HomeMy WebLinkAbout06-Comunity Development
Cly(.~ OF SAN BERNARDII ) - REQUEr T FOR COUNCIIIlib"Ir'N
From: Kenneth J. Henderson, Director
Subject: DECLARATION OF DEFAULT STATUS FOR
BELCO DEVELOPMENT COMPANY CDBG LOAN
($187,458.34)
Dept: Comrrunity Development
Date: November 17, 1986
Synopsis of Previous Council action:
In September and October of 1983, the Mayor and Common Council approved three (3) separate
Disposition and Development Agreement (DDA's) for $63,000; $77,000; and $25,000, respectively,
for the acquisition and development of Mt. Vernon and Spr~ce and Mt. Vernon' and Vine (total
$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).
In January of 1986, a Declaration of Default status for Belco Development Company CDBG loan
($187,458.34) was brought before the Mayor and Common Council. This item was tabled at that
time as Belco Development had made payment of the full amount in arrears just prior to the
meeting of the Mavor and Common Council on January 21, 1986.
Recommended motion:
FORM MOTION:
MOVE TO DECLARE BELCO DEVELOPMENT COMPANY IN DEFAULT OF ITS COMMUNITY DEVELOPMENT BLoCK
GRANT LOAN AGREEMENT OF $187,458.34.
Signature
Contact person: ---1{.pnnpt'h T Hpnnpr!':on
Phone:
383-5065
Supporting data attached: YES
Ward:
1
FUNDING REOUIREMENTS:
Amount:
N/A
Source:
Finance:
Council Notes:
75-0262
Agenda Item No.
~.
CIT( OF SAN BERNARDU- ') - REQUE'"'T FOR COUNCIL ACT.~N
STAFF REPORT
In September and October of 1983, the Mayor and Common Council
approved three (3) separate Disposition and Development Agree-
ments (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 and Mt.
Vernon 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
second annual payment was due, they approached Agency staff
regarding the restructuring of their agreements.
In October, 1985, the 11ayor 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 were
$1,247.17 per month, with payments to begin November 1, 1985.
Belco had failed to make the monthly payments for the months of
November, December and January which totaled $3,741.51.
In December, 1985, 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 forthcolliil'C)
to bring the matter before the Mayor and Common Council. Payn~nt
vIaS not received ilnd tbi.s malter wa~: brolJght befcle lhee riayol ane:
Common Council. However, just prior to the meeting of the Mayor
and Common Council, Belco paid the full amount in arrears. The
matter was tabled in view of this action.
Belco continued to make monthly payments for the next three (3)
months until May of 1986. At present, loan payments for the
months of May, 1986 through November 1986 remain unpaid. v7ith
loan payments of $1,247.17 per month, the total amount in arrears
to date is $8,730.19 plus accrued interest.
Staff again received a request for loan re$tructuring from Belco.
Staff responded to Belco's five (5) part request and indicated
insufficient information was provided by Beleo to make a detailed
analysis and to assure the Mayor and Common Council that the
City's interest would be adequately protected. Belco was also
advised to bring their loan payments current. No response was
forthcoming from Belco. Staff contacted Belco directly on
November 3, 1986 to advise the of the pending Declaration of
Default status. Belco advised staff that they were attempting to
secure refinancing of their loan and could pbssibly make payment
of the full amount in arrears within a week.
As a result of the foregoing, staff recommends that the loan be
decl~red in default and that the City Attorney's office be
75-0264
instructed to take any and all appropriate legal action to secure
repayment and to protect the City's interest.
~~~ G. ~k~~
Kenneth J. Henderson, Directo~
Community Develoment Department
KJH:LRD: Ib
attachment
file: belcostaffrept
/ tic (c,
ERN ARDINO 300 NORTH "0" STREET, SAN BERNAROINO. CALIFORNIA 92418
RAYMOND D. SCHWEITZER
ACTING CITY ADMINISTRATOR
October 2, 1986
William Collazo
739 North Mt. Vernon, Suite 300
San Bernardino, CA 92411
Re: COMMUNITY DEVELOPMENT BLOCK GRANT LOAN ($187,458.34)
Dear Bill:
I received your initial request and follow-up correspondence regard-
ing the above referenced subject. I apologize for the delay in
responding. However, please be advised that immediately after your
follow-up correspondence was received, the Mayor and Common Council
took an action separating the housing and community development
functions from the Redevelopment Agency (Community Development
Division) and incorporated same into the City Administrator's Office.
In view of the fact your loan proceeds came from the City's Community
Development Block Grant (CDBG) program, the responsibility for
administering and servicing the loan rests with this department.
Before I respond to the specifics of your request, I feel a review of
certain background events is appropriate. On September 15 and
October 20, 1983, the Mayor and Common Council approved three (3)
separate loans to Belco for $25,000, $63,000 and $77,000, respect-
ively (total of $165,000), for the acquisition and commercial deve-
lopment of two (2) sites located at Mt. Vernon and Vine and Mt.
Vernon and Spruce Streets. As part of the repayment provisions,
Belco was to make annual payments of roughly $13,700 on or before
August 31 of the affected year. Belco missed the first annual
payment and when the second annual payment was due and payable,
approached staff and inquired as to whether the three (3) disposition
and development agreements could be restructured. After negotiating
with staff, the Mayor and Common Council took action to consolidate
the three (3) DDA's into one (1) loan agreement, added accrued
interest of approximately $32,000 to the principal of $165,000 and
authorized the Mayor to execute the loan agreement with Belco
totaling $187,000.
The loan agreement is secured by a promissory note and deed of trust
bearing interest from July 1, 1985 at a rate of seven percent (7%)
per annum. The note provides for monthly payments over fifteen (15)
years, with payments commencing November 1, 1985. Additionally, the
monthly payment increases by two percent (2%) on the first of Novem-
ber each succeeding year until the note becomes due and payable.
Currently, Belco is five (5) months in arrears on its loan payments,
which equals $6,235.85 plus accrued interest. Given Belco's repay-
ment performance on the original DDA's and the present status of
loan, the serious consideration by staff of another request to
restructure the loan agreement becomes increasingly difficult,
especially in light of certain aspects of the request.
For instance, no documentation (such as pro forma, maintenance costs,
etc.) or cash-flow analyses have been submitted supporting your
assertions relative to your difficulties in meeting ongoing financial
obligations~ the difference between market rents and your current
lease agreements and your current maintenance costs versus the
"market norm". Moreover, when the original DDA's were consolidated
into the current loan agreement, staff was assured that Belco's then
current lease agreements provided for graduated payments which would
allow Belco to meet its obligation to the City (also on a graduated
basis) .
As to your five-part request noted as items "A" through "E" in your
original letter, the following is the department's response:
A. Limited Partnership: Staff has serious doubts as to the legality
of the City entering into a limited partnership with Belco. The
City Attorney's office indicated research would be required
before any such concept was approved. No California city nor
any other city that I know of has entered into the type of
contractual arrangement that is suggested.
B. Loan pavments ($25,000): As a result of the consolidation of the
three (3) DDA's, there is no $25,000 loan. There is, however, a
loan agreement of $187,000 in which Belco is five (5) months in
arrears. Any payments made would be applied to the loan
agreement currently in effect.
C. ForGiveness of Interest: A similar request was made and denied
at the time the agreement consolidation took place. It is
difficult to determine the justification for this request in the
absence of pertinent information/documentation. However, in
light of the interest savings Belco has already accrued (the
difference between the seven-percent (7%) interest rate and
market rate at the time the original loans were made -- 13%) and
the fact that a below market rate took into account the difficul-
ties of developing commercial properties along Mt. Vernon Avenue,
staff could not, at this time, support forgiveness of the accrued
interest.
D. Sale of proiect: Your letter indicates the City's original
investment was $140,000. Actually, the investment was for
$165,000. With respect to your definition of net profits, I do
not believe land investment should be a part of the definition
inasmuch as the City financed the land acquisition, soils test-
ing, compaction and related fees.
E. Participation in Cash-Flow: As stated earlier, there are
potential legal problems surrounding the limited partnership
issue that would appear to preclude participation in the positive
cash-flow by the City. It is doubtful in view of statements made
in your letter that a positive cash-flow is possible if your
current financial situation is as described. This would place
the City in the position of not receiving any payments until such
time as the buildings were sold.
Although the discussion above may appear to you that staff is
unwilling to assist, be advised that we are prepared to assist in
making this project financially viable. I must inform you, however,
that every effort should be made to bring your account current. As
stated in earlier correspondence to you, if your account is not
brought current, I am obligated to bring this matter before Council
in accordance with the City's Default/Noncompliance Policy.
Your early attention to this matter will be appreciated and please
call me at 714/383-5065 if you have any questions.
S~CerelY ,
Ke~~ f H~~~J,
Community Development
Director
Department
cc: Councilwoman Estrada
Ray Schweitzer
Allen R. Briggs
Lisa Dickey
File
KJH: Ib
file: belcocdbgloan
1
RESOLUTION NO.
4847
2 RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE
CITY OF SAN BERNARDINO DIRECTING REDEVELOPMENT AGENCY STAFF TO
3 ENFORCE ALL AGREEMENTS INVOLVING OR ADMINISTERED BY THE
REDEVELOPMENT AGENCY, INCLUDING INSTITUTION OF DEFAULT ACTIONS.
4
THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN
5 BERNARDINO HEREBY RESOLVES:
6 1. It shall be the responsibility of the staff of the
7 Redevelopment Agency of the City of San Bernardino to continuallY
8 monitor for full and complete compliance all agreements entered
9 into by the Community Development Commission of the City of San
10 Bernardino or by the Redevelopment Agency of the City of San
11 Bernardino, and all other agreements administered by Agency
12 staff.
13 2. In the event Agency staff finds that any party to an
/.
f~; 14 agreement with the Agency, the Commission or the City fails to
15 fully perform each and every obligation in a timely manner under
16 any such agreement administered by the staff of the Redevelopment
17 Agency, the Executive Director of the Redevelopment Agency shall
18 have the authority and be responsible to take immediate
19 corrective action in accordance with the terms of the specific
20 agreement involved, and, if no such specific corrective action is
21 specified in the agreement itself, the Executive Director shall
22 take other appropriate action to require that any noncompliance
23 be cured immediately.
24 3. At the time of taking any corrective action or any
25 action to notify a party to any such agreement that a status of
26 noncompliance has arisen, the Executive Director shall notify all
27 members of the Community Development Commission of the City of
28 / / /
/ / /
1
1 San Bernardino and the Mayor and Common Council by written
2 memorandum of the action taken, and of the proposed date by which
3 a formal default will be taken, in the event corrective action is
4 not promptly completed.
5 4. If full and complete compliance is not secured within
6 thirty days, or such longer period of time as may be granted by
7 the specific terms of the agreement, the Executive Director shall
8 be authorized to implement all provisions of the agreement
9 providing for default, forfeiture, foreclosure, termination, or
10 any other provisions relative to remedies in event of breach,
11 and, if no such specific provisions are included, shall take such
12 action as is authorized by law to terminate the agreement
13 involved.
~
14
5. The Executive Director is hereby authorized specifically
15 to take all such actions as are appropriate under the terms and
16 conditions of the respective agreements being enforced, unless
17 the Mayor and Common Council, as a body, or the Community
18 Development Commission of the City of San Bernardino, as a body,
19 by formal action entered upon the minutes of such body, directs
20 otherwise.
21
Dated:
F..hrll"ry 17 191\(,
22 AGENCY COUNSEL
23
24 By t2t6"l -/( 62~~
Allen R. Briggs v
25
26
The foregoing resolution was duly adopted by the following
27 / / /
28///
/ / /
/ / /
2
.
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
vote, to wit:
AYES:
NAYS:
ABSENT or
ABSTAIN:
Members Estrada, Rei 11y, Hernandez, Hark~ Quiel,
Frazier. Strickler
3