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HomeMy WebLinkAboutCity Council Committees - Operations - 04/20/2004Operations Committee Minutes April 20, 2004 Committee Members Present: Chair Tim Clark, Bruce White Julie Peterson was absent, however, had previously concurred with Chair Tim Clark on agenda items 1, 2, 3, 6, and 7. The meeting was called to order by Tim Clark, Chair at 4:02 p.m. APPROVAL OF MINUTES DATED APRIL 6, 2004 Bruce White moved to approve the amended minutes of the April 6, 2004, Operation Committee meeting. There was a clerical error in the minutes regarding the last issue regarding the Recognition of Vietnamese Heritage Flag agenda item. The last word in the minutes under the Recognition of Vietnamese Heritage Flag agenda item should have stated “motion.” rather than “have . . . .” The motion was seconded by Tim Clark and passed 3-0. Julie Peterson previously concurred on this agenda item. APPROVAL OF VOUCHERS DATED APRIL 15, 2004 Finance Director Bob Nachlinger presented the vouchers for April 15, 2004, for approval. Bruce White moved to approve the vouchers dated April 15, 2004. Tim Clark seconded the motion, which passed 3-0. Julie Peterson previously concurred on this item. PREMERA BLUE CROSS ADMINISTRATIVE SERVICES CONTRACT FOR 2004 Benefits Manager Becky Fowler presented the Premera Blue Cross Administrative Services Contract for 2004. advised the Operations Committee that the City contracts with Premera Blue Cross as a third-party administrator (TPA) to process claims and provide access to Premera Blue Cross’s PPO network of doctors and hospitals. Approximately 95% of the City’s employee population is contained under the Premera Blue Cross program totaling 2,200 lives. Included in this coverage is our LEOFF 1 retirees and their dependents. The projected budget for the self-funded Premera Blue Cross program for 2004 is slightly over $9 million. Ms. Fowler requested that the contract be authorized on the consent calendar for the Mayor’s signature. Chair Tim Clark inquired if this was the standard contract and similar to what all other local jurisdictions are facing. Ms. Fowler advised that yes this was the standard and that the City enters into a contract with Premera on a yearly basis. Bruce White moved to recommend that the Premera Blue Cross Administrative Services Contract be placed on the Consent Calendar for the April 20, 2004, City Council Meeting authorizing the Mayor to sign a one year contract with Premera Blue Cross. The motion was seconded by Tim Clark and passed 3-0. Julie Peterson previously concurred on this agenda item. KENT STATION PURCHASE & SALE AGREEMENT AMENDMENT Operations Committee, 4/20/2004 2 Economics Development Manager Nathan Torgelson presented the Kent Station Purchase & Sale Agreement Amendment. Mr. Torgelson advised that Dave Blanchard from Heartland and Dennis Rattie and Kristin Jensen from Tarragon were also present before the Committee. Dave Blanchard was the City’s lead negotiator regarding the Kent Station Covenants, Conditions and Restrictions. Mr. Torgelson advised the Operations Committee that two (2) Council approvals are necessary in order to pave the way for Kent Station, LLC to sign their lease with AMC Theaters. One is a minor amendment to the Purchase and Sale Agreement for Kent Station and the second is a legal document called a Declaration of Covenants, Conditions, and Restrictions (CC&R’s). Mr. Torgelson advised that the current Purchase and Sale Agreement for Kent Station that was adopted by the Council last January states that if Sound Transit ever charges for parking in the Sounder Commuter Rail garage after 12 noon during the cinema lease term, the City must provide a voucher system for patrons of the cinema or build a replacement parking structure within the Kent Station site or on the Municipal Lot Block, which is bound by 4th Avenue and 2nd Avenue and Harrison Street and Smith Street, that is located directly south of the Kent Station site. Mr. Torgelson advised that AMC is saying that if the City were ever in a position where they would have to build a replacement parking facility that the municipal lot block location is unacceptable to their patrons because of having to cross the five-lane Smith Street. The City is proposing to amend the Kent Station Purchase and Sale Agreement to exclude the Municipal Lot Block from the areas where replacement parking could be built and if the City was in that position the Developer would be required to give us land back within the Kent Station site free of charge. Mr. Torgelson stated that the only item being changed through the amendment is the boundaries where a replacement parking facility could be built and that the City would still have the option of doing an existing voucher system using the existing garage so it would still be the City’s option if Sound Transit ever did charge for parking the City will have the option of doing a voucher system or providing a replacement parking structure. The amendment actually strengthens the voucher language which would state that the City would only have to provide a voucher system for up to 3½ hours where in the existing Purchase and Sale Agreement there is no limitation of the number of hours which the City would validate for. Mr. Torgelson also pointed out that this also gives the City the Municipal Lot Block as an asset for the City as there would be no condition on the Municipal Lot Block as to whether or not the City would be required to build a replacement parking structure on that lot which allows the City if they ever choose in the future to redevelop the Municipal Lot Block property or sell it. Tim Clark inquired as to whether under the original Agreement the City is obligated to build additional parking if the Sounder garage became inadequate. Mr. Torgelson stated that in the Purchase and Sale Agreement if Sound Transit stated to charge for parking the City would have the option of doing a voucher system or building a replacement facility. Tim Clark stated that in effect then this amendment gives the City another option. Mr. Torgelson advised that the amendment changes the options of the boundaries of where the City could build a replacement parking facility which would exclude the Municipal Lot Block. The City like the Municipal Lot Block because the City already owned the property, but under the amendment the Developer would give the City free of charge the land necessary to build a parking garage. Bruce White stated that the issue of parking is one of the reasons why he is not supportive of the project. He stated that the Council was told that having to pay for parking or build a parking garage would be so remote but obviously AMC Theaters feels strong about from the tone of their letter they are willing to back out of the agreement were this not to be done. Mr. White advised that it appears to him that there is a distinct possibility that the City will be required to expend an additional $15-20 million to build a parking garage to accommodate AMC Theaters in Kent Station. He asked if it is really worth $20 million to build a parking garage as well as the $15 million loss of the land sale, together being $30-$35 million in order to have AMC Theaters in downtown Kent.. He stated to him Operations Committee, 4/20/2004 3 the answer is no and that is one of the reasons why he voted against the project and it would be hard for him to reconcile the original vote and support this amendment. He stated he would remain consistent and not support this amendment, however, not wanting to bottle this item in Committee he will pass it on to full City Council without recommendation. Tim Clark inquired of Nathan Torgelson that if the Operations Committee forward this amendment to the City Council at the April 20, 2004, Council meeting that there would be a full presentation to Council. Mr. Torgelson advised that that was correct. Bruce White moved to forward for consideration to the Kent City Council whether to recommendation/not recommend an amendment to the Kent Station purchase and sale agreement to change the boundary of the replacement parking area. The motion was seconded by Tim Clark and passed 2-0. Julie Peterson did not previously concur on this item. KENT STATION DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS Economics Development Manager Nathan Torgelson presented the Kent Station Declaration of Covenants, Conditions and Restrictions to the Operations Committee. Mr. Torgelson stated that in the Purchase and Sale Agreement that the Council passed in January one of the things that is recognized in that document is that the CC&Rs would be coming before the Operations Committee and the City Council later in 2004. It is now at that time as it is a requirement before the City can close on the sale of the Kent Station property. The purpose of the CC&Rs is to ensure that the Kent Station property is maintained as an attractive setting for development, to protect the owners of the property which includes the City, as well as the anchor tenant, AMC Theaters, against improper and undesirable uses of the Property, and to ensure and encourage the construction of high quality and development and improvements on the property, regardless of whom owns or develops the property. Mr. Torgelson advised that the reason the City is a party to the agreement is that the City will continue to be a land owner, the City is not selling all of the land, the land is being sold in phases and in the Purchase and Sale Agreement if Kent Station, LLC does not perform the City has the ability to buy the land back at the same price at which it was sold. Potentially the City could be buying land back, otherwise the City would never be a party to the CC&Rs, it would strictly be between the private property owner and the future tenants. Basically under the CC&RS the City does not get involved in major decision making unless we bought the property back, or if Kent Station LLC does not execute so much square footage by a certain date as required by the Purchase and Sale Agreement. The CC&Rs further restrict the types of uses on the property above and beyond the zoning code such as second hand stores, tattoo parlors, adult entertainment type uses that aren’t spelled out in our City’s zoning code and the CC&Rs also set up an architectural review committee which looks at issues such as signage, type of materials, etc. Those decisions are really made between the Developer and the tenants. This is a process in addition to the City’s Downtown Design Guidelines. The Developer will be going through the City’s design review process for downtown and in addition they will have a separate process for their prospective tenants. It also sets up an Owner’s Association and common area maintenance fees. Mr. Torgelson stated that it is important to point out that the City will not be a part of the Owner’s Association up front and the Cit will not pay any fees so the CC&Rs are budget neutral for the City as long as we own undeveloped property the City will not be paying any common area maintenance fees. It ensures high quality management and maintenance of open space, parking lots, and landscaping. Mr. Torgelson stated that AMC Theater does have broad powers within the document but that that is very typical of an anchor tenant but that any major amendments to the CC&Rs have to be approved by the City. Operations Committee, 4/20/2004 4 Tim Clark asked for clarification that adult entertainment is an exclusion. Mr. Torgelson advised that that was correct. Tim Clark inquired regarding the common areas and no cost to the City as long as the City’s property remains undeveloped. Mr. Torgelson advised that that was correct. Tim Clark stated that at this time on the back side of the property on the railroad tracks area is in fact the large scale refrigeration business and none of that comes out of this, correct? Mr. Torgelson further advised that that was correct that that business is a separate property owner. Tim Clark opened the table for a motion, however, Bruce White stated he would like to speak on the matter and that it would like to send this agenda item on to Council without a recommendation and would like to comment why. Mr. White stated that he felt it is unfortunate for the CC&Rs for the City to be involved at this point because as a municipality because the restrictions that are put on by AMC Theaters which are essentially are a big non-competing agreement that restricts what kind of businesses are allowed in Kent Station, that otherwise might be able to, and he is not referring to adult businesses or the like. As a municipality he stated he has a problem stating who can/cannot operate within the Kent Station project. He strongly feels this is an inappropriate position for the City. Tim Clark stated that this project has never been about simply putting property up for sale. It is in fact about Tarragon as a public development bring forward a vision as basically adopted by the City, and so it was about the vision. It is about having control of what the City’s downtown looks like, and that is the issue about revitalizing the Kent downtown area. Bruce White agreed, however, was still concerned about the CC&Rs prohibiting businesses from Kent Station. Bruce White further stated that these CC&Rs would prohibit video game establishments, snack food areas, etc. within a certain square feet of the AMC Theatre and he does not feel that is proper for AMC to have such control of what other businesses are able to offer the community and again he stated he does not feel that a government entity should be restricting that type of business. Bruce White moved to send on to Council without recommendation a motion to authorize the Mayor to sign the CC&Rs for Kent Station for recordation upon closing of the Initial Takedown Parcel. The motion was seconded by Tim Clark and passed 2-0. Julie Peterson did not previously concur on this item. KING COUNTY HOUSING AUTHORITY AMENDMENT TO HOUSING COOPERATION AGREEMENT Finance Director Bob Nachlinger presented a revised version of the King County Housing Authority Amendment to Housing Cooperation Agreement, which has been agreed to by the King County Housing Authority, as well as the City Attorney and Mr. Nachlinger. Mr. Nachlinger advised the Operations Committee that the “Harrison House” project was authorized by Ordinance No. 2948 adopted on November 6, 1990, which authorized the issuance of $6.7 million in Unlimited Tax General Obligation Bonds for the construction of the project. On June 4, 1991, the City adopted Ordinance No. 2985 authorizing the City to enter into the Housing Cooperation Agreement (interlocal agreement) with the King County Housing Authority. The bonds were subsequently refunded to lower the interest rate and there are $3,210,000 plus some unamortized discounts currently outstanding on these bonds. Mr. Nachlinger further advised that the Harrison House senior housing complex is in need of major capital improvements and that neither the City or the Housing Authority have available funds to make these repairs, which Mr. Nachlinger advised is estimated at approximately $2.5 million. The Housing Authority plans to partner with a private firm who will gain Operations Committee, 4/20/2004 5 the tax credits for affordable housing to make these repairs. This partnership will require some amendments to the current agreement between the Housing Authority and the City, as well as ownership rights. Mr. Nachlinger advised the Operations Committee that there will be a reduction of $17,280 in subsidies for rental assistance as a budget impact. Kent City Attorney Tom Brubaker advised that there were members of the Housing Authority present should the Committee have questions for them. Mr. Brubaker advised that the revised version of the Amendment Agreement which is the final agreement only differs from the amendment in the agenda packet allows for a different legal partnership entities to be added for these tax credit agencies. The City now can use limited liability partnerships and limited liability companies which allows a little more freedom under the State’s corporations and partnerships laws depending on who steps forward to participate with this project and the Housing Authority. Bruce White inquired who owns this building right now. Mr. Brubaker advised that before 1990 the City bought the land and built the building in a turn-key fashion and handed it over to the King County Housing Authority. The Housing Authority has it now in fee simple and that there is a reversionary clause that if the use of the property were to change from seniors low-income housing that the property would change back to the City. Bruce White then asked why the City is entering into this Amendment Agreement, what does the City have to gain. Mr. Brubaker stated that the City has an interest in providing low income housing for seniors in Kent and the City has an interest in providing a partnership with King County Housing Authority. Mr. Brubaker stated the City did design and build the building and that the building is in need of major repairs and it is unknown who is liable for the necessary repairs. The goal of this Amendment Agreement is to find a way to avoid the problems and the contensious issues all together and to find a solution which works for everyone and allows the City to refinance it and get the repairs done. Mr. Brubaker stated that the only drawback is the reversionary interest gets held in abeyance for the life of the bonds. Bruce White inquired as to what is the downside to the City for entering into this Amendment and Mr. Brubaker advised that he did not believe there is no other drawback. Mr. Brubaker advised that the Housing Authority has had difficulty in paying a past due LID assessment pertaining to the 277th Corridor. This will allow for those assessments to be paid off. The Housing Authority are caught in a bind as they are trying to keep the rents low so to be affordable for the seniors and yet it is hard to generate enough capital out of those rents to do the repairs that are necessary. Tim Clark questioned that in essence what they are doing is capturing a revenue stream as a basis for refunding of the bonds which allows them semi-refinance? Bob Nachlinger advised that essentially the future tax credits for investing in public housing if you will are such that they are worth today enough money to make these repairs. Tim Clark asked if this wasn’t a rather common practice on the east coast is it not. Mr. Nachlinger advised that tax credit deals are very common place. Bruce White moved to recommend that the amendment to the interlocal agreement between the City of Kent and the King County Housing Authority be approved and forwarded to the City Council at their meeting of May 4, 2004, subject to the City’s Finance Director and the City Attorney’s concurrence of the language therein. The motion was seconded by Tim Clark and passed 3-0. Julie Peterson previously concurred on this agenda item. Operations Committee, 4/20/2004 6 TAXABLE REFUNDING OF THE OUTSTANDING UNLIMITED TAX HOUSING BONDS Finance Director Bob Nachlinger presented the Taxable Refunding of the Outstanding Unlimited Tax Housing Bonds agenda item which is a companion item to the King County Housing Authority Amendment to Housing Cooperation Agreement. Mr. Nachlinger advised that the modification of the existing Housing Cooperation Agreement creates a new entity which will have an ownership interest in the property until the obligations used to finance it are retired. This entity is not a governmental entity under the rules of the Internal Revenue Service and as such, cannot have tax exempt bonds outstanding on the Project. The City must replace the outstanding debt on the Project with taxable debt to remain in compliance with the IRS rules. The additional costs between the tax exempt and taxable debt as well as all of the costs of this transaction will be paid for by the Authority. The City will incur no additional costs due to this refunding. Mr. Nachlinger stated that the amendment to the Housing Cooperation Agreement between the City of Kent and the King County Housing Authority will create a limited partnership with an ownership interest in the Project. Under Internal Revenue Service regulations, such an entity causes the financing used for the Project to become taxable rather than tax exempt. The City must undertake this refunding concurrently with the agreement to be in compliance with these regulations. Mr. Nachlinger stated that there is no budget impact regarding refunding of the unlimited tax housing bonds and that the agreement with the Housing Authority states that the Housing Authority will pay any and all increases to the cost of the existing debt and the City is to be held harmless for any payments necessary for any increases and debt service costs and also the cost of the transaction in doing this and the residents of the City will receive no additional tax burden. He further advised that refunding of $3 million of bond were voted on and paid for and to reissue them as taxable bonds. Tim Clark inquired as to whether this is a fairly standard approach and Mr. Nachlinger advised it was. Bruce White moved to recommend that the Ordinance authorizing the refunding of the outstanding portion of the Housing Bonds authorized by Ordinance No. 3115 on a taxable basis be approved and forwarded to the City Council at its meeting of May 4, 2004.. The motion was seconded by Tim Clark and passed 3-0. Julie Peterson previously concurred on this item. 2004 1st QUARTER FINANCIAL REPORT Assistant Finance Director Cliff Craig presented the 2004 1st Quarter Financial Report for informational purposes only. Mr. Craig advised the City has moved to doing the City’s Financial Reports on a quarterly basis to save staff time and make better use of the City’s limited resources. that the revenues are $540,000 under the adjusted budget and that expenditures are $380,000 under budget. Mr. Cliff advised that the general fund is looking more less as what it has been and probably with an ending fund balance coming in around 4½% of expenditures, however, these are early projections and they believe they will improve as the year progresses. He cautioned though that this early in the year the data is very inconclusive as it is still too early in the year to tell where the budget is going. Tim Clark stated that the Finance Department has done a great job but that when seeing the January sales tax figures everyone was stunned. Mr. Craig advised that February was even worse than January and that it came back up again in March. Tim Clark advised that a whole lot of life in the City is coming if you look at the building permits. Tim Clark inquired if there was a significant Operations Committee, 4/20/2004 7 increase in permitting and other sources of revenue for the City, such as in general sales taxes and other types of utility rates and what not. Mr. Cliff expects that there is come correlation over time and it will eventually turn into property tax for the City. Mr. Nachlinger stated that it add to utility taxes. There is about a two year lag time between the building permit and seeing something hit the tax rolls. Mr. Clark then inquired about whether the street fund has stabilized at this point. Mr. Nachlinger advised yes it is. Mr. Craig advised that its revenue sources are not as volatile as the general fund. He stated the motor vehicle fuel tax is fairly stable and the utility taxes are generally good and the utility taxes are currently coming in over budget. Tim Clark inquired regarding the criminal justice fund needing an adjustment. Mr. Craig stated that if the criminal justice portion of the sales tax does not pick up we may need to move some of that staff from the criminal justice fund into the general fund as the criminal justice sales tax is also down and they will want to see a greater amount of expenditure savings there. Mr. Craig advised that it is not a large fund. The total expenditure is approximately $2 million per year and if you look at the bottom line right now it would be down about $115,000 which may require them to move a funding for a few staff to a different place such as the general fund. Mr. Cliff stated that the insurance fund is showing a good trend now. It has stabilized and is now coming in under budget. Mr. Nachlinger stated that the entire quarterly report will be on the City’s website in a day or two for the citizens review. The meeting was adjourned at 4:41 p.m. Renee Cameron Operations Committee Secretary