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City Mgm't Tells City Hall's Economic Dev'ment Comm'n That Multi-Million-Dollar Civic Center Pay-To-Privatize Transaction Has Closed Escrow; City Officials Mum To Media Locally While Seeking Voter Approval For Sales Tax Increase


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(April 30, 2016, 1:10 p.m.) -- Confirming a story reported (first again) by LBREPORT.com on April 23, the City's Director of Economic and Property Development, Mike Conway, told the April 26 meeting of LB's Economic Development Commission that financial close has occurred on LB's Civic Center transaction.

In an item agendized for an oral report, Mr. Conway stated that the transaction effectively closed escrow on April 20 at 4:06 p.m. by telephone, involving parties in various parts of the U.S. (and one in England) saying "yes" and then signing the final project agreement. Mr. Conway indicated the final agreement will be placed on City Hall's website in a few days.

City officials have been mum in releases to local media to date on the controversial transaction's financial close...while seeking voter approval for a June 2016 ballot measure that would raise LB's sales tax to 10% (currently 9% in Signal Hill/Lakewood and 8% in most OC cities) that could be spent for any general fund purposes...including annual City cost increases (giving the private operator an annual CPI escalator) that the Council approved as part of the Civic Center transaction.

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At least two business entities involved in the transaction issued releases (April 20 and 22) spotted by LBREPORT.com that quoted Mayor Garcia and Mr. Conway, webposted on "prnewswire.com," a platform used to convey press releases to multiple media outlets (visible here and here.

The Civic Center project, approved in mid-December 2015 without dissent by Councilmembers Gonzalez, Lowenthal, Price, Supernaw, Mungo, Andrews, Uranga, Austin and Richardson contractually binds LB taxpayers to pay a private operator to finance, build, operate and maintain LB's Civic Center for 40+ years. The City will pay the private operator an annual sum that will increase each year per CPI for which the City will receive a new City Hall, a smaller Main Library and the City has permanently given up part of what had previously been publicly owned property in part of LB's Civic Center, now conveyed for private development (without a publicly released appraisal of its value.)

Mr. Conway indicated that City-conveyed/now-privately owned portion of the Civic Center will include up to 580 residential units, 200 hotel rooms and 45,000 sq. ft. of retail space (with roughly 200 of the roughly 500 residential units on a parcel at 3rd St./Pacific Ave. that the City also conveyed as part of the transaction.)

Mr. Conway said that based on RFP [request for proposals] responses that the City has been getting on its downtown properties, reflecting City Council support that has reached a financial close "has generated a lot of interest in downtown properties because they see the investment in the downtown so they're very excited about that."

Economic Development Commission member Michelle Molina [a downtown property owner through Molina entities] called the project "incredible" and said she was "really blown away."

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The P3 ("public private partnership") type of transaction used by the City is similar to the arrangement that State Legislative Analyst's Office concluded cost millions more than traditional financing when applied to new LB courthouse [LBREPORT.com coverage here.] [The Port of LB will also build its new HQ in the new Civic Center but using a differently structure, design-build transaction in which the Port acquires its new building outright.]

At least two City Hall hired firms (and Mr. Conway indicated a third) involved in the project have issued releases (one on April 20 and another on April 22) indicating that the City reached financial close on the Civic Center transaction. The releases were placed on "prnewswire.com," a platform commonly used for distributing releases nationally, and include quotes by Mayor Robert Garcia and Mr. Conway.

Mr. Conway told LB's Economic Development Commission that the project had proceeded on a rapid timeline after the City was informed of the building's seismic issues in 2013...but City officials publicly discussed City Hall's seismic issues in a 2007 City Council study session, then declined (through the entire process) to seek bids on a seismic retrofit for LB's less than 40-year old City Hall, which could have been financed through a bond with fixed (not escalating) annual payments and a vote of the people.

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City management argued under Mayor Foster, continuing under Mayor Garcia (an early supporter along with LB's current downtown Council reps) that City Hall's seismic issues offered the City an "opportunity" to have an entirely new Civic Center for roughly the amount the City was spending (adjusted for inflation) for its current Civic Center. Management described LB's current City Hall (which won architectural awards when built) as "functionally obsolete" and contended LB's current Civic Center was a poor use of public space. With the exception of Councilwoman Gerrie Schipske (who voted against pursuing the transaction and exited the Council under term limits after an unsuccessful Mayoral bid in 2014), no Councilmembers voted against pursuing an entirely new Civic Center.

Mr. Conway identified the City team directly involved in the project as Financial Mgt. Dir. John Gross, City Librarian Glenda Williams, Deputy City Attorney Rich Anthony, Craig Beck and himself.

Mr. Conway indicated that construction on the new Civic Center is slated to begin in July 2016 with a groundbreaking ceremony scheduled for mid-July 2016 and City Hall occupancy now anticipated in June 2019. City Hall's annual payments to the private operator will begin after occupancy...meaning Council incumbents in districts 1, 3, 5, 7 and 9 who voted for the transaction and may seek re-election in 2018 will be able to get through that election cycle before the budget impacts of those costs begin coming due.

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Financial close occurred less than 24 hours after the City Council voted on April 19 (7-0, Mungo and Richardson absent) to entering into a contract with the new Civic Center operator for custodial, maintenance and security services. At the April 19 Council meeting, Richard Suarez, representing IAM, the city employee union representing a number of those workers, testified in opposition to the Council action and alleged that the City's action violated the Meyers-Milias-Brown Act (after a meet-and-confer impasse, now awaiting an independent fact-finders findings.) The Council went on to approve the management sought action (after Mr. Conway said delaying action could create City liability in addressing City Hall's seismic issues.)



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