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City Council Regular Meeting Minutes 04 <br /> June 8,2004 <br /> Page 4 <br /> 1 The risk of obtaining these loan funds needs to be reviewed from two aspects: <br /> 2 <br /> 3 1. Actually drawing down the loan funds; and <br /> 4 2. Repayment of the loan if it is drawn down <br /> 5 ' <br /> 6 The risk under#1 is minimal since the City/HRA is not required to draw down any funds until <br /> 7 the developer has met certain presale and constructional financing requirements. If the presale <br /> 8 requirement and proof of construction financing from a lending institution are met, it will <br /> 9 provide reassurance to the City and HRA that there is a market for the product the developer is <br /> 10 constructing and the corresponding price points they have set. <br /> 11 <br /> 12 Under#2, the City and HRA were always at risk of repaying the loan if it was drawn upon. <br /> 13 Again, the loan was going to be repaid through land sale proceeds and a General Obligation TIF <br /> 14 bond when the development was finishing being constructed. The.City/HRA's only risk would <br /> ..15 be if the developer for some reason did not move forward with the development after meeting the <br /> 16 presale and construction financing requirement or quit constructing the development half way(or <br /> 17 at another point) through construction The likelihood of the development not moving forward <br /> 18 after meeting the presale requirement is low since they have invested considerable dollars in <br /> 19 completing architectural drawings and plans for submittal to the City for approval, they have <br /> 20 been working on meeting the presale requirement-and are nearing finalization of their <br /> 21 construction financing. <br /> 22 <br /> 23 Ms. Kvilvang noted that would leave the scenario in which the developer walks away.from the <br /> 24 development prior to completing it. To analyze this risk the question that the City and HRA <br /> 25 need to answer is: Would the City move forward with acquiring this land for redevelopment if <br /> 26 this developer defaults during the construction phase? It is assumed that the answer to that is <br /> 27 yes. The City and HRA have committed extensive.resources to assure that the Northwest <br /> 28 Quadrant Redevelopment Plan would be implemented. If the developer was to`walk away", the <br /> 29 City and HRA would have the right to the unfinished project and could select another developer <br /> 30 to step in and finish the development, or propose an alternative solution. <br /> 31 <br /> 32 3. What are the terms of the loan agreement <br /> 33 <br /> 34 Following are the loan agreement terms: <br /> 35 <br /> 36 1. The loan is a non-revolving loan and the City/HRA can draw the funds down at <br /> 37 anytime <br /> 38 2. Loan maturity is 36 months <br /> 39 3. The loan is taxable <br /> 40 4. Loan proceeds will be utilized to acquire and demolish property in the Northwest <br /> 41 Quadrant Redevelopment Area <br /> 42 5. Loan has a variable interest rate based upon the three (3)month LIBOR(currently <br /> 43 1.26)plus 175 base points (total of 3.01%). Interest rate is set on day of closing.. <br /> 44 6. Interest rate will be reset quarterly on the first day of each calendar quarter <br /> 45 (January 1, April 1, July 1, and October 1) <br /> 46 7. Quarterly payments of interest to be paid in arrears on the first day of each <br /> 47 calendar quarter and calculated on an actual/360 basis <br />