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HomeMy WebLinkAbout1988-07-12; City Council; 9537; Report of Council Golf Course SubcommitteeCI” * OF CARLSBAD - AGENr- BILL Ai @ AB# 953’2 MTG.7/12/88 DEPT. Council TITLE: DEPT. HD. CITY AlTY CITY Ma- REPORT OF COUNCIL GOLF COURSE SU BCOMM l TT EE RECOMMENDED ACTION: Review and discuss Subcommittee report. ITEM EXPLANATION: The attached report has been prepared for Council review and discussion by the Council Subcommittee. EXHl BIT : 1. Subcommittee recommendation, dated July 6, 1988. July 6, 1988 TO : CITY COUNCIL FROM : Golf Course Subcommittee REPORT OF COMMITTEE ON GOLF AND TENNIS FACILITY FINANCING Your Council Subcommittee had two meetings, one on July 2, 1988, and the other on July 5, 1988 to review the issue with staff and prepare a recommendation for consideration by the full Council. reviewed the attached report from the City Finance and Parks and Recreation Directors. $10 million depending upon the location and scope of the proposed facilities. Such facilities could be financed if an additional 2% was added to the Transient Occupancy Tax. The Subcommittee Proposed golf and tennis facilities would cost between $6 and Operating costs for the golf and tennis complex will be covered by user fees and charges. The City would have a variety of revenue sources such as greens fees, concessions, leases and rentals which could be used to fund direct operating expenses. TOT will generate ultimately more than is needed to fund golf and tennis facilities. in accordance with the City's Parks and Recreation Program. The balance will be used for other general City recreation facilities In summary, the Committee recommends the Council consider two alternatives: 1. Special Transient Occupancy Tax to be levied in two steps - 1% on July 1, 1989 and 1% on January 1, 1990. Requires two-thirds majority for approval. 2. General Transient Occupancy Tax - 1% to be levied on January 1, 1989 and 1% to be levied on January 1, 1990, and a separate Proposition H vote. Both require 50% majority for approval. Committee members both agree on alternative 1 and can recommend that alternative to the Council. on alternative 2, the Council may want to consider alternative 2 as well. Although the Subcommittee did not reach agreement JOHN J. MAMAUX MARK V. PETTINE saf July 6, 1988 TO : CITY MANAGER ASSISTANT CITY MANAGER FROM : FINANCE DIRECTOR PARKS & RECREATION DIRECTOR REPORT ON GOLF COURSE COMMITTEE MEETING On July 2, 1988, the Council's Golf Course Committee met with the City staff to discuss various options for funding the construction of a City owned golf courseltennis facility. The Committee reviewed various alternatives including 1) a General Obligation bond issue, 2) private development, 3) special tax increases to support a debt issue, and 4) funding general operations from a general tax and allowing the Council to determine how the general tax funds should be spent. The committee narrowed the field of options to these shown below and is asking the full Council to discuss the matter at the next available Council meeting. Funding Alternatives A. Special Taxes: 1) Increase the Transient Occupancy Tax by 2% on the dates shown below: 1% on July 1, 1989 1% on January 1, 1990 2) Increase the Transient Occupancy Tax as shown below: 2% on January 1, 1990 3) Increase the Transient Occupancy Tax as shown below: 2% on April 1, 1990 B. General Taxes: 1) Increase the Transient Occupancy Tax as shown below for general fund operations: 1% on January 1, 1989 1% on January 1, 1990 Should the Council wish to proceed with a tax measure to be placed before the voters, all actions must be completed by August 9th and submitted to the County Registrar's office by August 12th to qualify for the November ballot. Pro j ec t Description The committee reviewed various alternative configurations for a golf complex/ tennis facility and sports field development at Macario Canyon Park. reviewing the available options, the committee is recommending the following configuration for the facilities: After Regulation (72 par) golf course on one of three possible sites: Lake Calavera, Macario Canyon or the county property near the Safety Center. Project costs would include: Course construction Club house/Pro shop Exterior site work (parking, lighting etc) Maintenance building and yard Cart storage shed Maintenance equipment Access improvements The cost of carts and operations for the first 6 months are also considerations, however these may be met through either contracting or other methods . Tennis Center including the following: Construction of up to 16 courts Club house/Pro shop Exterior site work Access improvements The construction of a short course (par 56) was also discussed. this time is to accomplish the construction of a regulation course with the construction of a short course to follow when funding allows. The priority at The concept of developing Macario Canyon sports facilities was also discussed by the committee. later date, the committee is recommending that the existing park development plan be followed and that Macario Canyon not be considered for development until required. Although the Council may wish to discuss these facilities at a The tentative project construction schedule calls for the golf courseltennis improvements to begin in early 1990 and end by early 1992, If voters were to approve a funding mechanism in November 1988, site selection would begin immediately. is selected. Construction bids could be accepted as early as March or April 1990 with construction requiring up to 18 months. Design could be completed approximately 6 to 8 months after a site Operating costs for the golf and tennis complex will be covered by user fees and charges. The City has a variety of sources of revenue, including greens fees, concesions, leases and rentals which can be used to fund direct operating expenses. Staff does not anticipate sufficient revenue to offset debt service costs * Fundinn The committee reviewed several basic funding concepts including general obligation bonds, private developers and special taxes. In addition, the committee discussed the use of General Fund revenues to support debt service payments augmented by the increase of TOT taxes. After some discussion, the committee narrowed the field of funding options to two, both of which deal with increasing the Transient Occupancy Tax (TOT) rate. -2- These options are summarized below: Special Tax - Requires a 213 vote General Tax - Requires simple majority - Funds received are designated - Funds received are deposited to for special purposes the General Fund - No separate Prop H Vote required - Spending more than $1 million on for spending on special projects a capital project requires a Prop H Vote. - 1% TOT tax increase yields - 1% TOT tax increase yields about about $375,000 per year $375,000 per year The Special Tax scenario is very similar to Proposition D presented to the voters last June. The major differences between Prop D and the Special Tax options considered by the committee are found in the starting date for the tax. The table below summarizes the various special tax proposals: Effective Dates for Tax Increases Proposition D 2% Special Tax Option 1 1% Special Tax Option 2 2% Special Tax Option 3 2% General Tax Option 1 1% ANNUAL TOT REVENUE July 1, 1989 July 1, 1989 1% January, 1990 January 1, 1990 April 1, 1990 January 11, 1989 1% January 1990 vs PROJECT COSTS VARIOUS TAX OPTIONS TOT Revenue in Thousands - ^^^ PROJECT COSTS 1 zoo 1000 aoo 600 400 200 0 m-89 09-90 90-91 91-92 FISCAL YEAR PROPD SPEC TAX OPT 1 SPEC TAX OPT 2 6 SPEC TAX OPT 3 GEN TAX OPT 1 The General Tax proposal would have two key features. ballot measure would direct all revenue to the General Fund. The Council is not required to go forward with a bond issue or golf courseltennis center construction. Second, a companion Proposition H advisory measure would be necessary to allow Council to proceed with project construction. several methods for structuring a General Tax measure using various starting dates for the tax increase. for a 1% increase beginning January 1, 1989 and another 1% beginning January 1, 1990. First, the tax increase There are One proposal outlined by the committee would call -3- The starting dates for the tax increases are important to guarantee that the City has sufficient cash flow to support debt service andlor project costs as they occur. The chart below shows the estimated increased TOT revenue vs the expected project costs. Those alternatives that show a deficiency of revenue in 1989-90 depend on a loan of funds from the General Fund to allow project design to proceed. Any loan would be repaid during 1990-91 from proceeds of the bond sale. Allowing the General Tax measure to phase in during 1988-89 provides about $200.000 in revenue this year which can be used to help balance the current budget. The surplus in each of the remaining years under both the Special and General Tax measures could also be used to help fund City operations. The amount of funding necessary will depend upon the final design of the project. Cost estimates for construction of a regulation golf course and tennis facility range from $6 million to $10 million. This wide range reflects the uncertainty surrounding final site selection and scope of the project. The chart belob shows the debt service costs for bond issues up to $12 million based on current interest rates. ANNUAL DEBT SERVICE COSTS Debt Servlce In Thousand $ 1400 I 1 1200 1000 800 600 400 200 $10 mll In debt ralses about $8.6 mll In lunds for constructlon -. 0' I I I I I I I I I I I 12 3 4 6 6 7 6 9 10 11 12 Million Dollars of Debt Issued AT 815 AT 915 - Draft Ballot Measures The committee indicated an interest in reviewing draft ballot language. Two measures have been roughed out, one for the Special Tax and one for the General Tax measures. The City Attorney will provide the City Council with guidance on the final wording of the final measure. 1. Special Tax: "Shall Ordinance No. __. be adopted amending Chapter 3.12 of the Carlsbad Municipal Code to increase the Transient Occupancy Tax rate by an additional 2% to pay for a public golf course, tennis courts 'or other recreational facilities consistent with the City Parks and Recreation program. (The ordinance prepared by the City Attorney will deal with the specific dates of the tax increases and how funds in excess of those required fox debt service will be distributed to the General Fund.) -4- 2. General Tax: "Shall Ordinance No. Municipal Code to increase the Transient Occupancy Tax rate by an additional 2% to pay for general City operations?" be adopted amending Chapter 3.12 of the Carlsbad (The ordinance prepared by the City Attorney will deal with the specific dates of the tax increases and how funds are to be distributed to the General Fund.) Proposition H Spending Limit: "Should the City of Carlsbad be authorized to construct a golf course and tennis facilities with a total cost greater than $1 million?" (The City Attorney will provide additional guidance on the wording of the Proposition H measure.) ResPonse to Committee Ouestions The committee raised several questions during the meeting which may have some bearing on the Council's final decision. addressed by the City Attorney if Council wishes to pursue the issue. Attorney has provided guidance where necessary and may wish to comment separately. Some of these questions can be further The 1. If the City places a Special Tax measure before the voters, can it be worded in a way that it will allow the imposition of a tax if a 2/3 vote is achieved or provides Proposition H approval if a simple iiiajority is received but a Special Tax is not approved? Although there may be a way to word such a measure, the Council would be on more stable ground if the two questions were separated. The State Constitution limits state ballot measures to single issues. Coiiibining the Proposition H question with the tax question may conflict with this constraint. 2. Can the City propose a General Tax measure increasing the TOT by 2% for General fund purposes? Yes. There is no limitation on the City's ability to propose a General Tax increase for general purposes. 3. Can the City pledge General Fund revenues to the repayment of bonds used to construct a City facility? Yes. in public finance. repayment of debt and total amount of debt outstanding must be observed in any issue. The pledge of General Fund revenues to the repayment of debt is common The normal limitations of adequacy of revenue for 4. Can the City issue tax exempt debt for the construction of the golf course/ tennis center? -5- Maybe. If the City enters into an agreement with a private operator for management services and a portion of the operator's conipensation is based on the revenue produced by the facility, then it is likely that the City may be forced into issuing taxable bonds. If the City operates the course itself, the bonds can be tax exempt. The difference between a taxable and tax exempt issue is about $200,000 per year (assuming a $10 illillion bond issue) in additional debt service. Recommendat ions The committee reconiniends that the City Council select the appropriate funding method and direct staff to provide the necessary documents for placing the issue before the voters in November, 1988. The City Attorney will provide direction to Council on the necessary actions and will assist in drafting the final ballot measure. I /JAMES F. ELLIOTT DAVID BRADSTREET c: Vince Biondo, City Attorney David Bradstreet, Parks & Recreation Director -6-