HomeMy WebLinkAbout04/06/1993, 11 - PERFORMING ARTS CENTER �I�IIII�N�I�III�I�III IIOIII
city r MEETING DATE:
hi u c� or san lugs oBispo -�
COUNCIL AGENDA REPORT ITEbb-OWeER: I 1
FROM: William C. Statler, Director of Finance
Prepared by: Linda Asprion, Revenue Managerye
SUBJECT: PERFORMING ARTS CENTER
CAO RECOMMENDATION
Adopt a resolution authorizing the Mayor to execute a memorandum of understanding with
California Polytechnic State University (Cal Poly), to deposit the City's share of the
constructions costs ($3.5 million) for the performing arts center into the State managed
Surplus Money Investment Fund (SMIF) where the City will continue to earn interest at a
similar rate to our current investments in the Local Agency Investment Fund (LAIF).
DISCUSSION
Background
On November 13, 1989, the City of San Luis Obispo, Cal Poly, and the Foundation for the
Performing Arts entered into a Development Agreement for the construction of a
performing-arts center to be located at Cal Poly. Under the terms of the agreement, the
cost of designing and constructing this project is to be shared as follows:
■ City: one sixth
E Foundation for the Performing Arts: one sixth
i
■ Cal Poly/State of California: two thirds
On March 17, 1992, the Council authorized payments totaling $435,400 towards the City's
share of architectural and engineering (A&E) fees for the performing arts center. This
amount has been disbursed leaving the City's remaining commitment at $4,264,360. Of this
remaining commitment, $3.5 million is allocated for construction costs with $764,360
remaining for Group II equipment. The Development Agreement specifies that the City's
share of the construction costs will be paid prior to the signing of the construction contract.
However, Cal Poly is requesting the City to fund our share of the construction costs now.
Why does Cal Poly need the funds now?
The City has received a letter from Cal Poly (Attachment A) indicating the need to finalize
the funding package for the performing arts center. With the State's portion of the cost
appropriation earmarked for 1993-94 from a bond sale, the State will be receiving an interim
loan from the Pooled Money Investment Fund. The Board governing the Pooled Money
Investment Fund is meeting on April 9, 1993 to grant loan approval to the State and
requires all the funding from the non-state partners be,fulfilled prior to granting loan
approval.
ii1N71 �IVIIIIIII�IIn ����� city of San tins OBISp0
NMI COUNCIL AGENDA REPORT
It is imperative that loan approval be granted at the April 9, 1993 meeting to ensure the
preservation of the State appropriation. Once loan approval is granted, the State Public
Works Board will issue the "Proceed to Bid" documentation. Issuance of the 'Proceed to
Bid" during the 1992-93 fiscal year assures the State appropriation for 1993-94.
What are the conditions of the memorandum of agreement?
Per the memorandum of understanding (Exhibit 1), if Council authorizes the $3.5 million
to be transferred into the Surplus Money Investment Fund (SMIF) the City will continue
to earn interest on the funds at a rate similar to our current investment in LAIF and the
interest will be remitted to the City semi-annually. Just as LAIF is the City's State managed
investment pool, SMIF is the counterpart for Cal Poly. At the State level both investment
pools are administered by the State Treasurer,which provides a very high quality investment
in terms of safety, liquidity, and yield.
Additionally, the City will receive an accounting from Cal Poly's controller of the funds on
a quarterly basis indicating the amount disbursed for construction costs and the principal
balance remaining. If any portion of the principal is remaining at the end of construction
those funds will be returned to the City. Should for any reason the construction of the
performing arts center not occur the funds would be immediately returned to the City.
Are there any other alternatives?
Yes. The City could obtain a stand-by letter of credit from our financial institution, Bank
of America. This letter of credit would require the City to place $3.5 million with the bank,
earning an interest rate approximately 1 1/2% less than if the funds were in LAIF (which
would decrease interest revenue by approximately $75,000 over a-two-year period), plus the
City would incur the cost for the letter of credit of about $50,000. Although the City has
obtained a Letter of Commitment from Bank of America indicating their willingness to issue
the letter of credit, this alternative is not recommended because of the additional cost and
loss of interest revenue the City would incur.
FISCAL IMPACT
The 1991-93 Financial Plan provides the City's four year Capital Improvement Plan which
indicates the City's intent to debt finance the construction costs for the performing arts
center. However, on March 13, 1993, as part of the eight point budget strategy for closing
the City's projected $3.3 million deficit for 1993-94, the Council approved the use of fund
balance (reserves) to fund construction of the performing arts center in order to reduce
future annual debt service costs. As such, the construction costs for the performing arts
center will be funded from available reserves.
illlil►�►ilfdiilllllllPuu►I��U��I City of san lois oBispo
A COUNCIL AGENDA REPORT
SUMMARY
The performing arts center project is proceeding as planned. It is time for the funding
package to be finalized to meet the requirements for the State appropriation earmarked for
1993-94. In order to meet all of the requirements in a timely manner staff is recommending
the deposit of the City's share of the construction costs ($3.5 million) into the Surplus
Money Investment Fund.
ATTACHMENTS
A. Letter dated April 2, 1993 from Frank Lebens,Vice President for Administration and
Finance
B. Resolution authorizing the Mayor to sign the memorandum of understanding with
Cal Poly
I
11-3
® AttachmentaL ,
C A
POLY
C:ALIFVKNiA POLYTF.l:HN1C STAT.UNIVE0111
SAN l.ius Mimi, CA 93407
11us:xrm A TAIKs NVISIoN
April 2, 1993 (S05).7i6.2171 FAx (F05) 756.7560
John Dunn
City Administrative Officer
City of San Luis Obispo
P.O. Box 8100
San Luis Obispo, CA 93403-8100
Performing Arts Center
As you are aware, we are nearing the time frame whereby the funding package for the Performing Arts Center
needs to be finalized to enable us to meet the requirements for the Proceed to Bid. With the State appropriation
earmarked for 1993194, it is imperative that the Proceed to Bid be issued this fiscal year and that the funding
commitments from the three parties involved be in place before the Public Works Board will authorize the
Proceed to Bid.
In my communication to you on March 22, it was anticipated that the State would be issuing bonds and that the
i Public Works Board would take action on the Proceed to Bid at its May 14 meeting. Alternatively, the interim
State funding mechanism will be a loan from the Pooled Money Investment Fund, pending the bond sale to
ensure the preservation of the appropriation. As I explained to Bill Stader last week, the Pooled Money
Investment Board will be meeting on April 9, and staff to the Board has advised that the Board will not act on
the loan without documentation supporting the Development.Agreement provisions relative to the non-state
partners in the project specifying that either a letter of credit or funds on deposit with the CSU Controller are
in place.
Accordingly, as I have advised Bill Statler, we need to have the commitment from the City of San Luis Obispo
in place prior to the April 9 meeting of the Pooled Money Investment Board with the draft documentation
submitted for review by April 6. 1 understand that this will be an agenda item for your April 6 City Council
meeting, and the Council will be considering the Development Agreement options. As specified in my
March 22 letter to you, the letter of credit or deposited funds should be in an amount adequate to satisfy the
City's share for construction,construction management, and contingency(less any advances for the design phase
and less Group Jl equipment funding). This amounts to approximately$3.5 Million. Should you choose the
letter of credit alternative, the draft accompanying my March 22 letter may be used as a model. For your
convenience,I have attached a draft Memorandum of Understanding stipulating the deposit arrangements should
you elect to deposit funds with the Controller of The California State University.
Please let me know if there is anything I can do to further expedite the process.
Frank T. Lebens
Vice President for Administration and Finance
Enclosure 1
II — �
ATTACHMENT B
RESOLUTION NO. (1993 SERIES)
RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO
ENTERING INTO A MEMORANDUM OF UNDERSTANDING AGREEMENT
FOR CONSTRUCTION PHASE FUNDING OF THE,PERFORMING ARTS
CENTER AT CALIFORNIA POLYTECHNIC STATE UNIVERSITY,
SAN LUIS OBISPO
NOW, THEREFORE BE IT RESOLVED, the City Council of the City of San Luis
Obispo agrees to
enter into the Memorandum of Understanding(Exhibit 1)with California Polytechnic State
University for the construction phase funding of the performing arts center and the Mayor
is authorized to execute the agreement on behalf of the City.
BE IT FURTHER RESOLVED THAT, the Director of Finance is authorized to
disburse $3,500,000 into the Surplus Money Investment Fund for the purpose of funding the
City's portion of the construction costs for the performing arts center.
Upon motion of _ seconded by
and on the following roll call vote:
AYES:
NOES:
ABSENT:
the foregoing resolution was adopted this day of . 1993.
Mayor Peg Pinard
ATTEST:
City Clerk Diane Gladwell
APPROVED:
tt rn
1 -5
Exhib�
MEMORANDUM OF UNDERSTANDING
AGREEMENT FOR CONSTRUCTION PHASE FUNDING OF
PERMZiLNG ARTS CENT TU
AT CALIFORNIA POLYTECHNIC STATE UNIVERSITY, SAN LUIS OBISPO
This memorandum of understanding by and between the City of San Luis Obispo
(hereinafter referred to as the City) and the Trustees of The California State University
(hereinafter referred to as the Trustees) entered into this 7th day of April 1991, whereby both
parties agree to the following:
In compliance with the provisions of the Development Agreement for the Performing Arts
Center dated December 5, 1989, and amended on Apr!) 25, 1991, the City agrees to transfer
funds in the amount-of three million five hundred thousand dollars ($3,500,000) to the Trustees
of The California State University.
These funds are for the exclusive purpose of meeting the City's commitment relative to
the construction phase,expenditures of the Performing Arts Center project.
Funds are to be invested in the Surplus Money Investment Fund(SMIF)by the Controller
of The California State University.
All interest earned is to be remitted to the City on no less than a semi-annual basis.
The California State University Controller is to provide quarterly reports to the City
Finance Director as to the expenditures against the funds and the balance remaining..
In the event construction of the project fails to take place, all funds on deposit per this
memorandum of understanding will be returned to the City.
For the Trustees of For.the City of
The California State University: San Luis Obispo:
Mary Garretson Peg Pinard
Controller Mayor
APPROVED AS TO FORM:
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