HomeMy WebLinkAboutRDA LOAN 1ST INTERST 06-20-94AG, ENDA ,nter. Com(
DATE: JOh'E 9, Z99,1
TO:
WILLIAM ,It,. HUSTON~ EXECUTIVE DIRECTOR TUSTTN COMMUNITY
REDEVELOPMENT /~GENCY (TCRDA)
FROM: RONALD /It.. NAULT, TREASURER
SUBJECT: wo~xzN~ CAPIT~L LOAN /%~REEMENT NITH FIRST INTERSTATE BANK
RECOMMEND/%TION =
Adopt Resolution No. RDA 94-9. 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 $75,000.
DISCUSSION=
The Health and Safety Code of the State of California governs
redevelopment agencies. The Code dictates that tax increment
revenues generated within a Redevelopment Agency Project Area can
only be transferred to the Agency to the extent that the Agency has
incurred debt that will be repaid from the tax increment and that
the debt must be equal to or greater than the total available tax
increment. There are many allowable debt alternatives for an
Agency to utilize but, the most typical form of debt is the
issuance of long term bonds. Loans between agencies and cities,
short term bank loans and even notes between developers and
agencies are acceptable debt activities that will support an
Agency's claim to its' annual tax increment.
In the past, for the South Central Project Area we have utilized
loans between the City and the Agency to secure the annual
increment. Because of the cash flow needs of the General Fund and
the onerous.legislative changes contained in AB 1290 for fiscal
1993/94, the Agency repaid the outstanding City loans and secured
a working capitalloan for $3 million from First Interstate Bank.
A third party loan is a much stronger debt transaction that will
stand any review by the State or the county as to the validity of
the debt and substantiate authority for receipt of current tax
increment.
Page 2
June 9, 1993
Working Capital Loan Agreement/First Interstate
The proposed loan is a simple one year working capital transaction
collateralized by a deposit equal to the current loan balance. The
rate is proposed at seventy percent (70%) of First Interstate
Bank's floating prime rate, currently 7.25 percent plus a fee of
.25 percent of the loan amount, $7,500. This will be offset by
interest earnings on the collateral deposit, currently paying two
percent. This arrangement is very similar to Tax Revenue
Anticipation Notes (TRAN) that have been issued extensively
throughout California for the past 20 years. This transaction will
save the Agency the cost of issuance that a TRANwould require,
typically, .5 percent-.6 percent of the issue and the net cost to
the Agency of 3 percent is very competitive with current short term
rates. ~
In 1993 the Agency selected First Interstate Bank for its general
banking needs after the City's Audit Committee reviewed proposals
from several institutions. The Agency selected First Interstate to
fund this transaction because of the competitiveness of their
banking proposal and their familiarity with the Agency which
simplified the loan process.
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. 94-9.
R6n~fld A. Nault
Treasurer
Tustin Community Redevelopment Agency
RAN: ls
Attachment
a:first~ntr.wah
Interst e
First Interstate Bank
of California
Orange County Commercial Center
5000 Birch Street, Suite 10,000
Newport Beach, CA 92660
714 253-4377
Fax: 714 253-4288
May l6, 1994
Ronald A. Nault
Finance Director
city of Tustin
300 Centennial Way
Tusti~ CA 92680
Dear Mr. Nault:
First Interstate Bank of California (FICAL) is pleased to make available to the Tustin Community
Redevelopment Agency (TCRA) the following credit arrangement:
FACILITY AMOUNT AND PURPOSE:
A transaction loan not to exceed Three Million dollars ($3,000,000) for normal working capital
requirements.
RATE:
70% of FICAL's floating prime rate.
FEES:
1/4 of 1% of the line amount.
COLLATERAL:
FICAL Savings Passbook in the amount of $3,000,000 (or less depending on actual loan amount).
The balance of this collateral account can be reduced as principal payments retire the outstanding
loan; however, the collateral acetmnt must always equal 100% of the outstanding loan balance.
REPAYMENT SCHEDULE:
Interest monthly in addition to principal payments of $1,000,000 on 12-31-94, $1,000,000 on 4-
30-95 and balance at maturity. Payments will be derived from incremental tax revenue funded to
May 16, 1994
Page 2
MATURITY:
One year from the origination date of the note.
FINANCIAL STATEMENT REQUIREMENTS:
1) CPA audited financial statements shall be submitted within 120 days ofthe fiscal year end.
SPECIAL REQUIREMENTS:
1) Signed statement from TCRA counsel acknowledging that the terms and conditions of the
subject credit facility comply with the bylaws of the TCRA.
2) Resolution adopted by the Tustin City Council authorizing the subject credit facility and the
terms and conditions of the credit facility. The resolution shall also state the individuals of TCRA
authorized to execute FICAL documents related to the credit facility.
3) TCRA shall maintain its principal domestic operating relationship with FICAL.
4) This agreement shall be governed by California law.
5) In the event that action is brought to enforce the terms of this agreement or .payment of the note
or notes hereunder, costs and reasonable attorneys' fees shall be awarded to the prevailing party.
6) All terms set forth in any note, guarantee, security agreement or other document executed in
connection with the facilities provided hereunder shall be in full force and effect.
7) Failure on the part of TCRA to pay any sum of the principal or interest when due, or any breach
or default by TCRA of or under any term, condition, provision, warranty or representation made in
this or any other agreement with FICAL, any appointment of a trustee as to a substantial portion of
the assets of TCRA, or any levy or attachment, execution or similar process, any act on the part of
TCRA of insolvency, general assignment for the benefit of creditors, voluntary or involuntary
filing under bankruptcy law, or any attachment or suit for taxes against TCRA, by Federal or State
government, or department thereof, or if for any other reason FICAL shall deem itself insecure,
shall at the option of FICAL, make immediately due and payable all sums loaned hereunder,
without presentation, demand, protest, or further notice of any kind, regardless of the terms of any
promissory note and/or security agreement evidencing the loan.
This commitment letter is not meant to be, nor shall it be construed as, an attempt to define all of
the terms and conditions involved in this financing. Rather, it is intended only to outline certain
basic points of our understanding around which the final terms and documentation are to be
structured.
May 16, 1994
Page 3
Further negotiations adding to or modifying thc general scope of these major terms shall not be
precluded by the issuance of this commitment letter and its acceptance by you. FICAL's
commitment to make this facility available is subject to the execution of loan documents and other
documents acceptable to FICAL and its counsel.
Kindly indicate your agreement to this commitment by signing the enclosed copy and returning it to
us. This offer shah expire at 3:00 p.m. on June 30, 1994 unless prior to such time we have received
such copy executed by you.
Anthon R.
y Gabne e, Jr.
Assistant Vice President
Orange County Corporate Banking
Acknowledged and aecep~ by:
Tustin Community Redevelopment Agency
Executive Director
Date
Director of Finance
Date
1
6
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9
10
11
19
15
16
17
18
19
2O
91
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26
RESOLUTZON NO. RDA 9 4-9
A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF
TUSTIN, CALIFORNIA, APPROVING ACQUISITION OF A $3,000,000
WORKING CAPITAL LOAN FROM FIRST INTERSTATE BANK OF
CALIFORNIA
The RedeveloPment Agency of the City of Tustin
does hereby resolve as follows:
lo
The Redevelopment Agency finds and determines as
follows:
ae
The Redevelopment Agency requires and has
sought a three million dollar ($3,000,000)
transactional loan for normal working capital
requirements of the South Central Project
Area.
Be
Ce
First Interstate Bank of California has
offered the Redevelopment Agencysuch a loan.
,.
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 16, 1993 letter from Anthony R. Gabriele,
Assistant 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 20th
day of June, 1994.
ATTEST:
Thomas Saltarelli
Redevelopment Chairperson
Mary E. Wynn
City Clerk
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