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2011/03/29ANAHEIM CITY COUNCIL ADJOURNED REGULAR MEETING OF MARCH 22, 2011 HELD ON MARCH 29, 2011 The City Council adjourned regular session of March 22, 2011 held on March 29, 20111 was called to order at 5:10 P.M. in the Chambers of Anaheim City Hall located at 200 South Anaheim Boulevard. A copy of the agenda was posted on March 25, 2011 on the kiosk outside City Hall. PRESENT: Mayor Tom Tait and Council Members: Gail Eastman, Lord Galloway, Kris Murray and Harry Sidhu. STAFF PRESENT: City Manager Tom Wood, City Attorney Cristina Talley, and City Clerk Linda Andal Invocation: Jimmy Gaston, Anaheim Police Department Chaplain Flag Salute: Council Member Kris Murray Mayor Tait called to order the Anaheim Public Financing Authority (in joint session with the Anaheim City Council) for joint public comments. ADDITIONS /DELETIONS TO THE AGENDAS: None PUBLIC COMMENTS (all agenda items): William Fitzgerald, Anaheim Home, opposed AMEA consensus agreement and certain other Council actions. Neal Runsvold, resident, addressed his comments regarding the proposed Anaheim NBA team, remarking that over 20 years ago, names of interested ticket purchases had been prioritized and he urged that the former list be considered should an NBA team make Anaheim their home. Mayor Tait asked Tom Morton, CS &E Director to meet with the resident regarding his comments. Todd Ament announced the Anaheim Chamber of Commerce wholeheartedly supported action to bring an NBA team to Anaheim as it would stimulate the local economy in a number of ways. It would add to Anaheim's distinction as a world class destination, and do so by attracting a team without negative impact to the City's general fund. Peter Agarwal, Anaheim Chamber of Commerce, expressed appreciation at the City's negotiation skills in attracting an NBA team without obligating the City to any risk or financial liability. He was in full support for this effort to create jobs and bring additional revenue to the city. Charles Ahlers, Anaheim /Orange County Visitors & Convention Bureau, also offered the full support of his organization in this effort to attract an NBA team to Anaheim. A third sport franchise, he stated, would have a significant economic value from the salaries associated with the team to the occupation of more hotel rooms generated through team travel as well as Council Meeting Minutes of Adjourned Regular meeting of March 22, 2011 held on March 29, 2011 Page 2 of 6 through premier events which could come to the City. He added the additional media exposure would strengthen the Anaheim brand making visitors more interested in traveling here. Kate Klimow, Orange County Business Council, remarked that one of her agency's four major initiatives was economic development which would foster job creation as well as increase private investment and Council's actions this evening would put into practice programs that encouraged investment in the City in a way that protected taxpayers from financial risk and encouraged private investment to pay for improvements. The Business Council commended Anaheim in their role as regional leaders. David Rose, retail businessman, looked forward to another sports franchise in Anaheim and the resulting economic increase to retail businesses. Lacey Kelly, Association of California Cities - Orange County, stated her organization's mission was to protect local control and to promote good government and policy- making among Orange County's elected officials. Attracting another sports franchise to Anaheim, she remarked, was good public policy and would create jobs and stimulate the economy at no expense to the taxpayers. Joseph Aihara, Western High School teacher, offered his support for an NBA team, emphasizing this was an opportunity for a community outreach program for student athletes excited about basketball. At 5:33 P.M., the Public Financing Authority was recessed and Council session continued with the public hearing item. PUBLIC HEARING: 1. This is a continued public hearing to consider a resolution approving the issuance of Anaheim Public Financing Authority lease revenue bonds for certain Honda Center B137.1 Improvements, including providing working capital in connection with its operation, and the financing thereof. RESOLUTION NO. 2011 -043 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ANAHEIM approving the issuance of taxable lease revenue bonds (Anaheim Arena financing project) by the Anaheim Public Financing Authority; approving specified documents in connection therewith; and authorizing related documents and certificates and the taking of related actions. City Manager Tom Wood announced that action on tonight's agenda items would add another chapter to Anaheim's history. He explained that in 1988, City leaders began planning for an arena to further define Anaheim as a destination to experience the best in entertainment and sports. Expectations had been exceeded through the performance of the Honda Center and the addition of a professional National Basketball Association (NBA) team was the next step. He introduced the City team to present an overall staff report encompassing all items before Council for consideration. Tom Morton, Director of Convention, Sports and Entertainment, reported staff was recommending three actions that would enable Anaheim to create a path for an NBA team to make Anaheim and the Honda Center its home. Should Council approve these items, he explained, they would only become effective if a vending contract between Anaheim Arena Management (AAM) and an NBA team was executed within 180 days. Approval of these items, Council Meeting Minutes of Adjourned Regular meeting of March 22, 2011 held on March 29, 2011 Page 3 of 6 he added, would fully protect Anaheim's taxpayers from financial and operational risk related to the Arena's operation or use of taxpayer funds to subsidize private enterprises. It would also facilitate a financing structure that allowed for private investment to advance funds for the Arena's improvements and the NBA team as well as continue to build on Anaheim's economic base as a destination center where visitors experience the best in professional sports, world class entertainment, theme parks and convention venues. He noted that the City's economy was largely based on its continued ability to attract guests to spend discretionary dollars while attending Anaheim venues and attractions, adding that providing additional reasons to come to Anaheim was a powerful stimulus to the economy and to long -term viability of the City. Providing background, Mr. Morton explained that in 1990, Council approved the construction of a world class arena and in 1993, the Anaheim Arena opened its doors to sold out performances by Barry Manilow. Later that same year, the National Hockey League announced its 4th expansion team, and the Mighty Ducks of Anaheim made Anaheim its home. At the same time, Arrowhead Water became the naming rights sponsor and the arena became the Arrowhead Pond of Anaheim. In 2003, the City approved and entered into the current facility management agreement with Anaheim Arena Management and in 2006 Honda Motor Company became the title sponsor and the facility was then called Honda Center. He commented on the success of the Honda Center, having receiving numerous industry awards over the years, the 2007 Stanley Cup Champions, and hosting numerous world class events, championships and concerts, including basketball tournaments. He added AAM also continued to improve the facility investing more than $22 million in capital improvements since 2003. As the center was designed and constructed to be home to two professional sports franchises, the City and facility management partners worked throughout the years to bring a second professional sports franchise to the venue. Tonight, Mr. Morton stated, to create a path to accomplish this goal, three items were recommended for approval. The first was approval of the issuance of Anaheim Public Financing Authority lease revenues not to exceed $75 million to provide funds for working capital including capital improvements and transition costs. This structure, he explained, allowed for private investment to fund the working capital and the facilitation of the bonds through the Financing Authority to insure all bond debt was paid only through the direct revenue generated from the Arena. It further insured that any short-fall in the repayment of the debt was at the sole risk of the investors, not the taxpayers or the City's general fund. Following the public hearing, he stated, the consent calendar contained the third amendment to the facilities management agreement making several changes to the term to enhance the long- term economic viability of the facility. The most significant change was to extend the base term from year 2023 to 2033 and to provide up to four 5 -year extended terms. This would assure the stability of management through the term of the NBA venue contract and also provided incentives for AAM to continue to make significant long -term investments in the building. The amendment, he added, would also modify the handling of revenues with the City sharing revenues after the 2011 bonds had been paid and if a share of net revenues exceeded $8 million up to $12 million, it would be set aside in a capital reserve fund each year during the extended terms. This, he explained, would provide for continued revenue sharing during the extended terms balanced with protected reserves for necessary future capital improvements. Further revisions would have AAM also assume the City's obligation to provide parking inventory for games and other events at the arena upon execution of a long -term ground lease for the Douglass lot, the former transfer station site. Other provisions, he described, were the long -term ground lease which required the manager to retain comparable parking for a minimum of 20 years after AAM's contract terminated. AAM would also have the right to develop the Council Meeting Minutes of Adjourned Regular meeting of March 22, 2011 held on March 29, 2011 Page 4 of 6 parking area fronting Katella Avenue on similar terms. The City, at no direct cost, would be assured of both continued availability of parking and long -term development of Douglass and Katella lots in a manner compatible with adjoining properties and the City's long -term goals. The third amendment would also facilitate the addition of exterior digital signage providing an increased revenue stream for the arena and would also require AAM to indemnify the city for claims relating to the relocation or obligations of an NBA team. The last item for Council's consideration was approval of a venue contract between an NBA team and AAM for the team to play its home games at the Honda Center. The City's approval, he explained, was required in order for AAM to enter into this type of agreement with any professional team. Regarding the Non Disturbance and Attornment agreement, the City would agree to honor the venue contract in the event of termination of the facility management agreement and also required the name of the NBA team to include the word "Anaheim" as its first word and sole geographic identifier. A Memorandum of Understanding regarding assignment of rights between the City and AAM would assist the NBA team in obtaining rights to use existing facilities at the American Sports Center as a potential temporary practice site for up to five years. Mr. Morton remarked staff was hesitant to identify the specific economic impact with this venture. However he pointed out an economist in 2008 stated the NBA Supersonics prior to moving to Oklahoma City, contributed $188 million to local economy through payroll, ticket sales and other consumer spending. Another study by the City of Oklahoma in 2006 stated the NBA New Orleans Hornets had an economic impact of $66 million on their temporary home. He described other actions the City would take; i.e., enter into a letter of intent for a separate lease with AAM for use of up to two floors of the 290 S. Anaheim Boulevard building, the former Willdan office building. This space would be used as temporary offices up to five years and the lease would allow for sublease of one of the floors to the NBA team. The AAM and/or the NBA team would be responsible for all tenant improvements, operating costs and taxes. Consideration for the use of the space would be the new tenant improvements which would revert to city upon termination of the lease. This lease, he added, was expected to be submitted for Council's approval at the next regularly scheduled council meeting. He concluded that approval of these items only created a path for an NBA basketball team to call Anaheim and Honda Center home. Ultimately the NBA team would need to file for relocation and NBA and its Board of Governors would have to approve the relocation. These agreements required no expenditure of taxpayer funds nor did they bring any new financial or operational risk to the City; the City would not reduce nor waive any applicable fees nor share the City's portion of any taxes generated as a result of the relocation of the NBA team. Bob Wingenroth, Finance Director, announced the resolution for adoption would authorize the issuance and execution of up to $75 million of Anaheim Public Financing Authority lease revenue bonds. The bonds would have a term of no more than 10 years and could be paid off early with no penalty. Up to $50 million would be used for working capital including transition costs and up to $25 million would be used for capital improvements at the Honda Center to ready it for an NBA team. Private investors would purchase the bonds, providing the $75 million in capital and he emphasized the money would not come from the City, its taxpayers, or the general fund and the investors would be repaid only from the revenues generated at the Honda Center. He also emphasized the City's full faith and credit would not back these bonds nor was the City at risk if funds were not available to pay back the investors. It was the investors who were are taking on the risk. Council Meeting Minutes of Adjourned Regular meeting of March 22, 2011 held on March 29, 2011 Page 5 of 6 Mayor Tait opened the public hearing for comments. William Fitzgerald, Anaheim HOME, explained in great detail as to why his organization felt approval of these items would not benefit the City, citing potential risks and liabilities, and lacking transparency. Mr. Diaz disagreed with Mr. Fitzgerald's comments and supported the City's efforts. With no other comments offered, Mayor Tait closed the hearing. Mayor Tait asked for clarification on the financing process. In this case, stated Mr. Wingenroth, private investors, identified in the packet information, would provide the money which would be paid back to those investors from the Honda Center revenue only. If there was any type of default, even in that situation, the City would not be at risk. In this financing package, the City was the conduit for the financing with no risk to the City nor the taxpayer. Mayor Pro Tem Sidhu asked to have the investors identified. Mr. Wingenroth responded the investors were identified in the Public Financing resolution, and were HS Portfolio LLP, H &S Investments1, LLP, and HS Partners Holding LP. Council Member Murray, in response to earlier comments raised, asked what happened to the financing plan if the NBA Board of Governors did not approve the relocation of an NBA team to Anaheim. Mr. Wingenroth responded that the financing plan would not occur. Council Member Galloway inquired whether there was any wording in any of the documents which tied a particular team to the bonds with Mr. Wingenroth responding no particular team had been identified to his knowledge. Mayor Tait remarked it was his responsibility to look after the interests of the residents and businesses in Anaheim and he was confident of going forward with an NBA sports franchise for Anaheim would be great for the economy and moved to approve RESOLUTION No. 2011 -043 OF THE CITY OF ANAHEIM approving the issuance of taxable lease revenue bonds (Anaheim Arena financing project) by the Anaheim Public Financing Authority; approving specified documents in connection therewith;' and authorizing related documents and certificates and the taking of related actions; seconded by Council Member Galloway. Roll Call Vote: Ayes — 5: (Mayor Tait and Council Members: Eastman, Galloway, Murray and Sidhu.) Noes — 0. Motion Carried CONSENT CALENDAR: Mayor Pro Tern moved to to adopt the consent calendar in accordance with reports, certifications and recommendations furnished each council member and as listed on the consent calendar, seconded by Council Member Galloway. Roll Call Vote: Ayes — 5: Mayor Tait and Council Members: Galloway, Eastman, Murray and Sidhu. Noes — 0. Motion Carried 2. Approve the Third Amendment to Facility Management Agreement with Anaheim Arena AGR- 1464.V.3 Management, LLC; approve the Venue Contract, in substantial form, between the NBA Team and Anaheim Arena Management, LLC, with such changes, insertions and AGR- 1464.V1 deletions as are approved by the City Manager; approve and authorize the City Manager AGR- 1464.Vll to execute a Non - Disturbance and Attornment Agreement, in substantial form, with the NBA Team, with such changes, insertions and deletions as are approved by the City Attorney and the City Manager, such approval to be conclusively evidenced by such execution; approve a Memorandum of Understanding with Anaheim Arena Management, Council Meeting Minutes of Adjourned Regular meeting of March 22, 2011 held on March 29, 2011 Page 6 of 6 LLC for assignment of rights for the use of a practice facility; and approve the California Environmental Quality Act determination. At 6:07 P.M., Mayor Tait briefly recessed the Council session to consider the Public Financing Authority agenda, reconvening the Council at 6:08 P.M. Council Communications: Mayor Tait remarked that Council's actions this evening would bring the City closer to attracting an NBA team to the Honda Center. The final decision was with NBA owners; however these measures would make the accommodations necessary for a sports team by approving a financing mechanism to provide for private funding for improvements to the Honda Center at no risk to the City. While the financial aspect was important, another priority was to insure any new team would only have Anaheim identified in the team name and he was confident the stands of the Center would be filled when the NBA came to town. Mayor Pro Tern Sidhu also remarked on this historic decision which opened the doors for an NBA team to come to Anaheim. Council Member Eastman expressed pride at participating in these actions and emphasized the transparency of Council's actions. Council Member Murray remarked that City leaders had this dream for more than two decades and that Anahem had the population regionally, the support politically, and the expertise professionally to make this happen. Council Member Galloway acknowledged City staff who through months of negotiations came up with a plan to please everyone. Adjournment: With no other business to conduct, Mayor Tait adjourned the meeting at 6:17 P.M. ROpectf Il y submi ed, Linda N. Andal, CIVIC City Clerk