AR 051507 Cooperation Loan Agreement

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Report to Redevelopment Agency Board and City Council regarding Cooperation Loan Agreement May 15, 2007 Page 2 of 3 DISCUSSION/ANALYSIS The Redevelopment Cooperation Loan Agreement is attached to this request as Exhibit A. The Agreement provides that the City of Colton will advance funds necessary for the Agency to undertake the land acquisitions contemplated for the habitat conservation area north of the 1-10. The Agency will repay the loan with 7% interest, if and when the West Valley Redevelopment Project Area has sufficient tax increment revenues or revenues from the property. The maximum loan from the City of Colton is contemplated to be $4,000,000. ENVIRONMENTAL IMPACT Not applicable. FINANCIAL IMPACT The Agency currently does not have the resources to purchase the property. Staff is recommending that the City General Fund loan the Agency the necessary funds to acquire the Retail Development Group (RDG) property. Other funds such as the Colton Public Finance Authority Fund and Capital Projects Fund can advance proceeds to the General Fund which in turn will loan the required cash to the Agency to acquire the property. Funding is available from various City funds for the immediate purchase including: 1) FY07 CDBG Allocation -- $260,481 2) Undesignated Fund Balance transfer from various city funds -- $3,389,519 There are additional funding opportunities that City staff is pursuing including federal Section 6 funds, contributions from other local government agencies, and potential development impact fees. The repayment of the loan is not expected to begin until such time as either the Agency has sufficient tax increment from the West Valley Redevelopment Project (and ability) resulting from the Super Block or funding from other sources as mentioned above. RISK MITIGATION ANALYSIS The nature of this transaction involves risk both to the Agency and the General Fund. Currently, the Agency owes money to the Water Department as a result of the acquisition of the FrontierTown site. By approving this transaction, an additional obligation of the Agency will be created — this time to the General Fund. While staff believes that the Agency will have significant tax increment from the West Valley Redevelopment Project as a result of the Colton Super Block development, the Mayor and City Council should be aware that insufficient tax increment is currently available to complete this land acquisition and repay a loan from the General Fund. However, it is staff's opinion that without securing the RDG property, staff may be unable to bring the highest and best uses to the lands within the Colton Super Block development and other areas of the West Valley Redevelopment Project.