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HomeMy WebLinkAbout03-03-2011 Jt. Spe Mtg CITY OF SAN BERNARDINO 300 N. "D" Street San Bernardino, CA 92418 Website: www.sbcity.org Mayor Patrick J. Morris Council Members: Virginia Marquez Vacant Tobin Brinker Fred Shorett Chas Kelley Rikke Van Johnson Wendy McCammack MINUTES MA YOR AND COMMON COUNCIL AND COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO JOINT SPECIAL MEETING THURSDAY, MARCH 3, 20ll ECONOMIC DEVELOPMENT AGENCY BOARDROOM 20I NORTH "E" STREET SAN BERNARDINO, CALIFORNIA NOTICE IS HEREBY GIVEN that the Mayor of the City of San Bernardino has called a joint special meeting of the Mayor and Common Council/Community Development Commission to be held at 5:00 p.m., Thursday, March 3, 20ll, 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: A Joint Mayor and Common Council and Community Development Commission Workshop on Agency Redevelopment Projects and Housing Funds. The joint special meeting of the Mayor and Common Council and Community Development Commission of the City of San Bernardino was called to order by Mayor/Chairman Morris at 5:09 p.m. on Thursday, March 3, 20ll, in the Economic Development Agency Boardroom, 201 North "E" Street, San Bernardino, California. Roll Call Present: Mayor/Chairman Morris; Council Members/Commissioners Marquez, Brinker, Kelley, Shorett, Johnson, McCammack; City Attorney Penman, Assistant City Manager Debra Kurita, Economic Development Agency Interim Executive Director Marzullo, Agency Counsel Sabo; and City Clerk Clark. Absent: Vacant: None. Second Ward. 03/03/2011 1. Closed Session Pursuant to Government Code Section(s): A. Conference with legal counsel - eXlstmg litigation - pursuant to Government Code Section 54956.9(a). B. Conference with legal counsel - anticipated litigation - significant exposure to litigation - pursuant to subdivision (b) (1), (2), (3) (A-F) of Government Code Section 54956.9. C. Conference with legal counsel - anticipated litigation - initiation of litigation - pursuant to subdivision (c) of Government Code Section 54956.9. D. Closed Session - personnel - pursuant to Government Code Section 54957. E. Closed session with Chief of Police on matters posing a threat to the security of public buildings or threat to the public's right of access to public services or public facilities - pursuant to Government Code Section 54957. F. Conference with labor negotiator - pursuant to Government Code Section 54957.6. G. Conference with real property negotiator - pursuant to Government Code Section 54956.8. The Mayor and Common Council did not recess to closed session during this meeting. 2. Joint Mayor and Common Council and Community Development Commission Workshop on Agency Redevelopment Projects and Housing Funds. Mayor/Chairman Morris convened the workshop to discuss the critical issue of how we will protect our local tax dollars from the threat that has been issued by the Governor to all cities in California that he is going to sweep away redevelopment agencies across the state and take those resources and put them elsewhere beyond our city limits. The Mayor stated that if we do not act to protect local dollars for investment within our City and for critical projects to rebuild our infrastructure, then we will not have done our job as elected leaders for the local taxpayers. He called on Emil Marzullo, Interim Executive 2 03/03/2011 Director of the Economic Development Agency to explain the proposal that will hopefully protect us from the sweeping take on economic development efforts in this City. Mr. Marzullo stated that he has been in local government for 3S years and he has seen government takes, but has never seen the wholesale elimination proposal like the one proposed by the Governor. The Governor has proposed eliminating the redevelopment authorities throughout the state and to take the money that we call tax increment, the money that is utilized in the redevelopment financing and building programs, and redistribute that to taxing entities. Mr. Marzullo explained that since Proposition 13 came into play in 1979 the general tax is 1 % of a property's value. So, for example, if you have a home or a bare piece of land that is worth $100,000, the general tax for that property is $1,000 and most people have a tax greater than that because there are add ons such as assessment bonds, school bonds, or it could be water issues or other things, but the 1 % ad valorem tax is based on the market value of the property. He noted that "ad valorem" means the tax based on value. So, if you take $1 of that ad valorem tax and split it up, it is split up to local entities, i.e., school districts, cities, counties, park and recreation districts, lighting districts, and any one of a number of entities. There is no exact formula of who gets what in what area as it is all based on what taxing entities were in place at the time that Proposition 13 was put in place. In the case of the City of San Bernardino, we receive 17 - 18% or 17 or 18 cents of every dollar and those dollars go to the General Fund. Those are the dollars that run municipal services; i.e., police, fire, general services of the City. Other functions of the City such as water and sewer are generally called enterprise functions and can charge a fee. Mr. Marzullo explained that redevelopment was an invention of the mid to late 1940s and it came out of post WWII when we had blighted cities and older urban areas and something was needed to bring them back to life. Mayor Morris commented that San Bernardino is a classical older city. This is a city with remarkably old infrastructure from sewer systems to water mains, to streets, curbs and sidewalks and in every respect we are one of the older cities in California, the oldest east of Los Angeles. Therefore, we have in an immense way challenges of blight and infrastructure degradation. Mr. Marzullo stated that the way redevelopment works is that it takes a portion of the ad valorem tax and establishes a redevelopment area. There are 14 redevelopment zones in the City and a large portion of this city is within 3 03/03/2011 redevelopment areas. The City of San Bernardino gets in excess of $45 million a year in redevelopment money. That amount changes with the amount of taxes collected and the value of property within the city. Of that $45 million, about $26 million is dedicated to debt service to pay down loans that have already been made in past years, some of which are decades old. The balance that is left is a discretionary amount that funds projects. Some of the projects for which we are paying the debt include the police station, libraries, public places, bridges, and infrastructure. Mr. Marzullo went on to explain that one of the biggest issues that they deal with is blighted housing. Twenty percent of redevelopment money, by statute, is required to be spent on low and moderate income housing. The Economic Development Agency has been very active in trying to change neighborhoods that have been problematic. He noted that redevelopment is not a panacea for all socio-economic problems; however, it is a tool that we have at the local level to fix what ails a City. In addition to using tax increment funds, the Agency also uses other tools such as the Enterprise Zone, Community Development Block Grants and the Work Force Investment Act. Mr. Marzullo explained that the Enterprise Zone is also proposed to be eliminated; Congress has mandated a 10% reduction in Community Development Block Grants; and, the Work Force Investment Act is another program proposed to be eliminated. So, the four principal tools used to change the city's physical characteristics are all on the chopping block. Mr. Marzullo stated that if redevelopment is eliminated the impact on the City's general fund will be a loss of $45 million a year at today' s ad valorem tax rate based on the value of property within the City. Mr. Marzullo went on to explain the different options that they have considered with regard to protecting our dollars and keeping them local. He stated that the Agency started out in its early days as a non-profit corporation. It was a 501(c)3 corporation called the San Bernardino Economic Development Corporation. The governing body was not the Council, but was a board comprised of local business people appointed by the City Council. The structure of that corporation is being utilized because a non-profit vehicle was needed to do tax exempt financing and that corporation is called The Sustainable Communities Reinvestment Partnership (SCRIP). The members of the SCRIP were asked to resign subject to actions taken at this meeting and the name of the corporation would be changed back to the San Bernardino Economic Development Corporation. Mr. Marzullo noted that at the last meeting of the Mayor and Council there were some concerns expressed about a non-profit corporation being run by a group of citizens and those concerns have been taken into consideration. 4 03/03/2011 Consequently, they have come up with an alternative solution. He noted that if the proposed plan is approved, they will take it to court and have it tested as a validation action to validate the contract that there is a legitimate, long-standing contract and that the proposed structure can be used. Mr. Marzullo read portions of the Legislative Advocate's Office and Senate Local Government Committee's proposed language that in essence states that if the State enacts their proposal, the Mayor and Council/Community Development Commission will not be able to go forward with the solution being suggested by Mr. Marzullo. The Legislative Advocate's Office and Senate Local Government Committee's proposed language says, in part, ".. . notwithstanding this part, commencing on the effective date no agency shall incur new or expanded existing monetary legal obligations except as provided in this part. All provisions of this part shall take effect and be operative on the effective date of the Act adding this part". Mr. Marzullo also read an excerpt from section two that states: "They may also not enter into contracts with, or incur obligations or make commitments to any entity whether governmental, tribal, or private, or any individual or groups, or individuals, for any purposes including, but not limited to, loan agreements, pass through agreements, regulatory agreements, service contracts, leases, ete. ... " Mayor Morris thanked Mr. Marzullo for the historical look at the ad valorem tax and how it is distributed and how the economic development corporations keep dollars local for local projects that help to rebuild cities. He asked legal counsel Timothy Sabo for comments and a general walk-through of the resolutions that are under consideration. RES. CDC/2011-8 - Resolution of the Community Development Commission of the City of San Bernardino approving the appointment of certain members to the San Bernardino Economic Development Corporation. (2A) Mr. Sabo stated that the first resolution appoints three of the commiSSIOn members to serve on the non-profit corporation. He noted that a copy of the By-laws are included in the backup for informational purposes only. Mr. Sabo stated that the most immediate prior Board of the non-profit met and voted to modify the By-laws as they are provided in the backup. Council member Kelley asked who were the members of the Board and Mr. Sabo responded that Messrs. Emil Marzullo, Brian Turnbull, and Jim Morris served on that Board. Mr. Sabo continued with an explanation of the remaining resolutions. 5 03/03/2011 RES. CDC/2011-9 - Resolution of the Community Development Commission of the City of San Bernardino approving a Certain Project Funding Agreement by and between the Redevelopment Agency of the City of San Bernardino ("Agency") and the San Bernardino Economic Development Corporation, Inc., relating to the $525,000,000 principal amount for the Redevelopment Project Areas - Capital Improvement Projects. (2B) Mr. Sabo explained that this resolution is really the agreement that is the substance of the action proposed. He indicated that an extensive amount of work has been put into the exhibits to identify the projects that came from both the Redevelopment Agency's administration plan, which is done every five years and is updated regularly, plus the City's CIP Program. He noted that staff worked with the Public Works Director and City staff to develop a comprehensive list that is broken out by ward. Also attached to this resolution is an exhibit that lists ongoing contractual obligations; i.e., bonded indebtedness where bonds are issued to public investors and private indebtedness which is in a form of owner participation agreements, reimbursement agreements, disposition development agreements and those are carried as debt. RES. CDC/2011-10 Resolution of the Community Development Commission of the City of San Bernardino authorizing (I) that Certain Loan Agreement in connection with the issuance of the Redevelopment Agency of the San Bernardino Promissory Note Series 2011 (City Redevelopment Activities and Public Works Projects), and (2) that Loan Agreement in connection with the issuance of the San Bernardino Promissory Note Series 2011 and the forms of legal documents related thereto. (2C) Mr. Sabo explained that this resolution is the loan agreement that matches the public improvement list so that we now have a document that we have $525,000,000 of projects. He indicated that some of the projects may become something else; they may be funded by a Federal grant, may be done by a developer, may be done by other sources, but they have identified all of the projects so that we have an expectation. RES. CDC/2011-11 - Resolution of the Community Development Commission of the City of San Bernardino approving a Certain Housing Capitalization Funding Agreement (Sub-Recipient Agreement) by and between the Redevelopment Agency of the City of San Bernardino ("Agency") and Affordable Housing Solutions, Inc., a California non-profit corporation ("AHS"), Inc., relating to the financing of certain housing programs and activities. (2D) 6 03/03/2011 Mr. Sabo explained that this resolution is very similar to the second resolution (2B) and it deals with the housing component. He explained that for the last couple of years a lot of the housing programs have been operating through the Affordable Housing Solutions because they are acquiring and disposing of foreclosed homes through the NSP Program. This agreement quantifies housing programs that have an origin in some already approved document and then projecting forward for the next 30 years what would be the cost of some of these ongoing programs; i.e., the down payment assistance, rehabilitation, beautification of homes, and other types of activity. RES. 2011-47 - Resolution of the Mayor and Common Council of the City of San Bernardino approving and authorizing a Certain Reimbursement and Project Implementation Agreement by and between the City of San Bernardino and the San Bernardino Economic Development Corporation, Inc., authorizing the form of certain legal documents related thereto and authorizing and directing their preparation. (2E) Mr. Sabo explained that he thought it would be very beneficial to have a separate City obligation with a non-profit corporation only for the CIP projects so that this is not just an agency issue. This is a reimbursement agreement whereby the non-profit will agree to undertake the City CIP Project to the extent that if they do not or cannot, there would be a reimbursement back to the City. It's another way to insure that the CIP projects will be done. City Attorney Penman stated that he and Mr. Sabo met for quite some time and he and Sr. Ass!. City Attorney Easland have also spoken with the Mayor. He indicated that he declined to sign off on Resolution 2E due to a number of legal issues that are uncertain; however, the validation action is a way to resolve those legal issues. He commented that if the validation action comes out in our favor, it gives us some additional insulation from a challenge by the State. Mr. Penman recommended that the following language be added to the motion on 2E: "subject to legal review and approval by the City Attorney's Office and the outcome of the validation action". City Clerk Clark read the title of Resolution 2E into the record. Council member/Commissioner Shorett made a motion, seconded by Council member/Commissioner Marquez, to add the following verbiage to Resolution 2E: subject to legal review and approval by the City Attorney's Office and the outcome of the validation action. The motion carried with Kelly and McCammack voting "no." Discussion ensued concerning the validation action. Mr. Sabo indicated it would probably take three to four weeks to get the validation action filed, do all 7 03/03/2011 the research, and prepare the documents; and it would probably have a final judgment the latter part of this year. Council member/Commissioner Shorett made a motion, seconded by Council member/Commissioner Marquez, to approve Resolutions 2A, 2B, 2C, 2D, and 2E. The vote was taken following discussion. Council member/Commissioner Kelley stated that he strongly opposed the attempt by Governor Brown to take San Bernardino's redevelopment dollars. In order to prevent Sacramento's money grab, he supports the City Council taking action to protect our city funds; however, he stated that he is very concerned that the non-profit idea being discussed lacks the necessary accountability to protect city taxpayers from financial abuse. Mr. Kelley stated that he would support the creation of a non-profit to handle City redevelopment funds if, and only if, the non-profit's board consisted of all seven City Council members to insure that the residents of each ward have an equal voice in the expenditure and use of City redevelopment funds and also provide the public the level of accountability required by the taxpayers. Mayor/Chairman Morris asked Mr. Sabo to explain why there is a need to create a separate legal entity with a distinctive separate board from the seven council persons who also act as the EDA Board. Mr. Sabo indicated that his concern is that just as those cities that are trying to do this between the City Council and they are wearing the same hat as the Redevelopment Agency Board members, again you have the transparency that you are one and the same. He stated that their goal was to set up a very legal structure and there are still going to be administrative procedures, policies, as far as how monies will be spent, the accountability, reporting, what type of approvals might still be required by the Commission or the City Council. Mr. Sabo believes it's best to leave the framework in place; that there are still administrative policies and procedures that can be adopted and other limitations that can be imposed once this action has been taken. City Attorney Penman stated that it is a real challenge to form a non-profit corporation that is sufficiently separate from the City so as to survive the argument that it is sort of our alter ego. Mr. Penman stated that he agreed with the Mayor that the proposed actions give us more insulation than just changing hats and having the exact people on the board. Mayor Morris explained that the construct of the board is a six member board of directors that consists of three citizen electeds; a member of the school board who is elected and is a resident of the City; a member of the Chamber of Commerce Board of Directors, who although not elected is a local citizen living 8 03/0312011 locally and has a business background; and, a County Supervisor who has general oversight by way of jurisdiction of our City. Council Member/Commissioner McCammack stated that since Mr. Shorett's motion includes items with which she must abstain from, she was going to abstain on the entire motion. Mrs. McCammack left the room. Mr. Penman stated for the record that Mrs. McCammack informed him that after reviewing Exhibit A projects, there are a number in the Uptown Redevelopment Project Area that she would have to abstain from because she owns property in the Uptown Redevelopment Project Area. Also, Omnitrans is a client of hers and they are part of the construction of a TOD Center and parking for the sbX bus. Council Member/Commissioner Kelley made a substitute motion that the new Board include representatives from the wards that do not have an elected representative. The motion died for lack of a second. Public Comments: Warner Hodgdon, San Bernardino, CA; Kathy Mallon, San Bernardino, CA; Robert Jenkins, San Bernardino, CA; Amelia Sanchez Lopez, San Bernardino, CA; Rita Arias, San Bernardino, CA; John Valdivia, San Bernardino, CA. City Clerk Clark read the titles of each resolution and requested that the motion to approve resolutions 2A through 2E include waiving further reading of the resolutions. The maker of the motion and the seconder of the motion agreed to include waiving further reading of the resolutions. Council member/Commissioner Brinker stated that one of the projects listed on page seven of Exhibit A is in the Third Ward, it is the construction of the railway grade separation on Hunts Lane, south of Hospitality Lane, and that project is within 500 feet of his house so he was not sure if he should recuse himself on that particular item. Legal Counsel Sabo recommended that he abstain on that item. Council member/Commissioner Brinker made a motion, seconded by Council member/Commissioner Kelley, to delete project construction of railway grade separation on Hunts Lane, south of Hospitality Lane, from the list of projects listed for Resolution 2E. The motion carried with McCammack abstaining. 9 03/03/2011 The original motion made by Council member/Commissioner Shorett, seconded by Council member/Commissioner Marquez, to approve Resolutions 2A, 2B, 2C, 2D, and 2E (as amended), carried and Mayor and Common Council Resolution No. 2011-47 and Community Development Commission Resolution Nos. CDC/2011-8, CDC/2011-9, CDC/2011-10 and CDC/2011-11 were adopted with Kelley voting "no" and McCammack abstaining. Council member/Commissioner Shorett made a motion, seconded by Council member/Commissioner Marquez, to add to Exhibit A of Resolution 2E, the project construction of railway grade separation on Hunts Lane, south of Hospitality Lane. The motion failed by the following vote: Ayes: Marquez, Shorett, Johnson. Nays: Kelley. Abstentions: Brinker, McCammack. 3. Adjournment At 6:58 p.m., the meeting was adjourned. The next joint regular meeting of the Mayor and Common Council/Community Development Commission is scheduled for Monday, March 7, 2011. RACHEL G. CLARK, CMC City Clerk a~ /J.~ -- 10 03/03/2011