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20100629 Late CorrespondenceRECEIVED FROM -C(:)R L T TH RPV CC AND MADE A PART OF THE PE AT THE Steve Wolowicz COUNCIL MEETING OF Oral report on meetings OFFICE OF THE CITY CLERK .rnocwl G rtTY GI_FRK H:\My Documents\RPV City Council\2010\oral report 6-29-10.xis page 1 of 2 6/28/201010:16 AM Meeting today June 29, 2010 Last report April 20, 2010 Date Event Comments 4/21/10 Monthly joint mayors' lunch meeting Shared financial issues of jurisdictions 4/21/10 CCCA meeting general Bd. Meeting - these are really open to all council members and senior staff awards to Lois Gaston out going President; attended by Lee Baca 4/22/10 PVP Transit Authority board meeting financial issues - rec'd county funding - may be of concern I in next few years 4/22/10 fund raiser - Greg Allen's freedom for u -- support for youth center arrived late -- full house -- met Steve Cooley new RPV resident 4/23/10 Grand opening of trader Joe's great event - council members attended - the crew made us all feel welcome -- even met old friends now working there; commented on extra work by Council _ 4/23/10 CCCA lunch meeting at Terranea Frank Zerunyan hosted Associates and golf committee -- encourage all to attend May conference 4/24/10 community leaders breakfast _ presentation of plans for parks -- encourage all in community to attend workshops _ 4/25/10 _ spoke to Colt Road HOA 4/26/10 lunch meeting - LAAFB - honorary commanders importance of AFB to economy and our city -- show presentation 4/26/10 spoke to The Hill HOA annual meeting 4/27/10 Planning meeting for next CC agenda With City Mgr., Dep. City Mgr.., City Clerk and by phone Mayor pro tem 4/29/10 address by Don Knabe in Torrance presentation by Torrance Area C of C -- attended by many council members other cities 4/29/10 _ attended 50th anniversary at CSU DH presented RPV proclamation -- new library -- growing campus -- originate in PV 4/30/10 Reception for Holocaust survivors at Los Verde's -- part of Assembly -- hosted by Bonnie Lowenthal -- importance to learn of stories - read names of RPV residents 5/1/10 PV seniors - 1st coffee and cars 5/2/101 spoke at del Cerro HOA annual meeting _ hosted by Marietta and Leo Fong -- organized by Al and Kathy Edgerton 5/5/10 Cinco de Mayo lunch at Sheriffs station spoke with mayors Frank Scotto & Don Sugeyama and council member Margret Estrada 5/5/10 funeral for former Torrance Police Chief Don Nash Also past RPV resident 5/7/10 Ma ors breakfast Explained last CC meeting and heard committee status updates 5/11/10 planning session w/ staff for 5/18 meeting With City Mgr., Dep. City Mgr.., City Clerk and by phone Mayor pro tem 5/11/10 Torrance Mayor- state of the city learned they received grant for water quality issue 5/12/10 to 5/15 CCCA annual conference !see notes and agenda 5/19/10 LA county - Annual older Americans recognition day _ our nominees -Ann Shaw and Ken Dyda 5/22/10 RPV CC budget workshop 5/25/10 5/25/10 planning meeting for 6/1 meeting With City Mgr., Dep. City Mgr.., City Clerk and by phone Mayor pro tem Frank Scotto brief state of city talk at rotary 5/26/10 LA County sheriff 41st annual officers memorial 5/26/10j met w/ Kevin Moen re possible lights at Peninsula HS — 5/27/10 Abalone cove site inspection w/ staff -- item on council agenda 1 5/28/10 met w/ Ann Shaw re PV seniors Learned of their interests in civic center 6/2/10 6/2/10 Presented environmental awards at Cornerstone school tExamples of hands-on environmental awareness that is working Civic center sub committee - 1 st meeting 6/4/10 - monthly mayor's breakfast , — — -- Explained last CC meeting and heard committee status updates 6/5/10 Rolling Hill Rivera HOA area picnic fw/ Brian -- spoke on local area issues and answered questions H:\My Documents\RPV City Council\2010\oral report 6-29-10.xis page 1 of 2 6/28/201010:16 AM RPV CC Steve Wolowicz Oral report on meetings 6/5/10 Annual event for So Bay Children's Health Center RPV donation) sat w/ Bd. Members and Mayor of Torrance and former mayor of MB _ 6/6/10 Installation of new pastor at Mt. Olive Lutheran Church Welcome Reverend Craig Molitoris and his wife and family ---------- 6/8/10 plannincmeeting for next CC agenda With City Mgr., Dep. City Mgr.., City Clerk and by phone Mayor pro tem 6/8/10 election night events included event for Torrance city council and mayor 6/10/10 meeting w/ Don Knabe and Janice Hahn and their respective staff w/ Carolyn Lehr, Ron Dragoo and Sarah Singer -- (comments from City Manager 6/10/10 annual luncheon of B of D So. Bay Police & Fire Memorial Fdn 6/11/10 Spoke on panel -- Zerun an center at Libra -- moderator Kay Finer w/ Sen. Rod Wright & Pres. Malaga Bank Randy Bower, I past Chair of Chamber 6/16/10 Joint Mayors' luncheon meeting — ---- 6/16/10 Annenberg project update by Leonard Aube ------- ---- 6/16/10 Spoke to CHOA 6/18/10 Attended Los Serenos de la Pt. Vicente Whale of A Day Wrap Up 6/21/10 Sub committee, staff & Consultant meeting re civic center funding 6/21/10 LA County Economic Development report results 6/22/10 Planning meeting w/ staff for 6/29/10 Council meeting With City Mgr., Dep. City Mgr.., City Clerk Palos Verdes Art Center - awards meeting - presented certificate to 6/25/10 Don Crocker 6/26/10 American Cancer Relay for Life -attended and welcomin comments H:\My Documents\RPV City Council\2010\oral report 6-29-10.xis page. 2 of 2 6/28/201010:16 AM 9 1. Process steps 2. Financing options for the civic center 3. Overview of borrowing process 4. Overview of procurement processes & common models 5. Application to the City's situation, capabilities & needs 6. Estimated debt and debt service burdens for several scenarios 7. "Next steps" Supplemental material: • Three "public/private partnership" examples • A view of interest rates • Diagram of a financing lease structure • Example of a decision-making model for a P3 June 29, 2010 1 Tonight's presentation describes a process .... .... not an event. There is much additional data required to enable the City and the Council to make informed financial decisions. This session emphasizes process more than it describes conclusions and assumes there will be ample opportunity for future engagement and dialogue. Council Feedback Impact staff,, Review Matters Jure 29, 2010 2 is • No interest cost • Interest cost is major • Harder to • No interest cost • Often impractical consideration implement • Benefit nexus for large projects • Easy to implement • Legally and usually present • Typical approach financially complex • Smaller projects • Short-lived assets June 29, 2010 • Large, durable assets • Long economic life • Toll roads • Streets • Utilities • Water/wastewater • Parking • Storm drains 3 ATTRIBUTE GENERAL OBLIGATION BONDS LEASE -REVENUE BONDS 2/3rds vote of the electorate Unlimited ad valorem taxation on property (not, "full faith and credit") Usually lower than any other due to security; presently about 4.75% Competitive sale is required No; not permitted M Minor differences for general law cities and charter cities, but must be "real property and improvements" Typically level total payment (principal and interest) over 30 years (40 years is maximum) Majority vote of City Council Annual appropriations of rental payments, plus available reserve funds Can be as much as 0.75% to 1.0% above GO bond rate; presently about 5.50% Competitive or negotiated Yes; always required; assume lesser of 10% of bonds or one year's debt service Yes; also rental interruption insurance and title insurance Lny property that the public agency has the legal authority to lease. As a practical matter, usually only land and depreciable property Typically level total payment (principal and interest) over 25 — 30 years, depending on the useful life of the asset June 29, 2010 4 r� START WITH THE COST "TENSION TRIANGLE" Premise: Speed, quality and cost can become mutually exclusive factors. Engineers often use this graphic tool to demonstrate the complexity of balancing cost, speed and quality of a particular project. The value of the cost "tension triangle" is to remind us of the complexity present in any project that must balance the three factors. June 29, 2010 8 What is a "public-private partnership" and how could it help the City? British divestiture of coal, oil, steel and electricity business of the 1980s. (replacement theory) Office of Management and Budget Circular A-76: There is no government ownership and control. (definition) California Legislative Analyst: " ...the involvement of the private sector in providing goods and services that otherwise might be directly provided by governments." These responsibilities might include: ✓ design ✓ development ✓ construction ✓ operation ✓ ownership ✓ financing ✓ maintenance June 29, 2010 9 I L!_Orl al" Public Project t Integrated Project Delivery Mi a....a......................... a ........... F1Design -Build Design-Build-OPera- i .................................. a........... E** -------------------..---------------------------------------J COST OF MONEY ----.------------------------------------------------------ mo Adapted from: The Canadian Council for Public -Private Partnerships June 29, 2010 22 Hypothesis: Areas for additional inquiry: • The City's need isn't for an "enterprise" asset (water treatment, parking, sewer, toll road, etc.); is a P3 viable? • P3s are private entities — they do not have access to tax-exempt financing • Occupancy costs would be paid for a long period of time — long enough to enable the City to furnish its own financing June 29, 2010 13 staffv/ The City's familiar and `_the skill toexecute,public projects combinedv/ The City's team has zt,xperience with similar projects and requirements transparentFinancial planning is straightforward Process is ' ! i ✓ Greater flexibility Offers '. possibility of taking less time combined " . experience similarprojectsan- delivery ae ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ✓ Reductions in construction cost might come at the expense of financing costs ✓ P3s are evolving constantly — appetites may change ................................ v/ Financial planning is more # i Process! . June 29, 2010 14 DEVELOP THE SITE AS FOLLOWS: 1. Cultural center: 30,000 sq. ft., two levels, stone Private fagade, block back-up, steel frame, 12 foot story height — guess of $350 per sq. ft. (land excluded) 2. Community center: 20,000 sq. ft., two levels, $5.6 million decorative concrete block, 10 foot story height, steel frame — guess of $280 per sq. ft. (land excluded) 3. Village green: 1.7 acres, improvement costs undefined; not yet known — guess $1.0 million :�3.0 million 4. City hall replacement: 36,000 sq. ft., two $13.5 million levels, stone fagade, block back-up, steel frame, 12 foot story height — guess of $375 per sq. ft. (land excluded) Note: site preparation, engineering and certain design costs are not included in overall estimates. Sources: Deloitte Commercial Square Foot Building Costs, 2010 edition; RSMeans —Reed Construction Data, 2010 Market Insights June 29, 2010 15 *Carry costs for general obligation bonds are for illustration only; interest may not be capitalized on this borrowing. June 29, 2010 16 Debt Service Structure I all scenarios use level amortization over their term Funded #merest; 4dds, "carry cos#" frgt pg 16 to produ `"rqutrroceecs" blow Interest rate 20 yr BBB 20 yr BBB (close of business 61281101 Delphis "96" Delphis "92"+ Delphis "92"+ (Reuters) (Reuters) Earnings Rate n/a 2.Ola 2 E1Y n/a nia Required Proceeds $23,177,375 $23,370,750 $23,868,000 $23,868,000 $23,868,000 Costs of jssuce � 77 to 2Y. parva* $473B08 , 1 $487,(tmited June 29, 2010 17 a) Refine where the City wishes to "land" on the cost tension triangle b) Guidance on the desire for greater private involvement, especially: • Charter or "home rule" issue • Particular benefit desired from a P3 or hybrid c) Clarify uses for the facilities that might create financing challenges • Private uses • Uneven revenue streams to service debt/lease obligation • Dependence on fundraising activities • Restrictions on land use imposed by deed restrictions d) Measure the economic/useful life of the proposed facilities and match to debt service and/or depreciation e) Establish level of control desired over the financing terms and conditions f) Assess City's ability/willingness to absorb resulting debt service g) Consider competing needs for funding and reconcile June 29, 2010 18 A Workshop for the City of Rancho Palos tierdes 111"AIMM Mm, three "public/private partnership" example view o interest s rates Diagram # financing s.Is structuri Examplesa o 0 � 1� MA.GIs ADVISORS June 29 2010 public finance consulting 1 Seattle got: 0 $200 million new, state-of-the-art facility ® Costs savings of $50 million (estimated) B Reduction in start-up and testing risk Largest water treatment facility ever attempted in a P3 • Better control of the project enabling greater efficiency in pricing • Reduction of its "profit at risk" ® Valuable experience in developing the P3 • More efficient mobilization of workforce June 29, 2010 20 Dallas got: Kroger got: i 12,900 sq. ft. branch library to replace ® More efficient use of its land existing, outmoded facility ® Increased traffic from library's location s Shared parking ® Less costly store renovation • No out-of-pocket costs June 29, 2010 21 CalTRANS got: The first privately funded toll way developed in the United States since the IMIM capacity in heavily traveled corridor ® Someone else to fund the project CPTC ,o Congestion pricing . Covenant to not compete • Valuable experience in developing the P3 a Predictable revenue stream on which it could finance the cost of the project June 29, 2010 22 17.50% 15.00% 12.50% 10.00% 7.50% 5.00% 2.50 1/1/1981 1/1/1984 1/1/1987 1/1/1990 1/1/1993 Recession Dates Moody's AAA (seasoned) Corporate Bonds Bond Buyer's "11 Bond" Index (high-grade) 1/1/1996 1/1/1999 1/1/2002 1/1/2005 Moody's BAA (seasoned) Corporate Bonds 20 Year US Treasury (constant maturity) 1/1/2008 June 29, 2010 23 June 29, 2010 25 June 29, 2010 27 3.0 _. __.._ ........... ................................. ............ -- Commercial Mortgage - 2.5 - _____baCl4e-&-Secu-ri Ie -s -- issuance is near zero 2.0 0 L 1.5 1.0 as . so ue {Cf CA �-•1 c31 Gt � tit t#� � � Ci Ci O O .--I r -i rW e -i r-+ r -I .-1 cti .--+ 'V N O O O O O O O O N N N N N N N N Straight Corporate Debt Convertible Dc:)t-Asset Sacked Debt Pion Agency MBS TOTAL DEBT June 29, 2010 27 Acquisficd 06 ._ ;� • `- m � . �- �j � � - `yam'' `., ` KEY Std UPPER POINTVICENTE • " �' �. ol a it GATEWAY PARK 1 ND C©N Yv h� x WJ a ILS (€)OSTING AND PROPOSED" p JLHEADS r . lSTALACCESS TRAIL - PROPOSED ROUTE l-� )POSED PEDESTRIAN CROSSINGSmvu SIBLE NEW SIGNALS OR SMART CROSSWALKS EWAYTO RANCHO PALOS VERDES COAST kDWAY MEDIAN NTING IMPROVEMENTS` E ALK IMPROVEMENTAREA SIBLE FUTURE ROAD NARROWING WAYS (SHARED AND SEPARATED)