1996 02 20 RDA Minutes LA QUINTA REDEVELOPMENT AGENCY
MINUTES
February 20, 1996
Regular meeting of the La Quinta Redevelopment Agency was called to order by
Chairman Sniff.
PRESENT: Board Members Adolph, Bangerter, Henderson, Perkins, Chairman Sniff
ABSENT: None
CONFIRMATION OF AGENDA
Chairman Sniff asked that Consent Calendar Item No.3 be pulled for discussion.
APPROVAL OF MINUTES
MOTION It was moved by Board Members Adolph/Bangerter to approve Minutes of
February 6, 1996 as submitted. Motion carried unanimously.
PUBLIC COMMENT
Ms. Audrey Ostrowsky, P.O. Box 351, said she understood that The Village Economic
Development Plan would be on the agenda.
Mr. Genovese, Executive Director, advised that it would be discussed at a special
meeting at the Senior Center on March 9th and that property owners would be
notified.
BUSINESS SESSION None
CONSENT CALENDAR
Consent Calendar Item No.3 was pulled for discussion.
1. APPROVAL OF DEMAND REGISTER, DATED FEBRUARY 20, 1996.
2. TRANSMITTAL OF TREASURY REPORT, DATED DECEMBER 31, 1995.
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Redevelopment Agency Minutes 2 February 20, 1996
3. APPROVAL OF AN OWNER PARTICIPATION AGREEMENT BETWEEN THE
REDEVELOPMENT AGENCY AND MR. & MRS. HAROLD HARRIS FOR
FINANCIAL ASSISTANCE TO DEVELOP AN 11-ROOM, 9,000 SQUARE-FOOT
BED AND BREAKFAST INN ON APPROXIMATELY ONE ACRE OF PROPERTY
LOCATED ADJACENT TO LAKE LA QUINTA.
MOTION- It was moved by Board Members Adolph/Bangerter that the Consent
Calendar be approved as recommended with the exception of Item No. 3.
Motion carried unanimously.
lt?mNo.3
Mr. Herman, Community Development Director, advised that the proposed
Owner Participation Agreement between the Redevelopment Agency and Mr.
& Mrs. Harold Harris is for financial assistance up to $100,000 for
development of a previously-approved Bed & Breakfast Inn that will be located
adjacent to Lake La Quinta.
Chairman Sniff stated that he understood that some of the Agency's questions
would be answered prior to this matter being brought back to them for a
decision.
Mr. Spevacek, Planning Consultant for Rosenow Spevacek Group, Inc., advised
that one of the questions was in regard to the financial viability as it relates to
the bank's lending requirements and the financial capability of Mr. & Mrs.
Harris to construct and operate the establishment. He advised that a
construction loan of $1 7 million has been approved by Valley Independent
Bank and will convert to a First and Second Trust Deed. The Small Business
Administration SBA) who will be funding the Second Trust Deed for
$650,000, has issued a letter of approval to the Valley Independent Bank.
Research into the financial viability of the Inn and innkeepers has proved to be
very positive.
Chairman?an Sniff questioned the staff report's reference to potential" positive
cash flow.
Mr. Spevacek advised that staff prepared a construction and 25-year operating
pro forma for the Inn during review of this project, using very conservative
cost factors concerning occupancy rates and some additional start-up costs.
The review indicated a positive cash flow, but potentials for unforeseen factors
always exist.
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Redevelopment Agency Minutes 3 February 20, 1996
In response to Chairman Sniff, Mr. Spevacek advised that the pro forma did not
include a review of similar inns in Palm Desert and Palm Springs. The structure
of the Owner Participation Agreement allows for a reduction in the owner's
obligation to repay the $100,000 loan if the occupancy rate is less than 30%
for the first two years of operation. The agreement was structured in this
manner to accommodate the legal requirements of Redevelopment Law for this
type of loan.
Ms. Honeywell, Agency Legal Counsel, advised that the loan will actually be
forgiven if a 30%-occupancy rate is not reached. She advised that the purpose
of redevelopment funds is to assist businesses that the Agency would like to
see develop in the project area that wouldn't be able to make it without the
Agency's financial assistance. Therefore, if repayment is required without the
business making a profit, the Agency would be acting as a lender as opposed
to its designed purpose.
In response to Board Member Henderson, Ms. Honeywell advised that the loan
must be repaid within two years from when it's received, but the 30%-
occupancy rate is based on the two-year period following the official opening
of the business.
In response to Board Member Adolph, Mr. Spevacek advised that the loan
would be secured by the Second Trust Deed and remain a second during the
construction-loan phase of the project, but would be in a third position behind
the SBA loan after the Inn opens.
Board Member Adolph understood that the funds wouldn't be given to Mr. &
Mrs. Harris, but rather used to pay permit fees.
Mr. Spevacek advised that the City's permit fees would be paid through a
paper transfer, but a check will be given to Mr. & Mrs. Harris to pay the other
governmental agency fees. He referred to Attachment 3 of the agreement
which lists the appropriate fees and pointed out that the Fire Department plan
check fee and the electrical and gas hook-up fees are still yet unknown. The
fees that are paid at the end of the project will set off the final payments and
the two-year repayment schedule.
Board Member Henderson felt that the reduction in the obligation to pay was
an incentive to fail.
Mr. Spevacek advised that the owner would not be able to make a living, pay
the loan payments, and meet the operational expenses if the occupancy rate
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Redevelopment Agency Minutes 4 February 20,1996
drops below 30%. It would be a financial disincentive to walk away from a
$1.5 million loan to save $100,000.
Board Member Perkins understood that approximately $35,000 of the loan
would be for in-kind fees, etc. to which Mr. Spevacek responded yes.
In response to Board Member Perkins, Mr. Spevacek advised that, basically,
the inn would generate $53,000 in transient occupancy tax TOT) by Year 2
and $82,000-$92,000 by Year 4. Additionally, the Redevelopment Agency will
receive approximately $5,000 in tax increment revenue from the inn.
Board Member Perkins felt that redevelopment funds were meant for this type
of project and was pleased and excited about it.
Board Member Bangerter concurred.
In response to Board Member Henderson, Ms. Honeywell advised that the
owners may sell or transfer ownership of the property after a Certificate of
Occupancy COC) is issued, but the loan obligation would be secured by the
Deed of Trust. The recorded covenants require that it continue to be run as
a bed and breakfast inn and new owners would have to comply with all the
terms of the agreement. The minimal nature of this investment and the fact
that the owners are paying the Agency back is why there's an allowance to
sell the property after the COO is issued. The prohibition of sale can be
extended until the Agency reconveys the Deed of Trust if the Agency wishes.
Chairman Sniff was concerned that the owners aren't putting more of their
own funds into this project because the three loans total approximately$1 6
million and it's potential value is only $1 8 million.
In response to Board Member Bangerter, Mr. Spevacek advised that the
agreement requires the loan to be repaid within two years or at the sale of their
residence, whichever is sooner.
Ms. Honeywell advised that the owners have a contractual agreement to repay
the City as soon as they sell their home.
Board Member Perkins pointed out that Valley Independent Bank must feel
comfortable with the project to approve their loan. He felt that this project has
a better chance of being successful than past projects have been and with a
small amount of agency funding.
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Redevelopment Agency Minutes 5 February 20, 1996
Board Member Henderson asked if there was a consensus of the Council to
prohibit the sale of the property until the end of the two-year period or
repayment of the loan.
Chairman Sniff didn?t have a problem with that and asked staff to amend the
language in the agreement.
Mr. Herman advised of an addition to the agreement in Section 13 of
Attachment 6 Agreement Regarding Covenants to Develop, Use and Maintain
the Site) which provides for the lender or purchaser to modify the agreement
as long as the Agency is not adversely affected by such modification. Such
modifications could include sale of the property or converting the use of the
property.
Mr. Spevacek advised that Redevelopment Law requires the Agency to impose
certain covenants on any project that it assists and those covenants run for the
life of the land-use controls of the Redevelopment Plan. In this case, for
projects in Project Area No. 2, the covenants would run for 30 years and
include such things as maintenance, use, discrimination, etc.
Ms. Honeywell advised that the following changes would be made to the
agreement:
1) The prohibition clause on Page 2 107) Prohibition) is amended to
read....."Until the repayment of the Agency?v a?sist?nce pursuant to
Section 201....
2) The last sentence in the paragraph on Page 4, 201) Agency
Assistance) is amended to include....from the official opening of the
project as evidenced by the issuance of the Certificate of Occupancy.
Ms. Audrey Ostrowsky, P. 0. Box 351, asked when the property was
designated as commercial property.
Mr. Herman advised that these two lots are part of an original designation in
1985, of Mixed-Regional Commercial.
Ms. Ostrowsky questioned the proposed use of redevelopment funds when the
downtown streets still need repair.
MOTION It was moved by Board Members Adolph/Bangerter to adopt
Resolution No. RDA 96-01 including modified language as provided by legal
counsel. Motion carried unanimously.
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Redevelopment Agency Minutes 6 February 20, 1 996
DEPARTMENT REPORTS
1. TRANSMITTAL OF REVENUE AND EXPENDITURES REPORT. DATED
DECEMBER 31, 1995.
MOTION It was moved by Board Members Bangerter/Henderson to receive
and file the Revenue and Expenditures Report, dated December 31, 1995.
Motion carried unanimously.
CHAIR AND BOARD MEMBERS' ITEMS None
PUBLIC HEARINGS None
Agency recessed to Closed Session.
CLOSED SESSION
1 Conference with real property negotiator pursuant to Government Code Section
54956.9 concerning potential acquisition and disposition of real property
located at the southeast corner of Simon Drive and Highway 111. Property
Owner Negotiator: Richard Gattis.
Agency Board reconvened with no decision being made which requires reporting
pursuant to Section 54957.1 of the Government Code Brown Act).
There being no further business, the meeting was adjourned.
Res p?ctfuIly submitted,
NDR$;?HoLA Secretary
La Quinta Redevelopment Agency
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