HomeMy WebLinkAboutR7-Economic Development Agency
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ECONOMIC DEVELOPMENT AGENCY
OF THE CITY OF SAN BERNARDINO
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REOUEST FOR COMMISSION/COUNCIL ACTION
FROM: RONALD E. WINKLER
Development Director
SUBJECT: DOWNTOWN CINEPLEX -
HUD 108 LOAN GUARANTEE
APPLICATION
DATE: February 12,1997
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Svnoosis ofPreyious Commission/Council/Committee Actionls):
On July 10, 1995, the Community Development Commission approved an Exclusive Negotiating Agreement with
Metropolitan Development.
ISynoosis Continued to Next Pue...)
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OPEN PUBLIC HEARING
CLOSE PUBLIC HEARING
Recommended Motionls):
IMayor and Common Council)
MOTION A:
That the Mayor and Common Council approve, without modification, the proposed
application for Section 108 loan guarantee assistance for the downtown cinema complex
project from the U.S. Department of Housing and Urban Development (HOD) and direct
preparation of the final application for public distribution and for submission to HOD.
IMotionls) Continued to Next Pal!e...)
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CO!1tact Person(s): Ronald E. Winkler/John Hoel!er
Phone:
5081
Project Area(s): Central City ICC)
Ward(s):
One(J)
Supporting Data Attached: IllI Staff Report 0 Resolution(s) 0 Agreement(s)/Contract(s) 0 Map(s) 0 LtrlMemo
FUNDING REQUIREMENTS: Amount: $ N/A
Source:
N/A
Budget Authority:
N/A
SIGNATURE:
Administr~
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Ronald E. mkler, Director
Development
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Commission/Council Notes:
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REW:ffiH:lag:02-17-01.cdc
COMMISSION MEETING AGENDA
MEETING DATE: 02/17/1997
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Agenda Item Numt
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Request for Commission/Council Action
Downtown Cineplex-HUD 108 Loan Guarantee Application
February 10, 1997
Page Number -2-
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SynoDsis of Previous Commission/Council/Committee Action{s) Continued:
On November 4, 1996, the Commission and the Mayor and Common Council approved a
Disposition and Development Agreement with MDA-San Bernardino Associates, L.L.C.
(Metropolitan).
On December 20, 1996, the Community Development Citizen's Advisory Committee met to
review the proposed application for HUD 108 Loan Guarantee Assistance. The Committee voted
to recommend that a final application be filed.
Recommended Motion{s) Continued:
(Mavor and Common Council)
MOTION B: That the Mayor and Common Council authorize the Mayor of the City of San
Bernardino to submit an application for HUD 108 loan guarantee assistance for the
downtown cinema complex project together with amendments thereto and all
understandings, and assurances contained therein; and, further, that the Council
direct and authorize the Mayor to act in connection with the application to provide
such additional information as may be required.
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REW:JBH:lag:02-17-01.cdc
COMMISSION MEETING AGENDA
MEETING DATE: 02/17/1997
Agenda Item Number: .,
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ECONOMIC DEVELOPMENT AGENCY
STAFF REPORT
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Downtown Cineolex - DUD 108 Loan Guarantee Aoolication
On November 4, 1996, the CDC approved execution of a Disposition and Development
Agreement (DDA) with Metropolitan Development for the construction and operation ofa multi-
screen cineplex in the central business district of San Bernardino. Metropolitan has an executed
lease with Cinema Star Luxury Theaters, Inc to operate the complex. The DDA indicates that the
Agency will file an application for HOD 108 loan guarantee assistance to secure financing for the
project.
As you know, Section 108 loans are available to communities for projects which typically have
significant initial capital needs. Eligible activities for funding include: (I) acquisition of improved
or unimproved real property in fee or by long term lease, including, acquisition for economic
development purposes; (2) rehabilitation of real property owned or acquired by the public entity;
(3) payment of interest; (4) relocation payments and assistance; (5) clearance, removal and
demolition activities; (6) site preparation, reconstruction or construction of improvements; etc.
Although the loan is backed by the annual entitlement payments received under the Community
Development Block Grant (CDBG) Program, cities most often use the loan for economic
development projects which generate income for debt service, thus preserving the annual
entitlement. In the case of the cinema project, rent payment from Cinema Star will debt service
the loan.
Staff prepared the attached proposed application information and distributed it to the community
by means of newspaper advertisements which also provided notice of to day's public hearing. This
hearing will satisfy HOD regulations requiring an advertised public hearing prior to submission of
an application. Following the conclusion ofthe public hearing, adoption of the form motions
would provide the necessary authorization for the Mayor to execute and file the application with
HOD.
Although the form motions allow filing an application, they do not provide authority to actually
consummate a HOD I 08 guaranteed loan. Additional Commission action will be required to
authorize execution ofloan documents and issuance of debt obligations. This will not occur until
some future date when all environmental reviews are complete and clearances have been obtained.
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REW:JBH:lag:02-17-01.cdc
COMMISSION MEETING AGENDA
MEETING DATE: 02/17/1997
Agenda Item Number:
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. ECONOMIC DEVELOPMENT AGENCY STAFF REPORT
Downtown Cineplex - HUD 108 Loan Guarantee Application
February 10, 1997
Page Number -4-
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THE PUBLIC REVIEW PROCESS
The rules and regulations published by HUD provide that there be a public process prior to filing
a fipal application for HUD 108 loan guarantee assistance. This public review has been facilitated
in two ways. First the proposed application has been advertised as described above and,
secondly, the same proposed application was reviewed by the Community Development Citizen
Advisory Committee on December 20, 1996. The Committee adopted a recommendation in favor
of filing a fina1 application. The committee adopted the motion contingent on proper financial
safe guards in place for the city.
The proposed application for the HUD 108 loan guarantee assistance is attached. The proposed
application mentions the City's application for an accompanying ED! grant. It should be noted
that staffhas not yet received actual notice of determination but it appears that the grant request
will not be approved. In this event, the Agency will use its own resources to finance costs such as
land acquisition, demolition and equity requirements. These will be paid back, however from tax
increment, together with cash payments received through participation payments from project
revenues.
AIITHORlZATION PROCEDURE
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After the close of the public hearing, the Commission should consider any comments and views
received and, if appropriate, modifY the proposed application. Upon completion, staff will make
the final application available to the public. To file the application, the City must certifY that it
possesses the legal authority to pledge its future CDBG grants as required under ~570.705(b)(2)
of Title 24. It must also certifY that it has made efforts to obtain financing without the use of the
loan guarantee and cannot complete such financing consistent with the timely execution of the
program plans without such guarantee. Standard certifications regarding drug-free workplace,
debarment and suspension of contractors, and an anti-lobbying statement are required. The City
must certifY that it possesses the legal authority to submit the application and to use the funds. It
must adopt an authorization for the official representative of the City to submit the application
and amendments thereto. All ofthese certifications are included in the form motions.
Even if the application is approved, implementation of the loan and issuance of debt obligations
will not be authorized at this time. A separate action ofthe Commission (following completion of
all environmental reviews) will be needed to authorize execution of the actual loan documents.
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<<EW:JBH:lag:02-17-01.cdc
COMMISSION MEETING AGENDA
MEETING DATE: 02/17/1997
Agenda Item Number: I
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. ECONOMIC DEVELOPMENT AGENCY STAFF REPORT
Downtown Cineplex - lillD 108 Loan Guarantee Application
February 10, 1997
Page Number -5-
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RECOMMENDATION
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Based upon the above, staff recommends adoption of the form motion.
C?~{ ~/~
RQNALD E. WINKLER, Director
Development Department
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COMMISSION MEETING AGENDA
MEETING DATE: 02/17/1997
Agenda Item Number: 1
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NOTICE OF PUBLIC HEARING AND PROPOSED APPLICATION UNDER
SECTION 108 OF THE HOUSING AND COMMUNITY DEVELOPMENT ACT
(Downtown Cinema Complex - City orSan Bernardino)
PUBLIC NOTICE:
Notice is hereby given that a public hearing will be held by the Mayor and Common Council of
the City of San Bernardino to receive citizen comments regarding the following proposed
application for loan guarantee assistance for the Downtown Cinema Complex project under
Section 108 of the Federal Housing and Community Development Act of 1974, as amended (Title
24).
The public hearing will be held at the following time and place:
11:00 a.m. on Monday, February 17, 1997
City Hall Chambers
300 North D Street
San Bernardino, California.
Citizens may submit written comments prior to the hearing and may appear at the meeting to
make oral comments. Written comments should be addressed to the applicant below.
PROPOSED APPLICATION FOR HUD SECTION 108 LOAN GUARANTEE
Section 108 of Title 24 authorizes a program of community development loan guarantee
assistance (Section 108 financing). Under this program, the Housing and Urban Development
Department (HUD) provides cities that receive entitlement grants with front-end financing for
large scale community and economic development projects that cannot be financed from annual
grants. Current and future annual grants are pledged as security for the Section 108 financing.
As with all Community Development Block Grant (CDBG) program activities, the projects
funded with Section 108 financing must either principally benefit low-moderate income persons,
aid in the elimination or prevention of slums and blight, or meet other community development
needs having a particular urgency.
Applicant:
City of San Bernardino
Economic Development Agency
201 North E Street, Third Floor
San Bernardino, CA 92401-1507
Attn: John Hoeger, Project Manager
909384-5958 909384-5216 (fax)
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Project Name and Location:
The Downtown Cinema Complex (Cineplex) project is located on the on the northwest corner of
4th & E Streets in the City of San Bernardino, California. It extends approximately 450 feet to
the north and 450 feet to the west which will include the middle portion of Downtown Parking
Lot Number Two.
Project Description:
The proposed Downtown Cinema Complex entails 20 screens and will cover 80,000 square feet
located in the heart of downtown San Bernardino. The project includes acquisition of existing
buildings, relocation of existing businesses, the demolition of three structures, and the
construction of the multi-screen facility. An operator (CinemaStar) has signed a lease to equip
and operate the theater complex.
Loan Request:
The City of San Bernardino is requesting Section 108 financing in the amount of$7,000,000 for a
term of20 years. These funds will be used for construction ofthe Cineplex which is expected to
cost a total of$12, 175,000. Metropolitan Development, a private developer, will obtain a private
loan of$3,600,000. The developer and the City will make equity contributions of $250,425 and
$1,324,575 respectively to complete the construction financing. A companion application for an
Economic Development Initiative (ED!) grant has been submitted in the amount of $3,572,600.
The ED! grant funds will be used for land acquisition, business relocation assistance and
demolition costs as well as to provide for debt payment reserves which enhance the security for
the Section 108 financing.
Meeting the Community Development Objective:
The Cineplex meets the City's adopted consolidated plan objective by providing job creation for
the economic empowerment oflow and moderate-income residents in the City. The theater
operation will create 300 entry level jobs for local residents creating opportunities for low and
moderate income individuals and increasing the economic vitality of the downtown retail area. In
addition, the Cineplex meets the standard for achieving one of the national objectives of the
CDBG program because the complex will provide entertainment services to 104,264 low and
moderate income individuals.
Eligible Activity:
As referenced in section 570.703(1)(1), this activity qualifies under section 570.203(b) as a
Special Economic Development Activity hased upon its resulting public benefits. Upon receiving
the funds from the Section 108 financing, the City will make a corresponding loan in the full
amount to the developer. This provision of assistance to a for-profit developer is based upon the
City's determination that the assistance is both necessary and appropriate to obtain services and
create jobs for low and moderate income residents in the City.
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Program Income:
The project is expected to produce CDBG program income for the City. Operations are forecast
to produce $85,000 per year for the City starting with the first full year of operation. There are
rent increases every five years so that the City's share increases to $180,000 per year starting in
year five and $285,692 per year starting in year eleven. Similar increases take place every five
years and additional program income would be expected upon sale or refinance of the facility.
Loan Security (Collateral):
The security for the Section 108 financing will be a second trust deed on the Cineplex in the
amount of $7,000,000 subordinate to a private first trust deed in an amount not to exceed
$3,600,000. Under section 570.705(b)(2) the City will pledge all grants made or for which it may
become eligible under the CDBG Entitlement Program. In addition, the project will be required
to ineet HUD underwriting criteria for debt service coverage and for the project's loan to value
ratio.
Additional Information:
Additional information may be obtained by contacting the applicant at the address and telephone
number given above.
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Kandy Roe
325 W. Sixth Street
San Bernardino, CA 92401
(909) 884-9933
(909) 864-1242
February 17, 1997
RE: Public Hearing for the downtown 20-screen cinema complex
Mayor and Council:
As 1 wrote to you all, 1 spoke with the manager of a professional planning and research
firm and with one of their clients, the Assistant Director of the Glendale RDA. They
both explained to me that a cinema is a good anchor for reviving downtowns, especially
when integrated with another strong anchor several blocks away. Two main anchors set
up several blocks from each other create a "built-in walking audience" where smaller
businesses, events, shops, food, etc., can thrive.
1 propose that the city integrate the 20-screen cinema complex on Fourth and "E" with the
MainStreet Arts Colony on Sixth and "F". This could be done simply by making the
layout designs of the cinema and The Arts Colony in a way that would promote a natural
walking pattern between them. Employing this type of two-anchor design has been very
successful for other cities including Santa Monica's Third Street Promenade and
Glendale's Brand Street. Having strong ml;lin anchors to create walking traffic is also the
concept behind every shopping mall.
A successful project downtown would produce not only jobs and opportunities for small
business owners, but a sense of community pride. But most important, by bridging these
two projects, you would create a local arts and entertainment district, which would keep
the communities entertainment money in the community - money that would otherwise
be spent in outlying areas.
Thank you,
FntPled into Record at
1'.lI,",cIIiCmvOevCms Mtg:
2.- //7l, 7
Kandy Roe
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City of San Bernardmo
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