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HomeMy WebLinkAbout01-20-2011 MinutesSan CITY OF SAN BERNARDINO 300 N. "D "Street San Bernardino, CA 92418 Website: www.sbcity.org Mayor Patrick J. Morris Council Members: Virginia Marquez Jason Desjardins Tobin Brinker Fred Shorett Chas Kelley Rikke Van Johnson Wendy McCammack MINUTES MAYOR AND COMMON COUNCIL AND COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO JOINT SPECIAL MEETING JANUARY 20, 2011 ECONOMIC DEVELOPMENT AGENCY BOARDROOM 201 NORTH "E" STREET SAN BERNARDINO, CALIFORNIA AND JOINT ADJOURNED SPECIAL MEETINGS JANUARY 21-23, 2011 COUNCIL CHAMBERS - CITY HALL NOTICE IS HEREBY GIVEN that the Mayor and Common Council of the City of San Bernardino have called a special meeting of the Mayor and Common Council for 5:30 p.m., Thursday, January 20, 2011, in the Economic Development Agency Boardroom, 201 North "E" Street, San Bernardino, California. The purpose for which this meeting was called was to consider the following: Approval of a Cooperative Financing Agreement of the Redevelopment Agency of the City of San Bernardino and appointing Commission Members to serve on the board of a certain non-profit corporation. The special meeting of the Mayor and Common Council of the City of San Bernardino was called to order by Mayor/Chairman Morris at 5:37 p.m., Thursday, January 20, 2011, in the Economic Development Agency Boardroom, 201 North "E" Street, San Bernardino, California. 1 01/20/2011 01/21-23/2011 Roll Call Present: Mayor/Chairman Morris; Council Members/Commissioners Marquez, Brinker, Shorett, Kelley, Johnson, McCammack; City Attorney Penman; Assistant City Manager Kurita; Economic Development Agency Interim Executive Director Marzullo and Agency Counsel Sabo; Deputy City Clerk Hartzel. Absent: Council Member/Commissioner Desjardins. Council Member/Commissioner Desjardins arrived at 5:40 p.m. 1. Approval of a Cooperation Financing Agreement of the Redevelopment Agency of the City of San Bernardino and appointing Commission Members to serve on the board of a certain non-profit corporation Resolution of the Community Development Commission of the City of San Bernardino approving a certain Corporative Financing Agreement by and between the Redevelopment Agency of the City of San Bernardino ("Agency") and the Sustainable Communities Reinvestment Partnership, Inc., for the financing, funding and undertaking of various redevelopment related activities of the Agency. Note: No backup materials were distributed with the agenda. Mayor/Chairman Morris advised that the Governor's recent budget proposal included a recommendation to the legislature that the State dissolve the redevelopment organizations in the cities and counties of California. He stated that Emil Marzullo, Interim Executive Director of the Economic Development Agency, and Agency Counsel Tim Sabo had analyzed the issue and would be discussing it with the Council this evening. Mr. Marzullo stated that one week ago the Governor released his budget plan. It was not good news for us because not only do we have extensive redevelopment areas in the city, but we have one of the few enterprise zones in the state, which are both scheduled for elimination in the Governor's proposal. He stated that when the news first broke staff didn't initially react, as they wanted to see the reaction from the representative organizations—the State Redevelopment Association (CRA), the League of California Cities, the County Association—because in the Governor's proposal the state would essentially capture the nondebt cloaked RDA money across the state through every community and redistribute that to taxing entities in each county jurisdiction. So it would go to the cities, to special districts, to counties—and in turn some responsibilities would also go from the state to some of those entities. 2 01/20/2011 01/21-23/2011 He stated that they spoke with CRA last week and they went to a meeting last week with the League of Cities to get their take on this, and it really depends on who you listen to, as to what their take is. Some say this is a done deal. Others say it is a political ploy to try and bring people to the table—make it so distasteful that everyone will give up something. He stated that they don't know what the politics of it are, but when they saw the Community Redevelopment Agency of the City of Los Angeles take a very overt action, and they saw the County of Riverside and Northern California cities taking action, they felt they needed to at least present something and come up with some solutions. Mr. Marzullo distributed the following four documents and explained to the Council how the City would be affected financially if the Governor and the legislature enact the tax take away. • From the League of California Cities an article titled, Governor's Budget Eliminates Redevelopment Agencies, Enterprise Zones, and Realigns State Services to Local Governments • A 2 -page document titled, CITY OF SAN BERNARDINO, IMPACT OF STATE BUDGET RDA CUT, DRAFT • A 1 -page document titled, CORPORATE RECORDS, SUSTAINABLE COMMUNITIES REINVESTMENT PARTNERSHIP, INC. • A draft resolution Mr. Marzullo stated that if they just look at it from a budget standpoint, the City's general fund actually wins a little bit—they think that will be about $1.4 million more than they get now in the general fund. But when you look at the expenses that the City will get, that amounts to approximately $8.5 million. So, when you look at an add of $1.5 million and a hit of $8.5 million, on an annual basis it is a net loss of about $7 million every year—a hit that is potentially substantial and long-term. He advised that the Community Redevelopment Agency of the City of Los Angeles transferred the assets, the properties, the responsibilities from the Community Redevelopment Agency to the City of L.A. He noted that the reason it works well in their case is because their redevelopment agency is governed by nonelected people—there are no elected individuals on that board— so when they transferred it to the City they could make the argument that they were different entities. However, in the City of San Bernardino, if we took all the assets of the Agency and by decree of both the Council and the Community Development Commission transfer the assets to the City, the challenge we would have is that the boards do wear different hats, but they are the same individuals. He stated that our legal counsel opined that that is so transparent that it would be easy to 3 01/20/2011 01/21-23/2011 essentially undo. The State could say, we see what you are doing—these are the same people, the same board—you just moved it over to protect the money. Riverside County decided to bond up—they essentially went out and took all of their projects that were shelf ready, created the documentation, and are ready to go to the bond market to sell debt, which then creates an impairment contract issue that if you don't pay that debt once the bonds are issued, that could be a problem. But, that would at least protect some dollars. Looking at that resolution for San Bernardino, we don't have enough projects ready to do that and we believe that the State legislature sooner rather than later is going to take some overt action—they are going to take some emergency action that is going to freeze our ability to do that. The remaining option was to see whether we have another entity, or another way, that we can take and shield dollars, at least in a ministerial way. The Agency looked at what entities we have in terms of the nonprofits, and we have two. One is the Neighborhood Housing nonprofit that we use for the Neighborhood Stabilization Program (NSP), for 20 percent set-aside, for HOME funds, etc. It didn't look like a good candidate because its issues are really related only to housing. The only other one we had is Corporate Records. So, the other option was to take another corporation, and we had one that we actually converted two years ago. He explained that in 1973 the San Bernardino Economic Development Council was essentially incorporated, but it had been inactive for many years. We were looking at doing some sustainability projects and one was the solar project that's on the building here at EDA. We had a concept that if we had a nonprofit that was a Community Development Corporation (CDC) and could get involved in this, we had a construct that we could take advantage of the private tax credits—the 30 percent private tax credits—the federal and state. We couldn't do it as a government, or as a nonprofit, but we figured a way to do it. So we took that nonprofit—saving money and time because we didn't have to start another corporation—and we just changed the bylaws and the name and turned it into the Sustainable Communities Reinvestment Partnership, Inc. (SCRIP). We appointed a new board of directors and officers, and we did the project up here and we saved about $1 million by having this project. Mr. Marzullo continued, stating that they still have this organization, which is a CDC and a 501(c)(3) nonprofit. We determined that if we were to transfer assets from the Agency to a CDC, that would be the one we would do it in, but we wouldn't do it in the construct of the current board of directors, because it wasn't set up to do this. We would have to bring that board to a meeting, we would have to change the bylaws, we would have to change the structure, and then create a contractual arrangement between the Redevelopment Agency and the nonprofit that the employees, the assets, the liabilities, all of those things 4 01/20/2011 01/21-23/2011 transfer and we create a contract issue. He added that that is the whole reason for this—to create an impairment blockage so that the money take could at least be argued legally that you are going to impair a contract between these two legal entities. Mr. Marzullo stated that the board of directors is now himself, Brian Turnbull, and Jim Morris. They had three people and they only used it as a financing mechanism, so they didn't need an extensive board unless they expanded the role of SCRIP. He stated that the last option is to do nothing. They can sit and wait and see what happens with the State. They don't know that this is a real action that is going to happen and they don't know what the true impact is. Again, depending on who you talk to at the League or CRA, some say we should go out and do something and others say, no, hold back, don't make any moves, you could be defeating your purposes. We looked at it as more of a professional responsibility that we need to bring this to light and say we've got some opportunities and we've got some threats. He added that the State is quietly being urged to get the legislature to move on an emergency action relatively soon. However, whether that is this weekend, next week, or a month from now, he doesn't know, so timing is an issue. Agency Counsel Sabo stated that on Monday he talked to a lobbyist who is active in Sacramento, and what he had cautioned was that if it does happen, it is going to happen very quickly, and that once the bill is introduced it will already have been drafted. Mr. Marzullo indicated that Mr. Sabo and his staff researched the legal background relative to the legal options on how they would do this. He stated that they put together a draft resolution and a draft document that would be an agreement between the two agencies—a Cooperating Financing Agreement. Discussion ensued regarding the City's legal protections, how the courts might rule in the face of multiple lawsuits filed by the cities—would they issue a temporary stay order or a preliminary injunction—and the constitutional protections that redevelopment has. Also discussed at great length was the establishment and use of a nonprofit to protect the City's/Agency's funds. Agency Counsel Sabo stated that what he was attempting to do was to create for those committed projects that the agency intended to do, a contract with someone we are comfortable with that would do those—commit the tax increment funds so that we can then move forward and do those. Without a binding commitment with the developer or some other third party, he thought there was a very good chance those monies could be taken back and thrown into the pool. 5 01/20/2011 01/21-23/2011 What Mr. Sabo was looking for was who is the best third party where you take a form of a cooperative agreement, but not just an intent type of agreement, because in his typical form of a cooperative agreement between two governmental agencies, there is no enforcement. Mr. Marzullo added that the proposed action is a preventive measure. If they did this and they had the preventive measure in place and the state did not do what they say they are going to do, they could just undo the preventive measure. He stated that when they put it in place, in order to make this as transparent as possible for the public's purpose, that the bylaws would be changed for the nonprofit and then they would have three members represented from the City as elected members, they would have four members from the community (and they did that purposely so you would not have a majority of the City where the state could argue, it's the same board). The four members would be appointed by the nonprofit members. So the Council would appoint their members and the rest would be appointed by the board. He stated that in order to make it work, they would first have to put an interim board of directors in place. Secondly, they made a change in the bylaws recommendation that the bylaws of the existing corporation would be required to comply with the Brown Act, and it would be required that any conflict of interest issues related to contracts regarding property purchase and budgets would go back to the City Council for approval because it is the City's money. Council Member/Commissioner Desjardins expressed concern that the appointed persons that were going to be proposed for this new entity are of the business community. He asked if there wasn't a developer or a real estate person that has expertise in this who could be appointed. Mr. Marzullo stated that they had all of about a day to come up with some construct. On the interim board they wanted people that were not only active in the city, but that had some background or involvement in economic or community development or redevelopment—understood it—recognizing they would come back and be revising these bylaws multiple times. If this became the long term solution, and they were going beyond just this protection issue, he would anticipate a lot more revision to the bylaws and the construct of the nonprofit because then you actually have to go into business. After much discussion Council Member/Commissioner Brinker stated that it was his hope that the Council would continue this item to another meeting before they decided to take any kind of action. Mr. Brinker commented that we have to do a good job of explaining to our other elected colleagues on our local school boards, why this is important to them that we are able to keep our redevelopment dollars. 6 01/20/2011 01/21-23/2011 Council Member/Commissioner McCammack stated that she thought the voters would be very upset if they thought this Council was ready to abrogate its authority over a $150 million budget by turning it over to a nonprofit that will not take its direction from the Council, but take its direction from those who appoint them. She stated that there were some other alternatives that needed to be discussed in terms of the strictness of the bylaws, because once you turn the bylaws over to a nonprofit, they can make them say whatever they want them to say and the Council would have zero control. City Attorney Penman added that the bylaws can be changed in a moment by the nonprofit's board, they can do away with the Brown Act, and they can change who can be on the nonprofit. He thought the voters might be concerned if all of a sudden we go from eight of their elected officials—seven Council members and a Mayor—deciding how $300 million is spent, to transferring that to a private non-profit corporation, which at the outset has bylaws that include elected officials, but could change those in a weeks time so that they don't include elected officials, and they could just be nonprofit. He stated that he could also see transferring a property, but it's one thing to transfer the baseball stadium or the Cinemax Theater over to a private nonprofit—it's another thing to transfer the California Theatre, the Convention Center, or the EDA building to a private nonprofit. Council Member/Commissioner McCammack stated that the way it sits right now, she couldn't support the proposed action. She added that there are other avenues such as transferring the assets to the nonprofit and then insisting that the nonprofit transfer them back to the City and contract with them to maintain them. Council Member/Commissioner Marquez asked what would be the detriment if we transferred it to the City? Agency Counsel Sabo explained that the detriment is that some of these we just purchased from the City would be transferred back to the City, and some of these are clear redevelopment acquisitions, not related to the City. Mr. Marzullo cautioned that they needed to be clear. They are not suggesting that the State is going to take the properties—they are not threatening that. The property is only being used as a mechanism to help to create the contract impairment as a blockade from the take of taxes—that was the strategy here. Moving the property to the City, but not creating a contract impairment will not save anything. 7 01/20/2011 01/21-23/2011 City Attorney Penman stated, we have a very strong vehicle if we contract, as this document provides that we will, with a nonprofit to take over our debt service, to take over some of our obligations, to take over our new projects. Transferring the property is entirely different. Mr. Penman stated that the transfer of the property is premature because he doesn't think it's needed to protect the tax increment money. Mayor/Chairman Morris noted that we have a new possible analysis to be made on which assets, real property specifically, would be maintained by the City. Council Member/Commissioner McCammack stated that there were a couple of other things that she had hoped they would investigate, and one of them was a specific purpose JPA. She stated that the JPA could certainly be made up of several different types of elected officials, such as one from the County, etc.—it could be a whole variety of different things. But a JPA at least still holds the elected body accountable. She worried that with the nonprofit, the bylaws can changed at a moments notice. Mayor/Chairman Morris stated that there are a host of possible vehicles that could be used for this purpose, but urgency is the byword here. Council Member/Commissioner McCammack pointed out that they could call a special meeting. The Mayor stated that his point was that when you walk down a JPA road you are talking about getting other government entities into the equation as well. Council Member/Commissioner Brinker stated that the JPA is actually a good idea if we involve our schools and make them partners. He stated that we need to be partners in this so they see the benefits and they've got some say in how the money is being spent. Council Member/Commissioner Shorett asked if a restriction can be placed on bylaws so that they can't be changed so easily? Mr. Sabo answered that we could put something in there, but there has to be another string attached to it; otherwise, how do you enforce it. He added that if the nonprofit does something you don't like, there could be something written into the agreement that would say, if you do this, this or this, or change the bylaws, or do something, then that could be an event of termination. Council Member/Commissioner Johnson stated that cities are moving money throughout the state. Whatever action we take has got to be coming back with a timeline that's very quick, so we can do something. Once we put this in place, it won't have to go into action until the state takes its action, but we better have something in place before the state takes its action. 8 01/20/2011 01/21-23/2011 Council Member/Commissioner McCammack noted that Mr. Johnson just made a great suggestion—that we work duel tracks. If the nonprofit plan could be tightened up to not allow so much control to be lost, and you've got a JPA template in your laptop, do whatever you can to give us two options. Then at that point in time we've got some options that can come very quickly to us. Mr. Sabo reminded the Council that we do have a Joint Powers Financing Authority that is already in existence. Again, we have the same parties, but maybe what we can do is amend for somebody else to come in. City Attorney Penman noted that the time problem could be solved immediately. This meeting could be continued to a specific time tomorrow. The City Clerk can show up at that specific time, even on a weekend, and each day continue the meeting to the following day at the specified time. The meeting could then be continued from Sunday to Monday (which is a regular Council meeting date) and on Monday they can start all over again, so they can stay ahead of the legislators, since he was told it would take at least 48 hours for them to get together. Secondly, he stated that he was going to suggest the financing authority, which already exists—they wouldn't need a new one. And they could simply have the school district elect someone from the school board, or someone they choose; and the same with a nonprofit. He stated that he was not suggesting that any of these things be done, but he wanted to give examples of what could be done. They could have the school board choose one of the nonprofit members, they could have the downtown business association choose one, they could have the Neighborhood Associations presidents group choose one, they could have the Chamber of Commerce choose one—there are all kinds of ways they could have different groups choosing the nonprofit board members to avoid the appearance of conflict. The consensus of opinion was to recess the meeting until 4:30 p.m. the following day (Friday) in the Council Chambers. If attendance by the Mayor and Council members was needed, staff would call and alert them. Otherwise, the City Clerk would announce that due to lack of a quorum there would be no meeting and would continue the meeting to 4:30 p.m. the next day (Saturday); and this process would be repeated on Saturday and on Sunday, with Sunday's meeting recessing to the regularly scheduled meeting on Monday at 4:30 p.m. 2. Adjournment At 7:22 p.m. the meeting adjourned to 4:30 p.m., Friday, January 21, 2011, in the Council Chambers of City Hall. The next joint regular meeting is scheduled for 1:30 p.m., Monday, January 24, 2011. 9 01/20/2011 01/21-23/2011 January 21, 2011 - Due to lack of a quorum, meeting was adjourned to 4:30 p.m., Saturday, January 22, 2011. January 22, 2011 - Due to lack of a quorum, meeting was adjourned to 4:30 p.m., Sunday, January 23, 2011. January 23, 2011 - Due to lack of a quorum, meeting was adjourned to 4:30 p.m., Monday, January 24, 2011. RACHEL G. CLARK City Clerk By: G',,' e . 1644 Linda E. Hartzel Deputy City Clerk 10 01/20/2011 01/21-23/2011