CITY OF LAREDO

                                                       WORKSHOP

                                                       M2001-W-001

                                         CITY COUNCIL CHAMBERS

                                             1110 HOUSTON STREET

                                               LAREDO, TEXAS 78040

                                                   FEBRUARY 1, 2001

                                                             5:30 P.M.

 

I.          CALL TO ORDER

 

            With a quorum present Mayor Elizabeth G.  Flores called the meeting to order.

 

II.        PLEDGE OF ALLEGIANCE

 

            Mayor Elizabeth G.  Flores led in the Pledge of Allegiance.

 

III.       ROLL CALL

 

            In attendance:

 

            Elizabeth G.  Flores,                                                                 Mayor

            Alfredo Agredano,                                                                    Council Member, District I

            Louis H.  Bruni,                                                                        Council Member, District II

            John C.  Galo,                                                                          Council Member, District III

            Johnny Amaya,                                                                         Council Member, District IV

            Eliseo Valdez, Jr.,                                                                     Council Member, District V

            Jose A.  Valdez, Jr.,                                                                 Council Member, District VII

            Juan Ramirez,                                                                           Council Member, District VIII

            Larry Dovalina,                                                                         City Manager

            Cynthia Collazo,                                                                       Assistant City Manager

            Jaime Flores,                                                                            City Attorney

 

            Motion to excuse Mayor Pro Tempore Guerra.

 

            Moved:  Cm.  Bruni

            Second:  Cm.  Agredano

            For:     7                                               Against:  0                                            Abstain:  0

 

IV.       STAFF REPORT

 

            1.  Presentation and discussion regarding the Development Agreement between the City of Laredo and Arena Ventures, L.L.C., for the Laredo Entertainment Center, with possible action.

 

Carl Hirsh, representative from Stafford Sports, emphasized the main points discussed in the Development Agreement.  A complete copy of the Development Agreement can be found at the City Secretary’s Office.

 

            2.  Presentation and discussion regarding the Operating Agreement between the City of Laredo and Arena Ventures, L.L.C., for the Laredo Entertainment Center, with possible action.

 

Carl Hirsh, representative from Stafford Sports, emphasized the main points discussed in the Operating Agreement.  A complete copy of the Operating Agreement can be found at the City Secretary’s Office.   

 

Questions from Council Members:

 

Cm.  Ramirez

 

Cm.  Ramirez stated, “That gentleman over there said that the ball park in Arlington is having a great success, but that is a major league baseball park, if that is what he meant.  This is going to be an arena that will house a western professional hockey league, and we cannot compare to that area.  You have a great balance Fort--Worth Metro Plex in that area and there are more people out there than here.”

 

            Mayor Flores asked, “What is the question?”

 

Jeffery Leuschel, from McCall, Park Hurst, and Horton L. L. P. stated, “My reference is solely to sales taxes that are generated and not making any comparison other than we will provide in the bond documents the ability to use sells tax to pay off the bonds early to the same extent that they did in Arlington.” 

 

Larry Dovalina, City Manager stated, “Is it viable to assume that you are going to have the capability to pay off the bonds in a shorter period of time than what you are actually issuing the bonds for?”  He continued to say “when we made the projections for the bond, in this particular place, I think that we used a figure of a little bit over 2 million dollars and we were not projecting that under the current structure, the sales tax is coming at a little over $3 million dollars, so we are already capable of starting to accelerate the process.”

 

Mayor Flores stated, “It doesn’t have anything to do whether it is professional basketball, baseball or hockey--it is a separate issue.”

 

Cm.  Ramirez stated, “Another thing that I am not comfortable with is the twenty-five year lease with Arena Ventures.  I am not in agreement with that.  Also, like Councilman Bruni said and mentioned about the 1.2 million, the cost of roadways, curb gutters and whatever infrastructure-- that somebody is going to pay the other half. That is still quiet an expense. And, actually, what we are doing is that we are starting a good business for somebody else that is going to run it for twenty five years and, basically, we actually won’t have any say so, other than we will probably get peanuts out of it.  That is the way that I feel.”

 

            Mayor Flores stated, “Thank you for your personal opinion.” 

 

Cm.  J. Valdez

 

Cm.  J.  Valdez asked, “What percent are the architects going to be charging for the design?  Is that on the total construction, or how are they figuring that out?”

 

Kiki de Ayala, representing Arena Ventures, stated, “The fee is approximately 6 ˝ percent, that is for architect, engineering, as well as the consultants like sound and a variety of other consultants that he will have to use.”

 

Cm. J.  Valdez asked, “Is that 6 ˝ of the $35 million?”

 

            Larry Dovalina, City Manager, answered “no, of the construction cost only.”

 

Cm.  J.  Valdez asked, “I am just curious why--is this coming out of whose budget?  The offices for the construction--The city is going to have their own office at the location?” 

 

Carl Hirsh stated, “This is for the city.”

 

            Cm.  J.  Valdez asked, “What is the percentage of hiring local people?”

 

Carl Hirsh stated,” What the developer has agreed is to take the city goals as they use them on all other projects and attach that as an exhibit to this.”

 

Larry Dovalina, City Manager, stated, “I think that addresses the issue where he talks about hiring qualified sub-contractors within the city as stated in the sentence itself, and the majority of our subcontractors are considered minorities except in Laredo.”   

 

Cm. J.  Valdez questioned, “On page 17, 5.1 it states in the center of the paragraph the project developer shall select the general contractor.  The project developer shall consult with the city with respect to such selection but the project developer shall have the sole right to select the general contractor.  Now on 3.3F it says that the services of the general contractor with the city’s approval?”

 

Carl Hirsh stated, “If you look at the rest of 5.1, it talks about being from a qualified list--contractor meets the General contractors qualifications which is what 3.3F is referred to.  And it will be an exhibit to this which talks about the qualifications that any contractor has to have, and a list of potential list of contractors that meet that qualifications.”

 

Cm.  J. Valdez questioned, “My question is, and I know that they are going to present somebody, but do we have approval, because over here on 3.3F it says that we have approval?”

 

Carl Hirsh stated, “ Yes, we have approval over the list.  We have to agree to what the qualifications are for the contractors and the list that is submitted in the exhibit.  Once we approve that, and we agree to that with the developer, they can pick any one of those.”

 

Cm.  J.  Valdez questioned, “As far as change orders, will you explain that?  All change orders come before council or only certain amounts?” 

 

Carl Hirsh stated, “The only change orders that have to come to council are ones that you are willing to pay for.  Other than that anything that you guys are responsible for-- money your representative has to run it through your process to approve those.  Any change order to the project that the developer does as long as it meets the program standards and the quality construction standards, it is his nickel so he can do it.”

 

Cm.  J.  Valdez stated, “Please define pre opening expenses.”

 

Carl Hirsh stated, “Pre-opening expenses are hiring the staff, doing some trade ads, uniforms, training, grand opening, a variety of other issues.”

 

Cm.  J.  Valdez stated, “Where it states project developers shall make all necessary arrangements to permit at the operator selection.  The operator shall have partial occupancy prior to substantial completion.  Is that for the offices?” 

 

Carl Hirsh stated, “It is for the offices, it might be for the food service supplier, it could be the cleaning crew that needs to set up their space in advance and any and all of those.  A ticket office might go in early.”

 

Cm.  J.  Valdez stated, “Would you please explain force majeure.”

 

Jeffery Leuschel, from McCall, Park Hurst, and Horton L. L. P.  stated, “force majeure is what you would commonly refer to as acts of God -  such as storms, some acts of destruction.  In some instances materials not being available.” 

 

Cm.  J.  Valdez questioned, “Is the hockey equipment part of the contract?”

 

Carl Hirsh answered, “Yes, that is projected to be part of the F F & E budget.”

 

Cm.  J.  Valdez questioned, “How many days is the City going to get the facility?

 

Carl Hirsh stated, “Twenty-two.” 

 

Cm.  J.  Valdez questioned, “How did we come up with that number? That was before I was here, so I’m just curious.”

 

Mayor Flores answered, “There were several ways that we came up with the number of  days.  I’ll ask Mr. Hart if he remembers, but one of the things that we did was, we went back to the Civic Center and the different Community events verses the times that they actually leased it for something but a community event where we would use--i. e. graduations and those sorts of things and came out with those day.  Remember, even though it is a community event, it is not free to the city; it is not free to the operator; it is not free to the guy that has to turn on the lights because there is still an expense.  Just like Cm.  Ramirez wanted us to waive a fee for a particular Mother’s Day program at the Civic Center--and there is no such thing as waive the fee.  It has to come out of somebody’s budget.  And so we figured that we could afford twenty two days.” 

 

Cm.  J.  Valdez questioned, “Are we going to submit a calendar, and how many days prior are we going to do this?”

 

Carl Hirsh stated, “There will be a booking procedure that will come in place.  It talks about the primary tenant getting the first route of dates and then there will be a booking procedures once the management company is on board, and then that will be through the City representative and the manager of the building who will work out how that will go forward.”

 

Cm.  J.  Valdez questioned, “Is the contract with Arena Ventures for 25 years?”

 

Jeffery Leuschel, from McCall, Park Hurst, and Horton L. L. P. stated, “It is twenty-five years, and then there are two five-year options to extend that the Operator may exercise.” 

 

Carl Hirsh added, “Just on that term issue, the outs for the city, if you will--if the operator is not performing their duties and operating and maintaining the building to the quality arena standards, obviously they can be terminated. It is not a life long sentence without repercussions.”

 

Cm.  J.  Valdez questioned,  “Now another question, and this is something that I have been talking to a lot of the community, a lot of police officers--and I don’t know if they would agree to--Arena Ventures would agree to hire these people, but as far as security-- I know that is says they have the right to hire whoever they want.  I have been talking to a lot of police officers, and they like to see that they hire certified peace officers.  That is first choice of security.”

 

Carl Hirsh stated, “It is an issue that we have talked about, and the operator is willing to obligate itself to the extent that they use peace officers based on the type of event and to the number that they have.  They will look first to hire Laredo Police Officers before any others, in other words, county, sheriff or anything other than that.  So they have agreed to that. They have agreed to the extent that when they use them, they will look first to the Laredo off duty police officers. ”

 

Mayor Flores stated, “And without hurting the community in the private sector if there is a time when the private sector security is qualified, or maybe there will be a mix or something, but certainly that can be arranged.”

 

Cm.  J.  Valdez stated, “I would like to have the Peace Officer be the first choice.”

 

Larry Dovalina, City Manager, stated, “There are some events that require that--and I think the operator is well aware of when those events are and generally they’re the large public events such as concerts and stuff like that where they need to have a different kind of mix.  And I’m sure that he would be prudent to that, and I’m sure that is what he is saying when he suggested that.”

 

            Cm.  J.  Valdez stated, “I would like to see it for every event, that’s the thing.”

 

Carl Hirsh stated, “One of the things that I think that is important for all of us to focus on is--the idea here is for us to get as many events as possible.  And the more things that we require the operator to do that increases the cost of the building on an operating bases, limits the amount of events and then we will run into all sorts of different problems.  So I think that is one of the things that we cannot loose sight of.”

  

Cm.  J.  Valdez, questioned, “In reference to the 1.2 million dollars that Mr.  Ramirez  just mentioned that we are going to pay half and Arena Ventures is going to pay half for the roadway?”

 

Carl Hirsh answered, “yes.”

 

Cm.  J.  Valdez questioned, “Is their half coming out of the 4 percent or is it coming out of the 35 million?”

 

Carl Hirsh stated, “It is coming out of the 35.5.”

 

Cm.  J.  Valdez questioned, “So in other words, we are actually paying the whole amount.  Is that correct?”

 

Carl Hirsh stated, “That’s one way to look at it.  The way you need to look at it, though, is for every penny that goes over 35.5, they are reaching in their pocket.  So by putting this in the budget, what they are doing is making it a lot tighter and a harder budget to be able to produce the product that we are looking for.   Yes, they are going at risk.  At the end of the day we will know whether or not we paid for it out of the project budget or whether or not they paid for it.”

 

Cm.  J. Valdez questioned, “As far as the method of construction, once the general contractor is hired, I guess this is more for--Arena Ventures hopefully can answer it.  They are going to hire their own consultant to make sure that the their the contract is going--is that coming out of the 4% since you are hiring the person it is not coming out of the $35?”

 

Kiki de Ayala, representing Arena Ventures stated, “That, we will be hiring our own project consultant to be there on site, and to my understanding the City will be hiring their own as well.”

 

Cm.  J.  Valdez questioned, “That is my concern, if we are going to pay you 4%, and that is off of the total project or the $27?”

 

Kiki de Ayala, representing Arena Ventures stated, “Off the total project, less some line items, I think”.

 

Cm.  J.  Valdez stated, “That is why I’m saying if you are going to have your person to manage the construction, I guess from the architect and the general contractor.  I just want to make sure that it is coming out of your budget.”

 

Cm.  J.  Valdez stated, “I just wanted to make sure that from Arena Ventures’ viewpoint, that the Arena will work even if you don’t have hockey for what ever reason the hockey is unsuccessful, or the league.”

 

Dennis Hart stated, “In regards to could the arena survive without the 35 to 40 days that the hockey might bring?  It would be a much more difficult task, but there are other things at our disposal that we would try to plug in there in its place.”

 

Cm.  Eliseo Valdez, Jr.

 

Eliseo Valdez submitted a list of concerns for the record from his constituents to the City Secretary’s office.

 

Cm.  E.  Valdez asked, “How and what way can the City participate in the profit sharing of whatever they are going to make at the Arena on the sliding scale.  And, then, our legal reps here gave us some information on that, and can you elaborate on that--on the benefit that we exercise in the tax exempt bonds and how we are still going to make money on the ticket sales and the parking fees that are going to go to the capital fund?”

 

Jeffery Leuschel, from McCall, Park Hurst, and Horton L. L. P.  stated, “In order for the bonds to be issued on a tax exempt basis, the regulations of the treasury require that none of the revenues generated by the arena be available as part of the general funds of the City. Thus, without getting too technical or complicated, if they are part of the general funds of the City, the Internal Revenue Service deems those available to pay debt service on the bond.  We tried to structure this in a way where the sole revenue that could be looked at as being available to pay the debt service is sales tax.  In an effort to have some of those funds flow into the City, we have restricted those funds to flow into the Arena, and that is the $1 seating charge and the $1 parking charge, the share of the naming rights. All are anticipated to fund the City’s contribution to the renewal and replacement account of $125,000 a year that Mr.  Hirsh referred to earlier.  If there are surpluses in addition to $125,000, there will be a special operating account established in the bond or authorization instrument to be held for additional uses with respect to the arena.  To do any more than that would cause a potential problem with the tax exemption of the bonds and would cause the City to incur additional interest cost in trying to sell the bonds at a taxable basis rather than a tax exempt basis.” 

 

Cm.  E.  Valdez stated, “Now, I do know that Estrada Hinojosa and our staff used very conservative figures in looking at the economic sales tax, and we, the City, do have the option of retiring the bond as early as possible because the figures were quiet conservative, and we expect to do a lot better than we have in the past years.”

 

Jeffery Leuschel, from McCall, Park Hurst, and Horton L. L. P. stated, “I’ll speak for my partner who you all know, Mr. Tart, who will be doing the bond transaction, but the bond document will provide for that kind of flexibility.  If we generate--the ball park in Arlington is a perfect example.  They’re going to pay those bonds off next year because the sales taxes generated well-exceeded expectations and thus they are able to retire those bonds many years prior to their maturity.  And we will provide for that in our transaction as well, that flexibility.”

 

Cm.  E.  Valdez stated, “In looking at the bond requirement and Mr.  Carl Hirsh already elaborated on that and just to touch on it again as far as having negotiated the risk during the operating and developmental stage do you feel quit comfortable with the bond that we came up with and the formula that was used to come up with that figure?”

 

Carl Hirsh answered, “Yes, and we will talk about both different pieces of it.  In the Development area we have 2 ˝ million dollars in a letter of credit direct pay to the City.  We have half of their development fee at risk, so we feel that there is a substantial amount of cash that’s actually there in the budget.”

 

Jeffery Leuschel, from McCall, Park Hurst, and Horton L. L. P. stated, “Plus, Carl is--I may add--if the budget plus off cost exceeds $35.5, the letter of credit that Mr.  Hirsh referred to will be increased by the amount of the overage.”

 

Carl Hirsh stated, “In addition, there will be a contingency in the actual budget of $35.5 so we know that there will be some cushion there to be able to bring this in.  So we feel good that we are in the right spot in an effort to get that done.  On the operating side what we have is five years of operating history.  Right now we don’t have any operating history, which is why we wanted some protection.  So we got 2 ˝ million dollars, which lets us operate that building for at least a year flat out.  If they walk away on day one, the city is protected.  We have money in which to be able to operate that and go find someone else who will go at risk and operate it for us. But we are protected because that money is there.  After a five year operating history, first we will be building up our reserves through the various funding sources that we have so we will always have some money in reserve to do that as well as the initial operating reserve that we do as part of the bond documents.  So, yes, we feel very comfortable that we have protected the City’s downside in both cases.”

 

Cm.  E.  Valdez stated, “The formula that we used to come up with the capital fund--you know, the taxpayers voted for the economic sales tax.  The facility itself is going to be an asset for the community and for the taxpayers. Are we satisfied and comfortable with the formula that we used to come up with the figures so that at the end of the contract with Arena Ventures, or whoever it may be, that we have a facility as good as when we started?”

 

Carl Hirsh stated, “The figure that we used of $250,000 - $125 per partner, if you will, is in the initial five years.  There is a five-year review of that figure to make sure that we are still on target, in terms of keeping the building up the way we want it as the owner and the operator is performing.  So after five years, we will be reviewing that, as well.   After our last meeting it was requested that we get a chance to look at the facility fee and the parking fee after five years.  Arena Operators has agreed that we will do that.  We will revisit the issue very five years.” 

 

Cm.  E.  Valdez stated, “What about matching the improvements around the arena itself by the development group?  Are they going to be matching our development as we go across and make sure--we don’t want a facility sitting out there in the middle of nowhere.  It’s not in the middle of nowhere, but they are talking about additional development around the facility itself.”

 

Carl Hirsh stated, “The arena developer has a 42 month option on the surrounding land right now.  If they exercise that option and deliver to us within that 42 months a development plan, then we are satisfied that there is going to be some development happening, and we are on our way as long as it is an improved development by the City.  If, however, they fail to do that for reasons other than the world has fallen around us and development is not happening anywhere, which they will have to come and prove to us at the City, then they will have to continue that letter of credit for, not only the five years, but for an addition 24 months on top of that.  So they are going at risk for an additional two years of that letter of credit if they are out there by themselves, and they are not going to survive because there is no other development around.” 

 

Jeffery Leuschel, from McCall, Park Hurst, and Horton L. L. P. Attorney – “Just so there is no confusion, we have two (2)  2 ˝ million dollars letters of credit.  The one that we just heard recited is the Operator Letter of Credit the one we have to envision covering O & M cost at the arena.” 

 

Cm.  E. Valdez stated, “And you touched on it earlier, the language in the contract to keep them from selling their interest to a smaller outfit with less credential without our approval.  You already talked about the assignment clause.  Can you elaborate on that?”  

 

Carl Hirsh stated, “The bottom line which I know that you are interested in is they need the City’s consent.”

 

Cm.  E.  Valdez stated, “One more question came to my mind as we were talking about security and certified police officers.  And I agree with that, but we are a growing city, and as a growing city we feel some growing pains, and as big as we are and as fast as we are will we have something in the contract.  Or what will we have in the contract? I know this question should be to SMG or to Arena Ventures to keep anything from coming in there that is going to disrupt any public security or public safety. Let’s say we have not experienced some of the things, like the big cities have problems with hate groups who want to hold a convention here or things like that.  Can we have something in the contract to prohibit anything like that?”

 

Carl Hirsh stated, “I think there is a two-part answer to that.  The first is that they have to do things that are within the quality arena standards and lets not forget that.  That is very important.  The way they operate this building has to be in a quality way that is viewed by other buildings and they cannot.  Number two is you internally have a permitting process on how you allow things to happen and not happen in the City.  So you have the ultimate control in what happens.”

 

Cm.  Johnny Amaya

 

Cm.  Amaya stated, “Can we share the revenues and if not explain why.”

 

Jeffery Leuschel, from McCall, Park Hurst, and Horton L. L. P., “There are two ways to answer that question.  Yes, you can share the revenues if you are willing to give up the ability to issue tax-exempt bonds.  And our direction was that you wanted to issued tax exempt bonds.” 

 

Carl Hirsh stated, “That is the legal issue.  There is also a business issue that goes with that where the developer and the operator is taking all the risk.  So if you want to participate in the profits, they may want you to share in the risk. So one of the things that was directed to me very early on by City Staff is you didn’t want any risk. So we focused very hard on not putting the City in any situation for risk.” 

 

Jeffery Leuschel, from McCall, Park Hurst, and Horton L. L. P. stated, “This is why you have a team negotiating transaction.”

 

            Cm.  Amaya questioned, “How are we doing on the arena football?”

 

Dennis Hart, with Arena Ventures stated, “In fact, we have a couple of gentlemen here tonight that are interested in the arena football venture, and we just came back from the western professional hockey league all star game in meetings, and it just so happens that several of the owners of WPHL also hold arena football franchises. So we are at a good opportunity to get their thoughts on how to make it succeed and I think that we are bullish on it.  I think that we will make that happen.”

 

Mayor Flores stated, “And let’s not forget the Spurs commitment to do their exposition games here in Laredo.”

 

Dennis Hart stated, “I will tell you from my perspective that I have been blessed to be involved in a lot of big and complicated and sophisticated business deals, and this is by far the most complicated and sophisticated business that I have ever worked on.  And from day one that we sat down and first approached the Mayor and bounced the idea off of her, it was clear that the City’s position then, from day one, and from the City’s position to this meeting tonight that the City wanted no finance risk in this transaction.  I think that these document bare that out.  I will have to tell you from our stand point there was a couple of stages in the negotiation where we had to back up and take a deep breath and search deep in our souls and say do we really want to do this and the answer is “yes”.   We think that this is a fairly constructed deal, and we are ready to move forward.”

 

Cm.  John Galo

 

Cm.  Galo stated, “I wish you could elaborate a little bit more on the 22 days.  I don’t think that you spoke here.  Now we can walk in there rent free is that what I understood?”

 

Carl Hirsh answered “Correct, rent free.  All you pay are out of pocket expenses to operate the facility on that day.” 

 

            Cm.  Galo stated, “So we are going to pay the light on that day.”

 

Jeffery Leuschel from McCall, Park Hurst, and Horton L. L. P. stated, “Yes is the answer, but you do get all the revenues on that day.”

 

Cm.  Galo stated, “Do we have a clue at this time, in your past experience, what it will cost?”

Carl Hirsh stated, “It really does depend on the kind of event and what kind of load you have to do.  It is very early to do that.  I don’t think it would be in the operators best interest to make it cost prohibited for you to go in there and do an event.  We have their commitment to work very hard with the City to make that work.”

 

Cm.  Galo stated, “When we say no commercial events, how about if we have a free event?”

 

Carl Hirsh stated, “That, as long as it is not something that they would be able to bring in for money, I think that the answer is, you can do that.  If you are going to bring in a concert because you got someone to sponsor it and it is something that they could have gotten and made money on, then they will have a problem with that.”

 

Cm.  Galo stated, “Let’s take and example--what was the one where the supplies for the school--Johnny Canales, when they filmed that and all you had to do is bring school supplies to get in.  It was held at West Martin Field and it was free.” 

 

Mayor Flores stated, “Somebody paid the $10,000 fee.  He had a corporate sponsor.” 

 

            Cm.  Galo stated, “We still have the ability to ask don’t we?”

 

                        Carl Hirsh stated, “Absolutely.  You will always have the ability to ask.”

 

            Cm.  Galo stated, “We are not exclusively prohibited from doing that?”

 

Carl Hirsh stated, “This is the layout of the twenty two days--is basically to take of the things that were in the Civic Center;  that is why we built in the twenty two days such as graduations, boy scout jamborees, police functions, etc.”

 

Cm.  Galo stated, “So if we donated it or gave it over to all the schools for their graduations, they pay the fee which is whatever- staffing and lights, air-conditioning, insurance - to run this. We in turn can give them the revenue from the concession.  It is all in the profit from the concessions stand.”

 

Carl Hirsh stated, “It would be the net part of it, parking and then the concessions. Again, if they sell t-shirts for the graduating class – any of those kinds of revenues.  If they have sponsors for temporary signage, that kind of money would go right back to them.” 

 

Cm.  Galo stated, “ I wanted to go over a little bit on the letters of credit.  You spoke about it earlier.  The first on the development phase--it doesn’t go into effect until they have acquired a franchise.  Is that the way that I understand it?”

 

Carl Hirsh stated, “It’s one of the conditions precedent to the bond sale.  It has to be in place 30 days before we sell bonds as well as the proof that the hockey team has been acquired.  The same 30 days before we sell the bonds.  It is simultaneous.  They both have to be in place 30 days before the bond sale.”

 

Cm.  Galo stated, “Will we have recourse if the league folds?”

 

Carl Hirsh stated, “The way the documents are written is that they have to have a hockey team to be able to commence the operation agreement.  Once the operation agreement goes into place, if they don’t have a hockey team, they really can’t take over the operation.  I think if something like the league folding happened we would sit down in good faith with the operator and try to figure out a resolution.  When they in good faith built the building and the league folded around them.  I think that there is a question between a business issue and a legal issue there.”

 

Cm.  Galo stated, “And that LC either goes away or just gets transferred into the Operation LC?”

Carl Hirsh stated, “There will be a second LC because there is an overlap between the Development Agreement and the Operation Agreement. When you have had substantial completion of the Development Agreement you actually will be operating already, so for a period--”

 

Cm.  Galo stated, “And the operating also, it doesn’t stair step down?  It is the 2.5 million over a five year period?”

 

Carl Hirsh said “Correct.”

 

Cm. Galo stated, “If they don’t exercise their options, an additional two years--so they could have it potentially seven years exposure.”

 

Carl Hirsh stated,  One thing--I want to go back in terms of their exposure during the development period.  We talked about what our protection was.  In addition to the money that they put up, they will have purchased a hockey team by that time.  They spent money over this development period so it would be very difficult as a developer just to pick up and walk away with a little problem.  I think that the exposure will deal if there is a major problem.  I think that is an exposure in any development field.” 

 

Cm.  Galo stated, “Where did the twenty-two days come from?” 

 

Jeffery Leuschel from McCall, Park Hurst, and Horton L. L. P. stated, “Again, I think that the Mayor’s response was looking at the Civic Center use and coming up with that use based on the Civic Center use.” 

 

Cm. Galo stated, “Let me just ask, then, if by agreement that would entitle us to some more days.  Say they don’t have it rented and we say, hey, we have something we would like to use?

 

Carl Hirsh stated, “I am not going to speak for them, but I will speak from my experience as being an operator from facilities across the country. If a municipality came to me and I had a dark day, why wouldn’t I give it to them.”

 

Cm.   Galo stated, “Going back to that also what we talked earlier.  If the ice was up and it was a free day, a city day, would we be able to use the ice or open it up to ice skating?” 

 

Carl Hirsh stated, “That would be one of your twenty-two days.”

 

Cm.  Galo questioned, “That would not be in contest with their revenue because if they used it as a revenue source?”

 

Carl Hirsh stated, “You would not be charging for it, as I understood it.  Is that correct? I don’t remember getting into this conversation when we talked to the operator.  I don’t know their plans for skating in the arena.  I do know that we talked about the city being able to use it as a skating rink as one of your twenty-two days.” 

 

Cm.  Galo stated, “I just want to make sure--let’s just say that the year has gone out and we have only used eleven (11) days and we have 13 days left and there are ten days left in the budget, can we just open it up?  The ice is up.  We want to make sure that there is not going to be a conflict.”

 

Carl Hirsh stated, “I don’t believe that is going to be a conflict.”

 

Cm.  Galo questioned, “We know we have ten days left in the budget and they would know in advance their bookings would have been there already right?”

 

Carl Hirsh stated, “I said they are going to set up a booking procedure where we get the operating plan nine (9) months in advance.  They will talk about how the primary tenants gets its dates, and they will talk about how they are going to book the rest of the buildings, and you are next on the list.  You would go through that, and one of the things that you might want to do is tentatively say, this year we think that we are only going to use it 15 days, there are several left, so let’s see what you are doing for Christmas.  The Hockey team is going to play there. Maybe there are days that the hockey team is not playing there; we want to hold it for the city.”

 

Jeffery Leuschel, from McCall, Park Hurst, and Horton L. L. P.  stated, “If you do not use your twenty-two (22) dates in a year, they do not carry over to the next year. 

 

Cm.  Galo questioned, “Do we have any idea at this point how many parking spaces we are going to have?”

 

Carl Hirsh stated, “No is the answer.  But they will provide us with a parking plan as the design moves forward and it has to be done in compliance with the City Codes and Ordinances.”

 

Cm.  Galo stated, “When we pay off the bonds, and lets say we go back and look up the revenue streams and the tickets seasonal, can that criteria change?”

 

Jeffery Leuschel from McCall, Park Hurst, and Horton L. L. P. stated, “that criteria can change.”  

 

Carl Hirsh stated, “Because the bonds have gone away and they are no longer outstanding.  But let’s remember one thing--we voted the sales tax for this project and once the project is paid off then the tax ceases.”

 

Cm.  Galo stated, “Even though the institution was built with tax bonds we are free of any other obligations as far as that so our criteria, when we look at the ticket price or something else--did you clarify it with a twenty five year lease, with two five year extensions?”

 

Jeffery Leuschel, from McCall, Park Hurst, and Horton L. L. P. stated, “That is correct.”

 

Cm.  Galo stated, “What happens if we come in at $34 million?  Do we save the money?” 

 

            Carl Hirsh stated, “ Yes, the City will save the money.”

           

Cm.  Bruni

 

 Cm.  Bruni stated, “Arena Ventures is a LLC Limited Liability Corporation, do we have a problem with that?”

 

Carl Hirsh answered, “I will speak from a business prospective and let Jeff speak to you from a legal prospective.  It is very common that these projects are done by Limited Liability Companies or Joint Ventures or Limited Liabilities Companies throughout.  That is done even in the major stadiums from a business prospective to protect liability in both the development and in the operating from the parent companies.  From a business prospective, it is something that I have seen everywhere in the country and how these things are done.”

 

Jeffery Leuschel, from McCall, Park Hurst, and Horton L. L. P. stated, “We were concerned because of asset issues and alike, and that is why we have two letters of credit; that is why we have reservations on payments of the development fee; that is why we have some of the other protections, monetary protections, built into the transaction because, yes, it is a concern, and yes it is common, and we felt that this is the best way to mitigate some of those asset concerns.” 

 

Cm.  Bruni questioned, “Has the project developer submitted an audited financial statement?” 

 

Carl Hirsh stated “no, not to my knowledge.”

 

Cm.  Bruni questioned, “Does the project developer have an audited financial statement?

 

Carl Hirsh stated, “I do not know.”

 

Cm. Bruni questioned, “Will the project developer submit an audited financial statement?”

 

Carl Hirsh stated, “We will follow up with him and get you the answers to those questions.”

 

Cm.  Bruni stated, “In terms of infrastructure cost of the City verses cost of the 20 acres that are being donated, where are we with those numbers?  What are the numbers?  What is the cost that the city is going to incur in infrastructure, verses the cost savings that the city will save by accepting 20 acres?”

 

Beto Ramirez stated, “The total cost of the roadways are approximately 1.2 million dollars, and that will include the construction of the streets, curb and gutter, lighting and sidewalks.” 

 

Cm.  Bruni stated, “So the total cost of the City’s infrastructure is going to be 1.2 million  - that includes everything?” 

 

Beto Ramirez stated, “Arena Ventures will pick up half of that cost and the City will pick up the other half.  It will be through interest earnings on the bonds.”

 

Jeffery Leuschel, from McCall, Park Hurst, and Horton L. L. P.  stated, “It is intended that the interest earnings on the construction fund will cover the City’s portion of the street improvement cost.  The agreement so provides.”

 

Cm.  Bruni stated, “So let’s make it clear now, there was a 1.2 million dollar figure thrown out there, and you said, Mr. Ramirez, that half of that is Arena Ventures and the other half is the City’s obligation; is that correct?” 

 

Beto Ramirez, Budget Director, stated, “Yes sir.  For further clarification the $600,000 that Arena Ventures is responsible for is in the project budget.  It is part of the $35.5 million dollars.  The City’s portion of $600,000 comes from the interest earnings that the bonds will have throughout the life.” 

 

Cm.  Bruni stated, “You spoke about Arena Joint Ventures—has a two month option to secure how many acres around the 23 acres?”

 

Carl Hirsh stated, “Forty-two, I don’t know exactly how many acres.  Actually, it is 60 acres.”

 

Cm.  Bruni stated, “So I guess since the City is putting a $35 million dollar building there, the sixty acres should be worth a lot of money.   I know that it is business, but business is business, and we are also business people up here.  Maybe we should have some kind of--or how shall I put it where it is not to offensive--some kind of partisans with your acreage over there also--Work out some kind of agreement where…?

 

            Mayor Flores questioned, “personally?” 

 

Cm.  Bruni stated, “The City is going to be the anchor guy there.  We are putting a $35 million dollar facility there, and they have the option--and me being a businessman, I just think this way; I am programmed to think this way.  They are going to have acreage around there, and we know that they are also going to have risk.  I guess I’m thinking like my mother when she does and oil an gas lease.  She always kind of pushes it to the limit.  It is just something to throw around there.  If there will be any way that they can be partners with us, maybe we can be partners with them. We can put that on the back burner.”

 

Mayor Flores stated, “And develop a building that doesn’t mind having 10,000 people at one time in its neighborhood.”

           

Cm.  Bruni stated, “I would also like to request that the Webb County Sheriff’s Office also be involved. We would prefer to have Certified Police Officers.” 

 

Cm.  Bruni stated, “If I may finish my thoughts here--where was I? With the security? The traffic?  We had a good presentation of the traffic.  I want to make sure that Jacaman is completed and is in place before the facility is open.  That is a must.  We look at signalization, of course, on both ends of Jacaman.  We have a very popular establishment on the corner of Jacaman and McPherson that is already a nightmare.  Not that I am out at 2 a.m. to see the traffic leave, but it is a nightmare there already.  So you can imagine if there is something going on both sides what kind of congestion that will create.  And I have discussed it with traffic, so they are aware of my concern.  And the last, Mayor, and this comes to pass, and we do have this facility, I think that it is going to speak well before the council and speak well for the citizens that approved it, and it will just be another jewel that will be sitting in District II that I so proudly represent.”

 

Cm.  Agredano

 

Cm.  Agredano questioned, “I have about three questions.  First of all, just for my understanding, on the first page of the Operating Agreement on the engagement of the operator it says that two additional extension terms of five years each may be exercised on the agreement.  Now, does the city have a say so on that?”

 

Carl Hirsh stated, “I believe it is their option.”

 

Cm.  Agredano questioned, “After the 25 year lease or term, or we pay off the bonds, is Arena Venture going to replace all the cooling and heating because it is a twenty five year lease and they are going to be twenty five years old?”

 

Carl Hirsh stated, “That is exactly the reason that we have the capital renewal and replacement fund, to make sure that we don’t end up in a situation twenty-five years from now, all those things go at once.  We have preventative maintenance that they are responsible for on a long-term basis and as things deteriorate and need improvement, that they request in terms of the agreement, they will have plans to replace all those major systems.” 

 

Cm.  Agredano stated, “Parking spaces for the size of the this Arena, 10,000 seat arena--how many parking spaces are we talking about?”

 

Carl Hirsh stated, “First of all, we are talking about 8,000 permanent seats with the ability to go to 10,000 with that.  I think it is up there somewhere in the range of 2,000 parking spaces.”

 

Cm.  Agredano stated, “The reason I ask is because sometimes you go to the shopping mall or one of the big stores and you go around and around and you can never find a parking space for about 10 or 15 minutes.  When you do find one it is about two blocks away from where you are going.”

 

Carl Hirsh stated, “It is in no ones interest to not have enough parking and make it convenient for people to park. So as the design moves forward, the Arena Developer along with your team and the design consultant that the city has--we will have to look at how it works best to be able to fit into those traffic flows that you laid out.”

 

Cm.  Agredano stated, “I have two teenagers, a daughter and a son, and four more that will be teenagers in a couple of years, and my question will be hours of operation since we have a curfew law being that concerts go on beyond 12:00 o’clock and 1:00 o’clock.”

 

Carl Hirsh stated, “I don’t know that we can add to that idea today. A lot of that depends on the act itself.  I’m sure that once an operator gets in there and understands local ordinances, and they will work with the police department. Most concerts are over well before 12 o’clock.”

 

V.  ADJOURNMENT

 

            Motion to adjourn.

 

            Moved:  Cm.  Bruni

            Second:  Cm.  Agredano

            For:     7                                               Against:  0                                            Abstain:  0

 

I hereby certify that the above minutes contained in pages 01 to 18 are true, complete, and correct proceedings of the City Council Meeting held on the 1st day of February 2001.

 

 

 

 

                                                                                    ___________________________________

                                                                                    Gustavo Guevara, Jr.

                                                                                    City Secretary