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Cooperative Loan Agreement Staff Report 05/04/99 Page 3 generated by the -refurbished motel in years 1 and 2 and 50% of TOT generated in years 3 through January 1, 2019 be paid to the Developer. Similarly, the Redevelopment Cooperation Loan Agreement between the City and Agency would provide that the Agency borrows the respective percentages of TOT generated by the motel from the City to reimburse Vanir. Based upon the estimated costs and revenue projections, it appears that the $300,000 in off-site improvements would be reimbursed sometime in year five and if assuming an annual expense of $48,000 for billboards expenditures, this cost would not be fully reimbursed during the life of the agreement. (Please refer to TOT and cost projections attached hereto as Exhibit "D"). The proposed OPA between the Agency and Vanir would provide for the payment of 100% of the TOT generated during the first two years to reimburse Vanir for the costs of the off-site improvements it must install. The Agency would normally fund the cost of these off-site improvements upfront, if it had the capacity to do so, but since it is unable to do so the Agency must attempt to reimburse the Developer as quickly as possible to encourage the project. The purpose for reimbursing the Developer for some of the costs for the off-site signage costs is that it would benefit the development and the surrounding downtown area. Additional advertising and signage would serve to increase the occupancy rate at the Motel, thus the amount of TOT the Motel will generate. Over the life of the agreement it is estimated that the project would generate approximately $2.3 million in Transient Occupancy Taxes ($1.1 million in Present Value). Of this $1.2 million ($ 631,599 in PV) would be used to reimburse Vanir for the off -sites and billboard costs and the City would receive approximately $ 1 .0 million or $458,889 in PV. In addition to the TOT that the project will generate, the renovation and operation of the motel will bring additional jobs, visitors and customers to the downtown area, helping to support and create additional economic activity. Recommendation: 1. Approve the proposed Resolution authorizing the City of Colton entering into a Redevelopment Cooperation Loan Agreement with the Redevelopment Agency for the City of Colton. Attachments: Exhibit "A" - Vanir Letter dated September 17, 1998 Exhibit "B" - Redevelopment Cooperation Loan Agreement Exhibit "C" — Estimated cost for off-site improvements. Exhibit"D" - Project Projections -Transient Occupancy Taxes. Exhibit "E" - Resolution No. "Irq� 7- 1 Staff Report Prepared by Greg Lantz, Program Manager S:\Greg\VANIR\CC Report TOT Loan.doc