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HomeMy WebLinkAbout1997-01-131VIINUTES REGULAR PALM DESERT REDEVELOPMENT AGENCY MEETING THURSDAY, FEBRUARY 13, 1997 CIVIC CENTER COUNCIL CHAMBER * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * I. CALL TO ORDER Chairman Kelly convened the meeting at 5:10 p.m. H. ROLL CALL Present: Vice Chairman Jean M. Benson Member Buford A. Crites Member Walter H. Snyder Member Robert A. Spiegel — Chairman Richard S. Kelly Also Present: Carlos L. Ortega, Executive Director Ramon A. Diaz, City Manager David J. Erwin, City Attorney Mary P. Gates, Assistant Agency Secretary John Wohlmuth, ACM/Director of Administrative Services Richard J. Folkers, ACM/Director of Public Works Paul Gibson, City Treasurer/Finance Director Pat Conlon, Director of Building and Safety Steve Smith, Planning Manager III. ORAL COMMUNICATIONS None IV. CONSENT CALENDAR A. MINUTES of the Regular Meeting of the Redevelopment Agency of January 23, 1997. Rec: Approve as presented. MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B. CLAIMS ANDMEMANDSAGAINST THE AGENCY TREASURY - Warrant Nos. 43, 44, 45, 43DR, 44DR, and 45DR. Rec: Approve as presented. C. CONSIDERATION of Parkview Professional Office Buildings Financial Statements for Month Ending November 30, 1996. Rec: Receive and file. D. AUTHORIZATION to Advertise and Ca11 for Bids for the Construction of the Irrigation Well for the South Course of the Desert Willow Project (Contract No. R12280). E. This item was removed from the Agenda for separate discussion under Section VI, Consent Items Held Over, of the Agenda. Please see that section for Council discussion and action. REQUEST FOR RATIFICATION of Addendums to JMS Engineering Contract (No. R10720) Regarding Cal State Site. Rec: By Minute Motion: 1) Concur with the Executive Director's action and ratify Addendum Nos. 1 and 2 to the JMS Engineering contract (No. R10720); 2) appropriate $10,400 from the Agency's Unobligated Project Fund. F. REQUEST FOR RATIFICATION of Actions by Staff Regarding Section 4 and the North Course of Desert Willow. Rec: By Minute Motion, ratify the following actions taken by staff to: 1) Authorize the firm of Mainiero, Smith and Associates, Inc. to accomplish a lot line adjustment in the northern half of Section 4 in the amount of $2,500.00 (Purchase Order No. 4661); 2) authorize the firm of Mainiero, Smith and Associates, Inc. to accomplish a survey staking of the perimeter wall of the North Course setting the exact location of the wall in the amount of $2,500. G. REQUEST FOR AUTHORIZATION to Hire a Consultant to Audit the Pre -Opening Expenses Provided to Desert Willow North Course. Rec: By Minute Motion, authorize staff to retain the firm of Diehl, Evans & Company/Oscar G. Armijo, a Joint Venture, to audit the pre -opening expenses provided to the Desert Willow North Course and appropriate $6,230.00 from the Agency's Unobligated Reserve. 2 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * H. REQUEST FOR APPROVAL of Change Order No. 1 to Contract No. R11270 for Additional Construction Services on the Desert Willow Project. Rec: By Minute Motion, approve Change Order No. 1 for additional construction services to Contract No. R11270 (Jones Bros. Const. Co.) in the amount of $13,075.82 and authorize the transfer of funds from contingency funds to the contract base account. Member Benson questioned Warrant Register No. 43 and noted that there was a check in the amount of $41,812.34 to Humboldt State University for the purchase of an electrolyzer. She asked what this was and why the Agency was paying for it. Economic Development Manager Paul Shillcock responded that this was a piece of equipment that extracts hydrogen from water using solar power. He said it would be going into the proposed refueling facility and that the cost was coming out of the $300,000 committed by the Redevelopment Agency. Member Spiegel asked that Item D be removed for separate discussion under Section VI, Consent Items Held Over, of the Agenda. Upon motion by Spiegel, second by Snyder, the remainder of the Consent Calendar was approved as presented by unanimous vote of the Agency Board. V. RESOLUTIONS None VI. CONSENT ITEMS HELD OVER D. AUTHORIZATION to Advertise and Call for Bids for the Construction of the Irrigation Well for the South Course of the Desert Willow Project (Contract No R12280). Member Spiegel stated that he did not remember the Agency Board putting aside monies for the south course. He asked if this meant that the south course was going to be built. Mr. Ortega responded that this would be held and either acted upon or not acted upon depending on the actions taken during the 7:00 p.m. public hearings. Member Spiegel moved to hold this item until after the public hearings at 7:00 p.m. Motion was seconded by Benson and carried by unanimous vote. Following the public hearings, Member Spiegel moved to direct staff to bring this issue back with a total package for the South Golf Course. Motion was seconded by Crites and carried by unanimous vote. 3 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * VII. NEW BUSINESS A. REQUEST FOR APPROVAL OF DESIGN CONTRACT AMENDMENTS FOR DESERT WILLOW PROJECT RESORT COURSE. Mr. Ortega recommended that this matter be held until after the public hearings at 7:00 p.m. The Agency Board concurred. Following the public hearings, and with Agency Board concurrence, staff was directed to bring this matter back at a later time with a total budget. VIII. CONTINUED BUSINESS None IX. OLD BUSINESS None X. REPORTS, REMARKS, AND AGENCY BOARD ITEMS REQUIRING ACTION A. EXECUTIVE DIRECTOR 1. Mr. Ortega noted the item for Closed Session as indicated by the City Attorney for the City Council Agenda. 2. Mr. Ortega asked that the Agency Board add an item to the Agenda for discussion dealing with Agency -owned property (10 acres) on Country Club next door to the Adventist Church. Member Crites moved to add this item to the Agenda for discussion. Motion was seconded by Spiegel and carried by unanimous vote. Mr. Ortega stated that the Adventist Church was beginning construction of a permanent church facility and requested permission to use the Agency -owned land during construction for storage of equipment. He said staff would recommend approval subject to the following conditions: 1) Execution of a Hold Harmless Agreement holding the Agency harmless from any injuries, etc.; 2) dust control during construction; 3) if the Agency sells the property, it is understood that the Adventist Church will vacate the land. Member Spiegel moved to, by Minute Motion, approve the request as recommended by Mr. Ortega with the three conditions. Motion was seconded by Snyder and carried by unanimous vote. 4 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B. AGENCY COUNSEL Absent C. CHAIRMAN AND MEMBERS OF THE AGENCY None XI. AWARDS, PRESENTATIONS, AND APPOINTMENTS None XII. PUBLIC HEARINGS A. CONSIDERATION OF DISPOSITION AND DEVELOPMENT AGREEMENT PURSUANT TO HEALTH AND SAFETY CODE SECTION 33433 RELATIVE TO INTRAWEST RESORT OWNERSHIP CORPORATION - 47 ACRES OF LAND LOCATED ON APPROXIMATELY NORTH OF COUNTRY CLUB DRIVE BETWEEN COOK STREET AND PORTOLA AVENUE, PALM DESERT (JOINT PUBLIC HEARING WITH THE PALM DESERT CITY COUNCIL), Continued from the Meeting of January 23, 1997, The following is a verbatim transcript of this portion of the meeting: Key RSK Richard S. Kelly, Mayor/Chairman RAD Ramon A. Diaz, City Manager CLO Carlos L. Ortega, Executive Director of the Redevelopment Agency SS Steve Smith, Planning Manager DJE David J. Erwin, City Attorney BAC Buford A. Crites, Councilman/Member JG Jim Gibbons MP Mark Pevers PD Phil Drell, Director of Community Development JMB Jean M. Benson, Mayor Pro Tempore/Vice Chairman RAS Robert A. Spiegel, Councilman/Member WHS Walter H. Snyder, Councilman/Member LW Leonard Wolk JR Jeff Rabin MPG Mary P. Gates, Deputy City Clerk/Assistant Agency Secretary RSK First item under public hearings is consideration of approval of a development agreement waiving certain requirements of the Municipal Code to allow final approval 5 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * of a conditional use permit for a 310-unit residential vacation ownership complex (timeshare) project and related tentative tract maps TT28450 and 1T28451, all located on r..,),:..ty in a portion of Section 4. RAD Mr. Mayor and members of the Council. We can and should take Items A and B together since they involve the same project. Carlos... CLO Mr. Mayor, the City Manager is correct. Item A on the agenda is a City Council item and involves a development agreement. Item B is a disposition and development agreement between the Agency and Intrawest Resort Ownership Corporation and is the subject of a joint public hearing this evening. The DDIA is also a public hearing. Both the hearing on the development agreement and the hearing on the disposition and development agreement have been advertised in accordance with law. Furthermore, a copy of the disposition and development agreement has been made available for public review. Since the development agreement and the disposition and development agreement are linked, we recommend that you open the public hearing on both Items A and B and take testimony on either or both. First, we should have the Planning staff summarize the project and the development agreement. The staff report on the disposition and development agreement contains a summary of the document including all of the deal points. If you have any questions, Agency staff, the Agency's fiscal consultant, and the Agency's legal counsel are here to answer any questions. RSK Any questions from the Board or the Council. Well, we'll listen, before I open the public hearing, we'll listen to the remainder of the staff report. SS Good evening. As Mr. Ortega indicated from the City side of things what is before you this evening is the development agreement to waive certain requirements of the Municipal Code to allow the final approval of the conditional use permit for the 310- unit residential vacation ownership complex. DJE Mr. Mayor, I'm sorry to interrupt, Steve. Mr. Mayor, I would ask you to open the public hearing for the Redevelopment Agency as well. RSK I didn't open either one, yet. I was going to open them as soon as we finish the staff report. DJE Okay. RSK I thought I said that. SS Continuing on...the matter was before the Planning Commission at its meeting of December 17th. At that time, after a lengthy public hearing, the Planning Commission approved the precise plan, the conditional use permit, and the two tentative tract maps, 28450 and 28451, all subject to conditions. One of the conditions on the Planning 6 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Commission action requires that the Council approve by ordinance this development agreement to waive the timeshare requirement that timeshare projects "shall be developed in conjunction with a resort hotel having 500 or more rooms." You have that development agreement before you this evening. It contains a recitation of certain benefits accruing should the City proceed with this project, some of which are also contained in the DDIA which the Redevelopment people will describe in more detail. The City Attorney's office has had an opportunity to review the development agreement. I understand Mr. Erwin has some additional language he wishes to bring up at this time. I would conclude by saying that subject to his comments, that staff recommends that you waive further reading and pass Ordinance No. 824 to second reading. You have the project before you in model form, and the plans are on the wall. If you need me to describe in more detail, I can, but I'll stop at this point unless there are questions. RSK Any questions? BAC Just one quick one. The disputation over parking requirements between 1.8, 1.5, 1.1, is now, what? SS It is now that we are going to have the higher number of parking provided in each phase and we're going to reevaluate at the end of each phase. BAC 1.8? SS I believe that is the number, yes, 1.8. RSK Any other questions? Did Redevelopment want to do a staff report? CLO Mr. Mayor, we do have an extensive summary. It is a very long and complex agreement. If you want to, I could give a summary of the summary real quick -like, if you'd like. RSK You could do that. CLO Essentially what the agreement contains is the sale of land to Intrawest Resort Ownership Corporation to build the units that are the subject of the Planning Commission recommendation which is the 310 units. There are provisions for options to buy additional r.or�.ty in the future to develop what may ultimately be close to 600 units. The provisions is that there is a land sale, there is a cash down payment of $3.5 million, there is a note backed by a trust deed, plus a corporate guarantee by Intrawest Corporation of $2.5 million. In addition, there are three sets of additional fees that are paid. One is what we call a one-time access fee of $12,000 per unit. In addition, to support the operation of the golf course there's over a period of five years a principal amount to be increased by Consumer Price Index, but the principal amount of $1.5 7 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * million, and that is paid over a period of five years. In addition to that, there is an ongoing fee of $3,500 per unit which will be paid, and those will be paid as long as there is a project. RSK Annually? CLO Annually, yes, sir. The Agency, by the agreement, is required of course to sell the land, is required to build and operate the golf course, and is required to provide certain benefits to the resort owners or the people that buy points in the vacation resort and to provide the infrastructure up to the property line. That is essentially the agreement. RSK Questions from the Council and Board? With that, then, I'll open the public hearing and ask...I guess, first, anybody representing the developer to make any comments they might have. JG Mr. Mayor, City Council, Agency staff, the staff of the City, and public. My name is Jim Gibbons, and I'm with Intrawest Resort Ownership Corporation. We have available a lengthy presentation which I think most everyone has seen already, but we have it if anyone wants to see backup materials. I think what I'd like to do is summarize tonight some of the things that have already been brought forward. Firstly, the process by which we've gone through the system in the City of Palm Desert. On the loth clay of December, 1996, we received...we successfully went through the Architectural Review Committee. Same day we had unanimous approval by the Section 4 Committee. On the 17th of December the Planning Commission sent this forward, and on the 30th of January, the Economic Development Committee met and recommended approval. Finally, as an endorsement, the project went on the 17th of January to the Chamber of Commerce Board. In addition to that, we have been out seeking public opinion. Intrawest prides itself on coming into a community and working with the people in the community and to that end we've gone out and tried to assess any concerns, not only from the people at the City, the people at the Redevelopment Agency, the people at City Council, and I think that we've addressed the concerns as much as we could, and I'm very proud to say that never in the history of my career in this industry with a project this big have we received this kind of a unanimous approval from the community. We're very proud of what we've accomplished and we look forward to going forward tonight. With respect to the development agreement and its dealing with the waiver of the timeshare ordinance, the City gave us a test and challenged us to meet three very severe challenges in order to get a waiver of the timeshare ordinance. The first one of those was that the scope of the proposed development and the credibility of the developer must justify the waiver, and I think that over the course of the months that we've been before you that we've been more than able to do that. Also, the unique nature of the resort club is more akin to a resort hotel because of the fact that it is a single ownership and that the members all own a share in one entity that is free and clear of financial 8 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * encumbrance and the fact that the members can use the resort not one week at a time as in traditional fractional ownership but one day at a time as in a hotel and the fact that the project contains in the 310 units in the fast phase it contains 600 keys similar to a hotel and ultimately up to 1,200 I think satisfies that. And, thirdly, that there would be substantial direct financial benefit to the community of Palm Desert, and I think as Mr. Ortega has put forth tonight, we have more than lived up to that part of the requirement. In closing, unless the Council finds that we should do a more extensive presentation, I would just like to thank the City staff, the Redevelopment Agency, the Council, and all of the people here in the City of Palm Desert who have shown us unbelievable support for the project, and I respectfully request tonight that you grant us approval of both the DDIA and the development agreement. Thank you. RSK Any questions from the Council? Anyone else would like to speak to this item at this time? Seeing...oh, there we go. MP Mr. Mayor, may I speak against the proposal now, is this the appropriate time? RSK Yes. MP My name is Mark Pevers. I reside at 877 Box Canyon Trail, Indian Ridge, in Palm Desert. I'm concerned both as a taxpayer and as a limited partner in Marriott's Desert Springs Resort. I read the quote from Mr. Ortega in the current newsletter that "hotels are back in business, financiers are looking once again to finance hotels, and that window of opportunity is here in Palm Desert." And then it also said that you've got commitments from two hotels for two of the pads and the Planning Commission has approved, I presume, the conference pad for another hotel. This is pretty hard to believe. There are two pads at the Indian Wells Golf Resort, no hotels on them. There's a pad at PGA West, no hotel. The Canyon Resort in Palm Springs has not been able to get financing. I spoke to an official in the Rancho Mirage city government today. They'd love resort hotels and more resort hotels in Rancho Mirage. There's just no interest. And I gave Mr. Ortega a letter which I asked him to distribute to the Redevelopment Agency. It's from the Marriott's Unlimited Partners dated January 20th of this year, and if financiers are jumping in to finance these hotels, we as partners, and Marriott had to look for a year to get anybody to refinance Desert Springs which is the Largest resort in the Valley, I think the most successful resort, and the best they could come up, the $99 million note is at 8.6% interest, and there are two other notes. One carries an interest rate of 20%, and one carries an interest rate of 13%, so obviously the private sector is saying that this is a risky investment. My next point is that if you have this interest from hotels, obviously there's a tremendous public subsidy involved, and I feel it is unfair, Desert Springs was built with 100% private money. We are suffering, we have not seen a nickel from hotel operations in years, and if you read this letter we're not going to see a nickel for years to come. So something's wrong. Either we've been conned, the projections were great, as Mr. Ortega said, the proforma for Desert Willow looks fantastic, it looked fantastic for Desert Springs too. And I think 9 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * that with the free golf course, and again, if Intrawest wants to pay for the golf course, up front, as well as the other hotels, I say fine, but I say it's not fair. We should be...the playing field should be level, they should have the same terms we had, Desert Springs has been very successful for Patin Desert. But let's compete and not freeze out the private sector. We put our equity into it, and right now it's worth next to nothing, and you're basically giving away the store. And if all these...you have Intrawest and these other two hotel entities interested, there's obviously a huge public subsidy. Because financiers aren't coming in. You need 50% equity, and Desert Springs being a proven hotel, we never missed a mortgage payment, this is the real world out there, not dealing with public money. I'd like to comment on that rather than just say thank you. And my next and last point is, three years ago I had a discussion with Ray Diaz, if this project were totally developed with Desert Springs, you could possibly have a project worth a billion dollars, and I said to Mr. Diaz, what are you doing about undergrounding the transmission lines on Country Club. And Mr. Diaz said, well legally we could use Redevelopment money, but we're not interested in doing it because it's not revenue producing. And I say if you want a destination resort, a first- class resort, the two and a half million dollars to do that is about half of one percent of the value of this total development if it goes as planned. $20 million was spent on the north course, $500,000 could have been spent to underground those residential lines on Frank Sinatra. It wasn't done. You have to have a beautiful environment. You did it on 111 between Rancho Mirage and Palm Desert. As you drive down there, it's gorgeous, you see the palm trees, you hardly see the businesses, and you see the mountains. And no thought has been done as far as I know to do it. The median strip is tired on Country Club, that certainly should be beautified. I mean, if you're going to go world -class, do it right. Again, so I'd like specific answers to...my main two questions are, one, how can you justify unfairly competing with the private sector and, two, what about getting this undergrounding of the high tension lines and also upgrading the median strip on Country Club which is certainly pretty shabby now. Thank you, and I appreciate your comments. RSK Is there anyone else who would like to speak to this issue? Seeing none, I will close the public hearing. DJE Mr. Mayor, might I add a provision that I would like you to consider in the development agreement if you are to consider it. It would be adding a paragraph D in the recitals which deals with the impact mitigation fee that would be paid per unit, and it is a one-time fee of $7,500 per unit payable six months following the date of the certificate of occupancy being issued for each unit. There is a recital referencing code section as paragraph D in the recitals, and it also would be included as paragraph number eight in the agreement requiring that same payment. That is not in the copy of the development agreement that you have in your packets. RSK Is that right, Mr. Ortega? 10 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * DJE This is my recommendation that you add to the development agreement. RSK I thought we had that in there. When you talked to me you said...you mentioned that, but it didn't get in the agreement? Oh, that's because it's in the ordinance? CLO No, that's what, I think, the City Attorney and Planning staff have been making sure it's in there. PD I'll clarify it. Our ordinance requires $150 payment on each week's share at the sale of each share. Since this project isn't selling week shares, we had to specify and take that formula and turn it into the $7,500 per unit, which is the total which is paid. So instead of having it, again, since we couldn't tie down what a week share was in this concept, we figured out what the total would have to be paid on each unit, and they will pay that. CLO To answer you question specifically, the agreement does contain an overall provision that the developer will pay all existing City fees, which include the $7,500. What the City Attorney is doing is clarifying... RSK You have no problem with that? CLO No, I have no problem with that. RSK I'll ask for the Council's direction. JMB Well, I have a comment. I am very very much opposed to the waiver of the ordinance that requires a hotel. I don't see any way that condos, by any other name they're still condos, the Department of Real Estate states that they're condos whether you call them resort club or whatever you call them, they're still timeshares, be built without a hotel. We went through this before we put that ordinance in, and now we're circumventing our own ordinance to go through and put a development agreement in so that we can justify putting in the condos, and I don't think it's right. I think that anyone that comes in that wants to build condos just say well, I'll go by your ordinance but we'll have a development agreement so I can circumvent it. If we do it for one, we have to do it for another. The City is selling this land to Intrawest. I think it's totally wrong. I see no reason for us to get into that position. I think if they want their project out there, let them build the 500-room hotel. The economic benefit comes from that, not a dribble here and a dribble there as they build a few condos and then see if they go. They stated in one of the presentations they expected eight five percent occupancy in the summer, and I can tell you as chairman of the Palm Springs Desert Resorts Visitors and Convention Bureau for the last six years the occupancy of all our Valley hotels has been fifty seven and a half percent. There's no way those condos are going to attract eighty five percent occupancy, and they're going to find that out the hard way when people can go someplace else in the summer rather than come here in June, July, and 11 IIINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * August, so that's going to slow down the building on them. I just think that there has to be some provision in there that everybody that wants to build condos doesn't come in and say oh well, the City will accommodate us, they'll do a development agreement and we can put condos in and get rid of the hotel, and we'll really circumvent what we started when we said we didn't want condos without a hotel. If they want to build 500 units out there and give them to the resort members, that's fine with me. But I think they need to do it all in one package so that the City of Palm Desert doesn't get stuck with this, as I can see coming down the road. It also says they have to have an 18-hole golf course, and they want us to pay for it. We spent $20 million on one, and I for one don't want to take the flack on $20 million for golf course two that's going to benefit the condo people. I just think it's totally wrong, I think we're in the wrong direction, and I am totally opposed to putting condos out there when they're in direct violation of our own ordinance. RAS Well, I happen to agree with Councilwoman Benson for maybe some other reasons, and I don't know that I'm going to answer your concerns, I doubt that I am. Our general fund budget for this year for the City of Palm Desert is $22 million. That's what we'll spend to maintain this city. Of the $22 million, $2.269 million come from property taxes, which tells you that we don't run the City because of what the people pay in property taxes here. Our two main money produces that run the City of Palm Desert are, number one, sales tax. Because we're now the retail center of the Valley, we will earn $8.15 million in sales tax, or 36% of our total income. The second biggest amount of money that we receive is $4.7 million in hotel occupancy tax, 21% of our budget. Of the $4.7 million, $3.1 million comes from the Marriott Hotel. All the rest come from smaller hotels in Palm Desert, but $3.1 million of $4.7 million comes from the Marriott. Now, if you add to that the fact that everything that's purchased there, whether it's a meal or whether it's something from the gift shop, has sales tax to it, conservatively the Marriott Hotel gives this City over $4 million a year in revenues to run it, almost twice what the City gets in property taxes from the people who live here. Now that's pretty dramatic. The Marriott Hotel came in with a beautiful destination resort that had convention facilities and was suggested as the number one hotel in the Valley. Right now their occupancy rate is about seventy five percent I believe. We are the only city, major city, in the Valley that has only one destination resort. All the rest of our hotels are small hotels. People are telling us they like this area to come for a destination resort. If another destination resort were added to this city, it would give us at least an additional $2 million to work with to pay police and the fire department and upgrade the roads and take care of the medians on Country Club, etc., etc., etc. The Marriott did not put in the timeshares until they were successful with their hotel and their golf courses. Intrawest, which is a fine corporation and has developed a wonderful plan, comes from Canada, where they have one of the best ski resorts in the world, outside Vancouver. But Intrawest built the ski resort, they built the hotels, they built the restaurants, they built the shops, they built the movies, and then as an afterthought they said let's try timeshares. Well the timeshares worked pretty good. But everything was already there, the hotels were there, the homes were there. Now 12 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Intrawest is coming to us and saying hey, guys, we want to put in some timeshares and then maybe there'll be a hotel that will come along and we'll have the complex. Well, I agree with Councilwoman Benson. This Council passed an ordinance that said that you can't have timeshares unless you've got a 500-room hotel, and in my opinion we're putting the horse before the cart. The City should be out trying to develop a hotel to go along with our fine golf course, yes it was an expensive golf course, but I viewed it and I'm not a golfer, but it's one of the prettiest golf courses that I've ever seen and I think will attract an awful lot of people to our community. But I can't vote for this project without the guarantee of the hotel. JMB I just have another question. I just wonder, on the outside, it says the applicants are Intrawest Resort Ownership, but the development agreement says it's Resort Ventures, LP, and why isn't it with Intrawest, and who is Resort Ventures, LP? I have no idea. PD I believe the party to the development agreement should also be Intrawest Resort Corporation. DJE The development agreement that I have is Intrawest Resort Ownership Corporation. PD Yes, yes, so... JMB This one I have says development agreement number 97, and it says it is between the City of Palm Desert, a municipal city, and Resort Ventures, LP, a California Limited Partnership. PD The version that went to the Planning Commission was that way, but in the interim it has been the latest draft which was circulated. I don't know which one you're looking at. You're looking at... DJE It's a draft that shows some redlining and additions, and it is with Resort Ventures Limited Partners. I've not seen that one. The only one I've seen is the Intrawest Resort Ownership Corporation. That may well be from the Planning Commission... PD Yes, it was from the packet for the Planning Commission. The latest one is all by itself and with the ordinance to the Council. JMB And so all the financial agreements and everything we're doing or approving is with Intrawest. PD Intrawest, correct. Intrawest Resort Ownership Corporation. DJE Intrawest Resort Ownership Corporation. RAS IROC? 13 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * DJE IROC, I-R-O-C. RAS A subsidiary of Intrawest? DJE IROC is reputedly a wholly -owned subsidiary of Intrawest. RAS So it's like signing a contract with Intrawest when you sign a contract with IROC? DJE No. RAS Then I don't understand. DJE Well, you have two separate corporate entities. IROC is a corporate entity. RAS But it is a subsidiary of Intrawest. DJE Yes, meaning that Intrawest is the owner of IROC. RAS Well, if you buy a car from Buick, aren't you buying it from General Motors? DJE Not necessarily. JMB Well, Intrawest themselves are responsible for all the financial obligations of this transaction? DJE There are several responsibilities for the financial aspects of the transaction. The principal is Intrawest Resort Ownership Corporation. There is an additional corporate guarantee of $2.5 million from Intrawest, the parent company, as I understand Mr. Ortega's comments. But the principal organization that you're dealing with is Intrawest Resort Ownership Corporation. JMB What you're saying is in essence it's Intrawest. DJE I'm trying to be correct because Intrawest is spoken of as the parent company. Intrawest Resort Ownership Corporation is a separate company. It is owned by Intrawest, but it is a separate entity. RSK But in the agreement, Intrawest itself is the guaranteeing company? CLO For the $2.5 million corporate guarantee, yes, that's backing the trust deed. JMB Well, I would think the... 14 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * RSK In other words, if IROC were to dissolve and disappear, then Intrawest would be _' responsible for $2.5 million, and we would take the project over also. CLO Correct. DJE Well, not necessarily. It depends if these go through and the property ownership is in IROC and IROC pulls up for whatever reason, that does not necessarily mean we step in and take it over. I think the documents would indicate that, but the question is in to the bankruptcy courts perhaps. CLO There is a trust deed and a note, and that is against the property. So, a, we would have the ability to foreclose on the property. In addition, what we insisted on that in addition to those, we get a $2.5 million corporate guarantee from Intrawest. JMB Well, I would think all these papers should reflect the same thing and we know where our money is and who's behind our money and who these partners are in this before we would go into any development agreement with anybody. We're certainly supposed to be a fiscally responsible Council, and I don't think that's fiscal responsibility to sign something you don't know what you're signing. BAC I guess the starting spot seems to be whether or not we would waive the hotel — orientation or requirement and so on. When we placed that requirement on this type of development about a decade ago, we did it because particular small timeshares in this Valley, we had a whole pile of them at the time and people were taking over little abandoned apartment projects and turning them into timeshares and this and that, and we simply didn't want that to happen in this city, and so the Marriott at the same time if I remember correctly wanted to do a project like this and so it was darn convenient for us to attach it to a 500-room hotel because only the Marriott had such a thing, and attach it to and 18-hole golf course because they were the only ones that had that, and we never had to worry about the issue again. To say that we were looking at 500-room hotels or something like that is, I think, less true than the Marriott and what they had was a good darn flag of convenience to make sure we didn't get developments that we did not think were financially stable at that time. If we believe something is financial stable and has the resources and has the quality and everything like that, then that's something we should look at. If we had a 500-room hotel that was run by some corporations who run hotels, we shouldn't approve that, period. I think the artifice of a particular number of hotel rooms or something is less important than the issue about quality and the issue about financial responsibility. That's my solid bias on that. I have to, on the other hand, also agree with Councilmember Spiegel that the hotel issue is an important one. The gentleman this evening talked about Marriott Desert Springs and there aren't any new hotels and so on, well, I think in a very short period of time _ we'll have a public chance to discuss two hotels in that general site area that have been proposed by a major hotel corporation. And I think we've already announced the name, haven't we in a past meeting? 15 1bIINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * RAS Not part of this... BAC Not part of this development. But back over on the corner... catty corner of where the Cal State campus will be, and those are I think legitimate opportunities. By the way, redoing Country Club Drive is on our capital works budget, and it couldn't come too soon if it happened tomorrow morning, in my opinion. Those poor jacaranda trees out there should be allowed to suffer their last and being given the dignity of a good burial or composting and get on with life. RSK And the grass with it. BAC And the turf with it that gets to battle the sand every year. There's not an argument -- it'll get done. The undergrounding issue, I think, is also an issue that we need to look at in terms of our capital budget, not on the retail, the small lines, but on those large lines which are further out, and when development hits on that side, that's one of the times that will trigger doing that at that time so that we get some money to come in and work with that at the same time. The answer is yes, we'll do that, it's easy to do when we're doing the other things at the same time, to pull those out of there and get those lines underground. I agree totally with you idea of Highway 111. We still have some up on Highway 74 and things like that. When we started this project originally Marriott was going to do this and obviously we weren't going to require Marriott to build a second hotel because they already had a hotel, and then Marriott apparently now in their judgment unwisely walked away from this, and we had another company that came in to do in essence an identical project. This was a project that I think was acceptable to this body when the Marriott Corporation was doing it with the same configuration basically in numbers and so on and so forth. JMB We didn't even talk about the financial with Marriott. BAC You and I will differ on that, I think we did talk about financial issues with Marriott. WHS I was one of them that talked to them. BAC But in any case, whether we did or we didn't, I believe we did. I think a reasonable question that Councilman Spiegel raises, though, what happens if we approve this investment, the company goes out and builds the number of units that they are minimally required to do, and then decides this is not a profitable venture. What happens, to be more blunt as my colleague said, if they cut bait and run or pull their line up? CLO Let me talk about what the agreement says, then I'll have our legal counsel tell you what legally we are requiring. Number one, there is a $3.5 million cash down payment that will be in our hands as soon as we close escrow on the property. Number two, there will be a $2.5 million corporate guarantee. Number three, as soon as we close 16 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * escrow, they will then...we will release from the trust deed 40 units at which point they will be made to pay an additional amount of some $480,000, and that's cash, that's not note. It reduces the note, of course, and we release those from the trust deed. There is a minimum payment requirement on a yearly basis that, on a yearly basis, they are required to pay down an additional 32 units, which again reduces the note... BAC The 2.5 you mean? CLO Well, it'll be a note for 4.5. BAC 4.5, okay. CLO 4.5. You will recall that initially $480,000 right off the bat in addition to the 3.5, and then there are requirements for them to pay additional amounts which represents an additional 32 units per year. There are also the requirements that when we release the units, some of the other fees are also payable. So there is a schedule of payments, any of which the failure to pay is a default, and we can foreclose. Now if you want to know about other personal guarantees that we have required of IROC, our legal counsel is here to answer those if you'd like. BAC So the issue, though, and it's an issue that Councilmember Spiegel brings up, we are, once we start this process, obliged to, and here's a question from the gentleman, do a basic golf course on the south side. That golf course is not just for IROC, it is also of course it'll be used for other playing, public and so on and so forth. How much money... JMB The south one I thought was for IROC's development. RSK Not exclusively. CLO The golf course is a public golf course to be run and operated by the City in the same manner as the north golf course. The only agreement with IROC is that their people have a right to use it, that they have certain reservation rights, just like the public does. As long as there are tee times available, regardless of who the previous users are, the public has a right to use it, just like any other golf course, just like the north golf course. BAC Now, given the amount of money that we would put into that course, and given the amount of money that IROC both gives us initially and is corporately responsible for and so on and so forth, what kind of difference in expenditures versus guaranteed income is there? CLO I will have our fiscal consultant tell us that. We have done several scenarios, if you'd like. 17 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * LW (Unclear)...under two scenarios. One scenario is...thank you...can everybody see that, is it clear? JMB No. WHS Lights. BAC Why don't you pull the... RAS Why don't you pull it back a little bit. LW That's better, now focus it more. That's good. We have two separate scenarios. One is if IROC completes phase one which is the first 311 units. The second scenario is if they complete everything, phase one, phase two, and phase three, for a total of 591 units. In phase one the land sale payment will be almost $9 million. The golf access fees which allow them, as Carlos said, priority scheduling on the golf course, is another $5.7 million, but the big item is the project amenity fee which is a $3,500 fee that's paid for each unit in perpetuity. This is a 30-year proforma but the payment... RAS Do you mind if we interrupt you as you go along? LW Sure, I would like you to do that. RAS The guarantee is only 30 units, as I understand. LW The guarantee? RAS Yes, they will build 30 units. LW No. RAS No? LW In fact, these payments will be paid whether they go (unclear) or not. I mean, these are contractual agreements where they will pay these payments whether or not they build any units. RAS In other words, if they build 30 units and they're not able to sell the 30 units and decide they want to get out, the City would get...what is that total number at the bottom... LW $67 million (unclear) RAS They would get $57 million... 18 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * LW 67. RAS 67. LW They are contractually liable to make those payment whether or not they build any units. JR Mr. Spiegel, my name is Jeff Rabin, and I'm sure the other Councilmembers recognize me. I'm with Bill Strausz's office, representing the Redevelopment Agency. The agreement provides that there's a contractual obligation to make these payments. If they don't make the payments, the Agency will have a choice either to sue IROC periodically for making the payments or the Agency can foreclose and take the land back. The...one modification that we have discussed since the notice of public hearing was first made was that it should be clarified that if the Agency forecloses, then the Agency has the land back and the Agency can now dispose of the land and hopefully would find another buyer and impose these obligations on some new buyer. But IROC is not going to be obligated to make the payments if the Agency has taken the land back, whether it's because they didn't make the payments or whether there has been a default on the promissory note. LW Thank you, Jeff, for making that clear. So the contractual obligation for IROC on — phase one is a total of $67 million. If they do the whole project, that total reaches $119 million, and these are direct benefits only, it doesn't include the indirect benefits. Let's talk about the indirect benefits for a moment. That's number six, Jeff. They should be in order. The indirect benefits include sales tax, property tax increments, the transient occupancy tax in lieu, that's $7,500 per unit, and also development fees. In phase one alone, the total alone is $45 million. For the whole project, it's $75 million, so that will be added to the total direct benefits. The grand total, number seven, Jeff, thank you, the grand total for phase one alone is $163 million for the 311 units. For the whole project, it's almost $245 million direct plus the indirect. Now as far as return on the investment is concerned for phase one or the whole project, Jeff, number eight, please, if they complete phase one, 311 units, the total benefits from IROC are $117 million. The cost to build everything we need to build, including the south golf course, is almost $45 million, so the net financial benefits are almost $73 million. That's a return on investment of 162 percent, and these are direct benefits only. RAS Over 30 years. LW Over 30 years, right. Internal rate of return is almost seven percent, and the present value, which is net benefits in today's dollars, is almost $5 million, after taking out the expense of doing everything. You add direct benefits to that and the present value goes up to almost $22.5 million, the total direct plus the indirect present value in today's dollars, almost a ten percent internal rate of return. Any other questions? 19 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *. BAC Let me go back to the question that I was starting with. Assume for a second that we go and meet all of our obligations. Assume for a moment that they in good faith begin their project and find out for whatever reason part way through the first phase that they do not choose to continue it. Where are we in terms of the amount of money that we have spent versus the amount of money that we will have in hand and the kinds of ongoing expenses we will have assumed for that area of land? LW Before I answer that, let me show you one more chart which includes the golf course revenue for the south golf course. Jeff, would you go back to number seven, please. We looked at chart number seven before, but let me talk about some of the items on it. The first item is the direct benefits we get from the IROC deal, the deal with IROC. And that's the land payments and the golf access fees plus the project amenity fees. That's the $67 million. The resort golf course over 30 years has been projected to produce net benefits of $50 million over 30 years. That's a total of $117 million, plus the indirect benefits is another $45 million, so the total is $163 million. The grand total for phase one plus the other two phases is almost $245 million, I neglected to include the resort golf course. In getting back to your question, as Carlos said, IROC is contractually liable to put the $3.5 million as a down payment as soon as we close escrow. And then there's another $2.5 million guarantee by the Intrawest corporate entity. That's a total of $6 million. And then they're contractually liable to pay us for at least 32 units of land each year through the sixth payment period at which time the note becomes due. That's a total of $576,000 per year for the five years until the note becomes due. Now, Jeff, you can talk about what happens if they don't pay off the note...what are our rights. JMB Could I ask a question right there? LW Yes. JMB You said 38 units... LW 32. JMB 32 units a year, and the first phase is 131 units, so how long do the have to build that first phase? LW The first phase is 311 units. JMB 311, and they only have to pay on 32 a year? LW They pay for the land, 32 units a year, and it takes about a year after they take down the land to build out the units. JMB So how many years is it taking to build this first phase? 20 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * LW It will take about eight to nine years to build out the first phase. JMB Okay. BAC But the note is due in six years. LW The note is due in six years. They have to pay the note... JR In five years. LW ...unpaid balance of the note five years after the close of escrow. BAC Right. LW It's a five-year note. JMB On the first phase. LW On the first phase. JR If any payments aren't paid, the Agency has...will hold the deed of trust on the property and will foreclose on that deed of trust and take the land back, and if any payments aren't made on the project amenity fees, the Agency will have a right to take back those units for which the project amenity fees haven't been paid. Now that would mean that IROC, or really the club, will have lost the investment that they made in building those units, which I understand is several hundred thousand dollars per unit. They'd lose a $200,000 investment on a $3,500 payment. It's obviously a risk, but one would have to wonder about the likelihood of that happening once they've made that investment and built the unit. But the greater risk is really that if IROC doesn't build out the properties, but the Agency will have full security in the real property. JMB What you're saying it's not IROC building them, it's Intrawest, because we didn't find any IROC. JR IROC is the...did I say Intrawest? LW You may have, but it is IROC. JR I mean IROC is the obligor on the promissory note, except to the extent that Intrawest Corporation is also guaranteeing $2.5 million to the principal on that promissory note. As IROC makes payments on that promissory note, it reduces Intrawest's guarantee. For example... JMB We don't know who IROC is. 21 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * JR IROC? IROC is Intrawest Resort Ownership Corporation, which is a separate corporation, but it's a wholly owned subsidiary of Intrawest Corporation. But, for example, if IROC makes the first installment payment on the promissory note of $576,000, Intrawest's guarantee then would be reduced to $1.9 million approximately. BAC Now, go back to my question again. JR Your question is what will we have in hand... BAC As ongoing liabilities should we have to take a piece of property back. JR I'm not as familiar with the cost of the Agency's investment in constructing the golf course and the infrastructure improvements as Mr. Wolk is. Do you remember offhand what that investment is? LW The total number is about $44 million to build everything that we're required to build, according to the DDA. CLO That includes the value of the land. LW That's right. The land is $17 million of that, and the infrastructure is about $24 million, and the interest on the bonds would be used to buy the land is another $3 million. And that total should be about $44 million. BAC That comes right to $44 million. LW Thank goodness. BAC Not even give or take a million or two. Now, the golf course, we have one we're going to open, we have this other one that we're going to use...is the proposal that's primarily for Intrawest as they grow and for the hotels as they come in and so on and so forth. What is our maximum yearly projected loss if, as an example, this project does not go forward and we have that golf course? LW Well, the cost to maintain the golf course, we have the economy of scale of having the north golf course in place. It costs about 50% more to maintain and to operate the south golf course than it does to operate the north golf course. And that number is about $1.3 million as I recall to operate the south golf course. BAC Per year. LW Per year. We need net income of at least $1.3 million to break even on that golf course. 22 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BAC Okay. LW And the break even point is about 27,000 rounds, 24,000 to 27,000 rounds of golf in my projection. BAC And on the north course, as an example, what is your projection for the first year's number of rounds? LW It isn't my projection, it's actually Kemper's projection. The first year, I believe, was 37,000 rounds on the north...is that correct, Carlos? CLO That's correct. LW 37,000 rounds on the north golf course, on the north golf course. BAC And what percentage of the $1.3 million in yearly carrying costs of the south golf course is IROC proposing to make us hold for from the start? LW Well, we don't have a guarantee from IROC beyond what was just mentioned, the $2.5 million guarantee by the parent company on the note, and the contractual obligation to pay golf access fees per year. And also the project amenity fees on an annual basis. JR I could point to you in the DDA and tell you what sections that's set forth in if you give me one moment. BAC I've looked at that, and I'm just...so everybody in the room gets an idea of about how much money is coming in... LW Okay, let me tell you that, I have... BAC ...for that $1.3 million obligation that we have. LW I'll be right back. JMB While he's doing that, I just have another question, I guess, of Carlos. If the south course is going to be open to the public as well as the north, then they would use their Palm Desert resident card for fees on the south course, too? CLO No, they would not be residents because they're not buying... RSK No, she's talking about...the resident card is good at both courses. CLO Yes, they'll be operated the same way, yes. 23 IINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * JR Well, I can speak to the project amenity first, which is in Section 5.4.3 of the agreement, and in the second payment period, that's approximately a one-year period that will start, which we project will start January 1, 1998. The first year it's $70,000, the second year $140,000, subject to a CPI adjustment, each of these are subject to increase in accordance with the CPI, then $280,000, then $420,000, then $560,000, anyhow it scales up to a point then in the tenth year, it will be about $1 million, $1.1 million. LW And this is without the CPI cost of living adjustment. JR But the members of the Council can refer to this in Sections 5.4.3 and 5.4.4 for those numbers. That's the project amenity fee. Then there's the, also, the $12,000 per unit fee that's paid as the units are released from the lien of the deed of trust. LW As the land is taken down they pay $12,000 for each unit of land. JR And that's a one-time fee. The project amenity fees are the major fees that will be used for offsetting the Agency's cost of construction of the golf course. LW In your packet you have as an attachment in the Section 33433 report a 30-year proforma which includes a CPI cost of living which breaks down on an annual basis what payments we expect to get from IROC on this deal. What I'm saying, Buford, is in your packet is an attachment to the Section 33433 report. I have an annual 30-year proforma for all the payments that we expect to get from IROC. BAC Yes. LW It will address this $1.3 million that we have on the golf course, the south course. BAC And it's number what again now... LW It's about $1.3 million. That's the cost to operate the south course per year. CLO That would be assuming you get no play at all. LW Any other questions? RSK Anyone have any more questions that require the lights to be out? BAC Not unless we're napping. No. I have a couple of lights on questions. RSK Could we have the lights back and see if we can operate without that screen? BAC Thank you, Leonard. 24 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * LW You're welcome. BAC A couple of small questions. Carlos, I note that according to the development agreement, if IROC completes phase one, the south golf course will have the "at IROC" name attached to it. CLO Right, the... BAC Now, my recollections last time we discussed that, that would happen if they completed phase one and built a hotel. CLO No, the... BAC I'm just saying as one person, the hotel, six or eight hundred, whatever that is, has as much right to a name at the end of that as this development does. If it's all one and the same company, then that's fine and dandy, but if it's the Hilton Hotel, playing golf "at Intrawest", that's... RSK That's not acceptable. BAC ...that's...here's one person with whom that's not happening. CLO The whole project is going to be named Desert Willow. BAC I hear that, but that golf course will have that name added. CLO The...what we've discussed...I know, you may want to amend that, and we can talk to the developer about that, but the agreement has always read that when they had completed x number of units, that whatever name we had given the south course, let's say we named it... BAC "Fred's golf course" CLO "Fred's golf course", that it would be, when they had built so many units, "Fred's golf course at Intrawest", I believe that's what we had always talked about. BAC That's what they had always talked about. CLO Well, we had talked about it, and I think at the... RSK We never had a good feeling about that, ever. CLO Well, that's a point that can be discussed with the developer. 25 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BAC And on that same page, one other little question. According to this, we are obligated on the building of the clubhouse, to build 2,000 square feet of that clubhouse for — Intrawest's exclusive use. CLO That's correct, and that is part of the proforma. We have added that into the cost versus benefits. RSK What do you mean by 2,000 feet, in other words, what...does it mean that you're going to build a larger... CLO No, what it is is I think the current plans are that we would build around a 20,000 square foot clubhouse. BAC It says 20,000 to 25,000. CLO And we would reserve a space, okay, in that... RSK Like for what? CLO For their club activities, to be used exclusively by their members. RSK And what would they do there? CLO I think the developer should answer that, what they would do there. BAC It says work, in essence, you know, do things where you get strong and muscular and... RSK Oh, a fitness center? BAC Yes, steam room... JMB For their members. BAC Furnished health club and lounge. RSK Well, if we're going to have a fitness center in the clubhouse, why wouldn't we just do one that would be open to everybody? CLO Well, we would have if we wanted it open to the public, however part of this agreement says that they needed 2,000 square foot of that clubhouse for them to use exclusively. WHS We increased the clubhouse by that much when they asked for that. 26 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BAC And they're providing... CLO And they provide all the furniture. BAC ...furniture, fixtures, and equipment. CLO Right. We just merely have to provide... BAC We provide the shell. CLO Right. JMB We pay for the clubhouse. We're building the clubhouse. BAC Building, yes. JMB And building the golf course, and they're getting a free ride. RSK No. How can you say that? They're paying. CLO That's why they're paying all those... JMB They haven't made it yet, but we've got to build all that before we know. WHS I have to bring up something when statements like this are made. Right next door to us, Indian Wells wanted to have some hotels in Indian Wells. So what did they do? They build two golf courses, they built the golf clubhouse, they paid for every dime, they spent all the money to build the golf courses and the clubhouse before the hotels were built, then the hotels were finally come around and built them. They built them for the purpose of doing that. We're...this is not something that's never been done before. My God, it's been done next door. JMB Indian Wells was a little suspect in using Redevelopment money for that too, and they have been ever since. WHS All I know is that they're making a hell of a lot of money now and makes another fine city. RSK They run the city with it. Well, let's continue with Councilman Crites. BAC I'll hold for a minute now and ask what Councilman Snyder has for questions, and I'll set a second. 27 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * WHS Well, I'm a little flabbergasted. I've been mixed up with this city 20 years come next March. I've seen us grow from a little village to what we are, I've been involved in...what would happen if we built the Town Center. The time it came up the City was just like now, we were fifty percent against it, we didn't want it, we wanted to be a village. And somehow we had a group of people get together and come up with some things and find out a way that we could indeed build a Town Center, which produces a hell of a lot of the money that we run our city. I was here when the Marriott Hotel people wanted to come and build a hotel. We had an ordinance that says you can't build anything more than two stories, and all of a sudden we found out, my God, we have to change the ordinance if we want that hotel. And somehow we managed to do it. Somehow we built the most beautiful resort in the Valley, maybe in the State, and it produces most of the money that runs this city. We get no sales tax, I mean we get no real estate tax, very little, we have no city tax, it's our duty as members of this Council, to find a way to come up with the wherewithal to build this city, create the parks, clean the beautiful streets that you have. We do it because we're willing to sit down with people, work out programs, take some risks at times, but primarily have a group of people that have been demonstrating to you tonight the effort that they've put into it to create this program, the amount of intelligence and skill that has been done to put together a package that is sensible, reasonable, and something that needs to be done. We will probably have one of the most renowned resorts in Area 4 in this whole damn state if all this comes about. If you can't take the chance and move out, then you're not going to have a city like we have had and will have and do have by taking the guts to move out and do something. We have had this..over a year we've been working on this. We've had some of the most skilled people in the world putting together a package that makes it feasible, economical, and right. And I think that we have done one hell of a job, and I would be proud to see this organization in that area. RSK I suppose I should say something also. First thing I want to emphasize, and I remember when we had all the problems, the world had a problem with timeshares, people coming in and turning a little hotel into timeshare and then disappearing in the middle of the night. And we didn't want any of that to happen in our city. We put that ordinance in. I'm one of the instigators of the ordinance, to protect the buyer, and no, really, no other reason than to protect the buyer. Now, the Marriott is a wonderful, wonderful thing for the City of Palm Desert, no doubt and nobody argues about that, that we run the City with income from the Town Center and the Marriott Hotel, basically that's the catalyst of everything we have. And they have timeshares there, and we approved those timeshares because we knew the Marriott was a solid corporation, but let's face it, everybody, the Marriott timeshares are a loser. We don't...the only thing we really make anymore from the Marriott timeshares is that people come there and what they buy and we get sales tax, they don't pay any transient occupancy tax. And it's obvious why the Marriott started to deal with us across the road and decided they didn't want to anymore, they had too good a deal on the other side of the road. And so that that wouldn't happen to us again we put together a package there and I can repeat all of those different fees that go in and the ongoing fees that go on forever. 28 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Now we don't get any property tax in our city to run the City, and these are the kinds of projects that we put together so that whoever sits up here 20 years from now won't have to worry about cutting the Police Department, cutting the Fire Department, not patching the holes in the road. And when you look at that income stream that's created, you look right here on this proforma, right off the top there, it's going to be an average of over $5 million a year over 30 years, it gets up to $444 million, $445 million just direct income to the City, that doesn't say anything for the indirect income. And so, you know, as long as we're sure that we are backing it up so that we have somebody responsible, we have a few other deals we made with public/private partnerships in the City and didn't succeed but because of the job that our Redevelopment department did when they wrote the contracts, when they wrote the agreements, we really benefit. The fact that they disappeared was a benefit. If Intrawest chose to disappear and we had ourselves 300 units, well, we'd make more money yet. So the main thing is that we have the agreement written in a way that we're protected regardless of what happens. And when Indian Wells did their golf courses I thought then that was the smartest thing anybody ever did. Everybody in Indian Wells that helps run the city will tell you that without that they'd be broke. I mean, they may have a big income, but none of that money gets to the city to run the city without those golf courses they would be, the city itself, there would be no money to run it with. So, in this case, it's not the same as just bringing a hotel in, it's a case that nothing was happening and so we decided to make it happen, so we put together the whole project there. And when I think of the economic impact that that will have on the City of Palm Desert and the surrounding communities, and I think of the jobs...economic development is nothing but jobs, and when you think of the amount of...what we're spending is nothing compared with what the private sector is going to spend there, and just the jobs it creates by building the things we're building, the jobs that we've created already by just building what we've built there, and then when it's all finished the amount of jobs that are going to be created for people there, I mean that's going to be the largest economic impact of anything that's happened yet in the Coachella Valley. And I think that Councilman Snyder said it right, that you can sit on your hands and worry, but the things we are doing...we had a City Manager before that was innovative and willing to take a chance, so we've accomplished some wonderful things that way. I studied this backwards and forwards, it's not just a year that we've been working on this, it's been two years. WHS Yes, you're correct. RSK And it's not like we're just looking at this tonight, we've been looking at these figures for about a year, most of us have been through it seven or eight times, so it looks to me like it's an opportunity to move ahead and keep the City financially solvent long after I'm gone, which probably won't be too long from now. BAC Don't give people false hope. 29 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * WHS No fair lighting candles tonight. RSK So are there any more questions or discussions or... CLO Mr. Chairman, I'd just like to add a couple of things now that we've had all these discussions on benefits to...there's a couple of resolutions. One is an Agency resolution, another is a City resolution. They say exactly the same thing except they need to be acted on one resolution by the Agency, one the Council. And these are the resolutions approving the sale to Intrawest Resort, one by the City and one by the Agency. When you look at Section 5, there is a blank there, and now that we've had all this discussion on benefit versus investment, the reason those numbers need to be there are for the same reason that we had to make available the agreement that contained all the figures and benefits. By Redevelopment law, we must make a finding that we are getting not less than the fair market value for the property. Therefore, in Section 5, we should add the following: "The Agency has obtained an evaluation of the fair market value of the property from REASCO who has determined that the fair market value of the r.�Y:..tJ at the highest and best use of the property is approximately $7,775,000 for phase one", that's what we would be adding, "and $7,000,000 for phase two and three" that is, of course, if the phases are exercised. That would be the addition to the ordinances, both of them. In Section 8, we would make the Agency finds, and in the case of the City I presume it would say that the City finds, that the consideration of $67 million for phase one and $52 million for phase two, is that phase two and three, Leonard? LW That's phase two and three. CLO Phase two and three, to be paid by IROC is not less than the fair market value of the property at its highest and best use and so forth. But those would be the add-ons to both of those resolutions. WHS Well, if there's no further discussion, I would make a motion, Mr. Mayor. RSK What's your motion? WHS I would make a motion, that's the City Council and the Redevelopment Agency, to these three areas as the legal, Carlos, legal presentation that you would like the motion to encompass. CLO Well, the two items...or one by the City Council, the consideration of the development agreement and then the other ones...the consideration of the disposition and development agreement... RSK With the additions that you... 30 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * WHS With that which you just reiterated. CLO Along with these resolutions, which are recommendation one and recommendation two. WHS That's my motion. BAC I believe that our City Attorney would like to have any such motion conditioned... DJE Conditioned upon a report back to the Council on the subcommittee that exists doing a background and financial check. BAC Right. Not just a report coming back, but an acceptance. DJE Report and approval by the Council. WHS Yes, acceptance by the Council. That is in my motion. He'll give you the motion in its entirety, right? BAC So that the motion, then, includes an amendment that any approvals only exist subject to the approval by the Council of a background and financial check, etc... — DJE That's correct. BAC ...will be brought to the Council. DJE Yes. You have on your development agreement...it's approval is by an ordinance, first reading tonight, second reading at your next meeting. Hopefully we'll have it by then. BAC And if not, we don't do anything. DJE That's correct. WHS We don't do a second reading. BAC Just hold it. DJE Yes, sir. BAC Either until we are satisfied or hold it because we're not satisfied. DJE Correct. BAC Given that, I would so second. 31 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * WHS Thank you, sir. RSK Any other discussion? Would you please vote. MPG Councilmember Benson, your light did not come on. Motion carries by a 3-2 vote, with Councilmembers Spiegel and Benson voting no. BAC I would suggest we take a five-minute recess. For purposes of clarification, Councilman Snyder moved to: 1) Waive further reading and pass Ordinance No. $24 to second reading, approving DA96-1; 2) waive further reading and adopt City Council Resolution No. 97-10 approving the sale by the Palm Desert Redevelopment Agency to Intrawest Resort Ownership Corporation of approximately 47 acres of real r,vr;4 ty north of Country Club Drive, west of Cook Street, and east of Portola Avenue; 3) waive further reading and adopt Redevelopment Agency Resolution No. 334 approving the sale by the Palm Desert Redevelopment Agency to Intrawest Resort Ownership Corporation of approximately 47 acres of real property north of Country Club Drive, west of Cook Street, and east of Portola Avenue, with these actions conditioned upon a report from the Investment and Finance Committee Subcommittee doing the background and financial check and approval of said report by the City Council/Redevelopment Agency Board. Motion was seconded by Crites and carried by a 3-2 vote, with Councilmembers/Members Benson and Spiegel voting NO. B. REQUEST FOR APPROVAT. OF TRANSFER OF LAND AND FACILITIES FROM THE REDEVELOPMENT AGENCY TO THE CITY OF PALM DESERT (JOINT PUBLIC HEARING WITH THE PALM DESERT CITY COUNCIL). The following is a verbatim transcript of this portion of the meeting: Key RSK Richard S. Kelly, Mayor/Chairman RAD Ramon A. Diaz, City Manager CLO Carlos L. Ortega, Executive Director of the Redevelopment Agency JMB Jean M. Benson, Mayor Pro Tempore/Vice Chairman BAC Buford A. Crites, Councilman/Member RAS Robert A. Spiegel, Councilman/Member JR Jeff Rabin MPG Mary P. Gates, Deputy City Clerk/Assistant Agency Secretary RSK The next item is a request of approval of transfer of land and facilities from the Redevelopment Agency to the City of Palm Desert, joint public hearing with the Palm Desert Redevelopment Agency. Staff report. RAD Yes, Mr. Ortega will run us through this portion of the Agenda. 32 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * CLO Mr. Mayor, this public hearing is no different than the other one except that in this case the Agency proposes to transfer land and other public facilities to the City. The law requires that we do the same thing. A summary of what is being transferred has been available to the public. The requirements are a little bit different, however, in that we don't have to prove that we are getting compensation for the City in this case because what we are doing is transferring public facilities to be operated for the public and to be owned by the City. There are several transfers of property. Some of them do not necessarily need to be done tonight. Some of them there is an urgency that it be done; for example, one of them is the north course which you know will be open on Saturday which will begin to incur expenses, and the City needs to provide for those expenses. We also need for you to give authority as an Agency to transfer that and as a City to transfer that to the City. The other one is allowing us to spend money for the construction of the publicly -owned south golf course. The other one is for you to allow the transfer of the office buildings to the City. The other one is for you for allow the transfer of the rest of the Civic Center, including the ballfields, including the picnic areas, and including the two buildings. Another item that we are requesting is... JMB Could I just ask a question. CLO Yes. JMB Why are we just now transferring the ballfields and all of that now. Why does that have to be done now? CLO Simply because we should have done that and we hadn't gotten around to it. Basically, there was no specific urgency to do it, they were being used by the public, they are owned by the Agency, we need to officially do that. JMB So what's the urgency now if there wasn't before? CLO Well, in that eventually they must be transferred to the City. We the Agency cannot continue to own them forever. You know, while they were under construction, they were being developed, you know, it was fine, but now we need to ultimately transfer them to the City. BAC Jean, do you have an objection to transferring them? JMB Well, some of these I'm just wondering why they were all thrown in with the north course, the south course, and all the other property when this could have been done at any time, and you've got all these thrown in, the building and you've got those through the park, and then you come in the north course, and then the south course, and... RSK They should have done it (unclear). 33 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * JMB I guess, but it seems to me the wrong time to be doing it now in conjunction with all this other stuff. CLO The reason is because in looking at the codes that we put our attorneys to work at, they basically have to do a lot of legal research, and as long as they had done it for one building, basically we thought let's just do it all now since they've already done the research as opposed to doing them, you know, one at a time. RAS Let me ask a question, please, if you're finished, Jean. JMB Yes. RAS It looks like all of the items, one through ten, relate either to the north course that goes over right away, the adjacent buildings or the baseball fields, except for items number two and number eight which relate specifically to the south course. CLO Right. RAS Okay, which there's been no money brought forth, how much it's going to cost us, what we're going to agree on, and I don't feel comfortable with approving a south course that I don't know anything about tonight. CLO You can leave those two out, as I stated at the beginning. RAS That's what I would like to do if the Council has no objection to that. RSK I agree. RAS Is there a problem with that? JR Can I answer your question about that? Yes, code...Redevelopment law requires the City and the Agency to approve, at a public hearing, the Agency expenditure of funds for buildings that are publicly owned, if they're using tax increment. And so the proper way to do that is to have that approval done by the Agency. It doesn't mean that there's a transfer, it doesn't mean that anybody's approving any expenditure of funds or the specific amount. It just means in concept that the Agency and the City are approving that the Agency can use tax increment for that purpose. RAS Well, I'm not suggesting that we shouldn't approve the office buildings, I'm not suggesting we shouldn't approve the north course, and I'm not suggesting that we shouldn't approve the ballparks. All I'm saying is the south course, nothing has been shown to us, I have no feeling for it at all, and I would just as soon not approve the south course until I have a little more knowledge. 34 11IINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * CLO We will readvertise. RSK Is there any problem with us pulling those right now? JR Well, periodically, the Agency will be spending money in development of the south course, and it would be... BAC Not until we approve it. RAS Not until it's approved. JR I'm not saying the specific amounts, it has...in the past approved expenditures... RSK But we didn't do this until after we did everything else, so we'll just do the same thing with the south course. CLO Jeff, what we will do is when the Council approves the budget, we will readvertise the public hearing and we'll do that for those two things. No problem. JR That would be fine. RAS I mean, the north course is finished, so that's...there's nothing you can do about the north course, it's there. And the buildings are there, and the ballfields are there. The south course is there. Thank you very much. RSK We all agree to pull two and eight, right? CLO If you would approve everything except two and eight. RAS I move that we approve the request for transfer of land, etc. etc., except for items number two and number eight which relate to the south golf course at Desert Willow. CLO And on five and six, before you take the vote, we'd like to add that the City can charge an appropriate interest, appropriate legal interest. RSK Is there a second to that? BAC I'd make a second to that. RSK Any further discussion? Would you please vote. MPG The motion carries by unanimous vote. 35 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * RSK Wait a minute, that was a public hearing. I'll open the public hearing. Would anyone like to speak to Item C? Seeing no one, I'll close the public hearing. MPG Would you vote again, please, and I'll reannounce the vote. RSK Okay, we'll do it real official. Would you please vote again. MPG The motion carries by unanimous vote. For purposes of clarification, Councilman/Member Spiegel moved to approve the following items from the Agenda: 1) waive further reading and adopt City Council Resolution No 97-11 approving payment by the Palm Desert Redevelopment Agency for all or part of the value of the land for and cost of the installation and construction of a publicly owned golf course and related facilities and improvements (North Golf Course); 3) waive further reading and adopt City Council Resolution No. 97-13 approving payment by the Palm Desert Redevelopment Agency for all or part of the value of the land for and cost of the installation and construction of publicly owned buildings (two office buildings); 4) waive further reading and adopt City Council Resolution No. 97-14 approving payment by the Palm Desert Redevelopment Agency for all or part of the value of the land for and cost of the installation and construction of publicly owned buildings, facilities, structures, and improvements (Civic Center); 5) authorize the appropriation of $648,400.00 from the City's Unobligated General Fund reserves providing for the first three months' operations fund for the Desert Willow Golf Course, including charging appropriate interest; 6) authorize the appropriation of $40,000.00 to the Parkview Office Complex fund from the City's Unobligated General Fund reserves to provide for the first two months' operation expense, including charging appropriate interest; 7) waive further reading and adopt Redevelopment Agency Resolution No. 3.35 approving payment by the Agency for all or part of the value of the land for and cost of the installation and construction of a publicly owned golf course and related facilities and improvements (North Golf Course); 9) waive further reading and adopt Redevelopment Agency Resolution No. 337 approving payment by the Agency for all or part of the value of the land for and cost of the installation and construction of publicly owned buildings (two office buildings); 10) waive further reading and adopt Redevelopment Agency Resolution No. 338. approving payment by the Agency for all or part of the value of the land for and cost of the installation and construction of publicly owned buildings, facilities, structures, and improvements (Civic Center), and to take no action on Items 2 and 8 of the Agenda dealing with the South Golf Course. Motion was seconded by Crites and carried by unanimous vote. XIII. ORAL COMMUNICATIONS None 36 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 13, 1997 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * XIV. ADJOURNMENT Upon motion by Spiegel, second by Crites, and unanimous vote of the Agency Board, Chairman Kelly adjourned the meeting at 9:30 p.m. to Closed Session. He reconvened the meeting at 10:05 p.m. and adjourned it to 12:00 p.m. on Wednesday, February 19, 1997, for discussion of budget philosophy. ATTEST: MARY P. G4_,-S, ASSISTANT SECRETARY TO THE PALM DESERT REDEVELOPMENT AGENCY 37