CC Minutes - 05/11/09 Meeting - Laserfiche WebLink

Home Browse Search

Councilor Zelenka asked Ms. Davis to explain the rationale behind the 18 percent increase. Ms. Davis replied that it was primarily to cover the 20 -year facility plan, funded through the bond. She pointed out that the facility plan had been put into place to meet regulatory requirements. In response to a follow -up question from Councilor Zelenka, Ms. Davis confirmed that a small portion of the increase was likely caused by the loss. of Hynix. Roll call vote; the motion passed unanimously, 8:0. 6. ACTION: Resolution 4976 Authorizing a Contingent Loan Agreement to Secure a Borrowing .by Lane Council of Governments Councilor Zelenka, seconded by Councilor Clark, moved to adapt Resolution 4976 authorizing a Contingent Loan Agreement to secure a borrowing by Lane Council of Governments. Councilor Zelenka asked for an explanation of what the agreement was for and what the City's liability would be. Sue Cutsogeorge, Financial Analysis Manager for the Finance Division, stated that the resolution would authorize a contingent Ivan agreement with the City and the Lane Council of Governments (LCOG). She said LCGG was borrowing money for improvements planned for the Park Place Building, recently purchased by LCGG. She explained that LCGG had been caught "between a rock and a hard place," as the project's costs had increased and when they went to borrow money for it the bottom had fallen out of the credit market. She related that the resolution would help them to obtain the loan by saying the City would guarantee payments on the loan, in the event that was needed. She added that LCGG would create a reserve equal to one year of payments when the loan closed. She said as long as LCGG made the payments on time, the City would do nothing; if a payment was missed, the money would be drawn from the reserve and the City would replenish the reserve, to be paid back with interest by LCGG. She confirmed that in the worst case scenario, if LCGG could not make -the payments, the City would be "on the hook" for the loan. She stated that the loan was a 10 -year loan at approximately $70,000 per year and the City would take a position on some real estate that LCGG owned as security. Councilor Zelenka ascertained that the total amount of the loan was $550,000. Councilor Brown asked what was being used as collateral. Ms. Cutsogeorge responded that equity in the Park Place Building and the Schaefer's Building was being offered as collateral. She noted thata the City would be in second position on both buildings; the equity being offered in collateral was in excess of the loan amount. In response to a follow -up question from Councilor Brown, Ms. Cutsogeorge estimated the amount the City paid to LCGG in dues to be between $60,000 and $50,000. Councilor Brown asked what the money was for and the "worst possible thing" that would happen if the City did not help LCGG attain financing. Ms. Cutsogeorge responded that the money was for refurbishing the space for LCGG's tenants. She said LCGG would have to pay for the work itself if it could not get a loan, and this would create an issue with its auditor, Jones & Roth. Councilor Taylor opined that the City would be taking a chance with taxpayers' money. Councilor Pryor stated that he sat on the LCGG Board and had looked into the resolution in detail. He noted that LCGG had done this before; the County had acted as guarantor when LCGG purchased the Schaefer's Building. He underscored his belief that the City would be guaranteeing a loan that LCGG could repay. He averred that the co I lateral ization of both buildings made the City's exposure minimal, as LCCG's assets were better than what would be needed to cover the loan. He underscored that the bank was requiring a guarantor because of the current economic climate. He added that the building was an asset to the downtown. MINUTES Eugene City Council May 11, 2009 Page 6 Regular Meeting