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HomeMy WebLinkAboutRDA Min 2000-10-23 10-23-00 Seal Beach, California October 23, 2000 The Redevelopment Agency of the City of Seal Beach met in regular session at 7:15 p.m. with Chairman Yost calling the meeting to order. I' ROLL CALL Present: Chairman Yost Agencymembers Boyd, Campbell, Doane, Larson Absent: None Also present: Mr. McIntyre, Interim Executive Director Mr. Barrow, City Attorney Ms. Yeo, City Clerk APPROVAL OF AGENDA It was the consensus of the Agency to approve the order of the agenda as presented. PUBLIC COMMENTS There were no public comments. APPROVAL OF MINUTES Boyd moved, second by Doane, to approve the minutes of the September 25th, 2000 Agency meeting as presented. I AYES: NOES: Boyd, Campbell, Doane, Larson, Yost None Motion carried AGENCY COMMENTS No Agency comments were presented. ADJOURNMENT It was the consensus of the Agency to adjourn until the joint public hearing with the City Council to consider the bond issuance by the Redevelopment Agency relating to the Seal Beach Trailer park acquisition financing. The meeting was adjourned at 7:17 p.m. pending the joint public hearing. ChaiJ{ I" 10-23-00 Seal Beach, California October 23, 2000 _I The City Council of the City of Seal Beach met in regular session at 7:17 p.m. with Mayor Campbell calling the meeting to order with the Salute to the Flag. ROLL CALL Present: Mayor Campbell Councilmembers Boyd, Doane, Larson, Yost Absent: None I Also present: Mr. McIntyre, Interim City Manager Mr. Barrow, City Attorney Mr. Whittenberg, Director of Development Services Mr. Badum, Director of Public Works/City Engineer Chief Sellers, Police Department Chief Cushman, Lifeguard Department Ms. Beard, Director of Recreation, Parks, Community Services Ms. Arends-King, Director of Administrative Services Mr. Dorsey, Assistant to the City Manager Ms. Yeo, City Clerk JOINT CITY COUNCIL/REDEVELOPMENT AGENCY PUBLIC HEARING / RESOLUTION NUMBER 4853 - SEAL BEACH TRAILER PARK ACQUISITION FINANCING / BOND ISSUANCE Mayor Campbell declared the joint public hearing of the City Council and Redevelopment Agency to be open to consider the issuance of bonds by the City Council/Redevelopment Agency for the purpose of the Seal Beach Trailer Park acquisition financing. The City Clerk certified that notice of the public hearing had been advertised as required by law and reported receipt of three communications, one in support, one requesting that the acquisition be set aside pending further review, and one questioning the process. The Interim City Manager mentioned that several consultants have worked with City staff on this issue for a number of months and will be making a presentation on behalf of staff. I Mr. Kyle Snow, Best, Best & Kreiger, bond counsel, explained that under the Health and Safety Code redevelopment agencies are allowed to issue bonds for the purpose of making loans to certain types of corporations who can use the proceeds of the loan to acquire mobile home parks and other types of housing projects, if the bonds were to be approved they would be issued under an indenture then loaned in this case to Linc Housing under a loan agreement, also a regulatory agreement would be placed on the property that would require that at least twenty percent of the units in the Park be set aside for very low income tenants. Mr. Snow stated that this hearing is being held as a requirement of federal tax law, 10-23-00 the bonds will be tax exempt and the federal tax code requires that there be a hearing to allow the public to speak, at this meeting the Council is being asked to approve the bond issue yet that does not result in the issuance of bonds because at a later date certain agreements will come before the Council for consideration with an official statement, which is the marketing document, at that time the Redevelopment Agency would authorize issuance of the bonds, thereafter the bonds would be sold, the action at this meeting is a preliminary step to allow the bonds to be tax exempt. Ms. Pam Newcomb, Kinsell, Newcomb & DeDios, underwriters, confirmed that this is the public hearing and this matter will again be before the Council on November 13th for approval of bond documents, at that time the proposal will be three tiered financing, tax exempt bonds in an approximate amount of $6.5 million, a State MPROP loan of approximately $1 million, and an Agency loan of $1 million, that funding combined will be able to provide for the purchase of the Park, payment for all costs associated with the issuance of the bonds, set aside bond reserves and capital improvement funds for the Park acquisition, the intent is to market the bonds thereafter and to close the financing by mid-December. Mayor Campbell noted that there are some that do not understand the process, the fact that the residents of the Trailer Park have the opportunity to purchase the Park from Mr. Hall is wonderful in that a similar attempt made by the residents of a trailer park to the south was not successful, the conditions imposed by Mr. Hall on the Seal Beach Park were basically unlivable and intended to drive the residents out, this effort would allow the residents to preserve their homes and bring some stability into the rental increase process, it is unfortunate that past rents did not keep pace with market values, and noted there are only two hundred resident-owned mobile home parks in California, Seal Beach could be two hundred one. Councilman Yost asked for clarification of the proposed sale price of the Park. I I Mayor Campbell invited members of the audience wishing to speak to this item to come to the microphone and state their name for the record. Mr. Bill Orton, Riversea Road, was duly sworn by the City Clerk as requested. Mr. Orton stated he is generally in support of a buyout, that he stood before the Residents Association and said exactly that, to the one hundred plus people whose doors he knocked on, campaigned at, and talked about the proposed buyout, and said he was pleased to hear details from the attorney and financing authority as details have not been forthcoming in this process. Mr. Orton reported that as of this date he sent a letter to the MPROP program in Sacramento requesting that his name be struck from the application which was submitted by the Resident Association and/or Linc, the reason for that is that when he signed the application for MPROP funding he was told by an officer of the association that it was just an application for State funding, to that explained that he works for the State, his job is to look out for the way taxpayer dollars are spent, therefore he is not comfortable putting his name on a blank check by saying that an application is also an I 10-23-00 I election. Mr. Orton said he was told by Hunter Johnson at the last Association meeting that by signing the application form he was also declaring himself in support of all of the terms that are presently being negotiated, to that he said he made no such election, he has voted every time in the past twenty years that he could, he knows what an election is, he has not had the opportunity to express his free will and to have the informed consent of the govern in this matter. Mr. Orton said he generally supports a buyout, hopes that one works, yet he sees no detail, only vague outlines of the proposal, if it works that is great, but City and State taxpayer dollars are involved here, no fear mongering and no closed process runs unless adequate information to the govern is adequate if there is to be millions of dollars involved. Mr. Orton offered that he would call upon the City to not recognize the MPROP application as being an instrument of election, it is an application but it is not a declaration or an election instrument, if there is to be an election in the Park as to whether the residents endorse the actual terms of an agreement, he would ask that the City Clerk, who conducts local elections, be empowered to conduct an impartial process where people have the opportunity to read the documents that they are going to be affected by, that they have the opportunity to debate, and that a free and fair vote be taken as he does not feel that that process has been followed. Mr. Paul Jeffers, Trailer Park, noted the statement by the Mayor that this is a wonderful opportunity for the Park, yet said he was told twenty years ago that he had a wonderful opportunity to take part in the covenants and disposition agreement established the Redevelopment Agency, there was a recent rent increase of 3.8 percent pursuant to that agreement, to the statement that the residents were lucky that the rents did not increase with the land value, he stated the covenants were not written on the value of the land, it was the City who bought condemned land and turned it over to the original owner of the property, to that he asked what has happened to the covenants since this sale was started, the Redevelopment Agency had an obligation to protect the covenants for the residents, there had been considerable involvement and money on the part of the City to set up the Trailer Park. Mr. Jeffers said he too would like to buy the Park but with covenants similar to those originally promised, the history of the Park needs to be looked into, he has been involved since the Park was established, fought rent increases, etc. He noted that there is now the lawsuit by the current land owner and the attorneys are saying the residents do not have a chance under the covenant, how could this happen, also, having just looked at the loan documents said he had been told the rents would be $500 and that would not change, however the documents show the rent changing every year. The Mayor advised that legal experts have analyzed the covenants, this is an opportunity for the residents to purchase the Park, and if not, Mr. Hall will then do as he has done in the past. In response to Mayor Campbell, the City Attorney advised that the covenants are not the issue of discussion and are the subject of litigation. Mr. Gordon Shanks said he too has been in favor of the Park purchase, however he also understands the I I 10-23-00 question of Mr. Jeffers, suggesting that possibly there is something wrong with the financial statement because for the first twenty years the space rent is shown as going up one hundred percent where the operating income only goes up thirty-eight percent, that may be the source of concern, possibly someone should review the space rent figures, as yet he could not see where the difference between the space rent and operations goes. Mr. Shanks said if there is anything that can be done within reason to get the Park out of the hands of the current owner it must be done. Ms. Newcomb said in discussions with Linc it was represented that in the first year, starting with the sale of the bonds, there would be average rents in the Park of $364, the second year they would go to $446, the third year would be $527, during that period of time the Agency would pledge approximately $340,000 as a rent subsidy to help people transition from the initial rent up to what will eventually be the $527. A reason that all of the documentation is not being approved tonight is that one of the documents is an Agency agreement which sets forth in more detail those items, if at the time the $527 is reached there are still people in need of subsidy there are a couple of ways that can be achieved, one is surplus cash flow after payment of the debt and expenses, the surplus can flow into the subsidy funds, or Linc could also ask the Agency if they would be willing to pledge additional subsidy. Ms. Newcomb offered that the reason the proforma looks odd is because the $340,000 is shown, that is cash that is realized at the time of closing, it is factored into the equation, the proforma also shows that after reaching the $527 the rent is generally increased by two percent per year after that, to her knowledge that has not been discussed with the residents nor has it been determined at this time. I I Ms. Renee LeShon, Trailer Park resident since 1969, mentioned there have been many changes, when she first bought her trailer the rents were $40 per month, when Mr. Dawson bought the Park the rents tripled, people were concerned, but as this takes place the people will be able to accept, she personally qualifies in the Park for low income, she has concern as to how she will have the money, but she feels strongly about the hundreds of hours that the committee and the City has put into this effort, and she supports what the City, committee and Linc Housing have done, and she is uncertain that the covenants are going to continue to protect her in the future. Ms. LeShon suggested that the residents be sensible, there will be rent increases but they can be managed, this is a wonderful way for the residents to be in control of their homes and destiny, and the fear of change should not overcome what will be good for all. Mr. Mark Cunningham, Cottonwood Lane, offered that the applause alone shows the support for this effort, the group is very united, although he has not been involved in the purchase effort the committee has done an outstanding job of dispersing information and seeking opinions, when there is something of this magnitude there will always be four or five opposed, the majority wants this to go through. Ms. Linda Stobbe, Cottonwood Lane, noted the figure of $527 being the average, asked if there is a high end dollar figure, also, at a recent I 10-23-00 I meeting a comment was made that Linc Housing is an organization set up for helping residential trailer park communities such as Seal Beach, to that she asked how a lending organization can be non-profit. Mr. Hunter Johnson, Linc Housing, explained that they are not the lenders rather the borrowers in conjunction with the residents, it is the underwriting team that brings the money in to buy the bonds and the Redevelopment Agency is actually the lenders, Linc brings the ability to borrow at tax exempt rates which is a significant savings. Mr. Johnson stated that they are in the process of developing the range of rents, that was another reason to delay the other documents until the next meeting, there are also some ideas that they want to present to the Resident Committee for consideration, in all discussions there has been an estimated average range, they are going through and looking at the size of the space, location, and other characteristics that are felt may have an ability to influence what the rent ought to be. With regard to the question relating to the total purchase price, Mr. Johnson reported it to be $7,450,000, there is a draft appraisal that has a range of values in the low to mid $6 million up to over $11 million depending upon a variety of circumstances and it sets a value for the Park, based upon the set of circumstances under which this purchase is being made, at $7.4 million, the purchase price and the appraisal are within two to three percent of each other. Mr. Glen Clark, Trailer Park, also expressed appreciation to the Council and Agency and consultants. He noted that about eighteen months ago the Park residents woke up to a crisis, their homes and lives in jeopardy, the Park had been purchased by a profit oriented person, a committee commenced to look for a permanent solution to the problem, first was the existing covenant, a good document however developed several years ago and may not reflect the terms and conditions necessary for present day, legal opinions were sought, every opinion was that the document had holes and not an iron clad document that could be defended in court, and if anyone of the provisions were tested and found inadequate the covenant could be deemed to be invalid, there were two choices, rely on the covenant or defend the covenant as best one could and look for a more permanent solution, thereafter expert advice was sought, people who are knowledgeable about trailer parks, the advice of all was to buy the Park. Mr. Clark noted this long process has been on-going for some fourteen months, no quick decisions, numerous. committee and general meetings, community affairs, innumerable face to face communications with residents of the Park, letters sent out, several surveys, primary question was if they wanted to participate in a non- profit purchase of the Park if they could afford it, average rent about $500 per month based upon size and location, a question too as to the need for financial aid, there were nine-four responses, of that nine-two said yes, two no. He provided a copy of that survey to the City Clerk. Mr. Clark noted the presence of Mr. Johnson of Linc Housing, and expressed the desire of the Park Association that the Council and Agency approve this first step for the purchase of the Trailer Park. Mr. Jeffrey McMorrow, Welcome Lane, stated he is a practicing attorney in Long Beach, former resident of I I 10-23-00 San Marino. Mr. McMorrow said when the original committee formed there were suggestions from neighbors that he take an active role, he saw that as prudent given the legal complexities and his ability to explain certain things to the residents, the current theme however has been that there are more questions and concerns about details, and repercussions, it was hoped there would be an explanation by the committee or its members, by one C-3 corporation, a non-profit, he is curious why the Trailer Park did not consider that route as a possibility, there are also questions relating to long term ramifications of property tax that persons such as himself might pay, concerns with rent increases in the future, people are trying to make sense of this. Mr. McMorrow noted there have been allegations at this meeting that the committee has taken actions without being forthcoming about how information would be used or presented to this agency, he has seen little discussion of alternatives to purchasing the Park, in fact his position is that dissent has not been welcome at the meetings, he for one has not been privy to the meetings, not invited, because he has indicated that if his property values were damaged by any action of the committee he would take legal action as appropriate, he has been excluded, he was not present at the election of the present board. Mr. McMorrow expressed his opinion that the purchase plan needs more study, at least with regard to the concerns of the average resident, again his belief is that there are alternatives to the sale, it is thought that the covenants are probably enforceable which was the position of the City when Mr. Hall proposed rent increases in October of last year, he has read the complaint, the answer to the complaint, both felt to be well drafted, it is known that the Park attorney, Mr. Stanton, has suggested that the owners of the Park take an active role in the lawsuit, his feeling is that this will be a divisive issue in the Park, there is fear, he knows nothing about Linc Housing or its qualifications, no knowledge as to how the bond issue will come about or how financing perfected, the appraisal will indicate more as to the worth of the Park. Mr. McMorrow said he has a concern as a dwelling owner in that Mr. Hall has indicated that he could not sell his home in place, his personal feeling is that he has a cause of action against him, nor does he feel that buying the park at any price is a sound solution to the problem, a fair price is warranted, and residents are entitled to more information. Mr. Paul Jeffers, Cottonwood Lane, mentioned that a petition was being circulated in the Park recently with questions to which people wanted answers, it became controversial, he too wants to buy the Park, it is known that that is the best thing to do, yet he wants to see the facts and figures first. To Mr. Jeffers question as to the sale price of the Park, $7.4 million was confirmed to be correct. To the question of total debt, Ms. Newcomb responded that there is a $6.5 million tax exempt debt, a $1 million State loan, and a $1 million Redevelopment Agency loan, the payments on the State and Agency loans are deferred for approximately five years at a reduced rate of interest, the State is generally three percent and the Agency has been proposed at three percent, the tax exempt financing ranges between serial and term bonds, four and a quarter to six I I I 10-23-00 I percent. With regard to the question of the purpose for the $1 million difference between the $7.4 million debt and the approximate $8.4 million, Ms. Newcomb stated approximately $500,000 is a debt service reserve fund, if that is never needed for a shortfall it would be the final debt service payment in the thirty-fifth year, it is an asset, it is invested at approximately the cost of the money, until all reports are completed the final numbers are not known, however about $120,000 is held as a capital improvement fund if it is needed, a physical needs assessment will be done in terms of what is needed to be done to the Park today and over the next ten years, that is capitalized into the bond issue, there is also the cost of issuing the bonds, bond printing fees, underwriter, advisory, other fees, there is a non- profit fee, there are also some small operating reserve funds as various options are being looked at as to how to prepare the bond financing, it can be insured, it can be rated, or even non-rated, part of the up-front money is to pay the insurance costs, that is done to secure a lower, long term interest rate, however it needs to be determined if that is economically feasible, this requires looking at all of the different options as to how the bond sale will be finalized and sold and the least costly in terms of debt. Mr. Jeffers stated it was good to get some of the questions answered, he mentioned however that meetings have been held with those that have long term leases, it was heard earlier that those leases would present a problem, offered that when the residents tried to buy the Park in the 1980's it was found that there was a new State law whereby if thirty percent of the Park had long term leases it would become a subdivision and if that were to occur it would no longer fall under any form of rent control, the people were requested to not sign the long term leases as that could impact the covenants, at that time the Park owner was told that the covenants ran with the land. Mr. Jeffers said he requested that all of the people with long term leases be talked to individually, is there an answer as to what will be done with these people, how are they going to fit into the rent schedule, and can the residents in general be invited to any of the meetings where these leases are discussed. With regard to the appraisal, Mr. Jeffers mentioned that it is known that at one time there was a toxic chemical plant along the backside of the Park and possibly Oakwood, when digging was being done for Riversea he watched, there were pipes dug up with some kind of green substance inside, he wants assurance that toxics will be looked at. Mr. Johnson reported that the standard in the industry is a phase one environmental study anytime a property is bought, that was done when Mr. Hall obtained the property, no reference was found to there being a former Dow Chemical site, the search includes walking around the site, a small amount of asbestos and lead base paint was found, they are in the process of ordering a new phase one report, neither the lenders or Linc Housing would go forward without it, so everything that can be determined with regard to harzardous materials will be. With regard to the situation of leases, there have been meetings with the lessees, there are fifteen of them, an analysis of the leases has been done, they are valid, there are some issues that are still being I I 10-23-00 sorted out, this was discussed at the last general meeting, in reality there is no ability to terminate those leases, the leases provide for pass throughs among other things, there may be a way to offset some of the inequality that was mentioned, it is a fact that the residents without the leases are agreeing to a higher rent increase, at this point some of the leaseholders have indicated willingness to essentially void their lease and join the other residents, however there may be a few that may not do that, in essence the lease will be treated as a legal document and if there is an ability to pass through any cost increases that the other residents are already sharing, that will likely be done, that may be offset for those of low income or by the rent system program, yet they expect to honor the leases for the good and bad of them. Mr. Johnson noted that there have been inquiries about obtaining answers, there is a process, they are going through and answering those questions, by the next week or two they will sit with the committee to obtain their feedback, work with the financial consultants, then meet with the residents for further explanation, that is hoped to be completed by the next meeting. With regard to the toxic issue, Mr. Jeffers said he believed it was eight to ten feet deep. Mr. Johnson assured that will be done before this transaction is complete. There being no further comments, Mayor Campbell declared the public hearing closed. I Yost moved, second by Doane, to adopt Resolution Number 4853 entitled "A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEAL BEACH APPROVING THE ISSUANCE BY THE REDEVELOPMENT AGENCY OF THE CITY OF SEAL BEACH OF ONE OR MORE SERIES OF MOBILE HOME PARK REVENUE BONDS TO FINANCE THE ACQUISITION OF THE SEAL BEACH TRAILER PARK." By unanimous consent, full reading of Resolution Number 4853 was waived. Councilman Boyd noted that he is essentially an institutional real estate investor, does similar bond transactions, commended the consultants for putting together this issue, however he does not want to chance someone claiming that he has a conflict, which he does not, therefore will abstain from voting on this item. I AYES: NOES: ABSTAIN: Campbell, Doane, Larson, Yost None Boyd Motion carried There was no other Redevelopment Agency business to consider. ADJOURNMENT It was the order of the Chair, with no objections from Council, to adjourn this meeting until Monday, November 13th at 6:00 p.m. for both the City Council and the Redevelopment Agency. The meeting was adjourned at 12:23 a.m. I Ch.i~n Y- CCJY Clerk/Secreta