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HomeMy WebLinkAboutReso - CC - 074-1976—YJML:KIJ:v 8-23-76 RESOLUTION NO. 74-76 A RESOLUTION EXPRESSING APPROVAL, IN PRINCIPLE, SUBJECT TO CONDITIONS OF A PROPOSAL FOR THE FINANCING OF A MUNICIPAL CONVENTION CENTER WITH APPURTENANT MUNICIPAL GOLF COURSE FACILITY RESOLVED, by the City Council of the City of Burlingame, California, that WHEREAS, there has been submitted to this Council a proposal, hereinafter called "the Proposal",for the financing of a municipal convention center facility and appurtenant municipal golf course by the authorization and issuance of revenue bonds by a joint powers entity to be formed by joint powers agreement by this City and the Redevelopment Agency of this City, the preliminary and general terms of which Proposal are outlined in a communication to Mr. Charles Schwalm from Mr. Ken Jones, dated July 23, 1976, a copy of which is hereto attached and incorporated herein by reference; NOW, THEREFORE, IT IS ORDERED, as follows: 1. That this Council does hereby approve the Proposal, in principle, subject to the happening of the following condi- tions to the satisfaction of this Council: a) That an economic feasibility report be prepared by a consultant of acnowledged reputa- tion satisfactory to this Council, demonstrating that the project is economically feasible; b) That the developers provide this Council with evidence satisfactory to this Council, that they are financially responsible and have the financial resources available to them to accomplish all of their responsibilities under the Proposal; c) That the developers cooperate in every respect ,with this Council in accomplishing the Proposal; 4�.-:; .k=a-•,.cam... . a.3 d) That all elements of the Proposal, including without limitation the amount of any developer profit, the terms and conditions of any management contracts, the design and construction of the improvements and any and all other details of the transaction, be subject to negotiation and specific Council approval; e) That all legal documents, resolu- tions, and any other action submitted to this Council in connection with the Proposal be subject to the approval of the City Attorney and of any special counsel employed by the City or the joint powers entity; f) That there be prepared and processed a legally adequate environmental impact report concerning the effect of the Proposal upon the environment. * * * * * * * * * * I hereby certify that the foregoing is a full, true and correct copy of a resolution duly passed and adopted by the City Council of the City of Burlingame, California, at a regular meeting thereof held on the 20th day of September 1976, by the following vote: AYES, and in favor thereof, Councilmembers:Amstrup-Crosby Harrison, Mangini, Martin NOES, Councilmembers: None ABSENT, Councilmembers: None City Cle•k of t e City of Burlingame APPROVED: A. - 4ayo r -2- 7-23-76 WVLSON. JONES. MORTON 6 LYNCH P O ... 112 SJCl3i33 o 2. a44DI .ry ,,.T 1COIr MUNICATION Ali[rvTIOR Mn _ Charles Schwalm FROM Mn. Ken Jones R, Golf Course/Convention Center rinancing--II The possible financial program outlined in my memorandum of July 7, 1976 is apparently not capable of accomplishment for a variety of reasons which I will not attempt to enumerate. Certainly there were a number of serious legal problems which would have to have been resolved under that program. The alternate possibility outlined in this memorandum is intended to be a complete substitute for the prior proposal and is, in our opinion, a more acceptable program from the legal point of view. The project would involve the construction of a public convention center with an appurtenant golf course facility and public parking on lands now owned by the City and some adjacent lands to be acquired. ASSUMED COSTS Project costs assumed at this time would be as follows: Convention center complete with 150 ancillary room facilities $ 6,000,000 Golf Course 1,700,000 Parking Lot 1,500,000 Funded interest 1,045,000 Bond reserve fund 1,170,000 Developer's profit 1,250,000 Incidental expenses 500,000 Total project cost $13,165,000 FINANCING PROGRAM A. Issuing Entity. The entity which would authorize and issue the bonds to finance the foregoing program would be a joint powers agency created by a joint exercise of powers agreement between the redevelopment agency of the City of Burlingame and the City. The joint powers agency would be a separate public entity distinct from both the redevelopment agency and the City. It would be governed either by the City Council or by a separately appointed board. The agreement would invest the agency with the power to issue bonds and to construct, maintain 7-23-76 WI+SON. JONES, MORTON & LYNCH DATE_ - - P O BOX 152 SAN GA MATFO, 94401 COMMUNICATION1A151 ATFO CA Charles Schwalm Ken Jones ATE 1101 MR FROM MM._ _ Golf Course/Convention Center Financing --II RE and operate a convention center with an appurtenant golf course facility and parking lot. B. Bond Security. The bonds would be secured by a lease from the joint powers agency to the City and by a deed of trust on the convention center/golf course facility. While the City would be obligated by the lease to pay rent at a level necessary to meet bond service, it is proposed that the City enter into an agreement with the developer, who will be the owner of the Sheraton Hotel, whereby the hotel will be obligated to pay the City a minimum of one year's principal and interest payment on the bonds, estimated at $1,170,000 in exchange for the exclusive right to use the convention center facilities for a period of not to exceed 3 months during the year. The hotel would also have a nonexclusive right, in common with all other public and private agencies, to use the convention center when not otherwise required for City purposes and functions. Such a backup agreement would be an integral part of the entire transaction and would be established as a requirement of the redevelopment plan hereinafter discussed. It could be secured by an encumbrance on the hotel. Also, the hotel would be conveyed to the City free and clear of all encumbrances after the financing becomes fully discharged and paid. The City would accomplish the actual operation and management of the convention center/golf course through a management agreement with a qualified operator. Such agreement would have to be for a one-year term and compensation would have to be based on a fixed fee in order to meet IRS requirements. LEGAL PROCEDURES If the foregoing arrangement were undertaken, it would not, in our opinion, be necessary to obtain an IRS ruling, nor State Corporation Commissioner clearance, nor SEC clearance, as was the case with proposal I. It would, however, be necessary to go through various procedures required by state law, as follows: A. The City Council would have to introduce and adopt an ordinance declaring a need for the redevelopment agency to function in the City of Burlingame. This ordinance would have to be introduced and adopted and would become effective 30 days thereafter. -2- 7-23-76 WILSON. JONES. MOFTON & LYNCH DAT[___ -- P O PO11P2 SAN MTFO a<.P1 44161 FO A23 CA COMMUNICATION Charles Schwalm AITLNTION MR —__ _ —..__ __._ _. _.__._ FROM MF.._ RA____. Golf Course/Convention- Center __Financing--lI_— Ken Jones It should be emphasized that the sole function of the redevelopment agency in this program is to act as one of the contracting parties for the creation of the joint powers agency issuing entity. It is not proposed that the redevelopment plan include any tax allocation financing features, although this is of course legally possible. It appears that this feature would not have any significant financial implication in any event. B. The redevelopment agency and the City, working with the plan- ning commission and other City officials, would have to approve the pro- cedures for establishing a survey area, a project area and a redevelopment plan for the area of the project. The procedures for accomplishing this are set forth in the attached procedural outline. Depending on time priorities and the availability of personnel, this procedure would take a minimum of 4 to 5 months. C. Procedures for the preparation and processing of an environ- mental impact report for the project would have to be accomplished. This would be carried on concurrently with the steps under paragraph B above. D. Upon final approval of the redevelopment plan, the City and the redevelopment agency would enter into a joint exercise of powers agreement creating the separate agency for the purpose of issuing the bonds to fin- ance the project. This agreement would include the authority for the agency to issue the bonds and the power to issue bonds would have to be approved by both the redevelopment agency and the City by ordinance, which is subject to referendum. E. The bonds, once authorized, would have to be sold at public sale because of the fact that the program includes a lease -back to the City. The sale would have to be at no less than par and a maximum interest rate of 8%. F. The accomplishment of the project would be by a contract award- ed by either the joint powers agency, the redevelopment agency or the City, after advertisement for competitive bids. The terms and conditions of the bidding would include a requirement that the bidder would have to comply with all of the terms and conditions and requirements of the redevelopment plan, which would include a requirement that the developer enter into the guarantee of use agreement mentioned above; that is, the successful bidder would have to agree to pay an annual minimum in an amount necessary to meet bond service in consideration of the exclusive right to the use of the con- vention center facility for a period of not to.exceed 3 months of the year. We believe that the foregoing program is legally sound. However, we have not been given the opportunity to review any of the financial figures involved in the operation of the hotel. This phase of the proposal -3- 7-23-76 WfLSON,:ONES, MORTON 9 LYNCH v o Roa i1. s.N H.TEO 2. A«o' COMMUNICATION Charles Schwalm A,EN,o. MR RE Golf Course/Convention Center Financing--Il FROM MR. Ken Jones is obviously of vital importance to the City because it represents the City's indemnification for taking on the rental obligation to the joint powers entity. Eno. KIJ:v cc: R. David Martin Sharon White Jerry Laster Bob Ryan