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2012 04 04 OB MinutesOVERSIGHT BOARD OF THE SUCCESSOR AGENCY TO LA QUINTA REDEVELOPMENT AGENCY MINUTES APRIL 4, 2012 A regular meeting of the Oversight Board of the Successor Agency to La Quinta Redevelopment Agency was called to order at 2:00 p.m. by Chairperson Pena. PRESENT: Board Members Ellis, Marshall, Maysels, McDaniel, Osborne and Chairperson Pena Absent: Board Member Nelson PUBLIC COMMENT - None CONFIRMATION OF AGENDA - Confirmed PRESENTATIONS - None APPROVAL OF MINUTES MOTION: A motion was made by Board Members Maysels /Ellis to approve the minutes of the March 7, 2012 meeting. Motion carried unanimously. BUSINESS ITEMS 1. Consideration of Adoption of a Resolution Adopting a Conflict of Interest Code for the Oversight Board of the Successor Agency to La Quinta Redevelopment Agency Kathy Jenson, Rutan & Tucker, Counsel to the Successor Agency, presented staff report. Jenson indicated that all public agencies are required to have a Conflict of Interest Code in place and although there is no clear legislation indicating whether or not this requirement applies to the Oversight Board, she recommended that the Board adopt a Conflict of Interest Code. MOTION: A motion was made by Osborne /Ellis to adopt a resolution adopting a Conflict of Interest Code for the Oversight Board of the Successor Agency to La Quinta Redevelopment Agency. Motion carried by a vote of 6 ayes, 0 nays, 1 absent. RESOLUTION NO. OB 2012 -004 A RESOLUTION OF THE OVERSIGHT BOARD OF THE SUCCESSOR AGENCY TO LA QUINTA REDEVELOPMENT AGENCY ADOPTING A CONFLICT OF INTEREST CODE FOR THE OVERSIGHT BOARD 2. Consideration of Adoption of a Resolution Approving. Recognized Obligation Payment Schedules (BOPS) of the Former La Quinta Redevelopment Agency for the periods of January 2012 through June 2012 and July 2012 through December 2012 Staff presented staff report. MOTION: A motion was made by McDaniel /Osborne to approve the ROPS of the Former La Quinta Redevelopment Agency for the periods of January 2012 through June 2012 and July 2012 through December 2012. Motion carried by a vote of 6 ayes, 0 nays, 1 absent. RESOLUTION NO. OB 2012 -005 A RESOLUTION OF THE OVERSIGHT BOARD OF THE SUCCESSOR AGENCY TO LA QUINTA REDEVELOPMENT AGENCY ADOPTING RECOGNIZED OBLIGATION PAYMENT SCHEDULES FOR THE PERIODS OF JANUARY 2012 THROUGH JUNE 2012 AND JULY 2012 THROUGH DECEMBER 2012 3. Consideration of Successor Agency Administrative Budget for the periods of February 2012 through June 2012 and July 2012 through December 2012 Staff presented staff report. Board Member McDaniel pointed out that it appears that the total administrative budget exceeds the administrative allowance. Staff indicated that the State requires all administrative items to be included in the budget even though some items are covered in the Recognized Obligation Payment Schedule ( "ROPS "). McDaniel asked if the State does allow it to be part of the ROPS and staff indicated that they prefer this particular type of format. Board Member Maysels asked if the administrative budget that was given to the Board to approve for February to June is $501,127 and the budget for July to December totals $648,197. Staff stated that the $501,127 is the administrative allowance for February to June, and the $648,197 is the total OVERSIGHT BOARD MINUTES 2 APRIL 4, 2012 administrative budget for July to December, including the BOPS. Maysels pointed out that without the ROPS, the administrative allowance for July to December would be $391,373. MOTION: A motion was made by Ellis / Maysels to approve the Successor Agency Administrative Budget for the periods of February 2012 through June 2012 and July 2012 through December 2012. Motion carried by a vote of 6 ayes, 0 nays, 1 absent. 4. Consideration of an Owner Participation Agreement Between the Former La Quinta Redevelopment Agency and Mega Dealer LLC /Robert N. La Torre, Inc. (dba Torre Nissan) Frank Spevacek, Principal, RSG, Inc., presented staff report. Chairperson Pena asked Mr. Spevacek what would happen if the dealership is sold or no longer operating. Mr. Spevacek explained that the way this transaction is structured, there is a ten -year operating covenant that has been agreed to by Torre Nissan and affirmed by Nissan Motors to keep this point in La Quinta for a ten -year period. He indicated that instead of getting repaid principal and interest on the loan in terms of Torre Nissan paying the loan as if they were paying a mortgage, the net increase in sales tax and property tax revenue over a 2012 base towards the obligation is being credited to retire this obligation. Mr. Spevacek further explained that projections have shown that given the percentage of increase in sales due to the new lines of business as well as the new look, this obligation should be repaid through those funds in an 11 year period. Chairperson Pena asked if Torre. Nissan could accelerate the payments if they do better than expected and could the loan be extended if they do not do as well as expected. Mr. Spevacek indicated that they Certainly could accelerate the loan. If they do not do as well as expected, this is a non - recourse loan so the period may be extended or if the ten -year period threshold is not met, the remaining balance would be forgiven as long as they were still in operation. Board Member McDaniel asked when the increased sales tax comes in, does it come in as city revenue or does it go back to redevelopment to repay the loan. Mr. Spevacek stated that would be city revenue. Michael Reinhardt, Executive Manager of Torre Nissan, addressed the Board. Mr. Reinhardt informed the. Board that the reason for entering into this project was to improve Torre Nissan's business and the results of their business in La Quinta. He stated that Torre Nissan strongly believes in the OVERSIGHT BOARD MINUTES 3 APRIL 4, 2012 city and the community such as schools and other organizations in the Valley. Mr. Reinhardt explained that with the new Nissan image, the anticipation is over 22% increase in sales, which is the experience nationwide. He indicated that they expect an increase in sales and therefore, early payment of the loan is possible. Due the economy turning around, the general businessmen (pool service, air conditioning repair) are now in need of new vehicles. As soon as the expansion is completed, Torre will be able to offer commercial vehicles with a large selection. Mr. Spevacek added that one of the aspects that will be beneficial to the various taxing agencies is that the increased property tax revenue these improvements will generate will be broadly disbursed to the city, county and school districts. Redevelopment agencies were the benefactor of those funds, now the other taxing agencies will be the benefactor of the increased property values. Board Member Maysels asked if the payments for this loan are coming only from the City of La Quinta's property tax and sales tax portion. Mr. Spevacek answered yes. MOTION: A motion was made by Maysels /Ellis to approve a resolution approving a change to the Schedule of Performance to an Owner Participation Agreement between the former La Quinta Redevelopment Agency, Mega Dealer, LLC, and Robert N. La Torre, Inc. and authorizing the continued administration and implementation of same with requested changes: Page 1, after fourth "WHEREAS" should be "unanticipated" delays Page 2, Section 4 should read... "The Oversight Board has determined not to terminate or renegotiate the DDA pursuant to its authority under Health and Safety Code Section 34181(e)." Motion carried by a vote of 6 ayes, 0 nays, 1 absent. RESOLUTION NO. OB 2012 -006 A RESOLUTION OF THE OVERSIGHT BOARD OF THE SUCCESSOR AGENCY TO LA QUINTA REDEVELOPMENT AGENCY APPROVING A CHANGE OVERSIGHT BOARD MINUTES 4 APRIL 4, 2012 TO THE SCHEDULE OF PERFORMANCE TO AN OWNER PARTICIPATION AGREEMENT BETWEEN THE FORMER LA QUINTA REDEVELOPMENT AGENCY, MEGA DEALER, LLC, AND ROBERT N. LA TORRE, INC., AND AUTHORIZING THE CONTINUED ADMINISTRATION AND IMPLEMENTATION OF THE SAME 5. Consideration of Disposition and Development Agreement Between the Former La Quinta Redevelopment Agency and Coral Mountain Partners, L.P. Frank Spevacek presented staff report. John Durso, Coral Mountain Partners, LLC, explained that they have been working on this deal with the City for about 3 1 /2 years. Coral Mountain Partners, LLC is responsible for in excess of approximately 300 affordable housing units, all of which were under the same type of public /private partnership as this particular deal, so there is familiarity with the process. This project would give the City of La Quinta another 176 affordable housing units that are really needed. The last affordable housing project in La Quinta was a 218 unit project, with very similar rent and income restrictions and all 218 units actually leased up in four months. This indicates a huge demand for affordable housing. All architects and engineers are locally- based. Coral Mountain Partners believes in hiring local companies and all the money from the redevelopment agency used so far has, therefore, been recycled back into the local economy. The hope is to continue to be able to do that by using the funds to hire qualified local sub - contractors. Mr. Durso indicated that, if it weren't for the holiday schedule and the DDA being signed four days after the first of the year, they may not be standing in front of this Board requesting that the Board concur with the fact that the DDA is truly enforceable and that the land is actually a housing asset. This project is ready, building permits are secured and ready to go, all architecture and engineering is completed. He further stated that it would really be a disservice to this community to allow this project not to be built and not to be able to provide the housing that the community needs. Board Member Marshall asked if any members of the public appeared when the DDA was discussed at the council meeting. Successor Agency Counsel Jenson indicated that there was no opposition to the project at the DDA hearing or the subsequent site development permit application meeting. Successor Agency Counsel Jenson added that everyone in the area received notice, including surrounding businesses. Mr. Durso indicated that they have received great feedback and have incredibly supportive neighboring housing projects and businesses. OVERSIGHT BOARD MINUTES 5 APRIL 4, 2012 Board Member Marshall asked Mr. Durso how long ago were the 300 other affordable housing units that Coral Mountain Partners, LLC built and were they local. Mr. Durso indicated that those projects were built about three years ago and have gone in phases since then and were all local projects. Board Member McDaniel asked if the Board is only approving funds that are readily available and not obligating any funds beyond that which have already been allocated for this project. Mr. Spevacek indicated that was correct and that the funds have been accrued by the redevelopment agency to underwrite this and two other affordable housing projects that were underway. This is money on hand, not money that would be anticipated to come in. Chairperson Pena asked Mr. Spevacek if the 4% tax credit assures the developer of those credits from the State. Mr. Spevacek indicated that Mr. Durso has been in discussions with California Tax Credit Allocation Committee ( "CTAC ") and basically they have the allocation but want assurances through this action and Department of Finance review that these funds will be available. There are also title issues with the project because after the legislation was upheld, title companies have basically drawn back and have put clouds on all titles of all properties associated with redevelopment agencies. So, part of this action is to also affirm that this is a legitimate use that the Oversight Board would approve so we can deal with the title company. Mr. Spevacek went on to explain that if this project is approved, it would be beneficial to have direction from the Chairperson of the Board to write a letter to the DOF, which can possibly assist in removing cloud from the title. Chairperson Pena asked if in the event of cost overruns or the contingency is exceeded, where any additional funds would come from. Mr. Durso explained that as part of the tax - exempt bond financing, the tax - exempt bond company is very conservative so contingencies are relatively high to start with; next in line are developer fees, which run approximately $2,000,000; then behind that are personal guarantees from Mr. Shovlin. So when they guarantee to the bond holders, they are guaranteeing completion on budget or within contingency or basically Coral Mountain Partners, LLC has to come up with the difference. Board Member Marshall made a comment that based on what she has read and the history of the involvement with this project, she feels very confident that the DOF will approve the project just based on when it was started, when the land was purchased, when the DDA and the ENA were signed, all of the environmental — in combination, all of those things will ensure that the DOF will agree that it is an enforceable obligation. OVERSIGHT BOARD MINUTES 6 APRIL 4, 2012 MOTION: A motion was made by Marshall /Osborne to adopt a resolution approving the Disposition and Development Agreement Between the Former La Quinta Redevelopment Agency and Coral Mountain Partners, L.P. with requested changes: Page 2, Section 6 should read... "The Oversight Board has determined not to terminate or renegotiate the DDA pursuant to its authority under Health and Safety Code Section 34181(e)." Motion carried by a vote of 6 ayes, 0 nays, 1 absent. RESOLUTION NO. OB 2012 -007 A RESOLUTION OF THE OVERSIGHT BOARD OF THE SUCCESSOR AGENCY TO LA QUINTA REDEVELOPMENT AGENCY MAKING CERTAIN ACKNOWLEDGMENTS AND APPROVALS WITH RESPECT TO THE CORAL MOUNTAIN PROPERTY AND DISPOSITION AND DEVELOPMENT AGREEMENT AND AUTHORIZING THE CONTINUED ADMINISTRATION AND IMPLEMENTATION OF THE SAME MOTION: An additional motion was moved by Osborne /Maysels authorizing Chairperson Pefla to send a letter to the Department of Finance indicating that the Board has adopted this resolution and requesting that the Department of Finance affirmatively respond authorizing the project to proceed. Motion carried by a vote of 6 ayes, 0 nays, 1 absent. REPORTS AND INFORMATIONAL ITEMS 1. Update on the Debts and Obligations of the Former La Quinta Redevelopment Agency Staff presented staff report. Chairperson Pena asked if who is liable to make the pass- through payments if the County fails to make them. Successor Agency Counsel Jenson stated that it is the County's responsibility under the law to make the payments. There is no liability on the City to make the payments. Successor Agency Counsel Jenson made a clarification with regard to the deeds of trust on the Washington Street Apartments when the Agency OVERSIGHT BOARD MINUTES 7 APRIL 4, 2012 owned it. - the former Redevelopment Agency (Successor Agency) is still responsible for the deeds of trust even though the property has been transferred to the La Quinta Housing Authority. DEPARTMENT REPORTS 1. Response to Public Comment Interim City Manager, Mark Weiss, indicated that Ms. Wolff has an appointment next week with staff to further discuss the matter. CHAIR AND BOARD MEMBERS' ITEMS - None ADJOURNMENT - 2:44 p.m. There being no further business, it was moved by Board Members Osborne /Marshall to adjourn. Motion carried unanimously. LORI LAFOND Oversight Board OVERSIGHT BOARD MINUTES 8 APRIL 4, 2012 Respectfully submitted,