Loading...
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. Minutes 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 Minutes 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 Minutes 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 Minutes 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. * * * * * * * * * * * * *