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Minutes 08-17-10 Special MINUTES OF THE SPECIAL COMMUNITY REDEVELOPMENT AGENCY BOARD MEETING HELD ON TUESDAY, AUGUST 17, 2010 AT 6:30 PM IN THE CITY COMMISSION CHAMBERS CITY HALL, BOYNTON BEACH, FL PRESENT: Jose Rodriguez, Chair Marlene Ross, Vice Chair Woodrow Hay Steve Holzman William Orlove Lisa Bright, Executive Director James Cherot, Board Attorney I. Call to order - Chairman Jose Rodriguez Chair Rodriguez called the meeting to order at 7:12 p.m. Attorney Cherot requested that an item be added to cover the site development work on the Ocean Breeze West project and the contract with B&B that had been approved conditionally at a previous meeting tor his research on the issue ot compliance with procurement procedures. Attorney Cherot wanted to report the results ot his research and have a motion to either approve or disapprove the B&B contract unconditionally. Chair Rodriguez indicated it would be added as Item 3.A. Motion Mr. Orlove moved to add Item 3.A to the agenda regarding the contract with B&B and the Ocean Breeze development. Vice Chair Ross seconded the motion. The motion passed. II. Roll Call The Deputy City Clerk called the roll revealing all members were present. III. Review and approval of Lease for 710 N. Federal Highway (Holiday House) Meeting Minutes Community Redevelopment Agency Board Boynton Beach, FL August 17, 2010 Attorney Cherof disclosed a phone conference had been held to discuss the draft lease. A negotiated lease agreement was agreed upon. Three points were not agreed upon that are important issues. The annual escalation clause for payment of rent included a 5% annual increase over the term of the lease. Two alternatives suggested were any increases would be based on the Consumer Price Index (CPI) or link the rent based upon any increase in revenue for the CRA based upon CRA property tax values. The CPI is level if not negative at this time and would result in little, if any, rent for the benefit of the landlord. There is an anticipation that a revenue increase for the CRA would allow for a higher rent payment. Chair Rodriguez suggested the better approach would be using the revenue increase for the specific building rather than the entire CRA tax values. Lisa Bright, Executive Director of the CRA, replied it was a triple net lease so the property taxes on the unimproved portion is $22,000 a year. When improved the appraisal was anticipated to increase to $1.2 million. The discussion was that both parties would work to reduce the property taxes with the Property Tax Appraiser. The commercial lease requires the CRA would be responsible for the ad valorem property taxes. It would not be a normal practice to use Tax Increment Funding (TIF) monies to pay for real property taxes for a private property. Ms. Bright further clarified that the escalation costs were tied to the cost of financing any renovations with a 7% interest rate. The escalation would assist the owner in financing the renovation costs. Mr. Holzman inquired if the escalation of the rent could be pegged to escalation in the value of the property year-over-year. Ms. Bright disagreed and negotiations had ensued with the onus on the owner to justify the increase. With the declining real estate market, Ms. Bright felt the 5% escalation was too high. Arthur D'Almeida, 105 E. Palmetto Park Road, Boca Raton, recalled he had been instructed to keep the rental rate lower. He had started with a below market rental rate of $15.80 a square foot that had been included in a package deal to accommodate the budgetary problems. Mr. D'Almeida advised he would not recoup approximately $350,000 needed to renovate the building for six years assuming the 5% increase. There were 18 or 19 requested changes that he agreed to make and there was some flexibility in terms of the rental increase. He proposed a 5% increase for the first three years, 3% for the second three years and then revert to a cost-of-living increase for the final three years. Mr. Holzman felt the proposed increases were reasonable. Attorney Cherof advised there was no legal issue involved, it was purely a business point. Mr. Orlove confirmed the current rent for the extended six month lease was $3,700 2 Meeting Minutes Community Redevelopment Agency Board Boynton Beach, FL August 17, 2010 up from $3,300 for 1,625 square feet. There would be 3,400 square feet at the Holiday House site. Mr. Hay remained opposed to the project even though he was sensitive to the need for improvement on north Federal Highway in District II. However, in his view improving one building would not necessarily bring more private investment to the area. He was concerned with the huge financial investment by the CRA for new office space in light of the crowded conditions being endured by the Police Department staff. Mr. Hay contended it was inconsistent for the CRA staff to give up their retirements and build new office space for over $1 million that would not ultimately be owned by the CRA. He urged the Board to direct staff to redirect their efforts to improve several properties along the Federal Highway Corridor. The fayade grant program has not been fully utilized by the property owners. He maintained that putting the needs of staff before the needs of the citizens using the trolley system would be foolish. Mr. Hay preferred the monies that would be used to retrofit the interior of the new building, be divided among several businesses to improve their exteriors. He asserted the addition of a new building would only serve to make the other buildings appear more run down. There would also be the potential of driving a "social" wedge between the CRA staff and City staff. He would not support the project. Vice Chair Ross thanked Mr. D'Almeida for his diligence and patience. She remarked it was difficult to justify the dollars spent on one building and the prospect of helping several businesses with the same amount. There was not adequate facilities for the entire Police Department while nine CRA staff were getting elaborate work space. She speculated a new City Hall could include space for the CRA also in one building in the downtown area. Mr. Orlove concurred in part with Vice Chair Ross and Mr. Hay. He had questioned the viability of the project at the last meeting and had sought direction from the Legal Department on the advisability of getting into a situation like this. Attorney Cherof advised other governmental entitles did enter into leases for property to perform governmental functions and negotiate the points in the same manner as was being done. Mr. Orlove was not in favor of the proposed project. He did favor the Magnuson House, owned by the CRA as a new location for the office. Money would have to be expended to improve the building. The proposed project was not the proper way to redevelop the Federal Highway corridor in his view. The Ruth Jones Cottage, owned by the CRA, could be use to redevelop the CRA district. Mr. Holzman stressed the CRA funds cannot be used for City functions such as construction of a new Police Department or new City Hall. He emphasized the function of the CRA was not to own buildings that would come off the tax rolls. The Board and Commission continue to rationalize taking property taxes off the 3 Meeting Minutes Community Redevelopment Agency Board Boynton Beach. FL August 17. 2010 rolls. Eventually the CRA would be finished with redevelopment and ownership of properties would not be feasible. Mr. Holzman suggested the rent increase be related to the CPI to garner more support for the property. The building would remain empty if the CRA does not assist the owner. Mr. Holzman did not understand why the money suggested to make improvements had not been spent. The proposed project could act as a catalyst for other improvements. Chair Rodriguez was disappointed and apologized to Mr. D'Almeida that the project may not proceed. It would be a huge opportunity to develop the north end of Federal Highway. Assisting with redevelopment is the core of the CRA activities. Economic development does not start with having an office building, rather helping others redevelop their buildings, increasing the property values for additional TIF to support other projects. Mr. D'Almeida proposed taking the CPI calculation to the lending bank for their approval. Mr. Orlove would consider the proposal. He also wanted to explore what would be necessary to make the building a useable office site and re- evaluate the lease arrangement. He remained opposed to spending thousands of dollars to make office space for the staff to use. It appeared to him that $88,000 would be spent for all the interior work plus the cost to move the CRA staff and appropriate furnishings obtained to use a space that is being rented. Chair Rodriguez noted $50,000 had been spent for neighborhood parties and events while redevelopment is being discouraged and the tax base is not increased. Mr. D'Almeida pointed out he did not approach the CRA to become a tenant in the building. He had worked and spent money to attempt to partner with the City and did not intend to offend anyone. He respected the Board's comments and had followed whatever direction had been given. There was a benefit to both the City and the landlord; however, it did not appear the City was interested in the proposition. He would review the figures again. The proposal included a new building on Federal Highway with 50 parking spaces and a section that could be sublet to offset the rent. There was considerable expense for a project of this magnitude. Mr. Orlove recalled the Chair had brought the project to Mr. D'Almeida's attention. He reiterated his concern that the CRA would be investing in a privately owned building. Mr. Hay remained firmly opposed to the project and promoted giving the funds to five other businesses along the corridor for a face- lift. Mr. Holzman wanted to hold Mr. Hay to follow through with giving the money to five businesses for improvements. Chair Rodriguez commented the CRA had bought many properties in the Heart of Boynton for as much as $500,000 only to tear down the buildings and have vacant lots for the purpose of redevelopment. 4 Meeting Minutes Community Redevelopment Agency Board Boynton Beach, FL August 17, 2010 The CRA is suppose to help the landlords and tenants to make improvements and redevelop properties. Motion Mr. Hay moved to kill the project in terms of going any further and direct staff to put together a commercial fayade grant setting aside an amount of $200,000 to present back to the Board. Chair Rodriguez pointed out the actual budgeted amount was $125.000 and $200,000 had not been allocated to the project. Motion Mr. Orlove made a substitute motion to table the lease agreement pending any further discussion with Mr. D'Almeida. Mr. Holzman seconded the motion. Attorney Cherof clarified it would not be a substitute motion. The first motion had failed for lack of a second. The motion passed 4-1 (Mr. Hay dissenting). Attorney Cherof distributed an additional agenda item. III.A. Approval of contract between the CRA and B & B Underground Contracting for site development of Ocean Breeze West in the amount of $431,720.08. Attorney Cherof explained there had been a motion to approve subject to his review of the procurement process that had been used. There was originally a reference in the original Agenda Cover Sheet to the bid being the lowest, responsible bid as verified by Simons and White Engineering that initiated the review of the procurement issue. Staff subsequently advised it was an error to include the reference to Simons and White. The Company was not involved in the bid verification and did not determine that B&B Underground Contracting was the lowest bidder. The revised Agenda Cover Sheet reflected that REG Architects determined B&B Underground Contracting was the lowest, responsible bidder. Attorney Cherof's review of the procurement process revealed nothing substantive would interfere with the award of the bid. He did find some irregularities in the bidding processes, including the fact REG was able to sign a contract on behalf of the CRA with Simons and White that would be another issue. Attorney Cherof would work with staff on the procurement process and formalizing and finalizing bidding documents. There was room for improvement, 5 Meeting Minutes Community Redevelopment Agency Board Boynton Beach, FL August 17, 2010 but there was nothing in the award to B&B Underground Contracting that would prohibit the award of the contract. Motion Mr. Hay moved to approve. Mr. Orlove seconded the motion. The motion passed unanimously. Mr. Holzman disclosed he had been contacted by the owner of a building at the corner of MLK Boulevard and the railroad who wanted to sell the building to the CRA. He would provide that information to the Executive Director. IV. Adjournment There being no further business to come before the Board, Chair Rodriguez properly adjourned the meeting at 7:56 p.m. ""\ .. -. iJ'l \ C. .r'~ l' ;f!~-( d Lt. i-' (/ '1!Y(~- / udith A. Pyle, C~ . Deputy City Clerk 6