Loading...
HomeMy WebLinkAbout1989 09-13 CC MINBook 71/Page 184 9/13/89 MINUTES OF AN ADJOURNED MEETING OF THE CITY COUNCIL OF THE CITY OF NATIONAL CITY, CALIFORNIA WORKSHOP - PROPOSED CIVIC CENTER FINANCING SEPTEMBER 13, 1989 The meeting was called to order in the Main Conference Room at 4:00 p.m. by Mayor Waters. ROLL CALL Council members present: Dalla, Inzunza, Pruitt, Van Deventer, Waters. Absent: None. Administrative officials present: Bolint, Caloza, Eiser, Kimble, McCabe, Myers, Peoples, Peterson, Post, Ruiz. The Mayor read into the record, a letter from the City Attorney concerning the Financing of New Civic Center and explaining Health and Safety Code Section 33445 (part of the Community Redevelopment Law) which provides for the payment of all or part of a land acquisition and construction costs by a redevelopment agency for a publicly -owned building with the consent of the legislative body (City Council). A copy is on file in the Office of the City Clerk. The Mayor then called on City Manager McCabe to give his presentation. CITY COUNCIL WORKSHOP REGARDING PROPOSED CIVIC CENTER FINANCING (a) Presentation by City Manager McCabe. City Manager McCabe handed out copies of his presentation to those in attendance. A copy is on file in the Office of the City Clerk. The presentation began with a brief walk through of the Final City Budget for 1989-90 with the scheduling therein based on the final budget. (A) Budget Reconciliation Statement - Final vs. Preliminary (Schedule 1), which reflects that the budget for this year increased by only 2.8% which means that only $818,000. was added to the City budget for the current calendar year. Schedule 1 summarizes all of the numbers from the following two schedules which reflects a $29.5 million budget for the City and then with Redevelopment, well over $40 million. (B) Budget Analysis - By Fund (Schedule 2), the second page, reflects the major revenues and expenditures that will take place in the City and have been summarized. The main emphasis is that while there is a total reserve for the upcoming year of $5.8 million, a majority of that reserve is for restricted uses such as special revenues gas tax, sewer, grants, Proposition "A" money and liability insurance. He then called attention to Area 643, Vehicle Services which this year is lower than what the Council Policy indicates they should be. There should be about $1.8 million in the account but in the Final Budget, there is only $360,000. resulting in a variance of $1.4. The reserve was started three years ago as a sinking fund based on the value of the City Fleet so that at all times there would be sufficient funding for needed replacement (this year a new Fire Engine at $200,000. was purchased). This is a solid budget that recognizes what is happening with revenues plus a minimal increase for the coming year. The bottom line is that there is an almost $6 million dollar reserve with 80-90%tied up in various accounts which cannot be spent for salaries, cars etc. but must be put into parks and recreation, roads, the bond act etc. So only about $1 million is free as shown on the top line of Schedule 2, there is $810,450. for things that may occur during the year. Last year about $400,000. was spent out of the reserve. (C)Expenditure Analysis - All Funds (Schedule 3), is the expenditures by department, by fund and indicates where the money is being spent. The major portion this year went into Personnel Services, salary adjustments. Even at that, the adjustments were an average of 5.6% total. The total budget only went up 2.8%. The City Manager then reviewed with the Mayor and Council, the "History of Why Tax Increment Financing." The bottom line was that based on review of City Operating Budget, General Fund and Tax Increment Revenue, Council did not support a City budget expenditure because it is directly affected by the Gann Limit (override expires 1991 - $1.1 million) and because of the potential reduction of service levels to citizens to fund the debt. The Council had supported tax increment financing because of a) no impact on Gann; b) no impact on CDC Bond Capacity; c) it is a relatively predictable and secure source of funds. City Manager McCabe then presented two charts which were prepared based on information provided by CDC Director Peterson who on 9/12/89 submitted revised figures. The first chart presented was on the Redevelopment Analysis df Income, (CDC vs. Private Effort) (Attachment 2 in the presentation package). The analysis for the past year indicates that the total increment value is $325,299,618. One third ($109,536,970) is generated from CDC project areas while two thirds ($215,762,648) is generated from private effort. So when talking about the City, what it is doing and how it is progressing, it is somewhat limited because the redevelopment areas take in half the City which is only gradually moving while the development area is rapidly moving with the tax increment money. This is why the City has requested assistance from redevelopment, since the building would be in the redevelopment area, to produce the City Hall as a benefit to the whole area. A 2 to 1 ratio may be something to think about. Book 71/Page 185 9/13/89 City Manager McCabe also presented a chart and explained the "Projected Cash Flow " Analysis (Attachments 4A and revised version 4B in the presentation package). Mr. Petersons information which he had provided for the CDC - Amendment III, inclusive of the most recent revisions submitted, were used to create the chart. The years run from 1989 to 2013; the Tax Increments are what is produced every year, which coincide with Mr. Petersons figures; the Bond Proceeds are from Schedule B and take into account the proceeds of the bonds that CDC is going to sell on those specific dates; Schedule C the fixed cost for the CDC operation has been put together extending them out based on the information provided by Mr. Peterson; the CAB COP column is the City Administration Building funding, COP which is $14 million or $1.4 million annually even if tax increment bonds were sold; the Debt Service is shown on Schedule D and is the dollar amount necessary to pay off these items; Schedules E,F and G are the various things Council has agreed to do under the Amendment III Plan and have been reflected under the years that they have been called out to be done; the Fund Balance shows that if you start with the cash available from the budget of CDC and play the figures going across, the ending balances for the amount of time that that is in operation. There appears to be sufficient funding on the first go -around to pay for all of Amendment III, the standard cost of operating CDC, the City Administrative Building and cover all the debt service. The revised plan submitted by Mr. Peterson (Attachment 4B in the presentation package), resulted in a better Fund Balance than in the first. In closing, McCabe reiterated that this was a workable project with the CDC paying all of Amendment III, $14 million on the City Administration Building and still having the reserve reflected in the Fund Balance column at the end of each year. Once by the year 1998, when the City pays off Plaza Bonita, it will add $1 million to its' resources also. The recommendation, as from the start, is that the tax increment financing be the method to carry off the building of City Hall and Amendment III. A general discussion and question and answer period followed. Mayor Waters then called on Community Development Director, Arnold Peterson. (b) Presentation by Community Development Director Peterson. Mr. Petersons presentation consisted of a review of a spread sheet he had previously prepared and submitted to the Mayor and Council. The Spreadsheet was titled "Community Development Commission of the City of National City, CA. National City Downtown Redevelopment Project, Amendment III Financial Projection 9/11/89. A copy is included in the presentation package on file in the Office of the City Clerk. Mr. Peterson said there was a flaw caused by a statement previously made by a bond lawyer who said that the COP's had no effect on the CDC bonding capacity for tax increment bonds. He stated that this was legally true and correct, however, his projection and "belief on a practical basis", is that the CDC must have in its hands the money to issue and pay on the bonds. This means that if the Redevelopment Agency sells $14. million COP's, that money goes out and if at $1.4 million per year, the capacity to issue and sell the bonds needed to do the projects and programs under Amendment III is not there. Finance Director Caloza added clarification that according to the financial advisor, Stone & Youngberg, the CDC's obligation for the COP's can be structured to be a junior debt for all existing and future CDC tax increment bonds. Mr. Peterson clarified that this meant that the issuance and sale of COP's is a junior debt that would be put aside and not considered when calculating the Redevelopment Agencies next bond issue. Finance Director Caloza further clarified that for the COP's, the City would be issuing the debt. The City would therefore be primarily liable for the payment of the debt service. The obligation of the CDC would be to the City. Mr. Peterson said that this helped as the COP's then are not a debt to the CDC and would not impair the CDC. Mr. Peterson said that the matter remaining in question, was how much the CDC would pay. Once the amount was determined, the CDC would not be in a position to sell tax increment bonds to an extent more than payment on bonds outstanding, less any other bonafide contract payments to a developer, the City etc. and the remainder is what could be bonded against. Councilman Van Deventer left at 5:12 p.m. Councilman Van Deventer returned at 5:13 p.m. Councilman Van Deventer pointed out the balance left over each year that could be used. Mr. Peterson stated he did not know the accuracy of the figures. Councilman Van Deventer reminded Mr. Peterson that the figures were those which he had provided. City Manager McCabe noted that the factor Mr. Peterson seemed to be leaving out, was the starting of his equation with what the tax increment is for every year which is like paying all debts out of one paycheck every two weeks. The fund balance is being left out which is carried forward. For example, it is not really $3.8 it is $6.3 with which $25 million in bonds could be sold. Each year this amount is carried forward. Book 71/Page 186 9/13/89 General discussion, questions and answers followed Mr. Petersons presentation. Councilman Van Deventer left at 5:34 p.m. Councilman Van Deventer returned at 5:35 p.m. Mayor Waters called a recess at 5:55 p.m. Councilmembers reconvened at 6:05 p.m. ROLL CALL Councilmembers present: Dalla, Inzunza, Pruitt, Van Deventer, Waters. Councilman Pruitt stated that 50% is more than fair for the Community Development Commission to obligate itself for in retiring whatever the note is for the new Civic Center and at the same time leave it in a position to continue doing what its doing, which is generating revenues and redeveloping areas of this City to help pay whatever the bill is. Councilman Van Deventer stated that he would like to see Council go into it where the CDC picks up 3/4 through the year 1998. At that time the CDC would be relieved down to the 50% at that time because at that time we would release in the City $1.1 million of revenue expansion that we would be putting out right now. Mr. Peterson proposed that if the Board Members could be in agreement that CDC would pay 2/3 the payment of the Civic Center period without any reference to any future change, he would recommend that. City Manager McCabe stated that a 2/3 CDC and 1/3 City split was a reasonable solution. ACTION: Motion made by Van Deventer, seconded by Inzunza, for the CDC to Day 2/3 of whatever indebtedness the Civic Center will be. total costs. and each keep $1.000.000 that can be used to reduce the basic amount or provide it towardpayments. and the City to sell the COP's. Carried by unanimous vote. ADJOURNMENT Motion by Van Deventer, seconded by Pruitt the meeting be adjourned to the Next Regular Meeting - Tuesday. September 19. 1989 - 4:00 p.m. in the Council Chambers Carried by unanimous vote. The meeting closed at 6:49 p.m. 0-AA- Vlk e �I La) CITY CLER The foregoing minutes were approved at the regular meeting of September 12, 1989 MAYOR CITY OF NATIONAL CITY, CA ALL CITY COUNCIL MEETINGS ARE TAPE RECORDED. YOU MAY LISTEN TO THE TAPES IN THE CITY CLERK'S OFFICE.