HomeMy WebLinkAbout2004-04-01 e-packet Please note change of location.
SPECIAL JOINI' MEETING
CITY COUNCIL
and
CONFERENCE CENTER AUTHOR/TY
OF THE
CITY OF SOUTH SAN FRANCISCO
P.O. Box 7l ] (City HalT, 400 Grand Avenue)
South San Francisco, California 94083
Meeting to be held at:
SOUTH SAN FRANCISCO
CONFERENCE CENTER
255 SOUTH AIRPORT BOULEVARD
THURSDAY, APRIL 1,2004
5:30 P.M.
NOTICE IS HEREBY GIVEN, pursuant to Section 54956 of the Government Code of the
State of California, the City Council of the City of South San Francisco will hold a Special Joint
Meeting with the Conference Center Authority on Thursday, the 1 ST day of April 2004, at 5:30 p.m.,
in the South San Francisco Conference Center, 255 South Airport Boulevard, South San Francisco,
California.
Purpose of the meeting:
1. Call to Order
2. Roll Call
o
Public Comments -- comments are limited to items on the Special Meeting
Agenda
Study Session: Discussion/Direction regarding South San Francisco
Convention Facility/Hotel Development Options
5. Adjournment
City ~lerk
Staff Report
AGENDA ITEM #4
DATE:
TO:
FROM:
SUBJECT:
April 1, 2004
Honorable Mayor and City Council
Jim Steele, Director of Finance
Sandra O'Toole, Conference Center Executive Director
Joint Study Session With Conference Center Authority on Convention
Center Options
A joint study session has been scheduled between the City Council and the Conference Center Authority
on April 1. At that meeting, staff will:
Brief the Council and the Authority on the options for financing a new convention center
and an adjacent hotel;
Discuss the risks and opportunities associated with these options;
Gauge Council and Authority support for proceeding with additional feasibility analysis.
By: Dire~~ce
For your information, attached is a copy of the PowerPoint presentation to be covered on April 1.
Approved:
Michael A. Wilsbn
City Manager
Attachment: Power Point Presentation for Study Session
Joint Presentation to
the South San Francisco City Council
and Conference Center Authority
April 1,2004
Goals for tonight:
Brief the City Council and Conference
Center Authority on options for
financing a new convention center and
adjacent hotel;
Discuss the risks and opportunities;
Gauge support for proceeding with
additional feasibility analysis.
Discussion Points
Existing Conference Center site
update
i1.
Oyster Point Site update
III. Why an anchor convention hotel is
important for convention center
success
IV. Financing options for constructing/
operating a convention center hotel
Preliminary legal and financial
indicators suggest project could be
feasible
VI. Financing steps underway
VII. Next steps, if support exists for
proceeding
VIII.
Major Uncertainties
lEI
Existing Conference Center Site
Update
Al
Any expansion of the existing facility
would require additional land beyond
that owned by the City of South San
Francisco.
B. In 2003, Wyndham International,
owner of both the Holiday Inn and the
Ramada Inn, put the two properties
up for sale.
Existing Site Update
C. The Holiday Inn was purchased in
late 2003 by the owner of the Four
Points by Sheraton. The new owner
has immediate
improvements
updates.
plans for
and other
capital
aesthetic
Existing Site Update
DI
The
early
Ramada
2004
Night Inns.
Inn was purchased in
by the owner of Good
It appears the new owner
will continue to operate the property
as a hotel.
I1.
Update on Oyster Point Site
A. The site at Oyster Point has been
identified as a favorable location for
a new convention center
approximately
leaseable
200,000 sq.
90,000 sq. ft.
with
of
space (approximately
ft. in its entirety). The
site is adjacent to a site entitled for
hotel development and is large
enough to accommodate a facility of
this size.
Oyster Point Site
B. The site
South
is owned by the
San Francisco,
managed/operated under
of a Joint Powers
City of
and is
the terms
Agreement
between the City and the San Mateo
County Harbor District.
That JPA agreement expires in 2026.
Oyster Point Site
C. Some of the land where the
convention center would be sited is
sub-leased to King Ventures by the
Harbor District.
It appears there are
development at this time.
no plans for
Oyster Point Site
D. The Raiser Organization negotiated a
development
the hotel
agreement to
site. The
develop
Raiser
Organization worked with developer
Dalton Smith to plan and construct a
332-room Hilton Hotel.
The development agreement has expired;
The Harbor District has not renewed it.
III.
Anchor hotel is a key to
convention center success
A. Meeting planners generally require a
high-quality, full-service hotel to
house their event attendees.
B. The majority of the Conference
Center's clients prefer hotel facilities
adjacent to the Center
this eliminates the need to transport
attendees between the hotel and meeting
facilities.
Anchor hotel
Gl
A headquarters
necessary
accommodate
events that
to
the
could
hotel
would be
adequately
hotel needs of
be attracted to a
new, larger center.
IV. Financing Options for a
Convention Center Hotel
A. Traditional, private financing
and ownership
The private hotel market has dried up
since 2000,
Financing/Ownership Options
B. Private financing with more traditional
city involvement
Example: investing tax increment
revenues from the City's Redevelopment
Agency (RDA):
1. RDA financing of hotel infrastructure
!roads, sewers, sidewalks, traffic
,mprovements, landscaping).
Financing/Ownership Options
2. RDA financing of a portion of the hotel
that can be thought of as either public
space or as part of the new Convention
Center:
a) Parking structure
b) Joint lobby/atrium shared between hotel
and Convention Center
c) Adjacent marina recreation improvements
that could attract a hotel
d) Joint hotel/convention center restaurant,
Financing/Ownership Options
C. Public investment and ownership by the
City.
City could earn all potential hotel
surpluses for re-investment in convention
center or in other community
needs/assets (parks, libraries, etc.),
but
would carry all risks.
Risks from Public Ownership
Hotel revenue could be insufficient to
meet all project debt service payments
on bonds;
2. No firewall between City and bond
repayment: City's General Fund would
be on the line for making up any debt
service deficiencies if revenues fall
short.
Risks from Public Ownership
3. Public Sector not experienced in hotel
operations.
Financing/Ownership Options
D. Public investment and ownership through
a separate non-profit corporation tied to
the City.
1. A non-profit corporation could be set up to
be eligible to sell tax exempt debt if its
purpose is to "relieve the burdens of
government"
Example: a non-profit set up to facilitate
development of the marina area.
20
Non-Profit Ownership Option
2. Non-profit could be controlled by City
(through the governance structure of its
charter)
Non-profit would earn all potential surpluses from
the hotel for re-investment in convention center
and/or other community needs/assets (parks,
libraries, etc.).
2!
Non-Profit Ownership Option
3. City would have to provide some form of
tax revenues to back the financing, but
those tax revenues could be capped and
isolated from the City's general tax flows,
insulating/protecting basic city services:
a) Dedication of Transient Occupancy Tax
(TOT) from the new hotel;
b) Dedication of a portion of the tax increment
generated by the Redevelopment Agency
Non-Profit Ownership Option
4. City would likely oversee the hotel
operation by hiring a hotel management
company to run day-to-day operations.
Non-Profit Ownership Option
Because the City's General Fund would
be insulated under a non-profit ownership
structure, staff believes this option makes
the most sense, if the project moves
forward.
Financing/Ownership Options
Under a City or non-profit financing model, the
bond market would be the ultimate judge of
the project's feasibility.
to sell the bonds, objective market and economic
analyses would need to demonstrate that the hotel,
with the dedicated, capped City revenue stream,
would be sufficient risk to cover the bond debt
service.
25
V. Preliminary legal and financial
indicators suggest project could be
feasible
A. Bond counsel (Orrick, Herrington &
Sutcliffe) has indicated they can structure
a financing using a non-profit that could
insulate the City, and which would pass
IRS requirements for tax-exempt bonds.
B. City Attorney's Office has opined that,
while there are some legal risks, they
believe such a structure is reasonable.
P
minary financial models suggest the
ect could support a bond financing,
with additional City revenues.
C. Given preliminary cost estimates, model
suggests if hotel revenue were to grow
by an average of at least 5% a year, a
relatively modest investment of
Redevelopment tax increment could be
enough to make the project marketable
to the bond markets.
VI.
Financing Steps Underway
City Council/Redevelopment Agency
Board have approved steps to:
Incorporate the Oyster Point Marina into the
City's Redevelopment Agency;
Merge three of the City's four RDA project areas
fiscally (Downtown, Shearwater, Gateway),
allowing any of those project areas to contribute
tax increment to the new marina area.
Financing Steps Underway
Both of these steps will allow for
redevelopment dollars to flow into the
marina/landfill area. Uses of those funds
could support a number of priorities.
Examples include:
a new Convention Center/hotel;
other marina improvements to attract
retail/dining, etc.;
City share of ferry terminal
construction.
Use of Redevelopment Dollars....
If Redevelopment dollars are used,
they would mostly flow from other RDA
project areas, as the hotel/convention
center project will not generate much
new tax increment by itself,
~0
Financing Steps Underway
B. An independent financial advisory firm
with experience in hotel/convention
center financings (Public Financial
~anagement) has been retained.
VII. If Support Exists, Staff
Recommends the Next Steps:
A. Obtain an independent, updated market
and economic analysis of convention
center hotel
1. Does sufficient demand exist for a new
convention center and adjoining hotel?
2. How large should the hotel and convention
center be/what features should it have?
If Support Exists, Next Steps:
B. Use the results of the market analysis to
prepare more refined construction
drawings in order to obtain an updated
cost estimate for a hotel/convention
center.
If Support Exists, Next Steps:
C. Once cost estimates are in place, run
bond sizing models to see if sufficient
revenue can be generated from the
project to pay for debt service
requirements.
Cost for next steps is estimated to be
approximately $200,000
Funds would come from Conference Center
reserves.
If the following three factors come
together, the project would be
feasible:
EIB
market analysis of demand and revenue
potential
will determine .....
sizing and construction costs
which will have to be modeled for
bond financing requirements
which then gets compared back to expected
project revenues and how much
Redevelopment tax increment the City can
afford to invest.
VIII.
Major uncertainties:
Landfill cleanup costs
Cleaning up/mitigating old landfills can
potentially uncover unforeseen
environmental problems, driving up
costs.
Major uncertainties:
Future viability of Redevelopment Funds:
Vulnerability to State Budget raids may inhibit
City investment in the project
Governor has proposed a permanent annual
shift of $1.0 million away from RDA to
meet school funding requirements
of State;
State LAO has proposed an even
larger shift of $2.3 million
~?
Discussion