Minutes 04-15-04MINUTES OF THE COMMUNITY REDEVELOPMENT AGENCY WORKSHOP
HELD IN THE LIBRARY PROGRAM ROOM, BOYNTON BEACH, FLORIDA
ON THURSDAY, APRIL 15, 2004 AT 6:30 P.M.
Present:
Jeanne Heavilin, Chairperson
James Barretta
Larry Finkelstein
Don Fenton
Douglas Hutchinson, CRA Director
Absent:
Henderson Tillman, Vice Chair
Alexander DeMarco
Charlie Fisher
I. Call to Order
Chairperson Heavilin called the workshop meeting to order at 6:33 p.m. The
Recording Secretary called the roll and declared a quorum was present.
II. Workshop
A. Cash Flows, Budgets and Financial Projections for Board Direction
Openinq Remarks
Mr. Hutchinson explained that this was is not a budget workshop, but actually a
workshop to provide staff with direction on what the Board would like to include in the
budget and the level of spending that the Board wants to see. First reviewed were
the TIF projections on the projects that were included in the original agenda packet.
For the upcoming year (2004/2005) the following figures have been projected:
· Merano Bay--the projection is conservative at $6.6 million, which is 60% of
what the units sold for.
Tuscany for the current year (2003/2004) came in at $24 million. They have
converted to condominiums and even with the homestead exemptions, the unit
prices are substantially higher. The projections for 2004/2005 are $6 million.
Chairperson Heavilin inquired if the projections showed the property being taxed as
commercial versus residential units and Mr. Hutchinson stated that some of this
shows in the projections by going up $6 million. He pointed out that there is another
major building that was not occupied, and he feels that $6 million is conservative.
Meeting Minutes
Community Redevelopment Agency Workshop
Boynton Beach, Florida
April 15, 2004
Villa Del Sol - The $2 million in the projections is from the Tax Appraiser's
Office. There were two buildings not on the tax rolls yet, but will be included in
this coming year (2004/2005).
Industrial/Commercial - Last year there was almost $4 million and projections
for next year are at $2 million.
A valuation increase of 8% has also been projected for next year. Originally it
was forecasted at 11%, but the increase last year was actually 14%. Mr.
Hutchinson used a conservative 8%. The Tax Appraiser has the increase
between 11% to 12%.
Mr. Hutchinson anticipates that the TIF should be reliable based upon last year's
figures. He did not anticipate as great an increase as last year.
The following are the projections for year 2 (2005/2006):
Southern Builders Coastal Project--a portion of the project will be coming on
line during that period and should be at $2.5 million.
The Harbors - Mr. Hutchinson included this project in year two to be
conservative. He used a conservative figure of $12 million, compared to their
sales figures.
· Kensington Place - Even though this may be done in
Hutchinson only included it in year two. The project is
landscaping is being put in. A conservative figure is $2 million.
The following are projections for year 3 (2006/2007):
· Southern Builders come in at $10 million.
· The remainder of the Coastal Bay Project is projected at $2.5 million.
· The Marina Project shows up for the first time partially at $10 million.
· Industrial/Commercial is projected at $2 million
The following are projections for year 4 (2007/2008):
year one, Mr.
going up and
The remainder of the Marina Village should be on line. The project sold out for
the residential only at $98 million. Factoring in discounts and homestead
exemptions, Mr. Hutchinson projected this to be at $75 million. This does not
include any retail or restaurants. He feels that this figure is very conservative.
Coastline Office Building is four years away. $2.5 million is projected.
Meeting Minutes
Community Redevelopment Agency Workshop
Boynton Beach, Florida
April 15, 2004
Blue Lagoon has closed on the property and is also four years away. The
partial completion is projected at $10 million. Mr. Hutchinson thinks that this
could set a record and become a $110 million to $120 million project. In the
5th
year, he projected the project at an additional $65 million.
The developer will be at the CRA Board meeting for site plan approval in June if
everything goes according to plan. They are anticipating groundbreaking around this
time next year.
· MLK Village - $5 million. The area is being assembled and there should be
development around the 4th and 5th year.
· $2 million for Industrial/Commercial.
Projections for year five are as follows:
· The Arches (or whatever project comes to this area) is projected at $10
million.
· Coastline Office Building first phase should be completed and is projected to
produce an additional $7.5 million.
· Heart of Boynton has an additional $5 million projected for a total investment
of $10 million. Mr. Hutchinson feels that this is a very conservative figure.
· Industrial/Commercial- $1 million.
None of the big projects have been pushed up and it is anticipated that they will
come on line slowly. With regard to the TIF projects, for years two, three, four and
five, Mr. Hutchinson projected 4%, even though the Tax Assessor's Office is two to
three times this figure. He pointed out that this year they came within 1% of the
projections and did receive more money than anticipated.
Chairperson Heavilin questioned why Mr. Hutchinson used 4% when the Tax
Assessor is using around 11% per year. He was not sure that there would be double-
digit appreciation within the CRA every year. It is possible, but he felt that they could
sustain at least a 4% increase each year to keep up with inflation. He pointed out
that the bonding that they do will be based upon this year's income and he wanted to
make sure that the figures were not overly inflated. The figures can always be
adjusted if necessary. Tax rates should remain pretty stable.
Chairperson Heavilin noted that the amount of the current TIF increment stated
$115,738,078 and asked if this was correct. Mr. Hutchinson stated that this was a
mistake and will be corrected.
Meeting Minutes
Community Redevelopment Agency Workshop
Boynton Beach, Florida
April 15, 2004
Mr. Hutchinson reported that if the CRA decides to go with short term borrowing, they
could borrow between $6.1 million and $7.1 million with a five-year term. Mr. Fenton
inquired if this was for obtaining a line of credit with a bank and was informed it was.
Mr. Finkelstein asked what the rate of interest was based upon and Ms. Turner stated
it was at 3.8% with a five-year term.
Mr. Hutchinson noted that if they borrow with a credit enhancement from the City they
could borrow $6.975 million, which is actually 41% of the CRA's bonding capacity.
This figure is based upon 20 years amortization. If they had to borrow without the
credit enhancement of the City, they are at 78% of what they could borrow. These
are examples and Mr. Hutchinson pointed out that they have a greater capacity to
obtain credit enhancement and to do long term bonds.
Mr. Fenton assumed that the bonds would be rated AAA because of the City's
endorsement at a 1~/~% spread. Mr. Finkelstein pointed out that if the CRA went with
the 1~/2% spread, this increases the debt service by over $600,000. Mr. Hutchinson
said that it would be higher and these figures need to be clarified. He stated that Ms.
Turner would be reviewing this during her presentation.
Mr. Fenton did not think it was feasible to establish a variable line of credit now
because interest rates have gone up over 20 to 30 basis points in the last two weeks.
He would like to see the figures at 15 years instead of 20 years because they would
be paying less interest. Within five years, one-third of the debt would be paid off and
they could refinance and obtain more money. Mr. Finkelstein pointed out that they
need to make certain that they do not fall into a prepayment penalty that happened
previously. He also thought that they could go with a fixed rate over a 15-year period.
Mr. Hutchinson explained that the costs for the CRA projects could be adjusted and
are not actually known. He next reviewed how he arrived at the estimates for capital
projects as follows:
Boynton Beach Boulevard Extension is through the phasing that has
been approved. This includes permitting and design of the Promenade
and Riverwalk and the underground and construction of Boynton Beach
Boulevard Extension. The total costs could be $5.698 million
$1,000,000 for the Old High School. Renovation costs will be between
$3.8 million and $5 million. They need to have 20% to 25% to match
grant underwriting in order to finish the project.
MLK - The assessed value is $1.28 million and the properties are selling
at 2 Y2 to 3 times assessed value. If that were the case, it would make this
project go to $3.2 million. Mr. Hutchinson estimates costs for this project
at $800,000; $300,000 plus in fees, in addition to relocation costs. He
estimates the total cost for this project could be $4 million.
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Meeting Minutes
Community Redevelopment Agency Workshop
Boynton Beach, Florida
April 15, 2004
Parking includes the parking lot at Federal Highway and Ocean Avenue
and Boynton Beach Boulevard. Projected costs of this project are $1.75
million. These funds will be used to secure up to 145 public spaces,
depending upon the design and to reserve the right for 400 spaces in a
parking garage. The $1.75 million is $1 million less than merely acquiring
the property that the church is on. This would be a finished surface lot
with the right to go up for additional spaces as needed.
Mr. Hutchinson pointed out that he only projected out to three years for the known
projects. He did not speculate on the costs for the Museum and Boynton Beach
Boulevard extension. He needed direction on how the Board wanted to proceed on
spending money. He pointed out that after three years the CRA would have
additional bonding capacity of $17 million for other projects. If the CRA did not
receive credit enhancement, this figure would drop to approximately $11 million. The
figures presented show the Board how the picture looks with known factors.
Mr. Finkelstein asked if the CRA wanted to keep $1 million in year 3 available for the
direct incentive loan for the Arches. Mr. Hutchinson noted that this was carried
forward in year 3 and 4. Mr. Hutchinson stated that the signed incentive contract
would still be in effect at that time and that is why he included it.
Presentation by Julie Turner - Capital Funding Options
Mr. Hutchinson introduced Ms. Julie A. Turner, Principal of RBC Dain Rauscher to
present a PowerPoint presentation on Capital Funding Options for the CRA.
Ms. Turner stated that her presentation was based upon 20 years amortization. A
copy of the presentation is on file in the City Clerk's Office. Mr. Hutchinson added
that the short-term borrowing was at 5 years. Ms. Turner stated that the short term
could be stretched to 7 years for more flexibility.
Salient points of the presentation were -
Short Term Financing:
v' Provides the lowest interest costs, but would also result in lower interest
earnings on the cash because the cash is being spent immediately.
v' Less cash on hand and less cash flow flexibility.
," Less capacity for additional projects in a 5-year period.
," Future interest rate risk and may need to borrow long term for future projects
when rates are higher.
Long Term Financing:
Higher cumulative interest costs with higher interest earnings on cash.
More cash on hand and greater cash flow flexibility.
Meeting Minutes
Community Redevelopment Agency Workshop
Boynton Beach, Florida
April 15, 2004
Larger capacity for additional projects than in a 5-year period.
Current Iow interest rates would be locked in. Cash could be saved for future
additional projects.
Mr. Hutchinson pointed out that he looked at three years of projects and he is short
on funding for some. He felt it was important to get the right amount of money to get
the projects done.
Four financing options were looked at:
Cash only
Short-term financing through bank line of credit.
Long-term AAA-rated, insured debt financing in FY 2004/2004 (with City
pledge).
Long-term non-rated debt financing in FY 2004/2005 (without City
pledge). This option would have the highest cost.
The proposal assumed that the CRA wanted to assume a target fund balance of 20%
of prior year TIF revenues. Chairperson Heavilin thought that at one time they set an
amount for the reserves. Mr. Finkelstein thought that they agreed that they needed to
have a reserve, but no amount was ever set. He asked Ms. Turner if 20% was the
norm for a CRA. Ms. Turner noted that most municipal governments maintain at
least 10%, but those municipalities have a greater variety of revenues, which are
considered more stable than tax increment revenues. Ms. Turner noted that the CRA
revenues have fluctuated dramatically and were negative 22% in two years.
Mr. Hutchinson explained that the figures were negative because the County pulled
tax entities out of the TIF. However, there are no more tax entitles that would be
pulled out of the TIF. He will discuss this at length with Ms. Turner and noted that
this occurrence would not repeat. Ms. Turner stated that lending markets are
extremely conservative and tax increment revenues are considered volatile and less
creditworthy revenues compared to sales or gas taxes, property taxes, etc.
Mr. Finkelstein said that they needed to look at the interest expense if they went with
bonds as opposed to remaining with cash. Ms. Turner pointed out that annual debt
service varies and the CRA could end up paying back $2 million a year. Mr.
Hutchinson noted that if they went short term, the CRA would have no funds to put
back, but if they went with bonds, they could take on larger projects because they
woul(~ have the money in hand. Mr. Finkelstein said that these are factors that they
need to look at. As noted, the cash projections in year 5 will have $3 million.
Mr. Hutchinson pointed out that these are merely scenarios, but they do provide
direction on how to proceed.
Ms. Turner also presented short-term financing using a bank line of credit as a
funding mechanism. If the CRA determined to go back to Bank of America, the CRA
Meeting Minutes
Community Redevelopment Agency Workshop
Boynton Beach, Florida
April 15, 2004
should inform the Bank that they want to refinance the current loan, but would also
like to borrow an additional amount of money. The CRA should ask the Bank to do
away with the pre-payment penalty and ask for today's interest rate. Mr. Hutchinson
noted that they have to maintain their reserve funding, but the CRA does not have
any additional surplus until the 5th year.
Mr. Finkelstein inquired if the line titled "reserve fund balance" was the actual fund
balance and was informed that it was. He would like to see a better spreading out of
the projects because he thinks they are going to need more money to complete what
they promised to accomplish.
If the City agreed to back up the pledge for the CRA, this would reduce the interest
rate for both short and long term financing. Ms. Turner explained that the projections
she presented did not show the quarterly fluctuations and the funds indicated for that
year may not always be available for a particular quarter. Mr. Hutchinson pointed out
that the reserve funds are high and the true surplus is unencumbered funds.
With regard to 20-year financing, this could be shortened or lengthened. At the end of
the third year, they would have gotten over the quarterly fluctuations and
accumulated enough revenue growth to provide additional financing capacity for
$15.4 million in projects.
Ms. Turner pointed out that if the CRA went with non-rated financing, the interest
costs would be much higher. Chairperson Heavilin inquired why the CRA would
consider this. Mr. Hutchinson responded that he has spoken to the City and the City
appears to be agreeable to provide credit enhancement, but if they do not, they need
to have other options. Ms. Turner stated that this would be the worst-case scenario.
Mr. Finkelstein noted that there is a lot of cash remaining when this kind of money is
borrowed over long term. Chairperson Heavilin suggested doing some type of
combination financing.
Mr. Finkelstein asked Ms. Turner if she could prepare a chart that would show the
diminishing returns of the higher interest rates, the borrowing costs and net cash. He
felt that this would help them decide which way to proceed. Ms. Turner stated that
she could provide this.
Ms. Turner concluded her presentation.
III. Other Items
Comments on Budget Projections
Mr. Finkelstein had the following comments: (1) he would like to see the costs of the
entire projects included in the figures all the way across so they could know how
much they need to borrow; and (2) the projections for the Heart of Boynton should be
moved up one year, because in this current year, they have not spent any money.
Meeting Minutes
Community Redevelopment Agency Workshop
Boynton Beach, Florida
April 15, 2004
Mr. Hutchinson recommended leaving $250,000. Mr. Finkelstein suggested leaving
the $250,000 in the current year and to put $2 million in 2004/2005 and the balance
in 2005/2006. Mr. Hutchinson recommended moving $2 million into those periods.
Mr. Hutchinson will follow through on this.
Chairperson Heavilin asked what the street improvements represented, and Mr.
Hutchinson stated that there were none. She questioned why this was a line item. Mr.
Hutchinson noted that staff needs to know how much they need to underwrite. All of
the $4 million for the Heart of Boynton is going out with nothing being recovered.
Mr. Finkelstein felt that the Board needed more details on the $1.75 million for the
CBD Parking Site. He pointed out that there has been no analysis done to determine
if these spaces are actually needed and it still needs to be determined if the parking
spaces should be spread throughout various areas within the CRA. He also felt that
this figure was too high and all they would be doing is purchasing rights to parking
spaces, as opposed to actually buying parking spaces. Mr. Hutchinson requested
direction on this, but noted that they still want to keep this on the tax rolls. Mr.
Finkelstein pointed out that the Board previously discussed that they did not want to
build a parking garage and Mr. Hutchinson was not clear that this had actually been
decided. Mr. Hutchinson noted that a parking study had been previously done, but it
is now obsolete and needs to be updated. Mr. Fenton felt that they should leave the
$1.75 million in the budget until it can be determined how they should proceed with
the parking.
Mr. Barretta inquired how the general public would know that a project includes public
parking spaces. Mr. Finkelstein responded that the public parking would be clearly
marked with signage.
Mr. Finkelstein questioned why $1 million has been allocated to the Old High School
since they do not know what the School is going to be used for. He was under the
impression that the costs for the Old High School were included in the City's bond
and that the City would be rehabilitating the building. Mr. Finkelstein offered as an
alternative considering contributing $50,000 a year towards the debt service of the
City's bonds to do the renovations. Mr. Fenton pointed out that it has not been
determined who would be in charge of operations of the School. Mr. Hutchinson said
that if they went with Mr. Finkelstein's suggestion, the $50,000 would be allocated to
the line item "Programs and Projects." Mr. Barretta felt that this Board should provide
some direction to the City on how the building could be best used. Mr. Finkelstein
thought that the City would be handling this.
Chairperson Heavilin pointed out that the City did ask the CRA to provide input and a
committee was formed for this purpose. Mr. Finkelstein noted that the CRA is
already funding many public projects and their money is tight. Mr. Hutchinson was
requested to remove the $1 million for the High School from the projections.
Meeting Minutes
Community Redevelopment Agency Workshop
Boynton Beach, Florida
April 15, 2004
Mr. Hutchinson asked how the Board wanted to handle the Boynton Beach
Boulevard Extension. Mr. Finkelstein recommended that Mr. Hutchinson speak with
Dennis Haynes to determine what a realistic time schedule would be for the three
phases. Mr. Hutchinson felt that this could be completed within three years.
Chairperson Heavilin pointed out that at the last Board meeting, the Board wanted to
do the entire project.
Mr. Fenton inquired if it would be beneficial to move the money immediately to SBA.
Mr. Finkelstein felt that they first needed to determine if this was the place for their
money. Mr. Hutchinson pointed out that this is something Ms. Turner would look at.
Mr. Finkelstein would like to have a market analysis done to see where the best place
would be for their money. He thought that this was being done on a quarterly basis.
Ms. Turner pointed out that 90% of the governments in Florida have their money in
the SBA because it is paying the highest return; however, this is subject to change.
Mr. Hutchinson asked if the Board wanted to consider allocating between $500,000
to $600,000 to acquire a building and renovate it for offices. The property that staff
has looked at would cost up to $500,000 and this would leave the remainder for
renovations. Chairperson Heaviiin felt that Mr. Hutchinson's estimates were
somewhat high. Mr. Finkelstein asked if the CRA staff would consider renting larger
office space. Mr. Finkelstein also recommended waiting until Ms. Turner comes back
with some figures on borrowing.
Ms. Turner recommended that the CRA's Controller make some phone calls in the
interim to local banks to determine what the interest rates are. Mr. Finkelstein
reiterated that this should be done on a quarterly basis.
IV. Adjournment
There being no further business the meeting properly adjourned at 8:00 p.m.
Respectfully submitted,
Barbara M. Madden
Recording Secretary
(April 16, 2004)