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HomeMy WebLinkAbout04/03/2001 Adjourned Meeting / Study Session 162 CITY OF YAKIMA, WASHINGTON ADJOURNED MEETING /STUDY SESSION OF THE CITY COUNCIL APRIL 3, 2001- 7:30 A.M. 129 NORTH 2 STREET - COUNCIL CHAMBERS 1. ROLL CALL Present: Council: Mayor Mary Place, presiding, Council Members Clarence Barnett, Henry Beauchamp, Lynn Buchanan, Larry Mattson (absent after 8:45 a.m.), and John Puccinelli, Staff: City Manager Zais, Assistant City Attorney Peterson and City Clerk Roberts Absent: Council Member Bernard Sims Union Gap: Aubrey Reeves, Mayor, and Council Member Lee Driskill Yakima Center: Kathy Coffey, General Manager; and Deb Krautworm, Commission Member 2. REVIEW OF PROPOSED PUBLIC FACILITIES DISTRICT • General background information on proposed Public Facilities District City Manager Zais provided the following facts on the proposed Public Facilities District: • A market study supported the expansion of the Yakima Convention Center • Financing the expansion project has been the topic of considerable discussion including an analysis of the establishment of a Public Facilities District (PFD) • An amendment in the state law makes this financing tool available to us • We are looking at a partnership with Selah and Union Gap to recoup the sales tax credit that originates in our communities • An emerging consensus is to site it south of Yakima Avenue to minimize parking disruption and traffic on 8 Street and "A" Street; however, we are not here to spend time on the siting of the expansion • Background information and legislation Rita Anson, Finance Director, briefly reviewed Section 2 in the PFD report relating to the enabling legislation, RCW 35.57. The law provides that a portion, up to .033 %, of the gross retail sales revenues generated within a city be reallocated to the PFD established by that city. In order to obtain the sales tax refund, certain criteria need to be met: • The city must match those revenues • The project must be at least $10 million, including the debt service • ; The construction or remodeling must be started by January 1, 2003 16, 3 APRIL 3, 2001 ADJOURNED MEETING A PFD Board of Directors would oversee the District. The Board has the • authority to impose admission and parking fees and a tax on those fees, and with the vote of the people, the authority to implement a sales tax of 0.2 %. (See attached Exhibit 1, "Overview Proposed PFD Project ") • Ms. Anson quickly reviewed the development feasibility issues found in the chart in Section 3 of the report and provided detailed information regarding the operating revenues and expenditure estimates for the PFD. A final decision has not been made on what would be used for the City's match for the estimated sales tax credit. Calculated at one -third of the expected sales tax credit revenue for the next 25 years ($7.4 million), the City would need to contribute $2.5 million. The options being considered are: 1) contribute the Convention Center appraised at $11.8 million ($2.8 million for the property and $9 million for the building); or 2) contribute the property on which the Convention Center is built. The preference is to contribute the least amount, which would be the property, however, because of the way the legislation is written we may be contributing the building and keeping the property. • Proposed expansion project Ms. Anson stated that an architectural study provided two options. One option is to expand the convention center by 23,000 sq. ft. at a cost of $5.5 million. The second option, recommended by the architect, provides for a 26,000 sq. ft. expansion costing $7 million. Based on the financing of the expansion and the debt service, staff recommends an expansion budget of $5.5 million if Yakima is the only city establishing the PFD. If the three cities, Selah, Union Gap and Yakima join the PFD, staff would recommend an expansion budget of $6 million. City Manager Zais interjected that the estimates for the sales tax revenue are very conservative since the cities would be responsible for the debt service and would have to make up any deficit. Ms. Anson also commented that the sales tax credit is not a new tax, nor is it an increase of existing taxes;, it is a refund from the state on sales tax that is sent to the state from the cities. • Financing the project Ms. Anson stated that once a Public Facilities District is established, it immediately earns the sales tax credit, so prior to the time we actually issue the debt we could build up a reserve fund. The first obligation is to repay the $80,000- $100,000 the City of Yakima has spent to date on this project. The sales tax credit payment from the state would be used to make the annual bond payments. If the sales tax credit revenue were not sufficient to make the annual bond payment, the next source of revenue would be the reserve fund. If the reserve fund is exhausted, then the cities forming the PFD would be obligated to pay the difference based on a formula to apportion the cost. City Manager Zais advised Council that staff wants to avoid issuing bonds that would increase the City's debt capacity by the total amount of the project. The PFD would have its own debt capacity. 2 16 4 APRIL 3, 2001 ADJOURNED MEETING Ms. Anson referenced Section 5 and reviewed the objectives of the financing plan: 1) Minimize the impact on the City's debt capacity 2) Maximize project dollars 3) Provide a "marketable" bond offering A proposal was developed to meet the majority of those three objectives that includes a two -part financing structure through a revenue bond and a general obligation bond. Revenue bonds do not use debt capacity, but require that net operating revenues be at least 1.5 times debt service and that a debt reserve of 125% of the average annual debt service be established. She stated that their calculations show that the cost of the bonds can be covered within the projected budget, even using conservative numbers for the revenue projection. The calculations show the sales tax credit would be $500,000 and the debt service requirements would be $480,000, a $20,000 cushion. • Draft legal documents Ms. Anson stated she worked with Legal Department staff to identify what documents would have to be put in place to establish the PFD. The PFD would need a charter and a set of bylaws. If the PFD includes multiple cities, an interlocal agreement would be needed, as well as a design, development construction, financing and operating agreement. She reviewed the highlights of the draft charter, including the composition of the board of directors, and the bylaws. The Yakima City Council may amend the by -laws. City Manager Zais advised Council that with the creation of the PFD, the Yakima Advisory Commission would no longer need to be in existence since its responsibilities would be transferred to the regulating agency. He also pointed out that the District would also be subject to the Public Disclosure Act and the Open Meetings Act. Ms. Anson reviewed the highlights of the Interlocal Agreement and the Design, Development Construction, Financing and Operating Agreement, as well as the Yakima Commitments found in Section 4 of the Report. (Council Member Mattson absent after 8:45 a.m.) • The next steps to take Ms. Anson referenced the outline in Section 7 on the next steps to take if a decision is made to establish a PFD. The three cities would have to make a decision on whether or not they wish to form a Public Facility District, and to approve the Charter, bylaws and other agreements, hopefully by April 30. Next, members would have to be appointed to the PFD Board. By June 30, the PFD Board would take action to impose the .033% retail sales and use tax, establish their officers, meeting dates and other operating practices. In the meantime, the City would obtain approval from the Department of Revenue to transfer the sales tax credit; transfer the Convention Center property to the PFD; and eliminate the Yakima Center Advisory Commission, all by June 30; and then approve the bond issuance so that construction can begin no later than January 1, 2003. 3 165 APRIL 3, 2001 ADJOURNED MEETING • Staff recommendations Council considered the staff recommendations provided under Section 8 of the report, which are: • • Establish a Public Facility District with the cities of Selah and Union Gap • Transfer ownership of the Convention Center to meet the 33% sales tax credit match requirement • Approve expansion of the Convention Center for approximately $10 million • Approve issuance of the bonds to fund the expansion project • Yakima City Council retain control and responsibility for the design and construction of the expanded Convention Center Mayor Place commented that we have a consensus of the Yakima City Council to ask staff to bring this back on April 17 to consider legislation to establish the PFD. We will wait to hear from Union Gap and Selah. Aubrey Reeves, Mayor of Union Gap, stated that the earliest they could get back to Yakima on this would be April 23. Kathy Coffey, General Manager of the Yakima Center, stated that they have been working on this project for the last three years and look forward to implementing it. City Manager Zais and Council members expressed appreciation to staff members Rita Anson, Tim Jensen, Cindy Epperson and the legal assistance from our consulting attorneys for the thorough report. 3. ADJOURNMENT The meeting adjourned at 8:57 a.m. • READ AND CERTIFIED ACCURATE BY: ,rl 4 ��� l D r •UNCIL ME 0 ER ' I ATE • N 1/4 5 oU CI «'c ER el DATE • ATTEST: CITY CLERK MARY PLACE, MAYOR • Minutes prepared by Karen Roberts. An audio and video tape of this meeting are available in the City Clerk's Office. 4 166. APRIL 3, 2001 ADJOURNED MEETING EXHIBIT 1 City of Yakima PUBLIC FACILITY DISTRICT PROJECT (PFD) SECTION 4 PFD STRUCTURE - HIGHLIGHTS OVERVIEW PROPOSED PFD PROJECT (as of 03/29/01) 1. Multi -City PFD made up of Selah, Union Gap and Yakima 2. Establish PFD for purpose of: (a) Transferring sales tax revenues currently going to the state to the PFD, and thus, back into the local economy (b) Providing a funding mechanism for the expansion of the Yakima Convention Center 3. The expansion project will cost approximately $10 million, including debt service 4. Yakima will issue a Revenue bond and a LTGO Bond to fund the cost of the expansion project; (the LTGO bond will, but the revenue bond will not, affect the City's debt capacity). 5. The PFD will impose a .033% Sales Tax Credit (thereby transferring existing tax revenues from the state to the PFD) and will transfer these revenues to Yakima to pay debt service on the bonds 6. Should both the Sales Tax Revenues and related reserves be insufficient to cover a debt service payment, the cities will be obligated to contribute a proportionate share of the deficient amount (refer to "Development" document for more details) 7. Yakima will transfer ownership of the Convention Center to the PFD in fulfillment of the 33% sales tax revenue match requirement. (Currently under review is whether both land and building will be transferred to the PFD. The match requirement is approx. $2.4 million; appraised value of convention Center is: Land $2.8 million and Building $9 million. Refer to Appendix I for detailed calculation of match requirement.) 8. Construction will begin no later than January 1, 2003, per legislative requirement 9. Yakima will be responsible for the design and construction of the expansion • project (similar to the original construction and the first expansion project) and for the operation and maintenance of the expanded facility (similar to current arrangement) 5