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HomeMy WebLinkAboutrda min 1994/08/23 CC Minutes of a Joint Meeting of the Redevelopmerit Agency/City Council 9f the City of Chula Vista Tuesday, August 23, 1994 Council Chambers 10:24 p.m. Public Services Building CALL TO ORDER 1. ROLL CALL: PRESENT: '- · Agency/Council Members Hor~n, Moore, Rindone, and Chairman/Mayor Nader ABSENT: Agency/Council Member Fox ALSO PRESENT: John D. Goss, Executive Director; Brace M. Boogaard, Agency Counsel; Chris Salomone, Commntdty Development Director; Bob Powell, Director of Finance; and, Berlin D. Bosworth, Secretary to the Redevelopmerit Agency 2. APPROVAL OF MINUTES: None Submitted. CONSENT CALENDAR None Submitted. * * END OF CONSENT CALENDAR * * PUBLIC HEARINGS AND RELATED RESOLUTIONS AND 'ORDINANCES 3. PUBLIC HEARING TO CONSIDER A PROPOSED DISPOSITION AND DEVELOPMENT AGREEMENT BETWEEN THE REDEVELOPMENT AGENCY OF I'HE CITY OF CHULA VISTA, WAL- MART STORES, INC., AND CHULA VISTA TOWN CENTER ASSOCIATES, L.P., FOR THE PURPOSE OF DEVELOPING A COMMERCIAL SHOPPING CENTER AT THE NORTHWEST QUADRANT OF ~lFl'lt AVENUE AND C STREET IN THE TOWN CENTRE H REDEVELOPMENT PROJECT AREA-On 12/14/93 the Agency approved a Semi-Exclusive Negotiating and Covenantg Agreement with National Avenue Assnciatcs and Gntlin Development for the purposes of developing a community shopping center at the northwest quadrant of Fifth Avenue and C Streets in the Town Centre II Rcdevclopment Project Area. The Agency is requested to conduct the Public Hearing on the proposed negotiated Disposition and Development Agreement. Staff recommends the Agency conduct the Public Hearing and approve the resolutions. (Community Development Director) A. COUNCIL RESOLUTION 17631 and AGENCY RESOLUTION 1416 JOINT RESOLUTION OF THE CITY COUNCIL AND THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA FINDING PURSUANT TO HEALTH AND SAFETY CODE SECTIONS 33431 AND 33433, AFrER PUBLIC HEARING, THAT THE RESALE OF THE WALMART PARCEL IS EftHER AT FAIR MARKET VALUE OR AT SUCH LESSER PRICE AS IS NECESSARY TO EFFECTUATE THE REDEVELOPMENT PLAN; AND FINDING, PURSUANT TO HEALTH AND SAFETY CODE SECTION 33431, THAT IT IS IN THE BEST INTEREST OF THE PUBLIC, AND THE AGENCY, THAT CERTAIN REAL ESTATE BE SOLD TO REDEVELOPER WALK4d~T PURSUANT TO THE PROPOSED DISPOSITION AND DEVELOPMENT AGREEMENT, AND BE SOLD WITHOUT PUBLIC BID Minutes August 23, 1994 Page 2 B. COUNCIL RESOLUTION 17630 APPROVING AND AUTHORIZING FOR EXECUTION A MEMORANDUM OF UNDERSTANDING BY AND AMONG THE CITY OF CHULA VISTA, THE CITY OF NATIONAL CITY, THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA, AND THE NATIONAL CITY COMMUNITY DEVELOPMENT COMMISSION FOR THE PURPOSES OF COOPERATING ON THE POTENTIAL DEVELOPMENT OF COMMUNITY SHOPPING CENTERS ALONG THE SR-54 FREEWAY CORRIDOR BETWEEN FOURTH AVENUE AND NATIONAL CITY BOULEVARD WITH THE CITIES-OF CHULA VISTA AND NATIONAL CITY-The staffs of the City of National City and Chula Vista have developed a Memorandum of Understanding in that regard which is presented to the Agency for consideration. Staff recommends approval of the resolution. (Community Development Director) C. AGENCY RESOLUTION 1417 APPROVING AND AUTHORIZING FOR EXECUTION A MEMORANDUM OF UNDERSTANDING BY AND AMONG THE CITY OF CHULA VISTA, THE CITY OF NATIONAL CITY, THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA, AND THE NATIONAL CITY COMMUNITY DEVELOPMENT COMMISSION FOR THE PURPOSES OF COOPERATING ON THE POTENTIAL DEVELOPMENT OF COMMUNITY SHOPPING CENTERS ALONG THE SR-54 FREEWAY CORRIDOR BETWEEN FOURTH AVENUE AND NATIONAL CITY BOULEVARD WITH THE CITIES OF CHULA VISTA AND NATIONAL CITY Community Development Director Salomonc made a brief staff presentation. The inception of the process began approximately two and one-half years ago when Wal-Mart came to the City seeking a site. Wal-Mart's interest in the current site resulted in a Semi-Exclusive Negotjating Agreement, wltich the Council approved in December 1993, and concluded in the Disposition and Development Agreement now before the Agency. The project, located on the northwest comer of Fifth Avenue and C Street at Hi~way 54, between Broadway and Fourth Avenue, consisted of 219,000 square feet of retail on 21 acres. The Disposition and Development Agreement applied only to the Wal-Mart portion which consisted of a 120,000 square foot facility on 13 acres. The Agreement was contingent upon a number of entitiements which the Agency/Council would deliberate in the near future. Additional actions to fullow by the Agency/Council would include consideration of an Enviroumental Impact Report, General Plan Amendment, a Re-Zone, and a Local Coastal Plan Amendment. A draft Environmental Impact Report has been circulated, a public forum has been held by the Design Review Committee, and the Planning Commission held a hearing to consider the draft Environmental Impact Report. Key to the Development Agreement was a subsidy by the City. The Agency was also requested to consider a Memorandum of Understanding by and between the City of National City and the City of Chula Vista. The City of National City has undertaken a retail project on their adjacent parcel at about the same time Chula Vista began negotiation with Wal-Mart. Staff of both cities deemed , it appropriate to work together in a spirit of cooperation on a number of issues which included public improvements, traffic circulation, architecture, and signage. The City Council of the City of National City adopted the Memorandum of Understanding at its meeting on August 16, 1994. Marcia Scully, Esq., of Paone, Callaban, MCHOIm and Winton, and Agency Special Counsel, described the formula and rationale for the subsidy contained in the Disposition and Development Agreement. The size of the subsidy was $1,915,000. The Agency relied on the assistance of an economic consultant to determine the size of the subsidy. The economic consultant looked at the extraordinary infrastructure costs--a bridge to be built from Broadway, above the weftands, onto the site--that would be required for the development of this particular use of the property. The economist also analyzed the value the Agency and City would receive as a result of the project. Thesubsidywasstructnredasatraditiomdlandwrite-down. Wal-Mart would front the entire cost for the property. The Agency would be obligated to repay Wal-Mart the $1,915,000 over a 15-year period. The Agency's obligation was contingent upon Wal-Mart concluding construction and opening the store within 24 months after the approval of the Agreement. Agency payments wonld be made on a quarterly basis and the amount of the payment would be a stated percentage of the sales tax generated by the Wal-Mart. These ratchet up from an initial 20 percent payment in Year I to a 50 percent payment in Year 5. The purpose of the ratcheting was to account for any transfers of sales from other retail businesses within Chula Vista during the initial period of operation of the Wal- Mart store. If, during any time of the repayment period, the Wal-Mart store either closed or was sold to another Minutes Au~st 23, 1994 Page 3 retailer, any remaining debt would be forgiven. The $1,915,000 was a maximum repayment in the event the store did not generate the projected sales tax revenues. If the full debt was not paid at the end of the 15 year period, any remaining debt would be forgiven. The Agreement also called for the City and Agency to enter into a Cooperation Agreement. That Agreement would be presented to the Agency/Council for consideration at or before the time the enthlements came before the Agency/Council. The purpose of that Agreement was for the City to agree, in the event the Agency did not have sufficient funds to make any of its quarterly payments, to lend those funds to the ASeney. Wal-Mart would be a third-ps~ty beneficiary of that Agreement. in the event WaI-Mart did not build and open the store within 24-months after the approval of the Disposition and Development Agreement, the Agreement would automatically terminate and Wal-Mart would be obligated to pay the Agency $50,000 for the cost of negotiating the Agreement. Chair/Mayor Nader sought clarification regarding the subsidy being structured as a percentage of sales tax. Ms. Scully replied the annual amount of the repayment would be measured by the sales tax. Chair/Mayor Nader inquired if the reason the City had to guarantee the Agency's ability to make payment was because the sales tax went to the City's General Fund. Ms. Scully stated titat was correct. Chair/Mayor Nader pointed out the term subsidy had different meanings to different people and it was important people understood this was not a handout of tax dollars. What the Agency/City was doing was providing a percentage of the sales tax generated by the project. If the sales tax was not generated, so as to create a net gain to the City, then the City would not have to pay the so called subsidy. Ms. Scully replied that, too, was correct. Member/Council Member Rindone noted that was true to a certain extent. What' was being abated back was the alleged sales taxes that would accumulate from businesses that would lose sales because of this particular new business. How would the City know what Wal-Mart attracted in the way of sales taxes from other businesses? Principal Community Devdopment Specialist Lyle Haynes responded the figures were based upon the logic and analysis performed as part of the Enviwnmenml Impact Report which evaluated what the transfer effect would be. -That analysis was evaluated by the Agency's financial consultant, Keyser Marston. The majority of the transfer effect would occur within Years 1 and 2 and fall off dramatically in Years 3 and 4. By the end of Year 4, the tax dollars projected to be earned by Wal-Mart would be new tax dollars. Executive Director Goss said the Wal-Mart project would have some impact on businesses in Chula Vista as well as businesses outside the City, and this commercial development would bring new sales tax dollars into the City. Chair/Mayor Nader asked the name of the economic experts. Mr. Haynes replied John Ouauka, a sub-consultant on the Environmental Impact Report, prepared the economic analysis and that analysis was verified by Keyset Marston Associates, the Agency's financial advisor. Mr. Salomone added that representatives of Target Stores were brought into the negotiations and they agreed with the economic analysis that Target would lose up to 25 percent or more of its business to the Wal-Mart, but after a few years Target would experience an increase in sales because of the Wal-Mart. Mr. Goss stated his belief that staff did an excellent job on the project and he generally supported the economic deal oow before the Agency/Council. Between now and when the environmental documents and other permit documents Minutes August 23, 1994 Page 4 come before the Agency/Council, staff would be asked to look at the possibility of structuring the economics somewhat differendy. Some infrastructure contributions may be provided covering roughly half the Agency's contribution in order to take some of the pressure off the sales tax as it would be used to write down the value of the land. That may provide an advantage to the City by having less of an impact on the reduction in sales tax revenue the City would have over time. It would be structured to not have any impact on the Agency's budget, funding, or capital improvement budget. If a workable structure can be worked out there may be an effort to bring back a better economic deal. If not, what was negotiated was very good. The intent of re-looking at the economic deal was to make it better, if possible. Member/Council Member Rindone stated he was favorably impressed with the project, including creation of 450 new permanent full- and part-time jobs. A concern, however, was the size of the subsidy. How comfortable was staff about the size of the subsidy? Why would the deal not have an impact on the Agency budget? Mr. Goss replied the Keyser Manton study recommended, based upon their analysis of the economics of the deal, that the project would require a subsidy in an amount approximate to what was being proposed. The dea/was stmctored to be a sales tax rebate, or land write down, which would not have an impact on the Agency, In terms of the concept of doing infrastructure costs, there might be road tax money--not gas tax or Transnet-that may be available that could be utilized to do some infrastructure improvements which would not come out of the Agency's budget. This being the time and place, the public hearing was declared open. William McMahon, 245 Sea Vale, Chula Vista, 91910, urged the Agency/Council to reject the Disposition and Development Agreement. It was an unlawful giveaway of nearly $2 million in tax dollars. The Agency was in violation of AB1290. The project did not make economic sense as Wal-Mart would take business away from existing retailers. Retail jobs, with decent employers who provide health bene~ts and decent pay, wouldbe replaced with low-wage Wal-Mart jobs without health benefits. The project would have an enormous environmental impact on traffic, etc. The Agency could not legally approve the Agreement without's'tmultaneously considering the EnvironmentallmpactReport. The vnte on the Disposi~on and Development Agreement should be postponed until the Environmental Impact Report can be considered. In February 199z[ the Community Development Deparunent was requested to notify him of every public meeting concerning the project. A draft Environmental Impact Report was circulated and a Planning Commission meeting had been held, neither of which he received notice of. Because of the Brown Act violations, it was urged the matter be tabled to give him time to comment on the Environmental ~,Impact Report and appear before the Planning Commission. Mr. Haynes respectfully disagreed with the statement made by Mr. McMahon. Mr. McMahon was on the mailing list for the Environmental Impact Report and had been notified of all meetings. Mr. McMahon was in the office last Friday, 8/19/94, and was given a full packet which included the Staff Report and the Summary Report. Chair/Mayor Nader asked Agency Counsel/City Attorney if he had any comment regarding the timing of the Environment Impact Report. Agency Counsel/City Attorney Boogaard noted the Agreement before the Agency/Council reserved the unfettered discretion of the Agency/Council to approve or reject the Environmental Impact Report. The Agreement was contingent upon Agency/Council approval of the Environmental Impact Report. The Agreement would be voided should the Agency/Council not certify the Environmental Impact Report. The draft Environmental Impact Report had been circulated and the Planning Commission had dosed the public hearing, and no significant nnmltigable impacts were identified, with the exception of air quality and that only because of the cumulative affect on the air basin. Minutes August 23, 1994 Page 5 Chair/Mayor Nader noted in the past he had voted to certify an Environmental Impact Report but not voted to approve Overriding Considerations where there was significant unmitigable circumstances. What would be the impact on the project should the Agency/Council certify the Environmental Impact Report but not vote to approve the Overriding Considerations? Attorney Boogaard pointed out the City was not obligated to override unmitigated impacts. Agency Special Counsel Marcia Scully concurred, and further noted them were provisions in the Disposition and Development Agreement which expressly provided a number of entitiements--a General Plan Amendment, a Local Coastal Plan Amendment, Zone change-that would be necessary to move forward with the project. The Council has full discretion to approve or reject any of those entitlements. It would not be deemed to be bad faith if they were rejected. Jack Duncan, real estate consultant to Dixieline Lumber, 3250 Sports Arena Boulevard, San Diego, 92110, offered to answer any questions the Agency/Council might have, as Dixieline was the seller of more than hal f the Wal-Mal t Center site, as well as a co-tenant of the Center. He noted that while there was objection to the project, primarily by labor, Dixieline supported labor. Mark Ostoich, 600 North Arrowhead Avenue, San Bernardiao, representing Wai-Mart Stores, said he was also available to answer any questions and thanked the Agency/Council for ils consideration. He noted staff had been excellent to work with. The deal, though very hard fought, was equitable to beth sides. Member/Council Member Moore noted Chula Vista offered, through Southwestern College, training of employees for major employers such as Wal-Mart and that was available to Wal-Mart should it be interested in availing itself of those resources. Chair/Mayor Nader thought one could assume that a Labor Union could orgauiz¢ WaI-Mart just as easily as any other employer. Mr. Ostoich stated Wal-Wart was subject to all Labor laws of the United States and the State of California. Attorney Boogaa. rd sought to clarify a statement made by Mr. McMahon relative to AB1290. The Agreements had been crafted in a manner which did not identify sales tax as any source and therefore there was no specific 'obligation to use sales tax to provide the subsidy. Any source the City or A~ency had available to it may be called on. Sales tax was only identified as a measure for the subsidy. Chair/Mayor Nader complimented Attorney Booguard on the crafting of the Agreements. Attorney Boogaard demm'md, noting Agency Special Counsel, Marcia Scully, and Deputy City Attorney, Glen Coogins, deserved the compliment. Attorney Boogaard stated he wanted it on the record that Counsel found the AB 1290 issue was not a risk since the history of the development of the site showed prior development and therefore the AB1290 constraint against using sales tax would not apply on this particular property. Philip Ariains, Gatlin Development, 12625 High Bluff, San Diego, said G-afiin was involved with the project for over one year at Wal-Mart' s request. Wal-Mart came to Southern California about two years ago and identified several locations in Chula Vista as potential sites--this site and one other. Wal-Mart realized the site had an access problem and asked Gatlin for assistance. Gatlin worked with the staffs of the City of Chula Vista and the City of National City to solve the difficulties die site presented. Gadin was working diligently with Wal-Mart and the City to go forward with the project and was pushing forward for a 1995 opening. Wai-Mart authorized $150,000 worth of surcharging within the last month. There was considerable bad press against Wal-Mart with respect to their employment practices. Wal-Mart was rated in die Top 10 type of employers people want to work for. Both Wal- Mart's full- and pan-time employees have full benefits, which include medical, stock participation, and such. Minutes August 23, 1994 Page 6 Agency/Council Member Rindone asked what was surcharging. Mr. Adnm~ replied the problem was that the site was a fill site, that is, the site was unstable and soil was required to be brought in and stacked about 30 feet high and then compacted to re-stabilize the soil. It required a six-month process to do that. Jen'y Afford, National Avenue Associates, 244S Fifth Avenue, San Diego, spoke in favor of the project. The project would create a tremendous symbiosis in the area. The Chuia Vista project would generate approximately 450 jobs and the City of National City's portion of the project would generate additional jobs. There being no frether public testimony, the public hearing was declared closed. Agency/Cotmcil Member Rindone, quoted from page 3-8 of the staff report, It is possible the subsidy paid to Wal- Mart in any one year might be greater than the new sales tax revenue actually generated by Wal-Mart in that same year., and requested staff explain. Mr. Goss responded that was a possibility, in the sense, that if the sales tax was drawn from other businesses in Chuia Vista, then the increase in Wal-Mart generated sales tax would be counter balanced by a reduction of sales tax revenue of other businesses in Chula Vista and, therefore, the amount of the subsidy that would be forthcoming would be a negative to the City. As a practical matter, because of where Wal-Mart was located, and based upon the projections by the economic advisors, it was very unlikely that would happen. Mr. Salomone added that sales tax projections were very conservative. The sales tax projections did not contemplate the other sales tax generators on the site--the projection was based only on the 120,000 square foot Wal- Mart. There was an additional 80,000 square feet of commercial/retail which would generate sales tax but those were not contemplated to be used as a part of the Development Agreement. The net increase in sales tax to the City would be substantial. Mr. Goss noted a typical Wal-Mart generated two to two and one-half times greater sales tax revenue than a typical Target store. Chair/Mayor Nader pointed out a Labor Union individual had indicated there were alternative proposers to develop the property as well as documentation on the negative economic impacts of the project that was before the Agency/Council. Had any other proposals for development of the property been presented to the Community Development Department? Mr. Salomone said there had not. That Labor Union individual was offered the opportunity to propose, and Owner Participation Rights were extended under the Law. No proposals were received. COUNCEL RESOLUTION 17631, AGENCY RESOLUTION 1416, COUNCIL RESOLUTION 17630, AND AGENCY RESOLUTION 1417 OFFERED BY AGENCY/COUNCIL MEMBER RINDONE, reading of the text was waived, passed and approved 4-0-1, with Fox absent. ORAL COMMUNICATIONS None. Minutes August 23, 1994 Page 7 ACTION ITEMS 4. RESOLUTION 1411 ADOPTING THE REDEVELOPMENT AGENCY BUDGET FOR FY 1994-95 AND APPROPRIATING FUNDS THEREFOR-The FY 1994-95 Redevelopmcnt Agency Budget was reviewed as part of the City budget approval process. As the Redevelopmerit Agency is a separate legal entity, it is necessary to approve the budget separately as required by California Community Redcvelopment Law. Staff recommends approval of the resolution. (Administration) Executive Director Goss gave a brief report. At the 6/21/94 Agency meeting, the 1993-94 budget was adopted and the 1994-95 budget adoption was deferred pending staff response of two issues: [1] the City Attorney was to analyze the legal aspects of the proposal to invest City funds for acquisition of Agency-owned real estate, and [2] staff was to review the 1994-95 budget in greater detail. The City Attorney has indicated, that under the Charter, it did not appear legally viable. Staff now recommended selling off some Agency property and returning to the Agency mid-January 1995 with a mid-year progress report. It appeared, given the cttrrent economic situation of the Agency, there was a need, on a selective basis, to make liquid some of the Agency' s assets in order to provide revenue for balancing the budget of the Agency. It entailed selling the Marina Motor Hotel and Cappos property to the Port District. The Fuller Ford and South Bay Chevrolet sites were being marketed for sale, as well as Requests for Proposals being prepared for development opportunity of those two sites. A Request for Proposals was proposed to sell the El Dorado Building and leasing whatever parts the City continued to need for its operations. Over the past several months, it had been leanted the Agency would receive a portion of the expenses, related to the Paint Pit at the Corporation Yard, back as revenue. In terms of refunding the 1986 Bayfront TABS, it now appeared the savings for 1995 would be $816,000. The monies the Agency had been paying to the State for the past three fiscal years would stop, unless the State took additional action. The snmmary showIt on pages 4-10 and 4-11 of the staff report, was prepared to identify items that would be beneficial for future Agency budgets. The Agency still had other property assets it could sell, if necessary. The sale of the identified properties was a major work effort, and a high priority, by staff. Member/Council Member Horton noted part of the financial plan included selling off certain properties the Agency owned. Why was the E1 Dorado Building being done through a Request for Proposals. Mr. Goss replied the only buyer for the Marina Motor Hotel and Cappos property was the Port District. However, through a Request for Proposals process for the E1 Dorado Building, staff could recoup the value of the building based upon existing long-term rental commi/ments that might make it more desirable from an economic standpoint 'of a buyer. Staff may want to further elaborate. Mr. Salomone concurred with Mr. Goss. The South Bay Chevrolet site may be in question as the envisioned project was on hold. Member/Council Member Horton asked the purchase price of the Fuller Ford, South Bay Chevrolet sites, and the El Dorado Building. Mr. Salomone noted the approximate price of the South Bay Chevrolet and Fuller Ford sites was $2.5 million each. The El Dorado Building was purchased for approximately $1 million. Member/Council Member Moore had a concern with the sale of the El Dorado Building. The Agency/City was paying for nearly 80 percent of the occupancy. Prior to the Request for Proposals process, staff needed to prepare information which showed present income, what the Agency/City was paying to lease space in the building, and what the Agency/City would pay to lease the space should the building sell. Mr. Goss said staff would prepare those figures. The El Dondo Building was purchased, in part, because it was within a redevelopment project area and it provided needed office space for the Civic Center. Non-profit Minutes August 23, 1994 Page 8 organizations subsidized by the Agency/City was a burden on the City's Operating Budget. If the City was to lease the building, it would need to be determined if South Bay Community Services would pay market-rate rent, or whether them would be some other way for the Agency/City to subsidize South Bay Community Services, though that was a policy issue. Member/Council Member Moore poinmd out the building did not need to be sold for Council to change the policy with respect to the subsidy for South Bay Community Services. Mr. Goss noted that after analysis and discussion, it was determined the Agency should not subsidize City operations to that extent. Member/Council Member Moore noted one was better off to own than rent, unless of course, one bought high and sold low. Mr. Goss said an option would be for the City to buy the building from the Agency. There would, however, be a corresponding reduction in General Fund Reserves, but the City would have an asset and the Agency would receive money. Member/Council Member Moore stated he liked that scenario, but would prefer the City Manage: to place that in the Annual Budget and not use the Reserves. Chair/Mayor Nader noted the South Bay Chevrolet site was being considered for use for the Teen Club. Mr. Goss said staff had previously been directed to punsue the sale of the South Bay Chevrolet site. Mr. Salomone noted South Bay Community Services' proposal was only for eight months to one year for use of that site. There was the possibility of them using the site and the Agency still sought a buyer for the property. Staff was exploring other sites for the Teen Club. Mr. Goss noted all five Agency-owned properties listed in the staff report would not have to be sold this year to balance the Agency's budget. Unless otherwise directed, staff would seek to sell the South Bay Chevrolet site and would most likely do a Request for Proposals to determine interest in the site. Staff has been encouraged to look at other sites for the Teen Club. Member/Council Member Horton thought should the Agency have the opportunity to sell the South Bay Chevrolet site then it should do so. Member/Council Member Rindone wanted to know what was an excluded major capital expenditure, as stated on page 4-5 of the staff report. Director of Finance Powell pointed out capital expenditures were exchded from the report as Agency expenditures. Member/Council Member Rindone asked why they were left out of the prior report. Director of Finance Powell thought it was due to miscomm~mica~on between the Finance Department and Redevelopment Agency staff. CIP expenditures were excluded from that prior table. Member/Council Member Rindone explained he had made it clear when he voted on the 1993-94 Budget on 6/21/94, that he voted on it only because the Agency was ending with a positive balance. Because these figures were excluded, then the Agency did not end the fiscal year with a positive balance, it ended with a negative balance in the sum of $863,289. The current value listed for the Fuller Ford property was $1.1 million, yet when that property was discussed on page 4-3 of the staff report in conjunction with the proposal by Joelen Enterprises, that Minutes August 23, 1994 Page 9 amount ofmoney would be realized. Council had stated it wanted that project eramined, and if it proved feasible, then to go forward. Why was that property listed at $1.1 million when it was known that was not in the realm of possibility? Mr. Salomone stated staff needed to look at a proforma of the Joelen Enterprises project and the $1.1 million was the figure loelen Enterprises was willing to pay. However, their offer was below market value. Mr. Goss pointed out Joelen Enterprises had a concern over fees and once those were addressed, and resolved, it might make a difference in their economics and have an impact on land value. Secondly, the total number of properties staff recommended for sale exceeded by a considerable mount the amount needed to balance the Agency budget. Member/Council Member RiMone said the direction staff proposed to take-balm of the A-gency's budget-was one the Agency encouraged. The $5.5 million, which was reflective of the property sales, was only going to happen should everything be perfect. To have an Agency budget with a positive ending balance, staff would need to sell four of the five properties. Mr. Goss noted staff was projecting a surplus of $2.1 million. Member/Council Member Rindone acknowledged he understood; however, ff one looked at the current value, as shown in the staff report at the top of page 44, the current value was $5.5 million. In order for the Agency to end with a positive balm, as well as make up the more than $1 million operating deficit that actually happened in 1993-94, then at least four of the five properties listed would have to be sold. That was going to be difficult. Mr. Cross replied, not necessarily. If the Fuller Ford and South Bay Chevrolet properties were not sold, the other three properties add up to slightly less than the projected surplus. Selling the two properties to the Port District at current market value as well as selling the E1 Dorado Building would do it. Member/Council Member Rindone said that approach would leave a very thin margin. What would the Agency do next fiscal year? Mr. Goss said staff would have time to work with the Fuller Ford and South Bay Chevrolet sites. -Member/Council Member Rindone asked was there other properties staff might consider selling. Mr. Goss replied there was the Merziotis and 340-368 Bay Boulevard properties, which staff was recomlnendlng not be sold. Another property was the ShanEd La property, but Council's policy direction was to sell that property to the Port District in order to provide money to the Olympic Training Center. Member/Council Member Rindone asked what was the 340-368 Bay Boulevard property. Mr. Salomone explained those were two vacant lot properties on Bay Boulevard, south of P Street, on the west side, just south of the tirst lot, on which the Risi Bulldine sits. Member/Council Member Rindone asked the reason for holding those properties. Mr. Salomone stated the rationale was the Agency had created value by the building of the Rohr corporate headquarters adjacent to that property, and when the Bayfront developed that, too, would help to increase the property' s value. Minutes August 23, 1994 Page 10 Mr. Goss said if the Agency's inclination was to pursue the sale of other properties, then the 340-368 Bay · Boulevard property would head the list. Member/Council Member Hogon stated she could not support the sale of the 340-368 Bay Boulevard property. Member/Council Member Rindone stated the Agency should not be restricted to a limited number of properties that could be sold, and that he was not pushing the 340-368 Bay Boulevard property be included for sale. Member/Council Member Horton noted it was common for a Redevelopmerit Agency to carry debt. Member/Council Member Moore pointed out Redevelopmerit Agency must rnn a deficit. Member/Council Member Rindone said his concern was there might be properties which would be more marketable than those on shafts list. MINUTE RESOLUTION [Moore/Nader] to amend staff recommendation on page 4-1 to read: "That the Redevelopment Agency adopts the resolution which approves the Fiscal Year 1994-95 Redevelopment Agency budget and approves the following Financial Plan: [1] sell the Marina Motor Hotel and Cappos properties to the Port District; {2] market for sale the Fuller Ford and South Bay Chevrolet sites; [3] issue Request for Proposals (RFP) for the El Dorado Building subject to Agency approval of final fonn; [4] return to Agency in January 1995 with a mid-year progress report; [5] issue Request for Proposals (RFP) for the South Bay Chevrolet site subject to Agency approval of final form; and, [6] prior to issuance of a Request for Proposals for the El Dorado Building, return to the Agency with a report which shows a prior period of income from the E1 Dorado Building, what future funding requirements--ut a fair market value--would be needed if the City were to continue to lease space for various departments' staff and continue providing a rent subsidy to South Bay Community Services to occupy space in the EI Dorado Building." Approved with Resolution 1411. RESOLUTION 1411 O~}ERED BY MEMBER/COUNCIL MEMBER MOORE, reading of the text was waived. Member/Council Member Rindone asked what money staff was proposing to use to defense the non-refundable portion of the existing Bonds. ,Mr. Powell noted that was not part of the proposal before the Agency. Member/Council Member Rindone wanted to know why it was not. Mr. Haynes stated staff provided a discussion in the staff report, as shown on page 4-4, third paragraph, under Redemption of a Portion of the 1986 TABS. Mr. Powell informed the Agency that that portion of the Bonds was technically not defensible as that portion had been refunded twice, and under existing tax, law they were not defensible. The plan was to take property sale proceeds and set them aside to earn interest and thereby, in effect, defeasing the Bonds using those proceeds and interest earnings to pay down debt service. Member/Council Member Rindone pointed out that was new information. Mr. Goss noted, as staff reported to the Agency last May, by refunding the 1986 TABS the annual debt service savings was estimated to be between $100,000 and $200,000 annually; it now looked that the savings would be closer to $650,000. Minutes August 23, 1994 Page 11 Member/Council Member Riodone thought staff could explore similar options to reduce Agency expenditures so, should the Agency be able to accumulate funds, those could be used to pay down debt of other Bond issues. Member/Council Member Rindone indicated, while he hoped staff was right, he had very serious reservations about the proposed budget surplus, as indicated on page 4-7 of the staff report, as it appeared to be overly ambitious. In the mid-year report to come back to the Agency in January 1995, if the projections had not been reached, then staff needed to inform the Agency of that, and at the same time inform the Agency how to remedy the situation. Mr. Goss concurred and noted staff believed, understood, and was cognizant of the fact it was a very serious situation. As previously stated, he had stressed the point to staff that making it work was a very important part of staffs work program. Meanbet/Council Member Riodone commented the critical period was during the next three years; however, major projects were being developed by staff which could be beneficial to the Agency. He was pleased staff understood this was, indeed, serious. The mid-year report to the Agency was viewed as very important; and, if the process was not going as anticipated, then staff needed to recommend option(s) so the Agency could come close to the projections indicated in the staff report. Member/Council Member Moore remarked redevelopment agencies do not make anywhere near the property tax they used to. What they do do, if successful, was generate sizeable sales tax revenue to the City, which does not necessarily help the Agency. Member/Council Member Rindone asked where the $1.9 million subsidy from the Redevelopmerit Agency to Wal- Man was factored in. Mr. Goss replied it would show as "a wash." The Agency would pay the $1.9 million, but it would be from income that would come out of taxes from the City's General Operations into the Agency, then to the third party. Member/Council Member Rindone asked if staff was saying there would be no negative or positive impact to the Agency because of the subsidy. Mr. Salomone replied it was possible there would be no negative impact on the Agency. The major portion of the payback of the $1.9 million would come from new money generated by the whole project, not just the Wal-Mart project through property taxes. Member/Council Member Rindone asked that that be addressed in the Wal-Mart staff report when it came back to the Agency. Joseph Garcia, 484 Fifth Avenue, Chula Vista, asked if the Redevelopmerit Agency could tie-in with the International Monetary Fund as that would solve a lot of the Agency's problems. They lend money and it never gets paid back. He asked if staff could write a staff report in simple language which could be understood by the lay person. However, the analysis done by the City Attorney's office was appreciated because it was easy to compreheod. Mr. Salomone and his staff need the chance to straighten out the Agency. Chairman/Mayor Nader commented the purpose of redevelopmerit was not simply to generate revenue for the Redevelopment Agency. The purpose of redevelopment was to serve other purposes on behalf of the City-the upgmde of neighborhoods, the provision of affordable housing, the better provision of services our citizens need. The evaluation of redevelopmerit activities, including the budget, should be judged in that light and not simply in terms of revenue production which was not an end in itself in redevelopment. It was never intended to be. VOTE ON MOTION: 4-0-1, with Fox absent. Minutes August 23, 1994 Page 1~2 OTHER BUSINESS 5. DIRECTOR'S/CITY MANAGER'S REPORT(S) None. 6. CHAIRMAN'S/MAYOR'S REI~ORT(S) None. 7. AGENCY/COUNCIL MEMBER COMMENTS · Member/Council Member Rindone asked staff to prepare a one-page staff memorandum on status of the Lucky Market at Third Avenue and J Street. ADJOURNMENT ADJOURNMENT AT 12:16 A.M. (Wednesday) to the Regular Rcdcvelopmcnt Agency Meeting on Tuesday, September 6, 1994 at 4:00 p.m., immediately following the City Council meeting, in the City Co,.,nc.l Chambers. Respectfully Submitted, Berlin D. Bosworth, Secretary to the Redevelopmerit Agency [C:\WP51\AGENCYxaMINUTES\08-23-94.MIN]