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HomeMy WebLinkAboutMINUTES-07/27/2004-AdjournedJuly 27, 2004 COUNCIL OF THE CITY OF FORT COLLINS, COLORADO Council -Manager Form of Government Adjourned Meeting - 6:00 p.m. An adjourned meeting of the Council ofthe City ofFort Collins was held on Tuesday, July 27, 2004, at 6:00 p.m. in the Council Chambers of the City of Fort Collins City Hall. Roll Call was answered by the following Councilmembers: Bertschy, Hamrick, Kastein, Martinez, Tharp and Weitkunat. Councilmembers Absent: Roy Staff Members Present: Atteberry, Harris, Roy. Items Relating to the Summit Fort Collins Shopping Center Adopted The following is staffs memorandum on this item. "EXECUTIVE SUMMARY A. Second Reading of Ordinance No. 104, 2004, Amending Various Sections of the City Code so as to Expressly Permit the Deferral of Certain Utility Impact Fees. B. Resolution 2004-093 Approving an Agreement Between the City and Bayer Properties to Provide Financial Assistance for the Summit Fort Collins Shopping Center. Item A Some of the current City Code provisions allow the City Council to defer impact fees; others do not. This inconsistency came to light during the negotiations regarding the proposed Lifestyle Center. Specifically, the Code provisions establishing electric developmentfees and charges and stormwater fees do not permit deferral. And, while the Code provisions relating to water plant investment fees and sewer plan investment fees do permit arrangements for paying the fees over time, those Code provisions are worded differently than the Code provisions pertaining to the deferral of capital improvement expansion fees. This Ordinance, which was unanimously adopted on First Reading on July 6, 2004, brings consistency to the Code provisions on this subject and City practice, and would allow for all city impact fees to be paid over time, either in installments or in a lump sum. The Ordinance has been July 27, 2004 amended on Second Readingso that all of the Code provisions pertaining to impact fees clearly state that, if the fees are deferred and there is an increase in the amount of the fees during the deferral period, the applicant will pay the higher fee in effect at the time ofpayment. Item B On June 15, 2004 City Council adopted Resolution 2004-074 to provide a package of financial assistance.for the Lifestyle Center (The Summit Front Range Shopping Center). The package contains three components: The collection of a public improvement fee imposed by Bayer Properties upon the purchase of all goods and services at the Lifestyle Center except for the purchase offood for domestic home consumption ($8,000,000) The sharing of net new sales tax revenues generated by the Lifestyle Center ($5, OOQ 000) The deferral of impact fees for up to five years with an interest rate lower than market lending rates ($656,000) Based on these three components, the City and Bayer Properties have negotiated an agreement that details the specific actions and safeguards, for both parties, to implement the components of the agreed upon financial package. BACKGROUND The first phase of the Lifestyle Center will be approximately 500, 000 square feet on 90 acres at Harmony Road and Ziegler Road. The estimated net cost of the Center and related public improvements exceeds $70.5 million including approximately $13,240,000forpublic improvements to offset the impacts of the Center. The Developer will pay an estimated $5, 980, 000 in City, fees and taxes. Based on analysis ofthe market areafortheproject, an independent economic consultant (Economic Planning Systems) concluded that in the first year of full operation the Center will generate approximately $4.5 million ofsales tax revenue for the City. Of this amount, approximately $1.5 million would be annual net new tax revenue for the General Fund. This is a substantial increase to the tax base of the City. July 27, 2004 The total value of the financing package is approximately $13, 656, 000: Public improvement fee $ 8,000,000 (58.6%) City Sales Tax sharing $ 5,000,000 (36.6%) Fee deferral/interest savings $ 656,000 ( 4.8%) The. following explains the three major components ofthe financial assistance package and how they are to work. Public Improvement Fee (Section 3) a. The Public Improvement Fee (PIF) of.5% (50-cents on a $100 purchase) is to be imposed on retail sales made by shoppers at the Center. b. The Developer is responsiblefor using its best efforts to negotiate agreements with all future tenants and occupants of the Center to pay the PIF. C. Retailers at the Center will collect the PIF and remit to the City each month along with sales tax receipts. d. The City will remit the PIFproceeds to the Developer on a quarterly basis until $8.0 million is generated. Reimbursement of Sales Tax Increment Revenues (Section 4) a. The "sales tax increment" means the net new sales of the City's 2.25% sales tax rate; any special voter approved taxes, such as the Building Community Choices taxes, are exempt ,from the reimbursement. b. The City shall pay fifty percent (5011o) of the "sales tax increment" or the net new sales tax revenue received from the Lifestyle Center. C. The City shall begin to collect these revenues as soon as the Center is open and operating but will not start the reimbursement to the Developer until stores occupying no less than 250, 000 square, feet are open and operating and construction of at least 350, 000 square feet has been completed. d. Once the conditions stated in "c" above are met, the City will begin quarterly payments of the Developer's share of the sales tax increment. July 27, 2004 e. City payment of the sales tax increment to the Developer will continue until a total of $5.0 million has been paid or a period of 10 years lapses. The City's obligation will be satisfied when either of the two conditions occurs: reimbursement of $5.0 million or 10 years from the date of the first payment. f The Developer assumes the entire risk that the sales tax increment generated by the Lifestyle Center will be suffzcient to enable the City to reimburse $5.0 million to the Developer within the 10 year period. g. If the City's tax base is decreased during the 10 year period, then the period of time to collect and reimburse the Developer the $5.0 million shall be extended up to a maximum of 15 years from the date of the first payment. Deferral of Impact Fees (Section 2) a. The Developer is responsible for the payment of approximately $5,980, 000 in City Impact Fees. b. Payment of a select list of impact fees (it does not include Street Oversizing fees) may be deferred by the Developer for a period offzve years from the date the first building permit is issued. C. When the deferred fees are paid (within the five years) to the City, the Developer will also pay interest to the City at a rate of 2.2%per year (simple interest) from the date of issuance of the first building permit for the Lifestyle Center. d. If the City's impact fees are increased or decreased during the deferral period, the Developer shall pay the fee in effect at the time of payment in place of the initial fee plus interest. The City will notify the Developer 30 days before Council's consideration of a fee increase or decrease so that the Developer will have the opportunity to choose whether to pay the initial fee plus interest before the new fee takes effect or to continue to defer and pay the new fee. Other Provisions a. The City retains the right to withhold or offset payments of the sales tax increment if the Developer does not comply with all City codes, ordinances, resolutions and regulations or does not comply with the terms of the Development Agreement and fails to cure such violations after notice from the City. (Section 7) July 27, 2004 b. All obligations of the City for payment of the sales tax increment are subject to annual appropriations as approved by City Council. (Section 6) C. The Developer will maintain complete records of all income and expenses and the City has the right to inspect these records until the payments of the sales tax increment are satisfied. This will enable the City to monitor and assure that the specifics of the agreement are being properly implemented. (Section I])" Interim City Manager Atteberry introduced the agenda item. He stated there were two parts to the decision: Second Reading of an Ordinance to amend the City Code to allow deferral of electric and stormwater development impact fees, and a Resolution to approve the agreement between the City and Bayer Properties to provide financial assistance related to the Lifestyle Center. Diane Jones, Deputy City Manager, presented background information regarding the agenda item. She stated the Lifestyle Center was a new concept for an outdoor retail and community center. She stated Phase 1 was expected to be 500,000 square feet, and the estimated construction cost was $70.5 million (including $13.2 million in public improvements and $5.9 million in City fees and taxes). She stated the goal was for Fort Collins to remain a strong retail center. She stated this would be a unique draw, would add 1,200 new retail jobs and would bring in an estimated $1.5 million in annual net new sales taxes. She stated the share -back would be half of that amount. She stated the Council approved the general concept for the financial assistance package on June 15. She stated the value of financing the financial package was approximately $13,656,000 over a five to 10 yearperiod. She stated there were three basic components: the public improvement fee ($8 million), the sales tax share -back ($5 million), and the fee deferral/interest savings ($656,000). She stated the financial agreement was based on suggested Council parameters and the Resolution approved in June. She stated the agreement detailed the responsibilities of the developer and the City. She stated the public improvement fee (PIF) would be a privately imposed fee paid by Lifestyle Center customers. She stated the fee would be half of one percent (500 per $100 purchase). She stated the developer would be responsible for negotiating the imposition of the fee with all of the tenants and occupants and that the retailers would collect the fee and send it to the City each month. She stated the City would send the PIF proceeds to the developer on a quarterly basis. She stated the sales tax share -back referred to a portion of the net new sales tax revenues and that the City would share -back half of those revenues for a period of 10 years or $5 million (whichever would come first). She stated the estimated share -back was $734,000. She stated the City would begin to collect the tax as soon as the Lifestyle Center opened. She stated the share -back would begin when 250,000 square feet were open and 350,000 square feet were constructed. She stated the City would remit its payment on a quarterly basis, and the fee payment would equal $5 million or 10 years. She stated the developer would assume the risk that the net new sales tax would be sufficient for the City to share -back. She stated if the tax base decreased for some reason, the term could be extended to 15 years. She stated the deferral would pertain to selected fees, and the savings would result of a reduced interest fee. She stated none of the fees would be waived. She stated the deferral would be for up to five years, July 27, 2004 and the developer would pay the fee in effect at the time of the payment. She stated the City would retain the right to withhold payments for non-compliance with the Code, the Ordinances, standards, or the terms of the agreement. She stated the sales tax share -back would be subject to annual appropriations. She stated the City would have the right to inspect the developer's records. She stated the Resolution would approve the financing agreement between the City and Bayer Properties. Interim City Manager Atteberry stated there were a number of staff present who had worked closely on this item and that staff would be available to answer any questions. Mark Brophy, 1109 West Harmony Road, stated Bayer Properties did not need a subsidy. He stated Mr. Silverstein had indicated that the company was looking for a rate of return of 11.5% on this project. He stated if $5.6 million was taken away from the subsidies that the rate of return would be 10.7%. He stated Simon Property Group, the largest mall developer, had a 7.8% return to investors; that General Growth Properties (the Foothills Fashion Mall owner) had a 6.7% return on investment; and that Chelsea Property Group (just acquired by Simon Property Group) had a rate of return of 5.4%. He stated Bayer Properties could be sold to another company for a nice profit. He stated if the City did not give the money to Bayer Properties that they would have to get it from some other place (other speculators). He asked the Council to have a fairness opinion done by an independent accountant to determine if this was a fair deal for the City. Councilmember Tharp asked for additional information about the staff statement that a tax decrease could extend the time period to 15 years. Jones stated the agreement provided that if the City's tax rate was decreased from the current rate that the time period for the share -back would be extended up to a maximum of another five years. She stated all of the calculations were based on the 2.25% rate. Councilmember Hamrick asked if that provision was part of the original discussion. Jones stated the original discussion was for 10 years and that projections indicated that the time period would be less than 10 years. She stated the new provision was a contingency for a scenario in which the tax base was decreased. Councilmember Hamrick asked why staff believed that this provision was necessary. Jones stated the assumptions were based on 2.25% and that all of the assumptions must change in the tax rate changed. She stated the chances for the tax rate changing were remote. Councilmember Hamrick stated one of the issues he had with this was the assumption that Loveland would not develop a mall. He stated the Reporter Herald had reported that Loveland mall was going to happen and that more retailers were committing to the project. He asked if staff had an update to the status of the Loveland mall. Krcmarik stated Loveland was "quiet" about the progress on the mall. He stated the article in the Loveland newspaper was the most up to date information available. 0 July 27, 2004 Councilmember Hamrick asked if the return on investment to the developer could be lowered to about 10.7% if the subsidies were reduced. Krcmarik stated staff and the Economic Planning Systems Group did analyses based on a specific financial pro forma provided by Bayer Companies. He stated this was the first time Mr. Brophy's comments had been heard. He stated the analysis were looking at a net operating income compared to total cost in the first year of operation. He stated this was a different comparison than the one made by Mr. Brophy. Jones stated the net operating income was not the equivalent of profit. She stated there were other expenses and expenditures that would have to be deducted from the net operating income. Councilmember Hamrick asked if there was any way to get a true picture of the profit for this development. Krcmarik stated would be speculative until the center was built. Interim City Manager Atteberry stated Economic Planning Systems Group was an independent economic consultant hired to review the numbers and help the City from an independent perspective. Councilmember Hamrick asked if another Ordinance would be brought forward on this. Krcmarik stated this was the final action. Councilmember Hamrick asked if an Ordinance would be brought forward subsequent to the adoption of Resolution 2004-093 for approval of the agreement. City Attorney Roy stated the only piece of the arrangement that needed to be approved by Ordinance was the amendment to the Code to allow for the deferral of impact fees. He stated the other two components could be satisfactorily addressed by Council's approval of the agreement by Resolution. Mayor Martinez asked if the Economic Planning Systems Group was qualified to provide advice to the City. Krcmarik replied in the affirmative. Mayor Martinez asked if Mr. Silverstein could answer some of the questions asked by Council. David Silverstein, Bayer Properties, stated the company was not a speculator and would not attempt to build a $70.5 million facility unless it was pre -leased to a sufficient level to pay the debt service. He stated the extension of 10 years to 15 years was intended to allow the company to recoup the $5 million in the share -back in the event the tax rate decreased. He stated the company built projects to a cap rate and looked at net operating income and cost of the transaction. He stated the projects were built with net operating income of between 11.5% and 12% and that this was different than return on investment. He stated the project would not be built if the cap rate was less than 10% to 11 %. He stated those numbers had been analyzed by staff and EPS. He stated the company used the EPS projections regarding net sales and that the share -back would apply only to net new sales attributable to this project. Councilmember Kastein asked if EPS indicated that the offers made by the City were needed by Bayer to go ahead with the development. Krcmarik stated EPS indicated that the information presented by Bayer was reasonable and that in today's competitive market these were fairly common 7 July 27, 2004 measures. He stated the financing package was crafted in accordance with Council's parameters and through interaction between staff and Bayer Properties. He stated EPS made the final assessment that this would be a reasonable approach. Councilmember Kastein asked what would happen if Centerra would work out and the Lifestyle Center was not a "go" because the market could not support two centers. He asked what risk there would be to the City if that happened. Krcmarik stated the risk that was documented by EPS was a outflow from Fort Collins to Loveland or other areas. Councilmember Kastein asked what risks there would be to the City due to any commitments made to Bayer. Krcmar k stated if Bayer did not go ahead with the project there would be no increment or payment, that there would be no building permits or waiver of fees, and that there would be no public improvement fee collected from shoppers. Councilmember Kastein asked if all the City would stand to lose would be the sales tax. Krcmarik replied in the affirmative. Councilmember Kastein asked if there would be a decision point for future Councils regarding the annual appropriation that would have to be made. City Attorney Roy stated there would be a decision point at the time a decision would be made to appropriate money to be paid to the developer under the terms of the agreement. He stated the annual appropriation clause was necessary because of TABOR provisions relating to multi -year financial obligations. Councilmember Tharp asked what would happen if another Council decided not to make the appropriation. City Attorney Roy stated the agreement was expressly contingent upon the payment of the sales tax increment. He stated it was his opinion that it would not be a violation of the agreement for the City to fail to appropriate the monies. He stated he trusted that future Councils would feel a strong commitment to the agreement that had been negotiated. Councilmember Kastein stated this was a partnership and that Bayer was willing to assume some risk. He stated a commitment was being made and that the expectation was that future Councils would honor that commitment. City Attorney Roy stated this was a risk that must be taken by anyone negotiating any kind of agreement with the City that involved ongoing financial commitments due to TABOR. Councilmember Hamrick asked about the timeline for the development. Mr. Silverstein stated the goal was to start construction this Fall. He stated the developer was taking a lot of risk in making the investment. He stated the company was relying on its partner (the City) doing what it said it would do. He stated if the project was not built that there would be no cash outlay lost to the City. He stated two more major leases with tenants had been executed since the last Council meeting. He stated the project would remain very competitive and that a speculative project would not be built. July 27, 2004 Councilmember Tharp asked if the development plan would be considered by the Council at a later time. She stated she was interested in information about the branch library to be included in the development since that was not part of the agreement. Jones stated the agreement focused on the financial components. She stated the development plans would go through the development review process and that the library plans would be addressed in a development agreement. She stated would not come to Council for approval but that Council would be kept informed of the progress on that development agreement. Councilmember Tharp asked if Council would have any leverage as to whether the project would include the branch library. Interim City Manger Atteberry stated the library was not a condition of the approval of this agenda item. He stated staff's ongoing discussions with Bayer had been extremely positive with regard to the library. He stated staff would continue to work in partnership with Bayer. Mr. Silverstein stated he was prepared to go on record to say that the library would be incorporated into the development agreement. He stated the company had discussions with library representatives and that the architect had shared concept drawings with library personnel. He stated he every reason to believe that the library would be incorporated into the development agreement. He stated the library would fit well into the development concept. He stated he was making a personal commitment that the library would be part of the development agreement. He stated designs had been made and that the library was being incorporated into construction and development plans. Councilmember Tharp expressed a concern that the Council would not have an opportunity to look at the development agreement at any point. Mayor Martinez asked if there would be any problem since Mr. Silverstein was making a commitment regarding the library. Jones stated it would be incorporated into the development agreement and that Council would be kept informed about progress on the development agreement. Councilmember Weitkunat made a motion, seconded by Councilmember Tharp, to adopt Ordinance No. 104, 2004 on Second Reading. The vote on the motion was as follows: Yeas: Councilmembers Bertschy, Hamrick, Kastein, Martinez, Tharp and Weitkunat. Nays: None. THE MOTION CARRIED Councilmember Tharp made a motion, seconded by Councilmember Weitkunat, to adopt Resolution 2004-093. Councilmember Hamrick stated he would not support adoption of the Resolution. He stated if this was a good business deal, it would stand on its own merits and would not need the subsidy from the City. He stated the City had a right to know the rate of return since taxpayer funds were being used to subsidize the business. He stated that during the analysis the Centerra project was not used as a E July 27, 2004 basis for comparing net new sales tax. He stated he believed that project would go forward and that the City needed to go back to do another analysis to determine the impact on the net new sales tax. He stated this was not fair to existing businesses and that this would directly impact them. He stated the City would be involved in "choosing who the winners and losers are in our market." He stated he would vote against the motion. Councilmember Weitkunat stated she would support the motion. She stated it was good business for everyone for the City's partner to make a profit. She stated this was a wonderful commitment by the City. She stated the assistance would not cost the citizens anything and that this would be an appropriate way to begin to ensure the market in Fort Collins. She stated this was a quality developer that had great integrity and a good sense of the community. She stated she was looking forward to have the center up and running and bringing more revenue into the City. Councilmember Tharp stated the City was in this situation due to competition. She this was an effort to maintain the City's place as a regional shopping center. She stated she looked forward to the kind of Lifestyle Center that would attract needed sales tax to the region. Councilmember Bertschy stated he would not support the Resolution. He stated he objected to the Resolution on the basis of the sales tax share -back. He stated this was a solid project and that he would have preferred a mechanism other than the sales tax share -back. Councilmember Kastein stated this was about competition and that if the Lifestyle Center did not succeed, the City of Fort Collins would lose. He stated local businesses would also be hurt by a Lifestyle Center in Loveland. He stated he looked forward to the Lifestyle Center being here. He stated this would be a partnership and that he believed that the City was doing the right thing. Mayor Martinez stated he would support the Resolution. He stated he was surprised that some Councilmembers still viewed this as a subsidy. He stated this was an investment instead of a subsidy and that it would be a "fatal mistake" not to make this investment. The vote on the motion was as follows: Yeas Councilmembers Kastein, Martinez, Tharp and Weitkunat. Nays: Councilmembers Bertschy and Hamrick. THE MOTION CARRIED 10 July 27, 2004 Resolution 2004-094 Making Findings of Fact and Conclusions Pertaining to the Appeal of a Decision of the Landmark Preservation Commission Regarding the Request by Dick and Dianne Rule for a Waiver of Conditions or Permission to Relocate or Demolish Structures Located at 4824 South Lemay Avenue Adopted The following is staff's memorandum on this item. "EXECUTIVE SUMMARY On April 28, 2004, the Landmark Preservation Commission held a public hearing to consider a request byDick andDianne Rule for Waiver of Conditions of the Requirements Contained in Section 14-72 of the Municipal Code, or Permission to Relocate orDemolish the Structures Located at 4824 South Lemay Avenue. The Commission voted 4-1 to deny, in part, this request. On May 12, 2004, the Commission adopted its Findings and Resolution regarding its decision. That decision was appealed to the City Council. The basis of the appeal was that the Commission, in denying the request, failed to properly interpret and apply relevant provisions of the Code. On July 20, 2004, Council heard the appeal and overturned the decision of the Commission. The Council's findings on the appeal will be finalized by the adoption of the Resolution. " Mayor Martinez and Councilmember Kastein recused themselves from participation on this item. ("Secretary's Note: Mayor Martinez and Councilmernber Kastein left the room at this point. Mayor Pro Tem Bertschy chaired this portion of the meeting.) Interim City Manager Atteberry introduced the agenda item Councilmember Weitkunat made amotion, seconded by Councilmember Tharp, to adopt Resolution 2004-094. The vote on the motion was as follows: Yeas: Councilmembers Bertschy, Hamrick, Tharp and Weitkunat. Nays: None. (Mayor Martinez and Councilmember Kastein absent.) THE MOTION CARRIED ("Secretary's Note: Mayor Martinez and Councilmember Kastein returned to the meeting at this point.) 11 July 27, 2004 Other Business Councilmember W eitkunat stated Council had received a white paper on the Landmark Preservation Commission and necessary Code changes. She stated she would like to see the involvement and input of the Planning and Zoning Board in the process. Interim City Manager Attebeny stated there would be a study session on August 24 and that an effort would be made to obtain the input of the Planning and Zoning Board before that time. Councilmember Hamrick asked for information on the effect of spraying for West Nile Virus on home gardens and requested that information be issued for the public. Councilmember Hamrick asked Council about the purpose of the Council retreat scheduled for November 5-6. He asked if there was a preliminary agenda and if there was any urgency. Councilmember Tharp stated it was useful for the Council to have a quarterly retreat and that she had several items that she would like to see on that agenda. She stated the process for the hiring of the City Manager was underway and that a retreat would have been helpful to discuss the profile for the new City Manager. She stated it was necessary to have a retreat on the schedule to ensure that all Councilmembers would be available and that it could be canceled if there was nothing to discuss. She stated she objected to the cancellation of the summer retreat because issues arose that could have been discussed. Mayor Martinez agreed with Councilmember Tharp's comments. Councilmember Bertschy stated he believed that it would be helpful to discuss at a retreat prioritization of the remainder of the two-year policy agenda. Councilmember Kastein stated the retreat was a good format for working through how Councilmembers relate to each other and how they do the Council jobs. He stated the specifics and discussion of particular topics should be discussed in Study Sessions or Council meetings instead of at retreats. Interim City Manager Atteberry stated staff had been discussing the retreat and looked forward to the time spent in that setting with the Council. Mayor Martinez requested an update on the timers for the Council Chambers. 12 Adjournment The meeting adjourned at 6:50 p.m. a ATTEST: �, City Clerk 1 13 July 27, 2004