HomeMy WebLinkAboutMinutes City Council - 03/21/2000 - WorkshopI HEREBY CERTIFY that the foregoing is a true and correct copy of the minutes of the
Council Workshop of the City of Corpus Christi of March 21, 2000, which were approved by the
City Council on March 28, 2000.
WITNESSETH MY HAND AND SEAL, this 28th day of March, 2000.
Armando Chapa
City Secretary
SEAL
PRESENT
Mayor Samuel L. Neal Jr.
Mayor Pro Tem Mark Scott
Council Members:
Javier D. Colmenero
Henry Garrett
Dr. Arnold Gonzales
Rex A. Kinnison
Betty Jean Longoria
John Longoria
ABSENT
Melody Cooper
MINUTES
CITY OF CORPUS CHRISTI, TEXAS
City Council Workshop
March 21, 2000
12:10 p.m.
City Staff:
City Manager David R. Garcia
City Attorney James R. Bray Jr.
City Secretary Armando Chapa
Recording Secretary Rachelle P. Ramon
Mayor Neal called the workshop to order in the Basement Training Room of City Hall. City
Secretary Chapa called the roll and verified that the necessary quorum of the Council was present
and the workshop had been duly posted.
City Manager Garcia said that previously staff had provided written information to the
Council about problems the Columbus Fleet Association (CFA) was having with maintaining their
operations and some of the financial problems that resulted in the closing of the exhibit. He said it
was important to understand the history of the Columbus ships and the financial situation
surrounding them.
Mr. John Bell, a local attomey representing the Columbus Fleet Association, explained that
on May 7, 1993, the CFA entered into an agreement with Sociedad Estatal (a Spanish government
commission) and the Spain '92 Foundation to locate the Columbus fleet replicas in Corpus Christi.
Mr. Bell noted that Mr. Norman Wallace, CFA President, and Ms. Elida Ortiz, CFA Vice President,
were present at the workshop.
Mr. Bell said the agreement provided for a cash down payment of $1 million to Spain for a
50 -year lease of the ships. The CFA also agreed to pay an additional $500,000 to Spain out of net
operating revenues. He said the CFA borrowed the $1 million from a group of local banks, and that
loan was secured by all operating revenues of the association and guaranteed by the Devary Durrill
Foundation with a limited guaranty by Bud Smothers. An auxiliary agreement was signed by the
CFA, the Spain '92 Foundation and Sociedad Estatal recognizing the $1 million loan from the banks
and confirming that all revenues of the association were first pledged to repay the loan. In addition,
the auxiliary agreement contained a provision in which Spain agreed not to remove the ships from
Corpus Christi until the loan was paid off.
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City Council Workshop
March 21, 2000
Page 2
Mr. Bell said that in 1994 a barge operated by Dixie Carriers struck the Columbus replicas,
which caused significant damage. Over a period of about eight months after the collision, a task
force was appointed by the Greater Corpus Christi Business Alliance under Mr. Alex Harris to
consider different ways to present the fleet. Consequently, the decision was made to develop the
Santa Maria Plaza next to the Corpus Christi Museum of Science and History, and the city issued
$2.91 million in tax-exempt revenue bonds secured by hoteUmotel taxes to build that plaza. He said
the intention at the time was also to build a marina adjacent to the plaza, but the funding proved to
be insufficient to do the entire project and the CFA was not able to secure additional grants.
Mr. Bell said that as part of the $2.91 million bond issue, the CFA entered into a 20 -year
lease agreement with the city for the use of the Santa Maria Playa, and the association agreed to pay
rent on the plaza equal to the bond payments. Mr. Bell explained that the CFA's primary debt is the
$1 million owed to the local banks plus additional funds borrowed from the Durrill Foundation;
CFA's obligation to pay the bonds is in the form of a lease obligation. In addition, the Alliance
amended its consulting services agreement with the city in effect to guarantee that lease payment.
If the CFA was not able to make the lease payments, the Alliance authorized the deduction from its
hotel/motel tax revenues in an amount sufficient to pay the debt service on the bonds. And the CFA
agreed to reimburse the Alliance to the extent it ever had to make advances on its behalf.
He went on to say that construction of the Santa Maria Plaza was commenced in January
1995 and in March of that year, the CFA retained a local law firm to pursue a claim against Dixie
Carriers for damages to the Columbus fleet. Approximately $1 7 million was received in insurance
proceeds from the fleet's own insurance company, Lloyd's of London. He said the lawsuit was trying
to collect additional damages for interruption of business, loss of revenues, and other damages that
were not covered by the insurance proceeds. Mr. Bell said that through arbitration, Dixie Carriers
was ordered to pay $1.5 million, but that money was paid to Lloyd's of London as part of the
subrogation claim. The fleet only received the $1.7 million from Lloyd's of London.
Mr. Bell said the idea of the Santa Maria Plaza was to operate it as a restoration project in
progress, including hiring shipwrights. However, that restoration did not proceed as planned and in
1997 the CFA hired the original shipyard that built the vessels in Spain to come to Corpus Christi
and complete the restoration for about $340,000. He said the shipyard fully performed under their
contract to complete the restoration of the vessels. But the vessels were not able to be put into the
water since there was no place to display them in the water. Consequently, the items remaining were
to put the ballast in the vessels and to make them seaworthy. He said those tasks as well as hoisting
the ships into the water will cost a few hundred thousand dollars. Mr. Bell noted that Spain has
indicated their unhappiness that the ships are not in the water. He added that once the restoration was
completed, approximately $100,000 of the $1.7 million was used to pay against the $1 million debt
exactly the way the agreement said it was to have been paid.
Responding to Mrs. Longoria, Mr. Bell and Mr. Dusty Durrill further explained financial
aspects associated with the Columbus ships, including additional monies borrowed from the Durrill
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City Council Workshop
March 21, 2000
Page 3
aspects associated with the Columbus ships, including additional monies borrowed from the Durrill
Foundation. Mr. Bell provided the following breakdown of the finances: $798,000 (the remainder
of the $1 million loan) owed to Frost Bank and the Durrill Foundation; $70,000 owed to Frost Bank
and the Smothers Foundation; $580,000 owed to the Durrill Foundation; and $500,000 for the
deferred payment to Spain, for a total of $1,948,000.
Mr. Garcia said that for staff's presentation, they took the actual revenues and expenditures
of the Columbus Fleet Association for the most recent year (FY 1998-99). He said the Council asked
staff to go back and reconsider the costs to operate the ships on a minimal basis. Mr. Garcia said the
revenue assumptions that were used were: calculating attendance at 71% of the 1998-99 level; basing
the fee structure on the 1998-99 schedule ($8 for adults and $4 for children); relocating the Nina to
minimize competition; soliciting contributions by outside volunteers and groups; and having only
minimal marketing.
The City Manager then reviewed the following expenditure assumptions: eliminating the
administrative staff (required functions would be administered by museum staff); establishing
maintenance and marketing as the expenditure priorities; opening the exhibit six days per week (10
a.m.-5 p.m.); having volunteers and groups conduct fundraising and special events; maintaining the
funding of the plaza debt service from the hotel occupancy tax; and writing off all of the outstanding
notes. He said that given those assumptions, staff was able to develop a minimal operating budget
that drops the deficit to $28,287. Mr. Garcia and Mr. Rudy Garza, Assistant Budget Director, then
responded to Council members' questions regarding specific aspects of the revenue and expenditure
assumptions and the financial plan.
Responding to Mayor Neal, Mr. Bell said Spain has always maintained that they wanted to
retain ownership of the vessels, which would be leased under some sort of operating agreement with
an entity. He said currently the CFA has an agreement with Spain, which would have to be reworked
to provide that the ships would be operated by the City of Corpus Christi but there could still be a
non-profit organization between the city and Spain. Other options could be for the city to contract
directly with Spain, or a new corporation could be formed. Mr. Bell reiterated that Spain wants the
vessels back in the water, which would cost about $380,000.
Following additional discussion, Mr. Garcia pointed out that several deadlines with regard
to the ships have come and gone, which he explained. Mr. Bell said the situation is somewhat in a
stalemate now because Spain has expressed a desire to relocate the vessels and has tentatively
discussed the issue with Landry's Seafood Restaurants Inc. However, neither entity is ready to close
on that agreement until everything is settled in Corpus Christi. He said the CFA has used its
remaining dollars to maintain the insurance on the ships and to retain two employees to provide
maintenance on the vessels, but that money has been depleted.
In response to Council questions, Mr. Durrill said Spain is unwilling or unable to address the
money owed to the Durrill and Smothers foundations. He said the boats cannot be removed from
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City Council Workshop
March 21, 2000
Page 4
Corpus Christi unless the liens placed on them by the foundations are removed. Mr. Durrill said that
if the debts were forgiven and if the city could operate the ships under that scenario, he thinks it
should be considered. He also discussed options for placing the ships in the water and for a possible
marina location. He added that he thinks a smaller steering committee should be formed that could
conduct fundraising and special events for the ships.
Mr. Ramon Hernandez said he and others have recently formed the non-profit Carabelas de
Colon Historical Foundation, which proposes to raise funds to benefit the Columbus ships. He said
their group consists of volunteers who are concerned about the ships and who have experience with
them. He said they intend to propose a multi -phase development that will enhance the marina and
which will probably involve forgiving the existing debt. He said they should be able to finalize their
proposal in about a week. Mr. Wallace said people need to remember that the Columbus Fleet
Association is still in existence and that any action taken with regard to the ships has to be approved
by Spain.
A member of the Carabelas de Colon organization said the biggest mistake would be to give
the ships back to the museum because they are not in the water and they are rotting. Mrs. Longoria
pointed out that the City Council directed the City Manager to present a proposal on how the city
can retain the ships, which involves keeping them in their current location at the museum.
Mr. Colmenero encouraged the interested parties to continue to communicate with each
other. Mr. Hemandez said that regardless of who ends up getting the ships, they are deteriorating in
their current state. Mrs. Marie Woods said some short-term funds are needed to address the ships'
condition. Mr. Kinnison said he would be willing to support a group which had an agreement with
Spain and there was, for example, a per head cost from the museum to display the ships. However,
he said he would not support any plan that puts an operational burden on the city.
Mr. Scott asked Mr. Hernandez what his perception was of the relationship of the "Seeds of
Change" exhibit and the Columbus ships. Mr. Hernandez replied that he agreed there should be an
educational vehicle but he reiterated that the ships should be placed in the water and he encouraged
the Council to show leadership regarding this issue. Mr. Scott said that at some point in the past the
public was told that they would not have to pay for the operation of the ships. He also emphasized
the debt payment that remains.
Mr. Abel Alonzo said that when the Council members ran for office, they promised to
address the city's necessities, not luxuries. He also questioned why Mr. Harris was not present to
explain why the ships were in this financial situation. Mr. John Torrey, a member of the Carabelas
de Colon organization, said they feel that if the Columbus ships are managed properly, they can
sustain themselves. He said an investigation may show that money was spent unwisely in the past.
Dr. Gonzales said he would hate for the city to lose the ships, citing their popularity among
Hispanics from South America and Latin America. He suggested that some Council members meet
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City Council Workshop
March 21, 2000
Page 5
with interested parties to find a solution. He added that he believes the ships should be in the water,
and while he acknowledges that mistakes were made, they need to move forward.
Mayor Neal said they have known for four months that the ships were in trouble and the only
person who stepped forward was Mr. Durrill. He said in two weeks the money will run out, the
insurance will be terminated, and someone will have to deal with the Spanish government to either
release the ships or an organization will have to come forward with a substantial amount of money.
He said neither the city nor the museum has any money for the ships.
Responding to Mr. Longoria, Mr. Bell said the Alliance's position is that their agreement is
terminated. Mr. Longoria said the city does not even have the funds it needs to make improvements
to the museum to protect its existing artifacts.
Following additional discussion, it was determined that a committee consisting of Dr.
Gonzales, Mrs. Longoria, Mr. Kinnison and Mr. Colmenero would meet with interested persons
during the next week and place the item on the agenda for the March 28th Council meeting.
There being no further business to come before the Council, Mayor Neal adjourned the
Council workshop at 1:58 p.m. on March 21, 2000.
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