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Home My WebLink About1969-06-25; City Council; MinutesLI I Y OF CARL'SBAD COUI 0 e 1c Meeting of: CITY COUNCIL (Adjourned Regular Meeting) c\ ,Date of Meeting: ,.June 25, 1969 Time of Meeting: 5:OO P. M. lJi9; -\ Place of Meeting: CounciJ Chambers CARLSBAD PARKING AUTHORITY(Specia1 Meeting ~~ ~~~ ~"~" ROLL CALL: Councilman Castro was present at 5:09 P.M. CARLSBAD PARKING AUTHORITY: Memb.ers present were Directors Cannon, Snedeker, Sugg and Daugherty. Director. Killan was absent. Approval of Audit. The City Manager referred to an Audit Report on the construction costs of? the parkin area for Plaza Camino Real prepared by John F. Forbe and Company. It was pointed out the total cost of .construction for the parking area was $;1,787,869. The Carlsbad Parking Aut'hority's share of the cost amounted to $1,263,619.00 and Plaza Camino Real's share was $524,250. I " Present Absent '9 'S Cmn. Castro was presknt at 5:09 P.M. Following discussion it was moved by Director Snedeker, and seconded by Director Cannon that the fied by John F. Forbes and Company. Four "Ayes" and Director Kil lan absent. By motion of the Council the audit report submitted by John F. Forbes and Company was accepted as recom- Motion mended by the Carlsbad Parking Authority. Ayes Carlsbad Parking Authority accept the audit as certi- Proposed Bond Sale. Mr. Urban Schreiner, represent- ing O'Melveny & Myers, attorneys at law, stated that due to the maximum limitation of 6% interest on the bonds under the terms of the agreement, the bonds would not be marketable at the present time. Under ~ the terms of the agreement the Carlsbad Parking; I Authority is obliged to issue a certificate of lia- t bility to the May Co. and/or Partnership. The I Authority will have to go through the formality or I i mechanics of selling the bonds, however, he'did not feel that too much money should be spent to se77 the bonds on the open market. Mr. Robert Getz, Vice President of the May Co. Deparl ment Stores, stated the agreement between the Carls- bad Parking Authority and the Partnership is requir- : ed to go to bid for the sale of the bonds within six 1 months time and do everything possible to sell the bonds at 6% or less. If the Authority'is unable to ~ sell .the bonds at 6% or less than the May Co. would take over the bonds. There is legislation pending to increase the interest rate for Parking Authority Bonds to 7%; however, he did not feel the legislatio! I would make it impossible for municipalities to sell , bonds. Further, the City was prepared to spend up to two million dollars on this projec.t, and the ' actual cost to the City is approximately one and one uarter million. He read in the newspaper the City j Council felt very strongly about not exc:eeding the 1 6% interest rate. Mr. Getz asked what discount the 1 May Co. would have to take if they took over the 1 bonds at 6% and then tried to market them? ~q - 1 I Mr. Van der Pol, representing Bartle Wells Associate 2 - financial consultants, addressed the Council and ~ explained the May Co. would have to know what the j 1 -a i I VI -4 \b \LVUAW -2- \?% 0 e 7 discount would be if they had to.market the bonds. His company has been searching for ideas to finance this project, and suggested that it would be better for both parties to have the Authority issue notes and pay 6% interest on the actual construction cost, set up a reserve for amortization, and then when the Authority is ready to market the bonds it would be in a better financial position. Under this plan the City could start making payments according to a schedule, give the May Co. notes to secure its debt, and the company would be receiving interest on a tax exempt basis. The actual sale of the bonds would be deferred until the bond market is riper. Also in a- year from now the City would be in a much better competitive position. . Mr. Martin, City Manager, asked if this plan would accelerate the obligation of the City, as he was in hopes of using some of the sales tax revenue for the General Fund expenditures this next fiscal year. Mr. Schreiner pointed out according to the agreement monies would have to be set aside for amortization sold it would cost the City between $120,000 and $129,000. Under the note plan the City would pay interest and principal this calendar year. If bonds were sold he had recommended the City pay interest only this next fiscal year. Mr. Van der Pol stated that if the note plan is ac- ceptable to both parties, the City would be paying interest on approximately $1,300,000 in an approxi- mate amount of $78,000 and $42,000 on the principal. He proposed that the principal payment not be paid to the May Co., but set up a reserve fund. of the bonds. It was estimated that if bonds were Mr. Martin asked if the reserve fund could be de- ferred for the first year, and Mr. Van der Pol state it could be, but he would not recommend it being de- ferred as it would place the City in a better posi- tion at the time the bonds were sold. - C Director Cannon asked what affect the note method would have on the City's credit and he was informed the holding of a note would be more favorable than if bonds were sold at this time, and would be no obligation-against the City's credit. Director Cannon stated he would not like to make a decision at this time as he felt other avenues shoulc be explored and perhaps oth.er meetings held to dis- cuss the matter further. Mr. Getz stated the note route would only be accept- able if the interest on the notes is non-taxable. . If the Partnership took notes and locked themselves in for a temporary time, it should be clearly under- stood that when the bonds are marketable - say October - the City will market the bonds even' at 7, 8 or 11 percent interest. He inquired as to why a reserve would be set up rather than making principal payments to the Partnership? Mr. Van der Pol in- formed Mr. Getz he was looking at it from the City's F 110 . .i _*. i ~ I I I ~ .- LI i Y OF CARLSBAD Cot 0 -3- \- 111 P 0 standpoint as amortization would be so small. Mr. Getz indicated the Partnership might be willing to waive the principal payment until Penny's store opens then he felt if the bonds were not marketable by that time principal payments should be ma-de. Mr. Van der- Pol pointed out if bonds were so:d principal payments were not to be made the first year and $30,000 would have been paid the second year, The need for a re- serve fund is the bonds are secured by this fund. The question was asked if the incidental fees and costs in connection with the Parking Authority docu- ments and transactions would have to be paid this coming fiscal year in the event the sale of bonds was deferred and the Parking Authority chose to issue notes, or would they be deferred until the bonds were sold? Mr. Van der Pol stated he was sure the attorneys, financial consultants, etc., would want payment of their fees, or at least partial payment. Mr. Van der Pol inquired as to whether the partner- ship would need a note for the indebtedness,-or could the matter ride until a later date? Mr. Schreiler explained that something should be done under the con- fines of the documents, The Parking Authority would have to either amend the documents, sell the bonds or issue notes in order for the debt to be secured. Mr. Getz stated if the City would be interested in raising the ceiling on the interest rate in the event the 7% legislation is passed, and will try and sell the bonds as soon as possible, he did not feel the Partnership would object to waiting for a short period of time, providing the interest would be tax exempt. However, by March of next year if the interest ceilinb is 7% and the bonds are still not marketable, then all parties should sit down and take another look at the situation. After further discussion, Mayor Dunne suggeited that a concrete proposal be submitted and an informal meeting be held, consisting of two members from the Council and two from the Parking Authority, and a representative from the May Co. to discuss the mattel prior to a formal meeting being held. APPROVAL OF MINUTES: Minutes of the joint special meeting of the City Council and the Carlsbad Parking Authority held April 29, 1969, were approved -as presented. Motion Ayes Absent It was moved by Director Cannon and seconded by Director Snedeker that the minutes of the joint special meeting of the City Council and Carlsbad Parking Authority held April 29, 1969 were approved as presented. Four "Ayes", Director Killen absent. By proper motion the meeting was adjourned at 6:35 P.Y. Respectfully submitted, I f. ? , s ,x. *2 ,. -..- . 3 liL,g&fQd/ -. .,- . *' {,, ,L , r ..,< .' dL f , . ./&///&y<,/' - Marbaret E. Adams,' City Clerk i 1 J i