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HomeMy WebLinkAboutCC Minutes - 04/25/07 Work Session M I N U T E S Eugene City Council Work Session and Meeting of the Eugene Urban Renewal Agency McNutt Room—Eugene City Hall April 25, 2007 Noon COUNCILORS PRESENT: Andrea Ortiz, Chris Pryor, Betty Taylor, Bonny Bettman, George Poling, Jennifer Solomon, Mike Clark, Alan Zelenka. Her Honor Mayor Kitty Piercy called the meeting of the Eugene City Council to order. Mayor Piercy recognized Ms. Ortiz for a motion unrelated to the agenda. Ms. Ortiz, seconded by Mr. Pryor, moved to authorize the expenditure of not more than $5,000 to sponsor a half-day seminar on how the City Council and City organization can create multicultural alliances, with the funding coming from a General Fund contingency. Acting City Manager Angel Jones indicated the proposed expenditure was consistent with the council’s goal on race and the funding was available. Mr. Clark noted recent discussion at the Human Rights Commission about the training, and said great excitement was expressed by the commission about the possibility. The motion passed unanimously, 7:0, Ms. Solomon having not yet arrived. A. WORK SESSION: Downtown Development Finance Tools Mayor Piercy noted a motion was included in the materials before the council, but she suggested it was premature and that the council use the meeting for discussion and then decide on next steps. Acting City Manager Jones introduced the item, reminding the council of the meetings that had occurred with regard to the West Broadway development area. She said staff prepared a motion but did not anticipate action. Acting City Manager Jones called the council’s attention to a flier provided at councilors’ places regarding a public input opportunity on the West Broadway development proposals on April 30, 2007, at 6 p.m. at the Bascom-Tykeson Room at the Eugene Library. Ms. Solomon arrived. Financial Analysis Manager Sue Cutsogeorge provided a PowerPoint presentation on Downtown Develop- ment Financial Tools. She concluded that the City had the financial capacity to take on a significant development project within existing resources with a low level of risk using financial risk mitigation MINUTES—Eugene City Council April 25, 2007 Page 1 Work Session measures, such as relying on existing revenues to structure the debt, including reserves and revenue cushions. Based on preliminary information from the developers, staff believed it could build a finance plan that included capacity for future projects without completely “tapping out” the district. The financial benefit to the community would be directly related to the scale of the project. She invited questions. Mayor Piercy called on the council for comments and questions. Ms. Bettman commended the materials provided as informative. Ms. Bettman said she thought the council should avoid using General Fund money for the project given the dire budget picture. She determined from Ms. Cutsogeorge that the library bond would be paid off in 2009 and asked if the capacity going into the library now would become available. Ms. Cutsogeorge said no; it went away. Ms. Bettman believed that staff had scheduled a work session to discuss an increase in the spending limit, and the materials seemed to be weighted toward increasing the limit as opposed to making an investment within the City’s current spending capacity. Ms. Cutsogeorge said when the council chose the developer that decision would be inherent in the choice it made. If it chose the larger project, it would require an Urban Renewal Plan amendment. Ms. Bettman asked how the demolition of buildings affected the tax base and the baseline revenue being generated now. Ms. Cutsogeorge said the revenue was not assessed on individual properties so the General Fund would not be affected by property demolition; it was likely that urban renewal revenues would go down somewhat. Ms. Bettman requested a memorandum on the topic. Ms. Bettman determined from Ms. Cutsogeorge that urban renewal revenues could be used on anything in the Downtown Urban Renewal Plan. Mr. Zelenka complimented staff on the quality of materials provided to the council. He said he would like to see the school district benefit somehow. Regarding the information provided on financial risks, he asked that a memorandum fleshing out those risks be provided to the council. Mr. Zelenka asked what rules existed with regard to when and how the benefit of the tax increment could be shared with the General Fund. He asked if there was a way to direct some of the tax increment revenue to the General Fund. Ms. Cutsogeorge said the Downtown Urban Renewal Plan did not include any provisions for revenue sharing. She pointed out that the City was able to complete some projects using urban renewal funds that it would have otherwise had to fund from other sources, which provided some ancillary relief to the General Fund. Ms. Cutsogeorge noted that if the revenues available to the district were diverted to other uses, the result would be fewer revenues for projects in the district. City Attorney Glenn Klein indicated he would answer Mr. Zelenka’s questions in writing. Responding to a question from Mr. Clark, Mr. Klein said the State rules were that the tax increment dollars must be spent either within the district or, in limited circumstances, just outside the district if the project was to directly benefit the district. He cited a traffic signal that provided access to a district but was located just outside the district as an example. He indicated he would provide a written answer. MINUTES—Eugene City Council April 25, 2007 Page 2 Work Session Mr. Clark asked if the City had latitude in what it called urban renewal. Mr. Klein said there was latitude but it was not without limits. Ms. Ortiz thanked staff for its work. She was happy to see the public input process being planned because she had been receiving some community pushback. She had been questioning whether the process was the right way of “going about it” and had been resistant to paying attention to the details of the proposals because she did not think it was a good time. It had been challenging for her to visualize spending the amount of money necessary if the council moved forward. Speaking to the materials provided to the council, Ms. Ortiz did not think the information the staff provided about Cathedral City was valuable because it was an “apples to oranges” comparison. Mayor Piercy asked how staff determined what level of public expenditure was appropriate. She expected there were standards in place or that the manager had a percentage in mind. Mr. Braud said if the City pursued the larger project, staff would need to do a cost-benefit analysis. There were intangibles also, such as bringing housing downtown and a potential the projects would provide a change in the overall attitude toward downtown. Mayor Piercy said it was difficult to make a decision when the council had no such cost- benefit analysis. Responding to the mayor’s question, Community Development Division Manager Mike Sullivan indicated that both proposals were below 15 percent public participation, which was at the low range of the examples staff provided to the council. He thought that both proposals were well within the range of what staff had seen in other projects in other communities. Ms. Taylor asked if a bus or shuttle could be paid for by urban renewal. Ms. Cutsogeorge said she would have to look at the plan. Ms. Taylor recalled the plan included a street car. Responding to a question from Ms. Taylor, Central Services Director Jim Carlson said when the district was formed, the assessed value in the district was frozen; that number did not change, no matter what happened in the district from either demolition or improvements. Ms. Taylor observed that the council was talking as if it had to choose one option or another. It did not have to choose either. Ms. Taylor asked staff to discuss the difference between an investment and a subsidy. Ms. Cutsogeorge said if one looked at the opportunities as partnership between the private and public sector one might consider it an investment. She suggested the question was somewhat political in nature. Responding to a question from Ms. Taylor, Mr. Klein said that the agreement between the developer and City would spell out the developers’ responsibilities even if the developer left town. He said it was a matter of negotiating such protections into the agreement between the City and developer. Mr. Pryor expressed appreciation for the staff work, saying it helped clarify the risk for him. The council could then decide if the risk was tolerable. He did not think the council had yet discussed the acceptability of the risk, which left staff in a difficult spot. Ms. Bettman was happy to hear the council talk about the source of funds for urban renewal, which were property taxes consolidated from different sources, like schools and the general funds of the county and MINUTES—Eugene City Council April 25, 2007 Page 3 Work Session cities. It was important to expend those funds in the way they were intended, which was to benefit the overall community by focusing reinvestments in downtown. That raised the issue of risk, and she wanted to see very specific steps the council could take to reduce or reasonably remove risk. She pointed out that the larger the development, the bigger the risk. Ms. Bettman noted the conditions requested by the developers and said she would like to see such a list of conditions on the City’s part. She said the council needed to think about other things it could do with the money, such as invest in a civic center and purchase pedestrian th th amenities for 6and 7 avenues. Speaking to Ms. Taylor’s question, Mr. Zelenka defined a public investment as a situation in which public funds are used to support a project one does like, and a subsidy is a public investment in a project one does not like. He agreed that the council needed to determine the level of risk. Risk was relative; the bigger bold projects had more benefits and greater risks. Mr. Zelenka said he would like to see staff provide information about the possible impacts of a worst case scenario. He asked that the financial information in the packet be summarized. Mr. Clark said the council needed more conversation about the risk and benefits of inaction. He found the current situation downtown unacceptable and said the risks of doing nothing were high and also unaccept- able. When the council discussed urban renewal he would like to hear it talk about the purpose of it and the benefits involved. He understood the reason such a district was created was to leverage private funds and have a greater impact on downtown. He did not think the district’s intent was to underwrite the costs of public infrastructure. Ms. Bettman said in terms of the specific development, she thought that due diligence would require the City to do a cost-benefit analysis of downtown regarding carrying capacity for housing and office use and determine what the demographics could support and to identify the lowest risk investments for the City, which the council was told by the downtown panel was housing, and the higher risks involved. She wanted to have that information to evaluate any development proposal and did not want to have a cost-benefit analysis of the specific development, as that would be missing the point of what the City needed and what constituted a wise investment. Ms. Bettman suggested that one small-scale development could lead to another such project and then another, which could equal the large-scale investment, but that was not reflected in the projections provided to the council. She thought the council needed to see that information. Mr. Zelenka asked that ancillary and social benefits and costs be listed in conjunction with the projects. He acknowledged that task would be subjective. B. WORK SESSION: West Broadway Project Update Mr. Braud provided a PowerPoint presentation updating the council on the West Broadway project. He reviewed the three options before the council and briefly noted the timelines for options 1 and 2. Option 1: Select KWG Development Partners Option 2: Select Beam Development MINUTES—Eugene City Council April 25, 2007 Page 4 Work Session Option 3: Take no action on the Request for Qualifications (RFQ) responses Mr. Braud reiterated the upcoming public input opportunity on April 30 and noted the upcoming council work sessions scheduled on the topic on May 9 and May 11. Mayor Piercy encouraged councilors to attend the public input opportunity. Mayor Piercy asked when all the costs would be known. Mr. Braud said that the City requested that information from both developers. He believed that information would be available on May 9. Mayor Piercy asked if the parking calculation took into account existing utilization. Mr. Braud believed the answer to the question was yes. Mr. Clark determined from Mr. Braud that none of the options the City held on downtown property had expired. Mr. Clark asked Mr. Braud if the two companies made assumptions about potential tenants. Mr. Braud said they had made assumptions about the market. He said that the market for housing downtown was strong. He suspected that once a project was selected, the project was likely to evolve and could change, particularly after the City head from the community. He said that selection of a concept did not mean anything was set in concrete. Ms. Bettman said her preference was for Option 2, particularly since the already approved housing project on the Sears site could be incorporated into the project. She said the Beam project was a small, incremental project that could be started now. The larger KWG project would require a year of study to determine its feasibility. She said that by accepting Option 2, a transition plan for the existing buildings would be created, and the remainder of the footprint would be addressed in a separate process. Once the remainder of the site had gone through public input, the City could issue another Request for Proposals. Ms. Bettman said the turnkey parking structure was a no-bid contract and she did not see a public hearing scheduled for the structure. Mr. Braud said the City would have to take those steps. He reiterated that the City was still at the conceptual stage. Ms. Bettman recalled that KWG was requiring a 13 percent yield, which could be changed by how much it reimbursed the City for its options. Mr. Braud indicated the 13 percent yield on cost was based on the $18 million property acquisition. That had already been factored into the conceptual pro forma. The amount needed to be injected to reach the 13 percent yield on cost was $1.6 million. Responding to a question from Mr. Zelenka about off-site costs, Mr. Braud said those generally included the costs of sidewalks and landscaping on public property. Mr. Zelenka asked about the location of the 1,000 existing parking spaces. Mr. Braud said most were in Broadway Place but the Overpark and Parcade parking garages were also located within two blocks. Mr. Zelenka asked how many spaces $15.9 million paid for. Mr. Braud estimated it would fund about 300 public parking spaces. Mr. Zelenka observed most people do not know how expensive parking was. Mr. Zelenka requested a pro/con comparison on the development options, that is, the developer doing the plan versus the City doing the plan as described by Ms. Bettman. MINUTES—Eugene City Council April 25, 2007 Page 5 Work Session Ms. Taylor thought April 30 was short notice for both the public and council. Ms. Taylor noted the Beam’s latest proposal included housing in two locations. Ms. Taylor hoped the council would discuss the issue of fees for unoccupied buildings downtown again. Ms. Taylor said urban renewal was intended to clean up blight, and if empty spaces were blight, certainly the hole on Willamette Street qualified in that regard. She suggested it was an appropriate property for the application of eminent domain. Ms. Taylor wanted to drop the options on all but two sites and wanted to complete the housing project on the Sears site. She thought public involvement should come before any decision. Regarding existing businesses, she said the details indicated an upscale environment, which was not what everything was or should be. She did not think the project would protect existing local businesses. Mr. Poling thanked staff for the materials provided to the council and said he currently favored the KWG proposal. He acknowledged the addition of housing in the Beam proposal but said that KGW also proposed housing and a grocery store. KWG was also talking about LEED certification, reuse of existing buildings, and its interest in working with local businesses. Mr. Poling asked the status of the housing project at the Sears site. Mr. Braud said that KWG asked that the process be suspended while the larger scale project was being reviewed. Mr. Poling asked if KWG would still develop that site if the larger project did not go forward. Mr. Braud said yes. Mr. Poling questioned how long the City could drag out the process before residents lost interest. He emphasized that the council would only be examining concepts initially, and those concepts could be modified by public and council input before a final project was selected. He thought it preferable to do the large scale development and “kick-start” downtown. Mr. Pryor said the downtown panel presentation demonstrated to him the complexity of the topic. He saw the pros and cons of each option. He thought staff did a good job of framing the information, but was concerned the council was moving in the wrong order. It needed more clarity on what it wanted. He was not particularly enamored with the Beam proposal but feared the KWG proposal was too big for the community and would reach a certain point and begin to unravel. He suggested it would not be the end of the world if the options expired. Mr. Braud said the options would expire and he did not know if they could be extended for all the properties involved. Mr. Pryor did not know what to do at this point and preferred to be more deliberate. He suggested that waiting might be the better strategy. Ms. Bettman thought if the City wanted to kick-start downtown it needed to go with the “bird in hand” with regard to the rehabilitation of existing buildings. The use was supportable and it was a small investment on the part of the City. If the City committed to KWG it would not know for a year if it was viable. Then the City could be in the position of doing nothing and having to do damage control, which did not leave it in a good negotiating position. MINUTES—Eugene City Council April 25, 2007 Page 6 Work Session Ms. Bettman indicated her intent to offer a motion related to the options the City held on downtown property. Mayor Piercy closed the meeting of the City Council and convened a meeting of the Urban Renewal Agency. Ms. Bettman, seconded by Ms. Taylor, moved to direct the manager to renew options #11 and #12 regarding the West Broadway project. Responding to a question from Ms. Taylor, Ms. Bettman declined to amend the motion to drop the other options. Mr. Zelenka asked if the council needed to take action given the manager had the authority to take action and he intended to renew the options. Acting City Manager Jones indicated the manager intended to renew all the options. Mr. Klein asked if Ms. Bettman intended that the manager not renew all the options as he thought that should be made explicit. Ms. Bettman rephrased the motion to direct the City Manager to renew only options 11 and 12. Ms. Taylor accepted the modification. Mr. Klein said the intent of the motion was that the manager would be directed not to renew the other options. Ms. Bettman pointed out that the other options did not expire on April 26. Mr. Klein indicated the effect of the motion was to deny the KWG proposal. Mr. Poling, seconded by Mr. Clark, moved to amend the motion to include Option 15. Mr. Poling said the council did not know what proposal it would support at this point and he did not want to preclude the KWG proposal from moving forward by losing the options. Mr. Clark thought it premature to end an option before the community discussion. Ms. Ortiz did not understand the subject and did not support any of the options. She wanted to know what the public was willing to pay for. Mayor Piercy said she did not think the motion was necessary at this time as the council was in the middle of the process. The motion to the amendment passed 4:3; Ms. Taylor, Ms. Bettman, and Ms. Ortiz voting no. Mr. Clark, seconded by Mr. Poling, moved to amend the motion to remove the word “only.” The amendment to the motion passed, 4:3; Ms. Taylor, Ms. Bettman, and Ms. Ortiz voting no. The amended motion passed 4:3; Ms. Taylor, Ms. Bettman, and Ms. Ortiz voting no. The meeting adjourned at 1:36 p.m. MINUTES—Eugene City Council April 25, 2007 Page 7 Work Session Respectfully submitted, Dennis M. Taylor City Manager (Recorded by Kimberly Young) MINUTES—Eugene City Council April 25, 2007 Page 8 Work Session