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. . - Council Member Ira referred to the line of credit requested in the Redevelopment Agency Budget, and said, "I am assuming the line of credit is essentially for Fund 807, the General Fund," and Director Church agreed. He said he was concerned about the repayment based on projected growth in that Fund. Council Member Ira said, "I guess my thought is, I really don't believe we are going to get our interest paid back." He said he believed "the loan was important, the development of that site was important, but at the same time, we need to be realistic here. I think we have to visualize right now that that money is going to be taken out of the General Fund and we are not going to get those interest payments in reality. We really need to look at that and budget accordingly." In response to Council Member Ira's questions regarding the low and moderate income housing fund deficits, Director Church said State law included incentives to spend those funds, and actually penalized Agencies that accumulate more than two years annual accrual of revenues. Council Member Ira said it appeared that in year three there would have to be a cut in housing programs to avoid a deficit situation and avoid having other funds expended to support those programs, and he wanted everyone to be aware of that situation. MEMO 7/7/98 - In response to Council Member Leipzig's questions regarding the legality of assuming interest payments may not be paid, City Attorney Schricker said, "It is legal to make a loan. The notion of entering into a loan with the assumption that interest won't be repaid is not so much a legal question, as a policy as to whether or not that's the nature of the conditions of the loan you want to make. The loans we have restructured in the past have had a definite schedule of payments which included interest and I understood that was what the proposal was this time as well. If that is not feasible then it ought to be revisited so that we don't project an unrealistic repayment schedule." Answering further questions, City Attorney Schricker advised that it was acceptable for a City to make a loan without interest payments. City Manager Everett advised that one of the conditions involved "is buying a piece of land. It is our assumption that we won't be giving that piece of land away to a developer, that we will actually be selling it. And in two years, or a period of time, we will recapture that or a piece of it, if the Redevelopment Agency does decide to make a contribution, and by then the land will have gone up as well." He said that a major part of the repayment of the loan would be covered by development of that property. Director Church advised that since the Council Membersl Agency Board Members were both the lender and the borrower, ultimate control of the transaction rested with them. - BUDGET STUDY SESSION MINUTE BOOK NO. 57 JULY6,1998 MINUTES Page No. 051 PAGE 8