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File Number: 14-231 <br />The DSFRC is seeking a loan of $1.5 million, from the City of San Leandro, to cover operating <br />costs for the first 24 months of operation of the new PCC. Due to changes in the <br />reimbursement structure at the U.S. Department of Health and Human Services, the lag-time <br />for initial reimbursement of new federally-qualified health centers is averaging 19 - 23 months, <br />after which time, centers are reimbursed on a quarterly basis. This loan will be repaid as soon <br />as federal reimbursement is received, and it is possible that the entire amount requested will <br />not be required if the federal reimbursement schedule is accelerated. As security for the loan, <br />DSFRC will pledge the building it owns at 1190 Davis Street, which is used as a child care <br />center. A recent appraisal indicates a value of this collateral at $1.7 million. <br />As of June 30, 2013, DSFRC had drawn down $300,000 of an available $350,000 line of <br />credit provided by Wells Fargo Bank (Bank) at a per annum interest rate of five percent. <br />DSFRC has indicated that the Bank is unwilling to extend the $1.5 million needed to fund the <br />start-up costs. <br />There are strict default provisions that would accelerate all loan monies to come due if a <br />non-payment, late payment or other default by the DSFRC occurs. The City will have no <br />maintenance, insurance or upkeep responsibilities for the property to be purchased. <br />With this Loan, the City will complete a recent round of initiatives aimed toward improving the <br />health of City residents. Other commitments include $3 million to preserve San Leandro <br />Hospital’s emergency room , $1.2 million loan for San Leandro Unified School District’s <br />acquisition of the Girls Inc. building to provide health services to District students and the <br />recent $169,000 commitment to Building Futures for services to end homelessness in the <br />City. <br />Legal Analysis <br />The City Attorney drafted the Loan Agreement , Promissory Note, and First Deed of Trust in <br />compliance with all generally and specifically applicable laws and regulations. <br />Fiscal Impact <br />$1.5 million is available from the General Fund unrestricted assets. Currently, these assets, if <br />invested in the Local Agency Investment Fund (LAIF), yield 0.23%. The 4.5% interest rate for <br />the DSFRC Loan would provide a favorable rate of return for the City’s investment . <br />ATTACHMENTS <br />Attachments to Resolution <br />·Deed of Trust <br />·Promissory Note <br />·Loan Agreement <br />PREPARED BY: David Baum, Finance Director, Finance Department <br />Page 2 City of San Leandro Printed on 6/10/2014