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HomeMy WebLinkAbout1986-08-13 Minutes• • MINUTES OF A JOINT MEETING OF THE CITY BOARD OF DIRECTORS A joint meeting City Arts Center p.,m. in Room 376, _Arkansas. AND THE CITY ARTS CENTER BOARD of the Fayetteville City Board of Directors and the Board was held on Wednesday, August 13, 1986 at 3:00 of City Hall, 113,West:Mountain Street, Fayetteville, PRESENT: City .Board:. Mayor! ;Noland; :Directors Bumpass, Hess, Lancaster and<Orton;.p Arts Center,.Soard: -Steve„Adams, Mary Margaret Durst, Frank, Sharp, Loris. Stanton, Billie Starr, and Roger Widder; City Staff: City Manager Grimes, City At:torney,,McCord, ,City 41erk:Kennedy, Administrative Services Director Linebaugh; members of the press and audience ABSENT: City Directors Johnson and Martin; Arts Center Board member Sarah Burnside 256 • DICKSON.STREET PARKING 'IMPROVEMENTS Rick Mayes, representing Dickson Street merchants, presented a status 256.1 report on plans for parking for the proposed Arts Center. He displayed a drawing which depicted several areas in the Dickson Street neighborhood which are being considered as possible parking lots and which hopefully would provide a total of 340 parking spaces. Regarding the formation of a parking improvement district, Mayes said there were plans for,.meeting with land owners and that more information will be available at a later date. In answer to a question from Sharp, Mayes said that he had been working on this project with assistance from the City Manager, the City Draftsman Clyde Randall, Administrative Intern Kevin Crosson and ,Tr:affic• Superintendent Perry- ,Franklin. ..:Mayes ,.displayed; an artist's sketch of the:.northeast corner of West,. and ;Dickson Street as envisioned. 77 ,ARCHITECTURE:- STUDENTS: PROJECT Pat O'Leary presented a model showing work. done. by. University: -of 256.2 Arkansas architectural students who used the proposed Arts Center as a class project. FUNDING Administrative Services Director Scott Linebaugh presented information 256.3 on a proposal for a $3,700,000 bond issue for financing the City's 252 August 13, 1986 share of the project. Linebaugh said this would net $3 million needed for the project. Linebaugh explained $1,500,000 would be available at the end of 1986 from 1/2 of HMR tax excess plus 4% of 1% sales tax accumulated. Linebaugh noted that the $3 million + the $1.5 million would total the $4.5 million needed by the City for the project. Linebaugh distributed a schedule showing debt service and coverage requirements. _Linebaugh stated it has been determined that in order to sell the bonds, a 110% coverage factor will be necessary but that it is yet to be determined whether this can be pledged or must be cash up front. Linebaugh explained that there will not be enough money available'if cash is required. 257.1 In answer to a question from Bumpass, Linebaugh explained that accumulated interest will go to a non-profit Board of Directors for the Arts Center. Linebaugh said the only interest the City will earn will be on debt service reserve. McCord reported theaveragecoupon interest rate on the bonds is assumed to be 7.5%. Linebaugh said a total of $4,060,000 in interest will be paid over a twenty-year period. 257.2 Frank Sharp pointed out that a previous Schedule provided by Linebaugh shows $11 million to be available for all HMR tax excess plus 4% of 1% sales tax accumulated. Sharp commented that, with a $7.7 million bond issue, there could be close to a 50-50 split of funds for the Arts Center and for advertising and promotion. Linebaugh said a 50-50 split would work for just debt service payments. 257.3 In answer to a question from Director Hess, Linebaugh estimated the funds available from the 4% of 1% sales tax accumulation amount to approximately $400,000, with about $1 million representing HMR tax excess. 257.4 Hess raised the possibility of adopting a 1% sales tax for up to two years to generate $6-$7 million. The City Attorney noted this would require a vote of the people. Director Bumpass asked about the possibility of levying an additional HMR tax. The City Attorney responded that he did not think there was authority to levy additional HMR tax in Fayetteville. He stated there was legislation in 1985 which authorized, with voter approval, the City to impose additional sales tax of 1/2 of 1% or 1% for a period of up to two years, for parks and recreation, or recreation purposes, which includes an arts center by definition. In answer to a question from Hess, Linebaugh said the generation of $6 million from a 1% tax would mean there would be no debt service. 257.5 Bumpass asked how much available latitude there was, and what kind of expected revenue could be expected from the franchise taxes the City is allowed to charge but is not charging. Linebaugh said he was in the process of working on a report on that question which will be available soon. August 13, 1986 Linebaugh summarized that, with existing sources available, debt service can be covered -with 1/2 of HMR excess tax plus the 4% of 1% sales tax accumulation, with the question of the coverage factor remaining. Bumpass asked if it was projected that the revenue from user fees is still estimated at $20,000 per year. Frank Sharp said the intent was for the user fees to be as low as possible so that everyone could use the center. He said the original $20,000 estimate was in line with the arts center in Jonesboro, but thatit was hoped support groups would be formed to bring in an additional estimate of about $15,000. :., Hess,: commented ,that,. ;when, the, project ,first ,began, :the .City.,was ,,,considering the use of surplus ,operating funds., .Hess, noted.,,tha.,now ,,there is a projection by Linebaugh that in 1987,there.will beta! deficit ,of. $1,300,000 in operating funds,,,. Hess said that, if a 1%, sales tax ,,.can generate. approximately $6, millionthe Citywould be able to, keep badly,neededrfunds and;the Arts,Center,can be,paid cif in,two years. Sharp remarked that, in 1977 when the HMR tax was adopted, a lot of people understood that an arts center and a continuing education center would be built, and that the City Board adopted Resolution No. 15-77 which said that all the excess would go to build an arts center, after a modest amount for advertising. Sharp commented that $4 million over the next 20 years was a stretch of ••modest••. Steve Adams pointed out that the charge of the Arts Center Board was to work with the funds which were available for the project. He said he didn't feel it would be appropriate for the Arts Center Board to decide whether a new tax should be imposed, and this decision should be left in the hands of the City Board of Directors. Director Bumpass asked the Arts Center Board how they arrived at their estimate of $20,000 annually in user fees. Billie Starr explained that .,individuals were interviewed from other centers and they were told that user fees should be kept as low as possible so local groups will have incentive to use the center. After further discussion, it was explained that specific_ user units had not yet been set up, and Loris ,.:Stanton :pointed out: .that a.management group will, determine this in their operation of the- .center. AGREEMENT/ARTICLES/BYLAWS The.City Attorney reported. that he, Steve Adams and Ginger Crisp met to review the Interlocal Cooperation Agreement, and the Articles of Incorporation and Bylaws for the two non—profit corporations. McCord said revisions were made to original drafts to comply with federal tax law requirements. McCord said it was assumed the City would have to issue bonds to finance construction costs. McCord explained the 258 258.1 258.2 258.3 258.4 258.5 258.6 258.7 259 August 13, 1986 facility would need to he owned by the City and the University as joint tenants because interest needs to be capitalized on the bonds, unless the City allocates more than 50% of the contemplated revenues. McCord said the end result was that the management corporation was designated agent of the City and the University for construction, maintenance and operation of the facility, instead of outright ownership. 259.1 Steve Adams noted drafts had been distributed of Bylaws of the Arts Council, Articles of Incorporation of the Arts Council, Bylaws of the Arts Foundation, and Articles of Incorporation of the Arts Foundation. 259.2 Adams explained the Interlocal Agreement provides for the creation of two corporations - (1) the Arts Council, which will act as agent for the City and University in building, operating andmaintaining the center, with its own Articles of Incorporation and Bylaws, and (2) the Arts Foundation, the entity which is proposed to manage the endowment for the center. Adams explained the investment policy must comply both with the investment policy of the University and the City. He said the main purpose of the Foundation will be to act as a fund-raiser to raise large contributions to be added to the endowment, but will also oversee the budget of the Arts Council. Adams said this seemed more convenient than the idea of submitting an annual budget to the City Board of Directors and the University Board of Trustees. 259.3 Adams explained each corporation is to be governed by its own Board of Directors, with each Board proposed to have six Directors - three on each Board to be appointed by the University Board of Trustees and three on each Board to be appointed by the City Board of Directors. Adams said the Directors would be answerable directly to the City and University Boards and may be removed, with or without cause, with or without notice, by either Board whenever it is deemed appropriate by the Board. 259.4 Director Orton stated she thought some cause should be stated in the case of removal of a Director. Orton asked why someone would be removed without cause. Adams said, in the event the Board disagrees over whether a Director is carrying out policy correctly, this provision has been made so that the City or University Board does not have to go to court to remove one of the Directors. Orton pointed out that these Boards will be public entities. Adams suggested there could be a situation where Directors disagree about implementation of policy. Orton asked Adams if that meant that the intent was to only have Directors on the Boards who all agree with each other. ,Adams said the City Board would only have the right to remove its own appointees, and the University its own appointees, in the event there is any problem in the matter of interpretation of policy, or the expenditure of funds. Director Hess pointed out that there would have to be a majority vote by the City Board to remove a Director. Orton suggested that should be stated rather than stating "without cause". Hess said he thought the provision allowed flexibility and avoids having to delineate all the Pi August 13, 1986 causes in public. Orton said she thought, if there is a cause, such a removal should be done publicly. The City Attorney pointed out that the Board of Directors currently has that authority with its appointed citizen commissions and boards. Loris Stanton noted that it was the University's position to be insistent that this provision be contained in the Agreement. Director Orton commented that the City is more "public" than the University. She stated the University does not abide by the Freedom of Information laws. Adams said.he was not saying the City Board should not establish its own policy with respect to the two Boards but he wondered whether it needed to be contained in the Interlocal Agreement Adams said he was not sure whether the University would agree to place similar limits on their.. Board. of .Trustees. Director: Bumpass stated there were different ways -to implement the selection of the Directors. - Hesuggested membership on •the- Boards could be similar to that of the Advert.ising.and Promotion Commission, which has three City Board members serving; or similar to -some boards on which the City Finance Officer and City Manager serve. Adams explained that it is anticipated that those persons appointed to the Foundation Board would be more acclimated to fund—raising rather than to management of investments. With respect to the Arts Council Board, Adams said it was anticipated to appoint persons with some expertise in construction, organization, and management.' Adams explained terms are proposed to be on a staggered, three—year basis, with one one—year director, one two—year director, and one three—year director. In answer to a question from Orton, Adams said that, although there was no provision which would allow a person to serve on both boards, there was no prohibition against such an overlap. Adams said he thought coordination between the boards would be handled by the Executive Director hired to manage the center. Adams said both corporations will be required to submit an annual 'report to the City and University Boards which will include a statement of financial condition. In answer to a question from Lancaster; Adams said an -audit would be included in the annual. report. Director Hess asked if the current drafts represented a final product. Adams said he thought one more joint meeting may be necessary between the Arts Center Board and the University committee. 260.1 260.2 260.3 260.4 260.5 260.6 260.7 260.8 Roger Widder pointed out there had been a great deal of discussion at 260.9 the last joint meeting regarding the matter of the Foundation Board Bi August 13, 1986 having final budget approval for the Arts Council Board. Widder said that in his mind this had not been resolved, as the current draft still. shows the Arts Council Board presenting a budget for approval by the Foundation Board. Widder said he thought this gave the Foundation Board the ultimate responsibility and control over the operation of the center and tends to place the Arts Council Board under the Foundation Board. Orton agreed and noted it appeared the Foundation Board could do everything except hire the Executive Director. 261.1 The City Attorney reported he, Ginger Crisp and Steve Adams had discussed the alternative that, if where is a change of ownership required by the financing, the operating budget could be approved by the City Board and University Board of Trustees. 261.2 Loris Stanton said he thought it had been determined at the last joint meeting that the Arts Council Board would coordinate with the Foundation Board on a budget but it would not necessarily be approved by the Foundation, but by the City Board and the University Board of Trustees. Adams warned that having to get approval from those two bodies could be a long, involved process if changes are ever made in the budget. 261.3 Mayor Noland noted that Section 7 (a) of the Arts Council Bylaws seemed somewhat vague. He said it was not clear what the management duties actually were. Noland suggested there should be additional elaboration. 261.4 The City Attorney suggested the following be added to Section 7 (a): ...including policies for the management, operation and maintenance of a center for the arts and the setting of user fees. 261.5 The Mayor asked who would make the decision as to whether or not to allow a specific group to use the center. 261.6 Director Bumpass said he thought the Foundation Board may have an additional purpose if there is an instance in which an amount of money has been raised which is greater than the initial endowment. Bumpass suggested there could be a case where that extra money could be used, in the discretion of the Foundation Board, to subsidize user fees. 261.7 Loris Stanton noted that Section 7 (a) of the Foundation Bylaws states "To make and change regulations, not inconsistent with these By -Laws, for the management of the Corporation's affairs.", pointing out that there was a provision to change the regulations. Noland questioned the meaning of the term "management". 261.8 In answer to a question from the Mayor, Adams said he did anticipate one more meeting with the University and did anticipate there would be • • August 13, 1986 a fourth draft of the documents. Bumpass suggested City Board members could contact Adams with their input. Adams said he thought it was still unresolved who will be reviewing the budget every year, noting that right now the Foundation Board has been chosen for that function. McCord noted the City Board and University Board of Trustees could be eliminated from having that responsibility if the City Manager and University President (or their designated agents) could be responsible for approving the budget. Widder asked whether approval would be made of an overall total budget, or of a line -by-line budget. City Manager Grimes stated he familiar with the budget but he authority to approve or disapprove an annual joint meeting to approve thought the Foundation needs to be didn't think it should have the it. He suggested the possibility of a proposed budget. Billie Starr commented that, unless more specific duties are outlined for both corporations, they will be given a really tough job. She also pointed out that an Executive Director will play an important part and should be working closely with the management Board. Bumpass said he thought it important that the City Board be able to have input in the budget approval. McCord said having the University President and City Manager approving the budget eliminates the problem of having to wait to go the University Trustees at one of their four meetings per year. McCord noted the City Board must decide as soon as possible how it is going to finance their $4.5 million share of the project. McCord said, if the Board is going to try to have debt financing, they must have a vote of the people -- if they are going to try to increase the HMR tax (if they can legally) it would require a vote -- or if they are going to try to use sales tax, that will require a vote. In answer to a question from Sharp, the City Board members agreed with the City Attorney's suggestion that the City Manager and University President have authority to approve the budget. Sharp said he would attempt to schedule a joint meeting next week with the Arts Center Board and the University committee, and would attempt to send a new draft of the documents to the City Board prior to their September 2 Board meeting. ADJOURNMENT With no further business, the meeting adjourned at 5:00 p.m. 262 262.1 262.2 262.3 262.4 262.5 262.6 262.7 262.8 262.9 262.10