Loading...
HomeMy WebLinkAbout11/17/1986 Meeting M I NUT E S . Eugene City Council Umpqua Room, Valley River Inn November 17, 1986 5:30 p.m. COUNCILORS PRESENT: Richard Hansen, Debra Ehrman, Ruth Bascom, Freeman Holmer, Jeff Miller, Roger Rutan, Emily Schue COUNCILORS ABSENT: Cynthi a Wooten A REPORT FROM THE COUNCIL SUBCOMMITTEE ON AIRPORT FINANCING The adjourned meeting of November 12, 1986 of the City Council of Eugene, Oregon, was called to order by Mayor Brian B. Obie. A revised agenda was noted. Mahlon Sweet Airport Aviation Director Bob Shelby discussed the history of the airport terminal. He said that the airfield has no pavement surface (outside of some minor taxiways) that is over eight years old. He said that over $14 million in City funds, FAA trust funds, and the FAA's own budget funds have been invested in this facility since 1978. He said that e some of that money is directly related to the terminal project, such as a $1.6 million aircraft parking area that was in the CIP. In addition, he said that $885,000 has been invested in the design work of the facility and there is $3 million worth of capital improvements in the CIP directly related to the terminal project but not included. He said the purpose of the project is to increase the depth of the ticket lobby, enlarge the public seating for terminal visitors, move the car rental booths and gift shop out of the main lobby, increase the space of the flight kitchen and security area, and to locate all of the airlines in one line. The Ai rport Commission's recommendation was distributed. He said that the Airport Commission's recommendation to the subcommittee is that $1.9 million be deleted from the project, $850,000 be bid as an alternative bid, and $1.4 million would be funded through other sources. Finance Director Warren Wong summarized the information that was provided to the councilors and discussed staff's recommendation on the project. He said financing options that would be needed to pay the public share of the airport project included addit i ona 1 property taxes, a IIcash out," interfund loans, assumption of airport operating costs, and the identification of new revenue sources. He detailed the proposed financing strategy and cited the advantages and disadvantages of the proposal. Mr. Wong said that $1.7 million up-front cash would be needed to keep the project on the adopted timeline. The design process will continue, bid e MINUTES--Eugene City Council Dinner Session November 17, 1986 Page 1 documents will be issued, and a bid award will be made. He said the City will do the preliminary work to secure the long-term fi nanci ng, an e economic analysis will be done, project administration costs will be paid, and some site work will be done in spring 1987. He said that after completion of the audit on the last fiscal year, $194,922 was identified as money that is available and not currently obligated to any service or capital project. He said this money is net of funding the FY87 Capital Budget. He discussed the options that staff i dent ifi ed in order of increasing impact on existing operating and capital service levels that are funded by the General Fund. Mr. Wong discussed the proposed deferral of FY86 and FY87 capital projects in the Parks Department and Public Works Department. He said staff is confident that the projects listed can be deferred without creation of an emergency situation. He described the options available to make debt service payments if the City issues some type of long-term debt. He said that staff recommends the issuance of a Revenue-Backed General Obligation Bond for long-term financing. He said it will require a vote and it would authorize the City Council and the Budget Committee to levy a property tax if necessary. He said it is the lowest-cost financing of all the long- term debt instruments that are available. He described possible funding sources to be used for debt service repayment. Mr. Wong said that at a previous meeting, Mr. Hansen had asked if the City could get a revenue bond measure approved and also place a restriction on the levying of the tax. Mr. Wong said that after discusstng the question with bond counsels, it appears that restricting the levying of the tax is not possible. He said that the voters cannot be asked to approve a e revenue-backed general obligation measure which allows the City to levy property taxes and at the same time state that the City will never levy property taxes--it could appear to be a sham. Proposed debt service repayment schedules were discussed. Mr. Wong said that there would be a positive surplus for the first several years which would be placed in a reserve. He said the reserve would be used to make debt service payments. He stressed the importance of not defaulting on the debt. He discussed the adopted subcommittee recommendation of a long- term debt issuance of $5.221 mi 11 i on and what the debt servi ce and deficits would be. He said that if the entire debt service was levied as a property tax--under the $4 million issue--it would add $0.15/$1,000 to the levy, and--under the $5.2 million issue--it would add $0.20/$1,000 to the levy. He then described current tax rates and said that the debt service rate, given the outstanding General Obligation Bonds, will be going down from $1.22/$1,000 to zero over the next several years since additional general obligation debt has not been issued. He said that the staff recommendation is a consolidation of an external financing instrument using existing internal resources and new resources to pay the debt service. Mr. Miller noted that the 6.32 percent and 8.0 percent finance rates almost cost the same. Mr. Wong said that bank issuance loan costs are e MINUTES--Eugene City Council Dinner Session November 17, 1986 Page 2 significantly lower and certificates of participation often require a debt service reserve and insurance. e Mr. Wong said a Room Tax increase is a possible source of revenue but it was not included in the proposal because the rate in the metropolitan area is the same for Eugene and Springfield. If the rate is increased by one percent in Eugene, it would not match Springfield. He said the existing Room Tax proceeds could be re-allocated to the airport project. Ms. Bascom said Springfield may also want to increase its room tax. Mr. Gleason discussed the transfers at the end of the year. He said that when the money is transferred at the end of the year when the books are closed, since expenditures are held back, and revenues forecasted, the City ends up with a cash balance that rolls forward. He said that that money has always been allocated to the capital account. He said that if the money was first allocated to the airport account, it could amount to a significant increase in funds. Mr. Wong said that money usually amounts to a couple of hundred thousand dollars a year. He did not include this money on the chart because there is never a guarantee that the money is there until the end of the fiscal year. He said that for the last six years the City has had positive balances in the budget, with the exception of 1982. Ms. Schue said that Lane County has tentatively committed to funding part of the land development, but she was concerned since there is no contract and there is a new Board of Commissioners. She asked what the City would do if that money or the EDA money is not available. Public Works Director Christine Andersen said that a Lane County Circuit Court judge is to e decide on this issue before the end of 1986. She said that staff is working on a contingency plan in case the money is not available. She said that the parking area is being contended in the courts, not the entire project. She said about $1.3 million is in controversy--by eliminating the porte cochere ($225,000) and the additional ticket counter area ($315,000), and by using the $315,000 contingency which is built into the current budget, $500,000 in additional funds woul d be required if the City did not receive the $1.3 million in question. She said there is an EDA application of $440,000 that is not included in the subcommittee recommendation. She said that the debt service could be increased to fill the funding gap. The councilors were told that by the way the road funds are matched from va ri ous sources, it would not be possible to defer parking lot construction until a later date. Ms. Andersen said the only way to defer parking lot construction would be to reduce the City's amount of lottery participation. Mr. Wong said that a straight revenue bond or a certificate of participation (which would not require a vote) are under consideration. Mr. Wong said it would be complicated to put the public's share and the airline's share together in one bond package. Mr. Gleason said a key issue of negotiations addresses who benefits from which revenue package. He said the City wants to maximize its benefit, even though the airlines tax benefit may be different. Mr. Obie asked if the airline revenues would grow over the next 20 years. Mr. Wong said that the City is e MINUTES--Eugene City Council Dinner Session November 17, 1986 Page 3 negotiating with the airlines on agreements which essentially call for the airlines to make a debt service payment on a certain amount of money. He e said it also guarantees that if there is an operating deficit at the airport, the airlines will make up the difference. He said that if airport revenues exceed expenditures, operating profits will result. He said that projections indicate that profits will come on-line between 1990-1992 and profits are to increase substantially within 10-15 years. Mr. Wong said these are profits after the debt service is already covered. In answer to a question by Mr. Holmer, Mr. Wong said that a revenue bond, without general obligation backing, has a higher rate of interest than a general obligation-backed bond. A revenue bond without general obligation backing would require that a debt service reserve be set up, as well as a coverage ratio. Mr. Wong said the airlines have tentatively agreed to fund the debt service and coverage ratio. Mr. Wong said the airlines would not share in the two percent car rental tax because it would be a city-wide tax, not a revenue of the airport. He said that the car rental tax will also apply to other car rental agencies in the city, not only those agencies located at the airport. Christine Andersen said there are two parts to the airport project--the land/air side and the terminal side. She said the design work on the land/air side includes taking the work that was prepared last summer, reconfiguring it for the entire land/air side, and putting out an advertisement for bids by mid-February and construction could begin in May. It would be a 12-month construction period, but by starting in mid- Mayor June it would allow the City to complete the paving work on the project before the terminal activities were started after October. She e said that lighting and landscaping work would continue after October. .On the terminal side, Ms. Andersen said that in order to keep within the proposed schedule, design authorization will be needed by December 10. She said that will allow eight months for the design work on the terminal to be completed, advertisements for bid would be initiated in mid-August, and construction could begin in November. Land work would be done first to get the pavi ng work completed before construction begins on the terminal to keep disruption of airport operations minimal. She said that if the City is unable to get a construction date which will a 11 ow a complete construction season out at the airport, it could turn into a two- year paving activity. Ms. Andersen said that by January 1, 1987 the Lane County road fund issue wi 11 be settled. She said that these funds are tied closely to the land/air side of the program. She said that in order to move forward on a March 31 election date, it is necessary for the council to decide on the amount of the bonded figure that will be put on the ballot by January 10. She said that it is anticipated that the County road funds will be allocated for that project--but that staff is preparing a contingency plan in case the funds are not available. She said that if the council does not opt to pay for the full $750,000 in capital projects as payment for the project, whatever remains would be a recommended gap closure for County road funds. e MINUTES--Eugene City Council Dinner Session November 17, 1986 Page 4 Mr. Gleason added that if the council authorizes a limited design package to start in December, and if the voters turn down the ballot in the March e election, the City would turn that money back into an obligation of the airport fund which would be paid for by airline expenses out in the future--the money would not come out of the operating account of the City. Mr. Rutan said the goals of the project are to better serve the traveling public, to get competitive airfares, to improve frequency and destination schedules. and to give a new face to the community. He said that the airport is operating on 1989 projected levels. Mr. Rutan discussed the City Council subcommittee IIRecommendations for Airport Expansion and Improvement Projectll which were distributed. He said the subcommittee recommended that the porte cochere and the 30 feet of the ticket lobby be added back into the project since the additional ticket lobby space is to provide for the fifth airline because experts have stated that Eugene is a five-airline community. He said the subcommittee felt it important to develop a plan for funding for the projects shown inTi er III. He said it was recommended to get bid alternatives on the roofing and carpeting. Mr. Rutan said that a general obligation bond appeared to be the most logical way to finance the project balance. He said a final project cost review will be done prior to January 1, 1987, to identify any further potential for project cost reduction. He said that new revenue sources will be exp 1 ored, including the toll booth, the car rental tax, and securing additional FAA money. e Mr. Rutan said the subcommittee has not yet defined where the up-front $400,000 will come from. He said the subcommittee has also not finalized the funding details of the $5.2 million; however, the subcommittee is confident that adequate community resources are available to service the debt if the City wanted to do so. Ms. Ehrman said the subcommittee felt it was very important to sell the project in March and that the City Council needs a plan on how to fund that debt service. Mr. Hansen said that it was agreed that the staff would proceed with the CIP program that was originally outlined and not look to the CIP to raise any money on this particular project. He said that the subcommittee did not intend to use the CIP and stop projects already planned. He said that the subcommittee believes that the prudent way to raise the money is on a revenue-based bond, but there is no airport revenue available. The subcommittee asked the councilors to accept the funding concept of the project and to allow the subcommittee additional time to prepare the funding specifics. Mr. Rutan said the Airport Commission made a recommendation on the tiers of project deletions and the subcommittee mostly agreed with the recommendation. He said that all of Tier I deletions are out of the project except for the porte cochere and the 30 feet of lobby space. He e MINUTES--Eugene City Council Dinner Session November 17, 1986 Page 5 said it was recommended that the one percent for art be deleted. Ms. Schue said if the one percent for art was deleted, it would require an e ordinance change and could result in community dissatisfaction. It was agreed to hold a meeting and public hearing on this subject on December 15. The subcommittee will finalize its recommendations and will provide information on the up-front cash and the means to service the debt by that date. Ms. Bascom said that she would like the pros and cons discussed on the 30 feet of the ticket lobby to provide for the fifth airline. Mr. Hansen said that if the fifth ticket bay is not built it will limit the growth capacity of the airport in the future. Mr. Rutan said that the bid could be structured to reflect that the 30 feet of the ticket lobby may be cut from the proposal at a later date. Mr. Hansen said that he thought it was important to decide whether this would be a five-airline project or not from the beginning of the project. Mr. Holmer expressed his support to the subcommittee on the project, but asked for the assurance that the City does not face a property tax when the general obligation revenue bond issue goes to the voters in March. He suggested looking to the Ilbeginning working capital fund II of $7 million to reduce the amount of the required bond issue. It would also give much greater assurance to the voters that property taxes would not be required to payoff the bond issue. The City could then go to the voters with a revenue-backed general obligation bond that will not have'any possibility of bei ng subject to a property tax. He said the City could begin restoring that beginning operating capital fund just as the staff e recommendation is that the City pay back the bonds out of the funds that the City would otherwise put in the beginning operating capital. He said that the airport project should be viewed as one that the City wants adopted without a hazard of a property tax so that when the counci 1 considers the possible library expansion, it will have the option of levying a property tax for that purpose. Mr. Holmer's recommendation will be evaluated and the councilors will hear the merits of this suggestion. Ms. Schue said that she is pleased with the work done by the Airport Commission, council subcommittee and staff. She said she likes the idea of the general obligation revenue bond and is pleased that the issue will go to the voters. Ms. Schue said she wants the one percent towards art included in the project. Mr. Rutan said that staff was initially asked to come back with a proposal that would be totally internally funded with no possibility of an obligation onto property taxes. He said the subcommittee chose to present a combination proposal. He discussed the certificates of participation and asked if the City Council was interested in exploring the certificate of participation in the context Mr. Holmer referenced or a portion thereof. Mr. Miller said he would like to see the feasibility of having the porte cochere and the 30 feet of ticket counter space be alternate bids without e MINUTES--Eugene City Council Dinner Session November 17, 1986 Page 6 incurring additional costs. He wanted to ensure that there would not be excessive architectural fees in the process. He asked that economic e development revenue funding be explored as additional funding sources. Ms. Ehrman asked councilors if they supported a toll booth. Mr. Obie said he received negative feedback from the community on the subject. Ms. Schue and Ms. Bascom were not interested in the booth, and Mr. Holmer thought the idea should be explored. Mr. Obie would like the subcommi ttee to look at the total airport enterprise to determine what it would create over a period of time and to evaluate that cost in terms of the money that may be borrowed. He asked if the City will realize a return on its investment in the airport. Mr. Rutan said that Planning Department staff will give him suggestions on how to do a refinement plan at the airport and will identify commercial and industrial land in that area. In response to a question from Mr. Hansen, the councilors said they were not in favor of raising a portion of the money for the airport project through additional property taxes. The councilors were also not in favor of a room tax without discussion with the City of Springfield. A public hearing on this issue is scheduled for December 15. e Mayor Obie adjourned the meeting at 7:20 p.m. R~~~ . ~. -- Micheal Gleason City Manager (Recorded by Sue Lewandowski) MNCC1117 e MINUTES--Eugene City Council Dinner Session November 17, 1986 Page 7