderstanding between the Agency and staff was intentional or by oversight. The form that was proper for any staff report should always be the complete form. When talking about deferral of CIP costs or outlays that could be changed or used in a budget assumption to project deficits, etc. was a policy issue and making certain assumptions and presenting that or not presenting that was a legitimate issue. He did not feel there was any question about the inquiries the Agency made regarding any general fund interaction between the Agency budget situation and any liabilities to the general fund. He felt it important to examine that. Due to the situation he felt it necessary to state that all information provided to the Agency/Council must be the complete information and must never be skewed by intention or by omission. CLOSED SESSION The Agency met in Closed Session at 10:23 p.m. and reconvened at 10:49 p.m. 10. CONFERENCE WITH LEGAL COUNSEL REGARDING: 1. Potential litigation pursuant to Government Code Section 54956.9 · CYPRESS CREEK CO., L.P., a Delaware limited partnership, by SUNBELT MANAGEMENT COMPANY, a Florida corporation, its managing agent against the Redevelopment Agency of the City of Chula Vista and the City of Chula Vista 11. REPORT OF ACTIONS TAKEN IN CLOSED SESSION - No reportable actions were taken in Closed Session. ADJOURNMENT ADJOURNMENT AT 10:50 P.M. to the Regular Redevefupment Agency Meeting on March 21, 1995 at 6:00 p.m., immediately following the City Council meeting, in the City Council Chambers. Respectfully submitted, BEVERLY A. AUTHELET, CMC/AAE, City Clerk · Vicki C. Sederquist, Depu~ty Clerk