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HomeMy WebLinkAbout03/16/81 MINUTES RA MINUTES BAKERSFIELD REDEVELOPMENT AGENCY Special Meeting - March 16, 1981 A Special Meeting of the Bakersfield Redevelopment Agency, held jointly with the City Council, was called to order by Chairman Casper Monday, March 16, 1981, at 8:50 p.m. in the City Council Chamber. The City Clerk called the roll as follows: MEMBERS PRESENT: ABSENT: STAFF PRESENT: OTHERS: Vincent Casper, Chairman Jeanne Foth, Vice Chairman Dr. Richard Bilas (Left meeting at 11:45 p.m.) John Mooneyham Gene Winer Frank Lewis Dr. Glenn D. Puder Philip Kelmar, Executive Director Richard Russell, Deputy Executive Director W. D. Higginbotham, Treasurer Richard Oberholzer, City Attorney Dennis Needham, Director of Fire & Development Services Jim Gilchrist and Dave Kennon, Community Development & Housing Marjorie Friedlander, Agency Special Counsel Calvin Hollis, Agency Financial Consultant Mr. Tim Kelly, Keyser Marston Associates, Land Use Analyst Mr. Daniel Donahue, President, John S. Grlfflth & Company A copy of the Minutes of the Council of the City of Bakersfield, Pages 8 through 19, dated March 16, 7981, marked Exhibit "A," reflecting all action taken at this joint meeting, is attached hereto and thereby made a part hereof. Bernice E. Stewart, Secretary to the Bakersfield Redevelopment Agency Bakersfield, California, March 16, 1981 - Page 8 Mayor Shell declared a brief recess at 8:45 P.M. and reconvened the meeting at 8:47 P.M. Joint Meeting between the City Council · and Redevelopment Agency for review and consideration of the 19S1 Urban Development Action Grant (UDAG) Application for the Downtown Retail Center. The meeting was Called to order by Mayor Shell. Mayor Shell announced that Councilman Payne would sot participate in the following matter due to a real or imaginary conflict of interest. Agency Chairman Casper called the Redevelopment Agency Special Meeting to order· The City Clerk called the roll of the Agency as follows: Present: Agency Members Casper, Foth, Bilas, Mooneyham, Winer Absent: Agency Members Lewis, Puder Director of Fire & Development Services Needham stated the purpose of thi~ meeting is that the Department of Rousing and Urban Development (HUD), who administers the UDAG Program, is requesting further assurances from the Council & Redevelopment Agency regarding the $7,500,O00 UDAG Application the City has submitted. With the aid of a map, Mr. Needham pointed out the following changes. The 40 acre shopping center site, as previously designed (bounded on the east by "Q" Street, on the west by "L" Street, on the north by 23rd Street and on the south by 20th Street), has been changed to a differen~ configurZt'ion. It is now approximately 11 acres smaller. The site now proposed in the UDAG Application is approxi- mately 29 acres and the west boundary line has been changed to "M" Street. E X H I El I T 'A" Bakersfield, California, March-16, 1981 - Page 9 ~'- Mr. Needham'ing~'bduced the following persons: Mr. Cal Hol].is, representing the firm o£ Katz, Rollis, Coren & Associates, Financial Consultants for the Redevelopment AEency. Mrs. Marjorie Friedlander, Special Counsel for the Redevelopment Agency. Mr. Tim Kelly, representing Keyser Marston Associates, Inc., Land Use Analyst. Mr. Dan'Donahue, President of John S. Grif~ith Company, developers of the project. , Mrs. Marjorie Friedlander, Special Counsel for the Redevelopmen{ Agency, stated the Council decided, last July, to approve the submission of a UDAG Application. The original agree- ment between the Bakersfield Redevelopment Agency and developer, John S. Grifflth Company, goes back even further than that. The Joint Development Agreement was negotiated and approved by the Redevelopment Agency in December, 1979. The public budget, as it appeared at that time, looked as though there would be a gap in the ability of the Agency to meet all the necessary public costs. At that time a determination was made to approach the Department of Housing and Urban Development (HUD), to seek an Action Grant to fill that gap, so it would be possible to bring about the substantial private investment of funds as proposed by the John G. Griffith Company in order to develop the downtown retail cch%er. The UDAG Program is fairly n~w. It is an off-shoot of the Community Develop- ment Block Grant Program, which makes sums of money available for various kinds of activities in eligible communities. Bakersfield is an eligible community asd, as such, can apply for an Urban Development Action Grant, and that is what we have been trying to process since last July. The information submitted in July was considered in September and'a decision was reached, at that time, that there was not sufficient information available to the UDAG Program in terms of clear and film commitments from each of the participants for them to d~ide to fund it. It appeared that it was a project that would be el~gibl~ for funding provided a sufficient : '"~ Bakersfield, Calii'ornia, ~iarch 16, 1981 - Page 10 set of commitments:c~uld }e.~Ru,t,~together. T~e UDAG Program requires that every single component,~t,hat :is identified as something to be included in the finat :p~oject, be supported by a letter of co~nmit- ment or intent from the developer, participating department stores and the developer's lender. At the same time it must be shown how the public,sectors' contribution is going to be financed. Each one of thqse items must be:documented and part, o~ the file. Those letters are, not commitments forever, each time the project is held- over for a quarter each one needs to be updated. Following the September review~we were advised that the application would be held- over for review in December. Between the time the submission was completed in{September and the December~quarter there were some changes in the circumstances that the developer had to confront. The major change was a decision by one of the department stores, that originally intended to build his own store, to have the developer build that store for him and then lease it from the developer. That made a very substantial difference in the ability of the developer to undertake the project, because that was a change in his private cost. The siiu&tion was evaluated by the Agency's consultants, Keyser ~arston Associates, and it was determined the developer would no longer be able to afford the original land price that he had proposed to pay. The reasonable cost to the developer for that opportunity was su6stantially less. That meant that the Redevelop- ment Agency would have a smaller sum of money from the sale of land that it was to acquire~for the shopping center~ Therefore, there would be a problem getting~the Agency to provide sufficient funds to carry out its obligations. The developer went back to look at the site to see what could be done to reduce the cost to the Redevelopment Agency so,that no additional funds would be required from the Agency in order to fulfill its obligation. At that point ~r. Cal Rollis became involved. Be reviewed what was now being asked of the Agency. A way was worked out so that the Agency could Bakersfield, California, ~larch 16, 1981 - Page 11 ';". ~ continue to part'ieipa.te~nd,assemble'a site within the b~dget limitations that~'exis~ed~!'! A.proposal was made to reduce the'site which would reduce the cost'of ncquiring the land and relocating the occupants of that site2 It became necessary to pull all'that together, rather hastily~ so that when the time came for the December review we did not have every letter in place and HUD held the proposal ove~ for the Ma~ch review period. This is a rather dynamic process. The figures do not remain the same, things are always changing and we are trying to keep the UDAG Program people advised of where the project stands at the present time. Each quarter the costs and sources of income need to be verified to make sure they are still true or revised to bring them up to date. The project is substantially the same except, at this point, instead of four department stores being committed there are three. Mr. Dan Donahue, President of John S. Griffith Company, stated when the plans were first submitted they encompassed three additional City blocks, to the west of the project as it is now proposed. There were also two other parcels to the north, running south of Highway 178. In the original scheme there were five department stores, however, because of problems encountered by Montgomery Wards, in their capital expenditure budgets, they were deleted from the project. As a result John S. Griffith Company has finalized agreements..with their Joint venture partners. The May Company has a proposal for a 2~level store of 120,000 square feet. Gottschalk's is planning a 80,000 square foot store~ which may be expanded to 90,000 square feet' Today verbal approval was received from J. C. Penney's'for a 21level 138,000 square foot store. There is also a site in ~the middle Of the center for a fourth major store., 2 levels with 80,000-90,000 Square feet, and that will be deter- mined as the development ~goes~ahead. There are four or five potentia~ prospects for this site. 'The ~emainder of the center will contain Bakersfield, California, ~a~ch 16, 1~81 - Page 12 271,000 square feeti~ah~,.h~Ys~pproximatel~.~12$ shops. The entire center will be~two~ levels'~wiZh~ou~ major department stores and 125 shops. There will~also~ be a 2 level,' 3,§00 car parking structure. Mr. Donahue then explalned the traffic Patterns around the shopping center and parking structure. Nr. Tim. Kelley, representing Keyser Narston Associates, Inc., stated when the original UDAG Application went out, before the project changed, the land disposition value was estimated at $7,000,000 with the parking lease. Now the value is $3,000,000. There are a couple of major differences in the proposal. There will be one less department store and one department store has decided a~ainst buildin~ their own. store. They will have the developer build it and then lease it back from them. Other than that the mall shop spmce is exactly the same as before. In the last year, with interest rates ~oinE up, the department store took the position that they were not goin~ to absorb the increase, the developer will, and they will pay a fixed rent· The parking lease payment originally was $800,000 going tO $900,000, and now it will be $7R2,000 going to $812,000. The reduction is due to the omission of one department store and pro rata reduction across the board for that store. In essence we feel the developer is payinE a reasonable price, ~iventhe risk of the center, ~nd the major changes were not unique. Mr. Cal Hollis, President of Katz, Hollis, Coren & Associates, Financial Consultants for the Redevelopment AEency, stated they have been workin~ with the Redevelopmen~ Agency and City of Bakersfield throuEhout this UDAG process. The changes that have been explained this evening have caused significant changes in the way a financing plan has been developed in order to put this together. The financing plan that ~s now proposed, for your consideration and explained in the information contained in the agend~ packase, is one which we feel is viable· It is one that meets the needs of this particular development, both from the Bakersfield, Ca%ifornia, March 16, 1981 - Page 13 . Agency's and City's p~rspe~ti~e~ ,~What Is being asked tonight is to basically give the staff permission to continue with the UDAG process, meaning completing this quarter's filing. The staff'needs the Council's and Agency's input and that can be accomplished through the resolutions presented tonight for adoption. Tonight is not the final decision, there will ~be a number of decisions later. The basic financing for this project is coming from three areas: (1) the developer who will pay the Agency $3,000,000 and an annual parking lease payment of $722,000 for the first four years, going to $812,000 for the balance of the lease; (2) the Federal Government is being asked to grant the City of Bakersfield $7,500,000; and (3) the Redevelopment Agency is asking to use tax increments, generated by this development and other developments within the redevelopment project area, to fund the project. The primary mechanism for funding this project is a debt instrument called a Lease Revenue Bond. It is the exact type of financing used for the "K" Street Parking Garage. The Redevelopment Agency issues Lease Revenue Bonds to fund part of the acquisition and construction of _~j the parking facility. This facility will be publicly owned by the Redevelopment Agency. The City will lease that garage from the Redevelopment Agency and agree to make an annual lease payment equal to debt service on the bond that was sold to finance the facility. The developer will agree to sublease the parking facility from the City and maintain and operate it at their cost. These leases typically run.for a term of no less than 25 years and very often go to 50 years, with additional rights to extend the term. This will be a major long-term lease. The difference between what the developer pays the City and what the City must pay in its annual lease paymen~ will be reimbursed ~o the City, annually, from tax increments generated by this development and other developments ~ within the project area. Bakers£J.e[d. Ca[il~m~ia. March 16, [981 - Page 14 This ls;th~,i~.mary .me¢l~anism bY which bonds will be sold for a total of $15,395,000, secured by the lease £rom ~h~ paying, includes $7,500,000 ill UDAG [unds, $l,198,000 of interest earnings (i~terest earned on the bond proceeds during the acquisition and construction period), and a deferred compensation to the City Bakersfield, California,. March 16, 1981 - Page 15 -.~ Demolition-si~t~'~preparation.and on and off site improve- ments have been re-estimated, ns of this mouth, by the City staff for that parking facility at $6 ~ 000, 000. In negotiations witb tbe the $6,000,000 would be tile dew~]oper's responsibility. The last major item of cost is $4,600,000 and called interest. The Agency will sell the bonds 2 years prior to the time the facility is completed and the City cannot start making lease borrowed money is being held by the Agency it is invested and earns interest and that interest is available to the Agency for this project. Tbat interest is estimated to be $1,198,000. payments, is $72,545,000; or 84Q. of all the money being put into the prt~ject. The Redevelopmen~ Agency is placing $'1,156,000 of its own funds into the project and issuing bonds, supported by tax $3,057,000, for a total of $4,200,000 of public funds not supported by this particular development. The City of Bakersfield is asked to put in $500,000, in the. form of land it currently owns. The Federal Government i~ asked to put in $7,500,000 of UDAG funds. Baker~ficl(i, (-ktLit,,rnia, Mai'cb 16, 1951 - Page Interest earnings of'!$1;198;O00. 'The total from all sources is jnsl under $86,000,000. Mr. Skip i¥igham; representing th~.~ Downtown Business Mr, John Corcoran, 201 Wether]y Drive, stated he is concerned about what this project wJ]l ultimately cost the City of Bakersfield and asked several questiun.~ about the public financing the projec~ over a 25-50 year length of time. Agency Member Bilas expressed his concerns about the entire l)roject, not the initial lunding or UDAG funds, but the long-term prospect for surviwtl of the downtown mall. Dr. Bilas stated he is scared to death of puhlic.-private enterprises, because they become public enterprises. The fr~e enterprise system should be preserved in its purest form, il' possible. His philosophical belief is that subsidies are not necessary. He stated he is all for what is being done, but not at a cost to the taxpayers of the City of Bakersfield or the U.S.A. Councilman Christensen, speaking in opposition, made the following prepared statement and requested that it be spread in the minutes: It seems paradoxical, if not hypocritical; that some of the people in our community who strongly support a program to get government out of business, even voted for a President who chafed at the bit and said that, have suddenly changed their minds and want this Council to support a request for $7,500~000 of Federal grant to build a downtown mall. It seems that the guiding principal~o£ whether government should be in business or not, is whether it is pro- ratable for a particular individual or a group. A great philosopher once stated that "truth is truth so long as it works, when it no longer Bakersfield, Califor~ia, 5larch 16, 1981 - Page 17 ' · - works it iSq'nO~']onger truth,:!! When private enterprise has to call on government for help' then private enterprise is no longer working or truth. It was Shakespeare who, through one of his characters stated "Oh consistency, thou art a jewel," philosophy. The government is like a dope pusher today, he has made everyone become addicted. This applies to conservatives and liberals alike. In looking at the audience I've never seen so many conservative solialists sitting out there. How in good conscience can the government cutoff the income of needy children and turnaround, ~riving millions to the business commuuity l'or beautification~ expansion and not for survival. Beautification should be left up Co the individual owner and not milked out or the taxpayer. In conclusion, I should ]~ke to state the pashers or advocators of the downtown mall all have something to gain without spending a nickel. Furthermore, want the taxpayers to finance their speculative pro- jec~ and guarantee the bonds. There is a lot more I could say. I hope I've expressed the honest, the goodwill of the Second Ward. thank you. During a very lengthy discussion, Mr. Tom SchrJber, Executive Vice-President ¢,f John S, Grif£ith Company, answered some questions nbout the package for HUD for the UDAG funds and traffic in the surrounding area. Councilman Strong stated he is concerned about the certainty of the acquisition costs. Public costs over the next 25 years will be at least $35,000,000 and the City will be liable for another $20,000,000, in addition to all the money that has gone into the project so far. Something should be done in this area, but he stated he is not sure this is the answer. Councilman Strong also stated he is not going to be rushed or stampeded into making a decision which will be a liability on this community for the next 25 years and'he urged that every Councilman take this into consideration. Upon a motion by Councilman Chrisgensen a brief recess was declared a~ 11:45 P.M., in order to change the ~ape on the recording equipment. The 3oint meeting was reconvened at 12:00 Midnight. Upon a motlon by Councilman Means the staff was requested to prepare a Housing Plan for the Downtown Area for all income Bakersfield, Calilo~'nia, March 16, 1981 - Page 18 levels with timetables and specific numbers to be presented to the Agency and Council for apgroval, by the following roll ca] 1 vote: Ayes: Noes: Absent: Councilman Ratty Abstaining: Upon a motion by Councilman Barton, Resolution No, 19-8] of the Council of the City of Bakersfield setting forth the intent of the City Council ti) sell certain real property to the Bakers- field Redevelopment Agency ant{ to lease public parking facilities in connection with the development of the Downtown Bakersfield Retail Center, subject to a condition, was adopted by the following roll call vote: Ayes: Councilmen Barton, Means, Ratty, Rockoff Noes: Councilmen Christensen, Strong Absent: None Abstaining: Councilman Payne · Adoption of Resolution No. RA1-81 of the Bakersfield Redevelopment Agency (The "Agency") setting forth the Agency's intent to accept a Revised ' Development Proposal from Bakersfield Associates and to issue Lease-Revenue Bonds to finance a portion of the public costs for the Downtown Retail Center Development subject to certain conditions. Upon a motion by Agency Member Foth, seconded by Agency Member Winer, Resolution No, RA1-81 of the Bakersfield Redevelopment Agency (The "Agency") setting forth the Agency's intent to accept a Revised Development Proposal from Bakersfield Associates and to issuo Lease-Revenue Bonds to ['illtlllce a portion of the public costs RECESS MARY K. SHELL ~,IAYOR of the City of Bakersfield, Calif. ,j ATTEST: PHILIP YET.MAR CITY CLERK and Ex Officio Clerk of the Council of the City of Bakersfield, California ma