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HomeMy WebLinkAboutrda min 1994/05/03 MINUTES OF A REGULAR MEETING OF THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA Tuesday, May 3, 1994 Council Chambers 8:05 p.m. Public Services Building CALL TO ORDER 1. ROLL CALL: PRESENT: Members Fox, Hotton, Moore, Rindone, and Chairman Nader ALSO PRESENT: John D. Goss, Executive Director; Bruce M. Boogaard, Agency General Counsel; Susan Merrill, Interim Finance Administrator; Carla Griffin, Administrative Secretary; and Berlin Bosworth, Secretary to the Redevelopmerit Agency 2. APPROVAL OF MINUTES: None. CONSENT CALENDAR (Item pulled: 4) BALANCE OF THE CONSENT CALENDAR OFFERED BY MEMBER HORTON, reading of the text was waived/passed and approved unanimously. 3. WRITTEN COMMUNICATIONS: None. 4. RESOLUTION 1401 APPROVING A SlDEWALK CAFI~ PROPOSAL ba~OM NU.'Fg OVER YOGURT SHOP AT 310 TH/RD AVENUE, SUITE C-9 AND WAIVING THE ANNUAL FEE FOR THE USE OF THE PUBLIC RIGItT-OF-WAY--The owner of Nuts Over Yogurt is proposing to locate a 105 square foot sidewalk caf6 adjacent to the shop. The Town Centre Sidewalk Caf~ Policy allows sidewalk caf6s under certain conditions subject to Agency approval. One said condition is the payment of an annual fee. Staff recommends the fee be waived. Staff recommends approval of the resolution with certain conditions. (Community Development Director) Pulled from the Consent Calendar. Member Rindone asked the cost of the encroachment fee. Miguel Tapia, Community Development Specialist, replied it was between $100 and $150. Member Rindone inquired whether that was a one-time fee or an annual fee. Mr. Tapia noted it was a one-time fee. RESOLUTION 1401 OI~3FERED BY MEMBER RINDONE, reading of the text was waived. Member Fox wanted to know how long the process for Nuts Over Yogurt took. He had heard a complaint it was an inordinate amount of time. Mr. Tapia stated the process took several steps and at one point there was concern from the Engineering Department regarding the manner in which the iron rail was to be installed which took time to resolve. Chair Nader pointed out die question was how long the process took--from the time the project was first suggested to staff until it was agendized for tonight's meeting. Mr. Tapia estimated it was six to eight weeks. Minutes May 3, 1994 Page 2 Chair Nader asked Mr. Salomone if he concurred. Mr. Salomone replied it was about eight weeks. Chair Nader asked if the project was in some other department before it reached Community Development. Brent Toogood, owner, Nuts Over Yogurt, 310 Tltird Avenue, Chula Vista, CA 91910, said the project had first been presented to staff at the beginning of 1994. Member Fox asked if staff was developing a policy which would handle future requests for outdoor caf6s. Mr. Saiomone stated staff would like to develop a policy. Member Fox thou~t not having a current policy would somewhat explain the delay. Having a policy would help to encourage additional outdoor caf~s which would add to the ambience to the downtown area. Who was developing the policy? Would it go before any commission? Mr. Salomone noted Community Development would be developing the policy. It would be brought before the Project Area Committee and most likely the Design Review Committee prior to coming before the Agency. Member Moore pointed out a policy had been adopted sometime ago and the policy should be updated. Mr. Tapia acknowledged there was an existing policy adopted in the mid-1980s. Staff was reviewing that policy with the intent to update and revise it and bring it back before the Agency. Chair Nader pointed out there had been several projects in the recent past which seemed to take an inordinate amount of time to go through the process. Four months for the Nuts Over Yogurt request to be processed was rather excessive, even accounting for~the fact it had to go before the Project Area Committee. Will the revised policy cut down the amount of time fixis type process takes? Mr. Salomone said yes. Chair Nader asked when the revised policy would be coming back to the Agency. Mr. Tapia replied it would come back in June 1994. Chair Nader asked the Clerk to make sure the item was on the second regular Agency June 1994 meeting had staff not brought the item back prior to then. Otherwise, staff was to make a report on the status of the revisions to the policy. Mary Coburn, Town Manager, Downtown Business Association, 360 Third Avenue, Chula Vista, CA 91910, asked the Agency to consider waiving the one-time encroachment permit fee as well as making an apology to Mr. Toogood for the delay. It was her belief he suffered a business loss by not being able to have the sidewalk caf6 operating soouer. Member Fox asked the amount of that fee. Mr. Tapia stated the fee was approxinaately $125. MOTION [Fox/Nader] to amend Resolution 1041 to waive the encroachment fee. Member Moore could not support waiving the fec as the business would be encroaching on public property. Minutes May 3, 1994 Page 3 Chair Nader said he wanted to encourage staff to deal with requests more expeditiously. This was not the only concern he had heard about permitting procedures in the Town Centre area. The use would generate more in City revenues than die fee. Member Rindone noted the $210 annual sidewalk fee was being waived for the next two years. Brent Toogood asked about the fee for boldng down newspaper racks and those racks that contained aparmaent rental publications on City sidewalks. Mr. Boogaard stated there was a licensing ordinance administered by the Police or Finance Department which covered that issue. Member Rindone noted the staff report, first paragraph, page 4-2, stated the applicant had requested the fee be waived. The applicant was now saying he did not know about the encroachment fee. Mr. Tapia replied he was not aware the applicant did not understand there was a fee. Staff provided information to the applicant relating to the encroachment permit. VOTE ON MOTION: Failed, 2-2-1, with Moore and Rindone opposed; Hotton absent. VOTE ON RESOLUTION 1401: passed and approved 3-l-l, With Moore opposed; Hotton absent. 5. RESOLUTION 1402 WAIVING CONSULTANT SELECTION PROCESS A~D APPROVING AGREEMENT WITH LEEDSIIILL-RERKENIIOFF, INC. FOR CONSTRUCTION LIAISON SUPPORT FOR TH~ WIDENING OF OTAY VALLEY ROAD--On 3/15/88 the Agency approved an agreement with Leedshill-Herkenhoff, Inc. for preparation of engineering and environmental studies for the widening of Otay Vailey Road. Construction of Phase 1 (from 1-805 to Nirvana Avenue) is underway. Bids for Phases 2 and 3 (from Nirvana Avenue to the easterly City limits and from the castefly City limits south to the Otay Rio subdivision, respectively) will be received 5/I 1/94. The proposed contract provides for construction liaison support services, on an as-needed basis, during the construction of all three phases. Staff recommends approval of the resolution. (Director of Public Works-Engineering) 6. RESOLUTION 1403 APPROVING AN AMENDMENT TO OWNER PARTICIPATION AGREEMENT WITH IDM SATELLITE DMSION, INC., FOR THE REMODELLING OF BUll,PING AT 311 F STREET--On 4/5/94 the Agency approved and Owner Participation Agreement (OPA) with IDM Satellite Division, Inc. for the remodelling of 311 F Street. Subsequent to approval of the OPA the applicant had to make changes to the floor plans. The change requires the OPA be amended. Staff recommends approval of the resolution. (Community Development Director) Chris Salomone, Community Development Director, informed the Agency the applicant had requested Item 6 be continued to the next regular Agency meeting. Chair Nader stated pan of d~e Consent Calendar recouunendation would be to continue Item 6 to the next regular Agency meeting. Member Moore asked if staff had been advised. George Krempl, Deputy City Manager, said the applicant could continue to make substantive progress on the building and pull demolition and foundation permits and proceed incrementally. * * END OF CONSENT CALENDAR * * Minutes May 3, 1994 Page 4 PUBLIC HEARINGS AND RELATED RESOLUTIONS AND ORDINANCES None Submitted. ORAL COMMUNICATIONS None. ACTION ITEMS 7. AGENCY RESOLUTION 1400 AUTHORIZING APPOINTMENT OF BOND UNDERWRITER, BOND COUNSEL, AND FINANCIAL ADVISOR FOR 'rite PROPOSED NEGOTIATED SALE OF BONDS IN THE AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $30,000,000 FOR ADVANCE REFUNDING OF 'FILE 1986 TAX ALLOCATION BONDS ISSUED BY THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA FOR THE BAYFRONT/TOWN CENTRE REDEVELOPMENT PROJECT, WAIVING THE CONSULTANT SELECTION PROCESS FOR SAID PERSONS, AND APPROPRIATING FUNDS IN THE AMOUNT OF $25,000 FOR THE FINANCIAL ADVISOR--The Agency authorized pursuing advance refunding of the 1986 Tax Allocation Bonds on 12128/93. The Agency is now asked to appoint the Bond Counsel, Underwriter, and authorize staff to review the need for a Financial Adv'tsor as well as evaluate additional financing mechanisms. Actual approval of the sale of the Refunding Bonds would be presented to the Agency in June 1994 assuming tax-exempt interest rote levels remain low, and the successful completion of a validation proceeding now in progress. Staff recommends approval of the resolution. (Assistant City Manager/Financial Administrator) [4/Sths Vote Requlredl Susan Merrill, Interim Finance Administrator, noted what was before the Agency was the first action to refunding the Bayfront/Tom Centre Redevelopmerit 1986 Bonds. Staff requested the Agency appoint the Bond Underwriter, Bond Counsel, and Financ'nd Advisor for the issuance as authorized at the December 28, 1993 Agency Special Meeting. Staff waived the consultant selection process because of the intrica(les of the Issue. Staff would return to the Agency with a recommendation on the actual funding mechanisms. Member Rindone asked why the request took five months to come back to the Agency. Ms. Merrill replied the validation process was ongoing and would not be completed for two weeks. There would be a 60-day waiting period beyond that to do the validation process. Bruce M. Boogaard, Agency General Counsel, informed validation processes normally go by default, but in the case of this Issue, a concerned citizen filed a Response and the City was able to answer the concerned citizen's Question. The citizen was satisfied with the City's response and withdrew his Answer so as to allow the validation proceeding to go back on the default track as opposed to go to trial Member Rindone inquired as to what a validation proceeding consisted. Mr. Boogaard responded it validated ale various legal aspects to the particular Issue; specifically, the adoption of Ordinance 2585 which corrected an error in a prior Ordinance capping the tax increment the City was entided to rec(ive. It also validated certain other aspects of the proposed transaction. The value of the validation proceeding was that bond holders would be able to rely on a Court Judgedrent finally settling any sensitive legal issues so the Issue would receive a higher rating and a lower interest cost. Member Rindone asked if the name of the concerned citizen was public information and could that be shared. Minutes May 3, 1994 Page 5 Mr. Boogaard stated the citizen was Mr. Joseph Garcia. He was very forthright about getting the facts, and once he received the facts, he was very fair to the Agency about withdrawing his concerns. Member Rindone desired to know why a Secondary Underwriter was recommended. Ms. Merrill noted the Secondary Underwriter had been in contact with the former Finance Director. Having both Undervaiters being able to help on the complex refunding Issue would be advantageous to the City. Member Rindone queried the standard practice for an Issue of this complexity. Ms. Merrill said it was a standard practice within various cities. Member Rindone asked how the Secondmy Underwriter was determined. Ms. MetTill stated the firm, having considerable expertise in this area, had put a tremendous mount of time and effort into the refunding and had worked with the former Finance Director. Member Rindone asked if the selection process for the Secondary Underwriter was a recommendation of a Department Head. How was the Secondary Underwriter deten~ined? Ms. Merrill contended it was the recommendation of various staff to the City Manager, Member Rindone asked the Executive Director if it was his recommendati,~il or was it staff'~ recommendation which he supported. John D. Goss, ExeCutive Director, said it was his recommendation. Member Rindone sought clarification as to how the Secondary Underwriter was selected over other Secondary Underwriters. Mr. Goss noted it was based on his knowledge and evaluation. The Secondary Underwriter had completed previous work for the City. Both the former Department Head and he felt the Secondary Underwriter could add expertise to the overall process. Member Rindone, pointing to page 7-2, third paragraph, of the staff report, noted the fixed rate refunding and the fixed-to-floating interest rate swap and asked staff to explain that paragraph in layman terms. Mr. Don Rice, Grigsby Branford & Company, Inc., stated a fixed-to-floating interest rate swap was a way of converting a portion of fixed rate debt to a floating rate basis for an interim time period through a contractual format as opposed to changing the character of the underlying debt itself. Member Rindone wanted to know how or what portion of the original $36 million Issue was deteHnined to be placed in that category. Mr. Rice responded it would be based upon market conditions as one approached the execution of the transaction. It would be for a portion of the Issue and that had not been determined at this point in time. Member Rindone stated that was a method which could be utilized should the refunding be deemed to be feasible. Mr. Rice concurred. Member Rindone asked how the recommendation for the Bond Counsel was determined. Minutes May 3, 1994 Page 6 Ms. Merrill replied Jones, Hall, Hill & White have extensive knowledge of the City and Redevelopment Agency, and have been Bond Counsel on many Issues for the City. The fima was the Bond Counsel on the City's PEPS Issue which was finalized two weeks prior. Mr. Boogaard added Bond Counsel signed an Agreement with the City in 1985 to provide, in all circtm~stances, Bond Counsel services. The existing contract had a cancellation clause, by either party at any time. However, it was ongoing until cancelled. Member Rindone asked if that firm had worked for the City previously. Ms. Merrill pointed out the firm was the Bond Cotmsel for the City's PERS Refunding Obligation. Mr. Boogaard thought the firm had been Bond Counsel on every Issue since 1985. Member Rindone asked how the Primary Underwriter was determined. Ms. Merrill noted the firm suggested the use of derivative products to enlumce the return to the Redevelopmetu Agency. There were very few Underwriters within the United States who have done any type of municipal derivative product. It was not an area staff would look into lighdy. Staff wanted to do a tremendous amount of analysis. There was a good chance the City may not have to use derivatives to enhance the refunding. Staff would be returning to the Agency with an analysis in order to get the Agency's final verification before the actual re~mding would take place. Member Rindone remarked if that was not a determination of staff, then that was just an option that particular Primary lJnderwriter has featured or focused on, but .has not necessarily determined was going to be the avenue pursued for the refunding financing. Ms. Merrill stated that was correct. Member Rindone, referring to staff report, page 7-2, next to last paragraph, noted Grigsby offers the capacity to execute these derivative transactions and are one of the few Underwriters having ttu's ability. Would it be safe to assume they were not the sole source for that capability. Ms. Merrill said that was so. There were other firms with that ability. Merrill Lynch, she believed, had its own derivatives subsidary as well as several others. Member Rindone, referring to staff report, page 7-2, last paragraph, it was indicated in staffs reconunendation that Grigsby has agreed to an up-front fee of 1% which was very beneficial to the City as most rates compare from 1.3 % to 2%. Had the City compared this rate and how does staff know that was reflective of what would be in the best interest of the City. Ms. Merrill cited as an example the PERS Refunding which Grigsby Brandford did at 1.3% and that the current Issue would be quite a bit less. Staff had checked prior rates paid by the City and the 1% rate was less than prior rates. Member Rindone noted the request to waive the RFP competitive bidding process and asked the basis for that recommendation. Ms. Merrill responded the Underwriter was one of a very few firms who had done that type refunding. Because of the transition with Finance Directors, she recommended rite City have a Financial Advisor on board in order to maintain continuity and knowledge. Kelling, Northcross & Nobriga, Inc., have done derivative products and have extensive background within cities as financial advisors within the State of California. Minutes May 3, 1994 Page 7 Member Rindone asked when staff was first aware there might be the possibility of re~naneing the Redevelopmere Agency 1986 Tax Allocation Bonds. Ms. Merrill acknowledged she did not know the history of the particular matter. Mr. Goss stated proposals had been made around November 1993 by the two firms being discussed, When the idea was approached seriously, staff then worked diligently to bring the item to this point. Member Rindone, noting his perplexity, pointed out the normal procedure when this was anticipated, was to put the item out for bid. Why had that not been done in November or December 19937 Mr. Goss replied the main point was timing. There was a favorable bond market at that time. A consideration was the time it would take to make the selection by going through the competitive bidding process. Clearly, ff staff had gone through the selection process, it would have taken substantially longer to get to the point where staff was at today with the refunding. Member Rindone inquired as to the typical length of time for the selection process had it gone out for competitive bidding. Ms. Menill said it would take three to four weeks to issue the RFP and another month to allow for re, spouse. Staff would then have to evaluate the responses before making a recommendation. The entire process would more than likely take three to four months. Member Rindone noted the process was now in its fifth month. The RFP process would only have taken three to four months. Why would that not have been an avenue pursued by staff? Ms. Merrill pointed out staff was not aware, at that point in time, there would be a Response filed which has affected the timeframe for the refunding Issue. Mr. Goss noted the idea of the bond refunding had been first been considered in December 1993. The process was started at the end of December 1993 and early January 1994. If an RFP selection process had been added to the timeframe, staff would not be bringing the item before the Agency this evening. It would more likely not be coming · before the Agency for another couple of months. Member Rindone asked if Agency action tonight would allow financing to commence with the preparation of the bonds for sale since there was now not adequate time to go our for an RFP, or because this was a team staff had confidence in. Ms. Merrill said it was a team she had very much confidence with. She did not believe the Agency could find another team with the knowledge to de the various types of alternative financings for the City. Member Rindone wanted to know if the City had any other expression of interest and willingness to participate in the refunding Issue. Ms. Merrill did not know of any. Member Rindone asked if this was the first time the Agency was asked to waive the competitive process for a refinance Issue. Ms. Merrill did not believe so. Mr. Goss pointed out Council took action to waive the bidding process for refunding the PERS Obligation. Minutes May 3, 1994 Page 8 Member Rindone asked if it was not good practice to periodically be sure the City went out for competitive bid. No one is questioning the integrity of any of the four companies. It appeared there seemed to be a pattern. Unless the City' s back was against the wall, or there seemed to be a precipitous change in the market analysis in anticipated bond rates, it was in the public's best interest to always ensure that the City had been aggressive in being open and competitive. FIe did not understand, with the period in excess of five months, why that had not been done. Ms. Merrill stated staff believed, in December 1993, the Issue could be fast-tracked. Staff had not been able to do so because of various types of new information which caused the Issue to be delayed. Mr. Goss said it was his belief it was a very good idea to go out on a reguhr RFP process if these types of Issues were the norm. With a City of this size it was not the norm. The PERS Issue and the Bayfront Issue was the only two the City would be doing. Because of the delays which occurred with this refunding, it did not move along as anticipated. He felt comfortable with the proposed percentage rate to do the work. The reasons for issuing an RFP was to select the quality of the team involved, and the rate. The rate on this Issue was below the market. It would have been better to go out with an RFP. When staff was looking at the Issue in November/December, the effort was to get to the market as quickly as possible to save the Agency money. Member Rindone did not disagree with that intent. What caused the delay? Mr. Goss replied in terms of the validation process there was an Answer which was filed which took some time to work through before it got to the type validation process which staff was going back to at this point. Member Rindone desired to know how long flLat process took. Mr. Boogaard replied the validation action was filed January 15, 1994 and legal counsel was just recently able to settle the claim of the Answerer last Thursday (April 28, 1994). Member Rindone asked if the City had a financial advisor when it when out for the PERS refunding. Ms. Merrill stated the City did not. Member Rindone asked why staff wanted a Financial Advisor. Ms. Merrill said it was her recommendation because of the transition within the Finance Depamnent. Member Moore asked the firm name of the Primary Underwriter. What would they be doing for the City and who were the other firms involved'? Steve Nellson, Vice President, Gfigsby Brandford, San Diego Office, replied Grigsby Brandford would the Primary Underwriter, which was an investment banking firm with headquarters in San Francisco. The Secondary Under- writer was Donaldson, Lufidn & Jenrette; Bond Counsel was Jones Hall Hill & White; and Kelling, Northcross & Nobriga was Financial Advisor. Member Moore noted the reason the City looked for firms who employed professionals with these skills was to get the City the best interest rate and package deal. Mr. Boogasrd pointed out the primary purpose of Bond Counsel, as retained, was to research and stand behind an opinion that a particular interest paid by the City on a bond to bondholders was or was not tax exempt. Mr. Neilson stated Bond Counsel would provide an opinion whether the securities were exempt from federal and state income tax. Bond Counsel would also provide an opinion as to the validity and legality of the'bonds. Minutes May 3, 1994 Page 9 Member Moore asked if it was typical for the City to hire a major company who would provide certain skills-such as Primary Underwriter, Secondary Llndervaiter, Bond Counsel--and could they all come from the same company. Ms. Merrill said the Secondary Underwriter was a separate company. The Bond Counsel and Financial Advisor were also from different firms. Member Moore asked if this was a form of checks and balances. Ms. Merrill stated it was very much so. Member Moore asked about a derivative product that may enhance City savings and desired to know if that was explained by saying fixed rate and fixed to floating interest ~ate. Mr. Boogaard stated it proposed to add the term of what was otherwise a fixed rate into a variable rate for a shorter period of time than the City would normally issue a bond for. It was his understanding there would be two separate documents: the City would issue the Bonds to a group of bondhulders and then enter into a separate contract, for example, with Grigsby, whereby Grigsby would pay the City, yearly, interest at a fixed rate. For example, using g % as the annual return on $20 million would equate to $1.6 million. The City would promise to pay that company interest on the same $20 million, each year, at whatever the index showed the variable rate to be. If the variable rate was 6%, the firm would pay the City money; if the variable rate was 10%, the City would end up paying that firm more money than it paid to the City. Mr. Neilson said the use of derivative products was something that would take a lot of time to educate staff and Council Members about. Grigsby had introduced derivatives as a possibility for a potential cost-saving mechanism. Whether or not the use of derivatives made sense would depend upon market conditions close to the time the sell of the unde~ying bonds took place. Derivatives was mentioned only as a possibility, but by no means was there any indication derivative products would be a part of the transaction. Mr. Boogaard pointed out the Agency would have an opportunity to review the bond Issue should the Agency approve the plan of the consultant, Mark Northcross. Staff would provide die Agency advice and a recommendation. Bond Counsel would do likewise. Member Fox stated though he was not totally satisfied with the responses to Member Rindone's questions, he was prepared to vote for the resolution as he was not aware of any other alternatives. His vote was predicated on the item coming back before Council in June 1994. Council should have mechanisms and safeguards in place when the City does not go through a selection process. Early on in the process, when staff knows it will not be following the consultant selection process, then Members need to be so advised. The Agency was ultimately responsible for the process. RESOLUTION 1400 OlqYERED BY MEMBER FOX reading of the text was waived. Member Rindone asked who was representing Kelling, Northcross & Nobriga. Mr. Mark Northcross, Kelling, Northcross & Nobriga, with offices in Oakland, California, replied he was representing the firm. Member Rindone asked what Mr. Northcross looked for in an Underwriter. Mr. Northcross said an Underwriter had been hired for two reasons: · the City needed to be very confident of the Primary Underwriter's ability to undervaite and sell the type of securities the City would be offering to the market; and, · the Primary Underwriter had to have the ability to structure and manage the actual debt process. Member Rindone asked if Mr. Northcross had worked with companies other than Gtigshy in the derivative field. Minutes May 3, 1994 Page 10 Mr.. Northcross replied there were only a few Underwriters which provided derivative products. There was a larger timverse of originators of derivative products such as insurance companies and banks. There was an advantage of having a broker between the City and the providers of derivative products. The Underwriter served as a broker between the City of Chula Vista and the universe of bond investors. The Underwriter, in this case, in their derivative products group, serves essentially as the City's interface to the broader world of originators of derivative products. The City could go directly to that universe. As an example, if a Member was to sell his/her home, he/she could sell directiy or through a real estate broker. The City could do the equivalent of for sale by owner with derivative products by direc~y dealing with major European banks, global insurance companies, or other major institutions. In this case, staff was recommending the Agency use a broker, Grigsby, for the transaction. Member Rindone inquired if staff was making the determination there was a need to get to the market as soon as possible. Based on the material presented, it seemed to be a valid assessment. Why was that not brought to the Agency in December 1993 when the decision was made to go forward. Mr. Goss stated he was not sure he could respond as he was not at the December 28, 1993 meeting. He would have to ask the Agency Attorney who was at the meeting what occurred. Mr. Boogaard said a resolution was passed by the Agency directing the validation action to proceed and correcting the 1986 error in Ordinance 2146. The appoinUnent of Underwriters was not discussed. Member Rindone said he understood that but wanted to know when staff made the determination it would not go forward with the RFP process. Mr. GOss said he was not at that meeting. Staff should have indicated at that time that was the process that would be used. Member Rindone said that was not done. There was a great deal of discussion at that meeting about some Members of the Agency not even being notified of the meeting. In fact, there was a very lengthy discussion as a result of that. But at no time was there an indication there would be a change in process in which staff would not be seeking or going out to RFP. When was that decision made by staff Mr. Goss responded it was his belief staff should have informed the Members at the December 28, 1993 meeting that that was the only way to get to the market in a timely fashion to take advantage of the favorable rates. Ms. Menfill informed Members all documents relating to the bond refunding had to be in place by the end of calendar year 1993 due to AB1290. Various people had worked on the Issue in a quasi-authorized fashion. Member Rindone replied there may be a number of good reasons and justifications but no answer was being given to the question of when staff made the determination to pre-select firms. He was not questioning the ability of Grigsby. He thought they were an outstanding firm. That was not the issue. The issue was: the Members were not notified, and had not been until this meeting's Agenda was issued. When was the decision made? Mr. Goss asked if the decision referred to, related to, whether or not to go out for RFPs, or to the decision as to who would be recommended. Member Rindone said it referred to whether or not to go out to RFP. Mr. Goss could not give a specific date, but believed it was made around December by staff. Member Rindone asked why it was not then brought forth to the Member for approval at that time. Mr. Goss said that was his question too. T'nat information should have been passed on to the Members on December 28. Minutes May 3, 1994 Page 11 Member Rindone asked whose responsibility was that. Mr. Goss replied it would have been the Finance Director's at that time. He was pushing for getting it done before the begimting of calendar year 1994. Member Rindone asked who the Finance Director reported to. Mr. Goss stated he reported to the City Manager and the City Manager was ultimately responsible. It was his expectation that had happened. Member Moore asked for an explanation of AB1290. Mr. Salomone stated AB1290 was an onmibns redevelopmere reform bill by the Legislature. It did such things as put caps on amount of indebtedness an Agency could incur, the length of redevelopment for collecting that, the life of a redevehipment area--all of that would go into effect under AB 1290. These mandatory controls went into effect on January 1, 1994. Member Rindone said the decision had been made not to go out for bid and asked when the decision was made who would be selected. Mr. Goss replied the decision was made in the first part of 1994 and was a process where the former Finance Director worked with Donaldson, Lufldu & Jenrette as well as with the Cnigsby firm. In terms of maldng the final decision, that was made in the latter part of February. Member Rindone wanted to know why it was not brought to the Agency at that time. Mr. Goss did not recall the procedure at that point and did not know why it was not brought back to the Agency at that time. Member Rindone pointed out there were two competing public interests involved: · ensuring the most open process always be followed and, · the process in which the most favorable response was ascertained on behalf of the citizens, residents and ratepayers in the City. Based on what was in the Agenda, the information indicated the three firms and the ~nanc'ml adviser were ext~mely credible. He believed staff was extremely remiss in not getting anthorization to waive the RFP process. StaffwasalsoremissinitsfaihiretoseekpriorapprovalfromtheAgency as it knew it has been a standing practice of this Agency--while he has been a Member--the RFP process was to be followed. An issue such as this had a tremendous impact and fithancial benefit to the City. Staff and the Agency had to do everything possible to ensure the process was followed. If there was to be a variation from the process, then at the earliest mornera, staff was to notify the Members. He asked what the downside would be if the item was not approved at tonight's meeting. Mr. Goss responded the downside would be the City would probably miss an opportunity to do a refunding which could be financially advantageous to the Agency. The City would miss an oppommity to extend the debt life of the Agency which would therefore extend the life of the Agency. Member Rindone asked what amounts of money were being discussed. Mr. Booguard replied there was a cap on the ability of the Agency to receive tax increment established under Ordinance 2146 eight years ago which limited total receipts to $50 million and $20 million. That mistake needed to be corrected, and the combined total for both Town Centre 1 and the Bayfront would be $210 million. Member Rindone asked what the delay would entail if the Issue went out to RFP. Mr. Booguard replied the risk would be to miss a market interest oppommity that was apparently on the rise. Minutes May 3, 1994 Page 12 Member Rindone desired to know the consequences should the Issue be put out to RFP. Ms. Merrill stated one would need a crystal bail to know the answer. Mr. Neilson, in replying to Member Rindone, stated it was his belief the City would be giving up time if the Issue was not approved tonight. With the validation coming within severai months, the rirms staff was recommending would begin doing their jobs. However, Grigsby had been "crunching" numbers for several months and assisting in getting the deal to this point. Now was the time, if the City wanted to be prepared to enter the market in July, to put together the Disclosure. The refunding was very complicated as some of the prior bonds had been refunded once and some twice. In order to be prepared in July, ail documents, including Indentures, would have to be completed and ready to go so that if the market was there, i.e., if interest rates were low enough to make the refunding economicai, the City would be prepared to do it. Should the City determine, at this point it wanted to go out for an RFP for Underwriters then there would be further delay. What interest rates would do during that two to three months, no one could say. Member Rindone asked if the payment for the Bond for 1994 been paid. Ms. Merrill stated payment was made on the actual due dates which was on a semi-annual basis. Member Rindone asked why the City did not get tax-free bonds. Ms. Merrill replied the City would get tax-exempt bonds. Member Rindone said if the refunding Issue was supported tonight and the Issue went out in approximately 60 days--at this time, what was the best guess of the rate for the m-free bonds. Mr. Northcross replied if the bonds could be sold tomorrow the rate would be in the low 6s. The financ'nd benefit to the City, at the current time, would approximate $150,000 yearly through 2011. That would enable the Agency to leverage additional debt sufficient to fund a $2 million project within the existing debt service cash flow. Chair Nader asked the consequences of a delay by going out for an RFP. Mr. Northcross pointed out it depended on which way interest rates went. If the Agency delayed, it would be betting interest rates would be staying the same or go down. He would not give the Agency any advice on how to make that bet. Member Moore said the bonds could be sold within two months if the Agency approved the iteru before it. Should the item not be approved, it would be at least five months before the bonds would be at a point where they could be put on the market. Member Rindone pointed out he had asked the question earlier but wanted to ask it again. Had the City received inquires by any other Bond Underwriters or Secondary Underwriters in regard to any re~nancing of this or other actions of the Redevelopmerit Agency since November 19937 Ms. Merrill was not aware of any. Member Rindone noted the Agency, on December 28, 1993, voted to retinanee. He asked if firms in this business were aware this was a possibility. Was that common knowledge? Was that knowledge available to those who would have an interest in participating? Ms. Merrill acknowledged the specific item may not be common knowledge. However, the knowledge of which bonds are out in the marketplace would be common knowledge. The City had been contacted by both Grigsby Brandford and Donald, Lufkin & Jenrette with a request to look at the re~nancing of the Issue under discussion. Minutes May 3, 1994 Page 13 Underwriters could look at documents available to them which listed the Agency's Bonds and could then contact the City at any time. To her knowledge, no other firms had contacted the Finance Deparmaent to date. Chair Nader asked if other rums had inquired on other Issues. Ms. Merrill stated none besides the two firms just mendonexl. Member Fox wanted to know if it was common knowledge that Grigsby had the deal and therefore there was no interest by other Underwriters. Ms. Merrill could not evaluate that. Member Fox asked how people in the business would find out about a decision such as the one approved on December 28, 1993 dealing with the 1986 Bond Re~uaneing Issue. Ms. Merrill noted the 1986 Bond Issues would be common knowledge. Underwriters knew legislation on ABI290 was taking effect on January 1, 1994 and would have been looking at all redevelopment agencies' bonds Of~c'ml Statements to ascertain if there was the possibility of refunding. The Underwriters would normally approach a redevelopmeat agency With a proposal. Member Moore said the Underwriters must have a system for knoWing what would be coming forth and pursue it if they so desired. Ms. Merrill said there were private contractors who had all Official Statements of all the cities in California. Underwriters call these private contractors and inquire about a specific city. Member Moore wanted to hear from the professionals on how they attracted business. Mr. Nellson pointed out there was a data base by which an Underwriter could get the Official Statement. On the Statement's cover it statexl what debt was outstanding, the particular Series of Bond, and what interest rates are paid. There was considerable analysis which would have to be done. In the case of the 1986 Bond Issue, a firm would need to find out if it would be an economic refunding as well as analyze a number of tax and legal considerations. When the Agency took action last December and passed the resolution to go forward With the re~mding, the way an Underwriter would know about it was if it had been published in a local paper and the Underwriter had read the article. Another way would be if an Underwriter had made a specific request to the City. That was a fimc~on of an Underwriter being out tbere looking for business. Chair Nader doubted Chula Vista had the only Redevelopment Agency in the State scrambling to beat the December 31, 1993 deadline with respect to AB1290. Mr. Neilson noted, from the standpoint of an Undenvriter, the actions the Agency had to take in regard to the statutory requirements of AB1290 had nothing to do with whether the refunding was economical or not. That was a function of what interest rate the Agency was paying on its existing bonds and what could the Agency pay in today's market. Member Rindone, referring to staff report, page 7-3, top of page, noted Grigsby and Donaldson agreed to fee wholly contingent on the sale of the Bonds and the realizing of econoraic savings by the City. If the market were not favorable, and there was no economic savings by the City, then the Agency's action tonight would be negated and there would be no cost to the City except the potential cost of the Financial Advisor which was also being recommended by staff. Was that a correct understanding? Ms. Merrill said yes. If the Agency did not refund the Bond Issue, the only cost to the City would be for the Financial Advisor up to a limit of $25,000. Minutes May 3, 1994 Page 14 Member Rindone inquired if there was enough savings to make it financial feasible to cover the 1% fee, but not enough to save the City money, would the City proceed. Ms. Merrill replied the Agency would not proceed unless there was savings over the cost of issuance. Not only was there the 1% fee on the Underwriters, but there was a fee for Bond Counsel. Unless there was quite a bit of savings above those fees, staff would not recommend going forward. When staff came back to the Agency, staff wonld indicate the exact amount of savings the City would achieve so the Agency could make the determination to proceed or not. Member Rindone asked if it were fair to say if the savings to the City was not at least 1% above the cost of issuance, then there was no recommendation to move forward. Ms. Merrill answered, definitely. Member Rindone noted all Members were interested in what was best for the fiscal soundness of the City. He was appalled at the failure of staff, in more than one instance, of not indicating earlier to the Agency it was considering not going out for RFP, but secondarily not informing the Agency who had been selected when the decision was made. That was unacceptable and should not occur again. That was the responsibility of the City Manager's Office. It was made clear in the staff report and ensning discussion on the item there was a competent and experienced trio of firms and Fivancial Advisor which would oversee the Issue to ensure that what the Agency directed would be followed through, with at least a minimal savillgs or there was no deal. It would bc F, scady imprudent to miss that opportunity. VOTE ON RESOLUTION 1400: passed and approved 4-0-1, Horton absent. 8. AGENCY RESOLUTION 1390 ADOPTING THE REDEVELOPMENT AGENCY BUDGET FOR FY 1993-94 AND APPROPRIATING FUNDS THEREFOR--The FY 1993-94 Redevelopmerit Agency Budget was reviewed as part of the City budget approval process. As the Redevelopment Agency is a separate legal entity, it is necessary to approve the budget separately as required by California Community Redevelopment Law. The formal Agency adoption of the budget had been delayed in order to determine the full impact of State budget resolutions and to complete the evaluation of staffing needs for the Economic Development function in ate Community Development Department as directed by City Council during and subsequent to the City's budget review process. This item was continued from the meeting of April 19. 1993. Staff mornmends this item be continued to the meeting of May 17, 1994. (Community Development Director) MSC [Nader/Moore] to approve staffs recommendation to continue the item to the May 17, 1994 meeting, 4-0-1, with Horton absent. OTHER BUSINESS 9. DIRECTOR'S REPORT(SI Mr. Goss informed it was his inte~ to provide the Agency with additional information and rationale as to why RFPS were not typically used in bond Issue processes. Chair Nader asked that be provided to the Members. Member Rindone said the point was when the rationale was known, determined and a decision made not to go out for an RFP, that was when it should be brought to the attention of Members. May 3, 1994 Page 15 · Mr. Goss concurred and would respond to that point as well. 10. CltAIRMAN'S REPORT(S} Chair Nader discussed the ramifications of how City regulations impact businesses in Chula Vista; specifically, the sign regulations and the consequent impact on a business on E Street by having to remove a wall mural. I 1. AGENCY MEMBER COMMENTS Member Moore asked staff to respond in the near future to the Council Referral on newspaper racks. Mr. Boogaard replied staff would get the Referral back with diligence. ADJOURNMENT ADJOURNMENT AT 9:50 P.M. to the Regular Redevelopmerit Agency Meeting on Tuesday, May 17, 1994 at 6:00 p.m. in the City Council Chambers. Respectfully submitted, Berlin D. Bosworth Secretary to the Redevelopment Agency