2001 AGN DEC 04 I16 - Laserfiche WebLink

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Report to Redevelopment Agency Board regarding EVLC Agreement November 26, 2001 Page 2 of 5 Each parcel was to have been encumbered with an annual assessment for its proportionate share of the public improvements. The annual assessments would be paid by the Developer using funds rebated by the City/Agency. If the rebates were less than the annual assessments, the Developer was to absorb the difference as a Developer Loan. If the rebates were greater than the annual assessments, the debt was retired early. This approach ultimately did not work because the first major user (Ashley Furniture) declined to accept the assessment lien and instead purchased a finished lot from the Developer. Request for Renegotiation The Developer thereafter requested that the Agency consider alternative approaches to raise the necessary public improvement capital. The Agency indicated an openness to consider alternatives provided the modified terms were at least equal and preferably better than the existing terms. The Developer pursued an EDA Grant to help fund a total reconstruction of Cooley Drive as the principal incentive for the Agency/City to consider modifications to the Agreement. In order to obtain the $1 million EDA Grant, the City/Agency has to provide a matching contribution of not less than $1 million. The Agency has contacted the California lnfrastructure Bank and bond underwriters to obtain a loan for the Agency's match of the EDA Grant as well as provide additional project funding. Redevelopment Executive Advisory Committee (REAC) Consideration After several months of negotiations, the REAC considered several proposed alternatives in early August, 2001 and rejected some of the more complex proposals. The REAC directed that the Agency should only consider methods of financing that minimized RDA credit exposure and saved the Agency significant monies. The EDA grant in and of itself was insufficient incentive to change the original method of financing. Agency staff and the Developer thereafter discussed the possibility of a lump sum buyout to help finance a portion of the public improvement costs with the Developer responsible for the balance. There would be no future tax increment rebates, but the sales tax rebate would continue until 2020. The primary objective of this approach was initially simplification but it became more advantageous as the Agency's expected cost of debt declined. On November 19, 2001 the REAC considered the final draft of the proposed Amendment No. 2 to the Participation Agreement and forwarded the Amendment to the Agency Board for approval with one modification -- that the Developer provide collateral to repay the Agency advance of $600,000 by June 30, 2001 if Option 3 is exercised. That modification is contained in the final Amendment. Discussion/Analysis Change in Project Scope The project scope has changed since the Agreement was originally approved. The changes in development character and economics are summarized in Exhibit A. The project added approximately 375,000 square feet of building coverage and $20 million in assessed valuation. This results in higher property tax increments and development impact fees. However, the project no longer includes the Driver's World Superstore and thus projected sales taxes are far below original estimates. The gains in property tax increments were