The item was among ten that Mayor Garcia collectively introduced by saying they "should go rather quickly." [The Mayor doesn't decide "how quickly" items go; Councilmembers do.] Councilman Jeannine Pearce moved, Councilwoman Mary Zendejas seconded, and the Council voted 9-0 to approve.

To hear what took place (including Mayor Garcia's introduction), click here.

The action came just minutes after city management delivered a report on the City's fiscal outlook indicating revenue shortfalls so large that they would require Council cuts to all city departments and affect taxpayer services.

The Council action, recommended by city management, will let Plenary Properties Long Beach, LLC delay payment to the City of $7.3 million that it's contractually required to pay to receive City conveyance of the "mid block" parcel (roughly where the old City Hall stands) for the LLC's private development,. The conveyance was originally supposed to occur in November 2020 but for issues city management says relate to delays in demolishing the old main library, was extended to September 2021. The May 19 agenda item indicates the LLC now seeks an additional delay in conveyance of the "mid block parcel" to reflect COVID-19 economic conditions that have the made the LLC's developing the mid block parcel less desirable at present than originally anticipated.

[Scroll down for further.]

City manageement's agendizing memo visible at this link, acknowledged that if the Council agrees to the conveyance delay sought by the LLC, it could result in a further delay of up to a year in payment of the $7.3 million to the City.

Management's agendizing memo notes that if the Council declined to amend the contract and if the LLC didn't otherwise come up with the $7.3 million, the City wouldn't be required to convey the mid block parcel to the LLC. In that event, the City could presumably continue to retain it...and use it for public purposes or could sell it and collect more than the $7.3 million the LLC would pay the City..

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City management's agendizing memo also acknowledged that Council approval of the delay would decrease Civic Center Fund funds available (money available to be appropriated and spent) from a positive $2.4 million to a negative $5.0 million.

However during this period, LB taxpayers will continue to remain responsible for paying the LLC its annual escalating "service fee" for operating the Civic Center LBREPORT.com estimates the annual "service fee" has now reached at least $17 million annually...and the agenda item doesn't mention any reduction in the "service fee" to reflect City budget issues related to COVID-19. To the contrary, management's agendizing memo said the amendment requested by the LLC "will have no impact to the previously approved Service Fee for operations. "

[LBREPORT.com also believes the delay would also effectively give the LLC a de facto extended no-interest loan for $7.3 million for the additional months. During this period, city management's memo indicated that LB taxpayers will remain responsible for paying maintenance costs on the parcel.]

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City management agendized the item with the uneventful title of an "amendment to the contract with Plenary Properties Long Beach, LLC, of Los Angeles, CA, modifying the conditions of final occupancy. (District 2)."

The agendizing memo by LB Public Works Director Craig Beck (signed as approved by City Manager Tom Modica) recommended Council approval of the LLC-sought delay offering the following narrative and reasoning:

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...As specified in the Agreement, the old City Hall site (Mid-block site) is to be transferred to Plenary (or its approved assignee) for development of a private mixed-use project. Entitlements for the Mid-block site were approved by the Planning Commission at its meeting on March 19, 2020. The project includes 580 residential units, of which 58 units are affordable, and 35,000 square feet of retail space. The Mid-block site development also includes construction of Cedar Avenue between Ocean Boulevard and Broadway to further improve access throughout the downtown area.

Conveyance of the Mid-block site was scheduled to be finalized in April 2020; however, due to the economic impacts of the COVID-19 pandemic, the planned development has stalled. Plenary has requested the City acknowledge these impacts and extend the conveyance timeline. Plenary believes its development partner will have a clearer understanding of the financial markets and its ability to fund the construction of the private development by the fourth quarter of 2020.

Plenary has also requested the City modify a portion of the Agreement related to the required reimbursement to the City of allowance account funding. At Project financial close in April 2016, the City temporarily funded $7.375 million for the Civic Center project allowance accounts related to Project design modifications. The $7.375 million was scheduled to be repaid to the City upon the final occupancy date, which aligns with the completion of Lincoln Park. The delay in conveyance of the Mid-block site and associated economic impacts, have created funding challenges for the construction of Lincoln Park. Plenary is asking that the timing for the repayment of the allowance account funding be aligned with the conveyance of the Mid-block or the long-stop date of September 30, 2022, whichever comes first. Plenary states this is necessary to continue with progress on the construction of Lincoln Park.

In consideration for the requested change, City staff negotiated several additional safeguards to ensure construction timelines are met. These include liquidated damages if Lincoln Park is not completed by September 30, 2021; payment of $1 million for construction of Cedar Avenue if the Mid-Block site conveyance is not completed by the long-stop date; and, provisions for the City to retain the Mid-block site as collateral for repayment of the contingency allowance accounts.

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TIMING CONSIDERATIONS

City Council action is requested on May 19, 2020, to allow for the timely development of the new Lincoln Park.

FISCAL IMPACT

The City advanced $7.375 million to Plenary to fund the contingency allowance accounts. This advance was planned to be repaid by November 2020 (the original Civic Center final occupancy date) but was later modified to September 30, 2021 to accommodate construction delays associated with demolition of the old Main Library. The recommendation modifies the refunding language to align with the conveyance of the Mid-block site. If the conveyance is completed in the fourth quarter of 2020 as Plenary hopes, the City will be repaid a year earlier than is currently required. However, although the intent and expectation is that Plenary will repay the City, there would be no legal requirement for them to do so. If Plenary fails to make the repayment by September 2022, the City will retain ownership of the Mid-block site and will be able to sell the Mid-block and retain the proceeds from the sale. Staff believes the scenario of the City not being repaid and instead retaining ownership of the Mid-block site, while possible, is unlikely because the value of the Mid-block site is expected to remain significantly greater than the $7.375 million owed, even when considering the cost of the old City Hall demolition. The City is responsible for costs associated with maintenance of the Mid-block site until it is conveyed to Plenary or sold to a different entity, so the potential extension of the time for conveyance increases these City costs beyond what had initially been anticipated.

Due to the shift in the repayment timeframe to as late as September 2022, with no assurance that payment will be made (even though it is expected), Financial Management cannot rely on the receipt of the $7.375 million to the Civic Center Fund and cannot treat it as funds available to be spent. As a result, with the approval of this agreement, the Civic Center Fund funds available (money available to be appropriated and spent) will change from a positive $2.4 million to a negative $5.0 million. It is the position of Financial Management that as a result of this change, the Civic Center Fund will have limited financial capacity and will not be able to fund any Civic Center improvement projects until and unless the $7.375 million is repaid. However, since it is reasonably likely that the $7.375 m will be repaid by September 2022, major corrective actions do not necessarily need to be taken.

The amendment to the Civic Center Agreement will have no impact to the previously approved Service Fee for operations. This recommendation has no staffing impact beyond the normal budgeted scope of duties and is consistent with existing City Council priorities. Construction of Lincoln Park falls under the Civic Center Project Labor Agreement, which prioritizes the hiring of -local construction workers.

July 8, 2016: Mayor Garcia, Vice Mayor Suja Lowenthal, Councilwoman Lena Gonzalez and state Senator Ricardo visible. Present in the audience were Councilmembers Daryl Supernaw, Roberto Uranga and Dee Andrews. Also visible are Supervisor Don Knabe, former Mayor Bob Foster, City Manager Pat West, city management level staffers, LB Port officials and a rep from the Civic Center developer/operator The City described the event in a news release at this link.)

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