10C Action Items 2017 1016 - Laserfiche WebLink

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File Number: 17-560 occur in the future, there is sufficient value in the property to ensure that the City investment could be repaid through a sale of the property. With that said, the prospective pool of buyers for a historic theater is likely small, so the appraised value does come with significant uncertainty. Proposed Loan Structure - Based on the ongoing discussions, staff understands the upcoming balloon payment to be the most urgent need facing the BAL. Refinancing this debt to a secure, long-term repayment plan will eliminate an impending financial challenge and enable Curtain Call to focus on continuing and expanding programming and operations. Staff also recognizes that facility improvements can improve the viability of the theatre and begin to address some maintenance needs. Consequently, staff proposed the following two-part package of financial assistance for the BAL: Loan Term 1. A City General Fund loan to the Dillman family of $400,000 at 3% interest for a term of 30 years. This will enable the BAL owners to address the upcoming balloon payment and secure long-term financing at a lower interest rate. Although City staff would normally deem it preferable to make such a community assistance loan to a non-profit entity, in this case the loan would be to the family that owns the building and holds the debt. This allows the loan to be secured by the value of the property. Semi-annual debt service payments would be $10,157.37, with the option to pay monthly, and total interest payments over the life of the loan would be $209,442.26. The loan would be secured by a deed of trust. Additionally, the loan agreement requires full repayment upon transfer and does not permit the borrower to encumber or borrow against the value of the property without the written consent of the City. The 30-year term reflects an effort by staff to balance the need to offer low payments to the borrower and a desire to minimize risk and uncertainty to the extent possible. This term is considerably longer than typical City-funded financing instruments and does create some risk because it is impossible to foresee what the economic climate for a theater will be in 30 years. It is also possible (and perhaps likely) that physical issues will arise with the structure, given its age. The 3% interest is recommended by staff to adequately protect the investment of taxpayer funds. Although interest rates are currently at historic lows and the City does not earn 3% on its investments, that situation is unlikely to last through the duration of the loan term. After accounting for inflation, the City does not expect to earn any net profit on this loan. Staff also believes that the rate is lower than what the borrowers could find from another lender. 2. Forgivable loan to Curtain Call Performing Arts for $100,000, for a term of three years. The City commonly uses forgivable loans to incentivize physical improvements to commercial buildings. For example, the City provided a $50,000 loan to the BAL for exterior façade improvements that was ultimately forgiven. For the proposed loan, staff recommends a term of three years, and the full loan amount would be forgiven if the BAL complied with all terms. According to the proposed Agreement, the forgivable loan could be used for the following: ·Re-treat the curtains, movie screen cleaning or a brand new screen including installation, Page 3 City of San Leandro Printed on 10/10/2017 212