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HomeMy WebLinkAbout10/04/2001 BAKERSFIELD (~.~/~/~-~/~~ Mike Maggard, Chair Alan Tandy, City II/l~ager Harold Hanson Darnell Haynes, Assistant to the City Manager Mark Salvaggio AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Thursday, October 4, 2001, 4:00 p.m. City Manager's Conference Room 1. ROLL CALL Call to Order at 4:09 p.m. Present: Councilmembers Mike Maggard, Chair; and Harold Hanson Absent: Councilmember Mark Salvaggio 2. ADOPT AUGUST 30, 2001 AGENDA SUMMARY REPORT Adopted as submitted. (Councilmember Salvaggio absent) 3. PUBLIC STATEMENTS 4. DEFERRED BUSINESS A. Review and Committee recommendation regarding Bakersfield Senior Center request for financial assistance The Budget and Finance Committee reviewed the audit report provided by the Bakersfield Senior Center. Alexander Lark, Ph.D., Executive Director of the Bakersfield Senior Center responded to questions regarding financial statements and accounts payable. Lynn Edwards, Senior Center Board Member, discussed current liabilities and explained the Center has contracted with an agency that helps get past IRS debt waived or reduced. City Attorney Bart Thiltgen cautioned that the City should not pay any IRS penalties owed by the Senior Center, because that may involve the City in any future liabilities owed to the IRS by the Senior Center. Staff explained they would need a schedule of what is included in accounts payable that confirms the current liabilities account balance. Al)OFf'lQ) AS Sl3Bt. ff~l"l'E]) DECEMBF_.R 6, 200t AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Thursday, October 4, 2001 Page -2- Economic Development Director Donna Kunz explained HUD funding regulations for non-profit operations and the need to show enhanced or expanded services each year, or if that is not possible, a waiver can be requested from HUD. This HUD requirement would not apply until the application is submitted for the second year of funding. Also, past expenses cannot be included when applying for HUD funding. Staff explained the City Council approved in concept a contribution of $50,000 per year for the Bakersfield Senior Center. The first year would be funded by Council Contingency and starting with FY 2002-03 an application would be made yearly to HUD with Council approval for CDBG funding of $50,000. Dr. Lark spoke about his plans for fund-raisers and income generators. The Health Services Program is critical and they will be applying for grants to pay for health screening. They will be having educational classes. Some will be tuition paying and include GED classes and computer classes, which Dr. Lark has taught previously at Fresno College. There is a parenting class. There will be fine arts and entertainment for seniors as well. They will be having fund-raisers including expanded Bingo with new boards starting immediately. He is confident that they will be able to be successful with the plans they have for income generators and assistance from the City of $50,000 per year and the $10,000 per year from United Way. Committee member Hanson made a motion that in concurrence with Council's policy for funding non-profits, the Committee recommendation to Council is to fund $50,000 for the Bakersfield Senior Center out of Council Contingency to be disbursed in partnership with the Center's board for amounts to be determined after review of the accounts payable schedule and approval of the Finance Director with the understanding that this will be funding through June 30, 2002, and in the interim, CDBG funds will be applied for from HUD for FY July 1,2002-03. Also, included in the motion at staff's request were the four recommendations of the Finance Director: 1) an audit of records at June 30, 2001, which has been completed; 2) annual audits if the support is to be ongoing; 3) compliance with Federal and State laws, especially as they apply to payment of payroll, payroll records and taxes; and 4) accounting records to be in compliance with Generally Accepted Account Principles. The motion was unanimously approved (Committee member Salvaggio absent). Staff will prepare an agreement for execution by the Bakersfield Senior Center. 5. NEW BUSINESS A. Review and Committee recommendation regarding Bakersfield Senior Center - Senior Housing Project Economic Development Director Donna Kunz stated in Februarythis year the Bakersfield Senior Center came to the Budget and Finance Committee with a request for assistance to buy additional land for approximately $560,000 to expand their Senior Housing Project. At the time staff had only identified about $280,000 that was available from prior year CHDO/HOME funds. The Budget and Finance Committee directed staff to look at financing plans or structure some type of loan with the organization and bring it back to the Committee. Several months have AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Thursday, October 4, 2001 Page -3- passed and it has been difficult to find funding that would work for this particular project. Currently there is about $420,000 on hand of CHDO funds, which is a 15% reserve set-aside of HOME funds, which is part of the City's entitlement block grant program. These funds are unprogrammed and accumulated over the past two fiscal years. This is insufficient to fund the Senior Center's request for $585,982. Staff has had many meetings with the Bakersfield Senior Center and Retirement Housing, Inc., co-sponsor of the project. They are proposing to build an 80-unit senior housing project. They have receive a 202 capital advance allocation from HUD for $7 million, which is essentially a grant, there is no debt service. Along with the 202 Grant, comes a guarantee of Section 8 Certificates, so they will have rental income to pay its operations, replacement fund for paint, etc. The way a 202 is designed the minimum contribution that you have to put up is $25,000 into a loan reserve fund and is held on deposit with HUD. The 202 money can be used to pay acquisition, design, and construction. The project is restricted to Iow-income seniors, age 62 and older. It is a 40 year forgivable loan, there is no debt service. Anything that is saved under the original 202, not used for construction, can be put into an operating account. Donna Kunz presented two financial options for the Committee to review. There is full funding available for Option1, approximately $335,000. Option 2 will require all of the HOME/CHDO funds available this year and part of next year's allocation. Option 1 would use the original site (1.8 acres) that was submitted in the 202 application. The proposed assistance of $335,000 is based on per square foot value of comparable land in the area. There has not been a negotiated price. The Bakersfield Senior Center and Retirement Housing, Inc., as co-sponsors, must form a new entity and the Senior Center must sell their land to that entity. Staff used a comparable square foot average for analysis. One of the advantages of building on the original site would be whatever you saved from the 202 monies, could be used for future operations of the housing project. Option 1 does not require any acquisition or relocation. Option 2 would provide assistance of $495,000 to acquire land for an expanded site (approximately 2.6 acres). Land for the expanded site is what is being requested by the Senior Center. Under Option 2, the proposed assistance is based on several budgets and estimates and the use of City departments and outside consultants to develop the relocation, demolition and acquisition costs, with City staff handling the relocation services. This would provide about 2.6 acres and allow for a very nice project. This budget is predicated upon having willing sellers that are also willing to sell close to our appraisals. If that is not the case, the City's Redevelopment Agency would have to step up and use its eminent domain powers, which would add additional costs to the $495,000. The costs savings the City shows, $495,000 verses the amount being requested by the Senior Center of $585,982, is possible as the City would be using City staff to do the acquisition and relocation activities and our analysis has lower estimates on the demolition and relocation. Informal appraisals were used by the City and the Senior Center to estimate the costs. The biggest concern with the expanded project is there is no fund to be put into the operating reserve AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Thursday, October 4, 2001 Page -4- account to assure on-going maintenance. You have very-low income, very-low revenue stream and expenses grow. It is always good to have an operating reserve and also to be able to give some extra amenities. One key missing is a formal agreement between Bakersfield Senior Center and Retirement Housing, Inc., which outlines who is doing what and also how the board is going to be established, because the City's proposal will be an escrow type situation. The City would acquire the properties and transfer the land through the Senior Center and right on to the new entity which must be formed by the Bakersfield Senior Center and Retirement Housing, Inc. The entire parcel would be put into the project. Staff did not recommending one alternative over the other, but wanted to give the Committee two options, as Option 2 will not leave funds available for any other project in the City. Vernon Strong, Bakersfield Senior Center Project, stated he would like to see schedules of the totals showing how the City can do this cheaper than their cost and recommendations given to the City of $585,982. He explained their request to the City was to purchase land for the expanded site, as the original site is too small to build a quality project. Mr. Strong explained when they came to the Committee in February, the Committee approved their request for CHDO funds, which were available for the first $280,000, and the Committee requested staff to work with the Senior Center to "make the project happen." He continued, based on this, they went out to the property owners and developed options to purchase the properties they needed. If HUD is to consider expanding the project, they need to be able to go onto the property. Option agreements were entered into with the property owners on what we anticipated the property would be appraised for. He expressed it is easier to work from an estimate and an option than it would be to get yourself in a box with an appraisal when that becomes the value of the property. Ms. Kunz stated she would completely agreed if this were a private transaction. However, this is a public acquisition and as such, there are certain HUD regulations requiring appraisals that the City must follow for acquisition and relocation that were not followed in obtaining the option agreements. The City cannot use the options provided by the Senior Center in the application to HUD. Under Option 2, staff is proposing the City would be acquiring the land and as we do with any other public acquisition, notice the tenants and property owners and do appraisals. Dr. Lark spoke about the options and agreements they already have obtained being a better procedure because it avoids eminent domain and the opportunity of losing the whole project because of the time factor. The Committee discussed funding. The City has approximately $420,000 in unprogrammed HOME/CHDO funds. If the Committee decides to recommend Option 2 to the Council, staff would recommend $495,000 and taking the balance of funds needed out of next year's entitlement. AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Thursday, October 4, 2001 Page -5- Mr. Edwards explained there is no comparison between the original site and the expanded site. There are traffic problems with the entrance to the original site, because of the school traffic from 7:30 a.m. until 9:00 a.m. with busses and parents dropping children off. The crime on 5th Street is another problem with the original site. The expanded project will take out the apartments and empty houses and close the street, which will help cleanup the crime. Dr. Lark spoke about the quality of life tenants would have with the expanded project. A quality project will have a direct affect on the value of the lifestyle of the people who are going to live there. Committee member Hanson stated he would support Option 2 as proposed by staff with the City getting appraisals and purchasing the properties providing we have willing sellers. If the sellers are not willing, then this needs to be brought back for further negotiations. Committee member Hanson made a motion to recommend Option 2 to the City Council providing that it does not exceed $495,000, which takes into consideration that the property owners are willing sellers. The Committee unanimously approved the motion (Committee member Salvaggio absent). B., Review and Committee recommendation regarding First Night~ Bakersfield request for financial assistance Assistant City Manager John Stinson stated last year the City provided support services of approximately $40,000 in-kind contributions to provide Police, Fire, Public Works, Recreation and Parks, Economic and Community Development staff and office space. Staff recommended that the City continue to provide in-kind services this year for First Night~. Staff is not recommending the request for additional funding of $10,000, costs of facilities or covering the amount they currently owe Centennial Garden, as these exPenses do not fall under the Council's policy for contributions to non-profits. The City did not cover the costs of facilities last year and those charges were only for actual costs for labor, utilities, and security at the Garden and the Convention Center for approximately $14,000, which has not been paid. At the Committee's request, staff explained the Economic and Community Development budget was prepared shortly after the First Night~ 2001 event and there was some uncertainty of their financial condition and Council direction for non-profit funding, so $10,000 was included in the Economic Development Marketing Promotion Account, which could be used for any promotional activities. Financial information including a balance sheet and profit and loss statement for First Night~ were provided. Elaine McNearney, board member First Night~ Bakersfield, thanked staff for recommending the $40,000 in-kind support services, as that is how they were able to continue last year. She explained, the first year, 1999, they operated under the umbrella of the City and they took over in the second year and formed a nonprofit corporation, but inherited a $20,000 debt. She explained that they did not know 6,000 people would crash the event last year and so button sales would not cover expenses and they would be unable to pay their bills. They would like to go forward with the presumption that they will have an event this year. Their board AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Thursday, October 4, 2001 Page -6- is now completely volunteer with no paid staff. Their current assets total about $16,000 from fund-raising. They are planning to pay their debts by separate fund-raisers for debt-reduction. However, new sponsors' money or any contribution from the City is earmarked for this year's event. Ms. McNearney explained they have scaled back their budget and will be relying on corporate sponsors, not just button sales. The schools will be partnering and allowing student button sales. They are planning a smaller event, shorter time frame, less performers, and to have security and a more controlled environment, while still having a quality event. If the facilities are not donated, they do not have the ability to rent the Centennial Garden and will have to locate the event elsewhere. She said their request is for $40,000 in-kind services, donation of the use' of facilities at the Arena, Plaza and the Convention Center, and for the City to absorb the past debt of approximately $13,000 still owed to the arena, and also release of the $10,000 in the current budget. Or secondly, if that is not possible, use the $10,000 as part of paying the past debt at the arena. Philip Belhumeur, First Night~), spoke about button sales and sponsors and expressed that they would like to keep the event at the same location, as it is the perfect venue and showcases the event. Committee member Hanson thought there should be an effort made to have the performing artists work at a reduced rate as a contribution toward the event. The event itself is very worthwhile for the community, but based on the debt still owing for last year, he would be more comfortable recommending support if there were a plan to show how this year's event will be financially successful. Committee Chair Maggard explained the Committee does not have the latitude to go beyond the Council policy, which was just reaffirmed, on the specific criteria for contributions. He explained this does not allow recommending the contribution of the $10,000. Also, it would be difficult for the City to forgive payment owed to the arena when only actual hard costs were charged, as the operators who manage the arena are under a performance agreement. He would support staff's recommendation for in-kind support services of staff and office space. Committee member Hanson made a motion to recommend to the Council that the City continue to support First Night~) in a suitable venue with in-kind services of staff and office space up to $40,040 as detailed on the list by staff. The Committee unanimously approved the motion (Committee member Salvaggio absent). C. Review and Committee recommendation regarding application of the business license ordinance to commercial and residential rental property businesses The Committee deferred this item to the next meeting. AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Thursday, October 4, 2001 Page -7- D. Review and Committee recommendation regarding Bakersfield Centennial Garden and Convention Center Financial Statements (This item heard after 5.A.) Finance Director Gregory Klimko gave a brief overview of the financial statements. Jim Foss, Executive Director, Bakersfield Centennial Garden and Convention Center, stated that energy costs have had a significant impact on the cost of operations. They are conserving energy whenever possible and although their usage is down, rate increases have significantly increased their costs. The Public Utilities Commission is considering yet another increase to businesses and he wanted the Council to be aware of possible additional increases in energy costs, as it is the second largest line item in their budget. The Committee accepted and approved forwarding the Bakersfield Centennial Garden and Convention Center Financial Statements to Council for approval (Committee member Salvaggio absent). Staff was directed to include the energy cost information in the administrative report. 6. COMMITTEE COMMENTS 7. ADJOURNMENT The meeting adjourned at 6:45 p.m. Staff present: City Attorney Bart Thiltgen; Assistant City Manager John W. Stinson; Finance Director Gregory Klim ko; Assistant to the City Manager Darnell Haynes; Deputy City Attorney Janice Scanlan; Deputy City Attorney Michael AIIford; Economic Development Director Donna Kunz; Economic/Community Development Business Manager Rhonda Barnhard; Community Development Coordinator George Gonzales; Economic/Community Development Principal Planner Vince Zaragoza; Assistant Recreation and Parks Director Allen Abe; City Treasurer Bill Descary; and Executive Director of the Centennial Garden and Convention Center Jim Foss. Others present: Alexander H. Lark, Ph.D., Executive Director, Bakersfield Senior Center; Lynn Edwards, Bakersfield Senior Center; Vernon and David Strong, Bakersfield Senior Center/Senior Housing Project; Elaine McNearney, First Night~; Philip Belhumeur, Longs Drugs/First Night~; James Burger, reporter, The Bakersfield Californian; and Peter J Rudy, KUZZ Radio cc: Honorable Mayor and City Council DWH:jp S:\Damell~2001 BFCommittee~bf01 octO4summa~j, wpd