06/05/12 Special - Laserfiche WebLink

Home

Commissioner Backous stated his position that PNC has pushed the HRA as far as it should be pushed and he has no problem re -dealing. He stated he can't believe the HRA would make a bad decision worse because it felt it was running out of time. Commissioner Backous stated he does not think the Subordination Agreement contains any remedies and if the HRA exercised its Right of Reverter, they will foreclose, which is not a remedy. Commissioner Backous stated he has never supported this project and does not support the Subordination Agreement. Commissioner Ramsey indicated the remedies were done September 27 when he made the motion and it was seconded by Commissioner Wise to get this done. Commissioner Ramsey stated he is frustrated that this consideration even came back to the HRA, which was not necessary because the purchase agreement was signed and the documents were to be delivered to the buyer. City Administrator Ulrich stated it was brought before the HRA at the advice of legal counsel. He agreed with the comment by HRA Executive Director Nelson that the HRA cannot renegotiate with PNC because the deal is fixed. However, there may be negotiating with F&C to make the majority of the HRA more comfortable. Commissioner Elvig asked why the HRA wouldn't go back to F&C to get a more comfortable position. Mr. Bray stated if the decision is to go back and talk with F&C, the HRA will need to look at the front end of the deal or if they have ability to bring a new guarantor to the table outside PNC. Development Director Lazan stated the Development Team represented to them that the deal was done, final documents were prepared and provided to F&C and PNC and those documents became exhibits to the PNC loan documents. He believed staff negotiated well on the Subordination Agreement and to change the equity structure now would result in a new set of terms to which F&C would have to agree and require revising the loan documents. Chairperson McGlone stated this has been under discussion for two and a half years with some of the best minds and top -shelf consultants to get it right. He stated he is comfortable they did the best they could and he has no desire to re -deal at this stage of the game. Ms. Kvilvang explained the issue before the HRA is calling for the sale of tax increment bonds. As part of the development agreement the City will provide $6.825 million financing to the project. Previously, staff looked at a three-year temporary bond, bonds that could be prepaid after the first year and paid in full in three years. However, in consideration of the tight project time table and historic low interest rates, there is an option to consider issuing a ten-year bond instead with a three-year call. She explained a ten-year bond would provide flexibility between construction and leasing. Ms. Kvilvang noted there would be additional costs with a ten-year bond, mostly in capitalized interest of $240,000. However, if the City had to issue an additional bond because payment in three years could not be made, there would be additional costs of about $100,000, resulting in a net cost of about $140,000/$130,000 to create that flexibility. Housing and Redevelopment Authority / February 28, 2012 Page 6 of 8