PURPOSE

The purpose of this report is to provide information to the City Council and Agency Board to authorize the execution of: 1) a Cooperation Agreement between the Redevelopment Agency and the City of Burbank for the reimbursement of $1,366,775 to the Redevelopment Agency by the City from land sale proceeds; 2) transfer the MTA Grant of $632,000 to City Centre; and 3) make an appropriation from the Fiscal Year 02-03 Golden State unappropriated fund balance of $237,099 to complete Phase II of the Five Points Improvement Project.

BACKGROUND

On June 13, 2000, the City and the Redevelopment Agency entered into a Cooperation Agreement (Co-Op) authorizing the Agency to assist the City with Phase II and III of the Five Points Realignment Project.  The Agency and the City found that the design of the Five Points improvements would be of benefit to the Golden State Redevelopment Project Area, and that there was no other reasonable means of financing the City public improvements other than through Agency funding.

The total project costs were estimated at the time of the Co-Op to be $19,131,988 (this amount includes an estimated $3,363,869 for contingency).  Funding sources for the project included Development Impact Fees, State Transportation Improvement Program (STIP) grant funding, Burbank Water and Power Undergrounding funds, and funds from the Agency�s Golden State Redevelopment Project Area. The Agency�s Golden State contribution totaled $8,279,146,[1] inclusive of the following:

�        $170,020 for the design of the public improvements (Resolution No. 25,730);

�        Approximately $2,894,973 for the acquisition of the State Farm and Animal Hospital properties; and

�        $5,214,153 for Phase II and III (Resolution R-1976 and Resolution No. 25,771).

The Co-Op authorized the transfer of $5,214,153 in Agency funds to be used toward the City�s public improvements, specifically land acquisition of the remaining five properties needed for the project.[2]  The City Council approved a Budget Amendment accepting and appropriating the Agency's contribution to Fund 370 - the City's Capital Improvement Fund.  The transfers were made in July 2000 as follows:

•  $3,955,755 from account number 301.CD21A.70005.0000

• $1,258,398 from account number 301.CD22A.70999.1140

A total of $5,214,153 was transferred to fund 370 and appropriated in account number 370.CD21A.70005 (Five Points project account).  It is important to note that no other monies other than the $5.2 million in Agency funds were appropriated in the Five Points project account.  This account paid for acquisition, design, and construction related expenses for the Five Points project.

On February 13, 2001, the City and Agency entered into a Co-Op authorizing the transfer of Agency land (State Farm and Animal Hospital) to the City.  The properties were valued at $2,894,973.  The City had limited resources to pay the Agency, and will therefore transfer a $632,000 MTA Grant to the Agency for the properties.  The grant will be received for right-of-way acquisition and the construction of the Five Points Realignment Project.  The Co-Op states that when the grant funds are received by the City, the Financial Services Director will take the necessary steps to transfer the funds to the appropriate Agency budget.  Agency staff is working with MTA staff to finalize documentation necessary to receive the $632,000 grant.

Phase II, property acquisition, the completion of utility work, and the Five Points realignment improvements, is complete.  In addition, the property acquisition for Phase III, the widening of Burbank Boulevard Bridge, is also complete.  Phase III required the acquisition of 101 (Froelich), 107 (Pearce), 111 (Cleghorn), and 123 (Animal Hospital) West Burbank Boulevard.  The Froelich, Pearce, and Cleghorn properties were acquired via a Resolution of Necessity on September 5, 2000.  The Animal Hospital was acquired through a negotiated settlement in April 2000 (Resolution R-1966).  There are no remaining appropriations in the Five Points project account. 

The physical improvements to Burbank Boulevard bridge are expected to begin later this year.  Phase III � Burbank Boulevard Bridge widening � is fully funded by the grant; however, the funds are being advanced by Fund 127 � Development Impact Fees.  Funds have been appropriated to project account 127.CD33A.70005.0000.13557.

Several remnant parcels were created from the Five Points realignment project, including remnant property that is not necessary for the widening of the Burbank Boulevard bridge.  In May 2002, the City Council and Redevelopment Agency entered into a Cooperation Agreement for the exchange of Agency and City land in order to facilitate the construction of the Caltrans SR 134 Freeway ramp project, and to relocate and construct the Hollywood Way and Alameda distribution sub-stations.  The City transferred the Five Points remnants to the Agency, and the Agency transferred the 3-unit apartment building at 3510 West Alameda Avenue and the 14-unit apartment building at 3516 West Alameda Avenue required for the project.

The West Alameda properties have a combined square footage of 25,794 square feet and were valued at approximately $1,120,000.  The remnants from the Five Points project have a combined 44,435 square feet and were valued at approximately $1,741,920[3] (Co-Op approved in May 2002).  The City made the conveyance in order to reduce the Agency�s prior deficit incurred for acquiring the State Farm and Animal Hospital properties for the Five Points project, and to allow future development of the remnants if possible. 

As previously stated, the City will pay the Agency the $632,000 MTA Grant for the State Farm and Animal Hospital properties valued at $2,894,973, creating an Agency deficit of about $2,262,973 for the properties.  After deducting the value of the Five Points remnant property, conveyed from the City to the Agency (a $1,741,920 value), the Agency�s deficit for the acquisition of the two properties was reduced to approximately $521,053. 

After deducting the $632,000 MTA Grant, and the value of the remnant property conveyed to the Agency (a $1,741,920 value) as stated above, the total Agency contribution to the Five Points Realignment Project is reduced from $8,279,146 to $5,905,226.  Furthermore, the Agency has received $1,160,480 from MTA to reimburse construction management and construction costs, further reducing the total Agency contribution to the Five Points Realignment project to a net contribution of $4,850,600 summarized on the next page:

AGENCY CONTRIBUTION

            $8,279,146                TOTAL AGENCY CONTRIBUTION

Minus              $   632,000                MTA Grant

Minus              $1,741,920                Value of Remnant Property

Minus              $1,160,480                MTA Reimbursement

                        $4,850,600                NET AGENCY CONTRIBUTION                

DISCUSSION

In November 2000, the City of Burbank entered into a Purchase and Sale Agreement with Zelman Retail Partners, Inc. for the sale of 52,488 square feet of remnant property to be incorporated into the Costco parking lot.  The 52,488 square feet of remnant property was made up of 1) a portion of vacated Victory Boulevard (39,395 sf), 2) a portion of a vacated alley (253 sf), and 3) 12,840 sf from portions of land from the El Burrito, Chevron, and State Farm sites (Exhibit A).

Zelman purchased the remnant City property with the intent to assign the rights to the property to The Price Company.[4]  The City received the appraised value of $25 dollars a square foot for the property for a total of $1,366,775.  In December 2000, Costco took possession of the site. The Assignment and Assumption Agreement between Zelman and Costco Wholesale Corporation was executed in September 2001.

As stated earlier, at the time of the Co-Op Agreement between the Agency and City in June 2000 for the transfer of $5.2 million from the Agency to the City to fund the project, one of the findings made was that there was no other reasonable way of funding the project.  Since the Co-Op Agreement, the City has received $1,366,775 from the sale of remnant property to Zelman.  The remaining remnant parcels have been transferred to the Agency for reimbursement for the Agency�s contribution on the State Farm and Animal Hospital properties (Co-Op Agreement approved in May 2002); however, there still remains an Agency net contribution of $4,850,600 for the project.

REIMBURSEMENT CO-OP AGREEMENT

Staff recommends that the City reimburse the Redevelopment Agency the $1,366,775 received in land sale proceeds (from Zelman for Costco) to help off-set the remaining Agency net contribution of $4,850,600.  The recommended reimbursement will reduce the Agency�s net contribution to the project to $3,483,825.  The recommended reimbursement would as a general rule go to the Golden State Redevelopment Project Area, the project area that funded the Five Points realignment project.  However, staff is recommending that the reimbursement be used to offset deficits in the City Centre Redevelopment Project Area.  The Golden State Redevelopment Project Area is financially stable, and recently issued bonds to complete infrastructure improvements in and around the Project Area.  Golden State is not in need of the funds.  Golden State cannot directly assist City Centre, as Tax Increment funds cannot be transferred directly from one project area to another.  Agency staff is reviewing the feasibility of merging the Golden State, City Centre and South San Fernando Redevelopment Project Areas in order to pool resources, and use funds in the areas with the most need such as downtown; however, the timing of the proposed merger, if approved, is more than nine months out (approximate time frame to complete a project area merger). 

In this case, since the funds are currently in the City�s hands, the funds can be redirected to the City Centre Redevelopment Project Area either by a direct payment from the City to the City Centre, or by structuring the payment as a loan to the City Centre.  Because of the financial uncertainty within the City Centre, staff is recommending that the City contribute the funds to the City Centre Redevelopment Project Area rather than structure a loan which would further tax the ability of the City Centre to make debt service payments.

The City Centre Redevelopment Project Area, has often been operating at a deficit, at times having to borrow funds to pay its debt obligations.  Therefore, staff recommends the reimbursement funds go to the City Centre Redevelopment Project Area.  City Centre is expecting land sale proceeds for the Old Police Block site; however, the timing of those funds is several months away.  City Centre would be able to use the reimbursement funds immediately.  Therefore, the Redevelopment Agency recommends the City transfer the $1.366 million to the City Centre Project Area Fund which can use the funds immediately to repay ongoing debt obligations.  These reimbursement funds, along with the land sale proceeds expected from the Old Police Block and possibly the project area merger, will make the City Centre Project Area a much healthier fund.

MTA GRANT

To further assist the City Centre Project Area, Agency staff also recommends the $632,000 MTA grant be deposited to the City Centre Redevelopment Project Area fund instead of the Golden State Redevelopment Project Area fund � the Agency funding source for the Five Points Realignment Project.  In the Co-Op dated February 2001 allowing the transfer of the $632,000 MTA Grant from the City to the Agency, the Financial Services Director received authority to transfer the funds to the appropriate Agency account.  Staff recommends the Finance Director deposit the funds to the City Centre Capital Projects Fund (302.ND000.30004).  With these two funding sources (the $1.366 million from land sale proceeds, and the $632,000 MTA Grant), the City Centre Redevelopment Project Area will be in better financial shape, and avoid operating with a negative cash flow.

GOLDEN STATE APPROPRIATION

A final invoice for Phase II relating to aid-in-construction activities for water service was received in the amount of $237,099.  Since the project account paid for construction management and construction related expenses, there are no funds available in the project account.  However, as stated above, the Agency has received a reimbursement from MTA for those expenses.  The funds were deposited into Account No. 301.ND000.48010.1064.000000 (Golden State Revenue Account).

Staff recommends the City Council/Agency Board approve the budget amendment/appropriation of $237,099 from the Golden State Redevelopment Project Area to pay this invoice, and close out Phase II of the Five Points Realignment Project.  The appropriation would be made from Fiscal Year 02-03 Golden State unappropriated fund balance.

FISCAL IMPACT

The fiscal impact to the City by the Reimbursement Co-Op Agreement will be the transfer of $1,366,775 in land sale proceeds that came from both City-owned property (vacated Victory Boulevard), and from properties owned by the City but purchased with Agency funds.  The fiscal impact to the Agency will be a reduction in the Agency net contribution to the project, and also assistance to the City Centre Redevelopment Project Area.

Therefore, if approved, the General Capital Projects Fund Budget will be amended by transferring $1,366,775 in land sale proceeds from 370.CD12A.70005, to the City Centre Capital Projects Fund (302.ND000.30004).  In addition, the Finance Director will deposit the $632,000 MTA Grant to the City Centre Capital Projects Fund (302.ND000.30004).  Finally, the Golden State Capital Projects Fund Budget will be amended by appropriating $237,099 to the Golden State Capital Projects Fund account 301.CD21A.70999.1030.000000 (Temporary Capital Account � Water Control Facilities).

RECOMMENDATION

Staff recommends: 1) the City and Redevelopment Agency approve the Cooperation Agreement authorizing the City to reimburse the $1,366,775 received in land sale proceeds to the Redevelopment Agency (funds will be deposited in the City Centre Redevelopment Project Area Fund); 2) authorize the Financial Services Director to deposit the $632,000 MTA grant to the City Centre Redevelopment Project Area Fund; and 3) approve the budget amendment/appropriation of $237,099 out of the Golden State unappropriated fund balance to close out Phase II of the Five Points Project.

 EXHIBITS

A � Remnant property sold to Costco

B � Proposed Reimbursement Cooperation Agreement