MINUTES
ADJOURNED REGULAR MEETING OF THE
CITY COUNCIL AND REDEVELOPMENT AGENCY
AND SPECIAL MEETING OF THE
PUBLIC FINANCE AUTHORITY
MAY 24, 2007 - 5:00 p.m.
CALL TO ORDER
The regular meeting of the City Council and Redevelopment Agency of the City of Highland was called to order at 5:06 p.m. by Mayor Jones at the Donahue Council Chambers, 27215 Base Line, Highland, California.
The invocation was given by Reverend Mark Rush of Immanuel Baptist Church and the Pledge of Allegiance was led by Mayor Pro Tem Lilburn.
ROLL CALL
Present: Lilburn, McCallon, Jones
Absent: Timmer, Scott
City Clerk Hughes announced that Councilwoman Scott will be participating on item #14 and closed session items remotely via telephone; 909.838.7210, 8509 Cartman Drive, Fayetteville, North Carolina 28314.
SPECIAL PRESENTATIONS
None
COMMUNITY INPUT
None
CITY COUNCIL/REDEVELOPMENT AGENCY/PUBLIC FINANCING AUTHORITY CONSENT CALENDAR
A MOTION was made by Councilman McCallon, seconded by Mayor Pro Tem Lilburn, to approve the consent calendar as submitted. Motion carried on a roll call vote, 3-0, with Councilman Timmer and Councilwoman Scott absent.
1. Waive the Reading of All Ordinances
Waived the reading of all Ordinances in their entirety and read by title only.
2. Minutes - April 24, 2007 City Council Regular Meeting
Approved Minutes as submitted.
3. Minutes - April 24, 2007 RDA Regular Meeting
Approved Minutes as submitted.
4. Warrant Register
Approved Warrant Register No. 441 for May 24, 2007, in the amount of $1,670,979.87 and Payroll of $63,847.01.
5. Interlocal Agreement Concerning Distribution of the 2007 Byrne Justice Assistance Grant (JAG) Program Award
1. Authorized the City Manager to sign the Interlocal Agreement concerning distribution of the 2007 Byrne Justice Assistance Grant (JAG) Program Award;
2. Authorized the Director of Administrative Services to complete any necessary documentation to complete the grant process; and
3. Authorized the expenditure of the grant award of $20,017 for special project overtime in the Justice Assistance Grant (JAG) 2007/2008 budget.
6. Grant of Easement/Tract 14326-1 (Dyess)
1. Accepted the Grant of Easement for Landscaping from Kimberly Dyess; and
2. Directed the City Clerk to record the Grant of Easement.
7. Easement Acceptance/US Home (Tract No. 14362)
1. Accepted the Grant of Easement for community trail purposes; and
2. Directed the City Clerk to record the Grant of Easement.
8. Easement Acceptance/Inland Dental Center (DRB 04-004)
1. Accepted the Grant of Easement for landscape purposes from So. Cal. Dental Partnership, Inc.; and
2. Directed the City Clerk to record the Grant of Easement.
9. RDA Paying Off $950,000 in Accumulated Interest
1. Approved paying off a portion of the interest amount ($950,000) of the $1,300,000 note to the City with an effective date of June 30, 2007; and
2. Approved the following budget adjustment: $950,000 from 083-2100 (Unreserved, undesignated) to 083-8030.5200 (Interest); $950,000 from 081-8010-4183 to 083-8030-9981.
10. Approval of the Annual Joe Crump, Sr., Volunteer of the Year Award
Approved the proposed elements and/or criteria for the Annual Joe Crump Sr. Volunteer of the Year Award.
11. Award of Bid Number 2007-3 "Exhibit Hall Displays" for the Highland Sam Racadio Library and Environmental Learning Center to Margeorge, Inc., (dba Skyline Orange County)
Awarded Bid Number 2007-3 "Exhibit Hall Displays" for the Highland Sam Racadio Library and Environmental Learning Center to Margeorge, Inc. (dba Skyline Orange County).
12. Easement and Maintenance Agreement Approval/Tract 16914, Lot "A" Toll Land XXIII L.P.
1. Approved the Easement and Maintenance Agreement; and
2. Authorized the Mayor to sign the agreement.
13. Notice of Completion for Project Entitled "Highland Athletic Center Phase II"
1. Authorized the Mayor to sign the Notice of Completion for the project entitled "Highland Athletic Center Phase II"; and
2. Directed the City Clerk to record the Notice of Completion with the San Bernardino County Recorders Office; and
3. Authorized Staff to release the 10% retention funds 35 days from the recordation of the Notice of Completion.
CITY COUNCIL/REDEVELOPMENT AGENCY/PUBLIC FINANCING AUTHORITY LEGISLATIVE
14. (Proposed) $42,770,000 Highland Redevelopment Agency Highland Redevelopment Project No.1 Tax Allocation Bonds, Series 2007.
City Clerk Hughes phoned Councilwoman Scott and placed her on speaker phone.
City Manager Hughes stated item #14 is a proposed $42,770,000 tax allocation bond for various projects in the City of Highland. This item was discussed at the last City Council meeting and staff received direction to bring back this item in the form that is before you tonight which staff has done so. We have various representatives and financial advisors here as well as the underwriter and are prepared to answer any questions that you may have.
Mayor Jones inquired if there were any questions from Councilwoman Scott.
Councilwoman Scott stated no, the conversation was cutting out when he was talking. She got as far as the financial people being there to answer any questions.
City Manager Hughes stated that was the end of his presentation.
Councilwoman Scott stated that was the end, okay, she's with us and she wants to hear what the other Council members have to say and what we're going to do with this.
City Clerk Hughes inquired if Councilwoman Scott had any questions.
Councilwoman Scott stated the only question she has is regarding the interest rate. She knows that the bond we have right now has a nice low interest rate and she doesn't like unknowns. If we have an interest rate that is higher than the one we're at right now, she would rather have two loans rather than a lower interest rate over into larger loan with a higher interest rate because that is silly. She wouldn't do that in her own private life and she wouldn't want to manage the city's money that way.
Mr. Marshall Linn, Urban Futures, stated unfortunately he did not bring the last offering statement from the last bond issue but he believe it was 4.64%.
Councilwoman Scott stated she is not hearing anything at all. She would like to know if Marshall could answer her questions.
Mr. Linn stated he is attempting to do that.
Councilwoman Scott stated she is not hearing him at all.
Mayor Jones stated we will have to repeat it to Councilwoman Scott. Basically what Marshall has said is that he is projecting the current rate will be 4.5% depending on what it is when it's marketed. The current rate that we currently have on it is 4.64%, so this will be a reduction in interest of about 1.14% in rate.
Councilwoman Scott stated you are cutting out real bad. The current rate for our RDA loan is 4.65%.
Mr. Linn stated that is an estimate. Unfortunately, he does not have it but his memory wants to tell me it's right around 4.60 or 4.65 but he would not put his life on it but he believes that is a pretty accurate estimate.
Councilwoman Scott asked what would you estimate, a ballpark figure?
Mr. Linn stated let me just state a couple of things that have come about in the last day or so. The Agency had received a rating of standard and this time the rating was an A rating and last time it went on the bonds is 1994, the rating was an A-. So we've actually gone up in rating. That A- will allow us to move ahead and buy insurance from Amback. We actually have a bid from Amback and that bid, in all my years of this business, is at the lowest it's ever been and that's 49 basic points and he has never seen a bid as low as that on a tax allocation bond. We did the City of Banning last week and that was about 51 so the actual cost of the insurance has come down significantly and Jody, again, the bond market moves daily.
Councilwoman Scott stated she realizes that.
Mr. Linn stated and we're estimating if today we sold the bonds to be about 4.5% subject to change at the time that we actually sell the bonds.
Councilwoman Scott stated okay, that's even better yet if we can get a 4.5% because that would even be lower than what we've got now.
Mr. Linn stated well, the goal we have as always, at the City of Highland, is to go with the best popular rate. He would like to say it's skill but it's not. It's basically luck. The day that we hit that market place and we have bidders on the bond and so on, that's what the rate will be.
Councilwoman Scott stated that's the only question she had at this time. Hopefully she will able to hear what the other Council Members have to say.
Mr. Linn thanked Councilwoman Scott.
Councilman McCallon stated at the last meeting he expressed his objection to going to the full bond capacity of the Redevelopment Agency and he would like to make a few comments this evening. He is pro-growth and pro-development. He wants to see the city grow, he wants to see the redevelopment areas grow and he thinks the areas down there along Greenspot are very important to the city. He's opposed to the $42 million bond issue for several reasons. First of all it maxes out our bonding capacity, limiting our flexibility; second of all it, if you will, provides infrastructure monies that are not enough to cover everything that people want to do down there and at the same time it's providing funds for projects that we don't really have any return on vestment numbers given to us yet in terms of sales tax and property tax, etc. By going ahead and doing these infrastructure improvements with this bond proceed, without having any projects really, we've got four developers along this route. We've got Treh, Regency, Mission Development, Vestar and we've got Pacific Realty Properties and he knows Treh is ready to go with the Lowe's. The others right now are projects that are being prepared. He objects to providing redevelopment bond money for infrastructure that will increase the value of the developer's property and project without a project, if you will. He knows for instance on the Mission development side, they currently have the housing element up for sale. He just doesn't like doing that. We have been a city that has had development pay its own way. At the Public Works Subcommittee, our financial advisor gave us an option, which I thought was a pretty good one, that we would essentially have a win-win situation whereby establishing this CFD concept with some performance parameters that we could agree to on either sales tax and/or property occupancy, etc., that we would bond against that CFD. Take those proceeds and put this infrastructure in and at that point he is willing to discuss doing the full $16 million of infrastructure improvements. He thinks that's a good approach because we would reimburse the CFD tax out of the property tax increment to be generated. It assures us that we will have a project, that something will be built, that we will be getting tax increment in, tax and sales tax. He cannot support $42 million bond. He can support what was originally proposed, $27.4 million. He would propose that we proceed with the $27.4 million and let all this other stuff come together. The actual sales tax, the property tax increment numbers, and if we need to, we can issue a bond later. We can investigate using this CFD which has been successfully used in other places and he has seen, at least in his discussions with the various property owners and developers, that there is no real objection to proceeding that way. So, he thinks we're just rushing to do something and providing monies for infrastructure and giving some of the developers a free ride. He is opposed to it and he'll vote against it.
Mayor Jones stated he thinks it is important that we lose confusion from what is actually taking place. Number one the maximum bonding capacity, if we don't use that, it's not going to be used. Meaning that if we bond for the original $27 million that was proposed that amount of course goes unused and cannot be used until, of course, we go back and we bond again. In an RDA, it is absolutely opposite of running the city itself. In RDA, in fact, if you don't use that then you're not using the prudent main approach, which in fact is to use that to the best improvements and getting rid of the blight and other things within the community and to promote, of course, the development in the community that's there. He thinks it is important to understand that the Greenspot Corridor and that within the Golden Triangle area is in fact an area that needs an investment within it because the cost of improvements to the off-site improvements. We are not spending one red cent for any project that is going to go in that area. We're simply proposing to spend money on the improvements and widening of the street which needs to be done anyway no matter if no one comes in there. That's important to understand. Now, how's that going to be paid for? It's going to be paid for with the current tax increment in the RDA that we currently have. We are not overspending that fund and the ability to use it or are we having to subsidize that from the city general fund or any other area in that way. So, that's important that we understand what that is taking place there. As far as the providing of the projects, he does not think whether there's projects out there now or ever has anything to do with the need for widening that street and getting the improvements in there so that the normal flow of traffic in and out that we currently have, and is going to increase, is there to take care of that particular area. The element as to whether Mission sells out their housing element or any other portion really doesn't have anything to do with this bonding agenda that's here this evening. A pay-as-you-go that's exactly what we're doing. We're in the richest and purest form of pay-as-you-go in the RDA that you could ever be. We have the funds available to in fact pay for the bond. The bond amount can in fact be used to be put back into the community and in it's greatest form because by designating that project area, the project area then comes in to a tax increment and all of the area that is affected by that project area is the improvements that are made. Now that starts with the purchase of the land, that's important to understand, that land was purchased at a price greater than the increment was when we first designated the area in an RDA and as any improvements are made on there. That increment of course, continues to climb and then pays back to the RDA funds those tax increments that are necessary to make that happen. As far as the CFD, there is no opportunity at this time even to address that. We have no projects built there and until those projects are built we can't even talk about a CFD in that instance. As far as sales tax, the same situation goes there. Until something is built, there is no sales tax unless we allow the street vendor or someone else to come out and build on the corner.
Mayor Pro Tem Lilburn stated this is a tough, tough item. She guesses she's a little disappointed because after our last meeting that we went away it was clear where we were going. She's a little disappointed that we didn't have the opportunity to talk about a CFD because that was out on the table. The Public Works Subcommittee brought it and she thought we should have discussed it. If not, had some kind of study session so we could be educated, however, she would like to ask Marshall a couple of questions. One, is it possible to do a CFD with no projects out there first of all.
Mr. Linn stated it is possible to form a CFD. You form a CFD anywhere you want to but you can't complete the process of forming a CFD until we actually have a project. We need a project to figure out what's going to be built, either single family homes, multi-family homes or stores. We used basically the square footage and so on to go ahead and calculate the actual taxes that will be paid. So, yes you can go ahead and form one but theoretically if you had a vacant piece of land you could form one and not have any tax breaks put on it immediately. Would that be practical to do in this case, no, we should have the project first before we actually form the CFD. We have to move ahead and have the voters tell us what they want to build and that's going to be the most important bit of information that we need in order to formulate the actual tax.
City Attorney Peg Battersby stated we also have to have the builder's request a CFD. They have to consent to it.
Mayor Pro Tem Lilburn asked Mr. Linn if he specializes in CFD only because she's taking his word for this right now?
Mr. Linn stated his company is probably rated number three in the state in the number of CFD's.
Mayor Pro Tem Lilburn stated another thing she wanted to make clear that the current bond that's being proposed and the current $30 million and the $42 million additional. The newly proposed $42 million is not affecting, it can be paid for by our current tax increments, clear.
City Manager Hughes stated that is correct.
Mayor Pro Tem Lilburn stated she just wanted to clarify that and we currently in $30 million that we are proposing and this is what she's not getting. We're proposing and it was approved in the Public Works that we widen Greenspot Road, why is it different in the $30 million and the new proposed. Why would that be different?
Mayor Jones stated we are widening it to four lanes only.
Mayor Pro Tem Lilburn stated but it's still widening regardless of its two, ten or hundred, it's still widening and it's still going to make a difference in the property down there.
Councilman McCallon stated it's being widened to four.
Mayor Pro Tem Lilburn stated and we're proposing six.
Councilman McCallon stated we're widening it to four to handle the current traffic. Six lane widening is to handle traffic out in the year 2025.
Mayor Pro Tem Lilburn stated she understands that but her point is we're widening the road and it's going to increase and enhance that development down there the same as the six would be. She likes a mixture of both and as crazy as that sounds she is willing to propose that the current additional amount and there's a $600,000 difference between two items alone. Between, she guesses, the developers' estimate versus our estimates and two items alone, which is the additional widening and the median, that's a $600,000 difference.
City Manager Hughes stated in reality what we're talking about is this $10.5 million isn't enough to cover all the improvements anyway and staff's estimates, developers' estimates, they're just that, they're truly just estimates until you actually take the projects out and go out to bid and get hard numbers. We do know that the $10.5 is not enough.
City Engineer Wong stated he would like to give clarification on the amounts. The $30 million that Mayor Pro Tem Lilburn is talking about, which was the original proposal, of the bond sale does not include any infrastructure for each new development will have to construct.
Mayor Pro Tem Lilburn stated so we're just going to put some road down and no curb and gutter or anything.
City Engineer Wong stated that's correct.
Mayor Pro Tem Lilburn stated $2.5 million just to lay some road down.
City Engineer Wong stated it is to remove the existing pavement and build wider pavement and increase the width from two to four lanes and that's all there is. So, anything above that $30 million up to $40 million something that we talked about, improvements that the community is asking the city to do and to fully, not only improving the streets, to widen to full width but we will also do, for example, utility undergrounding, landscaping median and parkway median, dry utilities, gas lines, water, sewer.
City Manager Hughes stated and it should also point out that it was the Council's request to underground even the high voltage issue. That was at the request of the Council. It's not required by our ordinance to do the undergrounding. It was high voltage. That was something we wanted over and above and that was placed in the bond.
Mayor Pro Tem Lilburn stated but after doing a lot of education on this CFD, she likes the recommendation of the CFD because especially where we're allowing to reimburse some tax as they start developing and they're tax increments, once they bought into the property and they're committed and they start to build because we could do all these infrastructures. We have no guarantee that they're not going to go sell the property and say thanks a lot, appreciate all that stuff you did, see you later.
Mayor Jones asked what does that change?
Mayor Pro Tem Lilburn stated that's just her feeling and she's just trying to express how she feels and what she can see because the developers, she appreciates them, and she knows they've done a lot but this is our city and they don't live here and we just have to make, she's just trying to make sure she does the best for the city. So, especially when we're proposing to once they build and we're proposing to give back reimbursement out of that tax increment that they have generated, we're going to give it back to them to help them pay that CFD payment. So, she's really for both. She's for both adding the additional money to finish that widening and that infrastructure because it improves and that's what RDA monies is for and she's for the median. Let's just do it. Why would we do it and then come back and re-do and make our residents, they're already miserable out there as it is, why would we do that to them again, again and again? So, she really likes the thought of just adding on that additional widening money and that median to finish that project under the additional RDA money and unless you can tell me why not to CFD it, she's willing to listen to everything.
Mayor Jones stated the important response to that is that by making the investment to make the improvements and improve them now so that in fact it is finished, all the work is done and it's ready for development to take place. Then when that project, of course, is proposed to us we could readdress a CFD at that time if the developers propose that's what they want. So, we're getting the best of both worlds. We're getting the work done, we're showing the investment in the community, we're showing the community that in fact Highland wants to invest in a place that they can be entertained, a place they can go eat, a place they can go shop, a place they can call their Town Center and not spend the money out of the community. That's really what we're investing in. We're not spending one dime for any of the projects there that are developments, we're spending it on infrastructure for Greenspot, to clean it up, to take it from Church Avenue all the to the freeway in a completed form and one that we can be proud of as a community that will set that area aside. Now, as far as the sale of the property, if they turn around and sell the property today, it doesn't change whether the new person who buys it. A matter of fact, it increases then because that person is going to buy it at an amount greater than the current developer paid for it and they're going to have a greater desire to develop it and develop it so that, in fact, can pay for itself and they can come out of that hole. They're not coming into the community because this is a nice place to make donations and get a great tax write off, we don't give any of those. So, that's basically the answers there.
Councilman McCallon stated as far as the widening goes we're doing the four lane widening and only four lanes because it's to handle the current traffic and we don't feel a need for the six lanes until some time in the future. However, normally when we condition projects that come in for development then we ask them to build things out to their ultimate right-of-way and that's what we would do in this particular case with all four of the developers along there as they brought their projects on in. We conditioned to widen it to the full six lanes. If we go ahead and do this, it will be the first time the city has gone out to subsidize the development. For instance, the whole doughnut hole area, that's under development right now, received no subsidy, no help for infrastructure from the county at all and they're moving ahead with projects. Whether we put money into the infrastructure or not, he believes the projects would move forward. He, like he said before, objects to providing this without some return to the city and he believes establishing some way where we can have a dialogue and win-win rather than going ahead now and saying oh, we're going to bond for everything we can, whatever we have left over from what projects are in our $27.4 million will provide that to do something down on Greenspot. He just thinks its bad fiscal policy, it's not being fiscally prudent. Our financial advisor advised the CFD route, thought that would be better than going out and bonding to our maximum capacity and other people I've talked to, people he respects. Say it's the wrong approach and that's why he opposes it. He believes it's the wrong approach.
Mayor Pro Tem Lilburn stated Councilman McCallon is saying our financial advisor advised us of the CFD but he just advised us that you can't do a CFD with nothing on the property.
Mr. Linn stated you can form a CFD anytime you want to, if the developer or the city could actually initiate the process to form a CFD. You can't go through the formal formation process, as far as special tax or what the tax rate will be until we know pretty much what's going to be on the property. The thought was that if you and again this is Council's choice whether you're going to go for the larger size or the smaller size transaction, that's a choice that the four of you on the Agency Board will make but the CFD idea was this, that we form the CFD and he thinks most of the individuals who are going to build there agreed because to them it's neutral. They're going to pay property tax anyway. What happens to that property tax, we simply marry up the amount of tax recommendation or new property tax they're going to be paying with the payments on the CFD. So, for them it's neutral but what we're going to get for that is operating covenants. Those operating covenants will have strict guidelines that you'll adopt that one, that they'll keep the center occupied at X amount of rate, whether it be 95% occupied or whatever, you at the Agency Board determine what's equitable. You'll be able to determine the class of tenants that are in that center and the center, generally, when they get older the type of tenants, the Class A tenants tend to move out and you get a different type of tenant and two, you'll be able to structure a threshold of what they have to pay in property tax and unless they meet these minimum of three criteria, they don't get reimbursed from the CFD, from the tax increment to make the payments on the CFD bonds. So, that's a tremendous incentive to the owners of the property to make sure that the center is well run and to make sure that center gives everybody in the City of Highland the type of quality center that they need. So, it's actually neutral to them, it doesn't cost them anymore, doesn't cost them any less. He thinks one of the things we've been talking about with the CFD is that it's really somewhat a form of a tax allocation mode in a sense that we're really using still tax allocation money to pay for the CFD. It lessens the burden on the city, the city's bond issue can become smaller or if the Council elected to go with the larger bond those additional proceeds can be used for other public works projects throughout the entire city. It's not putting all your eggs in one basket. The Mayor makes some very, very excellent points and he certainly agrees with him. This is going to be the showplace of the City of Highland. This is the central city that we've all worked for for many, many years and he thinks it is very imperative that we go ahead and actually build that but he thinks there's two ways to skin the cat. If you're so prone to go with the larger bond issue, by all means, go with that, you don't have to give the developers all that money because the certain amount of money that he believes that we can raise from the CFD, probably between $5 and $7 million, that's kind of a real, real guesstimate. Those additional funds, if you elected to raise the larger amount of money, that differential in funds, about $6 million dollars, could be used for other public works projects throughout the entire city.
Mayor Pro Tem Lilburn stated but the point is the $30 million is maxing us out with our staff and these projects are, if we go with these additional bond monies, we have to hire, these bonds have, this money has to be spent within a certain time frame, correct.
Mr. Linn stated three years.
Mayor Pro Tem Lilburn stated so we would have to hire the additional staff to expedite these projects. We have one project submitted and another project, fairly sure, and some projects, if these projects were built in the next year or so, would that increase our bond capacity.
Mr. Linn stated the answer to that question is yes. In fact, he had worked on a cash flow all afternoon and found a couple of errors in it, program errors, but when this center is built out, it's going to probably have a value about $250 million to $300 million, that's when the whole thing builds out. That will give you additional tax increment, no question about that. In fact when the land sells, it's going to give you additional tax increment. So you're making investment, you're making public investments and he hasn't worked out the ratio but one of the things he made, a statement he made to the Council years and years ago, we probably tried to use a bench mark of every dollar of public investment that goes in the project we expect at least $7 million out of it. This project at full build-out will more than meet that level of private investment versus public investment. We get a $300 million shopping center out of this for a definite $30 million. That's a wise and prudent investment. He is just stating that we don't have to give them all the money in the tax allocation money. They can fund part of it through a CFD and freeze up $5 to $6 million to use in other parts of the city.
Mayor Jones stated Marshall had stated if we give them the whole $30 million. We're not even proposing to give them the whole $30 million. If in fact a $30 million investment would be a good prudent thing for us to do as an RDA because of the return we're going to get, what if we made a $11 million investment, what kind of investment is that. That's what we're proposing.
Mr. Linn stated well, he's not sure that they can build out the project for $1 million.
Mayor Jones stated they're not building out the project for $11 million. We're only building the infrastructure that is there. Their project amounts are totally separate from what we're building. We're only building the infrastructure that are off-site improvements, nothing on any project.
Mr. Linn stated well, the question really and the answer to that is does $11 million get you far enough as far as widening the streets, putting in the medians, putting in curbs and gutters, that allows them to move ahead with the projects. If it doesn't, you're probably not building enough infrastructure to help that project along. He thinks one of the things to do, the cost of the tremendous amount sales tax that's going to come off this project, you'll probably want to help them to the maximum extent possible. He doesn't even think anyone's saying don't do that, he thinks what is being said is there are other ways to do this as opposed to just bonding to the max. That would be a combination of a smaller tax allocation bond, CFD bond so much down the road and if that wasn't enough we could also issue a smaller tax allocation bond sometime in the future to make up that deficit. The flip side of that is you could do the larger amount of bond issues and he needs to be very objective on this, we do have a financial interest when these bonds are sold. He wants to make sure that the public is aware of that but we're going into an environment now where interest rates are starting to move up. We have an opportune time to sell a very large amount of bonds at a very great rate. He thinks that needs to weigh in to your consideration now. He can't guarantee what will happen to the bond rate next week let alone six months from now. He just doesn't know. He just came from a meeting at the City of Colton and he advised them if they have infrastructure projects that are escalating at costs 15% to 20% per year. It makes sense to use money that you can get at 4.5%.
Mayor Pro Tem Lilburn stated you brought the tax guy along who says that the interest is rising, what's it going from, where was it and how fast is it rising because it's slower than it was.
Mr. Ralph Holmes stated in terms of interest rates, rates move around and really, he can't predict them.
Mayor Pro Tem Lilburn stated well tell me what they were and where they're going.
Mr. Holmes stated okay, they are low. I know that. Rates right now are very low and they are lower than they were in 2004. They are not as low as they've ever been but they're probably in the 5%-10% range of lower. Rates are very low. Will they go down? Yeah.
Mayor Pro Tem Lilburn stated have they gone up.
Ralph Holmes stated yes.
Mayor Pro Tem Lilburn stated recently.
Mr. Holmes stated recently, in fact, the market has taken a beating in the last week. People are seeing rates go up because they don't want to put their money so their kind of waiting. Again, you can't predict, he can't and this is what he does for a living but rates have gone up.
Mayor Pro Tem Lilburn asked Mr. Linn to explain the small tax allocation versus the CFD. You had said we could issue a smaller tax allocation.
Mr. Linn stated the question was if the Council elected to go with the smaller size bond issue, then elected to form the CFD, once we have enough information from all the builders and what they're going to build, takes about 90-120 days to form a CFD District. If there's a shortfall at that time and the Council elects to put more money into the infrastructure, we have the option and would probably be sometime in the fall to issue another tax allocation bond if we needed that. Unfortunately, you're at a market risk. We don't know what the rates will be in the fall.
Mayor Jones stated he would like to make that decision if and when, of course, a CFD would in fact be proposed by the developers. He wouldn't like to make that decision now saying well we want a CFD but then we're going to spend a portion of that money elsewhere within the community not on the project that in fact the developers are proposing a CFD on. To him that's really cumbersome.
Mayor Pro Tem Lilburn stated not to mention that our plate is full right now. She means these projects are going to take us a really long time. Well they can only take us so long but this because its such a special project and there's so much potential and we see so much down there, this is why we're willing to even consider doing this, this additional bond so we could hurry and do the infrastructure. So, they could provide all the additional sales tax, the shopping for our community and take care of business in our own city.
Mayor Jones stated there's another point he thinks needs to be addressed and that's the current money, the $20 or $30 million that we were proposing and what it is being used for. In all proposed projects that its being used for are all infrastructure improvements in a project area that there will be no tax increase other than the standard inflation, tax increases, that come. What does that do for the RDA?
Mr. Linn stated it doesn't help them much.
Mayor Jones stated what's the problem with that.
Mr. Linn stated well the problem is, again, he thinks it's always been the policy of this city and something we've talked about for 15-16 years now, for every dollar you put in try to maximize the amount of the dollars you'll get out. You put it into a project area and you don't get any investment out, yes, you do have a project there that probably does improve the quality of life but as far as economic choice to make, you probably want to put it into a project that will generate many, many, many millions of additional sales tax dollars.
Mayor Jones stated now that being said probably the most prudent thing the RDA could decide to do is spend the $30 million on this project and spend the other $11 million on the other proposed projects and cut those back because this project itself, when its built out, will in fact increase the tax increment. The most prudent thing an RDA Director can ever do is to purchase bonds and invest it in areas where RDA increases the tax increment and then returns to the RDA the potential ability to bond additional and this will in fact increase our bonding capacity so that in fact we can turn around and do those projects that are not on demand of time and can be completed later. Yes, it is benevolent of us to say we want to give sidewalks, streets and curbs and gutters to areas that have never had those but it isn't mandatory that they be done tomorrow and so that being said he thinks the most prudent thing that we're doing as an RDA is in fact investing in our city and providing some services that we don't have and we are losing the tax dollars that are being spent by our citizens going out of the community. Over 85% of disposal income is being spent in another community that should stay in our community with restaurants, entertainment, sales, retail sales where you can buy clothing and other things and that's taken on. That's the most prudent thing we can do.
Councilman McCallon asked if we have an estimate of what the city will get in sales tax with these projects.
Mr. Linn stated no, once he is presented a type plan and know what types of stores are going to go there, either a Target or Wal-Mart, or what have you, he can pretty much within a week give you a pretty good indication of what the average Wal-Mart will give you as far as sales tax, average Target store, Bed & Bath, you know all of these stores that would probably go in there. At this time, I do not have even a list of stores.
City Manager Hughes stated for correction purposes we did receive some financial documents from Regency and Treh Partners. We do not have that information for the entire area. We can't tell you what the entire area is going to generate. That needs to be pointed out.
Councilman McCallon stated when he was discussing this issue with a Vestar representative yesterday he was estimating that we have a $3 million dollar sales tax for this area available to the city. $3 million dollars will just about cover the services that we will need to provide for those areas in terms of police and fire. So, it will generate sales tax and it will generate substantial, $3 million, but that will just cover the additional services in terms of police and fire that we're going to have to provide for that area.
Mayor Jones stated the important thing to understand is those are jobs too. We are bringing to not only to the community jobs with increase of police and fire but we're also probably going to be bringing and he just tried to get the numbers for each of those developers and their proposals but we're looking at over 1,200 jobs. You know, there isn't a single project that we've ever done in this community that has brought those kinds of jobs to this community. Not one single project. We haven't done a combination of projects that have brought that number of jobs to our community.
Councilman McCallon stated he might say he agrees with Mayor Jones. It's going to bring jobs but his point is that the development is going to happen whether we provide the infrastructure or not and the jobs are going to be there, the sales tax is going to be there. He thinks we can have a win-win situation. We can have a zero sum game, if you will, like Marshall is proposing by doing this CFD approach and that way we're not subsidizing any of the development, if you will, for any of the developers and we get some return.
Mayor Jones stated we are not subsidizing any development of any of the developers. We are strictly putting in infrastructure that needs to be there and in order for Greenspot to flow traffic as we currently have the demands to do so. There is no subsidy of any developers whatsoever.
Councilman McCallon stated if he might, without this infrastructure bond, developers would be required to put that infrastructure in and it would come anyway. By us putting it in, that relieves them of the burden of doing it and increases the value of their property and project. The doughnut hole, like he said before, they had no participation by the county at all. The developer put all of that infrastructure in and has continued to do that.
Mayor Jones stated the doughnut hole probably is the lousiest development in the entire state that we could make a comparison to. This is where a developer was sued by a city and then turned around and negotiated with the county. That is the world's worst project that there is and he would never use that as an example in our city and hope that we would never enter into a project of that type.
Mayor Pro Tem Lilburn stated let's just say, hypothetically, we went and we honored the additional bond. It doesn't even cover the amount proposed. How would they cover the additional and she knows a lot of the developers are here and it was talked about the developers agreeing on a CFD.
Councilman McCallon stated he said they didn't have any major objections to it.
Mayor Pro Tem Lilburn stated they didn't have any major objections, okay. So, she guesses where would the additional money come from to cover the additional infrastructure that would be on the shortfall.
Mayor Jones stated in the numbers that Council should have that show these developments are going to cost around 16 million dollars. A good $2 or $3 million of that, in fact, is in landscaping alone. That landscaping is not necessary for the infrastructure itself. We could put in the infrastructure and landscape later and if those costs fell to the developer or we had to do something else to do that, if we had to use CFD money to do that, those are all things that can be decided down the line. His greatest concern is to widen this street, not put in the sleeves for telephone, gas, water and sewer and everything else, not put in the storm drains, not underground the utilities and then have to come back for the next four to six to ten years and do that as we do street cuts for the next ten years and make it done. He wants it done, he wants it inviting, he wants it the crown jewel of the city, he wants it to happen so that it in fact invites everyone of those commercial people there and they're glad to be there because they can come in and they can develop and we can enjoy the blessings of that development. Look at what happened to Stater Bros. when it sat for how many years, four years, five years, without a store on it because we, of course, said Vons is going to build. Vons didn't build because of economic situations. That's his concern here. We can over encumber these developers to the point where we say well, these are major costs of a development and the community is not going to help you one nickel on those, even those we're dictating to them they have to underground those utilities and the development code says we can't make them do that and so we're going to have to fund that money. If that's what we want, that's what we're going to have to do.
Councilman McCallon stated but the CFD approach nothing comes out of their pocket.
Mayor Jones stated Councilman McCallon is a business man and he knows better than that. What comes out of their pocket, let's talk about a CFD, what does it do. The CFD creates a tax and who's going to pay the tax, the developer is going to eat that and just write off. No, he's going to pass it on to the commercial retail stores that come in there. That retail store is not going to eat it either, he's going to turn around and he's going to pass it right through to you and me in the price of his merchandise as it comes through there.
Councilman McCallon stated but the tax is reimbursed to the developer out of the property increment so it's nothing out of his pocket.
Mayor Jones stated it's an increased cost of overhead.
Councilwoman Scott stated she would like to thank Mayor Pro Tem Lilburn for asking some of the questions she had and getting the responses from Marshall. Number one she agrees that some of the swaps in the fees or the projected costs of the Greenspot, such as the landscaping and so forth. That's just exactly what they are. They're swaps and they just need to be done. All one has to do is drive on Greenspot and watch our residents and citizens and even now before freeway 210 completely opens up, they are backed up and in a traffic jam there at the freeway. We definitely need to widen and before Mission or Vestar pay. That was a number one priority. One of the top priorities is to do something there with Greenspot for our current residents. The undergrounding, absolutely, we have said from the very beginning of the formation of the City of Highland that we wanted all utilities, etc., to be underground. Why should we widen and put in a beautiful street, one that's acceptable, one that people can travel and then immediately block off one or two lanes while we dig up the street and put in undergrounding for the various utilities and you know they don't have their act together. So, she's definitely for the street widening and the undergrounding and she thinks of Greenspot with a vision to the future regardless of whether we just happen to have a couple of developers that are interested now, great for them, she's glad if they turn out to be the developers great. If they turn out not to be the developers, just take care of our citizens, we still need to have the job done. She looks at that piece of property like she looks at what we had a vision for with Victoria shortly after we became a city. One of the first streets we widened was Victoria because of the access to what we thought because of the plans, what we had hoped to be the San Bernardino International Airport. All the plans that the Airport Authority had showed that the terminal would have its entrance and exit off of Victoria and the City of Highland planned way before and we went ahead and widened Victoria. Now we got in the plans this on and off ramp at Victoria because of the traffic we're trying to move our people around. We don't like gridlock. Now, that's her comment. Number two, she needs to ask City Manager Hughes a question. We have how many RDA projects in Highland, RDA designated areas, this is project area number one, we also have a couple of other smaller ones, don't we have three of them.
City Manager Hughes stated there's two.
Councilwoman Scott stated we have two. We have project area number one and then we have project area number two.
Director of Administrative Services Dantuono stated there's the original and the amended but they're all project area one.
City Manager Hughes stated they have been merged into one.
Councilwoman Scott stated so basically we only have the one project area which also encompasses clear out there to Boulder there and the shopping center up here, right.
Mayor Jones stated that's correct.
Mayor Pro Tem Lilburn stated at our last meeting she remembered Council talked about it's not in our ordinance that they have to underground the utilities.
City Manager Hughes stated the high voltage.
Mayor Pro Tem Lilburn stated okay. Which ones of these are the high voltage? Is it the $6 million?
City Manager Hughes stated if you go to page 153, he believes that explains.
Mayor Pro Tem Lilburn stated but our preference is every time we build a new development we're going, we want it underground, correct. So, why don't we make the developer make it? Why is it not a condition or why does the ordinance not say the developer has to put it underground?
City Manager Hughes stated because 66kv is extremely expensive to underground.
Mayor Pro Tem Lilburn stated but we're saying in the other breath that we want everything underground.
City Manager Hughes stated it will probably prohibit some developments from occurring.
Mayor Jones stated what you're doing is encumbering a project with a cost that in fact makes that project maybe financially not feasible. You're driving it out of the community because your conditions are in fact causing costs greater on that than they're able to recover and so they just walk down the street.
Mayor Pro Tem Lilburn stated okay, so we've almost answered something. So, they could essentially just keep these utilities above ground but it's our desire to put it underground.
City Engineer Wong stated maybe it is easier to explain if we look at page 157 of the agenda. This is a map that shows Greenspot Road from the freeway to Boulder Avenue. If you look at the south side of Greenspot Road you will see that about midway of the map from there to Boulder Avenue you see a darker line on the south side. Okay, that darker line represents the 66kv which goes from the Edison substation to the existing mini-storage facility along the south side of Greenspot and then that line continues to go north and pretty much bisects the Mission Development property within the property.
Mayor Pro Tem Lilburn asked if it runs right through the Mission Development property?
City Engineer Wong stated it does. The thick dark line continues to go from Greenspot all the way up to Eucalyptus Street within and kind of in the middle of Mission Development property. What the developer originally proposed to do is to remove the 66kv within the property and move that 66kv along the west side of Boulder Avenue.
Mayor Pro Tem Lilburn stated who suggested we move it alongside Boulder.
City Engineer Wong stated Mission Development.
Mayor Pro Tem Lilburn stated so that incurs additional costs to tear up Boulder.
Mayor Jones stated no because the real reason that was done is it's the shortest distance. The shortest distance between two points will increase their costs of undergrounding it.
City Engineer Wong stated they are just thinking of installing the 66kv as an overhead line along Boulder. So, basically they are moving one overhead to another location. At the study session, the City Council didn't like the idea of seeing some overhead lines along Boulder and at that point there was some talk about the city may want to pay the additional costs to install the line on Boulder as an underground line instead of overhead line. After that meeting, the request from the developer has gone beyond that. What they're asking is maybe the city, if the city can of course, they would like to see the city pay.
Mayor Pro Tem Lilburn stated how much would it be to overhead it.
City Engineer Wong stated they had $669,000 would be the overhead to keep it as an overhead line.
Mayor Pro Tem Lilburn stated then why do we have a quote of $3 million, it says $3.6 million for going underground but then under here it says underground $3 million so that is a $600,000 difference so she guesses all these differences could also add up to a $1 million.
City Engineer Wong stated staff did some estimates and the developer did some estimates so there are differences in the estimates.
City Manager Hughes stated well that's the discussion that we had at the beginning of the meeting is you won't know what the true costs are until you put these things out to bid and you do the work. These are estimates, they're simply estimates, they're best guess that we can come up with.
Mayor Jones stated you have ten people sit down and do ten estimates and they would all come up different depending on where they got their sources.
Mayor Pro Tem Lilburn asked Councilman McCallon if is he completely against any of the item additional bonding?
Councilman McCallon stated at this time. Like he had said, we don't know everything. Marshall has said we can put together a CFD and some other if we need to. We just don't know at this point.
Mayor Pro Tem Lilburn stated but she thinks she also heard Marshall say that it would be prudent of us not to put bond money where we're going to get money back, right.
Mr. Linn stated it is prudent to put bond money into investments which would pay dividends for years and years to come. The CFD is an alternative source of funding that can assist in this project. We wouldn't have to put in the balance of this money and could use the difference in other parts of the city for other projects.
Mayor Pro Tem Lilburn stated but we don't have it. We can't do any other projects. We're maxed out with staff. The only reason we're taking this project on in addition to all the additional $30 million projects that are out on the table is because we felt it was a necessity to get some development here and that project took a priority. So, we were hoping, I guess our thinking is to put some of the bond money in this infrastructure so we know we're going to get some money out and then we can increase our bond as well.
Mr. Linn stated he thinks what is being said is that you invest money and yes, additional tax increment will come off of this project and that will give you significant bonding capability. This will not be the last bond issue that the City of Highland does.
Mayor Pro Tem Lilburn stated she had at the last meeting requested the developers to come back with a wish list because nobody had any figures. She didn't fully understand the CFD, which she does now, and she's trying to go with that philosophy. Her personal opinion, she thinks some of the infrastructure projects that would enhance it and we don't have to re-tear up. Ultimately the people traveling to and from work that live here are going to suffer the consequences if we keep tearing up the roads. There's nothing worse than putting a brand new road down, tearing it up, adding the utilities, tearing it up. It's completely annoying. She thinks that this is a great project, it's going to bring in sales tax, there's great vision and she's willing to add the current bond, the utilities underground, the median and the additional street widening and the others she thinks is a wish list that if they're willing to do a CFD, she thinks they need to commit and buy into this project and she thinks they need to put some money into this as a commitment. If they don't want to do a CFD, then fine, but we're willing to do that and she thinks it's a great tool. She would recommend $33,869,530.
Councilwoman Scott stated she would like to clarify something. The $42,770,000 is not going to cover the whole wish list. So, we are going to come back, right and we are going to tear down the wish list and make it more reachable and acceptable, right.
Mayor Jones stated we are going to have to address that amount of money that is going to be spent on this particular infrastructure improvements. Now if that means taking items out of the list and the estimate and getting some formal bids on that, that's going to have to take place, yes.
Councilwoman Scott stated well that's what she thought because she definitely thinks we have things on the list that are nice and their fun but she also thinks they are such as the landscaping, the developers have to have landscaping, that's part of their project and she thinks that should be the developers responsibility. The other part, she thinks, is the city's responsibility. It's our responsibility to have our streets comparable for all of our citizens and certainly, like she said from the very beginning, we wanted the undergrounding with the utilities.
A MOTION was made by Mayor Jones, seconded by Councilwoman Scott, to adopt the following Resolutions; 1. Resolution No. 2007- Authorizing Issuance, Sale & Delivery by the Highland Redevelopment Agency of its Highland Redevelopment Project Area No. 1, Tax Allocation Bonds, Series 2007, in the amount of $42,770,000. Motion failed on a roll call vote, 2-2, with Mayor Pro Tem Lilburn and Councilman McCallon dissenting, and Councilman Timmer absent.
A MOTION was made by Mayor Pro Tem Lilburn to adopt the following Resolutions:
1. Resolution No. 2007- Authorizing Issuance, Sale & Delivery by the Highland Redevelopment Agency of its Highland Redevelopment Project Area No. 1, Tax Allocation Bonds, Series 2007, in the amount of $37,000,000 with a net of $33,869,530. Motion failed due to no second being received.
A MOTION was made by Councilman McCallon to move this item to the next regularly scheduled Council meeting.
Mayor Jones stated the reason we need to move on this now is because of the interest on the bonds. There is no guarantee that the interest rate is going to stay low. We may come, in fact, out on a greater interest rate than we're currently paying now on the current bond. That's the reason for doing this now. That's the reason for doing it all on the RDA funding whatsoever. If we don't take advantage of that, then we really aren't being prudent.
Councilwoman Scott stated she believes that's why refinancing the RDA came up to the beginning and it came up for a certain amount and that was when the Finance Subcommittee came up with their list and then we added to it a couple of Council meetings ago. There were some concerns that the interest rate would go up and that was why she asked about it tonight because if we dillydally with this thing, we're going to throw away an opportunity and then we're going to be sorry. We came in with a lower figure before. So, in relation to the max, the $42 million.
Mr. Linn stated he thinks the lower figure that we discussed last time and maybe his notes are wrong but I think we discussed a figure of a parmabond right around $35 million and correct him if he's wrong with a net of $32 million worth of bonds. He thinks that was the difference we had between the $42,770,000 and the $35,500,000. That's what his notes show.
Councilman McCallon stated as he recalled the original bond proceeds that we would get was like $27.4 or $27.5 million.
City Manager Hughes stated what it doesn't include is the transmission line relocation and undergrounding and relocation of the Edison transmission lines along Boulder and Webster to the substation which is $3.6 million.
Mayor Jones stated which is what we're requiring them to do as a city. What we say we're going to do, which is the 66kv lines, that's the major portion.
City Engineer Wong stated the 66kv line is the $3,643,000. The second figure on page 150, $3,947,000 is the utility line lower than 66kv.
Mayor Pro Tem Lilburn stated the dry utilities, gas and other utilities, which is the one that includes the 66kv.
City Engineer Wong stated the $3,643,000.
Mr. Glen Ellsman, Mission Development, stated just a point of clarification it sounds like there's an objective and this was brought up at the workshop of trying to underground the major utilities. It's broken up into two components. It's not one or the other, those are two. They're just describing two different locations for those utilities. When they come out of the substation on Greenspot, they first travel down the south side of Greenspot, and then approximately midway down the block between the freeway and Webster, they travel straight north to Eucalyptus. That's why the figures that you see there are broken out. So, that's just a point of clarification as to what that is.
Mayor Pro Tem Lilburn stated then you have one figure for underground and overhead for one portion but there isn't another figure for underground and overhead on the figure.
Mr. Glen Ellsman stated to answer your question, this sheet here breaks it out into the 66, which are items #4 and #5 and what you're talking about there is also dealing with the disruption to the construction to the street on Greenspot. There's a number of fees, the gas, the electrical, transformers and so forth that will traverse between both sides of the street and the undergrounding of those. So it's a second layer of utility. You have the main utilities, which are the 66kv's, which are the big transmission and then you have the smaller utilities that are also part of the widening project and the ultimate completion where all the utilities are underground at the time the project is complete. It's just a break out, there's multiple layers of utilities.
City Engineer Wong stated go back to page 157, the map that shows where the utility lines are, he had previously explained that the darkest line represents the 66kv and that 66kv stays along the south side of Greenspot between the Edison substation and the new storage and then it starts to go north across the entire Mission Development property. Staff did an estimate of the cost of undergrounding the 66kv along the south side of Greenspot and that little portion of the 66kv that goes across Greenspot, that portion of the cost you can see it on page 153. Page 153, the lower part of the estimate you will see on the item that says costs for undergrounding of 66kv. That cost to remove the underground that 66kv's on Greenspot and a little bit across Greenspot, staff estimated $3.1 million and that estimate does not include removal of the 66kv within the Mission Development project that goes between Greenspot and Eucalyptus because that's strictly within private property, not part of a city project. So the figure that was picked from, the developer's estimate, $3.6 million, is more than adequate to underground a 66kv.
Mayor Pro Tem Lilburn stated then she has a different theory. In the two proposals that infrastructure costs from the city's versus the Golden Triangle, there was some additional ones added on. So, she is going to go back to the city's without the additional add on from the Golden Triangle because she's keeping in mind this is for the entire project not just one specific, so she's going to take the $11,373,000. She is going to split that so around $6 million add it to the proposed because she thinks she'd like to maybe meet with them and say look we're willing to invest in some of the infrastructure, apply what we can to the priority which would be widening, the median and the undergrounding, and they need to invest as well. She'd be willing to put that and add it on to the bond and have them CFD it and participate in the project. So, that being said let's do a net of about $37 million.
City Manager Hughes stated no, the net would be about $33.4 million.
Mayor Pro Tem Lilburn stated the gross would be $37 million.
Mr. Linn stated he thinks if that's the motion that you want to consider motion all three, the agency action, the authority action and the Council action. The bond issued will be $37 million and the dollar amount will, all of that once the bond are actually sold. We're thinking we're going to get somewhere around $33.8 or $33.9 million, something to keep in mind if you're short and you want to go back for a bond issue in the amount of $42 million.
Mayor Pro Tem Lilburn stated because we can come back and ask for more once the development starts.
Mayor Jones stated but the rates change.
Mr. Linn stated let me make a point here when you get down to the smaller size bond issues that's going to be $5 million difference in the $37 million and the $42 million. The incremental costs of the sale and putting together the bond issues is getting to the point where it's going to be very, very expensive. The larger the bond issue, you spread the fees over a larger amount of time. It's probably not cost efficient if you think you might come back in six months for a small bond issue.
Mayor Pro Tem Lilburn stated she's not saying that she's proposing to come back for another, she's saying participate.
Mr. Linn stated he thinks what she's saying is that you want a gross amount of $37 million, net you approximately $34 million, and what he believes he's hearing is that you want the developers to participate in a CFD to make up any difference.
Glenn Ellsman stated if he may just add a point of clarification. What he's hearing in the discussion tonight is that there's concern that somehow the investment that Highland is making with the tax increment bond financing for infrastructure is somehow a subsidy to the developer.
Mayor Pro Tem Lilburn stated no, that's not what she's saying.
Glenn Ellsman stated he appreciates the clarification. The second part of it is that what has been provided and working with staff in terms of what the ultimate costs are here. Maybe another point of clarification is the amount of investment that will occur on behalf of the development community along Greenspot is an infrastructure road, Boulder and Webster and all the rest of that, as well as what occurs within the ultimate right-of-way is far going to exceed any of this investment that the city is making. So, we're going to making a substantial investment. Another thing is that if you go back to the original discussion of how do we address completing the road in a package where you're not going to be going back. We are dealing with a real time issue. Part of the time issue is the road is under construction. You guys can do the bond financing now and that would allow a mechanism for the construction to begin far faster than we can. The time it's going to take for everybody's projects to open and get approved, it will do a CFD funding mechanism is going to be long after the project is done. So, what you're going to end up with is each of the developers are going to be coming back after you open that road, even with the widening, they will be tearing into the road dealing with utility crossing hook ups, getting other components ready for the ultimate master plan that is being worked on. Just be aware that your objective of trying to do that will not be met if some of these other infrastructure items are not completed up front. That's just something to be aware of.
Mayor Pro Tem Lilburn stated she appreciates the information. She is coming from is we're maxing out, we would be maxing out our bonds. She wouldn't empty her bank account. She would not empty her account and max it out but we have other projects. She guesses what she worries about is what if somebody came right now to the Town Center and said I want to put something in. Can you guys do some infrastructure? We couldn't.
Mayor Jones stated that is not the same issue because that street is already widened. The improvements are already in.
Mayor Pro Tem Lilburn stated that's not true.
Mayor Jones stated that is true. You're talking about making a decision saying well I want to hold back the ability to bond at a future date, if and when, I have a project to do that. You don't have one and so holding back for that is "blue skying" it and hoping that the moon is made of green cheese or whatever. We have projects here that in fact are proposing to build here and bring in the greatest income, both in RDA tax increment increase and sales tax that this city has ever seen or will ever see. It is the most major project this city will ever see and if we, as a city, don't have the fortitude to step forward and say we want to make an investment in that and our investment is we want to improve the streets so that project that every one of our residents and anyone else who wants to come and shop there, can do so without driving over unimproved road for the next five to ten years and developing it. He means he doesn't know anybody that would not invest in that. Nobody.
Councilwoman Scott stated this project's income is to do the Civic Center that Mayor Pro Tem Lilburn was speaking about, that area is not in an RDA area. We're talking strictly in the RDA area.
Mayor Pro Tem Lilburn and Mayor Jones stated that is an RDA area.
Mayor Jones stated but in the same response to that is that in two to three years when this development on Greenspot in fact is increasing, we can go back and buy new bonds and our bonding capacity at that time would not be $33 million, he means $42 million, but in fact maybe $50 or $60 or $70 million and you can do any project that you want at the Town Center or anywhere else because we prudently invested now and that investment came back like no other project that is going to bring the dollars to be able to do that.
Councilwoman Scott stated she understands Mayor Pro Tem's Lilburn not wanting to empty out the bank account.
Mayor Jones stated we're not emptying out any bank account. It's not like your own bank account.
Councilwoman Scott stated she understands that, however, she also understands being in the business of refinancing her own property because that's how people can do anything, we refinance our properties and every time you refinance it cracks you. So, whenever you go to refinance, you're washing down the $5,000 or $10,000 that you can get in your refi. If the interest rate is low, you want to go for the highest amount in the refi. The same goes for the RDA there. We know from just your own figures tonight. We know we got $35 million in expenses.
Mayor Jones stated the response to Councilwoman Scott's comment is the belief of most people is that they relate RDA's to their own home mortgage. They are not the same. In home mortgage, your attempt is to in fact pay it off and own it out right. In RDA's, it is the exact opposite of what you're attempting to accomplish. You have the use of money which has been allotted to you to do certain projects that have big improvements and your prudence if you in fact maximize the use of that money in making and fulfilling the projects and cleaning up your city and doing the things that you want to do. There is no such thing in an RDA as a bank account that has a trust fund in it. You either bond to the amount and the allocation pays for that or you have nothing there. You have bonding capacity but that capacity is only there if in fact you incur a debt, a bond against it. It is not the same as your own personal finances and, anyone who thinks that does not understand RDA funding and we're missing the boat, if that's the rationale were using.
Councilwoman Scott stated financing is in fact whenever you increase your RDA incentives. Every time you increase it, it is very much like refinancing. There is a cost involved. So, if you're going to increase it $10,000 and you could increase it $20 million, you better go ahead and increase it by $20 million because to increase $10 million twice is going to double cost us.
Mayor Jones stated that is correct. It is an economy scale, the higher the amount is, the lower the net cost are in that and you can ask any bonding underwriter. That's the fact.
Mayor Pro Tem Lilburn stated in all these costs, let's say we go for the max bond, we're going to have to hire additional help. Can those funds be paid out of the RDA?
Mr. Linn stated yes they can as long as the funds coming out of the RDA. As long as the expenditure is related to the project, such as engineering, you can use RDA funds.
City Manager Hughes stated it has to be directly related to the project.
Councilwoman Scott stated let me get that again. We can use RDA funds to get the work done.
Mayor Pro Tem Lilburn stated let her clarify this because she's ready to vote. If nothing is built on that site right now and we bond for the max, our tax increment is going to pay for it, correct. We're not jeopardizing anything.
Mr. Linn stated at the present time, the agency has existing cash flow, if nothing happens on that site, you can adequately handle all the steps.
Mayor Jones stated by encumbering that project, we are also entitled to the tax increment that is there by the purchase of the property alone. That tax increment in itself is substantial.
Mr. Linn stated that is correct.
City Engineer Wong stated since there were a couple of comments regarding the timing of construction, he would like to provide a couple of pieces of information. First of all, there's city's current project to widen from two to four lanes is moving forward. In a few weeks time, construction will begin. So that part of the project will continue on and then ultimate widening of Greenspot to six lanes including all the utility construction will, in his opinion, have to go through another process, the environmental process, get permits from other agencies and you have to get the design done and all of this. He thinks it is a very aggressive estimate. We should be talking about 12 to 18 months.
Mayor Pro Tem Lilburn stated but it has to be done either way, whether we do it or whether they do it.
City Engineer Wong stated that's right.
Mayor Pro Tem Lilburn stated so that falls in group A and so would it be safe to say that because that's in group A, it would probably be moved to group B now.
City Engineer Wong stated what he is saying is this. To do the full improvement of Greenspot, you're talking about 12 to 18 months. Now, that doesn't mean within that 12 to 18 months that you cannot come back and do other things. It's not that you have to make all the financing work now. It still can be done within the next 12 to 18 months.
Mayor Jones stated he thinks the issue is if we prudently bond for the $42,770,000, our overhead costs and administrative costs for doing that are far less than if we do it in several bond processes and so, if we're going to put in investment into this project or in the community, then the way we ought to do it is with the amount that is not going to pay for all those improvements that we really have on the wish list there. It's going to pay for a portion of that. Then we're going to have to re-identify and re-meet with the developers and others and determine how are we going to fund those other improvements. That's another discussion. All we're saying is we're going to throw $11 million, plus or minus, whatever that is at this project. It's not going to fund all of it. It is simply going to build a certain portion and then we're going to have to identify where the other sources are coming from. So, for us to reduce the amount, less than $42 million, even makes that problem worse. It doesn't make it better and it increases the cost because we're talking about either doing a CFD or other things which are increased costs of this particular project so we're just monumenting the actual costs that are coming to the project that we could have helped resolve by doing the full $42 million.
Councilwoman Scott stated she feels very much better knowing that we can include the staff or labor for us to go forward because she knows the staff we have is already inundated with projects and if we can use RDA money to assist RDA projects and get an RDA project moving forward, she thinks that's a win-win situation.
A MOTION was made by Councilwoman Scott, seconded by Mayor Jones, to adopt the following Resolutions: Resolution No. 2007-024 Authorizing Issuance, Sale & Delivery by the Highland Redevelopment Agency of its Highland Redevelopment Project Area No. 1, Tax Allocation Bonds, Series 2007 in the Amount of $42,770,000. Motion carried on a roll call vote, 3-1, with Councilman McCallon dissenting and Councilman Timmer absent.
RESOLUTION NO. 2007-024
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HIGHLAND, CALIFORNIA, AUTHORIZING THE ISSUANCE, SALE AND DELIVERY BY THE HIGHLAND REDEVELOPMENT AGENCY OF ITS HIGHLAND REDEVELOPMENT PROJECT AREA NO. 1, TAX ALLOCATION BONDS, SERIES 2007
A MOTION was made by Public Finance Authority Member Scott, seconded by Public Finance Authority Vice President Lilburn, to adopt the following Resolutions: Resolution No. PFA2007-001 Authorizing the Execution and Delivery of a Bond Purchase Contract and Actions Related Thereto. Motion carried on a roll call vote, 3-1, with Public Finance Authority Member McCallon dissenting and Public Finance Authority Member Timmer absent.
RESOLUTION NO. PFA2007-01
A RESOLUTION OF THE HIGHLAND PUBLIC FINANCING AUTHORITY AUTHORIZING THE EXECUTION AND DELIVERY OF A BOND PURCHASE CONTRACT AND ACTIONS RELATED THERETO
A MOTION was made by Agency Member Scott, seconded by Chairman Jones, to adopt the following Resolutions: Resolution No. RDA2007-001 Authorizing the Issuance of Highland Redevelopment Project Area No. 1 Tax Allocation Bonds, Series 2007; Approving the Execution and Delivery of a Supplemental Indenture; a Bond Purchase Contract and Certain Other Documents in Connection With The Issuance, Delivery and Sale of Such Bonds; and Authorizing Certain Other Matters Relating Thereto. Motion carried on a roll call vote, 3-1, with Agency Member McCallon dissenting and Agency Member Timmer absent.
RESOLUTION NO. RDA2007-001
A RESOLUTION OF THE HIGHLAND REDEVELOPMENT AGENCY
AUTHORIZING THE ISSUANCE OF HIGHLAND REDEVELOPMENT
PROJECT AREA NO. 1 TAX ALLOCATION BONDS, SERIES 2007;
APPROVING THE EXECUTION AND DELIVERY OF A SUPPLEMENTAL INDENTURE, A BOND PURCHASE CONTRACT AND CERTAIN OTHER DOCUMENTS IN CONNECTION WITH THE ISSUANCE, DELIVERY
AND SALE OF SUCH BONDS; AND AUTHORIZING CERTAIN
OTHER MATTERS RELATING THERETO
15. Resolution No. RDA2007- 002 Setting Forth the Agency's Program to Acquire Real Property by Eminent Domain and Requesting that the City Council adopt an Ordinance Pursuant to the Provisions of the California Community Redevelopment Law, Health and Safety Code Section 33342.7
Economic Specialist Stater gave a brief review of the staff report.
A MOTION was made by Mayor Jones, seconded by Mayor Pro Tem Lilburn, to adopt Resolution No. RDA 2007-002. Motion carried on a roll call vote, 4-0, with Councilman Timmer absent.
RESOLUTION NO. RDA 2007-002
A RESOLUTION OF THE HIGHLAND REDEVELOPMENT AGENCY SETTING FORTH THE AGENCY'S PROGRAM TO ACQUIRE REAL PROPERTY BY EMINENT DOMAIN AND REQUESTING THAT THE CITY COUNCIL OF THE CITY OF HIGHLAND ADOPT AN ORDINANCE PURSUANT TO THE PROVISIONS OF THE CALIFORNIA COMMUNITY REDEVELOPMENT LAW, HEALTH AND SAFETY CODE SECTION 33342.7
16. Ordinance No. 313 Describing the Redevelopment Agency's Program to Acquire Real Property by Eminent Domain Pursuant to the Provisions of the California Community Redevelopment Law, Health and Safety Code Section 33342.7
A MOTION was made by Mayor Jones, seconded by Mayor Pro Tem Lilburn to introduce Ordinance No. 313. Motion carried on a roll call vote, 4-0, with Councilman Timmer absent.
City Clerk Hughes introduced Ordinance No. 313:
ORDINANCE NO. 313
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF HIGHLAND DESCRIBING THE REDEVELOPMENT AGENCY'S PROGRAM TO
ACQUIRE REAL PROPERTY BY EMINENT DOMAIN PURSUANT TO THE PROVISIONS OF THE CALIFORNIA COMMUNITY REDEVELOPMENT LAW, HEALTH AND SAFETY CODE SECTION 33342.7
which title was read.
17. Proposed Increase in the Maximum Grant Amount Offered by the Neighborhood Pride Single Family Grant Rehabilitation Program
Economic Specialist Stater gave a brief review of the staff report.
A MOTION was made by Councilman McCallon, seconded by Mayor Pro Tem Lilburn, to increase the Neighborhood Pride Single Family Rehabilitation Program's maximum grant amount to $25,000. Motion carried on a roll call vote, 4-0, with Councilman Timmer absent.
18. Discussion of the Level of Activity and Maximum Board Remove the Maximum Grant Amount Cap of $10,000 and Allow the Cap to be Regulated Solely as a Ten Percent (10%) of the Purchase Price
Economic Specialist Stater gave a brief review of the staff report.
Mayor Pro Tem Lilburn stated residents have to meet income qualifications of 100% of the median income which for a two person family is approximately $55,000 a year but they would not qualify for a $350,000 home.
Economic Specialist Stater stated this is just the upper cap. What was found working with the RDA attorney on a number of different scenarios is residents can get to about $315,000 to $320,000. They are required to have a 30-year fixed mortgage. We are not allowing the adjustable or interest only.
A MOTION was made by Councilman McCallon, seconded by Mayor Pro Tem Lilburn, to remove the maximum grant amount cap of $10,000 and allow the cap to be regulated solely as a ten percent (10%) of the purchase price. Motion carried on a roll call vote, 4-0, with Councilman Timmer absent.
19. East Highlands Village Benefit Association Ball Field Funds
Director of Administrative Services Dantuono gave a brief review of the staff report.
Ms. Velma Perez stated she had thought her organization was tax exempt, that they did not have to pay property taxes. They had found out by accident and we had an individual pay a portion of the taxes to take it off the auction block. We know there is money in the account and would like to have the money go toward the taxes that have been incurred over the years. We need a park in our area and we have really worked hard in the past to get it to where it is now. We need the city to help us and doing what is right for our community. Her concern is for the future of the ball field and does not want homes built on the property.
Mr. Lupe Perez stated he has questions to the property in question such as who holds title to the property. Does the city hold title?
Mayor Jones stated no, the property is actually in the East Highland Village Benefit Association's name. It was deeded to the Association by the City of Highland but there are some restrictions on the deed in regards to what can be done with it.
Mr. Lupe Perez stated his concern also is because of the little church that is there and what is going to be surrounding it.
Mayor Jones stated the way the deed is, even the tax assessor could never get a clear title on it because it is deeded in such a way that if in fact you default it reverts back to the city.
Mr. Lupe Perez stated there is $36,000 in the account. What happens to the account if we had defaulted, where does that money go to?
Mayor Jones stated that is one of the decisions we have to debate here this evening is what are our alternatives at this time and refer this to City Attorney Battersby for assistance.
City Attorney Battersby stated there's a couple of preliminary issues that she would like to address. She thinks there's a request to the city to reimburse the money that was paid to take the property off the tax sale from that fund that was set aside and there is an easy answer to the question. The agreement with the Association to set aside the money specifically does not provide the money can be used to pay taxes. It was set aside for the sole purpose of improving the property because East Highlands Ranch did not want the obligation to do the improvements and the city required East Highlands Ranch to provide park land or a similar facility. The Association is no longer in good standing. The Association has lost its corporate standing. That's a default under the agreement. That's number one. Number two is the Association has drawn down the account from $50,000 to $30 something thousand and there are not significant improvements on the property nor is it apparently regularly maintained. The money cannot be used to pay taxes and it looks to her like we have a serious default in the agreement which would allow the city to re-enter and take over the property if the Council chooses to do so. If not, we are going to have to restructure this whole deal. Nothing that she sees here gives the appearance that the Association has acted responsibly with respect to the property or the funds or the terms under which they accepted responsibility for the property.
Mayor Jones stated it is in the best interest of the city that the park be maintained for that community and in doing so he would think it would be prudent for the city to purchase the property for the tax bill amount and then take it over and maintain it as a park. The city then could provide a park for that area and it could maintained off the tax rolls like any other park in the city.
City Attorney Battersby stated a couple of things could be done if the city wants to look into acquiring the property. Delinquent taxes would need to be paid to take it off the tax sale. If the city does this, we will need the permission of the Association to do so or we are going to have to declare the Association in default for the various reasons that were stated and change title, take over the property. As she recalls, the property has some title problems associated with it to begin with and one of them was access and this is just a recollection. The property has an easement access that is adjacent to the road. The Association was charged with clearing up the title issue. She seriously doubts that it has happened. The city could take over the property and lease it to the Association for the same purpose and not give up title and also be tax exempt if they have appropriate status. Her recommendation is for the Council to assign this to an appropriate subcommittee who can review options and come back to Council with a recommendation.
A MOTION was made by Mayor Jones, seconded by Councilman McCallon, to assign Parks and Recreation Subcommittee to discuss options regarding helping the East Highlands Village Benefit Association. Motion carried on a roll call vote, 4-0, with Councilman Timmer absent.
20. Update on SANBAG, SCAG, Omnitrans, Work Program and Regional/Legislative Issues/Development Issues/Subcommittees/AB 1234 Updates
Councilman McCallon attended Legislative Action days in Sacramento, a League of California Cities Event, which gave the opportunity to speak with Legislators. He took the opportunity to speak with Senator Dutton about transportation issues.
21. San Bernardino International Airport Authority and IVDA
This item has been suspended to the next regularly scheduled Council meeting.
ANNOUNCEMENTS
Wednesday, May 30 at 6:00 p.m. Refuse Lien Hearing
City Attorney Battersby stated there's an announcement to be made from the 4:30 Closed Session meeting that the RDA's purchase of the property at 26720 5th Street from Anthony Russo Trust; APN 1192-542-37, was successful.
CLOSED SESSION
At 8:00 p.m., the City Council and Redevelopment Agency convened into closed session regarding the following:
CONFERENCE WITH REAL PROPERTY NEGOTIATOR
Pursuant to Government Code Section 54956.8 regarding the following property:
Property: APN 1192-431-05
Negotiating parties: Joseph Hughes, City of Highland
Under negotiation: Instruction to City's negotiator concerning price and terms of payment.
PUBLIC EMPLOYEE PERFORMANCE EVALUATION
Pursuant to Government Code Section 54957:
Title: City Manager
CONFERENCE WITH LABOR NEGOTIATOR
Pursuant to Government Code Section 54957.6 regarding the following:
Agency Negotiator: Joseph Hughes
Employee Organization: Unrepresented employees.
CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION
Initiation of litigation pursuant to Government Code Section 54956.9(c):
Two cases.
At 8:30 p.m., the City Council and Redevelopment Agency convened into open session, with all members present, making no announcements.
ADJOURN
There being no further business, Mayor Jones adjourned the meeting at 8:33 p.m. in memory of Margaret Fiero.
Submitted By: Approved By:
___________________________ ________________________________
Betty Hughes, CMC City Clerk Ross B. Jones, Mayor