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HomeMy WebLinkAbout1985-06-17HUNTINGTON BEACH PUBLIC FACILITIES CORPORATION MINUTES Special Meeting of June 17, 1985 The Special Meeting between the City Council and the Public Facilities Corporation was called to order by Mayor Bailey at the Civic Center, Room B-8, at 6:30 p.m. on June 17, 1985. There were present from the Council: Kelly Mandic Bailey Finley Green Thomas Absent: MacAllister There were present from the PFC Board: Houseal Nowlin Teixeira Wamhoff Absent: None The meeting was called to order by Mayor Bailey. Roll call was taken as recorded above. REVIEW OF LEGAL RELATIONSHIP BETWEEN CITY COUNCIL AND PFC - HUTTON Before I launch in to my legal statement, I just want to show every one this very lovely picture which will be hung in our law library in recognition of the con- tribution of the PFC to the City for the partition in the law library to accommodate the Deputies meeting all together in one big law library, and we appreciate that very much. My opinion in regard to the PFC, and the truth, , and the expired Directors is as follows: I have reviewed the Articles of the Corporation of the PFC which I am sure you are all familar with and your By -Laws, By -Laws that permit continuation, and I have read the minutes of the past three years, of every year. I have also reviewed the relevant portion of the California Corporations Code in regards to a non-profit corporation. The jest of my review is that the Corporation is required by law and its By -Laws to handle the selection of the expired Directors and to seek approval of the City Council of their selection, and this has not been done since 1977. This omission means that none of the Directors lawfully hold office. To compound this problem, I want you to note that California Corporation Code sets an absolute maximum for the term for Directors to three years. This is California Corporation Code 5220. My suggestion to correct this situation and to maintain a continuity of your Corpora- tion is the four remaining Directors should convene and elect five new Directors. The names of the Directors, so elected, shall be submitted to the City Council for approval, as provided in the PFC By -Laws, Article 5, Section 1, Page 12. Please note, that neither Case Law, Corporation Law, or Legal Writers suggest these solutions when all Directors have exceeded their term of office. However, the rules of common sense and necessity of the continuation of this Corporation dictates this recommended course of action. I have discussed this procedure that I am outlining to you today with attorneys in the Attorney General's Office, and they have agreed that this is the only reasonable course of action available to cure this problem, short of a legal proceedings which would determine the rights of the parties, and which would entitle quo warranto action. This is my opinion. If you have any questions, I would be happy to respond. FINANCIAL REPORT OF PFC - VILLELLA I would like to give a brief status of the current financial position of the PFC. The latest figures compiled as of May 1985. Both projects have a total combined fund balance of slightly under five million dollars, of which approximately 1.2 million is restricted by the laws of the indenture as a reserve, and an additional like amount that is self-imposed by the Board. Debt service, both principal and.interest for fiscal year, runs right around 1.2 million for the PFC to retire bonds and service the interest payment. The interest rates the PFC has been earning on their funds over recent years, last five or six years, average slightly over 11%. They are currently earning in excess of one-half million per year in interest. Thereby, they receive rent payments from the City -2- equaling approximately 1.2 million from bonds at both Civic Center and Library, which is designed and does pay for debt service for any one year. In addition to that, their other source of income is their interest, which is an additional one-half million dollars. The outstanding bonds for the PFC vary in the interest rates, the coupon rates on those bonds, the highest being slightly under 6% or 5.75% interest. The latest bonds retire at the Civic Center in 1998. The bonds have a premium call provision in which that should the bonds request to be retired early, there is a premium to be paid, and that premium is one -quarter of one percent of the principal amount, plus one -quarter of one percent of the principal amount for every year retired early. I would be glad to answer any questions. CAPITAL IMPROVEMENT NEEDS FOR CITY FACILITIES - COOK I would just like to point out to the Board and the City Council that the buildings are now 10 and 11 years old respectively. There is a great deal of maintenance needs required for buildings of that size and that age. I also should point out that the City maintains about 140 other structures. When you add them all together, there is really not enough funds to maintain them all properly and certainly not enough to make improvements to them. There is tremendous competition for funds for Capital Improvements. What we have asked for on the second page of your agenda is basically projects which are not maintenance projects at all, but are either projects.which would finish the Civic Center and Central Library as originally planned, or to upgrade some of them, or remodel some of them to keep up with the change in our staffing requirements for the size and`"growth of our City. The total of those projects that we are talking about is $722,000.00. I point out again, that they are not maintenance projects, so to speak, but improvement projects and those which would either finish the building or to bring the building up to current technology. There are other projects which the PFC did not fund, which would have normally been required to complete the buildings, such as the street improvements at the Library, and the adequate parking for the Library, and the lighting which we now provide across the street on Talbert Avenue. I would also be available for questions to talk specifics about these projects, when the time comes. -3- THE MAYOR OPENED FOR QUESTIONS WAMHOFF - I think the legal status of the directorship is at stand. I think we should all thank you for being invited, and take leave of the meeting immediately, and consult our attorney like I wanted to before. Seek our legal ramifications and meet later on. I am not an attorney, and I do not think any one of us is an attorney. We are just lay people. Thank you very much. NOWLIN - In as much as you have indicated there is a conflict of interest in serving both the PFC and the Council when you resigned from the PFC, I think that there is also a conflict in the attorney for the Council advising the PFC and their status. It would appear to me, the most prudent thing to do would be for us to consult with the attorney. GREEN - Mrs. Houseal, are not you an attorney? HOUSEAL - Yes. I feel we should send this to our attorney and see what he comes up with. I understand we have to abide by state law. We were never told that we had to be re -appointed. WAMHOFF - I wonder, if legally, we could get hold of the attorney, if that would be in the record? HOUSEAL - No, we have to remain in the Corporation. We can not walk away and leave the Corporation to disolve. WAMHOFF - Do you understand what I am saying? If we are not Directors per se, can we legally call our attorney? BAILEY - We received this report about the same time that you did, I assume. Did you receive it before this evening? NOWLIN - What report? BAILEY - From the City. We just received this last Thursday or Friday. It is not something that we knew. Having served on the Board, I did not know it at that time either, and no one had informed us of it. I'm sure that we do not want to be in an adversary position. All that we would like to do at this time is make sure that -4- things are going in the right direction according to the law. That is all we are concerned with. NOWLIN - I think we are all in the same catagory. You just received this report this evening? BAILEY - No, Thursday. NOWLIN - O.K., whenever you received it. All that I have received up to this date, up until the time I walked in here tonight, is merely a notice of the meeting with no indication. It says here, you are notified that a Special Meeting of the Huntington Beach Public Facilities of the City of Huntington Beach, California, is called for and will be held at the Civic Center Conference Room B-8, 2000 Main Street, Huntington Beach, California, 6:30 p.m. on Monday, June 17, 1985,.for the purpose of a joint meeting with the City Council of the City of Huntington Beach, to discuss Huntington Beach Public Facility Funds. Now this is the sole notice that I have received. I had no background. I had no courtesy,as the President, of having any communications from the Council, the City Attorney, or anybody. This letter was from Don Kiser, and I am not even sure who called this Special Meeting. BAILEY - I believe Councilman MacAllister was at your last meeting, and he indicated at that time that he would like to have us all meet. NOWLIN - That is right. But, as far as calling a Special Meeting, I do not know who called the Special Meeting. TEIXEIRA - Councilman MacAllister said that, but he did not ask us. N014LIN - No, he indicated by Minutes that he would like to get together in a study session, or some such thing. BAILEY - We had made a request for you to meet with us. I do not understand your objection to that. NOWLIN - I have no objection, except of course this was done as a great inconvenience to us. It was at a great inconvenience to me, and was so inconvenient that at least three of your members could not even make it. Well, three of them did not answer -5- roll call. So anyway, I think that is the reason why we need to consult our attorney. BAILEY - As I say, we do not want this to be a confrontation. NOWLIN - Oh no, no confrontation! BAILEY - Yes, if you want to do that.. We will meet at another time, or we can do it by communication, or whatever. I know you only meet every two months. There are some concerns. WAMHOFF - I would like to make a suggestion, if you do not mind. Why don't you members meet with us at our next regular meeting? We should have our fifth member. By that time, we should have legal counsel established. HOUSEAL - I do not believe we will get a fifth member until we get this straightened out. Legally, we can not vote for any member. NOWLIN - I do believe that the By -Laws say that we can remain in office until our replacements are selected. HUTTON - The Directors shall hold office, however, NOWLIN - Again, for the continuity of the organization. HUTTON - Of course, but that is of a limited duration. WAMHOFF - May I ask you what is the significance in this investigation of nosing in to the records. HUTTON - They are public records. WAMHOFF - I understand, but why was this not brought up before? See,I have been a member for longer than before 1977, I am sure. HUTTON - Then you are most certainly aware of the By -Laws of your organization, and its requirements that you refer your reappointment every year TEIXEIRA - I am not sure, but I thought some one said, It had to be approved by the City Council, but that is all. I do not know what happened after that. Don, I would presume would know, would you not, Don? HUTTON - I will read you, if I. may, the Amendment to the By -Laws that you adopted. This is the Amendment to the By -Laws of the HBPFC, Page 1 of 1, dated October 29, 1975. Approval of Directors. Directors, elected or appointed in accordance with the By -Laws of the Corporation, and in accordance with the provisions of the Articles of Incorporation that the Directors of the Huntington Beach Public Facilities Corporation are the only members of the Corporation, shall be deemed approved by the City Council of the City of Huntington Beach, California, unless expressly disapproved by Resolution transmitted or delivered to the Directors of the Huntington Beach Public Facilities Corporation, within thirty (30) days after notice of such election or appointment to the City Council. The Minutes did not reflect either in the City Council or your By -Laws bringing to the attention approval of the City Council for the last seven years. The Corporation Code also says, you may not hold office beyond three years, unless you are re-elected and approved by the City Council. I encourage you to seek your own legal advice. I would be happy to supply your counsel with my opinion and the text of my comments. KELLY - Mayor, may I ask a question please regarding the comments made by Financial Services? As I recall, you did mention Dan, please correct me if I am wrong, that there is some $500,000.00 annual yield from surplus interest. VILLELLA - Approximately over one-half million earned on funds. KELLY - Are you prepared to answer the question, how much surpl.us is held by PFC over and beyond the normal and expected reserve to satisfy its meaning for being related to security of the bond payments? VILLELLA- Total fund balance is approximately 4.9 million, of which the bond indenture requires a reserve of approximately 1.2 million. The Board themselves have restricted an additional like amount of 1.2 million, for a total of 2.4 million, a usable amount of 2.5 million. -7- KELLY - That leaves 2.5 million surplus beyond what would normally be expected? VILLELLA - Yes. That interest income figure is obviously earned on the full 4.9 million. KELLY - It seems to me Madam Mayor, if I may continue for a moment, and ladies and gentlemen, we have really two areas to discuss. Number one, is the rolls of the commission of PFC and the rolls of the Council in the fiscal management of this City, as it relates to the Public Facilities properties. We have been running into a wall in understanding each others roll. Based on the fact, that there is quite a recognizable surplus over and beyond what would be called for for the normal portions of conducting their business, we feel that some of that large overage should be considered by the PFC for some improvements and other things that these buildings are crying for, not the least of which is the list that was identified and alluded to by Paul Cook of $722,000.00. The Police Department, Community Services, I guess the law offices have gotten their money, Facility Maintenance, Landscape, Parks and Equipment Systems which are broken out. I guess there is a copy there. It seems to me that our fundamental reason for discoursing this evening is to see if there is a relationship with our responsibility of running our portion of the City and your responsibility of running your portion of the control of these funds on behalf of the City. If there is not some more reasonableness of flexibility in discussing it, and it is not a matter to me really of legal support on one side or the other, its a purely business function for you folks to explain to us why you husband that beyond normal reserve, rather than considering some of our appeals for help, like our elevators, for example. NOWLIN - I think it would be better for us to terminate the discussion, until we do get a new clarification on our status. Because there is really no sense in discussing it, if we are not even legally in office. GREEN - I would like to see this matter handled as quickly as you can get the legal advice from your attorney. NOWLIN - I concur with you, and as quickly as we can do what we need to do, we will get back to you. -8- THOMAS - I know the City wants to get this money because they see it is there. My question is, and the way I operate my business is, that I have 6% money versus 10% money, but I do not operate that way. When I have an excess of money, I pay off my land, I pay off my bills, and I do this. I was wondering why having this 6, 10 or 12% money, I would still like to have all this paid for. Rather than us putting this money some place, if that is what must be done with it, but take this money and pay the note off. NOWLIN - Just for your information, we do have an outstanding Resolution, and it has been our custom to buy bonds when we can buy them prudently at a reasonable price. We still have an outstanding authorization right now to purchase $200,000 worth should.they come on the market, and we share your very feeling, and that is the feeling that has been.expressed by the Board of Directors at many of our meetings. THOMAS - I would like to see the money go toward paying the note off rather than see it go in to parking or some redevelopment. WAMHOFF - Mr. Thomas, we would like to releave our bonds early. We would like to, say in fifteen or twenty years from now, use the surplus money to buy all the bonds back, and say to the City of Huntington Beach, it is all yours, we did our service, our Corporation is disolved. HOUSEAL - The reason we have not done that is the premium you mention It is not economically feasible to pay over 100, when the bonds are selling on the market for 78, and we will buy them, we have a Resolution to by them at 60. We have been trying to do the best we can do with the money for the City. THOMAS - It seems like you are doing a good job BAILEY Thank you so much for coming. That is all the time we have. 10