I'm going to preface this with the statement that this positng contains information from public documents along with links to public documents and does NOT violate Patch's TOS. Anybody should be able to post anything they want to write about the Bankhead Theater on the Town Square Board and anything else for that matter according to the Patch's message as I quote “All Boards Got a question? Something on your mind? Talk to your community, directly.”
The Bankhead Theater debt will be paid for by the city of Livermore using the HCIF funds. The City will lease the Theater back to LVPAC. The General Fund will not be used.
This was decided in a closed session held before the city council meeting and announced at the meeting by city attorney Alcala.
HOST COMMUNITY IMPACT FEES
In 1996, Alameda County certified an Environmental Impact Report and approved a
Conditional Use Permit for expansion of the Altamont Landfill by Waste Management of
Alameda County, Inc. The City of Livermore, the City of Pleasanton, and the Sierra Club
filed separate lawsuits challenging Alameda County’s actions. The Northern California
Recycling Association and the Altamont Landowners Against Rural Mismanagement
were also parties to the Sierra Club’s lawsuit. The three separate lawsuits were then
consolidated by court order.
In 1999, the lawsuit parties entered into a Settlement Agreement relating to the proposed
expansion of the Altamont Landfill. Results of the Settlement Agreement include
substantial reductions in the landfill expansion and waste imports. The Settlement
Agreement also requires the landfill operator, Waste Management of Alameda County,
Inc., to collect three new fees:
1) $0.75 per ton for open space acquisitions in fee or permanent easements;
2) $0.25 per ton for recycling and diversion education; and
3) $0.25 per ton for the host community impact fee (HCIF).
As a part of the Settlement Agreement, the first $10 million of HCIF was designated for
the planning and development of a performing arts center in Livermore. On July 25,
2005, the Livermore City Council adopted a resolution recommending the Alameda
County Board of Supervisors designate future amounts beyond the initial $10 million from
the Altamont Landfill’s HCIF for use on the Performing Arts Center. In August of 2005,
the Alameda County Board of Supervisors concurred with the allocation of HCIF fees in
excess of $10 million toward the Performing Arts Center.
In 2006, the City and County entered into a fiscal agreement for the HCIF to be used for
a performing arts center in Livermore. Similarly, in December 2007, the City Council
authorized the transfer of Vasco Road Landfill Host Community Impact Fees to LVPAC.
As outlined in the December 10, 2007 staff report, the Altamont Settlement Agreement
required the County to use its best efforts to impose a similar fee on the Vasco Road
Landfill when it renewed the Landfill’s Conditional Use Permit.
The City has analyzed and reviewed revenue projections anticipated to be received from
HCIF streams several times. A consulting firm, HH&F, provided an analysis that
projected revenue amounts from the Altamont Landfill. As of the latest projections, it is
anticipated that over the life of the Vasco landfill – 15 more years – the City will receive
approximately $3 million in HCIF fees. Anticipated revenue from both landfills from 2013
to their estimated closures (2041 for Altamont and 2023 for Vasco) is approximately $18
million. Add the revenue received from each landfill up to 2013 ($4 million from the
Altamont, and $212,000 from Vasco) and the total revenue received and projected is
$22.2 million through 2041.
Lease-Lease Back Arrangement Using HCIF as Rent
To utilize the HCIF revenue to assist LVPAC obtain construction financing for the
Bankhead Theater, the City also approved lease-lease back arrangement using the HCIF
revenues as rent for the Bankhead Theater. The lease agreement between the City and
LVPAC provided for lease of the property and ensured that no general fund money would
be used to fund LVPAC’s loan repayment amounts for construction costs.
That lease arrangement directs the City to pay the HCIF funds directly to the trustee for
the bonds used to finance the theater’s construction. However, the lease-lease back
arrangement also requires the Bankhead Theater to be operated as a community theater.
If it is not operated as a community theater, the terms and conditions in the lease-lease
back arrangement, and the restrictions on the revenues, would allow the withholding of
the HCIF so that the revenue is used for its intended purpose. In light of LVPAC’s
financial difficulties, City staff has asked the Bank of New York Mellon (who secured
LVPAC’s bond financing for the Bankhead Theater) to explain how it intends to ensure
the continued use of the Bankhead as a community theater to avoid jeopardizing the
HCIF revenue stream to the bond trustee in the event LVPAC cannot continue
BANKHEAD THEATER RESTRICTED TO USE AS A COMMUNITY THEATER
Use of the Bankhead Theater property is restricted to a community theater by the 2005
DDA, the grant deed for the transfer of the Bankhead Theater from the former-RDA to
LVPAC, and the Downtown Specific Plan. These title restrictions do not allow the
property to be used for any other purpose and for its transfer back to the City if it is not
used for a community theater. In particular, the 2005 DDA states that if the property is to
be sold or no longer used for a community performing arts center, the City must be
offered the first right to purchase the property and its facilities. Also, failure to use the
Bankhead as a community theater would violate the use restrictions for the HCIF fees
and the lease-lease back arrangement, which would jeopardize the use of those funds.
Therefore, the Bankhead can only be used as a community theater.
PRIVATE DEBT BURDENING THE BANKHEAD THEATER
The Bank of New York Mellon is the issuer of a Letter of Credit guaranteeing LVPAC’s
outstanding bond debt of approximately $22,000,000. As a part of that initial financing,
the Bank of New York holds a security interest in all of LVPAC’s assets including the
Bankhead Theater. By early 2013, LVPAC determined that it would be unable to pay
future interest and principal payments to the Bank if the debt was not restructured in
City and County Actions
In January 2013, the City completed its analysis of the legal issues confronting the Bank
should the Bank foreclose on the Bankhead Theater to offset some of LVPAC’s
indebtedness. By that time, legislation had been enacted in California to dissolve the
Livermore Redevelopment Agency, and reliance by the Bank upon a Regional Theater to
support the payment of the Bankhead Theater indebtedness seemed to be in
considerable doubt. The City Attorney for Livermore sent a letter to the Bank outlining
the City’s concerns and stating its legal position after the Bank had requested that the
City consider making a financial contribution to assist LVPAC in meeting its obligations to
the Bank. The Bank has not yet responded to the City’s legal analysis or concerns.
Further, at that time it did not appear to the City that the Bank was open to any dialogue
with the City to resolve the problems that might eventually cause the closure of the
Subsequently, in early 2013, at the request of LVPAC, the City loaned LVPAC the sum of
$475,000. Alameda County separately loaned LVPAC $400,000. The purpose of these
loans was to provide needed operating funds to LVPAC to give it sufficient time to resolve
the outstanding litigation with the State and to negotiate a solution with the Bank of New
York. Those sums currently remain outstanding obligations of LVPAC.
On October 29, 2013, the Superior Court issued its ruling in the LVPAC writ action,
denying LVPAC’s writ and upholding the Department of Finance’s decision that the 2011
DDA was not an enforceable obligation and is not entitled to receive tax increment
funding. This decision was a setback to LVPAC in its attempt to move forward with a
Regional Theater and was a further setback to the Bank in securing a repayment source
for the Bankhead indebtedness. While several proposals were made to the Bank in the
fall of 2013, none appeared to the City to be realistic.
In December 2013, LVPAC told the City that it was in troubling financial circumstances
and requested the City approach the Bank to negotiate for the purchase of the Bankhead
Theater and a compromise of LVPAC’s indebtedness. To this end, LVPAC sent a letter
requesting that the City set up a meeting with counsel for the Bank in early January,
2014. At that meeting, counsel for the City explained that LVPAC’s financial condition
appeared to be critical. Counsel for the Bank responded that the Bank did not agree.
According to the Bank’s counsel, while the financials of LVPAC were not good, they
certainly were not “grave” or “dire.” The Bank’s counsel stated that the Bank had
confidence that the current debt load could be serviced by LVPAC. Also, the City’s
attorney articulated several legal positions as previously stated in the City’s January 2013
letter to the Bank. Counsel for the Bank indicated that he would not respond to any of
Shortly after the meeting with the Bank, the City informed counsel for LVPAC that the
Bank was of the opinion that LVPAC’s financial condition was not grave and that the
Bank was confident that LVPAC’s 2014 fundraising efforts would keep LVPAC viable. If
the Bank was correct, then there seemed to be no need for the City’s intervention into
these issues. Counsel for the City urged counsel for LVPAC to be open and
straightforward about LVPAC’s fundraising plans and financial problems, if any, and
requested that counsel for LVPAC get back to them if the City could be of further help.
In Fall 2013 and Spring 2014, the City and County made several points to LVPAC in the
event LVPAC was interested in the City’s assistance. First, Supervisor Scott Haggerty
had authorized J. Morrow Otis, counsel for the City, to speak for him in any negotiations
with LVPAC or with the Bank. Secondly, the City and the County could not pay the debt
of a third party, such as LVPAC, with public funds. As an alternative, the City and County
could purchase an asset with public funds as long as the purchase price reflected the
value of the asset and the asset would be used for a public purpose. Nevertheless, the
City and County were interested in any negotiations that would lead to ownership of the
Bankhead Theater. Finally, LVPAC would be required to give to the City and the County
assurances that saving the Bankhead Theater was LVPAC’s first priority and not
promotion of a Regional Theater.
In April 2014, LVPAC met with representatives of the City to discuss LVPAC’s upcoming
negotiations with the Bank. At that meeting, the City clearly articulated the City’s and
County’s position that they were prohibited from simply paying private debts with public
funds without receiving a comparable value public benefit. No attempt was made to
dissuade the City from that position and indeed, some from LVPAC appeared to indicate
that they understood and agreed with the City’s position.
On May 24, 2014, the Mayor, City Attorney, staff for Supervisor Haggerty, the City and
County’s negotiator, and representatives of LVPAC participated in a telephone call with
representatives of the Bank of New York Mellon. That call laid the groundwork for an inperson
discussion scheduled for June 2, 2014.
LVPAC has also requested that the City participate in tentative settlement negotiations
with the Department of Finance regarding pending litigation over the Regional Theater.
In response to that request, the City has done everything requested to support LVPAC’s
position in those negotiations. The City Council has directed staff to continue to provide
any requested assistance to facilitate continuing negotiations.
FINANCIAL CONTRIBUTIONS TO THE BANKHEAD THEATER
From 2004 to 2014, the County and the City invested nearly $8M toward the approval,
construction, and operation of the Bankhead Theater. Some of these funds were
expended on consultants to provide financial analysis, peer review of documents
provided by LVPAC, legal costs, payments for fees associated with construction of the
Bankhead, HCIF fees dedicated for the purpose of debt service, or loans to LVPAC for
operational needs. A total listing of all City and County funds expended on this project is
attached as Attachment 6.
FISCAL AND ADMINISTRATIVE IMPACTS
This report is for informational purposes. There are no fiscal or administrative impacts
associated with receiving this report.