07/16/1986 Meeting - Laserfiche WebLink

Home Browse Search

V. COMMERCIAL REVITALIZATION LOAN: RECAPITALIZATION PROGRAM (memo distributed e City Manager Micheal Gleason introduced the item. Jesse Smith of the Development Department gave the staff report. He said the Commercial Revitalization Loan Program of the City provides leverage financing for improvements to commercial buildings within the urban renewal boundary. He said the program has loaned $460,000 in the last four years and it has leveraged $5 million in private financing. He said Title I Grant Funds were used for the program and there are no new funds available. Mr. Smith said the Recapitalization Program will sell seven of the nine loans in the program to local lenders, especially lenders who provided the original private financing. He said the sale will net between $270,000 and $300,000 for the City. He said the recapitalization program is a standard tool in banking and will provide an opportunity for the City to cooperate with lending institutions. Answering questions from Ms. Ehrman and Mr. Hansen, Mr. Smith said the City will retain two of the nine loans. One of the two loans is due now because the business was closed and the City is negotiating for the payment of the other loan because the business was sold. He said the payments for all the loans were deferred for three years and the interest was zero. The payments are now due. Ms. Wooten said the Council Committee on Economic Development (CCED) discussed the recapitalization program. She said CCED members agreed the recapitalization program should be approved thi s year. They had some e concerns about the future. She said the mechanism has been used in other cities successfully. Mr. Smith discussed how other cities use the program. He said the local lenders view the recapitalization program as an opportunity to fund the commercial revitalization loan program. Answering questions from Mr. Hansen, Mr. Smith said the City has not established a discount rate for selling the loans but the staff has the right to reject any bids. He said the staff expects the best bid from the lending institution that made the initial loan to the business. Mr. Holmer said he admires the work of the staff and lending officials in the program, but he is concerned because the proposal is to sell $450,000 worth of loans for $250,000 to $300,000 which will be loaned again. He said the City should look ahead to 1989 or 1990. He said the City should use the $30,000 a month which will be repaid to establish a permanent revolving fund for loans. He said he does not favor discounting loans at this time because the proposal does not recognize future needs as much as he would like to have them recognized. Responding to Mr. Holmer, Mr. Smith said the repayments for Commercial Revitalization loans are made annually for ten years. He said a revolving loan program is important and the funds that the City will receive from the Recapitalization Program e MINUTES--Eugene City Council July 16, 1986 Page 8