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HomeMy WebLinkAbout11/09/83 MINUTES RAMINUTES BAKERSFIELD REDEVELOPMENT AGENCY Regular Meeting--November 9, 1983 The Regular Meeting of the Bakersfield Redevelopment Agency was called to order by Chairman Barton on Wednesday, November 9, 1983 at 5:05 p.m. in the City Hall Council Chambers. The Secretary called the roll as follows: MEMBERS PRESENT: James Barton Chris Christensen John Means Art Rockoff MEMBERS ABSENT: Thomas Payne Donald Ratty MINUTES Minutes of the Special Joint Meeting of September 27, the Joint Public Hearing of October 18, and the Regular Meeting of October 26, 1983 were approved as presented. CORRESPONDENCE 1. Correspondence was received from Helen of the Mental Health Association in Kern County, 1983 regarding the lease of properties owned by Agency at 2022 "L" Street. Smoot, President dated October 25, the Redevelopment Ms. Susan Johnson, representing the Mental Health Association, was present to explain the services of the Mental Health Association and what it hopes to accomplish with the use of this building. She also requested some assistance in keeping the cost down. Agency [4ember Rockoff questioned if there would be any problem wihh leasing Lhis structure on a short-term basis. Executive Director Kelmar stated that it would have to be on a year-to-year basis, and that he didn't anticipate any problem with leasing the building on a one-year contract for at least hwo years, maybe three. Agency Member Rockoff guestioned ~ f a~?e would be any problem with bringing the building u? ~_o '~!ty code. Executive Director Kelmar responded Lhat the Building Depart- ment has reviewed the needs, and that it would cost approximately $7,000 to make the necessary iml~rovements to bring the building up to code. Agency Member Christensen commented that mental health ~s a very importanh problem within the nation, state and community, and that any reduction of rental fees would be of help since they have to spend money to bring it up to code. Executive Director Kelmar explained that he had indicated to Ms. Johnson that on the low end of the market the rental value would be abouh $1,000 and on the high end of the market $1,600 a month. After making the required improvements, and amortizing that over a two year period; from a market standpoint, the $700 is a fair figure. Agency Member Christeusen ~aade a motion that the rent be reduced from $700 to $400 a month. City Attorney Oberholzer indicated that in order to reduce the rent, the Agency would have to make certain findings or there would be a problem with ~he use of public funds for subsiGizing the rent. This would be accomplished by ado[~i~in%~ a resolution with the finding that Mental Health Association serves the community in the capacity of assisting those who would not ordinarily be able to obtain this service. Agency Member Christensen made a motion that the finding be made. Agency Member Means stated that the building has been vacant for some time, and that he doubted that anybody would rent it for a year; that $700 is more than the Agency would be getting. He stated that with the improvements beinG made, it would be financially tough for the Association. He questioned if there were community development monies available for any revenue sharing money for the improvements. Executive Director Kelmar stated that it would be a Council decision to use the revenue sharing money. Agency Member Rockoff stated that, aha lows for renting the building, $700 that he felt this was a fair price. after figuring the highs is a low cost. He commented Agency Member Christensen's motion to reduce the $700 to $400 was defeated by the following group vote: AYES: Christensen, Means NOES: Barton, Rockoff ABSTAINS: None ABSENT: Payne, Ratty rent from Agency Member Means commented that the Agency should not pay · the $7,000 for the improvements, but would like to assist the Association financially. Agency Member Means made a motion that the Redevelop~ent Agency approve a rental agreement of $700 a month and recommend to the City Council that they allocate $1,500 of revenue sharing money to the Kern County Health Association to be used for improvements on the property owned by the Agency at 2022 "L" Street. Executive Director Kelmar stated that the Council would have to change its policy on revenue sharing. Agency Member Rockoff stated that the potential of the building Oeing rented is not very good and, therefore, made a substitute motion to rent the building for $600 a month. Agency Member Christensen responded that $600 was not enough, and that the Agency should give something worthwhile or nothing at all. City Attorney Oberholzer questioned if Agency Member Rockoff had reached his $600 figure through an analysis which provided a fair market value for the property based upon improvements being made. Agency Member Rockoff stated that he wanted to discount the rent because of the lack of opportunity to rent the building at any figure, and considering the substantial improvements to be made, he felt that $600 is a fiar negotiated value. City Attorney Oberholzer stated that on record Mental Health Association has offered $700 and has asked for some contribution, and, therefore, some findings will have to be made. Agency Member Rockoff responded that the Mental Health Associa- tion could afford to pay that amount; they did not offer. He stated that the lease should be negotiated on a year-to-year basis and terminate on thirty days notice. City Attorney Obernolzer stated that if it is the Agency's determination that the price is a fair market value for the property -2- and the best the Agency can obtain, then there is no need for a finding. The substitute motion made by Mr. Rockoff, to rent the building at 2022 "L" Street for $600 on a year-to-year basis and to terminate upon thirty days notice, was carried by the following group vote: AYES: Christensen, Means, Rockoff, Barton NOES: None ABSTAINS: None ABSENT: Payne, Ratty 2. Correspondence was received from Dean Witter Reynolds, Inc., dated October 31, regarding the sale of hotel bonds. Mr. Calvin Hollis was present to give an oral report and an update on the status of the developer's evidence of financing concerning the hotel project. He stated that the Schedule of Performance required the developer to submit evidence of financing by October 15, and for the Agency, within 30 days of that date, to approve or disapprove that evidence of financing. The developer is proposing to finance this project through the issuance of industrial revenue bonds together with equity that has been raised locally. Two letters were received from Dean Witter and submitted as evidence of financing. The first listed several conditions, the second narrowed those conditions that his commitment was subject to. It is not a commitment letter which obligates Dean Witter to provide financing, and because of the tax-exempt nature of this financing, it is going to be impossi~le 'to get such a letter. ?!r. Hollis outlined the discussions with the developer and recommended that the Agency extend for 60 days the time it has to approve the developer's evidence of financing. As a result of the changes in the market condition, the de- veloper has re-evaluated the scope of the hotel project and has submitted a proposal to the Agency to increase the size of tile hotel from 239 rooms to 297, to remove ali i~he meeting rooms in the Auditorium,~ and to refurbish the exisi~ing meei~ing rooms in the Auditorium. The estimated cost for these changes would be $800,000 to $1,000,000, and he is proposing thak ih be an Agency obligation. The developer is asking that the Agency subordinate its right to receive rental income, to the bond holders and to subordinate its right to receive rental income to h~e equity investors until a minimum return of 10 percent has been reached by those equity investors. After the two obligations are met, the Agency would have a minimum rent payment to it of $200,000. The developer is asking that the Agency relieve him of some upfront obligations in the early years of the project and in return providing the Agency with a significant ownership interest in the revenue generated by the project. Before staff can make a recommendation, it has to deal with the method of calculating of Agency's additional rents and the concerns as to the coordination of operating the meeting rooms. The process would require an amendment to the DDA and a public hearing would be scheduled and a full analysis of the costs and revenues would be available to the Agency prior to taking any action. The Federal Government has created a time constraint regarding the bonds. They must be issued and must be purchased by the end of December. A public hearing would have to be held in the middle of December which would allow the developer to secure his financing. It is the recommendation to the Agency that it take action to extend the time period in which it must approve the developer's evidence of financing, and within the 60-day period, there would be an amended Disposition and Development Agreement which would incorporate the provisions as mentioned. Agency Member Christensen questioned the assurance the Agency has that the developer would not ask for another extension. He also questioned the relationship with the hotel having the right to operate the rooms of the Auditorium. Executive Director Kelmar stated that since AIRCOA has become involved in the project, they are taking a more realistic approach. He commented that if the developer is not able to sell the bonds and cannot quickly secure other financing, the project should not go forward. In answer to Mr. Christensen's second question, he stated that staff is not proposing, at this time, that the developer run the Auditorium. Chairman Barton questioned when the inducement resolution will be ready, and the time for this process. Mr. Hollis indicated that by the end of the week details as to the amendment would be available. By the first week of December the DDA would be completed, and two weeks later would be the public hearing. Agency Member Rockoff stated, for the record, that after hearing the potential terms of the agreement, he has a problem with the basic rent being subordinate to a 10 percent return to the equity owners. He stated that he understood subordinating to the bond servicing, but the way he understood the proposal was that the equity owners would be assured a 10 percent return on their invest- ment before the City received any rent which includes basic rent and that this presents a problem. Executive Director Kelmar stated that the marketing study showed a 50 percent occupancy for the first few years; that they may not be willing to invest their money on such a risk. He indicated that if the developer is no[: able to sell the bonds by the end of the year, the agreemenh outfit to be terminated because of their inability to proviae financing. Agency Member Christensan s~ated that ~ concurred with Mr. Kelmar's statement. Agency Member Christensen made a mot ~n [inat the correspondence from Dean Witter Reynolds, da[~e(~ October 3i, be received and placed on file. The motion was carried by the following group vote: AYES: Christensen, Means, Rockoff, Barton NOES: None ABSTAINS: None ABSENT: Payne, Ratty Agency Member Rockoff made a motion to give the developer 60 days (January 15, 1984) to provide their evidence of financing. The motion was carried by the following group vote: AYES: Christensen, Means, Rockoff, Barton NEOS: None ABSTAINS: None ABSENT: Payne, Ratty 3. Correspondence was received from Keith Breskin, representing Katz, Hollis, Coren & Associates, dated October 27, 1983 regarding the Truxtun Galleria Section 33433 Report. Agency Member Means made a motion to receive and place the cc ~ 'aspondence on file. The motion was carried by the following .,.,~p vote: Christensen, Means, Rockoff, Barton None .... rAINS: None .... ~NT: Payne, Ratty -4- CONSENT CALENDAR (a) Approval of Vouchers No. 127 through 138 totaling $800,749.86. Agency Member Rockoff made a motion, to approve item (a) of the Consent Calendar, which was carried by the following roll call vote: AYES: Christensen, Means, Rockoff, Barton NOES: None ABSTAINS: None ABSENT: Payne, Ratty ADJOURNMENT There being no further business to come before the Redevelop- ment Agency, Mr. Christensen made a motion to adjourn tke meetin9 at 5:59 p.m. / J/AMES J~//~BARTON, Chairman ~ ~Bakersfield Redevelopment Agency W. [~:~L~NBOTHAM,/~Secretary Bake~eld Redeve~nt Agency -5-