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APFA2014/03/11ANAHEIM PUBLIC FINANCING AUTHORITY REGULAR MEETING OF MARCH 11, 2014 PFA187 The Anaheim Public Financing Authority regular meeting was called to order at 5:40 P.M. for a joint public comment session with the Anaheim City Council. The meeting notice, agenda and related materials were duly posted on March 7, 2014. Present: Chairman Tom Tait and Authority Members: Jordan Brandman, Gail Eastman, Lucille Kring, and Kris Murray Staff Present: Interim City Manager Paul Emery, City Attorney Michael Houston, and Secretary Linda Andal ADDITIONS /DELETIONS TO THE AGENDA: None PUBLIC COMMENTS: No public comments made related to the Public Financing Authority agenda. CONSENT CALENDAR: At 6:29 P.M., Authority Member Kring moved to approve the Public Financing Authority consent calendar as presented, seconded by Authority Member Eastman. Roll Call Vote: Ayes — 5: (Chairman Tait and Authority Members: Brandman, Eastman, Kring and Murray). Noes — 0. Motion Carried. 8. Approve minutes of Public Financing Authority meeting of February 4, 2014. ANAHEIM CITY COUNCIL /PUBLIC FINANCING AUTHORITY JOINT PUBLIC HEARING: 9. A joint public hearing to approve the proposed financing of costs of certain 13137.1 improvements to the Anaheim Convention Center, including resolutions authorizing the 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 project /construction management services, a contract with Turner Construction Company for the design and construction, and a professional services agreement with Rider Levett Bucknall for design -build consulting services. Public Financing Authority Action: 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 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 Public Financing Agency Minutes of March 11, 2014 Page 2 of 18 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: would offer the ability to attract 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. Public Financing Agency Minutes of March 11, 2014 Page 3 of 18 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 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 Public Financing Agency Minutes of March 11, 2014 Page 4 of 18 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 the Authority'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 architects. He indicated that over the last two months staff finalized all of the negotiations and packaged this project for Council and the Authority'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 Public Financing Agency Minutes of March 11, 2014 Page 5 of 18 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 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 Public Financing Agency Minutes of March 11, 2014 Page 6 of 18 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. 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 Public Financing Agency Minutes of March 11, 2014 Page 7 of 18 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 the Authority 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 the Authority's approval of the issuance of bonds through the Anaheim Public Financing Authority, the project construction management services, and the issuance of bonds via the City Council along with the design /build contracts and consulting agreements. Chairman 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. Public Financing Agency Minutes of March 11, 2014 Page 8 of 18 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 the Authority 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 the Authority 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 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 /Authority, both in the public and private sector, and he supported Authority 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 the Authority 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 Public Financing Agency Minutes of March 11, 2014 Page 9 of 18 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/Authority 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 /Authority 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 /Authority 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 /Authority to vote unanimously to approve the expansion. 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 /Authority 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 Public Financing Agency Minutes of March 11, 2014 Page 10 of 18 transportation projects because they understood the benefit of promoting and enhancing the area as a whole. He encouraged Council /Authority 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 authority members. Chairman Tait commented that Mr. Fitzgerald was out of line in his comments asking that he remain civil when offering his perspective. Authority Member Kring and Vice Chair 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. 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 Public Financing Agency Minutes of March 11, 2014 Page 11 of 18 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 /Authority 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 Taps 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 /Authority 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. 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 Public Financing Agency Minutes of March 11, 2014 Page 12 of 18 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, Chairman Tait closed the public comment portion of the hearing. Authority 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. Vice Chair 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. Authority 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. Chairman 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 Public Financing Agency Minutes of March 11, 2014 Page 13 of 18 it equaled where the city was today and any new incremental revenue with 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 th 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 5 th 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 the Authority 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. Authority 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. Public Financing Agency Minutes of March 11, 2014 Page 14 of 18 Authority 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. Chairman 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 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 Chair 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. Chairman 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. Chairman 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. Chairman 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. Public Financing Agency Minutes of March 11, 2014 Page 15 of 18 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, Chairman Tait moved to continue this matter for one month to ensure clarity in the financial analysis of this project. Authority Member Brandman requested that staff address the Chair's concerns if there was no objection from Chairman Tait. Ms. Moreno remarked that before she addressed the analysis, she wanted to speak to the Chair's concern that the Crossroads report had just been received four days ago. She pointed out this report was an update to the analysis given to the Council in the July workshop, updated to address concerns that were raised by the Chair 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 Chair 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. Chairman 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. Chairman 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. Chairman 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 Chairman Tait, with Ms. Moreno responding it fell within the middle range of room rates used in the Crossroads report with Chairman 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 Chair'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 Public Financing Agency Minutes of March 11, 2014 Page 16 of 18 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. Chairman 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. Chairman 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 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. Chairman Tait stressed that he was not against expanding; rather the city should expand within their means. Chairman 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. Chairman 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. Chairman 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. Chairman 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. Public Financing Agency Minutes of March 11, 2014 Page 17 of 18 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 Chair'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. Chairman 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 Chair'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 revenues and the recapture of lost revenues. Chairman Tait responded sales tax was minor relative to transient occupancy taxes, adding he would like additional time to understand the Crossroads report. Authority Member Brandman thanked staff for clarifying all the questions raised during the hearing and for the thoroughness of their work on this project. Chairman 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. Vice Chair Murray stated it was important to underscore that the presentation and updated report received on Friday was based on input from the Authority, Chair, 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 Authority. 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. Public Financing Agency Minutes of March 11, 2014 Page 18 of 18 Chairman Tait stated he had moved to continue this item, asking for a second to that motion, with no second offered, the motion failed. Chairman Tait stated he had moved to continue this item, asking for a second to that motion, with no second offered. Authority Member Murray then moved to approve RESOLUTION NO 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 related thereto, seconded by Authority Member Kring. Authority Member Kring remarked it was time to listen to the professionals, the experts in the industry and the city's finance team and approve a project that would benefit the entire community. Roll Call Vote: Ayes — 4: (Authority Member Murray, Brandman, Eastman and Kring.) Noes — 1: Chairman Tait. Motion Carried. ADJOURNMENT: At 9:15, with no other business to conduct the March 11, 2014 Public Financing Authority meeting was adjourned. Re ully submitted, Linda N. Andal Secretary, Anaheim Public Financing Authority