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HomeMy WebLinkAboutrda min 1995/02/28 CC MINUTES OF A SPECIAL JOINT MEETING OF THE REDEVELOPMENT AGENCY/ CITY COUNCIL OF THE CITY OF CHULA VISTA Tuesday, February 28, 1995 Council Chambers 8:43 p.m. Public Services Building CALL TO ORDER 1. ROLL CALL: PRESENT: Agency/Council Members Fox, Moot, Padilia, Rindone, and Chair/Mayor Herton ALSO PRESENT: John D. Goss, Director/City Manager; Bruce M. Boogaard, Agency/Council Attorney; and Beverly A. Authelet, City Clerk 2. APPROVAL OF MINUTES: February 21, 1995 MSC (Fox/Padilla) to approve the minutes of February 21, 1995 as presented. Approved 40-0-1 with Moot CONSENT CALENDAR (Item pulled: 4) 3. WRITTEN COMMUNICATIONS: None submitted. 4. RESOLUTION 1446 PROPOSING TERMINATION OF THE AMENDED PALeMAR TROLLEY CENTER DISPOSITION AND DEVELOPMENT AGREEMENT AS A RESULT OF EXCESSIVE PHASE H PROPERTY ACQUISITION COSTS, AND DIRECTING STAFF TO MEET AND CONFER WITH THE PALeMAR TROLLEY CENTER DEVELOPER REGARDING THAT PROPOSITION-The approved Disposition and Development Agreement (DDA) called for the Agency to participate in the excess costs of property acquisition and public improvements in order to make the project financially feasible for the developer. As a risk containment measure, either party has the right to "walk away" after conferring with the other party, if the costs exceeded established maximum thresholds. Staff recommends approval of the resolution. (Commumty Development Director) Pulled from the Consent Calendar. Mr. Boogaard informed the Agency that an amended resolution had been distributed. It implemanted the recommendation from the City Manager to meet and confer over a termination. Copies of the amended resolution had been given to representatives of Cyprus Cre~k. Mr. Goss stated the project had been bifurcated into two phases. In Phase II there was n procedure involved where the parties could go through a process to meet and confer over the respective cost sharing that would be involved in the project. Staff felt the people involved in the project had been very open and honest and responsive in the project. There was some knowledge that they were slightly above the $20 sq. ~. target. It was his understanding there was a lot of variation as to what the eventual costs could be to the overall project, i.e. anywhere from $26 to $32 sq. ~. There was a desir~ to keep pushing ahead by the developer and it was not until late November or early December that staff focused on the fact that it would be at the $26 sq. ft. which was considerably above the limit in the agreement. He felt it his responsibility to call to the Agency's attention to the conditions they were facing in light of the agreement. The RDA was a business and needed to be concerned about the impact of various agreements on the overall operations. There was a letter on the dias that expressed concern that the decision to terminate had already been made and that compliance with the meet and confer provision in the agreement was not being made in good faith. He assured the Agency that was not in concert with any discussion or instrnctinus he had given staff. He felt under the agreement that the numbers had reached a point that it was worth while to use Minutes February 28, 1995 Page 2 the provisions in the agreement and to enter into a meet and confer process which would be in good faith by both parties. · Jim Moxham, 2801 Albatross. Street, San Diego, CA, representing Cypress Creek and their managing agent under the development agreement, Sun Belt Management Company, stall due to a delay of several years and bringing forward a larger project at the request of the Agency, the developer was promised the Agency's support and cooperation. The tone and direction of the staff report caught Sun Belt completely off-guard. They were shocked and felt betrayed. Sun Belt had done everything asked of them under the DDA and also not required of them, i .e. daycare, scholarship fund, redesign of project to accommodate a new street alignment for Price Club that was done at San Belt's cost with loss of efficiency of their parcels, etc. They had consisten~y performed throughout the process. Palomar Trolley had always been viewed and analyzed as one project, but because of the complex ownership interest of the Phase It properties it had to be built in two phases. If Sun Belt had waited until all the pieces were in place there would be no project today. Over the life of the DDA, which ran until 2012, the project would generate over $9.2 million in tax revenue to the City. That did not include the unaccounted benefit of a major Target expansion which was an indirect result of the project. All told over the term of the DDA, between what the new center would produce and what was being generated from Target, it would be over $10.6 million to the City. Phase I was developed below the anticipated cost and saved the Agency potential additional contribution of $165,000. Sun Belt successfully brought in the public improvements in under budget saving the Agency an additional potential contribution of $200,000. In their open and honest dealings with the City/Agency and their staff representatives they had always shared their cost projections. He did not feel there was any serious doubt in either party's mind that the cost would be over $20 sq. fL When the amended DDA was approved in 7/93, staff presented at that time that $21 sq. ft. was the most recent estimate. On 12/93, Sun Belt provided staff estimates that costs were approaching $24 sq. ft. and that information had been known for over 14 months. Even though staff knew for over one year that the costs were approaching their current level they took no action to consider termination. As recently as November when final settlements were being negotiated, Sun Belt sought confirmation that they should continue to proceed. The action before the Agency was the response to Sun Belt's request to have the Agency's support to increase the limit. They were justifiably upset when Agency representatives knew the costs, approved all the settlements, and they now found themselves before the Agency considering the adoption of a resolution to terminate the DDA. They had been blind sided by the sudden and unexpected action. Overall, the difference between the staff estimate at the beginning and where they were today was less than $33,000. Staff should be congratulated for accurately predicting the costs of the project. Sun Belt would pay the over budgeted amount (the $33,000 differential between when the DDA was approved and the present) if the Agency was prepared to move forward. Sun Belt requested that the Agency reject the resolution and direct staff to bring forward a resolution increasing the Phase II limits to $26 sq. ft. which would put them in line with the total costs as originally conceived when the DDA was approved. Chair Horton stated it was staffs consensus that Sun Belt performed in good faith and had been honest and up from in all dealings, It was her understanding that the actual $26 figure was not actually known'until several months ago. David Gnstafson, Assistant Director of Community Development, stated the first time he sew the $26 amoant in writing was the beginning of November. Mr. Moxham was correct in that staff knew that the costs were going to be over $20 sq. ft. The Agency knew that at the execution of the DDA, but they did not know how much over it would be. In early No~'ember, they had an estimate for one settlement that ran anywhere from a favorable settlement at $1.3 million to an unfavorable settlement at $2.2 million. Staff was in a quandary as to when they should bring forward an approval for an amoant over $20 when they did not know how much it would be over $20. Mr. Boogsard suggested that the matter had a potential for proceeding toward litigation. Although there had not been a threat of litigation, there was a letter from the attorney for the developer. The testimony being given would be extremely relevant to litigation. The Manager had presented an option which would get the Agency and developer to a negotiating table which would take advantage of a negotiated provision, i.e. tha "walk away' right. He recommended that the Agency either go into Closed Session to discuss the item because there was a setions prospect of litigation or that the Manager's recommendation be apprnved. He recommended that the solicitation of evidence that could be used against the Agency in subsequent litigation be avoided. Minutes February 28, 1995 Page 3 Chair Hotton questioned whether it would be Sun Belt's preference to go forward and m~et and confer to come up with a reasonable solution. Mr. Moxham replied Sun Belt was always prepared to discuss the issues and probably preferred that would have happened prior to the staff report. Sun Belt felt strongly about their position and were not hacking down from it and felt the Agency should move forward in taking action to increase the numbers. San Belt was prepared to sit down with staff and negotiate in good faith. Member Moot questioned if Sun Belt was unaware of Provision 8.4 of the agreement while they were negotiating the agreeme~nts to acquire the properties through condemnation and that the thought never occurred to them that the contract with Provision 8.4 may be asserted by the City. He was shocked that they knew that agreement existed with the provision in it and now they expressed shock that the Agency may want to invoke a provision of the agreement. Mr. Moxham stated he and San Belt were aware of the provision in the agreement and it was one of the reasons they had continually shared cost estimates with the Agency representatives so no one would be surprised in the eleventh hour as to what the costs were. They were continually updated as new information or settlements were reached. He felt it was Sun Belt's expectation, based on conversations with Agency representatives, that they were always supportive of increasing the limit. When the staff report came out to the contrary it was a shock. The provision allowed either party to terminate if the costs were over. Sun Belt knew they were over and did not choose to terminate and the Agency knew they were over and they never exercised that right to terminate until the resolution. It was a little difficult for him to say that the Agency could approve every settlement knowing that they were pushing the limit over $26, take the money from Sun Belt, settling them in the Ageney's name, and then come back and say we spent your money and you've gone over the limit and the Agency was going to terminate ander the provision. Mr. Bangsard urged the Agency not to respond publicly to that contention and to allow the matter to be handled by the representative at the negotiating table. Chair Horton questioned if the rents for Phase I were fixed rents or based on gross sales. Mr. Moxham replied they were all separately negotiated. Ralphs was $12 'sq. ft. with cost of living increases and a percentage. The majority of tenants had percentage rent provisions in their leases. Chair Horton stated since the projections were actually higher than originally anticipated their return was greater than anticipated. t . Mr. Moxham responded that the center had only been open for a short time and untd the annual sales figures came in on a stabilized basis with all the businesses open it was impossible to answer that question. Member Rindone stated everything that the City had done to the current time was in good working relationship with the developer. The first Phase had met, if not exceeded, both the developer's and City's expectations. He felt it was an intermediary step and the only reason he could support it was becaus~ it was a two part provision, i.e. 1) recognizing the provision to *walk away*'; and 2) directing staff to meet and confer with the project developer regarding possible alternatives to provide resolution and complete the project, i.e. Phase II. He felt everyone would like to see Phase II completed. With great reluctance he supported the staff recommendation, but did so because of the concern regarding the fiscal solvency of the RDA. MOTION: (Rindone) to approve the staff recommendation, i.e. to recognize the "walk away" provision and to direct staff to continue negotiations in an effort to find a solution to complete Phase 1/. Mr. Bangnard recommended that the Agency adopt amended Resolution 1446 which would be consistent with Member Rindone's motion and made reference to the relevant provisions of the agreement. in tei Febmary28, 1995 Page 4 Member Rindone stated that was the intent of his motion. Member Moot stated the contract provision required the Agency to meet and confer before considering termination. He read the staff report as giving the RDA a variety of views to look at as to what options could come up in a meet and confer conference. He felt the Agency's action was to go to the meet and confer process with the issue being brought back to the Agency to review what was discussed and what their options would be at that time. Mr. Boogaerd requested that a separate spin not be put on the language in Resolution 1446. The intent of the resolution was to put the Agency in a position to terminate the agreement and deliberate on terminating the agreement. That required that the Agency offer to meet and confer to raise the limits above the $12 sq. ft. as provided for in Section 8.4 of the agreement. RESOLUTION 1446, AS AMENDED, OF}'ERED BY MEMBER RINDONE, reading of the text was waived. RESOLUTION 1446 PROPOSING DELIBERATION ON TERMINATION OF THE AMENDED PALOMAR TROLLEY CENTER DISPOSITION AND DEVELOPMENT AGREEMENT AS A RESULT OF EXCESSIVE PHASE II PROPERTY ACQUISITION COSTS, AND DIRECTlING STAFF TO MEET AND CONFER WITH THE PALOMAR TROLLEY CENTER DEVELOPER REGARDING THAT PROPOSITION Chair Herton stated it was a hard decision to make as the Agency needed to find ways to address their deficit situation. However, it was her understanding that all through the project the developer worked in good faith with the Agency and went overboard in providing and addressing the Agency's needs in a very cooperative way. She supported the staff and developer entering into meet and confer for a possible solution. She felt the 'walk away' provision, given the situation, was too harsh. She was not sure in her opinion that was fair and equitable. VOTE ON RESOLUTION 1446: approved 4-1 with Herton opposed. 5. REPORT REQUEST FROM AUTO PARK DEALERS FOR ADDITIONAL FINANCIAL ASSISTANCE--On 1/17/95 Council approved a conditional payout of $1.3 mi.llion 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. (Continued from the meeting of February 14, 1995) Staff reaues_______.~ the item be continued to the meetin2 of March 7, 1995. (Community Development Director) MSUC (Rindoneatorton) to continue the item to the meeting of March 7, 1995. * * END OF CONSENT CALENDAR * * PUBLIC HEARINGS AND RELATED RESOLUTIONS AND ORDINANCES None Submitted. ORAL COMMUNICATIONS None Minutes February 28, 1995 Page 5 ACTION rlEMS 6. AGENCY/COUNCIL REPORT CONCERNING A REQUEST FROM McMHJ,1N COMPANIES FOR FEDERAL HOME FUNDS AND REDEVELOPMENT AGENCY LOW AND MODERATE INCOME HOUSING FUNDS FOR A PROPOSED AffORDABLE HOUSING PROJECT IN RANCHO DEL REY SPA lll-McMillin Company is negotiating with a private non-profit joint venture to develop a 40 unit affordable housing project in SPA III of Rancho del Rey. The joint venture has requested federal HOME monies end Low and Moderate Income Housing Fends for the project. Staff recommends the Agency/Council provide direction to staff. (Community Development Director) Agency/Council Member Moot stated he would abstain from participation due to a conflict of interest with his business and left the dins. Shelia Shanahen, Community Development Specialist I, reviewed the project. Staff would return on March 7, 1995 with specific project details and appropriate legal documents. The Housing Advisory Commission had reviewed the proposal and supported it conditioned upon Council approval of the final documents end that the City contribution net not exceed $10,000, To bring the net contribution down to $10,000 staff was proposing that the City and McMillin Company split the affordable housing credits that could be created from the project. Chair/Mayor Horton questioned how long the Agency/City had the $10,000/unit benchmark. David Gustafson, Assistant Director of Community Development, replied that it was not an official policy, but had been a general approach to affordable housing projects. The average might be closer to $8,000. Staff had taken the posture with most developers that $10,000 would be a maximum so the available funds could be spread out over all the project burden. Ms. Shanahan responded there was about $680,000 in Federal HOME funds and approximately $400,000 in the Agency low/moderate income housing fund. The Agency would be receiving over $700,000 in HOME funds 7/95 and approximately $1.1 million in low/moderate income housing funds. Chair/Mayor Horton questioned who came up with the estimated cost of $121 ,230/unit. Ms. Shanahan replied that the joint venture had prepared a proforma on the venture. That number included the land value as well as paying off the Mello Roos District. Agency/Council Member Rindone questioned the difference in the estimated value of the land. Ms. Shanahan stated staff was currently waiting for information on the value of the land. It was an estimate that everyone had agreed to use in the proforma and further negotiations about the relative contribution of McMillin's land contribution versus the Agency's was ongoing. Mr. Gustarson informed the Agency/Council that McMillin had engaged an appraisal and felt it would be ready for the meeting of the 7th. Agency/Council Member Rindone stated that would then have an impact on the requested funds per unit, therefore, there could be a significant change. Mr. Gustarson stated the negotiation had been structured so they would be responsible fqr providing $800,000 in the proforma and the Agency/City had capped their participation based on the concept of $800,000. Agency/Council Member Rindone questioned how the other 17 units would be marketed and how it would be advantageous to the Agency/City. February :28, 1995 Page 6 Ms. Shanahan replied that the units would be available for other developers, mostly the developers in the eastern territories with the affordable housing requirement. Instead of building actual units they could buy the credits for a dollar amount {estimated $25,000/credit). Agency/Council Member Rindone questioned if it would be on a 'first come, first serve' basis. Mr. Gustafson responded that McMillin would have the latitude, with the Agency/City oversight, to market the credits. A lot of the details were yet to be negotiated. The Agency/City would be looking at a guaranteed veturn of the Agency/City investment over $10,000/unit. With every sale McMillin would have to pay back that proportional amount, i.e. 1/17th of the entire cost over $10,000. Agency/Council Member Rindone questioned how long they would have to maintain the units for low cost housing, Ms. 5hanahen replied that the minimum affordability period would be 55 years. MSC (Fox/Rindone) to adopt staff recomroendatlon and have staff return on 317195. Apprnved 4.-0..O-1 with Moot abstaining. ITEMS PULLED FROM THE CONSENT CALENDAR Item pulled: 4. The minutes will reflect the published agenda order, OTHER BUSINESS :7. DIRECTOR/CITY MANAGER'S REPORT(S) - None 8. CHAIR/MAYOR'S REPORT(S) - None 9. AGENCY/COUNCIL MEMBER COMMENTS - None ADJOURNMENT ADJOURNMENT AT 9:28 p.m. to the Regular Redevelopment Agency Meeting on Mdeh 7, 1995 at 4:00 p.m., immediately following the City Council meeting, in the City Council Chambers. Respectfully submitted, BEVERLY A. AUTHELET, CMC, City Clerk Vicki C. Soderquist, DepJ~,City Clerk