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2014/03/11ANAHEIM CITY COUNCIL REGULAR MEETING OF MARCH 11, 2014 The regular meeting of March 11, 2014 was called to order by Mayor Tait at 3:05 P.M. in the chambers of Anaheim City Hall located at 200 Anaheim Boulevard. The meeting notice, agenda and related materials were duly posted on March 7, 2014. PRESENT Mayor Tom Tait and Council Members: Jordan Brandman, Gail Eastman, Lucille Kring and Kris Murray. STAFF PRESENT Interim City Manager Paul Emery, City Attorney Michael Houston and City Clerk Linda Andal. WORKSHOP — ANAHEIM CONVENTION CENTER BETTERMENT VII EXPANSION Interim City Manager Paul Emery introduced staff members and consultants for the purpose of updating City Council on the proposed 7 th Anaheim Convention Center Expansion, identified as Betterment VII. Tom Morton, Director of Convention, Sports and Entertainment, covered the history of the city's investment in this asset, reporting that in 1960 a group of 61 Anaheim businessmen, the Anaheim Visitor & Convention Bureau, organized to see what they could do to make the city a year -round destination. Their solution was to build a convention center to help fill hotel rooms throughout the year, not just during the spring and summer months when tourists visited Disneyland. In May of 1965, the city broke ground for construction of a 7,500 seat arena - torium with a 135,000 square foot exhibit and meeting complex which opened in July of 1967. That venture, he remarked, launched Anaheim as a convention destination bringing attendees from far and wide and providing tax revenues that benefited city services and the community. Within 6'h years, the Convention Center celebrated the grand opening of Betterment I, an expansion that was driven by strong demand for additional exhibit space and adding another 100,000 square feet of exhibit space and 21,000 square feet of meeting space. That was followed in 1982, with Betterment II, another 100,000 square foot exhibit hall and 21,000 additional square feet of flexible space that affirmed Anaheim's reputation in the meeting and convention industry. The Marriott opened in 1981 followed by the Hilton in 1984 and the added convention space and hotel inventory proved successful in attracting medical groups including the American Heart Association and the American College of Cardiologists. He reported the 90's was the decade of the greatest expansion of the Convention Center with Betterment III completed in 1990. The expansion offered an additional 150,000 square feet of exhibit space along with an 1,100 space adjacent parking structure and a 550 space below -grade parking site, followed by Betterment IV in 1993 that resulted in the conversion of the underground parking spaces into an additional 150,000 square feet of exhibit space. Betterment V, one of the largest Public Works projects undertaken by the city began construction in 1998 and opened in 2000 with Phase 1, creating the Hall D wedge which expanded the total space of Hall D to 220,000 square feet and Phase 2 expanding the total facility to 1.6 million square feet, including the addition of 220,000 square feet of exhibit space, a 38,000 square foot ballroom, new meeting rooms, and a grand glass enclosed lobby extending one - quarter mile in length. Contrary to a noted convention industry critic, Dr. Heywood Sanders, who reported that Anaheim's Betterment V did not pencil out, Mr. Morton emphasized the Convention Center's rental revenue in FY 97/98, the last full year of operation prior to the construction of that City Council Minutes of March 11, 2014 Page 2 of 31 expansion was $6.2 million and in FY 2000/01 that figure jumped to $9.6 million; total Center revenues reflected $14.5 million in FY 97/98 increasing to $22.7 million in 2000/01. He added Dr. Haywood Sanders also did not include Anaheim as a dominant player in the industry when it had long played a significant role in the regional economy and was a prime visitor and convention destination. The most recent enhancement, Betterment VI or the Grand Plaza, was completed in January of 2013 and this award winning expansion, he explained, added 100,000 square feet of multi- purpose outdoor space with three water features, new landscaping, and spectacular night lighting. The funding for this expansion as well as the next was made possible through the creation of the Anaheim Tourism Improvement District (ATID). ATID was a public /private partnership between the city, the Anaheim Orange County Visitor and Convention Bureau and the hoteliers in the resort and Platinum Triangle. The hoteliers agreed to self- assess a two percent fee on room rents used to fund the operation of the Visitors & Convention Bureau (VCB). He indicated the city then agreed to redirect the general fund dollars previously allocated to the VCB to the rapid expansion of the Convention Center and a portion of these reallocated dollars were then used to fund Phase 1 of the expansion, the $20 million Grand Plaza. To answer the question of why expand again, he responded it was necessary to allow Anaheim to retain its large annual convention and trade shows. Shows such as NAMM and Natural Products were growing beyond the confinement of the convention center and were actually occupying storage closets in the need to meet their exhibitor requirements. Anaheim also needed the ability to attract high yield meeting- intensive business because currently there was not enough meeting space to accommodate groups that want to return to Anaheim such as the American Heart Association. The center also needed the ability to hold concurrent conventions to maximize economic impacts and minimize peaks and valleys in hotel room occupancies. Lastly, he remarked, CarPark 1 needed replacement, a structure that could not be seismically retrofitted because of height limitations. To meet the Convention Center's future needs, Mr. Morton added staff would present the next opportunity for growth, Betterment VII. This expansion would occur on the current site of CarPark1 and when completed, would consist of 200,000 square feet of leasable flexible space or space that could be used as exhibit, ballroom or meeting rooms. Existing parking spaces would be replaced, new loading docks installed, and a new vehicular entrance constructed. The expansion also included a climate controlled connection to the existing convention center and all necessary front -of -house and back -of -house space. He emphasized the city team looked forward to presenting the merits of this expansion and why it was important to Anaheim's continued success as a convention destination. Jay Burress, Anaheim /Orange County Visitor & Convention Bureau (AOCVCB), thanked the hoteliers and the city for establishing the Anaheim TID as a method to fund future convention center expansions. He remarked if the city did not expand, large annual events would leave Anaheim and new opportunities would be lost to competitors. In addition, the client base would erode from the high end events such as national associations, trade shows and corporate events and less financially successful groups would remain. The fallout from this lost business would see the average daily rates and occupancy levels in hotels lessening with reduced visitor spending and TOT and other tax revenues that benefited the city declining along with significant job losses. Some of the events at risk because they required more space due to their business growth was the Helicopter Association International tradeshow, an event that had recently generated much excitement at the Convention Center with 60 helicopters on the exhibit floor and NAMM with 96,000 people in attendance and its resulting economic impacts; both events City Council Minutes of March 11, 2014 Page 3 of 31 setting spending records. Other groups such as Medical Design and Manufacturing, the Produce Marketing Association International, and Solar Energy Association also no longer fit in the Convention Center. He pointed out new business opportunities was a key part of this expansion to get back into the game with some of those markets and larger corporate meetings such as Microsoft, Oracle, and INFOCOMM that want to be in Anaheim. With the expansion, he indicated some of these groups would commit to Anaheim, like the American Heart Association who with the possibility of a future expansion in the works had committed for years 2019 and 2025. He added the American Heart Association represented 57,720 total room nights and their commitment made it clear to the medical community that Anaheim was open for business for the medical meetings market. Mr. Burress then played a video of Fred Linder of Natural Products Expo West explaining the need for expanded space for his growing organization that had reached 66,000 attendees this past year and voicing their strong support for expansion of the Anaheim Convention Center. Mr. Burress stated he was here to advocate and support the expansion of the Anaheim Convention Center because for the first time this year he had to tell customers they could not have the space they required from an exhibition standpoint, adding this was not a sustainable model for Anaheim and the sooner the expansion occurred, the AOCVCB would begin capturing new meeting intensive groups and fill the spaces with concurrent events to maximize the use of exhibit space and new meeting space to keep a steady flow of revenues coming into the city. Finance Director Debbie Moreno introduced Susan Sieger of Crossroads Consulting, remarking she had over 20 years of experience in convention, sports, and entertainment, and various hospitality and tourism industries and conducted more than 400 studies in the US and abroad. Prior to forming Crossroads she worked with KPMG, a convention and sports entertainment practice for 15 years, most recently as the National Director, and had worked at the Miami Beach Convention Center and other hospitality facilities across the country. Ms. Sieger provided an overview of the economic study process consisting of a market analysis, financial analysis, and an economic /fiscal benefit analysis adding the results of those analyses would drive the overall viability of the Anaheim Convention Center (ACC) expansion. Regarding the market analysis, she indicated it was important to understand industry trends, the ACC's historical operations, and what competitors were doing. For the financial analysis, the impact from both an operating revenue and expenditure perspective was needed and as part of their research Crossroads conducted a sensitivity analysis with the goal of testing the marketing financials of a 200,000 square foot expansion as well as a 160,000 and 180,000 square foot option. She noted that essentially, Anaheim would not get the same benefits because of the magnitude of the convention attendees coming. She explained the sensitivity analysis indicated it was not just about the amount of space but the type of space offered and suggested that the proposed flex space would allow the city to accomplish its goals specifically because it would enable the ACC to host more concurrent conventions and maximize the use. In looking at destination packages, she reported Anaheim had a great one, from airport accessibility, to hotels, to a few nearby attractions. As to why these events were important, she stated conventions and tradeshows made up 25 percent of ACC's events but accounted for nearly 60 percent of attendance with an average stay of 2.8 days per attendee. When loss business reports were analyzed, she remarked it was important to understand what was controllable and what was not. She provided that if the primary reason for lost business was lack of space and date availability, such was within the city's control and could be positively impacted by the addition of new flex space. She added a large percent of business was due to space and date availability contrary to certain articles that had been published recently. She City Council Minutes of March 11, 2014 Page 4 of 31 also stressed that this analysis and its accompanying research was specific to Anaheim's facility. She restated that Anaheim was a highly ranked destination relative to other convention /meeting cities and input from users reflected some groups could not secure dates and /or space due to the Convention Center's availability. In addition, 78 percent of respondents indicated they would use the proposed flex space as exhibit space, while 90 percent reported they would use it as meeting or ballroom space. She added Anaheim was deficient in ballroom space relative to others and in the meeting to ballroom space ratio as well. The interesting thing, she pointed out, was those that were interested in meeting room expansion required 628,000 square feet of exhibit space although they did not need a contiguous space but did require the entire existing ballroom area. If concurrent meetings were being considered, expanded ballroom space was necessary. The other factor, she remarked, was where users anticipated their events to be in five years with more than 50 percent of responders anticipating increased spacing needs at that time. She noted past convention users were pleased with the facility, its staff and general surroundings, an important point because no matter how large a facility was, if users did not like the destination, it would not matter what was built and often an expansion made sense from a space perspective but never from a service level perspective. One of the key questions for her was related to overnight stays and using the same assumptions, Crossroads compared the three year historical average to the status quo and determined there would be an increase in room nights from $773,000 to nearly $1.1 million with the ACC expansion. She added Crossroads did not account for any events that were not convention or trade shows so those larger corporate meetings or larger social functions where attendees stayed overnight were not included. The next question was related to the total generation of TOT resulting from the expansion which showed an increase of $24.7 million historically to a range of $31.9 million to $33.7 million, a significant increase with a range of $11.5 to $13.8 million in TOT taxes coming to the city. Ms. Sieger explained the economic impact of direct spending (eating in restaurants and staying in hotels), an increase in facility operating expenses, indirect and induced spending all of which made up the total economic impact of the ACC expansion. The increase showed a $610 million three year historical average, to a status quo scenario of $559 million, and a range of $718 to $825 million with the expansion, which translated to every dollar invested, the city would get $1.60 back. Related to job creation, in comparison to the status quo option, Anaheim would add between 1,800 to 2,200 more jobs. She added that not all jobs would be driven by the incremental spending of the convention and tradeshow attendees, exhibitors and by the facility expenses; it would more likely fall within a 40 — 48 percent range. OVERALL SUMMARY: Ms. Sieger remarked this research led her to believe the following: 1) the expansion complemented other investments the city made both directly on the property but also on surrounding areas and represented a good reuse of CarPark 1. She added the fact hoteliers would self -tax themselves to make a project like this move forward, was saying a lot in this industry and should the city take no action, the current level of activity could not be maintained. 2) Competitive facilities and other destinations were continually improving their product and by staying the same Anaheim would have less event activity, less economic and fiscal benefits and a higher operating loss. 3) The proposed flex space addressed ACC's current challenges related to limited ballroom and meeting space and would result in maintaining existing business, attracting new conventions and tradeshows, and increasing ACC's overall market share. 4) The cost benefit analysis indicated significant economic and City Council Minutes of March 11, 2014 Page 5 of 31 fiscal benefits with the expansion. 5) The proposed expansion would enhance ACC's marketability and competitive position for the next 10 to 15 years. Mark Vukojevic, City Engineer, stated as a member of the city's team, he lead the design and construction delivery of this expansion over the last year, announcing the city had clear objectives: an innovative design, a flexible facility with maximum value, and cost and schedule certainty. He indicated staff had looked at all possible delivery methods and specifically chose design /build delivery because it had the best tools for the objectives established at the beginning of this project. He explained the process was competitive and deliberate, using Request for Qualifications (RFQ's) which resulted in four design /build teams shortlisted to submit proposals to the city. In the Request for Proposal (RFP) stage, staff established its requirements and how the process would be scored with all teams understanding that the specifications were for a quality project which included all of the features and specifications necessary and 200,000 square feet of leasable flexible space (space that could be converted and used as exhibit space, ballroom space, or turned into meeting and classroom space), 1,400 parking spaces to replace CarPark 1, a fixed construction price of $155 million, and a connection to the existing Convention Center. At the RFP deadline date, he reported three teams submitted proposals and after a lengthy review and two interviews, the city's evaluation committee unanimously selected the design and construction proposal submitted by Turner Construction and Populous Architects. He remarked the process was competitive and the feedback from the winning and losing teams was that it was fair. He remarked that Turner Construction was a global provider of construction services and as a company their core values and commitments were in making a difference in the lives of their staff, their customers, and the communities they worked in. He added over the last two months, staff finalized the negotiations and packages for Council's consideration and if approved tonight, the design would begin tomorrow. Mr. Vukojevic showed renderings of the existing site plan and the proposed expansion, pointing out the new Convention Center space would sit on top of the existing CarPark1 site and the very southwest corner of that structure would connect to the existing Convention Center. The design continued the character of the existing facility, taking its imagery from California geology and geography and would have the design and feel of the existing site but also included unique features. He explained this concept was referred to as the architectural story and a brother and sister architect team from Populous had provided an incredible design for Anaheim. The new building would be nearly 350,000 gross square feet, containing 1,400 parking spaces within the same site, with all of the setbacks and landscaping features meeting or exceeding resort standards and fitting within the Katella frontage fully connected and contiguous to the existing Convention Center. One strong feature of the building, he pointed out, was an additional 10,000 square foot outdoor balcony on the north side of Katella that would offer great views for attendees and 10,000 square feet of additional leasable area. He pointed out that one thing different in the new space was that it faced west and consideration was built into the project to address the afternoon sun to insure all guests were comfortable. One of the renderings showed the flexible space used as an exhibit hall with Mr. Vukojevic stating the ceilings were 25 feet tall with a minimum amount of columns and the flexibility to partition space created meeting spaces of different sizes and shapes supported with efficient heating and cooling systems and plenty of restrooms. He indicated the main flexible space on the second floor had 25 foot high ceilings and was column free and could be converted into ballrooms, meeting rooms or exhibit halls. In the ballroom configuration of 100,000 square feet, he stated, it would be one of the largest column free ballrooms, a space in which 18 wheelers could drive City Council Minutes of March 11, 2014 Page 6 of 31 on it and would come with its own 15,000 square foot kitchen and all of the necessary elevators and escalators and back -of -house features to function seamlessly. He commented that one of the creative solutions the architects designed was placing a portion of the parking within the truss system in between the first and second floors, called interstitial parking. For this size of building, he explained, the floor space in between the levels were large because of the heavy weights and long spans utilized, and in most cases the space in between the floors were used for utilities with most of the space unused. He stated this was where the maximum value and maximum flexibility was found and all 1,400 spaces were located on site and interconnected with two separate ramps used to load cars in and out of the structure. He then showed a brief animation video that walked around and through the building to offer another perspective on how the building would look and feel. Mr. Vukojevic reported the timeline and schedule was established and the design would begin immediately and submittals had already been scheduled. The plan was to begin demolition of CarPark 1 in September of this year and to have 600 spaces back in service within one year. From there the contractor would complete the entire construction by the fall of 2016 and the new building would be turned over to the Convention Center and used for conventions that same year. Debbie Moreno, Finance Director, discussed the city's ability to afford this expansion and what financial benefits the project would bring to Anaheim. She reported this specific expansion had been discussed since the mid -2000 and because of the "great recession," it was obvious the city could not do this on its own. In partnership with the Visitors & Convention Bureau and the hoteliers in the resort and the Platinum Triangle, the Anaheim Tourism Improvement District - was formed in September 2010. The hoteliers agreed to self- assess two percent of the revenue they received from room sales to pay for improved marketing and promotions of the Anaheim destination and to contribute to future transportation projects. In return, she indicated, the city committed to expanding the Convention Center because it would no longer need to pay for the Visitors & Convention Bureau from the city's general fund (GF) revenues. That year, 2010, the amount that was freed up was roughly $6 million and was used to pay for the Grand Plaza expansion and could now be used for the next phase of the Convention Center expansion. She stated it was important to understand that the amount the GF was paying to the Visitors & Convention Bureau was based on a percentage of the Transient Occupancy Tax or TOT the city received and in 2010 that amount was around $6 million and today would reflect about $7.6 million. Using the assumption that TOT would grow at a conservative level of three percent annually, the value of the marketing and promotion fee that was originally paid to the VCB would be valued at $450 million through year 2046 (when the debt for the expansion would be paid off). Understanding the funding mechanism that was in the place, she explained, the city still needed to insure this was the right project for Anaheim to undertake. The questions she set out to answer before recommending for or against the expansion of the Convention Center was "would there be a return on the resort improvements after the cost for the expansion was paid; did the expansion create a net benefit to offset the associated costs; could the city afford this expansion; and would it benefit the entire community. To answer the question would Anaheim see a return on their investment in the resort, she reported the resort generated nearly 50 percent of the GF revenues (TOT, sales and use taxes, property taxes, and business licenses) and all of that was estimated to bring in about $120 million in 2014 to the general fund. The largest expenses related to the resort were for the debt service for the 1997 Resort Improvements and several other small debt issues. Additionally, the City Council Minutes of March 11, 2014 Page 7 of 31 City no longer was obligated to pay the Visitor and Convention Bureau marketing and promotions costs so after all the other debts were paid, $60 million would be left in tax revenues to provide for general fund services such as police, fire, parks, libraries and other community services. The answer to that question, she emphasized was yes, the city would see a $60 million return on the investment in the resort. To answer the question did the proposed expansion create a net benefit, the Finance Department hired Crossroads Consulting to perform a marketing and economic analysis of the proposed expansion; a firm that was an expert in the industry and had not been involved in the project before with no opinion on the overall plan. In the end, she commented their detailed research and conservative estimates showed Anaheim would gain significant new revenues totaling $380 million of predominantly TOT monies and additional sales and use taxes. The expansion would retain existing trade shows and conventions and their guests while enabling the city to retain $164 million in revenues that might have otherwise been lost. She indicated this was mostly due to TOT but also included a portion of operating revenue that the Convention Center received from rentals that would now be available to pay their day -to -day operations. She announced the total new and retained revenues reflected $545 million dollars and deducting the $410 million debt service for the Convention Center expansion and replacement of CarPark1 pointed to an economic benefit to the city of $135 million. That figure, she emphasized, meant the project was estimated to return $135 million more than it cost to build. She added if you take this one step further by adding the estimated $450 million of marketing and promotions costs that the city would have paid to the Visitors and Convention Bureau through year 2046, this would leave the city with a total benefit of $585 million. To answer the question could the city afford this expansion, Ms. Moreno stated there was roughly $85 million in existing general fund debt other than the 1997 resort improvements which would be paid off soon, and monies could be saved on interest payments by refinancing about $53 million in debt, paying it off sooner rather than originally scheduled with the exception of about $2 million borrowed several years ago for the Grand Plaza addition. She explained when adding the new funds to be borrowed for Betterment VII and the refinanced debt, staff expected to pay $17 million less per year which was roughly equal to where the city was today. Most of the new incremental revenue received could then be immediately used for general fund services since Anaheim would not be paying any more today, which made the expansion affordable. To the last question, did this expansion benefit the entire community, Ms. Moreno remarked the best way to answer that was to look at the overall impact of the general fund, those monies used to pay for all core services. She emphasized if this fund was better off, then the entire community was better off, especially as a portion of the city's debt would mature in 2019. She stated the general fund would be better off by going forward with Betterment VII. To keep the status quo and not expand and pay off the existing debt, she anticipated the following scenarios: Using the mid -point as an example, the overall resort tax revenues would be less without the expansion because there would be no new revenues and some of the existing revenues would be lost due to lost business. The debt service would be less but that meant the city would not pay off the debt as fast, because the debt service payment was tied to a percentage of revenues received. She added the other general fund debt service would be paid but the city would still have to replace CarPark1 at a cost of about $2 million and if the commitment to expand the Convention Center was not honored, Anaheim would likely have to fund the marketing and promotions now being paid by the ATID. At the end of year 2015, she estimated the net resort tax revenues remaining would be almost $116 million if expanded versus $109 million by keeping the status quo. This would mean there was an extra $7.2 million in the general fund to provide services to the entire community if the expansion went forward in City Council Minutes of March 11, 2014 Page 8 of 31 this year alone and over the course of 15 years, the general fund would be better off by $117 million and by $323 million in a 30 year period. She reiterated this project was a benefit to the entire community. Ms. Moreno brought up another component of the financing plan. In addition to providing the Convention Center expansion, she noted current market conditions made it possible to borrow an additional $20 million at historically low interest rates and still maintain debt service at or below current levels, providing for $20 million to be put back to work in the community on public safety facilities and other community and neighborhood improvement projects. Because of the new TOT revenues coming in, another $80 million could be paid toward the resort bonds which could result in them being paid a little faster. Based on the information today, she remarked, there was a lot to be gained for the community with this project and if it were delayed, it would likely cost more as interest rates rose, pointing out an increase of the interest rates at only one quarter of one percent resulted in an additional $500,000 per year in debt service. If no expansion occurred, Anaheim would see a decrease in convention center revenues and general fund tax revenues and with the existing debt obligations, there would be fewer resources available for the general fund in the short term. Based on the affirmative answers to her initial questions and the partnership with the local hotel industry that provided freed -up funding, Ms. Moreno recommended Council approve the expansion and the related financing plan. Mr. Morton ended the workshop emphasizing the analysis had shown that the expansion was necessary to stay competitive in the convention, tradeshow and meeting business. Anaheim needed the ability to retain large annual conventions and trade shows, the ability to attract high yield, meeting- intensive business, and the ability to hold concurrent conventions to maximize economic impacts, minimize peaks and valleys in hotel occupancies, and to replace the CarPark 1 structure. With this expansion, he stated, the city would see growth in general fund revenues and additional funds would become available for core city services and bond proceeds would also immediately be available for public safety facilities and community improvement projects. He remarked the City of Anaheim was in the convention and meeting business and was one of the nation's premier destinations and with this expansion it would ensure continued success for the future years to come. Mayor Pro Tern Murray remarked staff had been working on this project for nearly a year and engaged in public outreach, reviewing finances and conducting economic research. She thanked staff and the consultants for their in -depth report and confirmed that staff had used a conservative three percent growth for long range projections which showed that over 30 years the value of this expansion was $585 million to benefit the community. She then thanked the private sector for their investment in the city which made it possible to offset the cost of this expansion. Mayor Tait remarked the Crossroads analysis was just received by council last Friday, asking when it had been made available with Ms. Moreno indicating that the updated report was available on that day. He remarked the PKF Consulting report had been received in January 2014. Mayor Tait inquired about the other firms submitting proposals to the city for this project and Mark Vukojevic responded there were six firms that submitted a statement of qualifications responding to the city's Request for Qualifications and the city selection panel shortlisted four firms, one of which was Turner Construction and Populous Architects. The other firms were Clark Construction and Centrist Architects, PCL and LMN Construction and Gruen Architects, and the fourth was Hencil Phelps Construction with HOK Architectural firm. At the Request for Proposal deadline, Hencil Phelps did not submit a proposal and the each of the other three firms were interviewed. City Council Minutes of March 11, 2014 Page 9 of 31 Council Member Kring offered her full support for this expansion, remarking she had attended the National Products Expo and talked to Fred Linder who stated that his organization had grown so big that the arena contained exhibitors for the first time as well as the ballroom and 600 exhibitors were put on the third level of the Convention Center. Along with tents outside the hotels and vendors at one end of the Grand Plaza, Mr. Linder stated his business had expanded to the point they would not be able to book it in Anaheim in 2017. Just that one event, Council Member Kring remarked, benefitted not only Anaheim but the regional economy and she was in full support for the expansion. Mayor Tait inquired if Crossroads Consulting conducted sensitivity analyses about what the impact to the general fund would be if the assumptions were not met. Ms. Moreno responded that Crossroads Consulting used conservative assumptions based on the number of events held and did not assume Anaheim would get much larger conventions than they currently booked. Two discount factors were used; Crossroads looked at how many people would actually be staying in Anaheim, with a reduction for how many would not stay in a hotel and did not assume a growth factor other than normal inflation on the losses, so those were fairly conservative numbers in the 30 year estimate. Ms. Moreno looked at those number as well adding that if the results were only 50 percent right on the incremental revenues received, the city would still be better off in every single year and there would be a net benefit of $163 million over the life of the project versus doing nothing at all. Council Member Brandman thanked staff, the stakeholders and the consultants for a thorough presentation. ADDITIONS /DELETIONS TO CLOSED SESSION: None PUBLIC COMMENTS ON CLOSED SESSION ITEMS Cecil Jordan Corcoran offered the community an update on his religious work. City Attorney, Michael Houston reported pursuant to Government Code Section 54956.9 D(3), Closed Session Item No. 3, the city received a threat of litigation which was in the Office of the City Clerk for inspection and available upon request. At 4:10 P.M. the City Council recessed to closed session for consideration of the following items: CLOSED SESSION ITEMS: 1. CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION Initiation of litigation - authorization to file amicus curiae brief pursuant to paragraph (4) of subdivision (d) of the California Government Code Section 54956.9: One potential case: Orange Citizens for Parks and Recreation v. City of Orange, California Supreme Court Case No. S212800 2. CONFERENCE WITH LEGAL COUNSEL - EXISTING LITIGATION (Subdivision (d)(1) of Section 54956.9 of the California Government Code) Name of Case: Maria Lopez v. City of Anaheim et al., USDC Case No. SACV13 -01199 CJC (JPRx) 3. CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION Significant exposure to litigation pursuant to paragraph (2) of subdivision (d) of California Government Code Section 54956.9: One potential case. City Council Minutes of March 11, 2014 Page 10 of 31 4. CONFERENCE WITH LABOR NEGOTIATORS (Subdivision (a) of Section 54957.6 of the California Government Code) Agency designated representative: Kristine Ridge Name of employee organizations: International Brotherhood of Electrical Workers IBEW, Local 47, Anaheim Municipal Employees Association (AMEA) General Employees and Clerical Employees 5. CONFERENCE WITH REAL PROPERTY NEGOTIATORS (Subdivision 54956.8 of the California Government Code) Property: 2000 East Gene Autry Way, Anaheim, CA (Angels Stadium of Anaheim) Agency Negotiator: Tom Morton Negotiating Parties: Angels Baseball, LP, Pacific Coast Investors, LLC, City of Anaheim Under Negotiation: Price and Terms of Payment Regarding Lease At 5:14 P.M., council session was reconvened. INVOCATION: Nathan Zug, Anaheim Fire & Rescue Chaplain FLAG SALUTE: Council Member Jordan Brandman PRESENTATIONS: Recognizing Dr. Elizabeth Novack for her dedication and contributions to the Anaheim Union High School District and the greater Anaheim community Mayor Tait recognized the many accomplishments of Dr. Elizabeth Novack as a teacher, a principal, and a school district superintendent. Dr. Novack remarked she was a product of the Anaheim Union School District and was grateful for the opportunity to make a contribution to this community. Senator Lou Correa expressed his admiration as well, remarking Dr. Novack had put Anaheim's youths front and center at all times and that the plans and programs she had put in place would continue. Gaston Castellanos, representing Congresswoman Loretta Sanchez, emphasized Dr. Novack's inspiration and dedication to the children of this community. Daisy Campos, representing Assemblywoman Sharon Quirk Sliver, Jessica Gutierrez, representing Assemblyman Tom Daly, and Orange County Supervisor Shawn Nelson also honored Dr. Novack. Recognizing the 2013 Eagle Scouts from the City of Anaheim The recipients for the 2013 Eagle Scouts award were recognized and introduced to the community by Jorge Ruiz de Somocurcio. ACCEPTANCE OF OTHER RECOGNITIONS (TO BE PRESENTED AT A LATER DATE): Recognizing St Catherine's Academy on their 125th Anniversary Proclaiming March 22, 2014, as World Water Day Proclaiming March 21, 2014, as World Poetry Day Proclaiming March 2014, as American Red Cross Month Proclaiming March 2014, as Music in Our Schools Month City Council Minutes of March 11, 2014 Page 11 of 31 Proclaiming March 2014, as Women's History Month Sister Johnellen Turner announced St. Catherine's Academy celebrated their 125'" anniversary this month, remarking there were thousands of young men who attended this school and hundreds of sisters who had the Anaheim community for over a century. Donna Boston, American Red Cross, announced March was the time to celebrate the heroes who worked in the Red Cross and those members of the community who donated blood and volunteered and thanked the city for remembering and honoring their service. Kathleen Pezzetti, Anaheim Library, announced the special events scheduled to celebrate World Poetry Day inviting the community to participate. Dorothy Rose, Orange County Symphony, looked forward to expanding the Symphony's music program in Anaheim Schools, and this recognition was a way to call attention to that effort. She remarked that any interested person wishing to donate musical instruments, could do so at the Anaheim City School District office. Don Calkins, Assistant General Manager, Water Services, stated this was a good time in these California drought conditions to focus attention on the need to use water wisely, adding that Anaheim had a number of incentives and programs to help reduce water use. At 5:40 P.M., Mayor Tait called to order the Anaheim Public Financing Authority (in joint session with the Anaheim City Council). ADDITIONS /DELETIONS TO THE AGENDAS None PUBLIC COMMENTS (all agenda items, except public hearing): Leticia Mata, Orange County Human Relations, distributed their annual report, identifying specific services provided to Anaheim over the past year. She added in partnership with local municipalities, her organization encouraged understanding among neighbors and diverse community members, through respect and conflict resolution and had developed practical guidelines in managing civility in public forums. Cecil Jordan Corcoran, Outreach Homeless Ministries, discussed his purpose in the ministry. Daniel Demeyere, resident, updated the city on the Brookhurst Street Improvement project. Mayor Tait asked if the project management had improved with Mr. Demeyere responding that it had and thanked staff for their efforts. James Robert Reade discussed potential increase in gang activity referred to as Gang War 2014. William Fitzgerald, Anaheim HOME, spoke against the Convention Center expansion, the ARTIC project, Disneyland, the Higher Ground non - profit agency and other subjects. Michael Baker, Boys and Girls Club, looked forward to the upcoming gala fund raiser benefiting the outreach efforts to the community. He appreciated the city's support and urged the community to visit their website for sponsorship information. Bob Tiscareno stated he had spoken on several occasions to the issue of the homeless in Anaheim adding that the city's efforts to address this problem, was not working and identifying City Council Minutes of March 11, 2014 Page 12 of 31 specific situations he had seen happening in La Palma Park. On another issue, Mr. Tiscareno remarked that the four council members who forced the lawsuit against the city regarding districting should be required to pay the $2.8 million fine. He also indicated he would be a candidate for city council. Marie Baird indicated she was here with her family members regarding their property, the Parkview Inn on Harbor Boulevard, indicating there were plans in place to expand and build a larger hotel on their site which would include the IHOP restaurant and the Coldstone Creamery businesses. She expressed concern over the proposed route of a street car tract to be constructed from the ARTIC site to Disneyland and fearful it would affect their property and business. She opposed the alignment going through their property and asked for a public hearing on this matter. Mayor Tait requested staff schedule this item on a future agenda to address questions he had as well as the property owner's concerns. Hugo Gutierrez stated he had been an employee at Angel Stadium and the Honda Center and had not lost his job since Legends Co. came in as the management company and Aramark was no longer involved. He asked for a job retention law to be enacted to save the jobs of local workers who served the fans of Angel Stadium well. Joseph Nutt remarked he worked in Angel Stadium until this past year and before that was a premium bartender in the Diamond Club for seven years and recently found out he no longer had a job. He remarked those local workers were here to voice their concerns, and asking for a job retention law. Myrtle Turgison stated she was also an Aramark employee for Angel Stadium for the past six years and was now standing before Council because she had lost her job with Legends taking over stadium operations. She asked Council to reconsider the retention law and allow her to get back to work. Lloyd Lindsey also asked that Council consider a job retention ordinance to allow the stadium workers to return. Pedro Navagan remarked he had worked at the Convention Center for 20 years, remarking Council had allowed the firing of 500 workers at the Honda Center for the same type of situation and urged Council to pass a worker retention ordinance for the Convention Center labor force. Noel Rodriguez, Unite Here Local 11, indicated the union represented 5,000 workers in the tourism industry in Anaheim /Orange County, and if the city was going to invest taxpayer dollars into projects that benefited team owners and resort district hotels, they must make sure that the thousands of workers on those sites owned by the city were protected whenever the manager of a property decides to change companies. It happened with the Honda Center and now over 200 Angel Stadium workers were out of work and the Convention Center employees were facing a similar fate. He added whether the Council expanded the Convention Center or not, they should protect the jobs of the workers who take care of the fans and serve the guest and ensure visitors returned and could do this by passing a worker retention law similar to those passed in other major cities in the country. Brian Chuchua thanked Council Member Eastman for putting the Veteran's Memorial item on tonight's agenda. COUNCIL COMMUNICATIONS None City Council Minutes of March 11, 2014 Page 13 of 31 CITY MANAGER'S UPDATE None At 6:28 P.M., Mayor Tait recessed the Anaheim Public Financing Authority to consider the City Council consent calendar. CONSENT CALENDAR Council Member Eastman moved to waive reading in full of all ordinances and resolutions and to adopt the consent calendar as presented, in accordance with reports, certifications and recommendations furnished each city council member and as listed on the consent calendar, seconded by Council Member Kring. Roll Call Vote: Ayes — 5: (Chairman Tait and Council Members: Brandman, Eastman, Kring and Murray.) Noes — 0. Motion Carried. D180 1. Authorize the Purchasing Agent to issue purchase orders, in an amount not to exceed $93,000 plus applicable taxes, for three Ford Police Interceptor Utility vehicles to the lowest responsive and responsible bidder. 2. Approve and authorize the Director of Public Works to execute and take the necessary actions to implement and administer the First Amendment to the Property Management AGR- 7913.1 Agreement with LPC Transit Management LLC for parking management services for ARTIC and authorize de minimis changes that do not substantially change the terms and conditions of the Agreement, so long as such changes are determined to be de minimis by the City Attorney's Office. 3. Approve an agreement with Audio - Visual Services Group, Inc. dba PSAV Presentation AGR- 5409.A Services (PSAV) designating PSAV as the preferred audio - visual service provider and the exclusive rigging service provider at the Convention Center, specifically for the Ballroom, Meeting Rooms, Arena, and in Exhibit Halls not containing exhibit(s). 4. Approve and authorize the Public Utilities General Manager to execute and take the necessary actions to implement and administer the Renewable Power Purchase and AGR - 7998.1 Sale Agreement with Bowerman Power LFG, LLC (Seller), and any other related documents or agreements including, but not limited to, collateral assignment agreements and authorize the Public Utilities General Manager, or designee, to approve, as applicable, Accepted Compliance Costs in an amount not to exceed the Shared Compliance Expenditure Cap by 6% of the Expected Annual Net Energy Production multiplied by the Product Price Per Term Year and /or waive specified Seller Compliance Actions. 5. RESOLUTION NO. 2014 -044 A RESOLUTION OF THE CITY COUNCIL OF R100 THE CITY OF ANAHEIM, CALIFORNIA, in support of Assembly Bill 1453 and in favor of the establishment of the Southern California State Veterans Cemetery. 6. RESOLUTION NO. 2014 -045 A RESOLUTION OF THE CITY COUNCIL OF P124 THE CITY OF ANAHEIM accepting certain deeds conveying to the City of Anaheim certain interests in real properties (City Deed Nos. 11598; 11635, 11636, 11637, 11638, 11639, and 11640). D114 7. Approve minutes of Council meeting of February 4, 2014. At 6:30 P.M., the Anaheim Public Finance Authority was reconvened to consider the Joint Public Hearing. City Council Minutes of March 11, 2014 Page 14 of 31 CITY COUNCIL /PUBLIC FINANCE AUTHORITY JOINT PUBLIC HEARING 9. A joint public hearing to approve the proposed financing of costs of certain 6137.1 improvements to the Anaheim Convention Center, including resolutions authorizing the AGR- 7374.111 issuance and execution of lease revenue bonds in an aggregate principal amount not to exceed $300,000,000, a professional services agreement with STV Construction for AGR- 7374.IV project/construction management services, a contract with Turner Construction AGR- 7374.V Company for the design and construction, and a professional services agreement with Rider Levett Buckanail for design -build consulting services. Public Financing Authority Action: (See March 11, 2014 Financing Authority Minutes for details of approval; a separate action by the Authority was taken relating to the Public Financing Authority resolution) RESOLUTION NO. APFA 2014 -002 A RESOLUTION OF THE ANAHEIM PUBLIC FINANCING AUTHORITY authorizing the issuance of not -to- exceed $300,000,000 aggregate principal amount of its lease revenue bonds, providing the terms and conditions for the issuance of said bonds, and other matters relating thereto. City Council Action: RESOLUTION NO. 2014 -046 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ANAHEIM approving, authorizing and directing the execution of certain documents relating to the issuance of bonds by the Anaheim Public Financing Authority and other matters relating thereto. Approve a professional services agreement with STV Construction, Inc., in the amount of $8,573,562, to provide owners' representative and project/construction management services for the Anaheim Convention Center Expansion Project (Betterment VII). Determine that the proposal submitted by Turner Construction Company (Turner) represents the best value to the City, award and approve a contract, in substantial form, with Turner, in the amount of $155,000,000, for the design and construction of the Anaheim Convention Center Expansion Project (Betterment VII) at Car Park 1, waive any irregularities in any of the documents of the responsive, responsible, and qualified vendor deemed to offer the best value in this procurement process, authorize the Director of Public Works to execute any related documents and take the necessary actions to implement and administer the contract through completion, authorize the City Manager to execute the stipend agreements, in a total amount of $50,000 each, for the two non - selected respondents, and authorize the Director of Finance to execute the Escrow Agreement pertaining to contract retentions in accordance with Public Contract Code Section 22300. Waive Council Policy 4.1 and approve a Professional Services Agreement with Rider Levett Bucknall, in an amount not to exceed $497,762, for the design -build consulting services for the Anaheim Convention Center Expansion project. Tom Morton, Convention, Sports & Entertainment, addressed the 7 th expansion of the Anaheim Convention Center which spoke to the Center's success as a convention and meeting destination. Beginning with its opening in 1967, he noted the city had expanded six times to meet the needs of the convention market and as each expansion proved successful, Anaheim's attraction as a convention destination increased. To answer the question of why the need to expand again, Mr. Morton emphasized the following points: it would offer the ability to attract City Council Minutes of March 11, 2014 Page 15 of 31 high yield, meeting- intensive business, the ability to hold concurrent conventions to maximize economic impact and minimize peaks and valleys in hotel room occupancies, the need to replace CarPark1 parking structure which due to height limitations could not be seismically retrofit and lastly, it would offer the ability to meet future needs. He explained the next expansion, referred to as Betterment VII, would be located on the current site of CarPark1 and when completed, would provide 200,000 square feet of leasable, flexible space that could be used as exhibit, ballroom or meeting rooms, the replacement of existing parking spaces, new loading docks and a new improved vehicular entrance. In addition, a climate controlled connection to the existing facility and all the necessary front -of -house and back -of -house space to efficiently operate the facility would be included. Jay Burress, Anaheim /Orange County Visitors & Convention Bureau (AOCVCB) thanked the hospitality and hotel community that had the wisdom to partner with the city on the creation of a Tourism Improvement District (TID) established with the sole purpose of expanding future business and funded through a 2% self- assessment marketing fee on each hotel room per night. He emphasized the convention center had an opportunity to move forward with this expansion because it was outgrowing the need for flexible meeting space and the continued growth of education programs of the various national associations and corporations. He indicated corporate and medical meetings required a significant amount of concurrent meeting space which was not currently offered and without these higher level and higher tiered meetings, the convention center would be forced to fill that space with meetings requiring lower average daily room rates, lower transient occupancy taxes (TOT) and ultimately affecting jobs within the city. He explained that recent trade shows and meetings such as NAMM, Natural Products Expo West, and Helicopter Association International had a large economic impact on restaurants, shopping outlets, and entertainment with their huge numbers of attendees. He added that these venues were at risk of leaving Anaheim in order for them to grow. Mr. Burress explained that for many of these trade shows and conventions, it was their single most important revenue source to run their operations for the entire year and it was important for them to continue to grow their attendees and to do that, they would have to leave Anaheim for another destination that could accommodate their growth. He added the new business opportunities resulting from the expansion would attract American Academy of Ophthalmology, American Baker's Association, American College of Cardiology, American Heart Association, Infocomm, Microsoft, and Oracle, pointing out the American Heart Association already made a commitment for 2019 and 2025 because of the possibility of an expanded facility. He pointed out the American Heart Association represented 58,000 room nights and Expo West set a record last week with 67,000 attendees filling the Grand Plaza and with record high restaurant users. In addition, the Convention Center wanted to accommodate concurrent events and be able to maximize the use of space while having the city receiving the benefit of a continuous flow of transient occupancy tax. Susan Sieger, Crossroads Consulting, indicated her firm updated an economic study conducted in 2007 to reflect the most current financing terms. The key questions for her was whether there was a market demand for an expanded convention center, what was the impact to the Anaheim Convention Center event activity with and without the expansion, what were the potential economic benefits associated with an expanded convention center in terms of spending and jobs, and what were the potential tax revenues associated with an expanded facility. She indicated market research suggested the proposed flex space would result in the convention center hosting more simultaneous and larger conventions /tradeshows based on various factors including historical use, conventions, and tradeshows as a percentage of the overall convention center activity, user input, and the historical performance relative to competition and the overall City Council Minutes of March 11, 2014 Page 16 of 31 destination package. Lost business reports and industry trends were also factors to consider in this analysis. Her firm analyzed the last three years, and found that Anaheim would not be able to maintain the same amount of business because its competitors in terms of facilities and destinations were changing their product. The analysis showed there would be 35 to 40 percent more conventions with the expansion (which means 20 — 23 new conventions over the current status) and attendance would increase 41 to 50 percent higher under those same scenarios, increasing from 513,000 current attendees to between 720,000 to 767,000 people. In terms of room nights, she stated, not all attendees stayed overnight in Anaheim, so adjustments were made which showed 86 percent of attendees stayed overnight and 80 percent stayed in Anaheim, with about 1.4 persons per room, which reflected $998,000 to $1.1 million in annual room nights. The next question, what was the potential annual economic benefit associated with an expanded ACC measured in terms of spending and jobs; when compared against the status quo, she believed Anaheim would lose about nine percent of what they had been doing historically, and would increase from $134 million to $160 million in direct spending and $221.5 million to $266 million in total spending. She explained that for every dollar of direct spending, Anaheim would be getting $1.66 back. The third and potentially more important component was jobs and those numbers would increase from 1,800 to 2,200 jobs annually as a result of the spending associated with expansions. The next question, she remarked, was how that translated into tax revenues. She stated that Orange County would receive some of the benefit as well as the state, but for Anaheim, the increase over the status quo would be between $11.5 million and $13.8 million and for TOT that figure was expected to increase between $9.3 and $11.2 million annually. To summarize this research, Ms. Sieger remarked Anaheim had already made significant investments with both public and private funds and the fact the resorts were willing to self - assess themselves to expedite this process was a strong indicator of the support this investment was receiving. Anaheim's competitors continued to improve their product and while it was not necessary to double the space to keep up with them, it was important to make sure Anaheim was offering the best product possible. Because the status quo was estimated to result in a decrease in event activity which directly related to the bottom line as well as to economic and fiscal benefits, one of the things Crossroads Consulting saw was an opportunity to maintain existing business, attract new business, and increase Anaheim's overall market share of the industry. She thought the proposed expansion would enhance the Anaheim Convention Center's marketability and competitive position for the next ten to 15 years. City Engineer, Mark Vukojevic, reported the city had prepared a strong project package for Council's consideration with clear objectives; i.e. an innovative design, a flexible facility to meet the maximum value and cost, and schedule certainty. He indicated staff specifically chose design /build as a delivery method as the best tool to meet these objectives and in the Request for Proposal had established minimum requirements, quality expectations, disclosure on the scoring process and all the design teams were very clear on the need for 200,000 square feet of leasable flexible space, 1,400 parking spaces, and a fixed construction price of $155 million. On the RFP deadline date, three teams submitted proposals and the evaluation committee unanimously selected the design and construction proposal submitted by Turner Construction and Populous Architects. He remarked Turner Construction was a global provider of construction services, and at their core, the company's values and commitments were towards making a difference in the lives of their staff, customers, and the communities in which they worked. He added, Populous was recognized as one of the nation's premier convention center City Council Minutes of March 11, 2014 Page 17 of 31 architects. He indicated that over the last two months staff finalized all of the negotiations and packaged this project for Council's consideration. He further explained the design continued the existing character of the Convention Center, reflective of a warm, inviting atmosphere using imagery from California geography, geology, and the surrounding areas. He provided renderings showing the new expansion and its adjacency to the arena, noting the construction would have 350,000 gross square feet and 1,400 parking spaces with all the setbacks and landscaping standards in place to preserve and enhance unique outdoor areas. With this project, he remarked, the Convention Center was fully connected and contiguous and the front of the building along Katella was modern, sleek, and classic in design to match the character of the resort. A 10,000 square foot elevated outdoor balcony would take advantage of views and offer an additional 10,000 square feet of leasable space to the 200,000 square feet of new space. Another rendering showed how the second floor flex space could be turned into a ballroom configuration with 25 foot high ceilings, column free with a full kitchen, escalators, and elevators and all the necessary bathrooms and back -of house accessories. He explained the creative solution to parking which offered a portion of the parking within the truss system in between the first and second floors, called interstitial parking, which offered maximum value and maximum flexibility to the facility, adding that all parking spaces were on site, all fully connected with two separate access ramps that could be used to load cars in and out. Mr. Vukojevic indicated the timeline and the schedule for this expansion had been established and the design would begin immediately with submittals already scheduled. The plan was to begin demolition of CarPark 1 in September of this year and 600 spaces would be back in service within one year. From there, the contractor would complete the entire construction by the fall of 2016 and the new building would be turned over to the Convention Center for use. He added that in December of 2012, Council had adopted a resolution certifying the final impact report as well as the findings and mitigation monitoring plan for Amendment #14 to the Anaheim Resort Specific Plan, including Betterment VII and as part of tonight's action, staff was requesting Council approve the design /build agreement with Turner Construction and the necessary construction management support contracts to assist the city in delivering this project. Finance Director, Debbie Moreno discussed financing of the expansion and the benefits the city anticipated to receive from this project. She began with background information reporting Betterment VII had been in the discussion stages for some time and with the economic recession, it was obvious that the city would not be able to finance the expansion on its own and working with the Visitors and Convention Bureau and the hoteliers in the Resort District and the Platinum Triangle, the Anaheim Tourism Improvement District (ATID) was created in 2010. This enabled the hoteliers to agree to self - assess two percent of their room sales to pay for improved marketing and promotions of the Anaheim destination and to contribute to future transportation projects. In return, she explained the City no longer funded the Visitors and Convention Bureau (VCB) from the general fund and that amount freed up roughly $6 million annually which was used to pay for the Grand Plaza addition and could not be used for the next phase of the Convention Center expansion. She explained it was important to recognize that the amount the general fund previously paid to the VCB was based on a percentage of the transient occupancy tax (TOT) generated and in 2014, TOT revenues would reflect $7.6 million which meant that $1.6 million was now available in the general fund to provide services to the Anaheim community. She added if you assumed TOT to grow at three percent, the value of the marketing and promotions dollars the city used to pay to VCB would be valued at $450 million City Council Minutes of March 11, 2014 Page 18 of 31 from the beginning of the ATID in 2010 to year 2056, when the debt for the expansion would be paid. To ensure this was the right project for Anaheim, a list of questions was developed before staff could either recommend for or against the expansion of the Convention Center: 1) Was there a return on the resort investment? 2) Did the expansion create a net benefit? 3) Can the city afford it? 4) Did the investment benefit the entire community? To answer the question would Anaheim see a return on their investment in the resort, Ms. Moreno reported the resort generated nearly 50 percent of the general fund revenues (TOT, sales and use taxes, property taxes, and business licenses) and all of that was estimated to bring in about $120 million in 2014 to the general fund. The largest expenses related to the resort were for the debt service for the 1997 Resort Improvements and several other small debt issues. The City no longer paid the VCB marketing and promotions fees so after all the other debts were paid, $60 million would be left in tax revenues to provide for general fund services such as police, fire, parks, libraries, and other community services. The answer to that question, she remarked was yes, the city would see a $60 million return on the investment in the resort. To answer the question did the propose expansion create a net benefit, the Finance Department hired Crossroads Consulting to perform a market and economic analysis of the proposed expansion, a firm that was an expert in the field and had not been involved in the project before nor had an opinion on the overall plan. In the end, she commented their detailed research and conservative estimates showed Anaheim would gain significant new revenues totaling $380 million predominantly TOT monies and additional sales and use taxes. The expansion would retain existing trade shows and conventions and their guests and enable the city to retain $164 million in revenues that might have otherwise been lost. She indicated this was mostly due to TOT, but also included a portion of operating revenue that the Convention Center received from rentals that would now be available to pay their day -to -day operations. She announced the total new and retained revenues reflected $545 million dollars and deducting the $410 million debt service for the convention center expansion and replacement of CarPark1 showed an economic benefit to the city of $135 million. That figure, she emphasized, meant the project was estimated to return $135 million more than it cost to build. She added if you take this one step further by adding the estimated $450 million of marketing and promotions costs that the city would have paid to the VCB through year 2046, this would leave the city with a total benefit of $585 million. To answer the question could the city afford this expansion, Ms. Moreno stated there was roughly $85 million in existing general fund debt other than the 1997 resort improvements which would be paid off soon, and monies could be saved on interest payments by refinancing about $53 million in debt, paying it off sooner rather than originally scheduled with the exception of about $2 million borrowed several years ago for the Grand Plaza addition. She explained when adding the new funds to be borrowed for Betterment VII and the refinanced debt, staff expected to pay $17 million less per year and this was roughly equal to where the city was today. Most of the new incremental revenue received could then be immediately used for general fund services since Anaheim would not be paying any more today, which made the expansion affordable. City Council Minutes of March 11, 2014 Page 19 of 31 To the last question, did this benefit the entire community, Ms. Moreno remarked the best way to answer that was to look at the overall impact of the general fund, those monies used to pay for all core services. She emphasized if this fund was better off, then the entire community was better off, especially as a portion of the city's debt would mature in 2019 and no longer needed to be paid. The general fund would be better off by going forward with Betterment VII. She announced to not expand and pay off the existing debt, the following scenarios would occur. Using the mid -point as an example, the overall resort tax revenues would be less without the expansion because there would be no new revenues and some of the existing revenues would be lost because of lost business. The debt service would be less but that meant the city would not pay off the debt as fast, because the debt service payment was tied to percentage of revenues received. The other general fund debt service would be paid but the city would still have to replace CarPark1 at about $2 million and if the commitment to expand the Convention Center was not honored, Anaheim would likely have to fund the marketing and promotions now being paid by the ATID. At the end of year 2015, she estimated the net resort tax revenues remaining would be almost $116 million if expanded versus $109 million by keeping the status quo. This would mean there was an extra $7.2 million in the general fund to provide services to the entire community if the expansion went forward in this year alone and over the course of 15 years, the general fund would be better off by $117 million and $323 million in a 30 year period. She emphasized this project was a benefit to the entire community. Ms. Moreno brought up an additional component of the financing plan. In addition to providing the Convention Center expansion, she noted current market conditions made it possible to borrow an additional $20 million at historically low interest rates and still maintain debt service at or below current levels, offering $20 million to be put back to work in the community on public safety facilities and other community and neighborhood improvement projects. Because of the new TOT revenues coming in, another $80 million could be paid toward the resort bonds which could result in them being paid a little faster. Based on the information today, she remarked, there was a lot to be gained for the community with this project and if were delayed, it would likely cost more as interest rates rose, pointing out an increase of the interest rates at only one quarter of one percent resulted in an additional $500,000 per year in debt service. And if no expansion occurred, Anaheim would see a decrease in Convention Center revenues and general fund tax revenues and with the existing debt obligations, there would be fewer resources available for the general fund in the short term. Based on the affirmative answers to her initial questions and the partnership with the local hotel industry that provided freed -up funding, Ms. Moreno recommended Council approve the expansion and the related financing plan as the right project at the right time for the entire community. Tom Morton ended the presentation emphasizing the need for this 7 th expansion was necessary if Anaheim desired to stay in the convention, trade show, and meeting business; it needed to retain large annual conventions and tradeshows, to attract high yield meeting- intensive business, to hold concurrent conventions to maximize economic impact, minimize peaks and valleys in hotel room occupancies, and to replace CarPark 1. With this expansion the city would see growth of general fund revenues and additional funds would become available for core city services while bond proceeds would be immediately available for public safety facilities and community improvement projects. He stressed that Anaheim was one of the nation's premium convention and meeting business destinations and with this expansion, its continued success would be secured for future years. He requested Council's approval of the issuance of bonds through the Anaheim Public Financing Authority, the project construction management services, City Council Minutes of March 11, 2014 Page 20 of 31 and the issuance of bonds via the City Council along with the design /build contracts and consulting agreements. Mayor Tait opened the public hearing. Anthony Barron, GES Global Experience, remarked he was a member of Local 831, specializing in trade show and sign crafts installation. He was supportive of the proposed Convention Center expansion, remarking he had personally seen those expansions work and grow jobs. He thanked the city for their vision in the past and looked forward to the future. Rhonda Atterberry, Local 831 trade show and styler, remarked Anaheim could not afford the status quo as she had seen business go to San Diego or Las Vegas and other competitors, which necessitated members of Local 831 traveling and spending their dollars in other cities when she preferred to live and work closer to home and to keep those dollars in Anaheim. Jessica Lopez, trade show industry, remarked the countless hours and thousands of people behind a single event is often overlooked when considering the impact of convention and tradeshow destinations on a community. She supported an expansion that would help rebuild the economy and the Anaheim community, creating jobs and continued growth for the future. Kevin Kennedy was in support of the Convention Center expansion, thanking the many community partners who created a funding mechanism to finance this project. Today, he remarked, the two percent room assessment feet through ATID allowed Anaheim the ability to expand destination marketing and creatively promote the Convention Center and grow future business while supporting surrounding communities. He added the expansion was a necessity, not a luxury and was needed to remain competitive, grow future business, and create jobs for the citizens of this community. He offered letters of support from people in the community including Senator Bob Huff, Senator Lou Correa, Senator Mimi Walters, Assemblywoman Sharon Quirk Silva and Assemblyman Don Ladner all supporting the expansion and aware of the economic value the Convention Center brings to the region. Cecil Jordan Corcoran offered personal comments unrelated to this public hearing. Douglas Robbins, remarked he was in the painters and allied trades but was here as a resident expressing his full support for the Convention Center expansion. He added there were few things in life considered to be a sure thing but the expansion of the Convention Center, even if the anticipated revenues were reduced by 50 percent would still create revenue for the city and would bring direct and indirect benefits to the entire community. He urged Council to approve the project. Richard Samanigo, IBEW Local 441, remarked he represented over 2,000 local workers that were ready to work on this project and he hoped would be considered as part of the construction contract. Ross McCune, Anaheim Chamber of Commerce, remarked he was also the owner of Castle Building in Anaheim, and urged Council to vote in favor of the Convention Center expansion. He added much had been said about the proposed plan but the most important component was jobs on many levels. In Orange County there were 160,000 jobs depending on tourism and convention industry, ranging from entry level to executive, and this project would create much needed good - paying construction jobs. He indicated the partnership between the city and the City Council Minutes of March 11, 2014 Page 21 of 31 business community would modernize one of Anaheim's most valuable assets and allow Anaheim to keep its competitive edge in this industry and to pay dividends in the years to come. Carl Ritola, Plumbers & Steamfitters, Local 582, remarked Anaheim had been fortunate to have the vision of leaders who preceded Council, both in the public and private sector, and he supported Council taking advantage of past investments and building on them for the future. For his colleagues in Local 582 and the rest of the building trades, he urged Council to approve this project which would benefit so many in this community. Pete Mitchell, Anaheim Police Association, stated he was here in support of the Convention Center expansion and had submitted a letter from the Anaheim Police Association who strongly supported it as well because they recognized that business was the key to Anaheim's success to keep revenues flowing in order to address the needs of the community. Steve Arnold, Anaheim /Orange County Hotel lodging Association, remarked this was an important juncture for the city to act decisively to secure the strength of Anaheim's economy which would lead to direct benefits to tourism industry businesses, create more jobs for the community, and indirect revenues and benefits for its residents. Kevin Curtis, Rain Forest Cafe /Anaheim Restaurant Council, urged Council to approve the Convention Center expansion by a unanimous vote, because it would support existing hospitality businesses and create new jobs. As an example, his restaurant was one of the top in the nation in terms of gross sales, employing almost 500 people in one restaurant with a million diners per year. It was a large business and reached that level though prior convention expansions and because the city focused on future revenue growth in Anaheim. He added Anaheim needed this expansion to keep business flowing as competitors were always looking to lure business away. Robert Kaczmarczyk, Ralph Brennan Jazz Kitchen, also supported this expansion remarking all the businesses in the resort area benefitted from the Convention Center attractions. He had been a part of this industry for over 22 years in major cities throughout the west coast and at each facility he had seen expansions bring in direct benefits benefit to businesses and restaurants. He urged Council to unanimously approve the Convention Center expansion and allow local business to continue to prosper. Jim Adams, LA/OC Building & Construction Trade Council, requested all those affiliated with a local union to stand up and be counted. He added he was here to support the project recognizing that for the last seven years the craft unions had suffered severe job loss and this project would help create some of those much needed jobs. He added his organization was currently working with Turner Construction on other projects and had shared the same goals when it came to local job creation, career path in unions, and an apprenticeship program. He added it was the Trade Council's responsibility to train the construction work force for tomorrow and they took that obligation seriously but at the end of the day, jobs were needed to fulfill that obligation. In this case, he remarked, the expansion made good sense with no downside to the development. He urged Council to approve the expansion. Jill Kanzler remarked SOAR was solidly in support of this expansion as it would generate millions of dollars and the financing would cost the city no additional money. Generating $9.5 million in tax revenues each year, the creation of 1,800 to 2,200 jobs, she urged Council to vote unanimously to approve the expansion. City Council Minutes of March 11, 2014 Page 22 of 31 Phillip Salerno, Local 500 Masons, remarked the building trades just made history with the largest concrete pour ever done at the Wilshire Grand Skyscraper in downtown Los Angeles, using union labor and only possible with the unification of the building trades. He was here to support the ACC expansion and to use union workers from the area to build the next phase of the Convention Center with the trained apprentices of today. Robert Donahue, Disneyland Resort and AOCVCB, remarked Disney was fortunate to have one of the premiere convention centers in the nation and urged Council to approve an expansion that would keep the larger and more profitable shows and attract new ones that could bring significant business to the city. He added that a few years ago, the Disneyland Resort along with other hoteliers in the resort area and the Platinum Triangle formed the ATID which added a two percent room tax to fund the VCB and transportation projects because they understood the benefit of promoting and enhancing the area as a whole. He encouraged Council to support the expansion knowing it would benefit residents, businesses and the entire region. Julia Smith, Global Experience Specialists, explained her firm had been a major employee in the exhibition industry for over 70 years with 45 years in Anaheim. She acted as an officer on the boards of the International Association of Exhibitions and Events and the Exhibitions and Services Contractor's Association, talking to mutual clients and potential clients about what they were looking for in venues. She indicated mutual clients such as Helio Expo, Natural Products and Produce Marketing bring millions of dollars in spending to Anaheim and provided hundreds of jobs and work hours but those shows would seek out other venues if they could not grow in Anaheim. She had been an advocate and supporter and part of the Anaheim team through every expansion of the Convention Center and strongly urged an approval on this latest and necessary expansion. William Fitzgerald spoke against the Convention Center expansion, Disney Corporation, the GardenWalk hotel subsidy, ARTIC and various other city initiatives, alleging improprieties, payoffs and making certain claims against council members. Mayor Tait commented that Mr. Fitzgerald was out of line in his comments asking that he remain civil when offering his perspective. Both Council Member Kring and Mayor Pro Tern Murray responded to Mr. Fitzgerald's comments as a point of personal privilege. Shaun Robinson, Anaheim Hilton, remarked the Hilton had expanded before and planned to expand again as the largest convention hotel in Orange County and a major generator of jobs and revenues for Anaheim taxpayers. He stated this expansion was a prime example of how public consensus drove private ventures and another Hilton expansion would mean continued jobs for over 1,000 employees and hundreds of new jobs created on top of that. He strongly supported the Convention Center expansion adding the additional revenues were 100 percent generated by hotel room taxes by visitors and went directly to the city's general fund to pay for vital community services. Darlene Cochran, Pacific Sightseeing, stated she was a local transportation operator in Anaheim, home to the Gray Line of Anaheim, home to Disneyland Resort Express airport service, home to MegaBus California, Amtrak Bus Service and the Charter Company. She added her buses needed passengers to succeed, for tourists to visit, conventioneers to return, and the convention center to expand and grow. She remarked Pacific Sightseeing would do everything possible to support Anaheim because it supported her business by bringing visitors to the city. City Council Minutes of March 11, 2014 Page 23 of 31 Kevin Dow, Turner Construction, Anaheim, stated Turner and Populous were design partners and excited to be selected as the Convention Center's design /build team. He added Populous Architects represented the very best in architecture and design for assembly and convention center space throughout the country and Turner Construction was a local company with over 200 professionals here in Anaheim. He indicated his team provided a deep culture in business outreach and community participation and on this project, planned to create opportunities for small, minority, disadvantaged and local businesses to participate in the expansion. He added Turner Construction was working with Jim Adams and the Orange County business trades to facilitate local hiring programs and apprentice outreach programs. They believed the design would result in the Anaheim Convention Center being recognizable throughout the country as one of the most flexible meeting spaces and functional facility. He thanked the city for their foresight and support of this world class project. Todd Voth, Populous, remarked his firm had the opportunity to work on the Arena and the ballpark and felt a connection to Anaheim and had taken this opportunity to provide a design that met all of the city's goals and would be a state of the art facility that fit well within the current convention campus. John McKinney, resident, spoke in support of the Convention Center expansion, adding that if the income from the Anaheim Stadium was not enough to pay off this bond, it should be sold and that area used for the next expansion of the Convention Center, remarking more income would come from that purpose than had been received through the baseball stadium. Todd Ament, Anaheim Chamber of Commerce, spoke about a process that began as soon as the last expansion was completed, to address the market's demand for more space and opportunities in the Anaheim Convention Center. He discussed the various ideas considered for expansion including constructing a hotel over CarPark 1 and the hit the industry took during the recession and why the TID was formed in Anaheim and in Garden Grove in recognition of regional economic impacts related to the Anaheim destination. He added the expansion was ready to go, staff had done their work, the financing models had been figured out and Council had an opportunity to support an expansion bringing in an average of $20 million a year over the next 30 years; he urged their approval of the project. Chris Snyder, Catch Restaurant and Tapp's Fish House and Brewery, remarked that in 1991 there were three major restaurants in Anaheim, Mr. Stox, the Catch and the White House. The Catch restaurant decided in 2010 to reinvest in the city and bring the Catch back from its closure in 2008 with Mr. Snyder urging Council to take the next step that would lead the city through the next 20 years of success and support the Convention Center expansion on a unanimous vote. Ed Fuller, OC Visitors Association, emphasized that in 40 years with the Marriott, he had not seen as compelling an argument financially for a project as this one. He stated the Convention Center brings in money from outside the community which would not be here unless the Convention Center had grown and remained prosperous. Forty -two million visitors come to Orange County every year and 1.2 million use the Convention Center, which today generated a billion dollars and was a major part of the tourism market as well as generating future returning guests. To him the most important winner in this investment was the people, the jobs, the cab drivers and all the service individuals who would find new opportunities and be able to grow and become future leaders in the hospitality industry. City Council Minutes of March 11, 2014 Page 24 of 31 Larry Slagle stated that Disney, the hoteliers, and the business community all decided that a natural development for Anaheim should be a convention center to even out the demand and that concept had worked to this date. He stressed the TOT was paid by non - residents, and with the creation of the TID, the Convention Center upgrades would be paid for by visitors not residents. He suggested a financing mechanism should be considered for the next betterment upgrade. Cynthia Ward, resident remarked she was in support of this project as long as certain questions were answered: 1) Was there any guaranty in the contract to use union or local labor; 2) is the general fund at risk, because if it was, the Charter would not allow this project to be approved without a vote of the people; 3) What is the $20 million in bond funding; 4) was there a second parking structure; 5) what would the impacts be with the loss of parking while the expansion was under construction; 6) did finance staff take into account the GardenWalk hotel rooms whose TOT was being rebated to the developer; 7) were the anticipated rooms in Disney properties that give away tax money through the LPMR process and resort bonding addressed; 8) could the public get an update on the LPMR for Disney property that was derived from Anaheim's general fund; 9) what about earthquake impacts on interstitial parking, and 10) did Homeland Security sign off on the idea of unchecked, unattended vehicles. With no other comments offered, Mayor Tait closed the public comment portion of the hearing. Council Member Kring thanked everyone for participating, for their insightful comments, their passion for the expansion and the city team for their thorough workshop and public hearing presentation. She remarked the city had a great opportunity with financing in place and appreciated the business community behind the expansion to address a long overdue expansion and position Anaheim ahead of the curve and attracting conventions that would do double -duty. Mayor Pro Tern Murray thanked the entire team and staff for an extraordinary achievement and she looked forward to voting on a sustainable, unprecedented opportunity to invest in this community. She added the business community and the city had an historic partnership that stretched taxpayer dollars further with a resort district that generated more than 50 percent of the city's General Fund. The Grand Plaza was approved and came in under budget and ahead of schedule and she believed with this kind of planning in place, those same performance metrics would happen and she was proud to support this effort. Council Member Brandman asked that questions posed from members of the public be answered. In response to the first question related to union labor and Turner Construction, Mark Vukojevic explained that Turner had listed their subcontractors and trade partners and it was his understanding that many of those listed were union labor. The second question related to local hiring and the city's obligations - Mr. Vukojevic stated that Turner also provided a detailed plan on how they would approach efforts to create local hiring to have apprenticeship programs and specific training and safety programs tied into workforce development. Mayor Tait inquired if there was any requirement for local hiring in the contract with Mr. Vukojevic responding there was a hiring program in the contract with no specific numbers. The next question asked was whether the general fund was at risk and the Charter implications with Ms. Moreno, Finance Director, remarking that all the bonds would be issued by the Finance Authority and the City and the General Fund would pay the lease payments to the authority which would in turn make the bond payment, a legal structure used in California. Specific to any risk to the General Fund, she noted staff ensured any risk would be reduced by setting a ceiling for debt service so it equaled where the city was today and any new incremental revenue with City Council Minutes of March 11, 2014 Page 25 of 31 the exception of the piece that goes to the debt service or LPMR, could immediately go back into the community to provide general fund services. She emphasized the General Fund debt service would be the same as it was today and with the expansion no revenues would be lost and the city would be in a stronger position than it would otherwise be. Regarding the next question relating to the $20 million - Ms. Moreno indicated staff had identified as the result of the bonding capacity available, to recommend that $20 million be bonded for use in public safety facilities and neighborhood improvements. Staff would specifically recommend that bond be a part of the 2014/15 budget with the anticipation that those funds would provide for the relocation of fire stations as contemplated in the Fire Department's Strategic Plan as well as a significant amount of curb, gutter, sidewalk, and street improvements in various neighborhoods. That information, she explained, would be presented as part of the budget adoption. The 4 issue was whether there was a second parking structure being contemplated with Mr. Vukojevic replying the only parking structure within the project was the replacement of CarPark1. The 5th question addressed was whether staff took into account rooms that were yet to be constructed or were in an economic incentive program. Ms. Moreno stated the projections from Crossroads did not include any additional hotels from GardenWalk, because that revenue was anticipated to draw additional visitors to the city that would not otherwise stay here to enjoy higher -end rooms with more expensive room rates. Regarding the question related to LPMR payments - Ms. Moreno indicated the lease payment measurement revenues were based on formulas to make lease payments to the debt equal to certain revenues and those numbers had been accounted for in the fiscal analysis. She added when she discussed net benefit to the general fund, she had taken into account those revenues that would not be available for general fund services because they were earmarked for the lease payment. Typically about 30 percent of the TOT would be applied to the LPMR payment, a figure that was accounted for in staff's analyses. Mr. Emery asked staff to address the parking structure and its seismic capacity. Mr. Vukojevic stated a portion of the design was interstitial parking which had been closely reviewed, looked at and discussed with convention centers that used that type of parking with staff confident of this approach and design. He added it would be built with 2013 state seismic building codes and he was confident with this function. He added the other question had to do with Homeland Security, and he informed Council that Homeland Security, Police, and Fire had reviewed and concurred with staff on the design. Tom Morton remarked the last question had to do with the parking plan during construction. He indicated a plan was outlined and ready to go, not unlike the current overflow parking plan where partners at the Stadium and Honda Center were used and visitors parked there using buses to move them back to the Convention Center. He added with the construction of the Grand Plaza, a transit place was created for that purpose and staff was ready to go with that process. Council Member Brandman remarked that when the Convention Center was constructed it was done with the help of the school district as the city did not have all the bonding authority necessary and the school district helped the city out. He added this expansion was in the best tradition of a public /private partnership and a surefire winner for creating jobs, enhancing economic development and he was ready to support the project. Council Member Eastman offered her support as well, thanking everyone for their time, talent and stake in this project. She appreciated seeing a packed chamber with people united and supporting this vision and was ready to vote. Mayor Tait appreciated the presentation but had some questions remarking this was a complicated project obligating the city for 30 years and he wanted to ensure it was fiscally sound. He stated he had voted for the expansion in 2000, the $500 million bonds that improved City Council Minutes of March 11, 2014 Page 26 of 31 the resort area and the Grand Plaza addition. He asked staff what the total bond payment was for the expansion in annual and monthly payments with Ms. Moreno answering it was roughly $410 million dollars or around $13 to $15 million a year. He indicated the numbers in the Crossroads report versus the report from PKF issued this January, a firm the city had used for the last 30 years, were not the same when he analyzed the data to see if the increased room sales would pay for the obligation of the bonds. Crossroads reported they anticipated the expansion to generate about 229,000 total room nights which included an estimated 122,000 generated room nights and 107,000 recovered room nights. The VCB said the Convention Center generated about 7 million room nights per year and with 20,000 rooms, this reflected three or four percent of the total room nights. The VCB also estimated that 35 percent of attendees would book outside the V &CB for rooms and by applying that additional factor of 35 percent, they estimated that upper range of total room nights attributed to the ACC expansion was 309,150. Those 309,000 room nights multiplied by $142 average daily room rate multiplied by 15 percent transient occupancy tax equaled $6.6 million of new TOT revenues. The Mayor then subtracted $13.7 million of new General Fund expense from that figure which showed a $7.1 million annual General Fund shortfall. He emphasized these figures were taken directly from the PKF report while it appeared that Crossroads Consulting simply increased those numbers and he did not understand the methodology behind it. Mayor Tait also spoke to Dr. Haywood Sanders, a Johns Hopkins graduate and Harvard PhD and an expert on conventions, about the assumptions made in the Crossroads report, adding that the PKF data showed a drop in room nights for ACC from year 2000 to the present. Dr. Sanders's premise was the entire convention business had been flat and to assume big increases was a big assumption on the part of the city. Mayor Tait pointed out before 2000, the Convention Center had 600,000 to 700,000 room nights and since 2000, those numbers had dropped and was not the assumption used when the city paid for that earlier expansion. Using a chart from Dr. Sanders showing attendance numbers for major convention centers nationally, he pointed out Las Vegas and Orlando actually doubled their square feet going from 1 million square feet to two million square feet and the numbers dropped in attendance or did not increase much and he was concerned that Anaheim's expansion would not meet expectations. In addition he pointed to a statement in Anaheim's Crossroads report as to why Anaheim was losing business to its competitors and it was the exact same statement with the same percentage figures in a Crossroads report specific to the Baltimore Convention Center. Mayor Tait explained that the city was relying on those numbers from Crossroads for a $200 million investment and he was not comfortable voting for this expansion with such conflicting numbers. He felt the Crossroads report required additional study to understand the numbers because it was a 30 year obligation of the city's and an affordable expansion that would cost $6 to $7 million annually and still offer a first class convention center should be considered. He recognized that the business community supported this expansion but also recognized they would feel differently if they felt the city's general fund was put at risk. He also expressed concern over the GardenWalk hotel analysis remarking the city would be writing a check when those hotels were built for about $8 to $9 million a year back to the hotelier along with a check to the bond holders for $15 million a year, to be paid for by the increased rooms from this expansion and from the GardenWalk hotels. He did not feel the GardenWalk hotels would attract enough visitors because most people visited Disneyland or the Convention Center and stayed in that area. With those comments stated, Mayor Tait moved to continue this matter for one month to ensure clarity in the financial analysis of this project. Council Member Brandman requested that staff address the Mayor's concerns if there was no objection from Mayor Tait. Ms. Moreno remarked that before she addressed the analysis, she wanted to speak to the Mayor's concern that the Crossroads report had just been received four City Council Minutes of March 11, 2014 Page 27 of 31 days ago. She pointed out this report was an update to the analysis given to Council in the July workshop, updated to address concerns that were raised by the Mayor at that time and during a later meeting with Susan Sieger to talk about how the ADR might be higher for Anaheim's convention center hotels which would change some of the numbers and also because the Mayor wanted to look at it from strictly a room night perspective which was then incorporated into the analysis to see it clearly delineated to help with the review. Mayor Tait responded if the average daily room rate (ADR) was increased from $142, then the resulting figure would increase dramatically. Ms. Moreno stated the ADR used in the Crossroads analysis was higher because as discussed, typically during those peak areas, a higher room rate was generated by those hotels and was also consistent with the room rates used by PKF. She remarked if you look at where PKF projected the TOT would be compared in 1996 to today, the city was off by five percent and that was going through two recessions and she added, it had been fairly accurate over time. Mayor Tait asked how the 2000 study by Coopers and Lydman had estimated the increase in the transient occupancy tax with Ms. Moreno indicating she was not familiar with that study. She emphasized she had looked back at the total TOT projected for the City of Anaheim for 2013 and found it was roughly off by six percent from where it was projected in 1996. Mayor Tait stated the big expansion occurred in 2000 and the room rates were much less now, and was the reason for his concern and projections had estimated that those numbers would increase by 50 percent every year. Ms. Moreno replied if you look at only one element of the equation, there could be different results, but if you look at the project in the total generated TOT, including rate and occupancy, that was what was being generated today and the city was only six percent off where it anticipated being in 1996. Mr. Emery asked if Ms. Moreno was comfortable with the estimation of room nights used by Mayor Tait, with Ms. Moreno responding it fell within the middle range of room rates used in the Crossroads report with Mayor Tait indicating the PKF report disagreed with that statement; it was in the upper range. Mr. Emery asked Mr. Baldwin of PKF Consulting to respond to the Mayor's concerns regarding the differences in the PKF report versus the Crossroads analyses. Mr. Baldwin announced that in trying to project the future, there were a number of ways to analyze data, and he had provided the projections for the LPMR in 1996 for the $500 million resort bond improvements and updated that in 2006 and was within five percent of the Crossroads analysis. In this case, PKF used a lower number of room nights than Crossroads but incorporated a $50 average rate increase for convention rooms because of the compression which occurred during conventions. He added that the TOT differential between the two reports was about $500,000 which, in his opinion, was fairly close. PKF did take a conservative approach and did not go into as much depth as Crossroads but overall, he felt the projections were close and reflected incremental revenue the city already had to pay off in bond payments and because there would be no higher payments made than what the city paid today, he believed this was the most conservative underwriting he had seen. Mayor Tait stated currently the city was paying off on the old Convention Center expansion with Ms. Moreno responding that if the Grand Plaza was included, that payment was at $16.8 million per year. Mayor Tait added, those obligations were being paid based on decisions made years ago and in 2021 it would decrease to $5 million and those funds would flow to the general fund without any offsetting debt and Anaheim would be $12 million richer. Ms. Moreno responded the city would be richer in terms of debt service savings but would have had lost revenues without the expansion and possibly have to pay the VCB marketing and promotion costs as well. Mr. Emery emphasized that what the Finance Director had highlighted earlier, without an expanded convention center, Anaheim would run the risk of having less business coming into City Council Minutes of March 11, 2014 Page 28 of 31 the city and a potential risk that the ATID would dissolve and be a general fund burden of $6 million (2010 amount) to fund a visitors and convention bureau. Mayor Tait stressed that he was not against expanding; rather the city should expand within their means. Mayor Tait remarked if this project showed it could pay for itself, he would approve it without worrying about its impact on the general fund. Mr. Emery added that staff developed a proposal that reflected conservative estimates about growth and about average daily room rates and room nights that ameliorated those concerns and showed that the TOT accumulation over a 30 year period of the debt service without combining the ATID funding, would satisfy the long term needs of funding this facility expansion. He suggested Ms. Moreno clarify that with regard to the transient occupancy revenues over the 30 year period. Ms. Moreno pointed to a slide that showed the difference between expanding and not expanding the ACC. The slide showed there would be no debt service to pay, with a resort tax revenue baseline of roughly $192 million and the difference between the resort tax revenues with the expansion was the new increment received; otherwise the city would lose revenues, which she emphasized was not the LPMR. Mayor Tait asked if this was according to the Crossroads study with Ms. Moreno replying in the affirmative adding that numbers used were based on historical three year averages and inflated by three percent by year, a conservative number. Mayor Tait responded the number was inflated conservatively but did not mean the number was conservative with Mr. Emery adding that the number was based on the last three years of convention center activity. Mayor Tait believed the numbers were actually based on a massive increase in attendees and a massive increase in the ADR and then inflated by three percent. Ms. Moreno responded those numbers could not be characterized as massive, indicating on a chart where the LPMR payment was included, and if there was additional revenues those LPMR payments would increase and without an expansion, would decrease because there would be fewer revenues to measure against to pay the debt service. A savings on the general fund would be realized because the debt would only be $2.9 million because the city would only pay for the CarPark expansion conservatively estimated as a stand -alone project versus the $14.9 million the city would pay. In addition, the city would still have to pay at least $6 million for marketing and promotion which was at the annual funding level, and today would reflect $7.6 million. The slide stated in that year, 2015, the city would be $7.2 million better off and over the life of this project would be $323 million better off by expanding. The mid -point was used to ensure this was not an overly rosy picture and even that reflected $117 million increase over the life of the project. Mr. Morton remarked there was an attendance slide on which VCB had provided historical research. This chart reflected 1995 era and at that point what the Convention Center realized was a potential decline due to lack of space and lack of meeting space and Council at that time decided to expand to maintain and grow that business which was exactly what happened. In 2009/10, those figures stayed the same because they were booked prior to the recession which hit in 2010/11 and those numbers were now increasing. Additionally, he pointed to the Mayor's slide that addressed other expansions and other destinations which Mr. Morton pointed out, was not exhibit hall expansion. Anaheim's project would add flexible space, 200,000 square feet of exhibit space to grow with the large events, adding 170,000 square feet of meeting space that would allow ACC to attract events and also offer multiple ballroom usage and the opportunity for the Convention Center to host concurrent events. This expansion, he reiterated was not solely providing exhibit space but was providing exhibit, meeting, and ballroom space. Mayor Tait responded his slide addressed room nights only because the TOT gained from room nights was the key revenue generator and the chart from Dr. Sanders on attendance referred to facilities that had major expansions and showed there was not a 50 percent increase in attendance and in some of the facilities, a drop in attendance occurred. Mr. Morton addressed the Mayor's statement there would be a $7 million general fund shortfall which did not consider the freed up money from the ATID. Ms. Moreno remarked in addition to that were the new sales tax City Council Minutes of March 11, 2014 Page 29 of 31 revenues and the recapture of lost revenues. Mayor Tait responded sales tax was minor relative to transient occupancy taxes, adding he would like additional time to understand the Crossroads report. Council Member Brandman thanked staff for clarifying all the questions raised during the hearing and for the thoroughness of their work on this project. Mayor Tait remarked it would be prudent to continue this item, to have a credible expert like Dr. Haywood Sanders offer his point of view on the expansion. Mayor Pro Tern Murray stated it was important to underscore that the presentation and updated report received on Friday was based on input from the Council, Mayor, stakeholders and residents who queried the city on a number of points to make sure all aspects were factored into the economic analysis and that staff had taken six months to validate this proposal before presenting it to Council. She added the total city benefit was a more complicated equation than just one element of the TOT and confirmed those numbers used were based on actual numbers averaged from the last three years plus a growth factor of three percent when Anaheim actually saw a six percent compound annual growth during those years. The missing figure, she remarked, was the $450 million in TID monies that the business community was contributing towards this expansion. She was also concerned about delaying the project any further as the cost of bonds could escalate and the city's benefit of $585 million for a 30 year investment was an extraordinary return she was comfortable approving. A benefit that was regional and statewide, with the county potentially receiving nearly $500,000 to $580,000 annually, while the state could benefit from $11.3 to $13.5 million. She believed the financials were sound and clear and called for the question. Mayor Tait stated he had moved to continue this item, asking for a second to that motion, with no second offered, the motion failed. After the Anaheim Public Financing Authority took action to approve its agenda item specific to this hearing, Council Member Kring moved to approve RESOLUTION NO. 2014 -046, A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ANAHEIM approving, authorizing and directing the execution of certain documents relating to the issuance of bonds by the Anaheim Public Financing Authority and other matters relating thereto; seconded by Council Member Eastman. Roll Call Vote: Ayes — 4: (Mayor Pro Tern Murray and Council Members: Eastman, Brandman and Kring). NOES — 1: Mayor Tait. Motion Carried. Council Member Eastman moved to approve a professional services agreement with STV Construction, Inc., in the amount of $8,573,562, to provide owners' representative and project/construction management services for the Anaheim Convention Center Expansion Project (Betterment VII), seconded by Council Member Kring. Roll Call Vote: Ayes — 4: (Mayor Pro Tern Murray and Council Members: Brandman, Eastman and Kring.) Noes — 1: Mayor Tait. Motion Carried. Council Member Eastman moved to determine that the proposal submitted by Turner Construction Company (Turner) represents the best value to the City, award and approve a contract, in substantial form, with Turner, in the amount of $155,000,000, for the design and construction of the Anaheim Convention Center Expansion Project (Betterment VII) at Car Park 1, waive any irregularities in any of the documents of the responsive, responsible, and qualified vendor deemed to offer the best value in this procurement process, authorize the Director of Public Works to execute any related documents and take the necessary actions to implement and administer the contract through completion, authorize the City Manager to execute the City Council Minutes of March 11, 2014 Page 30 of 31 stipend agreements, in a total amount of $50,000 each, for the two non - selected respondents, and authorize the Director of Finance to execute the Escrow Agreement pertaining to contract retentions in accordance with Public Contract Code Section 22300; seconded by Council Member Kring. Roll Call Vote: Ayes — 4: (Mayor Pro Tern Murray and Council Members: Brandman, Eastman and Kring.) Noes — 1: Mayor Tait. Motion Carried. Council Member Eastman moved to waive Council Policy 4.1 and approve a Professional Services Agreement with Rider Levett Bucknall, in an amount not to exceed $497,762, for the design -build consulting services for the Anaheim Convention Center Expansion project; seconded by Council Member Kring. Roll Call Vote: Ayes — 4: (Mayor Pro Tern Murray and Council Members: Brandman, Eastman and Kring.) Noes — 1: Mayor Tait. Motion Carried. REPORT ON CLOSED SESSION ACTIONS Michael Houston, City Attorney, reported the City Council authorized the City Attorney to execute an amicus curiae brief being prepared by the California County Counsel Association in the Case of Orange Citizens for Parks and Recreation v. City of Orange. (Vote: 5 -0). COUNCIL COMMUNICATIONS Mayor Pro Tern Murray was appreciative of the recognition Dr. Elizabeth Novack received and announced the following upcoming events: a call for volunteers KABOOM! Build Day at John Marshall Park on March 22 and the 13 MEIU Adoption Committee donation collection for soldier welcome home bags. She urged the residents to visit the city's website for information on water conservation, remarking it was time to conserve and make serious lifestyle changes. Council Member Kring congratulated the Anaheim Police Department on their 11 % drop in violent crime in 2013, reflective of a significant drop in gang violence and Chief Quezada's community engagement activities. She urged the community to attend the Rotary Club's 5th Annual Easter Egg Hunt on April 5 at Ronald Reagan Park and discussed the From the Warfront to the Homefront Foundation, an organization committed to honoring veterans and families, creating a number of events, best known for Candlelight Memorial on May 18 honoring men and women who gave their lives for freedom. Ms. Kring further requested staff bring forward for Council approval the City's participation in the Candlelight Memorial event to honor veterans on the third Sunday in May. Council Member Eastman spoke of her attendance at the VFW Post 3173 celebration of community recognition and awards banquet, and highlighted the extraordinary people in the community being recognized. She also requested Steve Salicos and James Mc Duffie, who were recognized at the banquet as the police and fire officers of the year, be honored at a future City Council meeting. Mayor Tait spoke of his attendance at the VFW Post 3173 banquet and Opening Day for East and West Anaheim Little League. He requested a review of the City's contract with Sloat Higgins Jensen & Associates, the city's state legislative advocate to be placed on the next agenda and an update on the ARC project within the next month. City Council Minutes of March 11, 2014 Page 31 of 31 ADJOURNMENT: With no other business to conduct, Mayor Tait adjourned the March 11, 2014 council meeting at 9:49 P.M. R pe ully submitted, Linda N. Andal, CIVIC City Clerk