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HomeMy WebLinkAboutMinutes - Minutes - City Council - Meeting Date: 11/20/2001 * PLEASE NOTE: Since the Glendale City Council does not take formal action at the Workshops, Workshop minutes are not approved by the City Council. MINUTES CITY OF GLENDALE CITY COUNCIL WORKSHOP November 20, 2001 1:30 p.m. PRESENT: Mayor Elaine M. Scruggs, Vice Mayor Thomas R Eggleston, and Councilmembers Joyce V. Clark, Steven E. Frate, David M. Goulet, H. Phillip Lieberman, and Manuel D. Martinez ALSO PRESENT: Martin Vanacour, City Manager; Ed Beasley, Assistant City Manager; Rick Flaaen, City Attorney; and Pamela Oliveira, City Clerk 1 . COMMUNITY DEVELOPMENT BLOCK GRANT AND HOME INVESTMENT PARTNERSHIPS PROGRAM FISCAL YEAR 2002-2003 APPLICATION PROCESS CITY STAFF PRESENTING THIS ITEM: Ms. Pam Kavanaugh, Deputy City Manager; Ms. Gloria Santiago-Espino, Community Housing and Revitalization Director; and Mr. Gilbert Lopez; Neighborhood Revitalization Supervisor. OTHER PRESENTER: Mr. Ray Weinstein, Vice Chair of the Community Development Advisory Committee. Each year, the Chairperson of the Community Development Advisory Committee (CDAC) meets with the City Council on funding priorities for the Community Development Block Grant (CDBG) and HOME Investment Partnerships (HOME) Programs. Eligible CDBG activities include public service programs, housing-related activities, infrastructure improvements, and public facility improvements. The HOME funds may be used for activities that increase or preserve affordable housing. Grant-funded activities must benefit primarily low- and moderate-income individuals and families. Guidance from the City Council was requested to establish funding priorities for Fiscal Year 2002-2003. City Council guidance provided in the past to the CDAC and staff has been very helpful. The CDAC has been diligent in following the Council's direction when making funding recommendations. Staff has submitted to the Council a summary of the Council's funding priorities for the past several years. In addition, guidance from the City Council was requested concerning the following housing rehabilitation programs operated by the Neighborhood Revitalization Division: Single-Family Housing Rehabilitation Program, Exterior Improvement Program, Roof Repair/Replacement Program, and Demolition/Clearance activities. These and other related programs have assisted approximately 4,000 Glendale homeowners and citizens since 1978. In an effort to minimize the large amount of data the CDAC must review, it was proposed that the funding for the City's housing rehabilitation programs be pre-allocated on an annual basis rather than awarded as part of the grant application process. The annual funding level approved by the City Council has been consistent and predictable. Staff will present the information obtained at this Workshop to the CDAC at its regular meeting scheduled for December 19, 2001. The Community Development Advisory Committee met on September 19, 2001 to prepare for the Fiscal Year 2002-2003 grant process. At this meeting, the CDAC requested additional information on the performance of grant applicants who have received federal funding in the past. This information will assist them in making funding recommendations. The CDAC also recommended that the CDBG and HOME funds be pre-allocated to the City's housing rehabilitation programs. On October 24, 2001, the Neighborhood Revitalization Division conducted an orientation meeting with prospective grant applicants to provide assistance on the grant process. In late October and early November of 2001, the Neighborhood Revitalization Division offered a series of mini-workshops to prospective grant applicants. Topics covered at these workshops included application preparation, presentation of financial information, federal requirements for construction-related projects, and grant administration. The workshop on grant administration focused on agency responsibilities under grant agreements, and addressed financial accountability for the federal funds. The City began receiving CDBG funds in 1978, for the primary purpose of housing- related activities. Since that time, the City has received $30,789,000 in CDBG funds. In 1992, the City began receiving HOME funds; $4,502,061 has been received to-date. On October 11, 2001, prospective CDBG and HOME applicants were notified of the upcoming grant cycle by the Neighborhood Revitalization Division and invited to the orientation meeting. On October 18, 2001, a public notice was published in The Glendale Star notifying interested parties of the availability of funds for Fiscal Year 2002-2003 and the orientation meeting. 2 In Fiscal Year 2002-2003, it is estimated that the City will receive approximately $2 million in CDBG funds and $450,000 in HOME funds. The City will receive notification of actual funding allocations in December of 2001 or January of 2002. The recommendation was to review information and provide guidance to the Community Development Advisory Committee regarding funding priorities and the process for requesting funding for the City's housing rehabilitation programs. Councilmember Goulet stated that infill redevelopment, demolition, and cleanup are critical and should continue to be funded. He asked for additional information on the CSA (Community Services of Arizona) Emergency Home Repair Program. Mr. Lopez explained that the CSA program fills the gap for emergency services, particularly for senior residents and single head-of-household situations. Councilmember Goulet said people have gained a sense of trust in the Community Development Block Grant Program. Councilmember Clark asked what areas were considered CDBG areas. Ms. Santiago explained that the funds are intended for programs that benefit low and moderate income individuals or neighborhoods that have 51% low and moderate income households. She said areas in the central part of the City are primary areas; however, they also address homeowners throughout the entire City. Councilmember Clark asked how they determine that a neighborhood has 51% low to moderate income households. Ms. Santiago said they utilize census information. Councilmember Clark asked if the City publishes information regarding areas that are eligible for CDBG funding. Ms. Santiago said a map of the City and census track information is included in the grant application process. Councilmember Clark suggested that, in light of the State's expected rise in unemployment, the City's main focus should be on re-educating and re-training employees and providing job seeking assistance. Councilmember Martinez asked if Granada Estates would qualify for CDBG funds. Ms. Santiago said the neighborhood itself would not, but individual homeowners could qualify for some of the programs. Councilmember Martinez asked if mobile home owners could qualify for assistance. Ms. Santiago said mobile home owners are eligible for some programs, including roof repair and social services programs. Councilmember Martinez asked how information is disseminated to individual homeowners. Ms. Santiago said many of their programs are advertised by word-of- mouth. She stated that they also provide information through flyers and brochures. Councilmember Martinez agreed that the City needs to emphasize and give priority to unemployment issues. He also suggested that the City add land acquisition for affordable housing programs as a priority. Councilmember Lieberman asked if the $648,000 for housing rehabilitation was for homes owned by the City. Ms. Santiago explained that the homes are owned by private homeowners. Councilmember Lieberman asked if the $75,000 would be applied towards homes that the City had previously sponsored through a block grant program. Ms. Santiago said it would not. 3 Vice Mayor Eggleston asked Ms. Santiago to review Council's recommendations from last year. Ms. Santiago said the recommendations were for affordable housing projects. She noted that the Committee allocated $952,000 for housing-related activities. She stated the Council also gave a recommendation for clearance of blight, for which the committee allocated $90,000. She said Council also gave direction for seniors and youth, to which the Committee allocated $181,000 and $118,000, respectively. Vice Mayor Eggleston expressed his opinion that last year's recommendations served the City well. Councilmember Frate agreed that the City should spend a majority of the money on affordable and low income housing. He stressed the importance of rehabilitating homes, when possible. He stated that it is often difficult to relocate individuals, He said it is important to utilize the City's limited funds where they can do the most good. Councilmember Clark asked why home-delivered meals through the YWCA (Young Womens Christian Association) has not been funded in the past. She expressed concern about elderly residents who are unable to leave their homes. Ms. Santiago explained that the City Council generously agreed to put home-delivered meals in the General Fund because they felt it was an essential service. Mayor Scruggs said, as an advisory Board member for the YWCA, she has been made aware of the growing need. She stated that the City Council may need to revisit the issue. She acknowledged the importance of helping people regain employment. She stated that she would like to see a balance between getting people into jobs and taking care of them while they are unemployed. Mayor Scruggs noted that the Westside Food Bank serves 80,000 people every day. She said, together with services aimed at helping to alleviate hunger and homelessness, she supported a continued emphasis on senior and youth services. Councilmember Goulet noted that the number of seniors in need of food has increased and will continue to do so in the future. Councilmember Lieberman said he was in favor of the affordable housing projects and the clearance and demolition of blighted areas. He stated that he also supported programs that benefit seniors and youth. He suggested that they add training and/or retraining for unemployed citizens. Mayor Scruggs summarized by stating that Council supported the priorities implemented by the Community Development Advisory Committee in the past. She stated that the Council was also very interested in unemployment, affordable housing, and alleviating hunger, particularly the YWCA home-delivered meals program. In response to Mayor Scruggs' request, Ms. Santiago reviewed how her department ensures that agencies have the financial capacity to carryout the Council's goals. She explained that every agency that submits an application must have a current, audited financial statement. She said the agencies are required to attend training prior to the 4 funds being granted. She stated that her Department also provides technical assistance on a monthly basis and does formal monitoring. Councilmember Clark asked if they looked at what percentage of granted dollars were used for administrative services. Ms. Santiago said they look at administrative costs, as well as other resources the agency is offering. Vice Mayor Eggleston suggested that they continue with last year's recommendations, while adding in public services. 2. GLENDALE GATEWAY AND MANISTEE TOWN CENTER (COYOTES) DEVELOPMENT UPDATE CITY STAFF PRESENTING THIS ITEM: Mr. Ed Beasley, Assistant City Manager; Mr. Jim Colson, Economic Development Director; and Mr. Art Lynch, Finance Director; and Ms. Paula Ilardo, Marketing & Communications Director. OTHER PRESENTERS: Mr. Tim Wright, The Ellman Companies, Senior Vice President, Real Estate Operations; Mr. Shawn Hunter, President, Phoenix Coyotes; Mr. Jeff Hack, Director of Public Affairs, The Ellman Companies; Ms. Cynthia Crockett and Mr. Bruce Martens, with the law firm of Squire Sanders; Mr. Patrick McGarry, Project Lead, International Facilities Group, arena consultant; Mr. Jay Ruffner, Lead Attorney with the law firm of Fennemore Craig; Mr. Bill Eggleston, Director and Shareholder of Fennemore Craig; Mr. Ron Ballard, Partner with Fennemore Craig; Mr. Tom Hocking, T.L. Hocking &Associates; and Mr. John Overdorf, with the law firm of Greenberg Traurig. City staff provided the Mayor and Council with an overview of the Glendale/101 Arena (Coyotes)/Mixed-Use Project. Specific topics covered included a review of the conceptual site plan and development agreements. In April of 2001, the Council unanimously approved a memorandum of agreement with the Coyotes and The Ellman Companies to develop the Glendale/101 Arena (Coyotes)/Mixed-Use Project and redevelop Manistee Town Center. Council directed staff to negotiate development agreements for two development projects that met the mutual objectives of the Coyotes/Ellman Companies and the City of Glendale. Staff has been working with the Coyotes/Ellman Companies to structure the agreement in such a manner as to ensure a positive, long-term working relationship between all parties. As a result of the action taken by Council, the City of Glendale will be the home to the National Hockey League (NHL) Coyotes and a mixed-use development consisting of at least 1.6 million square feet of diverse retail, entertainment, dining, office, and residential development. 5 The City and The Ellman Companies have entered into a development agreement to redevelop the Manistee Town Center site, which will result in a major improvement to the City Center area and provide a new amenity to the City. Staff has been working with the Mayor and Council, as well as various other community groups, to discuss the project and answer questions. The City of Glendale has dedicated a portion of its web site to these projects and has also established a special telephone hotline for those without Internet access. The City has entered into a memorandum of agreement with The Ellman Companies to develop Glendale Gateway and redevelop Manistee Town Center. The City's financial commitment is to provide funding of up to $180 million, over a thirty-year period, in exchange for a specific amount of development (at least 1.6 million square feet of diverse retail, entertainment, dining, office, and residential development) according to the terms and conditions, which will be outlined in the development agreement. The planned development will result in increased revenue, which will help support general services, pay the debt service on the $180 million, and provide additional police and fire service throughout the City. This project will also accelerate development in the Glendale Gateway Area, resulting in increased amenities, job opportunities, and tax base; and significantly increase property values and assessed valuation. This item was presented for information, discussion and staff direction. Mr. Colson introduced members of the teams from The Ellman Companies, The Phoenix Coyotes, and the City. Mr. Lynch introduced members of the financial team. Mr. Wright expressed Mr. Ellman's regrets at not being able to attend the meeting. He noted that Mr. Ellman was out of the country. He reviewed the site and design concepts. He explained that the 223-acre site would include up to six million square feet of development. He stated that the project's very high quality development would include restaurants, Class-A office, entertainment, and recreational uses, a multi- purpose arena, destination, neighborhood and specialty retail, hotels and residential units. He said the original agreement for 25 acres of multi-family residential had been reduced to 13 acres in response to public comment. He said, however, they felt strongly that a multi-family component needs to be included to help support the retail and office uses. He stated that the power center and neighborhood center would be developed first and open prior to or along with the arena. He said they were very happy with the progress being made. He noted that retailers had expressed a greater level of interest in recent weeks. Mr. Hunter expressed his excitement. He said he wished they were playing in Glendale this fall. He noted that they had participated in Jazz Fest and Glendale Glitters and held three Coyote college events. He stated that they also kicked off their statewide goodwill tour by visiting eight cities. He said they would build the best building in the 6 Valley, if not North America, and, as such, it will attract the best events. Councilmember Goulet asked if the plan for the southeast corner had been presented to the public. Mr. Wright said they would present it to the public during their next round of neighborhood participation meetings. He explained that they had only recently acquired control for the design and development of that parcel. Mayor Scruggs thanked Mr. Hunter, on behalf of the elected officials and the citizens of the West Valley, for their participation in special events and willingness to meet with residents and local officials. Councilmember Clark asked when Council would receive information on the Nationwide Arena in Columbus, Ohio mentioned as a standard in the agreements. Mr. McGarry offered to provide that information later today. Mr. McGarry said his vision, as the City's consultant, was to maintain the public's trust throughout the process, ensure work progresses as planned, make certain that costs are accurate, and that the end product meets the long-term needs of the community. He said the arena will, at a minimum, meet or exceed the America West Arena in every aspect. He explained that the arena's number of seats and suites with a view to the floor, its superior sound systems and acoustics, and easy access for deliveries would make it a better building than any other building in the Phoenix area, and, as such, it would attract the best shows. He said combining the arena's marketability qualities with its location in the midst of a mixed-use development will result in economic growth. He explained that the critical mass created by the arena would be in the direct path of the dining and shopping experiences, leveraging the investment to its highest level. Mr. McGarry complimented the City on its innovative approach to financing the project. He pointed out that the revenue streams are not tied to costs. Mr. Ruffner thanked Mr. Colson, Mr. Beasley, Mr. Lynch, and Mr. Flaaen for their assistance and the Council's significant investment in terms of time and energy. He recognized Mr. Wright, Mr. Hunter, Mr. Martin, and Ms. Crockett for their tireless efforts in preparing the documentation. He listed the principal legal documents involved, the Arena Management Use and Lease Agreement, the Arena Development Agreement, the Mixed-Use Development Agreement, the Team Guaranty, and the Safety and Security Agreement. The Arena Management Use and Lease Agreement Mr. Eggleston reviewed the specifics of the Arena Management Use and Lease Agreement. He stated that it is the governing document with respect to how the arena facility would be operated. He explained that the purpose of the agreement is to provide for the ownership, management, use, and leasing of the facility. He stated that the City of Glendale would own the arena and the Coyotes would be the primary tenant, committed to using the facility for 30 full hockey seasons. He stated that the Arena Manager, an affiliate of The Ellman Companies, would conduct the day-to-day 7 operation of the arena. He noted that Glendale 101 Development, LLC and Coyote Center Development, LLC, were also parties to the agreement. He explained that the initial term of the agreement is for 30 full hockey seasons, with one two-year and two five-year renewal terms. With regard to cash flows, Mr. Eggleston stated that the team, the arena sub-manager, the retail/residential developer, and the entertainment developer would effectively guaranty any operating expense shortfalls. He noted that a $1 million operating reserve account would also be established and funded in full by the team prior to substantial completion of the facility. He explained that money running through the operating account would first be used for operating expenses; second, to make any necessary contributions to the operating reserve account; third, to pay the City for any unpaid guaranteed amount; and fourth, to appropriate parties for any advances made for the benefit of the arena. He said the remaining monies would be distributed to the parties, pursuant to the schedule set forth in the agreement. Mr. Eggleston explained that the City would receive team fees in the amount of $42,667 per month for the first 20 years, $91,667 per month for years 21- 25, and $95,833 per month for years 26-30. He stated that the rental for the first two-year renewal term would be $100,000 per month, while the second and third five-year renewal terms would be at fair market value. He reported that the team had also agreed to make a per game payment in the amount of $25,000, designed to cover operating expenses. He noted that this payment would increase 3% annually. He stated that the team would also make quarterly payments to the Renewal and Replacement Account. He pointed out that the City would also receive cash flow from parking fees at a rate of $2.45 per qualified ticket, with an increase of $.05 per year throughout the term of the agreement. Mr. Eggleston reviewed the arena recovery fees. He explained that the Base Recovery Fee would be $1.00 per qualified ticket for the first five years, $1.50 per qualified ticket for the next five years, and $2.00 per qualified ticket thereafter. He explained that the Base Recover Fee would be payable as follows: (1) to the Arena Developer until the date of recovery of the developer's deposit or until the 13th anniversary of the operation's start date; (2) to the team until the date of recovery of pre-opening expenses funded by the team or the 13th anniversary of the operations start date, in an amount not to exceed $2.5 million; and (3) to the City for years 14 through 30. He explained that the Supplemental Recovery Fee would be applicable only if the City paid in excess of $180 million in construction costs or pre-opening expenses. He stated that the City would receive $1.00 per ticket throughout the term of the agreement once the Supplemental Recovery Fee was triggered. He noted that the total of the Base and Supplemental Recovery Fees cannot exceed $2.00 per qualified ticket. Mr. Eggleston discussed the rights and obligations of each party. He stated that the Arena Manager is entitled to delegate to an arena sub-manager and to a quarterly Management Fee of $125,000, plus 1.5 percent of operating revenues. He noted that the Management Fee would not be paid when operating expenses are not current or if the team has not made appropriate Renewal and Replacement contributions. He said 8 the Arena Manager is obligated to do everything necessary to prepare for the opening of the arena and to manage and operate the arena, including maintaining the facility at a level at least equal to the quality of America West Arena and using commercially reasonable efforts to book events. Mr. Eggleston stated that the team has the right to (1) use the facility for 30 years; (2) retain hockey ticket receipts, merchandise sales, concessions, advertising, naming rights, suite license revenues, sponsorship fees, and broadcast rights as exclusive team revenues; and (3) have exclusive use of certain spaces, including the team box office, locker room, office and storage space, retail store(s), and a certain number of parking spaces. He said the team also has the right to control concessions, advertising, naming rights and broadcast rights, with the exception of allowing the Arena Manager to book up to two licenses per year for events sponsored by an entity that would otherwise violate the exclusivity provision in the team's advertising or naming rights agreements. He stated that the team would also control suites and premium seats, with right of first refusal, and would be required to turn over all revenues from those seats to the appropriate sponsor or promoter of the event. He said the team was obligated to play its games at the facility for 30 full hockey seasons. He noted that the City would be entitled to seek an injunction or, if unable to obtain an injunction, terminate the agreement and seek liquidated damages if the team defaults. Mr. Eggleston reviewed the City's rights and obligations. He stated that the City would be entitled to the use of one suite and related tickets for all events and use of the arena for up to four events per year that may feature performers normally booked in comparable facilities. He said the City would also be entitled to use of the arena for public service type events. He explained that, if the City imposes a tax on transactions and activities at the arena other than certain uniform taxes, and if the rate of such a tax exceeds the rate applicable to America West Arena, the City shall pay to Team and Arena Manager an amount equal to the difference. He noted that the agreement includes a non-competition provision, which prohibits the City from participating in a competing facility. Councilmember Lieberman said he was unable to agree with the statement contained on Page 3 of the agreement, "The City may take additional action at substantial additional cost to accomplish the City's objectives as described in this agreement and related agreements." He also mentioned the non-competition paragraph on Pages 92 and 93. He asked if the clause had been modified pursuant to previous discussions. Mr. Eggleston said language had been added to the agreement that would allow any open-air stadium or sports facility, including one with a movable roof. Mayor Scruggs said the Council had given direction regarding acceptable wording of the statement mentioned by Councilmember Lieberman. She asked Mr. Ruffner to review the language and explain the reasoning behind its inclusion in the agreement. Mr. Ruffner said they had changed the statement in all three agreements to read the City "may", rather than "will", incur substantial additional indirect costs not contemplated at this time. He explained that the citizens needed assurance that the Coyotes would 9 remain in Glendale and at the new arena for the entire 30 years of the agreement. He said two remedies are included in the Arena Management and Use Agreement: (1) the right to seek an injunction should the team seek to leave the arena before the end of the term of the agreement and (2) the right to enforce a liquidated damages provision. He explained that the purpose of the statement is to lend support to the idea that, while the City's investment of taxpayer monies is more than sufficient to establish the expectations set forth in the financial statements, the City may incur additional expenses over and above the amount specifically called for in the Arena Development Agreement. Councilmember Lieberman stated that he would not approve the statement without first receiving a list of the causes for which the City may need to spend the additional monies or, at a minimum, setting a cap on the amount that could be spent. Mr. Ruffner said it would be unnecessary to put a cap on something that is completely within the discretion of the City Council. He explained that the provision does not obligate the current or future City Councils to provide any money. Councilmember Lieberman suggested that the statement be removed altogether. Mayor Scruggs stated that the majority of the Council recognized the need to protect the City during the 30-year term. In response to Councilmember Lieberman's question, Mr. Eggleston said there is a general standard in all of the agreements that requires parties to act reasonably when giving or withholding their consent. Councilmember Martinez stated that he was comfortable with the new language, which reads the City "may" incur additional costs. Councilmember Clark said it was her understanding that the costs for construction of the arena were capped at $180 million. She asked where the Supplemental Recovery Fee applies. Mr. Ruffner explained that unanticipated factors could cause construction costs to increase; however, the City is under no obligation to spend more than $180 million. He said the Supplemental Recovery Fee allows the City Council a means to conclude construction if it deems that doing so is in the best interest of the City, should construction of the arena cost more than $180 million. He stated that the City would receive $1 .00 from each ticket throughout the 30-year agreement. Councilmember Clark asked for an explanation of the developer's deposit. Mr. Ruffner explained a $10 million developer's deposit has to be posted by the developer and provides another level of protection to the City. Councilmember Clark asked if the developer would be required to add money to its deposit should construction costs exceed $180 million. Mr. Ruffner said they would if change orders required by the developer caused the cost of the project to exceed the guaranteed maximum. Mayor Scruggs explained that the Supplemental Recovery Fee would apply if the developer refused to increase its deposit. She noted that the Supplemental Recovery Fee would continue throughout the 30 years, even if all costs have been recovered. 10 Councilmember Clark said she found the issue confusing. Mayor Scruggs agreed with Councilmember Clark. She stated that it should be clarified. Mr. Ruffner stated that there are numerous levels of protection against the City having to spend more than $180 million; however, the Supplemental Recovery Fee would allow the City to complete the project and recover the funds should construction costs be higher than anticipated. Councilmember Lieberman asked if the developer deposit could consist of a letter of credit, as well as cash. Mr. Ruffner stated that it has to be readily available funds, which could include a letter of credit. Mr. Wright said the statement referred to by Councilmember Lieberman does not create any obligation or expectation for the City to provide any more than the $180 million referred to in the budget. Mayor Scruggs asked if the Council still supported retaining the statement. The Council indicated that it did. Vice Mayor Eggleston noted that he and Mr. Eggleston were not related. In response to Vice Mayor Eggleston's question, Mr. Ruffner stated that they would assert in a court of law that the City has a very substantial investment, not necessarily encapsulated by the $180 million. Councilmember Clark asked if there was any obligation on the City's part to contribute to the Operating Reserve Account. Mr. Eggleston stated that there was no obligation. Councilmember Clark asked for a definition of a "qualified ticket." Mr. Eggleston explained that a qualified ticket is a full-price ticket. He noted that there is a sliding scale as to the number of free tickets the team can give out and any tickets exceeding that number would be considered qualified tickets. Councilmember Clark asked for confirmation that the base recovery fee is based strictly on qualified tickets. Mr. Eggleston agreed. Councilmember Clark asked if the City would be allowed to keep the operating revenue on any of the four events it is allowed to hold in the arena. Mr. Wright stated the City would keep the operating revenue; however, it would also be responsible for any losses. Arena Development Agreement Mr. Ballard reviewed the Arena Development Agreement. He explained that it provides for the obligations of the parties with respect to the design and construction of the arena. He stated that the arena would be a 17,500 seat, multi-purpose arena and would be owned by the City. He said the City would also own the parking and public infrastructure and improvements. He explained that the developer would retain 11 adjoining properties for its mixed-use development. He said the Arena Developer would develop the arena for the City, which would provide up to $180 million for construction costs. He identified the parties to the agreement as being the City of Glendale, Arena Development, LLC (Arena Developer), and Coyote Center Development, LLC (Entertainment Developer). He said land for the arena and parking would be acquired by the Entertainment Developer, with the portion applicable to the arena conveyed to the City at the Developer's cost. He stated that the land for public infrastructure would be acquired upon completion of the site plan. He reviewed the provisions for the design and construction of the arena Mr. Ballard reported that the City is required to contribute up to $180 million, with $30 million financed by general obligation funds and $150 million financed by other bonds and financial obligations. He stated that the Arena Developer is required to contribute, as a Developer Deposit, any excess over the City commitment amount. He noted that the City would be entitled to a $1 ticket surcharge for Arena events should it elect to fund any Developer Deposit which the Arena Developer fails to fund. He explained that a portion of the City's commitment amount would be used to acquire the land for the arena and parking with the remaining funds and Developer Deposit placed in one or more Disbursement Accounts. He stated that only eligible costs, those approved by the City and the developer, would be disbursed from the Disbursement Accounts. He stated that the City would be required to pay the costs of its consultants, advisors and certain insurance and bond reserve costs from sources other than the Disbursement Costs. He said the Arena Developer would be required to pay its Development Fee and pre-opening expenses from sources other than the Disbursement Accounts. Mr. Ballard stated that expedited disputes would be submitted to an agreed-upon neutral party for review and decision, while other matters would be resolved pursuant to rules of the American Arbitration Association. In response to Councilmember Clark's question, Mr. Ballard said they anticipated the construction costs for the arena to total $108 million. Mr. Ruffner said the $180 million figure includes the cost of the City's infrastructure. Councilmember Clark pointed out that attorney fees and consultant costs were not included in the $180 million. Councilmember Lieberman asked whether interest costs were included. Mr. Ballard stated that the budget includes interest for the construction period; however, interest on the bonds used to finance the construction over the 30 years was not. Councilmember Clark noted that the Arrowhead Towne Center had paid back its tax rebate substantially ahead of schedule. She stated that they had every reason to anticipate that this loan and its associated costs would be paid earlier than provided for in the agreement. Mr. Ruffner agreed. He said reasonable scenarios indicate recovery will occur sooner than 30 years. Councilmember Clark said she would expect to see other development in the area, which would generate sales tax revenue, thereby helping to payoff the bond financing. 12 Mixed-Use Development Agreement Mr. Ruffner identified the City of Glendale, Coyotes Center Development, LLC, and Glendale-101 Development, LLC as parties to the Mixed-Use Development Agreement. He explained that the purpose of the agreement is to provide for the private and commercial development of the portion of the 223-acre site not occupied by the arena, arena parking and public infrastructure. He stated that the site would be purchased by the Entertainment Developer, with the arena, arena parking and public infrastructure land sold to the City at the Developer's cost. He pointed out that all approvals in connection with the site are subject to applicable law and the City's regular processes. He stated that the agreement provides for future conveyances of the arena parking in exchange for replacement parking. He explained that the parties anticipate higher and better uses for that property. He said the agreement sets forth certain minimum requirements for development of the site. He stated that the agreement also states that the City will provide easements of its arena parking to the commercial development in and around the arena for use when an arena event is not scheduled. He said, in turn, the arena receives an easement for the 500 private parking spaces from the surrounding commercial development. He stated that, as with the other agreements, disputes were subject to arbitration. Councilmember Clark asked for confirmation that accepting the agreement in no way obligates the City to accept the site plan as presented. Mr. Ruffner agreed. He stated that an application had been accepted and was going through the regular City processes. Councilmember Clark asked if there would be other opportunities for citizen participation with regard to the site plan. Mr. Ruffner stated there would be. Councilmember Clark asked about the location of replacement parking. Mr. Ruffner stated that replacement parking must be in similar proximity to the arena. Councilmember Clark said including the cost of parking in the price of tickets encourages people to park in designated parking areas rather than in neighborhoods. Mr. Ruffner agreed. He pointed out that the parking would serve multiple uses. Councilmember Frate asked if ticket holders would be guaranteed a parking space. Mr. Ruffner said the parking consultants were still looking at the issue, but he did not believe they intended to control access to parking. He said the consultants believe there will be more than ample parking. Councilmember Lieberman asked what they agreed to in terms of the price of parking. Mr. Ruffner stated that the agreed-on cost was $2.45. Councilmember Lieberman pointed out that parking would add a substantial cost to season tickets. Mr. Beasley stated that the ticket price was well within the range of NHL standards. Team Guaranty Mr. Ruffner stated that the Team Guaranty is provided to the City by Coyotes Hockey, LLC with the purpose of providing assurances of minimum mixed-use development. He explained that if developers construct the minimum space within set time limits, the 13 team is not responsible pursuant to the Team Guaranty. He said, however, if the developers fail to construct the required minimum development and if minimum Qualified Tax Receipts are not attained, the Team is required to make certain payments to the City, as set forth in Schedule A of the Team Guaranty. Mr. Ruffner pointed out that they added a Safety and Security Agreement as an Exhibit to the Management Use and Lease Agreement. He explained that it states the City will provide for the Arena Manager's use of full-time, active-duty police officers, both within and outside the arena. He said the City would also provide full-time, active-duty police officers and police assistants to handle all traffic in and around the arena and required by events at the arena. He stated that the agreement also calls for the City to provide paramedics at the arena as needed. He said, in return, the Arena Manager would pay the salary and benefits costs of the persons assigned to these duties, as well as an administrative fee of $60,000 in the first year, increasing as administrative costs increase. In response to Councilmember Clark's question, Mr. Ruffner explained that the Team Guaranty was a negotiated amount that the City felt it would have to be assured. He explained that the guaranty would go into effect if the developers failed to construct the 800,000 square feet and the amount of qualified tax revenues reported was less than $2,921,934. He noted that the team would not be responsible for more than $1 million per year. Councilmember Martinez asked Mr. McGarry to comment on the safeguards built into the agreements. Mr. McGarry said, in his experience, this was a very good deal. He noted that it is very unusual to get a team guaranty. Mr. Ruffner concluded by stating that they had worked hard with The Ellman Companies to create an arrangement that will work well for the City, the Coyotes, and the development of the 223 acres. He also expressed his appreciation for the time the Council had devoted to the project. Financing Concepts Mr. Lynch reviewed the debt structure. He explained that they took a very conservative approach. He stated that General Obligation Bonds would be used for the public infrastructure, while an excise sales tax revenue bond would be used to finance the remaining project debt. He said they were also researching the project's ability to issue parking revenue bonds. He explained that the Arena, City Sales Tax and other revenues, Retail Development Sales Taxes, and other revenue and Parking Fees all go to the City, which is responsible for issuing bonds and constructing the arena project. He said the revenues coming to the City would then be used for debt service, with any remaining monies being considered excess revenue. 14 Mr. Lynch reviewed a base case scenario for direct revenue. He stated that the arena sales taxes were generated from several different sources; however, the Base Recovery Fee, Parking, and Arena Rent generate the majority of revenue. He also reviewed base case scenarios for the retail component of the project and by-product revenues. Mr. Lynch discussed the financing cash flow. He pointed out that the City of Glendale would use Excise Tax revenues to repay MPC Bonds, General Obligation Tax revenues to repay General Obligation Bonds and Parking revenues to repay Parking Revenue Bonds. Mayor Scruggs asked where Base Recovery should be reflected. Mr. Lynch said it is a direct revenue. Mayor Scruggs pointed that out the chart should be modified to reflect that the Base Recovery Fee is a direct revenue. Mr. Lynch discussed the worst case scenarios. He stated that, assuming there was no growth, the City's excess revenue would total $103 million. In response to Councilmember Clark's question, Mr. Hocking stated that the $103 million in excess revenue does not include the $92.2 million earmarked for other purposes. Councilmember Clark pointed out that any surplus in those dedicated funds would have to be directed towards their intended purpose and could not be considered excess revenue. Mr. Hocking stated that adding the $92.2 million to the $103 million would give the total amount of excess revenue coming into the City as a result of the project. Councilmember Lieberman asked if interest was included in the total project cost. Mr. Lynch explained that Debt Service Cost includes the interest component. Councilmember Lieberman asked if the interest on the $150 million includes the $30 million from General Obligation Bond interest. Mr. Hocking stated it does not because it is secured by a completely different source of revenue, the secondary property tax. He explained that the primary property tax does not go towards debt service. He stated that it essentially flows through to excess revenues. Vice Mayor Eggleston said, in the worst case, the City would only make $103 million over the next 30 years. Mayor Scruggs asked Mr. Hocking how they had arrived at $343.1 million. Mr. Hocking explained that the $343.1 million reflects the total debt service, principal and interest, on $150 million of bonds to be issued for the project. He said the $203 million reflects the total cost for the arena project, including $180 million coming from City funding, $10 million of cost overruns funded by the developer, and an additional $10 million in pre- opening expenses and developer fees. Mayor Scruggs asked how they arrived at the excess City revenue figure. Mr. Hocking explained that they cannot add up each number to arrive at the excess total because it includes certain revenues that are not tied specifically to debt service. He offered to provide schedules that show total sales 1.5 tax for the arena, net parking and retail development taxes, as well as the base recovery fee and any developer guaranty. Mr. Hocking stated they are continually revising and refining the numbers and the charts reflect their best estimates at this time. Mr. Lynch reviewed the best case scenario. He explained that, if everything went as planned, the City would realize excess revenue totaling $475 million. In response to Councilmember Martinez's question, Mr. Hocking stated that they were continually revising and refining the numbers. He explained that the excess revenues on the worst case scenario included other revenues totaling $92.2 million, but did not include the Base Recovery Fee. He said, for this presentation, in an effort to be conservative, they had removed the $92 million in other revenues and added the Base Recovery Charge. Councilmember Clark asked how the total project cost increased from $201 million to $203 million. Mr. Hocking explained that they had added $2.5 million to the revised budget to account for any unforeseen contingencies. Councilmember Martinez noted that The Ellman Companies was originally going to pay for the arena construction and the City was going to reimburse The Ellman Companies at its completion. He said, because of the change, the City will reap the benefit of the differential, a total of $2.7 million. Mr. Lynch explained that they compared the borrowing rate for both the developer and the City and found the difference in borrowing costs to total $2.7 million. He said they would look at the various instruments as they get closer to issuing bonds to determine which will provide the lowest possible cost. Councilmember Clark asked how they will pay back the indebtedness incurred during construction, when no revenue will be generated during that time. Mr. Lynch explained that they would issue bonds in an amount sufficient to pay the first payment when it comes due, allowing completion of the construction. He said it would also allow for retail development to move forward. Councilmember Clark asked to see the Safety and Security Agreement. Mr. Colson stated that he would provide Council with all of the latest documentation at the conclusion of the meeting. Councilmember Clark stated that she was tentatively ready to move forward, but unable to make the final decision until seeing all documentation in its final form. Mayor Scruggs asked if the Safety and Security Agreement includes any cost to the City. Mr. Colson said there are no costs to the City. He explained that it is a revenue generator for the City. He confirmed that the agreement ensures that the City's police and fire departments will respond to problems at the arena. 16 ADJOURNMENT The meeting was adjourned at 5:10 p.m. 17