HomeMy WebLinkAbout07.B- Community Development 7.B
DOC ID: 4541 A
CITY OF SAN BERNARDINO — REQUEST FOR COUNCIL ACTION
Agreement/Contract Amendment
From: Mark Persico M/CC Meeting Date: 07/18/2016
Prepared by: Georgeann "Gigi" Hanna,
Dept: Community Development Ward(s): 1
Subject:
Discuss and Take Possible Action on the Baseball Stadium Lease Renewal (#4541)
Current Business Registration Certificate: Not Applicable
Financial Impact:
Unknow at this time.
Motion: Discuss lease extension options and provide direction to staff.
Background
The Successor Agency to the former Redevelopment Agency of the City of San
Bernardino ("Successor Agency") submitted its Long Range Property Management Plan
("LRPMP") to the California Department of Finance ("DOF") in September 2015, and
after some amendments, the LRPMP was approved by DOF on December 31, 2015. In
the LRPMP, the Successor Agency proposed that the San Manuel Baseball Stadium be
transferred to the City as a government use property, as allowed under the California
Health and Safety Code ("HSC"). However, DOF rejected that proposal and directed
that the Stadium be sold.
Over the last six months, the Successor Agency lobbyists, Gonsalves & Sons, sought
DOF reconsideration of its determination and designation of the Stadium as a
government use property or a future development site. DOF ultimately declined to
modify its direction that the Stadium be sold. However, DOF did point out that the
property could be sold to a public entity, which could include the City. In addition, DOF
further clarified that actions taken to accomplish the sale of the property, regardless of
the amount of the purchase price, do not require DOF's review.
Although DOF thus appears to take the view that the Stadium can be sold to the City at
any price, it is staff's view that selling below fair market value could invite litigation by
one or more of the affected taxing entities challenging the legitimacy of the sale.
Therefore, if a below market sale or transfer of the Stadium is contemplated, it would
be prudent to seek a written concurrence, satisfactory to legal counsel, from the
affected taxing entities prior to consummating the transfer.
Analysis
The Stadium is currently leased to the Inland Empire 66ers Baseball Club of San
Bernardino, Inc. ("66ers"). The current lease included an initial 10-year term and two
five-year extensions. The second and final lease extension expires according to its
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terms on December 31, 2016. Over the past several years the 66ers have expressed
interest in either continuing to lease the Stadium or purchasing it (although the 66ers
previously withdrew their August 5, 2013 purchase offer). The 66ers' most recent
request is to lease the Stadium for an initial 10-year period with three five-year
extension options for a total potential occupancy period of 25 years. As a condition of
the new lease, the 66ers have requested a $2.3 million capital repairs budget (Exhibit
"A") allocation by the City to rectify a myriad of physical deficiencies at the Stadium.
Funds have not been previously allocated for repairs to the Stadium, and the Stadium
improvements must be considered in the broader context of other goals the City is
pursuing to rebuild the downtown core. Staff has compiled a list of financial resources
available to the Successor Agency and a list of known projects seeking funding (Exhibit
"B"). As outlined in Exhibit "B", the financial needs exceed the resources available. But
it is important to note that the Successor Agency has not yet allocated funding for
projects. Staff anticipates having that discussion with the Successor Agency in the near
future. This item is moving ahead of the broader discussion because the 66ers need to
know very soon whether they will be granted a new extension.
In addition to the proposed funding for capital repairs, the 66ers have requested an
annual operating subsidy of $250,000 to cover property maintenance and some utility
costs. Over the 25-year potential period of the lease, the operating subsidy would
amount to $6.25 million. By comparison, the Successor Agency through its Recognized
Obligation Payment Schedule ("ROPS") process allocated about $200,000 for property
maintenance for the Stadium during FY 2015-16. However, for FY 2016-17 DOF has
dramatically reduced the amount of funding available to the Successor Agency for
property maintenance, thus making it practically impossible for the Successor Agency to
provide the requested subsidy, and accelerating the Successor Agency's need to
dispose of the Stadium.
Moreover, if the City acquired the Stadium and leased it to the 66ers, the City would
then have to pay any subsidy provided to the team. However, the City's bankruptcy
plan of adjustment makes no provision for such a subsidy. Accordingly, in order to
provide such a subsidy the City would have to reduce the amounts allocated for other
budget items. Further, in the event that the Stadium does not have a user occupying
the property after December 31, 2016, the City and/or the Successor Agency will incur
certain costs to secure and safeguard the property until it can be disposed of to a third-
party entity. The amount of time involved and the potential costs to accomplish this are
currently unknown. However, if it is determined that the property will be sold to a third
party, then an interim property maintenance budget will be prepared and shared with
the Mayor and Common Council.
Options for Potential Direction
The options below each require a series of steps to implement. Staff has not started
discussions with any outside agencies because we are awaiting direction from the
Successor Agency. The list below is based upon currently available information:
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1. Offer the property to either the County of San Bernardino or California State
University San Bernardino at the appraised value and encourage the County or
CSUSB to lease the site to the 66ers. The County may have interest in the site
as a regional sports park and the CSUSB may wish to have a home field for its
intercollegiate baseball team. This has not been discussed with CSUSB.
2. Offer to sell the property to the 66ers for the appraised value without any
subsidies. In their August 5, 2013 offer to purchase the property, the 66ers
offered to provide a 10-year operating covenant to use the property for
professional baseball purposes. Therefore, include the operating covenant in the
offer.
3. Transfer the property to the City at the appraised value. Thereafter the City
offers to lease the property to the 66ers with funding for the capital repairs
budget and the annual operating subsidy. This option will require the City to
prioritize its available funding options for Baseball Stadium uses.
4. Transfer the property to the City at the appraised value. Thereafter the City
offers to lease the property to the 66ers without funding for the capital repairs
budget and/or the annual operating subsidy. As of the time that this staff report
was written, the 66ers' economic consultant (DMG Economics) confirmed that
the 66ers require both funding components for a lease. It is unknown what their
response may be if less than the 66ers' funding request is offered.
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5. Transfer the property to the City at a low or no cost per DOF's suggestion. Given
that this approach may be viewed as a below market rate sale or transfer of the
property, it is recommended that the Successor Agency seek a written
concurrence, satisfactory to legal counsel, from the affected taxing entities prior
to consummating the transfer. Once concurrence from the taxing entities is
achieved, the City leases the property to the 66ers with or without funding for the
capital repairs budget and/or the annual operating subsidy. Such a lease could
be considered and approved prior to full approval by the taxing entities, with the
effective date of the lease following the full approval by the affected taxing
entities.
6. Offer the property for sale to the public at appraised value. If there is a buyer
willing to pay appraised value, sell the property to the buyer for its ultimate reuse
for a purpose other than baseball.
7. Offer the property for sale to the public at an auction (either with or without a
required minimum bid). This approach has both the virtue of "the market"
dictating the price and the weakness that the resullt of the auction could be a
price that is lower than what an appraiser's opinion might reflect. Nevertheless,
auctioning property is considered an acceptable procedure by DOF.
Supporting Documents:
EXHIBIT A (Stadium Capital Repairs Budget) (DOCX)
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EXHIBIT B (Sources and Uses of Funds) (DOC)
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EXHIBIT "A"
SAN MANUEL BASEBALL STADIUM
CAPITAL REPAIRS BUDGET SUMMARY
(AS OF OCTOBER 2015)
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Items Estimates c
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Repair Cracked Exterior Stucco $350,000
Waterproof Concrete in Seating Area 450,000
Replace Deteriorated Stadium Seating 650,000 E
Replace Public Address System 450,000
Miscellaneous Repairs 100,000 2 Cn
Sum of Budget Estimate $2,000,000
Prevailing Wage Supplement 300,000
TOTAL BUDGET ESTIMATE $2,300,000 M ca
Notes:
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1. The budget estimates are based on data from the HOK Sports estimates of 10-16-15, with
additions noted below.
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2. For the purpose of budgeting, the high end of HOK's cost range, where given,was used.
3. The estimate for miscellaneous repairs was added by DMG Economics, consultant to the m
66ers. L
4. The estimate for the prevailing wage supplement was added by UFI.
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EXHIBIT "B
SUMMARY OF PROJECTED AVAILABLE RESOURCES
AND KNOWN PROJECTS SEEKING FUNDING
PROJECTED AVAILABLE RESOURCES
2010A TABS (EO# 131/per BEA): $6,045,430 --
2010B TABs (EO# 132/per BEA): 135,078
Estimated Theatre Square net land sales proceeds: 10,500,000
Total Estimated Funds: $16,680,508
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Rounded: $16.7 Million E
Notes: in
1. The funding from the Tax Allocation Bonds("TABs")is immediately available per the DOF-
approved Bond Expenditure Agreement("BEA"). If a last and final ROPS is ultimately N
achieved, then$800,000 of additional funding from the 2010B TABs will become available. m
2. The net land proceeds amount was estimated by Jim Rabe of Keyser Marston Associates
based on data presented by AECOM/Fransen.
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KNOWN PROJECTS SEEKING FUNDING
Demolition of Carousel Mall Improvements: $14,000,000 4-
Baseball Stadium Renovations: 2,300,000
California Theatre Seismic/Structural Renovations: 2,000,000
Convention Center Re-Roofing: 500,000
California Theatre Structural Assessment: 125,000 co
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Total Known Funding Requests: $18,925,000 0
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Rounded: $18.9 Million m
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Notes: _
1. The Carousel Mall demolition costs were estimated by AECOM/Fransen. w
2. The costs associated with the seismic/structural repairs related to the California Theatre are
only a rough estimate. A more current estimate needs to be obtained from a structural E
engineer.
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3. The cost of the baseball stadium renovations is based on an estimate obtained by the baseball Q
team and then inflated by$300,000 to cover prevailing wages.
4. The estimated cost of repairing the Convention Center roof was obtained by Donn
Dimichele.
Dated 7-8-16(UH)
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