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HomeMy WebLinkAboutPrelim - RDA 01/14/2010PRELIMINARY MINUTES REGULAR PALM DESERT REDEVELOPMENT DRAFT UA AGENCY MEETING THURSDAY, JANUARY 14, 2010 CIVIC CENTER COUNCIL CHAMBER 73510 FRED WARING DRIVE, PALM DESERT, CA 92260 I. CALL TO ORDER - 3:00 P.M. Chairman Finerty convened the meeting at 3:01 p.m. 11. ROLL CALL Present: Member Jean. M. Benson Vice Chairman Jim Ferguson Member Richard S. Kelly Member Robert A. Spiegel Chairman Cindy Finerty Also Present: John M. Wohlmuth, City Manager/RDA Executive Director David J. Erwin, City Attorney Justin McCarthy, ACM for Redevelopment Stephen Y. Aryan, Assistant to the City Manager Rachelle D. Klassen, City Clerk Bo Chen, City Engineer Russell Grance, Director of Building & Safety Lauri Aylaian, Director of Community Development Paul S. Gibson, Director of Finance/City Treasurer Janet M. Moore, Director of Housing Mark Greenwood, Director of Public Works Frankie Riddle, Director of Special Programs Bill Hunley, Battalion Chief, Palm Desert Fire/Riverside Co. Fire Dept./Cal Fire Andrew Shouse, Asst. Chief, Palm Desert Police/Riverside Co. Sheriff's Dept. Grace L. Mendoza, Deputy City Clerk III. ADJOURN TO CLOSED SESSION Reauest for Closed Session: Conference with Real Property Negotiator pursuant to Government Code Section 54956.8: PRELIMINARY MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING JANUARY 14, 2010 1) Property: APN 628-130-015 Negotiating Parties: Agency: John M. Wohlmuth/Lauri Aylaian/City of Palm Desert/ Palm Desert Redevelopment Agency Property Owner: Barracuda, LLC Under Negotiation: x Price x Terms of Payment 2) Property: APN 628-130-008 Negotiating Parties: Agency: John M. Wohlmuth/Lauri Aylaian/City of Palm Desert/ Palm Desert Redevelopment Agency Property Owner: David Nelson Under Negotiation: x Price x Terms of Payment 3) Property: APN 628-120-005 Negotiating Parties: Agency: John M. Wohlmuth/Lauri Aylaian/City of Palm Desert/ Palm Desert Redevelopment Agency Property Owner: Roger Snellenberger Under Negotiation: x Price x Terms of Payment 4) Property: APN 694-200-002 Negotiating Parties: Agency: John M. Wohlmuth/Justin McCarthy/ Palm Desert Redevelopment Agency Property Owner: Trustees of the California State University Under Negotiation: x Price x Terms of Payment 5) Property: APN 694-200-008 Negotiating Parties: Agency: John M. Wohlmuth/Justin McCarthy/ Palm Desert Redevelopment Agency Property Owner: Regents of the University of California Under Negotiation: x Price x Terms of Payment 6) Property: APN 694-160-003 Negotiating Parties: Agency: John M. Wohlmuth/Justin McCarthy/ Palm Desert Redevelopment Agency Property Owner: Palm Desert Redevelopment Agency Under Negotiation: x Price x Terms of Payment 2 PRELIMINARY MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING JANUARY 14, 2010 7) Property: 42135 Kansas Street (APN 637-033-001), Palm Desert Negotiating Parties: Agency: Justin McCarthy/Mark Greenwood/City of Palm Desert/ Palm Desert Redevelopment Agency Property Owner: Fannie Mae/Brian Barr, Broker Under Negotiation: x Price x Terms of Payment Upon a motion by Ferguson, second by Benson, and 5-0 vote of the Agency Board, Chairman Finerty adjourned the meeting to Closed Session at 3:02 p.m. She reconvened the meeting at 4:00 p.m. IV. RECONVENE REGULAR MEETING - 4:00 P.M. A. REPORT ON ACTION FROM CLOSED SESSION. None V. AWARDS, PRESENTATIONS, AND APPOINTMENTS None VI. CONSENT CALENDAR A. MINUTES of the Regular Redevelopment Agency Meetings of December 10 and December 24, 2009; and the Adjourned Regular Joint Meeting of the City Council and Redevelopment Agency of December 21, 2009. Rec: Approve as presented. B. CLAIMS AND DEMANDS AGAINST THE AGENCY TREASURY, - Warrant Nos. 133RDA, 137RDA, 142RDA, 144RDA, 146RDA, 134-Housing, 138-Housing, 143-Housing, 144-Housing, 147-Housing, 135HA, 139HA, and 148HA. Rec: Approve as presented. C. COMPLIANCE ANALYSIS AND INVESTMENT REPORTS, for the Months of September 2009, October 2009, and November 2009 (Joint Consideration with the Palm Desert City Council). Rec: Receive and file. 3 PRELIMINARY MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING JANUARY 14, 2010 D. REQUEST FOR APPROVAL of Change Order No. 1 to Contract No. R29300 — Desert Willow Entry Landscaping Project. Rec: By Minute Motion: 1) Approve Change Order No. 1 to the subject contract with Lippert Construction, La Quinta, California, for a three - calendar -day time extension to the contract with a revised completion date of December 24, 2009; 2) authorize the Chairman to execute said Change Order and related documents. E. REQUEST FOR ACCEPTANCE OF WORK for Contract No. C29300 — Construction of the Desert Willow Entry Landscaping Project (Lippert Construction, La Quinta, CA). Rec: By Minute Motion, accept the work as complete and authorize the Agency Secretary to file a Notice of Completion for the subject project. F. REQUEST FOR THE APPROVAL of the Consumption of Alcoholic Beverages on Agency -owned Property During Activities Associated with 2010 Fashion Week El Paseo. Rec: By Minute Motion, permit the consumption of alcoholic beverages on Agency -owned property at the northeast corner of Larkspur and Shadow Mountain Drive in connection with the special events for Fashion Week scheduled to be held March 21-28, 2010, and for the Shelter From the Storm Fund-raising Event on March 29, 2010. Upon a motion by Spiegel, second by Benson, and 5-0 vote of the Agency Board, the Consent Calendar was approved as presented. VII. CONSENT ITEMS HELD OVER None VIII. RESOLUTIONS None M PRELIMINARY MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING JANUARY 14, 2010 IX. NEW BUSINESS A. REQUEST FOR AUTHORIZATION TO RELEASE RETAINAGE IN THE AMOUNT OF $88,283.85 TO THE WESTFIELD CORPORATION, INC., FOR WESTFIELD PALM DESERT (JOINT CONSIDERATION WITH THE PALM DESERT CITY COUNCIL). Councilman/Member Spiegel asked if Director of Finance agreed with the recommendation. Mr. Gibson responded this was a Redevelopment Agency matter, but he did agreed. Councilman/Member Spiegel moved to, by Minute Motion, authorize release of retainage in the amount of $88,283.85 to the Westfield Corporation, per the Parking Easement Agreement dated December 9, 1999 (Contract No. C16920) — funds are available in Account No. 456-0000-206-0000. Motion was seconded by Kelly and carried by a 5-0 vote. X. CONTINUED BUSINESS None XI. OLD BUSINESS A. REQUEST FOR AUTHORIZATION TO PROCEED WITH A REQUEST FOR PROPOSALS (RFP) FOR FINAL DESIGN SERVICES AND APPROVAL OF CONCEPT PLAN FOR THE DESERT WILLOW KITCHEN/BUILDING EXPANSION. Member Benson moved to, by Minute Motion: 1) Approve the Concept Plan for the Desert Willow Kitchen/Building Expansion Project; 2) authorize staff to proceed with an RFP for final design services for the Desert Willow Kitchen/Building Expansion Project based on the revised concept plan (Contract No. R29450A). Motion was seconded by Spiegel and carried by a 5-0 vote. 5 PRELIMINARY MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING JANUARY 14, 2010 XII. PUBLIC HEARINGS A. CONSIDERATION OF AMENDMENTS TO THE PALM DESERT ENERGY INDEPENDENCE PROGRAM (EIP) REPORT; FIRST READING OF AN ORDINANCE AMENDING CHAPTER 3.30 OF TITLE 3 OF THE PALM DESERT MUNICIPAL CODE; AUTHORIZING THE ISSUANCE OF ONE OR MORE SERIES OF LIMITED OBLIGATION IMPROVEMENT BONDS TO THE PALM DESERT REDEVELOPMENT AGENCY TO ADDITIONALLY FUND THE EIP, A VALIDATION PROCEEDING IN CONNECTION WITH EIP LIMITED OBLIGATION IMPROVEMENT BONDS, A NO -ACTION LETTER REQUEST TO THE U.S. SECURITIES & EXCHANGE COMMISSION TO FACILITATE THE PUBLIC OFFERING OF EIP LIMITED OBLIGATION IMPROVEMENT BONDS, AND CITYADVANCE TO ENERGY INDEPENDENCE FUND; AND APPROVAL OF RELATED DOCUMENTS (JOINT CONSIDERATION WITH THE PALM DESERT CITY COUNCIL). Mr. Gibson stated staff had been meeting with underwriters and Bond Counsel to discuss options to keep the Energy Independence Program (EIP) moving forward. One of the issues was obviously the validation of the bonds to avoid having problems in a foreclosure type of process. Funding the program was also a concern, and in the process, it was determined that from the City's standpoint it would fund it up to $15 million from both City and Redevelopment Agency (RDA), and an additional $5 million would come from Redevelopment, and the City's portion is $4.69 million; both the City and Agency will receive interest earnings as part of their investment in the Program. On top of that, it was felt the guidelines needed to be amended, so that if the City wished to sell these loans to bond holders/public, that it met additional guidelines to allow that to happen, which are reflected in the proposed guidelines presented this evening along with the resolutions to adopt the additional funding for both the City and RDA. Councilman/Member Spiegel asked if the City expected to sell these bonds. Mr. Gibson stated it was a possibility, but right now the bonds would be taxable at an eight to ten percent interest rate if the City tried to sell them, which was obviously above what the City was currently charging. Staff is hoping the Federal Government will change its guidelines to a non-taxable bond, which would bring the interest rate down to what the City was offering. The actions for consideration this evening will help keep the program running, and it will take about 2-3 years to use up these funds, so staff is hoping the guidelines will change and the validation will be concluded. Further responding, he said only $4.3 million had been spent on the program in a period of a little more than a year. He said Wells Fargo issued a bond for $5 million of which $2.5 million was paid back to the General Fund. [1 PRELIMINARY MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING JANUARY 14, 2010 Mayor Pro Tem/Vice Chairman Ferguson noted the $15 million investment will bring a 7% income of $1 million a year for as long as the City decided to hold the notes. Councilman/Member Spiegel asked how many people are on the waiting list. Redevelopment Manager Martin Alvarez responded there were 250 on the interest list that are lined up to proceed with the program. Further responding, he said staff will process applications in early spring, which will line up for the summer months. Mr. Gibson noted the $4.3 million would be the immediate available money, and there was still money that hadn't been used in the range of $2 million. The RDA money will not be available until the City's rolls are bought. He expected it would be a year before those bonds are actually billed. Council member/Member Benson said she was concerned about something she read in The Desert Sun that stated some of the new rules were that individual homeowners would open up their books to inspection, which she thought would only be necessary if the homeowner was in default. Mayor Pro Tem/Vice Chairman Ferguson stated he interpreted that to mean that he would have to provide the pamphlet on his air conditioner and a work order receipt. He didn't interpret that to mean someone could go into his checkbook. Mr. Gibson stated that in order for the City to make this a public offering for bond issue, the Federal Government made these types of requirements in the guidelines and without it, the City could not offer the bond issue to the public. The only reason to go on the property is to verify that the assets are still there on the property. Mayor/Chairman Finerty declared the public hearing open and invited anyone who wished to come forward to speak on the subject to do so at this time. MR. EARL SCHMID, President/Ownerof Desert Power, stated his company was an alternative energy company in Palm Desert. He's lived in Palm Desert since 1981 and opened his business in 2000. He said the company has been aggressive because of the City's goal to reduce energy consumption by 30%, which was in line with their business. He commended the City and community for adopting that goal; however, he was concerned about the insurance requirement, proof of insurance, and 10% cap placed on property value. He believed the cap will eliminate many people they already had agreements with to install solar systems. He's heard that solar should be the last option, but the problem with that is, if the City wanted to reduce the energy consumption by 30% without getting 100% participation, 7 iJi�L,�<AFT PRELIMINARY MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING JANUARY 14, 2010 it wouldn't be realistic. He said the City's 30% reduction can't be reached by changing light bulbs, pool pumps, and air conditioners, even though they are all good things and they should be done. He believed in order to reach the 30% goal, solar systems will need to be installed on a substantial percentage of homes in Palm Desert. He said solar systems are a good investment because it increased the value of a home, and it lasted 40+ years according to the Department of Energy. However, placing a 10% cap on home values on loans, will make it difficult to reach the 30% energy reduction goal in this depressed housing value. MS. DIANNA SHAUNG with Richards, Watson, & Gershon stated she wanted to address some of the comments and questions made. In terms of the books and record keeping language, it only related to the actual improvement during construction, installation, and the continued maintenance and repairs of the assets as a controlled prudent fiscal measure. With respect to the comment about insurance, it is an addition to enabling the public offering in compliance with the Securities and Exchange Commission (SEC) No -Action Letter request. The reason for the No -Action Letter, as far as the Federal Government and SEC, if you have a long view as the purpose of this program and there is no insurance covering the improvement and the house burns down, the insurance will cover the house but not the improvement. Therefore, when that property wants to change hands, who would want to buy a property where they are paying an extra tax and getting no benefit. The City could be in a position where there are taxes on property for no additional value and creating a house that may not be marketable years from now. Therefore, the required insurance, which is not incrementally more expensive, will provide the protection and value intended to be there; it's difficult to realize energy savings if there are no improvements in the property. As to the value -to -lien ratio, there is some discretion where property owners can appeal to the City Manager to have a lower value -to -lien ratio. She said the City analyzed the existing pool of loans and found that the average value -to -lien ratio was about 12.5 to one; therefore, the City already exceeded the minimum that would be imposed, and it was also a very prudent fiscal management tool. Mayor Pro TemNice Chairman Ferguson asked Ms. Shaung to explain what a SEC No -Action Letter was and why these regulations needed to be adopted. MS. SHAUNG stated the SEC No -Action Letter is a process by which the Federal Government that has security regulations that govern when someone is going to sell an investment product to another party and adequate information is to be provided about that investment so that the buyer can make an informed decision. When a governmental agency is the issuer of bonds, they are usually exempt because their financial reports are public. When a governmental agency acts as a conduit and is passing DRAFT PRELIMINARY MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING JANUARY 14, 2010 through obligations that are payable by someone else and relate only to private improvement, it essentially looks, smells, and feels like a loan. However, the SEC says the ultimate credit is not the City of Palm Desert, it's really the property, because the property secured the tax. Generally this action is prohibited and would require registering like a public company, the filing of a registration statement, and coordinate annual financial reports as to the underlying securities. In this instance, the SEC would say the City of Palm Desert's bonds are exempt, but all the underlying property loans have to be registered with the SEC in order to enable a public offering. Now private placement is possible without a public offering, but there is generally a cost at a higher interest rate, because it comes with a restriction on the trading, and it needs to be sold to another qualified institution, buyer, or accredited investor. Because of the desire to keep the interest rate low to maximize a bond offering, a public offering will yield a lower interest rate. She said there is an exception if this was the type of relationship where it's payable from a private source, and that exception is that if there are adequate governmental controls over the operation and ownership of the private improvement, it will require regular reporting, insurance requirements, and making books and records available. These are the types of requirements the SEC has deemed in the past to enable them to issue a letter saying to Palm Desert that they will not take enforcement or action against it for selling an unregistered security. Mr. McCarthy stated the City of Palm Desert was not only pioneering a new financial tool and energy savings for sustainability, but that it was also pioneering a whole new asset class in the capital market. The recommendations from the City's underwriters, bond counsel, and fiscal advisors were designed to shape the product to be able to enter the market and create liquidity and increase the capital that's available to finance these types of loans in the future. If these requirements are designed to help the City be successful, it should be able to expand the market for the product beyond the City's $15 million cap. With respect to the lien -to -value, it's actually lien -to -value on assessed value and not a lien -to -value in terms on how the bank would approach it where they would be required to look at how much mortgage debt there was, and look at Senior and Junior's first and second credit lines. He said the City was much more permissive than what a conventional lender might be in terms of providing a second deed of trust type of loan, and it's all in order to facilitate the expansion of both the City's ability to secure energy savings, expand the market, and increase people's accessability to capital for this very purpose. With no further public testimony offered, Mayor/Chairman Finerty closed the public hearing. Mayor Pro Tem/Vice Chairman Ferguson said he attended the grand opening of Green Zone, a business incubator for alternative and renewable 9 7 A F"" PRELIMINARY MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING JANUARY 14, 2010 energy sources and was amazed to the volume of interest generated locally. He said many companies are doing business in Palm Desert and hiring people. He said the $9 million that will be infused into the program will hopefully last two years. He said 15 other states, including New York, Texas, and Colorado have all adopted AB 811, and they too, will have the same cash demands, probably even more so because not every city is as blessed as Palm Desert. He believed there will be recognizable debt instruments that will freely trade at some point. He said it was the vision of former City Manager Carlos Ortega who figured $15 million would be enough to get the program up and running. When the bond markets came around and recognized its superiority, it was easy to find third party funding with the City's program. In the meantime, the City will generate $1 million every year. He thanked Director of Finance Paul Gibson for putting all the documents and guidelines together. Mayor Pro Tem/Vice Chairman Ferguson moved to: 1) Conduct public hearing regarding proposed amendments to the EIP Report; 2) Waive further reading and adopt City Council Resolution No. 2010 - 3, approving Amendments to the Energy Independence Program Report and Administrative Guidelines Prepared Pursuant to Section 5898.22 of the California Streets and Highways Code; 3) Waive further reading and pass Ordinance No. 1204 to second reading, amending Chapter 3.30 of Title 3 of the Palm Desert Municipal Code - Public Works Contracts and Bidding Requirements; 4) Waive further reading and adopt City Council Resolution No. 2010 - 4, providing for the Issuance and Sale of its Energy Independence Program Limited Obligation Improvement Bonds (Taxable), in One or More Series and in Aggregate Principal Amount not to exceed $5,000,000; approving as to form and authorizing the execution and delivery of one or more Bond Purchase Agreements in connection therewith, and authorizing certain other matters relating thereto; 5) Waive further reading and adopt Redevelopment Agency Resolution No. 569, authorizing the Redevelopment Agency's investment in and purchase of the City of Palm Desert's Energy Independence Program, Limited Obligation Improvement Bonds (Taxable), in One or More Series and in Aggregate Principal Amount not to exceed $5,000,000; approving as to form and authorizing the execution and delivery of one or more Bond Purchase Agreements in connection therewith, and authorizing certain other matters relating thereto; 6) Waive further reading and adopt City Council Resolution No. 2010 - 5, authorizing Judicial Validation Proceedings relating to its Energy Independence Program, Limited Obligation Improvement Bonds, and a No -action Letter Request to the U. S. Securities & Exchange Commission, appropriating moneys from the General Fund to additionally fund the Program, and approving additional actions related thereto. Councilman/Member Spiegel asked if there had been any foreclosures on any of the properties with an EIP loan. Mr. Gibson responded there were none. Further responding, he said the first interest payment will come in January and May. 10 D7A`-T PRELIMINARY MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING JANUARY 14, 2010 Councilman/Member Kelly asked what would be the risk to the City if it sold bonds to run the program. Mayor Pro Tem/Vice Chairman Ferguson responded there was none. He said the EIP Finance Committee made up of himself, the Mayor, the Finance Director, and Redevelopment Manager Martin Alvarez discussed what to do with the $1 million income. He said a portion can be set aside as a reserve in case there is a foreclosure or threat of harm to the City. However, the City analyzed the default rate on all the assessment districts, and the default rate before going to tax sale was about 2.9%, and the default rate where a foreclosure actually happened, was like 1.6%, and that's only those that are forced into assessment districts, not people who are borrowing from the City and making an improvement on their home. Given the City's priority and very low default rate, the City's biggest concern would be a fire to a property. Further responding, he confirmed he didn't see a risk but an opportunity to build a reserve to take care of any possible problems. MS. SHAUNG added that if the City issued a bond now, it would be additionally payable from the General Fund because the market had accepted that, for instance, the Wells Fargo funds were General Fund credit. The actions today will enable the sale of bonds that are secured and payable solely from the revenues from these loans, and if necessary for foreclosure proceedings. The idea is that the spread currently being generated with the interest earnings, the City was building a reserve. If bonds are issued through the public market, there is always a requirement that a year's worth of debt service be set aside in case of cash flow ups and down variations. There is expressed language in the offering documents that would be prepared that state they are limiting solely these revenues from these contracts, and that the City of Palm Desert was not on the hook for it or payable from the General Fund. Councilmember/Member Benson seconded the motion, and it carried by a 5-0 vote. XI11. REPORTS, REMARKS, AND AGENCY BOARD ITEMS REQUIRING ACTION A. EXECUTIVE DIRECTOR Mr. Wohlmuth stated that Chairman Finerty previously requested the Palm Springs Desert Resort Communities Convention and Visitors Authority Tourism Business Improvement District (BID) item be on the January 28 City Council agenda. However, with Member Kelly's absence at that meeting, he asked instead to place it on the February 11 agenda. With Agency Board concurrence, the Executive Director was authorized to place consideration of the BID on the City Council agenda for the meeting of February 11, 2010. 11 PRELIMINARY MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING JANUARY 14, 2010 B. AGENCY COUNSEL None C. CHAIRMAN AND MEMBERS OF THE AGENCY None XIV. ADJOURNMENT On a motion by Spiegel, second by Ferguson, and 5-0 vote of the Agency Board, Chairman Finerty adjourned the meeting at 5:48 p.m. ATTEST: CINDY FINERTY, CHAIRMAN RACHELLE D. KLASSEN, SECRETARY PALM DESERT REDEVELOPMENT AGENCY 12