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06-19-89SpMtg JUNE 19, 1989 A Special Meeting of the City Commission of the City of Delray Beach, Florida, was called to order by Mayor Doak S. Campbell in the Commission Chambers at City Hall at 5:20 P.M., Monday, June 19, 1989. Roll call showed: Present - Commissioner William Andrews Commissioner Patricia Brainerd Commissioner Mary McCarty Commissioner Jimmy Weatherspoon Mayor Doak S. Campbell Absent - None Also present were - City Manager Walter O. Barry and City Attorney Herbert W.A. Thiele. 1. Mayor Campbell called the meeting to order and announced that this meeting has been called for the purpose of (1) Purchase of Adult Bookstore Property. The City Manager stated, in addition to the memo the Commission received on Friday, he and the Finance Director explored the unencumber- ed fund balance in the General Fund today as a possible option, which would be local short term borrowing, rather than do a conventional financing and pay a conventional interest rate. They found, that with the $3.1 million on hand of unencumbered fund balance, there is $968,000 committed to the Auburn Trace project which will be getting underway shortly and will drop the balance to a little more than $2,100,000 dollars. To take the $250,000, which is necessary to fund the bookstore acquisition, would bring the balance slightly below the $2,000,000 dollar target that the City has established. However, the cash flow that will be required in the Auburn Trace housing complex will not be immediate. Because of this, he is comfortable in stating that the cash flow will remain in a state above $2,000,000 dollars even while some of the encumberances against the fund will appear to draw it below that figure. Having the City assets in the form of real estate, rather than in cash, makes it possible to borrow against that asset if the need should arise. He has also been told there is some expectation of a near term turn around on title to the property which, in the event the City would fund it through the tax-free options, would not be readily avail- able because the City would have to retain title for the foreseeable future as a governmental purpose. Mayor Campbell questioned the level of the percentage at which the unencumbered fund would be at $1.88 million. The City Manager stated there is about a $30 million dollar General Fund budget this year and the Finance Director confirmed it would be right at seven percent. At the $1.88 million level it will be slightly below seven percent, but the target was between five and ten making it closer to 6.5 percent. Mayor Campbell stated the City's target has always been seven percent, which was lower this year, and it was his understanding that the City would never go below seven percent on unencumbered funds. Mayor Campbell commented that the other issue is that the differential has been used between the unencumbered fund balance at the minimum level and any surplus rollover from the current year budget used to supplement and offset any necessity of tax increase. He questioned what the anticipated unexpended surplus would be that would have gone into this fund balance. The City Manager advised it would be between $350,000 and $450,000, which is what is called a prior year's surplus and will be treated as a revenue in next year's budget. The City Manager stated the budget is still being worked on and his goal is to present to the Commission a budget with no tax increase. If there must be a tax increase, he would like it to be as minimal as possible. There is a prior year's surplus balance in the operating budget, which he would recommend the Commission not touch. There is an unencumbered fund balance which presently is maintained at a level of $3.1 million dollars. Money can be used from the unencumbered fund balance, drawing that level down to below the $3 million dollars in the short run. Furthermore, there is an obligation to the Auburn Trace Housing Apart- ment complex, which could bring the balance somewhere below $2 million dollars and below the seven percent target. However, the cash flow for the Auburn Trace project is not going to require that that be expended in the current fiscal year. Mayor Campbell stated as he understands it, as long as the City has a $1.88 million unencumbered balance, whether it comes from the current unencumbered surplus fund, or from unused current budgetary surplus from the current budget, that money would normally go to next year's operating budget. The City Manager stated the significance would be drawing from the unencumbered fund balance to balance the budget as opposed to drawing the prior year's surplus. David Huddleston, Finance Director, stated the use of the unrestricted fund balance would not preclude the City at a later date from financing that. Mayor Campbell stated that is not the issue, but rather whether you take it from the unencumbered surplus or the current year's surplus. If the City were not doing this, that money is going into the planning for the operating budget and, therefore, is $250,000 out of the upcoming budget. Mr. Huddleston confirmed that and stated if there are plans to sell the property, the revenues can be then be budgeted from the sale of the property. Upon question, the City Manager stated his recommendation is that it be taken from the unappropriated fund balance, assuming that the Commission does not want to bond it or hold the property for any length of time. That is one alternative. Mayor Campbell stated he was in contact with a banker today and another alternative would be to borrow the funds at prime rate on a short term basis. Mr. Huddleston advised that would cost the City roughly two and one-half percent. If the money is held in the fund balance, it can be invested at nine percent and if it is borrowed, the City will be paying eleven and one-half percent. Mayor Campbell stated he is concerned about the budget and how the City can hold a line, considering the upcoming bond issue and would like to see the property placed on the market immediately. He is totally against using the property for any City office use. He sincere- ly believed the benefit was conditioned on a fast turn around, thereby creating no real budgetary impact. Mr. Weatherspoon commented it is not often the Commission has an opportunity to rise above an undesirable situation and he feels this is an excellent chance to do just that. He feels concern over the haste connected with this decision along with some unknown factors that have not been presented to the Commission that he feels are equally impor- tant. For example, everyone seems so concerned with the bookstore, but he feels the two bars and the motel located in the same area are surely as influential in contributing to the activities taking place. He certainly does not feel there is going to be a rush on would-be purchas- ers of the property. The money required to buy the bookstore is almost as much as the City allocates on an annual basis for resurfacing streets and he feels other options should be exercised. Ms. Brainerd commented that she agrees if this purchase was to be used for redevelopment of the area, she feels $2,000,000 should be allocated allowing the City to purchase the remainder of the things that are contributing to the overall situation. She feels the idea that the purchase of the bookstore is going to eliminate all the problems is absolutely ludicrous. She feels it is a very bad decision, sets a bad precedent and she agrees with Mayor Campbell in that there is no public purpose. Until a funding source is located or decided on, especially if dollars are used that will come from an indebtedness that would have to have a public purpose, she will undoubtedly have a lot more to say about it. She feels it is a bad idea to use General Fund dollars, as it is her understanding this is the City's emergency fund for hurricanes or any other similar disasters. Ms. Brainerd also questioned, with regard to the check in the amount of a quarter of a million dollars for the closing on Friday, June 16th, where the money was coming from and who was going to make out the check. The City Attorney stated that with respect to all closings on real property transactions, as well as contracts for services, etc., the -2- 6/19/89 City Attorney's office prepares the contracts and the requisitions, as long as they are in accordance with the parameters outlined by the City Commission. The check request form is prepared by the City Attorney's office with information including to whom the check is to be made payable, the amount, etc. and it is sent to the administration for processing. The check is then returned in the correct amount to the correct payee and the City Attorney's office does not become involved with the budgetary issue of the designated source of funding. Ms. Brainerd requested confirmation of a statement made to her today that a check in the amount of $10,000 had been cut as earnest money on this property and she assumes the paperwork has been done. She also ques- tioned where that money came from. The City Manager stated it came from the City Commission's Contingency Fund. Ms. Brainerd stated she does not recall addressing that as a body. The City Manager stated the record would need to be reviewed, but he is confident that was the direction given. Mr. Weatherspoon stated, to his knowledge, the Commis- sion did not identify that as a source of funding. Ms. McCarty request- ed the minutes from the meeting be checked. Ms. Brainerd stated she would like to call the check null and void because it was not authorized by the Commission and there is no binding contract. Ms. McCarty sug- gested the City Manager be given an opportunity to prove his statement. Ms. Brainerd stated she would like to revisit this tomorrow night, regardless of the funding source that may be authorized tonight for the remainder of the property. Mr. Andrews moved to approve the designation of the Contingency Fund as the funding source in the amount of $257,400 maximum, to be approved on an emergency basis, to waive the requirements of Section 36.04 of the Code of Ordinances, and ratification of the contract for purchase and sale, seconded by Ms. McCarty. Upon roll call the Commis- sion voted as follows: Mr. Andrews - Yes; Ms. Brainerd - No; Ms. McCarty - Yes; Mr. Weatherspoon - No; Mayor Campbell - Yes. Said motion passed with a 3 to 2 vote. Before roll call the following discussion was had: Mayor Campbell stated he would like it to be clearly understood that it is the intent of the Commission to immediately place this property on the market and to aggressively seek a buyer for the proper- ty. Ms. McCarty stated she was in favor of placing the CRA on the property for the purpose of expediting the sale in order to have someone on site for any prospective buyers. If that will be too costly, she has no problem and agrees to turning it around as quickly as possible. Ms. McCarty questioned if the Commission should decide to forget the entire issue, could this contract be legally walked away from. The City Attorney advised there is arguably a binding contract, a representation, a check made payable, a check cut and a deposit made. He feels the seller would have the ability to go one of two ways. He could either enforce the contract through specific performance or take the $10,000. To cure any of those defects, bond counsel may want the Commission to adopt an additional resolution on the subject, which can be done later. For purposes of argument, if that three part motion is adopted, the closing can go forward. The documents have been executed and are in the possession of the seller's agent. The motion on the floor would ratify the $10,000 expenditure. Jay Slavin, Rainberry Bay, stated Ms. McCarty has taken the lead in convincing the Commission to purchase the bookstore. Also, the owner of the Volvo Dealership has taken a leadership role in convincing the public and some of the Commission to purchase the bookstore. Ms. Slavin also stated, it is her understanding, that Ms. McCarty and her husband recently purchased a Volvo at an exceptionally good deal. If this is true, she feels Commissioner McCarty should step down from the vote on the bookstore, in order that it not be perceived by the taxpay- ers as a conflict of interest. Pete Bowen, 116 Marine Way, stated he has long been a resident of Delray and no one has convinced him that the City has any right to purchase the Adult Bookstore in the County with taxpayers' money. A 3 6/19/89 similar purchase of the Georgia Town Tavern just shifted the complaints to another location in the City. He feels North Federal Highway will change only by economic conditions and not by the action of the City Commission. Stanley Milosky, N. Federal Highway, stated he lives near the Adult Bookstore and at the recent Visions 2000 meeting it was suggested that the "City expand its governmental efforts with the County and relevant governmental entities. The City should cooperate with the County's efforts in its establishment of a municipal coordinator. There should be contact persons from the City Departments working with the County." On June 13th an interlocal agreement between the City and the County was adopted. He does not understand why this bookstore could not have been eliminated by legal means per this interlocal agreement as opposed to a purchase. At this point the roll was called to the motion. Mayor Campbell declared the meeting adjourned at 5:55 P.M. ATTE S T: The undersigned is the City Clerk of the City of Delray Beach and that the information provided herein is the minutes of the meeting of said City Commission of June 19, 1989, which minutes were formally approved and adopted by the City Commission on~, ~ - ~ C~ty Clerk NOTE TO READER: If the minutes that you have received are not completed as indicated above, then this means that these are not the official minutes of City Commission. They will become the official minutes only after they have been reviewed and approved which may involve some amendments, additions, or deletions to the minutes as set forth above. -4- 6/19/89