City of Culver City, California
Redevelopment Agency Agenda Item Report
RECOMMENDATION:
Staff recommends the City Council and Culver City Redevelopment Agency
approve the First Amendment to Cooperation Loan Agreement By and Between
The City of Culver City and the Culver City Redevelopment Agency (the
“Amendment”).
BACKGROUND:
On May 29, 2007 the Council and Agency approved a cooperation agreement
whereby the City loaned $9 million to the Agency. Attachment Number 1 to this
staff report is a copy of the Council staff report from the May 29, 2007 meeting.
The purpose of the loan was to enable the Agency to reallocate its tax exempt
bond fund proceeds in accordance with the Bond documents. Attachment Number
2 to this staff report is a copy of the existing Cooperation Loan Agreement By and
Between The City of Culver City and the Culver City Redevelopment Agency (the
“Agreement”.)
DISCUSSION:
The Agreement requires repayment in full plus interest by June 21, 2008. It was
anticipated that the source of repayment would be land sales proceeds from the
various parcels the Agency expects to sell for new commercial development.
Currently the Agency is in escrow to sell the Baldwin Site and Parcel B and is
negotiating a Disposition and Development Agreement for the Washington/Centinela
site. The status of these three properties is indicated in the Table on the following
page.
Meeting Date: 6/16/2008 Item Number: J-1
AGENDA ITEM: JOINT ITEM Approval of the First Amendment To Cooperation
Loan Agreement By And Between The City Of Culver City And The Culver City
Redevelopment Agency.
Contact Person/Dept.: John Fisanotti Phone Number: (310) 253-5767
Fiscal Impact: Yes [X] No [] General Fund: Yes [X] No []
Public Hearing: [] Action Item: [X] Attachments: [X]
Public Notification: Master E-Mail Notification List on 06/11/08
Department Approval:
Sol Blumenfeld (06/05/08)
City Attorney Approval:
Carol Schwab (by H. Baker) (06/11/08)
Chief Financial Officer Approval:
Jeff Muir (06/11/08)
City Manager Approval:
Jerry B. Fulwood (06/11/08) City of Culver City, California
Redevelopment Agency Agenda Item Report
Property Status Sale Price Escrow
Closing Date
Baldwin Site In Escrow $3,200,000 December 2008
Parcel B In Escrow $5,900,000 July 2008
Washington/Centinela DDA under
Negotiation
$8,200,000?* FY 08-09?*
TOTAL PROCEEDS $17,300,000
* Estimated Pending final DDA terms
Since none of these transactions have closed yet, staff has drafted the Amendment
which modifies the repayment terms to reflect the Agency’s current position. The
Amendment will:
• Require a two-million dollar principal payment, in addition to accrued interest,
by June 30, 2008; and
• Require full repayment of the remaining principal and interest by June 30,
2009.
FISCAL ANALYSIS:
The City’s Chief Financial Officer has reviewed the proposed Amendment and
believes that the terms should not result in placing a burden on the City’s finances.
ATTACHMENTS:
1. Council staff report from the May 29, 2007 agenda.
2. “Cooperation Loan Agreement By and Between The City of Culver City and
the Culver City Redevelopment Agency.”
3. First Amendment to Cooperation Loan Agreement By and Between The City
of Culver City and the Culver City Redevelopment Agency
MOTION:
That the City Council:
1 Approve the First Amendment to Cooperation Loan Agreement By and Between
The City of Culver City and the Culver City Redevelopment Agency; and
2. Authorize the City Attorney to review/prepare the necessary documents; and,
3. Authorize the City Manager to execute the Amendment on behalf of the City. City of Culver City, California
Redevelopment Agency Agenda Item Report
That the Redevelopment Agency:
1. Approve the First Amendment to Cooperation Loan Agreement By and Between
The City of Culver City and the Culver City Redevelopment Agency; and
2. Authorize the Agency General Counsel to review/prepare the necessary
documents; and,
3. Authorize the Agency Chair to execute the Amendment on behalf of the Agency.
MEETING DATE: 06/16/08
JOINT ITEM to Consider Approval of the "First
Amendment To Cooperation Loan Agreement By And
Between The City Of Culver City And The Culver City
Redevelopment Agency"
AGENDA ITEM:
ATTACHMENTS
1. Council staff report from the May 29, 2007 agenda
2. Cooperation Loan Agreement By and Between the
City of Culver City and the Culver City Redevelopment
Agency
3. First Amendment to Cooperation Loan Agreement By
and Between the City of Culver City and the Culver
City Redevelopment Agency.
Pages
1-3
4-9
10-12City of Culver City, California
City Council Agenda Item Report
Meeting Date: 05/29/07 Item Number: J-2
AGENDA ITEM: Joint Item to Authorize a Loan From the City of Culver City to the
Culver City Redevelopment Agency for Bond Reallocation.
Contact Person/Dept.: Todd Tipton/CDD Phone Number: 310-253-5700
Fiscal Impact: Yes [X] No [] General Fund: Yes [X] No D
Public Hearing: D Action Item: [X] Attachments: [X]
Public Notification: Master Notification List (05/24/07).
Department Approval:
Todd Tipton (05/10/07)
City Attorney Approval:
Carol Schwab (by H. lker) (05/16/07)
City Controller Approval:
Marlee Chang (5/21/07)
City Manager Approval:
Jerry B. Fulwood (05/23/07)
RECOMMENDATION:
a $9,000,000 loan to the Culver City
for the purpose of bond reallocation, and
has acquired a number of properties
Redevelopment Plan. While a number of
increment funds, several properties were
project/proforma structure.
to purchase the properties at
that the residual land value would not
($1.5 million) of the total bond issuance
properties at Washington/National with tax
that any portion of the residual land value
Washington Centinela) would be applied to
paseos, right of way, traffic
related to the 2002 bonds and
it has become necessary to reallocate
June 24, 2007. This action will allow the
and disposition of the properties. To
of mechanisms in which to borrow
Staff recommends the City Council approve
Redevelopment Agency (the "Agency")
consider loan options and terms.
BACKGROUND/DISCUSSION:
Over the past few years, the Agency
throughout the City in furtherance of the
the properties were purchased with tax
purchased with bond funds due to the anticipated
Tax exempt bond funds were utilized
Washington/Centinela with the expectation
result in a return greater than five percent
($28 million). The Agency also acquired
exempt bond funds with the expectation
that exceeded the available return (after
public infrastructure improvements (sidewalks,
improvements, etc.) related to the project.
Due to the upcoming five year anniversary
scope/schedule alterations for both projects,
unrestricted monies to the bond funds by
Agency to remain flexible in its future use
remain flexible, staff has investigated a numberCity of Culver City, California
City Council Agenda Item Report
cash to replenish the bond funds for Washington Centinela (approximately
$9,000,000). These options include placing deeds of trust on Agency owned
property with an outside/private lender, selling/converting Certificates of Participation
for taxable bonds, or a loan from the City. In reviewing these options, Agency and
City staff have determined that the optimal course of action at this time would be to
pursue a loan from the City. This loan would not only be a strategic investment
opportunity for the City, earning market interest rate in a range from 4 - 6%, but
would also allow for ease in transfer and management between the entities. Loan
repayment would be derived from future property sales or increases in tax
increment.
It is proposed the funds for the $9,000,000 loan be allocated from the City's general
fund reserve. This allocation would represent approximately 1/3 of the current
reserve. To this end, fail safe measures would need to be considered in the unlikely
event that the City would require these funds be returned prior to the loan repayment
date. Two options would be to borrow against Agency owned property as well as
selling/converting to taxable bonds.
Throughout this loan period the objective of Agency staff will be shifted to finalize
projects with land assets prior to researching or assembling new projects or
properties. It is important to note, however, that Agency's direction to specific
projects or land sales may impact the rate at which the loan is repaid, and new
Agency initiated projects are brought forth for consideration.
FISCAL ANALYSIS:
In structuring this loan, the Agency Treasurer has spoken with several broker
dealers regarding market interest rates. The rates currently range from 5.135% to
5.33% for a four year investment with no call for either one to two years, with the
possibility of a full payback continuous after one or two years. Interest would be
payable every six months. In addition, it is recommended that the Agency pay a
slightly higher fee since the City has experienced an interest loss due to keeping
these funds available for this potential opportunity.
To this end, staff is recommending this loan be constructed to the following terms:
> Loan term: Up to four years (to allow for tax increment increases to buffer
property sales that may take longer than anticipated.)
> Semi annual repayment schedules (July and January)
> Fixed rate (approximately 5%, market bearing)
> No penalty for early repayment
> City has right to call loan at any time.City of Culver City, California
City Council Agenda Item Report
In regards to repayment amounts, staff has provided principal/interest models for the
Council's consideration (Exhibit A). The first model represents principal and interest
assuming 4%, 5% and 6% simple interest (compounded bi-annually). The second
model reflects an interest only structure. At this time, staff recommends that the
Agency approve the principal with the 5% interest model.
With this model, the City could earn up to $1,012,500 in interest payments by the
completion of the loan in 2011 which is comparable to interest earning that City
would otherwise receive.
EXHIBIT:
Exhibit A: Principal/Interest ratio models for repayment
MOTION:
That the City Council:
1) Approve a loan to the Redevelopment Agency for $9,000,000 to replenish bond
funds for properties purchased for the Washington/Centinela proiect for a four
year term, and;
2) Approve a principal/interest repa yment model at 5% to engage for the length of
the loan.
3) Authorize the City Attorney to prepare/review the necessary documents and
authorize the City Manager to execute these documents on behalf of the City.COOPERATION AND LOAN AGREEMENT
BY AND BETWEEN THE CITY OF CULVER CITY AND
THE CULVER CITY REDEVELOPMENT AGENCY
THIS COOPERATION AND LOAN AGREEMENT ("Agreement") is entered
into this 21 s' day of June, 2007 ("Effective Date"), by and between the CITY OF
CULVER CITY, a municipal corporation ("City") and the CULVER CITY
REDEVELOPMENT AGENCY, a public body, corporate and politic ("Agency"), with
reference to the following facts:
Over the last few years, the Agency has acquired a number of
properties within the Culver City Redevelopment Project Area for future
redevelopment While a number of the properties were purchased with tax
increment funds, several properties were purchased with bond funds due to the
anticipated project/pro forma structure.
B. Tax exempt bond funds were utilized to purchase the properties at
Washington/Cenfinela with the expectation that the residual land value would not
result in a return greater than five percent ($1.5 million) of the total bond issuance
($28 million).
C. Due to the upcoming five year anniversary related to the 2002 bonds
and scope/schedule alterations for both projects, it has become necessary to
reallocate unrestricted monies to the bond funds by June 24, 2007.
D. Under Health and Safety Code section 33601 ("Section 33601"), the
Agency may borrow money or accept financial or other assistance from any public
agency for any redevelopment project within its area of operation, and may comply
with any conditions of such loan or grant.
E. In light of this authority under Section 33601, Agency and City staff
have determined that the best course of action at this time would be to pursue a loan
in the amount of $9,000,000 from the City ("Loan"). Loan repayment would be
derived from future property sales, increases in tax increment generated from the
Culver City Redevelopment Project Area, and/or other lawfully available funds. The
City Council approved the Loan at the Council meeting on June 4, 2007.
F. The source of the Loan shall be the City's reserve fund ("Reserve
Fund"). By making the Loan from the Reserve Fund, the City is preserving the
required availability of the Reserve Fund, just as it would when the City invests
monies from the Reserve Fund in obligations of other public entities, in accordance
with the City's investment policy.
NOW, THEREFORE, the parties hereto do mutually agree as follows:
1ARTICLE 1 INTRODUCTORY PROVISIONS
1.1 Recitals Incorporated
The Recitals above are an integral part of this Agreement and set forth the
intentions of the Parties and the premises on which the Parties have decided to enter
into this Agreement.
ARTICLE 2 LOAN TO AGENCY
2.1 Loan
Pursuant to the terms of this Agreement, City agrees to make the Loan to
Agency in the original principal amount of NINE MILLION DOLLARS AND NO
CENTS ($9,000,000.00).
2.2 Terms of Repayment
a. General. The Agency shall repay the Loan in accordance with
the terms of this Paragraph 2.2.
b. Interest Payments. The outstanding principal shall bear interest
at the fixed rate of five point seven percent (5.7%). Accrued interest shall be
compounded and paid once every one hundred and eighty-two (182) days from the
Effective Date ("Interest Payment"). A penalty equal to three percent (3%) of the
Interest Payment due shall apply to any payment that is received after the Interest
Payment due date. Any Interest Payment not received by the Interest Payment due
date shall be added to the principal balance, shall become and be treated as
principal, and shall thereafter bear like interest. Interest Payments received by City
pursuant to the terms of this Agreement shall be applied first to the payment of any
interest accrued hereunder, then to reduce the principal balance due_
c. Principal Repayment. Repayment of the original principal
amount of NINE MILLION DOLLARS AND NO CENTS ($9,000,000) plus any
outstanding Interest Payments shall be due and payable in one lump sum to City not
later than 5:00 p.m_ three hundred and sixty-four (364) days from the Effective Date
of this Agreement (the "Maturity Date"), subject to the call provision in Paragraph 2.3,
below.
d. No Prepayment Penalty. There shall be no pre--payment penalty
if the Agency pays the Loan, in whole or in part, including interest, prior to the
Maturity Date.
e_ Remedies. If Agency has not paid in full the amounts due under
this Agreement by the close of business on the Maturity Date, the interest rate then
applicable to the balance due shall increase by one percent (1%), beginning the next
calendar day after the Maturity Date until full repayment of principal and accrued
interest_ Notwithstanding the foregoing, City shall have the right to declare Agency in
default and thereafter exercise all rights reserved hereunder for purposes of default.
22.3 Call Provision
Notwithstanding any provision to the contrary herein, the whole or any part of
the outstanding principal and accrued interest on the Loan shall be callable from time
to time, by the City, in its sole discretion, upon written notice by the City to the
Agency of the exact call amount ("Call Amount"). Agency shall have ninety (90) days
from the receipt of notice (as determined by Paragraph 42, below) to pay the Call
Amount.
ARTICLE 3 DEFAULTS AND REMEDIES
3.1 Defaults — General
Failure by either party to perform any obligation under this Agreement
constitutes a default under this Agreement, in which case the following shall apply:
a. The injured party shall give written notice of default to the party
in default specifying the default complained of. Failure or delay in giving sUch notice
shall not constitute a waiver of any default, nor shall it change the time of default.
Except as otherwise expressly provided in this Agreement, any failures or delays by
either party in asserting any of its rights and remedies as to any default shall not
operate as a waiver of any default or of any such rights and remedies, nor deprive
either party of its right to institute and maintain any actions or proceedings which it
may deem necessary to protect, assert or enforce any such rights or remedies.
b. The party in default shall have a period of thirty (30) calendar
days after such notice is received or deemed received, as set forth in Paragraph 4.2
hereof.
32 Institution of Legal Action
If the default is not cured within the time frames allowed by Paragraph 3.1, the
defaulting party shall be liable to the non-defaulting party for any damages caused
by such default. In addition to any other rights or remedies (and except as otherwise
provided in this Agreement), either party may institute legal action to cure, correct or
remedy any default, to recover damages for any default, to seek specific
performance, or to obtain any other remedy consistent with the purpose of this
Agreement. Such legal actions must be instituted in the Superior Court of the State
of California, for the County of Los Angeles, or in any other appropriate court located
within Los Angeles County.
3.3 Applicable Law
The laws of the State of California shall govern the interpretation and
enforcement of this Agreement.
3ARTICLE 4 MISCELLANEOUS PROVISIONS
41 Time of Essence
Time is expressly declared to be of the essence in this Agreement and of
every provision hereof in which time is an element.
4.2 Notices
Any notice to be given or other document to be delivered by any party to the
other or others hereunder, may be delivered in person to an officer of any party, or
may be deposited in the United States mail, duly certified or registered, return receipt
requested, with postage prepaid, or by Federal Express or other similar overnight
delivery service, or by facsimile machine if concurrently delivered by another
permissible method set forth in this Paragraph, and addressed to the party for whom
intended, as follows:
City: City of Culver City
9770 Culver Boulevard
Culver City, CA 90232
Attention: Jerry Fulwood, City Manager
Telephone: (310) 253-6000
Agency: Culver City Redevelopment Agency
9770 Culver Boulevard
Culver City, CA 90232
Attention: Sol Blumenfeld, Community Development Director
Telephone: (310) 253-5760
Any notice that is personally delivered (including by means of professional
messenger service, courier service such as United Parcel Service or Federal
Express, or by U.S_ Postal Service), shall be deemed received on the documented
date of receipt; and any notice that is sent by United States mail, duly certified and
registered, with postage prepaid shall be deemed received on the third day after
4.3 Bindinq Effect
This Agreement shall be binding on and inure to the benefit of the parties to
this Agreement and their respective heirs, personal representatives, successors and
assigns, except as otherwise provided in this Agreement
4.4 Titles and Captions
Titles or captions contained herein are inserted as a matter of convenience
and for reference, and in no way define, limit, extend or describe the scope of this
Agreement or any provision hereof. All references to 'Paragraph" shall mean the
Paragraphs of this Agreement unless otherwise specified.|109| 4.5 Interpretation
No provision in this Agreement is to be interpreted for or against either party
because that party or his legal representatives drafted such provision.
4.6 Further Assurances
The parties agree to promptly execute such other documents and take such
other actions as may be reasonably necessary to further the purposes of this
Agreement
4.7 Severance
If any provision of this Agreement is determined by a court of competent
jurisdiction to be illegal, invalid or unenforceable, such provision shall be deemed to
be severed and deleted from the Agreement, and the severance and deletion shall
not in any way affect the validity of the remaining provisions of this Agreement.
4.8 Liability and Indemnification
In contemplation of the provisions of California Government Code Section
895.2 imposing certain tort liability jointly upon public entities solely by reason of
such entities being parties to an agreement as defined by Government Code Section
895, the parties hereto, as between themselves, pursuant to the authorization
contained in Government Code Sections 895.4 and 895.6, shall each assume the full
liability imposed upon it, or any of its officers, agents or employees, by law for injury
caused by negligent or wrongful acts or omissions occurring in the performance of
this Agreement to the same extent that such liability would be imposed in the
absence of Government Code Section 895.2. To achieve the above-stated purpose,
each party indemnifies, defends and holds harmless the other party for any liability,
losses, cost or expenses that may be incurred by such other party solely by reason
of Government Code Section 895.2.
4.9 Calculation of Time Periods
Unless otherwise specified, in computing any period of time described herein,
the day of the act or event after which the designated period of time begins to run is
not to be included and the last day of the period so computed is to be included,
unless the last day is a Saturday, Sunday or legal holiday, in which event the period
shall run until the end of the next day which is neither a Saturday, Sunday or legal
holiday. The last day of any period of time described herein shall be deemed to end
at 5:00 p.m., California time_
4.10 Entire Agreement; Waivers and Amendments
This Agreement shall be executed in triplicate originals, each of which is
deemed to be an original. This Agreement consists of three (3) pages and one (1)
exhibit, which constitute the entire understanding and agreement of the parties.
This Agreement integrates all of the terms and conditions mentioned herein or
incidental hereto, and supersedes all negotiations or previous agreements between
5the parties with respect to the subject matter of this Agreement
This Agreement is intended solely for the benefit of the City and the Agency.
Notwithstanding any reference in this Agreement to persons or entities other than the
City and the Agency, there shall be no third party beneficiaries under this
Agreement
All waivers of the provisions of this Agreement and all amendments to this
Agreement must be in writing and signed by the authorized representatives of the
parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first set forth above.
Dated: C6- ) /5 7
Dated: 6(c,tt fo7
CITY OF CULVER CITY
CULVER CITY REDEVELOPMENT
AGENCY
APPROVED AS TO FORM:
CITY ATTORNEY
.44 6- Ti-A
f
Carol Schwab
City Attorney
KANE BALLMER BERKMAN
4//7(„„,„„r7
Murray 0. Kane
Agency General Counsel
6FIRST AMENDMENT TO COOPERATION LOAN AGREEMENT
BY AND BETWEEN THE CITY OF CULVER CITY AND
THE CULVER CITY REDEVELOPMENT AGENCY
THIS FIRST AMENDMENT TO COOPERATION LOAN AGREEMENT ("First
Amendment") is entered into this day of June, 2008 ("Effective Date"), by and
between the CITY OF CULVER CITY ("City") and the CULVER CITY
REDEVELOPMENT AGENCY ("Agency"), with reference to the following facts:
A. Under Health and Safety Code section 33601 ("Section 33601"), the
Agency may borrow money or accept financial or other assistance from any public
agency for any redevelopment project within its area of operation, and may comply
with any conditions of such loan or grant.
B. In light of this authority under Section 33601, Agency and City entered
into that certain COOPERATION LOAN AGREEMENT ("Agreement") on June 21,
2007, wherein the City agreed to provide, and the Agency agreed to accept, a loan in
the amount of $9,000,000 from the City ("Loan") for a term of one year, which term
ends on June 21, 2008 (the "Maturity Date").
C. The Agency and City now desire to extend the Maturity Date, to June
30, 2009 ("Extended Maturity Date"), subject to the following conditions: (i) the
Agency shall make a partial Loan payment to the City in the amount of TWO
MILLION DOLLARS AND NO CENTS ($2,000,000.00) ("First Payment") no later
than June 30, 2008, to be credited against the principal balance of the Loan; (ii) the
remainder of principal balance of the Loan plus any outstanding interest shall be due
and payable in its entirety no later than 5:00 p.m. on the Extended Maturity Date; (iii)
the Loan shall remain subject to the call provision in Section 2.3 of the Agreement
through the Extended Maturity Date; and (iv) all other terms and conditions of the
Agreement shall remain in effect.
NOW, THEREFORE, the Agency and City (the "Parties") do mutually agree
as follows:
ARTICLE 1 INTRODUCTORY PROVISIONS
1.1 Recitals Incorporated
The Recitals above are an integral part of this First Amendment and set forth
the intentions of the Parties and the premises on which the Parties have decided to
enter into this First Amendment.
1 of 3ARTICLE 2 FIRST PAYMENT OF LOAN TO CITY
2.1 First Payment of Loan
(a) the Agency pay the First Payment to the City no later than June 30,
2008, to be credited against the principal balance of the Loan;
(b) the remainder of principal balance of the Loan plus any outstanding
interest shall be paid by the Agency in its entirety no later than 5:00 p.m. on the
Extended Maturity Date;
(c) the Loan shall remain subject to the call provision in Section 2.3 of
the Agreement through the Extended Maturity Date; and
(d) all other terms and conditions of the Agreement shall remain in
effect.
ARTICLE 3 MISCELLANEOUS PROVISIONS
3.1 Entire Agreement; Waivers and Amendments
This First Amendment shall be executed in triplicate originals, each of which is
deemed to be an original. This First Amendment consists of three (3) pages, which
constitute the entire understanding and agreement of the Parties.
This First Amendment integrates all of the terms and conditions mentioned
herein or incidental hereto, and supersedes all negotiations or previous agreements
between the Parties with respect to the subject matter of this First Amendment.
This First Amendment is intended solely for the benefit of the City and the
Agency. Notwithstanding any reference in this First Amendment to persons or
entities other than the City and the Agency, there shall be no third party beneficiaries
under this First Amendment.
All waivers of the provisions of this First Amendment and all amendments to
this First Amendment must be in writing and signed by the authorized
representatives of the Parties.
SIGNATURES ON NEXT PAGE
2 of 3
1/IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as
of the date first set forth above.
Dated: CITY OF CULVER CITY
By
Jerry Fulwood
City Manager
Dated: CULVER CITY REDEVELOPMENT
AGENCY
By
Scott Malsin
Chair
APPROVED AS TO FORM:
CITY ATTORNEY
Carol Schwab
City Attorney
KANE BALLMER BERKMAN
Murray 0. Kane
Agency General Counsel
3 of 3
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