09-20 and 09-21-10 Special Called Regular Meeting of Fiscal Affairs Committee

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CITY OF LA PORTE, TEXAS Agreed Upon Procedures - Five Points Town Center Project (Continued) September 21, 2010 the process for approving the Project, the purchase of property for the Project, cleanup costs related to the removal of old fuel storage tanks, and the loan to East A to obtain the rights to property to be developed by East A. The EDC is a 4B development corporation tasked, along with City Council, with overseeing monies collected through a one-half cent sales tax. Cities in Texas were given the authorization to collect this sales tax in the 1991 Legislative Session in order to promote a wide range of civic and commercial projects under section 4B of the Development Corporation Act of 1979 (the "Act"). In order to be eligible for funding by taxes under section 4B, several criteria must be met under the Act. We have evaluated the Project for compliance with each of these criteria. 4B projects must be of an authorized category. According to section 4B(a)(2)(A), public parks, park facilities and events, and open space improvements are permissible projects. In addition, according to Attorney General Opinion JC-400, because the EDC's articles of incorporation include the phrase "including, but not limited to" any items allowable under Section 4B are also allowable under the EDC's bylaws. As the Plaza would appear to fall under a public park and open space improvement, the Plaza appears to be an approved class of project. The intention ofthe Project as a whole appears to fall under a "project that the board in its discretion determines promotes or develops new or expanded business enterprises that create or retain primary jobs" under the Economic Development Corporation Act. Approval of 4B projects must also go through a specific process. The first step in this process is public notice of a public hearing at least 60 days before the first project expenditure. This notice was published on June 1,2008 in The Bayshore Sun newspaper. The second step is to hold a public hearing. The public hearing was held on July 7, 2008 by the Board of Directors of the EDC. Once the public hearing has occurred and sixty days have elapsed since the first public notice, expenditures may proceed on the project. The first expenditure was made on October 28, 2008 (wire transfer and loan associated with the purchase of the Triangle property) which was more than four months from the date of first notice. The project must also be approved by the EDC's Board. This occurred in two stages. The planning phase of the Project was approved by both the Council and Board on February 25, 2008. The implementation phase of the Project was approved on July 7,2008 by the Board. Section 21 of the Act requires that the City approve all programs and expenditures of the EDC. The Council approved the Project on February 25,2008, and approved individual contracts during the course of the Project. Lastly, funds must be used for approved costs. These costs, according to Section 2(4) of the Act, include: "The cost of acquisition, cleanup, construction, reconstruction, improvement, and expansion, including the cost of the acquisition of all land, rights-o.f way, property rights, easements, and interests, the cost of all machinery and equipment, financing charges, inventory, raw materials and other supplies, research and development costs, interest prior to and during construction and for one year after completion of construction whether or not capitalized, necessary reserve funds, cost of estimates and of engineering and legal services, plans, specifications, surveys, estimates of cost and of revenue, other expenses necessary or incidental to determining the feasibility and practicability of acquiring, cleaning, constructing, reconstructing, improving, and expanding any such project, administrative expense and such other expense as may be necessary or incident to the acquisition, cleanup, construction, reconstruction, improvement, and expansion 9