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2017 07 06 MDD MinutesMINUTES OF THE REGULAR MEETING OF THE BOARD OF DIRECTORS OF THE BAYTOWN MUNICIPAL DEVELOPMENT DISTRICT July 06 2017 The Board of Directors of the Baytown Municipal Development District (MDD) met in a Regular Meeting on Thursday, July 06, 2017, at 4.40 P M., in the Council Chamber of the Baytown City Hall 2401 Market Street, Baytown, Texas with the following in attendance Stephen DonCarlos President Chris Presley Vice President Reggie Brewer Secretary Laura Alvarado Director Charles Johnson Director Robert Hoskins Director Dave Jirrels Director David McCartney Director Rick Davis General Manager Ignacio Ramirez, Sr General Counsel Leticia Brysch Assistant Secretary President DonCarlos convened the July 06 2017 Municipal Development Distinct (MDD) Board Regular Meeting with a quorum present at 4 40 P M. all members were present with the exception of Directors Englert, Hernandez, and Sam who were all absent BAYTOWN MUNICIPAL DEVELOPMENT DISTRICT (MDD) FY 201718 a Discuss the Baytown Municipal Development District's Fiscal Year 2017 18 Proposed Budget and budget process Finance Director Wade Nickerson presented the Baytown Municipal Development District's Fiscal Year 2017 18 Proposed Budget He stated that the revenues for the MDD comes from sales tax revenues which were not proposed for an increase in the upcoming budget. but rather as the same projections of fiscal year ending 2017 He stated that the expenditures included expenses from ongoing projects as well as the new proposed projects and the redevelopment construction of the Brunson Theater He noted that $200,000 was included in the current budget to start the Bronson Theater project while the remaining $13 million for its completion would be requested in the proposed budget He stated that other expenses included funding for the downtown infrastructure that provides for parking in the downtown area, $175,000 for the McElroy Park improvements that includes a restroom facility, the median improvements from the intersections of Market/Main as well as Market/Bayway Drive the lighting to Eddie Huron Park located on Bush Road, the Goose Creek Trail improvements to include connecting the 40 acres woods in the Goose Creek Park and Bush Terrace Park $135 000 for a trail to be built MDD Board Regular Meeting Minutes July 06 2017 Page 2 of 6 around Champion Park, and $135 million for the debt service associated with the hotel conference center President DonCarlos inquired as to how much debt service $13 million would handle Mr Nickerson stated that $1 3 million would handle approximately $18 million worth of debt service Director McCartney stated that the restrooms appears to constantly escalate in costs and further inquired if the costs of $20,000 for annual maintenance was feasible being that is compatible to that of the Brunson Theater Director Presley further inquired if the restroom in question was the prefabricated building In response to Director McCartney's concern regarding the restroom and maintenance costs Director of the Parks and Recreation Department, Scott Johnson stated that the restroom is identical to the one installed at Townsquare Roseland Park and Jenkins Park Mr Johnson further stated that currently there's a port -a can available for use in which they're getting constant complaints being that it's a very busy park, and because of such they want to upgrade to a full service restroom He noted that they're satisfied with the prefabricated restroom, in which they've had no known complaints with its regard He further noted that the restrooms were locked/unlocked during park hours has an emergency valve and has motion sensor detection for after hours In response to the inquiry of the determination of the maintenance costs Mr Johnson stated that the maintenance costs included daily cleaning services for five (5) days a week through a contract with Baytown Rehab Center (BRC) and further noted that the parks weekend crew cleans provide cleaning services on the weekends Mr Nickerson noted that the estimates on the Brunson Theater are difficult to assess what the actual cost would be being that it ll be a new building with very little maintenance initially; therefore the estimates are based on some of the other facilities in similar size Additionally, he noted that janitorial services for a small area would be included in the Brunson contract b Consider a resolution setting a public hearing regarding the Baytown Municipal Development District Fiscal Year 2017 18 Proposed Budget Mayor DonCarlos stated that the public hearing regarding the Baytown Municipal Development District Fiscal Year 2017 18 Proposed Budget is scheduled for August 03 2017 at 4.30 P M A motion was made by Director David McCartney and seconded by Vice -President Chris Presley approving Resolution No 308 that sets a public hearing on the Fiscal Year 2017 18 proposed budget for August 03. 2017 during the regularly scheduled Baytown Municipal Development District meeting, commencing at 4.30 P M in the Council Chambers of the Baytown City Hall The vote was as follows Ayes Secretary Reggie Brewer Director Charles Johnson, President Stephen H DonCarlos Director Robert C Hoskins Director David P Jrrrels Director David McCartney Vice President Chris Presley Director Laura Alvarado Nays None MDD Board Regular Meeting Mmutes July 06 2017 Page 3 of 6 Other Director Gary Englert (Absent), Director Mary Hernandez (Absent). Director Terry Sam (Absent) Approved RESOLUTION NO 308 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE BAYTOWN MUNICIPAL DEVELOPMENT DISTRICT ESTABLISHING THE DATE TIME AND PLACE FOR A PUBLIC HEARING ON THE 2017 18 PROPOSED BUDGET. AND PROVIDING FOR THE EFFECTIVE DATE THEREOF DISCUSSIONS Discuss the development of the Convention Center/Hotel Project at Bayland Island General Manager Davis presented the agenda item and stated that administration included others in the decision making regarding this project in which they preliminarily selected Garfield as a development partner in this endeavor He stated that they're in the process of negotiating a Master Development Agreement that will have to come before the MDD Board for approval He further stated that the assemblage of the team included engineering, legal and a consultant or guide to help meander through the difficulties of developing the hotel conference center in which the cares of Irvin and Odessa recommended Steve Moffett for such assistance He noted that the City of Irvm's project is similar to the project that Baytown is about to embark upon and he further requested that Mr Moffett provide the MDD Board with more information regarding the structure and financials of this type of project based on his experience Mr Moffett stated that he was a partner with Ray and Greg Garfield for about ten (10) years from 2002 to 2012, whereas, they developed the Overton Hotel and Conference Center in Lubbock Texas He stated that in 1992 the first public/private partnership between a city and private hotel developer was in Norfolk Virginia where he represented the owner of that project He stated that shortly afterwards. he joined Dick Stormont and assisted with developing many public/private partnerships in various states Mr Moffett stated that the purpose of public/private partnerships is for economic development. He stated that there are many reasons that the public/private partnership is necessary for the development of a full service hotel regardless of the hotel size He stated that when considering all of the building costs, along with the capital return requirements necessary of the private sector, most often those cannot be developed with 100% private funds, which is principally due to how banks underwrite hotel loans currently Mr Moffett stated that he and Mr Garfield came to the City of Baytown before to discuss the development of a hotel and conference center but ran into some obstacles He noted that it's not unusual for cities to take years to have a project of this magnitude completed, because it's not something done on a regular basis He also noted that in his perspective the most important thing on a hotel is the capitalization and further noted that no project is the same regardless to likeness, location, or similarity in structure Mr Moffett stated that having been on both sides of this project's capital structure, he's represented the MDD Board Regular Meeting Minutes July 06 2017 Page 4 of 6 lenders and is also an active hotel developer in the Lubbock market He stated that Garfield proposed a predevelopment agreement which has a ninety daytime period that could extend thirty days He stated that Garfield will look at the selected site and create site plans for viewing as well as, to receive feedback He further stated that the team will select the site plan then the architect will put together a concept design package which will include a building program that will layout all of the spaces in the building, available flags in the market, floor plans, conceptual pictures of the building, renderings and narratives for contactor's budget purposes He noted that the contractor will work on the budget's hard cost and the Garfield team will work on the soft costs to accumulate a total budget for the project Mr Moffett stated that once they receive the information for the concept design package, they can start to visualize what the capital plan is going to look like He stated that in public/private partnerships the ultimate goal is to see how much of the total budget of a project the private sector can finance which is typically financed with debt from a local lender or in equity that comes from an investor He stated that he's responsible for helping the City of Baytown figure out what can work within the City politically economically and legally He further stated that the key objective is to identify the costs needed to finance the project and if the City can finance it with the resources available, in which they will know at the end of 90 days Director McCartney mquired if $50 million was the expected number for this project and if the participating amount from the City would be $20 million or more Mr Moffett stated that $50 million was the number that he's seen which is a good number to start with based on a 200 room hotel with 20,000 square feet of meeting space Mr Moffett explained that within the last fifteen years and considering the projects of this type the average participation from the City in the total capital package was 38%, and further stated that the participating amount depends on various variables such as the cash flow from the hotel and the cost of the building. Additionally, Mr Moffett stated that there are many options and flexibility within the budget process but his main goal is to get the best deal for the City Director McCartney fiuYher inquired m to what other amenities would be needed in the proposed area of the project to make it successful Mr Moffett stated that restaurants are always good amenities to have near this type of project as well as evening activities being that the intent is to attract groups to hold meetings at the conference center Additionally Mr Moffett noted that the water is a big factor that should be capitalized into a positive amenity to this project President DonCarlos noted that it was recommended that the City concentrate on more water amenities in that area and that, in their presentation Garfield indicated that they had connections with a firm out of Dallas that operates mannas who were interested in this project During further discussion Mr Moffett stated that once they get past the first phase, it's going to take approximately 2 1/2 years to design and construct the hotel therefore additional planning for other amenities would be a wise decision He stated that Mr Garfield proposed an alternative structure, whereas, currently the private sector is going to own the hotel and the City will own the meeting space, as well as, the majority if not all of the back of house space He stated that once its identified as to how much the private sector can afford, the costs of the hotel and meeting space will be identified respectively MDD Board Regular Meeting Minutes July 06 2017 Page 5 of 6 Mr Moffett stated that with regards to the project in Irving, he worked with the city and drafted the RFP which specified that the respondents show where the equity would come from He stated that although the respondent had an equity partner the partner backed out of the deal He noted that Mr Garfield had an alternative plan that didn't change what the city was responsible for, but rather changed the funding to tax exempt bonds that were not sold in the public market and were already priced with a buyer He further stated that when the bonds for the hotel were fully amortized the hotel went back to the city, but the City of Irvmg didn't want to own a hotel, so the bonds went into a trust whereas the trustee will sell the bonds and give the proceeds to the city During further discussion, Mr Moffett stated that the City of Baytown will not be obligated to such bonds and once the City has funded the meeting space they are not obligated to subsidizing that meeting space because the entire building would be run by one (1) entity He stated that all of the cash flow from the conference center would go to the hotel and the hotel owner would pay to the City an annual facilities lease payment to utilize that space He noted that the private sector would have to maintain the conference center just as they maintain their hotel, set aside capital reserves and have a capital plan every year and provide for any replacements to the conference center He stated that once the capital structure is complete and construction starts the City is not in the business of operating or owning the hotel, but as the structure proposed by Mr Garfield works in the future years the City will get the hotel back to either own it and receive its cash flow or sale it and take the proceeds Director McCartney inquired as to how many of these types of deals were done Mr Moffett stated that they've only done one of these types of deals, but noted that Mr Garfield has a public financing background and worked with a public financing authority who issued bonds with a similar structure for residential and senior housing properties Additionally, he stated that Mr Garfield worked with buyers of the bonds for the Irving equity situation but with regards to this specific project he's proposing the same structure with a company out of Dallas called ORIX to buy the tax exempt bonds to finance the hotel President DonCarlos stated that there were positive meetings with the City of Baytown's financial advisor and Bond Counsel in which the bond counsel worked on the City of Irving's project and are very familiar with how this process operates Mr Moffett noted that they don't have to go through the learning curve as the entire bond, as well as, the legal documents have been created and therefore the documents would only have to be modified for this particular project General Manager Davis stated that he's conversed extensively with the City Manager of Irving, who stated that they also worked years trying to get their project accomplished, but was unable to do so until they tried this methodology in which he s well pleased General Manager Davis stated that the Assistant City Manager of Odessa mentioned that with the assistance of Steve Moffett their hotel/conference center project is working out well also Additionally General Manager Davis stated that staff is confident in the direction in which this project is going being that this type of project is already been tested and proven to be a success MDD Board Regular Meeting Minutes July 06 2017 Page 6 of 6 Director McCartney inquired, with regards to the Island if there was a determination of what the elevation of the structures was going to be built President DonCarlos stated that the determination would be par of the engineering and architectural design process Additionally, General Manager Davis stated that as they move forward with the design of this project they will seek a master plan of the island for future planning purposes MANAGER'S REPORT a Reminder that the next Baytown Municipal Development District meeting is scheduled for Thursday, August 03, 2017, at 4.30 P M., in the City Council Chamber, 2401 Market Street, Baytown, Texas, 77520 General Manager Davis stated that a discussion regarding the Brunson Theater will be scheduled with the MDD in two (2) weeks to introduce a proposal for an architectural firm to be engaged in such project Additionally, he stated that the next Baytown Municipal Development District meeting is scheduled for Thursday, August 03, 2017, at 4:30 P M., in the City Council Chamber 2401 Market Street Baytown Texas 77520 ADJOURN A motion was made by Director Laura Alvarado and seconded by Director Robert C Hoskins adjourning the July 06 2017 MDD Board Regular Meeting. The vote was as follows Ayes Secretary Reggie Brewer, Director Charles Johnson President Stephen H DonCarlos Director Robert C Hoskins, Director David P Jirrels, Director David McCartney Vice -President Chris Presley Director Laura Alvarado Nays None Other' Director Gary Engler (Absent) Director Mary Hernandez (Absent), Director Terry Sain (Absent) Approved With there being no further business to discuss President DonCarlos adjourned the July 06, 2017, Municipal Development District (MDD) Board Regular Meeting at 5.31 P M t City of Baytown