HomeMy WebLinkAboutRDA LOAN 1ST INTERST 06-07-93RDA NO. 6
6-7-93
-kTF: JUNE 1, 1993
TO:
FROM:
SUBJECT:
WILLIAM A. HUSTON, EXECUTIVE DIRECTOR TUBTIN COM/~UNITY
REDEVELOPMENT AGENCY (TCRDA)
RONALD A. NAULT, TREASURER (TCRDA)
WORKING CAPITAL LOAN AGREEMENT WITH FIRST INTERSTATE BANK
RECOMMENDATION=
Adopt Resolution No. RDA 93-8 approving a one year working Capital
Loan Agreement with First Interstate Bank and authorizing the
Executive Director to execute the Agreement on behalf of the
Agency.
FISCAL IMPACT:
The estimated net interest cost of the loan is $45,000.
DISCUSSION:
The Health and Safety Codes of the State of California govern
redevelopment agencies throughout the State. The Code dictates
that tax increment revenues generated within a Redevelopment Agency
Project Area can only be transferred to that Agency to the extent
that the Agency has incurred debt that will be repaid from the tax
increment and the debt must be equal to or greater than the total
tax increment. There are many allowable debt alternatives for an
Agency to utilize. The most typical form of debt is the issuance
of bonds. Loans between agencies and cities, short term bank loans
and even notes between developers and agencies are common debt
activities that support an Agency's annual tax increment flow.
In the South Central Project Area we have utilized loans between
the City and the Agency to secure our annual tax increment. For
the 1992-93 fiscal year the City lent the agency $3 million to
carry out the purposes of the South Central Project Area. This
loan is scheduled to be repaid prior to June 30, 1993. Staff has
carefully considered the options for a new loan for fiscal 1993-94
and has concluded that a short term working capital note between
the Agency and First Interstate Bank is in the best interest of the
Agency and the City.
Idle cash in the General Fund that is necessary to cover cash flow
or, otherwise available for investments has been severely impacted
Page 2
June 1, 1993
Working Capital
Loan Agreement/First Interstate
by the economy in general and the State over the past three years,
with an expectation that 1993-94 will be more of the same. Since an
alternative source for a short term loan is available to the Agency
the repayment of the outstanding loan will be of significant
benefit to the General Fund. Due to the time constraints relating
to the necessity of completing all debt obligations prior to June
30, staff approached First Interstate Bank where the Agency
currently has a banking relationship. They are already familiar
with the Agency which helped to expedite negotiations and approval
of the loan concept by the bank.
The proposed loan is a simple one year working capital transaction
collateralized by a deposit equal to the loan balance at any one
time. The rate is proposed at seventy five percent (75%) of First
Interstate Bank's floating prime rate, currently six percent (6%)
plus a fee of .25 percent of the loan amount. This will be offset
by interest earnings on the collateral deposit. This arrangement
is very similar to a Tax Revenue Anticipation Note (TRAN) that has
been used extensively throughout California, only this transaction
will save the Agency the cost of issuance that a TRAN would
require.
In summary,~staff has reviewed the needs of the Agency and the City
for the coming fiscal year and strongly recommends the acceptance
of the conditions of the loan proposal and the adoption of
Resolution RDA No. 93-8.
Treasurer
Tustin Community Redevelopment Agency
RAN:Is
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RESOLUTION NO. RDA 93-8
A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF
TUSTIN, CALIFORNIA, APPROVING ACQUISITION OF A $3,000,000
LINE OF CREDIT FROM FIRST INTERSTATE BANK OF CALIFORNIA
The Redevelopment Agency of the City of Tustin
does hereby resolve as follows:
The Redevelopment Agency finds and deterhines as
follows:
ae
The Redevelopment Agency requires and has
sought a three million dollar ($3,000,000)
transactional loan for normal working capital
requirements.
Be
First Interstate Bank of california has
offered the Redevelopment Agency such a loan.
Ce
The general terms and conditions of the loan
documents offered by First Interstate Bank of
California are reasonable and acceptable.
II.
The Redevelopment Agency of the City of Tustin
approves and accepts the general terms and
conditions of the loan documents offered by First
Interstate Bank of California as presented in the
May 24, 1993 letter from Steven A. Zamolo, Vice
President, Orange County Corporate Banking, et al.
III.
The Executive Director and/or Director of Finance
are authorized to negotiate the final terms and
conditions of the loan and, thereafter, to execute
all necessary documents related to said loan.
PASSED AND ADOPTED by the Redevelopment Agency of
the city of Tustin at a regular meeting held on the 7th
day of June, 1993.
ATTEST:
Jim Potts
Redevelopment Chairperson
Mary E. Wynn
City Clerk
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