2005 AGN MAY 03 I13 - Laserfiche WebLink

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Item #13 CITY OF COLTON AGENDA REPORT FOR CITY COUNCIL MEETING OF MAY 3, 2005 TO: Honorable Mayor and Council Members FROM: Al Holliman, Assistant City Manage T,' SUBJECT: Loan from the Community Reinvestment Fund for the Big League Dreams Sports Park DATE: April 26, 2005 BACKGROUND The City has been in discussions with Big League Dreams (BLD) since 1999 for the development and construction of a community sports complex. There have been numerous challenges relative to land acquisition and endangered species. As a result, there is much history relative to this project. Bonded indebtedness to build the park on its original site was incurred in August, 2002 in the amount of $7.2 million, which netted approximately $6.5 million after paying costs of issuance and setting aside a debt service reserve. In addition to this sum, BLD was to put in $1.5 million of their own money, or the City was to help procure a loan for them in this amount. The City had already purchased the land for the site, the former Frontier Town location, in the approximate amount of $2.1 million vis a vis a loan from the General Fund to the Redevelopment Agency (RDA). The RDA took title to the property as the park was to be located in the West Valley Project Area and development in addition to the sports park was contemplated. The Frontier Town site was 9.1 acres, which was not adequate for the estimated 15 or so acres needed for the sports park. Therefore, the City/RDA placed in escrow the adjoining 10 acres owned by Vern Shafer for $1 million, with $120,000 in accrued non refundable deposits. At this point the City had $8 million in estimated funds ($6.5 million in net bond proceeds and $1.5 million in BLD commitment). The projected cost of building the park was $7.2 million and $800,000 was to go towards acquiring the Shafer piece, with the remaining $320,000 coming from City reserves (Shafer = $1 million plus $120,000 in non-refundable deposits). It is also very important to note that under BLD's "standard" agreement with governmental entities, they do not participate financially in any acquisition or construction costs but rather pay a lease payment to cities equating to a percentage of gross revenue from the respective park. Currently, this number is 6% of gross receipts. However, our bond counsel opined that the City could not issue tax exempt bonds if it received a "profit" share from BLD. The City concluded it was better to issue the tax exempt bonds as the interest rate was 200 to 300 basis points lower than taxable issues at the time. The $250,000 in annual debt service savings as a result was deemed more prudent than taking on a larger debt payment in exchange for a profit share, yet to be determined. However, there was nothing which precluded BLD from putting in funds or borrowing money, which led to the negotiation for them to be responsible for the initial $1.5 million debt amount. Furthermore, there is no technical reason why the percentage of gross receipts methodology cannot be used as a mechanism for determining how much annual debt service BLD will pay. This is an important point which will be discussed later.