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FC092018SPECIAL FINANCE COMMITTEE MEETING September 20, 2018 Elected Officials Present Councilmember Dave Teitzel (Chair) Councilmember Diane Buckshnis Councilmember Kristiana Johnson Councilmember Fraley-Monillas Mayor Dave Earling Staff Present Scott James, Finance Director Carrie Hite, Parks, Recreation & Cult. Serv. Dir. Jeff Taraday, City Attorney Jeannie Dines, Recorder Guests Ferrell Fleming, Executive Dir, Senior Center Daniel Johnson, Capital Project Manager The meeting was called to order at 1:01 p.m. in the Brackett Meeting Room. Senior Center Lease Amendment Proposal Ms. Hite referenced materials in the packet and reviewed: • History o Current arrangement ■ Operational support: $75,000/year ■ No fee lease for current building ■ City maintains grounds ■ Senior Center maintains daily needs ■ City helps with capital items • January 2015: City entered into an option for a 40-year ground lease with Senior Center o Terms include ■ Senior Center right to demolish building and build new ■ Senior Center would pay for complete cost of new building ■ Senior Center would pay for 50% cost to construct parking lot, and maintain parking lot ■ City would use free of charge from 4-10 PM Monday -Thursday and other mutually agreeable times ■ Term for 40 years with renewal option for 15 more • Senior Center Proposal o Updates financial goal to exercise option; from $7.5M to $12M, or 75% of total cost o Parking lot and street frontage improvements for design, construction and maintenance become 100% responsibility of the City o Adds easements (still in process) for parking lot and utilities o New legal description defines the footprint of the building o Adds language to Section 4.1.1 to allow City Council to approve demolition and construction based on financial viability o Adds some minor cleanup language • Drawing of new Waterfront Center with Waterfront Redevelopment • Waterfront Redevelopment site plan • Drawing highlighting the footprint of Waterfront Center building • Drawing of the full project build out • Full project cost (original cost estimates from schematic phase, includes escalation, contingency, etc. Component I Costs Design Waterfront Park 1 $248,987 09/20/18 Special Finance Committee Minutes, Page 2 Design Parking Lot $ 116,040 Design Street Frontage $ 106,131 Design Ebbtide $ 203,510 Construction Park $2,129,118 Construction Street Frontage $ 291,554 Construction Ebbtide Walkway $1,371,033 Permitting, Eng. Environmental $ 325,000 Total 1 $6,145,386 • Parking Lot and Frontage Improvements Parking Lot Design Cost 50% Senior Center $ 116,040 $ 58,020 Parking Lot Construction $1,354,013 $677,006 Frontage Improvements Design $ 106,131 $ 53,065 Frontage Construction $ 291,554 $145,777 Total $1,867,736 $933,868 If Council interested in supporting lease amendment, City will need to identify and include other 50% ($933,868) in 2019 budget. Any in -water work must be done during July -mid October fish window Senior Center Due Diligence o Building replacement feasibility study — in packet o Campaign feasibility study o Waterfront Center Campaign update o Waterfront Center operational pro forma Mr. Fleming reviewed: • History of partnership between the City and the Senior Center • Edmonds, Mountlake Terrace and Lynnwood mayors were ex-officio members in 60s and 70s of South County Senior Center Board. • Property purchased using $300,000 HUD grant and $100,000 local match • City's Strategic Action Plan identified need for new building o Senior Center and Parks & Recreation appointed as lead to accomplish that • Many issues with the current building including water intrusion and plumbing problems • Thrift store relocating in December near Goodwill • Permitting process delay until April, operations continue at Senior Center until then Mr. Johnson provided campaign highlights: • Raised to date: $10,907,719 toward revised goal of $16M • Met $1 M Rick Steves community challenge • Rick Steves committed another $1 M, total $4M. • $1,027,500 in recent gifts • Submitted conditional use and shoreline development permits • Security community space to house programs during transition year • Plan to break ground spring 2019 (subject to fundraising and permitting) • Fundraising Sector Goal Raised Balance Leadership (individuals) $6,100,000 $4,707,500 $1,392,500 Board Board reserves $ 400,000 $ 370,121 $ 125,000 $ 29,879 ($125,000) Government $6,500,000 $4,000,000 $2,500,000 Foundations $2,500,000 $1,490,000 $1,010,000 Community Campaign $ 500,000 $ 215,098 $ 284,902 09/20/18 Special Finance Committee Minutes, Page 3 Total 1 $16,000,000 1 $10,907,719 1 $5,0092,218 • Recently learned Verdant request of $2.5M was not funded • Potential $500,000 from the City if the Council agrees to the lease agreement • $500,000 request pending with Snohomish County • Potential sources of additional Funds o Leadership Gifts — Goal $1.5M o Campaign Co -Chair Gary Haakenson — Woodway campaign event September 30 o Board — Goal $50,000 ■ Asking board members (who are able) to increase their original pledge o Government - goal $2.5M ■ State, Count, City o Foundations — Goal - $1 M ■ Hazel Miller, McEachern, Satterberg Foundation, local Tribes o Community Campaign — Goal $250,000 ■ Campaign Breakfast, October25 ■ Business Campaign — in partnership with the Chamber — "We're In" ■ Service Clubs Mr. Fleming reviewed • Existing ground lease developed in late 2014. o Concept of project at that time much simpler and did not envision the Waterfront Redevelopment. Original idea for beach restoration was the result of architect team • Have secured spaces throughout the City for most Senior Center programs during construction • One State grant has time limits, needs to be spent by June Mr. Johnson explained • Most campaigns require some type of financing due to pledges o Waterfront Center is trying to raise all funds via gifts and pledges but anticipate will need financing ■ Pursuing both bank financing and other options. ■ Semble publication: "The Essential Guide to Financing Options for Non -Profits" identifies seven options for financing and pros and cons of each (will provide electronic version) o Senior Center Board authorized engaging a business consultant who assists non -profits in preparing bank packages for financing ■ Will also do a market analysis on assumptions on revenues o If financing is required, debt service will be paid by pledge payments. Mr. Fleming reported on work being done by the Senior Center Finance Committee (Councilmember Buckshnis is on a leave of absent from that committee), new rental opportunities, and determining whether the thrift store will more profitable onsite or off -site. Mr. Fleming, Mr. Johnson and staff responded to questions and discussion followed regarding frontage improvements not anticipated in original ground lease, current responsibility for building maintenance, no plans to do a new feasibility study, timing to raise remaining funds, Senior Center coming to Council to exercise lease once have documentation of how to reach $16M, plans to continue fundraising during construction, including assumptions in proforma, including financing scenarios in proforma for Debt Service Net of Pledge Receivables instead of "to be determined," funding source if the Council agrees to fund the parking lot and frontage improvements, large Park projects where funds are committed, prioritization of Park and Public Works projects. Discussion continued regarding savings if a City crew constructed the sidewalk, the Senior Center not planning to ask the City for a bridge loan, specific language in the ground lease, the Waterfront Center building envelope, the City's responsibility for landscape maintenance, why membership dues and program fees are down, capital campaign contributors becoming operating fund donors, use of the 09/20/18 Special Finance Committee Minutes, Page 4 building by the Senior Center and the City, status of the Ebbtide declaratory judgment (Mr. Taraday provide update in executive session), interest rate and terms for personal loan, annual O&M, landscaping plan, future of the mature trees near the street, and the square footage of the existing and new thrift shop. Discussion continued regarding preserving building space intended for thrift shop for future growth, building design in response to sea level rise, flood insurance, Council approval of a temporary construction easement, Senior Center's hope to conclude the lease agreement by yearend, doing in - water work during the fish window, utility easement, timing of Council approval of temporary construction easement and demolition, and Council decision points related to the amended option and new ground lease, temporary construction easement, and approval to demolish and construct. Council requests included: • Include more detail on government grants in proforma • Add financing scenarios in Debt Service Net of Pledge Receivables in proforma • Include updated operational proforma assumptions • Include easement exhibits • Include Senior Center timeline, WG Clark letter, and updated feasibility Action: Schedule for full Council in November 20 for discussion and potential action. The meeting was adjourned at 2:47 p.m.