AgdaPkt 2003-09-22 - Laserfiche WebLink

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YEA- I REPORT To the Mayor and Members of the City Council and Redevelopment Agency Board From the City Manager and Executive Director September 22, 2003 Subject: Amendment to the loan agreement between the City of Redwood City and the Redwood City Redevelopment Agency. Recommendation: Approve the amendment to the loan agreement between the City of Redwood City (City) and the Redwood City Redevelopment Agency (Agency) adjusting the interest rate to an amount equal to the City's actual rate of return. Background and Analysis: The City and Agency entered into a Loan Agreement on January 8, 2003, under which the City agreed to loan the Redevelopment Agency $20 million for downtown improvement projects. The loan from the City to the Agency was intended to be a short-term loan that would be repaid when the Agency issued bonds later in 2003. At the time the agreement was prepared, staff in consultation with bond counsel and other finance professionals, established the interest rate on this loan at 7% for years 2003 through 2023 and 7.25% for years 2023 through 2032. This rate was established to represent the interest rate the Agency would be expected to pay with the issuance of the bonds, assuming ( conservatively ) that the Agency might have to issue taxable bonds. With more time to explore the nature of the projects being financed, bond counsel and tax counsel have determined that the projects being undertaken are eligible to be financed with tax - exempt bonds. The issuance of the tax exempt bonds was approved on September 8, 2003 In preparing the Agency funding plan for the FY 03 -04 budget and subsequently the bond issue, staff adjusted the interest rate referenced in the loan agreement to reflect the City's actual rate of return on funds rather than the higher rate. This approach preserved funds for projects and reduced the total bond financing required. SM /cls /CD /Agenda Amendment 1 to Loan Agreement