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HomeMy WebLinkAbout02/17/2015 Study Session MinutespowN o�- L rr � 7 9 MARANA 7 STUDY SESSION MINUTES 115 5 5 W. Civic Center Drive, Marana, Arizona 8 565 3 Council Chambers, February 17, 2015, at or after 6 :00 PM Ed Honea, Mayor Jon Post, Vice Mayor David Bowen, Council Member Patti Comerford, Council Member Herb Kai, Council Member Carol McGorray, Council Member Roxanne Ziegler, Council Member STUDY SESSION CALL TO ORDER AND ROLL CALL. Mayor Honea called the meeting to order at 6:02 p.m. Town Clerk Bronson called roll. Vice Mayor Post was excused until 6:10 p.m.; there was a quorum present. PLEDGE OF A.LLEGIANCEANVOCATIONIMOMENT OF SILENCE. Dispensed with until the regular meeting. APPROVAL OF AGENDA. .lotion to approve by Council Member McGorray, second by Council Member Bowen. Passed unanimously 6 CALL TO TIIE PUBLIC At this time any member of the public is allowed to address the Town Council on any issue within the jurisdiction of the Town Council, except for items scheduled for a Public Hearing at this meeting. The speaker may have up to three minutes to speak. Any persons wishing to address the Council must complete a speaker card located outside the Council Chambers and deliver it to the Town Clerk prior to the commencement of the meeting. Individuals addressing a meeting at the Call to the Public will not be provided with electronic technology capabilities beyond the existing voice amplification and recording capabilities in the facilities and the Town's overhead pr /document reader. Pursuant to the Arizona Open Meeting Law, at the conclusion of Call to the Public, individual members of the Council may respond to criticism February 17, 20 -15 Study Session Minutes 1 made by those who have addressed the Council, and may ask staff to review the matter, or may ask that the matter be placed on a future agenda. No speaker cards were presented. DISCUSSION /DIRECTION /POSSIBLE ACTION D I Relating to Economic Development; presentation and discussion regarding the creation of an Industrial Development Authority for the purpose of providing tax exempt financing to various industries (Curt woody and Frank Cassidy) . Presented by Curt Woody who stated that tonight's presentation on Industrial Development Authority's (IDA) is a potential tool for economic development. He then introduced Michael Caflso from GreenbergTraurig, LLP, who gave an overview of IDA financing in Arizona. An IDA can be considered a non - profit corporation that the Town can form. It has powers like other political subdivisions. An IDA would be governed by a separate Board of Directors appointed by the Mayor and Council; however, the Board manages the IDA, and the Council would have no involvement in the day to day activities. The most important aspect of an IDA is who are eligible borrowers and what are eligible projects. Financing is done through the issuance of bonds and is similar to a municipal property corporation. Under Arizona statues the projects that an IDA. finances does not have to be located within the town of Marana. An IDA does not provide investors and does not have access to funds which it can itself loan or invest. The borrower must provide eligible investors for bonds. The IDA is a conduit that can borrow tax exempt bonds at a lower interest rate and lend it. These debts are structured so that the town is not obligated on the debts nor can they affect the town's bond rating. There are two places to look for eligible borrowers and projects. Some of the more interesting are manufacturing, health care institutions, and educational institutions operated by nonprofit organizations such as charter schools. This is the most active in the state right now. Multi- family rental housing, single family owner - occupied housing, solid waste, electric energy and water, industrial parks are also eligible projects. In Arizona a number of projects have been done for electric energy and water. These are all done under state law. These things aren't worth a lot unless you're taking advantage of the fact that they're tax exempt. If they're not tax exempt, you might as well go to the bank and borrow money on your own. There are also some projects available under federal law, but they are very heavily regulated and can be complex to navigate. But eligible borrowers for tax exemption are governmental entities, hospitals and health care providers, and charter schools. Qualified small issue bonds are what IDA's hope to attract. Anything that relates to manufacturing and production of personal property; and airport facilities, although it is hard to find lenders for small fixed based operators. Also eligible are qualified residential rental facilities, sewage treatment and solid waste disposal facilities, etc. All of this is an interest rate issue. The use of this kind of financing is industry - driven. Sometimes it's actually easier and cheaper to go to a bank and get loans when interest rates are low. And there aren't a lot of small manufacturing jobs being created in the United States right now. February 17, 20-15 Study Session Minutes 2 Typically an IDA will have an application process, which he explained in general. Most boards will hire consultants around the state to help them process these applications because they can be complex and tinge - consuming, and it does require a formal meeting process. IDA's basically exist because of the fees that can be charged. Mr. Cafiso used an example of the City of Phoenix IDA issuing bonds to Guam. Using basis points as For every million dollars worth of bonds outstanding at a given time, they collect $750,000. In this scenario, the IDA loaned $100M and will collect $7,500 per year per million while that money is outstanding. What's happened in Arizona is that IDA's in Arizona, especially the larger ones, can generate revenues by charging these kinds of fees. The Maricopa IDA charges 10 basis points. Charter schools are a classic example. Fees are used to pay IDA expenses and provide for extra curricular programs such as scholarship programs, charitable organizations, educational development loans and small business loans. Next he reviewed some typical transactions over the past five years and who is using these funds. Great Hearts Academies, Legacy Traditional Schools and BASIS Schools. For healthcare, Mayo Clinic and Tucson Medical Center, although this is not as big an areas as it used to be because hospitals are being bought up by big chains. we would like to see more manufacturing. Gortex and Dunn-Edwards did deals about five years ago. Tucson Electric Power Company has a loan through an IDA, as does Global water Resource. The takeaway from all of this is that the IDA provides a vehicle for financing eligible projects. It's not an easy thing to do. The Arizona Legislature does not make a lot of tools available to cities and towns to do this. when forming an IDA, the important thing is to put competent people on the board and work with good consultants. The transactions that have gone bad were "too good to be true." Board members are not compensated except for travel expenses. In terms of the transactions, IDA's use a trustee bank to handle the transactions. Depending on sophistication and activities of the IDA they may or may not have staff of their own. But a smaller IGA could open a bank account with signature cards and have staff. However, there isn't any money to pay fees until there is a project on the books. If there is staff, it's usually the economic development director. Mr. Woody indicated that after learning more about IDA's and having a discussion with Jack Neubeek about the potential of an IDA for the town, it was determined that an education presentation to Council would be the first step. At this tune, the preference would be to have directive that the town not set up an IDA but be prepared to do so should a project become available to us. It would still require a resolution, a board of directors and an initial outlay of $3,000 to $5,000 to set up and a board of directors. An IDA can be set up fairly quickly, according to Mr. Cafiso. The challenge is getting a board involved that could lose interest and momentum if there is nothing for them to do. It's aspirational to do projects, but the challenge is that projects need to be lined up and ready to go. Most of the projects are done with prearranged teams that are already in place with the lenders and the lawyers. For the smaller IDA's it's really difficult to do that. You could look at the Phoenix or Maricopa IDA's websites to see how their programs are organized. February 17, 20 -15 Study Session Minutes 3 Mr. Woody indicated that there was no real need to take action tonight. We could begin looking for potential the three to seven board members throughout the community. D 2 Resolution No. 2015 -020: Relating to Transaction Privilege Tax; directing Town staff to initiate the process to adopt a dedicated 112 cent sales tax to be used for the design and construction, and fixtures, furniture and equipment for a new police department building (Gilbert Davidson) Gilbert Davidson focused on the project budget and what it is comprised on. Mr. Montague will go over the funding and financing plan, and then Gilbert will wrap up with the next steps. Staff identified the $18M for the physical facility which includes the design and engineering, site development such as drainage work on the campus site, and opportunities for sidewalks and connectivity to the campus and to the Ora Mae Harn Park. Next would be the facility construction and then furniture, fixtures and equipment. After the last study session, a sample concept was presented. Staff double- checked the sales tax numbers and make sure everything adds up. There isn't a final dollar amount, but we want to get Council direction to separate out some of the site improvements, sidewalks and other landscaping improvements. Funding for those campus improvements could come from the general fund dollars and the sales tax to pay back for the actual police facility. Erik. Montague walked Council through the funding elements and some of the sales tax projection items. In the two previous study sessions in November and December, projections were made f or various tax rates. Specific direction was given by Council for a 1 /2 cent sales tax. Staff` determined that it was important that we get an outside consultant analysis and forecast of the sales tax revenues. In December staff went through a process to receive the services of Elliott D. Pollack & Co. based in Scottsdale, Arizona. Rick Merritt, president of the Pollack firm, provided an overview of the report contained in the Council packet. Mr. Merrick stated that his firm does economic forecasting for the state of Arizona. The approach was to take a look at the town's sales tax revenues related to Pinta County based on the existing tax structure as well as the r/2 cent increase, and do an analysis of the increase on reimbursement agreements — in this instance just the new outlet mall. They looked at the duration of the tax for three -four years. Marana is a healthy and growing community expected to grow to 48,000 by 2020. Marana has about a five percent share of the county -- and is growing much faster than the county is going to grow. Annexing down I -10 was a significant plus, and Marana has shown it has a much better way of dealing with growth. The town is getting leakage from other communities rather than vice versa. The outlet mall is expected to generate about $6,000 per square foot. Pollack & Co. did two types of forecasts. The high level forecast turned out to be an optimistic scenario which trended out what is going on in the community today in terms of sales tax revenues, how the population will grow, and the impact of inflation. The detailed forecast was more conservative. we looked at individual tax categories and how those may be affected in the future. He indicated on a chart the deviation between the two. Generally, sales tax revenues could get to $30M in FY 2016. And by FY 2020, between $37M and $40M. This is assuming February 17, 20 -15 Study Session Minutes 4 there aren't shots to the economy such as a minor recession, but from all the forecasts we see, and a lot of forecasting was based on the UA forecasting project which we think is the best forecasting model in the state. They see continued growth in the county which should bring Marana along as well. Erik Montague continued that based on this independent analysis and summary, staff is recommending following the detailed forecast --- the conservative approach. Staff did additional analysis and determined that it wouldn't be advantageous to increase the contracting sales tax any more than it currently is. It could put us at a competitive disadvantage. With our new impact fee structure, we'd need to provide credit back. For similar reasons, there's an additional bed tax — the add -to bed tax or what's called the discriminatory portion. That is restricted for tourism - related items. There would be more dollars going toward tourism, but not toward the police facility. The recommendation is still to have a single item exemption to the new tax for the portion over $5,000 like vehicle sales and large purchases. once we adjust the contracting and other items out, it's going to increase duration of the tax from just over three years into the fourth year. Based on a straight line projection, it won't be for about 40 or 41 months. It's the recommended approach that we link the duration of any proposed increase to a capped dollar amount rather than time, so that if the economy maintains its health it would reduce the time that tax would be in place. Based on this analysis, that would put us about November 2018. The data in the chart is in Table 9 in the analysis. If a sales tax is approved, in addition to the construction schedule, a funding plan. would have to be identified. It could be pay as you go; structured borrowing; and a blended PayGo and structured. Gilbert then talked about next steps. Tonight is Step l — identified the potential revenue source, and the next step would be securing that. If Council is comfortable with where we're going, then a motion would be necessary to proceed with advertising for the 60 -day notice and the final official vote to adopt the 1 /2 cent sales tax. Then it goes to a 60 -day state process and then implementation effective July 2015. The next step would be to go through a procurement process to identify and select a construction project manager. That would be an outside individual, usually a contract- for -hire who is an expert in vertical construction to become part of the team on a temporary basis between March and May 2015. After that, we would begin the design and construction team formation. That would be doing a construction manager at risk and selecting an architect and a construction management firm who will then negotiate with the town and come up with a final price. with our cap being $18M, that is the target, but there may be some negotiated costs. once we conclude, that will come back to Council to finalize the dollar amount and all things related to the project. once that is done, they'll begin the design and construction. The target for completion would be mid -2017 and the sales tax concluding in 201.8 -19. Council Mcmber Ziegler asked about the construction project manager -- that would be our representative dealing with the contractor, the architect and all the detail. Mr. Davidson stated that our team is phenomenal at building horizontal, but we don't have any vertical project managers. The construction manager at risk would not be a member of our staff. It would be someone with expertise in vertical construction management. February 17, 20 -15 Study Session Minutes 5 Council Member Zie asked for additional clarification on fundin sources. Mr. Davidson indicated that Step 4 is where all of that will come back into pla — the overall size of the buildin cost of construction, and site improvement costs. To our benefit at this location ( as opposed to the Twin Peaks location we have the utilities — wet and dr - on the campus and alon Lon Adams, so the costs that were associated with the potential Twin Peaks site are not valid. But re of location, there will alwa need to be site improvements such as sewer, draina etc. Motion b Council Member Zi to adopt Resolution No. 2015-020, directin staff to initiate the process to adopt a dedicated Y2 cent sales tax to be used for the desi and construction, and fixtures, furniture and e for a new police department buildin Second b Council Member Bowen. Passed unanimousl Council Member Zic asked for further confirmation that the 1 /2 cent sales tax will no lon after $18M cap is paid. Mr. Davidson said that lan will be put into a resolution for Council when the item comes back for adoption. EXECUTIVE SESSIONS Pursuant to A.R.S. § 38-431.03, the Town Council ma vote to g o into executive session, which will not be open to the public, to discuss certain matters. E 1 Executive Session pursuant to A.R.S. § 38-431.03 ( A)(3), Council ma ask for discussion or consultation for le advice with the Town Attorne concernin an matter listed on this a FUTUIZE AG'ENDA ITEMS Notwithstandin the ma discretion re the items to be placed on the a if three or more Council members re that an item be placed on the a it must be placed on the a for the second re Town Council meetin after the date of the re pursuant to MaranaTown Code Section 2-4-2 ADJOURNMENT CERTIFICATION. Motion to adjourn at 7:18 p.m b Vice Ma Post, second b Council Member McGorra Passed uunanimousl I hereb certif that the fore are the true and correct minutes of the stud session of the Marana Town Council meetin held on Februar 17, 2015. 1 further certif that a q uorum was ' N (o present. 8 qW --- A ------ R A ------ N ------ A ocel fironson, Town Clerk Februar 17, 20-15 Stud Session Minutes 6