Item 6: Loan Guarantee for LCOG - Laserfiche WebLink

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ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY Action: Resolution 4976 Authorizing a Contingent Loan Agreement to Secure a Borrowing by Lane Council of Governments Meeting Date: May 11, 2009 Agenda Item Number: 6 Department: Central Services Staff Contact: Sue Cutsogeorge www.eugene-or.gov Contact Telephone Number: 682-5589 ISSUE STATEMENT The council is asked to approve a resolution that would provide a guarantee for a loan that Lane Council of Governments (LCOG) is entering into to fund a portion of the costs of improving the Park Place Building. The guarantee is requested because LCOG has been unable to secure sufficient loans to fund the full cost of the improvements without additional credit support. BACKGROUND In January 2008, LCOG purchased the Park Place Building in downtown Eugene with the intent to make the building the permanent offices of LCOG’s administration and government services. LCOG made the decision to purchase the Park Place Building rather than renew its 10-year lease in the Wells Fargo Building based on long-term financial savings and improved flexibility for office space. The purchase assumed LCOG would move into the Park Place Building sometime between June 2008, and June 2009. Construction of the new offices began in July 2008, and LCOG moved in November. The timing of the move was determined based on the City of Eugene’s need to move into the old LCOG office space in the Wells Fargo Building. The assumption at the time that LCOG purchased the building was that Umpqua Bank or Wells Fargo would provide the financing needed for the improvements, as had been the case with other LCOG improvements. Two events caused dramatic changes in the project during the year between the purchase and the construction of the improvements. First, the cost of the project increased significantly. The original estimate for improvement expense was $1.1 million. The final actual total expense will be about $1.9 million, which includes additional costs of design and moving. Second, a credit freeze developed nation-wide, making it extremely difficult for any organization to secure financing for projects. Umpqua Bank, which holds the mortgage on the Park Place Building, has lent LCOG an additional $800,000 to cover part of the cost of the improvements. LCOG spent $600,000 of its General Fund Reserves on the improvements. This leaves a funding gap of $500,000 which needs to be filled through another source. Z:\CMO\2009 Council Agendas\M090511\S0905116.doc