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18 <br /> St. Anthony City Council and HRA <br /> Fannie Mae Loan—Northwest Quadrant Redevelopment <br /> June 1,2004 <br /> Page 2 <br /> Primary Issues to Consider: <br /> 1. How is this loan structure different from what was originally proposed? <br /> 2. What is the risk to the City/HRA in obtaining these loan funds and providing their General <br /> Obligation taxing powers? <br /> 3. What are the terms of the loan agreement <br /> Analysis of Issues: <br /> 1. How is this loan structure different from what was originally proposed? <br /> The original loan structure anticipated that the City would borrow the funds,provide the necessary <br /> collateral ($837,500 set aside for up to a three year term) and not provide its General Obligation <br /> authority up front (less risk). The loan was going to be paid back as land sale proceeds were <br /> received and then when the development was finished being constructed and paying taxes, the <br /> City/HRA was going to pay off the remaining balance of the loan by utilizing its General <br /> Obligation authority and issue a GO TIF bond. The GO TIF bond would then be repaid by tax <br /> increment generated by the new development. <br /> Under the new structure, the City/HRA would be authorizing utilization of its General Obligation <br /> taxing powers up front, which would not require the City/HRA to provide$837,500 in collateral for <br /> the loan. This option would provide the City much more flexibility in completing other capital <br /> improvement projects as defined by the City Council and HRA since it would not require tying up a <br /> large sum of money for a three-year period. The loan will still be repaid as originally anticipated, <br /> which is through land sale proceeds and through the issuance of a GO TIF bond when the <br /> development is completed. <br /> The City/HRA was always intending to pledge its General Obligation taxing powers to repay the <br /> debt. The only difference between the two aforementioned loan structures is when the GO would <br /> be required, meaning up front (more risk) before the development is constructed or after the <br /> development is constructed(less risk). <br /> 2. What is the risk to the City/HRA in obtaining these loan funds and providing their General <br /> Obligation taxing powers? <br /> The risk of obtaining these loan funds needs to be reviewed from two aspects: <br /> 1. Actually drawing down the loan funds; and <br /> 2. Repayment of the loan if it is drawn down <br /> The risk under#1 is minimal since the City/HRA is not required to draw down any funds until the <br /> developer has met certain presale and construction financing requirements. If the presale <br />