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2003 04 01 RDA Minutes LA QUINTA REDEVELOPMENT AGENCY MINUTES APRIL 1, 2003 A regular meeting of the La Quinta Redevelopment Agency was called to order by Chairperson Henderson. PRESENT· Board Members Adolph, Osborne, Perkins, Sniff, Chairperson Henderson ABSENT: None PUBLIC COMMENT - None CLOSED SESSION Council Member Perkins and City Manager Genovese abstained from participating in Item No. 2 due to a conflict of interest. 1. Conference with Agency's real property negotiator, Mark Weiss, pursuant to Government Code Section 54956.8 concerning potential terms and conditions _._ of acquisition and/or disposition of real property located at the northwest corner i of Avenue 52 and Jefferson Street (APN: 772-220-007). Property Owner/ Negotiator: Susan Harvey. 2. Conference with Agency's real property negotiator, Mark Weiss, pursuant to Government Code Section 54956.8 concerning potential terms and conditions of acquisition and/or disposition of real property located northwest of the Washington Street and Avenue 48 intersection (APN: 643-090-024). Property Owner/Negotiator: Christi Salamone, La Quinta Arts Foundation. The Agency recessed to Closed Session to and until the hour of 7:00 pm. 7:00 P.M. The Agency meeting reconvened with no decisions being made in Closed Session which require reporting pursuant to Section 54957.1 of the Government Code (Brown Act). ~ ..... PUBLIC COMMENT - None Redevelopment Agency Minutes 2 April 1, 2003 CONFIRMATION OF AGENDA - Confirmed APPROVAL OF MINUTES MOTION - It was moved by Board Members Sniff/Osborne to approve the Minutes of March 18, 2003, as submitted. Motion carried unanimously. CONSENT CALENDAR 1. APPROVAL OF DEMAND REGISTER DATED APRIL 1, 2003. 2. APPROVAL OF: 1) LOAN FROM THE GENERAL FUND TO LA QUINTA REDEVELOPMENT PROJECT AREA NO. 1; AND 2) ADOPT A RESOLUTION MAKING FINDINGS PURSUANT TO HEALTH AND SAFETY SECTION 33445. MOTION -It was moved by Board Members Sniff/Adolph to approve the Consent Calendar as recommended with Item No. 2 being approved by RESOLUTION NO. RA 2003-07. Motion carried unanimously. BUSINESS SESSION 1. CONSIDERATION OF A PROFESSIONAL SERVICES AGREEMENT WITH MDS CONSULTING FOR PRELIMINARY ENGINEERING FOR THE RANCH PROJECT. Public Works Director Jonasson presented the staff report. He added staff has contacted KSL to make sure the appropriate mast arms are ordered for the traffic signal at Avenue 52 and Citrus so the poles can be installed appropriately the first time and not have to be moved when The Ranch project goes forward. He advised the contract amount should be corrected to $57,200. In response to Board Member Sniff, Chris Bergh, of MDS Consulting, stated the Army Corp of Engineers has indicated that, at this time, a permit from them is not required. Board Member Sniff commented he felt it would be good to have that in writing. He stated he will not oppose the contract but doesn't want to see any more recommendations for contracts on this project that are based on familiarity or previous involvement. Redevelopment Agency Minutes 3 April 1, 2003 Board Member Osborne asked if MDS has information on the property that other firms would not have and that the Agency would have to pay extra to obtain. Mr. Bergh stated he didn't know of any information that would not be available to other firms. In response to Board Member Perkins, Mr. Jonasson confirmed staff feels MDS would take the least amount of time to come up to speed so the project can move forward on schedule. He noted an RFP process would take six to eight weeks to complete. Board Member Perkins asked Agency Counsel if there is any problem awarding the contract, to which Ms. Jenson responded, "No." Board Member Sniff stated he feels clarity is in order since this is an exception to the formal bidding procedure. Chairperson Henderson pointed out the City has previously accommodated the sole source process. MOTION -It was moved by Board Members Adolph/Perkins to approve a Professional Services Agreement with MDS Consulting in the amount of $57,200 for preliminary engineering for The Ranch project, including design of the Avenue 52 road widening and waterline improvements. Motion carried unanimously. STUDY SESSION 1. DISCUSSION OF FUNDING SOURCES, COSTS, AND REVENUES ASSOCIATED WITH THE LA QUINTA GOLF AND RESORT PROJECT. Assistant Executive Director Weiss presented the staff report. Consultant Frank Spevacek advised the process of looking at the Agency's revenue that would be available for public investment began in 1999. As part of the mid-year financial management review process each year, projections are done for tax increment revenues generated within both redevelopment project areas. Using a 3% per annum growth rate, it was determined that over the remaining 30-year period of life for Project Area No. 1, it had a total revenue capacity of $300 million, representing revenue in excess of all existing bond debt service, housing set-aside payments, and contractual obligations that would have a senior-lien debt position. That equates to $100 million in today's Redevelopment Agency Minutes 4 April 1, 2003 dollars of revenue available for new investment if discounted at a 6.5% rate. He stated the Agency then set forth an agenda to put money aside for capital improvements, economic development, and to earmark money for new revenue- generating initiatives, one of which was the golf course option. In February 2002, a recommendation was made to the Agency to set aside $19.1 million for capital improvements, $6.3 million for economic development initiatives, and $20 million to look at purchasing The Ranch property. A recommendation was also made to issue $46 million in Project Area No. 1 bonds to fund the remaining purchase cost of the property and to set aside money for development of a golf course and other park and recreation improvements. In 2002, the Agency authorized staff to issue the Series 2002 Project Area No. 1 Tax Allocation Bonds, and to enter into an option agreement to purchase The Ranch property. He stated the chart on Page 4 of the staff report identifies the remaining capacity in Project Area No. 1 after housing set-aside deposits, existing taxing agency obligations, and all bond debt service and service-lien contractual obligations. A portion of the senior-lien contractual obligations includes the funding to assist the City in paying the debt on City Hall. He noted the remaining capacity in Project Area No. 1 is $229 million, which would equate to $73.2 million if discounted to today's dollars. He advised the Redevelopment Agency must be in debt in order to receive tax increment revenue, which means if the Agency ceases any new activities that create debt, it would receive only revenue needed to pay its annual debt service obligations. Some, if not all, of the $73.2 million of future revenue would be distributed to the State and other taxing jurisdictions instead of coming to the Agency. He noted the Agency's discussions over the years has been to prudently balance getting into additional debt in order to tap the revenue stream but not to get wildly into debt and live beyond its means. Board Member Sniff asked if every conceivable income from the property had been included. Mr. Spevacek advised the projections are based on the room count permitted in the purchase agreement with KSL, which is 250 hotel rooms and 500 key condo units. He stated the transient occupancy tax revenue projections are very conservative, assuming an average daily rental rate of $115 and annual occupancy rate of 65% By comparison, the marketing study used to support the lending for the Embassy Suites project, ran an occupancy rate of 68% and average daily rental rate of $125, and rated it up at 3% per annum. Board Member Sniff noted additional hotels on the site will significantly enhance the revenue stream. Redevelopment Agency Minutes 5 April 1, 2003 In response to Board Member~Sniff, Mr, Spevacek confirmed hotels are a greater revenue source than golf, and noted the La Quinta Resort & Club generates 94 million annually in TOT from approximately 652 rooms. Board Member Osborne requested clarification on Page 2 of the staff report regarding funding percentages of General Fund operating costs. Mr. Spevacek explained the growth from 40% to 53% is based on build-out of land area (approximately 3,000 hotel rooms and two million square feet of retail space), and not on the investment. Board Member Osborne stated he wants to be sure the project is being done to build a stronger financial revenue base for the General Fund, and noted 13% increase is not much in comparison to the cost of the project. Executive Director Genovese noted 13% is a conservative amount. He added other hotels in the City may utilize this asset, resulting in a percentage increase, but it may not be site-specific to The Ranch project. Mr. Spevacek noted the original cash flow projections were based on the '-- assumptions of having a 1,200-room hotel at PGA West and a 600 to 800-room hotel at I(SL's Desert Sea project site. These properties, that were originally expected to generate TOT revenue, were converted to residential use. In response to Board Member Osborne, Mr. Spevacek confirmed the Phase I budget is $21 million, and if any of the numbers change and the Agency decides it wants to spend a higher amount on the first course versus the second course, it would be able to fund it relatively quick with bonding. Board Member Adolph voiced concern about spending a lot of money for design concepts and cost estimates, and noted the cost evaluations are speculative at this point. He feels there are still too many things not in focus, and that it's important to find out if any hotels are interested in this site. He doesn't want this to be like the Fritz Burns pool project and use all the money for design concepts. Mr. Spevacek explained once the property was purchased, it was necessary to develop a program to determine land areas for certain uses, which is the purpose of the master plan. He stated a variety of hotel operators have inquired as to what the City's vision is for the property and what is hoped to be .... accomplished there. They have asked staff to let them know when the Agency figures out what is going to happen on the property, and now that we are . getting closer to defining what the vision will be, we can tell them. Redevelopment Agency Minutes 6 April 1, 2003 Board Member Adolph commented on the need to work in concert with the hotels to find out what they need instead of telling them what we have and asking if they can fit into it. Mr. Spevacek stated he didn't mean to imply the City is being rigid on the plan. He stated once a high-class vision that reflects the high-class image of the property has been developed, staff will be able to discuss the project with people in that caliber as to how they would fit into the project, or take the vision to a higher level. He stated staff has discussed the project with hotel developers for 24 months but needs a concept to show them. He further commented that we are the only impediment that stands between us and getting the project done on schedule. Board Member Adolph asked if any of the hotel developers are serious about the project. Mr. Weiss stated that's difficult to determine but at least four potential developers have submitted comments about the concept under review. He stated the most recent representation provides an opportunity for par. tnership in developing the property, including the village component, hotel, and maybe the casitas. He explained the developer has proposed the possibility of bringing capital into the project and developing it in one phase. He advised the discussions are preliminary, and staff has indicated such a proposal would be entertained post haste through proper negotiations. He stated the hotel developers are looking to see if entitlements are in place and if the City is serious about building the golf course in the timeframe indicated. Staff has indicated to the developers that the City would like to have a golf course open in January 2005, which is an aggressive schedule and requires certain things to be done in order to meet that schedule. He stated it's important to show the project is making progress to seriously attract hotel interests. The restrictions on the property through the agreement with KSL are a problem for the next few years but he noted many hotels go through a long timeframe for entitlements. He stated it's important for the City to show commitment in making progress on a quality plan. Board Member Adolph noted the City has tried to get hotels in the City for some time, and none have been built. Mr. Weiss stated he understood the City wished to move forward with a Phase I concept with the understanding that if a hotel cannot be accomplished at this time, the City will provide a golf course for the community until the market and restrictions allow the kind of hotel the City wants to attract. If the Agency is not prepared to do that, he noted it's important to know now and decide Redevelopment Agency Minutes 7 April 1, 2003 " whether or not we are willing to make that commitment until the complete . package is put together. Board Member Perkins stated he feels a preliminary layout will be impressive to show developers, and noted this concept is different from other hotels planned in the City. Board Nlember Sniff voiced disagreement with the comment that we are an impediment to the project schedule, and suggested it not be repeated. He wished to have staff share more information about their discussions with hotel developers because he feels what the Agency sees and hears is of little or no substance. He feels somewhat disenfranchised with the development, and that the Agency has had very little opportunity to make comments with a lot of those discarded. He then commented on the importance of timely information and input. Mr. Genovese stated he wished to make it clear that staff is always forthcoming with the Agency. As for staff's discussions with developers, unless staff violates the Brown Act, he stated they cannot inform the Agency as a whole of .-- every call that is received from developers -- it would have to be agendized through the closed session process. Preliminary discussions are held with various developers but staff doesn't bring them to the Agency unless it is a serious interest. He noted this is a long-range project, and that a five-star hotel is not envisioned to happen in a very short timeframe. He noted land availability within the City is being sold for subdivisions instead of being reserved for long- term uses such as hotels. Chairperson Henderson commented on the difficulty of getting a hotel in today's market, and stated she hopes the golf course will be the "hook" needed to attract hotels to La Quinta. She feels the mind set should be to build a golf course for the community and for the "hook" when the market is right to draw in a hotel. In response to Board Member Perkins, Ms. Jenson confirmed relaying information from staff to individual Agency Members is a violation of the Brown Act. Board Member Sniff stated his intent was that the entire Agency should be better informed. He doesn't need to know the names of potential developers but would like to know the content of their discussions with staff. - Mr. Weiss stated one developer has indicated interest in providing capital for the project. The interest extends to build-out of the entire project, potentially Redevelopment Agency Minutes 8 April 1, 2003 including the retail and hotel, and participating in the second golf course. The developer has reviewed the plan and suggested an increase to the commercial component to allow them to build their particular product. Another developer, whose product tends to be beach oriented, high-end resort more than five-star hotel products, has indicated they are looking for a desert location, and has suggested realigning the entry road for the hotel to guide people by the retail area. He advised a third high-end-resort hotel developer has followed the potential for a golf resort project in La Quinta since it was added to the City's economic development plan in 1996. The developer has reviewed the plan from the beginning and has submitted comments. Another firm proposes participating in the planning phase, and has submitted specific comments on the golf course routing and plan design. He stated those comments were forwarded to the Agency by GMA. Additionally, he spoke to a broker today who is monitoring the progress and has indicated he can link the City to any number of high-end resort hotels that might be interested in the project. There are two others who have followed the project for a few years and have tried to have a compensated role. They have looked at boutique hotels and other sites in the City and have asked what more can the City do for them. There's been some interest from individuals who are looking at the casitas component early on in the project. He stated there was some concern about the restrictions making it difficult to get a serious proposal but because of the progress being made and the quality of the course, there may be interest in putting forward a more concrete proposal. That has been encouraged by staff so the proposal can be brought to the Agency in closed session, and possibly solicit additional proposals. Chairperson Henderson noted the six months process for the master plan is on schedule, and will be come back to the Agency on April 15. Mr. Weiss stated once the Agency approves a concept plan, all interested parties will be notified. He pointed out a concept plan is subject to change, and added golf architects who have indicated an interest in the project will most likely have their suggestions for tweaking the plan. In response to Board Member Adolph, Mr. Weiss advised the Development Coordinator contract is scheduled to come before the Agency on April 15, and staff feels that position will be a great help in the golf course component. He noted once the Agency identifies a vision for the project by adopting a master plan, it will be important to ensure that the vision is kept intact throughout the duration of the process, and staff will be coming back in four to six weeks with ideas on how to proceed down that path. He stated staff's understanding has been that the Agency wants to provide a golf course for the community, with or without a hotel. Redevelopment Agency Minutes 9 April 1, 2003 Chairperson Henderson stated her understanding has been that a hotel is premier but the Agency also wants to provide a golf course for the community, and this provides the opportunity to provide a golf course that will produce a resort hotel. CHAIR AND BOARD MEMBERS' ITEMS - None PUBLIC HEARINGS - None ADJOURNMENT There being no further business, it was moved by Board Members Sniff/Adolph to adjourn. Motion carried unanimously. Respectfully submitted, ~dLJUNE S. (~iREEK, Agency Secretary La Quinta Redevelopment Agency