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RA1981/06/0981 -49 ANAHEIM REDEVELOPMENT AGENCY June 9, 1981, 1:00 P. M. Council Chambers Anaheim Civic Center PRESENT: AGENCY MEMBERS: ABSENT: AGENCY MEMBERS: PRESENT: CITY MANAGER: CITY ATTORNEY: SECRETARY: EXECUTIVE DIREC Overholt, Kaywood, Bay, Roth and Seymour None William 0. Talley William P. Hopkins Linda D. Roberts TOR: Norman J. Priest Chairman Seymour called the regular meeting of the Anaheim Redevelopment Agency to order at 1:00 p.m. MINUTES: On motion by Mr. Bay, seconded by Mr. Roth, minutes of the Anaheim Redevelopment Agency regular meeting held May 26, 1981, were approved. MOTION CARRIED. FINANCIAL DEMANDS AGAINST THE ANAHEIM REDEVELOPMENT AGENCY in the amount of $1,422.80, in accordance with the 1980 -81 Budget, were approved. 161.157: REQUEST- PROPOSAL FOR RENOVATION OF THE EXISTING PICKWICK HOTEL: Request of Leonard A. Hampel, Attorney for Mr. and Mrs Frank A. Dusek, was submitted. Mr. Norm Priest, Executive Director of Community Development, briefed the Council on his report dated June 3, 1981, recommending that the Agency adopt the recommendation of the Anaheim Redevelopment Commission that the Pickwick Hotel be acquired and assessed for inclusion in disposition of Parcel 10. He explained that on April 21, 1981, the Redevelopment Commission voted to recommend that the hotel be acquired by the Agency. Subsequent to that, the Duseks requested an opportunity to appear before the Agency today. Chairman Seymour asked to hear from either Mr. Dusek or Mr. Hampel. Mr. Leonard Hampel, attorney, Rutan and Tucker, 401 Civic Center Drive West, Santa Ana, representing Mr. and Mrs. Frank Dusek, owners of the Pickwick Hotel, stated the purpose of the request to address the Agency was to ask that they make a determination not to pursue condemnation of the Pickwick Hotel. It was the desire of his clients to commit firmly to a restoration program, spending in excess of $750,000 and perhaps up to $1,000,000 to completely renovate the structure and to continue operation of the hotel; but catering to senior citizen clientele. They felt it was econom- ically feasible, and brought with them this afternoon, experts in several fields, should there be questions of them (see Mr. Hampel's letter dated May 3, 1981 - on file in the City Clerk's office). Mr. Hampel then outlined some of the reasons why they felt it would be to the City's benefit to consider the plan for restoration of the hotel. The existence of the hotel was completely consistent with the Redevelopment Plan and it was also consistent with the original and exclusive Right Negotiate Agreement with Collins, Drabkin and Ratkovich, which agreement was entered into April 24, 1979 and extended four times. At various times, it had shown a hotel use on the specific 81 -50 ANAHEIM REDEVELOPMENT AGENCY JUNE - 9, 1981 1:00 P. M. property, Parcel 10. They were suggesting that the Duseks were legally entitled to consideration as owner- participants and they had requested same in numerous letters to the Agency. He continued that the Agency, beginning with the Project Area Committee (PAC) as far back as 1977, laid out certain criteria necessary for the preservation of the Pickwick Hotel and basically there were three: (1) Was the structure sound and engineeringly feasible to renovate and to make it consistent with the Redevelopment Plan The answer was "yes" and they had the engineering data to support that. (2) Did it have architect- ural merit. After a number of reviews, the structure was placed on the National Register of Historic Buildings. .(3) Absence of interference with the economic development of Parcel 10. At present, there was no proposal on Parcel 10 or an exclusive right to negotiate. In looking at the zoning ordinances of the City, the property was in a general commercial zone and the use was a permitted one within that zone. The renovation of the structure served a real need in the City of Anaheim as it pertained to the Housing Element which would show a shortage of affordable housing within the City. If the structure was completely renovated, it would be possible to lease out the ground floor for commercial shops. Currently they were unable to do so considering the threat of condemnation. If they could do so, the Duseks could still maintain their same rental rates providing features desirable for senior citizens at an average rate of $66 per week. The Redevelopment Commission asked the Duseks to produce certain things which they did and thus the Duseks were surprised that the Commission continued to recommend acquisition. The principal reason seemed to be, continued use of the Pickwick as a hotel would interfere with the develop- ment of Parcel 10, but now there were no plans to develop Parcel 10. The hotel continued to be 95 to 100% occupied. They also had letters of intent by merchants who would like to locate in the commercial portion of the structure. In terms of an economic proforma, they had gone into the economics of continuing to operate the hotel which were very favorable; in fact, it was the highest and best use from an economic viewpoint both to the City and the Duseks. There were some benefits to the Agency in maintaining the renovated Pickwick structure. If condemned, the Agency would face the prospect of having to find replacement housing, relocation of the tenants, concerns about making findings of consistency with the General Plan, problems in complying with the California Environmental Quality Act in doing environmental impact reports, because of the Office of Historic Preservation and finally, the City, without a developer, could not enter into a disposition and development agreement. Thus, there was no guarantee that if the Agency were to acquire the structure that there would be anybody to sell it to or recoup the monies that the Agency would have to pay for the structure. Mr. Hampel then introduced a representative from Rlagan & Kramer, Architects, to review the renderings that were posted on the Chamber's wall. ANAHEIM REDEVELOPMENT AGENCY, JUNE 9, 1981, 1:00 P. M. 81 -51 �.. Miss Lynn Stanton, Engineering firm, Rlagan & Kramer, then gave an overview of the proposal as to what could be done with the Pickwick Hotel supplemented by floor plans and elevation drawings posted on the Chamber's wall. The upper floor contained 49 rooms, the smallest being approximately 9' x 18' and the largest upwards of 11' x 22'. All the rooms would be kept exactly as they were at present, but upgrading all public facilities and common restrooms. It would be structurally upgraded and since Anaheim had no earthquake require- ments at the present time, they based their upgrading on Santa Ana's earth- quake requirements which were one of the strictest. They had also split restrooms on the upper floor now yielding 17 separate restrooms. Thirty - five percent of the rooms would have their own facilities and the rest would have to use the two common facilities. The mezzanine level would be used strictly for senior citizens as a TV /recreation room with no public use. On the first floor, they combined the senior citizens kitchen area, a court yard and the commercial space and also added public restrooms for the commercial use. There would be no external structural changes to the building whatsoever. With the earthquake requirements, the Pickwick was probably ideal as far as its structural possibilities because they could stucco over any changes made to the building and those changes could not be seen. The structural seismic upgrading would cost $343,000 or $10.60 per square foot. She then explained generally how the Pickwick could fit into a Parcel 10 proposal. At the conclusion of Miss Stanton's presentation, the Agency Members posed questions relative to certain aspects of the proposal. The Chairman noted that Miss Stanton stated relative to parking, since senior citizens were involved, there would be no need for parking for the second floor, but on the other hand, they would like to provide some. He asked for a further explanation. Miss Stanton stated that legally they did not have to provide any parking for senior citizen housing but it was obvious that residents were going to have parking needs. They would have to ask the City for some parking by sharing a facility, acquiring more land, etc. They were willing to cooperate with the City in exchange for certain things. Mr. Hampel interjected and stated that relative to parking, it was something that the Pickwick could contribute. There was a parcel behind it at present, approximately 50' by 175', the surface of which would yield 38 parking spaces. If the Duseks were to contribute that as part of a joint parking agreement to the Redevelopment Agency and as a contribution of property to the parking structure, there was a possibility of a joint use agreement which would enable them to have additional parking in exchange for their property. Depending on the developer, if he took all of Parcel 10, there would be advantages to working out joint agreements between the Duseks as a participant- owner, preserv- ing the hotel, and their relinquishing their parcel to the common benefit of the remainder of Parcel 10. It was a piece of real estate that could be developed as a part of a much larger parking structure. 81 -52 ANAHEIM REDEVELOPMENT AGENCY JUNE 9 1981 1:00 P. M. Discussion followed among the Chairman, Mr. Hampel and Miss Stanton on the parking situation at the conclusion of which, Mr. Hampel stated that if the property were deleted from the Plan itself, they would be more than happy to undertake the development of parking. What they had given was simply surface area parking and they could develop it on their own if the Parcel were deleted. They felt it should be integrated as part of Parcel 10 for the benefit of the Agency. Chairman Seymour then posed questions to Miss Stanton relative to the restrooms, the senior citizen's facilities, etc., at the conclusion of which Mr. Hampel commented that the facility would not be for disabled or handicapped people, but for senior citizens capable of living on their own. There would be a common kitchen for their own use. They were not talking about a lavish life style, but senior citizens who would be cooperating with one another to their mutual advantage to keep the costs down and to be able to live in a healthy and safe environment. They would, under those circumstances, be sharing the kitchen facilities. If.they wished to eat out, there were many other places close by. That was the reason it seemed to be such an ideal senior citizen housing development because there were a number of other facilities in close proximity- governmental facilities, shopping and restaurant facilities. Chairman Seymour asked Mr. Hampel if he was familiar with the present life -style at the Pickwick Hotel; Mr. Hampel answered that he was generally familiar with the hotel. He had been in the hotel, but not in the individual rooms. He knew generally of the living conditions but did not know how many people were living at the hotel at present. The manager would be better able to answer those questions. In terms of renovating the structure, they would be looking at a totally different time of occupancy in one, two or three years from now. The living conditions would be upgraded and brought up to Code. Mr. Clement W. Morin, CPA, 4067 Long Beach Boulevard, Suite A, Long Beach, reported that the current structure (Pickwick Hotel) had no outstanding liabilities existing on it so the required refurbishing loan would be a new loan in the amount of approximately $1,000,000. In the schedule previously submitted, that loan was anticipated to call for a 12% interest rate. The scheduled rates after the renovation would produce a gross schedule income of $315,144. In those rates, there is provided, as a deduction to that factor, a vacancy of approximately 5 %, or $15,757 and operating costs for the operation, salaries, wages, maintenance, etc., of $106,000, or 34% of the gross scheduled rent, leaving available spendable cash of 61% of the gross rents, or $192,460. The debt service for a $1,000,000 loan, 20 -year amoritization at a 12% interest factor, was $132,132 per year, or 42% of the gross scheduled rent, leaving an excess cash flow, including principal and interest of $60,328, or 19 %. Under that factor, any increase in the interest rate of 1% would cause a variation of approximately $10,000. If the interest rate did go higher than 12 %, the cash flow bottom line would decrease at the rate of $10,000 for every percentage factor increase, still leaving a possibility to provide a cash flow with an interest rate of 18 %. 81 -53 ANAHEIM REDEVELOPMENT AGENCY, JUNE 9, 1981, 1:00 P. M. Ken Young, Saffel and McCadam, Inc., 2801 Barranca, Irvine, stated that they had been asked to look at the project several weeks ago through Woody Rlagan's office and the Duseks. They had shown interest to the City of Anaheim that if the need be there for additional developers to come forth, they would be interested in doing so. They were unable at this time to come forward with any pertinent information as to a plan; however, it would be their intent to maintain the Pickwick Hotel as described and develop the rest of the Parcel. Questions were then posed to Mr. Young by Agency Members, at the conclusion of which Mr. Hampel stated it had only been a very short time since the Collins, Drabkin, Ratkovich exclusive right -to- negotiate had expired. Saffel and McCadam had indicated an interest if and when the City asked for additional proposals. Prior to that time, it would not have been appropriate for them to indicate interest since the City had an exclusive right -to- negotiate with the Collins group. In concluding, Mr. Hampel asked that they be given some kind of conclusion in terms of the Dusek's ability to own the Pickwick Hotel and in terms of what the future would hold for them. Mr. Frank Dusek, owner of the Pickwick Hotel, stated that the hotel operation was always under lease until last February 1, when he and Mrs. Dusek took over the operation, again with the purpose of improving conditions and upgrading the whole situation. Through the lessees, the conditions were worsening and when the lease expired, he had to take it back and change the situation around. They were in the process of doing so, and they were making considerable progress. Mr. Dusek then gave a brief historical overview of the property since he had purchased it. He also elaborated further on the conditions presently existing on the premises for the Chairman. Having been leased, the lessees apparently used the hotel as a "milking" situation by getting most of the money out without putting any capital improvements in, resulting in a run -down condition. The Chairman asked how many people were occupying the 49 rooms today. Mr. Dusek stated they made an agreement and rented to one person, but in checking the next day, five persons were utilizing the same premises. It was not easy to police a situation of that kind. It was not only management, but clientele as well, which was at this time a carry -over from the lessee status. He did not think they would have to worry about it any longer because they were improving the situation, including the improvement of clientele and conditions of the rooms and facilities. The rooms could be rented with double occupancy and thus he would say there were 100 people living at the hotel, two per room. Mr. Gene Willis, as of February 1, but today it was really changing. and approximately manager, Pickwick Hotel, stated he was employed at the hotel 1981. He explained that the condition in the past was bad, good and even the Police had indicated the place was They just needed something to go with. They had 49 rooms 65 people occupying the rooms, with very few transients. 81 -54 ANAHEIM REDEVELOPMENT AGENCY, JUNE 9, 1981, 1:00 P. M. Chairman Seymour then questioned the rental schedule. When he was there, he found that it was dependent on how many people occupied the rooms. Mr. Willis stated that they had no more than two people per room and rental was $15.00 per day, plus tax, and $57.00 a week, plus tax, for two people. They had approximately six refrigerators in the rooms, but all cooking was done on the lower level in the kitchen. There were no hot plates in the rooms at this time. Mr. Bay then recounted the activity which had taken place since the redirection of the Redevelopment program in 1976, as well as the meetings, plans and negotiations that had occurred relative to Parcel 10. Mr. Dusek, as requested by Mr. Bay, then expressed from his viewpoint what happened during that period of time and during all the negotiitions relative to his concern for the Pickwick Hotel. Mr. Hampel, supplementing Mr. Dusek's narrative, stated that he had gone through the files and there were some six letters since May of 1977, continuing through April of 1980, asking for owner participation in maintain- ing the Pickwick Hotel which he submitted (on file in the City Clerk's office). Mr. Priest, also at the request of Mr. Bay, recapped the history of the Pickwick Hotel during the last three to four years. At the conclusion of Mr. Priest's presentation, Chairman Seymour stated he felt they had a very open discussion in trying to arrive at a most difficult decision. For his part, and he was certain he was speaking for his colleagues, he felt the Redevelopment process was probably one of the most distasteful processes that he, as an elected official, must participate in. When government took property through the power of eminent domain, he had difficulty with that. On the other hand, the Agency realized many years ago that the deterioration of the downtown area into what had existed and still did to some degree, a home for winos, sex perverts, pornographic bookstores and movie houses, degenerates, sagging and closing businesses, required strong action if they were to turn the situation around. Therefore, the Agency most unwillingly, but feeling a great sense of responsibility, decided to proceed with the Redevelopment project which incorporated in that process the taking of property through the power of eminent domain. Relative to Mr. Dusek and the Pickwick Hotel, there was no doubt in his mind that he ( Dusek) had kept them abreast and put forth his desires to improve or rehabilitate the Pickwick Hotel. He did not feel that that would be consistent with what they stated in their Redevelopment plan if they were to continue with the Pickwick Hotel in its current configuration. He thereupon stated from the plan - "the basic objective of the project is the eradication of blighting influence within the Project Area and the prevention of the recurrence through the redevelopment of land uses consistent with the environmental, economic and social goals of the community." In his opinion, the action of the Community Redevelopment Commission was consistent with that plan, as well as being consistent with what had been stated in their guide for development. Although he found it extremely difficult philosophically, he for one was going to have to support .NO. the recommendation of the Community Redevelopment Commission. 81 -55 ANAHEIM REDEVELOPMENT AGENCY JUNE 9 1981 1:00 P M MOTION: Agency Member Seymour thereupon moved to support the recommendation of the Community Redevelopment Commission that the Pickwick Hotel be acquired and assessed for inclusion in Disposition of Parcel 10 and to deny the request of the Duseks to retain ownership and operation of the Pickwick Hotel. Agency member Bay seconded the motion. MOTION CARRIED. 161.128: FINANCIAL STATEMENTS FOR THE PERIOD ENDING APRIL 30 1981: On motion of Agency Member Roth, seconded by Agency Member Overholt, the financial statements for the period ended April 30, 1981, were ordered received and filed. MOTION CARRIED. RECESS: On motion by Agency Member Kaywood, seconded by Agency Member Overholt, the Agency recessed to 3:00 p.m. for a joint meeting with the City Council. MOTION CARRIED. (2:47 p.m.) 81 -56 ANAHEIM REDEVELOPMENT AGENCY, JUNE 9, 1981,3:00 P. M. AFTER RECESS: Chairman Seymour reconvened the Redevelopment Agency Meeting at 3:40 p. m, for the purpose of conducting a joint public hearing with ..... the City Council. All Agency Members were present. 161.123: PARTICIPATION AGREEMENT PACIFIC TELEPHONE AND TELEGRAPH COMPANY: Public hearing was held to consider a Participation Agreement between the Agency and the Pacific Telephone and Telegraph Company for development of land located between Lincoln Avenue and Cypress Street and Anaheim Boulevard and Clementine Street. Executive Director Norman J. Priest recommended approval of an Initial Study for the proposed agreement, finding that no subsequent Environ- mental Impact Report or supplement to an EIR is necessary or required. He further recommended that the Redevelopment Agency and the City Council each make certain findings with respect to the consideration to be received by the Agency pursuant'to the Participation Agreement, approving sale of said property, consenting to the provision of certain public improvements by the Agency, and approving the Participa- tion Agreement. Chairman /Mayor Seymour announced that the matter under consideration was a public hearing, and he asked if anyone wished to address the Redevelopment Agency /City Council. There was no response. Chairman/ Mayor Seymour declared the public hearing closed. Mr. /Councilman Seymour offered Resolution Nos. ARA81 -13 and ARA81 -14, and 81R -259 for adoption. Refer to Resolution Book. " RESOLUTION NO. ARA81 -13: A RESOLUTION OF THE ANAHEIM REDEVELOPMENT AGENCY APPROVING AN INITIAL STUDY AND FINDING AND DETERMINING THAT A SUBSEQUENT ENVIRONMENTAL IMPACT REPORT NEED NOT BE PREPARED FOR THE PROPOSED SALE OF CERTAIN REAL PROPERTY AND THE PROPOSED DEVELOPMENT OF SUCH REAL PROPERTY IN THE REDEVELOPMENT PROJECT ALPHA PROJECT AREA, RESOLUTION NO. ARA81-14: A RESOLUTION OF THE ANAHEIM REDEVELOPMENT AGENCY APPROVING THE PROPOSED SALE OF REAL PROPERTY IN REDEVELOPMENT PROJECT ALPHA; APPROVING THE PROPOSED PARTICIPATION AGREEMENT PERTAIN- ING THERETO; AND AUTHORIZING THE EXECUTION OF SAID PARTICIPATION AGREEMENT. RESOLUTION NO. 81R -259: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ANAHEIM CERTIFYING THE INITIAL STUDY WITH RESPECT TO THE PROPOSED PARTICIPATION AGREEMENT BETWEEN THE ANAHEIM REDEVELOPMENT AGENCY AND PACIFIC TELEPHONE AND TELEGRAPH COMPANY; FINDING THAT THE CONSIDERATION FOR THE SALE OF THE PROPERTY THEREUNDER IS NOT LESS THAN FAIR MARKET VALUE IN ACCORDANCE WITH COVENANTS AND CONDITIONS GOVERNING SUCH SALES; AND APPROVING THE SALE OF SUCH PROPERTY AND SAID PARTICIPATION AGREEMENT. 81 -57 ANAHEIM REDEVELOPMENT AGENCY. JUNE. 9. 1981. 3:00 P.M. Roll Call Vote: AYES: AGENCY /COUNCIL MEMBERS: Overholt, Kaywood, Bay, Roth and Seymour NOES: AGENCY /COUNCIL MEMBERS: None ABSENT: AGENCY /COUNCIL MEMBERS: None Chairman /Mayor Seymour declared Resolution Nos. ARA81 -13, ARA81 -14 and 81R -259 duly passed and adopted. ADJOURNMENT There being no further business to come before the Anaheim Redevelopment Agency, Mrs. Kaywood moved to adjourn. Mr. Bay seconded the motion. MOTION CARRIED. ADJOURNED: 3:50 p.m. LINDA D. ROBERTS, SECRETARY