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HomeMy WebLinkAbout08/09/1995 - City Council Special Meeting - Redevelopment Agency. 863 SPECIAL JOINT MEETING OF THE CITY COUNCIL AND REDEVELOPMENT AGENCY CITY OF COSTA MESA AUGUST 9, 1995 The Costa Mesa City Council and Redevelopment Agency, met in special joint session August 9, 1995, at 6:30 p.m., in the Council Chambers of City Hall, 77 Fair Drive, Costa Mesa, following the 6:30 p.m. regular Redevelopment Agency meeting. Notice of the special joint meeting was given as required by law. The City Council adjourned its regular meeting of August 7, 1995, to August 9 to discuss Orange County Bankruptcy Recovery Options. The meeting was called to order by the Mayor. ROLL CALL Council/Agency Members, Present: Mayor/Agency Member Joe Erickson Mayor Pro Tem/Agency Member Peter Buffa Council Member/Agency Chairperson Mary Hornbuckle Council Member/Agency Vice Chairperson Sandra Genis Council Member/Agency Member Gary Monahan Council/Agency Members Absent: None Officials Present: City Manager/Redevelopment Executive Director Allan Roeder City Attorney Thomas Kathe Redevelopment and Housing Manager Muriel Berman Finance Director Susan Temple Assistant Finance Director Marc Davis Accounting Supervisor Diane Butler Executive Secretary Marie Thompson OLD BUSINESS The Executive Secretary presented the Orange County Bankruptcy Orange County Recovery Options. Bankruptcy Recovery Options The City Manager announced that copies of the Agenda Report prepared for the regular Council meeting on August 7, 1995, and City Attorney's Report No. 95-72, pertaining to the Orange County Investment Pool had been made available to the public. He reported that a proposal received from the Orange County Division, League of California Cities, and copies of "Comparison of Alternative Bankruptcy Recovery Proposals" provided by State Assemblyman Curt Pringle's office were also available. The Finance Director outlined the components of the various plans which could affect sources of annual revenue and reserves for the City and the Redevelopment Agency: The first would divert a portion of property tax for 20 years, beginning at 4 percent in year one, accelerating to 16 percent in the fourth year through the remaining 16 years; the diversion over 20 years ranges from $34.6 million to $42.8 million, and does not take into consideration increases in this revenue stream. The second plan calls for the EM diversion of 25 percent of the one cent sales tax currently received and represents $6.6, million annually (12 percent of the City's 1995-96 adopted general fund budget). The third component suggests the forgiveness of debt owed to the City and .Redevelopment Agency. Currently, claims total approximately $635,000.00 for the .City and $125,000.00 for the Agency, and .would result in a loss of working capital and interest of approximately $31,000.00 per year for the City and $6,300.00 for the Agency. The fourth component calls for the withdrawal of general operating reserves from various agencies. This loss of working capital. would be approximately $850,000.00 per year. She reported that several: recovery plans sponsored by other agencies attempt to contain Orange County government problems within the County; pay all bond and vendor debt; and restore investor confidence in cities, special districts, and school districts, while continuing to give priority to schools, and ending the bankruptcy. Having attended most meetings dealing with the bankruptcy, Council Member Genis related some points which surfaced: everyone had a 100 percent recovery outlook but cities would lose much more than they would gain; while most cities were not willing to walk away from the debt, there seemed to be a consensus that many cities were willing to be last in line; efforts were being made to ensure that the County meets its obligations to vendors and bond holders, and the consensus moved towards making vendors and bond holders wait for the remainder of other money. Mayor Erickson recognized Council Member Genis for attending the bankruptcy meetings. The City Manager asked the Finance Director to highlight a proposal by the Orange County Investment Pool Group and the League of California Cities Representatives which was not available for the regular Council meeting on August 7, 1995. Although the proposal has legal and practical questions, he suggested that consideration be given to the list of common goals from the League of California Cities (Page 3 of The League handout). He added that no matter how the program is structured, it must be legal and practical in the short-term; for example, the option. of selling John Wayne Airport would not solve the bankruptcy within the required time frame. The Finance Director referred to the list of common goals that the League's Technical Committee was attempting to achieve, and outlined some of the plans: Orange County's plan would be submitted to the Board of Supervisors on August 15, 1995. Under bankruptcy law, the County is required to submit a plan to pay the entire bankruptcy; however, there is a problem since this plan considers taking funds from cities and special districts in order to pay the debt. The Orange County Legislative Delegation plan diverts funds from the Orange County Transportation Authority (OCTA), but the Technical Committee found that there would be 'downstream ramifications for cities' road programs. The plan developed by the Family of Governments proposes the sale of County assets to solve the immediate needs of the bankruptcy, with the remainder of the equation, notes and claims, to be subordinate to all other debt, but'paid before the County is paid. The Finance Director reported that the common goals are to pay all bond and vendor debt; to restore investor confidence; to give schools priority; to end the bankruptcy without new taxes; to maintain the integrity of the comprehensive settlement agreement, and to place a priority on utilizing County resources to solve the County bankruptcy. The Finance Director continued that the City will meet with County representatives and consultants for the Orange County Pool Investors to determine the immediate obligation which must be paid within this fiscal ,year. She stated that the best estimate of the immediate need is approximately $800 million, and the objective is to raise revenue, removing the sale of John Wayne Airport from the equation. The Finance Director reported that $1 billion in County debt is to be serviced each year; debt service is approximately $800 million per year but has fallen short by approximately $390 million; $25 million in administrative, costs include attorneys, consultants, and professionals who have a preferred position in line for payment; $190 million County Pool losses directly affect cities and special districts; Costa Mesa is in the process of tying down all the components of the $190 million; vendor and labor debt equals $100 million; and the State of California wants to have schools made whole and removed from the bankruptcy. The Finance Director added that the $800 million figure leaves $700 million, representing all remaining debt, and does not include a provision for the County recovering its losses except for the $190 million, unless the proceeds from the Merrill Lynch litigation exceed $709 million. She commented that under its current settlement agreement, Costa Mesa is entitled to 35 percent of any recovered funds, 100 percent would go to cities and special districts; and the County would receive any remaining funds. The Finance Director further reported that currently, the County has a $1 billion debt; has the ability to restructure the entire portfolio, and by extending the life of the bonds by five years, could generate $95 million in one-time revenues. She outlined several options: a loan from OCTA of $350 million which would be repaid from a revenue stream generated by the County's gas tax which is approximately $31 million; $250 million would be generated by the sale of landfill to either the Sanitation Districts or other entities that would pay more than $250 million, or the County could bond against the value of the landfill and generate $250 million that would beplacedin this equation; and bonding, against $100 million utilizing the Harbors, Beaches and Park District, and the Flood Control District, using assets controlled by the County to generate a bond for $100 million with the County repaying in a structured manner. She explained that the difference between the County Plan and the Family of Governments Plan is the deletion of the John Wayne Airport sale and replacing that with the loan from OCTA. The City Manager reported that the range of options referenced in the composite does not represent a finite list of opportunity within the County structure for generating revenue to meet the debt. Mark Korando, 582 Park Drive, Costa Mesa, speaking as a private citizenand not in any official capacity, was of the opinion that forgiveness of the debt with a, tradeoff would be the option to take. He urged Council to work with `tfie County in reducing the size of the County and to .implement the Composite Plan. Roy Pizarek, 1923 Whittier Avenue, Costa Mesa, asked about the time frame for proposals presented by the Finance Director. She responded that if the money were not available to invest, the City would not have that income stream. He was not convinced all the "cards were on the table" and wondered what would happen to cities if services were reduced and the County received additional funds. The Mayor reminded those present that even . though the recommendation was to accept public comment, he requested direction from Council should he be required to vote on behalf of the City. at the meeting of the League of California Cities, Orange County Division, on August 10, 1995. Council . Member Hornbuckle stated that in addition to discussing which direction the City might take, as a member of the League Resolution Committee, she will be considering a resolution from the City of Garden Grove which directs city representatives on the Orange County Transportation Authority (OCTA) Board to place Measure M on the Countywide ballot. She requested feedback from Council. The City Attorney confirmed that although it is not on the agenda, .it would be within the purview of Council to vote on the Garden Grove resolution since it addresses the Orange County bankruptcy issue. Council Member Genis stated that the existing settlement agreement for nonschool participants has $,342 million in secured settlement claims and $403 million in repayment claims for a total of $745 million. She noted that the City Composite Proposal shows these as recourse claims and nonrecourse claims with a total of $709 million with a different "split". She wanted to know the basis for that difference. The Finance Director responded that she would obtain this information for Council by August 10, 1995. Council Member Genis thought it would be a good idea to endorse various proposals with several priorities. She felt the proposal received today was a,good one but she had a question regarding the OCTA loan. She.' commented .that gas taxes must go for transportation; however, in this instance, a loan is being repaid instead of the funds being used for transportation purposes. She asked whether this would pass legal review. She believed that the diversion proposed by the Legislature was perhaps taking more from OCTA than the County needed. She asked if there were other means of transferring revenues, and stated that she would support the voters' decision. Mayor Pro Tem Buffa could not support the Garden Grove resolution at this time. In his opinion, there were some problems with the theory that Measure M can be placed on the ballot and asking voters if $340 million can be redirected for light rail. He pointed out that the $340 million is not available now but would be collected over the next 20 years. Mayor Pro Tem Buffa stated that according to some opinions, Measure M cannot be placed on the ballot unless it is to be rescinded. Council Member Genis stated that Measure M can be repealed; however, most discussions on the measure have focused on the reallocation of funds' under the revenue portion of the plan. She added that Measure M can be revised by the voters to change the funding allocation, and that she heard Sacramento is considering overriding the Board of Supervisors in order to do this. Council Member Genis preferred the loan option if it could be done legally. MOTION Mayor Pro Tem Buffa made a motion, seconded by Council Member To Reject Endorse- Monahan, not to endorse the Garden Grove resolution as presented. ment of Garden Council Member Genis could not support the motion as stated, and Grove Resolution suggested a' change to some of the language. She recommended OCTA place Measure M on a countywide ballot as soon as practicable and in accordance with legal requirements to allow voters � y f �.t 67 the opportunity to reallocate up to $350 million for bankruptcy recovery purposes, as opposed to saying "repeal or modify". Council agreed that property and sales tax diversions were unacceptable, and that there was a need to prioritize. Council Member Monahan did not want to see Measure M repealed, and shared Mayor Pro Tem Buffa's concerns. He expressed possible support of the resolution as reworded by Council Member Genis, noting that the voters will make the final determination. Council Member Hornbuckle stated that she would support Mayor Pro Tem Buffa's motion, and would present Council Member Genis's wording at the League meeting on August 10, 1995. Mayor Pro Tem Buffa was willing to amend his motion to support the City's representative on the League Resolution Committee who would take Council Member Genis's suggested wording for discussion. He repeated his opinion that the Garden Grove resolution is premature and is based on specific assumptions. SUBSTITUTE Council Member Genis stated that she would offer a substitute MOTION motion with the first preference being for the loan scenario, Adopted Council assuming it can be accomplished legally. She motioned to adopt Resolution 95-68 Resolution 95-68, A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COSTA MESA, CALIFORNIA, DIRECTING THE CITY REPRESENTATIVE ON THE BOARD OF DIRECTORS OF THE ORANGE COUNTY TRANSPORTATION AUTHORITY TO PLACE THE MEASURE M SALE TAX ORDINANCE ON A COUNTYWIDE BALLOT FOR THE PURPOSE OF REPEAL OR MODIFICATION which is similar to the Garden Grove resolution with changes under "now therefore be it resolved...", and following the wording "as soon as it is practicable", add "to the extent consistent with State law", and then, "to allow voters a chance to reallocate up to $350 million in Measure M funds for bankruptcy recovery purposes". The motion was seconded by Council Member Hornbuckle, and carried 4-0, Mayor Pro Tem Buffa voting no. Mayor Pro Tem Buffa stated he could not support the substitute motion with such specific wording. He repeated that $350 million is not immediately available, other than for road projects. Council Member Genis responded that OCTA indicated it could have $350 million available to lend to Orange County in the near future, and had funds to purchase an airport a few weeks ago. Mayor Pro Tem Buffa replied that it is a separate issue from placing Measure M on the ballot, that careful consideration is necessary, and that he would be more comfortable with a loan from OCTA. As a point of clarification, Council Member Hornbuckle stated it was her understanding that Council would oppose the Garden Grove resolution as written, but would support the changed wording, and that the'preference would be for -'the loan. Mayor Pro Tem Mayor Erickson congratulated Mayor Pro Tem and Mrs. Buffa on Buffa Left the the occasion of their 25th wedding anniversary. Mayor Pro Tem Meeting Buffa left the meeting to attend a celebration dinner. Council Member Monahan had little confidence in the City's being repaid. He stated that he would support a resolution which would forgive the debt, with contingencies that there would be no raid on property taxes, sales taxes, or City reserves. He suggested that if the City were to take such action, other cities might follow suit. He suggested that if money were recovered from Merrill Lynch, that the debt be paid from the recovered money. MOTION Council Member Genis moved that the City accept that the debt Accepted Debt would be secured only by 'a' Merrill Lynch settlement, and any if "Secured"; additional debt would not be repaid; that the City opposes the Opposed Tax diversion of traditional City revenues such as the property tax and Diversion sales tax, and that the City would be given credit for any such diversion which may occur in the amount of forgiven debt with interest; and, as suggested by the City Manager, that any provision for forgiving interest be tied to the County doing likewise. The motion was seconded ;by Council Member Monahan, and carried 4- 0, Mayor Pro Tem Buffa absent. MOTION Council Member Hornbuckle made a motion, seconded by Council Supported City's Member Genis, to go on record as; supporting the City Composite Composite Plan Plan, with the amendment that under the $100 million transfer from the Harbors, Beaches and Parks District and Flood Control District, add the wording . "or other County controlled accounts", as recommended by .Council Member Genis. The motion carried 4-0, Mayor Pro Tem Buffa absent. Council Member Genis requested that the City vigorously support efforts to fully open Orange County's budget, and asked if the request should go through. the League of California Cities. The City Manager responded that such an action was approved by the Orange County Division of the League, and a request was made to the County in connection' with preparation of the County budget. He reported that the Orange County Legislative Delegation was also approached on the same subject but a favorable response was not . received. He suggested a letter addressed to the Governor be authorized requesting an independent third party review, with copies distributed to the Board of Supervisors. The Finance Director noted that by subordinating Costa Mesa's claims, the City is recognizing that the only way to receive repayment would be if the County recovers $709 million from the 'Merrill Lynch claim. 'Council Member Hornbuckle thought it would be appropriate for 'Mayor Erickson, as, Council's voting representative, to keep the Council's comments in mind; however, he should vote appropriately if there were changes;in the proposal. Council Member Genis stated that' she heard of another proposal which suggested looking at the County's Redevelopment Account. She recommended having the Technical Group investigate the possibility of the County Redevelopment Agency giving up its tax 'increment money, which would then go to the General Fund. The Finance. Director responded that she is currently exploring this issue, and should have an answer by August 10, 1995. Mayor Erickson announced that by consensus, Council supported having the Technical Group look into the County Redevelopment Agency's tax increment money. Mayor Erickson deferred to Redevelopment Agency Chairperson Hornbuckle. i Agency Member Monahan referred to the Resolution adopted upon by Council concerning the Orange County bankruptcy debt, and 'asked if the Agency would be required to adopt such a resolution. City Attorney Kathe replied in the affirmative. MOTION On motion by Agency Member Monahan, seconded by Vice Adopted Agency Chairperson Genis, and carried 4-0; Agency Member Buffa absent, Resolution 191-95 Resolution 191-95, A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF COSTA MESA, CALIFORNIA, DIRECTING CITY REPRESENTATIVES ON THE BOARD OF DIRECTORS OF THE ORANGE COUNTY TRANSPORTATION AUTHORITY TO PLACE THE MEASURE M SALES TAX ORDINANCE ON A COUNTY -WIDE BALLOT FOR THE PURPOSE OF' REPEAL, OR MODIFICATION, was adopted directing the Agency Representative on the Board of Directors of the Orange County Transportation Authority to place Measure M on a Countywide ballot for the purpose of repeal or modification which is similar to the Garden Grove resolution with changes under "now therefore be it resolved..", and following the wording "as soon as it is practicable", add "to the extent consistent with State law"; and then', "to allow voters a chance to reallocate up to $350 million in Measure M funds for bankruptcy recovery purposes". ADJOURNMENT The meeting was adjourned at 8:47 p.m. May of the City of Costa Mesa ATTEST: Deputy City lerk of the City of Costa Mesa f �