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<br /> <br /> <br />ECC <br />UGENE ITY OUNCIL <br />AIS <br />GENDA TEM UMMARY <br /> <br /> <br /> <br />Action: Reconsideration of Resolution 4976 Authorizing a Contingent Loan Agreement <br />to Secure a Borrowing by Lane Council of Governments <br /> <br /> <br />Meeting Date: May 20, 2009 Agenda Item Number: A <br />Department: Central Services Staff Contact: Sue Cutsogeorge <br />www.eugene-or.gov Contact Telephone Number: 682-5589 <br /> <br /> <br /> <br /> <br />ISSUE STATEMENT <br /> <br />The council is going to reconsider approval of a resolution that would provide a guarantee for a loan that <br />Lane Council of Governments (LCOG) is seeking, to fund a portion of the Park Place Building improve- <br />ment costs. The City’s guarantee is requested because LCOG has been unable to secure sufficient loans <br />to fund the full cost of the improvements without additional credit support. <br /> <br /> <br />BACKGROUND <br /> <br />Background information on the loan guarantee was originally provided in the agenda item summary for <br />item 6 on the May 11 calendar. The information is repeated below. Additional information on the risks <br />of providing the guarantee and the reason the City of Eugene is asked to be the sole guarantor is also <br />included. <br /> <br />Risks of Providing the Loan Guarantee <br />By entering into a contingent loan agreement to secure a borrowing by LCOG, the City is taking on the <br />risk that LCOG is unable to make payments on the bank debt. The maximum potential financial liability <br />is shown in the following chart: <br /> <br />Potential Financial Liability Under Contingent Loan Guarantee <br /> <br />Principal Amount of Loan $550,000 <br />Plus: Estimated Interest Payments on Loan Over 10 Years 155,000 <br /> Total Loan Payments Over 10 Years $705,000 <br />Less: Amount of LCOG’s Initial Deposit Into Reserve Account - 70,000 <br /> Maximum City Liability Under Contingent Loan Agreement* $635,000 <br />*Amount may change slightly when final interest rate on the loan is set by the bank. <br /> <br />Should LCOG be unable to make payments on the loan, payments would be made from the reserve <br />account. If the reserve account should be drawn on to make payments, the City would be required to <br />replenish the reserve account; the council would then be presented with a budget request for the reserve <br />account payment. The estimated amount that would need to be paid in any one year is $70,000. Any <br />advance by the City under this agreement would become a loan to LCOG that they would have to repay <br />with interest. <br /> Z:\CMO\2009 Council Agendas\M090520\S090520A.doc <br /> <br />