Loading...
HomeMy WebLinkAboutMinutes 1990-11-07 Mayor Richard A. Haffey Council: Jack Drago Gus Nicolopulos John R. Penna , iRoberta Cerri Teglia AGENDA ADJOURNED REGULAR MEETING CALL TO ORDER: (Cassette No. 1) ROLL CALL: Closed Session for personnel matters, labor relations, property negotiations and litigation. RECALL TO ORDER: Joint Meeting with the Conference Center Board on the Conference Center. MINUTES City Council Municipal Services Building Community Room November 7, 1990 00320 ACTION TAKEN ADJOURNED REGULAR MEETING 6:35 p.m. Mayor Haffey presiding. Council present: Council Absent: Drago, Nicolopulos, Penna, Teglia, and Haffey. None. Council adjourned to a Closed Session at 6:35 p.m. to discuss the items noticed. Mayor Haffey recalled the meeting to order at 7:02 p.m., all Council pre- sent, no action taken. Conference Center Boardmembers Present: Connor, Ercoli, Raine, Canziani, Chairman Hughes. Boardmembers Absent: None Mayor Haffey stated that Item 2 was of much importance, and if they did not get to Items 3 and 4, it was because they should spend the preponderance of time available this evening on Item 2. Conference Center Director Carl spoke in detail: on meetings held with discussion of how to attract attendees to conference centers; cities enjoy economic benefits associated with the meetings market, attributes and elements that make a con- ference center successful. Councilwoman/Boardmember Teglia spoke in depth on the historical review: business attitude that prevailed in City Hall in the decade of the 1980s; the conference center proposal entertained in May 1989 was readily received by City Hall, and the Council moved quickly to ask the 11/7/90 Page i AGENDA Joint Meeting - Continued. ACTION TAKEN citizens to pass a tax measure to make the concept a reality; proposition influencing the financing of future con- cepts in government services; public/private partnership concepts were explored; economic development and rede- velopment strategies were pursued to keep and enhance S.S.F. businesses; marketing the community plans for a tentative con- vention center; Price Club leasing City land; secondary access road was provided by extending Gateway Blvd. to join Airport Blvd. to S.F. Airport from Oyster Point Blvd.; City was willing to explore the merits of the hotel owners proposal in 1989 - that if actualized would substantially bolster existing hotel business and new hotels to be built and increase T.O.T., etc. Boardmember Connor related: hotel occu- pancy in the past 8 years; loss of trade shows because of a lack of conference center space; having been approached by Berkey's real estate agent to expand his hotel; this had produced an idea among hotel owners and Convention & Visitors Director of the need for a conference space to benefit all parties; the idea of a $2.50 surcharge for all rooms rented in S.S.F. to be diverted into a revenue stream, not only to lease but to reno- vate, furnish, maintain, market, and operate this conference center; he had presented the idea to Mayor Teglia, Councilman Addiego and the City Manager who agreed S.S.F. needed to become a destination point for conference and trade shows; in 1989-90 S.S.F. has approximately 2,118 hotel rooms with 71% occupancy which will yield $2.4 million in T.O.T. Councilwoman/Boardmember Teglia has found the idea appealing as Mayor and felt it would correct the blight on So. Airport Blvd.; location was great for the prop- osed use; and would provide a long sought after local generator of business that the council had identified as highly valuable for the community. 11/7/g0 Page 2 AGENDA ACTION TAKEN 2. Joint Meeting - Continued. She had next: named a Subcommittee of herself and Councilman Addiego to preli- minarily explore the issue; had met with all major hotel owners in the City to see if they endorsed the concept; they did and she selected Mr. Connor and Mr. Raine as their representatives to deal with City Hall on this issue; had met with all major restauranteurs in S.S.F. and had received their input; they had voiced cautious support and were a little bit concerned that the restaurant industry not be forgotten and be included from the beginning; they appointed Joe Ercoli, owner of the Leaning Tower, to represent their interests; had met with businesses for input; Finance Dept. had examined the proposal figures, Planning the site and location, Bldg. Dept. had examined the building, and the Attorney was to investigate the process to make this happen. She related the results of the investiga- tions: financial figures appeared to be reasonable and conservative; insignifi- cant parking was identified as a problem; the building was not significant because two other City buildings had been gutted and renovated; City Attorney identified necessity of an election to impose the $2.50 hotel tax; City Manager approached Roy Fulmer for assistance in dealing with the property representative; negotiations ranged from June to September; property owners further north on Gateway were approached by City Manager for additional parking to cover deficit on the actual site; the representative is holding the site pending formalization by Council; Subcommittee presented all information to the Council on 6/28/89 for a July agenda item, and the issue asked that the issue be placed on the next ballot - which was 11/89; text of measure; analysis of measure; that the site was always iden- tified; minutes of 9/13/89 authorized execution of a lease for the site; four sites were identified by citizens on Allerton, Ecles, Kauffman and Harbor had all been found to be lacking; interim lease approved unanimously by the 11/7/90 Page 3 AGENDA ACTION TAKEN 00922 2. Joint Meeting - Continued. Council; campaign literature for Measure C; 78.2% of the voters approved Measure C; numerous newspaper articles addressed the process, etc. Boardmember Raine reiterated background information and proceeded to elaborate on marketing and location being the primary thing. He spoke of the goals recommended by the Board, adopted by the Council and taken as a mission statement by the Board. He proceeded to highlight some of the areas in the marketing study: demand in the S.F.O. area and its growth despite a downturn in the economy; citywide groups average between 1,250-1,800 attendees that stay an average of 3.6 nights; group associations represent 15.6% of the market; social, military, educational, and fraternal organizations market repre- sentatives are 12% of the business; that the Visalia conference center was built in an area without hotels; Visalia was now building a Radisson Hotel adjacent to the center; convenience of a location in terms of time and travel was very impor- tant, etc. Mayor Haffey stated that Council had approved the hiring of Group 4 as the architectural firm for the purpose of performing a site analysis, and various architectural tasks. He stated that based on previous goals on marketing strategy and goals for the sector in general that the Board had recommended to the Council; the Council approved the plan to include a ballroom, banquet exhibit space and banquet space for 700- 850 people; in June the Board recommended to the Council to approve a concept including 14,000 sq. ft. of ballroom space, a junior ballroom of 5,000 sq. ft., also an additional 7,000 sq. ft. lobby which was a recognized additional cost that was felt to be very important in meeting the goals and marketing stra- tegy for the project. 11/7/90 Page 4 Joint Meeting - Continued. He described schemes discussed by the Board: possibility of actually con- necting this particular conference center to the two hotels directly adjacent; this was rejected because of the cost and not recommended to the Council. He stated that he had just received a request to postpone Item No. 3, however, at the beginning of the meeting he had indicated that they would probably not get to Item No. 3. He pointed out the design concepts discussed by the Board, and the ultimate one to be recommended to the Council and its artist rendering. He related the following: conference center was 35,000 sq. ft.; grand ballroom was subdividable into 10 rooms; that it could accommodate over 1,900 people in a lecture style; in a reception set 1,300-1,400 people; for banquets or class room settings it would accommodate over 900 people; junior ballroom was 3,000 sq. ft. and sub- dividable into two rooms; had capacity for 430 people in a lecture style; recep- tion for 300, banquettes 200; large con- ference room will be more of an executive suite for more intimate setting; large kitchen, administrative and public faci- lities in the atrium where the Director's Office will be; landscaping plan and field trips were taken to select plants. Boardmember Ercoli spoke of cost estima- tes: original projection for construction and site work for original building, and the 7,000 sq. ft. lobby was approximately $4.2 million; the Group 4 estimate for the option chosen by the Board for construction and site work for the building and the 7,000 sq. ft. lobby was $5.6 million; at the start the Board had approved the least expensive design option contingent on the budget sup- porting the cost; staff was to evaluate costs for areas of reduction; Board had approved a staff suggestion on 9/27/90 for an independent construction cost estimate and cost reduction review to be 11/7/90 Page 5 AGENDA ACTION TAKEN Joint Meeting - Continued. performed; a firm conducted the study in October; their projected reduction was lower than Group 4; Board had not had an opportunity to review the suggested cost reductions; looking at phasing for cost reductions; construction, site work, all furnishings, all design and other features will be paid for by the bond proceeds; total of which will determine annual debt service; projected debt ser- vice of $600,000 a year annually, which yields proceeds of $5.5 million; Board committed - that project revenues must pay for all project costs and no general fund money can be used. Vice Chairman Canziani gave an overview of the projected revenues and expenditures. Chairman Hughes spoke in detail of the project expenditures: that it must be operated as an enterprise fund and become a self sustaining entity which will effectively generate more transit occu- pancy taxes and other related income for the City; financial summary report will be expanded upon and the various types of management plans; fixed costs, such as salary and benefits to operate the cen- ter; the Board was reviewing all options available and their cost; that the TOT revenue would be increased without being a burden to the people, etc. Conference Center Director Carl stated that the Council had the dedication from the Board and their justifications for the project in what the City has to gain to move forward. She stated that there was a considerable amount of work yet to do which she had experience in doing, and proceeded to elaborate: the planing; careful administration of the facility; provided top notch service; to attract business, and keep repeat business coming back to the center; working with the hospitality industry; that location, location, location was the key issue; market efforts, etc. 11/7/90 Page 6 2. Joint Meeting - Continued. City Manager Armas stated that the larger economic development objective was to embark upon and ensure the well being of the community which the Council has heard for 18 months, and heard again tonight. He reiterated that the TOT was the third highest revenue the City received, and that this was an investment of those revenues which he thought critical to pursue. He asked that the Council reaf- firm their earlier expressed support, and he hoped that he could then bring the lease for the satellite parking forward. Mayor/Boardmember Haffey thanked his fe)low Boardmembers for their presen- tations and hard work, and opened it up to Council discussion. Councilman Penna stated that the presen- tations had been good, and he wanted to go on record in saying that it is a good thing for the community to go through with this type of a project. He stated that some of his questions had to do with the actual merits of the costs and the revenues generated from the pro- ject. He stated the following after doing quick calculations after the rapid fire presentations: revenues from interest in 1992 of $1,000,025,000; $500,000 depending upon the cost of the project; debt service in the area of $1,100,000 which only took in the area of $5.5 million; there were cost exclusions such as kitchen, audio visual, disposal of asbestos, furnishing other than win- dow, overtime for construction, pro- fessional fees, etc. He estimates that the excluded costs would run another million dollars, and added to the five we are looking $7,000,000. He continued to expound on the extrapolations to come up to the projected cost as compared to the Marriott and the Hyatt and the expense of the high priced sales staff. He stated that he was being told that general fund monies would not be used, however, he felt that was not how it would work when there was not enough money. 11/7/90 Page 7 AGENDA ACTION TAKEN 00337 2. Joint Meeting - Continued. City Manager Armas made reference to the staff report to'answer Councilman Penna's questions on the kitchen and audio visual costs. He spoke of Board discussions in terms of the hotel expertise and the use of a number of providers for the needed equipment without using City capital. Councilman Penna felt that using provi- ders would be competing with the hotels. Discussion followed: that providers would act as a draw to the center; that the marketing study said just the oppo- site - that it would require considerable promotion through the County Convention & Visitor Bureau; that the two hotels would have to be promoted along with the cen- ter; debt service; that providers come into the hotel with overhead projectors, a kitchen, and other equipment and if you give them exclusive rights they put it in for free, and the hotel shares in a percentage of the revenue; report does not give cost breakdowns for a conference center with food vs. renting out the facility, or a revenue generated schedule that tells us the pros and cons of having our own equipment or renting it, etc. Vice Mayor Drago also expressed concern over the costs to furnish an empty building, and wanted to see the operating costs. He stated that it looked to him as though the costs were over $6.4 million which would not bother him if he could see the revenue coming in at other than $1.2 or $1.5 million; and we have added some satellite parking and the sublease charges, which he did not understand. He stated that he was concerned that the debt service had almost doubled, yet the revenue had stayed the same. Discussion followed: costs for fur- nishing as estimated by Group 4; $4.8 million for construction costs; the Vice Mayor had concern over where the money would come from if the conference center fails; assumption of 3% revenue growth 11/7/90 Page 8 AGENDA ACTION TAKEN Joint Meeting - Continued. per year; expense of the satellite parking lot; debt service projected at $600,000 per year; whether a consultant had looked at the feasibility of the pro- jected expenditures; that staff had used the knowledge of the Board, Group 4 and the Director; that the Board was very close to this - it was their child, and the report was designed to make it work; the Vice Mayor questioned if the City had documentation from financial advisors that said yes, there is no danger over the money coming in vs. the money going out; City has a proven bond record; that marketing was to be a partnership in San Mateo County, hotel industry, visitor service industry and the City; that the role of the Board was advisory to the Council; to run the center or lease it out; that it was in the hotels interest to market the conference center; Vice Mayor Drago would feel more comfortable if he knew the true operating costs, and knew there was enough revenue to cover the costs; Councilwoman Teglia reminded the Council of the money given yearly to the Visitors Bureau to market S.S.F. - which will go further with a conference center; that the City had hired a high powered Executive Director; the Executive Director assured the Council that they could make the conference center work within the revenue that was available, and they were examining all of the ele- ments of the operation; Boardmember Hughes pointed out that this was a preli- minary financial summary that had been presented; Vice Mayor Drago's only problem was whether that was the proper location for the center based on the figures they were receiving and the amount of money to be put in the building, and if shown that with slight risk, then he was willing to take that step, etc. Councilman Nicolopu)os stated that he had picked up allegations in the past few weeks that he was the thorn in this con- ference center, and was not in sink with it -- which was not true, he wanted the 11/7/90 Page 9 2. Joint Meeting - Continued. conference center as much.as.anyone on this Board did. He agreed with Councilmembers Penna and Drago on their concern over the voids and unknowns in the figures presented. He questioned if the projected future hotels had been considered in the location of 1/2 mile, and he expressed concern that the site could not be expanded. Executive Director Carl stated that all hotels had been considered. Boardmember Connor stated, if we are so concerned with budget now, how can you look to a bigger site. He stated that the Board needed to take care of the hotels now, and if there is a concern on the revenue or expenditure, the Board wil~ go back, prove the costs, and cut costs to bring it into budget. Vice Mayor Drago stated that he had learned something he had not known, that you can contract these things out, but he really wanted as complete an analysis of the finances as he could get. Councilman Penna had a second problem of concern, which was the parking, and the PG&E lease in the event that it is can- celled or the site purchased they could raise the amount of rent from 3.7~ a sq. ft. as compared to the rent on the satellite lot at 11¢ a sq. ft. He stated concern that the City would spend $6 - 7 million on a building and be committed to the site and the lot could be pulled out from us and we would have no place to park. City Manager Armas related: the value of the lot will be determined by the extent to which there was a demand; the satellite lot has a greater demand because of its size; PG&E does have an opportunity to review the rent charged to the City; there was no indication PG&E is increasing its rates; overhead are signi- ficant power lines that would be expen- sive to remove, and limited the 11/7/90 Page 10 AGENDA ACTION TAKEN 00340 Joint Meeting - Continued. attractiveness of the site for purchase. Councilman Penna stated that PG&E was a public entity with a responsibility to its shareholders to get the most revenue through leasing or selling their lots. He stated that they maintained easements but sold off lots if they did not rent the lots. He stated that the PG&E lot was of interest to the City; the two hotels because they did not have suf- ficient parking; and the rent-a-car agen- cies. He felt that the lot directly benefitted the two hotels, and felt the situation was becoming very muddy. Discussion followed: Councilwoman Teglia related that there was no way to guaran- tee a bid until it was secured, and the only control was through the award of bid; that the attractiveness of the proposal was the tax to be levied was doable, and a tax that the hotels could bear; that the cost would be increased for another site; that expansion of the facility was a problem to deal with down the line; that there were four major hotels and two other hotels that had been approved; that nothing would be happening with Shearwater for a number of years; Councilman Nicolopulos pointed out that the City owned six acres they had purchased from the Federal Government that could house the confer- ence center; Councilwoman Teglia stated that the GSA property had been bought with General Fund monies and any income derived had to go back into the General Fund; Boardmember Connor related that Measure C pamphlets had made mention of 400 new spaces being added, and that a new Councilmember should have brought himself up to snuff on all of the infor- mation; that Councilman Penna had written many memos to obtain information that was finally being brought forth tonight, and Measure C was passed for $2.50 in T.O.T. for a conference center and not as the physical location being at 255 So. Airport Blvd.; he stated that he still did not know what the revenue breakdown 11/7/90 Page 11 AGENDA ACTION TAKEN 2. Joint Meeting - Continued. was, or any idea what the different exclusions would cost, etc. Mayor Haffey believed that the Board had given information to the Council and needed direction on how the Board was to proceed. Vice Mayor Drago questioned what the problem was with trying to get a long term lease to run concurrently with the building lease. City Manager Armas stated it could. Councilman Penna questioned if they were talking about purchasing the PG&E land, and if so what is the price, and where is the money coming from. City Manager Armas stated that that could be identified as an objective and begin accumulating money for that objective, but until such a state of need - he would not advise it. He stated that the Council could seek to have the lease correspond to the lease terms of the building. Discussion followed: 90 day cancellation clause by PG&E on all their leases; the history of 225 So. Airport Blvd. )ease; a market study was never done on another site, and Councilman Penna was in favor of Council rejecting support for the con- ference center at that particular site and proceed to either negotiate the lease back with the owner, or offer it back to the two individuals who had brought it to the City because it benefits them most; Boardmember Hughes assured everyone that there was no collusion with the hotels adjacent to the site, and proceeded to refute comments to that effect through the use of the marketing study; that the $62,500 from the General Fund for the lease would have come back to the General Fund in the event of the loss of the site by not giving that amount to the Convention & Visitors Bureau; four other sites had been looked at and found 11/7/90 Page 12 AGENDA ACTION TAKEN 2. Joint Meeting - Continued. (Cassette No. 3) RECESS: RECALL TO ORDER: lacking; Boardmember Connor related that all hotels would benefit from the con- ference site; Councilman Penna did not feel that the amount of revenue this would generate was sufficient for the City to take this risk, because they were not a business and felt it should be turned over to the hospitality and con- vention industry; Councilwoman Teglia related that Allerton, Eccles, Hoffman and Harbor were the four sites looked at and rejected for the conference center due to distance and site constraints; Vice Mayor Drago had asked for figures on a new building meeting the same guidelines to make a workable conference site; the City Manager handed out projected assumptions to accommodate 1,500 and the need for a building of 76,000 sq. ft.; that it would cost $3.5 million to acquire the land; that over a twenty year time period it would cost $9.4 - 12 million more to buy the property rather than lease; Vice Mayor Drago stated that if the City was to build its own building on its land on Oyster Point Blvd. and lease it to the Conference Center Board at the same rate as the existing lease and parking -- at the end of twenty years it would have something; he stated that either way the Oyster Point property would be leased to the Conference Board or to the Japanese; City Manager Armas continued with his assumptions favoring leasing on Airport over building on Oyster Point Blvd. Mayor Haffey declared a recess at 10:20 p.m. Mayor Haffey recalled the meeting to order at 10:35 p.m., all Council and Board present. M/S Penna/Nicolopulos - To not go forward with encouraging this as the site of a conference center, and that we maintain the Conference Center Board to view other sites; and immediately work with the existing property owner for purposes of cancelling on the lease agreement or at least assigning it over to the adjourning 11/7/90 Page 13 2. Joint Meeting - Continued. property owners so that they can pursue the goal they originally started when they came to the City. Councilman Nicolopulos reiterated his questions to the City Manager as to what costs were encumbered for the City if the lease was broken. City Manager Armas stated that there were no figures present. Councilman Nicolopulos questioned if the lease could be broken. City Manager Armas replied, yes it could. Mayor Haffey made a point of clarifica- tion in that the Motion was to abandon this location as the site of the con- ference center and to use the Board to explore other sites. Vice Mayor Drago stated that complete abandonment at this time scared him. He stated that he was looking for financial people who do feasibility analysis to come in and show whether this project could work as they had done for the Mountain. He stated that he wanted it to work, but did not want to gamble. Councilwoman Teglia wanted to know that this was still moving along to bid, knowing that the Vice Mayor's request will be met. Councilman Penna stated that if the pro- ject was not stopped tonight, then we are allowing the architectural firm to con- tinue their drawings and the expenses will continue on the project, and allows the satellite lot to continue in a hold position. He stated that the Council had asked for all expenditures, revenues, operational figures tonight, and either we are or are not comfortable with those figures and should look elsewhere. Vice Mayor Drago stated he was not against this site, and that his only con- 11/7/90 Page 14 AGENDA ACTION TAKEN 2. Joint Meeting - Continued. cern was that the cost doesn't warrant the money coming in. He expressed con- cern when he had seen the costs go from $4.5 million to $5.5 million, however, if it could be shown that the money was coming in to support the site - then he did not have a problem if he could get those figures. Motion and Second failed by majority roll call vote, Councilmen Nicolopulos and Penna voted yes. Motion by Councilwoman Teglia - That the Conference Center Board be allowed to continue its work pursuing the variety of activities that are taking place in terms of a particular site, and working with the architect and getting ready to go to bid; at the same time Sandra Carl, Executive Director, Jesus Armas, City Manager, together with whoever else is necessary to satisfy and produce the financial details that have been asked for by the Vice Mayor to provide that -- however, she needed a time frame. City Manager Armas stated that he needed resolution on two fronts: the design - what area to include and exclude, and the Board had to approve an operational plan; and that it would take 30 - 60 days. M/S Teglia/Drago - The Conference Center Board will proceed with its work; that within 60 days there will be financial data as asked for by the Vice Mayor. Councilman Nicolopulos expressed frustra- tion in still not receiving information as he had requested from the City Manager. City Manager Armas replied: that the City was not paying any rent presently for the building - until June 1991; that the City is incurring costs related to the PG&E property and the work done by the architect will not be paid until the job is completed. He stated that if the City was to break the lease it would be a 11/7/90 Page 15 AGENDA ACTION TAKEN 2. Joint Meeting - Continued. subject for Closed Session. Councilman Penna reiterated his concerns on parking and cancellation of the PG&E lease, etc. Motion/Second carried by majority roll call vote, Councilmen Nicolopulos and Penna voted no. Vice Mayor Drago requested that Councilman Penna's questions also be answered within the 60 day period. Mayor Haffey ordered that to be done. M/S Connor/Raine - To adjourn the Conference Center Board meeting. Carried by unanimous voice vote. ADJOURNMENT: Time of adjournment of the Board meeting was 11:29 p.m. M/S Teglia/Nicolopulos - To adjourn the Council meeting to Wednesday, 11/14/90, 6:30 p.m., Municipal Services Building Community Room, 33 Arroyo Drive, for the purpose of a Closed Session for discussion of personnel matters, labor relations, property negotiations and litigation. Carried by unanimous voice vote. ADJOURNMENT: RESPECTFULLY SUBMITTED, City Clerk/ City of South San Francisco Time of adjournment of the Council meeting was 11:30 p.m. APPROVF_/D y y ,,/// City of South San F[~C'scO The entries of this Council meeting show the action taken by the City Council to dispose of an item. Oral communications, arguments, and comments are recorded on tape. The tape and documents related to the items are on file in the Office of the City Clerk and are available for inspection, review and copying. 11/7/90 Page 16