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HomeMy WebLinkAbout10/10/2002 B A K E R S F I E L D Mike Maggard, Chair Aian Tandy~Ci~'y M~ - Harold Hanson Staff: Darnell W. Haynes Mark Salvaggio AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE MEETING Thursday, October 10, 2002 City Manager's Conference Room - City Hall 1501 Truxtun Avenue, Bakersfield, CA 1. ROLL CALL Called to Order at 4:05 p.m. Present: Councilmembers Mike Maggard, Chair; Harold Hanson and Mark Salvaggio 2. ADOPT SEPTEMBER 12, 2002 AGENDA SUMMARY REPORT Adopted as submitted. 3. PUBLIC STATEMENTS 4. DEFERRED BUSINESS A. Discussion and Committee recommendation regarding Kern Economic Development Corporation (KernEDC) funding request At the Budget and Finance Committee meeting in September, the Committee reviewed the existing agreement, which provided yearly base funding of $60,000 and the potential to earn an additional $40,000 in incentive funds. Since 1998-99 of the $160,000 incentive monies available, only $70,000 has been earned over the four years. The Committee requested staff to meet with Mr. Collins and return to the Committee with an alternate plan. David Lyman, Economic Development Principal Planner, reported that he has met with Mr. Collins, President and CEO of KernEDC, to discuss funding issues in greater detail. ADOPTED AS SUB14ITTED ON NOVEI~ER 14, 2002. AGENDA SUMMARY REPOT BUDGET AND FINANCE COMMITTEE MEETING Thursday, October 10, 2002 Page - 2. - Staff is recommending providing KernEDC with a $20,000 base contribution for FY 2002-03 and an additional $50,000 in potential incentive funding. This provides KernEDC the opportunity to earn a potential $70,000 in the current fiscal year. The term of the proposed agreement would be for one year, retroactive to July 1, 2002. Five key points of the proposed funding arrangement are: · $5,000 could be earned for each increment of (50) jobs that may be created at more than one company in the first two years of the employer's existence in the City. This would be a cumulative total, for example, it could be two companies at (25) each or five companies at (10) each. The (50) would remain the trigger for any incentive payment to be made. · Payment of the incentive would be made when each cumulative (50) job benchmark has been reached, which provides for a more immediate payment for the incentive work. · KernEDC would no longer use file numbers but would refer to the client by a name, such as "Project Smart." · KernEDC and City staff would develop a mutual list of contacts that fall under the terms of the contract. Should the contract not immediately be renewed, this list would document those clients that both parties agree are covered under the contract for payment once the employer creates the necessary jobs. · KernEDC would make two presentations to City Council during the term of the agreement to provide an update on activities. Mr. Lyman explained City staff and Mr. Collins were in agreement with the above recommendations; however, Mr. Collins requested an additional sixth point. He requested jobs eligible for incentive payment be expanded to include jobs created at companies already located in Bakersfield, which would be beyond those created at new companies moving to the City. Staff did not recommend incentive pay for jobs created at existing companies. Mr. Collins stated he is in full agreement with staff's recommendation. However, he would like the Committee to keep in mind for future discussion his request to develop some type of incentive for jobs created at existing companies by the efforts of KernEDC. He provided a copy of a letter from State Farm Insurance Company. Committee Member Salvaggio made a motion to accept staff's recommendation. The Committee unanimously approved staff's recommendation and directed staff to forward an agreement to the City Council for a base contribution of $20,000 for FY 2002-03 and an additional $50,000 in potential incentive funding as outline in the above five points and detailed in the memo from the City Manager in the Committee packet. AGENDA SUMMARY REP~IT BUDGET AND FINANCE COMMITTEE MEETING Thursday, October 10, 2002 Page - 3 - 5. NEW BUSINESS A. Staff update and Committee recommendation regarding Kern-Tech, Inc. repayment of Economic Development loan David Lyman, Economic Development Principal Planner, provided an update. Earlier this year Kern Tech advised the City that they were unable to make the payment due on their Economic Development loan. Their payment was restructured at $1,000 per month with a six-month review. Kern Tech has made the monthly payments on time for the six-month period and has a loan balance of $162,797. Economic Development staff has reviewed Kern Tech's financial statements. Their financial picture has shown a slight improvement; however, Kern Tech is still in a negative financial situation. Staff's recommendation was to maintain the existing payment schedule with a one- year review. Committee Member Hanson stated the Committee had done an extensive review six months ago and Mr. Miller, Kern Tech, has shown good faith by making payments on time. He made a motion to approve staff's recommendation. The Committee unanimously agreed and voted to maintain the existing payment schedule of $1,000 per month for one year and review again in one year. Staff will forward and administrative report and agreement to the City Council. B. Staff report and Committee recommendation regarding Park Development Fee Public Works Director Raul Rojas explained the park development fee was established to help the City develop parks that are not installed by a developer, which occurs when a developer only builds a portion of the housing tract. Over time the City has made attempts to raise the fee to cover the cost to construct a park at the present time. The size of a park was six acres and in 1997 the standard was changed to a ten acre park. It was also noted the definition of a park should be updated sometime in the future. Is a park just grass and trees or should the cost to build a park include other amenities. Assistant to the Public Works Director Georgina Lorenzi stated the last fee increase was in January 2001. Some of the costs for parks seem to be coming in higher than anticipated. In order to have funds available to build new parks, staff is recommending the park development and improvement fee for fiscal year 2002-03 be adjusted in accordance with the inflation rate of 2.8% as indicated in the April 2002 Consumer Price Index. Public Works staff has been working with the BIA on this issue. AGENDA SUMMARY REP~IT BUDGET AND FINANCE COMMITTEE MEETING Thursday, October 10, 2002 Page - 4 - Brian Todd, BIA of Kern County, spoke regarding the following: 1) Propositions passed by the voters for State Bonds for parks and why that money is not being credited to those who buy new homes, which could offset the need for an increase in the fees; 2) using the Cost of Construction Index instead of the Consumer Price Index when calculating the park development fee; 3) questions regarding the census information being used by the City and the calculations on multiple and single family units; and 4) what projects have been funded with State Propositions/bond monies? City Manager Alan Tandy explained Proposition 13 was a Water Bond Issue approved for a limited range of water-related projects, which could include projects that served both water and parks. That source of funds was used for the 40 acre water storage and recharge area on Stockdale Highway, which can also serve as a soccer field. Most of the Proposition 12 money is going to fund the Aquatics and Ice Complex. These facilities will serve all residents and are intended to enhance the livability of the community. Bond monies are also being used for the Kern River Parkway new 32-acre regional park with lakes and an amphitheater located in a brand new development area. If the monies were being used to maintain existing parks, the argument to credit homebuyers would be valid, but Proposition money is being used for specific kinds of projects so all residents are beneficiaries of the bond money. The City has substantial needs in the area of Parks and Recreation and the Park and Water Bonds allow the City to address park and recreation enhancements, which serve the entire community. The Committee requested Public Works staff to meet with the BIA regarding the use of the Cost of Construction Index, census information and calculations on multiple and single family units used to base an increase. The City Manager will provide the BIA with information on the City's anticipated projects/funding for State Water and Park Propositions/Bond monies. This item will return to the next Budget and Finance Committee meeting. C. Staff report and Committee recommendation regarding acceptance of Financial Statements for the Bakersfield Centennial Garden and Convention Center Finance Director Gregory Klimko gave an overview on the 2001-02 Centennial Garden and Convention Center Financial Statements. Assistant City Manager John Stinson handed out a memo with a spreadsheet showing the annual savings over the last four years. Committee Member Hanson made a motion to accept the 2001-02 Centennial Garden and Convention Center Financial Statements. The Committee unanimously approved the motion and directed staff to forward the Financial Statements to the City Council. AGENDA SUMMARY RE T BUDGET AND FINANCE COMMITTEE MEETING Thursday, October 10, 2002 Page - $ - D. Staff report and Committee recommendation regarding contract language · Risk mitigation language · IndemnitY language Deputy City Attorney Alan Daniel stated the City had received a letter from BFGC Architects requesting a change in the indemnity clause in our contracts. Mr. Daniel has met with them several times and exchanged correspondence; however, BFGC does not want to compete for City work as long as the clause is in City contracts. Basically, the firm is asking the City to change the contract standard for indemnity to a tort standard where in case of a lawsuit each party would bear whatever percent of the judgment a jury decides to award. The purpose for an indemnity is to prevent the City from being pulled into lawsuits in which the City is not actually an involved party. Under the proposed language change, an insurance company could name the City as an additional defendant in the case to be able to negotiate a settlement from the City in lieu of litigation. This indemnity clause applies only to professional liability situations (designs or plans drawn by the professional, etc.) and does not apply to general liability. This indemnity clause is fairly standard throughout the state and has been the City's indemnity clause for many years. The Risk Management division has checked with other cities and EXCEL. Except for one city considering a change, other cities are not making any changes in their indemnity clauses. The City Attorney's Office is recommending no change be made to the City's indemnity clause in contracts. Committee Chair Maggard expressed from the professionals prospective, the indemnity clause prohibits many firms from participating because their insurance companies want the clause out of the contracts. Those that are willing to assume this degree of risk, may not be in the top firms. This may put the City in a position where we have a diminishing pool of professionals who will do the work, and those willing to assume this degree of risk, may not be in the top firms. Public Works Director Raul Rojas stated there is a lot of pressure from the insurance companies on professionals that their insurance rates will be bumped if they do not get the indemnity language out of the contracts. In some instances they have a legitimate point--they should not pay for something the City does, but they should be responsible for what they do. If we have architects that have issues with the indemnity clause, he suggested the City negotiate on a case by case basis. City Manager Alan Tandy explained BFGC is the fourth or fifth firm refusing to do business with the City. BFGC is one of the top local architectural firms. It is becoming a serious concern as to whether the City can get topnotch people to work on our projects. The City Attorney's Office is charged with protecting the City and it is understandable they do not want to unilaterally give up protection for the City. However, if this trend continues, the Committee/Council may want to make a AGENDA SUMMARY REPOT BUDGET AND FINANCE COMMITTEE MEETING Thursday, October 10, 2002 Page - {5 - decision to accept more risk because the offset is not to be able to hire professional designers. The City Manager thought it would be sufficient at this time to just be aware of the problem. In the event the trend continues and the City has a substantial job and does not have a qualified list of candidates to interview, staff would like to return to the Committee at that point in time to reconsider the issue. The Committee requested staff to continue monitoring. 6. COMMITTEE COMMENTS 7. ADJOURNMENT The meeting adjourned at 5:37 p.m. Attendance: City Manager Alan Tandy; City Attorney Bart Thiltgen; Assistant City Manager John W. Stinson; Assistant to the City Manager Darnell Haynes; Public Works Director Raul Rojas; Finance Director Gregory Klimko; Deputy City Attorney Alan Daniel; Assistant Finance Director Nelson Smith; Assistant to the Public Works Director Georgina Lorenzi; and Economic Development Principal Planner David Lyman. Centennial Garden and Convention Center Executive Director Jim Foss and Director of Finance Steve Womack. Patrick Collins, President and CEO of KernEDC; Brian Todd, BIA of Kern County; and Mike Miller, Kern-Tech. cc: Honorable Mayor and City Council S:\Darnell\02Budget and Finance\02octl0summary