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HomeMy WebLinkAboutReg 2008-01-22 Item 4C - Discussion - Formation of Public Facilities District *ALA COUNCIL AGENDA SYNOPSIS k 7 y�, Lritials ti:Em No. o1 s ,t 0 I IVIeetinz Date 1 Prepared by Mayor's review 1 Council reviews 1 t=> 01/22/08 I RAB ITEM INFORMATION CAS NUMBER: 08-004 I ORIGINAL AGLND DATE. JANUARY 22, 2008 AGENDA ITEai TITLE Formation of a Public Facilities District CATEGORY Discussion Motion n Resolution Ordinance LI Bid Award Public Hearing Other litg Date 1/22/08 Mtg Date A lts Date Altg Date lltg Date 11Itg Date Mtg Date I SPONSOR Council Mayor Adr�t Svcs DCD Finance Fire Legal n P &R I 1 Police n PTY/ SPONSOR'S The City has been asked to pursue a change in State Law to provide for creation of a Public SUMMARY Facilities District for the operation of Fort Dent Park. Council direction is requested as to whether or not there is interest in pursuing this change. REVIEWED BY COW Mtg. CA &P Cmte F &S Cmte n Transportation Cmte Utilities Cmte Arts Comm. Parks Comm. Planning Comm. DXIE: 01/14/2008 RECOMMENDATIONS: SPONSOR /ADMIN Direct staff to pursue legislative change at State level COMMTriEE No recommendation COST IMPACT FUND SOURCE EXPENDITURE REQUIRED AMOUNT BUDGETED APPROPRIATION REQUIRED Fund Source: MUCH OF THIS WORK WOULD BE DONE BY JAMIE DURKAN WHO IS CURRENTLY ON CONTRACT WITH THE CITY. Comments: Additional efforts on the part of the City Attorney could be required and could possibly result in additinnai attnrn v fees heinn inrurrpd by thp CTty I MTG. DATE I RECORD OF COUNCIL ACTION MTG. DATE I ATTACHMENTS 01/22/08 1 Informational Memorandum to Council dated 12/6/07 Information paper entitled Public Corporations, Commissions and Authorities Information paper from Preston /Gates /Ellis Questions from Community Affairs and Parks Committee Minutes from the Community Affairs Parks Committee meeting of 1/14/08 TO: City Council FROM: Rhonda Berry 1 DATE: December 6, 2007 RE: Request for the Foiniation of a Public Facilities District The City has received a request from Starfire Sports to consider forming a Public Facilities District "PFD which would own and operate Fort Dent Park. The District would then contract with Starfire Sports to operate the facility. In order for this to be a possibility, there must be change in state law. Currently cities in King County are not eligible to create PFD's. Starfire has requested that we attempt to lobby for this change this upcoming legislative session. I. WHAT IS A PUBLIC FACILITIES DISTRICT? PFD's can be established by cities for the purpose of developing certain regional facilities, such as convention or special events centers. "Regional center" means a convention, conference, or special events center, or any combination of facilities, and related parking facilities, serving a regional population constructed, improved, or rehabilitated after July 25, 1999, at a cost of at least ten million dollars, including debt service. RCW 35.57.020. "Regional center" also includes an existing convention, conference, or special events center, and related parking facilities, serving a regional population, that is improved or rehabilitated after July 25, 1999, where the costs of improvement or rehabilitation are at least ten million dollars, including debt service. A "special events center" is a facility, available to the public, used for community events, sporting events, trade shows, and artistic, musical, theatrical, or other cultural exhibitions, presentations, or perfoltiiances. RCW 35.57.020. PFD's are authorized to impose a local sales tax (0.033 credited against the state sales tax and thus can contribute new special revenues to certain public projects. Their ability to impose this tax is subject to numerous legal constraints and the PFD's independent structure can create both opportunities and issues that should be carefully considered. PFD's are municipal corporations to perform a specific function. They are able to acquire, construct, own, finance and operate one or more regional centers. They can buy and lease property; enter into contracts; impose fees for the use of their facility; impose the following C: \DOCUME— I\shelley\ LOCALS— i \Temp\XPGrpWise\MEMO PFD Formation.doc /S /12 06;07 taxes: non -voted sales tax, voted sales tax, parking tax, and admissions tax; and issue bonds. Further, as a separate legal entity, the PFD can sue and be sued, hire staff, and operate independently from the City. II. FORMATION PFD's are foinied by Council ordinance or resolution. In most instances the local government also contemplates the approval of a charter to govern the PFD. III. GOVERNANCE OF THE PFD The PFD is run by an independent board. The board would consist of five members selected by the City Council, a portion based on recommendations from local organizations such as local chambers of commerce, local economic development councils, and local labor councils. The PFD then takes over control and responsibility for the facility. PFD's are subject to the same laws that govern municipal corporations: public records laws, open meetings laws, prohibition against use for campaign purposes, audit requirements, and ethics statutes. IV. ISSUES TO CONSIDER PFD's can only be used in limited circumstances. The project contemplated must be rather large, at least $10 million. Currently, the non -voted sales tax is only available for PFD's created before 2002; thus, a change in legislation would be necessary on this point as well. Another issue which the Council should consider is the lack of control that the City would have over the PFD. Although the City holds the power of appointing members of the PFD board, the development, management, and operation of projects are in the hands of the PFD board. This lack of control also works to limit the City's liability related to the operation of the facility. -2- C: \DOCUME- 1lshelley\ LOCALS- 1 \Temp\`CPGrpWise \MEMO PFD Formation.doclS /12/06/07 EXAMPLE ONLY Information Item Provided to Tukwila City Council PUBLIC CORPORATIONS, COMMISSIONS AND AM S THE NUTS AND BOLTS MARCH 16, 2004 PRESENTED BY: CHRIS BACHA AND STEVE VICTOR ASSISTANT CITY ATTORNEYS, CITY OF TACOMA Outline: I. BACKGROUND A. Comprehensive City Demonstration Programs B. State Law Enactment C. 1974 Supplemental Legislation D. 1985 Expansion of Funding f I. POWERS /LIMITATIONS IN GENERAL A. Any Lawful Purpose B. Corporate Boundaries C. Limitation of Liability D. Governmental Oversight E. Grant of Powers F. Limitation on Powers. G. Restrictions on Assets Transferred From Enabling Authority. i. Deed Restrictions if. Notice of Sale iii. Approval /Public Hearing H. Dissolution I11. MUNICIPAL CODE A. In General B. Use of Funds /Assets /Credit C. Creation of Public Corporations /Commissions /Authorities i. Private Party Ap5fication li. City Manager Request iii. TEDD Director Review iv. Charter IV. WHY CREATE A PUBLIC CORPORATION /COMMISSION /AUTHORITY A. Single Project/Purpose B. Benefits i. Project Management ii. Fund Raising iii. Fewer Restrictions iv. Decision Making v. insulate the Council vi. Risk Reduction vii. Financing C. Are the Benefits Real i. Project Management ii. Insulate the Council iii. Risk Reduction iv. Financing Public Corporations 1. BACKGROUND: A. Comprehensive City Demonstration Programs (Federal Law): In 1966 Congress enacted public law 89 -754 known as the Demonstration City and Metropolitan Development Act 80 Stat 1255). Purpose: Congress found that there was a persistence of widespread urban slums and blight, a concentration of persons of low income in older urban areas, and unmet needs for housing and community service resulting in deterioration of quality of life. It also found that cities did not have the resources to deal adequately with these problems even with the Federal assistance provided through the urban renewal program and other grant -in aide programs, and so it created this act to provide additional financial assistance to help cities plan, develop and carry out locally prepared and scheduled comprehensive city demonstration programs containing new and imaginative proposal to rebuild or revitalize slum and blighted areas, expand housing, job and income opportunities, improve educational facilities, combat disease, reduce crime enhance recreational and cultural opportunities, etc. B. State Law Enactment. In 1970 and 1971 new legislation was enacted, codified at RCW 35.21.660 and RCW 35.21.670 in 1971 authorizing all cities to create public corporations, commissions and authorities to carry out the purposes of the DEMONSTRATION CITY AND METROPOLITAN DEVELOPMENT ACT OF 1966. In this legislation we see the hallmarks of the public corporation: Limitation of liabilities to assets of the corporation No taxing authority or powers of eminent domain No recourse to the assets of the enabling body Power to sue and be sued Power to loan and borrow funds C. 1974 Supplemental Legislation. In 1974 the legislature added RCW 35.21.730 35.21.755 to supplement RCW 35.21.660 and 670. This legislation clarified the powers of the public corporations /commissions /authorities in the administration of authorized federal grants or programs. Puu Corporations D. 1985 Expansion of Funding. Prior to 1985, public corporations /commissions /authorities were limited to programs involving either federal grants and loans or private funds. The 1985 amendment removed the limitations on use only of federal and private funds, thus allowing local governments to contribute resources and further allowing PDA's to issue tax exempt bonds. The purpose of public corporations /commissions /authorities was now stated as follows: i. improve the administration of federal grants and programs, ii. improve governmental efficiency and services, or iii. improve the general living conditions in the urban areas of the state. RCW 35.21.730. II. POWERS /LIMITATIONS IN GENERAL. A. Any Lawful Purpose. In general any city, town or county may create a public corporation, commission, or authority by ordinance or resolution to: i. administer and execute federal grants or programs, ii. receive and administer federal funds, goods or services, or ii. perform any lawful public purpose or public function. RCW 35.21.730(4). Thus, a public corporation, commission, or authority may be formed for any lawful public purpose using funds assets from any sources. B. Corporate Boundaries. Any powers expressly or impliediy given to such a corporation, commission, or authority shall not extend beyond the boundaries of the enabling authority unless through a contract with another city or county. RCW 35.21.740. C. Limitation of Liability. The enabling ordinance or resolution must provide that the liability of such public corporation is limited to its assets to prevent recourse to the enabling authority. RCW 35.21.730(4). Public Corporations D. Governmental Oversight. The governmental authority creating the public corporation /commission /authority shall, IN ORDER TO ENSURE THAT THE PURPOSES OF EACH PROGRAM UNDERTAKEN ARE REASONABLY ACCOMPLISHED AND TO CORRECT ANY DEFICIENCY: i. provide for the organization and operation of the public corporation /commission /authority (see Chapter 1.60 TMC), ii. control and oversee operation of the public corporation /commission /authority, and iii. control and oversee the funds of the public corporation /commission /authority RCW 35.21.745. E. Grant of Powers. Any public corporation /commission /authority may be empowered by the enabling authority to: 1. own and sell real and personal property, ii. contract with individuals, associations, and corporations, the state and the United States, iii. to sue and be sued, iv. to loan and borrow funds, v. to issue tax exempt bonds and other instruments evidencing indebtedness, vi. transfer any funds, real or personal property, property interest, or services (subject to RCW 35.21.747), vii. to do anything a natural person may do, and viii.to perform all manner and type of community services. RCW 35.21.745. Public Corporations F. Limitation on Powers. 1. No power of eminent domain, ii. No power to levy taxes or special assessments, iii. May not lend credit or gift funds (Article V111, Section 7), iv. Payment of Prevailing wage, v. Open competitive bidding, vi. Compliance with open public meetings and public disclosure laws, vii. Must perform public functions /purposes (Meaning such corporations must provide a public benefit and cannot service private purposes), viii.Compliance with the code of ethics for municipal officers (Chapter 42.23 RCW), and ix. Local government whistleblower laws apply (Chapter 42.41 RCW). RCW 35.21.745 35.21.757. G. Restrictions on Assets Transferred From Enabling Authority. RCW 35.21.747 was added in 1990 in response to a situation with a transfer of assets to the Pike Place Market. The legislation mandated the following whenever the enabling authority transfers real property to a public corporation /commission /authority: 1. Deed Restrictions. Appropriate deed restrictions must be included to ensure the continued use of the property for public purposes or the purposes for which the property was transferred, ii. Notice of Sale. 30 days written notice in advance of any proposed sale or encumbrance of the property to the enabling authority as well as each local newspaper of general circulation and other media requesting such notice, and ill. Approval /Public Hearing. The governing body of the enabling authority must approve the sale or encumbrance at a public meeting that has been advertised in conformance with the statute. RCW 35.21.747. Public Corporations H. Dissolution. In the event of insolvency or dissolution, the superior court shall have jurisdiction and authority to appoint trustees or receivers of corporate property and assets. Again, all liabilities must be satisfied from such assets; there is no recourse against the enabling authority. III. MUNICIPAL CODE (Chapter 1.60 TMC). A. in General. in 1994, the City of Tacoma enacted Chapter 1.60 TMC as a statement of municipal policy and procedures for the creation of public corporations /commissions /authorities. Chapter 1.60 TMC is a codification within the Municipal Code of the state law requirements; however, this chapter establishes the process for chartering of such public corporations /commissions /authorities, more specifically delineates the authority they may exercise and the limitations upon such power. For example, additional enumerated restrictions include: i. limitations on lobbying, partisan political activity, and further the election or defeat of a candidate for office (see also, RCW 42.17.130), ii. may not engage in business for profit, and iii. may not issue shares of stock. TMC 1.60.070 080. B. Use of Funds /Assets /Credit. The Municipal Code requires that all funds, assets, or credit of the public corporations /commissions /authorities shall be applied: i. toward community services and projects and activities authorized by its charter, and ii. in furtherance of a. a public program (meaning any program a public corporation may be authorized to perform, see TMC 1.60.020(24)), b. an agreement by the City, or c. an agreement with the United Stated for a Federal program. TMC 1.60.080(A). Public Corporations C. Creation of Public Corporations /Commissions /Authorities. i. Private Partv Application. To initiate proceedings to charter a public corporation, ANY PERSON OR GROUP OF PERSONS shall apply to the City Clerk. (See TMC 1.60.090 for required applicant information). ii. City Manager Request. in the alternative, the City Manager may request the initiation of proceedings to charter a public corporation. In such case, the procedure for review and approval of the charter shall be set forth by resolution adopted by the City Council. TEDD Director Review. Upon receipt of an application from a private party, the TEDD Director shall review the application, make a determination as to whether or not the applicant meets the criteria identified in the code (TMC 1.60.100), and make a recommendation to the City Council. iv. Charter. The City Council may, in its discretion, issue a charter pursuant to resolution. TMC 1.60.090, 100, 110. iV. WHY CREATE A PUBLIC CORPORATION /COMMISSION /AUTHORITY? A. Single Project/Purpose. Typically a public corporation /commission /authority is created to manage a single project or for a single purpose. For example, i. The FWDA was created by the City to redevelop the western uplands of the Thea Foss Waterway; li. The TCRA was created to manage and administer various federal loan programs, and iii. The Seattle Pike Place Market is a PDA tasked with managing and operating the Market property. B. Benefits. The perceived benefits of a public corporation /commission /authority are: i. Project Management. Day -to -day operations of a particular enterprise can be managed by professionals. ii. Fund Raisins. Some parties are more likely to provide funds to the public corporation /commission /authority because the public corporation /commission /authority is viewed as being independent from local government and because the public corporation /commission /authority can Public Corporations ensure the funds will not be used for other purposes. This may also create opportunities for partnerships with the private sector, who would otherwise seek to avoid dealing with governmental bureaucracy. iii. Fewer Restrictions. The public corporation /commission /authority is not subject to the same limitations as the enabling authority such as charter requirements and some restrictions on competitive bidding and procurement and hiring (civil service). iv. Decision Makin{. Decision making may be more expedient because the public corporation /commission /authority can react more quickly than the enabling authority. v. insulate the Council. The public corporation /commission /authority can relieve the council from the political pressure that might bear on a particular project or undertaking as well as the day to -day decision making. vi. Risk Reduction. The public corporation /commission /authority can insulate the City from liability associated with a project. vii. Financing. The public corporation /commission /authority can finance projects without impacting the debt capacity of the enabling authority through loans or bonds. C. Are the Benefits Real. The reality of the public corporation commission /authority is not necessary equal to the perception. Local government will not always succeed in realizing the benefits of establishing a public corporation /commission /authority for a variety of reasons. The success will depend upon the purpose and more importantly the financial autonomy of the public corporation /commission /authority. The down side of the percei\ .d benefits often occurs as follows: 1. Project Management. The costs of project management often are borne by the enabling authority. ii. Insulate the Council. The enabling authority has an obligation to oversee the operation and financing of the public corporation /commission /authority, and thus must still be involved in the affairs of the public corporation /commission /authority. In addition, because state law requires council approval of sale or encumbrance upon property transferred to the public corporation /commission /authority, the Council must still be involved in the policy decisions made by the public corporation /commission /authority. The Council therefore will be subject to efforts to influence the governing body of the enabling authority. Public Corporations Risk Reduction. Often, the public corporation /commission /authority will ask the enabling authority to protect it from exposure to liability as part of a development project. This is often at the insistence of a developer who wants protection from a deep pocket. i Financing. Frequently, the public corporation /commission /authority is unable to obtain financing without the guarantee of the full faith and credit of the enabling authority. Public Corporations INFORMATION ONLY PUBLIC FACILITIES DISTRICTS A. What Are Public Facilities Districts? Public faciiities districts PFDs are municipal corporations created by a city or county to perform specific statutory functions. RCW 35.57.010 (the "City PFD statute 36.100.010 (the 'County PFD Statute Under the City PFD Statute, PFDs can also be created jointly by a number of contiguous cities or by a combination of such cities and counties. Cities in King County are not eligible to create PFDs. Unlike PDAs, PFDs are limited by statute to certain purposes. PFDs created under the City PFD Statute may only develop and operate "regional centers Regional centers are defined to include "convention, conference, br special events center, or any combination of facilities, and related parking facilities, serving a regional population constructed, improved, or rehabilitated after July 25, 1999, at a cost of at least $10,000,000, including debt service." RCW 35.57.020(1). PFDs formed under the County PFD Statute have slightly broader powers. County PFDs are authorized to develop and operate sports facilities, entertainment facilities and convention facilities in addition to "regional centers" as defined above, together with contiguous parking facilities. In other words, County PFDs can develop and operate sports, convention and entertainment facilities that do not meet the $10 million threshold and other specific requirements for regional centers (note, however, that the nonvoted sales tax under RCW 82.14.390 can only be used for qualifying regional centers, regardless of whether the tax is collected by a City PFD or a County PFD). B. Why Are Public Facilities Districts Formed? PFDs are created to fulfill these statutory purposes: that is, to develop and operate regional centers or, in the case of County PFDs, to develop and operate other sports, entertainment or convention facilities. Since 1999, a number of PFDs have been formed to access the nonvoted sales tax that has been available under RCW 82.14.390 for regional centers. Because convention and special event centers typically are difficult to finance only from project revenues (i.e., they ordinarily require some level of tax or other subsidy, at least initially), PFDs have been formed to help finance these projects. C. What Powers Do Public Facilities Districts Have? The powers of City and County PFDs are provided in the City PFD Statute and the County PFD Statute, respectively. PFDs may engage in any of the following: Acquire, construct, own, remodel, maintain, equip, re- equip, repair, finance, and operate one or more regional centers (in the case of County PFDs, this authority is broadened to include sports facilities, entertainment facilities and convention facilities that don't meet the regional center definition); Buy or lease property; PrestonjGateslEllis LLP Enter into contracts, specifically including contracts with any city (or county, in the case of County PFDs) for the purpose of exercising any powers of a community renewal agency under chapter 35.81 RCW as well as management contracts with a public or private entity; As municipal corporations, to enter into interlocal agreements under chapter 39.34 RCW (in the case of County PFDs, this authority is to "enter into agreements under chapter 39.34 RCW for the joint provision and operation of such facilities Impose charges and fees for the use of its facilities; Accept gifts, grants, and donations; Impose the following taxes: nonvoted sales tax, voted sales tax, parking tax, and admissions tax (County PFDs have the further authority to impose voted lodging taxes as well as voted property taxes); Issue general obligation bonds (subject to debt limitations) and revenue bonds; Use design -build and GCCM supplemental alternative public works contracting procedures in connection with regional centers (either alone or by a City PFD in conjunction with a City); follow an RFP process to secure services by means of a service provider agreement; and follow procedures contained in RCW 43.19.1906 and 43.19.1911 for other purchases, contracts for purchase, and sales. In additional to these specific powers, PFDs have the usual powers of corporations for public purposes, including without limitation, hiring staff and suing/being sued. Limitations on authority are often set forth in the ordinance /resolution forming the PFD or in the PFD charter. D. How Are Public Facilities Districts Formed? A city or county may form a PFD by ordinance or resolution. PFDs formed by more than one city (or a combination of cities and counties) are formed by interlocal agreement. The statute does not specifically contemplate the approval of a charter to govern the PFD, but most PFDs have charters and bylaws that fulfill this purpose. E. How Are Public Facilities Districts Governed? The City PFD Statute and the County PFD Statute set forth the procedures for selecting boards of directors to govern PFDs. City PFD boards consist of five or seven members (depending on whether they are single city, multi -city or combined city- county PFDs) selected by the city council (or county commissioners), a portion based on recommendations from local organizations such as local chambers of commerce, local economic development councils, and local labor councils. County PFD boards also consist of five or seven members (depending on ratio of the population of the largest city in the county to total county population). Specified numbers of the members are appointed by the county council and, in some cases, the largest city's council and other boardmembers. In the case of the Washington State Major League Baseball Stadium PFD, specified numbers of members of the board are appointed by the governor and the county executive subject to confirmation by the county council. If a County PFD imposes a lodging tax, then the board must include a representative of the lodging industry. The authority that cities and counties have to appoint PFD boardmembers is a key control, under the City PFD Statute and the County PFD statute, over the PFD. Preston I Gates' Ellis LLP F. What Type Projects Can Public Facilities Districts Construct, Operate and Finance? As noted above, City PFDs are authorized only to do regional centers. County PFDs are also authorized to do other convention, entertainment and sports facilities and contiguous parking. Regional centers are specifically defined in the City PFD Statute. PFDs can develop more than one regional center, but each regional center must satisfy the following requirements embedded in the regional center definition. Convention, conference, or special events centers (the statute was amended in 2002 to add a definition for special events center: "a facility, available to the public, used for community events, sporting events, trade shows, and artistic, musical, theatrical, or other cultural exhibitions, presentations, or performances Related parking facilities; Serving a regional population; Constructed, improved, or rehabilitated at a cost of at least $10 million, including debt service; Conclusively presumed to serve a regional population if the total public cost is at least $10 million. RCW 82.14.390 allows PFDs to impose a 0.033 percent nonvoted sales tax to be used to finance regional centers. The tax is not a new tax from the perspective of taxpayers, as it operates as a credit against the amount that would otherwise be remitted to the state. RCW 82.14.390 places additional restrictions on regional center projects financed with this tax: The PFD must have been created before July 31, 2002; The PFD must commence construction of the regional center project before January 1, 2004; The facility must be financed over no more than a 25 -year period (because the tax expires when the bonds issued for the construction of the regional center and related parking facilities are retired, but not more than 25 years after the tax is first collected); The amount of sales tax collected by the PFD must be matched with a one -third match from other public or private sources (not including other nonvoted PFD taxes). The match can be in cash or in -kind. The match is measured against collections, and so presumably can be met (and must be adjusted) over time as collection occurs. If both a County PFD and a City PFD impose the tax within the same area, the City PFD tax is credited against the County PFD's tax. A number of legal issues arise with respect to PFDs: whether a particular obligation is a debt of the PFD for the purposes of statutory debt limitations, whether the PFD can serve as a conduit funder (or must have an ownership interest in the facility financed), what qualifies for the required match under RCW 82.14.390, what is required to satisfy the January 2004 deadline for commencement of construction, how to accommodate the unusual PFD statutory authority to issue general obligation and revenue bonds, what constitutes a qualifying regional center, and how to address the credit risks associated with sales and lodging tax backed bonds. There are additional legal, policy and financing issues that arise in any public /private transactions such as issues regarding the selection of private PrestonlGateslEllis LLP partners, gift of public funds questions, whether the project is a public work requiring competitive bidding, whether prevailing wages must be paid by the contractor, and the allocation of construction and operating risk. G. What Resources Do Public Facilities Districts Have? Unlike PDAs, PFDs have the power to impose both voted and nonvoted taxes. Like PDAs, PFDs also have authority to generate project revenues from user fees. Resources include: Charges and fees for the use of facilities Gifts, grants, and donations State sales tax credit (up 0.033% of the sales price; Regional Centers only) Voter approved lodging taxes (County PFDs only) Voter approved excess property tax levies (County PFDs only) Admission taxes (up to one cent on twenty cents of admissions charges; Regional centers) Parking taxes (up to 10 Regional centers) Voted sales taxes (up to two- tenths of 1 H. Can Public Facilities Districts Issue Tax Exempt Bonds? PFDs can issue tax- exempt or taxable bonds, either as general obligation bonds or as revenue bonds. General obligations are backed by the full faith, credit and resources of the PFD and are subject to statutory debt limitations. Any bonds backed by taxes are ordinarily viewed as debt subject to these limitations. Revenue bonds are not debt for the purposes of these debt limitations and are backed by net revenues of the project financed. PFDs may issue double barreled bonds (for example, backed by both tax receipts and net project revenues). Tax exempt financing can reduce the cost of developing a regional center or other project. There are numerous federal tax law considerations that a PFD should take into account in order to take advantage of this resource. Generally, for bonds to receive tax exempt status, the project financed by the bonds must be used for a public purpose, as opposed to a private activity, and must be repaid from public funds and not private sources. Any management contract with a private party must meet the safe harbor requirements under the federal tax code. I. What Are Examples of New Public Facilities Districts? The oldest Washington PFD is the Spokane PFD, formed in 1989 to complete the Spokane Veterans Memorial Arena (the Spokane PFD is currently planning a number of improvements including an expansion of the Spokane Convention Center; the Fair and Expo Center Grandstand to be developed in partnership with Spokane County; and CenterPlace at Mirabeau Point to be developed in partnership with the new City of Spokane Valley). The King County major league baseball stadium was also developed by a PFD (and the County PFD Statute has a number of special provisions that apply to just baseball PFDs). Preston IGateslEllis LLP A large number of PFDs have been formed since 1999 to take advantage of the nonvoted sales tax available under RCW 82.14.390 for regional centers that commence construction by January 1, 2004. Bellingham Whatcom County PFD (created July 2002). The Bellingham Whatcom County PFD is working to complete a cultural center, including the renovation and expansion of the Mount Baker Theatre. Other projects may include the partial renovation of the Whatcom Museum; and the future conversion of the existing Bellingham Library building for Museum uses, such as for a Children's Museum and exhibit space. Snohomish County PFD (formed July 2001). The Snohomish County PFD jointly provides a number of regional centers with other City PFDs: the Everett Arena and related parking facility, the South Snohomish County Conference Center to be built in Lynnwood, and the Edmonds Centre for the Performing Arts. The Edmonds PFD, the Everett PFD, and the City of Lynnwood /South Snohomish County PFD are the City PFDs formed to complete these joint projects. The Everett PFD has issued interim financing for its project in the form of commercial paper backed by a bank letter of credit. Benton County PFD (formed July 29, 2002). Following a model similar to the Snohomish County PFD, the Benton County PFD was formed to support regional center projects completed jointly with City PFDs, such as the Kennewick PFD, the City of Prosser PFD, the City of Richland PFD, and the City of Pasco PFD. The Kennewick PFD is working to develop a convention center, while the Richland PFD is developing a campus of special events facilities including a historical museum, an interpretive center for the federal Hanford Reach National Monument and a tribal cultural center. A number of PFDs in Thurston County are also working on joint endeavors. The Lacey PFD was created in July 2002 and the Capitol Area Regional Public Facilities District was formed in June 2002 (by Thurston County and the Cities of Lacey, Olympia, and Tumwater). The Olympia project is a new conference center in downtown Olympia; the Lacey project is a sports complex. Grays Harbor County PFD (formed July 15, 2002). The Grays Harbor County PFD is working with the City of Ocean Shores to develop a new convention center in Ocean Shores. The City is considering a private /public transaction with a private developer interested in building hotel and other tourism facilities in Ocean Shores. Greater Tacoma Regional Convention Center PFD (formed October 12, 1999). The Tacoma PFD consists of Pierce County as well as the cities of Tacoma, Fife, Lakewood, and University Place. The PFD has financed a new convention and trade center. The City of Tacoma has issued two rounds of commercial paper financing for the project, backed by bank letters of credit. The financing was structured to include both general obligation and revenue components, to minimize impacts on the City's debt capacity. 1 Thanks to Alison Henshaw, Administrative Assistant, Bellingham Whatcom Public Facilities District for compiling a list of all current PFD projects. The list included in this portion of the paper was drawn from Alison's materials. Preston I Gates I El I is UP Vancouver PFD (formed October 18, 1999). The Vancouver PFD is working to develop a hotel and convention center. The City has also formed a PDA to assist in the transaction, which includes a number of public /private features. Yakima Regional PFD (formed in July 2001). The Yakima Regional PFD includes the Cities of Selah, Union Gap and Yakima. The Yakima Regional PFD is expanding the Yakima Convention Center. The City of Yakima issued LTGO bonds to finance the improvements, to be repaid with PFD nonvoted sales tax revenues. Cowlitz County PFD (formed December 27, 1999). The project is a Regional Conference and Special Events Center. Kitsap PFD (formed May 15, 2000). The Kitsap PFD is involved in two joint regional center projects: a Conference Center in Bremerton and a special events center at the Kitsap County fairgrounds. The projects have been financed through LTGO bonds issued by Kitsap County, to be repaid with nonvoted sales taxes collected by the PFD. Skagit Regional Public Facilities District (created August 14, 2001). The Skagit PFD is developing a performing arts and conference center in conjunction with and on the campus of Skagit Valley Community College. The Skagit PFD sold its general obligation sales tax bonds on April 1, 2003. J. What Are the Disadvantages of Forming a Public Facilities District? Because of the limited statutory purposes of PFDs, PFDs can only be used in limited circumstances. In the case of City PFDs, and in the case of any PFD project financed with the nonvoted sales tax, projects must be relatively large (at least $10 million), must be either a convention /conference or special events center and must be underway (ready to start construction by January 1, 2004). Also, because the nonvoted sales tax is only available for PFDs created before July 31, 2002, the window for creating new City PFDs is essentially closed. A PFD could still be formed, but it would not be able to access the nonvoted sales tax, which has been the real attraction in forming PFDs in recent years. Another disadvantage of forming a PFD is the relatively low level of control the creating city or county has over the PFD and any PFD project. Although the creating municipality holds the power of appointing all or a portion of the members of the PFD board, generally the development, management, and operation of projects is in the hands of the PFD's board. Contract or charter provisions may provide for oversight and control over the PFD. The practical utility of these controls may be limited. Should the city or county desire to take steps to enforce charter or contract provisions it will need to do so in a public setting, which may prove contentious. Likewise, any action to replace board members could be contentious in a public setting. The lack of control over the project and the PFD, however, may be beneficial for the city or county as it reduces liability and financial risk to the city or county. Preston I Gates 1 Ellis LLP K. What Legal Requirements Apply to Public Facilities Districts /Public Facilities Districts? As a municipal corporation and taxing district, PFDs are subject to all laws that apply to such entities, including open public record requirements under chapter 42.17 RCW; open public meetings and other public process laws as provided in chapter 42.30 RCW; the prohibition on using PFD facilities for campaign purposes under RCW 42.17.130; to be audited by the State auditor and to be subject to various accounting requirements provided by chapter 43.09 RCW; and ethics requirements applicable to municipal officers under chapter 42.23 RCW. A PFD is also subject to constitutional constraints imposed on local governments, primarily limiting the use of public funds. Article VIII, Sections 5, 7 of the Washington Constitution prohibit the lending of public credit or gift of public funds to private entities, with limited exceptions. Furthermore, Article VII, Section 1 and Article VIII, Section 6, require that public debt be incurred and taxes levied exclusively for public purposes. Such constitutional constraints are triggered particularly when a public /private partnership is formed due to the private sector involvement. P:vARUARIOA Preston I Gates I Ellis LLP Community Affairs and Parks Committee Questions Regarding Formation of a Public Facilities District 1 By lobbying for a change in the state law, will that in any way obligate us to support the PFD for Starfire should the change be approved and becomes law? 1 would caution against requesting a legislative change for something the Council doesn't fully support or isn't ready to do; this could hurt us in the long run. Though some PFD'S have been created with no specific project in mind, those formed recently in Kent and Lewis County were for specific projects Kent's ice Arena/Performing Arts Center and Lewis County's rodeo arena. 2 In Section II Formation, what is meant by the sentence "In most instances the local government also contemplates the approval of a charter to govern the PFD Usually the formation ordinance attaches a charter- drafted by the City- that indicates how the PFD will be governed 3 Currently the city owns the land if a PFD was formed would the PFD then own the and and the buildings on the land? Once the PFD is formed, ownership of the park land would be transferred to the PFD. Any assets owned by Starfire would be purchased from Starfire. 4. Would any portion of Ft. Dent, the parks or trails, be able to remain under ownership and operation by the City? Yes. The PFD creation ordinance would define what property is transferred to the PFD and the City could reserve some of the park to remain with the City. Retaining a portion of the park would, however, diminish the amount of savings the City would realize from transferring the property to the PFD. 5. What City costs would be eliminated by the creation of a PFD for Ft. Dent Park? The City would be relieved of the approximately $60,000 currently spent on park maintenance at Ft. Dent. 6. Since Ft. Dent was initially acquired by the use of Forward Thrust funds, would the PFD have any obligation to keep a portion of Ft. Dent as open public space? The park would have to continue to be used for public recreation purposes 7. D. 1985 Expansion of Funding. How would the PFD (and Starfire) meet the (3) purposes of public corporations as amended in 1985? Do they need to meet all 3 or just one of the criteria? The three purposes of public corporations can be met by 1) improving the administration of federal grants and program; 2) improving governmental efficiency and services, or 3) improving the general living conditions in the urban areas of the state. Meeting one of the three criteria is sufficient for creation of the PFD(Reference RCW 35.21 730). 8. Governmental Oversight. If oversight of the PFD is required by the governmental authority creating the PFD, what will it cost us to provide on -going control and oversight of the funds, etc. Will we be compensated for our administrative costs involved in fulfilling this role? There is no requirement for direct City oversight. 9. Would the PFD be able to sell or transfer Ft. Dent to another party without our permission? The PFD would be able to sell or transfer that portion of Ft. Dent under its control, without City permission, as long as the new entity operated the park for public recreation purposes. 10 If the PFD declares bankruptcy, does the property return to the city? The ordinance creating the PFD will cover dissolution and can specify that the property revert to the City of the PFD is dissolved. If the district has outstanding obligations at the time of dissolution, the dissolution ordinance can be made subject to the payment in full of the outstanding debt. 11. Can the City be held liable for obligations of the PFD? No. Upon formation, the PFD is a separate legal entity 12. Of, if the property is sold to another party, could the city be given the right of 1st refusal? The City can be given the right of first refusal if that is written into the transfer agreement with the PFD. 13 If a PFD is a non profit, what are their main sources of revenue? RCW 35.57.040 provides that the PFD can charge admission charges, parking fees, sales and use taxes, and charge for the use of facilities. In addition, admission taxes and parking taxes may be imposed, though the City would forego those taxes for the PFD facility if the PFD chose to impose them. In other words, patrons would not pay parking tax to both the PFD AND the City of Tukwila. The PFD has the ability to issue bonds, and would receive a 0.033% share of the State's portion of sales tax generated in Tukwila. 14. Are PFD Governing Board members paid? Staff could only find provisions for the payment of travel expenses and per Diem (RCW 35.57 0510) 15. Risk Reduction. If the PFD asks the city to protect them from exposure to liability, and if the corporation is unable to obtain financing without the guarantee of the enabling authority, how much risk and liability would this create for the city? Once the PFD is formed it becomes its own entity. The City should not include any agreement to guarantee funds in the enabling ordinance; to do so would be lending credit for an entity over which it has no control_ Community Affairs Parks Committee Minutes January 14. 2008 Paae 2 C. Starfire Snorts Presentation on Prom-ams and Maior League Soccer Bruce Fletcher provided a brief history of the five year relationship of Starfire Sports in the City of Tukwila. Within the next few days he will provide a copy of the 40 -year public /private agreement between the City and Starfire. Chris Slatt, owner and operator, gave a PowerPoint presentation of Starfire Sports operations. This 501(c)(3) organization collaborates with a number of businesses, corporations and community groups that are primarily oriented around youth sports. He shared that Starfire Sports began with societal concerns regarding the future of today's youth. The Starfire mission is to provide world class inclusive facilities available to all youth. Starfire strives to be a platform for other organizations in order to create innovative programs. Over 1,000,000 people are estimated to visit the Starfire Sports complex each year (approximately, 150,000- 200,000 unduplicated visitors). Mr. Slatt's presentation included a timeline of milestones the organization has experienced since its inception in January 2003, including but not limited to additional fieldturf soccer fields, a 2200seat stadium, and an indoor 80,000 square foot athletic center. Other areas of discussion were: the Starfire Sports Concept (not a soccer club); Starfire Programs; Soccer Schools; Starfire Kids of Tomorrow; Soccer tournaments and other youth activities and events. Representatives from Starfire also discussed the financial assistance provided to local residents who are unable to pay associated soccer fees. The financial assistance has included waiving of individual and/or teams fees and related equipment expenses. MLS OOvortunitv. Mr. Slatt also discussed an opportunity that may be available to bring Major League Soccer (MLS) training and practice to Starfire Sports at Fort Dent Park. He explained that there are currently 14 MLS teams in the United States and Canada and the Seattle will be the 15 team. The MILS Seattle team will begin training late in 2008, and will play their first game at Qwest Field in 2009. Mr. Slatt would like to see the MLS team designate Starfire Sports as their training facility. He shared that the opportunity would give Starfire the ability to incorporate players and coaches into youth programs and schools as well as generate regional, national and international recognition. At this time, it appears as if there may be some discussion of utilizing a current practice area in Kirkland. It would cost the Seattle MLS team/owners approximately $2 million to prepare Starfire for MLS use. Mr. Slatt and Bruce Fletcher briefly discussed the effects this opportunity would have on softball players since it is likely the current softball fields at Fort Dent Park would need to be removed to make room the MLS practice field and respective facilities. Bruce said that currently, the softball fields serve 30 -40 Tukwila residents verses 200 or more Tukwila youth who utilize the facility for soccer. It appears as if the softball effect would be regional rather than local. INFORMATION ONLY. D. Formation of a Public Facilities District for Operation of Fort Dent Park At the December 10 COW meeting Rhonda Berry reported on a request from Startfire Sports regarding a request to form a Public Facilities District (PFD). Additionally she provided a memo regarding this t request and basic information regarding PFDs to all Councilmembers in early December. In summary, a Public Facilities District is a municipal corporation which creates a revenue source for the operation of a facility. Although a PFD is commonly used for the creation of new facilities, it can be utilized for an existing facility /center. The total cost of the facility must be at least $10 million. Starfire Sports meets these criteria; however, State Law currently restricts the formulation of Public Facilities Districts in King County. Therefore, the City would need to lobby the State Legislature for a change in law in order to formulate a PFD. Community Affairs Parks Committee Minutes January 14. 2008 Paae 3 If the State passed legislation which allowed the City of Tukwila to create a Public Facilities District, the City Council would need to pass an ordinance that creates the District. The Committee continued to discuss the PFD in detail. 7 Staff is requesting a formal decision from the Council if the Council is or is not inclined to support a change with the State Legislature before staff invests additional time to this request. The Committee did not determine support for or against the Public Facilities District, but recommended moving the request on to full Council for further discussion. Chris Slatt of Starfire stated that he is in support of the PFD for two reasons: 1.) The Current Starfire debt service is too high; and 2.) Other expansion problems /needs. Kimberly Matej explained that the Council would be discussing legislative priorities at the January 22 Regular Council meeting. Due to the short time frame to lobby this potential request as well as the light agenda for January 22, it might be best for the Council to discuss this issue at that time. The Committee agreed. FORWARD TO JANUARY 28 COW FOR FURTHER DISCUSSION TO DETERMINE COUNCIL INTEREST. III. MISCELLANEOUS At the opening of the meeting, Committee Chair Hernandez welcomed all attendees to a new year. As Chair she requested that staff hold the CAP agendas to no more than four items in order to address all the items prior to the end of each meeting. She noted the time constraints on CAP meetings due to Council meetings which follow, beginning at 7:00 p.m. Additionally, Joan requested the meetings to end at 6:30 p.m. in order to allow for time to prepare for the Council meeting. Meeting adjourned at 6:36 p.m. Next meeting: Monday, January 28, 2008 5:00 p.m. Conference Room #3 Committee Chair Approval I.; by KAM.