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7A Page 2 otherwise be able to provide, and in a manner that promotes a positive relationship and understanding between youth and the police. ( Building on a school site added significant unforeseen and additional costs to the project due to state standards unique to school sites with the final costs estimated to reach over $4.7 million dollars. In addition to the $400,000 contributed by the City, PAL raised an additional $2.6 million dollars, but experienced a shortfall of approximately $1.7 million dollars. The project could not be completed unless the remaining $1.7 million was funded. In December of 2003, the City Council voted to authorize the City to guarantee a loan for PAL at Bay Area Bank so that PAL could finish the building. The loan was a two year interest only loan of $1.5 million dollars. During that two year period, PAL raised nearly $300,000 in capital funds but not sufficient funds to pay down the principal of the loan. Bay Area Bank extended the loan through March 19th, 2006 to allow PAL to seek alternative financing. During this time, PAL came to realize, however, that alternative financing would require approximately $12,000 a month for loan servicing under the most favorable conditions. Under such a circumstance, PAL could no longer both pay the monthly loan and operate programs. Because of the building, PAL has been able to extend its collaborations with the School District, the Parks, Recreation and Community Service Department and act as a hub of collaboration with dozens of other non-profits serving the Redwood City area-including the Redwood City Education Foundation, the Hoover Boys and Girls Club, Guitars Not Guns, Arts for Youth and the Sheriffs Activities League. In order to be able to maintain a meaningful level of services to youth and to continue the collaboration, after long and careful consideration by the PAL board, and discussion with the City, the PAL Board determined that the debt would need to be restructured. The PAL board recommendation is an even closer partnership with the City whereby the City would payoff the loan principal from funds the City set aside to fund the guarantee, and PAL would make enhanced commitments to the City for services, including an arrangement whereby PAL agrees to pay the City back 50% of the $1.5 million through a 22 year loan agreement and the City absorbs the balance. The agreement would be structured to allow PAL to take two years to pay the City the first $250,000. After that payment, PAL would begin to pay the remaining $500,000 balance down by way of $2100 a month "rent" or "debt service" for 20 years. At the conclusion of those 20 years, PAL would have paid the City $750,000. PAL operates through grants and general fundraising. It is not possible to raise sufficient funds to both provide services and pay a traditional debt service. This debt restructuring would preserve the current services offered by PAL, and allows PAL to expand its services and make full use of the building. Alternatives 1. The City could payoff the loan to Bay Area Bank and require full repayment of the loan guarantee from PAL. This action would cause PAL to cease operation as it will be unable to fund the debt service on the loan and simultaneously raise the necessary funds for programs. 2. The City could payoff the loan to Bay Area Bank but elect not to require any repayment of the loan guarantee money by PAL. PAL would continue to operate and provide services in collaboration with those entities outlined above. - '-". ,...- -.-..__.....-. . -..- . -"-~" - -