Loading...
HomeMy WebLinkAbout01-30-2002 Special City Council MinutesMINUTES SPECIAL CITY COUNCIL MEETING CITY OF LAKE ELSINORE 130 SOUTH MAIN STREET LAKE ELSINORE, CALIFORNIA WEDNESDAY, JANUARY 30, 2002 *~*~**~~*~r~*~:~~x:~*~:~~e*:~*:~***~:~~~r:~~*x*:~~t~r:~~*x~*~*:~*:~~x*:~~:~~~*~:~~:~*~t~: CALL TO ORDER The Special City Council Meeting was called to arder by Mayor Kelley in Joint Session with the Redevelopment Agency at 11:04 a.m. ROLL CALL PRESENT: COUNCILMEMBERS: BUCKLEY, BRINLEY, SCHIFFNER, KELLEY ABSENT: COUNCILMEMBERS: HICKMAN Also present were: City Manager Watenpaugh, Assistant City Manager Best, City Attorney Leibold, Administrative Services Director Boone, Community Development Director Brady, Community Services Director Sapp, Information/Communications Dennis, City Treasurer Ferro, and City CIerW Human Resources Director Kasad. Discussion of Civic Partners - Back Basin Development. City Manager/Executive Director Watenpaugh noted previous discussions regarding the back basin with Civic Partners. He introduced Civic Partners representatives Steve Semingson and Jim Strofi. Mr. Semingson noted his background in Real Estate Development and Mr. Strofi's experience in development prior to becoming an attomey. Mr. Semingson indicated that his discussion would focus on the e~raordinary costs that would be incurred in the process of developing in the back basin, and noted that they were problematic issues for the prior developers involved in the project. He indicated that this was the type of PAGE TWO - CITY COUNCIL - JANUARY 30, 2002 project Civic Partner worked on, and noted the public/private partnering approach. He indicated that his background was in public finance, which gave him the knowledge to work out the financial constraints through partnering. He presented photos of some of the projects Civic Partners was currently involved in, advised that they had about $700 million in projects under development and would be starting another $280 million in the next 30 days. He indicated that the projects all involved public/private partnering to overcome financial hurdles. He detailed a variety of their projects in the cities of Modesto, California and Boise, Idaho, including mixed use residential/commercial, office buildings, a courthouse and the University of Idaho campus. Mr. Semingson addressed the Village One area of the back basin and noted that a portion of the property was under an Option Agreement with the Lehrs, and the rest was a City/Agency owned property previously under an Option with another developer. He commented on the challenges of the first village, but noted that with the challenges come opportunities. He detailed the challenges including the Army Corps of Engineers looking for an additional parcel of property to bring the Lake Management Plan into compliance, extraordinary grading requirements, the need to raise building pads between 10 and 12 feet to meet the 100 year flood requirements, and an average of five feet of unstable soil to be removed, recompacted and replaced. He further detailed the open space requirements and a need for ten additional acres for every nine acres developed to meet the environmental, and cut/fill needs of the site. Mr. Semingson advised that the golf course would be built very early in the development of the first village, however the first village would not be large enough to sustain the costs of the golf course. He further advised that because the project was within a Redevelopment Agency Project Area, it would trigger low and moderate housing requirements, which were substantial. He also advised that the Redevelopment Agency had some unmet low/moderate housing needs that they were accustomed to meeting, and prepared to deal with them, however it would add more costs. He noted recent discussions of the environmental mitigation, and the impact of the Multi-Species Habitat Conservation Plan. PAGE THREE - CITY COUNCIL - JANUARY 30, 2002 Mr. Semingson commented that with the extraordinary costs, come some very good revenue generating opportunities. He indicated that they would be oversizing the infrastructure in the first phase to address whatever happens in the next phases. Mayor Pro Tem/Boardmember Schiffner inquired if they could use any of the engineering work, etc. from the prior developer. Mr. Semingson indicated that they could not use very much of it, but there was a history which they would capitalize on as much as possible. He advised that the agreements with the regulatory agencies had expired. Mayor Pro Tem/Boardmember Schiffner noted that there was still a lot of information which would be helpful. Mr. Semingson concurred that there were some issues that wouldn't need further wark, as much of the information had been studied multiple times. Mr. Semingson indicated that time was an enemy of their business, so they wanted to move very quickly. He noted the area to the northwest of the mitigation area, which would serve as wetland mitigation for the Lake Management Program; and indicated that there would be 79 acres needed to comply with the Lake Management Plan. Councilwoman/Chairwoman Brinley inquired if any progress had been made toward purchasing any of the properties required. Mr. Semingson indicated that they held the existing option with the Lehr family for the area being discussed, and they were requesting the Agency's property. He further indicated that they had made a proposal to acquire the Agency's property as part of the first phase of Village One. Councilwoman/ Chairwoman Brinley inquired if they had approached the other owners in the area, and questioned their commitment to purchase of the property. Mr. Semingson indicated that they wanted an agreement with the City/RDA before contacting the property owners, so they are sure of what they are doing. He stressed the importance of ineeting certain investment criteria first. He indicated that the land value had been estimated at $20,000/acre, making the total nearly $1.6 million. He noted that there was a possible alternative with the Corps to trade far some property, which is currently under their control. Mr. Semingson readdressed the issues of soil instability, and the requirements for removal and compaction. He reiterated the need for PAGE FOUR - CITY COUNCIL - JANUARY 30, 2002 between 10 and 12 feet of fill for the building pads, and indicated that caused the need for more area to allow for cutting. Councilman/ Boardmember Buckley inquired how much of a cut would be required. Mr. Semingson indicated that it would be about a 15% cut because of the soil condition and another 5% or so to meet the flood starage requirements. Mayor Pro Tem/Boardmember Schiffner noted that this would work in favor of the flood plan. Mr. Semingson concurred and showed the scale relationship between the golf course, and the homes. He indicated that stabilization of the five feet of soil would cost about $6 million for Village One, and the cut necessary to bring the site above the 1265' level and create water storage would cost just over $14 million. He stressed that these number were best case scenarios, assuming that there would be no need to haul dirt in. He reiterated that far each ten acres, they would need to acquire an additional nine acres, at a cost of about $7 million for Village One. Mr. Semingson advised that the golf course was estimated at $12 million beyond the cost of the acquisition of the property and digging the hole for flood storage. Councilman/Boardmember Buckley inquired if the unrecoverable costs less the estimated value, could be considered promotional use, noting that he did not see it as unrecoverable costs. Mr. Semingson indicated that the golf course would improve the appeal of the houses and accelerate the sales potential. Mr. Semingson indicated that they would be paying about $14 million for low/moderate housing requirements, including the unmet set asides and depending on the applicability of the tax credit programs. He noted that about one in four applicants for tax credits is selected. He indicated that in addition to the above mentioned known factors they had set-aside $1.5 million in contingencies. Councilwoman/Chairwoman Brinley requested copies of the cost breakdown. Mr. Semingson indicated that staff had already received the information. He summarized that the total cost of extraordinary factors would be approximately $54,710,000. PAGE FIVE - CITY COUNCIL - JANUARY 30, 2002 Boardmember/Councilman Buckley inquired how much this project would cost if it was not planned for the back basin. Mr. Semingson indicated that all of the costs presented were extraordinary. Councilwoman/Chairwoman Brinley requested clarification that the total cost of the first phase was $54 million. Mr. Semingson clarified that those costs were in addition to housing costs. Mayar Pro Tem/Boardmember Schiffner questioned the low/moderate housing costs. Mr. Semingson detailed the loss of revenue from those units. City Attorney/Legal Counsel Leibold noted that this included the cost of unallocated housing. Councilwoman/Chairwoman Brinley suggested that based on the costs presented it would appear that the houses would have to be in the $500,000 range to meet the costs. Mr. Semingson detailed the extraordinary resources the project will bring based on the increased lot value due to the Lake and golf course. He noted that the Village One project would benefit by almost $10 million and the lake environment. He commented on favorable equity ratios which would impact the project. He thanked the Lehrs, the Urdels and Carmella Loellkes for their attendance at this meeting and for helping them to resolve issues. He noted their willingness to hold the property and allow a phased take down, so they did not have to go to the equity markets to hold the property. He stressed the importance of timing for this project, and noted that transferring dollars from equity to debt brings down the ultimate cost of the project, as $4.5 million dollars of equity servicing payments were not required. He advised that the a~erage home price for a single family home will be $225,000. He further advised that this did not reflect the low/moderate housing which would range from $500/month to $190,000, depending on the requirements. Councilwoman/Chairwoman Brinley inquired if they would be qualified for IIiJD lending. Mr. Semingson indicated that there were new HiJD and Fannie Mae programs. City Attorney/Legal Counsel Leibold noted that there had been discussion of low/moderate housing requirements being coordinated partially off-site to satisfy the requirements, and there might be some opportunity to adjust those numbers. Mr. Semingson noted that as they look at off-site requirements, it PAGE SIX - CITY COUNCIL - JANUARY 30, 2002 improves the potential for tax credits; and the participation of the Redevelopment Agency would allow for bonds to be tax exempt. Mayor Pro Tem/Boardmember Schiffner asked how many of the 1,750 homes in Village One would be low/moderate units. Mr. Semingson indicated that the 1,750 homes would require 2201ow/moderate units as an off-set. City Attorney/Legal Counsel Leibold explained the requirement which applies to all Redevelopment Agencies in California and explained the relevant calculations. Councilman/Boardmember Buckley questioned the appropriateness of meeting the requirement off-site. City Attorney/Legal Counsel Leibold indicated that if it could be met within the Redevelopment Project Area, appropriate findings could be made to meet the obligation. She further indicated that if it was within the City, but outside the Redevelopment Agency Project Area it could be counted toward the requirement, but it would be on a two to one basis, however she would prefer to avoid that situation. Mayor Pro Tem/Boardmember Schiffner noted that they could be built on downtown properties as well. Mr. Semingson indicated that if they were going to solve the deficiency through building something new, the most advantageous economic model was to do it in the downtown setting. Councilman/Boardmember Buckley indicated he thought off-site would be fine for rehabilitation of existing housing stock, but he didn't think it was appropriate to move everything from one neighborhood to another. He further indicated that he would be very concerned if they were considering building completely new buildings separate from the project. Mr. Semingson indicated that they were very strong proponents of mixed income within neighborhoods, and stressed the need to keep within the realities of project economics. He commented that they would endorse any model that encouraged mixing incomes throughout the neighborhood. Mayor Pro Tem/ Boardmember Schiffner noted that the in-fill lots in the downtown area were in need of improvements and development, and this would be a great opportunity to have those improvements done. Mr. Semingson indicated that although they wanted to guard their opportunities in the back basin, he would be happy to make his public finance expertise a~ailable to look at PAGE SEVEN - CITY COUNCIL - JANUARY 30, 2002 other projects as well. City Attorney/Legal Counsel Leibold indicated that there were a variety of solutions a~ailable. Mr. Semingson noted that these issues come with the territory, but stressed their commitment to proceeding with the project. He addressed the capitalized value of the tax increment, and indicated that whatever assistance was needed in the debt service would be able to be viewed as a loan rather than a contribution; which impacts how much financing can be created. He advised that they were looking to solve as much as possible through t~ increment financing. He suggested that after additional costs are determined, the project should come down to about a$15 million gap to fill. Mayor Pro TemBoardmember Schiffner questioned the final gap after the Agency's assistance. Mr. Semingson indicated that the increment was only relative to Village One, so it was a question of how to deal with the $14 million. He suggested that there was a very high probability of contributing towards the debts service of the existing senior lien, which was unmet. He indicated that they would like to view the tax increment financing as a loan, and that they were not asking for any kind of public domain taking of property. Councilwoman/Chairwoman Brinley inquired if the Agency were to rei~nstate the power of eminent domain, if it would alleviate problems. Mr. Semingson indicated that if that meant that they could develop the entire project, it would assist with the fiznding, however they had made the assumption that action was not possible. He noted the concerns of the lender with regard to the golf course, and the proposed tax increment off-set. There was general discussion of the accuracy of the numbers presented and the associated risks. Councilwoman/Chairwoman Brinley inquired how much Civic Partners had spent on the project so far. Mr. Semingson indicated that they had spent about $800,000; and noted that once they have amended the Disposition and Development Agreement, they would be in a slightly less risky position. He commented that their proposal was based on the assumption that as the property values escalate the increased amount would be available for tax increment financing. He indicated that the acquisition of property would take the project to a new level, and stressed that it was important to get the advantage of the base year assessment. Councilman/Boardmember Buckley noted that by talking about buying property it would make the property more PAGE EIGHT - CITY COUNCIL - JANUARY 30, 2002 valuable. Councilwoman/Chairwoman Brinley inquired if it would be appropriate to start gathering up property. Mr. Semingson indicated that would only accelerate the problem, but commented that when the Tax Increment Financing is used as a future repayment source, the equity provider was not needed. Mayor Pro Tem/Boardmember Schiffner asked about the need to raise the grade of the property, and whether it would be difficult to proceed in increments. Mr. Semingson indicated that without the golf course and mitigation measures, none of the property would have any value, but once the problems were solved, others could benefit from the improvements. There was further discussion of the lending requirements, risk factors, project timing, and the importance of moving forward quickly. Councilwoman/Chairwoman Brinley questioned the options, and noted that the community had been promised a golf course for a very long time. Mr. Semingson clarified that they want to build the golf course, but noted the concerns based on the phasing requirements. There was general discussion of the golf course timing and funding. Mr. Semingson indicated that the best option for everyone would be to build as soon as possible so the project would more quickly absorb the cost of the golf course. Mr. Semingson commented on the business philosophy they used when they took over the project and their efforts to reduce the project into manageable pieces and reduce the initial cost impacts. He addressed the FEMA and Army Corps of Engineers jurisdictional lines in the back basin and noted the steps required to shift the lines and make this project feasible. He indicated that they were still working to solve those issues, but they were limited until they knew what they could develop. Councilwoman/Chairwoman Brinley indicated that she did not see a problem as long as their efforts did not place the City in harms way with the Corps of Engineers. Mr. Semingson indicated that they were proposing to be part of the solution, possibly through the use of available grants; once they have received the permit to bring the City/Water District into compliance on the overall Lake Management Plan. PAGE NINE - CITY COUNCIL - JANUARY 30, 2002 Mayor Pro TemBoardmember Schiffner commented that if the project as proposed was found acceptable, he wanted a nice project. He indicated that generally speaking he would be in support of their proposal. Councilman/Boardmember Buckley commented on "being had" and requested an outline of Civic Partners' current and former relationship with TMC. Mr. Semingson indicated that the people at TMC were nice, good people, but Civic Partners was present at this meeting as a settlement of a dispute with TMC whereby they obtained control of the project. City Attorney/ Legal Counsel Leibold confirmed that Civic Partners was present at this meeting because of their settlement with TMC and because of the City's dispute with TMC. Mr. Strofi indicated that they were able to offer a solution to the Agency/City dispute with TMC. Mr. Semingson indicated that this would solve the problem for everyone. He noted that TMC's proposal was based on good intentions, but not well thought through. He noted that when contacted regarding this project, TMC had been cooperative. He stressed that Civic Partners was a separate entity and received this project as part of the settlement property of Minora Chen. Councilman/Boardmember Buckley questioned the status of the Civic Partners project underway in Vista, CA. Mr. Semingson indicated that it was going great, with four new leases signed yesterday. He encouraged Mr. Buckley to talk with the City Manager or Redevelopment Agency Director in Vista. Councilman/Boardmember Buckley indicated that he had concerns about the phasing and the lack of up-front land purchases, but that could be discussed later. Mr. Seminson indicated that they would be acquiring about $16 million in land very shortly after the execution of the agreement. He noted that was close to 700 acres in Village One. Mayor/Boardmember Kelley indicated that most of her questions had been answered, but reiterated that the golf course was a concern. Councilwoman/Chairwoman Brinley indicated that she enjoyed the presentation, and her only concern, as Chair of Agency, was what the project would look like. She noted that they had promised a beautiful package, but expressed hopes that the quality of the project would be a high priority. She PAGE TEN - CITY COUNCIL MINUTES - JANUARY 30, 2002 indicated that she was also concerned with the golf course, as it was important to the community. She stressed that the community deserved a good product. She thanked Civic Partners for their presence and presentation and indicated it was nice to put a face with the name. CLOSED SESSION A. CONFERENCE WITH LEGAL COUNSEL--EXISTING LITIGATION (Subdivision (a) of Gov't Code §54956.9) City of Lake Elsinore, Redevelopment Agency of the City of Lake Elsinore v. Diamond Sports & Entertainment LLC et al (Riverside Co. Superior Court Case #356131) B. CONFERENCE WITH LEGAL COUNSEL--EXISTING LITIGATION (Subdivision (a) of Godt Code §54956.9) Liberty Founders LLC v. City of Lake Elsinore, et al (Riverside Co. Superior Court Case #355890) C. CONFERENCE WITH LEGAL COUNSEL -- EXISTING LITIGATION (Subdivision (a) of Gov't Code §54956.9) Pacific Crematorium Inc. v. Stuart F. Comer, et al. (Riverside County Superior Court Case No. RIC 354575). City Attorney/Legal Counsel Leibold announced the Closed Session discussion items as listed above. THE SPECIAL CITY COUNCIL/REDEVELOPMENT AGENCY MEETING WAS RECESSED TO CLOSED SESSION AT 12:40 P.M. THE SPECIAL CITY COUCNIL MEETING RECONVENED AT 12:59 P.M. WITH THE FOLLOWING REPORTABLE ACTION: THE CITY COUNCIL VOTED 3 TO 1 WITH BUCKLEY CASTING THE DISSENTING VOTE AND HICKMAN ABSENT TO CONTRIBUTE $5,000 TO SETTLEMENT OF PAGE ELEVEN - CITY COUNCIL MINUTES - JANUARY 30, 2002 PACIFIC CREMATORIUM LITIGATION, AS FULL AND FINAL SETTLEMENT OF ALL ISSUES AND THE CASE WILL BE DISMISSED WTTH PREJUDICE. ADJOURNMENT THE SPECIAL CITY COUNCIL MEETING WAS ADJOURNED AT 1:00 P.M. ATTEST: ~ f~ ~~ E KELLEY, MAY R OF LAKE ELSINORE VICKI KASAD, CMC, CITY CLERK/ HUMAN RESOURCES DIRECTOR CITY OF LAKE ELSINORE