HomeMy WebLinkAbout1991.0606.TCRM.Minutes TOWN OF FOUNTAIN HILLS
41110,
MINUTES OF THE REGULAR MEETING OF THE FOUNTAIN HILLS TOWN COUNCIL
JUNE 6, 1991
A public meeting of the Fountain Hills Town Council was convened and called to
order by Mayor John Cutillo at 6:30 p.m., Thursday, June 6, 1991, in the Fountain
Hills Unified School District Administration Building located at 14605 N. Del
Cambre Ave. , Fountain Hills, Arizona.
ROLL CALL - Following the pledge to the flag and the invocation by Father Tot
O'Dey of the Church of the Ascension, roll call was taken. Present for roll call
were the following members of the Fountain Hills Town Council: Mayor John
Cutillo, Vice Mayor Frank Clark and Councilmembers Peg Tibbetts, Mike Minarsich,
Charlie Fox, Wally Hudson and Bill O'Brien. Also present were Town Manager Paul
Nordin, Director of Community Development Gary Jeppson, Town Attorney Bill
Farrell, Assistant Town Attorney Nick Dotterman and Town Clerk Cassie Hansen.
AGENDA ITEM #2 - DISCUSS AND POSSIBLY ACT UPON THE SUNSET KIWANIS REQUEST FOR A
SPECIAL EVENT LIQUOR LICENSE FOR THE 4TH OF JULY CELEBRATION
Councilman Fox made a MOTION and Mayor Cutillo SECONDED the motion to accept the
Sunset KIWANIS request for the July 4 celebration. Mr. Tekesky stated that the
proceeds from the event would be used for the youth activities in Fountain Hills
such as Mud Mania and Say No To Drugs program. He also mentioned that the event
would be held on private property and the land owner had given the Chamber of
Commerce permission to sell alcoholic beverages on the property. The Chamber had
given permission to the Sunset Kiwanis to operate a beer concession within the
fenced area of the park during the event. Mr. Tekesky said that the Maricopa
County Sheriff's Department, Rural Metro and Valley Security had informed him
that they would supply ample security for the event as long as the beer sales
would be confined to the fenced area. Mr. Tekesky said that the Sunset Kiwanis
would provide the proper insurance if their request was approved and that
coverage would be a one million dollar policy for the town. Mayor Cutillo asked
Mr. Tekesky to state his name and address for the record and Mr. Tekesky replied,
Steve Tekesky of 17261 Kirk Lane, Fountain Hills, Arizona. Dennis Contino from
14661 N. Kings Way stated that he felt alcohol should not be sold at the function
and that the Chamber should keep the event local and not advertise all over the
valley. Mr. Hansen from the public stated that no beer sales had been mentioned
in the advertising of the event and that there was no intention of changing or
cancelling the event. He added that he felt this would be done in good taste.
Ms. Kelly of 16276 East Rosetta, stated that she felt the Council could not do
anything at this time to stop the fiasco however she was remembering how the
event went two years ago. Steve Koover of 16430 Monaco stated that the Town had
been very concerned about Beeline Highway for a long time. In this regard his
concern was that if the Town condoned the sale of alcohol in the park to
thousands of people who would be driving back to the valley after a long day,
there would be a double standard involved. Mayor Cutillo said that they had been
assured by the police and the fire department that everything would be under
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control and that no more than twenty thousand people were expected at the event.
Mayor Cutillo called for a roll call vote and the results were as follows:
Vice Mayor Clark nay
Councilwoman Tibbetts aye
Counccilman O'Brien aye
Mayor Cutillo aye
Councilman Hudson aye
Counccilman Fox aye
Councilman Minarsich nay
The motion CARRIED five aye votes to two nay votes.
AGENDA ITEM #3 - DISCUSS AND POSSIBLY ACT UPON RESOLUTION 1991-26, APPROVING THE
PLANS. SPECIFICATIONS AND ESTIMATES AND DECLARING ITS INTENTION TO ORDER THE
IMPROVEMENT OF A PORTION OF THE TOWN OF FOUNTAIN HILLS KNOWN AS LOS ALTOS HILLS
IMPROVEMENT DISTRICT BY THE CONSTRUCTION OF CERTAIN IMPROVEMENTS INCLUDING THE
CONSTRUCTION. PAVING AND LANDSCAPING OF CERTAIN ROADS AND DRAINAGE FACILITIES;
ALL AS SHOWN ON THE PLANS; DESIGNATING SUCH IMPROVEMENT AS THE LOS ALTOS HILLS
IMPROVEMENT DISTRICT; DETERMINING THAT IMPROVEMENT BONDS WILL BE ISSUED TO
FINANCE THE COSTS AND EXPENSES THEREOF AND DECLARING THE WORK OR IMPROVEMENT TO
BE OP MORE THAN LOCAL OR ORDINARY PUBLIC BENEFIT; AND THAT THE COSTS OF SAID WORK
OR IMPROVEMENT WILL BE ASSESSED UPON THE LOS ALTOS HILLS IMPROVEMENT DISTRICT;
AND PROVIDING THAT THE PROPOSED WORK OR IMPROVEMENT WILL BE PERFORMED UNDER THE
PROVISIONS OF 48-571 THROUGH 48-621 INCLUSIVE. ARIZONA REVISED STATUTES, AND ALL
AMENDMENTS THERETO.
Mr. Nordin said that he would like to spend some time in discussion with the
Council and make his fifteen minute presentation which was really more for the
public than the Council. Mr. Nordin stated that approximately one year ago when
he came to Fountain Hills, he spent much time concentrating on figuring out what
the Council expected of him. Mr. Nordin stated that during the course of his
extensive interviewing process with the Town, prior to being offered the position
of Town Manager, he discovered that the Town Council and the community were, for
the most part, pro-growth and desirous of growing past its present population of
ten thousand. He added that the town was initially intended to grow to
thirty-five to forty-five thousand people when built out. He also said that one
of the things that should be considered as a necessary and natural outgrowth of
the policy decision would be the use of improvement districts. Mr. Nordin said
that the bond method of financing was a tried and true method and he stated that
the improvement district method was appropriate for this project. He explained
that improvement districts were designed to build roads, sewer lines, water lines
and other infrastructures. Mr. Nordin said that he had asked the Town's
financial consultants and the Town 's Bond Attorney to come up with some examples
of towns that had used similar programs. He cited Scottsdale as having one such
raw land deal and he added that Scottsdale had a very well established
improvement district procedure. Mr. Nordin stated that in 1988 the City of
Showlow did a raw land deal with a single owner and in 1985 the Town of Suprise
had a bond issue on a raw land deal. Mr. Nordin stated that the Los Altos Hills
improvement district would only include the construction of roadways, and the
drainage and landscaping that would go along with them and would not include any
sewer or water lines. Mr. Nordin said that the estimated cost for the
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improvements would be $6.35 million and stated that the resolution before the
Council was a resolution of intent which was the first step in the establishment
of an improvement district. Mr. Nordin explained that the resolution was to give
the appropriate land owners notice that an improvement district was being
considered for their property and give the public a thirty day notice that this
type of procedure was being considered. Mr. Nordin said that the tentative date
for the next step, if teh Council acted favorably on the resolution before them,
was July 10 and at that time there would be a resolution before the Council
actually ordering the improvements. He added that between now and the July 10
meeting, there would be time for public comment. Mr. Nordin said that the
resolution had been tabled many times and the reason for that was that the
developer of the land, the Felker Group, had not complied with all the
engineering requirements from Willdan and Associates. Mr. Nordin added that the
Town would assume a contingent liability with this type of process although no
money would pass directly to the developer, it would all go to the town. Mr.
Nordin said that the Town would set the standards for the construction of the
roads and would maintain ownership until the project was completed. The multi-
improvement district would enable the Town to construct the project and, in
effect, not pay for the construction but bill the property owners for the cost
of the improvements. Mr. Nordin went on to say that it was the staff's
responsibility to insure that the Town was adequately protected and that staff
was currently going through the process of analyzing whether or not the
contingent liability would ever become a reality. Mr. Nordin stated that Mr.
Felker had been associated with the project since day- one and that he wanted to
clarify that it was not Mr. Felker that was the monetary force behind the
project, but a group of insurance companies, Milwaukee Mutual, Secura and West
Bend Insurance from Milwaukee, Wisconsin. Mr. Nordin said that the Town 's
financial investigations had centered on the financial stability of the insurance
companies. Mr. Nordin said that he would then address contingent liability and
what would continue to be done between then and July 10 and whether it would
become a reality. He went on to say that there were two very important
safeguards that were presently in place that would work to insure that the
contingent liability would not become a reality. The first safeguard he
addressed was the super statutory lien and he explained that it would involve
three entities, the financial end of the project, the developer and the town
manager. Mr. Nordin said that, if for example, the developer defaulted on his
payments, the town manager would have the ability, through the super statutory
lien, to take the developer's property. The financial end of the project would
then not be in first position and the bond holders would take first position and
they would take over the developer's land free and clear. Mr. Nordin continued,
saying that the bond holders could sell the property for however much the market
would bear and hopefully generate enough revenue to pay off the debts. The
second safeguard that Mr. Nordin addressed was the financial stability of the
project itself which in this case would be the insurance companies that he
referred to earlier and he added that in the days forthcoming the staff would
continue to obtain financial statements from those entities. Mr. Nordin stated
that Mr. Felker had been in a chapter eleven action involving a Scottsdale
project. Mr. Nordin said that he would cite several options that the'Town had
in terms of the financial security that he had mentioned before. Mr. Nordin
said, first, they could investigate the possibility of the insurance company
consortium buying the bonds and that would provide the ultimate security in terms
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of collateralization in order to protect the Town one hundred percent. He said
that another possibility was concurrent construction of the road improvements and
golf course or the sewer lines adding that this would insure the project would
have improved, developed land on it at the same time that the improvement
district was making the road improvements. Mr. Nordin said that another way to
insure financial security would be to require that the company post full faith
credit bonds and reserve funds could be established in case the bond payments
were not made. Mr. Nordin said that he recommended approval of the resolution
of intention as he had outlined it, adding that if the Council did approve the
request, staff would continue to go forward with the studies of the project.
Mr. Nordin also added that the appraised value of the Los Altos Hills project was
$26 million and therefore the coverage ratio would be approximately four to one
which, he added, was very good. Councilman Minarsich stated that in case of a
default, the Town would only be responsible for the semi-annual payments and not
the seven million dollars all at one time and asked what the payment figure would
be. Mr. Nordin responded that the annual payments, which would be a principal
payment, would range from $225,000 to $700,000 with annual interest of $674,000
down to $59,000 in the last year of the bond issue. Mr. Nordin stated that the
annual debt service would range from $899,000. to $764,000. and that all of the
figures were based on a fifteen year schedule. Vice Mayor Clark asked that Mr.
Nordin run through what Tempe had done with their situation and he said what if
the developer could completely build out Los Altos Hills within a year so that
there would not be time for inflation to effect the project, what would the guess
be as to the assessed value at the completion of the project. Mr. Nordin
responded that the activities that a Town could be engaged in were very limited
and he added that Tempe had been involved in some very aggressive growth
activities. Mr. Nordin said Tempe obtained many parcels of land in the downtown
area by eminent domain and condemnation and in the beginning, actually gave some
of that land to developers in order to construct some of the buildings. In
response to Vice Mayor Clark 's second question, Mr. Nordin turned the floor over
to Mr. Casillas, from the Peacock group, and stated that in terms of potential
resale cost to other developers to build out, a figure of approximately $85
million was used. He said that did not include any homes being constructed on
the property, so if they wanted to figure in one hundred homes at one hundred
thousand each, that would add another $10 million. Mr. Casillas said that
Maricopa County Tax roles would be figured at a ninety percent value, which would
be $85.5 million and assuming the lowest assessed value ratio which is
residential property at ten percent, that would be $8,550,000 of new assessed
value. He added that this did not take into consideration any commercial
development on the property. Vice Mayor Clark stated that in that case there
would be an approximate ten percent across the board tax reduction for the tax-
payer. Mr. Nordin stated that as the Town 's assessed value increased it would
spread the tax burden around to a greater extent and therefore, the individual
cost would be less. Mr. Nordin said that he had always thought that one of the
main driving forces behind the community's desire to continue to grow was the
property value.
Mrs. Petroff asked how the improvement district differed from a road district
with regard to employees and did the Town currently have a road district.
Councilman Fox said that there were no road districts. Mrs. Petroff asked if the
citizens would be getting more for their money with the improvement district and
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Mr. Nordin answered that a common question among the citizens was if a road
district and an improvement district were the same or similar and they are not.
Mrs. Petroff asked if other areas of Fountain Hills would be able to use the
district or would it be just for Los Altos Hills. Mr. Nordin stated that it only
would be for the road construction in that area and that they would be public
roadways and not private. Mr. Nordin stated that his example using the city of
Tempe was not to be mistaken as the avenue that he thought the Town of Fountain
Hills should take. Mr. Thomas addressed the subject of contingent liability and
said that Vice Mayor Clark 's point regarding the assessed value of the town being
approximately $85 million was inaccurate and that the appraised value was
approaching $700 million. He added that the homeowner was assessed at ten
percent, commercial property was at twenty-five percent and vacant land was
sixteen percent, making the assessed valuation approach $100 million. He
continued, saying that he wanted to propose a very simple rule that on the
$100,000 home, having a market value of $125,000, the contingent liability for
each $100,000 of home value would be $635 and if they had to pay the interest
payments on the debt that would amount to approximately $45 per $100,000 of
assessed value annually. Mr. Gendler asked if the developer would continue with
the project should the improvement district not be formed and Mr. Nordin called
on Mr. Scott Rose from the Felker Group to answer the question. Mr. Rose stated
that conventional methods of financing for projects as these really were not
available in this market and whether or not they would go forward would be
dependent upon if they could obtain that sort of financing. He added that this
would be tax free financing and therefore could be at a lower tax rate. Mr. Ron
Smith from the Felker Group stated that the golf course construction would cost
approximately $7 million and the total, including all the amenities would be
approximately $10.5 to $11 million that the developer would be contributing. Mr.
Songer said that he felt there should be some guarantee to the tax payers and
that this would be a risky project, suggesting that the three insurance companies
should put some money in escrow as a show of good faith. Councilman Fox stated
that there had already been conversation with the insurance companies about a
type of added securities from them. Mr. Saladino asked if the $26 million
appraisal was with or without improvements and Mr. Farrell invited him to go by
the town offices and read it as he had not had time to read it in its entirety.
Mrs. Sniper asked if the insurance companies were going to take the risk on the
roads as well as the town and the owners and Mr. Nordin stated again that they
were in the process of investigating different methods that the insurance
companies could post a guarantee on the bonds. Mr. Rose stated that the
insurance companies were already taking a risk on the project in as much as they
already had $9 million hard cash invested in the project and another $8.2 million
in a second position lien on the property. He continued that the bond money that
would be taken out on the property would be in first position and should the
bonds not be paid, they would lose the land and the money they had invested.
Councilman Fox reiterated that there was no possibility of the Felker Group
obtaining the bond funds. Mr. Coover asked what the priorities were concerning
the road construction and the golf course, etc. , and what would happen if the
golf course grading was completed and the developer ran out of money. Mr. Smith
stated that the construction of the roads and utility trenches were scheduled for
the same time as the golf course and that the roads and the golf course would be
graded almost simultaneously.
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Mayor Cutillo made a MOTION to pass resolution 1991-26 as written and
Councilwoman Tibbetts SECONDED the motion. Vice Mayor Clark requested
clarification on the date of the hearing and Councilman Fox stated that it would
be Wednesday, July 10, at 6:30 p.m. in the School Administration Building.
Motion PASSED unanimously.
AGENDA ITEM # 4 - CALL TO THE PUBLIC
Mrs. Petroff asked for clarification on the transportation issue in Fountain
Hills and that she would like to see a local van or something and Mayor Cutillo
referred her to Mr. Nordin after the meeting.
AGENDA ITEM #5 - ADJOURNMENT
Councilman Fox made a MOTION to adjourn. SECONDED by Councilwoman Tibbetts and
CARRIED unanimously.
The Town Council adjourned at approximately 8:05 p.m.
TOWN F PO AIN HIL
By: /(74
Jotn . Cutillo, Mayor
ATTEST: c.L.a&L.k �IJ• �`� 4-�^J
Cassie B. Hansen, Town Clerk
CERTIFICATION
I hereby certify that the foregoing minutes are a true and correct copy of the
minutes of the Regular Meeting held by the Town Council of Fountain Hills on the
6th day of June 1991. I further certify that the meeting was duly called and
that a quorum was present.
DATED this I S*k. day of August 1991.
Cassie B. Hansen, Town Clerk
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