Loading...
HomeMy WebLinkAbout02/21/2002 BAKERSFIELD ~ Mike Maggard, Chair AI~ Tandy, City' M~"~ger Harold Hanson Darnell Haynes, Assistant to the City Manager Mark Salvaggio AGENDA SUMMARY REPORT SPECIAL MEETING BUDGET AND FINANCE COMMI'I'rEE Thursday, February 21, 2002 - 4:00 p.m. City Manager's Conference Room 1. ROLL CALL Call to Order at 4:05 p.m. Present: Councilmembers Mike Maggard, Chair; Harold Hanson and Mark Salvaggio 2. ADOPT JANUARY 17, 2002 AGENDA SUMMARY REPORT Adopted as submitted. 3. PUBLIC STATEMENTS 4. DEFERRED BUSINESS A. Staff report and Committee recommendation regarding application of the business license ordinance to commercial and residential rental property businesses At the last meeting, the Committee requested a list of alternatives to taxing of commercial and residential rental activities and legal analysis on each of the alternatives. City Attorney Bart Thiltgen stated this information was provided in a confidential memo to the Committee on January 30, 2002, which also included potential legal challenges and the City Attorney's analysis on whether the City would prevail in case of a challenge. This issue was reviewed at the January 17th Budget and Finance Committee meeting. The City Attorney recommended to apply the business license tax to property owners who rent or lease commercial properties. For residential properties, his recommendation was to determine if a person owns four or more residential rental units, that person is conducting a rental business and, therefore, subject to the business license tax; and ownership of less than four (three) residential rental units would not be subject to the business license tax. ADOP'fED AS S~/"I'ED Olq FdtR.CH 14, 2002. AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Thursday, February 21,2002 Page -2- Committee Member Hanson made a motion to apply the business license tax to property owners who rent or lease commercial properties; and for residential rentals, apply the business license tax to owners who rent or lease five or more units (four units or less would be exempt from the business license tax). Committee Members Hanson and Salvaggio voted: "aye." Committee Chair Maggard voted: "no." Committee Chair Maggard expressed most owners of residential property are investors and not in the business of renting or leasing properties, so he felt the business license tax should not apply to owners of residential rental property. As was discussed at the January 17th Budget and Finance Committee meeting, for commercial properties, he felt for those that are clearly in the business of managing properties and rent or lease commercial properties, the business license tax should apply, but the business license tax should not apply to a property owner who has an investment in commercial property who is clearly not in the business of renting or leasing properties. As Committee Chair Maggard dissented from the majority recommendation, the Committee unanimously recommended sending a majority and a minority report to the City Council. 5. NEW BUSINESS A. Staff report and Committee recommendation regarding Kern-Tech, Inc. repayment of economic development loan Economic Development Director Donna Kunz provided a short background of the company. Kern-Tech is a manufacturing and specialized tooling business located in the Old Town Kern-Pioneer Redevelopment Project area at 405 E. 19th. In the past, the company made firearms until government regulations made it impossible to survive in the firearms business. They transformed the company into Kern-Tech, Inc. in 1995. In the second year, the company brought nearly $1 million in business to Bakersfield. Their business was expected to increase with the addition of machinery and personnel, so they came to the City for financial assistance in the form of a loan to purchase equipment. On March 26, 1997, the City Council approved a 0% interest, five-year loan agreement for $169,797. Kern-Tech chose the option of one balloon payment of $169,797 at the end of the five years. Funds for this loan were Community Development Block Grant (CDBG) monies. In return for the loan, Kern-Tech agreed to hire 18 new employees over the term of the agreement (this has been accomplished). Of the workers hired each year, at least 51% had to be Iow and moderate-income individuals. Kern-Tech, Inc. has notified the City they are unable to meet the balloon payment and have requested a repayment schedule beginning in April 2002 of $1,000 per month. There were unforeseen business problems, which affected their ability to pay. Many of the companies placing orders with them., had reverses in their businesses. Kern-Tech had a large order AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Thursday, February 21, 2002 Page -3- for a machine and the ordering company went bankrupt and left Kern-Tech with a large bill owing to another supplier. Two of their largest customers closed due to the downturn in civil air traffic after September 11th. The owners of Kern-Tech have taken a 20% pay cut and the employees a 15% pay cut. They currently have 15 employees. Kern-Tech's plan is to get into military hardware as a small tooling supplier and are currently receiving orders. In the past, the Council had a priority of job creation and granted loans with federal monies (many of them forgivable) as a way to create jobs for Iow and moderate-income individuals to impact the jobless rate and social problems in' high unemployment areas. Staff recommended doing a workout with Kern-Tech to keep the company operating and the workers employed. Mike Miller, Kern Tech, spoke regarding their business, the loan and their intention to repay the loan. The Committee unanimously approved extending the loan for six month with 0% interest rate, using the existing collateral now in place, accepting payments of $1,000 per month, with a review by City staff in six months. This will allow time for the Council to adopt a loan policy and provide the City with the ability at the end of the six-months loan extension to restructure the loan, if necessary. Staff will prepare the amendment to the loan agreement and forward to the City Council for approval. B. Staff report and Committee recommendation regarding Economic Development Loan Program Policy City Manager Alan Tandy explained with the passage of SB 975, it is doubtful that future loan requests will occur. The legislation is so onerous to do.a loan of $150,000 to $250,000 would impose a cost of $600,000 to $800,000 on the business in most cases. Out of the current loans in the City's portfolio, probably most would not have been granted. Unless there are really unusually circumstances, the City will probably not be.approached for loans. Possibly someone needing a light rehab, but substantial construction projects will not. Past loans seem to be in two forms.. One would be local businesses that are either growing or relocating. Then there are those that are multi-city competitions, where firms are looking fOr incentives to relocate. Should any of them come back to compete, the City needs a loan policy flexible enough to compete with cities like Las Vegas and others who are offering incentive packages to get firms to locate in their city and create new jobs. The City has two projects in the pipeline. One is a very small rehab and they have submitted 75% of the required documentation. The second one is in the talking stage in the enterprise zone, which would create 300+ new jobs at $12 to $15 per hour. It would be important to complete the projects already started without trying to go back and start with a new policy. AGENDA SUMMARY REPORT I~UDGI~T AND FINANCE COMMITTEE Thursday, February 21, 2002 Page -4- Committee Member Hanson spoke about the importance of collateral when loaning money as an issue to consider when drafting a loan policy. The Committee requested Donna Kunz to draft a loan policy for the Committee's review. C. Staff report and Committee recommendation regarding funding request by Greater Bakersfield Vision 2020, Inc. (This item was heard after 5A.) This funding request is in two parts. The first is a $2,500 sponsorship request from Greater Bakersfield Vision 2020. The second is a request for $11,000 by the Vision 2020 Image Task Force to complete funding for an image study of Greater Bakersfield. Economic Development Director Donna Kunz explained the Economic Development Department has a marketing fund in their operating budget, which could fund these requests. For example, they sponsor the Economic Summit at CSUB for $2,000 to look at the City's economic issues. The City has been getting progress reports and materials from Vision 2020, which are very helpful for the Economic Development Department to plan strategies, programs and projects. Staff recommended the City invest in the study for the image product. Chris Frank, Bakersfield Chamber of Commerce, spoke regarding their request for a sponsorship of $2,500. The funds would be used toward the operation of the Vision 2020 program. They are requesting the City continue its involvement and support for one more round of funding. Their work should come to a close in the. next 18 months as the strategies developed by the Vision fomes are accomplished. Barry Zoeller, Co-Chair, Vision 2020 Image Task Force, spoke regarding improving the image of the community being extremely important, especially for economic development market retention. The main task of the Image Task Force is to produce a marketing campaign to measurably improve the image of Greater Bakersfield. First, they wish to do scientific research on exactly what is the current image of Greater Bakersfield. They have commissioned a research firm to do a study, which will cost approximately $57,000. They have commitments for $46,000 and need another $11,000 to fund the study ($8,000 for the study and $3,000 travel expenses). There was discussion regarding the future need for funding the final product for the marketing campaign itself and they may return to the City with another request. Committee Member Salvaggio made a motion to 1) fund the request from Greater Bakersfield Vision 2020 for the next year with a sponsorship of $2,500; and 2) fund the request from the Vision 2020 Image Task Force for $11,000 ($8,000 hard costs and $3,000 traveling expense) for the research study on the current image of Greater Bakersfield; 3) funding will be from Economic Development Department marketing fund; and 4) staff to forward the administrative report and agreement to the Council for approval. The Committee unanimously approved the motion. AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Thursday, February 21, 2002 Page -5- 6. COMMITTEE COMMENTS 7. ADJOURNMENT The meeting adjourned at 5:25 p.m. Staff present: City Manager Alan Tandy; City Attorney Bart Thiltgen; Assistant City Manager John W. Stinson; Assistant to the City Manager Darnell Haynes; Community Development Coordinator Director Donna Kunz; Assistant Finance Director Nelson Smith; City Treasurer Bill Descary; and Deputy City Attorney Janice Scanlan. Others present: Mike Miller, Kern Tech; Dave Cross, architect; Barry Zoeller, Vision 2020 Image Task Force; Chris Frank, Chamber of Commerce; and James Burger, reporter, The Bakersfield Californian cc: Honorable Mayor and City Council DWH:Jp S:~Damell~?.002Bud&FinanceCom mittee~bf02feb21 summary,wpd