04/16/1980 Meeting - Laserfiche WebLink

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If the recession deepens, there could be a problem of owners going bankrupt and a need to foreclose on the property. If developers ~, . cannot make the payments on the land they have required, the City .., would acquire possession because of nonpayment of liens and need to sell the property to recover costs. This could take three to five years. There are a sizable number of new subdivisions involved which is another category. The City is hard put to service the present developed areas. This would add to the present operating burden although presumably there would be additional income once the property is developed. Mr. Henry suggested the City not proceed with these new projects during this construction season or at least not before June 10, 1980, when a bond sale is scheduled for current projects. The City of Eugene contemplates selling approximately a $4-million bond issue in June and an $8-million issue in the fall of this year. It would be unwise to proceed with more liabilities and therefore he is suggesting holding off on further Bancrofting. The Manager recom- mended no new subdivisions be approved this construction year that require Bancroft financing. He suggested the City confine its efforts this year to the improvement of streets, arterials, and projects in established neighborhoods. The second issue was to determine when to increase the interest rates and for which projects. The existing warrant group amounts to $12 million and the Manager suggested applying the ten-percent interest rate to some of those projects. An increase in the systems develop- ment tax could make up the deficit. Manager introduced Mr. Long and asked him to elaborate on the legal aspects of levying increased interest rates. ~ Mr. Long said he had been asked what the City can charge as an interest rate to the property owners. He said that the City could raise the interest rate to ten percent and sell the bond at nine percent. Or the City can charge seven percent as they were doing and increase the systems development tax to pay for the difference in interest or levy it on the tax rolls. The memorandum from the City Attorney divides the $12.6 million in projects into four categories. With respect to the first category, the City is legally committed to a seven percent interest rate. Categories 2, 3, and 4 involve various projects at different stages of development. In the second category of projects, those owners have been told that the interest rate would be seven percent. Legally, it could be increased; however, that could meet with substantial resistance. In considering the 1980-81 projects, there is a lot of discretion and many alternatives. Mr. Haws questioned the reason for stopping subdivision development in the city if the developer had money to pay for the improvements himself. He did not want the City to subsidize the projects. Neither did he want to stop subdivision development. . 4/16/80--4