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HomeMy WebLinkAboutR14-Redevelopment Agency RED.:VELOPMENT AGENCY .R~QUEST FOR COMMISSION/COUNCIL ACTION F-'lm: GLENDA SAUL Subject: DECLARAT I ON OF DEFAULT STATUS FOR BELCO DEVELOPMENT COMPANY CDBG LOAN ($187,458.34) Dept: Redevelopment Agency Date: JANUARY 15, 1986 Synopsis of Previous Commission/Council action: In September and October 1983, the Mayor and Common Council approved three (3) separate Disposition and Development Agreements for $63,000; $77,000; and $25,000, respectively, for the acquisition and development of Mt. Vernon and Spruce and Mt. Vernon and Vine (total of $165,000). In October 1985, the Mayor and Common Council approved the restructuring of the three (3) Disposition and Development Agreements into one (1) loan agreement totaling $187,458.34 (principal plus accrued interest). Recommended motion: (MAYOR AND COMMON COUNC I L) REDEVELOPMENT COMMITTEE RECOMMENDATION: DECLARE BELeO DEVELOPMENT COMPANY IN DEFAULT OF THEIR COtlMUNITY DEVELOPMENT BLOCK GRANT LOAN AGREEMENT OF $187,458.34. ~;~cd Jj{~~1 Signature Contact person: GLENDA SAUL/KEN HENDERSON Phone: 383-5081 Supporting data attached: YES Ward: FUNDING REQUIREMENTS: Amount: $ N/A Project: N/ A No adverse I mpact on City: Date: January 21, 1986 leil Notes: AQenda Item No.l2- / if CI'~ ( OF SAN BERNARD~...O - REQUt:.~T FOR COUNCIL AC'" .ON STAFF REPORT In September and October of 1983, the Mayor and Common Council approved three (3) separate Disposition and Development Agreements (DDA's) with Belco Development Company for $63,000; $77,000; and $25,000 for the acquisition and development of properties located at Mt. Vernon Avenue and Spruce and Mt. Vernon Avenue and Vine. Terms of the DDA's required Belco to make an annual payment of $13,000(+) on or before August thirty-first of any given year until the total of the three (3) DDA's ($165,000) was repaid. Belco missed the first annual payment, and when the eecond annual payment was due, they approached Agency staff regarding the restructuring of their agreements. In October, 1985, the Mayor and Common Council considered and approved the consolidation of the three (3) DDA's into one (1) loan agreement, bearing interest at seven percent (7%) per annum, added the accrued interest to the principal and amortized the loan over thirty (30) years with the total loan due and payable in fifteen (15) years. The payments for the first year are $1,247.17 per month, with payments to begin November 1, 1985. Belco has failed to make the monthly payments for the months of November, December and January which totals $3,741.51. In December, staff brought this matter to the attention of the Redevelopment Committee. Staff was instructed to send a payment demand letter to Belco and if payment was not forthcoming to bring this matter before the Mayor and Common Council (letter attached). As a result of the foregoing, the Redevelopment Committee recommends that the loan be declared in default and that Agency Counsel be instructed to take all appropriate legal action to secure repayment and to protect the City's interests. 563L 1/86 75-0264 REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO, CALIFORNIA GLENDA SAUL EXECUTIVE DIRECTOR December 26, 1985 Abe Beltran William Collazo Belco Development Company 480 West Court Street San Bernardino, Calif. 92401 Re: Agency Loan - Mt. Vernon Avenue and Spruce Mt. Vernon Avenue and Vine Dear Mr. Beltran: In September of this year, the Mayor and Common Council, at the request of Belco Development Company, restructured and consolidated three (3) separate disposition and joint development agreements into one (1) loan agreement secured by a promissory note in the sum of $187,458.34 and bearing interest from July 1, 1985 at a rate of 7% per annum. The agreement provides for monthly payments amortized over thirty (30) years due and payable in full in fifteen (15) years beginning November 1, 1985. Additionally, the monthly payments shall increase 2% on the first payment anniversary date and shall increase 2% on every successive anniversary date thereafter. Our accounting records indicate that payments of $1,247.17 each for the months of November and December are past due, with January's payment fast approaching. I would appreciate you remitting a certified check payable to the Redevelopment Agency in the amount of $3,741.51 (includes months November, December and January). You should be aware that this matter has been brought to the attention of the Redevelopment Committee, and that staff has been instructed to bring this matter before the Mayor and Common Council should payment not be forthcoming. Please call Ken Henderson of my staff if you have any questions. Sincerely, 4&~~4I Glenda Saul, Executive Director Redevelopment Agency cc: Ken Henderson Barbara Lindseth File GS:KJH:lo:525L CITY HALL. 300 NORTH "0" STREET. RM. 320 . SAN BERNARDINO, CALIFORNIA 92418 . PHONE: (714) 383-5081 TELEX: 6711291 RDEV UW ~EDEVELOPMENT AGEL IY.RE:QUEST FOR COMr.._ JSION/COUNCIL ACTION From: GLENDA SAUL, EXECUTIVE DI RECTOR Subject: BELCO DEVELOPMENT COMPANY LOAN RESTRUCTURING \.Jept: Redevelopment Agency Date: AUGUST 2, 1985 Synopsis of Previous Commission/Council action: -On October 4, 1982, the Community Development Commission adopted Resolution Number 4383 authorizing staff to receive Belco's offer to purchase and set a public hearing. -On October 22, 1982, the Community Development Commission adopted Resolution Number 4390 approving the sale and the Disposition and Joint Development Agreement. -On March 4, 1933, the Community Development Commission adopted Resolution Number 4458 authorizing delay in the closing of escrow until June 1, 1983. Recommended motion: (MAYOR AND COMMON COUNCIL) Adopt Resolutions /~/#4 Jd Contact person: GI FNDA SAUl Phone: 383-5081 Supporting data attached: YES Ward: FUNDING REQUIREMENTS: Amount: $ N/A Project: N/A No adverse Impact on City: 1cil Notes: ~/ltl-VLU;C --- 1'7 fZJ/'~. ,y.lut. c:cc{X~ JI' 1 I1luJ4~ '1I.L' L~ /l~' Date: Auqust 5, 1935 '/:' co' Ct.f:~lIft L"-.s./i !.,:U Agenda Item No. Is .CI'. { OF SAN BERt-. ~RD~ ~O - REQUL.JT .. ~R COUNCIL AC. ~ON STAFF REPORT In August of 1982, the Community Development Commission and Belco Development Company entered into loan agreements for property located at Mt. Vernon Avenue and Spruce Street, and Mt. Vernon Avenue and Vine Street. The agreement was formalized in a Disposition and Joint Development Agreement between the Community Development Commission and Belco Development Company, William F. Collazo, Carol M. Callazo, Abe E. Beltran and Joa T. Beltran, and involved land owned by the Redevelopment Agency. The funds advanced to the redeveloper to purchase the land to develop a shopping center complex were provided out of City's Community Development Block Grant Funds. The loans in the amount of $63,000 and $77,000, respectively, were used to acquire the land, and the third loan in the amount of $25,000 was used for soil testing, compaction and architectural and engineering services. The documents executed at the time were entitled, Construction Loan Agreements. This has caused the City's auditors of the CDBG program to preliminarily cite the City's Community Development Division for an irregularity, since the construction loan agreements did not require compliance with the provisions of the Davis-Bacon Act concerning concerning prevailing wages, and the strict Davis-Bacon provisions were not adhered to in the construction of the shopping complexes. None of the funds provided from CDBG sources were used for actual construction, and therefore Davis-Bacon does not apply, but because of the form of the documents, i.e. "construction loan," the appearance of an irregularity exists, and the auditor has suggested that the matter be corrected before the audit report is submitted. At the same time, the redeveloper has fallen behind in its payments, and, despite the fact that the shopping center has been completed, occupancy by tenants has been slow in developing, with vacancies still existing, and the redeveloper has run into a cash flow problem. Agency staff has carefully reviewed the cash flow position of redeveloper, and concurs that reforming the payment schedule to incorporate all accrued interest to date, and providing for monthly payments hereafter, rather than annual payments, and to provide for an escalation clause in the payments, will be advantageous to Agency and City, and will enable redeveloper to cope with its cash flow problems. 75-0264 The proposal includes two substantive changes over and above the payment schedule. The first substantive change is that the original agreement provided that in the event of the sale of any part of the property, 12% of the net gross profits received by redeveloper within the first five year period, 15% of the net gross profits within the second five year period, and 20% of the net gross profits within the third five year period, would be paid by the redeveloper to the Agency. Redeveloper has asked to be relieved of that responsibility, and to make this a straight repayment program. At the time that this agreement was entered into, Agency participation in possible profits was a goal being stressed by federal authorities. That stress no longer exists, and staff is satisfied that it serves no necessary purpose. The second change of substance is that the original agreement provided that the redeveloper was to pay to the agency a percentage of all rent increases that occurred after rent was originally established, 10% of rent increases in the first year, 20% in the second year, and 30% in the third and subsequent years. Redeveloper has requested relief from that provision. Staff, in reviewing redeveloper's cash flow position, is satisfied that no undue profit can be earned by redeveloper, and that Agency and City have no need to participate in rent increases. Such participation is no longer insisted upon by federal authorities. Upon review of this matter by Agency Counsel, he has recommended that since Community Development Block Grant Funds were utilized, and not Agency funds, the disposition and joint development agreement should be set aside, and all future payments should be made direct to the City, and the funds from such payments utilized by the City in accordance with its standard procedures for loans made with Community Development Block Grant Funds. Identification of these funds as CDBG funds is important. Staff recommends adoption of the resolutions authorizing execution of the agreement to restructure the loans, and to cancel out the disposition and joint development agreement. 2 " , " , ( , ~ '5- RESOLUTION NO. - f5'" e2fj 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION OF THE CITY OF SAN BERNARDINO AUTHORIZING AND DIRECTING THE EXECUTION OF AN AGREEMENT AMONG THE ~ITY OF SAN BERNARDINO, THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO, BELCO DEVELOPMENT COMPANY, WILLIAJIII F. COLLAZO, CAROL N. COLLAZO, ABE E. BELTRAN AND JOA T. BELTRAN, RELATING TO THE PROPERTY AT MT. VERNON AVENUE AND VINE STREET, AND AT MT. VERNON AND SPRUCE STREET. BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO AS FOLLOWS: SECTION 1. The Mayor and Common Council of the City of San Bernardino are hereby authorized and directed to execute on behalf of said City an Agreement among the City of San Bernardino, the Community Development Commission of the City of San Bernardino and Belco Development Company, William F. Collazo and Carol N. Collazo, Abe E. Beltran and Joa T" Beltran, relating to the property at Mt. Vernon Avenue and Vine Street, and at Mt. Vernon Avenue and Spruce Street, a copy of which agreement is attached hereto as Exhibit wI- and incorporated herein by reference as though fully set forth at length. I HEREBY CERTIFY that the foregoing resolution was duly adopted by the Mayor and Common Council of the City of San Bernardino at a day of meeting thereof, held on the , 1985, by the following vote, to wit: AYES: Council Members NAYS: ABSENT: CITY CLERK ( 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The foregoing resolution is hereby approved this 1 2 3 4 5 Approved as to form: of , 1985. ~",/?" , r;y~-cv City Attorney day -=- Mayor of the City of San Bernardino 2 ( 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. 11 g' () 1 RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE 2 CITY OF SAN BERNARDINO AUTHORIZING AND DIRECTING THE EXECUTION OF AN AGREEMENT AMONG THE CITY OF SAN BERNARDINO, THE COMMUNITY 3 DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO, BELCO DEVELOPMENT COMPANY, WILLIAM F. COLLAZO, CAROL N. COLLAZO, ABE E. 4 BELTRAN AND JOA T. BELTRAN, RELATING TO THE PROPERTY AT MT. VERNON AVENUE AND VINE STREET, AND AT MT_ VERNON AVENUE AND 5 SPRUCE STREET. 6 BE IT RESOLVED BY THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO AS FOLLOWS: SECTION 1. The Chairman and Secretary of the Community Development Commission of the City of San Bernardino are hereby authorized and directed to execute on behalf of said Commission an Agreement among the City of San Bernardino, the Community Development Commission of the City of San Bernardino and Belco Development Company, William F. Collazo and Carol N. Collazq, Abe E. Beltran and Joa T. Beltran, relating to the property at Mt. Vernon Avenue and Vine Street, and at Mt. Vernon Avenue and Spruce Street, a copy of which agreement is attached hereto as Exhibit "I" and incorporated herein by reference as though fully set forth at length. ADOPTED: 1/ ~ 5: / '1~0;' I Approved as to form: AGENCY COUNSEL By~.~~7r ':' AGREEMENT AMONG THE CITY OF SAN BERNARDINO, THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO AND BELCO DEVELOP~IENT COMPANY, WILLIAM F. COLLAZO AND CAROL N. COLLAZO AND ABE E. BELTRAN AND JOA T. BELTRAN, RELATING TO PROPERTY AT MT. VERNON AVENUE AND VINE STREET AND AT MT. VERNON AVENUE AND SPRUCE STREET THIS AGREEMENT, made and executed as of the S;Y~ day of If U1fivl- , 1985, evidences the agreement by and among the City of San Bernardino, a municipal corporation, hereinafter "City", the Community Development Commission of the City of San Bernardino, California, a public body corporate, hereinafter "Commission" and the Belco Development Company, William F. Collazo, Carol N. Collazo, Abe E. Beltran and Joa T. Beltran, collectively, hereinafter referred to as the "Redeveloper." Section 1. Recitals. The parties hereto acknowledge: A. Commission and Redeveloper are parties to a certain Disposition and Joint Development Agreement recorded in the Official Records of San Bernardino County, California, September 15, 1983 as Document No. 83-214867, relating to the property at Mt. Vernon Avenue and Vine Street, sold for $77,000. Commission and Redeveloper are parties to a certain Disposition and Joint Development Agreement recorded in the Official Records of San Bernardino County, California September 15, 1983 as Document No. 83-214864, relating to the 1 property at Mt. Vernon Avenue and Spruce Street, sold for $63,000. ~ B. Pursuant to the Disposition and Joint Development ( Agreements, Commission, acting as City's administrator of Community Development Block Grant funds, has advanced to Redeveloper three separate loans, as follows: 1. A loan of $63,000, evidenced by promissory note and deed of trust, which deed of trust is recorded in Official Records of San Bernardino County, California, on October 20, 1983, as Document No. 83-246311. 2. A loan of $77,000, which loan is evidenced by a promissory note and a deed of trust which deed of trust is recorded in the Official Records of San Bernardino County, California, as of October 20, 1983, as Document No. 83-246313. 3. A loan of $25,000, evidenced by a promissory note and deed of trust, which deed of trust was recorded in the official records of San Bernardino County, California, on October 20, 1983, as Document No. 83-246312. C. Of the three loans referred to in Subsection B above, the $63,000 loan and the $77,000 loan were each made for purchase of certain property by Redeveloper for this project, and represented the acquisition price for such property. No part of those funds was intended for or used for actual construction on the premises. D. The $25,000 loan was for soil testing, architectural work, and preliminary engineering, and no part of that $25,000 loan was for actual construction of the project. ~ E. All of the funds advanced on these loans were advanced by the Commission as agent for the City in the distribution of Community Development Block Grant funds provided by the United States of America under its Community Development Block Grant program. F. The parties now desire to substitute this agreement and a substitute note and trust deed in place of the Disposition and Joint Development Agreements hereinabove referred to, and the three promissory notes and deeds of trust ~ referred to above_ Section 2. Implementation_ ( The parties therefore agree: A. Redeveloper shall execute and deliver to the City a promissory note and deed of trust in form approved by the City Attorney of the City, which promissory note shall be in the sum of $187,458.34, representing the principal amount outstanding with interest computed through June 30, 1985, and the note shall bear interest from July 1, 1985 at the rate of 7% per annum. The note shall provide for monthly payments at a rate to amortize the loan over a period of thirty (30) years, but shall provide for full payment of the loan within fifteen (15) years, and earlier payment in the event the property is sold, or pro rata if either complex is sold separately. Payments shall commence November 1, 1985, and the monthly payment shall be increased two (2%) percent on the first payment anniversary date, so that the monthly payments due commencing November 1, 1986 will be two (2%) percent 3 greater than the payment due November 1, 1985, and the payment due November 1, 1987 shall be two (2%) percent greater than the payment due November 1, 1986. Similar adjustment shall be provided for as to each successive anniversary date. B. Upon execution and delivery of the promissory note and deed of trust provided for hereinabove, the Executive Director/Secretary of the Community Development Commission is authorized and directed to execute a deed of reconveyance setting aside the three deeds of trust presently in existence, and is authorized to execute and deliver a certificate of completion evidencing the cancellation and termination of all further obligations of Redeveloper under each of those certain- ( Disposition and Joint Development Agreements recorded as Document No. 83-214864 and as Document No. 83-214867 in the Official Records of San Bernardino County, California. - C. The parties recognize that all funds repaid are Community Development Block Grant funds, and shall be recognized as such by the City upon such payment. IN WITNESS WHEREOF, the parties hereto have executed this agreement effective as of the date and year first set forth above. CITY OF SAN BERNARDINO COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO By BY Chairman Mayor ATTEST: By Secretary City Clerk 4 Approved as to form: By BELCO DEVELOPMENT COMPANY By Its ( ~ Approved as to form: AGENCY COUNSEL ':' By ~~..(~ Allen R. Bri 9 WILLIAM F. COLAZZO CAROL N. COLAZZO ABE E. BELTRAN JOA T. BELTRAN 5 ACKNOWLEDGMENTS ':" ~~. '"