City of Sacramento
City Council - 5PM Report
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www.cityofsacramento.org
File ID: 2024-01882 11/19/2024 Discussion Item 23.
Waterfront Reinvestment Program
File ID: 2024-01882
Location: Old Sacramento Waterfront, District 4, Represented by Councilmember Valenzuela Recommendation: Adopt a Resolution: 1) directing staff to proceed with implementation of the Waterfront Reinvestment Program; 2) authorizing the City Treasurer to initiate a Transient Occupancy Tax Revenue Bond Financing; and 3) transferring up to $324,560 from the Sacramento Riverfront multiyear operating project (I02180200, FUND 1001) to the Old Sac Children’s Play Area (M17700100).
Contact: Valerie Mamone, Development Project Manager, (916) 808-5451, vmamone- [email protected], Sabrina Tefft, Development Project Manager, (916) 808- 3789, [email protected]; Ellen Sullivan, Senior Development Project Manager, (916) 808-5758, [email protected]; Leslie Fritzsche, Economic Investment Manager, (916) 808-5450, [email protected]; City Manager’s Office of Innovation and Economic Development; Dustin Hollingsworth, Assistant Director, (916) 808-5538, [email protected], Convention and Cultural Services Department Development Presenter: Ellen Sullivan, Senior Development Project Manager, (916) 808-5758, [email protected]; Leslie Fritzsche, Economic Investment Manager, (916) 808-5450, [email protected]; City Manager’s Office of Innovation and Economic Development; Dustin Hollingsworth, Assistant Director, (916) 808-5538, [email protected] <mailto:[email protected]>, Convention and Cultural Services Department Attachments:
1-Description/Analysis
2-Waterfront Reinvestment Program Overall Project Site Plan 3-Resolution
Additional Description/Analysis
Issue Detail: The FY2016/17 budget priorities approved by the Mayor and City Council included an initiative to invest in the Sacramento riverfront as an economic driver for the region. In December 2016, the Mayor and City Manager requested a plan to identify opportunities to enhance the riverfront as a strategic destination asset for conventions, visitors, businesses, and workforce attraction efforts
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by both the City and other organizations.
Since 2017, staff have been working on various initiatives to leverage the city’s existing riverfront assets and transform the Old Sacramento Waterfront (OSW) into a vibrant entertainment district within its historic setting, establishing a premiere riverfront destination. On April 30, 2019, City Council approved the Destination Sacramento Program which proposed three projects utilizing Transient Occupancy Tax (TOT) funding to revitalize the waterfront:
o Front Street Project
o Museum Event Deck Project
o River Docks Project (determined not to be TOT eligible) At that hearing, the City Council approved an initial $5,000,000 in funding for the program, with a commitment of up to an additional $42,000,000, for a total of up to $47,000,000 (Resolution No. 2019 -0138), and directed Staff to proceed with project development.
Efforts continued on the Destination Sacramento Program, and work progressed through the schematic design phase. Unfortunately, due to the COVID-19 pandemic, project funding was reallocated to other City TOT-eligible obligations, and the project was paused.
Since then, staff developed a waterfront recovery strategy to position the Old Sacramento Waterfront to welcome visitors back and be prepared for future funding opportunities. Staff used American Rescue Plan Act (ARPA) funding to implement immediate clean and safe upgrades, including new lighting, Police Observation Device (POD) cameras, and other beautification projects in the district, while identifying key improvements to further enhance OSW as a tourist destination. Staff continues to use ARPA funding for immediate maintenance and business support in OSW. These investments are critical, especially with increased crowds anticipated following the Oakland A’s move to West Sacramento in 2025.
Staff has expanded on this work by developing a phased Waterfront Reinvestment Program. Phase 1 identifies six key tourism improvements as essential capital investments for Old Sacramento: the Public Market Buildings, the Waterfront Site Redevelopment Opportunity, Boardwalk Replacement, K Street Barge Hull Repair, River Docks and Native American-Themed Children’s Play Area. The projects are described in detail below. A future Phase 2 of the Waterfront Reinvestment Program will involve continued redevelopment, including the full buildout of the Public Market Buildings. The total cost of all TOT funded Phase 1 projects is $25 million and with the addition of Phase 2, the overall project cost is estimated to reach up to $40 million. If Phase 1 is approved by council, the TOT bond issuance is anticipated to occur in first quarter of 2025.
Outreach - Since 2017 the City has engaged in extensive outreach with the community regarding the proposed projects on the waterfront. Early outreach efforts to Old Sacramento merchants and owners, the California State Rail Museum and Sacramento History Museums along with their boards,
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historic preservation groups, and civic groups such as Downtown Sacramento Partnership, Greater Sacramento Economic Council, Visit Sacramento, Sacramento Metro Chamber of Commerce and Valley Vision. This outreach helped inform staff of key issues and goals.
More recently, outreach has focused on business and property owners within the OSW to discuss their vision for the Waterfront Redevelopment Opportunity, the Public Markets and the City’s proposed waterfront reinvestment program. Business and property owners have expressed support for the waterfront reinvestment program.
Waterfront Reinvestment Program (Phase 1)
Public Market Buildings
The North and South Public Markets are envisioned, through an adaptive reuse or rebuilding, as a high-performing regional destination that anchor the historic district, attracting locals and tourists with a unique, Sacramento-sourced shopping experience. This project will create a market destination and serve as a small business incubator, supporting several new businesses, selling local Sacramento goods. The North Public Market will focus on items such as art, specialty goods, crafts, flowers, and other non-food products, while the South Public Market will continue to center on food and beverage offerings.
The project is currently in the feasibility or pre-development phase and the buildings are undergoing some necessary maintenance. Consultant work will determine the next phase of design work and provide a business plan to guide the City on the building’s optimal uses and how to manage and lease the buildings.
Estimated Project Cost -- $2.8 Million
Schedule - Pre-development underway; Implementation TBD Waterfront Site Redevelopment Opportunity
The City-owned former Rio City Café building and adjacent Steamers Building, previously used as an ancillary kitchen, were recently vacated by the tenant. Given the sites prime waterfront location and the City’s goal for quick activation, staff has engaged a consultant to attract the highest and best user for the site. Staff anticipates issuing a consultant-guided solicitation for the former Rio City Café site by the first quarter of 2025. Based on the results of the solicitation, the City may consider capital repairs or improvements to the property, such as replacing the deck or constructing a new building.
Simultaneously, staff will issue a request for proposals for the Steamers Building, which could create an outdoor dining opportunity along the Embarcadero. Together, these two sites will offer a variety of waterfront dining options to further attract visitors to Old Sacramento.
Estimated Project Cost -- $5 Million
Schedule - May 2025 - October 2025 (Potential Construction Window for Deck)
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Boardwalk Replacement
There is over one mile of wooden boardwalks that are a vital part of the tourist experience in Old Sacramento. With over four million visitors walking on these wooden sidewalks annually, the boards deteriorate rapidly, leading to potential safety issues such as trip and falls. The last comprehensive boardwalk replacement project was completed in 2005 and since then, the City has only had funding for piecemeal repairs. A full boardwalk replacement is necessary to ensure a safer experience for visitors.
Estimated Project Cost -- $10 Million
Schedule - October 2024 (some initial repair) - October 2025 K Street Barge Hull Repair
The City owns the barge and dock system in the Sacramento River. The K Street Barge sits at the north end of the dock area and provides ADA access to the public dock system with an elevator housed on the barge. The Delta King, a historic 1920’s river vessel, is attached to this barge. Over its lifespan, the barge hull has deteriorated significantly, and if not repaired, it would severely limit public access to the docks and the Delta King. Allowing the barge to continue deteriorating would also impact the Delta King’s ability to operate, as it is essential systems, including boilers and chiller, are housed on the barge to keep the hotel and restaurants functional. If the Delta King were unable to operate and had to relocate, Old Sacramento would lose a significant landmark, impacting the area’s ability to convey the history of river transportation reducing its appeal as a tourist destination.
Estimated Project Cost -- $7.2 Million
Schedule - May 2026 - October 2026
Old Sacramento Docks
The City’s existing dock system requires deferred maintenance to ensure continued safe public access to the docks and waterfront. Enhancements to the dock system will provide the Sacramento community and visitors with the opportunity to experience and reconnect with the Sacramento River in a safe and engaging way. This project will also improve docking facilities for river boat traffic addressing the current lack of public open space and recreational opportunities within the OSW.
Congresswoman Matsui has provided $1.5 Million in funding for this project through a grant from the U.S Department of Housing and Urban Development, Office of Community Planning. Additionally, Governor Newsom recently signed AB157, which includes $4.6 million for the “Sacramento Riverfront Safety and Pedestrian Access Restoration Project”, providing further support for the docks project.
Staff will present any necessary grant agreement to City Council for approval. The City is currently developing a request for proposals to bring a consultant on board to assist with the project.
Project Cost -- $6.1 Million (Funded)
Schedule - November 2024 - June 2032
Native American Children’s Play Area
To provide a more diverse and comprehensive history of the Old Sacramento Waterfront, the City has
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embraced the opportunity to tell a broader story through themed play structures that highlight the Native American communities who have lived along the waterfront for thousands of years.
Collaborating with the Shingle Springs Band of MiWok Indians and Wilton Rancheria, the City has designed the play area with a “riparian corridor” theme. The play area will feature an entryway, a central iconic play structure with climbing nets and a slide, and smaller play structures that represent tule boats, tule huts, and rock mortars, with play surfaces mimicking the natural landscape. Together, these elements will illustrate local indigenous way of life along the river.
The play area will be located at the current site of the Old Schoolhouse, which will be removed as a part of the project. It’s important to note that Sacramento historically did not have a schoolhouse of this type in the Old Sacramento Waterfront. The old schoolhouse was initially built as a temporary display for the United States bicentennial in 1976 and was intended to stand for only a few years.
While it holds nostalgic value, it now has multiple structural issues and is in a state of significant disrepair. Additionally, the Old Schoolhouse does not reflect diverse story, whereas the new play area supports the City’s commitment to promoting diversity and inclusiveness for future generations. The play area project will bring new energy, resources, and activity to the Old Sacramento Waterfront, fostering connections among communities and visitors.
On November 14, 2023, City Council passed Resolution 2023-0359, approving a grant agreement for Community Reinvestment Projects with the California Natural Resources Agency in the amount of $20 million dollars. Of this amount, the Old Sacramento Play Area project was allocated $1 million dollars. To ensure adequate funding, staff recommend transferring up to $324,560 from the Sacramento Riverfront MYOP (I02180200, FUND 1001) to the Old Sac Children’s Play Area (M17700100).
Project Cost -- $1.324 Million (Funded)
Schedule - Construction June 2025 - December 2025
Policy Considerations: Implementation of this program will further the visions, goals, and objectives of the 2035 General Plan, the 2003 Sacramento Riverfront Master Plan as approved by the cities of Sacramento and West Sacramento and the Sacramento riverfront priorities set out by the Mayor and City Council. Further, the Waterfront Reinvestment Program will support city investments in the Golden 1 Center and Convention Center Complex by creating a related and supporting asset that will aid the economic development efforts of the city and other civic organizations.
Recommendations contained in this report are in accordance with Resolution No. 2024-0193, Section
13.9, which requires Council approval for MYOP budget transfers in excess of $250,000; and Resolution No. 2024-0193, Section 10.9, which requires Council approval to transfer CIP funds in excess of $250,000.
Economic Impacts: A renewed Sacramento waterfront destination can have a significant, beneficial impact on Sacramento’s ability to 1) capture increased sales and transit occupancy tax revenues
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from new waterfront business, 2) encourage visitors’ choice of Sacramento as a leisure and convention destination, and 3) market the region to new business relocations, and workforce attraction and retention.
Further, the economic benefits of the project will accrue to the entire Sacramento economy, but a concentrated benefit will also occur in the Old Sacramento Waterfront. Increased visitor spending and demand will expand business revenue, create new jobs, allowing for investment building infrastructure, new and improved businesses, amenities for residents, and serving as a catalyst for additional private infill development within an Opportunity Zone. The project will also support the underserved populations that have businesses within the OSW by increasing visitation and activity in the area. Further, the diverse businesses in the OSW support businesses in other areas of the City by serving as the gateway and encouraging visitors to explore the larger City and its offerings.
Environmental Considerations: This report concerns concept design activities that will not have a potentially significant effect on the environment, and do not constitute a “project” as defined by Sections 15061(b)(3) and 15378(b)(4) of the CEQA Guidelines (Title 14 Cal. Code Reg. §15000 et seq.).
Sustainability: Not Applicable.
Commission/Committee Action: Not Applicable.
Rationale for Recommendation: As one of seven National Historic Landmark Districts in California, the Old Sacramento Waterfront is the most historically significant attraction in Sacramento. It attracts over 4 million visitors a year and contributes to the almost 1 million annual overnight hotel stays in the surrounding Downtown Sacramento Partnership PBID boundaries. However, it has not reached its potential as a tourism visitor attraction or marketing asset. The projects will reactivate the Old Sacramento Waterfront and create a more compelling destination for locals, business and leisure visitors and will create a unique asset for marketing and Sacramento region.
Financial Considerations: A portion of the Waterfront Investment Reinvestment Program may be funded by the next series of TOT revenue bonds. Certain projects of the Waterfront Reinvestment Program may involve private activity/private use. As such, those projects may be funded by the issuance of taxable TOT revenue bonds. Other projects of the Waterfront Reinvestment Program that are not anticipated to involve private activity/private use may be funded by the issuance of tax-exempt TOT revenue bonds, which are anticipated to have a significantly lower cost of borrowing than taxable TOT revenue bonds.
Of the estimated $25 million cost of the Waterfront Reinvestment Program, as previously identified in this council report, Office of Innovation and Economic Development (OIED) staff estimates the
File ID: 2024-01882 11/19/2024 Discussion Item 23.
following:
Potential components to be financed by taxable TOT revenue bonds ($7.8 million) · certain capital improvements to the north and south public markets à $2.8 million · certain capital improvements associated with the City-owned former Rio City Café building and Steamers building à $5 million
Potential components to be financed by tax-exempt TOT revenue bonds ($17.2 million) · replacement of the boardwalk in Olds Sacramento à $10 million · repair of the hull of the K Street Barge à$7.2 million City Treasurer’s Office staff worked with Morgan Stanley, the bond underwriter of the 2018 TOT revenue bonds, and potentially the selected bond underwriter for the next series of TOT revenue bonds, to prepare preliminary debt modeling for the $25 million need for the Waterfront Reinvestment Program.
Based on the most recent 12 months of actual TOT collections covering the period of August 2023 - July 2024, the preliminary debt modeling by Morgan Stanely indicates there is significant TOT revenue bond capacity to issue additional series of TOT revenue bonds, while ensuring the required debt service coverage ratios per bond covenants of the existing TOT revenue bonds are met.
Based on interest rates as of October 30, 2024, plus an interest rate spread of 50 basis points, below are the estimates of the cost to fund the $25 million need for the Waterfront Reinvestment Program.
The estimated interest rate and debt service is blended for both the taxable and tax-exempt components.
Par Amount $26.63 million
All-in true interest cost 5.34%
Maximum Annual Debt Service $1.82 million
Post-presidential election on November 5, 2024, two major events occurred - 1) material movements in the interest rates of the benchmark bond interest rate indices, and 2) the decision on November 7, 2024 by the Federal Reserve to cut the federal funds rate by 25 basis points (0.25%) to further efforts to reduce inflation in the U.S. economy.
Looking ahead, there may be various economic variables that could impact the estimated cost of borrowing for the next series of TOT revenue bonds that are issued. The figures above are illustrative and are intended to demonstrate that barring an unexpected and catastrophic decline in TOT revenues, sufficient TOT revenue bonding capacity should exist to provide the ability to issue bonds to fund the Waterfront Reinvestment Program and other TOT eligible projects.
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If the City Council approves OIED staff’s recommendation to move forward with funding the Waterfront Reinvestment Program and authorizes the City Treasurer’s Office to initiate the next series of TOT revenue bonds, City Treasurer’s Office staff will bring a separate City Council report as soon as practicable to obtain the formal authorization to issue the next series of TOT revenue bonds, to obtain approval of the near-final form of all bond-related documents, and to obtain approval of all necessary actions prior to and subsequent to the issuance of the next series of TOT revenue bonds to effectuate the financing.
In the FY2022/23 Budget Resolution (Resolution No. 2022-0198, Section 18.19), Council approved $324,560 in one-time funds match for Riverfront federal grant projects from the National Endowments of the Arts and the U.S. Department of Commerce Economic Development Administration. Due to timing, budget constraints and scope concerns, the City stopped pursuing these grant opportunities.
Subsequently the California Natural Resources Agency Community Reinvestment Grant allocated $1 million in funding for the Old Sacramento Children’s Play Area, another Riverfront grant opportunity.
Staff is requesting authorization to utilize the one-time Riverfront grant match funds from the Sacramento Riverfront multi-year operating grant project (I02180200, Fund 1001) to augment the Old Sac Play Children’s Area (M17700100) by transferring up to $324,560 to assist in the construction and purchase of play equipment. This additional funding will bring the project budget to up to $1,324,560, ensuring that the project has sufficient resources. Adoption of the staff recommended resolution will provide an additional amount of up to $324,560 in funding for the project.
Local Business Enterprise (LBE): Not applicable.
Waterfront Reinvestment Program
Old Sacramento Docks
K Street Barge Hull Repair
Public Market Buildings
Native American Themed
Children’s Play Area
Waterfront Redevelopment
Opportunity
Boardwalk
Replacement
(Districtwide)
RESOLUTION NO. 2024-XXXX
Adopted by the Sacramento City Council
November 12, 2024
Waterfront Reinvestment Program
BACKGROUND
A. The dissolution of Redevelopment Agencies in 2011 resulted in the loss of an important source of funding for economic development projects within the city of Sacramento.
B. The FY2016/17 budget priorities approved by the Mayor and City Council included an initiative to invest in the Sacramento waterfront as an economic driver for the region’s economy.
C. Investment in a renewed waterfront could represent a major boost to Sacramento’s business and leisure visitations.
D. A renewed Old Sacramento Waterfront would contribute significantly to the region’s overall economic competitiveness by stimulating business growth, supporting additional downtown housing opportunities, and attracting and retaining a creative workforce.
E. The FY2022/23 Budget Resolution (Resolution No. 2022-0198, Section 18.19), Council approved $324,560 in one-time Riverfront federal grant match funds.
Unused funding to be redirected to the Waterfront Reinvested Program: Old Sacramento Children’s Play Area.
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS:
Section 1. Office of Innovation and Economic Development Staff is directed to proceed with the Waterfront Reinvestment Program.
Section 2. After funding the costs of the Waterfront Reinvestment Program, all residual TOT Revenue Bond capacity, may be used for eligible purposed codified in section
3.28.180 of the City Code. The parameters of the potential issuance of the additional series of TOT Revenue Bonds shall be consistent with the parameters of the 2018 TOT Revenue Bonds – maintaining a targeted minimum balance of the Community Center Fund of at least $8 million per year and maintaining necessary debt service coverage ratios.
Section 3. City Treasurer’s Office (CTO) staff is authorized to initiate the next issuance of TOT revenue bonds. CTO staff will bring a separate report to the City Council to obtain the formal authorization to issue the next series of TOT revenue bonds, obtain the approval of the near-final form of all bond-related documents, and obtain approval of all necessary actions to effectuate the financing.
Section 4. Transfer $324,560 from the Sacramento Riverfront MYOP (I02180200, FUND 1001) to the Old Sac Children’s Play Area capital improvement project (M17700102).
Exhibit A
Waterfront Reinvestment Program