Item A: Resolution to Secure a Borrowing by S090520A

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To secure LCOG’s performance under the contingent loan agreement, LCOG will execute a “Deed of Trust, Security Agreement, Assignment of Leases and Rents, and Fixture Filing” which gives the City a security interest in two properties (the Schaefers Building and the Park Place Building), plus an interest in all the leases on those properties, all furnishings on those properties and interest in other inventories, accounts, contract rights, and so on. The available equity in the two buildings, after taking into account the mortgages on the buildings, is $2.8 million, which is more than four times the maximum potential liability under the loan agreement. City of Eugene as Guarantor for the Loan Agreement LCOG approached the City of Eugene for assistance in securing a loan by providing a guarantee. LCOG’s other options would be to (1) ask ALL of the member governments to approve a direct borrowing without a separate guarantee or (2) ask a single or multiple credit-worthy member(s) to provide a guarantee. The option of having all member governments approve a direct borrowing without a separate guarantee is extremely difficult from a logistical perspective, because there are 28 member governments, each of which would have to approve a resolution authorizing a borrowing. In the past, LCOG has asked the County to provide a similar arrangement, and they were willing to do so. This time, LCOG asked Eugene, which is one of the larger member governments with a very good credit rating and it is the jurisdiction in which the Park Place Building is located. LCOG could ask a different member government or governments to serve in that role. Background Information from May 11 Meeting This section repeats the background information included in the May 11 meeting materials. In January 2008, Lane Council of Governments 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 ten-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 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\M090520\S090520A.doc