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CC - 05-02-89 - Adjourned Meeting u 0 APPROVED MINUTES OF THE ADJOURNED MEETING CITY OF ROSEl~ EAD ROSEMEAD CITY COUNCIL DATE MAY 2, 1989 The Adjourned Meeting of the Rosemead City Council was called to order by Mayor McDonald at 8:05 p.m. in the Conference Room of City Hall, 8838 E. Valley Boulevard, Rosemead, California. The Pledge to the Flag was led by Councilman DeCocker. The Invocation was delivered by Councilman Bruesch. ROLL CALL OF OFFICERS: Present: Councilmen Bruesch, DeCocker, Taylor, and Mayor McDonald Absent: Mayor Pro Tem Imperial - Excused I. STUDY SESSION WITH THE ROSEMEAD CHAMBER OF COMMERCE TO DISCUSS A CONTINUANCE OF THE TRANSIENT OCCUPANCY TAX VERBATIM DIALOGUE FOLLOWS: McDONALD: This evening we're gathered here to have a study session about the Rosemead Chamber of Commerce and to discuss the continuance of the Transient Occupancy Tax (TOT). What I'd like to do as a format is to make it quick, sweet, and fast. The reason is because I think we've already made the decision by going with the TOT to begin with that there was a certain amount of acceptance by the City as to help sponsor the getting of a Visitor Information Center (VIC) off the ground. So, I would like to concentrate action not necessarily on the services that are going to be provided because that would be written in a contract when the contract is written. What I'd like to concentrate on is the intention of this body to actually, the methodology, of the funding and which way they want to move in that direction. I think they've already made the move and the intention to go in that direction because they put you into four years of the TOT. However, we have a variety of ways that we can do this. As you know, since there wasn't any construction by January 1st of this year, the Council may at its own prerogative terminate the agreement that is now established and come up with any other methodology that they would like to do. We have the full gamut in front of us of what we can or how we can, as far as the mind comprehend, fund a VIC and help the Chamber of Commerce have a facility that's both acceptable to the City and to the Chamber. The concepts that I know you've been looking at is an individual building on a lot somewhere. Some of the concepts that we've been looking for is incorporating you into a community facility structure. I don't know which is more advantageous or disadvantageous to the City but I would like to throw out a concept that I have to simplify a little bit about where I'm coming from. I would like to terminate the contract that we have with the Foundation and work directly with the Chamber of Commerce. The fund that we have now, the 2% TOT, is up to about $188,000; based on that, by the year's end we ought to have about $200,000, maybe. Your projection over the four year period was to have how much money? BONNIE CULBERTSON, EXECUTIVE DIRECTOR, ROSEMEAD CHAMBER OF. COMMERCE: Between $450,000 and $500,000. BETTY DONDANVILLE, PRESIDENT, ROSEMEAD CHAMBER OF COMMERCE: Based on your figures. BRUESCH: You're halfway through it. CULBERTSON: No, we're beyond that. DONDANVILLE: We're 30 months as of January. ADJ CC 5-2-89 Page *1 FRANK G. TRIPEPI, CITY MANAGER: And those are projections that were worked out with the City, that's not just the Chamber's projections. A couple of things, one of the major contributors to this thing, is very late getting off the ground. I think we all realize that. Again, those were projections that were done almost three years ago. McDONALD: Concepts that we're looking at as far as a few of us thinking in terms of putting you into a community building that the City is thinking of building in the future or it could be ten years down the road is something that is just that, it's a vision down the road and may never happen. I would like to make the proposal, so we have somewhere to start, of terminating the contract that we have; offering $250,000 to the Chamber of Commerce to acquire, build, and construct a facility that would give itself its room and provide us with a VIC. That would be $250,000 and $50,000 for the next 25 years. The criteria on that contract for the services rendered would have to be, of course, written up and so forth and so on. The reason I've done that is that thinking of the TOT we don't know where that's going. It may go up; it may go down. We would not be tied into something that's gradually going this way or that way; we'd have a set figure and you'd know exactly what the income is over that period of time. Another thing is that we'd be working directly with you as a service contract and we don't have an individual foundation but the Chamber of Commerce and the City. Also, in this concept that I'm thinking about is that we would not be in any way, associated with.... what we would is start with $250,000 of your building and taper it off. In 25 years it would be all yours. We could go $10,000 a year or however we want to decrease that, similar to what we had in the contract that you've written over a 4-5 year period. If you sold it the first year, if you sold it the second year, and so forth. Just to start us, I'm throwing that out and that is just my concept. It has nothing to do with the other individuals in this room, here. It's just someplace to start. I don't know where any of the other Councilmen are coming from but we have discussed it, just briefly, in the hallways and byways. BRUESCH: Dennis. You said $50,000 a year. Where would that come from, general fund money? McDONALD: It would come out of general fund money which the TOT would become a part of. BRUESCH: Which would be almost like this percent and a quarter. McDONALD: It's almost a percent and a quarter, as it is right now. We haven't had the Sheraton and that's $48,000 as I recall. We haven't added the Sheraton to it, so it would probably be a little bit less than 1 1/4%. But we would be writing a contract, a service contract, and that way we're not tied into a certain amount. If there needs to be an increase or a decrease, we can do that. We're not tied to the TOT. That's just off the top of my head. TAYLOR: Mr. Mayor. I don't mind the $250,000. We did make an agreement and the voters of this City made an agreement, not so much this City Council, made an agreement with the Chamber of Commerce to give them the tax proceeds. It was projected there would be a little more money in there, which it hasn't come to be. I don't see that as being the big problem, even another year or year and a half, that's going to be another $100,000 on to that $250,000, or $200,000, or whatever it may be. That's going to be between $300,000 and $350,000. I personally would be in favor of letting it go another year and see how much more money comes into that. I would be opposed to a 25-year contract. Right now, we get the services from the Chamber for approximately $30,000 a year. The budget's what, about $80,000? CULBERTSON: $127,000. ADJ CC 5-2-89 Page #2 • 0 TAYLOR: I haven't seen the current budget, to tell you the truth, but $80,000 sticks in my mind. CULBERTSON: That was probably a couple of years ago. TAYLOR: Yes. Where's most of that money coming from, now? CULBERTSON: From membership and fund raisers and the City contract. The bulk of it is from membership. TAYLOR: Yes. BRUESCH: What is your budget, now? I didn't get that. CULBERTSON: $127,000, plus something. I didn't bring it with me but $127,000 and $250, something like that. TAYLOR: Another point I'd like to make is that I believe that the Chamber should be a stand-alone facility. They'd have total control of it, whatever liability, operation, maintenance, it's the Chamber's. I don't believe that any organization, we have a lot of good organizations in the City, and I don't believe that there should be preferential treatment for any of them. They should stand alone and stand on their own merits. McDONALD: The $50,000 amortized over a 50-year period or over a 25-year period, if we're giving them $30,000 for the services right now, that would certainly have to increase over a period of time. TAYLOR: It may. It's been reasonable, I believe. It's served its purpose. But I can't see, arbitrarily, when Bonnie, or the Chamber presents an annual budget, I think we've been fair with it. They've presented a good proposal but I can't arbitrarily say, let's just jack it to $50,000 for 25 years and no checks and balances, anymore. BRUESCH: You know, actually, what we're doing is going into a new field that's more than just your normal chamber promotion of the community. What we're doing is going into.... I'd say the Madison Avenue approach to commercially telling everybody that "Hey, Rosemead's here and it's a good place to live, to visit and to stay if you're coming into southern California." It's an additional service. That could be worked out in budget sessions as part of an expanded request for support each year. Whether it be $30,000 next year, or $40,000 next year, or $20,000 next year, it depends on what the services that they'll be providing us, above and beyond what they're doing now. Essentially, this is a new service that they're going to provide for our City. McDONALD:, I think the difficulty... the point is I agree with you, in that I would like to see them self-sustaining as an individual entity. The difficulty.... even if we let it go maybe a couple of more years, they're not going to have sufficient, down the road projection income monies that is going to allow them to secure a piece of property and actually build for their own facility. That's why, with us giving them a contract that is of course negotiable on a yearly basis, but showing them over a 25-year period, they've got something that they can walk into a financial institution and present as an agreement that they have with the City, can money be loaned to us to do this and this and this? I don't think.... they've looked at property and even the money they saw coming in on the (unintelligible contract, if it projected out, wasn't of or substantiative enough for a financial institution to give them a piece of property and let them build. DeCOCKER: Bonnie. I don't see here any place that indicates when the 1 1/4% would ever end. Is that something that would just go on and..... CULBERTSON: Unending. That would be up to the Council. We would hope that it would continue as long as the VIC serves the needs of the community. ADJ CC 5-2-89 Page #3 DeCOCKER: Pretend that you have your building and there's certain things related to running it and taking care of it. What would happen if we had a real bad gas shortage? I mean, who thought six months ago that we're going to have what we have today? What if we had one and all of a sudden people didn't drive and they didn't go to motels? What do you...do you think you have enough money to basically carry on your operations or is that something that would really be a detriment to you..... CULBERTSON: I suppose we would have to have a couple of more fund raisers, Bob, to be very honest with you. We have tried to project the costs of running the VIC and it's true, like Bob says, what we have proposed, the programs that we have laid out for you, are not programs that we would do as a Chamber of Commerce. They are moving in to another area, to really promote the City. If people can't drive they're probably going to fly. I guess we'd have to face that when we came to it. The Chamber, when we have had bad years before, everybody says, "Okay, what are we going to do?" and we put on a fund raiser and somehow we get through those situations and we have certainly brought ourselves from a very bad situation, eight years ago, to a very good situation, now. So, now we're in a position where we're trying to look for the future and the future of Rosemead. We have other people out there, now, that are saying "We're going to do this for everybody." If we don't combat that, there won't be local Chambers. This new organization that the West Covina Chamber has started is a very large threat to all the San Gabriel Valley communities. It means that we, as a Chamber, have to do more than just serve our members and the residents and the school kids which is basically what we serve right now. That's our basic services are to the residents, our members and the school. We're going to have to do more than that or these people are going to have the money. They're out selling memberships and their memberships are $2,500. Somehow, they're getting the larger companies to join them and without some of those big companies our Chamber couldn't stay afloat. We could not maintain our services even with our very wonderful City contract. It's our large companies like Ticor and Ca1Fed and Edison that help bring in the stability of income that we have to have and if those types of companies join a County or an area-wide Chamber because they say "We're going to promote the Valley" then we're going to be in trouble. BRUESCH: That's exactly what's going on. That's why we have the activity within the realm of hotels and motels in this area. The western half of the San Gabriel Valley is being marketed, worldwide. That's why we have the investment dollars coming in from Japan, Taiwan, and the rest of the area because it is being marketed worldwide. That's why I say, in my estimation, this type of VIC is a valuable asset to our community because we are hitching a ride on the rising tide. They wouldn't be building a Hilton and a Sheraton and all the other big name chains within a radius of about 8 miles, if there wasn't a projection that they were going to be needed in this area. These people who are investing are not the type who are going to be investing in something like powdered water or something like that, they know what they're doing. They're not dropping millions and millions and millions of dollars into large facilities without knowing what they're doing. Therefore, I think that in the future we are going to see this area being sold, well, you don't want to go to the crowded conditions of Anaheim, you certainly don't want to be in the terrible soup called L.A. (Los Angeles), the next best thing is the San Gabriel Valley. You're only 15 minutes from everything. I really think it's going to be something that we could hitch a ride on. McDONALD: The concept we're talking about is the need for the information to get out and if somebody else is going to do it, then why should we pay the Chamber of Commerce to do it? BRUESCH: That's the whole point. That's why I say I agree.... McDONALD: You're almost defeating the purpose. ADJ CC 5-2-89 Page #4 CULBERTSON: But you see they're not advertising Rosemead. McDONALD: But if they're advertising the San Gabriel Valley, we're part of the San Gabriel Valley. CULBERTSON: They're advertising the Valley. Yes, we are. BRUESCH: West Covina and Baldwin Park have two major hotels going in, right now. Are they going to be selling the Sheraton in Rosemead? No. CULBERTSON: It is a division of the West Covina Chamber. They are marketing it as the Council of Business and Industry but it is a division of the West Covina Chamber. They want to bring in $250,000 into their Chamber and that's how they're going to do it is by raking the large businesses from all of the communities. I think we need to combat it. I think we need to fight it. I think we need to stand up and be counted. That's just my feeling. I guess a thought comes to mind, Bob, the businesses that are doing badly, say they can't afford to advertise. But business people will tell you that when you're doing badly is when you have to advertise. If we can get brochures ...I get packets of brochures from all over the United States, sent by other Chambers of Commerce. They will send us 5-6 of their brochures, similar to this Visitors Guide from Concord, and we put those brochures in our racks and people pick them up all the time. So, if you're looking for a place to go visit, people go to their Chamber of Commerce and ask for information on L.A. and I want them to see a Rosemead brochure. The Chamber cannot afford to do a quality brochure like this. These are the types of things that we would like to do as part of the VIC under what we proposed...... McDONALD: I don't think we need to argue. We're in favor of a VIC. What we need to do is.... CULBERTSON: Right. I just.... McDONALD: ....find out which way the four of us could agree to recommend that this be done and it's acceptable to everybody. Gary's got a good point. We're the keepers of the funds of this community and when the mayor in his flitty little mind says for 25 years we're going to give somebody $50,000, you know, we don't know what's going to happen next year to the City of Rosemead if there's an earthquake or two years down the road if there's something there. There's some concern about that. However, the concern is also for the business people that we get the tax from, that supports a major part or a good deal of the budget that we have. BRUESCH: The thing that I'm saying is that whatever figure you come up with, $50,000, $40,000, $42,000.... McDONALD: Well, that's important, Bob. It's not whatever figure it is. BRUESCH: Let me finish my thought. If we say now that we shall for 50 years, 20 years, give this to you, every year or you'll have this for interminable time, then all of a sudden when a crunch comes down the road, like he mentions, then everybody's going to be looking and saying why does the Chamber get money and other services are going wanting. What we have to do is put it in the budgetary process so that when and if we ever have cuts we don't have this thing written in lead saying we shall give this no matter what happens, we have a contract. What I'm saying is that it should go through the budgetary process each year. I'm agreeing with the concept. I say that we do need a VIC. But I think that the public would accept it a lot more if the Chamber were offering it as a service that was negotiable each year, that's all I'm saying. McDONALD: I think we could write a contract on a long-term basis that everything we do budgetwise, we look at each year. ADJ CC 5-2-89 Page #5 9 BRUESCH: A contract renewable each year? McDONALD: But it still has to be something that I think the Chamber.... it's got to be on paper somewhere where they can take it in and be able to.... otherwise they're going to wait, to be able to get financial aid, otherwise they're going to wait 10 years before they get the amount of money and the value of the property and the construction's going to be that..... DeCOCKER: Bonnie, have you found any property? I know you've been looking..... CULBERTSON: Oh, yes. DeCOCKER: ....that you think is within your reach? CULBERTSON: No. We looked.... the most recent piece we looked at was a little two bedroom, no, yes, two bedroom house that needs to be demolished on the corner of Marshall and Hart. It's less than 800 square feet and they're asking $450,000. BRUESCH: That's a commercial lot, though, isn't it? CULBERTSON: It just blows your mind. We have contacted the owner of the little old house down here on Guess and Rosemead, a little white house. No way is that lady going to sell, right now. Well, somebody will walk up to her door and present cash and if she's not feeling well that day, and it will be gone. But we have had two realtors looking for property for several months, now. Before that the committee contacted people. Marguerite Brown has contacted many people. Things don't come on the market. They're simply, all of a sudden, things are changing and that property has been sold. BRUESCH: Have you looked on Del Mar? CULBERTSON: Harry Lim has alerted us to a couple of places on Del Mar. BRUESCH: There's two of them for sale right now. CULBERTSON: Our feeling, the feeling of the Chamber and the Foundation people, is that Del Mar is so far removed from the activities of the center of town that it isn't necessarily the best location for us. McDONALD: How were the prices there? BRUESCH: There's a place on Del Mar, a house for sale, for $179,000 I think. Small lot but it's $179,000. DeCOCKER: How much do you think a VIC would cost? CULBERTSON: Betty, you had figures on that. We were looking at.... we're happy with we felt we could do with 2,000 square feet. I think the committee was working with $65 a square foot. DONDANVILLE: It's very hard to know where to start, Bob, when you don't have a piece of property. You don't know what you can put on it, square footage wise. So, where the heck do you start? I mean, how do you propose a building when you don't know what you're going to put it on? But, we know this; that in the proposals we've done on a minimal scale we have spent the money that we foresee in these next four years which is far less than $400,000. It would be approximately $310,000 on my figures. And yes, you're right, 1 1/4% at $50,000 would be a little short would be $60,000 approximately a year. $5,000 or $50,000 a year might be a little short but $60,000 at the present 1 1/4% equals each other; 1 1/4% of the bed tax as it is now would be approximately $60,000 and if we continue in the direction we're going now on our four year contract, we will have in the vicinity of $300,000. Three years ago $300,000 was a tremendous amount of money. I made an offer on ADJ CC 5-2-89 Page #6 • • the property behind my property that's 50 x 140 that I refused for $30,000 twenty years ago, and it is now $300,000. It is a residential lot that is good for nothing. We're just kind of in a squirrel cage; we're going around and around; we don't have a start and we don't have an end but we have a need. I also believe that this last sentence... we've asked for additional help because of the expenditure that we are going to have. It doesn't make sense to spend $400,000 of our money, and I believe it's all our money, and continue in the same operation that we're in right now and the truth is that's exactly where we'll be if we do not make changes because we may have something new, but without additional funds we can't operate in any other way. If we can't operate in any other way than what we're doing now, what's the point? We would like to do...we would like that expenditure to be proven as very worthwhile and we would like to promote this area and we cannot do it as it is. But anyhow, our projections are, Bob, that everything that we can see between now and the end of the fourth year would be well taken up into our building. DeCOCKER: I don't know what construction costs are. I don't build things so that's why I asked the question. DONDANVILLE: We were working on $65 a square foot but you see if for instance...I mean... Gary's here so he knows what can be built on a 50 x 150 lot. With the restrictions it might be hard to get a 2,000 square-foot building.' I mean, there are building restrictions. And a residential area is certainly different than a commercial area. We'd be more flexible on a commercial piece of property or..... CULBERTSON: That figure was given to us by Don Roses who is a contractor. Gary? TAYLOR: That's reasonable. No question about it. DONDANVILLE: And we're in approximately 1,200 square feet, now and we're bulging. We could not have the conference room as we have promised and as there is a need for. There is a need for a room like this for business people or for people who come to the motels to have a place to meet. So, we feel that 2,000 square feet is as small a building as we could really get by with. McDONALD: Am I assuming wrong that if we gave you a contract over a period of time whether you could use that as a financial piece of...to take to a financial institution and get money for it? CULBERTSON: I would think we could. UNIDENTIFIED VOICE: I think Marguerite would think that would be a way out. Because the way she talked about it now...we talked about getting a note. She said as we stand right now, no bank would loan us any money. DONDANVILLE: But we do have a banker on our panel. TRIPEPI: Can you borrow money on those kinds of agreements? 2ND UNIDENTIFIED VOICE (POSSIBLY THE BANKER PREVIOUSLY ALLUDED TO): It's feasible, yes. TAYLOR: Now is this..... we're talking about $50,000 or $40,000 for extra services to the City. What does this have to do with the financing of the building? CULBERTSON: That's after the building. DONDANVILLE: It was not our thought to have a financed building. It was not our actual-actually our intention to finance a building. That throws in other figures that we weren't really even counting on as far as financing. we were hoping to be able to do with the funds that have been projected up to this point and therein lies our problem. ADJ CC 5-2-89 Page #7 0 • McDONALD: Well, we certainly could be.... you don't want to discriminate against other organizations but certainly you're a closer organization than anybody else in this City because of the relationship that we have. Maybe we can become the financial institution. I'm not sure that that would be acceptable to my colleagues. We could loan the money for the property and the building and then amortize it over a number of years, on payments. TRIPEPI: Can I ask another question? McDONALD: Sure. TRIPEPI: Let me throw something out that kind of takes that and maybe adds a twist to it. If there were agreement by the Council, to extend the present agreement that we have, say for another two years, three years, or whatever it takes to build that up to reasonable.... and I think that will grow considerably when the Sheraton is on line I don't understand why you can take a $50,000 annual budget agreement that is approved on an annual basis and say they can borrow on that why couldn't they take a TOT agreement, call it an anticipatory tax, and go out and have any financial institution on it if it's extended out to a say a seven-year period or six years, or eight, whatever it is. Why is one more secure than the other? BANKER?: Who is going to be signing these we haven't secured.... TRIPEPI: The same person.... who's going to sign it if you use the agreement that's approved in the budget, who would sign it then? You just said they could loan on it so who sign on that? 1st UNIDENTIFIED VOICE: That's always been a problem all along. Who's going to sign this note and get it..... TRIPEPI: Does that help the Chamber if the council were willing to extend that agreement to seven or eight years or something like that? Now you're getting up to a range, I think, that makes this fairly feasible. Susan, what's the projections on the Sheraton, conservatively, at 70% occupancy? SUSAN NEELY, FINANCE DIRECTOR: At 70% occupancy, which is what we budgeted for, on our six percent it's about $100,000 a year. McDONALD: Two percent would be about $30,000. CULBERTSON: The concern has been expressed that even though the Sheraton is going to certainly have business, it is also going to siphon off some of the business from the motels. TRIPEPI: But their siphoning off at a higher room rate. CULBERTSON: That's right. But it's not going to be total additional occupancy. TRIPEPI: That's true. But also if you folks are tied to the TOT and a.fixed fee, now I'm only throwing this out by way of a suggestion.... BRUESCH: I read two marketing surveys and they say that that won't happen. They're saying that the Sheraton is going to have a totally different clientele. The last marketing survey that we saw stated that. TRIPEPI: If you're tied to the TOT you basically will track with inflation. As those room rates go up so does your 2%. CULBERTSON: I don't think it makes any difference which way, you know, Dennis' suggestion or your suggestion.... TRIPEPI: Not a suggestion, I just..... ADJ CC 5-2-89 Page #8 • • CULBERTSON: Well, I mean it's an alternative..... TRIPEPI: ....something that maybe is more acceptable from a legal standpoint. Personally, now I'm not a banker, but I know you know we go to the market to sell notes. The only thing we get that money on is something that says we have the ability as a local agency to collect (unintelligible tax. If we're willing to say that we're going an 8% tax locally, it's been approved by the voters, State law allows it, and out of that 8% we're allocating you 2% it would seem that you could go to a secondary market with that and borrow against it, I would think which would allow you to capture a piece of property now, at today's prices, and pay for it with future dollars. ROBERT KRESS, CITY ATTORNEY: I think that Frank's idea works so long as the period of extension, you're going to acquire the property and pay off the obligation, because the problem in your obtaining the loan is you don't have the power to tax your members. Your members can walk. That's the same problem we had with the Contract Cities building. They couldn't assess their members in an affective way that they could ever get a bank to loan the money on the idea. That would seem to work if the period of time allowed for the actual acquisition and construction of a building. CULBERTSON: We have been offered Don Riddles' property, right down here, Howard's Rug for $550,000. Number 1, we don't have the money to go into it, secondly, we don't have the money to maintain that large a facility. And yet, that is such a reasonable price for that property it just blows your mind because he really would like to see the Chamber have it. BRUESCH: I've been thinking about that piece of property. You're right, for a VIC and even for a combination with the Chamber office, you'd still have a lot of space left over which could be income property for you. CULBERTSON: Speak up, folks. Our Board has not felt that that's the best thing for us to look at. DONDANVILLE: If you speak to any Chamber, speak to E1 Monte, and Dennis might be aware of it, E1 Monte, they have three rentals that they depend on and when the earthquake came they lost their rentals. It has been an extreme hardship and when the building is rejuvenated and back on the market they want no part of the rentals and it is above and beyond the duty of a Chamber manager you get into property management with that. You get 2 or 3 tenants and it takes management, there's problems and.... CULBERTSON: And if they're not filled, if you are expecting that income to meet the needs and then you have vacancies.... BRUESCH: You see, the point I'm making is that if there was an extension on the contract you'd have the money for that piece of property in three years. DONDANVILLE: Well, yes and no. You mean go in now and pay it off, okay. But I'd like to back up to Dennis's proposal, though. I'm not clear in my mind, is this $50,000 contract in lieu of our $30,000 contract? BRUESCH: No, in addition to. DONDANVILLE: I'm sorry but I'm not clear in my mind. You mentioned a contract and we already have a contract, so I need to clarify..... TRIPEPI: I think there's a difference and we're trying to find something that's agreeable to all. You have, I think a couple of members that are saying $50,000 and you go spend it to run the VIC and on the other side of the coin somebody is saying "I'm willing to listen to what your proposal is to operate it on an annual basis but I want to see documentation and figures on an annual basis, I'm not going to approve it long-term with no strings. ADJ CC 5-2-89 Page #9 DONDANVILLE: Well, that's only fair. TRIPEPI: If you have see I don't know what precludes you from, once the building is up, I think the Council has agreed, pretty much, that when the building is up and operational, if you now need $30,000 to continue to operate as a Chamber of Commerce and provide the City with those services, in addition to that the VIC needs $12,500 or $15,000 to operate out on this other plane, all you need to do is put it into the budgetary process and submit it to the Council and they would consider it. I think that's what I heard. McDONALD: Gary and Frank and I just came up with a concept, here where it may be a little bit more acceptable because we will extend the TOT tax a period of time and also they can come in on a yearly basis for the asking•of the services costs that they're actually rendering. BRUESCH: This is basically what I was thinking. MCDONALD: Right. So, along those lines, the proposal would be, concept-wise, the extension of the TOT 2% tax for up to 9 years, that gives you five more years with the projection on there and on a yearly basis, you can come in and document the costs for the services rendered. TAYLOR: Mr. Mayor. We've got to get something clarified. You're adding things on.... your one question to me was would I like to see an annual review and I said "Yes," and that was the only question. The other thing we're getting into now...Mr. Kress has to clarify... the way that this tax was passed, on the ballot, under the California State laws, how do we arbitrarily say that we will give it to the Chamber? I want that in writing before we say we're going to continue a tax on the people to give to an organization. That's something entirely different from what we're discussing. You understand what I'm saying, Bob? KRESS: Yes, but I think it's..... McDONALD: Let's terminate the contract and give them a 2% for nine years. TAYLOR: Well, that's the only way you're going to be able to do it but we can't refer that to the taxes in my understanding of the law just from general concept. That was a tax approved by the voters and if we just say that we will continue it, I don't think we can get away with that. MCDONALD: Okay, so why don't we then make the proposal that we terminate the contract.... TAYLOR: Well, I'm not.... McDONALD: ...because we have the ability to do it at this point.... TAYLOR: I know it says that we may terminate it, it doesn't say we have to. McDONALD: But we eliminate that three entity concept and go then to a two entity concept. TRIPEPI: That isn't the problem. What Mr. Taylor is saying is that it is a percent. He's saying that at some point that 8% has to go back to 6%. TAYLOR: Whatever the technicality and the way that it was put on the ballot.... TRIPEPI: That's what he's asking, in fact does it have to happen or can the Council decide to extend it for another.... ADJ CC 5-2-89 Page #10 • • KRESS: The tax remains at 8%. TAYLOR: Right, but that was approved as far as in the ballot measure to take the 2% and give to the Chamber. BRUESCH: That was my KRESS: It wasn't really part of the question. It was part of the argument and the reason for an increase in the tax. TAYLOR: I'll be opposed to it as far as the way we're going about it. Nobody's going to cut the Chamber's throat, by any means. I'm not proposing that we yank the funds out. I'd like to see that $250,000 or so stay somewhat under the control of the Chamber and what I'd like to work is another year and see when this is it just the one hotel coming on? TRIPEPI: The Sheraton. BRUESCH: Sometime in July. You'd have one fiscal year. TAYLOR: And we'll know what that... and again, at the end of next year ...right now, you're still operating in full capacity, I'll say and we'll know at that time, get a better idea and if it's no detriment to the Chamber, I'd like to see what those dollars are going to be. BRUESCH: Bonnie. when do you have to give any type of reply to Don? CULBERTSON: Don has said to us that he is planning to leave the area and he plans to put the property on the market. BRUESCH: When? CULBERTSON: He was going to do it a month ago and he hasn't done it yet. I think he is so hopeful that maybe the Chamber could work something out that he's kind of procrastinating. TAYLOR: Mr. Mayor. I don't want to put a real damper on it but we're looking for a facility now. Now, we're going into another long term liability of more debt. In other words, you were talking maybe someplace had it for $450,000, all of a sudden now we're up to $550,000. CULBERTSON: We said we could not afford it. TAYLOR: Okay, that's the point I've been trying to make. Let's.... McDONALD: Let's stick with what we're trying to decide. TAYLOR: ..something in reality. If we're talking that the Chamber could buy it and rent the building, that's fine but then that's another problem besides what we have. BRUESCH: My concept of this whole thing was, at the beginning, we are not taking the money out of our residents' pockets. We are basically taking the money out of a tourist pocket. And what we are doing with that tourist dollar is rolling it back into to the system to promote more tourism, basically that's what we're saying. I'm totally in favor of that concept. The only thing is, and I'm glad that Gary brought it up, that has always been my contention that if you have a four year period that was approved by the electorate, my fear is that legally we'd have to go back for another election if we were to extend it. TAYLOR: We don't have to go back for the whole thing, under the law.... ADJ CC 5-2-89 Page #11 • 0 BRUESCH: No, no, no. I'm not saying for the whole thing. Just for the 2% TAYLOR: What is it that allows our budget, 5% for community organization, so we don't have a problem with it. There's other ways to just take it out of General Funds but sticking with that tax, even though we're going to take it out of the General Fund, because it came in under TOT (tape turned over). BRUESCH: ....our banker. If this Council went on record as promoting the idea of rolling back the TOT to tourist enhancement would that be enough for a lending institution to make up that gap between whatever, the $350,000, the $550,000, or would it have to be more in concrete terms of this year you're going to get X number of dollars, next year you're going to get X number of dollars, and so forth. BANKER: It would have to be in concrete. They would actually need a contract indicating either a figure or a dollar amount. TRIPEPI: You can't work with projections? BANKER: They can take a look it but it's going to be really slim. KRESS: Well, I think Bob was saying if the Council goes on record and sort of pledges its support is that enough and the answer is no, it's got to be more concrete than that. BRUESCH: Secondly, could you work up a dollar figure that would include not only overhead, actual operational overhead, but also finance charges and money, come back to us in a year's time and get that not even a year's time, six months time get that figure to us and we can write out, say a ten-year contract for those services. CULBERTSON: We'd have done that, Bob, but like Betty says, the problem is we have nothing to base it on. We have nothing to base it on because at one point, several years ago there was a building at Garvey Park that we thought might be usable, if there were an area in our city like Arcadia has, where they have put their Chamber on City property, and they lease that back to the Chamber, something like that where we could put up the building, right now, we know the figures for the building; we could tell you what the overhead is and so on because we know what we can work with for the building but when every piece of property we look at is a different price and continually escalating, it's just almost impossible to come up with a figure. TRIPEPI: Let me clarify something, real quickly. There's a question on the TOT. In its simplest terms, if the City gets $250,000 a year in TOT you could,-if you wanted to, give $100,000 to the Chamber and say go market the City and that's legal. What I'm saying is, the TOT is not a special fund, it's not a restricted fund, it is so closely tied to tourism that there is in Sacramento a move to require Cities to give a percentage of their TOT.... BRUESCH: I wouldn't be against that, all I'm saying.... TRIPEPI: I'm against it. You guys should be able to decide to do it on your own, I don't the State should tell you that you have to do it. BRUESCH: The point is they need. in concrete terms something they can take to a lending institution that will show that they will have these dollars coming in. McDONALD: Let's make a proposal for 10 years. The extension of this, we've got it for four years, let's extend it up to a ten-year period and give us an amount here so we can..... we're looking at, it's going to cost you what, for a piece of property,? ADJ CC 5-2-89 Page #12 • • DONDANVILLE: We're back to square one. CULBERTSON: The lease expensive that we have looked at is the one at Marshall and Hart. It's visible and easy to get to and it's $450,000 and that's just the property, because the house would have to be taken down. DeCOCKER: Is the church over here any better, Betty, we talked about, is that piece of ground too expensive? CULBERTSON: They won't sell. DONDANVILLE: They're not ready to sell to us and if they did their price at that time, they did say they would let us know, their price at that time was $1,000,000. Now, as far as I'm concerned, $1,000,000 for that piece of property is the best buy in town. But, not for this group. DeCOCKER: I didn't know what they wanted. CULBERTSON: We contacted them almost a year ago. DONDANVILLE: That was the figure mentioned. TAYLOR: I don't believe that we're in a position tonight to make such a proposal. I'd like to see something brought back here with the recommendation that you may want to put into it but it's too wide open to just arbitrarily extend it because we don't know where we're going on it. We're just saying we'll give them the money but we don't know what's going to happen. McDONALD: But if make a proposal and we make a recommendation we've limited them into the parameters of what they're going to be able to work with and they go out there and actually work with that. McDONALD: If we extended the 2% out to nine years, the income would be $863,142 based on what we have now plus the Sheraton at 70% capacity. DeCOCKER: Is that what you're proposing, 1 1/4% for ten years? MCDONALD: No, this is a different concept here. This is the extension of.... let me ask one thing here. Would it be advantageous at this point to scrap the Foundation? KRESS: I'm a little bit hazy about why we had it in the first place. I need my recollection refreshed. I thought there was some tax reason. CULBERTSON: Our understanding was that you suggested it because the money needed to be put in a separate fund. KRESS: That was never.... CULBERTSON: So, if that was our misunderstanding, we did that thinking that was the proper thing to do. Before we had the Foundation approved the IRS sent us a letter stating that Foundations cannot build buildings. We wish you would scrap it and work directly with the Chamber. The Foundation is not working for us as we had been told by Alhambra. KRESS: I think that's where the suggestion came from, another Chamber. It was not from me. BRUESCH: I think it was a separate entity so that if the thing fell through we wouldn't have to go through the Chamber to get the money back, that type of thing. CULBERTSON: We set up the whole thing thinking that was the proper way to go and it proved not to be so. ADJ CC 5-2-89 Page #13 0 • KRESS: Does it have funds, now? CULBERTSON: $6,000 and we can use that money for other things. We could use it for supplies and things in the VIC but we cannot use it for the building. We could use it for an architect. Did you folks see this figure, back here? That's 2%. TRIPEPI: That's 1 1/4%. CULBERTSON: Oh, that's 1 1/4%. TRIPEPI: For nine years. I think you could take that to a bank. BANKER: Tomorrow I will call one of the gentlemen who works in the CRA downtown to see whether they can put together something. Not as a conforming type but as something we can take a look at with the concept. BRUESCH: Could I make one more suggestion, Bonnie? This just came up in my mind. You're talking about having a facility that's too large, such as the Riddle property, would there be anything that would preclude you getting a piece of property like that and then getting a lot split and..... CULBERTSON: Yes, because there's no parking on the one lot. DONDANVILLE: You'd have to demolish the building and that's a good idea. There's a 100-foot frontage; it's a 100 by 120 but parking is a problem. The one lot takes up both buildings. BRUESCH: What about a covenant? What about a parking covenant? In certain cases when your building with common frontage or area between, the two businesses can go into business together if they have a covenant that shares the parking. That covenant becomes part of the deed to the property so that it will be part of the property forever. CULBERTSON: You see, actually, we would be in a better location to buy the $450,000 one because probably they would negotiate down, somewhat at Marshall and Hart. BRUESCH: Then you're going into another $100,000 or so for the building. CULBERTSON: Yes; but then we've got the 2,000 square foot building that we can maintain and we know we can maintain it and we've got parking and we've got good accessibility from the freeway. It's probably a better location for us. It puts a little closer to the Garvey business district rather than being on Valley. That has made a whole lot of people happy that the Chamber made that move. It kind of showed that the whole City is important to us., BRUESCH: Are you thinking in terms of putting your daily business office up there, also? CULBERTSON: Yes, it would all be one complex. DONDANVILLE: Mr. Riddle's building is not a new building. That building is very old and it would probably take a lot of money to put it up to today's codes and make it presentable and usable as a Chamber and VIC. McDONALD: I'd like to make the recommendation or the motion that we scrap the Foundation as of July 1, 1989 and give the Chamber of Commerce the equivalent of six more years of what the 2% of the TOT would be. So, what we have totally is a nine year package of 2% of what the TOT would actually be. That figure is $968,142. That's a projection on the capacity of 70% of the Sheraton not taking away from anything else. So, the motion is to scrap the agreement with the Foundation; work directly with the Chamber of Commerce; give to the Chamber of Chamber starting on July 1st six years of what the equivalency of 2% of the TOT would be on a yearly basis for the next six years. ADJ CC 5-2-89 Page #14 TAYLOR: What happened to those other figures you had on the board a minute ago, Frank, at 1 1/40? TRIPEPI: That was..... CULBERTSON: That's the six years to include the 2 1/2 years that's already there. TAYLOR: I want to backtrack a minute. $863,000 something like that at 1 1/40. How can you go to 2% and get $100,000 more? That was for a total of nine years? McDONALD: As of July 1st, you'll still get all the monies up to that point. Then it goes for six years more or a total of nine. years. BRUESCH: On those figures with the Sheraton at 70% approximately what is it per year, then? McDONALD: It's approximately $120,000 per year. We're assuming that they're getting $188,000 and what's the remainder of this year and then the $120,000 for next year which is the fourth year and $120,000 after that. DeCOCKER: This July 1st, how much money will you have, Bonnie? CULBERTSON: Well, uh.... McDONALD: We don't know that. CULBERTSON: ...Susan gave us $186,000 at the end of January because she doesn't get the figures from the State.... DeCOCKER: Just round figures. $200,000? CULBERTSON: $200,000. DeCOCKER: Okay,.then by July of 1990 you have what, $300,000? Then you're talking about you'd like to buy a building, what's going to allow them to buy land or building because at the end of next year they're only going to have $300,000. McDONALD: But what they've got now is a commitment from the City. DeCOCKER: Property is constantly going up,• will they ever reach that point where they will have enough money? McDONALD: we conceivably believe that with.... TRIPEPI: The only way they could conceivably buy a building on this nine year extension to nine years total, is they have to take this document to a lending institution and say for the next six and a half years we are going to receive a hundred and some thousand dollars per year, here's the history of the TOT in Rosemead, here's the tables, here's what it's been, here's what the projections are, here's how we got there, they're going to take that financial, almost like an official statement, to lending institutions and say will you loan us x amount of dollars to buy and construct a building and we will pay you back over the nine years with the money we get. DeCOCKER: Do you think there's a lending institution that will do that? BRUESCH: Let's ask. Here's the paper that says the City Council is going to give us this for six more years. Will you give me a loan? DONDANVILLE: There will be equity. ADJ CC 5-2-89 Page #15 • BANKER: Because of the down payment...... and it's something we can take a look at. It's nothing that I can commit to but we also have a department that works on these special projects, which this would fall under and yes, it is feasible. TRIPEPI: See, what I'm saying is it was no different the other way. Let's go the other way and say they get 1 1/4% forever. They're still playing catchup. Because they're still only going to get so much per year. So, the way you eliminate that is to effectively draft some kind of a legal document that is a tax anticipatory note, that they can then take and have somebody make a loan on it. BRUESCH: This money that's being held for them from the TOT, is it collecting interest anywhere? TRIPEPI: It's invested along with the rest of our CDs. BRUESCH: Do they get benefit of that interest or do we get benefit of the interest? TRIPEPI: It's up to the Council. KRESS: The agreement does not provide for interest at this time. DeCOCKER: If that can happen, what Frank is saying, Mr. Mayor I'll second that, if that's your motion. McDONALD: Thank you, Bob. We have a motion on the floor, a first and a second. Do we have any further discussion? TAYLOR: I do intend to vote "NO" on it. In no way is it a reflection of the Chamber but I'd like the minutes to show that I believe it's an ill-conceived program for tonight because there is zero documentation presented tonight in review form. We've discussed the original proposal which we had some clarifications tonight. That appears not to have been the proper way to go about with the Foundation. Now, we are proposing this tonight with absolutely zero input as far as written documentation to research, to have the City Attorney check out. I feel that it's just an inappropriate way to go. In no way does it reflect on the Chamber as a body. BRUESCH: Point of information, Mr. Mayor..... McDONALD: Bob, just one second. Mr. Kress. Do you have any legal questions in the proposal or the motion that I made as far as you being able to draft from that something that would be workable? KRESS: 'Well, I think my understanding of what's being proposed is an extension of the terms in the agreement that's already been approved.... to substitute the Chamber of Commerce for the Foundation. I would think a perspective lender takes a look at this we would probably want to amend the agreement to specifically provide for a lender's interest. The agreement is made specifically non-assignable, now. We may want to deal with that issue but if this is the outline that the Council wants to adopt I think I can return an agreement for Council ratification. BRUESCH: When you say a lender's interest, that means we are the lender. KRESS: No. It means a financial institution looks at the fact that there is two hundred and some thousand now and based upon conservative projections there'll be this amount of money next year, so that they would use the currently accrued funds as a down payment and the income stream to make the mortgage payments would be the funds from the City. BRUESCH: Do I assume that we're talking about a principal only note without interest, in other words we're including the interest that is accruing as we hold the funds. ADJ CC 5-2-89 Page #16 McDONALD: I'm not assuming anything on that decision we'll have to make.... BRUESCH: I think it has to be part of our.... I think that's a McDONALD: How much interest is there on that amount? Do we know? NEELY: There's no interest allocated because there's nothing in the agreement that we are allocating it. McDONALD: There's no allocation of interest. BRUESCH: Legally, would a City ordinance, a formal City ordinance delineating this agreement, have more power in front of a lending institution that just a simple majority vote? KRESS: You're going to have a formally adopted agreement. I think the Mayor is asking for an instruction, staff to draft that agreement. Obviously, with some give and take with the lender, it may need some additional terms to satisfy their requirements. I think the Mayor is asking whether there is Council support if this possible, if there will be the three votes to approve the final legal document. BRUESCH: I'll call for the question. Vote resulted: Aye: DeCocker, McDonald, Bruesch No: Taylor Absent: Imperial Abstain: None The Mayor declared said motion duly carried and so ordered. BRUESCH: So, this will be back in front of us in a matter of a few weeks in a formal.... McDONALD: As soon as the draft is drafted. There being no further action to be taken at this time, the meeting was adjourned at 9:10 p.m. The next regular meeting is scheduled for May 9, 1989 at 8:00 p.m. Respectfully submitted: APPROVED: y Clerk MAYOR I ADJ CC 5-2-89 Page #17