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HomeMy WebLinkAbout01/6/2004 Minutes - Regular MeetingMINUTES OF THE CITY COUNCIL REGULAR MEETING OF THE CITY OF DIAMOND BAR JANUARY 6, 2004 STUDY SESSION: Mayor Zirbes called the Study Session to order at 5:05 p.m. in Room CC -8 of the South Coast Air Quality Management District/Government Center, 21865 Copley Dr., Diamond Bar, CA. Present: Council Members Chang, Huff, O'Connor, Mayor Pro Tem Herrera and Mayor Zirbes Also present: Linda Lowry, City. Manager; Mike Jenkins, City Attorney, Jim DeStefano, Deputy City Manager; David Doyle, Deputy City Manager; David Liu, Public Works Director; Bob Rose, Community Services Director; Linda Magnuson, Finance Director; Nancy Whitehouse, Executive Assistant; Ann Lungu, Associate Planner; Fred Alamolhoda, Senior Engineer and Lynda Burgess, City Clerk. ► Construction Bond Financing Discussion (Kosmont) ► Election/Temporary Signs ► Public Comments M/Zirbes adjourned the Study Session at 6:29 p.m. CALL TO ORDER: Mayor Zirbes called the meeting to order at 6:39 p.m. in the Auditorium of The Government Center/SCAQMD, 21865 Copley Dr., Diamond Bar, CA. M/Zirbes announced that Council held a Study Session at 5:05 p.m. to discuss Bond Financing options and Election and Temporary Signs. CM/Lowry reported that, regarding the construction bond financing discussion, Council met with consultants from Piper Jaffray and Kosmont Company and reviewed the financing arrangements made a year ago. She said that reports were given reviewing ongoing costs and providing three financing options to the City for the future. She said that the Council decided it would be economically appropriate for the City to stay with the current bond structuring. She reported that an additional discussion will take place near the end of Spring to allow the bond market to settle down and allow the City to become aware of its position (along with all of the other cities) with regard to State revenues and the VLF and a review of the budget for the next fiscal year. Regarding election and temporary signs, CM/Lowry reported that Council reviewed slides and options for adjusting the Municipal Code. Staff was directed to continue their structuring of options to bring back to Council at a future study session. She said that when the matter is brought back and options are presented to Council, the item will also be adgendized should the Council choose to take action that evening. JANUARY 6, 2004 PAGE 2 CITY COUNCIL PLEDGE OF ALLEGIANCE: INVOCATION: Church gave the invocation. ROLL CALL: Pro Tem Herrera, Mayor Zirbes. Council Member Huff led the Pledge of Allegiance. Monsignor James Loughnane, St. Denis Catholic Council Members Chang, Huff, O'Connor, Mayor Also present: Linda Lowry, City Manager; Mike Jenkins, City Attorney, Jim DeStefano, Deputy City Manager; David Doyle, Deputy City Manager; David Liu, Public Works Director; Bob Rose, Community Services Director; Linda Magnuson, Finance Director and Lynda Burgess, City Clerk. APPROVAL OF AGENDA: As presented. 1. SPECIAL PRESENTATIONS, CERTIFICATES, PROCLAMATIONS: 1.1 Redevelopment Agency Chairman Wen Chang presented a plaque to Debby O'Connor, outgoing Chairman of the Diamond Bar Redevelopment Agency. 1.2 Proclaimed January 27, 2004 as "Welcome Home Vietnam Veterans Day." 2. CITY MANAGER REPORTS AND RECOMMENDATIONS: None Offered. 3. PUBLIC COMMENTS: Ursula Lehmann requested assistance from the City because of problems in her neighborhood with a continuously barking dog belonging to a neighbor. She stated that she had already communicated with the Sheriff's Office, the Humane Society and the Public Safety Committee. She said that a member of the Sheriff's Department called and indicated that more neighbors need to complain about the dog before the Humane Society can take any action. She pointed out that the City's Code does not require complaints from other neighbors for a nuisance to be taken care of. She complained that the dog is barking all night long and even talking to the dog's owner did not solve the problem. Irene Wang, Librarian, Diamond Bar Library, presented VIP library cards and bookmarks to Mayor Pro Tem Carol Herrera and Council Member Bob Huff honoring their re-election to the City Council. Clyde Hennessee spoke about the upcoming election in March and encouraged everyone to vote. 4. - RESPONSE TO PUBLIC COMMENTS: CM/Lowry stated that, with respect to the barking dog issue, Mrs. Lehmann was given DCM/DeStefano's business card so that she and the Neighborhood JANUARY 6, 2004 PAGE 3 CITY COUNCIL Improvement officers can work on a solution to the problem. 5. SCHEDULE OF FUTURE? EVENTS: AS LISTED ON THE AGE=NDA FOR THIS MEETING. 6. CONSENT CALENDAR: Moved by MPT/Herrera, seconded by C/O'Connor to approve the Consent Calendar. Motion carried by the following Roll Call vote with C;/O'Connor abstaining from item 6.1.7, the December 16, 2003 City Council Regular Meeting minutes AYES: COUNCIL MEMBERS - Chang, Huff, O'Connor MPT/Herrera, M/Zirbes NOES: COUNCIL MEMBERS - None ABSENT: COUNCIL MEMBERS - None 6.1 APPROVED CITY COUNCIL_ MINUTES — 6.1.1 Special Study Session of November 18, 2003 — as corrected. 6.1.2 Study Session of November 18, 2003 — as presented. 6.1.3 Regular Meeting of November 18, 2003 — as presented. 6.1.4 Study Session of December 2, 2003 — as presented. 6.1.5 Regular Meeting of December 2, 2003 — as presented. 6.1.6 Study Session of December 16, 2003 — as presented. 6.1.7 Regular Meeting of December 16, 2003 — as presented. 6.2 RECEIVED AND FILED PLANNING COMMISSION MINUTES — December 9, 2003. 63 APPROVED WARRANT REGISTERS — dated December 18, 2003, December 23, 2003 and December 31, 2003 for a total of $803,113.77. 6.4 REVIEWED AND APPROVED TREASURER'S STATEMENT — month of November, 2003. 6.4 RECEIVED AND FILED TRANSMITTAL OF COMPREHENSIVE ANNUAL FINANCIAL REPORT AND SINGLE AUDIT REPORT ON FEDERAL AWARDS FROM THE YEAR ENDED JUNE 30, 2003. 7. PUBLIC HEARINGS: 7.1 ADOPT RESOLUTION NO. 2004-01 APPROVING THE COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM ALLOCATION OF $447,240 ' FOR FISCAL YEAR 2004-05. DCM/DeStefano reported that funds from the Federal government are allocated annually for public service programs usually operated by non-profit JANUARY 6, 2004 PAGE 4 CITY COUNCIL groups. He said in addition, public works types of projects may be funded as well as the City's costs to administer the overall program. He explained that staff sent out notices to all known applicants last November informing them of the upcoming fiscal year allocation process. He said that staff reviewed the applications over the last few weeks and is prepared to make recommendations. Regarding funds available for the next fiscal year, new Federal rules require a cap at a certain percent of the amount for public service projects, i.e. non -profits and public works projects, i.e. street improvements. He explained that this year's, cap in the public service category had been reduced from the 25% the City received for the last 2-3 years, to 15%. The reduction will have a great impact on public service participants who provide outstanding service to low - and moderate- income residents. He said that the even though the cap was lowered to 15%, the City can request a waiver. He recommended that a waiver request be presented to attempt to get the City back up to 25% of its allocation. He explained that the City will not have a clear understanding of the final allocations for each applicant for at least two to four months. He added that the staff report details Option 1 which would set aside 15% of the $447,000 for public service programs, 10% for overall administrative costs and 75% for public works projects. He stated that Option 2 shows 25% for public service providers, 10% for City administrative costs and 65% for public works projects. He said that the public service providers remain the same as in the past: Service Center for Independent Living, the- YMCA and the City's= comm-unity/senior programming activities and funding of a staff person. Public works categories will remain essentially the same as last year with an additional allocation for the home improvement loan program and adding approximately $190,00ftfor-a sidewalk projection north D.S.. Blvd.- between the SIS" MY and- basically, Temple Ave. MPT/Herrera asked staff to clarity that if Council chooses Option 2 for the public service categories and doesn't get approval to fund that extra 10%, then the City would have to take 10% from the public works category to fulfill that commitment? DCM/DeStefano responded that that would be the case. He stated that staff prepared a resolution setting forth Council's approval of. both options since it is known that it will be no less than 15% or more than 25% for public service categories. He further clarified that the final percentage may end up in the middle and the City would have the ability through federal requirements to adjust all of the categories appropriately. C/O'Connor asked that, if the County informs the City that 15% is all that is available, the City is then locked in at that percentage and cannot backfill with funds from the other portion? DCM/DeStefano responded that that was correct. JANUARY 6, 2004 PAGE 5 CITY COUNCIL M/Zirbes asked if the waiver request would continue beyond this funding cycle? DCM/DeStefano replied that that information is unknown at this time. He explained that there is an on-going battle between cities and governmental agencies for resources for capital projects, public works projects, economic development projects, housing projects, etc. C/Zirbes opened the Public Hearing. Alison Meyers, Associate Branch Director for the Diamond Bar/Walnut YMCA, reported that the organization addresses a necessary need by providing safe, quality, affordable childcare, day camp and preschool to those children whose parents must work. She stated that the programs allow parents to seek and maintain employment and training which improves their quality of life and the local economy. Further, she explained that the YMCA offers programs with the purpose of building character, raising self-esteem and strengthening families. She said that children are given field trip experiences which promotes community awareness, responsibility and regular attendance and provides then a positive sense of belonging in a quality place with high caliber role models that promote the values of caring, honesty, respect and responsibility. She pointed out that families are strengthened by offering activities for the entire family including_ camp and family dinners so the parents can spend quality time with theirchildren after work in a fun and relaxed environment. She explained that two programs receive CDBG funding — school aged childcare and day camp and a full time preschool is proposed to be added this year. She said that the request of $11,500 for funding the full-time preschool would provide a full curriculum for children ages two years nine months to five years old and operate between the hours of 6:30 a.m. to 6:30 p.m. five days a week. She added -that the program will provide parents a safe, caring, educational place to bring their preschooler during work hours and the CDBG funds will assist siblings of the families in the school aged program and day camp programs so all of the children of one family could be at one place. Over 112 school -aged children in the D.B./Walnut area are served daily by the program and day camp serves another hundred children. She explained that. 100% of the funding received subsidizes fees to low and moderate -income families and said that service is not denied to anyone based on inability to pay the fees. She said that the application submitted by the YMCA requested $34,000 for the school -aged program and $20,000 for day camp. Carol Lane, Service Center for Independent Living (SCIL) explained that the organization was incorporated in 1980 as one of a statewide network of independent living centers delivering services to people with disabilities. She said that each center is autonomous and serves a geographic region assigned by the State Department of Rehabilitation. She stated that the local center serves 22 cities in the East San Gabriel Valley and is proposing to provide 100 hours of service needed by D.B. residents regardless of age or JANUARY 6, 2004 PAGE 6 CITY COUNCIL type of disability. She further stated that the primary purpose and the goal of the proposed program is to help people with disabilities achieve and maintain independence, avoid institutionalization in compliance with the recently - enacted Olmstead Act, redirect expectations from a life of dependence to one of independence and provide access to essential support services. She explained that independent living centers are unique among service providers in that both State and Federal regulations require that over 50% of the center's governing board and staff be composed of persons with significant disabilities. She reported that 10 of the 11 staff members at the center have a significant disability including blindness and vision impairment, deafness and hard of hearing, muscular dystrophy, bi-polar disorder, cerebral palsy and those with multiple disabilities. She indicated that all program services are available from the center's mobile unit which visits Heritage Park the third Tuesday of each month and staff is available to come into the community to meet with residents. In response to MPT/Herre►a's question regarding the number of D.B. residents being served by the center, Ms. Lane indicated that the monthly billing statement sent to the City lists the type of service provided and the length of time of the service. She said that names are not provided on the reports but that the City's CDBG monitor can obtain that information from the center's office. While she could not remember the exact number of persons served, the center is anticipating. that_ a, minimum of 120 persons will be served. Clyde Hennessee spoke in support of the programs and services offered by the YMCA. There being no further testimony offered, M/Zirbes closed the Public Hearing. C/O'Connor asked how the Council would structure a motion to request the waiver? DCM/DeStefano stated that staff recommended that Council adopt the resolution showing the range of possibilities and include a letter requesting a waiver of the 15% requirement and a 25% public service cap for this year. C/O'Connor moved, C/Chang seconded, to adopt Resolution No. 2004-01 and request that staff submit a letter along with the resolution asking for the waiver for 25%. Motion carried by the following Roll Call vote: AYES: COUNCIL MEMBERS - Chang, Huff, O'Connor, MPT/Herrera, M/Zirbes NOES: COUNCIL MEMBERS - None ABSENT: COUNCIL MEMBERS - None C 1 JANUARY 6, 2004 PAGE 7 8. COUNCIL CONSIDERATION: CITY COUNCIL 8.1 APPOINTMENT OF COUNCIL SUBCOMMITTEES BY MAYOR: MPT/Herrera moved to accept the list as amended by the Mayor and C/Chang seconded the motion. Motion carried by the following Roll Call vote: AYES: COUNCIL MEMBERS - Chang, Huff, O'Connor, MPT/Herrera, M2irbes NOES: COUNCIL MEMBERS - None ABSENT: COUNCIL MEMBERS - None COMMITTEE DELEGATE ALTERNATE California Contract Cities Association Foothill Transit Board Four -Comers Transportation Policy Group Greater L.A. County Vector Control District Joint Powers Insurance Authority L.A. County Sanitation District No. 21 L.A. County City Selection Committee Lanterman Community Advisory Committee (State) League of CA Cities — L.A. County Division San Gabriel Valley Council of Governments San Gabriel Valley Economic Partnership Southern California Assn. Of Governments (SCAG) Tres Hermanos Conservation Authority Wildlife Corridor Conservation Authority (WCCA) Wildlife Corridor Conservation Authority Advisory Committee O'Connor Chang Huff Zirbes Huff Chang MacBride Chang O'Connor Zirbes O'Connor Zirbes Herrera Herrera Huff Herrera Chang Huff Herrera Chang- Staff Herrera Chang Huff/Herrera Zirbes Herrera Chang MacBride/Herrick CITY COUNCIL STANDING COMMITTEES Finance Community Coordinating Committee D.B. Community Foundation AD HOC COMMITTEES City Council Goals/City Manager Evaluation City Council Code of Ethics Economic Development Industry East Development Advisory Committee Lanterman Monitoring Legislative Neighborhood Improvement Sports Center Task Force Youth Master Plan Chamber of Commerce PLISD/City Herrera Huff Huff O'Connor Zirbes Herrera Huff Chang O'Connor Herrera Herrera Zirbes Zirbes O'Connor CITY COUNCIL LIAISON Chang Chang Zirbes Herrera Zirbes Huff Huff Huff Chang Herrera Herrera Zirbes O'Connor JANUARY 6, 2004 PAGE 8 CITY COUNCIL Senior Citizen Sphere of Influence/Annexation WVUSD/City Herrera Huff Herrera Zirbes Herrera Huff 8.2 ADOPT RESOLUTION NO. 2004-02: CONFIRMING APPOINTMENT OF SPECIFIC REPRESENTATIVES TO THE SAN GABRIEL VALLEY COUNCIL OF GOVERNMENTS. C/O'Connor moved, C/Huff seconded, to adopt Resolution No. 2004-02 and add Bob Huff's name in Section I to serve as governing board representative and Carol Herrera as the alternate governing board representative according to the committee assignments approved by the City Council in Item 8.1. Motion carried by the following Roll Call vote: AYES: COUNCIL MEMBERS - Chang, Huff, O'Connor, MPT/ Herrera, M/Zirbes NOES: COUNCIL MEMBERS - None ABSENT: COUNCIL MEMBERS - None 9. COUNCIL SUBCOMMITTEE REPORTS/COUNCIL MEMBER COMMENTS: C/O'Connor thanked the Mayor and her fellow Council Members for their consideration regarding her appointments to various committees. She announced that -she -recently became employed making it necessary for her to give up some of the committee positions that she had held in the past- Sly pointed out that she was the first member to the Community Foundation and= would now need -to= give it up because her work schedule conflicted witty Thursday. night meetings. She appreciated the fact that-M/Zirbes agreedto<take= the position as City Council appointee to the Foundation and felt -confident that he would make sure that the Foundation would continue its momentum. C/Huff wished everyone a Happy New Year. He extended congratulations to M/Zirbes for conducting a speedy meeting. C/Chang also wished everyone a happy and prosperous New Year. He reported that it was a pleasure for his family to enjoy the holidays at home this year. M PT/Herrera thanked C/O'Connor for passing the Wildlife Corridor Conservation Authority representation to her. She reminded everyone. that the City has a current campaign to bring a Trader Joe's to D.B. and encouraged everyone to return the postcard supporting Trader Joe's to the City. She also wished everybody a very prosperous 2004. M/Zirbes thanked the public for their interest in attending the City Council meeting or watching it on DBTV Channel 3. He reminded everyone that the Council Members can be reached regarding any matter of interest to the public at any time. He also wished everyone the happiest of New Years and announced that the meeting would be adjourned in memory of Gloria Ann JANUARY 6, 2004 PAGE 9 CITY COUNCIL Walters, a 36 -year resident of D.B. who recently succumbed to cancer. 10. ADJOURNMENT: There being no further business to conduct, M/Zirbes adjourned the meeting at 7:43 p.m. in memory of Gloria Ann Walters. LINDA C. LOWRY, CI CLERK 'The foregoing minutes are hereby approved this 20th day of January, 2004. c— B , MAYOR _ 1 1 CITY OF DIAMOND BAR CITY COUNCIL STUDY SESSION JANUARY 6, 2004 STUDY SESSION: Mayor Zirbes called the Study Session to order at 5:05 p.m. in Room CC -8 of the South Coast Air Quality Management District/Government Center, 21865 Copley Dr., Diamond Bar, CA. Present: Council Members Chang, Huff, O'Connor, Mayor Pro Tem Herrera (and Mayor Zirbes. Also Present were: Linda Lowry, City Manager; Mike Jenkins, City Attorney; James DeStefano; Deputy City Manager; David Doyle, Deputy City Manager; David Liu, Director of Public Works; Bob Rose, Community Services Director; Linda Magnuson, Finance Director; Nancy Whitehouse, Executive Assistant; Ann Lungu, Associate Planner; Fred Alamolhoda, Senior Engineer and Lynda Burgess, City Clerk. ► Construction Bond Financing Discussion (Kosmont) ON. Electioni7emporary Signs ► Public Comments 1) CONSTRUCTION BOND FINANCING DISCUSSION (KOSMONT) CM/Lowry explained thatat then last study session, the bond financing plan that was accepted a year ago was reviewed. She indicated that it was determined that there was a need to learn more about the letter of credit that was issued, how it fit into the financing structure and what possible options the City might have in the future to be able to eliminate that ongoing cost. At Council's direction, she stated that -staff contacted Mr. Larry Kosmont (Kosmont and Associates) and Mr. Eric Scriven (U.S. Bancorp/Piper Jaffray) who prepared information about the financing, the letter of credit and future options for the City about how the City might want to budget in the future and address the question about early pay down as well as options for using the letter of credit. Mr. Kosmont reported that there are a number of alternatives available to the City. He explained that he and Eric both felt that the timing of the bond issue last December was probably impeccable from the City's standpoint. He said that the City managed to capture low interest rates which prevailed through the year and, based on the Council's decision to choose a variable rate, resulted in a significant interest rate savings because the market really achieved record lows through the whole year. Further, he said that the City beat what has become a torrent of state problems and missed some of the congestion points in the marketplace due to the uncertainty of the state having issued bonds, then not issuing them, then going through a recall, then being downgraded. He felt that the City timed the window of opportunity perfectly both in terms of bond activities, the credit rating, concerns about California, the environment in and of itself and then through interest rates. Throughout all that, the City JANUARY 6, 2004 PAGE 2 CC STUDY SESSION was able to issue $13,755,000 worth of bonds and protected its reserves which he felt was also a very fortuitous decision because nothing has been decided at the State level in terms of preserving the VLF or back- filling it, the level of back -fill, the permanence of back -fill and all the issues surrounding local government tax revenues as subvened by State. He pointed out that another victory by the City is that the Community Center is very close to being finished and will have its own set of operating revenues and expenses. He stated that the City still has $25,000,000 or more in its pocket that are not hampered by the current financial milieu that is affecting all cities. He referred to Page 2 of his handout containing an outline showing the lease revenue bond facts, the City's budgeting issues around paying the semi-annual payments and the Letter of Credit. The City pays for a variable bond that provides the City certainty that there are funds available to pay the short interest rate. He explained that it was originally estimated that the variable interest rate would be at 3.5% but the City achieved a level of approximately 1.09% for the last year which saved the City nearly $500,000 in pure costs. He offered that the City now has choices regarding how to budget for the expenditures to sustain the current scheme, on cashing it in and choices on self-financing a variable cushion. Regarding Page 3, he indicated that the original program objectives were to preserve some capital, fund the community center and minimize the cost of capital which worked well with the low interest rates. Further, he explained that on Page 4, one of the objectives in preserving capital was to enable staff to engage in real estate transactions to fulfill a an economic development strategy. He stated that the City gained additional leverage for involvement in the real estate market to allow transactions that will bring in future revenue. He reminded everyone that the initial bond principal was $13,775,000 thirteen months ago with a final maturity date of 2033. He explained that the variable rate bond for 10 years with a 4.5% interest rate cap carries with it an integral Letter of Credit which is the real pool of cash. He further pointed out that, because the rates have been low, the City hasn't had to pay a surplus or a penalty for that cap. Mr. Kosmont referred to Page 6 of his handout and indicated that the City has some cushion in marketplace performance and could establish internal controls on budgeting to accelerate payment of the bonds in the future. Mr. Scriven reported that the City paid Union Bank and CaISTRS a fee to provide liquidity and credit via the Letter of Credit. He explained that, in order for investors to have confidence in the variable rate feature, it is essential that they have weekly liquidity. Regarding the credit feature, he explained that that is in case the City defaults, a larger financial institution will be behind it and the portion of the annual fee that is being paid to the two banks or the two financial institutions goes to the credit support to stand behind the City. JANUARY 6, 2004 PAGE 3 CC STUDY SESSION C/Chang explained that that was the main reason the City invited Mr. Scriven and Mr. K;osmont because the Council didn't really know exactly why that credit was needed. He asked why the City needs the Letter of Credit, at an annual cost of $150,000, when there are $20,000,000 in reserves providing the ability to pay off the bond. M/Zirbes stated that he felt the Council knew the fees up front. He stated that whenever a Letter of Credit is opened, new fees will be established. He felt that the Council was not really focused on the fact that there was going to be an annual charge of $150,000 for the two instruments. Mr. Scriven responded that first, $13,755,000 is a very small bond issue for variable rate structures. He explained that investors are typically looking for $30,000,000 to $50,000,000 to invest in on a weekly basis and they want to deal with known institutions. Diamond Bar did not have any debt in the marketplace and was an unknown even though the balance sheet was very good. He felt that the City could obtain a rating in the high A's, perhaps a low AA rating. He said it might give the City the opportunity to test the waters to provide its own liquidity, but there are costs to providing liquidity. He reported that one of the costs would be that the marketplace would demand that the City dedicate some of its liquid cash (money in the bank) to the repayment so that everything is in place for a turn -around on a day's notice to get the money to the financial institutions. He estimated that the fund dedication would probably be in the range of 11/2 to 2 times the outstanding balance. Mr. Scriven further explained that there are two pieces the City is paying for — liquidity and credit support. He stated that the payment is approximately 110 basis points of outstanding par for liquidity. The fee will decline as the balance declines. He said that, of the 110, approximately 25 to 30 basis points are paid for the liquidity to Union Bank/CaISTRS while the other 75 basis points are for credit support. He explained that in the current marketplace, credit support and liquidity cannot occur with a credit rating under AA. He said that Union Bank does not have an AA rating so CaISTRS is providing back up. He reported that there are lots of AAA and AA banks that provide singular letters of credit without a confirming letter of credit behind them. In looking back to December 2002 when the transaction was being underwritten, U.S. Bancorp/Pipe Jaffray talked to a lot of different market players and discovered that there were a couple of things that were working against the City which included being a first-time issuer. He stated that the City's financials were extremely strong, but being a first-time issuer with a transaction that is small for the variable rate marketplace did not work in the City's favor. He stated, however, that the bid and the fee that the City is paying is a good fee because it's based on the profile that Council wanted to take and the strategy undertaken. He reported that options are now available because the Diamond Bar Center is nearing completion so the construction risk will JANUARY 6, 2004 PAGE 4 CC STUDY SESSION soon be eliminated; the City now has a history in the marketplace and other markets are available that have emerged in the last 12-15 months for issues of this size. C/Chang understood that the City was basically punished because, even though it's financially solid, the City didn't have any credit history. Mr. Scriven responded that strong financials could overcome a first-time borrowing situation, but that the current market demands names that are recognizable. C/Chang asked whether having a letter of credit would be avoidable? Mr. Scriven explained that other options are available to the City but they would depend on whether the City's strategy would continue in its current direction. He stated that the City's strong surpluses make it very attractive given that most other cities are doing poorly, thus this is very good if the City wants to get a better deal. Mr. Kosmont stated that the City could look into converting from a Letter of Credit into an auction -rate bond structure. C/O'Connor asked whether, since Union Bank is not AA rated, are there other banks that are AA rated? Mr. Scriven responded that there are also banks rated AAA and that it would have been less expensive to have accomplished the transaction with an AA or AAA bank. He stated that CaISTRS backing would not have been necessary with a higher rated bank. Mr. Scriven explained that numerous AA and AAA banks were contacted regarding the offer but the bond amount was too small for many of them. He further stated that it was late in the year, many had hit their allocation ceilings and several were nervous about California generally. C/O'Connor asked if it would be possible now to change to a bank with a better rating? Mr. Scriven responded that he would recommend doing just that. Since the construction has not been completed yet, and since the City just paid an annual fee, he recommended discussing the matter again mid -year regardless of the strategy the Council is interested in implementing. The _ Council can then consider upgrading the overall Letter of Credit program, looking into the feasibility of self -liquidity, discussing whether a fixed rate or auction -rate structure would be more advantageous rather than a variable rate. JANUARY 6, 2004 PAGE 5 CC STUDY SESSION Mr. Kosmont agreed that it would be better to finish construction on the D.B. Center before looking into changing strategies. He pointed out that the interest rate market is still working for the City right now. M/Zirbes felt that the product being used at this time has worked better than anticipated considering the low interest rate. He stated that the Council was surprised at the last study session regarding the $150,000 annual Letter of Credit fee. He agreed that there will be a cost to changing the financing structure. Mr. Scriven pointed out that there's no cost to get out of the situation because the City has complete pre -payment flexibility. He said that the flexibility is fairly standard in variable rates so the City can pay off the bond with the money currently in the bank with no penalty. However, he stated that with a restructuring of the transaction and the type of deal negotiated, legal costs would apply as well as underwriting costs to resell and restructure it. Further, he said that there was a potential for some credit enhancement costs. Mr. Kosmont stated that the City would not be restructuring unless a net savings could be realized. C/Chang stated that he personally felt that the City is on the right track and that it is not wise to pay off the bond at this time especially since so much was spent to build up the credit and the City could use the funds for some other development. Regarding the annual Letter of Credit cost of $150,000 every year, he asked if there would be a way to avoid that cost or reduce it. Mr. Scriven explained that on Page 8 of the handout, three very straightforward alternatives are outlined. He stated that there are different strategies based on the City's choice to stay flexible for 2 to 3 years or flexible for 5 years. He stated that a packet would be given to CM/Lowry about providing liquidity and getting a rating on the City. He said he would like to follow up and discuss the liquidity issue. He suggested that the City should rate a high ;single A or even AA with its current financial situation and with an AA rating, the City may be able to provide its own credit. He pointed out that if the City needed to keep some sort of credit facility behind it, it would cost a fair amount per year depending on the way it is structured. If the Council is interested in self -liquidity, there are costs for a dedication of funds creating flexibility which remains as long as the bonds are outstanding. He suggested that if the City had an emergency and the funds are needed for a temporary use, the covenants cannot be broken on the transaction. Mr. Kosmont explained that some cities have gone too far with pledges and when they needed the money for another use, they couldn't. He said JANUARY 6, 2004 PAGE 6 CC STUDY SESSION that the credit rating issue is important for the City and that he should help acquire it because the credit can add savings to a transaction in a public/private partnership. Regarding providing liquidity, he stated that the City would want to be comfortable with the constraints of the liquidity because removing some of the layers of pledges cannot be removed quickly enough or inexpensively enough. He explained that Mr. Scriven was saying was that the range of flexibility will increase or decrease based on the City's credit rating. Mr. Scriven explained that in researching the costs associated with the Letter of Credit, he discovered that there aren't transactions the size of the City's that have self liquidity. In response to Mr. Hennessee, Mr. Kosmont explained that the City would be providing its own debt coverage instead of paying for it with a Letter of Credit, which would lower the cost each borrowing year. In reply to CM/Lowry, Eric stated that the current fixed rate for a 30 year — AAA transaction is approximately 4.75%. Mr. Kosmont suggested that, in order to be cautious, the rate should be — considered at 5%. Mr. Scriven reported that the third option shown on Page 8 of the handout is a relative new structure called an "auction -rate structure" which is very similar to a variable rate. He explained that the most common rate type of auction rate transaction is a 35 -day reset or auction versus the most common variable rate at a 7 -day reset and they trade at about 5-10 basis points higher than the 7 -day. Further, he stated that with an auction rate, the need for a liquidity provider is eliminated because the transaction is cleared every 35 days with the auction. He said that the City would need to purchase a municipal bond insurance policy and that, using a AA rating and not purchasing bond insurance for this size of transaction could still be problematic. If the City were to get a AAA insurance policy, the City would pay that cost and the annualized cost of the policy plus 10 basis points premium on the 7 -day. He said that the auction costs would be approximately 50 basis points versus the 110 basis points paid by the City right now. The same type of pre -payment options would exist and there would be no cost to get out of the current structure. He said that there would be some costs to get into the new transaction. The insurance policy would be priced on the City of Diamond Bar's regular underlying rating — high A or low AA-, or AA and that would make a very economical bond _ insurance policy. He further stated that there would be some legal costs for underwriting but the fee would be lower because the transaction was just structured within the last year. There would also be other costs of insurance for restructuring. JANUARY 6, 2004 PAGE 7 CC STUDY SESSION ' CM/Lowry asked if the City would lose all the value of the cap purchase last year? Mr. Scriven explained that the cap would stay in place and it is an asset, not an expense. The City actually purchased a contract which could be sold back to J.P. Morgan for its value. The value of the cap goes up if rates go up. He stated that rates have gone down slightly from 5.0% to 4.75% so it has been amortized by 1/10th plus the cap which carries forward to whatever auction or variable rate deal the City ends up with or it could be sold. He said that the City might also trade the cap, shorten it to five years or restructure the transaction depending on the City's strategy. CM/Lowry wondered why the contract for the cap would have value to anybody other than the City when the contract — isn't it made between the City and J.P. Morgan and the City's ability to do business? She felt that this subject might be one for discussion at another Study Session. Mr. Scriven replied that the contract is insurance essentially and there's a large part of it that J.P. Morgan is on the hook for that has not been amortized. C/Chang stated that none of the alternatives seem to fit the City right now. Mr. Scriven explained that another scenario would be to re -bid the existing situation after the Diamond Bar Center is completed. He said that the City would have approximately a year and a half after construction so the rating would probably reach A+ or AA- leading to a successful re -bid for another Letter of Credit. M/Zirbes stated that that would leave the City in basically the same position but with a lower annual cost. He felt that the City should explore the other alternatives. Mr. Kosmont pointed out that the construction phase needs to be completed before re-evaluating the City's alternatives. CM/Lowry reiterated that the auction option would keep the bond on the market 5 times longer since it can only be turned around every 35 days instead of every week. Mr. Scriven affirmed CM/Lowry's statement and said that the key features of an auction rate are the same as the variable rate but lower in cost. He stated that if the City went with an auction rate structure, paying it off in one year would not be beneficial. It would take the City 2-3 years to recoup its costs. He said that the insurance would cover the issue if the City were to keep it outstanding for 30 years. He recommended that the Council reassess what they want to go and, based on that, he would JANUARY 6, 2004 PAGE 8 CC STUDY SESSION research the liquidity issue. He asked if the City wanted to drop the subject of a fixed-rate alternative. M/Zirbes asked the Council if they would be interested in self -liquidity and utilizing the City's own money? C/O'Connor felt that the numbers would have to be available before the Council considers the matter. MPT/Herrera stated that she would not be in favor of the City hanging on to the $13.7 million debt. C/Chang suggested that the City keep the current status and look into re- bidding after the construction of the Center is completed: M/Zirbes felt that if the Council understood the cost factors involved, a strategy could be devised that would clarify where the City should be when the cap expires in 10 years. He suggested the auction rate strategy should be looked into in the near future. C/Chang said that the costs of the Letter of Credit then, are the costs of being in business. Mr. Kosmont verified C/Chang's statement. CM/Lowry pointed out that the City is still making money with the 2% interest on the Letter of Credit versus approximately 1 1/2% paid out. C/Chang felt that the issue should be reviewed with the City Council every year. Mr. Scriven suggested that the issue be agendized for discussion early each fiscal year since the anniversary date is in December so that the decision can be made whether to stay with the present structure or change it. Mr. Kosmont also suggested that there would be a huge benefit to the City to look into its credit rating soon after the construction is finished and the payments are made. Mr. Scriven stated that he had checked on that and the City could do it for a fairly reasonable amount which would be under 10, potentially at $5,000. Mr. Kosmont suggested that another meeting should be held in late Spring. He said that he and Mr. Scriven would prepare a small summary and send it to the City Manager. JANUARY 6, 2004 PAGE 9 CC STUDY SESSION Mr. Scriven stated that even though no prediction can be given on the rate of the Letter of Credit since it will depend on the market, but he could provide some indications for the Council. M/Zirbes stated that the Council consensus indicated agreement to meet again with the consultants at the end of Spring. 2. ELECTION/TEMPORARY SIGNS. Council consensus was to continue this matter to a later date for consideration but asked to view the slide presentation prepared by staff. DCM/DeStefano explained that Council asked to re -visit the issue approximately a year ago because of concerns regarding aesthetics and distractions to motorists by signs in rights-of-way. He reminded Council that a goal had been established in the beautification plan section of the Goals and Objectives to deal with election signs. He reported that, prior to review by the Planning Commission in early 2003, the City Attorney made recommendations based on case law. Further, he said that staff conducted surveys of other cities, selected approximately 12 and compared them to the City's process. The Planning Commission reviewed the issue and last August recommended that no changes be made to the policy. The matter was brought back to the City Council in September and because of the proximity to the election, the Council directed staff to bring it back after November. He explained that the slides being shown were photographs taken November 4, 2003, Election Day and went on to describe each slide. DCM/DeStefano reported that the current sign regulations are in an all- encompassing section of the code called `Temporary Signs" which addresses not just campaign signs but signs advertising other activities that occur in the next few weeks. In addition some types of temporary signs are included such as yard sale signs and some other types of signage. He reiterated that the Planning Commission said that they didn't see a need to make any changes but were concerned about a couple of aspects of the recommended changes. He said that one of their concerns is that the recommended changes attempt to deal more closely with current philosophies and the result of some court cases and seemed to deal more with the issue of getting the signs out of the right-of-way. Concerns expressed by members of Council and some residents involve the proliferation of signs in the right-of-way to the extent that it looks horrendous during election time. Some cities, Walnut for example, strictly prohibit signs in the right-of-way. He said that about 8 out of the 12 cities looked at by staff prohibit signs in the right-of-way. Brea, on the other hand, encourages signs in the right-of-way and on light poles, etc. He pointed out that the City has a 30 -day requirement before an election during which election signs can be placed. He said that in making a JANUARY 6, 2004 PAGE 10 CC STUDY SESSION recommendation in line with what other cities are doing and from case law, would be to expand that to as much as 60 days. C/O'Connor asked if DCM/DeStefano was talking about the public right-of- way or private property. DCM/DeStefano explained that he meant both public and private. C/O'Connor explained that she thought campaigns were placing signs on private property about 60 days in advance so the recommendation would be to change posting of signs in both public and private areas to 60 days in advance of an election. CA/Jenkins responded that the recommended language would be to not to allow signs on the public right-of-way at all so the 60 days would only apply to private. DCM/DeStefano reported that the Planning Commission liked the areas where signage restrictions were more restrictive than relaxed. For example, he said that the Commission did not like the recommendation that signs be allowed to be posted 60 days in advance and seemed to be — more comfortable with getting the signs out of the right-of-way and only allowing them on private property. He further reported that one of the areas looked at by the Commission would be the possibility of reducing the square footage of signs so instead of having six square foot signs perhaps they should be limited to five square feet, particularly in residential zones. He said that, on the other hand, the Commission seemed to support the idea of allowing up to 12 feet, which is somewhat an arbitrary number, in commercial and industrial zones. In response to C/O'Connor's question regarding the size of signs placed by C/Huff and MPT/Herrera in the last election, C/Huff stated that the size was approximately 22 x 24. C/Huff asked C/O'Connor to explain the types of changes she would like to see. C/O'Connor stated that if candidates are not allowed to use the public right-of-way, that she was concerned that the signs would end up on private property slopes, for example, D.B. Blvd. between Lorbeer and Tin Dr. rather than in tree wells. She said she felt that homeowners on the tops of the slopes would not remove the signs even though they had not given permission for the signs to be located on their property. She further stated that she would like to see some sort of penalty attached to the improper placement of signs but admitted that that would be problematic because other parties could take down legally -placed signs and move them to illegal locations just to penalize an opposing candidate. She 1 1 JANUARY 6, 2004 PAGE 11 CC STUDY SESSION suggested that in the staff recommended amendment, section (5) f be amended to read "Where a sign is erected on a vacant lot, or in a multi - tenant commercial center or in a location of a residential lot that is not visible from the residence, the candidate causing the sign to be erected must have written permission from the property owner on file with the City. Further, she suggested designation of certain corners in the City where signs would be allowed and each campaign would be allowed to place one sign per corner. She wondered whether this type of limitation would violate First Amendment rights. CA/Jenkins reminded Council that this area of the law is very heavily constrained by First Amendment considerations and reported that a great deal of what Council would like to do cannot be done. He pointed out that currently, the entire public right-of-way is designated as a public forum for the erection of signs of all kinds but he felt that the City could reduce open signage to only specific areas. He further felt that the City has more flexibility when dealing with the number of days in advance of an election for posting signs on public property than with private property because a property owner is allowed to express himself on election issues and the court seems to think that allowing 60 days in advance for posting election signs on private property is justified. C/O'Connor stated "So we could designate 24 inches..." CA/Jenkins responded that that could be done. He stated that C/O'Connor's comments reflected that she was searching for a way within the constraints of case law to deal with the slopes issue and the commercial parking lot issue and the vacant property issue. He pointed out that the City cannot require campaigns to get property owner permission on file in advance but if City staff were to ask for evidence of the property owner's permission and they don't have it, then staff could remove the sign(s) in question. C/Huff stated that putting up signs is not the most effective way to get the message out. He said he would not be against eliminating permission for signs to be placed in the public right-of-way and pointed out that the City of Walnut has a very aggressive enforcement program where signs are placed on private property but there is not a plethora of signs plastered all over the place. Further, he stated that the City of Chino Hills also has very effective controls with no public right-of-way issues. He stated that he'd c come to the conclusion that the City's regulations should be tightened up, if possible. CA/Jenkins reported that there is case law prohibiting cities from forcing candidates to produce written permission prior to being allowed to put up their signs. JANUARY 6, 2004 PAGE 12 CC STUDY SESSION C/Chang recommended that the City remove permission for signs to be placed in the public right-of-way, not designate certain areas for placement of signs and not allow signs to be placed on vacant private lots. MPT/Herrera stated that the proliferation of signs do not bother her. M/Zirbes stated that it appeared as though further discussion would be in order but that he wasn't sure whether it should take place at this meeting. He suggested that the matter be placed on a future study session so that more time could be devoted to it. He felt that staff had received direction from Council on what they like and where they want to be able to move with the regulations in another study session. DCM/DeStefano stated that staff has notes regarding Council's thoughts but that there wouldn't be enough time at this meeting to develop a consensus. If Council wishes, the matter can be scheduled for further discussion at another time. He said he felt that staff would need more of a direction from the entire Council in order to know how to amend the current regulations. C/O'Connor asked if Council would agree to have staff come up with - designated areas? C/Huff stated that he was in agreement with that and suggested that perhaps the corner of some park sites would be suitable. C/O'Connor requested staff to go through some of the major arterials and see what they would recommend while limiting the placement to one sign per candidate. She felt that if the City designated only 20 places for the signs, the candidate would only have to order 20 signs. C/Huff suggested that the matter be included in the regular City Council Agenda as well as on the Study Session Agenda for the same meeting. ADJOURNMENT: With no further business to conduct, M/Zirbes adjourned the Study Session to the regular meeting at 6:29 p.m. LYNDA BURGESS, City Clerk JANUARY 6, 2004 PAGE 13 CC STUDY SESSION The foregoing minutes are hereby approved this 3rd day of February, 2004. ATTEST: 7 ---- BOB ZI , ayor 1 1