HomeMy WebLinkAbout04/27/82 MINUTES RA JOINTBakersfield, California, April 27, 1982
Minutes of a Joint Public Hearing of the Council of
the City of Bakersfield and the Bakersfield Redevelopment Agency,
held in the Council Chambers of City Hall at 7:00 P.M., April 27,'
1982.
The meeting was called to order by Mayor Shell and
Agency Chairman Lewis, followed by the Pledge of Allegiance and
a moment of silent prayer.
The City Clerk called the roll of the Council, as follows:
Present: Mayor Shell. Councilmen Ratty, Rockoff, Strong, Barton
Christensen, Means
Absent: Councilman Payne
The City Clerk called the roll of the Agency as follows:
Present: Agency Members Bllas, Clausen, Lewis, Mooneyham, Moore,
Wirier
Absent: None.
Mayor Shell stated that the purpose of this public hearing
was to consider a proposal by Hedrick-McBride for development of a
downtown hotel located directly adjacent to and east of the Civic
Auditorium. The proposed plan would involve the property bounded
by Truxtun Avenue on the north, "Q" Street on the east, Santa Fe
Railroad right-of-way on the south, and the Civic Auditorium on the
west.
CORRESPONDENCE
Upon a motion by Councilman Means, correspondence from
the Community Development Program Department, County of Kern, dated
April 14, 1982, regarding the Negative Declaration for the Conven-
tion Center Hotel Facility was received and placed on file.
Upon a motion by Councilman Means, correspondence from
Kern County Council of Governments, dated April 22, 1982, regarding
the Negative Declaration for the Convention Center Hotel Facility
was received and placed on file.
Bakersfield, California, April 27, 1982 - Page 2
STAFF REPORTS
City Manager and Executive Director of the Redevelopment
Agency Kelmar introduced the Agency consultants and developer as'
follows:
Calvin Hollis, Katz, Hollis, Coren, & Associates, Inc.,
Financial Consultant for the Redevelopment Agency.
Joe Coomes and John Carrier, McDonough, Holland, and
Allen, Legal Counsel for the Redevelopment Agency.
Richard L. Botti, Keyser, Marston Associates, Inc.,
Land Use Economists for the Redevelopment Agency.
Tom McBride and Jack Cassidy, Hedrick and McBride,
Developers of the project.
Economic Development Coordinator Kennon, stated that the
Proposal involves construction of a Convention Center Hotel with
parking facilities, and a full service hotel with approximately
320 rooms, located on property directly adjacent to and east of the
Civic Auditorium. The proposed plan would involve the property
bounded by Truxtun Avenue on the north, "Q" Street on the east,
Santa Fe Railroad right-of-way on the south, and the Civic Auditorium
on the west. The Proposal also involves additional construction of
replacement facilities for the Civic Auditorium located south and
southwest of the existing facilities.
City Manager and Executive Director of the Redevelopment
Agency Kelmar gave a Summary Report for the proposed Convention
Center Hotel Development, as follows:
The City Council and Redevelopment Agency will be
considering a number of documents at the public
hearing on Tuesday, April 27th, relating to the
proposed Convention Hotel. These documents refer
to the various responsibilities on the part of the
developer and the City as defined in the Disposition
and Development Agreement and Lease Agreement. In
addition, there will be reports discussed which
deal with the economics and costs associated with
the DDA and Lease Agreement.
However, there are other issues which the City
Council and Redevelopment Agency members should be
made aware of which deal with this proposed develop-
ment and are not specifically a part of the above
named documents, but will require action either at
the hearing or subsequent meetings.
Bakersfield, California, April 27, 1982 - Page 3
1. Replacement of storase facilities and handi-
capped access at the Civic Auditorium.
The development of the hotel will result in the
loss of 12,000 square feet of storage facilities
presently utilized by the Civic Auditorium on
the block east of the Civic Auditorium. It will
be necessary to replace this storage. Preliminary
plans and cost estimates have been prepared to
add two storage areas to the rear of the Civic
Auditorium at an estimated cost of $810,000. In
addition, the issue of handicapped access to the
Civic Auditorium should also be addressed. The
developer will be providing total access to meet-
ing rooms and public areas and the City should
study this problem and attempt to resolve this
issue at this time.
A resolution for the use of tax increments for
these public improvements will be considered at
the public hearing.
2. Parkin~ for the Proposed Hotel.
A review has been made of various parking require-
ments for hotel facilities of a similar type. In
addition, the developer has provided data relating
to parking requirements, parking usage and patterns
of occupants relative to parking needs. In order
to relate this data to the site upon which the
hotel is proposed, the Council will be requested,
at its meeting on Wednesday, April 28, to adopt a
resolution which will expand the extended core area
boundary line, which now bisects the Civic Auditor-
ium property, easterly to "Q" Street.
In addition, the parking which will be lost with
the proposed addition of storage facilities to the
Civic Auditorium will be replaced by the recently
developed one-block County parking area just west
of the Civic Auditorium. The staff will also be
studying future parking requirements as well.
3. City-Owned Property
The City owns approximately 3/4 of a block within
the proposed site. It will be necessary for the
City Council, at a public hearing some time in the
future, to transfer this property to the Redevelop-
ment Agency. The Agency will pay the City for this
property at current market values.
City Manager and Executive Director Kelmar stated in the
Disposition and Development Agreement under Developer's Deposit, it
is indicated that prior to simultaneous execution of the Agreement
the Developer will initially deposit $50,000 with the City. Mr.
McBride has informed the City that his partner, Mr. Hedrick, will
be out of town until Friday, April 30, 1982, but the deposit will
be paid on Monday, May 3, 1982, at which time the Agreement will be
signed.
Bakersfield, California, April 27, 1982 - Page 4
Mr. Calvin Hollis, member of the Firm of Katz, Hollis,
Coren and Associates, Financial Consultant for the Redevelopment
Agency, stated, that when a Redevelopment Agency commits the us~
of cost increment to purchase property and then to convey it, ths
law requires that a summary report be prepared for a public hearing,
which presents the costs of the agreement to the agency, and an
evaluation of the property being conveyed.
In the Analysis of Cost of the Disposition and Development
Agreement for the Convention Center Hotel, dated April 1982, it
spells out what the agreement is, and what costs the Agency will
incur. Table 1 of the Summary Report, identifies the costs that
will be incurred by the Agency as a result of this agreement.
Those costs include land acquisition, demolition, site occupant
relocation, public improvements, and an administrative item, for a
total of $1,619,000. The agreement provides that the demolition
costs will be reimbursed to the Agency by the Developer over a
ten-year period, with an interest rate of 10% per year.
Included in the land acquisition is the appraised valus
of property currently owned by the City in the development area.
It is being proposed that the Redevelopment Agency agree to purchase
this property from the City, at the appraised value. The Agency
is incurring this as an obligation to the City to be repaid at such
time as funds are available. It will be the Agency's and City's
discretion as to what point in time the City is paid for this
property. It is, however, a cost to the Agency as they will be
paying the City for this property and it is included in the $1,452,000
shown.
It is proposed that the costs be financed out of Redevelop-
ment Agency funds currently on hand.
long-term financing contemplated.
Mr. Dick Botti of Keyser,
There are no bond sales or
Marston Associates,presented
the Analysis of Lease Agreement between the Bakersfield Redevelopment
Agency and Bakersfield Metropolitan Associates. Before the Council
Bakersfield, California, April 27, 1982 - Page 5
and Agency is the result of many meetings in many months of
negotiations created in part because of the pioneering nature of
the investment that this particular developer is going to make and
of the uncertain nature of the current financial market that
relates to securing the necessary $17,000,000 or $18,000,000
investment that is required for this type of hotel.
The basic lease terms can be broken into essentially
two components. The first component is the base rents. The base
rents start in year two at $50,000 per year and increases at
$50,000 per year until it reaches $200,000 in year five; and
remains at $200,000 per year through year fifteen. The purpose
of the low base rent, is to allow and provide some concessions
to the developer during the initial start of the hotel. After
year sixteen we believe the agreement provides for a unique
feature in that the base rent is established annually at 80% of
the previous year's rent. The previous year's rent for the cal-
culation of the base rent will include the percentage rents so
that after the sixteen years the percentage rent that is being
generated from the formula would be converted into a guaranteed
rental payment to the Agency. The percentage rent has two formu-
las; two components. During years one through five, the developer
has agreed to pay two percent of total room, and food and beverage
sales to the Agency, less the base rents. After year six the
developer has agreed to pay the Agency 5% of room sales, above
$8,700,000, as additional rent, and 3% of food and beverage sales
above $6,300,000. These numbers came about because of the need
to establish base and percentage rents that would allow the
developer to finance the hotel. Historically, those percentage
rents have been based upon 5% of rent sales and 3% of food sales
from year one. Today, because of the cost of money, these develop-
ers cannot afford a high ground rent payment. There comes a
point in time when the developer can afford to go back to the more
traditional percentage rates. It is our calculation that that
Bakersfield, California, April 27, 1982 - Page 6
point would be when the hotel generates $15,000,000 in total sales
volume. At the $15,000,000 sales figure, the developer and investor
would be receiving a fair return of investment on their invest-
ment of 18% of internal rate of return. The internal rate of
return is somewhat of a complex formula, based on discounted cash
flows. Today, in the present status of the financial markets, an
internal rate of return between 17% and 20% is required. This
formula will generate that return to the developer and will produce
to the Agency sufficient percentage rents above $15,000,000.
The last minor component, of the total rent, is the
repayment of the $100,000 the Agency needs to spend in order to
attempt to provide the necessary demolition and minor site improve-
ment work. As part of the analysis, income projections for the
hotel have been made based upon the rental terms outlined. The
Agency, based upon the terms contained in the proposed lease,
would receive approximately $2,000,000 in lease revenue payments.
Under the more conservative projection, the Agency would receive
approximately $1,800,000. In addition, the agency would receive,
in future years, additional revenues that could total between
$6,500,000 and $10,000,000 depending upon the growth of the economy
and inflation rate.
In terms of trying to measure the worth of the investment
to the Agency, cash flows have been taken that were produced by
our projections and discounted at a 10% rate. That discount rate
indicates that the worth of the investment to the Agency would be
between $2,000,000 and $2,400,000. If a slightly higher discount
rate of 12%; is assumed, the value of the investment to the Agency
would be between $1,600,000 and $1,800,000. The Proposed Lease
Agreement before the City Council and Agency provides an adequate
return for the money that the Agency needs to spend in order to
assemble the site, and to allow the developer to have a successJ~ul
project and raise the necessary equity capital.
Bakersfield, California, April 27, 1982 - Page 7
Economic Development Coordinator Kennon stated that at
the point in time, during negotiations, when it appeared that a
project was taking shape, staff conducted an "Initial Study"..
This is a requirement of the California Environmental Quality Act
in which the project is described and attempts are made to ident-
ify any impact that would have significant or traumatic impact
on the environment. That study was completed and is included in
the packet.
As a result of that study, it was found that there
would be no impact or conditions that were going to create a
traumatic or traumatizing impact to the environment or the
method which the community functions. There were a number of
issues that the City felt deserved to be discussed in more detail.
One of those issues is access to the site, and another one is
parking. There were several other issues of a lesser nature.
As a result of that, and studies dealing with those issues, the
City issued a Negative Declaration that was published in the
local paper.
The City received comments, none of which were of a
negative nature or indicating that there was additional concern
over what had already been identified. The one issue that the
City feels is obviously mitigated deals with fire prevention,
and as a function of the Building Code that would be included and
considered during the design of the structure. For that reason,
the Council and Agency are being requested to certify the Negative
Declaration.
Councilman Rockoff stated that in regard to the Lease
Agreement, he had concerns about whether the hotel operator or
lessee could further encumber the property as time goes on with
additional trust deeds without notice to the Agency; and how the
City would be protected so that the obligation under new encum-
brances might not jeopardize the collection of rents.
Bakersfield, California, April 27, 1982 - Page 8
Mr. Joe Coomes, Special Council for the Redevelopment
Agency, stated that the Lease is an unsubordinated ground lease,
meaning that a lender could not foreclose the interests of the
Agency under the lease. There is a provision, for a subordination
of rents during the first 10-year period. The question being
raised as to whether the developer could encumber the lease hold
interest to any amount, under the lease as it was drafted, since
it was unsubordinated; it does not have that type of restriction.
Just prior to the meeting, this particular provision was discussed
with the developer. The developer agreed to a limitation on
future financing to the lessor of .75% of the appraised value of
the property; or to an income to debt service ratio of 1 to 1.25
and that will take care of the concerns expressed.
Councilman Rockoff asked if there was a projected compu-
tation as to when payment to the City will occur for the land they
sell to the Redevelopment Agency.
Mr. Hollis stated that the decision for repayment to
the City is really not a function of the income generated from
this property or the project, but rather a decision of the City
and Agency as to how they are going to rank their redevelopment
priorities. The Agency has under consideration a number of develop-
ment opportunities that will take some Agency investment. As
these come up, they can decide to either fund these opportunities
or repay the City for this property. It is totally within the
City and Agency's discretion as to when this occurs.
City Manager, Executive Director Kelmar stated that
this would become a liability on the books of the Agency.
Councilman Rockoff stated that no matter when the
decision is made to repay the City, if there is not a cash
flow available to pay, then it cannot be done. Councilman Rockoff
asked when the cash would be available so that the City can make
a decision as to what they want to do?
Bakersfield, California, April 27, 1982 - Page 9
Mr. Hollis stated that there are several ways. One
way would be to pay back out of the increment generated by the
hotel. This project will generate anywhere between $180,000
and $220,000 a year in property taxes, which, because it is
incremental, will be received by the Agency. Under a plan such
as that, for the value of this property it would be three or
four years after the hotel is constructed before the City could
be repaid. That is an option that might be considered acceptable
to the Agency and Council.
Councilman Rockoff stated that he did not understand
Section 318, Subparagraph (g), of the Disposition and Development
Agreement, which reads as follows:
(g)
"Any insurance proceeds from fire and
extended coverage or other coverage
shall be used for repairs, reconstruction,
or restitution of the site to repay any
part of the outstanding indebtedness
secured by the mortgage, deed of trust,
or other security interest."
Mr. Coomes stated that the word, "not" ~has been left
out and should be inserted after the word site. It should read:
(g)
"Any insurance proceeds from fire and
extended coverage or other coverage
shall be used for repairs, reconstruction,
or restitution of the site not to repay
any part of the outstanding indebtedness
secured by the mortgage, deed of trust,
or other security interest."
Mayor Shell opened the hearing and called for comments
by persons in regards to the Negative Declaration, objections to
or in favor of the proposed Convention Center Hotel. No oral or
written comments being received, either in favor or objecting
to, the public portion of the hearing was closed for deliberation
and action.
Adoption of Resolution No. RA4-82 of the
Redevelopment Agency of the City of Bakers-
field making environmental findings necessary
for the proposed'Disposition and Development
Agreement between the Bakersfield Redevelopment
Agency and Bakersfield Metropolitan Association
for the lease of real property located in the
Downtown Bakersfield Redevelopment Project,
and the developers of said property.
Bakersfield, California, April 27, 1982 - Page 10
91
Upon a motion by Agency Member Winer, seconded by Agency
Member Bilas, Resolution No. RA4-82 of the Bakersfield Redevelopment
Agency making environmental findings necessary for the proposed
Disposition and Development Agreement between the Bakersfield Rede-
velopment Agency and Bakersfield Metropolitan Association for the
lease of real property located in the Downtown Bakersfield Redevelop-
ment Project, and the development of said property, was adopted by
the following roll call vote:
Ayes:
Agency Members Bilas, Clausen, Lewis, Mooneyham, Moore
Winer
Noes: None.
Absent: None.
Adoption of Resolution No. 39-82 of the
City Council of the City of Bakersfield
making environmental findings necessary
for the proposed Disposition and Development
Agreement between the Bakersfield Redevelop-
ment Agency and Bakersfield Metropolitan
Association for the lease of real property
located in the Downtown Bakersfield Redevelop-
ment Project, and the Development of said
property.
Upon a motion by Councilman Barton, Resolution No. 39-82,
of the Council of the City of Bakersfield making environmental find-
ings necessary for the proposed Disposition and Development Agree--
ment between the Bakersfield Redevelopment Agency and Bakersfield
Metropolitan Association for the lease of real property located in
the Downtown Bakersfield Redevelopment Project, and the Development
of said property, was adopted by the following roll call vote:
Ayes:
Councilmen Ratty, Rockoff, Strong, Barton, Chris%ensen,
Means
Absent: Councilman Payne
Adoption of Resolution No. 40-82 of the'
City Council of the City of Bakersfield
making findings with respect to a Dispo-
sition and Development Agreement between
the Bakersfield Redevelopment Agency and
Bakersfield Metropolitan Association
approving the proposed lease of certain
real property and the Disposition and
Development Agreement for the Convention
Center Hotel.
Bakersfield, California, April 27, 1982 - Page 11
Upon a motion by Councilman Means, Resolution No. 40-82,
of the Council of the City of Bakersfield making findings with
respect to a Disposition and Development Agreement between the
Bakersfield Redevelopment Agency and Bakersfield Metropolitan
Association approving the proposed lease of certain real property
and the Disposition and Development Agreement for the Convention
Center Hotel, was adopted by the following roll call vote:
Ayes:
Councilmen Ratty, Rockoff, Strong, Barton, Christensen,
Means
Noes: None.
Absent: Councilman Payne
Adoption of Resolution No. RA5-82, of the
Redevelopment Agency making certain find-
ings with respect to a Disposition and
Development Agreement between the Agency
and Bakersfield Metropolitan Association
approving the proposed lease of certain
real property and the Disposition and
Development Agreement for the Convention
Center Hotel; and authorizing the execution
and implementation of said Disposition and
Development Agreement.
Upon a motion by Agency Member Moore, seconded by Agency
Member Clausen, Resolution No. RA5-82, of the Redevelopment Agency
of the City of Bakersfield making certain findings with respect
to a Disposition and Development Agreement between the Agency and
Bakersfield Metropolitan Association approving the proposed lease
of certain real property and the Disposition and Development Agree-
ment for the Convention Center Hotel; and authorizing the execution
and implementation of said Disposition and Development Agreement,
was adopted by the following roll call vote:
Ayes: Agency Member Bilas, Clausen, Lewis, Mooneyham, Moore,
Winer
Noes: None.
Absent: None.
Adoption of Resolution No. 41-82, of the
City of Bakersfield wherein the Council
agrees to consider in concept the use of
Redevelopment Agency tax increments for
certain improvements on the Auditorium
made necessary by the development of the
proposed Convention Center Hotel.
Bakersfield, California, April 27, 1982 - Page 12 "~
Upon a motion by Councilman Ratty, Resolution No. 41-82,
of the Council of the City of Bakersfield wherein the Council
agrees to consider in concept the use of Redevelopment Agency Tax
Increments for certain improvements on the Auditorium made
necessary by the development'of the proposed Convention Center
Hotel, was adopted by the following roll call vote:
Ayes: Councilmen Ratty, Rockoff, Strong, Barton, Christensen,
Means
Noes: None.
Absent: Councilman Payne
ADJOURNMENT
Upon a motion by Agency Member Moore, seconded by Agency
Member Clausen, Redevelopment Agency's portion of the joint public
hearing held before the Council on the proposed Convention Center
Hotel with Parking Facilities located south of Truxtun Avenue,
west of "Q" Street, north of the Santa Fe Railroad right-of-way,
and east of the Civic Auditorium, was adjourned at 8:05 P.M.
Upon a motion by Councilman Christensen, joint public
hearing before the Council and Redevelopment Agency on the proposed
Convention Center Hotel with Parking Facilities located south of
Truxtun Avenue, west of "Q" Street, north of the Santa Fe Railroad
and east of the Civic Auditorium, was adjourned at
right-of-way,
8:05 P.M.
MAYOR o~ty of ~rnia
ATTEST:
CITY CLERK ~nd of the Council
of the City of Bakersfield, California
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