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HomeMy WebLinkAbout11/5/1984 - MINUTES a34 MINUTES OF CITY OF PALM SPRINGS CITY COUNCIL AND COMMUNITY REDEVELOPMENT AGENCY NOVEMBER 5, 1984 An Adjourned Regular Meeting of the City Council and of the Community Redevelopment Agency of the City of Palm Springs, was called to order by Mayor Bogert, in the Large Conference Room, City Hall , 3200 Tahquitz-McCallum Way, on Monday, November 5, 1984, at 9 a.m. ROLL CALL: Present: Council/Agency Members Birer, Foster, Maryanov, Smith & Mayor/Chairman Bogert Absent: None LEGISLATIVE ACTION: 1 . PA2 - FINANCING Recommendation: That the Council authorize delivery of Certif- icates of Participation to finance the acquisition and develop- ment of the Convention Center and authorize execution and delivery of various documents pertaining to the project. Economic Development & Housing Director stated that the aggre- gate principal amount of the Certificates is $36,670,000, out of which various fees amounting to approximately $454,000 will be paid in addition to closing costs, and the balance is for the project. He read Section 5 of the proposed Resolution , indicating that the original purchaser is to receive, as a deferred fee for marketing the Certificates, the sum of between 2% and 4% of the original aggregate principal amount of the Certificates, less in any case $110,603, and that the underwriter has indicated that final fees will approach the higher percentage, as each point reaches over $1 million. In answer to questions by Council , Marty Frankel , bond counsel , stated that if the project does not proceed, the bonds will be redeemed on April 2, 1985 and there will be no liability to the City, and all expenses would be paid from the proceeds of temporary investments made from the bond proceeds ; and that any "profit" would accrue to the City, however, since the amount to be earned is known, there should be no profit and no loss, and partial fees should fit within the amount known that will come from the temporary investments. Steve Kark stated that if the project does proceed, the escrow will change to permanent financing, and the only amount to be taken out of the temporary investments will be to cover the amount of the transaction not covered (remainder of the 4%;) remainder of the escrow will remain and collect interest, which could be as much as $400-600,000, which will be put into the construction fund; and if it is not needed for construction, it will be used toward redemption of the Conven- tion Center bonds. Mr. Frankel stated that if the project proceeds, the follow- ing would apply: a) Developer would come up with a Letter of Credit to secure the issuance of the hotel bonds - about $70 million. b) City of Palm Springs bonds, currently being held by the bonding agency and secured by the FNMA (Federal National Mortgage Administration) instruments and guaranteed by Letter of Credit, would then be disbursable to the public. c) Closing of the hotel portion and the Convention Center are locked together, and must be completed by December 31 , 1984. 231a Council& CRA Minutes 11-5-84 Page 2 1 . PA2 - FINANCING (Continued) d) If the financing is completed by December 31 , 1984, the City will have no obligation relative to the bonds issued for the hotel center (backed by Letter of Credit obtained by the developer) . e) City liable for debt service on its Convention Center bonds, but limited to annual appropriations limited to revenues (certain TOT and Sales tax generated because of the total project, and tax increment) ; default of the bonds would be covered by the Letter of Credit, which also risks the lack of sufficient revenue appropriations. Letter of Credit paid for by the City to extent of those defined revenues committed toward building of a Convention Center. Letter of Credit Bank takes risk that present City Council cannot bind future City Councils, but each year, the Council will have to address the appropri- ation and the proposed Resolution makes that commit- ment for this year (Section 9) . f) Revenues defined for are debt service and operations; revenues will not be available unless the hotel project also proceeds to generate the tax flows needed, includ- ing the tax increment. Economic Development & Housing Director stated that the Letter of Credit Bank has looked at the Laventhol & Horwath study information and budget for operation, and think they are fair and reasonable for what is being done. Mr. Frankel stated that the Installment Sale Agreement is the City's liability to pay off the Convention Center to be built by SENCA; that the Trust Indenture yaarcels the liability into the Certificates of Participation, which ultimately will be sold to the public, and defines the revenues, and limits the liability to pay under the Installment Sale Agreement to those revenues; that the Trust Agreement includes provisions that if the Letter of Credit, hotel financing, and a list of others things do not occur, all money raised will be held in a construction fund in escrow, and it is structured to be used to pay off all debts, and leave no liability to the City. Mr. Frankel stated that the effect of the Agency Agreement is required and provides that SENCA, Palm Springs, Inc. - allows for purchase of a building not yet built, but which is being purchased under a Sales Installment Agreement; City will have to be satisfied that there are enough binding contracts in the DDA, and it has seen enough of the plans and specs and wants to have it built, by December 31 , 1984, and lacking that, the City would not proceed - that the City has control whether to proceed with the Convention Center. He stated that the Remarketing Agreement relates to giving the Certificates of Participation to a designated Remarketing Agent who re-sells the Certificate, and barring that sale, returns it to the Letter of Credit Bank who must cover it; that the advantage is the City is getting short-term rates and at any time, with proper notice, the City can direct the Agent to go to fixed rates - Letter of Credit remains in place (hopefully renewable for the 30-year life, but terms of the Letter of Credit have not been received yet. ) With 60-days notice, the City could refinance long—term and do J Council & CRA Minutes 11-5-84 Page 3 1 . PA2 - FINANCING (Continued) away with Letter of Credit, if the bonds could be sold. He stated that the Operation Agreement is needed in order to issue the bonds, which was taken from a draft of the DDA - appointing SENCA as operator for five ;years, but may be dismissed on any November 1 , with 30-days notice; and he reviewed each paragraph of the agreement. He stated that it has been written in favor of the City; and it is a necessary document to proceed with the Convention Center, and the hotel operation. Councilman Birer suggested that the first sentence of the second paragraph should be rewritten to add ". . . .maximize economic benefit to the Cites" He stated that it would clarify that "economic benefit" relates to the total nature of the City, not particularly exact dollars to the operator. Councilman Maryanov suggested that the second sentence of the same paragraph should be clarified to read, ". . . . .booking and pricing policies established, by the City for the Convention Center. " Mr. Frankel stated that a very comprehensive agreement will be sold before proceeding on December 31 , 1984, and in all likelihood this agreement will be superceded; and that both changes could be made. He stated that the Delivery Memoran- dum recites actions which have been taken, closing documents, necessary to make the above documents valid; Resolution to be adopted, how proceeds will be used, for Convention Center, expended in compliance with IRS code, etc:, IRS approval to be signed by Mayor that have had TEFRA hearing, who are members of the Council , validity of the City as a subdivision of California, all of which are what will be signed in the Certi- ficate and Request of the City. In answer to question by Council , relative to price of Convention Center spelled out in the First Installment Agreement, Mr. Frankel stated that if the cost is less than the amount of the Certificates deposited for construction, the excess is used toward redemption of that obligation, which is required under law. Simplification: Agency Agreement - build facility; Installment & Sale Agreement - commit to buying it; and Trust Agreement - distribution of obligation to pay; excess to be used to lessen debt. Mr. Frankel stated that other than the $36,670,000 "loan," everything else (construction, cost of construction, architect, operation) is subject to finalization between the City and SENCA and nothing is final , except the $36+ million and the escrow to pay expenses; and the DDA will be the most important agreement to address the Council 's concerns, and to do so before December 31 ., 1984. Councilman Maryanov suggested that draft DDA be reviewed in near study session, to preclude last minute problems. Economic Development & Housing Director stated that would be possible, and Development Agreement Attorney could also be present. I„ny I Council & CRA Minutes 11-5-84 Page 4 1 . PA2 - FINANCING (Continued) Economic Development & Housing Specialist reported that, via telephone conversation during the meeting., SENCA has approved the two above added words to the Operation Agreement. Mr. Kark stated that the closing is occurring now in Los Angeles, and transfer is anticipated by 11 :30 a.m. , this date. Mr. Frankel read Section 9 of the proposed Resolution, stating that if everything goes forward, and payments must be made under the agreement, appropriation is made to do so, but only to the extent of commitment. Council may wish to move forward at its next meeting to adopt its standard budget amendment form Resolution . Councilman Birer stated that Section 7 of the Resolution heading refers to delivery of various documents pertaining to the project, and questioned if that meant only those referred to this date, to which Mr. Frankel responded in the affirmative. Resolution 15303, entitled: RESOLUTION AUTHORIZING THE DELIVERY OF THE CITY OF PALM SPRINGS CERTIFICATES OF PARTICIPATION (CONVENTION CENTER PROJECT) FOR THE PURPOSE OF CONVENTION CENTER FACILITY (THE "PROJECT") AND AUTHORIZING THE EXECUTION AND DELIVERY OF VARIOUS DOCUMENTS PERTAINING TO THE PROJECT. was presented, after which, it was moved by Birer, seconded by Foster, and unanimously carried, Maryanov and Smith abstaining, that Resolution 15303 be adopted. No business required of the Redevelopment Agency. ADJOURNMENT There being no further business at 10:10 a.m. , Mayor/Chairman declared the meeting adjourned. JUDITH SUMICH City Clerk & CRA Asst Secretary