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Minutes 05-20-08 MINUTES OF THE COMMUNITY REDEVELOPMENT AGENCY SPECIAL MEETING HELD ON TUESDAY, MAY 20,2008, AT 6:00 P.M. IN CITY COMMISSION CHAMBERS, BOYNTON BEACH, FLORIDA PRESENT: Jerry Taylor, Chair Jose Rodriguez, Vice Chair Woodrow Hay Marlene Ross Ron Weiland Lisa Bright, Executive Director James Cherof, Board Attorney I. Call to Order Chair Taylor called the meeting to order at 6:00 p.m. II. Pledge of Allegiance to the Flag and Invocation Mr. Hay offered the invocation, followed by the Pledge of Allegiance to the Flag. III. Roll Call The Recording Secretary called the roll. A quorum was present. IV. Discussion and Ratification of Agreement for Sale and Purchase of Licenses held by Southern Entertainment Company of Florida, Inc. Jim Cherof, Board Attorney, read Resolution 200B-X by title only, noting the resolution number would be assigned at a later date. "RESOLUTION 2008-X A RESOLUTION OF THE BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY AUTHORIZING THE EXECUTIVE DIRECTOR TO EXECUTE AN AGREEMENT FOR PURCHASE AND SALE OF ASSETS: AUTHORIZING THE AGENCY BOARD CHAIRMAN AND EXECUTIVE DIRECTOR TO EXECUTE TRANSACTION COSING DOCUMENTS AND PROVIDING AN EFFECTIVE DATE." Chair Taylor noted two items required consideration: (1) the escrow closing which required all funds payable to the seller be held in escrow pending confirmation of the transfer or reissuance of the liquor license; and (2) a separate Escrow Agreement, which would be signed by the parties at closing. Special Meeting Minutes Community Redevelopment Agency Boynton Beach, Florida May 20,2008 The seller was requesting $50/000 be held in escrow, while the board believed $750/000 should be escrowed. Attorney Cherof noted the contract brought before the CRA at the last meeting made no provision for the escrowed funds. Therefore, on the closing date, $l.3M would have to be transferred from the CRA to the seller of the licenses without any assurance that subsequent to the c1osing, the actual license documents would be provided to the CRA. Language added to Section 4.04 of the document provided that $1.3M would be held in escrow to ensure the transaction was effectuated prior to the money being transferred to the seller. The escrow agent would distribute the funds to the seller once the documents were in the CRA's possession. As noted earlier, the seller's attorney offered to escrow $50/000 which was to be held until the liquor license was transferred. During the week, Attorney Cherof learned that the State of Florida had initiated an administrative proceeding to revoke the license and that technically, the license was not subject to transfer while the proceeding was pending. Attorney Cherof understood from the department and from the seller's attorney that they had been in discussions as well. It was likely the State would agree to some type of order that would effectuate the transfer of the license from the seller to the CRA. It would be necessary for the CRA to determine the amount of funds to be held in escrow and what would have to occur in order for the funds to be distributed. Chair Taylor noted the greatest value would be the purchase of the business license and the liquor license would be secondary. He would be agreeable to retaining $500/000 in escrow towards the liquor license. Lisa Bright, Executive Director, advised that research revealed the current market value for the liquor license was $100/000-$150/000. This information was received from four entities. The Board discussed the issues further and noted: · $300/000 should be held for the liquor license and the business should be purchased. · The liquor license was not restrictive to the entertainment club and could be used in any other establishment. · The CRA might be premature in considering the purchase of the business license prior to determining the amount to be escrowed. Attorney Cherof pointed out the pending State Administrative proceeding and the State Criminal proceeding impacted the transfer or non-transfer of the liquor license. Of the two licenses involved, one license was issued by the City and the other by the State. It 2 Special Meeting Minutes Community Redevelopment Agency Boynton Beach, Florida May 20, 2008 would be at the board's discretion to determine which license had the highest value. Attorney Cherof was informed the value of the liquor license was $130/000 and, as indicated by Ms. Bright, staff had obtained additional figures. Board discussion ensued. Highlights included: · The CRA would be overpaying $1.3M for two licenses while not having a hand in the value of the property. · The CRA would be providing incentives which would facilitate development of the entire area and would rid the City of an unwanted use. · There were thriving businesses surrounding the entertainment club that were successful. · Other developers had indicated they would not invest in the area while the club existed. . The developer could flip the parcel for more than $1.2M. Ms. Bright reviewed the Federal Highway Corridor Plan Update which amended the plan of May 15/ 2001. The goal of the amendment was to include areas bordering the Platinum Gold parcel located in planning area five. The plan indicated the current uses in the southern portion of planning area five appeared marginal, uncoordinated and in a state of decline. The poor appearance of the various facilities detracted from the area. The plan further indicated the entrances to the City played a pivotal role as the gateway to the City. As such, it was important the two entrances provided a good first impression. The basis for staff's recommendation to purchase the Platinum Gold license was to prevent businesses of this nature from returning to the City. The action would vastly improve the economic and social conditions of the area. The question was raised as to whether restrictions could be placed to prevent the developer from flipping the property for a profit. Attorney Cherof noted the CRA had no contractual relationship with the developer. The only contractual relationship he was aware of was between the seller of the business and the property and the developer. He was not aware of whether a contract had been signed or if a closing date had been established. If the CRA were to become engaged in a contractual relationship with the developer, the CRA could prevent the developer from flipping the property. The CRA might wish to consider some type of right of first refusal to acquire the property if the developer wished to flip it and receive credit for the funds provided by the CRA for this portion of the transaction. 3 Special Meeting Minutes Community Redevelopment Agency Boynton Beach, Florida May 20, 2008 Attorney Cherof noted in the event the CRA purchased the two licenses and the developer and the seller did not reach an agreement, the CRA would deal with the eventual seller provided a restrictive covenant was negotiated. Jim Knight, 740 Havana Drive, Boca Raton, believed the redevelopment was vital and critical to the gateway area. His company had signed the contract, provided the deposit and was scheduled to close on June 15th. He was in the process of completing the environmental and initial title work. The question was raised as to whether Mr. Knight would agree to the restrictions suggested by Attorney Cherof. Mr. Knight advised he would be willing to make a commitment not to resell the property and would assist in ridding the City of the nuisance business. As Mr. Knight did not own the property, he could not provide a deed restriction. Attorney Cherof noted the restrictive covenant was intended to provide that any future use of the property be treated as a conditional use approval. The seller was amenable to this language, but because the seller had the property under contract, the developer's consent to the language was required. The seller of the licenses was prepared to record a restrictive covenant but was requesting joinder with the developer. Mr. Knight indicated the language did not appear to be an issue; however he wanted the language reviewed by the attorneys. Additionally, if the CRA were to have the right of first refusal, he did not believe it would be an issue, if he were made whole, for the CRA money contributed to this portion of the transaction be used as a credit against that value. Ryan Aiello, Attorney for Southern Entertainment, noted there was a lien on both licenses in the approximate amount of $1.1M and not much more than $50/000 could be escrowed. In order for the licenses to be transferred, the lien would have to be satisfied. Chair Taylor noted he was prepared to hold $200/000 in escrow against the liquor license and proceed with the balance at closing. Motion Mr. Hay moved to put $250/000 in escrow and move ahead. Mr. Ryan noted the lienholder expected payment upon transfer of the licenses. Another issue was timing and as such, Mr. Ryan suggested postponing the escrow closing. Attorney Cherof was asked for his opinion as to the liens on the licenses. Attorney Cherof noted the liens had not been disclosed and it would take a few days to obtain the estoppel information. 4 Special Meeting Minutes Community Redevelopment Agency Boynton Beach, Florida May 20, 2008 Mr. Hay withdrew his motion. It was suggested a letter be obtained from the State indicating its willingness to relinquish the license upon the good faith efforts of the City to purchase the licenses. It was suggested all funds be held in escrow to be paid out by the escrow agent. Attorney Cherof suggested either deferring the closing date to establish all the payouts and reach agreement on who would be paid at the c1osing, or closing in escrow with a deadline and having the distribution made by the escrow agent. He believed it would be more prudent to delay the closing. Motion Vice Chair Rodriguez moved that the board escrow the entire amount and delay closing until it gets sorted, and then distribute accordingly. Mr. Hay seconded the motion that passed 4-1 (Mr. Weiland dissenting). Attorney Cherof noted it would be necessary to address the secondary issue, the restrictive covenant, and the manner in which it would address future uses of the property. This was a tripartite issue as it also involved the developer. As noted earlier, Mr. Knight could not record a restrictive covenant as he did not own the property. As such, Attorney Cherof believed it would be prudent for the CRA to have the current owner record the restrictive covenant as part of the c1osing, with the developer's consent to the language. Mr. Knight indicated he would agree to this if it were approved by his attorney. Attorney Cherof noted, in addition to the two clauses drafted by the CRA, the remaining details would be resolved by tomorrow. He recommended approving the resolution, noting the documents would be provided in final form to the board. Motion Vice Chair Rodriguez moved to approve the resolution. Mr. Hay seconded the motion that passed unanimously. Mr. Weiland noted that although he was not in favor of the agreement to purchase the property, he was in favor of the resolution which placed restrictions on the development of the property. 5 Special Meeting Minutes Community Redevelopment Agency Boynton Beach, Florida May 20, 2008 v. Adjournment There being no further business to discuss, the meeting properly adjourned at 6:38 p.m. ~5)j Stephanie D. Kahn Recording Secretary 052208 6