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HomeMy WebLinkAboutCAP 2008-01-14 Item 2D - Discussion - Formation of Public Facilities District for Fort Dent Park Operation W: City Council FROM: DATE: December 6, 2007 RE: Request for the Formation 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. 1. 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 performances. 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-1 \Temp\XPGrp Wise\MEMO - PFO Fonnalion.doclS/12106/07 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 formed by Council ordinance or resolution. In most instances the local government also contemplates the approval of a charter to govern the PFD. Ill. GOVE~~ANCEOFTHEPFD The PFD is run by an independent board. The board \vould 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 po\ver 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 \vorks to limit the City's liability related to the operation of the facility. -2- C:IDOCUME-llshelleyILOCALS-lITemp\XPGrpWise\MEMO - PFD Formalion.doc/S!l2I06/07 PUBLIC CORPORATIONS, COMMISSIONS AND AUTHORITIES 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 II. 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 ii. Notice of Sale iii. Approval/Public Hearing H. Dissolution III. MUNICIPAL CODE A. In General B. Use of Funds/Assets/Credit C. Creation of Public Corporations/Commissions/Authorities i. Private Party Application ii. 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 2 I. 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. Public Corporations 3 D. 1985 Expansion of Fundin~. 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 impliedly 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 4 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 co rpo ration/ comm iss ion/a utho rity RCW 35.21.745. E. Grant of Powers. Any public corporation/commission/authority may be empowered by the enabling authority to: I. 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 5 F. Limitation on Powers. I. No power of eminent domain, II. No power to levy taxes or special assessments, III. May not lend credit or gift funds (Article VIII, 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 Enablin~ 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 co rporati 0 n/ com miss ion/a utho rity: i. 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 iii. Approval/Public Hearin~. 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 6 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 7 C. Creation of Public Corporations/Commissions/Authorities. i. Private Party 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 Mana~er 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. iii. 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. Sin~le 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; ii. 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 Mana~ement. Day-to-day operations of a particular enterprise can be managed by professionals. ii. Fund Raisin~. 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 8 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 MakinQ. 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. FinancinQ. 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 perceived benefits often occurs as follows: i. Proiect ManaQement. 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 9 vi. 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. vii. Fjnancjn~. 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 10