City of Gonzales
PUBLIC WORKS / CITY ENGINEER DEPARTMENT
STAFF REPORT
TO: Honorable Mayor Rios and City Council
DATE: February 5, 2024
FROM: Patrick Dobbins, Public Works Director/City Engineer THROUGH: Carmen Gil, City Manager
SUBJECT: Agreement with NHA for Community Center
RECOMMENDATION
It is recommended that the City Council authorize the City Manager to execute an Agreement with NHA Advisors to provide Municipal Advisor services related to the Community Center Complex Project for the not-to-exceed amount of $95,000.
BACKGROUND
The Community Center Complex is estimated to cost $34,050,000. The construction of the project will be phased due to grant funding deadlines. Phase 1 will construct the Library, Teen Innovation Center, Courtyard, parking lot and landscaping. Phase 2 is the Community Center including the Community Hall, Fitness Center, commercial kitchen, meeting rooms and restrooms.
Phase 1 will be funded by a variety of sources including the following:
• Measure X (local sales tax) expected to provide $7,500,000 of project funding. • $5.0M State grant for the Teen Innovation Center secured by State Senator Anna Caballero. • Community Development Block Grant (CDBG FY 2023/24 and FY 2024/25). • $1.8M County contribution to relocate existing library from the Gonzales Shopping Center. • Two grants (Electric Vehicle Charging Station Grant from the California Energy Commission and Building Forward Library Infrastructure Grant Program). • Capital Campaign with a $10.0M goal with pledges and contributions currently totaling $6.6M.
AGENDA
ITEM
9 The city applied to the US Department of Agriculture (USDA) for a low interest loan secured by City revenue sources, including Measure X. The formal application was submitted to USDA in July 2023 and the City received an approval letter from USDA in September 2023, indicating that a Rural Development Loan in the amount of $9,825,000 was approved for Phase 1 of the Community Center Project. The USDA Loan is effective upon completion of Phase 1, so the city must obtain an Interim Construction Loan (“Bridge Loan”).
Construction of Phase 1 is anticipated to begin by May 1, 2024, and be completed in November 2025.
REVIEW AND ANALYSIS
As mentioned above, the USDA requires the city secure an Interim Construction Loan (“Bridge Loan”) to fund construction of Phase 1. Upon completion of Phase 1 the USDA Loan will be in place. A Bridge Loan may be completed through either a public sale of short-term notes or a direct loan with a bank. The process to secure such funding is expected to take 60-75 days. Prior to the execution of a Bridge Loan, staff will return to the City Council to obtain approval of the financing terms and related documents.
NHA Advisors’ proposed fees for services related to the Bridge Loan range from $42,500 to $57,500.
The range is provided as the fee will ultimately depend on the financing structure, complexity, method of sale of the financing, the extent of NHA’s tasking and, generally, how much time it will take to complete the financing.
In addition, the Agreement with NHA provides for Municipal Advisor services relating to efforts to facilitate the takeout of the Bridge Loan with the USDA permanent funding (“USDA Takeout”). The process to manage, facilitate and provide USDA staff with sufficient documentation to close on the loan that it has committed to should be a more straightforward process. NHA’s proposed fee for such services is an amount not-to-exceed $32,500.
The proposed Municipal Advisor services for the Bridge Loan and the USDA Takeout will be paid contingent upon the completion of each.
Work to secure the Bridge Loan will commence immediately upon approval of the Agreement. The work related to the USDA Takeout will occur upon maturity of the Bridge Loan in conjunction with completion of Phase 1 construction.
How Recommendation Supports the Vision
Gonzales will continue to be a safe, clean, family-friendly community, diverse in its heritage, and committed to working collaboratively to preserve and retain its small-town charm.
Explain: Constructing a Community Center will provide residents with a facility for a wide variety of public and private functions, recreation programs and other activities which will enhance the quality of life of Gonzales residents.
Explain how the Recommendation Directly Implements the Mission The City Council and Staff of the City of Gonzales will realize our Vision by providing the leadership, commitment and resources necessary to provide excellent services that enhance the quality of life of our diverse community. X Yes ____ No____ N/A
Explain: Please see explanation above for the Mission.
City services will be delivered in a cost-effective, respectful and friendly manner to insure the safety and well-being of the residents and the promotion of business, recreational, housing and employment opportunities in an environmentally sustainable manner. X Yes ____No ____ N/A Explain: See Vision explanation above.
Strong fiscal policies allow us to provide appropriate infrastructure for:
• Public Safety Yes X No N/A
• Housing Yes X No N/A
• Recreation X Yes No N/A
• Environment X Yes No N/A
• Education X Yes No N/A
ALTERNATIVES
The City Council could direct staff to seek additional proposals. Staff doesn’t recommend this as NHA is the city’s long-time financial advisor and there is some urgency to engage them for the Bridge Loan and the USDA Takeout efforts.
BUDGET IMPACT
NHA’s expected costs are:
Secure Bridge Loan $57,500 estimated maximum
USDA Takeout $32,500 not-to-exceed
Expense budget $5,000
Total = $95,000
NHA’s services for the Bridge Loan and the USDA Takeout will be paid using GL 112-000-6245 (Community Center Project Funds – Contractual Services). The services provided in conjunction with the Bridge Loan will be included in the loan proceeds and not part of the City’s budget. USDA Loan proceeds cannot be used towards soft costs (interest costs or financing costs) and therefore the source of repayment of such components will come from other project funding sources.
CONCLUSION
It is recommended that the City Council authorize the City Manager to execute an Agreement with NHA Advisors to provide Municipal Advisor services related to the Community Center Complex Project for the not-to-exceed amount of $95,000.
Attachments:
1. NHA Advisors Agreement with Scope of Work